<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 28, 1999
REGISTRATION NO. 33-91226
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
POST-EFFECTIVE AMENDMENT NO. 5
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.
SENIOR EXECUTIVE VICE-PRESIDENT AND GENERAL COUNSEL
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) of Rule 485
/X/ on April 30, 1999 pursuant to paragraph (b) of Rule 485
/ / On (date) pursuant to paragraph (a)(1) of Rule 485
/ / on (date), pursuant to paragraph (a) of Rule 485
------------------------
This filing is made in reliance on Rule 6c-3 and 6e-3(T) under the
Investment Company Act of 1940 to register an indefinite amount of interests in
Metropolitan Life Separate Account UL which funds certain variable universal
life insurance policies.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<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; METLIFE
3........................................ Inapplicable
4........................................ SALES AND ADMINISTRATION OF THE GROUP POLICIES AND CERTIFICATES; SUMMARY; METLIFE
5, 6, 7.................................. SEPARATE ACCOUNT UL; THE METROPOLITAN SERIES FUND, INC.
8........................................ FINANCIAL STATEMENTS
9........................................ Inapplicable
10(a)..................................... OTHER CERTIFICATE PROVISIONS; CERTIFICATE RIGHTS
10(c), 10(d).............................. SUMMARY; CERTIFICATE BENEFITS; CERTIFICATE RIGHTS; PAYMENT AND ALLOCATION OF
PREMIUMS; THE FIXED ACCOUNT; OTHER CERTIFICATE PROVISIONS
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 WE RESERVE
10(g)(4), 10(h)(4)........................ Inapplicable
10(i)..................................... CERTIFICATE BENEFITS; PAYMENT AND ALLOCATION OF PREMIUMS; ISSUING A GROUP POLICY AND
A CERTIFICATE
11........................................ SUMMARY; SEPARATE ACCOUNT UL; THE METROPOLITAN SERIES FUND, INC.
12(a)..................................... Cover Page
12(b), 12(e).............................. Inapplicable
12(c), 12(d).............................. SEPARATE ACCOUNT UL; THE METROPOLITAN SERIES FUND, INC.
13(a), 13(b), 13(c), 13(d)................ SUMMARY; CHARGES AND DEDUCTIONS; SEPARATE ACCOUNT UL; THE METROPOLITAN SERIES FUND,
INC.; CERTIFICATE BENEFITS; OTHER POLICY PROVISIONS
13(e)..................................... SALES AND ADMINISTRATION OF THE GROUP POLICIES AND CERTIFICATES
13(f), 13(g).............................. Inapplicable
14........................................ ISSUING A GROUP POLICY AND A CERTIFICATE; SALES AND ADMINISTRATION OF THE GROUP
POLICIES AND CERTIFICATES
15........................................ PAYMENT AND ALLOCATION OF PREMIUMS
16........................................ SEPARATE ACCOUNT UL; THE METROPOLITAN SERIES FUND, INC.
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 UL; THE METROPOLITAN SERIES FUND, INC.
18(b), 18(d).............................. Inapplicable
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
ITEMS OF
FORM N-8B-2 CAPTIONS IN PROSPECTUS
- --------------------------------------------- ------------------------------------------------------------------------------------
<S> <C>
19........................................ SALES AND ADMINISTRATION OF THE GROUP POLICIES AND CERTIFICATES; VOTING RIGHTS;
REPORTS
20(a), 20(b).............................. RIGHTS WE RESERVE; SEPARATE ACCOUNT UL; THE METROPOLITAN SERIES FUND, INC.
20(c), 20(d), 20(e), 20(f)................ Inapplicable
21(a), 21(b).............................. CERTIFICATE RIGHTS--Loan Privileges; PAYMENT AND ALLOCATION OF PREMIUMS; OTHER
CERTIFICATE PROVISIONS
21(c), 22................................. Inapplicable
23........................................ SALES AND ADMINISTRATION OF THE GROUP POLICIES AND CERTIFICATES
24........................................ PAYMENT AND ALLOCATION OF PREMIUMS; OTHER CERTIFICATE PROVISIONS
25........................................ METLIFE
26........................................ CHARGES AND DEDUCTIONS
27........................................ METLIFE
28........................................ MANAGEMENT
29........................................ Inapplicable
30, 31, 32, 33, 34........................ Inapplicable
35........................................ GETTING MORE INFORMATION
36, 37.................................... Inapplicable
38........................................ SALES AND ADMINISTRATION OF THE GROUP POLICIES AND CERTIFICATES
39........................................ METLIFE; SALES AND ADMINISTRATION OF THE GROUP POLICIES AND CERTIFICATES
40(a)..................................... Inapplicable
40(b)..................................... SEPARATE ACCOUNT UL; THE METROPOLITAN SERIES FUND, INC.; CHARGES AND DEDUCTIONS
41(a)..................................... SUMMARY; METLIFE; SALES AND ADMINISTRATION OF THE GROUP POLICIES AND CERTIFICATES
41(b), 41(c), 42, 43...................... Inapplicable
44(a)..................................... SEPARATE ACCOUNT UL; THE METROPOLITAN SERIES FUND, INC.; CERTIFICATE BENEFITS--Cash
Value
44(b)..................................... Inapplicable
44(c)..................................... CHARGES AND DEDUCTIONS
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 UL; THE METROPOLITAN SERIES FUND
51(a), 51(b).............................. SUMMARY; METLIFE; CERTIFICATE BENEFITS; CERTIFICATE RIGHTS
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
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
ITEMS OF
FORM N-8B-2 CAPTIONS IN PROSPECTUS
- --------------------------------------------- ------------------------------------------------------------------------------------
<S> <C>
51(g)..................................... Captions referenced under Items 10(i) and 13 above
51(h), 51(j).............................. Inapplicable
51(i)..................................... SALES AND ADMINISTRATION OF THE GROUP POLICIES AND CERTIFICATES
52(a), 52(c).............................. RIGHTS WE RESERVE
52(b), 52(d).............................. Inapplicable
53(a)..................................... FEDERAL TAX MATTERS
53(b), 54 through 58...................... Inapplicable
59........................................ FINANCIAL STATEMENTS
</TABLE>
iii
<PAGE>
METLIFE-Registered Trademark-
METLIFE GROUP
VARIABLE UNIVERSAL LIFE
April 30, 1999
Prospectuses for
- -- Group Variable Universal Life Insurance
- -- Metropolitan Series Fund, Inc.
[PHOTO]
<PAGE>
PROSPECTUS
FOR
GROUP VARIABLE UNIVERSAL
LIFE INSURANCE POLICIES ("GROUP POLICIES")
ISSUED BY
METROPOLITAN LIFE INSURANCE COMPANY ("METLIFE")
APRIL 30, 1999
The Group Policies are designed to provide:
- - Life insurance coverage for employees (and/or their spouses) of employers who
purchase a Group Policy
- - Flexible premium payments, including the option of paying premiums through
payroll deduction
- - A death benefit that varies because it includes the employee's cash value in
addition to a fixed insurance amount
- - Ownership rights of employees set forth in a certificate ("Certificate")
issued in connection with the Group Policy
- - Funding options for allocating premium payments to and transferring cash value
among a fixed interest account and the following Metropolitan Life Separate
Account UL investment divisions:
<TABLE>
<S> <C>
STATE STREET RESEARCH DIVERSIFIED SCUDDER GLOBAL EQUITY
STATE STREET RESEARCH GROWTH T. ROWE PRICE SMALL CAP GROWTH
STATE STREET RESEARCH INCOME HARRIS OAKMARK LARGE CAP VALUE
SANTANDER INTERNATIONAL STOCK (FORMERLY STATE LEHMAN BROTHERS-REGISTERED TRADEMARK- AGGREGATE
STREET RESEARCH INTERNATIONAL STOCK) BOND INDEX
JANUS MID CAP METLIFE STOCK INDEX
LOOMIS SAYLES HIGH YIELD BOND MORGAN STANLEY EAFE-REGISTERED TRADEMARK- INDEX
RUSSELL 2000-REGISTERED TRADEMARK- INDEX
</TABLE>
In some cases, the employer may limit which of these investment divisions is
available.
A WORD ABOUT RISK:
This Prospectus discusses the risks associated with purchasing the Certificates.
The Metropolitan Series Fund, Inc. (the "Fund") prospectus discusses the risks
associated with investment in the Fund. The Fund prospectus is being provided to
you in addition to this Prospectus because each of the Separate Account UL
investment divisions named above invests solely in a corresponding "Portfolio"
of the Fund. The Prospectus is not valid unless you also receive or have
received a current Fund prospectus.
The purchase of a Certificate involves risk. You could lose money. You might
have to pay additional amounts of premium to avoid losing the life insurance
protection you purchased through a Certificate.
HOW TO LEARN MORE:
Before purchasing a Certificate, read the information in this Prospectus and in
the Fund prospectus. Keep these prospectuses for future reference.
Neither the Securities and Exchange Commission ("SEC") nor any state securities
authority has approved or disapproved these securities, nor have they determined
if this Prospectus is accurate or complete. This prospectus does not constitute
an offering in any jurisdiction where such offering may not lawfully be made.
Any representation otherwise is a criminal offense. Interests in the Separate
Account and the Fixed Account are not deposits or obligations of, or insured or
guaranteed by, the U.S. Government, any bank or other depository institution
including the Federal Deposit Insurance Corporation, the Federal Reserve Board
or any other agency or entity or person. We do not authorize any representations
about this offering other than as contained in this Prospectus or its
supplements or in our authorized supplemental sales material.
<TABLE>
<S> <C> <C>
METROPOLITAN LIFE INSURANCE COMPANY MAIN OFFICE: 1 MADISON AVE. NEW YORK, NY 10010 (800) 523-2894
</TABLE>
<PAGE>
TABLE OF CONTENTS FOR THIS PROSPECTUS
<TABLE>
<CAPTION>
PAGE
IN THIS
SUBJECT PROSPECTUS
- ---------------------------------------------------------------------- -----------------
<S> <C>
Summary............................................................... 2
MetLife............................................................... 6
Separate Account UL................................................... 7
The Fixed Account..................................................... 7
The Metropolitan Series Fund, Inc..................................... 8
Issuing a Group Policy and a Certificate.............................. 8
Certificate Benefits.................................................. 9
Certificate Rights.................................................... 12
Payment and Allocation of Premiums.................................... 16
Charges and Deductions................................................ 18
Federal Tax Matters................................................... 21
Showing Performance................................................... 23
Rights We Reserve..................................................... 23
Other Certificate Provisions.......................................... 24
Sales and Administration of the Group Policies and Certificates....... 25
Voting Rights......................................................... 26
Reports............................................................... 27
Illustration of Certificate Benefits.................................. 27
Getting More Information.............................................. 28
Legal, Accounting and Actuarial Matters............................... 28
Management............................................................ 29
Financial Statements.................................................. 32
</TABLE>
SUMMARY
This summary gives an overview of the Group Policy and Certificates and is
qualified by the more detailed information in the Prospectus, the Group Policy
and the Certificates.
MetLife issues the Group Policy and Certificates. In addition to the
Certificate, optional insurance benefits may also be added to your coverage.
PREMIUMS
Generally, if elected by your employer, you may pay premiums through payroll
deduction. If payroll deduction is not available, you may pay premiums to us on
a monthly, quarterly or annual basis. You may, with certain restrictions, make
premium payments in any amount and at any frequency. However, you may also be
required to make an unscheduled premium payment so that your Certificate will
remain in force. The Certificate will remain in force as long as the cash
surrender value is large enough to cover one monthly deduction, regardless of
whether or not premium payments have been made.
2
<PAGE>
CASH VALUE
Your cash value in the Certificate reflects your premium payments, the charges
we deduct, interest we credit if you have cash value in our fixed interest
account, any investment experience you have in our Separate Account, as well as
your loan and withdrawal activity. MetLife doesn't guarantee the investment
performance of the Separate Account UL investment divisions and you should
consider your risk tolerance before selecting any of these funding options.
TRANSFERS AND SYSTEMATIC INVESTMENT STRATEGIES
You may transfer cash value among the funding options, subject to certain
limits. You may also choose among four systematic investment strategies: the
Equity Generator-SM-, the Equalizer-SM-, the Allocator-SM-, and the
Rebalancer-SM-.
SPECIFIED FACE AMOUNT OF INSURANCE
Within certain limits, you may choose your specified face amount of insurance
when the Certificate is issued. You may also increase the amount at certain
times determined by your employer and subject to our underwriting requirements.
In certain cases, we will automatically increase the specified face amount at
each employee's salary increase on dates chosen by the employer. You may also
decrease the specified face amount.
DEATH BENEFIT
The death benefit is the specified face amount of the Certificate plus the
Certificate cash value at the date of death of the covered person.
SURRENDERS, PARTIAL WITHDRAWALS AND LOANS
Within certain limits, you may take partial withdrawals and loans from the
Certificate. You may also surrender your Certificate for its cash surrender
value.
TAX TREATMENT
In most cases, you will not pay income taxes on withdrawals or surrenders or at
the Final Date of the Certificate, until your cumulative withdrawn amounts
exceed the cumulative premiums you have paid. If your Certificate is a modified
endowment contract, you will pay income taxes on loans and withdrawals to the
extent of any gains (which is generally the excess of cash value over the
premiums paid). In this case, an additional 10% tax may also apply. The death
benefit may be subject to Federal and state estate taxes, but your beneficiary
will generally not be subject to income tax on the death benefit. As with any
taxation matter, you should consult with and rely on the advice of your own tax
advisor.
3
<PAGE>
TABLE OF CHARGES AND EXPENSES
This table shows the charges and expenses that you may pay under your
Certificate. These charges can vary, based on the Group Policy under which your
Certificate is issued. See "Charges and Deductions," below for more information
on your Certificate's charges:
<TABLE>
<CAPTION>
TYPE OF CHARGE OR EXPENSE AMOUNT OF CHARGE OR EXPENSE
<S> <C>
Charges we deduct from each premium
payment(1)
Charge for average expected state Up to 5% of each premium payment, depending on the
taxes attributable to premiums: state where the Certificates are purchased
Charge for expected federal taxes 0.35% of each premium payment
attributable to premiums:
Monthly Deduction from your Certificate's
cash value
Cost of insurance charges: Amount varies depending on the specifics of your
Certificate(2)
Administration charge: Up to $5 per Certificate
Charge for optional rider benefits: Depends on terms of rider
Separate Account charge: At least .45% (effective annual rate), not to
exceed .90%, of the average daily net assets in
the Separate Account. We make this charge for our
assumption of certain mortality and expense risks.
Surrender, Withdrawal and Loan For certain Group Policies, there may be a charge
transaction fees: of up to $25 per surrender, withdrawal or loan.(3)
</TABLE>
- ---------------
(1) Rather than deducting this charge from each premium payment you make, we
have the option of deducting an equivalent amount as part of the monthly
deduction. In that case, the amount of the deduction will be based on premium
payments received under all Certificates issued in connection with the Group
Policy.
(2) See "Cost of Insurance" under "Charges and Deductions" for a more detailed
discussion of factors affecting this charge. If you would like, we will provide
you with an illustration of the impact of these and other charges under the
Certificate based on various assumptions.
(3) We will not make any transaction charge for the surrender of a Certificate
because of the termination of the Group Policy.
4
<PAGE>
FUND INVESTMENT MANAGEMENT FEES AND DIRECT EXPENSES
MetLife receives an investment management fee from the Fund and the Fund incurs
direct expenses (see the Fund Prospectus and Statement of Additional Information
referred to therein). You bear indirectly your proportionate share of the fees
and expenses of the Portfolios of the Fund that correspond to the Separate
Account investment divisions you are using. The following sets forth the Fund's
fees and expenses for the year ending 12/31/98:
<TABLE>
<CAPTION>
MANAGEMENT TOTAL 1998
PORTFOLIOS FEE OTHER EXPENSES ANNUAL EXPENSES
<S> <C> <C> <C>
State Street Research Growth(a) .48% .05% .53%
State Street Research Diversified(a) .43% .05% .48%
State Street Research Income(a) .33% .06% .39%
Santander International Stock(a) .75% .27% 1.02%
Harris Oakmark Large Cap Value(b)(c) .75% .80% 1.55%
Janus Mid Cap(a) .72% .09% .81%
Loomis Sayles High Yield Bond(a)(c) .70% .35% 1.05%
Scudder Global Equity(a) .74% .28% 1.02%
T. Rowe Price Small Cap Growth(a) .53% .14% .67%
Lehman Brothers Aggregate Bond Index(b)(c) .25% .32% .57%
MetLife Stock Index(a) .25% .05% .30%
Morgan Stanley EAFE Index(b)(c) .30% .99% 1.29%
Russell 2000 Index(b)(c) .25% .70% .95%
</TABLE>
- ---------------
(a) Total annual expenses of these portfolios are expressed as a percentage of
average net assets.
(b) These portfolios commenced operations on 11/9/98. Total annual expenses of
these portfolios are expressed as a percentage of the year-end net assets.
Expenses (other than the management fees) are based on estimated amounts for
1999.
(c) During all or a portion of 1998, we bore all expenses (other than management
fees, brokerage commissions, taxes, interest and any non-recurring expenses) in
excess of .20% of the net assets for each of these portfolios. Therefore, the
expenses these portfolios paid were lower than those indicated in the chart
above. The chart below shows the actual expenses for these portfolios:
<TABLE>
<CAPTION>
TOTAL 1998
ANNUAL
OTHER EXPENSES EXPENSES WITH
WITH EXPENSE EXPENSE
PORTFOLIOS REIMBURSEMENT REIMBURSEMENT
<S> <C> <C>
Loomis Sayles High Yield Bond .31% 1.01%
Lehman Brothers Aggregate Bond Index .23% .48%
Harris Oakmark Large Cap Value .20% .95%
Morgan Stanley EAFE Index .25% .55%
Russell 2000 Index .20% .45%
</TABLE>
OTHER
Please refer to "Federal Tax Matters--Our taxation" for a description of certain
charges that we currently do not impose but may impose in the future.
5
<PAGE>
METLIFE
(SIDEBAR) YOU CAN CONTACT US AT OUR ADMINISTRATIVE OFFICE
(END SIDEBAR)
We are a mutual life insurance company. We were formed in 1868 in New York and
we currently conduct business in all 50 states, the District of Columbia, Puerto
Rico and Canada. We are one of the largest financial services companies in the
world with many of the largest United States corporations for clients. As of
December 31, 1998, we had total life insurance in force of approximately $1.7
trillion and total assets under management of approximately $359 billion. We
have listed our directors and certain key officers under "Management" and our
financial information under "Financial Statements", below.
GIVING US REQUESTS, INSTRUCTIONS OR NOTIFICATIONS
CONTACTING US: You can communicate all of your requests, instructions and
notifications to us by contacting us in writing at our Administrative Office. We
may require that certain requests, instructions and notifications be made on
forms that we provide. These include: changing your beneficiary; taking a
Certificate loan; changing your specified face amount; taking a partial
withdrawal; surrendering your Certificate; making transfer requests (including
elections with respect to the systematic investment strategies) or changing your
premium allocations. Our Administrative Office is our office at 177 South
Commons Drive, Aurora, Illinois 60507. We may name additional or alternate
Administrative Offices. If we do, we will notify you in writing.
WHEN YOUR REQUESTS, INSTRUCTIONS AND NOTIFICATIONS BECOME EFFECTIVE:
- - Generally, requests, premium payments and other instructions and notifications
are effective on the Date of Receipt. In those cases, the effective time is at
the end of the Valuation Period during which we receive them at our
Administrative Office. (Some exceptions to this general rule are noted below
and elsewhere in this Prospectus.)
- A Valuation period is the period between two successive Valuation Dates. It
begins at the close of regular trading on the New York Stock Exchange on a
Valuation Date and ends at the close of regular trading on the New York
Stock Exchange on the next succeeding Valuation Date. The close of regular
trading is 4:00 p.m., Eastern Time on most days.
- A Valuation Date is:
- Each day on which the New York Stock Exchange is open for trading.
- Other days, if we, as the Fund's investment manager, think that there has
been a sufficient degree of trading in the Fund's portfolio securities
that the current net asset value of its shares might be materially
affected.
- - If your Group Policy is still in its first year, the effective time of premium
allocation instructions and transfer requests you make in your Certificate
enrollment form, or within 20 days of your Investment Start Date, is the end
of the first Valuation Date after that 20 day period. During the 20 day
period, all of your cash value is automatically allocated to our Fixed
Account. Your Investment Start Date is the Date of Receipt of your first
premium payment with respect to your Certificate, or, if later, the Date of
Receipt of your enrollment form.
- - If your Group Policy is not still in its first year, the Investment Start Date
is the effective time of the allocation instructions you made in your
Certificate enrollment form.
- - The effective date of your Systematic Investment Strategies will be that set
forth in the strategy chosen.
6
<PAGE>
SEPARATE ACCOUNT UL
We established the Separate Account under New York law on December 13, 1988. The
Separate Account receives premium payments from the Group Policies and
Certificates described in this Prospectus and other variable life insurance
policies that we issue. We have registered the Separate Account as a unit
investment trust under the Investment Company Act of 1940 (the "1940 Act"). The
assets in the Separate Account legally belong to us, but they are held solely
for the benefit of investors in the Separate Account and no one else, including
our other creditors. We will keep an amount in the Separate Account that at
least equals the value of our commitments to policy owners that are based on
their investments in the Separate Account. We can also keep charges that we
deduct and other excess amounts in the Separate Account or we can transfer the
excess out of the Separate Account.
(SIDEBAR)
EACH SEPARATE ACCOUNT INVESTMENT DIVISION INVESTS IN A CORRESPONDING PORTFOLIO
OF THE FUND.
(END SIDEBAR)
The Separate Account has subdivisions, called "investment divisions." Each
investment division invests its assets exclusively in shares of a corresponding
Portfolio of the Fund. We can add new investment divisions to or eliminate
investment divisions from the Separate Account. You can designate how you would
like your net premiums and cash value to be allocated among the available
investment divisions and our Fixed Account. In some cases, your employer retains
the right to allocate the portion of any net premiums it pays rather than you
pay. If so, your Certificate will state this. Amounts you allocate to each
investment division receive the investment experience of the investment
division, and you bear this investment risk.
THE FIXED ACCOUNT
The Fixed Account is part of our general assets that are not in any legally-
segregated separate accounts. Amounts in the Fixed Account are credited with
interest at an effective annual rate of at least 3% (for Group Policies issued
prior to March 1, 1999, the rate is at least 4%). We may also credit excess
interest on such amounts. We guarantee the rate of such excess interest until
the end of the calendar year in which the Group Policy first becomes effective.
Thereafter, we will declare the rate of excess interest as of January 1 of each
year. We may declare different excess interest rates for net premiums allocated
to the Fixed Account and for cash value already in the Fixed Account. In
addition, we may declare different rates for premium payments received in
different years. We treat transfers into the Fixed Account as new premium
payment for these purposes.
We credit the guaranteed and excess interest on each Valuation Date. We
guarantee the credited interest, and it becomes part of the cash value of your
Certificate's cash value in the Fixed Account. We charge the portion of the
monthly deduction that is deducted from the Fixed Account against the most
recent premiums paid and interest credited thereto.
We can delay transfers, withdrawals, surrender and payment of Certificate loans
from the Fixed Account for up to 6 months. Since the Fixed Account is not
registered under the federal securities laws, this Prospectus contains only
limited information about the Fixed Account. The Group Policy and the
Certificate give you more information on the operation of the Fixed Account.
7
<PAGE>
THE METROPOLITAN SERIES FUND, INC.
(SIDEBAR)
YOU SHOULD CAREFULLY REVIEW THE INVESTMENT OBJECTIVES, STRATEGIES, AND RISKS OF
EACH FUND PORTFOLIO WHICH ARE CONTAINED IN THE FUND PROSPECTUS YOU HAVE ALSO
(END SIDEBAR) RECEIVED.
The Fund is a "series" type of mutual fund, which is registered as an open-end
management investment company under the 1940 Act. The Fund is divided into
Portfolios, each of which represent a different class of stock in which a
corresponding investment division of the Separate Account invests. Not all of
the Portfolios of the Fund are available in connection with the Certificates.
You should read the Fund prospectus, which you have also received. It contains
information about the Fund and its Portfolios, including the investment
objectives, strategies, risks and investment advisers that are associated with
each Portfolio. It also contains information on our different separate accounts
and our affiliates that invest in the Fund and the risks related thereto.
As of the end of each Valuation Period, we purchase and redeem Fund shares for
the Separate Account at their net asset value without any sales or redemption
charges. These purchases and redemptions reflect the amount of any of the
following transactions that take effect at the end of the Valuation Period:
- - The allocation of net premiums to the Separate Account.
- - Dividends and distributions on Fund shares that are reinvested as of the dates
paid (which reduces the value of each share of the Fund, increases the number
of Fund shares outstanding, but has no affect on the cash value in the
Separate Account).
- - Certificate loans and loan repayments allocated to the Separate Account.
- - Transfers to and among investment divisions.
- - Withdrawals and surrenders taken from the Separate Account.
ISSUING A GROUP POLICY AND A CERTIFICATE
We may issue a Group Policy to an employer or association ("employer") or to a
trust that is adopted by an employer. The minimum number of people in a group
that is required before we will issue a Group Policy to an employer is 200
lives. We reserve the right to issue a Group Policy or provide coverage to an
employer that does not meet this minimum.
Employees of employers and members of associations ("employees") (including
employees' spouses if permitted by the Group Policy) may own Certificates issued
under their employer's Group Policy. If you want to own a Certificate, then you
must complete an enrollment form, which must be received by the Administrative
Office. We reserve the right to reject an enrollment form for any reason
permitted by law, and our acceptance of an enrollment form is subject to our
underwriting rules.
(SIDEBAR)
WE WILL ISSUE A CERTIFICATE TO YOU AS OWNER. UNLESS YOUR EMPLOYER HAS RESERVED
OTHERWISE, YOU WILL HAVE ALL THE RIGHTS UNDER THE CERTIFICATE INCLUDING THE
(END SIDEBAR) ABILITY TO NAME A NEW OWNER OR CONTINGENT OWNER.
Generally, we will issue a Certificate only to an eligible employee, or a spouse
of an eligible employee when permitted by the employer. The person upon whose
life the Certificate is issued is called the covered person. The owner is
generally the covered person unless the enrollment form designates someone else
as owner. For the purpose of computing the covered person's age under the
Certificate, we start with the covered person's age on a day selected by your
employer. Age can be measured from December 31st in a given year, or from any
other date agreed to by your employer and us.
The Date of Certificate is set forth in your Certificate and is the effective
date for life insurance protection under your Certificate. We use the Date of
Certificate to calculate the Certificate years (and Certificate months and
monthly anniversaries).
8
<PAGE>
CERTIFICATE BENEFITS
INSURANCE PROCEEDS
If the Certificate is in force, we will pay your beneficiary the insurance
proceeds as of the end of the Valuation Period that includes the covered
person's date of death. We will pay this amount after we receive documents that
we request as due proof of the covered person's death. The beneficiary can
receive the death benefit in a single sum or under an income plan described
below. You may make this choice during the covered person's lifetime. If no
selection is made we will place the amount in an account to which we will credit
interest, and the beneficiary will have immediate access to all or part of that
amount. The beneficiary has one year from the date the insurance proceeds are
paid to change the selection from a single sum payment to an income plan, as
long as we have made no payments from the interest-bearing account. If the terms
of the income plan permit the beneficiary to withdraw the entire amount from the
plan, the beneficiary can also name contingent beneficiaries.
The insurance proceeds equal:
- - The death benefit provided on the date of death or the alternate death
benefit; plus
- - Any additional insurance proceeds provided by rider; minus
- - Any unpaid Certificate loans and accrued interest thereon, and any due and
unpaid charges accruing during a grace period.
DEATH BENEFIT
(SIDEBAR)
THE CERTIFICATE PROVIDES A DEATH BENEFIT WHICH INCLUDES THE CASH VALUE OF THE
CERTIFICATE.
(END SIDEBAR)
The death benefit varies and equals the specified face amount of the Certificate
plus the cash value on the date of death.
ALTERNATE DEATH BENEFIT
In order to ensure that the Certificate qualifies as life insurance under the
federal income tax laws, the beneficiary will receive an alternate death benefit
if it is greater than the amount that the beneficiary would have received under
the death benefit. The alternate death benefit is as follows:
<TABLE>
<CAPTION>
AGE OF COVERED PERSON AT DEATH % OF CASH VALUE*
<S> <C>
40 and less 250
45 215
50 185
55 150
60 130
65 120
70 115
75 to 90 105
95 100
</TABLE>
- ------------
* For the ages not listed, the percentage decreases by a ratable portion for
each full year.
SPECIFIED FACE AMOUNT
(SIDEBAR)
YOU CAN GENERALLY INCREASE OR DECREASE YOUR CERTIFICATE'S SPECIFIED FACE AMOUNT.
