<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 26, 2000
REGISTRATION NO. 33-57320
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
POST-EFFECTIVE AMENDMENT NO. 9
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 May 1, 2000, pursuant to paragraph (b) of Rule 485
/ / 60 days after filing pursuant to paragraph (a) 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.
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<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 POLICIES; METLIFE; SUMMARY
5, 6, 7........................... SEPARATE ACCOUNT UL; THE FUNDS
8................................. FINANCIAL STATEMENTS
9................................. Inapplicable
10(a).............................. OTHER POLICY PROVISIONS; POLICY RIGHTS
10(c), 10(d)....................... SUMMARY; POLICY BENEFITS; POLICY RIGHTS; PAYMENT AND
ALLOCATION OF PREMIUMS; THE FIXED ACCOUNT; OTHER POLICY
PROVISIONS
10(e).............................. PAYMENT AND ALLOCATION OF PREMIUMS--Policy Termination and
Reinstatement
10(f).............................. VOTING RIGHTS
10(g)(1)-(3), 10(h)(1)-(3)......... RIGHTS WE RESERVE
10(g)(4), 10(h)(4)................. Inapplicable
10(i).............................. POLICY BENEFITS; PAYMENT AND ALLOCATION OF PREMIUMS; ISSUING
A POLICY
11................................. SUMMARY; SEPARATE ACCOUNT UL; THE FUNDS
12(a).............................. Cover Page
12(b), 12(e)....................... Inapplicable
12(c), 12(d)....................... SEPARATE ACCOUNT UL; THE FUNDS
13(a), 13(b), 13(c), 13(d)......... SUMMARY--Table of Charges and Expenses, CHARGES AND
DEDUCTIONS; SEPARATE ACCOUNT UL; THE FUNDS; POLICY BENEFITS;
OTHER POLICY PROVISIONS
13(e).............................. SALES AND ADMINISTRATION OF THE POLICIES
13(f), 13(g)....................... Inapplicable
14................................. ISSUING A POLICY; SALES AND ADMINISTRATION OF THE POLICIES
15................................. PAYMENT AND ALLOCATION OF PREMIUMS
16................................. SEPARATE ACCOUNT UL; THE FUNDS
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 FUNDS
18(b), 18(d)....................... Inapplicable
19................................. SALES AND ADMINISTRATION OF THE POLICIES; VOTING RIGHTS;
REPORTS
20(a), 20(b)....................... RIGHTS WE RESERVE; SEPARATE ACCOUNT UL; THE FUNDS
20(c), 20(d), 20(e), 20(f)......... Inapplicable
21(a), 21(b)....................... POLICY RIGHTS--Loan Privileges; PAYMENT AND ALLOCATION OF
PREMIUMS; OTHER POLICY PROVISIONS
21(c), 22.......................... Inapplicable
23................................. SALES AND ADMINISTRATION OF THE POLICIES
</TABLE>
I-1
<PAGE>
<TABLE>
<CAPTION>
ITEMS OF
FORM N-8B-2 CAPTIONS IN PROSPECTUS
- --------------------------------------- ----------------------
<S> <C>
24................................. PAYMENT AND ALLOCATION OF PREMIUMS; OTHER POLICY 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 POLICIES
39................................. METLIFE; SALES AND ADMINISTRATION OF THE POLICIES
40(a).............................. Inapplicable
40(b).............................. SEPARATE ACCOUNT UL; THE FUNDS; CHARGES AND DEDUCTIONS
41(a).............................. SUMMARY; METLIFE; SALES AND ADMINISTRATION OF THE POLICIES
41(b), 41(c), 42, 43............... Inapplicable
44(a).............................. SEPARATE ACCOUNT UL; THE FUNDS; POLICY 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 FUNDS
51(a), 51(b)....................... SUMMARY; METLIFE; POLICY BENEFITS; POLICY RIGHTS
51(c), 51(d), 51(e)................ Captions referenced under Item 10(i) above
51(f).............................. PAYMENT AND ALLOCATION OF PREMIUMS--Policy Termination and
Reinstatement
51(g).............................. Captions referenced under Items 10(i) and 13 above
51(h), 51(j)....................... Inapplicable
51(i).............................. SALES AND ADMINISTRATION OF THE POLICIES
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>
I-2
<PAGE>
METFLEX -SM-
METLIFE FLEXIBLE PREMIUM
VARIABLE LIFE
------------------------
MAY 1, 2000
FLEXIBLE PREMIUM
VARIABLE LIFE
PROSPECTUSES
- PROSPECTUS FOR FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICIES
ISSUED BY METROPOLITAN LIFE INSURANCE COMPANY
- FUND PROSPECTUSES
METLIFE -Registered Trademark-
<PAGE>
PROSPECTUS
FOR
METFLEX,
A FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY ("POLICY")
ISSUED BY
METROPOLITAN LIFE INSURANCE COMPANY ("METLIFE")
MAY 1, 2000
The Policy is designed to provide:
- - Life insurance coverage
- - Flexible premium payments
- - A choice among three death benefit options
- - A method of financing certain deferred compensation plans, post-retirement
benefits and payroll deduction programs
- - Funding options for allocating premium payments to and transferring cash value
among a fixed interest account and the Metropolitan Life Separate Account UL
investment divisions which invest in the following corresponding fund ("Fund")
portfolios:
<TABLE>
<S> <C>
Metropolitan Series Fund, Inc. portfolios:
STATE STREET RESEARCH AGGRESSIVE GROWTH NEUBERGER BERMAN PARTNERS MID CAP VALUE
STATE STREET RESEARCH DIVERSIFIED SCUDDER GLOBAL EQUITY
STATE STREET RESEARCH GROWTH T. ROWE PRICE LARGE CAP GROWTH
STATE STREET RESEARCH INCOME T. ROWE PRICE SMALL CAP GROWTH
STATE STREET RESEARCH MONEY MARKET LEHMAN BROTHERS-REGISTERED TRADEMARK- AGGREGATE
PUTNAM INTERNATIONAL STOCK (FORMERLY SANTANDER BOND INDEX
INTERNATIONAL STOCK) METLIFE STOCK INDEX
HARRIS OAKMARK LARGE CAP VALUE MORGAN STANLEY EAFE-REGISTERED TRADEMARK- INDEX
JANUS MID CAP RUSSELL 2000 INDEX-REGISTERED TRADEMARK-
LOOMIS SAYLES HIGH YIELD BOND
The Janus Aspen Series portfolios:
JANUS GROWTH
The Invesco Variable Investment Funds, Inc. ("VIF") funds:
INVESCO VIF--HIGH YIELD INVESCO VIF--REAL ESTATE OPPORTUNITY
INVESCO VIF--EQUITY INCOME
The Franklin Templeton Variable Insurance Products Trust funds:
TEMPLETON INTERNATIONAL SECURITIES--CLASS 1
(FORMERLY TEMPLETON INTERNATIONAL FUND)
</TABLE>
A WORD ABOUT RISK:
This Prospectus discusses the risks associated with purchasing the Policy. Other
prospectuses discuss the risks associated with investment in the Fund described
therein. These prospectuses are being provided to you in addition to this
Prospectus because each of the Separate Account UL investment divisions
identified above invests solely in a corresponding "Portfolio" of a Fund. This
Prospectus is not valid unless you also receive or have received current Fund
prospectuses.
The purchase of the Policy 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 Policy.
HOW TO LEARN MORE:
Before purchasing a Policy, read the information in this Prospectus and in the
prospectus for each Fund. 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 ("FDIC"), 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 (732) 602-6400
</TABLE>
<PAGE>
TABLE OF CONTENTS FOR THIS PROSPECTUS
<TABLE>
<CAPTION>
PAGE
IN THIS
SUBJECT PROSPECTUS
- ------- ----------
<S> <C>
Summary............................................ 2
MetLife............................................ 7
Separate Account UL................................ 8
The Fixed Account.................................. 9
The Funds.......................................... 9
Issuing a Policy................................... 10
Policy Benefits.................................... 11
Policy Rights...................................... 16
Payment and Allocation of Premiums................. 20
Charges and Deductions............................. 21
Federal Tax Matters................................ 23
Showing Performance................................ 25
Rights We Reserve.................................. 25
Other Policy Provisions............................ 25
Sales and Administration of the Policies........... 27
Voting Rights...................................... 27
Reports............................................ 28
Illustration of Policy Benefits.................... 28
Getting More Information........................... 29
Legal, Accounting and Actuarial Matters............ 29
Management......................................... 30
Financial Statements............................... 32
</TABLE>
SUMMARY
This summary gives an overview of the Policy and is qualified by the more
detailed information in the balance of this Prospectus and the Policy.
MetLife issues the Policy. We offer the Policies to employers, employer
sponsored plans, or other organizations or individuals associated with such
employers, plans or organizations. We designed the Policies for financing
non-qualified deferred compensation plans, other post-employment benefits,
certain employer sponsored payroll deduction programs or other purposes. In
addition to the base Policy, optional insurance benefits may also be added to
your coverage.
PREMIUMS
The Policy allows flexibility in making premium payments. The Policy 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 Policy 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 Policy is issued. You may also change the amount at any time after the
first Policy year, subject to our rules and procedures.
DEATH BENEFIT OPTIONS
Generally, you have a choice among three options. These range from an amount
equal to the specified face amount to an amount equal to the specified face
amount plus the policy cash value at the date of death.
SURRENDERS, PARTIAL WITHDRAWALS AND LOANS
Within certain limits, you may take partial withdrawals and loans from the
Policy. You may also surrender your Policy 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 Policy, until your cumulative withdrawn amounts exceed the
cumulative premiums you have paid. If your Policy 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. If the Policy is part of a
collateral assignment equity split dollar arrangement with an employer, any
increases in cash value that are not due to premium payments may be taxed
annually. 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 pay under your Policy. See
"Charges and Deductions," below for more information about your Policy's
charges:
<TABLE>
TYPE OF CHARGE OR EXPENSE AMOUNT OF CHARGE OR EXPENSE
<S> <C>
Charges we deduct from each premium
payment
Sales charge: For Policies issued prior to May 1, 1996
or in connection with a large group(1),
up to 1% of each premium payment;
For Polices issued in connection with
other groups(2) on or after May 1, 1996,
- POLICY YEARS 1 TO 10--up to 9% of
premiums paid
- POLICY YEARS 11 AND LATER--up to 3% of
premiums paid,
until the total of payments in each such
Policy year equals the annual target
premium(3) for that year.
- There is no sales charge for payments
in excess of the annual target
premium(3) in any Policy year.
Charge for average expected state 2.25% of each premium payment
taxes attributable to premiums:
Charge for expected federal taxes 1.2% of each premium payment
attributable to premiums:
Administrative charge: Up to 1.05% of each premium payment. We
reduce the charge to .05% on the portion
of any premiums paid in a Policy year
above the annual target premium(3).
Monthly Deduction from your Policy's
cash value
Cost of term insurance charges: Amount varies depending on the specifics
of your Policy(4)
Mortality and expense risk charge: The charge is currently equivalent to an
effective annual rate of up to .60% of
the cash value in the Separate Account.
We intend to reduce this charge after
Policy year 9 to .39%. We may increase
this charge to not more than .90% at any
time.
Underwriting charge: (applies only if A one time charge of up to $3 per
you request an increase in your thousand dollars of increase.
specified face amount)
Charges for optional rider As specified in the form of each rider.
benefits(5):
Transfer charge: We do not charge for the first six
transfers in a Policy year; we charge $25
for each additional transfer you make in
a Policy year.
</TABLE>
- ---------------
(1) A large group is one that has a large number of individuals associated with
it as determined by us pursuant to our administrative standards that we apply
uniformly.
4
<PAGE>
(2) For other than large groups and except in certain states, if you surrender
your Policy during the first three Policy years, we will refund any sales load
deducted within 365 days prior to the date the request for surrender is received
at our Designated Office.
(3) See "Annual Target Premium" under "Charges and Deductions" for a detailed
discussion of the determination of the annual target premium. For some Policies,
an increase or decrease in the specified face amount will result in a
proportionate increase or decrease in the annual target premium. This could, in
turn, increase or decrease sales and administrative charges.
(4) See "Cost of Term 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 Policy based on various assumptions.
(5) Except for the interim term insurance rider, the charge for which is paid
for separately.
FUND INVESTMENT MANAGEMENT FEES AND DIRECT EXPENSES
The investment manager of each of the Funds receives an investment management
fee. Each of the Funds also incurs direct expenses (see the Fund Prospectus and
Statement of Additional Information referred to therein for each Fund). You bear
indirectly your proportionate share of the fees and expenses of the Portfolios
of each Fund that correspond to the Separate Account investment divisions you
are using.
The following sets forth the fees and expenses for each Portfolio, expressed as
a percentage of average net assets, for the year ending 12/31/99 for all
Portfolios of each Fund, except those Portfolios (referred to in footnote
(d) to the table) to be introduced on or about July 5, 2000, for which estimates
for the first year are used. The percentages in the table are before taking into
account the expense reimbursements referred to in the footnotes that follow the
table.
<TABLE>
<CAPTION>
MANAGEMENT OTHER TOTAL
PORTFOLIOS FEE EXPENSES ANNUAL EXPENSES
<S> <C> <C> <C>
State Street Research Money Market .25% .17% .42%
Neuberger Berman Partners Mid Cap
Value(a)(b) .70% .48% 1.18%
Lehman Brothers-Registered Trademark-
Aggregate Bond Index .25% .15% .40%
Janus Mid Cap .67% .04% .71%
State Street Research Income .32% .06% .38%
State Street Research Aggressive
Growth(a) .70% .04% .74%
State Street Research Diversified(a) .43% .03% .46%
Loomis Sayles High Yield Bond .70% .24% .94%
MetLife Stock Index .25% .04% .29%
Russell 2000-Registered Trademark-
Index(d) .25% .64% .89%
Harris Oakmark Large Cap Value(a)(b) .75% .40% 1.15%
T. Rowe Price Small Cap Growth(a) .52% .09% .61%
T. Rowe Price Large Cap Growth(a)(b) .69% .62% 1.31%
State Street Research Growth(a) .47% .04% .51%
Scudder Global Equity .67% .20% .87%
Morgan Stanley EAFE-Registered
Trademark- Index(e) .30% 1.47% 1.77%
Putnam International Stock .90% .22% 1.12%
Invesco VIF-High Yield(h)(i) .60% .48% 1.08%
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
MANAGEMENT OTHER TOTAL
PORTFOLIOS FEE EXPENSES ANNUAL EXPENSES
<S> <C> <C> <C>
Templeton International Securities-
Class 1(g) .69% .19% .88%
Janus Growth(f) .65% .02% .67%
Invesco VIF-Equity Income(h)(i) .75% .44% 1.19%
Invesco VIF-Real Estate
Opportunity(h)(i) .90% 8.87% 9.77%
</TABLE>
- ---------------
(a) The Metropolitan Series Fund directed certain portfolio trades to brokers
who paid a portion of the Fund's expenses. In addition, the Fund has entered
into arrangements with its custodian whereby credits realized as a result of
this practice were used to reduce a portion of each Portfolio's custodian fees.
These expense reductions are reflected in the table following (i) below.
(b) During 1999, we paid all expenses (other than management fees, brokerage
commissions, taxes, interest, extraordinary and non-recurring expenses)
(hereinafter "Expenses") in excess of .20% of the average net assets for each of
these Portfolios. This subsidy ceases when each Portfolio's total assets reach
$100 million or on November 8, 2000, whichever comes first. This expense
reimbursement is reflected in the table following (i) below. It states our
estimate of the effect of the anticipated reimbursement of Expenses for the
entire current year.
(c) These Portfolios will begin operations on or about July 5, 2000, except for
the Putnam Large Cap Growth Portfolio which will begin operations on May 1,
2000, but will not be available until on or about July 5, 2000. We will pay all
Expenses in excess of .20% of the average net assets for each of these
Portfolios until each Portfolio's total assets reach $100 million or until
July 4, 2002, whichever comes first. Therefore, the Expenses for these
Portfolios will be lower than those indicated in the table above. The table
following (i) below shows estimated first year expenses for these Portfolios
after expense reimbursement.
(d) We ceased subsidizing Expenses for this Portfolio during 1999. The expense
information in the above table has been restated to reflect current expenses as
if they had been in effect all year. Beginning on February 22, 2000, we began to
pay all Expenses in excess of .30% of the average net assets for the Russell
2000-Registered Trademark- Index Portfolio until the Portfolio's total assets
reach $200 million or until April 30, 2001, whichever comes first. This expense
reimbursement is reflected in the table following (i) below and is stated as if
it was in effect for the entire current year.
(e) We pay all Expenses in excess of .25% the average net assets for the Morgan
Stanley EAFE-Registered Trademark-Index Portfolio until the Portfolio's total
assets reach $100 million, or until November 8, 2000, whichever comes first.
After such date, MetLife will continue to pay all Expenses in excess of .40% of
the Portfolio's average net assets until the Portfolio's assets reach $200
million, or until April 30, 2001, whichever comes first. These expense
reimbursements are reflected in the table following (i) below. It states our
estimate of the effect of these anticipated reimbursements of expenses for the
entire current year.
(f) Expenses are based upon expenses for the fiscal year ended December 31,
1999, restated to reflect a reduction in the management fee. All expenses are
shown without the effect of expense offset arrangements.
(g) On February 8, 2000, the shareholders approved a merger and reorganization
that combined this fund with the Templeton International Equity Fund, effective
May 1, 2000. The shareholders of that fund have approved new management fees,
which apply to the combined fund effective May 1, 2000. The table above shows
restated total expenses based on the new fees and the assets of the fund as of
December 31, 1999, and not the assets of the combined fund. However, if the
table reflected both the new fees and the combined assets, the fund's expenses
after May 1, 2000 would be estimated as: Management fees - .65%; Other expenses
- -.20%; and Total Annual Expenses -.85%.
(h) The actual total expenses for the Invesco VIF-High Yield Fund, the Invesco
VIF-Equity Income Fund and the Invesco VIF-Real Estate Opportunity Fund were
lower than the figure shown below because their custodian fees were reduced
under expense offset arrangements. The SEC does not permit the amounts shown in
the table above to reflect these reductions.
(i) Certain expenses of the Invesco VIF-High Yield Fund, the Invesco VIF-Equity
Income Fund and the Invesco VIF-Real Estate Opportunity Fund were absorbed
voluntarily by INVESCO in order to ensure that expenses for these Funds did not
exceed 1.05%, 1.15% and 1.35%,
6
<PAGE>
respectively, of the Fund's average net assets pursuant to an agreement between
each Fund and INVESCO. These commitments may be changed at any time following
consultation with the board of directors. These expense absorbtion arrangements
are reflected in the table below.
<TABLE>
<CAPTION>
OTHER TOTAL ANNUAL
EXPENSES EXPENSES AFTER
AFTER EXPENSE EXPENSE
PORTFOLIO REIMBURSEMENT REIMBURSEMENT
<S> <C> <C>
State Street Research Diversified .02% .45%
Neuberger Berman Partners Mid Cap Value .06% .76%
Harris Oakmark Large Cap Value .19% .94%
State Street Research Aggressive Growth .02% .72%
T. Rowe Price Large Cap Growth .24% .93%
Russell 2000-Registered Trademark- Index .30% .55%
State Street Research Growth .02% .49%
T. Rowe Price Small Cap Growth .09% .61%
Morgan Stanley EAFE-Registered Trademark- Index .36% .66%
Invesco VIF-High Yield .47% 1.07%
Invesco VIF-Equity Income .42% 1.17%
Invesco VIF-Real Estate Opportunity 1.02% 1.92%
</TABLE>
OTHER
Please refer to "Federal Tax Matters-Our taxation" and "Policy Benefits--Cash
Value Transfers" for a description of certain charges that we currently do not
impose but may impose in the future.
METLIFE
Metropolitan Life Insurance Company ("MetLife") is a wholly-owned subsidiary of
MetLife, Inc., a publicly traded company. Our main office is located at One
Madison Avenue, New York, New York 10010. MetLife was formed under the laws of
New York State in 1868. Headquartered in New York City, we are a leading
provider of insurance and financial services to a broad spectrum of individual
and group customers. With approximately $420 billion of assets under management
as of December 31, 1999 on a pro-forma basis, including the acquisition of
GenAmerican Corp., MetLife provides individual insurance and investment products
to approximately 9 million households in the United States. MetLife also
provides group insurance and invesment products to corporations and other
institutions employing over 33 million employees and members. We have listed out
directors and certain key officers under "Management ," and our financial
information under "Financial Statements," below.
GIVING US REQUESTS, INSTRUCTIONS OR NOTIFICATIONS
(SIDEBAR)
YOU CAN CONTACT US AT OUR DESIGNATED OFFICE.
(END SIDEBAR)
CONTACTING US: You can communicate all of your requests, instructions and
notifications to us by contacting us in writing at our Designated Office. We may
require that certain requests, instructions and notifications be made on forms
that we provide. These include: changing your beneficiary; taking a Policy loan;
changing your death benefit option; taking a partial withdrawal; surrendering
your Policy; making transfer requests (including elections with respect to the
systematic investment strategies) or changing your premium allocations. Our
Designated Office is our home office at 1 Madison Avenue, New York, NY 10010. We
may name additional or alternate Designated Offices. If we do, we will notify
you in writing.
7
<PAGE>
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 Designated
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 think that there has been a sufficient degree of trading
in a Fund's portfolio securities that the current net asset value of its
shares might be materially affected.
- - The end of the free look period is the effective time of the premium
allocation instructions you make in your Policy application (and any changes
in allocation or transfer requests you make on or before the end of the free
look period). Your Investment Start Date is the date the first net premium is
applied to the Fixed Account and/or the Separate Account and is the later of
(1) the Date of Policy and (2) the Date of Receipt of your first premium
payment.
- - The effective date of your Systematic Investment Strategies will be that set
forth in the strategy chosen.
SEPARATE ACCOUNT UL
We established the Separate Account under New York law on December 13, 1988. The
Separate Account receives premium payments from the Policy 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 A 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 a 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. Amounts you allocate to each
investment division receive the investment experience of the investment
division, and you bear this investment risk.
8
<PAGE>
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%, except where state law
requires 4% (for Policies issued prior to April 30, 2000, the rate is 4%). We
may also credit excess interest on such amounts. Different excess interest rates
may apply to different amounts based upon when such amounts were allocated to
the Fixed Account.
Any partial amounts we remove from the Fixed Account (such as any portion of
your Policy's monthly deduction that is allocable to the Fixed Account) will be
taken from the most recently allocated amounts first. Any excess interest rate
will be credited for at least 12 months before a new rate is credited. We can
delay transfers, withdrawals, surrender and payment of Policy 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 Policy gives you more information on
the operation of the Fixed Account.
THE FUNDS
(SIDEBAR)
YOU SHOULD CAREFULLY REVIEW THE INVESTMENT OBJECTIVES, STRATEGIES, AND RISKS OF
EACH PORTFOLIO WHICH ARE CONTAINED IN THE PROSPECTUS FOR EACH FUND YOU HAVE ALSO
RECEIVED.
(END SIDEBAR)
Each of the Funds is a "series" type of mutual fund, which is registered as an
open-end management investment company under the 1940 Act. Each Fund is divided
into Portfolios, each of which represents a different class of stock in which a
corresponding investment division of the Separate Account invests. You should
read each Fund prospectus that you have also received. They contain information
about each Fund and its Portfolios, including the investment objectives,
strategies, risks and investment advisers that are associated with each
Portfolio. They also contain information on our different separate accounts and
those of our affiliates, that invest in each Fund and the risks related thereto.
Some of the Portfolios have names and investment objectives that are very
similar to certain publicly available mutual funds that are managed by the same
money managers. These Portfolios are not those publicly available mutual funds
and will not have the same performance. Different performance will result from
such factors as different implementation of investment policies, different cash
flows into and out of the Portfolios, different fees and different sizes.
Our arrangements with certain of the unaffiliated Fund sponsors provide that
they or one of their affiliates will pay us based on a percentage (up to 0.25%
on an annual basis) of the net assets of a Portfolio attributable to the
Policies. The fees are not charged to you, the Separate Account or the
Portfolio.
9
<PAGE>
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).
- - Policy 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 POLICY
If you want to own a Policy, then you must complete an application, which must
be received by the Designated Office. We reserve the right to reject an
application for any reason permitted by law, and our acceptance of an
application is subject to our underwriting rules.
We may choose one of three types of underwriting when selling Policies. We
decide which type to use based on the total number of eligible possible insureds
for whom you can purchase a Policy and the percentage of those insureds for whom
you actually purchase a Policy. The three types of underwriting are:
- - Guaranteed Issue--requires the least evidence of insurability and rating
classification
- - Simplified Underwriting--requires more evidence of insurability and rating
classification
- - Full Underwriting--requires the most evidence of insurability and rating
classification
An insured who is a standard risk under Simplified Underwriting or Guaranteed
Issue may have a higher cost of term insurance rate than would apply to the same
insured under Full Underwriting.
(SIDEBAR)
WE WILL ISSUE A POLICY TO YOU AS OWNER. YOU WILL HAVE ALL THE RIGHTS UNDER THE
POLICY INCLUDING THE ABILITY TO NAME A NEW OWNER OR CONTINGENT OWNER.
(END SIDEBAR)
Generally, we will issue a Policy only for insureds that are age 70 or less
(although we may decide to permit an insured that is older) that have provided
evidence of insurability that we find acceptable. An "insured" is the person
upon whose life we issue the Policy. For the purpose of computing the insured's
age under the Policy, we start with the insured's age on the Date of Policy
which is set forth in the Policy. Age under the Policy at any other time is then
computed using that issue age and adding the number of full Policy years
completed.
The Date of Policy is usually the date the Policy application is approved. We
use the Date of Policy to calculate the Policy years (and Policy months and
monthly anniversaries). We may permit a Date of Policy that is earlier than the
date the application is approved if there have been no material
misrepresentations in the application in order to preserve a younger age for the
insured.
- - You may request that your Date of Policy be the same date the planned periodic
premium is received. In these cases, you would incur a charge for insurance
protection before insurance coverage starts. However, the earlier
10
<PAGE>
Date of Policy gives you the potential advantage of having the premium applied
to the Separate or Fixed Account on an earlier date if a payment is received.
Insurance coverage under the Policy will generally begin at the time the
application is approved. For coverage to be effective, the insured's health must
be the same as stated in the application and, in most states, the insured must
not have sought medical advice or treatment after the date of the application.
POLICY BENEFITS
This discussion generally does not take into account the effect of obtaining a
portion of the insurance coverage under the yearly renewable term rider. This
rider may be more economical in some cases than taking the full amount under the
Policy. See "Optional Benefits Added by Rider."
INSURANCE PROCEEDS
If the Policy is in force, we will pay your beneficiary the insurance proceeds
as of the end of the Valuation Period that includes the insured's date of death.
We will pay this amount after we receive documents that we request as due proof
of the insured'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 insured'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 under the death benefit option or minimum death benefit that
is then in effect; plus
- - Any additional insurance proceeds provided by rider; minus
- - Any unpaid Policy loans and accrued interest thereon, and any due and unpaid
charges accruing during a grace period.
DEATH BENEFIT OPTIONS
(SIDEBAR)
THE POLICY GENERALLY OFFERS A CHOICE OF THREE DEATH BENEFIT OPTIONS.
(END SIDEBAR)
You can choose among three options. You select which option you want in the
Policy application. The three options are:
- - Option A: The death benefit is a level amount and equals the specified face
amount of the Policy
- - Option B: The death benefit varies and equals the specified face amount of the
Policy plus the cash value on the date of death.
- - Option C: The death benefit varies and equals the specified face amount of the
Policy plus the amount by which the Policy premiums paid exceeds withdrawals
made.
In many states, you have the flexibility to include a yearly renewable term
rider. This rider is generally not available with Policies issued to or in
connection with large groups.
11
<PAGE>
There are issues that you should consider in choosing your death benefit option.
For example, under Options B and C, the cash value or other amounts are added to
the specified face amount. Therefore, the death benefit will generally be
greater under these options than under Option A, for Policies with the same
specified face amount and premium payments. By the same token, the cost of
insurance will generally be greater under Options B and C than under Option A.
You can change your death benefit option after the first Policy year, provided
that:
(SIDEBAR) YOU CAN GENERALLY CHANGE YOUR DEATH BENEFIT OPTION.
(END SIDEBAR)
- - Your cash surrender value after the change would be enough to pay at least two
monthly deductions.
- - The specified face amount continues to be no less than the minimum we allow
after a decrease.
- - The total premiums you have paid do not exceed the then current maximum
premium limitations permitted under Internal Revenue Service rules.
- - You provide evidence satisfactory to us of the insured's insurability, as we
may require.
Any change will be effective on the monthly anniversary on or immediately
following the Date of Receipt of the request (or following the date we approve
it if we require evidence of insurability). A change in death benefit option
will cause us to automatically increase or decrease your specified face amount
so that the amount of the death benefit is not changed on the effective date of
the new death benefit option.
Before you change your death benefit option you should consider the following:
- - If the term insurance portion of your death benefit changes, as it may with a
change from Option A to B or C and vice versa, the term insurance charge will
also change. This will affect your cash value and, in some cases, the death
benefit levels.
- - If your specified face amount changes because of the change in death benefit
option, consider also the issues presented by changing your specified face
amount that are described under "Specified Face Amount," below. These issues
include the possibility: that your Policy would become a modified endowment
contract; that you would receive a taxable distribution; and of changes in the
maximum premium amounts that you can pay.
MINIMUM DEATH BENEFIT
In no event will the Policy death benefit (plus the proceeds under any yearly
renewable term rider on the insured's life) be lower than the minimum amount
required to maintain the Policy as life insurance under the federal income tax
laws. We determine this minimum by applying either the:
I. Cash Value Accumulation Test or
II. Guideline Premium/Cash Value Corridor Test.
12
<PAGE>
You choose the Cash Value Accumulation Test or the Guideline Premium/Cash Value
Corridor Test before we issue your Policy. Before choosing between these two
tests you should consider the following:
- - The Cash Value Accumulation Test may allow you to pay a greater amount in
premiums for the same amount of death benefit under federal income tax laws
and still qualify as life insurance. You should ask for an illustration
comparing results under both tests.
- - Increases in death benefits by operation of the Cash Value Accumulation Test
will result in a higher monthly cost of term insurance. Such increases can
also occur under the Guideline Premium/Cash Value Corridor Test, although this
is less likely.
SPECIFIED FACE AMOUNT
(SIDEBAR)
YOU CAN GENERALLY INCREASE OR DECREASE YOUR POLICY'S SPECIFIED FACE AMOUNT.
(END SIDEBAR)
The specified face amount is the basic amount of insurance specified in your
Policy. The Minimum Initial Specified Face amount is the smallest amount of
specified face amount for which a Policy may be issued. Currently this amount is
$100,000. You should consider whether to take all of your coverage as specified
face amount or whether to take some coverage, if available, under our yearly
renewable term insurance benefit (see "Optional Benefits Added by Rider).
Generally, you may change your specified face amount at any time after the first
Policy year. Any change will be effective on: the monthly anniversary on or next
following the (a) Date of Receipt of your request; or (b) if we require evidence
of insurability, the date we approve your request.
No reduction may decrease the specified face amount below the Minimum Initial
Specified Face Amount during the first five Policy years or one half that amount
thereafter. These minimums also apply to decreases that result from partial
withdrawals or changes in death benefit options. If there have been previous
specified face amount increases, any decreases in specified face amount will be
made in the following order: (i) the specified face amount provided by the most
recent increase; (ii) the next most recent increases successively; and
(iii) the initial specified face amount.
You may increase the specified face amount only if the cash surrender value
after the change is large enough to cover at least two monthly deductions based
on your most recent cost of term insurance charge. Any increase may require that
we receive additional evidence of insurability that is satisfactory to us. We
may also impose a one-time underwriting charge.
Before you change your specified face amount you should consider the following:
- - The term insurance portion of your death benefit will likely change and so
will the term insurance charge. This will affect the insurance charges, cash
value and, in some cases, death benefit levels.
- - Reducing your specified face amount in the first 15 Policy years may result in
our returning an amount to you which could then be taxed on an income first
basis.
- - The amount of additional premiums that the tax laws permit you to pay into
your Policy may increase or decrease. The additional amount you can pay
without causing your Policy to be a modified endowment contract for tax
purposes may also increase or decrease.
- - In some circumstances, the Policy could become a modified endowment contract.
13
<PAGE>
- - For Policies issued on or after May 1, 1996 in connection with other than
large groups, the sales charge and the administration charge may change.
CASH VALUE
(SIDEBAR) YOUR POLICY IS DESIGNED TO ACCUMULATE CASH VALUE.
(END SIDEBAR)
Your Policy's cash value equals:
- - The Fixed Account cash value, plus
- - The Policy Loan Account cash value, plus
- - The Separate Account cash value.
Your Policy's cash surrender value equals your cash value minus any outstanding
Policy loans (plus accrued interest).
The Separate Account cash value allocated to each investment division is
calculated as follows:
- - On your Investment Start Date, the Policy's cash value in an investment
division will equal the portion of any net premium allocated to the investment
division, reduced by the portion of any monthly deductions allocated to the
Policy's cash value in that investment division.
- - 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
- 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 Policy anniversary on which the insured is Age 95. Subject
to certain conditions, we will allow you to extend that date where permitted by
state law. If the insured is living on the Final Date, we will pay you the cash
surrender value of the Policy. You can receive the cash surrender value in a
single sum, in an account that earns interest, or under an available income
plan.
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) (other than the charge for the interim term
insurance rider) as part of the monthly deduction. Each rider contains important
information, including limits and conditions that apply to the
14
<PAGE>
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 Policy.
- - That the amount of benefits provided under the rider is not based on
investment performance of a separate account; but, if the Policy 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.
- - That, as discussed below, there are special factors with respect to charges in
connection with the yearly renewable term insurance benefit.
Generally, we currently make the following benefits available by rider:
<TABLE>
<S> <C>
- - Disability Waiver of Monthly - Interim Term Insurance Benefit
Deduction Benefit(1)
- - Accidental Death Benefit - Yearly Renewable Term
Insurance Benefit(3)
- - Accelerated Death Benefit(2)
</TABLE>
- ------------
(1) 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 Policy'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.
