-----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, EYrbuk8qw/lXIYYVaMlHz+V7py9ceFE63nFzR/p2UElBQ//k7RLRv1rESFSkaFQR zmuigIFZj9UfaM3BsXBAzA== 0001193125-08-087739.txt : 20080423 0001193125-08-087739.hdr.sgml : 20080423 20080423133532 ACCESSION NUMBER: 0001193125-08-087739 CONFORMED SUBMISSION TYPE: 485BPOS PUBLIC DOCUMENT COUNT: 3 FILED AS OF DATE: 20080423 DATE AS OF CHANGE: 20080423 EFFECTIVENESS DATE: 20080428 FILER: COMPANY DATA: COMPANY CONFORMED NAME: New England Variable Life Separate Account CENTRAL INDEX KEY: 0000717347 IRS NUMBER: 042708937 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: 1933 Act SEC FILE NUMBER: 033-52050 FILM NUMBER: 08771331 BUSINESS ADDRESS: STREET 1: NEW ENGLAND LIFE INSURANCE COMPANY STREET 2: 501 BOYLSTON STREET CITY: BOSTON STATE: MA ZIP: 02116 BUSINESS PHONE: 6175782000 MAIL ADDRESS: STREET 1: NEW ENGLAND LIFE INSURANCE COMPANY STREET 2: 501 BOYLSTON STREET CITY: BOSTON STATE: MA ZIP: 02116 FORMER COMPANY: FORMER CONFORMED NAME: NEW ENGLAND VARIABLE LIFE SEPARATE ACCOUNT DATE OF NAME CHANGE: 20011204 FORMER COMPANY: FORMER CONFORMED NAME: NEW ENGLAND LIFE SEPARATE ACCOUNT DATE OF NAME CHANGE: 20011129 FORMER COMPANY: FORMER CONFORMED NAME: NEW ENGLAND VARIABLE LIFE SEPARATE ACCOUNT DATE OF NAME CHANGE: 19920703 0000717347 S000004217 New England Variable Life Separate Account C000023048 Zenith Life Plus II 485BPOS 1 d485bpos.txt ZENITH LIFE PLUS II POST-EFFECTIVE AMENDMENT NO. 20 As filed with Securities and Exchange Commission on April 23, 2008 Registration No. 033-52050 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------- FORM S-6 POST-EFFECTIVE AMENDMENT NO. 20 TO REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ---------- New England Variable Life Separate Account (Exact Name of Trust) New England Life Insurance Company (Name of Depositor) 501 Boylston Street Boston, Massachusetts 02116 (Address of depositor's principal executive offices) ---------- Marie C. Swift, Esquire Vice President and Counsel New England Life Insurance Company 501 Boylston Street Boston, Massachusetts 02116 (Name and address of agent for service) Copies to: Stephen E. Roth, Esquire Mary E. Thornton, Esquire Sutherland Asbill & Brennan LLP 1275 Pennsylvania Avenue, N.W. Washington, D.C. 20004 ---------- It is proposed that this filing will become effective (check appropriate box) [_] immediately upon filing pursuant to paragraph (b) [X] on April 28, 2008 pursuant to paragraph (b) [_] 60 days after filing pursuant to paragraph (a)(1) [_] on (date) pursuant to paragraph (a)(1) of Rule 485 [_] this post-effective amendment designates a new effective date for a previously filed post-effective amendment Title of Securities being Registered: Interests in Variable Ordinary Life Insurance Policies. This registration statement incorporates by reference the prospectuses and supplements dated April 30, 2007, May 1, 2006, May 1, 2005, May 1, 2004, September 18, 2003, May 1, 2003, May 1, 2002, May 1, 2001, May 1, 2000 and April 30, 1999 each as filed in Post-Effective Amendment No. 19 filed April 20, 2007, Post-Effective No. 18 filed April 27, 2006, Post-Effective No. 17 filed April 29, 2005, Post-Effective No. 16 filed April 30, 2004, Post-Effective Amendment No. 15 filed September 18, 2003, Post-Effective Amendment No. 14 filed April 30, 2003, Post-Effective Amendment No. 13 filed April 30, 2002, Post-Effective Amendment No. 12 filed on April 26, 2001, Post-Effective Amendment No. 11 filed on April 26, 2000 and Post-Effective Amendment No. 10 filed on April 26, 1999, respectively, to the Registration Statement on Form S-6 (File No. 033-52050). NEW ENGLAND LIFE INSURANCE COMPANY ZENITH LIFE PLUS II VARIABLE ORDINARY LIFE INSURANCE POLICIES SUPPLEMENT DATED APRIL 28, 2008 TO PROSPECTUSES DATED APRIL 30, 1999, MAY 1, 2000, AND MAY 1, 2001 This supplement updates, and to the extent inconsistent therewith, replaces certain information contained in the prospectuses dated April 30, 1999, May 1, 2000, and May 1, 2001, as annually and periodically supplemented. You should read and retain this supplement. We will send you an additional copy of the last full prospectus for your Policy as supplemented, without charge, on written request. The Zenith Life Plus II Policies are no longer available for sale. New England Life Insurance Company ("NELICO") is a wholly-owned subsidiary of Metropolitan Life Insurance Company ("MetLife"). MetLife is a wholly-owned subsidiary of MetLife, Inc., a publicly-traded company. NELICO's Home Office is 501 Boylston Street, Boston Massachusetts 02116. NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE POLICIES OR DETERMINED IF THIS SUPPLEMENT IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. THE SECURITIES AND EXCHANGE COMMISSION MAINTAINS A WEB SITE THAT CONTAINS MATERIAL INCORPORATED BY REFERENCE, AND OTHER INFORMATION REGARDING REGISTRANTS THAT FILE ELECTRONICALLY WITH THE SECURITIES AND EXCHANGE COMMISSION. THE ADDRESS OF THE SITE IS HTTP://WWW.SEC.GOV. THE ELIGIBLE FUND PROSPECTUSES ARE ATTACHED. PLEASE READ THEM AND KEEP THEM FOR REFERENCE. WE DO NOT GUARANTEE HOW ANY OF THE SUB-ACCOUNTS OR ELIGIBLE FUNDS WILL PERFORM. THE POLICIES AND THE ELIGIBLE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, ANY FINANCIAL INSTITUTION AND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER GOVERNMENT AGENCY. INTRODUCTION TO THE POLICIES EXCHANGE PROGRAM We are currently offering an exchange program under which you may be able to exchange your Policy for a flexible premium variable life insurance policy issued by us--Zenith Flexible Life 2001--if your Policy meets certain conditions. Under the terms of the exchange program, we will waive the surrender charge that would otherwise be payable on surrender of your Policy, and we will waive the sales, premium and federal tax charges that would otherwise be payable on the cash value that is transferred to the Zenith Flexible Life 2001 policy. Please contact your registered representative about the availability of this exchange program. We intend to terminate the exchange program. Accordingly, applications must be received by us no later than September 30, 2008. RECEIPT OF COMMUNICATIONS AND PAYMENTS AT NELICO'S DESIGNATED OFFICE We will treat your request for a Policy transaction, or your submission of a payment, as received by us if we receive a request conforming to our administrative procedures or a payment at our Designated Office before the close of regular trading on the New York Stock Exchange on that day (usually 4:00 p.m. Eastern Time). If we receive it after that time, or if the New York Stock Exchange is not open that day, then we will treat it as received on the next day when the New York Stock Exchange is open. These rules apply regardless of the reason we did not receive your request by the close of regular trading on the New York Stock Exchange--even if due to our delay (such as a delay in answering your telephone call). The Designated Office for various Policy transactions is as follows: Premium Payments............................. New England Financial P.O. Box 371499 Pittsburgh, PA 15250-7499 Payment Inquiries and Correspondence......... New England Financial/MetLife P.O. Box 30440 Tampa, FL 33630-3440 Beneficiary and Ownership Changes............ New England Financial/MetLife P.O. Box 541 Warwick, RI 02887-0541 Surrenders, Loans, Withdrawals and Sub-Account Transfers...................... New England Financial/MetLife P.O. Box 543 Warwick, RI 02887-0543 Death Claims................................. New England Financial/MetLife P.O. Box 353 Warwick, RI 02887-0353 Sub-Account Transfers by Telephone........... (800) 200-2214 All Other Telephone Transactions and Inquiries.................................. (800) 388-4000 You may request an account transfer or reallocation of future premiums by written request (which may be telecopied) to our Designated Office, by telephoning us, or over the Internet (subject to our restrictions on "market timing" transfers). To request a transfer or reallocation by telephone, you should contact your registered representative or contact us at (800) 200-2214. To request a transfer or reallocation over the Internet, you may log on to our website at www.nef.com. We use reasonable procedures to confirm that instructions communicated by telephone, facsimile or Internet are genuine. Any telephone, facsimile or Internet instructions that we reasonably believe to be genuine will be your responsibility, including losses arising from any errors in the communication of instructions. However, because telephone and Internet transactions may be available to anyone who provides A-2 certain information about you and your Policy, you should protect that information. We may not be able to verify that you are the person providing telephone or Internet instructions, or that you have authorized any such person to act for you. Telephone, facsimile, and computer systems (including the Internet) may not always be available. Any telephone, facsimile, or computer system, whether it is yours, your service provider's, your registered representative's, or ours, can experience outages or slowdowns for a variety of reasons. These outages or slowdowns may delay or prevent our processing of your request. Although we have taken precautions to help our systems handle heavy use, we cannot promise complete reliability under all circumstances. If you are experiencing problems, you should make your request by writing to our Designated Office. If you send your premiums or transaction requests to an address other than the one we have designated for receipt of such premiums or requests, we may return the premium to you, or there may be a delay in applying the premium or transaction to your policy. PAYMENT OF PROCEEDS. We may withhold payment of surrender or loan proceeds if any portion of those proceeds would be derived from a Policy Owner's check, or from a premium transaction under our pre-authorized checking arrangement 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 Policy 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. Policy 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. We do not accept cash, money orders, or travelers checks. POLICY VALUES AND BENEFITS AGE 100 The Policies endow at age 100 of the insured for the greater of the current cash value and the Policy face amount (each reduced by any outstanding loans plus interest). You can elect to continue the Policy beyond age 100 of the insured instead of taking payment at age 100. Sixty days before the anniversary when the insured is age 100 we will send you an election form. If you elect to continue the Policy, the cash value will remain in the sub- accounts and/or Fixed Account that you have chosen. We will not deduct Policy charges or accept premium payments after age 100. You can continue to make loans, surrenders and account transfers. The death benefit after age 100 equals the greater of (1) the Policy's face amount at age 100 (as reduced by any later surrenders or face amount reductions), and (2) the cash value on the date of death. The proceeds we pay will be reduced by any outstanding loan plus interest. The tax consequences of continuing the Policy beyond the insured's age 100 are unclear. You should consult a tax adviser if you intend to keep the Policy in force beyond the insured's age 100. TABULAR CASH VALUE The Policy's tabular cash value is a hypothetical value. We use it to determine (1) the Option 2 death benefit, (2) whether you can skip a scheduled premium payment under the Special Premium Option, and (3) how much cash value you can withdraw from the Policy. (See "Death Benefit", "Special Premium Option" and "Partial Surrender and Partial Withdrawal".) We recalculate the tabular cash value when we recalculate the Policy's scheduled premium. When we recalculate the scheduled premium (at the Policy anniversary when the insured is age 70, or after 10 years, if later), the new scheduled premium and tabular cash value amounts depend on the Policy's actual cash value on the recalculation date. (See "Premiums--Scheduled Premium Recalculation".) The tabular cash value increases on the premium recalculation date if the Policy's actual cash value on that date is higher than the tabular cash value just before the recalculation. We determine the new scheduled premium amount based on the new tabular cash value. (See "Premiums--Scheduled Premium Recalculation".) A-3 After the premium recalculation date, we determine the tabular cash value in the same manner as before the recalculation, starting with the tabular cash value on the premium recalculation date and assuming payment of the recalculated scheduled premium starting at age 71 (or 11 years after the Policy is issued, if later). The change in the scheduled premium does not take effect until the next Policy anniversary, but the new tabular cash value takes effect immediately. This means that the amount of the Option 2 death benefit, the cash value available for withdrawal, and your ability to skip scheduled premium payments under the Special Premium Option may also be affected on the premium recalculation date. See Appendix F for examples. Your premium payment schedule (annual vs. quarterly, for example) affects the amount of the tabular cash value. We calculate the tabular cash value on any day up to the premium recalculation date as if the current payment schedule had always been in effect. Thereafter, we calculate it as if the current payment schedule had been in effect since the premium recalculation date. CHARGES AND EXPENSES The amount of a charge may not necessarily correspond to the costs of the services or benefits that are implied by the name of the charge or that are associated with the particular Policy. For example, the sales charge and Deferred Sales Charge may not fully cover all of our sales and distribution expenses, and we may use proceeds from other charges, including the mortality and expense risk charge and the cost of insurance charge, to help cover those expenses. We can profit from certain charges. MORTALITY AND EXPENSE RISK CHARGE. We deduct a charge for the mortality and expense risks that we assume. We are currently waiving 0.08% of the Mortality and Expense Risk Charge for the Sub-account investing in the BlackRock Large-Cap Core Portfolio and an amount equal to the Eligible Fund expenses that are in excess of 0.88% for the Sub-account investing in the MFS Research International Portfolio. CHARGES AGAINST THE ELIGIBLE FUNDS AND THE SUB-ACCOUNTS OF THE VARIABLE ACCOUNT ELIGIBLE FUND EXPENSES. Charges for investment advisory fees and other expenses are deducted from the assets of the Eligible Funds. The following table describes the annual operating expenses for each Eligible Fund for the year ended December 31, 2007, before and after any applicable contractual fee waivers and expense reimbursements: ANNUAL OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
ACQUIRED GROSS FUND FEES TOTAL FEE WAIVERS NET TOTAL MANAGEMENT OTHER 12B-1 AND ANNUAL AND EXPENSE ANNUAL FEES EXPENSES FEES EXPENSES* EXPENSES* REIMBURSEMENTS EXPENSES** ---------- -------- ----- --------- --------- -------------- ---------- METROPOLITAN SERIES FUND, INC. (CLASS A SHARES) BlackRock Aggressive Growth Portfolio................... 0.71% 0.05% -- -- 0.76% -- 0.76% BlackRock Bond Income Portfolio................... 0.38% 0.06% -- -- 0.44% 0.01% 0.43%/1/ BlackRock Diversified Portfolio................... 0.44% 0.06% -- -- 0.50% -- 0.50% BlackRock Large Cap Value Portfolio................... 0.68% 0.06% -- -- 0.74% -- 0.74% BlackRock Legacy Large Cap Growth Portfolio............ 0.73% 0.06% -- -- 0.79% -- 0.79% BlackRock Money Market Portfolio................... 0.33% 0.07% -- -- 0.40% 0.01% 0.39%/2/
A-4
ACQUIRED GROSS FUND FEES TOTAL FEE WAIVERS NET TOTAL MANAGEMENT OTHER 12B-1 AND ANNUAL AND EXPENSE ANNUAL FEES EXPENSES FEES EXPENSES* EXPENSES* REIMBURSEMENTS EXPENSES** ---------- -------- ----- --------- --------- -------------- ---------- BlackRock Strategic Value Portfolio.................... 0.82% 0.06% -- -- 0.88% -- 0.88% Davis Venture Value Portfolio.. 0.69% 0.04% -- -- 0.73% -- 0.73% FI Large Cap Portfolio......... 0.77% 0.07% -- -- 0.84% -- 0.84% FI Mid Cap Opportunities Portfolio.................... 0.68% 0.05% -- -- 0.73% -- 0.73% FI Value Leaders Portfolio..... 0.64% 0.07% -- -- 0.71% -- 0.71% Franklin Templeton Small Cap Growth Portfolio............. 0.90% 0.11% -- -- 1.01% -- 1.01% Harris Oakmark Focused Value Portfolio.................... 0.72% 0.04% -- -- 0.76% -- 0.76% Jennison Growth Portfolio...... 0.63% 0.04% -- -- 0.67% -- 0.67% Julius Baer International Stock Portfolio.................... 0.84% 0.12% -- -- 0.96% 0.04% 0.92%/3/ Lehman Brothers Aggregate Bond Index Portfolio......... 0.25% 0.05% -- -- 0.30% 0.01% 0.29%/4/ Loomis Sayles Small Cap Portfolio.................... 0.90% 0.05% -- -- 0.95% 0.05% 0.90%/5/ MetLife Mid Cap Stock Index Portfolio.................... 0.25% 0.07% -- 0.01% 0.33% 0.01% 0.32%/6/ MetLife Stock Index Portfolio.. 0.25% 0.04% -- -- 0.29% 0.01% 0.28%/6/ MFS Total Return Portfolio..... 0.53% 0.05% -- -- 0.58% -- 0.58% MFS Value Portfolio............ 0.72% 0.05% 0.77% 0.07% 0.70%/7/ Morgan Stanley EAFE Index Portfolio.................... 0.30% 0.12% -- 0.01% 0.43% 0.01% 0.42%/8/ Neuberger Berman Mid Cap Value Portfolio.............. 0.64% 0.05% -- -- 0.69% -- 0.69% Oppenheimer Global Equity Portfolio.................... 0.51% 0.10% -- -- 0.61% -- 0.61% Russell 2000 Index Portfolio... 0.25% 0.07% -- 0.01% 0.33% 0.01% 0.32%/6/ T. Rowe Price Large Cap Growth Portfolio.................... 0.60% 0.07% -- -- 0.67% -- 0.67% T. Rowe Price Small Cap Growth Portfolio.................... 0.51% 0.08% -- -- 0.59% -- 0.59% Western Asset Management Strategic Bond Opportunities Portfolio.................... 0.61% 0.05% -- -- 0.66% -- 0.66% Western Asset Management U.S. Government Portfolio......... 0.49% 0.05% -- -- 0.54% -- 0.54% Zenith Equity Portfolio........ -- 0.01% -- 0.70% 0.71% -- 0.71%/9/ MetLife Conservative Allocation Portfolio.................... 0.10% 0.05% -- 0.59% 0.74% 0.05% 0.69%/10/ MetLife Conservative to Moderate Allocation Portfolio.................... 0.10% 0.01% -- 0.64% 0.75% 0.01% 0.74%/10/ MetLife Moderate Allocation Portfolio.................... 0.08% 0.01% -- 0.67% 0.76% -- 0.76%/10/ MetLife Moderate to Aggressive Allocation Portfolio......... 0.08% 0.01% -- 0.70% 0.79% -- 0.79%/10/ MetLife Aggressive Allocation Portfolio.................... 0.10% 0.04% -- 0.73% 0.87% 0.04% 0.83%/10/
A-5
ACQUIRED GROSS FUND FEES TOTAL FEE WAIVERS NET TOTAL MANAGEMENT OTHER 12B-1 AND ANNUAL AND EXPENSE ANNUAL FEES EXPENSES FEES EXPENSES* EXPENSES* REIMBURSEMENTS EXPENSES** ---------- -------- ----- --------- --------- -------------- ---------- MET INVESTORS SERIES TRUST (CLASS A SHARES) BlackRock Large Cap Core Portfolio................... 0.58% 0.07% -- -- 0.65% -- 0.65% Clarion Global Real Estate Portfolio................... 0.61% 0.04% -- -- 0.65% -- 0.65% Cyclical Growth and Income ETF Portfolio................... 0.45% 0.10% -- 0.23% 0.78% -- 0.78%/11/ Cyclical Growth ETF Portfolio. 0.45% 0.09% -- 0.24% 0.78% -- 0.78%/11/ Harris Oakmark International Portfolio................... 0.77% 0.09% -- -- 0.86% -- 0.86% Janus Forty Portfolio......... 0.65% 0.05% -- -- 0.70% -- 0.70% Lazard Mid Cap Portfolio...... 0.69% 0.07% -- -- 0.76% -- 0.76% Legg Mason Partners Aggressive Growth Portfolio............ 0.62% 0.05% -- -- 0.67% -- 0.67% Legg Mason Value Equity Portfolio................... 0.63% 0.04% -- -- 0.67% -- 0.67% Lord Abbett Bond Debenture Portfolio................... 0.49% 0.05% -- -- 0.54% -- 0.54% Met/AIM Small Cap Growth Portfolio................... 0.86% 0.06% -- -- 0.92% -- 0.92% MFS Research International Portfolio................... 0.70% 0.09% -- -- 0.79% -- 0.79% Oppenheimer Capital Appreciation Portfolio...... 0.58% 0.04% -- -- 0.62% -- 0.62% PIMCO Inflation Protected Bond Portfolio................... 0.50% 0.05% -- -- 0.55% -- 0.55% PIMCO Total Return Portfolio.. 0.48% 0.04% -- -- 0.52% -- 0.52%/12/ RCM Technology Portfolio...... 0.88% 0.09% -- -- 0.97% -- 0.97% T. Rowe Price Mid Cap Growth Portfolio................... 0.75% 0.05% -- -- 0.80% -- 0.80% FIDELITY(R) VARIABLE INSURANCE PRODUCTS (INITIAL CLASS) Equity-Income Portfolio....... 0.46% 0.09% -- -- 0.55% -- 0.55% AMERICAN FUNDS INSURANCE SERIES (CLASS 2 SHARES) American Funds Bond Fund...... 0.40% 0.01% 0.25% -- 0.66% -- 0.66% American Funds Global Small Capitalization Fund......... 0.70% 0.03% 0.25% -- 0.98% -- 0.98% American Funds Growth Fund.... 0.32% 0.01% 0.25% -- 0.58% -- 0.58% American Funds Growth-Income Fund........................ 0.26% 0.01% 0.25% -- 0.52% -- 0.52%
- -------- * 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 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. A-6 /1/ 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. /2/ 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 0.345% for the first $500 million of the Portfolio's average daily net assets and 0.335% for the next $500 million. /3/ 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 0.81% for the first $500 million of the Portfolio's average daily net assets and 0.78% for the next $500 million. /4/ 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 0.244%. /5/ 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 by 0.05%. /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 0.243%. 7 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 0.65% for the first $1.25 billion of the Portfolio's average daily net assets, 0.60% for the next $250 million and 0.50% for amounts over $1.5 billion. /8/ 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 0.293%. /9/ The Portfolio is a "fund of funds" that invests equally in three other portfolios of the Metropolitan Series Fund, Inc.: the FI Value Leaders Portfolio, the Jennison Growth Portfolio and the Capital Guardian U.S. Equity Portfolio. 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 it invests, including the management fee. /10/The Portfolio is a "fund of funds" that invests substantially all of its assets in other portfolios of the Metropolitan Series Fund, Inc. and the Met Investors Series Trust. 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 it invests, including the management fee. MetLife Advisers, LLC has contractually agreed, for the period April 28, 2008 through April 30, 2009, to waive fees or pay all expenses (other than acquired fund fees and expenses, brokerage costs, taxes, interest and any extraordinary expenses) so as to limit the net operating expenses of the Portfolio (other than acquired fund fees and expenses, brokerage costs, taxes, interest and any extraordinary expenses) to 0.10% for the Class A shares, 0.35% for the Class B shares and 0.25% for the Class E shares. /11/The Portfolio primarily invests its assets in other investment companies known as exchange-traded funds ("underlying ETFs"). As an investor in an underlying ETF or other investment company, the Portfolio will bear its pro rata portion of the operating expenses of the underlying ETF or other investment company, including the management fee. /12/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. THE FEE AND EXPENSE INFORMATION REGARDING THE ELIGIBLE FUNDS WAS PROVIDED BY THOSE ELIGIBLE FUNDS. FIDELITY VARIABLE INSURANCE PRODUCTS AND THE AMERICAN FUNDS INSURANCE SERIES ARE NOT AFFILIATED WITH NELICO. CERTAIN PAYMENTS WE RECEIVE WITH REGARD TO THE ELIGIBLE FUNDS An investment adviser (other than our affiliates MetLife Advisers, LLC and Met Investors Advisory LLC) or subadviser of an Eligible Fund, or its affiliates, may make payments to us and/or certain of our 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 Policies and, in the Company's role as an intermediary, with respect to the Eligible 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 Eligible Fund assets. Policy Owners, through their indirect investment in the Eligible Funds, bear the costs of these advisory fees (see the Eligible Funds' prospectuses for more information). The amount of the payments we receive is based on a percentage of assets of the Eligible Funds attributable to the Policies and certain other variable insurance products that we and our affiliates A-7 issue. These percentages differ and some advisers or subadvisers (or other affiliates) may pay us more than others. These percentages currently range up to 0.50%. Additionally, an investment adviser or subadviser of an Eligible Fund or its affiliates may provide us with wholesaling services that assist in the distribution of the Policies and may pay us and/or certain of our affiliates amounts to participate in sales meetings. These amounts may be significant and may provide the adviser or subadviser (or their affiliate) with increased access to persons involved in the distribution of the Policies. We and/or certain of our affiliated insurance companies have joint ownership interests in affiliated investment advisers MetLife Advisers, LLC and Met Investors Advisory LLC, which are formed as "limited liability companies". Our 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 Eligible Funds. We will benefit accordingly from assets allocated to the Eligible Funds to the extent they result in profits to the advisers. (See "Fee Table - Eligible Funds Fees and Expenses" for information on the management fees paid by the Eligible Funds and the Statement of Additional Information for the Eligible Funds for information on the management fees paid by the advisers to the subadvisers.) Certain Eligible Funds have adopted a Distribution Plan under Rule 12b-1 of the Investment Company Act of 1940. An Eligible Fund's 12b-1 Plan, if any, is described in more detail in the Eligible Fund's prospectus. (See "Fee Table - Eligible Fund Fees and Expenses" and "Distribution of the Policies.") Any payments we receive pursuant to those 12b-1 Plans are paid to us or our distributor. Payments under an Eligible Fund's 12b-1 Plan decrease the Eligible Fund's investment return. SELECTION OF THE ELIGIBLE FUNDS We select the Eligible Funds offered through this Policy 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 Eligible Fund's adviser or subadviser is one of our affiliates or whether the Eligible Fund, its adviser, its subadviser(s), or an affiliate will make payments to us or our affiliates. For additional information on these arrangements, see "Certain Payments We Receive with Regard to the Eligible Funds" above. 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 portfolios advised by our affiliates in the variable insurance products we issue. We review the Eligible Funds periodically and may remove an Eligible Fund or limit its availability to new Premiums and/or transfers of cash value if we determine that the Eligible Fund no longer meets one or more of the selection criteria, and/or if the Eligible Fund has not attracted significant allocations from Policy Owners. In some cases, we have included Eligible Funds based on recommendations made by selling firms. These selling firms may receive payments from the Eligible Funds they recommend and may benefit accordingly from the allocation of cash value to such Eligible Funds. We pay American Funds Distributors, Inc., principal underwriter for the American Funds Insurance Series, a percentage of all premiums allocated to the American Funds Bond Fund, the American Funds Global Small Capitalization Fund, the American Funds Growth Fund, and the American Funds Growth-Income Fund, for the services it provides in marketing the Funds' shares in connection with the Policies. Each of these Funds makes payments to our distributor under their distribution plans in consideration of services provided and expenses incurred by our distributor in distributing their shares. These payments currently equal 0.25% of Variable Account assets invested in the particular Eligible Fund. (See "Eligible Fund Expenses'' and the Eligible Fund prospectuses.) WE DO NOT PROVIDE ANY INVESTMENT ADVICE AND DO NOT RECOMMEND OR ENDORSE ANY PARTICULAR ELIGIBLE FUND. YOU BEAR THE RISK OF ANY DECLINE IN THE CASH VALUE OF YOUR POLICY RESULTING FROM THE PERFORMANCE OF THE ELIGIBLE FUNDS YOU HAVE CHOSEN. A-8 THE VARIABLE ACCOUNT INVESTMENTS OF THE VARIABLE ACCOUNT Each Sub-Account of the Variable Account invests in a corresponding Eligible Fund. Each Eligible Fund is part of an open-end management investment company, more commonly known as a mutual fund, that serves as an investment vehicle for variable life insurance and variable annuity separate accounts of various insurance companies. The mutual funds that offer the Eligible Funds are the Metropolitan Series Fund, Inc., the Met Investors Series Trust, the Variable Insurance Products Fund and the American Funds Insurance Series. Each of these mutual funds has an investment adviser responsible for overall management of the fund. Some investment advisers have contracted with sub-advisers to make the day-to-day investment decisions for the Eligible Funds. The adviser, sub-adviser and investment objective of each Eligible Fund are as follows: METROPOLITAN SERIES FUND, INC. ADVISER: METLIFE ADVISERS, LLC ELIGIBLE FUND SUB-ADVISER INVESTMENT OBJECTIVE - ------------- ----------- -------------------- BlackRock Aggressive Growth BlackRock Advisors, LLC Maximum capital appreciation. Portfolio BlackRock Bond Income Portfolio BlackRock Advisors, LLC A competitive total return primarily from investing in fixed-income securities. BlackRock Diversified Portfolio BlackRock Advisors, LLC High total return while attempting to limit investment risk and preserve capital. BlackRock Large Cap Value Portfolio BlackRock Advisors, LLC Long-term growth of capital. BlackRock Legacy Large Cap BlackRock Advisors, LLC Long-term growth of capital. Growth Portfolio BlackRock Money Market Portfolio/1/ BlackRock Advisors, LLC A high level of current income consistent with preservation of capital. BlackRock Strategic Value Portfolio BlackRock Advisors, LLC High total return, consisting principally of capital appreciation. Davis Venture Value Portfolio Davis Selected Advisers, L.P./2/ Growth of capital. FI Large Cap Portfolio Pyramis Global Advisors, LLC/3/ Long-term growth of capital. FI Mid Cap Opportunities Portfolio Pyramis Global Advisors, LLC/3/ Long-term growth of capital. FI Value Leaders Portfolio Pyramis Global Advisors, LLC/3/ Long-term growth of capital. Franklin Templeton Small Cap Franklin Advisers, Inc. Long-term capital growth. Growth Portfolio Harris Oakmark Focused Value Harris Associates L.P. Long-term capital appreciation. Portfolio Jennison Growth Portfolio Jennison Associates LLC Long-term growth of capital. Julius Baer International Stock Julius Baer Investment Long-term growth of capital. Portfolio (formerly FI International Management LLC/3/ Stock Portfolio) Lehman Brothers Aggregate Bond MetLife Investment Advisors To equal the performance of the Lehman Index Portfolio Company, LLC Brothers Aggregate Bond Index. Loomis Sayles Small Cap Portfolio Loomis, Sayles & Company, Long-term capital growth from L.P. investments in common stocks or other equity securities.
