-----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, QaPB/uCFp5XJQcQdMFvOXI/qU4KjFiOAFf5mKrtsVCB3PB9m7paWTtzprJcq4FGk B3lP2dDIfHYXpVMlnMTpwQ== 0000950135-08-002377.txt : 20080408 0000950135-08-002377.hdr.sgml : 20080408 20080408144159 ACCESSION NUMBER: 0000950135-08-002377 CONFORMED SUBMISSION TYPE: 485BPOS PUBLIC DOCUMENT COUNT: 3 FILED AS OF DATE: 20080408 DATE AS OF CHANGE: 20080408 EFFECTIVENESS DATE: 20080428 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: 333-147891 FILM NUMBER: 08745093 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: 08745094 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 C000059286 PrimElite II Annuity 485BPOS 1 y44184l3e485bpos.txt METLIFE OF CT SEPERATE ACCOUNT PFII FOR VARIABLE ANNUITIES As filed with the Securities and Exchange Commission on April 8, 2008 REGISTRATION STATEMENT NO. 333-147891 811-08317 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------- FORM N-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ] PRE-EFFECTIVE AMENDMENT NO. [ ] POST-EFFECTIVE AMENDMENT NO. 1 [X] AND REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 AMENDMENT NO. 23 [X] (Check Appropriate box or boxes.) METLIFE OF CT SEPARATE ACCOUNT PF II FOR VARIABLE ANNUITIES (Exact name of Registrant) METLIFE INSURANCE COMPANY OF CONNECTICUT (Name of Depositor) ONE CITYPLACE, 185 ASYLUM STREET, 3CP, HARTFORD, CONNECTICUT 06103-3415 (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 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 28, 2008 pursuant to paragraph (b) of Rule 485. [ ] 60 days after filing pursuant to paragraph (a)(1) of Rule 485. [ ] on (date) pursuant to paragraph (a)(1) of Rule 485. 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 APRIL 28, 2008 This prospectus describes PRIMELITE II ANNUITY, a flexible premium deferred variable annuity contract (the "Contract") issued by MetLife Insurance Company of Connecticut. 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"). We may issue it as an individual contract or as a group contract. When we issue a group contract, you will receive a certificate summarizing the Contract's provisions. For convenience, we refer to contracts and certificates as "Contracts." You can choose to have your premium ("Purchase Payments") accumulate on a variable and/or, subject to availability, fixed basis in one or more 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 28, 2008 are: AMERICAN FUNDS INSURANCE SERIES(R) -- CLASS 2 Legg Mason Partners Variable Social American Funds Bond Fund Awareness Portfolio American Funds Global Growth Fund LEGG MASON PARTNERS VARIABLE INCOME TRUST American Funds Global Small Capitalization Legg Mason Partners Variable Adjustable Fund Rate Income Portfolio American Funds Growth Fund Legg Mason Partners Variable High Income American Funds Growth-Income Fund Portfolio FIDELITY(R) VARIABLE INSURANCE Legg Mason Partners Variable Money Market PRODUCTS -- SERVICE CLASS 2 Portfolio Equity-Income Portfolio MET INVESTORS SERIES TRUST Mid Cap Portfolio Lord Abbett Bond Debenture FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS Portfolio -- Class A TRUST -- CLASS 2 Lord Abbett Growth and Income Franklin Income Securities Fund 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 METROPOLITAN SERIES FUND, INC. Legg Mason Partners Variable Capital BlackRock Aggressive Growth Portfolio Portfolio -- Class D Legg Mason Partners Variable Dividend BlackRock Bond Income Portfolio -- Class E Strategy Portfolio Capital Guardian U.S. Equity Legg Mason Partners Variable Fundamental Portfolio -- Class B Value Portfolio -- Class I Jennison Growth Portfolio -- Class B Legg Mason Partners Variable Global Equity MFS(R) Total Return Portfolio -- Class F Portfolio T. Rowe Price Large Cap Growth Legg Mason Partners Variable International Portfolio -- Class B All Cap Western Asset Management U.S. Government Opportunity Portfolio Portfolio -- Class A Legg Mason Partners Variable Investors PIONEER VARIABLE CONTRACTS TRUST -- CLASS II Portfolio -- Class I Pioneer Fund VCT Portfolio Legg Mason Partners Variable Large Cap Pioneer Mid Cap Value VCT Portfolio Growth Portfolio -- Class I THE UNIVERSAL INSTITUTIONAL FUNDS, INC. Legg Mason Partners Variable Lifestyle Equity and Income Portfolio -- Class II Allocation 50% U.S. Real Estate Securities Legg Mason Partners Variable Lifestyle Portfolio -- Class I Allocation 70% VAN KAMPEN LIFE INVESTMENT TRUST -- CLASS II Legg Mason Partners Variable Lifestyle Comstock Portfolio Allocation 85% Growth and Income Portfolio Legg Mason Partners Variable Mid Cap Core Portfolio -- Class I Legg Mason Partners Variable Small Cap Growth Portfolio -- Class I
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 28, 2008. 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 P.O. Box 10426, Des Moines, IA 50306-0426, call 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. TABLE OF CONTENTS
PAGE ---- GLOSSARY................................................................ 3 SUMMARY................................................................. 5 FEE TABLE............................................................... 8 CONDENSED FINANCIAL INFORMATION......................................... 12 THE ANNUITY CONTRACT.................................................... 12 Contract Owner Inquiries................................................ 13 Purchase Payments....................................................... 13 Accumulation Units...................................................... 14 The Variable Funding Options............................................ 14 FIXED ACCOUNT........................................................... 20 CHARGES AND DEDUCTIONS.................................................. 20 General................................................................. 20 Withdrawal Charge....................................................... 21 Free Withdrawal Allowance............................................... 22 Transfer Charge......................................................... 22 Administrative Charges.................................................. 22 Mortality and Expense Risk Charge....................................... 22 Variable Liquidity Benefit Charge....................................... 22 Enhanced Stepped-Up Provision Charge.................................... 23 Variable Funding Option Expenses........................................ 23 Premium Tax............................................................. 23 Changes in Taxes Based upon Premium or Value............................ 23 TRANSFERS............................................................... 23 Market Timing/Excessive Trading......................................... 24 Dollar Cost Averaging................................................... 25 ACCESS TO YOUR MONEY.................................................... 26 Systematic Withdrawals.................................................. 27 Loans................................................................... 27 OWNERSHIP PROVISIONS.................................................... 27 Types of Ownership...................................................... 27 Contract Owner.......................................................... 27 Beneficiary............................................................. 28 Annuitant............................................................... 28 DEATH BENEFIT........................................................... 28 Death Proceeds before the Maturity Date................................. 29 Enhanced Stepped-Up Provision ("E.S.P.")................................ 29 Payment of Proceeds..................................................... 30 Spousal Contract Continuance (subject to availability--does not apply if a non-spouse is a joint owner)........................................ 32 Beneficiary Contract Continuance (not permitted for non-natural beneficiaries)........................................................ 32 Planned Death Benefit................................................... 33 Death Proceeds after the Maturity Date.................................. 33 THE ANNUITY PERIOD...................................................... 33 Maturity Date........................................................... 33 Allocation of Annuity................................................... 34 Variable Annuity........................................................ 34 Fixed Annuity........................................................... 34 PAYMENTS OPTIONS........................................................ 35 Election of Options..................................................... 35 Annuity Options......................................................... 35 Variable Liquidity Benefit.............................................. 36 MISCELLANEOUS CONTRACT PROVISIONS....................................... 36 Right to Return......................................................... 36 Termination............................................................. 36 Required Reports........................................................ 36 Suspension of Payments.................................................. 36 THE SEPARATE ACCOUNTS................................................... 37 Performance Information................................................. 37 FEDERAL TAX CONSIDERATIONS.............................................. 38 General Taxation of Annuities........................................... 38 Types of Contracts: Qualified and Non-qualified......................... 39 Qualified Annuity Contracts............................................. 39 Taxation of Qualified Annuity Contracts................................. 39 Mandatory Distributions for Qualified Plans............................. 40 Individual Retirement Annuities......................................... 40 Roth IRAs............................................................... 41 TSAs (ERISA and Non-ERISA).............................................. 41 Non-qualified Annuity Contracts......................................... 43 Diversification Requirements for Variable Annuities..................... 44 Ownership of the Investments............................................ 44 Taxation of Death Benefit Proceeds...................................... 44 Other Tax Considerations................................................ 45 Puerto Rico Tax Considerations.......................................... 45 Non-Resident Aliens..................................................... 45 Tax Credits and Deductions.............................................. 45 OTHER INFORMATION....................................................... 45 The Insurance Company................................................... 45 Financial Statements.................................................... 46 Distribution of Variable Annuity Contracts.............................. 46 Conformity with State and Federal Laws.................................. 48 Voting Rights........................................................... 48 Restrictions on Financial Transactions.................................. 48 Legal Proceedings....................................................... 48 APPENDIX A: CONDENSED FINANCIAL INFORMATION FOR METLIFE OF CT SEPARATE ACCOUNT PF FOR VARIABLE ANNUITIES..................................... A-1 APPENDIX B: CONDENSED FINANCIAL INFORMATION FOR METLIFE OF CT 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 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: P.O. Box 10426, Des Moines, IA 50306-0426 (for overnight delivery or courier service only: 4700 Westown Parkway, Suite 200, West Des Moines, IA 50266). 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, 408A or 414(d) 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. 3 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. 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. 4 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 MetLife Insurance Company of Connecticut ("the Company," "We" or "Us"). The Company sponsors MetLife of CT Separate Account PF for Variable Annuities ("Separate Account PF") and MetLife of CT Separate Account PF II for Variable Annuities ("Separate Account PF II"), each a segregated account ("Separate Account"). Prior to December 7, 2007, Separate Account PF II was sponsored by MetLife Life and Annuity Company of Connecticut ("MLACC"). On that date, MLACC merged with and into the Company, and the Company became the sponsor of Separate Account PF II. Immediately following the merger, the Company stopped issuing Contracts under Separate Account PF II and now only issues Contracts under Separate Account PF. When we refer to the Separate Account, we are referring to Separate Account PF, except where the Contract was originally issued by MLACC, in which case, we are referring to Separate Account PF II. The Contract and/or certain optional benefits may not currently be available for sale in all states. For contracts issued in New York, a waiver of the withdrawal charge may apply to all Annuity Payments. 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 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. If your Contract was issued as a Qualified Contract under Section 403(b) of the Code in a 90-24 transfer completed on or before September 24, 2007, we urge you to consult with your tax advisor prior to making additional purchase payments (if permitted) as significant adverse tax consequences may result from such additional payments. (See "Federal Tax Considerations.") 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. 5 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 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 (generally, 4:00 p.m., Eastern Time) 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. Where permitted by state law, we also reserve the right to restrict transfers into the Fixed Account if the credited interest rate is equal to the minimum guaranteed interest rate specified under the Contract. 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 each business day 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. (This includes withdrawals resulting from a request to divide the Contract Value due to divorce.) If you select the Enhanced Stepped-Up Provision, ("E.S.P."), an additional 0.25% annually will be deducted each business day 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. 6 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 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 may elect to continue his/her portion of the Contract and take required distributions over time, rather than have the death benefit paid to the beneficiary in a lump sum. 7 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. 8 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% or, if greater, an amount, if any, equal to the fund expenses that are in excess of 0.68% 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, an amount equal to the Underlying Fund expenses that are in excess of 1.10% for the Subaccount investing in the Third Avenue Small Cap Value Portfolio, an amount equal to the Underlying Fund expenses that are in excess of 1.18% for the Subaccount investing in the MFS(R) Research International 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. UNDERLYING FUND EXPENSES AS OF DECEMBER 31, 2007 (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 (12b-1) fees 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 888-556-5412. 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 (12b-1) fees, and other expenses) 0.52% 1.40%
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 ACQUIRED FUND FEES OPERATING AND/OR EXPENSE OPERATING UNDERLYING FUND FEE (12b-1) FEES EXPENSES AND EXPENSES* EXPENSES REIMBURSEMENT EXPENSES** - --------------- ---------- ------------ -------- ------------------ --------- --------------- --------------- ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND, INC. -- CLASS B Global Technology Portfolio+... 0.75% 0.25% 0.17% -- 1.17% -- 1.17% AMERICAN FUNDS INSURANCE SERIES(R) -- CLASS 2 American Funds Bond Fund....... 0.40% 0.25% 0.01% -- 0.66% -- 0.66% American Funds Global Growth Fund........................ 0.53% 0.25% 0.02% -- 0.80% -- 0.80% American Funds Global Small Capitalization Fund......... 0.70% 0.25% 0.03% -- 0.98% -- 0.98% American Funds Growth Fund..... 0.32% 0.25% 0.01% -- 0.58% -- 0.58% American Funds Growth-Income Fund........................ 0.26% 0.25% 0.01% -- 0.52% -- 0.52% FIDELITY(R) VARIABLE INSURANCE PRODUCTS -- SERVICE CLASS 2 Equity-Income Portfolio........ 0.46% 0.25% 0.09% -- 0.80% -- 0.80% Mid Cap Portfolio.............. 0.56% 0.25% 0.10% -- 0.91% -- 0.91%
9
DISTRIBUTION TOTAL CONTRACTUAL FEE NET TOTAL AND/OR ANNUAL WAIVER ANNUAL MANAGEMENT SERVICE OTHER ACQUIRED FUND FEES OPERATING AND/OR EXPENSE OPERATING UNDERLYING FUND FEE (12b-1) FEES EXPENSES AND EXPENSES* EXPENSES REIMBURSEMENT EXPENSES** - --------------- ---------- ------------ -------- ------------------ --------- --------------- --------------- FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST -- CLASS 2 Franklin Income Securities Fund........................ 0.45% 0.25% 0.02% -- 0.72% -- 0.72% Mutual Shares Securities Fund(1)..................... 0.59% 0.25% 0.13% -- 0.97% -- 0.97% Templeton Growth Securities Fund........................ 0.73% 0.25% 0.03% -- 1.01% -- 1.01% LEGG MASON PARTNERS VARIABLE EQUITY TRUST Legg Mason Partners Variable Aggressive Growth Portfolio -- Class I++...... 0.75% -- 0.07% -- 0.82% -- 0.82%(2) Legg Mason Partners Variable Appreciation Portfolio -- Class I........ 0.69% -- 0.11% 0.01% 0.81% -- 0.81%(2) Legg Mason Partners Variable Appreciation Portfolio -- Class II++..... 0.69% 0.25% 0.20% 0.01% 1.15% -- 1.15%(2) Legg Mason Partners Variable Capital and Income Portfolio -- Class I++...... 0.75% -- 0.13% -- 0.88% -- 0.88% Legg Mason Partners Variable Capital and Income Portfolio -- Class II....... 0.75% 0.25% 0.13% -- 1.13% -- 1.13% Legg Mason Partners Variable Capital Portfolio........... 0.75% 0.25% 0.11% -- 1.11% -- 1.11%(2) Legg Mason Partners Variable Dividend Strategy Portfolio++................. 0.65% -- 0.33% -- 0.98% -- 0.98%(2) Legg Mason Partners Variable Fundamental Value Portfolio -- Class I........ 0.75% -- 0.08% -- 0.83% -- 0.83%(2) Legg Mason Partners Variable Global Equity Portfolio..... 0.75% 0.25% 0.19% -- 1.19% -- 1.19%(2) Legg Mason Partners Variable International All Cap Opportunity Portfolio++..... 0.85% -- 0.26% -- 1.11% -- 1.11%(2) Legg Mason Partners Variable Investors Portfolio -- Class I........................... 0.62% -- 0.14% -- 0.76% -- 0.76%(2) Legg Mason Partners Variable Large Cap Growth Portfolio -- Class I++...... 0.75% -- 0.15% -- 0.90% -- 0.90%(3) Legg Mason Partners Variable Lifestyle Allocation 50%++++..................... -- -- 0.10% 0.68% 0.78% -- 0.78%(4) Legg Mason Partners Variable Lifestyle Allocation 70%++++..................... -- -- 0.15% 0.74% 0.89% -- 0.89%(4) Legg Mason Partners Variable Lifestyle Allocation 85%++++..................... -- -- 0.23% 0.82% 1.05% -- 1.05%(4) Legg Mason Partners Variable Mid Cap Core Portfolio -- Class I++...... 0.75% -- 0.26% -- 1.01% -- 1.01%(2) Legg Mason Partners Variable Small Cap Growth Portfolio -- Class I........ 0.75% -- 0.35% -- 1.10% -- 1.10%(2) Legg Mason Partners Variable Social Awareness Portfolio++................. 0.67% -- 0.38% -- 1.05% -- 1.05%(2) LEGG MASON PARTNERS VARIABLE INCOME TRUST Legg Mason Partners Variable Adjustable Rate Income Portfolio++................. 0.55% 0.25% 0.60% -- 1.40% -- 1.40%(2) Legg Mason Partners Variable High Income Portfolio++..... 0.60% -- 0.15% -- 0.75% -- 0.75%(2) Legg Mason Partners Variable Money Market Portfolio++.... 0.45% -- 0.08% -- 0.53% -- 0.53%(2) MET INVESTORS SERIES TRUST BlackRock Large Cap Core Portfolio -- Class E+....... 0.58% 0.15% 0.06% -- 0.79% -- 0.79% Lord Abbett Bond Debenture Portfolio -- Class A........ 0.49% -- 0.05% -- 0.54% -- 0.54% Lord Abbett Growth and Income Portfolio -- Class B........ 0.49% 0.25% 0.03% -- 0.77% -- 0.77%
10
DISTRIBUTION TOTAL CONTRACTUAL FEE NET TOTAL AND/OR ANNUAL WAIVER ANNUAL MANAGEMENT SERVICE OTHER ACQUIRED FUND FEES OPERATING AND/OR EXPENSE OPERATING UNDERLYING FUND FEE (12b-1) FEES EXPENSES AND EXPENSES* EXPENSES REIMBURSEMENT EXPENSES** - --------------- ---------- ------------ -------- ------------------ --------- --------------- --------------- Met/AIM Capital Appreciation Portfolio -- Class E........ 0.76% 0.15% 0.10% -- 1.01% -- 1.01% MFS(R) Research International Portfolio -- Class B........ 0.70% 0.25% 0.09% -- 1.04% -- 1.04% Oppenheimer Capital Appreciation Portfolio -- Class B........ 0.58% 0.25% 0.06% -- 0.89% -- 0.89% Pioneer Strategic Income Portfolio -- Class A........ 0.60% -- 0.09% -- 0.69% -- 0.69%(5) Third Avenue Small Cap Value Portfolio -- Class B++...... 0.73% 0.25% 0.03% -- 1.01% -- 1.01% METROPOLITAN SERIES FUND, INC. BlackRock Aggressive Growth Portfolio -- Class D........ 0.71% 0.10% 0.05% -- 0.86% -- 0.86% BlackRock Bond Income Portfolio -- Class E........ 0.38% 0.15% 0.06% -- 0.59% 0.01% 0.58%(6) Capital Guardian U.S. Equity Portfolio -- Class B........ 0.66% 0.25% 0.05% -- 0.96% -- 0.96% Jennison Growth Portfolio -- Class B........ 0.63% 0.25% 0.04% -- 0.92% -- 0.92% MFS(R) Total Return Portfolio -- Class F........ 0.53% 0.20% 0.05% -- 0.78% -- 0.78% T. Rowe Price Large Cap Growth Portfolio -- Class B........ 0.60% 0.25% 0.07% -- 0.92% -- 0.92% Western Asset Management U.S. Government Portfolio -- Class A........ 0.49% -- 0.05% -- 0.54% -- 0.54% PIONEER VARIABLE CONTRACTS TRUST -- CLASS II Pioneer Fund VCT Portfolio..... 0.65% 0.25% 0.05% -- 0.95% -- 0.95% Pioneer Mid Cap Value VCT Portfolio................... 0.65% 0.25% 0.06% -- 0.96% -- 0.96% THE UNIVERSAL INSTITUTIONAL FUNDS, INC. Equity and Income Portfolio -- Class II....... 0.41% 0.35% 0.29% -- 1.05% -- 1.05% U.S. Real Estate Securities Portfolio -- Class I........ 0.74% -- 0.28% -- 1.02% -- 1.02% VAN KAMPEN LIFE INVESTMENT TRUST -- CLASS II Comstock Portfolio............. 0.56% 0.25% 0.03% -- 0.84% -- 0.84% Growth and Income Portfolio.... 0.56% 0.25% 0.04% -- 0.85% -- 0.85%
- --------- * Acquired Fund Fees and Expenses are fees and expenses incurred indirectly by a portfolio as a result of investing in shares of one or more underlying portfolios. ** Net Total Annual Operating Expenses do not reflect: (1) voluntary waivers of fees or 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 investments except under dollar cost averaging and rebalancing programs in existence at the time of closing. ++ Fees and expenses of this Portfolio are based on the Portfolio's fiscal year ended October 31, 2007. ++++ Fees and expenses of this Portfolio are based on the Portfolio's fiscal year ended January 31, 2008. (1) We may market this Underlying Fund under the name "Franklin Templeton Mutual Shares Securities Fund" in written materials outside of this prospectus. (2) Other Expenses have been revised to reflect the estimated effect of additional prospectus and shareholder report printing and mailing expenses expected to be incurred by the fund going forward. (3) Other Expenses have been revised to reflect the estimated effect of additional prospectus and shareholder report printing and mailing expenses expected to be incurred by the fund going forward. Due to contractual waivers and/or reimbursements in place through March 1, 2009, the Portfolio's actual total net operating expenses, excluding brokerage, taxes, interest and extraordinary expenses, are not expected to exceed 0.78% prior to that date. (4) The Portfolio is a "fund of funds" that invests substantially all of its assets in other Legg Mason-affiliated portfolios. Because the Portfolio invests in other underlying portfolios, the Portfolio will bear its pro rata portion of the operating expenses of the underlying portfolios in which the Portfolio invests, including the management fee. Other Expenses have been revised to reflect the estimated effect of additional prospectus and shareholder report printing and mailing expenses expected to be incurred by the fund going forward. (5) The Management Fee has been restated to reflect an amended management fee agreement, as if the agreement had been in effect during the preceding fiscal year. 11 (6) MetLife Advisers, LLC has contractually agreed, for the period April 28, 2008 through April 30, 2009, to reduce the Management Fee for each Class of the Portfolio to the annual rate of 0.325% for the amounts over $1 billion but less than $2 billion. 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 THE ANNUITIZED AT THE END OF PERIOD END OF PERIOD SHOWN: SHOWN: ---------------------------------------------------------- ---------------------------------- FUNDING OPTION 1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS - -------------- ---------- ---------------------- ---------- ---------- ---------- ---------- ---------- Underlying Fund with Maximum Total Annual Operating Expenses......... $1,137 $1,623 $2,250 $3,618 $337 $1,028 $1,740 Underlying Fund with Minimum Total Annual Operating Expenses......... $1,050 $1,363 $1,821 $2,791 $250 $768 $1,311 IF CONTRACT IS NOT SURREN- DERED OR ANNUITIZED AT THE END OF PERIOD SHOWN: ---------- FUNDING OPTION 10 YEARS - -------------- ---------- Underlying Fund with Maximum Total Annual Operating Expenses......... $3,618 Underlying Fund with Minimum Total Annual Operating Expenses......... $2,791
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 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. 12 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 state law, we also reserve the right to restrict allocation of Purchase Payments to the Fixed Account if the credited interest rate 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 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 Account whenever the current credited interest rate for the Fixed Account is equal to the minimum guaranteed rate specified in your contract. Purchase Payments may be made at any time while the Annuitant is alive and before the date Annuity Payments begin. 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.") 13 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). IF YOU SEND YOUR PURCHASE PAYMENTS OR TRANSACTION REQUESTS TO AN ADDRESS OTHER THAN THE ONE WE HAVE DESIGNATED FOR RECEIPT OF SUCH PURCHASE PAYMENTS OR REQUESTS, WE MAY RETURN THE PURCHASE PAYMENT TO YOU, OR THERE MAY BE A DELAY IN APPLYING THE PURCHASE PAYMENT OR TRANSACTION TO YOUR CONTRACT. QUALIFIED CONTRACTS UNDER SECTION 403(B). If your Contract was issued as a Qualified Contract under Section 403(b) of the Code (also called a "tax sheltered annuity" or "TSA") in a 90-24 transfer completed on or before September 24, 2007, we urge you to consult with your tax advisor prior to making additional purchase payments. Such additional payments may have significant adverse tax consequences. (See "Federal Tax Consequences.") 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 policies, and in some instances, certain retirement plans. They are not the same as the retail mutual funds 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 a number of 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 allocation of assets to portfolios advised by our affiliates than those that are not, we may be more inclined to offer 14 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. These broker-dealer firms may receive payments from the Underlying Funds they recommend and may benefit accordingly from the allocation of Contract Value to such Underlying Funds. When the Company develops a variable 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 YOUR CONTRACT VALUE 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 (both of which are now MetLife Insurance Company of Connecticut) from Citigroup. Legg Mason replaced the Citigroup affiliates as a party to the agreement when Citigroup sold its asset management business to Legg Mason. The agreement also obligates Legg Mason to continue making payments to the Company with respect to Underlying Funds advised by Legg Mason affiliates, on the same terms provided for in administrative services agreements between Citigroup's asset management affiliates and the Travelers insurance companies that predate the acquisition. 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 its affiliates. These payments may be used for a variety of purposes, including payment of expenses for certain administrative, marketing and support services with respect to the Contracts, and, in the Company's role as an intermediary, with respect to 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 its 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 15 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 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, MetLife Investors Distribution Company. Payments under an Underlying Fund's 12b-1 Plan decrease the Underlying Fund's investment return. We make certain payments to American Funds Distributors, Inc., principal underwriter for the American Funds Insurance Series. (See "Distribution of Variable Annuity 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 888-556-5412 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. -- CLASS B Global Technology Portfolio+ Seeks long-term growth of AllianceBernstein L.P. capital. AMERICAN FUNDS INSURANCE SERIES(R) -- CLASS 2 American Funds Bond Fund Seeks to maximize current income Capital Research and Management and preserve capital by investing Company primarily in fixed-income securities. American Funds Global Growth Fund Seeks capital appreciation Capital Research and Management through stocks. Company American Funds Global Small Seeks capital appreciation Capital Research and Management Capitalization Fund through stocks. Company American Funds Growth Fund Seeks capital appreciation Capital Research and Management through stocks. Company American Funds Growth-Income Fund Seeks both capital appreciation Capital Research and Management and income. Company FIDELITY(R) VARIABLE INSURANCE PRODUCTS -- SERVICE CLASS 2 Equity-Income Portfolio Seeks income and capital Fidelity Management & Research appreciation potential primarily Company from income-producing equity securities. Mid Cap Portfolio Seeks long-term growth of Fidelity Management & Research capital. Company FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST -- CLASS 2 Franklin Income Securities Fund Seeks to maximize income while Franklin Advisers, Inc. maintaining prospects for capital appreciation. Mutual Shares Securities Fund* Seeks capital appreciation, with Franklin Mutual Advisers, LLC income as a secondary goal.
16
FUNDING INVESTMENT INVESTMENT OPTION OBJECTIVE ADVISER/SUBADVISER - --------------------------------- --------------------------------- --------------------------------- Templeton Growth Securities Fund Seeks long-term capital growth. Templeton Global Advisors Limited LEGG MASON PARTNERS VARIABLE EQUITY TRUST Legg Mason Partners Variable Seeks capital appreciation. Legg Mason Partners Fund Advisor, Aggressive Growth LLC Portfolio -- Class I Subadviser: ClearBridge Advisors, LLC Legg Mason Partners Variable Seeks long-term appreciation of Legg Mason Partners Fund Advisor, Appreciation Portfolio -- Class capital. LLC I Subadviser: ClearBridge Advisors, LLC Legg Mason Partners Variable Seeks long-term appreciation of Legg Mason Partners Fund Advisor, Appreciation Portfolio -- Class capital. LLC II++ Subadviser: ClearBridge Advisors, LLC Legg Mason Partners Variable Seeks total return (that is, a Legg Mason Partners Fund Advisor, Capital and Income combination of income and long- LLC Portfolio -- Class I++ term capital appreciation). Subadvisers: Western Asset Management Company; ClearBridge Advisors, LLC; Western Asset Management Company Limited Legg Mason Partners Variable Seeks total return (that is, a Legg Mason Partners Fund Advisor, Capital and Income combination of income and long- LLC Portfolio -- Class II term capital appreciation). Subadvisers: Western Asset Management Company; ClearBridge Advisors, LLC; Western Asset Management Company Limited Legg Mason Partners Variable Seeks capital appreciation Legg Mason Partners Fund Advisor, Capital Portfolio through investment in securities LLC which the portfolio managers Subadviser: ClearBridge Advisors, believe have above-average LLC capital appreciation potential. 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 long-term capital growth; Legg Mason Partners Fund Advisor, Global Equity Portfolio dividend income, if any, is LLC incidental to this goal. Subadviser: Batterymarch Financial Management, Inc. 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: Global Currents Investment Management, LLC Legg Mason Partners Variable Seeks long-term growth of Legg Mason Partners Fund Advisor, Investors Portfolio -- Class I capital. Current income is a LLC secondary objective. Subadviser: ClearBridge Advisors, LLC
17
FUNDING INVESTMENT INVESTMENT OPTION OBJECTIVE ADVISER/SUBADVISER - --------------------------------- --------------------------------- --------------------------------- 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 a balance of growth of Legg Mason Partners Fund Advisor, Lifestyle Allocation 50% captial and income. 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 Mid Seeks long-term growth of Legg Mason Partners Fund Advisor, Cap Core Portfolio -- Class I capital. LLC Subadviser: ClearBridge Advisors, 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 capital appreciation and Legg Mason Partners Fund Advisor, Social Awareness Portfolio retention of net investment LLC 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 High Seeks high current income. Legg Mason Partners Fund Advisor, Income Portfolio Secondarily, seeks capital LLC appreciation. Subadvisers: Western Asset Management Company; 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 high current income and the Met Investors Advisory, LLC Portfolio -- Class A opportunity for capital Subadviser: Lord, Abbett & Co. appreciation to produce a high LLC total return. Lord Abbett Growth and Income Seeks long-term growth of capital Met Investors Advisory, LLC Portfolio -- Class B and income without excessive Subadviser: Lord, Abbett & Co. fluctuation in market value. LLC
18
FUNDING INVESTMENT INVESTMENT OPTION OBJECTIVE ADVISER/SUBADVISER - --------------------------------- --------------------------------- --------------------------------- Met/AIM Capital Appreciation Seeks capital appreciation. Met Investors Advisory, LLC Portfolio -- Class E Subadviser: Invesco 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 Appreciation Seeks capital appreciation. Met Investors Advisory, LLC Portfolio -- Class B Subadviser: OppenheimerFunds, 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, LLC BlackRock Bond Income Seeks a competitive total return MetLife Advisers, LLC Portfolio -- Class E primarily from investing in Subadviser: BlackRock Advisors, fixed-income securities. LLC Capital Guardian U.S. Equity Seeks long-term growth of MetLife Advisers, LLC Portfolio -- Class B capital. Subadviser: Capital Guardian Trust Company Jennison Growth Seeks long-term growth of MetLife Advisers, LLC Portfolio -- Class B capital. Subadviser: Jennison Associates LLC 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 Portfolio -- Class A consistent with preservation of Subadviser: Western Asset capital and maintenance of Management Company liquidity. PIONEER VARIABLE CONTRACTS TRUST -- CLASS II Pioneer Fund VCT Portfolio Seeks reasonable income and Pioneer Investment Management, capital growth. Inc. Pioneer Mid Cap Value VCT Seeks capital appreciation by Pioneer Investment Management, Portfolio 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.
19
FUNDING INVESTMENT INVESTMENT OPTION OBJECTIVE ADVISER/SUBADVISER - --------------------------------- --------------------------------- --------------------------------- U.S. Real Estate Securities Seeks to provide above average Morgan Stanley Investment Portfolio -- Class I current income and long-term Management Inc. capital appreciation by investing primarily in equity securities of companies in the U.S. real estate industry, including real estate investment trusts. VAN KAMPEN LIFE INVESTMENT TRUST -- CLASS II Comstock Portfolio 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 Portfolio Seeks long-term growth of capital Van Kampen Asset Management and income.
- --------- * We may market this Underlying Fund under the name "Franklin Templeton Mutual Shares Securities Fund" in written materials outside of this prospectus. + Not available under all Contracts. Availability depends on Contract issue date. ++ Closed to new investments except under dollar cost averaging and rebalancing programs in existence at the time of closing. Certain Variable Funding Options may have been subject to a merger, substitution or other change. Please see "Appendix C -- Additional Information Regarding Underlying Funds." FIXED ACCOUNT - -------------------------------------------------------------------------------- We may offer our Fixed Account as a funding option. Please refer to your Contract and Appendix D for more information. 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 - 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 20 - 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 - 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. (This includes withdrawals resulting from a request to divide the Contract Value due to divorce.) 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%
For purposes of the withdrawal charge calculation, withdrawals are deemed to be taken first from: (a) any Purchase Payment to which no withdrawal charge applies, then (b) any remaining free withdrawal allowance (as described below) (after being reduced by (a)), then (c) any remaining Purchase Payment to which a withdrawal charge applies (on a first-in, first-out basis), then (d) 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) - in the form of lifetime Annuity Payments or Annuity Payments for a fixed period of at least five years - under the Nursing Home Confinement provision (as described in Appendix E) - due to a minimum distribution under our minimum distribution rules then in effect Note: Any free withdrawals taken will not reduce Purchase Payments still subject to a withdrawal charge. 21 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 end of the previous 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. The annual Contract administrative charge will be deducted on a pro-rata basis from amounts allocated to the Variable Funding Options. We will deduct this 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, if it is available, 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 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 registered representative. 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. 22 We will assess the charge as a percentage of the total benefit received 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%
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, 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. 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 23 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, American Funds Global Small Capitalization Fund, Templeton Growth Securities Fund, Legg Mason Partners Variable Global Equity Portfolio, 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 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 24 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 or, if applicable, any asset allocation program described in this prospectus 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 separate accounts funding variable insurance contracts or retirement plans. 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 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. 25 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 either a 6 Month Program or 12 Month Program. The 6 Month Program and the 12 Month Program will generally have different credited interest rates. Under the 6 Month Program, the interest rate can accrue up to 6 months on the remaining amounts in the Special DCA Program and we must transfer all Purchase Payments and accrued interest on a level basis to the selected funding options in 6 months. 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 Special DCA 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 non-DCA Program 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. Transfers made under any DCA Program will not be counted for purposes of restrictions we may impose on the number of transfers permitted under the Contract. 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. 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) and/or the Fixed Account 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 26 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, loan or withdrawal proceeds if any portion of those proceeds would be derived from a Contract Owner's check that has not yet cleared (i.e., that could still be dishonored by your banking institution). We may use telephone, fax, Internet or other means of communications to verify that payment from the Contract Owner's 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. Contract Owners 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. 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. 27 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. 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." 28 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. 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 29 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 a lump sum distribution. - -------------------------------------------------------------------------------------------------------------- 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 a lump sum distribution. - -------------------------------------------------------------------------------------------------------------- NON-SPOUSAL JOINT OWNER (WHO The surviving joint owner. Yes IS NOT THE ANNUITANT) - -------------------------------------------------------------------------------------------------------------- NON-SPOUSAL JOINT OWNER (WHO The beneficiary (ies), or, The beneficiary elects to Yes IS THE ANNUITANT) if none, to the Contract continue the Contract rather Owner's estate. than receive a lump sum distribution. - -------------------------------------------------------------------------------------------------------------- SPOUSAL JOINT OWNER (WHO IS The surviving joint owner. The spouse elects to Yes NOT THE ANNUITANT) continue the Contract. - --------------------------------------------------------------------------------------------------------------
30
- -------------------------------------------------------------------------------------------------------------- MANDATORY BEFORE THE MATURITY DATE, THE COMPANY WILL PAYOUT RULES UPON THE DEATH OF THE PAY THE PROCEEDS TO: UNLESS... APPLY* - -------------------------------------------------------------------------------------------------------------- SPOUSAL JOINT OWNER (WHO IS THE ANNUITANT) The beneficiary (ies), or, The spouse elects to Yes if none, to the surviving continue the Contract. joint 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 a lump sum 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) - -------------------------------------------------------------------------------------------------------------- BENEFICIARY No death proceeds are N/A payable; Contract continues. - -------------------------------------------------------------------------------------------------------------- CONTINGENT BENEFICIARY No death proceeds are N/A payable; Contract continues. - --------------------------------------------------------------------------------------------------------------
31 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 lump sum 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. The terms and conditions that applied to the original Contract (including Contract fees and charges) will also apply to the continued Contract, with certain exceptions described in the Contract. Any Purchase Payment made 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 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. For purposes of the death benefit on the continued Contract, the death benefit will be calculated the same as prior to continuance except all values used to calculate the death benefit, which may include a Step-Up Value or Roll-Up Death Benefit Value (depending on the optional benefit), are reset on the date the spouse continues the contract. Spousal continuation will not satisfy required minimum distribution rules for Qualified Contracts other than IRAs. In addition, because the contract proceeds must be distributed within the time periods required by the federal Internal Revenue Code, the right of a spouse to continue the contract, and all contract provisions relating to spousal continuation, are available only to a person who is defined as a "spouse" under the federal Defense of Marriage Act, or any other applicable federal law. 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 32 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 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 33 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. 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 34 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. 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. This option may not satisfy the minimum required distribution rules for Qualified Contracts. Consult a tax adviser before electing this option. 35 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." 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 terminate 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 36 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 - -------------------------------------------------------------------------------- The Company sponsors Separate Account PF and Separate Account PF II. When we refer to the Separate Account, we are referring to Separate Account PF, except where the Contract was originally issued by MLACC, in which case, we are referring to Separate Account PF II. (See "The Insurance Company" .) 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 anticipate merging Separate Account PF and Separate Account PF II with and into another separate account of the Company (the MetLife of CT Separate Account Eleven for Variable Annuities) during the fourth quarter of 2008 at the earliest, subject to regulatory approval. This merger will have no effect on the provisions of, and the rights and obligations under, the Contract. Similarly, the merger will not have any adverse impact on your Contract Value or any tax consequences for you. We hold the assets of the Separate Account 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 37 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. 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%. The reduced rates apply during 2003 through 2008, and thereafter will increase to prior levels. Under current federal 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 advisers 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 38 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 policy, 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 payment payable to the designated beneficiary or the actuarial value of the payments to be received by the beneficiary. Consult an estate planning adviser for more information. 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 us 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 qualified employee pension plan 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 tax 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. 39 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, as well as all living benefits such as GMAB and GMWB , if available in your contract) must be added to the Contract 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. 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), 408 OR 457, 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 in 2007 and $5,000 in 2008, and it may be indexed for inflation in years after 2008. 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 40 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 $46,000 or 100% of pay for each participant in 2008. 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% 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). Recently, the IRS announced new regulations affecting sec.403(b) plans and arrangements. As part of these regulations, employers will need to meet certain requirements in order for their employees' annuity contracts that fund these programs to retain a tax deferred status under sec.403(b). These regulations are generally effective January 1, 2009. Prior to the new rules, transfers of one annuity contract to another would not result in a loss of tax deferred status under sec.403(b) under certain conditions (so-called "90-24 transfers"). The new regulations have the following effect regarding transfers: (1) a newly issued contract funded by a transfer which is completed after September 24, 2007, is subject to the employer requirements referred to above; (2) additional purchase payments made after September 24, 2007, to a contract that was funded by a 90-24 transfer on or before September 24, 2007, may subject the contract to this new employer requirement. If your Contract was issued previously in a 90-24 transfer completed on or before September 24, 2007, we urge you to consult with your tax advisor prior to making additional purchase payments (if permitted). 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 41 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 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"). 42 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 indicate 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. 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. 43 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. 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 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. 44 OTHER TAX CONSIDERATIONS 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 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 COMPANY 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. Before December 7, 2007, certain of the Contracts were issued by MetLife Life and Annuity Company of Connecticut, a stock life insurance company chartered in 1973 in Connecticut. These Contracts were funded through Separate Account PF II, a separate account registered with the SEC as a unit investment trust under the Investment Company Act of 1940, as amended. On December 7, 2007, MLACC, a wholly-owned subsidiary of the Company 45 and an indirect, wholly-owned subsidiary of MetLife, Inc., merged with and into the Company. Upon consummation of the merger, MLACC's corporate existence ceased by operation of law, and the Company assumed legal ownership of all of the assets of MLACC, including Separate Account PF II and its assets. Pursuant to the merger, therefore, Separate Account PF II became a separate account of the Company. As a result of the merger, the Company also has become responsible for all of MLACC's liabilities and obligations, including those created under the Contract as initially issued by MLACC (formerly known as The Travelers Life and Annuity Company) and outstanding on the date of the merger. The Contract has thereby become a variable contract funded by a separate account of the Company, and each owner thereof has become a Contract Owner of the Company. 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 (the "Company") has appointed MetLife Investors Distribution Company ("MLIDC") to serve as the principal underwriter and distributor of the securities offered through this Prospectus, pursuant to the terms of a Distribution and Principal Underwriting Agreement. 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 Financial Industry Regulatory Authority (FINRA). An investor brochure that includes information describing FINRA's Public Disclosure Program is available by calling FINRA's Public Disclosure Program hotline at 1- 800-289-9999, or by visiting FINRA's website at www.finra.org. MLIDC and the Company enter into selling agreements with affiliated and unaffiliated broker-dealers who are registered with the SEC and are members of FINRA, 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 offered on a continuous basis. 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 Funds' shares in connection with the Contract. 46 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 a preferred distribution arrangement 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., Walnut Street Securities, Inc., and New England Securities Corporation. See the "Statement of Additional Information -- DISTRIBUTION AND PRINCIPAL UNDERWRITING AGREEMENT" for a list of the broker-dealer firms that received such additional compensation during 2007, 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 that may be offered under 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 Met 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. SALE 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, 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. MetLife registered representatives 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 representatives 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 47 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. 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. 48 APPENDIX A - -------------------------------------------------------------------------------- CONDENSED FINANCIAL INFORMATION FOR METLIFE OF CT SEPARATE ACCOUNT PF FOR VARIABLE ANNUITIES ACCUMULATION UNIT VALUES (IN DOLLARS) The following Accumulation Unit Value ("AUV") 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 ("SAI"). The first table provides the AUV information for the MINIMUM Separate Account Charge available under the contract. The second table provides the AUV information for the MAXIMUM Separate Account Charge available under the contract. Please refer to the Fee Table section of this prospectus for more information on Separate Account Charges. PRIMELITE II -- SEPARATE ACCOUNT CHARGES 1.65%