(2) Payment under this rider may affect eligibility for benefits under state or
federal law. This rider is currently not available in New Jersey or
Massachusetts.
(3) Generally not available in connection with large groups.
The yearly renewable term insurance benefit provides coverage on the insured to
age 95. You may purchase this rider, if available, only at Policy issue, though
the amount of coverage of an existing rider can be decreased or, subject to
evidence of insurability, increased. Since the amount of annual target premium
(see "Annual Target Premium" under "Charges and Deductions") is not affected by
this rider, the amount of sales charge you pay may be less if coverage is
obtained through this rider rather than as part of the Policy. However, the
current charges for the cost of insurance are higher and commissions that we pay
our representatives may be lower under this rider. You should consider these
factors before allocating the insurance coverage between the Policy and this
rider.
INCOME PLANS
(SIDEBAR)
GENERALLY YOU CAN RECEIVE THE POLICY'S INSURANCE PROCEEDS, AMOUNTS PAYABLE AT
THE FINAL DATE OR AMOUNTS PAID UPON SURRENDER UNDER AN INCOME PLAN INSTEAD OF IN
A LUMP SUM.
(END SIDEBAR)
Before you purchase an income plan you should consider:
- - The tax consequences associated with the Policy 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 your Policy will terminate at the time you purchase an income plan and
you will receive a new contract, which describes the terms of the income plan.
You should carefully review the terms of the new contract, because it contains
important information about the terms and conditions of the income plan.
- - That these plans do not have a variable investment return.
15
<PAGE>
Generally, we currently make the following income plans available:
<TABLE>
<S> <C>
- - Interest income - Installment Income for a
Stated Period
- - Installment Income of a Stated - Single Life Income-Guaranteed
Amount Payment Period
- - Joint and Survivor Life Income - Single Life Income-Guaranteed
Return
</TABLE>
POLICY RIGHTS
CASH VALUE TRANSFERS
(SIDEBAR)
YOU CAN TRANSFER YOUR CASH VALUE AMONG THE INVESTMENT DIVISIONS AND THE FIXED
ACCOUNT AT ANY TIME BEGINNING AFTER THE END OF THE FREE LOOK PERIOD.
(END SIDEBAR)
The minimum amount you may transfer is $50 or, if less, the total amount in an
investment option. You may make transfers at any time. The maximum amount that
you may transfer or withdraw from the Fixed Account in any Policy year is the
greater of $50 and 25% of the largest amount in the Fixed Account over the last
four Policy years. This limit does not apply to a full surrender, any loans
taken, or any transfers under a systematic investment strategy. We may also
limit the number of investment options to which you may transfer cash value,
and, under certain conditions, we may have to approve transfers to the Fixed
Account (see "Allocating Net Premiums" under "Payment and Allocation of
Premiums.").
We do not currently charge for the first six transfers in a Policy year. We
charge $25 for any additional amounts transferred in the same Policy year. (For
this purpose, all transfers made as part of the same request count as one
transfer). Transactions under the Systematic Investment Strategies are not
considered "transfers" for purposes of this charge. We reserve the right to
assess a charge in the future against all transfers. Currently, transfers are
not taxable transactions.
Each Fund may restrict or refuse purchases or redemptions of shares in their
Portfolios as a result of certain market timing activities. You should read each
Fund's prospectus for more details.
We reserve the right to refuse to accept any transaction request where the
request would tend to disrupt administration of the Policies or is not in the
best interests of Policy owners or the Separate Account.
SYSTEMATIC INVESTMENT STRATEGIES: You can choose one of four currently
available strategies. 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 Policy month equal to at least $20 to the MetLife
Stock Index investment division or the State Street Research Aggressive Growth
investment division. The transfer will be made at the beginning of the Policy
month following the Policy month in which the interest was earned.
- - EQUALIZER: allows you to periodically equalize amounts in your Fixed Account
and either the MetLife Stock Index investment division or the State Street
Research Aggressive Growth investment division. We currently make equalization
at the end of each 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 Policy
anniversary.
16
<PAGE>
- - 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 quarter.
- - ALLOCATOR: allows you to systematically transfer money from the State Street
Research Money Market investment division to the Fixed Account and/or any
investment division(s). You must have enough cash value in the
State Street Research Money Market investment division 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 State Street Research Money
Market investment division is exhausted.
- A specific amount for a specific number of months.
- 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. We may also allow you
to authorize your sales representative to make such requests. 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 or your sales
representative, as applicable, 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 POLICY AS SECURITY FOR THE LOAN.
(END SIDEBAR)
The amount of each loan must be:
- - At least $250.
- - No more than the greater of the cash surrender value less two monthly
deductions and 75% of the cash surrender value (unless your Policy tells you
that state law requires a different percentage to be applied) when added to
all other outstanding Policy loans.
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 as
the Policy's cash value in each such option bears to the total cash value of
the Policy in the Fixed Account and the investment divisions.
- - Transfer such cash value to the Policy 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 Policy loans, determined by us. This
percentage charge will not exceed 2%, and the minimum rate we will credit to
the Policy Loan Account will be 3% per year, except where state law requires
4% (for Policies issued prior to April 30, 2000, the rate is 4%). At least
once a year, we will transfer any
17
<PAGE>
interest earned in your Policy 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. We will tell you the initial
interest rate that applies to your loan and mail you advance notices of any
increases applicable to existing loans. The interest rate charged for a Policy
year will never be greater than the maximum allowed by law and will generally
be the greater of:
- The published monthly average for the calendar month ending two months
before the start of such year; and
- The guaranteed rate used to credit interest to the cash value allocated to
the Fixed Account for the Policy, plus no more than 1%.
The published monthly average means (a) Moody's Corporate Bond Yield Average
Monthly Average Corporates, as published by Moody's Investors Service, Inc. or
any successor service; or (b) If the Moody's average is not published, a
substantially similar average established by regulation issued by the insurance
supervisory official of the state in which your Policy is delivered.
Your interest payments are due at the end of each Policy year and if you don't
pay the amount within 31 days after it is due, we will treat it as a new Policy
loan, which will be taken from the Fixed Account and the investment divisions by
the same method as other loans.
Repaying your loans (plus accrued interest) is done by sending in payments at
least equal to $25. 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, except that amounts borrowed from the Fixed Account
will be repaid to the Fixed Account first.
Before taking a Policy loan you should consider the following:
- - Interest payments on loans are generally not deductible for tax purposes.
- - Under certain situations, Policy loans could be considered taxable
distributions.
- - If you surrender your Policy or if we terminate your Policy, or at the Final
Date, any outstanding loan amounts (plus accrued interest) will be taxed as a
distribution. (See "Federal Tax Matters--The Policy--Loans" below.)
- - A policy loan increases the chances of our terminating your policy due to
insufficient cash value. We will terminate your Policy 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 61 days of the
monthly anniversary.
- - Your Policy's death benefit will be reduced by any unpaid loan (plus accrued
interest).
SURRENDER AND WITHDRAWAL PRIVILEGES
(SIDEBAR) YOU CAN SURRENDER YOUR POLICY FOR ITS CASH SURRENDER VALUE.
(END SIDEBAR)
We may ask you to return the Policy before we honor your request to surrender
your Policy. You can choose to have the proceeds paid in a single sum, or under
an income plan. If the insured dies after you surrender the Policy but before
the end of the Policy month in which you surrendered the Policy, we will pay
your beneficiary an amount equal to the difference between the Policy's death
benefit and its cash value, computed as of the surrender date.
18
<PAGE>
You can make partial withdrawals if:
- - The withdrawal would not result in the cash surrender value being less than
sufficient to pay 2 monthly deductions.
- - The withdrawal is at least $250.
- - The withdrawal would not result in total premiums paid exceeding any then
current maximum premium limitation determined by Internal Revenue Code Rules.
- - The withdrawal would not result in your specified face amount falling below
the minimum allowable amount after a decrease, as described under "Specified
Face Amount," above.
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 Policy.
We will deduct your withdrawal from the Fixed Account and the investment
divisions in the same proportion that the Policy's cash value in each such
option bears to the total cash value of the Policy in the Fixed Account and the
investment divisions.
Before surrendering your Policy or requesting a partial withdrawal you should
consider the following:
- - Amounts received may be taxable as income and, if your Policy is a modified
endowment contract, subject to certain tax penalties.
- - Your Policy could become a modified endowment contract.
- - For partial withdrawals, your death benefit will decrease, generally by the
amount of the withdrawal. For Option A Policies, your specified face amount
will also decrease, generally by the amount of the withdrawal.
- - In some cases you may be better off taking a Policy 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 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 Policy months (or within 24 Policy 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 Policy 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.
THIRD PARTY REQUESTS
Generally, we only accept requests for transactions or information from you.
Therefore, we reserve the right not to process transactions requested on your
behalf by your agent with a power of attorney or any other authorization. This
includes processing transactions by an agent you designate, through a power of
attorney or other authorization, who has the ability to control the amount and
timing of transfers for a number of other Policy owners, and who simultaneously
makes the same request or series of requests on behalf of other Policy owners.
19
<PAGE>
(SIDEBAR)
YOU CAN MAKE VOLUNTARY PLANNED PERIODIC PREMIUM PAYMENTS AND UNSCHEDULED PREMIUM
PAYMENTS.
(END SIDEBAR)
PAYMENT AND ALLOCATION OF PREMIUMS
PREMIUMS
The payment of premiums won't guarantee that your Policy will remain in force.
Rather, this depends on your Policy's cash surrender value.
PAYING PREMIUMS
You can make premium payments, subject to certain limitations discussed below,
through the:
- - VOLUNTARY PLANNED PERIODIC PREMIUM SCHEDULE: You choose the schedule on your
application. The schedule sets forth the amount of premiums, fixed payment
intervals and the period of time that you intend to pay premiums. The schedule
can be: (a) annual; (b) semi-annual; or (c) through another method to which we
agree. After payment of the first planned periodic premium, you do not have to
pay premiums in accordance with your voluntary planned period premium
schedule.
- - UNSCHEDULED PREMIUM PAYMENT OPTION: You can make premium payments at any
time.
(SIDEBAR)
NET PREMIUMS ARE YOUR PREMIUMS MINUS THE CHARGES DEDUCTED FROM YOUR PREMIUMS.
(END SIDEBAR)
MAXIMUM AND MINIMUM PREMIUM PAYMENTS
- - The first premium may not be less than the planned premium.
- - After the first Policy year, your voluntary planned periodic payments must be
at least $100, whether on an annual or semi-annual basis.
- - 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 Policy from
terminating. We will let you make premium payments that would turn your Policy
into a modified endowment contract, but we will tell you of this status in
your annual statement, and if possible, we will tell you how to reverse the
status.
- - We reserve the right not to sell a Policy to any group or individual
associated with such group if the total amount of annual premium that is
expected to be paid in connection with all Policies sold to the group or
individuals associated with such group is less than $250,000.
- - We may require evidence of insurability for premium payments that cause the
minimum death benefit to exceed the death benefit then in effect under the
death benefit option chosen.
ALLOCATING NET PREMIUMS
Your allocations of net premiums to the Fixed Account are effective as of the
Investment Start Date. Your allocations of net premiums to the investment
divisions of the Separate Account are effective as of the end of the free look
period. During the free look period, we allocate the net premium payments you
allocated to the investment divisions to the State Street Research Money Market
investment division. At the end of the free look period, we will then allocate
your cash value in that investment division among all the Separate Account
investment divisions according to your net premium allocation instructions.
You can instruct us to allocate your net premiums among the Fixed Account and
the investment divisions. The percentage of your net premium allocation into
each of these investment options must be in whole numbers. You can change your
allocations (effective after the end of the free look period) at
20
<PAGE>
any time by giving us written notification at our Designated Office or in
another manner that we permit. If you have cash value of at least $60,000,000 in
the Fixed Account for all Policies you own, we will have to give prior approval
to any allocation of net premium or transfer of cash value to the Fixed Account.
Over the lifetime of your Policy, we may restrict you to allocating net premiums
and cash value to a maximum of 17 investment divisions of the Separate Account
(including the State Street Research Money Market Division) plus allocations to
the Fixed Account, if any. Once you reach the limit, you may re-allocate cash
value and net premiums among the 17 selected investment divisions, but you may
not allocate net premiums or cash value to any additional investment divisions.
We reserve the right to eliminate this restriction at any time.
POLICY TERMINATION AND REINSTATEMENT
TERMINATION: We will terminate your Policy without any cash surrender value if:
- - The cash surrender value is less than the monthly deduction;
- - We do not receive a sufficient premium payment within the 61-day grace period
to cover the monthly deduction. We will mail you notice if any grace period
starts.
REINSTATEMENT: Upon your request, we will reinstate your Policy (without
reinstating any amounts in a Policy loan account), subject to certain terms and
conditions that the Policy 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:
- - A written application for reinstatement (the date we approve the application
will be the effective date of the reinstatement).
- - Evidence of insurability that we find satisfactory.
- - An additional premium amount that the Policy prescribes for this purpose.
CHARGES AND DEDUCTIONS
(SIDEBAR)
CAREFULLY REVIEW THE "TABLE OF CHARGES AND EXPENSES" IN THE "SUMMARY" WHICH SETS
FORTH THE CHARGES THAT YOU PAY UNDER YOUR POLICY.
(END SIDEBAR)
The Policy 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 Policies.
The following sets forth additional information about some (but not all) of the
Policy charges.
ANNUAL TARGET PREMIUM: We use the concept of annual target premium to determine
certain limits on sales and administrative charges under the Policy. We define
the annual target premium to be:
- - For Policies issued prior to May 1, 1996 or issued in connection with large
groups, 50% of the estimated annual amount which satisfied the 7-Pay test
under federal tax law based on the issue age of the insured and the initial
specified face amount. (See "Modified Endowment Contracts" under "Federal Tax
Matters.")
- - For all other Policies, 100% of the estimated annual amount that satisfied the
7-Pay test based on the issue age of the insured, the specified face amount of
insurance and standard underwriting class. For such Policies, the annual
target premium amount is increased and decreased proportionately for increases
and decreases in the specified face amount of the Policy.
21
<PAGE>
ADMINISTRATIVE CHARGE: We make this charge primarily to compensate us for
expenses we incur in the administration of the Policy, including our
underwriting and start-up expenses.
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 and currently range from 0 to
3.5%. Our charge approximates the average tax rate we expect to pay on premiums
we receive from all states.
CHARGES INCLUDED IN THE MONTHLY DEDUCTION: We allocate the monthly deduction
(except for the monthly mortality and expense risk charge) among the Fixed
Account and each investment division of the Separate Account in the same
proportion as the Policy's cash value in each such option bears to
the total cash value of the Policy in the Fixed Account and the investment
divisions. We deduct the monthly deductions as of each monthly anniversary,
commencing with the Date of Policy.
- - COST OF TERM INSURANCE: This charge varies monthly based on many factors.
Each month, we determine the charge by multiplying your cost of insurance
rates by the term insurance amount.
- The term insurance amount is the death benefit at the beginning of the
Policy month divided by a discount factor to account for an assumed return;
minus the cash value at the beginning of the Policy month after deduction of
all other applicable charges. Factors that affect the term insurance amount
include the specified face amount, the cash value and the death benefit
option you choose (generally, the term insurance amount will be higher for
Options B and C).
- The term insurance rate is based on our expectations as to future
experience, taking into account the insured's sex (if permitted by law),
age, underwriting class and rate class. The rates will never exceed the
guaranteed rates, which are based on certain 1980 Commissioners Standard
Ordinary Mortality Tables and the insured's sex and age. Our current rates
are lower than the maximums in most cases. We review our rates periodically
and may adjust them, but we will apply the same rates to everyone who has
had their Policy for the same amount of time and who is the same age, sex
and rate class. As a general rule, the cost of insurance rate increases each
year you own your Policy, as the insured's age increases.
- Rate class relates to the level of mortality risk we assume with respect
to an insured. It can be the standard rate class, or one that is higher
(and if the insured is 20 or older, we may divide rate class by smoking
status). The insured's rate class will affect your cost of term insurance.
You can also have more than one rate class in effect, if the insured's
rate class has changed and you change your specified face amount. A better
rate class will lower the cost of term insurance on your entire Policy and
a worse rate class will affect the portion of your cost of term insurance
charge attributable to the specified face amount increase.
- - MORTALITY AND EXPENSE RISK CHARGE: We make this monthly charge primarily to
compensate us for:
- mortality risks that insureds 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. This monthly charge is
allocated proportionately to the cash value in each investment division of
the Separate Account.
22
<PAGE>
VARIATIONS IN CHARGES: We may vary a charge by group, based on anticipated
variations in our costs or risks associated with the group or individuals in the
group that the charge was intended to cover. Our variations in the charges will
be made in accordance with our established and uniformly applied administrative
procedures. We consider a variety of factors in determining charges, including
but not limited to:
- - The nature of the group and its organizational framework
- - The method by which sales will be made to the individuals associated with the
group
- - The facility by which premiums will be paid
- - The group's capabilities with respect to administrative tasks
- - Our anticipated persistency of the Policies
- - The size of the group and the number or years it has been in existence
- - The aggregate amount of premiums we expect to be paid on the Policies owned by
the group or by individuals associated with the group
Any variations in charges will be reasonable and will not be unfairly
discriminatory to the interests of any Policy owner.
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 POLICY.
(END SIDEBAR)
The following is a brief summary of some tax rules that may apply to your
Policy. You should consult with your own tax advisor to find out how taxes can
affect your benefits and rights under your Policy, especially before you make
unscheduled premium payments, change your specified face amount, change your
death benefit option, change coverage provided by riders, take a loan or
withdrawal, or assign or surrender the Policy.
THE POLICY
INSURANCE PROCEEDS
- - Generally excludable from your beneficiary's gross income.
- - The proceeds may be subject to federal estate tax: (i) if paid to the
insured's estate; or (ii) if paid to a different beneficiary if the insured
possessed incidents of ownership at or within three years before death.
- - If you die before the insured, the value of your Policy (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 POLICY IS NOT A MODIFIED ENDOWMENT CONTRACT)
- - You are generally not taxed on your cash value until you withdraw it,
surrender your Policy 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 Policy
years, when a distribution may be subject to tax if there is a gain in your
Policy (which is generally when your cash value exceeds the cumulative
premiums you paid). Finally, if your Policy is part of a collateral assignment
equity split dollar arrangement, there is a risk that increases in cash value
may be taxed annually.
LOANS
- - Loan amounts received will generally not be subject to income tax, unless your
Policy is or becomes a modified endowment contract or terminates.
23
<PAGE>
- - Interest on loans is generally not deductible. For businesses that own a
Policy, at least part of the interest deduction unrelated to the Policy may be
disallowed unless the insured is a 20% owner, officer, director or employee of
the business.
- - If your Policy terminates (upon surrender, cancellation, lapse or the Final
Date) while any Policy 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 Policy
distribution.
MODIFIED ENDOWMENT CONTRACTS
These contracts are life insurance contracts where the premiums paid during the
first 7 years after the Policy is issued, or after a material change in the
Policy, exceed tax law limits referred to as the "7-pay test." Material changes
in the Policy include changes in the level of benefits and certain other changes
to your Policy after the issue date. Reductions in benefits during a 7-pay
period may cause your Policy to become a modified 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 Policy 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 insured's death, including loans,
assignments and pledges, are treated as income first and subject to income tax
(to the extent of any gain in your Policy). 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 Policy to qualify as life insurance, we must comply with
certain diversification standards with respect to the investments underlying the
Policy. 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 Policy owners of gains under their Policies.
CHANGES TO TAX RULES AND INTERPRETATIONS
Changes in applicable tax rules and interpretations can adversely affect the tax
treatment of your Policy. These changes may take effect retroactively. We
reserve the right to amend the Policy 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 Policy benefits and rights.
24
<PAGE>
OUR TAXATION
In general, we don't expect to incur federal, state or local taxes upon the
earnings or realized capital gains attributable to the assets in the Separate
Account relating to the cash surrender value of the Policies. If we do incur
such taxes, 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 Policy owners or would help carry out the purposes of
the Policy. 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 a Fund or another fund or investment permitted by law.
- - Changing the way we assess charges without exceeding the aggregate amount of
the Policy's guaranteed maximum charges.
- - Making any necessary technical changes to the Policy to conform it to the
changes we have made.
OTHER POLICY PROVISIONS
(SIDEBAR)
CAREFULLY REVIEW YOUR POLICY WHICH CONTAINS A FULL DISCUSSION OF ALL ITS
PROVISIONS.
(END SIDEBAR)
You should read your Policy 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 Policy during this period. The period is the later of:
- - 10 days after you receive the Policy (unless state law requires your Policy to
specify a longer specified period); and
- - the date we receive a receipt signed by you.
If you return your Policy, we will send you a complete refund of any premiums
paid (or cash value plus any charges deducted if state law requires) within
seven days.
25
<PAGE>
INCONTESTABILITY
We will not contest:
- - Your Policy after 2 Policy 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 insured commits suicide within the first two Policy 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 insured commits suicide within two
years of such increase.
AGE AND SEX
We will adjust benefits to reflect the correct age and sex of the insured, if
this information isn't correct in the Policy application.
ASSIGNMENT AND CHANGE IN OWNERSHIP
You can assign your Policy as collateral if you notify us in writing. The
assignment or release of the assignment is effective when it is recorded at the
Designated 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 change of ownership or other assignment.
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 Policy.
- - The Securities and Exchange Commission by order permits us to do so for the
protection of Policy 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 3% per year (or
higher if state law requires) from the date of death until the date we pay the
benefit.
DIVIDENDS
The Policy is "nonparticipating," which means it is not eligible for dividends
from us and does not share in any distributions of our surplus.
26
<PAGE>
SALES AND ADMINISTRATION OF THE POLICIES
(SIDEBAR)
WE PERFORM THE SALES AND ADMINISTRATIVE SERVICES FOR THE POLICIES.
(END SIDEBAR)
We serve as the "principal underwriter," as defined in the 1940 Act, for the
Policy and 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.
BONDING
Our directors, officers and employees are bonded in the amount of $50,000,000,
subject to a $5,000,000 deductible.
DISTRIBUTING THE POLICIES
We sell the Policies through licensed life insurance sales representatives:
- - Registered through us.
- - Registered through other broker-dealers, including a wholly owned subsidiary.
COMMISSIONS
We may pay commissions to representatives (or the broker-dealers through which
they are registered) for the sale of our products. The commissions do not result
in a charge against the Policy in addition to the charges already described
elsewhere in this Prospectus. We paid no commissions in 1997. Commissions paid
in 1998 and 1999 totaled $2,463,084 and $2,877,550, respectively. Maximum
commissions are generally:
- - POLICY YEARS 1-10:
10% of premiums paid up to the target premium
3% of premiums paid above the target premium
- - POLICY YEARS 11 AND LATER: 3% of premiums paid.
- - POLICY YEARS 8 AND LATER: We may pay up to .15% of the cash value of a Policy
and administrative expenses in certain circumstances.
VOTING RIGHTS
(SIDEBAR)
YOU CAN GIVE US VOTING INSTRUCTIONS ON SHARES OF EACH PORTFOLIO OF A FUND THAT
ARE ATTRIBUTED TO YOUR POLICY.
(END SIDEBAR)
The Funds have 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 Policy 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 a 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
Policy 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 Policy's cash value in the corresponding investment division; by
- - The net asset value of one share of that Portfolio.
We will count fractional votes.
27
<PAGE>
If we do not receive timely voting instructions from Policy 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.
- - Change in death benefit options.
- - Transfers among investment divisions (including those through Systematic
Investment Strategies, which are confirmed quarterly).
- - Partial withdrawals.
- - Loan amounts you request.
- - Loan repayments and premium payments.
If your premium payments are made through a systematic payment method, we will
not send you any confirmation in addition to the one you receive from your
employer.
We will also send you an annual statement within 30 days after a Policy 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 Policy loans.
- - Automatic loans to pay interest.
- - Information on your modified endowment contract status (if applicable).
We will also send you a Fund's annual and semi-annual reports to shareholders.
ILLUSTRATION OF POLICY BENEFITS
(SIDEBAR)
PERSONALIZED ILLUSTRATIONS CAN HELP YOU UNDERSTAND HOW YOUR POLICY VALUES CAN
VARY.
(END SIDEBAR)
In order to help you understand how your Policy 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 insured under your Policy and such factors as the
specified face amount, death benefit option, 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.
28
<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 the Policy
for approval in every jurisdiction in which the Policy is sold. The Policy may
not be available in every jurisdiction. You should ask your sales representative
whether the Policy is available in your 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 Policies. 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 Policy.
Rocco A. Mariano, Jr., 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.
29
<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>
<S> <C> <C>
PRINCIPAL OCCUPATION & POSITIONS AND OFFICES
NAME BUSINESS ADDRESS WITH METLIFE
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 Chairman of the Board,
Chief Executive Officer President, Chief
Metropolitan Life Insurance Company Executive Officer and
One Madison Ave. Director
New York, NY 10010
Gerald Clark Vice Chairman of the Board and Vice Chairman of the
Chief Investment Officer Board, Chief
Metropolitan Life Insurance Company Investment Officer
One Madison Ave. and Director
New York, NY 10010
Joan Ganz Cooney Chairman, Executive Committee Director
Children's Television Workshop
One Lincoln Plaza
New York, NY 10023
Burton A. Dole, Jr. Retired Chairman, President and Director
Chief Executive Officer
Nellcor Puritan Bennett
2200 Faradlay Ave.
Carlsbad, CA 92008
James R. Houghton Chairman of the Board Emeritus Director
and Director
Corning Incorporated
80 East Market Street, 2nd Floor
Corning, NY 14830
Harry P. Kamen Chairman and Director
Chief Executive Officer (Retired)
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.
524 Main Street
Bolton, MA 01720
Allen E. Murray Retired Chairman of the Board and Director
Chief Executive Officer
Mobil Corporation
375 Park Ave., Suite 2901
New York, NY 10152
</TABLE>
30
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
PRINCIPAL OCCUPATION & POSITIONS AND OFFICES
NAME BUSINESS ADDRESS WITH METLIFE
Stewart Nagler Vice Chairman of the Board and Vice Chairman of the
Chief Financial Officer Board and Chief
Metropolitan Life Insurance Company Financial Officer
One Madison Avenue and Director
New York, NY 10010
John J. Phelan, Jr. Retired Chairman and Director
Chief Executive Officer
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, Director
President and Chief 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 Director
Chief Executive Officer
Pfizer, Inc.
235 East 42nd Street
New York, NY 10017
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
NAME OF OFFICER* POSITION WITH METROPOLITAN LIFE
Robert H. Benmosche Chairman of the Board, President and
Chief Executive Officer
Gerald Clark Vice Chairman of the Board, Chief Investment Officer and
Director
Stewart G. Nagler Vice Chairman of the Board, Chief Financial Officer and
Director
Gary A. Beller Senior Executive Vice-President and General Counsel
James H. Benson President, Individual Business; Chairman, Chief Executive
Officer and President, New England Life Insurance Company
C. Robert Henrikson President, Institutional Business
William J. Toppeta President, Client Services and Chief Administrative
Officer
Richard A. Liddy Senior Executive Vice-President
Catherine H. Rein Senior Executive Vice-President; President and Chief
Executive Officer, Metropolitan Property and Casualty
Insurance Company
John H. Tweedie Senior Executive Vice-President
Lisa M. Weber Executive Vice-President
Judy E. Weiss Executive Vice-President and Chief Actuary
</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. Robert H. Benmosche has been an officer of Metropolitan Life
since September, 1995; prior thereto, he was an Executive Vice-President of
Paine Webber. 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. 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, Scudder Global Equity, Harris Oakmark Large Cap Value, Neuberger
Berman Partners Mid Cap Value, T. Rowe Price Large Cap Growth, Lehman Brothers
Aggregate Bond Index, Morgan Stanley EAFE Index, Russell 2000 Index, Janus
Large Cap Growth, Invesco VIF High Yield, Invesco VIF Industrial Income,
Invesco VIF Realty and Templeton International Stock Portfolios of
Metropolitan Life Separate Account UL (the "Separate Account") as of December
31, 1999, and the related statements (i) of operations for the year ended
December 31, 1999 and of changes in net assets for the years ended December
31, 1999 and 1998 of the State Street Research Growth, State Street Research
Income, State Street Research Money Market, State Street Research Diversified,
State Street Research Aggressive Growth, MetLife Stock Index, Santander
International Stock, Loomis Sayles High Yield Bond, Janus Mid Cap, T. Rowe
Price Small Cap Growth, Scudder Global Equity, Harris Oakmark Large Cap Value,
Neuberger Berman Partners Mid Cap Value, T. Rowe Price Large Cap Growth,
Lehman Brothers Aggregate Bond Index, Morgan Stanley EAFE Index and Russell
2000 Index Portfolios and (ii) of operations and of changes in net assets for
the period May 3, 1999 (commencement of operations) to December 31, 1999 of
Janus Large Cap Growth, Invesco VIF High Yield, Invesco VIF Industrial Income,
Invesco VIF Realty and Templeton International Stock Portfolios. 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, 1999
by correspondence with the custodian and the depositor of the Separate
Account. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the 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, Scudder Global Equity, Harris Oakmark
Large Cap Value, Neuberger Berman Partners Mid Cap Value, T. Rowe Price Large
Cap Growth, Lehman Brothers Aggregate Bond Index, Morgan Stanley EAFE Index,
Russell 2000 Index, Janus Large Cap Growth, Invesco VIF High Yield, Invesco
VIF Industrial Income, Invesco VIF Realty and Templeton International Stock
Portfolios of Metropolitan Life Separate Account UL as of December 31, 1999
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.
We did not audit the financial statements for the Templeton Variable Products
Series Fund, the Janus Aspen Series Fund and the Investco Investment Funds,
Inc., of which the investment information for these funds is summarized in
Note 5 to the financial statements. The financial statements for these funds
were audited by other auditors.
DELOITTE & TOUCHE LLP
Tampa, Florida
March 27, 2000
1
<PAGE>
Metropolitan Life Separate Account UL
STATEMENT OF ASSETS AND LIABILITIES
At December 31, 1999
<TABLE>
<CAPTION>
State Street State Street
State Street State Street Research State Street Research
Research Research Money Research Aggressive
Growth Income Market Diversified Growth
Portfolio Portfolio Portfolio Portfolio Portfolio
------------ ------------ ------------ ------------ ------------
ASSETS:
<S> <C> <C> <C> <C> <C>
Investments at Value
(Note 2A):
State Street Research
Growth Portfolio
(10,745,186 shares;
cost $333,312,756)..... $420,566,549 -- -- -- --
State Street Research
Income Portfolio
(5,620,168 shares; cost
$70,920,972)........... -- $65,643,563 -- -- --
State Street Research
Money Market Portfolio
(3,197,886 shares; cost
$34,029,917)........... -- -- $33,075,729 -- --
State Street Research
Diversified Portfolio
(13,568,374 shares;
cost $225,692,070)..... -- -- -- $247,894,193 --
State Street Research
Aggressive Growth
Portfolio (5,593,963
shares; cost
$149,637,856).......... -- -- -- -- $215,087,902
MetLife Stock Index
Portfolio (6,441,446
shares;
cost $196,867,091)..... -- -- -- -- --
Santander International
Stock Portfolio
(3,175,743 shares ;
cost $41,292,139)...... -- -- -- -- --
Loomis Sayles High Yield
Bond Portfolio (541,135
shares; cost
$5,032,558)............ -- -- -- -- --
Janus Mid Cap Portfolio
(3,102,796 shares; cost
$64,508,142)........... -- -- -- -- --
T. Rowe Price Small Cap
Growth Portfolio
(2,043,071 shares; cost
$24,804,658)........... -- -- -- -- --
Scudder Global Equity
Portfolio (970,303
shares;
cost $11,980,830)...... -- -- -- -- --
Harris Oakmark Large Cap
Value Portfolio (33,250
shares; cost $310,760). -- -- -- -- --
Neuberger Berman
Partners Mid Cap Value
Portfolio (49,457
shares; cost $575,293). -- -- -- -- --
T. Rowe Price Large Cap
Growth Portfolio
(96,515 shares; cost
$1,121,477)............ -- -- -- -- --
Lehman Brothers
Aggregate Bond Index
Portfolio (56,961
shares; cost $565,809). -- -- -- -- --
Morgan Stanley EAFE
Index Portfolio (93,368
shares;
cost $1,085,242)....... -- -- -- -- --
Russell 2000 Index
Portfolio (36,094
shares; cost $410,863). -- -- -- -- --
Janus Large Cap Growth
Portfolio (2,864
shares;
cost $85,665).......... -- -- -- -- --
Invesco VIF High Yield
Portfolio (280 shares;
cost $3,233)........... -- -- -- -- --
Invesco VIF Industrial
Income Portfolio (279
shares;
cost $5,827)).......... -- -- -- -- --
Invesco VIF Realty
Portfolio (200 shares;
cost $1,500)........... -- -- -- -- --
Templeton International
Stock (307 shares; cost
$6,351)................ -- -- -- -- --
------------ ----------- ----------- ------------ ------------
Total Investments....... 420,566,549 65,643,563 33,075,729 247,894,193 215,087,902
Cash and Accounts
Receivable............. 20 0 0 0 0
------------ ----------- ----------- ------------ ------------
Total Assets............ 420,566,569 65,643,563 33,075,729 247,894,193 215,087,902
LIABILITIES............. 898,400 12,123 2,247 191,488 417,916
------------ ----------- ----------- ------------ ------------
NET ASSETS.............. $419,668,169 $65,631,440 $33,073,482 $247,702,705 $214,669,986
============ =========== =========== ============ ============
</TABLE>
See Notes to Financial Statements.