A-9
ELIGIBLE FUND SUB-ADVISER INVESTMENT OBJECTIVE - ------------- ----------- -------------------- MetLife Mid Cap Stock Index MetLife Investment Advisors To equal the performance of the Standard Portfolio Company, LLC & Poor's Mid Cap 400 Composite Stock Price Index. MetLife Stock Index Portfolio MetLife Investment Advisors To equal the performance of the Standard Company, LLC & Poor's 500 Composite Stock Price Index. MFS Total Return Portfolio Massachusetts Financial Favorable total return through investment Services Company in a diversified portfolio. MFS Value Portfolio (formerly Harris Massachusetts Financial Capital appreciation and reasonable Oakmark Large Cap Value Portfolio) Services Company/4/ income. Morgan Stanley EAFE Index MetLife Investment Advisors To equal the performance of the MSCI Portfolio Company, LLC EAFE Index. Neuberger Berman Mid Cap Value Neuberger Berman Capital growth. Portfolio Management Inc. Oppenheimer Global Equity Portfolio OppenheimerFunds, Inc. Capital appreciation. Russell 2000 Index Portfolio MetLife Investment Advisors To equal the return of the Russell 2000 Company, LLC Index. T. Rowe Price Large Cap Growth T. Rowe Price Associates, Inc. Long-term growth of capital and, Portfolio secondarily, dividend income. T. Rowe Price Small Cap Growth T. Rowe Price Associates, Inc. Long-term capital growth. Portfolio Western Asset Management Western Asset Management To maximize total return consistent with Strategic Bond Opportunities Company preservation of capital. Portfolio Western Asset Management U.S. Western Asset Management To maximize total return consistent with Government Portfolio Company preservation of capital and maintenance of liquidity. Zenith Equity Portfolio/5/ N/A Long-term capital appreciation. MetLife Conservative Allocation N/A A high level of current income, with Portfolio growth of capital as a secondary objective. MetLife Conservative to Moderate N/A A high total return in the form of income Allocation Portfolio and growth of capital, with a greater emphasis on income. MetLife Moderate Allocation N/A A balance between a high level of current Portfolio income and growth of capital, with a greater emphasis on growth of capital. MetLife Moderate to Aggressive N/A Growth of capital. Allocation Portfolio MetLife Aggressive Allocation N/A Growth of capital. Portfolio
A-10
ELIGIBLE FUND SUB-ADVISER INVESTMENT OBJECTIVE - ------------- ----------- -------------------- MET INVESTORS SERIES TRUST ADVISER: MET INVESTORS ADVISORY LLC BlackRock Large Cap Core Portfolio BlackRock Advisors, LLC Long-term capital growth. Clarion Global Real Estate Portfolio ING Clarion Real Estate Total return through investment in real (formerly Neuberger Berman Real Securities L.P./6/ estate securities, emphasizing both capital Estate Portfolio) appreciation and current income. Cyclical Growth and Income ETF Gallatin Asset Management, Growth of capital and income. Portfolio Inc. Cyclical Growth ETF Portfolio Gallatin Asset Management, Growth of capital. Inc. Harris Oakmark International Harris Associates L.P. Long-term capital appreciation. Portfolio Janus Forty Portfolio Janus Capital Management Capital appreciation. LLC Lazard Mid Cap Portfolio Lazard Asset Management Long-term growth of capital. LLC Legg Mason Partners Aggressive ClearBridge Advisors, LLC Capital appreciation. Growth Portfolio Legg Mason Value Equity Portfolio Legg Mason Capital Long-term growth of capital. Management, Inc. Lord Abbett Bond Debenture Lord, Abbett & Co. LLC To provide high current income and the Portfolio opportunity for capital appreciation to produce a high total return. Met/AIM Small Cap Growth Portfolio Invesco Aim Capital Long-term growth of capital. Management, Inc./7/ MFS Research International Massachusetts Financial Capital appreciation. Portfolio Services Company Oppenheimer Capital Appreciation OppenheimerFunds, Inc. Capital appreciation. Portfolio PIMCO Inflation Protected Bond Pacific Investment Maximum real return, consistent with Portfolio Management Company LLC preservation of capital and prudent investment management. PIMCO Total Return Portfolio Pacific Investment Maximum total return, consistent with the Management Company LLC preservation of capital and prudent investment management. RCM Technology Portfolio RCM Capital Management LLC Capital appreciation; no consideration is given to income. T. Rowe Price Mid Cap Growth T. Rowe Price Associates, Inc. Long-term growth of capital. Portfolio
A-11
ELIGIBLE FUND SUB-ADVISER INVESTMENT OBJECTIVE - ------------- ----------- -------------------- FIDELITY(R) VARIABLE INSURANCE PRODUCTS ADVISER: FIDELITY MANAGEMENT & RESEARCH COMPANY Equity-Income Portfolio See fund prospectus Reasonable income. The fund will also consider the potential for capital appreciation. The fund's goal is to achieve a yield which exceeds the composite yield on the securities comprising the Standard & Poor's 500/SM/ Index (S&P 500(R)). AMERICAN FUNDS INSURANCE SERIES ADVISER: CAPITAL RESEARCH AND MANAGEMENT COMPANY American Funds Bond Fund N/A Maximize current income and preserve capital by investing primarily in fixed- income securities. American Funds Global Small N/A Capital appreciation through stocks. Capitalization Fund American Funds Growth Fund N/A Capital appreciation through stocks. American Funds Growth-Income N/A Capital appreciation and income. Fund
- -------- /1/ An investment in the BlackRock Money Market Portfolio is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the Portfolio seeks to preserve the value of your investment at $100 per share, it is possible to lose money by investing in the Portfolio. During extended periods of low interest rates, the yields of the Sub-Account investing in the BlackRock Money Market Portfolio may become extremely low and possibly negative. /2/ Davis Selected Advisers, L.P. may also delegate any of its responsibilities to Davis Selected Advisers-NY, Inc., a wholly-owned subsidiary. /3/ Prior to April 28, 2008, Fidelity Management & Research Company was the sub-adviser to this Portfolio. /4/ Prior to January 7, 2008, Harris Associates L.P. was the sub-adviser to this Portfolio. /5/ The Zenith Equity Portfolio is a fund of funds that invests equally in three other Portfolios of the Metropolitan Series Fund, Inc.; the FI Value Leaders Portfolio, the Jennison Growth Portfolio and the Capital Guardian U.S. Equity Portfolio. The sub-advisers to these Portfolios are Pyramis Global Advisors, LLC, Jennison Associates LLC and Capital Guardian Trust Company, respectively. /6/ Prior to April 28, 2008, Neuberger Berman Management Inc. was the sub-adviser to this Portfolio. /7/ Prior to April 28, 2008, AIM Capital Management, Inc. was the sub-adviser to this Portfolio. FOR MORE INFORMATION REGARDING THE ELIGIBLE FUNDS AND THEIR INVESTMENT ADVISERS AND SUB-ADVISERS, SEE THE ELIGIBLE FUND PROSPECTUSES ATTACHED AT THE END OF THIS PROSPECTUS AND THEIR STATEMENTS OF ADDITIONAL INFORMATION. The Eligible Funds' investment objectives may not be met. The investment objectives and policies of certain Eligible Funds are similar to the investment objectives and policies of other funds that may be managed by the same investment adviser or sub-adviser. The investment results of the Eligible Funds may be higher or lower than the results of these funds. There is no assurance, and no representation is made, that the investment results of any of the Eligible Funds will be comparable to the investment results of any other fund. SUBSTITUTION OF INVESTMENTS If investment in the Eligible Funds or a particular Fund is no longer possible, in our judgment becomes inappropriate for the purposes of the Policies, or for any other reason in our sole discretion, we may substitute another Eligible Fund or Funds without your consent. The substituted fund may have different fees and expenses. Substitution may be made with respect to existing investments or the investment of future premium payments, or both. However, we will not make such substitution without any necessary approval of the Securities and Exchange A-12 Commission. Furthermore, we may make available or close sub-accounts to allocation of premium payments or cash value, or both, for some or all classes of Policies, at any time in our sole discretion. SHARE CLASSES OF THE ELIGIBLE FUNDS The Eligible Funds offer various classes of shares, each of which has a different level of expenses. Attached prospectuses for the Eligible Funds may provide information for share classes that are not available through the Policy. When you consult the attached prospectus for any Eligible Fund, you should be careful to refer to only the information regarding the class of shares that is available through the Policy. For the Metropolitan Series Fund, Inc. and Met Investors Series Trust, we offer Class A Shares only, for Fidelity Variable Insurance Products we offer Initial Class shares only, and for the American Funds Insurance Series we offer Class 2 shares only. PREMIUMS SCHEDULED PREMIUM RECALCULATION We recalculate the initial scheduled premium for the Policy on the anniversary when the insured is age 70, or 10 years after the Policy is issued, whichever is later. We recalculate the scheduled premium using the Policy's current cash value and assuming that guaranteed maximum charges will apply and that the Policy will earn a 4.5% net rate of return. The recalculation is done before we credit the premium and deduct the monthly charges due on that anniversary. The recalculated scheduled premium will not be less than the initial scheduled premium, and it will not be higher than the maximum scheduled premium shown on your Policy's schedule page. The recalculated scheduled premium applies to the Policy starting on the following Policy anniversary, when the insured has reached age 71 (or 11 years after the Policy is issued, whichever is later). If the Policy earned a net return of greater than 4.5%, if you made unscheduled payments, if less than the guaranteed maximum charges were deducted or if you made no loans or withdrawals of cash value, the increase in the scheduled premium could be reduced, or possibly avoided. Generally, the Policy's scheduled premium will not increase if the Policy's sub-accounts have earned the daily equivalent of a constant annual net rate of return (after deduction of the mortality and expense risk charge and Eligible Fund fees and expenses) of 6% to 8%, depending on the insured's age at issue, sex and underwriting class, and: you have paid each scheduled premium (and have not used the Special Premium Option to skip payments); you have made no loans, partial withdrawals, partial surrenders or unscheduled payments; and all Policy charges including cost of insurance charges do not increase above their current levels. However, variations in the rate of return, even if it averages 6% to 8%, could cause a scheduled premium increase. If your scheduled premium increases and you do not wish to pay the higher amount, you may (i) lapse the Policy to variable paid-up insurance (if available under your Policy) or to a fixed-benefit lapse option, (ii) take a partial surrender to reduce the Policy's face amount and cash value and keep the scheduled premium at its initial level (as long as the remaining face amount meets our minimum face amount requirement), or (iii) reduce the Policy's face amount, without reducing the Policy's cash value (except by the amount of any Surrender Charge that applies). For a description of how the premium recalculation affects the Policy's tabular cash value, see "Tabular Cash Value". OTHER POLICY FEATURES TRANSFER OPTION Frequent requests from Policy owners to transfer cash value may dilute the value of an Eligible Fund's shares if the frequent trading involves an attempt to take advantage of pricing inefficiencies created by a lag between a A-13 change in the value of the securities held by the Eligible Fund and the reflection of that change in the Eligible 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 Eligible Funds and may disrupt portfolio management strategy, requiring an Eligible 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 Eligible Funds, which may in turn adversely affect Policy owners and other persons who may have an interest in the Policies (e.g., 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 Eligible Funds (I.E., the BlackRock Strategic Value Portfolio, FI International Stock Portfolio, Franklin Templeton Small Cap Growth Portfolio, Loomis Sayles Small Cap Portfolio, Morgan Stanley EAFE Index Portfolio, Oppenheimer Global Equity Portfolio, Russell 2000 Index Portfolio, Western Asset Management Strategic Bond Opportunities Portfolio, T. Rowe Price Small Cap Growth Portfolio, Harris Oakmark International Portfolio, Lord Abbett Bond Debenture Portfolio, Met/AIM Small Cap Growth Portfolio, MFS Research International Portfolio, VIP Overseas Portfolio and American Funds Global Small Capitalization Fund--the "Monitored Portfolios") and we monitor transfer activity in those Monitored Portfolios. In addition, as described below, we intend to 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 category of international, small-cap, and high-yield Eligible Funds, in a 12-month period there were, (1) six or more transfers involving the given category; (2) cumulative gross transfers involving the given category that exceed the current cash value; and (3) two or more "round-trips" involving any portfolio in the given category. A round-trip generally is defined as a transfer in followed by a transfer out within the next seven calendar days or a transfer out followed by a transfer in within the next seven calendar days, in either case subject to certain other criteria. We do not believe that other Eligible Funds present a significant opportunity to engage in arbitrage trading and therefore do not monitor transfer activity in those Eligible Funds. We may change the Monitored Portfolios at any time without notice in our sole discretion. In addition to monitoring transfer activity in certain Eligible Funds, we rely on the underlying Eligible 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 Policy, 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; each additional violation will result in the imposition of a six-month restriction, during which period we will require all transfer requests to or from an American Funds portfolio to be submitted with an original signature. Further, as Monitored Portfolios, all American Funds portfolios also will be subject to our current market timing and excessive trading policies, procedures and restrictions (described below), 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 Policy owners or other persons who have an interest in the Policies, we require all future transfer requests to or from any Monitored Portfolios or other identified Eligible Funds under that Policy to be submitted in writing with an original signature. Transfers made under a Dollar Cost A-14 Averaging Program, and, if applicable, any rebalancing 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 Eligible 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 Policy owners to avoid such detection. Our ability to restrict such transfer activity also may be limited by provisions of the Policy. Accordingly, there is no assurance that we will prevent all transfer activity that may adversely affect Policy owners and other persons with interests in the Policies. We do not accommodate market timing in any Eligible Fund and there are no arrangements in place to permit any Policy owner to engage in market timing; we apply our policies and procedures without exception, waiver, or special arrangement. The Eligible 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, Eligible 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 Eligible 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 Eligible Funds, we have entered into a written agreement, as required by SEC regulation, with each Eligible Fund or its principal underwriter that obligates us to provide to the Eligible Fund promptly upon request certain information about the trading activity of individual Policy Owners, and to execute instructions from the Eligible Fund to restrict or prohibit further purchases or transfers by specific Policy Owners who violate the frequent trading policies established by the Eligible Fund. In addition, Policy Owners and other persons with interests in the Policies should be aware that the purchase and redemption orders received by the Eligible Funds generally are "omnibus" orders from intermediaries, such as retirement plans or separate accounts funding variable insurance products. The omnibus orders reflect the aggregation and netting of multiple orders from individual owners of variable insurance products and/or individual retirement plan participants. The omnibus nature of these orders may limit the Eligible 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 Eligible Funds (and thus Policy Owners) will not be harmed by transfer activity relating to other insurance companies and/or retirement plans that may invest in the Eligible Funds. If an Eligible Fund believes that an omnibus order reflects one or more transfer requests from Policy Owners engaged in disruptive trading activity, the Eligible 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 Eligible 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 Policy owner). You should read the Eligible Fund prospectuses for more details. THE FIXED ACCOUNT We are not currently imposing limitations on transfers from the Fixed Account, but we reserve the right to do so. A-15 TAX CONSIDERATIONS INTRODUCTION The following summary provides a general description of the Federal income tax considerations associated with the Policy and does not purport to be complete or to cover all tax situations. This discussion is not intended as tax advice. Counsel or other competent tax advisors should be consulted for more complete information. This discussion is based upon our understanding of the present Federal income tax laws. No representation is made as to the likelihood of continuation of the present Federal income tax laws or as to how they may be interpreted by the Internal Revenue Service. IRS Circular 230 Notice: The tax information contained herein is not intended to (and cannot) be used by anyone to avoid IRS penalties. It is intended to support the sale of the Policy. You should seek tax advice based on your particular circumstances from an independent tax adviser. TAX STATUS OF THE POLICY In order to qualify as a life insurance contract for Federal income tax purposes and to receive the tax treatment normally accorded life insurance contracts under Federal tax law, a Policy must satisfy certain requirements which are set forth in the Internal Revenue Code. Guidance as to how these requirements are to be applied is limited. Nevertheless, we anticipate that the Policy will satisfy the applicable requirements. There is additional uncertainty, however, with respect to Policies issued on a substandard risk or automatic issue basis and Policies with term riders added and it is not clear whether such Policies will in all cases satisfy the applicable requirements. We may take appropriate steps to bring the Policy into compliance with applicable requirements and we reserve the right to restrict Policy transactions in order to do so. The insurance proceeds payable on the death of the insured will never be less than the minimum amount required for the Policy to be treated as life insurance under section 7702 of the Internal Revenue Code, as in effect on the date the Policy was issued. In some circumstances, owners of variable contracts who retain excessive control over the investment of the underlying separate account assets may be treated as the owners of those assets. Although published guidance in this area does not address certain aspects of the Policies, we believe that the Owner of a Policy should not be treated as the owner of the Variable Account assets. We reserve the right to modify the Policies to bring them into conformity with applicable standards should such modification be necessary to prevent Owners of the Policies from being treated as the owners of the underlying Variable Account assets. In addition, the Code requires that the investments of the Variable Account be "adequately diversified" in order for the Policies to be treated as life insurance contracts for Federal income tax purposes. It is intended that the Variable Account, through the Eligible Funds, will satisfy these diversification requirements. If Eligible Fund shares are sold directly to either non-qualified plans or to tax-qualified plans that later lose their tax-qualified status, the Variable Account investing in the Eligible Fund may fit the diversification requirements of section 817(h) of the Internal Revenue Code of 1986. This could have adverse tax consequences for variable life insurance owners, including losing the benefit of tax deferral. The following discussion assumes that the Policy will qualify as a life insurance contract for Federal income tax purposes. TAX TREATMENT OF POLICY BENEFITS IN GENERAL. We believe that the death benefit under a Policy should generally be excludible from the gross income of the beneficiary. Federal, state and local transfer, and other tax consequences of ownership or receipt of Policy proceeds depend on the circumstances of each Policy Owner or beneficiary. A tax advisor should be consulted on these consequences. A-16 Generally, the Policy Owner will not be deemed to be in constructive receipt of the Policy cash value until there is a distribution. When distributions from a Policy occur, or when loans are taken out from or secured by a Policy, the tax consequences depend on whether the Policy is classified as a "Modified Endowment Contract." MODIFIED ENDOWMENT CONTRACTS. Under the Internal Revenue Code, certain life insurance contracts are classified as "Modified Endowment Contracts," with less favorable income tax treatment than other life insurance contracts. Due to the Policy's flexibility with respect to premium payments and benefits, each Policy's circumstances will determine whether the Policy is a MEC. In general a Policy will be classified as a Modified Endowment Contract if the amount of premiums paid into the Policy causes the Policy to fail the "7-pay test." A Policy will fail the 7-pay test if at any time in the first seven Policy years, the amount paid into the Policy exceeds the sum of the level premiums that would have been paid at that point under a Policy that provided for paid-up future benefits after the payment of seven level annual payments. If there is a reduction in the benefits under the Policy during the first seven Policy years, for example, as a result of a partial surrender, the 7-pay test will have to be reapplied as if the Policy had originally been issued at the reduced face amount. If there is a "material change" in the Policy's benefits or other terms, even after the first seven Policy years, the Policy may have to be retested as if it were a newly issued Policy. A material change can occur, for example, when there is an increase in the death benefit which is due to the payment of an unnecessary premium. Unnecessary premiums are premiums paid into the Policy which are not needed in order to provide a death benefit equal to the lowest death benefit that was payable in the first seven Policy years. To prevent your Policy from becoming a Modified Endowment Contract, it may be necessary to limit premium payments. This may be the case when the insured reaches very high ages, even if you have not made any unscheduled payments for the Policy. The point at which you may have to limit your scheduled premium payments will depend on the issue age, sex and underwriting class of the insured, investment experience and the amount of any unscheduled payments you have made. You may be able to limit payment of scheduled premiums by using the Special Premium Option, when it is available, or by allowing the Policy to lapse to paid-up insurance. (See "Special Premium Option" and "Default and Lapse Options".) A current or prospective Policy Owner should consult a tax advisor to determine whether a Policy transaction will cause the Policy to be classified as a Modified Endowment Contract. DISTRIBUTIONS OTHER THAN DEATH BENEFITS FROM MODIFIED ENDOWMENT CONTRACTS. Policies classified as Modified Endowment Contracts are subject to the following tax rules: (1) All distributions other than death benefits, including distributions upon surrender and withdrawals, from a Modified Endowment Contract will be treated first as distributions of gain taxable as ordinary income and as tax-free recovery of the Policy Owner's investment in the Policy only after all gain has been distributed. (2) Loans taken from or secured by a Policy classified as a Modified Endowment Contract are treated as distributions and taxed accordingly. (3) A 10 percent additional income tax is imposed on the amount subject to tax except where the distribution or loan is made when the Policy Owner has attained age 59 1/2 or is disabled, or where the distribution is part of a series of substantially equal periodic payments for the life (or life expectancy) of the Policy Owner or the joint lives (or joint life expectancies) of the Policy Owner and the Policy Owner's beneficiary or designated beneficiary. If a Policy becomes a modified endowment contract, distributions that occur during the contract year will be taxed as distributions from a modified endowment contract. In addition, distributions from a Policy within two years before it becomes a modified endowment contract will be taxed in this manner. This means that a distribution made from a Policy that is not a modified endowment contract could later become taxable as a distribution from a modified endowment contract. DISTRIBUTIONS OTHER THAN DEATH BENEFITS FROM POLICIES THAT ARE NOT MODIFIED ENDOWMENT CONTRACTS. Distributions other than death benefits from a Policy that is not classified as a Modified Endowment Contract are A-17 generally treated first as a recovery of the Policy Owner's investment in the Policy and only after the recovery of all investment in the Policy as taxable income. However, certain distributions which must be made in order to enable the Policy to continue to qualify as a life insurance contract for Federal income tax purposes if Policy benefits are reduced during the first 15 Policy years may be treated in whole or in part as ordinary income subject to tax. Loans from or secured by a Policy that is not a Modified Endowment Contract are generally not treated as distributions. Finally, neither distributions from nor loans from or secured by a Policy that is not a Modified Endowment Contract are subject to the 10 percent additional income tax. INVESTMENT IN THE POLICY. Your investment in the Policy is generally your aggregate Premiums. When a distribution is taken from the Policy, your investment in the Policy is reduced by the amount of the distribution that is tax-free. POLICY LOANS. In general, interest on a Policy loan will not be deductible. If a Policy loan is outstanding when a Policy is canceled or lapses, the amount of the outstanding indebtedness will be added to the amount distributed and will be taxed accordingly. A loan may also be taxed when a Policy is exchanged. Before taking out a Policy loan, you should consult a tax adviser as to the tax consequences. MULTIPLE POLICIES. All Modified Endowment Contracts that are issued by NELICO (or its affiliates) to the same Policy Owner during any calendar year are treated as one Modified Endowment Contract for purposes of determining the amount includible in the Policy Owner's income when a taxable distribution occurs. LIFE INSURANCE PURCHASES BY NONRESIDENT ALIENS AND FOREIGN CORPORATIONS. Policy Owners that are not U.S. citizens or residents will generally be subject to U.S. Federal withholding tax on taxable distributions from life insurance policies at a 30% rate, unless a lower treaty rate applies. In addition, Policy Owners may be subject to state and/or municipal taxes and taxes that may be imposed by the Policy Owner's country of citizenship or residence. WITHHOLDING. To the extent that Policy distributions are taxable, they are generally subject to withholding for the recipient's federal income tax liability. Recipients can generally elect, however, not to have tax withheld from distributions. ESTATE, GIFT AND GENERATION-SKIPPING TRANSFER TAXES. The transfer of the Policy or the designation of a beneficiary may have Federal, state, and/or local transfer and inheritance tax consequences, including the imposition of gift, estate, and generation-skipping transfer taxes. When the insured dies, the death proceeds will generally be includable in the Policy Owner's estate for purposes of the Federal estate tax if the Policy Owner was the insured. If the Policy Owner was not the insured, the fair market value of the Policy would be included in the Policy Owner's estate upon the Policy Owner's death. The Policy would not be includable in the insured's estate if the insured neither retained incidents of ownership at death nor had given up ownership within three years before death. Moreover, under certain circumstances, the Internal Revenue Code may impose a "generation-skipping transfer tax" when all or part of a life insurance policy is transferred to, or a death benefit is paid to, an individual two or more generations younger than the Policy Owner. Regulations issued under the Internal Revenue Code may require us to deduct the tax from your Policy, or from any applicable payment, and pay it directly to the IRS. Qualified tax advisers should be consulted concerning the estate and gift tax consequences of Policy ownership and distributions under Federal, state and local law. The individual situation of each Policy Owner or beneficiary will determine the extent, if any, to which Federal, state, and local transfer and inheritance taxes may be imposed and how ownership or receipt of Policy proceeds will be treated for purposes of Federal, state and local estate, inheritance, generation-skipping and other taxes. A-18 The Economic Growth and Tax Relief Reconciliation Act of 2001 ("EGTRRA") repeals the Federal estate tax and replaces it with a carryover basis income tax regime effective for estates of decedents dying after December 31, 2009. EGTRRA also repeals the generation-skipping transfer tax, but not the gift tax, for transfers made after December 31, 2009. EGTRRA contains a sunset provision, which essentially returns the Federal estate, gift and generation-skipping transfer taxes to their pre-EGTRRA form, beginning in 2011. Congress may or may not enact permanent repeal between now and then. During the period prior to 2010, EGTRRA provides for periodic decreases in the maximum estate tax rate coupled with periodic increases in the estate tax exemption. The maximum estate tax rate for 2007-2009 is 45%. The estate tax exemption is $2,000,000 for 2006-2008 and $3,500,000 in 2009. The complexity of the new tax law, along with uncertainty as to how it might be modified in coming years, underscores the importance of seeking guidance from a qualified adviser to help ensure that your estate plan adequately addresses your needs and those of your beneficiaries under all possible scenarios. OTHER TAX CONSIDERATIONS. The tax consequences of continuing the Policy beyond the insured's 100th year are unclear. You should consult a tax adviser if you intend to keep the Policy in force beyond the insured's 100th year. If a trustee under a pension or profit-sharing plan, or similar deferred compensation arrangement, owns a Policy, the Federal, state and estate tax consequences could differ. The amounts of life insurance that may be purchased on behalf of a participant in a pension or profit-sharing plan are limited. Providing excessive life insurance coverage in a retirement plan will have adverse tax consequences. The inclusion of riders, such as waiver of premium riders, may also have adverse tax consequences. Therefore, it is important to discuss with your tax adviser the suitability of the Policy, including the suitability of coverage amounts and Policy riders, before any purchase by a retirement plan. Any proposed distribution or sale of a Policy by a retirement plan will also need to be discussed with a tax adviser. The current cost of insurance for the net amount at risk is treated as a "current fringe benefit" and must be included annually in the plan participant's gross income. We report this cost to the participant annually. If the plan participant dies while covered by the plan and the Policy proceeds are paid to the participant's beneficiary, then the excess of the death benefit over the cash value is not income taxable. However, the cash value will generally be taxable to the extent it exceeds the participant's cost basis in the Policy. Policies owned under these types of plans may be subject to restrictions under the Employee Retirement Income Security Act of 1974 ("ERISA"). You should consult a qualified adviser regarding ERISA. Department of Labor ("DOL") regulations impose requirements for participant loans under retirement plans covered by ERISA. Plan loans must also satisfy tax requirements to be treated as nontaxable. Plan loan requirements and provisions may differ from Policy loan provisions. Failure of plan loans to comply with the requirements and provisions of the DOL regulations and of tax law may result in adverse tax consequences and/or adverse consequences under ERISA. Plan fiduciaries and participants should consult a qualified adviser before requesting a loan under a Policy held in connection with a retirement plan. Businesses can use the Policies in various arrangements, including nonqualified deferred compensation or salary continuance plans, split dollar insurance plans, executive bonus plans, tax exempt and nonexempt welfare benefit plans, retiree medical benefit plans and others. The tax consequences of such plans may vary depending on the particular facts and circumstances. If you are purchasing the Policy for any arrangement the value of which depends in part on its tax consequences, you should consult a qualified tax adviser. In recent years, moreover, Congress has adopted new rules relating to life insurance owned by businesses. Any business contemplating the purchase of a new Policy or a change in an existing Policy should consult a tax adviser. Ownership of the Policy by a corporation, trust or other non-natural person could jeopardize some (or all) of such entity's interest deduction under Internal Revenue Code Section 264, even where such entity's indebtedness is in no way connected to the Policy. In addition, under Section 264(f)(5), if a business (other than a sole proprietorship) is directly or indirectly a beneficiary of the Policy, the Policy could be treated as held by the A-19 business for purposes of the Section 264(f) entity-holder rules. Therefore, it would be advisable to consult with a qualified tax adviser before any non-natural person is made an owner or holder of the Policy, or before a business (other than a sole proprietorship) is made a beneficiary of the Policy. GUIDANCE ON SPLIT DOLLAR PLANS. The IRS has issued guidance on split dollar insurance plans. A tax advisor should be consulted with respect to this guidance if you have purchased or are considering the purchase of a Policy for a split dollar insurance plan. If your Policy is part of an equity split-dollar arrangement taxed under the economic benefit regime, there is risk that some portion of the Policy cash value may be taxed prior to any Policy distribution. If your split dollar plan provides deferred compensation, recently enacted rules governing deferred compensation arrangements may apply. Failure to adhere to these rules will result in adverse tax consequences. Consult a tax adviser. In addition, the Sarbanes-Oxley Act of 2002 (the "Act"), which was signed into law on July 30, 2002, prohibits, with limited exceptions, publicly-traded companies, including non-U.S. companies that have securities listed on U.S. exchanges, from extending, directly or indirectly or through a subsidiary, many types of personal loans to their directors or executive officers. It is possible that this prohibition may be interpreted to apply to split-dollar life insurance arrangements for directors and executive officers of such companies, since such arrangements can arguably be viewed as involving a loan from the employer for at least some purposes. Although the prohibition on loans generally took effect as of July 30, 2002, there is an exception for loans outstanding as of the date of enactment, so long as there is no material modification to the loan terms and the loan is not renewed after July 30, 2002. Any affected business contemplating the payment of a premium on an existing Policy or the purchase of a new Policy in connection with a split-dollar life insurance arrangement should consult legal counsel. ALTERNATIVE MINIMUM TAX. There may also be an indirect tax upon the income in the Policy or the proceeds of a Policy under the Federal corporate alternative minimum tax, if the Policyowner is subject to that tax. PUERTO RICO. We believe that Policies subject to Puerto Rican tax law will generally receive treatment similar, with certain modifications, to that described above. Among other differences, Policies governed by Puerto Rican tax law are not currently subject to the rules described above regarding Modified Endowment Contracts. You should consult your tax adviser with respect to Puerto Rican tax law governing the Policies. POSSIBLE TAX LAW CHANGES. Although the likelihood of legislative changes is uncertain, there is always the possibility that the tax treatment of the Policy could change by legislation or otherwise. Consult a tax adviser with respect to legislative developments and their effect on the Policy. TAX CREDITS AND DEDUCTIONS. NELICO may be entitled to certain tax benefits related to the assets of the Variable Account. These tax benefits, which may include foreign tax credits and corporate dividend received deductions, are not passed back to the Variable Account or to Policy Owners since NELICO is the owner of the assets from which the tax benefits are derived. NELICO'S INCOME TAXES Under current Federal income tax law NELICO is not taxed on the Variable Account's operations. Thus, currently we do not deduct a charge from the Variable Account for company Federal income taxes, except for the charge for federal taxes that is deducted from scheduled premiums and unscheduled payments. We reserve the right to charge the Variable Account for any future Federal income taxes we may incur. Under current laws in several states we may incur state and local taxes (in addition to premium taxes). These taxes are not now significant and we are not currently charging for them. If they increase, we may deduct charges for such taxes. A-20 MANAGEMENT The directors and executive officers of NELICO and their principal business experience: DIRECTORS OF NELICO
NAME AND PRINCIPAL BUSINESS ADDRESS PRINCIPAL BUSINESS EXPERIENCE ------------------ ------------------------------------------------------------------------ Michael K. Farrell*** Director of NELICO since 2004 and Senior Vice President of Metropolitan Life Insurance Company since 2002. Gene L. Lunman ***** Director of NELICO since 2006 and Senior Vice President of Metropolitan Life Insurance Company since 2005. William J. Mullaney ** Director of NELICO since 2007 and President of Institutional Business at Metropolitan Life Insurance Company since 2007. Formerly President 2004-2007 of Metropolitan Property and Casualty. Michael J. Vietri**** Director of NELICO since 2005 and Executive Vice President of Metropolitan Life Insurance Company since 2005. Formerly, Senior Vice President 1999-2004 of Metropolitan Life Insurance Company. Lisa M. Weber ** Chairman of the Board, President and Chief Executive Officer of NELICO since 2004 and President, Individual Business of Metropolitan Life Insurance Company since 2004; formerly, Director of NELICO since 2000 and Senior Executive Vice President and Chief Administrative Officer 2001-2004 of Metropolitan Life. William J. Wheeler ** Director of NELICO since 2002 and Executive Vice President and Chief Financial Officer of Metropolitan Life Insurance Company since 2003. Formerly, Senior Vice President 1997-2003 of Metropolitan Life. EXECUTIVE OFFICERS OF NELICO OTHER THAN DIRECTORS NAME AND PRINCIPAL BUSINESS ADDRESS PRINCIPAL BUSINESS EXPERIENCE ------------------ ------------------------------------------------------------------------ Alan C. Leland, Jr.* Senior Vice President of NELICO since 1996 and Vice President of Metropolitan Life Insurance Company since 2000. Joseph J. Prochaska, Jr.** Executive Vice President and Chief Accounting Officer of NELICO since 2006 and Executive Vice President and Chief Accounting Officer of Metropolitan Life Insurance Company since 2006. Formerly Senior Vice President and Chief Accounting Officer 2004-2006 of NELICO and Senior Vice President and Chief Accounting Officer 2003-2006 of Metropolitan Life.