UNIT VALUE AT NUMBER OF UNITS BEGINNING OF UNIT VALUE AT OUTSTANDING AT PORTFOLIO NAME YEAR YEAR END OF YEAR END OF YEAR - -------------- ---- ------------- ------------- --------------- AIM Variable Insurance Funds AIM V.I. Capital Appreciation Subaccount (Series II) (7/02)......................................... 2007 1.099 1.171 -- 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)............................................. 2007 1.078 1.153 -- 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)................................... 2007 0.894 1.054 373,758 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 --
A-1 PRIMELITE II -- SEPARATE ACCOUNT CHARGES 1.65% (CONTINUED)
UNIT VALUE AT NUMBER OF UNITS BEGINNING OF UNIT VALUE AT OUTSTANDING AT PORTFOLIO NAME YEAR YEAR END OF YEAR END OF YEAR - -------------- ---- ------------- ------------- --------------- American Funds Insurance Series American Funds Global Growth Subaccount (Class 2) (5/03)............................................. 2007 1.919 2.168 5,576,381 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 American Funds Growth Subaccount (Class 2) (5/03).. 2007 1.709 1.888 16,400,139 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)............................................. 2007 1.602 1.655 15,886,649 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 Fidelity(R) Variable Insurance Products VIP Equity -- Income Subaccount (Service Class 2) (2/02)............................................. 2007 1.395 1.389 3,870,491 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)..... 2007 0.974 0.974 -- 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).... 2007 1.908 2.165 6,619,571 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-2 PRIMELITE II -- SEPARATE ACCOUNT CHARGES 1.65% (CONTINUED)
UNIT VALUE AT NUMBER OF UNITS BEGINNING OF UNIT VALUE AT OUTSTANDING AT PORTFOLIO NAME YEAR YEAR END OF YEAR END OF YEAR - -------------- ---- ------------- ------------- --------------- 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 Growth and Income Subaccount (3/02).......... 2007 1.199 1.255 -- 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)............................................. 2007 1.070 1.139 -- 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 Variable Equity Trust LMPVET Aggressive Growth Subaccount (Class I) (2/02)............................................. 2007 1.115 1.113 67,192,448 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 --
A-3 PRIMELITE II -- SEPARATE ACCOUNT CHARGES 1.65% (CONTINUED)
UNIT VALUE AT NUMBER OF UNITS BEGINNING OF UNIT VALUE AT OUTSTANDING AT PORTFOLIO NAME YEAR YEAR END OF YEAR END OF YEAR - -------------- ---- ------------- ------------- --------------- LMPVET Appreciation Subaccount (Class I) (2/02).... 2007 1.253 1.337 60,471,522 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 -- LMPVET Appreciation Subaccount (Class II) (11/07).. 2007 1.163 1.161 1,134,645 LMPVET Capital and Income Subaccount (Class I) (4/07)............................................. 2007 1.231 1.236 16,299,106 LMPVET Capital and Income Subaccount (Class II) (2/04)............................................. 2007 1.113 1.154 3,892,628 2006 1.024 1.113 4,140,428 2005 0.999 1.024 4,325,435 2004 1.000 0.999 1,071,806 LMPVET Capital Subaccount (2/04)................... 2007 1.160 1.162 2,461,862 2006 1.038 1.160 3,377,777 2005 1.003 1.038 3,401,260 2004 1.000 1.003 1,521,728 LMPVET Dividend Strategy Subaccount (2/02)......... 2007 1.033 1.082 3,767,693 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 -- LMPVET Fundamental Value Subaccount (Class I) (2/02)............................................. 2007 1.353 1.347 52,408,854 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 -- LMPVET Global Equity Subaccount (2/04)............. 2007 1.222 1.260 2,725,731 2006 1.078 1.222 2,802,275 2005 1.029 1.078 2,501,134 2004 1.000 1.029 670,023
A-4 PRIMELITE II -- SEPARATE ACCOUNT CHARGES 1.65% (CONTINUED)
UNIT VALUE AT NUMBER OF UNITS BEGINNING OF UNIT VALUE AT OUTSTANDING AT PORTFOLIO NAME YEAR YEAR END OF YEAR END OF YEAR - -------------- ---- ------------- ------------- --------------- LMPVET International All Cap Opportunity Subaccount (2/02)............................................. 2007 1.441 1.507 2,309,073 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 -- LMPVET Investors Subaccount (Class I) (4/07)....... 2007 1.308 1.282 1,409,526 LMPVET Large Cap Growth Subaccount (Class I) (5/02)............................................. 2007 1.123 1.163 3,863,245 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 -- LMPVET Lifestyle Allocation 50% Subaccount (2/02).. 2007 1.252 1.271 8,425,378 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 -- LMPVET Lifestyle Allocation 70% Subaccount (10/02)............................................ 2007 1.227 1.253 1,311,821 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 -- LMPVET Lifestyle Allocation 85% Subaccount (5/02).. 2007 1.245 1.265 827,016 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 --
A-5 PRIMELITE II -- SEPARATE ACCOUNT CHARGES 1.65% (CONTINUED)
UNIT VALUE AT NUMBER OF UNITS BEGINNING OF UNIT VALUE AT OUTSTANDING AT PORTFOLIO NAME YEAR YEAR END OF YEAR END OF YEAR - -------------- ---- ------------- ------------- --------------- LMPVET Mid Cap Core Subaccount (Class I) (2/02).... 2007 1.363 1.436 4,376,841 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 -- LMPVET Multiple Discipline Subaccount-Large Cap Growth and Value (2/04)............................ 2007 1.125 1.145 -- 2006 1.018 1.125 1,184,596 2005 1.000 1.018 1,220,644 2004 1.000 1.000 623,702 LMPVET Small Cap Growth Subaccount (Class I) (4/07)............................................. 2007 1.416 1.458 1,509,509 LMPVET Social Awareness Subaccount (4/02).......... 2007 1.076 1.174 2,512,242 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 Income Trust LMPVIT Adjustable Rate Income Subaccount (2/04).... 2007 1.025 1.022 1,667,406 2006 1.001 1.025 1,868,796 2005 0.994 1.001 2,976,647 2004 1.000 0.994 995,190 LMPVIT Government Subaccount (Class I) (2/02)...... 2007 1.102 1.112 17,181,720 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 -- LMPVIT High Income Subaccount (2/02)............... 2007 1.435 1.416 14,304,642 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 --
A-6 PRIMELITE II -- SEPARATE ACCOUNT CHARGES 1.65% (CONTINUED)
UNIT VALUE AT NUMBER OF UNITS BEGINNING OF UNIT VALUE AT OUTSTANDING AT PORTFOLIO NAME YEAR YEAR END OF YEAR END OF YEAR - -------------- ---- ------------- ------------- --------------- LMPVIT Money Market Subaccount (3/02).............. 2007 1.019 1.051 7,195,124 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 Legg Mason Partners Variable Portfolios V LMPVPV Small Cap Growth Opportunities Subaccount (Class I) (3/02)................................... 2007 1.350 1.440 -- 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 -- Legg Mason Partners Variable Portfolios II LMPVPII Capital and Income Subaccount (5/05)....... 2007 1.176 1.236 -- 2006 1.075 1.176 17,906,147 2005 1.000 1.075 11,960,583 Legg Mason Partners Variable Portfolios III, Inc. LMPVPIII Large Cap Value Subaccount (5/02)......... 2007 1.254 1.318 -- 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 -- Met Investors Series Trust MIST BlackRock Large-Cap Core Subaccount (Class A) (4/06)............................................. 2007 1.264 1.325 -- 2006 1.194 1.264 80,496 MIST BlackRock Large-Cap Core Subaccount (Class E) (4/07)............................................. 2007 1.314 1.324 82,560 MIST Lord Abbett Bond Debenture Subaccount (Class A) (4/06).......................................... 2007 1.314 1.381 6,599,824 2006 1.254 1.314 7,018,904 MIST Lord Abbett Growth and Income Subaccount (Class B) (4/06)................................... 2007 1.075 1.097 1,977,622 2006 1.001 1.075 2,199,812 MIST Met/AIM Capital Appreciation Subaccount (Class E) (4/07) *........................................ 2007 1.156 1.206 424,276 MIST MFS(R) Research International Subaccount (Class B) (4/07) *................................. 2007 1.740 1.827 1,759,672
A-7 PRIMELITE II -- SEPARATE ACCOUNT CHARGES 1.65% (CONTINUED)
UNIT VALUE AT NUMBER OF UNITS BEGINNING OF UNIT VALUE AT OUTSTANDING AT PORTFOLIO NAME YEAR YEAR END OF YEAR END OF YEAR - -------------- ---- ------------- ------------- --------------- MIST Oppenheimer Capital Appreciation Subaccount (Class B) (4/06)................................... 2007 1.008 1.133 1,826,518 2006 0.994 1.008 1,897,888 MIST Pioneer Strategic Income Subaccount (Class A) (4/06)............................................. 2007 1.142 1.198 23,161,936 2006 1.103 1.142 24,420,649 MIST Third Avenue Small Cap Value Subaccount (Class B) (4/07) *........................................ 2007 1.887 1.722 4,599,939 Metropolitan Series Fund, Inc. MSF BlackRock Aggressive Growth Subaccount (Class D) (4/06).......................................... 2007 0.822 0.973 1,993,125 2006 0.842 0.822 1,997,859 MSF BlackRock Bond Income Subaccount (Class E) (4/06)............................................. 2007 1.116 1.165 13,466,776 2006 1.076 1.116 13,727,003 MSF Capital Guardian U.S. Equity Subaccount (Class B) (4/07) *........................................ 2007 1.141 1.079 436,474 MSF MFS(R) Total Return Subaccount (Class F) (4/06)............................................. 2007 1.338 1.371 25,929,145 2006 1.252 1.338 27,487,362 MSF T. Rowe Price Large Cap Growth Subaccount (Class B) (4/06) *................................. 2007 1.068 1.147 1,091,622 2006 0.998 1.068 1,016,963 MSF Western Asset Management U.S. Government Subaccount (Class A) (4/06) *...................... 2007 1.006 1.035 3,074,604 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 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
A-8 PRIMELITE II -- SEPARATE ACCOUNT CHARGES 1.65% (CONTINUED)
UNIT VALUE AT NUMBER OF UNITS BEGINNING OF UNIT VALUE AT OUTSTANDING AT PORTFOLIO NAME YEAR YEAR END OF YEAR END OF YEAR - -------------- ---- ------------- ------------- --------------- Pioneer Variable Contracts Trust Pioneer Fund VCT Subaccount (Class II) (7/02)...... 2007 1.250 1.288 1,007,301 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)............................................. 2007 1.653 1.713 6,989,477 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)......................................... 2007 1.616 1.750 -- 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)............................................. 2007 1.793 1.915 -- 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 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
A-9 PRIMELITE II -- SEPARATE ACCOUNT CHARGES 1.65% (CONTINUED)
UNIT VALUE AT NUMBER OF UNITS BEGINNING OF UNIT VALUE AT OUTSTANDING AT PORTFOLIO NAME YEAR YEAR END OF YEAR END OF YEAR - -------------- ---- ------------- ------------- --------------- 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 Securities Subaccount (Class I) (5/05).......................................... 2006 1.173 1.593 5,413,097 2005 1.019 1.173 2,858,716 Van Kampen Life Investment Trust Van Kampen LIT Comstock Subaccount (Class II) (2/02)............................................. 2007 1.404 1.349 31,487,761 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 --
A-10 PRIMELITE II -- SEPARATE ACCOUNT CHARGES 1.65% (CONTINUED)
UNIT VALUE AT NUMBER OF UNITS BEGINNING OF UNIT VALUE AT OUTSTANDING AT PORTFOLIO NAME YEAR YEAR END OF YEAR END OF YEAR - -------------- ---- ------------- ------------- --------------- Van Kampen LIT Growth and Income Subaccount (Class II) (3/02)......................................... 2007 1.483 1.495 13,155,255 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)......................................... 2007 0.929 1.066 7,785,918 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
PRIMELITE II -- SEPARATE ACCOUNT CHARGES 1.90%
UNIT VALUE AT NUMBER OF UNITS BEGINNING OF UNIT VALUE AT OUTSTANDING AT PORTFOLIO NAME YEAR YEAR END OF YEAR END OF YEAR - -------------- ---- ------------- ------------- --------------- AIM Variable Insurance Funds AIM V.I. Capital Appreciation Subaccount (Series II) (7/02)......................................... 2007 1.085 1.155 -- 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)............................................. 2007 1.076 1.151 -- 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)................................... 2007 0.883 1.039 49,496 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 --
A-11 PRIMELITE II -- SEPARATE ACCOUNT CHARGES 1.90% (CONTINUED)
UNIT VALUE AT NUMBER OF UNITS BEGINNING OF UNIT VALUE AT OUTSTANDING AT PORTFOLIO NAME YEAR YEAR END OF YEAR END OF YEAR - -------------- ---- ------------- ------------- --------------- 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)............................................. 2007 1.902 2.143 749,033 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).. 2007 1.693 1.866 1,539,783 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)............................................. 2007 1.588 1.636 1,347,351 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 -- Fidelity(R) Variable Insurance Products VIP Equity -- Income Subaccount (Service Class 2) (2/02)............................................. 2007 1.378 1.369 363,012 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)..... 2007 0.963 0.963 -- 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).... 2007 1.885 2.133 1,067,431 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
A-12 PRIMELITE II -- SEPARATE ACCOUNT CHARGES 1.90% (CONTINUED)
UNIT VALUE AT NUMBER OF UNITS BEGINNING OF UNIT VALUE AT OUTSTANDING AT PORTFOLIO NAME YEAR 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 Growth and Income Subaccount (3/02).......... 2007 1.184 1.238 -- 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)............................................. 2007 1.057 1.124 -- 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 -- Legg Mason Partners Variable Equity Trust LMPVET Aggressive Growth Subaccount (Class I) (2/02)............................................. 2007 1.101 1.097 7,712,562 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 --
A-13 PRIMELITE II -- SEPARATE ACCOUNT CHARGES 1.90% (CONTINUED)
UNIT VALUE AT NUMBER OF UNITS BEGINNING OF UNIT VALUE AT OUTSTANDING AT PORTFOLIO NAME YEAR YEAR END OF YEAR END OF YEAR - -------------- ---- ------------- ------------- --------------- LMPVET Appreciation Subaccount (Class I) (2/02).... 2007 1.238 1.317 6,385,287 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 -- LMPVET Appreciation Subaccount (Class II) (11/07).. 2007 1.152 1.149 121,747 LMPVET Capital and Income Subaccount (Class I) (4/07)............................................. 2007 1.225 1.228 2,007,080 LMPVET Capital and Income Subaccount (Class II) (2/04)............................................. 2007 1.105 1.143 421,155 2006 1.020 1.105 557,384 2005 0.997 1.020 566,640 2004 1.000 0.997 142,461 LMPVET Capital Subaccount (2/04)................... 2007 1.152 1.151 172,522 2006 1.033 1.152 174,980 2005 1.000 1.033 183,189 2004 1.000 1.000 75,446 LMPVET Dividend Strategy Subaccount (2/02)......... 2007 1.020 1.065 425,155 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 -- LMPVET Fundamental Value Subaccount (Class I) (2/02)............................................. 2007 1.336 1.327 6,052,809 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 -- LMPVET Global Equity Subaccount (2/04)............. 2007 1.213 1.248 341,333 2006 1.073 1.213 358,579 2005 1.026 1.073 342,927 2004 1.000 1.026 58,989
A-14 PRIMELITE II -- SEPARATE ACCOUNT CHARGES 1.90% (CONTINUED)
UNIT VALUE AT NUMBER OF UNITS BEGINNING OF UNIT VALUE AT OUTSTANDING AT PORTFOLIO NAME YEAR YEAR END OF YEAR END OF YEAR - -------------- ---- ------------- ------------- --------------- LMPVET International All Cap Opportunity Subaccount (2/02)............................................. 2007 1.423 1.485 556,105 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 -- LMPVET Investors Subaccount (Class I) (4/07)....... 2007 1.291 1.263 164,647 LMPVET Large Cap Growth Subaccount (Class I) (5/02)............................................. 2007 1.109 1.146 426,833 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 -- LMPVET Lifestyle Allocation 50% Subaccount (2/02).. 2007 1.236 1.252 947,042 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 -- LMPVET Lifestyle Allocation 70% Subaccount (10/02)............................................ 2007 1.212 1.235 86,962 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 -- LMPVET Lifestyle Allocation 85% Subaccount (5/02).. 2007 1.229 1.246 66,494 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 --
A-15 PRIMELITE II -- SEPARATE ACCOUNT CHARGES 1.90% (CONTINUED)
UNIT VALUE AT NUMBER OF UNITS BEGINNING OF UNIT VALUE AT OUTSTANDING AT PORTFOLIO NAME YEAR YEAR END OF YEAR END OF YEAR - -------------- ---- ------------- ------------- --------------- LMPVET Mid Cap Core Subaccount (Class I) (2/02).... 2007 1.346 1.415 543,205 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 -- LMPVET Multiple Discipline Subaccount-Large Cap Growth and Value (2/04)............................ 2007 1.117 1.135 -- 2006 1.014 1.117 121,990 2005 0.998 1.014 177,059 2004 1.000 0.998 80,820 LMPVET Small Cap Growth Subaccount (Class I) (4/07)............................................. 2007 1.397 1.436 415,133 LMPVET Social Awareness Subaccount (4/02).......... 2007 1.062 1.156 160,248 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 Income Trust LMPVIT Adjustable Rate Income Subaccount (2/04).... 2007 1.018 1.012 173,766 2006 0.996 1.018 229,486 2005 0.992 0.996 547,773 2004 1.000 0.992 392,451 LMPVIT Government Subaccount (Class I) (2/02)...... 2007 1.088 1.095 2,065,433 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 -- LMPVIT High Income Subaccount (2/02)............... 2007 1.417 1.394 1,561,858 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 --
A-16 PRIMELITE II -- SEPARATE ACCOUNT CHARGES 1.90% (CONTINUED)
UNIT VALUE AT NUMBER OF UNITS BEGINNING OF UNIT VALUE AT OUTSTANDING AT PORTFOLIO NAME YEAR YEAR END OF YEAR END OF YEAR - -------------- ---- ------------- ------------- --------------- LMPVIT Money Market Subaccount (3/02).............. 2007 1.006 1.035 952,098 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 Legg Mason Partners Variable Portfolios V LMPVPV Small Cap Growth Opportunities Subaccount (Class I) (3/02)................................... 2007 1.333 1.421 -- 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 Capital and Income Subaccount (5/05)....... 2007 1.171 1.230 -- 2006 1.073 1.171 2,103,309 2005 1.000 1.073 1,176,130 Legg Mason Partners Variable Portfolios III, Inc. LMPVPIII Large Cap Value Subaccount (5/02)......... 2007 1.238 1.300 -- 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 -- Met Investors Series Trust MIST BlackRock Large-Cap Core Subaccount (Class A) (4/06)............................................. 2007 1.248 1.308 -- 2006 1.181 1.248 5,213 MIST BlackRock Large-Cap Core Subaccount (Class E) (4/07)............................................. 2007 1.297 1.304 5,113 MIST Lord Abbett Bond Debenture Subaccount (Class A) (4/06).......................................... 2007 1.298 1.360 798,620 2006 1.241 1.298 895,852 MIST Lord Abbett Growth and Income Subaccount (Class B) (4/06)................................... 2007 1.074 1.093 352,745 2006 1.001 1.074 394,695 MIST Met/AIM Capital Appreciation Subaccount (Class E) (4/07) *........................................ 2007 1.141 1.188 251,384 MIST MFS(R) Research International Subaccount (Class B) (4/07) *................................. 2007 1.717 1.800 227,158
A-17 PRIMELITE II -- SEPARATE ACCOUNT CHARGES 1.90% (CONTINUED)
UNIT VALUE AT NUMBER OF UNITS BEGINNING OF UNIT VALUE AT OUTSTANDING AT PORTFOLIO NAME YEAR YEAR END OF YEAR END OF YEAR - -------------- ---- ------------- ------------- --------------- MIST Oppenheimer Capital Appreciation Subaccount (Class B) (4/06)................................... 2007 1.006 1.128 450,004 2006 0.994 1.006 391,836 MIST Pioneer Strategic Income Subaccount (Class A) (4/06)............................................. 2007 1.134 1.187 2,350,665 2006 1.097 1.134 2,524,024 MIST Third Avenue Small Cap Value Subaccount (Class B) (4/07) *........................................ 2007 1.862 1.696 816,269 Metropolitan Series Fund, Inc. MSF BlackRock Aggressive Growth Subaccount (Class D) (4/06).......................................... 2007 0.811 0.959 370,385 2006 0.833 0.811 421,407 MSF BlackRock Bond Income Subaccount (Class E) (4/06)............................................. 2007 1.102 1.148 1,126,150 2006 1.064 1.102 1,260,190 MSF Capital Guardian U.S. Equity Subaccount (Class B) (4/07) *........................................ 2007 1.138 1.074 307,696 MSF MFS(R) Total Return Subaccount (Class F) (4/06)............................................. 2007 1.321 1.350 2,263,684 2006 1.238 1.321 2,404,225 MSF T. Rowe Price Large Cap Growth Subaccount (Class B) (4/06) *................................. 2007 1.067 1.142 267,056 2006 0.998 1.067 256,247 MSF Western Asset Management U.S. Government Subaccount (Class A) (4/06) *...................... 2007 1.002 1.028 343,195 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-18 PRIMELITE II -- SEPARATE ACCOUNT CHARGES 1.90% (CONTINUED)
UNIT VALUE AT NUMBER OF UNITS BEGINNING OF UNIT VALUE AT OUTSTANDING AT PORTFOLIO NAME YEAR YEAR END OF YEAR END OF YEAR - -------------- ---- ------------- ------------- --------------- Pioneer Variable Contracts Trust Pioneer Fund VCT Subaccount (Class II) (7/02)...... 2007 1.234 1.269 282,906 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)............................................. 2007 1.633 1.688 895,816 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)......................................... 2007 1.596 1.726 -- 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)............................................. 2007 1.771 1.889 -- 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-19 PRIMELITE II -- SEPARATE ACCOUNT CHARGES 1.90% (CONTINUED)
UNIT VALUE AT NUMBER OF UNITS BEGINNING OF UNIT VALUE AT OUTSTANDING AT PORTFOLIO NAME YEAR 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 Securities 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)............................................. 2007 1.386 1.328 4,217,413 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-20 PRIMELITE II -- SEPARATE ACCOUNT CHARGES 1.90% (CONTINUED)
UNIT VALUE AT NUMBER OF UNITS BEGINNING OF UNIT VALUE AT OUTSTANDING AT PORTFOLIO NAME YEAR YEAR END OF YEAR END OF YEAR - -------------- ---- ------------- ------------- --------------- Van Kampen LIT Growth and Income Subaccount (Class II) (3/02)......................................... 2007 1.464 1.473 2,189,792 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)......................................... 2007 0.917 1.050 1,445,272 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
* 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, 2007. Number of Units Outstanding at the end of the year may include units for Contracts in payout phase. Variable Funding Option mergers and substitutions that occurred between January 1, 2005 and December 31, 2007 are displayed below. Please see Appendix C for more information on Variable Funding Option mergers, substitutions and other changes. 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. A-21 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. Effective on or about 04/30/2007, AIM Variable Insurance Funds-AIM V.I. Capital Appreciation Fund was replaced by Met Investors Series Trust-Met/AIM Capital Appreciation Portfolio Class E and is no longer available as a funding option. Effective on or about 04/30/2007, AIM Variable Insurance Funds-AIM V.I. Core Equity Fund was replaced by Metropolitan Series Fund, Inc.-Capital Guardian U.S. Equity Portfolio and is no longer available as a funding option. Effective on or about 04/30/2007, Legg Mason Partners Investment Series-Legg Mason Partners Variable Growth and Income Portfolio merged into Legg Mason Partners Variable Equity Trust-Legg Mason Partners Variable Appreciation Portfolio and is no longer available as a funding option. Effective on or about 04/30/2007, Legg Mason Partners Investment Series-Legg Mason Partners Variable Premier Selections All Cap Growth Portfolio merged into Legg Mason Partners Variable Equity Trust-Legg Mason Partners Variable Aggressive Growth Portfolio and is no longer available as a funding option. Effective on or about 04/30/2007, Legg Mason Partners Variable Portfolios V-Legg Mason Partners Variable Small Cap Growth Opportunities Portfolio merged into Legg Mason Partners Variable Equity Trust-Legg Mason Partners Variable Small Cap Growth Portfolio and is no longer available as a funding option. Effective on or about 04/30/2007, Legg Mason Partners Variable Portfolios III, Inc.-Legg Mason Partners Variable Large Cap Value Portfolio merged into Legg Mason Partners Variable Equity Trust-Legg Mason Partners Variable Investors Portfolio and is no longer available as a funding option. Effective on or about 04/30/2007, Legg Mason Partners Variable Portfolios II- Legg Mason Partners Variable Capital and Income Portfolio merged into Legg Mason Partners Variable Equity Trust-Legg Mason Partners Variable Capital and Income Portfolio (Class I) and is no longer available as a funding option. Effective on or about 04/30/2007, Met Investors Series Trust-BlackRock Large-Cap Core Portfolio -- Class A was exchanged for Met Investors Series Trust-BlackRock Large-Cap Core Portfolio -- Class E and is no longer available as a funding option. Effective on or about 04/30/2007, Putnam Variable Trust-Putnam VT International Equity Fund was replaced by Met Investors Series Trust-MFS(R) Research International Portfolio and is no longer available as a funding option. Effective on or about 04/30/2007, Putnam Variable Trust-Putnam VT Small Cap Value Fund was replaced by Met Investors Series Trust-Third Avenue Small Cap Value Portfolio and is no longer available as a funding option. Effective on or about 11/12/2007, Legg Mason Partners Variable Equity Trust-Legg Mason Partners Variable Multiple Discipline Portfolio -- Large Cap Growth and Value merged into Legg Mason Partners Variable Equity Trust-Legg Mason Partners Variable Appreciation Portfolio and is no longer available as a funding option. A-22 APPENDIX B - -------------------------------------------------------------------------------- CONDENSED FINANCIAL INFORMATION FOR METLIFE OF CT SEPARATE ACCOUNT PF II FOR VARIABLE ANNUITIES ACCUMULATION UNIT VALUES (IN DOLLARS) The following Accumulation Unit Value ("AUV") 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 ("SAI"). The first table provides the AUV information for the MINIMUM Separate Account Charge available under the contract. The second table provides the AUV information for the MAXIMUM Separate Account Charge available under the contract. Please refer to the Fee Table section of this prospectus for more information on Separate Account Charges. PRIMELITE II -- SEPARATE ACCOUNT CHARGES 1.65%
UNIT VALUE AT NUMBER OF UNITS BEGINNING OF UNIT VALUE AT OUTSTANDING AT PORTFOLIO NAME YEAR YEAR END OF YEAR END OF YEAR - -------------- ---- ------------- ------------- --------------- AIM Variable Insurance Funds AIM V.I. Capital Appreciation Subaccount (Series II) (1/02)......................................... 2007 1.099 1.171 -- 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)............................................. 2007 1.078 1.153 -- 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)................................... 2007 0.894 1.054 1,902,685 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
B-1 PRIMELITE II -- SEPARATE ACCOUNT CHARGES 1.65% (CONTINUED)
UNIT VALUE AT NUMBER OF UNITS BEGINNING OF UNIT VALUE AT OUTSTANDING AT PORTFOLIO NAME YEAR YEAR END OF YEAR END OF YEAR - -------------- ---- ------------- ------------- --------------- American Funds Insurance Series American Funds Global Growth Subaccount (Class 2) (6/03)............................................. 2007 1.919 2.168 9,634,666 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 American Funds Growth Subaccount (Class 2) (6/03).. 2007 1.709 1.888 23,383,210 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)............................................. 2007 1.602 1.655 18,941,101 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 Fidelity(R) Variable Insurance Products VIP Equity -- Income Subaccount (Service Class 2) (1/02)............................................. 2007 1.395 1.389 9,224,621 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)..... 2007 0.974 0.974 -- 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).... 2007 1.908 2.165 13,842,765 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-2 PRIMELITE II -- SEPARATE ACCOUNT CHARGES 1.65% (CONTINUED)
UNIT VALUE AT NUMBER OF UNITS BEGINNING OF UNIT VALUE AT OUTSTANDING AT PORTFOLIO NAME YEAR YEAR END OF YEAR END OF YEAR - -------------- ---- ------------- ------------- --------------- 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 Growth and Income Subaccount (2/02).......... 2007 1.199 1.255 3 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)............................................. 2007 1.070 1.139 5 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 Variable Equity Trust LMPVET Aggressive Growth Subaccount (Class I) (2/02)............................................. 2007 1.115 1.113 177,957,534 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 --
B-3 PRIMELITE II -- SEPARATE ACCOUNT CHARGES 1.65% (CONTINUED)
UNIT VALUE AT NUMBER OF UNITS BEGINNING OF UNIT VALUE AT OUTSTANDING AT PORTFOLIO NAME YEAR YEAR END OF YEAR END OF YEAR - -------------- ---- ------------- ------------- --------------- LMPVET Appreciation Subaccount (Class I) (2/02).... 2007 1.253 1.337 151,394,781 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 -- LMPVET Appreciation Subaccount (Class II) (11/07).. 2007 1.163 1.161 664,261 LMPVET Capital and Income Subaccount (Class I) (4/07)............................................. 2007 1.231 1.236 22,927,970 LMPVET Capital and Income Subaccount (Class II) (3/04)............................................. 2007 1.113 1.154 6,061,734 2006 1.024 1.113 3,630,658 2005 0.999 1.024 3,626,249 2004 0.963 0.999 1,898,313 LMPVET Capital Subaccount (3/04)................... 2007 1.160 1.162 2,944,542 2006 1.038 1.160 3,264,696 2005 1.003 1.038 3,362,905 2004 0.997 1.003 2,153,379 LMPVET Dividend Strategy Subaccount (2/02)......... 2007 1.033 1.082 12,473,021 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 -- LMPVET Fundamental Value Subaccount (Class I) (2/02)............................................. 2007 1.353 1.347 147,235,109 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 -- LMPVET Global Equity Subaccount (2/04)............. 2007 1.222 1.260 2,101,232 2006 1.078 1.222 2,058,227 2005 1.029 1.078 1,942,557 2004 0.987 1.029 971,238
B-4 PRIMELITE II -- SEPARATE ACCOUNT CHARGES 1.65% (CONTINUED)
UNIT VALUE AT NUMBER OF UNITS BEGINNING OF UNIT VALUE AT OUTSTANDING AT PORTFOLIO NAME YEAR YEAR END OF YEAR END OF YEAR - -------------- ---- ------------- ------------- --------------- LMPVET International All Cap Opportunity Subaccount (2/02)............................................. 2007 1.441 1.507 6,372,158 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 -- LMPVET Investors Subaccount (Class I) (4/07)....... 2007 1.308 1.282 4,911,162 LMPVET Large Cap Growth Subaccount (Class I) (2/02)............................................. 2007 1.123 1.163 14,485,013 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 -- LMPVET Lifestyle Allocation 50% Subaccount (2/02).. 2007 1.252 1.271 24,073,684 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 -- LMPVET Lifestyle Allocation 70% Subaccount (2/02).. 2007 1.227 1.253 4,257,583 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 -- LMPVET Lifestyle Allocation 85% Subaccount (3/02).. 2007 1.245 1.265 2,218,189 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 --
B-5 PRIMELITE II -- SEPARATE ACCOUNT CHARGES 1.65% (CONTINUED)
UNIT VALUE AT NUMBER OF UNITS BEGINNING OF UNIT VALUE AT OUTSTANDING AT PORTFOLIO NAME YEAR YEAR END OF YEAR END OF YEAR - -------------- ---- ------------- ------------- --------------- LMPVET Mid Cap Core Subaccount (Class I) (2/02).... 2007 1.363 1.436 15,740,579 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 -- LMPVET Multiple Discipline Subaccount-Large Cap Growth and Value (4/04)............................ 2007 1.125 1.145 -- 2006 1.018 1.125 710,153 2005 1.000 1.018 812,122 2004 0.982 1.000 687,609 LMPVET Small Cap Growth Subaccount (Class I) (4/07)............................................. 2007 1.416 1.458 4,926,001 LMPVET Social Awareness Subaccount (2/02).......... 2007 1.076 1.174 6,536,615 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 Income Trust LMPVIT Adjustable Rate Income Subaccount (2/04).... 2007 1.025 1.022 2,145,107 2006 1.001 1.025 2,454,655 2005 0.994 1.001 2,641,727 2004 1.000 0.994 1,103,173 LMPVIT Government Subaccount (Class I) (2/02)...... 2007 1.102 1.112 56,673,958 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 -- LMPVIT High Income Subaccount (2/02)............... 2007 1.435 1.416 31,738,874 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 --
B-6 PRIMELITE II -- SEPARATE ACCOUNT CHARGES 1.65% (CONTINUED)
UNIT VALUE AT NUMBER OF UNITS BEGINNING OF UNIT VALUE AT OUTSTANDING AT PORTFOLIO NAME YEAR YEAR END OF YEAR END OF YEAR - -------------- ---- ------------- ------------- --------------- LMPVIT Money Market Subaccount (2/02).............. 2007 1.019 1.051 23,817,176 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 Legg Mason Partners Variable Portfolios V LMPVPV Small Cap Growth Opportunities Subaccount (Class I) (2/02)................................... 2007 1.350 1.440 12 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 -- Legg Mason Partners Variable Portfolios II LMPVPII Capital and Income Subaccount (5/05)....... 2007 1.176 1.236 -- 2006 1.075 1.176 26,099,559 2005 1.000 1.075 18,327,731 Legg Mason Partners Variable Portfolios III, Inc. LMPVPIII Large Cap Value Subaccount (2/02)......... 2007 1.254 1.318 -- 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 -- Met Investors Series Trust MIST BlackRock Large-Cap Core Subaccount (Class A) (4/06)............................................. 2007 1.264 1.325 -- 2006 1.194 1.264 2,563,110 MIST BlackRock Large-Cap Core Subaccount (Class E) (4/07)............................................. 2007 1.314 1.324 2,130,798 MIST Lord Abbett Bond Debenture Subaccount (Class A) (4/06).......................................... 2007 1.314 1.381 16,219,213 2006 1.254 1.314 16,621,877 MIST Lord Abbett Growth and Income Subaccount (Class B) (4/06)................................... 2007 1.075 1.097 6,114,878 2006 1.001 1.075 6,661,735 MIST Met/AIM Capital Appreciation Subaccount (Class E) (4/07) *........................................ 2007 1.156 1.206 1,089,336 MIST MFS(R) Research International Subaccount (Class B) (4/07) *................................. 2007 1.740 1.827 5,098,227
B-7 PRIMELITE II -- SEPARATE ACCOUNT CHARGES 1.65% (CONTINUED)
UNIT VALUE AT NUMBER OF UNITS BEGINNING OF UNIT VALUE AT OUTSTANDING AT PORTFOLIO NAME YEAR YEAR END OF YEAR END OF YEAR - -------------- ---- ------------- ------------- --------------- MIST Oppenheimer Capital Appreciation Subaccount (Class B) (4/06)................................... 2007 1.008 1.133 5,549,460 2006 0.994 1.008 5,375,003 MIST Pioneer Strategic Income Subaccount (Class A) (4/06)............................................. 2007 1.142 1.198 33,507,295 2006 1.103 1.142 32,547,006 MIST Third Avenue Small Cap Value Subaccount (Class B) (4/07) *........................................ 2007 1.887 1.722 8,597,958 Metropolitan Series Fund, Inc. MSF BlackRock Aggressive Growth Subaccount (Class D) (4/06).......................................... 2007 0.822 0.973 6,209,203 2006 0.842 0.822 6,012,058 MSF BlackRock Bond Income Subaccount (Class E) (4/06)............................................. 2007 1.116 1.165 29,984,247 2006 1.076 1.116 33,211,682 MSF Capital Guardian U.S. Equity Subaccount (Class B) (4/07) *........................................ 2007 1.141 1.079 1,529,138 MSF MFS(R) Total Return Subaccount (Class F) (4/06)............................................. 2007 1.338 1.371 61,481,865 2006 1.252 1.338 65,891,290 MSF T. Rowe Price Large Cap Growth Subaccount (Class B) (4/06) *................................. 2007 1.068 1.147 2,749,497 2006 0.998 1.068 2,763,617 MSF Western Asset Management U.S. Government Subaccount (Class A) (4/06) *...................... 2007 1.006 1.035 7,584,908 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 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
B-8 PRIMELITE II -- SEPARATE ACCOUNT CHARGES 1.65% (CONTINUED)
UNIT VALUE AT NUMBER OF UNITS BEGINNING OF UNIT VALUE AT OUTSTANDING AT PORTFOLIO NAME YEAR YEAR END OF YEAR END OF YEAR - -------------- ---- ------------- ------------- --------------- Pioneer Variable Contracts Trust Pioneer Fund VCT Subaccount (Class II) (1/02)...... 2007 1.250 1.288 2,069,782 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)............................................. 2007 1.653 1.713 13,342,882 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)......................................... 2007 1.616 1.750 -- 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)............................................. 2007 1.793 1.915 -- 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 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
B-9 PRIMELITE II -- SEPARATE ACCOUNT CHARGES 1.65% (CONTINUED)
UNIT VALUE AT NUMBER OF UNITS BEGINNING OF UNIT VALUE AT OUTSTANDING AT PORTFOLIO NAME YEAR YEAR END OF YEAR END OF YEAR - -------------- ---- ------------- ------------- --------------- 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 Securities Subaccount (Class I) (5/05).......................................... 2006 1.173 1.593 11,702,824 2005 1.000 1.173 5,692,305 Van Kampen Life Investment Trust Van Kampen LIT Comstock Subaccount (Class II) (2/02)............................................. 2007 1.404 1.349 77,058,816 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 --
B-10 PRIMELITE II -- SEPARATE ACCOUNT CHARGES 1.65% (CONTINUED)
UNIT VALUE AT NUMBER OF UNITS BEGINNING OF UNIT VALUE AT OUTSTANDING AT PORTFOLIO NAME YEAR YEAR END OF YEAR END OF YEAR - -------------- ---- ------------- ------------- --------------- Van Kampen LIT Growth and Income Subaccount (Class II) (2/02)......................................... 2007 1.483 1.495 45,026,293 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)......................................... 2007 0.929 1.066 17,921,154 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
PRIMELITE II -- SEPARATE ACCOUNT CHARGES 1.90%
UNIT VALUE AT NUMBER OF UNITS BEGINNING OF UNIT VALUE AT OUTSTANDING AT PORTFOLIO NAME YEAR YEAR END OF YEAR END OF YEAR - -------------- ---- ------------- ------------- --------------- AIM Variable Insurance Funds AIM V.I. Capital Appreciation Subaccount (Series II) (1/02)......................................... 2007 1.085 1.155 -- 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)............................................. 2007 1.076 1.151 -- 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)................................... 2007 0.883 1.039 349,598 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
B-11 PRIMELITE II -- SEPARATE ACCOUNT CHARGES 1.90% (CONTINUED)
UNIT VALUE AT NUMBER OF UNITS BEGINNING OF UNIT VALUE AT OUTSTANDING AT PORTFOLIO NAME YEAR YEAR END OF YEAR END OF YEAR - -------------- ---- ------------- ------------- --------------- 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)............................................. 2007 1.902 2.143 1,449,206 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).. 2007 1.693 1.866 3,398,636 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)............................................. 2007 1.588 1.636 2,876,487 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 Fidelity(R) Variable Insurance Products VIP Equity -- Income Subaccount (Service Class 2) (1/02)............................................. 2007 1.378 1.369 1,189,438 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)..... 2007 0.963 0.963 -- 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).... 2007 1.885 2.133 1,922,112 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
B-12 PRIMELITE II -- SEPARATE ACCOUNT CHARGES 1.90% (CONTINUED)
UNIT VALUE AT NUMBER OF UNITS BEGINNING OF UNIT VALUE AT OUTSTANDING AT PORTFOLIO NAME YEAR 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 Growth and Income Subaccount (2/02).......... 2007 1.184 1.238 -- 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)............................................. 2007 1.057 1.124 -- 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 -- Legg Mason Partners Variable Equity Trust LMPVET Aggressive Growth Subaccount (Class I) (2/02)............................................. 2007 1.101 1.097 24,024,831 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 --
B-13 PRIMELITE II -- SEPARATE ACCOUNT CHARGES 1.90% (CONTINUED)
UNIT VALUE AT NUMBER OF UNITS BEGINNING OF UNIT VALUE AT OUTSTANDING AT PORTFOLIO NAME YEAR YEAR END OF YEAR END OF YEAR - -------------- ---- ------------- ------------- --------------- LMPVET Appreciation Subaccount (Class I) (2/02).... 2007 1.238 1.317 22,171,575 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 -- LMPVET Appreciation Subaccount (Class II) (11/07).. 2007 1.152 1.149 534,540 LMPVET Capital and Income Subaccount (Class I) (4/07)............................................. 2007 1.225 1.228 2,916,880 LMPVET Capital and Income Subaccount (Class II) (3/04)............................................. 2007 1.105 1.143 869,790 2006 1.020 1.105 401,282 2005 0.997 1.020 578,376 2004 0.962 0.997 316,002 LMPVET Capital Subaccount (3/04)................... 2007 1.152 1.151 551,771 2006 1.033 1.152 645,523 2005 1.000 1.033 594,595 2004 0.997 1.000 424,410 LMPVET Dividend Strategy Subaccount (2/02)......... 2007 1.020 1.065 1,960,077 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 -- LMPVET Fundamental Value Subaccount (Class I) (2/02)............................................. 2007 1.336 1.327 20,359,324 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 -- LMPVET Global Equity Subaccount (2/04)............. 2007 1.213 1.248 357,203 2006 1.073 1.213 341,381 2005 1.026 1.073 443,186 2004 0.987 1.026 287,731
B-14 PRIMELITE II -- SEPARATE ACCOUNT CHARGES 1.90% (CONTINUED)
UNIT VALUE AT NUMBER OF UNITS BEGINNING OF UNIT VALUE AT OUTSTANDING AT PORTFOLIO NAME YEAR YEAR END OF YEAR END OF YEAR - -------------- ---- ------------- ------------- --------------- LMPVET International All Cap Opportunity Subaccount (2/02)............................................. 2007 1.423 1.485 1,215,949 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 -- LMPVET Investors Subaccount (Class I) (4/07)....... 2007 1.291 1.263 648,748 LMPVET Large Cap Growth Subaccount (Class I) (2/02)............................................. 2007 1.109 1.146 1,792,983 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 -- LMPVET Lifestyle Allocation 50% Subaccount (2/02).. 2007 1.236 1.252 3,713,106 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 -- LMPVET Lifestyle Allocation 70% Subaccount (2/02).. 2007 1.212 1.235 996,036 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 -- LMPVET Lifestyle Allocation 85% Subaccount (3/02).. 2007 1.229 1.246 392,297 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 --
B-15 PRIMELITE II -- SEPARATE ACCOUNT CHARGES 1.90% (CONTINUED)
UNIT VALUE AT NUMBER OF UNITS BEGINNING OF UNIT VALUE AT OUTSTANDING AT PORTFOLIO NAME YEAR YEAR END OF YEAR END OF YEAR - -------------- ---- ------------- ------------- --------------- LMPVET Mid Cap Core Subaccount (Class I) (2/02).... 2007 1.346 1.415 1,782,638 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 -- LMPVET Multiple Discipline Subaccount-Large Cap Growth and Value (4/04)............................ 2007 1.117 1.135 -- 2006 1.014 1.117 654,277 2005 0.998 1.014 700,287 2004 0.982 0.998 598,174 LMPVET Small Cap Growth Subaccount (Class I) (4/07)............................................. 2007 1.397 1.436 396,574 LMPVET Social Awareness Subaccount (2/02).......... 2007 1.062 1.156 787,212 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 Income Trust LMPVIT Adjustable Rate Income Subaccount (2/04).... 2007 1.018 1.012 145,281 2006 0.996 1.018 231,208 2005 0.992 0.996 223,798 2004 1.000 0.992 156,852 LMPVIT Government Subaccount (Class I) (2/02)...... 2007 1.088 1.095 7,442,572 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 -- LMPVIT High Income Subaccount (2/02)............... 2007 1.417 1.394 4,488,831 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 --
B-16 PRIMELITE II -- SEPARATE ACCOUNT CHARGES 1.90% (CONTINUED)
UNIT VALUE AT NUMBER OF UNITS BEGINNING OF UNIT VALUE AT OUTSTANDING AT PORTFOLIO NAME YEAR YEAR END OF YEAR END OF YEAR - -------------- ---- ------------- ------------- --------------- LMPVIT Money Market Subaccount (2/02).............. 2007 1.006 1.035 3,347,410 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 Legg Mason Partners Variable Portfolios V LMPVPV Small Cap Growth Opportunities Subaccount (Class I) (2/02)................................... 2007 1.333 1.421 -- 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 Capital and Income Subaccount (5/05)....... 2007 1.171 1.230 -- 2006 1.073 1.171 3,176,191 2005 1.000 1.073 2,026,765 Legg Mason Partners Variable Portfolios III, Inc. LMPVPIII Large Cap Value Subaccount (2/02)......... 2007 1.238 1.300 -- 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 -- Met Investors Series Trust MIST BlackRock Large-Cap Core Subaccount (Class A) (4/06)............................................. 2007 1.248 1.308 -- 2006 1.181 1.248 293,766 MIST BlackRock Large-Cap Core Subaccount (Class E) (4/07)............................................. 2007 1.297 1.304 307,110 MIST Lord Abbett Bond Debenture Subaccount (Class A) (4/06).......................................... 2007 1.298 1.360 1,921,364 2006 1.241 1.298 2,255,266 MIST Lord Abbett Growth and Income Subaccount (Class B) (4/06)................................... 2007 1.074 1.093 918,093 2006 1.001 1.074 973,764 MIST Met/AIM Capital Appreciation Subaccount (Class E) (4/07) *........................................ 2007 1.141 1.188 289,105 MIST MFS(R) Research International Subaccount (Class B) (4/07) *................................. 2007 1.717 1.800 553,220
B-17 PRIMELITE II -- SEPARATE ACCOUNT CHARGES 1.90% (CONTINUED)
UNIT VALUE AT NUMBER OF UNITS BEGINNING OF UNIT VALUE AT OUTSTANDING AT PORTFOLIO NAME YEAR YEAR END OF YEAR END OF YEAR - -------------- ---- ------------- ------------- --------------- MIST Oppenheimer Capital Appreciation Subaccount (Class B) (4/06)................................... 2007 1.006 1.128 892,205 2006 0.994 1.006 844,137 MIST Pioneer Strategic Income Subaccount (Class A) (4/06)............................................. 2007 1.134 1.187 3,269,303 2006 1.097 1.134 3,480,407 MIST Third Avenue Small Cap Value Subaccount (Class B) (4/07) *........................................ 2007 1.862 1.696 1,174,654 Metropolitan Series Fund, Inc. MSF BlackRock Aggressive Growth Subaccount (Class D) (4/06).......................................... 2007 0.811 0.959 813,743 2006 0.833 0.811 771,578 MSF BlackRock Bond Income Subaccount (Class E) (4/06)............................................. 2007 1.102 1.148 3,558,798 2006 1.064 1.102 4,099,682 MSF Capital Guardian U.S. Equity Subaccount (Class B) (4/07) *........................................ 2007 1.138 1.074 310,819 MSF MFS(R) Total Return Subaccount (Class F) (4/06)............................................. 2007 1.321 1.350 6,908,703 2006 1.238 1.321 7,537,235 MSF T. Rowe Price Large Cap Growth Subaccount (Class B) (4/06) *................................. 2007 1.067 1.142 559,877 2006 0.998 1.067 645,611 MSF Western Asset Management U.S. Government Subaccount (Class A) (4/06) *...................... 2007 1.002 1.028 450,356 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-18 PRIMELITE II -- SEPARATE ACCOUNT CHARGES 1.90% (CONTINUED)
UNIT VALUE AT NUMBER OF UNITS BEGINNING OF UNIT VALUE AT OUTSTANDING AT PORTFOLIO NAME YEAR YEAR END OF YEAR END OF YEAR - -------------- ---- ------------- ------------- --------------- Pioneer Variable Contracts Trust Pioneer Fund VCT Subaccount (Class II) (1/02)...... 2007 1.234 1.269 457,582 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)............................................. 2007 1.633 1.688 1,446,389 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)......................................... 2007 1.596 1.726 -- 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)............................................. 2007 1.771 1.889 -- 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-19 PRIMELITE II -- SEPARATE ACCOUNT CHARGES 1.90% (CONTINUED)
UNIT VALUE AT NUMBER OF UNITS BEGINNING OF UNIT VALUE AT OUTSTANDING AT PORTFOLIO NAME YEAR 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 Securities 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)............................................. 2007 1.386 1.328 10,167,104 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-20 PRIMELITE II -- SEPARATE ACCOUNT CHARGES 1.90% (CONTINUED)
UNIT VALUE AT NUMBER OF UNITS BEGINNING OF UNIT VALUE AT OUTSTANDING AT PORTFOLIO NAME YEAR YEAR END OF YEAR END OF YEAR - -------------- ---- ------------- ------------- --------------- Van Kampen LIT Growth and Income Subaccount (Class II) (2/02)......................................... 2007 1.464 1.473 6,800,407 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)......................................... 2007 0.917 1.050 4,402,989 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
* 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, 2007. Number of Units Outstanding at the end of the year may include units for Contracts in payout phase. Variable Funding Option mergers and substitutions that occurred between January 1, 2005 and December 31, 2007 are displayed below. Please see Appendix C for more information on Variable Funding Option mergers, substitutions and other changes. 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. B-21 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. Effective on or about 04/30/2007, AIM Variable Insurance Funds-AIM V.I. Capital Appreciation Fund was replaced by Met Investors Series Trust-Met/AIM Capital Appreciation Portfolio Class E and is no longer available as a funding option. Effective on or about 04/30/2007, AIM Variable Insurance Funds-AIM V.I. Core Equity Fund was replaced by Metropolitan Series Fund, Inc.-Capital Guardian U.S. Equity Portfolio and is no longer available as a funding option. Effective on or about 04/30/2007, Legg Mason Partners Investment Series-Legg Mason Partners Variable Growth and Income Portfolio merged into Legg Mason Partners Variable Equity Trust-Legg Mason Partners Variable Appreciation Portfolio and is no longer available as a funding option. Effective on or about 04/30/2007, Legg Mason Partners Investment Series-Legg Mason Partners Variable Premier Selections All Cap Growth Portfolio merged into Legg Mason Partners Variable Equity Trust-Legg Mason Partners Variable Aggressive Growth Portfolio and is no longer available as a funding option. Effective on or about 04/30/2007, Legg Mason Partners Variable Portfolios V-Legg Mason Partners Variable Small Cap Growth Opportunities Portfolio merged into Legg Mason Partners Variable Equity Trust-Legg Mason Partners Variable Small Cap Growth Portfolio and is no longer available as a funding option. Effective on or about 04/30/2007, Legg Mason Partners Variable Portfolios III, Inc.-Legg Mason Partners Variable Large Cap Value Portfolio merged into Legg Mason Partners Variable Equity Trust-Legg Mason Partners Variable Investors Portfolio and is no longer available as a funding option. Effective on or about 04/30/2007, Legg Mason Partners Variable Portfolios II- Legg Mason Partners Variable Capital and Income Portfolio merged into Legg Mason Partners Variable Equity Trust-Legg Mason Partners Variable Capital and Income Portfolio (Class I) and is no longer available as a funding option. Effective on or about 04/30/2007, Met Investors Series Trust-BlackRock Large-Cap Core Portfolio -- Class A was exchanged for Met Investors Series Trust-BlackRock Large-Cap Core Portfolio -- Class E and is no longer available as a funding option. Effective on or about 04/30/2007, Putnam Variable Trust-Putnam VT International Equity Fund was replaced by Met Investors Series Trust-MFS(R) Research International Portfolio and is no longer available as a funding option. Effective on or about 04/30/2007, Putnam Variable Trust-Putnam VT Small Cap Value Fund was replaced by Met Investors Series Trust-Third Avenue Small Cap Value Portfolio and is no longer available as a funding option. Effective on or about 11/12/2007, Legg Mason Partners Variable Equity Trust-Legg Mason Partners Variable Multiple Discipline Portfolio -- Large Cap Growth and Value merged into Legg Mason Partners Variable Equity Trust-Legg Mason Partners Variable Appreciation Portfolio and is no longer available as a funding option. B-22 APPENDIX C - -------------------------------------------------------------------------------- ADDITIONAL INFORMATION REGARDING UNDERLYING FUNDS Certain Underlying Funds 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 a part. UNDERLYING FUND MERGERS/REORGANIZATIONS The following former Underlying Funds were merged with and into the new Underlying Funds
FORMER UNDERLYING FUND NEW UNDERLYING FUND - --------------------------------------------- --------------------------------------------- LEGG MASON PARTNERS VARIABLE EQUITY TRUST LEGG MASON PARTNERS VARIABLE EQUITY TRUST Legg Mason Partners Variable Multiple Legg Mason Partners Variable Appreciation Discipline Portfolio -- Large Cap Growth Portfolio -- Class II and Value
UNDERLYING FUND SUBSTITUTIONS The following new Underlying Funds were substituted for the former Underlying Funds.