(END SIDEBAR)
The specified face amount is the basic amount of insurance specified in your
Certificate. The Minimum Specified Face Amount is the smallest amount of
specified face amount for which a Certificate may be issued, and is set forth in
your Certificate. This amount will never be less than $10,000.
9
<PAGE>
Generally, you may change your specified face amount subject to certain
limitations. Any change you request will be effective on the monthly anniversary
on or next following our approval of your request.
You are permitted to decrease the specified face amount to as low as the Minimum
Specified Face Amount set forth in your Certificate.
You may request an increase on a date or dates determined by your employer and
set forth in your Certificate. If you are a qualifying employee, we will make
automatic increases in the specified face amount when your salary increases on a
date or dates determined by your employer. However, you can notify us in writing
that you do not desire such automatic increases. Any requirements as to the
minimum amount of an increase are set forth in your Certificate. Any increase is
subject to our underwriting rules which may include a requirement for evidence
satisfactory to us of the covered person's insurability.
Before you change your specified face amount you should consider the following:
- - The insurance portion of your death benefit will likely change and so will the
insurance charge. This will affect the insurance charges, cash value and death
benefit levels.
- - Reducing your specified face amount in the first 15 Certificate years may
result in our returning an amount to you which could then be taxed on an
income first basis, even if your Certificate is not a modified endowment
contract.
- - The amount of additional premiums that the tax laws permit you to pay into
your Certificate may increase or decrease. The additional amount you can pay
without causing your Certificate to be a modified endowment contract for tax
purposes may also increase or decrease.
- - The Certificate could become a modified endowment contract in certain
circumstances.
CASH VALUE
(SIDEBAR) YOUR CERTIFICATE IS DESIGNED TO ACCUMULATE CASH VALUE.
(END SIDEBAR)
Your Certificate's cash value equals:
- - The Fixed Account cash value, plus
- - The Loan Account cash value, plus
- - The Separate Account cash value.
Your Certificate's cash surrender value equals your cash value minus:
- - Any outstanding Certificate loans (plus accrued interest); and
- - Any accrued and unpaid monthly deduction.
The Separate Account cash value allocated to each investment division is
calculated as follows:
- - Unless the Group Policy is still in its first year, we will, on the Investment
Start Date for your Certificate, allocate your cash value among the investment
divisions as you requested your net premiums to be allocated in your
enrollment form or a subsequent reallocation request. If the Group Policy is
still in its first year, we will make this allocation 20 days after the
Investment Start Date.
- - Thereafter, at the end of each Valuation Period the cash value in an
investment division will equal:
- The cash value in the investment division at the beginning of the Valuation
Period; plus
- All net premiums, loan repayments and cash value transfers into the
investment division during the Valuation Period; minus
10
<PAGE>
- All partial cash withdrawals, loans and cash value transfers out of the
investment division during the Valuation Period; minus
- The portion of the any charges and deductions allocated to the cash value in
the investment division during the Valuation Period; plus
- The net investment return for the Valuation Period on the amount of cash
value in the investment division at the beginning of the Valuation Period.
The net investment return currently equals the rate of increase or decrease
in the net asset value per share of the underlying Fund portfolio over the
Valuation Period, adjusted upward to take appropriate account of any
dividends and other distributions paid by the portfolio during the period.
The net investment return could in the future be reduced by a charge for
taxes that we have the right to impose.
BENEFIT AT FINAL DATE
The Final Date is the Certificate anniversary on which the covered person is Age
95. Subject to certain conditions, we will allow you to extend that date where
permitted by state law. If the covered person is living on the Final Date, we
will pay you the cash surrender value of the Certificate. You will receive the
cash surrender value in a single sum.
PAID-UP CERTIFICATE PROVISION
Under this provision, you can choose to terminate the death benefit (and any
riders in effect) and use all or part of the cash surrender value as a single
premium for a "paid-up" benefit under the Certificate. ("Paid-up" means no
further premiums are required.) You may no longer allocate cash value to the
Separate Account or the Fixed Account. You will receive in cash any remaining
cash surrender value that is not used to purchase a paid-up benefit. The paid up
benefit must not be
- - more than can be purchased using the Certificate's cash surrender value
- - more than the death benefit under the Certificate at the time you choose to
use this provision
- - less than $10,000
OPTIONAL BENEFITS ADDED BY RIDER
You may be eligible for certain benefits provided by rider, subject to certain
underwriting requirements and the payment of additional premiums. We will deduct
any charges for the rider(s) as part of the monthly deduction. Each rider
contains important information, including limits and conditions that apply to
the benefits. If you decide to purchase any of the riders, you should carefully
review their provisions to be sure if the benefit is something that you want.
You should also consider:
- - That the addition of certain riders can restrict your ability to exercise
certain rights under the Certificate.
- - That the amount of benefits provided under the rider is not based on
investment performance of a separate account; but, if the Certificate
terminates because of poor investment performance or any other reason, the
riders generally will also terminate.
- - The tax consequences. You should also consult with your tax advisor before
purchasing one of the riders.
11
<PAGE>
Generally, we currently make the following benefits available by rider:
<TABLE>
<S> <C>
- - Disability Waiver of Monthly - Accidental Death or
Deduction Benefit(1),(2) Dismemberment Benefit
- - Accelerated Death - Dependent Life Benefits
Benefit(1),(3)
- - Accidental Death Benefit
</TABLE>
- ------------
(1) Provided to you only if elected by your employer.
(2) An increase in specified face amount may not be covered by this rider. If
not, the portion of the monthly deduction associated with the increase will
continue to be deducted from the cash value, which if insufficient, could result
in the Certificate's termination. For this reason, it may be advantageous for
the owner, at the time of total disability, to reduce the specified face amount
to that covered by this rider.
(3) Payment under this rider may affect eligibility for benefits under state or
federal law.
INCOME PLANS
(SIDEBAR)
GENERALLY YOU CAN RECEIVE THE CERTIFICATE'S INSURANCE PROCEEDS UNDER AN INCOME
(END SIDEBAR) PLAN INSTEAD OF IN A LUMP SUM.
Before you purchase an income plan you should consider:
- - The tax consequences associated with the Certificate proceeds, which can vary
considerably, depending on whether a plan is chosen. You or your beneficiary
should consult with a qualified tax adviser about tax consequences.
- - That these plans do not have a variable investment return.
Generally, we currently make the following income plans available:
<TABLE>
<S> <C>
- - Interest income - Installment Income for a
Stated Period
- - Installment Income for a - Single Life Income-Guaranteed
Stated Amount Payment Period
- - Joint and Survivor Life Income - Single Life Income-Guaranteed
Return
</TABLE>
CERTIFICATE RIGHTS
(SIDEBAR)
GENERALLY, YOU CAN TRANSFER YOUR CASH VALUE AMONG THE INVESTMENT DIVISIONS AND
(END SIDEBAR) THE FIXED ACCOUNT AT ANY TIME.
CASH VALUE TRANSFERS
The minimum amount you may transfer is $200 or, if less, the total amount in an
investment option. You may make transfers at any time. In some cases, your
employer retains the right to transfer the portion of any net premiums it pays
rather than you pay. Your Certificate will set forth any such employer rights.
In some cases, the maximum amount that you may transfer or withdraw from the
Fixed Account in any Certificate year is the greater of
- - $200, and
- - 25% of the largest amount in the Fixed Account over the last four Certificate
years (or since the Date of Certificate if the Certificate has been in effect
for less than four years).
This limit does not apply to
- - a full surrender
- - any loans taken
- - any transfers under a systematic investment strategy
The Certificate includes a description of your cash value transfer rights. We do
not charge for transfers. Currently, transfers are not taxable transactions.
12
<PAGE>
SYSTEMATIC INVESTMENT STRATEGIES: For certain groups, you can choose one of
four currently available strategies. Your employer can inform you whether these
investment strategies are available. You can also change or cancel your choice
at any time.
- - EQUITY GENERATOR: allows you to transfer the interest earned on amounts in
the Fixed Account in any Certificate month equal to at least $20 to the
MetLife Stock Index investment division. The transfer will be made at the
beginning of the Certificate month following the Certificate month in which
the interest was earned.
- - EQUALIZER: allows you to periodically equalize amounts in your Fixed Account
and the MetLife Stock Index investment division. We currently make
equalization at the end of each calendar quarter. We will terminate this
strategy if you make a transfer out of the investment division or the Fixed
Account that isn't part of the strategy. You may then reelect the Equalizer on
your next Certificate anniversary.
- - REBALANCER: allows you to periodically redistribute amounts in the Fixed
Account and investment divisions in the same proportion that the net premiums
are then being allocated. We currently make the redistribution at the
beginning of each calendar quarter.
- - ALLOCATOR: allows you to systematically transfer money from the Fixed Account
to any investment division(s). You must have enough cash value in the Fixed
Account to enable the election to be in effect for three months. The election
can be to transfer each month:
- A specific amount until the cash value in the Fixed Account is exhausted;
- A specific amount for a specific number of months; or
- Amounts in equal installments until the total amount you have requested has
been transferred.
TRANSFERS BY TELEPHONE: We may, if permitted by state law, decide in the future
to allow you to make transfer requests, changes to Systematic Investment
Strategies and allocations of future net premium by phone. The following
procedures would apply:
- - We must have received your authorization in writing satisfactory to us, to act
on instructions from any person that claims to be you, as long as that person
follows our procedures.
- - We will institute reasonable procedures to confirm that instructions we
receive are genuine. Our procedures will include receiving from the caller
your personalized data.
- - All telephone calls will be recorded.
- - You will receive a written confirmation of any transaction.
- - Neither the Separate Account nor we will be liable for any loss, expense or
cost arising out of a telephone request if we reasonably believed the request
to be genuine.
LOAN PRIVILEGES
(SIDEBAR)
YOU CAN BORROW FROM US AND USE YOUR CERTIFICATE AS SECURITY FOR THE LOAN.
(END SIDEBAR)
The amount of each loan must be:
- - At least $200.
- - No more than 75% of the cash surrender value (unless your Certificate tells
you that state law requires a different percentage to be applied) when added
to all other outstanding Certificate loans.
13
<PAGE>
For certain Group Policies, we may charge a transaction fee of up to $25 for
each loan if your Certificate so states.
As of your loan request's Date of Receipt, we will:
- - Remove an amount equal to the loan from your cash value in the Fixed Account
and each investment division of the Separate Account in the same proportion
that the Certificate's cash value in each such option bears to the total cash
value of the Certificate in the Fixed Account and the investment divisions.
- - Transfer such cash value to the Loan Account, where it will be credited with
interest at a rate equal to the loan rate charged less a percentage charge,
based on expenses associated with Certificate loans, determined by us. This
percentage charge will not exceed 2%, and the minimum rate we will credit to
the Loan Account will be 3% per year (for Group Policies issued prior to March
1, 1999, the minimum rate is 4%). At least once a year, we will transfer any
interest earned in your Loan Account to the Fixed Account and the investment
divisions, according to the way that we then allocate your net premiums.
- - Charge you interest, which will accrue daily at a rate of up to 8% per year
(which is the maximum rate we will ever charge). We will determine the current
interest rate applicable to you at the time you take a loan. Your interest
payments are generally due at the beginning of each Certificate year. However,
we reserve the right to make interest payments due in a different manner. If
you don't pay the amount within 31 days after it is due, we will treat it as a
new Certificate loan.
Repaying your loans (plus accrued interest) is done by sending in payments at
any time before the Final Date while the covered person is living. You should
designate whether a payment is intended as a loan repayment or a premium
payment, since we will treat any payment for which no designation is made as a
premium payment. We will allocate your repayment to the Fixed Account and the
investment divisions, in the same proportion that net premiums are then
allocated.
Before taking a Certificate loan you should consider the following:
- - Interest payments on loans are generally not deductible for tax purposes.
- - Under certain situations, Certificate loans could be considered taxable
distributions.
- - If you surrender your Certificate or if we terminate your Certificate, or at
the Final Date, any outstanding loan amounts (plus accrued interest) may be
taxed as a distribution. (See "Federal Tax Matters--The Certificate-- Loans"
below.)
- - A Certificate loan increases the chances of our terminating your Certificate
due to insufficient cash value. We will terminate your Certificate with no
value if: (a) on a monthly anniversary your loans (plus accrued interest)
exceed your cash value minus the monthly deduction; and (b) we tell you of the
insufficiency and you do not make a sufficient payment within the greater of
(i) 61 days of the monthly anniversary, or (ii) 30 days after the date notice
of the start of the grace period is mailed to you.
- - Your Certificate's death benefit will be reduced by any unpaid loan (plus
accrued interest).
14
<PAGE>
SURRENDER AND WITHDRAWAL PRIVILEGES
(SIDEBAR)
YOU CAN SURRENDER YOUR CERTIFICATE FOR ITS CASH SURRENDER VALUE.
(END SIDEBAR)
We may ask you to return the Certificate before we honor your request to
surrender your Certificate. The proceeds will be paid in a single sum. If the
covered person dies after you surrender the Certificate but before the end of
the Certificate month in which you surrendered the Certificate, we will pay your
beneficiary an amount equal to the difference between the Certificate's death
benefit and its cash value, computed as of the surrender date.
You can make partial withdrawals if:
- - The withdrawal is at least $200.
- - In some cases, the amount you request to withdraw from the Fixed Account is
not more than the greater of (a) $200, and (b) 25% of the largest amount in
the Fixed Account over the last four Certificate years (or since the Date of
Certificate if the Certificate has been in effect for less than four years).
Your Certificate includes a description of your rights to make partial
withdrawals. If you make a request for a partial withdrawal that is not
permitted, we will tell you and you may then ask for a smaller withdrawal or
surrender the Certificate. We will deduct your withdrawal from the Fixed Account
and each of the investment divisions of the Separate Account in the same
proportion that the Certificate's cash value in each such option bears to the
total cash value of the Certificate in the Fixed Account and the investment
divisions.
Before surrendering your Certificate or requesting a partial withdrawal you
should consider the following:
- - Transaction fees of up to $25 (but not greater than 2% of the amount
withdrawn) may apply, if your Certificate so states.
- - Amounts received may be taxable as income and, if your Certificate is a
modified endowment contract, subject to certain tax penalties.
- - If you also decrease your specified face amount at the time of the withdrawal,
your Certificate could become a modified endowment contract.
- - For partial withdrawals, your death benefit will decrease by the amount of the
withdrawal.
- - In some cases you may be better off taking a Certificate loan, rather than a
partial withdrawal.
EXCHANGE PRIVILEGE
If you decide that you no longer want to take advantage of the investment
divisions in the Separate Account, you may transfer all of your money into the
Fixed Account. No transaction charge will be imposed on a transfer of your
entire cash value (or the cash value attributable to a specified face amount
increase) to the Fixed Account within the first 24 Certificate months (or within
24 Certificate months after a specified face amount increase you have requested,
as applicable). In some states, in order to exercise your exchange privilege,
you must transfer, without charge, the Certificate cash value (or the portion
attributable to a specified face amount increase) to a flexible premium fixed
benefit life insurance policy, which we make available.
15
<PAGE>
PAYMENT AND ALLOCATION OF PREMIUMS
PREMIUMS
The payment of premiums won't guarantee that your Certificate will remain in
force. Rather, this depends on your Certificate's cash surrender value.
PAYING PREMIUMS
(SIDEBAR)
YOU CAN MAKE PLANNED PERIODIC PREMIUM PAYMENTS AND UNSCHEDULED PREMIUM PAYMENTS.
(END SIDEBAR)
You can make premium payments, subject to certain limitations discussed below,
through:
- - PAYROLL DEDUCTION: Where provided by your employer, you may pay premiums
through payroll deduction. Your employer may require that you pay a minimum
monthly amount in order to use payroll deduction. Your employer may send
payroll deductions to us as much as 30 days after the deduction is made.
- - PLANNED PERIODIC PAYMENTS: If there is no payroll deduction available, you
may elect to pay premiums monthly, quarterly or annually.
- - UNSCHEDULED PREMIUM PAYMENT OPTION: You can make premium payments at any
time.
MAXIMUM AND MINIMUM PREMIUM PAYMENTS
- - The first premium may not be less than the planned premium.
- - Unscheduled premium payments must be at least $100 each. We may change this
minimum amount on 90 days notice to you.
- - You may not pay premiums that exceed tax law premium limitations for life
insurance policies. We will return any amounts that exceed these limits except
that we will keep any amounts that are required to keep the Certificate from
terminating. We will let you make premium payments that would turn your
Certificate into a modified endowment contract, but we will promptly tell you
of this status, and if possible, we will tell you how to reverse the status.
ALLOCATING NET PREMIUMS
(SIDEBAR)
NET PREMIUMS ARE YOUR PREMIUMS MINUS THE CHARGES DEDUCTED FROM YOUR PREMIUMS.
(END SIDEBAR)
Generally, you indicate in your enrollment form the initial allocation of net
premiums among the Fixed Account and the investment divisions of the Separate
Account. In some cases, your employer has the right to allocate the portion of
any net premiums it pays rather than you pay until the covered person retires
(if the covered person is employed by your employer) or your Certificate becomes
portable. Your Certificate includes a description of your right to allocate net
premiums.
The percentage of your net premium allocation into each of these investment
options must be a minimum of 10% and in whole numbers. You can change your
allocations at any time by giving us written notification at our Administrative
Office or in another manner that we permit.
TERMINATION OF EMPLOYER PARTICIPATION IN THE GROUP POLICY
Your employer can terminate its participation in the Group Policy. In addition,
we may also terminate your employer's participation in the Group Policy if
either:
1. during any twelve month period, the total specified face amount for all
Certificate Owners under the Group Policy or the number of Certificates
falls by certain amounts or below the minimum levels we establish (these
levels are set forth in your Certificate), or
16
<PAGE>
2. your employer makes available to its employees another life insurance
product.
Both your employer and MetLife must provide ninety days' written notice to the
other as well as to you before terminating participation in the Group Policy.
Termination means that your employer will no longer send premiums to us through
payroll deduction and that no new Certificates will be issued to employees in
your employer's group.
EFFECT OF TERMINATION OF GROUP POLICY PARTICIPATION ON OWNERS
You will remain an Owner of your Certificate if
- - you are an Owner of a Certificate that has become portable (as discussed
below) not later than the Certificate monthly anniversary prior to termination
of your employer's participation, or
- - you are an Owner who exercised the paid-up Certificate provision not later
than the last Certificate monthly anniversary prior to notice being sent to
you of the termination.
For all other Owners,
- - If your employer replaces the Group Policy with another life insurance product
that is designed to have cash value,
- we will terminate your Certificate and
- we will transfer your cash surrender value to the other life insurance
product (or pay your cash surrender value to you if you are not covered by
the new product).
- - If the other life insurance product is not designed to have cash value,
- we will terminate your certificate and
- we will pay your cash surrender value to you.
If there is no other life insurance product, then, depending on the terms of
your Certificate,
- - you may have the option of choosing to become an Owner of a portable
Certificate or a paid-up Certificate, and
- - you may have the option of purchasing insurance based on the "conversion"
rights set forth in your Certificate and of receiving the cash surrender value
of your Certificate. If you choose the conversion rights, the insurance
provided will be substantially less (and in some cases nominal) than the
insurance provided under your Certificate.
Instead of any of the above options, you may choose to apply your Certificate's
cash surrender value to the purchase of an annuity product from MetLife upon
termination of your Certificate.
PORTABLE CERTIFICATE: A Certificate becomes portable when an event specified in
the Certificate occurs. These events may include:
- - the covered person's retirement as determined by your employer
- - other termination of the covered person's employment
- - the sale by your employer of the business unit with which the covered person
is employed
If you become the Owner of a portable Certificate, the current cost of insurance
may change, but it will never be higher than the guaranteed cost of insurance.
Also, we may no longer consider you a member of your employer's group for
purposes of determining cost of insurance rates and charges.
17
<PAGE>
CERTIFICATE TERMINATION AND REINSTATEMENT WHILE THE GROUP POLICY IS IN EFFECT
TERMINATION: We will terminate your Certificate without any cash surrender
value if:
- - The cash surrender value on any monthly anniversary is less than the monthly
deduction; and
- - We do not receive a sufficient premium payment within the grace period to
cover the monthly deduction. We will mail you notice if any grace period
starts. The grace period is the greater of (a) 61 days measured from the
monthly anniversary and (b) 30 days after the notice is mailed.
REINSTATEMENT: The following applies unless the Group Policy has been
terminated and you would not have been permitted to retain your Certificate on a
portable or paid-up basis. Upon your request, we will reinstate your
Certificate, subject to certain terms and conditions that the Certificate
provides. We must receive your request within 3 years (or within a longer period
if required by state law) after the end of the grace period and before the Final
Date. You also must provide us with:
- - A written request for reinstatement.
- - Evidence of insurability that we find satisfactory.
- - An additional premium amount that the Certificate prescribes for this purpose.
CHARGES AND DEDUCTIONS
(SIDEBAR)
CAREFULLY REVIEW THE "TABLE OF CHARGES AND EXPENSES" IN THE "SUMMARY" WHICH SETS
(END SIDEBAR) FORTH THE CHARGES THAT YOU PAY UNDER YOUR CERTIFICATE.
The Certificate charges compensate us for our expenses and risks. Any
distinctions we make about the specific purposes of the different charges are
imprecise, and we are free to keep and use our revenues or profits for any other
purpose, including paying any of our costs and expenses in connection with the
Group Policies and Certificates. The following sets forth additional information
about some (but not all) of the Certificate charges.
CHARGE FOR AVERAGE EXPECTED STATE TAXES ATTRIBUTABLE TO PREMIUMS: We make this
charge to reimburse us for the state premium taxes that we must pay on premiums
we receive. Premium taxes vary from state to state. We will charge one rate for
each group. We estimate the initial charge for each group based on anticipated
taxes to be incurred on behalf of each group during the first Group Policy year.
Thereafter, we will base this charge on anticipated taxes taking into account
actual state and local premium taxes we incur 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 residence of the Owners.
We may deduct this charge, as well as the charge for expected federal taxes
attributable to premiums, either as a percent of premium or as part of the
monthly deduction. In the latter case, the amount we deduct would depend on the
amount of premiums paid by the group as a whole rather than the amount paid by
you. We will waive the state premium tax charge for Internal Revenue Code
Section 1035 exchanges from any other policy to a Certificate. We will also
waive the state premium tax charge as well as the charge for expected federal
taxes attributable to premiums for 1035 exchanges from another MetLife policy to
a Certificate.
18
<PAGE>
CHARGES INCLUDED IN THE MONTHLY DEDUCTION: Your Certificate describes the
charges that are applicable to you as part of the monthly deduction.
The monthly deduction accrues on each monthly anniversary starting with the Date
of Certificate. However, we may make the actual deduction up to 45 days after
each such monthly anniversary. We allocate the monthly deduction among the Fixed
Account and each of the investment divisions of the Separate Account in the same
proportion that the Certificate's cash value in each such option bears to the
total cash value of the Certificate in the Fixed Account and the investment
divisions.
- - COST OF INSURANCE: This charge varies monthly based on many factors. Each
month, we determine the charge by multiplying your cost of insurance rates by
the insurance amount.
- The insurance amount is the death benefit at the beginning of the
Certificate month, minus the cash value at the beginning of the Certificate
month. The insurance amount will be affected by changes in the specified
face amount of the Certificate. The insurance amount and therefore the cost
of insurance will be greater if the specified face amount is increased. If
the alternate death benefit is in effect, then the cost of insurance will
vary directly with the cash value.
- - The cost of insurance rate is based on:
- The age and rate class of the covered person
- Group mortality characteristics
- The particular characteristics under the Group Policy that are agreed to by
your employer and us, such as
1. The rate class structure
2. The degree of stability in the charges sought by your employer, and
3. Portability features
- The amount of any surplus or reserves to be transferred to us from any
previous insurer or from another of our policies (see "Other Certificate
Provisions-Dividends").
The actual monthly cost of insurance rates will be based on our expectations as
to future experience. The rates, however, will never exceed the guaranteed cost
of insurance rates set forth in your Certificate. These guaranteed rates may be
up to 150% of the rates that could be charged based on the 1980 Commissioners
Standard Ordinary Mortality Table, Males, age last birthday ("1980 CSO Table").
The maximum guaranteed rates may be higher than the 1980 CSO Table because we
- - use simplified underwriting and non-medical issue procedures whereby we may
not require the covered person to submit to a medical or paramedical
examination, and
- - may provide coverage to groups that present substandard risk characteristics
according to our underwriting criteria.
Our current rates are lower than 100% of the 1980 CSO Table in most cases. We
review our rates periodically and may adjust them based on our expectations of
future experience. We will apply the same rates to everyone in a group who has
had their Certificate for the same amount of time and who is the same age and
rate class. We adjust the rates from time to time based on several factors,
including
- - the number of Certificates in force for each group
- - the number of Certificates in the group surrendered or becoming portable
during the period
- - the actual experience of the group.
19
<PAGE>
As a general rule, the cost of insurance rate increases each year you own your
Certificate, as the covered person's age increases. Our use of simplified
underwriting and non-medical issue procedures may result in higher cost of
insurance charges for some healthy individuals.
Rate class relates to the level of mortality risk we assume with respect to a
covered person. We and your employer will agree to the number of classes and
characteristics of each class. The classes may vary by smoker and non-smokers,
active and retired status, Owners of portable Certificates and other Owners,
and/or any other non-discriminatory classes we and your employer agree to. The
covered person's rate class will affect your cost of insurance.
ADMINISTRATION CHARGE: We make this monthly charge primarily to compensate us
for expenses we incur in the administration of the Certificates, including our
underwriting and start-up expenses. Your Certificate will describe your
administration charge.
We will determine differences in the administration charge rates applicable to
different Group Policies based on expected differences in the administrative
costs under the Certificates or in the amount of revenues that we expect to
derive from the charge. Such differences may result, for example, from
- - features under each Group Policy that are agreed to by your employer and us,
- - the extent to which certain administrative functions in connection with the
Group Policy are to be performed by us or by your employer, and
- - the expected average Certificate size.
CHARGE AGAINST THE SEPARATE ACCOUNT: We make this daily charge against the
assets in the Separate Account primarily to compensate us for:
- - mortality risks that covered persons may live for a shorter period than we
expect; and
- - expense risks that our issuing and administrative expenses may be higher than
we expect.
If our estimates are correct, we will realize a profit from this charge,
otherwise, we could incur a loss.
We determine differences in this charge for different Group Policies based on
differences in the levels of mortality and expense risks under those Group
Policies. These differences arise mainly from the fact that
- - the factors discussed above on which the cost of insurance and administration
charges are based are more uncertain in some cases than others, and
- - our ability to recover any unexpected costs from Certificate charges varies
from case to case depending on the maximum rates for such charges we agree to
with employers.
We will determine Certificate charge rates pursuant to our established actuarial
procedures, and we will not discriminate unreasonably or unfairly against owners
of Certificates under any Group Policy.
We reserve the right, if permitted by law, to change the structure of this
charge so that it is charged on a monthly basis as a percentage of cash value in
the Separate Account or so that it is charged as a part of the monthly
deduction.
20
<PAGE>
FEDERAL TAX MATTERS
(SIDEBAR)
YOU SHOULD CONSULT WITH YOUR OWN TAX ADVISOR TO FIND OUT HOW TAXES CAN AFFECT
YOUR BENEFITS AND RIGHTS UNDER YOUR CERTIFICATE.
(END SIDEBAR)
The following is a brief summary of some tax rules that may apply to your
Certificate. You should consult with your own tax advisor to find out how taxes
can affect your benefits and rights under your Certificate, especially before
you make unscheduled premium payments, change your specified face amount, change
coverage provided by riders, take a loan or withdrawal, or assign or surrender
the Certificate.
THE CERTIFICATE
INSURANCE PROCEEDS
- - Generally excludable from your beneficiary's gross income.
- - The proceeds may be subject to federal estate tax: (i) if paid to the covered
person's estate; or (ii) if paid to a different beneficiary if the covered
person possessed incidents of ownership at or within three years before death.
- - If you die before the covered person, the value of your Certificate
(determined under IRS rules) is included in your estate and may be subject to
federal estate tax.
- - Whether or not any federal estate tax is due is based on a number of factors
including the estate size.
CASH VALUE (IF YOUR CERTIFICATE IS NOT A MODIFIED ENDOWMENT CONTRACT)
- - You are generally not taxed on your cash value until you withdraw it,
surrender your Certificate or receive a distribution on the Final Date. In
these cases, you are generally permitted to take withdrawals up to the amount
of premiums paid without any tax consequences. However, withdrawals will be
subject to income tax after you have received amounts equal to the total
premiums you paid. Somewhat different rules apply in the first 15 Certificate
years when a distribution may be subject to tax if there is a gain in your
Certificate (which is generally when your cash value exceeds the cumulative
premiums you paid).
LOANS
- - Loan amounts received will generally not be subject to income tax, unless your
Certificate is or becomes a modified endowment contract or terminates.
- Interest on loans is generally not deductible.