2
<PAGE>
<TABLE>
<CAPTION>
Loomis T. Rowe Harris Neuberger
MetLife Santander Sayles Price Scudder Oakmark Berman
Stock International High Yield Janus Small Cap Global Large Cap Partners
Index Stock Bond Mid Cap Growth Equity Value Mid Cap Value
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
- ------------ ------------- ---------- ------------ ----------- ----------- --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
-- -- -- -- -- -- -- --
-- -- -- -- -- -- -- --
-- -- -- -- -- -- -- --
-- -- -- -- -- -- -- --
-- -- -- -- -- -- -- --
$261,458,295 -- -- -- -- -- -- --
-- $44,047,550 -- -- -- -- -- --
-- -- $4,918,907 -- -- -- -- --
-- -- -- $113,376,167 -- -- -- --
-- -- -- -- $32,137,518 -- -- --
-- -- -- -- -- $14,467,210 -- --
-- -- -- -- -- -- $296,920 --
-- -- -- -- -- -- -- $592,005
-- -- -- -- -- -- -- --
-- -- -- -- -- -- -- --
-- -- -- -- -- -- -- --
-- -- -- -- -- -- -- --
-- -- -- -- -- -- -- --
-- -- -- -- -- -- -- --
-- -- -- -- -- -- -- --
-- -- -- -- -- -- -- --
-- -- -- -- -- -- -- --
- ------------ ----------- ---------- ------------ ----------- ----------- -------- --------
261,458,295 44,047,550 4,918,907 113,376,167 32,137,518 14,467,210 296,920 592,005
84,625 0 35,301 0 11,803 30,687 42,578 285
- ------------ ----------- ---------- ------------ ----------- ----------- -------- --------
261,542,920 44,047,550 4,954,208 113,376,167 32,149,321 14,497,897 339,498 592,290
248,062 122,989 0 297,416 0 0 0 0
- ------------ ----------- ---------- ------------ ----------- ----------- -------- --------
$261,294,858 $43,924,561 $4,954,208 $113,078,751 $32,149,321 $14,497,897 $339,498 $592,290
============ =========== ========== ============ =========== =========== ======== ========
</TABLE>
3
<PAGE>
Metropolitan Life Separate Account UL
STATEMENT OF ASSETS AND LIABILITIES (Continued)
At December 31, 1999
<TABLE>
<CAPTION>
T. Rowe Lehman Morgan
Price Brothers Stanley Russell
Large Cap Aggregate EAFE 2000
Growth Bond Index Index Index
Portfolio Portfolio Portfolio Portfolio
ASSETS: ----------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Investments at Value (Note 2A):
State Street Research Growth
Portfolio (10,745,186 shares; cost
$333,312,756)..................... -- -- -- --
State Street Research Income
Portfolio (5,620,168 shares; cost
$70,920,972)...................... -- -- -- --
State Street Research Money Market
Portfolio (3,197,886 shares; cost
$34,029,917)...................... -- -- -- --
State Street Research Diversified
Portfolio (13,568,374 shares; cost
$225,692,070)..................... -- -- -- --
State Street Research Aggressive
Growth Portfolio (5,593,963
shares; cost $149,637,856)........ -- -- -- --
MetLife Stock Index Portfolio
(6,441,446 shares;
cost $196,867,091)................ -- -- -- --
Santander International Stock
Portfolio (3,175,743 shares ; cost
$41,292,139)...................... -- -- -- --
Loomis Sayles High Yield Bond
Portfolio (541,135 shares; cost
$5,032,558)....................... -- -- -- --
Janus Mid Cap Portfolio (3,102,796
shares;
cost $64,508,142)................. -- -- -- --
T. Rowe Price Small Cap Growth
Portfolio (2,043,071 shares; cost
$24,804,658)...................... -- -- -- --
Scudder Global Equity Portfolio
(970,303 shares;
cost $11,980,830)................. -- -- -- --
Harris Oakmark Large Cap Value
Portfolio (33,250 shares; cost
$310,760)......................... -- -- -- --
Neuberger Berman Partners Mid Cap
Value Portfolio (49,457 shares;
cost $575,293).................... -- -- -- --
T. Rowe Price Large Cap Growth
Portfolio (96,515 shares; cost
$1,121,477)....................... $1,294,264 -- -- --
Lehman Brothers Aggregate Bond
Index Portfolio (56,961 shares;
cost $565,809).................... -- $538,275 -- --
Morgan Stanley EAFE Index Portfolio
(93,368 shares;
cost $1,085,242).................. -- -- $1,245,531 --
Russell 2000 Index Portfolio
(36,094 shares; cost $410,863).... -- -- -- $451,900
Janus Large Cap Growth Portfolio
(2,864 shares;
cost $85,665)..................... -- -- -- --
Invesco VIF High Yield Portfolio
(280 shares; cost $3,233)......... -- -- -- --
Invesco VIF Industrial Income
Portfolio (279 shares;
cost $5,827))..................... -- -- -- --
Invesco VIF Realty Portfolio (200
shares; cost $1,500).............. -- -- -- --
Templeton International Stock (307
shares; cost $6,351).............. -- -- -- --
---------- -------- ---------- --------
Total Investments................. 1,294,264 538,275 1,245,531 451,900
Cash and Accounts Receivable....... 0 22,766 0 88
---------- -------- ---------- --------
Total Assets...................... 1,294,264 561,041 1,245,531 451,988
LIABILITIES........................ 40,869 0 23,869 0
---------- -------- ---------- --------
NET ASSETS......................... $1,253,395 $561,041 $1,221,662 $451,988
========== ======== ========== ========
</TABLE>
See Notes to Financial Statements.
4
<PAGE>
<TABLE>
<CAPTION>
Janus Invesco Invesco VIF Invesco Templeton
Large Cap VIF Industrial VIF International
Growth High Yield Income Realty Stock
Portfolio Portfolio Portfolio Portfolio Portfolio Total
- --------- ---------- ----------- --------- ------------- --------------
<S> <C> <C> <C> <C> <C>
-- -- -- -- -- $ 420,566,549
-- -- -- -- -- 65,643,563
-- -- -- -- -- 33,075,729
-- -- -- -- -- 247,894,193
-- -- -- -- -- 215,087,902
-- -- -- -- -- 261,458,295
-- -- -- -- -- 44,047,550
-- -- -- -- -- 4,918,907
-- -- -- -- -- 113,376,167
-- -- -- -- -- 32,137,518
-- -- -- -- -- 14,467,210
-- -- -- -- -- 296,920
-- -- -- -- -- 592,005
-- -- -- -- -- 1,294,264
-- -- -- -- -- 538,275
-- -- -- -- -- 1,245,531
-- -- -- -- -- 451,900
$96,373 -- -- -- -- 96,373
-- $3,227 -- -- -- 3,227
-- -- $5,872 -- -- 5,872
-- -- -- $1,584 -- 1,584
-- -- -- -- $6,832 6,832
------- ------ ------ ------ ------ --------------
96,373 3,227 5,872 1,584 6,832 1,457,206,366
0 0 0 0 0 228,153
------- ------ ------ ------ ------ --------------
96,373 3,227 5,872 1,584 6,832 1,457,434,519
0 0 0 0 0 2,255,379
------- ------ ------ ------ ------ --------------
$96,373 $3,227 $5,872 $1,584 $6,832 $1,455,179,140
======= ====== ====== ====== ====== ==============
</TABLE>
5
<PAGE>
Metropolitan Life Separate Account UL
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the year ended December 31, 1999
------------------------------------------------------------------
State Street State Street
State Street State Street Research State Street Research
Research Research Money Research Aggressive
Growth Income Market Diversified Growth
Portfolio Portfolio Portfolio Portfolio Portfolio
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Income:
Dividends (Note 3)..... $44,038,080 $ 4,181,436 $1,538,117 $20,799,436 $ 4,466,938
Expenses:
Mortality and expense
charges (Note 4)...... 3,209,889 499,462 241,265 1,973,981 1,429,076
----------- ----------- ---------- ----------- -----------
Net investment income
(loss)................. 40,828,191 3,681,974 1,296,852 18,825,455 3,037,862
----------- ----------- ---------- ----------- -----------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS: (Note
2B)
Net realized gain (loss)
from security
transactions........... 3,593,964 15,187 245,673 743,624 1,280,373
Change in unrealized
appreciation
(depreciation) of
investments............ 16,515,105 (5,496,396) (275,023) (2,237,161) 47,914,985
----------- ----------- ---------- ----------- -----------
Net realized and
unrealized gain (loss)
on investments......... 20,109,069 (5,481,209) (29,350) (1,493,537) 49,195,358
----------- ----------- ---------- ----------- -----------
NET INCREASE (DECREASE)
IN NET ASSETS FROM
OPERATIONS............. $60,937,260 $(1,799,235) $1,267,502 $17,331,918 $52,233,220
=========== =========== ========== =========== ===========
</TABLE>
See Notes to Financial Statements.
6
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
Loomis T. Rowe Harris Neuberger
MetLife Santander Sayles Price Scudder Oakmark Berman
Stock International High Yield Janus Small Cap Global Large Cap Partners
Index Stock Bond Mid Cap Growth Equity Value Mid Cap Value
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
- ----------- ------------- ---------- ----------- ---------- ---------- --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
$12,076,347 $ 6,737,411 $ 384,074 $ 5,416,355 $ 0 $ 486,049 $ 2,973 $13,508
1,722,924 334,318 32,947 432,040 159,812 86,933 615 627
- ----------- ----------- --------- ----------- ---------- ---------- -------- -------
10,353,423 6,403,093 351,127 4,984,315 (159,812) 399,116 2,358 12,881
- ----------- ----------- --------- ----------- ---------- ---------- -------- -------
3,899,836 528,185 (159,077) 1,140,427 41,394 272,213 (5,489) 679
24,029,258 (1,137,521) 384,776 44,344,823 6,830,580 1,937,990 (13,841) 16,713
- ----------- ----------- --------- ----------- ---------- ---------- -------- -------
27,929,094 (609,336) 225,699 45,485,250 6,871,974 2,210,203 (19,330) 17,392
- ----------- ----------- --------- ----------- ---------- ---------- -------- -------
$38,282,517 $ 5,793,757 $ 576,826 $50,469,565 $6,712,162 $2,609,319 $(16,972) $30,273
=========== =========== ========= =========== ========== ========== ======== =======
</TABLE>
7
<PAGE>
Metropolitan Life Separate Account UL
STATEMENTS OF OPERATIONS (Continued)
<TABLE>
<CAPTION>
For the year ended December 31, 1999
----------------------------------------
T. Rowe Lehman Morgan
Price Brothers Stanley Russell
Large Cap Aggregate EAFE 2000
Growth Bond Index Index Index
Portfolio Portfolio Portfolio Portfolio
--------- ---------- --------- ---------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Income:
Dividends (Note 3).................. $ 5,264 $ 24,999 $ 15,956 $13,398
Expenses:
Mortality and expense charges (Note
4)................................. 4,482 2,156 4,919 1,131
-------- -------- -------- -------
Net investment income (loss)......... 782 22,843 11,037 12,267
-------- -------- -------- -------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS: (Note 2B)
Net realized gain (loss) from
security transactions............... 2,027 (1,189) 92,428 10,610
Change in unrealized appreciation
(depreciation) of investments....... 172,687 (27,533) 160,288 41,036
-------- -------- -------- -------
Net realized and unrealized gain
(loss) on investments............... 174,714 (28,722) 252,716 51,646
-------- -------- -------- -------
NET INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS..................... $175,496 $ (5,879) $263,753 $63,913
======== ======== ======== =======
</TABLE>
See Notes to Financial Statements.
8
<PAGE>
<TABLE>
<CAPTION>
For the period May 3, 1999 to December 31, 1999
- -------------------------------------------------------------
Janus Invesco Invesco VIF Invesco Templeton
Large Cap VIF Industrial VIF International
Growth High Yield Income Realty Stock
Portfolio Portfolio Portfolio Portfolio Portfolio Total
- ----------- ------------ ----------- --------- ------------- ------------
<S> <C> <C> <C> <C> <C>
$ 0 $ 0 $ 0 $ 0 $ 0 $100,200,341
61 0 0 1 5 10,136,644
------- --- --- --- ---- ------------
(61) 0 0 (1) (5) 90,063,697
------- --- --- --- ---- ------------
79 0 0 0 32 11,700,976
10,708 (6) 45 84 481 133,172,078
------- --- --- --- ---- ------------
10,787 (6) 45 84 513 144,873,054
------- --- --- --- ---- ------------
$10,726 $(6) $45 $83 $508 $234,936,751
======= === === === ==== ============
</TABLE>
9
<PAGE>
Metropolitan Life Separate Account UL
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
State Street Research State Street Research State Street Research
Growth Portfolio Income Portfolio Money Market Portfolio
-------------------------- -------------------------- --------------------------
For the Year For the Year For the Year For the Year For the Year For the Year
Ended Ended Ended Ended Ended Ended
December 31, December 31, December 31, December 31, December 31, December 31,
1999 1998 1999 1998 1999 1998
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN
NET ASSETS:
From operations:
Net investment income
(loss)................ $ 40,828,191 $ 27,785,410 $ 3,681,974 $ 3,877,871 $ 1,296,852 $ 1,022,138
Net realized gain
(loss) from security
transactions.......... 3,593,964 1,828,922 15,187 239,248 245,673 139,583
Change in unrealized
appreciation
(depreciation) of
investments........... 16,515,105 38,462,367 (5,496,396) (12,424) (275,023) (384,125)
------------ ------------ ----------- ----------- ------------ ------------
Net increase (decrease)
in net assets from
operations............ 60,937,260 68,076,699 (1,799,235) 4,104,695 1,267,502 777,596
------------ ------------ ----------- ----------- ------------ ------------
From capital
transactions:
Net premiums........... 76,267,713 68,697,236 15,797,917 13,501,414 35,768,800 28,800,532
Redemptions............ (15,563,840) (9,651,413) (1,719,595) (1,455,088) (296,905) (292,311)
Net portfolio
transfers............. 3,590,588 462,907 2,922,342 2,032,607 (23,898,442) (12,984,969)
Other net transfers.... (38,125,701) (33,909,522) (6,009,960) (5,444,551) (2,027,635) (2,036,921)
------------ ------------ ----------- ----------- ------------ ------------
Net increase in net
assets from capital
transactions.......... 26,168,760 25,599,208 10,990,704 8,634,382 9,545,818 13,486,331
------------ ------------ ----------- ----------- ------------ ------------
NET CHANGE IN NET
ASSETS................. 87,106,020 93,675,907 9,191,469 12,739,077 10,813,320 14,263,927
NET ASSETS--BEGINNING OF
YEAR................... 332,562,149 238,886,242 56,439,971 43,700,894 22,260,162 7,996,235
------------ ------------ ----------- ----------- ------------ ------------
NET ASSETS--END OF YEAR. $419,668,169 $332,562,149 $65,631,440 $56,439,971 $ 33,073,482 $ 22,260,162
============ ============ =========== =========== ============ ============
</TABLE>
See Notes to Financial Statements.
10
<PAGE>
<TABLE>
<CAPTION>
State Street Research
State Street Research Aggressive Growth MetLife Santander
Diversified Portfolio Portfolio Stock Index Portfolio International Stock Portfolio
- -------------------------- -------------------------- -------------------------- -------------------------------
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,
1999 1998 1999 1998 1999 1998 1999 1998
- ------------ ------------ ------------ ------------ ------------ ------------ -------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 18,825,455 $ 17,838,146 $ 3,037,862 $ 7,473,609 $ 10,353,423 $ 5,466,190 $ 6,403,093 $ 119,967
743,624 522,086 1,280,373 390,678 3,899,836 2,060,324 528,185 251,518
(2,237,161) 12,721,568 47,914,985 9,316,026 24,029,258 21,573,004 (1,137,521) 5,740,557
- ------------ ------------ ------------ ------------ ------------ ------------ -------------- --------------
17,331,918 31,081,800 52,233,220 17,180,313 38,282,517 29,099,518 5,793,757 6,112,042
- ------------ ------------ ------------ ------------ ------------ ------------ -------------- --------------
54,466,186 48,746,380 41,977,555 48,080,744 80,432,444 59,343,787 8,765,614 10,224,172
(8,542,813) (5,712,146) (6,935,090) (4,373,459) (5,037,136) (2,361,734) (1,805,287) (1,153,624)
2,267,794 2,809,643 (8,586,687) (6,687,894) 20,459,060 9,729,932 (1,507,125) (2,377,311)
(26,640,820) (23,504,994) (18,101,172) (18,773,580) (31,708,703) (23,041,439) (3,575,131) (3,678,501)
- ------------ ------------ ------------ ------------ ------------ ------------ -------------- --------------
21,550,347 22,338,883 8,354,606 18,245,811 64,145,665 43,670,546 1,878,071 3,014,736
- ------------ ------------ ------------ ------------ ------------ ------------ -------------- --------------
38,882,265 53,420,683 60,587,826 35,426,124 102,428,182 72,770,064 7,671,828 9,126,778
208,820,440 155,399,757 154,082,160 118,656,036 158,866,676 86,096,612 36,252,733 27,125,955
- ------------ ------------ ------------ ------------ ------------ ------------ -------------- --------------
$247,702,705 $208,820,440 $214,669,986 $154,082,160 $261,294,858 $158,866,676 $ 43,924,561 $ 36,252,733
============ ============ ============ ============ ============ ============ ============== ==============
</TABLE>
11
<PAGE>
Metropolitan Life Separate Account UL
STATEMENTS OF CHANGES IN NET ASSETS (Continued)
<TABLE>
<CAPTION>
T. Rowe Price
Loomis Sayles Janus Small Cap Growth
High Yield Bond Portfolio Mid Cap Portfolio Portfolio
------------------------- -------------------------- --------------------------
For the Year For the Year For the Year For the Year For the Year For the Year
Ended Ended Ended Ended Ended Ended
December 31, December 31, December 31, December 31, December 31, December 31,
1999 1998 1999 1998 1999 1998
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN
NET ASSETS:
From operations:
Net investment income
(loss)................ $ 351,127 $ 241,444 $ 4,984,315 $ 9,561 $ (159,812) $ (71,325)
Net realized gain
(loss) from security
transactions.......... (159,077) (15,746) 1,140,427 178,428 41,394 (14,908)
Change in unrealized
appreciation
(depreciation) of
investments........... 384,776 (428,334) 44,344,823 4,299,801 6,830,580 455,213
---------- ---------- ------------ ----------- ----------- -----------
Net increase (decrease)
in net assets from
operations............ 576,826 (202,636) 50,469,565 4,487,790 6,712,162 368,980
---------- ---------- ------------ ----------- ----------- -----------
From capital
transactions:
Net premiums........... 1,766,270 1,559,975 31,140,404 13,796,446 10,707,741 8,413,079
Redemptions............ (387,694) (29,635) (1,283,943) (179,560) (556,621) (87,656)
Net portfolio
transfers............. 1,046,383 180,422 24,344,237 4,280,509 5,288,531 3,021,876
Other net transfers.... (587,488) (451,340) (12,718,059) (5,121,876) (3,307,953) (2,968,930)
---------- ---------- ------------ ----------- ----------- -----------
Net increase in net
assets from capital
transactions.......... 1,837,471 1,259,422 41,482,639 12,775,519 12,131,698 8,378,369
---------- ---------- ------------ ----------- ----------- -----------
NET CHANGE IN NET
ASSETS................. 2,414,297 1,056,786 91,952,204 17,263,309 18,843,860 8,747,349
NET ASSETS--BEGINNING OF
YEAR................... 2,539,911 1,483,125 21,126,547 3,863,238 13,305,461 4,558,112
---------- ---------- ------------ ----------- ----------- -----------
NET ASSETS--END OF YEAR. $4,954,208 $2,539,911 $113,078,751 $21,126,547 $32,149,321 $13,305,461
========== ========== ============ =========== =========== ===========
</TABLE>
See Notes to Financial Statements.
12
<PAGE>
<TABLE>
<CAPTION>
Scudder Harris Oakmark Neuberger Berman Partners T. Rowe Price
Global Equity Portfolio Large Cap Value Portfolio Mid Cap Value Portfolio Large Cap Growth Portfolio
---------------------------- --------------------------- --------------------------- ---------------------------
For the Period For the Period For the Period
For the Year For the Year For the Year November 9, For the Year November 9, For the Year November 9,
Ended Ended Ended 1998 to Ended 1998 to Ended 1998 to
December 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31,
1999 1998 1999 1998 1999 1998 1999 1998
------------ ------------ ------------ -------------- ------------ -------------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 399,116 $ 82,316 $ 2,358 $ 0 $ 12,881 $ 0 $ 782 $ 0
272,213 35,936 (5,489) 0 679 0 2,027 0
1,937,990 556,946 (13,841) 0 16,713 0 172,687 0
----------- ----------- -------- --- -------- --- ---------- ---
2,609,319 675,198 (16,972) 0 30,273 0 175,496 0
----------- ----------- -------- --- -------- --- ---------- ---
4,574,226 3,660,518 125,384 0 162,181 0 141,433 0
(541,665) (44,451) (8,780) 0 0 0 0 0
985,125 2,251,711 224,137 0 433,203 0 1,037,195 0
(1,431,966) (1,263,459) 15,729 0 (33,367) 0 (100,729) 0
----------- ----------- -------- --- -------- --- ---------- ---
3,585,720 4,604,319 356,470 0 562,017 0 1,077,899 0
----------- ----------- -------- --- -------- --- ---------- ---
6,195,039 5,279,517 339,498 0 592,290 0 1,253,395 0
8,302,858 3,023,341 0 0 0 0 0 0
----------- ----------- -------- --- -------- --- ---------- ---
$14,497,897 $ 8,302,858 $339,498 $ 0 $592,290 $ 0 $1,253,395 $ 0
=========== =========== ======== === ======== === ========== ===
</TABLE>
13
<PAGE>
Metropolitan Life Separate Account UL
STATEMENTS OF CHANGES IN NET ASSETS (Continued)
<TABLE>
<CAPTION>
Lehman Brothers Aggregate Morgan Stanley Russell 2000
Bond Index Portfolio EAFE Index Portfolio Index Portfolio
--------------------------- --------------------------- ---------------------------
For the Period For the Period For the Period
For the Year November 9, For the Year November 9, For the Year November 9,
Ended 1998 to Ended 1998 to Ended 1998 to
December 31, December 31, December 31, December 31, December 31, December 31,
1999 1998 1999 1998 1999 1998
------------ -------------- ------------ -------------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN
NET ASSETS:
From operations:
Net investment income
(loss)................ $ 22,843 $ 0 $ 11,037 $ 0 $ 12,267 $ 0
Net realized gain
(loss) from security
transactions.......... (1,189) 0 92,428 0 10,610 0
Change in unrealized
appreciation
(depreciation) of
investments........... (27,533) 0 160,288 0 41,036 0
-------- --- ---------- --- -------- ---
Net increase (decrease)
in net assets from
operations............ (5,879) 0 263,753 0 63,913 0
-------- --- ---------- --- -------- ---
From capital
transactions:
Net premiums........... 93,732 0 139,276 0 214,532 0
Redemptions............ (1,012) 0 (1,812) 0 (1,472) 0
Net portfolio
transfers............. 484,526 0 862,477 0 219,845 0
Other net transfers.... (10,326) 0 (42,032) 0 (44,830) 0
-------- --- ---------- --- -------- ---
Net increase in net
assets from capital
transactions.......... 566,920 0 957,909 0 388,075 0
-------- --- ---------- --- -------- ---
NET CHANGE IN NET
ASSETS................. 561,041 0 1,221,662 0 451,988 0
NET ASSETS--BEGINNING OF
YEAR................... 0 0 0 0 0 0
-------- --- ---------- --- -------- ---
NET ASSETS--END OF YEAR. $561,041 $ 0 $1,221,662 $ 0 $451,988 $ 0
======== === ========== === ======== ===
</TABLE>
See Notes to Financial Statements.
14
<PAGE>
<TABLE>
<CAPTION>
Invesco VIF Invesco VIF Templeton
Janus Large Cap High Yield Industrial Income Invesco VIF International
Growth Portfolio Portfolio Portfolio Realty Portfolio Stock Portfolio TOTAL
- ---------------- -------------- ----------------- ---------------- --------------- ------------------------------
For the Period For the Period For the Period For the Period For the Period For the Year For the Year
May 3, 1999 to May 3, 1999 to May 3, 1999 to May 3, 1999 to May 3, 1999 to Ended Ended
December 31, December 31, December 31, December 31, December 31, December 31, December 31,
1999 1999 1999 1999 1999 1999 1998
- ---------------- -------------- ----------------- ---------------- --------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
$ (61) $ 0 $ 0 $ (1) $ (5) $ 90,063,697 $ 63,845,327
79 0 0 0 32 11,700,976 5,616,069
10,708 (6) 45 84 481 133,172,078 92,300,599
------- ------ ------ ------ ------ -------------- --------------
10,726 (6) 45 83 508 234,936,751 161,761,995
------- ------ ------ ------ ------ -------------- --------------
99 0 0 0 1,166 362,542,673 304,824,283
0 0 0 0 0 (42,683,665) (25,341,077)
86,070 3,236 5,802 1,524 5,208 30,275,029 2,719,433
(522) (3) 25 (23) (50) (144,450,716) (120,195,113)
------- ------ ------ ------ ------ -------------- --------------
85,647 3,233 5,827 1,501 6,324 205,683,321 162,007,526
------- ------ ------ ------ ------ -------------- --------------
96,373 3,227 5,872 1,584 6,832 440,620,072 323,769,521
0 0 0 0 0 1,014,559,068 690,789,547
------- ------ ------ ------ ------ -------------- --------------
$96,373 $3,227 $5,872 $1,584 $6,832 $1,455,179,140 $1,014,559,068
======= ====== ====== ====== ====== ============== ==============
</TABLE>
15
<PAGE>
Metropolitan Life Separate Account UL
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
1.BUSINESS
Metropolitan Life Separate Account UL (the "Separate Account") is a multi-
division unit investment trust registered under the Investment Company Act of
1940. The five divisions are ULII, IVUL, GVUL, UL2001 and VAI. The Separate
Account presently consists of twenty-two investment portfolios used to support
variable universal life insurance policies. The assets in each portfolio are
invested in shares of the corresponding portfolio of the Metropolitan Series
Fund, Inc., the Janus Aspen Series Fund, the Invesco Variable Investment
Funds, Inc. and the Templeton Variable Products Series Fund (the "Funds").
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 May 3, 1999, operations commenced for
the five new investment portfolios added to the Separate Account on that date:
the Janus Large Cap Growth Portfolio, the Invesco VIF High Yield Portfolio,
the Invesco VIF Industrial Income Portfolio, the Invesco VIF Realty Portfolio
and the Templeton International Stock Portfolio. On November 9, 1998,
operations commenced for the six new investment portfolios added to the
Separate Account on that date: the Harris Oakmark Large Cap Value Portfolio,
the Neuberger Berman Partners Mid Cap Value Portfolio, the T. Rowe Price Large
Cap Growth Portfolio, the Lehman Brothers Aggregate Bond Index Portfolio, the
Morgan Stanley EAFE Index Portfolio and the Russell 2000 Index Portfolio.
2.SIGNIFICANT ACCOUNTING POLICIES
A.Valuation of Investments
Investments in shares of the Funds are valued at the reported net asset
values of the respective portfolios. A summary of investments of the
twenty-two designated portfolios of the Funds in which the five
investment divisions of the Separate Account invest as of December 31,
1999 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 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 reserve 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 of 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
certain 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 on certain policies to recover a
portion of the Federal income tax adjustment attributable to policy
acquisition expenses.
16
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(Continued)
3.DIVIDENDS
On May 4, 1999 and December 16, 1999, the Metropolitan Series Fund, Inc.
declared dividends for all shareholders of record on May 7, 1999 and December
21, 1999 respectively. The amount of dividends received by the Separate
Account was $100,200,341. The dividends were paid to Metropolitan Life on May
11, 1999 and December 22, 1999, respectively, and were immediately reinvested
in additional shares of the portfolios in which the investment divisions
invest. As a result of this reinvestment, the number of shares of the
Metropolitan Series Fund, Inc. held by each of the sixteen investment
portfolios increased by the following: State Street Research Growth Portfolio,
1,168,696 shares; State Street Research Income Portfolio, 357,372 shares;
State Street Research Money Market Portfolio, 148,919 shares; State Street
Research Diversified Portfolio, 1,161,405 shares; State Street Research
Aggressive Growth Portfolio, 126,713 shares; MetLife Stock Index Portfolio,
307,335 shares; Santander International Stock Portfolio, 495,499 shares;
Loomis Sayles High Yield Bond Portfolio, 42,345 shares; Janus Mid Cap
Portfolio, 164,544 shares; Scudder Global Equity Portfolio, 34,867 shares;
Harris Oakmark Large Cap Value Portfolio, 343 shares; Neuberger Berman
Partners Mid Cap Value Portfolio, 1,185 shares; T. Rowe Price Large Cap Growth
Portfolio, 410 shares; Lehman Brothers Aggregate Bond Index Portfolio, 2,648
shares; Morgan Stanley EAFE Index Portfolio, 1,260 shares and Russell 2000
Index Portfolio, 1,133 shares.
No dividends were received by the T. Rowe Price Small Cap Growth Portfolio,
the Janus Large Cap Growth Portfolio, the Invesco VIF High Yield Portfolio,
the Invesco VIF Industrial Income Portfolio, the Invesco VIF Realty Portfolio
or the Templeton International Stock Portfolio.
4.EXPENSES
For 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 be higher than an effective
annual rate of .90% of the average daily value of the net assets of the
monthly anniversary value of the net assets in the Separate Account
attributable to such policies.
17
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(Continued)
5.SUMMARY OF INVESTMENTS AS OF DECEMBER 31, 1999
Investment information, summarized by investment type and industry sector,
for each portfolio in which the Separate Account invests is presented below:
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
-------------- ------------ ------------ --------------
Value Value Value Value
(Note 2A) (Note 2A) (Note 2A) (Note 2A)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
COMMON STOCK
Banking................. $ 82,527,431 (2.3%) $ 37,290,000 (1.3%)
Biotechnology........... 54,963,147 (1.5%) 24,690,597 (0.9%)
Broadcasting............ 296,377,400 (8.2%) 133,419,212 (4.6%)
Business Services....... 112,535,700 (3.1%) 50,496,775 (1.8%)
Chemicals............... 76,861,100 (2.1%) 34,515,338 (1.2%)
Computer Equipment &
Service................ 256,218,167 (7.1%) 115,412,728 (4.0%)
Consumer Products....... 41,549,200 (1.1%) 18,585,325 (0.6%)
Drugs & Health Care..... 199,768,100 (5.5%) 89,658,175 (3.1%)
Electrical Equipment.... 135,638,375 (3.7%) 61,141,725 (2.1%)
Electronics............. 311,786,331 (8.6%) 139,112,337 (4.8%)
Entertainment & Leisure. 69,260,925 (1.9%) 31,127,400 (1.1%)
Financial Services...... 207,714,472 (5.7%) 93,083,836 (3.2%)
Food & Beverages........ 68,059,775 (1.9%) 30,438,238 (1.1%)
Household Products...... 115,271,300 (3.2%) 52,737,925 (1.8%)
Insurance............... 122,153,209 (3.4%) 55,087,431 (1.9%)
Liquor.................. 35,878,100 (1.0%) 16,110,094 (0.6%)
Medical Equipment &
Supply................. 64,919,375 (1.8%) 29,183,519 (1.0%)
Multi-Industry.......... 157,590,888 (4.3%) 70,569,787 (2.5%)
Office & Business
Equipment.............. 100,591,019 (2.8%) 45,145,450 (1.6%)
Oil..................... 78,019,820 (2.1%) 34,877,416 (1.2%)
Oil & Gas Exploration... 10,186,600 (0.3%) 4,492,675 (0.2%)
Oil-International....... 148,770,011 (4.1%) 66,566,008 (2.3%)
Retail Trade............ 230,490,362 (6.4%) 103,622,031 (3.6%)
Software................ 220,768,794 (6.1%) 99,297,338 (3.5%)
Telecommunications
Equipment & Services... 166,601,284 (4.6%) 74,851,353 (2.6%)
Transportation-Trucking. 5 (0.0%)
Utilities-Electric...... 29,997,175 (0.8%) 13,395,200 (0.5%)
Utilities-Gas &
Pipelines.............. 38,584,063 (1.1%) 17,426,063 (0.6%)
Utilities-Telephone..... 103,491,375 (2.9%) 46,478,737 (1.6%)
-------------- --------------
Total Common Stock...... 3,536,573,498 (97.6%) 1,588,812,718 (55.3%)
-------------- --------------
LONG-TERM DEBT
SECURITIES
Corporate Bonds:
Aerospace & Defense..... $ 3,129,248 (0.7%) 8,007,919 (0.3%)
Asset Backed............ 13,145,137 (2.7%) 16,750,976 (0.6%)
Automotive.............. 7,115,862 (1.5%) 14,621,369 (0.5%)
Banking................. 5,120,913 (1.1%)
Collateralized Mortgage
Obligations............ 23,320,293 (4.9%) 45,392,738 (1.6%)
Drugs & Health Care..... 2,903,965 (0.6%) 6,368,139 (0.2%)
Electrical Equipment.... 5,032,173 (0.2%)
Entertainment & Leisure. 4,307,188 (0.2%)
Finance & Banking....... 19,467,181 (4.1%) 90,280,549 (3.1%)
Financial Services...... 120,137,416 (25.1%) 305,430,425 (10.6%)
Food & Beverages........ 9,895,519 (2.1%) 12,511,591 (0.4%)
Healthcare Services..... 13,325,625 (2.8%) 28,557,900 (1.0%)
Industrials............. 13,357,360 (2.8%) 58,750,359 (2.0%)
Mortgage Related........ 11,533,851 (2.4%) 31,552,849 (1.1%)
Newspapers.............. 9,744,055 (2.0%) 20,468,019 (0.7%)
Pollution Control....... 1,760,000 (0.4%) 19,866,031 (0.7%)
Restaurant.............. 3,089,555 (0.6%) 3,884,012 (0.1%)
Retail Grocery.......... 7,162,867 (1.5%) 20,183,815 (0.7%)
Telecommunications
Equipment & Services... 14,952,575 (3.1%) 36,301,441 (1.3%)
Utilities-Electric...... 23,188,403 (4.9%) 35,847,072 (1.3%)
Utilities-Gas &
Pipelines.............. 2,508,129 (0.5%) 6,344,091 (0.2%)
------------ --------------
Total Corporate Bonds... 304,857,954 (63.8%) 770,458,656 (26.8%)
------------ --------------
Federal Agency
Obligations............ 33,244,644 (6.9%) 64,815,085 (2.3%)
Federal Treasury
Obligations............ 69,212,535 (14.5%) 254,049,569 (8.8%)
Foreign Obligations..... 9,200,344 (1.9%) 23,045,630 (0.8%)
State Agency
Obligations............ 19,552,778 (4.1%) 46,617,831 (1.6%)
Yankee Bonds............ 26,698,901 (5.6%) 63,191,720 (2.2%)
------------ --------------
Total Long-Term Debt
Securities............. 462,767,156 (96.8%) 1,222,178,491 (42.5%)
------------ --------------
SHORT-TERM OBLIGATIONS
Bankers' Acceptances.... $ 2,296,541 (4.5%)
Commercial Paper........ 104,406,562 (2.9%) 4,153,120 (0.9%) 46,206,089 (89.6%) 40,162,565 (1.4%)
Foreign Obligations..... 2,527,260 (4.9%)
Repurchase Agreements... 906,000 (0.0%)
-------------- ------------ ----------- --------------
Total Short-Term
Obligations............ 105,312,562 (2.9%) 4,153,120 (0.9%) 51,029,890 (99.0%) 40,162,565 (1.4%)
-------------- ------------ ----------- --------------
TOTAL INVESTMENTS....... 3,641,886,060 (100.5%) 466,920,276 (97.7%) 51,029,890 (99.0%) 2,851,153,774 (99.2%)
Other Assets Less
Liabilities............ (18,570,414) (-0.5%) 10,959,423 (2.3%) 515,101 (1.0%) 23,257,871 (0.8%)
-------------- ------------ ----------- --------------
NET ASSETS.............. $3,623,315,646 (100.0%) $477,879,699 (100.0%) $51,544,991 (100.0%) $2,874,411,645 (100.0%)
============== ============ =========== ==============
</TABLE>
18
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(Continued)
5.SUMMARY OF INVESTMENTS AS OF DECEMBER 31, 1999--(Continued)
Metropolitan Series Fund, Inc.
