-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WhkOTWzu0/49wX5NNyBadlgKdZoi2nTXg9huqxElnt7o0ZGiLkXGi8ILYEOoBVQN tcpp/v3yMv7uxr3a1+jQEw== 0000950123-07-005162.txt : 20070406 0000950123-07-005162.hdr.sgml : 20070406 20070406141021 ACCESSION NUMBER: 0000950123-07-005162 CONFORMED SUBMISSION TYPE: 485BPOS PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 20070406 DATE AS OF CHANGE: 20070406 EFFECTIVENESS DATE: 20070430 FILER: COMPANY DATA: COMPANY CONFORMED NAME: METLIFE OF CT SEPARATE ACCOUNT PF II FOR VARIABLE ANNUITIES CENTRAL INDEX KEY: 0001043307 IRS NUMBER: 000000000 STATE OF INCORPORATION: CT FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: 1933 Act SEC FILE NUMBER: 333-72336 FILM NUMBER: 07754139 BUSINESS ADDRESS: STREET 1: METLIFE LIFE AND ANNUITY COMPANY OF CO STREET 2: ONE CITYPLACE, 185 ASYLUM STREET, 3CP CITY: HARTFORD STATE: CT ZIP: 06103-3415 BUSINESS PHONE: 1-888-556-5412 MAIL ADDRESS: STREET 1: METLIFE LIFE AND ANNUITY COMPANY OF CO STREET 2: ONE CITYPLACE, 185 ASYLUM STREET, 3CP CITY: HARTFORD STATE: CT ZIP: 06103-3415 FORMER COMPANY: FORMER CONFORMED NAME: TRAVELERS SEPARATE ACCOUNT PF II FOR VARIABLE ANNUITIES DATE OF NAME CHANGE: 19970731 FILER: COMPANY DATA: COMPANY CONFORMED NAME: METLIFE OF CT SEPARATE ACCOUNT PF II FOR VARIABLE ANNUITIES CENTRAL INDEX KEY: 0001043307 IRS NUMBER: 000000000 STATE OF INCORPORATION: CT FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: 1940 Act SEC FILE NUMBER: 811-08317 FILM NUMBER: 07754140 BUSINESS ADDRESS: STREET 1: METLIFE LIFE AND ANNUITY COMPANY OF CO STREET 2: ONE CITYPLACE, 185 ASYLUM STREET, 3CP CITY: HARTFORD STATE: CT ZIP: 06103-3415 BUSINESS PHONE: 1-888-556-5412 MAIL ADDRESS: STREET 1: METLIFE LIFE AND ANNUITY COMPANY OF CO STREET 2: ONE CITYPLACE, 185 ASYLUM STREET, 3CP CITY: HARTFORD STATE: CT ZIP: 06103-3415 FORMER COMPANY: FORMER CONFORMED NAME: TRAVELERS SEPARATE ACCOUNT PF II FOR VARIABLE ANNUITIES DATE OF NAME CHANGE: 19970731 0001043307 S000005878 METLIFE OF CT SEPARATE ACCOUNT PF II FOR VARIABLE ANNUITIES C000016100 PrimElite II Annuity 485BPOS 1 m29586e485bpos.txt 485BPOS AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 6, 2007 REGISTRATION STATEMENT NO. 333-72336 811-08317 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------- FORM N-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 POST-EFFECTIVE AMENDMENT NO. 6 AND REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 AMENDMENT NO. 19 METLIFE OF CT SEPARATE ACCOUNT PF II FOR VARIABLE ANNUITIES (Exact name of Registrant) METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT (Name of Depositor) ONE CITYPLACE, HARTFORD, CONNECTICUT 06199 (Address of Depositor's Principal Executive Offices) Depositor's Telephone Number, including area code: (860) 308-1000 MARIE C. SWIFT, ESQ. METROPOLITAN LIFE INSURANCE COMPANY 501 BOYLSTON STREET BOSTON, MA 02116 (Name and Address of Agent Agent for Service) Approximate Date of Proposed Public Offering: It is proposed that this filing will become effective (check appropriate box): [ ] immediately upon filing pursuant to paragraph (b) of Rule 485. [X] on April 30, 2007 pursuant to paragraph (b) of Rule 485. [ ] days after filing pursuant to paragraph (a)(1) of Rule 485. [ ] on pursuant to paragraph (a)(1) of Rule 485. If appropriate, check the following box: [ ] this post-effective amendment designates a new effective date for a previously filed post-effective amendment. Title of Securities Being Registered: Individual Variable Annuity Contracts - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PRIMELITE II(SM) ANNUITY PROSPECTUS: METLIFE OF CT SEPARATE ACCOUNT PF FOR VARIABLE ANNUITIES METLIFE OF CT SEPARATE ACCOUNT PF II FOR VARIABLE ANNUITIES This prospectus describes PRIMELITE II ANNUITY, a flexible premium deferred variable annuity contract (the "Contract") issued by MetLife Insurance Company of Connecticut or MetLife Life and Annuity Company of Connecticut. MetLife Life and Annuity Company of Connecticut does not solicit or issue insurance products in the state of New York. Refer to your Contract for the name of your issuing company. The Contract is available in connection with certain retirement plans that qualify for special federal income tax treatment ("Qualified Contracts") as well as those that do not qualify for such treatment ("Non-qualified Contracts"). You can choose to have your premium ("Purchase Payments") accumulate on a variable and/or, subject to availability, fixed basis in one of our funding options. Your Contract Value before the Maturity Date and the amount of monthly income afterwards will vary daily to reflect the investment experience of the Variable Funding Options you select. You bear the investment risk of investing in the Variable Funding Options. The Variable Funding Options available for contracts purchased on or after April 30, 2007 are: ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES LEGG MASON PARTNERS VARIABLE INCOME TRUST FUND, INC. -- CLASS B Legg Mason Partners Variable Adjustable AllianceBernstein Large Cap Growth Rate Income Portfolio Portfolio Legg Mason Partners Variable Government AMERICAN FUNDS INSURANCE SERIES -- CLASS 2 Portfolio -- Class I American Funds Global Growth Fund Legg Mason Partners Variable High Income American Funds Growth Fund Portfolio American Funds Growth-Income Fund Legg Mason Partners Variable Money Market FIDELITY VARIABLE INSURANCE PRODUCTS Portfolio -- SERVICE CLASS 2 MET INVESTORS SERIES TRUST VIP Equity-Income Portfolio Lord Abbett Bond Debenture VIP Mid Cap Portfolio Portfolio -- Class A FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS Lord Abbett Growth and Income TRUST -- CLASS 2 Portfolio -- Class B Mutual Shares Securities Fund Met/AIM Capital Appreciation Templeton Growth Securities Fund Portfolio -- Class E LEGG MASON PARTNERS VARIABLE EQUITY TRUST MFS(R) Research International Legg Mason Partners Variable Aggressive Portfolio -- Class B Growth Portfolio -- Class I Oppenheimer Capital Appreciation Legg Mason Partners Variable Appreciation Portfolio -- Class B Portfolio -- Class I Pioneer Strategic Income Portfolio -- Class Legg Mason Partners Variable Capital and A Income Portfolio -- Class II Third Avenue Small Cap Value Legg Mason Partners Variable Dividend Portfolio -- Class B Strategy Portfolio METROPOLITAN SERIES FUND, INC. Legg Mason Partners Variable Fundamental BlackRock Aggressive Growth Value Portfolio -- Class I Portfolio -- Class D Legg Mason Partners Variable International BlackRock Bond Income Portfolio -- Class E All Cap Opportunity Portfolio Capital Guardian U.S. Equity Legg Mason Partners Variable Investors Portfolio -- Class B Portfolio -- Class I MFS(R) Total Return Portfolio -- Class F Legg Mason Partners Variable Large Cap T. Rowe Price Large Cap Growth Growth Portfolio -- Class I Portfolio -- Class B Legg Mason Partners Variable Mid Cap Core Western Asset Management U.S. Government Portfolio -- Class I Portfolio -- Class A Legg Mason Partners Variable Multiple PIONEER VARIABLE CONTRACTS TRUST -- CLASS II Discipline Portfolio -- All Cap Growth Pioneer Fund VCT Portfolio and Value Pioneer Mid Cap Value VCT Portfolio Legg Mason Partners Variable Multiple THE UNIVERSAL INSTITUTIONAL FUNDS, INC. Discipline Portfolio -- Global All Cap Equity and Income Portfolio -- Class II Growth and Value U.S. Real Estate Securities Legg Mason Partners Variable Multiple Portfolio -- Class I Discipline Portfolio -- Large Cap Growth VAN KAMPEN LIFE INVESTMENT TRUST -- CLASS II and Value Comstock Portfolio Legg Mason Partners Variable Small Cap Growth and Income Portfolio Growth Portfolio -- Class I Strategic Growth Portfolio Legg Mason Partners Variable Social LEGG MASON PARTNERS VARIABLE EQUITY TRUST Awareness Portfolio Legg Mason Partners Variable Lifestyle Allocation 50% Legg Mason Partners Variable Lifestyle Allocation 70% Legg Mason Partners Variable Lifestyle Allocation 85%
Certain Variable Funding Options have been subject to a merger, substitution or other change. Please see "Appendix C -- Additional Information Regarding Underlying Funds" for more information. The Contract, certain Contract features and/or some of the funding options may not be available in all states. This prospectus provides the information that you should know before investing in the Contract. Please keep this prospectus for future reference. You can receive additional information about your Contract by requesting a copy of the Statement of Additional Information ("SAI") dated April 30, 2007. We filed the SAI with the Securities and Exchange Commission ("SEC"), and it is incorporated by reference into this prospectus. To request a copy, write to us at One Cityplace, 185 Asylum Street, 3CP, Hartford, Connecticut 06103-3415, call 1-888- 556-5412 or access the SEC's website (http://www.sec.gov). See Appendix F for the SAI's table of contents. NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR THE ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. VARIABLE ANNUITY CONTRACTS ARE NOT DEPOSITS OF ANY BANK, AND ARE NOT INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY. PROSPECTUS DATED APRIL 30, 2007 TABLE OF CONTENTS Glossary................................ 3 Summary................................. 4 Fee Table............................... 7 Condensed Financial Information......... 11 The Annuity Contract.................... 11 Contract Owner Inquiries.............. 12 Purchase Payments..................... 12 Accumulation Units.................... 13 The Variable Funding Options.......... 13 The Fixed Account....................... 17 Charges and Deductions.................. 17 General............................... 17 Withdrawal Charge..................... 18 Free Withdrawal Allowance............. 19 Transfer Charge....................... 19 Administrative Charges................ 19 Mortality and Expense Risk Charge..... 19 Variable Liquidity Benefit Charge..... 19 Enhanced Stepped-Up Provision Charge.. 20 Variable Funding Option Expenses...... 20 Premium Tax........................... 20 Changes in Taxes Based upon Premium or Value.............................. 20 Transfers............................... 20 Market Timing/Excessive Trading....... 21 Dollar Cost Averaging................. 22 Access to Your Money.................... 23 Systematic Withdrawals................ 24 Loans................................. 24 Ownership Provisions.................... 24 Types of Ownership...................... 24 Contract Owner........................ 24 Beneficiary........................... 25 Annuitant............................. 25 Death Benefit........................... 25 Death Proceeds before the Maturity Date............................... 26 Enhanced Stepped-Up Provision......... 26 Payment of Proceeds................... 27 Spousal Contract Continuance.......... 29 Beneficiary Contract Continuance...... 29 Planned Death Benefit................. 30 Death Proceeds after the Maturity Date............................... 30 The Annuity Period...................... 30 Maturity Date......................... 30 Allocation of Annuity................. 31 Variable Annuity...................... 31 Fixed Annuity......................... 31 Payment Options......................... 31 Election of Options................... 31 Annuity Options....................... 32 Variable Liquidity Benefit............ 32 Miscellaneous Contract Provisions....... 33 Right to Return....................... 33 Termination........................... 33 Required Reports...................... 33 Suspension of Payments................ 33 The Separate Accounts................... 33 Performance Information............... 34 Federal Tax Considerations.............. 34 General Taxation of Annuities......... 35 Types of Contracts: Qualified and Non- qualified.......................... 36 Qualified Annuity Contracts........... 36 Taxation of Qualified Annuity Contracts........................ 36 Mandatory Distributions for Qualified Plans.................. 36 Individual Retirement Annuities.... Roth IRAs.......................... TSAs (ERISA and non-ERISA)......... Individual Retirement Annuities.... 37 Roth IRAs.......................... 37 Non-qualified Annuity Contracts....... 39 Diversification Requirements for Variable Annuities............... 41 Ownership of the Investments....... 41 Taxation of Death Benefit Proceeds......................... 41 Other Tax Considerations.............. 41 Puerto Rico Tax Considerations..... 41 Non-Resident Aliens................ 42 Tax Credits and Deductions......... Other Information....................... 42 The Insurance Companies............... 42 Financial Statements.................. 42 Distribution of Variable Annuity Contracts.......................... 42 Conformity with State and Federal Laws............................... 44 Voting Rights......................... 44 Restrictions on Financial Transactions....................... 45 Legal Proceedings..................... 45 Appendix A: Condensed Financial Information Separate Account PF for Variable Annuities.................... A-1 Appendix B: Condensed Financial Information Separate Account PF II for Variable Annuities.................... B-1 Appendix C: Additional Information Regarding Underlying Funds............ C-1 Appendix D: The Fixed Account........... D-1 Appendix E: Waiver of Withdrawal Charge for Nursing Home Confinement.......... E-1 Appendix F: Contents of the Statement of Additional Information................ F-1
2 GLOSSARY ACCUMULATION UNIT -- an accounting unit of measure used to calculate the value of this Contract before Annuity Payments begin. ANNUITANT -- the person on whose life the Maturity Date and Annuity Payments depend. ANNUITY PAYMENTS -- a series of periodic payments (a) for life; (b) for life with a minimum number of payments; (c) for the joint lifetime of the Annuitant and another person, and thereafter during the lifetime of the survivor; or (d) for a fixed period. ANNUITY UNIT -- an accounting unit of measure used to calculate the amount of Annuity Payments. CASH SURRENDER VALUE -- the Contract Value less any withdrawal charge and premium tax not previously deducted. CODE -- the Internal Revenue Code of 1986, as amended, and all related laws and regulations that are in effect during the term of this Contract. CONTINGENT ANNUITANT -- the individual who becomes the Annuitant when the Annuitant who is not the owner dies prior to the Maturity Date. CONTRACT DATE -- the date on which the Contract is issued. CONTRACT OWNER (you) -- the person named in the Contract (on the specifications page) as the owner of the Contract. CONTRACT VALUE -- Purchase Payments, plus or minus any investment experience on the amounts allocated to the variable funds or interest on amounts allocated to the Fixed Account, adjusted by any applicable charges and withdrawals. CONTRACT YEARS -- twelve month periods beginning with the Contract Date. DEATH REPORT DATE -- the day on which we have received 1) Due Proof of Death and 2) written payment instructions or election of spousal or beneficiary contract continuation. DUE PROOF OF DEATH -- (i) a copy of a certified death certificate; (ii) a copy of a certified decree of a court of competent jurisdiction as to the finding of death; (iii) a written statement by a medical doctor who attended the deceased; or (iv) any other proof satisfactory to us. FIXED ACCOUNT -- an account that consists of all of the assets under this Contract other than those in the Separate Account. HOME OFFICE -- the Home Office of MetLife Insurance Company of Connecticut or MetLife Life and Annuity Company of Connecticut or any other office that we may designate for the purpose of administering this Contract. for transfer, withdrawal, surrender, and (if applicable) loan requests, our Home Office address is : MetLife, P.O. Box 990014, Hartford, CT 06199-0014. For Purchase Payments and (if applicable) loan repayments, our Home Office address is : MetLife, P.O. Box 371857, Pittsburgh, PA 15250-7857. MATURITY DATE -- the date on which the Annuity Payments are to begin. PAYMENT OPTION -- an annuity option elected under your Contract. PURCHASE PAYMENT -- any premium paid by you to initiate or supplement this Contract. QUALIFIED CONTRACT -- a contract used in a retirement plan or program that is intended to qualify under Sections 401, 403, 408, or 408A of the Code. SEPARATE ACCOUNT -- a segregated account registered with the Securities and Exchange Commission ("SEC"), the assets of which are invested solely in the Underlying Funds. The assets of the Separate Account are held exclusively for the benefit of Contract Owners. SUBACCOUNT -- that portion of the assets of a Separate Account that is allocated to a particular Underlying Fund. UNDERLYING FUND -- a portfolio of an open-end management investment company that is registered with the SEC in which the Subaccounts invest. VALUATION DATE -- a date on which a Subaccount is valued. VALUATION PERIOD -- the period between successive valuations. VARIABLE FUNDING OPTION -- a Subaccount of the Separate Account that invests in an Underlying Fund. WE, US, OUR -- MetLife Insurance Company of Connecticut or MetLife Life and Annuity Company of Connecticut. WRITTEN REQUEST -- written information sent to us in a form and content satisfactory to us and received at our Home Office. YOU, YOUR -- "You" is, the Contract Owner, and a natural person, a trust established for the benefit of a natural person, or a charitable remainder trust. 3 SUMMARY: PRIMELITE II ANNUITY THIS SUMMARY DETAILS SOME OF THE MORE IMPORTANT POINTS THAT YOU SHOULD KNOW AND CONSIDER BEFORE PURCHASING THE CONTRACT. PLEASE READ THE ENTIRE PROSPECTUS CAREFULLY. WHAT COMPANY WILL ISSUE MY CONTRACT? Your issuing company is either MetLife Insurance Company of Connecticut or MetLife Life and Annuity Company of Connecticut ("the Company," "We" or "Us"). MetLife Life and Annuity Company of Connecticut does not solicit or issue insurance products in the state of New York. Refer to your Contract for the name of your issuing company. Each company sponsors its own segregated account ("Separate Account"). MetLife Insurance Company of Connecticut sponsors the MetLife of CT Separate Account PF for Variable Annuities ("Separate Account PF "); MetLife Life and Annuity Company of Connecticut sponsors the MetLife of CT Separate Account PF II for Variable Annuities ("Separate Account PF II"). When we refer to the Separate Account, we are referring to either Separate Account PF or Separate Account PF II, depending upon your issuing Company. You may only purchase a contract in states where the Contract has been approved for sale. The Contract and/or certain optional benefits may not currently be available for sale in all states. Contracts issued in your state may provide different features and benefits from and impose different costs (such as a waiver of the withdrawal charge on all Annuity Payments) than those described in this prospectus. CAN YOU GIVE ME A GENERAL DESCRIPTION OF THE CONTRACT? We designed the Contract for retirement savings or other long-term investment purposes. The Contract provides a death benefit as well as guaranteed payout options. You direct your payment(s) to one or more of the Variable Funding Options and/or to the Fixed Account that is part of our general account (the "Fixed Account"). We guarantee money directed to the Fixed Account as to principal and interest. The Variable Funding Options fluctuate with the investment performance of the Underlying Funds and are not guaranteed. You can also lose money in the Variable Funding Options. The Contract, like all deferred variable annuity contracts, has two phases: the accumulation phase and the payout phase (annuity period). During the accumulation phase generally, under a Qualified Contract, your pre-tax contributions accumulate on a tax-deferred basis and are taxed as income when you make a withdrawal, presumably when you are in a lower tax bracket. During the accumulation phase, under a Non-qualified Contract, earnings on your after- tax contributions accumulate on a tax-deferred basis and are taxed as income when you make a withdrawal. The payout phase occurs when you begin receiving payments from your Contract. The amount of money you accumulate in your Contract determines the amount of income (Annuity Payments) you receive during the payout phase. During the payout phase, you may choose one of a number of annuity options. You may receive income payments in the form of a variable annuity, a fixed annuity, or a combination of both. If you elect variable income payments, the dollar amount of your payments may increase or decrease. Once you choose one of the annuity options and begin to receive payments, it cannot be changed. WHO CAN PURCHASE THIS CONTRACT? The Contract is currently available for use in connection with (1) individual non-qualified purchases; (2) rollovers from Individual Retirement Annuities (IRAs); (3) rollovers from other qualified retirement plans and (4) beneficiary-directed transfers of death proceeds from another contract. Qualified Contracts include contracts qualifying under Section 401(a), 403(b), 408(b) or 408A of the Code. Purchase of this Contract through a tax qualified retirement plan ("Plan") does not provide any additional tax deferral benefits beyond those provided by the Plan. Accordingly, if you are purchasing this Contract through a Plan, you should consider purchasing this Contract for its death benefit, annuity option benefits, and other non-tax- related benefits. You may purchase the Contract with an initial payment of at least $5,000. You may make additional payments of at least $100 at any time during the accumulation phase. No additional payments are allowed if this Contract is purchased with a beneficiary-directed transfer of death proceeds. The ages of the owner and Annuitant determine which death benefits and certain optional features are available to you. See "The Annuity Contract" section for more information. CAN I EXCHANGE MY CURRENT ANNUITY CONTRACT FOR THIS CONTRACT? The Code generally permits you to exchange one annuity contract for another in a "tax-free exchange." Therefore, you can transfer the proceeds from another annuity contract to purchase this Contract. Before making an exchange to acquire this Contract, you should carefully 4 compare this Contract to your current contract. You may have to pay a surrender charge under your current contract to exchange it for this Contract, and this Contract has its own surrender charges that would apply to you. The other fees and charges under this Contract may be higher or lower and the benefits may be different than those of your current contract. In addition, you may have to pay federal income or penalty taxes on the exchange if it does not qualify for tax- free treatment. You should not exchange another contract for this Contract unless you determine, after evaluating all the facts, the exchange is in your best interests. Remember that the person selling you the Contract generally will earn a commission on the sale. IS THERE A RIGHT TO RETURN PERIOD? If you cancel the Contract within twenty days after you receive it, you will receive a full refund of your Contract Value plus any Contract charges and premium taxes you paid (but not fees and charges assessed by the Underlying Funds). Where state law requires a different right to return period, or the return of Purchase Payments, the Company will comply. You bear the investment risk on the Purchase Payment allocated to a Variable Funding Option during the right to return period; therefore, the Contract Value we return may be greater or less than your Purchase Payment. If you purchased your Contract as an Individual Retirement Annuity, and you return it within the first seven days after delivery, or longer if your state law permits, we will refund your full Purchase Payment. During the remainder of the right to return period, we will refund your Contract Value (including charges we assessed). We will determine your Contract Value at the close of business on the day we receive a Written Request for a refund. CAN YOU GIVE A GENERAL DESCRIPTION OF THE VARIABLE FUNDING OPTIONS AND HOW THEY OPERATE? The Variable Funding Options represent Subaccounts of the Separate Account. At your direction, the Separate Account, through its Subaccounts, uses your Purchase Payments to purchase shares of one or more of the Underlying Funds that holds securities consistent with its own investment policy. Depending on market conditions, you may make or lose money in any of these Variable Funding Options. You can transfer among the Variable Funding Options as frequently as you wish without any current tax implications. Currently there is no charge for transfers, nor a limit to the number of transfers allowed. We may, in the future, charge a fee for any transfer request, or limit the number of transfers allowed. At a minimum, we would always allow one transfer every six months. We reserve the right to restrict transfers that we determine will disadvantage other Contract Owners. You may transfer between the Fixed Account and the Variable Funding Options twice a year (during the 30 days after the six-month Contract Date anniversary), provided the amount is not greater than 15% of the Fixed Account value on that date. Amounts previously transferred from the Fixed Account to the Variable Funding Options may not be transferred back to the Fixed Account for a period of at least six months from the date of the transfer. WHAT EXPENSES WILL BE ASSESSED UNDER THE CONTRACT? The Contract has insurance features and investment features, and there are costs related to each. We deduct an administrative expense charge and a mortality and expense risk ("M&E") charge daily from amounts you allocate to the Separate Account. We deduct the administrative expense charge at an annual rate of 0.15% and deduct the M&E charge at an annual rate of 1.50%. For Contracts with a Contract Value of less than $50,000, we also deduct an annual Contract administrative charge of $30. Each Underlying Fund also charges for management costs and other expenses. We will apply a withdrawal charge to withdrawals from the Contract, and will calculate it as a percentage of the Purchase Payments withdrawn. The maximum percentage is 8%, decreasing to 0% after eight full years. If you select the Enhanced Stepped-Up Provision, ("E.S.P."), an additional 0.25% annually will be deducted from amounts in the Variable Funding Options. This provision is not available when either the Annuitant or owner is age 76 or older on the Rider Effective Date. Upon annuitization, if the Variable Liquidity Benefit is selected, there is a maximum charge of 8% of the amounts withdrawn. Please refer to Payment Options for a description of this benefit. HOW WILL MY PURCHASE PAYMENTS AND WITHDRAWALS BE TAXED? Generally, the payments you make to a Qualified Contract during the accumulation phase are made with before-tax dollars. Generally, you will be taxed on your Purchase Payments and on any earnings when you make a withdrawal or begin receiving Annuity Payments. Under a Non-qualified Contract, payments to the Contract are made with after-tax dollars, and earnings will generally accumulate tax-deferred. You will be taxed on these earnings when they are withdrawn from the Contract. If you are 5 younger than 59 1/2 when you take money out, you may be charged a 10% federal penalty tax on the amount withdrawn. For owners of Qualified Contracts, if you reach a certain age, you may be required by federal tax laws to begin receiving payments from your annuity or risk paying a penalty tax. In those cases, we can calculate and pay you the minimum required distribution amounts (see "Access to Your Money - Systematic Withdrawals"). HOW MAY I ACCESS MY MONEY? You can take withdrawals any time during the accumulation phase. Withdrawal charges may apply, as well as income taxes, and/or a penalty tax on amounts withdrawn. WHAT IS THE DEATH BENEFIT UNDER THE CONTRACT? The death benefit applies upon the first death of the Contract Owner, joint owner, or Annuitant. Assuming you are the Annuitant, the death benefit is as follows: If you die before the Contract is in the payout phase, the person you have chosen as your beneficiary will receive a death benefit. We calculate the death benefit value at the close of the business day on which our Home Office receives (1) Due Proof of Death, (2) written payment instructions or the election of spousal or beneficiary contract continuance. Please refer to the Death Benefit section in the Prospectus for more details. WHERE MAY I FIND OUT MORE ABOUT ACCUMULATION UNIT VALUES? The Condensed Financial Information in Appendix A or Appendix B to this prospectus provides more information about Accumulation Unit values. ARE THERE ANY ADDITIONAL FEATURES? This Contract has other features you may be interested in. These include: - DOLLAR COST AVERAGING. This is a program that allows you to invest a fixed amount of money in Variable Funding Options each month, theoretically giving you a lower average cost per unit over time than a single one-time purchase. Dollar Cost Averaging requires regular investments regardless of fluctuating price levels, and does not guarantee profits or prevent losses in a declining market. Potential investors should consider their financial ability to continue purchases through periods of low price levels. - SYSTEMATIC WITHDRAWAL OPTION. Before the Maturity Date, you can arrange to have money sent to you at set intervals throughout the year. Of course, any applicable income and penalty taxes will apply on amounts withdrawn. Withdrawals in excess of the annual free withdrawal allowance may be subject to a withdrawal charge. - AUTOMATIC REBALANCING. You may elect to have the Company periodically reallocate the values in your Contract to match the rebalancing allocation selected. - MANAGED DISTRIBUTION PROGRAM. This program allows us to automatically calculate and distribute to you, in November of the applicable tax year, an amount that will satisfy the Internal Revenue Service's minimum distribution requirements imposed on certain contracts once the owner reaches age 70 1/2 or retires. These minimum distributions occur during the accumulation phase. - SPOUSAL CONTRACT CONTINUANCE (SUBJECT TO AVAILABILITY). If your spouse is named as an owner and/or beneficiary, and you die prior to the Maturity Date, your spouse may elect to continue the Contract as owner rather than have the death benefit paid to the beneficiary. This feature applies to a spousal joint Contract Owner and/or beneficiary only. - ENHANCED STEPPED-UP PROVISION ("E.S.P."). For an additional charge, the total death benefit payable may be increased based on the earnings in your Contract. - BENEFICIARY CONTRACT CONTINUANCE (NOT PERMITTED FOR NON-NATURAL BENEFICIARIES). If you die before the Maturity Date, and if the value of any beneficiary's portion of the death benefit is between $20,000 and $1,000,000 as of the date of your death, that beneficiary(s) may elect to continue his/her portion of the Contract and take required distributions over time, rather than have the death benefit paid to them in a lump sum. 6 FEE TABLE - -------------------------------------------------------------------------------- The following tables describe the fees and expenses that you will pay when buying, owning, and surrendering the Contract. The first table describes the fees and expenses that you will pay at the time that you buy the Contract, surrender the Contract, or transfer Contract Value between Variable Funding Options. Expenses shown do not include premium taxes, which may be applicable. CONTRACT OWNER TRANSACTION EXPENSES WITHDRAWAL CHARGE....................................... 8%(1) (as a percentage of the Purchase Payments withdrawn) TRANSFER CHARGE......................................... $10(2) (assessed on transfers that exceed 12 per year) VARIABLE LIQUIDITY BENEFIT CHARGE....................... 8%(3) (as a percentage of the present value of the remaining Annuity Payments that are surrendered. The interest rate used to calculate this present value is 1% higher than the Assumed (Daily) Net Investment Factor used to calculate The Annuity Payments)
The next table describes the fees and expenses that you will pay periodically during the time that you own the Contract, not including Underlying Fund fees and expenses. CONTRACT ADMINISTRATIVE CHARGES ANNUAL CONTRACT ADMINISTRATIVE CHARGE................... $30(4)
- --------- (1) The withdrawal charge declines to zero after the Purchase Payment has been in the Contract for 8 years. The charge is as follows:
YEARS SINCE PURCHASE PAYMENT MADE - ------------------------------------------ GREATER THAN OR EQUAL TO BUT LESS THAN WITHDRAWAL CHARGE - ------------------------ ------------- ----------------- 0 years 2 years 8% 2 years 4 years 7% 4 years 5 years 6% 5 years 6 years 5% 6 years 7 years 4% 7 years 8 years 3% 8 + years 0%
- --------- (2) We do not currently assess the transfer charge. (3) This withdrawal charge only applies when you surrender the Contract after beginning to receive Annuity Payments. The Variable Liquidity Benefit Withdrawal Charge declines to zero after eight years. The charge is as follows:
YEARS SINCE INITIAL PURCHASE PAYMENT - ------------------------------------------ GREATER THAN OR EQUAL TO BUT LESS THAN WITHDRAWAL CHARGE - ------------------------ ------------- ----------------- 0 years 2 years 8% 2 years 4 years 7% 4 years 5 years 6% 5 years 6 years 5% 6 years 7 years 4% 7 years 8 years 3% 8 + years 0%
- --------- (4) We do not assess this charge if Contract Value is $50,000 or more on the fourth Friday of each August. 7 ANNUAL SEPARATE ACCOUNT CHARGES: (as a percentage of the average daily net assets of the Separate Account)
- --------------------------------------------------------------------------------------------- WITHOUT E.S.P. WITH E.S.P. - --------------------------------------------------------------------------------------------- Mortality & Expense Risk Charge 1.50%(5) Mortality & Expense Risk Charge 1.50%(5) Administrative Expense Charge 0.15% Administrative Expense Charge 0.15% ---- Total Annual Separate Account E.S.P. Charge 0.25% ---- Charges 1.65% Total Annual Separate Account Charges 1.90% - ---------------------------------------------------------------------------------------------
- --------- (5) We are waiving the following amounts of the Mortality and Expense Risk Charge: 0.15% for the Subaccount investing in the Western Asset Management U.S. Government Portfolio, an amount equal to the Underlying Fund expenses that are in excess of 1.16% for the Subaccount investing in the Met/AIM Capital Appreciation Portfolio, an amount equal to the Underlying Fund expenses that are in excess of 1.16% for the Subaccount investing in the Capital Guardian U.S. Equity Portfolio and an amount equal to the Underlying Fund expenses that are in excess of 0.92% for the Subaccount investing in the T. Rowe Price Large Cap Growth Portfolio -- Class B. UNDERLYING FUND EXPENSES AS OF DECEMBER 31, 2006 (unless otherwise indicated): The first table below shows the range (minimum and maximum) of the total annual operating expenses charged by all of the Underlying Funds, before any voluntary or contractual fee waivers and/or expense reimbursements. The second table shows each Underlying Fund's management fee, distribution and/or service fees (12b-1) if applicable, and other expenses. The Underlying Funds provided this information and we have not independently verified it. More detail concerning each Underlying Fund's fees and expenses is contained in the prospectus for each Underlying Fund. Current prospectuses for the Underlying Funds can be obtained by calling 1-800-556-5412. MINIMUM AND MAXIMUM TOTAL ANNUAL UNDERLYING FUND OPERATING EXPENSES
MINIMUM MAXIMUM ------- ------- TOTAL ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Underlying Fund assets, including management fees, distribution and/or service fees (12b-1) fees, and other expenses) 0.48% 1.21%
UNDERLYING FUND FEES AND EXPENSES (as a percentage of average daily net assets)
DISTRIBUTION TOTAL CONTRACTUAL FEE NET TOTAL AND/OR ANNUAL WAIVER ANNUAL MANAGEMENT SERVICE OTHER OPERATING AND/OR EXPENSE OPERATING UNDERLYING FUND: FEE (12b-1) FEES EXPENSES EXPENSES REIMBURSEMENT EXPENSES* - ---------------- ------------ -------------- ---------- ----------- ----------------- ------------------- ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND, INC. AllianceBernstein Global Technology Portfolio -- Class B+....... 0.75% 0.25% 0.18% 1.18% -- 1.18% AllianceBernstein Large Cap Growth Portfolio -- Class B........................... 0.75% 0.25% 0.08% 1.08% -- 1.08% AMERICAN FUNDS INSURANCE SERIES American Funds Global Growth Fund -- Class 2............. 0.55% 0.25% 0.03% 0.83% -- 0.83% American Funds Growth Fund -- Class 2............. 0.32% 0.25% 0.02% 0.59% -- 0.59% American Funds Growth-Income Fund -- Class 2............. 0.27% 0.25% 0.01% 0.53% -- 0.53% FIDELITY(R) VARIABLE INSURANCE PRODUCTS VIP Equity-Income Portfolio -- Service Class 2........................... 0.47% 0.25% 0.10% 0.82% -- 0.82% VIP Mid Cap Portfolio -- Service Class 2........................... 0.57% 0.25% 0.11% 0.93% -- 0.93% FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST Mutual Shares Securities Fund -- Class 2............. 0.60% 0.25% 0.21% 1.06% -- 1.06% Templeton Growth Securities Fund -- Class 2............. 0.74% 0.25% 0.04% 1.03% -- 1.03%
8
DISTRIBUTION TOTAL CONTRACTUAL FEE NET TOTAL AND/OR ANNUAL WAIVER ANNUAL MANAGEMENT SERVICE OTHER OPERATING AND/OR EXPENSE OPERATING UNDERLYING FUND: FEE (12b-1) FEES EXPENSES EXPENSES REIMBURSEMENT EXPENSES* - ---------------- ------------ -------------- ---------- ----------- ----------------- ------------------- LEGG MASON PARTNERS VARIABLE EQUITY TRUST Legg Mason Partners Variable Aggressive Growth Portfolio -- Class I++...... 0.75% -- 0.02% 0.77% -- 0.77% Legg Mason Partners Variable Appreciation Portfolio -- Class I........ 0.70% -- 0.02% 0.72% -- 0.72%(9) Legg Mason Partners Variable Capital and Income Portfolio -- Class I++...... 0.75% -- 0.08% 0.83% -- 0.83% Legg Mason Partners Variable Capital and Income Portfolio -- Class II....... 0.75% 0.25% 0.06% 1.06% 0.11% .95%(1) Legg Mason Partners Variable Dividend Strategy Portfolio++................. 0.65% -- 0.24% 0.89% -- 0.89% Legg Mason Partners Variable Fundamental Value Portfolio -- Class I........ 0.75% -- 0.02% 0.77% -- 0.77% Legg Mason Partners Variable International All Cap Opportunity Portfolio++..... 0.85% -- 0.09% 0.94% -- 0.94% Legg Mason Partners Variable Investors Portfolio -- Class I........................... 0.65% -- 0.07% 0.72% -- 0.72% Legg Mason Partners Variable Large Cap Growth Portfolio -- Class I++...... 0.75% -- 0.04% 0.79% -- 0.79% Legg Mason Partners Variable Mid Cap Core Portfolio -- Class I++...... 0.75% -- 0.07% 0.82% -- 0.82% Legg Mason Partners Variable Multiple Discipline Portfolio -- All Cap Growth and Value................... 0.75% 0.25% 0.05% 1.05% -- 1.05% Legg Mason Partners Variable Multiple Discipline Portfolio -- Global All Cap Growth and Value............ 0.75% 0.25% 0.09% 1.09% -- 1.09% Legg Mason Partners Variable Multiple Discipline Portfolio -- Large Cap Growth and Value............ 0.75% 0.25% 0.21% 1.21% -- 1.21% Legg Mason Partners Variable Small Cap Growth Portfolio -- Class I........ 0.75% -- 0.21% 0.96% -- 0.96% Legg Mason Partners Variable Social Awareness Portfolio++................. 0.66% -- 0.12% 0.78% -- 0.78% LEGG MASON PARTNERS VARIABLE INCOME TRUST Legg Mason Partners Variable Adjustable Rate Income Portfolio++................. 0.55% 0.25% 0.22% 1.02% -- 1.02% Legg Mason Partners Variable Government Portfolio -- Class I++...... 0.55% -- 0.13% 0.68% -- 0.68% Legg Mason Partners Variable High Income Portfolio++..... 0.60% -- 0.06% 0.66% -- 0.66% Legg Mason Partners Variable Money Market Portfolio++.... 0.45% -- 0.03% 0.48% -- 0.48% MET INVESTORS SERIES TRUST BlackRock Large-Cap Core Portfolio -- Class E+....... 0.63% 0.15% 0.22% 1.00% -- 1.00%(2)(3)(4) Lord Abbett Bond Debenture Portfolio -- Class A........ 0.50% -- 0.04% 0.54% -- 0.54%(2) Lord Abbett Growth and Income Portfolio -- Class B........ 0.50% 0.25% 0.03% 0.78% -- 0.78%(2) Met/AIM Capital Appreciation Portfolio -- Class E++...... 0.77% 0.15% 0.09% 1.01% -- 1.01%(2)(3)(4)(5)- (10) MFS(R) Research International Portfolio -- Class B........ 0.72% 0.25% 0.14% 1.11% -- 1.11%(2) Oppenheimer Capital Appreciation Portfolio -- Class B........ 0.57% 0.25% 0.05% 0.87% -- 0.87%(2)(3)
9
DISTRIBUTION TOTAL CONTRACTUAL FEE NET TOTAL AND/OR ANNUAL WAIVER ANNUAL MANAGEMENT SERVICE OTHER OPERATING AND/OR EXPENSE OPERATING UNDERLYING FUND: FEE (12b-1) FEES EXPENSES EXPENSES REIMBURSEMENT EXPENSES* - ---------------- ------------ -------------- ---------- ----------- ----------------- ------------------- Pioneer Strategic Income Portfolio -- Class A++...... 0.70% -- 0.12% 0.82% -- 0.82%(2)(3)(5)(10) Third Avenue Small Cap Value Portfolio -- Class B........ 0.74% 0.25% 0.04% 1.03% -- 1.03%(2) METROPOLITAN SERIES FUND, INC. BlackRock Aggressive Growth Portfolio -- Class D........ 0.72% 0.10% 0.06% 0.88% -- 0.88%(11) BlackRock Bond Income Portfolio -- Class E........ 0.39% 0.15% 0.07% 0.61% 0.01% 0.60%(6)(11) Capital Guardian U.S. Equity Portfolio -- Class B........ 0.66% 0.25% 0.06% 0.97% -- 0.97%(11) MFS(R) Total Return Portfolio -- Class F........ 0.53% 0.20% 0.05% 0.78% -- 0.78%(7)(11) T. Rowe Price Large Cap Growth Portfolio -- Class B........ 0.60% 0.25% 0.08% 0.93% -- 0.93%(11) Western Asset Management U.S. Government Portfolio -- Class A........ 0.50% -- 0.07% 0.57% -- 0.57%(11) PIONEER VARIABLE CONTRACTS TRUST Pioneer Fund VCT Portfolio -- Class II....... 0.65% 0.25% 0.05% 0.95% -- 0.95% Pioneer Mid Cap Value VCT Portfolio -- Class II....... 0.65% 0.25% 0.06% 0.96% -- 0.96% THE UNIVERSAL INSTITUTIONAL FUNDS, INC. Equity and Income Portfolio -- Class II....... 0.43% 0.35% 0.30% 1.08% -- 1.08% U.S. Real Estate Securities Portfolio -- Class I........ 0.73% -- 0.28% 1.01% -- 1.01% VAN KAMPEN LIFE INVESTMENT TRUST Comstock Portfolio -- Class II.......................... 0.56% 0.25% 0.03% 0.84% -- 0.84% Growth and Income Portfolio -- Class II....... 0.56% 0.25% 0.04% 0.85% -- 0.85% Strategic Growth Portfolio -- Class II....... 0.70% 0.25% 0.08% 1.03% -- 1.03%
NET TOTAL ANNUAL OPERATING DISTRIBUTION TOTAL CONTRACTUAL FEE NET TOTAL EXPENSES AND/OR ANNUAL WAIVER ANNUAL INCLUDING MANAGEMENT SERVICE OTHER OPERATING AND/OR EXPENSE OPERATING UNDERLYING FUND UNDERLYING FUND: FEE (12b-1) FEES EXPENSES EXPENSES REIMBURSEMENT EXPENSES* EXPENSES* - ---------------- ------------ -------------- ---------- ----------- ----------------- --------- --------------- LEGG MASON PARTNERS VARIABLE EQUITY TRUST Legg Mason Partners Variable Lifestyle Allocation 50%#........ 0.35% -- 0.00% 0.35% -- 0.35% 1.00%(8) Legg Mason Partners Variable Lifestyle Allocation 70%#........ 0.35% -- 0.00% 0.35% -- 0.35% 1.03%(8) Legg Mason Partners Variable Lifestyle Allocation 85%#........ 0.35% -- 0.00% 0.35% -- 0.35% 1.04%(8)
- --------- * Net Total Annual Operating Expenses do not reflect (1) voluntary waivers of fees and expenses; (2) contractual waivers that are in effect for less than one year from the date of this Prospectus, or (3) expense reductions resulting from custodial fee credits or directed brokerage arrangements. + Not available under all Contracts. Availability depends on Contract issue date. ++ Closed to new investment except under dollar cost averaging and rebalancing programs in existence at the time of closing. ++ Fees and expenses for this Portfolio are based on the Portfolio's fiscal year ended October 31, 2006. # Fees and expenses for this Portfolio are based on the Portfolio's fiscal year ended January 31, 2007. NOTES (1) Management has contractually agreed to waive fees and/or reimburse expenses to limit Total Annual Operating Expenses to 0.95% until May 1, 2008. (2) Other Expenses have been restated to reflect new custodian, fund administration and transfer agent fee schedules, as if these fee schedules had been in effect for the previous fiscal year. 10 (3) The Management Fee has been restated to reflect an amended management fee agreement, as if the agreement had been in effect during the previous fiscal year. (4) This is a new share class for this Portfolio. Operating expenses are estimated based on the expenses of the Class A shares of the Portfolio. (5) Effective November 1, 2006, the Portfolio's fiscal year end has been changed from October 31 to December 31. The fees and expenses shown are for the Portfolio's last fiscal year ended October 31, 2006. (6) MetLife Advisers, LLC has contractually agreed, for the period May 1, 2007 through April 30, 2008, to reduce the Management Fee to the annual rate of 0.325% for amounts over $1 billion but less than $2 billion. (7) The Management Fee has been restated to reflect current fees, as if current fees had been in effect for the previous fiscal year. (8) These Portfolios are "funds of funds" that invest substantially all of their assets in other Legg Mason-affiliated portfolios. Because the Portfolios invest in other underlying portfolios, each Portfolio also will bear its pro rata portion of the operating expenses of the underlying portfolios in which the Portfolio invests, including the management fee. Based on the expense ratios of underlying Legg Mason affiliated portfolios in which the Portfolios were invested on January 31, 2007, the approximate total operating expenses of the underlying portfolios are expected to be as follows: 0.65% for the Legg Mason Partners Lifestyle Allocation 50%, 0.68% for the Legg Mason Partners Lifestyle Allocation 70% and 0.69% for the Legg Mason Partners Lifestyle Allocation 85%. (9) Other Expenses include 0.01% of "Acquired Fund Fees and Expenses," which are fees and expenses attributable to underlying portfolios in which the Portfolio was invested during the preceding fiscal year. (10) Other Expenses have been restated to reflect the current Met Investors Series Trust fee schedule, as if that schedule had applied to the Portfolio for the entire fiscal year. (11) Other Expenses have been restated to reflect current fees, as if current fees had been in effect for the previous fiscal year. EXAMPLE This example is intended to help you compare the cost of investing in the Contract with the cost of investing in other variable annuity Contracts. These costs include Contract Owner transaction expenses, Contract fees, separate account annual expenses, and Underlying Fund total annual operating expenses. This example does not represent past or future expenses. Your actual expenses may be more or less than those shown. This example assumes that you invest $10,000 in the Contract for the time periods indicated and that your investment has a 5% return each year. The example reflects the annual Contract administrative charge, factoring in that the charge is waived for contracts over a certain value. Additionally, the example is based on the minimum and maximum Underlying Fund total annual operating expenses shown above and does not reflect any Underlying Fund fee waivers and/or expense reimbursements. The example assumes you have elected all of the available optional benefits and that you have allocated all of your Contract Value to either the Underlying Fund with the maximum total annual operating expenses or the Underlying Fund with the minimum total annual operating expenses. Your actual expenses will be less than those shown if you do not elect all of the available optional benefits. EXAMPLE
IF CONTRACT IS NOT SURRENDERED OR IF CONTRACT IS SURRENDERED AT ANNUITIZED AT THE END THE END OF PERIOD SHOWN: OF PERIOD SHOWN: ---------------------------------------------------------- ---------------------- FUNDING OPTION 1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS - -------------- ---------- ---------- ---------- ---------- ---------- ---------- Underlying Fund with Maximum Total Annual Operating Expenses............. $1118 $1567 $2159 $3446 $318 $972 Underlying Fund with Minimum Total Annual Operating Expenses............. 1046 1351 1801 2751 246 756 IF CONTRACT IS NOT SURRENDERED OR ANNUITIZED AT THE END OF PERIOD SHOWN: ---------------------- FUNDING OPTION 5 YEARS 10 YEARS - -------------- ---------- ---------- Underlying Fund with Maximum Total Annual Operating Expenses............. $1649 $3446 Underlying Fund with Minimum Total Annual Operating Expenses............. 1291 2751
CONDENSED FINANCIAL INFORMATION - -------------------------------------------------------------------------------- See Appendices A and B. THE ANNUITY CONTRACT - -------------------------------------------------------------------------------- PrimElite II Annuity is a contract between the Contract Owner ("you") and the Company. This is the prospectus -- it is not the Contract. The prospectus highlights many Contract provisions to focus your attention on the Contract's essential features. Your rights and obligations under the Contract will be determined by the language of the Contract 11 itself. When you receive your Contract, we suggest you read it promptly and carefully. There may be differences in your Contract from the descriptions in this prospectus because of the requirements of the state where we issued your Contract. We will include any such differences in your Contract. The Company offers several different annuities that your investment professional may be authorized to offer to you. Each annuity offers different features and benefits that may be appropriate for you. In particular, the annuities differ based on variations in the standard and optional death benefit protection provided for your beneficiaries, the availability of optional living benefits, the ability to access your Contract Value if necessary and the charges that you will be subject to if you make a withdrawal or surrender the annuity. The separate account charges and other charges may be different between each annuity we offer. Optional death benefits and living benefits are subject to a separate charge for the additional protections they offer to you and your beneficiaries. Furthermore, annuities that offer greater flexibility to access your Contract Value generally are subject to higher separate account charges than annuities that deduct charges if you make a withdrawal or surrender. We encourage you to evaluate the fees, expenses, benefits and features of this annuity against those of other investment products, including other annuity products offered by us and other insurance companies. Before purchasing this or any other investment product you should consider whether the product you purchase is consistent with your risk tolerance, investment objectives, investment time horizon, financial and tax situation, liquidity needs and how you intend to use the annuity. You make Purchase Payments to us and we credit them to your Contract. We promise to pay you an income, in the form of Annuity Payments, beginning on a future date that you choose, the Maturity Date. The Purchase Payments accumulate tax deferred in the funding options of your choice. We offer multiple Variable Funding Options. We may also offer a Fixed Account option. Where permitted by law, we reserve the right to restrict Purchase Payments into the Fixed Account whenever the credited interest rate on the Fixed Account is equal to the minimum guaranteed interest rate specified under the Contract. The Contract Owner assumes the risk of gain or loss according to the performance of the Variable Funding Options. The Contract Value is the amount of Purchase Payments, plus or minus any investment experience on the amounts you allocate to the Separate Account ("Separate Account Contract Value") or interest on the amounts you allocate to the Fixed Account ("Fixed Account Contract Value"). The Contract Value also reflects all withdrawals made and charges deducted. There is generally no guarantee that at the Maturity Date the Contract Value will equal or exceed the total Purchase Payments made under the Contract. The date the Contract and its benefits become effective is referred to as the Contract Date. Each 12-month period following the Contract Date is called a Contract Year. Certain changes and elections must be made in writing to the Company. Where the term "Written Request" is used, it means that you must send written information to our Home Office in a form and content satisfactory to us. The ages of the owner and Annuitant determine which death benefits and certain optional features are available to you.
MAXIMUM AGE BASED ON THE OLDER OF THE OWNER AND DEATH BENEFIT/OPTIONAL FEATURE ANNUITANT ON THE CONTRACT DATE - ------------------------------------------------------ ----------------------------------------------- Standard Death Benefit 80 Enhanced Stepped-Up Provision (E.S.P.) 75
Purchase of this Contract through a tax qualified retirement plan or IRA does not provide any additional tax deferral benefits beyond those provided by the plan or the IRA. Accordingly, if you are purchasing this Contract through a plan or IRA, you should consider purchasing this Contract for its death benefit, annuity option benefits, and other non-tax-related benefits. You should consult with your tax adviser to determine if this Contract is appropriate for you. CONTRACT OWNER INQUIRIES Any questions you have about your Contract should be directed to our Home Office at 1-888-556-5412. PURCHASE PAYMENTS Your initial Purchase Payment is due and payable before the Contract becomes effective. The initial Purchase Payment must be at least $5,000. You may make additional payments of at least $100 at any time. No additional payments are allowed if this Contract is purchased with a beneficiary-directed transfer of death benefit proceeds. Under certain circumstances, we may waive the minimum Purchase Payment requirement. Purchase Payments over $1,000,000 may be made only with our prior consent. We may restrict allocations of Purchase Payments to the Fixed 12 Account whenever the current credited interest rate for the Fixed Account is equal to the minimum guaranteed rate specified in your contract. We accept Purchase Payments made by check or cashier's check. We do not accept cash, money orders or traveler's checks. We reserve the right to refuse purchase payments made via a personal check in excess of $100,000. Purchase payments over $100,000 may be accepted in other forms, including but not limited to, EFT/wire transfers, certified checks, corporate checks, and checks written on financial institutions. The form in which we receive a purchase payment may determine how soon subsequent disbursement requests may be fulfilled. (See "Access To Your Money.") We will apply the initial Purchase Payment less any applicable premium tax within two business days after we receive it at our Home Office with a properly completed application or order request. If your request or other information accompanying the initial Purchase Payment is incomplete when received, we will hold the Purchase Payment for up to five business days. If we cannot obtain the necessary information within five business days, we will return the Purchase Payment in full, unless you specifically consent for us to keep it until you provide the necessary information. We will credit any subsequent Purchase Payment to a Contract on the same business day we receive it, if it is received in good order by our Home Office by 4:00 p.m. Eastern time. A business day is any day that the New York Stock Exchange is open for regular trading (except when trading is restricted due to an emergency as defined by the Securities and Exchange Commission). ACCUMULATION UNITS The period between the Contract Date and the Maturity Date is the accumulation period. During the accumulation period, an Accumulation Unit is used to calculate the value of a Contract. Each Variable Funding Option has a corresponding Accumulation Unit value. The Accumulation Units are valued each business day and their values may increase or decrease from day to day. The daily change in value of an Accumulation Unit each day is based on the investment performance of the corresponding Underlying Fund, and the deduction of separate account charges shown in the Fee Table in this prospectus. The number of Accumulation Units we will credit to your Contract once we receive a Purchase Payment or transfer request (or, liquidate for a withdrawal request) is determined by dividing the amount directed to each Variable Funding Option (or, taken from each Variable Funding Option) by the value of its Accumulation Unit. Normally, we calculate the value of an Accumulation Unit for each Variable Funding Option as of the close of regular trading (generally 4:00 p.m. Eastern time) each day the New York Stock Exchange is open. After the value is calculated, we credit your Contract. During the annuity period (i.e., after the Maturity Date), you are credited with Annuity Units. THE VARIABLE FUNDING OPTIONS You choose the Variable Funding Options to which you allocate your Purchase Payments. From time to time we may make new Variable Funding Options available. These Variable Funding Options are Subaccounts of the Separate Account. The Subaccounts invest in the Underlying Funds. You are not investing directly in the Underlying Fund. Each Underlying Fund is a portfolio of an open-end management investment company that is registered with the SEC under the Investment Company Act of 1940. These Underlying Funds are not publicly traded and are only offered through variable annuity contracts, variable life insurance products, and maybe in some instances, certain retirement plans. They are not the same retail mutual funds as those offered outside of a variable annuity or variable life insurance product, although the investment practices and fund names may be similar and the portfolio managers may be identical. Accordingly, the performance of the retail mutual fund is likely to be different from that of the Underlying Fund. We select the Underlying Funds offered through this Contract based on several criteria, including asset class coverage, the strength of the adviser's or subadviser's reputation and tenure, brand recognition, performance, and the capability and qualification of each investment firm. Another factor we consider during the selection process is whether the Underlying Fund's adviser or subadviser is one of our affiliates or whether the Underlying Fund, its adviser, its subadviser(s), or an affiliate will make payments to us or our affiliates. In this regard, the profit distributions we receive from our affiliated investment advisers are a component of the total revenue that we consider in configuring the features and investment choices available in the variable insurance products that we and our affiliated insurance companies issue. Since we and our affiliated insurance companies may benefit more from the 13 allocation of assets to portfolios advised by our affiliates than those that are not, we may be more inclined to offer portfolios advised by our affiliates in the variable insurance products we issue. For additional information on these arrangements, see "Payments We Receive." We review the Underlying Funds periodically and may remove an Underlying Fund or limit its availability to new Purchase Payments and/or transfers of Contract Value if we determine that the Underlying Fund no longer meets one or more of the selection criteria, and/or if the Underlying Fund has not attracted significant allocations from Contract Owners. In some cases, we have included Underlying Funds based on recommendations made by broker-dealer firms. When the Company develops a variable annuity product in cooperation with a fund family or distributor (e.g. a "private label" product) the Company will generally include Underlying Funds based on recommendations made by the fund family or distributor, whose selection criteria may differ from the Company's selection criteria. WE DO NOT PROVIDE ANY INVESTMENT ADVICE AND DO NOT RECOMMEND OR ENDORSE ANY PARTICULAR UNDERLYING FUND. YOU BEAR THE RISK OF ANY DECLINE IN THE CONTRACT VALUE OF YOUR CONTRACT RESULTING FROM THE PERFORMANCE OF THE UNDERLYING FUNDS YOU HAVE CHOSEN. If investment in the Underlying Funds or a particular Underlying Fund is no longer possible, in our judgment becomes inappropriate for purposes of the Contract, or for any other reason in our sole discretion, we may substitute another Underlying Fund or Underlying Funds without your consent. The substituted Underlying Fund may have different fees and expenses. Substitution may be made with respect to existing investments or the investment of future Purchase Payments, or both. However, we will not make such substitution without any necessary approval of the Securities and Exchange Commission and applicable state insurance departments. Furthermore, we may close Underlying Funds to allocations of Purchase Payments or Contract Value, or both, at any time in our sole discretion. In certain circumstances, the Company's ability to remove or replace an Underlying Fund may be limited by the terms of a five-year agreement between MetLife, Inc. (MetLife) and Legg Mason, Inc. (Legg Mason) relating to the use of certain Underlying Funds advised by Legg Mason affiliates. The agreement sets forth the conditions under which the Company can remove an Underlying Fund, which, in some cases, may differ from the Company's own selection criteria. In addition, during the term of the agreement, subject to the Company's fiduciary and other legal duties, the Company is generally obligated in the first instance to consider Underlying Funds advised by Legg Mason affiliates in seeking to make a substitution for an Underlying Fund advised by a Legg Mason affiliate. The agreement was originally entered into on July 1, 2005 by MetLife and certain affiliates of Citigroup Inc. (Citigroup) as part of MetLife's acquisition of The Travelers Insurance Company and The Travelers Life and Annuity Company from Citigroup. Legg Mason replaced the Citigroup affiliates as a party to the agreement when Citigroup sold its asset management business to Legg Mason. PAYMENTS WE RECEIVE. As described above, an investment adviser (other than our affiliates MetLife Advisers, LLC, and Met Investors Advisory LLC) or subadviser of an Underlying Fund, or its affiliates, may make payments to the Company and/or certain of our affiliates. These payments may be used for any corporate purpose, including payment of expenses that the Company and/or its affiliates incur in promoting, marketing, and administering the Contracts and, in its role as an intermediary, the Underlying Funds. The Company and its affiliates may profit from these payments. These payments may be derived, in whole or in part, from the advisory fee deducted from Underlying Fund assets. Contract Owners, through their indirect investment in the Underlying Funds, bear the costs of these advisory fees (see the Underlying Funds' prospectuses for more information). The amount of the payments we receive is based on a percentage of assets of the Underlying Funds attributable to the Contracts and certain other variable insurance products that the Company and its affiliates issue. These percentages differ and some advisers or subadvisers (or other affiliates) may pay the Company more than others. These percentages currently range up to 0.50%. Additionally, an investment adviser or subadviser of an Underlying Fund or its affiliates may provide the Company with wholesaling services that assist in the distribution of the Contracts and may pay the Company and/or certain of our affiliates amounts to participate in sales meetings. These amounts may be significant and may provide the adviser or subadviser (or their affiliate) with increased access to persons involved in the distribution of the Contracts. The Company and/or certain of its affiliated insurance companies have joint ownership interests in its affiliated investment advisers MetLife Advisers, LLC and Met Investors Advisory LLC, which are formed as "limited liability companies." The Company's ownership interests in MetLife Advisers, LLC and Met Investors Advisory LLC entitle us to profit distributions if the adviser makes a profit with respect to the advisory fees it receives from the Underlying Fund. The Company will benefit accordingly from assets allocated to the Underlying Funds to the extent they result 14 in profits to the advisers. (See "Fee Table -- Underlying Fund Fees and Expenses" for information on the management fees paid by the Underlying Funds and the Statement of Additional Information for the Underlying Funds for information on the management fees paid by the advisers to the subadvisers.) Certain Underlying Funds have adopted a Distribution Plan under Rule 12b-1 of the Investment Company Act of 1940. An Underlying Fund's 12b-1 Plan, if any, is described in more detail in the Underlying Fund's prospectus. (See "Fee Table -- Underlying Fund Fees and Expenses" and "Other Information -- Distribution of Variable Annuity Contracts.") Any payments we receive pursuant to those 12b-1 Plans are paid to us or our distributor. Payments under a Underlying Fund's 12b-1 Plan decrease the Underlying Fund's investment return. The agreement described above between MetLife and Legg Mason also obligates Legg Mason affiliates to continue on their current terms certain arrangements under which we receive payments in connection with our provision of administrative, marketing or other support services to the Underlying Funds advised or subadvised by Legg Mason affiliates. We make certain payments to American Funds Distributors, Inc., principal underwriter for the American Funds Insurance Series. (See "Distribution of the Contracts") Each Underlying Fund has different investment objectives and risks. The Underlying Fund prospectuses contain more detailed information on each Underlying Fund's investment strategy, investment advisers and its fees. You may obtain an Underlying Fund prospectus by calling 1-800-556-5412 or through your registered representative. We do not guarantee the investment results of the Underlying Funds. The current Underlying Funds are listed below, along with their investment advisers and any subadviser:
FUNDING INVESTMENT INVESTMENT OPTION OBJECTIVE ADVISER/SUBADVISER - --------------------------------- --------------------------------- --------------------------------- ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND, INC. AllianceBernstein Global Seeks long-term growth of AllianceBernstein L.P. Technology capital. Portfolio -- Class B+ AllianceBernstein Large Cap Seeks long-term growth of AllianceBernstein L.P. Growth Portfolio -- Class B capital. AMERICAN FUNDS INSURANCE SERIES American Funds Global Growth Seeks capital appreciation Capital Research and Management Fund -- Class 2 through stocks. Company American Funds Growth Seeks capital appreciation Capital Research and Management Fund -- Class 2 through stocks. Company American Funds Growth-Income Seeks both capital appreciation Capital Research and Management Fund -- Class 2 and income. Company FIDELITY(R) VARIABLE INSURANCE PRODUCTS VIP Equity-Income Seeks reasonable income. The fund Fidelity Management & Research Portfolio -- Service Class 2 will also consider the potential Company for capital appreciation. The fund's goal is to achieve a yield which exceeds the composite yield on the securities comprising the Standard & Poor's 500(SM) Index (S&P 500(R)). VIP Mid Cap Seeks long-term growth of Fidelity Management & Research Portfolio -- Service Class 2 capital. Company FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST Mutual Shares Securities Seeks capital appreciation, with Franklin Mutual Advisers, LLC Fund -- Class 2 income as a secondary goal. Templeton Growth Securities Seeks long-term capital growth. Templeton Global Advisors Limited Fund -- Class 2 LEGG MASON PARTNERS VARIABLE EQUITY TRUST Legg Mason Partners Variable Seeks long-term capital Legg Mason Partners Fund Advisor, Aggressive Growth appreciation. LLC Portfolio -- Class I Subadviser: ClearBridge Advisors, LLC Legg Mason Partners Variable Seeks long-term appreciation of Legg Mason Partners Fund Advisor, Appreciation capital. LLC Portfolio -- Class I Subadviser: ClearBridge Advisors, LLC Legg Mason Partners Variable Seeks long-term growth of Legg Mason Partners Fund Advisor, Capital and Income capital. LLC Portfolio -- Class I++ and Subadviser: ClearBridge Advisors, Class II LLC and Western Asset Management Company
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FUNDING INVESTMENT INVESTMENT OPTION OBJECTIVE ADVISER/SUBADVISER - --------------------------------- --------------------------------- --------------------------------- Legg Mason Partners Variable Seeks capital appreciation, Legg Mason Partners Fund Advisor, Dividend Strategy Portfolio principally through investments LLC in dividend-paying stocks. Subadviser: ClearBridge Advisors, LLC Legg Mason Partners Variable Seeks long-term capital growth. Legg Mason Partners Fund Advisor, Fundamental Value Current income is a secondary LLC Portfolio -- Class I consideration. Subadviser: ClearBridge Advisors, LLC Legg Mason Partners Variable Seeks total return on assets from Legg Mason Partners Fund Advisor, International All Cap growth of capital and income. LLC Opportunity Portfolio Subadviser: Brandywine Global Investment Management, LLC Legg Mason Partners Variable Seeks long-term growth of Legg Mason Partners Fund Advisor, Investors Portfolio -- Class capital. Current income is a LLC I secondary objective. Subadviser: ClearBridge Advisors, LLC Legg Mason Partners Variable Seeks long term growth of Legg Mason Partners Fund Advisor, Large Cap Growth capital. LLC Portfolio -- Class I Subadviser: ClearBridge Advisors, LLC Legg Mason Partners Variable Seeks long-term growth of Legg Mason Partners Fund Advisor, Lifestyle Allocation 50% capital. LLC Subadviser: Legg Mason Global Asset Allocation, LLC Legg Mason Partners Variable Seeks long-term growth of Legg Mason Partners Fund Advisor, Lifestyle Allocation 70% capital. LLC Subadviser: Legg Mason Global Asset Allocation, LLC Legg Mason Partners Variable Seeks capital appreciation. Legg Mason Partners Fund Advisor, Lifestyle Allocation 85% LLC Subadviser: Legg Mason Global Asset Allocation, LLC Legg Mason Partners Variable Seeks long-term growth of Legg Mason Partners Fund Advisor, Mid Cap Core capital. LLC Portfolio -- Class I Subadviser: ClearBridge Advisors, LLC Legg Mason Partners Variable Seeks long-term growth of Legg Mason Partners Fund Advisor, Multiple Discipline capital. LLC Portfolio -- All Cap Growth Subadviser: ClearBridge Advisors, and Value LLC Legg Mason Partners Variable Seeks long-term growth of Legg Mason Partners Fund Advisor, Multiple Discipline capital. LLC Portfolio -- Global All Cap Subadviser: ClearBridge Advisors, Growth and Value LLC Legg Mason Partners Variable Seeks long-term growth of Legg Mason Partners Fund Advisor, Multiple Discipline capital. LLC Portfolio -- Large Cap Subadviser: ClearBridge Advisors, Growth and Value LLC Legg Mason Partners Variable Seeks long term growth of Legg Mason Partners Fund Advisor, Small Cap Growth capital. LLC Portfolio -- Class I Subadviser: ClearBridge Advisors, LLC Legg Mason Partners Variable Seeks long-term capital Legg Mason Partners Fund Advisor, Social Awareness Portfolio appreciation and retention of net LLC investment income. Subadviser: Legg Mason Investment Counsel, LLC LEGG MASON PARTNERS VARIABLE INCOME TRUST Legg Mason Partners Variable Seeks to provide high current Legg Mason Partners Fund Advisor, Adjustable Rate Income income and to limit the degree of LLC Portfolio fluctuation of its net asset Subadviser: Western Asset value resulting from movements in Management Company interest rates. Legg Mason Partners Variable Seeks high current return. Legg Mason Partners Fund Advisor, Government LLC Portfolio -- Class I Subadviser: Western Asset Management Company Legg Mason Partners Variable Seeks high current income. Legg Mason Partners Fund Advisor, High Income Portfolio Secondarily, seeks capital LLC appreciation. Subadviser: Western Asset Management Company and Western Asset Management Company Limited Legg Mason Partners Variable Seeks to maximize current income Legg Mason Partners Fund Advisor, Money Market Portfolio consistent with preservation of LLC capital. Subadviser: Western Asset Management Company MET INVESTORS SERIES TRUST BlackRock Large-Cap Core Seeks long-term capital growth. Met Investors Advisory, LLC Portfolio -- Class E+ Subadviser: BlackRock Advisors, LLC Lord Abbett Bond Debenture Seeks to provide high current Met Investors Advisory, LLC Portfolio -- Class A income and the opportunity for Subadviser: Lord, Abbett & Co. capital appreciation to produce a LLC high total return. Lord Abbett Growth and Income Seeks long-term growth of capital Met Investors Advisory, LLC Portfolio -- Class B and current income without Subadviser: Lord, Abbett & Co. excessive fluctuations in the LLC market value.
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FUNDING INVESTMENT INVESTMENT OPTION OBJECTIVE ADVISER/SUBADVISER - --------------------------------- --------------------------------- --------------------------------- Met/AIM Capital Appreciation Seeks capital appreciation. Met Investors Advisory, LLC Portfolio -- Class E Subadviser: AIM Capital Management, Inc. MFS(R) Research International Seeks capital appreciation. Met Investors Advisory, LLC Portfolio -- Class B Subadviser: Massachusetts Financial Services Company Oppenheimer Capital Seeks capital appreciation. Met Investors Advisory, LLC Appreciation Subadviser: OppenheimerFunds, Portfolio -- Class B Inc. Pioneer Strategic Income Seeks a high level of current Met Investors Advisory, LLC Portfolio -- Class A income. Subadviser: Pioneer Investment Management, Inc. Third Avenue Small Cap Value Seeks long-term capital Met Investors Advisory, LLC Portfolio -- Class B appreciation. Subadviser: Third Avenue Management LLC METROPOLITAN SERIES FUND, INC. BlackRock Aggressive Growth Seeks maximum capital MetLife Advisers, LLC Portfolio -- Class D appreciation. Subadviser: BlackRock Advisors, Inc. BlackRock Bond Income Seeks competitive total return MetLife Advisers, LLC Portfolio -- Class E primarily from investing in Subadviser: BlackRock Advisors, fixed-income securities. Inc. Capital Guardian U.S. Equity Seeks long-term growth of MetLife Advisers, LLC Portfolio -- Class B capital. Subadviser: Capital Guardian Trust Company MFS(R) Total Return Seeks a favorable total return MetLife Advisers, LLC Portfolio -- Class F through investment in a Subadviser: Massachusetts diversified portfolio. Financial Services Company T. Rowe Price Large Cap Growth Seeks long-term growth of capital MetLife Advisers, LLC Portfolio -- Class B and, secondarily, dividend Subadviser: T. Rowe Price income. Associates Inc. Western Asset Management U.S. Seeks to maximize total return MetLife Advisers, LLC Government consistent with preservation of Subadviser: Western Asset Portfolio -- Class A capital and maintenance of Management Company liquidity. PIONEER VARIABLE CONTRACTS TRUST Pioneer Fund VCT Invests in a broad list of Pioneer Investment Management, Portfolio -- Class II carefully selected, reasonably Inc. priced securities for reasonable income and capital growth. Pioneer Mid Cap Value VCT Seeks capital appreciation by Pioneer Investment Management, Portfolio -- Class II investing in a diversified Inc. portfolio of securities consisting primarily of common stocks. THE UNIVERSAL INSTITUTIONAL FUNDS, INC. Equity and Income Seeks both capital appreciation Morgan Stanley Investment Portfolio -- Class II and current income. Management, Inc. (d/b/a Van Kampen) U.S. Real Estate Securities Seeks above average current Morgan Stanley Investment Portfolio -- Class I income and long-term capital Management, Inc. (d/b/a Van appreciation. Kampen) VAN KAMPEN LIFE INVESTMENT TRUST Comstock Portfolio -- Class II Seeks capital growth and income Van Kampen Asset Management through investments in equity securities, including common stocks, preferred stocks and securities convertible into common and preferred stocks. Growth and Income Seeks capital appreciation. Van Kampen Asset Management Portfolio -- Class II Strategic Growth Seeks long-term growth of capital Van Kampen Asset Management Portfolio -- Class II and income.