- If your Certificate terminates (upon surrender, cancellation, lapse or the
Final Date) while any Certificate loan is outstanding, the amount of the
loan plus accrued interest thereon will be deemed to be a "distribution" to
you. Any such distribution will have the same tax consequences as any other
Certificate distribution.
MODIFIED ENDOWMENT CONTRACTS
These contracts are life insurance contracts where the premiums paid during the
first 7 years after the Certificate is issued, or after a material change in the
Certificate, exceed tax law limits referred to as the "7-pay test." Material
changes in the Certificate include changes in the level of benefits and certain
other changes to your Certificate after the issue date. Reductions in benefits
during a 7-pay period may cause your Certificate to become a modified
21
<PAGE>
endowment contract. Generally, a life insurance policy that is received in
exchange for a modified endowment contract will also be considered a modified
endowment contract.
If your Certificate is considered a modified endowment contract the following
applies:
- - The death benefit will generally be income tax free to your beneficiary, as
discussed above.
- - Amounts withdrawn or distributed before the covered person's death, including
loans, assignments and pledges, are treated as income first and subject to
income tax. All modified endowment contracts you purchase from us and our
affiliates during the same calendar year are treated as a single contract for
purposes of determining the amount of any such income.
- - An additional 10% income tax generally applies to the taxable portion of the
amounts received before age 59 1/2, except generally if you are disabled or if
the distribution is part of a series of substantially equal periodic payments
made over life expectancy.
DIVERSIFICATION
In order for your Certificate to qualify as life insurance, we must comply with
certain diversification standards with respect to the investments underlying the
Certificate. We believe that we satisfy and will continue to satisfy these
diversification standards. Inadvertent failure to meet these standards may be
able to be corrected. Failure to meet these standards would result in immediate
taxation to Certificate owners of gains under their Certificates.
CHANGES TO TAX RULES AND INTERPRETATIONS
Changes in applicable tax rules and interpretations can adversely affect the tax
treatment of your Certificate. These changes may take effect retroactively. We
reserve the right to amend the Certificate in any way necessary to avoid any
adverse tax treatment. Examples of changes that could create adverse tax
consequences include:
- - Possible taxation of cash value transfers.
- - Possible taxation as if you were the owner of your allocable portion of the
Separate Account's assets.
- - Possible limits on the number of investment funds available or the frequency
of transfers among them.
- - Possible changes in the tax treatment of Certificate benefits and rights.
OTHER ISSUES RELATING TO GROUP VARIABLE UNIVERSAL LIFE
While "employee pay all" group variable universal life should generally be
treated as separate from any Internal Revenue Code Section 79 Group Term Life
Insurance Plan also in effect, in some circumstances group variable universal
life could be viewed as being part of such a plan, giving rise to adverse tax
consequences. Finally, employer involvement and other factors determine whether
group variable universal life is subject to the Employee Retirement Income
Security Act ("ERISA").
22
<PAGE>
OUR TAXATION
We don't expect to incur federal, state or local taxes upon the earnings or
realized capital gains attributable to the Separate Account. If we do incur
federal, state or local taxes at some time in the future, we reserve the right
to charge cash value allocated to the Separate Account for these taxes.
SHOWING PERFORMANCE
We may advertise or otherwise show:
- - Investment division performance ranking and rating information as it compares
among similar investments as compiled by independent organizations.
- - Comparisons of the investment divisions with performance of similar
investments and appropriate indices.
- - Our insurance company ratings that are assigned by independent rating agencies
and that are relevant when considering our ability to honor our guarantees.
- - Personalized illustrations based on historical Separate Account performance.
RIGHTS WE RESERVE
We reserve the right to make certain changes if we believe the changes are in
the best interest of our Certificate owners or would help carry out the purposes
of the Certificate. We will make these changes in the manner permitted by
applicable law and only after getting any necessary owner and regulatory
approval. We will notify you of any changes that result in a material change in
the underlying investments in the investment divisions, and you will have a
chance to transfer out of the affected division (without charge). Some of the
changes we may make include:
- - Operating the Separate Account in any other form that is permitted by
applicable law.
- - Changes to obtain or continue exemptions from the 1940 Act.
- - Transferring assets among investment divisions or to other separate accounts,
or our general account or combining or removing investment divisions from the
Separate Account.
- - Substituting Fund shares in an investment division for shares of another
portfolio of the Fund or another fund or investment permitted by law.
- - Changing the way we assess charges without exceeding the aggregate amount of
the Certificate's guaranteed maximum charges.
- - Making any necessary technical changes to the Certificate to conform it to the
changes we have made.
23
<PAGE>
OTHER CERTIFICATE PROVISIONS
(SIDEBAR)
CAREFULLY REVIEW YOUR CERTIFICATE WHICH CONTAINS A FULL DISCUSSION OF ALL ITS
(END SIDEBAR) PROVISIONS.
You should read your Certificate for a full discussion of its provisions. The
following is a brief discussion of some of the provisions that you should
consider:
FREE LOOK PERIOD
You can return the Certificate or terminate an increase in the specified face
amount during this period. The period is the later of:
- - 10 days after you receive the Certificate or, in the case of an increase, the
revised Certificate (unless state law requires your Certificate to specify a
longer specified period); and
- - 45 days after we receive the completed enrollment form or specified face
amount increase request.
If you return your Certificate, we will send you a complete refund of any
premiums paid within seven days. If you terminate an increase in the specified
face amount, we will restore all Certificate values to what they would have been
had there been no increase. We will also refund any premiums paid so that the
Certificate will continue to qualify as life insurance under the federal income
tax laws.
INCONTESTABILITY
We will not contest:
- - Your Certificate after two Certificate years from issue or reinstatement
(excluding riders added later).
- - An increase in a death benefit after it has been in effect for two years.
SUICIDE
If the covered person commits suicide within the first two Certificate years (or
another period required by state law), your beneficiary will receive all
premiums paid (without interest), less any outstanding loans (plus accrued
interest) and withdrawals taken. Similarly, we will pay the beneficiary only the
cost of any increase in specified face amount if the covered person commits
suicide within two years of such increase.
AGE
We will adjust benefits to reflect the correct age of the covered person, if
this information isn't correct in the Certificate enrollment form.
ASSIGNMENT
You can assign your Certificate if you notify us in writing. The assignment or
release of the assignment is effective when it is recorded at the Administrative
Office. We are not responsible for determining the validity of the assignment or
its release. Also, there could be serious adverse tax consequences to you or
your beneficiary, so you should consult with your tax adviser before making any
assignment.
24
<PAGE>
PAYMENT AND DEFERMENT
(SIDEBAR)
UNDER CERTAIN SITUATIONS, WE MAY DEFER PAYMENTS.
(END SIDEBAR)
Generally, we will pay or transfer amounts from the Separate Account within
seven days after the Date of Receipt of all necessary documentation required for
such payment or transfer. We can defer this if:
- - The New York Stock Exchange has an unscheduled closing.
- - There is an emergency so that we could not reasonably determine the investment
experience of a Certificate.
- - The Securities and Exchange Commission by order permits us to do so for the
protection of Certificate owners (provided that the delay is permitted under
New York State insurance law and regulations).
- - With respect to the insurance proceeds, if entitlement to a payment is being
questioned or is uncertain.
- - We are paying amounts attributable to a check. In that case we can wait for a
reasonable time (15 days or less) to let the check clear.
We currently pay interest on the amount of insurance proceeds at 4% per year (or
higher if state law requires) from the date of death until the date we pay the
benefit.
DIVIDENDS
The Group Policy and Certificates are participating. However, we do not
anticipate that the Group Policies and Certificates will be entitled to any
dividend. In some situations involving transfer of coverage to a Group Policy or
to a successor insurer, certain amounts of surplus or reserves may also be
transferred to us or the successor insurer rather than being declared as
dividends.
SALES AND ADMINISTRATION OF THE GROUP POLICIES AND CERTIFICATES
(SIDEBAR)
WE PERFORM THE SALES AND ADMINISTRATIVE SERVICES FOR THE GROUP POLICIES AND
CERTIFICATES.
(END SIDEBAR)
We serve as the "principal underwriter," as defined in the 1940 Act, for the
Group Policies and Certificates as well as other variable life insurance and
variable annuity contracts issued by a subsidiary and us. We are registered
under the Securities Exchange Act of 1934 as a broker-dealer and are a member of
the National Association of Securities Dealers, Inc. We are an investment
manager to the Fund and may also provide advisory services to other clients.
COMPUTER SYSTEMS
We use computer systems to process Group Policy and Certificate transactions and
valuations. These systems need to be adjusted to be able to continue to
administer the Group Policies and Certificates beginning January 1, 2000. As is
the case with most systems conversion projects, risks and uncertainties exist
due, in part, to reliance on third party vendors and a project could be delayed.
Although we cannot give you assurances, we are devoting substantial resources
necessary to make these systems modifications and expect that necessary changes
will be completed on time and in a way that will result in no disruption to
Group Policy and Certificate servicing operations.
25
<PAGE>
BONDING
Our directors, officers and employees are bonded in the amount of $50,000,000,
subject to a $5,000,000 deductible.
DISTRIBUTING THE GROUP POLICIES AND CERTIFICATES
We sell the Group Policies and Certificates through licensed life insurance
sales representatives:
- - Registered through us.
- - Registered through other broker-dealers, including a wholly owned subsidiary.
COMMISSIONS
We do not pay commissions to MetLife representatives for the sale of the Group
Policies and Certificates, although MetLife representatives may earn certain
incentive award credits. We may pay commissions to other registered
broker-dealers who have entered into selling agreements with us. Commissions or
fees which are payable to a broker-dealer or third party administrator,
including maximum commissions, are set forth in our schedules of group insurance
commission rates. These commissions consist of:
- - Up to 15% of the cost of insurance, and may be based on the services provided
by the broker-dealer or third party administrator, and
- - A per-Certificate payment, based on the total number of Certificates issued
under a Group Policy.
The commissions do not result in a charge against the Group Policies or
Certificates in addition to the charges already described elsewhere in this
Prospectus. We paid no commissions in 1996, 1997 or 1998.
VOTING RIGHTS
(SIDEBAR)
YOU CAN GIVE US VOTING INSTRUCTIONS ON SHARES OF EACH FUND PORTFOLIO THAT ARE
(END SIDEBAR) ATTRIBUTED TO YOUR CERTIFICATE.
The Fund has shareholder meetings from time to time to, for example, elect
directors and approve investment managers. We will vote the shares of each
Portfolio that are attributed to your Certificate based on your instructions.
Should we determine that the 1940 Act no longer requires us to do this, we may
decide to vote Fund shares in our own right, without input from you or any other
owners of variable life insurance policies or variable annuity contracts that
participate in the Fund.
If you are eligible to give us voting instructions, we will send you
informational material and a form to send back to us. We are entitled to
disregard voting instructions in certain limited circumstances prescribed by the
SEC. If we do so, we will give you our reasons in the next semi-annual report to
Certificate owners.
The number of shares for which you can give us voting instructions is determined
as of the record date for the Fund shareholder meeting by dividing:
- - Your Certificate's cash value in the corresponding investment division; by
- - The net asset value of one share of that Portfolio.
We will count fractional votes.
26
<PAGE>
If we do not receive timely voting instructions from Certificate owners and
other insurance and annuity owners that are entitled to give us voting
instructions, we will vote those shares in the same proportion as the shares
held in the same separate account for which we did receive voting instructions.
Also, we will vote Fund shares that are not attributable to insurance or annuity
owners (including shares that we hold in our general account) or that are held
in separate accounts that are not registered under the 1940 Act in the same
proportion as the aggregate of the shares for which we received voting
instructions from all insurance and annuity owners.
REPORTS
Generally, you will promptly receive statements confirming your significant
transactions such as:
- - Change in specified face amount.
- - Transfers among investment divisions (including those through Systematic
Investment Strategies, which may be confirmed quarterly).
- - Partial withdrawals.
- - Loan amounts you request.
- - Loan repayments and premium payments.
If your premium payments are made through a payroll deduction plan, we will not
send you any confirmation in addition to the one you receive from your bank or
employer.
We will also send you an annual statement within 30 days after a Certificate
year that will summarize the year's transactions and include information on:
- - Deductions and charges.
- - Status of the death benefit.
- - Cash and cash surrender values.
- - Amounts in the investment divisions and Fixed Account.
- - Status of Certificate loans.
- - Automatic loans to pay interest.
- - Information on your modified endowment contract status (if applicable).
We will also send you the Fund's annual and semi-annual reports to shareholders.
ILLUSTRATION OF CERTIFICATE BENEFITS
(SIDEBAR)
PERSONALIZED ILLUSTRATIONS CAN HELP YOU UNDERSTAND HOW YOUR CERTIFICATE VALUES
CAN VARY.
(END SIDEBAR)
In order to help you understand how your Certificate values would vary over time
under different sets of assumptions, we will provide you with certain
illustrations upon request. These will be based on the age and insurance risk
characteristics of the covered person under your Certificate and such factors as
the specified face amount, premium payment amounts and rates of return (within
limits) that you request. You can request such illustrations at any time. We
have filed an example of such an illustration as an exhibit to the registration
statement referred to below.
27
<PAGE>
GETTING MORE INFORMATION
We are regulated by the New York Insurance Department and periodically are
examined by them. We are also subject to the laws and regulations of all the
jurisdictions in which we do business and, if required, we have filed a form of
the Group Policy and form of the Certificate for approval in every jurisdiction
in which the Group Policy and Certificate are sold. The Group Policy and
Certificate may not be available in every jurisdiction.
We file annual statements on our operations, including financial statements,
with insurance departments of various jurisdictions so that they can review our
solvency and compliance with applicable laws and regulations. You can review
these statements which are available at the offices of the various insurance
departments.
This Prospectus is part of a registration statement that we filed with the
Securities and Exchange Commission under the Securities Act of 1933. The
registration statement includes additional information, amendments and exhibits.
You can get this information from the Securities and Exchange Commission (a
copying fee may apply) by visiting or writing to its Public Reference Room or
using its Internet site at:
- - Securities and Exchange Commission
Public Reference Room
Washington, D.C. 20549
Call 1-800-SEC-0330 (for information about using the
Public Reference Room)
Internet site: HTTP://WWW.SEC.GOV
LEGAL, ACCOUNTING AND ACTUARIAL MATTERS
Christopher P. Nicholas, Associate General Counsel at MetLife, has passed upon
the legality of the Group Policies and Certificates. Messrs. Freedman, Levy,
Kroll & Simonds, Washington, D.C., have advised us on certain matters relating
to the federal securities laws.
Deloitte & Touche LLP, independent auditors, audited the financial statements
included in this Prospectus, as stated in their reports appearing herein. The
financial statements are included in reliance upon the reports of such firm
given upon their authority as experts in accounting and auditing. Our financial
statements should be considered only as bearing upon our ability to meet our
obligations under the Certificate.
Frank Cassandra, FSA, MAAA, Assistant Vice-President and Actuary of MetLife, has
examined actuarial matters included in the registration statement, as stated in
his opinion filed as an exhibit to the registration statement.
28
<PAGE>
MANAGEMENT
The present directors and the senior officers and secretary of MetLife 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>
Curtis H. Barnette Chairman and Chief Executive Officer Director
Bethlehem Steel Corp.
1170 Eight Ave.--Martin Tower 2118
Bethlehem, PA 18016
Robert H. Benmosche Chairman of the Board, President and Chief Chairman of the Board,
Executive Officer President, Chief Executive
Metropolitan Life Insurance Company Officer and Director
One Madison Ave.
New York, NY 10010
Gerald Clark Vice Chairman of the Board and Chief Investment Vice Chairman of the Board,
Officer Chief Investment Officer and
Metropolitan Life Insurance Company Director
One Madison Ave.
New York, NY 10010
Joan Ganz Cooney Chairman, Executive Committee Director
Children's Television Workshop
One Lincoln Plaza
New York, NY 10023
Burton A. Dole, Jr. Retired Chairman, President and Director
Chief Executive Officer
Puritan Bennett
Overland Park, KS
James R. Houghton Chairman of the Board Emeritus and Director Director
Corning Incorporated
80 East Market Street, 2nd Floor
Corning, NY 14830
Harry P. Kamen Chairman and Chief Executive Officer (Retired) Director
Metropolitan Life Insurance Company
One Madison Ave.
New York, NY 10010
Helene L. Kaplan Of Counsel Director
Skadden Arps, Slate, Meagher & Flom
919 Third Ave.
New York, NY 10022
Charles M. Leighton Retired Chairman and Director
Chief Executive Officer
CML Group, Inc.
Bolton, MA 01720
Allen E. Murray Retired Chairman of the Board and Chief Executive Director
Officer
Mobil Corporation
375 Park Ave., Suite 2901
New York, NY 10163
</TABLE>
29
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION & POSITIONS AND OFFICES
NAME BUSINESS ADDRESS WITH METLIFE
<S> <C> <C>
Stewart Nagler Vice Chairman of the Board and Chief Financial Vice Chairman of the Board and
Officer Chief Financial Officer and
Metropolitan Life Insurance Company Director
One Madison Avenue
New York, NY 10010
John J. Phelan, Jr. Retired Chairman and Chief Executive Officer Director
New York Stock Exchange, Inc.
P.O. Box 312
Mill Neck, NY 11765
Hugh B. Price President and Chief Executive Officer Director
National Urban League, Inc.
12 Wall Street
New York, NY 10005
Robert G. Schwartz Retired Chairman of the Board, President and Chief Director
Executive Officer
Metropolitan Life Insurance Company
200 Park Ave., Suite 5700
New York, NY 10166
Ruth J. Simmons, Ph.D. President Smith College Director
College Hall 20
Northhampton, MA 01063
William C. Steere, Jr. Chairman of the Board and Chief Executive Officer Director
Pfizer, Inc.
235 East 42nd Street
New York, NY 10017
</TABLE>
<TABLE>
<CAPTION>
NAME OF OFFICER* POSITION WITH METROPOLITAN LIFE
<S> <C>
Robert H. Benmosche Chairman of the Board, President and Chief
Executive Officer
Gerald Clark Vice Chairman of the Board
Stewart G. Nagler Vice Chairman of the Board
Gary A. Beller Senior Executive Vice-President and General
Counsel
C. Robert Henrikson Senior Executive Vice-President
William J. Toppeta Senior Executive Vice-President
John H. Tweedie Senior Executive Vice-President
Daniel J. Cavanagh Executive Vice-President
Jeffrey J. Hodgman Executive Vice-President
Terence I. Lennon Executive Vice-President
David A. Levene Executive Vice-President
Judy E. Weiss Executive Vice-President and Chief Actuary
Alexander D. Brunini Senior Vice-President
Jon F. Danski Senior Vice-President and Controller
Richard M. Blackwell Senior Vice-President
James B. Digney Senior Vice-President
William T. Friedman Senior Vice-President
Ira Friedman Senior Vice-President
Anne E. Hayden Senior Vice-President
</TABLE>
30
<PAGE>
<TABLE>
<CAPTION>
NAME OF OFFICER* POSITION WITH METROPOLITAN LIFE
<S> <C>
Sybil C. Jacobsen Senior Vice-President
Joseph W. Jordan Senior Vice-President
Kernan F. King Senior Vice-President
Nicholas D. Latrenta Senior Vice-President
Leland C. Launer, Jr. Senior Vice-President
Gary E. Lineberry Senior Vice-President
James L. Lipscomb Senior Vice-President
William Livesey Senior Vice-President
James M. Logan Senior Vice-President
Eugene Marks, Jr. Senior Vice-President
William R. Prueter Senior Vice-President
Joseph A. Reali Senior Vice-President
Vincent P. Reusing Senior Vice-President
Felix Schirripa Senior Vice-President
Robert E. Sollmann, Jr. Senior Vice-President
Thomas L. Stapleton Senior Vice-President and Tax Director
James F. Stenson Senior Vice-President
Stanley J. Talbi Senior Vice-President
Richard R. Tartre Senior Vice-President
Lisa M. Weber Senior Vice-President
William J. Wheeler Senior Vice-President and Treasurer
Anthony J. Williamson Senior Vice-President
Louis J. Ragusa Vice-President and Secretary
</TABLE>
- ---------------
* The principal occupation of each officer, except for the following officers,
during the last five years has been as an officer of Metropolitan Life or an
affiliate thereof. Gary A. Beller has been an officer of Metropolitan Life 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 Metropolitan Life since September, 1995; prior thereto, he
was an Executive Vice-President of Paine Webber. Terrence I. Lennon has been an
officer of Metropolitan Life since March, 1994; prior thereto, he was Assistant
Deputy Superintendent and Chief Examiner of the New York State Department of
Insurance. Richard R. Tartre has been an officer of Metropolitan Life since
January 13, 1997; prior thereto, he was President and CEO of Astra Management
Corp. William J. Wheeler has been an officer of Metropolitan Life since October
13, 1997; prior thereto, he was Senior Vice-President, Investment Banking of
Donaldson, Lufkin and Jenrette. Lisa Weber has been an officer of Metropolitan
Life since March 16, 1998; prior thereto, she was a Director of Diversity
Strategies and Development and an Associate Director of Human Resources of Paine
Webber. Jon F. Danski has been an officer of Metropolitan Life since March 25,
1998; prior thereto, he was Senior Vice-President, Controller and General
Auditor at ITT Corporation. The business address of each officer is 1 Madison
Avenue, New York, New York 10010.
31
<PAGE>
FINANCIAL STATEMENTS
(The balance of this page has been left blank intentionally.)
32
<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
State Street Research Growth, State Street Research Income, State Street
Research Money Market, State Street Research Diversified, State Street
Research Aggressive Growth, MetLife Stock Index, Santander International
Stock, Loomis Sayles High Yield Bond, Janus Mid Cap, T. Rowe Price Small Cap
Growth and Scudder Global Equity Divisions of Metropolitan Life Separate
Account UL (the "Separate Account") as of December 31, 1998, and the related
statements (i) of operations for the year ended December 31, 1998 and of
changes in net assets for the years ended December 31, 1998 and 1997 of the
State Street Research Growth, State Street Research Income, State Street
Research Money Market, State Street Research Diversified, State Street
Research Aggressive Growth, MetLife Stock Index and Santander International
Stock Divisions and (ii) of operations for the year ended December 31, 1998
and of changes in net assets for the year ended December 31, 1998 and for the
period March 3, 1997 (commencement of operations) to December 31, 1997 of the
Loomis Sayles High Yield Bond, Janus Mid Cap, T. Rowe Price Small Cap Growth
and Scudder Global Equity Divisions. 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, 1998
by correspondence with the custodian and 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 financial position of the State Street Research Growth, State
Street Research Income, State Street Research Money Market, State Street
Research Diversified, State Street Research Aggressive Growth, MetLife Stock
Index, Santander International Stock, Loomis Sayles High Yield Bond, Janus Mid
Cap, T. Rowe Price Small Cap Growth and Scudder Global Equity Divisions of
Metropolitan Life Separate Account UL at December 31, 1998 and the results of
their operations and the changes in their net assets for the respective stated
periods, in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
New York, New York
March 15, 1999
1
<PAGE>
Metropolitan Life Separate Account UL
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
<TABLE>
<CAPTION>
State Street
State Street State Street State Street State Street Research MetLife Santander
Research Research Research Research Aggressive Stock International
Growth Income Money Market Diversified Growth Index Stock
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):
State Street Research
Growth Portfolio
(8,991,252 shares; cost
$262,836,766).......... $333,575,453 -- -- -- -- -- --
State Street Research
Income Portfolio
(4,419,504 shares; cost
$56,262,271)........... -- $56,481,257 -- -- -- -- --
State Street Research
Money Market Portfolio
(2,150,767 shares; cost
$22,944,978)........... -- -- $22,265,813 -- -- -- --
State Street Research
Diversified Portfolio
(11,376,036 shares;
cost $184,766,024)..... -- -- -- $209,205,308 -- -- --
State Street Research
Aggressive Growth
Portfolio (5,227,911
shares; cost
$136,845,160).......... -- -- -- -- $154,380,221 -- --
MetLife Stock Index
Portfolio (4,498,549
shares; cost
$118,596,732).......... -- -- -- -- -- $159,158,678 --
Santander International
Stock Portfolio
(2,566,510 shares; cost
$32,397,518)........... -- -- -- -- -- -- $36,290,449
Loomis Sayles High Yield
Bond Portfolio (303,096
shares; cost
$3,041,405)............ -- -- -- -- -- -- --
Janus Mid Cap Portfolio
(1,214,612 shares; cost
$16,647,482)........... -- -- -- -- -- -- --
T. Rowe Price Small Cap
Growth Portfolio
(1,084,560 shares; cost
$12,826,959)........... -- -- -- -- -- -- --
Scudder Global Equity
Portfolio (671,753
shares; cost
$7,767,908)............ -- -- -- -- -- -- --
------------ ----------- ----------- ------------ ------------ ------------ -----------
Total Assets........... 333,575,453 56,481,257 22,265,813 209,205,308 154,380,221 159,158,678 36,290,449
LIABILITIES............. 1,013,304 41,286 5,651 384,868 298,061 292,002 37,716
------------ ----------- ----------- ------------ ------------ ------------ -----------
NET ASSETS.............. $332,562,149 $56,439,971 $22,260,162 $208,820,440 $154,082,160 $158,866,676 $36,252,733
============ =========== =========== ============ ============ ============ ===========
</TABLE>
See Notes to Financial Statements.
2
<PAGE>
<TABLE>
<CAPTION>
Loomis T. Rowe
Sayles Price Scudder
High Yield Janus Small Cap Global
Bond Mid Cap Growth Equity
Division Division Division Division
- ---------- ----------- ----------- ----------
<S> <C> <C> <C>
-- -- -- --
-- -- -- --
-- -- -- --
-- -- -- --
-- -- -- --
-- -- -- --
-- -- -- --
$2,542,977 -- -- --
-- $21,170,685 -- --
-- -- $13,329,240 --
-- -- -- $8,316,299
- ---------- ----------- ----------- ----------
2,542,977 21,170,685 13,329,240 8,316,299
3,066 44,138 23,779 13,441
- ---------- ----------- ----------- ----------
$2,539,911 $21,126,547 $13,305,461 $8,302,858
========== =========== =========== ==========
</TABLE>
3
<PAGE>
Metropolitan Life Separate Account UL
STATEMENTS OF OPERATIONS
For the year ended December 31, 1998
<TABLE>
<CAPTION>
State
State State State State Street
Street Street Street Street Research MetLife Santander
Research Research Research Research Aggressive Stock International
Growth Income Money Market Diversified Growth Index Stock
Division Division Division Division Division Division Division
----------- ---------- ------------ ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Income:
Dividends (Note 2)..... $30,285,471 $4,298,707 $1,166,116 $19,448,803 $ 8,619,767 $ 6,486,305 $ 404,896
Expenses:
Mortality and expense
charges
(Note 3).............. 2,500,061 420,836 143,978 1,610,657 1,146,158 1,020,115 284,929
----------- ---------- ---------- ----------- ----------- ----------- ----------
Net investment income
(loss)................. 27,785,410 3,877,871 1,022,138 17,838,146 7,473,609 5,466,190 119,967
----------- ---------- ---------- ----------- ----------- ----------- ----------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS: (Note
1B)
Net realized gain (loss)
from security
transactions........... 1,828,922 239,248 139,583 522,086 390,678 2,060,324 251,518
Change in unrealized
appreciation
(depreciation) of
investments............ 38,462,367 (12,424) (384,125) 12,721,568 9,316,026 21,573,004 5,740,557
----------- ---------- ---------- ----------- ----------- ----------- ----------
Net realized and
unrealized gain (loss)
on investments......... 40,291,289 226,824 (244,542) 13,243,654 9,706,704 23,633,328 5,992,075
----------- ---------- ---------- ----------- ----------- ----------- ----------
NET INCREASE (DECREASE)
IN NET ASSETS RESULTING
FROM OPERATIONS........ $68,076,699 $4,104,695 $ 777,596 $31,081,800 $17,180,313 $29,099,518 $6,112,042
=========== ========== ========== =========== =========== =========== ==========
</TABLE>
See Notes to Financial Statements.