FORMER UNDERLYING FUND NEW UNDERLYING FUND - --------------------------------------------- --------------------------------------------- ALLIANCEBERNSTEIN VARIABLE PRODUCT SERIES METROPOLITAN SERIES FUND, INC. FUND, INC. Large Cap Growth Portfolio -- Class B T. Rowe Price Large Cap Growth Portfolio -- Class B LEGG MASON PARTNERS VARIABLE INCOME TRUST METROPOLITAN SERIES FUND, INC. Legg Mason Partners Variable Government Western Asset Management U.S. Government Portfolio -- Class I Portfolio -- Class A VAN KAMPEN LIFE INVESTMENT TRUST METROPOLITAN SERIES FUND, INC. Strategic Growth Portfolio -- Class II Jennison Growth Portfolio -- Class B
C-1 THIS PAGE INTENTIONALLY LEFT BLANK. 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. E-1 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 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. 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 28, 2008 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, P.O. Box 10426, Des Moines, IA 50306- 0426. For the MetLife Insurance Company of Connecticut Statement of Additional Information please request MIC-Book-37. For the Statement of Additional Information for the contracts issued by the former MetLife Life and Annuity Company of Connecticut please request MLAC-Book-37. Name: ------------------------------------------------- Address: ---------------------------------------------- CHECK BOX: [ ] MIC-Book-37 [ ] MLAC-Book-37 F-1 PRIMELITE II STATEMENT OF ADDITIONAL INFORMATION DATED APRIL 28, 2008 FOR METLIFE OF CT SEPARATE ACCOUNT PF II FOR VARIABLE ANNUITIES ISSUED BY METLIFE INSURANCE COMPANY OF CONNECTICUT This Statement of Additional Information ("SAI") contains information in addition to the information described in the Prospectus for the variable annuity contracts (the "Contracts") offered by MetLife Insurance Company of Connecticut (the "Company", "we" or "our"). This SAI is not a prospectus but relates to, and should be read in conjunction with the Prospectus dated April 28, 2008. A copy of the Individual Variable Annuity Contract Prospectus may be obtained by writing to MetLife Insurance Company of Connecticut, Annuity Investor Services, P.O. Box 10426, Des Moines, IA 50306-0426 or by accessing the Securities and Exchange Commission's website at http://www.sec.gov. TABLE OF CONTENTS
ITEM ---- 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................................... 8 FINANCIAL STATEMENTS............................................................ 1
THE INSURANCE COMPANY 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. Prior to May 1, 2006, the Company was known as The Travelers Insurance Company. The Company 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. Before December 7, 2007, all Contracts were issued by MetLife Life and Annuity Company of Connecticut ("MLACC"), a stock life insurance company chartered in 1973 in Connecticut. Prior to May 1, 2006, MLACC was known as The Travelers Life and Annuity Company. On December 7, 2007, MLACC, an indirect wholly-owned subsidiary of MetLife, Inc. and a direct wholly-owned subsidiary of the Company, merged with and into the Company. Upon consummation of the merger, MLACC's separate corporate existence ceased by operation of law, and the Company assumed legal ownership of all of the assets of MLACC, including the Separate Account and its assets. As a result of the merger, the Company also has become responsible for all of MLACC's liabilities and obligations, including those created under Contracts initially issued by MLACC and outstanding on the date of the merger. Such Contracts have thereby become variable contracts funded by a separate account of the Company, and each Owner thereof has become a contract owner of the Company. 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 condition 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 - -------------------------------- -------------------------------- -------------------------------- 2007............................ $128,229,602 $0 2006............................ $ 62,664,480 $0 2005............................ $ 90,942,874 $0
(+)MLACC merged with and into the Company on December 7, 2007. Underwriting commissions paid before that date were paid by MLACC. 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 2007 ranged from $86,518 to $5,658,714. The amount of commissions paid to selected broker-dealer firms during 2007 ranged from $91,352 to $10,077,903. The amount of total compensation (includes non-commission as well as commission amounts) paid to selected broker-dealer firms during 2007 ranged from $433,549 to $10,536,736. 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 2007 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. Morgan Stanley DW, Inc. PFS Investments, Inc. (d/b/a Primerica) Pioneer Funds Distributor, Inc. 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. 3 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.) 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: Effective Yield = ((Base Return + 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. 4 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 1(st) 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 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. 5 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 $46,000 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. 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 2008 (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 6 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 2008 is $46,000. The limit on employee salary reduction deferrals (commonly referred to as "401(k) contributions") is $15,500 in 2008. 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 2008). 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 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. 7 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. INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The financial statements of each of the Subaccounts of the Separate Account and consolidated financial statements and the related financial statement schedules of MetLife Insurance Company of Connecticut and subsidiaries (which report expresses an unqualified opinion on the consolidated financial statements and financial statement schedules and includes an explanatory paragraph referring to changes in MetLife Insurance Company of Connecticut and subsidiaries' method of accounting for deferred acquisition costs as required by accounting guidance adopted on January 1, 2007) 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 have been so 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. REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Contract Owners of MetLife of CT Separate Account PF II for Variable Annuities and the Board of Directors of MetLife Insurance Company of Connecticut: We have audited the accompanying statements of assets and liabilities of MetLife of CT Separate Account PF II for Variable Annuities (the "Separate Account") of MetLife Insurance Company of Connecticut (the "Company") comprising each of the individual Subaccounts listed in Appendix A as of December 31, 2007, and the related statements of operations for the periods presented in the year then ended, and the statements of changes in net assets for each of the periods presented in the two years then ended. We have also audited the statements of operations for the periods presented in the year ended December 31, 2007, and the statements of changes in net assets for each of the periods presented in the two years then ended for each of the individual Subaccounts listed in Appendix B. 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 Note 5 for the periods in the two 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. 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 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, 2007, 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 constituting the Separate Account of the Company as of December 31, 2007, the results of their operations for the periods presented in the year then ended, and the changes in their net assets for each of the periods presented 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, FL March 24, 2008 APPENDIX A 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) Fidelity VIP Equity-Income Subaccount (Service Class 2) Fidelity VIP Mid Cap Subaccount (Service Class 2) FTVIPT Mutual Shares Securities Subaccount (Class 2) FTVIPT Templeton Growth Securities Subaccount (Class 2) LMPVET Aggressive Growth Subaccount (Class I) LMPVET Appreciation Subaccount (Class I) LMPVET Appreciation Subaccount (Class II) LMPVET Capital Subaccount LMPVET Dividend Strategy Subaccount LMPVET Fundamental Value Subaccount (Class I) LMPVET Global Equity Subaccount LMPVET International All Cap Opportunity Subaccount LMPVET Investors Subaccount (Class I) LMPVET Large Cap Growth Subaccount (Class I) LMPVET Lifestyle Allocation 50% Subaccount LMPVET Lifestyle Allocation 70% Subaccount LMPVET Lifestyle Allocation 85% Subaccount LMPVET Mid Cap Core Subaccount (Class I) LMPVET Small Cap Growth Subaccount (Class I) LMPVET Social Awareness Subaccount LMPVET Capital and Income Subaccount (Class I) LMPVET Capital and Income Subaccount (Class II) LMPVIT Adjustable Rate Income Subaccount LMPVIT Government Subaccount (Class I) LMPVIT High Income Subaccount LMPVIT Money Market Subaccount MIST BlackRock Large-Cap Core Subaccount (Class E) MIST Lord Abbett Bond Debenture Subaccount (Class A) MIST Lord Abbett Growth and Income Subaccount (Class B) MIST Met/AIM Capital Appreciation Subaccount (Class E) MIST MFS Research International Subaccount (Class B) MIST Oppenheimer Capital Appreciation Subaccount (Class B) MIST Pioneer Strategic Income Subaccount (Class A) MIST Third Avenue Small Cap Value Subaccount (Class B) MSF BlackRock Aggressive Growth Subaccount (Class D) MSF BlackRock Bond Income Subaccount (Class E) MSF Capital Guardian U.S. Equity Subaccount (Class B) MSF MFS 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) UIF Equity and Income Subaccount (Class II) UIF U.S. Real Estate Securities Subaccount (Class I) Pioneer Fund VCT Subaccount (Class II) Pioneer Mid Cap Value VCT Subaccount (Class II) Van Kampen LIT Comstock Subaccount (Class II) Van Kampen LIT Growth and Income Subaccount (Class II) Van Kampen LIT Strategic Growth Subaccount (Class II) APPENDIX B AIM V.I. Capital Appreciation Subaccount (Series II) AIM V.I. Core Equity Subaccount (Series II) LMPIS Premier Selections All Cap Growth Subaccount LMPVET Multiple Discipline Subaccount--Large Cap Growth and Value LMPVPV Small Cap Growth Opportunities Subaccount LMPIS Growth and Income Subaccount LMPVPII Capital and Income Subaccount LMPVPIII Large Cap Value Subaccount MIST BlackRock Large-Cap Core Subaccount (Class A) Putnam VT International Equity Subaccount (Class IB) Putnam VT Small Cap Value Subaccount (Class IB) METLIFE OF CT SEPARATE ACCOUNT PF II FOR VARIABLE ANNUITIES OF METLIFE INSURANCE COMPANY OF CONNECTICUT STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 2007
ALLIANCEBERNSTEIN ALLIANCEBERNSTEIN AMERICAN FUNDS AMERICAN FUNDS GLOBAL TECHNOLOGY LARGE-CAP GROWTH GLOBAL GROWTH GROWTH SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT (CLASS B) (CLASS B) (CLASS 2) (CLASS 2) ----------------- ----------------- -------------- -------------- ASSETS: Investments at fair value $2,369,369 $1,979,596 $23,999,358 $50,501,916 ---------- ---------- ----------- ----------- Total Assets 2,369,369 1,979,596 23,999,358 50,501,916 ---------- ---------- ----------- ----------- LIABILITIES: Other payables Insurance charges 302 235 3,037 6,398 Administrative fees 30 25 297 627 Due to Metlife Insurance Company of Connecticut -- -- -- -- ---------- ---------- ----------- ----------- Total Liabilities 332 260 3,334 7,025 ---------- ---------- ----------- ----------- NET ASSETS $2,369,037 $1,979,336 $23,996,024 $50,494,891 ========== ========== =========== ===========
The accompanying notes are an integral part of these financial statements. 1
AMERICAN FUNDS FIDELITY VIP FIDELITY VIP FTVIPT MUTUAL GROWTH-INCOME EQUITY-INCOME MID CAP SHARES SECURITIES SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT (CLASS 2) (SERVICE CLASS 2) (SERVICE CLASS 2) (CLASS 2) -------------- ----------------- ----------------- ----------------- ASSETS: Investments at fair value $36,067,985 $16,915,318 $44,075,460 $69,123,667 ----------- ----------- ----------- ----------- Total Assets 36,067,985 16,915,318 44,075,460 69,123,667 ----------- ----------- ----------- ----------- LIABILITIES: Other payables Insurance charges 4,567 2,076 5,337 8,469 Administrative fees 447 209 546 853 Due to Metlife Insurance Company of Connecticut -- -- -- -- ----------- ----------- ----------- ----------- Total Liabilities 5,014 2,285 5,883 9,322 ----------- ----------- ----------- ----------- NET ASSETS $36,062,971 $16,913,033 $44,069,577 $69,114,345 =========== =========== =========== ===========
The accompanying notes are an integral part of these financial statements. 2
FTVIPT TEMPLETON LMPVET AGGRESSIVE LMPVET LMPVET GROWTH SECURITIES GROWTH APPRECIATION APPRECIATION LMPVET LMPVET SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT CAPITAL DIVIDEND STRATEGY (CLASS 2) (CLASS I) (CLASS I) (CLASS II) SUBACCOUNT SUBACCOUNT ----------------- ----------------- ------------ ------------ ----------- ----------------- ASSETS: Investments at fair value $36,299,957 $375,605,598 $471,077,332 $1,735,948 $4,559,912 $41,980,428 ----------- ------------ ------------ ---------- ---------- ----------- Total Assets 36,299,957 375,605,598 471,077,332 1,735,948 4,559,912 41,980,428 ----------- ------------ ------------ ---------- ---------- ----------- LIABILITIES: Other payables Insurance charges 4,437 44,157 54,074 221 567 4,709 Administrative fees 451 4,675 5,842 22 57 521 Due to Metlife Insurance Company of Connecticut -- -- -- -- -- -- ----------- ------------ ------------ ---------- ---------- ----------- Total Liabilities 4,888 48,832 59,916 243 624 5,230 ----------- ------------ ------------ ---------- ---------- ----------- NET ASSETS $36,295,069 $375,556,766 $471,017,416 $1,735,705 $4,559,288 $41,975,198 =========== ============ ============ ========== ========== ===========
The accompanying notes are an integral part of these financial statements. 3
LMPVET LMPVET LMPVET FUNDAMENTAL VALUE LMPVET INTERNATIONAL INVESTORS SUBACCOUNT GLOBAL EQUITY ALL CAP OPPORTUNITY SUBACCOUNT (CLASS I) SUBACCOUNT SUBACCOUNT (CLASS I) ----------------- ------------- ------------------- ----------- ASSETS: Investments at fair value $310,083,834 $3,436,938 $48,350,951 $70,730,496 ------------ ---------- ----------- ----------- Total Assets 310,083,834 3,436,938 48,350,951 70,730,496 ------------ ---------- ----------- ----------- LIABILITIES: Other payables Insurance charges 37,270 429 5,271 7,461 Administrative fees 3,846 43 600 876 Due to Metlife Insurance Company of Connecticut -- -- -- -- ------------ ---------- ----------- ----------- Total Liabilities 41,116 472 5,871 8,337 ------------ ---------- ----------- ----------- NET ASSETS $310,042,718 $3,436,466 $48,345,080 $70,722,159 ============ ========== =========== ===========
The accompanying notes are an integral part of these financial statements. 4
LMPVET LMPVET LMPVET LARGE CAP GROWTH LMPVET LIFESTYLE LMPVET LIFESTYLE LMPVET LIFESTYLE MID CAP CORE SMALL CAP GROWTH SUBACCOUNT ALLOCATION 50% ALLOCATION 70% ALLOCATION 85% SUBACCOUNT SUBACCOUNT (CLASS I) SUBACCOUNT SUBACCOUNT SUBACCOUNT (CLASS I) (CLASS I) ---------------- ---------------- ---------------- ---------------- ------------ ---------------- ASSETS: Investments at fair value $24,859,288 $133,746,760 $72,035,918 $49,231,269 $37,072,317 $16,685,239 ----------- ------------ ----------- ----------- ----------- ----------- Total Assets 24,859,288 133,746,760 72,035,918 49,231,269 37,072,317 16,685,239 ----------- ------------ ----------- ----------- ----------- ----------- LIABILITIES: Other payables Insurance charges 3,006 14,576 7,567 5,159 4,403 1,897 Administrative fees 309 1,650 889 610 459 207 Due to Metlife Insurance Company of Connecticut -- -- -- -- -- -- ----------- ------------ ----------- ----------- ----------- ----------- Total Liabilities 3,315 16,226 8,456 5,769 4,862 2,104 ----------- ------------ ----------- ----------- ----------- ----------- NET ASSETS $24,855,973 $133,730,534 $72,027,462 $49,225,500 $37,067,455 $16,683,135 =========== ============ =========== =========== =========== ===========
The accompanying notes are an integral part of these financial statements. 5
LMPVET LMPVET LMPVET SOCIAL CAPITAL AND INCOME CAPITAL AND INCOME LMPVIT ADJUSTABLE AWARENESS SUBACCOUNT SUBACCOUNT RATE INCOME SUBACCOUNT (CLASS I) (CLASS II) SUBACCOUNT --------------- ------------------ ------------------ ----------------- ASSETS: Investments at fair value $19,973,044 $31,934,795 $9,067,056 $2,562,901 ----------- ----------- ---------- ---------- Total Assets 19,973,044 31,934,795 9,067,056 2,562,901 ----------- ----------- ---------- ---------- LIABILITIES: Other payables Insurance charges 2,254 4,014 1,113 314 Administrative fees 247 394 111 32 Due to Metlife Insurance Company of Connecticut -- -- 7,347 -- ----------- ----------- ---------- ---------- Total Liabilities 2,501 4,408 8,571 346 ----------- ----------- ---------- ---------- NET ASSETS $19,970,543 $31,930,387 $9,058,485 $2,562,555 =========== =========== ========== ==========
The accompanying notes are an integral part of these financial statements. 6
MIST BLACKROCK MIST LORD ABBETT MIST LORD ABBETT LMPVIT GOVERNMENT LMPVIT HIGH LMPVIT LARGE-CAP CORE BOND DEBENTURE GROWTH AND INCOME SUBACCOUNT INCOME MONEY MARKET SUBACCOUNT SUBACCOUNT SUBACCOUNT (CLASS I) SUBACCOUNT SUBACCOUNT (CLASS E) (CLASS A) (CLASS B) ----------------- ----------- ------------ -------------- ---------------- ----------------- ASSETS: Investments at fair value $84,514,541 $82,790,105 $58,693,967 $50,365,976 $26,316,323 $7,942,259 ----------- ----------- ----------- ----------- ----------- ---------- Total Assets 84,514,541 82,790,105 58,693,967 50,365,976 26,316,323 7,942,259 ----------- ----------- ----------- ----------- ----------- ---------- LIABILITIES: Other payables Insurance charges 10,306 9,691 6,691 5,291 3,273 1,001 Administrative fees 1,041 1,022 724 626 324 98 Due to Metlife Insurance Company of Connecticut -- -- -- -- -- -- ----------- ----------- ----------- ----------- ----------- ---------- Total Liabilities 11,347 10,713 7,415 5,917 3,597 1,099 ----------- ----------- ----------- ----------- ----------- ---------- NET ASSETS $84,503,194 $82,779,392 $58,686,552 $50,360,059 $26,312,726 $7,941,160 =========== =========== =========== =========== =========== ==========
The accompanying notes are an integral part of these financial statements. 7
MIST MET/AIM MIST MFS RESEARCH MIST OPPENHEIMER MIST PIONEER CAPITAL APPRECIATION INTERNATIONAL CAPITAL APPRECIATION STRATEGIC INCOME SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT (CLASS E) (CLASS B) (CLASS B) (CLASS A) -------------------- ----------------- -------------------- ---------------- ASSETS: Investments at fair value $1,945,967 $16,409,563 $8,884,949 $50,509,159 ---------- ----------- ---------- ----------- Total Assets 1,945,967 16,409,563 8,884,949 50,509,159 ---------- ----------- ---------- ----------- LIABILITIES: Payables Insurance charges 243 1,925 1,091 6,164 Administrative fees 24 203 110 622 Due to Metlife Insurance Company of Connecticut -- -- -- -- ---------- ----------- ---------- ----------- Total Liabilities 267 2,128 1,201 6,786 ---------- ----------- ---------- ----------- NET ASSETS $1,945,700 $16,407,435 $8,883,748 $50,502,373 ========== =========== ========== ===========
The accompanying notes are an integral part of these financial statements. 8
MIST THIRD AVENUE MSF BLACKROCK MSF BLACKROCK SMALL CAP VALUE AGGRESSIVE GROWTH BOND INCOME SUBACCOUNT SUBACCOUNT SUBACCOUNT (CLASS B) (CLASS D) (CLASS E) ----------------- ----------------- ------------- ASSETS: Investments at fair value $20,045,105 $57,574,918 $39,985,475 ----------- ----------- ----------- Total Assets 20,045,105 57,574,918 39,985,475 ----------- ----------- ----------- LIABILITIES: Payables Insurance charges 2,457 6,103 4,977 Administrative fees 248 713 491 Due to Metlife Insurance Company of Connecticut -- -- -- ----------- ----------- ----------- Total Liabilities 2,705 6,816 5,468 ----------- ----------- ----------- NET ASSETS $20,042,400 $57,568,102 $39,980,007 =========== =========== =========== MSF CAPITAL MSF MFS MSF T. ROWE PRICE GUARDIAN U.S. EQUITY TOTAL RETURN LARGE CAP GROWTH SUBACCOUNT SUBACCOUNT SUBACCOUNT (CLASS B) (CLASS F) (CLASS B) -------------------- ------------ ----------------- ASSETS: Investments at fair value $2,589,318 $184,054,400 $4,661,891 ---------- ------------ ---------- Total Assets 2,589,318 184,054,400 4,661,891 ---------- ------------ ---------- LIABILITIES: Payables Insurance charges 314 21,055 574 Administrative fees 32 2,273 58 Due to Metlife Insurance Company of Connecticut -- -- -- ---------- ------------ ---------- Total Liabilities 346 23,328 632 ---------- ------------ ---------- NET ASSETS $2,588,972 $184,031,072 $4,661,259 ========== ============ ==========
The accompanying notes are an integral part of these financial statements. 9
MSF WESTERN ASSET MANAGEMENT UIF EQUITY UIF U.S. REAL ESTATE U.S. GOVERNMENT AND INCOME SECURITIES PIONEER FUND VCT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT (CLASS A) (CLASS II) (CLASS I) (CLASS II) ----------------- ------------ -------------------- ---------------- ASSETS: Investments at fair value $9,636,883 $168,145,270 $22,753,010 $3,771,622 ---------- ------------ ----------- ---------- Total Assets 9,636,883 168,145,270 22,753,010 3,771,622 ---------- ------------ ----------- ---------- LIABILITIES: Payables Insurance charges 1,049 20,740 2,694 470 Administrative fees 118 2,081 278 47 Due to Metlife Insurance Company of Connecticut -- -- -- -- ---------- ------------ ----------- ---------- Total Liabilities 1,167 22,821 2,972 517 ---------- ------------ ----------- ---------- NET ASSETS $9,635,716 $168,122,449 $22,750,038 $3,771,105 ========== ============ =========== ==========
The accompanying notes are an integral part of these financial statements. 10
PIONEER MID CAP VAN KAMPEN LIT VAN KAMPEN LIT VAN KAMPEN LIT VALUE VCT COMSTOCK GROWTH AND INCOME STRATEGIC GROWTH SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT (CLASS II) (CLASS II) (CLASS II) (CLASS II) --------------- -------------- ----------------- ---------------- ASSETS: Investments at fair value $30,347,477 $191,710,852 $136,921,158 $60,267,261 ----------- ------------ ------------ ----------- Total Assets 30,347,477 191,710,852 136,921,158 60,267,261 ----------- ------------ ------------ ----------- LIABILITIES: Payables Insurance charges 3,700 22,524 15,954 6,809 Administrative fees 375 2,378 1,698 747 Due to Metlife Insurance Company of Connecticut -- -- -- -- ----------- ------------ ------------ ----------- Total Liabilities 4,075 24,902 17,652 7,556 ----------- ------------ ------------ ----------- NET ASSETS $30,343,402 $191,685,950 $136,903,506 $60,259,705 =========== ============ ============ ===========
The accompanying notes are an integral part of these financial statements. 11 METLIFE OF CT SEPARATE ACCOUNT PF II FOR VARIABLE ANNUITIES OF METLIFE INSURANCE COMPANY OF CONNECTICUT STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2007
AIM V.I. AIM V.I. ALLIANCEBERNSTEIN ALLIANCEBERNSTEIN CAPITAL APPRECIATION CORE EQUITY GLOBAL TECHNOLOGY LARGE-CAP GROWTH SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT (SERIES II) (a) (SERIES II) (a) (CLASS B) (CLASS B) -------------------- --------------- ----------------- ----------------- INVESTMENT INCOME: Dividends $ -- $ -- $ -- $ -- --------- --------- -------- -------- EXPENSES: Mortality and expense risk charges 7,883 10,489 27,083 27,944 Administrative charges 782 1,035 2,638 2,915 --------- --------- -------- -------- Total expenses 8,665 11,524 29,721 30,859 --------- --------- -------- -------- Net investment income (loss) (8,665) (11,524) (29,721) (30,859) --------- --------- -------- -------- NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Realized gain distributions -- -- -- -- Realized gains (losses) on sale of investments 425,446 315,901 69,706 59,423 --------- --------- -------- -------- Net realized gains (losses) 425,446 315,901 69,706 59,423 --------- --------- -------- -------- Change in unrealized gains (losses) on investments (312,213) (150,590) 234,124 185,886 --------- --------- -------- -------- Net increase (decrease) in net assets resulting from operations $ 104,568 $ 153,787 $274,109 $214,450 ========= ========= ======== ========
(a) For the period January 1, 2007 to April 27, 2007. (b) For the period November 12, 2007 to December 31, 2007. (c) For the period April 30, 2007 to December 31, 2007. (d) For the period January 1, 2007 to November 9, 2007. The accompanying notes are an integral part of these financial statements. 12
AMERICAN FUNDS AMERICAN FUNDS AMERICAN FUNDS FIDELITY VIP GLOBAL GROWTH GROWTH GROWTH-INCOME EQUITY-INCOME SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT (CLASS 2) (CLASS 2) (CLASS 2) (SERVICE CLASS 2) -------------- -------------- -------------- ----------------- INVESTMENT INCOME: Dividends $ 587,366 $ 386,682 $ 557,497 $ 287,083 ---------- ---------- ---------- ----------- EXPENSES: Mortality and expense risk charges 314,819 738,515 554,207 229,513 Administrative charges 30,795 72,306 54,277 23,094 ---------- ---------- ---------- ----------- Total expenses 345,614 810,821 608,484 252,607 ---------- ---------- ---------- ----------- Net investment income (loss) 241,752 (424,139) (50,987) 34,476 ---------- ---------- ---------- ----------- NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Realized gain distributions 820,236 3,243,020 1,174,510 1,448,146 Realized gains (losses) on sale of investments 237,668 918,984 609,391 310,303 ---------- ---------- ---------- ----------- Net realized gains (losses) 1,057,904 4,162,004 1,783,901 1,758,449 ---------- ---------- ---------- ----------- Change in unrealized gains (losses) on investments 1,103,836 908,774 (593,728) (1,922,632) ---------- ---------- ---------- ----------- Net increase (decrease) in net assets resulting from operations $2,403,492 $4,646,639 $1,139,186 $ (129,707) ========== ========== ========== =========== FIDELITY VIP FTVIPT MUTUAL MID CAP SHARES SECURITIES SUBACCOUNT SUBACCOUNT (SERVICE CLASS 2) (CLASS 2) ----------------- ----------------- INVESTMENT INCOME: Dividends $ 200,202 $ 1,029,628 ---------- ----------- EXPENSES: Mortality and expense risk charges 586,124 1,067,520 Administrative charges 59,683 107,260 ---------- ----------- Total expenses 645,807 1,174,780 ---------- ----------- Net investment income (loss) (445,605) (145,152) ---------- ----------- NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Realized gain distributions 3,443,364 2,520,859 Realized gains (losses) on sale of investments 651,309 1,231,807 ---------- ----------- Net realized gains (losses) 4,094,673 3,752,666 ---------- ----------- Change in unrealized gains (losses) on investments 1,155,887 (2,442,372) ---------- ----------- Net increase (decrease) in net assets resulting from operations $4,804,955 $ 1,165,142 ========== ===========
The accompanying notes are an integral part of these financial statements. 13
FTVIPT TEMPLETON LMPIS PREMIER LMPVET LMPVET GROWTH SECURITIES SELECTIONS AGGRESSIVE GROWTH APPRECIATION SUBACCOUNT ALL CAP GROWTH SUBACCOUNT SUBACCOUNT (CLASS 2) SUBACCOUNT (a) (CLASS I) (CLASS I) ----------------- -------------- ----------------- ------------- INVESTMENT INCOME: Dividends $ 508,871 $ 12,898 $ -- $ 5,024,331 ----------- ---------- ----------- ------------ EXPENSES: Mortality and expense risk charges 563,545 69,678 5,717,947 6,657,290 Administrative charges 57,169 8,156 605,631 720,845 ----------- ---------- ----------- ------------ Total expenses 620,714 77,834 6,323,578 7,378,135 ----------- ---------- ----------- ------------ Net investment income (loss) (111,843) (64,936) (6,323,578) (2,353,804) ----------- ---------- ----------- ------------ NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Realized gain distributions 1,623,653 1,442,788 2,165,467 38,962,790 Realized gains (losses) on sale of investments 818,351 (257,497) 12,761,058 15,839,317 ----------- ---------- ----------- ------------ Net realized gains (losses) 2,442,004 1,185,291 14,926,525 54,802,107 ----------- ---------- ----------- ------------ Change in unrealized gains (losses) on investments (2,093,538) (58,846) (8,644,318) (21,561,074) ----------- ---------- ----------- ------------ Net increase (decrease) in net assets resulting from operations $ 236,623 $1,061,509 $ (41,371) $ 30,887,229 =========== ========== =========== ============
(a) For the period January 1, 2007 to April 27, 2007. (b) For the period November 12, 2007 to December 31, 2007. (c) For the period April 30, 2007 to December 31, 2007. (d) For the period January 1, 2007 to November 9, 2007. The accompanying notes are an integral part of these financial statements. 14
LMPVET APPRECIATION LMPVET SUBACCOUNT LMPVET CAPITAL DIVIDEND STRATEGY (CLASS II) (b) SUBACCOUNT SUBACCOUNT -------------- -------------- ----------------- INVESTMENT INCOME: Dividends $ 13,762 $ 18,453 $ 867,132 --------- --------- ---------- EXPENSES: Mortality and expense risk charges 3,856 74,182 610,484 Administrative charges 375 7,374 67,680 --------- --------- ---------- Total expenses 4,231 81,556 678,164 --------- --------- ---------- Net investment income (loss) 9,531 (63,103) 188,968 --------- --------- ---------- NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Realized gain distributions 127,584 253,736 -- Realized gains (losses) on sale of investments (675) 102,076 118,970 --------- --------- ---------- Net realized gains (losses) 126,909 355,812 118,970 --------- --------- ---------- Change in unrealized gains (losses) on investments (114,662) (269,169) 1,911,951 --------- --------- ---------- Net increase (decrease) in net assets resulting from operations $ 21,778 $ 23,540 $2,219,889 ========= ========= ========== LMPVET LMPVET FUNDAMENTAL VALUE LMPVET INTERNATIONAL SUBACCOUNT GLOBAL EQUITY ALL CAP OPPORTUNITY (CLASS I) SUBACCOUNT SUBACCOUNT ----------------- ------------- ------------------- INVESTMENT INCOME: Dividends $ 3,889,655 $ 19,324 $ 461,937 ------------ -------- ------------ EXPENSES: Mortality and expense risk charges 4,904,567 51,064 681,456 Administrative charges 506,755 5,077 77,614 ------------ -------- ------------ Total expenses 5,411,322 56,141 759,070 ------------ -------- ------------ Net investment income (loss) (1,521,667) (36,817) (297,133) ------------ -------- ------------ NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Realized gain distributions 15,211,949 165,398 24,187,208 Realized gains (losses) on sale of investments 8,598,177 74,809 811,102 ------------ -------- ------------ Net realized gains (losses) 23,810,126 240,207 24,998,310 ------------ -------- ------------ Change in unrealized gains (losses) on investments (22,418,194) (96,936) (22,198,171) ------------ -------- ------------ Net increase (decrease) in net assets resulting from operations $ (129,735) $106,454 $ 2,503,006 ============ ======== ============
The accompanying notes are an integral part of these financial statements. 15
LMPVET LMPVET INVESTORS LARGE CAP GROWTH LMPVET LIFESTYLE LMPVET LIFESTYLE SUBACCOUNT SUBACCOUNT ALLOCATION 50% ALLOCATION 70% (CLASS I) (c) (CLASS I) SUBACCOUNT SUBACCOUNT ------------- ---------------- ---------------- ---------------- INVESTMENT INCOME: Dividends $ 903,996 $ 10,532 $ 4,911,297 $2,003,719 ----------- ---------- ----------- ---------- EXPENSES: Mortality and expense risk charges 669,732 386,642 1,919,963 1,009,351 Administrative charges 78,630 39,870 217,804 118,787 ----------- ---------- ----------- ---------- Total expenses 748,362 426,512 2,137,767 1,128,138 ----------- ---------- ----------- ---------- Net investment income (loss) 155,634 (415,980) 2,773,530 875,581 ----------- ---------- ----------- ---------- NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Realized gain distributions 1,944,682 -- 1,277,589 1,262,423 Realized gains (losses) on sale of investments (24,948) 1,064,585 2,413,324 178,641 ----------- ---------- ----------- ---------- Net realized gains (losses) 1,919,734 1,064,585 3,690,913 1,441,064 ----------- ---------- ----------- ---------- Change in unrealized gains (losses) on investments (3,965,497) 361,833 (3,929,734) (187,668) ----------- ---------- ----------- ---------- Net increase (decrease) in net assets resulting from operations $(1,890,129) $1,010,438 $ 2,534,709 $2,128,977 =========== ========== =========== ==========
(a) For the period January 1, 2007 to April 27, 2007. (b) For the period November 12, 2007 to December 31, 2007. (c) For the period April 30, 2007 to December 31, 2007. (d) For the period January 1, 2007 to November 9, 2007. The accompanying notes are an integral part of these financial statements. 16
LMPVET MULTIPLE LMPVET DISCIPLINE LMPVET LIFESTYLE MID CAP CORE SUBACCOUNT- ALLOCATION 85% SUBACCOUNT LARGE CAP GROWTH SUBACCOUNT (CLASS I) AND VALUE (d) ---------------- ------------ ---------------- INVESTMENT INCOME: Dividends $ 804,222 $ 154,575 $ 10,306 ----------- ----------- --------- EXPENSES: Mortality and expense risk charges 675,683 572,543 24,881 Administrative charges 80,086 59,890 2,414 ----------- ----------- --------- Total expenses 755,769 632,433 27,295 ----------- ----------- --------- Net investment income (loss) 48,453 (477,858) (16,989) ----------- ----------- --------- NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Realized gain distributions 3,446,130 7,111,139 87,037 Realized gains (losses) on sale of investments 719,031 1,179,714 159,349 ----------- ----------- --------- Net realized gains (losses) 4,165,161 8,290,853 246,386 ----------- ----------- --------- Change in unrealized gains (losses) on investments (2,996,565) (5,584,003) (192,118) ----------- ----------- --------- Net increase (decrease) in net assets resulting from operations $ 1,217,049 $ 2,228,992 $ 37,279 =========== =========== ========= LMPVET LMPVPV SMALL CAP GROWTH LMPVET SMALL CAP GROWTH SUBACCOUNT SOCIAL AWARENESS OPPORTUNITIES (CLASS I) (c) SUBACCOUNT SUBACCOUNT (a) ---------------- ---------------- ---------------- INVESTMENT INCOME: Dividends $ -- $ 265,893 $ 4,207 ---------- ----------- ----------- EXPENSES: Mortality and expense risk charges 163,029 272,272 78,710 Administrative charges 17,783 29,803 8,620 ---------- ----------- ----------- Total expenses 180,812 302,075 87,330 ---------- ----------- ----------- Net investment income (loss) (180,812) (36,182) (83,123) ---------- ----------- ----------- NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Realized gain distributions 1,167,141 3,083,704 603,808 Realized gains (losses) on sale of investments 16,712 397,527 2,883,237 ---------- ----------- ----------- Net realized gains (losses) 1,183,853 3,481,231 3,487,045 ---------- ----------- ----------- Change in unrealized gains (losses) on investments (765,023) (1,687,755) (2,225,441) ---------- ----------- ----------- Net increase (decrease) in net assets resulting from operations $ 238,018 $ 1,757,294 $ 1,178,481 ========== =========== ===========
The accompanying notes are an integral part of these financial statements. 17
LMPVET LMPVET LMPVIT LMPIS CAPITAL AND INCOME CAPITAL AND INCOME ADJUSTABLE RATE GROWTH AND INCOME SUBACCOUNT SUBACCOUNT INCOME SUBACCOUNT (a) (CLASS I) (c) (CLASS II) SUBACCOUNT ----------------- ------------------ ------------------ --------------- INVESTMENT INCOME: Dividends $ 54,087 $ 443,420 $ 107,421 $123,565 ----------- ----------- ----------- -------- EXPENSES: Mortality and expense risk charges 238,336 354,228 95,289 42,991 Administrative charges 25,231 34,774 9,511 4,307 ----------- ----------- ----------- -------- Total expenses 263,567 389,002 104,800 47,298 ----------- ----------- ----------- -------- Net investment income (loss) (209,480) 54,418 2,621 76,267 ----------- ----------- ----------- -------- NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Realized gain distributions 687,451 5,113,732 1,420,972 -- Realized gains (losses) on sale of investments 11,539,087 (22,461) 61,431 (4,594) ----------- ----------- ----------- -------- Net realized gains (losses) 12,226,538 5,091,271 1,482,403 (4,594) ----------- ----------- ----------- -------- Change in unrealized gains (losses) on investments (9,620,052) (5,174,099) (1,230,000) (79,306) ----------- ----------- ----------- -------- Net increase (decrease) in net assets resulting from operations $ 2,397,006 $ (28,410) $ 255,024 $ (7,633) =========== =========== =========== ========
(a) For the period January 1, 2007 to April 27, 2007. (b) For the period November 12, 2007 to December 31, 2007. (c) For the period April 30, 2007 to December 31, 2007. (d) For the period January 1, 2007 to November 9, 2007. The accompanying notes are an integral part of these financial statements. 18
LMPVIT GOVERNMENT LMPVIT LMPVIT LMPVPII SUBACCOUNT HIGH INCOME MONEY MARKET CAPITAL AND INCOME (CLASS I) SUBACCOUNT SUBACCOUNT SUBACCOUNT (a) ----------- ----------- ------------ ------------------ INVESTMENT INCOME: Dividends $ 4,557,086 $ 7,499,472 $2,865,867 $ 209,724 ----------- ----------- ---------- ----------- EXPENSES: Mortality and expense risk charges 1,339,254 1,270,129 830,739 169,117 Administrative charges 135,513 134,156 89,802 16,603 ----------- ----------- ---------- ----------- Total expenses 1,474,767 1,404,285 920,541 185,720 ----------- ----------- ---------- ----------- Net investment income (loss) 3,082,319 6,095,187 1,945,326 24,004 ----------- ----------- ---------- ----------- NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Realized gain distributions -- -- -- 1,326,748 Realized gains (losses) on sale of investments (581,992) (1,121,942) -- 2,849,294 ----------- ----------- ---------- ----------- Net realized gains (losses) (581,992) (1,121,942) -- 4,176,042 ----------- ----------- ---------- ----------- Change in unrealized gains (losses) on investments (1,710,181) (6,001,482) -- (2,421,470) ----------- ----------- ---------- ----------- Net increase (decrease) in net assets resulting from operations $ 790,146 $(1,028,237) $1,945,326 $ 1,778,576 =========== =========== ========== =========== MIST BLACKROCK LMPVPIII LARGE-CAP CORE LARGE CAP VALUE SUBACCOUNT SUBACCOUNT (a) (CLASS E) (c) --------------- -------------- INVESTMENT INCOME: Dividends $ 306,468 $ -- ----------- --------- EXPENSES: Mortality and expense risk charges 335,221 466,165 Administrative charges 39,361 55,176 ----------- --------- Total expenses 374,582 521,341 ----------- --------- Net investment income (loss) (68,114) (521,341) ----------- --------- NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Realized gain distributions -- -- Realized gains (losses) on sale of investments 12,362,740 18,160 ----------- --------- Net realized gains (losses) 12,362,740 18,160 ----------- --------- Change in unrealized gains (losses) on investments (8,179,975) 497,178 ----------- --------- Net increase (decrease) in net assets resulting from operations $ 4,114,651 $ (6,003) =========== =========
The accompanying notes are an integral part of these financial statements. 19
MIST BLACKROCK MIST LORD ABBETT MIST LORD ABBETT MIST MET/AIM LARGE-CAP CORE BOND DEBENTURE GROWTH AND INCOME CAPITAL APPRECIATION SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT (CLASS A)(a) (CLASS A) (CLASS B) (CLASS E) (c) -------------- ---------------- ----------------- -------------------- INVESTMENT INCOME: Dividends $ 392,416 $1,432,743 $ 75,005 $ -- ----------- ---------- --------- -------- EXPENSES: Mortality and expense risk charges 232,440 400,235 129,777 18,242 Administrative charges 27,529 39,643 12,784 1,806 ----------- ---------- --------- -------- Total expenses 259,969 439,878 142,561 20,048 ----------- ---------- --------- -------- Net investment income (loss) 132,447 992,865 (67,556) (20,048) ----------- ---------- --------- -------- NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Realized gain distributions 3,418,749 33,042 385,405 -- Realized gains (losses) on sale of investments 3,020,231 228,370 95,937 4,811 ----------- ---------- --------- -------- Net realized gains (losses) 6,438,980 261,412 481,342 4,811 ----------- ---------- --------- -------- Change in unrealized gains (losses) on investments (3,843,310) 55,947 (228,374) 58,871 ----------- ---------- --------- -------- Net increase (decrease) in net assets resulting from operations $ 2,728,117 $1,310,224 $ 185,412 $ 43,634 =========== ========== ========= ========
(a) For the period January 1, 2007 to April 27, 2007. (b) For the period November 12, 2007 to December 31, 2007. (c) For the period April 30, 2007 to December 31, 2007. (d) For the period January 1, 2007 to November 9, 2007. The accompanying notes are an integral part of these financial statements. 20
MIST MFS RESEARCH MIST OPPENHEIMER MIST PIONEER INTERNATIONAL CAPITAL APPRECIATION STRATEGIC INCOME SUBACCOUNT SUBACCOUNT SUBACCOUNT (CLASS B) (c) (CLASS B) (CLASS A) ----------------- -------------------- ---------------- INVESTMENT INCOME: Dividends $ -- $ -- $ 325,597 --------- --------- ---------- EXPENSES: Mortality and expense risk charges 132,212 114,128 720,453 Administrative charges 13,912 11,397 72,468 --------- --------- ---------- Total expenses 146,124 125,525 792,921 --------- --------- ---------- Net investment income (loss) (146,124) (125,525) (467,324) --------- --------- ---------- NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Realized gain distributions -- 450,860 -- Realized gains (losses) on sale of investments 23,384 48,749 136,611 --------- --------- ---------- Net realized gains (losses) 23,384 499,609 136,611 --------- --------- ---------- Change in unrealized gains (losses) on investments 745,807 470,618 2,660,858 --------- --------- ---------- Net increase (decrease) in net assets resulting from operations $ 623,067 $ 844,702 $2,330,145 ========= ========= ========== MIST THIRD AVENUE MSF BLACKROCK MSF BLACKROCK SMALL CAP VALUE AGGRESSIVE GROWTH BOND INCOME SUBACCOUNT SUBACCOUNT SUBACCOUNT (CLASS B) (c) (CLASS D) (CLASS E) ----------------- ----------------- ------------- INVESTMENT INCOME: Dividends $ -- $ -- $1,295,171 ----------- ---------- ---------- EXPENSES: Mortality and expense risk charges 228,877 731,302 624,314 Administrative charges 23,147 85,774 61,598 ----------- ---------- ---------- Total expenses 252,024 817,076 685,912 ----------- ---------- ---------- Net investment income (loss) (252,024) (817,076) 609,259 ----------- ---------- ---------- NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Realized gain distributions -- -- -- Realized gains (losses) on sale of investments (113,031) 857,725 267,320 ----------- ---------- ---------- Net realized gains (losses) (113,031) 857,725 267,320 ----------- ---------- ---------- Change in unrealized gains (losses) on investments (1,983,337) 9,736,586 850,061 ----------- ---------- ---------- Net increase (decrease) in net assets resulting from operations $(2,348,392) $9,777,235 $1,726,640 =========== ========== ==========
The accompanying notes are an integral part of these financial statements. 31
MSF CAPITAL MSF WESTERN ASSET GUARDIAN MSF MFS TOTAL MSF T. ROWE PRICE MANAGEMENT U.S. EQUITY RETURN LARGE CAP GROWTH U.S. GOVERNMENT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT (CLASS B) (c) (CLASS F) (CLASS B) (CLASS A) ------------- ------------- ----------------- ----------------- INVESTMENT INCOME: Dividends $ -- $ 3,920,476 $ 8,481 $254,353 --------- ----------- --------- -------- EXPENSES: Mortality and expense risk charges 26,147 2,725,378 67,487 129,077 Administrative charges 2,624 294,751 6,747 14,603 --------- ----------- --------- -------- Total expenses 28,771 3,020,129 74,234 143,680 --------- ----------- --------- -------- Net investment income (loss) (28,771) 900,347 (65,753) 110,673 --------- ----------- --------- -------- NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Realized gain distributions -- 6,614,789 39,124 -- Realized gains (losses) on sale of investments 2,573 1,871,121 74,109 97,389 --------- ----------- --------- -------- Net realized gains (losses) 2,573 8,485,910 113,233 97,389 --------- ----------- --------- -------- Change in unrealized gains (losses) on investments (152,967) (4,105,824) 266,990 76,548 --------- ----------- --------- -------- Net increase (decrease) in net assets resulting from operations $(179,165) $ 5,280,433 $ 314,470 $284,610 ========= =========== ========= ========
(a) For the period January 1, 2007 to April 27, 2007. (b) For the period November 12, 2007 to December 31, 2007. (c) For the period April 30, 2007 to December 31, 2007. (d) For the period January 1, 2007 to November 9, 2007. The accompanying notes are an integral part of these financial statements. 22
UIF EQUITY UIF U.S. REAL ESTATE AND INCOME SECURITIES PIONEER FUND VCT SUBACCOUNT SUBACCOUNT SUBACCOUNT (CLASS II) (CLASS I) (CLASS II) ----------- -------------------- ---------------- INVESTMENT INCOME: Dividends $ 3,160,001 $ 350,437 $ 38,387 ----------- ----------- --------- EXPENSES: Mortality and expense risk charges 2,594,152 442,488 58,815 Administrative charges 259,922 45,678 5,867 ----------- ----------- --------- Total expenses 2,854,074 488,166 64,682 ----------- ----------- --------- Net investment income (loss) 305,927 (137,729) (26,295) ----------- ----------- --------- NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Realized gain distributions 4,449,038 2,736,634 -- Realized gains (losses) on sale of investments 2,021,430 189,414 159,562 ----------- ----------- --------- Net realized gains (losses) 6,470,468 2,926,048 159,562 ----------- ----------- --------- Change in unrealized gains (losses) on investments (3,838,179) (8,560,307) (8,048) ----------- ----------- --------- Net increase (decrease) in net assets resulting from operations $ 2,938,216 $(5,771,988) $ 125,219 =========== =========== ========= PIONEER MID CAP PUTNAM VT PUTNAM VT VALUE VCT INTERNATIONAL EQUITY SMALL CAP VALUE SUBACCOUNT SUBACCOUNT SUBACCOUNT (CLASS II) (CLASS IB) (a) (CLASS IB) (a) --------------- -------------------- --------------- INVESTMENT INCOME: Dividends $ 168,645 $ 288,646 $ 131,045 ----------- ----------- ----------- EXPENSES: Mortality and expense risk charges 443,992 45,265 114,932 Administrative charges 44,938 4,752 11,615 ----------- ----------- ----------- Total expenses 488,930 50,017 126,547 ----------- ----------- ----------- Net investment income (loss) (320,285) 238,629 4,498 ----------- ----------- ----------- NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Realized gain distributions 3,013,523 1,249,537 2,620,894 Realized gains (losses) on sale of investments (82,170) 1,582,756 2,596,634 ----------- ----------- ----------- Net realized gains (losses) 2,931,353 2,832,293 5,217,528 ----------- ----------- ----------- Change in unrealized gains (losses) on investments (1,780,787) (2,264,629) (3,624,464) ----------- ----------- ----------- Net increase (decrease) in net assets resulting from operations $ 830,281 $ 806,293 $ 1,597,562 =========== =========== ===========
The accompanying notes are an integral part of these financial statements. 23
VAN KAMPEN LIT VAN KAMPEN LIT VAN KAMPEN LIT COMSTOCK GROWTH AND INCOME STRATEGIC GROWTH SUBACCOUNT SUBACCOUNT SUBACCOUNT (CLASS II) (CLASS II) (CLASS II) -------------- ----------------- ---------------- INVESTMENT INCOME: Dividends $ 3,447,774 $ 2,073,344 $ -- ------------ ----------- ----------- EXPENSES: Mortality and expense risk charges 3,040,992 2,082,886 825,763 Administrative charges 321,802 222,159 90,653 ------------ ----------- ----------- Total expenses 3,362,794 2,305,045 916,416 ------------ ----------- ----------- Net investment income (loss) 84,980 (231,701) (916,416) ------------ ----------- ----------- NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Realized gain distributions 4,784,847 5,583,840 -- Realized gains (losses) on sale of investments 5,198,906 4,747,945 (1,334,742) ------------ ----------- ----------- Net realized gains (losses) 9,983,753 10,331,785 (1,334,742) ------------ ----------- ----------- Change in unrealized gains (losses) on investments (17,380,234) (8,346,861) 10,644,140 ------------ ----------- ----------- Net increase (decrease) in net assets resulting from operations $ (7,311,501) $ 1,753,223 $ 8,392,982 ============ =========== ===========
(a) For the period January 1, 2007 to April 27, 2007. (b) For the period November 12, 2007 to December 31, 2007. (c) For the period April 30, 2007 to December 31, 2007. (d) For the period January 1, 2007 to November 9, 2007. The accompanying notes are an integral part of these financial statements. 24 This page is intentionally left blank. METLIFE OF CT SEPARATE ACCOUNT PF II FOR VARIABLE ANNUITIES OF METLIFE INSURANCE COMPANY OF CONNECTICUT STATEMENTS OF CHANGES IN NET ASSETS FOR THE YEARS ENDED DECEMBER 31, 2007 AND 2006
ALLIANCEBERNSTEIN AIM V.I.CAPITAL APPRECIATION AIM V.I.CORE EQUITY GLOBAL TECHNOLOGY SUBACCOUNT SUBACCOUNT SUBACCOUNT (SERIES II) (SERIES II) (CLASS B) ---------------------------- ----------------------- ---------------------- 2007 (a) 2006 2007 (a) 2006 (b) 2007 2006 ------------- ------------- ----------- ---------- ---------- ---------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) $ (8,665) $ (26,535) $ (11,524) $ (9,753) $ (29,721) $ (25,778) Net realized gains (losses) 425,446 55,038 315,901 6,840 69,706 71,040 Change in unrealized gains (losses) on investments (312,213) 32,520 (150,590) 150,590 234,124 61,141 ----------- ---------- ----------- ---------- ---------- ---------- Net increase (decrease) in net assets resulting from operations 104,568 61,023 153,787 147,677 274,109 106,403 ----------- ---------- ----------- ---------- ---------- ---------- CONTRACT TRANSACTIONS: Purchase payments received from contract owners 12,534 105,644 85,288 79,101 333,680 113,608 Transfers from other funding options 15,415 378,022 318,814 2,038,627 571,879 111,188 Contract charges -- (888) (3) (686) (526) (610) Contract surrenders (71,554) (218,913) (40,971) (48,072) (106,159) (109,174) Transfers to other funding options (1,685,955) (148,894) (2,539,141) (178,698) (214,778) (272,779) Other receipts (payments) (6,534) (64) (2,994) (12,729) -- (1,456) ----------- ---------- ----------- ---------- ---------- ---------- Net increase (decrease) in net assets resulting from contract transactions (1,736,094) 114,907 (2,179,007) 1,877,543 584,096 (159,223) ----------- ---------- ----------- ---------- ---------- ---------- Net increase (decrease) in net assets (1,631,526) 175,930 (2,025,220) 2,025,220 858,205 (52,820) NET ASSETS: Beginning of period 1,631,526 1,455,596 2,025,220 -- 1,510,832 1,563,652 ----------- ---------- ----------- ---------- ---------- ---------- End of period $ -- $1,631,526 $ -- $2,025,220 $2,369,037 $1,510,832 =========== ========== =========== ========== ========== ==========
(a) For the period January 1, 2007 to April 27, 2007. (b) For the period May 1, 2006 to December 31, 2006. (c) For the period November 12, 2007 to December 31, 2007. (d) For the period April 30, 2007 to December 31, 2007. (e) For the period January 1, 2007 to November 9, 2007. The accompanying notes are an integral part of these financial statements. 26
ALLIANCEBERNSTEIN AMERICAN FUNDS LARGE-CAP GROWTH GLOBAL GROWTH SUBACCOUNT SUBACCOUNT (CLASS B) (CLASS 2) ---------------------- ------------------------ 2007 2006 2007 2006 ---------- ---------- ----------- ----------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) $ (30,859) $ (30,125) $ 241,752 $ (105,488) Net realized gains (losses) 59,423 63,834 1,057,904 138,442 Change in unrealized gains (losses) on investments 185,886 (75,094) 1,103,836 2,201,755 ---------- ---------- ----------- ----------- Net increase (decrease) in net assets resulting from operations 214,450 (41,385) 2,403,492 2,234,709 ---------- ---------- ----------- ----------- CONTRACT TRANSACTIONS: Purchase payments received from contract owners 9,814 175,367 946,758 2,440,476 Transfers from other funding options 151,496 856,978 7,179,001 5,679,345 Contract charges (844) (869) (4,782) (3,378) Contract surrenders (153,203) (172,154) (1,439,338) (963,145) Transfers to other funding options (237,175) (484,570) (1,634,764) (1,245,013) Other receipts (payments) (15,001) 256 (44,879) (129,951) ---------- ---------- ----------- ----------- Net increase (decrease) in net assets resulting from contract transactions (244,913) 375,008 5,001,996 5,778,334 ---------- ---------- ----------- ----------- Net increase (decrease) in net assets (30,463) 333,623 7,405,488 8,013,043 NET ASSETS: Beginning of period 2,009,799 1,676,176 16,590,536 8,577,493 ---------- ---------- ----------- ----------- End of period $1,979,336 $2,009,799 $23,996,024 $16,590,536 ========== ========== =========== =========== AMERICAN FUNDS AMERICAN FUNDS GROWTH GROWTH-INCOME SUBACCOUNT SUBACCOUNT (CLASS 2) (CLASS 2) ------------------------ ------------------------ 2007 2006 2007 2006 ----------- ----------- ----------- ----------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) $ (424,139) $ (330,341) $ (50,987) $ (19,589) Net realized gains (losses) 4,162,004 527,002 1,783,901 934,586 Change in unrealized gains (losses) on investments 908,774 2,911,358 (593,728) 2,937,430 ----------- ----------- ----------- ----------- Net increase (decrease) in net assets resulting from operations 4,646,639 3,108,019 1,139,186 3,852,427 ----------- ----------- ----------- ----------- CONTRACT TRANSACTIONS: Purchase payments received from contract owners 1,197,405 7,534,312 969,707 4,455,237 Transfers from other funding options 9,078,648 7,791,181 5,403,171 3,418,626 Contract charges (10,720) (9,204) (6,881) (6,036) Contract surrenders (3,768,087) (2,154,820) (2,833,914) (2,079,864) Transfers to other funding options (4,224,811) (2,839,381) (2,190,625) (1,376,801) Other receipts (payments) (215,137) (296,343) (395,923) (55,039) ----------- ----------- ----------- ----------- Net increase (decrease) in net assets resulting from contract transactions 2,057,298 10,025,745 945,535 4,356,123 ----------- ----------- ----------- ----------- Net increase (decrease) in net assets 6,703,937 13,133,764 2,084,721 8,208,550 NET ASSETS: Beginning of period 43,790,954 30,657,190 33,978,250 25,769,700 ----------- ----------- ----------- ----------- End of period $50,494,891 $43,790,954 $36,062,971 $33,978,250 =========== =========== =========== ===========
The accompanying notes are an integral part of these financial statements. 27
FIDELITY VIP FTVIPT MUTUAL EQUITY-INCOME FIDELITY VIP MID SHARES SUBACCOUNT CAP SECURITIES (SERVICE SUBACCOUNT SUBACCOUNT CLASS 2) (SERVICE CLASS 2) (CLASS 2) ------------------------ ------------------------ ------------------------ 2007 2006 2007 2006 2007 2006 ----------- ----------- ----------- ----------- ----------- ----------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) $ 34,476 $ 139,626 $ (445,605) $ (489,186) $ (145,152) $ (195,536) Net realized gains (losses) 1,758,449 1,450,977 4,094,673 3,660,064 3,752,666 2,273,498 Change in unrealized gains (losses) on investments (1,922,632) 205,842 1,155,887 (240,023) (2,442,372) 6,954,419 ----------- ----------- ----------- ----------- ----------- ----------- Net increase (decrease) in net assets resulting from operations (129,707) 1,796,445 4,804,955 2,930,855 1,165,142 9,032,381 ----------- ----------- ----------- ----------- ----------- ----------- CONTRACT TRANSACTIONS: Purchase payments received from contract owners 576,031 481,264 667,623 3,427,232 1,365,197 6,635,559 Transfers from other funding options 7,178,066 3,271,291 11,308,909 13,593,344 10,365,445 12,261,789 Contract charges (4,141) (3,377) (14,627) (12,848) (16,986) (14,305) Contract surrenders (1,384,696) (663,102) (3,978,124) (2,759,760) (5,936,723) (3,624,915) Transfers to other funding options (1,852,159) (1,166,577) (5,075,476) (5,272,816) (5,423,968) (3,162,553) Other receipts (payments) (96,862) (25,193) (95,791) (84,717) (201,063) (45,325) ----------- ----------- ----------- ----------- ----------- ----------- Net increase (decrease) in net assets resulting from contract transactions 4,416,239 1,894,306 2,812,514 8,890,435 151,902 12,050,250 ----------- ----------- ----------- ----------- ----------- ----------- Net increase (decrease) in net assets 4,286,532 3,690,751 7,617,469 11,821,290 1,317,044 21,082,631 NET ASSETS: Beginning of period 12,626,501 8,935,750 36,452,108 24,630,818 67,797,301 46,714,670 ----------- ----------- ----------- ----------- ----------- ----------- End of period $16,913,033 $12,626,501 $44,069,577 $36,452,108 $69,114,345 $67,797,301 =========== =========== =========== =========== =========== ===========
(a) For the period January 1, 2007 to April 27, 2007. (b) For the period May 1, 2006 to December 31, 2006. (c) For the period November 12, 2007 to December 31, 2007. (d) For the period April 30, 2007 to December 31, 2007. (e) For the period January 1, 2007 to November 9, 2007. The accompanying notes are an integral part of these financial statements. 28
FTVIPT TEMPLETON GROWTH LMPIS PREMIER SECURITIES SELECTIONS SUBACCOUNT ALL CAP GROWTH (CLASS 2) SUBACCOUNT ------------------------ ------------------------- 2007 2006 2007 (a) 2006 ----------- ----------- ------------ ----------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) $ (111,843) $ (94,792) $ (64,936) $ (266,205) Net realized gains (losses) 2,442,004 1,363,791 1,185,291 521,589 Change in unrealized gains (losses) on investments (2,093,538) 4,338,464 (58,846) 761,222 ----------- ----------- ------------ ----------- Net increase (decrease) in net assets resulting from operations 236,623 5,607,463 1,061,509 1,016,606 ----------- ----------- ------------ ----------- CONTRACT TRANSACTIONS: Purchase payments received from contract owners 916,555 4,252,850 22,820 160,386 Transfers from other funding options 6,097,717 7,993,697 50,656 307,486 Contract charges (11,793) (9,687) (139) (16,079) Contract surrenders (3,464,762) (1,988,436) (665,650) (2,096,015) Transfers to other funding options (3,913,039) (2,185,030) (17,860,833) (1,700,884) Other receipts (payments) (45,163) (282,484) 73,221 (318,986) ----------- ----------- ------------ ----------- Net increase (decrease) in net assets resulting from contract transactions (420,485) 7,780,910 (18,379,925) (3,664,092) ----------- ----------- ------------ ----------- Net increase (decrease) in net assets (183,862) 13,388,373 (17,318,416) (2,647,486) NET ASSETS: Beginning of period 36,478,931 23,090,558 17,318,416 19,965,902 ----------- ----------- ------------ ----------- End of period $36,295,069 $36,478,931 $ -- $17,318,416 =========== =========== ============ =========== LMPVET AGGRESSIVE GROWTH LMPVET APPRECIATION SUBACCOUNT SUBACCOUNT (CLASS I) (CLASS I) -------------------------- -------------------------- 2007 2006 2007 2006 ------------ ------------ ------------ ------------ INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) $ (6,323,578) $ (6,453,149) $ (2,353,804) $ (2,042,708) Net realized gains (losses) 14,926,525 7,107,875 54,802,107 21,351,148 Change in unrealized gains (losses) on investments (8,644,318) 27,189,244 (21,561,074) 36,172,722 ------------ ------------ ------------ ------------ Net increase (decrease) in net assets resulting from operations (41,371) 27,843,970 30,887,229 55,481,162 ------------ ------------ ------------ ------------ CONTRACT TRANSACTIONS: Purchase payments received from contract owners 4,548,420 17,522,919 3,883,832 12,169,048 Transfers from other funding options 28,533,253 17,065,642 58,479,735 10,737,489 Contract charges (242,958) (259,136) (293,130) (293,215) Contract surrenders (39,585,137) (37,161,953) (55,449,218) (49,227,890) Transfers to other funding options (25,825,317) (22,851,159) (24,276,860) (19,976,209) Other receipts (payments) (1,515,146) (1,761,412) (2,824,647) (3,363,015) ------------ ------------ ------------ ------------ Net increase (decrease) in net assets resulting from contract transactions (34,086,885) (27,445,099) (20,480,288) (49,953,792) ------------ ------------ ------------ ------------ Net increase (decrease) in net assets (34,128,256) 398,871 10,406,941 5,527,370 NET ASSETS: Beginning of period 409,685,022 409,286,151 460,610,475 455,083,105 ------------ ------------ ------------ ------------ End of period $375,556,766 $409,685,022 $471,017,416 $460,610,475 ============ ============ ============ ============
The accompanying notes are an integral part of these financial statements. 29
LMPVET APPRECIATION SUBACCOUNT LMPVET CAPITAL LMPVET DIVIDEND STRATEGY (CLASS II) SUBACCOUNT SUBACCOUNT ------------------- ---------------------- ------------------------ 2007 (c) 2006 2007 2006 2007 2006 ---------- ------ ---------- ---------- ----------- ----------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) $ 9,531 $-- $ (63,103) $ (44,971) $ 188,968 $ 254,933 Net realized gains (losses) 126,909 -- 355,812 282,733 118,970 (1,131,734) Change in unrealized gains (losses) on investments (114,662) -- (269,169) 282,843 1,911,951 7,773,864 ---------- --- ---------- ---------- ----------- ----------- Net increase (decrease) in net assets resulting from operations 21,778 -- 23,540 520,605 2,219,889 6,897,063 ---------- --- ---------- ---------- ----------- ----------- CONTRACT TRANSACTIONS: Purchase payments received from contract owners -- -- 53,400 137,534 535,417 779,877 Transfers from other funding options 1,796,202 -- 292,110 669,305 1,579,355 1,419,923 Contract charges -- -- (1,356) (1,335) (32,726) (36,003) Contract surrenders (44,344) -- (282,735) (175,636) (5,075,962) (5,324,062) Transfers to other funding options (37,931) -- (494,193) (335,665) (3,162,511) (4,787,137) Other receipts (payments) -- -- (18,213) (624) (215,302) (293,527) ---------- --- ---------- ---------- ----------- ----------- Net increase (decrease) in net assets resulting from contract transactions 1,713,927 -- (450,987) 293,579 (6,371,729) (8,240,929) ---------- --- ---------- ---------- ----------- ----------- Net increase (decrease) in net assets 1,735,705 -- (427,447) 814,184 (4,151,840) (1,343,866) NET ASSETS: Beginning of period -- -- 4,986,735 4,172,551 46,127,038 47,470,904 ---------- --- ---------- ---------- ----------- ----------- End of period $1,735,705 $-- $4,559,288 $4,986,735 $41,975,198 $46,127,038 ========== === ========== ========== =========== ===========
(a) For the period January 1, 2007 to April 27, 2007. (b) For the period May 1, 2006 to December 31, 2006. (c) For the period November 12, 2007 to December 31, 2007. (d) For the period April 30, 2007 to December 31, 2007. (e) For the period January 1, 2007 to November 9, 2007. The accompanying notes are an integral part of these financial statements. 30