- -------- *The principal business address is 501 Boylston Street, Boston, MA 02116. **The principal business address is One MetLife Plaza, 27-01 Queens Plaza North, Long Island City, NY 11101. ***The principal business address is 10 Park Avenue, Morristown, NJ 07962. ****The principal business address is 177 South Commons Drive, Aurora, IL 60504. *****The principal business address is 185 Asylum Street, Hartford, CT 06103. A-21 VOTING RIGHTS We own the Eligible Fund shares held in the Variable Account and vote those shares at meetings of the Eligible Fund shareholders. Under Federal securities law, you currently have the right to instruct us how to vote shares that are attributable to your Policy. Policy Owners who are entitled to give voting instructions and the number of shares attributable to their Policies are determined as of the meeting record date. If we do not receive timely instructions, we will vote shares in the same proportion as (i) the aggregate cash value of policies giving instructions, respectively, to vote for, against, or withhold votes on a proposition, bears to (ii) the total cash value in that sub-account for all policies for which we receive voting instructions. No voting privileges apply to the Fixed Account or to cash value removed from the Variable Account due to a Policy loan. The effect of this proportional voting is that a small number of Policy Owners may control the outcome of a vote. We will vote all Eligible Fund shares held by our general account (or any unregistered separate account for which voting privileges were not extended) in the same proportion as the total of (i) shares for which voting instructions were received and (ii) shares that are voted in proportion to such voting instructions. The Eligible Funds' Boards of Trustees monitor events to identify conflicts that may arise from the sale of Eligible Fund shares to variable life and variable annuity separate accounts of affiliated and, if applicable, unaffiliated insurance companies and qualified plans. Conflicts could result from changes in state insurance law or Federal income tax law, changes in investment management of an Eligible Fund, or differences in voting instructions given by variable life and variable annuity contract owners and by qualified plans. If there is a material conflict, the Board of Trustees will determine what action should be taken, including the removal of the affected sub-accounts from the Eligible Fund(s), if necessary. If we believe any Eligible Fund action is insufficient, we will consider taking other action to protect Policy Owners. There could, however, be unavoidable delays or interruptions of operations of the Variable Account that we may be unable to remedy. We may disregard voting instructions for changes in the investment policy, investment adviser or principal underwriter of an Eligible Fund portfolio if required by state insurance law, or if we (i) reasonably disapprove of the changes and (ii) in the case of a change in investment policy or investment adviser, make a good faith determination that the proposed change is prohibited by state authorities or inconsistent with a sub-account's investment objectives. If we do disregard voting instructions, the next annual report to Policy Owners will include a summary of that action and the reasons for it. RESTRICTIONS ON FINANCIAL TRANSACTIONS Applicable laws designed to counter terrorism and prevent money laundering might, in certain circumstances, require us to reject a premium payment and/or block or "freeze" your Policy. If these laws apply in a particular situation, we would not be allowed to process any request for withdrawals, surrenders, loans or death benefits, make transfers, or continue making payments under your death benefit option until instructions are received from the appropriate regulator. We also may be required to provide additional information about you or your Policy to government regulators. TOLL-FREE NUMBERS For sub-account transfers, premium reallocations, or Statements of Additional Information for the Eligible Funds, call 1-800-200-2214. You may also call our Client TeleService Center at 1-800-388-4000 for current information about your Policy values, to change or update Policy information such as your address, billing mode, beneficiary or ownership, or for information about other Policy transactions. A-22 The Financial Industry Regulatory Authority (FINRA) maintains a Public Disclosure Program for investors. A brochure that includes information describing the 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. INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The financial statements of each of the Subaccounts of New England Variable Life Separate Account included in this Prospectus Supplement have been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report appearing herein, and are included in reliance upon the report of such firm given upon their authority as experts in accounting and auditing. The principal address of Deloitte & Touche LLP is 201 East Kennedy Boulevard, Suite 1200, Tampa, Florida 33602-5827. The consolidated financial statements of New England Life Insurance Company (the "Company") included in this Prospectus Supplement have been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report appearing herein (which report expresses an unqualified opinion and includes an explanatory paragraph referring to the fact that the Company changed its method of accounting for income taxes as required by accounting guidance adopted on January 1, 2007, and changed its method of accounting for defined benefit pension and other postretirement plans, as required by accounting guidance adopted on December 31, 2006), and are included in reliance upon the report of such firm given upon their authority as experts in accounting and auditing. The principal address of Deloitte & Touche LLP is 201 East Kennedy Boulevard, Suite 1200, Tampa, Florida 33602-5827. A-23 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Policy Owners of New England Variable Life Separate Account and the Board of Directors of New England Life Insurance Company: We have audited the accompanying statements of assets and liabilities of the New England Variable Life Separate Account (the "Separate Account") of New England Life Insurance Company (the "Company") comprising each of the individual Sub- Accounts listed in Appendix A as of December 31, 2007, and the related statements of operations and changes in net assets for each of the periods in the three years then ended. We have also audited the statements of operations and changes in net assets for each of the periods presented in the three years ended December 31, 2007, for the individual Sub-Account 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. 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 Sub-Accounts constituting the Separate Account of the Company as of December 31, 2007, the results of their operations and the changes in their net assets for each of the periods presented in the three 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 AA-1 APPENDIX A MSF Zenith Equity Sub-Account MSF BlackRock Bond Income Sub-Account MSF BlackRock Money Market Sub-Account MSF MFS Total Return Sub-Account MSF Harris Oakmark Focused Value Sub-Account MSF FI Value Leaders Sub-Account MSF Loomis Sayles Small Cap Sub-Account MSF Davis Venture Value Sub-Account MSF BlackRock Legacy Large Cap Growth Sub-Account MSF Western Asset Management U.S. Government Sub-Account MSF Western Asset Management Strategic Bond Opportunities Sub-Account MSF FI Mid Cap Opportunities Sub-Account MSF Jennison Growth Sub-Account MSF Russell 2000 Index Sub-Account MSF FI International Stock Sub-Account MSF BlackRock Strategic Value Sub-Account MSF MetLife Stock Index Sub-Account MSF Lehman Brothers Aggregate Bond Index Sub-Account MSF Morgan Stanley EAFE Index Sub-Account MSF MetLife Mid Cap Stock Index Sub-Account MSF Franklin Templeton Small Cap Growth Sub-Account MSF BlackRock Large Cap Value Sub-Account MSF Neuberger Berman Mid Cap Value Sub-Account MSF Harris Oakmark Large Cap Value Sub-Account MSF T. Rowe Price Large Cap Growth Sub-Account MSF T. Rowe Price Small Cap Growth Sub-Account MSF Oppenheimer Global Equity Sub-Account MSF BlackRock Aggressive Growth Sub-Account MSF BlackRock Diversified Sub-Account MSF MetLife Conservative Allocation Sub-Account MSF MetLife Conservative to Moderate Allocation Sub-Account MSF MetLife Moderate Allocation Sub-Account MSF MetLife Moderate to Aggressive Allocation Sub-Account MSF MetLife Aggressive Allocation Sub-Account MSF FI Large Cap Sub-Account American Funds Growth Sub-Account American Funds Growth-Income Sub-Account American Funds Global Small Capitalization Sub-Account American Funds Bond Sub-Account Fidelity VIP Equity-Income Sub-Account Fidelity VIP Overseas Sub-Account MIST T. Rowe Price Mid-Cap Growth Sub-Account MIST PIMCO Total Return Sub-Account MIST RCM Technology Sub-Account MIST Lazard Mid-Cap Sub-Account MIST Met/AIM Small Cap Growth Sub-Account MIST Harris Oakmark International Sub-Account MIST Legg Mason Partners Aggressive Growth Sub-Account MIST Neuberger Berman Real Estate Sub-Account MIST MFS Research International Sub-Account MIST Lord Abbett Bond Debenture Sub-Account MIST Oppenheimer Capital Appreciation Sub-Account MIST Cyclical Growth ETF Sub-Account MIST Cyclical Growth and Income ETF Sub-Account MIST PIMCO Inflation Protected Bond Sub-Account MIST Legg Mason Value Equity Sub-Account MIST BlackRock Large-Cap Core Sub-Account MIST Janus Forty Sub-Account AA-2 APPENDIX B MSF BlackRock Large Cap Sub-Account AA-3 NEW ENGLAND VARIABLE LIFE SEPARATE ACCOUNT OF NEW ENGLAND LIFE INSURANCE COMPANY STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 2007
MSF MSF BLACKROCK MSF BLACKROCK MSF MFS MSF HARRIS OAKMARK ZENITH EQUITY BOND INCOME MONEY MARKET TOTAL RETURN FOCUSED VALUE SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT ------------- ------------ ------------- ------------ ------------------ ASSETS: Investments at fair value........ $690,594,069 $127,264,799 $262,494,738 $129,344,353 $158,598,792 Other receivables................ -- -- -- 641 -- Due from New England Life Insurance Company............. -- -- -- -- -- ------------ ------------ ------------ ------------ ------------ Total Assets................ 690,594,069 127,264,799 262,494,738 129,344,994 158,598,792 ------------ ------------ ------------ ------------ ------------ LIABILITIES: Other payables................... 1 8 -- -- 12 Due to New England Life Insurance Company....................... 2,284,739 643,419 913,293 913,026 716,282 ------------ ------------ ------------ ------------ ------------ Total Liabilities........... 2,284,740 643,427 913,293 913,026 716,294 ------------ ------------ ------------ ------------ ------------ NET ASSETS......................... $688,309,329 $126,621,372 $261,581,445 $128,431,968 $157,882,498 ============ ============ ============ ============ ============ MSF FI VALUE LEADERS SUB-ACCOUNT ------------- ASSETS: Investments at fair value........ $79,364,546 Other receivables................ -- Due from New England Life Insurance Company............. -- ----------- Total Assets................ 79,364,546 ----------- LIABILITIES: Other payables................... -- Due to New England Life Insurance Company....................... 444,623 ----------- Total Liabilities........... 444,623 ----------- NET ASSETS......................... $78,919,923 ===========
The accompanying notes are an integral part of these financial statements. AA-4
MSF WESTERN MSF WESTERN ASSET MSF LOOMIS SAYLES MSF DAVIS MSF BLACKROCK LEGACY ASSET MANAGEMENT MANAGEMENT STRATEGIC MSF FI MID CAP SMALL CAP VENTURE VALUE LARGE CAP GROWTH U.S. GOVERNMENT BOND OPPORTUNITIES OPPORTUNITIES SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT ----------------- ------------- -------------------- ---------------- -------------------- -------------- $175,245,739 $384,998,705 $226,036,890 $8,641,838 $15,342,866 $33,999,805 -- 11 -- -- -- 2 -- -- -- -- -- -- ------------ ------------ ------------ ---------- ----------- ----------- 175,245,739 384,998,716 226,036,890 8,641,838 15,342,866 33,999,807 ------------ ------------ ------------ ---------- ----------- ----------- -- -- -- -- -- -- 817,512 1,832,089 1,253,369 86,505 189,450 253,976 ------------ ------------ ------------ ---------- ----------- ----------- 817,512 1,832,089 1,253,369 86,505 189,450 253,976 ------------ ------------ ------------ ---------- ----------- ----------- $174,428,227 $383,166,627 $224,783,521 $8,555,333 $15,153,416 $33,745,831 ============ ============ ============ ========== =========== =========== MSF FI MSF JENNISON MSF RUSSELL INTERNATIONAL GROWTH 2000 INDEX STOCK SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT ------------ ----------- ------------- $8,045,335 $27,290,053 $49,703,006 -- -- -- -- -- -- ---------- ----------- ----------- 8,045,335 27,290,053 49,703,006 ---------- ----------- ----------- -- -- 1 106,109 231,575 253,907 ---------- ----------- ----------- 106,109 231,575 253,908 ---------- ----------- ----------- $7,939,226 $27,058,478 $49,449,098 ========== =========== ===========
The accompanying notes are an integral part of these financial statements. AA-5 NEW ENGLAND VARIABLE LIFE SEPARATE ACCOUNT OF NEW ENGLAND LIFE INSURANCE COMPANY STATEMENT OF ASSETS AND LIABILITIES -- (CONTINUED) DECEMBER 31, 2007
MSF MSF MSF BLACKROCK MSF METLIFE LEHMAN BROTHERS MORGAN STANLEY MSF METLIFE STRATEGIC VALUE STOCK INDEX AGGREGATE BOND INDEX EAFE INDEX MID CAP STOCK INDEX SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT --------------- ------------ -------------------- -------------- ------------------- ASSETS: Investments at fair value.. $63,725,614 $222,829,425 $28,937,355 $22,317,061 $19,229,936 Other receivables.......... -- -- -- 1 -- Due from New England Life Insurance Company....... -- -- -- -- -- ----------- ------------ ----------- ----------- ----------- Total Assets.......... 63,725,614 222,829,425 28,937,355 22,317,062 19,229,936 ----------- ------------ ----------- ----------- ----------- LIABILITIES: Other payables............. 6 3 1 -- -- Due to New England Life Insurance Company....... 386,777 1,167,891 180,482 189,068 200,214 ----------- ------------ ----------- ----------- ----------- Total Liabilities..... 386,783 1,167,894 180,483 189,068 200,214 ----------- ------------ ----------- ----------- ----------- NET ASSETS................... $63,338,831 $221,661,531 $28,756,872 $22,127,994 $19,029,722 =========== ============ =========== =========== =========== MSF FRANKLIN TEMPLETON SMALL CAP GROWTH SUB-ACCOUNT ------------------ ASSETS: Investments at fair value.. $7,204,909 Other receivables.......... -- Due from New England Life Insurance Company....... -- ---------- Total Assets.......... 7,204,909 ---------- LIABILITIES: Other payables............. -- Due to New England Life Insurance Company....... 130,650 ---------- Total Liabilities..... 130,650 ---------- NET ASSETS................... $7,074,259 ==========
The accompanying notes are an integral part of these financial statements. AA-6
MSF MSF MSF MSF MSF MSF BLACKROCK NEUBERGER BERMAN HARRIS OAKMARK T. ROWE PRICE T. ROWE PRICE OPPENHEIMER LARGE CAP VALUE MID CAP VALUE LARGE CAP VALUE LARGE CAP GROWTH SMALL CAP GROWTH GLOBAL EQUITY SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT --------------- ---------------- --------------- ---------------- ---------------- ------------- $12,047,592 $39,946,741 $12,428,637 $8,056,199 $4,302,777 $6,587,487 -- -- -- -- -- -- -- -- -- -- -- -- ----------- ----------- ----------- ---------- ---------- ---------- 12,047,592 39,946,741 12,428,637 8,056,199 4,302,777 6,587,487 ----------- ----------- ----------- ---------- ---------- ---------- -- 5 -- -- -- -- 128,173 229,393 129,946 108,030 77,428 204,096 ----------- ----------- ----------- ---------- ---------- ---------- 128,173 229,398 129,946 108,030 77,428 204,096 ----------- ----------- ----------- ---------- ---------- ---------- $11,919,419 $39,717,343 $12,298,691 $7,948,169 $4,225,349 $6,383,391 =========== =========== =========== ========== ========== ========== MSF MSF METLIFE MSF BLACKROCK BLACKROCK CONSERVATIVE AGGRESSIVE GROWTH DIVERSIFIED ALLOCATION SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT ----------------- ----------- ------------ $2,301,682 $3,627,258 $2,075,961 -- -- -- -- -- -- ---------- ---------- ---------- 2,301,682 3,627,258 2,075,961 ---------- ---------- ---------- -- -- -- 68,454 79,152 62,338 ---------- ---------- ---------- 68,454 79,152 62,338 ---------- ---------- ---------- $2,233,228 $3,548,106 $2,013,623 ========== ========== ==========
The accompanying notes are an integral part of these financial statements. AA-7 NEW ENGLAND VARIABLE LIFE SEPARATE ACCOUNT OF NEW ENGLAND LIFE INSURANCE COMPANY STATEMENT OF ASSETS AND LIABILITIES -- (CONTINUED) DECEMBER 31, 2007
MSF METLIFE MSF METLIFE MODERATE TO CONSERVATIVE TO MSF METLIFE AGGRESSIVE MSF METLIFE MSF FI MODERATE ALLOCATION MODERATE ALLOCATION ALLOCATION AGGRESSIVE ALLOCATION LARGE CAP SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT ------------------- ------------------- ----------- --------------------- ----------- ASSETS: Investments at fair value... $3,348,667 $29,647,292 $40,760,271 $7,250,945 $226,159 Other receivables........... -- -- -- -- -- Due from New England Life Insurance Company........ -- -- -- -- -- ---------- ----------- ----------- ---------- -------- Total Assets........... 3,348,667 29,647,292 40,760,271 7,250,945 226,159 ---------- ----------- ----------- ---------- -------- LIABILITIES: Other payables.............. -- -- -- -- -- Due to New England Life Insurance Company........ 69,462 455,206 291,735 119,901 7,663 ---------- ----------- ----------- ---------- -------- Total Liabilities...... 69,462 455,206 291,735 119,901 7,663 ---------- ----------- ----------- ---------- -------- NET ASSETS.................... $3,279,205 $29,192,086 $40,468,536 $7,131,044 $218,496 ========== =========== =========== ========== ======== AMERICAN FUNDS GROWTH SUB-ACCOUNT -------------- ASSETS: Investments at fair value... $236,869,518 Other receivables........... -- Due from New England Life Insurance Company........ -- ------------ Total Assets........... 236,869,518 ------------ LIABILITIES: Other payables.............. 7 Due to New England Life Insurance Company........ 1,047,422 ------------ Total Liabilities...... 1,047,429 ------------ NET ASSETS.................... $235,822,089 ============
The accompanying notes are an integral part of these financial statements. AA-8
AMERICAN FUNDS AMERICAN FUNDS AMERICAN FUNDS FIDELITY VIP FIDELITY VIP MIST T. ROWE PRICE GROWTH-INCOME GLOBAL SMALL CAPITALIZATION BOND EQUITY-INCOME OVERSEAS MID-CAP GROWTH SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT -------------- --------------------------- -------------- ------------- ------------ ------------------ $132,552,953 $88,458,567 $9,928,326 $161,393,068 $157,387,257 $25,371,265 -- -- -- -- 1 -- -- -- -- -- -- -- ------------ ----------- ---------- ------------ ------------ ----------- 132,552,953 88,458,567 9,928,326 161,393,068 157,387,258 25,371,265 ------------ ----------- ---------- ------------ ------------ ----------- 4 4 -- 1 -- 644 581,017 501,563 121,877 687,251 625,550 176,313 ------------ ----------- ---------- ------------ ------------ ----------- 581,021 501,567 121,877 687,252 625,550 176,957 ------------ ----------- ---------- ------------ ------------ ----------- $131,971,932 $87,957,000 $9,806,449 $160,705,816 $156,761,708 $25,194,308 ============ =========== ========== ============ ============ =========== MIST PIMCO MIST RCM MIST LAZARD TOTAL RETURN TECHNOLOGY MID-CAP SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT ------------ ----------- ----------- $58,649,638 $6,030,767 $8,630,036 -- 1 -- -- -- 5,101 ----------- ---------- ---------- 58,649,638 6,030,768 8,635,137 ----------- ---------- ---------- 1 -- -- 290,062 102,504 104,664 ----------- ---------- ---------- 290,063 102,504 104,664 ----------- ---------- ---------- $58,359,575 $5,928,264 $8,530,473 =========== ========== ==========
The accompanying notes are an integral part of these financial statements. AA-9 NEW ENGLAND VARIABLE LIFE SEPARATE ACCOUNT OF NEW ENGLAND LIFE INSURANCE COMPANY STATEMENT OF ASSETS AND LIABILITIES -- (CONCLUDED) DECEMBER 31, 2007
MIST MIST LEGG MASON MIST MIST MFS MIST MET/AIM HARRIS OAKMARK PARTNERS NEUBERGER BERMAN RESEARCH SMALL CAP GROWTH INTERNATIONAL AGGRESSIVE GROWTH REAL ESTATE INTERNATIONAL SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT ---------------- -------------- ----------------- ---------------- ------------- ASSETS: Investments at fair value..... $5,236,185 $55,351,392 $2,879,136 $23,811,123 $22,252,742 Other receivables............. -- -- -- -- -- Due from New England Life Insurance Company.......... -- -- -- -- -- ---------- ----------- ---------- ----------- ----------- Total Assets............. 5,236,185 55,351,392 2,879,136 23,811,123 22,252,742 ---------- ----------- ---------- ----------- ----------- LIABILITIES: Other payables................ 2 2 -- -- -- Due to New England Life Insurance Company.......... 96,972 292,650 68,226 232,975 167,951 ---------- ----------- ---------- ----------- ----------- Total Liabilities........ 96,974 292,652 68,226 232,975 167,951 ---------- ----------- ---------- ----------- ----------- NET ASSETS...................... $5,139,211 $55,058,740 $2,810,910 $23,578,148 $22,084,791 ========== =========== ========== =========== =========== MIST LORD ABBETT BOND DEBENTURE SUB-ACCOUNT -------------- ASSETS: Investments at fair value..... $39,634,716 Other receivables............. -- Due from New England Life Insurance Company.......... -- ----------- Total Assets............. 39,634,716 ----------- LIABILITIES: Other payables................ -- Due to New England Life Insurance Company.......... 273,886 ----------- Total Liabilities........ 273,886 ----------- NET ASSETS...................... $39,360,830 ===========
The accompanying notes are an integral part of these financial statements. AA-10
MIST OPPENHEIMER MIST CYCLICAL MIST CYCLICAL MIST PIMCO MIST LEGG MASON MIST BLACKROCK CAPITAL APPRECIATION GROWTH ETF GROWTH AND INCOME ETF INFLATION PROTECTED BOND VALUE EQUITY LARGE-CAP CORE SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT -------------------- ------------- --------------------- ------------------------ --------------- -------------- $929,814 $855,470 $554,985 $1,603,711 $15,270,450 $2,121,728 -- -- -- -- 452 -- -- -- -- -- -- -- -------- -------- -------- ---------- ----------- ---------- 929,814 855,470 554,985 1,603,711 15,270,902 2,121,728 -------- -------- -------- ---------- ----------- ---------- -- -- -- -- -- 453 29,664 38,264 14,848 23,837 138,816 61,864 -------- -------- -------- ---------- ----------- ---------- 29,664 38,264 14,848 23,837 138,816 62,317 -------- -------- -------- ---------- ----------- ---------- $900,150 $817,206 $540,137 $1,579,874 $15,132,086 $2,059,411 ======== ======== ======== ========== =========== ========== MIST JANUS FORTY SUB-ACCOUNT ----------- $4,390,017 -- -- ---------- 4,390,017 ---------- -- 33,266 ---------- 33,266 ---------- $4,356,751 ==========
The accompanying notes are an integral part of these financial statements. AA-11 NEW ENGLAND VARIABLE LIFE SEPARATE ACCOUNT OF NEW ENGLAND LIFE INSURANCE COMPANY STATEMENT OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2007, 2006, AND 2005
MSF ZENITH MSF BLACKROCK BOND EQUITY INCOME SUB-ACCOUNT SUB-ACCOUNT --------------------------------------- -------------------------------------- 2007 2006 2005 2007 2006 2005 ----------- ----------- ----------- ---------- ----------- ----------- INVESTMENT INCOME: Dividends............................... $ 5,502,763 $ 3,979,926 $ 6,876,189 $4,328,987 $ 7,710,876 $ 5,631,818 ----------- ----------- ----------- ---------- ----------- ----------- EXPENSES: Mortality and expense risk charges...... 4,386,637 4,467,612 4,495,973 679,178 717,365 772,945 Administrative charges.................. -- -- ----------- ----------- ----------- ---------- ----------- ----------- Total expenses..................... 4,386,637 4,467,612 4,495,973 679,178 717,365 772,945 ----------- ----------- ----------- ---------- ----------- ----------- Net investment income (loss)............ 1,116,126 (487,686) 2,380,216 3,649,809 6,993,511 4,858,873 ----------- ----------- ----------- ---------- ----------- ----------- NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Realized gain distributions............. -- -- -- -- 131,914 1,627,107 Realized gains (losses) on sale of investments.......................... 9,513,829 3,349,559 (5,379,155) 127,546 (13,781) 996,410 ----------- ----------- ----------- ---------- ----------- ----------- Net realized gains (losses)........ 9,513,829 3,349,559 (5,379,155) 127,546 118,133 2,623,517 ----------- ----------- ----------- ---------- ----------- ----------- Change in unrealized gains (losses) on investments.......................... 23,411,344 51,317,310 70,211,420 3,398,540 (2,014,842) (4,913,177) ----------- ----------- ----------- ---------- ----------- ----------- Net realized and unrealized gains (losses) on investments.............. 32,925,173 54,666,869 64,832,265 3,526,086 (1,896,709) (2,289,660) ----------- ----------- ----------- ---------- ----------- ----------- Net increase (decrease) in net assets resulting from operations............ $34,041,299 $54,179,183 $67,212,481 $7,175,895 $ 5,096,802 $ 2,569,213 =========== =========== =========== ========== =========== ===========
(a) For the period May 1, 2005 to December 31, 2005. (b) For the period January 1, 2007 to April 27, 2007. (c) For the period May 1, 2006 to December 31, 2006. (d) For the period April 30, 2007 to December 31, 2007. The accompanying notes are an integral part of these financial statements. AA-12
MSF BLACKROCK MSF MFS MSF HARRIS OAKMARK MONEY MARKET TOTAL RETURN FOCUSED VALUE SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT ------------------------------------- --------------------------------------- -------------------------- 2007 2006 2005 2007 2006 2005 2007 2006 ----------- ---------- ---------- ----------- ----------- ----------- ------------ ----------- $10,093,362 $4,241,081 $2,504,875 $ 2,950,145 $ 4,709,688 $ 2,316,436 $ 1,048,730 $ 582,752 ----------- ---------- ---------- ----------- ----------- ----------- ------------ ----------- 427,655 409,635 414,735 754,803 744,613 769,066 950,782 1,000,013 -- -- -- ----------- ---------- ---------- ----------- ----------- ----------- ------------ ----------- 427,655 409,635 414,735 754,803 744,613 769,066 950,782 1,000,013 ----------- ---------- ---------- ----------- ----------- ----------- ------------ ----------- 9,665,707 3,831,446 2,090,140 2,195,342 3,965,075 1,547,370 97,948 (417,261) ----------- ---------- ---------- ----------- ----------- ----------- ------------ ----------- -- -- -- 4,463,515 2,946,345 1,468,852 23,124,324 17,981,050 -- -- -- 1,902,142 (1,226,278) (5,994,499) 8,964,547 10,486,064 ----------- ---------- ---------- ----------- ----------- ----------- ------------ ----------- -- -- -- 6,365,657 1,720,067 (4,525,647) 32,088,871 28,467,114 ----------- ---------- ---------- ----------- ----------- ----------- ------------ ----------- -- -- -- (3,417,410) 8,705,063 6,226,980 (44,475,207) (6,779,768) ----------- ---------- ---------- ----------- ----------- ----------- ------------ ----------- -- -- -- 2,948,247 10,425,130 1,701,333 (12,386,336) 21,687,346 ----------- ---------- ---------- ----------- ----------- ----------- ------------ ----------- $ 9,665,707 $3,831,446 $2,090,140 $ 5,143,589 $14,390,205 $ 3,248,703 $(12,288,388) $21,270,085 =========== ========== ========== =========== =========== =========== ============ =========== MSF HARRIS OAKMARK FOCUSED VALUE SUB-ACCOUNT ----------- 2005 ----------- $ 81,262 ----------- 1,028,292 ----------- 1,028,292 ----------- (947,030) ----------- 1,952,508 10,028,942 ----------- 11,981,450 ----------- 5,681,945 ----------- 17,663,395 ----------- $16,716,365 ===========
The accompanying notes are an integral part of these financial statements. AA-13 NEW ENGLAND VARIABLE LIFE SEPARATE ACCOUNT OF NEW ENGLAND LIFE INSURANCE COMPANY STATEMENT OF OPERATIONS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2007, 2006, AND 2005
MSF FI VALUE MSF LOOMIS SAYLES LEADERS SMALL CAP SUB-ACCOUNT SUB-ACCOUNT --------------------------------------- --------------------------------------- 2007 2006 2005 2007 2006 2005 ----------- ----------- ----------- ----------- ----------- ----------- INVESTMENT INCOME: Dividends............................... $ 809,095 $ 958,429 $ 928,280 $ 146,606 $ -- $ -- ----------- ----------- ----------- ----------- ----------- ----------- EXPENSES: Mortality and expense risk charges...... 548,087 557,966 531,868 1,052,120 1,011,861 942,436 Administrative charges.................. -- -- -- -- -- ----------- ----------- ----------- ----------- ----------- ----------- Total expenses..................... 548,087 557,966 531,868 1,052,120 1,011,861 942,436 ----------- ----------- ----------- ----------- ----------- ----------- Net investment income (loss)............ 261,008 400,463 396,412 (905,514) (1,011,861) (942,436) ----------- ----------- ----------- ----------- ----------- ----------- NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Realized gain distributions............. 7,659,831 2,213,565 -- 20,142,285 14,538,332 1,892,004 Realized gains (losses) on sale of investments.......................... 584,957 (1,027,480) (2,000,300) 3,068,217 2,674,592 7,354,968 ----------- ----------- ----------- ----------- ----------- ----------- Net realized gains (losses)........ 8,244,788 1,186,085 (2,000,300) 23,210,502 17,212,924 9,246,972 ----------- ----------- ----------- ----------- ----------- ----------- Change in unrealized gains (losses) on investments.......................... (5,423,442) 7,503,062 9,329,675 (3,427,252) 8,523,003 1,095,808 ----------- ----------- ----------- ----------- ----------- ----------- Net realized and unrealized gains (losses) on investments.............. 2,821,346 8,689,147 7,329,375 19,783,250 25,735,927 10,342,780 ----------- ----------- ----------- ----------- ----------- ----------- Net increase (decrease) in net assets resulting from operations............ $ 3,082,354 $ 9,089,610 $ 7,725,787 $18,877,736 $24,724,066 $ 9,400,344 =========== =========== =========== =========== =========== ===========
(a) For the period May 1, 2005 to December 31, 2005. (b) For the period January 1, 2007 to April 27, 2007. (c) For the period May 1, 2006 to December 31, 2006. (d) For the period April 30, 2007 to December 31, 2007. The accompanying notes are an integral part of these financial statements. AA-14
MSF DAVIS VENTURE MSF BLACKROCK LEGACY MSF WESTERN ASSET MANAGEMENT VALUE LARGE CAP GROWTH U.S. GOVERNMENT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT - -------------------------------------- ----------------------------------------- -------------------------------- 2007 2006 2005 2007 2006 2005 2007 2005 2006 - ----------- ----------- ----------- ----------- ------------ ------------ --------- --------- -------- $ 3,162,666 $ 3,079,024 $ 2,385,741 $ 431,640 $ 259,843 $ 927,385 $ 180,075 $ 217,962 $ 52,739 - ----------- ----------- ----------- ----------- ------------ ------------ --------- --------- -------- 2,172,613 2,091,326 2,023,092 1,322,272 1,306,165 1,349,395 48,445 52,571 12,987 -- -- -- -- -- -- -- -- -- - ----------- ----------- ----------- ----------- ------------ ------------ --------- --------- -------- 2,172,613 2,091,326 2,023,092 1,322,272 1,306,165 1,349,395 48,445 52,571 12,987 - ----------- ----------- ----------- ----------- ------------ ------------ --------- --------- -------- 990,053 987,698 362,649 (890,632) (1,046,322) (422,010) 131,630 165,391 39,752 - ----------- ----------- ----------- ----------- ------------ ------------ --------- --------- -------- -- -- -- -- -- -- -- -- 71,945 9,218,751 4,885,353 4,781,824 (5,770,805) (12,779,112) (14,537,569) 548,137 (135,837) 474 - ----------- ----------- ----------- ----------- ------------ ------------ --------- --------- -------- 9,218,751 4,885,353 4,781,824 (5,770,805) (12,779,112) (14,537,569) 548,137 (135,837) 72,419 - ----------- ----------- ----------- ----------- ------------ ------------ --------- --------- -------- 5,528,444 43,007,635 26,829,481 42,663,606 21,093,144 28,235,221 (163,639) 403,509 (63,876) - ----------- ----------- ----------- ----------- ------------ ------------ --------- --------- -------- 14,747,195 47,892,988 31,611,305 36,892,801 8,314,032 13,697,652 384,498 267,672 8,543 - ----------- ----------- ----------- ----------- ------------ ------------ --------- --------- -------- $15,737,248 $48,880,686 $31,973,954 $36,002,169 $ 7,267,710 $ 13,275,642 $ 516,128 $ 433,063 $ 48,295 =========== =========== =========== =========== ============ ============ ========= ========= ========
The accompanying notes are an integral part of these financial statements. AA-15 NEW ENGLAND VARIABLE LIFE SEPARATE ACCOUNT OF NEW ENGLAND LIFE INSURANCE COMPANY STATEMENT OF OPERATIONS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2007, 2006, AND 2005
MSF WESTERN ASSET MANAGEMENT MSF FI MID CAP STRATEGIC BOND OPPORTUNITIES OPPORTUNITIES SUB-ACCOUNT SUB-ACCOUNT ------------------------------- ------------------------------------ 2007 2006 2005 2007 2006 2005 -------- -------- --------- ---------- ---------- ---------- INVESTMENT INCOME: Dividends................................... $410,391 $625,265 $ 157,099 $ 45,446 $ 1,790 $ -- -------- -------- --------- ---------- ---------- ---------- EXPENSES: Mortality and expense risk charges.......... 62,240 50,309 26,433 181,049 174,002 176,847 Administrative charges...................... -- -- -- -- -------- -------- --------- ---------- ---------- ---------- Total expenses........................... 62,240 50,309 26,433 181,049 174,002 176,847 -------- -------- --------- ---------- ---------- ---------- Net investment income (loss)................ 348,151 574,956 130,666 (135,603) (172,212) (176,847) -------- -------- --------- ---------- ---------- ---------- NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Realized gain distributions................. 14,151 99,652 96,910 -- -- -- Realized gains (losses) on sale of investments.............................. (87,287) (87,814) 129,189 2,127,224 1,255,273 (428,954) -------- -------- --------- ---------- ---------- ---------- Net realized gains (losses).............. (73,136) 11,838 226,099 2,127,224 1,255,273 (428,954) -------- -------- --------- ---------- ---------- ---------- Change in unrealized gains (losses) on investments.............................. 253,652 8,968 (186,816) 529,109 2,418,061 2,538,292 -------- -------- --------- ---------- ---------- ---------- Net realized and unrealized gains (losses) on investments........................... 180,516 20,806 39,283 2,656,333 3,673,334 2,109,338 -------- -------- --------- ---------- ---------- ---------- Net increase (decrease) in net assets resulting from operations................ $528,667 $595,762 $ 169,949 $2,520,730 $3,501,122 $1,932,491 ======== ======== ========= ========== ========== ==========
(a) For the period May 1, 2005 to December 31, 2005. (b) For the period January 1, 2007 to April 27, 2007. (c) For the period May 1, 2006 to December 31, 2006. (d) For the period April 30, 2007 to December 31, 2007. The accompanying notes are an integral part of these financial statements. AA-16