4
<PAGE>
<TABLE>
<CAPTION>
Loomis T. Rowe
Sayles Price Scudder
High Yield Janus Small Cap Global
Bond Mid Cap Growth Equity
Division Division Division Division
---------- ---------- --------- --------
<S> <C> <C> <C>
$ 256,747 $ 98,545 $ 0 $125,120
15,303 88,984 71,325 42,804
--------- ---------- -------- --------
241,444 9,561 (71,325) 82,316
--------- ---------- -------- --------
(15,746) 178,428 (14,908) 35,936
(428,334) 4,299,801 455,213 556,946
--------- ---------- -------- --------
(444,080) 4,478,229 440,305 592,882
--------- ---------- -------- --------
$(202,636) $4,487,790 $368,980 $675,198
========= ========== ======== ========
</TABLE>
5
<PAGE>
Metropolitan Life Separate Account UL
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
State Street Research State Street Research State Street Research
Growth Division Income Division Money Market Division
-------------------------- -------------------------- --------------------------
For the Year For the Year For the Year For the Year For the Year For the Year
Ended Ended Ended Ended Ended Ended
December 31, December 31, December 31, December 31, December 31, December 31,
1998 1997 1998 1997 1998 1997
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN
NET ASSETS:
From operations:
Net investment income
(loss)................ $ 27,785,410 $ 40,418,794 $ 3,877,871 $ 2,617,788 $ 1,022,138 $ 353,194
Net realized gain
(loss) from security
transactions.......... 1,828,922 1,080,724 239,248 32,950 139,583 68,458
Change in unrealized
appreciation
(depreciation) of
investments........... 38,462,367 6,378,588 (12,424) 748,796 (384,125) (49,717)
------------ ------------ ----------- ----------- ----------- -----------
Net increase (decrease)
in net assets
resulting from
operations............ 68,076,699 47,878,106 4,104,695 3,399,534 777,596 371,935
------------ ------------ ----------- ----------- ----------- -----------
From capital
transactions:
Net premiums........... 68,697,236 59,834,638 13,501,414 13,090,983 28,800,532 13,691,749
Redemptions............ (9,651,413) (7,416,220) (1,455,088) (1,082,695) (292,311) (357,692)
Net portfolio
transfers............. 462,907 3,569,720 2,032,607 1,296,485 (12,984,969) (12,877,177)
Other net transfers.... (33,909,522) (29,309,077) (5,444,551) (4,895,666) (2,036,921) (887,059)
------------ ------------ ----------- ----------- ----------- -----------
Net increase (decrease)
in net assets
resulting from capital
transactions.......... 25,599,208 26,679,061 8,634,382 8,409,107 13,486,331 (430,179)
------------ ------------ ----------- ----------- ----------- -----------
NET CHANGE IN NET AS-
SETS................... 93,675,907 74,557,167 12,739,077 11,808,641 14,263,927 (58,244)
NET ASSETS--BEGINNING OF
YEAR................... 238,886,242 164,329,075 43,700,894 31,892,253 7,996,235 8,054,479
------------ ------------ ----------- ----------- ----------- -----------
NET ASSETS--END OF
YEAR................... $332,562,149 $238,886,242 $56,439,971 $43,700,894 $22,260,162 $ 7,996,235
============ ============ =========== =========== =========== ===========
</TABLE>
See Notes to Financial Statements.
6
<PAGE>
<TABLE>
<CAPTION>
State Street Research Santander
State Street Research Aggressive Growth MetLife International Stock
Diversified Division Division Stock Index Division Division
- -------------------------- -------------------------- -------------------------- --------------------------
For the Year For the Year For the Year For the Year For the Year For the Year For the Year For the Year
Ended Ended Ended Ended Ended Ended Ended Ended
December 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31,
1998 1997 1998 1997 1998 1997 1998 1997
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 17,838,146 $ 22,302,995 $ 7,473,609 $ 3,470,806 $ 5,466,190 $ 1,186,647 $ 119,967 $ (232,079)
522,086 418,723 390,678 136,827 2,060,324 1,210,648 251,518 (84,952)
12,721,568 1,103,869 9,316,026 2,615,059 21,573,004 13,344,725 5,740,557 (691,181)
- ------------ ------------ ------------ ------------ ------------ ----------- ----------- -----------
31,081,800 23,825,587 17,180,313 6,222,692 29,099,518 15,742,020 6,112,042 (1,008,212)
- ------------ ------------ ------------ ------------ ------------ ----------- ----------- -----------
48,746,380 41,236,061 48,080,744 52,235,040 59,343,787 38,059,853 10,224,172 11,240,912
(5,712,146) (4,829,385) (4,373,459) (3,613,975) (2,361,734) (1,198,193) (1,153,624) (1,139,393)
2,809,643 1,557,340 (6,687,894) (5,941,719) 9,729,932 9,580,428 (2,377,311) (3,084,541)
(23,504,994) (19,209,913) (18,773,580) (20,670,473) (23,041,439) (13,547,536) (3,678,501) (5,008,528)
- ------------ ------------ ------------ ------------ ------------ ----------- ----------- -----------
22,338,883 18,754,103 18,245,811 22,008,873 43,670,546 32,894,552 3,014,736 2,008,450
- ------------ ------------ ------------ ------------ ------------ ----------- ----------- -----------
53,420,683 42,579,690 35,426,124 28,231,565 72,770,064 48,636,572 9,126,778 1,000,238
155,399,757 112,820,067 118,656,036 90,424,471 86,096,612 37,460,040 27,125,955 26,125,717
- ------------ ------------ ------------ ------------ ------------ ----------- ----------- -----------
$208,820,440 $155,399,757 $154,082,160 $118,656,036 $158,866,676 $86,096,612 $36,252,733 $27,125,955
============ ============ ============ ============ ============ =========== =========== ===========
</TABLE>
7
<PAGE>
Metropolitan Life Separate Account UL
STATEMENTS OF CHANGES IN NET ASSETS (Continued)
<TABLE>
<CAPTION>
Loomis Sayles Janus
High Yield Bond Division Mid Cap Division
--------------------------- ----------------------------
For the Period For the Period
For the Year March 3, 1997 For the Year March 3, 1997
Ended to Ended to
December 31, December 31, December 31, December 31,
1998 1997 1998 1997
------------ -------------- ------------ --------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN
NET ASSETS:
From operations:
Net investment income
(loss)................ $ 241,444 $ 59,549 $ 9,561 $ 5,937
Net realized gain
(loss) from security
transactions.......... (15,746) 9,361 178,428 26,779
Change in unrealized
appreciation
(depreciation) of
investments........... (428,334) (70,093) 4,299,801 223,402
---------- ---------- ----------- ----------
Net increase (decrease)
in net assets
resulting from
operations............ (202,636) (1,183) 4,487,790 256,118
---------- ---------- ----------- ----------
From capital
transactions:
Net premiums........... 1,559,975 590,158 13,796,446 2,676,784
Redemptions............ (29,635) (1,126) (179,560) (46,974)
Net portfolio
transfers............. 180,422 1,002,454 4,280,509 1,554,471
Other net transfers.... (451,340) (107,178) (5,121,876) (577,161)
---------- ---------- ----------- ----------
Net increase in net
assets resulting from
capital transactions.. 1,259,422 1,484,308 12,775,519 3,607,120
---------- ---------- ----------- ----------
NET CHANGE IN NET
ASSETS................. 1,056,786 1,483,125 17,263,309 3,863,238
NET ASSETS--BEGINNING OF
PERIOD................. 1,483,125 -- 3,863,238 --
---------- ---------- ----------- ----------
NET ASSETS--END OF
PERIOD................. $2,539,911 $1,483,125 $21,126,547 $3,863,238
========== ========== =========== ==========
</TABLE>
See Notes to Financial Statements.
8
<PAGE>
<TABLE>
<CAPTION>
T. Rowe Price Scudder
Small Cap Growth Division Global Equity Division
------------------------------------ ----------------------------------------------
For the Period For the Period
For the Year March 3, 1997 For the Year March 3, 1997
Ended to Ended to
December 31, December 31, December 31, December 31,
1998 1997 1998 1997
------------ -------------- ------------ --------------
<S> <C> <C> <C>
$ (71,325) $ (8,790) $ 82,316 $ 23,414
(14,908) 47,764 35,936 21,982
455,213 47,067 556,946 (8,556)
----------- ---------- ----------- ----------
368,980 86,041 675,198 36,840
----------- ---------- ----------- ----------
8,413,079 1,816,732 3,660,518 1,425,649
(87,656) (40,707) (44,451) (7,873)
3,021,876 3,110,800 2,251,711 1,855,028
(2,968,930) (414,754) (1,263,459) (286,303)
----------- ---------- ----------- ----------
8,378,369 4,472,071 4,604,319 2,986,501
----------- ---------- ----------- ----------
8,747,349 4,558,112 5,279,517 3,023,341
4,558,112 -- 3,023,341 --
----------- ---------- ----------- ----------
$13,305,461 $4,558,112 $ 8,302,858 $3,023,341
=========== ========== =========== ==========
</TABLE>
9
<PAGE>
Metropolitan Life Separate Account UL
NOTES TO FINANCIAL STATEMENTS
December 31, 1998
Metropolitan Life Separate Account UL (the "Separate Account") is a multi-
division unit investment trust registered under the Investment Company Act of
1940 and consists of eleven 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. On March 3, 1997, operations commenced for
the four new investment divisions added to the Separate Account on that date:
the Loomis Sayles High Yield Bond Division, the Janus Mid Cap Division, the T.
Rowe Price Small Cap Growth Division and the Scudder Global Equity Division.
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
eleven designated portfolios of the Fund in which the eleven investment
divisions of the Separate Account invests as of December 31, 1998 is
included as Note 5.
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 May 5, 1998 and December 16, 1998, the Fund declared dividends for all
shareholders of record on May 7, 1998 and December 23, 1998, respectively. The
amount of dividends received by the Separate Account was $71,190,477. The
dividends were paid to Metropolitan Life on May 8, 1998 and December 24, 1998,
respectively, and were immediately reinvested in additional shares of the
portfolios in which the investment divisions invest. As a result of
10
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(Continued)
this reinvestment, the number of shares of the Fund held by each of the eleven
investment divisions increased by the following: State Street Research Growth
Portfolio, 827,171 shares; State Street Research Income Portfolio, 339,329
shares; State Street Research Money Market Portfolio, 112,807 shares; State
Street Research Diversified Portfolio, 1,066,122 shares; State Street Research
Aggressive Growth Portfolio, 304,920 shares; MetLife Stock Index Portfolio,
183,724 shares; Santander International Stock Portfolio, 28,929 shares; Loomis
Growth Sayles High Yield Bond Portfolio, 30,811 shares; Janus Mid Cap
Portfolio, 6,072 shares; T. Rowe Price Small Cap Growth Portfolio, 0 shares
and Scudder Global Equity Portfolio, 10,237 shares.
3.EXPENSES
With respect to assets in the Separate Account that support certain
policies, Metropolitan Life applies a charge against the assets attributable
to the Separate Account for the mortality and expense risks assumed by
Metropolitan Life. This charge varies by policy type but will not be higher
than an effective annual rate of .90% of the average daily value of the net
assets or the monthly anniversary value of the net assets in the Separate
Account which are attributable to such policies.
4.CHANGE OF NAME
Effective November 9, 1998, Santander Global Advisors, Inc. became the sub-
investment manager of the Santander International Stock Portfolio (formerly
State Street Research International Stock Portfolio) of the Metropolitan
Series Fund, Inc. Simultaneously with that change, the corresponding
investment division had its name changed to the Santander International Stock
Division.
11
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(Continued)
5.SUMMARY OF INVESTMENTS AS OF DECEMBER 31, 1998
Below are summarized information of the investments of the portfolios of the
Fund in which each of the investment divisions invest.
Metropolitan Series Fund, Inc.
<TABLE>
<CAPTION>
State Street State Street State Street State Street
Research Research Research Research
Growth Income Money Market Diversified
Portfolio Portfolio Portfolio Portfolio
-------------- ------------ ------------ --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
COMMON STOCK
Automotive............. $ 50,517,664 (1.6%) $ 22,855,593 (0.9%)
Banking................ 172,519,438 (5.5%) 80,028,947 (3.0%)
Broadcasting........... 225,213,831 (7.2%) 105,681,212 (4.0%)
Business Services...... 18,336,219 (0.6%) 8,507,594 (0.3%)
Chemicals.............. 62,797,294 (2.0%) 29,250,869 (1.1%)
Computer Equipment & 41,206,377 (1.3%) 19,014,400 (0.7%)
Service...............
Drugs & Health Care.... 131,563,219 (4.2%) 60,383,637 (2.3%)
Electrical Equipment... 138,582,619 (4.5%) 63,888,537 (2.4%)
Electronics............ 138,832,022 (4.5%) 64,421,153 (2.4%)
Entertainment & 27,114,300 (0.9%) 12,803,681 (0.5%)
Leisure...............
Financial Services..... 191,024,825 (6.1%) 88,565,588 (3.3%)
Food & Beverages....... 134,094,937 (4.3%) 60,573,275 (2.3%)
Forest Products & 32,516,000 (1.0%) 14,948,000 (0.6%)
Paper.................
Hotel & Motel.......... 19,960,981 (0.6%) 9,194,031 (0.3%)
Household Products..... 46,167,600 (1.5%) 21,275,813 (0.8%)
Insurance.............. 141,994,575 (4.6%) 64,324,269 (2.4%)
Medical Equipment & 117,281,881 (3.8%) 54,248,912 (2.0%)
Supply................
Miscellaneous.......... 44,334,619 (1.7%)
Multi-Industry......... 95,549,138 (3.1%)
Office & Business 191,625,919 (6.2%) 88,440,600 (3.3%)
Equipment.............
Oil & Gas Exploration.. 7,017,606 (0.2%) 3,077,344 (0.1%)
Oil.................... 45,891,390 (1.5%) 21,240,514 (0.8%)
Oil-Domestic........... 53,123,188 (1.7%) 24,575,613 (0.9%)
Oil-International...... 54,448,875 (1.7%) 25,169,625 (1.0%)
Pollution Control...... 16,542,550 (0.5%) 7,697,788 (0.3%)
Restaurant............. 56,595,225 (1.8%) 26,450,950 (1.0%)
Retail Grocery......... 96,199,400 (3.1%) 44,458,550 (1.7%)
Retail Trade........... 203,995,450 (6.6%) 94,199,631 (3.5%)
Software............... 82,984,778 (2.7%) 38,365,860 (1.4%)
Telecommunications 20,702,053 (0.7%) 9,738,909 (0.4%)
Equipment & Services..
Tobacco................ 55,233,400 (1.8%) 26,279,200 (1.0%)
Transportation- 288 (0.0%)
Trucking..............
Utilities-Electric..... 85,602,613 (2.8%) 38,564,994 (1.5%)
Utilities-Gas 28,536,956 (0.9%) 13,312,681 (0.5%)
Distribution &
Pipelines.............
Utilities-Telephone.... 178,222,078 (5.7%) 82,338,872 (3.1%)
-------------- --------------
Total Common Stock..... 2,961,994,401 (95.2%) 1,368,211,549 (51.5%)
-------------- --------------
LONG-TERM DEBT
SECURITIES
Corporate Bonds:
Asset Backed........... $ 5,952,261 (1.1%) 55,261 (0.0%)
Banking................ 4,912,622 (0.9%) 17,413,654 (0.7%)
Collateralized Mortgage 23,365,521 (4.4%) 44,988,869 (1.7%)
Obligations...........
Drugs & Health Care.... 4,023,433 (0.8%) 9,762,956 (0.4%)
Electrical Equipment... 5,669,210 (0.2%)
Finance & Banking...... 12,285,984 (0.5%)
Financial Services..... 88,530,073 (16.8%) 187,150,983 (7.0%)
Food & Beverages....... 7,991,697 (1.5%)
Healthcare Services.... 10,514,202 (2.0%) 19,278,706 (0.7%)
Household Products..... 4,022,759 (0.8%) 5,804,994 (0.2%)
Industrials............ 25,394,604 (4.8%) 96,688,722 (3.6%)
Insurance.............. 2,999,260 (0.6%) 6,981,640 (0.3%)
Miscellaneous.......... 2,397,587 (0.5%) 9,052,290 (0.3%)
Mortgage Related....... 2,067,088 (0.4%) 18,490,416 (0.7%)
Multi-Industry......... 4,255,312 (0.8%) 14,878,388 (0.6%)
Newspapers............. 10,184,873 (1.9%) 20,021,470 (0.7%)
Pollution Control...... 6,608,464 (1.3%) 17,460,438 (0.7%)
Restaurant............. 3,312,855 (0.6%) 4,164,732 (0.2%)
Retail Grocery......... 5,018,800 (0.9%) 10,149,300 (0.4%)
Utilities-Electric..... 11,597,255 (2.2%) 11,922,582 (0.4%)
Utilities-Telephone.... 4,725,144 (0.9%) 15,953,880 (0.6%)
------------ --------------
Total Corporate Bonds.. 227,873,810 (43.2%) 528,174,475 (19.9%)
Federal Agency 43,969,433 (8.3%) 99,933,906 (3.8%)
Obligations............
Federal Treasury 190,468,139 (36.2%) 413,509,607 (15.6%)
Obligations............
Foreign Obligations..... 14,827,292 (2.8%) 31,091,792 (1.2%)
State Agency 20,142,424 (3.8%) 50,582,786 (1.9%)
Obligation.............
Yankee Bonds............ 21,382,026 (4.1%) 43,966,468 (1.6%)
------------ --------------
Total Bonds............ 518,663,124 (98.4%) 1,167,259,034 (44.0%)
------------ --------------
SHORT-TERM OBLIGATIONS
Commercial Paper....... 153,385,000 (4.9%) 24,658,252 (4.7%) $38,907,115 (94.5%) 144,348,000 (5.4%)
-------------- ------------ ----------- --------------
FOREIGN OBLIGATIONS .... 1,978,317 (4.8%)
-----------
TOTAL INVESTMENTS....... 3,115,379,401 (100.1%) 543,321,376 (103.1%) 40,885,432 (99.3%) 2,679,818,583 (100.9%)
Other Assets Less (3,298,290) (-0.1%) (16,467,003) (-3.1%) 299,303 (0.7%) (22,831,517) (-0.9%)
Liabilities...........
-------------- ------------ ----------- --------------
NET ASSETS.............. $3,112,081,111 (100.0%) $526,854,373 (100.0%) $41,184,735 (100.0%) $2,656,987,066 (100.0%)
============== ============ =========== ==============
</TABLE>
12
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(Continued)
5.SUMMARY OF INVESTMENTS AS OF DECEMBER 31, 1998--(CONTINUED)
Metropolitan Series Fund, Inc.
<TABLE>
<CAPTION>
State Street
Research Santander
MetLife Aggressive International
Stock Index Growth Stock
Portfolio Portfolio Portfolio
-------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
COMMON STOCK
Aerospace............... $ 39,162,797 (1.3%) $ 19,058,175 (1.3%) $ 1,022,761 (0.3%)
Automotive.............. 50,697,557 (1.6%) 50,687,806 (3.6%) 9,542,116 (3.2%)
Banking................. 226,942,249 (7.3%) 13,915,069 (1.0%) 43,646,670 (14.7%)
Broadcasting............ 68,923,306 (2.2%) 129,192,089 (9.0%)
Business Services....... 182,199,234 (12.7%)
Building & 11,707,369 (0.4%) 6,667,401 (2.2%)
Construction............
Business Services....... 44,921,087 (1.4%)
Chemicals............... 56,423,606 (1.8%) 52,643,156 (3.7%) 539,483 (0.2%)
Computer Equipment & 117,894,780 (3.8%) 39,012,934 (2.7%)
Service.................
Construction & Mining 148,738 (0.0%)
Equipment...............
Construction Materials.. 8,604,883 (2.9%)
Consumer Products....... 581,507 (0.2%)
Containers & Glass...... 5,030,406 (0.2%) 11,219,387 (0.8%)
Cosmetics............... 5,524,500 (0.2%)
Drugs & Health Care..... 275,280,674 (8.8%) 57,715,516 (4.0%) 30,583,278 (10.3%)
Education............... 21,623,094 (1.5%)
Electrical Equipment.... 133,697,394 (4.3%) 7,149,188 (0.5%) 5,308,380 (1.8%)
Electronics............. 162,610,341 (5.2%) 72,071,731 (5.0%) 8,966,121 (3.0%)
Entertainment & 29,081,710 (0.9%) 89,647,425 (6.3%)
Leisure.................
Financial Services...... 155,792,983 (5.0%) 26,278,875 (1.8%) 10,369,932 (3.5%)
Food & Beverages........ 142,667,553 (4.6%) 3,010,144 (1.0%)
Forest Products & 27,901,546 (0.9%) 593,175 (0.2%)
Paper...................
Healthcare Services..... 1,019,313 (0.0%) 20,341,956 (1.4%)
Homebuilders............ 1,575,306 (0.1%) 3,931,488 (1.3%)
Hospital Management..... 9,035,485 (0.3%) 16,403,625 (1.2%)
Hotel & Motel........... 5,102,388 (0.2%) 20,250,769 (1.4%)
Household Appliances & 5,126,825 (0.2%) 4,650,482 (1.6%)
Home Furnishings........
Household Products...... 88,111,919 (2.8%)
Industrial Components & 231,000 (0.0%)
Material................
Insurance............... 100,057,086 (3.2%) 42,106,469 (2.9%) 28,578,219 (9.6%)
Liquor.................. 4,647,400 (0.1%)
Machinery............... 21,152,778 (0.7%)
Medical Equipment & 86,922,531 (2.8%) 13,084,500 (0.9%)
Supply..................
Metals-Aluminum......... 7,229,194 (0.2%)
Metals-Gold............. 5,043,754 (0.2%)
Metals-Non-Ferrous...... 1,590,626 (0.1%) 2,856,153 (1.0%)
Metals-Steel & Iron..... 2,500,224 (0.1%) 649,136 (0.2%)
Mining.................. 1,733,106 (0.1%)
Miscellaneous........... 21,171,351 (0.7%) 12,238,669 (0.9%) 3,109,774 (1.0%)
Multi-Industry.......... 11,674,256 (0.4%) 2,932,702 (1.0%)
Newspapers.............. 14,141,700 (0.5%)
Office & Business 139,575,075 (4.5%) 38,931,731 (2.7%) 1,794,427 (0.6%)
Equipment...............
Oil & Gas Exploration... 2,982,744 (0.1%) 15,520,862 (1.1%) 5,273,395 (1.8%)
Oil-Domestic............ 23,193,860 (0.7%)
Oil-International....... 133,887,606 (4.3%) 10,485,842 (3.5%)
Oil-Services............ 17,001,025 (0.5%)
Photography............. 7,522,413 (0.2%) 3,083,591 (1.0%)
Pollution Control....... 9,371,951 (0.3%) 24,137,762 (1.7%)
Printing & Publishing... 8,504,231 (0.3%) 32,332,737 (2.3%)
Restaurant.............. 20,110,638 (0.6%)
Retail Grocery.......... 24,447,469 (0.8%) 4,145,160 (1.4%)
Retail Trade............ 177,505,612 (5.7%) 190,272,119 (13.3%) 7,371,495 (2.5%)
Software................ 148,059,255 (4.8%) 99,577,969 (7.0%)
Telecommunications 73,478,888 (5.1%) 12,397,259 (4.2%)
Equipment & Services....
Textiles & Apparel...... 7,063,863 (0.2%) 10,687,669 (0.8%)
Tires & Rubber.......... 3,766,669 (0.1%) 1,421,457 (0.5%)
Tobacco................. 45,493,656 (1.5%) 9,957,902 (3.3%)
Toys & Amusements....... 3,494,528 (0.1%) 11,522,594 (0.8%) 1,598,187 (0.5%)
Transportation.......... 624,855 (0.2%)
Transportation- 9,437,948 (0.3%) 3,280,800 (1.1%)
Airlines................
Transportation- 3,068,259 (1.0%)
Miscellaneous...........
Transportation- 14,912,864 (0.5%) 508,639 (0.2%)
Railroad................
Transportation- 572,000 (0.0%)
Trucking................
Utilities-Electric...... 75,968,625 (2.4%) 11,213,151 (3.8%)
Utilities-Gas 13,329,126 (0.4%) 16,061,906 (1.1%) 3,019,359 (1.0%)
Distribution &
Pipelines...............
Utilities- 1,886,504 (0.1%) 2,707,194 (0.9%)
Miscellaneous...........
Utilities-Telephone..... 259,132,899 (8.3%) 33,505,139 (11.3%)
-------------- -------------- ------------
Total Common Stock...... 3,089,695,399 (99.3%) 1,409,363,904 (98.5%) 291,599,916 (98.0%)
------------
PREFERRED STOCK
Retail Trade............ 269,563 (0.1%)
------------
Total Preferred Stock... 269,563 (0.1%)
------------
Total Equity 291,869,479
Securities..............
SHORT-TERM OBLIGATIONS-- 6,447,000 (2.2%)
REPURCHASE AGREEMENTS...
------------
SHORT-TERM OBLIGATIONS-- 1,574,324 (0.1%)
COMMERCIAL PAPER........
-------------- --------------
TOTAL INVESTMENTS....... 3,089,695,399 (99.3%) 1,410,938,228 (98.6%) 298,316,479 (100.3%)
Other Assets Less 22,223,585 (0.7%) 20,398,358 (1.4%) (935,567) (-0.3%)
Liabilities.............
-------------- -------------- ------------
NET ASSETS.............. $3,111,918,984 (100.0%) $1,431,336,586 (100.0%) $297,380,912 (100.0%)
============== ============== ============
</TABLE>
13
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(Continued)
5.SUMMARY OF INVESTMENTS AS OF DECEMBER 31, 1998--(CONTINUED)
Metropolitan Series Fund, Inc.
<TABLE>
<CAPTION>
Loomis Sayles
High Yield Bond
Portfolio
---------------
<S> <C> <C>
COMMON STOCK
Banking............................................... $ 15,557 (0.0%)
Forest Products & Paper............................... 870,986 (2.1%)
Oil & Gas Exploration................................. 52,216 (0.1%)
Real Estate........................................... 539,556 (1.3%)
Restaurant............................................ 12,460 (0.0%)
Utilities-Electric.................................... 89,870 (0.2%)
-----------
Total Common Stock.................................... 1,580,645 (3.7%)
-----------
PREFERRED STOCK
Banking............................................... 212,295 (0.4%)
Construction Materials................................ 62,344 (0.2%)
Financial Services.................................... 164,529 (0.4%)
Metals-Steel & Iron................................... 265,687 (0.6%)
Office & Business Equipment........................... 820,589 (1.9%)
Oil-Services.......................................... 112,219 (0.3%)
Transportation-Shipping............................... 232,000 (0.6%)
Transportation-Trucking............................... 51,000 (0.1%)
Utilities-Electric.................................... 320,200 (0.8%)
Utilities-Telephone................................... 213,750 (0.5%)
-----------
Total Preferred Stock................................. 2,454,613 (5.8%)
-----------
LONG-TERM DEBT SECURITIES
Convertible Bonds:
Automotive............................................ 351,750 (0.8%)
Building & Construction............................... 84,000 (0.2%)
Computer Equipment & Service.......................... 3,652,187 (8.6%)
Drugs & Health Care................................... 1,117,000 (2.6%)
Electronics........................................... 1,819,762 (4.3%)
Entertainment & Leisure............................... 75,580 (0.2%)
Foreign Obligation.................................... 4,378,810 (10.3%)
Healthcare Services................................... 171,313 (0.4%)
Industrial Components & Material...................... 73,750 (0.2%)
Industrials........................................... 117,975 (0.3%)
Medical Equipment & Supply............................ 407,825 (1.0%)
Metals-Steel & Iron................................... 0 (0.0%)
Mining................................................ 354,875 (0.8%)
Oil & Gas Exploration................................. 136,000 (0.3%)
Oil-Services.......................................... 261,056 (0.6%)
Pollution Control..................................... 375,458 (0.9%)
Real Estate........................................... 94,000 (0.2%)
Restaurant............................................ 608,630 (1.4%)
Retail Trade.......................................... 81,000 (0.2%)
Telecommunications Equipment & Services............... 190,000 (0.5%)
Textiles & Apparel.................................... 411,162 (1.0%)
Transportation-Shipping............................... 241,125 (0.6%)
Transportation-Trucking............................... 128,000 (0.3%)
-----------
Total Convertible Bonds............................... 15,131,258 (35.7%)
-----------
Corporate Bonds:
Broadcasting.......................................... 1,762,079 (4.2%)
Food & Beverages...................................... 588,209 (1.4%)
Industrials........................................... 484,325 (1.1%)
Oil & Gas Exploration................................. 856,500 (2.0%)
Retail Grocery........................................ 216,000 (0.5%)
Retail Trade.......................................... 389,250 (0.9%)
Telecommunications Equipment & Services............... 2,226,525 (5.3%)
Transportation........................................ 412,500 (1.0%)
Transportation-Shipping............................... 360,000 (0.9%)
Utilities-Electric.................................... 783,500 (1.8%)
Utilities-Telephone................................... 1,162,125 (2.7%)
-----------
Total Corporate Bonds................................. 9,241,013 (21.8%)
-----------
Foreign Obligations.................................... 9,503,947 (22.4%)
-----------
Yankee Bonds........................................... 2,867,825 (6.7%)
-----------
Total Bonds........................................... 36,744,043 (96.1%)
-----------
SHORT-TERM OBLIGATIONS--REPURCHASE AGREEMENTS.......... 794,000 (1.9%)
-----------
TOTAL INVESTMENTS...................................... 41,573,301 (98.0%)
Other Assets Less Liabilities......................... 829,690 (2.0%)
-----------
NET ASSETS............................................. $42,402,991 (100.0%)
===========
</TABLE>
14
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(Continued)
5.SUMMARY OF INVESTMENTS AS OF DECEMBER 31, 1998--(CONTINUED)
Metropolitan Series Fund, Inc.