<TABLE>
<CAPTION>
State Street
Research Santander
MetLife Aggressive International
Stock Index Growth Stock
Portfolio Portfolio Portfolio
-------------- -------------- -------------
Value Value Value
(Note 2A) (Note 2A) (Note 2A)
<S> <C> <C> <C> <C> <C> <C>
COMMON STOCK
Aerospace & Defense.... $ 42,520,747 (1.0%)
Automotive............. 53,473,320 (1.3%) $ 24,293,875 (1.5%) $ 12,765,921 (4.0%)
Banking................ 222,504,127 (5.3%) 11,599,213 (0.7%) 35,345,047 (11.1%)
Biotechnology.......... 4,259,062 (0.1%) 24,580,406 (1.5%)
Broadcasting........... 102,304,763 (2.4%) 113,538,148 (7.1%)
Building &
Construction.......... 12,908,642 (0.3%) 1,129,927 (0.4%)
Business Services...... 52,283,928 (1.2%) 128,551,113 (8.0%) 6,578,957 (2.1%)
Chemicals.............. 66,926,188 (1.6%) 5,668,625 (0.4%) 14,809,559 (4.7%)
Computer Equipment &
Service............... 344,503,286 (8.2%) 176,966,356 (11.1%)
Construction Materials. 1,347,336 (0.0%) 4,145,142 (1.3%)
Consumer Products...... 1,541,270 (0.0%) 15,105,475 (0.9%) 2,347,558 (0.7%)
Consumer Services...... 1,546,791 (0.0%) 22,926,075 (1.4%)
Containers & Glass..... 4,748,324 (0.1%) 1,276,864 (0.4%)
Cosmetics.............. 4,566,110 (0.1%)
Drugs & Health Care.... 269,559,821 (6.4%) 33,934,131 (2.1%) 15,475,094 (4.9%)
Electrical Equipment... 198,603,236 (4.7%) 11,781,000 (0.7%) 11,051,542 (3.5%)
Electronics............ 290,979,817 (6.9%) 205,642,403 (12.8%) 27,888,740 (8.8%)
Entertainment &
Leisure............... 31,589,263 (0.8%) 55,319,769 (3.5%)
Financial Services..... 211,099,391 (5.0%) 15,565,562 (1.0%) 22,770,469 (7.2%)
Food & Beverages....... 144,392,638 (3.4%)
Forest Products &
Paper................. 38,649,761 (0.9%)
Healthcare Services.... 540,800 (0.0%)
Homebuilders........... 1,209,419 (0.0%) 2,861,065 (0.9%)
Hospital Management.... 11,657,934 (0.3%)
Hotel & Motel.......... 6,028,073 (0.1%) 11,613,994 (0.7%)
Household Appliances &
Home Furnishings...... 4,477,880 (0.1%) 10,469,911 (3.3%)
Household Products..... 95,206,866 (2.3%)
Industrial Components &
Material.............. 190,650 (0.0%) 4,141,955 (1.3%)
Insurance.............. 123,792,495 (3.0%) 9,968,500 (3.1%)
Liquor................. 6,651,963 (0.2%)
Machinery.............. 24,637,034 (0.6%) 4,784,205 (1.5%)
Medical Equipment &
Supply................ 98,448,956 (2.3%) 15,930,200 (1.0%) 1,710,480 (0.5%)
Metals-Aluminum........ 15,170,831 (0.4%)
Metals-Gold............ 5,671,760 (0.1%)
Metals-Non-Ferrous..... 2,318,173 (0.1%) 3,141,599 (1.0%)
Metals-Steel & Iron.... 4,254,478 (0.1%) 10,929,924 (3.4%)
Mining................. 3,046,177 (0.1%)
Miscellaneous.......... 4,915,428 (0.1%) 4,099,931 (1.3%)
Multi-Industry......... 53,514,408 (1.3%) 9,173,529 (2.9%)
Newspapers............. 20,296,141 (0.5%)
Office & Business
Equipment............. 192,540,031 (4.6%) 43,779,375 (2.7%) 2,382,141 (0.8%)
Oil.................... 3,253,848 (1.0%)
Oil & Gas Exploration.. 4,313,126 (0.1%) 2,903,201 (0.9%)
Oil-Domestic........... 26,869,426 (0.6%)
Oil-Equipment &
Services.............. 26,067,054 (0.6%) 10,873,000 (0.7%) 3,294,267 (1.0%)
Oil-International...... 174,437,716 (4.2%) 6,183,861 (1.9%)
Packaging.............. 618,375 (0.0%)
Personal Care.......... 1,790,854 (0.6%)
Photography............ 7,423,620 (0.2%) 3,030,146 (1.0%)
Plastics............... 1,642,705 (0.5%)
Pollution Control...... 4,170,830 (0.1%)
Printing & Publishing.. 8,326,516 (0.2%) 21,786,212 (1.4%) 1,419,888 (0.4%)
Real Estate............ 4,807,378 (1.5%)
Restaurant............. 22,291,487 (0.5%)
Retail Grocery......... 17,788,649 (0.4%) 1,661,126 (0.5%)
Retail Trade........... 258,726,495 (6.2%) 176,908,418 (11.1%) 12,081,931 (3.8%)
Software............... 306,073,513 (7.3%) 118,954,841 (7.4%)
Technology............. 19,159,525 (1.2%)
Telecommunications
Equipment & Services.. 121,104,733 (2.9%) 154,558,970 (9.7%) 11,386,247 (3.6%)
Textiles & Apparel..... 7,270,147 (0.2%) 8,983,463 (0.6%)
Tires & Rubber......... 2,933,650 (0.1%) 1,029,788 (0.3%)
Tobacco................ 20,221,865 (0.5%) 7,882,048 (2.5%)
Toys & Amusements...... 3,146,864 (0.1%) 814,349 (0.3%)
Transportation-
Airlines.............. 9,225,687 (0.2%) 7,301,153 (2.3%)
Transportation-
Miscellaneous......... 3,557,910 (1.1%)
Transportation-
Railroad.............. 15,390,852 (0.4%)
Transportation-
Trucking.............. 525,406 (0.0%)
Utilities-Electric..... 67,540,874 (1.6%) 9,663,975 (0.6%)
Utilities-Gas &
Pipelines............. 21,701,498 (0.5%) 13,129,119 (0.8%) 1,526,783 (0.5%)
Utilities-
Miscellaneous......... 1,420,319 (0.0%)
Utilities-Telephone.... 306,347,545 (7.3%) 16,136,400 (1.0%) 15,549,318 (4.9%)
-------------- -------------- -------------
Total Common Stock..... 4,208,813,565 (100.1%) 1,466,949,643 (91.6%) 310,364,861 (97.7%)
-------------- -------------- -------------
</TABLE>
19
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(Continued)
5.SUMMARY OF INVESTMENTS AS OF DECEMBER 31, 1999--(Continued)
Metropolitan Series Fund, Inc.
<TABLE>
<CAPTION>
State Street
Research Santander
MetLife Aggressive International
Stock Index Growth Stock
Portfolio Portfolio Portfolio
(continued) (continued) (continued)
-------------- -------------- -------------
Value Value Value
(Note 2A) (Note 2A) (Note 2A)
<S> <C> <C> <C> <C> <C> <C>
PREFERRED STOCK
Banking................ 2,290,901 (0.7%)
Retail Trade........... 309,734 (0.1%)
------------
Total Preferred Stock.. 2,600,635 (0.8%)
------------
LONG-TERM DEBT
SECURITIES
Foreign Obligations.... 158,596 (0.0%)
SHORT TERM OBLIGATIONS
Commercial Paper....... 154,949,235 (9.7%)
Repurchase Agreements.. 4,097,000 (1.3%)
Federal Agency
Obligations........... 1,206,498 (0.0%)
-------------- -------------- ------------
TOTAL INVESTMENTS....... 4,210,020,063 (100.1%) 1,621,898,878 (101.3%) 317,221,092 (99.8%)
Other Assets Less
Liabilities............ (4,818,376) (-0.1%) (21,058,178) (-1.3%) 609,779 (0.2%)
-------------- -------------- ------------
NET ASSETS.............. $4,205,201,687 (100.0%) $1,600,840,700 (100.0%) $317,830,871 (100.0%)
============== ============== ============
</TABLE>
20
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(Continued)
5.SUMMARY OF INVESTMENTS AS OF DECEMBER 31, 1999--(Continued)
Metropolitan Series Fund, Inc.
<TABLE>
<CAPTION>
Loomis Sayles
High Yield
Bond Portfolio
--------------
Value
(Note 2A)
<S> <C> <C>
COMMON STOCK
Banking............................................... $ 3,252 (0.0%)
Forest Products & Paper............................... 1,625,767 (2.7%)
Oil & Gas Exploration................................. 141,728 (0.2%)
Oil-Equipment & Services.............................. 56,250 (0.1%)
Real Estate........................................... 239,906 (0.4%)
Restaurant............................................ 3,479 (0.0%)
Utilities-Electric.................................... 20,632 (0.0%)
-----------
Total Common Stock.................................... 2,091,014 (3.4%)
-----------
PREFERRED STOCK
Banking............................................... 8,549 (0.0%)
Construction Materials................................ 129,844 (0.2%)
Food & Beverages...................................... 29,250 (0.0%)
Metals-Steel & Iron................................... 182,000 (0.3%)
Oil & Gas Exploration................................. 267,750 (0.4%)
Oil-Equipment & Services.............................. 281,685 (0.5%)
Real Estate........................................... 175,650 (0.3%)
Telecommunications Equipment & Services............... 1,400,884 (2.3%)
Transportation-Shipping............................... 12,000 (0.0%)
Utilities-Electric.................................... 300,459 (0.5%)
Utilities-Telephone................................... 214,312 (0.4%)
-----------
Total Preferred Stock................................. 3,002,383 (4.9%)
-----------
LONG-TERM DEBT SECURITIES
Convertible Bonds
Automotive............................................ 380,625 (0.6%)
Building & Construction............................... 81,500 (0.1%)
Computer Equipment & Service.......................... 3,458,197 (5.6%)
Drugs & Health Care................................... 1,967,862 (3.2%)
Electronics........................................... 1,882,512 (3.1%)
Entertainment & Leisure............................... 237,480 (0.4%)
Foreign Obligations................................... 5,617,845 (9.1%)
Healthcare Services................................... 297,375 (0.5%)
Industrial Components & Material...................... 364,625 (0.6%)
Industrials........................................... 692,775 (1.1%)
Medical Equipment & Supply............................ 208,050 (0.3%)
Oil & Gas Exploration................................. 150,000 (0.2%)
Oil-Equipment & Services.............................. 1,094,043 (1.8%)
Pollution Control..................................... 123,188 (0.2%)
Real Estate........................................... 91,000 (0.2%)
Restaurant............................................ 357,360 (0.6%)
Retail Trade.......................................... 68,563 (0.1%)
Telecommunications Equipment & Services............... 442,500 (0.7%)
Transportation-Trucking............................... 129,600 (0.2%)
-----------
Total Convertible Bonds............................... 17,645,100 (28.6%)
-----------
Corporate Bonds
Broadcasting.......................................... 1,687,875 (2.7%)
Chemicals............................................. 292,740 (0.5%)
Computer Equipment & Service.......................... 627,120 (1.0%)
Food & Beverages...................................... 76,402 (0.1%)
Healthcare Services................................... 976,095 (1.6%)
Industrials........................................... 912,871 (1.5%)
Oil & Gas Exploration................................. 988,687 (1.6%)
Oil-Equipment & Services.............................. 3,231,875 (5.2%)
Real Estate........................................... 409,937 (0.7%)
Retail Trade.......................................... 452,163 (0.7%)
Telecommunications Equipment & Services............... 5,659,875 (9.2%)
Textiles & Apparel.................................... 333,506 (0.6%)
Transportation........................................ 261,563 (0.4%)
Transportation-Shipping............................... 626,800 (1.0%)
Utilities-Electric.................................... 705,750 (1.2%)
Utilities-Telephone................................... 493,000 (0.8%)
-----------
Total Corporate Bonds................................. 17,736,259 (28.8%)
-----------
Foreign Obligations................................... 11,987,615 (19.4%)
Yankee Bonds.......................................... 6,418,660 (10.4%)
-----------
Total Long-Term Debt Securities....................... 53,787,634 (87.2%)
-----------
SHORT-TERM OBLIGATIONS
Repurchase Agreements................................. 884,000 (1.4%)
-----------
TOTAL INVESTMENTS..................................... 59,765,031 (96.9%)
Other Assets Less Liabilities......................... 1,936,338 (3.1%)
-----------
NET ASSETS............................................ $61,701,369 (100.0%)
===========
</TABLE>
21
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(Continued)
5.SUMMARY OF INVESTMENTS AS OF DECEMBER 31, 1999--(Continued)
Metropolitan Series Fund, Inc.
<TABLE>
<CAPTION>
T. Rowe Price
Janus Small Cap Scudder
Mid Cap Growth Global Equity
Portfolio Portfolio Portfolio
-------------- ------------- -------------
Value Value Value
(Note 2A) (Note 2A) (Note 2A)
<S> <C> <C> <C> <C> <C> <C>
COMMON STOCK
Aerospace & Defense.... $ 1,025,437 (0.4%) $ 2,654,542 (1.5%)
Automotive............. 2,668,712 (1.0%) 389,527 (0.2%)
Banking................ 2,779,701 (1.0%) 6,374,730 (3.7%)
Biotechnology.......... $ 42,717,280 (2.2%) 1,622,128 (0.6%) 3,766,838 (2.2%)
Broadcasting........... 182,450,383 (9.4%) 9,202,244 (3.4%) 4,670,099 (2.7%)
Building &
Construction.......... 1,147,375 (0.4%) 514,750 (0.3%)
Business Services...... 152,634,350 (7.9%) 23,868,284 (8.9%) 2,358,915 (1.4%)
Chemicals.............. 3,291,533 (1.2%) 10,906,382 (6.4%)
Computer Equipment &
Service............... 419,901,193 (21.7%) 24,709,494 (9.2%) 3,283,932 (1.9%)
Construction & Mining
Equipment............. 727,050 (0.3%)
Construction Materials. 678,125 (0.3%) 2,484,832 (1.5%)
Consumer Products...... 398,263 (0.1%)
Drugs & Health Care.... 51,178,119 (2.6%) 16,126,810 (6.0%) 5,494,040 (3.2%)
Education.............. 34,102,280 (1.8%) 3,104,162 (1.2%)
Electrical Equipment... 5,424,125 (2.0%) 5,874,457 (3.4%)
Electronics............ 255,169,133 (13.2%) 39,158,644 (14.5%) 13,213,361 (7.7%)
Entertainment &
Leisure............... 49,936,749 (2.6%) 5,588,944 (2.1%)
Financial Services..... 6,797,057 (2.5%) 5,079,216 (3.0%)
Food & Beverages....... 1,538,278 (0.6%)
Forest Products &
Paper................. 963,375 (0.6%)
Healthcare Services.... 14,559,746 (0.8%) 702,625 (0.3%) 568,269 (0.3%)
Hospital Management.... 500,656 (0.2%)
Household Appliances &
Home Furnishings...... 1,246,452 (0.7%)
Industrial Components &
Material.............. 856,794 (0.3%)
Insurance.............. 2,260,759 (0.8%) 4,670,482 (2.7%)
Lease Rental
Obligations........... 1,193,456 (0.4%)
Machinery.............. 151,599 (0.1%)
Medical Equipment &
Supply................ 14,836,617 (0.8%) 6,020,644 (2.2%)
Metals-Gold............ 4,072,604 (2.4%)
Metals-Non-Ferrous..... 4,677,775 (2.7%)
Metals-Steel & Iron.... 6,605,028 (3.9%)
Mining................. 1,744,481 (1.0%)
Miscellaneous.......... 275,600 (0.1%)
Multi-Industry......... 2,482,024 (1.4%)
Newspapers............. 854,775 (0.3%)
Office & Business
Equipment............. 4,939,347 (1.8%) 5,639,675 (3.3%)
Oil & Gas Exploration.. 932,512 (0.3%) 683,750 (0.4%)
Oil-Domestic........... 3,765,288 (2.2%)
Oil-Equipment &
Services.............. 2,943,681 (1.1%) 1,531,040 (0.9%)
Oil-International...... 3,368,984 (2.0%)
Photography............ 1,244,309 (0.5%)
Pollution Control...... 969,891 (0.4%)
Real Estate............ 2,692,804 (1.0%) 2,179,844 (1.3%)
Restaurant............. 1,091,461 (0.1%) 4,051,256 (1.5%)
Retail Grocery......... 1,830,483 (0.7%)
Retail Trade........... 13,244,333 (0.7%) 13,945,028 (5.2%) 1,396,008 (0.8%)
Software............... 124,501,640 (6.4%) 31,128,170 (11.5%) 7,143,207 (4.2%)
Telecommunications
Equipment & Services.. 473,207,570 (24.5%) 23,235,061 (8.6%) 12,333,669 (7.2%)
Textiles & Apparel..... 2,968,687 (1.1%) 575,629 (0.3%)
Tobacco................ 212,694 (0.1%)
Toys & Amusements...... 478,400 (0.2%)
Transportation-
Airlines.............. 1,232,378 (0.5%) 2,112,781 (1.2%)
Transportation-
Railroad.............. 824,988 (0.3%) 5,090,951 (3.0%)
Transportation-
Trucking.............. 940,175 (0.3%)
Utilities-Electric..... 7,734,478 (4.5%)
Utilities-Gas &
Pipelines............. 1,606,375 (0.9%)
Utilities-Telephone.... 91,101,795 (4.7%) 1,916,966 (0.7%) 8,137,388 (4.7%)
-------------- ------------ ------------
Total Common Stock..... 1,920,632,649 (99.4%) 258,795,811 (96.0%) 157,759,471 (91.9%)
-------------- ------------ ------------
SHORT-TERM OBLIGATIONS
Commercial Paper....... 44,688,825 (2.3%)
Foreign Obligations.... 5,218,413 (3.0%)
Repurchase Agreements.. 1,914,000 (0.1%) 6,468,000 (3.8%)
-------------- ------------
Total Short-Term
Obligations........... 46,602,825 (2.4%) 11,686,413 (6.8%)
-------------- ------------
LONG-TERM DEBT
SECURITIES
Participating Loan
Notes................. 420,065 (0.2%)
Federal Treasury
Obligations........... 195,140 (0.1%)
SHORT-TERM OBLIGATIONS
Regulated Investment
Companies............. 12,572,104 (4.7%)
-------------- ------------ ------------
TOTAL INVESTMENTS....... 1,967,235,474 (101.8%) 271,563,055 (100.8%) 169,865,949 (98.9%)
Other Assets Less
Liabilities............ (35,438,420) (-1.8%) (2,045,413) (-0.8%) 1,848,472 (1.1%)
-------------- ------------ ------------
NET ASSETS.............. $1,931,797,054 (100.0%) $269,517,642 (100.0%) $171,714,421 (100.0%)
============== ============ ============
</TABLE>
22
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(Continued)
5.SUMMARY OF INVESTMENTS AS OF DECEMBER 31, 1999--(Continued)
Metropolitan Series Fund, Inc.
<TABLE>
<CAPTION>
Morgan Stanley
Russell 2000 EAFE
Index Portfolio Index Portfolio
--------------- ---------------
Value Value
(Note 2A) (Note 2A)
<S> <C> <C> <C> <C>
COMMON STOCK
Aerospace & Defense........... $ 678,269 (0.6%) $ 193,539 (0.2%)
Agriculture & Related......... 69,500 (0.1%)
Automotive.................... 1,110,278 (1.0%) 3,241,751 (3.9%)
Banking....................... 7,243,688 (6.5%) 8,729,364 (10.6%)
Biotechnology................. 2,144,522 (1.9%) 193,965 (0.2%)
Broadcasting.................. 1,513,037 (1.4%) 951,178 (1.2%)
Building & Construction....... 602,606 (0.5%) 444,750 (0.5%)
Business Services............. 7,088,385 (6.4%) 1,208,099 (1.5%)
Chemicals..................... 1,803,803 (1.6%) 1,933,527 (2.4%)
Coal.......................... 30,375 (0.0%)
Computer Equipment & Service.. 8,906,921 (8.0%) 1,885,797 (2.3%)
Construction & Mining
Equipment.................... 264,722 (0.2%) 37,709 (0.0%)
Construction Materials........ 695,375 (0.6%) 920,852 (1.1%)
Consumer Products............. 329,088 (0.3%) 426,599 (0.5%)
Consumer Services............. 41,388 (0.0%) 103,263 (0.1%)
Containers & Glass............ 313,969 (0.3%) 145,958 (0.2%)
Cosmetics..................... 43,751 (0.1%)
Drugs & Health Care........... 5,063,950 (4.5%) 4,831,395 (5.9%)
Education..................... 159,694 (0.1%)
Electrical Equipment.......... 2,139,364 (1.9%) 2,346,494 (2.9%)
Electronics................... 8,542,542 (7.7%) 6,444,858 (7.8%)
Entertainment & Leisure....... 1,726,211 (1.6%) 401,596 (0.5%)
Financial Services............ 2,146,995 (1.9%) 3,529,550 (4.3%)
Food & Beverages.............. 1,575,037 (1.4%) 2,170,309 (2.6%)
Forest Products & Paper....... 919,925 (0.8%) 448,821 (0.5%)
Healthcare Services........... 914,353 (0.8%) 21,577 (0.0%)
Homebuilders.................. 526,462 (0.5%) 135,410 (0.2%)
Hospital Management........... 344,369 (0.3%)
Hotel & Motel................. 454,447 (0.4%) 209,742 (0.3%)
Household Appliances & Home
Furnishings.................. 735,853 (0.7%) 554,907 (0.7%)
Household Products............ 307,909 (0.3%) 23,221 (0.0%)
Industrial Components &
Material..................... 1,976,599 (1.8%) 443,963 (0.5%)
Industrial
Development / Pollution
Bonds........................ 70,720 (0.1%)
Insurance..................... 3,360,032 (3.0%) 4,037,027 (4.9%)
Investment Companies.......... 38,106 (0.0%)
Lease Rental Obligations...... 436,903 (0.4%) 6,440 (0.0%)
Liquor........................ 205,856 (0.2%) 628,678 (0.8%)
Machinery..................... 1,854,774 (1.7%) 937,355 (1.1%)
Medical Equipment & Supply.... 2,052,444 (1.8%) 160,632 (0.2%)
Metals-Aluminum............... 56,888 (0.1%) 27,558 (0.0%)
Metals-Gold................... 27,638 (0.0%) 17,957 (0.0%)
Metals-Non-Ferrous............ 148,431 (0.1%) 243,787 (0.3%)
Metals-Steel & Iron........... 794,678 (0.7%) 714,613 (0.9%)
Mining........................ 148,944 (0.1%) 51,399 (0.1%)
Miscellaneous................. 513,562 (0.5%) 92,534 (0.1%)
Mobile Homes.................. 198,119 (0.2%)
Multi-Industry................ 902,396 (0.8%) 4,241,874 (5.2%)
Newspapers.................... 146,913 (0.1%) 5,582 (0.0%)
Office & Business Equipment... 1,049,025 (0.9%) 444,459 (0.5%)
Oil........................... 245,419 (0.2%) 1,824,272 (2.2%)
Oil & Gas Exploration......... 1,377,606 (1.2%) 74,383 (0.1%)
Oil-Domestic.................. 7,204 (0.0%)
Oil-Equipment & Services...... 1,199,770 (1.1%) 970,166 (1.2%)
Oil-International............. 1,486,992 (1.8%)
</TABLE>
23
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(Continued)
5.SUMMARY OF INVESTMENTS AS OF DECEMBER 31, 1999--(Continued)
Metropolitan Series Fund, Inc.
<TABLE>
<CAPTION>
Morgan Stanley
Russell 2000 EAFE
Index Portfolio Index Portfolio
(continued) (continued)
--------------- ---------------
Value Value
(Note 2A) (Note 2A)
<S> <C> <C> <C> <C>
COMMON STOCK--(Continued)
Packaging.................. 95,138 (0.1%)
Personal Care.............. 51,100 (0.1%) 512,187 (0.6%)
Photography................ 308,944 (0.3%) 146,031 (0.2%)
Plastics................... 136,109 (0.1%) 55,133 (0.1%)
Pollution Control.......... 170,117 (0.2%) 8,788 (0.0%)
Printing & Publishing...... 681,175 (0.6%) 579,027 (0.7%)
Real Estate................ 4,853,008 (4.4%) 1,113,230 (1.4%)
Restaurant................. 905,844 (0.8%) 63,682 (0.1%)
Retail Grocery............. 358,198 (0.3%) 678,318 (0.8%)
Retail Trade............... 3,602,791 (3.2%) 2,263,892 (2.8%)
Shipbuilding............... 107,250 (0.1%) 6,851 (0.0%)
Software................... 9,163,883 (8.2%) 528,209 (0.6%)
Technology................. 1,124,335 (1.0%)
Telecommunications
Equipment & Services...... 7,256,975 (6.5%) 5,713,882 (6.9%)
Textiles & Apparel......... 994,724 (0.9%) 268,027 (0.3%)
Tires & Rubber............. 47,500 (0.0%) 246,555 (0.3%)
Tobacco.................... 142,120 (0.1%) 298,673 (0.4%)
Toys & Amusements.......... 36,441 (0.0%) 182,813 (0.2%)
Transportation............. 195,463 (0.2%) 207,016 (0.3%)
Transportation-Airlines.... 821,011 (0.7%) 431,963 (0.5%)
Transportation-
Miscellaneous............. 22,388 (0.0%)
Transportation-Railroad.... 462,959 (0.4%) 551,262 (0.7%)
Transportation-Shipping.... 201,838 (0.2%) 399,092 (0.5%)
Transportation-Trucking.... 698,687 (0.6%) 9,013 (0.0%)
Utilities.................. 367,963 (0.3%)
Utilities-Electric......... 1,548,840 (1.4%) 1,998,232 (2.4%)
Utilities-Gas & Pipelines.. 2,091,713 (1.9%) 462,574 (0.6%)
Utilities-Miscellaneous.... 109,089 (0.1%)
Utilities-Telephone........ 310,884 (0.3%) 6,851,920 (8.3%)
Utilities-Water............ 116,150 (0.1%)
------------ -----------
Total Common Stock......... 111,978,300 (100.2%) 81,773,424 (99.3%)
------------ -----------
PREFERRED STOCK
Automotive................. 22,424 (0.0%)
Broadcasting............... 152,498 (0.2%)
Building & Construction.... 9,187 (0.0%)
Oil-Equipment & Services... 8,865 (0.0%)
Oil-International.......... 15,413 (0.0%)
Retail Grocery............. 7,711 (0.0%)
Retail Trade............... 9,096 (0.0%)
Software................... 210,838 (0.3%)
-----------
Total Preferred Stock...... 436,032 (0.5%)
-----------
SHORT-TERM OBLIGATIONS
Federal Agency Obligations. 996,977 (0.9%) 1,042,652 (1.3%)
------------ -----------
TOTAL INVESTMENTS.......... 112,975,277 (101.1%) 83,252,108 (101.1%)
Other Assets Less
Liabilities............... (1,246,645) (-1.1%) (897,193) (-1.1%)
------------ -----------
NET ASSETS................. $111,728,632 (100.0%) $82,354,915 (100.0%)
============ ===========
</TABLE>
24
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(Continued)
5.SUMMARY OF INVESTMENTS AS OF DECEMBER 31, 1999--(Continued)
Metropolitan Series Fund, Inc.
<TABLE>
<CAPTION>
Lehman
Brothers
Aggregate
Bond Index
Portfolio
------------
Value
(Note 2A)
<S> <C> <C>
LONG-TERM DEBT SECURITIES
Corporate Bonds:
Aerospace & Defense...................................... $ 217,373 (0.2%)
Asset Backed............................................. 1,114,534 (0.9%)
Automotive............................................... 656,234 (0.5%)
Banking.................................................. 2,646,073 (2.0%)
Broadcasting............................................. 459,729 (0.4%)
Collateralized Mortgage Obligations...................... 1,557,920 (1.2%)
Drugs & Health Care...................................... 137,862 (0.1%)
Entertainment & Leisure.................................. 447,900 (0.3%)
Finance & Banking........................................ 1,184,489 (0.9%)
Financial Services....................................... 5,417,318 (4.2%)
Food & Beverages......................................... 198,824 (0.2%)
Forest Products & Paper.................................. 902,049 (0.7%)
Industrials.............................................. 138,134 (0.1%)
Liquor................................................... 468,535 (0.4%)
Multi-Industry........................................... 712,878 (0.5%)
Office & Business Equipment.............................. 465,375 (0.4%)
Oil & Gas Exploration.................................... 572,352 (0.4%)
Printing & Publishing.................................... 457,777 (0.3%)
Real Estate.............................................. 502,193 (0.4%)
Restaurant............................................... 457,986 (0.4%)
Retail Trade............................................. 1,152,172 (0.9%)
Telecommunications Equipment & Services.................. 1,447,723 (1.1%)
Transportation-Airlines.................................. 825,882 (0.6%)
Transportation-Railroad.................................. 300,801 (0.2%)
Utilities-Electric....................................... 1,364,726 (1.1%)
Utilities-Gas & Pipelines................................ 723,618 (0.6%)
Utilities-Telephone...................................... 1,420,791 (1.1%)
------------
Total Corporate Bonds.................................... 25,951,248 (20.1%)
------------
Federal Agency Obligations............................... 57,027,167 (44.1%)
Federal Treasury Obligations............................. 35,460,210 (27.4%)
State Agency Obligations................................. 182,909 (0.1%)
Yankee Bonds............................................. 2,257,967 (1.7%)
------------
Total Bonds.............................................. 120,879,501 (93.4%)
------------
SHORT-TERM OBLIGATIONS
Commercial Paper......................................... 4,535,468 (3.5%)
Federal Agency Obligations............................... 595,728 (0.5%)
------------
Total Short-Term Obligations............................. 5,131,196 (4.0%)
------------
TOTAL INVESTMENTS......................................... 126,010,697 (97.4%)
Other Assets Less Liabilities............................. 3,327,963 (2.6%)
------------
NET ASSETS................................................ $129,338,660 (100.0%)
============
</TABLE>
25
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(Continued)
5.SUMMARY OF INVESTMENTS AS OF DECEMBER 31, 1999--(Continued)
Metropolitan Series Fund, Inc.