MSF JENNISON MSF RUSSELL 2000 MSF FI INTERNATIONAL GROWTH INDEX STOCK SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT - ------------------------------- ------------------------------------- ------------------------------------- 2007 2006 2005(A) 2007 2006 2005 2007 2006 2005 - -------- -------- ---------- ----------- ---------- ---------- ----------- ---------- ---------- $ 33,839 $ -- $ -- $ 268,946 $ 230,031 $ 180,042 $ 544,110 $ 729,587 $ 280,738 - -------- -------- ---------- ----------- ---------- ---------- ----------- ---------- ---------- 34,144 35,207 23,580 128,128 127,671 116,225 264,117 260,392 246,068 -- -- -- -- -- -- -- -- - -------- -------- ---------- ----------- ---------- ---------- ----------- ---------- ---------- 34,144 35,207 23,580 128,128 127,671 116,225 264,117 260,392 246,068 - -------- -------- ---------- ----------- ---------- ---------- ----------- ---------- ---------- (305) (35,207) (23,580) 140,818 102,360 63,817 279,993 469,195 34,670 - -------- -------- ---------- ----------- ---------- ---------- ----------- ---------- ---------- 283,769 6,968 -- 2,200,968 1,065,026 881,529 2,643,262 -- -- 315,524 343,593 113,996 1,226,017 2,295,212 1,047,635 2,972,805 3,142,765 60,812 - -------- -------- ---------- ----------- ---------- ---------- ----------- ---------- ---------- 599,293 350,561 113,996 3,426,985 3,360,238 1,929,164 5,616,067 3,142,765 60,812 - -------- -------- ---------- ----------- ---------- ---------- ----------- ---------- ---------- 241,138 (97,967) 1,346,139 (4,104,853) 760,311 (920,521) (1,169,019) 3,874,760 7,358,868 - -------- -------- ---------- ----------- ---------- ---------- ----------- ---------- ---------- 840,431 252,594 1,460,135 (677,868) 4,120,549 1,008,643 4,447,048 7,017,525 7,419,680 - -------- -------- ---------- ----------- ---------- ---------- ----------- ---------- ---------- $840,126 $217,387 $1,436,555 $ (537,050) $4,222,909 $1,072,460 $ 4,727,041 $7,486,720 $7,454,350 ======== ======== ========== =========== ========== ========== =========== ========== ==========
The accompanying notes are an integral part of these financial statements. AA-17 NEW ENGLAND VARIABLE LIFE SEPARATE ACCOUNT OF NEW ENGLAND LIFE INSURANCE COMPANY STATEMENT OF OPERATIONS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2007, 2006, AND 2005
MSF BLACKROCK MSF METLIFE STRATEGIC VALUE STOCK INDEX SUB-ACCOUNT SUB-ACCOUNT ---------------------------------------- -------------------------------------- 2007 2006 2005 2007 2006 2005 ------------ ----------- ----------- ----------- ----------- ---------- INVESTMENT INCOME: Dividends............................... $ 220,789 $ 224,665 $ -- $ 2,398,288 $ 4,372,870 $3,421,268 ------------ ----------- ----------- ----------- ----------- ---------- EXPENSES: Mortality and expense risk charges...... 325,408 335,248 350,929 1,332,854 1,289,082 1,270,350 Administrative charges.................. -- -- -- -- -- -- ------------ ----------- ----------- ----------- ----------- ---------- Total expenses....................... 325,408 335,248 350,929 1,332,854 1,289,082 1,270,350 ------------ ----------- ----------- ----------- ----------- ---------- Net investment income (loss)............ (104,619) (110,583) (350,929) 1,065,434 3,083,788 2,150,918 ------------ ----------- ----------- ----------- ----------- ---------- NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Realized gain distributions............. 8,479,929 13,284,231 4,835,969 4,661,979 7,462,193 -- Realized gains (losses) on sale of investments.......................... 4,161,467 1,764,431 2,738,291 3,177,430 685,540 (869,033) ------------ ----------- ----------- ----------- ----------- ---------- Net realized gains (losses).......... 12,641,396 15,048,662 7,574,260 7,839,409 8,147,733 (869,033) ------------ ----------- ----------- ----------- ----------- ---------- Change in unrealized gains (losses) on investments.......................... (15,003,565) (4,163,723) (4,669,915) 1,523,885 19,171,837 6,994,271 ------------ ----------- ----------- ----------- ----------- ---------- Net realized and unrealized gains (losses) on investments.............. (2,362,169) 10,884,939 2,904,345 9,363,294 27,319,570 6,125,238 ------------ ----------- ----------- ----------- ----------- ---------- Net increase (decrease) in net assets resulting from operations............ $ (2,466,788) $10,774,356 $ 2,553,416 $10,428,728 $30,403,358 $8,276,156 ============ =========== =========== =========== =========== ==========
(a) For the period May 1, 2005 to December 31, 2005. (b) For the period January 1, 2007 to April 27, 2007. (c) For the period May 1, 2006 to December 31, 2006. (d) For the period April 30, 2007 to December 31, 2007. The accompanying notes are an integral part of these financial statements. AA-18
MSF LEHMAN BROTHERS MSF MORGAN STANLEY MSF METLIFE AGGREGATE BOND INDEX EAFE INDEX MID CAP STOCK INDEX SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT - ----------------------------------- ------------------------------------ ------------------------------------ 2007 2006 2005 2007 2006 2005 2007 2006 2005 - ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- $1,404,882 $1,293,549 $1,157,616 $ 410,461 $ 265,198 $ 179,280 $ 145,663 $ 192,747 $ 91,207 - ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- 95,544 95,979 103,536 77,728 59,709 45,771 72,303 61,078 52,899 -- -- -- -- -- -- -- -- -- - ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- 95,544 95,979 103,536 77,728 59,709 45,771 72,303 61,078 52,899 - ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- 1,309,338 1,197,570 1,054,080 332,733 205,489 133,509 73,360 131,669 38,308 - ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- -- -- -- 218,913 -- -- 780,511 1,093,970 667,929 (421,410) (259,014) 8,478 1,209,367 885,145 820,065 656,349 1,024,828 662,040 - ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- (421,410) (259,014) 8,478 1,428,280 885,145 820,065 1,436,860 2,118,798 1,329,969 - ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- 905,709 151,885 (564,840) 230,293 2,461,504 569,205 (229,825) (744,231) 184,066 - ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- 484,299 (107,129) (556,362) 1,658,573 3,346,649 1,389,270 1,207,035 1,374,567 1,514,035 - ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- $1,793,637 $1,090,441 $ 497,718 $1,991,306 $3,552,138 $1,522,779 $1,280,395 $1,506,236 $1,552,343 ========== ========== ========== ========== ========== ========== ========== ========== ==========
The accompanying notes are an integral part of these financial statements. AA-19 NEW ENGLAND VARIABLE LIFE SEPARATE ACCOUNT OF NEW ENGLAND LIFE INSURANCE COMPANY STATEMENT OF OPERATIONS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2007, 2006, AND 2005
MSF FRANKLIN TEMPLETON MSF BLACKROCK SMALL CAP GROWTH LARGE CAP SUB-ACCOUNT SUB-ACCOUNT -------------------------------- ------------------------------- 2007 2006 2005 2007(B) 2006 2005 --------- -------- --------- --------- -------- -------- INVESTMENT INCOME: Dividends.................................... $ -- $ -- $ -- $ 29,085 $ 22,762 $ 15,079 --------- -------- --------- --------- -------- -------- EXPENSES: Mortality and expense risk charges........... 26,810 28,720 27,835 1,428 4,287 3,792 Administrative charges....................... -- -- -- -- -- -- --------- -------- --------- --------- -------- -------- Total expenses............................ 26,810 28,720 27,835 1,428 4,287 3,792 --------- -------- --------- --------- -------- -------- Net investment income (loss)................. (26,810) (28,720) (27,835) 27,657 18,475 11,287 --------- -------- --------- --------- -------- -------- NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Realized gain distributions.................. 510,107 349,716 214,727 -- -- -- Realized gains (losses) on sale of investments............................... 304,907 374,033 375,574 367,439 96,820 91,015 --------- -------- --------- --------- -------- -------- Net realized gains (losses)............... 815,014 723,749 590,301 367,439 96,820 91,015 --------- -------- --------- --------- -------- -------- Change in unrealized gains (losses) on investments............................... (481,667) (40,740) (268,460) (295,910) 114,020 (52,412) --------- -------- --------- --------- -------- -------- Net realized and unrealized gains (losses) on investments............................... 333,347 683,009 321,841 71,529 210,840 38,603 --------- -------- --------- --------- -------- -------- Net increase (decrease) in net assets resulting from operations................. $ 306,537 $654,289 $ 294,006 $ 99,186 $229,315 $ 49,890 ========= ======== ========= ========= ======== ========
(a) For the period May 1, 2005 to December 31, 2005. (b) For the period January 1, 2007 to April 27, 2007. (c) For the period May 1, 2006 to December 31, 2006. (d) For the period April 30, 2007 to December 31, 2007. The accompanying notes are an integral part of these financial statements. AA-20
MSF BLACKROCK MSF NEUBERGER BERMAN MSF HARRIS OAKMARK LARGE CAP VALUE MID CAP VALUE LARGE CAP VALUE SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT - -------------------------------- ------------------------------------- ------------------------------------ 2007 2006 2005 2007 2006 2005 2007 2006 2005 - --------- ---------- -------- ----------- ---------- ---------- ----------- ---------- --------- $ 101,926 $ 80,958 $ 42,131 $ 223,989 $ 180,406 $ 67,355 $ 107,958 $ 103,127 $ 83,913 - --------- ---------- -------- ----------- ---------- ---------- ----------- ---------- --------- 36,677 21,578 17,673 186,043 178,822 132,620 48,197 52,868 56,910 -- -- -- -- -- -- -- -- -- - --------- ---------- -------- ----------- ---------- ---------- ----------- ---------- --------- 36,677 21,578 17,673 186,043 178,822 132,620 48,197 52,868 56,910 - --------- ---------- -------- ----------- ---------- ---------- ----------- ---------- --------- 65,249 59,380 24,458 37,946 1,584 (65,265) 59,761 50,259 27,003 - --------- ---------- -------- ----------- ---------- ---------- ----------- ---------- --------- 387,606 396,606 45,372 1,205,537 3,259,000 1,934,364 377,407 -- -- 359,624 148,622 148,397 1,141,912 1,396,123 708,334 458,712 704,802 486,957 - --------- ---------- -------- ----------- ---------- ---------- ----------- ---------- --------- 747,230 545,228 193,769 2,347,449 4,655,123 2,642,698 836,119 704,802 486,957 - --------- ---------- -------- ----------- ---------- ---------- ----------- ---------- --------- (599,618) 598,642 54,281 (1,353,621) (908,234) 476,829 (1,411,253) 1,401,637 (644,749) - --------- ---------- -------- ----------- ---------- ---------- ----------- ---------- --------- 147,612 1,143,870 248,050 993,828 3,746,889 3,119,527 (575,134) 2,106,439 (157,792) - --------- ---------- -------- ----------- ---------- ---------- ----------- ---------- --------- $ 212,861 $1,203,250 $272,508 $ 1,031,774 $3,748,473 $3,054,262 $ (515,373) $2,156,698 $(130,789) ========= ========== ======== =========== ========== ========== =========== ========== =========
The accompanying notes are an integral part of these financial statements. AA-21 NEW ENGLAND VARIABLE LIFE SEPARATE ACCOUNT OF NEW ENGLAND LIFE INSURANCE COMPANY STATEMENT OF OPERATIONS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2007, 2006, AND 2005
MSF T. ROWE PRICE MSF T. ROWE PRICE LARGE CAP GROWTH SMALL CAP GROWTH SUB-ACCOUNT SUB-ACCOUNT ------------------------------ ------------------------------ 2007 2006 2005 2007 2006 2005 -------- -------- -------- -------- -------- -------- INVESTMENT INCOME: Dividends..................................... $ 30,054 $ 23,618 $ 22,907 $ -- $ -- $ -- -------- -------- -------- -------- -------- -------- EXPENSES: Mortality and expense risk charges............ 32,838 18,139 4,385 18,437 13,378 2,744 Administrative charges........................ -- -- -- -- -- -- -------- -------- -------- -------- -------- -------- Total expenses............................. 32,838 18,139 4,385 18,437 13,378 2,744 -------- -------- -------- -------- -------- -------- Net investment income (loss).................. (2,784) 5,479 18,522 (18,437) (13,378) (2,744) -------- -------- -------- -------- -------- -------- NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Realized gain distributions................... 59,691 -- -- -- -- -- Realized gains (losses) on sale of investments................................ 282,606 414,265 52,379 153,641 148,598 35,555 -------- -------- -------- -------- -------- -------- Net realized gains (losses)................ 342,297 414,265 52,379 153,641 148,598 35,555 -------- -------- -------- -------- -------- -------- Change in unrealized gains (losses) on investments................................ 220,924 274,201 401,931 266,932 (69,411) 111,744 -------- -------- -------- -------- -------- -------- Net realized and unrealized gains (losses) on investments................................ 563,221 688,466 454,310 420,573 79,187 147,299 -------- -------- -------- -------- -------- -------- Net increase (decrease) in net assets resulting from operations.................. $560,437 $693,945 $472,832 $402,136 $ 65,809 $144,555 ======== ======== ======== ======== ======== ========
(a) For the period May 1, 2005 to December 31, 2005. (b) For the period January 1, 2007 to April 27, 2007. (c) For the period May 1, 2006 to December 31, 2006. (d) For the period April 30, 2007 to December 31, 2007. The accompanying notes are an integral part of these financial statements. AA-22
MSF OPPENHEIMER MSF BLACKROCK MSF BLACKROCK GLOBAL EQUITY AGGRESSIVE GROWTH DIVERSIFIED SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT - ----------------------------- ---------------------------- ------------------------------ 2007 2006 2005 2007 2006 2005 2007 2006 2005 - -------- -------- -------- -------- ------- ------- -------- -------- -------- $ 67,589 $ 92,861 $ 4,794 $ -- $ -- $ -- $ 80,791 $ 75,836 $ 23,386 - -------- -------- -------- -------- ------- ------- -------- -------- -------- 24,863 16,758 3,627 6,542 4,379 1,689 10,216 10,705 6,411 -- -- -- -- -- -- -- -- -- - -------- -------- -------- -------- ------- ------- -------- -------- -------- 24,863 16,758 3,627 6,542 4,379 1,689 10,216 10,705 6,411 - -------- -------- -------- -------- ------- ------- -------- -------- -------- 42,726 76,103 1,167 (6,542) (4,379) (1,689) 70,575 65,131 16,975 - -------- -------- -------- -------- ------- ------- -------- -------- -------- 88,174 71,767 -- -- -- -- -- -- -- 266,756 148,433 14,077 83,010 53,157 29,202 122,433 32,548 42,119 - -------- -------- -------- -------- ------- ------- -------- -------- -------- 354,930 220,200 14,077 83,010 53,157 29,202 122,433 32,548 42,119 - -------- -------- -------- -------- ------- ------- -------- -------- -------- (64,091) 302,557 177,774 210,386 13,209 29,347 (15,315) 223,263 41,409 - -------- -------- -------- -------- ------- ------- -------- -------- -------- 290,839 522,757 191,851 293,396 66,366 58,549 107,118 255,811 83,528 - -------- -------- -------- -------- ------- ------- -------- -------- -------- $333,565 $598,860 $193,018 $286,854 $61,987 $56,860 $177,693 $320,942 $100,503 ======== ======== ======== ======== ======= ======= ======== ======== ========
The accompanying notes are an integral part of these financial statements. AA-23 NEW ENGLAND VARIABLE LIFE SEPARATE ACCOUNT OF NEW ENGLAND LIFE INSURANCE COMPANY STATEMENT OF OPERATIONS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2007, 2006, AND 2005
MSF METLIFE MSF METLIFE CONSERVATIVE CONSERVATIVE ALLOCATION TO MODERATE ALLOCATION SUB-ACCOUNT SUB-ACCOUNT ---------------------------- ---------------------------- 2007 2006 2005(A) 2007 2006 2005(A) -------- ------- ------- -------- ------- ------- INVESTMENT INCOME: Dividends....................................... $ -- $15,353 $1,666 $ -- $ 7,682 $ 921 -------- ------- ------ -------- ------- ------ EXPENSES: Mortality and expense risk charges.............. 7,484 1,896 574 6,272 1,020 189 Administrative charges.......................... -- -- -- -- -- -- -------- ------- ------ -------- ------- ------ Total expenses............................... 7,484 1,896 574 6,272 1,020 189 -------- ------- ------ -------- ------- ------ Net investment income (loss).................... (7,484) 13,457 1,092 (6,272) 6,662 732 -------- ------- ------ -------- ------- ------ NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Realized gain distributions..................... 837 5,892 441 4,518 5,267 45 Realized gains (losses) on sale of investments.. 79,400 1,663 35 93,567 (1,515) 1,590 -------- ------- ------ -------- ------- ------ Net realized gains (losses).................. 80,237 7,555 476 98,085 3,752 1,635 -------- ------- ------ -------- ------- ------ Change in unrealized gains (losses) on investments.................................. 26,176 23,520 4,828 42,349 37,322 1,955 -------- ------- ------ -------- ------- ------ Net realized and unrealized gains (losses) on investments.................................. 106,413 31,075 5,304 140,434 41,074 3,590 -------- ------- ------ -------- ------- ------ Net increase (decrease) in net assets resulting from operations.............................. $ 98,929 $44,532 $6,396 $134,162 $47,736 $4,322 ======== ======= ====== ======== ======= ======
(a) For the period May 1, 2005 to December 31, 2005. (b) For the period January 1, 2007 to April 27, 2007. (c) For the period May 1, 2006 to December 31, 2006. (d) For the period April 30, 2007 to December 31, 2007. The accompanying notes are an integral part of these financial statements. AA-24
MSF METLIFE MSF METLIFE MODERATE TO AGGRESSIVE MSF METLIFE MODERATE ALLOCATION ALLOCATION AGGRESSIVE ALLOCATION SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT - ------------------------------ ------------------------------- ----------------------------- 2007 2006 2005(A) 2007 2006 2005(A) 2007 2006 2005(A) - -------- ---------- ------- -------- ---------- ------- -------- -------- ------- $ 46,442 $ 193,892 $15,189 $ 69,019 $ 105,754 $10,881 $ 15,959 $ 11,554 $ 1,511 - -------- ---------- ------- -------- ---------- ------- -------- -------- ------- 55,629 22,851 2,590 92,683 33,391 2,174 23,833 6,252 350 -- -- -- -- -- -- -- -- -- - -------- ---------- ------- -------- ---------- ------- -------- -------- ------- 55,629 22,851 2,590 92,683 33,391 2,174 23,833 6,252 350 - -------- ---------- ------- -------- ---------- ------- -------- -------- ------- (9,187) 171,041 12,599 (23,664) 72,363 8,707 (7,874) 5,302 1,161 - -------- ---------- ------- -------- ---------- ------- -------- -------- ------- 32,152 271,127 337 39,440 269,137 253 10,196 48,490 1,142 340,089 68,899 1,188 600,792 97,892 4,220 107,011 19,663 1,271 - -------- ---------- ------- -------- ---------- ------- -------- -------- ------- 372,241 340,026 1,525 640,232 367,029 4,473 117,207 68,153 2,413 - -------- ---------- ------- -------- ---------- ------- -------- -------- ------- 434,465 763,970 80,069 110,236 1,414,416 59,638 (66,432) 190,262 12,700 - -------- ---------- ------- -------- ---------- ------- -------- -------- ------- 806,706 1,103,996 81,594 750,468 1,781,445 64,111 50,775 258,415 15,113 - -------- ---------- ------- -------- ---------- ------- -------- -------- ------- $797,519 $1,275,037 $94,193 $726,804 $1,853,808 $72,818 $ 42,901 $263,717 $16,274 ======== ========== ======= ======== ========== ======= ======== ======== =======
The accompanying notes are an integral part of these financial statements. AA-25 NEW ENGLAND VARIABLE LIFE SEPARATE ACCOUNT OF NEW ENGLAND LIFE INSURANCE COMPANY STATEMENT OF OPERATIONS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2007, 2006, AND 2005
MSF FI LARGE CAP AMERICAN FUNDS GROWTH SUB-ACCOUNT SUB-ACCOUNT ----------------- --------------------------------------- 2007 2006(C) 2007 2006 2005 ------- ------- ----------- ----------- ----------- INVESTMENT INCOME: Dividends........................................ $ 201 $ -- $ 1,808,360 $ 1,615,103 $ 1,155,350 ------- ------ ----------- ----------- ----------- EXPENSES: Mortality and expense risk charges............... 450 14 931,420 840,501 725,394 Administrative charges........................... -- -- -- -- -- ------- ------ ----------- ----------- ----------- Total expenses................................ 450 14 931,420 840,501 725,394 ------- ------ ----------- ----------- ----------- Net investment income (loss)..................... (249) (14) 876,940 774,602 429,956 ------- ------ ----------- ----------- ----------- NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Realized gain distributions...................... 8,351 -- 15,721,386 1,235,025 -- Realized gains (losses) on sale of investments... (1,581) 3 13,121,698 5,192,349 2,405,771 ------- ------ ----------- ----------- ----------- Net realized gains (losses)................... 6,770 3 28,843,084 6,427,374 2,405,771 ------- ------ ----------- ----------- ----------- Change in unrealized gains (losses) on investments................................... (2,362) 1,229 (4,084,594) 11,430,058 21,506,036 ------- ------ ----------- ----------- ----------- Net realized and unrealized gains (losses) on Investments................................... 4,408 1,232 24,758,490 17,857,432 23,911,807 ------- ------ ----------- ----------- ----------- Net increase (decrease) in net assets resulting from operations............................... $ 4,159 $1,218 $25,635,430 $18,632,034 $24,341,763 ======= ====== =========== =========== ===========
(a) For the period May 1, 2005 to December 31, 2005. (b) For the period January 1, 2007 to April 27, 2007. (c) For the period May 1, 2006 to December 31, 2006. (d) For the period April 30, 2007 to December 31, 2007. The accompanying notes are an integral part of these financial statements. AA-26
AMERICAN FUNDS AMERICAN FUNDS GROWTH-INCOME GLOBAL SMALL CAPITALIZATION AMERICAN FUNDS BOND SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT - ------------------------------------- -------------------------------------- ------------------- 2007 2006 2005 2007 2006 2005 2007 2006(C) - ----------- ----------- ---------- ----------- ----------- ---------- --------- ------- $ 2,024,719 $ 1,767,133 $1,310,673 $ 2,390,291 $ 265,030 $ 346,171 $ 602,879 $ 5,629 - ----------- ----------- ---------- ----------- ----------- ---------- --------- ------- 467,907 423,392 407,832 352,106 262,581 174,725 29,462 4,908 -- -- -- -- -- -- -- -- - ----------- ----------- ---------- ----------- ----------- ---------- --------- ------- 467,907 423,392 407,832 352,106 262,581 174,725 29,462 4,908 - ----------- ----------- ---------- ----------- ----------- ---------- --------- ------- 1,556,812 1,343,741 902,841 2,038,185 2,449 171,446 573,417 721 - ----------- ----------- ---------- ----------- ----------- ---------- --------- ------- 4,240,718 2,556,084 387,210 6,097,376 2,961,958 -- -- -- 4,528,995 4,285,244 1,956,707 4,426,929 2,972,183 2,045,188 35,969 (45) - ----------- ----------- ---------- ----------- ----------- ---------- --------- ------- 8,769,713 6,841,328 2,343,917 10,524,305 5,934,141 2,045,188 35,969 (45) - ----------- ----------- ---------- ----------- ----------- ---------- --------- ------- (4,583,687) 7,262,226 2,102,684 1,634,253 6,069,880 6,281,497 (437,728) 90,784 - ----------- ----------- ---------- ----------- ----------- ---------- --------- ------- 4,186,026 14,103,554 4,446,601 12,158,558 12,004,021 8,326,685 (401,759) 90,739 - ----------- ----------- ---------- ----------- ----------- ---------- --------- ------- $ 5,742,838 $15,447,295 $5,349,442 $14,196,743 $12,006,470 $8,498,131 $ 171,658 $91,460 =========== =========== ========== =========== =========== ========== ========= =======
The accompanying notes are an integral part of these financial statements. AA-27 NEW ENGLAND VARIABLE LIFE SEPARATE ACCOUNT OF NEW ENGLAND LIFE INSURANCE COMPANY STATEMENT OF OPERATIONS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2007, 2006, AND 2005
FIDELITY VIP EQUITY-INCOME FIDELITY VIP OVERSEAS SUB-ACCOUNT SUB-ACCOUNT ---------------------------------------- --------------------------------------- 2007 2006 2005 2007 2006 2005 ------------ ----------- ----------- ----------- ----------- ----------- INVESTMENT INCOME: Dividends.............................. $ 3,064,817 $ 5,504,500 $ 2,594,848 $ 5,111,389 $ 1,245,648 $ 817,432 ------------ ----------- ----------- ----------- ----------- ----------- EXPENSES: Mortality and expense risk charges..... 1,045,345 988,690 968,260 918,741 857,135 756,839 Administrative charges................. -- -- ------------ ----------- ----------- ----------- ----------- ----------- Total expenses...................... 1,045,345 988,690 968,260 918,741 857,135 756,839 ------------ ----------- ----------- ----------- ----------- ----------- Net investment income (loss)........... 2,019,472 4,515,810 1,626,588 4,192,648 388,513 60,593 ------------ ----------- ----------- ----------- ----------- ----------- NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Realized gain distributions............ 13,515,291 19,947,649 5,702,259 10,137,255 865,959 639,729 Realized gains (losses) on sale of investments......................... 2,864,369 3,302,552 4,169,368 220,654 (2,696,039) 976,472 ------------ ----------- ----------- ----------- ----------- ----------- Net realized gains (losses)......... 16,379,660 23,250,201 9,871,627 10,357,909 (1,830,080) 1,616,201 ------------ ----------- ----------- ----------- ----------- ----------- Change in unrealized gains (losses) on investments......................... (16,083,412) 1,879,953 (3,446,973) 8,937,231 24,309,349 19,836,609 ------------ ----------- ----------- ----------- ----------- ----------- Net realized and unrealized gains (losses) on investments............. 296,248 25,130,154 6,424,654 19,295,140 22,479,269 21,452,810 ------------ ----------- ----------- ----------- ----------- ----------- Net increase (decrease) in net assets resulting from operations........... $ 2,315,720 $29,645,964 $ 8,051,242 $23,487,788 $22,867,782 $21,513,403 ============ =========== =========== =========== =========== ===========
(a) For the period May 1, 2005 to December 31, 2005. (b) For the period January 1, 2007 to April 27, 2007. (c) For the period May 1, 2006 to December 31, 2006. (d) For the period April 30, 2007 to December 31, 2007. The accompanying notes are an integral part of these financial statements. AA-28
MIST T. ROWE PRICE MIST PIMCO MID-CAP GROWTH TOTAL RETURN MIST RCM TECHNOLOGY SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT - ----------------------------------- ----------------------------------- -------------------------------- 2007 2006 2005 2007 2006 2005 2007 2006 2005 - ---------- ---------- ---------- ---------- ---------- --------- ---------- -------- -------- $ 54,866 $ -- $ -- $1,944,178 $1,199,023 $ 22,275 $ -- $ -- $ -- - ---------- ---------- ---------- ---------- ---------- --------- ---------- -------- -------- 101,197 87,596 66,861 203,511 188,799 158,792 18,206 14,830 15,761 -- -- -- - ---------- ---------- ---------- ---------- ---------- --------- ---------- -------- -------- 101,197 87,596 66,861 203,511 188,799 158,792 18,206 14,830 15,761 - ---------- ---------- ---------- ---------- ---------- --------- ---------- -------- -------- (46,331) (87,596) (66,861) 1,740,667 1,010,224 (136,517) (18,206) (14,830) (15,761) - ---------- ---------- ---------- ---------- ---------- --------- ---------- -------- -------- 1,046,424 660,383 368,914 -- 17,702 263,932 151,685 -- 25,657 1,737,033 638,410 607,665 35,653 4,333 148,971 502,076 28,396 (70,742) - ---------- ---------- ---------- ---------- ---------- --------- ---------- -------- -------- 2,783,457 1,298,793 976,579 35,653 22,035 412,903 653,761 28,396 (45,085) - ---------- ---------- ---------- ---------- ---------- --------- ---------- -------- -------- 895,981 (53,103) 1,202,380 2,098,892 1,194,931 477,776 595,431 157,821 409,427 - ---------- ---------- ---------- ---------- ---------- --------- ---------- -------- -------- 3,679,438 1,245,690 2,178,959 2,134,545 1,216,966 890,679 1,249,192 186,217 364,342 - ---------- ---------- ---------- ---------- ---------- --------- ---------- -------- -------- $3,633,107 $1,158,094 $2,112,098 $3,875,212 $2,227,190 $ 754,162 $1,230,986 $171,387 $348,581 ========== ========== ========== ========== ========== ========= ========== ======== ========
The accompanying notes are an integral part of these financial statements. AA-29 NEW ENGLAND VARIABLE LIFE SEPARATE ACCOUNT OF NEW ENGLAND LIFE INSURANCE COMPANY STATEMENT OF OPERATIONS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2007, 2006, AND 2005
MIST LAZARD MIST MET/AIM MID-CAP SMALL CAP GROWTH SUB-ACCOUNT SUB-ACCOUNT ---------------------------------- -------------------------------- 2007 2006 2005 2007 2006 2005 ----------- -------- --------- -------- --------- --------- INVESTMENT INCOME: Dividends................................... $ 57,415 $ 32,928 $ 21,353 $ -- $ -- $ -- ----------- -------- --------- -------- --------- --------- EXPENSES: Mortality and expense risk charges.......... 41,294 28,902 28,093 19,748 19,305 18,759 Administrative charges...................... -- -- -- -- ----------- -------- --------- -------- --------- --------- Total expenses........................... 41,294 28,902 28,093 19,748 19,305 18,759 ----------- -------- --------- -------- --------- --------- Net investment income (loss)................ 16,121 4,026 (6,740) (19,748) (19,305) (18,759) ----------- -------- --------- -------- --------- --------- NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Realized gain distributions................. 786,878 723,389 644,873 69,016 561,530 77,549 Realized gains (losses) on sale of investments.............................. 35,802 42,786 230,324 268,048 213,397 337,036 ----------- -------- --------- -------- --------- --------- Net realized gains (losses).............. 822,680 766,175 875,197 337,064 774,927 414,585 ----------- -------- --------- -------- --------- --------- Change in unrealized gains (losses) on investments.............................. (1,252,571) 60,580 (443,804) 171,391 (225,798) (114,128) ----------- -------- --------- -------- --------- --------- Net realized and unrealized gains (losses) on investments........................... (429,891) 826,755 431,393 508,455 549,129 300,457 ----------- -------- --------- -------- --------- --------- Net increase (decrease) in net assets resulting from operations................ $ (413,770) $830,781 $ 424,653 $488,707 $ 529,824 $ 281,698 =========== ======== ========= ======== ========= =========
(a) For the period May 1, 2005 to December 31, 2005. (b) For the period January 1, 2007 to April 27, 2007. (c) For the period May 1, 2006 to December 31, 2006. (d) For the period April 30, 2007 to December 31, 2007. The accompanying notes are an integral part of these financial statements. AA-30
MIST HARRIS OAKMARK MIST LEGG MASON PARTNERS MIST NEUBERGER BERMAN INTERNATIONAL AGGRESSIVE GROWTH REAL ESTATE SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT - ------------------------------------ -------------------------------- ------------------------------------- 2007 2006 2005 2007 2006 2005 2007 2006 2005 - ----------- ---------- ---------- --------- --------- -------- ----------- ---------- ---------- $ 536,334 $ 963,939 $ 31,624 $ 6,982 $ -- $ -- $ 303,897 $ 187,018 $ -- - ----------- ---------- ---------- --------- --------- -------- ----------- ---------- ---------- 245,138 163,035 90,152 13,291 15,055 15,219 115,932 79,737 34,808 -- -- -- -- -- -- - ----------- ---------- ---------- --------- --------- -------- ----------- ---------- ---------- 245,138 163,035 90,152 13,291 15,055 15,219 115,932 79,737 34,808 - ----------- ---------- ---------- --------- --------- -------- ----------- ---------- ---------- 291,196 800,904 (58,528) (6,309) (15,055) (15,219) 187,965 107,281 (34,808) - ----------- ---------- ---------- --------- --------- -------- ----------- ---------- ---------- 4,601,954 2,406,268 329,543 284,333 203,518 3,598 2,435,217 888,402 12,751 3,272,828 1,074,798 592,237 41,658 284,271 316,472 1,183,037 832,878 201,804 - ----------- ---------- ---------- --------- --------- -------- ----------- ---------- ---------- 7,874,782 3,481,066 921,780 325,991 487,789 320,070 3,618,254 1,721,280 214,555 - ----------- ---------- ---------- --------- --------- -------- ----------- ---------- ---------- (9,052,128) 5,394,065 2,041,888 (250,410) (542,275) 137,586 (8,438,976) 3,634,132 847,791 - ----------- ---------- ---------- --------- --------- -------- ----------- ---------- ---------- (1,177,346) 8,875,131 2,963,668 75,581 (54,486) 457,656 (4,820,722) 5,355,412 1,062,346 - ----------- ---------- ---------- --------- --------- -------- ----------- ---------- ---------- $ (886,150) $9,676,035 $2,905,140 $ 69,272 $ (69,541) $442,437 $(4,632,757) $5,462,693 $1,027,538 =========== ========== ========== ========= ========= ======== =========== ========== ==========
The accompanying notes are an integral part of these financial statements. AA-31 NEW ENGLAND VARIABLE LIFE SEPARATE ACCOUNT OF NEW ENGLAND LIFE INSURANCE COMPANY STATEMENT OF OPERATIONS -- (CONCLUDED) FOR THE YEARS ENDED DECEMBER 31, 2007, 2006, AND 2005
MIST MFS RESEARCH MIST LORD ABBETT BOND INTERNATIONAL DEBENTURE SUB-ACCOUNT SUB-ACCOUNT ---------------------------------- ------------------------------------- 2007 2006 2005 2007 2006 2005 ---------- ---------- -------- ---------- ---------- ----------- INVESTMENT INCOME: Dividends.................................. $ 254,062 $ 114,246 $ 21,042 $2,071,611 $2,392,153 $ 1,551,512 ---------- ---------- -------- ---------- ---------- ----------- EXPENSES: Mortality and expense risk charges......... 76,591 33,607 6,112 172,086 138,690 118,297 Administrative charges..................... -- -- -- -- -- ---------- ---------- -------- ---------- ---------- ----------- Total expenses.......................... 76,591 33,607 6,112 172,086 138,690 118,297 ---------- ---------- -------- ---------- ---------- ----------- Net investment income (loss)............... 177,471 80,639 14,930 1,899,525 2,253,463 1,433,215 ---------- ---------- -------- ---------- ---------- ----------- NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Realized gain distributions................ 2,475,350 449,149 179,824 47,775 -- 2,207,072 Realized gains (losses) on sale of investments............................. 76,075 461,623 52,795 194,210 (42,854) 338,350 ---------- ---------- -------- ---------- ---------- ----------- Net realized gains (losses)............. 2,551,425 910,772 232,619 241,985 (42,854) 2,545,422 ---------- ---------- -------- ---------- ---------- ----------- Change in unrealized gains (losses) on investments............................. (534,417) 533,798 232,397 237,120 840,461 (3,442,079) ---------- ---------- -------- ---------- ---------- ----------- Net realized and unrealized gains (losses) on investments.......................... 2,017,008 1,444,570 465,016 479,105 797,607 (896,657) ---------- ---------- -------- ---------- ---------- ----------- Net increase (decrease) in net assets resulting from operations............... $2,194,479 $1,525,209 $479,946 $2,378,630 $3,051,070 $ 536,558 ========== ========== ======== ========== ========== ===========
(a) For the period May 1, 2005 to December 31, 2005. (b) For the period January 1, 2007 to April 27, 2007. (c) For the period May 1, 2006 to December 31, 2006. (d) For the period April 30, 2007 to December 31, 2007. The accompanying notes are an integral part of these financial statements. AA-32