+ Not available under all Contracts. Availability depends on Contract issue date. ++ Closed to new investment except under dollar cost averaging and rebalancing programs in existence at the time of closing. Certain Variable Funding Options have been subject to a merger, substitution or other change. Please see "Appendix C -- Additional Information Regarding Underlying Funds" for more information. FIXED ACCOUNT - -------------------------------------------------------------------------------- We may offer our Fixed Account as a funding option. Please see Appendix D for more information. 17 CHARGES AND DEDUCTIONS - -------------------------------------------------------------------------------- GENERAL We deduct the charges described below. The charges are for the services and benefits we provide, costs and expenses we incur, and risks we assume under the Contracts. Services and benefits we provide include: - the ability for you to make withdrawals and surrenders under the Contracts - the death benefit paid on the death of the Contract Owner, Annuitant, or first of the joint owners - the available funding options and related programs (including dollar cost averaging, portfolio rebalancing, and systematic withdrawal programs) - administration of the annuity options available under the Contracts and - the distribution of various reports to Contract Owners Costs and expenses we incur include: - losses associated with various overhead and other expenses associated with providing the services and benefits provided by the Contracts - sales and marketing expenses including commission payments to your registered representative and - other costs of doing business Risks we assume include: - that Annuitants may live longer than estimated when the annuity factors under the Contracts were established - that the amount of the death benefit will be greater than the Contract Value and - that the costs of providing the services and benefits under the Contracts will exceed the charges deducted We may also deduct a charge for taxes. Unless otherwise specified, charges are deducted proportionately from all funding options in which you are invested. The amount of a charge may not necessarily correspond to the costs associated with providing the services or benefits indicated by the designated charge. For example, the withdrawal charge we collect may not fully cover all of the sales and distribution expenses we actually incur. The amount of any fee or charge is not impacted by an outstanding loan. We may also profit on one or more of the charges. We may use any such profits for any corporate purpose, including the payment of sales expenses. WITHDRAWAL CHARGE We do not deduct a sales charge from Purchase Payments when they are made to the Contract. However, a withdrawal charge will apply if Purchase Payments are withdrawn before they have been in the Contract for eight years. We will assess the charge as a percentage of the Purchase Payment withdrawn as follows:
YEARS SINCE PURCHASE PAYMENT MADE - ------------------------------------------ GREATER THAN OR EQUAL TO BUT LESS THAN WITHDRAWAL CHARGE - ------------------------ ------------- ----------------- 0 years 2 years 8% 2 years 4 years 7% 4 years 5 years 6% 5 years 6 years 5% 6 years 7 years 4% 7 years 8 years 3% 8 + years 0%
18 For purposes of the withdrawal charge calculation, withdrawals are deemed to be taken first from: 1. any Purchase Payment to which no withdrawal charge applies, then; 2. any remaining free withdrawal allowance (as described below) (after being reduced by 1), then; 3. any remaining Purchase Payment to which a withdrawal charge applies (on a first-in, first-out basis), then; 4. any Contract earnings. Unless you instruct us otherwise, we will deduct the withdrawal charge from the amount requested. We will not deduct a withdrawal charge if Purchase Payments are distributed: - due to the death of the Contract Owner or the Annuitant (with no contingent Annuitant surviving); - if an annuity payout (based on life expectancy) has begun; - due to a minimum distribution under our minimum distribution rules then in effect; or - if the Annuitant is confined to an eligible Nursing Home as described in Appendix E. Note: Any free withdrawals taken will not reduce Purchase Payments still subject to a withdrawal charge. FREE WITHDRAWAL ALLOWANCE Beginning in the second Contract Year, you may withdraw up to 15% of the Contract Value annually, without a withdrawal charge. We calculate the available withdrawal amount as of the first Valuation Date of any given Contract Year. In addition, if you have enrolled in our systematic withdrawal program and have made an initial Purchase Payment of at least $50,000, you may withdraw up to 15% of the Contract Value in the first Contract Year without incurring a withdrawal charge. If you have Purchase Payments no longer subject to a withdrawal charge, the maximum you may withdraw without a withdrawal charge is the greater of (a) the free withdrawal allowance or (b) the total amount of Purchase Payments no longer subject to a withdrawal charge. Any free withdrawal taken will reduce Purchase Payments no longer subject to a withdrawal charge. The free withdrawal allowance applies to any partial or full withdrawal. The free withdrawal allowance is not cumulative from year to year. Any withdrawal is subject to federal income taxes on the taxable portion. In addition, a 10% federal penalty may be assessed on any withdrawal if the Contract Owner is under age 59 1/2. You should consult with your tax adviser regarding the tax consequences of a withdrawal. TRANSFER CHARGE We reserve the right to assess a transfer charge of up to $10.00 on transfers exceeding 12 per year. We will notify you in writing at your last known address at least 31 days before we impose any such transfer charge. ADMINISTRATIVE CHARGES There are two administrative charges: the $30 annual Contract administrative charge and the administrative expense charge. We will deduct the annual Contract administrative charge on the fourth Friday of each August. This charge compensates us for expenses incurred in establishing and maintaining the Contract and we will prorate this charge (i.e. calculate) from the date of purchase. We will prorate this charge if you surrender your Contract, or if we terminate your Contract. We will not deduct a Contract administrative charge from the Fixed Account or: (1) from the distribution of death proceeds; (2) after an annuity payout has begun; or (3) if the Contract Value on the date of assessment equals or is greater than $50,000. We deduct the administrative expense charge (sometimes called "Subaccount administrative charge") on each business day from amounts allocated to the Variable Funding Options to compensate the Company for certain related administrative and operating expenses. The charge equals, on an annual basis, 0.15% of the daily net asset 19 value allocated to each of the Variable Funding Options, and is reflected in our Accumulation and Annuity Unit value calculations. MORTALITY AND EXPENSE RISK CHARGE Each business day, we deduct a mortality and expense risk ("M&E") charge from amounts held in the Variable Funding Options. We reflect the deduction in our calculation of Accumulation and Annuity Unit values. The charges stated are the maximum for this product. We reserve the right to lower this charge at any time. This charge is equal to 1.50% annually. This charge compensates the Company for risks assumed, benefits provided and expenses incurred, including the payment of commissions to your sales agent. VARIABLE LIQUIDITY BENEFIT CHARGE If the Variable Liquidity Benefit is selected, there is a maximum charge of 8% of the amounts withdrawn. This charge is not assessed during the accumulation phase. We will assess the charge as a percentage of the total benefit received as follows:
YEARS SINCE INITIAL PURCHASE PAYMENT - ------------------------------------------ GREATER THAN OR EQUAL TO BUT LESS THAN WITHDRAWAL CHARGE - ------------------------ ------------- ----------------- 0 years 2 years 8% 2 years 4 years 7% 4 years 5 years 6% 5 years 6 years 5% 6 years 7 years 4% 7 years 8 years 3% 8 + years 0%
Please refer to Payment Options for a description of this benefit. ENHANCED STEPPED-UP PROVISION CHARGE If the E.S.P. option is selected, a charge is deducted each business day from amounts held in the Variable Funding Options. The charge equals, on an annual basis, a maximum of 0.25% of the amounts held in each funding option. VARIABLE FUNDING OPTION EXPENSES We summarized the charges and expenses of the Underlying Funds in the fee table. Please review the prospectus for each Underlying Fund for a more complete description of that fund and its expenses. Underlying Fund expenses are not fixed or guaranteed and are subject to change by the Fund. PREMIUM TAX Certain state and local governments charge premium taxes ranging from 0% to 3.5%, depending upon jurisdiction. We are responsible for paying these taxes and will determine the method used to recover premium tax expenses incurred. We will deduct any applicable premium taxes from your Contract Value either upon death, surrender, annuitization, or at the time you make Purchase Payments to the Contract, but no earlier than when we have a tax liability under state law. CHANGES IN TAXES BASED UPON PREMIUM OR VALUE If there is any change in a law assessing taxes against the Company based upon premiums, contract gains or value of the Contract, we reserve the right to charge you proportionately for this tax. 20 TRANSFERS - -------------------------------------------------------------------------------- Subject to the limitations described below, you may transfer all or part of your Contract Value between Variable Funding Options at any time up to 30 days before the Maturity Date. After the Maturity Date, you may make transfers only if allowed by your Contract or with our consent. Transfer requests received at our Home Office that are in good order before the close of the New York Stock Exchange (NYSE) will be processed according to the value(s) next computed following the close of business. Transfer requests received on a non-business day or after the close of the NYSE will be processed based on the value(s) next computed on the next business day. Where permitted by state law, we reserve the right to restrict transfers from the Variable Funding Options to the Fixed Account whenever the credited interest rate on the Fixed Account is equal to the minimum guaranteed interest rate specified under the Contract. Currently, there are no charges for transfers; however, we reserve the right to charge a fee for any transfer request, which exceeds twelve per year. Since each Underlying Fund may have different overall expenses, a transfer of Contract Values from one Variable Funding Option to another could result in your investment becoming subject to higher or lower expenses. Also, when making transfers, you should consider the inherent risks associated with the Variable Funding Options to which your Contract Value is allocated. MARKET TIMING/EXCESSIVE TRADING Frequent requests from Contract Owners to transfer Contract Value may dilute the value of an Underlying Fund's shares if the frequent trading involves an attempt to take advantage of pricing inefficiencies created by a lag between a change in the value of the securities held by the Underlying Fund and the reflection of that change in the Underlying Fund's share price ("arbitrage trading"). Regardless of the existence of pricing inefficiencies, frequent transfers may also increase brokerage and administrative costs of the Underlying Funds and may disrupt Underlying Fund management strategy, requiring an Underlying Fund to maintain a high cash position and possibly resulting in lost investment opportunities and forced liquidations ("disruptive trading"). Accordingly, arbitrage trading and disruptive trading activities (referred to collectively as "market timing") may adversely affect the long-term performance of the Underlying Funds, which may in turn adversely affect Contract Owners and other persons who may have an interest in the Contracts (e.g., annuitants and beneficiaries). We have policies and procedures that attempt to detect and deter frequent transfers in situations where we determine there is a potential for arbitrage trading. Currently, we believe that such situations may be presented in the international, small-cap, and high-yield Underlying Funds, i.e., AllianceBernstein Global Technology Portfolio, American Funds Global Growth Fund, Templeton Growth Securities Fund, Legg Mason Partners Variable International All Cap Opportunity Portfolio, Legg Mason Partners Variable Small Cap Growth Portfolio, Legg Mason Partners Variable High Income Portfolio, Lord Abbett Bond Debenture Portfolio, MFS(R) Research International Portfolio, Pioneer Strategic Income Portfolio and Third Avenue Small Cap Value Portfolio (the "Monitored Portfolios"), and we monitor transfer activity in those Monitored Portfolios. In addition, as described below, we treat all American Funds Insurance Series portfolios ("American Funds portfolios") as Monitored Portfolios. We employ various means to monitor transfer activity, such as examining the frequency and size of transfers into and out of the Monitored Portfolios within given periods of time. For example, we currently monitor transfer activity to determine if, for each of the Monitored Portfolios, in a three-month period there were two or more "round-trips" of a certain dollar amount or greater. A round-trip is defined as a transfer in followed by a transfer out within the next 10 calendar days, or a transfer out followed by a transfer in within the next 10 calendar days. In the case of a Contract that has been restricted previously, a single round-trip of a certain dollar amount or greater will trigger the transfer restrictions described below. We do not believe that other Underlying Funds present a significant opportunity to engage in arbitrage trading and therefore do not monitor transfer activity in those Underlying Funds. We may change the Monitored Portfolios at any time without notice in our sole discretion. In addition to monitoring transfer activity in certain Underlying Funds, we rely on the Underlying Funds to bring any potential disruptive trading activity they identify to our attention for investigation on a case-by-case basis. We will also investigate other harmful transfer activity that we identify from time to time. We may revise these policies and procedures in our sole discretion at any time without prior notice. AMERICAN FUNDS MONITORING POLICY. As a condition to making their portfolios available in our products, American Funds requires us to treat all American Funds portfolios as Monitored Portfolios under our current market timing and 21 excessive trading policies and procedures. Further, American Funds requires us to impose additional specified monitoring criteria for all American Funds portfolios available under the Contract, regardless of the potential for arbitrage trading. We are required to monitor transfer activity in American Funds portfolios to determine if there were two or more transfers in followed by transfers out, in each case of a certain dollar amount or greater, in any 30-day period. A first violation of the American Funds monitoring policy will result in a written notice of violation; any additional violation will result in the imposition of the transfer restrictions described below. Further, as Monitored Portfolios, American Funds portfolios also will be subject to our current market timing and excessive trading policies, procedures and restrictions, and transfer restrictions may be imposed upon a violation of either monitoring policy. Our policies and procedures may result in transfer restrictions being applied to deter market timing. Currently, when we detect transfer activity in the Monitored Portfolios that exceeds our current transfer limits, or other transfer activity that we believe may be harmful to other Owners or other persons who have an interest in the Contracts, we will exercise our contractual right to restrict your number of transfers to one every six months. In addition, we also reserve the right, but do not have the obligation, to further restrict the right to request transfers by any market timing firm or any other third party who has been authorized to initiate transfers on behalf of multiple Contract Owners. We may, among other things: - reject the transfer instructions of any agent acting under a power of attorney on behalf of more than one Owner, or - reject the transfer or exchange instructions of individual Owners who have executed pre-authorized transfer forms which are submitted by market timing firms or other third parties on behalf of more than one Owner. Transfers made under a Dollar Cost Averaging Program, a rebalancing program are not treated as transfers when we evaluate trading patterns for market timing. The detection and deterrence of harmful transfer activity involves judgments that are inherently subjective, such as the decision to monitor only those Underlying Funds that we believe are susceptible to arbitrage trading or the determination of the transfer limits. Our ability to detect and/or restrict such transfer activity may be limited by operational and technological systems, as well as our ability to predict strategies employed by Owners to avoid such detection. Our ability to restrict such transfer activity also may be limited by provisions of the Contract. Accordingly, there is no assurance that we will prevent all transfer activity that may adversely affect Owners and other persons with interests in the Contracts. We do not accommodate market timing in any Underlying Fund and there are no arrangements in place to permit any Contract Owner to engage in market timing; we apply our policies and procedures without exception, waiver, or special arrangement. The Underlying Funds may have adopted their own policies and procedures with respect to frequent purchases and redemptions of their respective shares and we reserve the right to enforce these policies and procedures. For example, Underlying Funds may assess a redemption fee (which we reserve the right to collect) on shares held for a relatively short period. The prospectuses for the Underlying Funds describe any such policies and procedures, which may be more or less restrictive than the policies and procedures we have adopted. Although we may not have the contractual authority or the operational capacity to apply the frequent trading policies and procedures of the Underlying Funds, we have entered into a written agreement, as required by SEC regulation, with each Underlying Fund or its principal underwriter that obligates us to provide to the Underlying Fund promptly upon request certain information about the trading activity of individual Contract Owners, and to execute instructions from the Underlying Fund to restrict or prohibit further purchases or transfers by specific Contract Owners who violate the frequent trading policies established by the Underlying Fund. In addition, Contract Owners and other persons with interests in the contracts should be aware that the purchase and redemption orders received by the Underlying Funds generally are "omnibus" orders from intermediaries, such as retirement plans or separate accounts funding variable insurance contracts. The omnibus orders reflect the aggregation and netting of multiple orders from individual owners of variable insurance contracts and/or individual retirement plan participants. The omnibus nature of these orders may limit the Underlying Funds in their ability to apply their frequent trading policies and procedures. In addition, the other insurance companies and/or retirement plans may have different policies and procedures or may not have any such policies and procedures because of contractual limitations. For these reasons, we cannot guarantee that the Underlying Funds (and thus Contract Owners) will not be harmed by transfer activity relating to other insurance companies and/or retirement plans that may invest in the Underlying Funds. If an Underlying Fund believes that an omnibus order reflects one or more 22 transfer requests from Contract Owners engaged in disruptive trading activity, the Underlying Fund may reject the entire omnibus order. In accordance with applicable law, we reserve the right to modify or terminate the transfer privilege at any time. We also reserve the right to defer or restrict the transfer privilege at any time that we are unable to purchase or redeem shares of any of the Underlying Funds, including any refusal or restriction on purchases or redemptions of their shares as a result of their own policies and procedures on market timing activities (even if an entire omnibus order is rejected due to the market timing activity of a single Contract Owner). You should read the Underlying Fund prospectuses for more details. DOLLAR COST AVERAGING Dollar cost averaging or the pre-authorized transfer program (the "DCA Program") allows you to transfer a set dollar amount to other funding options on a monthly or quarterly basis during the accumulation phase of the Contract. Using this method, you will purchase more Accumulation Units in a funding option if the value per unit is low and will purchase fewer Accumulation Units if the value per unit is high. Therefore, you may achieve a lower-than-average cost per unit in the long run if you have the financial ability to continue the program over a long enough period of time. Dollar cost averaging does not assure a profit or protect against a loss. You may elect the DCA Program through Written Request or other method acceptable to us. You must have a minimum total Contract Value of $5,000 to enroll in the DCA Program. The minimum amount that may be transferred through this program is $100. There is no additional fee to participate in the DCA Program. You may establish pre-authorized transfers of Contract Values from the Fixed Account, subject to certain restrictions. Under the DCA Program, automated transfers from the Fixed Account may not deplete your Fixed Account Value in less than twelve months from your enrollment in the DCA Program. In addition to the DCA Program, within the Fixed Account, we may credit increased interest rates to Contract Owners under an administrative Special DCA Program established at our discretion, depending on availability and state law. Under this program, the Contract Owner may pre-authorize level transfers to any of the funding options under a 6 Month or 12 Month Special DCA Program. The programs may have different credited interest rates. We must transfer all Purchase Payments and accrued interest on a level basis to the selected funding options in the applicable time period. Under each program, the interest will accrue only on the remaining amounts in the Special DCA Program. For example, under the 12 Month program, the interest rate can accrue up to 12 months on the remaining amounts in the Special DCA Program and we must transfer all Purchase Payments and accrued interest in this program on a level basis to the selected funding options in 12 months. The pre-authorized transfers will begin after the initial program Purchase Payment and complete enrollment instructions are received by the Company. If we do not receive complete program enrollment instructions within 15 days of receipt of the initial program Purchase Payment, the entire balance in the program will be transferred into the Money Market Variable Funding Option. You may start or stop participation in the DCA Program at any time, but you must give the Company at least 30 days' notice to change any automated transfer instructions that are currently in place. If you stop the Special DCA Program and elect to remain in the Fixed Account, we will credit your Contract Value for the remainder of 6 or 12 months with the interest rate for funds. You may only have one DCA Program or Special DCA Program in place at one time. We will allocate any subsequent Purchase Payments we receive within the DCA Program period selected to the current funding options over the remainder of that DCA Program transfer period, unless you direct otherwise. All provisions and terms of the Contract apply to the DCA and Special DCA Programs, including provisions relating to the transfer of money between funding options. We reserve the right to suspend or modify transfer privileges at any time and to assess a processing fee for this service. If the Fixed Account is not available as a funding option, you may still participate in the DCA Program. 23 ACCESS TO YOUR MONEY - -------------------------------------------------------------------------------- Any time before the Maturity Date, you may redeem all or any portion of the Cash Surrender Value, that is, the Contract Value less any withdrawal charge, outstanding loans, and any premium tax not previously deducted. Unless you submit a Written Request specifying the Variable Funding Option(s) from which we are to withdraw amounts, we will make the withdrawal on a pro rata basis. We will determine the Cash Surrender Value as of the close of business after we receive your surrender request at our Home Office. The Cash Surrender Value may be more or less than the Purchase Payments you made. You may not make withdrawals during the annuity period. For amounts allocated to the Variable Funding Options, we may defer payment of any Cash Surrender Value for a period of up to five business days after the Written Request is received. For amounts allocated to the Fixed Account, we may defer payment of any Cash Surrender Value for a period up to six months. In either case, it is our intent to pay as soon as possible. We cannot process requests for withdrawals that are not in good order. We will contact you if there is a deficiency causing a delay and will advise what is needed to act upon the withdrawal request. We may withhold payment of surrender, withdrawal or, if applicable, loan proceeds if any portion of those proceeds would be derived from a personal check that has not yet cleared (i.e., that could still be dishonored by our banking institution). We may use telephone, fax, Internet or other means of communications to verify that payment from the check has been or will be collected. We will not delay payment longer than necessary for us to verify that payment has been or will be collected. You may avoid the possibility of delay in the disbursement of proceeds coming from a check that has not yet cleared by providing us with a certified check. If your Contract is issued as part of a 403(b) plan, there are restrictions on your ability to make withdrawals from your Contract. You may not withdraw contributions or earnings made to your Contract after December 31, 1988 unless you are (a) age 59 1/2, (b) no longer employed, (c) deceased, (d) disabled, or (e) experiencing a financial hardship. Even if you are experiencing a financial hardship, you may only withdraw contributions, not earnings. You should consult with your tax adviser before making a withdrawal from your Contract. SYSTEMATIC WITHDRAWALS Before the Maturity Date, you may choose to withdraw a specified dollar amount (at least $100) on a monthly, quarterly, semiannual or annual basis. We will deduct any applicable premium taxes and withdrawal charge. To elect systematic withdrawals, you must have a Contract Value of at least $15,000 and you must make the election on the form we provide. We will surrender Accumulation Units pro rata from all funding options in which you have an interest, unless you instruct us otherwise. You may begin or discontinue systematic withdrawals at any time by notifying us in writing, but you must give at least 30 days' notice to change any systematic withdrawal instructions that are currently in place. We reserve the right to discontinue offering systematic withdrawals or to assess a processing fee for this service upon 30 days' written notice to Contract Owners (where allowed by state law). There is currently no additional fee for electing systematic withdrawals. Each systematic withdrawal is subject to federal income taxes on the taxable portion and may be subject to Contract charges. In addition, a 10% federal penalty tax may be assessed on systematic withdrawals if the Contract Owner is under age 59 1/2. You should consult with your tax adviser regarding the tax consequences of systematic withdrawals. MANAGED DISTRIBUTION PROGRAM. Under the systematic withdrawal option, you may choose to participate in the Managed Distribution Program. At no cost to you, you may instruct us to calculate and make minimum distributions that may be required by the IRS upon reaching age 70 1/2. (See "Federal Tax Considerations".) These payments will not be subject to the withdrawal charge and will be in lieu of the free withdrawal allowance. No Dollar Cost Averaging will be permitted if you are participating in the Managed Distribution Program. LOANS Loans may be available under your Contract. Loans may only be taken against funds allocated or transferred to the Fixed Account. If available, all loan provisions are described in your Contract or loan agreement. 24 OWNERSHIP PROVISIONS - -------------------------------------------------------------------------------- TYPES OF OWNERSHIP CONTRACT OWNER The Contract belongs to the Contract Owner named in the Contract (on the Contract Specifications page), or to any other person to whom you subsequently assign the Contract. You may only make an assignment of ownership or a collateral assignment for Non-qualified Contracts. You have sole power during the Annuitant's lifetime to exercise any rights and to receive all benefits given in the Contract provided you have not named an irrevocable beneficiary and provided you have not assigned the Contract. You receive all payments while the Annuitant is alive unless you direct them to an alternate recipient. An alternate recipient does not become the Contract Owner. If this Contract is purchased by a beneficiary of another contract who directly transferred the death proceeds due under that contract, he/she will be granted the same rights the owner has under the Contract except that he/she cannot transfer ownership, take a loan or make additional Purchase Payments. Joint Owner. For Non-qualified Contracts only, you may name joint owners (e.g., spouses) in a Written Request before the Contract is in effect. Joint owners may independently exercise transfers allowed under the Contract. All other rights of ownership must be exercised by both owners. Joint owners own equal shares of any benefits accruing or payments made to them. BENEFICIARY You name the beneficiary in a Written Request. The beneficiary has the right to receive any death benefit proceeds remaining under the Contract upon the death of the Annuitant or the Contract Owner. If more than one beneficiary survives the Annuitant or Contract Owner, they will share equally in benefits unless you recorded different shares with the Company by Written Request before the death of the Annuitant or Contract Owner. In the case of a non-spousal beneficiary or a spousal beneficiary who has not chosen to assume the Contract, we will not transfer or otherwise remove the death benefit proceeds from either the Variable Funding Options or the Fixed Account, as most recently elected by the Contract Owner, until the Death Report Date. Unless you have named an irrevocable beneficiary you have the right to change any beneficiary by Written Request during the lifetime of the Annuitant and while the Contract continues. ANNUITANT The Annuitant is designated in the Contract (on the Contract Specifications page), and is the individual on whose life the Maturity Date and the amount of the monthly Annuity Payments depend. You may not change the Annuitant after your Contract is in effect. Contingent Annuitant. You may name one individual as a Contingent Annuitant. A Contingent Annuitant may not be changed, deleted or added to the Contract after the Contract Date. If the Annuitant who is not the owner dies prior to the Maturity Date, and the Contingent Annuitant is still living: - the death benefit will not be payable upon the Annuitant's death - the Contingent Annuitant becomes the Annuitant - all other rights and benefits will continue in effect. When a Contingent Annuitant becomes the Annuitant, the Maturity Date remains the same as previously in effect. If the Annuitant is also the owner, a death benefit is paid to the beneficiary regardless of whether or not there is a Contingent Annuitant. 25 DEATH BENEFIT - -------------------------------------------------------------------------------- Before the Maturity Date, generally, a death benefit is payable when either the Annuitant or a Contract Owner dies. We calculate the death benefit at the close of the business day on which our Home Office receives (1) Due Proof of Death and (2) written payment instructions or election of spousal or beneficiary contract continuance ("Death Report Date"). Any applicable premium tax, outstanding loans or withdrawals not previously deducted will be subtracted from any death benefit values. NOTE: If the owner dies before the Annuitant, the death benefit is recalculated, replacing all references to "Annuitant" with "owner." DEATH PROCEEDS BEFORE THE MATURITY DATE
- -------------------------------------------------------------------------------------- AGE ON CONTRACT DATE DEATH BENEFIT - -------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------- If the Annuitant was younger than age 75 on the Contract Date, the death benefit will be the greatest of: - the Contract Value on the Death Report Date - the total Purchase Payments made under the Contract, less the total amount of any withdrawals or - the step-up value, if any, as described below. - -------------------------------------------------------------------------------------- If the Annuitant was between the age of 75 and 80 on the Contract Date, the death benefit will be the greater of: - the Contract Value on the Death Report Date or - total Purchase Payments made under the Contract less the total amount of any withdrawals - --------------------------------------------------------------------------------------
WHERE THE ANNUITANT WAS YOUNGER THAN AGE 75 ON THE CONTRACT DATE. The step-up value will initially equal the Contract Value on the first Contract Date. On each subsequent Contract Date anniversary that occurs before the Annuitant's 76th birthday and before the Annuitant's death, if the Contract Value is greater than the step-up value, the step-up value will be increased to equal the Contract Value on that date. If the step-up value is greater than the Contract Value, the step-up value will remain unchanged. Whenever a Purchase Payment is made, the step-up value will be increased by the amount of that Purchase Payment. Whenever a withdrawal is taken, the step-up value will be reduced by a partial surrender reduction as described below. The only changes made to the step-up value on or after the Annuitant's 76th birthday will be those related to additional Purchase Payments or partial withdrawals as described above. PARTIAL SURRENDER REDUCTION. If you make a withdrawal we will reduce the step-up value by a partial surrender reduction which equals (1) the step-up value prior to the withdrawal, multiplied by (2) the amount of the partial surrender, divided by (3) the Contract Value before the surrender. For example, assume your current Contract Value is $55,000. If your current step-up value is $50,000, and you decide to make a withdrawal of $10,000, we would reduce the step-up value as follows: 50,000 x (10,000/55,000) = $9,090 Your new step-up value would be 50,000-9,090, or $40,910. The following example shows what would happen in a declining market. Assume your current Contract Value is $30,000. If your current step-up value is $50,000, and you decide to make a partial withdrawal of $10,000, we would reduce the step-up value as follows: 50,000 x (10,000/30,000) = $16,666 Your new step-up value would be 50,000-16,666, or $33,334. 26 ENHANCED STEPPED-UP PROVISION ("E.S.P.") THIS PROVISION IS NOT AVAILABLE TO A CUSTOMER WHEN EITHER THE ANNUITANT OR OWNER IS AGE 76 OR OLDER ON THE RIDER EFFECTIVE DATE. The rider effective date is the date the rider is attached to and made a part of the Contract. If you have selected the E.S.P., the total death benefit as of the Death Report Date will equal the death benefit described above plus the greater of zero or the following amount: IF THE ANNUITANT IS YOUNGER THAN AGE 70 ON THE RIDER EFFECTIVE DATE, 40% OF THE LESSER OF: (1) 250% of the modified Purchase Payments excluding Purchase Payments that are both received after the first rider effective date anniversary and within 12 months of the Death Report Date, or (2) your Contract Value minus the modified Purchase Payments, calculated as of the Death Report Date; or IF THE ANNUITANT IS BETWEEN THE AGES OF 70 AND 75 ON THE RIDER EFFECTIVE DATE, 25% OF THE LESSER OF: (1) 250% of the modified Purchase Payments excluding Purchase Payments that are both received after the first rider effective date anniversary and within 12 months of the Death Report Date, or (2) your Contract Value minus the modified Purchase Payments, calculated as of the Death Report Date. THE INITIAL MODIFIED PURCHASE PAYMENT is equal to the Contract Value as of the rider effective date. Whenever a Purchase Payment is made after the rider effective date, the modified Purchase Payment(s) are increased by the amount of the Purchase Payment. Whenever a partial surrender is taken after the rider effective date, the modified Purchase Payment(s) are reduced by a partial surrender reduction as described below. THE PARTIAL SURRENDER REDUCTION IS EQUAL TO: (1) the modified Purchase Payment(s) in effect immediately prior to the reduction for the partial surrender, multiplied by (2) the amount of the partial surrender divided by (3) the Contract Value immediately prior to the partial surrender. For example, assume your current modified Purchase Payment is $50,000 and that your current Contract Value is $55,000. You decide to make a withdrawal of $10,000. We would reduce the modified Purchase Payment as follows: 50,000 x (10,000/55,000) = $9,090 Your new modified Purchase Payment would be $50,000-$9,090 = $40,910 The following example shows what would happen in a declining market. Assume your current Contract Value is $30,000. If your current modified Purchase Payment is $50,000 and you decide to make a withdrawal of $10,000, we would reduce the modified Purchase Payment as follows: 50,000 x (10,000/30,000) = $16,666 Your new modified Purchase Payment would be 50,000-16,666 = $33,334 PAYMENT OF PROCEEDS We describe the process of paying death benefit proceeds before the Maturity Date in the charts below. The charts do not encompass every situation and are merely intended as a general guide. More detailed information is provided in your Contract. Generally, the person(s) receiving the benefit may request that the proceeds be paid in a lump sum, or be applied to one of the settlement options available under the Contract. NON-QUALIFIED CONTRACTS
- --------------------------------------------------------------------------------------------------------------- MANDATORY BEFORE THE MATURITY DATE, THE COMPANY WILL PAYOUT RULES UPON THE DEATH OF THE PAY THE PROCEEDS TO: UNLESS... APPLY* - --------------------------------------------------------------------------------------------------------------- OWNER (WHO IS NOT THE The beneficiary(ies), or if The beneficiary elects to Yes ANNUITANT) (WITH NO JOINT none, to the Contract continue the Contract rather OWNER) Owner's estate. than receive the distribution. - ---------------------------------------------------------------------------------------------------------------
27
- --------------------------------------------------------------------------------------------------------------- MANDATORY BEFORE THE MATURITY DATE, THE COMPANY WILL PAYOUT RULES UPON THE DEATH OF THE PAY THE PROCEEDS TO: UNLESS... APPLY* - --------------------------------------------------------------------------------------------------------------- OWNER (WHO IS THE ANNUITANT) The beneficiary(ies), or if The beneficiary elects to Yes (WITH NO JOINT OWNER) none, to the Contract continue the Contract rather Owner's estate. than receive the distribution. - --------------------------------------------------------------------------------------------------------------- NON-SPOUSAL JOINT OWNER (WHO The surviving joint owner. Yes IS NOT THE ANNUITANT) - --------------------------------------------------------------------------------------------------------------- NON-SPOUSAL JOINT OWNER (WHO The beneficiary(ies), or, if The beneficiary elects to Yes IS THE ANNUITANT) none, to the Contract continue the Contract rather Owner's estate. than receive a distribution. - --------------------------------------------------------------------------------------------------------------- SPOUSAL JOINT OWNER (WHO IS The surviving joint owner. The spouse elects to Yes NOT THE ANNUITANT) continue the Contract. - --------------------------------------------------------------------------------------------------------------- SPOUSAL JOINT OWNER (WHO IS The beneficiary(ies), or, if The spouse elects to Yes THE ANNUITANT) none, to the surviving joint continue the Contract. owner. A spouse who is not the beneficiary may decline to continue the Contract and instruct the Company to pay the beneficiary. - --------------------------------------------------------------------------------------------------------------- ANNUITANT (WHO IS NOT THE The beneficiary(ies), or if The beneficiary elects to Yes CONTRACT OWNER) none, to the Contract Owner. continue the Contract rather than receive the distribution. But, if there is a Contingent Annuitant, then the Contingent Annuitant becomes the Annuitant and the Contract continues in effect (generally using the original Maturity Date). The proceeds will then be paid upon the death of the Contingent Annuitant or owner. - --------------------------------------------------------------------------------------------------------------- ANNUITANT (WHO IS THE See death of "owner who is Yes CONTRACT OWNER) the Annuitant" above. - --------------------------------------------------------------------------------------------------------------- ANNUITANT (WHERE OWNER IS A The beneficiary(ies), or if Yes (Death of NON-NATURAL ENTITY/TRUST) none, to the owner. Annuitant is treated as death of the owner in these circumstances.) - --------------------------------------------------------------------------------------------------------------- CONTINGENT ANNUITANT No death proceeds are N/A (ASSUMING ANNUITANT IS STILL payable; Contract continues. ALIVE) - ---------------------------------------------------------------------------------------------------------------
28
- --------------------------------------------------------------------------------------------------------------- MANDATORY BEFORE THE MATURITY DATE, THE COMPANY WILL PAYOUT RULES UPON THE DEATH OF THE PAY THE PROCEEDS TO: UNLESS... APPLY* - --------------------------------------------------------------------------------------------------------------- BENEFICIARY No death proceeds are N/A payable; Contract continues. - --------------------------------------------------------------------------------------------------------------- CONTINGENT BENEFICIARY No death proceeds are N/A payable; Contract continues. - ---------------------------------------------------------------------------------------------------------------
QUALIFIED CONTRACTS
- --------------------------------------------------------------------------------------------------------------- MANDATORY PAYOUT BEFORE THE MATURITY DATE, THE COMPANY WILL RULES APPLY (SEE UPON THE DEATH OF THE PAY THE PROCEEDS TO: UNLESS... ABOVE) - --------------------------------------------------------------------------------------------------------------- OWNER/ANNUITANT The beneficiary(ies), or if The beneficiary elects to Yes none, to the Contract continue the Contract rather Owner's estate. than receive a distribution. - --------------------------------------------------------------------------------------------------------------- BENEFICIARY No death proceeds are N/A payable; Contract continues. - --------------------------------------------------------------------------------------------------------------- CONTINGENT BENEFICIARY No death proceeds are N/A payable; Contract continues. - ---------------------------------------------------------------------------------------------------------------
* Certain payout rules of the Code are triggered upon the death of any Owner. Non-spousal beneficiaries (as well as spousal beneficiaries who choose not to assume the Contract) must begin taking distributions based on the beneficiary's life expectancy within one year of death or take a complete distribution of Contract proceeds within 5 years of death. Spousal Beneficiaries must choose to continue the Contract as allowed under the Spousal Contract Continuance provision described below within one year of death. For Qualified Contracts, if mandatory distributions have already begun at the death of the Annuitant, the 5-year payout option is not available. SPOUSAL CONTRACT CONTINUANCE (SUBJECT TO AVAILABILITY -- DOES NOT APPLY IF A NON-SPOUSE IS A JOINT OWNER) Within one year of your death, if your spouse is named as an owner and/or beneficiary, and you die before the Maturity Date, your spouse may elect to continue the Contract as owner rather than have the death benefit paid to the beneficiary. If you were the Annuitant and your spouse elects to continue the Contract, your spouse will be named the Annuitant as of the Death Report Date. If your spouse elects to continue the Contract as Contract Owner, the death benefit will be calculated as of the Death Report Date. If the Contract Value is less than the calculated death benefit, the Contract Value will be increased to equal the death benefit. This amount is referred to as the adjusted Contract Value. Any difference between the Contract Value and the adjusted Contract Value will be allocated to the funding options in the same proportion as the allocations of the Contract prior to the Death Report Date. Any premium paid before the Death Report Date is no longer subject to a withdrawal charge if your spouse elects to continue the Contract. Purchase Payments made to the Contract after the Death Report Date will be subject to the withdrawal charge. All other Contract fees and charges applicable to the original Contract will also apply to the continued Contract. All other benefits and features of your Contract will be based on your spouse's age on the Death Report Date as if your spouse had purchased the Contract with the adjusted Contract Value on the Death Report Date. This spousal contract continuance is available only once for each Contract. Please note that spousal continuation will not satisfy minimum required distribution rules for Qualified Contracts. Please consult a tax advisor before electing this option. BENEFICIARY CONTRACT CONTINUANCE (NOT PERMITTED FOR NON-NATURAL BENEFICIARIES) If you die before the Maturity Date, and if the value of any beneficiary's portion of the death benefit is between $20,000 and $1,000,000 as of the Death Report Date, (more than $1,000,000 is subject to Home Office approval), your beneficiary(ies) may elect to continue his/her portion of the Contract subject to applicable Internal Revenue Code distribution requirements, rather than receive the death benefit in a lump sum. If the beneficiary chooses to 29 continue the Contract, the beneficiary can extend the payout phase of the Contract enabling the beneficiary to "stretch" the death benefit distributions out over his life expectancy as permitted by the Internal Revenue Code. If your beneficiary elects to continue the Contract, the death benefit will be calculated as of the Death Report Date. The initial Contract Value of the continued Contract (the "adjusted Contract Value") will equal the greater of the Contract Value or the death benefit calculated on the Death Report Date and will be allocated to the funding options in the same proportion as prior to the Death Report Date. If the adjusted Contract Value is allocated to the Variable Funding Options, the beneficiary bears the investment risk. The beneficiary who continues the Contract will be granted the same rights as the owner under the original Contract, except the beneficiary cannot: - transfer ownership - take a loan - make additional Purchase Payments. The beneficiary may also name his/her own beneficiary ("succeeding beneficiary") and has the right to take withdrawals at any time after the Death Report Date without a withdrawal charge. The E.S.P. option is not available to a beneficiary continuing the Contract under this provision. All other fees and charges applicable to the original Contract will also apply to the continued Contract; the E.S.P. charge no longer applies. All benefits and features of the continued Contract will be based on the beneficiary's age on the Death Report Date as if the beneficiary had purchased the Contract with the adjusted Contract Value on the Death Report Date. PLANNED DEATH BENEFIT You may request that rather than receive a lump-sum death benefit, the beneficiary(ies) receive all or a portion of the death benefit proceeds either: - as a variable or fixed annuity for life or a period that does not exceed the beneficiary's life expectancy, or - under the terms of the Beneficiary Continuance provision described above. If the Beneficiary Continuance provision is selected as a planned death benefit, no surrenders will be allowed other than payments meant to satisfy minimum distribution amounts or systematic withdrawal amounts, if greater. You must make the planned death benefit request as well as any revocation of this request in writing. Upon your death, your beneficiary(ies) cannot revoke or modify this request. If the death benefit at the time we receive Due Proof of Death is less than $2,000, we will only pay a lump sum to the beneficiary. If periodic payments due under the planned death benefit election are less than $100, we reserve the right to make Annuity Payments at less frequent intervals, resulting in a payment of at least $100 per year. If no beneficiary is alive when death benefits become payable, we will pay the death benefit as provided in your Contract. DEATH PROCEEDS AFTER THE MATURITY DATE If any Contract Owner or the Annuitant dies on or after the Maturity Date, the Company will pay the beneficiary a death benefit consisting of any benefit remaining under the annuity or income option then in effect. THE ANNUITY PERIOD - -------------------------------------------------------------------------------- MATURITY DATE Under the Contract, you can receive regular payments ("Annuity Payments"). You can choose the month and the year in which those payments begin ("Maturity Date"). You can also choose among payout options or elect a lump sum distribution. While the Annuitant is alive, you can change your selection any time up to the Maturity Date. Annuity Payments will begin on the Maturity Date stated in the Contract unless (1) you fully surrendered the Contract; (2) we paid the proceeds to the beneficiary before that date; or (3) you elected another date. Annuity Payments are a series of periodic payments (a) for life; (b) for life with a minimum number of payments assured; (c) for the joint lifetime of the Annuitant and another person, and thereafter during the lifetime of the survivor; or (d) for a fixed period. We may require proof that the Annuitant is alive before we make Annuity Payments. Not all options may be available in all states. Please be aware that once the Contract is annuitized, you are ineligible to receive the death benefit you have selected. 30 You may choose to annuitize at any time after the first Contract Date anniversary. Unless you elect otherwise, the Maturity Date will be the Annuitant's 90(th) birthday or ten years after the effective date of the Contract, if later (this requirement may be changed by us). At least 30 days before the original Maturity Date, you may elect to extend the Maturity Date to any time prior to the Annuitant's 90th birthday or to a later date with our consent. You may use certain annuity options taken at the Maturity Date to meet the minimum required distribution requirements of federal tax law, or you may use a program of withdrawals instead. These mandatory distribution requirements take effect generally upon the death of the Contract Owner, or with certain Qualified Contracts upon either the later of the Contract Owner's attainment of age 70 1/2 or year of retirement; or the death of the Contract Owner. You should seek independent tax advice regarding the election of minimum required distributions. ALLOCATION OF ANNUITY You may elect to receive your Annuity Payments in the form of a variable annuity, a fixed annuity, or a combination of both. If, at the time Annuity Payments begin, you have not made an election, we will apply your Cash Surrender Value to provide an annuity funded by the same funding options as you have selected during the accumulation period. At least 30 days before the Maturity Date, you may transfer the Contract Value among the funding options in order to change the basis on which we will determine Annuity Payments. (See "Transfers.") VARIABLE ANNUITY You may choose an annuity payout that fluctuates depending on the investment experience of the Variable Funding Options. We determine the number of Annuity Units credited to the Contract by dividing the first monthly Annuity Payment attributable to each Variable Funding Option by the corresponding Accumulation Unit value as of 14 days before the date Annuity Payments begin. We use an Annuity Unit to measure the dollar value of an Annuity Payment. The number of Annuity Units (but not their value) remains fixed during the annuity period. DETERMINATION OF FIRST ANNUITY PAYMENT. Your Contract contains the tables we use to determine your first monthly Annuity Payment. If you elect a variable annuity, the amount we apply to it will be the Cash Surrender Value as of 14 days before the date Annuity Payments begin, less any applicable premium taxes not previously deducted. The amount of your first monthly payment depends on the annuity option you elected and the Annuitant's adjusted age. Your Contract contains the formula for determining the adjusted age. We determine the total first monthly Annuity Payment by multiplying the benefit per $1,000 of value shown in the Contract tables by the number of thousands of dollars of Contract Value you apply to that annuity option. The Contract tables factor in an assumed daily net investment factor of 3.0%. We call this your net investment rate. Your net investment rate of 3% corresponds to an annual interest rate of 3%. This means that if the annualized investment performance, after expenses, of your Variable Funding Options is less than 3%, then the dollar amount of your variable Annuity Payments will decrease. However, if the annualized investment performance, after expenses, of your Variable Funding Options is greater than 3%, then the dollar amount of your variable Annuity Payments will increase. DETERMINATION OF SECOND AND SUBSEQUENT ANNUITY PAYMENTS. The dollar amount of all subsequent Annuity Payments changes from month to month based on the investment experience, as described above, of the applicable funding options. The total amount of each Annuity Payment will equal the sum of the basic payments in each funding option. We determine the actual amounts of these payments by multiplying the number of Annuity Units we credited to each funding option by the corresponding Annuity Unit value as of the date 14 days before the date the payment is due. FIXED ANNUITY You may choose a fixed annuity that provides payments that do not vary during the annuity period. We will calculate the dollar amount of the first fixed Annuity Payment as described under "Variable Annuity," except that the amount we apply to begin the annuity will be your Cash Surrender Value as of the date Annuity Payments begin. Payout rates will not be lower than that shown in the Contract. If it would produce a larger payment, the first fixed Annuity Payment will be determined using the Annuity Tables in effect on the Maturity Date. 31 PAYMENT OPTIONS - -------------------------------------------------------------------------------- ELECTION OF OPTIONS While the Annuitant is alive, you can change your annuity option selection any time up to the Maturity Date. Once Annuity Payments have begun, no further elections are allowed. During the Annuitant's lifetime, if you do not elect otherwise before the Maturity Date, we will pay you (or another designated payee) the first of a series of monthly Annuity Payments based on the life of the Annuitant, in accordance with Annuity Option 2 (Life Annuity with 120 monthly payments assured). For certain Qualified Contracts, Annuity Option 4 (Joint and Last Survivor Life Annuity -- Annuity Reduced on Death of Primary Payee) will be the automatic option as described in the Contract. (See "Annuity Options.") The minimum amount that can be placed under an annuity option will be $2,000 unless we agree to a lesser amount. If any monthly periodic payment due is less than $100, the Company reserves the right to make payments at less frequent intervals, or to pay the Contract Value in a lump-sum. On the Maturity Date, we will pay the amount due under the Contract in accordance with the payment option that you select. You may choose to receive a single lump-sum payment. You must elect an option in writing, in a form satisfactory to the Company. Any election made during the lifetime of the Annuitant must be made by the Contract Owner. ANNUITY OPTIONS Subject to the conditions described in "Election of Options" above, we may pay all or any part of the Cash Surrender Value under one or more of the following annuity options. Payments under the annuity options are generally made on a monthly basis. We may offer additional options. Option 1 -- Life Annuity -- No Refund. The Company will make Annuity Payments during the lifetime of the Annuitant ending with the last payment before death. This option offers the maximum periodic payment, since there is no assurance of a minimum number of payments or provision for a death benefit for beneficiaries. Option 2 -- Life Annuity with 120, 180 or 240 Monthly Payments Assured. The Company will make monthly Annuity Payments during the lifetime of the Annuitant, with the agreement that if, at the death of that person, payments have been made for less than 120, 180 or 240 months, as elected, we will continue making payments to the beneficiary during the remainder of the period. Option 3 -- Joint and Last Survivor Life Annuity -- No Refund. The Company will make regular Annuity Payments during the lifetime of the Annuitant and a second person. When either person dies, we will continue making payments to the survivor. No further payments will be made following the death of the survivor. Option 4 -- Joint and Last Survivor Life Annuity -- Annuity Reduced on Death of Primary Payee. The Company will make Annuity Payments during the lifetimes of the Annuitant and a second person. You will designate one as primary payee, and the other will be designated as secondary payee. On the death of the secondary payee, the Company will continue to make monthly Annuity Payments to the primary payee in the same amount that would have been payable during the joint lifetime of the two persons. On the death of the primary payee, the Company will continue to make Annuity Payments to the secondary payee in an amount equal to 50% of the payments, which would have been made during the lifetime of the primary payee. No further payments will be made once both payees have died. Option 5 -- Payments for a Fixed Period without Life Contingency. We will make periodic payments for the period selected. Please note that Option 5 may not satisfy minimum required distribution rules for Qualified Contracts. Please consult a tax adviser before electing this option. Option 6 -- Other Annuity Options. We will make any other arrangements for Annuity Payments as may be mutually agreed upon. VARIABLE LIQUIDITY BENEFIT This benefit is only offered with the annuity option "Payments for a Fixed Period without Life Contingency." 32 At any time after annuitization and before death, the Contract Owner may surrender and receive a payment equal to (A) minus (B), where (A) equals the present value of remaining certain payments, and (B) equals a withdrawal charge not to exceed the maximum withdrawal charge rate shown on the specifications page of the Contract multiplied by (A). The interest rate used to calculate the present value is a rate 1% higher than the Assumed (Daily) Net Investment Factor used to calculate the Annuity Payments. The remaining period certain payments are assumed to be level payments equal to the most recent period certain payment prior to the request for this liquidity benefit. A withdrawal charge is not imposed if the surrender is made after the expiration of the withdrawal charge period shown on the specifications page of the Contract. MISCELLANEOUS CONTRACT PROVISIONS - -------------------------------------------------------------------------------- RIGHT TO RETURN You may return the Contract for a full refund of the Contract Value plus any Contract charges and premium taxes you paid (but not any fees and charges the Underlying Fund assessed) within twenty days after you receive it (the "right to return period"). You bear the investment risk of investing in the Variable Funding Options during the right to return period; therefore, the Contract Value we return may be greater or less than your Purchase Payment. If you purchase the Contract as an Individual Retirement Annuity, and return it within the first seven days after delivery, or longer if your state law permits, we will refund your Purchase Payment in full; during the remainder of the right to return period, we will refund the Contract Value (including charges). We will determine the Contract Value following the close of the business day on which we receive your Contract and a Written Request for a refund. Where state law requires a different period, or the return of Purchase Payments or other variations of this provision, we will comply. Refer to your Contract for any state-specific information. TERMINATION We reserve the right to terminate the Contract on any business day if your Contract Value as of that date is less than $2,000 and you have not made Purchase Payments for at least two years, unless otherwise specified by state law. Accordingly, no Contract will be terminated due solely to negative investment performance. Termination will not occur until 31 days after we have mailed notice of termination to your last known address and to any assignee of record. If we terminate the Contract, we will pay you the Cash Surrender Value less any applicable taxes. In certain states, we may be required to pay you the Contract Value. Federal tax law may impose additional restrictions on our right to cancel your traditional IRA, Roth IRA or other Qualified Contract. REQUIRED REPORTS As often as required by law, but at least once in each Contract Year before the due date of the first Annuity Payment, we will furnish a report showing the number of Accumulation Units credited to the Contract and the corresponding Accumulation Unit value(s) as of the report date for each funding option to which the Contract Owner has allocated amounts during the applicable period. The Company will keep all records required under federal and state laws. SUSPENSION OF PAYMENTS The Company reserves the right to suspend or postpone the date of any payment or determination of values on any business day (1) when the New York Stock Exchange ("the Exchange") is closed; (2) when trading on the Exchange is restricted; (3) when an emergency exists, as determined by the SEC, so that the sale of securities held in the Separate Account may not reasonably occur, or so that the Company may not reasonably determine the value the Separate Account's net assets; or (4) during any other period when the SEC, by order, so permits for the protection of security holders. At any time, payments from the Fixed Account may be delayed up to 6 months. THE SEPARATE ACCOUNTS - -------------------------------------------------------------------------------- MetLife Insurance Company of Connecticut and MetLife Life and Annuity Company of Connecticut each sponsor Separate Accounts: Separate Account PF and Separate Account PF II, respectively. References to "Separate Account" 33 refer either to Separate Account PF or Separate Account PF II, depending on the issuer of your Contract. Both Separate Account PF and Separate Account PF II were established on July 30, 1997 and are registered with the SEC as unit investment trusts under the Investment Company Act of 1940, as amended. We will invest Separate Account assets attributable to the Contracts exclusively in the shares of the Variable Funding Options. We hold the assets of Separate Account PF and Separate Account PF II for the exclusive and separate benefit of the owners of each Separate Account, according to the laws of Connecticut. Income, gains and losses, whether or not realized, from assets allocated to the Separate Account are, in accordance with the Contracts, credited to or charged against the Separate Account without regard to other income, gains and losses of the Company. The assets held by the Separate Account are not chargeable with liabilities arising out of any other business that we may conduct. Obligations under the Contract are obligations of the Company. Any obligations that exceed the assets in the Separate Account are payable by the Company's general account. The amount of the guaranteed death benefit that exceeds the Contract Value is paid from the Company's general account. Benefit amounts paid from the general account are subject to the financial strength and claims-paying ability of the Company. All investment income and other distributions of the funding options are payable to the Separate Account. We reinvest all such income and/or distributions in shares of the respective funding option at net asset value. Shares of the funding options are currently sold only to life insurance company separate accounts to fund variable annuity and variable life insurance contracts. Certain variable annuity separate accounts and variable life insurance separate accounts may invest in the funding options simultaneously (called "mixed" and "shared" funding). It is conceivable that in the future it may be disadvantageous to do so. Although the Company and the Variable Funding Options do not currently foresee any such disadvantages either to variable annuity contract owners or variable life policy owners, each Underlying Fund's Board of Directors intends to monitor events in order to identify any material conflicts between them and to determine what action, if any, should be taken. If a Board of Directors was to conclude that separate funds should be established for variable life and variable annuity separate accounts, the variable annuity contract owners would not bear any of the related expenses, but variable annuity contract owners and variable life insurance policy owners would no longer have the economies of scale resulting from a larger combined fund. We reserve the right to transfer assets of the Separate Account to another separate account, and/or to modify the structure or operation of the Separate Account, subject to the necessary regulatory approvals. If we do so, we guarantee that the modification will not affect your Contract Value. PERFORMANCE INFORMATION In advertisements for the Contract, we may include performance figures to show you how a Variable Funding Option has performed in the past. These figures are rates of return or yield quotations shown as a percent. These figures show past performance of a Variable Funding Option and are not an indication of how a Variable Funding Option will perform in the future. Our advertisements may show performance figures assuming that you do not elect any optional features such as the E.S.P. However, if you elect any of these optional features, they involve additional charges that will serve to decrease the performance of your Variable Funding Options. You may wish to speak with your registered representative to obtain performance information specific to the optional features you may wish to select. Performance figures for each Variable Funding Option are based in part on the performance of a corresponding Underlying Fund. In some cases, the Underlying Fund may have existed before the technical inception of the corresponding Variable Funding Option. In those cases, we can create "hypothetical historical performance" of a Variable Funding Option. These figures show the performance that the Variable Funding Option would have achieved had it been available during the entire history of the Underlying Fund. In a low interest rate environment, yields for money market Subaccounts, after deduction of the Mortality and Expense Risk Charge, Administrative Expense Charge and the charge for any optional benefit riders (if applicable), may be negative even though the Underlying Fund's yield, before deducting for such charges, is positive. If you allocate a portion of your Contract Value to a money market Subaccount or participate in an asset allocation program where Contract Value is allocated to a money market Subaccount under the applicable asset allocation model, that portion of your Contract Value may decrease in value. 34 FEDERAL TAX CONSIDERATIONS - -------------------------------------------------------------------------------- The following general discussion of the federal income tax consequences related to your investment in this Contract is not intended to cover all situations, and is not meant to provide tax or legal advice. Because of the complexity of the law and the fact that the tax results will vary depending on many factors, you should consult your tax and/or legal adviser regarding the tax implications of purchasing this Contract based upon your individual situation. For further tax information, an additional discussion of certain tax matters is contained in the SAI. You are responsible for determining whether your purchase of a Contract, withdrawals, income payments and any other transaction under your Contract satisfy applicable tax law. We are not responsible for determining if your employer's plan or arrangement satisfies the requirements of the Code and/or the Employee Retirement Income Security Act of 1974 (ERISA). GENERAL TAXATION OF ANNUITIES Congress has recognized the value of saving for retirement by providing certain tax benefits, in the form of tax deferral, for premiums paid under an annuity and permitting tax-free transfers between the various investment options offered under the Contract. The Internal Revenue Code ("Code") governs how earnings on your investment in the Contract are ultimately taxed, depending upon the type of contract, qualified or non-qualified, and the manner in which the money is distributed, as briefly described below. In analyzing the benefits of tax deferral it is important to note that the Jobs and Growth Tax Relief Reconciliation Act of 2003 amended Code Section 1 to reduce the marginal tax rates on long-term capital gains and dividends to 5% and 15%, respectively. The reduced rates apply during 2003 through 2008, and thereafter will increase to prior levels. Under current federal income tax law, the taxable portion of distributions under variable annuity contracts and qualified plans (including IRAs) is not eligible for the reduced tax rate applicable to long-term capital gains and dividends. Earnings under annuity contracts, like interest payable on fixed investments (notes, bonds, etc.) continue to be taxed as ordinary income (top rate of 35%). The tax law provides deferred annuities issued after October 21, 1988 by the same insurance company or an affiliate in the same calendar year to the same owner are combined for tax purposes. As a result, a greater portion of your withdrawals may be considered taxable income than you would otherwise expect. Although the law is not clear, the aggregation rule may also adversely affect the tax treatment of payments received under an income annuity where the owner has purchased more than one non-qualified annuity during the same calendar year from the same or an affiliated company after October 21, 1988, and is not receiving income payments from all annuities at the same time. Please consult your own tax advisor. STATE AND LOCAL TAXES. The rules for state and local income taxes may differ from the federal income tax rules. Purchasers and prospective purchasers of the Contract should consult their own tax advisors and the law of the applicable taxing jurisdiction to determine what rules and tax benefits apply to the contract. PENALTY TAX FOR PREMATURE DISTRIBUTIONS. For both Qualified and Non-qualified Contracts, taxable distributions taken before the Contract Owner has reached the age of 59 1/2 will be subject to a 10% additional tax penalty unless the distribution is taken in a series of periodic distributions, for life or life expectancy, or unless the distribution follows the death or disability of the Contract Owner. Other exceptions may be available in certain qualified plans. The 10% tax penalty is in addition to any other penalties that may apply under your Contract and the normal income taxes due on the distribution. TAX-FREE EXCHANGES. Code Section 1035 provides that, if certain conditions are met, no gain or loss is recognized when an annuity contract is received in exchange for a life insurance, endowment, or annuity contract. Since different annuity contracts have different expenses, fees and benefits, a tax-free exchange could result in your investment becoming subject to higher or lower fees and/or expenses. FEDERAL ESTATE TAXES. While no attempt is being made to discuss the Federal estate tax implications of the Contract, you should keep in mind that the value of an annuity contract owned by a decedent and payable to a beneficiary by virtue of surviving the decedent is included in the decedent's gross estate. Depending on the terms of the annuity contract, the value of the annuity included in the gross estate may be the value of the lump sum payable to the designated beneficiary or the actuarial value of the payments to be received by the beneficiary. Consult an estate planning advisor for more information. 35 GENERATION-SKIPPING TRANSFER TAX. Under certain circumstances, the Code may impose a "generation-skipping transfer tax" when all or part of an annuity contract is transferred to, or a death benefit is paid to, an individual two or more generations younger than the contract owner. Regulations issued under the Code may require the Company to deduct the tax from your Contract or from any applicable payment and pay it directly to the IRS. TYPES OF CONTRACTS: QUALIFIED AND NON-QUALIFIED QUALIFIED ANNUITY CONTRACTS If you purchase your Contract with proceeds of an eligible rollover distribution from any tax-qualified employee pension or retirement savings plan or individual retirement annuity (IRA), your Contract is referred to as a Qualified Contract. Some examples of Qualified Contracts are: IRAs (including Roth IRAs), tax sheltered annuities established by public school systems or certain tax exempt organizations under Code Section 403(b), corporate-sponsored pension, retirement savings and profit sharing plans (including 401(k) plans), Keogh Plans (for self-employed individuals), and certain other qualified deferred compensation plans. Another type of Qualified Contract is a Roth IRA, under which after-tax contributions accumulate until maturity, when amounts (including earnings) may be withdrawn tax-free. The rights and benefits under a Qualified Contract may be limited by the terms of the retirement plan, regardless of the terms and conditions of the Contract. Plan participants making contributions to Qualified Contracts will be subject to the required minimum distribution rules as provided by the Code and described below. All qualified plans (including IRAs) receive tax-deferral under the Code. Although there are no additional tax benefits to funding your qualified plan or IRA with an annuity, it does offer you additional insurance benefits, such as the availability of a guaranteed income for life. The Contract has not been submitted to the IRS for approval as to form as a valid IRA. Such approval would not constitute an IRS approval or endorsement of any funding options under the contract. IRS approval as to form is not required to constitute a valid IRA. Disqualification of the Contract as an IRA could result in the immediate taxation of amounts held in the Contract and other adverse consequences. TAXATION OF QUALIFIED ANNUITY CONTRACTS Under a qualified annuity, since amounts paid into the Contract generally have not yet been taxed, the full amount of any distributions (including the amount attributable to Purchase Payments), whether paid in the form of lump sum withdrawals or Annuity Payments, are generally taxed at ordinary income tax rates unless the distribution is transferred to an eligible rollover account or contract. There are special rules which govern the taxation of Qualified Contracts, including withdrawal restrictions, requirements for mandatory distributions, and contribution limits. Amounts rolled over to the Contract from other qualified funding vehicles generally are not subject to current taxation. MANDATORY DISTRIBUTIONS FOR QUALIFIED PLANS Federal tax law requires that minimum annual distributions begin by April 1st of the calendar year following the calendar year in which an IRA owner attains age 70 1/2. Participants in qualified plans and 403(b) annuities may defer minimum distributions until the later of April 1st of the calendar year following the calendar year in which they attain age 70 1/2 or the year of retirement (except for participants who are 5% or more owners of the plan sponsor) . If you own more than one individual retirement annuity and/or account, you may satisfy the minimum distribution rules on an aggregate basis (i.e. determine the total amount of required distributions from all IRAs and take the required amount from any one or more IRAs). A similar aggregate approach is available to meet your 403(b) minimum distribution requirements if you have multiple 403(b) annuities. Recently promulgated Treasury regulations changed the distribution requirements; therefore, it is important that you consult your tax adviser as to the impact of these regulations on your personal situation. Final income tax regulations regarding minimum distribution requirements were released in June 2004. These regulations affect both deferred and income annuities. Under these new rules, effective with respect to minimum distributions required for the 2006 distribution year, in general, the value of all benefits under a deferred annuity (including death benefits in excess of cash value, including the Enhanced Stepped-Up Provision) must be added to the account value in computing the amount required to be distributed over the applicable period. We will provide you with additional information as to the amount of your interest in the Contract that is subject to required minimum distributions under this new rule and either compute the required amount for you or offer to do so at your request. 36 The new rules are not entirely clear and you should consult your personal tax advisor as to how these rules affect your Contract. MINIMUM DISTRIBUTIONS FOR BENEFICIARIES UPON THE CONTRACT OWNER'S DEATH: Upon the death of the Contract Owner and/or Annuitant of a Qualified Contract, the funds remaining in the Contract must be completely withdrawn within five years from the date of death or minimum distributions may be taken over the life expectancy of the individual beneficiaries (or in the case of certain trusts that are contract beneficiaries, over the life expectancy of the individuals who are the beneficiaries of the trust), provided such distributions are payable at least annually and begin within one year from the date of death. Special rules apply where the beneficiary is the surviving spouse, which allow the spouse to assume the Contract and defer the minimum distribution requirements. NOTE TO PARTICIPANTS IN QUALIFIED PLANS INCLUDING 401, 403(B), OR 408, (INCLUDING IRA OWNERS): While annual plan contribution limits may be increased from time to time by Congress and the IRS for federal income tax purposes, these limits must be adopted by each state for any higher limits to be effective at a state income tax level. In other words, the permissible contribution limits for federal and state income tax purposes may be different. Therefore, in certain states, a portion of the contributions may not be excludible or deductible from state income taxes. Please consult your employer or tax adviser regarding this issue. INDIVIDUAL RETIREMENT ANNUITIES To the extent of earned income for the year and not exceeding the applicable limit for the taxable year, an individual may make contributions, which in some cases may be deductible, to an individual retirement annuity (IRA). The applicable limit is $4,000 for calendar year 2007, $5,000 for 2008, and may be indexed for inflation in future years. Additional "catch-up contributions" may be made to an IRA by individuals age 50 or over. There are certain limits on the deductible amount based on the adjusted gross income of the individual and spouse and on their participation in a retirement plan. If an individual is married and the spouse is not employed, the individual may establish IRAs for the individual and spouse. Purchase Payments may then be made annually into IRAs for both spouses in the maximum amount of 100% of earned income up to a combined limit based on the individual limits outlined above. Deductible contributions to an IRA and Roth IRA for the year must be aggregated for purposes of the individual Code Section 408A limits and the Code Section 219 limits (age 50+catch-up). Partial or full distributions are treated as ordinary income, except that amounts contributed after 1986 on a non-deductible basis are not includable in income when distributed. An additional tax of 10% will apply to any taxable distribution from the IRA that is received by the participant before the age of 59 1/2 except by reason of death, disability or as part of a series of payments for life or life expectancy. Distributions must commence by April 1st of the calendar year after the close of the calendar year in which the individual attains the age of 70 1/2. Certain other mandatory distribution rules apply on the death of the individual. The individual must maintain personal and tax return records of any non-deductible contributions and distributions. Section 408 (k) of the Code provides for the purchase of a Simplified Employee Pension (SEP) plan. A SEP is funded through an IRA and can accept an annual employer contribution limited to the lesser of $45,000 or 100% of pay for each participant in 2007. ROTH IRAS Effective January 1, 1998, Section 408A of the Code permits certain individuals to contribute to a Roth IRA. Eligibility to make contributions is based upon income, and the applicable limits vary based on marital status and/or whether the contribution is a rollover contribution from another IRA or an annual contribution. Contributions to a Roth IRA, which are subject to certain limitations, (similar to the annual limits for traditional IRAs), are not deductible and must be made in cash or as a rollover or transfer from another Roth IRA or other IRA. A conversion of "traditional" IRA to a Roth IRA may be subject to tax and other special rules apply. You should consult a tax adviser before combining any converted amounts with other Roth IRA contributions, including any other conversion amounts from other tax years. Qualified distributions from a Roth IRA are tax-free. A qualified distribution requires that the Roth IRA has been held for at least 5 years, and the distribution is made after age 59 1/2, on death or disability of the owner, or for a limited amount ($10,000) for a qualified first time home purchase for the owner or certain relatives. Income tax and a 10% 37 penalty tax may apply to distributions made (1) before age 59 1/2 (subject to certain exceptions) or (2) during five taxable years starting with the year in which the first contribution is made to the Roth IRA. TSAS (ERISA AND NON-ERISA) GENERAL. TSAs fall under sec.403(b) of the Code, which provides certain tax benefits to eligible employees of public school systems and organizations that are tax exempt under sec.501(c)(3) of the Code. In general contributions to sec.403(b) arrangements are subject to limitations under sec.415(c) of the Code (the lesser of 100% of includable compensation or the applicable limit for the year). Note: Proposed income tax regulations issued in November 2004 would require certain fundamental changes to these arrangements including (a) a requirement that there be a written plan document in addition to the annuity contract or sec.403(b)(7) custodial account, (b) significant restrictions on the ability for participants to direct proceeds between 403(b) annuity contracts and (c) additional restrictions on withdrawals of amounts attributable to contributions other than elective deferrals. The proposed regulations will generally not be effective until taxable years beginning after December 31, 2007 at the earliest, and may not be relied on until issued in final form. However, certain aspects including a proposed prohibition on the use of life insurance contracts under 403(b) arrangements and rules affecting payroll taxes on certain types of contributions are currently effective unless revised or revoked in final regulations. WITHDRAWALS AND INCOME PAYMENTS. If you are under 59 1/2, you cannot withdraw money from your TSA Contract unless the withdrawal: - Relates to purchase payments made prior to 1989 (and pre-1989 earnings on those purchase payments); - Is directly transferred to another permissible investment under sec.403(b) arrangements; - Relates to amounts that are not salary reduction elective deferrals; - Occurs after you die, leave your job or become disabled (as defined by the Code); or - Is for financial hardship (but only to the extent of purchase payments) if your plan allows it. DESIGNATED ROTH ACCOUNT FOR 403(B) PLANS. Effective January 1, 2006, employers that established and maintain a TSA/403(b) plan ("the Plan") may also establish a Qualified Roth Contribution Program under Section 402A of the Code ("Designated Roth Accounts") to accept after-tax contributions as part of the TSA plan. In accordance with our administrative procedures, we may permit these contributions to be made as purchase payments to a Section 403(b) Contract under the following conditions: (1) The employer maintaining the plan has demonstrated to our satisfaction that Designated Roth Accounts are permitted under the Plan. (2) In accordance with our administrative procedures, the amount of elective deferrals has been irrevocably designated as an after- tax contribution to the Designated Roth Account. (3) All state regulatory approvals have been obtained to permit the Contract to accept such after-tax elective deferral contributions (and, where permitted under the Qualified Roth Contribution Program and the Contract, rollovers and trustee-to-trustee transfers from other Designated Roth Accounts). (4) In accordance with our procedures and in a form satisfactory to us, we may accept rollovers from other funding vehicles under any Qualified Roth Contribution Program of the same type in which the employee participates as well as trustee-to-trustee transfers from other funding vehicles under the same Qualified Roth Contribution Program for which the participant is making elective deferral contributions to the Contract. (5) No other contribution types (including employer contributions, matching contributions, etc.) will be allowed as designated Roth contributions, unless they become permitted under the Code. (6) If permitted under the federal tax law, we may permit both pre- tax contributions under a 403(b) plan as well as after-tax contributions under the Plan's Qualified Roth Contribution Program to be made 38 under the same Contract as well as rollover contributions and contributions by trustee-to-trustee transfers. In such cases, we will account separately for the designated Roth contributions and the earnings thereon from the contributions and earnings made under the pre-tax TSA plan (whether made as elective deferrals, rollover contributions or trustee-to-trustee transfers). As between the pre-tax or traditional Plan and the Qualified Roth Contribution Program, we will allocate any living benefits or death benefits provided under the Contract on a reasonable basis, as permitted under the tax law. (7) We may refuse to accept contributions made as rollovers and trustee-to-trustee transfers, unless we are furnished with a breakdown as between participant contributions and earnings at the time of the contribution. Many of the federal income tax rules pertaining to Designated Roth Accounts have not yet been finalized. Both you and your employer should consult their own tax and legal advisors prior to making or permitting contributions to be made to a Qualified Roth Contribution Program. The following general tax rules are based on our understanding of the Code and any regulations issued through December 31, 2005, and are subject to change and to different interpretation as well as additional guidance in respect to areas not previously addressed: The employer must permit contributions under a pre-tax 403(b) plan in order to permit contributions to be irrevocably designated and made part of a Qualified Roth Contribution Program. Elective deferral contributions to the Designated Roth Account must be aggregated with all other elective deferral contributions made by a taxpayer for purposes of the individual Code Section 402(g) limits and the Code Section 414(v) limits (relating to age 50 and over catch-up contributions) as well as contribution limits that apply under the Plan. In general, the same tax law rules with respect to restricted monies, triggering events and permitted distributions will apply to the Designated Roth Accounts under the Plan as apply to the traditional pre-tax accounts under the plan (e.g., death or disability of participant, severance from employment, attainment of age 59 1/2 and hardship withdrawals only with respect to contributions (if permitted under the Plan)). If the amounts have been held under any Designated Roth Account of a participant for at least five years and are made on account of death, disability or after attainment of age 59 1/2, then any withdrawal, distribution or payment of these amounts is generally free of federal income tax ("Qualified Distributions"). Unlike Roth IRAs, withdrawal, distributions and payments that do not meet the five year rule will generally be taxed on a pro-rated basis with respect to earnings and after-tax contributions. The 10% penalty tax will generally apply on the same basis as a traditional pre-tax account under the Plan. Additionally, rollover distributions may only be made tax-free into another Designated Roth Account or into a Roth IRA. Some states may not permit contributions to be made to a Qualified Roth Contribution Program or may require additional conforming legislation for these rules to become effective. LOANS. If your TSA Contract permits loans, such loans will be made only from any Fixed Interest Account balance and only up to certain limits. In that case, we credit your Fixed Interest Account balance up to the amount of the outstanding loan balance with a rate of interest that is less than the interest rate we charge for the loan. The Code and applicable income tax regulations limit the amount that may be borrowed from your Contract and all you employer plans in the aggregate and also require that loans be repaid, at a minimum, in scheduled level payments over a proscribed term. Your Contract will indicated whether loans are permitted. The terms of the loan are governed by the Contract and loan agreement. Failure to satisfy loan limits under the Code or to make any scheduled payments according to the terms of your loan agreement and Federal tax law could have adverse tax consequences. Consult a tax advisor and read your loan agreement and Contract prior to taking any loan. 39 NON-QUALIFIED ANNUITY CONTRACTS If you purchase the Contract on an individual basis with after-tax dollars and not under one of the programs described above, your Contract is referred to as non-qualified. As the owner of a non-qualified annuity, you do not receive any tax benefit (deduction or deferral of income) on Purchase Payments, but you will not be taxed on increases in the value of your Contract until a distribution occurs -- either as a withdrawal made prior to the Maturity Date or in the form of periodic Annuity Payments. As a general rule, there is income in the Contract (earnings) to the extent the Contract Value exceeds your investment in the Contract. The investment in the Contract equals the total Purchase Payments less any amount received previously which was excludible from gross income. Generally, different tax rules apply to Annuity Payments than to withdrawals and payments received before the annuity starting date. When a withdrawal is made, you are taxed on the amount of the withdrawal that is considered earnings under federal tax laws. Similarly, when you receive an Annuity Payment, part of each periodic payment is considered a return of your Purchase Payments and will not be taxed, but the remaining portion of the Annuity Payment (i.e., any earnings) will be considered ordinary income for federal income tax purposes. Annuity Payments are subject to an "excludable amount" or "exclusion ratio" which determines how much of each payment is treated as: - a non-taxable return of your Purchase Payment; or - a taxable payment of earnings. We generally will tell you how much of each Annuity Payment is a non-taxable return of your Purchase Payments. However, it is possible that the IRS could conclude that the taxable portion of Annuity Payments under a non-qualified contract is an amount greater (or less) than the taxable amount determined by us and reported by us to you and the IRS. Generally, once the total amount treated as a non-taxable return of your Purchase Payments equals your Purchase Payments, then all remaining payments are fully taxable. We will withhold a portion of the taxable amount of your Annuity Payment for income taxes, unless you elect otherwise. The amount we withhold is determined by the Code. Code Section 72(s) requires that non-qualified annuity contracts meet minimum mandatory distribution requirements upon the death of the Contract Owner, including the death of either of the Joint Owners. If these requirements are not met, the Contract will not be treated as an annuity contract for federal income tax purposes and earnings under the Contract will be taxable currently, not when distributed. The distribution required depends, among other things, upon whether an annuity option is elected or whether the succeeding Contract Owner is the surviving spouse. We will administer contracts in accordance with these rules and we will notify you when you should begin receiving payments. There is a more complete discussion of these rules in the SAI. If a non-qualified annuity is owned by a non-natural person (e.g., a corporation), increases in the value of the Contract attributable to Purchase Payments made after February 28, 1986 are includable in income annually and taxed at ordinary income tax rates. Furthermore, for contracts issued after April 22, 1987, if the Contract is transferred to another person or entity without adequate consideration, all deferred increases in value will be treated as income for federal income tax purposes at the time of the transfer. PARTIAL WITHDRAWALS: If you make a partial withdrawal of your Contract Value, the distribution generally will be taxed as first coming from earnings (income in the Contract) and then from your Purchase Payments. These withdrawn earnings are includable in your taxable income. (See Penalty Tax for Premature Distributions below.) Any direct or indirect borrowing against the value of the Contract or pledging of the Contract as security for a loan will be treated as a cash distribution under the tax law, and will have tax consequences in the year taken. It should be noted that there is no guidance as to the determination of the amount of income in a Contract if it is issued with a Guaranteed Minimum Withdrawal Benefit (GMWB). Therefore, you should consult with your tax adviser as to the potential tax consequences of a partial surrender if your Contract is issued with a GMWB. PARTIAL ANNUITIZATIONS (IF AVAILABLE WITH YOUR CONTRACT): At the present time the IRS has not approved the use of an exclusion ratio or exclusion amount when only part of your Contract Value is applied to a payment option. Currently, we will treat the application of less than your entire Contract Value under a Non- qualified Contract to a payment option (i.e. taking Annuity Payments) as a taxable withdrawal for federal income tax purposes (which may also be subject to the 10% penalty tax if you are under age 59 1/2). We will then treat the amount of the withdrawal (after any deductions for taxes) as the purchase price of an income annuity and tax report the income payments 40 received under that annuity under the rules for variable income annuities. Consult your tax attorney prior to partially annuitizing your Contract. We will determine the excludable amount for each income payment under the Contract as a whole by using the rules applicable to variable income payments in general (i.e. by dividing your after-tax purchase price, as adjusted for any refund or guarantee feature, by the number of expected income payments from the appropriate IRS table). However, the IRS may determine that the excludable amount is different from our computation. DIVERSIFICATION REQUIREMENTS FOR VARIABLE ANNUITIES The Code requires that any non-qualified variable annuity contracts based