LMPVET FUNDAMENTAL VALUE LMPVET INTERNATIONAL LMPVET INVESTORS SUBACCOUNT LMPVET GLOBAL EQUITY ALL CAP OPPORTUNITY SUBACCOUNT (CLASS I) SUBACCOUNT SUBACCOUNT (CLASS I) -------------------------- ---------------------- ------------------------- ----------------- 2007 2006 2007 2006 2007 2006 2007 (d) 2006 ------------ ------------ ---------- ---------- ------------ ----------- ----------- ---- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) $ (1,521,667) $ (8,556) $ (36,817) $ (15,427) $ (297,133) $ 310,461 $ 155,634 $-- Net realized gains (losses) 23,810,126 18,674,415 240,207 149,156 24,998,310 877,797 1,919,734 -- Change in unrealized gains (losses) on investments (22,418,194) 28,346,410 (96,936) 234,774 (22,198,171) 9,682,639 (3,965,497) -- ------------ ------------ ---------- ---------- ------------ ----------- ----------- --- Net increase (decrease) in net assets resulting from operations (129,735) 47,012,269 106,454 368,503 2,503,006 10,870,897 (1,890,129) -- ------------ ------------ ---------- ---------- ------------ ----------- ----------- --- CONTRACT TRANSACTIONS: Purchase payments received from contract owners 4,059,813 11,490,189 74,650 312,895 754,108 975,632 343,323 -- Transfers from other funding options 7,815,433 10,979,352 638,869 537,349 2,201,464 2,474,823 83,124,887 -- Contract charges (145,860) (157,570) (897) (770) (42,638) (46,894) (60,609) -- Contract surrenders (31,330,047) (29,110,713) (232,623) (190,061) (6,730,914) (5,434,846) (7,418,474) -- Transfers to other funding options (18,879,475) (18,685,981) (253,202) (413,852) (3,444,173) (3,722,072) (2,843,902) -- Other receipts (payments) (1,163,492) (1,408,413) (24,752) (114,149) (148,146) (567,632) (532,937) -- ------------ ------------ ---------- ---------- ------------ ----------- ----------- --- Net increase (decrease) in net assets resulting from contract transactions (39,643,628) (26,893,136) 202,045 131,412 (7,410,299) (6,320,989) 72,612,288 -- ------------ ------------ ---------- ---------- ------------ ----------- ----------- --- Net increase (decrease) in net assets (39,773,363) 20,119,133 308,499 499,915 (4,907,293) 4,549,908 70,722,159 -- NET ASSETS: Beginning of period 349,816,081 329,696,948 3,127,967 2,628,052 53,252,373 48,702,465 -- -- ------------ ------------ ---------- ---------- ------------ ----------- ----------- --- End of period $310,042,718 $349,816,081 $3,436,466 $3,127,967 $ 48,345,080 $53,252,373 $70,722,159 $-- ============ ============ ========== ========== ============ =========== =========== ===
The accompanying notes are an integral part of these financial statements. 31
LMPVET LARGE CAP GROWTH LMPVET LIFESTYLE LMPVET LIFESTYLE SUBACCOUNT ALLOCATION 50% ALLOCATION 70% (CLASS I) SUBACCOUNT SUBACCOUNT ------------------------- -------------------------- -------------------------- 2007 2006 2007 2006 2007 2006 ----------- ----------- ------------ ------------ ------------ ------------ INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) $ (415,980) $ (413,994) $ 2,773,530 $ 1,933,767 $ 875,581 $ 352,736 Net realized gains (losses) 1,064,585 679,571 3,690,913 1,259,208 1,441,064 (986,043) Change in unrealized gains (losses) on investments 361,833 437,572 (3,929,734) 6,603,532 (187,668) 6,675,759 ----------- ----------- ------------ ------------ ------------ ------------ Net increase (decrease) in net assets resulting from operations 1,010,438 703,149 2,534,709 9,796,507 2,128,977 6,042,452 ----------- ----------- ------------ ------------ ------------ ------------ CONTRACT TRANSACTIONS: Purchase payments received from contract owners 731,682 687,442 1,072,932 1,671,243 435,392 979,796 Transfers from other funding options 1,045,464 1,847,775 6,313,760 2,237,920 2,204,436 441,186 Contract charges (12,102) (13,656) (78,120) (89,439) (70,723) (81,282) Contract surrenders (2,942,807) (3,134,291) (19,879,469) (18,715,764) (13,066,562) (10,926,934) Transfers to other funding options (2,724,462) (2,925,819) (6,766,883) (8,031,524) (3,446,692) (3,955,106) Other receipts (payments) 122,592 (335,775) (1,806,693) (2,963,822) (866,970) (850,523) ----------- ----------- ------------ ------------ ------------ ------------ Net increase (decrease) in net assets resulting from contract transactions (3,779,633) (3,874,324) (21,144,473) (25,891,386) (14,811,119) (14,392,863) ----------- ----------- ------------ ------------ ------------ ------------ Net increase (decrease) in net assets (2,769,195) (3,171,175) (18,609,764) (16,094,879) (12,682,142) (8,350,411) NET ASSETS: Beginning of period 27,625,168 30,796,343 152,340,298 168,435,177 84,709,604 93,060,015 ----------- ----------- ------------ ------------ ------------ ------------ End of period $24,855,973 $27,625,168 $133,730,534 $152,340,298 $ 72,027,462 $ 84,709,604 =========== =========== ============ ============ ============ ============
(a) For the period January 1, 2007 to April 27, 2007. (b) For the period May 1, 2006 to December 31, 2006. (c) For the period November 12, 2007 to December 31, 2007. (d) For the period April 30, 2007 to December 31, 2007. (e) For the period January 1, 2007 to November 9, 2007. The accompanying notes are an integral part of these financial statements. 32
LMPVET LIFESTYLE LMPVET MID CAP CORE LMPVET MULTIPLE DISCIPLINE ALLOCATION 85% SUBACCOUNT SUBACCOUNT-LARGE CAP SUBACCOUNT (CLASS I) GROWTH AND VALUE ----------------------- ------------------------ -------------------------- 2007 2006 2007 2006 2007 (e) 2006 ----------- ------------ ----------- ----------- ----------- ------------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) $ 48,453 $ (256,746) $ (477,858) $ (408,906) $ (16,989) $ (16,639) Net realized gains (losses) 4,165,161 140,801 8,290,853 5,953,512 246,386 67,602 Change in unrealized gains (losses) on investments (2,996,565) 4,480,282 (5,584,003) (796,241) (192,118) 120,228 ----------- ------------ ----------- ----------- ----------- ---------- Net increase (decrease) in net assets resulting from operations 1,217,049 4,364,337 2,228,992 4,748,365 37,279 171,191 ----------- ------------ ----------- ----------- ----------- ---------- CONTRACT TRANSACTIONS: Purchase payments received from contract owners 616,116 451,678 988,351 1,098,587 1,651 54,416 Transfers from other funding options 1,657,266 379,743 1,374,023 1,326,335 169,444 302,108 Contract charges (54,388) (62,723) (18,859) (19,738) (427) (407) Contract surrenders (8,992,186) (8,142,984) (3,881,744) (3,286,489) (131,872) (217,538) Transfers to other funding options (1,436,836) (3,991,685) (3,067,973) (2,987,420) (1,910,802) (161,940) Other receipts (payments) (193,892) (205,921) 44,388 (370,431) -- -- ----------- ------------ ----------- ----------- ----------- ---------- Net increase (decrease) in net assets resulting from contract transactions (8,403,920) (11,571,892) (4,561,814) (4,239,156) (1,872,006) (23,361) ----------- ------------ ----------- ----------- ----------- ---------- Net increase (decrease) in net assets (7,186,871) (7,207,555) (2,332,822) 509,209 (1,834,727) 147,830 NET ASSETS: Beginning of period 56,412,371 63,619,926 39,400,277 38,891,068 1,834,727 1,686,897 ----------- ------------ ----------- ----------- ----------- ---------- End of period $49,225,500 $ 56,412,371 $37,067,455 $39,400,277 $ -- $1,834,727 =========== ============ =========== =========== =========== ========== LMPVET SMALL CAP GROWTH SUBACCOUNT (CLASS I) ----------------------- 2007 (d) 2006 ----------- ---- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) $ (180,812) $-- Net realized gains (losses) 1,183,853 -- Change in unrealized gains (losses) on investments (765,023) -- ----------- --- Net increase (decrease) in net assets resulting from operations 238,018 -- ----------- --- CONTRACT TRANSACTIONS: Purchase payments received from contract owners 140,888 -- Transfers from other funding options 18,651,321 -- Contract charges (9,003) -- Contract surrenders (1,259,341) -- Transfers to other funding options (1,056,741) -- Other receipts (payments) (22,007) -- ----------- --- Net increase (decrease) in net assets resulting from contract transactions 16,445,117 -- ----------- --- Net increase (decrease) in net assets 16,683,135 -- NET ASSETS: Beginning of period -- -- ----------- --- End of period $16,683,135 $-- =========== ===
The accompanying notes are an integral part of these financial statements. 33
LMPVET SOCIAL LMPVPV SMALL CAP AWARENESS GROWTH OPPORTUNITIES LMPIS GROWTH AND INCOME SUBACCOUNT SUBACCOUNT SUBACCOUNT ------------------------ ------------------------- ------------------------- 2007 2006 2007 (a) 2006 2007 (a) 2006 ----------- ----------- ------------ ----------- ------------ ----------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) $ (36,182) $ (212,826) $ (83,123) $ (274,152) $ (209,480) $ (438,283) Net realized gains (losses) 3,481,231 121,447 3,487,045 1,644,769 12,226,538 1,115,415 Change in unrealized gains (losses) on investments (1,687,755) 1,236,016 (2,225,441) 433,440 (9,620,052) 4,777,425 ----------- ----------- ------------ ----------- ------------ ----------- Net increase (decrease) in net assets resulting from operations 1,757,294 1,144,637 1,178,481 1,804,057 2,397,006 5,454,557 ----------- ----------- ------------ ----------- ------------ ----------- CONTRACT TRANSACTIONS: Purchase payments received from contract owners 295,610 222,535 71,304 866,019 120,666 1,043,039 Transfers from other funding options 610,809 416,051 304,337 2,183,104 349,753 1,360,047 Contract charges (11,973) (13,271) (109) (10,010) (248) (27,783) Contract surrenders (1,835,482) (2,120,159) (681,699) (1,849,109) (1,760,569) (6,744,985) Transfers to other funding options (947,597) (1,492,694) (18,740,156) (2,267,398) (54,581,136) (2,405,860) Other receipts (payments) (59,783) (299,168) (3,184) (96,991) (72,385) (427,924) ----------- ----------- ------------ ----------- ------------ ----------- Net increase (decrease) in net assets resulting from contract transactions (1,948,416) (3,286,706) (19,049,507) (1,174,385) (55,943,919) (7,203,466) ----------- ----------- ------------ ----------- ------------ ----------- Net increase (decrease) in net assets (191,122) (2,142,069) (17,871,026) 629,672 (53,546,913) (1,748,909) NET ASSETS: Beginning of period 20,161,665 22,303,734 17,871,026 17,241,354 53,546,913 55,295,822 ----------- ----------- ------------ ----------- ------------ ----------- End of period $19,970,543 $20,161,665 $ -- $17,871,026 $ -- $53,546,913 =========== =========== ============ =========== ============ ===========
(a) For the period January 1, 2007 to April 27, 2007. (b) For the period May 1, 2006 to December 31, 2006. (c) For the period November 12, 2007 to December 31, 2007. (d) For the period April 30, 2007 to December 31, 2007. (e) For the period January 1, 2007 to November 9, 2007. The accompanying notes are an integral part of these financial statements. 34
LMPVET CAPITAL AND INCOME LMPVET CAPITAL AND INCOME SUBACCOUNT SUBACCOUNT (CLASS I) (CLASS II) ------------------------- ------------------------- 2007 (d) 2006 2007 2006 -------------- -------- -------------- --------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) $ 54,418 $-- $ 2,621 $ (3,495) Net realized gains (losses) 5,091,271 -- 1,482,403 186,336 Change in unrealized gains (losses) on investments (5,174,099) -- (1,230,000) 207,944 ----------- --- ----------- ---------- Net increase (decrease) in net assets resulting from operations (28,410) -- 255,024 390,785 ----------- --- ----------- ---------- CONTRACT TRANSACTIONS: Purchase payments received from contract owners 30,734 -- 753,093 280,970 Transfers from other funding options 36,837,095 -- 4,155,350 433,114 Contract charges (6,979) -- (1,273) (980) Contract surrenders (1,457,319) -- (360,257) (266,797) Transfers to other funding options (3,406,816) -- (442,790) (514,297) Other receipts (payments) (37,918) -- (153,827) (7,352) ----------- --- ----------- ---------- Net increase (decrease) in net assets resulting from contract transactions 31,958,797 -- 3,950,296 (75,342) ----------- --- ----------- ---------- Net increase (decrease) in net assets 31,930,387 -- 4,205,320 315,443 NET ASSETS: Beginning of period -- -- 4,853,165 4,537,722 ----------- --- ----------- ---------- End of period $31,930,387 $-- $ 9,058,485 $4,853,165 =========== === =========== ========== LMPVIT ADJUSTABLE LMPVIT GOVERNMENT RATE INCOME SUBACCOUNT SUBACCOUNT (CLASS I) ----------------------- -------------------------- 2007 2006 2007 2006 ---------- ----------- ------------ ------------ INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) $ 76,267 $ 80,522 $ 3,082,319 $ 2,258,867 Net realized gains (losses) (4,594) 5,016 (581,992) (727,155) Change in unrealized gains (losses) on investments (79,306) (9,066) (1,710,181) 648,268 ---------- ----------- ------------ ------------ Net increase (decrease) in net assets resulting from operations (7,633) 76,472 790,146 2,179,980 ---------- ----------- ------------ ------------ CONTRACT TRANSACTIONS: Purchase payments received from contract owners 116,068 699,491 781,973 3,046,759 Transfers from other funding options 488,226 670,165 6,106,144 7,434,928 Contract charges (524) (520) (35,064) (41,449) Contract surrenders (469,228) (255,292) (9,606,254) (11,084,468) Transfers to other funding options (463,707) (1,130,052) (7,718,849) (9,255,979) Other receipts (payments) (66,447) (31,332) (1,241,546) (599,430) ---------- ----------- ------------ ------------ Net increase (decrease) in net assets resulting from contract transactions (395,612) (47,540) (11,713,596) (10,499,639) ---------- ----------- ------------ ------------ Net increase (decrease) in net assets (403,245) 28,932 (10,923,450) (8,319,659) NET ASSETS: Beginning of period 2,965,800 2,936,868 95,426,644 103,746,303 ---------- ----------- ------------ ------------ End of period $2,562,555 $ 2,965,800 $ 84,503,194 $ 95,426,644 ========== =========== ============ ============
The accompanying notes are an integral part of these financial statements. 35
LMPVIT HIGH INCOME LMPVIT MONEY MARKET LMPVPII CAPITAL AND INCOME SUBACCOUNT SUBACCOUNT SUBACCOUNT --------------------------- --------------------------- --------------------------- 2007 2006 2007 2006 2007 (a) 2006 ------------ ------------ ------------ ------------ ------------ ------------ INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) $ 6,095,187 $ 5,587,440 $ 1,945,326 $ 2,037,430 $ 24,004 $ 86,317 Net realized gains (losses) (1,121,942) (1,262,595) -- -- 4,176,042 338,441 Change in unrealized gains (losses) on investments (6,001,482) 3,778,828 -- -- (2,421,470) 2,286,421 ----------- ------------ ------------ ------------ ------------ ----------- Net increase (decrease) in net assets resulting from operations (1,028,237) 8,103,673 1,945,326 2,037,430 1,778,576 2,711,179 ----------- ------------ ------------ ------------ ------------ ----------- CONTRACT TRANSACTIONS: Purchase payments received from contract owners 1,272,145 4,255,817 2,162,788 8,451,830 790,373 8,193,479 Transfers from other funding options 4,934,173 5,404,516 22,334,850 15,959,584 1,173,273 5,890,614 Contract charges (34,027) (38,114) (31,216) (33,316) (43) (5,500) Contract surrenders (9,804,001) (10,239,390) (14,661,101) (10,505,685) (882,335) (1,568,566) Transfers to other funding options (4,070,352) (6,561,143) (14,766,394) (25,634,301) (37,236,372) (2,214,210) Other receipts (payments) (933,495) (808,842) (661,194) (1,723,422) (21,655) (481,246) ----------- ------------ ------------ ------------ ------------ ----------- Net increase (decrease) in net assets resulting from contract transactions (8,635,557) (7,987,156) (5,622,267) (13,485,310) (36,176,759) 9,814,571 ----------- ------------ ------------ ------------ ------------ ----------- Net increase (decrease) in net assets (9,663,794) 116,517 (3,676,941) (11,447,880) (34,398,183) 12,525,750 NET ASSETS: Beginning of period 92,443,186 92,326,669 62,363,493 73,811,373 34,398,183 21,872,433 ----------- ------------ ------------ ------------ ------------ ----------- End of period $82,779,392 $ 92,443,186 $ 58,686,552 $ 62,363,493 $ -- $34,398,183 =========== ============ ============ ============ ============ ===========
(a) For the period January 1, 2007 to April 27, 2007. (b) For the period May 1, 2006 to December 31, 2006. (c) For the period November 12, 2007 to December 31, 2007. (d) For the period April 30, 2007 to December 31, 2007. (e) For the period January 1, 2007 to November 9, 2007. The accompanying notes are an integral part of these financial statements. 36
MIST BLACKROCK LMPVPIII LARGE-CAP CORE LARGE CAP VALUE SUBACCOUNT SUBACCOUNT (CLASS E) --------------------------- ---------------------- 2007 (a) 2006 2007 (d) 2006 ------------ ------------ ------------ -------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) $ (68,114) $ (180,131) $ (521,341) $ -- Net realized gains (losses) 12,362,740 2,022,507 18,160 -- Change in unrealized gains (losses) on investments (8,179,975) 10,625,536 497,178 -- ------------ ------------ ----------- ------- Net increase (decrease) in net assets resulting from operations 4,114,651 12,467,912 (6,003) -- ------------ ------------ ----------- ------- CONTRACT TRANSACTIONS: Purchase payments received from contract owners 211,766 840,870 223,458 -- Transfers from other funding options 1,255,248 1,236,848 57,837,150 -- Contract charges (1,007) (68,911) (50,226) -- Contract surrenders (3,867,371) (9,957,682) (5,579,474) -- Transfers to other funding options (83,600,287) (4,562,991) (1,560,565) -- Other receipts (payments) (88,909) (497,662) (504,281) -- ------------ ------------ ----------- ------- Net increase (decrease) in net assets resulting from contract transactions (86,090,560) (13,009,528) 50,366,062 -- ------------ ------------ ----------- ------- Net increase (decrease) in net assets (81,975,909) (541,616) 50,360,059 -- NET ASSETS: Beginning of period 81,975,909 82,517,525 -- -- ------------ ------------ ----------- ------- End of period $ -- $ 81,975,909 $50,360,059 $ -- ============ ============ =========== ======= MIST BLACKROCK MIST LORD ABBETT LARGE-CAP CORE BOND DEBENTURE SUBACCOUNT SUBACCOUNT (CLASS A) (CLASS A) --------------------------- --------------------------- 2007 (a) 2006 (b) 2007 2006 (b) ------------ ------------ ------------ ------------ INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) $ 132,447 $ (552,457) $ 992,865 $ (286,438) Net realized gains (losses) 6,438,980 (79,263) 261,412 41,378 Change in unrealized gains (losses) on investments (3,843,310) 3,843,311 55,947 1,431,073 ------------ ----------- ----------- ----------- Net increase (decrease) in net assets resulting from operations 2,728,117 3,211,591 1,310,224 1,186,013 ------------ ----------- ----------- ----------- CONTRACT TRANSACTIONS: Purchase payments received from contract owners 161,117 277,579 551,049 196,758 Transfers from other funding options 190,934 62,297,046 4,315,926 27,483,364 Contract charges (922) (57,401) (5,622) (5,668) Contract surrenders (2,749,940) (4,514,242) (2,464,041) (1,738,610) Transfers to other funding options (58,640,329) (2,407,793) (2,749,250) (1,150,423) Other receipts (payments) (103,649) (392,108) (481,342) (135,652) ------------ ----------- ----------- ----------- Net increase (decrease) in net assets resulting from contract transactions (61,142,789) 55,203,081 (833,280) 24,649,769 ------------ ----------- ----------- ----------- Net increase (decrease) in net assets (58,414,672) 58,414,672 476,944 25,835,782 NET ASSETS: Beginning of period 58,414,672 -- 25,835,782 -- ------------ ----------- ----------- ----------- End of period $ -- $58,414,672 $26,312,726 $25,835,782 ============ =========== =========== ===========
The accompanying notes are an integral part of these financial statements. 37
MIST MET/AIM MIST MFS MIST LORD ABBETT CAPITAL RESEARCH GROWTH AND INCOME APPRECIATION INTERNATIONAL SUBACCOUNT SUBACCOUNT SUBACCOUNT (CLASS B) (CLASS E) (CLASS B) ---------------------- ---------------- ----------------- 2007 2006 (b) 2007 (d) 2006 2007 (d) 2006 ---------- ---------- ---------- ---- ----------- ---- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) $ (67,556) $ (93,120) $ (20,048) $-- $ (146,124) $-- Net realized gains (losses) 481,342 10,508 4,811 -- 23,384 -- Change in unrealized gains (losses) on investments (228,374) 677,684 58,871 -- 745,807 -- ---------- ---------- ---------- --- ----------- --- Net increase (decrease) in net assets resulting from operations 185,412 595,072 43,634 -- 623,067 -- ---------- ---------- ---------- --- ----------- --- CONTRACT TRANSACTIONS: Purchase payments received from contract owners 47,166 46,489 9,230 -- 224,821 -- Transfers from other funding options 322,825 8,532,001 2,058,308 -- 17,579,181 -- Contract charges (3,178) (3,399) (860) -- (4,924) -- Contract surrenders (682,764) (418,858) (121,570) -- (915,103) -- Transfers to other funding options (408,089) (196,330) (43,042) -- (1,063,087) -- Other receipts (payments) (71,648) (3,539) -- -- (36,520) -- ---------- ---------- ---------- --- ----------- --- Net increase (decrease) in net assets resulting from contract transactions (795,688) 7,956,364 1,902,066 -- 15,784,368 -- ---------- ---------- ---------- --- ----------- --- Net increase (decrease) in net assets (610,276) 8,551,436 1,945,700 -- 16,407,435 -- NET ASSETS: Beginning of period 8,551,436 -- -- -- -- -- ---------- ---------- ---------- --- ----------- --- End of period $7,941,160 $8,551,436 $1,945,700 $-- $16,407,435 $-- ========== ========== ========== === =========== ===
(a) For the period January 1, 2007 to April 27, 2007. (b) For the period May 1, 2006 to December 31, 2006. (c) For the period November 12, 2007 to December 31, 2007. (d) For the period April 30, 2007 to December 31, 2007. (e) For the period January 1, 2007 to November 9, 2007. The accompanying notes are an integral part of these financial statements. 38
MIST OPPENHEIMER MIST PIONEER MIST THIRD AVENUE MSF BLACKROCK CAPITAL APPRECIATION STRATEGIC INCOME SMALL CAP VALUE AGGRESSIVE GROWTH SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT (CLASS B) (CLASS A) (CLASS B) (CLASS D) ---------------------- ------------------------ ----------------- ------------------------ 2007 2006 (b) 2007 2006 (b) 2007 (d) 2006 2007 2006 (b) ---------- ---------- ----------- ----------- ----------- ---- ----------- ----------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) $ (125,525) $ (74,675) $ (467,324) $ 1,626,857 $ (252,024) $-- $ (817,076) $ (565,738) Net realized gains (losses) 499,609 (8,121) 136,611 50,090 (113,031) -- 857,725 (602,257) Change in unrealized gains (losses) on investments 470,618 187,092 2,660,858 (119,753) (1,983,337) -- 9,736,586 (752,253) ---------- ---------- ----------- ----------- ----------- --- ----------- ----------- Net increase (decrease) in net assets resulting from operations 844,702 104,296 2,330,145 1,557,194 (2,348,392) -- 9,777,235 (1,920,248) ---------- ---------- ----------- ----------- ----------- --- ----------- ----------- CONTRACT TRANSACTIONS: Purchase payments received from contract owners 406,235 74,735 1,727,478 2,923,136 139,618 -- 561,079 340,621 Transfers from other funding options 1,806,683 7,301,911 9,878,333 48,066,493 26,606,022 -- 2,897,933 68,229,137 Contract charges (2,900) (2,813) (10,691) (9,315) (8,443) -- (63,116) (69,062) Contract surrenders (724,179) (326,868) (4,875,156) (2,660,113) (1,599,034) -- (7,928,303) (4,748,248) Transfers to other funding options (355,946) (251,253) (4,163,767) (3,598,930) (2,725,142) -- (4,321,655) (4,421,274) Other receipts (payments) (8,951) 18,096 (495,047) (167,387) (22,229) -- (327,746) (438,251) ---------- ---------- ----------- ----------- ----------- --- ----------- ----------- Net increase (decrease) in net assets resulting from contract transactions 1,120,942 6,813,808 2,061,150 44,553,884 22,390,792 -- (9,181,808) 58,892,923 ---------- ---------- ----------- ----------- ----------- --- ----------- ----------- Net increase (decrease) in net assets 1,965,644 6,918,104 4,391,295 46,111,078 20,042,400 -- 595,427 56,972,675 NET ASSETS: Beginning of period 6,918,104 -- 46,111,078 -- -- -- 56,972,675 -- ---------- ---------- ----------- ----------- ----------- --- ----------- ----------- End of period $8,883,748 $6,918,104 $50,502,373 $46,111,078 $20,042,400 $-- $57,568,102 $56,972,675 ========== ========== =========== =========== =========== === =========== ===========
The accompanying notes are an integral part of these financial statements. 39
MSF BLACKROCK MSF CAPITAL MSF MFS BOND INCOME GUARDIAN U.S. EQUITY TOTAL RETURN SUBACCOUNT SUBACCOUNT SUBACCOUNT (CLASS E) (CLASS B) (CLASS F) ------------------------ ------------------- -------------------------- 2007 2006 (b) 2007 (d) 2006 2007 2006 (b) ----------- ----------- ---------- ------- ------------ ------------ INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) $ 609,259 $ (482,117) $ (28,771) $ -- $ 900,347 $ (2,048,838) Net realized gains (losses) 267,320 77,058 2,573 -- 8,485,910 299,644 Change in unrealized gains (losses) on investments 850,061 1,960,953 (152,967) -- (4,105,824) 14,932,019 ----------- ----------- ---------- ----- ------------ ------------ Net increase (decrease) in net assets resulting from operations 1,726,640 1,555,894 (179,165) -- 5,280,433 13,182,825 ----------- ----------- ---------- ----- ------------ ------------ CONTRACT TRANSACTIONS: Purchase payments received from contract owners 380,757 447,131 69,191 -- 1,800,655 1,650,877 Transfers from other funding options 3,559,694 45,712,962 2,991,876 -- 6,804,642 207,591,242 Contract charges (10,972) (12,072) (897) -- (90,130) (98,295) Contract surrenders (3,917,777) (2,418,132) (89,178) -- (21,852,982) (13,273,176) Transfers to other funding options (3,713,392) (2,813,291) (179,453) -- (7,387,559) (7,282,714) Other receipts (payments) (369,091) (148,344) (23,402) -- (1,164,237) (1,130,509) ----------- ----------- ---------- ----- ------------ ------------ Net increase (decrease) in net assets resulting from contract transactions (4,070,781) 40,768,254 2,768,137 -- (21,889,611) 187,457,425 ----------- ----------- ---------- ----- ------------ ------------ Net increase (decrease) in net assets (2,344,141) 42,324,148 2,588,972 -- (16,609,178) 200,640,250 NET ASSETS: Beginning of period 42,324,148 -- -- -- 200,640,250 -- ----------- ----------- ---------- ----- ------------ ------------ End of period $39,980,007 $42,324,148 $2,588,972 $ -- $184,031,072 $200,640,250 =========== =========== ========== ===== ============ ============
(a) For the period January 1, 2007 to April 27, 2007. (b) For the period May 1, 2006 to December 31, 2006. (c) For the period November 12, 2007 to December 31, 2007. (d) For the period April 30, 2007 to December 31, 2007. (e) For the period January 1, 2007 to November 9, 2007. The accompanying notes are an integral part of these financial statements. 40
MSF WESTERN MSF T.ROWE PRICE ASSET MANAGEMENT LARGE CAP GROWTH U.S. GOVERNMENT SUBACCOUNT SUBACCOUNT (CLASS B) (CLASS A) ---------------------- ------------------------ 2007 2006 (b) 2007 2006 (b) ---------- ---------- ----------- ----------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) $ (65,753) $ (45,355) $ 110,673 $ (87,763) Net realized gains (losses) 113,233 (414) 97,389 54,014 Change in unrealized gains (losses) on investments 266,990 315,602 76,548 337,290 ---------- ---------- ----------- ----------- Net increase (decrease) in net assets resulting from operations 314,470 269,833 284,610 303,541 ---------- ---------- ----------- ----------- CONTRACT TRANSACTIONS: Purchase payments received from contract owners 88,063 57,300 277,504 858,536 Transfers from other funding options 903,946 4,387,129 4,861,956 11,128,651 Contract charges (1,550) (1,410) (1,677) (1,859) Contract surrenders (328,012) (353,520) (1,047,263) (502,578) Transfers to other funding options (393,095) (264,963) (3,850,155) (2,535,020) Other receipts (payments) (16,932) -- (121,768) (18,762) ---------- ---------- ----------- ----------- Net increase (decrease) in net assets resulting from contract transactions 252,420 3,824,536 118,597 8,928,968 ---------- ---------- ----------- ----------- Net increase (decrease) in net assets 566,890 4,094,369 403,207 9,232,509 NET ASSETS: Beginning of period 4,094,369 -- 9,232,509 -- ---------- ---------- ----------- ----------- End of period $4,661,259 $4,094,369 $ 9,635,716 $ 9,232,509 ========== ========== =========== =========== UIF U.S. UIF EQUITY AND INCOME REAL ESTATE SECURITIES SUBACCOUNT SUBACCOUNT (CLASS II) (CLASS I) -------------------------- ------------------------ 2007 2006 2007 2006 ------------ ------------ ----------- ----------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) $ 305,927 $ (776,607) $ (137,729) $ (101,294) Net realized gains (losses) 6,470,468 4,333,793 2,926,048 1,409,397 Change in unrealized gains (losses) on investments (3,838,179) 12,518,580 (8,560,307) 4,829,149 ------------ ------------ ----------- ----------- Net increase (decrease) in net assets resulting from operations 2,938,216 16,075,766 (5,771,988) 6,137,252 ------------ ------------ ----------- ----------- CONTRACT TRANSACTIONS: Purchase payments received from contract owners 4,276,637 15,139,002 1,087,803 3,656,609 Transfers from other funding options 15,723,404 20,281,087 10,305,878 13,493,184 Contract charges (38,295) (34,643) (10,639) (7,647) Contract surrenders (14,466,963) (11,567,486) (3,116,116) (1,499,270) Transfers to other funding options (7,671,554) (8,084,829) (9,530,696) (2,597,546) Other receipts (payments) (765,395) (1,265,997) (127,202) (22,112) ------------ ------------ ----------- ----------- Net increase (decrease) in net assets resulting from contract transactions (2,942,166) 14,467,134 (1,390,972) 13,023,218 ------------ ------------ ----------- ----------- Net increase (decrease) in net assets (3,950) 30,542,900 (7,162,960) 19,160,470 NET ASSETS: Beginning of period 168,126,399 137,583,499 29,912,998 10,752,528 ------------ ------------ ----------- ----------- End of period $168,122,449 $168,126,399 $22,750,038 $29,912,998 ============ ============ =========== ===========
The accompanying notes are an integral part of these financial statements. 41
PIONEER MID CAP PUTNAM VT PIONEER FUND VCT VALUE VCT INTERNATIONAL EQUITY SUBACCOUNT SUBACCOUNT SUBACCOUNT (CLASS II) (CLASS II) (CLASS IB) ---------------------- ------------------------ ------------------------- 2007 2006 2007 2006 2007 (a) 2006 ---------- ---------- ----------- ----------- ------------ ----------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) $ (26,295) $ (18,160) $ (320,285) $ (403,778) $ 238,629 $ (74,261) Net realized gains (losses) 159,562 83,938 2,931,353 6,382,931 2,832,293 154,595 Change in unrealized gains (losses) on investments (8,048) 385,895 (1,780,787) (3,520,087) (2,264,629) 1,417,596 ---------- ---------- ----------- ----------- ------------ ----------- Net increase (decrease) in net assets resulting from operations 125,219 451,673 830,281 2,459,066 806,293 1,497,930 ---------- ---------- ----------- ----------- ------------ ----------- CONTRACT TRANSACTIONS: Purchase payments received from contract owners 67,945 143,184 682,985 2,597,449 76,284 418,059 Transfers from other funding options 451,571 674,504 7,209,507 4,385,877 1,256,272 4,763,409 Contract charges (1,209) (1,048) (10,030) (8,718) (42) (2,713) Contract surrenders (399,919) (370,826) (2,161,532) (1,570,049) (202,467) (556,484) Transfers to other funding options (267,778) (91,267) (2,878,686) (2,889,223) (11,262,943) (1,097,158) Other receipts (payments) (19,673) (14,030) (64,659) (86,568) -- (13,564) ---------- ---------- ----------- ----------- ------------ ----------- Net increase (decrease) in net assets resulting from contract transactions (169,063) 340,517 2,777,585 2,428,768 (10,132,896) 3,511,549 ---------- ---------- ----------- ----------- ------------ ----------- Net increase (decrease) in net assets (43,844) 792,190 3,607,866 4,887,834 (9,326,603) 5,009,479 NET ASSETS: Beginning of period 3,814,949 3,022,759 26,735,536 21,847,702 9,326,603 4,317,124 ---------- ---------- ----------- ----------- ------------ ----------- End of period $3,771,105 $3,814,949 $30,343,402 $26,735,536 $ -- $ 9,326,603 ========== ========== =========== =========== ============ ===========
(a) For the period January 1, 2007 to April 27, 2007. (b) For the period May 1, 2006 to December 31, 2006. (c) For the period November 12, 2007 to December 31, 2007. (d) For the period April 30, 2007 to December 31, 2007. (e) For the period January 1, 2007 to November 9, 2007. The accompanying notes are an integral part of these financial statements. 42
PUTNAM VT VAN KAMPEN LIT SMALL CAP VALUE COMSTOCK SUBACCOUNT SUBACCOUNT (CLASS IB) (CLASS II) ------------------------- -------------------------- 2007 (a) 2006 2007 2006 ------------ ----------- ------------ ------------ INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) $ 4,498 $ (285,081) $ 84,980 $ (607,763) Net realized gains (losses) 5,217,528 2,161,717 9,983,753 15,197,814 Change in unrealized gains (losses) on investments (3,624,464) 1,019,412 (17,380,234) 13,642,293 ------------ ----------- ------------ ------------ Net increase (decrease) in net assets resulting from operations 1,597,562 2,896,048 (7,311,501) 28,232,344 ------------ ----------- ------------ ------------ CONTRACT TRANSACTIONS: Purchase payments received from contract owners 220,739 2,611,569 2,861,177 9,267,203 Transfers from other funding options 1,091,764 5,089,733 8,883,116 10,730,340 Contract charges (101) (8,058) (92,967) (99,747) Contract surrenders (675,581) (1,702,484) (18,721,767) (17,685,357) Transfers to other funding options (25,854,154) (1,841,688) (13,701,944) (11,632,620) Other receipts (payments) (25,204) (70,431) (916,193) (1,366,746) ------------ ----------- ------------ ------------ Net increase (decrease) in net assets resulting from contract transactions (25,242,537) 4,078,641 (21,688,578) (10,786,927) ------------ ----------- ------------ ------------ Net increase (decrease) in net assets (23,644,975) 6,974,689 (29,000,079) 17,445,417 NET ASSETS: Beginning of period 23,644,975 16,670,286 220,686,029 203,240,612 ------------ ----------- ------------ ------------ End of period $ -- $23,644,975 $191,685,950 $220,686,029 ============ =========== ============ ============ VAN KAMPEN LIT VAN KAMPEN LIT GROWTH AND INCOME STRATEGIC GROWTH SUBACCOUNT SUBACCOUNT (CLASS II) (CLASS II) -------------------------- ------------------------ 2007 2006 2007 2006 ------------ ------------ ----------- ----------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) $ (231,701) $ (833,568) $ (916,416) $ (971,428) Net realized gains (losses) 10,331,785 12,087,091 (1,334,742) (2,683,813) Change in unrealized gains (losses) on investments (8,346,861) 7,956,216 10,644,140 4,238,328 ------------ ------------ ----------- ----------- Net increase (decrease) in net assets resulting from operations 1,753,223 19,209,739 8,392,982 583,087 ------------ ------------ ----------- ----------- CONTRACT TRANSACTIONS: Purchase payments received from contract owners 1,834,601 5,020,434 697,596 1,338,161 Transfers from other funding options 6,917,394 9,011,780 2,034,898 2,576,641 Contract charges (60,129) (63,413) (46,491) (52,010) Contract surrenders (13,703,159) (13,955,424) (6,136,955) (6,717,704) Transfers to other funding options (9,620,103) (7,842,716) (5,105,118) (5,440,584) Other receipts (payments) (943,602) (582,812) (176,708) (658,161) ------------ ------------ ----------- ----------- Net increase (decrease) in net assets resulting from contract transactions (15,574,998) (8,412,151) (8,732,778) (8,953,657) ------------ ------------ ----------- ----------- Net increase (decrease) in net assets (13,821,775) 10,797,588 (339,796) (8,370,570) NET ASSETS: Beginning of period 150,725,281 139,927,693 60,599,501 68,970,071 ------------ ------------ ----------- ----------- End of period $136,903,506 $150,725,281 $60,259,705 $60,599,501 ============ ============ =========== ===========
The accompanying notes are an integral part of these financial statements. 43 METLIFE OF CT SEPARATE ACCOUNT PF II FOR VARIABLE ANNUITIES OF METLIFE INSURANCE COMPANY OF CONNECTICUT NOTES TO THE FINANCIAL STATEMENTS 1. ORGANIZATION MetLife of CT Separate Account PF II for Variable Annuities (the "Separate Account"), a separate account of MetLife Insurance Company of Connecticut (the "Company"), was established by the Board of Directors of MetLife Life and Annuity Company of Connecticut ("MLAC") on July 30, 1997 to support operations of MLAC with respect to certain variable annuity contracts (the "Contracts"). On December 7, 2007, MLAC merged into the Company and the Separate Account became a separate account of the Company. The Company is a direct wholly-owned subsidiary of MetLife, Inc., a Delaware corporation. The Separate Account is registered as a unit investment trust under the Investment Company Act of 1940, as amended, and exists in accordance with the regulations of the Connecticut Department of Insurance. The Separate Account is divided into Subaccounts, each of which is treated as an individual accounting entity for financial reporting purposes. Each Subaccount invests in shares of the corresponding portfolio, series, or fund (with the same name) of registered investment management companies (the "Trusts") which are presented below: AllianceBernstein Variable Products Series Fund, Inc. ("AllianceBernstein") American Funds Insurance Series ("American Funds") Fidelity Variable Insurance Products Fund ("Fidelity VIP") Franklin Templeton Variable Insurance Products Trust ("FTVIPT") Legg Mason Partners Variable Income Trust ("LMPVIT") Legg Mason Partners Variable Equity Trust ("LMPVET") Met Investors Series Trust ("MIST") Metropolitan Series Fund, Inc. ("MSF") Pioneer Variable Contracts Trust ("Pioneer") Universal Institutional Funds, Inc. ("UIF") Van Kampen Life Investment Trust ("Van Kampen LIT") The assets of the Separate Account are registered in the name of the Company. Under applicable insurance law, the assets and liabilities of the Separate Account are clearly identified and distinguished from the Company's other assets and liabilities. The portion of the Separate Account's assets applicable to the Contracts is not chargeable with liabilities arising out of any other business the Company may conduct. Purchase payments applied to the Separate Account 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, 2007 (the share class indicated in parentheses is that of the portfolio, series, or fund in which the Subaccount invests): 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) Fidelity VIP Equity-Income Subaccount (Service Class 2) Fidelity VIP Mid Cap Subaccount (Service Class 2) FTVIPT Mutual Shares Securities Subaccount (Class 2) FTVIPT Templeton Growth Securities Subaccount (Class 2) LMPVET Aggressive Growth Subaccount (Class I) LMPVET Appreciation Subaccount (Class I) LMPVET Appreciation Subaccount (Class II) LMPVET Capital Subaccount LMPVET Dividend Strategy Subaccount LMPVET Fundamental Value Subaccount (Class I) LMPVET Global Equity Subaccount LMPVET International All Cap Opportunity Subaccount LMPVET Investors Subaccount (Class I) 44 1. ORGANIZATION -- (CONTINUED) LMPVET Large Cap Growth Subaccount (Class I) LMPVET Lifestyle Allocation 50% Subaccount LMPVET Lifestyle Allocation 70% Subaccount LMPVET Lifestyle Allocation 85% Subaccount LMPVET Mid Cap Core Subaccount (Class I) LMPVET Small Cap Growth Subaccount (Class I) LMPVET Social Awareness Subaccount LMPVET Capital and Income Subaccount (Class I) LMPVET Capital and Income Subaccount (Class II) LMPVIT Adjustable Rate Income Subaccount LMPVIT Government Subaccount (Class I) LMPVIT High Income Subaccount LMPVIT Money Market Subaccount MIST BlackRock Large-Cap Core Subaccount (Class E) MIST Lord Abbett Bond Debenture Subaccount (Class A) MIST Lord Abbett Growth and Income Subaccount (Class B) MIST Met/AIM Capital Appreciation Subaccount (Class E) MIST MFS Research International Subaccount (Class B) MIST Oppenheimer Capital Appreciation Subaccount (Class B) MIST Pioneer Strategic Income Subaccount (Class A) MIST Third Avenue Small Cap Value Subaccount (Class B) MSF BlackRock Aggressive Growth Subaccount (Class D) MSF BlackRock Bond Income Subaccount (Class E) MSF Capital Guardian U.S. Equity Subaccount (Class B) MSF MFS 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) UIF Equity and Income Subaccount (Class II) UIF U.S. Real Estate Securities Subaccount (Class I) Pioneer Fund VCT Subaccount (Class II) Pioneer Mid Cap Value VCT Subaccount (Class II) Van Kampen LIT Comstock Subaccount (Class II) Van Kampen LIT Growth and Income Subaccount (Class II) Van Kampen LIT Strategic Growth Subaccount (Class II) The following Subaccounts ceased operations during the year ended December 31, 2007: AIM V.I. Capital Appreciation Subaccount AIM V.I. Core Equity Subaccount LMPIS Premier Selections All Cap Growth Subaccount LMPVET Multiple Discipline Subaccount-Large Cap Growth and Value LMPVPV Small Cap Growth Opportunities Subaccount LMPIS Growth and Income Subaccount LMPVPII Capital and Income Subaccount LMPVPIII Large Cap Value Subaccount Putnam VT International Equity Subaccount Putnam VT Small Cap Value Subaccount 45 1. ORGANIZATION -- (CONTINUED) The operations of the Subaccounts were affected by the following changes that occurred during the year ended December 31, 2007: NAME CHANGES:
OLD NAME NEW NAME - --------------------------------------------------- ---------------------------------------------------- Legg Mason Partners Variable Multiple Discipline Legg Mason Partners Variable Capital and Income Portfolio - Balanced All Cap Growth and Value Portfolio Legg Mason Partners Variable Balanced Portfolio Legg Mason Partners Variable Allocation 50% Portfolio Legg Mason Partners Variable High Growth Portfolio Legg Mason Partners Variable Allocation 85% Portfolio Legg Mason Partners Variable Growth Portfolio Legg Mason Partners Variable Allocation 70% Portfolio Legg Mason Partners Variable International All Cap Legg Mason Partners Variable International All Cap Growth Portfolio Opportunity Portfolio Legg Mason Partners Variable Social Awareness Stock Legg Mason Partners Variable Social Awareness Portfolio Portfolio Legg Mason Partners Variable Multiple Discipline Legg Mason Partners Variable Capital Portfolio Portfolio - All Cap Growth and Value Legg Mason Partners Variable Multiple Discipline Legg Mason Partners Variable Global Equity Portfolio Portfolio - Global All Cap Growth and Value
MERGERS:
OLD NAME NEW NAME - --------------------------------------------------- ---------------------------------------------------- Legg Mason Partners Variable Premier Selections All Legg Mason Partners Variable Aggressive Growth Cap Growth Portfolio Portfolio Legg Mason Partners Variable Large Cap Value Legg Mason Partners Variable Investors Portfolio Portfolio Legg Mason Partners Variable Small Cap Growth Legg Mason Partners Variable Small Cap Growth Opportunities Portfolio Portfolio Legg Mason Partners Variable Growth and Income Legg Mason Partners Variable Appreciation Portfolio Portfolio Legg Mason Partners Variable Capital and Income Legg Mason Partners Variable Multiple Discipline Portfolio Portfolio - Balanced All Cap Growth and Value Legg Mason Partners Variable Multiple Discipline Legg Mason Partners Variable Appreciation Portfolio Large Cap Growth and Value Portfolio
SUBSTITUTIONS:
OLD NAME NEW NAME - --------------------------------------------------- ---------------------------------------------------- AIM V.I. Capital Appreciation Fund Met/AIM Capital Appreciation Portfolio AIM V.I. Core Equity Fund Capital Guardian U.S. Equity Portfolio Putnam VT International Equity Fund MFS Research International Portfolio Putnam VT Small Cap Value Fund Third Avenue Small Cap Value Portfolio
PORTFOLIO SHARE CLASS EXCHANGE:
OLD NAME NEW NAME - --------------------------------------------------- ---------------------------------------------------- BlackRock Large-Cap Core Portfolio (Class A) BlackRock Large-Cap Core Portfolio (Class E)
46 1. ORGANIZATION -- (CONCLUDED) This report is prepared for the general information of contract owners and is not an offer of units of the Separate Account or shares of the Separate Account's underlying investments. It should not be used in connection with any offer except in conjunction with the prospectus for the Separate Account products offered by the Company and the prospectus of the underlying portfolio, series, or fund, which collectively contain all the pertinent information, including additional information on charges and expenses. 2. SIGNIFICANT ACCOUNTING POLICIES BASIS OF ACCOUNTING The financial statements included herein have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for variable annuity separate accounts registered as unit investment trusts. VALUATION OF INVESTMENTS Investments are reported at fair value and are based on the net asset value per share as determined by the underlying assets of the portfolio, series, or fund of the Trusts, which value their investment securities at fair value. Changes in fair value are recorded in the statement of operations. SECURITY TRANSACTIONS Security transactions are recorded on a 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. FEDERAL INCOME TAXES The operations of the Separate Account 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 ("IRC"). Under the current provisions of the IRC, the Company does not expect to incur federal income taxes on the earnings of the Separate Account to the extent the earnings are credited under the Contracts. Accordingly, no charge is being made currently to the Separate Account for federal income taxes. The Company will periodically review the status of this policy in the event of changes in the tax law. A charge may be made in future years for any federal income taxes that would be attributable to the Contracts. ANNUITY PAYOUTS Net assets allocated to Contracts in the payout period are computed according to industry standard mortality tables. The assumed investment return is 3.0 percent. The mortality risk is fully borne by the Company and may result in additional amounts being transferred into the Separate 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. PURCHASE PAYMENTS Purchase payments received from contract owners by the Company are credited as accumulation or annuity units as of the end of the valuation period in which received, as provided in the prospectus. NET TRANSFERS The contract owner has the opportunity to transfer funds between Subaccounts within the Separate Account or the fixed account, which is an investment option in the Company's general account. OTHER RECEIPTS (PAYMENTS) Included in "other receipts (payments)" in the statements of changes in net assets are primarily contract benefits which have been re-deposited with the Company and distributions for payouts. USE OF ESTIMATES The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect amounts reported herein. Actual results could differ from these estimates. 47 2. SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED) ADOPTION OF NEW ACCOUNTING PRONOUNCEMENT Effective January 1, 2007, the Company adopted Financial Accounting Standards Board ("FASB") Interpretation ("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. The adoption of FIN 48 had no impact on the financial statements of the Separate Account. FUTURE ADOPTION OF NEW ACCOUNTING PRONOUNCEMENT In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157, FAIR VALUE MEASUREMENTS ("SFAS 157"). SFAS 157 defines fair value, establishes a framework for measuring fair value under GAAP and requires enhanced disclosures about fair value measurements. SFAS 157 does not require additional 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 certain exceptions. The Company believes the adoption of SFAS 157 will have no material impact on the financial statements of the Separate Account. 3. EXPENSES AND RELATED PARTY TRANSACTIONS The following annual Separate Account charges are asset-based charges and assessed through a daily reduction in unit values which are recorded as expenses in the accompanying statement of operations: MORTALITY AND EXPENSE RISK -- The mortality risk assumed by the Company is the risk that those insured may die sooner than anticipated and therefore, the Company will pay an aggregate amount of death benefits greater than anticipated. The expense risk assumed is where expenses incurred in issuing and administering the Contracts will exceed the amounts realized from the administrative charges assessed against the Contracts. In addition, the charge compensates the Company for the risk that the investor may live longer than estimated and the Company would be obligated to pay more in income payments than anticipated. ADMINISTRATIVE -- The Company has responsibility for the administration of the Contracts and the Separate Account. Generally, the administrative charge is related to the maintenance, including distribution, of each Contract and the Separate Account. ENHANCED STEPPED-UP PROVISION -- For an additional charge, the total death benefit payable may be increased based on the earnings in the Contracts. The table below represents the range of effective annual rates for each respective charge for the year ended December 31, 2007: Mortality and Expense Risk 1.25% - 1.50% Administrative 0.15% Enhanced Stepped-Up Provision 0.25%
The above referenced charges may not necessarily correspond to the costs associated with providing the services or benefits indicated by the designation of the charge or associated with a particular contract. A contract administrative charge of $30 is assessed on an annual basis for Contracts with a value of less than $50,000. In addition, most Contracts impose a surrender charge which ranges from 0% to 8% if the contract is partially or fully surrendered within the specified surrender charge period. These charges are assessed through the redemption of units and are recorded as contract charges in the accompanying statements of changes in net assets. Certain investments in the various portfolios, series or funds of the MIST and MSF Trusts hold shares which are managed by Met Investors Advisory, LLC and MetLife Advisers, LLC, respectively. Both act in the capacity of investment advisor and are indirect affiliates of the Company. 48 4. STATEMENT OF INVESTMENTS
FOR THE YEAR ENDED AS OF DECEMBER 31, 2007 DECEMBER 31, 2007 ------------------------ ---------------------------- MARKET COST OF PROCEEDS SHARES VALUE ($) PURCHASES ($) FROM SALES ($) ----------- ----------- ------------- ------------- AIM V.I. Capital Appreciation Subaccount (Series II) (Cost $0) (a) -- -- 14,899 1,759,807 AIM V.I. Core Equity Subaccount (Series II) (Cost $0) (a) -- -- 351,794 2,542,591 AllianceBernstein Global Technology Subaccount (Class B) (Cost $1,837,229) 116,660 2,369,369 851,034 297,721 AllianceBernstein Large-Cap Growth Subaccount (Class B) (Cost $1,562,055) 66,075 1,979,596 121,412 398,660 American Funds Global Growth Subaccount (Class 2) (Cost $19,388,246) 959,974 23,999,358 7,183,340 1,117,856 American Funds Growth Subaccount (Class 2) (Cost $31,742,857) 756,923 50,501,916 9,815,826 4,948,687 American Funds Growth-Income Subaccount (Class 2) (Cost $42,160,849) 853,478 36,067,985 5,805,282 3,734,571 Fidelity VIP Equity-Income Subaccount (Service Class 2) (Cost $17,480,530) 717,663 16,915,318 8,353,768 2,453,823 Fidelity VIP Mid Cap Subaccount (Service Class 2) (Cost $37,970,200) 1,237,032 44,075,460 10,924,798 5,130,349 FTVIPT Mutual Shares Securities Subaccount (Class 2) (Cost $58,378,482) 3,423,659 69,123,667 9,100,790 6,585,626 FTVIPT Templeton Growth Securities Subaccount (Class 2) (Cost $30,473,257) 2,351,033 36,299,957 5,485,909 4,404,389 LMPIS Premier Selections All Cap Growth Subaccount (Cost $0) (a) -- -- 1,550,233 18,554,183 LMPVET Aggressive Growth Subaccount (Class I) (Cost $298,402,060) 23,029,160 375,605,598 18,880,941 57,136,815 LMPVET Appreciation Subaccount (Class I) (Cost $410,992,440) 17,870,915 471,077,332 97,503,894 81,358,966 LMPVET Appreciation Subaccount (Class II) (Cost $1,850,610) (b) 65,706 1,735,948 1,936,125 84,840 LMPVET Capital Subaccount (Cost $4,327,935) 289,334 4,559,912 546,146 806,901 LMPVET Dividend Strategy Subaccount (Cost $41,665,406) 4,009,592 41,980,428 1,691,928 7,876,820 LMPVET Fundamental Value Subaccount (Class I) (Cost $274,777,977) 14,296,166 310,083,834 19,836,435 45,803,136 LMPVET Global Equity Subaccount (Cost $3,111,138) 192,870 3,436,938 806,985 476,184 LMPVET International All Cap Opportunity Subaccount (Cost $67,426,963) 5,402,341 48,350,951 25,267,578 8,786,514 LMPVET Investors Subaccount (Class I) (Cost $74,695,993) (c) 4,281,507 70,730,496 85,659,018 10,938,077 LMPVET Large Cap Growth Subaccount (Class I) (Cost $19,753,594) 1,497,547 24,859,288 1,116,264 5,310,981 LMPVET Lifestyle Allocation 50% Subaccount (Cost $126,765,908) 10,838,473 133,746,760 10,068,573 27,159,021 LMPVET Lifestyle Allocation 70% Subaccount (Cost $73,792,829) 6,324,488 72,035,918 5,050,486 17,721,746 LMPVET Lifestyle Allocation 85% Subaccount (Cost $48,745,016) 3,646,761 49,231,269 5,538,665 10,446,617 LMPVET Mid Cap Core Subaccount (Class I) (Cost $37,214,326) 2,994,533 37,072,317 8,001,512 5,930,511 LMPVET Multiple Discipline Subaccount-Large Cap Growth and Value (Cost $0) (d) -- -- 257,552 2,059,681 LMPVET Small Cap Growth Subaccount (Class I) (Cost $17,450,261) (c) 1,110,129 16,685,239 19,656,320 2,222,772 LMPVET Social Awareness Subaccount (Cost $19,829,482) 801,487 19,973,044 4,062,656 2,964,288
49 4. STATEMENT OF INVESTMENTS -- (CONTINUED)
FOR THE YEAR ENDED AS OF DECEMBER 31, 2007 DECEMBER 31, 2007 ------------------------ ----------------------------- MARKET COST OF PROCEEDS SHARES VALUE ($) PURCHASES ($) FROM SALES ($) ----------- ----------- ------------- -------------- LMPVPV Small Cap Growth Opportunities Subaccount (Cost $0) (a) -- -- 764,757 19,295,167 LMPIS Growth and Income Subaccount (Cost $0) (a) -- -- 881,392 56,352,085 LMPVET Capital and Income Subaccount (Class I) (Cost $37,108,894) (c) 2,573,311 31,934,795 42,034,551 4,903,197 LMPVET Capital and Income Subaccount (Class II) (Cost $9,918,002) 729,454 9,067,056 6,118,361 736,342 LMPVIT Adjustable Rate Income Subaccount (Cost $2,702,323) 268,930 2,562,901 652,227 971,495 LMPVIT Government Subaccount (Class I) (Cost $90,976,372) 7,943,096 84,514,541 6,865,904 15,500,859 LMPVIT High Income Subaccount (Cost $99,035,604) 12,412,310 82,790,105 8,949,363 11,494,163 LMPVIT Money Market Subaccount (Cost $58,693,967) 58,693,967 58,693,967 16,763,445 20,448,091 LMPVPII Capital and Income Subaccount (Cost $0) (a) -- -- 2,852,573 37,695,523 LMPVPIII Large Cap Value Subaccount (Cost $0) (a) -- -- 1,014,785 87,179,954 MIST BlackRock Large-Cap Core Subaccount (Class E) (Cost $49,868,798) (c) 4,549,772 50,365,976 57,660,405 7,809,767 MIST BlackRock Large-Cap Core Subaccount (Class A) (Cost $0) (a) -- -- 3,941,823 61,537,952 MIST Lord Abbett Bond Debenture Subaccount (Class A) (Cost $24,829,303) 2,083,636 26,316,323 4,688,359 4,494,945 MIST Lord Abbett Growth and Income Subaccount (Class B) (Cost $7,492,950) 276,830 7,942,259 806,431 1,284,032 MIST Met/AIM Capital Appreciation Subaccount (Class E) (Cost $1,887,096) (c) 163,664 1,945,967 2,048,514 166,229 MIST MFS Research International Subaccount (Class B) (Cost $15,663,756) (c) 1,145,919 16,409,563 16,384,193 743,821 MIST Oppenheimer Capital Appreciation Subaccount (Class B) (Cost $8,227,239) 901,110 8,884,949 2,310,532 863,682 MIST Pioneer Strategic Income Subaccount (Class A) (Cost $47,968,055) 5,040,834 50,509,159 6,892,744 5,314,307 MIST Third Avenue Small Cap Value Subaccount (Class B) (Cost $22,028,443) (c) 1,278,387 20,045,105 25,566,464 3,424,991 MSF BlackRock Aggressive Growth Subaccount (Class D) (Cost $48,590,584) 2,008,895 57,574,918 1,189,370 11,186,443 MSF BlackRock Bond Income Subaccount (Class E) (Cost $37,174,461) 360,327 39,985,475 2,849,858 6,309,801 MSF Capital Guardian U.S. Equity Subaccount (Class B) (Cost $2,742,284) (c) 209,322 2,589,318 3,087,884 348,172 MSF MFS Total Return Subaccount (Class F) (Cost $173,228,205) 1,199,442 184,054,400 11,727,382 26,098,142 MSF T. Rowe Price Large Cap Growth Subaccount (Class B) (Cost $4,079,298) 284,262 4,661,891 862,968 636,934 MSF Western Asset Management U.S. Government Subaccount (Class A) (Cost $9,223,045) 771,568 9,636,883 4,779,303 4,549,612 UIF Equity and Income Subaccount (Class II) (Cost $145,861,733) 11,407,413 168,145,270 14,588,439 12,804,818 UIF U.S. Real Estate Securities Subaccount (Class I) (Cost $25,951,592) 1,031,883 22,753,010 8,735,029 7,528,259 Pioneer Fund VCT Subaccount (Class II) (Cost $2,936,445) 146,984 3,771,622 445,305 642,051
50 4. STATEMENT OF INVESTMENTS -- (CONCLUDED)
FOR THE YEAR ENDED AS OF DECEMBER 31, 2007 DECEMBER 31, 2007 ------------------------ ------------------------------ MARKET COST OF PROCEEDS SHARES VALUE ($) PURCHASES ($) FROM SALES ($) ---------- ----------- ------------- -------------- Pioneer Mid Cap Value VCT Subaccount (Class II) (Cost $33,181,501) 1,586,381 30,347,477 8,198,513 2,726,630 Putnam VT International Equity Subaccount (Class IB) (Cost $0) (a) -- -- 2,490,697 11,136,595 Putnam VT Small Cap Value Subaccount (Class IB) (Cost $0) (a) -- -- 3,364,142 25,983,783 Van Kampen LIT Comstock Subaccount (Class II) (Cost $163,741,590) 13,892,091 191,710,852 9,791,248 26,626,396 Van Kampen LIT Growth and Income Subaccount (Class II) (Cost $107,793,080) 6,425,207 136,921,158 9,984,061 20,206,514 Van Kampen LIT Strategic Growth Subaccount (Class II) (Cost $63,152,125) 1,810,371 60,267,261 434,356 10,081,854
(a) For the period January 1, 2007 to April 27, 2007. (b) For the period November 12, 2007 to December 31, 2007. (c) For the period April 30, 2007 to December 31, 2007. (d) For the period January 1, 2007 to November 9, 2007. 51 5. FINANCIAL HIGHLIGHTS The following table is a summary of unit values and units outstanding for the Contracts, net investment income ratios, and expense ratios, excluding expenses for the underlying portfolio, series, or fund for each of the five years in the period ended December 31, 2007:
AS OF DECEMBER 31 FOR THE YEAR ENDED DECEMBER 31 --------------------------------- ------------------------------------------------ UNIT VALUE(1) INVESTMENT(2) EXPENSE RATIO(3) TOTAL RETURN(4) UNITS LOWEST TO NET ASSETS INCOME LOWEST TO LOWEST TO (000S) HIGHEST ($) ($000S) RATIO (%) HIGHEST (%) HIGHEST (%) ------ ------------- ---------- ------------- ---------------- --------------- AIM V.I. Capital Appreciation 2007 -- 1.155 - 1.450 -- -- 1.40 - 1.90 6.45 - 6.62 Subaccount (Series II) (a) 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 AIM V.I. Core Equity 2007 -- 1.151 - 1.156 -- -- 1.40 - 1.90 6.96 - 7.04 Subaccount (Series II) (a) 2006 1,879 1.076 - 1.080 2,025 0.58 1.40 - 1.90 6.51 - 7.80 AllianceBernstein Global Technology 2007 2,252 1.039 - 1.054 2,369 -- 1.65 - 1.90 17.67 - 17.90 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 AllianceBernstein Large-Cap Growth 2007 1,684 1.066 - 1.469 1,979 -- 1.40 - 1.90 11.39 - 11.97 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 American Funds Global Growth 2007 11,084 2.143 - 2.168 23,996 2.86 1.65 - 1.90 12.67 - 12.98 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 2007 26,782 1.866 - 1.888 50,495 0.80 1.65 - 1.90 10.22 - 10.47 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 2007 21,818 1.636 - 1.655 36,063 1.54 1.65 - 1.90 3.02 - 3.31 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 Fidelity VIP Equity-Income 2007 11,984 1.369 - 1.572 16,913 1.86 1.40 - 1.90 (0.65) - (0.19) 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 Fidelity VIP Mid Cap 2007 20,158 2.133 - 2.277 44,070 0.50 1.40 - 1.90 13.16 - 13.74 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
52 5. FINANCIAL HIGHLIGHTS -- (CONTINUED)
AS OF DECEMBER 31 FOR THE YEAR ENDED DECEMBER 31 ---------------------------------- ------------------------------------------------ UNIT VALUE(1) INVESTMENT(2) EXPENSE RATIO(3) TOTAL RETURN(4) UNITS LOWEST TO NET ASSETS INCOME LOWEST TO LOWEST TO (000S) HIGHEST ($) ($000S) RATIO (%) HIGHEST (%) HIGHEST (%) ------- ------------- ---------- ------------- ---------------- --------------- FTVIPT Mutual Shares Securities 2007 44,941 1.503 - 1.640 69,114 1.44 1.40 - 1.90 1.49 - 2.05 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 FTVIPT Templeton Growth Securities 2007 23,165 1.511 - 1.769 36,295 1.34 1.40 - 1.90 0.40 - 0.91 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 LMPIS Premier Selections All Cap Growth 2007 -- 1.016 - 1.139 -- 0.08 1.40 - 1.90 6.34 - 6.50 Subaccount (a) 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 LMPVET Aggressive Growth 2007 340,445 1.091 - 1.113 375,557 -- 1.40 - 1.90 (0.36) - 0.09 Subaccount (Class I) 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 LMPVET Appreciation 2007 341,228 1.317 - 1.428 471,017 1.05 1.40 - 1.90 6.38 - 6.89 Subaccount (Class I) 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 LMPVET Appreciation Subaccount (Class II) (b) 2007 1,498 1.149 - 1.172 1,736 0.78 1.40 - 1.90 1.23 - 1.40 LMPVET Capital Subaccount 2007 3,925 1.151 - 1.173 4,559 0.38 1.40 - 1.90 (0.09) - 0.43 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 LMPVET Dividend Strategy Subaccount 2007 46,696 0.818 - 1.082 41,975 1.92 1.40 - 1.90 4.41 - 5.01 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 LMPVET Fundamental Value 2007 235,956 1.239 - 1.347 310,043 1.15 1.40 - 1.90 (0.67) - (0.08) Subaccount (Class I) 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 LMPVET Global Equity Subaccount 2007 2,727 1.248 - 1.273 3,436 0.57 1.40 - 1.90 2.89 - 3.50 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
53 5. FINANCIAL HIGHLIGHTS -- (CONTINUED)
AS OF DECEMBER 31 FOR THE YEAR ENDED DECEMBER 31 ---------------------------------- ------------------------------------------------ UNIT VALUE(1) INVESTMENT(2) EXPENSE RATIO(3) TOTAL RETURN(4) UNITS LOWEST TO NET ASSETS INCOME LOWEST TO LOWEST TO (000S) HIGHEST ($) ($000S) RATIO (%) HIGHEST (%) HIGHEST (%) ------- ------------- ---------- ------------- ---------------- --------------- LMPVET International All Cap 2007 39,675 1.151 - 1.507 48,345 0.89 1.40 - 1.90 4.36 - 4.83 Opportunity 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 LMPVET Investors Subaccount (Class I) (c) 2007 57,368 1.228 - 1.282 70,722 1.17 1.40 - 1.90 (2.85) - (2.54) LMPVET Large Cap Growth 2007 21,830 1.072 - 1.163 24,856 0.04 1.40 - 1.90 3.34 - 3.88 Subaccount (Class I) 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 LMPVET Lifestyle Allocation 50% 2007 99,556 1.252 - 1.372 133,731 3.38 1.40 - 1.90 1.29 - 1.78 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 LMPVET Lifestyle Allocation 70% 2007 58,129 1.235 - 1.253 72,027 2.53 1.40 - 1.90 1.90 - 2.40 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 LMPVET Lifestyle Allocation 85% 2007 38,673 1.246 - 1.274 49,226 1.51 1.40 - 1.90 1.38 - 1.92 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 LMPVET Mid Cap Core Subaccount (Class I) 2007 26,489 1.331 - 1.436 37,067 0.39 1.40 - 1.90 5.13 - 5.63 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 LMPVET Multiple Discipline 2007 -- 1.135 - 1.156 -- 0.55 1.40 - 1.90 1.61 - 2.03 Subaccount-Large Cap Growth 2006 1,634 1.117 - 1.133 1,835 0.78 1.40 - 1.90 10.16 - 10.75 and Value (d) 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 LMPVET Small Cap Growth Subaccount (Class I) (c) 2007 11,741 1.391 - 1.458 16,683 -- 1.40 - 1.90 1.06 - 1.38 LMPVET Social Awareness 2007 19,133 0.964 - 1.174 19,971 1.34 1.40 - 1.90 8.85 - 9.30 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
54 5. FINANCIAL HIGHLIGHTS -- (CONTINUED)