MIST CYCLICAL MIST PIMCO MIST OPPENHEIMER MIST CYCLICAL GROWTH AND INFLATION MIST LEGG MASON CAPITAL APPRECIATION GROWTH ETF INCOME ETF PROTECTED BOND VALUE EQUITY SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT ---------------------------- ----------------- ---------------- ----------------- ------------------------ 2007 2006 2005(A) 2007 2006(C) 2007 2006(C) 2007 2006(C) 2007 2006(C) -------- ------- ------- ------- ------- ------ ------- ------- ------- ----------- ---------- $ 569 $ 670 $ 100 $ -- $ 958 $ 1 $518 $ 6,107 $ -- $ 571 $ 24,458 -------- ------- ------ ------- ------ ------ ---- ------- ------ ----------- ---------- 2,466 1,113 166 2,198 54 402 1 1,990 304 90,453 59,974 -- -- -- -- -- -- -- -- -- -- -------- ------- ------ ------- ------ ------ ---- ------- ------ ----------- ---------- 2,466 1,113 166 2,198 54 402 1 1,990 304 90,453 59,974 -------- ------- ------ ------- ------ ------ ---- ------- ------ ----------- ---------- (1,897) (443) (66) (2,198) 904 (401) 517 4,117 (304) (89,882) (35,516) -------- ------- ------ ------- ------ ------ ---- ------- ------ ----------- ---------- 25,435 1,527 1,429 -- 200 16 -- -- -- 19,247 324,347 38,860 1,008 205 5,211 30 2,297 57 6,584 3,457 165,623 (1,762) -------- ------- ------ ------- ------ ------ ---- ------- ------ ----------- ---------- 64,295 2,535 1,634 5,211 230 2,313 57 6,584 3,457 184,870 322,585 -------- ------- ------ ------- ------ ------ ---- ------- ------ ----------- ---------- (22,990) 16,452 276 12,959 663 3,249 261 60,630 (646) (1,096,137) 915,746 -------- ------- ------ ------- ------ ------ ---- ------- ------ ----------- ---------- 41,305 18,987 1,910 18,170 893 5,562 318 67,214 2,811 (911,267) 1,238,331 -------- ------- ------ ------- ------ ------ ---- ------- ------ ----------- ---------- $ 39,408 $18,544 $1,844 $15,972 $1,797 $5,161 $835 $71,331 $2,507 $(1,001,149) $1,202,815 ======== ======= ====== ======= ====== ====== ==== ======= ====== =========== ========== MIST BLACKROCK LARGE-CAP CORE MIST JANUS FORTY SUB-ACCOUNT SUB-ACCOUNT -------------- ---------------- 2007(D) 2007(D) -------------- ---------------- $ -- $ -- ------- -------- 2,290 5,703 -- -- ------- -------- 2,290 5,703 ------- -------- (2,290) (5,703) ------- -------- -- -- 1,835 32,447 ------- -------- 1,835 32,447 ------- -------- 17,789 325,311 ------- -------- 19,624 357,758 ------- -------- $17,334 $352,055 ======= ========
The accompanying notes are an integral part of these financial statements. AA-33 NEW ENGLAND VARIABLE LIFE SEPARATE ACCOUNT OF NEW ENGLAND LIFE INSURANCE COMPANY STATEMENT OF CHANGES IN NET ASSETS FOR THE YEARS ENDED DECEMBER 31, 2007, 2006, AND 2005
MSF ZENITH MSF BLACKROCK EQUITY BOND INCOME SUB-ACCOUNT SUB-ACCOUNT ------------------------------------------ ------------------------------------------ 2007 2006 2005 2007 2006 2005 ------------ ------------ ------------ ------------ ------------ ------------ INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss)......... $ 1,116,126 $ (487,686) $ 2,380,216 $ 3,649,809 $ 6,993,511 $ 4,858,873 Net realized gains (losses).......... 9,513,829 3,349,559 (5,379,155) 127,546 118,133 2,623,517 Change in unrealized gains (losses) on investments.................... 23,411,344 51,317,310 70,211,420 3,398,540 (2,014,842) (4,913,177) ------------ ------------ ------------ ------------ ------------ ------------ Net increase (decrease) in net assets resulting from operations...................... 34,041,299 54,179,183 67,212,481 7,175,895 5,096,802 2,569,213 ------------ ------------ ------------ ------------ ------------ ------------ POLICY TRANSACTIONS: Premium payments received from policy owners............................ 48,982,296 57,108,890 65,714,595 13,102,069 15,774,530 19,391,114 Net transfers (including fixed account).......................... (16,648,229) (13,281,803) (25,730,819) (3,553,929) (1,868,717) (3,904,856) Policy charges....................... (28,682,505) (32,125,034) (35,597,542) (8,076,177) (8,943,481) (9,748,943) Transfers for policy benefits and terminations...................... (83,441,462) (92,360,514) (79,421,692) (17,053,383) (11,632,711) (14,362,312) ------------ ------------ ------------ ------------ ------------ ------------ Net increase (decrease) in net assets resulting from policy transactions.................... (79,789,900) (80,658,461) (75,035,458) (15,581,420) (6,670,379) (8,624,997) ------------ ------------ ------------ ------------ ------------ ------------ Net increase (decrease) in net assets............................ (45,748,601) (26,479,278) (7,822,977) (8,405,525) (1,573,577) (6,055,784) NET ASSETS: Beginning of period.................. 734,057,930 760,537,208 768,360,185 135,026,897 136,600,474 142,656,258 ------------ ------------ ------------ ------------ ------------ ------------ End of period........................ $688,309,329 $734,057,930 $760,537,208 $126,621,372 $135,026,897 $136,600,474 ============ ============ ============ ============ ============ ============
(a) For the period May 1, 2005 to December 31, 2005. (b) For the period January 1, 2007 to April 27, 2007. (c) For the period May 1, 2006 to December 31, 2006. (d) For the period April 30, 2007 to December 31, 2007. The accompanying notes are an integral part of these financial statements. AA-34
MSF HARRIS OAKMARK MSF BLACKROCK MSF MFS FOCUSED MONEY MARKET TOTAL RETURN VALUE SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT -------------------------------------------- ------------------------------------------ ------------ 2007 2006 2005 2007 2006 2005 2007 ------------ ------------- ------------ ------------ ------------ ------------ ------------ $ 9,665,707 $ 3,831,446 $ 2,090,140 $ 2,195,342 $ 3,965,075 $ 1,547,370 $ 97,948 -- -- -- 6,365,657 1,720,067 (4,525,647) 32,088,871 -- -- -- (3,417,410) 8,705,063 6,226,980 (44,475,207) ------------ ------------- ------------ ------------ ------------ ------------ ------------ 9,665,707 3,831,446 2,090,140 5,143,589 14,390,205 3,248,703 (12,288,388) ------------ ------------- ------------ ------------ ------------ ------------ ------------ 98,073,424 135,699,752 107,472,471 12,200,489 13,733,135 15,024,558 17,550,825 93,437,588 (100,453,140) (63,053,463) (2,098,624) 294,564 385,064 (9,114,711) (9,650,087) (10,769,926) (11,021,637) (9,076,745) (9,257,656) (9,466,492) (10,337,802) (28,514,588) (21,985,731) (34,342,941) (12,959,163) (13,537,678) (10,812,487) (21,517,389) ------------ ------------- ------------ ------------ ------------ ------------ ------------ 153,346,337 2,490,955 (945,570) (11,934,043) (8,767,635) (4,869,357) (23,419,077) ------------ ------------- ------------ ------------ ------------ ------------ ------------ 163,012,044 6,322,401 1,144,570 (6,790,454) 5,622,570 (1,620,654) (35,707,465) 98,569,401 92,247,000 91,102,430 135,222,422 129,599,852 131,220,506 193,589,963 ------------ ------------- ------------ ------------ ------------ ------------ ------------ $261,581,445 $ 98,569,401 $ 92,247,000 $128,431,968 $135,222,422 $129,599,852 $157,882,498 ============ ============= ============ ============ ============ ============ ============ MSF HARRIS OAKMARK FOCUSED VALUE SUB-ACCOUNT --------------------------- 2006 2005 ------------ ------------ $ (417,261) $ (947,030) 28,467,114 11,981,450 (6,779,768) 5,681,945 ------------ ------------ 21,270,085 16,716,365 ------------ ------------ 20,240,462 22,603,533 (6,984,833) (1,228,394) (11,758,335) (11,941,873) (20,553,354) (17,247,580) ------------ ------------ (19,056,060) (7,814,314) ------------ ------------ 2,214,025 8,902,051 191,375,938 182,473,887 ------------ ------------ $193,589,963 $191,375,938 ============ ============
The accompanying notes are an integral part of these financial statements. AA-35 NEW ENGLAND VARIABLE LIFE SEPARATE ACCOUNT OF NEW ENGLAND LIFE INSURANCE COMPANY STATEMENT OF CHANGES IN NET ASSETS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2007, 2006, AND 2005
MSF FI MSF LOOMIS VALUE LEADERS SAYLES SMALL CAP SUB-ACCOUNT SUB-ACCOUNT ---------------------------------------- ------------------------------------------ 2007 2006 2005 2007 2006 2005 ------------ ----------- ----------- ------------ ------------ ------------ INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss).......... $ 261,008 $ 400,463 $ 396,412 $ (905,514) $ (1,011,861) $ (942,436) Net realized gains (losses)........... 8,244,788 1,186,085 (2,000,300) 23,210,502 17,212,924 9,246,972 Change in unrealized gains (losses) on investments........................ (5,423,442) 7,503,062 9,329,675 (3,427,252) 8,523,003 1,095,808 ------------ ----------- ----------- ------------ ------------ ------------ Net increase (decrease) in net assets resulting from operations....................... 3,082,354 9,089,610 7,725,787 18,877,736 24,724,066 9,400,344 ------------ ----------- ----------- ------------ ------------ ------------ POLICY TRANSACTIONS: Premium payments received from policy owners............................. 7,145,787 8,012,599 8,896,771 14,774,231 15,721,567 17,455,776 Net transfers (including fixed account)........................... (3,058,805) (1,419,862) (1,898,427) (1,641,025) 1,490,346 (2,197,482) Policy charges........................ (4,894,875) (5,258,146) (5,533,622) (9,578,386) (10,054,115) (9,873,297) Transfers for policy benefits and terminations....................... (10,114,059) (7,262,710) (6,281,616) (19,552,476) (17,447,756) (15,390,121) ------------ ----------- ----------- ------------ ------------ ------------ Net increase (decrease) in net assets resulting from policy transactions..................... (10,921,952) (5,928,119) (4,816,894) (15,997,656) (10,289,958) (10,005,124) ------------ ----------- ----------- ------------ ------------ ------------ Net increase (decrease) in net assets............................. (7,839,598) 3,161,491 2,908,893 2,880,080 14,434,108 (604,780) NET ASSETS: Beginning of period................... 86,759,521 83,598,030 80,689,137 171,548,147 157,114,039 157,718,819 ------------ ----------- ----------- ------------ ------------ ------------ End of period......................... $ 78,919,923 $86,759,521 $83,598,030 $174,428,227 $171,548,147 $157,114,039 ============ =========== =========== ============ ============ ============
(a) For the period May 1, 2005 to December 31, 2005. (b) For the period January 1, 2007 to April 27, 2007. (c) For the period May 1, 2006 to December 31, 2006. (d) For the period April 30, 2007 to December 31, 2007. The accompanying notes are an integral part of these financial statements. AA-36
MSF WESTERN ASSET MANAGEMENT MSF DAVIS MSF BLACKROCK U.S. VENTURE VALUE LEGACY LARGE CAP GROWTH GOVERNMENT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT ------------------------------------------- ------------------------------------------ ------------ 2007 2006 2005 2007 2006 2005 2007 ------------ ------------ ------------ ------------ ------------ ------------ ------------ $ 990,053 $ 987,698 $ 362,649 $ (890,632) $ (1,046,322) $ (422,010) $ 131,630 9,218,751 4,885,353 4,781,824 (5,770,805) (12,779,112) (14,537,569) 548,137 5,528,444 43,007,635 26,829,481 42,663,606 21,093,144 28,235,221 (163,639) ------------ ------------ ------------ ------------ ------------ ------------ ------------ 15,737,248 48,880,686 31,973,954 36,002,169 7,267,710 13,275,642 516,128 ------------ ------------ ------------ ------------ ------------ ------------ ------------ 38,544,386 41,433,594 45,304,294 23,107,132 27,126,878 32,017,760 974,535 (162,183) 6,972,882 4,723,509 (8,990,395) (8,238,569) (11,651,043) (13,642,180) (24,032,496) (25,071,853) (24,730,783) (13,964,343) (15,188,080) (16,836,570) (1,071,721) (38,349,034) (37,940,542) (35,703,171) (21,903,233) (23,004,299) (23,077,763) (1,333,311) ------------ ------------ ------------ ------------ ------------ ------------ ------------ (23,999,327) (14,605,919) (10,406,151) (21,750,839) (19,304,070) (19,547,616) (15,072,677) ------------ ------------ ------------ ------------ ------------ ------------ ------------ (8,262,079) 34,274,767 21,567,803 14,251,330 (12,036,360) (6,271,974) (14,556,549) 391,428,706 357,153,939 335,586,136 210,532,191 222,568,551 228,840,525 23,111,882 ------------ ------------ ------------ ------------ ------------ ------------ ------------ $383,166,627 $391,428,706 $357,153,939 $224,783,521 $210,532,191 $222,568,551 $ 8,555,333 ============ ============ ============ ============ ============ ============ ============ MSF WESTERN ASSET MANAGEMENT U.S. GOVERNMENT SUB-ACCOUNT ------------------------ 2006 2005 ----------- ---------- $ 165,391 $ 39,752 (135,837) 72,419 403,509 (63,876) ----------- ---------- 433,063 48,295 ----------- ---------- 933,314 602,814 18,232,860 3,928,870 (164,432) (4,874) (2,311,899) (102,069) ----------- ---------- 16,689,843 4,424,741 ----------- ---------- 17,122,906 4,473,036 5,988,976 1,515,940 ----------- ---------- $23,111,882 $5,988,976 =========== ==========
The accompanying notes are an integral part of these financial statements. AA-37 NEW ENGLAND VARIABLE LIFE SEPARATE ACCOUNT OF NEW ENGLAND LIFE INSURANCE COMPANY STATEMENT OF CHANGES IN NET ASSETS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2007, 2006, AND 2005
MSF WESTERN ASSET MANAGEMENT STRATEGIC BOND MSF WESTERN ASSET OPPORTUNITIES MSF FI MID CAP OPPORTUNITIES SUB-ACCOUNT SUB-ACCOUNT -------------------------------------- --------------------------------------- 2007 2006 2005 2007 2006 2005 ----------- ----------- ---------- ----------- ----------- ----------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss)............ $ 348,151 $ 574,956 $ 130,666 $ (135,603) $ (172,212) $ (176,847) Net realized gains (losses)............. (73,136) 11,838 226,099 2,127,224 1,255,273 (428,954) Change in unrealized gains (losses) on investments.......................... 253,652 8,968 (186,816) 529,109 2,418,061 2,538,292 ----------- ----------- ---------- ----------- ----------- ----------- Net increase (decrease) in net assets resulting from operations.......... 528,667 595,762 169,949 2,520,730 3,501,122 1,932,491 ----------- ----------- ---------- ----------- ----------- ----------- POLICY TRANSACTIONS: Premium payments received from policy owners............................... 1,691,871 1,722,200 944,706 3,742,012 4,265,472 5,352,651 Net transfers (including fixed account)............................. 722,589 3,997,084 4,983,850 (151,503) (437,405) (2,329,977) Policy charges.......................... (408,643) (1,072,703) (479,569) (2,393,294) (2,619,758) (2,693,904) Transfers for policy benefits and terminations......................... (1,376,844) (759,525) 9,081 (2,973,113) (3,616,353) (3,827,741) ----------- ----------- ---------- ----------- ----------- ----------- Net increase (decrease) in net assets resulting from policy transactions....................... 628,973 3,887,056 5,458,068 (1,775,898) (2,408,044) (3,498,971) ----------- ----------- ---------- ----------- ----------- ----------- Net increase (decrease) in net assets... 1,157,640 4,482,818 5,628,017 744,832 1,093,078 (1,566,480) NET ASSETS: Beginning of period..................... 13,995,776 9,512,958 3,884,941 33,000,999 31,907,921 33,474,401 ----------- ----------- ---------- ----------- ----------- ----------- End of period........................... $15,153,416 $13,995,776 $9,512,958 $33,745,831 $33,000,999 $31,907,921 =========== =========== ========== =========== =========== ===========
(a) For the period May 1, 2005 to December 31, 2005. (b) For the period January 1, 2007 to April 27, 2007. (c) For the period May 1, 2006 to December 31, 2006. (d) For the period April 30, 2007 to December 31, 2007. The accompanying notes are an integral part of these financial statements. AA-38
MSF MSF MSF JENNISON GROWTH RUSSELL 2000 INDEX FI INTERNATIONAL STOCK SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT - ------------------------------------- --------------------------------------- --------------------------------------- 2007 2006 2005(A) 2007 2006 2005 2007 2006 2005 - ---------- ---------- ---------- ----------- ----------- ----------- ----------- ----------- ----------- $ (305) $ (35,207) $ (23,580) $ 140,818 $ 102,360 $ 63,817 $ 279,993 $ 469,195 $ 34,670 599,293 350,561 113,996 3,426,985 3,360,238 1,929,164 5,616,067 3,142,765 60,812 241,138 (97,967) 1,346,139 (4,104,853) 760,311 (920,521) (1,169,019) 3,874,760 7,358,868 - ---------- ---------- ---------- ----------- ----------- ----------- ----------- ----------- ----------- 840,126 217,387 1,436,555 (537,050) 4,222,909 1,072,460 4,727,041 7,486,720 7,454,350 - ---------- ---------- ---------- ----------- ----------- ----------- ----------- ----------- ----------- 865,331 1,205,068 740,436 2,914,771 3,263,779 3,248,510 4,627,887 5,276,401 5,882,164 (467,007) (243,649) 6,853,835 1,280,693 (398,409) 1,826,402 (1,272,836) (3,243,602) 2,376,896 (541,759) (602,502) (550,017) (1,512,998) (1,717,841) (1,509,360) (3,100,038) (3,329,491) (2,981,336) (501,709) (933,241) (379,628) (2,543,374) (2,667,653) (1,452,015) (4,854,339) (5,184,592) (4,541,012) - ---------- ---------- ---------- ----------- ----------- ----------- ----------- ----------- ----------- (645,144) (574,324) 6,664,626 139,092 (1,520,124) 2,113,537 (4,599,326) (6,481,284) 736,712 - ---------- ---------- ---------- ----------- ----------- ----------- ----------- ----------- ----------- 194,982 (356,937) 8,101,181 (397,958) 2,702,785 3,185,997 127,715 1,005,436 8,191,062 7,744,244 8,101,181 -- 27,456,436 24,753,651 21,567,654 49,321,383 48,315,947 40,124,885 - ---------- ---------- ---------- ----------- ----------- ----------- ----------- ----------- ----------- $7,939,226 $7,744,244 $8,101,181 $27,058,478 $27,456,436 $24,753,651 $49,449,098 $49,321,383 $48,315,947 ========== ========== ========== =========== =========== =========== =========== =========== ===========
The accompanying notes are an integral part of these financial statements. AA-39 NEW ENGLAND VARIABLE LIFE SEPARATE ACCOUNT OF NEW ENGLAND LIFE INSURANCE COMPANY STATEMENT OF CHANGES IN NET ASSETS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2007, 2006, AND 2005
MSF BLACKROCK MSF METLIFE STRATEGIC VALUE STOCK INDEX SUB-ACCOUNT SUB-ACCOUNT ---------------------------------------- ------------------------------------------ 2007 2006 2005 2007 2006 2005 ------------ ----------- ----------- ------------ ------------ ------------ INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss).......... $ (104,619) $ (110,583) $ (350,929) $ 1,065,434 $ 3,083,788 $ 2,150,918 Net realized gains (losses)........... 12,641,396 15,048,662 7,574,260 7,839,409 8,147,733 (869,033) Change in unrealized gains (losses) on investments........................ (15,003,565) (4,163,723) (4,669,915) 1,523,885 19,171,837 6,994,271 ------------ ----------- ----------- ------------ ------------ ------------ Net increase (decrease) in net assets resulting from operations....................... (2,466,788) 10,774,356 2,553,416 10,428,728 30,403,358 8,276,156 ------------ ----------- ----------- ------------ ------------ ------------ POLICY TRANSACTIONS: Premium payments received from policy owners............................. 8,567,884 10,016,371 11,576,525 20,897,752 23,555,006 27,860,084 Net transfers (including fixed account)........................... (3,731,864) (3,240,644) (3,111,264) (4,565,682) (3,618,267) (4,751,511) Policy charges........................ (4,997,622) (5,788,899) (5,579,438) (13,965,424) (14,837,987) (15,678,503) Transfers for policy benefits and terminations....................... (7,850,922) (8,180,388) (8,620,790) (20,215,741) (19,805,380) (17,547,024) ------------ ----------- ----------- ------------ ------------ ------------ Net increase (decrease) in net assets resulting from policy transactions..................... (8,012,524) (7,193,560) (5,734,967) (17,849,095) (14,706,628) (10,116,954) ------------ ----------- ----------- ------------ ------------ ------------ Net increase (decrease) in net assets............................. (10,479,312) 3,580,796 (3,181,551) (7,420,367) 15,696,730 (1,840,798) NET ASSETS: Beginning of period................... 73,818,143 70,237,347 73,418,898 229,081,898 213,385,168 215,225,966 ------------ ----------- ----------- ------------ ------------ ------------ End of period......................... $ 63,338,831 $73,818,143 $70,237,347 $221,661,531 $229,081,898 $213,385,168 ============ =========== =========== ============ ============ ============
(a) For the period May 1, 2005 to December 31, 2005. (b) For the period January 1, 2007 to April 27, 2007. (c) For the period May 1, 2006 to December 31, 2006. (d) For the period April 30, 2007 to December 31, 2007. The accompanying notes are an integral part of these financial statements. AA-40
MSF LEHMAN BROTHERS MSF MORGAN MSF METLIFE AGGREGATE BOND INDEX STANLEY EAFE INDEX MID CAP STOCK INDEX SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT ---------------------------------------- --------------------------------------- ------------------------- 2007 2006 2005 2007 2006 2005 2007 2006 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- $ 1,309,338 $ 1,197,570 $ 1,054,080 $ 332,733 $ 205,489 $ 133,509 $ 73,360 $ 131,669 (421,410) (259,014) 8,478 1,428,280 885,145 820,065 1,436,860 2,118,798 905,709 151,885 (564,840) 230,293 2,461,504 569,205 (229,825) (744,231) ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- 1,793,637 1,090,441 497,718 1,991,306 3,552,138 1,522,779 1,280,395 1,506,236 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- 3,938,931 4,465,814 6,120,007 2,012,947 1,903,791 1,624,296 2,140,824 2,077,311 641,064 (736,557) (39,963) 2,764,130 1,415,021 1,865,320 1,204,876 2,156,257 (2,109,596) (2,347,755) (2,228,461) (1,142,690) (976,720) (664,273) (1,225,103) (1,175,219) (5,505,909) (2,306,877) (2,879,600) (1,502,625) (1,159,728) (885,158) (1,439,724) (1,573,397) ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- (3,035,510) (925,375) 971,983 2,131,762 1,182,364 1,940,185 680,873 1,484,952 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- (1,241,873) 165,066 1,469,701 4,123,068 4,734,502 3,462,964 1,961,268 2,991,188 29,998,745 29,833,679 28,363,978 18,004,926 13,270,424 9,807,460 17,068,454 14,077,266 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- $28,756,872 $29,998,745 $29,833,679 $22,127,994 $18,004,926 $13,270,424 $19,029,722 $17,068,454 =========== =========== =========== =========== =========== =========== =========== =========== MSF METLIFE MID CAP STOCK INDEX SUB-ACCOUNT ----------- 2005 ----------- $ 38,308 1,329,969 184,066 ----------- 1,552,343 ----------- 1,958,858 1,698,120 (991,538) (878,765) ----------- 1,786,675 ----------- 3,339,018 10,738,248 ----------- $14,077,266 ===========
The accompanying notes are an integral part of these financial statements. AA-41 NEW ENGLAND VARIABLE LIFE SEPARATE ACCOUNT OF NEW ENGLAND LIFE INSURANCE COMPANY STATEMENT OF CHANGES IN NET ASSETS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2007, 2006, AND 2005
MSF FRANKLIN TEMPLETON MSF BLACKROCK SMALL CAP GROWTH LARGE CAP SUB-ACCOUNT SUB-ACCOUNT ------------------------------------ ------------------------------------- 2007 2006 2005 2007(B) 2006 2005 ---------- ---------- ---------- ----------- ---------- ---------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss).............. $ (26,810) $ (28,720) $ (27,835) $ 27,657 $ 18,475 $ 11,287 Net realized gains (losses)............... 815,014 723,749 590,301 367,439 96,820 91,015 Change in unrealized gains (losses) on investments............................ (481,667) (40,740) (268,460) (295,910) 114,020 (52,412) ---------- ---------- ---------- ----------- ---------- ---------- Net increase (decrease) in net assets resulting from operations............ 306,537 654,289 294,006 99,186 229,315 49,890 ---------- ---------- ---------- ----------- ---------- ---------- POLICY TRANSACTIONS: Premium payments received from policy owners................................. 1,137,927 1,163,086 1,317,725 104,653 347,915 410,498 Net transfers (including fixed account)... (427,712) 122,806 (24,152) (1,923,687) (129,734) 122,361 Policy charges............................ (581,918) (629,100) 214,577 25,366 (183,772) (351,343) Transfers for policy benefits and terminations........................... (664,298) (726,827) (477,703) (82,524) (100,042) (98,451) ---------- ---------- ---------- ----------- ---------- ---------- Net increase (decrease) in net assets resulting from policy transactions... (536,001) (70,035) 1,030,447 (1,876,192) (65,633) 83,065 ---------- ---------- ---------- ----------- ---------- ---------- Net increase (decrease) in net assets..... (229,464) 584,254 1,324,453 (1,777,006) 163,682 132,955 NET ASSETS: Beginning of period....................... 7,303,723 6,719,469 5,395,016 1,777,006 1,613,324 1,480,369 ---------- ---------- ---------- ----------- ---------- ---------- End of period............................. $7,074,259 $7,303,723 $6,719,469 $ -- $1,777,006 $1,613,324 ========== ========== ========== =========== ========== ==========
(a) For the period May 1, 2005 to December 31, 2005. (b) For the period January 1, 2007 to April 27, 2007. (c) For the period May 1, 2006 to December 31, 2006. (d) For the period April 30, 2007 to December 31, 2007. The accompanying notes are an integral part of these financial statements. AA-42
MSF BLACKROCK MSF NEUBERGER BERMAN MSF HARRIS OAKMARK LARGE CAP VALUE MID CAP VALUE LARGE CAP VALUE SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT -------------------------------------- --------------------------------------- ------------------------- 2007 2006 2005 2007 2006 2005 2007 2006 ----------- ---------- ---------- ----------- ----------- ----------- ----------- ----------- $ 65,249 $ 59,380 $ 24,458 $ 37,946 $ 1,584 $ (65,265) $ 59,761 $ 50,259 747,230 545,228 193,769 2,347,449 4,655,123 2,642,698 836,119 704,802 598,642 (599,618) -- 54,281 (1,353,621) (908,234) 476,829 (1,411,253) 1,401,637 ----------- ---------- ---------- ----------- ----------- ----------- ----------- ----------- 212,861 1,203,250 272,508 1,031,774 3,748,473 3,054,262 (515,373) 2,156,698 ----------- ---------- ---------- ----------- ----------- ----------- ----------- ----------- 1,736,308 1,273,493 1,223,191 4,765,700 4,959,891 4,126,831 2,470,688 2,614,196 2,790,302 2,264,706 828,737 1,352,841 3,313,258 10,234,605 (807,292) (1,914,435) (809,970) (625,912) (358,712) (2,475,494) (2,429,912) (1,703,492) (1,178,992) (1,198,384) (849,408) (502,152) (493,392) (3,301,385) (4,191,370) (1,518,068) (1,286,132) (1,371,089) ----------- ---------- ---------- ----------- ----------- ----------- ----------- ----------- 2,867,232 2,410,135 1,199,824 341,662 1,651,867 11,139,876 (801,728) (1,869,712) ----------- ---------- ---------- ----------- ----------- ----------- ----------- ----------- 3,080,093 3,613,385 1,472,332 1,373,436 5,400,340 14,194,138 (1,317,101) 286,986 8,839,326 5,225,941 3,753,609 38,343,907 32,943,567 18,749,429 13,615,792 13,328,806 ----------- ---------- ---------- ----------- ----------- ----------- ----------- ----------- $11,919,419 $8,839,326 $5,225,941 $39,717,343 $38,343,907 $32,943,567 $12,298,691 $13,615,792 =========== ========== ========== =========== =========== =========== =========== =========== MSF HARRIS OAKMARK LARGE CAP VALUE SUB-ACCOUNT ----------- 2005 ----------- $ 27,003 486,957 (644,749) ----------- (130,789) ----------- 2,755,662 3,367,458 (919,919) (1,260,031) ----------- 3,943,170 ----------- 3,812,381 9,516,425 ----------- $13,328,806 ===========
The accompanying notes are an integral part of these financial statements. AA-43 NEW ENGLAND VARIABLE LIFE SEPARATE ACCOUNT OF NEW ENGLAND LIFE INSURANCE COMPANY STATEMENT OF CHANGES IN NET ASSETS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2007, 2006, AND 2005
MSF T. ROWE PRICE MSF T. ROWE PRICE LARGE CAP GROWTH SMALL CAP GROWTH SUB-ACCOUNT SUB-ACCOUNT ------------------------------------- ------------------------------------ 2007 2006 2005 2007 2006 2005 ---------- ----------- ---------- ---------- ---------- ---------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss).............. $ (2,784) $ 5,479 $ 18,522 $ (18,437) $ (13,378) $ (2,744) Net realized gains (losses)............... 342,297 414,265 52,379 153,641 148,598 35,555 Change in unrealized gains (losses) on investments............................ 220,924 274,201 401,931 266,932 (69,411) 111,744 ---------- ----------- ---------- ---------- ---------- ---------- Net increase (decrease) in net assets resulting from operations............ 560,437 693,945 472,832 402,136 65,809 144,555 ---------- ----------- ---------- ---------- ---------- ---------- POLICY TRANSACTIONS: Premium payments received from policy owners................................. 1,012,052 816,331 591,192 452,880 482,945 192,959 Net transfers (including fixed account)... 1,717,618 (1,166,712) 4,452,406 (2,941) 2,061,128 1,433,966 Policy charges............................ (442,333) (349,606) (212,943) (269,262) (235,627) (69,022) Transfers for policy benefits and terminations........................... (604,435) (354,454) (4,707) (486,114) (494,459) 30,285 ---------- ----------- ---------- ---------- ---------- ---------- Net increase (decrease) in net assets resulting from policy transactions... 1,682,902 (1,054,441) 4,825,948 (305,437) 1,813,987 1,588,188 ---------- ----------- ---------- ---------- ---------- ---------- Net increase (decrease) in net assets..... 2,243,339 (360,496) 5,298,780 96,699 1,879,796 1,732,743 NET ASSETS: Beginning of period....................... 5,704,830 6,065,326 766,546 4,128,650 2,248,854 516,111 ---------- ----------- ---------- ---------- ---------- ---------- End of period............................. $7,948,169 $ 5,704,830 $6,065,326 $4,225,349 $4,128,650 $2,248,854 ========== =========== ========== ========== ========== ==========
(a) For the period May 1, 2005 to December 31, 2005. (b) For the period January 1, 2007 to April 27, 2007. (c) For the period May 1, 2006 to December 31, 2006. (d) For the period April 30, 2007 to December 31, 2007. The accompanying notes are an integral part of these financial statements. AA-44
MSF OPPENHEIMER MSF BLACKROCK MSF BLACKROCK GLOBAL EQUITY AGGRESSIVE GROWTH DIVERSIFIED SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT - ------------------------------------- ---------------------------------- ------------------------------------ 2007 2006 2005 2007 2006 2005 2007 2006 2005 - ---------- ---------- ---------- ---------- ---------- -------- ---------- ---------- ---------- $ 42,726 $ 76,103 $ 1,167 $ (6,542) $ (4,379) $ (1,689) $ 70,575 $ 65,131 $ 16,975 354,930 220,200 14,077 83,010 53,157 29,202 122,433 32,548 42,119 (64,091) 302,557 177,774 210,386 13,209 29,347 (15,315) 223,263 41,409 - ---------- ---------- ---------- ---------- ---------- -------- ---------- ---------- ---------- 333,565 598,860 193,018 286,854 61,987 56,860 177,693 320,942 100,503 - ---------- ---------- ---------- ---------- ---------- -------- ---------- ---------- ---------- 837,977 559,232 192,624 298,684 259,300 113,786 542,378 530,545 518,291 1,279,304 2,208,426 2,006,518 663,687 478,662 121,245 (106,906) (137,715) 1,547,503 (533,685) (316,970) (71,119) (179,875) (124,900) (21,042) (240,896) (267,046) (150,300) (665,077) (353,882) (16,991) (98,956) (190,376) (22,809) (238,799) (114,557) 214,179 - ---------- ---------- ---------- ---------- ---------- -------- ---------- ---------- ---------- 918,519 2,096,806 2,111,032 683,540 422,686 191,180 (44,223) 11,227 2,129,673 - ---------- ---------- ---------- ---------- ---------- -------- ---------- ---------- ---------- 1,252,084 2,695,666 2,304,050 970,394 484,673 248,040 133,470 332,169 2,230,176 5,131,307 2,435,641 131,591 1,262,834 778,161 530,121 3,414,636 3,082,467 852,291 - ---------- ---------- ---------- ---------- ---------- -------- ---------- ---------- ---------- $6,383,391 $5,131,307 $2,435,641 $2,233,228 $1,262,834 $778,161 $3,548,106 $3,414,636 $3,082,467 ========== ========== ========== ========== ========== ======== ========== ========== ==========
The accompanying notes are an integral part of these financial statements. AA-45 NEW ENGLAND VARIABLE LIFE SEPARATE ACCOUNT OF NEW ENGLAND LIFE INSURANCE COMPANY STATEMENT OF CHANGES IN NET ASSETS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2007, 2006, AND 2005
MSF METLIFE MSF METLIFE CONSERVATIVE CONSERVATIVE ALLOCATION TO MODERATE ALLOCATION SUB-ACCOUNT SUB-ACCOUNT -------------------------------- ---------------------------------- 2007 2006 2005(A) 2007 2006 2005(A) ---------- -------- -------- ---------- ---------- -------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss)................ $ (7,484) $ 13,457 $ 1,092 $ (6,272) $ 6,662 $ 732 Net realized gains (losses)................. 80,237 7,555 476 98,085 3,752 1,635 Change in unrealized gains (losses) on investments.............................. 26,176 23,520 4,828 42,349 37,322 1,955 ---------- -------- -------- ---------- ---------- -------- Net increase (decrease) in net assets resulting from operations.............. 98,929 44,532 6,396 134,162 47,736 4,322 ---------- -------- -------- ---------- ---------- -------- POLICY TRANSACTIONS: Premium payments received from policy owners................................... 769,492 45,000 37,630 337,216 825,099 3,539 Net transfers (including fixed account)..... 880,143 466,352 467,937 1,533,011 737,291 211,564 Policy charges.............................. (155,322) (43,018) (15,907) (190,305) (84,551) (8,792) Transfers for policy benefits and terminations............................. (541,477) (45,428) (1,636) (189,219) (101,842) 19,974 ---------- -------- -------- ---------- ---------- -------- Net increase (decrease) in net assets resulting from policy transactions..... 952,836 422,906 488,024 1,490,703 1,375,997 226,285 ---------- -------- -------- ---------- ---------- -------- Net increase (decrease) in net assets....... 1,051,765 467,438 494,420 1,624,865 1,423,733 230,607 NET ASSETS: Beginning of period......................... 961,858 494,420 -- 1,654,340 230,607 -- ---------- -------- -------- ---------- ---------- -------- End of period............................... $2,013,623 $961,858 $494,420 $3,279,205 $1,654,340 $230,607 ========== ======== ======== ========== ========== ========
(a) For the period May 1, 2005 to December 31, 2005. (b) For the period January 1, 2007 to April 27, 2007. (c) For the period May 1, 2006 to December 31, 2006. (d) For the period April 30, 2007 to December 31, 2007. The accompanying notes are an integral part of these financial statements. AA-46
MSF METLIFE MSF METLIFE MSF METLIFE MODERATE ALLOCATION MODERATE TO AGGRESSIVE ALLOCATION AGGRESSIVE ALLOCATION SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT - --------------------------------------- -------------------------------------- ---------------------------------- 2007 2006 2005(A) 2007 2006 2005(A) 2007 2006 2005(A) - ----------- ----------- ---------- ----------- ----------- ---------- ---------- ---------- -------- $ (9,187) $ 171,041 $ 12,599 $ (23,664) $ 72,363 $ 8,707 $ (7,874) $ 5,302 $ 1,161 372,241 340,026 1,525 640,232 367,029 4,473 117,207 68,153 2,413 434,465 763,970 80,069 110,236 1,414,416 59,638 (66,432) 190,262 12,700 - ----------- ----------- ---------- ----------- ----------- ---------- ---------- ---------- -------- 797,519 1,275,037 94,193 726,804 1,853,808 72,818 42,901 263,717 16,274 - ----------- ----------- ---------- ----------- ----------- ---------- ---------- ---------- -------- 4,591,851 1,970,347 193,806 8,025,824 2,579,522 182,303 1,465,391 398,456 63,611 11,387,562 10,824,618 3,365,968 16,643,206 16,629,738 2,430,641 3,168,683 2,731,433 325,604 (2,291,100) (805,250) (81,379) (3,459,926) (1,255,856) (93,764) (704,990) (195,893) (17,221) (1,867,684) (428,730) 165,328 (3,231,860) (861,689) 226,967 (134,659) (309,325) 17,062 - ----------- ----------- ---------- ----------- ----------- ---------- ---------- ---------- -------- 11,820,629 11,560,985 3,643,723 17,977,244 17,091,715 2,746,147 3,794,425 2,624,671 389,056 - ----------- ----------- ---------- ----------- ----------- ---------- ---------- ---------- -------- 12,618,148 12,836,022 3,737,916 18,704,048 18,945,523 2,818,965 3,837,326 2,888,388 405,330 16,573,938 3,737,916 -- 21,764,488 2,818,965 -- 3,293,718 405,330 -- - ----------- ----------- ---------- ----------- ----------- ---------- ---------- ---------- -------- $29,192,086 $16,573,938 $3,737,916 $40,468,536 $21,764,488 $2,818,965 $7,131,044 $3,293,718 $405,330 =========== =========== ========== =========== =========== ========== ========== ========== ========