on a Separate Account must meet specific diversification standards. Non-qualified variable annuity contracts shall not be treated as an annuity for federal income tax purposes if investments made in the account are not adequately diversified. Final tax regulations define how Separate Accounts must be diversified. The Company constantly monitors the diversification of investments and believes that its accounts are adequately diversified. The consequence of any failure to diversify is essentially the loss to the Contract Owner of tax-deferred treatment, requiring the current inclusion of a proportionate share of the income and gains from the Separate Account assets in the income of each Contract Owner. The Company intends to administer all contracts subject to this provision of law in a manner that will maintain adequate diversification. OWNERSHIP OF THE INVESTMENTS In certain circumstances, owners of variable annuity contracts have been considered to be the owners of the assets of the underlying Separate Account for federal income tax purposes due to their ability to exercise investment control over those assets. When this is the case, the Contract Owners have been currently taxed on income and gains attributable to the Separate Account assets. There is little guidance in this area, and some features of the Contract, such as the number of funds available and the flexibility of the Contract Owner to allocate premium payments and transfer amounts among the funding options, have not been addressed in public rulings. While we believe that the Contract does not give the Contract Owner investment control over Separate Account assets, we reserve the right to modify the Contract as necessary to prevent a Contract Owner from being treated as the owner of the Separate Account assets supporting the Contract. TAXATION OF DEATH BENEFIT PROCEEDS Amounts may be distributed from a Non-qualified Contract because of the death of an owner or Annuitant. Generally, such amounts are includable in the income of the recipient as follows: (i) if distributed in a lump sum, they are taxed in the same manner as a full surrender of the Contract; or (ii) if distributed under a payment option, they are taxed in the same way as Annuity Payments. OTHER TAX CONSIDERATIONS TREATMENT OF CHARGES FOR OPTIONAL BENEFITS The Contract may provide one or more optional enhanced death benefits or other minimum guaranteed benefit that in some cases may exceed the greater of purchase price or the Contract Value. It is possible that the Internal Revenue Service may take the position that the charges for the optional enhanced benefit(s) are deemed to be taxable distributions to you. Although we do not believe that a charge under such optional enhanced benefit should be treated as a taxable withdrawal, you should consult with your tax advisor before selecting any rider or endorsement to the Contract. PUERTO RICO TAX CONSIDERATIONS The Puerto Rico Internal Revenue Code of 1994 (the "1994 Code") taxes distributions from non-qualified annuity contracts differently than in the U.S. Distributions that are not in the form of an annuity (including partial surrenders and period certain payments) are treated under the 1994 Code first as a return of investment. Therefore, a substantial portion of the amounts distributed generally will be excluded from gross income for Puerto Rico tax purposes until the cumulative amount paid exceeds your tax basis. The amount of income on annuity distributions (payable over your lifetime) is also calculated differently under the 1994 Code. Since Puerto Rico residents are also subject to U.S. income tax on all income other than income sourced to Puerto Rico and the Internal Revenue Service issued 41 guidance in 2004 which indicated that the income from an annuity contract issued by a U.S. life insurer would be considered U.S. source income, the timing of recognition of income from an annuity contract could vary between the two jurisdictions. Although the 1994 Code provides a credit against the Puerto Rico income tax for U.S. income taxes paid, an individual may not get full credit because of the timing differences. You should consult with a personal tax adviser regarding the tax consequences of purchasing an annuity contract and/or any proposed distribution, particularly a partial distribution or election to annuitize. NON-RESIDENT ALIENS Distributions to non resident aliens ("NRAs") are subject to special and complex tax and withholding rules under the Code with respect to U.S. source income, some of which are based upon the particular facts and circumstances of the Contract Owner, the beneficiary and the transaction itself. As stated above, the IRS has taken the position that income from the Contract received by NRAs is considered U.S. source income. In addition, Annuity Payments to NRAs in many countries are exempt from U.S. tax (or subject to lower rates) based upon a tax treaty, provided that the Contract Owner complies with the applicable requirements. NRAs should seek guidance from a tax adviser regarding their personal situation. TAX CREDITS AND DEDUCTIONS The Company may be entitled to certain tax benefits related to the assets of the Separate Account. These tax benefits, which may include foreign tax credits and corporate dividend received deductions, are not passed back to the Separate Account or to contract owners since the Company is the owner of the assets from which the tax benefits are derived. OTHER INFORMATION - -------------------------------------------------------------------------------- PrimElite II is a service mark of Citigroup, Inc. or its affiliates and is used by MetLife, Inc. and its affiliates under license. THE INSURANCE COMPANIES Please refer to your Contract to determine which Company issued your Contract. MetLife Insurance Company of Connecticut is a stock insurance company chartered in 1863 in Connecticut and continuously engaged in the insurance business since that time. It is licensed to conduct life insurance business in all states of the United States, the District of Columbia, Puerto Rico, Guam, the U.S. and British Virgin Islands and the Bahamas. The Company is a wholly-owned subsidiary of MetLife, Inc., a publicly-traded company. MetLife, Inc., through its subsidiaries and affiliates, is a leading provider of insurance and other financial services to individual and institutional customers. The Company's Home Office is located at One Cityplace, Hartford, Connecticut 06103-3415. MetLife Life and Annuity Company of Connecticut is a stock insurance company chartered in 1973 in Connecticut and continuously engaged in the insurance business since that time. It is licensed to conduct life insurance business in all states of the United States (except New York), the District of Columbia and Puerto Rico. The Company is an indirect wholly-owned subsidiary of MetLife, Inc., a publicly-traded company. The Company's Home Office is located at One Cityplace, Hartford, Connecticut 06103-3415. FINANCIAL STATEMENTS The financial statements for the Company and its Separate Account are located in the Statement of Additional Information. DISTRIBUTION OF VARIABLE ANNUITY CONTRACTS DISTRIBUTION AND PRINCIPAL UNDERWRITING AGREEMENT. MetLife Insurance Company of Connecticut and MetLife Life and Annuity Company of Connecticut (together the "Company") have appointed MetLife Investors Distribution Company ("MLIDC") to serve as the principal underwriter and distributor of the securities offered through this 42 Prospectus, pursuant to the terms of a Distribution and Principal Underwriting Agreement. Prior to October 20, 2006, the principal underwriter and distributor was MLI Distribution LLC, which merged with and into MLIDC on that date. MLIDC, which is an affiliate of the Company, also acts as the principal underwriter and distributor of other variable annuity contracts and variable life insurance policies issued by the Company and its affiliated companies. The Company reimburses MLIDC for expenses MLIDC incurs in distributing the Contracts (e.g. commissions payable to retail broker-dealers who sell the Contracts). MLIDC does not retain any fees under the Contracts; however, MLIDC may receive 12b-1 fees from the Underlying Funds. MLIDC's principal executive offices are located at 5 Park Plaza, Suite 1900, Irvine, California 92614. MLIDC is registered as a broker-dealer with the Securities and Exchange Commission ("SEC") under the Securities Exchange Act of 1934, as well as the securities commissions in the states in which it operates, and is a member of the National Association of Securities Dealers, Inc. ("NASD"). MLIDC and the Company enter into selling agreements with affiliated and unaffiliated broker-dealers who are registered with the SEC and are members of the NASD, and with entities that may offer the Contracts but are exempt from registration. Applications for the Contract are solicited by registered representatives who are associated persons of such affiliated or unaffiliated broker-dealer firms. Such representatives act as appointed agents of the Company under applicable state insurance law and must be licensed to sell variable insurance products. The Company intends to offer the Contract in all jurisdictions where it is licensed to do business and where the Contract is approved. The Contracts are continuously offered. COMPENSATION. Broker-dealers who have selling agreements with MLIDC and the Company are paid compensation for the promotion and sale of the Contracts. Registered representatives who solicit sales of the Contract typically receive a portion of the compensation payable to the broker-dealer firm. The amount the registered representative receives depends on the agreement between the firm and the registered representative. This agreement may also provide for the payment of other types of cash and non-cash compensation and other benefits. A broker- dealer firm or registered representative of a firm may receive different compensation for selling one product over another and/or may be inclined to favor one product provider over another product provider due to differing compensation rates. We generally pay compensation as a percentage of purchase payments invested in the Contract. Alternatively, we may pay lower compensation on purchase payments but pay periodic asset-based compensation based on all or a portion of the Contract Value. The amount and timing of compensation may vary depending on the selling agreement but is not expected to exceed 7.50% of Purchase Payments (if up-front compensation is paid to registered representatives) and up to 1.50% annually of average Contract Value (if asset-based compensation is paid to registered representatives). We pay American Funds Distributors, Inc., principal underwriter for the American Funds Insurance Series, a percentage of all Purchase Payments allocated to the funds in the American Funds Insurance Series for services it provides in marketing the fund shares in connection with the Contract. The Company and MLIDC have also entered into preferred distribution arrangements with certain broker-dealer firms. These arrangements are sometimes called "shelf space" arrangements. Under these arrangements, the Company and MLIDC pay separate, additional compensation to the broker-dealer firm for services the broker-dealer provides in connection with the distribution of the Company's products. These services may include providing the Company with access to the distribution network of the broker-dealer, the hiring and training of the broker-dealer's sales personnel, the sponsoring of conferences and seminars by the broker-dealer, or general marketing services performed by the broker-dealer. The broker-dealer may also provide other services or incur other costs in connection with distributing the Company's products. These preferred distribution arrangements will not be offered to all broker- dealer firms and the terms of such arrangements may differ between broker-dealer firms. Compensation payable under such arrangements may be based on aggregate, net or anticipated sales of the Contracts, total assets attributable to sales of the Contract by registered representatives of the broker-dealer firm or based on the length of time that a Contract owner has owned the Contract. Any such compensation payable to a broker-dealer firm will be made by MLIDC or the Company out of their own assets and will not result in any additional direct charge to you. Such compensation may cause the broker-dealer firm and its registered representatives to favor the Company's products. The Company and MLIDC have entered into preferred distribution arrangements with their affiliate Tower Square Securities, Inc. and with the unaffiliated broker-dealer firms identified in the Statement of Additional Information. The Company and MLIDC may enter into similar arrangements with their other affiliates MetLife Securities, Inc. and/or Metropolitan Life Insurance Company, Walnut Street Securities, Inc. and New England Securities Corporation. See the "Statement of Additional 43 Information -- DISTRIBUTION AND PRINCIPAL UNDERWRITING AGREEMENT" for a list of the broker-dealer firms that received such additional compensation during 2006, as well as the range of additional compensation paid. The Company and MLIDC have entered into selling agreements with certain broker- dealer firms that have an affiliate that acts as investment adviser or sub- adviser to one or more Underlying Funds which may be offered in the Contracts. These investment advisory firms include Fidelity Management & Research Company, Morgan Stanley Investment Advisers Inc., MetLife Investment Funds Management LLC, MetLife Advisers, LLC and Met Investors Advisory LLC. MetLife Investment Funds Management LLC, MetLife Advisers, LLC and MetLife Investors Advisory LLC are affiliates of the Company. Registered representatives of broker-dealer firms with an affiliated company acting as an adviser or a sub-adviser may favor these Funds when offering the Contracts. SALES BY AFFILIATES OF THE COMPANY. The Company and MLIDC may offer the Contracts through retail broker-dealer firms that are affiliates of the Company, including Tower Square Securities, Inc., MetLife Securities, Inc. and/or Metropolitan Life Insurance Company, Walnut Street Securities, Inc. and New England Securities Corporation. The compensation paid to affiliated broker- dealer firms for sales of the Contracts is generally not expected to exceed, on a present value basis, the percentages described above. These broker-dealer firms pay their registered representatives all or a portion of the commissions received for their sales of Contracts; some firms may retain a portion of commissions. The amount the broker dealer firms pass on to their registered representatives is determined in accordance with their internal compensation programs. These programs may also include other types of cash compensation, such as bonuses, equity awards (such as stock options), training allowances, supplementary salary, financing arrangements, marketing support, medical and other insurance benefits, retirement benefits, non-qualified deferred compensation plans and other benefits. For registered representatives of certain affiliates, the amount of this additional cash compensation is based primarily on the amount of proprietary products sold and serviced by the representative. Proprietary products are those issued by the Company or its affiliates. The managers who supervise these registered representatives may also be entitled to additional cash compensation based on the sale of proprietary products by their representatives. Because the additional cash compensation paid to these registered representatives and their managers is primarily based on sales of proprietary products, these registered representatives and their managers have an incentive to favor the sale of proprietary products over other products issued by non-affiliates. Registered representatives of our affiliates, MetLife Securities, Inc. and/or Metropolitan Life Insurance Company, receive cash payments for the products they sell and service based upon a "gross dealer" concession model. The cash payment is equal to a percentage of the gross dealer concession. For MetLife registered representatives other than those in our MetLife Resources (MLR) Division, the percentage is determined by a formula that takes into consideration the amount of premiums and purchase payments applied to proprietary products that the registered representative sells and services. The percentage could be as high as 100%. (MLR registered representatives receive compensation based upon premiums and purchase payments applied to all products sold and serviced by the representative.) In addition, all MetLife registered representative are entitled to the additional compensation described above based on sales of proprietary products. Because sales of proprietary products are a factor determining the percentage of gross dealer concession and/or the amount of additional compensation to which MetLife registered representatives are entitled, they have an incentive to favor the sale of proprietary products. In addition, because their sales managers' compensation is based on the sales made by the representatives they supervise, these sales managers also have an incentive to favor the sale of proprietary products. The Company's affiliates also offer their registered representatives and their managers non-cash compensation incentives, such as conferences, trips, prizes and awards. Other non-cash compensation payments may be made for other services that are not directly related to the sale of products. These payments may include support services in the form of recruitment and training of personnel, production of promotional materials and similar services. CONFORMITY WITH STATE AND FEDERAL LAWS The laws of the state in which we deliver a contract govern that Contract. Where a state has not approved a contract feature or funding option, it will not be available in that state. Any paid-up annuity, Cash Surrender Value or death benefits that are available under the Contract are not less than the minimum benefits required by the statutes of the state in which we delivered the Contract. We reserve the right to make any changes, including retroactive changes, in the Contract to the extent that the change is required to meet the requirements of any law or regulation issued by any governmental agency to which the Company, the Contract or the Contract Owner is subject. 44 VOTING RIGHTS The Company is the legal owner of the shares of the Underlying Funds. However, we believe that when an Underlying Fund solicits proxies in conjunction with a vote of shareholders we are required to obtain from you and from other owners instructions on how to vote those shares. We will vote all shares, including those we may own on our own behalf, and those where we have not received instructions from Contract Owners, in the same proportion as shares for which we received voting instructions. The effect of this proportional voting is that a small number of contract owners may control the outcome of a vote. Should we determine that we are no longer required to comply with the above, we will vote the shares in our own right. In certain limited circumstances, and when permitted by law, we may disregard voting instructions. If we do disregard voting instructions, a summary of that action and the reasons for such action would be included in the next annual report to Contract Owners. RESTRICTIONS ON FINANCIAL TRANSACTIONS Federal laws designed to counter terrorism and prevent money laundering might, in certain circumstances, require us to block a Contract Owner's ability to make certain transactions and thereby refuse to accept any request for transfers, withdrawals, surrenders, or death benefits, until the instructions are received from the appropriate regulator. We may also be required to provide additional information about you and your Contract to government regulators. LEGAL PROCEEDINGS In the ordinary course of business, the Company, similar to other life insurance companies, is involved in lawsuits (including class action lawsuits), arbitrations and other legal proceedings. Also, from time to time, state and federal regulators or other officials conduct formal and informal examinations or undertake other actions dealing with various aspects of the financial services and insurance industries. In some legal proceedings involving insurers, substantial damages have been sought and/or material settlement payments have been made. It is not possible to predict with certainty the ultimate outcome of any pending legal proceeding or regulatory action. However, the Company does not believe any such action or proceeding will have a material adverse effect upon the Separate Account or upon the ability of MLIDC to perform its contract with the Separate Account or of the Company to meet its obligations under the Contracts. 45 APPENDIX A CONDENSED FINANCIAL INFORMATION - -------------------------------------------------------------------------------- METLIFE OF CT SEPARATE ACCOUNT PF FOR VARIABLE ANNUITIES ACCUMULATION UNIT VALUES (IN DOLLARS) The following Accumulation Unit Value information should be read in conjunction with the Separate Account's audited financial statement and notes, which are included in the Statement of Additional Information. SEPARATE ACCOUNT CHARGES 1.65%
NUMBER OF UNITS UNIT VALUE AT UNIT VALUE AT OUTSTANDING AT PORTFOLIO NAME YEAR BEGINNING OF YEAR END OF YEAR END OF YEAR - -------------- ---- ----------------- ------------- --------------- AIM Variable Insurance Funds AIM V.I. Capital Appreciation Subaccount (Series II) (7/02)....................................... 2006 1.053 1.099 400,096 2005 0.986 1.053 331,592 2004 0.943 0.986 211,974 2003 0.742 0.943 32,460 2002 1.000 0.742 4,254 AIM V.I. Core Equity Subaccount (Series II) (4/06)........................................... 2006 1.000 1.078 394,257 AIM V.I. Premier Equity Subaccount (Series II) (10/02).......................................... 2006 0.904 0.948 -- 2005 0.872 0.904 393,438 2004 0.840 0.872 145,850 2003 0.684 0.840 66,654 2002 1.000 0.684 -- AllianceBernstein Variable Products Series Fund, Inc. AllianceBernstein Global Technology Subaccount (Class B) (5/02)................................. 2006 0.839 0.894 441,618 2005 0.822 0.839 380,702 2004 0.796 0.822 349,075 2003 0.563 0.796 147,453 2002 1.000 0.563 18,093 AllianceBernstein Large-Cap Growth Subaccount (Class B) (3/02)................................. 2006 0.991 0.969 290,807 2005 0.877 0.991 270,629 2004 0.823 0.877 149,949 2003 0.678 0.823 23,283 2002 1.000 0.678 -- American Funds Insurance Series American Funds Global Growth Subaccount (Class 2) (5/03)........................................... 2006 1.620 1.919 5,412,999 2005 1.444 1.620 3,654,265 2004 1.293 1.444 989,563 2003 1.000 1.293 6,878
A-1 ACCUMULATION UNIT VALUES (IN DOLLARS) (CONTINUED) SEPARATE ACCOUNT CHARGES 1.65% (CONTINUED)
NUMBER OF UNITS UNIT VALUE AT UNIT VALUE AT OUTSTANDING AT PORTFOLIO NAME YEAR BEGINNING OF YEAR END OF YEAR END OF YEAR - -------------- ---- ----------------- ------------- --------------- American Funds Growth Subaccount (Class 2) (5/03)........................................... 2006 1.576 1.709 16,757,129 2005 1.379 1.576 12,408,380 2004 1.246 1.379 3,552,042 2003 1.000 1.246 49,980 American Funds Growth-Income Subaccount (Class 2) (5/03)........................................... 2006 1.414 1.602 16,729,364 2005 1.358 1.414 14,433,611 2004 1.251 1.358 4,227,825 2003 1.000 1.251 144,009 Franklin Templeton Variable Insurance Products Trust FTVIPT Mutual Shares Securities Subaccount (Class 2) (5/02)........................................ 2006 1.288 1.500 10,931,246 2005 1.184 1.288 8,267,127 2004 1.069 1.184 3,039,535 2003 0.868 1.069 808,687 2002 1.000 0.868 91,338 FTVIPT Templeton Growth Securities Subaccount (Class 2) (5/02)................................. 2006 1.271 1.523 9,136,905 2005 1.187 1.271 7,840,706 2004 1.040 1.187 3,142,540 2003 0.800 1.040 283,137 2002 1.000 0.800 84,385 Legg Mason Partners Investment Series LMPIS Dividend Strategy Subaccount (2/02)........ 2006 0.890 1.033 4,079,357 2005 0.907 0.890 4,195,706 2004 0.892 0.907 2,303,940 2003 0.734 0.892 573,333 2002 1.009 0.734 93,979 2001 1.000 1.009 -- LMPIS Government Subaccount (Class A) (2/02)..... 2006 1.076 1.102 18,913,530 2005 1.078 1.076 18,738,391 2004 1.063 1.078 11,427,223 2003 1.073 1.063 5,176,659 2002 1.011 1.073 1,077,507 2001 1.000 1.011 --
A-2 ACCUMULATION UNIT VALUES (IN DOLLARS) (CONTINUED) SEPARATE ACCOUNT CHARGES 1.65% (CONTINUED)
NUMBER OF UNITS UNIT VALUE AT UNIT VALUE AT OUTSTANDING AT PORTFOLIO NAME YEAR BEGINNING OF YEAR END OF YEAR END OF YEAR - -------------- ---- ----------------- ------------- --------------- LMPIS Growth and Income Subaccount (3/02)........ 2006 1.084 1.199 9,682,865 2005 1.061 1.084 10,283,101 2004 0.997 1.061 7,189,671 2003 0.778 0.997 2,085,976 2002 1.016 0.778 89,169 2001 1.000 1.016 -- LMPIS Premier Selections All Cap Growth Subaccount (2/02)................................ 2006 1.014 1.070 373,584 2005 0.969 1.014 360,165 2004 0.958 0.969 283,449 2003 0.725 0.958 21,227 2002 1.007 0.725 -- 2001 1.000 1.007 -- Legg Mason Partners Lifestyle Series, Inc. LMPLS Balanced Subaccount (2/02)................. 2006 1.176 1.252 8,453,717 2005 1.166 1.176 8,775,640 2004 1.102 1.166 4,808,815 2003 0.931 1.102 1,116,400 2002 1.012 0.931 472,345 2001 1.000 1.012 -- LMPLS Growth Subaccount (10/02).................. 2006 1.146 1.227 1,284,585 2005 1.112 1.146 1,285,764 2004 1.041 1.112 942,245 2003 0.815 1.041 118,677 2002 1.011 0.815 11,828 2001 1.000 1.011 -- LMPLS High Growth Subaccount (5/02).............. 2006 1.156 1.245 751,287 2005 1.108 1.156 754,963 2004 1.018 1.108 621,593 2003 0.756 1.018 96,453 2002 1.009 0.756 643 2001 1.000 1.009 -- Legg Mason Partners Variable Portfolios V LMPVPV Small Cap Growth Opportunities Subaccount (3/02)........................................... 2006 1.215 1.350 1,706,621 2005 1.178 1.215 1,559,894 2004 1.036 1.178 917,815 2003 0.742 1.036 154,191 2002 1.014 0.742 16,830 2001 1.000 1.014 --
A-3 ACCUMULATION UNIT VALUES (IN DOLLARS) (CONTINUED) SEPARATE ACCOUNT CHARGES 1.65% (CONTINUED)
NUMBER OF UNITS UNIT VALUE AT UNIT VALUE AT OUTSTANDING AT PORTFOLIO NAME YEAR BEGINNING OF YEAR END OF YEAR END OF YEAR - -------------- ---- ----------------- ------------- --------------- Legg Mason Partners Variable Portfolios II LMPVPII Appreciation Subaccount (2/02)........... 2006 1.110 1.253 57,417,246 2005 1.082 1.110 54,199,664 2004 1.011 1.082 29,591,957 2003 0.825 1.011 4,207,195 2002 1.017 0.825 631,993 2001 1.000 1.017 -- LMPVPII Capital and Income Subaccount (5/05)..... 2006 1.075 1.176 17,906,147 2005 1.000 1.075 11,960,583 LMPVPII Fundamental Value Subaccount (2/02)...... 2006 1.177 1.353 56,966,155 2005 1.142 1.177 54,679,708 2004 1.073 1.142 33,185,395 2003 0.787 1.073 6,097,876 2002 1.016 0.787 1,187,609 2001 1.000 1.016 -- Legg Mason Partners Variable Portfolios III, Inc. LMPVPIII Adjustable Rate Income Subaccount (2/04)........................................... 2006 1.001 1.025 1,868,796 2005 0.994 1.001 2,976,647 2004 1.000 0.994 995,190 LMPVPIII Aggressive Growth Subaccount (2/02)..... 2006 1.042 1.115 71,585,101 2005 0.949 1.042 63,751,713 2004 0.877 0.949 35,344,463 2003 0.663 0.877 5,588,355 2002 1.001 0.663 1,431,257 2001 1.000 1.001 -- LMPVPIII High Income Subaccount (2/02)........... 2006 1.314 1.435 15,294,647 2005 1.302 1.314 15,109,514 2004 1.199 1.302 7,854,071 2003 0.956 1.199 1,352,108 2002 1.004 0.956 120,648 2001 1.000 1.004 -- LMPVPIII International All Cap Growth Subaccount (2/02)........................................... 2006 1.164 1.441 2,456,386 2005 1.059 1.164 2,381,924 2004 0.913 1.059 1,243,238 2003 0.729 0.913 244,746 2002 0.997 0.729 53,764 2001 1.000 0.997 --
A-4 ACCUMULATION UNIT VALUES (IN DOLLARS) (CONTINUED) SEPARATE ACCOUNT CHARGES 1.65% (CONTINUED)
NUMBER OF UNITS UNIT VALUE AT UNIT VALUE AT OUTSTANDING AT PORTFOLIO NAME YEAR BEGINNING OF YEAR END OF YEAR END OF YEAR - -------------- ---- ----------------- ------------- --------------- LMPVPIII Large Cap Growth Subaccount (5/02)...... 2006 1.092 1.123 4,657,131 2005 1.055 1.092 4,592,714 2004 1.069 1.055 3,701,753 2003 0.736 1.069 423,768 2002 0.995 0.736 30,375 2001 1.000 0.995 -- LMPVPIII Large Cap Value Subaccount (5/02)....... 2006 1.078 1.254 1,510,863 2005 1.029 1.078 1,384,192 2004 0.946 1.029 509,895 2003 0.753 0.946 131,942 2002 1.027 0.753 16,251 2001 1.000 1.027 -- LMPVPIII Mid Cap Core Subaccount (2/02).......... 2006 1.207 1.363 4,837,334 2005 1.133 1.207 4,558,926 2004 1.043 1.133 3,031,872 2003 0.817 1.043 305,771 2002 1.027 0.817 50,575 2001 1.000 1.027 -- LMPVPIII Money Market Subaccount (3/02).......... 2006 0.990 1.019 7,310,300 2005 0.979 0.990 8,938,799 2004 0.986 0.979 6,243,825 2003 0.996 0.986 1,973,279 2002 1.000 0.996 700,234 LMPVPIII Social Awareness Stock Subaccount (4/02)........................................... 2006 1.016 1.076 2,939,644 2005 0.989 1.016 2,878,590 2004 0.947 0.989 1,702,149 2003 0.747 0.947 610,982 2002 1.010 0.747 216,899 2001 1.000 1.010 -- Legg Mason Partners Variable Portfolios IV LMPVPIV Multiple Discipline Subaccount-All Cap Growth and Value (2/04).......................... 2006 1.038 1.160 3,377,777 2005 1.003 1.038 3,401,260 2004 1.000 1.003 1,521,728 LMPVPIV Multiple Discipline Subaccount-Balanced All Cap Growth and Value (2/04).................. 2006 1.024 1.113 4,140,428 2005 0.999 1.024 4,325,435 2004 1.000 0.999 1,071,806
A-5 ACCUMULATION UNIT VALUES (IN DOLLARS) (CONTINUED) SEPARATE ACCOUNT CHARGES 1.65% (CONTINUED)
NUMBER OF UNITS UNIT VALUE AT UNIT VALUE AT OUTSTANDING AT PORTFOLIO NAME YEAR BEGINNING OF YEAR END OF YEAR END OF YEAR - -------------- ---- ----------------- ------------- --------------- LMPVPIV Multiple Discipline Subaccount-Global All Cap Growth and Value (2/04)...................... 2006 1.078 1.222 2,802,275 2005 1.029 1.078 2,501,134 2004 1.000 1.029 670,023 LMPVPIV Multiple Discipline Subaccount-Large Cap Growth and Value (2/04).......................... 2006 1.018 1.125 1,184,596 2005 1.000 1.018 1,220,644 2004 1.000 1.000 623,702 Met Investors Series Trust MIST BlackRock Large-Cap Core Subaccount (Class A) (4/06)........................................ 2006 1.194 1.264 80,496 MIST Lord Abbett Bond Debenture Subaccount (Class A) (4/06)........................................ 2006 1.254 1.314 7,018,904 MIST Lord Abbett Growth and Income Subaccount (Class B) (4/06)................................. 2006 1.001 1.075 2,199,812 MIST Oppenheimer Capital Appreciation Subaccount (Class B) (4/06)................................. 2006 0.994 1.008 1,897,888 MIST Pioneer Strategic Income Subaccount (Class A) (4/06)........................................ 2006 1.103 1.142 24,420,649 Metropolitan Series Fund, Inc. MSF BlackRock Aggressive Growth Subaccount (Class D) (4/06)........................................ 2006 0.842 0.822 1,997,859 MSF BlackRock Bond Income Subaccount (Class E) (4/06)........................................... 2006 1.076 1.116 13,727,003 MSF MFS(R) Total Return Subaccount (Class F) (4/06)........................................... 2006 1.252 1.338 27,487,362 MSF T. Rowe Price Large Cap Growth Subaccount (Class B) (4/06)................................. 2006 0.998 1.068 1,016,963 MSF Western Asset Management U.S. Government Subaccount (Class A) (4/06) *.................... 2006 0.973 1.006 3,255,793 Oppenheimer Variable Account Funds Oppenheimer Capital Appreciation Subaccount/VA (Service Shares) (4/02).......................... 2006 0.997 1.042 -- 2005 0.966 0.997 1,628,806 2004 0.922 0.966 778,637 2003 0.717 0.922 125,907 2002 1.000 0.717 69,299
A-6 ACCUMULATION UNIT VALUES (IN DOLLARS) (CONTINUED) SEPARATE ACCOUNT CHARGES 1.65% (CONTINUED)
NUMBER OF UNITS UNIT VALUE AT UNIT VALUE AT OUTSTANDING AT PORTFOLIO NAME YEAR BEGINNING OF YEAR END OF YEAR END OF YEAR - -------------- ---- ----------------- ------------- --------------- Oppenheimer Main Street/VA Subaccount (Service Shares) (7/02)................................... 2006 1.104 1.166 -- 2005 1.061 1.104 1,735,645 2004 0.989 1.061 1,202,095 2003 0.795 0.989 374,299 2002 1.000 0.795 13,819 Pioneer Variable Contracts Trust Pioneer Fund VCT Subaccount (Class II) (7/02).... 2006 1.092 1.250 1,007,988 2005 1.048 1.092 847,903 2004 0.960 1.048 353,742 2003 0.791 0.960 92,577 2002 1.000 0.791 35,462 Pioneer Mid Cap Value VCT Subaccount (Class II) (4/02)........................................... 2006 1.497 1.653 7,125,022 2005 1.414 1.497 6,485,147 2004 1.180 1.414 1,790,106 2003 0.875 1.180 202,580 2002 1.000 0.875 31,067 Putnam Variable Trust Putnam VT International Equity Subaccount (Class IB) (8/02)....................................... 2006 1.287 1.616 1,402,929 2005 1.166 1.287 1,163,455 2004 1.020 1.166 665,064 2003 0.807 1.020 149,667 2002 1.000 0.807 3,381 Putnam VT Small Cap Value Subaccount (Class IB) (5/02)........................................... 2006 1.554 1.793 4,650,786 2005 1.476 1.554 4,110,317 2004 1.189 1.476 1,706,259 2003 0.808 1.189 317,621 2002 1.000 0.808 91,626 The Travelers Series Trust Travelers Convertible Securities Subaccount (3/02)........................................... 2006 1.177 1.254 -- 2005 1.192 1.177 6,894,912 2004 1.140 1.192 4,818,421 2003 0.918 1.140 310,836 2002 1.000 0.918 22,585
A-7 ACCUMULATION UNIT VALUES (IN DOLLARS) (CONTINUED) SEPARATE ACCOUNT CHARGES 1.65% (CONTINUED)
NUMBER OF UNITS UNIT VALUE AT UNIT VALUE AT OUTSTANDING AT PORTFOLIO NAME YEAR BEGINNING OF YEAR END OF YEAR END OF YEAR - -------------- ---- ----------------- ------------- --------------- Travelers Managed Income Subaccount (3/02)....... 2006 1.086 1.076 -- 2005 1.089 1.086 13,950,241 2004 1.077 1.089 9,850,096 2003 1.009 1.077 1,885,210 2002 1.000 1.009 184,893 Travelers Mercury Large Cap Core Subaccount (2/02)........................................... 2006 1.125 1.194 -- 2005 1.021 1.125 80,088 2004 0.895 1.021 85,120 2003 0.751 0.895 148,315 2002 1.020 0.751 5,783 2001 1.000 1.020 -- Travelers MFS(R) Mid Cap Growth Subaccount (4/02)........................................... 2006 0.796 0.842 -- 2005 0.785 0.796 1,805,962 2004 0.699 0.785 1,215,305 2003 0.519 0.699 253,862 2002 1.031 0.519 135,394 2001 1.000 1.031 -- Travelers MFS(R) Total Return Subaccount (2/02).. 2006 1.213 1.252 -- 2005 1.198 1.213 25,938,434 2004 1.092 1.198 12,506,074 2003 0.953 1.092 2,953,572 2002 1.023 0.953 433,848 2001 1.000 1.023 -- Travelers Pioneer Strategic Income Subaccount (2/04)........................................... 2006 1.092 1.103 -- 2005 1.071 1.092 21,520,517 2004 1.000 1.071 6,041,372 Travelers U.S. Government Securities Subaccount (5/05)........................................... 2006 1.009 0.973 -- 2005 1.005 1.009 2,162,376 Universal Institutional Funds, Inc. UIF Equity and Income Subaccount (Class II) (5/03)........................................... 2006 1.343 1.488 40,660,405 2005 1.272 1.343 33,653,121 2004 1.159 1.272 10,092,376 2003 1.000 1.159 108,186 UIF U.S. Real Estate Subaccount (Class I) (5/05)........................................... 2006 1.173 1.593 5,413,097 2005 1.019 1.173 2,858,716
A-8 ACCUMULATION UNIT VALUES (IN DOLLARS) (CONTINUED) SEPARATE ACCOUNT CHARGES 1.65% (CONTINUED)
NUMBER OF UNITS UNIT VALUE AT UNIT VALUE AT OUTSTANDING AT PORTFOLIO NAME YEAR BEGINNING OF YEAR END OF YEAR END OF YEAR - -------------- ---- ----------------- ------------- --------------- Van Kampen Life Investment Trust Van Kampen LIT Comstock Subaccount (Class II) (2/02)........................................... 2006 1.230 1.404 33,934,853 2005 1.201 1.230 30,140,222 2004 1.040 1.201 13,621,817 2003 0.808 1.040 2,749,682 2002 1.020 0.808 751,345 2001 1.000 1.020 -- Van Kampen LIT Growth and Income Subaccount (Class II) (3/02)................................ 2006 1.300 1.483 14,225,335 2005 1.204 1.300 12,254,481 2004 1.073 1.204 6,093,021 2003 0.854 1.073 2,115,801 2002 1.019 0.854 349,540 2001 1.000 1.019 -- Van Kampen LIT Strategic Growth Subaccount (Class II) (2/02)....................................... 2006 0.920 0.929 8,656,849 2005 0.869 0.920 7,893,631 2004 0.827 0.869 5,414,821 2003 0.662 0.827 2,061,287 2002 1.000 0.662 735,236 Variable Insurance Products Fund VIP Equity-Income Subaccount (Service Class 2) (2/02)........................................... 2006 1.182 1.395 3,826,350 2005 1.139 1.182 3,388,787 2004 1.041 1.139 1,441,365 2003 0.814 1.041 70,333 2002 1.000 0.814 -- VIP Growth Subaccount (Service Class 2) (7/02)... 2006 0.935 0.974 -- 2005 0.901 0.935 886,287 2004 0.888 0.901 307,238 2003 0.681 0.888 83,046 2002 1.000 0.681 33,149 VIP Mid Cap Subaccount (Service Class 2) (4/02).. 2006 1.726 1.908 6,563,289 2005 1.487 1.726 5,894,141 2004 1.212 1.487 2,008,398 2003 0.892 1.212 148,278 2002 1.000 0.892 39,776
A-9 ACCUMULATION UNIT VALUES (IN DOLLARS) (CONTINUED) SEPARATE ACCOUNT CHARGES 1.90%
NUMBER OF UNITS UNIT VALUE AT UNIT VALUE AT OUTSTANDING AT PORTFOLIO NAME YEAR BEGINNING OF YEAR END OF YEAR END OF YEAR - -------------- ---- ----------------- ------------- --------------- AIM Variable Insurance Funds AIM V.I. Capital Appreciation Subaccount (Series II) (7/02)....................................... 2006 1.043 1.085 161,375 2005 0.979 1.043 168,824 2004 0.938 0.979 105,046 2003 0.740 0.938 -- 2002 1.000 0.740 -- AIM V.I. Core Equity Subaccount (Series II) (4/06)........................................... 2006 1.000 1.076 295,332 AIM V.I. Premier Equity Subaccount (Series II) (10/02).......................................... 2006 0.895 0.938 -- 2005 0.865 0.895 203,928 2004 0.836 0.865 160,205 2003 0.682 0.836 35,524 2002 1.000 0.682 35,524 AllianceBernstein Variable Products Series Fund, Inc. AllianceBernstein Global Technology Subaccount (Class B) (5/02)................................. 2006 0.830 0.883 55,333 2005 0.816 0.830 59,896 2004 0.792 0.816 8,507 2003 0.561 0.792 -- 2002 1.000 0.561 -- AllianceBernstein Large-Cap Growth Subaccount (Class B) (3/02)................................. 2006 0.981 0.957 147,773 2005 0.871 0.981 128,761 2004 0.819 0.871 77,090 2003 0.677 0.819 -- 2002 1.000 0.677 1,910 American Funds Insurance Series American Funds Global Growth Subaccount (Class 2) (5/03)........................................... 2006 1.610 1.902 663,156 2005 1.438 1.610 291,822 2004 1.291 1.438 102,469 2003 1.000 1.291 -- American Funds Growth Subaccount (Class 2) (5/03)........................................... 2006 1.566 1.693 1,593,574 2005 1.373 1.566 1,152,839 2004 1.244 1.373 365,082 2003 1.000 1.244 -- American Funds Growth-Income Subaccount (Class 2) (5/03)........................................... 2006 1.405 1.588 1,382,333 2005 1.353 1.405 1,129,243 2004 1.249 1.353 366,232 2003 1.000 1.249 --
A-10 ACCUMULATION UNIT VALUES (IN DOLLARS) (CONTINUED) SEPARATE ACCOUNT CHARGES 1.90% (CONTINUED)
NUMBER OF UNITS UNIT VALUE AT UNIT VALUE AT OUTSTANDING AT PORTFOLIO NAME YEAR BEGINNING OF YEAR END OF YEAR END OF YEAR - -------------- ---- ----------------- ------------- --------------- Franklin Templeton Variable Insurance Products Trust FTVIPT Mutual Shares Securities Subaccount (Class 2) (5/02)........................................ 2006 1.275 1.481 761,120 2005 1.175 1.275 707,934 2004 1.063 1.175 255,649 2003 0.866 1.063 29,550 2002 1.000 0.866 6,924 FTVIPT Templeton Growth Securities Subaccount (Class 2) (5/02)................................. 2006 1.259 1.505 746,620 2005 1.178 1.259 538,279 2004 1.035 1.178 209,269 2003 0.798 1.035 13,506 2002 1.000 0.798 -- Legg Mason Partners Investment Series LMPIS Dividend Strategy Subaccount (2/02)........ 2006 0.882 1.020 478,557 2005 0.900 0.882 521,259 2004 0.887 0.900 399,585 2003 0.732 0.887 185,683 2002 1.009 0.732 186,448 2001 1.000 1.009 -- LMPIS Government Subaccount (Class A) (2/02)..... 2006 1.066 1.088 2,174,561 2005 1.070 1.066 2,088,879 2004 1.058 1.070 1,113,834 2003 1.071 1.058 373,309 2002 1.011 1.071 185,573 2001 1.000 1.011 -- LMPIS Growth and Income Subaccount (3/02)........ 2006 1.073 1.184 875,896 2005 1.053 1.073 911,116 2004 0.992 1.053 850,123 2003 0.776 0.992 79,305 2002 1.016 0.776 2,505 2001 1.000 1.016 -- LMPIS Premier Selections All Cap Growth Subaccount (2/02)................................ 2006 1.003 1.057 99,241 2005 0.962 1.003 100,359 2004 0.953 0.962 84,407 2003 0.723 0.953 -- 2002 1.007 0.723 -- 2001 1.000 1.007 --
A-11 ACCUMULATION UNIT VALUES (IN DOLLARS) (CONTINUED) SEPARATE ACCOUNT CHARGES 1.90% (CONTINUED)
NUMBER OF UNITS UNIT VALUE AT UNIT VALUE AT OUTSTANDING AT PORTFOLIO NAME YEAR BEGINNING OF YEAR END OF YEAR END OF YEAR - -------------- ---- ----------------- ------------- --------------- Legg Mason Partners Lifestyle Series, Inc. LMPLS Balanced Subaccount (2/02)................. 2006 1.164 1.236 967,907 2005 1.157 1.164 890,935 2004 1.096 1.157 436,460 2003 0.929 1.096 3,362 2002 1.012 0.929 3,316 2001 1.000 1.012 -- LMPLS Growth Subaccount (10/02).................. 2006 1.135 1.212 87,834 2005 1.104 1.135 115,215 2004 1.035 1.104 55,891 2003 0.813 1.035 2,438 2002 1.011 0.813 2,444 2001 1.000 1.011 -- LMPLS High Growth Subaccount (5/02).............. 2006 1.144 1.229 71,795 2005 1.100 1.144 85,145 2004 1.013 1.100 22,216 2003 0.755 1.013 -- 2002 1.008 0.755 -- 2001 1.000 1.008 -- Legg Mason Partners Variable Portfolios V LMPVPV Small Cap Growth Opportunities Subaccount (3/02)........................................... 2006 1.203 1.333 451,641 2005 1.169 1.203 308,987 2004 1.031 1.169 146,485 2003 0.740 1.031 -- 2002 1.014 0.740 -- 2001 1.000 1.014 -- Legg Mason Partners Variable Portfolios II LMPVPII Appreciation Subaccount (2/02)........... 2006 1.099 1.238 6,355,388 2005 1.074 1.099 6,100,306 2004 1.006 1.074 3,219,651 2003 0.823 1.006 301,268 2002 1.017 0.823 150,730 2001 1.000 1.017 -- LMPVPII Capital and Income Subaccount (5/05)..... 2006 1.073 1.171 2,103,309 2005 1.000 1.073 1,176,130
A-12 ACCUMULATION UNIT VALUES (IN DOLLARS) (CONTINUED) SEPARATE ACCOUNT CHARGES 1.90% (CONTINUED)
NUMBER OF UNITS UNIT VALUE AT UNIT VALUE AT OUTSTANDING AT PORTFOLIO NAME YEAR BEGINNING OF YEAR END OF YEAR END OF YEAR - -------------- ---- ----------------- ------------- --------------- LMPVPII Fundamental Value Subaccount (2/02)...... 2006 1.165 1.336 6,737,226 2005 1.134 1.165 6,390,231 2004 1.068 1.134 3,672,945 2003 0.785 1.068 138,029 2002 1.016 0.785 96,176 2001 1.000 1.016 -- Legg Mason Partners Variable Portfolios III, Inc. LMPVPIII Adjustable Rate Income Subaccount (2/04)........................................... 2006 0.996 1.018 229,486 2005 0.992 0.996 547,773 2004 1.000 0.992 392,451 LMPVPIII Aggressive Growth Subaccount (2/02)..... 2006 1.032 1.101 8,356,321 2005 0.942 1.032 7,532,695 2004 0.873 0.942 4,280,561 2003 0.661 0.873 320,535 2002 1.001 0.661 216,871 2001 1.000 1.001 -- LMPVPIII High Income Subaccount (2/02)........... 2006 1.301 1.417 1,775,375 2005 1.292 1.301 1,619,152 2004 1.192 1.292 947,512 2003 0.953 1.192 45,868 2002 1.004 0.953 21,504 2001 1.000 1.004 -- LMPVPIII International All Cap Growth Subaccount (2/02)........................................... 2006 1.152 1.423 604,078 2005 1.051 1.152 596,957 2004 0.909 1.051 246,040 2003 0.727 0.909 24,970 2002 1.000 0.727 16,692 2002 0.997 1.000 -- 2001 1.000 0.997 -- LMPVPIII Large Cap Growth Subaccount (5/02)...... 2006 1.081 1.109 526,286 2005 1.047 1.081 578,542 2004 1.063 1.047 445,771 2003 0.734 1.063 7,128 2002 0.995 0.734 3,932 2001 1.000 0.995 --
A-13 ACCUMULATION UNIT VALUES (IN DOLLARS) (CONTINUED) SEPARATE ACCOUNT CHARGES 1.90% (CONTINUED)
NUMBER OF UNITS UNIT VALUE AT UNIT VALUE AT OUTSTANDING AT PORTFOLIO NAME YEAR BEGINNING OF YEAR END OF YEAR END OF YEAR - -------------- ---- ----------------- ------------- --------------- LMPVPIII Large Cap Value Subaccount (5/02)....... 2006 1.067 1.238 198,066 2005 1.021 1.067 201,133 2004 0.941 1.021 121,128 2003 0.751 0.941 -- 2002 1.027 0.751 -- 2001 1.000 1.027 -- LMPVPIII Mid Cap Core Subaccount (2/02).......... 2006 1.195 1.346 553,372 2005 1.124 1.195 508,747 2004 1.038 1.124 231,571 2003 0.815 1.038 32,618 2002 1.027 0.815 7,852 2001 1.000 1.027 -- LMPVPIII Money Market Subaccount (3/02).......... 2006 0.980 1.006 1,161,331 2005 0.971 0.980 1,506,215 2004 0.981 0.971 930,200 2003 0.994 0.981 24,646 2002 1.000 0.994 14,481 LMPVPIII Social Awareness Stock Subaccount (4/02)........................................... 2006 1.005 1.062 149,491 2005 0.982 1.005 207,911 2004 0.942 0.982 195,977 2003 0.745 0.942 8,238 2002 1.010 0.745 8,238 2001 1.000 1.010 -- Legg Mason Partners Variable Portfolios IV LMPVPIV Multiple Discipline Subaccount-All Cap Growth and Value (2/04).......................... 2006 1.033 1.152 174,980 2005 1.000 1.033 183,189 2004 1.000 1.000 75,446 LMPVPIV Multiple Discipline Subaccount-Balanced All Cap Growth and Value (2/04).................. 2006 1.020 1.105 557,384 2005 0.997 1.020 566,640 2004 1.000 0.997 142,461 LMPVPIV Multiple Discipline Subaccount-Global All Cap Growth and Value (2/04)...................... 2006 1.073 1.213 358,579 2005 1.026 1.073 342,927 2004 1.000 1.026 58,989
A-14 ACCUMULATION UNIT VALUES (IN DOLLARS) (CONTINUED) SEPARATE ACCOUNT CHARGES 1.90% (CONTINUED)
NUMBER OF UNITS UNIT VALUE AT UNIT VALUE AT OUTSTANDING AT PORTFOLIO NAME YEAR BEGINNING OF YEAR END OF YEAR END OF YEAR - -------------- ---- ----------------- ------------- --------------- LMPVPIV Multiple Discipline Subaccount-Large Cap Growth and Value (2/04).......................... 2006 1.014 1.117 121,990 2005 0.998 1.014 177,059 2004 1.000 0.998 80,820 Met Investors Series Trust MIST BlackRock Large-Cap Core Subaccount (Class A) (4/06)........................................ 2006 1.181 1.248 5,213 MIST Lord Abbett Bond Debenture Subaccount (Class A) (4/06)........................................ 2006 1.241 1.298 895,852 MIST Lord Abbett Growth and Income Subaccount (Class B) (4/06)................................. 2006 1.001 1.074 394,695 MIST Oppenheimer Capital Appreciation Subaccount (Class B) (4/06)................................. 2006 0.994 1.006 391,836 MIST Pioneer Strategic Income Subaccount (Class A) (4/06)........................................ 2006 1.097 1.134 2,524,024 Metropolitan Series Fund, Inc. MSF BlackRock Aggressive Growth Subaccount (Class D) (4/06)........................................ 2006 0.833 0.811 421,407 MSF BlackRock Bond Income Subaccount (Class E) (4/06)........................................... 2006 1.064 1.102 1,260,190 MSF MFS(R) Total Return Subaccount (Class F) (4/06)........................................... 2006 1.238 1.321 2,404,225 MSF T. Rowe Price Large Cap Growth Subaccount (Class B) (4/06)................................. 2006 0.998 1.067 256,247 MSF Western Asset Management U.S. Government Subaccount (Class A) (4/06) *.................... 2006 0.970 1.002 484,312 Oppenheimer Variable Account Funds Oppenheimer Capital Appreciation Subaccount/VA (Service Shares) (4/02).......................... 2006 0.987 1.031 -- 2005 0.959 0.987 364,731 2004 0.917 0.959 219,546 2003 0.715 0.917 2,996 2002 1.000 0.715 -- Oppenheimer Main Street/VA Subaccount (Service Shares) (7/02)................................... 2006 1.093 1.154 -- 2005 1.053 1.093 301,029 2004 0.984 1.053 174,458 2003 0.793 0.984 11,371 2002 1.000 0.793 11,239
A-15 ACCUMULATION UNIT VALUES (IN DOLLARS) (CONTINUED) SEPARATE ACCOUNT CHARGES 1.90% (CONTINUED)
NUMBER OF UNITS UNIT VALUE AT UNIT VALUE AT OUTSTANDING AT PORTFOLIO NAME YEAR BEGINNING OF YEAR END OF YEAR END OF YEAR - -------------- ---- ----------------- ------------- --------------- Pioneer Variable Contracts Trust Pioneer Fund VCT Subaccount (Class II) (7/02).... 2006 1.081 1.234 318,450 2005 1.040 1.081 287,728 2004 0.956 1.040 112,612 2003 0.789 0.956 20,592 2002 1.000 0.789 -- Pioneer Mid Cap Value VCT Subaccount (Class II) (4/02)........................................... 2006 1.482 1.633 969,085 2005 1.403 1.482 933,821 2004 1.175 1.403 294,695 2003 0.873 1.175 19,751 2002 1.000 0.873 19,890 Putnam Variable Trust Putnam VT International Equity Subaccount (Class IB) (8/02)....................................... 2006 1.274 1.596 187,911 2005 1.157 1.274 114,947 2004 1.015 1.157 101,688 2003 0.805 1.015 -- 2002 1.000 0.805 -- Putnam VT Small Cap Value Subaccount (Class IB) (5/02)........................................... 2006 1.539 1.771 913,185 2005 1.465 1.539 816,143 2004 1.183 1.465 205,603 2003 0.806 1.183 32,632 2002 1.000 0.806 30,261 The Travelers Series Trust Travelers Convertible Securities Subaccount (3/02)........................................... 2006 1.165 1.241 -- 2005 1.183 1.165 702,143 2004 1.135 1.183 319,270 2003 0.916 1.135 2,073 2002 1.000 0.916 -- Travelers Managed Income Subaccount (3/02)....... 2006 1.075 1.064 -- 2005 1.081 1.075 1,363,245 2004 1.071 1.081 923,519 2003 1.007 1.071 35,241 2002 1.000 1.007 5,025
A-16 ACCUMULATION UNIT VALUES (IN DOLLARS) (CONTINUED) SEPARATE ACCOUNT CHARGES 1.90% (CONTINUED)
NUMBER OF UNITS UNIT VALUE AT UNIT VALUE AT OUTSTANDING AT PORTFOLIO NAME YEAR BEGINNING OF YEAR END OF YEAR END OF YEAR - -------------- ---- ----------------- ------------- --------------- Travelers Mercury Large Cap Core Subaccount (2/02)........................................... 2006 1.114 1.181 -- 2005 1.013 1.114 5,610 2004 0.891 1.013 29,057 2003 0.749 0.891 32,180 2002 1.020 0.749 6,523 2001 1.000 1.020 -- Travelers MFS(R) Mid Cap Growth Subaccount (4/02)........................................... 2006 0.788 0.833 -- 2005 0.779 0.788 450,317 2004 0.696 0.779 290,136 2003 0.517 0.696 -- 2002 1.031 0.517 -- 2001 1.000 1.031 -- Travelers MFS(R) Total Return Subaccount (2/02).. 2006 1.201 1.238 -- 2005 1.189 1.201 2,172,182 2004 1.087 1.189 915,568 2003 0.951 1.087 114,345 2002 1.023 0.951 42,663 2001 1.000 1.023 -- Travelers Pioneer Strategic Income Subaccount (2/04)........................................... 2006 1.087 1.097 -- 2005 1.069 1.087 2,444,255 2004 1.000 1.069 1,228,205 Travelers U.S. Government Securities Subaccount (5/05)........................................... 2006 1.008 0.970 -- 2005 1.004 1.008 238,562 Universal Institutional Funds, Inc. UIF Equity and Income Subaccount (Class II) (5/03)........................................... 2006 1.335 1.474 3,767,295 2005 1.267 1.335 3,140,206 2004 1.158 1.267 774,400 2003 1.000 1.158 -- UIF U.S. Real Estate Subaccount (Class I) (5/05)........................................... 2006 1.171 1.587 938,458 2005 1.019 1.171 427,330 Van Kampen Life Investment Trust Van Kampen LIT Comstock Subaccount (Class II) (2/02)........................................... 2006 1.218 1.386 4,369,683 2005 1.192 1.218 3,821,493 2004 1.034 1.192 1,623,320 2003 0.806 1.034 144,654 2002 1.020 0.806 155,076 2001 1.000 1.020 --
A-17 ACCUMULATION UNIT VALUES (IN DOLLARS) (CONTINUED) SEPARATE ACCOUNT CHARGES 1.90% (CONTINUED)
NUMBER OF UNITS UNIT VALUE AT UNIT VALUE AT OUTSTANDING AT PORTFOLIO NAME YEAR BEGINNING OF YEAR END OF YEAR END OF YEAR - -------------- ---- ----------------- ------------- --------------- Van Kampen LIT Growth and Income Subaccount (Class II) (3/02)................................ 2006 1.287 1.464 2,362,101 2005 1.195 1.287 1,889,263 2004 1.067 1.195 889,669 2003 0.852 1.067 152,148 2002 1.019 0.852 144,121 2001 1.000 1.019 -- Van Kampen LIT Strategic Growth Subaccount (Class II) (2/02)....................................... 2006 0.911 0.917 1,594,820 2005 0.863 0.911 1,477,962 2004 0.823 0.863 592,605 2003 0.660 0.823 100,020 2002 1.000 0.660 99,270 Variable Insurance Products Fund VIP Equity-Income Subaccount (Service Class 2) (2/02)........................................... 2006 1.171 1.378 335,620 2005 1.130 1.171 221,702 2004 1.035 1.130 52,352 2003 0.812 1.035 2,323 2002 1.000 0.812 2,133 VIP Growth Subaccount (Service Class 2) (7/02)... 2006 0.926 0.963 -- 2005 0.894 0.926 278,574 2004 0.884 0.894 160,354 2003 0.680 0.884 -- 2002 1.000 0.680 -- VIP Mid Cap Subaccount (Service Class 2) (4/02).. 2006 1.709 1.885 1,023,785 2005 1.476 1.709 880,194 2004 1.206 1.476 282,598 2003 0.889 1.206 19,424 2002 1.000 0.889 26,016
* We are currently waiving a portion of the Mortality and Expense Risk charge for this Subaccount. Please see "Fee Table -- Annual Separate Account Charges" for more information. The date next to each funding option name reflects the date money first came into the funding option through the Separate Account. Funding options not listed above had no amounts allocated to them or were not available as of December 31, 2006. Number of Units Outstanding at End of Year may include units for Contract Owners in payout phase, where appropriate. If an accumulation unit value has no assets and units across all sub-accounts within the Separate Account, and has had no assets and units for the history displayed on the Condensed Financial Information in the past, then it may not be displayed. A-18 Variable Funding Option mergers and substitutions that occurred between January 1, 2005 and December 31, 2006, are displayed below. Please see Appendix C for more information on Variable Funding Option name changes, mergers and substitutions. Effective on or about 05/01/2006, AIM Variable Insurance Fund-AIM VI Premier Equity Fund merged into AIM Variable Insurance Fund-AIM VI Core Equity Fund and is no longer available as a funding option. Effective on or about 05/01/2006, Oppenheimer Variable Account Funds-Oppenheimer Capital Appreciation Fund/VA was replaced by Met Investors Series Trust- Oppenheimer Capital Appreciation Portfolio and is no longer available as a funding option. Effective on or about 05/01/2006, Oppenheimer Variable Account Funds-Oppenheimer Main Street Fund/VA was replaced by Met Investors Series Trust-Lord Abbett Growth and Income Portfolio and is no longer available as a funding option. Effective on or about 05/01/2006, The Travelers Series Trust-Convertible Securities Portfolio merged into Met Investors Series Trust-Lord Abbett Bond Debenture Portfolio and is no longer available as a funding option. Effective on or about 05/01/2006, The Travelers Series Trust-Mercury Large Cap Core Portfolio merged into Met Investors Series Trust-Mercury Large-Cap Core Portfolio and is no longer available as a funding option. Effective on or about 05/01/2006, The Travelers Series Trust-MFS(R) Mid Cap Growth Portfolio merged into Metropolitan Series Fund, Inc.-BlackRock Aggressive Growth Portfolio and is no longer available as a funding option. Effective on or about 05/01/2006, The Travelers Series Trust-MFS(R) Total Return Portfolio merged into Metropolitan Series Fund, Inc.-MFS(R) Total Return Portfolio and is no longer available as a funding option. Effective on or about 05/01/2006, The Travelers Series Trust-Pioneer Strategic Income Portfolio merged into Met Investors Series Trust-Pioneer Strategic Income Portfolio and is no longer available as a funding option. Effective on or about 05/01/2006, The Travelers Series Trust-Travelers Managed Income Portfolio merged into Metropolitan Series Fund, Inc.-BlackRock Bond Income Portfolio and is no longer available as a funding option. Effective on or about 05/01/2006, The Travelers Series Trust-U.S. Government Securities Portfolio merged into Metropolitan Series Fund, Inc.-Western Asset Management U.S. Government Portfolio and is no longer available as a funding option. Effective on or about 05/01/2006, Variable Insurance Products Fund-VIP Growth Portfolio was replaced by Metropolitan Series Fund, Inc.-T. Rowe Price Large Cap Growth Portfolio and is no longer available as a funding option. A-19 THIS PAGE INTENTIONALLY LEFT BLANK. APPENDIX B CONDENSED FINANCIAL INFORMATION - -------------------------------------------------------------------------------- METLIFE OF CT SEPARATE ACCOUNT PF II FOR VARIABLE ANNUITIES ACCUMULATION UNIT VALUES (IN DOLLARS) The following Accumulation Unit Value information should be read in conjunction with the Separate Account's audited financial statement and notes, which are included in the Statement of Additional Information. SEPARATE ACCOUNT CHARGES 1.65%
NUMBER OF UNITS UNIT VALUE AT UNIT VALUE AT OUTSTANDING AT PORTFOLIO NAME YEAR BEGINNING OF YEAR END OF YEAR END OF YEAR - -------------- ---- ----------------- ------------- --------------- AIM Variable Insurance Funds AIM V.I. Capital Appreciation Subaccount (Series II) (1/02)....................................... 2006 1.053 1.099 1,154,270 2005 0.986 1.053 1,092,486 2004 0.943 0.986 1,077,607 2003 0.742 0.943 761,864 2002 1.000 0.742 381,270 AIM V.I. Core Equity Subaccount (Series II) (4/06)........................................... 2006 1.000 1.078 1,418,171 AIM V.I. Premier Equity Subaccount (Series II) (1/02)........................................... 2006 0.904 0.948 -- 2005 0.872 0.904 1,299,525 2004 0.840 0.872 1,085,405 2003 0.684 0.840 932,004 2002 1.000 0.684 607,232 AllianceBernstein Variable Products Series Fund, Inc. AllianceBernstein Global Technology Subaccount (Class B) (1/02)................................. 2006 0.839 0.894 1,414,842 2005 0.822 0.839 1,620,215 2004 0.796 0.822 1,559,555 2003 0.563 0.796 1,174,255 2002 1.000 0.563 267,834 AllianceBernstein Large-Cap Growth Subaccount (Class B) (1/02)................................. 2006 0.991 0.969 1,394,296 2005 0.877 0.991 1,203,723 2004 0.823 0.877 1,223,901 2003 0.678 0.823 949,919 2002 1.000 0.678 319,132 American Funds Insurance Series American Funds Global Growth Subaccount (Class 2) (6/03)........................................... 2006 1.620 1.919 7,432,127 2005 1.444 1.620 4,389,212 2004 1.293 1.444 2,257,467 2003 1.072 1.293 575,003
B-1 ACCUMULATION UNIT VALUES (IN DOLLARS) (CONTINUED) SEPARATE ACCOUNT CHARGES 1.65% (CONTINUED)
NUMBER OF UNITS UNIT VALUE AT UNIT VALUE AT OUTSTANDING AT PORTFOLIO NAME YEAR BEGINNING OF YEAR END OF YEAR END OF YEAR - -------------- ---- ----------------- ------------- --------------- American Funds Growth Subaccount (Class 2) (6/03)........................................... 2006 1.576 1.709 22,394,851 2005 1.379 1.576 16,387,765 2004 1.246 1.379 7,513,013 2003 1.113 1.246 1,844,532 American Funds Growth-Income Subaccount (Class 2) (6/03)........................................... 2006 1.414 1.602 18,427,635 2005 1.358 1.414 15,653,534 2004 1.251 1.358 8,585,788 2003 1.080 1.251 2,201,925 Franklin Templeton Variable Insurance Products Trust FTVIPT Mutual Shares Securities Subaccount (Class 2) (1/02)........................................ 2006 1.288 1.500 36,284,203 2005 1.184 1.288 30,290,245 2004 1.069 1.184 16,331,713 2003 0.868 1.069 7,568,125 2002 1.000 0.868 1,962,284 FTVIPT Templeton Growth Securities Subaccount (Class 2) (1/02)................................. 2006 1.271 1.523 18,297,244 2005 1.187 1.271 15,288,996 2004 1.040 1.187 9,039,659 2003 0.800 1.040 4,994,641 2002 1.000 0.800 2,095,522 Legg Mason Partners Investment Series LMPIS Dividend Strategy Subaccount (2/02)........ 2006 0.890 1.033 13,714,100 2005 0.907 0.890 15,088,397 2004 0.892 0.907 13,921,645 2003 0.734 0.892 12,898,299 2002 1.009 0.734 8,588,329 2001 1.000 1.009 -- LMPIS Government Subaccount (Class A) (2/02)..... 2006 1.076 1.102 62,666,727 2005 1.078 1.076 68,499,731 2004 1.063 1.078 68,341,140 2003 1.073 1.063 63,462,120 2002 1.011 1.073 36,659,033 2001 1.000 1.011 --
B-2 ACCUMULATION UNIT VALUES (IN DOLLARS) (CONTINUED) SEPARATE ACCOUNT CHARGES 1.65% (CONTINUED)
NUMBER OF UNITS UNIT VALUE AT UNIT VALUE AT OUTSTANDING AT PORTFOLIO NAME YEAR BEGINNING OF YEAR END OF YEAR END OF YEAR - -------------- ---- ----------------- ------------- --------------- LMPIS Growth and Income Subaccount (2/02)........ 2006 1.084 1.199 21,713,916 2005 1.061 1.084 24,074,224 2004 0.997 1.061 24,352,581 2003 0.778 0.997 17,476,253 2002 1.016 0.778 8,370,704 2001 1.000 1.016 -- LMPIS Premier Selections All Cap Growth Subaccount (2/02)................................ 2006 1.014 1.070 1,260,889 2005 0.969 1.014 1,390,977 2004 0.958 0.969 1,488,652 2003 0.725 0.958 884,681 2002 1.007 0.725 388,569 2001 1.000 1.007 -- Legg Mason Partners Lifestyle Series, Inc. LMPLS Balanced Subaccount (2/02)................. 2006 1.176 1.252 26,545,866 2005 1.166 1.176 29,448,631 2004 1.102 1.166 27,808,469 2003 0.931 1.102 18,990,148 2002 1.012 0.931 9,889,468 2001 1.000 1.012 -- LMPLS Growth Subaccount (2/02)................... 2006 1.146 1.227 3,895,427 2005 1.112 1.146 4,282,070 2004 1.041 1.112 4,445,270 2003 0.815 1.041 3,599,500 2002 1.011 0.815 2,042,002 2001 1.000 1.011 -- LMPLS High Growth Subaccount (3/02).............. 2006 1.156 1.245 2,040,378 2005 1.108 1.156 2,298,313 2004 1.018 1.108 2,060,321 2003 0.756 1.018 1,169,683 2002 1.009 0.756 466,499 2001 1.000 1.009 -- Legg Mason Partners Variable Portfolios V LMPVPV Small Cap Growth Opportunities Subaccount (2/02)........................................... 2006 1.215 1.350 5,306,600 2005 1.178 1.215 4,909,438 2004 1.036 1.178 4,782,328 2003 0.742 1.036 3,203,973 2002 1.014 0.742 1,595,685 2001 1.000 1.014 --
B-3 ACCUMULATION UNIT VALUES (IN DOLLARS) (CONTINUED) SEPARATE ACCOUNT CHARGES 1.65% (CONTINUED)
NUMBER OF UNITS UNIT VALUE AT UNIT VALUE AT OUTSTANDING AT PORTFOLIO NAME YEAR BEGINNING OF YEAR END OF YEAR END OF YEAR - -------------- ---- ----------------- ------------- --------------- Legg Mason Partners Variable Portfolios II LMPVPII Appreciation Subaccount (2/02)........... 2006 1.110 1.253 149,172,572 2005 1.082 1.110 155,142,727 2004 1.011 1.082 137,920,833 2003 0.825 1.011 88,035,333 2002 1.017 0.825 35,777,863 2001 1.000 1.017 -- LMPVPII Capital and Income Subaccount (5/05)..... 2006 1.075 1.176 26,099,559 2005 1.000 1.075 18,327,731 LMPVPII Fundamental Value Subaccount (2/02)...... 2006 1.177 1.353 163,498,411 2005 1.142 1.177 174,576,320 2004 1.073 1.142 160,011,735 2003 0.787 1.073 107,576,060 2002 1.016 0.787 51,708,377 2001 1.000 1.016 -- Legg Mason Partners Variable Portfolios III, Inc. LMPVPIII Adjustable Rate Income Subaccount (2/04)........................................... 2006 1.001 1.025 2,454,655 2005 0.994 1.001 2,641,727 2004 1.000 0.994 1,103,173 LMPVPIII Aggressive Growth Subaccount (2/02)..... 2006 1.042 1.115 194,859,317 2005 0.949 1.042 198,614,689 2004 0.877 0.949 178,313,906 2003 0.663 0.877 115,850,423 2002 1.001 0.663 53,566,170 2001 1.000 1.001 -- LMPVPIII High Income Subaccount (2/02)........... 2006 1.314 1.435 33,590,399 2005 1.302 1.314 35,168,444 2004 1.199 1.302 29,278,952 2003 0.956 1.199 16,909,642 2002 1.004 0.956 5,535,785 2001 1.000 1.004 -- LMPVPIII International All Cap Growth Subaccount (2/02)........................................... 2006 1.164 1.441 6,986,401 2005 1.059 1.164 7,358,772 2004 0.913 1.059 6,739,520 2003 0.729 0.913 4,907,935 2002 0.997 0.729 2,163,754 2001 1.000 0.997 --
B-4 ACCUMULATION UNIT VALUES (IN DOLLARS) (CONTINUED) SEPARATE ACCOUNT CHARGES 1.65% (CONTINUED)
NUMBER OF UNITS UNIT VALUE AT UNIT VALUE AT OUTSTANDING AT PORTFOLIO NAME YEAR BEGINNING OF YEAR END OF YEAR END OF YEAR - -------------- ---- ----------------- ------------- --------------- LMPVPIII Large Cap Growth Subaccount (2/02)...... 2006 1.092 1.123 16,323,187 2005 1.055 1.092 17,343,718 2004 1.069 1.055 17,325,882 2003 0.736 1.069 11,429,389 2002 0.995 0.736 3,199,210 2001 1.000 0.995 -- LMPVPIII Large Cap Value Subaccount (2/02)....... 2006 1.078 1.254 5,409,449 2005 1.029 1.078 5,473,119 2004 0.946 1.029 4,853,022 2003 0.753 0.946 4,042,327 2002 1.027 0.753 1,545,399 2001 1.000 1.027 -- LMPVPIII Mid Cap Core Subaccount (2/02).......... 2006 1.207 1.363 17,120,209 2005 1.133 1.207 18,819,813 2004 1.043 1.133 18,624,981 2003 0.817 1.043 15,085,591 2002 1.027 0.817 7,958,407 2001 1.000 1.027 -- LMPVPIII Money Market Subaccount (2/02).......... 2006 0.990 1.019 27,994,003 2005 0.979 0.990 34,665,549 2004 0.986 0.979 39,228,751 2003 0.996 0.986 34,695,987 2002 1.000 0.996 27,866,936 LMPVPIII Social Awareness Stock Subaccount (2/02)........................................... 2006 1.016 1.076 7,140,102 2005 0.989 1.016 8,196,156 2004 0.947 0.989 8,618,425 2003 0.747 0.947 6,309,864 2002 1.010 0.747 3,231,899 2001 1.000 1.010 -- Legg Mason Partners Variable Portfolios IV LMPVPIV Multiple Discipline Subaccount-All Cap Growth and Value (3/04).......................... 2006 1.038 1.160 3,264,696 2005 1.003 1.038 3,362,905 2004 0.997 1.003 2,153,379 LMPVPIV Multiple Discipline Subaccount-Balanced All Cap Growth and Value (3/04).................. 2006 1.024 1.113 3,630,658 2005 0.999 1.024 3,626,249 2004 0.963 0.999 1,898,313
B-5 ACCUMULATION UNIT VALUES (IN DOLLARS) (CONTINUED) SEPARATE ACCOUNT CHARGES 1.65% (CONTINUED)
NUMBER OF UNITS UNIT VALUE AT UNIT VALUE AT OUTSTANDING AT PORTFOLIO NAME YEAR BEGINNING OF YEAR END OF YEAR END OF YEAR - -------------- ---- ----------------- ------------- --------------- LMPVPIV Multiple Discipline Subaccount-Global All Cap Growth and Value (2/04)...................... 2006 1.078 1.222 2,058,227 2005 1.029 1.078 1,942,557 2004 0.987 1.029 971,238 LMPVPIV Multiple Discipline Subaccount-Large Cap Growth and Value (4/04).......................... 2006 1.018 1.125 710,153 2005 1.000 1.018 812,122 2004 0.982 1.000 687,609 Met Investors Series Trust MIST BlackRock Large-Cap Core Subaccount (Class A) (4/06)........................................ 2006 1.194 1.264 2,563,110 MIST Lord Abbett Bond Debenture Subaccount (Class A) (4/06)........................................ 2006 1.254 1.314 16,621,877 MIST Lord Abbett Growth and Income Subaccount (Class B) (4/06)................................. 2006 1.001 1.075 6,661,735 MIST Oppenheimer Capital Appreciation Subaccount (Class B) (4/06)................................. 2006 0.994 1.008 5,375,003 MIST Pioneer Strategic Income Subaccount (Class A) (4/06)........................................ 2006 1.103 1.142 32,547,006 Metropolitan Series Fund, Inc. MSF BlackRock Aggressive Growth Subaccount (Class D) (4/06)........................................ 2006 0.842 0.822 6,012,058 MSF BlackRock Bond Income Subaccount (Class E) (4/06)........................................... 2006 1.076 1.116 33,211,682 MSF MFS(R) Total Return Subaccount (Class F) (4/06)........................................... 2006 1.252 1.338 65,891,290 MSF T. Rowe Price Large Cap Growth Subaccount (Class B) (4/06)................................. 2006 0.998 1.068 2,763,617 MSF Western Asset Management U.S. Government Subaccount (Class A) (4/06) *.................... 2006 0.973 1.006 7,266,256 Oppenheimer Variable Account Funds Oppenheimer Capital Appreciation Subaccount/VA (Service Shares) (1/02).......................... 2006 0.997 1.042 -- 2005 0.966 0.997 5,379,839 2004 0.922 0.966 5,141,151 2003 0.717 0.922 4,008,783 2002 1.000 0.717 1,764,279
B-6 ACCUMULATION UNIT VALUES (IN DOLLARS) (CONTINUED) SEPARATE ACCOUNT CHARGES 1.65% (CONTINUED)
NUMBER OF UNITS UNIT VALUE AT UNIT VALUE AT OUTSTANDING AT PORTFOLIO NAME YEAR BEGINNING OF YEAR END OF YEAR END OF YEAR - -------------- ---- ----------------- ------------- --------------- Oppenheimer Main Street/VA Subaccount (Service Shares) (1/02)................................... 2006 1.104 1.166 -- 2005 1.061 1.104 6,413,447 2004 0.989 1.061 6,508,028 2003 0.795 0.989 5,471,650 2002 1.000 0.795 2,403,025 Pioneer Variable Contracts Trust Pioneer Fund VCT Subaccount (Class II) (1/02).... 2006 1.092 1.250 2,178,405 2005 1.048 1.092 2,162,951 2004 0.960 1.048 1,995,491 2003 0.791 0.960 1,358,575 2002 1.000 0.791 639,742 Pioneer Mid Cap Value VCT Subaccount (Class II) (1/02)........................................... 2006 1.497 1.653 12,464,001 2005 1.414 1.497 11,632,085 2004 1.180 1.414 6,608,509 2003 0.875 1.180 3,512,972 2002 1.000 0.875 1,786,015 Putnam Variable Trust Putnam VT International Equity Subaccount (Class IB) (1/02)....................................... 2006 1.287 1.616 3,365,097 2005 1.166 1.287 2,744,099 2004 1.020 1.166 2,190,698 2003 0.807 1.020 1,815,234 2002 1.000 0.807 922,947 Putnam VT Small Cap Value Subaccount (Class IB) (1/02)........................................... 2006 1.554 1.793 9,862,779 2005 1.476 1.554 8,606,888 2004 1.189 1.476 6,176,092 2003 0.808 1.189 3,503,133 2002 1.000 0.808 1,871,036 The Travelers Series Trust Travelers Convertible Securities Subaccount (1/02)........................................... 2006 1.177 1.254 -- 2005 1.192 1.177 18,097,453 2004 1.140 1.192 18,257,454 2003 0.918 1.140 10,471,039 2002 1.000 0.918 3,886,675
B-7 ACCUMULATION UNIT VALUES (IN DOLLARS) (CONTINUED) SEPARATE ACCOUNT CHARGES 1.65% (CONTINUED)
NUMBER OF UNITS UNIT VALUE AT UNIT VALUE AT OUTSTANDING AT PORTFOLIO NAME YEAR BEGINNING OF YEAR END OF YEAR END OF YEAR - -------------- ---- ----------------- ------------- --------------- Travelers Managed Income Subaccount (1/02)....... 2006 1.086 1.076 -- 2005 1.089 1.086 37,926,777 2004 1.077 1.089 37,028,523 2003 1.009 1.077 27,700,968 2002 1.000 1.009 8,413,347 Travelers Mercury Large Cap Core Subaccount (2/02)........................................... 2006 1.125 1.194 -- 2005 1.021 1.125 2,898,122 2004 0.895 1.021 3,462,259 2003 0.751 0.895 3,278,969 2002 1.020 0.751 2,035,876 2001 1.000 1.020 -- Travelers MFS(R) Mid Cap Growth Subaccount (2/02)........................................... 2006 0.796 0.842 -- 2005 0.785 0.796 6,679,817 2004 0.699 0.785 6,450,235 2003 0.519 0.699 5,024,422 2002 1.031 0.519 2,513,043 2001 1.000 1.031 -- Travelers MFS(R) Total Return Subaccount (2/02).. 2006 1.213 1.252 -- 2005 1.198 1.213 69,127,365 2004 1.092 1.198 61,658,986 2003 0.953 1.092 44,157,745 2002 1.023 0.953 20,349,095 2001 1.000 1.023 -- Travelers Pioneer Strategic Income Subaccount (2/04)........................................... 2006 1.092 1.103 -- 2005 1.071 1.092 25,963,992 2004 1.000 1.071 6,291,670 Travelers U.S. Government Securities Subaccount (5/05)........................................... 2006 1.009 0.973 -- 2005 1.000 1.009 4,028,431 Universal Institutional Funds, Inc. UIF Equity and Income Subaccount (Class II) (5/03)........................................... 2006 1.343 1.488 92,881,762 2005 1.272 1.343 87,670,300 2004 1.159 1.272 51,520,513 2003 1.016 1.159 14,602,910 UIF U.S. Real Estate Subaccount (Class I) (5/05)........................................... 2006 1.173 1.593 11,702,824 2005 1.000 1.173 5,692,305
B-8 ACCUMULATION UNIT VALUES (IN DOLLARS) (CONTINUED) SEPARATE ACCOUNT CHARGES 1.65% (CONTINUED)
NUMBER OF UNITS UNIT VALUE AT UNIT VALUE AT OUTSTANDING AT PORTFOLIO NAME YEAR BEGINNING OF YEAR END OF YEAR END OF YEAR - -------------- ---- ----------------- ------------- --------------- Van Kampen Life Investment Trust Van Kampen LIT Comstock Subaccount (Class II) (2/02)........................................... 2006 1.230 1.404 83,510,128 2005 1.201 1.230 83,415,232 2004 1.040 1.201 66,370,502 2003 0.808 1.040 46,233,542 2002 1.020 0.808 24,650,743 2001 1.000 1.020 -- Van Kampen LIT Growth and Income Subaccount (Class II) (2/02)................................ 2006 1.300 1.483 48,745,625 2005 1.204 1.300 49,977,234 2004 1.073 1.204 43,119,673 2003 0.854 1.073 35,159,389 2002 1.019 0.854 18,418,400 2001 1.000 1.019 -- Van Kampen LIT Strategic Growth Subaccount (Class II) (2/02)....................................... 2006 0.920 0.929 20,410,232 2005 0.869 0.920 21,465,513 2004 0.827 0.869 20,850,171 2003 0.662 0.827 16,621,436 2002 1.000 0.662 9,580,394 Variable Insurance Products Fund VIP Equity-Income Subaccount (Service Class 2) (1/02)........................................... 2006 1.182 1.395 6,336,386 2005 1.139 1.182 5,931,580 2004 1.041 1.139 5,062,464 2003 0.814 1.041 3,432,360 2002 1.000 0.814 1,858,184 VIP Growth Subaccount (Service Class 2) (1/02)... 2006 0.935 0.974 -- 2005 0.901 0.935 2,575,619 2004 0.888 0.901 2,119,684 2003 0.681 0.888 1,596,479 2002 1.000 0.681 868,137 VIP Mid Cap Subaccount (Service Class 2) (1/02).. 2006 1.726 1.908 13,521,062 2005 1.487 1.726 11,040,201 2004 1.212 1.487 6,568,572 2003 0.892 1.212 2,848,282 2002 1.000 0.892 1,430,300
B-9 ACCUMULATION UNIT VALUES (IN DOLLARS) (CONTINUED) SEPARATE ACCOUNT CHARGES 1.90%
NUMBER OF UNITS UNIT VALUE AT UNIT VALUE AT OUTSTANDING AT PORTFOLIO NAME YEAR BEGINNING OF YEAR END OF YEAR END OF YEAR - -------------- ---- ----------------- ------------- --------------- AIM Variable Insurance Funds AIM V.I. Capital Appreciation Subaccount (Series II) (1/02)....................................... 2006 1.043 1.085 202,327 2005 0.979 1.043 240,175 2004 0.938 0.979 229,571 2003 0.740 0.938 192,718 2002 1.000 0.740 36,499 AIM V.I. Core Equity Subaccount (Series II) (4/06)........................................... 2006 1.000 1.076 325,682 AIM V.I. Premier Equity Subaccount (Series II) (1/02)........................................... 2006 0.895 0.938 -- 2005 0.865 0.895 313,864 2004 0.836 0.865 309,789 2003 0.682 0.836 197,321 2002 1.000 0.682 46,815 AllianceBernstein Variable Products Series Fund, Inc. AllianceBernstein Global Technology Subaccount (Class B) (1/02)................................. 2006 0.830 0.883 278,723 2005 0.816 0.830 247,051 2004 0.792 0.816 221,396 2003 0.561 0.792 224,735 2002 1.000 0.561 91,138 AllianceBernstein Large-Cap Growth Subaccount (Class B) (1/02)................................. 2006 0.981 0.957 81,353 2005 0.871 0.981 81,689 2004 0.819 0.871 84,080 2003 0.677 0.819 75,228 2002 1.000 0.677 37,120 American Funds Insurance Series American Funds Global Growth Subaccount (Class 2) (6/03)........................................... 2006 1.610 1.902 1,223,211 2005 1.438 1.610 911,024 2004 1.291 1.438 385,385 2003 1.071 1.291 29,570 American Funds Growth Subaccount (Class 2) (6/03)........................................... 2006 1.566 1.693 3,265,214 2005 1.373 1.566 3,085,691 2004 1.244 1.373 1,392,278 2003 1.112 1.244 282,597 American Funds Growth-Income Subaccount (Class 2) (6/03)........................................... 2006 1.405 1.588 2,805,399 2005 1.353 1.405 2,590,211 2004 1.249 1.353 1,014,630 2003 1.080 1.249 173,814
B-10 ACCUMULATION UNIT VALUES (IN DOLLARS) (CONTINUED) SEPARATE ACCOUNT CHARGES 1.90% (CONTINUED)
NUMBER OF UNITS UNIT VALUE AT UNIT VALUE AT OUTSTANDING AT PORTFOLIO NAME YEAR BEGINNING OF YEAR END OF YEAR END OF YEAR - -------------- ---- ----------------- ------------- --------------- Franklin Templeton Variable Insurance Products Trust FTVIPT Mutual Shares Securities Subaccount (Class 2) (1/02)........................................ 2006 1.275 1.481 4,395,309 2005 1.175 1.275 3,986,065 2004 1.063 1.175 1,875,066 2003 0.866 1.063 896,114 2002 1.000 0.866 236,332 FTVIPT Templeton Growth Securities Subaccount (Class 2) (1/02)................................. 2006 1.259 1.505 1,996,610 2005 1.178 1.259 1,560,387 2004 1.035 1.178 1,251,578 2003 0.798 1.035 618,235 2002 1.000 0.798 308,000 Legg Mason Partners Investment Series LMPIS Dividend Strategy Subaccount (2/02)........ 2006 0.882 1.020 2,153,520 2005 0.900 0.882 2,133,013 2004 0.887 0.900 1,847,010 2003 0.732 0.887 1,685,023 2002 1.009 0.732 864,150 2001 1.000 1.009 -- LMPIS Government Subaccount (Class A) (2/02)..... 2006 1.066 1.088 8,673,255 2005 1.070 1.066 9,141,730 2004 1.058 1.070 9,068,341 2003 1.071 1.058 8,260,011 2002 1.011 1.071 3,801,561 2001 1.000 1.011 -- LMPIS Growth and Income Subaccount (2/02)........ 2006 1.073 1.184 3,985,595 2005 1.053 1.073 4,517,515 2004 0.992 1.053 4,201,219 2003 0.776 0.992 3,045,686 2002 1.016 0.776 904,823 2001 1.000 1.016 -- LMPIS Premier Selections All Cap Growth Subaccount (2/02)................................ 2006 1.003 1.057 319,586 2005 0.962 1.003 496,279 2004 0.953 0.962 359,780 2003 0.723 0.953 206,672 2002 1.007 0.723 65,709 2001 1.000 1.007 --
B-11 ACCUMULATION UNIT VALUES (IN DOLLARS) (CONTINUED) SEPARATE ACCOUNT CHARGES 1.90% (CONTINUED)
NUMBER OF UNITS UNIT VALUE AT UNIT VALUE AT OUTSTANDING AT PORTFOLIO NAME YEAR BEGINNING OF YEAR END OF YEAR END OF YEAR - -------------- ---- ----------------- ------------- --------------- Legg Mason Partners Lifestyle Series, Inc. LMPLS Balanced Subaccount (2/02)................. 2006 1.164 1.236 3,704,000 2005 1.157 1.164 4,469,039 2004 1.096 1.157 4,556,847 2003 0.929 1.096 3,932,435 2002 1.012 0.929 2,347,467 2001 1.000 1.012 -- LMPLS Growth Subaccount (2/02)................... 2006 1.135 1.212 1,067,631 2005 1.104 1.135 1,184,409 2004 1.035 1.104 1,189,301 2003 0.813 1.035 1,004,326 2002 1.011 0.813 628,983 2001 1.000 1.011 -- LMPLS High Growth Subaccount (3/02).............. 2006 1.144 1.229 283,022 2005 1.100 1.144 227,750 2004 1.013 1.100 238,199 2003 0.755 1.013 122,977 2002 1.008 0.755 258,874 2001 1.000 1.008 -- Legg Mason Partners Variable Portfolios V LMPVPV Small Cap Growth Opportunities Subaccount (2/02)........................................... 2006 1.203 1.333 494,456 2005 1.169 1.203 561,533 2004 1.031 1.169 583,489 2003 0.740 1.031 586,440 2002 1.014 0.740 262,012 2001 1.000 1.014 -- Legg Mason Partners Variable Portfolios II LMPVPII Appreciation Subaccount (2/02)........... 2006 1.099 1.238 21,411,414 2005 1.074 1.099 24,423,541 2004 1.006 1.074 20,966,180 2003 0.823 1.006 13,856,750 2002 1.017 0.823 4,867,753 2001 1.000 1.017 -- LMPVPII Capital and Income Subaccount (5/05)..... 2006 1.073 1.171 3,176,191 2005 1.000 1.073 2,026,765
B-12 ACCUMULATION UNIT VALUES (IN DOLLARS) (CONTINUED) SEPARATE ACCOUNT CHARGES 1.90% (CONTINUED)
NUMBER OF UNITS UNIT VALUE AT UNIT VALUE AT OUTSTANDING AT PORTFOLIO NAME YEAR BEGINNING OF YEAR END OF YEAR END OF YEAR - -------------- ---- ----------------- ------------- --------------- LMPVPII Fundamental Value Subaccount (2/02)...... 2006 1.165 1.336 22,402,759 2005 1.134 1.165 25,071,566 2004 1.068 1.134 22,496,777 2003 0.785 1.068 15,231,228 2002 1.016 0.785 6,510,825 2001 1.000 1.016 -- Legg Mason Partners Variable Portfolios III, Inc. LMPVPIII Adjustable Rate Income Subaccount (2/04)........................................... 2006 0.996 1.018 231,208 2005 0.992 0.996 223,798 2004 1.000 0.992 156,852 LMPVPIII Aggressive Growth Subaccount (2/02)..... 2006 1.032 1.101 25,641,545 2005 0.942 1.032 27,286,660 2004 0.873 0.942 24,370,479 2003 0.661 0.873 16,197,046 2002 1.001 0.661 6,443,339 2001 1.000 1.001 -- LMPVPIII High Income Subaccount (2/02)........... 2006 1.301 1.417 4,920,591 2005 1.292 1.301 5,461,831 2004 1.192 1.292 4,550,092 2003 0.953 1.192 3,664,412 2002 1.004 0.953 867,832 2001 1.000 1.004 -- LMPVPIII International All Cap Growth Subaccount (2/02)........................................... 2006 1.152 1.423 1,237,657 2005 1.051 1.152 1,370,936 2004 0.909 1.051 1,352,374 2003 0.727 0.909 915,183 2002 1.000 0.727 444,810 2002 0.997 1.000 -- 2001 1.000 0.997 -- LMPVPIII Large Cap Growth Subaccount (2/02)...... 2006 1.081 1.109 1,576,460 2005 1.047 1.081 2,164,817 2004 1.063 1.047 2,099,159 2003 0.734 1.063 1,278,714 2002 0.995 0.734 468,934 2001 1.000 0.995 --
B-13 ACCUMULATION UNIT VALUES (IN DOLLARS) (CONTINUED) SEPARATE ACCOUNT CHARGES 1.90% (CONTINUED)
NUMBER OF UNITS UNIT VALUE AT UNIT VALUE AT OUTSTANDING AT PORTFOLIO NAME YEAR BEGINNING OF YEAR END OF YEAR END OF YEAR - -------------- ---- ----------------- ------------- --------------- LMPVPIII Large Cap Value Subaccount (2/02)....... 2006 1.067 1.238 685,043 2005 1.021 1.067 738,870 2004 0.941 1.021 749,840 2003 0.751 0.941 696,285 2002 1.027 0.751 342,080 2001 1.000 1.027 -- LMPVPIII Mid Cap Core Subaccount (2/02).......... 2006 1.195 1.346 2,013,539 2005 1.124 1.195 2,287,011 2004 1.038 1.124 2,110,037 2003 0.815 1.038 1,803,289 2002 1.027 0.815 996,513 2001 1.000 1.027 -- LMPVPIII Money Market Subaccount (2/02).......... 2006 0.980 1.006 3,268,257 2005 0.971 0.980 3,724,514 2004 0.981 0.971 5,172,548 2003 0.994 0.981 5,368,806 2002 1.000 0.994 3,630,924 LMPVPIII Social Awareness Stock Subaccount (2/02)........................................... 2006 1.005 1.062 903,070 2005 0.982 1.005 1,068,555 2004 0.942 0.982 930,219 2003 0.745 0.942 859,550 2002 1.010 0.745 378,685 2001 1.000 1.010 -- Legg Mason Partners Variable Portfolios IV LMPVPIV Multiple Discipline Subaccount-All Cap Growth and Value (3/04).......................... 2006 1.033 1.152 645,523 2005 1.000 1.033 594,595 2004 0.997 1.000 424,410 LMPVPIV Multiple Discipline Subaccount-Balanced All Cap Growth and Value (3/04).................. 2006 1.020 1.105 401,282 2005 0.997 1.020 578,376 2004 0.962 0.997 316,002 LMPVPIV Multiple Discipline Subaccount-Global All Cap Growth and Value (2/04)...................... 2006 1.073 1.213 341,381 2005 1.026 1.073 443,186 2004 0.987 1.026 287,731
B-14 ACCUMULATION UNIT VALUES (IN DOLLARS) (CONTINUED) SEPARATE ACCOUNT CHARGES 1.90% (CONTINUED)
NUMBER OF UNITS UNIT VALUE AT UNIT VALUE AT OUTSTANDING AT PORTFOLIO NAME YEAR BEGINNING OF YEAR END OF YEAR END OF YEAR - -------------- ---- ----------------- ------------- --------------- LMPVPIV Multiple Discipline Subaccount-Large Cap Growth and Value (4/04).......................... 2006 1.014 1.117 654,277 2005 0.998 1.014 700,287 2004 0.982 0.998 598,174 Met Investors Series Trust MIST BlackRock Large-Cap Core Subaccount (Class A) (4/06)........................................ 2006 1.181 1.248 293,766 MIST Lord Abbett Bond Debenture Subaccount (Class A) (4/06)........................................ 2006 1.241 1.298 2,255,266 MIST Lord Abbett Growth and Income Subaccount (Class B) (4/06)................................. 2006 1.001 1.074 973,764 MIST Oppenheimer Capital Appreciation Subaccount (Class B) (4/06)................................. 2006 0.994 1.006 844,137 MIST Pioneer Strategic Income Subaccount (Class A) (4/06)........................................ 2006 1.097 1.134 3,480,407 Metropolitan Series Fund, Inc. MSF BlackRock Aggressive Growth Subaccount (Class D) (4/06)........................................ 2006 0.833 0.811 771,578 MSF BlackRock Bond Income Subaccount (Class E) (4/06)........................................... 2006 1.064 1.102 4,099,682 MSF MFS(R) Total Return Subaccount (Class F) (4/06)........................................... 2006 1.238 1.321 7,537,235 MSF T. Rowe Price Large Cap Growth Subaccount (Class B) (4/06)................................. 2006 0.998 1.067 645,611 MSF Western Asset Management U.S. Government Subaccount (Class A) (4/06) *.................... 2006 0.970 1.002 482,213 Oppenheimer Variable Account Funds Oppenheimer Capital Appreciation Subaccount/VA (Service Shares) (1/02).......................... 2006 0.987 1.031 -- 2005 0.959 0.987 868,538 2004 0.917 0.959 742,889 2003 0.715 0.917 656,134 2002 1.000 0.715 250,885 Oppenheimer Main Street/VA Subaccount (Service Shares) (1/02)................................... 2006 1.093 1.154 -- 2005 1.053 1.093 878,337 2004 0.984 1.053 924,515 2003 0.793 0.984 738,923 2002 1.000 0.793 204,337
B-15 ACCUMULATION UNIT VALUES (IN DOLLARS) (CONTINUED) SEPARATE ACCOUNT CHARGES 1.90% (CONTINUED)
NUMBER OF UNITS UNIT VALUE AT UNIT VALUE AT OUTSTANDING AT PORTFOLIO NAME YEAR BEGINNING OF YEAR END OF YEAR END OF YEAR - -------------- ---- ----------------- ------------- --------------- Pioneer Variable Contracts Trust Pioneer Fund VCT Subaccount (Class II) (1/02).... 2006 1.081 1.234 458,015 2005 1.040 1.081 553,184 2004 0.956 1.040 534,842 2003 0.789 0.956 280,451 2002 1.000 0.789 137,457 Pioneer Mid Cap Value VCT Subaccount (Class II) (1/02)........................................... 2006 1.482 1.633 1,447,559 2005 1.403 1.482 1,459,777 2004 1.175 1.403 841,746 2003 0.873 1.175 662,686 2002 1.000 0.873 166,486 Putnam Variable Trust Putnam VT International Equity Subaccount (Class IB) (1/02)....................................... 2006 1.274 1.596 407,536 2005 1.157 1.274 207,492 2004 1.015 1.157 183,018 2003 0.805 1.015 216,412 2002 1.000 0.805 117,321 Putnam VT Small Cap Value Subaccount (Class IB) (1/02)........................................... 2006 1.539 1.771 1,311,328 2005 1.465 1.539 1,186,488 2004 1.183 1.465 716,503 2003 0.806 1.183 403,015 2002 1.000 0.806 200,289 The Travelers Series Trust Travelers Convertible Securities Subaccount (1/02)........................................... 2006 1.165 1.241 -- 2005 1.183 1.165 2,254,615 2004 1.135 1.183 1,817,843 2003 0.916 1.135 1,196,043 2002 1.000 0.916 212,419 Travelers Managed Income Subaccount (1/02)....... 2006 1.075 1.064 -- 2005 1.081 1.075 4,382,714 2004 1.071 1.081 4,729,731 2003 1.007 1.071 2,801,167 2002 1.000 1.007 892,590
B-16 ACCUMULATION UNIT VALUES (IN DOLLARS) (CONTINUED) SEPARATE ACCOUNT CHARGES 1.90% (CONTINUED)
NUMBER OF UNITS UNIT VALUE AT UNIT VALUE AT OUTSTANDING AT PORTFOLIO NAME YEAR BEGINNING OF YEAR END OF YEAR END OF YEAR - -------------- ---- ----------------- ------------- --------------- Travelers Mercury Large Cap Core Subaccount (2/02)........................................... 2006 1.114 1.181 -- 2005 1.013 1.114 353,121 2004 0.891 1.013 409,648 2003 0.749 0.891 403,330 2002 1.020 0.749 162,046 2001 1.000 1.020 -- Travelers MFS(R) Mid Cap Growth Subaccount (2/02)........................................... 2006 0.788 0.833 -- 2005 0.779 0.788 855,494 2004 0.696 0.779 833,779 2003 0.517 0.696 866,277 2002 1.031 0.517 413,979 2001 1.000 1.031 -- Travelers MFS(R) Total Return Subaccount (2/02).. 2006 1.201 1.238 -- 2005 1.189 1.201 8,046,427 2004 1.087 1.189 6,007,575 2003 0.951 1.087 4,391,128 2002 1.023 0.951 1,656,799 2001 1.000 1.023 -- Travelers Pioneer Strategic Income Subaccount (2/04)........................................... 2006 1.087 1.097 -- 2005 1.069 1.087 3,279,930 2004 1.000 1.069 933,893 Travelers U.S. Government Securities Subaccount (5/05)........................................... 2006 1.008 0.970 -- 2005 1.000 1.008 271,553 Universal Institutional Funds, Inc. UIF Equity and Income Subaccount (Class II) (5/03)........................................... 2006 1.335 1.474 10,407,477 2005 1.267 1.335 10,216,786 2004 1.158 1.267 5,875,896 2003 1.016 1.158 1,681,850 UIF U.S. Real Estate Subaccount (Class I) (5/05)........................................... 2006 1.171 1.587 1,933,273 2005 1.000 1.171 1,013,473 Van Kampen Life Investment Trust Van Kampen LIT Comstock Subaccount (Class II) (2/02)........................................... 2006 1.218 1.386 10,667,905 2005 1.192 1.218 11,124,820 2004 1.034 1.192 9,212,344 2003 0.806 1.034 6,939,669 2002 1.020 0.806 2,909,821 2001 1.000 1.020 --
B-17 ACCUMULATION UNIT VALUES (IN DOLLARS) (CONTINUED) SEPARATE ACCOUNT CHARGES 1.90% (CONTINUED)
NUMBER OF UNITS UNIT VALUE AT UNIT VALUE AT OUTSTANDING AT PORTFOLIO NAME YEAR BEGINNING OF YEAR END OF YEAR END OF YEAR - -------------- ---- ----------------- ------------- --------------- Van Kampen LIT Growth and Income Subaccount (Class II) (2/02)................................ 2006 1.287 1.464 7,132,339 2005 1.195 1.287 7,427,230 2004 1.067 1.195 6,993,309 2003 0.852 1.067 5,719,195 2002 1.019 0.852 2,434,809 2001 1.000 1.019 -- Van Kampen LIT Strategic Growth Subaccount (Class II) (2/02)....................................... 2006 0.911 0.917 4,748,476 2005 0.863 0.911 5,047,438 2004 0.823 0.863 5,321,920 2003 0.660 0.823 3,913,231 2002 1.000 0.660 1,495,362 Variable Insurance Products Fund VIP Equity-Income Subaccount (Service Class 2) (1/02)........................................... 2006 1.171 1.378 1,270,069 2005 1.130 1.171 1,248,723 2004 1.035 1.130 823,033 2003 0.812 1.035 621,111 2002 1.000 0.812 290,414 VIP Growth Subaccount (Service Class 2) (1/02)... 2006 0.926 0.963 -- 2005 0.894 0.926 859,177 2004 0.884 0.894 564,171 2003 0.680 0.884 382,481 2002 1.000 0.680 239,307 VIP Mid Cap Subaccount (Service Class 2) (1/02).. 2006 1.709 1.885 1,910,023 2005 1.476 1.709 1,624,818 2004 1.206 1.476 833,326 2003 0.889 1.206 272,951 2002 1.000 0.889 183,898
* We are currently waiving a portion of the Mortality and Expense Risk charge for this Subaccount. Please see "Fee Table -- Annual Separate Account Charges" for more information. The date next to each funding option name reflects the date money first came into the funding option through the Separate Account. Funding options not listed above had no amounts allocated to them or were not available as of December 31, 2006. Number of Units Outstanding at End of Year may include units for Contract Owners in payout phase, where appropriate. If an accumulation unit value has no assets and units across all sub-accounts within the Separate Account, and has had no assets and units for the history displayed on the Condensed Financial Information in the past, then it may not be displayed. B-18 Variable Funding Option mergers and substitutions that occurred between January 1, 2005 and December 31, 2006, are displayed below. Please see Appendix C for more information on Variable Funding Option name changes, mergers and substitutions. Effective on or about 05/01/2006, AIM Variable Insurance Fund-AIM VI Premier Equity Fund merged into AIM Variable Insurance Fund-AIM VI Core Equity Fund and is no longer available as a funding option. Effective on or about 05/01/2006, Oppenheimer Variable Account Funds-Oppenheimer Capital Appreciation Fund/VA was replaced by Met Investors Series Trust- Oppenheimer Capital Appreciation Portfolio and is no longer available as a funding option. Effective on or about 05/01/2006, Oppenheimer Variable Account Funds-Oppenheimer Main Street Fund/VA was replaced by Met Investors Series Trust-Lord Abbett Growth and Income Portfolio and is no longer available as a funding option. Effective on or about 05/01/2006, The Travelers Series Trust-Convertible Securities Portfolio merged into Met Investors Series Trust-Lord Abbett Bond Debenture Portfolio and is no longer available as a funding option. Effective on or about 05/01/2006, The Travelers Series Trust-Mercury Large Cap Core Portfolio merged into Met Investors Series Trust-Mercury Large-Cap Core Portfolio and is no longer available as a funding option. Effective on or about 05/01/2006, The Travelers Series Trust-MFS(R) Mid Cap Growth Portfolio merged into Metropolitan Series Fund, Inc.-BlackRock Aggressive Growth Portfolio and is no longer available as a funding option. Effective on or about 05/01/2006, The Travelers Series Trust-MFS(R) Total Return Portfolio merged into Metropolitan Series Fund, Inc.-MFS(R) Total Return Portfolio and is no longer available as a funding option. Effective on or about 05/01/2006, The Travelers Series Trust-Pioneer Strategic Income Portfolio merged into Met Investors Series Trust-Pioneer Strategic Income Portfolio and is no longer available as a funding option. Effective on or about 05/01/2006, The Travelers Series Trust-Travelers Managed Income Portfolio merged into Metropolitan Series Fund, Inc.-BlackRock Bond Income Portfolio and is no longer available as a funding option. Effective on or about 05/01/2006, The Travelers Series Trust-U.S. Government Securities Portfolio merged into Metropolitan Series Fund, Inc.-Western Asset Management U.S. Government Portfolio and is no longer available as a funding option. Effective on or about 05/01/2006, Variable Insurance Products Fund-VIP Growth Portfolio was replaced by Metropolitan Series Fund, Inc.-T. Rowe Price Large Cap Growth Portfolio and is no longer available as a funding option. B-19 THIS PAGE INTENTIONALLY LEFT BLANK. APPENDIX C - -------------------------------------------------------------------------------- The Underlying Funds listed below were subject to a merger, substitution or other change. The chart below identifies the former name and new name of each of these Underlying Funds, and, where applicable, the former name and new name of the trust of which the Underlying Fund is part. ADDITIONAL INFORMATION REGARDING UNDERLYING FUNDS UNDERLYING FUND NAME CHANGES
FORMER NAME NEW NAME - --------------------------------------------- --------------------------------------------- LEGG MASON PARTNERS LIFESTYLE SERIES, INC. LEGG MASON PARTNERS LIFESTYLE SERIES, INC. Legg Mason Partners Variable Lifestyle Legg Mason Partners Variable Lifestyle Balanced Portfolio Allocation 50% Legg Mason Partners Variable Lifestyle Legg Mason Partners Variable Lifestyle Growth Portfolio Allocation 70% Legg Mason Partners Variable Lifestyle Legg Mason Partners Variable Lifestyle High Growth Portfolio Allocation 85% LEGG MASON PARTNERS VARIABLE PORTFOLIOS III, LEGG MASON PARTNERS VARIABLE PORTFOLIOS III, INC. INC. Legg Mason Partners Variable International Legg Mason Partners Variable International All Cap Growth Portfolio All Cap Opportunity Portfolio LEGG MASON PARTNERS VARIABLE PORTFOLIOS III, LEGG MASON PARTNERS VARIABLE PORTFOLIOS III, INC. INC. Legg Mason Partners Variable Social Legg Mason Partners Variable Social Awareness Stock Portfolio Awareness Portfolio LEGG MASON PARTNERS VARIABLE PORTFOLIOS IV LEGG MASON PARTNERS VARIABLE PORTFOLIOS IV Legg Mason Partners Variable Multiple Legg Mason Partners Variable Capital and Discipline Portfolio -- Balanced All Cap Income Portfolio Growth and Value Portfolio MET INVESTORS SERIES TRUST MET INVESTORS SERIES TRUST Mercury Large-Cap Core Portfolio BlackRock Large-Cap Core Portfolio VAN KAMPEN LIFE INVESTMENT TRUST VAN KAMPEN LIFE INVESTMENT TRUST Emerging Growth Portfolio Strategic Growth Portfolio
UNDERLYING FUND MERGERS/REORGANIZATIONS The following former Underlying Funds were merged with and into the new Underlying Funds and/or were reorganized into a new trust.
FORMER UNDERLYING FUND/TRUST NEW UNDERLYING FUND/TRUST - --------------------------------------------- --------------------------------------------- LEGG MASON PARTNERS INVESTMENT SERIES LEGG MASON PARTNERS VARIABLE EQUITY TRUST Legg Mason Partners Variable Dividend Legg Mason Partners Variable Dividend Strategy Portfolio Strategy Portfolio LEGG MASON PARTNERS INVESTMENT SERIES LEGG MASON PARTNERS VARIABLE INCOME TRUST Legg Mason Partners Variable Government Legg Mason Partners Variable Government Portfolio Portfolio LEGG MASON PARTNERS INVESTMENT SERIES LEGG MASON PARTNERS VARIABLE PORTFOLIOS II Legg Mason Partners Variable Growth and Legg Mason Partners Variable Appreciation Income Portfolio Portfolio LEGG MASON PARTNERS INVESTMENT SERIES LEGG MASON PARTNERS VARIABLE EQUITY TRUST Legg Mason Partners Variable Premier Legg Mason Partners Variable Aggressive Selections All Cap Growth Portfolio Growth Portfolio LEGG MASON PARTNERS LIFESTYLE SERIES, INC. LEGG MASON PARTNERS VARIABLE EQUITY TRUST Legg Mason Partners Variable Lifestyle Legg Mason Partners Variable Lifestyle Allocation 50% Allocation 50% LEGG MASON PARTNERS LIFESTYLE SERIES, INC. LEGG MASON PARTNERS VARIABLE EQUITY TRUST Legg Mason Partners Variable Lifestyle Legg Mason Partners Variable Lifestyle Allocation 70% Allocation 70% LEGG MASON PARTNERS LIFESTYLE SERIES, INC. LEGG MASON PARTNERS VARIABLE EQUITY TRUST Legg Mason Partners Variable Lifestyle Legg Mason Partners Variable Lifestyle Allocation 85% Allocation 85% LEGG MASON PARTNERS VARIABLE PORTFOLIOS I LEGG MASON PARTNERS VARIABLE EQUITY TRUST Legg Mason Partners Variable Investors Legg Mason Partners Variable Investors Portfolio Portfolio LEGG MASON PARTNERS VARIABLE PORTFOLIOS I LEGG MASON PARTNERS VARIABLE EQUITY TRUST Legg Mason Partners Variable Small Cap Legg Mason Partners Variable Small Cap Growth Growth Portfolio Portfolio LEGG MASON PARTNERS VARIABLE PORTFOLIOS II LEGG MASON PARTNERS VARIABLE EQUITY TRUST Legg Mason Partners Variable Appreciation Legg Mason Partners Variable Appreciation Portfolio Portfolio LEGG MASON PARTNERS VARIABLE PORTFOLIOS II LEGG MASON PARTNERS VARIABLE PORTFOLIOS IV Legg Mason Partners Variable Capital and Legg Mason Partners Variable Capital and Income Portfolio Income Portfolio
C-1
FORMER UNDERLYING FUND/TRUST NEW UNDERLYING FUND/TRUST - --------------------------------------------- --------------------------------------------- LEGG MASON PARTNERS VARIABLE PORTFOLIOS II LEGG MASON PARTNERS VARIABLE EQUITY TRUST Legg Mason Partners Variable Fundamental Legg Mason Partners Variable Fundamental Value Portfolio Value Portfolio LEGG MASON PARTNERS VARIABLE PORTFOLIOS III, LEGG MASON PARTNERS VARIABLE INCOME TRUST INC. Legg Mason Partners Variable Adjustable Legg Mason Partners Variable Adjustable Rate Rate Income Portfolio Income Portfolio LEGG MASON PARTNERS VARIABLE PORTFOLIOS III, LEGG MASON PARTNERS VARIABLE EQUITY TRUST INC. Legg Mason Partners Variable Aggressive Legg Mason Partners Variable Aggressive Growth Portfolio Growth Portfolio LEGG MASON PARTNERS VARIABLE PORTFOLIOS III, LEGG MASON PARTNERS VARIABLE INCOME TRUST INC. Legg Mason Partners Variable High Income Legg Mason Partners Variable High Income Portfolio Portfolio LEGG MASON PARTNERS VARIABLE PORTFOLIOS III, LEGG MASON PARTNERS VARIABLE EQUITY TRUST INC. Legg Mason Partners Variable International Legg Mason Partners Variable International All Cap Opportunity Portfolio All Cap Opportunity Portfolio LEGG MASON PARTNERS VARIABLE PORTFOLIOS III, LEGG MASON PARTNERS VARIABLE EQUITY TRUST INC. Legg Mason Partners Variable Large Cap Legg Mason Partners Variable Large Cap Growth Growth Portfolio Portfolio LEGG MASON PARTNERS VARIABLE PORTFOLIOS III, LEGG MASON PARTNERS VARIABLE PORTFOLIOS I INC. Legg Mason Partners Variable Large Cap Legg Mason Partners Variable Investors Value Portfolio Portfolio LEGG MASON PARTNERS VARIABLE PORTFOLIOS III, LEGG MASON PARTNERS VARIABLE EQUITY TRUST INC. Legg Mason Partners Variable Mid Cap Core Legg Mason Partners Variable Mid Cap Core Portfolio Portfolio LEGG MASON PARTNERS VARIABLE PORTFOLIOS III, LEGG MASON PARTNERS VARIABLE INCOME TRUST INC. Legg Mason Partners Variable Money Market Legg Mason Partners Variable Money Market Portfolio Portfolio LEGG MASON PARTNERS VARIABLE PORTFOLIOS III, LEGG MASON PARTNERS VARIABLE EQUITY TRUST INC. Legg Mason Partners Variable Social Legg Mason Partners Variable Social Awareness Awareness Portfolio Portfolio LEGG MASON PARTNERS VARIABLE PORTFOLIOS IV LEGG MASON PARTNERS VARIABLE EQUITY TRUST Legg Mason Partners Variable Capital and Legg Mason Partners Variable Capital and Income Portfolio Income Portfolio LEGG MASON VARIABLE PORTFOLIOS IV LEGG MASON PARTNERS VARIABLE EQUITY TRUST Legg Mason Partners Variable Multiple Legg Mason Partners Variable Multiple Discipline Portfolio -- All Cap Growth Discipline Portfolio -- All Cap Growth and Value and Value LEGG MASON VARIABLE PORTFOLIOS IV LEGG MASON PARTNERS VARIABLE EQUITY TRUST Legg Mason Partners Variable Multiple Legg Mason Partners Variable Multiple Discipline Portfolio -- Large Cap Growth Discipline Portfolio -- Large Cap Growth and Value and Value LEGG MASON VARIABLE PORTFOLIOS IV LEGG MASON PARTNERS VARIABLE EQUITY TRUST Legg Mason Partners Variable Multiple Legg Mason Partners Variable Multiple Discipline Portfolio -- Global All Cap Discipline Portfolio -- Global All Cap Growth and Value Growth and Value LEGG MASON PARTNERS VARIABLE PORTFOLIOS V LEGG MASON PARTNERS VARIABLE PORTFOLIOS I, INC. Legg Mason Partners Variable Small Cap Legg Mason Partners Variable Small Cap Growth Growth Opportunities Portfolio Portfolio -- Class I
UNDERLYING FUND SUBSTITUTIONS The following new Underlying Funds were substituted for the former Underlying Funds.