<TABLE>
<CAPTION>
Harris Oakmark Neuberger Berman T. Rowe Price
Large Cap Value Partners Mid Cap Value Large Cap
Portfolio Portfolio Growth Portfolio
--------------- ---------------------- ----------------
Value Value Value
(Note 2A) (Note 2A) (Note 2A)
<S> <C> <C> <C> <C> <C> <C>
COMMON STOCK
Aerospace & Defense.... $ 3,218,687 (8.4%) $ 822,900 (2.1%)
Automotive............. 1,947,912 (5.0%) $ 260,550 (0.5%)
Banking................ 3,446,094 (9.0%) 851,525 (2.2%) 1,887,612 (3.7%)
Biotechnology.......... 431,081 (0.8%)
Broadcasting........... 1,537,144 (4.0%) 2,779,959 (5.4%)
Building &
Construction.......... 813,375 (2.1%) 246,138 (0.5%)
Business Services...... 3,166,562 (8.3%) 1,177,100 (3.0%) 2,216,848 (4.3%)
Chemicals.............. 1,192,344 (3.1%) 1,938,494 (5.0%)
Computer Equipment &
Service............... 972,969 (2.5%) 1,436,228 (3.7%) 4,917,202 (9.6%)
Consumer Products...... 2,168,375 (5.7%)
Containers & Glass..... 191,706 (0.5%)
Drugs & Health Care.... 727,988 (1.9%) 3,374,794 (6.6%)
Electrical Equipment... 439,875 (1.1%) 1,288,125 (2.5%)
Electronics............ 1,815,625 (4.7%) 792,706 (2.1%) 4,235,797 (8.2%)
Entertainment &
Leisure............... 1,735,500 (4.5%) 481,500 (1.2%) 87,750 (0.2%)
Financial Services..... 1,618,975 (4.2%) 4,435,533 (8.6%)
Food & Beverages....... 341,925 (0.7%)
Forest Products &
Paper................. 821,250 (2.1%) 1,103,437 (2.9%) 234,900 (0.5%)
Hospital Management.... 398,438 (0.8%)
Hotel & Motel.......... 368,950 (1.0%) 361,213 (0.7%)
Household Appliances &
Home Furnishings...... 739,200 (1.9%)
Household Products..... 922,387 (1.8%)
Industrials............ 201,400 (0.5%) 174,900 (0.3%)
Insurance.............. 878,813 (2.3%) 1,890,531 (4.9%) 1,188,617 (2.3%)
Machinery.............. 1,577,063 (4.1%) 1,209,506 (3.1%)
Medical Equipment &
Supply................ 1,241,094 (3.2%) 1,205,187 (2.3%)
Metals-Aluminum........ 498,063 (1.3%)
Metals-Non-Ferrous..... 434,125 (1.1%)
Metals-Steel & Iron.... 570,025 (1.5%)
Mining................. 107,400 (0.3%)
Miscellaneous.......... 1,785,375 (4.7%)
Multi-Industry......... 458,850 (1.2%) 3,303,693 (6.4%)
Newspapers............. 1,844,500 (4.8%) 192,719 (0.4%)
Office & Business
Equipment............. 340,588 (0.7%)
Oil.................... 547,031 (1.4%)
Oil & Gas Exploration.. 1,010,250 (2.6%)
Oil-Domestic........... 592,500 (1.5%)
Oil-Equipment &
Services.............. 2,015,375 (5.2%) 238,006 (0.5%)
Oil-International...... 1,476,969 (2.9%)
Packaging.............. 686,359 (1.8%)
Printing & Publishing.. 2,301,000 (6.0%) 501,500 (1.3%) 355,081 (0.7%)
Real Estate............ 1,281,250 (3.3%) 535,500 (1.4%) 205,969 (0.4%)
Restaurant............. 169,313 (0.3%)
Retail Grocery......... 981,221 (1.9%)
Retail Trade........... 611,000 (1.6%) 2,590,426 (5.0%)
Software............... 1,988,325 (5.1%) 4,157,962 (8.1%)
Telecommunications
Equipment & Services.. 3,108,844 (8.0%) 2,269,381 (4.4%)
Textiles & Apparel..... 2,081,625 (5.4%) 163,556 (0.3%)
Tobacco................ 1,864,275 (4.9%) 264,338 (0.5%)
Toys & Amusements...... 1,765,312 (4.6%)
Transportation-
Airlines.............. 510,313 (1.3%)
Transportation-
Railroad.............. 582,075 (1.5%) 261,188 (0.5%)
Utilities-Electric..... 1,118,050 (2.9%)
Utilities-Gas &
Pipelines............. 286,663 (0.7%)
Utilities-Telephone.... 2,158,184 (4.2%)
----------- ----------- -----------
Total Common Stock..... 34,729,994 (90.5%) 36,880,419 (95.2%) 50,117,550 (97.5%)
----------- ----------- -----------
SHORT-TERM OBLIGATIONS
Commercial Paper....... 1,500,000 (3.9%)
Regulated Investment
Companies............. 1,867,428 (3.6%)
Repurchase Agreements.. 1,482,000 (3.9%) 1,854,000 (4.8%) 703,000 (1.4%)
----------- ----------- -----------
Total Short-Term
Obligations........... 2,982,000 (7.8%) 1,854,000 (4.8%) 2,570,428 (5.0%)
----------- ----------- -----------
TOTAL INVESTMENTS...... 37,711,994 (98.3%) 38,734,419 (100.0%) 52,687,978 (102.5%)
Other Assets Less
Liabilities........... 665,535 (1.7%) (12,430) (0.0%) (1,286,462) (-2.5%)
----------- ----------- -----------
NET ASSETS............. $38,377,529 (100.0%) $38,721,989 (100.0%) $51,401,516 (100.0%)
=========== =========== ===========
</TABLE>
26
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(Continued)
5.SUMMARY OF INVESTMENTS AS OF DECEMBER 31, 1999--(Continued)
Templeton Variable Products Series Fund
<TABLE>
<CAPTION>
Templeton
International
Stock
Portfolio
--------------
Value
(Note 2A)
<S> <C> <C>
COMMON STOCK
Aerospace & Defense................................... $ 1,925,333 (0.2%)
Appliances & Household Durables....................... 43,597,485 (3.8%)
Automotive............................................ 38,876,270 (3.4%)
Banking............................................... 93,961,811 (8.1%)
Broadcasting.......................................... 11,671,882 (1.0%)
Building Materials & Components....................... 8,232,097 (0.7%)
Chemicals............................................. 50,382,806 (4.3%)
Data Processing & Reproduction........................ 9,436,991 (0.8%)
Electrical & Electronics.............................. 86,309,209 (7.4%)
Energy Sources........................................ 61,113,306 (5.3%)
Financial Services.................................... 67,495,324 (5.8%)
Food & Household Products............................. 22,749,989 (2.0%)
Forest Products & Paper............................... 21,609,388 (1.9%)
Health & Personal Care................................ 43,531,166 (3.8%)
Industrial Components................................. 4,125,846 (0.4%)
Insurance............................................. 63,000,165 (5.4%)
Machinery & Engineering............................... 7,096,640 (0.6%)
Merchandising......................................... 30,647,631 (2.6%)
Metals & Mining....................................... 70,173,353 (6.1%)
Multi-Industry........................................ 52,379,143 (4.5%)
Real Estate........................................... 1,704,438 (0.1%)
Recreation & Other Consumer Goods..................... 11,067,926 (1.0%)
Telecommunications.................................... 103,119,516 (8.9%)
Transportation........................................ 51,149,658 (4.4%)
Utilities-Gas & Pipelines............................. 87,566,150 (7.5%)
-------------- -------
Total Common Stock.................................... 1,042,923,523 (90.0%)
-------------- -------
Preferred Stock....................................... 56,820,552 (4.9%)
SHORT-TERM OBLIGATIONS
Repurchase Agreements................................. 46,236,000 (4.0%)
-------------- -------
TOTAL INVESTMENTS..................................... 1,145,980,075 (98.9%)
Other Assets Less Liabilities......................... 12,182,392 (1.1%)
-------------- -------
NET ASSETS............................................ $1,158,162,467 (100.0%)
============== =======
</TABLE>
27
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(Continued)
5.SUMMARY OF INVESTMENTS AS OF DECEMBER 31, 1999--(Continued)
Janus Aspen Series Fund
<TABLE>
<CAPTION>
Janus Aspen
Growth Portfolio
----------------
Value
(Note 2A)
<S> <C> <C>
COMMON STOCK
Audio and Video Products............................. $ 12,027,000 (0.4%)
Automotive........................................... 1,586,454 (0.1%)
Brewery.............................................. 12,112,537 (0.4%)
Broadcast Services and Programming................... 105,648,024 (3.5%)
Cable Television..................................... 253,832,722 (8.5%)
Cellular Telecommunications.......................... 152,852,858 (5.1%)
Circuits............................................. 121,198,124 (4.0%)
Commercial Banks..................................... 8,067,519 (0.3%)
Commercial Services.................................. 30,151,000 (1.0%)
Computer Software.................................... 55,568,330 (1.9%)
Computer Memory Devices.............................. 31,415,384 (1.0%)
Computers Micro...................................... 158,170,877 (5.3%)
Cosmetics and Toiletries............................. 11,884,925 (0.4%)
Cruise Lines......................................... 20,701,929 (0.7%)
Data Processing and Management....................... 37,104,521 (1.2%)
Distribution and Wholesale........................... 24,791,256 (0.8%)
Diversified Financial Services....................... 22,502,813 (0.7%)
Diversified Operations............................... 165,718,684 (5.5%)
Electronic Components................................ 79,706,735 (2.7%)
Electronic Safety Devices............................ 6,334,247 (0.2%)
Enterprise Software and Services..................... 24,758,379 (0.8%)
Finance-Credit Card.................................. 62,213,244 (2.1%)
Finance-Investment Bankers/Brokers................... 42,087,398 (1.4%)
Food-Wholesale....................................... 3,307,287 (0.1%)
Identification Systems and Devices................... 11,250,562 (0.4%)
Instruments-Scientific............................... 42,286,156 (1.4%)
Internet Content..................................... 11,715,741 (0.4%)
Internet Software.................................... 37,657,646 (1.3%)
Life and Health Insurance............................ 72,109,337 (2.4%)
Medical-Biomedical and Genetic....................... 46,106,600 (1.5%)
Medical-Drugs........................................ 21,339,070 (0.7%)
Medical-Instruments.................................. 10,103,026 (0.3%)
Money Center Banks................................... 72,862,400 (2.4%)
Multi-Line Insurance................................. 38,767,246 (1.3%)
Multimedia........................................... 191,538,881 (6.4%)
Networking Products.................................. 117,238,564 (3.9%)
Office Automation and Equipment...................... 11,390,880 (0.4%)
Optical Supplies..................................... 15,991,391 (0.5%)
Pipelines............................................ 72,361,869 (2.4%)
Property and Casualty Insurance...................... 7,297,509 (0.2%)
Publishing-Newspapers................................ 8,696,844 (0.3%)
Radio................................................ 27,660,475 (0.9%)
Retail Building Products............................. 35,819,450 (1.2%)
Retail-Discount...................................... 11,151,245 (0.4%)
Retail-Office Supplies............................... 20,860,390 (0.7%)
Retail-Restaurants................................... 75,633,305 (2.5%)
Super Regional Banks................................. 11,427,330 (0.4%)
Telecommunication Equipment.......................... 180,832,646 (6.0%)
Telecommunication Services........................... 31,562,024 (1.1%)
Telephone-Integrated................................. 15,503,209 (0.5%)
Television........................................... 41,936,217 (1.4%)
--------------
Total Common Stock................................... 2,684,842,260 (89.4%)
--------------
LONG-TERM DEBT SECURITIES
Corporate Bonds:
Retail Internet...................................... 13,019,556 (0.4%)
Telecommunication Services........................... 15,050,000 (0.5%)
--------------
Total Corporate Bonds................................ 28,069,556 (0.9%)
--------------
SHORT-TERM OBLIGATIONS
Repurchase Agreements................................. 217,600,000 (7.3%)
U.S. Government Agencies.............................. 74,360,555 (2.5%)
--------------
Total Short-Term Obligations.......................... 291,960,555 (9.8%)
--------------
TOTAL INVESTMENTS..................................... 3,004,872,371 (100.1%)
Other Assets Less Liabilities......................... (2,889,168) (0.1%)
--------------
NET ASSETS............................................ $3,001,983,203 (100.0%)
==============
</TABLE>
28
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(Continued)
5.SUMMARY OF INVESTMENTS AS OF DECEMBER 31, 1999--(Continued)
Invesco Variable Investment Funds, Inc.
<TABLE>
<CAPTION>
Invesco
VIF-High
Yield Portfolio
---------------
Value
(Note 2A)
<S> <C> <C>
COMMON STOCKS & WARRANTS
Computer Related..................................... $ 20,475 (0.0%)
Telecommunications--Long Distance.................... 1,500 (0.0%)
Telephone............................................ 3,454 (0.0%)
-----------
Total Common Stocks & Warrants....................... 25,429 (0.0%)
-----------
PREFERRED STOCK
Publishing........................................... 304,500 (0.5%)
Telecommunications--Cellular & Wireless.............. 445,000 (0.8%)
Telecommunications--Long Distance.................... 1,005,000 (1.8%)
Telephone............................................ 368,083 (0.6%)
-----------
Total Preferred Stock................................ 2,122,583 (3.7%)
-----------
FIXED INCOME SECURITIES
Corporate Bonds:
Biotechnology........................................ 552,500 (0.9%)
Broadcasting......................................... 2,861,250 (4.9%)
Cable................................................ 5,033,700 (8.6%)
Chemicals............................................ 1,100,750 (1.9%)
Communications--Equipment & Manufacturing............ 866,000 (1.5%)
Computer Related..................................... 2,974,625 (5.1%)
Electric Utilities................................... 2,348,825 (4.0%)
Electrical Equipment................................. 206,000 (0.4%)
Engineering & Construction........................... 182,000 (0.3%)
Gaming............................................... 1,955,238 (3.3%)
Healthcare Services.................................. 740,000 (1.3%)
Household Products................................... 365,000 (0.6%)
Iron & Steel......................................... 703,570 (1.2%)
Lodging--Hotels...................................... 225,000 (0.4%)
Metals & Mining...................................... 350,000 (0.6%)
Oil & Gas Related.................................... 2,483,975 (4.3%)
Paper & Forest Products.............................. 1,046,060 (1.8%)
Personal Care........................................ 257,250 (0.4%)
Pollution Control.................................... 895,000 (1.5%)
Services............................................. 2,530,312 (4.3%)
Shipping............................................. 95,000 (0.2%)
Specialty Printing................................... 683,750 (1.2%)
Telecommunications--Cellular & Wireless.............. 2,369,250 (4.1%)
Telecommunications--Long Distance.................... 9,060,975 (15.5%)
Telephone............................................ 11,058,433 (18.9%)
Textiles & Apparel Manufacturing..................... 915,000 (1.6%)
-----------
Total Corporate Bonds................................ 51,859,463 (88.8%)
-----------
SHORT-TERM INVESTMENTS
Repurchase Agreements................................ 2,968,000 (5.1%)
-----------
TOTAL INVESTMENTS.................................... 56,975,475 (97.6%)
Other Assets Less Liabilities........................ 1,403,130 (2.4%)
-----------
NET ASSETS........................................... $58,378,605 (100.0%)
===========
</TABLE>
29
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(Continued)
5.SUMMARY OF INVESTMENTS AS OF DECEMBER 31, 1999--(Continued)
Invesco Variable Investment Funds, Inc.
<TABLE>
<CAPTION>
Invesco Invesco
VIF Industrial VIF Realty
Income Portfolio Portfolio
---------------- ----------
Value Value
(Note 2A) (Note 2A)
<S> <C> <C> <C> <C>
COMMON STOCK
Aerospace & Defense............ $ 1,589,874 (2.0%)
Automobiles.................... 534,375 (0.7%)
Banks.......................... 4,750,694 (5.9%)
Beverages...................... 1,977,650 (2.5%)
Broadcasting................... 1,475,500 (1.8%)
Chemicals...................... 1,117,962 (1.4%)
Communications-Equipment
Manufacturing................. 972,562 (1.2%)
Computer Related............... 2,232,056 (2.8%)
Electric Utilities............. 1,438,590 (1.8%)
Electronics.................... 1,305,600 (1.6%)
Electrical Equipment........... 1,934,375 (2.4%)
Electronics-semiconductor...... 2,512,500 (3.1%)
Financial...................... 1,111,250 (1.4%)
Foods.......................... 3,215,379 (4.0%)
Gaming......................... 1,000,000 (1.3%)
Gold & Precious Metals Mining.. 171,500 (0.2%)
Health Care Drugs-
Pharmaceuticals............... 6,066,543 (7.6%)
Health Care Related............ 1,027,465 (1.3%)
Household Products............. 2,176,500 (2.7%)
Insurance...................... 2,640,875 (3.3%)
Investment Bank/Broker Firm.... 999,250 (1.3%)
Lodging-Hotels................. 772,937 (1.0%)
Manufacturing.................. 996,938 (1.2%)
Oil & Gas Related.............. 5,659,240 (7.1%)
Paper & Forest Products........ 1,426,638 (1.8%)
Railroads...................... 2,285,062 (2.9%)
Real Estate Investment Trust... $ 544,084 (87.0%)
Real Estate Related............ 16,965 (2.7%)
Restaurants.................... 1,007,812 (1.3%)
Retail......................... 4,794,062 (6.0%)
Savings & Loan................. 1,154,156 (1.4%)
Services....................... 452,625 (0.6%)
Telecommunications-Cellular &
Wireless...................... 825,000 (1.0%)
Telecommunications-Long
Distance...................... 1,555,313 (2.0%)
Telephone...................... 4,413,256 (5.5%)
Tobacco........................ 394,187 (0.5%)
----------- ---------
Total Common Stock............. 65,987,726 (82.6%) 561,049 (89.7%)
----------- ---------
FIXED INCOME SECURITIES
Corporate Bonds:
Airlines....................... 293,092 (0.4%)
Building Materials............. 510,509 (0.6%)
Cable.......................... 355,750 (0.4%)
Computer Related............... 222,469 (0.3%)
Electric Utilities............. 3,076,860 (3.9%)
Insurance...................... 425,360 (0.5%)
Lodging-Hotels................. 218,852 (0.3%)
Oil & Gas Related.............. 1,470,846 (1.9%)
Paper & Forest Products........ 105,624 (0.1%)
Services....................... 98,500 (0.1%)
Telecommunications-Long
Distance...................... 151,250 (0.2%)
Telephone...................... 653,905 (0.8%)
-----------
Total Corporate Bonds.......... 7,583,017 (9.5%)
-----------
US Government Obligations...... 712,501 (0.9%)
-----------
Total Fixed Income Securities.. 8,295,518 (10.4%)
SHORT TERM INVESTMENTS
Repurchase Agreements.......... 6,586,000 (8.2%)
----------- ---------
TOTAL INVESTMENTS.............. 80,869,244 (101.2%) 561,049 (89.7%)
Other Assets Less Liabilities.. (976,632) (-1.2%) 64,429 (10.3%)
----------- ---------
NET ASSETS..................... $79,892,612 (100.0%) $ 625,478 (100.0%)
=========== =========
</TABLE>
30
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(Concluded)
5.SUMMARY OF INVESTMENTS AS OF DECEMBER 31, 1999--(Concluded)
The value of investments in the Funds 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. Lacking any sales, securities are valued at the mean between
closing bid and asked prices (except the Loomis Sayles High Yield Bond
Portfolio, which values such securities at 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 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, first, by using the mean between
last current bid and asked prices or, second, by using last available closing
price (except the Scudder Global Equity Portfolio which second values such
securities at last current bid or third, by using last available price).
Domestic securities traded on over-the-counter markets are valued at the
mean between 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 would value such security, first, at last
sale price and, second, at bid price or the Scudder Global Equity and the
Neuberger Berman Partners Mid Cap Value Portfolios that value such securities,
first, at last sale price and, second, at last bid price). All non-U.S.
securities traded on over-the-counter securities markets 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
(except the Neuberger Berman Partners Mid Cap Value Portfolio which is valued
at the mean between closing bid and asked prices). Where market quotations are
not readily available for 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 its delegates believe accurately reflects fair value. Portfolio
securities that are traded both on over-the-counter markets and on a stock
exchange are valued according to the broadest and most representative market.
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,
including valuations furnished by a pricing service retained for this purpose
and typically utilized by other institutional-sized trading organizations.
Forward foreign exchange contracts are valued based on the closing prices of
the forward currency contract rates in 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 method as securities having a maturity of
more than sixty days.
Options 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. If
no sales have occurred, options are valued at the mean between 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 deposits 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.
For this purpose, value is the value 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.
31
<PAGE> 1
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
METROPOLITAN LIFE INSURANCE COMPANY
Independent Auditors' Report................................
Consolidated Statements of Income for the years ended
December 31, 1999, 1998 and 1997..........................
Consolidated Balance Sheets at December 31, 1999 and 1998...
Consolidated Statements of Equity for the years ended
December 31, 1999, 1998 and 1997..........................
Consolidated Statements of Cash Flows for the years ended
December 31, 1999, 1998 and 1997..........................
Notes to Consolidated Financial Statements..................
</TABLE>
<PAGE> 2
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Policyholders of
Metropolitan Life Insurance Company:
We have audited the accompanying consolidated balance sheets of
Metropolitan Life Insurance Company and subsidiaries (the "Company") as of
December 31, 1999 and 1998, and the related consolidated statements of income,
equity and cash flows for each of the three years in the period ended December
31, 1999. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the consolidated financial position of Metropolitan Life
Insurance Company and subsidiaries at December 31, 1999 and 1998, and the
consolidated results of their operations and their consolidated cash flows for
each of the three years in the period ended December 31, 1999 in conformity with
generally accepted accounting principles.
Deloitte & Touche LLP
New York, New York
February 7, 2000
<PAGE> 3
METROPOLITAN LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(IN MILLIONS)
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
REVENUES
Premiums.................................................... $12,088 $11,503 $11,278
Universal life and investment-type product policy fees...... 1,438 1,360 1,418
Net investment income....................................... 9,816 10,228 9,491
Other revenues.............................................. 2,154 1,994 1,491
Net realized investment gains (losses) (net of amounts
allocable to other accounts of $(67), $608 and $231,
respectively)............................................. (70) 2,021 787
------- ------- -------
25,426 27,106 24,465
------- ------- -------
EXPENSES
Policyholder benefits and claims (excludes amounts directly
related to net realized investment gains (losses) of
$(21), $368 and $161, respectively)....................... 13,105 12,638 12,403
Interest credited to policyholder account balances.......... 2,441 2,711 2,878
Policyholder dividends...................................... 1,690 1,651 1,742
Other expenses (excludes amounts directly related to net
realized investment gains (losses) of $(46), $240 and $70,
respectively)............................................. 6,755 8,019 5,771
------- ------- -------
23,991 25,019 22,794
------- ------- -------
Income before provision for income taxes and extraordinary
item...................................................... 1,435 2,087 1,671
Provision for income taxes.................................. 593 740 468
------- ------- -------
Income before extraordinary item............................ 842 1,347 1,203
Extraordinary item -- demutualization expense............... 225 4 --
------- ------- -------
Net income.................................................. $ 617 $ 1,343 $ 1,203
======= ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 4
METROPOLITAN LIFE INSURANCE COMPANY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1999 AND 1998
(IN MILLIONS)
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
ASSETS
Investments:
Fixed maturities available-for-sale, at fair value........ $ 96,981 $100,767
Equity securities, at fair value.......................... 2,006 2,340
Mortgage loans on real estate............................. 19,739 16,827
Real estate and real estate joint ventures................ 5,649 6,287
Policy loans.............................................. 5,598 5,600
Other limited partnership interests....................... 1,331 1,047
Short-term investments.................................... 3,055 1,369
Other invested assets..................................... 1,501 1,484
-------- --------
135,860 135,721
Cash and cash equivalents................................... 2,789 3,301
Accrued investment income................................... 1,725 1,994
Premiums and other receivables.............................. 6,681 5,972
Deferred policy acquisition costs........................... 8,492 6,538
Deferred income taxes....................................... 603 --
Other....................................................... 4,141 3,752
Separate account assets..................................... 64,941 58,068
-------- --------
$225,232 $215,346
======== ========
LIABILITIES AND EQUITY
Liabilities:
Future policy benefits...................................... $ 73,582 $ 72,701
Policyholder account balances............................... 45,901 46,494
Other policyholder funds.................................... 4,498 4,061
Policyholder dividends payable.............................. 974 947
Short-term debt............................................. 4,208 3,585
Long-term debt.............................................. 2,514 2,903
Current income taxes payable................................ 548 403
Deferred income taxes payable............................... -- 545
Other....................................................... 14,376 10,772
Separate account liabilities................................ 64,941 58,068
-------- --------
211,542 200,479
-------- --------
Commitments and contingencies (Note 9)
Equity:
Retained earnings........................................... 14,100 13,483
Accumulated other comprehensive income (loss)............... (410) 1,384
-------- --------
13,690 14,867
-------- --------
$225,232 $215,346
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 5
METROPOLITAN LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(IN MILLIONS)
<TABLE>
<CAPTION>
ACCUMULATED OTHER
COMPREHENSIVE INCOME (LOSS)
-----------------------------------------
NET FOREIGN MINIMUM
UNREALIZED CURRENCY PENSION
COMPREHENSIVE RETAINED INVESTMENT TRANSLATION LIABILITY
TOTAL INCOME (LOSS) EARNINGS GAINS (LOSSES) ADJUSTMENT ADJUSTMENT
----- ------------- -------- -------------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1997....... $11,983 $10,937 $ 1,028 $ 18 $ --
Comprehensive income:
Net income..................... 1,203 $ 1,203 1,203
-------
Other comprehensive income:
Unrealized investment gains,
net of related offsets,
reclassification
adjustments and income
taxes...................... 870 870
Foreign currency translation
adjustments................ (49) (49)
-------
Other comprehensive income... 821 821
-------
Comprehensive income........... $ 2,024
=======
------- ------- ------- ----- ----
Balance at December 31, 1997..... 14,007 12,140 1,898 (31) --
Comprehensive income:
Net income..................... 1,343 $ 1,343 1,343
-------
Other comprehensive loss:
Unrealized investment losses,
net of related offsets,
reclassification
adjustments and income
taxes...................... (358) (358)
Foreign currency translation
adjustments................ (113) (113)
Minimum pension liability
adjustment................. (12) (12)
-------
Other comprehensive loss..... (483) (483)
-------
Comprehensive income........... $ 860
=======
------- ------- ------- ----- ----
Balance at December 31, 1998..... 14,867 13,483 1,540 (144) (12)
Comprehensive loss:
Net income..................... 617 $ 617 617
-------
Other comprehensive loss:
Unrealized investment losses,
net of related offsets,
reclassification
adjustments and income
taxes...................... (1,837) (1,837)
Foreign currency translation
adjustments................ 50 50
Minimum pension liability
adjustment................. (7) (7)
-------
Other comprehensive loss..... (1,794) (1,794)
-------
Comprehensive loss............. $(1,177)
=======
------- ------- ------- ----- ----
Balance at December 31, 1999..... $13,690 $14,100 $ (297) $ (94) $(19)
======= ======= ======= ===== ====
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 6
METROPOLITAN LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(IN MILLIONS)
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income.................................................. $ 617 $ 1,343 $ 1,203
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization expenses.................. 173 56 (36)
(Gains) losses from sales of investments and businesses,
net................................................... 137 (2,629) (1,018)
Change in undistributed income of real estate joint
ventures and other limited partnership interests...... (322) (91) 157
Interest credited to policyholder account balances...... 2,441 2,711 2,878
Universal life and investment-type product policy
fees.................................................. (1,438) (1,360) (1,418)
Change in accrued investment income..................... 269 (181) (215)
Change in premiums and other receivables................ (619) (2,681) (792)
Change in deferred policy acquisition costs, net........ (389) (188) (159)
Change in insurance related liabilities................. 2,248 1,481 2,364
Change in income taxes payable.......................... 22 251 (99)
Change in other liabilities............................. 857 2,390 (206)
Other, net.............................................. (131) (260) 213
-------- -------- --------
Net cash provided by operating activities................... 3,865 842 2,872
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Sales, maturities and repayments of:
Fixed maturities........................................ 73,120 57,857 75,346
Equity securities....................................... 760 3,085 1,821
Mortgage loans on real estate........................... 1,992 2,296 2,784
Real estate and real estate joint ventures.............. 1,062 1,122 2,046
Other limited partnership interests..................... 469 146 166
Purchases of:
Fixed maturities........................................ (72,253) (67,543) (76,603)
Equity securities....................................... (410) (854) (2,121)
Mortgage loans on real estate........................... (4,395) (2,610) (4,119)
Real estate and real estate joint ventures.............. (341) (423) (624)
Other limited partnership interests..................... (465) (723) (338)
Net change in short-term investments...................... (1,577) (761) 63
Net change in policy loans................................ 2 133 17
Purchase of businesses, net of cash received.............. (2,972) -- (430)
Proceeds from sales of businesses......................... -- 7,372 135
Net change in investment collateral....................... 2,692 3,769 --
Other, net................................................ (73) (183) 191
-------- -------- --------
Net cash provided by (used in) investing activities......... (2,389) 2,683 (1,666)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Policyholder account balances:
Deposits................................................ 18,428 19,361 16,061
Withdrawals............................................. (20,650) (21,706) (18,831)
Short-term debt, net...................................... 623 (1,002) 1,265
Long-term debt issued..................................... 44 693 989
Long-term debt repaid..................................... (433) (481) (104)
-------- -------- --------
Net cash used in financing activities....................... (1,988) (3,135) (620)
-------- -------- --------
Change in cash and cash equivalents......................... (512) 390 586
Cash and cash equivalents, beginning of year................ 3,301 2,911 2,325
-------- -------- --------
CASH AND CASH EQUIVALENTS, END OF YEAR...................... $ 2,789 $ 3,301 $ 2,911
======== ======== ========
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest.................................................. $ 388 $ 367 $ 422
======== ======== ========
Income taxes.............................................. $ 587 $ 579 $ 589
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 7
METROPOLITAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS ARE IN MILLIONS UNLESS OTHERWISE STATED.)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS
Metropolitan Life Insurance Company ("MetLife") and its subsidiaries (the
"Company") is a leading provider of insurance and financial services to a broad
section of institutional and individual customers. The Company offers life
insurance, annuities and mutual funds to individuals and group insurance and
retirement and savings products and services to corporations and other
institutions.
PLAN OF REORGANIZATION
On September 28, 1999, the board of directors of MetLife adopted, pursuant
to the New York Insurance Law, a plan of reorganization, and subsequently
adopted amendments to the plan, pursuant to which MetLife proposes to convert
from a mutual life insurance company to a stock life insurance company and
become a wholly-owned subsidiary of MetLife, Inc. The plan was approved by
MetLife's voting policyholders on February 7, 2000. The plan will become
effective at such time as the New York Superintendent of Insurance
("Superintendent") approves it based on finding, among other things, that the
plan is fair and equitable to policyholders. The plan requires an initial public
offering of common stock and provides for other capital raising transactions on
the effective date of the plan.
On the date the plan of reorganization becomes effective, each
policyholder's membership interest will be extinguished and each eligible
policyholder will be entitled to receive, in exchange for that interest, trust
interests representing shares of common stock of MetLife, Inc. to be held in a
trust, cash or an adjustment to their policy values in the form of policy
credits, as provided in the plan. In addition, when MetLife demutualizes,
MetLife's Canadian branch will make cash payments to holders of certain policies
transferred to Clarica Life Insurance Company ("Clarica Life") in connection
with the sale of a substantial portion of MetLife's Canadian operations in 1998.
See Note 9.
The plan of reorganization requires that MetLife establish and operate a
closed block for the benefit of holders of certain individual life insurance
policies of MetLife. Assets will be allocated to the closed block in an amount
that is expected to produce cash flows which, together with anticipated revenue
from the policies included in the closed block, are reasonably expected to be
sufficient to support obligations and liabilities relating to these policies,
including, but not limited to, provisions for the payment of claims and certain
expenses and taxes, and for the continuation of policyholder dividend scales in
effect for 1999, if the experience underlying such dividend scales continues,
and for appropriate adjustments in such scales if the experience changes. The
closed block assets, the cash flows generated by the closed block assets and the
anticipated revenues from the policies in the closed block will benefit only the
holders of these policies included in the closed block. To the extent that, over
time, cash flows from the assets allocated to the closed block and claims and
other experience relating to the closed block are, in the aggregate, more or
less favorable than assumed in establishing the closed block, total dividends
paid to the closed block policyholders in the future may be greater than or less
than which would have been paid to these policyholders if the policyholder
dividend scales in effect for 1999 had been continued. Any cash flows in excess
of amounts assumed will be available for distribution over time to closed block
policyholders and will not be available to stockholders. The closed block will
continue in effect until the last policy in the closed block is no longer in
force.
<PAGE> 8
METROPOLITAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The accounting principles to account for the participating policies
included in the closed block will be those used prior to the date of the
demutualization. However, a policyholder dividend obligation will be established
for earnings that will be paid to policyholders as additional dividends in the
amounts described below, unless these earnings are offset by future unfavorable
experience in the closed block. Although all of the cash flows of the closed
block are for the benefit of closed block policyholders, the excess of closed
block liabilities over closed block assets at the effective date will represent
the estimated maximum future contributions from the closed block expected to be
reported in income as the contribution from the closed block after income taxes.
The contribution from the closed block will be recognized in income over the
period the policies and contracts in the closed block remain in force.
Management believes that over time the actual cumulative contributions from the
closed block will approximately equal the expected cumulative contributions, due
to the effect of dividend changes. If, over the period the closed block remains
in existence, the actual cumulative contribution from the closed block is
greater than the expected cumulative contribution from the closed block, the
expected cumulative contribution will be recognized in income with the excess
recorded as a policyholder dividend obligation, because the excess of the actual
cumulative contribution from the closed block over the expected cumulative
contribution will be paid to closed block policyholders as additional
policyholder dividends unless offset by future unfavorable experience of the
closed block. If over such period, the actual cumulative contribution from the
closed block is less than the expected cumulative contribution from the closed
block, the actual contribution will be recognized in income. However, dividends
in the future may be changed, which would be intended to increase future actual
contribution until the actual contribution equal the expected cumulative
contribution.
BASIS OF PRESENTATION
The accompanying consolidated financial statements have been prepared in
conformity with generally accepted accounting principles ("GAAP"). The New York
State Insurance Department (the "Department") recognizes only statutory
accounting practices for determining and reporting the financial condition and
results of operations of an insurance company for determining solvency under the
New York Insurance Law. No consideration is given by the Department to financial
statements prepared in accordance with GAAP in making such determination.
The preparation of financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the dates of
the financial statements and the reported amounts of revenues and expenses
during the reporting periods. The most significant estimates include those used
in determining deferred policy acquisition costs, investment allowances and the
liability for future policyholder benefits. Actual results could differ from
those estimates.
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of
MetLife and its subsidiaries, partnerships and joint ventures in which MetLife
has a majority voting interest or general partner interest with limited removal
rights by limited partners. All material intercompany accounts and transactions
have been eliminated.
The Company accounts for its investments in real estate joint ventures and
other limited partnership interests in which it does not have a controlling
interest, but more than a minimal interest, under the equity method of
accounting.
Minority interest related to consolidated entities included in other
liabilities was $245 and $274 at December 31, 1999 and 1998, respectively.
<PAGE> 9
METROPOLITAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Certain amounts in the prior years' consolidated financial statements have
been reclassified to conform with the 1999 presentation.
INVESTMENTS
The Company's fixed maturity and equity securities are classified as
available-for-sale and are reported at their estimated fair value. Unrealized
investment gains and losses on securities are recorded as a separate component
of other comprehensive income (loss), net of policyholder related amounts and
deferred income taxes. The cost of fixed maturity and equity securities is
adjusted for impairments in value deemed to be other than temporary. These
adjustments are recorded as realized losses on investments. Realized gains and
losses on sales of securities are determined on a specific identification basis.
All security transactions are recorded on a trade date basis.