<TABLE>
<CAPTION>
Janus T. Rowe Price Scudder
Mid Cap Small Cap Growth Global Equity
Portfolio Portfolio Portfolio
------------ ---------------- -------------
<S> <C> <C> <C> <C> <C> <C>
COMMON STOCK
Aerospace............... $3,727,399 (1.0%) $ 4,229,684 2.2%) $ 1,879,388 (1.7%)
Automotive.............. 2,564,169 (1.4%)
Banking................. 9,622,934 (2.6%) 4,461,345 (2.4%) 4,198,216 (3.7%)
Biotechnology........... 11,305,260 (3.0%) 1,266,294 (0.7%) 1,453,650 (1.3%)
Broadcasting............ 56,634,368 (15.2%) 8,249,688 (4.4%) 5,551,477 (4.9%)
Building & 2,130,563 (1.1%)
Construction...........
Business Services....... 28,673,398 (7.7%) 20,708,402 (11.0%) 1,494,872 (1.3%)
Chemicals............... 1,736,627 (0.9%) 7,465,971 (6.6%)
Computer Equipment & 24,005,995 (6.5%) 13,056,117 (6.9%)
Service................
Construction Materials.. 1,041,569 (0.6%) 804,892 (0.7%)
Construction & Mining 1,196,531 (0.6%)
Equipment..............
Consumer Products....... 810,937 (0.4%) 1,847,336 (1.6%)
Consumer Services....... 314,036 (0.3%)
Drugs & Health Care..... 29,539,775 (8.0%) 15,080,999 (8.0%) 4,157,539 (3.7%)
Education............... 49,914,109 (13.4%) 2,946,847 (1.6%)
Electrical Equipment.... 1,206,631 (0.6%) 1,451,842 (1.3%)
Electronics............. 31,345,472 (8.5%) 15,441,078 (8.2%) 2,655,535 (2.3%)
Entertainment & 3,353,212 (0.9%) 4,214,784 (2.2%)
Leisure................
Financial Services...... 18,747,329 (5.0%) 5,415,602 (2.9%) 645,360 (0.6%)
Food & Beverages........ 2,135,359 (1.1%) 2,954,732 (2.6%)
Forest Products & 55,000 (0.0%) 319,973 (0.3%)
Paper..................
General Business........ 3,927,964 (1.1%)
Healthcare Services..... 4,612,719 (2.4%)
Hospital Management..... 638,575 (0.3%)
Hotel & Motel........... 340,747 (0.2%)
Household Appliances & 403,925 (0.2%)
Home Furnishings.......
Insurance............... 3,745,319 (2.0%) 11,857,700 (10.4%)
Machinery............... 669,592 (0.6%)
Medical Equipment & 4,249,506 (2.2%) 1,516,833 (1.3%)
Supply.................
Metals--Gold............ 2,892,048 (2.5%)
Metals--Non-Ferrous..... 215,600 (0.1%) 2,869,241 (2.5%)
Metals--Steel & Iron.... 1,047,581 (0.9%)
Mining.................. 876,832 (0.8%)
Miscellaneous........... 1,838,275 (1.0%)
Multi-Industry.......... 3,295,292 (0.9%) 3,397,089 (3.0%)
Newspapers.............. 1,033,000 (0.5%)
Office & Business 4,521,756 (2.4%) 3,408,501 (3.0%)
Equipment..............
Oil & Gas Exploration... 697,450 (0.4%) 1,039,598 (0.9%)
Oil..................... 213,875 (0.2%)
Oil--Domestic........... 1,949,213 (1.7%)
Oil--International...... 1,961,332 (1.7%)
Oil--Services........... 1,409,228 (0.7%) 904,951 (0.8%)
Photography............. 450,056 (0.2%)
Pollution Control....... 923,737 (0.5%)
Printing & Publishing... 1,210,744 (0.6%) 1,014,244 (0.9%)
Real Estate............. 1,252,440 (0.7%) 1,934,002 (1.7%)
Restaurant.............. 19,240,018 (5.2%) 3,582,490 (1.9%)
Retail Grocery.......... 1,872,900 (1.0%)
Retail Trade............ 13,958,932 (3.8%) 16,684,107 (8.8%)
Shipbuilding............ 717,072 (0.4%)
Software................ 13,719,159 (3.7%) 14,046,833 (7.4%) 3,141,600 (2.8%)
Telecommunications 27,154,008 (7.3%) 10,619,403 (5.6%) 1,177,250 (1.0%)
Equipment & Services...
Textiles & Apparel...... 1,837,403 (1.0%)
Transportation-- 6,419,241 (1.7%) 1,762,225 (0.9%) 2,026,000 (1.8%)
Airlines...............
Transportation-- 883,047 (0.5%) 1,918,670 (1.7%)
Railroad...............
Transportation-- 1,206,775 (0.6%)
Trucking...............
Utilities--Electric..... 7,631,561 (6.7%)
Utilities--Gas 2,852,129 (2.5%)
Distribution &
Pipelines..............
Utilities--Telephone.... 103,469 (0.1%) 2,664,242 (2.3%)
------------ ------------ ------------
Total Common Stock...... 354,583,865 (95.5%) 188,807,027 (99.8%) 96,158,903 (84.6%)
------------ ------------ ------------
PREFERRED STOCK
Food & Beverages........ 227,228 (0.2%)
Metals--Steel & Iron.... 327,140 (0.3%)
Oil--International...... 244,426 (0.2%)
Software................ 1,099,328 (1.0%)
------------ ------------ ------------
Total Preferred Stock... -- -- 1,898,122 (1.7%)
------------ ------------ ------------
Total Equity 354,583,865 (95.5%) 188,807,027 (99.8%) 98,057,025 (86.3%)
Securities.............
------------ ------------ ------------
LONG-TERM DEBT
SECURITIES
Federal Treasury 7,775,488 (6.8%)
Obligations............
Foreign Obligations..... 2,113,840 (1.9%)
------------
Total Long-Term Debt 9,889,328 (8.7%)
Securities.............
------------
SHORT-TERM OBLIGATIONS
Commercial Paper........ 14,593,552 (3.9%) 1,170,561 (0.6%)
Federal Agency 7,884,076 (4.2%)
Obligations............
Repurchase Agreements... 6,398,000 (5.6%)
------------ ------------ ------------
Total Short-Term 14,593,552 (3.9%) 9,054,637 (4.8%) 6,398,000 (5.6%)
Obligations............
------------ ------------ ------------
TOTAL INVESTMENTS....... 369,177,417 (99.4%) 197,861,664 (104.6%) 114,344,353 (100.6%)
Other Assets Less 2,326,494 (0.6%) (8,729,698) (-4.6%) (629,356) (-0.6%)
Liabilities............
------------ ------------ ------------
NET ASSETS.............. $371,503,911 (100.0%) $189,131,966 (100.0%) $113,714,997 (100.0%)
============ ============ ============
</TABLE>
15
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(Concluded)
5. SUMMARY OF INVESTMENTS AS OF DECEMBER 31, 1998--(CONCLUDED)
The value of the investments of the Fund's portfolios are determined using
the following valuation techniques. Portfolio securities that are traded on
domestic stock exchanges are valued at the last price as of the close of
business on the day the securities are being valued, or, lacking any sales, at
the mean between closing bid and asked prices (except for the Loomis Sayles
High Yield Bond Portfolio, which in the latter case would value such
securities at the last bid price). Securities trading primarily on non-
domestic exchanges are valued at the preceding closing price on the exchange
where it primarily trades (or, in the case of the Loomis Sayles High Yield
Bond and Scudder Global Equity Portfolios, the last sale). A security that is
listed or traded on more than one exchange is valued at the quotation on the
exchange determined to be the primary market for that security by the Board of
Directors or its delegates. If no closing price is available, then such
securities are valued by using the mean between the last current bid and asked
prices or, second, by using the last available closing price (except for the
Scudder Global Equity Portfolio which second values such securities at the
last current bid, and third by using the last available price). Domestic
securities traded in the over-the-counter market are valued at the mean
between the bid and asked prices or yield equivalent as obtained from two or
more dealers that make markets in the securities (except for the Loomis Sayles
High Yield Bond Portfolio, which, in the latter case, would value such
security at the last bid price; or the Scudder Global Equity Portfolio which
would value such security first at the last sale, and second at the bid
price). All non-U.S. securities traded in the over-the-counter securities
market are valued at the last sale quote, if market quotations are available,
or the last closing bid price, if there is no active trading in a particular
security for a given day. Where market quotations are not readily available
such non-domestic over-the-counter securities, then such securities will be
valued in good faith by a method that the Board of Directors, or it delegates,
believe accurately reflects fair value. Portfolio securities which are traded
both in the over-the-counter market and on a stock exchange are valued
according to the broadest and most representative market, and it is expected
that for debt securities this ordinarily will be the over-the-counter market.
Securities and assets for which market quotations are not readily available
(e.g. certain long-term bonds and notes) are valued at fair value as
determined in good faith by or under the direction of the Board of Directors
of the Fund, including valuations furnished by a pricing service retained for
this purpose and typically utilized by other institutional-sized trading
organizations. Forward foreign currency exchange contracts are valued based on
the closing prices of the forward currency contract rates in the London
foreign exchange markets on a daily basis as provided by a reliable bank or
dealer. Short-term instruments with a remaining maturity of sixty days or less
are valued utilizing the amortized cost, method of valuation. If for any
reason the fair value of any security is not fairly reflected by such method,
such security will be valued by the same methods as securities having a
maturity of more than sixty days.
Options, whether on securities, indices, or futures contracts, are valued at
the last sales price available as of the close of business on the day of
valuation or, if no sale, at the mean between the bid and asked prices.
Options on currencies are valued at the spot price each day. As a general
matter, futures contracts are marked-to-market daily. The value of futures
contracts will be the sum of the margin deposit plus or minus the difference
between the value of the futures contract on each day the net asset value is
calculated and the value on the date the futures contract originated, value
being that established on a recognized commodity exchange, or by reference to
other customary sources, with gain or loss being realized when the futures
contract closes or expires.
16
<PAGE>
Metropolitan Life Insurance Company
Consolidated Financial Statements
as of December 31, 1998 and 1997 and for the
Years Ended December 31, 1998, 1997 and 1996
and
Independent Auditors' Report
<PAGE>
Independent Auditors' Report
The Board of Directors and Policyholders of
Metropolitan Life Insurance Company:
We have audited the accompanying consolidated balance sheets of Metropolitan
Life Insurance Company and subsidiaries (the "Company") as of December 31,
1998 and 1997, and the related consolidated statements of income, equity and
cash flows for each of the three years in the period ended December 31, 1998.
These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the consolidated financial position of Metropolitan
Life Insurance Company and subsidiaries at December 31, 1998 and 1997, and the
consolidated results of their operations and their consolidated cash flows for
each of the three years in the period ended December 31, 1998 in conformity
with generally accepted accounting principles.
As discussed in Note 1 to the consolidated financial statements, in 1997 the
Company changed the method of accounting for investment income on certain
structured securities.
DELOITTE & TOUCHE LLP
New York, New York
February 4, 1999
2
<PAGE>
Metropolitan Life Insurance Company
CONSOLIDATED STATEMENTS OF INCOME
For the Years Ended December 31, 1998, 1997 and 1996
(In millions)
<TABLE>
<CAPTION>
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
REVENUES
Premiums............................................... $11,503 $11,278 $11,345
Universal life and investment-type product policy fees. 1,360 1,418 1,243
Net investment income.................................. 10,228 9,491 8,978
Other revenues......................................... 1,965 1,491 1,246
Net realized investment gains.......................... 2,021 787 231
------- ------- -------
27,077 24,465 23,043
------- ------- -------
EXPENSES
Policyholder benefits and claims....................... 12,488 12,234 12,286
Interest credited to policyholder account balances..... 2,731 2,884 2,868
Policyholder dividends................................. 1,653 1,742 1,728
Other expenses......................................... 8,118 5,934 4,755
------- ------- -------
24,990 22,794 21,637
------- ------- -------
Income before provision for income taxes, discontinued
operations and extraordinary item..................... 2,087 1,671 1,406
Provision for income taxes............................. 740 468 482
------- ------- -------
Income before discontinued operations and extraordinary
item.................................................. 1,347 1,203 924
Loss from discontinued operations...................... -- -- 71
------- ------- -------
Income before extraordinary item....................... 1,347 1,203 853
Extraordinary item--demutualization expense............ 4 -- --
------- ------- -------
Net income............................................. $ 1,343 $ 1,203 $ 853
======= ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
Metropolitan Life Insurance Company
CONSOLIDATED BALANCE SHEETS
December 31, 1998 and 1997 (In millions)
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
ASSETS
Investments:
Fixed maturities available-for-sale, at fair value......... $100,767 $ 92,630
Equity securities, at fair value........................... 2,340 4,250
Mortgage loans on real estate.............................. 16,827 20,193
Real estate and real estate joint ventures................. 6,287 7,080
Policy loans............................................... 5,600 5,846
Other limited partnership interests........................ 964 855
Short-term investments..................................... 1,369 679
Other invested assets...................................... 1,567 4,456
-------- --------
135,721 135,989
Cash and cash equivalents.................................... 3,301 2,911
Accrued investment income.................................... 1,994 1,860
Premiums and other receivables............................... 5,972 3,319
Deferred policy acquisition costs............................ 6,560 6,436
Other........................................................ 3,448 3,641
Separate account assets...................................... 58,350 48,620
-------- --------
$215,346 $202,776
======== ========
LIABILITIES AND EQUITY
Liabilities:
Future policy benefits....................................... $ 72,701 $ 73,848
Policyholder account balances................................ 46,494 48,543
Other policyholder funds..................................... 4,061 3,998
Policyholder dividends payable............................... 947 969
Short-term debt.............................................. 3,585 4,587
Long-term debt............................................... 2,903 2,884
Income taxes payable, current and deferred................... 948 952
Other........................................................ 10,772 4,650
Separate account liabilities................................. 58,068 48,338
-------- --------
200,479 188,769
-------- --------
Commitments and contingencies (Note 9)
Equity:
Retained earnings............................................ 13,483 12,140
Accumulated other comprehensive income....................... 1,384 1,867
-------- --------
14,867 14,007
-------- --------
$215,346 $202,776
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
Metropolitan Life Insurance Company
CONSOLIDATED STATEMENTS OF EQUITY (CONTINUED)
For the Years Ended December 31, 1998, 1997 and 1996
(In millions)
<TABLE>
<CAPTION>
Accumulated Other Comprehensive Income
----------------------------------------------
Net Foreign Minimum
Unrealized Currency Pension
Comprehensive Retained Investment Translation Liability
Total Income Earnings Gains Adjustment Adjustment
------- ------------- -------- ------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1,
1996................... $11,754 $10,084 $ 1,646 $ 24 $ --
Comprehensive income:
Net income............. 853 $ 853 853
------
Other comprehensive
loss:
Unrealized investment
losses, net of
related offsets,
reclassification
adjustments and
income taxes........ (618) (618)
Foreign currency
translation
adjustments......... (6) (6)
------
Other comprehensive
loss.................. (624) (624)
------
Comprehensive income. $ 229
------- ====== ------- ------------- ------------ ------------
Balance at December 31,
1996................... 11,983 10,937 1,028 18 --
Comprehensive income:
Net income............. 1,203 $1,203 1,203
------
Other comprehensive
income:
Unrealized investment
gains, net of
related offsets,
reclassification
adjustments and
income taxes........ 870 870
Foreign currency
translation
adjustments......... (49) (49)
------
Other comprehensive
income................ 821 821
------
Comprehensive income. $2,024
------- ====== ------- ------------- ------------ ------------
Balance at December 31,
1997................... 14,007 12,140 1,898 (31) --
Comprehensive income:
Net income............. 1,343 $1,343 1,343
Other comprehensive
loss:
Unrealized investment
losses, net of
related offsets,
reclassification
adjustments and
income taxes........ (358) (358)
Foreign currency
translation
adjustments......... (113) (113)
Minimum pension
liability
adjustment.......... (12) (12)
------
Other comprehensive
loss.................. (483) (483)
-------
------
Comprehensive income. $ 860
------- ------- ------------- ------------ ------------
======
Balance at December 31,
1998................... $14,867 $13,483 $ 1,540 $ (144) $ (12)
======= ======= ============= ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
Metropolitan Life Insurance Company
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1998, 1997 and 1996
(In millions)
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities
Net income....................................... $ 1,343 $ 1,203 $ 853
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization expenses....... 56 (36) (18)
Gains from sales of investments and
businesses, net............................. (2,629) (1,018) (428)
Change in undistributed income of real estate
joint ventures and other limited partnership
interests................................... (91) 157 (45)
Interest credited to policyholder account
balances.................................... 2,731 2,884 2,868
Universal life and investment-type product
policy fees................................. (1,360) (1,418) (1,243)
Change in accrued investment income.......... (181) (215) 350
Change in premiums and other receivables..... (2,681) (792) (125)
Change in deferred policy acquisition costs,
net......................................... (188) (159) (391)
Change in insurance related liabilities...... 1,493 2,364 2,349
Change in income taxes payable............... 211 (99) (134)
Change in other liabilities.................. 2,390 (206) 902
Other, net................................... (253) 207 (1,250)
-------- -------- --------
Net cash provided by operating activities........ 841 2,872 3,688
-------- -------- --------
Cash flows from investing activities
Sales, maturities and repayments of:
Fixed maturities............................. 57,857 75,346 76,117
Equity securities............................ 3,085 1,821 2,069
Mortgage loans on real estate................ 2,296 2,784 2,380
Real estate and real estate joint ventures... 1,122 2,046 2,358
Other limited partnership interests.......... 146 166 178
Purchases of:
Fixed maturities............................. (67,543) (76,603) (76,225)
Equity securities............................ (854) (2,121) (2,742)
Mortgage loans on real estate................ (2,610) (4,119) (4,225)
Real estate and real estate joint ventures... (423) (624) (989)
Other limited partnership interests.......... (723) (338) (307)
Net change in short-term investments........... (761) 63 1,028
Net change in policy loans..................... 133 17 (128)
Proceeds from sales of businesses.............. 7,372 274 --
Net change in investment collateral............ 3,769 -- --
Other, net..................................... (183) (378) (438)
-------- -------- --------
Net cash provided by (used in) investing
activities...................................... 2,683 (1,666) (924)
-------- -------- --------
Cash flows from financing activities
Policyholder account balances:
Deposits..................................... $ 19,361 $ 16,061 $ 17,167
Withdrawals.................................. (21,706) (18,831) (19,321)
Short-term debt, net........................... (1,001) 1,265 69
Long-term debt issued.......................... 693 989 --
Long-term debt repaid.......................... (481) (104) (284)
-------- -------- --------
Net cash used in financing activities............ (3,134) (620) (2,369)
-------- -------- --------
Change in cash and cash equivalents.............. 390 586 395
Cash and cash equivalents, beginning of year..... 2,911 2,325 1,930
-------- -------- --------
Cash and cash equivalents, end of year........... $ 3,301 $ 2,911 $ 2,325
======== ======== ========
Supplemental disclosures of cash flow
information:
Interest....................................... $ 367 $ 422 $ 310
======== ======== ========
Income taxes................................... $ 579 $ 589 $ 497
======== ======== ========
</TABLE>
Cash paid during the year for:
See accompanying notes to consolidated financial statements.
6
<PAGE>
Metropolitan Life Insurance Company
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts are in millions unless otherwise stated)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business
Metropolitan Life Insurance Company ("MetLife") and its subsidiaries (the
"Company") is a leading provider of insurance and financial services to a
broad section of institutional and individual customers. The Company offers
life insurance, annuities and mutual funds to individuals and group insurance
and retirement and savings products and services to corporations and other
institutions.
Basis of Presentation
The accompanying consolidated financial statements have been prepared in
conformity with generally accepted accounting principles ("GAAP"). The New
York State Insurance Department (the "Department") recognizes only statutory
accounting practices for determining and reporting the financial condition and
results of operations of an insurance company for determining solvency under
the New York Insurance Law. No consideration is given by the Department to
financial statements prepared in accordance with GAAP in making such
determination.
The preparation of financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. The most significant estimates include those used
in determining deferred policy acquisition costs, investment allowances and
the liability for future policyholder benefits. Actual results could differ
from those estimates.
During 1997, management changed to the retrospective interest method of
accounting for investment income on structured notes in accordance with
authoritative guidance issued in late 1996. As a result, net investment income
increased by $175. The cumulative effect of this accounting change on prior
years' income was not material.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
MetLife and its subsidiaries, partnerships and joint ventures in which MetLife
has a controlling interest. All material intercompany accounts and
transactions have been eliminated.
The Company accounts for its investments in real estate joint ventures and
other limited partnership interests in which it does not have a controlling
interest, but more than a minimal interest, under the equity method of
accounting.
Minority interest relating to consolidated entities included in other
liabilities was $274 and $277 at December 31, 1998 and 1997, respectively.
Certain amounts in the prior years' consolidated financial statements have
been reclassified to conform with the 1998 presentation.
Investments
The Company's fixed maturity and equity securities are classified as
available-for-sale and are reported at their estimated fair value. Unrealized
investment gains and losses on securities are recorded as a separate component
of other comprehensive income, net of policyholder related amounts and
deferred income taxes. The cost of fixed maturity and equity securities is
adjusted for impairments in value deemed to be other than temporary. These
adjustments are recorded as realized losses on investments. Realized gains and
losses on sales of securities are determined on a specific identification
basis. All security transactions are recorded on a trade date basis.
Mortgage loans on real estate are stated at amortized cost, net of valuation
allowances. Valuation allowances are established for the excess carrying value
of the mortgage loan over its estimated fair value when it is probable that,
based upon current information and events, the Company will be unable to
collect all amounts due under the
7
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(Continued)
contractual terms of the loan agreement. Valuation allowances are based upon
the present value of expected future cash flows discounted at the loan's
original effective interest rate or the collateral value if the loan is
collateral dependent. Interest income earned on impaired loans is accrued on
the net carrying value amount of the loan based on the loan's effective
interest rate.
Real estate, including related improvements, is stated at cost less
accumulated depreciation. Depreciation is provided on a straight-line basis
over the estimated useful life of the asset (typically 20 to 40 years). Cost
is adjusted for impairment whenever events or changes in circumstances
indicate the carrying amount of the asset may not be recoverable. Impaired
real estate is written down to estimated fair value with the impairment loss
being included in realized losses on investments. Impairment losses are based
upon the estimated fair value of real estate, which is generally computed
using the present value of expected future cash flows from the real estate
discounted at a rate commensurate with the underlying risks. Real estate
acquired in satisfaction of debt is recorded at estimated fair value at the
date of foreclosure. Valuation allowances on real estate held-for-sale are
computed using the lower of depreciated cost or estimated fair value, net of
disposition costs.
Policy loans are stated at unpaid principal balances.
Short-term investments are stated at amortized cost, which approximates fair
value.
Derivative Instruments
The Company uses derivative instruments to manage market risk through one of
four principal risk management strategies: the hedging of invested assets,
liabilities, portfolios of assets or liabilities and anticipated transactions.
The Company's derivative strategy employs a variety of instruments including
financial futures, financial forwards, interest rate and foreign currency
swaps, floors, foreign exchange contracts, caps and options.
The Company's derivative program is monitored by senior management. The
Company's risk of loss is typically limited to the fair value of its
derivative instruments and not to the notional or contractual amounts of these
derivatives. Risk arises from changes in the fair value of the underlying
instruments and, with respect to over-the-counter transactions, from the
possible inability of counterparties to meet the terms of the contracts. The
Company has strict policies regarding the financial stability and credit
standing of its major counterparties.
The Company's derivative instruments are designated as hedges and are highly
correlated to the underlying risk at contract inception. The Company monitors
the effectiveness of its hedges throughout the contract term using an offset
ratio of 80 to 125 percent as its minimum acceptable threshold for hedge
effectiveness. Derivative instruments that lose their effectiveness are marked
to market through net investment income.
Gains or losses on financial futures contracts entered into in anticipation
of investment transactions are deferred and, at the time of the ultimate
investment purchase or disposition, recorded as an adjustment to the basis of
the purchased assets or to the proceeds on disposition. Gains or losses on
financial futures used in asset risk management are deferred and amortized
into net investment income over the remaining term of the investment. Gains or
losses on financial futures used in portfolio risk management are deferred and
amortized into net investment income or policyholder benefits over the
remaining life of the hedged sector of the underlying portfolio.
Financial forward contracts that are entered into to purchase securities are
marked to fair value through other comprehensive income, similar to the
accounting for the investment security. Such contracts are accounted for at
settlement by recording the purchase of the specified securities at fair
value. Gains or losses resulting from the termination of forward contracts are
recognized immediately as a component of net investment income.
Interest rate and certain foreign currency swaps involve the periodic
exchange of payments without the exchange of underlying principal or notional
amounts. Net receipts or payments are accrued and recognized over the term of
the swap agreement as an adjustment to net investment income or other expense.
Gains or losses resulting from swap terminations are amortized over the
remaining term of the underlying asset or liability. Gains and losses on swaps
and certain foreign forward exchange contracts entered into in anticipation of
investment transactions are deferred and, at the time of the ultimate
investment purchase or disposition, reflected as an adjustment to the basis of
the purchased
8
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(Continued)
assets or to the proceeds of disposition. In the event the asset or liability
underlying a swap is disposed of, the swap position is closed immediately and
any gain or loss is recorded as an adjustment to the proceeds from
disposition.
The Company periodically enters into collars, which consist of purchased put
and written call options, to lock in unrealized gains on equity securities.
Collars are marked to market through other comprehensive income, similar to
the accounting for the underlying equity securities. Purchased interest rate
caps and floors are used to offset the risk of interest rate changes related
to insurance liabilities. Premiums paid on floors, caps and options are split
into two components, time value and intrinsic value. Time value is amortized
over the life of the applicable derivative instrument. The intrinsic value and
any gains or losses relating to these derivative instruments adjust the basis
of the underlying asset or liability and are recognized as a component of net
investment income over the term of the underlying asset or liability being
hedged as an adjustment to the yield.
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents.
Property, Equipment and Leasehold Improvements
Property, equipment and leasehold improvements, which are included in other
assets, are stated at cost, less accumulated depreciation and amortization.
Depreciation is determined using either the straight-line or sum-of-the-years-
digits method over the estimated useful lives of the assets. Estimated lives
range from 20 to 40 years for real estate and 5 to 15 years for all other
property and equipment. Accumulated depreciation on property and equipment and
accumulated amortization of leasehold improvements was $1,048 at both December
31, 1998 and 1997. Related depreciation and amortization expense was $95, $103
and $78 for the years ended December 31, 1998, 1997 and 1996, respectively.
Deferred Policy Acquisition Costs
The costs of acquiring new insurance business that vary with, and are
primarily related to, the production of new business are deferred. Such costs,
which consist principally of commissions, agency and policy issue expenses,
are amortized over the expected life of the contract for participating
traditional life, universal life and investment-type products. Generally,
deferred policy acquisition costs are amortized in proportion to the present
value of estimated gross margins or profits from investment, mortality,
expense margins and surrender charges. Actual gross margins or profits can
vary from management's estimates resulting in increases or decreases in the
rate of amortization. Management periodically updates these estimates and
evaluates the recoverability of deferred policy acquisition costs. When
appropriate, management revises its assumptions of the estimated gross margins
or profits of these contracts, and the cumulative amortization is re-estimated
and adjusted by a cumulative charge or credit to current operations.
Deferred policy acquisition costs for non-participating traditional life,
non-medical health and annuity policies with life contingencies are amortized
in proportion to anticipated premiums. Assumptions as to anticipated premiums
are made at the date of policy issuance and are consistently applied during
the life of the contracts. Deviations from estimated experience are reflected
in operations when they occur. For these contracts, the amortization period is
typically the estimated life of the policy.
Deferred policy acquisition costs for property and liability insurance
contracts, which are primarily comprised of commissions and certain
underwriting expenses, are deferred and amortized on a pro rata basis over the
applicable contract term or reinsurance treaty.
Other Intangible Assets
The excess of cost over the fair value of net assets acquired ("goodwill")
and the value of business acquired are included in other assets. Goodwill is
amortized on a straight-line basis over a period ranging from 10 to 30 years.
The Company continually reviews goodwill to assess recoverability from future
operations using undiscounted cash flows.
9
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(Continued)
Impairments are recognized in operating results if a permanent diminution in
value is deemed to have occurred. The value of business acquired is amortized
over the expected policy or contract duration in relation to the present value
of estimated gross profits from such policies and contracts.