FORMER UNDERLYING FUND NEW UNDERLYING FUND - --------------------------------------------- --------------------------------------------- AIM VARIABLE INSURANCE FUNDS MET INVESTORS SERIES TRUST AIM V.I. Capital Appreciation Met/AIM Capital Appreciation Fund -- Series II Portfolio -- Class E AIM VARIABLE INSURANCE FUNDS MET INVESTORS SERIES TRUST AIM V.I. Core Equity Fund -- Series II Capital Guardian U.S. Equity Portfolio -- Class B PUTNAM VARIABLE TRUST MET INVESTORS SERIES TRUST Putnam VT International Equity MFS(R) Research International Fund -- Class IB Portfolio -- Class B PUTNAM VARIABLE TRUST MET INVESTORS SERIES TRUST Putnam VT Small Cap Value Fund -- Class IB Third Avenue Small Cap Value Portfolio -- Class B
UNDERLYING FUND SHARE CLASS EXCHANGE The following former Underlying Fund share class was exchanged into the new Underlying Fund share class.
FORMER UNDERLYING FUND SHARE CLASS NEW UNDERLYING FUND SHARE CLASS - --------------------------------------------- --------------------------------------------- MET INVESTORS SERIES TRUST MET INVESTORS SERIES TRUST BlackRock Large-Cap Core Portfolio -- Class BlackRock Large-Cap Core Portfolio -- Class E A
C-2 APPENDIX D - -------------------------------------------------------------------------------- THE FIXED ACCOUNT The Fixed Account is part of the Company's general account assets. These general account assets include all assets of the Company other than those held in the Separate Accounts sponsored by the Company or its affiliates. The staff of the SEC does not generally review the disclosure in the prospectus relating to the Fixed Account. Disclosure regarding the Fixed Account and the general account may, however, be subject to certain provisions of the federal securities laws relating to the accuracy and completeness of statements made in the prospectus. Under the Fixed Account, the Company assumes the risk of investment gain or loss, guarantees a specified interest rate, and guarantees a specified periodic Annuity Payment. The investment gain or loss of the Separate Account or any of the funding options does not affect the Fixed Account Contract Value, or the dollar amount of fixed Annuity Payments made under any payout option. We guarantee that, at any time, the Fixed Account Contract Value will not be less than the amount of the Purchase Payments allocated to the Fixed Account, plus interest credited as described below, less any applicable premium taxes or prior withdrawals. Purchase Payments allocated to the Fixed Account and any transfers made to the Fixed Account become part of the Company's general account, which supports insurance and annuity obligations. Where permitted by state law, we reserve the right to restrict Purchase Payments into the Fixed Account whenever the credited interest rate on the Fixed Account is equal to the minimum guaranteed interest rate specified in your Contract. The general account and any interest therein are not registered under, or subject to the provisions of, the Securities Act of 1933 or Investment Company Act of 1940. We will invest the assets of the Fixed Account at our discretion. Investment income from such Fixed Account assets will be allocated to us and to the Contracts participating in the Fixed Account. Investment income from the Fixed Account allocated to us includes compensation for mortality and expense risks borne by us in connection with Fixed Account Contracts. The amount of such investment income allocated to the Contracts will vary from year to year in our sole discretion at such rate or rates as we prospectively declare from time to time. We guarantee the initial rate for any allocations into the Fixed Account for one year from the date of such allocation. We guarantee subsequent renewal rates for the calendar quarter. We also guarantee that for the life of the Contract we will credit interest at a rate not less than the minimum interest rate allowed by state law. We reserve the right to change the rate subject to applicable state law. We will determine any interest we credit to amounts allocated to the Fixed Account in excess of the minimum guaranteed rate in our sole discretion. You assume the risk that interest credited to the Fixed Account may not exceed the minimum guaranteed rate for any given year. We have no specific formula for determining the interest rate. Some factors we may consider are regulatory and tax requirements, general economic trends and competitive factors. TRANSFERS You may make transfers from the Fixed Account to any available Variable Funding Option(s) twice a year during the 30 days following the semiannual anniversary of the Contract Date. We limit transfers to an amount of up to 15% of the Fixed Account Contract Value on the semiannual Contract Date anniversary. (This restriction does not apply to transfers under the Dollar Cost Averaging Program.) Amounts previously transferred from the Fixed Account to Variable Funding Options may not be transferred back to the Fixed Account for a period of at least six months from the date of transfer. We reserve the right to waive either of these restrictions. Where permitted by state law, we reserve the right to restrict transfers into the Fixed Account whenever the credited interest rate on the Fixed Account is equal to the minimum guaranteed interest rate specified in your Contract. Automated transfers from the Fixed Account to any of the Variable Funding Options may begin at any time. Automated transfers from the Fixed Account may not deplete your Fixed Account value in a period of less than twelve months from your enrollment in the Dollar Cost Averaging Program. D-1 THIS PAGE INTENTIONALLY LEFT BLANK. APPENDIX E - -------------------------------------------------------------------------------- WAIVER OF WITHDRAWAL CHARGE FOR NURSING HOME CONFINEMENT (AVAILABLE ONLY IF THE OWNER IS AGE 70 OR YOUNGER ON THE DATE THE CONTRACT IS ISSUED.) If, after the first Contract Year and before the Maturity Date, and you begin confinement in an eligible nursing home, you may surrender or make withdrawal, subject to the maximum withdrawal amount described below, without incurring a withdrawal charge. In order for the Company to waive the withdrawal charge, the withdrawal must be made during continued confinement in an eligible nursing home after the qualifying period has been satisfied, or within sixty (60) days after such confinement ends. The qualifying period is confinement in an eligible nursing home for ninety (90) consecutive days. We will require proof of confinement in a form satisfactory to us, which may include certification by a licensed physician that such confinement is medically necessary. An eligible nursing home is defined as an institution or special nursing unit of a hospital which: (a) is Medicare approved as a provider of skilled nursing care services; and (b) is not, other than in name only, an acute care hospital, a home for the aged, a retirement home, a rest home, a community living center, or a place mainly for the treatment of alcoholism. OR Meets all of the following standards: (a) is licensed as a nursing care facility by the state in which it is licensed; (b) is either a freestanding facility or a distinct part of another facility such as a ward, wing, unit or swing-bed of a hospital or other facility; (c) provides nursing care to individuals who are not able to care for themselves and who require nursing care; (d) provides, as a primary function, nursing care and room and board; and charges for these services; (e) provides care under the supervision of a licensed physician, registered nurse (RN) or licensed practical nurse (LPN); (f) may provide care by a licensed physical, respiratory, occupational or speech therapist; and (g) is not, other than in name only, an acute care hospital, a home for the aged, a retirement home, a rest home, a community living center, or a place mainly for the treatment of alcoholism. We will not waive withdrawal charges if confinement is due to one or more of the following causes: (a) mental, nervous, emotional or personality disorder without demonstrable organic disease, including, but not limited to, neurosis, psychoneurosis, psychopathy or psychosis (b) the voluntary taking or injection of drugs, unless prescribed or administered by a licensed physician (c) the voluntary taking of any drugs prescribed by a licensed physician and intentionally not taken as prescribed (d) sensitivity to drugs voluntarily taken, unless prescribed by a physician (e) drug addiction, unless addiction results from the voluntary taking of drugs prescribed by a licensed physician, or the involuntary taking of drugs. FILING A CLAIM: You must provide the Company with written notice of a claim during continued confinement after the 90-day qualifying period, or within sixty days after such confinement ends. The maximum withdrawal amount for which we will waive the withdrawal charge is the Contract Value on the next valuation date following written proof of claim, less any Purchase Payments made within a one-year period before E-1 confinement in an eligible nursing home begins, less any Purchase Payment made on or after the Annuitant's 71st birthday. We will pay any withdrawal requested under the scope of this waiver as soon as we receive proper written proof of your claim, and we will pay the withdrawal in a lump sum. You should consult with your tax adviser regarding the tax impact of any withdrawals taken from your Contract. E-2 APPENDIX F - -------------------------------------------------------------------------------- CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION The Statement of Additional Information contains more specific information and financial statements relating to the Separate Account and MetLife Insurance Company of Connecticut or MetLife Life and Annuity Company of Connecticut. A list of the contents of the Statement of Additional Information is set forth below: The Insurance Company Principal Underwriter Distribution and Principal Underwriting Agreement Valuation of Assets Federal Tax Considerations Independent Registered Public Accounting Firm Condensed Financial Information Financial Statements - -------------------------------------------------------------------------------- Copies of the Statement of Additional Information dated April 30, 2007 are available without charge. To request a copy, please clip this coupon on the line above, enter your name and address in the spaces provided below, and mail to MetLife Insurance Company of Connecticut/MetLife Life and Annuity Company of Connecticut, One Cityplace, 185 Asylum Street, 3CP, Hartford, Connecticut 06103- 3415. For the MetLife Insurance Company of Connecticut Statement of Additional Information please request MIC-Book-19, and for the MetLife Life and Annuity Company of Connecticut Statement of Additional Information please request MLAC- Book-19. Name: ------------------------------------------------- Address: ---------------------------------------------- CHECK BOX: [ ] MIC-Book-19 [ ] MLAC-Book-19 F-1 PRIMELITE II STATEMENT OF ADDITIONAL INFORMATION DATED APRIL 30, 2007 FOR METLIFE OF CT SEPARATE ACCOUNT PF II FOR VARIABLE ANNUITIES ISSUED BY METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT This Statement of Additional Information ("SAI") is not a prospectus but relates to, and should be read in conjunction with the Prospectus dated April 30, 2007. A copy of the Individual Variable Annuity Contract Prospectus may be obtained by writing to MetLife Life and Annuity Company of Connecticut, Annuity Investor Services, One Cityplace, Hartford, Connecticut 06103-3415, or by calling (800) 842-9325 or by accessing the Securities and Exchange Commission's website at http://www.sec.gov. TABLE OF CONTENTS THE INSURANCE COMPANY........................................................ 2 PRINCIPAL UNDERWRITER........................................................ 2 DISTRIBUTION AND PRINCIPAL UNDERWRITING AGREEMENT............................ 2 VALUATION OF ASSETS.......................................................... 4 FEDERAL TAX CONSIDERATIONS................................................... 5 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM................................ 9 FINANCIAL STATEMENTS......................................................... 1
THE INSURANCE COMPANY MetLife Life and Annuity Company of Connecticut (the "Company") is a stock insurance company chartered in 1973 in Connecticut and continuously engaged in the insurance business since that time. The Company is licensed to conduct life insurance business in all states of the United States (except New York), the District of Columbia and Puerto Rico. The Company is a wholly-owned subsidiary of MetLife, Inc., a publicly traded company. MetLife, Inc., through its subsidiaries and affiliates, is a leading provider of insurance and other financial services to individual and institutional customers. The Company's Home Office is located at One Cityplace, Hartford, Connecticut 06103-3415. STATE REGULATION. The Company is subject to the laws of the state of Connecticut governing insurance companies and to regulation by the Insurance Commissioner of the state of Connecticut (the "Commissioner"). An annual statement covering the operations of the Company for the preceding year, as well as its financial conditions as of December 31 of such year, must be filed with the Commissioner in a prescribed format on or before March 1 of each year. The Company's books and assets are subject to review or examination by the Commissioner or his agents at all times, and a full examination of its operations is conducted at least once every four years. The Company is also subject to the insurance laws and regulations of all other states in which it is licensed to operate. However, the insurance departments of each of these states generally apply the laws of the home state (jurisdiction of domicile) in determining the field of permissible investments. THE SEPARATE ACCOUNT. MetLife of CT Separate Account PF II for Variable Annuities (the "Separate Account") meets the definition of a separate account under the federal securities laws, and complies with the provisions of the 1940 Act. Additionally, the operations of the Separate Account are subject to the provisions of Section 38a-433 of the Connecticut General Statutes, which authorizes the Commissioner to adopt regulations under it. Section 38a-433 contains no restrictions on the investments of the Separate Account, and the Commissioner has adopted no regulations under the Section that affect the Separate Account. The Company holds title to the assets of the Separate Account. The assets are kept physically segregated and are held separate and apart from the Company's general corporate assets. Records are maintained of all purchases and redemptions of the Underlying Funds held in each of the Variable Funding Options. PRINCIPAL UNDERWRITER MetLife Investors Distribution Company ("MLIDC")* serves as principal underwriter for the Separate Account and the Contracts. The offering is continuous. MLIDC's principal executive offices are located at 5 Park Plaza, Suite 1900, Irvine, CA 92614. MLIDC is affiliated with the Company and the Separate Account. DISTRIBUTION AND PRINCIPAL UNDERWRITING AGREEMENT Information about the distribution of the Contracts is contained in the prospectus (see "Other Information -- Distribution of the Variable Annuity Contracts"). Additional information is provided below. Under the terms of the Distribution and Principal Underwriting Agreement among the Separate Account, MLIDC and the Company, MLIDC acts as agent for the distribution of the Contracts and as principal underwriter for the Contracts. The Company reimburses MLIDC for certain sales and overhead expenses connected with sales functions. 2 The following table shows the amount of commissions paid to and the amount of commissions retained by the Distributor and Principal Underwriter over the past three years. UNDERWRITING COMMISSIONS
UNDERWRITING COMMISSIONS PAID AMOUNT OF UNDERWRITING TO THE DISTRIBUTOR BY THE COMMISSIONS RETAINED BY THE YEAR COMPANY* DISTRIBUTOR* - -------------------------------- -------------------------------- -------------------------------- 2006............................ $ 62,664,479 $0 2005............................ $ 90,942,874 $0 2004............................ $104,087,148 $0
*Effective as of October 20, 2006, the former principal underwriter for the Separate Account and the Contracts, MLI Distribution LLC, merged with and into MetLife Investors Distribution Company. The Company and MLIDC have also entered into preferred distribution arrangements with certain broker-dealer firms. These arrangements are sometimes called "shelf space" arrangements. Under these arrangements, the Company and MLIDC pay separate, additional compensation to the broker-dealer firms for services the broker-dealer firms provide in connection with the distribution of the Company's products. These services may include providing the Company with access to the distribution network of the broker-dealer firms, the hiring and training of the broker-dealer firms' sales personnel, the sponsoring of conferences and seminars by the broker-dealer firms, or general marketing services performed by the broker-dealer firms. The broker-dealer firms may also provide other services or incur other costs in connection with distributing the Company's products. These preferred distribution arrangements will not be offered to all broker- dealer firms and the terms of such arrangements may differ between broker-dealer firms. Compensation payable under such arrangements may be based on aggregate, net or anticipated sales of the Contract, total assets attributable to sales of the Contract by registered representatives of the broker-dealer firms or based on the length of time that a Contract owner has owned the Contract. Any such compensation payable to a broker-dealer firm will be made by MLIDC or the Company out of their own assets and will not result in any additional direct charge to you. Such compensation may cause the broker-dealer firms and their registered representatives to favor the Company's products. The amount of additional compensation (non-commission amounts) paid to selected broker-dealer firms during 2006 ranged from $2,289 to $5,893,669. The amount of commissions paid to selected broker-dealer firms during 2006 ranged from $650,170 to $26,200,094. The amount of total compensation (includes non-commission as well as commission amounts) paid to selected broker-dealer firms during 2006 ranged from $652,459 to $32,093,763. The following list sets forth the names of broker-dealer firms that have entered into preferred distribution arrangements with the Company and MLIDC under which the broker-dealer firms received additional compensation in 2006 in connection with the sale of our variable annuity contracts, variable life policies and other insurance products (including the Contracts). The broker-dealer firms are listed in alphabetical order: Citicorp Investment Services Citigroup Global Markets Inc. (d/b/a Smith Barney) DWS Scudder Distributors, Inc. Merrill Lynch, Pierce, Fenner & Smith, Incorporated Morgan Stanley DW, Inc. PFS Investments, Inc. (d/b/a Primerica) Pioneer Funds Distributor, Inc. Tower Square Securities, Inc. 3 There are other broker-dealer firms who receive compensation for servicing our contracts, and the account value of the contracts or the amount of added purchase payments received may be included in determining their additional compensation, if any. REDUCTION OR ELIMINATION OF THE WITHDRAWAL CHARGE. We may reduce or eliminate the withdrawal charge under the Contract when certain sales or administration of the Contract result in savings or reduced expenses and/or risks. We will not reduce or eliminate the withdrawal charge where such reduction or elimination would be unfairly discriminatory to any person. VALUATION OF ASSETS FUNDING OPTIONS. The value of the assets of each Funding Option is determined at 4:00 p.m. eastern time on each business day, unless we need to close earlier due to an emergency. A business day is any day the New York Stock Exchange is open. It is expected that the Exchange will be closed on Saturdays and Sundays and on the observed holidays of New Year's Day, Martin Luther King, Jr. Day, President's Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day. Each security traded on a national securities exchange is valued at the last reported sale price on the business day. If there has been no sale on that day, then the value of the security is taken to be the mean between the reported bid and asked prices on the business day or on the basis of quotations received from a reputable broker or any other recognized source. THE CONTRACT VALUE. The value of an Accumulation Unit on any business day is determined by multiplying the value on the preceding business day by the net investment factor for the valuation period just ended. The net investment factor is used to measure the investment performance of a Funding Option from one valuation period to the next. The net investment factor for a Funding Option for any valuation period is equal to the sum of 1.000000 plus the net investment rate (the gross investment rate less any applicable Funding Option deductions during the valuation period relating to the mortality and expense risk charge and the administrative expense charge). The gross investment rate of a Funding Option is equal to (a) minus (b), divided by (c) where: (a) = investment income plus capital gains and losses (whether realized or unrealized); (b) = any deduction for applicable taxes (presently zero); and (c) = the value of the assets of the funding option at the beginning of the valuation period. The gross investment rate may be either positive or negative. A Funding Option's investment income includes any distribution whose ex-dividend date occurs during the valuation period. ACCUMULATION UNIT VALUE. The value of the Accumulation Unit for each Funding Option was initially established at $1.00. The value of an Accumulation Unit on any business day is determined by multiplying the value on the preceding business day by the net investment factor for the valuation period just ended. The net investment factor is calculated for each Funding Option and takes into account the investment performance, expenses and the deduction of certain expenses. ANNUITY UNIT VALUE. The initial Annuity Unit value applicable to each Funding Option was established at $1.00. An Annuity Unit value as of any business day is equal to (a) the value of the Annuity Unit on the preceding business day, multiplied by (b) the corresponding net investment factor for the business day just ended, divided by (c) the assumed net investment factor for the valuation period. (For example, the assumed net investment factor based on an annual assumed net investment rate of 3.0% for a valuation period of one day is 1.000081 and, for a period of two days, is 1.000081 x 1.000081.) 4 CALCULATION OF MONEY MARKET YIELD From time to time, we may quote in advertisements and sales literature the adjusted and unadjusted effective yield for a money market Subaccount for a 7- day period, as described below. On a Contract-specific basis, the effective yield is computed at each month-end according to the following formula: EffectiveYield = ((BaseReturn + 1) to the power of (365 / 7)) - 1 Where: Base Return = (AUV Change -- Contract Charge Adjustment) / Prior AUV. AUV Change = Current AUV -- Prior AUV. Contract Charge Adjustment = Average AUV * Period Charge. Average AUV = (Current AUV + Prior AUV) / 2. Period Charge = Annual Contract Fee * (7/365). Prior AUV = Unit value as of 7 days prior. Current AUV = Unit value as of the reporting period (last day of the month). We may also quote the effective yield of a money market Subaccount for the same 7-day period, determined on an unadjusted basis (which does not deduct Contract- level charges), according to the same formula but where: Base Return = AUV Change / Prior AUV Because of the charges and deductions imposed under the Contract, the yield for the Subaccount will be lower than the yield for the corresponding Underlying Fund. The yields on amounts held in the Subaccount normally will fluctuate on a daily basis. Therefore, the disclosed yield for any given past period is not an indication or representation of future yields or rates of return. The actual yield for the Subaccount is affected by changes in interest rates on money market securities, average portfolio maturity of the Underlying Fund, the types and qualities of portfolio securities held by the Underlying Fund, and the Underlying Fund's operating expenses. Yields on amounts held in the Subaccount may also be presented for periods other than a 7-day period. FEDERAL TAX CONSIDERATIONS The following description of the federal income tax consequences under this Contract is general in nature and is therefore not exhaustive and is not intended to cover all situations. Because of the complexity of the law and the fact that the tax results will vary according to the factual status of the individual involved, a person contemplating purchase of an annuity contract and by a Contract Owner or beneficiary who may make elections under a Contract should consult with a qualified tax or legal adviser. MANDATORY DISTRIBUTIONS FOR QUALIFIED PLANS Federal tax law requires that minimum annual distributions begin by April 1st of the calendar year following the later of calendar year in which a participant under a qualified plan or a Section 403(b) annuity attains age 70 1/2 or retires. Minimum annual distributions under an IRA must begin by April 1st of the calendar year in which the Contract Owner attains 70 1/2 regardless of when he or she retires. Distributions must also begin or be continued according to the minimum distribution rules under the Code following the death of the Contract Owner or the annuitant. You should note that the U.S. Treasury recently issued regulations clarifying the operation of the required minimum distribution rules. NONQUALIFIED ANNUITY CONTRACTS Individuals may purchase tax-deferred annuities without any contribution limits. The purchase payments receive no tax benefit, deduction or deferral, but taxes on the increases in the value of the contract are generally deferred until distribution and transfers between the various investment options are not subject to tax. Generally, if an annuity contract is owned by other than an individual (or an entity such as a trust or other "look-through" entity which owns 5 for an individual's benefit), the owner will be taxed each year on the increase in the value of the contract. An exception applies for purchase payments made before March 1, 1986. The benefits of tax deferral of income earned under a non- qualified annuity should be compared with the relative federal tax rates on income from other types of investments (dividends and capital gains, taxable at 15% or less) relative to the ordinary income treatment received on annuity income and interest received on fixed instruments (notes, bonds, etc.). If two or more annuity contracts are purchased from the same insurer within the same calendar year, such annuity contract will be aggregated for federal income tax purposes. As a result, distributions from any of them will be taxed based upon the amount of income in all of the same calendar year series of annuities. This will generally have the effect of causing taxes to be paid sooner on the deferred gain in the contracts. Those receiving partial distributions made before the maturity date will generally be taxed on an income-first basis to the extent of income in the contract. If you are exchanging another annuity contract for this annuity, certain pre-August 14, 1982 deposits into an annuity contract that have been placed in the contract by means of a tax-deferred exchange under Section 1035 of the Code may be withdrawn first without income tax liability. This information on deposits must be provided to the Company by the other insurance company at the time of the exchange. There is income in the contract generally to the extent the cash value exceeds the investment in the contract. The investment in the contract is equal to the amount of premiums paid less any amount received previously which was excludable from gross income. Any direct or indirect borrowing against the value of the contract or pledging of the contract as security for a loan will be treated as a cash distribution under the tax law. In order to be treated as an annuity contract for federal income tax purposes, Section 72(s) of the Code requires any non-qualified contract to contain certain provisions specifying how your interest in the contract will be distributed in the event of the death of an owner of the contract. Specifically, Section 72(s) requires that (a) if an owner dies on or after the annuity starting date, but prior to the time the entire interest in the contract has been distributed, the entire interest in the contract will be distributed at least as rapidly as under the method of distribution being used as of the date of such owner's death; and (b) if any owner dies prior to the annuity starting date, the entire interest in the contract will be distributed within five years after the date of such owner's death. These requirements will be considered satisfied as to any portion of an owner's interest which is payable to or for the benefit of a designated beneficiary and which is distributed over the life of such designated beneficiary or over a period not extending beyond the life expectancy of that beneficiary, provided that such distributions begin within one year of the owner's death. The designated beneficiary refers to a natural person designated by the owner as a beneficiary and to whom ownership of the contract passes by reason of death. However, if the designated beneficiary is the surviving spouse of the deceased owner, the contract may be continued with the surviving spouse as the successor-owner. Contracts will be administered by the Company in accordance with these rules and the Company will make a notification when payments should be commenced. Special rules apply regarding distribution requirements when an annuity is owned by a trust or other entity for the benefit of one or more individuals. INDIVIDUAL RETIREMENT ANNUITIES To the extent of earned income for the year and not exceeding the applicable limit for the taxable year, an individual may make contributions, which in some cases may be deductible, to an individual retirement annuity (IRA). The applicable limit is $4,000 for calendar year 2007, $5,000 for 2008, and may be indexed for inflation in future years. Additional "catch-up" contributions may be made to an IRA by individuals age 50 or over. There are certain limits on the deductible amount based on the adjusted gross income of the individual and spouse and based on their participation in a retirement plan. If an individual is married and the spouse does not have earned income, the individual may establish IRAs for the individual and spouse. Purchase payments may then be made annually into IRAs for both spouses in the maximum amount of 100% of earned income up to a combined limit based on the individual limits outlined above. The Code provides for the purchase of a Simplified Employee Pension (SEP) plan. A SEP is funded through an IRA with an annual employer contribution limit of up to $45,000 for each participant. The Internal Revenue Services has not reviewed the contract for qualifications as an IRA, and has not addressed in a ruling of general applicability whether a death benefit provision such as the optional enhanced death benefit in the contract comports with IRA qualification requirements. 6 SIMPLE PLAN IRA FORM Employers may establish a savings incentive match plan for employees ("SIMPLE plan") under which employees can make elective salary reduction contributions to an IRA based on a percentage of compensation of up to the applicable limit for the taxable year. The applicable limit is $10,500 in 2007 (which may be indexed for inflation for future years). (Alternatively, the employer can establish a SIMPLE cash or deferred arrangement under IRS Section 401(k)). Under a SIMPLE plan IRA, the employer must either make a matching contribution or a nonelective contribution based on the prescribed formulas for all eligible employees. Early withdrawals are subject to the 10% early withdrawal penalty generally applicable to IRAs, except that an early withdrawal by an employee under a SIMPLE plan IRA, within the first two years of participation, shall be subject to a 25% early withdrawal tax. ROTH IRAS Section 408A of the Code permits certain individuals to contribute to a Roth IRA. Eligibility to make contributions is based upon income, and the applicable limits vary based on marital status and/or whether the contribution is a rollover contribution from another IRA or an annual contribution. Contributions to a Roth IRA, which are subject to certain limitations (similar to the annual limits for the traditional IRA's), are not deductible and must be made in cash or as a rollover or transfer from another Roth IRA or other IRA. A conversion of a "traditional" IRA to a Roth IRA may be subject to tax and other special rules apply. You should consult a tax adviser before combining any converted amounts with other Roth IRA contributions, including any other conversion amounts from other tax years. Qualified distributions from a Roth IRA are tax-free. A qualified distribution requires that the Roth IRA has been held for at least 5 years, and the distribution is made after age 59 1/2, on death or disability of the owner, or for a limited amount ($10,000) for a qualified first time home purchase for the owner or certain relatives. Income tax and a 10% penalty tax may apply to distributions made (1) before age 59 1/2 (subject to certain exceptions) or (2) during five taxable years starting with the year in which the first contribution is made to any Roth IRA of the individual. QUALIFIED PENSION AND PROFIT-SHARING PLANS Like most other contributions made under a qualified pension or profit-sharing plan, purchase payments made by an employer are not currently taxable to the participant and increases in the value of a contract are not subject to taxation until received by a participant or beneficiary. Distributions are generally taxable to the participant or beneficiary as ordinary income in the year of receipt. Any distribution that is considered the participant's "investment in the contract" is treated as a return of capital and is not taxable. Under a qualified plan, the investment in the contract may be zero. The annual limits that apply to the amounts that may be contributed to a defined contribution plan for 2007 is $45,000. The limit on employee salary reduction deferrals (commonly referred to as "401(k) contributions") is $15,500 in 2007. The annual limit may be indexed for inflation in future years. Additional "catch-up contributions" may be made by individuals age 50 or over. Amounts attributable to salary reduction contributions under Code Section 401(k) and income thereon may not be withdrawn prior to severance from employment, death, total and permanent disability, attainment of age 59 1/2, or in the case of hardship. SECTION 403(B) PLANS Under Code section 403(b), payments made by public school systems and certain tax exempt organizations to purchase annuity contracts for their employees are excludable from the gross income of the employee, subject to certain limitations. However, these payments may be subject to FICA (Social Security) taxes. A qualified contract issued as a tax-sheltered annuity under section 403(b) will be amended as necessary to conform to the requirements of the Code. The annual limits under Code Section 403(b) for employee salary reduction deferrals are increased under the same rules applicable to 401(k) plans ($15,500 in 2007). Code section 403(b)(11) restricts this distribution under Code section 403(b) annuity contracts of: (1) elective contributions made in years beginning after December 31, 1998; (2) earnings on those contributions; and (3) earnings in such years on amounts held as of the close of the last year beginning before January 1, 1989. Distribution of those 7 amounts may only occur upon death of the employee, attainment of age 59 1/2, separation from service, disability, or financial hardship. In addition, income attributable to elective contributions may not be distributed in the case of hardship. FEDERAL INCOME TAX WITHHOLDING The portion of a distribution, which is taxable income to the recipient, will be subject to federal income tax withholding as follows: 1. ELIGIBLE ROLLOVER DISTRIBUTION FROM SECTION 403(B) PLANS OR ARRANGEMENTS, FROM QUALIFIED PENSION AND PROFIT-SHARING PLANS, OR FROM 457 PLANS SPONSORED BY GOVERNMENTAL ENTITIES There is a mandatory 20% tax withholding for plan distributions that are eligible for rollover to an IRA or to another qualified retirement plan (including a 457 plan sponsored by a governmental entity) but that are not directly rolled over. A distribution made directly to a participant or beneficiary may avoid this result if: (a) a periodic settlement distribution is elected based upon a life or life expectancy calculation, or (b) a term-for-years settlement distribution is elected for a period of ten years or more, payable at least annually, or (c) a minimum required distribution as defined under the tax law is taken after the attainment of the age of 70 1/2 or as otherwise required by law, or (d) the distribution is a hardship distribution. A distribution including a rollover that is not a direct rollover will be subject to the 20% withholding, and the 10% additional tax penalty on premature withdrawals may apply to any amount not added back in the rollover. The 20% withholding may be recovered when the participant or beneficiary files a personal income tax return for the year if a rollover was completed within 60 days of receipt of the funds, except to the extent that the participant or spousal beneficiary is otherwise underwithheld or short on estimated taxes for that year. 2. OTHER NON-PERIODIC DISTRIBUTIONS (FULL OR PARTIAL REDEMPTIONS) To the extent not subject to 20% mandatory withholding as described in 1. above, the portion of a non-periodic distribution, which constitutes taxable income, will be subject to federal income tax withholding, if the aggregate distributions exceed $200 for the year, unless the recipient elects not to have taxes withheld. If no such election is made, 10% of the taxable portion of the distribution will be withheld as federal income tax; provided that the recipient may elect any other percentage. Election forms will be provided at the time distributions are requested. This form of withholding applies to all annuity programs. 3. PERIODIC DISTRIBUTIONS (DISTRIBUTIONS PAYABLE OVER A PERIOD GREATER THAN ONE YEAR) The portion of a periodic distribution, which constitutes taxable income, will be subject to federal income tax withholding under the wage withholding tables as if the recipient were married claiming three exemptions. A recipient may elect not to have income taxes withheld or have income taxes withheld at a different rate by providing a completed election form. Election forms will be provided at the time distributions are requested. This form of withholding applies to all annuity programs. Recipients who elect not to have withholding made are liable for payment of federal income tax on the taxable portion of the distribution. Recipients may also be subject to penalties under the estimated tax payment rules if withholding and estimated tax payments are not sufficient to cover tax liabilities. Recipients who do not provide a social security number or other taxpayer identification number will not be permitted to elect out of withholding. Additionally, U.S citizens residing outside of the country, or U.S. legal residents temporarily residing outside the country, are subject to different withholding rules and generally cannot elect out of withholding. 8 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The financial statements of MetLife of CT Separate Account PF II for Variable Annuities (formerly, The Travelers Separate Account PF II for Variable Annuities) and the consolidated financial statements of MetLife Life and Annuity Company of Connecticut (formerly, The Travelers Life and Annuity Company) (the "Company") (which report expresses an unqualified opinion and includes an explanatory paragraph referring to the acquisition of the Company by MetLife Inc. on July 1, 2005 and the application of the purchase method of accounting to the assets and liabilities of the Company as required by the U.S. Securities and Exchange Commission Staff Accounting Bulletin 5.J., Push Down Basis of Accounting Required in Certain Limited Circumstances and such assets and liabilities were measured at their fair values as of the acquisition date in conformity with Statement of Financial Accounting Standards No. 141, Business Combinations) as of December 31, 2006 and 2005 (SUCCESSOR) and the related consolidated statements of income, stockholder's equity, and cash flows for the year ended December 31, 2006 (SUCCESSOR) and the six months ended December 31, 2005 (SUCCESSOR), and June 30, 2005 (PREDECESSOR) and the financial statement schedules as of December 31, 2006, and 2005 (SUCCESSOR), and for the year ended December 31, 2006 (SUCCESSOR) and the six months ended December 31, 2005 (SUCCESSOR), and June 30, 2005 (PREDECESSOR) included in this Statement of Additional Information have been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their reports appearing herein, and are included in reliance upon the reports of such firm given upon their authority as experts in accounting and auditing. The principal business address of Deloitte & Touche LLP is 201 East Kennedy Boulevard, Suite 1200, Tampa, FL 33602-5827. INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The financial statements and schedules of MetLife Life and Annuity Company of Connecticut (formerly The Travelers Life and Annuity Company) for the year ended December 31, 2004 have been included in reliance upon the reports of KPMG LLP, independent registered public accounting firm, appearing elsewhere herein, and upon the authority of said firm as experts in accounting and auditing. 9 ANNUAL REPORT December 31, 2006 MetLife of CT Separate Account PF II for Variable Annuities of MetLife Life and Annuity Company of Connecticut REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Policyholders of MetLife of CT Separate Account PF II for Variable Annuities and the Board of Directors of MetLife Life and Annuity Company of Connecticut: We have audited the accompanying statement of assets and liabilities of the Subaccounts (as disclosed in Appendix A) comprising MetLife of CT Separate Account PF II for Variable Annuities (formerly, The Travelers Separate Account PF II for Variable Annuities) (the "Separate Account") of MetLife Life and Annuity Company of Connecticut (formerly, The Travelers Life and Annuity Company) ("MLAC") as of December 31, 2006, the related statement of operations for the period in the year then ended, and the statements of changes in net assets for each of the periods in the two years then ended. These financial statements are the responsibility of the Separate Account's management. Our responsibility is to express an opinion on these financial statements based on our audits. The financial highlights of the Separate Account included in footnote 5 for the periods in the three years ended December 31, 2004, were audited by other auditors whose report, dated March 21, 2005, expressed an unqualified opinion on those financial highlights. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Separate Account is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Separate Account's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2006, by correspondence with the custodian. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of each of the Subaccounts comprising the Separate Account of MLAC as of December 31, 2006, the results of their operations for the period in the year then ended, and the changes in their net assets for each of the periods in the two years then ended, in conformity with accounting principles generally accepted in the United States of America. /s/ DELOITTE & TOUCHE LLP Certified Public Accountants Tampa, Florida March 19, 2007 APPENDIX A AIM V.I. Capital Appreciation Subaccount (Series II) AIM V.I. Core Equity Subaccount (Series II) AIM V.I. Premier Equity Subaccount (Series II) AllianceBernstein Global Technology Subaccount (Class B) AllianceBernstein Large-Cap Growth Subaccount (Class B) American Funds Global Growth Subaccount (Class 2) American Funds Growth Subaccount (Class 2) American Funds Growth-Income Subaccount (Class 2) FTVIPT Mutual Shares Securities Subaccount (Class 2) FTVIPT Templeton Growth Securities Subaccount (Class 2) LMPIS Dividend Strategy Subaccount LMPIS Government Subaccount (Class A) LMPIS Growth and Income Subaccount LMPIS Premier Selections All Cap Growth Subaccount LMPLS Balanced Subaccount LMPLS Growth Subaccount LMPLS High Growth Subaccount LMPVPII Appreciation Subaccount LMPVPII Capital and Income Subaccount LMPVPII Fundamental Value Subaccount LMPVPIII Adjustable Rate Income Subaccount LMPVPIII Aggressive Growth Subaccount LMPVPIII High Income Subaccount LMPVPIII International All Cap Growth Subaccount LMPVPIII Large Cap Growth Subaccount LMPVPIII Large Cap Value Subaccount LMPVPIII Mid Cap Core Subaccount LMPVPIII Money Market Subaccount LMPVPIII Social Awareness Stock Subaccount LMPVPIV Multiple Discipline Subaccount-All Cap Growth and Value LMPVPIV Multiple Discipline Subaccount-Balanced All Cap Growth and Value LMPVPIV Multiple Discipline Subaccount-Global All Cap Growth and Value LMPVPIV Multiple Discipline Subaccount-Large Cap Growth and Value LMPVPV Small Cap Growth Opportunities Subaccount MIST BlackRock Large-Cap Core Subaccount (Class A) MIST Lord Abbett Bond Debenture Subaccount (Class A) MIST Lord Abbett Growth and Income Subaccount (Class B) MIST Oppenheimer Capital Appreciation Subaccount (Class B) MIST Pioneer Strategic Income Subaccount (Class A) MSF BlackRock Aggressive Growth Subaccount (Class D) MSF BlackRock Bond Income Subaccount (Class E) MSF MFS(R) Total Return Subaccount (Class F) MSF T. Rowe Price Large Cap Growth Subaccount (Class B) MSF Western Asset Management U.S. Government Subaccount (Class A) Oppenheimer Capital Appreciation Subaccount/VA (Service Shares) Oppenheimer Main Street/VA Subaccount (Service Shares) Pioneer Fund VCT Subaccount (Class II) Pioneer Mid Cap Value VCT Subaccount (Class II) Putnam VT International Equity Subaccount (Class IB) Putnam VT Small Cap Value Subaccount (Class IB) Travelers Convertible Securities Subaccount Travelers Managed Income Subaccount Travelers Mercury Large Cap Core Subaccount Travelers MFS(R) Mid Cap Growth Subaccount Travelers MFS(R) Total Return Subaccount Travelers Pioneer Strategic Income Subaccount Travelers U.S. Government Securities Subaccount UIF Equity and Income Subaccount (Class II) UIF U.S. Real Estate Securities Subaccount (Class I) Van Kampen LIT Comstock Subaccount (Class II) Van Kampen LIT Growth and Income Subaccount (Class II) Van Kampen LIT Strategic Growth Subaccount (Class II) VIP Equity - Income Subaccount (Service Class 2) VIP Growth Subaccount (Service Class 2) VIP Mid Cap Subaccount (Service Class 2) METLIFE OF CT SEPARATE ACCOUNT PF II FOR VARIABLE ANNUITIES STATEMENT OF ASSETS AND LIABILITIES December 31, 2006
AIM V.I. Capital AllianceBernstein AllianceBernstein Appreciation AIM V.I. Core Equity Global Technology Large-Cap Growth Subaccount Subaccount Subaccount Subaccount (Series II) (Series II) (Class B) (Class B) ----------- ----------- --------- --------- Assets: Investments at market value ............. $1,631,674 $2,025,486 $1,512,227 $2,011,534 ---------- ---------- ---------- ---------- Total Assets ......................... 1,631,674 2,025,486 1,512,227 2,011,534 ---------- ---------- ---------- ---------- Liabilities: Payables: Insurance charges...................... 135 169 128 158 Administrative fees.................... 13 17 12 16 Due to MetLife Life and Annuity Company of Connecticut......................... -- 80 1,255 1,561 ---------- ---------- ---------- ---------- Total Liabilities .................... 148 266 1,395 1,735 ---------- ---------- ---------- ---------- Net Assets: .............................. $1,631,526 $2,025,220 $1,510,832 $2,009,799 ========== ========== ========== ==========
The accompanying notes are an integral part of these financial statements. 1 METLIFE OF CT SEPARATE ACCOUNT PF II FOR VARIABLE ANNUITIES STATEMENT OF ASSETS AND LIABILITIES -- (Continued) December 31, 2006
American Funds American Funds FTVIPT Mutual Global Growth American Funds Growth-Income Shares Securities Subaccount Growth Subaccount Subaccount Subaccount (Class 2) (Class 2) (Class 2) (Class 2) --------- --------- --------- --------- Assets: Investments at market value ..................... $16,592,370 $43,807,019 $33,981,610 $67,819,068 ----------- ----------- ----------- ----------- Total Assets ................................. 16,592,370 43,807,019 33,981,610 67,819,068 ----------- ----------- ----------- ----------- Liabilities: Payables: Insurance charges.............................. 1,397 3,675 2,854 5,568 Administrative fees............................ 136 360 279 557 Due to MetLife Life and Annuity Company of Connecticut.................................... 301 12,030 227 15,642 ----------- ----------- ----------- ----------- Total Liabilities ............................ 1,834 16,065 3,360 21,767 ----------- ----------- ----------- ----------- Net Assets: ...................................... $16,590,536 $43,790,954 $33,978,250 $67,797,301 =========== =========== =========== ===========
The accompanying notes are an integral part of these financial statements. 2 METLIFE OF CT SEPARATE ACCOUNT PF II FOR VARIABLE ANNUITIES STATEMENT OF ASSETS AND LIABILITIES -- (Continued) December 31, 2006
FTVIPT Templeton Growth Securities LMPIS Government LMPIS Premier Subaccount LMPIS Dividend Subaccount LMPIS Growth and Selections All Cap LMPLS Balanced (Class 2) Strategy Subaccount (Class A) Income Subaccount Growth Subaccount Subaccount --------- ------------------- --------- ----------------- ----------------- ---------- $36,493,624 $46,134,401 $95,441,669 $53,551,657 $17,320,293 $152,353,619 ----------- ----------- ----------- ----------- ----------- ------------ 36,493,624 46,134,401 95,441,669 53,551,657 17,320,293 152,353,619 ----------- ----------- ----------- ----------- ----------- ------------ 2,963 3,414 7,742 4,154 1,214 11,016 300 379 784 440 143 1,252 11,430 3,570 6,499 150 520 1,053 ----------- ----------- ----------- ----------- ----------- ------------ 14,693 7,363 15,025 4,744 1,877 13,321 ----------- ----------- ----------- ----------- ----------- ------------ $36,478,931 $46,127,038 $95,426,644 $53,546,913 $17,318,416 $152,340,298 =========== =========== =========== =========== =========== ============
The accompanying notes are an integral part of these financial statements. 3 METLIFE OF CT SEPARATE ACCOUNT PF II FOR VARIABLE ANNUITIES STATEMENT OF ASSETS AND LIABILITIES -- (Continued) December 31, 2006
LMPVPV Small Cap LMPVPII LMPLS Growth LMPLS High Growth Growth Opportunities Appreciation Subaccount Subaccount Subaccount Subaccount ---------- ---------- ---------- ---------- Assets: Investments at market value ...................... $84,716,204 $56,416,754 $17,872,614 $460,654,160 ----------- ----------- ----------- ------------ Total Assets .................................. 84,716,204 56,416,754 17,872,614 460,654,160 ----------- ----------- ----------- ------------ Liabilities: Payables: Insurance charges............................... 5,904 3,909 1,341 34,839 Administrative fees............................. 696 464 147 3,786 Due to MetLife Life and Annuity Company of Connecticut..................................... -- 10 100 5,060 ----------- ----------- ----------- ------------ Total Liabilities ............................. 6,600 4,383 1,588 43,685 ----------- ----------- ----------- ------------ Net Assets: ....................................... $84,709,604 $56,412,371 $17,871,026 $460,610,475 =========== =========== =========== ============
The accompanying notes are an integral part of these financial statements. 4 METLIFE OF CT SEPARATE ACCOUNT PF II FOR VARIABLE ANNUITIES STATEMENT OF ASSETS AND LIABILITIES -- (Continued) December 31, 2006
LMPVPII Capital LMPVPII LMPVPIII Adjustable LMPVPIII and Income Fundamental Value Rate Income LMPVPIII Aggressive LMPVPIII High International All Cap Subaccount Subaccount Subaccount Growth Subaccount Income Subaccount Growth Subaccount ---------- ---------- ---------- ----------------- ----------------- ----------------- $34,415,126 $349,870,551 $2,966,069 $409,744,732 $92,458,329 $53,256,956 ----------- ------------ ---------- ------------ ----------- ----------- 34,415,126 349,870,551 2,966,069 409,744,732 92,458,329 53,256,956 ----------- ------------ ---------- ------------ ----------- ----------- 2,878 27,811 244 31,814 7,183 3,834 283 2,875 25 3,368 760 437 13,782 23,784 -- 24,528 7,200 312 ----------- ------------ ---------- ------------ ----------- ----------- 16,943 54,470 269 59,710 15,143 4,583 ----------- ------------ ---------- ------------ ----------- ----------- $34,398,183 $349,816,081 $2,965,800 $409,685,022 $92,443,186 $53,252,373 =========== ============ ========== ============ =========== ===========
The accompanying notes are an integral part of these financial statements. 5 METLIFE OF CT SEPARATE ACCOUNT PF II FOR VARIABLE ANNUITIES STATEMENT OF ASSETS AND LIABILITIES -- (Continued) December 31, 2006
LMPVPIII Large Cap LMPVPIII Large Cap LMPVPIII Mid Cap LMPVPIII Money Growth Subaccount Value Subaccount Core Subaccount Market Subaccount ----------------- ---------------- --------------- ----------------- Assets: Investments at market value .............. $27,627,586 $81,982,404 $39,405,605 $62,378,614 ----------- ----------- ----------- ----------- Total Assets .......................... 27,627,586 81,982,404 39,405,605 62,378,614 ----------- ----------- ----------- ----------- Liabilities: Payables: Insurance charges....................... 2,191 5,731 3,093 4,746 Administrative fees..................... 227 674 324 512 Due to MetLife Life and Annuity Company of Connecticut.......................... -- 90 1,911 9,863 ----------- ----------- ----------- ----------- Total Liabilities ..................... 2,418 6,495 5,328 15,121 ----------- ----------- ----------- ----------- Net Assets: ............................... $27,625,168 $81,975,909 $39,400,277 $62,363,493 =========== =========== =========== ===========
The accompanying notes are an integral part of these financial statements. 6 METLIFE OF CT SEPARATE ACCOUNT PF II FOR VARIABLE ANNUITIES STATEMENT OF ASSETS AND LIABILITIES -- (Continued) December 31, 2006
LMPVPIV LMPVPIV LMPVPIV LMPVPIV LMPVPIII Multiple Discipline Multiple Discipline Multiple Discipline Multiple MIST BlackRock Social Subaccount- Subaccount- Subaccount- Discipline Subaccount- Large-Cap Core Awareness Stock All Cap Growth Balanced All Cap Global All Cap Large Cap Growth Subaccount Subaccount and Value Growth and Value Growth and Value and Value (Class A) ---------- --------- ---------------- ---------------- --------- --------- $20,164,904 $4,987,760 $4,853,605 $3,128,263 $1,834,899 $58,419,208 ----------- ---------- ---------- ---------- ---------- ----------- 20,164,904 4,987,760 4,853,605 3,128,263 1,834,899 58,419,208 ----------- ---------- ---------- ---------- ---------- ----------- 1,512 414 400 260 157 4,056 166 41 40 26 15 480 1,561 570 -- 10 -- -- ----------- ---------- ---------- ---------- ---------- ----------- 3,239 1,025 440 296 172 4,536 ----------- ---------- ---------- ---------- ---------- ----------- $20,161,665 $4,986,735 $4,853,165 $3,127,967 $1,834,727 $58,414,672 =========== ========== ========== ========== ========== ===========
The accompanying notes are an integral part of these financial statements. 7 METLIFE OF CT SEPARATE ACCOUNT PF II FOR VARIABLE ANNUITIES STATEMENT OF ASSETS AND LIABILITIES -- (Continued) December 31, 2006
MIST Lord Abbett MIST Lord Abbett MIST Oppenheimer MIST Pioneer Bond Debenture Growth and Income Capital Appreciation Strategic Income Subaccount Subaccount Subaccount Subaccount (Class A) (Class B) (Class B) (Class A) --------- --------- --------- --------- Assets: Investments at market value .............. $25,838,592 $8,552,299 $6,918,732 $46,133,254 ----------- ---------- ---------- ----------- Total Assets .......................... 25,838,592 8,552,299 6,918,732 46,133,254 ----------- ---------- ---------- ----------- Liabilities: Payables: Insurance charges....................... 2,149 713 571 3,776 Administrative fees..................... 212 70 57 379 Due to MetLife Life and Annuity Company of Connecticut.......................... 449 80 -- 18,021 ----------- ---------- ---------- ----------- Total Liabilities ..................... 2,810 863 628 22,176 ----------- ---------- ---------- ----------- Net Assets: ............................... $25,835,782 $8,551,436 $6,918,104 $46,111,078 =========== ========== ========== ===========
The accompanying notes are an integral part of these financial statements. 8 METLIFE OF CT SEPARATE ACCOUNT PF II FOR VARIABLE ANNUITIES STATEMENT OF ASSETS AND LIABILITIES -- (Continued) December 31, 2006
MSF Western Asset MSF BlackRock MSF BlackRock MSF MFS(R) MSF T. Rowe Price Management Aggressive Growth Bond Income Total Return Large Cap Growth U.S. Government Pioneer Fund VCT Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount (Class D) (Class E) (Class F) (Class B) (Class A) (Class II) --------- --------- --------- --------- --------- ---------- $56,977,680 $42,328,037 $200,659,864 $4,094,758 $9,233,254 $3,816,855 ----------- ----------- ------------ ---------- ---------- ---------- 56,977,680 42,328,037 200,659,864 4,094,758 9,233,254 3,816,855 ----------- ----------- ------------ ---------- ---------- ---------- 3,987 3,531 15,224 340 670 314 468 348 1,649 34 75 31 550 10 2,741 15 -- 1,561 ----------- ----------- ------------ ---------- ---------- ---------- 5,005 3,889 19,614 389 745 1,906 ----------- ----------- ------------ ---------- ---------- ---------- $56,972,675 $42,324,148 $200,640,250 $4,094,369 $9,232,509 $3,814,949 =========== =========== ============ ========== ========== ==========
The accompanying notes are an integral part of these financial statements. 9 METLIFE OF CT SEPARATE ACCOUNT PF II FOR VARIABLE ANNUITIES STATEMENT OF ASSETS AND LIABILITIES -- (Continued) December 31, 2006
Pioneer Mid Cap Putnam VT Putnam VT UIF Equity Value VCT International Equity Small Cap Value and Income Subaccount Subaccount Subaccount Subaccount (Class II) (Class IB) (Class IB) (Class II) ---------- ---------- ---------- ---------- Assets: Investments at market value ..................... $26,738,551 $9,327,771 $23,647,471 $168,178,399 ----------- ---------- ----------- ------------ Total Assets ................................. 26,738,551 9,327,771 23,647,471 168,178,399 ----------- ---------- ----------- ------------ Liabilities: Payables: Insurance charges.............................. 2,178 731 1,926 13,830 Administrative fees............................ 220 77 194 1,382 Due to MetLife Life and Annuity Company of Connecticut.................................... 617 360 376 36,788 ----------- ---------- ----------- ------------ Total Liabilities ............................ 3,015 1,168 2,496 52,000 ----------- ---------- ----------- ------------ Net Assets: ..................................... $26,735,536 $9,326,603 $23,644,975 $168,126,399 =========== ========== =========== ============
The accompanying notes are an integral part of these financial statements. 10 METLIFE OF CT SEPARATE ACCOUNT PF II FOR VARIABLE ANNUITIES STATEMENT OF ASSETS AND LIABILITIES -- (Concluded) December 31, 2006
Van Kampen LIT Van Kampen LIT UIF U.S. Real Estate Van Kampen LIT Growth and Income Strategic Growth VIP Equity-Income VIP Mid Cap Securities Subaccount Comstock Subaccount Subaccount Subaccount Subaccount Subaccount (Class I) (Class II) (Class II) (Class II) (Service Class 2) (Service Class 2) --------- ---------- ---------- ---------- ----------------- ----------------- $29,917,133 $220,727,328 $150,742,527 $60,605,361 $12,627,701 $36,473,815 ----------- ------------ ------------ ----------- ----------- ----------- 29,917,133 220,727,328 150,742,527 60,605,361 12,627,701 36,473,815 ----------- ------------ ------------ ----------- ----------- ----------- 2,388 17,128 11,601 4,530 1,034 2,949 246 1,814 1,239 498 104 299 1,501 22,357 4,406 832 62 18,459 ----------- ------------ ------------ ----------- ----------- ----------- 4,135 41,299 17,246 5,860 1,200 21,707 ----------- ------------ ------------ ----------- ----------- ----------- $29,912,998 $220,686,029 $150,725,281 $60,599,501 $12,626,501 $36,452,108 =========== ============ ============ =========== =========== ===========
The accompanying notes are an integral part of these financial statements. 11 METLIFE OF CT SEPARATE ACCOUNT PF II FOR VARIABLE ANNUITIES STATEMENT OF OPERATIONS For the year ended December 31, 2006
AIM V.I. Capital AIM V.I. Premier AllianceBernstein Appreciation AIM V.I. Core Equity Equity Subaccount Global Technology Subaccount (Series II) Subaccount (Series II) (Series II) Subaccount (Class B) ---------------------- ---------------------- ----------- -------------------- Investment Income: Dividends .................... $ -- $ 10,181 $ 11,027 $ -- -------- -------- --------- -------- Expenses: Insurance charges ............ 24,149 18,159 7,564 23,482 Administrative fees .......... 2,386 1,775 734 2,296 -------- -------- --------- -------- Total expenses ............ 26,535 19,934 8,298 25,778 -------- -------- --------- -------- Net investment income (loss).................. (26,535) (9,753) 2,729 (25,778) -------- -------- --------- -------- Realized Gain (Loss) and Unrealized Gain (Loss) on Investments: Realized gain distribution.. -- -- -- -- Realized gain (loss) on sale of investments ............ 55,038 6,840 251,635 71,040 -------- -------- --------- -------- Realized gain (loss) ..... 55,038 6,840 251,635 71,040 -------- -------- --------- -------- Change in unrealized gain (loss) on investments ..... 32,520 150,590 (182,399) 61,141 -------- -------- --------- -------- Net increase (decrease) in net assets resulting from operations.................. $ 61,023 $147,677 $ 71,965 $106,403 ======== ======== ========= ========
The accompanying notes are an integral part of these financial statements. 12 METLIFE OF CT SEPARATE ACCOUNT PF II FOR VARIABLE ANNUITIES STATEMENT OF OPERATIONS -- (Continued) For the year ended December 31, 2006
AllianceBernstein American Funds American Funds American Funds Large-Cap Growth Global Growth Growth Subaccount Growth-Income Subaccount (Class B) Subaccount (Class 2) (Class 2) Subaccount (Class 2) -------------------- -------------------- --------- -------------------- Investment Income: Dividends ........................ $ -- $ 118,458 $ 334,074 $ 496,919 -------- ---------- ---------- ---------- Expenses: Insurance charges ................ 27,287 204,032 605,276 470,495 Administrative fees .............. 2,838 19,914 59,139 46,013 -------- ---------- ---------- ---------- Total expenses ................ 30,125 223,946 664,415 516,508 -------- ---------- ---------- ---------- Net investment income (loss) . (30,125) (105,488) (330,341) (19,589) -------- ---------- ---------- ---------- Realized Gain (Loss) and Unrealized Gain (Loss) on Investments: Realized gain distribution...... -- -- 255,702 743,561 Realized gain (loss) on sale of investments ................... 63,834 138,442 271,300 191,025 -------- ---------- ---------- ---------- Realized gain (loss) ......... 63,834 138,442 527,002 934,586 -------- ---------- ---------- ---------- Change in unrealized gain (loss) on investments ................ (75,094) 2,201,755 2,911,358 2,937,430 -------- ---------- ---------- ---------- Net increase (decrease) in net assets resulting from operations $(41,385) $2,234,709 $3,108,019 $3,852,427 ======== ========== ========== ==========
The accompanying notes are an integral part of these financial statements. 13 METLIFE OF CT SEPARATE ACCOUNT PF II FOR VARIABLE ANNUITIES STATEMENT OF OPERATIONS -- (Continued) For the year ended December 31, 2006
FTVIPT Mutual FTVIPT Templeton LMPIS Premier Shares Securities Growth Securities LMPIS Dividend LMPIS Government LMPIS Growth and Selections All Cap Subaccount (Class 2) Subaccount (Class 2) Strategy Subaccount Subaccount (Class A) Income Subaccount Growth Subaccount - -------------------- -------------------- ------------------- -------------------- ----------------- ----------------- $ 778,033 $ 401,104 $ 943,822 $3,847,603 $ 404,715 $ -- ---------- ---------- ----------- ---------- ---------- ---------- 885,221 450,565 619,832 1,442,421 762,196 238,320 88,348 45,331 69,057 146,315 80,802 27,885 ---------- ---------- ----------- ---------- ---------- ---------- 973,569 495,896 688,889 1,588,736 842,998 266,205 ---------- ---------- ----------- ---------- ---------- ---------- (195,536) (94,792) 254,933 2,258,867 (438,283) (266,205) ---------- ---------- ----------- ---------- ---------- ---------- 1,981,448 1,117,448 -- -- 17,593 560,481 292,050 246,343 (1,131,734) (727,155) 1,097,822 (38,892) ---------- ---------- ----------- ---------- ---------- ---------- 2,273,498 1,363,791 (1,131,734) (727,155) 1,115,415 521,589 ---------- ---------- ----------- ---------- ---------- ---------- 6,954,419 4,338,464 7,773,864 648,268 4,777,425 761,222 ---------- ---------- ----------- ---------- ---------- ---------- $9,032,381 $5,607,463 $ 6,897,063 $2,179,980 $5,454,557 $1,016,606 ========== ========== =========== ========== ========== ==========
The accompanying notes are an integral part of these financial statements. 14 METLIFE OF CT SEPARATE ACCOUNT PF II FOR VARIABLE ANNUITIES STATEMENT OF OPERATIONS -- (Continued) For the year ended December 31, 2006
LMPVPV Small Cap LMPLS Balanced LMPLS Growth LMPLS High Growth Growth Opportunities Subaccount Subaccount Subaccount Subaccount -------------- ------------ ----------------- -------------------- Investment Income: Dividends ...................................... $4,247,741 $1,603,307 $ 582,844 $ -- ---------- ---------- ---------- ---------- Expenses: Insurance charges .............................. 2,077,728 1,118,567 750,472 246,972 Administrative fees ............................ 236,246 132,004 89,118 27,180 ---------- ---------- ---------- ---------- Total expenses................................ 2,313,974 1,250,571 839,590 274,152 ---------- ---------- ---------- ---------- Net investment income (loss) ................ 1,933,767 352,736 (256,746) (274,152) ---------- ---------- ---------- ---------- Realized Gain (Loss) and Unrealized Gain (Loss) on Investments: Realized gain distribution.................... -- -- -- 1,189,718 Realized gain (loss) on sale of investments... 1,259,208 (986,043) 140,801 455,051 ---------- ---------- ---------- ---------- Realized gain (loss) ........................ 1,259,208 (986,043) 140,801 1,644,769 ---------- ---------- ---------- ---------- Change in unrealized gain (loss) on investments ................................. 6,603,532 6,675,759 4,480,282 433,440 ---------- ---------- ---------- ---------- Net increase (decrease) in net assets resulting from operations............................... $9,796,507 $6,042,452 $4,364,337 $1,804,057 ========== ========== ========== ==========
The accompanying notes are an integral part of these financial statements. 15 METLIFE OF CT SEPARATE ACCOUNT PF II FOR VARIABLE ANNUITIES STATEMENT OF OPERATIONS -- (Continued) For the year ended December 31, 2006
LMPVPII LMPVPII LMPVPIII Adjustable Appreciation LMPVPII Capital and Fundamental Value Rate Income LMPVPIII Aggressive LMPVPIII High Subaccount Income Subaccount Subaccount Subaccount Growth Subaccount Income Subaccount - ------------ ------------------- ----------------- ------------------- ------------------- ----------------- $ 4,892,651 $ 598,084 $ 5,389,303 $134,111 $ -- $ 7,025,140 ----------- ---------- ----------- -------- ----------- ----------- 6,254,675 465,972 4,892,115 48,746 5,834,402 1,300,062 680,684 45,795 505,744 4,843 618,747 137,638 ----------- ---------- ----------- -------- ----------- ----------- 6,935,359 511,767 5,397,859 53,589 6,453,149 1,437,700 ----------- ---------- ----------- -------- ----------- ----------- (2,042,708) 86,317 (8,556) 80,522 (6,453,149) 5,587,440 ----------- ---------- ----------- -------- ----------- ----------- 12,855,895 217,865 13,660,420 -- 437,935 -- 8,495,253 120,576 5,013,995 5,016 6,669,940 (1,262,595) ----------- ---------- ----------- -------- ----------- ----------- 21,351,148 338,441 18,674,415 5,016 7,107,875 (1,262,595) ----------- ---------- ----------- -------- ----------- ----------- 36,172,722 2,286,421 28,346,410 (9,066) 27,189,244 3,778,828 ----------- ---------- ----------- -------- ----------- ----------- $55,481,162 $2,711,179 $47,012,269 $ 76,472 $27,843,970 $ 8,103,673 =========== ========== =========== ======== =========== ===========
The accompanying notes are an integral part of these financial statements. 16 METLIFE OF CT SEPARATE ACCOUNT PF II FOR VARIABLE ANNUITIES STATEMENT OF OPERATIONS -- (Continued) For the year ended December 31, 2006
LMPVPIII International All Cap LMPVPIII Large Cap LMPVPIII Large Cap LMPVPIII Mid Cap Growth Subaccount Growth Subaccount Value Subaccount Core Subaccount --------------------- ------------------ ------------------ ---------------- Investment Income: Dividends ............................ $ 1,048,735 $ 42,228 $ 978,740 $ 210,015 ----------- --------- ----------- ---------- Expenses: Insurance charges .................... 662,563 413,367 1,036,819 560,247 Administrative fees .................. 75,711 42,855 122,052 58,674 ----------- --------- ----------- ---------- Total expenses...................... 738,274 456,222 1,158,871 618,921 ----------- --------- ----------- ---------- Net investment income (loss) ...... 310,461 (413,994) (180,131) (408,906) ----------- --------- ----------- ---------- Realized Gain (Loss) and Unrealized Gain (Loss) on Investments: Realized gain distribution.......... 1,071,879 -- 1,439,916 4,794,482 Realized gain (loss) on sale of investments ....................... (194,082) 679,571 582,591 1,159,030 ----------- --------- ----------- ---------- Realized gain (loss) .............. 877,797 679,571 2,022,507 5,953,512 ----------- --------- ----------- ---------- Change in unrealized gain (loss) on investments ....................... 9,682,639 437,572 10,625,536 (796,241) ----------- --------- ----------- ---------- Net increase (decrease) in net assets resulting from operations........... $10,870,897 $ 703,149 $12,467,912 $4,748,365 =========== ========= =========== ==========
The accompanying notes are an integral part of these financial statements. 17 METLIFE OF CT SEPARATE ACCOUNT PF II FOR VARIABLE ANNUITIES STATEMENT OF OPERATIONS -- (Continued) For the year ended December 31, 2006
LMPVPIV Multiple LMPVPIV Multiple LMPVPIII Social Discipline Subaccount- Discipline Subaccount- LMPVPIII Money Awareness Stock All Cap Growth and Balanced All Cap Market Subaccount Subaccount Value Growth and Value - ----------------- --------------- ---------------------- ---------------------- $3,096,813 $ 102,726 $ 30,345 $ 73,835 ---------- ---------- -------- -------- 956,297 284,386 68,562 70,364 103,086 31,166 6,754 6,966 ---------- ---------- -------- -------- 1,059,383 315,552 75,316 77,330 ---------- ---------- -------- -------- 2,037,430 (212,826) (44,971) (3,495) ---------- ---------- -------- -------- -- -- 226,771 139,929 -- 121,447 55,962 46,407 ---------- ---------- -------- -------- -- 121,447 282,733 186,336 ---------- ---------- -------- -------- -- 1,236,016 282,843 207,944 ---------- ---------- -------- -------- $2,037,430 $1,144,637 $520,605 $390,785 ========== ========== ======== ======== LMPVPIV Multiple LMPVPIV Multiple Discipline Subaccount- Discipline Subaccount- Global All Cap Large Cap Growth Growth and Value and Value - ---------------------- ---------------------- $ 35,715 $ 13,753 -------- -------- 46,565 27,737 4,577 2,655 -------- -------- 51,142 30,392 -------- -------- (15,427) (16,639) -------- -------- 78,808 45,105 70,348 22,497 -------- -------- 149,156 67,602 -------- -------- 234,774 120,228 -------- -------- $368,503 $171,191 ======== ========
The accompanying notes are an integral part of these financial statements. 18 METLIFE OF CT SEPARATE ACCOUNT PF II FOR VARIABLE ANNUITIES STATEMENT OF OPERATIONS -- (Continued) For the year ended December 31, 2006
MIST BlackRock MIST Lord Abbett MIST Lord Abbett MIST Oppenheimer Large-Cap Core Bond Debenture Growth and Income Capital Appreciation Subaccount (Class A) Subaccount (Class A) Subaccount (Class B) Subaccount (Class B) -------------------- -------------------- -------------------- -------------------- Investment Income: Dividends ..................... $ -- $ -- $ -- $ -- ---------- ---------- -------- -------- Expenses: Insurance charges ............. 493,965 260,705 84,758 67,927 Administrative fees ........... 58,492 25,733 8,362 6,748 ---------- ---------- -------- -------- Total expenses............... 552,457 286,438 93,120 74,675 ---------- ---------- -------- -------- Net investment income (loss) .................... (552,457) (286,438) (93,120) (74,675) ---------- ---------- -------- -------- Realized Gain (Loss) and Unrealized Gain (Loss) on Investments: Realized gain distribution... -- -- -- -- Realized gain (loss) on sale of investments ............. (79,263) 41,378 10,508 (8,121) ---------- ---------- -------- -------- Realized gain (loss) ....... (79,263) 41,378 10,508 (8,121) ---------- ---------- -------- -------- Change in unrealized gain (loss) on investments ...... 3,843,311 1,431,073 677,684 187,092 ---------- ---------- -------- -------- Net increase (decrease) in net assets resulting from operations................... $3,211,591 $1,186,013 $595,072 $104,296 ========== ========== ======== ========
The accompanying notes are an integral part of these financial statements. 19 METLIFE OF CT SEPARATE ACCOUNT PF II FOR VARIABLE ANNUITIES STATEMENT OF OPERATIONS -- (Continued) For the year ended December 31, 2006
MSF Western Asset MIST Pioneer MSF BlackRock MSF BlackRock Bond MSF MFS(R) Total MSF T. Rowe Price Management U.S. Strategic Income Aggressive Growth Income Subaccount Return Subaccount Large Cap Growth Government Subaccount (Class A) Subaccount (Class D) (Class E) (Class F) Subaccount (Class B) Subaccount (Class A) - -------------------- -------------------- ------------------ ----------------- -------------------- -------------------- $2,123,213 $ -- $ -- $ -- $ -- $ -- ---------- ----------- ---------- ----------- -------- -------- 451,162 506,254 438,892 1,848,390 41,280 78,875 45,194 59,484 43,225 200,448 4,075 8,888 ---------- ----------- ---------- ----------- -------- -------- 496,356 565,738 482,117 2,048,838 45,355 87,763 ---------- ----------- ---------- ----------- -------- -------- 1,626,857 (565,738) (482,117) (2,048,838) (45,355) (87,763) ---------- ----------- ---------- ----------- -------- -------- -- -- -- -- -- -- 50,090 (602,257) 77,058 299,644 (414) 54,014 ---------- ----------- ---------- ----------- -------- -------- 50,090 (602,257) 77,058 299,644 (414) 54,014 ---------- ----------- ---------- ----------- -------- -------- (119,753) (752,253) 1,960,953 14,932,019 315,602 337,290 ---------- ----------- ---------- ----------- -------- -------- $1,557,194 $(1,920,248) $1,555,894 $13,182,825 $269,833 $303,541 ========== =========== ========== =========== ======== ========
The accompanying notes are an integral part of these financial statements. 20 METLIFE OF CT SEPARATE ACCOUNT PF II FOR VARIABLE ANNUITIES STATEMENT OF OPERATIONS -- (Continued) For the year ended December 31, 2006
Oppenheimer Capital Appreciation Oppenheimer Main Pioneer Mid Cap Subaccount/VA Street/VA Subaccount Pioneer Fund VCT Value VCT (Service Shares) (Service Shares) Subaccount (Class II) Subaccount (Class II) ------------------- -------------------- --------------------- --------------------- Investment Income: Dividends .................... $ 12,116 $ 82,740 $ 37,208 $ -- ----------- ----------- -------- ----------- Expenses: Insurance charges ............ 32,552 41,836 50,418 366,877 Administrative fees .......... 3,211 4,125 4,950 36,901 ----------- ----------- -------- ----------- Total expenses.............. 35,763 45,961 55,368 403,778 ----------- ----------- -------- ----------- Net investment income (loss) ................... (23,647) 36,779 (18,160) (403,778) ----------- ----------- -------- ----------- Realized Gain (Loss) and Unrealized Gain (Loss) on Investments: Realized gain distribution.. -- -- -- 6,458,894 Realized gain (loss) on sale of investments ............ 1,416,485 2,007,564 83,938 (75,963) ----------- ----------- -------- ----------- Realized gain (loss) ...... 1,416,485 2,007,564 83,938 6,382,931 ----------- ----------- -------- ----------- Change in unrealized gain (loss) on investments ..... (1,103,817) (1,581,351) 385,895 (3,520,087) ----------- ----------- -------- ----------- Net increase (decrease) in net assets resulting from operations.................. $ 289,021 $ 462,992 $451,673 $ 2,459,066 =========== =========== ======== ===========
The accompanying notes are an integral part of these financial statements. 21 METLIFE OF CT SEPARATE ACCOUNT PF II FOR VARIABLE ANNUITIES STATEMENT OF OPERATIONS -- (Continued) For the year ended December 31, 2006
Putnam VT Putnam VT Small Cap Travelers Mercury Travelers MFS(R) Mid International Equity Value Subaccount Travelers Convertible Travelers Managed Large Cap Core Cap Growth Subaccount (Class IB) (Class IB) Securities Subaccount Income Subaccount Subaccount Subaccount - --------------------- ------------------- --------------------- ----------------- ----------------- -------------------- $ 32,950 $ 64,138 $ 214,512 $ 929,370 $ 132,699 $ -- ---------- ---------- ---------- ----------- ----------- ------------ 97,155 317,369 122,956 222,012 257,013 280,871 10,056 31,850 12,102 21,863 30,447 33,034 ---------- ---------- ---------- ----------- ----------- ------------ 107,211 349,219 135,058 243,875 287,460 313,905 ---------- ---------- ---------- ----------- ----------- ------------ (74,261) (285,081) 79,454 685,495 (154,761) (313,905) ---------- ---------- ---------- ----------- ----------- ------------ -- 1,963,925 336,016 -- 1,937,697 3,632,001 154,595 197,792 1,730,644 (3,474,264) (4,852,905) (47,643,863) ---------- ---------- ---------- ----------- ----------- ------------ 154,595 2,161,717 2,066,660 (3,474,264) (2,915,208) (44,011,862) ---------- ---------- ---------- ----------- ----------- ------------ 1,417,596 1,019,412 (572,661) 2,353,369 6,877,929 48,219,423 ---------- ---------- ---------- ----------- ----------- ------------ $1,497,930 $2,896,048 $1,573,453 $ (435,400) $ 3,807,960 $ 3,893,656 ========== ========== ========== =========== =========== ============
The accompanying notes are an integral part of these financial statements. 22 METLIFE OF CT SEPARATE ACCOUNT PF II FOR VARIABLE ANNUITIES STATEMENT OF OPERATIONS -- (Continued) For the year ended December 31, 2006
Travelers Pioneer Travelers U.S. UIF Equity and Travelers MFS(R) Total Strategic Income Government Securities Income Subaccount Return Subaccount Subaccount Subaccount (Class II) ---------------------- ----------------- --------------------- ----------------- Investment Income: Dividends ........................ $ 2,676,353 $ -- $ 454,632 $ 1,790,046 ----------- --------- --------- ----------- Expenses: Insurance charges ................ 904,848 189,045 31,555 2,334,226 Administrative fees .............. 98,380 18,858 3,190 232,427 ----------- --------- --------- ----------- Total expenses.................. 1,003,228 207,903 34,745 2,566,653 ----------- --------- --------- ----------- Net investment income (loss) .. 1,673,125 (207,903) 419,887 (776,607) ----------- --------- --------- ----------- Realized Gain (Loss) and Unrealized Gain (Loss) on Investments: Realized gain distribution...... 2,904,953 -- 110,619 3,405,694 Realized gain (loss) on sale of investments ................... 3,005,906 (124,860) (763,822) 928,099 ----------- --------- --------- ----------- Realized gain (loss) .......... 5,910,859 (124,860) (653,203) 4,333,793 ----------- --------- --------- ----------- Change in unrealized gain (loss) on investments ................ (1,041,286) 698,829 (23,764) 12,518,580 ----------- --------- --------- ----------- Net increase (decrease) in net assets resulting from operations $ 6,542,698 $ 366,066 $(257,080) $16,075,766 =========== ========= ========= ===========
The accompanying notes are an integral part of these financial statements. 23 METLIFE OF CT SEPARATE ACCOUNT PF II FOR VARIABLE ANNUITIES STATEMENT OF OPERATIONS -- (Continued) For the year ended December 31, 2006
UIF U.S. Real Van Kampen LIT Van Kampen LIT Van Kampen LIT VIP Equity - Income VIP Growth Securities Estate Comstock Subaccount Growth and Income Strategic Growth Subaccount Subaccount Subaccount (Class I) (Class II) Subaccount (Class II) Subaccount (Class II) (Service Class 2) (Service Class 2) - -------------------- ------------------- --------------------- --------------------- ------------------- ----------------- $ 221,750 $ 2,688,916 $ 1,400,731 $ -- $ 315,354 $ 5,642 ---------- ----------- ----------- ----------- ---------- --------- 292,977 2,980,644 2,018,540 874,893 159,849 18,307 30,067 316,035 215,759 96,535 15,879 1,789 ---------- ----------- ----------- ----------- ---------- --------- 323,044 3,296,679 2,234,299 971,428 175,728 20,096 ---------- ----------- ----------- ----------- ---------- --------- (101,294) (607,763) (833,568) (971,428) 139,626 (14,454) ---------- ----------- ----------- ----------- ---------- --------- 1,331,314 12,501,676 9,304,032 -- 1,324,259 -- 78,083 2,696,138 2,783,059 (2,683,813) 126,718 596,232 ---------- ----------- ----------- ----------- ---------- --------- 1,409,397 15,197,814 12,087,091 (2,683,813) 1,450,977 596,232 ---------- ----------- ----------- ----------- ---------- --------- 4,829,149 13,642,293 7,956,216 4,238,328 205,842 (436,547) ---------- ----------- ----------- ----------- ---------- --------- $6,137,252 $28,232,344 $19,209,739 $ 583,087 $1,796,445 $ 145,231 ========== =========== =========== =========== ========== =========
The accompanying notes are an integral part of these financial statements. 24 METLIFE OF CT SEPARATE ACCOUNT PF II FOR VARIABLE ANNUITIES STATEMENT OF OPERATIONS -- (Concluded) For the year ended December 31, 2006
VIP Mid Cap Subaccount (Service Class 2) ----------------- Investment Income: Dividends ............................................................................................. $ 50,135 ---------- Expenses: Insurance charges ..................................................................................... 489,809 Administrative fees ................................................................................... 49,512 ---------- Total expenses....................................................................................... 539,321 ---------- Net investment income (loss) ....................................................................... (489,186) ---------- Realized Gain (Loss) and Unrealized Gain (Loss) on Investments: Realized gain distribution........................................................................... 3,342,824 Realized gain (loss) on sale of investments.......................................................... 317,240 ---------- Realized gain (loss) ............................................................................... 3,660,064 ---------- Change in unrealized gain (loss) on investments...................................................... (240,023) ---------- Net increase (decrease) in net assets resulting from operations ....................................... $2,930,855 ==========
The accompanying notes are an integral part of these financial statements. 25 METLIFE OF CT SEPARATE ACCOUNT PF II FOR VARIABLE ANNUITIES STATEMENTS OF CHANGES IN NET ASSETS For the years ended December 31, 2006 and 2005
AIM V.I. Capital Appreciation AIM V.I. Core AIM V.I. Premier Subaccount Equity Subaccount Equity Subaccount (Series II) (Series II) (Series II) ----------------------- ----------------- ------------------------ 2006 2005 2006 2005 2006 2005 ---- ---- ---- ---- ---- ---- Operations: Net investment income (loss) ..................... $ (26,535) $ (21,975) $ (9,753) $ -- $ 2,729 $ (13,029) Realized gain (loss) ............................. 55,038 27,108 6,840 -- 251,635 10,927 Change in unrealized gain (loss) on investments .. 32,520 83,719 150,590 -- (182,399) 53,293 ---------- ---------- ---------- ---- ----------- ---------- Net increase (decrease) in net assets resulting from operations ............................... 61,023 88,852 147,677 -- 71,965 51,191 ---------- ---------- ---------- ---- ----------- ---------- Unit Transactions: Participant purchase payments .................... 105,644 152,212 79,101 -- 19,311 203,301 Participant transfers from other funding options . 378,022 108,127 2,038,627 -- 29,296 84,398 Administrative charges ........................... (888) (791) (686) -- (7) (596) Contract surrenders .............................. (218,913) (117,295) (48,072) -- (24,332) (56,315) Participant transfers to other funding options ... (148,894) (62,642) (178,698) -- (1,551,132) (36,056) Other receipts/(payments) ........................ (64) -- (12,729) -- -- (5,328) ---------- ---------- ---------- ---- ----------- ---------- Net increase (decrease) in net assets resulting from unit transactions ........................ 114,907 79,611 1,877,543 -- (1,526,864) 189,404 ---------- ---------- ---------- ---- ----------- ---------- Net increase (decrease) in net assets........... 175,930 168,463 2,025,220 -- (1,454,899) 240,595 Net Assets: Beginning of year............................... 1,455,596 1,287,133 -- -- 1,454,899 1,214,304 ---------- ---------- ---------- ---- ----------- ---------- End of year..................................... $1,631,526 $1,455,596 $2,025,220 $ -- $ -- $1,454,899 ========== ========== ========== ==== =========== ==========
The accompanying notes are an integral part of these financial statements. 26 METLIFE OF CT SEPARATE ACCOUNT PF II FOR VARIABLE ANNUITIES STATEMENTS OF CHANGES IN NET ASSETS -- (Continued) For the years ended December 31, 2006 and 2005
AllianceBernstein AllianceBernstein American Funds Global Technology Large-Cap Growth Global Growth Subaccount Subaccount Subaccount (Class B) (Class B) (Class 2) ----------------------- ----------------------- ------------------------ 2006 2005 2006 2005 2006 2005 ---- ---- ---- ---- ---- ---- Operations: Net investment income (loss) ............... $ (25,778) $ (25,395) $ (30,125) $ (20,271) $ (105,488) $ (61,058) Realized gain (loss) ....................... 71,040 23,611 63,834 47,831 138,442 22,591 Change in unrealized gain (loss) on investments............................... 61,141 37,360 (75,094) 136,811 2,201,755 891,421 ---------- ---------- ---------- ---------- ----------- ---------- Net increase (decrease) in net assets resulting from operations ............... 106,403 35,576 (41,385) 164,371 2,234,709 852,954 ---------- ---------- ---------- ---------- ----------- ---------- Unit Transactions: Participant purchase payments .............. 113,608 124,959 175,367 69,512 2,440,476 3,564,351 Participant transfers from other funding options................................... 111,188 177,702 856,978 600,553 5,679,345 1,031,860 Administrative charges ..................... (610) (686) (869) (595) (3,378) (1,562) Contract surrenders ........................ (109,174) (182,359) (172,154) (208,393) (963,145) (332,093) Participant transfers to other funding options................................... (272,779) (54,928) (484,570) (93,771) (1,245,013) (351,629) Other receipts/(payments) .................. (1,456) -- 256 (2,502) (129,951) 15 ---------- ---------- ---------- ---------- ----------- ---------- Net increase (decrease) in net assets resulting from unit transactions ........ (159,223) 64,688 375,008 364,804 5,778,334 3,910,942 ---------- ---------- ---------- ---------- ----------- ---------- Net increase (decrease) in net assets..... (52,820) 100,264 333,623 529,175 8,013,043 4,763,896 Net Assets: Beginning of year......................... 1,563,652 1,463,388 1,676,176 1,147,001 8,577,493 3,813,597 ---------- ---------- ---------- ---------- ----------- ---------- End of year............................... $1,510,832 $1,563,652 $2,009,799 $1,676,176 $16,590,536 $8,577,493 ========== ========== ========== ========== =========== ==========
The accompanying notes are an integral part of these financial statements. 27 METLIFE OF CT SEPARATE ACCOUNT PF II FOR VARIABLE ANNUITIES STATEMENTS OF CHANGES IN NET ASSETS -- (Continued) For the years ended December 31, 2006 and 2005
American Funds FTVIPT FTVIPT American Funds Growth-Income Mutual Shares Templeton Growth Growth Subaccount Subaccount Securities Subaccount Securities Subaccount (Class 2) (Class 2) (Class 2) (Class 2) - -------------------------- ------------------------- ------------------------- ------------------------- 2006 2005 2006 2005 2006 2005 2006 2005 ---- ---- ---- ---- ---- ---- ---- ---- $ (330,341) $ (163,690) $ (19,589) $ (6,945) $ (195,536) $ (267,711) $ (94,792) $ (100,721) 527,002 20,025 934,586 104,739 2,273,498 130,186 1,363,791 76,850 2,911,358 3,280,657 2,937,430 885,917 6,954,419 3,343,478 4,338,464 1,365,864 - ------------ ----------- ----------- ----------- ----------- ----------- ----------- ----------- 3,108,019 3,136,992 3,852,427 983,711 9,032,381 3,205,953 5,607,463 1,341,993 - ------------ ----------- ----------- ----------- ----------- ----------- ----------- ----------- 7,534,312 13,092,593 4,455,237 11,097,349 6,635,559 15,511,019 4,252,850 7,187,120 7,791,181 4,326,446 3,418,626 2,469,185 12,261,789 9,978,867 7,993,697 4,012,544 (9,204) (4,509) (6,036) (3,432) (14,305) (7,489) (9,687) (5,408) (2,154,820) (1,033,021) (2,079,864) (1,117,615) (3,624,915) (1,967,586) (1,988,436) (835,252) (2,839,381) (1,105,101) (1,376,801) (686,832) (3,162,553) (1,470,945) (2,185,030) (803,946) (296,343) (27,560) (55,039) (5,803) (45,325) (76,959) (282,484) (14,371) - ------------ ----------- ----------- ----------- ----------- ----------- ----------- ----------- 10,025,745 15,248,848 4,356,123 11,752,852 12,050,250 21,966,907 7,780,910 9,540,687 - ------------ ----------- ----------- ----------- ----------- ----------- ----------- ----------- 13,133,764 18,385,840 8,208,550 12,736,563 21,082,631 25,172,860 13,388,373 10,882,680 30,657,190 12,271,350 25,769,700 13,033,137 46,714,670 21,541,810 23,090,558 12,207,878 - ------------ ----------- ----------- ----------- ----------- ----------- ----------- ----------- $ 43,790,954 $30,657,190 $33,978,250 $25,769,700 $67,797,301 $46,714,670 $36,478,931 $23,090,558 ============ =========== =========== =========== =========== =========== =========== ===========
The accompanying notes are an integral part of these financial statements. 28 METLIFE OF CT SEPARATE ACCOUNT PF II FOR VARIABLE ANNUITIES STATEMENTS OF CHANGES IN NET ASSETS -- (Continued) For the years ended December 31, 2006 and 2005
LMPIS Dividend LMPIS Government Strategy Subaccount Subaccount (Class A) ------------------------- --------------------------- 2006 2005 2006 2005 ---- ---- ---- ---- Operations: Net investment income (loss) .......... $ 254,933 $ 193,109 $ 2,258,867 $ 2,986,506 Realized gain (loss) .................. (1,131,734) (1,465,774) (727,155) (168,156) Change in unrealized gain (loss) on investments.......................... 7,773,864 355,981 648,268 (2,942,310) ----------- ----------- ------------ ------------ Net increase (decrease) in net assets resulting from operations .......... 6,897,063 (916,684) 2,179,980 (123,960) ----------- ----------- ------------ ------------ Unit Transactions: Participant purchase payments. ........ 779,877 2,963,974 3,046,759 10,342,014 Participant transfers from other funding options...................... 1,419,923 1,746,309 7,434,928 7,810,247 Administrative charges ................ (36,003) (40,365) (41,449) (48,793) Contract surrenders ................... (5,324,062) (4,999,691) (11,084,468) (11,249,832) Participant transfers to other funding options.............................. (4,787,137) (4,618,050) (9,255,979) (10,273,887) Other receipts/(payments) ............. (293,527) (251,473) (599,430) (623,548) ----------- ----------- ------------ ------------ Net increase (decrease) in net assets resulting from unit transactions ... (8,240,929) (5,199,296) (10,499,639) (4,043,799) ----------- ----------- ------------ ------------ Net increase (decrease) in net assets.............................. (1,343,866) (6,115,980) (8,319,659) (4,167,759) Net Assets: Beginning of year.................... 47,470,904 53,586,884 103,746,303 107,914,062 ----------- ----------- ------------ ------------ End of year.......................... $46,127,038 $47,470,904 $ 95,426,644 $103,746,303 =========== =========== ============ ============ LMPIS Growth and Income Subaccount ------------------------- 2006 2005 ---- ---- Operations: Net investment income (loss) .......... $ (438,283) $ (435,402) Realized gain (loss) .................. 1,115,415 373,586 Change in unrealized gain (loss) on investments.......................... 4,777,425 1,225,128 ----------- ----------- Net increase (decrease) in net assets resulting from operations .......... 5,454,557 1,163,312 ----------- ----------- Unit Transactions: Participant purchase payments. ........ 1,043,039 3,419,720 Participant transfers from other funding options...................... 1,360,047 1,724,276 Administrative charges ................ (27,783) (30,013) Contract surrenders ................... (6,744,985) (5,985,306) Participant transfers to other funding options.............................. (2,405,860) (3,181,675) Other receipts/(payments) ............. (427,924) (279,377) ----------- ----------- Net increase (decrease) in net assets resulting from unit transactions ... (7,203,466) (4,332,375) ----------- ----------- Net increase (decrease) in net assets.............................. (1,748,909) (3,169,063) Net Assets: Beginning of year.................... 55,295,822 58,464,885 ----------- ----------- End of year.......................... $53,546,913 $55,295,822 =========== ===========
The accompanying notes are an integral part of these financial statements. 29 METLIFE OF CT SEPARATE ACCOUNT PF II FOR VARIABLE ANNUITIES STATEMENTS OF CHANGES IN NET ASSETS -- (Continued) For the years ended December 31, 2006 and 2005
LMPIS Premier Selections All Cap Growth LMPLS LMPLS LMPLS High Subaccount Balanced Subaccount Growth Subaccount Growth Subaccount - -------------------------- --------------------------- --------------------------- -------------------------- 2006 2005 2006 2005 2006 2005 2006 2005 ---- ---- ---- ---- ---- ---- ---- ---- $ (266,205) $ (267,705) $ 1,933,767 $ 1,300,243 $ 352,736 $ 26,197 $ (256,746) $ (635,516) 521,589 (359,181) 1,259,208 500,707 (986,043) (2,006,625) 140,801 (834,724) 761,222 1,523,854 6,603,532 (266,673) 6,675,759 4,803,980 4,480,282 4,147,273 - ------------ ----------- ------------ ------------ ------------ ------------ ------------ ----------- 1,016,606 896,968 9,796,507 1,534,277 6,042,452 2,823,552 4,364,337 2,677,033 - ------------ ----------- ------------ ------------ ------------ ------------ ------------ ----------- 160,386 481,991 1,671,243 6,385,193 979,796 1,328,435 451,678 1,035,321 307,486 260,749 2,237,920 3,806,697 441,186 821,661 379,743 468,376 (16,079) (19,061) (89,439) (102,776) (81,282) (93,239) (62,723) (71,922) (2,096,015) (2,171,290) (18,715,764) (19,667,517) (10,926,934) (10,420,289) (8,142,984) (7,191,947) (1,700,884) (1,515,330) (8,031,524) (6,911,409) (3,955,106) (5,038,374) (3,991,685) (3,282,901) (318,986) (93,093) (2,963,822) (2,468,533) (850,523) (544,723) (205,921) (411,951) - ------------ ----------- ------------ ------------ ------------ ------------ ------------ ----------- (3,664,092) (3,056,034) (25,891,386) (18,958,345) (14,392,863) (13,946,529) (11,571,892) (9,455,024) - ------------ ----------- ------------ ------------ ------------ ------------ ------------ ----------- (2,647,486) (2,159,066) (16,094,879) (17,424,068) (8,350,411) (11,122,977) (7,207,555) (6,777,991) 19,965,902 22,124,968 168,435,177 185,859,245 93,060,015 104,182,992 63,619,926 70,397,917 - ------------ ----------- ------------ ------------ ------------ ------------ ------------ ----------- $ 17,318,416 $19,965,902 $152,340,298 $168,435,177 $ 84,709,604 $ 93,060,015 $ 56,412,371 $63,619,926 ============ =========== ============ ============ ============ ============ ============ ===========
The accompanying notes are an integral part of these financial statements. 30 METLIFE OF CT SEPARATE ACCOUNT PF II FOR VARIABLE ANNUITIES STATEMENTS OF CHANGES IN NET ASSETS -- (Continued) For the years ended December 31, 2006 and 2005