Mortgage loans on real estate are stated at amortized cost, net of
valuation allowances. Valuation allowances are established for the excess
carrying value of the mortgage loan over its estimated fair value when it is
probable that, based upon current information and events, the Company will be
unable to collect all amounts due under the contractual terms of the loan
agreement. Valuation allowances are based upon the present value of expected
future cash flows discounted at the loan's original effective interest rate or
the collateral value if the loan is collateral dependent. Interest income earned
on impaired loans is accrued on the net carrying value amount of the loan based
on the loan's effective interest rate.
Real estate, including related improvements, is stated at cost less
accumulated depreciation. Depreciation is provided on a straight-line basis over
the estimated useful life of the asset (typically 20 to 40 years). Cost is
adjusted for impairment whenever events or changes in circumstances indicate the
carrying amount of the asset may not be recoverable. Impaired real estate is
written down to estimated fair value with the impairment loss being included in
realized losses on investments. Impairment losses are based upon the estimated
fair value of real estate, which is generally computed using the present value
of expected future cash flows from the real estate discounted at a rate
commensurate with the underlying risks. Real estate acquired in satisfaction of
debt is recorded at estimated fair value at the date of foreclosure. Valuation
allowances on real estate held-for-sale are computed using the lower of
depreciated cost or estimated fair value, net of disposition costs.
Policy loans are stated at unpaid principal balances.
Short-term investments are stated at amortized cost, which approximates
fair value.
DERIVATIVE INSTRUMENTS
The Company uses derivative instruments to manage market risk through one
of four principal risk management strategies: the hedging of invested assets,
liabilities, portfolios of assets or liabilities and anticipated transactions.
The Company's derivative strategy employs a variety of instruments including
financial futures, financial forwards, interest rate and foreign currency swaps,
floors, foreign exchange contracts, caps and options.
The Company's derivative program is monitored by senior management. The
Company's risk of loss is typically limited to the fair value of its derivative
instruments and not to the notional or contractual amounts of these derivatives.
Risk arises from changes in the fair value of the underlying instruments and,
with respect to over-the-counter transactions, from the possible inability of
counterparties to meet the terms of the contracts. The Company has strict
policies regarding the financial stability and credit standing of its major
counterparties.
<PAGE> 10
METROPOLITAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company's derivative instruments are designated as hedges and are
highly correlated to the underlying risk at contract inception. The Company
monitors the effectiveness of its hedges throughout the contract term using an
offset ratio of 80 to 125 percent as its minimum acceptable threshold for hedge
effectiveness. Derivative instruments that lose their effectiveness are marked
to market through net investment income.
Gains or losses on financial futures contracts entered into in anticipation
of investment transactions are deferred and, at the time of the ultimate
investment purchase or disposition, recorded as an adjustment to the basis of
the purchased assets or to the proceeds on disposition. Gains or losses on
financial futures used in asset risk management are deferred and amortized into
net investment income over the remaining term of the investment. Gains or losses
on financial futures used in portfolio risk management are deferred and
amortized into net investment income or policyholder benefits over the remaining
life of the hedged sector of the underlying portfolio.
Financial forward contracts that are entered into to purchase securities
are marked to fair value through other comprehensive income (loss), similar to
the accounting for the investment security. Such contracts are accounted for at
settlement by recording the purchase of the specified securities at the
contracted value. Gains or losses resulting from the termination of forward
contracts are recognized immediately as a component of net investment income.
Interest rate and certain foreign currency swaps involve the periodic
exchange of payments without the exchange of underlying principal or notional
amounts. Net receipts or payments are accrued and recognized over the term of
the swap agreement as an adjustment to net investment income or other expense.
Gains or losses resulting from swap terminations are amortized over the
remaining term of the underlying asset or liability. Gains and losses on swaps
and certain foreign forward exchange contracts entered into in anticipation of
investment transactions are deferred and, at the time of the ultimate investment
purchase or disposition, reflected as an adjustment to the basis of the
purchased assets or to the proceeds of disposition. In the event the asset or
liability underlying a swap is disposed of, the swap position is closed
immediately and any gain or loss is recorded as an adjustment to the proceeds
from disposition.
The Company periodically enters into collars, which consist of purchased
put and written call options, to lock in unrealized gains on equity securities.
Collars are marked to market through other comprehensive income (loss), similar
to the accounting for the underlying equity securities. Purchased interest rate
caps and floors are used to offset the risk of interest rate changes related to
insurance liabilities. Premiums paid on floors, caps and options are split into
two components, time value and intrinsic value. Time value is amortized over the
life of the applicable derivative instrument. The intrinsic value and any gains
or losses relating to these derivative instruments adjust the basis of the
underlying asset or liability and are recognized as a component of net
investment income over the term of the underlying asset or liability being
hedged as an adjustment to the yield.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents.
<PAGE> 11
METROPOLITAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Property, equipment and leasehold improvements, which are included in other
assets, are stated at cost, less accumulated depreciation and amortization.
Depreciation is determined using either the straight-line or
sum-of-the-years-digits method over the estimated useful lives of the assets.
Estimated lives range from 20 to 40 years for real estate and 5 to 15 years for
all other property and equipment. Accumulated depreciation of property and
equipment and accumulated amortization on leasehold improvements was $1,130 and
$1,098 at December 31, 1999 and 1998, respectively. Related depreciation and
amortization expense was $103, $116 and $103 for the years ended December 31,
1999, 1998 and 1997, respectively.
DEFERRED POLICY ACQUISITION COSTS
The costs of acquiring new insurance business that vary with, and are
primarily related to, the production of new business are deferred. Such costs,
which consist principally of commissions, agency and policy issue expenses, are
amortized with interest over the expected life of the contract for participating
traditional life, universal life and investment-type products. Generally,
deferred policy acquisition costs are amortized in proportion to the present
value of estimated gross margins or profits from investment, mortality, expense
margins and surrender charges. Interest rates are based on rates in effect at
the inception of the contracts. Actual gross margins or profits can vary from
management's estimates resulting in increases or decreases in the rate of
amortization. Management periodically updates these estimates and evaluates the
recoverability of deferred policy acquisition costs. When appropriate,
management revises its assumptions of the estimated gross margins or profits of
these contracts, and the cumulative amortization is re-estimated and adjusted by
a cumulative charge or credit to current operations.
Deferred policy acquisition costs for non-participating traditional life,
non-medical health and annuity policies with life contingencies are amortized in
proportion to anticipated premiums. Assumptions as to anticipated premiums are
made at the date of policy issuance and are consistently applied during the
lives of the contracts. Deviations from estimated experience are included in
operations when they occur. For these contracts, the amortization period is
typically the estimated life of the policy.
Deferred policy acquisition costs related to internally replaced contracts
are expensed at date of replacement.
Deferred policy acquisition costs for property and casualty insurance
contracts, which are primarily comprised of commissions and certain underwriting
expenses, are deferred and amortized on a pro rata basis over the applicable
contract term or reinsurance treaty.
On September 28, 1999, the Company's Board of Directors adopted a plan of
reorganization. Consequently, in the fourth quarter of 1999, the Company was
able to commit to state insurance regulatory authorities that it would establish
investment sub-segments to further align investments with the traditional
individual life business of the Individual segment. As a result, future
dividends for the traditional individual life business will be determined based
on the results of the new investment sub-segments. Additionally, estimated
future gross margins used to determine amortization of deferred policy
acquisition costs and the amount of unrealized investment gains and losses
relating to these products are based on investments in the new sub-segments.
Using the investments in the sub-segments to determine estimated gross margins
and unrealized investment gains and losses increased 1999 amortization of
deferred policy acquisition costs by $56 (net of income taxes of $32) and
decreased other comprehensive loss in 1999 by $123 (net of income taxes of $70).
<PAGE> 12
METROPOLITAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Information regarding deferred policy acquisition costs is as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Balance at January 1.................................. $ 6,538 $6,436 $7,227
Capitalized during the year........................... 1,160 1,025 1,000
------- ------ ------
Total............................................ 7,698 7,461 8,227
------- ------ ------
Amortization allocated to:
Net realized investment gains (losses).............. (46) 240 70
Unrealized investment gains (losses)................ (1,628) (216) 727
Other expenses...................................... 862 587 771
------- ------ ------
Total amortization............................... (812) 611 1,568
------- ------ ------
Dispositions and other................................ (18) (312) (223)
------- ------ ------
Balance at December 31................................ $ 8,492 $6,538 $6,436
======= ====== ======
</TABLE>
Amortization of deferred policy acquisition costs is allocated to (1)
realized investment gains and losses to provide consolidated statement of income
information regarding the impact of such gains and losses on the amount of the
amortization, (2) unrealized investment gains and losses to provide information
regarding the amount of deferred policy acquisition costs that would have been
amortized if such gains and losses had been realized and (3) other expenses to
provide amounts related to the gross margins or profits originating from
transactions other than investment gains and losses.
Realized investment gains and losses related to certain products have a
direct impact on the amortization of deferred policy acquisition costs.
Presenting realized investment gains and losses net of related amortization of
deferred policy acquisition costs provides information useful in evaluating the
operating performance of the Company. This presentation may not be comparable to
presentations made by other insurers.
INTANGIBLE ASSETS
The excess of cost over the fair value of net assets acquired ("goodwill")
and other intangible assets, including the value of business acquired, are
included in other assets. Goodwill is amortized on a straight-line basis over a
period ranging from 10 to 30 years. The Company continually reviews goodwill to
assess recoverability from future operations using undiscounted cash flows.
Impairments are recognized in operating results if a permanent diminution in
value is deemed to have occurred. Other intangible assets are amortized over the
expected policy or contract duration in relation to the present value of
estimated gross profits from such policies and contracts.
<PAGE> 13
METROPOLITAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
GOODWILL OTHER INTANGIBLE ASSETS
-------------------- --------------------------
1999 1998 1997 1999 1998 1997
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
YEARS ENDED DECEMBER 31
Net Balance at January 1.............. $404 $359 $136 $1,006 $1,055 $ 767
Acquisitions.......................... 237 67 240 156 39 355
Amortization.......................... (30) (22) (17) (114) (88) (67)
---- ---- ---- ------ ------ ------
Net Balance at December 31............ $611 $404 $359 $1,048 $1,006 $1,055
==== ==== ==== ====== ====== ======
DECEMBER 31
Accumulated amortization.............. $118 $ 88 $ 392 $ 278
==== ==== ====== ======
</TABLE>
FUTURE POLICY BENEFITS AND POLICYHOLDER ACCOUNT BALANCES
Future policy benefit liabilities for participating traditional life
insurance policies are equal to the aggregate of (a) net level premium reserves
for death and endowment policy benefits (calculated based upon the nonforfeiture
interest rate, ranging from 3% to 10%, and mortality rates guaranteed in
calculating the cash surrender values described in such contracts), (b) the
liability for terminal dividends and (c) premium deficiency reserves, which are
established when the liabilities for future policy benefits plus the present
value of expected future gross premiums are insufficient to provide for expected
future policy benefits and expenses after deferred policy acquisition costs are
written off.
Future policy benefit liabilities for traditional annuities are equal to
accumulated contractholder fund balances during the accumulation period and the
present value of expected future payments after annuitization. Interest rates
used in establishing such liabilities range from 3% to 8%. Future policy benefit
liabilities for non-medical health insurance are calculated using the net level
premium method and assumptions as to future morbidity, withdrawals and interest,
which provide a margin for adverse deviation. Interest rates used in
establishing such liabilities range from 3% to 10%. Future policy benefit
liabilities for disabled lives are estimated using the present value of benefits
method and experience assumptions as to claim terminations, expenses and
interest. Interest rates used in establishing such liabilities range from 3% to
10%.
Policyholder account balances for universal life and investment-type
contracts are equal to the policy account values, which consist of an
accumulation of gross premium payments plus credited interest, ranging from 2%
to 17%, less expenses, mortality charges and withdrawals.
The liability for unpaid claims and claim expenses for property and
casualty insurance represents the amount estimated for claims that have been
reported but not settled and claims incurred but not reported. Liabilities for
unpaid claims are estimated based upon the Company's historical experience and
other actuarial assumptions that consider the effects of current developments,
anticipated trends and risk management programs. Revisions of these estimates
are included in operations in the year such refinements are made.
RECOGNITION OF INSURANCE REVENUE AND RELATED BENEFITS
Premiums related to traditional life and annuity policies with life
contingencies are recognized as revenues when due. Benefits and expenses are
provided against such revenues to recognize profits over the estimated lives of
the policies. When premiums are due over a significantly shorter period than the
period over which benefits are provided, any excess profit is deferred and
recognized into operations in a constant relationship to insurance in-force or,
for annuities, the amount of expected future policy benefit payments.
<PAGE> 14
METROPOLITAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Premiums related to non-medical health contracts are recognized on a pro
rata basis over the applicable contract term.
Premiums related to universal life and investment-type products are
credited to policyholder account balances. Revenues from such contracts consist
of amounts assessed against policyholder account balances for mortality, policy
administration and surrender charges. Amounts that are charged to operations
include interest credited and benefit claims incurred in excess of related
policyholder account balances.
Premiums related to property and casualty contracts are recognized as
revenue on a pro rata basis over the applicable contract term. Unearned premiums
are included in other liabilities.
DIVIDENDS TO POLICYHOLDERS
Dividends to policyholders are determined annually by the board of
directors. The aggregate amount of policyholders' dividends is related to actual
interest, mortality, morbidity and expense experience for the year, as well as
management's judgment as to the appropriate level of statutory surplus to be
retained by MetLife and its insurance subsidiaries.
DIVIDEND RESTRICTIONS
MetLife, when it converts from a mutual life insurance company to a stock
life insurance company, may be restricted as to the amounts it may pay as
dividends to MetLife, Inc. Under the New York Insurance Law, the Superintendent
has broad discretion to determine whether the financial condition of a stock
life insurance company would support the payment of dividends to its
shareholders. The Department has established informal guidelines for the
Superintendent's determinations which focus upon, among other things, the
overall financial condition and profitability of the insurer under statutory
accounting practices.
PARTICIPATING BUSINESS
Participating business represented approximately 19% and 21% of the
Company's life insurance in-force, and 84% and 81% of the number of life
insurance policies in-force, at December 31, 1999 and 1998, respectively.
Participating policies represented approximately 42% and 44%, 39% and 40%, and
41% and 41% of gross and net life insurance premiums for the years ended
December 31, 1999, 1998 and 1997, respectively.
INCOME TAXES
MetLife and its includable life insurance and non-life insurance
subsidiaries file a consolidated U.S. federal income tax return in accordance
with the provisions of the Internal Revenue Code, as amended (the "Code"). Under
the Code, the amount of federal income tax expense incurred by mutual life
insurance companies includes an equity tax calculated based upon a prescribed
formula that incorporates a differential earnings rate between stock and mutual
life insurance companies. MetLife will not be subject to the equity tax when it
converts to a stock life insurance company. The future tax consequences of
temporary differences between financial reporting and tax bases of assets and
liabilities are measured at the balance sheet dates and are recorded as deferred
income tax assets and liabilities.
REINSURANCE
The Company has reinsured certain of its life insurance and property and
casualty insurance contracts with other insurance companies under various
agreements. Amounts due from
<PAGE> 15
METROPOLITAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
reinsurers are estimated based upon assumptions consistent with those used in
establishing the liabilities related to the underlying reinsured contracts.
Policy and contract liabilities are reported gross of reinsurance credits.
Deferred policy acquisition costs are reduced by amounts recovered under
reinsurance contracts. Amounts received from reinsurers for policy
administration are reported in other revenues.
SEPARATE ACCOUNTS
Separate accounts are established in conformity with insurance laws and are
generally not chargeable with liabilities that arise from any other business of
the Company. Separate account assets are subject to general account claims only
to the extent the value of such assets exceeds the separate account liabilities.
Investments (stated at estimated fair value) and liabilities of the separate
accounts are reported separately as assets and liabilities. Deposits to separate
accounts, investment income and realized and unrealized gains and losses on the
investments of the separate accounts accrue directly to contractholders and,
accordingly, are not reflected in the Company's consolidated statements of
income and cash flows. Mortality, policy administration and surrender charges to
all separate accounts are included in revenues. See Note 6.
FOREIGN CURRENCY TRANSLATION
Balance sheet accounts of foreign operations are translated at the exchange
rates in effect at each year-end and income and expense accounts are translated
at the average rates of exchange prevailing during the year. The local
currencies of foreign operations are the functional currencies unless the local
economy is highly inflationary. Translation adjustments are charged or credited
directly to other comprehensive income (loss). Gains and losses from foreign
currency transactions are reported in other expenses and were insignificant for
all years presented.
EXTRAORDINARY ITEM -- DEMUTUALIZATION EXPENSE
The accompanying consolidated statements of income include extraordinary
charges of $225 (net of income taxes of $35) and $4 (net of income taxes of $2)
for the years ended December 31, 1999 and 1998, respectively, related to costs
associated with the demutualization.
APPLICATION OF ACCOUNTING PRONOUNCEMENTS
Effective January 1, 1999, the Company adopted Statement of Position
("SOP") 98-5, Reporting on the Costs of Start-Up Activities ("SOP 98-5"). SOP
98-5 broadly defines start-up activities. SOP 98-5 requires costs of start-up
activities and organization costs to be expensed as incurred. Adoption of SOP
98-5 did not have a material effect on the Company's consolidated financial
statements.
Effective January 1, 1999, the Company adopted SOP 98-1, Accounting for the
Costs of Computer Software Developed or Obtained for Internal Use ("SOP 98-1").
SOP 98-1 provides guidance for determining when an entity should capitalize or
expense external and internal costs of computer software developed or obtained
for internal use. Adoption of the provisions of SOP 98-1 had the effect of
increasing other assets by $82 at December 31, 1999.
Effective January 1, 1999, the Company adopted SOP 97-3, Accounting for
Insurance and Other Enterprises for Insurance Related Assessments ("SOP 97-3").
SOP 97-3 provides guidance on accounting by insurance and other enterprises for
assessments related to insurance activities including recognition, measurement
and disclosure of guaranty fund and other insurance related
<PAGE> 16
METROPOLITAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
assessments. Adoption of SOP 97-3 did not have a material effect on the
Company's consolidated financial statements.
In 1998, the Company adopted the provisions of Statement of Financial
Accounting Standards No. 125, Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities ("SFAS 125") which were
deferred by SFAS 127, Deferral of the Effective Date of Certain Provisions of
FASB Statement No. 125. The deferred provisions provide accounting and reporting
standards related to repurchase agreements, dollar rolls, securities lending and
similar transactions. Adoption of the provisions had the effect of increasing
assets and liabilities by $3,769 at December 31, 1998 and increasing other
revenues and other expenses by $266 for the year ended December 31, 1998.
During 1997, the Company changed to the retrospective interest method of
accounting for investment income on structured notes in accordance with Emerging
Issues Task Force Consensus No. 96-12, Recognition of Interest Income and
Balance Sheet Classification of Structured Notes. This accounting change
increased 1997 net investment income by $175, which included an immaterial
amount related to prior years.
In June 1999, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 137, Accounting for Derivative Instruments
and Hedging Activities -- Deferral of the Effective Date of FASB Statement No.
133 ("SFAS 137"). SFAS 137 defers the provisions of Statement of Financial
Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging
Activities ("SFAS 133") until January 1, 2001. SFAS 133 requires, among other
things, that all derivatives be recognized in the consolidated balance sheets as
either assets or liabilities and measured at fair value. The corresponding
derivative gains and losses should be reported based upon the hedge
relationship, if such a relationship exists. Changes in the fair value of
derivatives that are not designated as hedges or that do not meet the hedge
accounting criteria in SFAS 133 are required to be reported in income. The
Company is in the process of quantifying the impact of SFAS 133 on its
consolidated financial statements.
In October 1998, the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position ("SOP") 98-7, Accounting for Insurance
and Reinsurance Contracts That Do Not Transfer Insurance Risk ("SOP 98-7"). SOP
98-7 provides guidance on the method of accounting for insurance and reinsurance
contracts that do not transfer insurance risk, defined in the SOP as the deposit
method. SOP 98-7 classifies insurance and reinsurance contracts for which the
deposit method is appropriate into those that 1) transfer only significant
timing risk, 2) transfer only significant underwriting risk, 3) transfer neither
significant timing or underwriting risk and 4) have an indeterminate risk. The
Company is required to adopt SOP 98-7 as of January 1, 2000. Adoption of SOP
98-7 is not expected to have a material effect on the Company's consolidated
financial statements.
<PAGE> 17
METROPOLITAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2. INVESTMENTS
The components of net investment income were as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Fixed maturities.................................... $ 6,766 $ 6,563 $ 6,445
Equity securities................................... 40 78 50
Mortgage loans on real estate....................... 1,479 1,572 1,684
Real estate and real estate joint ventures.......... 1,426 1,529 1,718
Policy loans........................................ 340 387 368
Other limited partnership interests................. 199 196 302
Cash, cash equivalents and short-term investments... 173 187 169
Other............................................... 501 841 368
------- ------- -------
10,924 11,353 11,104
Less: Investment expenses........................... 1,108 1,125 1,613
------- ------- -------
$ 9,816 $10,228 $ 9,491
======= ======= =======
</TABLE>
Net realized investment gains (losses), including changes in valuation
allowances, were as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Fixed maturities........................................ $(538) $ 573 $ 118
Equity securities....................................... 99 994 224
Mortgage loans on real estate........................... 28 23 56
Real estate and real estate joint ventures.............. 265 424 446
Other limited partnership interests..................... 33 13 12
Sales of businesses..................................... -- 531 139
Other................................................... (24) 71 23
----- ------ ------
(137) 2,629 1,018
Amounts allocable to:
Future policy benefit loss recognition................ -- (272) (126)
Deferred policy acquisition costs..................... 46 (240) (70)
Participating contracts............................... 21 (96) (35)
----- ------ ------
$ (70) $2,021 $ 787
===== ====== ======
</TABLE>
Realized investment gains (losses) have been reduced by (1) additions to
future policy benefits resulting from the need to establish additional
liabilities due to the recognition of investment gains, (2) deferred policy
acquisition cost amortization to the extent that such amortization results from
realized investment gains and losses, and (3) additions to participating
contractholder accounts when amounts equal to such investment gains and losses
are credited to the contractholders' accounts. This presentation may not be
comparable to presentations made by other insurers.
<PAGE> 18
METROPOLITAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The components of net unrealized investment gains (losses), included in
accumulated other comprehensive income (loss), were as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Fixed maturities.................................... $(1,828) $ 4,809 $ 4,766
Equity securities................................... 875 832 1,605
Other invested assets............................... 165 154 294
------- ------- -------
(788) 5,795 6,665
------- ------- -------
Amounts allocable to:
Future policy benefit loss recognition............ (249) (2,248) (2,189)
Deferred policy acquisition costs................. 697 (931) (1,147)
Participating contracts........................... (118) (212) (312)
Deferred income taxes............................... 161 (864) (1,119)
------- ------- -------
491 (4,255) (4,767)
------- ------- -------
$ (297) $ 1,540 $ 1,898
======= ======= =======
</TABLE>
The changes in net unrealized investment gains (losses) were as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Balance at January 1.................................. $ 1,540 $1,898 $1,028
Unrealized investment gains (losses) during the
year................................................ (6,583) (870) 3,402
Unrealized investment (gains) losses relating to:
Future policy benefit loss recognition.............. 1,999 (59) (970)
Deferred policy acquisition costs................... 1,628 216 (727)
Participating contracts............................. 94 100 (303)
Deferred income taxes................................. 1,025 255 (532)
------- ------ ------
Balance at December 31................................ $ (297) $1,540 $1,898
======= ====== ======
Net change in unrealized investment gains (losses).... $(1,837) $ (358) $ 870
======= ====== ======
</TABLE>
<PAGE> 19
METROPOLITAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FIXED MATURITIES AND EQUITY SECURITIES
Fixed maturities and equity securities at December 31, 1999 were as
follows:
<TABLE>
<CAPTION>
COST OR GROSS UNREALIZED
AMORTIZED ---------------- ESTIMATED
COST GAIN LOSS FAIR VALUE
--------- ---- ---- ----------
<S> <C> <C> <C> <C>
Fixed Maturities:
Bonds:
U.S. Treasury securities and
obligations of U.S. government
corporations and agencies.......... $ 5,990 $ 456 $ 147 $ 6,299
States and political subdivisions.... 1,583 4 45 1,542
Foreign governments.................. 4,090 210 94 4,206
Corporate............................ 47,505 585 1,913 46,177
Mortgage and asset-backed
securities......................... 27,396 112 847 26,661
Other................................ 12,235 313 462 12,086
------- ------ ------ -------
98,799 1,680 3,508 96,971
Redeemable preferred stocks............. 10 -- -- 10
------- ------ ------ -------
$98,809 $1,680 $3,508 $96,981
======= ====== ====== =======
Equity Securities:
Common stocks........................... $ 980 $ 921 $ 35 $ 1,866
Nonredeemable preferred stocks.......... 151 -- 11 140
------- ------ ------ -------
$ 1,131 $ 921 $ 46 $ 2,006
======= ====== ====== =======
</TABLE>
Fixed maturities and equity securities at December 31, 1998 were as
follows:
<TABLE>
<CAPTION>
COST OR GROSS UNREALIZED
AMORTIZED ----------------- ESTIMATED
COST GAIN LOSS FAIR VALUE
--------- ---- ---- ----------
<S> <C> <C> <C> <C>
Fixed Maturities:
Bonds:
U.S. Treasury securities and
obligations of U.S. government
corporations and agencies.......... $ 6,640 $1,117 $ 10 $ 7,747
States and political subdivisions.... 597 26 -- 623
Foreign governments.................. 3,435 254 88 3,601
Corporate............................ 46,377 2,471 260 48,588
Mortgage and asset-backed
securities......................... 26,456 569 46 26,979
Other................................ 12,438 1,069 293 13,214
------- ------ ---- --------
95,943 5,506 697 100,752
Redeemable preferred stocks............. 15 -- -- 15
------- ------ ---- --------
$95,958 $5,506 $697 $100,767
======= ====== ==== ========
Equity Securities:
Common stocks........................... $ 1,286 $ 923 $ 77 $ 2,132
Nonredeemable preferred stocks.......... 222 4 18 208
------- ------ ---- --------
$ 1,508 $ 927 $ 95 $ 2,340
======= ====== ==== ========
</TABLE>
<PAGE> 20
METROPOLITAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company held foreign currency derivatives with notional amounts of
$4,002 and $716 to hedge the exchange rate risk associated with foreign bonds at
December 31, 1999 and 1998, respectively. The Company also held options with
fair values of $(11) to hedge the market value of common stocks at December 31,
1998.
At December 31, 1999, fixed maturities held by the Company that were below
investment grade or not rated by an independent rating agency had an estimated
fair value of $8,813. At December 31, 1999, non-income producing fixed
maturities were insignificant.
The amortized cost and estimated fair value of bonds at December 31, 1999,
by contractual maturity date, are shown below:
<TABLE>
<CAPTION>
AMORTIZED ESTIMATED
COST FAIR VALUE
--------- ----------
<S> <C> <C>
Due in one year or less............................... $ 3,180 $ 3,217
Due after one year through five years................. 18,152 18,061
Due after five years through ten years................ 23,755 23,114
Due after ten years................................... 26,316 25,918
------- -------
71,403 70,310
Mortgage and asset-backed securities.................. 27,396 26,661
------- -------
$98,799 $96,971
======= =======
</TABLE>
Fixed maturities not due at a single maturity date have been included in
the above table in the year of final maturity. Actual maturities may differ from
contractual maturities due to the exercise of prepayment options.
Sales of securities were as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Securities classified as available-for-sale:
Proceeds.......................................... $59,852 $46,913 $69,275
Gross realized gains.............................. $ 605 $ 2,053 $ 965
Gross realized losses............................. $ 911 $ 486 $ 627
Fixed maturities classified as held-to-maturity:
Proceeds.......................................... $ -- $ -- $ 352
Gross realized gains.............................. $ -- $ -- $ 5
Gross realized losses............................. $ -- $ -- $ 1
</TABLE>
Gross realized losses above exclude writedowns recorded during 1999 for
permanently impaired available-for-sale securities of $133.
During 1997, fixed maturities with an amortized cost of $11,682 were
transferred from held-to-maturity to available-for-sale. Other comprehensive
income at the date of reclassification was increased by $198 excluding the
effects of deferred income taxes and policyholder related amounts.
Excluding investments in U.S. governments and agencies, the Company is not
exposed to any significant concentration of credit risk in its fixed maturities
portfolio.
<PAGE> 21
METROPOLITAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SECURITIES LENDING PROGRAM
The Company participates in securities lending programs whereby large
blocks of securities, which are returnable to the Company on short notice and
included in investments, are loaned to third parties, primarily major brokerage
firms. The Company requires a minimum of 102% of the fair value of the loaned
securities to be separately maintained as collateral for the loans. Securities
with a cost or amortized cost of $6,458 and $4,005 and estimated fair value of
$6,391 and $4,552 were on loan under the program at December 31, 1999 and 1998,
respectively. The Company was liable for cash collateral under its control of
$6,461 and $3,769 at December 31, 1999 and 1998, respectively. This liability is
included in other liabilities. Security collateral on deposit from securities
borrowers is returnable to them on short notice and is not reflected in the
consolidated financial statements.
STATUTORY DEPOSITS
The Company had investment assets on deposit with regulatory agencies of
$476 and $466 at December 31, 1999 and 1998, respectively.
MORTGAGE LOANS ON REAL ESTATE
Mortgage loans were categorized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------
1999 1998
------------------ ------------------
AMOUNT PERCENT AMOUNT PERCENT
------ ------- ------ -------
<S> <C> <C> <C> <C>
Commercial mortgage loans.................. $14,931 75% $12,503 74%
Agricultural mortgage loans................ 4,816 24% 4,256 25%
Residential mortgage loans................. 82 1% 241 1%
------- --- ------- ---
19,829 100% 17,000 100%
=== ===
Less: Valuation allowances................. 90 173
------- -------
$19,739 $16,827
======= =======
</TABLE>
Mortgage loans on real estate are collateralized by properties primarily
located throughout the United States. At December 31, 1999, approximately 16%,
8% and 8% of the properties were located in California, New York and Florida,
respectively. Generally, the Company (as the lender) requires that a minimum of
one-fourth of the purchase price of the underlying real estate be paid by the
borrower.
Certain of the Company's real estate joint ventures have mortgage loans
with the Company. The carrying values of such mortgages were $547 and $606 at
December 31, 1999 and 1998, respectively.
<PAGE> 22
METROPOLITAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Changes in mortgage loan valuation allowances were as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Balance at January 1................................. $ 173 $ 289 $ 469
Additions............................................ 40 40 61
Deductions for writedowns and dispositions........... (123) (130) (241)
Deductions for disposition of affiliates............. -- (26) --
----- ----- -----
Balance at December 31............................... $ 90 $ 173 $ 289
===== ===== =====
</TABLE>
A portion of the Company's mortgage loans on real estate was impaired and
consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------
1999 1998
---- ----
<S> <C> <C>
Impaired mortgage loans with valuation allowances.......... $540 $ 823
Impaired mortgage loans without valuation allowances....... 437 375
---- ------
977 1,198
Less: Valuation allowances................................. 83 149
---- ------
$894 $1,049
==== ======
</TABLE>
The average investment in impaired mortgage loans on real estate was
$1,134, $1,282 and $1,680 for the years ended December 31, 1999, 1998 and 1997,
respectively. Interest income on impaired mortgages was $101, $109 and $110 for
the years ended December 31, 1999, 1998 and 1997, respectively.
The investment in restructured mortgage loans on real estate was $980 and
$1,140 at December 31, 1999 and 1998, respectively. Interest income of $80, $74
and $91 was recognized on restructured loans for the years ended December 31,
1999, 1998 and 1997, respectively. Gross interest income that would have been
recorded in accordance with the original terms of such loans amounted to $92,
$87 and $116 for the years ended December 31, 1999, 1998 and 1997, respectively.
Mortgage loans on real estate with scheduled payments of 60 days (90 days
for agriculture mortgages) or more past due or in foreclosure had an amortized
cost of $44 and $65 at December 31, 1999 and 1998, respectively.
<PAGE> 23
METROPOLITAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
REAL ESTATE AND REAL ESTATE JOINT VENTURES
Real estate and real estate joint ventures consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1999 1998
---- ----
<S> <C> <C>
Real estate and real estate joint ventures
held-for-investment....................................... $5,440 $6,301
Impairments................................................. (289) (408)
------ ------
5,151 5,893
------ ------
Real estate and real estate joint ventures held-for-sale.... 719 546
Impairments................................................. (187) (119)
Valuation allowance......................................... (34) (33)
------ ------
498 394
------ ------
$5,649 $6,287
====== ======
</TABLE>
Accumulated depreciation on real estate was $2,235 and $2,065 at December
31, 1999 and 1998, respectively. Related depreciation expense was $247, $282 and
$338 for the years ended December 31, 1999, 1998 and 1997, respectively.
Real estate and real estate joint ventures were categorized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------
1999 1998
----------------- -----------------
AMOUNT PERCENT AMOUNT PERCENT
------ ------- ------ -------
<S> <C> <C> <C> <C>
Office........................................ $3,846 68% $4,265 68%
Retail........................................ 587 10% 640 10%
Apartments.................................... 474 8% 418 7%
Land.......................................... 258 5% 313 5%
Agriculture................................... 96 2% 195 3%
Other......................................... 388 7% 456 7%
------ --- ------ ---
$5,649 100% $6,287 100%
====== === ====== ===
</TABLE>
The Company's real estate holdings are primarily located throughout the
United States. At December 31, 1999, approximately 25%, 24% and 10% of the
Company's real estate holdings were located in New York, California and Texas,
respectively.
Changes in real estate and real estate joint ventures held-for-sale
valuation allowance were as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Balance at January 1....................................... $ 33 $110 $ 661
Additions charged (credited) to operations................. 36 (5) (76)
Deductions for writedowns and dispositions................. (35) (72) (475)
---- ---- -----
Balance at December 31..................................... $ 34 $ 33 $ 110
==== ==== =====
</TABLE>
Investment income related to impaired real estate and real estate joint
ventures held-for-investment was $61, $105 and $28 for the years ended December
31, 1999, 1998 and 1997, respectively. Investment income related to real estate
and real estate joint ventures held-for-sale
<PAGE> 24
METROPOLITAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
was $14, $3 and $11 for the years ended December 31, 1999, 1998 and 1997,
respectively. The carrying value of non-income producing real estate and real
estate joint ventures was $22 and $1 at December 31, 1999 and 1998,
respectively.