<TABLE>
<CAPTION>
Value of Business Acquired Goodwill
-------------------------- ----------------
Years Ended December 31 1998 1997 1996 1998 1997 1996
- ----------------------- -------- -------- -------- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net Balance at January 1........ $ 498 $ 358 $ 381 $884 $544 $377
Acquisitions.................... 32 176 7 80 387 197
Amortization.................... (55) (36) (30) (59) (47) (30)
-------- -------- -------- ---- ---- ----
Net Balance at December 31...... $ 475 $ 498 $ 358 $905 $884 $544
======== ======== ======== ==== ==== ====
<CAPTION>
December 31 1998 1997 1998 1997
- ----------- -------- -------- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Accumulated Amortization........ $ 142 $ 87 $207 $148
======== ======== ==== ====
</TABLE>
Future Policy Benefits and Policyholder Account Balances
Future policy benefit liabilities for participating traditional life
insurance policies are equal to the aggregate of (a) net level premium
reserves for death and endowment policy benefits (calculated based upon the
nonforfeiture interest rate, ranging from 2% to 7%, and mortality rates
guaranteed in calculating the cash surrender values described in such
contracts), (b) the liability for terminal dividends, and (c) premium
deficiency reserves, which are established when the liabilities for future
policy benefits plus the present value of expected future gross premiums are
insufficient to provide for expected future policy benefits and expenses after
deferred policy acquisition costs are written off.
Future policy benefit liabilities for traditional annuities are equal to
accumulated contractholder fund balances during the accumulation period and
the present value of expected future payments after annuitization. Interest
rates used in establishing such liabilities range from 5% to 8%. Future policy
benefit liabilities for non-medical health insurance are calculated using the
net level premium method and assumptions as to future morbidity, withdrawals
and interest, which provide a margin for adverse deviation. Interest rates
used in establishing such liabilities range from 4% to 7%. Future policy
benefit liabilities for disabled lives are estimated using the present value
of benefits method and experience assumptions as to claim terminations,
expenses and interest. Interest rates used in establishing such liabilities
range from 4% to 8%.
Policyholder account balances for universal life and investment-type
contracts are equal to the policy account values, which consist of an
accumulation of gross premium payments plus credited interest, ranging from 3%
to 17%, less expenses, mortality charges and withdrawals.
The liability for unpaid claims and claim expenses for property and casualty
insurance represents the amount estimated for claims that have been reported
but not settled and claims incurred but not reported. Liabilities for unpaid
claims are estimated based upon the Company's historical experience and other
actuarial assumptions that consider the effects of current developments,
anticipated trends and risk management programs. Revisions of these estimates
are reflected in operations in the year such refinements are made.
Recognition of Insurance Revenue and Related Benefits
Premiums related to traditional life and annuity policies with life
contingencies are recognized as revenues when due. Benefits and expenses are
provided against such revenues to recognize profits over the estimated lives
of the policies. When premiums are due over a significantly shorter period
than the period over which benefits are provided, any excess profit is
deferred and recognized into operations in a constant relationship to
insurance in-force or, for annuities, the amount of expected future policy
benefit payments.
10
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(Continued)
Premiums related to non-medical health contracts are recognized on a pro
rata basis over the applicable contract term.
Premiums related to universal life and investment-type contracts are
credited to policyholder account balances. Revenues from such contracts
consist of amounts assessed against policyholder account balances for
mortality, policy administration and surrender charges. Amounts that are
charged to operations include interest credited and benefit claims incurred in
excess of related policyholder account balances.
Premiums related to property and casualty contracts are recognized as
revenue on a pro rata basis over the applicable contract term. Unearned
premiums are included in other liabilities.
Dividends to Policyholders
Dividends to policyholders are determined annually by the Board of
Directors. The aggregate amount of policyholders' dividends is related to
actual interest, mortality, morbidity and expense experience for the year, as
well as management's judgment as to the appropriate level of statutory surplus
to be retained by the Company.
Participating Business
Participating business represented approximately 21% and 22% of the
Company's life insurance in-force, and 81% and 87% of the number of life
insurance policies in-force, at December 31, 1998 and 1997, respectively.
Participating policies represented approximately 39% and 40%, 41% and 41%, and
40% and 44% of gross and net life insurance premiums for the years ended
December 31, 1998, 1997 and 1996, respectively.
Income Taxes
MetLife and its includable life insurance and non-life insurance
subsidiaries file a consolidated U.S. Federal income tax return in accordance
with the provisions of the Internal Revenue Code, as amended ("the Code").
Under the Code, the amount of Federal income tax expense incurred by mutual
life insurance companies includes an equity tax calculated based upon a
prescribed formula that incorporates a differential earnings rate between
stock and mutual life insurance companies. The future tax consequences of
temporary differences between financial reporting and tax bases of assets and
liabilities are measured as of the balance sheet dates and are recorded as
deferred income tax assets and liabilities.
Reinsurance
The Company has reinsured certain of its life insurance and property and
casualty insurance contracts with other insurance companies under various
agreements. Amounts due from reinsurers are estimated based upon assumptions
consistent with those used in establishing the liabilities related to the
underlying reinsured contracts. Policy and contract liabilities are reported
gross of reinsurance credits.
Separate Accounts
Separate accounts are established in conformity with insurance laws and are
generally not chargeable with liabilities that arise from any other business
of the Company. Separate account assets are subject to general account claims
only to the extent the value of such assets exceeds the separate account
liabilities. Investments (stated at estimated fair value) and liabilities of
the separate accounts are reported separately as assets and liabilities.
Deposits to separate accounts, investment income and realized and unrealized
gains and losses on the investments of the separate accounts accrue directly
to contractholders and, accordingly, are not reflected in the Company's
consolidated statements of income and cash flows. Mortality, policy
administration and surrender charges to all separate accounts are included in
revenues.
Foreign Currency Translation
Balance sheet accounts of foreign operations are translated at the exchange
rates in effect at each year-end and income and expense accounts are
translated at the average rates of exchange prevailing during the year. The
local currencies of foreign operations are generally the functional
currencies. Translation adjustments are charged or
11
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(Continued)
credited directly to other comprehensive income. Gains and losses from foreign
currency transactions are reported in other expenses and were insignificant
for all years presented.
Extraordinary Item--Demutualization Expense
On November 24, 1998, the Board of Directors authorized management to
develop a plan to convert from a mutual life insurance company to a stock life
insurance company (the "demutualization"). A final plan to convert to a
publicly traded stock company is subject to the approval of the Board of
Directors, the policyholders and the New York Superintendent of Insurance
("Superintendent"). The Department has not yet reviewed or approved any
materials relating to the demutualization.
The accompanying consolidated statements of income reflect an extraordinary
charge of $4 (net of income taxes of $2) for the year ended December 31, 1998
related to costs associated with the demutualization.
Application of Accounting Pronouncements
In October 1998, the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position ("SOP") 98-7, Accounting for Insurance
and Reinsurance Contracts That Do Not Transfer Insurance Risk ("SOP 98-7").
SOP 98-7 provides guidance on the method of accounting for insurance and
reinsurance contracts that do not transfer insurance risk, defined in the SOP
as the deposit method. SOP 98-7 classifies insurance and reinsurance contracts
for which the deposit method is appropriate into those that 1) transfer only
significant timing risk, 2) transfer only significant underwriting risk, 3)
transfer neither significant timing or underwriting risk and 4) have an
indeterminate risk. The Company is required to adopt SOP 98-7 as of January 1,
2000. Adoption of SOP 98-7 is not expected to have a material effect on the
Company's consolidated financial statements.
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") 133, Accounting for
Derivative Instruments and Hedging Activities ("SFAS 133"). SFAS 133 requires,
among other things, that all derivatives be recognized in the consolidated
balance sheets as either assets or liabilities and measured at fair value. The
corresponding derivative gains and losses should be reported based upon the
hedge relationship, if such a relationship exists. Changes in the fair value
of derivatives that are not designated as hedges or that do not meet the hedge
accounting criteria in SFAS 133 are required to be reported in income. The
Company is required to adopt SFAS 133 as of January 1, 2000. The Company is in
the process of quantifying the impact of SFAS 133 on its consolidated
financial statements.
In April 1998, the AICPA issued SOP 98-5, Reporting on the Costs of Start-Up
Activities ("SOP 98-5"). SOP 98-5 broadly defines start-up activities. SOP 98-
5 requires costs of start-up activities and organization costs to be expensed
as incurred. The Company is required to adopt SOP 98-5 as of January 1, 1999.
Adoption of SOP 98-5 is not expected to have a material effect on the
Company's consolidated financial statements.
In March 1998, the AICPA issued SOP 98-1, Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use ("SOP 98-1"). SOP 98-
1 provides guidance for determining when an entity should capitalize or
expense external and internal costs of computer software developed or obtained
for internal use. The Company is required to adopt SOP 98-1 as of January 1,
1999. Adoption of SOP 98-1 is not expected to have a material effect on the
Company's consolidated financial statements.
In December 1997, the AICPA issued SOP 97-3, Accounting for Insurance and
Other Enterprises for Insurance Related Assessments ("SOP 97-3"). SOP 97-3
provides guidance on accounting by insurance and other enterprises for
assessments related to insurance activities including recognition, measurement
and disclosure of guaranty fund and other insurance related assessments. The
Company is required to adopt SOP 97-3 as of January 1, 1999. Adoption of SOP
97-3 is not expected to have a material effect on the Company's consolidated
financial statements.
In 1998, the Company adopted SFAS 131, Disclosures About Segments of an
Enterprise and Related Information ("SFAS 131"). SFAS 131 establishes
standards for reporting financial information and related disclosures about
products and services, geographic areas and major customers relating to
operating segments in annual financial statements. Adoption of SFAS 131 had no
effect on the Company's consolidated financial statements.
12
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(Continued)
In 1998, the Company adopted SFAS 130, Reporting Comprehensive Income ("SFAS
130"). SFAS 130 establishes standards for reporting and displaying
comprehensive income and its components in a financial statement that is
displayed with the same prominence as other financial statements. Adoption of
SFAS 130 had no effect on the Company's consolidated financial statements.
In 1998, the Company adopted the provisions of SFAS 125 which were deferred
by SFAS No. 127, Deferral of the Effective Date of Certain Provisions of FASB
Statement No. 125. The deferred provisions provide accounting and reporting
standards related to repurchase agreements, dollar rolls, securities lending
and similar transactions. Adoption of the provisions had the effect of
increasing assets and liabilities by $3,769 at December 31, 1998 and
increasing revenues and expenses by $266 for the year ended December 31, 1998.
2. INVESTMENTS
The components of net investment income were as follows:
<TABLE>
<CAPTION>
Years ended December 31,
---------------------------
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Fixed maturities........................... $ 6,563 $ 6,445 $ 6,042
Equity securities.......................... 78 50 60
Mortgage loans on real estate.............. 1,572 1,684 1,523
Real estate and real estate joint ventures. 1,529 1,718 1,668
Policy loans............................... 387 368 399
Other limited partnership interests........ 196 302 215
Cash, cash equivalents and short-term
investments 187 169 214
Other...................................... 841 368 401
-------- ------- --------
11,353 11,104 10,522
Less: Investment expenses.................. 1,125 1,613 1,544
-------- ------- --------
$10,228 $ 9,491 $ 8,978
======== ======= ========
Net realized investment gains, including changes in valuation allowances,
were as follows:
<CAPTION>
Years ended December 31,
---------------------------
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Fixed maturities........................... $ 573 $ 118 $ 234
Equity securities.......................... 994 224 101
Mortgage loans on real estate.............. 23 56 (86)
Real estate and real estate joint ventures. 424 446 371
Other limited partnership interests........ 13 12 (129)
Sale of subsidiaries....................... 531 139 --
Other...................................... 71 23 (33)
-------- ------- --------
2,629 1,018 458
Amounts allocable to:
Future policy benefit loss recognition... (300) (126) (203)
Deferred policy acquisition costs........ (240) (70) (4)
Participating pension contracts.......... (68) (35) (20)
-------- ------- --------
$ 2,021 $ 787 $ 231
======== ======= ========
</TABLE>
13
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(Continued)
The components of net unrealized investment gains, included in accumulated
other comprehensive income, were as follows:
<TABLE>
<CAPTION>
Years ended December
31,
-------------------------
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
Fixed maturities............................. $ 4,809 $ 4,766 $ 2,226
Equity securities............................ 832 1,605 563
Other invested assets........................ 125 294 474
------- ------- -------
5,766 6,665 3,263
------- ------- -------
Amounts allocable to:
Future policy benefit loss recognition..... (2,248) (2,189) (1,219)
Deferred policy acquisition costs.......... (902) (1,147) (420)
Participating pension contracts............ (212) (312) (9)
Deferred income taxes........................ (864) (1,119) (587)
------- ------- -------
(4,226) (4,767) (2,235)
------- ------- -------
$ 1,540 $ 1,898 $ 1,028
======= ======= =======
The changes in net unrealized investment gains were as follows:
<CAPTION>
Years ended December
31,
-------------------------
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
Balance at January 1......................... $ 1,898 $ 1,028 $ 1,646
Unrealized investment gains (losses) during
the year.................................... (899) 3,402 (2,493)
Unrealized investment (gains) losses relating
to:
Future policy benefit loss recognition..... (59) (970) 845
Deferred policy acquisition costs.......... 245 (727) 328
Participating pension contracts............ 100 (303) 341
Deferred income taxes........................ 255 (532) 361
------- ------- -------
Balance at December 31....................... $ 1,540 $ 1,898 $ 1,028
======= ======= =======
Net change in unrealized investment gains.... $ (358) $ 870 $ (618)
======= ======= =======
</TABLE>
14
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(Continued)
Fixed Maturities and Equity Securities
Fixed maturities and equity securities at December 31, 1998 were as follows:
<TABLE>
<CAPTION>
Gross
Cost or Unrealized Estimated
Amortized ------------ Fair
Cost Gain Loss Value
--------- ------- ---- ---------
<S> <C> <C> <C> <C>
Fixed Maturities:
Bonds:
U.S. Treasury securities and obligations
of U.S. government corporations and
agencies................................. $ 6,640 $ 1,117 $ 10 $ 7,747
States and political subdivisions......... 597 26 -- 623
Foreign governments....................... 3,435 254 88 3,601
Corporate................................. 46,377 2,471 260 48,588
Mortgage and asset-backed securities 26,456 569 46 26,979
Other..................................... 12,438 1,069 293 13,214
------- ------- ---- --------
95,943 5,506 697 100,752
Redeemable preferred stocks............... 15 -- -- 15
------- ------- ---- --------
$95,958 $ 5,506 $697 $100,767
======= ======= ==== ========
Equity Securities:
Common stocks............................. $ 1,286 $ 923 $ 77 $ 2,132
Nonredeemable preferred stocks............ 222 4 18 208
------- ------- ---- --------
$ 1,508 $ 927 $ 95 $ 2,340
======= ======= ==== ========
Fixed maturities and equity securities at December 31, 1997 were as follows:
<CAPTION>
Gross
Cost or Unrealized Estimated
Amortized ------------ Fair
Cost Gain Loss Value
--------- ------- ---- ---------
<S> <C> <C> <C> <C>
Fixed Maturities:
Bonds:
U.S. Treasury securities and obligations
of U. S. government
corporations and agencies................ $ 8,708 $ 1,010 $ 2 $ 9,716
States and political subdivisions......... 486 22 -- 508
Foreign governments....................... 3,420 371 52 3,739
Corporate................................. 41,012 2,337 291 43,058
Mortgage and asset-backed securities...... 22,370 579 21 22,928
Other..................................... 11,374 929 134 12,169
------- ------- ---- --------
87,370 5,248 500 92,118
Redeemable preferred stocks............... 494 19 1 512
------- ------- ---- --------
$87,864 $ 5,267 $501 $ 92,630
======= ======= ==== ========
Equity Securities:
Common stocks............................. $ 2,444 $ 1,716 $105 $ 4,055
Nonredeemable preferred stocks............ 201 5 11 195
------- ------- ---- --------
$ 2,645 $ 1,721 $116 $ 4,250
======= ======= ==== ========
</TABLE>
The Company held foreign currency derivatives with notional amounts of $716
and $408 to hedge the exchange rate risk associated with foreign bonds at
December 31, 1998 and 1997, respectively. The Company also held options with
fair values of $(11) and $33 to hedge the market value of common stocks at
December 31, 1998 and 1997, respectively.
15
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(Continued)
At December 31, 1998, fixed maturities held by the Company that were below
investment grade or not rated by an independent rating agency totaled $8,289.
At December 31, 1998, non-income producing fixed maturities were
insignificant.
The amortized cost and estimated fair value of bonds at December 31, 1998,
by contractual maturity date, are shown below:
<TABLE>
<CAPTION>
Estimated
Amortized Fair
Cost Value
--------- ---------
<S> <C> <C>
Due in one year or less............................... $ 2,380 $ 2,462
Due after one year through five years................. 17,062 17,527
Due after five years through 10 years................. 23,769 24,714
Due after 10 years.................................... 26,276 29,070
-------- --------
69,487 73,773
Mortgage and asset-backed securities.................. 26,456 26,979
-------- --------
$ 95,943 $100,752
======== ========
</TABLE>
Fixed maturities not due at a single maturity date have been included in the
above table in the year of final maturity. Actual maturities may differ from
contractual maturities due to the exercise of prepayment options.
Sales of fixed maturities and equity securities were as follows:
<TABLE>
<CAPTION>
Years ended December
31,
-----------------------
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
Fixed maturities classified as available-for-
sale:
Proceeds..................................... $43,828 $67,454 $67,239
Gross realized gains......................... $ 928 $ 672 $ 1,067
Gross realized losses........................ $ 355 $ 558 $ 842
Fixed maturities classified as held-to-
maturity:
Proceeds..................................... $ -- $ 352 $ 1,281
Gross realized gains......................... $ -- $ 5 $ 10
Gross realized losses........................ $ -- $ 1 $ 1
Equity securities:
Proceeds..................................... $ 3,085 $ 1,821 $ 2,069
Gross realized gains......................... $ 1,125 $ 293 $ 150
Gross realized losses........................ $ 131 $ 69 $ 49
</TABLE>
During 1997, fixed maturities with an amortized cost of $11,682 were
transferred from held-to-maturity to available-for-sale. Other comprehensive
income at the date of reclassification was increased by $198 excluding the
effects of deferred income taxes and policyholder related amounts.
Excluding investments in U.S. governments and agencies, the Company is not
exposed to any significant concentration of credit risk in its fixed
maturities portfolio.
Securities Lending Program
The Company participates in securities lending programs whereby large blocks
of securities are loaned to third parties, primarily major brokerage firms.
The Company requires a minimum of 102% of the fair value of the loaned
securities to be separately maintained as collateral for the loans. Securities
with a cost or amortized cost of $4,005 and $6,068 and estimated fair value of
$4,552 and $6,653 were on loan under the program at December 31, 1998 and
1997, respectively. The Company is liable for cash collateral of $3,769 at
December 31, 1998. This liability is included in other liabilities. Rebates of
$266 were paid and accrued on the cash collateral for the year ended
16
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1998. The rebates paid and accrued during 1998 are included in
other operating costs and expenses. Security collateral is returnable on short
notice and is not reflected in the consolidated financial statements.
Statutory Deposits
The Company had investment assets on deposit with regulatory agencies of
$466 and $4,695 as of December 31, 1998 and 1997, respectively.
Mortgage Loans on Real Estate
Mortgage loans were categorized as follows:
<TABLE>
<CAPTION>
December 31,
----------------------------------
1998 1997
---------------- ----------------
Amount Percent Amount Percent
------- ------- ------- -------
<S> <C> <C> <C> <C>
Commercial mortgage loans.................... $12,503 74% $14,945 73%
Agriculture mortgage loans................... 4,256 25% 3,753 18%
Residential mortgage loans................... 241 1% 272 1%
Other loans.................................. -- -- 1,512 8%
------- ------ ------- -----
17,000 100% 20,482 100%
====== =====
Less: Valuation allowances................... 173 289
------- -------
$16,827 $20,193
======= =======
Mortgage loans on real estate are collateralized by properties primarily
located throughout the United States. At December 31, 1998, approximately 15%,
9% and 7% of the properties were located in California, New York and Florida,
respectively. Generally, the Company (as the lender) requires that a minimum
of one-fourth of the purchase price of the underlying real estate be paid by
the borrower.
Certain of the Company's real estate joint ventures have mortgage loans with
the Company. The carrying values of such mortgages were $606 and $725 at
December 31, 1998 and 1997, respectively.
Changes in mortgage loan valuation allowances were as follows:
<CAPTION>
Years ended December
31,
-------------------------
1998 1997 1996
------- ------- -------
<S> <C> <C> <C> <C>
Balance at January 1......................... $ 289 $ 469 $ 491
Additions.................................... 40 61 144
Deductions for writedowns and dispositions... (130) (241) (166)
Deductions for disposition of affiliates..... (26) -- --
------- ------ -------
Balance at December 31....................... $ 173 $ 289 $ 469
======= ====== =======
A portion of the Company's mortgage loans on real estate was impaired and
consisted of the following:
<CAPTION>
December 31,
----------------
1998 1997
------- -------
<S> <C> <C> <C> <C>
Impaired mortgage loans with valuation
allowances.................................. $ 823 $1,231
Impaired mortgage loans without valuation
allowances.................................. 375 306
------- ------
1,198 1,537
Less: Valuation allowances................... 149 250
------- ------
$ 1,049 $1,287
======= ======
</TABLE>
17
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(Continued)
The average recorded investment in impaired mortgage loans on real estate
was $1,282, $1,680 and $2,113 for the years ended December 31, 1998, 1997 and
1996, respectively. Interest income on impaired mortgages was $109, $110 and
$119 for the years ended December 31, 1998, 1997 and 1996, respectively.
Restructured mortgage loans on real estate were $1,036 and $1,207 at
December 31, 1998 and 1997, respectively. Interest income of $74, $91 and $135
was recognized on restructured loans for the years ended December 31, 1998,
1997 and 1996, respectively. Gross interest income that would have been
recorded in accordance with the original terms of such loans amounted to $87,
$116 and $198 for the years ended December 31, 1998, 1997 and 1996,
respectively.
Mortgage loans on real estate with scheduled payments 60 days (90 days for
agriculture mortgages) or more past due or in foreclosure had an amortized
cost of $65 and $255 as of December 31, 1998 and 1997, respectively.
Real Estate and Real Estate Joint Ventures
Real estate and real estate joint ventures consisted of the following:
<TABLE>
<CAPTION>
December 31,
---------------
1998 1997
------- ------
<S> <C> <C>
Real estate and real estate joint ventures held-for-
investment............................................ $ 6,301 $6,731
Impairments............................................ (408) (407)
------- ------
5,893 6,324
------- ------
Real estate and real estate joint ventures held-for-
sale.................................................. 546 915
Impairments............................................ (119) (49)
Valuation allowance.................................... (33) (110)
------- ------
394 756
------- ------
$ 6,287 $7,080
======= ======
</TABLE>
Accumulated depreciation on real estate was $2,065 and $2,030 at December
31, 1998 and 1997, respectively. Related depreciation expense was $282, $338
and $348 for the years ended December 31, 1998, 1997 and 1996, respectively.
Real estate and real estate joint ventures were categorized as follows:
<TABLE>
<CAPTION>
December 31,
------------------------------
1998 1997
--------------- --------------
Amount Percent Amount Percent
------- ------- ------ -------
<S> <C> <C> <C> <C>
Office..................................... $ 4,265 68% $4,730 67%
Retail..................................... 640 10% 804 11%
Apartments................................. 418 7% 406 6%
Land....................................... 313 5% 346 5%
Agriculture................................ 195 3% 214 3%
Other...................................... 456 7% 580 8%
------- --- ------ ---
$ 6,287 100% $7,080 100%
======= === ====== ===
</TABLE>
The Company's real estate holdings are primarily located throughout the
United States. At December 31, 1998, approximately 23%, 23% and 12% of the
Company's real estate holdings were located in New York, California and Texas,
respectively.
Changes in real estate and real estate joint ventures held-for-sale
valuation allowance were as follows:
<TABLE>
<CAPTION>
Years ended December 31,
----------------------------
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Balance at January 1.... $ 110 $ 661 $ 924
Additions charged
(credited) to
operations............. (5) (76) 127
Deductions for
writedowns and
dispositions........... (72) (475) (390)
-------- -------- --------
Balance at December 31.. $ 33 $ 110 $ 661
======== ======== ========
</TABLE>
18
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(Continued)
Investment income (expense) relating to impaired real estate and real estate
joint ventures held-for-investment was $105, $28 and $(10) for the years ended
December 31, 1998, 1997 and 1996, respectively. Investment income relating to
real estate and real estate joint ventures held-for-sale was $3, $11 and $70
for the years ended December 31, 1998, 1997 and 1996, respectively. The
carrying value of non-income producing real estate and real estate joint
ventures was insignificant at December 31, 1998 and 1997, respectively.
The Company owned real estate acquired in satisfaction of debt of $154 and
$218 at December 31, 1998 and 1997, respectively.
Direct Financing and Leveraged Leases
Direct financing and leveraged leases, included in other invested assets,
consisted of the following:
<TABLE>
<CAPTION>
December 31,
-------------------------------------------------
Direct Financing Leveraged
Leases Leases Total
----------------- -------------- --------------
1998 1997 1998 1997 1998 1997
----------------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Investment................... $ -- $ 1,137 $1,067 $ 851 $1,067 $1,988
Estimated residual values.... -- 183 607 641 607 824
------- --------- ------ ------ ------ ------
-- 1,320 1,674 1,492 1,674 2,812
Unearned income.............. -- (261) (471) (428) (471) (689)
------- --------- ------ ------ ------ ------
Net investment............... $ -- $ 1,059 $1,203 $1,064 $1,203 $2,123
======= ========= ====== ====== ====== ======
</TABLE>
The investment amounts set forth above are generally due in monthly
installments. The payment periods generally range from three to eight years,
but in certain circumstances are as long as 20 years. Average yields range
from 7% to 12%. These receivables are generally collateralized by the related
property.
3. DERIVATIVE INSTRUMENTS
The table below provides a summary of the carrying value, notional amount
and current market or fair value of derivative financial instruments (other
than equity options) held at December 31, 1998 and 1997:
<TABLE>
<CAPTION>
1998 1997
------------------------------------- -------------------------------------
Current Market or Current Market or
Fair Value Fair Value
------------------ ------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Carrying Notional Carrying Notional
Value Amount Assets Liabilities Value Amount Assets Liabilities
-------- -------- ------ ----------- -------- -------- ------ -----------
Financial futures....... $ 3 $ 2,190 $ 8 $ 6 $ 10 $ 2,262 $ 17 $ 7
Foreign exchange
contracts.............. -- 136 -- 2 -- 150 2 --
Interest rate swaps..... (9) 1,621 17 50 (11) 1,464 9 28
Foreign currency swaps.. (1) 580 3 62 -- 258 3 30
Caps.................... -- 8,391 -- -- -- 1,545 13 --
Options (fixed income).. -- -- -- -- 2 275 -- 2
-------- -------- ------ ----------- -------- -------- ------ -----------
Total contractual
commitments............ $ (7) $ 12,918 $ 28 $ 120 $ 1 $ 5,954 $ 44 $ 67
======== ======== ====== =========== ======== ======== ====== ===========
</TABLE>
19
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(Continued)
The following is a reconciliation of the notional amounts by derivative type
and strategy as of December 31, 1998 and 1997:
<TABLE>
<CAPTION>
December 31, 1997 Terminations/ December 31, 1998
Notional Amount Additions Maturities Notional Amount
----------------- --------- ------------- -----------------
<S> <C> <C> <C> <C>
BY DERIVATIVE TYPE
Financial futures....... $2,262 $25,073 $(25,145) $ 2,190
Foreign exchange
contracts.............. 150 1,231 (1,245) 136
Interest rate swaps..... 1,464 788 (631) 1,621
Foreign currency swaps.. 258 386 (64) 580
Caps.................... 1,545 8,250 (1,404) 8,391
Options (fixed income).. 275 -- (275) --
------ ------- -------- -------
Total contractual
commitments............ $5,954 $35,728 $(28,764) $12,918
====== ======= ======== =======
BY STRATEGY
Liability hedging....... $1,860 $ 8,419 $ (1,538) $ 8,741
Invested asset hedging.. 817 1,666 (1,619) 864
Portfolio hedging....... 2,787 25,643 (25,600) 2,830
Anticipated transaction
hedging................ 490 -- (7) 483
------ ------- -------- -------
Total contractual
commitments............ $5,954 $35,728 $(28,764) $12,918
====== ======= ======== =======
</TABLE>
The following table presents the notional amounts of derivative financial
instruments by maturity at December 31, 1998:
<TABLE>
<CAPTION>
Remaining Life
---------------------------------------
<S> <C> <C> <C> <C> <C>
After Five
After One Years After
One Year Year Through Through Ten Ten
or Less Five Years Years Years Total
-------- ------------ ----------- ----- -------
Financial futures.............. $2,190 $ -- $ -- $ -- $ 2,190
Foreign exchange contracts..... 136 -- -- -- 136
Interest rate swaps............ 470 774 162 215 1,621
Foreign currency swaps......... 39 182 343 16 580
Caps........................... 1,875 6,496 20 -- 8,391
-------- ------------ ----------- ----- -------
Total contractual commitments.. $4,710 $ 7,452 $ 525 $ 231 $12,918
======== ============ =========== ===== =======
</TABLE>
In addition to the derivative instruments above, the Company uses equity
option contracts as invested asset hedges. There were 92 thousand and 7
million equity option contracts outstanding with carrying values of $(11) and
$27 and market values of $(11) and $33, as of December 31, 1998 and 1997,
respectively. The outstanding contracts have a remaining life of one year or
less as of December 31, 1998.