LMPVPV Small Cap Growth LMPVPII Opportunities Subaccount Appreciation Subaccount ------------------------- --------------------------- 2006 2005 2006 2005 ---- ---- ---- ---- Operations: Net investment income (loss) .......... $ (274,152) $ (257,160) $ (2,042,708) $ (3,021,307) Realized gain (loss) .................. 1,644,769 2,124,203 21,351,148 2,448,594 Change in unrealized gain (loss) on investments.......................... 433,440 (1,347,960) 36,172,722 12,667,994 ----------- ----------- ------------ ------------ Net increase (decrease) in net assets resulting from operations .......... 1,804,057 519,083 55,481,162 12,095,281 ----------- ----------- ------------ ------------ Unit Transactions: Participant purchase payments ......... 866,019 842,457 12,169,048 37,366,865 Participant transfers from other funding options...................... 2,183,104 1,718,824 10,737,489 14,775,055 Administrative charges. ............... (10,010) (11,217) (293,215) (316,767) Contract surrenders ................... (1,849,109) (1,710,451) (49,227,890) (47,202,418) Participant transfers to other funding options.............................. (2,267,398) (2,145,654) (19,976,209) (18,782,884) Other receipts/(payments) ............. (96,991) (62,652) (3,363,015) (2,609,439) ----------- ----------- ------------ ------------ Net increase (decrease) in net assets resulting from unit transactions ... (1,174,385) (1,368,693) (49,953,792) (16,769,588) ----------- ----------- ------------ ------------ Net increase (decrease) in net assets 629,672 (849,610) 5,527,370 (4,674,307) Net Assets: Beginning of year.................... 17,241,354 18,090,964 455,083,105 459,757,412 ----------- ----------- ------------ ------------ End of year.......................... $17,871,026 $17,241,354 $460,610,475 $455,083,105 =========== =========== ============ ============ LMPVPII Capital and Income Subaccount ------------------------- 2006 2005 ---- ---- Operations: Net investment income (loss) .......... $ 86,317 $ 130,473 Realized gain (loss) .................. 338,441 224,336 Change in unrealized gain (loss) on investments.......................... 2,286,421 135,050 ----------- ----------- Net increase (decrease) in net assets resulting from operations .......... 2,711,179 489,859 ----------- ----------- Unit Transactions: Participant purchase payments ......... 8,193,479 16,631,472 Participant transfers from other funding options...................... 5,890,614 5,656,936 Administrative charges. ............... (5,500) (468) Contract surrenders ................... (1,568,566) (215,836) Participant transfers to other funding options.............................. (2,214,210) (689,530) Other receipts/(payments) ............. (481,246) -- ----------- ----------- Net increase (decrease) in net assets resulting from unit transactions ... 9,814,571 21,382,574 ----------- ----------- Net increase (decrease) in net assets 12,525,750 21,872,433 Net Assets: Beginning of year.................... 21,872,433 -- ----------- ----------- End of year.......................... $34,398,183 $21,872,433 =========== ===========
The accompanying notes are an integral part of these financial statements. 31 METLIFE OF CT SEPARATE ACCOUNT PF II FOR VARIABLE ANNUITIES STATEMENTS OF CHANGES IN NET ASSETS -- (Continued) For the years ended December 31, 2006 and 2005
LMPVPIII LMPVPIII LMPVPII Fundamental Adjustable Rate Aggressive Growth LMPVPIII High Value Subaccount Income Subaccount Subaccount Income Subaccount - ---------------------------- ------------------------ --------------------------- -------------------------- 2006 2005 2006 2005 2006 2005 2006 2005 ---- ---- ---- ---- ---- ---- ---- ---- $ (8,556) $ (1,967,817) $ 80,522 $ 55,333 $ (6,453,149) $ (5,883,278) $ 5,587,440 $ 5,958,411 18,674,415 20,612,107 5,016 1,892 7,107,875 1,397,467 (1,262,595) (764,598) 28,346,410 (8,432,563) (9,066) (42,567) 27,189,244 41,767,609 3,778,828 (4,265,579) - ------------- ------------ ----------- ---------- ------------ ------------ ------------ ----------- 47,012,269 10,211,727 76,472 14,658 27,843,970 37,281,798 8,103,673 928,234 - ------------- ------------ ----------- ---------- ------------ ------------ ------------ ----------- 11,490,189 37,039,910 699,491 1,918,940 17,522,919 43,632,330 4,255,817 16,535,078 10,979,352 14,838,287 670,165 503,640 17,065,642 14,805,575 5,404,516 6,571,392 (157,570) (157,696) (520) (332) (259,136) (267,277) (38,114) (40,365) (29,110,713) (26,394,702) (255,292) (328,511) (37,161,953) (34,219,675) (10,239,390) (9,001,225) (18,685,981) (13,923,046) (1,130,052) (424,037) (22,851,159) (22,555,508) (6,561,143) (8,866,941) (1,408,413) (1,595,171) (31,332) -- (1,761,412) (1,409,151) (808,842) (577,204) - ------------- ------------ ----------- ---------- ------------ ------------ ------------ ----------- (26,893,136) 9,807,582 (47,540) 1,669,700 (27,445,099) (13,706) (7,987,156) 4,620,735 - ------------- ------------ ----------- ---------- ------------ ------------ ------------ ----------- 20,119,133 20,019,309 28,932 1,684,358 398,871 37,268,092 116,517 5,548,969 329,696,948 309,677,639 2,936,868 1,252,510 409,286,151 372,018,059 92,326,669 86,777,700 - ------------- ------------ ----------- ---------- ------------ ------------ ------------ ----------- $ 349,816,081 $329,696,948 $ 2,965,800 $2,936,868 $409,685,022 $409,286,151 $ 92,443,186 $92,326,669 ============= ============ =========== ========== ============ ============ ============ ===========
The accompanying notes are an integral part of these financial statements. 32 METLIFE OF CT SEPARATE ACCOUNT PF II FOR VARIABLE ANNUITIES STATEMENTS OF CHANGES IN NET ASSETS -- (Continued) For the years ended December 31, 2006 and 2005
LMPVPIII International LMPVPIII All Cap Growth Large Cap Growth Subaccount Subaccount ------------------------- ------------------------- 2006 2005 2006 2005 ---- ---- ---- ---- Operations: Net investment income (loss) .......... $ 310,461 $ (44,869) $ (413,994) $ (439,749) Realized gain (loss) .................. 877,797 (1,375,186) 679,571 360,766 Change in unrealized gain (loss) on investments.......................... 9,682,639 5,942,446 437,572 1,119,475 ----------- ----------- ----------- ----------- Net increase (decrease) in net assets resulting from operations .......... 10,870,897 4,522,391 703,149 1,040,492 ----------- ----------- ----------- ----------- Unit Transactions: Participant purchase payments ......... 975,632 1,753,293 687,442 1,879,350 Participant transfers from other funding options...................... 2,474,823 1,732,367 1,847,775 2,197,188 Administrative charges ................ (46,894) (48,375) (13,656) (15,639) Contract surrenders ................... (5,434,846) (4,430,985) (3,134,291) (2,895,076) Participant transfers to other funding options.............................. (3,722,072) (3,238,658) (2,925,819) (2,539,853) Other receipts/(payments) ............. (567,632) (286,052) (335,775) (156,648) ----------- ----------- ----------- ----------- Net increase (decrease) in net assets resulting from unit transactions ... (6,320,989) (4,518,410) (3,874,324) (1,530,678) ----------- ----------- ----------- ----------- Net increase (decrease) in net assets 4,549,908 3,981 (3,171,175) (490,186) Net Assets: Beginning of year.................... 48,702,465 48,698,484 30,796,343 31,286,529 ----------- ----------- ----------- ----------- End of year.......................... $53,252,373 $48,702,465 $27,625,168 $30,796,343 =========== =========== =========== =========== LMPVPIII Large Cap Value Subaccount --------------------------- 2006 2005 ---- ---- Operations: Net investment income (loss) .......... $ (180,131) $ 104,613 Realized gain (loss) .................. 2,022,507 (977,140) Change in unrealized gain (loss) on investments.......................... 10,625,536 4,791,069 ------------ ------------ Net increase (decrease) in net assets resulting from operations .......... 12,467,912 3,918,542 ------------ ------------ Unit Transactions: Participant purchase payments ......... 840,870 1,673,073 Participant transfers from other funding options...................... 1,236,848 850,021 Administrative charges ................ (68,911) (77,018) Contract surrenders ................... (9,957,682) (9,765,945) Participant transfers to other funding options.............................. (4,562,991) (3,705,894) Other receipts/(payments) ............. (497,662) (748,010) ------------ ------------ Net increase (decrease) in net assets resulting from unit transactions ... (13,009,528) (11,773,773) ------------ ------------ Net increase (decrease) in net assets (541,616) (7,855,231) Net Assets: Beginning of year.................... 82,517,525 90,372,756 ------------ ------------ End of year.......................... $ 81,975,909 $ 82,517,525 ============ ============
The accompanying notes are an integral part of these financial statements. 33 METLIFE OF CT SEPARATE ACCOUNT PF II FOR VARIABLE ANNUITIES STATEMENTS OF CHANGES IN NET ASSETS -- (Continued) For the years ended December 31, 2006 and 2005
LMPVPIV LMPVPIII LMPVPIII LMPVPIII Multiple Discipline Mid Cap Core Money Market Social Awareness Subaccount-All Cap Subaccount Subaccount Stock Subaccount Growth and Value - -------------------------- --------------------------- ------------------------- ----------------------- 2006 2005 2006 2005 2006 2005 2006 2005 ---- ---- ---- ---- ---- ---- ---- ---- $ (408,906) $ (351,594) $ 2,037,430 $ 950,502 $ (212,826) $ (190,892) $ (44,971) $ (44,369) 5,953,512 3,481,771 -- -- 121,447 (49,395) 282,733 95,851 (796,241) (709,973) -- -- 1,236,016 828,582 282,843 104,101 - ------------ ----------- ------------ ------------ ----------- ----------- ---------- ---------- 4,748,365 2,420,204 2,037,430 950,502 1,144,637 588,295 520,605 155,583 - ------------ ----------- ------------ ------------ ----------- ----------- ---------- ---------- 1,098,587 3,067,758 8,451,830 24,426,168 222,535 1,010,418 137,534 1,312,364 1,326,335 1,589,437 15,959,584 12,110,020 416,051 499,990 669,305 532,690 (19,738) (20,667) (33,316) (38,122) (13,271) (15,292) (1,335) (882) (3,286,489) (2,904,179) (10,505,685) (13,350,708) (2,120,159) (2,246,748) (175,636) (106,922) (2,987,420) (2,584,810) (25,634,301) (36,035,824) (1,492,694) (1,815,169) (335,665) (303,613) (370,431) (98,904) (1,723,422) (1,140,174) (299,168) (162,201) (624) -- - ------------ ----------- ------------ ------------ ----------- ----------- ---------- ---------- (4,239,156) (951,365) (13,485,310) (14,028,640) (3,286,706) (2,729,002) 293,579 1,433,637 - ------------ ----------- ------------ ------------ ----------- ----------- ---------- ---------- 509,209 1,468,839 (11,447,880) (13,078,138) (2,142,069) (2,140,707) 814,184 1,589,220 38,891,068 37,422,229 73,811,373 86,889,511 22,303,734 24,444,441 4,172,551 2,583,331 - ------------ ----------- ------------ ------------ ----------- ----------- ---------- ---------- $ 39,400,277 $38,891,068 $ 62,363,493 $ 73,811,373 $20,161,665 $22,303,734 $4,986,735 $4,172,551 ============ =========== ============ ============ =========== =========== ========== ==========
The accompanying notes are an integral part of these financial statements. 34 METLIFE OF CT SEPARATE ACCOUNT PF II FOR VARIABLE ANNUITIES STATEMENTS OF CHANGES IN NET ASSETS -- (Continued) For the years ended December 31, 2006 and 2005
LMPVPIV LMPVPIV LMPVPIV Multiple Discipline Multiple Discipline Multiple Discipline Subaccount-Balanced Subaccount-Global Subaccount-Large All Cap Growth All Cap Growth Cap Growth and Value and Value and Value ----------------------- ----------------------- ----------------------- 2006 2005 2006 2005 2006 2005 ---- ---- ---- ---- ---- ---- Operations: Net investment income (loss) .......... $ (3,495) $ (8,327) $ (15,427) $ (16,566) $ (16,639) $ (15,874) Realized gain (loss) .................. 186,336 52,026 149,156 36,543 67,602 32,573 Change in unrealized gain (loss) on investments.......................... 207,944 96,658 234,774 112,007 120,228 21,858 ---------- ---------- ---------- ---------- ---------- ---------- Net increase (decrease) in net assets resulting from operations .......... 390,785 140,357 368,503 131,984 171,191 38,557 ---------- ---------- ---------- ---------- ---------- ---------- Unit Transactions: Participant purchase payments ......... 280,970 1,897,984 312,895 1,105,111 54,416 349,685 Participant transfers from other funding options...................... 433,114 810,502 537,349 370,840 302,108 260,124 Administrative charges ................ (980) (433) (770) (360) (407) (247) Contract surrenders ................... (266,797) (99,586) (190,061) (77,229) (217,538) (66,651) Participant transfers to other funding options.............................. (514,297) (422,263) (413,852) (196,527) (161,940) (178,919) Other receipts/(payments) ............. (7,352) -- (114,149) -- -- -- ---------- ---------- ---------- ---------- ---------- ---------- Net increase (decrease) in net assets resulting from unit transactions ... (75,342) 2,186,204 131,412 1,201,835 (23,361) 363,992 ---------- ---------- ---------- ---------- ---------- ---------- Net increase (decrease) in net assets.............................. 315,443 2,326,561 499,915 1,333,819 147,830 402,549 Net Assets: Beginning of year.................... 4,537,722 2,211,161 2,628,052 1,294,233 1,686,897 1,284,348 ---------- ---------- ---------- ---------- ---------- ---------- End of year.......................... $4,853,165 $4,537,722 $3,127,967 $2,628,052 $1,834,727 $1,686,897 ========== ========== ========== ========== ========== ==========
The accompanying notes are an integral part of these financial statements. 35 METLIFE OF CT SEPARATE ACCOUNT PF II FOR VARIABLE ANNUITIES STATEMENTS OF CHANGES IN NET ASSETS -- (Continued) For the years ended December 31, 2006 and 2005
MIST MIST MIST MIST Oppenheimer BlackRock Large- Lord Abbett Bond Lord Abbett Capital Cap Debenture Growth and Appreciation Core Subaccount Subaccount Income Subaccount Subaccount (Class A) (Class A) (Class B) (Class B) - ------------------ ------------------ ----------------- ----------------- 2006 2005 2006 2005 2006 2005 2006 2005 ---- ---- ---- ---- ---- ---- ---- ---- $ (552,457) $ -- $ (286,438) $ -- $ (93,120) $ -- $ (74,675) $ -- (79,263) -- 41,378 -- 10,508 -- (8,121) -- 3,843,311 -- 1,431,073 -- 677,684 -- 187,092 -- - ----------- ---- ----------- ---- ---------- ---- ---------- ---- 3,211,591 -- 1,186,013 -- 595,072 -- 104,296 -- - ----------- ---- ----------- ---- ---------- ---- ---------- ---- 277,579 -- 196,758 -- 46,489 -- 74,735 -- 62,297,046 -- 27,483,364 -- 8,532,001 -- 7,301,911 -- (57,401) -- (5,668) -- (3,399) -- (2,813) -- (4,514,242) -- (1,738,610) -- (418,858) -- (326,868) -- (2,407,793) -- (1,150,423) -- (196,330) -- (251,253) -- (392,108) -- (135,652) -- (3,539) -- 18,096 -- - ----------- ---- ----------- ---- ---------- ---- ---------- ---- 55,203,081 -- 24,649,769 -- 7,956,364 -- 6,813,808 -- - ----------- ---- ----------- ---- ---------- ---- ---------- ---- 58,414,672 -- 25,835,782 -- 8,551,436 -- 6,918,104 -- -- -- -- -- -- -- -- -- - ----------- ---- ----------- ---- ---------- ---- ---------- ---- $58,414,672 $ -- $25,835,782 $ -- $8,551,436 $ -- $6,918,104 $ -- =========== ==== =========== ==== ========== ==== ========== ====
The accompanying notes are an integral part of these financial statements. 36 METLIFE OF CT SEPARATE ACCOUNT PF II FOR VARIABLE ANNUITIES STATEMENTS OF CHANGES IN NET ASSETS -- (Continued) For the years ended December 31, 2006 and 2005
MSF MIST BlackRock MSF Pioneer Strategic Aggressive BlackRock Bond Income Subaccount Growth Subaccount Income Subaccount (Class A) (Class D) (Class E) ------------------ ------------------ ------------------ 2006 2005 2006 2005 2006 2005 ---- ---- ---- ---- ---- ---- Operations: Net investment income (loss) .......... $ 1,626,857 $ -- $ (565,738) $ -- $ (482,117) $ -- Realized gain (loss) .................. 50,090 -- (602,257) -- 77,058 -- Change in unrealized gain (loss) on investments.......................... (119,753) -- (752,253) -- 1,960,953 -- ----------- ---- ----------- ---- ----------- ---- Net increase (decrease) in net assets resulting from operations .......... 1,557,194 -- (1,920,248) -- 1,555,894 -- ----------- ---- ----------- ---- ----------- ---- Unit Transactions: Participant purchase payments ......... 2,923,136 -- 340,621 -- 447,131 -- Participant transfers from other funding options...................... 48,066,493 -- 68,229,137 -- 45,712,962 -- Administrative charges ................ (9,315) -- (69,062) -- (12,072) -- Contract surrenders ................... (2,660,113) -- (4,748,248) -- (2,418,132) -- Participant transfers to other funding options.............................. (3,598,930) -- (4,421,274) -- (2,813,291) -- Other receipts/(payments) ............. (167,387) -- (438,251) -- (148,344) -- ----------- ---- ----------- ---- ----------- ---- Net increase (decrease) in net assets resulting from unit transactions ... 44,553,884 -- 58,892,923 -- 40,768,254 -- ----------- ---- ----------- ---- ----------- ---- Net increase (decrease) in net assets 46,111,078 -- 56,972,675 -- 42,324,148 -- Net Assets: Beginning of year.................... -- -- -- -- -- -- ----------- ---- ----------- ---- ----------- ---- End of year.......................... $46,111,078 $ -- $56,972,675 $ -- $42,324,148 $ -- =========== ==== =========== ==== =========== ====
The accompanying notes are an integral part of these financial statements. 37 METLIFE OF CT SEPARATE ACCOUNT PF II FOR VARIABLE ANNUITIES STATEMENTS OF CHANGES IN NET ASSETS -- (Continued) For the years ended December 31, 2006 and 2005
MSF T. Rowe MSF Western MSF MFS(R) Price Asset Management Oppenheimer Total Return Large Cap Growth U.S. Government Capital Appreciation Subaccount Subaccount Subaccount Subaccount/VA (Class F) (Class B) (Class A) (Service Shares) - -------------------- ----------------- ------------------ ------------------------ 2006 2005 2006 2005 2006 2005 2006 2005 ---- ---- ---- ---- ---- ---- ---- ---- $ (2,048,838) $ -- $ (45,355) $ -- $ (87,763) $ -- $ (23,647) $ (56,106) 299,644 -- (414) -- 54,014 -- 1,416,485 100,926 14,932,019 -- 315,602 -- 337,290 -- (1,103,817) 155,689 - ------------- ---- ---------- ---- ----------- ---- ----------- ---------- 13,182,825 -- 269,833 -- 303,541 -- 289,021 200,509 - ------------- ---- ---------- ---- ----------- ---- ----------- ---------- 1,650,877 -- 57,300 -- 858,536 -- 122,587 675,871 207,591,242 -- 4,387,129 -- 11,128,651 -- 267,161 538,786 (98,295) -- (1,410) -- (1,859) -- (15) (2,497) (13,273,176) -- (353,520) -- (502,578) -- (249,984) (423,858) (7,282,714) -- (264,963) -- (2,535,020) -- (6,866,608) (227,934) (1,130,509) -- -- -- (18,762) -- (4,128) (21) - ------------- ---- ---------- ---- ----------- ---- ----------- ---------- 187,457,425 -- 3,824,536 -- 8,928,968 -- (6,730,987) 560,347 - ------------- ---- ---------- ---- ----------- ---- ----------- ---------- 200,640,250 -- 4,094,369 -- 9,232,509 -- (6,441,966) 760,856 -- -- -- -- -- -- 6,441,966 5,681,110 - ------------- ---- ---------- ---- ----------- ---- ----------- ---------- $ 200,640,250 $ -- $4,094,369 $ -- $ 9,232,509 $ -- $ -- $6,441,966 ============= ==== ========== ==== =========== ==== =========== ==========
The accompanying notes are an integral part of these financial statements. 38 METLIFE OF CT SEPARATE ACCOUNT PF II FOR VARIABLE ANNUITIES STATEMENTS OF CHANGES IN NET ASSETS -- (Continued) For the years ended December 31, 2006 and 2005
Oppenheimer Pioneer Main Street/VA Pioneer Fund Mid Cap Value Subaccount VCT Subaccount VCT Subaccount (Service Shares) (Class II) (Class II) ------------------------ ----------------------- ------------------------- 2006 2005 2006 2005 2006 2005 ---- ---- ---- ---- ---- ---- Operations: Net investment income (loss) .......... $ 36,779 $ (40,707) $ (18,160) $ (16,822) $ (403,778) $ (222,185) Realized gain (loss) .................. 2,007,564 157,823 83,938 80,139 6,382,931 983,075 Change in unrealized gain (loss) on investments.......................... (1,581,351) 211,606 385,895 69,502 (3,520,087) 157,457 ----------- ---------- ---------- ---------- ----------- ----------- Net increase (decrease) in net assets resulting from operations .......... 462,992 328,722 451,673 132,819 2,459,066 918,347 ----------- ---------- ---------- ---------- ----------- ----------- Unit Transactions: Participant purchase payments ......... 200,470 653,879 143,184 584,981 2,597,449 6,986,873 Participant transfers from other funding options...................... 211,968 573,851 674,504 265,442 4,385,877 5,951,975 Administrative charges ................ (11) (3,076) (1,048) (769) (8,718) (5,443) Contract surrenders ................... (239,090) (703,899) (370,826) (282,305) (1,570,049) (932,117) Participant transfers to other funding options.............................. (8,897,659) (422,629) (91,267) (299,793) (2,889,223) (1,577,788) Other receipts/(payments) ............. (34,192) (11,972) (14,030) (25,102) (86,568) (19,442) ----------- ---------- ---------- ---------- ----------- ----------- Net increase (decrease) in net assets resulting from unit transactions ... (8,758,514) 86,154 340,517 242,454 2,428,768 10,404,058 ----------- ---------- ---------- ---------- ----------- ----------- Net increase (decrease) in net assets (8,295,522) 414,876 792,190 375,273 4,887,834 11,322,405 Net Assets: Beginning of year.................... 8,295,522 7,880,646 3,022,759 2,647,486 21,847,702 10,525,297 ----------- ---------- ---------- ---------- ----------- ----------- End of year.......................... $ -- $8,295,522 $3,814,949 $3,022,759 $26,735,536 $21,847,702 =========== ========== ========== ========== =========== ===========
The accompanying notes are an integral part of these financial statements. 39 METLIFE OF CT SEPARATE ACCOUNT PF II FOR VARIABLE ANNUITIES STATEMENTS OF CHANGES IN NET ASSETS -- (Continued) For the years ended December 31, 2006 and 2005
Putnam VT Putnam VT Travelers International Equity Small Cap Value Convertible Subaccount Subaccount Securities (Class IB) (Class IB) Subaccount - ------------------------ ------------------------- -------------------------- 2006 2005 2006 2005 2006 2005 ---- ---- ---- ---- ---- ---- $ (74,261) $ (11,281) $ (285,081) $ (193,246) $ 79,454 $ 227,468 154,595 51,494 2,161,717 846,541 2,066,660 561,788 1,417,596 328,370 1,019,412 90,295 (572,661) (1,087,798) - ----------- ---------- ----------- ----------- ------------ ----------- 1,497,930 368,583 2,896,048 743,590 1,573,453 (298,542) - ----------- ---------- ----------- ----------- ------------ ----------- 418,059 535,850 2,611,569 3,879,305 499,479 2,813,457 4,763,409 1,123,977 5,089,733 4,487,144 951,082 2,180,973 (2,713) (1,246) (8,058) (4,751) (49) (5,307) (556,484) (212,562) (1,702,484) (786,071) (848,073) (2,204,459) (1,097,158) (258,704) (1,841,688) (1,776,903) (26,282,312) (2,228,762) (13,564) (4,076) (70,431) (39,167) (43,231) (27,161) - ----------- ---------- ----------- ----------- ------------ ----------- 3,511,549 1,183,239 4,078,641 5,759,557 (25,723,104) 528,741 - ----------- ---------- ----------- ----------- ------------ ----------- 5,009,479 1,551,822 6,974,689 6,503,147 (24,149,651) 230,199 4,317,124 2,765,302 16,670,286 10,167,139 24,149,651 23,919,452 - ----------- ---------- ----------- ----------- ------------ ----------- $ 9,326,603 $4,317,124 $23,644,975 $16,670,286 $ -- $24,149,651 =========== ========== =========== =========== ============ =========== Travelers Managed Income Subaccount - -------------------------- 2006 2005 ---- ---- $ 685,495 $ 899,516 (3,474,264) (145,809) 2,353,369 (897,083) - ------------ ----------- (435,400) (143,376) - ------------ ----------- 829,083 8,799,910 1,411,227 3,839,772 (111) (12,812) (1,630,758) (3,957,540) (46,280,638) (7,687,167) (134,789) (41,620) - ------------ ----------- (45,805,986) 940,543 - ------------ ----------- (46,241,386) 797,167 46,241,386 45,444,219 - ------------ ----------- $ -- $46,241,386 ============ ===========
The accompanying notes are an integral part of these financial statements. 40 METLIFE OF CT SEPARATE ACCOUNT PF II FOR VARIABLE ANNUITIES STATEMENTS OF CHANGES IN NET ASSETS -- (Continued) For the years ended December 31, 2006 and 2005
Travelers Mercury Travelers MFS(R) Large Cap Core Mid Cap Growth Subaccount Subaccount --------------------------- --------------------------- 2006 2005 2006 2005 ---- ---- ---- ---- Operations: Net investment income (loss). ......... $ (154,761) $ (890,421) $ (313,905) $ (990,026) Realized gain (loss) .................. (2,915,208) (2,356,216) (44,011,862) (10,602,869) Change in unrealized gain (loss) on investments.......................... 6,877,929 9,416,185 48,219,423 12,172,002 ------------ ------------ ------------ ------------ Net increase (decrease) in net assets resulting from operations .......... 3,807,960 6,169,548 3,893,656 579,107 ------------ ------------ ------------ ------------ Unit Transactions: Participant purchase payments. ........ 93,255 404,554 442,111 1,431,550 Participant transfers from other funding options...................... 300,842 1,110,451 328,035 1,115,367 Administrative charges. ............... (1,046) (66,168) (1,259) (85,166) Contract surrenders ................... (2,565,239) (7,017,541) (2,621,323) (8,079,409) Participant transfers to other funding options ............................... (63,388,502) (4,470,432) (69,107,112) (5,512,468) Other receipts/(payments) ............. (76,940) (495,254) (245,616) (403,489) ------------ ------------ ------------ ------------ Net increase (decrease) in net assets resulting from unit transactions ... (65,637,630) (10,534,390) (71,205,164) (11,533,615) ------------ ------------ ------------ ------------ Net increase (decrease) in net assets (61,829,670) (4,364,842) (67,311,508) (10,954,508) Net Assets: Beginning of year.................... 61,829,670 66,194,512 67,311,508 78,266,016 ------------ ------------ ------------ ------------ End of year.......................... $ -- $ 61,829,670 $ -- $ 67,311,508 ============ ============ ============ ============ Travelers MFS(R) Total Return Subaccount ---------------------------- 2006 2005 ---- ---- Operations: Net investment income (loss). ......... $ 1,673,125 $ 1,294,871 Realized gain (loss) .................. 5,910,859 10,307,436 Change in unrealized gain (loss) on investments.......................... (1,041,286) (8,723,634) ------------- ------------ Net increase (decrease) in net assets resulting from operations .......... 6,542,698 2,878,673 ------------- ------------ Unit Transactions: Participant purchase payments. ........ 4,296,016 18,156,932 Participant transfers from other funding options...................... 3,401,705 16,253,599 Administrative charges. ............... (1,420) (108,083) Contract surrenders ................... (8,340,724) (21,430,580) Participant transfers to other funding options ............................... (207,414,592) (11,326,098) Other receipts/(payments) ............. (1,147,834) (1,366,214) ------------- ------------ Net increase (decrease) in net assets resulting from unit transactions ... (209,206,849) 179,556 ------------- ------------ Net increase (decrease) in net assets (202,664,151) 3,058,229 Net Assets: Beginning of year.................... 202,664,151 199,605,922 ------------- ------------ End of year.......................... $ -- $202,664,151 ============= ============
The accompanying notes are an integral part of these financial statements. 41 METLIFE OF CT SEPARATE ACCOUNT PF II FOR VARIABLE ANNUITIES STATEMENTS OF CHANGES IN NET ASSETS -- (Continued) For the years ended December 31, 2006 and 2005
Travelers UIF Equity UIF U.S. Real Estate Travelers Pioneer U.S. Government and Income Securities Strategic Income Securities Subaccount Subaccount Subaccount Subaccount (Class II) (Class I) - -------------------------- ------------------------- --------------------------- ------------------------- 2006 2005 2006 2005 2006 2005 2006 2005 ---- ---- ---- ---- ---- ---- ---- ---- $ (207,903) $ 1,031,451 $ 419,887 $ (26,872) $ (776,607) $ (1,064,915) $ (101,294) $ (31,421) (124,860) 9,333 (653,203) (10,985) 4,333,793 1,118,331 1,409,397 62,186 698,829 (593,939) (23,764) 23,764 12,518,580 6,447,937 4,829,149 532,577 - ------------ ----------- ----------- ----------- ------------ ------------ ----------- ----------- 366,066 446,845 (257,080) (14,093) 16,075,766 6,501,353 6,137,252 563,342 - ------------ ----------- ----------- ----------- ------------ ------------ ----------- ----------- 6,078,834 21,605,729 2,185,499 3,053,602 15,139,002 49,271,062 3,656,609 4,235,574 3,911,520 9,127,379 1,013,125 3,551,079 20,281,087 20,318,871 13,493,184 6,831,005 (61) (3,787) (25) (404) (34,643) (20,307) (7,647) (1,978) (1,163,136) (1,459,725) (163,882) (108,893) (11,567,486) (6,110,446) (1,499,270) (212,586) (43,453,950) (2,950,580) (7,959,192) (1,291,196) (8,084,829) (5,019,856) (2,597,546) (662,829) (193,167) (49,318) -- (8,540) (1,265,997) (327,825) (22,112) -- - ------------ ----------- ----------- ----------- ------------ ------------ ----------- ----------- (34,819,960) 26,269,698 (4,924,475) 5,195,648 14,467,134 58,111,499 13,023,218 10,189,186 - ------------ ----------- ----------- ----------- ------------ ------------ ----------- ----------- (34,453,894) 26,716,543 (5,181,555) 5,181,555 30,542,900 64,612,852 19,160,470 10,752,528 34,453,894 7,737,351 5,181,555 -- 137,583,499 72,970,647 10,752,528 -- - ------------ ----------- ----------- ----------- ------------ ------------ ----------- ----------- $ -- $34,453,894 $ -- $ 5,181,555 $168,126,399 $137,583,499 $29,912,998 $10,752,528 ============ =========== =========== =========== ============ ============ =========== ===========
The accompanying notes are an integral part of these financial statements. 42 METLIFE OF CT SEPARATE ACCOUNT PF II FOR VARIABLE ANNUITIES STATEMENTS OF CHANGES IN NET ASSETS -- (Continued) For the years ended December 31, 2006 and 2005
Van Kampen LIT Van Kampen LIT Growth and Comstock Income Subaccount Subaccount (Class II) (Class II) --------------------------- --------------------------- 2006 2005 2006 2005 ---- ---- ---- ---- Operations: Net investment income (loss) .......... $ (607,763) $ (1,200,050) $ (833,568) $ (925,392) Realized gain (loss) .................. 15,197,814 6,811,431 12,087,091 4,318,318 Change in unrealized gain (loss) on investments.......................... 13,642,293 (448,222) 7,956,216 6,933,802 ------------ ------------ ------------ ------------ Net increase (decrease) in net assets resulting from operations .......... 28,232,344 5,163,159 19,209,739 10,326,728 ------------ ------------ ------------ ------------ Unit Transactions: Participant purchase payments ......... 9,267,203 28,990,336 5,020,434 14,178,256 Participant transfers from other funding options...................... 10,730,340 16,298,186 9,011,780 10,524,483 Administrative charges ................ (99,747) (97,755) (63,413) (63,402) Contract surrenders ................... (17,685,357) (16,190,535) (13,955,424) (11,851,714) Participant transfers to other funding options.............................. (11,632,620) (10,736,790) (7,842,716) (7,070,282) Other receipts/(payments) ............. (1,366,746) (811,314) (582,812) (1,422,827) ------------ ------------ ------------ ------------ Net increase (decrease) in net assets resulting from unit transactions ... (10,786,927) 17,452,128 (8,412,151) 4,294,514 ------------ ------------ ------------ ------------ Net increase (decrease) in net assets 17,445,417 22,615,287 10,797,588 14,621,242 Net Assets: Beginning of year.................... 203,240,612 180,625,325 139,927,693 125,306,451 ------------ ------------ ------------ ------------ End of year.......................... $220,686,029 $203,240,612 $150,725,281 $139,927,693 ============ ============ ============ ============ Van Kampen LIT Strategic Growth Subaccount (Class II) ------------------------- 2006 2005 ---- ---- Operations: Net investment income (loss) .......... $ (971,428) $(1,014,977) Realized gain (loss) .................. (2,683,813) (3,072,589) Change in unrealized gain (loss) on investments.......................... 4,238,328 8,004,016 ----------- ----------- Net increase (decrease) in net assets resulting from operations .......... 583,087 3,916,450 ----------- ----------- Unit Transactions: Participant purchase payments ......... 1,338,161 2,934,926 Participant transfers from other funding options...................... 2,576,641 1,518,707 Administrative charges ................ (52,010) (60,211) Contract surrenders ................... (6,717,704) (6,251,366) Participant transfers to other funding options.............................. (5,440,584) (4,745,058) Other receipts/(payments) ............. (658,161) (364,918) ----------- ----------- Net increase (decrease) in net assets resulting from unit transactions ... (8,953,657) (6,967,920) ----------- ----------- Net increase (decrease) in net assets (8,370,570) (3,051,470) Net Assets: Beginning of year.................... 68,970,071 72,021,541 ----------- ----------- End of year.......................... $60,599,501 $68,970,071 =========== ===========
The accompanying notes are an integral part of these financial statements. 43 METLIFE OF CT SEPARATE ACCOUNT PF II FOR VARIABLE ANNUITIES STATEMENTS OF CHANGES IN NET ASSETS -- (Concluded) For the years ended December 31, 2006 and 2005
VIP Equity - Income VIP Growth VIP Mid Cap Subaccount Subaccount Subaccount (Service Class 2) (Service Class 2) (Service Class 2) - ------------------------ ------------------------ ------------------------- 2006 2005 2006 2005 2006 2005 ---- ---- ---- ---- ---- ---- $ 139,626 $ (30,790) $ (14,454) $ (39,443) $ (489,186) $ (271,072) 1,450,977 307,278 596,232 25,941 3,660,064 426,602 205,842 67,016 (436,547) 127,089 (240,023) 2,636,139 - ----------- ---------- ----------- ---------- ----------- ----------- 1,796,445 343,504 145,231 113,587 2,930,855 2,791,669 - ----------- ---------- ----------- ---------- ----------- ----------- 481,264 1,872,154 458,267 732,933 3,427,232 6,220,729 3,271,291 960,528 397,717 396,448 13,593,344 8,052,327 (3,377) (2,094) (10) (1,065) (12,848) (5,610) (663,102) (437,539) (120,755) (146,681) (2,759,760) (1,048,864) (1,166,577) (486,653) (4,211,083) (162,457) (5,272,816) (2,330,975) (25,193) (8,031) (6,860) (9,852) (84,717) (43,696) - ----------- ---------- ----------- ---------- ----------- ----------- 1,894,306 1,898,365 (3,482,724) 809,326 8,890,435 10,843,911 - ----------- ---------- ----------- ---------- ----------- ----------- 3,690,751 2,241,869 (3,337,493) 922,913 11,821,290 13,635,580 8,935,750 6,693,881 3,337,493 2,414,580 24,630,818 10,995,238 - ----------- ---------- ----------- ---------- ----------- ----------- $12,626,501 $8,935,750 $ -- $3,337,493 $36,452,108 $24,630,818 =========== ========== =========== ========== =========== ===========
The accompanying notes are an integral part of these financial statements. 44 NOTES TO FINANCIAL STATEMENTS 1. BUSINESS MetLife of CT Separate Account PF II for Variable Annuities ("Separate Account PF II") (formerly, The Travelers Separate Account PF II for Variable Annuities) is a separate account of MetLife Life and Annuity Company of Connecticut (the "Company") (formerly, The Travelers Life and Annuity Company), an indirect wholly owned subsidiary of MetLife, Inc., a Delaware corporation, and is available for funding certain variable annuity contracts issued by the Company. Separate Account PF II, established on July 30, 1997, is registered under the Investment Company Act of 1940, as amended, as a unit investment trust. The products supported by Separate Account PF II are PrimElite Annuity (formerly, Travelers Life & Annuity PrimElite Annuity) and PrimElite II Annuity (formerly, Travelers Life & Annuity PrimElite II Annuity). Separate Account PF II is divided into Subaccounts, each of which is treated as an individual separate account for financial reporting purposes. Each Subaccount invests in shares of the corresponding portfolios, series and funds (with the same name) of registered investment management companies (collectively, the "Funds") which are presented below. For convenience, the portfolios, series or funds are referred to as "portfolios". AIM Variable Insurance Funds Legg Mason Partners Variable Portfolios IV AllianceBernstein Variable Product Series Fund, Inc. Met Investors Series Trust American Funds Insurance Series Metropolitan Series Fund, Inc. Franklin Templeton Variable Insurance Products Trust Pioneer Variable Contracts Trust Legg Mason Partners Investment Series Putnam Variable Trust Legg Mason Partners Lifestyle Series, Inc. Universal Institutional Funds, Inc. Legg Mason Partners Variable Portfolios V Van Kampen Life Investment Trust Legg Mason Partners Variable Portfolios II Variable Insurance Products Fund Legg Mason Partners Variable Portfolios III, Inc.
Participant purchase payments applied to Separate Account PF II are invested in one or more Subaccounts in accordance with the selection made by the contract owner. The following Subaccounts were available for investment as of December 31, 2006 (the share class indicated in parentheses is that of the portfolio in which the Subaccount invests): AIM V.I. Capital Appreciation Subaccount (Series II) AIM V.I. Core Equity Subaccount (Series II) AllianceBernstein Global Technology Subaccount (Class B) AllianceBernstein Large-Cap Growth Subaccount (Class B) American Funds Global Growth Subaccount (Class 2) American Funds Growth Subaccount (Class 2) American Funds Growth-Income Subaccount (Class 2) FTVIPT Mutual Shares Securities Subaccount (Class 2) FTVIPT Templeton Growth Securities Subaccount (Class 2) LMPIS Dividend Strategy Subaccount LMPIS Government Subaccount (Class A) LMPIS Growth and Income Subaccount LMPIS Premier Selections All Cap Growth Subaccount LMPLS Balanced Subaccount LMPLS Growth Subaccount LMPLS High Growth Subaccount LMPVPV Small Cap Growth Opportunities Subaccount LMPVPII Appreciation Subaccount LMPVPII Capital and Income Subaccount LMPVPII Fundamental Value Subaccount LMPVPIII Adjustable Rate Income Subaccount LMPVPIII Aggressive Growth Subaccount LMPVPIII High Income Subaccount LMPVPIII International All Cap Growth Subaccount 45 NOTES TO FINANCIAL STATEMENTS -- (Continued) 1. BUSINESS -- (Continued) LMPVPIII Large Cap Growth Subaccount LMPVPIII Large Cap Value Subaccount LMPVPIII Mid Cap Core Subaccount LMPVPIII Money Market Subaccount LMPVPIII Social Awareness Stock Subaccount LMPVPIV Multiple Discipline Subaccount-All Cap Growth and Value LMPVPIV Multiple Discipline Subaccount-Balanced All Cap Growth and Value LMPVPIV Multiple Discipline Subaccount-Global All Cap Growth and Value LMPVPIV Multiple Discipline Subaccount-Large Cap Growth and Value MIST BlackRock Large-Cap Core Subaccount (Class A) MIST Lord Abbett Bond Debenture Subaccount (Class A) MIST Lord Abbett Growth and Income Subaccount (Class B) MIST Oppenheimer Capital Appreciation Subaccount (Class B) MIST Pioneer Strategic Income Subaccount (Class A) MSF BlackRock Aggressive Growth Subaccount (Class D) MSF BlackRock Bond Income Subaccount (Class E) MSF MFS(R) Total Return Subaccount (Class F) MSF T. Rowe Price Large Cap Growth Subaccount (Class B) MSF Western Asset Management U.S. Government Subaccount (Class A) Pioneer Fund VCT Subaccount (Class II) Pioneer Mid Cap Value VCT Subaccount (Class II) Putnam VT International Equity Subaccount (Class IB) Putnam VT Small Cap Value Subaccount (Class IB) UIF Equity and Income Subaccount (Class II) UIF U.S. Real Estate Securities Subaccount (Class I) Van Kampen LIT Comstock Subaccount (Class II) Van Kampen LIT Growth and Income Subaccount (Class II) Van Kampen LIT Strategic Growth Subaccount (Class II) VIP Equity - Income Subaccount (Service Class 2) VIP Mid Cap Subaccount (Service Class 2) The operations of the Subaccounts changed as follows during the years ending December 31, 2006 and 2005: For the year ended December 31, 2006: Mergers:
Old Portfolio New Portfolio ------------- ------------- AIM V.I. Premier Equity Portfolio (a) AIM V.I. Core Equity Portfolio (b) Travelers Convertible Securities Portfolio (a) Lord Abbett Bond Debenture Portfolio (b) Travelers Mercury Large-Cap Core Portfolio (a) Mercury Large-Cap Core Portfolio (b) Travelers Pioneer Strategic Income Portfolio (a) Pioneer Strategic Income Portfolio (b) Travelers MFS Mid Cap Growth Portfolio (a) BlackRock Aggressive Growth Portfolio (b) Travelers MFS Total Return Portfolio (a) MFS Total Return Portfolio (b) Travelers Travelers Managed Income Portfolio (a) BlackRock Bond Income Portfolio (b) Travelers U.S. Government Securities Portfolio (a) Western Asset Management U.S. Government Portfolio (b)
(a) For the period January 1, 2006 to April 30, 2006 (b) For the period May 1, 2006 to December 31, 2006 Substitutions:
Old Portfolio New Portfolio ------------- ------------- VIP Growth Portfolio (c) T. Rowe Price Large Cap Growth Portfolio (d) Oppenheimer Main Street Fund/VA (c) Lord Abbett Growth and Income Portfolio (d) Oppenheimer Capital Appreciation Fund/VA (c) Oppenheimer Capital Appreciation Portfolio (d)
(c) For the period January 1, 2006 to April 30, 2006 (d) For the period May 1, 2006 to December 31, 2006 46 NOTES TO FINANCIAL STATEMENTS -- (Continued) 1. BUSINESS -- (Concluded) Name Changes:
Old Name New Name -------- -------- Greenwich Street Series Appreciation Subaccount LMPVPII Appreciation Subaccount Greenwich Street Series Capital and Income Subaccount LMPVPII Capital and Income Subaccount Greenwich Street Series Fundamental Value Subaccount LMPVPII Fundamental Value Subaccount Smith Barney Allocation Series Inc.-Select Balanced LMPLS Lifestyle Balanced Subaccount Subaccount Smith Barney Allocation Series Inc.-Select Growth LMPLS Lifestyle Growth Subaccount Subaccount Smith Barney Allocation Series Inc.-Select High Growth LMPLS Lifestyle High Growth Subaccount Subaccount SB Government Subaccount LMPIS Government Subaccount Smith Barney Dividend Strategy Subaccount LMPIS Dividend Strategy Subaccount Smith Barney Growth and Income Subaccount LMPIS Growth and Income Subaccount Smith Barney Premier Selections All Cap Growth Subaccount LMPIS Premier Selections All Cap Growth Subaccount Multiple Discipline Portfolio-All Cap Growth and Value LMPVPIV Multiple Discipline Portfolio-All Cap Growth and Subaccount Value Subaccount Multiple Discipline Portfolio-Balanced All Cap Growth and LMPVPIV Multiple Discipline Portfolio-Balanced All Cap Value Subaccount Growth and Value Subaccount Multiple Discipline Portfolio-Global All Cap Growth and LMPVPIV Multiple Discipline Portfolio-Global All Cap Value Subaccount Growth and Value Subaccount Multiple Discipline Portfolio-Large Cap Growth and Value LMPVPIV Multiple Discipline Portfolio-Large Cap Growth Subaccount and Value Subaccount SB Adjustable Rate Income Subaccount LMPVPIII Adjustable Rate Income Subaccount Smith Barney Aggressive Growth Subaccount LMPVPIII Aggressive Growth Subaccount Smith Barney High Income Subaccount LMPVPIII High Income Portfolio Smith Barney International All Cap Growth Subaccount LMPVPIII International All Cap Growth Subaccount Smith Barney Large Capitalization Growth Subaccount LMPVPIII Large Cap Growth Subaccount Smith Barney Large Cap Value Subaccount LMPVPIII Large Cap Value Subaccount Smith Barney Mid Cap Core Subaccount LMPVPIII Mid Cap Core Subaccount Smith Barney Money Market Subaccount LMPVPIII Money Market Subaccount Smith Barney Small Cap Growth Opportunities Subaccount LMPVPV Small Cap Growth Opportunities Subaccount Social Awareness Stock Subaccount LMPVPIII Social Awareness Stock Subaccount Mercury Large-Cap Core Subaccount BlackRock Large-Cap Core Subaccount
For the year ended December 31, 2005: Additions: Smith Barney Capital and Income Subaccount TST U.S. Government Securities Subaccount TST Real Estate Subaccount Not all funds may be available in all states or to all contract owners. This report is prepared for the general information of contract owners and is not an offer of units of Separate Account PF II or shares of Separate Account PF II's underlying funds. It should not be used in connection with any offer except in conjunction with the prospectus for Separate Account PF II product(s) offered by the Company and the prospectuses of the underlying funds, which collectively contain all pertinent information, including additional information on charges and expenses. 47 NOTES TO FINANCIAL STATEMENTS -- (Continued) 2. SIGNIFICANT ACCOUNTING POLICIES The following is a summary of significant accounting policies consistently followed by Separate Account PF II in the preparation of its financial statements. Investments are valued daily at the net asset values per share of the underlying funds. Short-term investments are reported at fair value based on quoted market prices. Short-term investments, for which there is no reliable quoted market price, are recorded at amortized cost which approximates fair value. Changes in fair values are recorded in the Statement of Operations. Security transactions are accounted for on the trade date basis. Realized gains and losses on the sales of investments are computed on the basis of the average cost of the investment sold. Income from dividends and realized gain distributions are recorded on the ex-distribution date. Included in "Other receipts/(payments)" in the Statement of Changes in Net Assets are primarily contract benefits, which have been re-deposited with the Company and distributions for payouts. The operations of Separate Account PF II form a part of the total operations of the Company and are not taxed separately. The Company is taxed as a life insurance company under the provisions of the Internal Revenue Code of 1986 (the "Code"). Under existing Federal income tax law, no taxes are payable on the earnings of Separate Account PF II. Separate Account PF II is not taxed as a "regulated investment company" under Subchapter M of the Code. Net Assets allocated to contracts in the payout period are computed according to the Progressive Annuity Table for the PrimElite product and the Annuity 2000 Table for the PrimElite II product. The assumed investment return is 3.0 percent for all products. The mortality risk is fully borne by the Company and may result in additional amounts being transferred into the variable annuity account by the Company to cover greater longevity of annuitants than expected. Conversely, if amounts allocated exceed amounts required, transfers may be made to the Company. The financial highlights disclosure is comprised of the units, unit values, net assets, investment income ratio, expense ratios and total returns for each Subaccount. Since each Subaccount offers multiple contract charges, certain information is provided in the form of a range. The range information may reflect varying time periods if assets did not exist with all contract charge options of the Subaccount for the entire year. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 48 NOTES TO FINANCIAL STATEMENTS -- (Continued) 3. CONTRACT CHARGES The asset-based charges listed below are deducted, as appropriate, each business day and/or are assessed through the calculation of accumulation and/or annuity unit values: - Mortality and Expense Risks assumed by the Company ("M&E") - Administrative fees paid for administrative expenses ("ADM") - Enhanced Stepped-up Provision, if elected by the contract owner ("E.S.P.") Below is a table displaying separate account charges with their associated products offered in Separate Account PF II for each funding option.
Asset-based Charges ----------------------------- Optio- nal ------ Total Separate Account Charge (1) Product M&E ADM E.S.P. Charge --------------------------- ------- --- --- ------ ------ Separate Account Charge 1.40% ................................... PrimElite (notes 2-3) 1.25% 0.15% 1.40% Separate Account Charge 1.65% ................................... PrimElite II (notes 2-3) 1.50% 0.15% 1.65% Separate Account Charge 1.90% ................................... PrimElite II (notes 2-3) 1.50% 0.15% 0.25% 1.90%
(1) Certain accumulation and annuity unit values may not be available through certain Subaccounts. (2) An amount equal to the underlying fund expenses that are in excess of 0.92% is being waived for the T. Rowe Price Large Cap Growth Subaccount (Class B) of the Metropolitan Series Fund, Inc. (3) A waiver of 0.15% of the M&E charge applies to the Subaccount investing in the Western Asset Management U.S. Government Subaccount (Class A) of the Metropolitan Series Fund, Inc. An annual Administrative Charge (prorated for partial periods) is assessed through the redemption of units and paid to the Company to cover contract administrative charges as follows:
Product Administrative Charge ------- --------------------- PrimElite............................................ $30 PrimElite II......................................... $30 for contract values less than $50,000
No sales charges are deducted from participant purchase payments when they are received. However, a withdrawal charge will apply if purchase payments are withdrawn before they have been in the Contract for eight years. The maximum charge, applied to the amount withdrawn, is 8% decreasing to 0% after eight full years and are assessed through the redemption of units. Likewise, in the annuity phase, if the Variable Liquidity Benefit is selected, there is a surrender charge associated with the amounts withdrawn. The maximum charge, applied to the amount withdrawn, is 8% decreasing to 0% after eight full years and are assessed through the redemption of units. For a full explanation of product charges and associated product features and benefits, please refer to your product prospectus. 49 NOTES TO FINANCIAL STATEMENTS -- (Continued) 4. STATEMENT OF INVESTMENTS
As of and for the period ended December 31, 2006 ----------------------------------------------------- No. of Market Cost of Proceeds INVESTMENTS Shares Value Purchases from Sales ----------- ------ ----- --------- ---------- AIM Variable Insurance Funds (0.1%) AIM V.I. Capital Appreciation Subaccount (Series II) (Cost $1,319,461) 62,975 $ 1,631,674 $ 431,574 $ 343,121 AIM V.I. Core Equity Subaccount (Series II) (Cost $1,874,896) 74,962 2,025,486 2,133,249 265,193 AIM V.I. Premier Equity Subaccount (Series II) (Cost $0.00) -- -- 54,010 1,578,213 ---------- ------------ ----------- ----------- Total (Cost $3,194,357) 137,937 $ 3,657,160 $ 2,618,833 $ 2,186,527 ========== ============ =========== =========== AllianceBernstein Variable Products Series Fund, Inc. (0.1%) AllianceBernstein Global Technology Subaccount (Class B) (Cost $1,214,212) 89,270 $ 1,512,227 $ 223,878 $ 407,556 AllianceBernstein Large-Cap Growth Subaccount (Class B) (Cost $1,779,880) 76,281 2,011,534 905,771 559,226 ---------- ------------ ----------- ----------- Total (Cost $2,994,092) 165,551 $ 3,523,761 $ 1,129,649 $ 966,782 ========== ============ =========== =========== American Funds Insurance Series (2.6%) American Funds Global Growth Subaccount (Class 2) (Cost $13,085,093) 712,425 $ 16,592,370 $ 6,586,969 $ 912,687 American Funds Growth Subaccount (Class 2) (Cost $36,374,727) 683,630 43,807,019 12,031,833 2,066,082 American Funds Growth-Income Subaccount (Class 2) (Cost $29,062,755) 805,442 33,981,610 6,907,459 1,825,192 ---------- ------------ ----------- ----------- Total (Cost $78,522,575) 2,201,497 $ 94,380,999 $25,526,261 $ 4,803,961 ========== ============ =========== =========== Franklin Templeton Variable Insurance Products Trust (2.9%) FTVIPT Mutual Shares Securities Subaccount (Class 2) (Cost $54,632,208) 3,313,096 $ 67,819,068 $15,884,129 $ 2,028,328 FTVIPT Templeton Growth Securities Subaccount (Class 2) (Cost $28,575,520) 2,290,874 36,493,624 10,300,540 1,483,326 ---------- ------------ ----------- ----------- Total (Cost $83,207,728) 5,603,970 $104,312,692 $26,184,669 $ 3,511,654 ========== ============ =========== =========== Legg Mason Partners Investment Series (5.9%) LMPIS Dividend Strategy Subaccount (Cost $47,731,329) 4,595,060 $ 46,134,401 $ 1,475,871 $ 9,456,443 LMPIS Government Subaccount (Class A) (Cost $100,193,319) 8,700,243 95,441,669 6,948,113 15,178,477 LMPIS Growth and Income Subaccount (Cost $43,931,605) 4,881,646 53,551,657 1,075,776 8,697,553 LMPIS Premier Selections All Cap Growth Subaccount (Cost $17,261,447) 1,294,491 17,320,293 681,875 4,050,595 ---------- ------------ ----------- ----------- Total (Cost $209,117,700) 19,471,440 $212,448,020 $10,181,635 $37,383,068 ========== ============ =========== ===========
50 NOTES TO FINANCIAL STATEMENTS -- (Continued) 4. STATEMENT OF INVESTMENTS -- (Continued)
As of and for the period ended December 31, 2006 -- (Continued) ------------------------------------------------------- No. of Market Cost of Proceeds INVESTMENTS Shares Value Purchases from Sales ----------- ------ ----- --------- ---------- Legg Mason Partners Lifestyle Series, Inc. (8.2%) LMPLS Balanced Subaccount (Cost $141,443,032) 12,168,819 $152,353,619 $ 5,432,570 $ 29,383,636 LMPLS Growth Subaccount (Cost $86,285,447) 7,392,339 84,716,204 2,079,352 16,116,501 LMPLS High Growth Subaccount (Cost $52,933,936) 3,981,422 56,416,754 720,602 12,547,319 ----------- ------------ ----------- ------------ Total (Cost $280,662,415) 23,542,580 $293,486,577 $ 8,232,524 $ 58,047,456 =========== ============ =========== ============ Legg Mason Partners Variable Portfolios V (0.5%) LMPVPV Small Cap Growth Opportunities Subaccount Total (Cost $15,647,173) 1,563,658 $ 17,872,614 $ 2,963,771 $ 3,221,713 =========== ============ =========== ============ Legg Mason Partners Variable Portfolios II (23.6%) LMPVPII Appreciation Subaccount (Cost $379,008,195) 17,220,716 $460,654,160 $18,951,404 $ 58,067,326 LMPVPII Capital and Income Subaccount (Cost $31,993,656) 2,982,247 34,415,126 12,463,433 2,328,741 LMPVPII Fundamental Value Subaccount (Cost $292,146,501) 15,351,933 349,870,551 21,625,750 34,827,006 ----------- ------------ ----------- ------------ Total (Cost $703,148,352) 35,554,896 $844,939,837 $53,040,587 $ 95,223,073 =========== ============ =========== ============ Legg Mason Partners Variable Portfolios III, Inc. (22.1%) LMPVPIII Adjustable Rate Income Subaccount (Cost $3,026,185) 300,209 $ 2,966,069 $ 1,318,569 $ 1,285,453 LMPVPIII Aggressive Growth Subaccount (Cost $323,896,875) 25,355,491 409,744,732 5,361,832 38,779,938 LMPVPIII High Income Subaccount (Cost $102,702,346) 12,648,198 92,458,329 9,847,496 12,236,024 LMPVPIII International All Cap Growth Subaccount (Cost $50,134,797) 3,082,000 53,256,956 3,084,356 8,020,372 LMPVPIII Large Cap Growth Subaccount (Cost $22,883,725) 1,751,908 27,627,586 1,238,421 5,525,664 LMPVPIII Large Cap Value Subaccount (Cost $73,802,429) 3,776,251 81,982,404 2,783,307 14,529,772 LMPVPIII Mid Cap Core Subaccount (Cost $33,963,611) 2,749,868 39,405,605 5,752,900 5,602,837 LMPVPIII Money Market Subaccount (Cost $62,378,614) 62,378,614 62,378,614 14,092,761 25,528,637 LMPVPIII Social Awareness Stock Subaccount (Cost $18,333,587) 747,125 20,164,904 273,619 3,770,839 ----------- ------------ ----------- ------------ Total (Cost $691,122,169) 112,789,664 $789,985,199 $43,753,261 $115,279,536 =========== ============ =========== ============
51 NOTES TO FINANCIAL STATEMENTS -- (Continued) 4. STATEMENT OF INVESTMENTS -- (Continued)
As of and for the period ended December 31, 2006 -- (Continued) ------------------------------------------------------ No. of Market Cost of Proceeds INVESTMENTS Shares Value Purchases from Sales ----------- ------ ----- --------- ---------- Legg Mason Partners Variable Portfolios IV (0.4%) LMPVPIV Multiple Discipline Subaccount-All Cap Growth and Value (Cost $4,486,614) 303,761 $ 4,987,760 $ 1,196,573 $ 720,361 LMPVPIV Multiple Discipline Subaccount Balanced All Cap Growth and Value (Cost $4,474,551) 341,563 4,853,605 827,563 766,239 LMPVPIV Multiple Discipline Subaccount Global All Cap Growth and Value Cost $2,705,527) 174,276 3,128,263 858,999 664,032 LMPVPIV Multiple Discipline Subaccount-Large Cap Growth and Value (Cost $1,642,781) 115,402 1,834,899 389,458 384,261 ---------- ------------ ------------ ----------- Total (Cost $13,309,473) 935,002 $ 14,804,527 $ 3,272,593 $ 2,534,893 ========== ============ ============ =========== Met Investors Series Trust (4.1%) MIST BlackRock Large-Cap Core Subaccount (Class A) (Cost $54,575,897) 5,216,001 $ 58,419,208 $ 61,994,561 $ 7,339,400 MIST Lord Abbett Bond Debenture Subaccount (Class A) (Cost $24,407,519) 2,065,435 25,838,592 26,808,133 2,441,992 MIST Lord Abbett Growth and Income Subaccount (Class B) (Cost $7,874,614) 292,887 8,552,299 8,497,865 633,759 MIST Oppenheimer Capital Appreciation Subaccount (Class B) (Cost $6,731,640) 752,036 6,918,732 7,210,576 470,815 MIST Pioneer Strategic Income Subaccount (Class A) (Cost $46,253,008) 4,876,665 46,133,254 49,108,952 2,906,034 ---------- ------------ ------------ ----------- Total (Cost $139,842,678) 13,203,024 $145,862,085 $153,620,087 $13,792,000 ========== ============ ============ =========== Metropolitan Series Fund, Inc. (8.8%) MSF BlackRock Aggressive Growth Subaccount (Class D) (Cost $57,729,932) 2,394,020 $ 56,977,680 $ 67,271,061 $ 8,938,872 MSF BlackRock Bond Income Subaccount (Class E) (Cost $40,367,083) 392,326 42,328,037 44,333,663 4,043,637 MSF MFS(R) Total Return Subaccount (Class F) (Cost $185,727,844) 1,291,497 200,659,864 203,074,115 17,645,915 MSF T. Rowe Price Large Cap Growth Subaccount (Class B) (Cost $3,779,155) 269,569 4,094,758 4,371,729 592,160 MSF Western Asset Management U.S. Government Subaccount (Class A) (Cost $8,895,965) 750,671 9,233,254 11,260,480 2,418,529 ---------- ------------ ------------ ----------- Total (Cost $296,499,979) 5,098,083 $313,293,593 $330,311,048 $33,639,113 ========== ============ ============ ===========
52 NOTES TO FINANCIAL STATEMENTS -- (Continued) 4. STATEMENT OF INVESTMENTS -- (Continued)
As of and for the period ended December 31, 2006 -- (Continued) ------------------------------------------------------ No. of Market Cost of Proceeds INVESTMENTS Shares Value Purchases from Sales ----------- ------ ----- --------- ---------- Oppenheimer Variable Account Funds (0.0%) Oppenheimer Capital Appreciation Subaccount/VA (Service Shares) (Cost $0) -- $ -- $ 284,921 $ 7,039,850 Oppenheimer Main Street/VA Subaccount (Service Shares) (Cost $0) -- -- 468,472 9,190,587 ---------- ------------ ----------- ------------ Total (Cost $0) -- $ -- $ 753,393 $ 16,230,437 ========== ============ =========== ============ Pioneer Variable Contracts Trust (0.9%) Pioneer Fund VCT Subaccount (Class II) (Cost $2,973,631) 154,341 $ 3,816,855 $ 775,807 $ 451,684 Pioneer Mid Cap Value VCT Subaccount (Class II) (Cost $27,791,788) 1,321,075 26,738,551 10,805,766 2,319,854 ---------- ------------ ----------- ------------ Total (Cost $30,765,419) 1,475,416 $ 30,555,406 $11,581,573 $ 2,771,538 ========== ============ =========== ============ Putnam Variable Trust (0.9%) Putnam VT International Equity Subaccount (Class IB) (Cost $7,063,142) 451,927 $ 9,327,771 $ 4,250,715 $ 812,452 Putnam VT Small Cap Value Subaccount (Class IB) (Cost $20,023,007) 974,350 23,647,471 7,444,694 1,685,469 ---------- ------------ ----------- ------------ Total (Cost $27,086,149) 1,426,277 $ 32,975,242 $11,695,409 $ 2,497,921 ========== ============ =========== ============ The Travelers Series Trust (0.0%) Travelers Convertible Securities Subaccount (Cost $0) -- $ -- $ 1,455,609 $ 26,764,351 Travelers Managed Income Subaccount (Cost $0) -- -- 1,274,646 46,397,257 Travelers Mercury Large Cap Core Subaccount (Cost $0) -- -- 2,113,866 65,970,960 Travelers MFS(R) Mid Cap Growth Subaccount (Cost $0) -- -- 3,634,304 71,523,999 Travelers MFS(R) Total Return Subaccount (Cost $0) -- -- 6,489,468 211,126,720 Travelers Pioneer Strategic Income Subaccount (Cost $0) -- -- 7,568,704 42,598,133 Travelers U.S. Government Securities Subaccount (Cost $0) -- -- 3,395,081 7,789,281 ---------- ------------ ----------- ------------ Total (Cost $0) -- $ -- $25,931,678 $472,170,701 ========== ============ =========== ============ Universal Institutional Funds, Inc. (5.5%) UIF Equity and Income Subaccount (Class II) (Cost $142,056,683) 11,294,721 $168,178,399 $25,262,498 $ 8,120,548 UIF U.S. Real Estate Securities Subaccount (Class I) (Cost $24,555,407) 1,018,976 29,917,133 14,902,799 645,901 ---------- ------------ ----------- ------------ Total (Cost $166,612,090) 12,313,697 $198,095,532 $40,165,297 $ 8,766,449 ========== ============ =========== ============
53 NOTES TO FINANCIAL STATEMENTS -- (Continued) 4. STATEMENT OF INVESTMENTS -- (Concluded)
As of and for the period ended December 31, 2006 -- (Concluded) ----------------------------------------------------- No. of Market Cost of Proceeds INVESTMENTS Shares Value Purchases from Sales ----------- ------ ----- --------- ---------- Van Kampen Life Investment Trust (12.0%) Van Kampen LIT Comstock Subaccount (Class II) (Cost $175,377,833) 15,015,464 $220,727,328 $19,740,048 $18,600,447 Van Kampen LIT Growth and Income Subaccount (Class II) (Cost $113,267,588) 6,864,414 150,742,527 14,452,211 14,382,595 Van Kampen LIT Strategic Growth Subaccount (Class II) (Cost $74,134,365) 2,123,524 60,605,361 585,350 10,507,418 ---------- ------------ ----------- ----------- Total (Cost $362,779,786) 24,003,402 $432,075,216 $34,777,609 $43,490,460 ========== ============ =========== =========== Variable Insurance Products Fund (1.4%) VIP Equity - Income Subaccount (Service Class 2) (Cost $11,270,281) 488,121 $ 12,627,701 $ 4,445,636 $ 1,086,656 VIP Growth Subaccount (Service Class 2) (Cost $0) -- -- 746,449 4,243,782 VIP Mid Cap Subaccount (Service Class 2) (Cost $31,524,443) 1,064,929 36,473,815 14,809,072 3,044,406 ---------- ------------ ----------- ----------- Total (Cost $42,794,724) 1,553,050 $ 49,101,516 $20,001,157 $ 8,374,844 ========== ============ =========== ===========
54 NOTES TO FINANCIAL STATEMENTS -- (Continued) 5. FINANCIAL HIGHLIGHTS
Year Unit Value Net Investment(1) Expense Ratio(2) Total Return(3) Ended Units Lowest to Assets Income Lowest to Lowest to Dec 31 (000s) Highest ($) ($000s) Ratio (%) Highest (%) Highest (%) ------ ------ ----------- ------- --------- ----------- ----------- AIM Variable Insurance Funds AIM V.I. Capital Appreciation Subaccount (Series II) 2006 1,462 1.085 - 1.360 1,632 -- 1.40 - 1.90 4.03 - 4.62 2005 1,375 1.043 - 1.300 1,456 -- 1.40 - 1.90 4.25 - 6.80 2004 1,307 0.979 - 0.986 1,287 -- 1.65 - 1.90 4.37 - 4.56 2003 955 0.938 - 0.943 899 -- 1.65 - 1.90 26.76 - 27.09 2002 418 0.740 - 0.742 310 -- 1.65 - 1.90 (25.80) - (20.94) AIM V.I. Core Equity Subaccount (Series II) 2006 1,879 1.076 - 1.080 2,025 0.58 1.40 - 1.90 6.51 - 7.80 AIM V.I. Premier Equity Subaccount (Series II) 2006 -- 0.938 - 0.948 -- 0.73 1.65 - 1.90 4.80 - 4.87 2005 1,613 0.895 - 0.904 1,455 0.70 1.65 - 1.90 3.47 - 3.67 2004 1,395 0.865 - 0.872 1,214 0.37 1.65 - 1.90 3.47 - 3.81 2003 1,129 0.836 - 0.840 948 0.31 1.65 - 1.90 22.58 - 22.81 2002 654 0.682 - 0.684 447 0.68 1.65 - 1.90 (31.60) - (26.82) AllianceBernstein Variable Products Series Fund, Inc. AllianceBernstein Global Technology Subaccount (Class B) 2006 1,694 0.883 - 0.894 1,511 -- 1.65 - 1.90 6.39 - 6.56 2005 1,867 0.830 - 0.839 1,564 -- 1.65 - 1.90 1.72 - 2.07 2004 1,781 0.816 - 0.822 1,463 -- 1.65 - 1.90 3.03 - 3.27 2003 1,399 0.792 - 0.796 1,112 -- 1.65 - 1.90 41.18 - 41.39 2002 359 0.561 - 0.563 202 -- 1.65 - 1.90 (43.70) - (39.81) AllianceBernstein Large- Cap Growth Subaccount (Class B) 2006 1,919 0.957 - 1.312 2,010 -- 1.40 - 1.90 (2.45) - (2.02) 2005 1,586 0.981 - 1.339 1,676 -- 1.40 - 1.90 12.63 - 13.19 2004 1,308 0.871 - 0.877 1,147 -- 1.65 - 1.90 6.35 - 6.56 2003 1,025 0.819 - 0.823 844 -- 1.65 - 1.90 20.97 - 21.39 2002 356 0.677 - 0.678 242 -- 1.65 - 1.90 (32.20) - (23.93) American Funds Insurance Series American Funds Global Growth Subaccount (Class 2) 2006 8,655 1.902 - 1.919 16,591 0.89 1.65 - 1.90 18.14 - 18.46 2005 5,300 1.610 - 1.620 8,577 0.65 1.65 - 1.90 11.96 - 12.19 2004 2,643 1.438 - 1.444 3,814 0.42 1.65 - 1.90 11.39 - 11.68 2003 605 1.291 - 1.293 782 0.01 1.65 - 1.90 19.98 - 20.62 American Funds Growth Subaccount (Class 2) 2006 25,660 1.693 - 1.709 43,791 0.85 1.65 - 1.90 8.11 - 8.44 2005 19,473 1.566 - 1.576 30,657 0.86 1.65 - 1.90 14.06 - 14.29 2004 8,905 1.373 - 1.379 12,271 0.25 1.65 - 1.90 10.37 - 10.67 2003 2,127 1.244 - 1.246 2,650 0.24 1.65 - 1.90 11.95 - 11.97 American Funds Growth- Income Subaccount (Class 2) 2006 21,233 1.588 - 1.602 33,978 1.62 1.65 - 1.90 13.02 - 13.30 2005 18,244 1.405 - 1.414 25,770 1.64 1.65 - 1.90 3.84 - 4.12 2004 9,600 1.353 - 1.358 13,033 1.29 1.65 - 1.90 8.33 - 8.55 2003 2,376 1.249 - 1.251 2,972 1.95 1.65 - 1.90 15.83 - 16.08
55 NOTES TO FINANCIAL STATEMENTS -- (Continued) 5. FINANCIAL HIGHLIGHTS -- (Continued)
Year Unit Value Net Investment(1) Expense Ratio(2) Total Return(3) Ended Units Lowest to Assets Income Lowest to Lowest to Dec 31 (000s) Highest ($) ($000s) Ratio (%) Highest (%) Highest (%) ------ ------ ----------- ------- --------- ----------- ----------- Franklin Templeton Variable Insurance Products Trust FTVIPT Mutual Shares Securities Subaccount (Class 2) 2006 44,963 1.481 - 1.607 67,797 1.32 1.40 - 1.90 16.16 - 16.70 2005 36,186 1.275 - 1.377 46,715 0.85 1.40 - 1.90 8.51 - 10.07 2004 18,207 1.175 - 1.184 21,542 0.73 1.65 - 1.90 10.54 - 10.76 2003 8,464 1.063 - 1.069 9,041 0.87 1.65 - 1.90 22.75 - 23.16 2002 2,199 0.866 - 0.868 1,908 0.91 1.65 - 1.90 (13.20) - (12.79) FTVIPT Templeton Growth Securities Subaccount (Class 2) 2006 23,490 1.505 - 1.753 36,479 1.33 1.40 - 1.90 19.54 - 20.15 2005 18,006 1.259 - 1.459 23,091 1.05 1.40 - 1.90 6.88 - 7.83 2004 10,291 1.178 - 1.187 12,208 1.17 1.65 - 1.90 13.82 - 14.13 2003 5,613 1.035 - 1.040 5,836 1.48 1.65 - 1.90 29.70 - 30.00 2002 2,404 0.798 - 0.800 1,923 2.15 1.65 - 1.90 (20.00) - (16.70) Legg Mason Partners Investment Series LMPIS Dividend Strategy Subaccount 2006 54,058 0.779 - 1.033 46,127 2.05 1.40 - 1.90 15.65 - 16.27 2005 65,203 0.670 - 0.890 47,471 1.87 1.40 - 1.90 (2.00) - (1.62) 2004 73,480 0.681 - 0.907 53,587 0.91 1.40 - 1.90 1.47 - 1.95 2003 80,743 0.668 - 0.892 57,190 0.45 1.40 - 1.90 21.17 - 21.68 2002 81,876 0.549 - 0.734 46,672 0.61 1.40 - 1.90 (26.99) - (20.52) LMPIS Government Subaccount (Class A) 2006 84,627 1.088 - 1.274 95,427 3.95 1.40 - 1.90 2.06 - 2.66 2005 93,987 1.066 - 1.241 103,746 4.42 1.40 - 1.90 (0.37) - 0.16 2004 97,222 1.070 - 1.239 107,914 3.79 1.40 - 1.90 1.13 - 1.56 2003 98,982 1.058 - 1.220 109,473 3.01 1.40 - 1.90 (1.21) - (0.65) 2002 78,932 1.071 - 1.228 90,657 4.45 1.40 - 1.90 5.10 - 6.41 LMPIS Growth and Income Subaccount 2006 49,080 0.975 - 1.199 53,547 0.75 1.40 - 1.90 10.34 - 10.92 2005 56,308 0.879 - 1.084 55,296 0.78 1.40 - 1.90 1.90 - 2.45 2004 61,420 0.858 - 1.061 58,465 1.17 1.40 - 1.90 6.15 - 6.72 2003 56,233 0.804 - 0.997 49,145 0.65 1.40 - 1.90 27.84 - 28.43 2002 47,149 0.626 - 0.778 30,934 0.81 1.40 - 1.90 (23.28) - (21.18) LMPIS Premier Selections All Cap Growth Subaccount 2006 17,962 0.954 - 1.070 17,318 -- 1.40 - 1.90 5.38 - 5.76 2005 21,917 0.902 - 1.014 19,966 0.12 1.40 - 1.90 4.26 - 4.88 2004 25,495 0.860 - 0.969 22,125 -- 1.40 - 1.90 0.94 - 1.42 2003 27,014 0.848 - 0.958 23,019 -- 1.40 - 1.90 31.81 - 32.50 2002 29,623 0.640 - 0.725 19,001 0.06 1.40 - 1.90 (27.85) - (22.29) Legg Mason Partners Lifestyle Series, Inc. LMPLS Balanced Subaccount 2006 115,195 1.236 - 1.348 152,340 2.70 1.40 - 1.90 6.19 - 6.65 2005 135,703 1.164 - 1.264 168,435 2.21 1.40 - 1.90 0.61 - 1.12 2004 150,891 1.157 - 1.250 185,859 2.37 1.40 - 1.90 5.57 - 6.11 2003 153,411 1.096 - 1.178 178,916 2.67 1.40 - 1.90 17.98 - 18.63 2002 161,674 0.929 - 0.993 159,766 6.72 1.40 - 1.90 (7.80) - (6.43)
56 NOTES TO FINANCIAL STATEMENTS -- (Continued) 5. FINANCIAL HIGHLIGHTS -- (Continued)
Year Unit Value Net Investment(1) Expense Ratio(2) Total Return(3) Ended Units Lowest to Assets Income Lowest to Lowest to Dec 31 (000s) Highest ($) ($000s) Ratio (%) Highest (%) Highest (%) ------ ------ ----------- ------- --------- ----------- ----------- Legg Mason Partners Lifestyle Series, Inc. (Continued) LMPLS Growth Subaccount 2006 70,002 1.209 - 1.227 84,710 1.82 1.40 - 1.90 6.78 - 7.37 2005 82,537 1.126 - 1.146 93,060 1.45 1.40 - 1.90 2.81 - 3.21 2004 95,427 1.091 - 1.112 104,183 1.55 1.40 - 1.90 6.67 - 7.17 2003 105,572 1.018 - 1.041 107,533 1.68 1.40 - 1.90 27.31 - 28.05 2002 116,858 0.795 - 0.815 92,908 10.77 1.40 - 1.90 (19.13) - (14.75) LMPLS High Growth Subaccount 2006 45,160 1.229 - 1.250 56,412 0.98 1.40 - 1.90 7.43 - 7.94 2005 54,965 1.144 - 1.158 63,620 0.43 1.40 - 1.90 4.00 - 4.61 2004 63,590 1.100 - 1.108 70,398 0.39 1.40 - 1.90 8.59 - 9.06 2003 70,417 1.013 - 1.018 71,448 0.62 1.40 - 1.90 34.17 - 34.97 2002 78,953 0.752 - 0.756 59,368 1.10 1.40 - 1.90 (24.80) - (24.32) Legg Mason Partners Variable Portfolios V LMPVPV Small Cap Growth Opportunities Subaccount 2006 13,623 1.285 - 1.350 17,871 -- 1.40 - 1.90 10.81 - 11.35 2005 14,654 1.154 - 1.215 17,241 -- 1.40 - 1.90 2.91 - 3.41 2004 15,920 1.116 - 1.178 18,091 0.08 1.40 - 1.90 13.39 - 13.99 2003 14,922 0.979 - 1.036 14,817 -- 1.40 - 1.90 39.32 - 40.06 2002 11,907 0.699 - 0.742 8,402 -- 1.40 - 1.90 (26.73) - (21.94) Legg Mason Partners Variable Portfolios II LMPVPII Appreciation Subaccount 2006 355,607 1.238 - 1.336 460,610 1.08 1.40 - 1.90 12.65 - 13.22 2005 396,560 1.099 - 1.180 455,083 0.85 1.40 - 1.90 2.33 - 2.88 2004 409,904 1.074 - 1.147 459,757 1.16 1.40 - 1.90 6.76 - 7.20 2003 379,091 1.006 - 1.070 399,416 0.70 1.40 - 1.90 22.24 - 22.85 2002 346,509 0.823 - 0.871 299,834 1.48 1.40 - 1.90 (18.67) - (15.04) LMPVPII Capital and Income Subaccount 2006 29,276 1.171 - 1.176 34,398 1.96 1.65 - 1.90 9.13 - 9.40 2005 20,354 1.073 - 1.075 21,872 2.28 1.65 - 1.90 7.30 - 7.50 LMPVPII Fundamental Value Subaccount 2006 265,537 1.240 - 1.353 349,816 1.60 1.40 - 1.90 14.68 - 15.13 2005 287,839 1.077 - 1.177 329,697 0.97 1.40 - 1.90 2.73 - 3.36 2004 279,822 1.042 - 1.142 309,678 0.73 1.40 - 1.90 6.18 - 6.65 2003 221,360 0.977 - 1.073 227,937 0.75 1.40 - 1.90 36.05 - 36.83 2002 154,875 0.714 - 0.787 114,837 1.36 1.40 - 1.90 (22.48) - (18.45)
57 NOTES TO FINANCIAL STATEMENTS -- (Continued) 5. FINANCIAL HIGHLIGHTS -- (Continued)
Year Unit Value Net Investment(1) Expense Ratio(2) Total Return(3) Ended Units Lowest to Assets Income Lowest to Lowest to Dec 31 (000s) Highest ($) ($000s) Ratio (%) Highest (%) Highest (%) ------ ------ ----------- ------- --------- ----------- ----------- Legg Mason Partners Variable Portfolios III, Inc. LMPVPIII Adjustable Rate Income Subaccount 2006 2,893 1.018 - 1.033 2,966 4.15 1.40 - 1.90 2.21 - 2.68 2005 2,934 0.996 - 1.006 2,937 4.52 1.40 - 1.90 0.40 - 0.70 2004 1,260 0.992 - 0.994 1,253 2.10 1.65 - 1.90 (0.60) - (0.20) LMPVPIII Aggressive Growth Subaccount 2006 371,099 1.090 - 1.115 409,685 -- 1.40 - 1.90 6.69 - 7.28 2005 397,314 1.016 - 1.042 409,286 -- 1.40 - 1.90 9.55 - 10.08 2004 397,565 0.923 - 0.949 372,018 -- 1.40 - 1.90 7.90 - 8.46 2003 340,214 0.851 - 0.877 292,990 -- 1.40 - 1.90 32.07 - 32.55 2002 280,641 0.642 - 0.663 181,364 -- 1.40 - 1.90 (33.54) - (25.51) LMPVPIII High Income Subaccount 2006 69,415 1.207 - 1.435 92,443 7.66 1.40 - 1.90 8.92 - 9.43 2005 76,004 1.103 - 1.314 92,327 8.18 1.40 - 1.90 0.70 - 1.19 2004 73,082 1.090 - 1.302 86,778 9.00 1.40 - 1.90 8.39 - 9.00 2003 64,059 1.000 - 1.199 68,139 8.73 1.40 - 1.90 25.08 - 25.63 2002 51,069 0.796 - 0.956 41,652 26.25 1.40 - 1.90 (4.56) - (3.15) LMPVPIII International All Cap Growth Subaccount 2006 45,961 1.098 - 1.441 53,252 2.08 1.40 - 1.90 23.52 - 24.07 2005 52,324 0.885 - 1.164 48,702 1.36 1.40 - 1.90 9.61 - 10.21 2004 58,086 0.803 - 1.059 48,698 0.94 1.40 - 1.90 15.62 - 16.21 2003 61,479 0.691 - 0.913 43,760 1.08 1.40 - 1.90 25.03 - 25.64 2002 64,910 0.550 - 0.729 36,138 0.95 1.40 - 1.90 (26.67) - (20.89) LMPVPIII Large Cap Growth Subaccount 2006 25,210 1.032 - 1.123 27,625 0.15 1.40 - 1.90 2.59 - 3.20 2005 29,028 1.000 - 1.092 30,796 0.13 1.40 - 1.90 3.25 - 3.73 2004 30,640 0.964 - 1.055 31,287 0.39 1.40 - 1.90 (1.51) - (1.03) 2003 23,690 0.974 - 1.069 24,273 0.03 1.40 - 1.90 44.82 - 45.37 2002 9,415 0.670 - 0.736 6,548 0.48 1.40 - 1.90 (25.80) - (20.48) LMPVPIII Large Cap Value Subaccount 2006 68,173 1.198 - 1.254 81,976 1.20 1.40 - 1.90 16.03 - 16.65 2005 80,060 1.027 - 1.078 82,518 1.54 1.40 - 1.90 4.51 - 5.01 2004 92,136 0.978 - 1.029 90,373 1.85 1.40 - 1.90 8.50 - 9.15 2003 102,011 0.896 - 0.946 91,665 1.71 1.40 - 1.90 25.30 - 25.84 2002 113,574 0.712 - 0.753 80,980 3.68 1.40 - 1.90 (27.30) - (20.65) LMPVPIII Mid Cap Core Subaccount 2006 29,735 1.260 - 1.363 39,400 0.54 1.40 - 1.90 12.64 - 13.21 2005 33,190 1.113 - 1.207 38,891 0.63 1.40 - 1.90 6.32 - 6.81 2004 34,125 1.042 - 1.133 37,422 -- 1.40 - 1.90 8.29 - 8.88 2003 30,314 0.957 - 1.043 30,451 -- 1.40 - 1.90 27.36 - 27.94 2002 22,187 0.748 - 0.817 17,209 0.12 1.40 - 1.90 (20.26) - (15.98) LMPVPIII Money Market Subaccount 2006 57,641 1.006 - 1.158 62,363 4.51 1.40 - 1.90 2.65 - 3.12 2005 70,318 0.980 - 1.123 73,811 2.75 1.40 - 1.90 0.93 - 1.45 2004 83,653 0.971 - 1.107 86,890 0.89 1.40 - 1.90 (1.02) - (0.54) 2003 93,504 0.981 - 1.113 98,976 0.67 1.40 - 1.90 (1.31) - (0.71) 2002 111,874 0.994 - 1.121 121,508 1.26 1.40 - 1.90 (0.50) - (0.18) LMPVPIII Social Awareness Stock Subaccount 2006 21,107 0.882 - 1.076 20,162 0.49 1.40 - 1.90 5.67 - 6.27 2005 24,805 0.830 - 1.016 22,304 0.68 1.40 - 1.90 2.34 - 2.85 2004 28,151 0.807 - 0.989 24,444 0.77 1.40 - 1.90 4.25 - 4.81 2003 27,384 0.770 - 0.947 22,350 0.60 1.40 - 1.90 26.44 - 27.06 2002 25,387 0.606 - 0.747 15,894 0.93 1.40 - 1.90 (25.92) - (22.23)
58 NOTES TO FINANCIAL STATEMENTS -- (Continued) 5. FINANCIAL HIGHLIGHTS -- (Continued)
Year Unit Value Net Investment(1) Expense Ratio(2) Total Return(3) Ended Units Lowest to Assets Income Lowest to Lowest to Dec 31 (000s) Highest ($) ($000s) Ratio (%) Highest (%) Highest (%) ------ ------ ----------- ------- --------- ----------- ----------- Legg Mason Partners Variable Portfolios IV LMPVPIV Multiple Discipline Subaccount- All Cap Growth and Value 2006 4,301 1.152 - 1.168 4,987 0.67 1.40 - 1.90 11.52 - 11.98 2005 4,023 1.033 - 1.043 4,173 0.42 1.40 - 1.90 3.30 - 7.30 2004 2,578 1.000 - 1.003 2,583 0.63 1.65 - 1.90 0.60 - 1.42 LMPVPIV Multiple Discipline Subaccount- Balanced All Cap Growth and Value 2006 4,360 1.105 - 1.121 4,853 1.59 1.40 - 1.90 8.33 - 8.94 2005 4,432 1.020 - 1.029 4,538 1.45 1.40 - 1.90 2.31 - 3.94 2004 2,214 0.997 - 0.999 2,211 1.64 1.65 - 1.90 3.74 - 5.17 LMPVPIV Multiple Discipline Subaccount- Global All Cap Growth and Value 2006 2,562 1.213 - 1.230 3,128 1.17 1.40 - 1.90 13.05 - 13.57 2005 2,440 1.073 - 1.083 2,628 0.88 1.40 - 1.90 4.58 - 7.23 2004 1,259 1.026 - 1.029 1,294 0.85 1.65 - 1.90 4.26 - 5.34 LMPVPIV Multiple Discipline Subaccount- Large Cap Growth and Value 2006 1,634 1.117 - 1.133 1,835 0.78 1.40 - 1.90 10.16 - 10.75 2005 1,659 1.014 - 1.023 1,687 0.70 1.40 - 1.90 1.60 - 3.75 2004 1,286 0.998 - 1.000 1,284 1.51 1.65 - 1.90 1.83 - 4.39 Met Investors Series Trust MIST BlackRock Large-Cap Core Subaccount (Class A) 2006 52,707 1.100 - 1.264 58,415 -- 1.40 - 1.90 5.67 - 6.08 MIST Lord Abbett Bond Debenture Subaccount (Class A) 2006 19,727 1.258 - 1.314 25,836 -- 1.40 - 1.90 4.59 - 4.92 MIST Lord Abbett Growth and Income Subaccount (Class B) 2006 7,953 1.074 - 1.077 8,551 -- 1.40 - 1.90 7.29 - 7.59 MIST Oppenheimer Capital Appreciation Subaccount (Class B) 2006 6,867 1.006 - 1.009 6,918 -- 1.40 - 1.90 1.21 - 1.51 MIST Pioneer Strategic Income Subaccount (Class A) 2006 40,367 1.134 - 1.150 46,111 4.77 1.40 - 1.90 3.37 - 3.70 Metropolitan Series Fund, Inc. MSF BlackRock Aggressive Growth Subaccount (Class D) 2006 54,875 0.811 - 1.069 56,973 -- 1.40 - 1.90 (2.64) - (2.29) MSF BlackRock Bond Income Subaccount (Class E) 2006 38,027 1.042 - 1.116 42,324 -- 1.40 - 1.90 3.57 - 3.99 MSF MFS(R) Total Return Subaccount (Class F) 2006 140,118 1.321 - 1.538 200,640 -- 1.40 - 1.90 6.70 - 7.03 MSF T. Rowe Price Large Cap Growth Subaccount (Class B) 2006 3,833 1.067 - 1.070 4,094 -- 1.40 - 1.90 6.91 - 7.21 MSF Western Asset Management U.S. Government Subaccount (Class A) 2006 9,170 1.002 - 1.011 9,233 -- 1.25 - 1.75 3.30 - 3.69 Oppenheimer Variable Account Funds Oppenheimer Capital Appreciation Subaccount/VA (Service Shares) 2006 -- 1.031 - 1.312 -- 0.18 1.40 - 1.90 4.46 - 4.54 2005 6,425 0.987 - 1.255 6,442 0.73 1.40 - 1.90 2.92 - 8.10 2004 5,884 0.959 - 0.966 5,681 0.22 1.65 - 1.90 4.58 - 4.77 2003 4,665 0.917 - 0.922 4,296 0.26 1.65 - 1.90 28.25 - 28.59 2002 2,015 0.715 - 0.717 1,444 0.03 1.65 - 1.90 (28.30) - (25.98) Oppenheimer Main Street/VA Subaccount (Service Shares) 2006 -- 1.154 - 1.351 -- 0.97 1.40 - 1.90 5.58 - 5.71 2005 7,492 1.093 - 1.278 8,296 1.17 1.40 - 1.90 3.80 - 8.67 2004 7,433 1.053 - 1.061 7,881 0.67 1.65 - 1.90 7.01 - 7.28 2003 6,211 0.984 - 0.989 6,136 0.67 1.65 - 1.90 24.09 - 24.40 2002 2,607 0.793 - 0.795 2,072 0.02 1.65 - 1.90 (21.56) - (20.50)
59 NOTES TO FINANCIAL STATEMENTS -- (Continued) 5. FINANCIAL HIGHLIGHTS -- (Continued)
Year Unit Value Net Investment(1) Expense Ratio(2) Total Return(3) Ended Units Lowest to Assets Income Lowest to Lowest to Dec 31 (000s) Highest ($) ($000s) Ratio (%) Highest (%) Highest (%) ------ ------ ----------- ------- --------- ----------- ----------- Pioneer Variable Contracts Trust Pioneer Fund VCT Subaccount (Class II) 2006 2,991 1.234 - 1.487 3,815 1.13 1.40 - 1.90 14.15 - 14.74 2005 2,765 1.081 - 1.296 3,023 1.11 1.40 - 1.90 3.94 - 4.60 2004 2,530 1.040 - 1.048 2,647 0.99 1.65 - 1.90 8.79 - 9.17 2003 1,639 0.956 - 0.960 1,573 0.95 1.65 - 1.90 21.17 - 21.37 2002 777 0.789 - 0.791 614 1.07 1.65 - 1.90 (20.90) - (20.62) Pioneer Mid Cap Value VCT Subaccount (Class II) 2006 16,115 1.633 - 1.709 26,736 -- 1.40 - 1.90 10.19 - 10.69 2005 14,562 1.482 - 1.544 21,848 0.19 1.40 - 1.90 5.63 - 8.81 2004 7,450 1.403 - 1.414 10,525 0.26 1.65 - 1.90 19.40 - 19.83 2003 4,176 1.175 - 1.180 4,925 0.24 1.65 - 1.90 34.59 - 34.86 2002 1,953 0.873 - 0.875 1,709 0.28 1.65 - 1.90 (12.50) - (10.83) Putnam Variable Trust Putnam VT International Equity Subaccount (Class IB) 2006 5,493 1.596 - 1.882 9,327 0.49 1.40 - 1.90 25.27 - 25.97 2005 3,301 1.274 - 1.494 4,317 1.31 1.40 - 1.90 10.11 - 15.19 2004 2,374 1.157 - 1.166 2,765 1.44 1.65 - 1.90 13.99 - 14.31 2003 2,032 1.015 - 1.020 2,071 0.74 1.65 - 1.90 26.09 - 26.39 2002 1,040 0.805 - 0.807 839 0.05 1.65 - 1.90 (19.90) - (19.30) Putnam VT Small Cap Value Subaccount (Class IB) 2006 13,041 1.771 - 1.949 23,645 0.30 1.40 - 1.90 15.07 - 15.67 2005 10,665 1.539 - 1.685 16,670 0.15 1.40 - 1.90 5.05 - 14.86 2004 6,893 1.465 - 1.476 10,167 0.30 1.65 - 1.90 23.84 - 24.14 2003 3,906 1.183 - 1.189 4,642 0.27 1.65 - 1.90 46.77 - 47.15 2002 2,071 0.806 - 0.808 1,673 0.03 1.65 - 1.90 (23.96) - (19.20) The Travelers Series Trust Travelers Convertible Securities Subaccount 2006 -- 1.199 - 1.254 -- 0.86 1.40 - 1.90 6.52 - 6.67 2005 20,550 1.124 - 1.177 24,150 2.62 1.40 - 1.90 (1.52) - 6.54 2004 20,075 1.183 - 1.192 23,919 2.61 1.65 - 1.90 4.23 - 4.56 2003 11,667 1.135 - 1.140 13,298 5.10 1.65 - 1.90 23.91 - 24.18 2002 4,099 0.916 - 0.918 3,763 14.10 1.65 - 1.90 (8.20) - (4.08) Travelers Managed Income Subaccount 2006 -- 1.002 - 1.076 -- 2.06 1.40 - 1.90 (1.02) - (0.89) 2005 42,647 1.011 - 1.086 46,241 3.63 1.40 - 1.90 (0.56) - (0.10) 2004 41,758 1.081 - 1.089 45,444 5.07 1.65 - 1.90 0.93 - 1.11 2003 30,502 1.071 - 1.077 32,822 6.58 1.65 - 1.90 6.36 - 6.74 2002 9,306 1.007 - 1.009 9,391 28.76 1.65 - 1.90 0.90 - 1.61 Travelers Mercury Large Cap Core Subaccount 2006 -- 1.037 - 1.194 -- 0.21 1.40 - 1.90 6.01 - 6.25 2005 62,862 0.976 - 1.125 61,830 -- 1.40 - 1.90 9.97 - 10.53 2004 74,342 0.883 - 1.021 66,195 0.54 1.40 - 1.90 13.69 - 14.23 2003 82,282 0.773 - 0.895 64,047 0.67 1.40 - 1.90 18.96 - 19.47 2002 91,792 0.647 - 0.751 59,610 0.56 1.40 - 1.90 (26.14) - (20.78) Travelers MFS(R) Mid Cap Growth Subaccount 2006 -- 0.833 - 1.094 -- -- 1.40 - 1.90 5.71 - 5.91 2005 66,906 0.788 - 1.033 67,312 -- 1.40 - 1.90 1.16 - 1.67 2004 78,670 0.779 - 1.016 78,266 -- 1.40 - 1.90 11.93 - 12.51 2003 85,984 0.696 - 0.903 76,465 -- 1.40 - 1.90 34.62 - 35.18 2002 91,848 0.517 - 0.668 60,948 -- 1.40 - 1.90 (49.58) - (41.22)
60 NOTES TO FINANCIAL STATEMENTS -- (Continued) 5. FINANCIAL HIGHLIGHTS -- (Continued)
Year Unit Value Net Investment(1) Expense Ratio(2) Total Return(3) Ended Units Lowest to Assets Income Lowest to Lowest to Dec 31 (000s) Highest ($) ($000s) Ratio (%) Highest (%) Highest (%) ------ ------ ----------- ------- --------- ----------- ----------- The Travelers Series Trust (Continued) Travelers MFS(R) Total Return Subaccount 2006 -- 1.238 - 1.437 -- 1.32 1.40 - 1.90 3.08 - 3.31 2005 155,667 1.201 - 1.391 202,664 2.16 1.40 - 1.90 1.01 - 1.53 2004 154,254 1.189 - 1.370 199,606 2.82 1.40 - 1.90 9.38 - 9.95 2003 140,353 1.087 - 1.246 167,426 2.48 1.40 - 1.90 14.30 - 14.84 2002 121,655 0.951 - 1.085 129,043 6.29 1.40 - 1.90 (7.58) - (5.08) Travelers Pioneer Strategic Income Subaccount 2006 -- 1.097 - 1.109 -- -- 1.40 - 1.90 0.92 - 1.09 2005 31,549 1.087 - 1.097 34,454 6.66 1.40 - 1.90 1.68 - 2.24 2004 7,226 1.069 - 1.071 7,737 17.32 1.65 - 1.90 7.10 - 7.33 Travelers U.S. Government Securities Subaccount 2006 -- 0.970 - 0.975 -- 6.90 1.40 - 1.90 (3.77) - (3.56) 2005 5,133 1.008 - 1.011 5,182 -- 1.40 - 1.90 (0.69) - 0.90 Universal Institutional Funds, Inc. UIF Equity and Income Subaccount (Class II) 2006 113,021 1.474 - 1.501 168,126 1.15 1.40 - 1.90 10.41 - 11.02 2005 102,450 1.335 - 1.352 137,583 0.65 1.40 - 1.90 5.37 - 7.73 2004 57,396 1.267 - 1.272 72,971 -- 1.65 - 1.90 9.41 - 9.75 2003 16,285 1.158 - 1.159 18,879 1.16 1.65 - 1.90 8.63 - 14.07 UIF U.S. Real Estate Securities Subaccount (Class I) 2006 18,763 1.587 - 1.600 29,913 1.10 1.40 - 1.90 35.53 - 36.17 2005 9,162 1.171 - 1.175 10,753 0.48 1.40 - 1.90 17.10 - 17.50 Van Kampen Life Investment Trust Van Kampen LIT Comstock Subaccount (Class II) 2006 151,101 1.386 - 1.558 220,686 1.28 1.40 - 1.90 13.79 - 14.47 2005 158,534 1.218 - 1.361 203,241 0.91 1.40 - 1.90 2.18 - 2.64 2004 143,416 1.192 - 1.326 180,625 0.74 1.40 - 1.90 15.28 - 15.81 2003 124,966 1.034 - 1.145 137,449 0.78 1.40 - 1.90 28.29 - 28.94 2002 105,447 0.806 - 0.888 91,424 0.42 1.40 - 1.90 (20.57) - (17.59) Van Kampen LIT Growth and Income Subaccount (Class II) 2006 103,494 1.428 - 1.483 150,725 0.97 1.40 - 1.90 13.75 - 14.33 2005 109,784 1.249 - 1.300 139,928 0.84 1.40 - 1.90 7.70 - 8.23 2004 106,443 1.154 - 1.204 125,306 0.73 1.40 - 1.90 12.00 - 12.48 2003 101,462 1.026 - 1.073 105,963 0.69 1.40 - 1.90 25.23 - 25.89 2002 84,918 0.815 - 0.854 69,996 0.63 1.40 - 1.90 (15.89) - (12.70) Van Kampen LIT Strategic Growth Subaccount (Class II) 2006 101,290 0.490 - 0.929 60,600 -- 1.40 - 1.90 0.66 - 1.24 2005 118,715 0.484 - 0.920 68,970 0.01 1.40 - 1.90 5.56 - 6.14 2004 134,324 0.456 - 0.869 72,022 -- 1.40 - 1.90 4.86 - 5.31 2003 142,382 0.433 - 0.827 69,738 -- 1.40 - 1.90 24.70 - 25.14 2002 143,919 0.346 - 0.662 53,250 0.05 1.40 - 1.90 (33.59) - (29.49)
61 NOTES TO FINANCIAL STATEMENTS -- (Continued) 5. FINANCIAL HIGHLIGHTS -- (Concluded)
Year Unit Value Net Investment(1) Expense Ratio(2) Total Return(3) Ended Units Lowest to Assets Income Lowest to Lowest to Dec 31 (000s) Highest ($) ($000s) Ratio (%) Highest (%) Highest (%) ------ ------ ----------- ------- --------- ----------- ----------- Variable Insurance Products Fund VIP Equity - Income Subaccount (Service Class 2) 2006 8,902 1.378 - 1.575 12,627 2.98 1.40 - 1.90 17.68 - 18.33 2005 7,527 1.171 - 1.331 8,936 1.28 1.40 - 1.90 3.63 - 8.83 2004 5,885 1.130 - 1.139 6,694 1.22 1.65 - 1.90 9.18 - 9.41 2003 4,053 1.035 - 1.041 4,215 1.21 1.65 - 1.90 27.46 - 27.89 2002 2,149 0.812 - 0.814 1,747 -- 1.65 - 1.90 (20.93) - (18.60) VIP Growth Subaccount (Service Class 2) 2006 -- 0.963 - 1.278 -- 0.15 1.40 - 1.90 4.00 - 4.24 2005 3,544 0.926 - 1.226 3,337 0.24 1.40 - 1.90 3.58 - 11.35 2004 2,684 0.894 - 0.901 2,415 0.11 1.65 - 1.90 1.13 - 1.46 2003 1,979 0.884 - 0.888 1,756 0.08 1.65 - 1.90 30.00 - 30.40 2002 1,107 0.680 - 0.681 754 -- 1.65 - 1.90 (31.90) - (27.19) VIP Mid Cap Subaccount (Service Class 2) 2006 18,954 1.885 - 2.002 36,452 0.15 1.40 - 1.90 10.30 - 10.85 2005 14,215 1.709 - 1.806 24,631 -- 1.40 - 1.90 15.79 - 20.48 2004 7,402 1.476 - 1.487 10,995 -- 1.65 - 1.90 22.39 - 22.69 2003 3,121 1.206 - 1.212 3,783 0.18 1.65 - 1.90 35.66 - 35.87 2002 1,614 0.889 - 0.892 1,439 -- 1.65 - 1.90 (10.80) - (9.84)
- ------- (1) These amounts represent the dividends, excluding distributions of capital gains, received by the Subaccount from the underlying mutual fund, net of management fees assessed by the fund manager, divided by the average net assets. These ratios exclude those expenses, such as mortality and expense charges, that are assessed against contract owner accounts either through reductions in the unit values or the redemption of units. The recognition of investment income by the Subaccount is affected by the timing of the declaration of dividends by the underlying fund in which the Subaccount invests. (2) These amounts represent the annualized contract expenses of the separate account, consisting primarily of mortality and expense charges, for each period indicated. The ratios include only those expenses that result in a direct reduction to unit values. Charges made directly to contract owner accounts through the redemption of units and expenses of the underlying fund have been excluded. (3) These amounts represent the total return for the period indicated, including changes in the value of the underlying fund, and expenses assessed through the reduction of unit values. These ratios do not include any expenses assessed through the redemption of units. The total return is calculated for each period indicated or from the effective date through the end of the reporting period. As the total return is presented as a range of minimum to maximum values, based on the product grouping representing the minimum and maximum expense ratio amounts, some individual contract total returns are not within the ranges presented. 62 NOTES TO FINANCIAL STATEMENTS -- (Continued) 6. Schedules of Accumulation and Annuity Units for the years ended December 31, 2006 and 2005
AIM V.I. Capital AIM V.I. Core AIM V.I. Appreciation Equity Premier Equity Subaccount Subaccount Subaccount (Series (Series II) (Series II) II) --------------------- ---------------- ---------------------- 2006 2005 2006 2005 2006 2005 ---- ---- ---- ---- ---- ---- Accumulation and annuity units beginning of year ..................... 1,374,795 1,307,179 -- -- 1,613,389 1,395,194 Accumulation units purchased and transferred from other funding options 424,951 249,832 2,114,976 -- 52,282 330,115 Accumulation units redeemed and transferred to other funding options .. (337,256) (182,216) (235,537) -- (1,665,671) (111,920) Annuity units .......................... -- -- -- -- -- -- --------- --------- --------- --- ---------- --------- Accumulation and annuity units end of year .................................. 1,462,490 1,374,795 1,879,439 -- -- 1,613,389 ========= ========= ========= === ========== =========
AllianceBernstein AllianceBernstein American Funds Global Technology Large-Cap Growth Global Growth Subaccount (Class B) Subaccount (Class B) Subaccount (Class 2) --------------------- --------------------- ---------------------- 2006 2005 2006 2005 2006 2005 ---- ---- ---- ---- ---- ---- Accumulation and annuity units beginning of year ..................... 1,867,266 1,780,951 1,586,493 1,307,981 5,300,236 2,642,852 Accumulation units purchased and transferred from other funding options 274,518 389,342 895,957 570,656 4,694,288 3,118,444 Accumulation units redeemed and transferred to other funding options .. (448,219) (303,027) (563,477) (292,144) (1,339,186) (461,060) Annuity units .......................... -- -- -- -- -- -- --------- --------- --------- --------- ---------- --------- Accumulation and annuity units end of year .................................. 1,693,565 1,867,266 1,918,973 1,586,493 8,655,338 5,300,236 ========= ========= ========= ========= ========== =========
American Funds American Funds FTVIPT Mutual Growth Subaccount Growth-Income Shares Securities (Class 2) Subaccount (Class 2) Subaccount (Class 2) ----------------------- ----------------------- ----------------------- 2006 2005 2006 2005 2006 2005 ---- ---- ---- ---- ---- ---- Accumulation and annuity units beginning of year ..................... 19,473,456 8,905,291 18,243,746 9,600,418 36,186,317 18,206,779 Accumulation units purchased and transferred from other funding options 9,458,825 12,081,851 5,348,805 9,976,434 13,714,098 20,885,031 Accumulation units redeemed and transferred to other funding options .. (3,272,216) (1,513,686) (2,359,517) (1,333,106) (4,937,276) (2,905,493) Annuity units .......................... -- -- -- -- -- -- ---------- ---------- ---------- ---------- ---------- ---------- Accumulation and annuity units end of year .................................. 25,660,065 19,473,456 21,233,034 18,243,746 44,963,139 36,186,317 ========== ========== ========== ========== ========== ==========
63 NOTES TO FINANCIAL STATEMENTS -- (Continued) 6. Schedules of Accumulation and Annuity Units for the years ended December 31, 2006 and 2005 -- (Continued)
FTVIPT Templeton Growth Securities LMPIS Dividend LMPIS Government Subaccount (Class 2) Strategy Subaccount Subaccount (Class A) ----------------------- ------------------------- ------------------------- 2006 2005 2006 2005 2006 2005 ---- ---- ---- ---- ---- ---- Accumulation and annuity units beginning of year ..................... 18,005,873 10,291,237 65,203,020 73,479,980 93,987,275 97,221,575 Accumulation units purchased and transferred from other funding options 8,663,403 9,082,729 2,626,189 5,781,854 9,520,979 16,669,240 Accumulation units redeemed and transferred to other funding options .. (3,179,728) (1,368,093) (13,771,038) (14,058,814) (18,881,426) (19,901,878) Annuity units .......................... -- -- -- -- 31 (1,662) ---------- ---------- ----------- ----------- ----------- ----------- Accumulation and annuity units end of year .................................. 23,489,548 18,005,873 54,058,171 65,203,020 84,626,859 93,987,275 ========== ========== =========== =========== =========== ===========
LMPIS Premier LMPIS Growth and Selections All Cap LMPLS Balanced Income Subaccount Growth Subaccount Subaccount ------------------------ ----------------------- ------------------------- 2006 2005 2006 2005 2006 2005 ---- ---- ---- ---- ---- ---- Accumulation and annuity units beginning of year ..................... 56,308,290 61,420,160 21,917,024 25,494,966 135,702,985 150,891,117 Accumulation units purchased and transferred from other funding options 2,252,652 5,134,291 499,274 826,886 3,203,980 8,710,772 Accumulation units redeemed and transferred to other funding options .. (9,480,667) (10,246,161) (4,454,474) (4,404,828) (23,711,711) (23,892,326) Annuity units .......................... -- -- -- -- (294) (6,578) ---------- ----------- ---------- ---------- ----------- ----------- Accumulation and annuity units end of year .................................. 49,080,275 56,308,290 17,961,824 21,917,024 115,194,960 135,702,985 ========== =========== ========== ========== =========== ===========
LMPVPV Small Cap LMPIS Growth LMPIS High Growth Growth Opportunities Subaccount Subaccount Subaccount ------------------------- ------------------------- ----------------------- 2006 2005 2006 2005 2006 2005 ---- ---- ---- ---- ---- ---- Accumulation and annuity units beginning of year ..................... 82,536,763 95,426,722 54,964,521 63,589,893 14,654,067 15,920,029 Accumulation units purchased and transferred from other funding options 1,243,210 1,974,439 703,346 1,378,183 2,393,328 2,267,396 Accumulation units redeemed and transferred to other funding options .. (13,777,740) (14,864,398) (10,507,827) (10,003,555) (3,423,998) (3,533,358) Annuity units .......................... -- -- -- -- -- -- ----------- ----------- ----------- ----------- ---------- ---------- Accumulation and annuity units end of year .................................. 70,002,233 82,536,763 45,160,040 54,964,521 13,623,397 14,654,067 =========== =========== =========== =========== ========== ==========
64 NOTES TO FINANCIAL STATEMENTS -- (Continued) 6. Schedules of Accumulation and Annuity Units for the years ended December 31, 2006 and 2005 -- (Continued)
LMPVPII Appreciation LMPVPII Capital and LMPVPII Fundamental Subaccount Income Subaccount Value Subaccount ------------------------- ----------------------- ------------------------- 2006 2005 2006 2005 2006 2005 ---- ---- ---- ---- ---- ---- Accumulation and annuity units beginning of year ..................... 396,560,396 409,904,256 20,354,496 -- 287,838,802 279,821,666 Accumulation units purchased and transferred from other funding options 19,685,948 47,896,597 12,734,909 21,202,329 18,619,508 46,760,117 Accumulation units redeemed and transferred to other funding options .. (60,632,177) (61,233,233) (3,813,655) (847,833) (40,906,071) (38,726,057) Annuity units .......................... (7,043) (7,224) -- -- (15,250) (16,924) ----------- ----------- ---------- ---------- ----------- ----------- Accumulation and annuity units end of year .................................. 355,607,124 396,560,396 29,275,750 20,354,496 265,536,989 287,838,802 =========== =========== ========== ========== =========== ===========
LMPVPIII Adjustable Rate Income LMPVPIII Aggressive LMPVPIII High Subaccount Growth Subaccount Income Subaccount ---------------------- ------------------------- ------------------------- 2006 2005 2006 2005 2006 2005 ---- ---- ---- ---- ---- ---- Accumulation and annuity units beginning of year ..................... 2,934,313 1,260,025 397,313,986 397,565,075 76,003,513 73,082,057 Accumulation units purchased and transferred from other funding options 1,360,455 2,429,898 32,333,095 61,461,436 7,492,347 18,321,492 Accumulation units redeemed and transferred to other funding options .. (1,401,546) (755,610) (58,540,210) (61,704,840) (14,080,498) (15,400,036) Annuity units .......................... -- -- (7,498) (7,685) -- -- ---------- --------- ----------- ----------- ----------- ----------- Accumulation and annuity units end of year .................................. 2,893,222 2,934,313 371,099,373 397,313,986 69,415,362 76,003,513 ========== ========= =========== =========== =========== ===========
LMPVPIII International All Cap LMPVPIII Large Cap LMPVPIII Large Cap Growth Subaccount Growth Subaccount Value Subaccount ----------------------- ----------------------- ------------------------- 2006 2005 2006 2005 2006 2005 ---- ---- ---- ---- ---- ---- Accumulation and annuity units beginning of year ..................... 52,324,057 58,086,243 29,027,556 30,639,841 80,059,801 92,136,087 Accumulation units purchased and transferred from other funding options 3,161,129 3,730,872 2,448,790 4,051,997 1,867,392 2,515,557 Accumulation units redeemed and transferred to other funding options .. (9,524,131) (9,493,058) (6,266,603) (5,664,282) (13,753,726) (14,591,843) Annuity units .......................... -- -- -- -- -- -- ---------- ---------- ---------- ---------- ----------- ----------- Accumulation and annuity units end of year .................................. 45,961,055 52,324,057 25,209,743 29,027,556 68,173,467 80,059,801 ========== ========== ========== ========== =========== ===========
65 NOTES TO FINANCIAL STATEMENTS -- (Continued) 6. Schedules of Accumulation and Annuity Units for the years ended December 31, 2006 and 2005 -- (Continued)
LMPVPIII LMPVPIII Mid Cap LMPVPIII Money Market Social Awareness Core Subaccount Subaccount Stock Subaccount ----------------------- ------------------------- ----------------------- 2006 2005 2006 2005 2006 2005 ---- ---- ---- ---- ---- ---- Accumulation and annuity units beginning of year ..................... 33,189,619 34,124,864 70,318,443 83,653,240 24,804,920 28,151,430 Accumulation units purchased and transferred from other funding options 1,960,671 4,192,860 23,615,055 36,201,373 694,124 1,622,327 Accumulation units redeemed and transferred to other funding options .. (5,414,973) (5,128,105) (36,292,272) (49,536,028) (4,392,094) (4,968,837) Annuity units .......................... -- -- (136) (142) -- -- ---------- ---------- ----------- ----------- ---------- ---------- Accumulation and annuity units end of year .................................. 29,735,317 33,189,619 57,641,090 70,318,443 21,106,950 24,804,920 ========== ========== =========== =========== ========== ==========
LMPVPIV Multiple LMPVPIV Multiple LMPVPIV Multiple Discipline Discipline Discipline Subaccount- Subaccount- Subaccount- All Cap Growth and Balanced All Cap Global All Cap Value Growth and Value Growth and Value --------------------- --------------------- --------------------- 2006 2005 2006 2005 2006 2005 ---- ---- ---- ---- ---- ---- Accumulation and annuity units beginning of year ..................... 4,022,665 2,577,790 4,431,652 2,214,315 2,439,955 1,258,969 Accumulation units purchased and transferred from other funding options 761,889 1,856,806 681,598 2,739,928 756,327 1,441,405 Accumulation units redeemed and transferred to other funding options .. (483,769) (411,931) (753,683) (522,591) (634,148) (260,419) Annuity units .......................... -- -- -- -- -- -- --------- --------- --------- --------- --------- --------- Accumulation and annuity units end of year .................................. 4,300,785 4,022,665 4,359,567 4,431,652 2,562,134 2,439,955 ========= ========= ========= ========= ========= =========
LMPVPIV Multiple Discipline MIST BlackRock MIST Lord Abbett Subaccount- Large-Cap Core Bond Debenture Large Cap Growth and Subaccount Subaccount Value (Class A) (Class A) --------------------- ----------------- ----------------- 2006 2005 2006 2005 2006 2005 ---- ---- ---- ---- ---- ---- Accumulation and annuity units beginning of year ..................... 1,658,927 1,285,783 -- -- -- -- Accumulation units purchased and transferred from other funding options 342,888 619,488 59,888,119 -- 22,127,399 -- Accumulation units redeemed and transferred to other funding options .. (367,850) (246,344) (7,180,946) -- (2,400,058) -- Annuity units .......................... -- -- -- -- -- -- --------- --------- ---------- --- ---------- --- Accumulation and annuity units end of year .................................. 1,633,965 1,658,927 52,707,173 -- 19,727,341 -- ========= ========= ========== === ========== ===
66 NOTES TO FINANCIAL STATEMENTS -- (Continued) 6. Schedules of Accumulation and Annuity Units for the years ended December 31, 2006 and 2005 -- (Continued)
MIST Lord MIST Abbett Oppenheimer Growth and Capital MIST Pioneer Income Appreciation Strategic Income Subaccount Subaccount Subaccount (Class B) (Class B) (Class A) ---------------- ---------------- ----------------- 2006 2005 2006 2005 2006 2005 ---- ---- ---- ---- ---- ---- Accumulation and annuity units beginning of year ..................... -- -- -- -- -- -- Accumulation units purchased and transferred from other funding options 8,569,201 -- 7,446,797 -- 46,130,887 -- Accumulation units redeemed and transferred to other funding options .. (616,344) -- (579,672) -- (5,763,665) -- Annuity units .......................... -- -- -- -- -- -- --------- --- --------- --- ---------- --- Accumulation and annuity units end of year .................................. 7,952,857 -- 6,867,125 -- 40,367,222 -- ========= === ========= === ========== ===
MSF BlackRock Aggressive MSF BlackRock MSF MFS(R) Total Growth Bond Income Return Subaccount Subaccount Subaccount (Class (Class D) (Class E) F) ----------------- ----------------- ------------------ 2006 2005 2006 2005 2006 2005 ---- ---- ---- ---- ---- ---- Accumulation and annuity units beginning of year ..................... -- -- -- -- -- -- Accumulation units purchased and transferred from other funding options 64,701,691 -- 42,977,548 -- 156,010,422 -- Accumulation units redeemed and transferred to other funding options .. (9,826,869) -- (4,950,148) -- (15,904,962) -- Annuity units .......................... -- -- -- -- 12,312 -- ---------- --- ---------- --- ----------- --- Accumulation and annuity units end of year .................................. 54,874,822 -- 38,027,400 -- 140,117,772 -- ========== === ========== === =========== ===