AS OF DECEMBER 31 FOR THE YEAR ENDED DECEMBER 31 ---------------------------------- ------------------------------------------------- UNIT VALUE(1) INVESTMENT(2) EXPENSE RATIO(3) TOTAL RETURN(4) UNITS LOWEST TO NET ASSETS INCOME LOWEST TO LOWEST TO (000S) HIGHEST ($) ($000S) RATIO (%) HIGHEST (%) HIGHEST (%) ------- ------------- ---------- ------------- ---------------- --------------- LMPVPV Small Cap Growth Opportunities 2007 -- 1.372 - 1.440 -- 0.02 1.40 - 1.90 6.60 - 6.77 Subaccount (a) 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 LMPIS Growth and Income Subaccount (a) 2007 -- 1.020 - 1.255 -- 0.10 1.40 - 1.90 4.56 - 4.67 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 LMPVET Capital and Income Subaccount (Class I) (c) 2007 25,845 1.228 - 1.236 31,930 1.30 1.65 - 1.90 (0.16) - 0.00 LMPVET Capital and Income 2007 7,851 1.143 - 1.165 9,058 1.69 1.40 - 1.90 3.44 - 3.93 Subaccount (Class II) 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 LMPVIT Adjustable Rate Income 2007 2,507 1.012 - 1.032 2,563 4.30 1.40 - 1.90 (0.59) - (0.10) 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) LMPVIT Government Subaccount (Class I) 2007 74,486 1.095 - 1.288 84,503 5.05 1.40 - 1.90 0.64 - 1.10 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) LMPVIT High Income Subaccount 2007 62,701 1.193 - 1.416 82,779 8.39 1.40 - 1.90 (1.62) - (1.16) 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 LMPVIT Money Market Subaccount 2007 52,353 1.035 - 1.198 58,687 4.79 1.40 - 1.90 2.88 - 3.45 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) LMPVPII Capital and Income 2007 -- 1.230 - 1.236 -- 0.61 1.65 - 1.90 5.04 - 5.10 Subaccount (a) 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 LMPVPIII Large Cap Value Subaccount (a) 2007 -- 1.260 - 1.318 -- 0.38 1.40 - 1.90 5.01 - 5.18 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 MIST BlackRock Large-Cap Core Subaccount (Class E) (c) 2007 43,278 1.154 - 1.324 50,360 -- 1.40 - 1.90 (0.31) - 0.00
55 5. FINANCIAL HIGHLIGHTS -- (CONTINUED)
AS OF DECEMBER 31 FOR THE YEAR ENDED DECEMBER 31 ---------------------------------- -------------------------------------------------- UNIT VALUE(1) INVESTMENT(2) EXPENSE RATIO(3) TOTAL RETURN(4) UNITS LOWEST TO NET ASSETS INCOME LOWEST TO LOWEST TO (000S) HIGHEST ($) ($000S) RATIO (%) HIGHEST (%) HIGHEST (%) ------- ------------- ---------- ------------- ---------------- ----------------- MIST BlackRock Large-Cap Core 2007 -- 1.154 - 1.325 -- 0.69 1.40 - 1.90 4.81 - 4.91 Subaccount (Class A) (a) 2006 52,707 1.100 - 1.264 58,415 -- 1.40 - 1.90 5.67 - 6.08 MIST Lord Abbett Bond Debenture 2007 19,122 1.325 - 1.381 26,313 5.42 1.40 - 1.90 4.78 - 5.33 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 2007 7,241 1.093 - 1.102 7,941 0.88 1.40 - 1.90 1.77 - 2.32 Subaccount (Class B) 2006 7,953 1.074 - 1.077 8,551 -- 1.40 - 1.90 7.29 - 7.59 MIST Met/AIM Capital Appreciation Subaccount (Class E) (c) 2007 1,571 1.188 - 1.497 1,946 -- 1.40 - 1.90 2.86 - 3.24 MIST MFS Research International Subaccount (Class B) (c) 2007 8,511 1.800 - 2.132 16,407 -- 1.40 - 1.90 4.29 - 4.61 MIST Oppenheimer Capital Appreciation 2007 7,841 1.128 - 1.137 8,884 -- 1.40 - 1.90 12.13 - 12.69 Subaccount (Class B) 2006 6,867 1.006 - 1.009 6,918 -- 1.40 - 1.90 1.21 - 1.51 MIST Pioneer Strategic Income 2007 42,132 1.187 - 1.210 50,502 0.67 1.40 - 1.90 4.67 - 5.22 Subaccount (Class A) 2006 40,367 1.134 - 1.150 46,111 4.77 1.40 - 1.90 3.37 - 3.70 MIST Third Avenue Small Cap Value Subaccount (Class B) (c) 2007 11,502 1.696 - 1.876 20,042 -- 1.40 - 1.90 (10.22) - (9.89) MSF BlackRock Aggressive Growth 2007 46,999 0.959 - 1.269 57,568 -- 1.40 - 1.90 18.25 - 18.71 Subaccount (Class D) 2006 54,875 0.811 - 1.069 56,973 -- 1.40 - 1.90 (2.64) - (2.29) MSF BlackRock Bond Income 2007 34,431 1.090 - 1.165 39,980 3.15 1.40 - 1.90 4.17 - 4.61 Subaccount (Class E) 2006 38,027 1.042 - 1.116 42,324 -- 1.40 - 1.90 3.57 - 3.99 MSF Capital Guardian U.S. Equity Subaccount (Class B) (c) 2007 2,399 1.074 - 1.083 2,589 -- 1.40 - 1.90 (6.69) - (6.31) MSF MFS Total Return 2007 125,638 1.350 - 1.580 184,031 2.00 1.40 - 1.90 2.20 - 2.73 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 2007 4,063 1.142 - 1.152 4,661 0.19 1.40 - 1.90 7.03 - 7.66 Subaccount (Class B) 2006 3,833 1.067 - 1.070 4,094 -- 1.40 - 1.90 6.91 - 7.21 MSF Western Asset Management 2007 9,308 1.028 - 1.041 9,636 2.61 1.25 - 1.75 2.59 - 2.97 U.S. Government Subaccount (Class A) 2006 9,170 1.002 - 1.011 9,233 -- 1.25 - 1.75 3.30 - 3.69 UIF Equity and Income 2007 111,129 1.495 - 1.530 168,122 1.82 1.40 - 1.90 1.42 - 1.93 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 2007 17,485 1.291 - 1.308 22,750 1.15 1.40 - 1.90 (18.65) - (18.25) 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 Pioneer Fund VCT Subaccount (Class II) 2007 2,868 1.269 - 1.537 3,771 0.98 1.40 - 1.90 2.84 - 3.36 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
56 5. FINANCIAL HIGHLIGHTS -- (CONCLUDED)
AS OF DECEMBER 31 FOR THE YEAR ENDED DECEMBER 31 ---------------------------------- -------------------------------------------------- UNIT VALUE(1) INVESTMENT(2) EXPENSE RATIO(3) TOTAL RETURN(4) UNITS LOWEST TO NET ASSETS INCOME LOWEST TO LOWEST TO (000S) HIGHEST ($) ($000S) RATIO (%) HIGHEST (%) HIGHEST (%) ------- ------------- ---------- ------------- ---------------- ----------------- Pioneer Mid Cap Value VCT 2007 17,630 1.688 - 1.775 30,343 0.56 1.40 - 1.90 3.37 - 3.86 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 Putnam VT International Equity 2007 -- 1.726 - 2.038 -- 2.92 1.40 - 1.90 8.15 - 8.29 Subaccount (Class IB) (a) 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 Putnam VT Small Cap Value 2007 -- 1.889 - 2.082 -- 0.54 1.40 - 1.90 6.66 - 6.82 Subaccount (Class IB) (a) 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 Van Kampen LIT Comstock 2007 136,720 1.328 - 1.500 191,686 1.61 1.40 - 1.90 (4.18) - (3.72) 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 Van Kampen LIT Growth and Income 2007 93,076 1.444 - 1.495 136,904 1.40 1.40 - 1.90 0.61 - 1.12 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 Van Kampen LIT Strategic Growth 2007 87,183 0.563 - 1.066 60,260 -- 1.40 - 1.90 14.50 - 14.90 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
(1) The Company sells a number of variable annuity products which have unique combinations of features and fees that are charged against the contract owner's account balance. Differences in the fee structures result in a variety of unit values, expense ratios, and total returns. (2) These amounts represent the dividends, excluding distributions of capital gains, received by the Subaccount from the underlying portfolio, series, or fund, net of management fees assessed by the fund manager, divided by the average net assets. The ratios exclude those expenses, such as mortality and expense risk charges, that are assessed against contract owner accounts either through reductions in the unit values or the redemption of units. The investment income ratio is calculated for each period indicated or from the effective date through the end of the reporting period. The recognition of investment income by the Subaccount is affected by the timing of the declaration of dividends by the underlying portfolio, series, or fund in which the Subaccount invests. (3) These amounts represent the annualized contract expenses of the Separate Account, consisting primarily of mortality and expense risk 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 portfolio, series, or fund have been excluded. (4) These amounts represent the total return for the period indicated, including changes in the value of the underlying portfolio, series, or 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. (a) For the period January 1, 2007 to April 27, 2007. (b) For the period November 12, 2007 to December 31, 2007. (c) For the period April 30, 2007 to December 31, 2007. (d) For the period January 1, 2007 to November 9, 2007. 57 6. SCHEDULES OF ACCUMULATION AND ANNUITY UNITS FOR THE YEARS ENDED DECEMBER 31, 2007 AND 2006
AIM V.I. ALLIANCEBERNSTEIN CAPITAL APPRECIATION AIM V.I. CORE EQUITY GLOBAL TECHNOLOGY SUBACCOUNT SUBACCOUNT SUBACCOUNT (SERIES II) (SERIES II) (CLASS B) --------------------- -------------------- -------------------- 2007 (a) 2006 2007 (a) 2006 2007 2006 ---------- ---------- --------- --------- --------- --------- Accumulation and annuity units beginning of year 1,462,490 1,374,795 1,879,439 -- 1,693,565 1,867,266 Accumulation units issued and transferred from other funding options 24,318 424,951 367,909 2,114,976 890,663 274,518 Accumulation units redeemed and transferred to other funding options (1,486,808) (337,256) (2,247,348) (235,537) (331,945) (448,219) Annuity units -- -- -- -- -- -- ---------- --------- ---------- --------- --------- --------- Accumulation and annuity units end of year -- 1,462,490 -- 1,879,439 2,252,283 1,693,565 ========== ========= ========== ========= ========= =========
AMERICAN FUNDS FIDELITY VIP GROWTH - INCOME EQUITY - INCOME FIDELITY VIP MID CAP SUBACCOUNT SUBACCOUNT SUBACCOUNT (CLASS 2) (SERVICE CLASS 2) (SERVICE CLASS 2) ---------------------- ---------------------- ---------------------- 2007 2006 2007 2006 2007 2006 ---------- ---------- ---------- ---------- ---------- ---------- Accumulation and annuity units beginning of year 21,233,034 18,243,746 8,901,692 7,526,690 18,953,713 14,215,465 Accumulation units issued and transferred from other funding options 3,819,453 5,348,805 5,288,940 2,796,596 5,562,352 9,129,344 Accumulation units redeemed and transferred to other funding options (3,234,898) (2,359,517) (2,206,673) (1,421,594) (4,358,261) (4,391,096) Annuity units -- -- -- -- -- -- ---------- ---------- ---------- ---------- ---------- ---------- Accumulation and annuity units end of year 21,817,589 21,233,034 11,983,959 8,901,692 20,157,804 18,953,713 ========== ========== ========== ========== ========== ==========
(a) For the period January 1, 2007 to April 27, 2007. (b) For the period November 12, 2007 to December 31, 2007. (c) For the period April 30, 2007 to December 31, 2007. (d) For the period January 1, 2007 to November 9, 2007. 58
ALLIANCEBERNSTEIN AMERICAN FUNDS AMERICAN FUNDS LARGE-CAP GROWTH GLOBAL GROWTH GROWTH SUBACCOUNT SUBACCOUNT SUBACCOUNT (CLASS B) (CLASS 2) (CLASS 2) -------------------- ---------------------- ---------------------- 2007 2006 2007 2006 2007 2006 --------- --------- ---------- ---------- ---------- ---------- Accumulation and annuity units beginning of year 1,918,973 1,586,493 8,655,338 5,300,236 25,660,065 19,473,456 Accumulation units issued and transferred from other funding options 143,207 895,957 3,936,110 4,694,288 5,587,112 9,458,825 Accumulation units redeemed and transferred to other funding options (378,499) (563,477) (1,507,576) (1,339,186) (4,465,331) (3,272,216) Annuity units -- -- -- -- -- -- --------- --------- ---------- ---------- ---------- ---------- Accumulation and annuity units end of year 1,683,681 1,918,973 11,083,872 8,655,338 26,781,846 25,660,065 ========= ========= ========== ========== ========== ==========
FTVIPT MUTUAL FTVIPT TEMPLETON SHARES SECURITIES GROWTH SECURITIES LMPIS PREMIER SELECTIONS SUBACCOUNT SUBACCOUNT ALL CAP GROWTH (CLASS 2) (CLASS 2) SUBACCOUNT ---------------------- ---------------------- ----------------------- 2007 2006 2007 2006 2007 (a) 2006 ---------- ---------- ---------- ---------- ----------- ---------- Accumulation and annuity units beginning of year 44,963,139 36,186,317 23,489,548 18,005,873 17,961,824 21,917,024 Accumulation units issued and transferred from other funding options 7,314,896 13,714,098 4,294,410 8,663,403 74,712 499,274 Accumulation units redeemed and transferred to other funding options (7,336,568) (4,937,276) (4,619,110) (3,179,728) (18,036,536) (4,454,474) Annuity units -- -- -- -- -- -- ---------- ---------- ---------- ---------- ----------- ---------- Accumulation and annuity units end of year 44,941,467 44,963,139 23,164,848 23,489,548 -- 17,961,824 ========== ========== ========== ========== =========== ==========
59 6. SCHEDULES OF ACCUMULATION AND ANNUITY UNITS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2007 AND 2006
LMPVET AGGRESSIVE GROWTH LMPVET APPRECIATION LMPVET APPRECIATION SUBACCOUNT SUBACCOUNT SUBACCOUNT (CLASS I) (CLASS I) (CLASS II) ------------------------ ------------------------ ------------------- 2007 2006 2007 2006 2007(b) 2006 ----------- ----------- ----------- ----------- --------- -------- Accumulation and annuity units beginning of year 371,099,373 397,313,986 355,607,124 396,560,396 -- -- Accumulation units issued and transferred from other funding options 29,238,173 32,333,095 46,799,635 19,685,948 1,570,733 -- Accumulation units redeemed and transferred to other funding options (59,892,277) (58,540,210) (61,178,761) (60,632,177) (72,910) -- Annuity units -- (7,498) (183) (7,043) -- -- ----------- ----------- ----------- ----------- --------- --- Accumulation and annuity units end of year 340,445,269 371,099,373 341,227,815 355,607,124 1,497,823 -- =========== =========== =========== =========== ========= ===
LMPVET LMPVET INTERNATIONAL LMPVET INVESTORS GLOBAL EQUITY ALL CAP OPPORTUNITY SUBACCOUNT SUBACCOUNT SUBACCOUNT (CLASS I) -------------------- ---------------------- ---------------- 2007 2006 2007 2006 2007 (c) 2006 --------- --------- ---------- ---------- ---------- ---- Accumulation and annuity units beginning of year 2,562,134 2,439,955 45,961,055 52,324,057 -- -- Accumulation units issued and transferred from other funding options 567,274 756,327 2,319,527 3,161,129 65,971,778 -- Accumulation units redeemed and transferred to other funding options (402,300) (634,148) (8,605,692) (9,524,131) (8,603,687) -- Annuity units -- -- -- -- -- -- --------- --------- ---------- ---------- ---------- --- Accumulation and annuity units end of year 2,727,108 2,562,134 39,674,890 45,961,055 57,368,091 -- ========= ========= ========== ========== ========== ===
(a) For the period January 1, 2007 to April 27, 2007. (b) For the period November 12, 2007 to December 31, 2007. (c) For the period April 30, 2007 to December 31, 2007. (d) For the period January 1, 2007 to November 9, 2007. 60
LMPVET FUNDAMENTAL VALUE LMPVET CAPITAL LMPVET DIVIDEND SUBACCOUNT SUBACCOUNT STRATEGY SUBACCOUNT (CLASS I) -------------------- ----------------------- ------------------------ 2007 2006 2007 2006 2007 2006 --------- --------- ---------- ----------- ----------- ----------- Accumulation and annuity units beginning of year 4,300,785 4,022,665 54,058,171 65,203,020 265,536,989 287,838,802 Accumulation units issued and transferred from other funding options 290,104 761,889 2,220,943 2,626,189 8,840,842 18,619,508 Accumulation units redeemed and transferred to other funding options (666,363) (483,769) (9,582,686) (13,771,038) (38,419,471) (40,906,071) Annuity units -- -- -- -- (2,451) (15,250) --------- --------- ---------- ----------- ----------- ----------- Accumulation and annuity units end of year 3,924,526 4,300,785 46,696,428 54,058,171 235,955,909 265,536,989 ========= ========= ========== =========== =========== =========== LMPVET LARGE CAP LMPVET LIFESTYLE LMPVET LIFESTYLE GROWTH SUBACCOUNT ALLOCATION 50% ALLOCATION 70% (CLASS I) SUBACCOUNT SUBACCOUNT ---------------------- ------------------------ ------------------------ 2007 2006 2007 2006 2007 2006 ---------- ---------- ----------- ----------- ----------- ----------- Accumulation and annuity units beginning of year 25,209,743 29,027,556 115,194,960 135,702,985 70,002,233 82,536,763 Accumulation units issued and transferred from other funding options 1,575,618 2,448,790 5,579,342 3,203,980 2,126,236 1,243,210 Accumulation units redeemed and transferred to other funding options (4,955,710) (6,266,603) (21,218,237) (23,711,711) (13,999,394) (13,777,740) Annuity units -- -- (247) (294) -- -- ---------- ---------- ----------- ----------- ----------- ----------- Accumulation and annuity units end of year 21,829,651 25,209,743 99,555,818 115,194,960 58,129,075 70,002,233 ========== ========== =========== =========== =========== ===========
61 6. SCHEDULES OF ACCUMULATION AND ANNUITY UNITS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2007 AND 2006
LMPVET LMPVET LMPVET LIFESTYLE MID CAP CORE MULTIPLE DISCIPLINE ALLOCATION 85% SUBACCOUNT SUBACCOUNT-LARGE ALL CAP SUBACCOUNT (CLASS I) GROWTH AND VALUE ----------------------- ---------------------- ------------------------ 2007 2006 2007 2006 2007 (d) 2006 ---------- ----------- ---------- ---------- ----------- ----------- Accumulation and annuity units beginning of year 45,160,040 54,964,521 29,735,317 33,189,619 1,633,965 1,658,927 Accumulation units issued and transferred from other funding options 1,782,360 703,346 1,666,944 1,960,671 147,743 342,888 Accumulation units redeemed and transferred to other funding options (8,269,054) (10,507,827) (4,913,088) (5,414,973) (1,781,708) (367,850) Annuity units -- -- -- -- -- -- ---------- ----------- ---------- ---------- ---------- --------- Accumulation and annuity units end of year 38,673,346 45,160,040 26,489,173 29,735,317 -- 1,633,965 ========== ========== ========== ========== ========== =========
LMPVET LMPVET LMPIS CAPITAL AND INCOME CAPITAL AND INCOME GROWTH AND INCOME SUBACCOUNT SUBACCOUNT SUBACCOUNT (CLASS I) (CLASS II) ----------------------- ---------------- -------------------- 2007 (a) 2006 2007 (c) 2006 2007 2006 ----------- ---------- ---------- ---- --------- --------- Accumulation and annuity units beginning of year 49,080,275 56,308,290 -- -- 4,359,567 4,431,652 Accumulation units issued and transferred from other funding options 424,361 2,252,652 29,839,382 -- 4,314,946 681,598 Accumulation units redeemed and transferred to other funding options (49,504,636) (9,480,667) (3,994,533) -- (823,906) (753,683) Annuity units -- -- -- -- -- -- ----------- ---------- ---------- --- --------- --------- Accumulation and annuity units end of year -- 49,080,275 25,844,849 -- 7,850,607 4,359,567 =========== ========== ========== === ========= =========
(a) For the period January 1, 2007 to April 27, 2007. (b) For the period November 12, 2007 to December 31, 2007. (c) For the period April 30, 2007 to December 31, 2007. (d) For the period January 1, 2007 to November 9, 2007. 62
LMPVET SMALL CAP GROWTH LMPVET LMPVPV SMALL CAP SUBACCOUNT SOCIAL AWARENESS GROWTH OPPORTUNITIES (CLASS I) SUBACCOUNT SUBACCOUNT ---------------- ---------------------- ----------------------- 2007 (c) 2006 2007 2006 2007 (a) 2006 ---------- ---- ---------- ---------- ----------- ---------- Accumulation and annuity units beginning of year -- -- 21,106,950 24,804,920 13,623,397 14,654,067 Accumulation units issued and transferred from other funding options 13,406,077 -- 912,328 694,124 277,763 2,393,328 Accumulation units redeemed and transferred to other funding options (1,664,635) -- (2,886,107) (4,392,094) (13,901,160) (3,423,998) Annuity units -- -- -- -- -- -- ---------- --- ---------- ---------- ----------- ---------- Accumulation and annuity units end of year 11,741,442 -- 19,133,171 21,106,950 -- 13,623,397 ========== === ========== ========== =========== ==========
LMPVIT LMPVIT GOVERNMENT ADJUSTABLE RATE INCOME SUBACCOUNT LMPVIT HIGH INCOME SUBACCOUNT (CLASS I) SUBACCOUNT --------------------- ------------------------ ------------------------ 2007 2006 2007 2006 2007 2006 --------- ---------- ----------- ----------- ----------- ----------- Accumulation and annuity units beginning of year 2,893,222 2,934,313 84,626,859 93,987,275 69,415,362 76,003,513 Accumulation units issued and transferred from other funding options 583,814 1,360,455 6,162,865 9,520,979 4,547,891 7,492,347 Accumulation units redeemed and transferred to other funding options (970,488) (1,401,546) (16,302,237) (18,881,426) (11,262,492) (14,080,498) Annuity units -- -- (1,513) 31 -- -- --------- ---------- ----------- ----------- ----------- ----------- Accumulation and annuity units end of year 2,506,548 2,893,222 74,485,974 84,626,859 62,700,761 69,415,362 ========= ========== =========== =========== =========== ===========
63 6. SCHEDULES OF ACCUMULATION AND ANNUITY UNITS--(CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2007 AND 2006
LMPVPII LMPVIT MONEY MARKET CAPITAL AND INCOME LMPVPIII LARGE CAP VALUE SUBACCOUNT SUBACCOUNT SUBACCOUNT ------------------------ ----------------------- ------------------------ 2007 2006 2007 (a) 2006 2007 (a) 2006 ----------- ----------- ----------- ---------- ----------- ----------- Accumulation and annuity units beginning of year 57,641,090 70,318,443 29,275,750 20,354,496 68,173,467 80,059,801 Accumulation units issued and transferred from other funding options 22,320,260 23,615,055 1,657,716 12,734,909 1,182,733 1,867,392 Accumulation units redeemed and transferred to other funding options (27,607,916) (36,292,272) (30,933,466) (3,813,655) (69,356,200) (13,753,726) Annuity units (115) (136) -- -- -- -- ----------- ----------- ----------- ---------- ----------- ----------- Accumulation and annuity units end of year 52,353,319 57,641,090 -- 29,275,750 -- 68,173,467 =========== =========== =========== ========== =========== ===========
MIST LORD ABBETT MIST MET/AIM MIST MFS GROWTH AND INCOME CAPITAL APPRECIATION RESEARCH INTERNATIONAL SUBACCOUNT SUBACCOUNT SUBACCOUNT (CLASS B) (CLASS E) (CLASS B) --------------------- -------------------- ---------------------- 2007 2006 2007 (c) 2006 2007 (c) 2006 ---------- --------- --------- --------- ---------- ---------- Accumulation and annuity units beginning of year 7,952,857 -- -- -- -- -- Accumulation units issued and transferred from other funding options 338,413 8,569,201 1,699,633 -- 9,557,110 -- Accumulation units redeemed and transferred to other funding options (1,050,637) (616,344) (128,889) -- (1,046,060) -- Annuity units -- -- -- -- -- -- ---------- --------- --------- --- ---------- --- Accumulation and annuity units end of year 7,240,633 7,952,857 1,570,744 -- 8,511,050 -- ========== ========= ========= === ========== ===
(a) For the period January 1, 2007 to April 27, 2007. (b) For the period November 12, 2007 to December 31, 2007. (c) For the period April 30, 2007 to December 31, 2007. (d) For the period January 1, 2007 to November 9, 2007. 64
MIST BLACKROCK MIST BLACKROCK MIST LORD ABBETT LARGE - CAP CORE LARGE-CAP CORE BOND DEBENTURE SUBACCOUNT SUBACCOUNT SUBACCOUNT (CLASS E) (CLASS A) (CLASS A) ---------------- ----------------------- ---------------------- 2007 (c) 2006 2007 (a) 2006 2007 2006 ---------- ---- ----------- ---------- ---------- ---------- Accumulation and annuity units beginning of year -- -- 52,707,173 -- 19,727,341 -- Accumulation units issued and transferred from other funding options 49,926,075 -- 314,910 59,888,119 3,623,130 22,127,399 Accumulation units redeemed and transferred to other funding options (6,648,061) -- (53,022,083) (7,180,946) (4,228,348) (2,400,058) Annuity units -- -- -- -- -- -- ---------- --- ----------- ---------- ---------- ---------- Accumulation and annuity units end of year 43,278,014 -- -- 52,707,173 19,122,123 19,727,341 ========== === =========== ========== ========== ==========
MIST OPPENHEIMER MIST PIONEER MIST THIRD AVENUE CAPITAL APPRECIATION STRATEGIC INCOME SMALL CAP VALUE SUBACCOUNT SUBACCOUNT SUBACCOUNT (CLASS B) (CLASS A) (CLASS B) -------------------- ---------------------- ----------------- 2007 2006 2007 2006 2007 (c) 2006 --------- --------- ---------- ---------- ---------- ----- Accumulation and annuity units beginning of year 6,867,125 -- 40,367,222 -- -- -- Accumulation units issued and transferred from other funding options 1,970,644 7,446,797 9,927,989 46,130,887 13,818,957 -- Accumulation units redeemed and transferred to other funding options (996,378) (579,672) (8,163,680) (5,763,665) (2,316,882) -- Annuity units -- -- -- -- -- -- --------- --------- ---------- ---------- ---------- --- Accumulation and annuity units end of year 7,841,391 6,867,125 42,131,531 40,367,222 11,502,075 -- ========= ========= ========== ========== ========== ===
65 6. SCHEDULES OF ACCUMULATION AND ANNUITY UNITS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2007 AND 2006
MSF CAPITAL MSF BLACKROCK MSF BLACKROCK GUARDIAN AGGRESSIVE GROWTH BOND INCOME U.S. EQUITY SUBACCOUNT SUBACCOUNT SUBACCOUNT (CLASS D) (CLASS E) (CLASS B) ----------------------- ---------------------- --------------- 2007 2006 2007 2006 2007 (c) 2006 ----------- ---------- ---------- ---------- --------- ---- Accumulation and annuity units beginning of year 54,874,822 -- 38,027,400 -- -- -- Accumulation units issued and transferred from other funding options 3,211,540 64,701,691 3,537,089 42,977,548 2,652,356 -- Accumulation units redeemed and transferred to other funding options (11,087,543) (9,826,869) (7,133,417) (4,950,148) (253,132) -- Annuity units -- -- -- -- -- -- ----------- ---------- ---------- ---------- --------- --- Accumulation and annuity units end of year 46,998,819 54,874,822 34,431,072 8,027,400 2,399,224 -- =========== ========== ========== ========== ========= ===
UIF U.S. REAL ESTATE UIF EQUITY AND INCOME SECURITIES PIONEER FUND VCT SUBACCOUNT SUBACCOUNT SUBACCOUNT (CLASS II) (CLASS I) (CLASS II) ------------------------ ---------------------- -------------------- 2007 2006 2007 2006 2007 2006 ----------- ----------- ---------- ---------- --------- --------- Accumulation and annuity units beginning of year 113,020,582 102,450,017 18,762,978 9,162,426 2,990,765 2,764,563 Accumulation units issued and transferred from other funding options 13,063,227 25,616,411 7,091,486 12,560,475 381,050 640,520 Accumulation units redeemed and transferred to other funding options (14,955,096) (15,045,846) (8,369,361) (2,959,923) (503,415) (414,318) Annuity units -- -- -- -- -- -- ----------- ----------- ---------- ---------- --------- --------- Accumulation and annuity units end of year 111,128,713 113,020,582 17,485,103 18,762,978 2,868,400 2,990,765 =========== =========== ========== ========== ========= =========
(a) For the period January 1, 2007 to April 27, 2007. (b) For the period November 12, 2007 to December 31, 2007. (c) For the period April 30, 2007 to December 31, 2007. (d) For the period January 1, 2007 to November 9, 2007. 66
MSF WESTERN MSF T. ROWE PRICE ASSET MANAGEMENT MSF MFS TOTAL RETURN LARGE CAP GROWTH U.S. GOVERNMENT SUBACCOUNT SUBACCOUNT SUBACCOUNT (CLASS F) (CLASS B) (CLASS A) ------------------------ -------------------- ---------------------- 2007 2006 2007 2006 2007 2006 ----------- ----------- --------- --------- ---------- ---------- Accumulation and annuity units beginning of year 140,117,772 -- 3,832,825 -- 9,170,208 -- Accumulation units issued and transferred from other funding options 5,982,358 156,010,422 885,602 4,459,180 5,092,762 12,251,822 Accumulation units redeemed and transferred to other funding options (20,461,235) (15,904,962) (655,587) (626,355) (4,954,607) (3,081,614) Annuity units (774) 12,312 -- -- -- -- ----------- ----------- --------- --------- ---------- ---------- Accumulation and annuity units end of year 125,638,121 140,117,772 4,062,840 3,832,825 9,308,363 9,170,208 =========== =========== ========= ========= ========== ==========
PIONEER MID CAP PUTNAM VT PUTNAM VT VALUE VCT INTERNATIONAL EQUITY SMALL CAP VALUE SUBACCOUNT SUBACCOUNT SUBACCOUNT (CLASS II) (CLASS IB) (CLASS IB) ---------------------- ---------------------- ----------------------- 2007 2006 2007 (a) 2006 2007 (a) 2006 ---------- ---------- ---------- ---------- ----------- ---------- Accumulation and annuity units beginning of year 16,114,690 14,562,188 5,493,239 3,301,487 13,040,653 10,664,811 Accumulation units issued and transferred from other funding options 4,377,512 4,493,588 746,571 3,302,709 701,152 4,501,130 Accumulation units redeemed and transferred to other funding options (2,862,142) (2,941,086) (6,239,810) (1,110,957) (13,741,805) (2,125,288) Annuity units -- -- -- -- -- -- ---------- ---------- ---------- ---------- ----------- ---------- Accumulation and annuity units end of year 17,630,060 16,114,690 -- 5,493,239 -- 13,040,653 ========== ========== ========== ========== =========== ==========
67 6. SCHEDULES OF ACCUMULATION AND ANNUITY UNITS -- (CONCLUDED) FOR THE YEARS ENDED DECEMBER 31, 2007 AND 2006
VAN KAMPEN LIT VAN KAMPEN LIT VAN KAMPEN LIT COMSTOCK GROWTH AND INCOME STRATEGIC GROWTH SUBACCOUNT SUBACCOUNT SUBACCOUNT (CLASS II) (CLASS II) (CLASS II) ------------------------ ------------------------ ------------------------ 2007 2006 2007 2006 2007 2006 ----------- ----------- ----------- ----------- ----------- ----------- Accumulation and annuity units beginning of year 151,100,960 158,534,295 103,493,964 109,783,523 101,289,901 118,714,696 Accumulation units issued and transferred from other funding options 7,941,983 15,353,116 5,806,985 10,554,679 3,916,320 5,646,381 Accumulation units redeemed and transferred to other funding options (22,323,099) (22,786,451) (16,224,802) (16,844,238) (18,023,395) (23,071,176) Annuity units -- -- -- -- -- -- ----------- ----------- ----------- ----------- ----------- ----------- Accumulation and annuity units end of year 136,719,844 151,100,960 93,076,147 103,493,964 87,182,826 101,289,901 =========== =========== ========== =========== ========== ===========
(a) For the period January 1, 2007 to April 27, 2007. (b) For the period November 12, 2007 to December 31, 2007. (c) For the period April 30, 2007 to December 31, 2007. (d) For the period January 1, 2007 to November 9, 2007. 68 7. SUBSEQUENT EVENT The Company anticipates merging the Separate Account with and into MetLife of CT Separate Account Eleven for Variable Annuities, which is another separate account of the Company, during the fourth quarter of 2008 at the earliest, subject to regulatory approval. This merger will have no effect on the provisions of, and the rights and obligations under, the Contracts. 69 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders of MetLife Insurance Company of Connecticut: We have audited the accompanying consolidated balance sheets of MetLife Insurance Company of Connecticut and subsidiaries (the "Company") as of December 31, 2007 and 2006, and the related consolidated statements of income, stockholders' equity, and cash flows for each of the three years in the period ended December 31, 2007. Our audits also included the financial statement schedules listed in the Index to Consolidated Financial Statements and Schedules. 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. 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 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 Insurance Company of Connecticut and subsidiaries as of December 31, 2007 and 2006, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2007, 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 discussed in Note 1, the Company changed its method of accounting for deferred acquisition costs as required by accounting guidance adopted on January 1, 2007. /s/ DELOITTE & TOUCHE LLP New York, New York March 26, 2008 (April 1, 2008 as to Note 20) F-1 METLIFE INSURANCE COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife, Inc.) CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2007 AND 2006 (IN MILLIONS, EXCEPT SHARE AND PER SHARE DATA)
2007 2006 -------- -------- ASSETS Investments: Fixed maturity securities available-for-sale, at estimated fair value (amortized cost: $46,264 and $48,406, respectively)............................................. $ 45,671 $ 47,846 Equity securities available-for-sale, at estimated fair value (cost: $992 and $777, respectively)....................... 952 795 Mortgage and consumer loans.................................. 4,404 3,595 Policy loans................................................. 913 918 Real estate and real estate joint ventures held-for- investment................................................ 541 173 Real estate held-for-sale.................................... -- 7 Other limited partnership interests.......................... 1,130 1,082 Short-term investments....................................... 1,335 777 Other invested assets........................................ 1,445 1,241 -------- -------- Total investments......................................... 56,391 56,434 Cash and cash equivalents...................................... 1,774 649 Accrued investment income...................................... 637 597 Premiums and other receivables................................. 8,320 8,410 Deferred policy acquisition costs and value of business acquired..................................................... 4,948 5,111 Current income tax recoverable................................. 91 94 Deferred income tax assets..................................... 848 1,007 Goodwill....................................................... 953 953 Other assets................................................... 753 765 Separate account assets........................................ 53,867 50,067 -------- -------- Total assets.............................................. $128,582 $124,087 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES: Future policy benefits....................................... $ 19,576 $ 19,654 Policyholder account balances................................ 33,871 35,099 Other policyholder funds..................................... 1,777 1,513 Long-term debt -- affiliated................................. 635 435 Payables for collateral under securities loaned and other transactions.............................................. 10,471 9,155 Other liabilities............................................ 1,072 749 Separate account liabilities................................. 53,867 50,067 -------- -------- Total liabilities......................................... 121,269 116,672 -------- -------- CONTINGENCIES, COMMITMENTS AND GUARANTEES (NOTE 12) STOCKHOLDERS' EQUITY: Common stock, par value $2.50 per share; 40,000,000 shares authorized; 34,595,317 shares issued and outstanding at December 31, 2007 and 2006................................... 86 86 Additional paid-in capital..................................... 6,719 7,123 Retained earnings.............................................. 843 520 Accumulated other comprehensive income (loss).................. (335) (314) -------- -------- Total stockholders' equity................................ 7,313 7,415 -------- -------- Total liabilities and stockholders' equity................ $128,582 $124,087 ======== ========
See accompanying notes to consolidated financial statements. F-2 METLIFE INSURANCE COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife, Inc.) CONSOLIDATED STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31, 2007, 2006 AND 2005 (IN MILLIONS)
2007 2006 2005 ------ ------ ------ REVENUES Premiums.................................................. $ 353 $ 308 $ 281 Universal life and investment-type product policy fees.... 1,411 1,268 862 Net investment income..................................... 2,893 2,839 1,438 Other revenues............................................ 251 212 132 Net investment gains (losses)............................. (198) (521) (198) ------ ------ ------ Total revenues..................................... 4,710 4,106 2,515 ------ ------ ------ EXPENSES Policyholder benefits and claims.......................... 978 792 570 Interest credited to policyholder account balances........ 1,304 1,316 720 Other expenses............................................ 1,455 1,173 678 ------ ------ ------ Total expenses..................................... 3,737 3,281 1,968 ------ ------ ------ Income from continuing operations before provision for income tax.............................................. 973 825 547 Provision for income tax.................................. 282 228 156 ------ ------ ------ Income from continuing operations......................... 691 597 391 Income from discontinued operations, net of income tax.... 4 -- -- ------ ------ ------ Net income................................................ $ 695 $ 597 $ 391 ====== ====== ======
See accompanying notes to consolidated financial statements. F-3 METLIFE INSURANCE COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife, Inc.) CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 2007, 2006 AND 2005 (IN MILLIONS)
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) ---------------------------- NET FOREIGN ADDITIONAL UNREALIZED CURRENCY COMMON PAID-IN RETAINED INVESTMENT TRANSLATION STOCK CAPITAL EARNINGS GAINS (LOSSES) ADJUSTMENTS TOTAL ------ ---------- -------- -------------- ----------- ------ Balance at January 1, 2005............... $11 $ 471 $ 190 $ 30 $-- $ 702 MetLife Insurance Company of Connecticut's common stock purchased by MetLife, Inc. (Notes 2 and 3).......... 75 6,709 6,784 Comprehensive income (loss): Net income............................. 391 391 Other comprehensive income (loss): Unrealized gains (losses) on derivative instruments, net of income tax........................ (1) (1) Unrealized investment gains (losses), net of related offsets and income tax.................... (445) (445) Foreign currency translation adjustments, net of income tax.... 2 2 ------ Other comprehensive income (loss)... (444) ------ Comprehensive income (loss)............ (53) --- ------ ----- ----- --- ------ Balance at December 31, 2005............. 86 7,180 581 (416) 2 7,433 Revisions of purchase price pushed down to MetLife Insurance Company of Connecticut's net assets acquired (Note 2)..................................... 40 40 Dividend paid to MetLife, Inc. .......... (259) (658) (917) Capital contribution of intangible assets from MetLife, Inc., net of income tax (Notes 8 and 14)....................... 162 162 Comprehensive income: Net income............................. 597 597 Other comprehensive income: Unrealized gains (losses) on derivative instruments, net of income tax........................ (5) (5) Unrealized investment gains (losses), net of related offsets and income tax.................... 107 107 Foreign currency translation adjustments, net of income tax.... (2) (2) ------ Other comprehensive income.......... 100 ------ Comprehensive income................... 697 --- ------ ----- ----- --- ------ Balance at December 31, 2006............. 86 7,123 520 (314) -- 7,415 Cumulative effect of change in accounting principle, net of income tax (Note 1).. (86) (86) --- ------ ----- ----- --- ------ Balance at January 1, 2007............... 86 7,123 434 (314) -- 7,329 Dividend paid to MetLife, Inc. .......... (404) (286) (690) Comprehensive income: Net income............................. 695 695 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.................... (45) (45) Foreign currency translation adjustments, net of income tax.... 26 26 ------ Other comprehensive income (loss)... (21) ------ Comprehensive income................... 674 --- ------ ----- ----- --- ------ Balance at December 31, 2007............. $86 $6,719 $ 843 $(361) $26 $7,313 === ====== ===== ===== === ======
See accompanying notes to consolidated financial statements. F-4 METLIFE INSURANCE COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife, Inc.) CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2007, 2006 AND 2005 (IN MILLIONS)
2007 2006 2005 -------- -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES Net income............................................ $ 695 $ 597 $ 391 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization expenses........... 26 6 4 Amortization of premiums and accretion of discounts associated with investments, net..... 11 74 112 Losses from sales of investments and businesses, net............................................ 201 521 198 Gain from recapture of ceded reinsurance......... (22) -- -- Undistributed equity earnings of real estate joint ventures and other limited partnership interests...................................... (121) (83) (19) Interest credited to policyholder account balances....................................... 1,304 1,316 720 Universal life and investment-type product policy fees........................................... (1,411) (1,268) (862) Change in accrued investment income.............. (35) 2 (68) Change in premiums and other receivables......... 360 (509) (415) Change in deferred policy acquisition costs, net............................................ 61 (234) (211) Change in insurance-related liabilities.......... 71 234 812 Change in trading securities..................... -- (43) 103 Change in income tax payable..................... 287 156 298 Change in other assets........................... 690 586 574 Change in other liabilities...................... 234 (351) (876) Other, net....................................... -- -- 2 -------- -------- -------- Net cash provided by operating activities............. 2,351 1,004 763 -------- -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES Sales, maturities and repayments of: Fixed maturity securities........................ 21,546 27,706 24,008 Equity securities................................ 146 218 221 Mortgage and consumer loans...................... 1,208 1,034 748 Real estate and real estate joint ventures....... 155 126 65 Other limited partnership interests.............. 465 762 173 Purchases of: Fixed maturity securities........................ (19,365) (23,840) (32,850) Equity securities................................ (357) (109) -- Mortgage and consumer loans...................... (2,030) (2,092) (500) Real estate and real estate joint ventures....... (458) (56) (13) Other limited partnership interests.............. (515) (343) (330) Net change in policy loans.......................... 5 (2) 3 Net change in short-term investments................ (558) 991 599 Net change in other invested assets................. (175) (316) 233 Other, net.......................................... 16 1 3 -------- -------- -------- Net cash provided by (used in) investing activities... $ 83 $ 4,080 $ (7,640) -------- -------- --------
See accompanying notes to consolidated financial statements. F-5 METLIFE INSURANCE COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife, Inc.) CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2007, 2006 AND 2005 -- (CONTINUED) (IN MILLIONS)
2007 2006 2005 -------- -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES Policyholder account balances: Deposits......................................... $ 11,395 $ 8,185 $ 11,230 Withdrawals...................................... (13,563) (11,637) (12,369) Net change in payables for collateral under securities loaned and other transactions......... 1,316 (582) 7,675 Net change in short-term debt -- affiliated......... -- -- (26) Long-term debt issued -- affiliated................. 200 -- 400 Dividends on common stock........................... (690) (917) -- Financing element on certain derivative instruments...................................... 33 (55) (49) Contribution of MetLife Insurance Company of Connecticut from MetLife, Inc. .................. -- -- 443 -------- -------- -------- Net cash (used in) provided by financing activities... (1,309) (5,006) 7,304 -------- -------- -------- Change in cash and cash equivalents................... 1,125 78 427 Cash and cash equivalents, beginning of year.......... 649 571 144 -------- -------- -------- CASH AND CASH EQUIVALENTS, END OF YEAR................ $ 1,774 $ 649 $ 571 ======== ======== ======== Supplemental disclosures of cash flow information: Net cash paid (received) during the year for: Interest......................................... $ 33 $ 31 $ 18 ======== ======== ======== Income tax....................................... $ (6) $ 81 $ 87 ======== ======== ======== Non-cash transactions during the year: Net assets of MetLife Insurance Company of Connecticut acquired by MetLife, Inc. and contributed to MetLife Investors USA Insurance Company, net of cash received of $0, $0 and $443 million................................... $ -- $ -- $ 6,341 ======== ======== ======== Contribution of equity securities to MetLife Foundation..................................... $ 12 $ -- $ -- ======== ======== ======== Contribution of other intangible assets from MetLife, Inc., net of deferred income tax...... $ -- $ 162 $ -- ======== ======== ======== Contribution of goodwill from MetLife, Inc. ..... $ -- $ 29 $ -- ======== ======== ========
- -------- See Note 9 for disclosure regarding the receipt of $901 million under an affiliated reinsurance agreement during the year ended December 31, 2007, which is included in the change in premiums and other receivables in net cash provided by operating activities. See Note 2 for further discussion of the net assets of MetLife Insurance Company of Connecticut acquired by MetLife, Inc. and contributed to MetLife Investors USA Insurance Company. See accompanying notes to consolidated financial statements. F-6 METLIFE INSURANCE COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. BUSINESS, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BUSINESS "MICC" or the "Company" refers to MetLife Insurance Company of Connecticut, a Connecticut corporation incorporated in 1863, and its subsidiaries, including MetLife Investors USA Insurance Company ("MLI-USA"). The Company is a subsidiary of MetLife, Inc. ("MetLife"). The Company offers individual annuities, individual life insurance, and institutional protection and asset accumulation products. On December 7, 2007, MetLife Life and Annuity Company of Connecticut ("MLAC"), a former subsidiary, was merged with and into MetLife Insurance Company of Connecticut, its parent. The merger had no impact on the Company's consolidated financial statements. On October 11, 2006, MetLife transferred MLI-USA to MetLife Insurance Company of Connecticut. See Note 3. On July 1, 2005 (the "Acquisition Date"), MetLife Insurance Company of Connecticut became a wholly-owned subsidiary of MetLife. MetLife Insurance Company of Connecticut, together with 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. Since the Company is a member of a controlled group of affiliated companies, its results may not be indicative of those of a stand-alone entity. BASIS OF PRESENTATION The accompanying consolidated financial statements include the accounts of (i) MLI-USA and effective July 1, 2005, MetLife Insurance Company of Connecticut and its subsidiaries (See Notes 2 and 3); (ii) partnerships and joint ventures in which the Company has control; and (iii) variable interest entities ("VIEs") for which the Company is deemed to be the primary beneficiary. 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 venture's or 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 investments in real estate joint ventures and other limited partnership interests in which it has a minor equity investment and virtually no influence over the joint venture's or partnership's operations. During the second quarter of 2007, the nature of the Company's partnership interest in Greenwich Street Investments, LP ("Greenwich") changed such that Greenwich is no longer consolidated and is now accounted for under the equity method of accounting. During the second quarter of 2006, the Company's ownership interest in Tribeca Citigroup Investments, Ltd. ("Tribeca") declined to a position whereby Tribeca is no longer consolidated and is now accounted for under the equity method of accounting. As such, there was no minority interest liability at December 31, 2007. Minority interest related to Greenwich included in other liabilities was $43 million at December 31, 2006. Certain amounts in the prior year periods' consolidated financial statements have been reclassified to conform with the 2007 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 F-7 METLIFE INSURANCE COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 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; (iv) the application of the consolidation rules to certain investments; (v) the 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 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 values of 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, mortgage and consumer loans, policy loans, real estate, real estate joint ventures and other limited partnerships, 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 F-8 METLIFE INSURANCE COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 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. 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 4); (vii) unfavorable changes in forecasted cash flows on mortgage-backed and asset-backed securities; and (viii) other subjective factors, including concentrations and information obtained from regulators and rating agencies. Securities Lending. Securities loaned transactions are treated as financing arrangements and are recorded at the amount of cash received. The Company obtains collateral in an amount equal to 102% of the fair value of the securities loaned. The Company monitors the market value of the securities loaned on a daily basis with additional collateral obtained as necessary. Substantially all of the Company's securities loaned transactions are with large brokerage firms. Income and expenses associated with securities loaned transactions are reported as investment income and investment expense, respectively, within net investment income. Mortgage and Consumer Loans. Mortgage and consumer loans 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 F-9 METLIFE INSURANCE COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 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. Real Estate. Real estate held-for-investment, including related improvements, is stated at cost less accumulated depreciation. Depreciation is provided on a straight-line basis over the estimated useful life of the asset (typically 20 to 55 years). Rental income is recognized on a straight-line basis over the term of the respective leases. The Company classifies a property as held-for-sale if it commits to a plan to sell a property within one year and actively markets the property in its current condition for a price that is reasonable in comparison to its fair value. The Company classifies the results of operations and the gain or loss on sale of a property that either has been disposed of or classified as held- for-sale as discontinued operations, if the ongoing operations of the property will be eliminated from the ongoing operations of the Company and if the Company will not have any significant continuing involvement in the operations of the property after the sale. Real estate held-for-sale is stated at the lower of depreciated cost or fair value less expected disposition costs. Real estate is not depreciated while it is classified as held-for-sale. The Company periodically reviews its properties held-for- investment for impairment and tests properties for recoverability whenever events or changes in circumstances indicate the carrying amount of the asset may not be recoverable and the carrying value of the property exceeds its fair value. Properties whose carrying values are greater than their undiscounted cash flows are written down to their fair value, with the impairment loss included in net investment gains (losses). Impairment losses are based upon the estimated fair value of real estate, which is generally computed using the present value of expected future cash flows from the real estate discounted at a rate commensurate with the underlying risks. Real estate acquired upon foreclosure of commercial and agricultural mortgage loans is recorded at the lower of estimated fair value or the carrying value of the mortgage loan at the date of foreclosure. 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 or 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 investments in 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 or 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 other limited partnerships for impairments. For its cost method investments, the Company 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- F-10 METLIFE INSURANCE COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 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. 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 previously 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, 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 determination of the fair value of investments, the timing and amount of impairments, the recognition of income, or consolidation of investments may have a material effect on the amounts presented within the consolidated financial statements. F-11 METLIFE INSURANCE COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 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. The Company also uses derivative instruments to hedge its currency exposure associated with net investments in certain foreign operations. To a lesser extent, the Company uses credit derivatives, such as credit default swaps, 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 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, changes in the fair value of the derivative are generally 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"); (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"); or (iii) a hedge of a net investment in a foreign operation. In this documentation, the Company sets forth how the hedging instrument is expected to hedge the designated risks related to the hedged item 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 of hedge effectiveness and measurements of ineffectiveness 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. F-12 METLIFE INSURANCE COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 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. In a hedge of a net investment in a foreign operation, changes in the fair value of the hedging derivative that are measured as effective are reported within other comprehensive income (loss) consistent with the translation adjustment for the hedged net investment in the foreign operation. Changes in the fair value of the hedging instrument measured as ineffectiveness are reported within net investment gains (losses). 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 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. 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, F-13 METLIFE INSURANCE COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 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. Property, Equipment, Leasehold Improvements and Computer Software Property, equipment and leasehold improvements, which are included in other assets, are stated at cost, less accumulated depreciation and amortization. Depreciation is determined using either the straight-line or sum-of-the-years- digits method over the estimated useful lives of the assets, as appropriate. Estimated lives generally range from five to ten years for leasehold improvements and three to seven years for all other property and equipment. The net book value of property, equipment and leasehold improvements was less than $1 million and $1 million at December 31, 2007 and 2006, respectively. Computer software, which is included in other assets, is stated at cost, less accumulated amortization. Purchased software costs, as well as certain internal and external costs incurred to develop internal-use computer software during the application development stage, are capitalized. Such costs are amortized generally over a four-year period using the straight-line method. The cost basis of computer software was $72 million and $52 million at December 31, 2007 and 2006, respectively. Accumulated amortization of capitalized software was $11 million and $3 million at December 31, 2007 and 2006, respectively. Related amortization expense was $11 million, $3 million and $1 million for the years ended December 31, 2007, 2006 and 2005, respectively. 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 and morbidity, 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 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. F-14 METLIFE INSURANCE COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 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, morbidity, persistency, and investment returns at policy 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, 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. Prior to 2007, DAC related to any internally replaced contract was generally expensed at the date of replacement. As described more fully in "Adoption of New Accounting Pronouncements", effective January 1, 2007, the Company adopted Statement of Position ("SOP") 05-1, Accounting by Insurance Enterprises for Deferred Acquisition Costs in Connection with Modifications or Exchanges of Insurance Contracts ("SOP 05-1"). Under SOP 05-1, an internal replacement is defined as a modification in product benefits, features, rights or coverages that occur by the exchange of a contract for a new contract, or by amendment, endorsement, or rider to a contract, or by election or coverage within a contract. If the modification substantially changes the contract, the DAC is written off F-15 METLIFE INSURANCE COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) immediately through income and any new deferrable costs associated with the replacement contract are deferred. If the modification does not substantially change the contract, the DAC amortization on the original contract will continue and any acquisition costs associated with the related modification are expensed. 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. 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. For purposes of goodwill impairment testing, goodwill within Corporate & Other is allocated to reporting units within the Company's business segments. 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 or a 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, traditional annuities and non- medical health insurance. 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, morbidity, 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 expected future benefit payments and related expenses less the present value of expected future net premiums. Assumptions as to mortality and persistency are based upon the Company's experience when the basis of the liability is established. Interest rates for future policy benefit liabilities on non-participating traditional life insurance range from 3% to 8%. Future policy benefit liabilities for individual and group traditional fixed annuities after annuitization are equal to the present value of expected future payments. Interest rates used in establishing such liabilities range from 4% to 11%. Future policy benefit liabilities for non-medical health insurance are calculated using the net level premium method and assumptions as to future morbidity, withdrawals and interest, which provide a margin for adverse deviation. Interest rates used in establishing such liabilities range from 4% to 7%. F-16 METLIFE INSURANCE COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Future policy benefit liabilities for disabled lives are estimated using the present value of benefits method and experience assumptions as to claim terminations, expenses and interest. Interest rates used in establishing such liabilities range from 3% to 6%. Liabilities for unpaid claims and claim expenses for the Company's workers' compensation business are included in future policyholder benefits and are estimated based upon the Company's historical experience and other actuarial assumptions that consider the effects of current developments, anticipated trends and risk management programs, reduced for anticipated subrogation. The effects of changes in such estimated liabilities are included in the results of operations in the period in which the changes occur. The Company establishes future policy benefit liabilities for minimum death and income benefit guarantees relating to certain annuity contracts and secondary guarantees relating to certain life policies as follows: - Annuity guaranteed minimum 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. - Guaranteed minimum income benefit ("GMIB") liabilities are determined by estimating the expected value of the income benefits in excess of the projected account balance at any future date of annuitization 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 for estimating the GMIB liabilities are consistent with those used for estimating the GMDB liabilities. In addition, the calculation of guaranteed annuitization benefit liabilities incorporates an assumption for the percentage of the potential annuitizations that may be elected by the contractholder. 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. The assumptions used in estimating the secondary 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 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. F-17 METLIFE INSURANCE COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) - 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 in liabilities for future policy benefits, negatively affecting net income. The Company issues both GMWBs and GMABs directly and assumes risk relating to GMWBs and GMABs issued by an affiliate through a financing agreement. Some of the risks associated with GMWBs and GMABs directly written and assumed were transferred to a different affiliate through another financing agreement and are included in premiums and other receivables. The Company periodically reviews its estimates of actuarial liabilities for future policy benefits and compares them with its 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. Policyholder account balances relate to investment-type contracts and universal life-type policies. Investment-type contracts principally include traditional individual fixed annuities in the accumulation phase and non- variable group annuity contracts. Policyholder account balances are equal to: (i) policy account values, which consist of an accumulation of gross premium payments; (ii) credited interest, ranging from 1% to 13%, less expenses, mortality charges, and withdrawals; and (iii) fair value purchase accounting adjustments relating to the Acquisition. 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 death, disability, and long-term care ("LTC") 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 F-18 METLIFE INSURANCE COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 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. Premiums related to non-medical health and disability contracts are recognized on a pro rata basis over the applicable contract term. Deposits related to universal life-type and investment-type products are credited to policyholder account balances. Revenues from such contracts consist of amounts assessed against policyholder account balances for mortality, policy administration and surrender charges 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 policyholder account balances. Premiums related to workers' compensation contracts are recognized as revenue on a pro rata basis over the applicable contract term. 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 MetLife Insurance Company of Connecticut files a consolidated U.S. federal income tax return with its includable subsidiaries in accordance with the provisions of the Internal Revenue Code of 1986, as amended (the "Code"). Non- includable subsidiaries file either separate individual corporate tax returns or separate consolidated tax returns. Prior to the transfer of MLI-USA to MetLife Insurance Company of Connecticut, MLI-USA joined MetLife's includable subsidiaries in filing a federal income tax return. MLI-USA joined MetLife Insurance Company of Connecticut's includable subsidiaries as of October 11, 2006. The Company's accounting for income taxes represents management's best estimate of various events and transactions. Deferred 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. In connection with the Acquisition, for U.S. federal income tax purposes, an election in 2005 under Internal Revenue Code Section 338 was made by the Company's parent, MetLife. As a result of this election, the tax basis in the acquired assets and liabilities was adjusted as of the Acquisition Date and the related deferred tax asset established for the taxable difference from the book basis. The realization of deferred 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 F-19 METLIFE INSURANCE COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 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 (See also Note 11) or when estimates used in determining valuation allowances on deferred 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 laws, tax regulations, or interpretations of such laws or regulations, 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. As described more fully in "Adoption of New Accounting Pronouncements", the Company adopted FIN No. 48, Accounting for Uncertainty in Income Taxes -- An Interpretation of FASB Statement No. 109 ("FIN 48") effective January 1, 2007. Under FIN 48, the Company determines 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. A tax position is measured at the largest amount of benefit that is greater than 50 percent likely of being realized upon settlement. Unrecognized tax benefits due to tax uncertainties that do not meet the threshold are included within other liabilities and are charged to earnings in the period that such determination is made. 