4. REINSURANCE
The Company assumes and cedes insurance with other insurance companies. The
Company continually evaluates the financial condition of its reinsurers and
monitors concentration of credit risk in an effort to minimize its exposure to
significant losses from reinsurer insolvencies. The Company is contingently
liable with respect to ceded reinsurance should any reinsurer be unable to
meet its obligations under these agreements. The amounts in the consolidated
statements of income are presented net of reinsurance ceded.
The Company has exposure to catastrophes, which are an inherent risk of the
property and casualty insurance business and could contribute to material
fluctuations in the Company's results of operations. The Company uses excess
of loss and quota share reinsurance arrangements to diversify its risk
portfolio.
20
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(Continued)
The effects of reinsurance were as follows:
<TABLE>
<CAPTION>
Years ended December
31,
-------------------------
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
Direct premiums............................... $12,763 $12,728 $12,452
Reinsurance assumed........................... 409 360 508
Reinsurance ceded............................. (1,669) (1,810) (1,615)
------- ------- -------
Net premiums.................................. $11,503 $11,278 $11,345
======= ======= =======
Reinsurance recoveries netted against
policyholder benefits........................ $ 1,751 $ 1,648 $ 1,667
======= ======= =======
</TABLE>
Reinsurance recoverables, included in other receivables, were $2,956 and
$1,511 at December 31, 1998 and 1997, respectively. Reinsurance and ceded
commissions payables, included in other liabilities, were $105 and $158 at
December 31, 1998 and 1997, respectively.
The following provides an analysis of the activity in the liability for
benefits relating to property and casualty and group accident and non-medical
health policies and contracts:
<TABLE>
<CAPTION>
Years ended December
31,
-------------------------
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
Balance at January 1........................... $ 3,655 $ 3,345 $ 3,296
Reinsurance recoverables..................... (229) (215) (214)
------- ------- -------
Net balance at January 1....................... 3,426 3,130 3,082
------- ------- -------
Incurred related to:
Current year................................. 2,726 2,855 2,951
Prior years.................................. (245) 88 (114)
------- ------- -------
2,481 2,943 2,837
------- ------- -------
Paid related to:
Current year................................. (1,967) (1,832) (1,998)
Prior years.................................. (853) (815) (791)
------- ------- -------
(2,820) (2,647) (2,789)
------- ------- -------
Balance at December 31......................... 3,087 3,426 3,130
Add: Reinsurance recoverables................ 233 229 215
------- ------- -------
Balance at December 31......................... $ 3,320 $ 3,655 $ 3,345
======= ======= =======
</TABLE>
5. INCOME TAXES
The provision for income taxes was as follows:
<TABLE>
<CAPTION>
Years ended
December 31,
------------------
1998 1997 1996
------ ---- ----
<S> <C> <C> <C>
Current:
Federal............................................. $ 821 $424 $346
State and local..................................... 60 10 25
Foreign............................................. 99 26 27
------ ---- ----
980 460 398
------ ---- ----
Deferred:
Federal............................................. (178) (26) 66
State and local..................................... (8) 9 6
Foreign............................................. (54) 25 12
------ ---- ----
(240) 8 84
------ ---- ----
Provision for income taxes............................ $ 740 $468 $482
====== ==== ====
</TABLE>
21
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(Continued)
Reconciliations of the income tax provision at the U.S. statutory rate to
the provision for income taxes as reported were as follows:
<TABLE>
<CAPTION>
Years ended
December 31,
--------------------
1998 1997 1996
------ ------ ----
<S> <C> <C> <C>
Tax provision at U.S. statutory rate................ $ 730 $ 585 $492
Tax effect of:
Tax exempt investment income...................... (40) (30) (18)
Goodwill.......................................... 5 9 --
Surplus tax....................................... 18 (40) 38
State and local income taxes...................... 31 15 23
Foreign operations................................ 12 7 (7)
Tax credits....................................... (25) (15) (15)
Prior year taxes.................................. 4 (2) (46)
Sale of subsidiaries.............................. (19) (41) --
Other, net........................................ 24 (20) 15
------ ------ ----
Provision for income taxes.......................... $ 740 $ 468 $482
====== ====== ====
Deferred income taxes represent the tax effect of the differences between
the book and tax basis of assets and liabilities. Net deferred income tax
liabilities consisted of the following:
<CAPTION>
December 31,
--------------
1998 1997
------ ------
<S> <C> <C> <C>
Deferred income tax assets:
Policyholder liabilities and receivables.......... $3,239 $3,174
Net operating losses.............................. 22 33
Employee benefits................................. 174 187
Non-deductible liabilities........................ 441 162
Other, net........................................ 158 223
------ ------
4,034 3,779
Less: Valuation allowance......................... 21 24
------ ------
4,013 3,755
------ ------
Deferred income tax liabilities:
Investments....................................... 1,417 1,118
Deferred policy acquisition costs................. 1,774 1,890
Net unrealized investment gains................... 864 1,119
Other, net........................................ 18 100
------ ------
4,073 4,227
------ ------
Net deferred income tax liability................... $ (60) $ (472)
====== ======
</TABLE>
Foreign net operating loss carryforwards generated a deferred income tax
benefit of $21. The Company has recorded a valuation allowance related to
these tax benefits. The valuation allowance reflects management's assessment,
based on available information, that it is more likely than not that the
deferred income tax asset for foreign net operating loss carryforwards will
not be realized. The benefit will be recognized at such time management
believes that it is more likely than not that the portion of the deferred
income tax asset is realizable.
22
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(Continued)
The sources of deferred income tax expense (benefit) and their tax effects
were as follows:
<TABLE>
<CAPTION>
Years ended
December 31,
-----------------
1998 1997 1996
----- ---- ----
<S> <C> <C> <C>
Policyholder liabilities and receivables............... $ (65) $(93) $ 27
Net operating losses................................... 11 5 (19)
Investments............................................ 230 245 (6)
Deferred policy acquisition costs...................... (116) (51) 55
Employee benefits...................................... 13 (40) (4)
Non-deductible liabilities............................. (279) (66) (24)
Change in valuation allowances......................... (3) 10 4
Other, net............................................. (31) (2) 51
----- ---- ----
$(240) $ 8 $ 84
===== ==== ====
</TABLE>
The Company has been audited by the Internal Revenue Service for the years
through and including 1993. The Company is being audited for the years 1994,
1995 and 1996. The Company believes that any adjustments that might be
required for open years will not have a material effect on the Company's
consolidated financial statements.
23
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(Continued)
6. EMPLOYEE BENEFIT PLANS
Pension Benefit and Other Benefit Plans
The Company is both the sponsor and administrator of defined benefit pension
plans covering all eligible employees and sales representatives of MetLife and
certain of its subsidiaries. Retirement benefits are based upon years of
credited service and final average earnings history.
The Company also provides certain postretirement health care and life
insurance benefits for retired employees through insurance contracts.
Substantially all of the Company's employees may, in accordance with the plans
applicable to such benefits, become eligible for these benefits if they attain
retirement age, with sufficient service, while working for the Company.
<TABLE>
<CAPTION>
December 31,
------------------------------------
Pension Benefits Other Benefits
------------------ ----------------
1998 1997 1998 1997
-------- -------- ------- -------
<S> <C> <C> <C> <C>
Change in projected benefit obligation:
Projected benefit obligation at beginning
of year................................. $ 3,523 $ 3,268 $ 1,763 $ 1,773
Service cost............................. 88 73 31 30
Interest cost............................ 254 244 114 122
Actuarial gain........................... 205 160 (74) (57)
Divestitures, curtailments and
terminations............................ 24 (9) (13) 2
Change in benefits....................... 12 6 -- (2)
Benefits paid............................ (245) (219) (113) (105)
-------- -------- ------- -------
Projected benefit obligation at end of
year.................................... 3,861 3,523 1,708 1,763
-------- -------- ------- -------
Change in plan assets:
Contract value of plan assets at
beginning of year....................... 3,982 3,628 1,004 897
Actual return on plan assets............. 671 566 171 128
Employer contribution.................... 15 7 61 84
Benefits paid............................ (245) (219) (113) (105)
Other payments........................... (100) -- -- --
-------- -------- ------- -------
Contract value of plan assets at end of
year.................................... 4,323 3,982 1,123 1,004
-------- -------- ------- -------
Over (under) funded...................... 462 459 (585) (759)
Unrecognized net asset at transition..... (95) (140) -- --
Unrecognized net actuarial gains......... (81) (109) (322) (171)
Unrecognized prior service cost.......... 144 150 (3) (2)
-------- -------- ------- -------
Prepaid (accrued) benefit cost........... $ 430 $ 360 $ (910) $ (932)
======== ======== ======= =======
Qualified plan prepaid pension cost...... $ 546 $ 516 $ -- $ --
Non-qualified plan accrued pension cost.. (116) (156) -- --
-------- -------- ------- -------
Prepaid benefit cost..................... $ 430 $ 360 $ -- $ --
======== ======== ======= =======
</TABLE>
The aggregate projected benefit obligation and aggregate contract value of
plan assets for the pension plans were as follows:
<TABLE>
<CAPTION>
Qualified Plan Non-Qualified Plan Total
--------------- ------------------ -------------
1998 1997 1998 1997 1998 1997
------- ------- --------- --------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Aggregate projected benefit
obligation................ $ 3,638 $ 3,170 $ 223 $ 353 $3,861 $3,523
Aggregate contract value of
plan assets (principally
Company contracts)........ 4,323 3,831 -- 151 4,323 3,982
------- ------- --------- --------- ------ ------
Over (under) funded........ $ 685 $ 661 $ (223) $ (202) $ 462 $ 459
======= ======= ========= ========= ====== ======
</TABLE>
24
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(Continued)
The assumptions used in determining the aggregate projected benefit
obligation and aggregate contract value for the pension and other benefits
were as follows:
<TABLE>
<CAPTION>
Pension Benefits Other Benefits
--------------------- --------------------
Weighted average assumptions as of
December 31, 1998 1997 1998 1997
- ---------------------------------- --------- ----------- -------- -----------
<S> <C> <C> <C> <C>
Discount rate...................... 7%-7.25% 7.25%-7.75% 7% 7.25%-7.75%
Expected return on plan assets..... 8.5% 8.75% 7.25%-9% 8.75%
Rate of compensation increase...... 4.5%-8.5% 4.5%-8.5% n/a n/a
</TABLE>
The assumed health care cost trend rate used in measuring the accumulated
nonpension postretirement benefit obligation was 6.5% per year for pre-
Medicare eligible claims and 6% for Medicare eligible claims in 1998. The
assumed health care cost trend rate used in measuring the accumulated
nonpension postretirement benefit obligation was generally 9% in 1997,
gradually decreasing to 5.25% over 5 years.
Assumed health care cost trend rates may have a significant effect on the
amounts reported for health care plans. A one-percentage point change in
assumed health care cost trend rates would have the following effects:
<TABLE>
<CAPTION>
One One
Percent Percent
Increase Decrease
-------- --------
<S> <C> <C>
Effect on total of service and interest cost
components........................................... $ 16 $ 18
Effect on accumulated postretirement benefit
obligation........................................... $124 $183
</TABLE>
The components of periodic benefit costs were as follows:
<TABLE>
<CAPTION>
Pension Benefits Other Benefits
------------------- ----------------
1998 1997 1996 1998 1997 1996
----- ----- ----- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Service cost............................ $ 88 $ 73 $ 77 $ 31 $ 30 $ 41
Interest cost........................... 254 244 232 114 122 127
Expected return on plan assets.......... (330) (318) (273) (79) (66) (58)
Amortization of prior actuarial (gain)
loss................................... (11) (5) (12) (12) (4) 2
Curtailment (credit) cost............... (10) -- -- 4 -- --
----- ----- ----- ---- ---- ----
Net periodic benefit cost (credit)...... $ (9) $ (6) $ 24 $ 58 $ 82 $112
===== ===== ===== ==== ==== ====
</TABLE>
Savings and Investment Plans
The Company sponsors savings and investment plans for substantially all
employees under which the Company matches a portion of employee contributions.
The Company contributed $43, $44 and $42 for the years ended December 31,
1998, 1997 and 1996, respectively.
7. LEASES
In accordance with industry practice, certain of the Company's income from
lease agreements with retail tenants is contingent upon the level of the
tenants' sales revenues. Additionally, the Company, as lessee, has entered
into various lease and sublease agreements for office space, data processing
and other equipment. Future minimum rental and subrental income, and minimum
gross rental payments relating to these lease agreements were as follows:
<TABLE>
<CAPTION>
Gross
Rental Sublease Rental
Income Income Payments
------ -------- --------
<S> <C> <C> <C>
1999...................................... $1,213 $10 $126
2000...................................... 1,150 11 109
2001...................................... 1,052 11 94
2002...................................... 942 10 72
2003...................................... 787 9 51
Thereafter................................ 2,636 35 242
</TABLE>
25
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(Continued)
8. DEBT
Debt consisted of the following:
<TABLE>
<CAPTION>
December 31,
--------------
1998 1997
------- ------
<S> <C> <C>
MetLife:
6.300% surplus notes due 2003.................................. $ 397 $ 397
7.000% surplus notes due 2005.................................. 249 249
7.700% surplus notes due 2015.................................. 198 198
7.450% surplus notes due 2023.................................. 296 296
7.875% surplus notes due 2024.................................. 148 148
7.800% surplus notes due 2025.................................. 248 248
Other.......................................................... 207 436
------- ------
1,743 1,972
------- ------
Investment Related:
Exchangeable subordinated debt, interest based on LIBOR plus
factors, due 1999........................................... 212 374
Exchangeable subordinated debt, interest rates ranging from
4.90% to 6.18%, due 2001
and 2002.................................................... 371 --
------- ------
583 374
------- ------
Total MetLife.................................................... 2,326 2,346
------- ------
Nvest:
7.060% senior notes due 2003................................... 110 110
7.290% senior notes due 2007................................... 160 160
------- ------
270 270
------- ------
Other Companies:
Fixed rate notes, interest rates ranging from 6.96% to 8.51%,
maturity dates ranging from 1999 to 2008 179 --
Floating rate notes, interest based on LIBOR plus factors...... -- 146
Other.......................................................... 128 122
------- ------
307 268
------- ------
Total long-term debt............................................. 2,903 2,884
Total short-term debt............................................ 3,585 4,587
------- ------
$ 6,488 $7,471
======= ======
</TABLE>
Short-term debt consisted of commercial paper with a weighted average
interest rate of 5.31% and 5.75% and a weighted average maturity of 44 and 71
days as of December 31, 1998 and 1997, respectively.
The Company maintains an unsecured credit facility of $2,000 under which
bank loans and other short-term debt are drawn. This facility is maintained
for general corporate purposes and to provide additional support to the
Company's commercial paper program. At December 31, 1998 there were no
outstanding borrowings under the facility.
Payments of interest and principal on the surplus notes, subordinated to all
other indebtedness, may be made only with the prior approval of the
Superintendent. Subject to the prior approval of the Superintendent, the 7.45%
surplus notes may be redeemed, in whole or in part, at the election of the
Company at any time on or after November 1, 2003.
The exchangeable subordinated debt is payable in cash or by the delivery of
the underlying common stock collateral owned by the Company. The value
ascribed to the common stock at the date of delivery is the greater of the
market value at the date of the debt issuance or date of delivery. The debt
provides for additional interest if the market value of the common stock
appreciates above certain levels at the date of delivery as compared with the
market value at the date of issuance.
26
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(Continued)
The aggregate maturities of long-term debt are $413 in 1999, $45 in 2000,
$191 in 2001, $221 in 2002, $527 in 2003 and $1,518 thereafter.
Interest expense related to the Company's outstanding indebtedness was $333,
$344 and $311, for the years ended December 31, 1998, 1997 and 1996,
respectively.
9. COMMITMENTS AND CONTINGENCIES
Litigation
The Company and certain of its subsidiaries are currently defendants in
approximately 400 lawsuits, including over 40 putative or certified class
action lawsuits, raising allegations of improper marketing and sales of
individual life insurance or annuities (hereafter "sales practices claims").
Two of these putative class actions are filed in Canada and the remainder are
filed in the United States. These cases are brought by or on behalf of
policyholders and others and allege, among other claims, that individual life
insurance policies were improperly sold in replacement transactions or with
inadequate or inaccurate disclosure concerning the period for which premiums
would be payable, or were misleadingly sold as savings or retirement plans.
The classes proposed in the pending class actions are defined broadly enough,
in the aggregate, to include a substantial number of active and lapsed
policyholders who purchased individual life insurance policies from the
Company during the 1980's and 1990's. In California, Ohio and West Virginia,
courts have certified or deemed certifiable classes on behalf of policyholders
in those states who allegedly did not receive proper notice of replacement. A
Federal Court in Massachusetts has certified a mandatory class involving
certain former policyholders of New England Mutual Life Insurance Company
which merged into the Company in 1996. The United States Court of Appeals
remanded the case to the trial court for further consideration. A number of
the sales practices claims pending in federal courts have been consolidated as
a multidistrict proceeding for pre-trial purposes in the United States
District Court for the Western District of Pennsylvania and, as to former New
England Mutual Life Insurance Company policyholders, in the United States
District Court in Massachusetts. In another case, a New York federal court has
certified or conditionally certified some subclasses of purchasers of the
Company's policies and annuity contracts outside the United States. While most
of these cases are in the early stages of litigation, they seek substantial
damages, including in some cases punitive and treble damages and attorneys'
fees. Additional litigation relating to the Company's marketing and sale of
individual life insurance may be commenced in the future.
Regulatory authorities in a small number of states, including both insurance
departments and attorneys general, have ongoing investigations of the
Company's sales of individual life insurance or annuities, including
investigations of alleged improper replacement transactions and alleged
improper sales of insurance with inaccurate or inadequate disclosures as to
the period for which premiums would be payable. Over the past several years, a
number of investigations by other regulatory authorities have been resolved by
the Company for monetary payments and certain other relief.
The Company is also a defendant in numerous lawsuits seeking compensatory
and punitive damages for personal injuries allegedly caused by exposure to
asbestos or asbestos-containing products. The Company has never engaged in the
business of manufacturing, producing, distributing or selling asbestos or
asbestos-containing products. Rather, these lawsuits, currently numbering in
the thousands, have principally been based upon allegations relating to
certain research, publication and other activities of one or more of the
Company's employees during the period from the 1920's through approximately
the 1950's and alleging that the Company learned or should have learned of
certain health risks posed by asbestos and, among other things, improperly
publicized or failed to disclose those health risks. Legal theories asserted
against the Company have included negligence, intentional tort claims and
conspiracy claims concerning the health risks associated with asbestos. While
the Company believes it has meritorious defenses to these claims, and has not
suffered any adverse judgments in respect thereof, most of the cases have been
resolved by settlements. The Company intends to continue to exercise its best
judgment regarding settlement or defense of such cases. The number of such
cases that may be brought or the aggregate amount of any liability that may
ultimately be incurred by the Company is uncertain. Significant portions of
amounts paid in settlement of such cases have been funded with proceeds from a
previously resolved dispute with its primary, umbrella and first level excess
liability insurance carriers. The Company is presently in litigation with
several of its excess liability insurers regarding amounts payable under the
Company's policies with respect to coverage for these claims.
27
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(Continued)
The Company believes that the claims and the amount of damages asserted in
the aforementioned sales practices and asbestos personal injury litigations
are without merit, and it intends to continue to defend its interests
vigorously.
During 1998, the Company obtained certain excess reinsurance and insurance
policies providing coverage for risks associated primarily with sales
practices claims and claims for personal injuries caused by exposure to
asbestos or asbestos-containing products. In 1998, the Company recorded a
charge of $1,715, included in other expenses, for related insurance and
reinsurance premiums and for potential liabilities related to certain of these
claims.
Various litigation, claims and assessments against the Company, in addition
to the aforementioned and those otherwise provided for in the Company's
consolidated financial statements, have arisen in the course of the Company's
business, including in connection with its activities as an insurer, employer,
investor and taxpayer. Further, state insurance regulatory authorities and
other authorities regularly make inquiries and conduct investigations
concerning the Company's compliance with applicable insurance and other laws
and regulations.
In certain of the matters referred to above, very large and/or indeterminate
amounts, including punitive and treble damages, are sought. While it is not
feasible to predict or determine the ultimate outcome of all pending
investigations and legal proceedings, it is the opinion of the Company's
management that their outcomes, after consideration of available insurance and
reinsurance and the provisions made in the Company's consolidated financial
statements, are not likely to have a material adverse effect on the Company's
financial position. However, given the large and/or indeterminable amounts
sought in certain of these matters and the inherent unpredictability of
litigation, it is possible that an adverse outcome in certain matters could,
from time to time, have a material adverse effect on the Company's operating
results in particular quarterly or annual periods.
Year 2000
The Year 2000 issue is the result of the widespread use of computer programs
written using two digits (rather than four) to define the applicable year.
Such programming was a common industry practice designed to avoid the
significant costs associated with additional mainframe capacity necessary to
accommodate a four-digit year field. As a result, any of the Company's
computer systems that have time-sensitive software may recognize a date using
"00" as the year 1900 rather than the year 2000. This could result in major
system failures or miscalculations. The Company has conducted a comprehensive
review of its computer systems to identify the systems that could be affected
by the Year 2000 issue and has developed and implemented a plan to resolve the
issue. The Company currently believes that, with modifications to existing
software and converting to new software, the Year 2000 issue will not pose
significant operational problems for the Company's computer systems. However,
if such modifications and conversions are not completed on a timely basis, the
Year 2000 issue may have a material impact on the operations of the Company.
Furthermore, even if the Company completes such modifications and conversions
on a timely basis, there can be no assurance that the failure by vendors or
other third parties to solve the Year 2000 issue will not have a material
impact on the operations of the Company. The Company estimates the total cost
to resolve its Year 2000 problem to be approximately $210 (unaudited) of which
approximately $149 has been incurred through December 31, 1998.
Guaranty Funds
Under insurance guaranty fund laws in each state, the District of Columbia
and Puerto Rico, insurers licensed to do business can be assessed by state
insurance guaranty associations for certain obligations of insolvent insurance
companies to policyholders and claimants. Recent regulatory actions against
certain large life insurers encountering financial difficulty have prompted
various state insurance guaranty associations to begin assessing life
insurance companies for the deemed losses. Most of these laws do provide,
however, that an assessment may be excused or deferred if it would threaten an
insurer's solvency and further provide annual limits on such assessments. A
large part of the assessments paid by the Company pursuant to these laws may
be used as credits for a portion of the Company's premium taxes. The Company
paid guaranty fund assessments of $35, $23 and $25 in 1998, 1997 and 1996,
respectively, of which $24, $20 and $19 were estimated to be credited against
future premium taxes.
28
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(Continued)
10. OTHER EXPENSES
Other expenses were comprised of the following:
<TABLE>
<CAPTION>
Years ended December
31,
------------------------
1998 1997 1996
------- ------ -------
<S> <C> <C> <C>
Compensation.................................. $ 2,478 $2,072 $ 1,813
Commissions................................... 902 766 722
Interest and debt issue costs................. 379 453 311
Amortization of policy acquisition costs...... 587 771 633
Capitalization of policy acquisition costs.... (1,025) (1,000) (1,028)
Rent, net of sublease......................... 155 179 183
Minority interest............................. 67 56 30
Restructuring charge.......................... 81 -- --
Other......................................... 4,494 2,637 2,091
------- ------ -------
$ 8,118 $5,934 $ 4,755
======= ====== =======
</TABLE>
11. DISCONTINUED OPERATIONS
The 1996 loss from discontinued operations resulted from the finalization of
the transfer of certain group medical contracts in connection with the
Company's disposal of its group medical benefits business during 1995. The
components of discontinued operations for the year ended December 31, 1996
were as follows:
<TABLE>
<S> <C>
Loss from discontinued operations, net of
income tax benefit of $18........................................ $ 52
Loss on disposal of discontinued operations, net of
income tax benefit of $11........................................ 19
----
Loss from discontinued operations................................. $ 71
====
</TABLE>
12. CONSOLIDATED CASH FLOW INFORMATION
During 1998, the Company sold MetLife Capital Holdings, Inc. (a commercial
financing company) and substantially all of its Canadian and Mexican insurance
operations, which resulted in realized investment gains of $531. During 1997,
the Company sold its United Kingdom insurance operations, which resulted in a
realized investment gain of $139. Such sales caused a reduction in assets by
$10,663 and $4,342 and liabilities by $3,691 and $4,207 in 1998 and 1997,
respectively.
In 1997, the Company also acquired assets of $3,777 and assumed liabilities
of $3,347, through the acquisition of certain insurance and noninsurance
companies. The aggregate purchase prices were allocated to the assets and
liabilities acquired based upon their estimated fair values.
Real estate of $69, $151 and $189 was acquired in satisfaction of debt for
the years ended December 31, 1998, 1997 and 1996, respectively.
13. FAIR VALUE INFORMATION
The estimated fair values of financial instruments have been determined by
using available market information and the valuation methodologies described
below. Considerable judgment is often required in interpreting market data to
develop estimates of fair value. Accordingly, the estimates presented herein
may not necessarily be indicative of amounts that could be realized in a
current market exchange. The use of different assumptions or valuation
methodologies may have a material effect on the estimated fair value amounts.
29
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(Continued)
Amounts related to the Company's financial instruments were as follows:
<TABLE>
<CAPTION>
Estimated
Notional Carrying Fair
Amount Value Value
December 31, 1998 -------- -------- ---------
<S> <C> <C> <C>
Assets:
Fixed maturities.................................. $ $100,767 $100,767
Equity securities................................. 2,340 2,340
Mortgage loans on real estate..................... 16,827 17,793
Policy loans...................................... 5,600 6,143
Short-term investments............................ 1,369 1,369
Cash and cash equivalents......................... 3,301 3,301
Mortgage loan commitments......................... 472 -- 14
Liabilities:
Policyholder account balances..................... 37,088 37,304
Short-term debt................................... 3,585 3,585
Long-term debt.................................... 2,903 2,995
<CAPTION>
Estimated
Notional Carrying Fair
Amount Value Value
December 31, 1997 -------- -------- ---------
<S> <C> <C> <C>
Assets:
Fixed maturities.................................. $ $ 92,630 $ 92,630
Equity securities................................. 4,250 4,250
Mortgage loans on real estate..................... 20,193 21,084
Policy loans...................................... 5,846 6,110
Short-term investments............................ 679 679
Cash and cash equivalents......................... 2,911 2,911
Mortgage loan commitments......................... 334 -- 4
Liabilities:
Policyholder account balances..................... 37,034 37,265
Short-term debt................................... 4,587 4,587
Long-term debt.................................... 2,884 2,939
</TABLE>
The methods and assumptions used to estimate the fair values of financial
instruments are summarized as follows:
Fixed Maturities and Equity Securities
The fair value of fixed maturities and equity securities are based upon
quotations published by applicable stock exchanges or received from other
reliable sources. For securities in which the market values were not readily
available, fair values were estimated using quoted market prices of comparable
investments.
Mortgage Loans on Real Estate and Mortgage Loan Commitments
Fair values for mortgage loans on real estate and mortgage loan commitments
are estimated by discounting expected future cash flows using current interest
rates for similar loans with similar credit risk.
Policy Loans
Fair values for policy loans are estimated by discounting expected future
cash flows using U.S. treasury rates to approximate interest rates and the
Company's past experiences to project patterns of loan accrual and repayment
characteristics.
30
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(Continued)
Cash and Cash Equivalents and Short-term Investments
The carrying values for cash and cash equivalents and short-term investments
approximated fair market values due to the short-term maturities of these
instruments.
Policyholder Account Balances
The fair value of policyholder account balances are estimated by discounting
expected future cash flows, based upon interest rates currently being offered
for similar contracts with maturities consistent with those remaining for the
agreements being valued.
Short-term and Long-term Debt
The fair values of short-term and long-term debt are determined by
discounting expected future cash flows, using risk rates currently available
for debt with similar terms and remaining maturities.
Derivative Instruments
The fair value of derivative instruments, including financial futures,
financial forwards, interest rate and foreign currency swaps, floors, foreign
exchange contracts, caps and options are based upon quotations obtained from
dealers or other reliable sources. See Note 3 for derivative fair value
disclosures.