MSF T. Rowe MSF Western Price Asset Large Cap Management U.S. Oppenheimer Capital Growth Government Appreciation Subaccount Subaccount Subaccount/VA (Class B) (Class A) (Service Shares) ---------------- ----------------- ---------------------- 2006 2005 2006 2005 2006 2005 ---- ---- ---- ---- ---- ---- Accumulation and annuity units beginning of year ..................... -- -- -- -- 6,425,333 5,884,040 Accumulation units purchased and transferred from other funding options 4,459,180 -- 12,251,822 -- 338,162 1,220,672 Accumulation units redeemed and transferred to other funding options .. (626,355) -- (3,081,614) -- (6,763,495) (679,379) Annuity units .......................... -- -- -- -- -- -- --------- --- ---------- --- ---------- --------- Accumulation and annuity units end of year .................................. 3,832,825 -- 9,170,208 -- -- 6,425,333 ========= === ========== === ========== =========
67 NOTES TO FINANCIAL STATEMENTS -- (Continued) 6. Schedules of Accumulation and Annuity Units for the years ended December 31, 2006 and 2005 -- (Continued)
Oppenheimer Main Street/ Pioneer Fund VCT Pioneer Mid Cap Value VA Subaccount Subaccount (Class VCT (Service Shares) II) Subaccount (Class II) ----------------------- --------------------- ----------------------- 2006 2005 2006 2005 2006 2005 ---- ---- ---- ---- ---- ---- Accumulation and annuity units beginning of year ..................... 7,492,224 7,432,543 2,764,563 2,530,333 14,562,188 7,450,254 Accumulation units purchased and transferred from other funding options 345,295 1,124,950 640,520 804,018 4,493,588 8,880,783 Accumulation units redeemed and transferred to other funding options .. (7,837,519) (1,065,269) (414,318) (569,788) (2,941,086) (1,768,849) Annuity units .......................... -- -- -- -- -- -- ---------- ---------- --------- --------- ---------- ---------- Accumulation and annuity units end of year .................................. -- 7,492,224 2,990,765 2,764,563 16,114,690 14,562,188 ========== ========== ========= ========= ========== ==========
Putnam VT Putnam VT Small Cap International Equity Value Subaccount Travelers Convertible Subaccount (Class IB) (Class IB) Securities Subaccount ---------------------- ----------------------- ------------------------ 2006 2005 2006 2005 2006 2005 ---- ---- ---- ---- ---- ---- Accumulation and annuity units beginning of year ..................... 3,301,487 2,373,716 10,664,811 6,892,595 20,550,110 20,075,298 Accumulation units purchased and transferred from other funding options 3,302,709 1,309,003 4,501,130 5,543,370 1,197,066 4,349,128 Accumulation units redeemed and transferred to other funding options .. (1,110,957) (381,232) (2,125,288) (1,771,154) (21,747,176) (3,874,316) Annuity units .......................... -- -- -- -- -- -- ---------- --------- ---------- ---------- ----------- ---------- Accumulation and annuity units end of year .................................. 5,493,239 3,301,487 13,040,653 10,664,811 -- 20,550,110 ========== ========= ========== ========== =========== ==========
Travelers Managed Travelers Mercury Large Income Subaccount Cap Core Subaccount ------------------------- ------------------------- 2006 2005 2006 2005 ---- ---- ---- ---- Accumulation and annuity units beginning of year ..................... 42,647,316 41,758,254 62,861,929 74,342,477 Accumulation units purchased and transferred from other funding options 2,078,784 11,669,709 379,182 1,579,384 Accumulation units redeemed and transferred to other funding options .. (44,726,100) (10,780,647) (63,241,111) (13,059,932) Annuity units .......................... -- -- -- -- ----------- ----------- ----------- ----------- Accumulation and annuity units end of year .................................. -- 42,647,316 -- 62,861,929 =========== =========== =========== =========== Travelers MFS(R) Mid Cap Growth Subaccount ------------------------- 2006 2005 ---- ---- Accumulation and annuity units beginning of year ..................... 66,906,144 78,670,208 Accumulation units purchased and transferred from other funding options 820,358 3,004,586 Accumulation units redeemed and transferred to other funding options .. (67,726,502) (14,759,357) Annuity units .......................... -- (9,293) ----------- ----------- Accumulation and annuity units end of year .................................. -- 66,906,144 =========== ===========
68 NOTES TO FINANCIAL STATEMENTS -- (Continued) 6. Schedules of Accumulation and Annuity Units for the years ended December 31, 2006 and 2005 -- (Continued)
Travelers Pioneer Travelers U.S. Travelers MFS(R) Strategic Government Total Return Subaccount Income Subaccount Securities Subaccount -------------------------- ------------------------ ----------------------- 2006 2005 2006 2005 2006 2005 ---- ---- ---- ---- ---- ---- Accumulation and annuity units beginning of year ..................... 155,667,144 154,254,057 31,548,678 7,225,563 5,132,975 -- Accumulation units purchased and transferred from other funding options 6,085,021 27,889,745 9,086,664 28,441,589 3,205,790 6,544,315 Accumulation units redeemed and transferred to other funding options .. (161,740,226) (26,475,841) (40,635,342) (4,118,474) (8,338,765) (1,411,340) Annuity units .......................... (11,939) (817) -- -- -- -- ------------ ----------- ----------- ---------- ---------- ---------- Accumulation and annuity units end of year .................................. -- 155,667,144 -- 31,548,678 -- 5,132,975 ============ =========== =========== ========== ========== ==========
UIF U.S. Real Estate UIF Equity and Income Securities Van Kampen LIT Comstock Subaccount (Class II) Subaccount (Class I) Subaccount (Class II) ------------------------- ---------------------- ------------------------- 2006 2005 2006 2005 2006 2005 ---- ---- ---- ---- ---- ---- Accumulation and annuity units beginning of year ..................... 102,450,017 57,396,409 9,162,426 -- 158,534,295 143,415,760 Accumulation units purchased and transferred from other funding options 25,616,411 53,929,045 12,560,475 9,939,678 15,353,116 37,390,123 Accumulation units redeemed and transferred to other funding options .. (15,045,846) (8,875,437) (2,959,923) (777,252) (22,786,451) (22,271,588) Annuity units .......................... -- -- -- -- -- -- ----------- ----------- ---------- --------- ----------- ----------- Accumulation and annuity units end of year .................................. 113,020,582 102,450,017 18,762,978 9,162,426 151,100,960 158,534,295 =========== =========== ========== ========= =========== ===========
Van Kampen LIT Growth and Van Kampen LIT Strategic VIP Equity Income Income Subaccount (Class Growth Subaccount (Class Subaccount (Service II) II) Class 2) ------------------------- ------------------------- ---------------------- 2006 2005 2006 2005 2006 2005 ---- ---- ---- ---- ---- ---- Accumulation and annuity units beginning of year ..................... 109,783,523 106,442,501 118,714,696 134,324,389 7,526,690 5,885,498 Accumulation units purchased and transferred from other funding options 10,554,679 20,301,524 5,646,381 6,395,217 2,796,596 2,458,630 Accumulation units redeemed and transferred to other funding options .. (16,844,238) (16,960,502) (23,071,176) (22,004,910) (1,421,594) (817,438) Annuity units .......................... -- -- -- -- -- -- ----------- ----------- ----------- ----------- ---------- --------- Accumulation and annuity units end of year .................................. 103,493,964 109,783,523 101,289,901 118,714,696 8,901,692 7,526,690 =========== =========== =========== =========== ========== =========
69 NOTES TO FINANCIAL STATEMENTS -- (Concluded) 6. Schedules of Accumulation and Annuity Units for the years ended December 31, 2006 and 2005 -- (Concluded)
VIP Growth Subaccount VIP Mid Cap Subaccount (Service Class 2) (Service Class 2) ---------------------- ----------------------- 2006 2005 2006 2005 ---- ---- ---- ---- Accumulation and annuity units beginning of year ..................... 3,543,724 2,683,855 14,215,465 7,401,898 Accumulation units purchased and transferred from other funding options 820,729 1,219,253 9,129,344 9,009,968 Accumulation units redeemed and transferred to other funding options .. (4,364,453) (359,384) (4,391,096) (2,196,401) Annuity units .......................... -- -- -- -- ---------- --------- ---------- ---------- Accumulation and annuity units end of year .................................. -- 3,543,724 18,953,713 14,215,465 ========== ========= ========== ==========
70 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES
PAGE ---- Reports of Independent Registered Public Accounting Firm............... F-1 Financial Statements as of December 31, 2006 (SUCCESSOR) and 2005 (SUCCESSOR) and for the year ended December 31, 2006 (SUCCESSOR) and for the six months ended December 31, 2005 (SUCCESSOR) and June 30, 2005 (PREDECESSOR) and for the year ended December 31, 2004 (PREDECESSOR): Consolidated Balance Sheets.......................................... F-4 Consolidated Statements of Income.................................... F-5 Consolidated Statements of Stockholder's Equity...................... F-6 Consolidated Statements of Cash Flows................................ F-7 Notes to Consolidated Financial Statements........................... F-8 Financial Statement Schedules as of December 31, 2006 (SUCCESSOR) and 2005 (SUCCESSOR) and for the year ended December 31, 2006 (SUCCESSOR) and for the six months ended December 31, 2005 (SUCCESSOR) and June 30, 2005 (PREDECESSOR) and for the year ended December 31, 2004 (PREDECESSOR): Schedule I -- Consolidated Summary of Investments -- Other Than Investments in Related Parties.................................... F-58 Schedule III -- Consolidated Supplementary Insurance Information..... F-59 Schedule IV -- Consolidated Reinsurance.............................. F-61
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholder of MetLife Life and Annuity Company of Connecticut: We have audited the accompanying consolidated balance sheets of MetLife Life and Annuity Company of Connecticut and its subsidiary (the "Company") (formerly known as "The Travelers Life and Annuity Company") as of December 31, 2006 and 2005 (SUCCESSOR), and the related consolidated statements of income, stockholder's equity, and cash flows for the year ended December 31, 2006 (SUCCESSOR) and the six months ended December 31, 2005 (SUCCESSOR) and June 30, 2005 (PREDECESSOR). Our audits also included the financial statement schedules as of December 31, 2006 and 2005 (SUCCESSOR), and for the year ended December 31, 2006 (SUCCESSOR) and the six months ended December 31, 2005 (SUCCESSOR) and June 30, 2005 (PREDECESSOR), listed in the accompanying index. These consolidated financial statements and financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on the consolidated financial statements and financial statement schedules based on our audits. The consolidated financial statements and financial statement schedules of the Company for the year ended December 31, 2004 (PREDECESSOR) were audited by other auditors whose report, dated March 28, 2005, expressed an unqualified opinion. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated 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 financial position of MetLife Life and Annuity Company of Connecticut and its subsidiary as of December 31, 2006 and 2005 (SUCCESSOR), and the results of their operations and their cash flows for the year ended December 31, 2006 (SUCCESSOR) and the six months ended December 31, 2005 (SUCCESSOR), and June 30, 2005 (PREDECESSOR), in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein. As described in Note 2 to the consolidated financial statements, the Company was acquired by MetLife, Inc. on July 1, 2005. As required by the U.S. Securities and Exchange Commission Staff Accounting Bulletin Topic 5-J, Push Down Basis of Accounting Required in Certain Limited Circumstances, the purchase method of accounting was applied to the assets and liabilities of the Company, and such assets and liabilities were measured at their fair values as of the acquisition date in conformity with Statement of Financial Accounting Standards No. 141, Business Combinations. The accompanying consolidated financial statements for periods subsequent and prior to the acquisition date are labeled "SUCCESSOR" and "PREDECESSOR," respectively. /s/ DELOITTE & TOUCHE LLP DELOITTE & TOUCHE LLP New York, New York March 6, 2007 F-1 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The Board of Directors and Stockholder MetLife Life and Annuity Company of Connecticut: We have audited the accompanying statements of income, stockholder's equity, and cash flows of MetLife Life and Annuity Company of Connecticut (formerly, The Travelers Life and Annuity Company) for the year ended December 31, 2004 (PREDECESSOR). These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). 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 audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the results of the operations, stockholder's equity and cash flows of MetLife Life and Annuity Company of Connecticut for the year ended December 31, 2004 in conformity with U.S. generally accepted accounting principles. /s/ KPMG LLP KPMG LLP Hartford, Connecticut March 28, 2005 F-2 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The Board of Directors and Stockholder MetLife Life and Annuity Company of Connecticut: Under date of March 28, 2005, we reported on the statements of income, stockholder's equity and cash flows of MetLife Life and Annuity Company of Connecticut (formerly, The Travelers Life and Annuity Company) for the year ended December 31, 2004 (PREDECESSOR) , which are included in the Form 10-K. In connection with our audit of the aforementioned financial statements, we also audited the related financial statement schedules as listed in the accompanying index. These financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statement schedules based on our audit. In our opinion, such financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein. /s/ KPMG LLP KPMG LLP Hartford, Connecticut March 28, 2005 F-3 METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut) CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2006 AND 2005 (IN MILLIONS, EXCEPT SHARE AND PER SHARE DATA)
SUCCESSOR ----------------- 2006 2005 ------- ------- ASSETS Investments: Fixed maturity securities available-for-sale, at estimated fair value (amortized cost: $5,967 and $6,158, respectively).............................................. $ 5,889 $ 6,055 Equity securities available-for-sale, at estimated fair value (cost: $56 and $4, respectively)........................... 57 4 Mortgage loans on real estate................................. 295 258 Policy loans.................................................. 55 37 Real estate joint ventures held-for-investment................ 2 -- Other limited partnership interests........................... 68 73 Short-term investments........................................ 95 57 Other invested assets......................................... 341 333 ------- ------- Total investments.......................................... 6,802 6,817 Cash and cash equivalents....................................... 230 233 Accrued investment income....................................... 68 69 Premiums and other receivables.................................. 289 201 Deferred policy acquisition costs and value of business acquired...................................................... 1,712 1,777 Current income tax recoverable.................................. 19 20 Deferred income tax assets...................................... 8 90 Goodwill........................................................ 239 243 Other assets.................................................... 25 22 Separate account assets......................................... 12,246 12,179 ------- ------- Total assets............................................... $21,638 $21,651 ======= ======= LIABILITIES AND STOCKHOLDER'S EQUITY Liabilities: Future policy benefits........................................ $ 1,782 $ 1,740 Policyholder account balances................................. 5,377 5,688 Other policyholder funds...................................... 79 68 Payables for collateral under derivative transactions......... 102 108 Other liabilities............................................. 119 132 Separate account liabilities.................................. 12,246 12,179 ------- ------- Total liabilities.......................................... 19,705 19,915 ------- ------- CONTINGENCIES, COMMITMENTS AND GUARANTEES (NOTE 10) Stockholder's Equity: Common stock, par value $100 per share; 100,000 shares authorized, 30,000 shares issued and outstanding........... 3 3 Additional paid-in capital.................................... 1,730 1,725 Retained earnings............................................. 230 50 Accumulated other comprehensive income (loss)................. (30) (42) ------- ------- Total stockholder's equity................................. 1,933 1,736 ------- ------- Total liabilities and stockholder's equity................. $21,638 $21,651 ======= =======
See accompanying notes to consolidated financial statements. F-4 METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut) CONSOLIDATED STATEMENTS OF INCOME FOR THE YEAR ENDED DECEMBER 31, 2006 AND THE SIX MONTHS ENDED DECEMBER 31, 2005 AND JUNE 30, 2005 AND THE YEAR ENDED DECEMBER 31, 2004 (IN MILLIONS)
SUCCESSOR PREDECESSOR ------------------------------- ------------------------------- YEAR ENDED SIX MONTHS ENDED SIX MONTHS ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, JUNE 30, DECEMBER 31, ------------ ---------------- ---------------- ------------ 2006 2005 2005 2004 ------------ ---------------- ---------------- ------------ REVENUES Premiums........................... $ 43 $ 17 $ 20 $ 40 Universal life and investment-type product policy fees.............. 483 233 221 371 Net investment income.............. 361 167 223 389 Other revenues..................... 27 11 12 19 Net investment gains (losses)...... (83) (35) (6) 17 ---- ---- ---- ---- Total revenues................... 831 393 470 836 ---- ---- ---- ---- EXPENSES Policyholder benefits and claims... 117 90 49 85 Interest credited to policyholder account balances................. 154 76 126 241 Other expenses..................... 306 165 184 303 ---- ---- ---- ---- Total expenses................... 577 331 359 629 ---- ---- ---- ---- Income before provision for income tax.............................. 254 62 111 207 Provision for income tax........... 74 12 35 49 ---- ---- ---- ---- Net income......................... $180 $ 50 $ 76 $158 ==== ==== ==== ====
See accompanying notes to consolidated financial statements. F-5 METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut) CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY FOR THE YEAR ENDED DECEMBER 31, 2006 AND THE SIX MONTHS ENDED DECEMBER 31, 2005 AND JUNE 30, 2005 AND THE YEAR ENDED DECEMBER 31, 2004 (IN MILLIONS)
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) ----------------- ADDITIONAL NET UNREALIZED COMMON PAID-IN RETAINED INVESTMENT STOCK CAPITAL EARNINGS GAINS (LOSSES) TOTAL ------ ---------- -------- ----------------- ------ BALANCE AT JANUARY 1, 2004 (PREDECESSOR)........................ $3 $ 417 $ 764 $ 215 $1,399 Capital contributed by parent.......... 400 400 Comprehensive income (loss): Net income........................... 158 158 Other comprehensive income (loss): Unrealized gains (losses) on derivative instruments, net of income tax...................... (5) (5) Unrealized investment gains (losses), net of related offsets and income tax.................. 9 9 ------ Other comprehensive income (loss).......................... 4 ------ Comprehensive income (loss).......... 162 -- ------ ----- ----- ------ BALANCE AT DECEMBER 31, 2004 (PREDECESSOR)........................ 3 817 922 219 1,961 Comprehensive income (loss): Net income........................... 76 76 Other comprehensive income (loss): Unrealized gains (losses) on derivative instruments, net of income tax...................... (2) (2) Unrealized investment gains (losses), net of related offsets and income tax.................. (5) (5) ------ Other comprehensive income (loss).......................... (7) ------ Comprehensive income (loss).......... 69 Assumption of liabilities by parent.... 4 4 -- ------ ----- ----- ------ BALANCE AT JUNE 30, 2005 (PREDECESSOR)........................ 3 821 998 212 2,034 Effect of push down accounting of MetLife, Inc.'s purchase price on MetLife Life and Annuity Company of Connecticut's net assets acquired (see Note 2)......................... 1,112 (998) (212) (98) -- ------ ----- ----- ------ BALANCE AT JULY 1, 2005 (SUCCESSOR).... 3 1,933 -- -- 1,936 Comprehensive income (loss): Revisions of purchase price pushed down to MetLife Life and Annuity Company of Connecticut's net assets acquired (See Note 2)...... (208) (208) Net income........................... 50 50 Other comprehensive income (loss): Unrealized investment gains (losses), net of related offsets and income tax.................. (42) (42) ------ Other comprehensive income (loss).......................... (42) ------ Comprehensive income (loss).......... 8 -- ------ ----- ----- ------ BALANCE AT DECEMBER 31, 2005 (SUCCESSOR).......................... 3 1,725 50 (42) 1,736 Revisions of purchase price pushed down to MetLife Life and Annuity Company of Connecticut's net assets acquired (See Note 2)......................... 5 5 Comprehensive income (loss): Net income........................... 180 180 Other comprehensive income (loss): Unrealized investment gains (losses), net of related offsets and income tax.................. 12 12 ------ Other comprehensive income (loss).......................... 12 ------ Comprehensive income (loss).......... 192 -- ------ ----- ----- ------ BALANCE AT DECEMBER 31, 2006 (SUCCESSOR).......................... $3 $1,730 $ 230 $ (30) $1,933 == ====== ===== ===== ======
See accompanying notes to consolidated financial statements. F-6 METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut) CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 2006 AND THE SIX MONTHS ENDED DECEMBER 31, 2005 AND JUNE 30, 2005 AND THE YEAR ENDED DECEMBER 31, 2004 (IN MILLIONS)
SUCCESSOR PREDECESSOR ------------------------------- ------------------------------- YEAR ENDED SIX MONTHS ENDED SIX MONTHS ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, JUNE 30, DECEMBER 31, ------------ ---------------- ---------------- ------------ 2006 2005 2005 2004 ------------ ---------------- ---------------- ------------ CASH FLOWS FROM OPERATING ACTIVITIES Net income............................. $ 180 $ 50 $ 76 $ 158 Adjustments to reconcile net income to net cash provided by operating activities: Amortization of premiums and accretion of discounts associated with investments, net............................. 1 12 (8) (18) (Gains) losses from sales of investments, net................ 83 35 6 (17) Equity earnings of real estate joint ventures and other limited partnership interests........... (6) -- -- -- Interest credited to policyholder account balances................ 154 76 126 241 Universal life and investment-type product policy fees............. (483) (233) (221) (371) Change in accrued investment income.......................... 1 11 (4) (7) Change in premiums and other receivables..................... (83) (81) 2 -- Change in deferred policy acquisition costs, net.......... 53 (56) (90) (243) Change in insurance-related liabilities..................... 17 49 (15) (49) Change in income tax payable...... 74 (25) (242) 227 Change in other assets............ 191 90 49 72 Change in other liabilities....... (44) 54 (75) (17) Other, net........................ (1) (1) 34 (21) ------- ------- ----- ------- Net cash provided by (used in) operating activities................. 137 (19) (362) (45) ------- ------- ----- ------- CASH FLOWS FROM INVESTING ACTIVITIES Sales, maturities and repayments of: Fixed maturity securities......... 2,935 3,484 521 1,305 Equity securities................. 8 30 8 19 Mortgage loans on real estate..... 44 37 18 59 Real estate and real estate joint ventures........................ 1 -- 17 9 Other limited partnership interests....................... 24 17 18 23 Purchases of: Fixed maturity securities......... (2,863) (3,557) (448) (2,156) Equity securities................. (8) -- (1) (30) Mortgage loans on real estate..... (81) (20) (75) (136) Real estate and real estate joint ventures........................ (2) -- -- -- Other limited partnership interests....................... (17) (11) (41) (89) Net change in policy loans........... (17) (2) (4) (5) Net change in short-term investments....................... (37) 131 135 (225) Net change in other invested assets.. 30 20 16 43 Other, net........................... -- -- 2 (1) ------- ------- ----- ------- Net cash (used in) provided by investing activities................. 17 129 166 (1,184) ------- ------- ----- ------- CASH FLOWS FROM FINANCING ACTIVITIES Policyholder account balances: Deposits.......................... 551 343 476 1,023 Withdrawals....................... (684) (290) (181) (178) Net change in payables for collateral under derivative transactions..... (6) (2) (98) (16) Financing element of certain derivative instruments............ (18) (13) -- -- Capital contribution from parent..... -- -- -- 400 ------- ------- ----- ------- Net cash (used in) provided by financing activities................. (157) 38 197 1,229 ------- ------- ----- ------- Change in cash and cash equivalents.... (3) 148 1 -- Cash and cash equivalents, beginning of period............................... 233 85 1 1 ------- ------- ----- ------- CASH AND CASH EQUIVALENTS, END OF PERIOD............................... $ 230 $ 233 $ 2 $ 1 ======= ======= ===== ======= Supplemental disclosures of cash flow information: Income tax paid (received)........ $ -- $ 37 $ 277 $ (179) ======= ======= ===== ======= Non-cash transactions during the period: Assumption of liabilities by MetLife Insurance Company of Connecticut.. $ -- $ -- $ 4 $ -- ======= ======= ===== ======= Contribution of goodwill from MetLife, Inc. .................... $ (4) $ -- $ -- $ -- ======= ======= ===== ======= See Note 2 for purchase accounting adjustments.
See accompanying notes to consolidated financial statements. F-7 METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. BUSINESS, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BUSINESS "MLAC" or the "Company" refers to MetLife Life and Annuity Company of Connecticut (formerly, The Travelers Life and Annuity Company), a Connecticut corporation incorporated in 1973, and its subsidiary. MLAC is a wholly-owned subsidiary of MetLife Insurance Company of Connecticut ("MICC," formerly The Travelers Insurance Company). MICC is a subsidiary of MetLife, Inc. ("MetLife"). The Company's core offerings include universal and variable life insurance, fixed and variable deferred annuities, structured settlements and payout annuities. On July 1, 2005 ("Acquisition Date"), the Company became a subsidiary of MetLife. The Company and its parent, including substantially all of Citigroup Inc's ("Citigroup") international insurance businesses, excluding Primerica Life Insurance Company and its subsidiaries ("Primerica") (collectively, "Travelers"), were acquired by MetLife from Citigroup (the "Acquisition") for $12.1 billion. See Note 2 for further information on the Acquisition. The Company currently operates as a single segment and, as such, financial results are prepared and reviewed by management as a single operating segment. The Company continually evaluates its operating activities and the method utilized by management to evaluate the performance of such activities and will report on a segment basis when appropriate to do so. On February 14, 2006, a Certificate of Amendment was filed with the State of Connecticut Office of the Secretary of the State changing the name of The Travelers Life and Annuity Company to MetLife Life and Annuity Company of Connecticut, effective May 1, 2006. BASIS OF PRESENTATION The accompanying consolidated financial statements include the accounts of i) the Company and its subsidiary and ii) partnerships and joint ventures in which the Company has control. Assets, liabilities, revenues and expenses of the Company's general account for 2005 and 2004 include amounts related to certain separate accounts previously reported in separate account assets and liabilities. See "Adoption of New Accounting Pronouncements." Intercompany accounts and transactions have been eliminated. The Company uses the equity method of accounting for investments in equity securities in which it has more than a 20% interest and for real estate joint ventures and other limited partnership interests in which it has more than a minor equity interest or more than a minor influence over the joint ventures and partnership's operations, but does not have a controlling interest and is not the primary beneficiary. The Company uses the cost method of accounting for real estate joint ventures and other limited partnership interests in which it has a minor equity investment and virtually no influence over the joint ventures and partnership's operations. Certain amounts in the prior year periods' consolidated financial statements have been reclassified to conform with the 2006 presentation. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND CRITICAL ACCOUNTING ESTIMATES The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP") requires management to adopt accounting policies and make estimates and assumptions that affect amounts reported in the consolidated financial statements. The most critical estimates include those used in determining: (i) the fair value of investments in the absence of quoted market values; (ii) investment impairments; (iii) the recognition of income on certain investments; F-8 METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (iv) the application of the consolidation rules to certain investments; (v) fair value of and accounting for derivatives; (vi) the capitalization and amortization of deferred policy acquisition costs ("DAC") and the establishment and amortization of value of business acquired ("VOBA"); (vii) the measurement of goodwill and related impairment, if any; (viii) the liability for future policyholder benefits; (ix) accounting for income taxes and the valuation of deferred income tax assets; (x) accounting for reinsurance transactions; and (xi) the liability for litigation and regulatory matters. A description of such critical estimates is incorporated within the discussion of the related accounting policies which follow. The application of purchase accounting requires the use of estimation techniques in determining the fair value of the assets acquired and liabilities assumed -- the most significant of which relate to the aforementioned critical estimates. In applying these policies, management makes subjective and complex judgments that frequently require estimates about matters that are inherently uncertain. Many of these policies, estimates and related judgments are common in the insurance and financial services industries; others are specific to the Company's businesses and operations. Actual results could differ from these estimates. Investments The Company's principal investments are in fixed maturity and equity securities, policy loans, mortgage loans on real estate, real estate joint ventures and other limited partnership interests, short-term investments and other invested assets. The accounting policies related to each are as follows: Fixed Maturity and Equity Securities. 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 these securities are recorded as a separate component of other comprehensive income or loss, net of policyholder related amounts and deferred income taxes. All security transactions are recorded on a trade date basis. Investment gains and losses on sales of securities are determined on a specific identification basis. Interest income on fixed maturity securities is recorded when earned using an effective yield method giving effect to amortization of premiums and accretion of discounts. Dividends on equity securities are recorded when declared. These dividends and interest income are recorded as part of net investment income. Included within fixed maturity securities are loan-backed securities including mortgage-backed and asset-backed securities. Amortization of the premium or discount from the purchase of these securities considers the estimated timing and amount of prepayments of the underlying loans. Actual prepayment experience is periodically reviewed and effective yields are recalculated when differences arise between the prepayments originally anticipated and the actual prepayments received and currently anticipated. Prepayment assumptions for single class and multi-class mortgage-backed and asset-backed securities are obtained from broker-dealer survey values or internal estimates. For credit-sensitive mortgage-backed and asset-backed securities and certain prepayment-sensitive securities, the effective yield is recalculated on a prospective basis. For all other mortgage-backed and asset-backed securities, the effective yield is recalculated on a retrospective basis. The cost of fixed maturity and equity securities is adjusted for impairments in value deemed to be other-than-temporary in the period in which the determination is made. These impairments are included within net investment gains (losses) and the cost basis of the fixed maturity and equity securities is reduced accordingly. The Company does not change the revised cost basis for subsequent recoveries in value. F-9 METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The assessment of whether impairments have occurred is based on management's case-by-case evaluation of the underlying reasons for the decline in fair value. The Company's review of its fixed maturity and equity securities for impairments includes an analysis of the total gross unrealized losses by three categories of securities: (i) securities where the estimated fair value had declined and remained below cost or amortized cost by less than 20%; (ii) securities where the estimated fair value had declined and remained below cost or amortized cost by 20% or more for less than six months; and (iii) securities where the estimated fair value had declined and remained below cost or amortized cost by 20% or more for six months or greater. Additionally, management considers a wide range of factors about the security issuer and uses its best judgment in evaluating the cause of the decline in the estimated fair value of the security and in assessing the prospects for near-term recovery. Inherent in management's evaluation of the security are assumptions and estimates about the operations of the issuer and its future earnings potential. Considerations used by the Company in the impairment evaluation process include, but are not limited to: (i) the length of time and the extent to which the market value has been below cost or amortized cost; (ii) the potential for impairments of securities when the issuer is experiencing significant financial difficulties; (iii) the potential for impairments in an entire industry sector or sub-sector; (iv) the potential for impairments in certain economically depressed geographic locations; (v) the potential for impairments of securities where the issuer, series of issuers or industry has suffered a catastrophic type of loss or has exhausted natural resources; (vi) the Company's ability and intent to hold the security for a period of time sufficient to allow for the recovery of its value to an amount equal to or greater than cost or amortized cost (See also Note 3); (vii) unfavorable changes in forecasted cash flows on asset-backed securities; and (viii) other subjective factors, including concentrations and information obtained from regulators and rating agencies. Mortgage Loans on Real Estate. Mortgage loans on real estate are stated at unpaid principal balance, adjusted for any unamortized premium or discount, deferred fees or expenses, net of valuation allowances. Interest income is accrued on the principal amount of the loan based on the loan's contractual interest rate. Amortization of premiums and discounts is recorded using the effective yield method. Interest income, amortization of premiums and discounts, and prepayment fees are reported in net investment income. Loans are considered to be impaired 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 established for the excess carrying value of the loan over the present value of expected future cash flows discounted at the loan's original effective interest rate, the value of the loan's collateral if the loan is in the process of foreclosure or otherwise collateral dependent, or the loan's market value if the loan is being sold. The Company also establishes allowances for loan losses when a loss contingency exists for pools of loans with similar characteristics, such as mortgage loans based on similar property types or loan to value risk factors. A loss contingency exists when the likelihood that a future event will occur is probable based on past events. Interest income earned on impaired loans is accrued on the principal amount of the loan based on the loan's contractual interest rate. However, interest ceases to be accrued for loans on which interest is generally more than 60 days past due and/or where the collection of interest is not considered probable. Cash receipts on such impaired loans are recorded as a reduction of the recorded investment. Gains and losses from the sale of loans and changes in valuation allowances are reported in net investment gains (losses). Policy Loans. Policy loans are stated at unpaid principal balances. Interest income on such loans is recorded as earned using the contractually agreed upon interest rate. Generally, interest is capitalized on the policy's anniversary date. F-10 METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Real Estate Joint Ventures and Other Limited Partnership Interests. The Company uses the equity method of accounting for investments in real estate joint ventures and other limited partnership interests in which it has more than a minor equity interest, or more than a minor influence over the joint ventures and partnership's operations, but does not have a controlling interest and is not the primary beneficiary. The Company uses the cost method of accounting for real estate joint ventures and other limited partnership interests in which it has a minor equity investment and virtually no influence over the joint ventures and the partnership's operations. In addition to the investees performing regular evaluations for the impairment of underlying investments, the Company routinely evaluates its investments in real estate joint ventures and limited partnerships for impairments. For its cost method investments it follows an impairment analysis which is similar to the process followed for its fixed maturity and equity securities as described previously. For equity method investees, the Company considers financial and other information provided by the investee, other known information and inherent risks in the underlying investments, as well as future capital commitments, in determining whether an impairment has occurred. When an other-than- temporary impairment is deemed to have occurred, the Company records a realized capital loss within net investment gains (losses) to record the investment at its fair value. Prior to the Acquisition, the Company used the equity method of accounting for all real estate joint ventures and other limited partnership interests in which it had an ownership interest but did not control, including those in which it had a minor equity investment or virtually no influence over operations. Short-term Investments. Short-term investments include investments with remaining maturities of one year or less, but greater than three months, at the time of acquisition and are stated at amortized cost, which approximates fair value. Other Invested Assets. Other invested assets consist primarily of stand-alone derivatives with positive fair values. Estimates and Uncertainties. The Company's investments are exposed to three primary sources of risk: credit, interest rate and market valuation. The financial statement risks, stemming from such investment risks, are those associated with the recognition of impairments, the recognition of income on certain investments; and the determination of fair values. The determination of the amount of allowances and impairments, as applicable, are described above by investment type. The determination of such allowances and impairments is highly subjective and is based upon the Company's periodic evaluation and assessment of known and inherent risks associated with the respective asset class. Such evaluations and assessments are revised as conditions change and new information becomes available. Management updates its evaluations regularly and reflects changes in allowances and impairments in operations as such evaluations are revised. The recognition of income on certain investments (e.g. loan-backed securities including mortgage-backed and asset-backed securities, certain investment transactions, etc.) is dependent upon market conditions, which could result in prepayments and changes in amounts to be earned. The fair values of publicly held fixed maturity securities and publicly held equity securities are based on quoted market prices or estimates from independent pricing services. However, in cases where quoted market prices are not available, such as for private fixed maturity securities fair values are estimated using present value or valuation techniques. The determination of fair values is based on: (i) valuation methodologies; (ii) securities the Company deems to be comparable; and (iii) assumptions deemed appropriate given the circumstances. The fair value estimates are made at a specific point in time, based on available market information and judgments about financial instruments, including estimates of the timing and amounts of expected future cash flows and the credit standing of the issuer or counterparty. Factors considered in estimating fair value include: coupon rate, F-11 METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) maturity, estimated duration, call provisions, sinking fund requirements, credit rating, industry sector of the issuer, and quoted market prices of comparable securities. The use of different methodologies and assumptions may have a material effect on the estimated fair value amounts. Additionally, when the Company enters into certain real estate joint ventures and other limited partnerships for which the Company may be deemed to be the primary beneficiary under Financial Accounting Standards Board ("FASB") Interpretation ("FIN") No. 46(r), Consolidation of Variable Interest Entities -- An Interpretation of ARB No. 51, it may be required to consolidate such investments. The accounting rules for the determination of the primary beneficiary are complex and require evaluation of the contractual rights and obligations associated with each party involved in the entity, an estimate of the entity's expected losses and expected residual returns and the allocation of such estimates to each party. The use of different methodologies and assumptions as to the timing and amount of impairments, recognition of income and the determination of the fair value of investments may have a material effect on the amounts presented within the consolidated financial statements. Derivative Financial Instruments Derivatives are financial instruments whose values are derived from interest rates, foreign currency exchange rates, or other financial indices. Derivatives may be exchange traded or contracted in the over-the-counter market. The Company uses a variety of derivatives, including swaps, forwards, futures and option contracts, to manage the risk associated with variability in cash flows or changes in fair values related to the Company's financial instruments. To a lesser extent, the Company uses credit derivatives to synthetically replicate investment risks and returns which are not readily available in the cash market. The Company also purchases certain securities, issues certain insurance policies and investment contracts and engages in certain reinsurance contracts that have embedded derivatives. Freestanding derivatives are carried on the Company's consolidated balance sheet either as assets within other invested assets or as liabilities within other liabilities at fair value as determined by quoted market prices or through the use of pricing models. The determination of fair value, when quoted market values are not available, is based on valuation methodologies and assumptions deemed appropriate under the circumstances. Derivative valuations can be affected by changes in interest rates, foreign currency exchange rates, financial indices, credit spreads, market volatility, and liquidity. Values can also be affected by changes in estimates and assumptions used in pricing models. Such assumptions include estimates of volatility, interest rates, foreign currency exchange rates, other financial indices and credit ratings. Essential to the analysis of the fair value is a risk of counterparty default. The use of different assumptions may have a material effect on the estimated derivative fair value amounts as well as the amount of reported net income. If a derivative is not designated as an accounting hedge or its use in managing risk does not qualify for hedge accounting pursuant to Statement of Financial Accounting Standards ("SFAS") No. 133, Accounting for Derivative Instruments and Hedging Activities ("SFAS 133"), as amended changes in the fair value of the derivative are reported in net investment gains (losses). The fluctuations in fair value of derivatives which have not been designated for hedge accounting can result in significant volatility in net income. To qualify for hedge accounting, at the inception of the hedging relationship, the Company formally documents its risk management objective and strategy for undertaking the hedging transaction, as well as its designation of the hedge as either: (i) a hedge of the fair value of a recognized asset or liability or an unrecognized firm commitment ("fair value hedge"); or (ii) a hedge of a forecasted transaction or of the variability of cash flows to be received or paid related to a recognized asset or liability ("cash flow hedge"). In this documentation, the Company sets forth how the hedging instrument is expected to hedge the designated risks related to the hedged item F-12 METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) and sets forth the method that will be used to retrospectively and prospectively assess the hedging instrument's effectiveness and the method which will be used to measure ineffectiveness. A derivative designated as a hedging instrument must be assessed as being highly effective in offsetting the designated risk of the hedged item. Hedge effectiveness is formally assessed at inception and periodically throughout the life of the designated hedging relationship. Assessments and measurement of hedge effectiveness are also subject to interpretation and estimation and different interpretations or estimates may have a material effect on the amount reported in net income. The accounting for derivatives is complex and interpretations of the primary accounting standards continue to evolve in practice. Judgment is applied in determining the availability and application of hedge accounting designations and the appropriate accounting treatment under these accounting standards. If it was determined that hedge accounting designations were not appropriately applied, reported net income could be materially affected. Differences in judgment as to the availability and application of hedge accounting designations and the appropriate accounting treatment may result in a differing impact on the consolidated financial statements of the Company from that previously reported. Under a fair value hedge, changes in the fair value of the hedging derivative, including amounts measured as ineffectiveness, and changes in the fair value of the hedged item related to the designated risk being hedged, are reported within net investment gains (losses). The fair values of the hedging derivatives are exclusive of any accruals that are separately reported in the consolidated statement of income within interest income or interest expense to match the location of the hedged item. Under a cash flow hedge, changes in the fair value of the hedging derivative measured as effective are reported within other comprehensive income (loss), a separate component of stockholders' equity, and the deferred gains or losses on the derivative are reclassified into the consolidated statement of income when the Company's earnings are affected by the variability in cash flows of the hedged item. Changes in the fair value of the hedging instrument measured as ineffectiveness are reported within net investment gains (losses). The fair values of the hedging derivatives are exclusive of any accruals that are separately reported in the consolidated statement of income within interest income or interest expense to match the location of the hedged item. The Company discontinues hedge accounting prospectively when: (i) it is determined that the derivative is no longer highly effective in offsetting changes in the fair value or cash flows of a hedged item; (ii) the derivative expires, is sold, terminated, or exercised; (iii) it is no longer probable that the hedged forecasted transaction will occur; (iv) a hedged firm commitment no longer meets the definition of a firm commitment; or (v) the derivative is de- designated as a hedging instrument. When hedge accounting is discontinued because it is determined that the derivative is not highly effective in offsetting changes in the fair value or cash flows of a hedged item, the derivative continues to be carried on the consolidated balance sheet at its fair value, with changes in fair value recognized currently in net investment gains (losses). The carrying value of the hedged recognized asset or liability under a fair value hedge is no longer adjusted for changes in its fair value due to the hedged risk, and the cumulative adjustment to its carrying value is amortized into income over the remaining life of the hedged item. Provided the hedged forecasted transaction is still probable of occurrence, the changes in fair value of derivatives recorded in other comprehensive income (loss) related to discontinued cash flow hedges are released into the consolidated statement of income when the Company's earnings are affected by the variability in cash flows of the hedged item. When hedge accounting is discontinued because it is no longer probable that the forecasted transactions will occur by the end of the specified time period or the hedged item no longer meets the definition of a firm commitment, the derivative continues to be carried on the consolidated balance sheet at its fair value, with changes in fair value recognized currently in net investment gains (losses). Any asset or liability associated with a recognized firm commitment is derecognized from the consolidated balance sheet, and recorded currently in net F-13 METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) investment gains (losses). Deferred gains and losses of a derivative recorded in other comprehensive income (loss) pursuant to the cash flow hedge of a forecasted transaction are recognized immediately in net investment gains (losses). In all other situations in which hedge accounting is discontinued, the derivative is carried at its fair value on the consolidated balance sheet, with changes in its fair value recognized in the current period as net investment gains (losses). The Company is also a party to financial instruments that contain terms which are deemed to be embedded derivatives. The Company assesses each identified embedded derivative to determine whether it is required to be bifurcated under SFAS 133. If the instrument would not be accounted for in its entirety at fair value and it is determined that the terms of the embedded derivative are not clearly and closely related to the economic characteristics of the host contract, and that a separate instrument with the same terms would qualify as a derivative instrument, the embedded derivative is bifurcated from the host contract and accounted for as a freestanding derivative. Such embedded derivatives are carried on the consolidated balance sheet at fair value with the host contract and changes in their fair value are reported currently in net investment gains (losses). If the Company is unable to properly identify and measure an embedded derivative for separation from its host contract, the entire contract is carried on the balance sheet at fair value, with changes in fair value recognized in the current period in net investment gains (losses). Additionally, the Company may elect to carry an entire contract on the balance sheet at fair value, with changes in fair value recognized in the current period in net investment gains (losses) if that contract contains an embedded derivative that requires bifurcation. There is a risk that embedded derivatives requiring bifurcation may not be identified and reported at fair value in the consolidated financial statements and that their related changes in fair value could materially affect reported net income. Cash and Cash Equivalents The Company considers all highly liquid investments purchased with an original or remaining maturity of three months or less at the date of purchase to be cash equivalents. Deferred Policy Acquisition Costs and Value of Business Acquired The Company incurs significant costs in connection with acquiring new and renewal insurance business. Costs that vary with and relate to the production of new business are deferred as DAC. Such costs consist principally of commissions and agency and policy issue expenses. VOBA is an intangible asset that reflects the estimated fair value of in-force contracts in a life insurance company acquisition and represents the portion of the purchase price that is allocated to the value of the right to receive future cash flows from the business in- force at the acquisition date. VOBA is based on actuarially determined projections, by each block of business, of future policy and contract charges, premiums, mortality, separate account performance, surrenders, operating expenses, investment returns and other factors. Actual experience on the purchased business may vary from these projections. The recovery of DAC and VOBA is dependent upon the future profitability of the related business. DAC and VOBA are aggregated in the financial statements for reporting purposes. DAC related to internally replaced contracts are generally expensed at the date of replacement. DAC and VOBA on life insurance or investment-type contracts are amortized in proportion to gross premiums or gross profits, depending on the type of contract as described below. The Company amortizes DAC and VOBA related to non-participating traditional contracts (term insurance and non-participating whole life insurance) over the entire premium paying period in proportion to the present value of actual historic and expected future gross premiums. The present value of expected premiums is based upon the premium requirement of each policy and assumptions for mortality, persistency, and investment returns at policy F-14 METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) issuance, or policy acquisition as it relates to VOBA, that include provisions for adverse deviation and are consistent with the assumptions used to calculate future policyholder benefit liabilities. These assumptions are not revised after policy issuance or acquisition unless the DAC or VOBA balance is deemed to be unrecoverable from future expected profits. Absent a premium deficiency, variability in amortization after policy issuance or acquisition is caused only by variability in premium volumes. The Company amortizes DAC and VOBA related to fixed and variable universal life contracts and fixed and variable deferred annuity contracts over the estimated lives of the contracts in proportion to actual and expected future gross profits. The amortization includes interest based on rates in effect at inception or acquisition of the contracts. The amount of future gross profits is dependent principally upon returns in excess of the amounts credited to policyholders, mortality, persistency, interest crediting rates, expenses to administer the business, creditworthiness of reinsurance counterparties, the effect of any hedges used, and certain economic variables, such as inflation. Of these factors, the Company anticipates that investment returns, expenses, and persistency are reasonably likely to impact significantly the rate of DAC and VOBA amortization. Each reporting period, the Company updates the estimated gross profits with the actual gross profits for that period. When the actual gross profits change from previously estimated gross profits, the cumulative DAC and VOBA amortization is re-estimated and adjusted by a cumulative charge or credit to current operations. When actual gross profits exceed those previously estimated, the DAC and VOBA amortization will increase, resulting in a current period charge to earnings. The opposite result occurs when the actual gross profits are below the previously estimated gross profits. Each reporting period, the Company also updates the actual amount of business remaining in-force, which impacts expected future gross profits. Separate account rates of return on variable universal life contracts and variable deferred annuity contracts affect in-force account balances on such contracts each reporting period. Returns that are higher than the Company's long-term expectation produce higher account balances, which increases the Company's future fee expectations and decreases future benefit payment expectations on minimum death benefit guarantees, resulting in higher expected future gross profits. The opposite result occurs when returns are lower than the Company's long-term expectation. The Company's practice to determine the impact of gross profits resulting from returns on separate accounts assumes that long- term appreciation in equity markets is not changed by short-term market fluctuations, but is only changed when sustained interim deviations are expected. The Company monitors these changes and only changes the assumption when its long-term expectation changes. The Company also reviews periodically other long-term assumptions underlying the projections of estimated gross profits. These include investment returns, policyholder dividend scales, interest crediting rates, mortality, persistency, and expenses to administer business. Management annually updates assumptions used in the calculation of estimated gross profits which may have significantly changed. If the update of assumptions causes expected future gross profits to increase, DAC and VOBA amortization will decrease, resulting in a current period increase to earnings. The opposite result occurs when the assumption update causes expected future gross profits to decrease. Sales Inducements The Company has two different types of sales inducements which are included in other assets: (i) the policyholder receives a bonus whereby the policyholder's initial account balance is increased by an amount equal to a specified percentage of the customer's deposit; and (ii) the policyholder receives a higher interest rate using a dollar cost averaging method than would have been received based on the normal general account interest rate credited. The Company defers sales inducements and amortizes them over the life of the policy using the same methodology and assumptions used to amortize DAC. F-15 METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Goodwill Goodwill is the excess of cost over the fair value of net assets acquired. Goodwill is not amortized but is tested for impairment at least annually or more frequently if events or circumstances, such as adverse changes in the business climate, indicate that there may be justification for conducting an interim test. Impairment testing is performed using the fair value approach, which requires the use of estimates and judgment, at the "reporting unit" level. A reporting unit is the operating segment or a business one level below the operating segment, if discrete financial information is prepared and regularly reviewed by management at that level. If the carrying value of a reporting unit's goodwill exceeds its fair value, the excess is recognized as an impairment and recorded as a charge against net income. The fair values of the reporting units are determined using a market multiple and discounted cash flow model. The critical estimates necessary in determining fair value are projected earnings, comparative market multiples and the discount rate. Liability for Future Policy Benefits and Policyholder Account Balances The Company establishes liabilities for amounts payable under insurance policies, including traditional life insurance and traditional annuities. Generally, amounts are payable over an extended period of time and related liabilities are calculated as the present value of future expected benefits to be paid reduced by the present value of future expected premiums. Such liabilities are established based on methods and underlying assumptions in accordance with GAAP and applicable actuarial standards. Principal assumptions used in the establishment of liabilities for future policy benefits are mortality, policy lapse, renewal, retirement, investment returns, inflation, expenses and other contingent events as appropriate to the respective product type. Utilizing these assumptions, liabilities are established on a block of business basis. Future policy benefit liabilities for non-participating traditional life insurance policies are equal to the aggregate of the present value of future benefit payments and related expenses less the present value of future net premiums. Assumptions as to mortality and persistency are based upon the Company's experience when the basis of the liability is established. The interest rates for future policy benefit liabilities on non-participating traditional life insurance is 4%. Future policy benefit liabilities for individual annuities after annuitization are equal to the present value of expected future payments. Interest rates used in establishing such liabilities range from 3% to 6%. The Company establishes future policy benefit liabilities for minimum death benefit guarantees relating to certain annuity contracts and secondary guarantees relating to certain life policies as follows: - Annuity guaranteed death benefit ("GMDB") liabilities are determined by estimating the expected value of death benefits in excess of the projected account balance and recognizing the excess ratably over the accumulation period based on total expected assessments. The Company regularly evaluates estimates used and adjusts the additional liability balance, with a related charge or credit to benefit expense, if actual experience or other evidence suggests that earlier assumptions should be revised. The assumptions used in estimating the GMDB liabilities are consistent with those used for amortizing DAC, and are thus subject to the same variability and risk. The assumptions of investment performance and volatility are consistent with the historical experience of the Standard & Poor's 500 Index ("S&P"). The benefits used in calculating the liabilities are based on the average benefits payable over a range of scenarios. - Liabilities for universal and variable life secondary guarantees are determined by estimating the expected value of death benefits payable when the account balance is projected to be zero and recognizing those benefits ratably over the accumulation period based on total expected assessments. The Company regularly evaluates estimates used and adjusts the additional liability balances, with a related charge or credit to benefit expense, if actual experience or other evidence suggests that earlier assumptions should be revised. F-16 METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The assumptions used in estimating the secondary and paid up guarantee liabilities are consistent with those used for amortizing DAC, and are thus subject to the same variability and risk. The assumptions of investment performance and volatility for variable products are consistent with historical S&P experience. The benefits used in calculating the liabilities are based on the average benefits payable over a range of scenarios. The Company establishes policyholder account balances ("PAB") for guaranteed minimum benefit riders relating to certain variable annuity products as follows: - Guaranteed minimum withdrawal benefit riders ("GMWB") guarantee the contractholder a return of their purchase payment via partial withdrawals, even if the account value is reduced to zero, provided that the contractholder's cumulative withdrawals in a contract year do not exceed a certain limit. The initial guaranteed withdrawal amount is equal to the initial benefit base as defined in the contract (typically, the initial purchase payments plus applicable bonus amounts). The GMWB is an embedded derivative, which is measured at fair value separately from the host variable annuity product. - Guaranteed minimum accumulation benefit riders ("GMAB") provide the contractholder, after a specified period of time determined at the time of issuance of the variable annuity contract, with a minimum accumulation of their purchase payments even if the account value is reduced to zero. The initial guaranteed accumulation amount is equal to the initial benefit base as defined in the contract (typically, the initial purchase payments plus applicable bonus amounts). The GMAB is also an embedded derivative, which is measured at fair value separately from the host variable annuity product. - For both GMWB and GMAB, the initial benefit base is increased by additional purchase payments made within a certain time period and decreases by benefits paid and/or withdrawal amounts. After a specified period of time, the benefit base may also increase as a result of an optional reset as defined in the contract. - The fair values of the GMWB and GMAB riders are calculated based on actuarial and capital market assumptions related to the projected cash flows, including benefits and related contract charges, over the lives of the contracts, incorporating expectations concerning policyholder behavior. In measuring the fair value of GMWBs and GMABs, the Company attributes a portion of the fees collected from the policyholder equal to the present value of expected future guaranteed minimum withdrawal and accumulation benefits (at inception). The changes in fair value are reported in net investment gains (losses). Any additional fees represent "excess" fees and are reported in universal life and investment-type product policy fees. These riders may be more costly than expected in volatile or declining markets, causing an increase to liabilities for future policy benefits, negatively affecting net income. The Company periodically reviews its estimates of actuarial liabilities for future policy benefits and compares them with actual experience. Differences between actual experience and the assumptions used in pricing these policies, guarantees and riders and in the establishment of the related liabilities result in variances in profit and could result in losses. The effects of changes in such estimated liabilities are included in the results of operations in the period in which the changes occur. PABs relate to investment-type contracts and universal life-type policies. Investment-type contracts principally include traditional individual fixed annuities in the accumulation phase. PABs are equal to: (i) policy account values, which consist of an accumulation of gross premium payments; (ii) credited interest, ranging from 0.5% to 12% less expenses, mortality charges, and withdrawals; and (iii) fair value purchase accounting adjustments relating to the Acquisition. F-17 METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Other Policyholder Funds Other policyholder funds include policy and contract claims and unearned revenue liabilities. The liability for policy and contract claims generally relates to incurred but not reported claims as well as claims which have been reported but not yet settled. The liability for these claims is based on the Company's estimated ultimate cost of settling all claims. The Company derives estimates for the development of incurred but not reported claims principally from actuarial analyses of historical patterns of claims and claims development for each line of business. The methods used to determine these estimates are continually reviewed. Adjustments resulting from this continuous review process and differences between estimates and payments for claims are recognized in policyholder benefits and claims expense in the period in which the estimates are changed or payments are made. The unearned revenue liability relates to universal life-type and investment-type products and represents policy charges for services to be provided in future periods. The charges are deferred as unearned revenue and amortized using the product's estimated gross profits similar to DAC. Such amortization is recorded in universal life and investment-type product policy fees. Recognition of Insurance Revenue and Related Benefits Premiums related to traditional life and annuity policies with life contingencies are recognized as revenues when due from policyholders. Policyholder 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. Deposits related to universal life-type and investment-type products are credited to PABs. Revenues from such contracts consist of amounts assessed against PABs for mortality, policy administration and surrender charges and are recorded in universal life and investment-type product policy fees in the period in which services are provided. Amounts that are charged to operations include interest credited and benefit claims incurred in excess of related PABs. Premiums, policy fees, policyholder benefits and expenses are presented net of reinsurance. Other Revenues Other revenues include advisory fees, broker-dealer commissions and fees and administrative service fees. Such fees and commissions are recognized in the period in which services are performed. Income Taxes The Company files a consolidated U.S. federal income tax return in accordance with the provisions of the Internal Revenue Code of 1986, as amended (the "Code"). The Company's accounting for income taxes represents management's best estimate of various events and transactions. Deferred income tax assets and liabilities resulting from temporary differences between the financial reporting and tax bases of assets and liabilities are measured at the balance sheet date using enacted tax rates expected to apply to taxable income in the years the temporary differences are expected to reverse. For U.S. federal income tax purposes, an election in 2005 under Internal Revenue Code Section 338 was made by the Company's ultimate parent, MetLife. As a result of this election, the tax basis in the acquired assets and F-18 METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) liabilities was adjusted as of the acquisition date and the related deferred income tax asset established for the taxable difference from the book basis. The realization of deferred income tax assets depends upon the existence of sufficient taxable income within the carryback or carryforward periods under the tax law in the applicable tax jurisdiction. Valuation allowances are established when management determines, based on available information, that it is more likely than not that deferred income tax assets will not be realized. Significant judgment is required in determining whether valuation allowances should be established as well as the amount of such allowances. When making such determination, consideration is given to, among other things, the following: (i) future taxable income exclusive of reversing temporary differences and carryforwards; (ii) future reversals of existing taxable temporary differences; (iii) taxable income in prior carryback years; and (iv) tax planning strategies. The Company may be required to change its provision for income taxes in certain circumstances. Examples of such circumstances include when the ultimate deductibility of certain items is challenged by taxing authorities or when estimates used in determining valuation allowances on deferred income tax assets significantly change or when receipt of new information indicates the need for adjustment in valuation allowances. Additionally, future events such as changes in tax legislation could have an impact on the provision for income tax and the effective tax rate. Any such changes could significantly affect the amounts reported in the consolidated financial statements in the year these changes occur. The Company classifies interest recognized as interest expense and penalties recognized as a component of income tax. Reinsurance The Company enters into reinsurance transactions as a purchaser of reinsurance for its insurance products. For each of its reinsurance contracts, the Company determines if the contract provides indemnification against loss or liability relating to insurance risk in accordance with applicable accounting standards. The Company reviews all contractual features, particularly those that may limit the amount of insurance risk to which the reinsurer is subject or features that delay the timely reimbursement of claims. For reinsurance of existing in-force blocks of long-duration contracts that transfer significant insurance risk, the difference, if any, between the amounts paid, and the liabilities ceded related to the underlying contracts is considered the net cost of reinsurance at the inception of the contract. The net cost of reinsurance is recorded as an adjustment to DAC and recognized as a component of other expenses on a basis consistent with the way the acquisition costs on the underlying reinsured contracts would be recognized. Subsequent amounts paid on the reinsurance of in-force blocks, as well as amounts paid related to new business are recorded as ceded premiums and ceded future policy benefit liabilities are established. The assumptions used to account for long-duration reinsurance contracts are consistent with those used for the underlying contracts. Ceded policyholder and contract related liabilities, other than those currently due, are reported gross on the balance sheet. Amounts currently recoverable under reinsurance contracts are included in premiums and other receivables and amounts currently payable are included in other liabilities. Such assets and liabilities relating to reinsurance F-19 METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) contracts with the same reinsurer may be recorded net on the balance sheet, if a right of offset exists within the reinsurance contract. Premiums, fees and policyholder benefits and claims are net of reinsurance ceded. If the Company determines that a reinsurance contract does not expose the reinsurer to a reasonable possibility of a significant loss from insurance risk, the Company records the contract as a deposit, net of related expenses. Deposits received are included in other liabilities and deposits made are included within other assets. As amounts are paid or received, consistent with the underlying contracts, the deposit assets or liabilities are adjusted. Interest on such deposits is recorded as other revenue or other expenses, as appropriate. Periodically, the Company evaluates the adequacy of the expected payments or recoveries and adjusts the deposit asset or liability through other revenue or other expenses, as appropriate. Amounts received from reinsurers for policy administration are reported in other revenues. Accounting for reinsurance requires extensive use of assumptions and estimates, particularly related to the future performance of the underlying business and the potential impact of counterparty credit risks. The Company periodically reviews actual and anticipated experience compared to the aforementioned assumptions used to establish assets and liabilities relating to ceded reinsurance and evaluates the financial strength of counterparties to its reinsurance agreements using criteria similar to that evaluated in the security impairment process discussed previously. 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. The Company reports separately, as assets and liabilities, investments held in separate accounts and liabilities of the separate accounts if: (i) such separate accounts are legally recognized; (ii) assets supporting the contract liabilities are legally insulated from the Company's general account liabilities; (iii) investments are directed by the contractholder; and (iv) all investment performance, net of contract fees and assessments, is passed through to the contractholder. The Company reports separate account assets meeting such criteria at their fair value. Investment performance (including investment income, net investment gains (losses) and changes in unrealized gains (losses)) and the corresponding amounts credited to contractholders of such separate accounts are offset within the same line in the consolidated statements of income. The Company's revenues reflect fees charged to the separate accounts, including mortality charges, risk charges, policy administration fees, investment management fees and surrender charges. Separate accounts not meeting the above criteria are combined on a line-by-line basis with the Company's general account assets, liabilities, revenues and expenses. Litigation Contingencies The Company is a party to a number of legal actions and regulatory investigations. Given the inherent unpredictability of these matters, it is difficult to estimate the impact on the Company's consolidated financial position. Liabilities are established when it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. On a quarterly and annual basis, the Company reviews relevant information with respect to liabilities for litigation, regulatory investigations and litigation-related contingencies to be reflected in the Company's consolidated financial statements. It is possible that an adverse outcome in certain of the Company's litigation and regulatory investigations, or the use of different assumptions in the determination of amounts recorded could have a material effect upon the Company's consolidated net income or cash flows in particular quarterly or annual periods. F-20 METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) ADOPTION OF NEW ACCOUNTING PRONOUNCEMENTS Derivative Financial Instruments The Company has adopted guidance relating to derivative financial instruments as follows: - Effective January 1, 2006, the Company adopted prospectively SFAS No. 155, Accounting for Certain Hybrid Instruments ("SFAS 155"). SFAS 155 amends SFAS 133 and SFAS No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities ("SFAS 140"). SFAS 155 allows financial instruments that have embedded derivatives to be accounted for as a whole, eliminating the need to bifurcate the derivative from its host, if the holder elects to account for the whole instrument on a fair value basis. In addition, among other changes, SFAS 155: (i) clarifies which interest-only strips and principal-only strips are not subject to the requirements of SFAS 133; (ii) establishes a requirement to evaluate interests in securitized financial assets to identify interests that are freestanding derivatives or that are hybrid financial instruments that contain an embedded derivative requiring bifurcation; (iii) clarifies that concentrations of credit risk in the form of subordination are not embedded derivatives; and (iv) amends SFAS 140 to eliminate the prohibition on a qualifying special-purpose entity ("QSPE") from holding a derivative financial instrument that pertains to a beneficial interest other than another derivative financial interest. The adoption of SFAS 155 did not have a material impact on the Company's consolidated financial statements. - Effective October 1, 2006, the Company adopted SFAS 133 Implementation Issue No. B40, Embedded Derivatives: Application of Paragraph 13(b) to Securitized Interests in Prepayable Financial Assets ("Issue B40"). Issue B40 clarifies that a securitized interest in prepayable financial assets is not subject to the conditions in paragraph 13(b) of SFAS 133, if it meets both of the following criteria: (i) the right to accelerate the settlement if the securitized interest cannot be controlled by the investor; and (ii) the securitized interest itself does not contain an embedded derivative (including an interest rate-related derivative) for which bifurcation would be required other than an embedded derivative that results solely from the embedded call options in the underlying financial assets. The adoption of Issue B40 did not have a material impact on the Company's consolidated financial statements. - Effective January 1, 2006, the Company adopted prospectively SFAS 133 Implementation Issue No. B38, Embedded Derivatives: Evaluation of Net Settlement with Respect to the Settlement of a Debt Instrument through Exercise of an Embedded Put Option or Call Option ("Issue B38") and SFAS 133 Implementation Issue No. B39, Embedded Derivatives: Application of Paragraph 13(b) to Call Options That Are Exercisable Only by the Debtor ("Issue B39"). Issue B38 clarifies that the potential settlement of a debtor's obligation to a creditor occurring upon exercise of a put or call option meets the net settlement criteria of SFAS 133. Issue B39 clarifies that an embedded call option, in which the underlying is an interest rate or interest rate index, that can accelerate the settlement of a debt host financial instrument should not be bifurcated and fair valued if the right to accelerate the settlement can be exercised only by the debtor (issuer/borrower) and the investor will recover substantially all of its initial net investment. The adoption of Issues B38 and B39 did not have a material impact on the Company's consolidated financial statements. F-21 METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Other Pronouncements Effective November 15, 2006, the Company adopted U.S. Securities and Exchange Commission ("SEC") Staff Accounting Bulletin ("SAB") No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements ("SAB 108"). SAB 108 provides guidance on how prior year misstatements should be considered when quantifying misstatements in current year financial statements for purposes of assessing materiality. SAB 108 requires that registrants quantify errors using both a balance sheet and income statement approach and evaluate whether either approach results in quantifying a misstatement that, when relevant quantitative and qualitative factors are considered, is material. SAB 108 permits companies to initially apply its provisions by either restating prior financial statements or recording a cumulative effect adjustment to the carrying values of assets and liabilities as of January 1, 2006 with an offsetting adjustment to retained earnings for errors that were previously deemed immaterial but are material under the guidance in SAB 108. The adoption of SAB 108 did not have a material impact on the Company's consolidated financial statements. Effective January 1, 2006, the Company adopted SFAS No. 154, Accounting Changes and Error Corrections, a replacement of APB Opinion No. 20 and FASB Statement No. 3 ("SFAS 154"). SFAS 154 requires retrospective application to prior periods' financial statements for a voluntary change in accounting principle unless it is deemed impracticable. It also requires that a change in the method of depreciation, amortization, or depletion for long-lived, non- financial assets be accounted for as a change in accounting estimate rather than a change in accounting principle. The adoption of SFAS 154 did not have a material impact on the Company's consolidated financial statements. In June 2005, the Emerging Issues Task Force ("EITF") reached consensus on Issue No. 04-5, Determining Whether a General Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights ("EITF 04-5"). EITF 04-5 provides a framework for determining whether a general partner controls and should consolidate a limited partnership or a similar entity in light of certain rights held by the limited partners. The consensus also provides additional guidance on substantive rights. EITF 04-5 was effective after June 29, 2005 for all newly formed partnerships and for any pre-existing limited partnerships that modified their partnership agreements after that date. For all other limited partnerships, EITF 04-5 required adoption by January 1, 2006 through a cumulative effect of a change in accounting principle recorded in opening equity or applied retrospectively by adjusting prior period financial statements. The adoption of the provisions of EITF 04-5 did not have a material impact on the Company's consolidated financial statements. Effective November 9, 2005, the Company prospectively adopted the guidance in FASB Staff Position ("FSP") No. FAS 140-2, Clarification of the Application of Paragraphs 40(b) and 40(c) of FAS 140 ("FSP 140-2"). FSP 140-2 clarified certain criteria relating to derivatives and beneficial interests when considering whether an entity qualifies as a QSPE. Under FSP 140-2, the criteria must only be met at the date the QSPE issues beneficial interests or when a derivative financial instrument needs to be replaced upon the occurrence of a specified event outside the control of the transferor. The adoption of FSP 140-2 did not have a material impact on the Company's consolidated financial statements. Effective July 1, 2005, the Company adopted SFAS No. 153, Exchanges of Nonmonetary Assets, an amendment of APB Opinion No. 29 ("SFAS 153"). SFAS 153 amended prior guidance to eliminate the exception for nonmonetary exchanges of similar productive assets and replaced it with a general exception for exchanges of nonmonetary assets that do not have commercial substance. A nonmonetary exchange has commercial substance if the future cash flows of the entity are expected to change significantly as a result of the exchange. The provisions of SFAS 153 were required to be applied prospectively for fiscal periods beginning after June 15, 2005. The adoption of SFAS 153 did not have a material impact on the Company's consolidated financial statements. F-22 METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) In June 2005, the FASB completed its review of EITF Issue No. 03-1, The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments ("EITF 03-1"). EITF 03-1 provides accounting guidance regarding the determination of when an impairment of debt and marketable equity securities and investments accounted for under the cost method should be considered other-than-temporary and recognized in income. EITF 03-1 also requires certain quantitative and qualitative disclosures for debt and marketable equity securities classified as available-for-sale or held-to- maturity under SFAS No. 115, Accounting for Certain Investments in Debt and Equity Securities, that are impaired at the balance sheet date but for which an other-than-temporary impairment has not been recognized. The FASB decided not to provide additional guidance on the meaning of other-than-temporary impairment but has issued FSP FAS 115-1 and FAS 124-1, The Meaning of Other-Than-Temporary Impairment and its Application to Certain Investments ("FSP 115-1"), which nullifies the accounting guidance on the determination of whether an investment is other-than-temporarily impaired as set forth in EITF 03-1. As required by FSP 115-1, the Company adopted this guidance on a prospective basis, which had no material impact on the Company's consolidated financial statements, and has provided the required disclosures. Effective July 1, 2004, the Company adopted EITF Issue No. 03-16, Accounting for Investments in Limited Liability Companies ("EITF 03-16"). EITF 03-16 provides guidance regarding whether a limited liability company should be viewed as similar to a corporation or similar to a partnership for purposes of determining whether a noncontrolling investment should be accounted for using the cost method or the equity method of accounting. EITF 03-16 did not have a material impact on the Company's consolidated financial statements. Effective January 1, 2004, the Company adopted Statement of Position ("SOP") 03-1, Accounting and Reporting by Insurance Enterprises for Certain Nontraditional Long-Duration Contracts and for Separate Accounts ("SOP 03-1"), as interpreted by a Technical Practice Aid ("TPA") issued by the American Institute of Certified Public Accountants ("AICPA") and FSP No. FAS 97-1, Situations in Which Paragraphs 17(b) and 20 of FASB Statement No. 97, Accounting and Reporting by Insurance Enterprises for Certain Long-Duration Contracts and for Realized Gains and Losses from the Sale of Investments, Permit or Require Accrual of an Unearned Revenue Liability. SOP 03-1 provides guidance on (i) the classification and valuation of long-duration contract liabilities; (ii) the accounting for sales inducements; and (iii) separate account presentation and valuation. FUTURE ADOPTION OF NEW ACCOUNTING PRONOUNCEMENTS In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities ("SFAS 159"). SFAS 159 permits all entities the option to measure most financial instruments and certain other items at fair value at specified election dates and to report related unrealized gains and losses in earnings. The fair value option will generally be applied on an instrument-by-instrument basis and is generally an irrevocable election. SFAS 159 is effective for fiscal years beginning after November 15, 2007. The Company is evaluating which eligible financial instruments, if any, it will elect to account for at fair value under SFAS 159 and the related impact on the Company's consolidated financial statements. In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements ("SFAS 157"). SFAS 157 defines fair value, establishes a framework for measuring fair value in GAAP and requires enhanced disclosures about fair value measurements. SFAS 157 does not require any new fair value measurements. The pronouncement is effective for fiscal years beginning after November 15, 2007. The guidance in SFAS 157 will be applied prospectively with the exception of: (i) block discounts of financial instruments; and (ii) certain financial and hybrid instruments measured at initial recognition under SFAS 133 which are to be applied retrospectively as of the beginning of initial adoption (a limited form of retrospective application). The Company is currently evaluating the impact of SFAS 157 on the Company's consolidated financial statements. Implementation of SFAS 157 will require additional disclosures in the Company's consolidated financial statements. F-23 METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) In June 2006, the FASB issued FIN No. 48, Accounting for Uncertainty in Income Taxes -- an interpretation of FASB Statement No. 109 ("FIN 48"). FIN 48 clarifies the accounting for uncertainty in income tax recognized in a company's financial statements. FIN 48 requires companies to determine whether it is "more likely than not" that a tax position will be sustained upon examination by the appropriate taxing authorities before any part of the benefit can be recorded in the financial statements. It also provides guidance on the recognition, measurement and classification of income tax uncertainties, along with any related interest and penalties. Previously recorded income tax benefits that no longer meet this standard are required to be charged to earnings in the period that such determination is made. FIN 48 will also require significant additional disclosures. FIN 48 is effective for fiscal years beginning after December 15, 2006. Based upon the Company's evaluation work completed to date, the Company expects to recognize a reduction to the January 1, 2007 balance of retained earnings of less than $1 million. In March 2006, the FASB issued SFAS No. 156, Accounting for Servicing of Financial Assets -- an amendment of FASB Statement No. 140 ("SFAS 156"). Among other requirements, SFAS 156 requires an entity to recognize a servicing asset or servicing liability each time it undertakes an obligation to service a financial asset by entering into a servicing contract in certain situations. SFAS 156 will be applied prospectively and is effective for fiscal years beginning after September 15, 2006. The Company does not expect SFAS 156 to have a material impact on the Company's consolidated financial statements. In September 2005, the AICPA issued SOP 05-1, Accounting by Insurance Enterprises for Deferred Acquisition Costs in Connection with Modifications or Exchanges of Insurance Contracts ("SOP 05-1"). SOP 05-1 provides guidance on accounting by insurance enterprises for DAC on internal replacements of insurance and investment contracts other than those specifically described in SFAS No. 97, Accounting and Reporting by Insurance Enterprises for Certain Long- Duration Contracts and for Realized Gains and Losses from the Sale of Investments. SOP 05-1 defines an internal replacement as a modification in product benefits, features, rights, or coverages that occurs by the exchange of a contract for a new contract, or by amendment, endorsement, or rider to a contract, or by the election of a feature or coverage within a contract. Under SOP 05-1, modifications that result in a substantially unchanged contract will be accounted for as a continuation of the replaced contract. It is effective for internal replacements occurring in fiscal years beginning after December 15, 2006. In addition, in February 2007 related TPAs were issued by the AICPA to provide further clarification of SOP 05-1. The TPAs are effective concurrently with the adoption of the SOP. Based on the Company's interpretation of SOP 05-1 and related TPAs, the adoption of SOP 05-1 is not expected to have a material impact on the Company's financial statements. 2. ACQUISITION OF THE TRAVELERS INSURANCE COMPANY BY METLIFE, INC. FROM CITIGROUP INC. On the Acquisition Date, MetLife Life and Annuity Company of Connecticut, and other affiliated entities, including the Company's parent, MetLife Insurance Company of Connecticut, and substantially all of Citigroup Inc.'s international insurance businesses, excluding Primerica Life Insurance Company and its subsidiaries, were acquired by MetLife from Citigroup for $12.1 billion. The accounting policies of the Company were conformed to those of MetLife upon the Acquisition. The total consideration paid by MetLife for the purchase consisted of $11.0 billion in cash and 22,436,617 shares of MetLife's common stock with a market value of $1.0 billion to Citigroup and $100 million in other transaction costs. In accordance with FASB SFAS No. 141, Business Combinations, and SFAS No. 142, Goodwill and Other Intangible Assets, the Acquisition was accounted for by MetLife using the purchase method of accounting, which requires that the assets and liabilities of the Company be identified and measured at their fair value as of the acquisition date. As required by the SEC SAB Topic 5-J, Push Down Basis of Accounting Required in Certain Limited Circumstances, the purchase method of accounting applied by MetLife to the acquired assets and liabilities associated with the Company has been "pushed down" to the consolidated financial statements of the Company, F-24 METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) thereby establishing a new basis of accounting. This new basis of accounting is referred to as the "successor basis," while the historical basis of accounting is referred to as the "predecessor basis." Financial statements included herein for periods prior and subsequent to the Acquisition Date are labeled "predecessor" and "successor," respectively. Final Purchase Price Allocation and Goodwill The purchase price has been allocated to the assets acquired and liabilities assumed using management's best estimate of their fair values as of the acquisition date. The computation of the purchase price and the allocation of the purchase price to the net assets acquired based upon their respective fair values as of July 1, 2005, and the resulting goodwill, as revised, are presented below. Based upon MetLife's method of allocating the purchase price to the entities acquired, the purchase price attributed to the Company increased by $5 million. The increase in purchase price was a result of additional consideration paid in 2006 by MetLife to Citigroup of $115 million and an increase in transaction costs of $3 million, offset by a $4 million reduction in restructuring costs for a total purchase price increase of $114 million. The allocation of purchase price was updated as a result of the additional purchase price attributed to the Company of $5 million, an increase of $11 million in the value of the future policy benefit liabilities resulting from the finalization of the evaluation of the Travelers underwriting criteria, an increase of $6 million in other invested assets, an increase of $3 million in other assets and a decrease of $14 million in other liabilities due to the receipt of additional information, all resulting in a net impact of the aforementioned adjustments decreasing deferred income tax assets by $3 million. Goodwill decreased by $4 million as a consequence of such revisions to the purchase price and the purchase price allocation. F-25 METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SUCCESSOR ----------------- AS OF JULY 1, 2005 ----------------- (IN MILLIONS) TOTAL PURCHASE PRICE:.................................... $12,084 Purchase price attributed to other affiliates.......... 10,351 ------- Purchase price attributed to the Company............... 1,733 NET ASSETS ACQUIRED PRIOR TO PURCHASE ACCOUNTING ADJUSTMENTS............................................ $ 2,034 ADJUSTMENTS TO REFLECT ASSETS ACQUIRED AT FAIR VALUE: Fixed maturity securities available-for-sale........... (4) Mortgage loans on real estate.......................... 7 Real estate and real estate joint ventures held-for- investment.......................................... (1) Other limited partnership interests.................... 3 Other invested assets.................................. (4) Premiums and other receivables......................... (47) Elimination of historical deferred policy acquisition costs............................................... (1,622) Value of business acquired............................. 1,676 Value of distribution agreements acquired.............. 8 Net deferred income tax asset.......................... 258 Other assets........................................... 8 ADJUSTMENTS TO REFLECT LIABILITIES ASSUMED AT FAIR VALUE: Future policy benefits................................. (303) Policyholder account balances.......................... (464) Other liabilities...................................... (55) ------- NET FAIR VALUE OF ASSETS ACQUIRED AND LIABILITIES ASSUMED................................................ 1,494 ------- GOODWILL RESULTING FROM THE ACQUISITION.................. $ 239 =======