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 both a provider and a purchaser of reinsurance for its life 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 (received), and the liabilities ceded (assumed) 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 (received) on the reinsurance of in-force blocks, as well as amounts paid (received) related to new business, are recorded as ceded (assumed) premiums and ceded (assumed) 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. F-20 METLIFE INSURANCE COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 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 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 include amounts assumed under reinsurance contracts and 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 using the deposit method of accounting. 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 revenues 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 revenues 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 and assumed 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. Employee Benefit Plans Eligible employees, sales representatives and retirees of the Company are provided pension, postretirement and postemployment benefits under plans sponsored and administered by Metropolitan Life Insurance Company ("MLIC"), an affiliate of the Company. The Company's obligation and expense related to these benefits is limited to the amount of associated expense allocated from MLIC. F-21 METLIFE INSURANCE COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Foreign Currency Balance sheet accounts of foreign operations are translated at the exchange rates in effect at each year-end and income and expense accounts are translated at the average rates of exchange prevailing during the year. The local currencies of foreign operations generally are the functional currencies unless the local economy is highly inflationary. Translation adjustments are charged or credited directly to other comprehensive income or loss. Gains and losses from foreign currency transactions are reported as net investment gains (losses) in the period in which they occur. Discontinued Operations The results of operations of a component of the Company that either has been disposed of or is classified as held-for-sale are reported in discontinued operations if the operations and cash flows of the component have been or will be eliminated from the ongoing operations of the Company as a result of the disposal transaction and the Company will not have any significant continuing involvement in the operations of the component after the disposal transaction. Litigation Contingencies The Company is a party to legal actions and is involved in regulatory investigations. Given the inherent unpredictability of these matters, it is difficult to estimate the impact on the Company's 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 matters, or the use of different assumptions in the determination of amounts recorded, could have a material adverse effect upon the Company's consolidated net income or cash flows in particular quarterly or annual periods. ADOPTION OF NEW ACCOUNTING PRONOUNCEMENTS Income Taxes Effective January 1, 2007, the Company adopted 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. The adoption of FIN 48 did not have a material impact on the Company's consolidated financial statements. See also Note 11. Insurance Contracts Effective January 1, 2007, the Company adopted SOP 05-1 which provides guidance on accounting by insurance enterprises for DAC on internal replacements of insurance and investment contracts other than those specifically described in Statement of Financial Accounting Standards ("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 and is effective for internal replacements occurring in fiscal years beginning after December 15, 2006. In addition, in February 2007, the American Institute of Certified Public Accountants ("AICPA") issued related Technical Practice Aids ("TPAs") to provide further clarification of SOP 05-1. The TPAs became effective concurrently with the adoption of SOP 05-1. F-22 METLIFE INSURANCE COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) As a result of the adoption of SOP 05-1 and the related TPAs, if an internal replacement modification substantially changes a contract, then the DAC is written off immediately through income and any new deferrable costs associated with the new replacement are deferred. If a contract modification does not substantially change the contract, the DAC amortization on the original contract will continue and any acquisition costs associated with the related modification are immediately expensed. The adoption of SOP 05-1 and the related TPAs resulted in a reduction to DAC and VOBA on January 1, 2007 and an acceleration of the amortization period relating primarily to the Company's group life and non-medical health insurance contracts that contain certain rate reset provisions. Prior to the adoption of SOP 05-1, DAC on such contracts was amortized over the expected renewable life of the contract. Upon adoption of SOP 05-1, DAC on such contracts is to be amortized over the rate reset period. The impact as of January 1, 2007 was a cumulative effect adjustment of $86 million, net of income tax of $46 million, which was recorded as a reduction to retained earnings. 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 No. 133, Accounting for Derivative Instruments and Hedging ("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 F-23 METLIFE INSURANCE COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 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. Other Effective January 1, 2007, the Company adopted 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. The adoption of SFAS 156 did not have an impact on the Company's consolidated financial statements. 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"). F-24 METLIFE INSURANCE COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 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. 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 Nos. 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. FUTURE ADOPTION OF NEW ACCOUNTING PRONOUNCEMENTS Fair Value 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 and requires enhanced disclosures about fair value measurements. Effective January 1, 2008, the Company adopted SFAS 157 and applied the provisions of the statement prospectively to assets and liabilities measured and disclosed at fair value. In addition to new disclosure requirements, the adoption of SFAS 157 changes the valuation of certain freestanding derivatives by moving from a mid to bid pricing convention as well as changing the valuation of embedded derivatives associated with annuity contracts. The change in valuation of embedded derivatives associated with annuity contracts results from the incorporation of risk margins and the Company's own credit standing in their valuation. As a result of the adoption of SFAS 157 on January 1, 2008, the Company expects such changes to result in a gain in the range of $30 million to $50 million, net of income tax, in the Company's consolidated statement of income. In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities ("SFAS 159"). SFAS 159 permits 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 is generally applied on an instrument-by-instrument basis and is generally an irrevocable election. Effective January 1, 2008, the Company did not elect the fair value option for any instruments. Accordingly, there was no impact on the Company's retained earnings or equity as of January 1, 2008. F-25 METLIFE INSURANCE COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) In June 2007, the AICPA issued SOP 07-1, Clarification of the Scope of the Audit and Accounting Guide Investment Companies and Accounting by Parent Companies and Equity Method Investors for Investments in Investment Companies ("SOP 07-1"). Upon adoption of SOP 07-1, the Company must also adopt the provisions of FASB Staff Position FSP No. FIN 46(r)-7, Application of FASB Interpretation No. 46 to Investment Companies ("FSP FIN 46(r)-7"), which permanently exempts investment companies from applying the provisions of FIN No. 46(r), Consolidation of Variable Interest Entities -- An Interpretation of Accounting Research Bulletin No. 51, and its December 2003 revision ("FIN 46(r)") to investments carried at fair value. SOP 07-1 provides guidance for determining whether an entity falls within the scope of the AICPA Audit and Accounting Guide Investment Companies and whether investment company accounting should be retained by a parent company upon consolidation of an investment company subsidiary or by an equity method investor in an investment company. In certain circumstances, SOP 07-1 precludes retention of specialized accounting for investment companies (i.e., fair value accounting), when similar direct investments exist in the consolidated group and are measured on a basis inconsistent with that applied to investment companies. Additionally, SOP 07-1 precludes retention of specialized accounting for investment companies if the reporting entity does not distinguish through documented policies the nature and type of investments to be held in the investment companies from those made in the consolidated group where other accounting guidance is being applied. In February 2008, the FASB issued FSP No. SOP 7-1-1, Effective Date of AICPA Statement of Position 07-1, which delays indefinitely the effective date of SOP 07-1. The Company is closely monitoring further FASB developments. In May 2007, the FASB issued FSP No. FIN 39-1, Amendment of FASB Interpretation No. 39 ("FSP 39-1"). FSP 39-1 amends FIN No. 39, Offsetting of Amounts Related to Certain Contracts ("FIN 39"), to permit a reporting entity to offset fair value amounts recognized for the right to reclaim cash collateral (a receivable) or the obligation to return cash collateral (a payable) against fair value amounts recognized for derivative instruments executed with the same counterparty under the same master netting arrangement that have been offset in accordance with FIN 39. FSP 39-1 also amends FIN 39 for certain terminology modifications. FSP 39-1 applies to fiscal years beginning after November 15, 2007. FSP 39-1 will be applied retrospectively, unless it is impracticable to do so. Upon adoption of FSP 39-1, the Company is permitted to change its accounting policy to offset or not offset fair value amounts recognized for derivative instruments under master netting arrangements. The adoption of FSP 39-1 will not have an impact on the Company's financial statements. Business Combinations In December 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations -- A Replacement of FASB Statement No. 141 ("SFAS 141(r)") and SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements -- An Amendment of ARB No. 51 ("SFAS 160") which are effective for fiscal years beginning after December 15, 2008. Under SFAS 141(r) and SFAS 160: - All business combinations (whether full, partial, or "step" acquisitions) result in all assets and liabilities of an acquired business being recorded at fair value, with limited exceptions. - Acquisition costs are generally expensed as incurred; restructuring costs associated with a business combination are generally expensed as incurred subsequent to the acquisition date. - The fair value of the purchase price, including the issuance of equity securities, is determined on the acquisition date. - Certain acquired contingent liabilities are recorded at fair value at the acquisition date and subsequently measured at either the higher of such amount or the amount determined under existing guidance for non-acquired contingencies. - Changes in deferred tax asset valuation allowances and income tax uncertainties after the acquisition date generally affect income tax expense. F-26 METLIFE INSURANCE COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) - Noncontrolling interests (formerly known as "minority interests") are valued at fair value at the acquisition date and are presented as equity rather than liabilities. - When control is attained on previously noncontrolling interests, the previously held equity interests are remeasured at fair value and a gain or loss is recognized. - Purchases or sales of equity interests that do not result in a change in control are accounted for as equity transactions. - When control is lost in a partial disposition, realized gains or losses are recorded on equity ownership sold and the remaining ownership interest is remeasured and holding gains or losses are recognized. The pronouncements are effective for fiscal years beginning on or after December 15, 2008 and apply prospectively to business combinations. Presentation and disclosure requirements related to noncontrolling interests must be retrospectively applied. The Company is currently evaluating the impact of SFAS 141(r) on its accounting for future acquisitions and the impact of SFAS 160 on its consolidated financial statements. Other In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities -- An Amendment of FASB Statement No. 133 ("SFAS 161"). SFAS 161 requires enhanced qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of and gains and losses on derivative instruments, and disclosures about credit-risk-related contingent features in derivative agreements. SFAS 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. The Company is currently evaluating the impact of SFAS 161 on its consolidated financial statements. In February 2008, the FASB issued FSP No. FAS 140-3, Accounting for Transfers of Financial Assets and Repurchase Financing Transactions ("FSP 140- 3"). FSP 140-3 provides guidance for evaluating whether to account for a transfer of a financial asset and repurchase financing as a single transaction or as two separate transactions. FSP 140-3 is effective prospectively for financial statements issued for fiscal years beginning after November 15, 2008. The Company is currently evaluating the impact of FSP 140-3 on its consolidated financial statements. In January 2008, the FASB cleared SFAS 133 Implementation Issue E23, Clarification of the Application of the Shortcut Method ("Issue E23"). Issue E23 amends SFAS 133 by permitting interest rate swaps to have a non-zero fair value at inception, as long as the difference between the transaction price (zero) and the fair value (exit price), as defined by SFAS 157, is solely attributable to a bid-ask spread. In addition, entities would not be precluded from assuming no ineffectiveness in a hedging relationship of interest rate risk involving an interest bearing asset or liability in situations where the hedged item is not recognized for accounting purposes until settlement date as long as the period between trade date and settlement date of the hedged item is consistent with generally established conventions in the marketplace. Issue E23 is effective for hedging relationships designated on or after January 1, 2008. The Company does not expect the adoption of Issue E23 to have a material impact on its consolidated financial statements. In December 2007, the FASB ratified as final the consensus on EITF Issue No. 07-6, Accounting for the Sale of Real Estate When the Agreement Includes a Buy-Sell Clause ("EITF 07-6"). EITF 07-6 addresses whether the existence of a buy-sell arrangement would preclude partial sales treatment when real estate is sold to a jointly owned entity. The consensus concludes that the existence of a buy-sell clause does not necessarily preclude partial sale treatment under current guidance. EITF 07-6 applies prospectively to new arrangements entered into and assessments on existing transactions performed in fiscal years beginning after December 15, 2008. The Company does not expect the adoption of EITF 07-6 to have a material impact on its consolidated financial statements. F-27 METLIFE INSURANCE COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 2. ACQUISITION OF METLIFE INSURANCE COMPANY OF CONNECTICUT BY METLIFE, INC. FROM CITIGROUP INC. On the Acquisition Date, MetLife Insurance Company of Connecticut became a subsidiary of MetLife. MetLife Insurance Company of Connecticut, together with substantially all of Citigroup's international insurance businesses, excluding Primerica, were acquired by MetLife from Citigroup for $12.1 billion. Prior to the Acquisition, MetLife Insurance Company of Connecticut was a subsidiary of Citigroup Insurance Holding Company ("CIHC"). Primerica was distributed via dividend from MetLife Insurance Company of Connecticut to CIHC on June 30, 2005 in contemplation of 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 MetLife Insurance Company of Connecticut be identified and measured at their fair value as of the acquisition date. As of July 1, 2005 the net fair value of assets acquired and liabilities assumed totaled $5.9 billion, resulting in goodwill of $885 million. Further information on goodwill is described in Note 7. See Note 6 for the VOBA acquired as part of the acquisition and Note 8 for the value of distribution agreements ("VODA") and the value of customer relationships acquired ("VOCRA"). 3. CONTRIBUTION OF METLIFE INSURANCE COMPANY OF CONNECTICUT FROM METLIFE, INC. On October 11, 2006, MetLife Insurance Company of Connecticut and MetLife Investors Group, Inc. ("MLIG"), both subsidiaries of MetLife, entered into a transfer agreement ("Transfer Agreement"), pursuant to which MetLife Insurance Company of Connecticut agreed to acquire all of the outstanding stock of MLI-USA from MLIG in exchange for shares of MetLife Insurance Company of Connecticut's common stock. To effectuate the exchange of shares, MetLife returned 10,000,000 shares just prior to the closing of the transaction and retained 30,000,000 shares representing 100% of the then issued and outstanding shares of MetLife Insurance Company of Connecticut. MetLife Insurance Company of Connecticut issued 4,595,317 new shares to MLIG in exchange for all of the outstanding common stock of MLI-USA. After the closing of the transaction, 34,595,317 shares of MetLife Insurance Company of Connecticut's common stock are outstanding, of which MLIG holds 4,595,317 shares, with the remaining shares held by MetLife. In connection with the Transfer Agreement on October 11, 2006, MLIG transferred to MetLife Insurance Company of Connecticut certain assets and liabilities, including goodwill, VOBA and deferred income tax liabilities, which remain outstanding from MetLife's acquisition of MLIG on October 30, 1997. The assets and liabilities have been included in the financial data of the Company for all periods presented. The transfer of MLI-USA to MetLife Insurance Company of Connecticut was a transaction between entities under common control. Since MLI-USA was the original entity under common control, for financial statement reporting purposes, MLI-USA is considered the accounting acquirer of MetLife Insurance Company of Connecticut. Accordingly, all financial data included in these financial statement periods prior to July 1, 2005 is that of MLI-USA. For periods subsequent to July 1, 2005, MetLife Insurance Company of Connecticut has been combined with MLI-USA in a manner similar to a pooling of interests. F-28 METLIFE INSURANCE COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The equity of MetLife Insurance Company of Connecticut has been adjusted to reflect the return of the MetLife Insurance Company of Connecticut common stock by MetLife in connection with the transfer of MLI-USA to MetLife Insurance Company of Connecticut as follows:
ACCUMULATED OTHER COMPREHENSIVE INCOME ---------------- ADDITIONAL NET UNREALIZED COMMON PAID-IN RETAINED INVESTMENT GAINS STOCK CAPITAL EARNINGS (LOSSES) TOTAL ------ ---------- -------- ---------------- ------ MetLife Insurance Company of Connecticut's common stock purchased by MetLife in the Acquisition on July 1, 2005... $100 $6,684 $-- $-- $6,784 Return of MetLife Insurance Company of Connecticut's common stock from MetLife..... (25)(1) 25 -- -- -- ---- ------ --- --- ------ MetLife Insurance Company of Connecticut's common stock purchased by MetLife on July 1, 2005, as adjusted.......... $ 75 $6,709 $-- $-- $6,784 ==== ====== === === ======
- -------- (1) Represents the return of 10,000,000 shares of MetLife Insurance Company of Connecticut's common stock, at $2.50 par value, by MetLife to MetLife Insurance Company of Connecticut in anticipation of the transfer of MLI- USA to MetLife Insurance Company of Connecticut, for a total adjustment of $25 million. F-29 METLIFE INSURANCE COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 4. 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:
DECEMBER 31, 2007 ---------------------------------------------- GROSS COST OR UNREALIZED AMORTIZED ------------- ESTIMATED % OF COST GAIN LOSS FAIR VALUE TOTAL --------- ---- ------ ---------- ----- (IN MILLIONS) U.S. corporate securities............. $17,174 $119 $ 618 $16,675 36.5% Residential mortgage-backed securities.......................... 11,914 98 80 11,932 26.1 Foreign corporate securities.......... 6,536 83 184 6,435 14.1 U.S.Treasury/agency securities........ 3,976 126 11 4,091 9.0 Commercial mortgage-backed securities.......................... 3,182 28 67 3,143 6.9 Asset-backed securities............... 2,236 4 108 2,132 4.7 Foreign government securities......... 635 55 2 688 1.5 State and political subdivision securities.......................... 611 4 40 575 1.2 ------- ---- ------ ------- ----- Total fixed maturity securities..... $46,264 $517 $1,110 $45,671 100.0% ======= ==== ====== ======= ===== Non-redeemable preferred stock........ $ 777 $ 21 $ 63 $ 735 77.2% Common stock.......................... 215 9 7 217 22.8 ------- ---- ------ ------- ----- Total equity securities............. $ 992 $ 30 $ 70 $ 952 100.0% ======= ==== ====== ======= =====
DECEMBER 31, 2006 -------------------------------------------- GROSS COST OR UNREALIZED AMORTIZED ----------- ESTIMATED % OF COST GAIN LOSS FAIR VALUE TOTAL --------- ---- ---- ---------- ----- (IN MILLIONS) U.S. corporate securities.............. $17,331 $101 $424 $17,008 35.5% Residential mortgage-backed securities........................... 11,951 40 78 11,913 24.9 Foreign corporate securities........... 5,563 64 128 5,499 11.5 U.S.Treasury/agency securities......... 5,455 7 126 5,336 11.2 Commercial mortgage-backed securities.. 3,353 19 47 3,325 6.9 Asset-backed securities................ 3,158 14 10 3,162 6.6 Foreign government securities.......... 533 45 5 573 1.2 State and political subdivision securities........................... 1,062 6 38 1,030 2.2 ------- ---- ---- ------- ----- Total fixed maturity securities...... $48,406 $296 $856 $47,846 100.0% ======= ==== ==== ======= ===== Non-redeemable preferred stock......... $ 671 $ 22 $ 9 $ 684 86.0% Common stock........................... 106 6 1 111 14.0 ------- ---- ---- ------- ----- Total equity securities.............. $ 777 $ 28 $ 10 $ 795 100.0% ======= ==== ==== ======= =====
F-30 METLIFE INSURANCE COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The Company held foreign currency derivatives with notional amounts of $911 million and $472 million to hedge the exchange rate risk associated with foreign denominated fixed maturity securities at December 31, 2007 and 2006, respectively. The Company is not exposed to any significant concentrations of credit risk in its equity securities portfolio. The Company is exposed to concentrations of credit risk related to U.S. Treasury securities and obligations of U.S. government corporations and agencies. Additionally, at December 31, 2007 and 2006, the Company had exposure to fixed maturity securities backed by sub-prime mortgages with estimated fair values of $570 million and $819 million, respectively, and unrealized losses of $45 million and $2 million, respectively. These securities are classified within asset-backed securities in the immediately preceding tables. At December 31, 2007, 14% have been guaranteed by financial guarantors, of which 57% was guaranteed by financial guarantors who remained Aaa rated through February 2008. Overall, at December 31, 2007, $1.2 billion of the estimated fair value of the Company's fixed maturity securities were credit enhanced by financial guarantors of which $537 million, $499 million and $195 million at December 31, 2007, are included within corporate securities, state and political subdivisions and asset-backed securities, respectively, and 84% were guaranteed by financial guarantors who remained Aaa rated through February 2008. 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 $3.8 billion and $3.2 billion at December 31, 2007 and 2006, respectively. These securities had net unrealized gains (losses) of $(94) million and $51 million at December 31, 2007 and 2006, respectively. Non-income producing fixed maturity securities were $1 million and $6 million at December 31, 2007 and 2006, respectively. Net unrealized gains associated with non-income producing fixed maturity securities were less than $1 million and $1 million at December 31, 2007 and 2006, respectively. The amortized cost and estimated fair value of fixed maturity securities, by contractual maturity date (excluding scheduled sinking funds), are as follows:
DECEMBER 31, ----------------------------------------------- 2007 2006 ---------------------- ---------------------- AMORTIZED ESTIMATED AMORTIZED ESTIMATED COST FAIR VALUE COST FAIR VALUE --------- ---------- --------- ---------- (IN MILLIONS) Due in one year or less................. $ 1,172 $ 1,163 $ 1,620 $ 1,616 Due after one year through five years... 8,070 8,035 9,843 9,733 Due after five years through ten years.. 7,950 7,858 7,331 7,226 Due after ten years..................... 11,740 11,408 11,150 10,871 ------- ------- ------- ------- Subtotal.............................. 28,932 28,464 29,944 29,446 Mortgage-backed and asset-backed securities............................ 17,332 17,207 18,462 18,400 ------- ------- ------- ------- Total fixed maturity securities....... $46,264 $45,671 $48,406 $47,846 ======= ======= ======= =======
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. F-31 METLIFE INSURANCE COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Sales or disposals of fixed maturity and equity securities classified as available-for-sale are as follows:
YEARS ENDED DECEMBER 31, --------------------------- 2007 2006 2005 ------- ------- ------- (IN MILLIONS) Proceeds....................................... $14,826 $23,901 $22,241 Gross investment gains......................... $ 146 $ 73 $ 48 Gross investment losses........................ $ (373) $ (519) $ (347)
UNREALIZED LOSS FOR FIXED MATURITY AND EQUITY SECURITIES AVAILABLE-FOR-SALE The following tables present the estimated fair value and gross unrealized loss of the Company's fixed maturity (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:
DECEMBER 31, 2007 ------------------------------------------------------------------------------------------ EQUAL TO OR GREATER THAN 12 LESS THAN 12 MONTHS 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............ $ 6,643 $316 $ 5,010 $302 $11,653 $ 618 Residential mortgage- backed securities..... 2,374 52 1,160 28 3,534 80 Foreign corporate securities............ 2,350 86 2,234 98 4,584 184 U.S. Treasury/agency securities............ 307 2 343 9 650 11 Commercial mortgage- backed securities..... 417 26 1,114 41 1,531 67 Asset-backed securities............ 1,401 91 332 17 1,733 108 Foreign government securities............ 63 1 62 1 125 2 State and political subdivision securities............ 84 9 387 31 471 40 ------- ---- ------- ---- ------- ------ Total fixed maturity securities......... $13,639 $583 $10,642 $527 $24,281 $1,110 ======= ==== ======= ==== ======= ====== Equity securities....... $ 386 $ 42 $ 190 $ 28 $ 576 $ 70 ======= ==== ======= ==== ======= ====== Total number of securities in an unrealized loss position.............. 2,011 1,487 ======= =======
F-32 METLIFE INSURANCE COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 2006 ------------------------------------------------------------------------------------------ EQUAL TO OR GREATER THAN 12 LESS THAN 12 MONTHS 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............ $ 4,895 $104 $ 7,543 $320 $12,438 $424 Residential mortgage- backed securities..... 4,113 20 3,381 58 7,494 78 Foreign corporate securities............ 1,381 29 2,547 99 3,928 128 U.S. Treasury/agency securities............ 2,995 48 1,005 78 4,000 126 Commercial mortgage- backed securities..... 852 6 1,394 41 2,246 47 Asset-backed securities............ 965 3 327 7 1,292 10 Foreign government securities............ 51 1 92 4 143 5 State and political subdivision securities............ 29 2 414 36 443 38 ------- ---- ------- ---- ------- ---- Total fixed maturity securities......... $15,281 $213 $16,703 $643 $31,984 $856 ======= ==== ======= ==== ======= ==== Equity securities....... $ 149 $ 3 $ 188 $ 7 $ 337 $ 10 ======= ==== ======= ==== ======= ==== Total number of securities in an unrealized loss position.............. 1,955 2,318 ======= =======
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 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:
DECEMBER 31, 2007 --------------------------------------------------------------------------------------- COST OR AMORTIZED COST GROSS UNREALIZED LOSS NUMBER OF SECURITIES --------------------------- --------------------------- --------------------------- LESS THAN 20% 20% OR MORE LESS THAN 20% 20% OR MORE LESS THAN 20% 20% OR MORE ------------- ----------- ------------- ----------- ------------- ----------- (IN MILLIONS, EXCEPT NUMBER OF SECURITIES) Less than six months............ $10,721 $484 $ 368 $130 1,923 98 Six months or greater but less than nine months.. 3,011 -- 155 -- 337 -- Nine months or greater but less than twelve months............ 1,560 -- 86 -- 174 -- Twelve months or greater........... 10,261 -- 441 -- 1,375 -- ------- ---- ------ ---- Total............. $25,553 $484 $1,050 $130 ======= ==== ====== ====
F-33 METLIFE INSURANCE COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 2006 --------------------------------------------------------------------------------------- COST OR AMORTIZED COST GROSS UNREALIZED LOSS NUMBER OF SECURITIES --------------------------- --------------------------- --------------------------- LESS THAN 20% 20% OR MORE LESS THAN 20% 20% OR MORE LESS THAN 20% 20% OR MORE ------------- ----------- ------------- ----------- ------------- ----------- (IN MILLIONS, EXCEPT NUMBER OF SECURITIES) Less than six months... $12,922 $ 9 $150 $ 4 1,537 15 Six months or greater but less than nine months............... 568 -- 6 -- 78 1 Nine months or greater but less than twelve months............... 2,134 14 52 4 323 1 Twelve months or greater.............. 17,540 -- 650 -- 2,318 -- ------- --- ---- --- Total................ $33,164 $23 $858 $ 8 ======= === ==== ===
At December 31, 2007 and 2006, $1,050 million and $858 million, respectively, of unrealized losses related to securities with an unrealized loss position of less than 20% of cost or amortized cost, which represented 4% and 3%, respectively, of the cost or amortized cost of such securities. At December 31, 2007, $130 million of unrealized losses related to securities with an unrealized loss position of 20% or more of cost or amortized cost, which represented 27% of the cost or amortized cost of such securities. All of such unrealized losses of $130 million were related to securities that were in an unrealized loss position for a period of less than six months. At December 31, 2006, $8 million of unrealized losses related to securities with an unrealized loss position of 20% or more of cost or amortized cost, which represented 35% of the cost or amortized cost of such securities. Of such unrealized losses of $8 million, $4 million related to securities that were in an unrealized loss position for a period of less than six months. The Company held two fixed maturity and equity securities, each with a gross unrealized loss at December 31, 2007 of greater than $10 million. These securities represented 2%, or $21 million in the aggregate, of the gross unrealized loss on fixed maturity and equity securities. The Company held two fixed maturity and equity securities, each with a gross unrealized loss at December 31, 2006 of greater than $10 million. These securities represented 3%, or $25 million in the aggregate, of the gross unrealized loss on fixed maturity and equity securities. At December 31, 2007 and 2006, the Company had $1.2 billion and $866 million, respectively, of gross unrealized losses related to its fixed maturity and equity securities. These securities are concentrated, calculated as a percentage of gross unrealized loss, as follows:
DECEMBER 31, ----------- 2007 2006 ---- ---- SECTOR: U.S. corporate securities.................................. 52% 49% Foreign corporate securities............................... 16 15 Asset-backed securities.................................... 9 1 Residential mortgage-backed securities..................... 7 9 Commercial mortgage-backed securities...................... 6 5 U.S. Treasury/agency securities............................ 1 15 Other...................................................... 9 6 --- --- Total................................................... 100% 100% === ===
F-34 METLIFE INSURANCE COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, ----------- 2007 2006 ---- ---- INDUSTRY: Finance.................................................... 36% 18% Industrial................................................. 23 26 Mortgage-backed............................................ 13 14 Utility.................................................... 8 10 Government................................................. 1 15 Other...................................................... 19 17 --- --- 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 interest 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. SECURITIES LENDING The Company participates in a securities lending program whereby blocks of securities, which are included in fixed maturity and equity securities, are loaned to third parties, primarily major brokerage firms. The Company requires a minimum of 102% of the fair value of the loaned securities to be separately maintained as collateral for the loans. Securities with a cost or amortized cost of $9.9 billion and $8.8 billion and an estimated fair value of $9.8 billion and $8.6 billion were on loan under the program at December 31, 2007 and 2006, respectively. Securities loaned under such transactions may be sold or repledged by the transferee. The Company was liable for cash collateral under its control of $10.1 billion and $8.9 billion at December 31, 2007 and 2006, respectively. Security collateral of $40 million and $83 million on deposit from customers in connection with the securities lending transactions at December 31, 2007 and 2006, respectively, may not be sold or repledged and is not reflected in the consolidated financial statements. F-35 METLIFE INSURANCE COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) ASSETS ON DEPOSIT AND ASSETS PLEDGED AS COLLATERAL The Company had investment assets on deposit with regulatory agencies with a fair market value of $22 million and $20 million at December 31, 2007 and 2006, respectively, consisting primarily of fixed maturity and equity securities. Certain of the Company's fixed maturity securities are pledged as collateral for various derivative transactions as described in Note 5. Additionally, the Company has pledged certain of its fixed maturity securities in support of its funding agreements as described in Note 8. MORTGAGE AND CONSUMER LOANS Mortgage and consumer loans are categorized as follows:
DECEMBER 31, ----------------------------------- 2007 2006 ---------------- ---------------- AMOUNT PERCENT AMOUNT PERCENT ------ ------- ------ ------- (IN MILLIONS) Commercial mortgage loans..................... $3,125 71% $2,095 58% Agricultural mortgage loans................... 1,265 29 1,460 41 Consumer loans................................ 22 -- 46 1 ------ --- ------ --- Total....................................... 4,412 100% 3,601 100% === === Less: Valuation allowances.................... 8 6 ------ ------ Total mortgage and consumer loans........... $4,404 $3,595 ====== ======
Mortgage loans are collateralized by properties primarily located in the United States. At December 31, 2007, 26%, 7% and 7% of the value of the Company's mortgage and consumer loans were located in California, Florida and New York, respectively. Generally, the Company, as the lender, only loans up to 75% of the purchase price of the underlying real estate. Information regarding loan valuation allowances for mortgage and consumer loans is as follows:
YEARS ENDED DECEMBER 31, ------------------ 2007 2006 2005 ---- ---- ---- (IN MILLIONS) Balance at January 1,.................................... $ 6 $ 9 $ 1 Additions................................................ 7 3 8 Deductions............................................... (5) (6) -- --- --- --- Balance at December 31,.................................. $ 8 $ 6 $ 9 === === ===
F-36 METLIFE INSURANCE COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) A portion of the Company's mortgage and consumer loans was impaired and consisted of the following:
DECEMBER 31, ----------- 2007 2006 ---- ---- (IN MILLIONS) Impaired loans with valuation allowances..................... $65 $-- Impaired loans without valuation allowances.................. 2 8 --- --- Subtotal................................................... 67 8 Less: Valuation allowances on impaired loans................. 4 -- --- --- Impaired loans............................................. $63 $ 8 === ===
The average investment on impaired loans was $21 million, $32 million and $12 million for the years ended December 31, 2007, 2006 and 2005, respectively. Interest income on impaired loans was $3 million, $1 million and $2 million for the years ended December 31, 2007, 2006 and 2005, respectively. The investment in restructured loans was less than $1 million at December 31, 2007. There was no investment in restructured loans at December 31, 2006. Interest income, recognized on restructured loans, was less than $1 million for both years ended December 31, 2007 and 2006, respectively. There was no interest income on restructured loans for the year ended December 31, 2005. Gross interest income that would have been recorded in accordance with the original terms of such loans amounted to less than $1 million for each of the years ended December 31, 2007 and 2006. There was no gross interest income that would have been recorded in accordance with the original terms of such loans for the year ended December 31, 2005. Mortgage and consumer loans with scheduled payments of 90 days or more past due on which interest is still accruing, had an amortized cost of less than $1 million and $6 million at December 31, 2007 and 2006, respectively. There were no mortgage and consumer loans on which interest no longer accrued at both December 31, 2007 and 2006. There were no mortgage and consumer loans in foreclosure at both December 31, 2007 and 2006. REAL ESTATE HOLDINGS Real estate holdings consisted of the following:
DECEMBER 31, ----------- 2007 2006 ---- ---- (IN MILLIONS) Real estate............................................... $ 86 $ 30 Accumulated depreciation.................................. (11) (1) ---- ---- Net real estate........................................... 75 29 Real estate joint ventures................................ 466 144 ---- ---- Real estate and real estate joint ventures.............. 541 173 Real estate held-for-sale................................. -- 7 ---- ---- Total real estate holdings.............................. $541 $180 ==== ====
Related depreciation expense on real estate was $8 million for the year ended December 31, 2007. Depreciation expense on real estate was less than $1 million for both years ended December 31, 2006 and 2005. There was no depreciation expense related to discontinued operations for the years ended December 31, 2007 and 2005. Depreciation expense related to discontinued operations was less than $1 million of the year ended December 31, 2006. F-37 METLIFE INSURANCE COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) There were no impairments recognized on real estate held-for-sale for the years ended December 31, 2007, 2006 and 2005. The carrying value of non-income producing real estate was $1 million at December 31, 2007. There was no non- income producing real estate at December 31, 2006. The Company did not own any real estate acquired in satisfaction of debt during the years ended December 31, 2007 and 2006. Real estate holdings were categorized as follows:
DECEMBER 31, ----------------------------------- 2007 2006 ---------------- ---------------- AMOUNT PERCENT AMOUNT PERCENT ------ ------- ------ ------- (IN MILLIONS) Development joint ventures.................... $287 53% $ -- --% Real estate investment funds.................. 111 21 93 52 Office........................................ 88 16 46 26 Apartments.................................... 35 6 -- -- Agriculture................................... 19 4 28 15 Land.......................................... 1 -- 1 -- Retail........................................ -- -- 12 7 ---- --- ---- --- Total real estate holdings.................. $541 100% $180 100% ==== === ==== ===
The Company's real estate holdings are primarily located in the United States. At December 31, 2007, 22%, 21%, 6% and 5% of the Company's real estate holdings were located in California, New York, Texas and Florida, respectively. OTHER LIMITED PARTNERSHIP INTERESTS The carrying value of other limited partnership interests (which primarily represent ownership interests in pooled investment funds that make private equity investments in companies in the United States and overseas) was $1.1 billion at both December 31, 2007 and 2006. Included within other limited partnership interests at December 31, 2007 and 2006 were $433 million and $354 million, respectively, of hedge funds. For the years ended December 31, 2007, 2006 and 2005, net investment income from other limited partnership interests included $16 million, $30 million and $4 million, respectively, related to hedge funds. F-38 METLIFE INSURANCE COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) NET INVESTMENT INCOME The components of net investment income are as follows:
YEARS ENDED DECEMBER 31, ------------------------ 2007 2006 2005 ------ ------ ------ (IN MILLIONS) Fixed maturity securities........................... $2,803 $2,719 $1,377 Equity securities................................... 45 17 6 Mortgage and consumer loans......................... 263 182 113 Policy loans........................................ 53 52 26 Real estate and real estate joint ventures.......... 81 29 2 Other limited partnership interests................. 164 238 33 Cash, cash equivalents and short-term investments... 104 137 71 Other............................................... 7 8 -- ------ ------ ------ Total investment income........................... 3,520 3,382 1,628 Less: Investment expenses........................... 627 543 190 ------ ------ ------ Net investment income............................. $2,893 $2,839 $1,438 ====== ====== ======
For the years ended December 31, 2007 and 2006, affiliated investment expense of $36 million and $32 million, respectively, related to investment expenses, is included in the table above. There were no affiliated investment expenses for the year ended December 31, 2005. See "-- Related Party Investment Transactions" for discussion of affiliated net investment income related to short-term investments included in the table above. NET INVESTMENT GAINS (LOSSES) The components of net investment gains (losses) are as follows:
YEARS ENDED DECEMBER 31, --------------------- 2007 2006 2005 ----- ----- ----- (IN MILLIONS) Fixed maturity securities............................ $(272) $(497) $(300) Equity securities.................................... 15 10 1 Mortgage and consumer loans.......................... (2) 7 (9) Real estate and real estate joint ventures........... 1 64 7 Other limited partnership interests.................. (19) (1) (1) Sales of businesses.................................. -- -- 2 Derivatives.......................................... 305 177 (2) Other................................................ (226) (281) 104 ----- ----- ----- Net investment gains (losses) $(198) $(521) $(198) ===== ===== =====
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 $30 million and $41 million for the years ended December 31, 2007 and 2006, F-39 METLIFE INSURANCE COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) respectively. There were no losses from fixed maturity and equity securities deemed other-than-temporarily impaired for the year ended December 31, 2005. NET UNREALIZED INVESTMENT GAINS (LOSSES) The components of net unrealized investment gains (losses), included in accumulated other comprehensive income (loss), are as follows:
YEARS ENDED DECEMBER 31, --------------------- 2007 2006 2005 ----- ----- ----- (IN MILLIONS) Fixed maturity securities............................ $(606) $(566) $(639) Equity securities.................................... (38) 17 (4) Derivatives.......................................... (13) (9) (2) Other................................................ 8 7 (19) ----- ----- ----- Subtotal........................................... (649) (551) (664) ----- ----- ----- Amounts allocated from: Insurance liability loss recognition............... -- -- (78) DAC and VOBA....................................... 93 66 102 ----- ----- ----- Subtotal........................................... 93 66 24 ----- ----- ----- Deferred income tax.................................. 195 171 224 ----- ----- ----- Subtotal........................................... 288 237 248 ----- ----- ----- Net unrealized investment gains (losses)............. $(361) $(314) $(416) ===== ===== =====
The changes in net unrealized investment gains (losses) are as follows:
YEARS ENDED DECEMBER 31, --------------------- 2007 2006 2005 ----- ----- ----- (IN MILLIONS) Balance, January 1,.................................. $(314) $(416) $ 30 Unrealized investment gains (losses) during the year............................................... (98) 113 (756) Unrealized investment gains (losses) relating to: Insurance liability gain (loss) recognition........ -- 78 (78) DAC and VOBA....................................... 27 (36) 148 Deferred income tax................................ 24 (53) 240 ----- ----- ----- Balance, December 31,................................ $(361) $(314) $(416) ===== ===== ===== Net change in unrealized investment gains (losses)... $ (47) $ 102 $(446) ===== ===== =====
TRADING SECURITIES MetLife Insurance Company of Connecticut was the majority owner of Tribeca on the Acquisition Date. Tribeca was a feeder fund investment structure whereby the feeder fund invests substantially all of its assets in the master fund, Tribeca Global Convertible Instruments Ltd. The primary investment objective of the master fund is to achieve enhanced risk-adjusted return by investing in domestic and foreign equities and equity-related securities utilizing such strategies as convertible securities arbitrage. At December 31, 2005, the Company was the majority owner of the feeder fund and consolidated the fund within its consolidated financial statements. Net investment F-40 METLIFE INSURANCE COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) income related to the trading activities of Tribeca, which included interest and dividends earned on trading securities in addition to the net realized and unrealized gains (losses), was $12 million and $6 million for the six months ended June 30, 2006 and the year ended December 31, 2005, respectively. During the second quarter of 2006, the Company's ownership interests in Tribeca declined to a position whereby Tribeca is no longer consolidated and, as of June 30, 2006, was accounted for under the equity method of accounting. The equity method investment at December 31, 2006 of $82 million was included in other limited partnership interests. Net investment income related to the Company's equity method investment in Tribeca was $9 million for the six months ended December 31, 2006. VARIABLE INTEREST ENTITIES The following table presents the total assets of and maximum exposure to loss relating to VIEs 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:
DECEMBER 31, 2007 ----------------------- MAXIMUM TOTAL EXPOSURE TO ASSETS(1) LOSS(2) --------- ----------- (IN MILLIONS) Asset-backed securitizations........................... $ 1,140 $ 77 Real estate joint ventures(3).......................... 942 44 Other limited partnership interests(4)................. 3,876 418 Trust preferred securities(5).......................... 22,775 546 Other investments(6)................................... 1,600 79 ------- ------ Total................................................ $30,333 $1,164 ======= ======
- -------- (1) The assets of the asset-backed securitizations are reflected at fair value. The assets of the real estate joint ventures, other limited partnership interests, trust preferred securities and other investments 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 relating to the asset-backed securitizations is equal to the carrying amounts of participation. The maximum exposure to loss relating to real estate joint ventures, other limited partnership interests, trust preferred securities and other investments is equal to the carrying amounts plus any unfunded commitments, reduced by amounts guaranteed by other partners. Such a maximum loss would be expected to occur only upon bankruptcy of the issuer or investee. (3) Real estate joint ventures include partnerships and other ventures which engage in the acquisition, development, management and disposal of real estate investments. (4) Other limited partnership interests include partnerships established for the purpose of investing in public and private debt and equity securities. (5) Trust preferred securities are complex, uniquely structured investments which contain features of both equity and debt, may have an extended or no stated maturity, and may be callable at the issuer's option after a defined period of time. (6) Other investments include securities that are not trust preferred securities or asset-backed securitizations. F-41 METLIFE INSURANCE COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) RELATED PARTY INVESTMENT TRANSACTIONS As of December 31, 2007 and 2006, the Company held $582 million and $581 million, respectively, of its total invested assets in the MetLife Money Market Pool and the MetLife Intermediate Income Pool which are affiliated partnerships. These amounts are included in short-term investments. Net investment income from these invested assets was $25 million, $29 million and $10 million for the years ended December 31, 2007, 2006 and 2005, respectively. In the normal course of business, the Company transfers invested assets, primarily consisting of fixed maturity securities, to and from affiliates. Assets transferred to and from affiliates, inclusive of amounts related to reinsurance agreements, are as follows:
YEARS ENDED DECEMBER 31, ---------------------- 2007 2006 2005 ---- ---- ---- (IN MILLIONS) Estimated fair market value of assets transferred to affiliates......................................... $628 $164 $ 79 Amortized cost of assets transferred to affiliates... $629 $164 $ 78 Net investment gains (losses) recognized on transfers.......................................... $ (1) $ -- $ 1 Estimated fair market value of assets transferred from affiliates.................................... $836 $ 89 $830
5. DERIVATIVE FINANCIAL INSTRUMENTS TYPES OF DERIVATIVE FINANCIAL INSTRUMENTS The following table presents the notional amount and current market or fair value of derivative financial instruments held at:
DECEMBER 31, 2007 DECEMBER 31, 2006 ------------------------------- ------------------------------- CURRENT MARKET CURRENT MARKET OR FAIR VALUE OR FAIR VALUE NOTIONAL -------------------- NOTIONAL -------------------- AMOUNT ASSETS LIABILITIES AMOUNT ASSETS LIABILITIES -------- ------ ----------- -------- ------ ----------- (IN MILLIONS) Interest rate swaps................ $12,437 $ 336 $144 $ 8,841 $ 431 $ 70 Interest rate floors............... 12,071 159 -- 9,021 71 -- Interest rate caps................. 10,715 7 -- 6,715 6 -- Financial futures.................. 721 2 5 602 6 1 Foreign currency swaps............. 3,716 788 97 2,723 580 66 Foreign currency forwards.......... 167 2 -- 124 1 -- Options............................ -- 85 1 -- 80 7 Financial forwards................. 1,108 20 -- 900 -- 15 Credit default swaps............... 1,013 5 3 1,231 1 5 ------- ------ ---- ------- ------ ---- Total............................ $41,948 $1,404 $250 $30,157 $1,176 $164 ======= ====== ==== ======= ====== ====
The above table does not include notional amounts for equity futures, equity variance swaps and equity options. At December 31, 2007 and 2006, the Company owned 403 and 290 equity futures, respectively. Fair values of equity futures are included in financial futures in the preceding table. At December 31, 2007 and 2006, the Company owned 122,153 and 85,500 equity variance swaps, respectively. Fair values of equity variance swaps are included in financial forwards in the preceding table. At December 31, 2007 and 2006, the Company owned 821,100 and 1,022,900 equity options, respectively. Fair values of equity options are included in options in the preceding table. F-42 METLIFE INSURANCE COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The following table presents the notional amount of derivative financial instruments by maturity at December 31, 2007:
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.... $ 4,723 $ 4,963 $ 1,352 $1,399 $12,437 Interest rate floors... -- 2,551 9,520 -- 12,071 Interest rate caps..... 8,702 2,013 -- -- 10,715 Financial futures...... 634 -- -- 87 721 Foreign currency swaps................ 20 2,593 836 267 3,716 Foreign currency forwards............. 165 -- -- 2 167 Financial forwards..... -- -- -- 1,108 1,108 Credit default swaps... 205 519 289 -- 1,013 ------- ------- ------- ------ ------- Total................ $14,449 $12,639 $11,997 $2,863 $41,948 ======= ======= ======= ====== =======
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. The Company also enters into basis swaps to better match the cash flows from assets and related liabilities. In a basis swap, both legs of the swap are floating with each based on a different index. Generally, no cash is exchanged at the outset of the contract and no principal payments are made by either party. A single net payment is usually made by one counterparty at each due date. Basis swaps are included in interest rate swaps in the preceding table. Interest rate caps and floors are used by the Company primarily to protect its floating rate liabilities against rises in interest rates above a specified level, and against interest rate exposure arising from mismatches between assets and liabilities (duration mismatches), as well as to protect its minimum rate guarantee liabilities against declines in interest rates below a specified level, respectively. 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. F-43 METLIFE INSURANCE COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 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, foreign currency forwards and currency option contracts, 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. 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. The Company enters into currency option contracts that give it the right, but not the obligation, to sell the foreign currency amount in exchange for a functional currency amount within a limited time at a contracted price. The contracts may also be net settled in cash, based on differentials in the foreign exchange rate and the strike price. Currency option contracts are included in options in the preceding table. 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 a cash instrument such as a U.S. Treasury or Agency security. F-44 METLIFE INSURANCE COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) HEDGING The following table presents the notional amount and fair value of derivatives by type of hedge designation at:
DECEMBER 31, 2007 DECEMBER 31, 2006 ------------------------------- ------------------------------- FAIR VALUE FAIR VALUE NOTIONAL -------------------- NOTIONAL -------------------- AMOUNT ASSETS LIABILITIES AMOUNT ASSETS LIABILITIES -------- ------ ----------- -------- ------ ----------- (IN MILLIONS) Fair value................... $ 651 $ 20 $ 3 $ 69 $ -- $ 1 Cash flow.................... 486 85 3 455 42 -- Non-qualifying............... 40,811 1,299 244 29,633 1,134 163 ------- ------ ---- ------- ------ ---- Total...................... $41,948 $1,404 $250 $30,157 $1,176 $164 ======= ====== ==== ======= ====== ====
The following table presents the settlement payments recorded in income for the:
YEARS ENDED DECEMBER 31, ------------------ 2007 2006 2005 ---- ---- ---- (IN MILLIONS) Qualifying hedges: Interest credited to policyholder account balances..... $(6) $(9) $(1) Non-qualifying hedges: Net investment gains (losses).......................... 82 73 (8) --- --- --- Total............................................... $76 $64 $(9) === === ===
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; and (ii) foreign currency swaps to hedge the foreign currency fair value exposure of foreign currency denominated investments and liabilities. The Company recognized net investment gains (losses) representing the ineffective portion of all fair value hedges as follows:
YEARS ENDED DECEMBER 31, ------------------ 2007 2006 2005 ---- ---- ---- (IN MILLIONS) Changes in the fair value of derivatives................ $ 18 $(1) $-- Changes in the fair value of the items hedged........... (20) 2 -- ---- --- --- Net ineffectiveness of fair value hedging activities.... $ (2) $ 1 $-- ==== === ===
All components of each derivative's gain or loss were included in the assessment of hedge effectiveness. 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. F-45 METLIFE INSURANCE COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 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; (ii) interest rate swaps to convert floating rate liabilities to fixed rate liabilities; and (iii) foreign currency swaps to hedge the foreign currency cash flow exposure of foreign currency denominated investments and liabilities. For the years ended December 31, 2007 and 2006, the Company did not recognize any net investment gains (losses) which represented the ineffective portion of all cash flow hedges. For the year ended December 31, 2005, the Company recognized insignificant net investment gains (losses), which represented the ineffective portion of all cash flow hedges. All components of each derivative's gain or loss were included in the assessment of hedge effectiveness. For the years ended December 31, 2007, 2006 and 2005, there were no instances in which the Company discontinued 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. There were no hedged forecasted transactions, other than the receipt or payment of variable interest payments for the years ended December 31, 2007, 2006 and 2005. The following table presents the components of other comprehensive income (loss), before income tax, related to cash flow hedges:
YEARS ENDED DECEMBER 31, ------------------ 2007 2006 2005 ---- ---- ---- (IN MILLIONS) Other comprehensive income (loss) balance at January 1,.................................................... $ (9) $ (2) $(4) Gains (losses) deferred in other comprehensive income (loss) on the effective portion of cash flow hedges... 39 41 1 Amounts reclassified to net investment gains (losses)... (43) (48) 1 ---- ---- --- Other comprehensive income (loss) balance at December 31,................................................... $(13) $ (9) $(2) ==== ==== ===
At December 31, 2007, $65 million of the deferred net gain (loss) on derivatives accumulated in other comprehensive income (loss) is expected to be reclassified to earnings during the year ending December 31, 2008. 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, purchased caps and floors, and interest rate futures to economically hedge its exposure to interest rate volatility; (ii) foreign currency forwards, swaps and option contracts to economically hedge its exposure to adverse movements in exchange rates; (iii) credit default swaps to economically hedge 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 to synthetically create investments; (vi) financial forwards to buy and sell securities; and (vii) basis swaps to better match the cash flows of assets and related liabilities. The following table presents changes in fair value related to derivatives that do not qualify for hedge accounting:
YEARS ENDED DECEMBER 31, ------------------ 2007 2006 2005 ---- ---- ---- (IN MILLIONS) Net investment gains (losses), excluding embedded derivatives........................................... $112 $16 $(37)
F-46 METLIFE INSURANCE COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) EMBEDDED DERIVATIVES The Company has certain embedded derivatives that are required to be separated from their host contracts and accounted for as derivatives. These host contracts include guaranteed minimum withdrawal contracts, guaranteed minimum accumulation contracts and affiliated reinsurance contracts related to guaranteed minimum withdrawal contracts, guaranteed minimum accumulation contracts and certain guaranteed minimum income contracts. The following table presents the fair value of the Company's embedded derivatives at:
DECEMBER 31, ----------- 2007 2006 ---- ---- (IN MILLIONS) Embedded derivative assets................................... $125 $17 Embedded derivative liabilities.............................. $ -- $ 3
The following table presents changes in fair value related to embedded derivatives:
YEARS ENDED DECEMBER 31, ------------------ 2007 2006 2005 ---- ---- ---- (IN MILLIONS) Net investment gains (losses)................................. $116 $85 $41