14. STATUTORY FINANCIAL INFORMATION
The reconciliation of MetLife's statutory surplus and net change in
statutory surplus, determined in accordance with accounting practices
prescribed or permitted by insurance regulatory authorities, with equity and
net income determined in conformity with generally accepted accounting
principles were as follows:
<TABLE>
<CAPTION>
December 31,
----------------
1998 1997
------- -------
<S> <C> <C> <C>
Statutory surplus..................................... $ 7,388 $ 7,378
GAAP adjustments for:
Future policy benefits and policyholder account
balances........................................... (6,830) (6,807)
Deferred policy acquisition costs................... 6,560 6,438
Deferred income taxes............................... 295 (242)
Valuation of investments............................ 3,981 3,474
Statutory asset valuation reserves.................. 3,381 3,854
Statutory interest maintenance reserve.............. 1,486 1,261
Surplus notes....................................... (1,595) (1,555)
Other, net.......................................... 201 206
------- -------
Equity................................................ $14,867 $14,007
======= =======
<CAPTION>
Years ended December
31,
-----------------------
1998 1997 1996
------- ------- -----
<S> <C> <C> <C>
Net change in statutory surplus....................... $ 10 $ 227 $ 366
GAAP adjustments for:
Future policy benefits and policyholder account
balances........................................... 127 (38) (165)
Deferred policy acquisition costs................... 224 149 391
Deferred income taxes............................... 234 62 (74)
Valuation of investments............................ 1,158 (387) (84)
Statutory asset valuation reserves.................. (461) 1,136 599
Statutory interest maintenance reserve.............. 312 53 19
Other, net.......................................... (261) 1 (199)
------- ------- -----
Net income............................................ $ 1,343 $ 1,203 $ 853
======= ======= =====
</TABLE>
31
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(Continued)
15. SEPARATE ACCOUNTS
Separate accounts reflect two categories of risk assumption: non-guaranteed
separate accounts totaling $39,490 and $32,893 at December 31, 1998 and 1997,
respectively, in which the policyholder assumes the investment risk, and
guaranteed separate accounts totaling $18,578 and $15,445 at December 31, 1998
and 1997, respectively, in which MetLife contractually guarantees either a
minimum return or account value to the policyholder.
Fees charged to the separate accounts by the Company (including mortality
charges, policy administration fees and surrender charges) are reflected in
the Company's revenues as universal life and investment-type product policy
fees and totaled $413, $287 and $216 in 1998, 1997 and 1996, respectively.
Guaranteed separate accounts consisted primarily of Met Managed Guaranteed
Interest Contracts and participating close out contracts. The average interest
rate credited on these contracts was 7% at December 31, 1998. The assets that
support these liabilities were comprised of $16,639 in fixed maturities as of
December 31, 1998. The portfolios are segregated from other investments and
are managed to minimize liquidity and interest rate risk. In order to minimize
the risk of disintermediation associated with early withdrawals, these
investment products carry a graded surrender charge as well as a market value
adjustment.
16. OTHER COMPREHENSIVE INCOME
The following tables set forth the reclassification adjustments required for
the years ended December 31, 1998, 1997 and 1996 to avoid double-counting in
comprehensive income items that are included as part of net income for the
current year that have been reported as a part of other comprehensive income
in the current or prior year:
<TABLE>
<CAPTION>
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
Holding gains (losses) on investments arising during
the year........................................... $ 1,556 $ 4,479 $(1,494)
Income tax effect of holding gains or losses........ (646) (1,698) 550
Transfer of securities from held-to-maturity to
available-for-sale:
Holding gains on investments...................... -- 198 --
Income tax effect................................. -- (75) --
Reclassification adjustments:
Realized holding gains included in current year
net income....................................... (2,043) (868) (367)
Amortization of premium and discount on
investments...................................... (411) (406) (631)
Realized holding gains (losses) allocated to other
policyholder amounts............................. 608 231 227
Income tax effect................................. 766 394 285
Allocation of holding (gains) losses on investments
relating to other
policyholder amounts............................... (322) (2,231) 1,286
Income tax effect of allocation of holding gains and
losses to other
policyholder amounts............................... 134 846 (474)
------- ------- -------
Net unrealized investment (losses) gains............ (358) 870 (618)
------- ------- -------
Foreign currency translation adjustments arising
during the year.................................... (115) (46) (6)
Reclassification adjustment for sale of investment
in foreign operation............................... 2 (3) --
------- ------- -------
Foreign currency translation adjustment............. (113) (49) (6)
------- ------- -------
Minimum pension liability adjustment................ (12) -- --
------- ------- -------
Other comprehensive (loss) income................... $ (483) $ 821 $ (624)
======= ======= =======
</TABLE>
32
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(Continued)
17. RESTRUCTURING
During 1998, the Company restructured headquarters operations and
consolidated certain agencies and other operations. The impacts of these
actions on a segment basis are as follows:
<TABLE>
<CAPTION>
Severance
and Related Facility
Number of Termination Consolidation
Positions Costs Costs Total
--------- ----------- ------------- -----
<S> <C> <C> <C> <C>
Individual............................ 488 $15 $16 $31
Institutional......................... 320 8 2 10
Auto & Home........................... 357 4 -- 4
Corporate and Other................... 1,102 30 6 36
----- --- --- ---
2,267 $57 $24 $81
===== === === ===
</TABLE>
These programs are expected to be completed by the third quarter of 1999. As
of December 31, 1998, $28 of these restructuring costs had been paid and the
unpaid balance was $53.
18. BUSINESS SEGMENT INFORMATION
The Company provides insurance and financial services to customers in the
United States, Canada, Central America, South America, Europe and Asia. The
Company's business is divided into six segments: Individual, Institutional,
Auto & Home, International, Asset Management and Corporate. These segments are
managed separately because they either provide different products and
services, require different strategies or have different technology
requirements.
Individual offers a wide variety of individual insurance and investment
products, including life insurance, annuities and mutual funds. Institutional
offers a broad range of group insurance and retirement and savings products
and services, including group life insurance, non-medical health insurance
such as short and long-term disability, long-term care and dental insurance
and other insurance products and services. Auto & Home provides insurance
coverages including private passenger automobile, homeowners and personnel
excess liability insurance. International provides life insurance, accident
and health insurance, annuities and retirement and savings products to both
individuals and groups, and auto and homeowners coverage to individuals. Asset
Management provides a broad variety of asset management products and services
to individuals and institutions such as mutual funds for savings and
retirement needs, commercial real estate advisory and management services, and
institutional and retail investment management. Through its Corporate segment,
the Company reports items that are not allocated to any of the business
segments.
Set forth in the tables below is certain financial information with respect
to the Company's operating segments for the years ended December 31, 1998,
1997 and 1996. The accounting policies of the segments are the same as those
described in the summary of significant accounting policies, except for the
method of capital allocation. The Company allocates capital to each segment
based upon an internal capital allocation system that allows the Company to
more effectively manage its capital. The Company has divested operations that
did not meet targeted rates of return, including its medical insurance
operations, commercial leasing business, and insurance operations in the
United Kingdom and substantially all of its Canadian operations. The Company
evaluates the performance of each operating segment based upon income or loss
from operations before provision for income taxes and non-recurring items
(e.g. items of unusual or infrequent nature). The Company allocates non-
recurring items to the Corporate segment.
33
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(Continued)
<TABLE>
<CAPTION>
Auto
At or for the year ended & Asset Consolidation/
December 31, 1998 Individual Institutional Home International Management Corporate Elimination Total
- ------------------------ ---------- ------------- ------ ------------- ---------- --------- -------------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Premiums................ $ 4,381 $ 5,101 $1,403 $ 618 $ -- $ -- $ -- $11,503
Universal life and
investment-type product
policy fees 817 475 -- 68 -- -- -- 1,360
Net investment income... 5,501 3,864 81 343 76 808 (445) 10,228
Other revenues.......... 523 574 36 33 814 35 (50) 1,965
Net realized investment
gains.................. 663 552 122 117 -- 683 (116) 2,021
Policyholder benefits
and claims............. 4,659 6,373 869 597 -- (10) -- 12,488
Interest credited to
policyholder account
balances............... 1,443 1,199 -- 89 -- -- -- 2,731
Policyholder dividends.. 1,447 142 -- 64 -- -- -- 1,653
Other expenses.......... 2,609 1,592 546 352 799 2,632 (412) 8,118
Income before provision
for income taxes....... 1,727 1,260 227 77 91 (1,096) (199) 2,087
Income after provision
for income taxes....... 1,091 833 161 56 47 (675) (166) 1,347
Total assets............ 103,974 88,356 2,771 3,432 1,165 20,652 (5,004) 215,346
Deferred policy
acquisition costs...... 6,255 43 57 205 -- -- -- 6,560
Separate account assets. 23,038 35,286 -- 26 -- -- -- 58,350
Policyholder
liabilities............ 71,989 49,045 1,477 2,043 -- 1 (352) 124,203
Separate account
liabilities............ $23,013 $35,029 $ -- $ 26 $ -- $ -- $ -- $58,068
</TABLE>
<TABLE>
<CAPTION>
Auto
At or for the year ended & Asset Consolidation/
December 31, 1997 Individual Institutional Home International Management Corporate Elimination Total
- ------------------------ ---------- ------------- ------ ------------- ---------- --------- -------------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Premiums................ $ 4,327 $ 4,689 $1,354 $ 908 $ -- $ -- $ -- $11,278
Universal life and
investment-type product
policy fees............ 855 426 -- 137 -- -- -- 1,418
Net investment income... 4,754 3,754 71 504 87 895 (574) 9,491
Other revenues.......... 338 357 25 54 682 19 16 1,491
Net realized investment
gains.................. 356 45 9 142 -- 326 (91) 787
Policyholder benefits
and claims............. 4,597 5,934 834 869 -- -- -- 12,234
Interest credited to
policyholder account
balances............... 1,428 1,319 -- 137 -- -- -- 2,884
Policyholder dividends.. 1,340 305 -- 97 -- -- -- 1,742
Other expenses.......... 2,384 1,178 520 497 679 1,118 (442) 5,934
Income before provision
for income taxes....... 881 535 105 145 90 122 (207) 1,671
Income after provision
for income taxes....... 603 339 74 126 52 210 (201) 1,203
Total assets............ 95,990 83,481 2,542 7,412 1,147 18,494 (6,290) 202,776
Deferred policy
acquisition costs...... 5,912 40 56 428 -- -- -- 6,436
Separate account assets. 17,368 30,732 -- 520 -- -- -- 48,620
Policyholder
liabilities............ 70,686 49,550 1,509 5,615 -- 1 (3) 127,358
Separate account
liabilities............ $17,345 $30,473 $ -- $ 520 $ -- $ -- $ -- $48,338
</TABLE>
34
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(Continued)
<TABLE>
<CAPTION>
Auto
At or for the year ended & Asset Consolidation/
December 31, 1996 Individual Institutional Home International Management Corporate Elimination Total
- ------------------------ ---------- ------------- ------ ------------- ---------- --------- -------------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Premiums................ $ 4,559 $ 4,676 $1,316 $ 794 $-- $ -- $ -- $11,345
Universal life and
investment-type product
policy fees............ 729 375 -- 139 -- -- -- 1,243
Net investment income... 4,604 3,446 71 523 60 761 (487) 8,978
Other revenues.......... 74 475 26 37 495 89 50 1,246
Net realized investment
gains (losses) ....... 282 28 24 13 -- (112) (4) 231
Policyholder benefits
and claims............. 4,690 6,006 891 700 -- (1) -- 12,286
Interest credited to
policyholder account
balances 1,354 1,358 -- 156 -- -- -- 2,868
Policyholder dividends.. 1,333 284 -- 111 -- -- -- 1,728
Other expenses.......... 2,019 1,008 490 418 498 706 (384) 4,755
Income before provision
for income taxes....... 852 344 56 121 57 33 (57) 1,406
Income after provision
for income taxes....... 511 217 34 86 47 85 (56) 924
Total assets............ 86,042 75,872 2,801 11,714 901 18,900 (6,954) 189,276
Deferred policy
acquisition costs...... 6,495 29 56 647 -- -- -- 7,227
Separate account assets. 12,403 27,715 -- 3,645 -- -- -- 43,763
Policyholder
liabilities............ 67,220 48,253 1,562 6,045 -- 1 (55) 123,026
Separate account
liabilities............ $12,386 $27,368 $ -- $3,645 $-- $ -- $ -- $43,399
</TABLE>
The individual segment includes an equity ownership interest in Nvest
Companies, L.P. ("Nvest") under the equity method of accounting. Nvest has
been included within the asset management segment due to the types of products
and strategies employed by the entity. The individual segment's equity in
earnings of Nvest, which is included in net investment income, was $49, $45
and $43 for the years ended December 31, 1998, 1997 and 1996, respectively.
The investment in Nvest was $252, $216 and $152 at December 31, 1998, 1997 and
1996, respectively.
Net investment income and net realized investment gains are based upon the
actual results of each segment's specifically identifiable asset portfolio.
Other costs and operating costs were allocated to each of the segments based
upon: (i) a review of the nature of such costs, (ii) time studies analyzing
the amount of employee compensation costs incurred by each segment, and (iii)
cost estimates included in the Company's product pricing.
The consolidation/elimination column includes the elimination of all
intersegment amounts and the individual segment's ownership interest in Nvest.
The principal component of the intersegment amounts related to intersegment
loans, which bore interest at rates commensurate with related borrowings.
Revenues derived from any customer did not exceed 10% of consolidated
revenues. Revenues from U.S. operations were $25,643, $22,664 and $21,762 for
the years ended December 31, 1998, 1997 and 1996, respectively, which
represented 96%, 93% and 94%, respectively, of consolidated revenues.
35
<PAGE>
METLIFE -REGISTERED TRADEMARK-
GVUL
GROUP VARIABLE UNIVERSAL LIFE
PROSPECTUSES FOR
- GROUP VARIABLE UNIVERSAL LIFE
INSURANCE POLICIES AND CERTIFICATES
ISSUED BY
METROPOLITAN LIFE INSURANCE
COMPANY
- METROPOLITAN SERIES FUND, INC.
ML-GVUL (4/99 EDITION) PRINTED IN U.S.A.
POLICY FORM NO. 2130-S
99042XJ9 (EXP 0500) MLIC-LD
18000136683 (0499)
[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
REPRESENTATION WITH RESPECT TO FEES AND CHARGES
MetLife represents that the fees and charges deducted under the Group
Policies and Certificates described in this amended Registration Statement, in
the aggregate, are reasonable in relation to the services rendered, the expenses
to be incurred, and the risks assumed by MetLife under the Group Policies and
Certificates. MetLife bases its representation on its assessment of all of the
facts and circumstances, including such relevant factors as: the nature and
extent of such services, expenses and risks, the need for MetLife to earn a
profit, the degree to which the Group Policies and Certificates include
innovative features, and regulatory standards for exemptive relief under the
Investment Company Act of 1940 used prior to October 1996, including the range
of industry practice. This representation applies to all Group Policies and
Certificates issued pursuant to this Registration Statement, including those
sold on the terms specifically described in the Prospectus contained herein, or
any variations therein based on supplements, amendments, endorsements or other
riders to such group policies, certificates or Prospectus, or otherwise.
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises the following papers and documents:
The facing sheet.
Cross-Reference Table.
The Prospectus 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 with respect to fees and charges filed herewith.
The signatures.
Written Consents of the following persons:
Christopher P. Nicholas, filed with the initial filing of this
Registration Statement on April 14, 1995.
Frank Cassandra (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........................ ++
--(c) Form of personalized illustration......................................... +
(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............................... +++
</TABLE>
II-1
<PAGE>
<TABLE>
<C> <C> <S> <C>
2. --See Exhibit 1.A(5) above
3. --Opinion and consent of Counsel as to the legality of the securities being
sold.......................................................................... ++
4. --Not Applicable
5. --Not Applicable
6. --Opinion and consent of Frank Cassandra relating to the Group Variable
Universal Life Insurance Policies............................................. +
7. --Powers of Attorney............................................................ +++++
10. --Memorandum describing certain procedures filed pursuant to Rule
6e-3(T)(b)(12)(iii)........................................................... ++
27. --Financial Data Schedule (inapplicable)
</TABLE>
- ------------------------
+ Filed herewith.
* Incorporated herein by reference to the filing of Post-Effective Amendment
No. 5 to the Registration Statement of Separate Account UL (File No.
33-47927) on April 30, 1997.
** 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.
+++++ Incorporated herein by reference to the filing of Post-Effective Amendment
No. 5 to the Registration Statement of Separate Account UL (File No.
33-47927) on April 30, 1997, except for Robert H. Benmosche's power of
attorney, which is incorporated by reference to the filing of the
Registration Statement of Separate Account UL (File No. 333-40161) on
November 13, 1997, Jon F. Danski's power of attorney, which is
incorporated by reference to the filing of Pre-Effective Amendment No. 1
of Separate Account UL (File No. 333-40161) on April 2, 1998 and William
C. Steere, Jr.'s power of attorney, which is incorporated by reference to
the filing of Post-Effective Amendment No. 8 of Separate Account UL (File
No. 33-57320) on April 23, 1999.
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 28th day of April, 1999.
<TABLE>
<S> <C> <C> <C>
Metropolitan Life Insurance Company
(SEAL)
By: /s/ GARY A. BELLER
----------------------------------------
Gary A. Beller, Esq.
Senior Executive Vice-President &
General Counsel
Attest: /s/ CHERYL D. MARTINO
----------------------------------------
Cheryl D. Martino
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> <C> <S> <C>
Chairman, President and
* Chief Executive Officer
------------------------------------------- and Director (Principal
Robert H. Benmosche Executive Officer)
Senior Executive
* Vice-President and Chief
------------------------------------------- Financial Officer and
Stewart G. Nagler Director (Principal
Financial Officer)
* Senior Vice-President and
------------------------------------------- Controller (Principal
Jon F. Danski Accounting Officer)
*
------------------------------------------- Director
Curtis H. Barnette
Senior Executive
* Vice-President, Chief
------------------------------------------- Investment Officer and
Gerald Clark Director
*
------------------------------------------- Director
Joan Ganz Cooney
*By /s/ CHRISTOPHER P. NICHOLAS
--------------------------------------- April 28, 1999
Christopher P. Nicholas, Esq.
Attorney-in-fact
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------- -------------------------- -------------------
<C> <C> <S> <C>
*
------------------------------------------- Director
Burton A. Dole, Jr.
*
------------------------------------------- Director
James R. Houghton
* Chairman and Chief
------------------------------------------- Executive Officer
Harry P. Kamen (Retired) and Director
*
------------------------------------------- Director
Helene L. Kaplan
*
------------------------------------------- Director
Charles M. Leighton
*
------------------------------------------- Director
Allen E. Murray
*
------------------------------------------- Director
John J. Phelan, Jr.
*
------------------------------------------- Director
Hugh B. Price
*
------------------------------------------- Director
Robert G. Schwartz
*
------------------------------------------- Director
Ruth J. Simmons, Ph.D.
*
------------------------------------------- Director
William C. Steere, Jr.
*By /s/ CHRISTOPHER P. NICHOLAS
--------------------------------------- April 28, 1999
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 28th day of April, 1999.
<TABLE>
<S> <C> <C> <C>
Metropolitan Life Separate Account UL
(Registrant)
By: Metropolitan Life Insurance Company
(Depositor)
(SEAL) By: /s/ GARY A. BELLER
----------------------------------------
Gary A. Beller, Esq.
Senior Executive Vice-President
and General Counsel
Attest: /s/ CHERYL D. MARTINO
----------------------------------------
Cheryl D. Martino
Assistant Secretary
</TABLE>
II-5
<PAGE>
INDEPENDENT AUDITORS' CONSENT
METROPOLITAN LIFE INSURANCE COMPANY:
We consent to the use in this Post-Effective Amendment No. 5 to the
Registration Statement No. 33-91226 of Metropolitan Life Separate Account UL on
Form S-6 of our report dated March 15, 1999 relating to Metropolitan Life
Separate Account UL appearing in the Prospectus, which is a part of such
Registration Statement and our report dated February 4, 1999, relating to
Metropolitan Life Insurance Company also appearing in the Prospectus, and to the
reference to us under the heading "Legal, Accounting and Actuarial Matters" in
such Prospectus.
/S/ DELOITTE & TOUCHE LLP
Deloitte & Touche LLP
New York, New York
April 23, 1999
II-6
<PAGE>
EXHIBIT 1.A(5)(c)
Hypothetical Illustrations:
The following illustrations use hypothetical examples to show the way a
Certificate works. The illustrations are illustrative only and are not a
representation of past or future investment rates of return. Actual investment
rates of return will be different from those shown depending on a number of
factors, including: premium and cash value allocations or transfers among the
investment divisions and the Fixed Account made by an owner; and different rates
of return of the various Fund portfolios (which could include variations due to
differences in annual rates of return, even if the rates of return averaged 0%,
6% and 12% over a period of years). Neither we nor the Fund make any
representation that the hypothetical rates of return shown in these
illustrations can be achieved in any one year or sustained over any period of
time.
Upon request, we will furnish an illustration reflecting the proposed covered
person's age, sex, the specified face amount or premium amount requested,
frequency of planned periodic premium payments and any available rider
requested.
<PAGE>
GROUP VARIABLE UNIVERSAL LIFE INSURANCE CERTIFICATE(1)
ISSUE AGE 40
SPECIFIED FACE AMOUNT: $100,000
CURRENT INSURANCE POLICY CHARGES
<TABLE>
<CAPTION>
TOTAL CASH VALUE(2) TOTAL DEATH BENEFIT(2)
ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT
END OF RATES OF RETURN OF RATES OF RETURN OF
CERTIFICATE -------------------------------- ------------------------------------
YEAR 0% 6% 12% 0% 6% 12%
---- -------- -------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
1................................... $ 932 $ 962 $ 992 $100,932 $100,962 $100,992
2................................... 1,854 1,971 2,091 101,854 101,971 102,091
3................................... 2,765 3,029 3,310 102,765 103,029 103,310
4................................... 3,667 4,139 4,660 103,667 104,139 104,660
5................................... 4,558 5,302 6,157 104,558 105,302 106,157
6................................... 5,296 6,374 7,664 105,296 106,374 107,664
7................................... 6,026 7,499 9,333 106,026 107,499 109,333
8................................... 6,748 8,677 11,184 106,748 108,677 111,184
9................................... 7,462 9,914 13,235 107,462 109,914 113,235
10.................................. 8,167 11,210 15,508 108,167 111,210 115,508
15.................................. 10,472 17,409 29,649 110,472 117,409 129,649
20.................................. 11,076 23,437 51,169 111,076 123,437 151,169
25.................................. 9,198 28,228 83,848 109,198 128,228 183,848
30.................................. 1,998 27,992 131,171 101,998 127,992 231,171
</TABLE>
(1) This table illustrates 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 table is based on the payment of monthly premiums for a
specified face amount of $100,000 for an individual who is age 40.
(2) The current insurance policy charges illustration assumes:
(a) 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.
(b) no loans or partial withdrawals have been made. Excessive loans or
withdrawals, adverse investment performance or insufficient premium
payments may cause the Certificate to terminate because of
insufficient cash value.
(c) the covered person is in a rate class that does not distinguish
between smoker and nonsmoker and has current standardized cost of
insurance charges representative of a hypothetical standard Group
Policy as set forth in the following table:
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------
Age 40 to 44 45 to 49 50 to 54 55 to 59 60 to 64 65 to 69
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Monthly Cost of Insurance Rate Per $0.17 $0.29 $0.48 $0.75 $1.17 $2.10
$1,000 of Insurance
----------------------------------------------------------------------------------------------------
</TABLE>
The actual current cost of insurance rates can be expected to
vary from one Group Policy to another. 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, therefore, a higher death
benefit.
(d) a $2.00 per Certificate per month administration charge.
(e) a .35% DAC tax charge.
(f) a 2.5% premium tax rate.
(g) 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.
(h) no surrender transaction charge. Cash surrender values would be
equal to the cash value shown.
(i) a daily charge to the Fund for investment management services
equivalent to an annual rate of .50% of the average daily value
of the aggregate net assets of the available Fund portfolios (an
average of the rate for the thirteen available portfolios of the
Fund) and .17% for other direct expenses of the available Fund
portfolios (the average of the expenses indicated in the chart of
"Fund Investment Management Fees and Direct Expenses" in the
prospectus). 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: -1.12%, 4.86% and 10.83%, respectively.
<PAGE>
GROUP VARIABLE UNIVERSAL LIFE INSURANCE CERTIFICATE(1)
ISSUE AGE 40
SPECIFIED FACE AMOUNT: $100,000
GUARANTEED INSURANCE POLICY CHARGES
<TABLE>
<CAPTION>
TOTAL CASH VALUE(2) TOTAL DEATH BENEFIT(2)
ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT
END OF RATES OF RETURN OF RATES OF RETURN OF
CERTIFICATE -------------------------------- ------------------------------------
YEAR 0% 6% 12% 0% 6% 12%
---- -------- -------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
1................................... $ 597 $ 617 $ 636 $100,597 $100,617 $100,636
2................................... 1,146 1,220 1,295 101,146 101,220 101,295
3................................... 1,642 1,803 1,975 101,642 101,803 101,975
4................................... 2,083 2,365 2,677 102,083 102,365 102,677
5................................... 2,466 2,897 3,395 102,466 102,897 103,395
6................................... 2,789 3,398 4,131 102,789 103,398 104,131
7................................... 3,049 3,860 4,880 103,049 103,860 104,880
8................................... 3,243 4,279 5,643 103,243 104,279 105,643
9................................... 3,369 4,649 6,413 103,369 104,649 106,413
10.................................. 3,420 4,959 7,186 103,420 104,959 107,186
15.................................. 2,221 5,129 10,649 102,221 105,129 110,649
20.................................. 0(3) 1,392 11,772 0(3) 101,392 111,772
25.................................. 0(3) 0(3) 6,626 0(3) 0(3) 106,626
30.................................. 0(3) 0(3) 0(3) 0(3) 0(3) 0(3)
</TABLE>
(1) This table illustrates 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 table is based on the payment of monthly premiums for a
specified face amount of $100,000 for an individual who is age 40.
(2) The guaranteed insurance policy charges illustration assumes:
(a) 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.
(b) no loans or partial withdrawals have been made. Excessive loans or
withdrawals, adverse investment performance or insufficient premium
payments may cause the Certificate to terminate because of
insufficient cash value.
(c) the covered person is in a rate class that has maximum guaranteed cost
of insurance charges equal to the maximum rates that could be charged
(150% of the 1980 CSO Table) under a hypothetical representative
standard Group Policy. The actual maximum charge rates can be expected
to vary from one Group Policy to another.
(d) a $5.00 per Certificate per month administration charge.
(e) a .35% DAC tax charge.
(f) a 5.0% premium tax rate.
(g) 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.
(h) a surrender transaction charge of $25. Cash surrender values would be
$25 less than the cash value shown due to the deduction of this
surrender transaction charge.
(i) a daily charge to the Fund for investment management services
equivalent to an annual rate of .50% of the average daily value of the
aggregate net assets of the available Fund portfolios (an average of
the rate for the thirteen available portfolios of the Fund) and .17%
for other direct expenses of the available Fund portfolios (the
average of the expenses indicated in the chart of "Fund Investment
Management Fees and Direct Expenses" in the prospectus). Taking
account of the charges for investment management services, other Fund
expenses and the guaranteed 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: -1.56%, 4.39% and
10.34%, respectively.
(3) Zero value in cash value and death benefit indicate termination of
insurance coverage in the absence of a sufficient additional premium
payment.
<PAGE>
EXHIBIT 6
April 27, 1999
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. 5 to Registration Statement No. 33-91226 on Form S-6
("Registration Statement") which covers premiums received under Group Variable
Universal Life Insurance Policies and Certificates ("Policies") offered by the
Metropolitan Life Insurance Company ("MLIC") in each State where they have been
approved by appropriate State insurance authorities.
As an Assistant Vice-President and Actuary of MLIC, I have reviewed the Policies
and I am familiar with the Registration Statement, including the Prospectus
contained therein, and Exhibits thereto.
In my opinion, the illustrations of the death benefit and cash values for the
Group Policy in Exhibit 1.A(5)(c) included in the Registration Statement, based
on the assumptions stated in the illustrations, are consistent with the
provisions of the Policies. Such assumptions, including the assumed current
charge levels, are reasonable.
The Policies have not been designed so as to make the relationship between
premiums and benefits, as shown in these illustrations, appear to be
correspondingly more favorable to a prospective purchaser of a Certificate under
the Policies for males age 40 in the underwriting categories specified in the
illustrations, than to prospective purchasers of Certificates under the 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.
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 "Legal, Accounting,
and Actuarial Matters" in the Prospectus.
Very truly yours,
/s/ Frank Cassandra
Frank Cassandra
Assistant Vice-President and Actuary