The entire amount of goodwill is expected to be deductible for income tax purposes. F-26 METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) CONDENSED STATEMENT OF NET ASSETS ACQUIRED The condensed statement of net assets acquired reflects the fair value of the Company's net assets as follows:
SUCCESSOR ------------------ AS OF JULY 1, 2005 ------------------ (IN MILLIONS) ASSETS: Fixed maturity securities available-for-sale............. $ 6,135 Equity securities available-for-sale..................... 35 Mortgage loans on real estate............................ 277 Policy loans............................................. 36 Other limited partnership interests...................... 80 Short-term investments................................... 188 Other invested assets.................................... 338 ------- Total investments..................................... 7,089 Cash and cash equivalents................................ 85 Accrued investment income................................ 80 Premiums and other receivables........................... 175 Value of business acquired............................... 1,676 Goodwill................................................. 239 Other intangible assets.................................. 8 Deferred income tax asset................................ 97 Other assets............................................. 9 Separate account assets.................................. 11,617 ------- Total assets acquired................................. 21,075 ------- LIABILITIES: Future policy benefits................................... 1,739 Policyholder account balances............................ 5,684 Other policyholder funds................................. 15 Current income tax payable............................... 37 Other liabilities........................................ 250 Separate account liabilities............................. 11,617 ------- Total liabilities assumed............................. 19,342 ------- Net assets acquired................................... $ 1,733 =======
Other Intangible Assets VOBA reflects the estimated fair value of in-force contracts acquired and represents the portion of the purchase price that is allocated to the value of the right to receive future cash flows from the life insurance and annuity contracts in-force at the Acquisition Date. VOBA is based on actuarially determined projections, by each block of business, of future policy and contract charges, premiums, mortality and morbidity, separate account performance, surrenders, operating expenses, investment returns and other factors. Actual experience on the purchased business F-27 METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) may vary from these projections. If estimated gross profits or premiums differ from expectations, the amortization of VOBA is adjusted to reflect actual experience. The value of the other identifiable intangibles reflects the estimated fair value of the Company's distribution agreements acquired at July 1, 2005 and will be amortized in relation to the expected economic benefits of the agreements. If actual experience under the distribution agreements differs from expectations, the amortization of these intangibles will be adjusted to reflect actual experience. The use of discount rates was necessary to establish the fair value of VOBA, as well as the other identifiable intangible assets. In selecting the appropriate discount rates, management considered its weighted average cost of capital, as well as the weighted average cost of capital required by market participants. A discount rate of 11.5% was used to value these intangible assets. The fair values of business acquired and distribution agreements acquired are as follows:
SUCCESSOR ------------- WEIGHTED AVERAGE AS OF JULY 1, AMORTIZATION 2005 PERIOD ------------- ---------------- (IN MILLIONS) (IN YEARS) Value of business acquired........................ $1,676 16 Value of distribution agreements acquired......... 8 16 ------ Total value of intangible assets acquired, excluding goodwill........................... $1,684 16 ======
F-28 METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 3. INVESTMENTS FIXED MATURITY AND EQUITY SECURITIES AVAILABLE-FOR-SALE The following tables present the cost or amortized cost, gross unrealized gain and loss, and estimated fair value of the Company's fixed maturity and equity securities, the percentage that each sector represents by the total fixed maturity securities holdings and by the total equity securities holdings at:
SUCCESSOR ------------------------------------------------------ DECEMBER 31, 2006 ------------------------------------------------------ GROSS COST OR UNREALIZED AMORTIZED --------------- ESTIMATED % OF COST GAIN LOSS FAIR VALUE TOTAL --------- ---- ---- ---------- ----- (IN MILLIONS) U.S. corporate securities.......... $2,542 $18 $ 62 $2,498 42.4% Foreign corporate securities....... 892 5 21 876 14.9 U.S. Treasury/agency securities.... 801 2 20 783 13.3 Commercial mortgage-backed securities....................... 736 4 6 734 12.5 Residential mortgage-backed securities....................... 734 10 5 739 12.5 Asset-backed securities............ 102 -- 2 100 1.7 State and political subdivision securities....................... 91 1 6 86 1.5 Foreign government securities...... 69 5 1 73 1.2 ------ --- ---- ------ ----- Total fixed maturity securities.. $5,967 $45 $123 $5,889 100.0% ====== === ==== ====== ===== Nonredeemable preferred stock...... $ 55 $ 2 $ 1 $ 56 98.2% Common stock....................... 1 -- -- 1 1.8 ------ --- ---- ------ ----- Total equity securities.......... $ 56 $ 2 $ 1 $ 57 100.0% ====== === ==== ====== =====
SUCCESSOR ------------------------------------------------------ DECEMBER 31, 2005 ------------------------------------------------------ GROSS COST OR UNREALIZED AMORTIZED --------------- ESTIMATED % OF COST GAIN LOSS FAIR VALUE TOTAL --------- ---- ---- ---------- ----- (IN MILLIONS) U.S. corporate securities.......... $2,811 $ 6 $ 70 $2,747 45.4% Foreign corporate securities....... 562 4 16 550 9.1 U.S. Treasury/agency securities.... 793 4 6 791 13.0 Commercial mortgage-backed securities....................... 665 3 9 659 10.9 Residential mortgage-backed securities....................... 1,021 1 17 1,005 16.6 Asset-backed securities............ 147 -- 2 145 2.4 State and political subdivision securities....................... 84 -- 3 81 1.3 Foreign government securities...... 75 3 1 77 1.3 ------ --- ---- ------ ----- Total fixed maturity securities.. $6,158 $21 $124 $6,055 100.0% ====== === ==== ====== ===== Nonredeemable preferred stock...... $ 3 $-- $ -- $ 3 75.0% Common stock....................... 1 1 1 1 25.0 ------ --- ---- ------ ----- Total equity securities.......... $ 4 $ 1 $ 1 $ 4 100.0% ====== === ==== ====== =====
F-29 METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The Company held foreign currency derivatives with notional amounts of $11 million and $10 million to hedge the exchange rate risk associated with foreign denominated fixed maturity securities at December 31, 2006 and 2005, respectively. Excluding investments in U.S. Treasury securities and obligations of U.S. government corporations and agencies, the Company is not exposed to any significant concentration of credit risk in its fixed maturity securities portfolio. The Company held fixed maturity securities at estimated fair values that were below investment grade or not rated by an independent rating agency that totaled $361 million and $395 million at December 31, 2006 and 2005, respectively. These securities had a net unrealized gain (loss) of ($2) million and ($10) million at December 31, 2006 and 2005, respectively. Non-income producing fixed maturity securities were $2 million at both December 31, 2006 and 2005. Unrealized gains (losses) associated with non-income producing fixed maturity securities were $2 million and ($3) million at December 31, 2006 and 2005, respectively. The cost or amortized cost and estimated fair value of fixed maturity securities, by contractual maturity date (excluding scheduled sinking funds), are shown below:
SUCCESSOR ----------------------------------------------- DECEMBER 31, 2006 DECEMBER 31, 2005 ---------------------- ---------------------- COST OR COST OR AMORTIZED ESTIMATED AMORTIZED ESTIMATED COST FAIR VALUE COST FAIR VALUE --------- ---------- --------- ---------- (IN MILLIONS) Due in one year or less................. $ 362 $ 361 $ 347 $ 346 Due after one year through five years... 948 931 1,192 1,171 Due after five years through ten years.. 1,273 1,242 1,577 1,534 Due after ten years..................... 1,812 1,782 1,209 1,195 ------ ------ ------ ------ Subtotal.............................. 4,395 4,316 4,325 4,246 Mortgage-backed and other asset-backed securities............................ 1,572 1,573 1,833 1,809 ------ ------ ------ ------ Total fixed maturities................ $5,967 $5,889 $6,158 $6,055 ====== ====== ====== ======
Fixed maturity securities not due at a single maturity date have been included in the above table in the year of final contractual maturity. Actual maturities may differ from contractual maturities due to the exercise of prepayment options. Sales or disposals of fixed maturity and equity securities classified as available-for-sale are as follows:
SUCCESSOR PREDECESSOR ------------------------------- ------------------------------- YEAR ENDED SIX MONTHS ENDED SIX MONTHS ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, JUNE 30, DECEMBER 31, ------------ ---------------- ---------------- ------------ 2006 2005 2005 2004 ------------ ---------------- ---------------- ------------ (IN MILLIONS) Proceeds..................... $2,503 $3,351 $212 $820 Gross investment gains....... $ 5 $ 3 $ 9 $ 25 Gross investment losses...... $ (70) $ (54) $(12) $(25)
F-30 METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) UNREALIZED LOSS FOR FIXED MATURITY AND EQUITY SECURITIES AVAILABLE-FOR-SALE The following table presents the estimated fair values and gross unrealized loss of the Company's fixed maturity securities (aggregated by sector) and equity securities in an unrealized loss position, aggregated by length of time that the securities have been in a continuous unrealized loss position at:
SUCCESSOR ------------------------------------------------------------------------------------- DECEMBER 31, 2006 ------------------------------------------------------------------------------------- EQUAL TO OR GREATER LESS THAN 12 MONTHS THAN 12 MONTHS TOTAL --------------------------- --------------------------- --------------------------- ESTIMATED GROSS ESTIMATED GROSS ESTIMATED GROSS FAIR VALUE UNREALIZED LOSS FAIR VALUE UNREALIZED LOSS FAIR VALUE UNREALIZED LOSS ---------- --------------- ---------- --------------- ---------- --------------- (IN MILLIONS, EXCEPT NUMBER OF SECURITIES) U.S. corporate securities..... $1,330 $40 $500 $22 $1,830 $ 62 Foreign corporate securities.. 462 13 174 8 636 21 U.S. Treasury/agency securities.................. 474 17 51 3 525 20 Commercial mortgage-backed securities.................. 304 2 109 4 413 6 Residential mortgage-backed securities.................. 307 4 59 1 366 5 Asset-backed securities....... 45 -- 22 2 67 2 State and political subdivision securities...... 21 3 54 3 75 6 Foreign government securities.................. 13 1 12 -- 25 1 ------ --- ---- --- ------ ---- Total fixed maturity securities............... $2,956 $80 $981 $43 $3,937 $123 ====== === ==== === ====== ==== Equity securities............. $ 37 $ 1 $ 5 $-- $ 42 $ 1 ====== === ==== === ====== ==== Total number of securities in an unrealized loss position.................... 772 430 1,202 ====== ==== ======
All fixed maturity and equity securities in an unrealized loss position at December 31, 2005 had been in a continuous unrealized loss position for less than twelve months, as a new cost basis was established at the Acquisition Date. The number of securities in an unrealized loss position at December 31, 2005 was 1,504. F-31 METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) AGING OF GROSS UNREALIZED LOSS FOR FIXED MATURITY AND EQUITY SECURITIES AVAILABLE-FOR-SALE The following tables present the cost or amortized cost, gross unrealized loss and number of securities for fixed maturity securities and equity securities, where the estimated fair value had declined and remained below cost or amortized cost by less than 20%, or 20% or more at:
SUCCESSOR ------------------------------------------------------------ DECEMBER 31, 2006 ------------------------------------------------------------ COST OR GROSS NUMBER AMORTIZED COST UNREALIZED LOSS OF SECURITIES ------------------ ------------------ ------------------ LESS THAN 20% OR LESS THAN 20% OR LESS THAN 20% OR 20% MORE 20% MORE 20% MORE --------- ------ --------- ------ --------- ------ (IN MILLIONS, EXCEPT NUMBER OF SECURITIES) Less then six months........... $2,763 $ 4 $ 66 $ 2 696 9 Six months or greater but less than nine months............. 16 -- -- -- 24 -- Nine months or greater but less than twelve months........... 291 -- 13 -- 43 -- Twelve months or greater....... 1,029 -- 43 -- 430 -- ------ --- ---- --- ----- -- Total........................ $4,099 $ 4 $122 $ 2 1,193 9 ====== === ==== === ===== ==
SUCCESSOR ------------------------------------------------------------ DECEMBER 31, 2005 ------------------------------------------------------------ COST OR GROSS NUMBER OF AMORTIZED COST UNREALIZED LOSS SECURITIES ------------------ ------------------ ------------------ LESS THAN 20% OR LESS THAN 20% OR LESS THAN 20% OR 20% MORE 20% MORE 20% MORE --------- ------ --------- ------ --------- ------ (IN MILLIONS, EXCEPT NUMBER OF SECURITIES) Less than six months........... $4,843 $14 $119 $6 1,480 24 ------ --- ---- -- ----- -- Total........................ $4,843 $14 $119 $6 1,480 24 ====== === ==== == ===== ==
At December 31, 2006, $122 million of unrealized losses related to securities with an unrealized loss position of less than 20% of cost or amortized cost, which represented 3% of the cost or amortized cost of such securities. At December 31, 2005, $119 million of unrealized losses related to securities with an unrealized loss position of less than 20% of cost or amortized cost, which represented 2% of the cost or amortized cost of such securities. At December 31, 2006, $2 million of unrealized losses related to securities with an unrealized loss position of 20% or more of cost or amortized cost, which represented 50% of the cost or amortized cost of such securities. Of such unrealized losses of $2 million, all related to securities that were in an unrealized loss position for a period of less than six months. At December 31, 2005, $6 million of unrealized losses related to securities with an unrealized loss position of 20% or more of cost or amortized cost, which represented 43% of the cost or amortized cost of such securities. Of such unrealized losses of $6 million, all related to securities that were in an unrealized loss position for a period of less than six months. The Company held no fixed maturity securities and equity securities with a gross unrealized loss at December 31, 2006 of greater than $10 million. F-32 METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) At December 31, 2006 and 2005, the Company had $124 million and $125 million, respectively, of gross unrealized loss related to its fixed maturity and equity securities. These securities are concentrated, calculated as a percentage of gross unrealized loss, as follows:
SUCCESSOR ------------- DECEMBER 31, ------------- 2006 2005 ---- ---- SECTOR: U.S. corporate securities.................................. 50% 56% Foreign corporate securities............................... 17 13 U.S. Treasury/agency securities............................ 16 5 Commercial mortgage-backed securities...................... 5 7 Residential mortgage-backed securities..................... 4 14 Other...................................................... 8 5 --- --- Total................................................... 100% 100% === === INDUSTRY: Industrial................................................. 26% 21% Finance.................................................... 20 17 Government................................................. 17 5 Utility.................................................... 12 5 Mortgage-backed............................................ 9 21 Consumer................................................... 2 11 Other...................................................... 14 20 --- --- Total................................................... 100% 100% === ===
As described more fully in Note 1, the Company performs a regular evaluation, on a security-by-security basis, of its investment holdings in accordance with its impairment policy in order to evaluate whether such securities are other-than-temporarily impaired. One of the criteria which the Company considers in its other-than-temporary impairment analysis is its intent and ability to hold securities for a period of time sufficient to allow for the recovery of their value to an amount equal to or greater than cost or amortized cost. The Company's intent and ability to hold securities considers broad portfolio management objectives such as asset/liability duration management, issuer and industry segment exposures, interest rate views and the overall total return focus. In following these portfolio management objectives, changes in facts and circumstances that were present in past reporting periods may trigger a decision to sell securities that were held in prior reporting periods. Decisions to sell are based on current conditions or the Company's need to shift the portfolio to maintain its portfolio management objectives including liquidity needs or duration targets on asset/liability managed portfolios. The Company attempts to anticipate these types of changes and if a sale decision has been made on an impaired security and that security is not expected to recover prior to the expected time of sale, the security will be deemed other-than- temporarily impaired in the period that the sale decision was made and an other- than-temporary impairment loss will be recognized. Based upon the Company's current evaluation of the securities in accordance with its impairment policy, the cause of the decline being principally attributable to the general rise in rates during the holding period, and the Company's current intent and ability to hold the fixed maturity and equity securities with unrealized losses for a period of time sufficient for them to recover, the Company has concluded that the aforementioned securities are not other-than-temporarily impaired. F-33 METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) ASSETS ON DEPOSIT The Company had investment assets on deposit with regulatory agencies with a fair market value of $7 million and $5 million at December 31, 2006 and 2005, respectively, consisting primarily of fixed maturity and equity securities. MORTGAGE LOANS ON REAL ESTATE Mortgage loans on real estate are categorized as follows:
SUCCESSOR ----------------------------------- DECEMBER 31, ----------------------------------- 2006 2005 ---------------- ---------------- AMOUNT PERCENT AMOUNT PERCENT ------ ------- ------ ------- Commercial mortgage loans..................... $140 47% $123 47% Agricultural mortgage loans................... 155 53 136 53 ---- --- ---- --- Total....................................... 295 100% 259 100% === === Less: Valuation allowances.................... -- 1 ---- ---- Mortgage and consumer loans................... $295 $258 ==== ====
Mortgage loans are collateralized by properties located in the United States. At December 31, 2006, 19%, 18% and 8% of the value of the Company's mortgage loans on real estate were located in California, New York and Maryland, respectively. Generally, the Company, as the lender, only loans up to 75% of the purchase price of the underlying real estate. REAL ESTATE JOINT VENTURES The Company held $2 million in real estate joint ventures held-for- investment at December 31, 2006. The Company did not hold any interest in real estate joint ventures at December 31, 2005. Both accumulated depreciation on real estate joint ventures and the related depreciation expense were less than $1 million at December 31, 2006. At December 31, 2006, 100% of the Company's real estate joint ventures were located in New York. F-34 METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) NET INVESTMENT INCOME The components of net investment income are as follows:
SUCCESSOR PREDECESSOR ------------------------------- ------------------------------- YEAR ENDED SIX MONTHS ENDED SIX MONTHS ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, JUNE 30, DECEMBER 31, ------------ ---------------- ---------------- ------------ 2006 2005 2005 2004 ------------ ---------------- ---------------- ------------ (IN MILLIONS) Fixed maturity securities...... $314 $155 $185 $341 Equity securities.............. 1 -- -- 2 Mortgage loans on real estate.. 16 8 9 18 Policy loans................... 3 -- 1 1 Real estate joint ventures..... 1 -- -- -- Other limited partnership interests.................... 23 2 27 28 Cash, cash equivalents and short-term investments....... 14 5 4 5 ---- ---- ---- ---- Total investment income...... 372 170 226 395 Less: Investment expenses...... 11 3 3 6 ---- ---- ---- ---- Net investment income........ $361 $167 $223 $389 ==== ==== ==== ====
NET INVESTMENT GAINS (LOSSES) The components of net investment gains (losses) are as follows:
SUCCESSOR PREDECESSOR ------------------------------- ------------------------------- YEAR ENDED SIX MONTHS ENDED SIX MONTHS ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, JUNE 30, DECEMBER 31, ------------ ---------------- ---------------- ------------ 2006 2005 2005 2004 ------------ ---------------- ---------------- ------------ (IN MILLIONS) Fixed maturity securities...... $(69) $(51) $(5) $(6) Equity securities.............. -- -- 2 (1) Mortgage loans on real estate.. 1 (1) -- -- Real estate and real estate joint ventures............... (3) -- -- -- Derivatives.................... (12) 20 (3) 21 Other.......................... -- (3) -- 3 ---- ---- --- --- Net investment gains (losses).................. $(83) $(35) $(6) $17 ==== ==== === ===
The Company periodically disposes of fixed maturity and equity securities at a loss. Generally, such losses are insignificant in amount or in relation to the cost basis of the investment, are attributable to declines in fair value occurring in the period of the disposition or are as a result of management's decision to sell securities based on current conditions or the Company's need to shift the portfolio to maintain its portfolio management objectives. Losses from fixed maturity and equity securities deemed other-than- temporarily impaired, included within net investment gains (losses), were $4 million, $0, $0 and $7 million for the year ended December 31, 2006, the six months ended December 31, 2005 and June 30, 2005 and the year ended December 31, 2004, respectively. F-35 METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) NET UNREALIZED INVESTMENT GAINS (LOSSES) The components of net unrealized investment gains (losses), included in accumulated other comprehensive income (loss), are as follows:
SUCCESSOR PREDECESSOR ------------------------------ ------------------------------ YEAR ENDED SIX MONTHS ENDED SIX MONTHS ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, JUNE 30, DECEMBER 31, ------------ ---------------- ---------------- ------------ 2006 2005 2005 2004 ------------ ---------------- ---------------- ------------ (IN MILLIONS) Fixed maturity securities.......... $(78) $(103) $ 319 $ 332 Equity securities.................. 1 -- 3 3 Derivatives........................ -- -- -- 2 Other.............................. (2) (6) 4 -- ---- ----- ----- ----- Subtotal......................... (79) (109) 326 337 Allocated amounts: DAC and VOBA..................... 33 45 -- -- Deferred income tax................ 16 22 (114) (118) ---- ----- ----- ----- Net unrealized investment gains (losses).............. $(30) $ (42) $ 212 $ 219 ==== ===== ===== =====
The changes in net unrealized investment gains (losses) are as follows:
SUCCESSOR PREDECESSOR ------------------------------ ------------------------------ YEAR ENDED SIX MONTHS ENDED SIX MONTHS ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, JUNE 30, DECEMBER 31, ------------ ---------------- ---------------- ------------ 2006 2005 2005 2004 ------------ ---------------- ---------------- ------------ (IN MILLIONS) Balance at end of previous of period............................ $(42) $ 212 $219 $215 Effect of purchase accounting push down (See Note 2)................. -- (212) -- -- ---- ----- ---- ---- Balance at beginning of period...... (42) -- 219 215 ---- ----- ---- ---- Unrealized investment gains (losses) during the period................. 30 (109) (10) 6 Unrealized investment gains (losses) relating to: DAC and VOBA...................... (12) 45 -- -- Deferred income tax............... (6) 22 3 (2) ---- ----- ---- ---- Balance at end of period............ $(30) $ (42) $212 $219 ==== ===== ==== ==== Net change in unrealized investment gains (losses).................... $ 12 $ (42) $ (7) $ 4 ==== ===== ==== ====
F-36 METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) VARIABLE INTEREST ENTITIES The following table presents the total assets of and maximum exposure to loss relating to variable interest entities for which the Company has concluded that it holds significant variable interests but it is not the primary beneficiary and which have not been consolidated:
SUCCESSOR (REVISED) ------------------------ DECEMBER 31, 2005 ------------------------ NOT PRIMARY BENEFICIARY ------------------------ MAXIMUM TOTAL EXPOSURE TO ASSETS(1) LOSS(2) --------- ----------- (IN MILLIONS) Other investments(3)................................... $3,450 $25 ------ --- Total................................................ $3,450 $25 ====== ===
- -------- (1) The assets of the other limited partnerships are reflected at the carrying amounts at which such assets would have been reflected on the Company's consolidated balance sheet had the Company consolidated the VIE from the date of its initial investment in the entity. (2) The maximum exposure to loss of the other limited partnerships is equal to the carrying amounts plus any unfunded commitments, reduced by amounts guaranteed by other partners. (3) Other investments include investments in public and private debt and equity securities that are not asset-backed securitizations or collateralized debt obligations. 4. DERIVATIVE FINANCIAL INSTRUMENTS TYPES OF DERIVATIVE FINANCIAL INSTRUMENTS At the Acquisition Date, the Company's derivative positions which previously qualified for hedge accounting were dedesignated in accordance with SFAS 133. Such derivative positions were not redesignated in hedging relationships. Accordingly, all changes in such derivative fair values for the year ended December 31, 2006 and the six months ended December 31, 2005 are recorded in net investment gains (losses). The following table presents the notional amounts and current market or fair value of derivative financial instruments held at:
SUCCESSOR ----------------------------------------------------------------- DECEMBER 31, 2006 DECEMBER 31, 2005 ------------------------------- ------------------------------- CURRENT MARKET CURRENT MARKET OR FAIR VALUE OR FAIR VALUE NOTIONAL -------------------- NOTIONAL -------------------- AMOUNT ASSETS LIABILITIES AMOUNT ASSETS LIABILITIES -------- ------ ----------- -------- ------ ----------- (IN MILLIONS) Interest rate swaps............. $911 $266 $32 $1,069 $202 $ 2 Financial futures............... 26 -- -- 64 1 1 Foreign currency swaps.......... 32 1 9 31 -- 7 Foreign currency forwards....... 4 -- -- 8 -- -- Options......................... -- 53 5 -- 115 3 Financial forwards.............. -- -- 1 -- -- 2 Credit default swaps............ 4 -- -- 4 -- -- ---- ---- --- ------ ---- --- Total......................... $977 $320 $47 $1,176 $318 $15 ==== ==== === ====== ==== ===
F-37 METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The above table does not include notional values for equity futures, equity financial forwards and equity options. At December 31, 2006 and 2005, the Company owned 156 and 413 equity futures contracts, respectively. Market values of equity futures are included in financial futures in the preceding table. At December 31, 2006 and 2005, the Company owned 18,000 and 36,500 equity financial forwards, respectively. Market values of equity financial forwards are included in financial forwards in the preceding table. At December 31, 2006 and 2005, the Company owned 742,550 and 1,058,300 equity options, respectively. Market values of equity options are included in options in the preceding table. The following table presents the notional amounts of derivative financial instruments by maturity at December 31, 2006:
SUCCESSOR ----------------------------------------------------------------------------------- REMAINING LIFE ----------------------------------------------------------------------------------- AFTER ONE YEAR AFTER FIVE YEARS ONE YEAR OR LESS THROUGH FIVE YEARS THROUGH TEN YEARS AFTER TEN YEARS TOTAL ---------------- ------------------ ----------------- --------------- ----- (IN MILLIONS) Interest rate swaps......... $167 $352 $392 $-- $911 Financial futures........... 26 -- -- -- 26 Foreign currency swaps...... -- 8 24 -- 32 Foreign currency forwards... 4 -- -- -- 4 Credit default swaps........ -- 1 3 -- 4 ---- ---- ---- --- ---- Total..................... $197 $361 $419 $-- $977 ==== ==== ==== === ====
Interest rate swaps are used by the Company primarily to reduce market risks from changes in interest rates and to alter interest rate exposure arising from mismatches between assets and liabilities (duration mismatches). In an interest rate swap, the Company agrees with another party to exchange, at specified intervals, the difference between fixed rate and floating rate interest amounts as calculated by reference to an agreed notional principal amount. These transactions are entered into pursuant to master agreements that provide for a single net payment to be made by the counterparty at each due date. In exchange-traded interest rate (Treasury and swap) and equity futures transactions, the Company agrees to purchase or sell a specified number of contracts, the value of which is determined by the different classes of interest rate and equity securities, and to post variation margin on a daily basis in an amount equal to the difference in the daily market values of those contracts. The Company enters into exchange-traded futures with regulated futures commission merchants that are members of the exchange. Exchange-traded interest rate (Treasury and swap) futures are used primarily to hedge mismatches between the duration of assets in a portfolio and the duration of liabilities supported by those assets, to hedge against changes in value of securities the Company owns or anticipates acquiring, and to hedge against changes in interest rates on anticipated liability issuances by replicating Treasury or swap curve performance. The value of interest rate futures is substantially impacted by changes in interest rates and they can be used to modify or hedge existing interest rate risk. Exchange-traded equity futures are used primarily to hedge liabilities embedded in certain variable annuity products offered by the Company. Foreign currency derivatives, including foreign currency swaps and foreign currency forwards are used by the Company to reduce the risk from fluctuations in foreign currency exchange rates associated with its assets and liabilities denominated in foreign currencies. F-38 METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) In a foreign currency swap transaction, the Company agrees with another party to exchange, at specified intervals, the difference between one currency and another at a forward exchange rate calculated by reference to an agreed upon principal amount. The principal amount of each currency is exchanged at the inception and termination of the currency swap by each party. In a foreign currency forward transaction, the Company agrees with another party to deliver a specified amount of an identified currency at a specified future date. The price is agreed upon at the time of the contract and payment for such a contract is made in a different currency at the specified future date. Equity index options are used by the Company primarily to hedge minimum guarantees embedded in certain variable annuity products offered by the Company. To hedge against adverse changes in equity indices, the Company enters into contracts to sell the equity index within a limited time at a contracted price. The contracts will be net settled in cash based on differentials in the indices at the time of exercise and the strike price. Equity index options are included in options in the preceding table. The Company enters into financial forwards to buy and sell securities. The price is agreed upon at the time of the contract and payment for such a contract is made at a specified future date. Equity variance swaps are used by the Company primarily to hedge minimum guarantees embedded in certain variable annuity products offered by the Company. In an equity variance swap, the Company agrees with another party to exchange amounts in the future, based on changes in equity volatility over a defined period. Equity variance swaps are included in financial forwards in the preceding table. Certain credit default swaps are used by the Company to hedge against credit-related changes in the value of its investments and to diversify its credit risk exposure in certain portfolios. In a credit default swap transaction, the Company agrees with another party, at specified intervals, to pay a premium to insure credit risk. If a credit event, as defined by the contract, occurs, generally the contract will require the swap to be settled gross by the delivery of par quantities of the referenced investment equal to the specified swap notional in exchange for the payment of cash amounts by the counterparty equal to the par value of the investment surrendered. Credit default swaps are also used to synthetically create investments that are either more expensive to acquire or otherwise unavailable in the cash markets. These transactions are a combination of a derivative and usually a U.S. Treasury or Agency security. HEDGING The following table presents the notional amounts and fair value of derivatives by type of hedge designation at:
SUCCESSOR ----------------------------------------------------------------- DECEMBER 31, 2006 DECEMBER 31, 2005 ------------------------------- ------------------------------- FAIR VALUE FAIR VALUE NOTIONAL -------------------- NOTIONAL -------------------- AMOUNT ASSETS LIABILITIES AMOUNT ASSETS LIABILITIES -------- ------ ----------- -------- ------ ----------- (IN MILLIONS) Non-qualifying.................. $977 $320 $47 $1,176 $318 $15 ---- ---- --- ------ ---- --- Total......................... $977 $320 $47 $1,176 $318 $15 ==== ==== === ====== ==== ===
For the year ended December 31, 2006, the Company had $10 million in settlement payments related to non-qualifying derivatives included within net investment gains (losses). F-39 METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) FAIR VALUE HEDGES The Company designates and accounts for the following as fair value hedges when they have met the requirements of SFAS 133: (i) interest rate swaps to convert fixed rate investments to floating rate investments; (ii) foreign currency swaps to hedge the foreign currency fair value exposure of foreign- currency-denominated investments and liabilities; and (iii) interest rate futures to hedge against changes in value of fixed rate securities. The Company did not recognize any net investment gains (losses) representing the ineffective portion of all fair value hedges for the year ended December 31, 2006 and the six months ended December 31, 2005. The Company recognized net investment gains (losses) representing the ineffective portion of all fair value hedges as follows:
PREDECESSOR ------------------------------- SIX MONTHS ENDED YEAR ENDED JUNE 30, DECEMBER 31, ---------------- ------------ 2005 2004 ---------------- ------------ (IN MILLIONS) Changes in the fair value of derivatives.......... $-- $(3) Changes in the fair value of the items hedged..... (1) (1) --- --- Net ineffectiveness of fair value hedging activities...................................... $(1) $(4) === ===
All components of each derivative's gain or loss were included in the assessment of hedge ineffectiveness, except for financial futures where the time value component of the derivative was excluded from the assessment of ineffectiveness. For the year ended December 31, 2006 and the six months ended December 31, 2005, there was no cost of carry for financial futures. For the six months ended June 30, 2005 and the year ended December 31, 2004, the cost of carry for financial futures was ($1) million and ($4) million, respectively. There were no instances in which the Company discontinued fair value hedge accounting due to a hedged firm commitment no longer qualifying as a fair value hedge. CASH FLOW HEDGES The Company designates and accounts for the following as cash flow hedges, when they have met the requirements of SFAS 133: (i) interest rate swaps to convert floating rate investments to fixed rate investments; and (ii) foreign currency swaps to hedge the foreign currency cash flow exposure of foreign currency denominated investments and liabilities. For the year ended December 31, 2006, the six months ended December 31, 2005 and June 30, 2005 and the year ended December 31, 2004, the Company recognized no net investment gains (losses) as the ineffective portion of all cash flow hedges. All components of each derivative's gain or loss were included in the assessment of hedge ineffectiveness. In certain instances, the Company may discontinue cash flow hedge accounting because the forecasted transactions did not occur on the anticipated date or in the additional time period permitted by SFAS 133. For the year ended December 31, 2006, the six months ended December 31, 2005 and June 30, 2005 and the year ended December 31, 2004, there were no instances in which the Company discontinued cash flow hedges. There were no hedged forecasted transactions, other than the receipt or payment of variable interest payments for the year ended December 31, 2006, the six months ended December 31, 2005 and June 30, 2005 and the year ended December 31, 2004. F-40 METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The following table presents the components of other comprehensive income (loss), before income tax, related to cash flow hedges:
PREDECESSOR ------------------------------ SIX MONTHS ENDED YEAR ENDED JUNE 30, DECEMBER 31, ---------------- ------------ 2005 2004 ---------------- ------------ (IN MILLIONS) Other comprehensive income balance at the beginning of the period.................................... $ 2 $ 10 Gains (losses) deferred in other comprehensive income (loss) on the effective portion of cash flow hedges...................................... (3) (14) Amounts reclassified to net investment income...... 1 6 --- ---- Other comprehensive income balance at the end of the period....................................... $-- $ 2 === ====
The Company has not entered into any cash flow hedges since June 30, 2005. NON-QUALIFYING DERIVATIVES AND DERIVATIVES FOR PURPOSES OTHER THAN HEDGING The Company enters into the following derivatives that do not qualify for hedge accounting under SFAS 133 or for purposes other than hedging: (i) interest rate swaps and interest rate futures to economically hedge its exposure to interest rate volatility; (ii) foreign currency forwards and swaps to economically hedge its exposure to adverse movements in exchange rates; (iii) credit default swaps to minimize its exposure to adverse movements in credit; (iv) equity futures, equity index options, and equity variance swaps to economically hedge liabilities embedded in certain variable annuity products; (v) credit default swaps used to synthetically create investments; and (vi) financial forwards to buy and sell securities. Effective at the Acquisition Date, the Company's derivative positions which previously qualified for hedge accounting were dedesignated in accordance with SFAS 133. Such derivative positions were not redesignated and were included with the Company's other non-qualifying derivative positions from the Acquisition Date through December 31, 2006. For the year ended December 31, 2006, the six months ended December 31, 2005 and June 30, 2005 and the year ended December 31, 2004, the Company recognized as net investment gains (losses), excluding embedded derivatives, changes in fair value of ($72) million, ($14) million, $11 million and ($39) million, respectively, related to derivatives that do not qualify for hedge accounting. EMBEDDED DERIVATIVES The Company has certain embedded derivatives which are required to be separated from their host contracts and accounted for as derivatives. These host contracts include guaranteed minimum withdrawal contracts and guaranteed minimum accumulation contracts. The fair value of the Company's embedded derivative assets was $25 million and $0 at December 31, 2006 and 2005, respectively. The fair value of the Company's embedded derivative liabilities was $0 and $22 million at December 31, 2006 and 2005, respectively. The amounts recorded and included in net investment gains (losses) for the year ended December 31, 2006, the six months ended December 31, 2005 and June 30, 2005, and during the year ended December 31, 2004 were gains (losses) of $46 million, $23 million, ($2) million, and $19 million, respectively. CREDIT RISK The Company may be exposed to credit-related losses in the event of nonperformance by counterparties to derivative financial instruments. Generally, the current credit exposure of the Company's derivative contracts is F-41 METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) limited to the fair value at the reporting date. The credit exposure of the Company's derivative transactions is represented by the fair value of contracts with a net positive fair value at the reporting date. The Company manages its credit risk related to over-the-counter derivatives by entering into transactions with creditworthy counterparties, maintaining collateral arrangements and through the use of master agreements that provide for a single net payment to be made by one counterparty to another at each due date and upon termination. Because exchange traded futures are effected through regulated exchanges, and positions are marked to market on a daily basis, the Company has minimal exposure to credit related losses in the event of nonperformance by counterparties to such derivative instruments. The Company enters into various collateral arrangements, which require both the pledging and accepting of collateral in connection with its derivative instruments. As of December 31, 2006 and 2005, the Company was obligated to return cash collateral under its control of $102 million and $108 million, respectively. This unrestricted cash collateral is included in cash and cash equivalents and the obligation to return it is included in payables for collateral under derivative transactions in the consolidated balance sheets. As of December 31, 2006 and 2005, the Company had also accepted collateral consisting of various securities with a fair market value of $6 million and $22 million, respectively, which are held in separate custodial accounts. In addition, the Company has exchange traded futures, which require the pledging of collateral. As of both December 31, 2006 and 2005, the Company pledged collateral of $14 million, which is included in fixed maturity securities. The Company is permitted by contract to sell or repledge this collateral, but as of December 31, 2006 and 2005, none of the collateral had been sold or repledged. F-42 METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 5. DEFERRED POLICY ACQUISITION COSTS AND VALUE OF BUSINESS ACQUIRED Information regarding DAC and VOBA is as follows:
DAC VOBA TOTAL ------- ------ ------ (IN MILLIONS) Balance at January 1, 2004 (PREDECESSOR)........... $ 1,279 $ 12 $1,291 Capitalizations.................................. 469 -- 469 Less: Amortization............................... 226 1 227 ------- ------ ------ Balance at December 31, 2004 (PREDECESSOR)......... 1,522 11 1,533 Capitalizations.................................. 222 -- 222 Less: Amortization............................... 132 1 133 ------- ------ ------ Balance at June 30, 2005 (PREDECESSOR)............. 1,612 10 1,622 ------- ------ ------ Effect of purchase accounting push down (See Note 2)............................................... (1,612) 1,666 54 ------- ------ ------ Balance at July 1, 2005 (SUCCESSOR)................ -- 1,676 1,676 ------- ------ ------ Capitalizations.................................. 164 -- 164 ------- ------ ------ Less: Amortization related to: Net investment gains (losses)................. (3) (7) (10) Unrealized investment gains (losses).......... (17) (28) (45) Other expenses................................ 12 106 118 ------- ------ ------ Total amortization.......................... (8) 71 63 ------- ------ ------ Balance at December 31, 2005 (SUCCESSOR)........... 172 1,605 1,777 ------- ------ ------ Capitalizations.................................. 135 -- 135 Less: Amortization related to: Net investment gains (losses)................. (3) (33) (36) Unrealized investment gains (losses).......... 1 11 12 Other expenses................................ 53 171 224 ------- ------ ------ Total amortization.......................... 51 149 200 ------- ------ ------ Balance at December 31, 2006 (SUCCESSOR)........... $ 256 $1,456 $1,712 ======= ====== ======
The estimated future amortization expense allocated to other expenses for the next five years for VOBA is $188 million in 2007, $169 million in 2008, $156 million in 2009, $139 million in 2010 and $120 million in 2011. F-43 METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 6. GOODWILL Goodwill is the excess of cost over the fair value of net assets acquired. Information regarding goodwill is as follows:
SUCCESSOR ----------- DECEMBER 31, ----------- 2006 2005 ---- ---- (IN MILLIONS) Balance at January 1,....................................... $243 $ -- Effect of purchase accounting push down (See Note 2)........ (4) 243 ---- ---- Balance at December 31,..................................... $239 $243 ==== ====
7. INSURANCE VALUE OF DISTRIBUTION AGREEMENTS Information regarding the value of distribution agreements ("VODA"), which is reported in other assets, is as follows:
SUCCESSOR PREDECESSOR ------------------------------- ------------------------------- YEAR ENDED SIX MONTHS ENDED SIX MONTHS ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, JUNE 30, DECEMBER 31, ------------ ---------------- ---------------- ------------ 2006 2005 2005 2004 ------------ ---------------- ---------------- ------------ (IN MILLIONS) Balance at beginning of period....................... $ 8 $-- $-- $-- Effect of purchase accounting push down (See Note 2)....... -- 8 -- -- Amortization................... (1) -- -- -- --- --- --- --- Balance at end of period....... $ 7 $ 8 $-- $-- === === === ===
The estimated future amortization expense allocated to other expenses for VODA is $1 million per year for each of the years from 2007 to 2011. SALES INDUCEMENTS Information regarding deferred sales inducements, which are reported in other assets, is as follows:
SUCCESSOR PREDECESSOR ------------------------------- ------------------------------- YEAR ENDED SIX MONTHS ENDED SIX MONTHS ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, JUNE 30, DECEMBER 31, ------------ ---------------- ---------------- ------------ 2006 2005 2005 2004 ------------ ---------------- ---------------- ------------ (IN MILLIONS) Balance at end of previous period....................... $ 8 $ 36 $25 $-- Effect of purchase accounting push down (See Note 2)....... -- (36) -- -- --- ---- --- --- Balance at beginning of period....................... 8 -- 25 -- Capitalization................. 9 8 12 25 Amortization................... (1) -- (1) -- --- ---- --- --- Balance at end of period....... $16 $ 8 $36 $25 === ==== === ===
F-44 METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) SEPARATE ACCOUNTS Separate account assets and liabilities include pass-through separate accounts totaling $12.2 billion at both December 31, 2006 and 2005 for which the policyholder assumes all investment risk. 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 $246 million, $124 million, $95 million and $200 million for the year ended December 31, 2006, the six months ended December 31, 2005 and June 30, 2005, and the year ended December 31, 2004, respectively. For the year ended December 31, 2006, the six months ended December 31, 2005 and June 30, 2005 and the year ended December 31, 2004, there were no investment gains (losses) on transfers of assets from the general account to the separate accounts. GUARANTEES The Company issues annuity contracts which may include contractual guarantees to the contractholder for the highest contract value on a specified anniversary date minus any withdrawals following the contract anniversary, or total deposits made to the contract less any partial withdrawals plus a minimum return ("anniversary contract value" or "minimum return"). The Company also issues universal and variable life contracts where the Company contractually guarantees to the contractholder a secondary guarantee. Information regarding the types of guarantees relating to annuity contracts and universal and variable life contracts is as follows:
SUCCESSOR --------------------- DECEMBER 31, --------------------- 2006 2005 --------- --------- IN THE EVENT OF DEATH --------------------- (IN MILLIONS) ANNUITY CONTRACTS(1) ANNIVERSARY CONTRACT VALUE OR MINIMUM RETURN Separate account value................................ $ 14,156 $ 14,507 Net amount at risk(2)................................. $ 440(3)$ 569(3) Average attained age of contractholders............... 64 years 63 years SUCCESSOR --------------------- DECEMBER 31, --------------------- 2006 2005 --------- --------- SECONDARY GUARANTEES --------------------- (IN MILLIONS) UNIVERSAL AND VARIABLE LIFE CONTRACTS(1) Account value (General and Separate account).......... $ 1,807 $ 1,694 Net amount at risk(2)................................. $ 21,459(3)$ 21,719(3) Average attained age of policyholders................. 59 years 57 years
- -------- (1) The Company's annuity and life contracts with guarantees may offer more than one type of guarantee in each contract. Therefore, the amounts listed above may not be mutually exclusive. (2) The net amount at risk is based on the direct amount at risk (excluding reinsurance). F-45 METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (3) The net amount at risk for guarantees of amounts in the event of death is defined as the current guaranteed minimum death benefit in excess of the current account balance at the balance sheet date. Liabilities incurred, relating to annuity contracts, for guaranteed death benefits were $1 million for the six months ended December 31, 2005. There were no guaranteed death benefits incurred for the six months ended June 30, 2005 or the year ended December 31, 2004. Liabilities incurred, relating to universal and variable life contracts, for secondary guarantees were $13 million for the year ended December 31, 2006, $4 million for each of the six months ended December 31, 2005 and June 30, 2005 and $1 million for the year ended December 31, 2004. Account balances of contracts with insurance guarantees are invested in separate account asset classes as follows:
SUCCESSOR ----------------- DECEMBER 31, ----------------- 2006 2005 ------- ------- (IN MILLIONS) Mutual Fund Groupings Equity................................................ $ 9,336 $ 9,055 Bond.................................................. 940 1,055 Balanced.............................................. 1,070 1,261 Money Market.......................................... 282 286 Specialty............................................. 152 218 ------- ------- Total.............................................. $11,780 $11,875 ======= =======
8. REINSURANCE The Company's life insurance operations participate in reinsurance activities in order to limit losses, minimize exposure to large risks, and provide additional capacity for future growth. The Company has historically reinsured the mortality risk on new individual life insurance policies primarily on an excess of retention basis or a quota share basis. The Company has reinsured up to 90% of the mortality risk for all new individual life insurance policies. This practice was initiated by the Company for different products starting at various points in time between 1997 and 2002. On a case by case basis, the Company may retain up to $5 million per life on single life individual policies and reinsure 100% of amounts in excess of the Company's retention limits. The Company evaluates its reinsurance programs routinely and may increase or decrease its retention at any time. Placement of reinsurance is done primarily on an automatic basis and also on a facultative basis for risks with specific characteristics. In addition to reinsuring mortality risk, as described above, the Company reinsures other mortality and non-mortality risks, and specific coverages. The Company routinely reinsures certain classes of risks in order to limit its exposure to particular travel, avocation and lifestyle hazards. The Company has exposure to catastrophes, which could contribute to significant fluctuations in the Company's results of operations. The Company uses excess of retention and quota share reinsurance arrangements to provide greater diversification of risk and minimize exposure to larger risks. The Company reinsures its business through a diversified group of reinsurers. No single unaffiliated reinsurer has a material obligation to the Company nor is the Company's business substantially dependent upon any reinsurance contracts. The Company is contingently liable with respect to ceded reinsurance should any reinsurer be unable to meet its obligations under these agreements. F-46 METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The Company reinsures the riders containing benefit guarantees related to variable annuities to affiliated and non-affiliated reinsurers. The Company reinsures its risk associated with the secondary death benefit guarantee rider on certain universal life contracts to an affiliate. See Note 14. The amounts in the consolidated statements of income are presented net of reinsurance ceded. Information regarding the effect of reinsurance is as follows:
SUCCESSOR PREDECESSOR ------------------------------- ------------------------------- YEAR ENDED SIX MONTHS ENDED SIX MONTHS ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, JUNE 30, DECEMBER 31, ------------ ---------------- ---------------- ------------ 2006 2005 2005 2004 ------------ ---------------- ---------------- ------------ (IN MILLIONS) Direct premiums.............. $ 79 $ 41 $ 39 $ 74 Reinsurance ceded............ (36) (24) (19) (34) ---- ---- ---- ---- Net premiums earned.......... $ 43 $ 17 $ 20 $ 40 ==== ==== ==== ==== Reinsurance recoverables netted against policyholder benefits and claims........ $169 $ 42 $ 61 $ 95 ==== ==== ==== ====
Reinsurance recoverables, included in premiums and other receivables, were $139 million and $77 million at December 31, 2006 and 2005, respectively. Reinsurance and ceded commissions payables, included in other liabilities, were $16 million and $12 million at December 31, 2006 and 2005, respectively. For the year ended December 31, 2006 and the six months ended December 31, 2005 and June 30, 2005, reinsurance ceded include affiliated transactions of $5 million, $2 million and $3 million, respectively. For the year ended December 31, 2004 there were no affiliated reinsurance transactions. 9. INCOME TAX The provision for income tax from continuing operations is as follows:
SUCCESSOR PREDECESSOR ------------------------------- ------------------------------- YEAR ENDED SIX MONTHS ENDED SIX MONTHS ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, JUNE 30, DECEMBER 31, ------------ ---------------- ---------------- ------------ 2006 2005 2005 2004 ------------ ---------------- ---------------- ------------ (IN MILLIONS) Current Federal.............. $-- $(20) $ 50 $ 96 Deferred Federal............. 74 32 (15) (47) --- ---- ---- ---- Provision for income tax..... $74 $ 12 $ 35 $ 49 === ==== ==== ====
F-47 METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The reconciliation of the income tax provision at the U.S. statutory rate to the provision for income tax as reported for continuing operations is as follows:
SUCCESSOR PREDECESSOR ------------------------------- ------------------------------- YEAR ENDED SIX MONTHS ENDED SIX MONTHS ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, JUNE 30, DECEMBER 31, ------------ ---------------- ---------------- ------------ 2006 2005 2005 2004 ------------ ---------------- ---------------- ------------ (IN MILLIONS) Tax provision at U.S. statutory rate............. $ 89 $ 22 $39 $ 72 Tax effect of: Tax exempt investment income.................. (15) (10) (4) (15) Tax reserve release........ -- -- -- (8) ---- ---- --- ---- Provision for income tax..... $ 74 $ 12 $35 $ 49 ==== ==== === ====
Deferred income tax represents 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:
SUCCESSOR --------------------- DECEMBER 31, --------------------- 2006 2005 ---------- -------- (IN MILLIONS) Deferred income tax assets: Benefit, reinsurance and other reserves......... $ 487 $ 580 Capital loss carryforwards...................... 20 17 Net unrealized investment losses................ 16 22 Other........................................... 8 8 ----- ----- 531 627 ----- ----- Deferred income tax liabilities: DAC and VOBA.................................... (518) (525) Investments..................................... (5) (12) ----- ----- (523) (537) ----- ----- Net deferred income tax asset..................... $ 8 $ 90 ===== =====
At December 31, 2006, the Company has a net deferred income tax asset. If the Company determines that any of its deferred income tax assets will not result in future tax benefits, a valuation allowance must be established for the portion of these assets that are not expected to be realized. Based predominantly upon a review of the Company's anticipated future taxable income, but also including all other available evidence, both positive and negative, the Company's management concluded that it is "more likely than not" that the net deferred income tax assets will be realized. Capital loss carryforwards amount to $59 million at December 31, 2006 and will expire beginning in 2010. The Company files a consolidated tax return with its parent, MICC. Under the Tax Allocation Agreement, the federal income tax will be allocated between the companies on a separate return basis and adjusted for credits and other amounts required by the Tax Allocation Agreement. F-48 METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 10. CONTINGENCIES, COMMITMENTS AND GUARANTEES CONTINGENCIES LITIGATION The Company is a defendant in a number of litigation matters. In some of the matters, large and/or indeterminate amounts, including punitive and treble damages, are sought. Modern pleading practice in the United States permits considerable variation in the assertion of monetary damages or other relief. Jurisdictions may permit claimants not to specify the monetary damages sought or may permit claimants to state only that the amount sought is sufficient to invoke the jurisdiction of the trial court. In addition, jurisdictions may permit plaintiffs to allege monetary damages in amounts well exceeding reasonably possible verdicts in the jurisdiction for similar matters. This variability in pleadings, together with the actual experience of the Company in litigating or resolving through settlement numerous claims over an extended period of time, demonstrate to management that the monetary relief which may be specified in a lawsuit or claim bears little relevance to its merits or disposition value. Thus, unless stated below, the specific monetary relief sought is not noted. Due to the vagaries of litigation, the outcome of a litigation matter and the amount or range of potential loss at particular points in time may normally be inherently impossible to ascertain with any degree of certainty. Inherent uncertainties can include how fact finders will view individually and in their totality documentary evidence, the credibility and effectiveness of witnesses' testimony, and how trial and appellate courts will apply the law in the context of the pleadings or evidence presented, whether by motion practice, or at trial or on appeal. Disposition valuations are also subject to the uncertainty of how opposing parties and their counsel will themselves view the relevant evidence and applicable law. The Company is a party to a number of legal actions and is and/or has been involved in regulatory investigations. Given the inherent unpredictability of these matters, it is difficult to estimate the impact on the Company's consolidated financial position. On a quarterly and yearly basis, the Company reviews relevant information with respect to liabilities for litigation, regulatory investigations and litigation-related contingencies to be reflected in the Company's consolidated financial statements. Unless stated below, estimates of possible additional losses or ranges of loss for particular matters cannot in the ordinary course be made with a reasonable degree of certainty. The limitations of available data and uncertainty regarding numerous variables make it difficult to estimate liabilities. Liabilities are established when it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. It is possible that some of the matters could require the Company to pay damages or make other expenditures or establish accruals in amounts that could not be estimated as of December 31, 2006. Furthermore, it is possible that an adverse outcome in certain of the Company's litigation and regulatory investigations, or the use of different assumptions in the determination of amounts recorded, could have a material effect upon the Company's consolidated net income or cash flows in particular quarterly or annual periods. Macomber, et al. v. Travelers Property Casualty Corp., et al. (Conn. Super. Ct., Hartford, filed April 7, 1999). An amended putative class action complaint was filed against the Company, Travelers Equity Sales, Inc. and certain former affiliates. The amended complaint alleges Travelers Property Casualty Corporation, a former MLAC affiliate, purchased structured settlement annuities from the Company and spent less on the purchase of those structured settlement annuities than agreed with claimants, and that commissions paid to brokers for the structured settlement annuities, including an affiliate of MLAC, were paid in part to Travelers Property Casualty Corporation. On May 26, 2004, the Connecticut Superior Court certified a nationwide class action involving the following claims against the Company: violation of the Connecticut Unfair Trade Practice Statute, unjust enrichment, and civil conspiracy. On June 15, 2004, the defendants appealed the class certification order. In March 2006, the Connecticut Supreme Court reversed the trial court's certification of a class. Plaintiff may seek to file another motion for class F-49 METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) certification. Defendants have moved for summary judgment. The Company is continuing to vigorously defend against the claims in this matter. Regulatory bodies have contacted the Company and have requested information relating to various regulatory issues regarding mutual funds and variable insurance products, including the marketing of such products. The Company believes that many of these inquiries are similar to those made to many financial services companies as part of industry-wide investigations by various regulatory agencies. The Company is fully cooperating with regard to these information requests and investigations. The Company at the present time is not aware of any systemic problems with respect to such matters that may have a material adverse effect on the Company's consolidated financial position. In addition, the Company is a defendant or co-defendant in various other litigation matters in the normal course of business. These may include civil actions, arbitration proceedings and other matters arising in the normal course of business out of activities as an insurance company or otherwise. Further, state insurance regulatory authorities and other federal and state authorities may make inquiries and conduct investigations concerning the Company's compliance with applicable insurance and other laws and regulations. In the opinion of the Company's management, the ultimate resolution of these legal and regulatory proceedings would not be likely to have a material adverse effect on the Company's consolidated financial position or liquidity, but, if involving monetary liability, may be material to the Company's operating results for any particular period. INSOLVENCY ASSESSMENTS Most of the jurisdictions in which the Company is admitted to transact business require life insurers doing business within the jurisdiction to participate in guaranty associations, which are organized to pay contractual benefits owed pursuant to insurance policies issued by impaired, insolvent or failed life insurers. These associations levy assessments, up to prescribed limits, on all member insurers in a particular state on the basis of the proportionate share of the premiums written by member insurers in the lines of business in which the impaired, insolvent or failed insurer engaged. Some states permit member insurers to recover assessments paid through full or partial premium tax offsets. Assets and liabilities held for insolvency assessments are as follows:
SUCCESSOR ------------- DECEMBER 31, ------------- 2006 2005 ---- ---- (IN MILLIONS) Other Assets: Premium tax offset for future undiscounted assessments..... $ 1 $1 Premium tax offsets currently available for paid assessments............................................. -- 1 --- -- $ 1 $2 === == Liability: Insolvency assessments..................................... $ 1 $1 === ==
Assessments levied against the Company were less than $1 million for the year ended December 31, 2006, the six months ended December 31, 2005 and June 30, 2005 and the year ended December 31, 2004. F-50 METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) COMMITMENTS COMMITMENTS TO FUND PARTNERSHIP INVESTMENTS The Company makes commitments to fund partnership investments in the normal course of business. The amounts of these unfunded commitments were $46 million and $15 million at December 31, 2006 and 2005, respectively. The Company anticipates that these amounts will be invested in partnerships over the next five years. MORTGAGE LOAN COMMITMENTS The Company commits to lend funds under mortgage loan commitments. The amounts of these mortgage loan commitments were $60 million and $20 million at December 31, 2006 and 2005, respectively. COMMITMENTS TO FUND BANK CREDIT FACILITIES The Company commits to lend funds under bank credit facilities. The amount of these unfunded commitments was $24 million at December 31, 2006. The Company did not have any unfunded commitments related to bank credit facilities at December 31, 2005. GUARANTEES In the normal course of its business, the Company has provided certain indemnities, guarantees and commitments to third parties pursuant to which it may be required to make payments now or in the future. In the context of acquisition, disposition, investment and other transactions, the Company has provided indemnities and guarantees, including those related to tax, environmental and other specific liabilities, and other indemnities and guarantees that are triggered by, among other things, breaches of representations, warranties or covenants provided by the Company. In addition, in the normal course of business, the Company provides indemnifications to counterparties in contracts with triggers similar to the foregoing, as well as for certain other liabilities, such as third party lawsuits. These obligations are often subject to time limitations that vary in duration, including contractual limitations and those that arise by operation of law, such as applicable statutes of limitation. In some cases, the maximum potential obligation under the indemnities and guarantees is subject to a contractual limitation, while in other cases such limitations are not specified or applicable. Since certain of these obligations are not subject to limitations, the Company does not believe that it is possible to determine the maximum potential amount that could become due under these guarantees in the future. In addition, the Company indemnifies its directors and officers as provided in its charters and by-laws. Also, the Company indemnifies its agents for liabilities incurred as a result of their representation of the Company's interests. Since these indemnities are generally not subject to limitation with respect to duration or amount, the Company does not believe that it is possible to determine the maximum potential amount that could become due under these indemnities in the future. The Company's recorded liability at December 31, 2006 and 2005 for indemnities, guarantees and commitments is insignificant. 11. EQUITY DIVIDEND RESTRICTIONS Under Connecticut State Insurance Law, the Company is permitted, without prior insurance regulatory clearance, to pay stockholder dividends to its parent as long as the amount of such dividends, when aggregated with all other dividends in the preceding 12 months, does not exceed the greater of (i) 10% of its surplus to policyholders as of the end of the immediately preceding calendar year; or (ii) its statutory net gain from operations for the F-51 METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) immediately preceding calendar year. The Company will be permitted to pay a cash dividend in excess of the greater of such two amounts only if it files notice of its declaration of such a dividend and the amount thereof with the Connecticut Commissioner of Insurance (the "Commissioner") and the Commissioner does not disapprove the payment within 30 days after notice. In addition, any dividend that exceeds earned surplus (unassigned funds, reduced by 25% of unrealized appreciation in value or revaluation of assets or unrealized profits on investments) as of the last filed annual statutory statement requires insurance regulatory approval. Under Connecticut State Insurance Law, the Commissioner has broad discretion in determining whether the financial condition of a stock life insurance company would support the payment of such dividends to its stockholders. The Connecticut State Insurance Law requires prior approval for any dividends for a period of two years following a change in control. As a result of the acquisition on July 1, 2005, under Connecticut State Insurance Law all dividend payments by the Company through June 30, 2007 require prior approval of the Commissioner. The Company did not pay any dividends in 2006. However, since the Company's statutory unassigned funds surplus is negative, the Company cannot pay any dividends without prior approval of the Commissioner. CAPITAL CONTRIBUTIONS In 2005, the Company had an increase of $4 million in paid-in capital due to an assumption of all tax liabilities for potential audit liabilities for federal and state income taxes and other taxes with respect to pre-Acquisition tax periods. The Acquisition Agreement between MetLife and Citigroup, dated as of January 31, 2005, provides for an indemnification by Citigroup to MetLife for specified tax liabilities incurred prior to the Acquisition Date. During 2004, the Company received a capital contribution of $400 million from its parent, MICC. STATUTORY EQUITY AND INCOME The Connecticut Insurance Department (the "Department") imposes minimum risk-based capital ("RBC") requirements that were developed by the National Association of Insurance Commissioners ("NAIC"). The formulas for determining the amount of RBC specify various weighting factors that are applied to financial balances or various levels of activity based on the perceived degree of risk. Regulatory compliance is determined by a ratio of total adjusted capital, as defined by the NAIC, to authorized control level RBC, as defined by the NAIC. Companies below specific trigger points or ratios are classified within certain levels, each of which requires specified corrective action. MetLife Annuity exceeded the minimum RBC requirements for all periods presented herein. The NAIC adopted the Codification of Statutory Accounting Principles ("Codification") in 2001. Codification was intended to standardize regulatory accounting and reporting to state insurance departments. However, statutory accounting principles continue to be established by individual state laws and permitted practices. The Department has adopted Codification, with certain modifications, for the preparation of statutory financial statements of insurance companies domiciled in Connecticut. Modifications by the Department may impact the effect of Codification on statutory capital and surplus of the Company. Statutory accounting principles differ from GAAP primarily by charging policy acquisition costs to expense as incurred, establishing future policy benefit liabilities using different actuarial assumptions and valuing securities on a different basis. In addition, certain assets are not admitted under statutory accounting principles and are charged directly to surplus. The most significant asset not admitted by the Company is the net deferred tax assets resulting from temporary differences between statutory accounting principles basis and tax basis not expected to reverse and become recoverable within a year. Further, statutory accounting principles do not give recognition to amounts "pushed down" as a result of the Acquisition. F-52 METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Statutory net income (loss) of MLAC, a Connecticut domiciled insurer, was $107 million, ($97) million and ($211) million for the years ended December 31, 2006, 2005 and 2004, respectively. Statutory capital and surplus, as filed with the Department, was $740 million and $765 million at December 31, 2006 and 2005, respectively. OTHER COMPREHENSIVE INCOME (LOSS) The following table sets forth the reclassification adjustments required for the year ended December 31, 2006, the six months ended December 31, 2005 and June 30, 2005 and the year ended December 31, 2004, in other comprehensive income (loss) 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 period:
SUCCESSOR PREDECESSOR ------------------------------ ------------------------------ YEAR ENDED SIX MONTHS ENDED SIX MONTHS ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, JUNE 30, DECEMBER 31, ------------ ---------------- ---------------- ------------ 2006 2005 2005 2004 ------------ ---------------- ---------------- ------------ (IN MILLIONS) Holding gains (losses) on investments arising during the period.................... $ 98 $(75) $(5) $ 18 Income tax effect of holding gains (losses)............................. (34) 26 1 (6) Reclassification adjustments: Recognized holding gains (losses) included in current period income............................ (68) (46) 3 6 Amortization of premiums and accretion of discounts associated with investments....................... -- 12 (8) (18) Income tax effect of reclassification adjustments....................... 24 12 2 4 Allocation of holding gains (losses) on investments relating to other policyholder amounts................. (12) 45 -- -- Income tax effect of allocation of holding gains (losses) to other policyholder amounts.............................. 4 (16) -- -- ---- ---- --- ---- Other comprehensive income (loss).......................... $ 12 $(42) $(7) $ 4 ==== ==== === ====
12. OTHER EXPENSES Information on other expenses is as follows:
SUCCESSOR PREDECESSOR ------------------------------- ------------------------------- YEAR ENDED SIX MONTHS ENDED SIX MONTHS ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, JUNE 30, DECEMBER 31, ------------ ---------------- ---------------- ------------ 2006 2005 2005 2004 ------------ ---------------- ---------------- ------------ (IN MILLIONS) Compensation......................... $ 47 $ 27 $ 19 $ 45 Commissions.......................... 159 156 180 373 Amortization of DAC and VOBA......... 188 108 133 227 Capitalization of DAC................ (135) (164) (222) (469) Rent, net of sublease income......... 2 2 1 4 Other................................ 45 36 73 123 ----- ----- ----- ----- Total other expenses............... $ 306 $ 165 $ 184 $ 303 ===== ===== ===== =====
F-53 METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 13. FAIR VALUE INFORMATION The estimated fair value 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. Amounts related to the Company's financial instruments are as follows:
SUCCESSOR ---------------------------------- NOTIONAL CARRYING ESTIMATED AMOUNT VALUE FAIR VALUE -------- -------- ---------- (IN MILLIONS) DECEMBER 31, 2006 Assets: Fixed maturity securities............................ $5,889 $5,889 Equity securities.................................... $ 57 $ 57 Mortgage loans on real estate........................ $ 295 $ 289 Policy loans......................................... $ 55 $ 55 Short-term investments............................... $ 95 $ 95 Cash and cash equivalents............................ $ 230 $ 230 Accrued investment income............................ $ 68 $ 68 Mortgage loan commitments............................ $60 $ -- $ -- Commitments to fund bank credit facilities........... $24 $ -- $ -- Liabilities: Policyholder account balances........................ $2,740 $2,457 Payables for collateral under derivative transactions...................................... $ 102 $ 102
SUCCESSOR ---------------------------------- NOTIONAL CARRYING ESTIMATED AMOUNT VALUE FAIR VALUE -------- -------- ---------- (IN MILLIONS) DECEMBER 31, 2005 Assets: Fixed maturity securities............................ $6,055 $6,055 Equity securities.................................... $ 4 $ 4 Mortgage loans on real estate........................ $ 258 $ 258 Policy loans......................................... $ 37 $ 37 Short-term investments............................... $ 57 $ 57 Cash and cash equivalents............................ $ 233 $ 233 Accrued investment income............................ $ 69 $ 69 Mortgage loan commitments............................ $20 $ -- $ -- Liabilities: Policyholder account balances........................ $3,185 $2,972 Payables for collateral under derivative transactions...................................... $ 108 $ 108
F-54 METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The methods and assumptions used to estimate the fair value of financial instruments are summarized as follows: FIXED MATURITY SECURITIES AND EQUITY SECURITIES The fair values of publicly held fixed maturity securities and publicly held equity securities are based on quoted market prices or estimates from independent pricing services. However, in cases where quoted market prices are not available, such as for private fixed maturity securities, fair values are estimated using present value or valuation techniques. The determination of fair values is based on: (i) valuation methodologies; (ii) securities the Company deems to be comparable; and (iii) assumptions deemed appropriate given the circumstances. The fair value estimates are based on available market information and judgments about financial instruments, including estimates of the timing and amounts of expected future cash flows and the credit standing of the issuer or counterparty. Factors considered in estimating fair value include; coupon rate, maturity, estimated duration, call provisions, sinking fund requirements, credit rating, industry sector of the issuer, and quoted market prices of comparable securities. MORTGAGE LOANS ON REAL ESTATE, MORTGAGE LOAN COMMITMENTS AND COMMITMENTS TO FUND BANK CREDIT FACILITIES 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 and commitments to fund bank credit facilities, the estimated fair value is the net premium or discount of the commitments. POLICY LOANS The carrying values for policy loans approximate fair value. CASH AND CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS The carrying values for cash and cash equivalents and short-term investments approximated fair values due to the short-term maturities of these instruments. ACCRUED INVESTMENT INCOME The carrying value for accrued investment income approximates fair value. POLICYHOLDER ACCOUNT BALANCES The fair value of PABs which have final contractual maturities are estimated by discounting expected future cash flows based upon interest rates currently being offered for similar contracts with maturities consistent with those remaining for the agreements being valued. The fair value of PABs without final contractual maturities are assumed to equal their current net surrender value. PAYABLES FOR COLLATERAL UNDER DERIVATIVE TRANSACTIONS The carrying value for payables for collateral under derivative transactions approximate fair value. DERIVATIVE FINANCIAL INSTRUMENTS The fair value of derivative financial instruments, including financial futures, financial forwards, interest rate, credit default and foreign currency swaps, foreign currency forwards, and options are based upon quotations obtained from dealers or other reliable sources. See Note 4 for derivative fair value disclosures. F-55 METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 14. RELATED PARTY TRANSACTIONS In 2006, the Company entered into a Master Service Agreement with Metropolitan Life Insurance Company ("Metropolitan Life"), a wholly-owned subsidiary of MetLife, who provides administrative, accounting, legal and similar services to the Company. Metropolitan Life charged the Company $5 million, included in other expenses, for services performed under the Master Service Agreement for the year ended December 31, 2006. The Company entered into a Service Agreement with MetLife Group, Inc. ("MetLife Group"), a wholly-owned subsidiary of MetLife under which MetLife Group provides personnel services, as needed, to support the activities of the Company. MetLife Group charged the Company $28 million, included in other expenses, for services performed under the Service Agreement for the year ended December 31, 2006. There were no charges for the six months ended December 31, 2005. At December 31, 2006 and 2005, the Company had receivables from MICC of $13 million and $20 million, respectively. The Company had receivables from other affiliates of $4 million and payables to other affiliates of $2 million at December 31, 2006 and 2005, respectively, excluding affiliated reinsurance balances discussed below. Since the Company is a member of a controlled group of affiliate companies, its results may not be indicative of those of a stand-alone entity. As of December 31, 2006 and 2005, the Company held $89 million and $16 million, respectively, of its total invested assets in the MetLife Money Market Pool which is an affiliated partnership. These amounts are included in short- term investments. In the normal course of business, the Company transfers fixed maturity securities to affiliates and receives other fixed maturity securities from affiliates. The Company transferred invested assets to affiliates with both an amortized cost and fair market value of $15 million for the year ended December 31, 2006. The Company did not transfer assets to affiliates for the six months ended December 31, 2005. The realized capital losses recognized on these transfers were less than $1 million for the year ended December 31, 2006. The Company received invested assets from affiliates with a fair market value of $13 million for the year ended December 31, 2006. The Company did not receive transfers of assets from affiliates for the six months ended December 31, 2005. The Company also has reinsurance agreements with MetLife and certain of its subsidiaries, including Reinsurance Group of America, Incorporated ("RGA"), MetLife Reinsurance Company of South Carolina ("MRSC"), and Exeter Reassurance Company, Ltd. ("Exeter"). As of December 31, 2006, the Company had reinsurance related assets and liabilities from these agreements totaling $108 million and $12 million, respectively. Prior-year comparable assets and liabilities were $78 million and $47 million, respectively. The following tables reflect related party reinsurance information:
SUCCESSOR ------------------------------- YEAR ENDED SIX MONTHS ENDED DECEMBER 31, DECEMBER 31, ------------ ---------------- 2006 2005 ------------ ---------------- (IN MILLIONS) Ceded premiums.................................... $ 5 $ 2 Ceded fees, included in universal life and investment-type product policy fees............. 22 19 Ceded benefits, included in policyholder benefits and claims...................................... 38 39 Ceded fees, included in other expenses............ 37 12 ---- --- Total ceded..................................... $102 $72 ==== ===
F-56 METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SUCCESSOR ----------- DECEMBER 31, ----------- 2006 2005 ---- ---- (IN MILLIONS) Reinsurance recoverables, included in premiums and other receivables................................................ $108 $78 Ceded balances payable, included in other liabilities........ $ 12 $47
Prior to the Acquisition, the Company had related party transactions with its parent and/or affiliates. These transactions are described as follows: In December 2004, MLAC entered into a reinsurance agreement with MRSC related to guarantee features included in certain of their universal life and variable universal life products. All information subsequent to the Acquisition is included in the tables above. Fees associated with this agreement, included within other expenses, were $22 million for the six months ended June 30, 2005. In addition, MLAC's individual insurance mortality risk is reinsured, in part, to RGA, an affiliate subsequent to the Acquisition Date. All information subsequent to the Acquisition is included in the tables above. Ceded premiums were $3 million for the six months ended June 30, 2005. Ceded fees, included within universal life and investment-type product policy fees, were $7 million for the six months ended June 30, 2005. Ceded benefits, included within policyholder benefits and claims, were $5 million for the six months ended June 30, 2005. At June 30, 2005, MLAC had investments in Tribeca Citigroup Investments Ltd. ("Tribeca"), an affiliate of the Company, in the amount of $10 million. Income (loss) of ($1) million and $1 million was recognized on these investments in the six months ended June 30, 2005 and the year ended December 31, 2004, respectively. In July 2005, MLAC sold its investment in Tribeca. Citigroup and certain of its subsidiaries provided investment management and accounting services, payroll, internal auditing, benefit management and administration, property management and investment technology services to the Company. The Company paid MICC an insignificant amount for both the six months ended June 30, 2005 and the year ended December 31, 2004 for these services. In the ordinary course of business, the Company distributed fixed and variable annuity products through its former affiliate Smith Barney. Premiums and deposits related to these products were $506 million in 2004. The Company also marketed term and universal life products through Smith Barney. Premiums related to such products were $108 million in 2004. Commissions and fees paid to Smith Barney were $50 million in 2004. The Company also distributed deferred annuity products through its former affiliates, Primerica Financial Services, Inc. ("PFS"), CitiStreet Retirement Services, a division of CitiStreet LLC, (together with its subsidiaries, "CitiStreet") and Citibank, N.A. ("Citibank"). Deposits received from PFS were $636 million and commissions and fees paid to PFS were $48 million for the year ended December 31, 2004. Deposits received from CitiStreet were $116 million and related commissions and fees paid to CitiStreet were $3 million for the year ended December 31, 2004. Deposits received from Citibank were $112 million and commissions and fees paid to Citibank were $13 million for the year ended December 31, 2004. The leasing functions for the Company were administered by a Citigroup subsidiary. Rent expense related to leases was shared by the companies on a cost allocation method based generally on estimated usage by department. The Company's rent expense was insignificant in 2004. F-57 METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut) SCHEDULE I CONSOLIDATED SUMMARY OF INVESTMENTS -- OTHER THAN INVESTMENTS IN RELATED PARTIES DECEMBER 31, 2006 (IN MILLIONS)
SUCCESSOR ----------------------------------------- COST OR AMOUNT AT AMORTIZED ESTIMATED WHICH SHOWN ON COST(1) FAIR VALUE BALANCE SHEET --------- ---------- -------------- TYPE OF INVESTMENTS Fixed maturity securities: Bonds: U.S. Treasury/agency securities.............. $ 801 $ 783 $ 783 State and political subdivision securities... 91 86 86 Foreign government securities................ 69 73 73 Public utilities............................. 276 271 271 All other corporate bonds.................... 2,959 2,907 2,907 Mortgage-backed and asset-backed securities..... 1,572 1,573 1,573 Redeemable preferred stock...................... 199 196 196 ------ ------ ------ Total fixed maturity securities.............. 5,967 5,889 5,889 ------ ------ ------ Equity securities: Common stock: Industrial, miscellaneous and all other...... 1 1 1 Non-redeemable preferred stock.................. 55 56 56 ------ ------ ------ Total equity securities...................... 56 57 57 ------ ------ ------ Mortgage loans on real estate..................... 295 295 Policy loans...................................... 55 55 Real estate joint ventures........................ 2 2 Other limited partnership interests............... 68 68 Short-term investments............................ 95 95 Other invested assets............................. 341 341 ------ ------ Total investments............................... $6,879 $6,802 ====== ======
- -------- (1) Cost for fixed maturity securities and mortgage loans on real estate represents original cost reduced by repayments, net valuation allowances and writedowns from other-than-temporary declines in value and adjusted for amortization of premiums or accretion of discount; for equity securities, cost represents original cost reduced by writedowns from other-than-temporary declines in value; cost for real estate joint ventures and other limited partnership interests represents original cost reduced for other-than-temporary impairments or original cost adjusted for equity in earnings and distributions. F-58 METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut) SCHEDULE III CONSOLIDATED SUPPLEMENTARY INSURANCE INFORMATION AS OF DECEMBER 31, 2006 AND 2005 (IN MILLIONS)
DAC FUTURE POLICY POLICYHOLDER AND BENEFITS AND OTHER ACCOUNT UNEARNED VOBA POLICYHOLDER FUNDS BALANCES REVENUE(1) ------ ------------------ ------------ ---------- 2006 (SUCCESSOR).......................... $1,712 $1,861 $5,377 $45 ====== ====== ====== === 2005 (SUCCESSOR).......................... $1,777 $1,808 $5,688 $18 ====== ====== ====== ===
- -------- (1) Amounts are included within the future policy benefits and other policyholder funds column. F-59 METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut) SCHEDULE III CONSOLIDATED SUPPLEMENTARY INSURANCE INFORMATION FOR THE YEAR ENDED DECEMBER 31, 2006 AND FOR THE SIX MONTHS ENDED DECEMBER 31, 2005 AND JUNE 30, 2005 AND FOR THE YEAR ENDED DECEMBER 31, 2004 (IN MILLIONS)
PREMIUM POLICYHOLDER AMORTIZATION OF REVENUE NET BENEFITS DAC AND VOBA OTHER PREMIUMS AND POLICY INVESTMENT AND INTEREST CHARGED TO OPERATING WRITTEN CHARGES INCOME CREDITED OTHER EXPENSES EXPENSES(1) (EXCLUDING LIFE) ---------- ---------- ------------ --------------- ----------- ---------------- For the Year Ended December 31, 2006 (SUCCESSOR)..... $526 $361 $271 $188 $118 $-- ==== ==== ==== ==== ==== === For the Six Months Ended December 31, 2005 (SUCCESSOR).............. $250 $167 $166 $108 $ 57 $-- ==== ==== ==== ==== ==== === For the Six Months Ended June 30, 2005 (PREDECESSOR)............ $241 $223 $175 $133 $ 51 $ 4 ==== ==== ==== ==== ==== === For the Year Ended December 31, 2004 (PREDECESSOR)... $411 $389 $326 $227 $ 76 $ 6 ==== ==== ==== ==== ==== ===
- -------- (1) Includes other expenses excluding amortization of DAC and VOBA charged to other expenses. F-60 METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut) SCHEDULE IV CONSOLIDATED REINSURANCE AS OF DECEMBER 31, 2006 AND 2005 AND FOR THE YEAR ENDED DECEMBER 31, 2006 AND FOR THE SIX MONTHS ENDED DECEMBER 31, 2005 AND JUNE 30, 2005 AND FOR THE YEAR ENDED DECEMBER 31, 2004 (IN MILLIONS)
% AMOUNT GROSS NET ASSUMED AMOUNT CEDED ASSUMED AMOUNT TO NET ------- ------- ------- ------- -------- AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2006 (SUCCESSOR) Life insurance in-force..................... $63,138 $47,897 $-- $15,241 --% ======= ======= === ======= Insurance premium........................... $ 79 $ 36 $-- $ 43 --% ======= ======= === ======= AS OF AND FOR THE SIX MONTHS ENDED DECEMBER 31, 2005 (SUCCESSOR) Life insurance in-force..................... $63,023 $48,618 $-- $14,405 --% ======= ======= === ======= Insurance premium........................... $ 41 $ 24 $-- $ 17 --% ======= ======= === ======= FOR THE SIX MONTHS ENDED JUNE 30, 2005 (PREDECESSOR) Insurance premium........................... $ 39 $ 19 $-- $ 20 --% ======= ======= === ======= AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2004 (PREDECESSOR) Life insurance in-force..................... $54,886 $44,286 $-- $10,600 --% ======= ======= === ======= Insurance premium........................... $ 74 $ 34 $-- $ 40 --% ======= ======= === =======
For the year ended December 31, 2006, and the six months ended December 31, 2005 and June 30, 2005, reinsurance ceded include affiliated transactions of $5 million, $2 million and $3 million, respectively. For the year ended December 31, 2004, there were no affiliated reinsurance transactions. F-61 PRIMELITE II STATEMENT OF ADDITIONAL INFORMATION METLIFE OF CT SEPARATE ACCOUNT PF II FOR VARIABLE ANNUITIES INDIVIDUAL VARIABLE ANNUITY CONTRACT ISSUED BY METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT ONE CITYPLACE HARTFORD, CONNECTICUT 06103-3415 MLAC-BOOK-37 APRIL 30, 2007 PART C OTHER INFORMATION ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS (a) The financial statements of the Registrant and the report of Independent Registered Public Accounting Firm thereto are contained in the Registrant's Annual Report and are included in the Statement of Additional Information. The financial statements of the Registrant include: (1) Statement of Assets and Liabilities as of December 31, 2006 (2) Statement of Operations for the year ended December 31, 2006 (3) Statement of Changes in Net Assets for the years ended December 31, 2006 and 2005 (4) Notes to Financial Statements The consolidated financial statements and schedules of MetLife Life and Annuity Company of Connecticut and its subsidiary (formerly The Travelers Life and Annuity Company) and the reports of Independent Registered Public Accounting Firms, are contained in the Statement of Additional Information. The consolidated financial statements of MetLife Life and Annuity Company of Connecticut and subsidiaries include: (1) Consolidated Balance Sheets as of December 31, 2006 and 2005 (2) Consolidated Statements of Income for the year ended December 31, 2006 and the six months ended December 31, 2005 and June 30, 2005 and the year ended December 31, 2004 (3) Consolidated Statements of Stockholder's Equity for the year ended December 31, 2006 and the six months ended December 31, 2005 and June 30, 2005 and the year ended December 31, 2004 (4) Consolidated Statements of Cash Flows for the year ended December 31, 2006 and the six months ended December 31, 2005 and June 30, 2005 and the year ended December 31, 2004 (5) Notes to Consolidated Financial Statements (6) Financial Statement Schedules (b) Exhibits
EXHIBIT NUMBER DESCRIPTION - ------- ----------- 1. Resolution of The Travelers Life and Annuity Company Board of Directors authorizing the establishment of the Registrant. (Incorporated herein by reference to Exhibit 1 to the Registration Statement on Form N-4, File No. 333-32581, filed July 31, 1997.) 2. Not Applicable. 3(a) Distribution and Principal Underwriting Agreement among the Registrant, The Travelers Life and Annuity Company and Travelers Distribution LLC (Incorporated herein by reference to Exhibit 3(a) to the Registration Statement on Form N-4, File No. 333-58809 filed February 26, 2001.) 3(b) Form of Selling Agreement. (Incorporated herein by reference to Exhibit 3(b) to Post-Effective Amendment No. 14 to The Travelers Fund ABD for Variable Annuities to the Registration Statement on Form N-4, File No. 033-65343 filed April 5, 2006.) 3(c) Agreement and Plan of Merger (10-26-06) (MLIDLLC into MLIDC). (Incorporated herein by reference to Exhibit 3(c) to Post-Effective Amendment No. 16 to MetLife of CT Fund ABD II for Variable Annuities to the Registration Statement on Form N-4, File No. 033-65339/811- 07463 filed April 6, 2007.) 3(d) Master Retail Sales Agreement (MLIDC). (Incorporated herein by reference to Exhibit 3(d) to Post-Effective Amendment No. 16 to MetLife of CT Fund ABD II for Variable Annuities to the Registration Statement on Form N-4, File No. 033-65339/811-07463 filed April 6, 2007.) 4(a). Variable Annuity Contract. (Incorporated herein by reference to Exhibit 4 to Pre-Effective Amendment No. 1 to the Registration Statement on Form N-4, File No. 333-72336, filed January 23, 2002.)