The Company owned real estate acquired in satisfaction of debt of $47 and
$154 at December 31, 1999 and 1998, respectively.
Real estate of $37, $69 and $151 was acquired in satisfaction of debt
during the years ended December 31, 1999, 1998 and 1997, respectively.
LEVERAGED LEASES
Leveraged leases, included in other invested assets, consisted of the
following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1999 1998
---- ----
<S> <C> <C>
Investment............................................... $1,016 $1,067
Estimated residual values................................ 559 607
------ ------
1,575 1,674
Unearned income.......................................... (417) (471)
------ ------
$1,158 $1,203
====== ======
</TABLE>
The investment amounts set forth above are generally due in monthly
installments. The payment periods generally range from four to 15 years, but in
certain circumstances are as long as 30 years. Average yields range from 7% to
12%. These receivables are generally collateralized by the related property.
3. DERIVATIVE INSTRUMENTS
The table below provides a summary of the carrying value, notional amount
and current market or fair value of derivative financial instruments (other than
equity options) held at December 31, 1999 and 1998:
<TABLE>
<CAPTION>
1999 1998
------------------------------------------ ------------------------------------------
CURRENT MARKET CURRENT MARKET
OR FAIR VALUE OR FAIR VALUE
CARRYING NOTIONAL -------------------- CARRYING NOTIONAL --------------------
VALUE AMOUNT ASSETS LIABILITIES VALUE AMOUNT ASSETS LIABILITIES
-------- -------- ------ ----------- -------- -------- ------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Financial futures.................. $ 27 $ 3,140 $37 $ 10 $ 3 $ 2,190 $ 8 $ 6
Foreign exchange contracts......... -- -- -- -- -- 136 -- 2
Interest rate swaps................ (32) 1,316 11 40 (9) 1,621 17 50
Foreign currency swaps............. -- 4,002 26 103 (1) 580 3 62
Caps............................... 1 12,376 3 -- -- 8,391 -- --
---- ------- --- ---- --- ------- --- ----
Total contractual commitments...... $ (4) $20,834 $77 $153 $(7) $12,918 $28 $120
==== ======= === ==== === ======= === ====
</TABLE>
<PAGE> 25
METROPOLITAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following is a reconciliation of the notional amounts by derivative
type and strategy at December 31, 1999 and 1998:
<TABLE>
<CAPTION>
DECEMBER 31, 1998 TERMINATIONS/ DECEMBER 31, 1999
NOTIONAL AMOUNT ADDITIONS MATURITIES NOTIONAL AMOUNT
----------------- --------- ------------- -----------------
<S> <C> <C> <C> <C>
BY DERIVATIVE TYPE
Financial futures................... $ 2,190 $18,259 $17,309 $ 3,140
Foreign exchange contracts.......... 136 702 838 --
Interest rate swaps................. 1,621 429 734 1,316
Foreign currency swaps.............. 580 3,501 79 4,002
Caps................................ 8,391 5,860 1,875 12,376
------- ------- ------- -------
Total contractual commitments....... $12,918 $28,751 $20,835 $20,834
======= ======= ======= =======
BY STRATEGY
Liability hedging................... $ 8,741 $ 5,865 $ 2,035 $12,571
Invested asset hedging.............. 864 4,288 937 4,215
Portfolio hedging................... 2,830 13,920 14,729 2,021
Anticipated transaction hedging..... 483 4,678 3,134 2,027
------- ------- ------- -------
Total contractual commitments....... $12,918 $28,751 $20,835 $20,834
======= ======= ======= =======
</TABLE>
The following table presents the notional amounts of derivative financial
instruments by maturity at December 31, 1999:
<TABLE>
<CAPTION>
REMAINING LIFE
-------------------------------------------------------------------
ONE YEAR AFTER ONE YEAR AFTER FIVE YEARS
OR LESS THROUGH FIVE YEARS THROUGH TEN YEARS AFTER TEN YEARS TOTAL
-------- ------------------ ----------------- --------------- -----
<S> <C> <C> <C> <C> <C>
Financial futures......... $3,140 $ -- $ -- $ -- $ 3,140
Interest rate swaps....... 833 483 -- -- 1,316
Foreign currency swaps.... 7 3,371 503 121 4,002
Caps...................... 3,426 8,930 20 -- 12,376
------ ------- ---- ---- -------
Total contractual
commitments............. $7,406 $12,784 $523 $121 $20,834
====== ======= ==== ==== =======
</TABLE>
In addition to the derivative instruments above, the Company uses equity
option contracts as invested asset hedges. There were ninety-two thousand equity
option contracts outstanding with a carrying value of $(11) and a market value
of $(11) at December 31, 1998.
4. FAIR VALUE INFORMATION
The estimated fair values of financial instruments have been determined by
using available market information and the valuation methodologies described
below. Considerable judgment is often required in interpreting market data to
develop estimates of fair value. Accordingly, the estimates presented herein may
not necessarily be indicative of amounts that could be realized in a current
market exchange. The use of different assumptions or valuation methodologies may
have a material effect on the estimated fair value amounts.
<PAGE> 26
METROPOLITAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Amounts related to the Company's financial instruments were as follows:
<TABLE>
<CAPTION>
NOTIONAL CARRYING ESTIMATED
DECEMBER 31, 1999 AMOUNT VALUE FAIR VALUE
- ----------------- -------- -------- ----------
<S> <C> <C> <C>
Assets:
Fixed maturities.................................. $96,981 $96,981
Equity securities................................. 2,006 2,006
Mortgage loans on real estate..................... 19,739 19,452
Policy loans...................................... 5,598 5,618
Short-term investments............................ 3,055 3,055
Cash and cash equivalents......................... 2,789 2,789
Mortgage loan commitments......................... $465 -- (7)
Liabilities:
Policyholder account balances..................... 37,170 36,893
Short-term debt................................... 4,208 4,208
Long-term debt.................................... 2,514 2,466
Investment collateral............................. 6,451 6,451
</TABLE>
<TABLE>
<CAPTION>
NOTIONAL CARRYING ESTIMATED
DECEMBER 31, 1998 AMOUNT VALUE FAIR VALUE
- ----------------- -------- -------- ----------
<S> <C> <C> <C>
Assets:
Fixed maturities................................. $100,767 $100,767
Equity securities................................ 2,340 2,340
Mortgage loans on real estate.................... 16,827 17,793
Policy loans..................................... 5,600 6,143
Short-term investments........................... 1,369 1,369
Cash and cash equivalents........................ 3,301 3,301
Mortgage loan commitments........................ $472 -- 14
Liabilities:
Policyholder account balances.................... 37,448 37,664
Short-term debt.................................. 3,585 3,585
Long-term debt................................... 2,903 3,006
Investment collateral............................ 3,769 3,769
</TABLE>
The methods and assumptions used to estimate the fair values of financial
instruments are summarized as follows:
FIXED MATURITIES AND EQUITY SECURITIES
The fair value of fixed maturities and equity securities are based upon
quotations published by applicable stock exchanges or received from other
reliable sources. For securities in which the market values were not readily
available, fair values were estimated using quoted market prices of comparable
investments.
MORTGAGE LOANS ON REAL ESTATE AND MORTGAGE LOAN COMMITMENTS
Fair values for mortgage loans on real estate are estimated by discounting
expected future cash flows, using current interest rates for similar loans with
similar credit risk. For mortgage loan commitments, the estimated fair value is
the net premium or discount of the commitments.
<PAGE> 27
METROPOLITAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
POLICY LOANS
Fair values for policy loans are estimated by discounting expected future
cash flows using U.S. treasury rates to approximate interest rates and the
Company's past experiences to project patterns of loan accrual and repayment
characteristics.
CASH AND CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS
The carrying values for cash and cash equivalents and short-term
investments approximated fair market values due to the short-term maturities of
these instruments.
POLICYHOLDER ACCOUNT BALANCES
The fair value of policyholder account balances are estimated by
discounting expected future cash flows, based on interest rates currently being
offered for similar contracts with maturities consistent with those remaining
for the agreements being valued.
SHORT-TERM AND LONG-TERM DEBT AND INVESTMENT COLLATERAL
The fair values of short-term and long-term debt and investment collateral
are determined by discounting expected future cash flows, using risk rates
currently available for debt with similar terms and remaining maturities.
DERIVATIVE INSTRUMENTS
The fair value of derivative instruments, including financial futures,
financial forwards, interest rate and foreign currency swaps, floors, foreign
exchange contracts, caps and options are based upon quotations obtained from
dealers or other reliable sources. See Note 3 for derivative fair value
disclosures.
5. EMPLOYEE BENEFIT PLANS
PENSION BENEFIT AND OTHER BENEFIT PLANS
The Company is both the sponsor and administrator of defined benefit
pension plans covering all eligible employees and sales representatives of
MetLife and certain of its subsidiaries. Retirement benefits are based upon
years of credited service and final average earnings history.
The Company also provides certain postemployment benefits and certain
postretirement health care and life insurance benefits for retired employees
through insurance contracts. Substantially all of the Company's employees may,
in accordance with the plans applicable to the
<PAGE> 28
METROPOLITAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
postretirement benefits, become eligible for these benefits if they attain
retirement age, with sufficient service, while working for the Company.
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------
PENSION BENEFITS OTHER BENEFITS
---------------- ----------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Change in projected benefit obligation:
Projected benefit obligation at beginning of year.... $3,920 $3,573 $1,708 $1,763
Service cost....................................... 100 90 28 31
Interest cost...................................... 271 257 107 114
Actuarial (gains) losses........................... (260) 212 (281) (74)
Divestitures, curtailments and terminations........ (22) 24 10 (13)
Change in benefits................................. -- 12 -- --
Benefits paid........................................ (272) (248) (89) (113)
------ ------ ------ ------
Projected benefit obligation at end of year.......... 3,737 3,920 1,483 1,708
------ ------ ------ ------
Change in plan assets:
Contract value of plan assets at beginning of year... 4,403 4,056 1,123 1,004
Actuarial return on plan assets.................... 575 680 141 171
Employer contribution.............................. 20 15 24 61
Benefits paid...................................... (272) (248) (89) (113)
Other payments..................................... -- (100) -- --
------ ------ ------ ------
Contract value of plan assets at end of year......... 4,726 4,403 1,199 1,123
------ ------ ------ ------
Over (under) funded.................................. 989 483 (284) (585)
------ ------ ------ ------
Unrecognized net asset at transition................. (66) (98) -- --
Unrecognized net actuarial gains..................... (564) (78) (487) (322)
Unrecognized prior service cost...................... 127 145 (2) (2)
------ ------ ------ ------
Prepaid (accrued) benefit cost....................... $ 486 $ 452 $ (773) $ (909)
====== ====== ====== ======
Qualified plan prepaid pension cost.................. $ 632 $ 568 $ -- $ --
Non-qualified plan accrued pension cost.............. (146) (116) -- --
------ ------ ------ ------
Prepaid benefit cost................................. $ 486 $ 452 $ -- $ --
====== ====== ====== ======
</TABLE>
The aggregate projected benefit obligation and aggregate contract value of
plan assets for the pension plans were as follows:
<TABLE>
<CAPTION>
NON-QUALIFIED
QUALIFIED PLAN PLAN TOTAL
---------------- -------------- ----------------
1999 1998 1999 1998 1999 1998
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Aggregate projected benefit
obligation...................... $3,482 $3,697 $ 255 $ 223 $3,737 $3,920
Aggregate contract value of plan
assets (principally Company
contracts)...................... 4,726 4,403 -- -- 4,726 4,403
------ ------ ----- ----- ------ ------
Over (under) funded............... $1,244 $ 706 $(255) $(223) $ 989 $ 483
====== ====== ===== ===== ====== ======
</TABLE>
<PAGE> 29
METROPOLITAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The assumptions used in determining the aggregate projected benefit
obligation and aggregate contract value for the pension and other benefits were
as follows:
<TABLE>
<CAPTION>
PENSION BENEFITS OTHER BENEFITS
---------------------------- -----------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Weighted average assumptions at
December 31,
Discount rate....................... 6.25% - 7.75% 6.5% - 7.25% 6% - 7.75% 7%
Expected rate of return on plan
assets............................ 8% - 10.5% 8.5% - 10.5% 6% - 9% 7.25% - 9%
Rate of compensation increase....... 4.5% - 8.5% 4.5% - 8.5% N/A N/A
</TABLE>
The assumed health care cost trend rates used in measuring the accumulated
nonpension postretirement benefit obligation were 6.5% for pre-Medicare eligible
claims and 6% for Medicare eligible claims in both 1999 and 1998.
Assumed health care cost trend rates may have a significant effect on the
amounts reported for health care plans. A one-percentage point change in assumed
health care cost trend rates would have the following effects:
<TABLE>
<CAPTION>
ONE PERCENT ONE PERCENT
INCREASE DECREASE
----------- -----------
<S> <C> <C>
Effect on total of service and interest cost components.... $ 14 $ 11
Effect of accumulated postretirement benefit obligation.... $134 $111
</TABLE>
The components of periodic benefit costs were as follows:
<TABLE>
<CAPTION>
PENSION BENEFITS OTHER BENEFITS
--------------------- ------------------
1999 1998 1997 1999 1998 1997
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Service cost............................... $ 100 $ 90 $ 74 $ 28 $ 31 $ 30
Interest cost.............................. 271 257 247 107 114 122
Expected return on plan assets............. (363) (337) (324) (89) (79) (66)
Amortization of prior actuarial gains...... (6) (11) (5) (11) (13) (4)
Curtailment (credit) cost.................. (17) (10) -- 10 4 --
----- ----- ----- ---- ---- ----
Net periodic benefit cost (credit)......... $ (15) $ (11) $ (8) $ 45 $ 57 $ 82
===== ===== ===== ==== ==== ====
</TABLE>
SAVINGS AND INVESTMENT PLANS
The Company sponsors savings and investment plans for substantially all
employees under which the Company matches a portion of employee contributions.
The Company contributed $45, $43 and $44 for the years ended December 31, 1999,
1998 and 1997, respectively.
6. SEPARATE ACCOUNTS
Separate accounts reflect two categories of risk assumption: non-guaranteed
separate accounts totaling $47,618 and $39,490 at December 31, 1999 and 1998,
respectively, for which the policyholder assumes the investment risk, and
guaranteed separate accounts totaling $17,323 and $18,578 at December 31, 1999
and 1998, respectively, for which MetLife contractually guarantees either a
minimum return or account value to the policyholder.
<PAGE> 30
METROPOLITAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Fees charged to the separate accounts by the Company (including mortality
charges, policy administration fees and surrender charges) are reflected in the
Company's revenues as universal life and investment-type product policy fees and
totaled $485, $413 and $287 for the years ended December 31, 1999, 1998 and
1997, respectively. Guaranteed separate accounts consisted primarily of Met
Managed Guaranteed Interest Contracts and participating close out contracts. The
average interest rates credited on these contracts were 6.5% and 7% at December
31, 1999 and 1998, respectively. The assets that support these liabilities were
comprised of $16,874 and $16,639 in fixed maturities at December 31, 1999 and
1998, respectively. The portfolios are segregated from other investments and are
managed to minimize liquidity and interest rate risk. In order to minimize the
risk of disintermediation associated with early withdrawals, these investment
products carry a graded surrender charge as well as a market value adjustment.
7. DEBT
Debt consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1999 1998
---- ----
<S> <C> <C>
MetLife:
6.300% surplus notes due 2003.......................... $ 397 $ 397
7.000% surplus notes due 2005.......................... 249 249
7.700% surplus notes due 2015.......................... 198 198
7.450% surplus notes due 2023.......................... 296 296
7.785% surplus notes due 2024.......................... 148 148
7.800% surplus notes due 2025.......................... 248 248
Other.................................................... 130 207
------ ------
1,666 1,743
------ ------
Investment related:
Floating rate debt, interest based on LIBOR............ -- 212
Exchangeable debt, interest rates ranging from 4.90% to
5.80%, due 2001 and 2002............................ 369 371
------ ------
369 583
------ ------
Total MetLife............................................ 2,035 2,326
------ ------
Nvest:
7.060% senior notes due 2003........................... 110 110
7.290% senior notes due 2007........................... 160 160
------ ------
270 270
------ ------
Other Affiliated Companies:
Fixed rate notes, interest rates ranging from 6.96% to
8.51%, maturity dates ranging from 2000 to 2008..... 170 179
Other.................................................. 39 128
------ ------
209 307
------ ------
Total long-term debt..................................... 2,514 2,903
Total short-term debt.................................... 4,208 3,585
------ ------
$6,722 $6,488
====== ======
</TABLE>
<PAGE> 31
METROPOLITAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Short-term debt consisted of commercial paper with a weighted average
interest rate of 6.05% and 5.31% and a weighted average maturity of 74 and 44
days at December 31, 1999 and 1998, respectively.
The Company maintains unsecured credit facilities aggregating $7,000
(five-year facility of $1,000 expiring in April 2003; 364-day facility of $1,000
expiring in April 2000; 364-day facility of $5,000 expiring in September 2000).
Both $1,000 facilities bear interest at LIBOR plus 20 basis points. The $5,000
facility bears interest at various rates under specified borrowing scenarios.
The facilities can be used for general corporate purposes and also provide
backup for the Company's commercial paper program. At December 31, 1999, there
were no outstanding borrowings under any of the facilities.
Payments of interest and principal on the surplus notes, subordinated to
all other indebtedness, may be made only with the prior approval of the
Superintendent. Subject to the prior approval of the Superintendent, the 7.45%
surplus notes may be redeemed, in whole or in part, at the election of the
Company at any time on or after November 1, 2003.
Each issue of investment related debt is payable in cash or by delivery of
an underlying security owned by the Company. The amount payable at maturity of
the debt is greater than the principal of the debt if the market value of the
underlying security appreciates above certain levels at the date of debt
repayment as compared to the market value of the underlying security at the date
of debt issuance.
The aggregate maturities of long-term debt are $93 in 2000, $194 in 2001,
$210 in 2002, $415 in 2003, $126 in 2004 and $1,477 thereafter.
Interest expense related to the Company's outstanding indebtedness was
$358, $333 and $344 for the years ended December 31, 1999, 1998 and 1997,
respectively.
8. ACQUISITIONS AND DISPOSITIONS
In 1999 and 1997, respectively, the Company acquired assets of $4,832 and
$3,777 and assumed liabilities of $1,860 and $3,347 through the acquisition of
certain insurance and non-insurance operations. The aggregate purchase prices
were allocated to the assets and liabilities acquired based on their estimated
fair values.
During 1998, the Company sold MetLife Capital Holdings, Inc. (a commercial
financing company) and a substantial portion of its Canadian and Mexican
insurance operations, which resulted in a realized investment gain of $531.
During 1997, the Company sold its United Kingdom insurance operations, which
resulted in a realized investment gain of $139. Such sales caused a reduction in
assets of $10,663 and $4,342 and liabilities of $3,691 and $4,207 in 1998 and
1997, respectively.
See Note 16 for information regarding the Company's acquisition of
GenAmerica Corporation.
9. COMMITMENTS AND CONTINGENCIES
LITIGATION
The Company is currently a defendant in approximately 500 lawsuits raising
allegations of improper marketing and sales of individual life insurance
policies or annuities. These lawsuits are generally referred to as "sales
practices claims".
<PAGE> 32
METROPOLITAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
On December 28, 1999, after a fairness hearing, the United States District
Court for the Western District of Pennsylvania approved a class action
settlement resolving a multidistrict litigation proceeding involving alleged
sales practices claims. The settlement class includes most of the owners of
permanent life insurance policies and annuity contracts or certificates issued
pursuant to individual sales in the United States by Metropolitan Life Insurance
Company, Metropolitan Insurance and Annuity Company or Metropolitan Tower Life
Insurance Company between January 1, 1982 and December 31, 1997. This class
includes owners of approximately six million in-force or terminated insurance
policies and approximately one million in-force or terminated annuity contracts
or certificates.
In addition to dismissing the consolidated class actions, the District
Court's order also bars sales practices claims by class members for sales by the
defendant insurers during the class period, effectively resolving all pending
class actions against these insurers. The defendants are in the process of
having these claims dismissed.
Under the terms of the order, only those class members who excluded
themselves from the settlement may continue an existing, or start a new, sales
practices lawsuit against Metropolitan Life Insurance Company, Metropolitan
Insurance and Annuity Company or Metropolitan Tower Life Insurance Company for
sales that occurred during the class period. Approximately 20,000 class members
elected to exclude themselves from the settlement. Over 400 of the approximately
500 lawsuits noted above are brought by individuals who elected to exclude
themselves from the settlement.
The settlement provides three forms of relief. General relief, in the form
of free death benefits, is provided automatically to class members who did not
exclude themselves from the settlement or who did not elect the claim evaluation
procedures set forth in the settlement. The claim evaluation procedures permit a
class member to have a claim evaluated by a third party under procedures set
forth in the settlement. Claim awards made under the claim evaluation procedures
will be in the form of policy adjustments, free death benefits or, in some
instances, cash payments. In addition, class members who have or had an
ownership interest in specified policies will also automatically receive
deferred acquisition cost tax relief in the form of free death benefits. The
settlement fixes the aggregate amounts that are available under each form of
relief.
The Company expects that the total cost of the settlement will be
approximately $957. This amount is equal to the amount of the increase in
liabilities for the death benefits and policy adjustments and the present value
of expected cash payments to be provided to included class members, as well as
attorneys' fees and expenses and estimated other administrative costs, but does
not include the cost of litigation with policyholders who are excluded from the
settlement. The Company believes that the cost of the settlement will be
substantially covered by available reinsurance and the provisions made in its
consolidated financial statements, and thus will not have a material adverse
effect on its business, results of operations or financial position. The Company
has not yet made a claim under those reinsurance agreements and, although there
is a risk that the carriers will refuse coverage for all or part of the claim,
the Company believes this is very unlikely to occur. The Company believes it has
made adequate provision in its consolidated financial statements for all
probable losses for sales practices claims, including litigation costs involving
policyholders who are excluded from the settlement.
The class action settlement does not resolve nine purported or certified
class actions currently pending against New England Mutual Life Insurance
Company with which the Company merged in 1996. Eight of those actions have been
consolidated as a multidistrict proceeding for pre-trial purposes in the United
States District Court in Massachusetts. That Court certified a mandatory class
as to those claims. Following an appeal of that certification, the United States
<PAGE> 33
METROPOLITAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Court of Appeals remanded the case to the District Court for further
consideration. The Company is negotiating a settlement with class counsel.
The class action settlement also does not resolve three putative sales
practices class action lawsuits which have been brought against General American
Life Insurance Company. These lawsuits have been consolidated in a single
proceeding in the United States District Court for the Eastern District of
Missouri. General American Life Insurance Company and counsel for plaintiffs
have negotiated a settlement in principle of this consolidated proceeding.
General American Life Insurance Company has not reached agreement with
plaintiffs' counsel on the attorneys' fees to be paid. However, negotiations are
ongoing.
In addition, the class action settlement does not resolve two putative
class actions involving sales practices claims filed against Metropolitan Life
Insurance Company in Canada. The class action settlement also does not resolve a
certified class action with conditionally certified subclasses against
Metropolitan Life Insurance Company, Metropolitan Insurance and Annuity Company,
Metropolitan Tower Life Insurance Company and various individual defendants
alleging improper sales abroad. That lawsuit is pending in a New York federal
court.
In the past, the Company has resolved some individual sales practices
claims through settlement, dispositive motion or, in a few instances, trial.
Most of the current cases seek substantial damages, including in some cases
punitive and treble damages and attorneys' fees. Additional litigation relating
to the Company's marketing and sales of individual life insurance may be
commenced in the future.
Regulatory authorities in a small number of states, including both
insurance departments and one state attorney general, as well as the National
Association of Securities Dealers, Inc., have ongoing investigations or
inquiries relating to the Company's sales of individual life insurance policies
or annuities, including investigations of alleged improper replacement
transactions and alleged improper sales of insurance with inaccurate or
inadequate disclosures as to the period for which premiums would be payable.
Over the past several years, the Company has resolved a number of investigations
by other regulatory authorities for monetary payments and certain other relief,
and may continue to do so in the future.
MetLife is also a defendant in numerous lawsuits seeking compensatory and
punitive damages for personal injuries allegedly caused by exposure to asbestos
or asbestos-containing products. MetLife has never engaged in the business of
manufacturing, producing, distributing or selling asbestos or
asbestos-containing products. Rather, these lawsuits, currently numbering in the
thousands, have principally been based upon allegations relating to certain
research, publication and other activities of one or more of MetLife's employees
during the period from the 1920s through approximately the 1950s and alleging
that MetLife learned or should have learned of certain health risks posed by
asbestos and, among other things, improperly publicized or failed to disclose
those health risks. Legal theories asserted against MetLife have included
negligence, intentional tort claims and conspiracy claims concerning the health
risks associated with asbestos. While MetLife believes it has meritorious
defenses to these claims, and has not suffered any adverse judgments in respect
of these claims, most of the cases have been resolved by settlements. MetLife
intends to continue to exercise its best judgment regarding settlement or
defense of such cases. The number of such cases that may be brought or the
aggregate amount of any liability that MetLife may ultimately incur is
uncertain.
Significant portions of amounts paid in settlement of such cases have been
funded with proceeds from a previously resolved dispute with MetLife's primary,
umbrella and first level excess liability insurance carriers. MetLife is
presently in litigation with several of its excess
<PAGE> 34
METROPOLITAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
liability insurers regarding amounts payable under its policies with respect to
coverage for these claims. The trial court has granted summary judgment to these
insurers. MetLife has appealed. There can be no assurances regarding the outcome
of this litigation or the amount and timing of recoveries, if any, from these
excess liability insurers. MetLife's asbestos-related litigation with these
insurers should have no effect on recoveries under the excess insurance policies
described below.
The Company has recorded, in other expenses, charges of $499 ($317
after-tax), $1,895 ($1,203 after-tax) and $300 ($190 after-tax) for the years
ended December 31, 1999, 1998 and 1997, respectively, for sales practices claims
and claims for personal injuries caused by exposure to asbestos or
asbestos-containing products. The 1999 charge was principally related to the
settlement of the multidistrict litigation proceeding involving alleged improper
sales practices, accruals for sales practices claims not covered by the
settlement and other legal costs. The 1998 charge was comprised of $925 and $970
for sales practices claims and asbestos-related claims, respectively. The
Company recorded the charges for sales practices claims based on preliminary
settlement discussions and the settlement history of other insurers.
Prior to the fourth quarter of 1998, the Company established a liability
for asbestos-related claims based on settlement costs for claims that the
Company had settled, estimates of settlement costs for claims pending against
the Company and an estimate of settlement costs for unasserted claims. The
amount for unasserted claims was based on management's estimate of unasserted
claims that would be probable of assertion. A liability is not established for
claims which management believes are only reasonably possible of assertion.
Based on this process, the accrual for asbestos-related claims at December 31,
1997 was $386. Potential liabilities for asbestos-related claims are not easily
quantified, due to the nature of the allegations against the Company, which are
not related to the business of manufacturing, producing, distributing or selling
asbestos or asbestos-containing products, adding to the uncertainty as to the
number of claims that may be brought against the Company.
During 1998, the Company decided to pursue the purchase of excess insurance
to limit its exposure to asbestos-related claims. In connection with the
negotiations with the casualty insurers to obtain this insurance, the Company
obtained information that caused management to reassess the accruals for
asbestos-related claims. This information included:
- Information from the insurers regarding the asbestos-related claims
experience of other insureds, which indicated that the number of claims
that were probable of assertion against the Company in the future was
significantly greater than it had assumed in its accruals. The number of
claims brought against the Company is generally a reflection of the
number of asbestos-related claims brought against asbestos defendants
generally and the percentage of those claims in which the Company is
included as a defendant. The information provided to the Company relating
to other insureds indicated that the Company had been included as a
defendant for a significant percentage of total asbestos-related claims
and that it may be included in a larger percentage of claims in the
future, because of greater awareness of asbestos litigation generally by
potential plaintiffs and plaintiffs' lawyers and because of the
bankruptcy and reorganization or the exhaustion of insurance coverage of
other asbestos defendants; and that, although volatile, there was an
upward trend in the number of total claims brought against asbestos
defendants.
- Information derived from actuarial calculations the Company made in the
fourth quarter of 1998 in connection with these negotiations, which
helped to frame, define and quantify this liability. These calculations
were made using, among other things, current information regarding the
Company's claims and settlement experience (which reflected the Com-
<PAGE> 35
METROPOLITAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
pany's decision to resolve an increased number of these claims by
settlement), recent and historic claims and settlement experience of
selected other companies and information obtained from the insurers.
Based on this information, the Company concluded that certain claims that
previously were considered as only reasonably possible of assertion were now
probable of assertion, increasing the number of assumed claims to approximately
three times the number assumed in prior periods. As a result of this
reassessment, the Company increased its liability for asbestos-related claims to
$1,278 at December 31, 1998.
During 1998, the Company paid $1,407 of premiums for excess of loss
reinsurance agreements and excess insurance policies, consisting of $529 for the
excess of loss reinsurance agreements for sales practices claims and excess
mortality losses and $878 for the excess insurance policies for asbestos-related
claims.
The Company obtained the excess of loss reinsurance agreements to provide
reinsurance with respect to sales practices claims made on or prior to December
31, 1999 and for certain mortality losses in 1999. These reinsurance agreements
have a maximum aggregate limit of $650, with a maximum sublimit of $550 for
losses for sales practices claims. This coverage is in excess of an aggregate
self-insured retention of $385 with respect to sales practices claims and $506,
plus the Company's statutory policy reserves released upon the death of
insureds, with respect to life mortality losses. At December 31, 1999, the
subject losses under the reinsurance agreements due to sales practices claims
and related counsel fees from the time the Company entered into the reinsurance
agreements did not exceed that self-insured retention. The maximum sublimit of
$550 for sales practices claims was within a range of losses that management
believed were reasonably possible at December 31, 1998. Each excess of loss
reinsurance agreement for sales practices claims and mortality losses contains
an experience fund, which provides for payments to the Company at the
commutation date if experience is favorable at such date. The Company accounts
for the aggregate excess of loss reinsurance agreements as reinsurance; however,
if deposit accounting were applied, the effect on the Company's consolidated
financial statements in 1998, 1999 and 2000 would not be significant.
Under reinsurance accounting, the excess of the liability recorded for
sales practices losses recoverable under the agreements of $550 over the premium
paid of $529 results in a deferred gain of $21 which is being amortized into
income over the settlement period from January 1999 through April 2000. Under
deposit accounting, the premium would be recorded as an other asset rather than
as an expense, and the reinsurance loss recoverable and the deferred gain would
not have been recorded. Because the agreements also contain an experience fund
which increases with the passage of time, the increase in the experience fund in
1999 and 2000 under deposit accounting would be recognized as interest income in
an amount approximately equal to the deferred gain that will be amortized into
income under reinsurance accounting.
The excess insurance policies for asbestos-related claims provide for
recovery of losses up to $1,500, which is in excess of a $400 self-insured
retention ($878 of which was recorded as a recoverable at December 31, 1999 and
1998). The asbestos-related policies are also subject to annual and per-claim
sublimits. Amounts are recoverable under the policies annually with respect to
claims paid during the prior calendar year. Although amounts paid in any given
year that are recoverable under the policies will be reflected as a reduction in
the Company's operating cash flows for that year, management believes that the
payments will not have a material adverse effect on the Company's liquidity.
Each asbestos-related policy contains an experience fund and a reference fund
that provides for payments to the Company at the commutation date if experience
under the policy to such date has been favorable, or pro rata reductions from
time to
<PAGE> 36
METROPOLITAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
time in the loss reimbursements to the Company if the cumulative return on the
reference fund is less than the return specified in the experience fund.
A purported class action suit involving policyholders in 32 states has been
filed in a Rhode Island state court against MetLife's subsidiary, Metropolitan
Property and Casualty Insurance Company, with respect to claims by policyholders
for the alleged diminished value of automobiles after accident-related repairs.
A similar "diminished value" allegation was made recently in a Texas Deceptive
Trade Practices Act letter and lawsuit which involve a Metropolitan Property and
Casualty Company policyholder. A purported class action has been filed against
Metropolitan Property and Casualty Insurance Company and its subsidiary,
Metropolitan Casualty Insurance Company, in Florida by a policyholder alleging
breach of contract and unfair trade practices with respect to Metropolitan
Casualty Insurance Company allowing the use of parts not made by the original
manufacturer to repair damaged automobiles. These suits are in the early stages
of litigation and Metropolitan Property and Casualty Insurance Company and
Metropolitan Casualty Insurance Company intend to vigorously defend themselves
against these suits. Similar suits have been filed against several other
personal lines property and casualty insurers.
The United States, the Commonwealth of Puerto Rico and various hotels and
individuals have sued MetLife Capital Corporation, a former subsidiary of the
Company, seeking damages for clean up costs, natural resource damages, personal
injuries and lost profits and taxes based upon, among other things, a release of
oil from a barge which was being towed by the M/V Emily S. In connection with
the sale of MetLife Capital, the Company acquired MetLife Capital's potential
liability with respect to the M/V Emily S lawsuit. MetLife Capital had entered
into a sale and leaseback financing arrangement with respect to the M/V Emily S.
The plaintiffs have taken the position that MetLife Capital, as the owner of
record of the M/V Emily S, is responsible for all damages caused by the barge,
including the oil spill. The governments of the United States and Puerto Rico
have claimed damages in excess of $150. At a mediation, the action brought by
the United States and Puerto Rico was conditionally settled, provided that the
governments have access to additional sums from a fund contributed to by oil
companies to help remediate oil spills. The Company can provide no assurance
that this action will be settled in this manner.
Three putative class actions have been filed by Conning Corporation
shareholders alleging that the Company's announced offer to purchase the
publicly-held Conning shares is inadequate and constitutes a breach of fiduciary
duty (see Note 16). The Company believes the actions are without merit, and
expects that they will not materially affect its offer to purchase the shares.