The accompanying notes are an integral part of these financial statements. AA-47 NEW ENGLAND VARIABLE LIFE SEPARATE ACCOUNT OF NEW ENGLAND LIFE INSURANCE COMPANY STATEMENT OF CHANGES IN NET ASSETS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2007, 2006, AND 2005
MSF FI AMERICAN FUNDS LARGE CAP GROWTH SUB-ACCOUNT SUB-ACCOUNT ------------------ ------------------------------------------ 2007 2006(C) 2007 2006 2005 -------- ------- ------------ ------------ ------------ INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss)................... $ (249) $ (14) $ 876,940 $ 774,602 $ 429,956 Net realized gains (losses).................... 6,770 3 28,843,084 6,427,374 2,405,771 Change in unrealized gains (losses) on investments................................. (2,362) 1,229 (4,084,594) 11,430,058 21,506,036 -------- ------- ------------ ------------ ------------ Net increase (decrease) in net assets resulting from operations................. 4,159 1,218 25,635,430 18,632,034 24,341,763 -------- ------- ------------ ------------ ------------ POLICY TRANSACTIONS: Premium payments received from policy owners... 37,436 16,267 28,650,107 28,697,849 27,228,305 Net transfers (including fixed account)........ 153,933 15,303 8,738,159 15,651,054 22,188,970 Policy charges................................. 13,753 (523) (15,172,729) (14,638,343) (11,001,262) Transfers for policy benefits and terminations................................ (23,057) 7 (23,992,053) (20,722,283) (16,035,229) -------- ------- ------------ ------------ ------------ Net increase (decrease) in net assets resulting from policy transactions........ 182,065 31,054 (1,776,516) 8,988,277 22,380,784 -------- ------- ------------ ------------ ------------ Net increase (decrease) in net assets.......... 186,224 32,272 23,858,914 27,620,311 46,722,547 NET ASSETS: Beginning of period............................ 32,272 -- 211,963,175 184,342,864 137,620,317 -------- ------- ------------ ------------ ------------ End of period.................................. $218,496 $32,272 $235,822,089 $211,963,175 $184,342,864 ======== ======= ============ ============ ============
(a) For the period May 1, 2005 to December 31, 2005. (b) For the period January 1, 2007 to April 27, 2007. (c) For the period May 1, 2006 to December 31, 2006. (d) For the period April 30, 2007 to December 31, 2007. The accompanying notes are an integral part of these financial statements. AA-48
AMERICAN FUNDS AMERICAN FUNDS AMERICAN GROWTH-INCOME GLOBAL SMALL CAPITALIZATION FUNDS BOND SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT - ------------------------------------------- --------------------------------------- ----------------------- 2007 2006 2005 2007 2006 2005 2007 2006(C) - ------------ ------------ ------------ ----------- ----------- ----------- ---------- ---------- $ 1,556,812 $ 1,343,741 $ 902,841 $ 2,038,185 $ 2,449 $ 171,446 $ 573,417 $ 721 8,769,713 6,841,328 2,343,917 10,524,305 5,934,141 2,045,188 35,969 (45) (4,583,687) 7,262,226 2,102,684 1,634,253 6,069,880 6,281,497 (437,728) 90,784 - ------------ ------------ ------------ ----------- ----------- ----------- ---------- ---------- 5,742,838 15,447,295 5,349,442 14,196,743 12,006,470 8,498,131 171,658 91,460 - ------------ ------------ ------------ ----------- ----------- ----------- ---------- ---------- 17,443,560 17,768,146 17,474,402 8,861,579 7,460,456 6,022,679 808,464 117,315 5,598,362 4,502,222 8,683,680 11,221,226 9,669,549 10,952,001 6,542,599 3,017,940 (9,265,701) (8,907,016) (6,931,071) (5,193,638) (4,193,256) (2,407,785) (402,838) (52,979) (9,282,924) (9,406,926) (7,928,080) (7,731,219) (5,929,777) (3,514,984) (446,366) (40,804) - ------------ ------------ ------------ ----------- ----------- ----------- ---------- ---------- 4,493,297 3,956,426 11,298,931 7,157,948 7,006,972 11,051,911 6,501,859 3,041,472 - ------------ ------------ ------------ ----------- ----------- ----------- ---------- ---------- 10,236,135 19,403,721 16,648,373 21,354,691 19,013,442 19,550,042 6,673,517 3,132,932 121,735,797 102,332,076 85,683,703 66,602,309 47,588,867 28,038,825 3,132,932 -- - ------------ ------------ ------------ ----------- ----------- ----------- ---------- ---------- $131,971,932 $121,735,797 $102,332,076 $87,957,000 $66,602,309 $47,588,867 $9,806,449 $3,132,932 ============ ============ ============ =========== =========== =========== ========== ==========
The accompanying notes are an integral part of these financial statements. AA-49 NEW ENGLAND VARIABLE LIFE SEPARATE ACCOUNT OF NEW ENGLAND LIFE INSURANCE COMPANY STATEMENT OF CHANGES IN NET ASSETS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2007, 2006, AND 2005
FIDELITY VIP FIDELITY VIP EQUITY-INCOME OVERSEAS SUB-ACCOUNT SUB-ACCOUNT ------------------------------------------ ------------------------------------------ 2007 2006 2005 2007 2006 2005 ------------ ------------ ------------ ------------ ------------ ------------ INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss)......... $ 2,019,472 $ 4,515,810 $ 1,626,588 $ 4,192,648 $ 388,513 $ 60,593 Net realized gains (losses).......... 16,379,660 23,250,201 9,871,627 10,357,909 (1,830,080) 1,616,201 Change in unrealized gains (losses) on investments.................... (16,083,412) 1,879,953 (3,446,973) 8,937,231 24,309,349 19,836,609 ------------ ------------ ------------ ------------ ------------ ------------ Net increase (decrease) in net assets resulting from operations...................... 2,315,720 29,645,964 8,051,242 23,487,788 22,867,782 21,513,403 ------------ ------------ ------------ ------------ ------------ ------------ POLICY TRANSACTIONS: Premium payments received from policy owners............................ 12,978,363 14,033,200 16,342,695 10,377,600 11,657,246 13,154,046 Net transfers (including fixed account).......................... (793,715) 441,501 (3,576,606) (1,500,831) 376,011 (5,626,376) Policy charges....................... (8,472,918) (8,899,177) (9,604,505) (7,012,401) (7,129,516) (7,163,253) Transfers for policy benefits and terminations...................... (20,802,918) (19,760,305) (16,259,358) (16,976,327) (16,523,855) (12,483,594) ------------ ------------ ------------ ------------ ------------ ------------ Net increase (decrease) in net assets resulting from policy transactions.................... (17,091,188) (14,184,781) (13,097,774) (15,111,959) (11,620,114) (12,119,177) ------------ ------------ ------------ ------------ ------------ ------------ Net increase (decrease) in net assets............................ (14,775,468) 15,461,183 (5,046,532) 8,375,829 11,247,668 9,394,226 NET ASSETS: Beginning of period.................. 175,481,284 160,020,101 165,066,633 148,385,879 137,138,211 127,743,985 ------------ ------------ ------------ ------------ ------------ ------------ End of period........................ $160,705,816 $175,481,284 $160,020,101 $156,761,708 $148,385,879 $137,138,211 ============ ============ ============ ============ ============ ============
(a) For the period May 1, 2005 to December 31, 2005. (b) For the period January 1, 2007 to April 27, 2007. (c) For the period May 1, 2006 to December 31, 2006. (d) For the period April 30, 2007 to December 31, 2007. The accompanying notes are an integral part of these financial statements. AA-50
MIST T. ROWE PRICE MIST MIST MID-CAP GROWTH PIMCO TOTAL RETURN RCM TECHNOLOGY SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT --------------------------------------- --------------------------------------- ----------------------- 2007 2006 2005 2007 2006 2005 2007 2006 ----------- ----------- ----------- ----------- ----------- ----------- ---------- ---------- $ (46,331) $ (87,596) $ (66,861) $ 1,740,667 $ 1,010,224 $ (136,517) $ (18,206) $ (14,830) 2,783,457 1,298,793 976,579 35,653 22,035 412,903 653,761 28,396 895,981 (53,103) 1,202,380 2,098,892 1,194,931 477,776 595,431 157,821 ----------- ----------- ----------- ----------- ----------- ----------- ---------- ---------- 3,633,107 1,158,094 2,112,098 3,875,212 2,227,190 754,162 1,230,986 171,387 ----------- ----------- ----------- ----------- ----------- ----------- ---------- ---------- 2,616,266 2,412,145 2,210,701 7,798,188 8,332,214 7,951,787 748,864 728,617 2,286,635 4,082,277 3,515,422 8,797,608 2,272,536 5,024,207 992,668 (66,416) (1,482,925) (1,255,222) 1,162,511 (3,609,937) (3,823,317) (2,817,682) (337,837) (403,463) (3,414,682) (2,153,114) (1,558,530) (4,627,274) (4,390,572) (3,201,390) (502,954) (323,852) ----------- ----------- ----------- ----------- ----------- ----------- ---------- ---------- 5,294 3,086,086 5,330,104 8,358,585 2,390,861 6,956,922 900,741 (65,114) ----------- ----------- ----------- ----------- ----------- ----------- ---------- ---------- 3,638,401 4,244,180 7,442,202 12,233,797 4,618,051 7,711,084 2,131,727 106,273 21,555,907 17,311,727 9,869,525 46,125,778 41,507,727 33,796,643 3,796,537 3,690,264 ----------- ----------- ----------- ----------- ----------- ----------- ---------- ---------- $25,194,308 $21,555,907 $17,311,727 $58,359,575 $46,125,778 $41,507,727 $5,928,264 $3,796,537 =========== =========== =========== =========== =========== =========== ========== ========== MIST RCM TECHNOLOGY SUB-ACCOUNT ----------- 2005 ----------- $ (15,761) (45,085) 409,427 ----------- 348,581 ----------- 812,663 (305,989) (2,923,681) (513,027) ----------- (2,930,034) ----------- (2,581,453) 6,271,717 ----------- $ 3,690,264 ===========
The accompanying notes are an integral part of these financial statements. AA-51 NEW ENGLAND VARIABLE LIFE SEPARATE ACCOUNT OF NEW ENGLAND LIFE INSURANCE COMPANY STATEMENT OF CHANGES IN NET ASSETS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2007, 2006, AND 2005
MIST MIST LAZARD MID-CAP MET/AIM SMALL CAP GROWTH SUB-ACCOUNT SUB-ACCOUNT ------------------------------------- ------------------------------------ 2007 2006 2005 2007 2006 2005 ----------- ---------- ---------- ---------- ---------- ---------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss).............. $ 16,121 $ 4,026 $ (6,740) $ (19,748) $ (19,305) $ (18,759) Net realized gains (losses)............... 822,680 766,175 875,197 337,064 774,927 414,585 Change in unrealized gains (losses) on investments............................ (1,252,571) 60,580 (443,804) 171,391 (225,798) (114,128) ----------- ---------- ---------- ---------- ---------- ---------- Net increase (decrease) in net assets resulting from operations............ (413,770) 830,781 424,653 488,707 529,824 281,698 ----------- ---------- ---------- ---------- ---------- ---------- POLICY TRANSACTIONS: Premium payments received from policy owners................................. 1,061,073 929,653 946,465 583,986 583,612 573,108 Net transfers (including fixed account)... 2,487,040 331,990 775,293 309,844 703,361 (434,825) Policy charges............................ (568,318) (484,415) (365,618) (339,442) (322,915) (273,721) Transfers for policy benefits and terminations........................... (797,916) (848,430) (657,186) (452,322) (645,337) (314,854) ----------- ---------- ---------- ---------- ---------- ---------- Net increase (decrease) in net assets resulting from policy transactions... 2,181,879 (71,202) 698,954 102,066 318,721 (450,292) ----------- ---------- ---------- ---------- ---------- ---------- Net increase (decrease) in net assets..... 1,768,109 759,579 1,123,607 590,773 848,545 (168,594) NET ASSETS: Beginning of period....................... 6,762,364 6,002,785 4,879,178 4,548,438 3,699,893 3,868,487 ----------- ---------- ---------- ---------- ---------- ---------- End of period............................. $ 8,530,473 $6,762,364 $6,002,785 $5,139,211 $4,548,438 $3,699,893 =========== ========== ========== ========== ========== ==========
(a) For the period May 1, 2005 to December 31, 2005. (b) For the period January 1, 2007 to April 27, 2007. (c) For the period May 1, 2006 to December 31, 2006. (d) For the period April 30, 2007 to December 31, 2007. The accompanying notes are an integral part of these financial statements. AA-52
MIST MIST MIST LEGG MASON PARTNERS NEUBERGER BERMAN REAL HARRIS OAKMARK INTERNATIONAL AGGRESSIVE GROWTH ESTATE SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT --------------------------------------- ------------------------------------ ------------------------- 2007 2006 2005 2007 2006 2005 2007 2006 ----------- ----------- ----------- ---------- ---------- ---------- ----------- ----------- $ 291,196 $ 800,904 $ (58,528) $ (6,309) $ (15,055) $ (15,219) $ 187,965 $ 107,281 7,874,782 3,481,066 921,780 325,991 487,789 320,070 3,618,254 1,721,280 (9,052,128) 5,394,065 2,041,888 (250,410) (542,275) 137,586 (8,438,976) 3,634,132 ----------- ----------- ----------- ---------- ---------- ---------- ----------- ----------- (886,150) 9,676,035 2,905,140 69,272 (69,541) 442,437 (4,632,757) 5,462,693 ----------- ----------- ----------- ---------- ---------- ---------- ----------- ----------- 6,699,487 4,761,695 3,525,337 494,859 524,835 516,302 4,350,769 2,775,441 10,245,789 12,282,382 10,361,229 (140,512) (345,649) 609,339 4,217,420 8,893,675 (3,258,769) (2,448,674) (1,125,549) (228,414) (256,951) (236,670) (2,374,752) (1,528,756) (7,228,755) (2,869,569) (1,196,961) (272,791) (305,655) (330,452) (2,790,791) (1,499,224) ----------- ----------- ----------- ---------- ---------- ---------- ----------- ----------- 6,457,752 11,725,834 11,564,056 (146,858) (383,420) 558,519 3,402,646 8,641,136 ----------- ----------- ----------- ---------- ---------- ---------- ----------- ----------- 5,571,602 21,401,869 14,469,196 (77,586) (452,961) 1,000,956 (1,230,111) 14,103,829 49,487,138 28,085,269 13,616,073 2,888,496 3,341,457 2,340,501 24,808,259 10,704,430 ----------- ----------- ----------- ---------- ---------- ---------- ----------- ----------- $55,058,740 $49,487,138 $28,085,269 $2,810,910 $2,888,496 $3,341,457 $23,578,148 $24,808,259 =========== =========== =========== ========== ========== ========== =========== =========== MIST NEUBERGER BERMAN REAL ESTATE SUB-ACCOUNT ----------- 2005 ----------- $ (34,808) 214,555 847,791 ----------- 1,027,538 ----------- 1,356,195 5,585,725 (426,306) (138,091) ----------- 6,377,523 ----------- 7,405,061 3,299,369 ----------- $10,704,430 ===========
The accompanying notes are an integral part of these financial statements. AA-53 NEW ENGLAND VARIABLE LIFE SEPARATE ACCOUNT OF NEW ENGLAND LIFE INSURANCE COMPANY STATEMENTS OF CHANGES IN NET ASSETS -- (CONCLUDED) FOR THE YEARS ENDED DECEMBER 31, 2007, 2006, 2005
MIST MIST MFS RESEARCH INTERNATIONAL LORD ABBETT BOND DEBENTURE SUB-ACCOUNT SUB-ACCOUNT -------------------------------------- --------------------------------------- 2007 2006 2005 2007 2006 2005 ----------- ----------- ---------- ----------- ----------- ----------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss)............ $ 177,471 $ 80,639 $ 14,930 $ 1,899,525 $ 2,253,463 $ 1,433,215 Net realized gains (losses)............. 2,551,425 910,772 232,619 241,985 (42,854) 2,545,422 Change in unrealized gains (losses) on investments.......................... (534,417) 533,798 232,397 237,120 840,461 (3,442,079) ----------- ----------- ---------- ----------- ----------- ----------- Net increase (decrease) in net assets resulting from operations.......... 2,194,479 1,525,209 479,946 2,378,630 3,051,070 536,558 ----------- ----------- ---------- ----------- ----------- ----------- POLICY TRANSACTIONS: Premium payments received from policy owners............................... 1,971,165 849,738 454,269 5,048,438 5,015,300 5,031,351 Net transfers (including fixed account)............................. 9,894,185 5,383,217 2,305,761 1,930,430 759,926 1,974,575 Policy charges.......................... (974,849) (466,966) (82,477) (3,094,670) (3,014,141) (2,531,254) Transfers for policy benefits and terminations......................... (1,510,679) (789,611) (7,719) (3,801,319) (3,269,583) (1,947,373) ----------- ----------- ---------- ----------- ----------- ----------- Net increase (decrease) in net assets resulting from policy transactions....................... 9,379,822 4,976,378 2,669,834 82,879 (508,498) 2,527,299 ----------- ----------- ---------- ----------- ----------- ----------- Net increase (decrease) in net assets... 11,574,301 6,501,587 3,149,780 2,461,509 2,542,572 3,063,857 NET ASSETS: Beginning of period..................... 10,510,490 4,008,903 859,123 36,899,321 34,356,749 31,292,892 ----------- ----------- ---------- ----------- ----------- ----------- End of period........................... $22,084,791 $10,510,490 $4,008,903 $39,360,830 $36,899,321 $34,356,749 =========== =========== ========== =========== =========== ===========
(a) For the period May 1, 2005 to December 31, 2005. (b) For the period January 1, 2007 to April 27, 2007. (c) For the period May 1, 2006 to December 31, 2006. (d) For the period April 30, 2007 to December 31, 2007. The accompanying notes are an integral part of these financial statements. AA-54
MIST MIST MIST MIST OPPENHEIMER CYCLICAL GROWTH CYCLICAL GROWTH PIMCO INFLATION MIST LEGG MASON CAPITAL APPRECIATION ETF AND INCOME ETF PROTECTED BOND VALUE EQUITY SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT ------------------------------- ------------------ ------------------ --------------------- ------------------------- 2007 2006 2005(A) 2007 2006(C) 2007 2006(C) 2007 2006(C) 2007 2006(C) --------- -------- -------- -------- ------- -------- ------- ---------- -------- ----------- ----------- $ (1,897) $ (443) $ (66) $ (2,198) $ 904 $ (401) $ 517 $ 4,117 $ (304) $ (89,882) $ (35,516) 64,295 2,535 1,634 5,211 230 2,313 57 6,584 3,457 184,870 322,585 (22,990) 16,452 276 12,959 663 3,249 261 60,630 (646) (1,096,137) 915,746 --------- -------- -------- -------- ------- -------- ------- ---------- -------- ----------- ----------- 39,408 18,544 1,844 15,972 1,797 5,161 835 71,331 2,507 (1,001,149) 1,202,815 --------- -------- -------- -------- ------- -------- ------- ---------- -------- ----------- ----------- 96,097 46,379 7,461 59,076 2,223 30,553 416 81,110 7,566 1,876,712 1,374,783 583,595 157,892 131,687 752,504 88,638 492,703 38,659 1,418,711 180,926 (289,314) 16,626,658 (51,485) (29,478) (3,938) (62,899) (1,942) (25,861) (1,198) (29,715) (3,063) (1,170,952) (1,009,352) (100,436) (7,347) 9,927 (38,167) 4 (1,133) 2 (125,721) (23,778) (1,438,828) (1,039,287) --------- -------- -------- -------- ------- -------- ------- ---------- -------- ----------- ----------- 527,771 167,446 145,137 710,514 88,923 496,262 37,879 1,344,385 161,651 (1,022,382) 15,952,802 --------- -------- -------- -------- ------- -------- ------- ---------- -------- ----------- ----------- 567,179 185,990 146,981 726,486 90,720 501,423 38,714 1,415,716 164,158 (2,023,531) 17,155,617 332,971 146,981 -- 90,720 -- 38,714 -- 164,158 -- 17,155,617 -- --------- -------- -------- -------- ------- -------- ------- ---------- -------- ----------- ----------- $ 900,150 $332,971 $146,981 $817,206 $90,720 $540,137 $38,714 $1,579,874 $164,158 $15,132,086 $17,155,617 ========= ======== ======== ======== ======= ======== ======= ========== ======== =========== =========== MIST BLACKROCK MIST LARGE-CAP CORE JANUS FORTY SUB-ACCOUNT SUB-ACCOUNT -------------- ----------- 2007(D) 2007(D) -------------- ----------- $ (2,290) $ (5,703) 1,835 32,447 17,789 325,311 ---------- ---------- 17,334 352,055 ---------- ---------- 261,566 64,358 2,139,773 4,029,930 (195,732) (53,982) (163,530) (35,610) ---------- ---------- 2,042,077 4,004,696 ---------- ---------- 2,059,411 4,356,751 -- -- ---------- ---------- $2,059,411 $4,356,751 ========== ==========
The accompanying notes are an integral part of these financial statements. AA-55 NEW ENGLAND VARIABLE LIFE SEPARATE ACCOUNT OF NEW ENGLAND LIFE INSURANCE COMPANY NOTES TO THE FINANCIAL STATEMENTS 1. ORGANIZATION New England Variable Life Separate Account (the "Separate Account"), a separate account of New England Life Insurance Company (the "Company"), was established by the Company's Board of Directors on January 31, 1983 to support operations of the Company with respect to certain variable life insurance policies (the "Policies"). The Company is an indirect 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 Massachusetts Department of Insurance. The Separate Account is divided into Sub-Accounts, each of which is treated as an individual accounting entity for financial reporting purposes. Each Sub- Account 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: Metropolitan Series Fund, Inc. ("MSF") American Funds Insurance Series ("American Funds") Fidelity Variable Insurance Products Fund ("Fidelity VIP") Met Investors Series Trust ("MIST") 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 Policies is not chargeable with liabilities arising out of any other business the Company may conduct. Premium payments applied to the Separate Account are invested in one or more Sub-Accounts in accordance with the selection made by the policy owner. The following Sub-Accounts were available for investment as of December 31, 2007: MSF Zenith Equity Sub-Account MSF MetLife Conservative Allocation Sub- Account MSF BlackRock Bond Income Sub-Account MSF MetLife Conservative to Moderate Allocation Sub-Account MSF BlackRock Money Market Sub-Account MSF MetLife Moderate Allocation Sub- Account MSF MFS Total Return Sub-Account MSF MetLife Moderate to Aggressive Allocation Sub-Account MSF Harris Oakmark Focused Value Sub- MSF MetLife Aggressive Allocation Sub- Account Account MSF FI Value Leaders Sub-Account MSF FI Large Cap Sub-Account MSF Loomis Sayles Small Cap Sub-Account American Funds Growth Sub-Account MSF Davis Venture Value Sub-Account American Funds Growth-Income Sub-Account MSF BlackRock Legacy Large Cap Growth American Funds Global Small Sub-Account Capitalization Sub-Account MSF Western Asset Management U.S. American Funds Bond Sub-Account Government Sub-Account MSF Western Asset Management Strategic Fidelity VIP Equity-Income Sub-Account Bond Opportunities Sub-Account MSF FI Mid Cap Opportunities Sub-Account Fidelity VIP Overseas Sub-Account MSF Jennison Growth Sub-Account MIST T. Rowe Price Mid-Cap Growth Sub- Account MSF Russell 2000 Index Sub-Account MIST PIMCO Total Return Sub-Account MSF FI International Stock Sub-Account MIST RCM Technology Sub-Account MSF BlackRock Strategic Value Sub-Account MIST Lazard Mid-Cap Sub-Account MSF MetLife Stock Index Sub-Account MIST Met/AIM Small Cap Growth Sub-Account MSF Lehman Brothers Aggregate Bond Index MIST Harris Oakmark International Sub- Sub-Account Account MSF Morgan Stanley EAFE Index Sub-Account MIST Legg Mason Partners Aggressive Growth Sub-Account MSF MetLife Mid Cap Stock Index Sub- MIST Neuberger Berman Real Estate Sub- Account Account MSF Franklin Templeton Small Cap Growth MIST MFS Research International Sub- Sub-Account Account MSF BlackRock Large Cap Value Sub-Account MIST Lord Abbett Bond Debenture Sub- Account MSF Neuberger Berman Mid Cap Value Sub- MIST Oppenheimer Capital Appreciation Account Sub-Account MSF Harris Oakmark Large Cap Value Sub- MIST Cyclical Growth ETF Sub-Account Account MSF T. Rowe Price Large Cap Growth Sub- MIST Cyclical Growth and Income ETF Sub- Account Account MSF T. Rowe Price Small Cap Growth Sub- MIST PIMCO Inflation Protected Bond Sub- Account Account MSF Oppenheimer Global Equity Sub-Account MIST Legg Mason Value Equity Sub-Account MSF BlackRock Aggressive Growth Sub- MIST BlackRock Large-Cap Core Sub-Account Account MSF BlackRock Diversified Sub-Account MIST Janus Forty Sub-Account
AA-56 NEW ENGLAND VARIABLE LIFE SEPARATE ACCOUNT OF NEW ENGLAND LIFE INSURANCE COMPANY NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) 1. ORGANIZATION -- (CONTINUED) The following Sub-Accounts ceased operations during the year ended December 31, 2007: MSF BlackRock Large Cap Sub-Account The operations of the Sub-Accounts were affected by the following changes that occurred during the year ended December 31, 2007: NAME CHANGES:
Old Name New Name - -------- -------- RCM Global Technology Portfolio RCM Technology Portfolio Legg Mason Aggressive Growth Legg Mason Partners Aggressive Portfolio Growth Portfolio
MERGERS:
Old Name New Name - -------- -------- BlackRock Large Cap Portfolio BlackRock Large-Cap Core Portfolio
This report is prepared for the general information of policy 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 life 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 statements 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 identified 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 Policies. 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 Policies. AA-57 NEW ENGLAND VARIABLE LIFE SEPARATE ACCOUNT OF NEW ENGLAND LIFE INSURANCE COMPANY NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) 2. SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED) PREMIUM PAYMENTS The Company deducts a sales charge and a state premium tax charge from premiums before amounts are allocated to the Separate Account. In the case of certain Policies, the Company also deducts a federal income tax charge before amounts are allocated to the Separate Account. The federal income tax charge is imposed in connection with certain Policies to recover a portion of the federal income tax adjustment attributable to policy acquisition expenses. Net premiums are credited as accumulation units as of the end of the valuation period in which received, as provided in the prospectus. NET TRANSFERS The policy owner has the opportunity to transfer funds between Sub-Accounts within the Separate Account or the fixed account, which is an investment option in the Company's general account. 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. 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. CHANGE IN BASIS OF PRESENTATION In prior year statements of changes in net assets, the Separate Account reported cost of insurance ("COI") in the financial statement line item "Transfers for policy benefits and terminations." The COI has been reclassified and now appears separately in the line item "Policy charges." This reclassification presents COI more consistent with the intent of what COI charges represent. The reclassification had no effect on the net assets of the Sub-Accounts or unit values of the Policies. 3. EXPENSES AND RELATED PARTY TRANSACTIONS The following annual Separate Account charge is an asset-based charge and assessed through a daily reduction in unit values which is recorded as an expense in the accompanying statements 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 Policies will exceed the amounts realized from the administrative charges assessed against the Policies. AA-58 NEW ENGLAND VARIABLE LIFE SEPARATE ACCOUNT OF NEW ENGLAND LIFE INSURANCE COMPANY NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) 3. EXPENSES AND RELATED PARTY TRANSACTIONS -- (CONTINUED) The table below represents the range of effective annual rates for the charge for the year ended December 31, 2007: - -------------------------------------------------------------------------- Mortality and Expense Risk 0.20%-0.90% - --------------------------------------------------------------------------
The above referenced charge 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 policy. For some Policies, the Mortality and Expense Risk charge which ranges from .10% to .90% is assessed on a monthly basis through the redemption of units. Other policy charges that are assessed through the redemption of units generally include: COI charges, administrative charges, a policy fee, and charges for benefits provided by rider. The COI charge is the primary charge under the policy for the death benefit provided by the Company. Administrative charges range from $.15 to $.38 for every $1,000 of the policy face amount and are assessed per policy per month. Policy fees range from $0 to $25 and are assessed monthly depending on the policy and the policy year. In addition, a surrender charge is imposed if the policy is partially or fully surrendered within the specified surrender charge period that ranges from 0% to 90% and/or $0 to $5 for every $1,000 of the policy face amount. For those policy owners who choose optional living benefit riders, these charges range from $0 to $500 per $100 or $1,000 face amount of the policy cash value and are deducted monthly. These charges are assessed through the redemption of units and are recorded as policy transactions in the accompanying statements of changes in net assets. Certain investments in the various portfolios, series or funds of the MIST and MSF Trusts hold shares which are managed by Met Investors Advisory, LLC and MetLife Advisers, LLC, respectively. Both act in the capacity of investment advisor and are indirect affiliates of the Company. AA-59 NEW ENGLAND VARIABLE LIFE SEPARATE ACCOUNT OF NEW ENGLAND LIFE INSURANCE COMPANY NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) 4. STATEMENT OF INVESTMENTS
FOR THE YEAR ENDED AS OF DECEMBER 31, DECEMBER 31, 2007 2007 ----------------------------- ------------------------ COST OF PROCEEDS FROM SHARES COST ($) PURCHASES ($) SALES ($) ---------- ----------- ------------- ------------- MSF Zenith Equity Sub-Account............... 1,472,639 597,919,698 13,747,006 92,761,924 MSF BlackRock Bond Income Sub-Account....... 1,139,243 124,798,372 9,213,726 21,213,615 MSF BlackRock Money Market Sub-Account...... 2,624,946 262,494,738 218,797,493 55,701,178 MSF MFS Total Return Sub-Account............ 837,126 114,721,244 12,857,635 17,968,978 MSF Harris Oakmark Focused Value Sub- Account................................... 722,743 153,312,556 28,993,339 29,381,222 MSF FI Value Leaders Sub-Account............ 404,571 69,022,134 11,008,622 14,033,841 MSF Loomis Sayles Small Cap Sub-Account..... 707,606 139,990,664 26,684,957 23,408,665 MSF Davis Venture Value Sub-Account......... 10,565,277 267,292,978 19,809,494 42,981,001 MSF BlackRock Legacy Large Cap Growth Sub- Account................................... 8,453,137 167,979,262 6,770,555 29,365,949 MSF Western Asset Management U.S. Government Sub-Account............................... 691,901 8,446,573 4,178,912 19,157,020 MSF Western Asset Management Strategic Bond Opportunities Sub-Account............................... 1,206,200 15,094,593 5,079,941 4,028,400 MSF FI Mid Cap Opportunities Sub-Account.... 1,608,316 23,300,441 3,015,378 4,919,550 MSF Jennison Growth Sub-Account............. 590,700 6,556,026 1,044,894 1,396,926 MSF Russell 2000 Index Sub-Account.......... 1,924,545 26,462,909 7,318,829 4,780,602 MSF FI International Stock Sub-Account...... 3,098,691 32,333,595 5,462,721 7,167,546 MSF BlackRock Strategic Value Sub-Account... 4,200,766 68,565,383 12,951,782 12,623,185 MSF MetLife Stock Index Sub-Account......... 6,022,417 182,674,648 17,086,472 29,218,957 MSF Lehman Brothers Aggregate Bond Index Sub-Account............................... 2,637,863 28,146,579 7,451,253 9,198,858 MSF Morgan Stanley EAFE Index Sub-Account... 1,298,258 17,143,601 5,625,812 2,913,230 MSF MetLife Mid Cap Stock Index Sub- Account................................... 1,279,437 17,785,059 4,448,412 2,889,722 MSF Franklin Templeton Small Cap Growth Sub- Account................................... 675,249 6,972,694 1,852,760 1,896,854 MSF BlackRock Large Cap Sub-Account(a)...... -- -- 192,609 2,102,932 MSF BlackRock Large Cap Value Sub-Account... 885,202 11,551,906 4,997,909 1,671,898 MSF Neuberger Berman Mid Cap Value Sub- Account................................... 1,878,962 38,141,383 8,102,808 6,555,607 MSF Harris Oakmark Large Cap Value Sub- Account................................... 871,573 11,941,171 2,539,057 2,909,804 MSF T. Rowe Price Large Cap Growth Sub- Account................................... 488,847 7,104,131 2,939,281 1,169,481 MSF T. Rowe Price Small Cap Growth Sub- Account................................... 249,147 3,950,165 812,404 1,130,857 MSF Oppenheimer Global Equity Sub-Account... 376,428 6,164,278 2,618,769 1,438,582 MSF BlackRock Aggressive Growth Sub- Account................................... 79,670 2,014,973 1,112,294 420,665 MSF BlackRock Diversified Sub-Account....... 199,519 3,331,336 1,013,154 1,008,035 MSF MetLife Conservative Allocation Sub- Account................................... 185,685 2,021,436 2,101,323 1,117,989 MSF MetLife Conservative to Moderate Allocation Sub-Account.................... 288,430 3,267,041 2,707,838 1,186,129 MSF MetLife Moderate Allocation Sub- Account................................... 2,470,608 28,368,788 15,240,988 3,077,559 MSF MetLife Moderate to Aggressive Allocation Sub-Account.................... 3,279,185 39,175,981 24,370,787 6,264,782 MSF MetLife Aggressive Allocation Sub- Account................................... 572,744 7,114,415 4,929,298 1,082,526 MSF FI Large Cap Sub-Account................ 15,427 227,292 300,889 103,479 American Funds Growth Sub-Account........... 3,550,203 181,837,650 41,013,573 26,217,476 American Funds Growth-Income Sub-Account.... 3,136,606 112,221,867 21,251,297 10,967,992 American Funds Global Small Capitalization Sub-Account............................... 3,282,322 67,516,913 23,474,583 8,089,616 American Funds Bond Sub-Account............. 900,120 10,275,270 7,953,001 796,863 Fidelity VIP Equity-Income Sub-Account...... 6,750,024 156,688,895 23,265,000 24,959,084 Fidelity VIP Overseas Sub-Account........... 6,215,926 105,589,795 20,174,805 20,961,492 MIST T. Rowe Price Mid-Cap Growth Sub- Account................................... 2,581,004 21,662,159 6,830,929 5,794,290 MIST PIMCO Total Return Sub-Account......... 4,772,143 55,364,407 16,966,579 6,910,903 MIST RCM Technology Sub-Account............. 884,277 4,978,942 2,955,592 1,924,918 MIST Lazard Mid-Cap Sub-Account............. 709,124 9,751,244 5,480,651 2,511,859 MIST Met/AIM Small Cap Growth Sub-Account... 352,368 4,806,511 1,668,386 1,503,877 MIST Harris Oakmark International Sub- Account................................... 3,205,060 54,883,525 21,223,005 9,891,940 MIST Legg Mason Partners Aggressive Growth Sub-Account............................... 381,848 3,049,466 807,095 704,793 MIST Neuberger Berman Real Estate Sub- Account................................... 1,691,131 27,565,412 12,341,448 6,263,534 MIST MFS Research International Sub- Account................................... 1,542,117 21,969,761 14,224,281 2,126,683 MIST Lord Abbett Bond Debenture Sub- Account................................... 3,138,141 38,527,233 8,657,831 6,639,211 MIST Oppenheimer Capital Appreciation Sub- Account................................... 93,543 936,075 1,069,644 499,764 MIST Cyclical Growth ETF Sub-Account........ 70,876 841,849 829,008 83,248 MIST Cyclical Growth and Income ETF Sub- Account................................... 47,153 551,476 546,612 36,022 MIST PIMCO Inflation Protected Bond Sub- Account................................... 146,324 1,543,727 1,699,136 330,482 MIST Legg Mason Value Equity Sub-Account.... 1,454,329 15,450,841 1,326,766 2,439,669 MIST BlackRock Large-Cap Core Sub- Account(b)................................ 190,460 2,103,939 2,392,940 290,830 MIST Janus Forty Sub-Account(b)............. 52,381 4,064,706 4,347,711 315,453
(a) For the period January 1, 2007 to April 27, 2007. (b) For the period April 30, 2007 to December 31, 2007. AA-60 NEW ENGLAND VARIABLE LIFE SEPARATE ACCOUNT OF NEW ENGLAND LIFE INSURANCE COMPANY NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) 5. FINANCIAL HIGHLIGHTS The following table is a summary of total returns, expenses as a percentage of average net assets, excluding expenses for the underlying portfolio, series, or fund, and the investment income ratio to average net assets, for each of the five years in the period ended December 31, 2007. The table shows the ranges of total returns of the Sub-Accounts for all Policies investing in the Separate Account. The total return reflects the appropriate mortality and expense risk charged against the Sub-Account assets, where applicable, for each type of policy. These figures do not reflect charges deducted from the premiums and the cash values of the Policies as such charges will affect the actual cash values and benefits of the Policies.