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 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, 2007 and 2006, the Company was obligated to return cash collateral under its control of $370 million and $273 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 securities loaned and other transactions in the consolidated balance sheets. As of December 31, 2007 and 2006, the Company had also accepted collateral consisting of various securities with a fair market value of $526 million and $410 million, respectively, which are held in separate custodial accounts. The Company is permitted by contract to sell or repledge this collateral, but as of December 31, 2007 and 2006, none of the collateral had been sold or repledged. In addition, the Company has exchange traded futures, which require the pledging of collateral. As of both December 31, 2007 and 2006, the Company pledged collateral of $25 million, which is included in fixed maturity securities. The counterparties are permitted by contract to sell or repledge this collateral. F-47 METLIFE INSURANCE COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 6. 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, 2005.......................... $ 678 $ -- $ 678 Contribution of MetLife Insurance Company of Connecticut from MetLife (Note 2)................. -- 3,490 3,490 Capitalizations................................... 886 -- 886 ------ ------ ------ Subtotal..................................... 1,564 3,490 5,054 ------ ------ ------ Less: Amortization related to: Net investment gains (losses).................. -- (26) (26) Unrealized investment gains (losses)........... (41) (107) (148) Other expenses................................. 109 205 314 ------ ------ ------ Total amortization........................... 68 72 140 ------ ------ ------ Balance at December 31, 2005........................ 1,496 3,418 4,914 Capitalizations................................... 721 -- 721 ------ ------ ------ Subtotal..................................... 2,217 3,418 5,635 ------ ------ ------ Less: Amortization related to: Net investment gains (losses).................. (16) (68) (84) Unrealized investment gains (losses)........... (10) 46 36 Other expenses................................. 252 320 572 ------ ------ ------ Total amortization........................... 226 298 524 ------ ------ ------ Balance at December 31, 2006........................ 1,991 3,120 5,111 Effect of SOP 05-1 adoption....................... (7) (125) (132) Capitalizations................................... 682 -- 682 ------ ------ ------ Subtotal..................................... 2,666 2,995 5,661 ------ ------ ------ Less: Amortization related to: Net investment gains (losses).................. 44 (16) 28 Unrealized investment gains (losses)........... (18) (9) (27) Other expenses................................. 388 324 712 ------ ------ ------ Total amortization........................... 414 299 713 ------ ------ ------ Balance at December 31, 2007........................ $2,252 $2,696 $4,948 ====== ====== ======
The estimated future amortization expense allocated to other expenses for the next five years for VOBA is $342 million in 2008, $303 million in 2009, $269 million in 2010, $237 million in 2011, and $195 million in 2012. Amortization of VOBA and DAC is related to (i) investment gains and losses and the impact of such gains and losses on the amount of the amortization; (ii) unrealized investment gains and losses to provide information regarding the amount that would have been amortized if such gains and losses had been recognized; and (iii) other expenses to provide amounts related to the gross profits originating from transactions other than investment gains and losses. F-48 METLIFE INSURANCE COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 7. GOODWILL Goodwill is the excess of cost over the fair value of net assets acquired. Information regarding goodwill is as follows:
DECEMBER 31, ------------------ 2007 2006 2005 ---- ---- ---- (IN MILLIONS) Balance at January 1,.................................. $953 $924 $ 68 Contribution from MetLife (Note 2)..................... -- 29 856 ---- ---- ---- Balance at December 31,................................ $953 $953 $924 ==== ==== ====
8. INSURANCE INSURANCE LIABILITIES Insurance liabilities are as follows:
DECEMBER 31, ------------------------------------------------------- OTHER FUTURE POLICY POLICYHOLDER POLICYHOLDER BENEFITS ACCOUNT BALANCES FUNDS ----------------- ----------------- --------------- 2007 2006 2007 2006 2007 2006 ------- ------- ------- ------- ------ ------ (IN MILLIONS) Individual Traditional life.................. $ 921 $ 871 $ -- $ -- $ 50 $ 37 Universal variable life........... 575 527 4,995 4,522 1,496 1,314 Annuities......................... 944 1,015 15,058 16,106 36 5 Other............................. -- -- 47 32 -- -- Institutional Group life........................ 220 234 763 765 5 6 Retirement & savings.............. 12,040 12,325 12,836 13,731 -- -- Non-medical health & other........ 303 328 -- -- 2 2 Corporate & Other (1)............... 4,573 4,354 172 (57) 188 149 ------- ------- ------- ------- ------ ------ Total.......................... $19,576 $19,654 $33,871 $35,099 $1,777 $1,513 ======= ======= ======= ======= ====== ======
(1) Corporate & Other includes intersegment eliminations. Affiliated insurance liabilities included in the table above include reinsurance assumed and ceded. Affiliated future policy benefits, included in the table above, were $29 million and $25 million at December 31, 2007 and 2006, respectively. Affiliated policyholder account balances, included in the table above, were $97 million and $(57) million at December 31, 2007 and 2006, respectively. Affiliated other policyholder funds, included in the table above, were $1.3 billion and $1.2 billion at December 31, 2007 and 2006, respectively. F-49 METLIFE INSURANCE COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) VALUE OF DISTRIBUTION AGREEMENTS AND CUSTOMER RELATIONSHIPS ACQUIRED Information regarding the VODA and VOCRA, which are reported in other assets, is as follows:
YEARS ENDED DECEMBER 31, ---------------------- 2007 2006 2005 ---- ---- ---- (IN MILLIONS) Balance at January 1,................................. $237 $ 72 $-- Contribution from MetLife............................. -- -- 73 Contribution of VODA from MetLife..................... -- 167 -- Amortization.......................................... (5) (2) (1) ---- ---- --- Balance at December 31,............................... $232 $237 $72 ==== ==== ===
The estimated future amortization expense allocated to other expenses for the next five years for VODA and VOCRA is $7 million in 2008, $9 million in 2009, $11 million in 2010, $13 million in 2011 and $15 million in 2012. On September 30, 2006, MLI-USA received a capital contribution from MetLife of $162 million in the form of intangible assets related to VODA of $167 million, net of deferred income tax of $5 million, for which MLI-USA receives the benefit. The VODA originated through MetLife's acquisition of Travelers and is reported within other assets in the amount of $164 million and $166 million at December 31, 2007 and 2006, respectively. The value of the other identifiable intangibles as discussed above reflects the estimated fair value of the Citigroup/Travelers distribution agreements acquired at July 1, 2005 and will be amortized in relation to the expected economic benefits of the agreement. The weighted average amortization period of the other intangible assets is 16 years. 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 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. SALES INDUCEMENTS Information regarding deferred sales inducements, which are reported in other assets, is as follows:
YEARS ENDED DECEMBER 31, ------------------ 2007 2006 2005 ---- ---- ---- (IN MILLIONS) Balance at January 1,.................................. $330 $218 $143 Capitalization......................................... 124 129 83 Amortization........................................... (51) (17) (8) ---- ---- ---- Balance at December 31,................................ $403 $330 $218 ==== ==== ====
SEPARATE ACCOUNTS Separate account assets and liabilities consist of pass-through separate accounts totaling $53.9 billion and $50.1 billion at December 31, 2007 and 2006, respectively, 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 F-50 METLIFE INSURANCE COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) fees and totaled $947 million, $800 million and $467 million for the years ended December 31, 2007, 2006 and 2005, respectively. For the years ended December 31, 2007, 2006 and 2005, there were no investment gains (losses) on transfers of assets from the general account to the separate accounts. OBLIGATIONS UNDER GUARANTEED INTEREST CONTRACT PROGRAM The Company issues fixed and floating rate obligations under its guaranteed interest contract ("GIC") program which are denominated in either U.S. dollars or foreign currencies. During the year ended December 31, 2007, the Company issued $653 million in such obligations and repaid $616 million. During the year ended December 31, 2006, there were no new issuances of such obligations and there were repayments of $1.1 billion. There were no new issuances or repayments of such obligations for the year ended December 31, 2005. Accordingly, at December 31, 2007 and 2006, GICs outstanding, which are included in policyholder account balances, were $5.2 billion and $4.6 billion, respectively. During the years ended December 31, 2007, 2006 and 2005, interest credited on the contracts, which are included in interest credited to policyholder account balances, was $230 million, $163 million and $80 million, respectively. OBLIGATIONS UNDER FUNDING AGREEMENTS MICC is a member of the Federal Home Loan Bank of Boston (the "FHLB of Boston") and holds $70 million of common stock of the FHLB of Boston at both December 31, 2007 and 2006, which is included in equity securities. MICC has also entered into funding agreements with the FHLB of Boston whereby MICC has issued such funding agreements in exchange for cash and for which the FHLB of Boston has been granted a blanket lien on certain MICC assets, including residential mortgage-backed securities, to collateralize MICC's obligations under the funding agreements. MICC maintains control over these pledged assets, and may use, commingle, encumber or dispose of any portion of the collateral as long as there is no event of default and the remaining qualified collateral is sufficient to satisfy the collateral maintenance level. Upon any event of default by MICC, the FHLB of Boston's recovery on the collateral is limited to the amount of MICC's liability to the FHLB of Boston. The amount of MICC's liability for funding agreements with the FHLB of Boston was $726 million and $926 million at December 31, 2007 and 2006, respectively, which is included in policyholder account balances. The advances on these funding agreements are collateralized by residential mortgage-backed securities with fair values of $901 million and $1.1 billion at December 31, 2007 and 2006, respectively. F-51 METLIFE INSURANCE COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) LIABILITIES FOR UNPAID CLAIMS AND CLAIM EXPENSES Information regarding the liabilities for unpaid claims and claim expenses relating to group accident and non-medical health policies and contracts, which are reported in future policy benefits, is as follows:
YEARS ENDED DECEMBER 31, -------------------- 2007 2006 2005 ----- ----- ---- (IN MILLIONS) Balance at January 1,................................. $ 551 $ 512 $ -- Less: Reinsurance recoverables...................... (403) (373) -- ----- ----- ---- Net balance at January 1,............................. 148 139 -- ----- ----- ---- Contribution of MetLife Insurance Company of Connecticut by MetLife (Note 3)..................... -- -- 137 Incurred related to: Current year........................................ 32 29 19 Prior years......................................... (5) 4 (3) ----- ----- ---- 27 33 16 ----- ----- ---- Paid related to: Current year........................................ (2) (2) (1) Prior years......................................... (24) (22) (13) ----- ----- ---- (26) (24) (14) ----- ----- ---- Net balance at December 31,........................... 149 148 139 Add: Reinsurance recoverables....................... 463 403 373 ----- ----- ---- Balance at December 31,............................... $ 612 $ 551 $512 ===== ===== ====
Claims and claim adjustment expenses associated with prior periods decreased by $5 million for the year ended December 31, 2007, increased by $4 million for the year ended December 31, 2006, and decreased by $3 million for the year ended December 31, 2005. In all periods presented, the change was due to differences between actual benefit periods and expected benefit periods for LTC and disability contracts. GUARANTEES The Company issues annuity contracts which may include contractual guarantees to the contractholder for: (i) return of no less than total deposits made to the contract less any partial withdrawals ("return of net deposits"); and (ii) 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. F-52 METLIFE INSURANCE COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Information regarding the types of guarantees relating to annuity contracts and universal and variable life contracts is as follows:
DECEMBER 31, --------------------------------------------------------------- 2007 2006 ------------------------------ ------------------------------ IN THE AT IN THE AT EVENT OF DEATH ANNUITIZATION EVENT OF DEATH ANNUITIZATION -------------- ------------- -------------- ------------- (IN MILLIONS) ANNUITY CONTRACTS(1) RETURN OF NET DEPOSITS Separate account value.......... $ 11,337 N/A $ 8,213 N/A Net amount at risk(2)........... $ 33(3) N/A $ --(3) N/A Average attained age of contractholders............... 62 years N/A 61 years N/A ANNIVERSARY CONTRACT VALUE OR MINIMUM RETURN Separate account value.......... $ 41,515 $ 16,143 $ 44,036 $ 13,179 Net amount at risk(2)........... $ 1,692(3) $ 245(4) $ 1,422(3) $ 30(4) Average attained age of contractholders............... 56 years 61 years 58 years 60 years
DECEMBER 31, ----------------------- 2007 2006 ---------- ---------- SECONDARY SECONDARY GUARANTEES GUARANTEES ---------- ---------- (IN MILLIONS) UNIVERSAL AND VARIABLE LIFE CONTRACTS(1) Account value (general and separate account).......... $ 2,797 $ 3,262 Net amount at risk(2)................................. $ 38,621(3) $ 48,630(3) Average attained age of policyholders................. 57 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). (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. (4) The net amount at risk for guarantees of amounts at annuitization is defined as the present value of the minimum guaranteed annuity payments available to the contractholder determined in accordance with the terms of the contract in excess of the current account balance. F-53 METLIFE INSURANCE COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Information regarding the liabilities for guarantees (excluding base policy liabilities) relating to annuity and universal and variable life contracts is as follows:
UNIVERSAL AND VARIABLE LIFE ANNUITY CONTRACTS CONTRACTS -------------------------- ------------- GUARANTEED GUARANTEED DEATH ANNUITIZATION SECONDARY BENEFITS BENEFITS GUARANTEES TOTAL ---------- ------------- ------------- ----- (IN MILLIONS) Balance at January 1, 2005............. $-- $-- $-- $-- Incurred guaranteed benefits........... 3 -- 9 12 Paid guaranteed benefits............... -- -- -- -- --- --- --- --- Balance at December 31, 2005........... 3 -- 9 12 Incurred guaranteed benefits........... -- -- 22 22 Paid guaranteed benefits............... (3) -- -- (3) --- --- --- --- Balance at December 31, 2006........... -- -- 31 31 Incurred guaranteed benefits........... 6 28 34 68 Paid guaranteed benefits............... (4) -- -- (4) --- --- --- --- Balance at December 31, 2007........... $ 2 $28 $65 $95 === === === ===
Excluded from the table above are guaranteed death and annuitization benefit liabilities on the Company's annuity contracts of $45 million, $38 million and $28 million at December 31, 2007, 2006 and 2005, respectively, which were reinsured 100% to an affiliate and had corresponding recoverables from affiliated reinsurers related to such guarantee liabilities. Account balances of contracts with insurance guarantees are invested in separate account asset classes as follows:
DECEMBER 31, ----------------- 2007 2006 ------- ------- (IN MILLIONS) Mutual Fund Groupings Equity................................................ $40,608 $37,992 Bond.................................................. 2,307 2,831 Balanced.............................................. 4,422 2,790 Money Market.......................................... 1,265 949 Specialty............................................. 395 460 ------- ------- Total.............................................. $48,997 $45,022 ======= =======
9. 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 2004. 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 F-54 METLIFE INSURANCE COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 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 previously, the Company reinsures other risks, as well as 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. MICC's workers' compensation business is reinsured through a 100% quota- share agreement with The Travelers Indemnity Company, an insurance subsidiary of The Travelers Companies, Inc. Effective July 1, 2000, MetLife Insurance Company of Connecticut reinsured 90% of its individual LTC insurance business with Genworth Life Insurance Company and its subsidiary ("GLIC"), in the form of indemnity reinsurance agreements. In accordance with the terms of the reinsurance agreements, GLIC will effect assumption and novation of the reinsured contracts, to the extent permitted by law, by July 31, 2008. The Company reinsures the new production of fixed annuities and the riders containing benefit guarantees related to variable annuities to affiliated and non-affiliated reinsurers. 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. The amounts in the consolidated statements of income are presented net of reinsurance ceded. Information regarding the effect of reinsurance is as follows:
YEARS ENDED DECEMBER 31, --------------------- 2007 2006 2005 ----- ----- ----- (IN MILLIONS) Direct premiums...................................... $ 654 $ 599 $ 413 Reinsurance assumed.................................. 17 21 38 Reinsurance ceded.................................... (318) (312) (170) ----- ----- ----- Net premiums......................................... $ 353 $ 308 $ 281 ===== ===== ===== Reinsurance recoverables netted against policyholder benefits and claims................................ $ 671 $ 635 $ 560 ===== ===== =====
Reinsurance recoverables, included in premiums and other receivables, were $4.9 billion and $4.6 billion at December 31, 2007 and 2006, respectively, including $3.4 billion and $3.0 billion at December 31, 2007 and 2006, respectively, relating to reinsurance on the run-off LTC business and $1.2 billion and $1.3 billion at December 31, 2007 and 2006, respectively, relating to reinsurance on the run-off of workers' compensation business. Reinsurance and ceded commissions payables, included in other liabilities, were $128 million and $99 million at December 31, 2007 and 2006, respectively. The Company has reinsurance agreements with MetLife and certain of its subsidiaries, including MLIC, Reinsurance Group of America, Incorporated, MetLife Reinsurance Company of South Carolina ("MRSC"), Exeter Reassurance Company, Ltd. ("Exeter"), General American Life Insurance Company ("GALIC"), Mitsui Sumitomo MetLife Insurance Co., Ltd. and MetLife Reinsurance Company of Vermont ("MRV"). At December 31, 2007, the Company had reinsurance-related assets and liabilities from these agreements totaling $3.4 billion and $1.7 billion, F-55 METLIFE INSURANCE COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) respectively. At December 31, 2006, comparable assets and liabilities were $2.8 billion and $1.2 billion, respectively. The following table reflects related party reinsurance information:
YEARS ENDED DECEMBER 31, ---------------------- 2007 2006 2005 ---- ---- ---- (IN MILLIONS) Assumed premiums..................................... $ 17 $ 21 $ 38 Assumed fees, included in universal life and investment-type product policy fees................ $119 $ 65 $194 Assumed fees, included in net investment gains (losses)........................................... $ -- $ -- $ 6 Assumed benefits, included in policyholder benefits and claims......................................... $ 18 $ 11 $ 32 Assumed benefits, included in interest credited to policyholder account balances...................... $ 53 $ 49 $ 42 Assumed acquisition costs, included in other expenses........................................... $ 39 $ 58 $111 Ceded premiums....................................... $ 32 $ 21 $ 12 Ceded fees, included in universal life and investment-type product policy fees................ $216 $130 $ 93 Interest earned on ceded reinsurance, included in other revenues..................................... $ 85 $ 68 $ 55 Ceded benefits, included in policyholder benefits and claims............................................. $ 95 $ 86 $ 92 Interest costs on ceded reinsurance, included in other expenses..................................... $ 33 $ 77 $182
The Company has assumed risks related to guaranteed minimum benefit riders from an affiliated joint venture under a reinsurance contract. Such guaranteed minimum benefit riders are embedded derivatives and are included within net investment gains (losses). The assumed amounts were $(113) million, $57 million and $28 million for the years ended December 31, 2007, 2006 and 2005, respectively. These risks have been retroceded in full to another affiliate under a retrocessional agreement resulting in no net impact on net investment gains (losses). The Company has also ceded risks related to guaranteed minimum benefit riders written by the Company to another affiliate. The guaranteed minimum benefit riders directly written by the Company are embedded derivatives and changes in their fair value are included within net investment gains (losses). The ceded reinsurance also contain embedded derivatives and changes in their fair value are also included within net investment gains (losses). The ceded amounts were $276 million, $(31) million and $5 million for the years ended December 31, 2007, 2006 and 2005, respectively. Effective December 20, 2007, MLI-USA recaptured two ceded blocks of business (the "Recaptured Business") from Exeter. The Recaptured Business consisted of two blocks of universal life secondary guarantee risk, one assumed from GALIC, and the other written by MLI-USA. As a result of the recapture, MLI- USA received $258 million of assets from Exeter, reduced receivables from affiliates, included in premiums and other receivables, by $112 million and reduced other assets by $124 million. The recapture resulted in a pre-tax gain of $22 million. Concurrent with the recapture, the same business was ceded to MRV. The cession does not transfer risk to MRV and is therefore accounted for under the deposit method. MLI-USA transferred $258 million of assets to MRV as a result of this cession, and recorded a receivable from affiliates, included in premiums and other receivables, of $258 million. Effective December 31, 2007, MLI-USA entered into a reinsurance agreement to cede two blocks of business to MRV, on a 90% coinsurance funds withheld basis. This agreement covered certain term and certain universal life policies issued in 2007 and to be issued during 2008 by MLI-USA. This agreement transfers risk to MRV and, therefore, is accounted for as reinsurance. As a result of the agreement, DAC decreased $136 million, affiliated F-56 METLIFE INSURANCE COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) reinsurance recoverables, included in premiums and other receivables, increased $326 million, MLI-USA recorded a funds withheld liability for $223 million, included in other liabilities, and unearned revenue, included in other policyholder funds, was reduced by $33 million. On December 1, 2006, the Company acquired a block of structured settlement business from Texas Life Insurance Company ("Texas Life"), a wholly-owned subsidiary of MetLife, through an assumptive reinsurance agreement. This transaction increased future policy benefits of the Company by $1.3 billion and decreased deferred income tax liabilities by $142 million at December 31, 2006. During the year ended December 31, 2007, the receivable from Texas Life related to premiums and other considerations of $1.2 billion held at December 31, 2006 was settled with $901 million of cash and $304 million of fixed maturity securities. Effective January 1, 2005, MLI-USA entered into a reinsurance agreement to assume an in-force block of business from GALIC. This agreement covered certain term and universal life policies issued by GALIC on and after January 1, 2000 through December 31, 2004. This agreement also covered certain term and universal life policies issued on or after January 1, 2005. MLI-USA paid and deferred 100% of a ceding commission to GALIC of $386 million resulting in no gain or loss on the transfer of the in-force business as of January 1, 2005. 10. LONG-TERM DEBT -- AFFILIATED Long-term debt outstanding is as follows:
DECEMBER 31, ----------- 2007 2006 ---- ---- (IN MILLIONS) Surplus notes, interest rate 7.349%, due 2035..................... $400 $400 Surplus notes, interest rate LIBOR plus 1.15%, maturity date 2009............................................................ 200 -- Surplus notes, interest rate 5%, due upon request................. 25 25 Surplus notes, interest rate LIBOR plus 0.75%, due upon request... 10 10 ---- ---- Total long-term debt -- affiliated................................ $635 $435 ==== ====
MetLife Credit Corp., an affiliate, is the holder of a surplus note issued by the Company during the fourth quarter of 2007 in the amount of $200 million at December 31, 2007. MetLife is the holder of a surplus note issued by MLI-USA in the amount of $400 million at December 31, 2007 and 2006. MLIG is the holder of two surplus notes issued by MLI-USA in the amounts of $25 million and $10 million at both December 31, 2007 and 2006. These surplus notes may be redeemed, in whole or in part, at the election of the Company at any time, subject to the prior approval of the insurance department of the state of domicile. Payments of interest and principal on these surplus notes may be made only with the prior approval of the insurance department of the state of domicile. The aggregate maturities of long-term debt as of December 31, 2007 are $200 million in 2009, $400 million in 2035, and $35 million payable upon request and regulatory approval. Interest expense related to the Company's indebtedness, included in other expenses, was $33 million, $31 million and $25 million for the years ended December 31, 2007, 2006 and 2005, respectively. F-57 METLIFE INSURANCE COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 11. INCOME TAXES The provision for income tax from continuing operations is as follows:
YEARS ENDED DECEMBER 31, ------------------ 2007 2006 2005 ---- ---- ---- (IN MILLIONS) Current: Federal.............................................. $(10) $ 18 $ (3) State and local...................................... 4 -- (2) Foreign.............................................. 1 -- -- ---- ---- ---- Subtotal............................................. (5) 18 (5) ---- ---- ---- Deferred: Federal.............................................. $306 $212 $162 State and local...................................... -- (2) (1) Foreign.............................................. (19) -- -- ---- ---- ---- Subtotal............................................. 287 210 161 ---- ---- ---- Provision for income tax............................... $282 $228 $156 ==== ==== ====
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:
YEARS ENDED DECEMBER 31, ------------------ 2007 2006 2005 ---- ---- ---- (IN MILLIONS) Tax provision at U.S. statutory rate................... $342 $288 $191 Tax effect of: Tax-exempt investment income......................... (65) (62) (27) Prior year tax....................................... 9 (9) (9) Foreign tax rate differential and change in valuation allowance......................................... (5) 12 -- State tax, net of federal benefit.................... 3 -- 2 Other, net........................................... (2) (1) (1) ---- ---- ---- Provision for income tax............................... $282 $228 $156 ==== ==== ====
F-58 METLIFE INSURANCE COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 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:
DECEMBER 31, ----------------- 2007 2006 ------- ------- (IN MILLIONS) Deferred income tax assets: Benefit, reinsurance and other reserves................ $ 1,929 $ 2,238 Net unrealized investment losses....................... 195 171 Capital loss carryforwards............................. 150 155 Investments............................................ 54 63 Net operating loss carryforwards....................... 42 10 Tax credits............................................ 20 -- Operating lease reserves............................... 13 13 Employee benefits...................................... -- 3 Litigation-related..................................... -- 1 Other.................................................. 15 20 ------- ------- 2,418 2,674 Less: Valuation allowance.............................. -- 4 ------- ------- 2,418 2,670 ------- ------- Deferred income tax liabilities: DAC and VOBA........................................... (1,570) (1,663) ------- ------- (1,570) (1,663) ------- ------- Net deferred income tax asset............................ $ 848 $ 1,007 ======= =======
Domestic net operating loss carryforwards amount to $29 million at December 31, 2007 and will expire beginning in 2025. Foreign net operating loss carryforwards amount to $113 million at December 31, 2007 with indefinite expiration. Capital loss carryforwards amount to $430 million at December 31, 2007 and will expire beginning in 2010. Tax credit carryforwards amount to $20 million at December 31, 2007. The Company has recorded a valuation allowance related to tax benefits of certain foreign net operating loss carryforwards. The valuation allowance reflects management's assessment, based on available information, that it is more likely than not that the deferred income tax asset for certain foreign net operating loss carryforwards will not be realized. The tax benefit will be recognized when management believes that it is more likely than not that these deferred income tax assets are realizable. In 2007, the Company recorded a reduction of $4 million to the deferred income tax valuation allowance related to certain foreign net operating loss carryforwards. The Company files income tax returns with the U.S. federal government and various state and local jurisdictions, as well as foreign jurisdictions. With a few exceptions, the Company is no longer subject to U.S. federal, state and local income tax examinations by tax authorities for years prior to 2003 and is no longer subject to foreign income tax examinations for the years prior to 2006. The adoption of FIN 48 did not have a material impact on the Company's consolidated financial statements. The Company reclassified, at adoption, $64 million of deferred income tax liabilities, for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility, to the liability for unrecognized tax benefits. Because of the impact of deferred tax accounting, other than interest and penalties, the disallowance of the shorter deductibility period would not affect the annual effective tax rate but would F-59 METLIFE INSURANCE COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) accelerate the payment of cash to the taxing authority to an earlier period. The total amount of unrecognized tax benefits as of January 1, 2007 that would affect the effective tax rate, if recognized, was $5 million. The Company also had less than $1 million of accrued interest, included within other liabilities, as of January 1, 2007. The Company classifies interest accrued related to unrecognized tax benefits in interest expense, while penalties are included within income tax expense. As of December 31, 2007, the Company's total amount of unrecognized tax benefits is $53 million and there are no amounts of unrecognized tax benefits that would affect the effective tax rate, if recognized. The total amount of unrecognized tax benefit decreased by $11 million from the date of adoption primarily due to a settlement reached with the Internal Revenue Service ("IRS") with respect to a post-sale purchase price adjustment. As a result of the settlement, an item within the liability for unrecognized tax benefits, in the amount of $6 million, was reclassified to deferred income taxes. The Company does not anticipate any material change in the total amount of unrecognized tax benefits over the ensuing 12 month period. A reconciliation of the beginning and ending amount of unrecognized tax benefits for the year ended December 31, 2007, is as follows:
TOTAL UNRECOGNIZED TAX BENEFITS ------------------ (IN MILLIONS) Balance at January 1, 2007 (date of adoption)............. $64 Reductions for tax positions of prior years............... (2) Additions for tax positions of current year............... 5 Reductions for tax positions of current year.............. (8) Settlements with tax authorities.......................... (6) --- Balance at December 31, 2007.............................. $53 ===
During the year ended December 31, 2007, the Company recognized $2 million in interest expense associated with the liability for unrecognized tax benefits. As of December 31, 2007, the Company had $3 million of accrued interest associated with the liability for unrecognized tax benefits, an increase of $2 million from the date of adoption. On September 25, 2007, the IRS issued Revenue Ruling 2007-61, which announced its intention to issue regulations with respect to certain computational aspects of the Dividends Received Deduction ("DRD") on separate account assets held in connection with variable annuity contracts. Revenue Ruling 2007-61 suspended a revenue ruling issued in August 2007 that would have changed accepted industry and IRS interpretations of the statutes governing these computational questions. Any regulations that the IRS ultimately proposes for issuance in this area will be subject to public notice and comment, at which time insurance companies and other interested parties will have the opportunity to raise legal and practical questions about the content, scope and application of such regulations. As a result, the ultimate timing and substance of any such regulations are unknown at this time. For the year ended December 31, 2007, the Company recognized an income tax benefit of $64 million related to the separate account DRD. The Company will file a consolidated tax return with its includable subsidiaries. Non-includable subsidiaries file either separate individual corporate tax returns or separate consolidated tax returns. 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 such tax allocation agreement. F-60 METLIFE INSURANCE COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 12. 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. On a quarterly and annual basis, the Company reviews relevant information with respect to litigation and contingencies to be reflected in the Company's consolidated financial statements. The review includes senior legal and financial personnel. Estimates of possible losses or ranges of loss for particular matters cannot in the ordinary course be made with a reasonable degree of certainty. 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, 2007. The Company has faced numerous claims, including class action lawsuits, alleging improper marketing or sales of individual life insurance policies, annuities, mutual funds or other products. The Company continues to vigorously defend against the claims in all pending matters. Some sales practices claims have been resolved through settlement. Other sales practices claims have been won by dispositive motions or have gone to trial. Most of the current cases seek substantial damages, including in some cases punitive and treble damages and attorneys' fees. Additional litigation relating to the Company's marketing and sales of individual life insurance, annuities, mutual funds or other products may be commenced in the future. Various litigation, claims and assessments against the Company, in addition to those discussed previously and those otherwise provided for in the Company's financial statements, have arisen in the course of the Company's business, including, but not limited to, in connection with its activities as an insurer, employer, investor, investment advisor or taxpayer. Further, federal, state or industry regulatory or governmental authorities may conduct investigations, serve subpoenas or make other inquiries concerning a wide variety of issues, including the Company's compliance with applicable insurance and other laws and regulations. It is not possible to predict the ultimate outcome of all pending investigations and legal proceedings or provide reasonable ranges of potential losses. In some of the matters referred to previously, large and/or indeterminate amounts, including punitive and treble damages, are sought. Although in light of these considerations it is possible that an adverse outcome in certain cases could have a material adverse effect upon the Company's financial F-61 METLIFE INSURANCE COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) position, based on information currently known by the Company's management, in its opinion, the outcomes of such pending investigations and legal proceedings are not likely to have such an effect. However, given the large and/or indeterminate amounts sought in certain of these matters and the inherent unpredictability of litigation, it is possible that an adverse outcome in certain matters could, from time to time, have a material adverse effect on the Company's net income or cash flows in particular quarterly or annual periods. INSOLVENCY ASSESSMENTS Most of the jurisdictions in which the Company is admitted to transact business require 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 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:
DECEMBER 31, ----------- 2007 2006 ---- ---- (IN MILLIONS) Other Assets: Premium tax offset for future undiscounted assessments.. $ 8 $ 9 Premium tax offsets currently available for paid assessments........................................... 1 1 --- --- $ 9 $10 === === Liability: Insolvency assessments..................................... $17 $19 === ===
Assessments levied against the Company were less than $1 million for each of the years ended December 31, 2007, 2006 and 2005. COMMITMENTS LEASES The Company, as lessee, has entered into lease agreements for office space. Future sublease income is projected to be insignificant. Future minimum rental income and minimum gross rental payments relating to these lease agreements are as follows:
GROSS RENTAL RENTAL INCOME PAYMENTS ------ -------- (IN MILLIONS) 2008..................................................... $ 3 $15 2009..................................................... $ 3 $ 8 2010..................................................... $ 3 $ 6 2011..................................................... $ 3 $ 6 2012..................................................... $ 3 $-- Thereafter............................................... $80 $--
F-62 METLIFE INSURANCE COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 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 $1.4 billion and $616 million at December 31, 2007 and 2006, 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 $626 million and $665 million at December 31, 2007 and 2006, respectively. COMMITMENTS TO FUND BANK CREDIT FACILITIES AND PRIVATE CORPORATE BOND INVESTMENTS The Company commits to lend funds under bank credit facilities and private corporate bond investments. The amounts of these unfunded commitments were $488 million and $173 million at December 31, 2007 and 2006, respectively. OTHER COMMITMENTS The Company has entered into collateral arrangements with affiliates, which require the transfer of collateral in connection with secured demand notes. At December 31, 2007, the Company had agreed to fund up to $60 million of cash upon the request of an affiliate and had transferred collateral consisting of various securities with a fair market value of $73 million to custody accounts to secure the notes. The counterparties are permitted by contract to sell or repledge this collateral. 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, such as in the case of MetLife International Insurance Company, Ltd. ("MLII"), a former affiliate, discussed below, 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. The Company has provided a guarantee on behalf of MLII that is triggered if MLII cannot pay claims because of insolvency, liquidation or rehabilitation. During the second quarter of 2007, MLII was sold to a third party. Life insurance coverage in-force, representing the maximum potential obligation under this guarantee, was $434 million and $444 million at December 31, 2007 and 2006, respectively. The Company does not have any collateral related to this guarantee, but has recorded a liability of $1 million that was based on the total account value of the guaranteed policies plus the amounts retained per policy at December 31, 2007. The remainder of the risk was ceded to external reinsurers. The Company did not have a recorded liability related to this guarantee at December 31, 2006. 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 F-63 METLIFE INSURANCE COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 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. In connection with synthetically created investment transactions, the Company writes credit default swap obligations that generally require payment of principal outstanding due in exchange for the referenced credit obligation. If a credit event, as defined by the contract, occurs the Company's maximum amount at risk, assuming the value of the referenced credits becomes worthless, was $324 million at December 31, 2007. The credit default swaps expire at various times during the next ten years. 13. EMPLOYEE BENEFIT PLANS Subsequent to the Acquisition, the Company became a participating affiliate in qualified and non-qualified, noncontributory defined benefit pension and other postretirement plans sponsored by MLIC. Employees were credited with prior service recognized by Citigroup, solely (with regard to pension purposes) for the purpose of determining eligibility and vesting under the Metropolitan Life Retirement Plan for United States Employees (the "Plan"), a noncontributory qualified defined benefit pension plan, with respect to benefits earned under the Plan subsequent to the Acquisition Date. Net periodic expense related to these plans was based on the employee population at the beginning of the year. During 2006, the employees of the Company were transferred to MetLife Group, Inc., a wholly-owned subsidiary of MetLife ("MetLife Group"), therefore no pension expense was allocated to the Company for the year ended December 31, 2007. Pension expense of $8 million related to the MLIC plans was allocated to the Company for the year ended December 31, 2006. There were no expenses allocated to the Company for the six months ended December 31, 2005. 14. EQUITY COMMON STOCK The Company has 40,000,000 authorized shares of common stock, 34,595,317 shares of which are outstanding as of December 31, 2007. Of such outstanding shares, 30,000,000 shares are owned directly by MetLife, Inc. and the remaining shares are owned by MLIG. CAPITAL CONTRIBUTIONS On September 30, 2006, MLI-USA received a capital contribution from MetLife of $162 million in the form of intangible assets related to VODA, and the associated deferred income tax liability, which is more fully described in Note 8. See also Note 3 for information related to the change in the reporting entity. STATUTORY EQUITY AND INCOME Each insurance company's state of domicile 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 Insurance Company of Connecticut and MLI-USA each exceeded the minimum RBC requirements for all periods presented herein. F-64 METLIFE INSURANCE COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 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 Connecticut Insurance Department and the Delaware Department of Insurance have adopted Codification with certain modifications for the preparation of statutory financial statements of insurance companies domiciled in Connecticut and Delaware, respectively. Modifications by the various state insurance departments may impact the effect of Codification on the statutory capital and surplus of MetLife Insurance Company of Connecticut and MLI-USA. 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, reporting surplus notes as surplus instead of debt 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 assets not admitted by the Company are net deferred income 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 purchase accounting adjustments made as a result of the Acquisition. Statutory net income of MetLife Insurance Company of Connecticut, a Connecticut domiciled insurer, was $1.1 billion, $856 million and $1.0 billion for the years ended December 31, 2007, 2006 and 2005, respectively. Statutory capital and surplus, as filed with the Connecticut Insurance Department, was $4.2 billion and $4.1 billion at December 31, 2007 and 2006, respectively. Due to the merger of MLAC with and into MetLife Insurance Company of Connecticut, the 2006 statutory net income balance was adjusted. Statutory net loss of MLI-USA, a Delaware domiciled insurer, was $1.1 billion, $116 million and $227 million for the years ended December 31, 2007, 2006 and 2005, respectively. Statutory capital and surplus, as filed with the Delaware Insurance Department, was $584 million and $575 million at December 31, 2007 and 2006, respectively. DIVIDEND RESTRICTIONS Under Connecticut State Insurance Law, MetLife Insurance Company of Connecticut is permitted, without prior insurance regulatory clearance, to pay shareholder 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 immediately preceding calendar year. MetLife Insurance Company of Connecticut 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 ("Connecticut Commissioner") and the Connecticut 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 Connecticut 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 shareholders. 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 MetLife Insurance Company of Connecticut through June 30, 2007 required prior approval of the Connecticut Commissioner. In the third quarter of 2006, after receiving regulatory approval from the Connecticut Commissioner, MetLife Insurance Company of Connecticut paid a $917 million dividend. Of that amount, F-65 METLIFE INSURANCE COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) $259 million was a return of capital. In the fourth quarter of 2007, MetLife Insurance Company of Connecticut paid a dividend of $690 million. Of that amount, $404 million was a return of capital as approved by the insurance regulator. During 2008, MetLife Insurance Company of Connecticut is permitted to pay, without regulatory approval, a dividend of $1,026 million. Under Delaware State Insurance Law, MLI-USA is permitted, without prior insurance regulatory clearance, to pay a stockholder dividend to its parent as long as the amount of the dividend 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 immediately preceding calendar year (excluding realized capital gains). MLI-USA will be permitted to pay a cash dividend to MetLife Insurance Company of Connecticut in excess of the greater of such two amounts only if it files notice of the declaration of such a dividend and the amount thereof with the Delaware Commissioner of Insurance ("Delaware Commissioner") and the Delaware Commissioner does not disapprove the distribution within 30 days of its filing. In addition, any dividend that exceeds earned surplus (defined as unassigned funds) as of the last filed annual statutory statement requires insurance regulatory approval. Under Delaware State Insurance Law, the Delaware 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. MLI-USA did not pay dividends for the years ended December 31, 2007 and 2006. Because MLI-USA's statutory unassigned funds surplus is negative, MLI-USA cannot pay any dividends without prior approval of the Delaware Commissioner in 2008. OTHER COMPREHENSIVE INCOME (LOSS) The following table sets forth the reclassification adjustments required for the years ended December 31, 2007, 2006 and 2005 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 year:
YEARS ENDED DECEMBER 31, ----------------------- 2007 2006 2005 ----- ----- ------- (IN MILLIONS) Holding gains (losses) on investments arising during the year.......................................... $(358) $(434) $(1,148) Income tax effect of holding gains (losses)......... 122 147 402 Reclassification adjustments: Recognized holding (gains) losses included in current year income............................ 260 487 295 Amortization of premiums and accretion of discounts associated with investments.......... -- 60 96 Income tax effect................................. (88) (186) (137) Allocation of holding gains on investments relating to other policyholder amounts..................... 27 42 71 Income tax effect of allocation of holding gains to other policyholder amounts........................ (10) (14) (25) ----- ----- ------- Net unrealized investment gains (losses)............ (47) 102 (446) ----- ----- ------- Foreign currency translation adjustment............. 26 (2) 2 ----- ----- ------- Other comprehensive income (loss)................... $ (21) $ 100 $ (444) ===== ===== =======
F-66 METLIFE INSURANCE COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 15. OTHER EXPENSES Information on other expenses is as follows:
YEARS ENDED DECEMBER 31, -------------------------- 2007 2006 2005 ------- ------- ------ (IN MILLIONS) Compensation........................................ $ 125 $ 134 $ 106 Commissions......................................... 633 712 931 Interest and debt issue costs....................... 35 31 25 Amortization of DAC and VOBA........................ 740 488 288 Capitalization of DAC............................... (682) (721) (886) Rent, net of sublease income........................ 5 11 7 Minority interest................................... -- 26 1 Insurance tax....................................... 44 42 10 Other............................................... 555 450 196 ------- ------- ------ Total other expenses.............................. $1,455 $1,173 $ 678 ======= ======= ======
See Notes 9, 10 and 19 for discussion of affiliated expenses included in the table above. 16. BUSINESS SEGMENT INFORMATION The Company has two operating segments, Individual and Institutional, as well as Corporate & Other. These segments are managed separately because they either provide different products and services, require different strategies or have different technology requirements. Individual offers a wide variety of protection and asset accumulation products, including life insurance, annuities and mutual funds. Institutional offers a broad range of group insurance and retirement & savings products and services, including group life insurance and other insurance products and services. Corporate & Other contains the excess capital not allocated to the business segments, various start-up entities and run-off business, the Company's ancillary international operations, interest expense related to the majority of the Company's outstanding debt, expenses associated with certain legal proceedings and the elimination of intersegment transactions. Economic capital is an internally developed risk capital model, the purpose of which is to measure the risk in the business and to provide a basis upon which capital is deployed. The economic capital model accounts for the unique and specific nature of the risks inherent in MetLife's businesses. As a part of the economic capital process, a portion of net investment income is credited to the segments based on the level of allocated equity. Set forth in the tables below is certain financial information with respect to the Company's segments, as well as Corporate & Other, for the years ended December 31, 2007, 2006 and 2005. The accounting policies of the segments are the same as those of the Company, except for the method of capital allocation and the accounting for gains (losses) from intercompany sales, which are eliminated in consolidation. Subsequent to the Acquisition Date, the Company allocates equity to each segment based upon the economic capital model used by MetLife that allows MetLife and the Company to effectively manage their capital. The Company evaluates the performance of each segment based upon net income excluding net investment gains (losses), net of income tax, and adjustments related to net investment gains (losses), net of income tax. F-67 METLIFE INSURANCE COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEAR ENDED CORPORATE & DECEMBER 31, 2007 INDIVIDUAL INSTITUTIONAL OTHER TOTAL - ------------------ ---------- ------------- ----------- -------- (IN MILLIONS) STATEMENT OF INCOME: Premiums.................................... $ 295 $ 34 $ 24 $ 353 Universal life and investment-type product policy fees............................... 1,370 39 2 1,411 Net investment income....................... 1,090 1,510 293 2,893 Other revenues.............................. 237 14 -- 251 Net investment gains (losses)............... 116 (314) -- (198) Policyholder benefits and claims............ 479 466 33 978 Interest credited to policyholder account balances.................................. 661 643 -- 1,304 Other expenses.............................. 1,329 50 76 1,455 ------- ------- ------- -------- Income from continuing operations before provision for income tax.................. 639 124 210 973 Provision for income tax.................... 227 41 14 282 ------- ------- ------- -------- Income from continuing operations........... 412 83 196 691 Income from discontinued operations, net of income tax................................ -- 4 -- 4 ------- ------- ------- -------- Net income.................................. $ 412 $ 87 $ 196 $ 695 ======= ======= ======= ======== BALANCE SHEET: Total assets................................ $82,214 $35,173 $11,195 $128,582 DAC and VOBA................................ $ 4,930 $ 16 $ 2 $ 4,948 Goodwill.................................... $ 234 $ 312 $ 407 $ 953 Separate account assets..................... $51,398 $ 2,469 $ -- $ 53,867 Policyholder liabilities.................... $24,122 $26,169 $ 4,933 $ 55,224 Separate account liabilities................ $51,398 $ 2,469 $ -- $ 53,867
F-68 METLIFE INSURANCE COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEAR ENDED CORPORATE & DECEMBER 31, 2006 INDIVIDUAL INSTITUTIONAL OTHER TOTAL - ------------------ ---------- ------------- ----------- -------- (IN MILLIONS) STATEMENT OF INCOME: Premiums.................................... $ 218 $ 65 $ 25 $ 308 Universal life and investment- type product policy fees............................... 1,244 24 -- 1,268 Net investment income....................... 985 1,449 405 2,839 Other revenues.............................. 195 15 2 212 Net investment gains (losses)............... (194) (282) (45) (521) Policyholder benefits and claims............ 315 450 27 792 Interest credited to policyholder account balances.................................. 669 647 -- 1,316 Other expenses.............................. 1,045 16 112 1,173 ------- ------- ------- -------- Income from continuing operations before provision for income tax.................. 419 158 248 825 Provision for income tax.................... 145 55 28 228 ------- ------- ------- -------- Net income.................................. $ 274 $ 103 $ 220 $ 597 ======= ======= ======= ======== BALANCE SHEET: Total assets................................ $76,897 $35,982 $11,208 $124,087 DAC and VOBA................................ $ 4,946 $ 165 $ -- $ 5,111 Goodwill.................................... $ 234 $ 312 $ 407 $ 953 Separate account assets..................... $47,566 $ 2,501 $ -- $ 50,067 Policyholder liabilities.................... $24,429 $27,391 $ 4,446 $ 56,266 Separate account liabilities................ $47,566 $ 2,501 $ -- $ 50,067
FOR THE YEAR ENDED CORPORATE & DECEMBER 31, 2005(1) INDIVIDUAL INSTITUTIONAL OTHER TOTAL - -------------------- ---------- ------------- ----------- ------ (IN MILLIONS) STATEMENT OF INCOME: Premiums................................... $ 152 $116 $ 13 $ 281 Universal life and investment-type product policy fees.............................. 845 17 -- 862 Net investment income...................... 530 712 196 1,438 Other revenues............................. 121 10 1 132 Net investment gains (losses).............. (113) (87) 2 (198) Policyholder benefits and claims........... 224 324 22 570 Interest credited to policyholder account balances................................. 417 303 -- 720 Other expenses............................. 640 30 8 678 ----- ---- ---- ------ Income from continuing operations before provision for income tax................. 254 111 182 547 Provision for income tax................... 53 38 65 156 ----- ---- ---- ------ Net income................................. $ 201 $ 73 $117 $ 391 ===== ==== ==== ======
- -------- (1) Includes six months of results for MetLife Insurance Company of Connecticut and its subsidiaries and twelve months of results for MLI- USA. F-69 METLIFE INSURANCE COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Net investment income and net investment gains (losses) are based upon the actual results of each segment's specifically identifiable asset portfolio adjusted for allocated equity. Other costs are allocated to each of the segments based upon: (i) a review of the nature of such costs; (ii) time studies analyzing the amount of employee compensation costs incurred by each segment; and (iii) cost estimates included in the Company's product pricing. Revenues derived from any customer did not exceed 10% of consolidated revenues for the years ended December 31, 2007, 2006 and 2005. Substantially all of the Company's revenues originated in the United States. 17. DISCONTINUED OPERATIONS The Company actively manages its real estate portfolio with the objective of maximizing earnings through selective acquisitions and dispositions. Income related to real estate classified as held-for-sale or sold is presented in discontinued operations. These assets are carried at the lower of depreciated cost or fair value less expected disposition costs. In the Institutional segment, the Company had net investment income of $1 million, net investment gains of $5 million and income tax of $2 million related to discontinued operations resulting in income from discontinued operations of $4 million, net of income tax, for the year ended December 31, 2007. The Company had $1 million of investment income and $1 million of investment expense resulting in no change to net investment income for the year ended December 31, 2006. The Company did not have investment income or expense related to discontinued operations for the year ended December 31, 2005. There was no carrying value of real estate related to discontinued operations at December 31, 2007. The carrying value of real estate related to discontinued operations was $7 million at December 31, 2006. 18. 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. The implementation of SFAS 157 may impact the fair value assumptions and methodologies associated with the valuation of assets and liabilities. See also Note 1 regarding the adoption of SFAS 157. F-70 METLIFE INSURANCE COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Amounts related to the Company's financial instruments are as follows:
NOTIONAL CARRYING ESTIMATED AMOUNT VALUE FAIR VALUE DECEMBER 31, 2007 -------- -------- ---------- (IN MILLIONS) Assets: Fixed maturity securities...................... $45,671 $45,671 Equity securities.............................. $ 952 $ 952 Mortgage and consumer loans.................... $ 4,404 $ 4,407 Policy loans................................... $ 913 $ 913 Short-term investments......................... $ 1,335 $ 1,335 Cash and cash equivalents...................... $ 1,774 $ 1,774 Accrued investment income...................... $ 637 $ 637 Mortgage loan commitments...................... $626 $ -- $ (11) Commitments to fund bank credit facilities and private corporate bond investments.......... $488 $ -- $ (31) Liabilities: Policyholder account balances.................. $28,112 $27,707 Long-term debt -- affiliated................... $ 635 $ 609 Payables for collateral under securities loaned and other transactions...................... $10,471 $10,471
NOTIONAL CARRYING ESTIMATED AMOUNT VALUE FAIR VALUE DECEMBER 31, 2006 -------- -------- ---------- (IN MILLIONS) Assets: Fixed maturity securities...................... $47,846 $47,846 Equity securities.............................. $ 795 $ 795 Mortgage and consumer loans.................... $ 3,595 $ 3,547 Policy loans................................... $ 918 $ 918 Short-term investments......................... $ 777 $ 777 Cash and cash equivalents...................... $ 649 $ 649 Accrued investment income...................... $ 597 $ 597 Mortgage loan commitments...................... $665 $ -- $ 1 Commitments to fund bank credit facilities and private corporate bond investments.......... $173 $ -- $ -- Liabilities: Policyholder account balances.................. $29,780 $28,028 Long-term debt -- affiliated................... $ 435 $ 425 Payables for collateral under securities loaned and other transactions...................... $ 9,155 $ 9,155