A civil complaint challenging the fairness of the plan of reorganization
and the adequacy and accuracy of the disclosures to policyholders regarding the
plan has been filed in New York Supreme Court for Kings County on behalf of an
alleged class consisting of the policyholders of MetLife who should have
membership benefits in MetLife and were and are eligible to receive notice, vote
and receive consideration in the demutualization. The complaint seeks to enjoin
or rescind the plan and seeks other relief. The defendants named in the
complaint are MetLife and the individual members of its board of directors and
MetLife, Inc. MetLife believes that the allegations made in the complaint are
wholly without merit, and intends to vigorously contest the complaint.
Various litigation, claims and assessments against the Company, in addition
to those discussed above and those otherwise provided for in the Company's
consolidated financial statements, have arisen in the course of the Company's
business, including, but not limited to, in connection with its activities as an
insurer, employer, investor, investment advisor and taxpayer. Further, state
insurance regulatory authorities and other Federal and state authorities
regularly
<PAGE> 37
METROPOLITAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
make inquiries and conduct investigations concerning the Company's compliance
with applicable insurance and other laws and regulations.
In some of the matters referred to above, very large and/or indeterminate
amounts, including punitive and treble damages, are sought. While it is not
feasible to predict or determine the ultimate outcome of all pending
investigations and legal proceedings or provide reasonable ranges of potential
losses, it is the opinion of the Company's management that their outcomes, after
consideration of available insurance and reinsurance and the provisions made in
the Company's consolidated financial statements, are not likely to have a
material adverse effect on the Company's consolidated financial position.
However, given the large and/or indeterminate amounts sought in certain of these
matters and the inherent unpredictability of litigation, it is possible that an
adverse outcome in certain matters could, from time to time, have a material
adverse effect on the Company's operating results or cash flows in particular
quarterly or annual periods.
TRANSFERRED CANADIAN POLICIES
In July 1998, MetLife sold a substantial portion of its Canadian operations
to Clarica Life. As part of that sale, a large block of policies in effect with
MetLife in Canada were transferred to Clarica Life, and the holders of the
transferred Canadian policies became policyholders of Clarica Life. Those
transferred policyholders are no longer policyholders of MetLife and, therefore,
are not entitled to compensation under the plan of reorganization. However, as a
result of a commitment made in connection with obtaining Canadian regulatory
approval of that sale, if MetLife demutualizes, its Canadian branch will make
cash payments to those who are, or are deemed to be, holders of those
transferred Canadian policies. The payments, which will be recorded in other
expenses in the same period as the effective date of the plan, will be
determined in a manner that is consistent with the treatment of, and fair and
equitable to, eligible policyholders of MetLife. The amount of the payment is
dependent upon the initial public offering price of common stock to be issued on
the effective date of the plan of demutualization.
YEAR 2000
The Year 2000 issue was the result of the widespread use of computer
programs written using two digits (rather than four) to define the applicable
year. Such programming was a common industry practice designed to avoid the
significant costs associated with additional mainframe capacity necessary to
accommodate a four-digit field. As a result, any of the Company's computer
systems that have time-sensitive software may recognize a date using "00" as the
year 1900 rather than the year 2000. This could result in major system failures
or miscalculations. The Company has conducted a comprehensive review of its
computer systems to identify the systems that could be affected by the Year 2000
issue and has implemented a plan to resolve the issue. There can be no
assurances that the Year 2000 plan of the Company or that of its vendors or
third parties have resolved all Year 2000 issues. Further, there can be no
assurance that there will not be any future system failure or that such failure,
if any, will not have a material impact on the operations of the Company.
LEASES
In accordance with industry practice, certain of the Company's income from
lease agreements with retail tenants is contingent upon the level of the
tenants' sales revenues. Additionally, the Company, as lessee, has entered into
various lease and sublease agreements
<PAGE> 38
METROPOLITAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
for office space, data processing and other equipment. Future minimum rental and
subrental income and minimum gross rental payments relating to these lease
agreements were as follows:
<TABLE>
<CAPTION>
GROSS
RENTAL SUBLEASE RENTAL
INCOME INCOME PAYMENTS
------ -------- --------
<S> <C> <C> <C>
2000......................................... $ 817 $13 $156
2001......................................... 740 12 135
2002......................................... 689 11 111
2003......................................... 612 9 90
2004......................................... 542 9 69
Thereafter................................... 2,032 27 299
</TABLE>
10. INCOME TAXES
The provision for income taxes was as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Current:
Federal................................................... $643 $668 $370
State and local........................................... 24 60 10
Foreign................................................... 4 99 26
---- ---- ----
671 827 406
---- ---- ----
Deferred:
Federal................................................... (78) (25) 28
State and local........................................... 2 (8) 9
Foreign................................................... (2) (54) 25
---- ---- ----
(78) (87) 62
---- ---- ----
Provision for income taxes.................................. $593 $740 $468
==== ==== ====
</TABLE>
Reconciliations of the income tax provision at the U.S. statutory rate to
the provision for income taxes as reported were as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Tax provision at U.S. statutory rate........................ $502 $730 $585
Tax effect of:
Tax exempt investment income.............................. (39) (40) (30)
Surplus tax............................................... 125 18 (40)
State and local income taxes.............................. 18 31 15
Tax credits............................................... (5) (25) (15)
Prior year taxes.......................................... (31) 4 (2)
Sale of businesses........................................ -- (19) (41)
Other, net................................................ 23 41 (4)
---- ---- ----
Provision for income taxes.................................. $593 $740 $468
==== ==== ====
</TABLE>
<PAGE> 39
METROPOLITAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Deferred income taxes represent the tax effect of the differences between
the book and tax basis of assets and liabilities. Net deferred income tax assets
and liabilities consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1999 1998
---- ----
<S> <C> <C>
Deferred income tax assets:
Policyholder liabilities and receivables............... $3,042 $3,108
Net operating losses................................... 72 22
Net unrealized investment losses....................... 161 --
Employee benefits...................................... 192 174
Litigation related..................................... 468 312
Other.................................................. 242 158
------ ------
4,177 3,774
Less: Valuation allowance.............................. 72 21
------ ------
4,105 3,753
------ ------
Deferred income tax liabilities:
Investments............................................ 1,472 1,529
Deferred policy acquisition costs...................... 1,967 1,887
Net unrealized investment gains........................ -- 864
Other.................................................. 63 18
------ ------
3,502 4,298
------ ------
Net deferred income tax asset (liability)................ $ 603 $ (545)
====== ======
</TABLE>
Foreign net operating loss carryforwards generated deferred income tax
benefits of $72 and $21 at December 31, 1999 and 1998, respectively. The Company
has recorded a valuation allowance related to these tax benefits. The valuation
allowance reflects management's assessment, based on available information, that
it is more likely than not that the deferred income tax asset for foreign net
operating loss carryforwards will not be realized. The benefit will be
recognized when management believes that it is more likely than not that the
portion of the deferred income tax asset is realizable.
The Company has been audited by the Internal Revenue Service for the years
through and including 1993. The Company is being audited for the years 1994,
1995 and 1996. The Company believes that any adjustments that might be required
for open years will not have a material effect on the Company's consolidated
financial statements.
11. REINSURANCE
The Company assumes and cedes insurance with other insurance companies. The
Company continually evaluates the financial condition of its reinsurers and
monitors concentration of credit risk in an effort to minimize its exposure to
significant losses from reinsurer insolvencies. The Company is contingently
liable with respect to ceded reinsurance should any reinsurer be unable to meet
its obligations under these agreements. The amounts in the consolidated
statements of income are presented net of reinsurance ceded.
The Company's life insurance operations participate in reinsurance in order
to limit losses, minimize exposure to large risks and to provide additional
capacity for future growth. During
<PAGE> 40
METROPOLITAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
1998, the Company began reinsuring, under yearly renewal term policies, 90
percent of the mortality risk on universal life policies issued after 1983. The
Company also reinsures 90 percent of the mortality risk on term life insurance
policies issued after 1995 under yearly renewal term policies and coinsures 100
percent of the mortality risk in excess of $25 and $35 on single and joint
survivorship policies, respectively.
During 1997, the Company obtained a 100 percent coinsurance policy to
provide coverage for contractual payments generated by certain portions of the
Company's non-life contingency long-term guaranteed interest contracts and
structured settlement lump sum contracts issued during the periods 1991 through
1993. The policy was amended in 1998 to include structured settlement lump sum
payments issued during the period 1983 through 1990, 1994 and 1995. Reinsurance
recoverables under the contract, which has been accounted for as a financing
transaction, were $1,372 and $1,374 at December 31, 1999 and 1998, respectively.
See Note 9 for information regarding certain excess of loss reinsurance
agreements providing coverage for risks associated primarily with sales
practices claims.
The Company has exposure to catastrophes, which are an inherent risk of the
property and casualty insurance business and could contribute to material
fluctuations in the Company's results of operations. The Company uses excess of
loss and quota share reinsurance arrangements to limit its maximum loss, provide
greater diversification of risk and minimize exposure to larger risks. The
Company's reinsurance program is designed to limit a catastrophe loss to no more
than 10% of the Auto & Home segment's statutory surplus.
The effects of reinsurance were as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Direct premiums..................................... $13,249 $12,763 $12,728
Reinsurance assumed................................. 484 409 360
Reinsurance ceded................................... (1,645) (1,669) (1,810)
------- ------- -------
Net premiums........................................ $12,088 $11,503 $11,278
======= ======= =======
Reinsurance recoveries netted against policyholder
benefits.......................................... $ 1,626 $ 1,744 $ 1,648
======= ======= =======
</TABLE>
The effects of reinsurance with GenAmerica Corporation ("GenAmerica") were
as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Premiums ceded to GenAmerica.............................. $108 $113 $61
==== ==== ===
Reinsurance recoveries from GenAmerica netted against
policyholder benefits................................... $ 74 $ 28 $24
==== ==== ===
</TABLE>
Reinsurance recoverables, included in other receivables, were $2,898 and
$3,134 at December 31, 1999 and 1998, respectively, of which $5 and $5,
respectively, were recoverable from GenAmerica. Reinsurance and ceded
commissions payables, included in other liabilities, were $148 and $105 at
December 31, 1999 and 1998, respectively.
<PAGE> 41
METROPOLITAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following provides an analysis of the activity in the liability for
benefits relating to property and casualty and group accident and non-medical
health policies and contracts:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Balance at January 1................................ $ 3,320 $ 3,655 $ 3,345
Reinsurance recoverables.......................... (233) (229) (215)
------- ------- -------
Net balance at January 1............................ 3,087 3,426 3,130
------- ------- -------
Acquisition of business............................. 204 -- --
------- ------- -------
Incurred related to:
Current year...................................... 3,129 2,726 2,855
Prior years....................................... (16) (245) 88
------- ------- -------
3,113 2,481 2,943
------- ------- -------
Paid related to:
Current year...................................... (2,128) (1,967) (1,832)
Prior years....................................... (759) (853) (815)
------- ------- -------
(2,887) (2,820) (2,647)
------- ------- -------
Balance at December 31.............................. 3,517 3,087 3,426
Add: Reinsurance recoverables..................... 272 233 229
------- ------- -------
Balance at December 31.............................. $ 3,789 $ 3,320 $ 3,655
======= ======= =======
</TABLE>
12. OTHER EXPENSES
Other expenses were comprised of the following:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Compensation........................................ $ 2,590 $ 2,478 $ 2,078
Commissions......................................... 937 902 766
Interest and debt issue costs....................... 405 379 453
Amortization of policy acquisition costs (excludes
amortization of $(46), $240 and $70, respectively,
related to realized investment gains and
(losses))......................................... 862 587 771
Capitalization of policy acquisition costs.......... (1,160) (1,025) (1,000)
Rent, net of sublease income........................ 239 155 179
Minority interest................................... 55 67 56
Restructuring charge................................ -- 81 --
Other............................................... 2,827 4,395 2,468
------- ------- -------
$ 6,755 $ 8,019 $ 5,771
======= ======= =======
</TABLE>
During 1998, the Company recorded charges of $81 to restructure
headquarters operations and consolidate certain agencies and other operations.
These costs have been fully paid at December 31, 1999.
<PAGE> 42
METROPOLITAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
13. STATUTORY FINANCIAL INFORMATION
The reconciliations of MetLife's statutory surplus and net change in
statutory surplus, determined in accordance with accounting practices prescribed
or permitted by insurance regulatory authorities, with equity and net income
determined in conformity with generally accepted accounting principles were as
follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1999 1998
---- ----
<S> <C> <C>
Statutory surplus........................................... $ 7,630 $ 7,388
GAAP adjustments for:
Future policy benefits and policyholder account
balances............................................... (4,167) (6,830)
Deferred policy acquisition costs......................... 8,381 6,560
Deferred income taxes..................................... 886 (190)
Valuation of investments.................................. (2,102) 3,981
Statutory asset valuation reserves........................ 3,189 3,381
Statutory interest maintenance reserves................... 1,114 1,486
Surplus notes............................................. (1,602) (1,595)
Other, net................................................ 361 686
------- -------
Equity...................................................... $13,690 $14,867
======= =======
</TABLE>
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Net change in statutory surplus......................... $ 242 $ 10 $ 227
GAAP adjustments for:
Future policy benefits and policyholder account
balances........................................... 556 127 (38)
Deferred policy acquisition costs..................... 379 224 149
Deferred income taxes................................. 154 234 62
Valuation of investments.............................. 473 1,158 (387)
Statutory asset valuation reserves.................... (226) (461) 1,136
Statutory interest maintenance reserves............... (368) 312 53
Other, net............................................ (593) (261) 1
----- ------ ------
Net income.............................................. $ 617 $1,343 $1,203
===== ====== ======
</TABLE>
<PAGE> 43
METROPOLITAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
14. OTHER COMPREHENSIVE INCOME (LOSS)
The following table sets forth the reclassification adjustments required
for the years ended December 31, 1999, 1998 and 1997 to avoid double-counting in
other comprehensive income (loss) items that are included as part of net income
for the current year that have been reported as a part of other comprehensive
income (loss) in the current or prior year:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Holding (losses) gains on investments arising during the
year...................................................... $(6,314) $ 1,493 $ 4,257
Income tax effect of holding gains or losses................ 2,262 (617) (1,615)
Transfer of securities from held-to-maturity to
available-for-sale:
Holding gains on investments.............................. -- -- 198
Income tax effect......................................... -- -- (75)
Reclassification adjustments:
Realized holding (gains) losses included in current year
net income............................................. 38 (2,013) (844)
Amortization of premium and discount on investments....... (307) (350) (209)
Realized holding (losses) gains allocated to other
policyholder amounts................................... (67) 608 231
Income tax effect......................................... 120 729 312
Allocation of holding losses (gains) on investments relating
to other policyholder amounts............................. 3,788 (351) (2,231)
Income tax effect of allocation of holding gains and losses
to other policyholder amounts............................. (1,357) 143 846
------- ------- -------
Net unrealized investment (losses) gains.................... (1,837) (358) 870
------- ------- -------
Foreign currency translation adjustments arising during the
year...................................................... 50 (115) (46)
Reclassification adjustment for sale of investment in
foreign operation......................................... -- 2 (3)
------- ------- -------
Foreign currency translation adjustment..................... 50 (113) (49)
------- ------- -------
Minimum pension liability adjustment........................ (7) (12) --
------- ------- -------
Other comprehensive income (loss)........................... $(1,794) $ (483) $ 821
======= ======= =======
</TABLE>
15. BUSINESS SEGMENT INFORMATION
The Company provides insurance and financial services to customers in the
United States, Canada, Central America, South America, Europe and Asia. The
Company's business is divided into six segments: Individual, Institutional, Auto
& Home, International, Asset Management and Corporate. These segments are
managed separately because they either provide different products and services,
require different strategies or have different technology requirements.
Individual offers a wide variety of individual insurance and investment
products, including life insurance, annuities and mutual funds. Institutional
offers a broad range of group insurance and retirement and savings products and
services, including group life insurance, non-medical health insurance such as
short and long-term disability, long-term care and dental insurance and other
insurance products and services. Auto & Home provides insurance coverages
including private passenger automobile, homeowners and personal excess liability
insurance. International provides life insurance, accident and health insurance,
annuities and retirement and savings
<PAGE> 44
METROPOLITAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
products to both individuals and groups, and auto and homeowners coverage to
individuals. Asset Management provides a broad variety of asset management
products and services to individuals and institutions such as mutual funds for
savings and retirement needs, commercial real estate advisory and management
services, and institutional and retail investment management. Through its
Corporate segment, the Company reports items that are not allocated to any of
the business segments.
Set forth in the tables below is certain financial information with respect
to the Company's operating segments for the years ended December 31, 1999, 1998
and 1997. The accounting policies of the segments are the same as those
described in the summary of significant accounting policies, except for the
method of capital allocation. The Company allocates capital to each segment
based upon an internal capital allocation system that allows the Company to more
effectively manage its capital. The Company has divested operations that did not
meet targeted rates of return, including its commercial leasing business
(Corporate segment) and substantial portions of its Canadian operations
(International segment), and insurance operations in the United Kingdom
(International segment). The Company evaluates the performance of each operating
segment based upon income or loss from operations before provision for income
taxes and non-recurring items (e.g. items of unusual or infrequent nature). The
Company allocates non-recurring items (primarily consisting of sales practices
claims and claims for personal injuries caused by exposure to asbestos or
asbestos-containing products) and prior to its sale in 1998, the results of
MetLife Capital Holdings, Inc. to the Corporate segment.
<TABLE>
<CAPTION>
AUTO
AT OR FOR THE YEAR ENDED & ASSET CONSOLIDATION/
DECEMBER 31, 1999 INDIVIDUAL INSTITUTIONAL HOME INTERNATIONAL MANAGEMENT CORPORATE ELIMINATION TOTAL
- ------------------------ ---------- ------------- ---- ------------- ---------- --------- -------------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Premiums................ $ 4,289 $ 5,525 $1,751 $ 523 $ -- $ -- $ -- $ 12,088
Universal life and
investment-type
product policy fees... 888 502 -- 48 -- -- -- 1,438
Net investment income... 5,346 3,755 103 206 80 605 (279) 9,816
Other revenues.......... 558 629 21 12 803 59 72 2,154
Net realized investment
gains (losses)........ (14) (31) 1 1 -- (41) 14 (70)
Policyholder benefits
and claims............ 4,625 6,712 1,301 463 -- -- 4 13,105
Interest credited to
policyholder account
balances.............. 1,359 1,030 -- 52 -- -- -- 2,441
Policyholder
dividends............. 1,509 159 -- 22 -- -- -- 1,690
Other expenses.......... 2,719 1,589 514 248 795 1,031 (141) 6,755
Income (loss) before
provision for income
taxes and
extraordinary item.... 855 890 61 5 88 (408) (56) 1,435
Income (loss) after
provision for income
taxes before
extraordinary item.... 555 567 56 21 51 (358) (50) 842
Total assets............ 109,401 88,127 4,443 4,381 1,036 19,834 (1,990) 225,232
Deferred policy
acquisition costs..... 8,049 106 93 244 -- -- -- 8,492
Separate account
assets................ 28,828 35,236 -- 877 -- -- -- 64,941
Policyholder
liabilities........... 72,956 47,781 2,318 2,187 -- 6 (293) 124,955
Separate account
liabilities........... 28,828 35,236 -- 877 -- -- -- 64,941
</TABLE>
<PAGE> 45
METROPOLITAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
AUTO
AT OR FOR THE YEAR ENDED & ASSET CONSOLIDATION/
DECEMBER 31, 1998 INDIVIDUAL INSTITUTIONAL HOME INTERNATIONAL MANAGEMENT CORPORATE ELIMINATION TOTAL
- ------------------------ ---------- ------------- ---- ------------- ---------- --------- -------------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Premiums................ $ 4,323 $ 5,159 $1,403 $ 618 $ -- $ -- $ -- $ 11,503
Universal life and
investment-type
product policy fees... 817 475 -- 68 -- -- -- 1,360
Net investment income... 5,480 3,885 81 343 75 682 (318) 10,228
Other revenues.......... 474 575 36 33 817 111 (52) 1,994
Net realized investment
gains................. 659 557 122 117 -- 679 (113) 2,021
Policyholder benefits
and claims............ 4,606 6,416 1,029 597 -- (10) -- 12,638
Interest credited to
policyholder account
balances.............. 1,423 1,199 -- 89 -- -- -- 2,711
Policyholder
dividends............. 1,445 142 -- 64 -- -- -- 1,651
Other expenses.......... 2,577 1,613 386 352 799 2,601 (309) 8,019
Income (loss) before
provision for income
taxes and
extraordinary item.... 1,702 1,281 227 77 93 (1,119) (174) 2,087
Income (loss) after
provision for income
taxes before
extraordinary item.... 1,069 846 161 56 49 (691) (143) 1,347
Total assets............ 103,614 88,741 2,763 3,432 1,164 20,852 (5,220) 215,346
Deferred policy
acquisition costs..... 6,194 82 57 205 -- -- -- 6,538
Separate account
assets................ 23,013 35,029 -- 26 -- -- -- 58,068
Policyholder
liabilities........... 71,571 49,406 1,477 2,043 -- 1 (295) 124,203
Separate account
liabilities........... 23,013 35,029 -- 26 -- -- -- 58,068
</TABLE>
<TABLE>
<CAPTION>
AUTO
AT OR FOR THE YEAR ENDED & ASSET CONSOLIDATION/
DECEMBER 31, 1997 INDIVIDUAL INSTITUTIONAL HOME INTERNATIONAL MANAGEMENT CORPORATE ELIMINATION TOTAL
- ------------------------ ---------- ------------- ---- ------------- ---------- --------- -------------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Premiums................. $ 4,327 $ 4,689 $1,354 $ 908 $ -- $ -- $ -- $ 11,278
Universal life and
investment-type product
policy fees............ 855 426 -- 137 -- -- -- 1,418
Net investment income.... 4,754 3,754 71 504 78 700 (370) 9,491
Other revenues........... 338 357 25 54 682 19 16 1,491
Net realized investment
gains.................. 356 45 9 142 -- 326 (91) 787
Policyholder benefits and
claims................. 4,597 5,934 1,003 869 -- -- -- 12,403
Interest credited to
policyholder account
balances............... 1,422 1,319 -- 137 -- -- -- 2,878
Policyholder dividends... 1,340 305 -- 97 -- -- -- 1,742
Other expenses........... 2,394 1,178 351 497 679 966 (294) 5,771
Income before provision
for income taxes....... 877 535 105 145 81 79 (151) 1,671
Income after provision
for income taxes....... 599 339 74 126 45 163 (143) 1,203
Total assets............. 95,323 83,473 2,542 7,412 1,136 18,641 (5,745) 202,782
Deferred policy
acquisition costs...... 5,912 40 56 428 -- -- -- 6,436
Separate account assets.. 17,345 30,473 -- 520 -- -- -- 48,338
Policyholder
liabilities............ 70,686 49,547 1,509 5,615 -- 1 -- 127,358
Separate account
liabilities............ 17,345 30,473 -- 520 -- -- -- 48,338
</TABLE>
<PAGE> 46
METROPOLITAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Individual segment includes an equity ownership interest in Nvest
Companies, L.P. ("Nvest") under the equity method of accounting. Nvest has been
included within the Asset Management segment due to the types of products and
strategies employed by the entity. The individual segment's equity in earnings
of Nvest, which is included in net investment income, was $48, $49 and $45 for
the years ended December 31, 1999, 1998 and 1997, respectively. The investment
in Nvest was $196, $252 and $216 at December 31, 1999, 1998 and 1997,
respectively.
Net investment income and net realized investment gains are based upon the
actual results of each segment's specifically identifiable asset portfolio.
Other costs and operating costs were allocated to each of the segments based
upon: (1) a review of the nature of such costs, (2) time studies analyzing the
amount of employee compensation costs incurred by each segment, and (3) cost
estimates included in the Company's product pricing.
The consolidation/elimination column includes the elimination of all
intersegment amounts and the Individual segment's ownership interest in Nvest.
The principal component of the intersegment amounts related to intersegment
loans, which bore interest at rates commensurate with related borrowings.
Revenues derived from any customer did not exceed 10% of consolidated
revenues. Revenues from U.S. operations were $24,637, $25,643 and $22,664 for
the years ended December 31, 1999, 1998 and 1997, respectively, which
represented 97%, 96% and 93%, respectively, of consolidated revenues.
16. SUBSEQUENT EVENTS
On January 6, 2000, the Company acquired GenAmerica for $1.2 billion. In
connection with this acquisition, the Company incurred $900 of short-term debt.
GenAmerica is a holding company which includes General American Life Insurance
Company, 48.3% of the outstanding shares of Reinsurance Group of America ("RGA")
common stock, a provider of reinsurance, and 61.0% of the outstanding shares of
Conning Corporation common stock, an asset manager. On January 18, 2000, the
Company announced that it had proposed to acquire all of the outstanding shares
of Conning common stock not already owned by it for $10.50 per share in cash, or
approximately $55. At December 31, 1999, the Company owned 9.6% of the
outstanding shares of RGA common stock which were acquired on November 24, 1999
for $125. Subsequent to the GenAmerica acquisition, the Company owned 57.9% of
the outstanding shares of RGA common stock. Total assets, revenues and net loss
of GenAmerica were $23,594, $3,916 and $(174), respectively, at or for the year
ended December 31, 1999.
As part of the acquisition agreement, in September 1999 the Company assumed
$5,752 of General American Life funding agreements and received cash of $1,926
and investment assets with a market value of $3,826. In October 1999, as part of
the assumption arrangement, the holders of General American Life funding
agreements aggregating $5,136 elected to have the Company redeem the funding
agreements for cash. General American Life agreed to pay the Company a fee of
$120 in connection with the assumption of the funding agreements. The fee will
be considered as part of the purchase price to be allocated to the fair value of
assets and liabilities acquired. The Company also agreed to make a capital
contribution of $120 to General American Life after the completion of the
acquisition.
At the date of the acquisition agreement, the Company and GenAmerica were
parties to a number of reinsurance agreements. In addition, as part of the
acquisition, the Company entered into agreements effective as of July 25, 1999,
which coinsured new and certain existing business of General American Life and
some of its affiliates. See Note 11.
<PAGE>
METLIFE -Registered Trademark-
Metropolitan Life Insurance Company
One Madison Avenue, New York, NY 10010
(0400) printed in U.S.A JC(exp0501)MLIC-LD
<PAGE>
PART II
REPRESENTATION WITH RESPECT TO FEES AND CHARGES
Metropolitan Life represents that the fees and charges deducted under the
Policies offered and sold pursuant to 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 Metropolitan Life under the Policies.
Metropolitan Life 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 Metropolitan Life to earn a
profit, the degree to which the Policies 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 policies issued pursuant 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 policies 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 32 pages.
Undertaking to File Reports as filed with the initial filing of this
Registration Statement on January 22, 1993.
Undertaking pursuant to Rule 484(b)(1) under the Securities Act of 1933
as filed with the initial filing of this Registration Statement on
January 22, 1993.
Representation With Respect To Fees And Charges.
The signatures.
Written Consents of the following persons:
Rocco A. Mariano, Jr. (filed with Exhibit 6 below).
Freedman, Levy, Kroll & Simonds as filed with the initial filing of
this Registration Statement on January 22, 1993.
Deloitte & Touche LLP
The following exhibits:
<TABLE>
<S> <C> <C> <C> <C> <C>
1.A (1) -- Resolution of Board of Directors of Metropolitan Life effecting
the establishment of Metropolitan Life Separate Account UL...... ++++
(2) -- Not Applicable
(3) -- (a) Not Applicable
-- (b) Form of Selected Broker Agreement........................... *
-- (c) Schedule of Sales Commissions............................... +++
(4) -- Not Applicable
(5) -- (a) Specimen Flexible Premium Variable Life Insurance Policy.... *
-- (b) Alternate pages required by State Law....................... *
-- (c) Endorsement for calculation of minimum death benefit using
the Cash Value Accumulation test................................ *
-- (d) Accelerated Death Benefit and Zero Cost Loan riders......... *
-- (e) Yearly Renewable Term rider................................. +++++
-- (f) Refund of sales load rider.................................. +++++
-- (g) Amended Policy Specifications Page indicating alternate
premium expense charges..................................... +++++
-- (h) (1) Participation Agreements with Invesco and Janus......... **
(2) Form of Participation Agreement with Templeton.......... **
-- (i) Form of personalized illustration........................... **
(6) -- (a) Restated Charter and By-Laws of Metropolitan Life........... ***
(7) -- Not Applicable
</TABLE>
II-1
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
(8) -- Not Applicable
(9) -- Not Applicable
(10) -- (a) Amended Application Forms for Policy and Form of Receipt
(including State variations).................................... *
3. -- Opinion and consent of Counsel as to the legality of the
securities being registered..................................... +++++
4. -- Not Applicable
5. -- See Exhibit 27 below.
6. -- Opinion and consent of Rocco A. Mariano, Jr., relating to the
Policies........................................................ +
7. -- Not Applicable
8. -- Powers of Attorney.............................................. ++++
11. -- Memoranda describing certain procedures filed pursuant to Rule
6e-3(T)(b)(12)(iii)............................................. *
27. -- Financial Data Schedule (not applicable)
No Code of Ethics has been included in the above exhibits,
because the registrant invests only in shares of open-end
management investment companies registered under the Investment
Company Act of 1940.
</TABLE>
- ------------------------
<TABLE>
<C> <S>
+ Filed herewith.
++ Included in the filing of Post-Effective Amendment No. 4 to
this Registration Statement on March 1, 1996.
+++ Incorporated by reference from "Distribution of the
Policies" in the Prospectus included herein.
++++ Incorporated 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 Registration Statement of
Separate Account UL (File No. 333-40161) filed on
November 13, 1997, Stewart G. Nagler's power of attorney,
which is incorporated by reference to the filing of Post-
Effective Amendment No. 6 to the Registration Statement of
Separate Account UL (File No. 33-47927) on December 23,
1997, Virginia M. Wilson's power of attorney which is
incorporated by reference to the filing of Pre-Effective
Amendment No. 2 to the Registration Statement of
Metropolitan Life Separate Account E (File No. 333-80547) on
November 1, 1999 and William C. Steere, Jr.'s power of
attorney which is included in the filing of Post-Effective
Amendment No. 8 to this Registration Statement.
+++++ Included in the filing of Post-Effective Amendment No. 5 to
this Registration Statement on April 26, 1996.
* Included in the filing of Post-Effective Amendment No. 6 to
this Registration Statement on April 30, 1997.
** Included in the filing of Post-Effective Amendment No. 8 to
this Registration Statement on April 23, 1999.
*** Incorporated by reference to the filing of Post-Effective
Amendment No. 3 to the Registration Statement of Separate
Account UL (File No. 333-40161) on April 6, 2000.
</TABLE>
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
effectness 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 25th day of April, 2000.
<TABLE>
<S> <C>
Metropolitan Life Insurance Company
(Seal)
By: /s/ GARY A. BELLER
--------------------------------------
Gary A. Beller
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 in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <C> <S> <C>
* Chairman, President, and
------------------------------------------- Chief Executive Officer
Robert H. Benmosche and Director (Principal
Executive Officer)
* Vice-Chairman of the Board
------------------------------------------- and Chief Investment
Gerald Clark Officer and Director
* Vice-Chairman of the Board
------------------------------------------- and Chief Financial
Stewart G. Nagler Officer (Principal
Financial Officer)
* Senior Vice-President and
------------------------------------------- Controller (Principal
Virginia M. Wilson Accounting Officer)
*
------------------------------------------- Director
Curtis H. Barnette
*
------------------------------------------- Director
Joan Ganz Cooney
*
------------------------------------------- Director
Burton A. Dole, Jr.
*By /s/ CHRISTOPHER P. NICHOLAS
---------------------------------------
Christopher P. Nicholas, Esq.
Attorney-in-fact
April 25, 2000
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <C> <S> <C>
*
------------------------------------------- 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
*By /s/ CHRISTOPHER P. NICHOLAS
--------------------------------------- April 25, 2000
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) 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 25th day of April 2000.
Metropolitan Life Separate Account UL
(Registrant)
By: Metropolitan Life Insurance Company
(Depositor)
(Seal)
By: /s/ GARY A. BELLER, ESQ.
---------------------------------------
Senior Executive Vice-President and
General Counsel
Attest: /s/ CHERYL D. MARTINO
------------------------------------
Assistant Secretary
II-5
<PAGE>
INDEPENDENT AUDITORS' CONSENT
METROPOLITAN LIFE INSURANCE COMPANY:
We consent to the use in this Post-Effective Amendment No. 9 to the
Registration Statement No. 33-57320 of Metropolitan Life Separate Account UL on
Form S-6 of our report dated March 27, 2000 relating to Metropolitan Life
Separate Account UL appearing in the Prospectus, which is a part of such
Registration Statement, and our report dated February 7, 2000, 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 26, 2000
II-6
<PAGE>
EXHIBIT 6
April 25, 2000
Metropolitan Life Insurance Company
One Madison Avenue
New York, NY 10010
Dear Sirs:
This opinion is furnished in connection with the filing of Post-Effective
Amendment No. 9 to Registration Statement No. 33-57320 on Form S-6
("Registration Statement") which covers premiums received under Flexible Premium
Variable Life Insurance Policies ("Policies") offered by 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 Policy forms and I am familiar with the
Registration Statement and Exhibits thereto.
In my opinion, the illustrations of Policy death benefits, cash values, cash
surrender values and accumulated premiums in Exhibit 1A. (5) (i) included in the
Registration Statement, based on the assumptions stated therein, are consistent
with the provisions of the Policy forms. Also, in my opinion, the amounts
assumed in the illustrations for current Policy charges (including the decrease
in mortality and expense risk charge after 9 years) remain reasonable, based on
MLIC's current expectations.
The Policies have not been designed so as to make the relationship between
premiums and benefits, as shown in these illustrations appear to be
disproportionately more favorable to a prospective purchaser of the Policy for
standard risk males age 45, than to prospective purchasers of Policies for a
male at other ages or in other underwriting classes or for a female. Nor have
the particular illustrations shown been selected for the purpose of making that
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 contained in the registration
statement.
Very truly yours,
/s/ Rocco A. Mariano, Jr.
- ------------------------------
Rocco A. Mariano, Jr., FSA, MAAA
Assistant Vice-President and Actuary