FOR THE YEAR ENDED DECEMBER 31 AS OF DECEMBER 31 ------------------------------------------------------ ----------------- EXPENSE RATIO(2) TOTAL RETURN(3,4) INVESTMENT(1) LOWEST TO LOWEST TO NET ASSETS ($) INCOME RATIO (%) HIGHEST (%) HIGHEST (%) ----------------- ---------------- ---------------- ----------------- MSF Zenith Equity Sub-Account.......... 2007 688,309,329 0.76 0.20-0.90 4.31-5.26 2006 734,057,930 0.53 0.00-0.90 7.31-8.28 2005 760,537,208 0.90 0.00-0.90 9.17-10.15 2004 768,360,185 0.45 0.00-0.90 10.00-11.00 2003 756,136,082 0.26 0.00-0.90 30.27-31.45 MSF BlackRock Bond Sub-Account......... 2007 126,621,372 3.31 0.20-0.90 5.34-6.29 2006 135,026,897 5.70 0.00-0.90 3.48-4.41 2005 136,600,474 4.03 0.00-0.90 1.50-2.41 2004 142,656,258 4.05 0.00-0.90 3.49-4.43 2003 144,581,086 3.23 0.00-0.90 4.90-5.85 MSF BlackRock Money Market Sub- Account.............................. 2007 261,581,445 4.94 0.20-0.90 4.09-5.04 2006 98,569,401 4.66 0.00-0.90 3.88-4.81 2005 92,247,000 2.73 0.00-0.90 1.97-2.89 2004 91,102,430 0.94 0.00-0.90 0.08-0.99 2003 104,081,007 0.79 0.00-0.90 (0.10)-0.81 MSF MFS Total Return Sub-Account....... 2007 128,431,968 2.19 0.20-0.90 3.44-4.38 2006 135,222,422 3.59 0.00-0.90 11.21-12.21 2005 129,599,852 1.78 0.00-0.90 2.20-3.12 2004 131,220,506 2.34 0.00-0.90 10.25-11.25 2003 83,494,581 1.36 0.00-0.90 15.95-17.00 MSF Harris Oakmark Focused Value Sub- Account.............................. 2007 157,882,498 0.57 0.20-0.90 (7.68)-(6.84) 2006 193,589,963 0.31 0.00-0.90 11.45-12.45 2005 191,375,939 0.04 0.00-0.90 9.00-9.98 2004 182,473,887 0.04 0.00-0.90 8.51-9.93 2003 165,660,062 0.14 0.00-0.90 31.47-32.66 MSF FI Value Leader Sub-Account........ 2007 78,919,923 0.96 0.20-0.90 3.26-4.20 2006 86,759,521 1.12 0.00-0.90 10.93-11.93 2005 83,598,030 1.13 0.00-0.90 9.71-10.69 2004 80,689,137 1.25 0.00-0.90 12.71-13.73 2003 76,081,031 0.72 0.00-0.90 25.78-26.92 MSF Loomis Sayles Small Cap Sub- Account.............................. 2007 174,428,227 0.08 0.20-0.90 10.89-11.90 2006 171,548,147 -- 0.00-0.90 15.64-16.68 2005 157,114,039 -- 0.00-0.90 6.00-6.96 2004 157,718,819 -- 0.00-0.90 15.31-16.35 2003 143,154,523 -- 0.00-0.90 35.24-36.47 MSF Davis Venture Value Sub-Account.... 2007 383,166,627 0.80 0.20-0.90 3.64-4.58 2006 391,428,706 0.83 0.00-0.90 13.56-14.58 2005 357,153,939 0.69 0.00-0.90 9.31-10.30 2004 335,586,136 0.58 0.00-0.90 11.36-12.37 2003 302,685,265 0.36 0.00-0.90 29.70-30.87
AA-61 NEW ENGLAND VARIABLE LIFE SEPARATE ACCOUNT OF NEW ENGLAND LIFE INSURANCE COMPANY NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) 5. FINANCIAL HIGHLIGHTS -- (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31 AS OF DECEMBER 31 ------------------------------------------------------ ----------------- EXPENSE RATIO(2) TOTAL RETURN(3,4) INVESTMENT(1) LOWEST TO LOWEST TO NET ASSETS ($) INCOME RATIO (%) HIGHEST (%) HIGHEST (%) ----------------- ---------------- ---------------- ----------------- MSF BlackRock Legacy Large Cap Growth Sub-Account.......................... 2007 224,783,521 0.20 0.20-0.90 17.65-18.72 2006 210,532,191 0.12 0.00-0.90 3.20-4.13 2005 222,568,551 0.41 0.00-0.90 6.05-7.00 2004 228,840,525 -- 0.00-0.90 7.84-8.81 2003 225,355,598 0.06 0.00-0.90 33.94-35.15 MSF Western Asset Management U.S. Government Sub-Account............... 2007 8,555,333 1.62 0.20-0.90 3.41-4.35 2006 23,111,882 1.96 0.00-0.90 3.23-4.16 2005 5,988,976 1.41 0.00-0.90 0.81-1.72 2004 1,515,940 0.86 0.00-0.90 2.08-3.01 2003 1,028,922 0.75 0.00 1.68 MSF Western Asset Management Strategic Bond Opportunities Sub-Account....... 2007 15,153,416 2.75 0.20-0.90 3.10-4.03 2006 13,995,776 5.01 0.00-0.90 4.12-5.06 2005 9,512,958 2.35 0.00-0.90 1.91-2.83 2004 3,884,941 1.79 0.00-0.90 5.65-6.61 2003 1,638,004 2.09 0.00 12.62 MSF FI Mid Cap Opportunities Sub- Account.............................. 2007 33,745,831 0.13 0.20-0.90 7.36-8.33 2006 33,000,999 0.01 0.00-0.90 10.85-11.85 2005 31,907,921 0.00 0.00-0.90 5.96-6.92 2004 33,474,401 0.52 0.00-0.90 16.14-17.19 2003 28,559,896 -- 0.00-0.90 33.38-34.58 MSF Jennison Growth Sub-Account........ 2007 7,939,226 0.43 0.20-0.90 10.67-11.67 2006 7,744,244 -- 0.00-0.90 1.84-2.76 2005 8,101,181 -- 0.00-0.90 20.77-21.49 MSF Russell 2000 Index Sub-Account..... 2007 27,058,478 0.93 0.20-0.90 (2.40)-(1.51) 2006 27,456,436 0.86 0.00-0.90 16.91-17.96 2005 24,753,651 0.78 0.00-0.90 3.57-4.50 2004 21,567,654 0.45 0.00-0.90 16.71-17.77 2003 13,781,579 0.59 0.00-0.90 44.76-46.07 MSF FI International Stock Sub- Account.............................. 2007 49,449,098 1.07 0.20-0.90 9.34-10.33 2006 49,321,383 1.49 0.00-0.90 15.45-16.49 2005 48,315,947 0.63 0.00-0.90 16.95-18.00 2004 40,124,885 1.28 0.00-0.90 17.13-18.19 2003 35,668,554 0.68 0.00-0.90 26.90-28.04 MSF BlackRock Strategic Value Sub- Account.............................. 2007 63,338,831 0.31 0.20-0.90 (4.32)-(3.45) 2006 73,818,143 0.31 0.00-0.90 15.69-16.73 2005 70,237,347 -- 0.00-0.90 3.22-4.15 2004 73,418,898 -- 0.00-0.90 11.97-14.31 2003 57,204,349 -- 0.00-0.90 48.79-50.14 MSF MetLife Stock Index Sub-Account.... 2007 221,661,531 1.05 0.20-0.90 4.29-5.23 2006 229,081,898 2.00 0.00-0.90 14.43-15.46 2005 213,385,168 1.60 0.00-0.90 3.70-4.64 2004 215,225,966 0.85 0.00-0.90 9.54-10.53 2003 200,963,908 1.69 0.00-0.90 27.05-28.20
AA-62 NEW ENGLAND VARIABLE LIFE SEPARATE ACCOUNT OF NEW ENGLAND LIFE INSURANCE COMPANY NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) 5. FINANCIAL HIGHLIGHTS -- (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31 AS OF DECEMBER 31 ------------------------------------------------------ ----------------- EXPENSE RATIO(2) TOTAL RETURN(3,4) INVESTMENT(1) LOWEST TO LOWEST TO NET ASSETS ($) INCOME RATIO (%) HIGHEST (%) HIGHEST (%) ----------------- ---------------- ---------------- ----------------- MSF Lehman Brothers Aggregate Bond Index Sub-Account.................... 2007 28,756,872 4.78 0.20-0.90 5.91-6.87 2006 29,998,745 4.36 0.00-0.90 3.19-4.12 2005 29,833,679 3.98 0.00-0.90 1.15-2.06 2004 28,363,978 3.15 0.00-0.90 3.16-4.10 2003 25,940,210 6.15 0.00-0.90 2.70-3.63 MSF Morgan Stanley EAFE Index Sub- Account.............................. 2007 22,127,994 1.95 0.20-0.90 9.82-10.82 2006 18,004,926 1.70 0.00-0.90 24.60-25.72 2005 13,270,424 1.55 0.00-0.90 12.23-13.24 2004 9,807,460 0.68 0.00-0.90 18.57-19.64 2003 4,822,619 1.26 0.00-0.90 36.40-37.64 MSF MetLife Mid Cap Stock Index Sub- Account.............................. 2007 19,029,722 0.76 0.20-0.90 6.81-7.78 2006 17,068,454 1.22 0.00-0.90 9.11-10.10 2005 14,077,266 0.74 0.00-0.90 11.27-12.27 2004 10,738,248 0.47 0.00-0.90 15.00-16.05 2003 6,317,800 0.45 0.00-0.90 33.76-34.96 MSF Franklin Templeton Small Cap Growth Sub-Account.......................... 2007 7,074,259 -- 0.20-0.90 3.60-4.54 2006 7,303,723 -- 0.00-0.90 9.03-10.01 2005 6,719,469 -- 0.00-0.90 3.72-4.65 2004 5,395,016 -- 0.00-0.90 10.41-11.41 2003 3,347,608 -- 0.00-0.90 43.63-44.93 MSF BlackRock Large Cap Sub-Account (a).................................. 2007 -- 1.58 0.20-0.90 4.46-5.36 2006 1,777,006 1.31 0.00-0.90 13.09-14.11 2005 1,613,324 0.97 0.00-0.90 2.66-3.59 2004 1,480,369 0.65 0.00-0.90 9.86-10.85 2003 911,927 0.65 0.00-0.90 29.07-30.24 MSF BlackRock Large Cap Value Sub- Account.............................. 2007 11,919,419 0.93 0.20-0.90 2.46-3.39 2006 8,839,326 1.20 0.00-0.90 18.26-19.32 2005 5,225,941 0.94 0.00-0.90 5.04-5.98 2004 3,753,609 -- 0.00-0.90 12.38-13.40 2003 2,167,116 1.39 0.00-0.90 34.46-35.68 MSF Neuberger Berman Mid Cap Value Sub- Account.............................. 2007 39,717,343 0.55 0.20-0.90 2.52-3.45 2006 38,343,907 0.50 0.00-0.90 10.46-11.45 2005 32,943,567 0.26 0.00-0.90 11.26-12.27 2004 18,749,429 0.23 0.00-0.90 21.80-22.91 2003 9,582,471 0.26 0.00-0.90 35.29-36.52 MSF Harris Oakmark Large Cap Value Sub- Account.............................. 2007 12,298,691 0.79 0.20-0.90 (4.66)-(3.79) 2006 13,615,792 0.80 0.00-0.90 17.06-18.11 2005 13,328,806 0.73 0.00-0.90 (2.26)-(1.38) 2004 9,516,425 0.47 0.00-0.90 10.42-11.42 2003 5,609,527 -- 0.00-0.90 24.37-25.49 MSF T. Rowe Price Large Cap Growth Sub- Account.............................. 2007 7,948,169 0.42 0.20-0.90 8.40-9.39 2006 5,704,830 0.42 0.00-0.90 12.23-13.24 2005 6,065,326 0.67 0.00-0.90 5.64-6.59 2004 766,546 -- 0.00-0.90 8.94-9.93
AA-63 NEW ENGLAND VARIABLE LIFE SEPARATE ACCOUNT OF NEW ENGLAND LIFE INSURANCE COMPANY NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) 5. FINANCIAL HIGHLIGHTS -- (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31 AS OF DECEMBER 31 ------------------------------------------------------ ----------------- EXPENSE RATIO(2) TOTAL RETURN(3,4) INVESTMENT(1) LOWEST TO LOWEST TO NET ASSETS ($) INCOME RATIO (%) HIGHEST (%) HIGHEST (%) ----------------- ---------------- ---------------- ----------------- MSF T. Rowe Price Small Cap Growth Sub- Account.............................. 2007 4,225,349 -- 0.20-0.90 8.87-9.86 2006 4,128,650 -- 0.00-0.90 2.97-3.90 2005 2,248,854 -- 0.00-0.90 10.01-11.01 2004 516,111 -- 0.00-0.90 10.09-11.08 MSF Oppenheimer Global Equity Sub- Account.............................. 2007 6,383,391 1.08 0.20-0.90 5.53-6.49 2006 5,131,307 2.33 0.00-0.90 15.55-16.59 2005 2,435,641 0.37 0.00-0.90 15.18-16.22 2004 131,591 -- 0.00-0.90 15.37-16.42 MSF BlackRock Aggressive Growth Sub- Account.............................. 2007 2,233,228 -- 0.20-0.90 19.49-20.58 2006 1,262,834 -- 0.00-0.90 5.77-6.73 2005 778,161 -- 0.00-0.90 9.71-10.70 2004 530,121 -- 0.00-0.90 12.28-12.98 MSF BlackRock Diversified Sub-Account.. 2007 3,548,106 2.37 0.20-0.90 4.94-5.90 2006 3,414,636 2.35 0.00-0.90 9.54-10.53 2005 3,082,467 1.19 0.00-0.90 2.13-3.05 2004 852,291 -- 0.00-0.90 7.53-8.72 MSF MetLife Conservative Allocation Sub-Account.......................... 2007 2,013,623 -- 0.20-0.90 4.79-5.74 2006 961,858 2.62 0.00-0.90 6.30-7.25 2005 494,420 0.67 0.00-0.90 3.50-4.13 MSF MetLife Conservative to Moderate Allocation Sub-Account............... 2007 3,279,205 -- 0.20-0.90 4.11-5.06 2006 1,654,340 1.51 0.00-0.90 8.79-9.77 2005 230,607 0.80 0.00-0.90 5.79-6.43 MSF MetLife Moderate Allocation Sub- Account.............................. 2007 29,192,086 0.20 0.20-0.90 3.61-4.55 2006 16,573,938 1.85 0.00-0.90 11.18-12.18 2005 3,737,916 0.81 0.00-0.90 8.00-8.66 MSF MetLife Moderate to Aggressive Allocation Sub-Account............... 2007 40,468,536 0.20 0.20-0.90 3.18-4.12 2006 21,764,488 0.94 0.00-0.90 13.53-14.55 2005 2,818,965 0.77 0.00-0.90 10.27-10.94 MSF MetLife Aggressive Allocation Sub- Account.............................. 2007 7,131,044 0.27 0.20-0.90 2.55-3.48 2006 3,293,718 0.72 0.00-0.90 15.03-16.07 2005 405,330 0.75 0.00-0.90 12.04-12.72 MSF FI Large Cap Sub-Account........... 2007 218,496 0.12 0.20-0.90 3.01-3.94 2006 32,272 -- 0.00-0.90 1.62-2.23 American Funds Growth Sub-Account...... 2007 235,822,089 0.78 0.20-0.90 11.34-12.35 2006 211,963,175 0.81 0.00-0.90 9.23-10.22 2005 184,342,864 0.72 0.00-0.90 15.15-16.19 2004 137,620,317 0.19 0.00-0.90 11.49-12.50 2003 98,204,163 0.13 0.00-0.90 35.58-36.81 American Funds Growth-Income Sub- Account.............................. 2007 131,971,932 1.54 0.20-0.90 4.10-5.04 2006 121,735,797 1.60 0.00-0.90 14.17-15.20 2005 102,332,076 1.39 0.00-0.90 4.89-5.83 2004 85,683,703 0.96 0.00-0.90 9.38-10.37 2003 60,261,397 1.18 0.00-0.90 31.24-32.43
AA-64 NEW ENGLAND VARIABLE LIFE SEPARATE ACCOUNT OF NEW ENGLAND LIFE INSURANCE COMPANY NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) 5. FINANCIAL HIGHLIGHTS -- (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31 AS OF DECEMBER 31 ------------------------------------------------------ ----------------- EXPENSE RATIO(2) TOTAL RETURN(3,4) INVESTMENT(1) LOWEST TO LOWEST TO NET ASSETS ($) INCOME RATIO (%) HIGHEST (%) HIGHEST (%) ----------------- ---------------- ---------------- ----------------- American Funds Global Small Capitalization Sub-Account........... 2007 87,957,000 2.91 0.20-0.90 20.33-21.43 2006 66,602,309 0.46 0.00-0.90 22.95-24.05 2005 47,588,867 0.92 0.00-0.90 24.23-25.35 2004 28,038,825 -- 0.00-0.90 19.80-20.88 2003 16,170,489 0.52 0.00-0.90 52.15-53.53 American Funds Bond Sub-Account........ 2007 9,806,449 9.07 0.20-0.90 2.40-3.33 2006 3,132,932 0.57 0.00-0.90 5.32-5.95 Fidelity VIP Equity-Income Sub- Account.............................. 2007 160,705,816 1.75 0.20-0.90 0.62-1.53 2006 175,481,284 3.32 0.00-0.90 19.12-20.19 2005 160,020,101 1.60 0.00-0.90 4.92-5.87 2004 165,066,633 1.51 0.00-0.90 10.53-11.53 2003 157,938,372 1.72 0.00-0.90 29.16-30.33 Fidelity VIP Overseas Sub-Account...... 2007 156,761,708 3.30 0.20-0.90 16.26-17.31 2006 148,385,879 0.87 0.00-0.90 17.02-18.08 2005 137,138,211 0.62 0.00-0.90 17.98-19.05 2004 127,743,985 1.12 0.00-0.90 12.61-13.64 2003 120,188,250 0.77 0.00-0.90 42.09-43.37 MIST T. Rowe Price Mid-Cap Growth Sub- Account.............................. 2007 25,194,308 0.23 0.20-0.90 16.79-17.85 2006 21,555,907 -- 0.00-0.90 5.61-6.56 2005 17,311,727 -- 0.00-0.90 13.84-14.87 2004 9,869,525 -- 0.00-0.90 17.09-18.15 2003 5,166,306 -- 0.00-0.90 35.90-37.12 MIST PIMCO Total Return Sub-Account.... 2007 58,359,575 3.62 0.20-0.90 6.88-7.85 2006 46,125,778 2.55 0.00-0.90 3.87-4.80 2005 41,507,727 0.06 0.00-0.90 1.55-2.46 2004 33,796,643 7.43 0.00-0.90 4.30-5.25 2003 24,279,961 1.53 0.00-0.90 3.58-4.52 MIST RCM Technology Sub-Account........ 2007 5,928,264 -- 0.20-0.90 30.48-31.67 2006 3,796,537 -- 0.00-0.90 4.54-5.48 2005 3,690,264 -- 0.00-0.90 10.36-11.35 2004 6,271,717 0.05 0.00-0.90 (5.14)-(4.28) 2003 4,294,955 -- 0.00-0.90 56.43-57.84 MIST Lazard Mid-Cap Sub-Account........ 2007 8,530,473 0.64 0.20-0.90 (3.35)-(2.47) 2006 6,762,364 0.53 0.00-0.90 13.85-14.87 2005 6,002,785 0.39 0.00-0.90 7.43-8.40 2004 4,879,178 -- 0.00-0.90 13.57-14.60 2003 2,523,380 0.12 0.00-0.90 25.29-26.42 MIST Met/AIM Small Cap Growth Sub- Account.............................. 2007 5,139,211 -- 0.20-0.90 10.40-11.40 2006 4,548,438 -- 0.00-0.90 12.89-13.91 2005 3,699,893 -- 0.00-0.90 7.62-8.59 2004 3,868,487 -- 0.00-0.90 5.77-6.73 2003 3,568,720 -- 0.00-0.90 37.83-39.08 MIST Harris Oakmark International Sub- Account.............................. 2007 55,058,740 0.93 0.20-0.90 (1.75)-(0.86) 2006 49,487,138 2.51 0.00-0.90 28.05-29.20 2005 28,085,269 0.15 0.00-0.90 13.46-14.48 2004 13,616,073 0.04 0.00-0.90 19.72-20.80 2003 5,222,560 1.73 0.00-0.90 34.16-35.37
AA-65 NEW ENGLAND VARIABLE LIFE SEPARATE ACCOUNT OF NEW ENGLAND LIFE INSURANCE COMPANY NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) 5. FINANCIAL HIGHLIGHTS -- (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31 AS OF DECEMBER 31 ------------------------------------------------------ ----------------- EXPENSE RATIO(2) TOTAL RETURN(3,4) INVESTMENT(1) LOWEST TO LOWEST TO NET ASSETS ($) INCOME RATIO (%) HIGHEST (%) HIGHEST (%) ----------------- ---------------- ---------------- ----------------- MIST Legg Mason Partners Aggressive Growth Sub-Account................... 2007 2,810,910 0.23 0.20-0.90 1.68-2.60 2006 2,888,496 -- 0.00-0.90 (2.48)-(1.60) 2005 3,341,457 -- 0.00-0.90 12.83-13.84 2004 2,340,501 -- 0.00-0.90 7.84-8.82 2003 2,049,192 -- 0.00-0.90 28.76-29.93 MIST Neuberger Berman Real Estate Sub- Account.............................. 2007 23,578,148 1.11 0.20-0.90 (15.56)-(14.79) 2006 24,808,259 1.05 0.00-0.90 36.67-37.90 2005 10,704,430 -- 0.00-0.90 12.59-13.61 2004 3,299,369 3.44 0.00-0.90 28.96-29.74 MIST MFS Research International Sub- Account.............................. 2007 22,084,791 1.44 0.20-0.90 12.58-13.60 2006 10,510,490 1.49 0.00-0.90 25.78-26.91 2005 4,008,903 0.86 0.00-0.90 15.73-16.77 2004 859,123 -- 0.00-0.90 18.65-19.72 MIST Lord Abbett Bond Debenture Sub- Account.............................. 2007 39,360,830 5.37 0.20-0.90 5.89-6.85 2006 36,899,321 6.78 0.00-0.90 8.38-9.35 2005 34,356,749 4.73 0.00-0.90 0.90-1.81 2004 31,292,892 6.47 0.00-0.90 7.46-9.59 2003 28,578,861 6.34 0.00-0.90 26.13-27.26 MIST Oppenheimer Capital Appreciation Sub-Account.......................... 2007 900,150 0.10 0.20-0.90 13.42-14.45 2006 332,971 0.28 0.00-0.90 6.85-7.81 2005 146,981 0.14 0.00-0.90 3.93-4.87 MIST Cyclical Growth ETF Sub-Account... 2007 817,206 -- 0.20-0.90 5.02-5.76 2006 90,720 6.20 0.00-0.90 7.06-7.70 MIST Cyclical Growth and Income ETF Sub-Account.......................... 2007 540,137 -- 0.20-0.90 4.81-5.97 2006 38,714 8.25 0.00-0.90 6.68-7.31 MIST PIMCO Inflation Protected Bond Sub-Account.......................... 2007 1,579,874 1.02 0.20-0.90 10.08-11.08 2006 164,158 -- 0.00-0.90 (0.42)-0.46 MIST Legg Mason Value Equity Sub- Account.............................. 2007 15,132,086 -- 0.20-0.90 (6.57)-(5.72) 2006 17,155,617 0.21 0.00-0.90 7.71-8.35 MIST BlackRock Large-Cap Core Sub- Account(b)........................... 2007 2,059,411 -- 0.20-0.90 5.67-6.63 MIST Janus Forty Sub-Account(b)........ 2007 4,356,751 -- 0.20-0.90 26.05-27.09
(1.) These amounts represent the dividends, excluding distributions of capital gains, received by the Sub-Account from the underlying portfolio, series, or fund net of management fees assessed by the portfolio manager, divided by the average net assets. These ratios exclude mortality and expense risk charges. The recognition of investment income by the Sub-Account is affected by the timing of the declaration of dividends by the underlying portfolio, series, or fund in which the Sub-Account invests. (2.) These amounts represent the annualized policy expenses of the Separate Account, consisting primarily of mortality and expense charges for each period indicated. The investment income ratio is calculated for each period indicated or from the effective date through the end of the reporting period. AA-66 NEW ENGLAND VARIABLE LIFE SEPARATE ACCOUNT OF NEW ENGLAND LIFE INSURANCE COMPANY NOTES TO THE FINANCIAL STATEMENTS -- (CONCLUDED) 5. FINANCIAL HIGHLIGHTS -- (CONCLUDED) (3.) Each Sub-Account calculates a daily performance measure called a "unit value," which reflects changes in the net asset value per share of the underlying assets of the portfolio, series, or fund including daily charges against the Sub-Account for mortality and expense risk charges, where applicable, and any dividend or capital gain distributions from the portfolio, series, or fund. The total return of a Sub-Account is calculated by taking the difference between the Sub-Account's ending unit value and the beginning unit value for the period and dividing it by the beginning unit value for the period. 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 policy total returns are not within the ranges presented. (4.) The Company sells a number of Policies which have unique combinations of features and fees. Differences in the fee structures result in a variety of expense ratios and total returns that are charged against the Separate Account or policy cash values. (a) For the period January 1, 2007 to April 27, 2007. (b) For the period April 30, 2007 to December 31, 2007. AA-67 NEW ENGLAND LIFE INSURANCE COMPANY AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS for the Years Ended December 31, 2007, 2006 and 2005 and Report of Independent Registered Public Accounting Firm F-1 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholder of New England Life Insurance Company: We have audited the accompanying consolidated balance sheets of New England Life Insurance Company and subsidiaries (the "Company") as of December 31, 2007 and 2006, and the related consolidated statements of income, stockholder's equity, and cash flows for each of the three years in the period ended December 31, 2007. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the consolidated financial statements 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 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. 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 New England Life Insurance Company 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. As discussed in Note 1, the Company changed its method of accounting for income taxes as required by accounting guidance adopted on January 1, 2007, and changed its method of accounting for defined benefit pension and other postretirement plans, as required by accounting guidance adopted on December 31, 2006. /s/ DELOITTE & TOUCHE LLP Certified Public Accountants Tampa, Florida April 14, 2008 F-2 NEW ENGLAND LIFE INSURANCE COMPANY AND SUBSIDIARIES 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: $814 and $880, respectively)............................................ $ 821 $ 886 Equity securities available-for-sale, at estimated fair value (cost: $0 and $7, respectively).................... -- 7 Mortgage loans on real estate............................... 2 2 Policy loans................................................ 411 357 Other limited partnership interests......................... 14 18 Short-term investments...................................... 123 141 ------- ------- Total investments........................................ 1,371 1,411 Cash.......................................................... 51 12 Accrued investment income..................................... 20 21 Premiums and other receivables................................ 302 286 Deferred policy acquisition costs............................. 1,349 1,310 Current income tax recoverable................................ 13 -- Other assets.................................................. 66 58 Separate account assets....................................... 10,904 10,490 ------- ------- Total assets............................................. $14,076 $13,588 ======= ======= LIABILITIES AND STOCKHOLDER'S EQUITY LIABILITIES: Future policy benefits...................................... $ 594 $ 541 Policyholder account balances............................... 813 922 Other policyholder funds.................................... 433 400 Policyholder dividends payable.............................. 5 4 Current income tax payable.................................. -- 3 Deferred income tax liability............................... 69 59 Other liabilities........................................... 179 215 Separate account liabilities................................ 10,904 10,490 ------- ------- Total liabilities........................................ 12,997 12,634 ------- ------- CONTINGENCIES, COMMITMENTS AND GUARANTEES (NOTE 10) STOCKHOLDER'S EQUITY: Common stock, par value $125 per share; 50,000 shares authorized; 20,000 shares issued and outstanding............ 3 3 Additional paid-in capital.................................... 458 458 Retained earnings............................................. 627 503 Accumulated other comprehensive loss.......................... (9) (10) ------- ------- Total stockholder's equity............................... 1,079 954 ------- ------- Total liabilities and stockholder's equity............... $14,076 $13,588 ======= =======
See accompanying notes to consolidated financial statements. F-3 NEW ENGLAND LIFE INSURANCE COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31, 2007, 2006 AND 2005 (IN MILLIONS)
2007 2006 2005 ---- ---- ---- REVENUES Premiums..................................................... $ 80 $ 96 $106 Universal life and investment-type product policy fees....... 546 521 481 Net investment income........................................ 71 71 66 Other revenues............................................... 121 92 88 Net investment gains (losses)................................ 7 (4) (4) ---- ---- ---- Total revenues.......................................... 825 776 737 ---- ---- ---- EXPENSES Policyholder benefits and claims............................. 142 142 153 Interest credited to policyholder account balances........... 30 34 32 Policyholder dividends....................................... 8 7 6 Other expenses............................................... 507 486 461 ---- ---- ---- Total expenses.......................................... 687 669 652 ---- ---- ---- Income before provision for income tax....................... 138 107 85 Provision for income tax..................................... 27 9 29 ---- ---- ---- Net income................................................... $111 $ 98 $ 56 ==== ==== ====
See accompanying notes to consolidated financial statements. F-4 NEW ENGLAND LIFE INSURANCE COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY FOR THE YEARS ENDED DECEMBER 31, 2007, 2006 AND 2005 (IN MILLIONS)
ACCUMULATED OTHER COMPREHENSIVE LOSS --------------------------- NET DEFINED ADDITIONAL UNREALIZED BENEFIT COMMON PAID-IN RETAINED INVESTMENT PLANS STOCK CAPITAL EARNINGS GAINS (LOSSES) ADJUSTMENT TOTAL ------- ---------- -------- -------------- ---------- ------- Balance at January 1, 2005........ $ 3 $458 $349 $ 14 $ -- $ 824 Comprehensive income: Net income...................... 56 56 Other comprehensive income (loss): Unrealized investment gains (losses), net of related offsets and income tax..... (11) (11) ------- Comprehensive income............ 45 ------- --------- -------- ---- ---------- ------- Balance at December 31, 2005...... 3 458 405 3 -- 869 Comprehensive income: Net income...................... 98 98 Other comprehensive income (loss): Unrealized investment gains (losses), net of related offsets and income tax..... (3) (3) ------- Comprehensive income............ 95 ------- Adoption of SFAS 158, net of income tax................... (10) (10) ------- --------- -------- ---- ---------- ------- Balance at December 31, 2006...... 3 458 503 -- (10) 954 Cumulative effect of a change in accounting principle, net of income tax (Note 1)............. 13 13 ------- --------- -------- ---- ---------- ------- Balance at January 1, 2007........ 3 458 516 -- (10) 967 Comprehensive income: Net income...................... 111 111 Other comprehensive income (loss): Unrealized investment gains (losses), net of related offsets and income tax..... 1 1 ------- Comprehensive income............ 112 ------- --------- -------- ---- ---------- ------- Balance at December 31, 2007...... $3 $ 458 $ 627 $ 1 $ (10) $ 1,079 ======= ========= ======== ==== ========== =======
See accompanying notes to consolidated financial statements. F-5 NEW ENGLAND LIFE INSURANCE COMPANY AND SUBSIDIARIES 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.............................................. $ 111 $ 98 $ 56 Adjustments to reconcile net income to net cash used in operating activities: Depreciation and amortization expenses............. 3 3 6 Amortization of premiums and accretion of discounts associated with investments, net................. (1) -- 2 (Gains) losses from sales of investments and businesses, net.................................. (7) 4 4 Interest credited to policyholder account balances......................................... 30 34 32 Universal life and investment-type product policy fees............................................. (546) (521) (481) Change in premiums and other receivables........... 7 (30) (69) Change in deferred policy acquisition costs, net... (40) (22) (32) Change in insurance-related liabilities............ 52 39 78 Change in income tax payable....................... (7) 12 26 Change in other assets............................. 108 124 86 Change in other liabilities........................ 206 209 184 Other, net......................................... 1 (4) (4) ------- ------- ------- Net cash used in operating activities................... (83) (54) (112) ------- ------- ------- CASH FLOWS FROM INVESTING ACTIVITIES Sales, maturities and repayments of: Fixed maturity securities.......................... 283 196 470 Mortgage loans on real estate...................... -- 7 -- Other limited partnership interests................ 3 2 2 Purchases of: Fixed maturity securities.......................... (219) (286) (460) Payment to participating common stock shareholders upon dissolution of subsidiary (Note 2)............ (16) -- -- Net change in short-term investments.................. 18 (89) (22) Net change in policy loans............................ (54) (30) (19) Other, net............................................ (1) 8 (2) ------- ------- ------- Net cash provided by (used in) investing activities..... 14 (192) (31) ------- ------- ------- CASH FLOWS FROM FINANCING ACTIVITIES Policyholder account balances: Deposits........................................... 1,771 1,626 1,366 Withdrawals........................................ (1,663) (1,374) (1,117) Redemption of shares subject to mandatory redemption.. -- -- (100) ------- ------- ------- Net cash provided by financing activities............... 108 252 149 ------- ------- ------- Change in cash.......................................... 39 6 6 Cash, beginning of year................................. 12 6 -- ------- ------- ------- CASH, END OF YEAR....................................... $ 51 $ 12 $ 6 ======= ======= ======= Supplemental disclosures of cash flow information: Net cash paid (received) during the year for: Interest........................................... $ -- $ -- $ 3 ======= ======= ======= Income tax......................................... $ 22 $ (7) $ 4 ======= ======= =======
See accompanying notes to consolidated financial statements. F-6 NEW ENGLAND LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. BUSINESS, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BUSINESS New England Life Insurance Company ("NELICO") and its subsidiaries (collectively, the "Company") is a wholly-owned subsidiary of Metropolitan Life Insurance Company ("MLIC"), which is a wholly-owned subsidiary of MetLife, Inc. ("MetLife"). The Company is headquartered in Boston, Massachusetts as a Massachusetts chartered company. The Company principally provides life insurance and annuity contracts through a network of general agencies and independent brokers located throughout the United States. The Company also provides participating and non-participating traditional life insurance, pension products, as well as, group life, medical, and disability coverage. The Company is licensed to conduct business in 50 states and the District of Columbia. NELICO owned 100% of the voting common stock of Omega Reinsurance Corporation ("Omega"), which was dissolved in October 2007. Omega is included in the accompanying consolidated financial statements until its date of dissolution. See Note 2. NELICO owns 100% of the outstanding common stock of New England Securities Corporation ("NES") and a majority interest in MetLife Advisors, LLC ("Advisors"). BASIS OF PRESENTATION The accompanying consolidated financial statements include the accounts of NELICO and its subsidiaries. Intercompany accounts and transactions have been eliminated. The Company uses the equity method of accounting for investments in other limited partnership interests in which it has more than a minor equity interest or more than a minor influence over the 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 other limited partnership interests in which it has a minor equity investment and virtually no influence over the partnership's operations. Certain amounts in the prior years' consolidated financial statements have been reclassified to conform with the 2007 presentation. The Company had no minority interest related to consolidated entities at December 31, 2007. Minority interest related to consolidated entities included in other liabilities was $7 million at December 31, 2006. 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. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND CRITICAL ACCOUNTING ESTIMATES The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP") requires management to adopt accounting policies and make estimates and assumptions that affect amounts reported in the consolidated financial statements. The most critical estimates include those used in determining: i) the fair value of investments in the absence of quoted market values; ii) investment impairments; iii) the recognition of income on certain investments; iv) the application of the consolidation rules to certain investments; v) the fair value of and accounting for derivatives; F-7 NEW ENGLAND LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) vi) the capitalization and amortization of deferred policy acquisition costs ("DAC"); vii) the liability for future policyholder benefits; viii) accounting for income taxes and the valuation of deferred tax assets; ix) accounting for reinsurance transactions; x) accounting for employee benefit plans; 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. 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 investments are in fixed maturity and equity securities, mortgage loans on real estate, policy loans, other limited partnerships and short-term investments. The accounting policies related to each are as follows: Fixed Maturity and Equity Securities. The Company's fixed maturity and equity securities are classified as available-for-sale and are reported at their estimated fair value. Unrealized investment gains and losses on these securities are recorded as a separate component of other comprehensive income or loss, net of policyholder related amounts and deferred income taxes. All security transactions are recorded on a trade date basis. Investment gains and losses on sales of securities are determined on a specific identification basis. Interest income on fixed maturity securities is recorded when earned using an effective yield method giving effect to amortization of premiums and accretion of discounts. Dividends on equity securities are recorded when declared. These dividends and interest income are recorded as part of net investment income. Included within fixed maturity securities are loan-backed securities including mortgage-backed and asset-backed securities. Amortization of the premium or discount from the purchase of these securities considers the estimated timing and amount of prepayments of the underlying loans. Actual prepayment experience is periodically reviewed and effective yields are recalculated when differences arise between the prepayments originally anticipated and the actual prepayments received and currently anticipated. Prepayment assumptions for single class and multi-class mortgage-backed and asset-backed securities are obtained from broker-dealer survey values or internal estimates. For credit-sensitive mortgage-backed and asset-backed securities and certain prepayment-sensitive securities, the effective yield is recalculated on a prospective basis. For all other mortgage-backed and asset-backed securities, the effective yield is recalculated on a retrospective basis. The cost of fixed maturity and equity securities is adjusted for impairments in value deemed to be other-than-temporary in the period in which the determination is made. These impairments are included within net investment gains (losses) and the cost basis of the fixed maturity and equity securities is reduced accordingly. The Company does not change the revised cost basis for subsequent recoveries in value. 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 F-8 NEW ENGLAND LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) estimated fair value had declined and remained below cost or amortized cost by 20% or more for six months or greater. Additionally, management considers a wide range of factors about the security issuer and uses its best judgment in evaluating the cause of the decline in the estimated fair value of the security and in assessing the prospects for near-term recovery. Inherent in management's evaluation of the security are assumptions and estimates about the operations of the issuer and its future earnings potential. Considerations used by the Company in the impairment evaluation process include, but are not limited to:(i) the length of time and the extent to which the market value has been below cost or amortized cost; (ii) the potential for impairments of securities when the issuer is experiencing significant financial difficulties; (iii) the potential for impairments in an entire industry sector or sub-sector; (iv) the potential for impairments in certain economically depressed geographic locations; (v) the potential for impairments of securities where the issuer, series of issuers or industry has suffered a catastrophic type of loss or has exhausted natural resources; (vi) the Company's ability and intent to hold the security for a period of time sufficient to allow for the recovery of its value to an amount equal to or greater than cost or amortized cost (See also Note 3); (vii) unfavorable changes in forecasted cash flows on mortgage-backed and asset-backed securities; and (viii) other subjective factors, including concentrations and information obtained from regulators and rating agencies. Mortgage Loans on Real Estate. Mortgage loans on real estate are stated at unpaid principal balance, adjusted for any unamortized premium or discount, deferred fees or expenses, net of valuation allowances. Interest income is accrued on the principal amount of the loan based on the loan's contractual interest rate. Amortization of premiums and discounts is recorded using the effective yield method. Interest income, amortization of premiums and discounts, and prepayment fees are reported in net investment income. Loans are considered to be impaired when it is probable that, based upon current information and events, the Company will be unable to collect all amounts due under the contractual terms of the loan agreement. Valuation allowances are established for the excess carrying value of the loan over the present value of expected future cash flows discounted at the loan's original effective interest rate, the value of the loan's collateral if the loan is in the process of foreclosure or otherwise collateral dependent, or the loan's market value if the loan is being sold. The Company also establishes allowances for loan losses when a loss contingency exists for pools of loans with similar characteristics, such as mortgage loans based on similar property types or loan to value risk factors. A loss contingency exists when the likelihood that a future event will occur is probable based on past events. Interest income earned on impaired loans is accrued on the principal amount of the loan based on the loan's contractual interest rate. However, interest ceases to be accrued for loans on which interest is generally more than 60 days past due and/or where the collection of interest is not considered probable. Cash receipts on such impaired loans are recorded as a reduction of the recorded investment. Gains and losses from the sale of loans and changes in valuation allowances are reported in net investment gains (losses). Policy Loans. Policy loans are stated at unpaid principal balances. Interest income on such loans is recorded as earned using the contractually agreed upon interest rate. Generally, interest is capitalized on the policy's anniversary date. Other Limited Partnership Interests. The Company uses the equity method of accounting for investments in other limited partnership interests in which it has more than a minor equity interest or more than a minor influence over the 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 other limited partnership interests in which it has a minor equity investment and virtually no influence over 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 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 F-9 NEW ENGLAND LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Company considers financial and other information provided by the investee, other known information and inherent risks in the underlying investments, as well as future capital commitments, in determining whether an impairment has occurred. When an other-than-temporary impairment is deemed to have occurred, the Company records a realized capital loss within net investment gains (losses) to record the investment at its fair value. 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. 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 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-10 NEW ENGLAND LIFE INSURANCE COMPANY AND SUBSIDIARIES 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 and forwards, to manage the risk associated with variability in cash flows or changes in fair values related to the Company's financial instruments. To a lesser extent, the Company may use 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"); or (ii) a hedge of a forecasted transaction or of the variability of cash flows to be received or paid related to a recognized asset or liability ("cash flow hedge"). In this documentation, the Company sets forth how the hedging instrument is expected to hedge the designated risks related to the hedged item 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. 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 F-11 NEW ENGLAND LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) accruals that are separately reported in the consolidated statement of income within interest income or interest expense to match the location of the hedged item. The Company had no fair value hedges during the years ended December 31, 2007, 2006 and 2005. 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 stockholder's equity, and the deferred gains or losses on the derivative are reclassified into the consolidated statement of income when the Company's earnings are affected by the variability in cash flows of the hedged item. Changes in the fair value of the hedging instrument measured as ineffectiveness are reported within net investment gains (losses). The fair values of the hedging derivatives are exclusive of any accruals that are separately reported in the consolidated statement of income within interest income or interest expense to match the location of the hedged item. The Company discontinues hedge accounting prospectively when: (i) it is determined that the derivative is no longer highly effective in offsetting changes in the fair value or cash flows of a hedged item; (ii) the derivative expires, is sold, terminated, or exercised; (iii) it is no longer probable that the hedged forecasted transaction will occur; (iv) a hedged firm commitment no longer meets the definition of a firm commitment; or (v) the derivative is de- designated as a hedging instrument. When hedge accounting is discontinued because it is determined that the derivative is not highly effective in offsetting changes in the fair value or cash flows of a hedged item, the derivative continues to be carried on the consolidated balance sheet at its fair value, with changes in fair value recognized currently in net investment gains (losses). The carrying value of the hedged recognized asset or liability under a fair value hedge is no longer adjusted for changes in its fair value due to the hedged risk, and the cumulative adjustment to its carrying value is amortized into income over the remaining life of the hedged item. Provided the hedged forecasted transaction is still probable of occurrence, the changes in fair value of derivatives recorded in other comprehensive income (loss) related to discontinued cash flow hedges are released into the consolidated statement of income when the Company's earnings are affected by the variability in cash flows of the hedged item. When hedge accounting is discontinued because it is no longer probable that the forecasted transactions will occur by the end of the specified time period or the hedged item no longer meets the definition of a firm commitment, the derivative continues to be carried on the consolidated balance sheet at its fair value, with changes in fair value recognized currently in net investment gains (losses). Any asset or liability associated with a recognized firm commitment is derecognized from the consolidated balance sheet, and recorded currently in net 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, 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 F-12 NEW ENGLAND LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 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. 