EXHIBIT NUMBER DESCRIPTION - ------- ----------- 4(b). Company Name Change Endorsement The Travelers Life and Annuity Company effective May 1, 2006. (Incorporated herein by reference to Exhibit 4(c) to Post-Effective Amendment No. 14 to The Travelers Fund ABD II for Variable Annuities Registration Statement on Form N-4, File No. 033-65339 filed on April 7, 2006.) 5(a). Application. (Incorporated herein by reference to Exhibit 5 to Pre- Effective Amendment No. 1 to the Registration Statement on Form N-4, File No. 333-32581, filed November 4, 1997.) 5(b). Form of Variable Annuity Application. (Incorporated herein by reference to Exhibit 5 to Post-Effective Amendment No. 14 to The Travelers Fund ABD for Variable Annuities to the Registration Statement on Form N-4, File No. 033-65343 filed April 6, 2006.) 6(a) Charter of The Travelers Life and Annuity Company, as amended on April 10, 1990. (Incorporated herein by reference to Exhibit 6(a) to Registration Statement on Form N-4, File No. 33-58131, filed via Edgar on March 17, 1995.) 6(b) By-Laws of The Travelers Life and Annuity Company, as amended on October 20, 1994. (Incorporated herein by reference to Exhibit 6(b) to the Registration Statement on Form N-4, File No. 33-58131, filed via Edgar on March 17, 1995.) 6(c). Certificate of Amendment of the Charter as Amended and Restated of The Travelers Life and Annuity Company effective May 1, 2006. (Incorporated herein by reference to Exhibit 6(c) to Post-Effective Amendment No. 14 to The Travelers Fund ABD II for Variable Annuities Registration Statement on Form N-4, File No. 033-65339 filed April 7, 2006.) 7. Specimen Reinsurance Agreement. (Incorporated herein by reference to Exhibit 7 to Post-Effective Amendment No. 2 the Registration Statement on Form N-4, File No. 333-65942 filed April 15, 2003.) 8(a). Form of Participation Agreements. (Incorporated herein by reference to Exhibit 8 to Post-Effective Amendment No. 8 to the Registration Statement on Form N-4, File No. 333-101778 filed April 21, 2005.) 8(b). Participation Agreement Among Metropolitan Series Fund, Inc., MetLife Advisers, LLC, Metropolitan Life Insurance Company, The Travelers Insurance Company and The Travelers Life and Annuity Company effective November 1, 2005. (Incorporated herein by reference to Exhibit 8(b) to Post-Effective Amendment No. 14 to The Travelers Fund ABD for Variable Annuities Registration Statement on Form N-4, File No. 033-65343 filed April 6, 2006.) 8(c). Participation Agreement Among Met Investors Series Trust, Met Investors Advisory, LLC, MetLife Investors Distribution Company, The Travelers Insurance Company and The Travelers Life and Annuity Company effective November 1, 2005. (Incorporated herein by reference to Exhibit 8(c) to Post-Effective Amendment No. 14 to The Travelers Fund ABD for Variable Annuities Registration Statement on Form N-4, File No. 033-65343 filed April 6, 2006.) 9. Opinion of Counsel as to the legality of securities being registered. (Incorporated herein by reference to Exhibit 9 to Pre-Effective Amendment No. 1 to the Registration Statement on Form N-4, File No. 333-72336, filed January 23, 2002.) 10(a) Consent of KPMG LLP, Independent Registered Public Accounting Firm. Filed herewith. 10(b) Consent of Deloitte & Touche LLP, Independent Registered Public Accounting Firm. Filed herewith. 11. Not applicable. 12. Not applicable. 13. Power of Attorney authorizing Michele H. Abate, John E. Connolly, Jr., James L. Lipscomb, Gina C. Sandonato, Myra L. Saul, and Marie C. Swift to act as signatory for Michael K. Farrell, William J. Mullaney, Lisa M. Weber, Stanley J. Talbi, and Joseph J. Prochaska, Jr. Filed herewith.
ITEM 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR Principal Business Address: MetLife Life and Annuity Company of Connecticut One Cityplace Hartford, CT 06103-3415
NAME AND PRINCIPAL POSITIONS AND OFFICES BUSINESS ADDRESS WITH INSURANCE COMPANY - -------------------------------- --------------------------------------------------------------------- Michael K. Farrell Director and President 10 Park Avenue Morristown, NJ 07962 William J. Mullaney Director 700 Quaker Lane Warrick, RI 02886 Lisa M. Weber Director One MetLife Plaza 27-01 Queens Plaza North Long Island City, New York 11101 Steven A. Kandarian Executive Vice President and Chief Investment Officer 10 Park Avenue Morristown, NJ 07962 James L. Lipscomb Executive Vice President and General Counsel One MetLife Plaza 27-01 Queens Plaza North Long Island City, New York 11101 Joseph J. Prochaska, Jr. Executive Vice President and Chief Accounting Officer One MetLife Plaza 27-01 Queens Plaza North Long Island City, New York 11101 Stanley J. Talbi Executive Vice President and Chief Financial Officer One MetLife Plaza 27-01 Queens Plaza North Long Island City, New York 11101 Gwenn L. Carr Senior Vice President and Secretary One MetLife Plaza 27-01 Queens Plaza North Long Island City, New York 11101 Anthony J. Williamson Senior Vice President and Treasurer One MetLife Plaza 27-01 Queens Plaza North Long Island City, New York 11101 Roberto Baron Vice President and Senior Actuary One MetLife Plaza 27-01 Queens Plaza North Long Island City, New York 11101 S. Peter Headley Vice President and Assistant Secretary 6750 Poplar Avenue Germantown, TN 38138 Daniel D. Jordan Vice President and Assistant Secretary 501 Boylston Street Boston, MA 02116 Bennett Kleinberg Vice President and Actuary 185 Asylum Street Hartford, CT 06103 Paul L. LeClair Vice President and Actuary 501 Boylston Street Boston, MA 02116 Linn K. Richardson Vice President and Actuary 10 Park Avenue Morristown, NJ 07962
NAME AND PRINCIPAL POSITIONS AND OFFICES BUSINESS ADDRESS WITH INSURANCE COMPANY - -------------------------------- --------------------------------------------------------------------- Jonathan L. Rosenthal Vice President and Chief Hedging Officer 10 Park Avenue Morristown, NJ 07962 Jeffrey N. Altman Vice President 10 Park Avenue Morristown, NJ 07962 Steven J. Brash Vice President One MetLife Plaza 27-01 Queens Plaza North Long Island City, New York 11101 William D. Cammarata Vice President 18210 Crane Nest Drive Tampa, FL 33647 Vincent Cirulli Vice President 10 Park Avenue Morristown, NJ 07962 James R. Dingler Vice President 10 Park Avenue Morristown, NJ 07962 Elizabeth M. Forget Vice President 260 Madison Ave New York, NY 10016 Judith A. Gulotta Vice President 10 Park Avenue Morristown, NJ 07962 C. Scott Inglis Vice President 10 Park Avenue Morristown, NJ 07962 Gene L. Lunman Vice President 185 Asylum Street Hartford, CT 06103 Joseph J. Massimo Vice President 18210 Crane Nest Drive Tampa, FL 33647 Daniel A. O'Neill Vice President 10 Park Avenue Morristown, NJ 07962 Mark S. Reilly Vice President 185 Asylum Street Hartford, CT 06103 Mark J. Remington Vice President 185 Asylum Street Hartford, CT 06103 Ragai A. Roushdy Vice President 10 Park Avenue Morristown, NJ 07962 Erik V. Savi Vice President 10 Park Avenue Morristown, NJ 07962
NAME AND PRINCIPAL POSITIONS AND OFFICES BUSINESS ADDRESS WITH INSURANCE COMPANY - -------------------------------- --------------------------------------------------------------------- Kevin M. Thorwarth Vice President 10 Park Avenue Morristown, NJ 07962 Mark. H. Wilsmann Vice President 10 Park Avenue Morristown, NJ 07962
ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR REGISTRANT The Registrant is a separate account of MetLife Life and Annuity Company of Connecticut under Connecticut insurance law. The Depositor is a wholly owned subsidiary of MetLife, Inc., a publicly traded company. No person is controlled by the Registrant. The following outline indicates those entities that are controlled by MetLife, Inc. or are under the common control of MetLife, Inc. ORGANIZATIONAL STRUCTURE OF METLIFE, INC. AND SUBSIDIARIES AS OF DECEMBER 31, 2006 The following is a list of subsidiaries of MetLife, Inc. updated as of December 31, 2006. Those entities which are listed at the left margin (labeled with capital letters) are direct subsidiaries of MetLife, Inc. Unless otherwise indicated, each entity which is indented under another entity is a subsidiary of that other entity and, therefore, an indirect subsidiary of MetLife, Inc. Certain inactive subsidiaries have been omitted from the MetLife, Inc. organizational listing. The voting securities (excluding directors' qualifying shares, (if any)) of the subsidiaries listed are 100% owned by their respective parent corporations, unless otherwise indicated. The jurisdiction of domicile of each subsidiary listed is set forth in the parenthetical following such subsidiary. A. MetLife Group, Inc. (NY) B. MetLife Bank National Association (USA) C. Exeter Reassurance Company, Ltd. (Bermuda) D. MetLife Taiwan Insurance Company Limited (Taiwan) E. Metropolitan Tower Life Insurance Company (DE) 1. TH Tower NGP, LLC (DE) 2. Partners Tower, L.P. (DE) - a 99% limited partnership interest of Partners Tower, L.P. is held by Metropolitan Tower Life Insurance Company and 1% general partnership interest is held by TH Tower NGP, LLC (DE) 3. TH Tower Leasing, LLC (DE) 4. MetLife Reinsurance Company of Charleston (SC) F. MetLife Pensiones S.A. (Mexico)- 97.4738% is owned by Metlife, Inc. and 2.5262% is owned by Metropolitan Asset Management Corporation. G. MetLife Chile Inversiones Limitada (Chile)- 99.9999999% is owned by MetLife, Inc. and 0.0000001% is owned by Natiloportem Holdings, Inc. 1. MetLife Chile Seguros de Vida S.A. (Chile)- 99.99% is owned by MetLife Chile Inversiones Limitada, and 0.01% is owned by MetLife International Holdings, Inc. a) MetLife Chile Administradora de Mutuos Hipotecarios S.A. (Chile)- 99.99% is owned by MetLife Chile Seguros de Vida S.A., and 0.01% is owned by MetLife Chile Inversiones Limitada. H. MetLife Mexico S.A. (Mexico)- 98.70541% is owned by Metlife, Inc., 1.27483% is owned by Metropolitan Asset Management Corporation and 0.01976% is owned by Metlife International Holdings, Inc. 1. MetLife Afore, S.A. de C.V. (Mexico)- 99.99% is owned by MetLife Mexico S.A. (Mexico) and 0.01% is owned by MetLife Pensiones S.A. a) Met1 SIEFORE, S.A. de C.V. (Mexico)- 99.99% is owned by MetLife Afore, S.A. de C.V. and 0.01% is owned by MetLife Mexico S.A. (Mexico) b) Met2 SIEFORE, S.A. de C.V. (Mexico)- 99.99% is owned by MetLife Afore, S.A. de C.V. and 0.01% is owned by MetLife Mexico S.A. (Mexico) c) Met3 SIEFORE, S.A. de C.V. (Mexico)- 99.9% is owned by MetLife Afore, S.A. de C.V. and 0.01% is owned by MetLife Mexico S.A. (Mexico) I. MetLife Mexico Servicios, S.A. de C.V. (Mexico)- 98% is owned by MetLife, Inc. and 2% is owned by MetLife International Holdings, Inc. J. Metropolitan Life Seguros de Vida S.A. (Uruguay) K. MetLife Securities, Inc. (DE) L. Enterprise General Insurance Agency, Inc. (DE) 1. MetLife General Insurance Agency of Texas, Inc. (DE) 2. MetLife General Insurance Agency of Massachusetts, Inc. (MA) 1 M. Metropolitan Property and Casualty Insurance Company (RI) 1. Metropolitan General Insurance Company (RI) 2. Metropolitan Casualty Insurance Company (RI) 3. Metropolitan Direct Property and Casualty Insurance Company (RI) 4. Met P&C Managing General Agency, Inc. (TX) 5. MetLife Auto & Home Insurance Agency, Inc. (RI) 6. Metropolitan Group Property and Casualty Insurance Company (RI) a) Metropolitan Reinsurance Company (U.K.) Limited (United Kingdom) 7. Metropolitan Lloyds, Inc. (TX) a) Metropolitan Lloyds Insurance Company of Texas (TX)- Metropolitan Lloyds Insurance Company of Texas, an affiliated association, provides automobile, homeowner and related insurance for the Texas market. It is an association of individuals designated as underwriters. Metropolitan Lloyds, Inc., a subsidiary of Metropolitan Property and Casualty Insurance Company, serves as the attorney-in-fact and manages the association. 8. Economy Fire & Casualty Company (IL) a) Economy Preferred Insurance Company (IL) b) Economy Premier Assurance Company (IL) N. Cova Corporation (MO) 1. Texas Life Insurance Company (TX) 2. Cova Life Management Company (DE) O. MetLife Investors Insurance Company (MO) P. First MetLife Investors Insurance Company (NY) Q. Walnut Street Securities, Inc. (MO) R. Newbury Insurance Company, Limited (BERMUDA) S. MetLife Investors Group, Inc. (DE) 1. MetLife Investors Distribution Company (MO) 2. Met Investors Advisory, LLC (DE) 3. MetLife Investors Financial Agency, Inc. (TX) 2 T. MetLife International Holdings, Inc. (DE) 1. MetLife Mexico Cares, S.A. de C.V. (Mexico) a) Fundacion MetLife Mexico, A.C. (Mexico) 2. Natiloportem Holdings, Inc. (DE) a) Servicios Administrativos Gen, S.A. de C.V. (Mexico) (1) MLA Comercial, S.A. de C.V. (Mexico) 99% is owned by Servicios Administrativos Gen, S.A. de C.V. and 1% is owned by MetLife Mexico Cares, S.A. de C.V. (2) MLA Servicios, S.A. de C.V. (Mexico) 99% is owned by Servicios Administrativos Gen, S.A. de C.V. and 1% is owned by MetLife Mexico Cares, S.A. de C.V. 3. MetLife India Insurance Company Private Limited (India)- 26% is owned by MetLife International Holdings, Inc. and 74% is owned by third parties. 4. Metropolitan Life Insurance Company of Hong Kong Limited (Hong Kong)- 99.9989% is owned by MetLife International Holdings, Inc. and 0.0011% is owned by Natiloporterm Holdings, Inc. 5. Metropolitan Life Seguros de Retiro S.A. (Argentina)- 95.23% is owned by MetLife International Holdings, Inc. and 4.77% is owned by Natiloportem Holdings, Inc. 6. Metropolitan Life Seguros de Vida S.A. (Argentina)- 95.2499% is owned by MetLife International Holdings, Inc. and 4.7473% is owned by Natiloportem Holdings, Inc. 7. MetLife Insurance Company of Korea Limited (South Korea)- 21.22% of MetLife Insurance Company of Korea Limited is owned by MetLife, Mexico, S.A. and 78.78% is owned by Metlife International Holdings, Inc. 8. Metropolitan Life Seguros e Previdencia Privada S.A. (Brazil)- 91.227896580% is owned by MetLife International Holdings, Inc. and 8.772103054% is owned by MetLife Vida e Previdencia S.A., and 0.000000366% is owned by Natiloportem Holdings, Inc. 9. MetLife Global, Inc. (DE) 10. MetLife Administradora de Fundos Multipatrocinados Ltda (Brazil) - 95.4635% is owned by MetLife International Holdings, Inc. and 4.5364% is owned by Natiloportem Holdings, Inc. 11. MetLife Insurance Limited (United Kingdom) 12. MetLife General Insurance Limited (Australia) 13. MetLife Limited (United Kingdom) 14. MetLife Insurance S.A./NV (Belgium) - 99.9% is owned by MetLife International Holdings, Inc. and 0.1% is owned by third parties. 15. MetLife Services Limited (United Kingdom) 16. Siembra Seguros de Vida S.A. (Argentina) - 97.9327% is owned by MetLife International Holdings, Inc. and 2.0672% is owned by Natiloportem Holdings, Inc. 17. MetLife International Insurance Ltd. (Bermuda) 18. MetLife Insurance Limited (Australia) a) MetLife Insurance and Investment Trust (Australia) b) MetLife Investments Pty Limited (Australia) c) MetLife Trustee Pty Limited (Australia) d) MetLife Services (Singapore) PTE Limited (Australia) 19. Siembra Seguros de Retiro S.A. (Argentina) - 96.8819% is owned by MetLife International Holdings, Inc. and 3.1180% is owned by; Natiloportem Holdings, Inc. 20. Best Market S.A. (Argentina) - 5% of the shares are held by Natiloportem Holdings, Inc., and 94.9999% is owned by MetLife International Holdings Inc. 21. Compania Previsional MetLife S.A. (Brazil) - 95.4635% is owned by MetLife International Holdings, Inc. and 4.5364% is owned by Natiloportem Holdings, Inc. (a) Met AFJP S.A. (Argentina) - 75.4088% of the shares of Met AFJP S.A. are held by Compania Previsional MetLife SA, 19.5912% is owned by Metropolitan Life Seguros de Vida SA, 3.9689% is held by Natiloportem Holdings, Inc., and 1.0310% is held by Metropolitan Life Seguros de Retiro SA. 22. MetLife Worldwide Holdings, Inc. (DE) a) MetLife Towarzystwo Ubezpieczen na Zycie S.A. (Poland) b) MetLife Reinsurance (Bermuda) Ltd. (Bermuda) c) MetLife Direct Co., Ltd. (Japan) d) MetLife Vida e Previdencia S.A. (Brazil) U. Metropolitan Life Insurance Company (NY) 1. 334 Madison Euro Investments, Inc. (DE) a) Park Twenty Three Investments Company (United Kingdom)- 1% voting control of Park Twenty Three Investments Company is held by St. James Fleet Investments Two Limited. (1) Convent Station Euro Investments Four Company (United Kingdom)- 1% voting control of Convent Station Euro Investments Four Company is held by 334 Madison Euro Investments, Inc. as nominee for Park Twenty Three Investments Company. 2. St. James Fleet Investments Two Limited (Cayman Islands)- 34% of the shares of St. James Fleet Investments Two Limited is held by Metropolitan Life Insurance Company. 3. One Madison Investments (Cayco) Limited (Cayman Islands)- 10.1% voting control of One Madison Investments (Cayco) Limited is held by Convent Station Euro Investments Four Company. 4. CRB Co, Inc. (MA)- AEW Real Estate Advisors, Inc. holds 49,000 preferred non-voting shares and AEW Advisors, Inc. holds 1,000 preferred non-voting shares of CRB, Co., Inc. 5. GA Holding Corp. (MA) 3 6. Thorngate, LLC (DE) 7. Alternative Fuel I, LLC (DE) 8. Transmountain Land & Livestock Company (MT) 9. MetPark Funding, Inc. (DE) 10. HPZ Assets LLC (DE) 11. Missouri Reinsurance (Barbados), Inc. (Barbados) 12. Metropolitan Tower Realty Company, Inc. (DE) a) Midtown Heights, LLC (DE) 13. MetLife (India) Private Ltd. (India) 14. Metropolitan Marine Way Investments Limited (Canada) 15. MetLife Private Equity Holdings, LLC (DE) 16. 23rd Street Investments, Inc. (DE) a) Mezzanine Investment Limited Partnership-BDR (DE). Metropolitan Life Insurance Company holds a 99% limited partnership interest in Mezzanine Investment Limited Partnership-BDR and 23rd Street Investments, Inc. is a 1% general partner. b) Mezzanine Investment Limited Partnership-LG (DE). 23rd Street Investments, Inc. is a 1% general partner of Mezzanine Investment Limited Partnership-LG. Metropolitan Life Insurance Company holds a 99% limited partnership interest in Mezzanine Investment Limited Partnership-LG. 17. Metropolitan Realty Management, Inc. (DE) 18. Dewey Square South, LLC (NY) 19. Hyatt Legal Plans, Inc. (DE) a) Hyatt Legal Plans of Florida, Inc. (FL) 20. MetLife Holdings, Inc. (DE) a) MetLife Credit Corp. (DE) b) MetLife Funding, Inc. (DE) 4 21. Bond Trust Account A (MA) 22. Metropolitan Asset Management Corporation (DE) a) MetLife Capital Credit L.P. (DE)- 90% of MetLife Capital Credit L.P. is held directly by Metropolitan Life Insurance Company. b) MetLife Capital Limited Partnership (DE)- 73.78% Limited Partnership interest is held directly by Metropolitan Life Insurance Company. c) MetLife Investments Asia Limited (Hong Kong)- One share of MetLife Investments Asia Limited is held by W&C Services, Inc., a nominee of Metropolitan Asset Management Corporation. d) MetLife Investments Limited (United Kingdom)- 23rd Street Investments, Inc. holds one share of MetLife Investments Limited and LA Investments, S.A. and 1% of MetLife Latin America Asesorias e Inversiones Limitada. e) LA Investments, S.A. (Argentina)- 23rd Street Investments, Inc. holds one share of MetLife Investments Limited and LA Investments, S.A. and 1% of MetLife Latin America Asesorias e Inversiones Limitada. f) MetLife Latin America Asesorias e Inversiones Limitada (Chile)- 23rd Street Investments, Inc. holds one share of MetLife Investments Limited and LA Investments, S.A. and 1% of MetLife Latin America Asesorias e Inversiones Limitada. 23. New England Life Insurance Company (MA) a) MetLife Advisers, LLC (MA) b) New England Securities Corporation (MA) c) Omega Reinsurance Corporation (AZ) 24. GenAmerica Financial, LLC (MO) a) GenAmerica Capital I (DE) b) General American Life Insurance Company (MO) (1) GenAmerica Management Corporation (MO) 5 (2) Reinsurance Group of America, Incorporated (MO) - (52.8%) (a) Reinsurance Company of Missouri, Incorporated (MO) (i) Timberlake Financial, L.L.C. (DE) (A) Timberlake Reinsurance Company II (SC) (ii) RGA Reinsurance Company (MO) (A) Fairfield Management Group, Inc. (MO) (aa) Reinsurance Partners, Inc. (MO) (b) RGA Worldwide Reinsurance Company, Ltd. (Barbados) (c) RGA Americas Reinsurance Company, Ltd. (Barbados) (d) RGA Reinsurance Company (Barbados) Ltd. (Barbados) (80%) (i) RGA Financial Group, L.L.C. (DE)- RGA Reinsurance Company also owns a 20% non- equity membership in RGA Financial Group, L.L.C. (e) RGA Life Reinsurance Company of Canada (Canada) (f) RGA International Corporation (Nova Scotia) (g) RGA Holdings Limited (U.K.) (United Kingdom) (i) RGA UK Services Limited (United Kingdom) (ii) RGA Capital Limited U.K. (United Kingdom) (iii) RGA Reinsurance (UK) Limited (United Kingdom) (iv) RGA Services India Private Limited (India) (h) RGA South African Holdings (Pty) Ltd. (South Africa) (i) RGA Reinsurance Company of South Africa Limited (South Africa) (i) RGA Australian Holdings PTY Limited (Australia) (i) RGA Reinsurance Company of Australia Limited (Australia) (ii) RGA Asia Pacific PTY, Limited (Australia) (j) General American Argentina Seguros de Vida, S.A. (Argentina) - 95% of General American Argentina Seguros de Vida, S.A. is owned by Reinsurance Group of America, Incorporated and 5% is owned by RGA Reinsurance Company (Barbados) Ltd. 6 (k) RGA Technology Partners, Inc. (MO) (l) RGA International Reinsurance Company (Ireland) (m) RGA Capital Trust I (DE) (n) RGA Global Reinsurance Company, Ltd. (Bermuda) 25. Corporate Real Estate Holdings, LLC (DE) 26. Ten Park SPC (CAYMAN ISLANDS ) - 1% voting control of Ten Park SPC is held by Metropolitan Asset Management Corporation 27. MetLife Tower Resources Group, Inc. (DE) 28. Headland - Pacific Palisades, LLC (CA) 29. Headland Properties Associates (CA) 30. Krisman, Inc. (MO) 31. Special Multi-Asset Receivables Trust (DE) 32. White Oak Royalty Company (OK) 33. 500 Grant Street GP LLC (DE) 34. 500 Grant Street Associates Limited Partnership (CT) - 99% of 500 Grant Street Associates Limited Partnership is held by Metropolitan Life Insurance Company and 1% by 500 Grant Street GP LLC 35. MetLife Canada/MetVie Canada (Canada) 36. MetLife Retirement Services LLC (NJ) a) MetLife Investment Funds Services LLC (NJ) b) MetLife Investment Funds Management LLC (NJ) c) MetLife Associates LLC (DE) 37. Euro CL Investments LLC (DE) 38. MEXDF Properties, LLC (DE) 39. MSV Irvine Property, LLC (DE) - 4% of MSV Irvine Property, LLC is owned by Metropolitan Tower Realty Company, Inc. and 96% is owned by Metropolitan Life Insurance Company V. MetLife Capital Trust II (DE) W. MetLife Capital Trust III (DE) X. MetLife Insurance Company of Connecticut (Life Department) (Accident Department) (CT) 1. 440 South LaSalle LLC (DE) 2. Pilgrim Investments Oakmont Lane, LLC (DE) - 50% is owned by MetLife Insurance Company of Connecticut and 50% is owned by a third party 3. Pilgrim Alternative Investments Opportunity Fund I, LLC (DE) - 67% is owned by MetLife Insurance Company of Connecticut, and 33% is owned by third party 4. Pilgrim Alternative Investments Opportunity Fund III Associates, LLC (CT) - 67% is owned by MetLife Insurance Company of Connecticut, and 33% is owned by third party 5. Pilgrim Investments Highland Park, LLC (DE) 6. Pilgrim Investments Schaumberg Windy Point, LLC (DE) 7. Pilgrim Investments York Road, LLC (DE) 8. Euro TI Investments LLC (DE) 9. Greenwich Street Investments, LLC (DE) a) Greenwich Street Capital Offshore Fund, Ltd. (Virgin Islands) b) Greenwich Street Investments, L.P. (DE) 10. Hollow Creek, L.L.C. (CT) 11. One Financial Place Corporation (DE) - 100% is owned in the aggregate by MetLife Insurance Company of Connecticut and MetLife Life and Annuity Company of Connecticut. 12. One Financial Place Holdings, LLC (DE)-100% is owned in the aggregate by MetLife Insurance Company of Connecticut and MetLife Life and Annuity Company of Connecticut. 13. Plaza LLC (CT) a) Travelers Asset Management International Company LLC (NY) b) Tower Square Securities, Inc. (CT) 1) Tower Square Securities Insurance Agency of New Mexico, Inc. (NM) 2) Tower Square Securities Insurance Agency of Ohio, Inc. (OH) (99%) c) Travelers Investment Adviser, Inc. (DE) 14. TIC European Real Estate LP, LLC (DE) 15. MetLife European Holdings, Inc. (UK) a) MetLife Europe Limited, Inc. (UK) b) MetLife Pensions Trustees Limited (UK) 16. Travelers European Investments LLC (CT) 17. Travelers International Investments Ltd. (Cayman Islands) 18. Trumbull Street Equity Investments LLC (DE) a) Tandem EGI/C Investments, L.P. (DE) - The General Partner is Trumbull Street Equity Investments LLC. 19. MetLife Life and Annuity Company of Connecticut (CT) a) Euro TL Investments LLC (DE) 20. TLA Holdings LLC (DE) a) The Prospect Company (DE) 1) Panther Valley, Inc. (NJ) 21. TRAL & Co. (CT) - TRAL & Co. is a general partnership. Its partners are MetLife Insurance Company of Connecticut and MetLife Life and Annuity Company of Connecticut. 22. Tribeca Distressed Securities L.L.C. (DE) 23. MetLife Investors USA Insurance Comapny (DE) Y. MetLife Reinsurance Company of South Carolina (SC) Z. MetLife Investment Advisors Company, LLC (DE) AA. Trumbull Street Investments LLC (DE) BB. MetLife Standby I, LLC (DE) 1. MetLife Exchange Trust I (DE) The voting securities (excluding directors' qualifying shares, if any) of each subsidiary shown on the organizational chart are 100% owned by their respective parent corporation, unless otherwise indicated. In addition to the entities shown on the organizational chart, MetLife, Inc. (or where indicated, a subsidiary) also owns interests in the following entities: 1) Metropolitan Life Insurance Company owns varying interests in certain mutual funds distributed by its affiliates. These ownership interests are generally expected to decrease as shares of the funds are purchased by unaffiliated investors. 2) Metropolitan Life Insurance Company indirectly owns 100% of the non-voting preferred stock of Nathan and Lewis Associates Ohio, Incorporated, an insurance agency. 100% of the voting common stock of this company is held by an individual who has agreed to vote such shares at the direction of N.L. HOLDING CORP. (DEL), a direct wholly owned subsidiary of MetLife, Inc. 3) Mezzanine Investment Limited Partnerships ("MILPs"), Delaware limited partnerships, are investment vehicles through which investments in certain entities are held. A wholly owned subsidiary of Metropolitan Life Insurance Company serves as the general partner of the limited partnerships and Metropolitan Life Insurance Company directly owns a 99% limited partnership interest in each MILP. The MILPs have various ownership and/or debt interests in certain companies. 4) New England Life Insurance Company ("NELICO"), owns 100% of the voting common stock of Omega Reinsurance Corporation, which is 100% of all the stock outstanding as of 12/31/06. 5) The Metropolitan Money Market Pool and MetLife Intermediate Income Pool are pass-through investment pools, of which Metropolitan Life Insurance Company and/or its subsidiaries and/or affiliates are general partners. NOTE: THE METLIFE, INC. ORGANIZATIONAL CHART DOES NOT INCLUDE REAL ESTATE JOINT VENTURES AND PARTNERSHIPS OF WHICH METLIFE, INC. AND/OR ITS SUBSIDIARIES IS AN INVESTMENT PARTNER. IN ADDITION, CERTAIN INACTIVE SUBSIDIARIES HAVE ALSO BEEN OMITTED. 7 ITEM 27. NUMBER OF CONTRACT OWNERS As of January 31, 2007, there were 16,451 qualified contracts and 15,806 non- qualified contracts of PrimElite II offered by the Registrant. ITEM 28. INDEMNIFICATION The Depositor's parent, MetLife, Inc. has secured a Financial Institutions Bond in the amount of $50,000,000, subject to a $5,000,000 deductible. MetLife, Inc. also maintains a Directors and Officers Liability and Corporate Reimbursement Insurance Policy with limits of $400 million under which the Depositor and MetLife Investors Distribution Company, the Registrant's underwriter (the "Underwriter"), as well as certain other subsidiaries of MetLife are covered. A provision in MetLife, Inc.'s by-laws provides for the indemnification (under certain circumstances) of individuals serving as directors or officers of certain organizations, including the Depositor and the Underwriter. Sections 33-770 to 33-778, inclusive of the Connecticut General Statutes ("C.G.S.") regarding indemnification of directors and officers of Connecticut corporations provides in general that Connecticut corporations shall indemnify their officers, directors and certain other defined individuals against judgments, fines, penalties, amounts paid in settlement and reasonable expenses actually incurred in connection with proceedings against the corporation. The corporation's obligation to provide such indemnification generally does not apply unless (1) the individual is wholly successful on the merits in the defense of any such proceeding; or (2) a determination is made (by persons specified in the statute) that the individual acted in good faith and in the best interests of the corporation and in all other cases, his conduct was at least not opposed to the best interests of the corporation, and in a criminal case he had no reasonable cause to believe his conduct was unlawful; or (3) the court, upon application by the individual, determines in view of all of the circumstances that such person is fairly and reasonably entitled to be indemnified, and then for such amount as the court shall determine. With respect to proceedings brought by or in the right of the corporation, the statute provides that the corporation shall indemnify its officers, directors and certain other defined individuals, against reasonable expenses actually incurred by them in connection with such proceedings, subject to certain limitations. C.G.S. Section 33-778 provides an exclusive remedy; a Connecticut corporation cannot indemnify a director or officer to an extent either greater or less than that authorized by the statute, e.g., pursuant to its certificate of incorporation, by-laws, or any separate contractual arrangement. However, the statute does specifically authorize a corporation to procure indemnification insurance to provide greater indemnification rights. The premiums for such insurance may be shared with the insured individuals on an agreed basis. Insofar as indemnification for liability arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. ITEM 29. PRINCIPAL UNDERWRITER (a) MetLife Investors Distribution Company 5 Park Plaza, Suite 1900 Irvine, CA 92614 Prior to October 20, 2006, MLI Distribution LLC was the principal underwriter and distributor. On that date MLI Distribution LLC merged into MetLife Investors Distribution Company. MetLife Investors Distribution Company also serves as principal underwriter and distributor for the following investment companies (other than the Registrant): MetLife of CT Fund U for Variable Annuities MetLife of CT Fund BD for Variable Annuities MetLife of CT Fund BD II for Variable Annuities MetLife of CT Fund BD III for Variable Annuities MetLife of CT Fund BD IV for Variable Annuities MetLife of CT Fund ABD for Variable Annuities MetLife of CT Fund ABD II for Variable Annuities MetLife of CT Separate Account PF for Variable Annuities MetLife of CT Separate Account PF II for Variable Annuities MetLife of CT Separate Account QP for Variable Annuities MetLife of CT Separate Account QPN for Variable Annuities MetLife of CT Separate Account TM for Variable Annuities MetLife of CT Separate Account TM II for Variable Annuities MetLife of CT Separate Account Five for Variable Annuities MetLife of CT Separate Account Six for Variable Annuities MetLife of CT Separate Account Seven for Variable Annuities MetLife of CT Separate Account Eight for Variable Annuities MetLife of CT Separate Account Nine for Variable Annuities MetLife of CT Separate Account Ten for Variable Annuities MetLife of CT Fund UL for Variable Life Insurance, MetLife of CT Fund UL II for Variable Life Insurance MetLife of CT Fund UL III for Variable Life Insurance MetLife of CT Variable Life Insurance Separate Account One MetLife of CT Variable Life Insurance Separate Account Two MetLife of CT Variable Life Insurance Separate Account Three Metropolitan Life Variable Annuity Separate Account I Metropolitan Life Variable Annuity Separate Account II MetLife of CT Separate Account Eleven for Variable Annuities MetLife of CT Separate Account Twelve for Variable Annuities MetLife of CT Separate Account Thirteen for Variable Annuities MetLife of CT Separate Account Fourteen for Variable Annuities MetLife Insurance Company of Connecticut Variable Annuity Separate Account 2002 MetLife Life and Annuity Company of Connecticut Variable Annuity Separate Account 2002 Met Investors Series Trust MetLife Investors Variable Annuity Account One MetLife Investors Variable Annuity Account Five MetLife Investors Variable Life Account One MetLife Investors Variable Life Account Five MetLife Investors USA Separate Account A MetLife Investors USA Variable Life Account A First MetLife Investors Variable Annuity Account One General American Separate Account Eleven General American Separate Account Twenty-Eight General American Separate Account Twenty-Nine General American Separate Account Two Security Equity Separate Account Twenty-Six Security Equity Separate Account Twenty-Seven (b) MetLife Investors Distribution Company is the principal underwriter for the Contracts. The following persons are officers and managers of MetLife Investors Distribution Company. The principal business address for MetLife Investors Distribution Company is 5 Park Plaza, Suite 1900, Irvine, CA 92614.
NAME AND PRINCIPAL POSITIONS AND OFFICES BUSINESS ADDRESS WITH UNDERWRITER - -------------------------- --------------------------------------------------------------------- Michael K. Farrell Director 5 Park Plaza Suite 1900 Irvine, CA 92614 Craig W. Markham Director and Vice President 13045 Tesson Ferry Road St. Louis, MO 63128 William J. Toppeta Director 1 MetLife Plaza 27-01 Queens Plaza North Long Island City, NY 11101 Paul A. Sylvester President, National Sales Manager- Annuities & LTC 10 Park Avenue Morristown, NJ 07962 Elizabeth M. Forget Executive Vice President, Investment Fund Management & Marketing 260 Madison Avenue New York, NY 10016 Paul A. LaPiana Executive Vice President, National Sales Manager-Life 5 Park Plaza Suite 1900 Irvine, CA 92614 Richard C. Pearson Executive Vice President, General Counsel and Secretary 5 Park Plaza Suite 1900 Irvine, CA 92614
NAME AND PRINCIPAL POSITIONS AND OFFICES BUSINESS ADDRESS WITH UNDERWRITER - -------------------------- --------------------------------------------------------------------- Andrew Aiello Senior Vice President, Channel Head-National Accounts Channel 1 MetLife Plaza 27-01 Queens Plaza North Long Island City, NY 11101 Jeffrey A. Barker Senior Vice President, Channel Head-Independent Accounts 1 MetLife Plaza 27-01 Queens Plaza North Long Island City, NY 11101 Douglas P. Rodgers Senior Vice President, Channel Head-LTC 10 Park Avenue, 1st Floor Morristown, NJ 07962 Myrna F. Solomon Senior Vice President, Channel Head-Banks 501 Boylston Street Boston, MA 02116 Leslie Sutherland Senior Vice President, Channel Head-Broker/Dealers 1 MetLife Plaza Long Island City, NY 11101 Edward C. Wilson Senior Vice President, Channel Head-Wirehouse 5 Park Plaza Suite 1900 Irvine, CA 92614 Curtis Wohlers Senior Vice President, Channel Head-Planners 1 MetLife Plaza 27-01 Queens Plaza North Long Island City, NY 11101 Anthony J. Williamson Treasurer 1 MetLife Plaza 27-01 Queens Plaza North Long Island City, NY 11101 Peter Gruppuso Vice President and Chief Financial Officer 485-E US Highway 1 South Iselin, NJ 08830 Debora L. Buffington Vice President, Director of Compliance 5 Park Plaza Suite 1900 Irvine, CA 92614 David DeCarlo Vice President 5 Park Plaza Suite 1900 Irvine, CA 92614 Charles M. Deuth Vice President, National Accounts 5 Park Plaza Suite 1900 Irvine, CA 92614 Jay S. Kaduson Senior Vice President 10 Park Avenue Morristown, NJ 07962 James R. Fitzpatrick Vice President 5 Park Plaza Suite 1900 Irvine, CA 92614
NAME AND PRINCIPAL POSITIONS AND OFFICES BUSINESS ADDRESS WITH UNDERWRITER - -------------------------- --------------------------------------------------------------------- Paul M. Kos Vice President 5 Park Plaza Suite 1900 Irvine, CA 92614 Deron J. Richens Vice President 5 Park Plaza Suite 1900 Irvine, CA 92614 Cathy Sturdivant Vice President 5 Park Plaza Suite 1900 Irvine, CA 92614 Paulina Vakouros Vice President 5 Park Plaza Suite 1900 Irvine, CA 92614
(c) Compensation from the Registrant. The following commissions and other compensation were received by the Distributor, directly or indirectly, from the Registrant during the Registrant's last fiscal year:
(2) NET (1) UNDERWRITING (3) (4) (5) NAME OF PRINCIPAL DISCOUNTS AND COMPENSATION ON BROKERAGE OTHER UNDERWRITER COMMISSIONS REDEMPTION COMMISSIONS COMPENSATION ----------------- --------------- --------------- --------------- --------------- MLI Distribution LLC................... $62,664,479 $0 $0 $0
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS (1) MetLife Life and Annuity Company of Connecticut One Cityplace Hartford, Connecticut 06103-3415 ITEM 31. MANAGEMENT SERVICES Not Applicable. ITEM 32. UNDERTAKINGS The undersigned Registrant hereby undertakes: (a) To file a post-effective amendment to this registration statement as frequently as is necessary to ensure that the audited financial statements in the registration statement are never more than sixteen months old for so long as payments under the variable annuity contracts may be accepted; (b) To include either (1) as part of any application to purchase acontract offered by the prospectus, a space that an applicant can check to request a Statement of Additional Information, or (2) a post card or similar written communication affixed to or included in the prospectus that the applicant can remove to send for a Statement of Additional Information; and (c) To deliver any Statement of Additional Information and any financial statements required to be made available under this Form N-4 promptly upon written or oral request. The Company hereby represents: (a) That the aggregate charges under the Contracts of the Registrant described herein are reasonable in relation to the services rendered, the expenses expected to be incurred, and the risks assumed by the Company. SIGNATURES As required by the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant certifies that it meets the requirements of Securities Act Rule 485(b) for effectiveness of this amendment to this Registration Statement and has caused this amendment to this Registration Statement to be signed on its behalf, in the City of Hartford, and State of Connecticut, on this 6th day of April 2007. METLIFE OF CT SEPARATE ACCOUNT PF II FOR VARIABLE ANNUITIES (Registrant) METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT (Depositor) By: /s/ MICHAEL K. FARRELL ------------------------------------ Michael K. Farrell, President As required by the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities indicated on the 6th day of April 2007.
/s/ *MICHAEL K. FARRELL President and Director - --------------------------------------------- (Michael K. Farrell) /s/ *STANLEY J. TALBI Executive Vice President and Chief - --------------------------------------------- Financial Officer (Stanley J. Talbi) /s/ *JOSEPH J. PROCHASKA, JR. Executive Vice President and Chief - --------------------------------------------- Accounting Officer (Joseph J. Prochaska, Jr.) /s/ *WILLIAM J. MULLANEY Director - --------------------------------------------- (William J. Mullaney) /s/ *LISA M. WEBER Director - --------------------------------------------- (Lisa M. Weber)
By: /s/ MICHELE H. ABATE ------------------------------------ Michele H. Abate, Attorney-in-Fact * MetLife Life and Annuity Company of Connecticut. Executed by Michele H. Abate on behalf of those indicated pursuant to powers of attorney filed herewith. EXHIBIT INDEX 10(a) Consent of KPMG LLP, Independent Registered Public Accounting Firm. 10(b) Consent of Deloitte & Touche LLP, Independent Registered Public Accounting Firm. 13 Powers of Attorney.
EX-99.10.A 2 m29586exv99w10wa.txt CONSENT OF KPMG LLP CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The Board of Directors MetLife Life and Annuity Company of Connecticut: We consent to the use of our reports included herein and to the reference to our firm under the heading "Independent Registered Public Accounting Firm". /s/ KPMG LLP Hartford, Connecticut April 5, 2007 EX-99.10.B 3 m29586exv99w10wb.txt CONSENT OF DELOITTE & TOUCHE LLP Consent of Independent Registered Public Accounting Firm We consent to the use in this Post-Effective Amendment No. 6/Amendment No. 19 to the Registration Statement No. 333-72336/811-08317 on Form N-4 of our report dated March 19, 2007, relating to the financial statements of MetLife of CT Separate Account PF II for Variable Annuities (formerly, The Travelers Separate Account PF II for Variable Annuities), and our report on the consolidated financial statements and financial schedules dated March 6, 2007 (which report expresses an unqualified opinion and includes an explanatory paragraph referring to the acquisition of MetLife Life and Annuity Company of Connecticut (the "Company") (formerly, The Travelers Life and Annuity Company) by MetLife Inc. on July 1, 2005, and as required by the U.S. Securities and Exchange Commission Staff Accounting Bulletin 5.J., Push Down Basis of Accounting Required in Certain Limited Circumstances, the purchase method of accounting was applied to the assets and liabilities of the Company, and such assets and liabilities were measured at their fair values as of the acquisition date in conformity with Statement of Financial Accounting Standards No. 141, Business Combinations), of the Company, both appearing in the Statement of Additional Information, which is part of such Registration Statement. We also consent to the reference to us under the heading "Independent Registered Public Accounting Firm" appearing in the Statement of Additional Information, which is a part of such Registration Statement. /s/ Deloitte & Touche LLP Certified Public Accountants Tampa, Florida April 5, 2007 EX-99.13 4 m29586exv99w13.txt EX-99.13: POWERS OF ATTORNEY MetLife Life and Annuity Company of Connecticut Power of Attorney Michael K. Farrell Director and President KNOW ALL MEN BY THESE PRESENTS, that I, Michael K. Farrell, a director and President of MetLife Life and Annuity Company of Connecticut, a Connecticut company, do hereby appoint Michele H. Abate, John E. Connolly, Jr., James L. Lipscomb, Gina C. Sandonato, Myra L. Saul and Marie C. Swift, and each of them severally, my true and lawful attorney-in-fact, for me and in my name, place and stead to execute and file any instrument or document to be filed as part of or in connection with or in any way related to the Registration Statements and any and all amendments thereto, filed by said Company under the Securities Act of 1933 and/or the Investment Company Act of 1940, in connection with: - MetLife of CT Fund ABD II for Variable Annuities (Premier Advisers II, Premier Advisers III and Premier Advisers III (Series II) File No. 333-65500, Portfolio Architect, Portfolio Architect Select, Premier Advisers (Class I), Premier Advisers (Class II) File No. 033-65339, MetLife Access Annuity and MetLife Access Select Annuity File No. 333-23327), - MetLife of CT Fund BD II for Variable Annuities (Vintage Annuity File No. 033-58131), - MetLife of CT Fund BD IV for Variable Annuities (Protected Equity Portfolio File No. 333-65946, Index Annuity File No. 333-27687, Vintage XTRA Annuity, Portfolio Architect XTRA, Vintage XTRA (Series II) File No. 333-70659), - MetLife of CT Separate Account Six for Variable Annuities (MetLife Retirement Account Annuity File No. 333-58809), - MetLife of CT Separate Account Eight for Variable Annuities (Premier Advisers AssetManager, Premier Advisers L, Premier Advisers L (Series II) File No. 333-60215), - MetLife of CT Separate Account Ten for Variable Annuities (Vintage II and Vintage II (Series II) File No. 333-82013, Vintage 3, Portfolio Architect 3, Portfolio Architect L, Vintage L, Pioneer AnnuiStar Flex File No. 333-65922), - MetLife of CT Separate Account PF II for Variable Annuities (PrimElite Annuity File No. 333-32581 and PrimElite II Annuity File No. 333-72336), - MetLife of CT Separate Account TM II for Variable Annuities (Marquis Portfolios File No 333-40191), - MetLife of CT Separate Account Twelve for Variable Annuities (Pioneer AnnuiStar Plus, Portfolio Architect Plus, Scudder Advocate Rewards Annuity File No. 333-101814), - MetLife of CT Separate Account Fourteen for Variable Annuities (Pioneer AnnuiStar, Portfolio Architect II and Pioneer AnnuiStar Value File No. 333-101815), - MetLife Life and Annuity Company of CT Variable Annuity Separate Account 2002 (Vintage Access, Portfolio Architect Access, Scudder Advocate Advisor and Scudder Advocate Advisor- STI File No. 333-100434, Scudder Advocate Advisor TL4 File No. 333-109611), - MetLife of CT Fund UL II for Variable Life Insurance (MarketLife File No. 033-63927, Variable Survivorship Life File No. 333-69773, Variable Life Accumulator and Accumulator Series II File No. 333-96521, Variable Life File No. 333-96517, Variable Survivorship Life II File No. 333-56958, Variable Life Accumulator Series III File No. 333-113110), - MetLife of CT Variable Life Insurance Separate Account One (VintageLife File No.033-88578), - MetLife of CT Variable Life Insurance Separate Account Two (Portfolio Architect Life File No. 333-15053), or any other separate accounts for variable contracts that are created or become separate accounts of said Company in the future, and to have full power and authority to do or cause to be done in my name, place and stead each and every act and thing necessary or appropriate in order to effectuate the same, as fully to all intents and purposes as I might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact or any of them, may do or cause to be done by virtue hereof. Each said attorney-in-fact shall have power to act hereunder with or without the others. IN WITNESS WHEREOF, I have hereunto set my hand this 8th day of March, 2007. /s/ Michael K. Farrell ---------------------------------------- Michael K. Farrell MetLife Life and Annuity Company of Connecticut Power of Attorney William J. Mullaney Director KNOW ALL MEN BY THESE PRESENTS, that I, William J. Mullaney, a director of MetLife Life and Annuity Company of Connecticut, a Connecticut company, do hereby appoint Michele H. Abate, John E. Connolly, Jr., James L. Lipscomb, Gina C. Sandonato, Myra L. Saul and Marie C. Swift, and each of them severally, my true and lawful attorney-in-fact, for me and in my name, place and stead to execute and file any instrument or document to be filed as part of or in connection with or in any way related to the Registration Statements and any and all amendments thereto, filed by said Company under the Securities Act of 1933 and/or the Investment Company Act of 1940, in connection with: - MetLife of CT Fund ABD II for Variable Annuities (Premier Advisers II, Premier Advisers III and Premier Advisers III (Series II) File No. 333-65500, Portfolio Architect, Portfolio Architect Select, Premier Advisers (Class I), Premier Advisers (Class II) File No. 033-65339, MetLife Access Annuity and MetLife Access Select Annuity File No. 333-23327), - MetLife of CT Fund BD II for Variable Annuities (Vintage Annuity File No. 033-58131), - MetLife of CT Fund BD IV for Variable Annuities (Protected Equity Portfolio File No. 333-65946, Index Annuity File No. 333-27687, Vintage XTRA Annuity, Portfolio Architect XTRA, Vintage XTRA (Series II) File No. 333-70659), - MetLife of CT Separate Account Six for Variable Annuities (MetLife Retirement Account Annuity File No. 333-58809), - MetLife of CT Separate Account Eight for Variable Annuities (Premier Advisers AssetManager, Premier Advisers L, Premier Advisers L (Series II) File No. 333-60215), - MetLife of CT Separate Account Ten for Variable Annuities (Vintage II and Vintage II (Series II) File No. 333-82013, Vintage 3, Portfolio Architect 3, Portfolio Architect L, Vintage L, Pioneer AnnuiStar Flex File No. 333-65922), - MetLife of CT Separate Account PF II for Variable Annuities (PrimElite Annuity File No. 333-32581 and PrimElite II Annuity File No. 333-72336), - MetLife of CT Separate Account TM II for Variable Annuities (Marquis Portfolios File No 333-40191), - MetLife of CT Separate Account Twelve for Variable Annuities (Pioneer AnnuiStar Plus, Portfolio Architect Plus, Scudder Advocate Rewards Annuity File No. 333-101814), - MetLife of CT Separate Account Fourteen for Variable Annuities (Pioneer AnnuiStar, Portfolio Architect II and Pioneer AnnuiStar Value File No. 333-101815), - MetLife Life and Annuity Company of CT Variable Annuity Separate Account 2002 (Vintage Access, Portfolio Architect Access, Scudder Advocate Advisor and Scudder Advocate Advisor- STI File No. 333-100434, Scudder Advocate Advisor TL4 File No. 333-109611), - MetLife of CT Fund UL II for Variable Life Insurance (MarketLife File No. 033-63927, Variable Survivorship Life File No. 333-69773, Variable Life Accumulator and Accumulator Series II File No. 333-96521, Variable Life File No. 333-96517, Variable Survivorship Life II File No. 333-56958, Variable Life Accumulator Series III File No. 333-113110), - MetLife of CT Variable Life Insurance Separate Account One (VintageLife File No.033-88578), - MetLife of CT Variable Life Insurance Separate Account Two (Portfolio Architect Life File No. 333-15053), or any other separate accounts for variable contracts that are created or become separate accounts of said Company in the future, and to have full power and authority to do or cause to be done in my name, place and stead each and every act and thing necessary or appropriate in order to effectuate the same, as fully to all intents and purposes as I might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact or any of them, may do or cause to be done by virtue hereof. Each said attorney-in-fact shall have power to act hereunder with or without the others. IN WITNESS WHEREOF, I have hereunto set my hand this 8th day of March, 2007. /s/ William J. Mullaney ---------------------------------------- William J. Mullaney MetLife Life and Annuity Company of Connecticut Power of Attorney Lisa M. Weber Director KNOW ALL MEN BY THESE PRESENTS, that I, Lisa M. Weber, a director of MetLife Life and Annuity Company of Connecticut, a Connecticut company, do hereby appoint Michele H. Abate, John E. Connolly, Jr., James L. Lipscomb, Gina C. Sandonato, Myra L. Saul and Marie C. Swift, and each of them severally, my true and lawful attorney-in-fact, for me and in my name, place and stead to execute and file any instrument or document to be filed as part of or in connection with or in any way related to the Registration Statements and any and all amendments thereto, filed by said Company under the Securities Act of 1933 and/or the Investment Company Act of 1940, in connection with: - MetLife of CT Fund ABD II for Variable Annuities (Premier Advisers II, Premier Advisers III and Premier Advisers III (Series II) File No. 333-65500, Portfolio Architect, Portfolio Architect Select, Premier Advisers (Class I), Premier Advisers (Class II) File No. 033-65339, MetLife Access Annuity and MetLife Access Select Annuity File No. 333-23327), - MetLife of CT Fund BD II for Variable Annuities (Vintage Annuity File No. 033-58131), - MetLife of CT Fund BD IV for Variable Annuities (Protected Equity Portfolio File No. 333-65946, Index Annuity File No. 333-27687, Vintage XTRA Annuity, Portfolio Architect XTRA, Vintage XTRA (Series II) File No. 333-70659), - MetLife of CT Separate Account Six for Variable Annuities (MetLife Retirement Account Annuity File No. 333-58809), - MetLife of CT Separate Account Eight for Variable Annuities (Premier Advisers AssetManager, Premier Advisers L, Premier Advisers L (Series II) File No. 333-60215), - MetLife of CT Separate Account Ten for Variable Annuities (Vintage II and Vintage II (Series II) File No. 333-82013, Vintage 3, Portfolio Architect 3, Portfolio Architect L, Vintage L, Pioneer AnnuiStar Flex File No. 333-65922), - MetLife of CT Separate Account PF II for Variable Annuities (PrimElite Annuity File No. 333-32581 and PrimElite II Annuity File No. 333-72336), - MetLife of CT Separate Account TM II for Variable Annuities (Marquis Portfolios File No 333-40191), - MetLife of CT Separate Account Twelve for Variable Annuities (Pioneer AnnuiStar Plus, Portfolio Architect Plus, Scudder Advocate Rewards Annuity File No. 333-101814), - MetLife of CT Separate Account Fourteen for Variable Annuities (Pioneer AnnuiStar, Portfolio Architect II and Pioneer AnnuiStar Value File No. 333-101815), - MetLife Life and Annuity Company of CT Variable Annuity Separate Account 2002 (Vintage Access, Portfolio Architect Access, Scudder Advocate Advisor and Scudder Advocate Advisor- STI File No. 333-100434, Scudder Advocate Advisor TL4 File No. 333-109611), - MetLife of CT Fund UL II for Variable Life Insurance (MarketLife File No. 033-63927, Variable Survivorship Life File No. 333-69773, Variable Life Accumulator and Accumulator Series II File No. 333-96521, Variable Life File No. 333-96517, Variable Survivorship Life II File No. 333-56958, Variable Life Accumulator Series III File No. 333-113110), - MetLife of CT Variable Life Insurance Separate Account One (VintageLife File No.033-88578), - MetLife of CT Variable Life Insurance Separate Account Two (Portfolio Architect Life File No. 333-15053), or any other separate accounts for variable contracts that are created or become separate accounts of said Company in the future, and to have full power and authority to do or cause to be done in my name, place and stead each and every act and thing necessary or appropriate in order to effectuate the same, as fully to all intents and purposes as I might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact or any of them, may do or cause to be done by virtue hereof. Each said attorney-in-fact shall have power to act hereunder with or without the others. IN WITNESS WHEREOF, I have hereunto set my hand this 8th day of March, 2007. /s/ Lisa M. Weber ---------------------------------------- Lisa M. Weber MetLife Life and Annuity Company of Connecticut Power of Attorney Joseph J. Prochaska, Jr. Executive Vice President and Chief Accounting Officer KNOW ALL MEN BY THESE PRESENTS, that I, Joseph J. Prochaska, Jr., Executive Vice President and Chief Accounting Officer of MetLife Life and Annuity Company of Connecticut, a Connecticut company, do hereby appoint Michele H. Abate, John E. Connolly, Jr., James L. Lipscomb, Gina C. Sandonato, Myra L. Saul and Marie C. Swift, and each of them severally, my true and lawful attorney-in-fact, for me and in my name, place and stead to execute and file any instrument or document to be filed as part of or in connection with or in any way related to the Registration Statements and any and all amendments thereto, filed by said Company under the Securities Act of 1933 and/or the Investment Company Act of 1940, in connection with: - MetLife of CT Fund ABD II for Variable Annuities (Premier Advisers II, Premier Advisers III and Premier Advisers III (Series II) File No. 333-65500, Portfolio Architect, Portfolio Architect Select, Premier Advisers (Class I), Premier Advisers (Class II) File No. 033-65339, MetLife Access Annuity and MetLife Access Select Annuity File No. 333-23327), - MetLife of CT Fund BD II for Variable Annuities (Vintage Annuity File No. 033-58131), - MetLife of CT Fund BD IV for Variable Annuities (Protected Equity Portfolio File No. 333-65946, Index Annuity File No. 333-27687, Vintage XTRA Annuity, Portfolio Architect XTRA, Vintage XTRA (Series II) File No. 333-70659), - MetLife of CT Separate Account Six for Variable Annuities (MetLife Retirement Account Annuity File No. 333-58809), - MetLife of CT Separate Account Eight for Variable Annuities (Premier Advisers AssetManager, Premier Advisers L, Premier Advisers L (Series II) File No. 333-60215), - MetLife of CT Separate Account Ten for Variable Annuities (Vintage II and Vintage II (Series II) File No. 333-82013, Vintage 3, Portfolio Architect 3, Portfolio Architect L, Vintage L, Pioneer AnnuiStar Flex File No. 333-65922), - MetLife of CT Separate Account PF II for Variable Annuities (PrimElite Annuity File No. 333-32581 and PrimElite II Annuity File No. 333-72336), - MetLife of CT Separate Account TM II for Variable Annuities (Marquis Portfolios File No 333-40191), - MetLife of CT Separate Account Twelve for Variable Annuities (Pioneer AnnuiStar Plus, Portfolio Architect Plus, Scudder Advocate Rewards Annuity File No. 333-101814), - MetLife of CT Separate Account Fourteen for Variable Annuities (Pioneer AnnuiStar, Portfolio Architect II and Pioneer AnnuiStar Value File No. 333-101815), - MetLife Life and Annuity Company of CT Variable Annuity Separate Account 2002 (Vintage Access, Portfolio Architect Access, Scudder Advocate Advisor and Scudder Advocate Advisor- STI File No. 333-100434, Scudder Advocate Advisor TL4 File No. 333-109611), - MetLife of CT Fund UL II for Variable Life Insurance (MarketLife File No. 033-63927, Variable Survivorship Life File No. 333-69773, Variable Life Accumulator and Accumulator Series II File No. 333-96521, Variable Life File No. 333-96517, Variable Survivorship Life II File No. 333-56958, Variable Life Accumulator Series III File No. 333-113110), - MetLife of CT Variable Life Insurance Separate Account One (VintageLife File No.033-88578), - MetLife of CT Variable Life Insurance Separate Account Two (Portfolio Architect Life File No. 333-15053), or any other separate accounts for variable contracts that are created or become separate accounts of said Company in the future, and to have full power and authority to do or cause to be done in my name, place and stead each and every act and thing necessary or appropriate in order to effectuate the same, as fully to all intents and purposes as I might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact or any of them, may do or cause to be done by virtue hereof. Each said attorney-in-fact shall have power to act hereunder with or without the others. IN WITNESS WHEREOF, I have hereunto set my hand this 12th day of March, 2007. /s/ Joseph J. Prochaska, Jr. ---------------------------------------- Joseph J. Prochaska, Jr. MetLife Life and Annuity Company of Connecticut Power of Attorney Stanley J. Talbi Executive Vice President and Chief Financial Officer KNOW ALL MEN BY THESE PRESENTS, that I, Stanley J. Talbi, Executive Vice President and Chief Financial Officer of MetLife Life and Annuity Company of Connecticut, a Connecticut company, do hereby appoint Michele H. Abate, John E. Connolly, Jr., James L. Lipscomb, Gina C. Sandonato, Myra L. Saul and Marie C. Swift, and each of them severally, my true and lawful attorney-in-fact, for me and in my name, place and stead to execute and file any instrument or document to be filed as part of or in connection with or in any way related to the Registration Statements and any and all amendments thereto, filed by said Company under the Securities Act of 1933 and/or the Investment Company Act of 1940, in connection with: - MetLife of CT Fund ABD II for Variable Annuities (Premier Advisers II, Premier Advisers III and Premier Advisers III (Series II) File No. 333-65500, Portfolio Architect, Portfolio Architect Select, Premier Advisers (Class I), Premier Advisers (Class II) File No. 033-65339, MetLife Access Annuity and MetLife Access Select Annuity File No. 333-23327), - MetLife of CT Fund BD II for Variable Annuities (Vintage Annuity File No. 033-58131), - MetLife of CT Fund BD IV for Variable Annuities (Protected Equity Portfolio File No. 333-65946, Index Annuity File No. 333-27687, Vintage XTRA Annuity, Portfolio Architect XTRA, Vintage XTRA (Series II) File No. 333-70659), - MetLife of CT Separate Account Six for Variable Annuities (MetLife Retirement Account Annuity File No. 333-58809), - MetLife of CT Separate Account Eight for Variable Annuities (Premier Advisers AssetManager, Premier Advisers L, Premier Advisers L (Series II) File No. 333-60215), - MetLife of CT Separate Account Ten for Variable Annuities (Vintage II and Vintage II (Series II) File No. 333-82013, Vintage 3, Portfolio Architect 3, Portfolio Architect L, Vintage L, Pioneer AnnuiStar Flex File No. 333-65922), - MetLife of CT Separate Account PF II for Variable Annuities (PrimElite Annuity File No. 333-32581 and PrimElite II Annuity File No. 333-72336), - MetLife of CT Separate Account TM II for Variable Annuities (Marquis Portfolios File No 333-40191), - MetLife of CT Separate Account Twelve for Variable Annuities (Pioneer AnnuiStar Plus, Portfolio Architect Plus, Scudder Advocate Rewards Annuity File No. 333-101814), - MetLife of CT Separate Account Fourteen for Variable Annuities (Pioneer AnnuiStar, Portfolio Architect II and Pioneer AnnuiStar Value File No. 333-101815), - MetLife Life and Annuity Company of CT Variable Annuity Separate Account 2002 (Vintage Access, Portfolio Architect Access, Scudder Advocate Advisor and Scudder Advocate Advisor- STI File No. 333-100434, Scudder Advocate Advisor TL4 File No. 333-109611), - MetLife of CT Fund UL II for Variable Life Insurance (MarketLife File No. 033-63927, Variable Survivorship Life File No. 333-69773, Variable Life Accumulator and Accumulator Series II File No. 333-96521, Variable Life File No. 333-96517, Variable Survivorship Life II File No. 333-56958, Variable Life Accumulator Series III File No. 333-113110), - MetLife of CT Variable Life Insurance Separate Account One (VintageLife File No.033-88578), - MetLife of CT Variable Life Insurance Separate Account Two (Portfolio Architect Life File No. 333-15053), or any other separate accounts for variable contracts that are created or become separate accounts of said Company in the future, and to have full power and authority to do or cause to be done in my name, place and stead each and every act and thing necessary or appropriate in order to effectuate the same, as fully to all intents and purposes as I might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact or any of them, may do or cause to be done by virtue hereof. Each said attorney-in-fact shall have power to act hereunder with or without the others. IN WITNESS WHEREOF, I have hereunto set my hand this 8th day of March, 2007. /s/ Stanley J. Talbi ---------------------------------------- Stanley J. Talbi -----END PRIVACY-ENHANCED MESSAGE-----