F-71 METLIFE INSURANCE COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife, Inc.) 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 AND CONSUMER LOANS, MORTGAGE LOAN COMMITMENTS, COMMITMENTS TO FUND BANK CREDIT FACILITIES, AND PRIVATE CORPORATE BOND INVESTMENTS Fair values for mortgage and consumer loans are estimated by discounting expected future cash flows, using current interest rates for similar loans with similar credit risk. For mortgage loan commitments, commitments to fund bank credit facilities, and private corporate bond investments 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 approximate 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 policyholder account balances 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 policyholder account balances without final contractual maturities are assumed to equal their current net surrender value. LONG-TERM DEBT -- AFFILIATED The fair values of long-term debt are determined by discounting expected future cash flows using risk rates currently available for debt with similar terms and remaining maturities. F-72 METLIFE INSURANCE COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) PAYABLES FOR COLLATERAL UNDER SECURITIES LOANED AND OTHER TRANSACTIONS The carrying value for payables for collateral under securities loaned and other 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, caps, floors, and options are based upon quotations obtained from dealers or other reliable sources. See Note 5 for derivative fair value disclosures. 19. RELATED PARTY TRANSACTIONS SERVICE AGREEMENTS The Company has entered into a Master Service Agreement with MLIC, which provides administrative, accounting, legal and similar services to the Company. MLIC charged the Company $170 million, $93 million and $15 million, included in other expenses, for services performed under the Master Service Agreement for the years ended December 31, 2007, 2006 and 2005, respectively. The Company has entered into a Service Agreement with MetLife Group, under which MetLife Group provides personnel services, as needed, to support the activities of the Company. MetLife Group charged the Company $107 million, $154 million and $49 million, included in other expenses, for services performed under the Service Agreement for the years ended December 31, 2007, 2006 and 2005, respectively. The Company has entered into various additional agreements with other affiliates for services necessary to conduct its activities. Typical services provided under these additional agreements include management, policy administrative functions and distribution services. Expenses and fees incurred with affiliates related to these agreements, recorded in other expenses, were $198 million, $190 million and $48 million for the years ended December 31, 2007, 2006 and 2005, respectively. In 2005, the Company entered into Broker-Dealer Wholesale Sales Agreements with several affiliates ("Distributors"), in which the Distributors agree to sell, on the Company's behalf, fixed rate insurance products through authorized retailers. The Company agrees to compensate the Distributors for the sale and servicing of such insurance products in accordance with the terms of the agreements. The Distributors charged the Company $89 million and $65 million, included in other expenses, for the years ended December 31, 2007 and 2006, respectively. The Company did not incur any such expenses for the year ended December 31, 2005. The Company had net payables to affiliates of $27 million and $9 million at December 31, 2007 and 2006, respectively, related to the expenses discussed above. These payables exclude affiliated reinsurance expenses discussed in Note 9. See Notes 4, 8, 9 and 10 for additional related party transactions. 20. SUBSEQUENT EVENT On April 1, 2008, MICC entered into an agreement to issue a $750 million surplus note to MetLife Capital Trust X, an affiliate, with an interest rate of 8.595%. F-73 METLIFE INSURANCE COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife, Inc.) SCHEDULE I CONSOLIDATED SUMMARY OF INVESTMENTS -- OTHER THAN INVESTMENTS IN RELATED PARTIES DECEMBER 31, 2007 (IN MILLIONS)
AMOUNT AT COST OR ESTIMATED WHICH SHOWN ON AMORTIZED COST (1) FAIR VALUE BALANCE SHEET TYPE OF INVESTMENTS ------------------ ---------- -------------- Fixed Maturity Securities: Bonds: U.S. Treasury/agency securities.......... $ 3,976 $ 4,091 $ 4,091 State and political subdivision securities............................. 611 575 575 Foreign government securities............ 635 688 688 Public utilities......................... 2,546 2,500 2,500 All other corporate bonds................ 19,661 19,242 19,242 Mortgage-backed and asset-backed securities............................... 17,332 17,207 17,207 Redeemable preferred stock.................. 1,503 1,368 1,368 ------- ------- ------- Total fixed maturity securities.......... 46,264 45,671 45,671 ------- ------- ------- Equity Securities: Common stock: Banks, trust and insurance companies..... 1 1 1 Industrial, miscellaneous and all other.. 214 216 216 Non-redeemable preferred stock.............. 777 735 735 ------- ------- ------- Total equity securities.................. 992 952 952 ------- ------- ------- Mortgage and consumer loans................... 4,404 4,404 Policy loans.................................. 913 913 Real estate and real estate joint ventures.... 541 541 Other limited partnership interests........... 1,130 1,130 Short-term investments........................ 1,335 1,335 Other invested assets......................... 1,445 1,445 ------- ------- Total investments...................... $57,024 $56,391 ======= =======
- -------- (1) Cost or amortized cost for fixed maturity securities and mortgage and consumer loans 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 discounts; for equity securities, cost represents original cost reduced by writedowns from other-than-temporary declines in value; for real estate, cost represents original cost reduced by writedowns and adjusted for valuation allowances and depreciation; 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-74 METLIFE INSURANCE COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife, Inc.) SCHEDULE III CONSOLIDATED SUPPLEMENTARY INSURANCE INFORMATION DECEMBER 31, 2007, 2006 AND 2005 (IN MILLIONS)
DAC FUTURE POLICY POLICYHOLDER AND BENEFITS AND OTHER ACCOUNT UNEARNED SEGMENT VOBA POLICYHOLDER FUNDS BALANCES REVENUE (1) - ------- ------ ------------------ ------------ ----------- 2007 Individual............................... $4,930 $ 4,022 $20,100 $342 Institutional............................ 16 12,570 13,599 -- Corporate & Other........................ 2 4,761 172 1 ------ ------- ------- ---- $4,948 $21,353 $33,871 $343 ====== ======= ======= ==== 2006 Individual............................... $4,946 $ 3,769 $20,660 $260 Institutional............................ 165 12,895 14,496 3 Corporate & Other........................ -- 4,503 (57) -- ------ ------- ------- ---- $5,111 $21,167 $35,099 $263 ====== ======= ======= ==== 2005 Individual............................... $4,753 $ 3,452 $21,403 $141 Institutional............................ 161 11,880 16,460 1 Corporate & Other........................ -- 4,305 (23) -- ------ ------- ------- ---- $4,914 $19,637 $37,840 $142 ====== ======= ======= ====
- -------- (1) Amounts are included within the future policy benefits and other policyholder funds column. F-75 METLIFE INSURANCE COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife, Inc.) SCHEDULE III -- (CONTINUED) CONSOLIDATED SUPPLEMENTARY INSURANCE INFORMATION DECEMBER 31, 2007, 2006 AND 2005 (IN MILLIONS)
AMORTIZATION OF PREMIUM NET POLICYHOLDER DAC AND VOBA OTHER REVENUE AND INVESTMENT BENEFITS AND CHARGED TO OPERATING PREMIUMS WRITTEN SEGMENT POLICY CHARGES INCOME INTEREST CREDITED OTHER EXPENSES EXPENSES (1) (EXCLUDING LIFE) - ------- -------------- ---------- ----------------- --------------- ------------ ---------------- 2007 Individual............... $1,665 $1,090 $1,140 $717 $612 $-- Institutional............ 73 1,510 1,109 23 27 7 Corporate & Other........ 26 293 33 -- 76 25 ------ ------ ------ ---- ---- --- $1,764 $2,893 $2,282 $740 $715 $32 ====== ====== ====== ==== ==== === 2006 Individual............... $1,462 $ 985 $ 984 $481 $564 $-- Institutional............ 89 1,449 1,097 6 10 9 Corporate & Other........ 25 405 27 1 111 25 ------ ------ ------ ---- ---- --- $1,576 $2,839 $2,108 $488 $685 $34 ====== ====== ====== ==== ==== === 2005 (2) Individual............... $ 997 $ 530 $ 641 $287 $353 $-- Institutional............ 133 712 627 1 29 9 Corporate & Other........ 13 196 22 -- 8 13 ------ ------ ------ ---- ---- --- $1,143 $1,438 $1,290 $288 $390 $22 ====== ====== ====== ==== ==== ===
- -------- (1) Includes other expenses excluding amortization of DAC and VOBA charged to other expenses. (2) Includes six months of results for MetLife Insurance Company of Connecticut and twelve months of results for MLI-USA. F-76 METLIFE INSURANCE COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife, Inc.) SCHEDULE IV CONSOLIDATED REINSURANCE DECEMBER 31, 2007, 2006 AND 2005 (IN MILLIONS)
% AMOUNT ASSUMED GROSS AMOUNT CEDED ASSUMED NET AMOUNT TO NET ------------ -------- ------- ---------- -------- 2007 Life insurance in-force............. $189,630 $152,943 $13,934 $50,621 27.5% ======== ======== ======= ======= Insurance premium Life insurance...................... $ 384 $ 82 $ 17 $ 319 5.3% Accident and health................. 270 236 -- 34 --% -------- -------- ------- ------- Total insurance premium........... $ 654 $ 318 $ 17 $ 353 4.8% ======== ======== ======= =======
% AMOUNT ASSUMED GROSS AMOUNT CEDED ASSUMED NET AMOUNT TO NET ------------ -------- ------- ---------- -------- 2006 Life insurance in-force............. $153,390 $119,281 $14,374 $48,483 29.6% ======== ======== ======= ======= Insurance premium Life insurance...................... $ 323 $ 72 $ 21 $ 272 7.7% Accident and health................. 276 240 -- 36 --% -------- -------- ------- ------- Total insurance premium........... $ 599 $ 312 $ 21 $ 308 6.8% ======== ======== ======= =======
% AMOUNT ASSUMED GROSS AMOUNT CEDED ASSUMED NET AMOUNT TO NET ------------ ------- ------- ---------- -------- 2005 (1) Life insurance in-force............. $126,362 $93,686 $16,921 $49,597 34.1% ======== ======= ======= ======= Insurance premium Life insurance...................... $ 269 $ 45 $ 38 $ 262 14.5% Accident and health................. 144 125 -- 19 --% -------- ------- ------- ------- Total insurance premium........... $ 413 $ 170 $ 38 $ 281 13.5% ======== ======= ======= =======
For the year ended December 31, 2007, reinsurance ceded and assumed included affiliated transactions of $32 million and $17 million, respectively. For the year ended December 31, 2006, both reinsurance ceded and assumed included affiliated transactions of $21 million. For the year ended December 31, 2005, reinsurance ceded and assumed included affiliated transactions of $12 million and $38 million, respectively. - -------- (1) Includes six months of results for MetLife Insurance Company of Connecticut and twelve months of results for MLI-USA. F-77 8 PRIMELITE II STATEMENT OF ADDITIONAL INFORMATION METLIFE OF CT SEPARATE ACCOUNT PF II FOR VARIABLE ANNUITIES ISSUED BY METLIFE INSURANCE COMPANY OF CONNECTICUT ONE CITYPLACE HARTFORD, CONNECTICUT 06103-3415 MLAC-Book-37 April 28, 2008 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, 2007 (2) Statement of Operations for the year ended December 31, 2007 (3) Statement of Changes in Net Assets for the years ended December 31, 2007 and 2006 (4) Notes to Financial Statements The consolidated financial statements and schedules of MetLife Insurance Company of Connecticut and subsidiaries and the report of Independent Registered Public Accounting Firm, are contained in the Statement of Additional Information. The consolidated financial statements of MetLife Insurance Company of Connecticut and subsidiaries include: (1) Consolidated Balance Sheets as of December 31, 2007 and 2006 (2) Consolidated Statements of Income for the years ended December 31, 2007, December 31, 2006 and 2005 (3) Consolidated Statements of Stockholder's Equity for the years ended December 31, 2007, 2006 and 2005 (4) Consolidated Statements of Cash Flows for the year ended December 31, 2007, 2006 and 2005 (5) Notes to Consolidated Financial Statements (6) Financial Statement Schedules (b) Exhibits
EXHIBIT NUMBER DESCRIPTION - ------- ----------- 1(a). 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.) 1(b). Resolution of Board of Directors of MetLife Insurance Company of Connecticut (including Agreement and Plan of Merger) (Incorporated herein by reference to Exhibit 1(b) to Registrant's Registration Statement on Form N-4, 333- 147891/811-08317, filed on December 7, 2007.) 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 6, 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.) 3(e). Services Agreement between MetLife Investors Distribution Company and MetLife Insurance Company of Connecticut. (Incorporated herein by reference to Exhibit 3(e) to Post-Effective Amendment No. 15 to MetLife of CT Fund BD for Variable Annuities' Registration Statement on Form N-4, File Nos. 033-73466/811-08242, filed April 7, 2008.) 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.) 4(c). Merger Endorsement (6-E48-07) (December 7, 2007) (Incorporated herein by reference to Exhibit 4(c) to Registrant's Registration Statement on Form N-4, 333- 147891/811-08317, filed on December 7, 2007.) 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 Insurance Company, as amended on October 19, 1994. (Incorporated herein by reference to Exhibit 3 (a) (i) to Registration Statement on Form S-2, File No. 033-58677, filed via Edgar on April 18, 1995.) 6(b) By-Laws of The Travelers Insurance Company, as amended on October 20, 1994. (Incorporated herein by reference to Exhibit 3 (b) (i) to the Registration Statement on Form S-2, File No. 033-58677, filed via Edgar on April 18, 1995.) 6(c). Certificate of Amendment of the Charter as Amended and Restated of The Travelers Insurance Company effective May 1, 2006. (Incorporated herein by reference to Exhibit 6(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.) 6(d). Certificate of Correction of MetLife Insurance Company of Connecticut. (Incorporated herein by reference to Exhibit 6(d) to Post-Effective No. 11 to MetLife of CT Separate Account Nine for Variable Annuities' Registration Statement on Form N-4, File Nos. 333-65926/811-09411, filed on October 31, 2007.) 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, MetLife Investors Distribution Company and MetLife Insurance Company of Connecticut (effective August 31, 2007). (Incorporated herein by reference to Exhibit 6(d) to Post-Effective No. 11 to MetLife of CT Separate Account Nine for Variable Annuities' Registration Statement on Form N-4, File Nos. 333-65926/811-09411, filed on October 31, 2007.) 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 Registrant's Registration Statement on Form N-4, 333- 147891/811-08317, filed on December 7, 2007.) 10. Consent of Deloitte & Touche LLP, Independent Registered Public Accounting Firm. (filed herewith) 11. Not applicable. 12. Not applicable. 13. Powers 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 Insurance 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 1 Metlife Plaza 27-01 Queens Plaza North Long Island City, NY 11101 Lisa M. Weber Director 1 MetLife Plaza 27-01 Queens Plaza North Long Island City, NY 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 1 MetLife Plaza 27-01 Queens Plaza North Long Island City, NY 11101 Joseph J. Prochaska, Jr. Executive Vice President and Chief Accounting Officer 1 MetLife Plaza 27-01 Queens Plaza North Long Island City, NY 11101 Stanley J. Talbi Executive Vice President and Chief Financial Officer 1 MetLife Plaza 27-01 Queens Plaza North Long Island City, NY 11101 Gwenn L. Carr Senior Vice President and Secretary 1 MetLife Plaza 27-01 Queens Plaza North Long Island City, NY 11101 Eric T. Steigerwalt Senior Vice President and Treasurer 1 MetLife Plaza 27-01 Queens Plaza North Long Island City, NY 11101 William D. Cammarata Senior Vice President 18210 Crane Nest Drive Tampa, FL 33647 Elizabeth M. Forget Senior Vice President 260 Madison Ave New York, NY 10016 Gene L. Lunman Senior Vice President 185 Asylum Street Hartford, CT 06103 Roberto Baron Vice President and Senior Actuary 1 MetLife Plaza 27-01 Queens Plaza North Long Island City, NY 11101 S. Peter Headley Vice President and Assistant Secretary 3717 W. 100(th) Street Suite 700 Overland Park, KS 62210 Daniel D. Jordan Vice President and Assistant Secretary 501 Boylston Street Boston, MA 02116 Bennett D. Kleinberg Vice President and Actuary 185 Asylum Street Hartford, CT 06103
NAME AND PRINCIPAL POSITIONS AND OFFICES BUSINESS ADDRESS WITH INSURANCE COMPANY - -------------------------- --------------------------------------------------------------------- Christopher A. Kremer Vice President and Actuary 501 Boylston Street Boston, MA 02116 Paul L. LeClair Vice President and Actuary 501 Boylston Street Boston, MA 02116 Jonathan L. Rosenthal Vice President and Chief Hedging Officer 10 Park Avenue Morristown, NJ 07962 Patrick D. Studley Vice President and Actuary 1 MetLife Plaza 27-01 Queens Plaza North Long Island City, NY 11101 Jeffrey N. Altman Vice President 1 MetLife Plaza 27-01 Queens Plaza North Long Island City, NY 11101 Steven J. Brash Vice President 1 MetLife Plaza 27-01 Queens Plaza North Long Island City, NY 11101 Herbert B. Brown Vice President 1 MetLife Plaza 27-01 Queens Plaza North Long Island City, NY 11101 Vincent Cirulli Vice President 10 Park Avenue Morristown, NJ 07962 Deidre E. Curran Vice President 300 Davidson Ave. Somerset, NJ 08873 James R. Dingler Vice President 10 Park Avenue Morristown, NJ 07962 Judith A. Gulotta Vice President 10 Park Avenue Morristown, NJ 07962 Gregory M. Harrison Vice President 1 MetLife Plaza 27-01 Queens Plaza North Long Island City, NY 11101 C. Scott Inglis Vice President 10 Park Avenue Morristown, NJ 07962 James W. Koeger Vice President 13045 Tesson Ferry Road St. Louis, MO 63128 Joseph J. Massimo Vice President 18210 Crane Nest Drive Tampa, FL 33647 Daniel A. O'Neill Vice President 8717 W. 110(th) Street Suite 700 Overland Park, KS 62210
NAME AND PRINCIPAL POSITIONS AND OFFICES BUSINESS ADDRESS WITH INSURANCE COMPANY - -------------------------- --------------------------------------------------------------------- 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 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 Insurance 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. No person is controlled by the Registrant. ORGANIZATIONAL STRUCTURE OF METLIFE, INC. AND SUBSIDIARIES AS OF DECEMBER 31, 2007 The following is a list of subsidiaries of MetLife, Inc. updated as of December 31, 2007. 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) 5. MetLife Reinsurance Company of Vermont (VT) 6. Entrecap Real Estate II, LLC (DE) a) PREFCO Dix-Huit LLC (CT) b) PREFCO X Holdings LLC (CT) c) PREFCO Ten Limited Partnership (CT) - a 99.9% limited partnership interest of PREFCO Ten Limited Partnership is held by Entrecap Real Estate II, LLC and 0.1% general partnership is held by PREFCO X Holdings LLC. a) PREFCO Vingt LLC (CT) b) PREFCO Twenty Limited Partnership (CT) - a 99% limited partnership interest of PREFCO Twenty Limited Partnership is held by Entrecap Real Estate II, LLC and 1% general partnership is held by PREFCO Vingt LLC. 7. Plaza Drive Properties, LLC (DE) 8. MTL Leasing, LLC (DE) a) PREFCO IX Realty LLC (CT) b) PREFCO XIV Holdings LLC (CT) c) PREFCO Fourteen Limited Partnership (CT) - a 99.9% limited partnership interest of PREFCO Fourteen Limited Partnership is held by MTL Leasing, LLC and 0.1% general partnership is held by PREFCO XIV Holdings LLC. F. MetLife Pensiones S.A. (Mexico)- 97.4738% is owned by MetLife, Inc. and 2.5262% is owned by MetLife International Holdings, Inc. 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., 1.29459% 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) MetA 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. MetLife 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)- 99.99905% is owned by MetLife International Holdings, Inc. and 0.00095% 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)- 74.5485235740% is owned by MetLife International Holdings, Inc. and 25.451476126% is owned by MetLife Worldwide Holdings, Inc. and 0.0000003% 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. MetLife Insurance Limited (Australia) a) MetLife Insurance and Investment Trust (Australia) b) MetLife Investments Pty Limited (Australia) c) MetLife Services (Singapore) PTE Limited (Australia) 17. 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. 18. 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. 19. 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. 20. MetLife Worldwide Holdings, Inc. (DE) a) MetLife Towarzystwo Ubezpieczen na Zycie Spolka Akcyjna. (Poland) b) MetLife Direct Co., Ltd. (Japan) c) MetLife Fubon Limited (Japan) 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% of the shares of Park Twenty Three Investments Company is held by Metropolitan Life Insurance Company. 99% is owned by 334 Madison Euro Investment, Inc. (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. 99% is owned by 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. 89.9% of the shares of One Madison Investments (Cayco) Limited is held by Metropolitan Life Insurance 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 Real Estate Cayman Company (Cayman Islands) 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. c) MetLife Capital Credit L.P. (DE)- 1% General Partnership interest is held by 23rd Street Investments, Inc., 99% Limited Partnership Interest is held by Metropolitan Life Insurance Company. d) MetLife Capital Limited Partnership (DE)- 1% General Partnership interest is held by 23rd Street Investments, Inc., 99% Limited Partnership Interest is held by Metropolitan Life Insurance Company. 17. Metropolitan Realty Management, Inc. (DE) 18. Hyatt Legal Plans, Inc. (DE) a) Hyatt Legal Plans of Florida, Inc. (FL) 19. MetLife Holdings, Inc. (DE) a) MetLife Credit Corp. (DE) b) MetLife Funding, Inc. (DE) 4 20. Bond Trust Account A (MA) 21. MetLife Investments Asia Limited (Hong Kong). 22. MetLife Investments Limited (United Kingdom)- 23rd Street Investments, Inc. holds one share of MetLife Investments Limited. 23. MetLife Latin America Asesorias e Inversiones Limitada (Chile)- 23rd Street Investments, Inc. holds 0.01% of MetLife Latin America Asesorias e Inversiones Limitada. 24. New England Life Insurance Company (MA) a) MetLife Advisers, LLC (MA) b) New England Securities Corporation (MA) 25. 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% is owned by General American Life Insurance Company. (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) Reinsurance Partners, Inc. (MO) (iii) Parkway Reinsuarnce Company (MO) (b) RGA Worldwide Reinsurance Company, Ltd. (Barbados) (c) RGA Atlantic Reinsurance Company, Ltd. (Barbados) (d) RGA Americas Reinsurance Company, Ltd. (Barbados) (e) RGA Reinsurance Company (Barbados) Ltd. (Barbados) (i) RGA Financial Group, L.L.C. (DE)- 80% is owned by RGA Reinsurance Company (Barbados) Ltd. RGA Reinsurance Company also owns a 20% non-equity membership in RGA Financial Group, L.L.C. (f) RGA Life Reinsurance Company of Canada (Canada) (g) RGA International Corporation (Nova Scotia/Canada) (h) 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) - Reinsurance Group of America Incorporated owns 99% of RGA Services India Private Limited and RGA Holdings Limited owns 1%. (i) RGA South African Holdings (Pty) Ltd. (South Africa) (i) RGA Reinsurance Company of South Africa Limited (South Africa) (j) RGA Australian Holdings PTY Limited (Australia) (i) RGA Reinsurance Company of Australia Limited (Australia) (ii) RGA Asia Pacific PTY, Limited (Australia) (k) 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 (l) RGA Technology Partners, Inc. (MO) (m) RGA International Reinsurance Company (Ireland) (n) RGA Capital Trust I (DE) (i) RGA Global Reinsurance Company, Ltd. (Bermuda) 26. Corporate Real Estate Holdings, LLC (DE) 27. Ten Park SPC (CAYMAN ISLANDS ) - 1% voting control of Ten Park SPC is held by 23rd Street Investments, Inc. 28. MetLife Tower Resources Group, Inc. (DE) 29. Headland - Pacific Palisades, LLC (CA) 30. Headland Properties Associates (CA) - 1% is owned by Headland - Pacific Palisades, LLC and 99% is owned by Metropolitan Life Insurance Company. 31. Krisman, Inc. (MO) 32. Special Multi-Asset Receivables Trust (DE) 33. White Oak Royalty Company (OK) 34. 500 Grant Street GP LLC (DE) 35. 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 36. MetLife Canada/MetVie Canada (Canada) 37. MetLife Retirement Services LLC (NJ) a) MetLife Investment Funds Services LLC (NJ) b) MetLife Investment Funds Management LLC (NJ) c) MetLife Associates LLC (DE) 38. Euro CL Investments LLC (DE) 39. MEX DF Properties, LLC (DE) 40. 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 41. MetLife Properties Ventures, LLC (DE) a) Citypoint Holdings II Limited (UK) 42. Housing Fund Manager, LLC (DE) 43. MTC Fund I, LLC (DE) 0.01% of MTC Fund I, LLC is held by Housing Fund Manager, LLC. 44. MTC Fund II, LLC (DE) V. MetLife Capital Trust II (DE) W. MetLife Capital Trust III (DE) X. MetLife Capital Trust IV (DE) Y. MetLife Insurance Company of Connecticut (CT) - 86.72% is owned by MetLife, Inc. and 13.28% is owned by MetLife Investors Group, Inc. (Life Department)(Accident Department) The operations of the Accident Department have ceased as a result of the transfer of the worker's compensation business to an unrelated party. 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. Metropolitan Connecticut Properties Ventures, LLC (DE) 7. MetLife Canadian Property Ventures LLC (NY) 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. 12. One Financial Place Holdings, LLC (DE)-100% is owned in the aggregate by MetLife Insurance Company of Connecticut. 13. Plaza LLC (CT) a) 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% is owned by Tower Square Securities, Inc. 14. TIC European Real Estate LP, LLC (DE) 15. MetLife European Holdings, Inc. (UK) a) MetLife Europe Limited (IRELAND) (i) MetLife Pensions Trustees Limited (UK) b) MetLife Assurance Limited (UK) 16. Travelers International Investments Ltd. (Cayman Islands) 17. Euro TL Investments LLC (DE) 18. Corrigan TLP LLC (DE) 19. TLA Holdings LLC (DE) a) The Prospect Company (DE) 1) Panther Valley, Inc. (NJ) 20. TRAL & Co. (CT) - TRAL & Co. is a general partnership. Its partners are MetLife Insurance Company of Connecticut and Metropolitan Life Insurance Company. 21. Tribeca Distressed Securities L.L.C. (DE) 22. MetLife Investors USA Insurance Comapny (DE) 23. MetLife Property Ventures Canada ULC (Canada) Z. MetLife Reinsurance Company of South Carolina (SC) AA. MetLife Investment Advisors Company, LLC (DE) BB. MetLife Standby I, LLC (DE) 1. MetLife Exchange Trust I (DE) CC. MetLife Services and Solutions, LLC (DE) 1. MetLife Solutions Pte. Ltd. (Singapore) (i) MetLife Services East Private Limited (India) DD. Soap Acquisition Corporation (NY) 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) 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, 2008, there were 15,584 qualified contracts and 15,091 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 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 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 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 Metropolitan Life Variable Annuity Separate Account I Metropolitan Life Variable Annuity Separate Account II 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 Metropolitan Life Separate Account E Metropolitan Life Separate Account UL Metropolitan Tower Life Separate Account One Metropolitan Tower Life Separate Account Two Paragon Separate Account A Paragon Separate Account B Paragon Separate Account C Paragon Separate Account D Metropolitan Series Fund, Inc. (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 10 Park Avenue Morristown, NJ 07962 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 5 Park Plaza Suite 1900 Irvine, CA 92614 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 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 27-01 Queens Plaza North Long Island City, NY 11101 Edward C. Wilson Senior Vice President, Channel Head-Wirehouse 1 MetLife Plaza 27-01 Queens Plaza North Long Island City, NY 11101 Curtis Wohlers Senior Vice President, Channel Head-Planners 1 MetLife Plaza 27-01 Queens Plaza North Long Island City, NY 11101 Jay S. Kaduson Senior Vice President 10 Park Avenue Morristown, NJ 07962 Eric T. Steigerwalt Treasurer 1 MetLife Plaza 27-01 Queens Plaza North Long Island City, NY 11101 Peter Gruppuso Vice President, 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 1 MetLife Plaza 27-01 Queens Plaza North Long Island City, NY 11101 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
NAME AND PRINCIPAL POSITIONS AND OFFICES BUSINESS ADDRESS WITH UNDERWRITER - -------------------------- --------------------------------------------------------------------- Cathy Sturdivant Vice President 5 Park Plaza Suite 1900 Irvine, CA 92614 Paulina Vakouros Vice President 260 Madison Avenue New York, NY 10016
(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 ----------------- --------------- --------------- --------------- --------------- MetLife Investors.......................... $128,299,602 $0 $0 $0 Distribution Company
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS METLIFE INSURANCE 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 a contract 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 MetLife Insurance Company of Connecticut 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 MetLife Insurance Company of Connecticut. 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 Registration Statement and has caused this Registration Statement to be signed on its behalf, in the City of Boston, and Commonwealth of Massachusetts, on this 8th day of April 2008. METLIFE OF CT SEPARATE ACCOUNT PF II FOR VARIABLE ANNUITIES (Registrant) METLIFE INSURANCE COMPANY OF CONNECTICUT (Depositor) By: /s/ DANIEL D. JORDAN ------------------------------------ Daniel D. Jordan, Vice President and Assistant Secretary As required by the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities indicated on the 8th day of April 2008.
/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 Insurance Company of Connecticut. Executed by Michele H. Abate on behalf of those indicated pursuant to powers of attorney filed herewith. EXHIBIT INDEX 10 Consent of Deloitte & Touche LLP, Independent Registered Public Accounting Firm 13 Powers of Attorney
EX-99.10 2 y44184l3exv99w10.txt CONSENT OF DELOITTE & TOUCHE LLP CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM We consent to the use in this Post-Effective Amendment No. 1/Amendment No. 23 to the Registration Statement No. 333-147891/811-08317 on Form N-4 of our report dated March 24, 2008, relating to the financial statements of each of the Subaccounts of MetLife of CT Separate Account PF II for Variable Annuities and the use of our report dated March 26, 2008 (April 1, 2008 as to Note 20) on the consolidated financial statements and financial statement schedules of MetLife Insurance Company of Connecticut and subsidiaries (which report expresses an unqualified opinion and includes an explanatory paragraph regarding changes in MetLife Insurance Company of Connecticut and subsidiaries' method of accounting for deferred acquisition costs as required by accounting guidance adopted on January 1, 2007) both appearing in the Statement of Additional Information, which is part of such Registration Statement, and to the reference to us under the heading "Independent Registered Public Accounting Firm" appearing in the Statement of Additional Information, which is part of such Registration Statement. /s/ Deloitte & Touche LLP Tampa, Florida April 8, 2008 EX-99.13 3 y44184l3exv99w13.txt POWERS OF ATTORNEY MetLife Insurance Company of Connecticut Power of Attorney Michael K. Farrell President and Director KNOW ALL MEN BY THESE PRESENTS, that I, Michael K. Farrell, President and a director of MetLife Insurance Company of Connecticut, a Connecticut company, do hereby appoint Michele H. Abate, Paul G. Cellupica, 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 for Variable Annuities (Premier Advisers II, Premier Advisers III and Premier Advisers III (Series II) File No. 333-65506, Portfolio Architect, Portfolio Architect Select, Premier Advisers (Class I), Premier Advisers (Class II) File No. 033-65343, MetLife Access Annuity and MetLife Access Select Annuity File No. 333-23311), - - MetLife of CT Fund ABD II for Variable Annuities (Premier Advisers II, Premier Advisers III and Premier Advisers III (Series II) File No. 333-147893, Portfolio Architect, Portfolio Architect Select, Premier Advisers (Class I), Premier Advisers (Class II) File No. 333-147885, MetLife Access Annuity and MetLife Access Select Annuity File No. 333-147887), - - MetLife of CT Fund BD for Variable Annuities (Vintage Annuity File No. 033-73466), - - MetLife of CT Fund BD II for Variable Annuities (Vintage Annuity File No. 333-147894), - - MetLife of CT Fund BD III for Variable Annuities (Protected Equity Portfolio File No. 333-65942, Index Annuity File No. 333-27689, Vintage XTRA Annuity, Portfolio Architect XTRA, Vintage XTRA (Series II) File No. 333-70657), - - MetLife of CT Fund BD IV for Variable Annuities (Protected Equity Portfolio File No. 333-147886, Index Annuity File No. 333-147884, Vintage XTRA Annuity, Portfolio Architect XTRA, Vintage XTRA (Series II) File No. 333-147895), - - MetLife of CT Fund U for Variable Annuities (Universal Annuity File No. 002-79529, Universal Select Annuity File No. 333-116783, Universal Annuity Advantage File No. 333-117028), - - MetLife of CT Separate Account Five for Variable Annuities (MetLife Retirement Account Annuity File No. 333-58783), - - MetLife of CT Separate Account Six for Variable Annuities (MetLife Retirement Account Annuity File No. 333-147892), - - MetLife of CT Separate Account Seven for Variable Annuities (Premier Advisers AssetManager, Premier Advisers L, Premier Advisers L (Series II) File No. 333-60227), - - MetLife of CT Separate Account Eight for Variable Annuities (Premier Advisers AssetManager, Premier Advisers L, Premier Advisers L (Series II) File No. 333-147889), - - MetLife of CT Separate Account Nine for Variable Annuities (Vintage II and Vintage II (Series II) File No. 333-82009, Vintage 3, Portfolio Architect 3, Portfolio Architect L, Vintage L, Pioneer AnnuiStar Flex File No. 333-65926), - - MetLife of CT Separate Account Ten for Variable Annuities (Vintage II and Vintage II (Series II) File No. 333-147896, Vintage 3, Portfolio Architect 3, Portfolio Architect L, Vintage L, Pioneer AnnuiStar Flex File No. 333-147905), - - MetLife of CT Separate Account Eleven for Variable Annuities (Pioneer AnnuiStar Plus, Portfolio Architect Plus, Scudder Advocate Rewards Annuity File No. 333-101778), - - MetLife of CT Separate Account Twelve for Variable Annuities (Pioneer AnnuiStar Plus, Portfolio Architect Plus, Scudder Advocate Rewards Annuity File No. 333-147902), - - MetLife of CT Separate Account Thirteen for Variable Annuities (Pioneer AnnuiStar, Portfolio Architect II and Pioneer AnnuiStar Value File No. 333-101777), - - MetLife of CT Separate Account Fourteen for Variable Annuities (Pioneer AnnuiStar, Portfolio Architect II and Pioneer AnnuiStar Value File No. 333-147898), - - MetLife of CT Separate Account PF for Variable Annuities (PrimElite Annuity File No. 333-32589 and PrimElite II Annuity File No. 333-72334), - - MetLife of CT Separate Account PF II for Variable Annuities (PrimElite Annuity File No. 333-147888 and PrimElite II Annuity File No. 333-147891), - - MetLife of CT Separate Account QP for Variable Annuities (Gold Track and Gold Track Select File No. 333-00165), - - MetLife of CT Separate Account QPN for Variable Annuities (MetLife Retirement Perspectives File No. 333-141941, Unallocated Group Variable Annuity File No. 333-136191), - - MetLife of CT Separate Account TM for Variable Annuities (Marquis Portfolios File No 333-40193), - - MetLife of CT Separate Account TM II for Variable Annuities (Marquis Portfolios File No. 333-147890), - - MetLife Insurance Company of Connecticut Variable Annuity Separate Account 2002 (Vintage Access, Portfolio Architect Access, Scudder Advocate Advisor and Scudder Advocate Advisor- ST1 File No. 333-100435, Scudder Advocate Advisor TL4 File No. 333-109612), - - MetLife Life and Annuity Company of Connecticut Variable Annuity Separate Account 2002 (Vintage Access, Portfolio Architect Access, Scudder Advocate Advisor and Scudder Advocate Advisor- ST1 File No. 333-147907), - - MetLife of CT Fund UL for Variable Life Insurance (MarketLife and Invest File No. 002-88637, MetLife Variable Survivorship Life File No. 333-69771, MetLife Variable Life Accumulator and MetLife Variable Life Accumulator Series 2 File No. 333-96515, MetLife Variable Life File No. 333-96519, MetLife Variable Survivorship Life II File No. 333-56952, MetLife Variable Life Accumulator Series III File No. 333-113109), - - MetLife of CT Fund UL II for Variable Life Insurance (MarketLife File No. 333-147904, MetLife Variable Survivorship Life File No. 333-147901, MetLife Variable Life Accumulator and MetLife Variable Life Accumulator Series 2 File No. 333-147908, MetLife Variable Life File No. 333-147900, MetLife Variable Survivorship Life II File No. 333-147897, MetLife Variable Life Accumulator Series III File No. 333-147899), - - MetLife of CT Fund UL III for Variable Life Insurance (Corporate Owned Variable Universal Life Series 1 and Series 2 File No. 333-71349, Corporate Owned Variable Universal Life 2000 and Corporate Owned Variable Universal Life III File No. 333-94779, Corporate Benefit Life File No. 333-64364, Corporate Select Policy File No. 333-105335, Corporate Owned Variable Universal Life IV File No. 333-113533), - - MetLife of CT Variable Life Insurance Separate Account One (VintageLife File No. 333-147903), - - MetLife of CT Variable Life Insurance Separate Account Two (Portfolio Architect Life File No. 333-147906), - - MetLife of CT Variable Life Insurance Separate Account Three (VintageLife File No.033-88576), - - MetLife of CT Variable Life Insurance Separate Account Four (Portfolio Architect Life File No. 333-15045), 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 17th day of March, 2008. /s/ Michael K. Farrell ---------------------------------------- Michael K. Farrell MetLife Insurance 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 Insurance Company of Connecticut, a Connecticut company, do hereby appoint Michele H. Abate, Paul G. Cellupica, 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 for Variable Annuities (Premier Advisers II, Premier Advisers III and Premier Advisers III (Series II) File No. 333-65506, Portfolio Architect, Portfolio Architect Select, Premier Advisers (Class I), Premier Advisers (Class II) File No. 033-65343, MetLife Access Annuity and MetLife Access Select Annuity File No. 333-23311), - - MetLife of CT Fund ABD II for Variable Annuities (Premier Advisers II, Premier Advisers III and Premier Advisers III (Series II) File No. 333-147893, Portfolio Architect, Portfolio Architect Select, Premier Advisers (Class I), Premier Advisers (Class II) File No. 333-147885, MetLife Access Annuity and MetLife Access Select Annuity File No. 333-147887), - - MetLife of CT Fund BD for Variable Annuities (Vintage Annuity File No. 033-73466), - - MetLife of CT Fund BD II for Variable Annuities (Vintage Annuity File No. 333-147894), - - MetLife of CT Fund BD III for Variable Annuities (Protected Equity Portfolio File No. 333-65942, Index Annuity File No. 333-27689, Vintage XTRA Annuity, Portfolio Architect XTRA, Vintage XTRA (Series II) File No. 333-70657), - - MetLife of CT Fund BD IV for Variable Annuities (Protected Equity Portfolio File No. 333-147886, Index Annuity File No. 333-147884, Vintage XTRA Annuity, Portfolio Architect XTRA, Vintage XTRA (Series II) File No. 333-147895), - - MetLife of CT Fund U for Variable Annuities (Universal Annuity File No. 002-79529, Universal Select Annuity File No. 333-116783, Universal Annuity Advantage File No. 333-117028), - - MetLife of CT Separate Account Five for Variable Annuities (MetLife Retirement Account Annuity File No. 333-58783), - - MetLife of CT Separate Account Six for Variable Annuities (MetLife Retirement Account Annuity File No. 333-147892), - - MetLife of CT Separate Account Seven for Variable Annuities (Premier Advisers AssetManager, Premier Advisers L, Premier Advisers L (Series II) File No. 333-60227), - - MetLife of CT Separate Account Eight for Variable Annuities (Premier Advisers AssetManager, Premier Advisers L, Premier Advisers L (Series II) File No. 333-147889), - - MetLife of CT Separate Account Nine for Variable Annuities (Vintage II and Vintage II (Series II) File No. 333-82009, Vintage 3, Portfolio Architect 3, Portfolio Architect L, Vintage L, Pioneer AnnuiStar Flex File No. 333-65926), - - MetLife of CT Separate Account Ten for Variable Annuities (Vintage II and Vintage II (Series II) File No. 333-147896, Vintage 3, Portfolio Architect 3, Portfolio Architect L, Vintage L, Pioneer AnnuiStar Flex File No. 333-147905), - - MetLife of CT Separate Account Eleven for Variable Annuities (Pioneer AnnuiStar Plus, Portfolio Architect Plus, Scudder Advocate Rewards Annuity File No. 333-101778), - - MetLife of CT Separate Account Twelve for Variable Annuities (Pioneer AnnuiStar Plus, Portfolio Architect Plus, Scudder Advocate Rewards Annuity File No. 333-147902), - - MetLife of CT Separate Account Thirteen for Variable Annuities (Pioneer AnnuiStar, Portfolio Architect II and Pioneer AnnuiStar Value File No. 333-101777), - - MetLife of CT Separate Account Fourteen for Variable Annuities (Pioneer AnnuiStar, Portfolio Architect II and Pioneer AnnuiStar Value File No. 333-147898), - - MetLife of CT Separate Account PF for Variable Annuities (PrimElite Annuity File No. 333-32589 and PrimElite II Annuity File No. 333-72334), - - MetLife of CT Separate Account PF II for Variable Annuities (PrimElite Annuity File No. 333-147888 and PrimElite II Annuity File No. 333-147891), - - MetLife of CT Separate Account QP for Variable Annuities (Gold Track and Gold Track Select File No. 333-00165), - - MetLife of CT Separate Account QPN for Variable Annuities (MetLife Retirement Perspectives File No. 333-141941, Unallocated Group Variable Annuity File No. 333-136191), - - MetLife of CT Separate Account TM for Variable Annuities (Marquis Portfolios File No 333-40193), - - MetLife of CT Separate Account TM II for Variable Annuities (Marquis Portfolios File No. 333-147890), - - MetLife Insurance Company of Connecticut Variable Annuity Separate Account 2002 (Vintage Access, Portfolio Architect Access, Scudder Advocate Advisor and Scudder Advocate Advisor- ST1 File No. 333-100435, Scudder Advocate Advisor TL4 File No. 333-109612), - - MetLife Life and Annuity Company of Connecticut Variable Annuity Separate Account 2002 (Vintage Access, Portfolio Architect Access, Scudder Advocate Advisor and Scudder Advocate Advisor- ST1 File No. 333-147907), - - MetLife of CT Fund UL for Variable Life Insurance (MarketLife and Invest File No. 002-88637, MetLife Variable Survivorship Life File No. 333-69771, MetLife Variable Life Accumulator and MetLife Variable Life Accumulator Series 2 File No. 333-96515, MetLife Variable Life File No. 333-96519, MetLife Variable Survivorship Life II File No. 333-56952, MetLife Variable Life Accumulator Series III File No. 333-113109), - - MetLife of CT Fund UL II for Variable Life Insurance (MarketLife File No. 333-147904, MetLife Variable Survivorship Life File No. 333-147901, MetLife Variable Life Accumulator and MetLife Variable Life Accumulator Series 2 File No. 333-147908, MetLife Variable Life File No. 333-147900, MetLife Variable Survivorship Life II File No. 333-147897, MetLife Variable Life Accumulator Series III File No. 333-147899), - - MetLife of CT Fund UL III for Variable Life Insurance (Corporate Owned Variable Universal Life Series 1 and Series 2 File No. 333-71349, Corporate Owned Variable Universal Life 2000 and Corporate Owned Variable Universal Life III File No. 333-94779, Corporate Benefit Life File No. 333-64364, Corporate Select Policy File No. 333-105335, Corporate Owned Variable Universal Life IV File No. 333-113533), - - MetLife of CT Variable Life Insurance Separate Account One (VintageLife File No. 333-147903), - - MetLife of CT Variable Life Insurance Separate Account Two (Portfolio Architect Life File No. 333-147906), - - MetLife of CT Variable Life Insurance Separate Account Three (VintageLife File No.033-88576), - - MetLife of CT Variable Life Insurance Separate Account Four (Portfolio Architect Life File No. 333-15045), 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 11th day of March, 2008. /s/ William J. Mullaney ---------------------------------------- William J. Mullaney MetLife Insurance 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 Insurance Company of Connecticut, a Connecticut company, do hereby appoint Michele H. Abate, Paul G. Cellupica, 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 for Variable Annuities (Premier Advisers II, Premier Advisers III and Premier Advisers III (Series II) File No. 333-65506, Portfolio Architect, Portfolio Architect Select, Premier Advisers (Class I), Premier Advisers (Class II) File No. 033-65343, MetLife Access Annuity and MetLife Access Select Annuity File No. 333-23311), - - MetLife of CT Fund ABD II for Variable Annuities (Premier Advisers II, Premier Advisers III and Premier Advisers III (Series II) File No. 333-147893, Portfolio Architect, Portfolio Architect Select, Premier Advisers (Class I), Premier Advisers (Class II) File No. 333-147885, MetLife Access Annuity and MetLife Access Select Annuity File No. 333-147887), - - MetLife of CT Fund BD for Variable Annuities (Vintage Annuity File No. 033-73466), - - MetLife of CT Fund BD II for Variable Annuities (Vintage Annuity File No. 333-147894), - - MetLife of CT Fund BD III for Variable Annuities (Protected Equity Portfolio File No. 333-65942, Index Annuity File No. 333-27689, Vintage XTRA Annuity, Portfolio Architect XTRA, Vintage XTRA (Series II) File No. 333-70657), - - MetLife of CT Fund BD IV for Variable Annuities (Protected Equity Portfolio File No. 333-147886, Index Annuity File No. 333-147884, Vintage XTRA Annuity, Portfolio Architect XTRA, Vintage XTRA (Series II) File No. 333-147895), - - MetLife of CT Fund U for Variable Annuities (Universal Annuity File No. 002-79529, Universal Select Annuity File No. 333-116783, Universal Annuity Advantage File No. 333-117028), - - MetLife of CT Separate Account Five for Variable Annuities (MetLife Retirement Account Annuity File No. 333-58783), - - MetLife of CT Separate Account Six for Variable Annuities (MetLife Retirement Account Annuity File No. 333-147892), - - MetLife of CT Separate Account Seven for Variable Annuities (Premier Advisers AssetManager, Premier Advisers L, Premier Advisers L (Series II) File No. 333-60227), - - MetLife of CT Separate Account Eight for Variable Annuities (Premier Advisers AssetManager, Premier Advisers L, Premier Advisers L (Series II) File No. 333-147889), - - MetLife of CT Separate Account Nine for Variable Annuities (Vintage II and Vintage II (Series II) File No. 333-82009, Vintage 3, Portfolio Architect 3, Portfolio Architect L, Vintage L, Pioneer AnnuiStar Flex File No. 333-65926), - - MetLife of CT Separate Account Ten for Variable Annuities (Vintage II and Vintage II (Series II) File No. 333-147896, Vintage 3, Portfolio Architect 3, Portfolio Architect L, Vintage L, Pioneer AnnuiStar Flex File No. 333-147905), - - MetLife of CT Separate Account Eleven for Variable Annuities (Pioneer AnnuiStar Plus, Portfolio Architect Plus, Scudder Advocate Rewards Annuity File No. 333-101778), - - MetLife of CT Separate Account Twelve for Variable Annuities (Pioneer AnnuiStar Plus, Portfolio Architect Plus, Scudder Advocate Rewards Annuity File No. 333-147902), - - MetLife of CT Separate Account Thirteen for Variable Annuities (Pioneer AnnuiStar, Portfolio Architect II and Pioneer AnnuiStar Value File No. 333-101777), - - MetLife of CT Separate Account Fourteen for Variable Annuities (Pioneer AnnuiStar, Portfolio Architect II and Pioneer AnnuiStar Value File No. 333-147898), - - MetLife of CT Separate Account PF for Variable Annuities (PrimElite Annuity File No. 333-32589 and PrimElite II Annuity File No. 333-72334), - - MetLife of CT Separate Account PF II for Variable Annuities (PrimElite Annuity File No. 333-147888 and PrimElite II Annuity File No. 333-147891), - - MetLife of CT Separate Account QP for Variable Annuities (Gold Track and Gold Track Select File No. 333-00165), - - MetLife of CT Separate Account QPN for Variable Annuities (MetLife Retirement Perspectives File No. 333-141941, Unallocated Group Variable Annuity File No. 333-136191), - - MetLife of CT Separate Account TM for Variable Annuities (Marquis Portfolios File No 333-40193), - - MetLife of CT Separate Account TM II for Variable Annuities (Marquis Portfolios File No. 333-147890), - - MetLife Insurance Company of Connecticut Variable Annuity Separate Account 2002 (Vintage Access, Portfolio Architect Access, Scudder Advocate Advisor and Scudder Advocate Advisor- ST1 File No. 333-100435, Scudder Advocate Advisor TL4 File No. 333-109612), - - MetLife Life and Annuity Company of Connecticut Variable Annuity Separate Account 2002 (Vintage Access, Portfolio Architect Access, Scudder Advocate Advisor and Scudder Advocate Advisor- ST1 File No. 333-147907), - - MetLife of CT Fund UL for Variable Life Insurance (MarketLife and Invest File No. 002-88637, MetLife Variable Survivorship Life File No. 333-69771, MetLife Variable Life Accumulator and MetLife Variable Life Accumulator Series 2 File No. 333-96515, MetLife Variable Life File No. 333-96519, MetLife Variable Survivorship Life II File No. 333-56952, MetLife Variable Life Accumulator Series III File No. 333-113109), - - MetLife of CT Fund UL II for Variable Life Insurance (MarketLife File No. 333-147904, MetLife Variable Survivorship Life File No. 333-147901, MetLife Variable Life Accumulator and MetLife Variable Life Accumulator Series 2 File No. 333-147908, MetLife Variable Life File No. 333-147900, MetLife Variable Survivorship Life II File No. 333-147897, MetLife Variable Life Accumulator Series III File No. 333-147899), - - MetLife of CT Fund UL III for Variable Life Insurance (Corporate Owned Variable Universal Life Series 1 and Series 2 File No. 333-71349, Corporate Owned Variable Universal Life 2000 and Corporate Owned Variable Universal Life III File No. 333-94779, Corporate Benefit Life File No. 333-64364, Corporate Select Policy File No. 333-105335, Corporate Owned Variable Universal Life IV File No. 333-113533), - - MetLife of CT Variable Life Insurance Separate Account One (VintageLife File No. 333-147903), - - MetLife of CT Variable Life Insurance Separate Account Two (Portfolio Architect Life File No. 333-147906), - - MetLife of CT Variable Life Insurance Separate Account Three (VintageLife File No.033-88576), - - MetLife of CT Variable Life Insurance Separate Account Four (Portfolio Architect Life File No. 333-15045), 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 13th day of March, 2008. /s/ Lisa M. Weber ---------------------------------------- Lisa M. Weber MetLife Insurance 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 Insurance Company of Connecticut, a Connecticut company, do hereby appoint Michele H. Abate, Paul G. Cellupica, 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 for Variable Annuities (Premier Advisers II, Premier Advisers III and Premier Advisers III (Series II) File No. 333-65506, Portfolio Architect, Portfolio Architect Select, Premier Advisers (Class I), Premier Advisers (Class II) File No. 033-65343, MetLife Access Annuity and MetLife Access Select Annuity File No. 333-23311), - - MetLife of CT Fund ABD II for Variable Annuities (Premier Advisers II, Premier Advisers III and Premier Advisers III (Series II) File No. 333-147893, Portfolio Architect, Portfolio Architect Select, Premier Advisers (Class I), Premier Advisers (Class II) File No. 333-147885, MetLife Access Annuity and MetLife Access Select Annuity File No. 333-147887), - - MetLife of CT Fund BD for Variable Annuities (Vintage Annuity File No. 033-73466), - - MetLife of CT Fund BD II for Variable Annuities (Vintage Annuity File No. 333-147894), - - MetLife of CT Fund BD III for Variable Annuities (Protected Equity Portfolio File No. 333-65942, Index Annuity File No. 333-27689, Vintage XTRA Annuity, Portfolio Architect XTRA, Vintage XTRA (Series II) File No. 333-70657), - - MetLife of CT Fund BD IV for Variable Annuities (Protected Equity Portfolio File No. 333-147886, Index Annuity File No. 333-147884, Vintage XTRA Annuity, Portfolio Architect XTRA, Vintage XTRA (Series II) File No. 333-147895), - - MetLife of CT Fund U for Variable Annuities (Universal Annuity File No. 002-79529, Universal Select Annuity File No. 333-116783, Universal Annuity Advantage File No. 333-117028), - - MetLife of CT Separate Account Five for Variable Annuities (MetLife Retirement Account Annuity File No. 333-58783), - - MetLife of CT Separate Account Six for Variable Annuities (MetLife Retirement Account Annuity File No. 333-147892), - - MetLife of CT Separate Account Seven for Variable Annuities (Premier Advisers AssetManager, Premier Advisers L, Premier Advisers L (Series II) File No. 333-60227), - - MetLife of CT Separate Account Eight for Variable Annuities (Premier Advisers AssetManager, Premier Advisers L, Premier Advisers L (Series II) File No. 333-147889), - - MetLife of CT Separate Account Nine for Variable Annuities (Vintage II and Vintage II (Series II) File No. 333-82009, Vintage 3, Portfolio Architect 3, Portfolio Architect L, Vintage L, Pioneer AnnuiStar Flex File No. 333-65926), - - MetLife of CT Separate Account Ten for Variable Annuities (Vintage II and Vintage II (Series II) File No. 333-147896, Vintage 3, Portfolio Architect 3, Portfolio Architect L, Vintage L, Pioneer AnnuiStar Flex File No. 333-147905), - - MetLife of CT Separate Account Eleven for Variable Annuities (Pioneer AnnuiStar Plus, Portfolio Architect Plus, Scudder Advocate Rewards Annuity File No. 333-101778), - - MetLife of CT Separate Account Twelve for Variable Annuities (Pioneer AnnuiStar Plus, Portfolio Architect Plus, Scudder Advocate Rewards Annuity File No. 333-147902), - - MetLife of CT Separate Account Thirteen for Variable Annuities (Pioneer AnnuiStar, Portfolio Architect II and Pioneer AnnuiStar Value File No. 333-101777), - - MetLife of CT Separate Account Fourteen for Variable Annuities (Pioneer AnnuiStar, Portfolio Architect II and Pioneer AnnuiStar Value File No. 333-147898), - - MetLife of CT Separate Account PF for Variable Annuities (PrimElite Annuity File No. 333-32589 and PrimElite II Annuity File No. 333-72334), - - MetLife of CT Separate Account PF II for Variable Annuities (PrimElite Annuity File No. 333-147888 and PrimElite II Annuity File No. 333-147891), - - MetLife of CT Separate Account QP for Variable Annuities (Gold Track and Gold Track Select File No. 333-00165), - - MetLife of CT Separate Account QPN for Variable Annuities (MetLife Retirement Perspectives File No. 333-141941, Unallocated Group Variable Annuity File No. 333-136191), - - MetLife of CT Separate Account TM for Variable Annuities (Marquis Portfolios File No 333-40193), - - MetLife of CT Separate Account TM II for Variable Annuities (Marquis Portfolios File No. 333-147890), - - MetLife Insurance Company of Connecticut Variable Annuity Separate Account 2002 (Vintage Access, Portfolio Architect Access, Scudder Advocate Advisor and Scudder Advocate Advisor- ST1 File No. 333-100435, Scudder Advocate Advisor TL4 File No. 333-109612), - - MetLife Life and Annuity Company of Connecticut Variable Annuity Separate Account 2002 (Vintage Access, Portfolio Architect Access, Scudder Advocate Advisor and Scudder Advocate Advisor- ST1 File No. 333-147907), - - MetLife of CT Fund UL for Variable Life Insurance (MarketLife and Invest File No. 002-88637, MetLife Variable Survivorship Life File No. 333-69771, MetLife Variable Life Accumulator and MetLife Variable Life Accumulator Series 2 File No. 333-96515, MetLife Variable Life File No. 333-96519, MetLife Variable Survivorship Life II File No. 333-56952, MetLife Variable Life Accumulator Series III File No. 333-113109), - - MetLife of CT Fund UL II for Variable Life Insurance (MarketLife File No. 333-147904, MetLife Variable Survivorship Life File No. 333-147901, MetLife Variable Life Accumulator and MetLife Variable Life Accumulator Series 2 File No. 333-147908, MetLife Variable Life File No. 333-147900, MetLife Variable Survivorship Life II File No. 333-147897, MetLife Variable Life Accumulator Series III File No. 333-147899), - - MetLife of CT Fund UL III for Variable Life Insurance (Corporate Owned Variable Universal Life Series 1 and Series 2 File No. 333-71349, Corporate Owned Variable Universal Life 2000 and Corporate Owned Variable Universal Life III File No. 333-94779, Corporate Benefit Life File No. 333-64364, Corporate Select Policy File No. 333-105335, Corporate Owned Variable Universal Life IV File No. 333-113533), - - MetLife of CT Variable Life Insurance Separate Account One (VintageLife File No. 333-147903), - - MetLife of CT Variable Life Insurance Separate Account Two (Portfolio Architect Life File No. 333-147906), - - MetLife of CT Variable Life Insurance Separate Account Three (VintageLife File No.033-88576), - - MetLife of CT Variable Life Insurance Separate Account Four (Portfolio Architect Life File No. 333-15045), 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 11th day of March, 2008. /s/ Stanley J. Talbi ---------------------------------------- Stanley J. Talbi MetLife Insurance 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 Insurance Company of Connecticut, a Connecticut company, do hereby appoint Michele H. Abate, Paul G. Cellupica, 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 for Variable Annuities (Premier Advisers II, Premier Advisers III and Premier Advisers III (Series II) File No. 333-65506, Portfolio Architect, Portfolio Architect Select, Premier Advisers (Class I), Premier Advisers (Class II) File No. 033-65343, MetLife Access Annuity and MetLife Access Select Annuity File No. 333-23311), - - MetLife of CT Fund ABD II for Variable Annuities (Premier Advisers II, Premier Advisers III and Premier Advisers III (Series II) File No. 333-147893, Portfolio Architect, Portfolio Architect Select, Premier Advisers (Class I), Premier Advisers (Class II) File No. 333-147885, MetLife Access Annuity and MetLife Access Select Annuity File No. 333-147887), - - MetLife of CT Fund BD for Variable Annuities (Vintage Annuity File No. 033-73466), - - MetLife of CT Fund BD II for Variable Annuities (Vintage Annuity File No. 333-147894), - - MetLife of CT Fund BD III for Variable Annuities (Protected Equity Portfolio File No. 333-65942, Index Annuity File No. 333-27689, Vintage XTRA Annuity, Portfolio Architect XTRA, Vintage XTRA (Series II) File No. 333-70657), - - MetLife of CT Fund BD IV for Variable Annuities (Protected Equity Portfolio File No. 333-147886, Index Annuity File No. 333-147884, Vintage XTRA Annuity, Portfolio Architect XTRA, Vintage XTRA (Series II) File No. 333-147895), - - MetLife of CT Fund U for Variable Annuities (Universal Annuity File No. 002-79529, Universal Select Annuity File No. 333-116783, Universal Annuity Advantage File No. 333-117028), - - MetLife of CT Separate Account Five for Variable Annuities (MetLife Retirement Account Annuity File No. 333-58783), - - MetLife of CT Separate Account Six for Variable Annuities (MetLife Retirement Account Annuity File No. 333-147892), - - MetLife of CT Separate Account Seven for Variable Annuities (Premier Advisers AssetManager, Premier Advisers L, Premier Advisers L (Series II) File No. 333-60227), - - MetLife of CT Separate Account Eight for Variable Annuities (Premier Advisers AssetManager, Premier Advisers L, Premier Advisers L (Series II) File No. 333-147889), - - MetLife of CT Separate Account Nine for Variable Annuities (Vintage II and Vintage II (Series II) File No. 333-82009, Vintage 3, Portfolio Architect 3, Portfolio Architect L, Vintage L, Pioneer AnnuiStar Flex File No. 333-65926), - - MetLife of CT Separate Account Ten for Variable Annuities (Vintage II and Vintage II (Series II) File No. 333-147896, Vintage 3, Portfolio Architect 3, Portfolio Architect L, Vintage L, Pioneer AnnuiStar Flex File No. 333-147905), - - MetLife of CT Separate Account Eleven for Variable Annuities (Pioneer AnnuiStar Plus, Portfolio Architect Plus, Scudder Advocate Rewards Annuity File No. 333-101778), - - MetLife of CT Separate Account Twelve for Variable Annuities (Pioneer AnnuiStar Plus, Portfolio Architect Plus, Scudder Advocate Rewards Annuity File No. 333-147902), - - MetLife of CT Separate Account Thirteen for Variable Annuities (Pioneer AnnuiStar, Portfolio Architect II and Pioneer AnnuiStar Value File No. 333-101777), - - MetLife of CT Separate Account Fourteen for Variable Annuities (Pioneer AnnuiStar, Portfolio Architect II and Pioneer AnnuiStar Value File No. 333-147898), - - MetLife of CT Separate Account PF for Variable Annuities (PrimElite Annuity File No. 333-32589 and PrimElite II Annuity File No. 333-72334), - - MetLife of CT Separate Account PF II for Variable Annuities (PrimElite Annuity File No. 333-147888 and PrimElite II Annuity File No. 333-147891), - - MetLife of CT Separate Account QP for Variable Annuities (Gold Track and Gold Track Select File No. 333-00165), - - MetLife of CT Separate Account QPN for Variable Annuities (MetLife Retirement Perspectives File No. 333-141941, Unallocated Group Variable Annuity File No. 333-136191), - - MetLife of CT Separate Account TM for Variable Annuities (Marquis Portfolios File No 333-40193), - - MetLife of CT Separate Account TM II for Variable Annuities (Marquis Portfolios File No. 333-147890), - - MetLife Insurance Company of Connecticut Variable Annuity Separate Account 2002 (Vintage Access, Portfolio Architect Access, Scudder Advocate Advisor and Scudder Advocate Advisor- ST1 File No. 333-100435, Scudder Advocate Advisor TL4 File No. 333-109612), - - MetLife Life and Annuity Company of Connecticut Variable Annuity Separate Account 2002 (Vintage Access, Portfolio Architect Access, Scudder Advocate Advisor and Scudder Advocate Advisor- ST1 File No. 333-147907), - - MetLife of CT Fund UL for Variable Life Insurance (MarketLife and Invest File No. 002-88637, MetLife Variable Survivorship Life File No. 333-69771, MetLife Variable Life Accumulator and MetLife Variable Life Accumulator Series 2 File No. 333-96515, MetLife Variable Life File No. 333-96519, MetLife Variable Survivorship Life II File No. 333-56952, MetLife Variable Life Accumulator Series III File No. 333-113109), - - MetLife of CT Fund UL II for Variable Life Insurance (MarketLife File No. 333-147904, MetLife Variable Survivorship Life File No. 333-147901, MetLife Variable Life Accumulator and MetLife Variable Life Accumulator Series 2 File No. 333-147908, MetLife Variable Life File No. 333-147900, MetLife Variable Survivorship Life II File No. 333-147897, MetLife Variable Life Accumulator Series III File No. 333-147899), - - MetLife of CT Fund UL III for Variable Life Insurance (Corporate Owned Variable Universal Life Series 1 and Series 2 File No. 333-71349, Corporate Owned Variable Universal Life 2000 and Corporate Owned Variable Universal Life III File No. 333-94779, Corporate Benefit Life File No. 333-64364, Corporate Select Policy File No. 333-105335, Corporate Owned Variable Universal Life IV File No. 333-113533), - - MetLife of CT Variable Life Insurance Separate Account One (VintageLife File No. 333-147903), - - MetLife of CT Variable Life Insurance Separate Account Two (Portfolio Architect Life File No. 333-147906), - - MetLife of CT Variable Life Insurance Separate Account Three (VintageLife File No.033-88576), - - MetLife of CT Variable Life Insurance Separate Account Four (Portfolio Architect Life File No. 333-15045), 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 14th day of March, 2008. /s/ Joseph J. Prochaska, Jr. ---------------------------------------- Joseph J. Prochaska, Jr. -----END PRIVACY-ENHANCED MESSAGE-----