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 cost basis of the property, equipment and leasehold improvements was less than $1 million and $1 million at December 31, 2007 and 2006, respectively. Accumulated depreciation and amortization of property, equipment and leasehold improvements was less than $1 million at both December 31, 2007 and 2006. Related depreciation and amortization expense was $1 million, less than $1 million and less than $1 million for the years ended December 31, 2007, 2006 and 2005, 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 $35 million at both December 31, 2007 and 2006, respectively. Accumulated amortization of capitalized software was $32 million and $30 million at December 31, 2007 and 2006, respectively. Related amortization expense was $1 million, $2 million and $4 million for the years ended December 31, 2007, 2006 and 2005, respectively. Deferred Policy Acquisition Costs 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. The recovery of DAC is dependent upon the future profitability of the related business. DAC on life insurance or investment-type contracts are amortized in proportion to gross premiums, gross margins or gross profits, depending on the type of contract as described below. The Company amortizes DAC related to non-participating and non-dividend- paying traditional contracts (term insurance, non-participating whole life insurance, non-medical health insurance and traditional group 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 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 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 related to participating, dividend-paying traditional contracts over the estimated lives of the contracts in proportion to actual and expected future gross margins. The amortization includes interest based on rates in effect at inception of the contracts. The future gross margins are dependent principally on investment returns, policyholder dividend scales, mortality, persistency, expenses to administer the business, creditworthiness of reinsurance counterparties, and certain economic variables, such as inflation. For participating contracts future gross margins are also dependent upon changes in the policyholder dividend obligation. Of these factors, the Company anticipates that investment returns, expenses, persistency, and other factor changes and F-13 NEW ENGLAND LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) policyholder dividend scales are reasonably likely to impact significantly the rate of DAC amortization. Each reporting period, the Company updates the estimated gross margins with the actual gross margins for that period. When the actual gross margins change from previously estimated gross margins, the cumulative DAC amortization is re-estimated and adjusted by a cumulative charge or credit to current operations. When actual gross margins exceed those previously estimated, the DAC amortization will increase, resulting in a current period charge to earnings. The opposite result occurs when the actual gross margins are below the previously estimated gross margins. Each reporting period, the Company also updates the actual amount of business in-force, which impacts expected future gross margins. The Company amortizes DAC related to variable universal life contracts 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 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 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 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 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 margins and profits. These include investment returns, policyholder dividend scales, interest crediting rates, mortality, persistency, and expenses to administer business. Management annually updates assumptions used in the calculation of estimated gross margins and profits which may have significantly changed. If the update of assumptions causes expected future gross margins and profits to increase, DAC amortization will decrease, resulting in a current period increase to earnings. The opposite result occurs when the assumption update causes expected future gross margins and 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 immediately through income and any new deferrable costs associated with the replacement contract are deferred. If F-14 NEW ENGLAND LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 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. 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, disability incidence, disability terminations, 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 participating traditional life insurance policies are equal to the aggregate of (i) net level premium reserves for death and endowment policy benefits (calculated based upon the non- forfeiture interest rate, ranging from 4% to 5%); and (ii) the liability for terminal dividends. 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. The interest rate for the aggregate future policy benefit liabilities is 6%. Participating business represented approximately 3% of the Company's life insurance in-force, and 9% of the number of life insurance policies in-force, at both December 31, 2007 and 2006. Participating policies represented approximately 42% and 59%, 43% and 51%, and 45% and 47%, of gross and net life insurance premiums for the years ended December 31, 2007, 2006 and 2005, respectively. 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 5% to 7%. Future policy benefit liabilities for disabled lives are estimated using the present value of benefits method and experience assumptions as to claim terminations, expenses and interest. Interest rates used in establishing such liabilities range from 4% to 7%. Liabilities for unpaid claims are estimated based upon the Company's historical experience and other actuarial assumptions that consider the effects of current developments, anticipated trends and risk management programs. The effects of changes in such estimated liabilities are included in the results of operations in the period in which the changes occur. F-15 NEW ENGLAND LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The Company establishes future policy benefit liabilities for minimum death and income benefit guarantees relating to certain annuity contracts and secondary and paid-up 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 and paid- up 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 and paid-up guarantee liabilities are consistent with those used for amortizing DAC, and are thus subject to the same variability and risk. The assumptions of investment performance and volatility for variable products are consistent with historical S&P experience. The benefits used in calculating the liabilities are based on the average benefits payable over a range of scenarios. The Company establishes policyholder account balances 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. The risk associated with GMWB riders written is ceded 100% to an affiliate through a reinsurance agreement. - 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. The risk associated with GMAB riders written is ceded 100% to an affiliate through a reinsurance agreement. F-16 NEW ENGLAND LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) - 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 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; and (ii) credited interest, ranging from 3% to 10% less expenses, mortality charges, and withdrawals. Other Policyholder Funds Other policyholder funds include policy and contract claims, unearned revenue liabilities, premiums received in advance, policyholder dividends due and unpaid, and policyholder dividends left on deposit. The liability for policy and contract claims generally relates to incurred but not reported death and disability claims, as well as claims which have been reported but not yet settled. The liability for these claims is based on the Company's estimated ultimate cost of settling all claims. The Company derives estimates for the development of incurred but not reported claims principally from actuarial analyses of historical patterns of claims and claims development for each line of business. The methods used to determine these estimates are continually reviewed. Adjustments resulting from this continuous review process and differences between estimates and payments for claims are recognized in policyholder benefits and claims expense in the period in which the estimates are changed or payments are made. The unearned revenue liability relates to universal life-type and investment-type products and represents policy charges for services to be provided in future periods. The charges are deferred as unearned revenue and amortized using the product's estimated gross profits, similar to DAC. Such amortization is recorded in universal life and investment-type product policy fees. The Company accounts for the prepayment of premiums on its group life and health contracts as premium received in advance and applies the cash received to premiums when due. Also included in other policyholder funds are policyholder dividends due and unpaid on participating policies and policyholder dividends left on deposit. Such liabilities are presented at amounts contractually due to policyholders. F-17 NEW ENGLAND LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 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, 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. Policyholder Dividends Policyholder dividends are approved annually by NELICO's board of directors. The aggregate amount of policyholder dividends is related to actual interest, mortality, morbidity and expense experience for the year, as well as management's judgment as to the appropriate level of statutory surplus to be retained by NELICO. Income Taxes The Company joins with MetLife and its includable life insurance and non- life insurance subsidiaries in filing a consolidated U.S. federal income tax return in accordance with the provisions of the Internal Revenue Code of 1986, as amended. 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. 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 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 F-18 NEW ENGLAND LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (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 9) 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. For prospective reinsurance of short-duration contracts that meet the criteria for reinsurance accounting, amounts paid (received) are recorded as ceded (assumed) premiums and ceded (assumed) unearned premiums and are reflected as a component of premiums and other receivables (future policy benefits). Such amounts are amortized through earned premiums over the remaining contract period in proportion to the amount of protection provided. For retroactive reinsurance of short-duration contracts that meet the criteria of reinsurance accounting, amounts paid (received) in excess of (which do not exceed) the related insurance liabilities ceded (assumed) are recognized immediately as a loss. Any gains on such retroactive contracts are deferred and recorded in other liabilities. The gains are amortized primarily using the recovery method. The assumptions used to account for both long and short-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-19 NEW ENGLAND LIFE INSURANCE COMPANY AND SUBSIDIARIES 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. Employee Benefit Plans The Company's employees, who meet specified eligibility requirements, participate in pension, other postretirement and postemployment plans in various forms. These benefit plans are accounted for following the guidance outlined in Statement of Financial Accounting Standards ("SFAS") No. 87, Employers' Accounting for Pensions ("SFAS 87"), SFAS No. 106, Employers Accounting for Postretirement Benefits Other Than Pensions, SFAS No. 112, Employers Accounting for Postemployment Benefits -- An Amendment of FASB Statements No. 5 and No. 43 and as of December 31, 2006, SFAS No. 158, Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements No. 87, 88, 106 and SFAS No. 132(r) ("SFAS 158"). The obligations and expenses associated with these plans require an extensive use of assumptions such as the discount rate, expected rate of return on plan assets, rate of future compensation increases, healthcare cost trend F-20 NEW ENGLAND LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) rates, as well as assumptions regarding participant demographics such as rate and age of retirements, withdrawal rates, and mortality. Management, in consultation with its external actuarial firm, determines these assumptions based upon a variety of factors such as historical performance of the plan and its assets, currently available market and industry data, and expected benefit payout streams. The assumptions used may differ materially from actual results due to, among other factors, changing market and economic conditions and changes in participant demographics. These differences may have a significant effect on the Company's consolidated financial statements and liquidity. As described more fully in "Adoption of New Accounting Pronouncements", effective December 31, 2006, the Company adopted SFAS 158. Effective with the adoption of SFAS 158 on December 31, 2006, the Company recognizes the funded status of the benefit obligations for each of its plans on the consolidated balance sheet. The actuarial gains or losses, prior service costs and credits, and the remaining net transition asset or obligation that had not yet been included in net periodic benefit costs as of December 31, 2006 are now charged, net of income tax, to accumulated other comprehensive loss. Additionally, these changes eliminated the additional minimum pension liability provisions of SFAS 87. Litigation Contingencies The Company is a party to a number of legal actions and is involved in a number of 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 of the Company's litigation and regulatory investigations, or the use of different assumptions in the determination of amounts recorded could have a material effect upon the Company's consolidated net income or cash flows. 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. As a result of the implementation of FIN 48, the Company recognized a $10 million decrease in the liability for unrecognized tax benefits, a $3 million decrease in the interest liability for unrecognized tax benefits, and a corresponding increase to the January 1, 2007 balance of retained earnings of $13 million. See also Note 9. 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 SFAS 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 F-21 NEW ENGLAND LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 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. 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 did not have an impact on the Company's consolidated financial statements. Defined Benefit and Other Postretirement Plans Effective December 31, 2006, the Company adopted SFAS 158. The pronouncement revises financial reporting standards for defined benefit pension and other postretirement plans by requiring the: (i) recognition in the statement of financial position of the funded status of defined benefit plans measured as the difference between the fair value of plan assets and the benefit obligation, which is the projected benefit obligation for pension plans and the accumulated postretirement benefit obligation for other postretirement plans; (ii) recognition as an adjustment to accumulated other comprehensive loss, net of income tax, those amounts of actuarial gains and losses, prior service costs and credits, and net asset or obligation at transition that have not yet been included in net periodic benefit costs as of the end of the year of adoption; (iii) recognition of subsequent changes in funded status as a component of other comprehensive income; (iv) measurement of benefit plan assets and obligations as of the date of the statement of financial position; and (v) disclosure of additional information about the effects on the employer's statement of financial position. The adoption of SFAS 158 resulted in an increase of $10 million, net of income tax, to accumulated other comprehensive loss, which is included as a component of total consolidated stockholder's equity. As the Company's measurement date for its pension and other postretirement benefit plans is already December 31 there was no impact of adoption due to changes in measurement date. See also "Summary of Significant Accounting Policies and Critical Accounting Estimates" and Note 11. 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; F-22 NEW ENGLAND LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (ii) establishes a requirement to evaluate interests in securitized financial assets to identify interests that are freestanding derivatives or that are hybrid financial instruments that contain an embedded derivative requiring bifurcation; (iii) clarifies that concentrations of credit risk in the form of subordination are not embedded derivatives; and (iv) amends SFAS 140 to eliminate the prohibition on a qualifying special-purpose entity ("QSPE") from holding a derivative financial instrument that pertains to a beneficial interest other than another derivative financial interest. The adoption of SFAS 155 did not have a material impact on the Company's consolidated financial statements. - Effective October 1, 2006, the Company adopted SFAS 133 Implementation Issue No. B40, Embedded Derivatives: Application of Paragraph 13(b) to Securitized Interests in Prepayable Financial Assets ("Issue B40"). Issue B40 clarifies that a securitized interest in prepayable financial assets is not subject to the conditions in paragraph 13(b) of SFAS 133, if it meets both of the following criteria: (i) the right to accelerate the settlement if the securitized interest cannot be controlled by the investor; and (ii) the securitized interest itself does not contain an embedded derivative (including an interest rate-related derivative) for which bifurcation would be required other than an embedded derivative that results solely from the embedded call options in the underlying financial assets. The adoption of Issue B40 did not have a material impact on the Company's consolidated financial statements. - Effective January 1, 2006, the Company adopted prospectively SFAS 133 Implementation Issue No. B38, Embedded Derivatives: Evaluation of Net Settlement with Respect to the Settlement of a Debt Instrument through Exercise of an Embedded Put Option or Call Option ("Issue B38") and SFAS 133 Implementation Issue No. B39, Embedded Derivatives: Application of Paragraph 13(b) to Call Options That Are Exercisable Only by the Debtor ("Issue B39"). Issue B38 clarifies that the potential settlement of a debtor's obligation to a creditor occurring upon exercise of a put or call option meets the net settlement criteria of SFAS 133. Issue B39 clarifies that an embedded call option, in which the underlying is an interest rate or interest rate index, that can accelerate the settlement of a debt host financial instrument should not be bifurcated and fair valued if the right to accelerate the settlement can be exercised only by the debtor (issuer/borrower) and the investor will recover substantially all of its initial net investment. The adoption of Issues B38 and B39 did not have a material impact on the Company's consolidated financial statements. 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 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 F-23 NEW ENGLAND LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) errors that were previously deemed immaterial but are material under the guidance in SAB 108. The adoption of SAB 108 did not have a material impact on the Company's consolidated financial statements. Effective January 1, 2006, the Company adopted SFAS No. 154, Accounting Changes and Error Corrections, a replacement of APB Opinion No. 20 and FASB Statement No. 3 ("SFAS 154"). SFAS 154 requires retrospective application to prior periods' financial statements for a voluntary change in accounting principle unless it is deemed impracticable. It also requires that a change in the method of depreciation, amortization, or depletion for long-lived, non- financial assets be accounted for as a change in accounting estimate rather than a change in accounting principle. The adoption of SFAS 154 did not have a material impact on the Company's consolidated financial statements. In June 2005, the Emerging Issues Task Force ("EITF") reached consensus on Issue No. 04-5, Determining Whether a General Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights ("EITF 04-5"). EITF 04-5 provides a framework for determining whether a general partner controls and should consolidate a limited partnership or a similar entity in light of certain rights held by the limited partners. The consensus also provides additional guidance on substantive rights. EITF 04-5 was effective after June 29, 2005 for all newly formed partnerships and for any pre-existing limited partnerships that modified their partnership agreements after that date. For all other limited partnerships, EITF 04-5 required adoption by January 1, 2006 through a cumulative effect of a change in accounting principle recorded in opening equity or applied retrospectively by adjusting prior period financial statements. The adoption of the provisions of EITF 04-5 did not have a material impact on the Company's consolidated financial statements. Effective November 9, 2005, the Company prospectively adopted the guidance in FASB Staff Position ("FSP") No. FAS 140-2, Clarification of the Application of Paragraphs 40(b) and 40(c) of FAS 140 ("FSP 140-2"). FSP 140-2 clarified certain criteria relating to derivatives and beneficial interests when considering whether an entity qualifies as a QSPE. Under FSP 140-2, the criteria must only be met at the date the QSPE issues beneficial interests or when a derivative financial instrument needs to be replaced upon the occurrence of a specified event outside the control of the transferor. The adoption of FSP 140-2 did not have a material impact on the Company's consolidated financial statements. Effective July 1, 2005, the Company adopted SFAS No. 153, Exchanges of Nonmonetary Assets, an amendment of APB Opinion No. 29 ("SFAS 153"). SFAS 153 amended prior guidance to eliminate the exception for nonmonetary exchanges of similar productive assets and replaced it with a general exception for exchanges of nonmonetary assets that do not have commercial substance. A nonmonetary exchange has commercial substance if the future cash flows of the entity are expected to change significantly as a result of the exchange. The provisions of SFAS 153 were required to be applied prospectively for fiscal periods beginning after June 15, 2005. The adoption of SFAS 153 did not have a material impact on the Company's consolidated financial statements. Effective July 1, 2005, the Company adopted EITF Issue No. 05-6, Determining the Amortization Period for Leasehold Improvements ("EITF 05-6"). EITF 05-6 provides guidance on determining the amortization period for leasehold improvements acquired in a business combination or acquired subsequent to lease inception. As required by EITF 05-6, the Company adopted this guidance on a prospective basis which had no 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- F-24 NEW ENGLAND LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 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 primarily changes 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 $3 million to $7 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. 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 FSP No. FSP 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 F-25 NEW ENGLAND LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 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. - 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. F-26 NEW ENGLAND LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 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. 2. DISPOSITIONS On October 31, 2006, the board of directors of Omega approved the adoption of a restructuring plan (the "Restructuring Plan"). On November 20, 2006, the board of directors of NELICO, as Omega's sole voting shareholder, and Omega's participating common stock ("PCS") shareholders, also approved the Restructuring Plan. Under the Restructuring Plan: (i) all reinsurance arrangements were terminated effective December 31, 2006; (ii) all outstanding shares of PCS were redeemed effective December 31, 2006; and (iii) payments totaling $16 million were made on June 29, 2007 to the PCS shareholders. Payments consisted of former shareholders' outstanding redemption payment balance plus an additional 40 percent of such balance. In connection with the Restructuring Plan, Omega was dissolved in October 2007 and its remaining assets and liabilities were assumed by NELICO. Total assets and total liabilities of Omega at December 31, 2006 were $7 million and $1 million, respectively. Total revenues of Omega included in the Company's consolidated revenues were less than $1 million, $12 million and $33 million for the years ended December 31, 2007, 2006 and 2005, respectively. F-27 NEW ENGLAND LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 3. INVESTMENTS FIXED MATURITY AND EQUITY SECURITIES AVAILABLE-FOR-SALE The following tables present the cost or amortized cost, gross unrealized gain and loss, and estimated fair value of the Company's fixed maturity and equity securities, the percentage that each sector represents by the total fixed maturity securities holdings and by the total equity securities holdings at:
DECEMBER 31, 2007 -------------------------------------------- GROSS COST OR UNREALIZED AMORTIZED ----------- ESTIMATED % OF COST GAIN LOSS FAIR VALUE TOTAL --------- ---- ---- ---------- ----- (IN MILLIONS) U.S. corporate securities................ $407 $11 $ 7 $411 50.1% Foreign corporate securities............. 177 2 4 175 21.3 Residential mortgage-backed securities... 144 1 -- 145 17.7 U.S. Treasury/agency securities.......... 56 4 -- 60 7.3 Commercial mortgage-backed securities.... 15 -- -- 15 1.8 Foreign government securities............ 15 -- -- 15 1.8 Asset-backed securities.................. -- -- -- -- 0.0 State and political subdivision securities............................. -- -- -- -- 0.0 ---- --- --- ---- ----- Total fixed maturity securities........ $814 $18 $11 $821 100.0% ==== === === ==== ===== Non-redeemable preferred stock........... $ -- $-- $-- $ -- 0.0% ---- --- --- ---- ----- Total equity securities................ $ -- $-- $-- $ -- 0.0% ==== === === ==== =====
DECEMBER 31, 2006 -------------------------------------------- GROSS COST OR UNREALIZED AMORTIZED ----------- ESTIMATED % OF COST GAIN LOSS FAIR VALUE TOTAL --------- ---- ---- ---------- ----- (IN MILLIONS) U.S. corporate securities................ $445 $12 $ 4 $453 51.1% Foreign corporate securities............. 150 1 4 147 16.6 Residential mortgage-backed securities... 175 1 1 175 19.8 U.S. Treasury/agency securities.......... 93 1 -- 94 10.6 Commercial mortgage-backed securities.... 1 -- -- 1 0.1 Foreign government securities............ 12 -- -- 12 1.4 Asset-backed securities.................. 3 -- -- 3 0.3 State and political subdivision securities............................. 1 -- -- 1 0.1 ---- --- --- ---- ----- Total fixed maturity securities........ $880 $15 $ 9 $886 100.0% ==== === === ==== ===== Non-redeemable preferred stock........... $ 7 $-- $-- $ 7 100.0% ---- --- --- ---- ----- Total equity securities................ $ 7 $-- $-- $ 7 100.0% ==== === === ==== =====
The Company held foreign currency derivatives with notional amounts of $10 million to hedge the exchange rate risk associated with foreign denominated fixed maturity securities at both December 31, 2007 and 2006. 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 F-28 NEW ENGLAND LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) U.S. government corporations and agencies. The Company had no fixed maturity securities backed by sub-prime mortgages at both December 31, 2007 and 2006. 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 $39 million and $36 million at December 31, 2007 and 2006, respectively. These securities had net unrealized gains (losses) of ($2) million and less than $1 million at December 31, 2007 and 2006, respectively. There were no non-income producing fixed maturity securities at both December 31, 2007 and 2006. 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................. $ 35 $ 36 $ 46 $ 46 Due after one year through five years... 340 351 279 285 Due after five years through ten years.. 157 153 257 254 Due after ten years..................... 123 121 119 122 ---- ---- ---- ---- Subtotal.............................. 655 661 701 707 Mortgage-backed and asset-backed securities............................ 159 160 179 179 ---- ---- ---- ---- Total fixed maturity securities....... $814 $821 $880 $886 ==== ==== ==== ====
Fixed maturity securities not due at a single maturity date have been included in the above table in the year of final contractual maturity. Actual maturities may differ from contractual maturities due to the exercise of prepayment options. Sales or disposals of fixed maturity and equity securities classified as available-for-sale are as follows:
YEARS ENDED DECEMBER 31, ------------------ 2007 2006 2005 ---- ---- ---- (IN MILLIONS) Proceeds............................................... $229 $117 $377 Gross investment gains................................. $ 1 $ -- $ 1 Gross investment losses................................ $ (3) $ (2) $ (5)
F-29 NEW ENGLAND LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 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 LESS THAN 12 MONTHS THAN 12 MONTHS TOTAL ----------------------- ----------------------- ----------------------- GROSS GROSS GROSS ESTIMATED UNREALIZED ESTIMATED UNREALIZED ESTIMATED UNREALIZED FAIR VALUE LOSS FAIR VALUE LOSS FAIR VALUE LOSS ---------- ---------- ---------- ---------- ---------- ---------- (IN MILLIONS, EXCEPT NUMBER OF SECURITIES) U.S. corporate securities......... $ 89 $ 3 $111 $ 4 $200 $ 7 Foreign corporate securities...... 28 -- 72 4 100 4 Residential mortgage-backed securities...................... 27 -- 1 -- 28 -- U.S. Treasury/agency securities... -- -- -- -- -- -- Commercial mortgage-backed securities...................... -- -- -- -- -- -- Foreign government securities..... -- -- 10 -- 10 -- Asset-backed securities........... -- -- -- -- -- -- ---- --- ---- --- ---- --- Total fixed maturity securities................... $144 $ 3 $194 $ 8 $338 $11 ==== === ==== === ==== === Equity securities................. $ -- $-- $ -- $-- $ -- $-- ==== === ==== === ==== === Total number of securities in an unrealized loss position........ 63 55 ==== ====
DECEMBER 31, 2006 --------------------------------------------------------------------------- EQUAL TO OR GREATER LESS THAN 12 MONTHS THAN 12 MONTHS TOTAL ----------------------- ----------------------- ----------------------- GROSS GROSS GROSS ESTIMATED UNREALIZED ESTIMATED UNREALIZED ESTIMATED UNREALIZED FAIR VALUE LOSS FAIR VALUE LOSS FAIR VALUE LOSS ---------- ---------- ---------- ---------- ---------- ---------- (IN MILLIONS, EXCEPT NUMBER OF SECURITIES) U.S. corporate securities......... $124 $ 1 $122 $ 3 $246 $ 4 Foreign corporate securities...... 20 1 84 3 104 4 Residential mortgage-backed securities...................... 37 -- 45 1 82 1 U.S. Treasury/agency securities... 35 -- 15 -- 50 -- Commercial mortgage-backed securities...................... -- -- 1 -- 1 -- Foreign government securities..... 10 -- -- -- 10 -- Asset-backed securities........... 1 -- 1 -- 2 -- ---- --- ---- --- ---- --- Total fixed maturity securities................... $227 $ 2 $268 $ 7 $495 $ 9 ==== === ==== === ==== === Equity securities................. $ -- $-- $ 7 $-- $ 7 $-- ==== === ==== === ==== === Total number of securities in an unrealized loss position........ 101 126 ==== ====
F-30 NEW ENGLAND LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) AGING OF GROSS UNREALIZED LOSS FOR FIXED MATURITY AND EQUITY SECURITIES AVAILABLE-FOR-SALE The following tables present the cost or amortized cost, gross unrealized loss and number of securities for fixed maturity 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 GROSS UNREALIZED NUMBER OF COST LOSS SECURITIES ------------------ ------------------ ------------------ LESS 20% LESS 20% LESS 20% THAN 20% OR MORE THAN 20% OR MORE THAN 20% OR MORE -------- ------- -------- ------- -------- ------- (IN MILLIONS, EXCEPT NUMBER OF SECURITIES) Less than six months................... $ 87 $ 3 $ 1 $ 1 31 2 Six months or greater but less than nine months.......................... 36 -- 2 -- 24 -- Nine months or greater but less than twelve months........................ 21 -- -- -- 7 -- Twelve months or greater............... 202 -- 7 -- 55 -- ---- --- --- --- Total................................ $346 $ 3 $10 $ 1 ==== === === ===
DECEMBER 31, 2006 ------------------------------------------------------------ COST OR AMORTIZED GROSS UNREALIZED NUMBER OF COST LOSS SECURITIES ------------------ ------------------ ------------------ LESS 20% LESS 20% LESS 20% THAN 20% OR MORE THAN 20% OR MORE THAN 20% OR MORE -------- ------- -------- ------- -------- ------- (IN MILLIONS, EXCEPT NUMBER OF SECURITIES) Less than six months................... $175 $-- $ 1 $-- 59 -- Six months or greater but less than nine months.......................... 5 -- -- -- 8 -- Nine months or greater but less than twelve months........................ 49 -- 1 -- 34 -- Twelve months or greater............... 282 -- 7 -- 126 -- ---- --- --- --- Total................................ $511 $-- $ 9 $-- ==== === === ===
At December 31, 2007 and 2006, $10 million and $9 million, respectively, of unrealized losses related to securities with an unrealized loss position of less than 20% of cost or amortized cost, which represented 3% and 2%, respectively, of the cost or amortized cost of such securities. At December 31, 2007, $1 million of unrealized losses related to securities with an unrealized loss position of 20% or more of cost or amortized cost, which represented 33% of the cost or amortized cost of such securities. All such unrealized losses related to securities that were in an unrealized loss position for a period of less than six months. At December 31, 2006, there were no unrealized losses related to securities with an unrealized loss position of 20% or more of cost or amortized cost. F-31 NEW ENGLAND LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) At December 31, 2007 and 2006, the Company had $11 million and $9 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.................................. 64% 45% Foreign corporate securities............................... 36 44 Residential mortgage-backed securities..................... -- 11 --- --- Total................................................... 100% 100% === === INDUSTRY: Finance.................................................... 58% 35% Industrial................................................. 24 28 Utility.................................................... 7 7 Consumer................................................... 7 16 Mortgage-backed............................................ -- 11 Other...................................................... 4 3 --- --- 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. ASSETS ON DEPOSIT The Company had investment assets on deposit with regulatory agencies with a fair market value of $3 million at both December 31, 2007 and 2006, consisting primarily of fixed maturity securities. F-32 NEW ENGLAND LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) MORTGAGE LOANS ON REAL ESTATE Mortgage loans on real estate are categorized as follows:
DECEMBER 31, ----------------------------------- 2007 2006 ---------------- ---------------- AMOUNT PERCENT AMOUNT PERCENT ------ ------- ------ ------- (IN MILLIONS) Commercial mortgage loans..................... $ 2 100% $ 2 100% --- === --- === Less: Valuation allowances.................... -- -- --- --- Total mortgage loans on real estate......... $ 2 $ 2 === ===
At December 31, 2007, 100% of the Company's mortgage loans on real estate were collateralized by property located in California. Generally, the Company, as the lender, only loans up to 75% of the purchase price of the underlying real estate. 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 $14 million and $18 million at December 31, 2007 and 2006, respectively. NET INVESTMENT INCOME The components of net investment income are as follows:
YEARS ENDED DECEMBER 31, ------------------------ 2007 2006 2005 ---- ---- ---- (IN MILLIONS) Fixed maturity securities............................. $48 $46 $44 Mortgage loans on real estate......................... -- 1 -- Policy loans.......................................... 21 19 18 Other limited partnership interests................... (1) 3 3 Cash and short-term investments....................... 5 3 2 Other................................................. 1 2 2 --- --- --- Total investment income............................. 74 74 69 Less: Investment expenses............................. 3 3 3 --- --- --- Net investment income............................... $71 $71 $66 === === ===
For each of the years ended December 31, 2007, 2006 and 2005, affiliated investment income of $1 million is included in the table above. For each of the years ended December 31, 2007 and 2006, affiliated investment expenses of $1 million are 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. F-33 NEW ENGLAND LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 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.............................. $(2) $(3) $(4) Derivatives............................................ 8 (1) 1 Other.................................................. 1 -- (1) --- --- --- Net investment gains (losses)........................ $ 7 $(4) $(4) === === ===
For the years ended December 31, 2007, 2006 and 2005, affiliated net investment gains (losses) of $17 million, ($5) million and ($1) million, respectively, are included in the table above. 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 less than $1 million for each of the years ended December 31, 2007, 2006 and 2005. NET UNREALIZED INVESTMENT GAINS (LOSSES) The components of net unrealized investment gains (losses), included in accumulated other comprehensive loss, are as follows:
YEARS ENDED DECEMBER 31, ------------------------ 2007 2006 2005 ---- ---- ---- (IN MILLIONS) Fixed maturity securities............................ $ 7 $ 6 $11 Derivatives.......................................... (2) (3) (3) Other................................................ (1) (1) (1) --- --- --- Subtotal........................................... 4 2 7 --- --- --- Amounts allocated from DAC........................... (2) (2) (2) Deferred income tax.................................. (1) -- (2) --- --- --- Subtotal........................................... (3) (2) (4) --- --- --- Net unrealized investment gains (losses)............. $ 1 $-- $ 3 === === ===
F-34 NEW ENGLAND LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The changes in net unrealized investment gains (losses) are as follows:
YEARS ENDED DECEMBER 31, ------------------------ 2007 2006 2005 ---- ---- ---- (IN MILLIONS) Balance, January 1,.................................. $-- $ 3 $ 14 Unrealized investment gains (losses) during the year............................................... 2 (5) (19) Unrealized gains (losses) relating to: DAC................................................ -- -- 2 Deferred income tax................................ (1) 2 6 --- --- ---- Balance, December 31,................................ $ 1 $-- $ 3 === === ==== Net change in unrealized investment gains (losses)... $ 1 $(3) $(11) === === ====
VARIABLE INTEREST ENTITIES The following table presents the total assets of and maximum exposure to loss relating to variable interest entities ("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 ----------------------- NOT PRIMARY BENEFICIARY ----------------------- MAXIMUM TOTAL EXPOSURE TO ASSETS(1) LOSS(2) --------- ----------- (IN MILLIONS) Trust preferred securities(3).......................... $1,250 $20 ------ --- Total................................................ $1,250 $20 ====== ===
- -------- (1) The assets of the trust preferred securities 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 trust preferred securities 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) 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. RELATED PARTY INVESTMENT TRANSACTIONS As of December 31, 2007 and 2006, the Company held $117 million and $125 million, respectively, of its total invested assets in the Metropolitan Money Market Pool, an affiliated partnership. These amounts are included in short-term investments. Net investment income from these invested assets was $5 million, $3 million and $2 million for the years ended December 31, 2007, 2006 and 2005, respectively. F-35 NEW ENGLAND LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 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 value of assets transferred to affiliates.......................................... $ -- $ 1 $ 3 Amortized cost of assets transferred to affiliates.... $-- $ 1 $ 3 Net investment gains (losses) recognized on transfers........................................... $-- $-- $-- Estimated fair value of assets transferred from affiliates.......................................... $-- $-- $ 4
4. 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) Foreign currency swaps................ $10 $-- $ 5 $10 $-- $ 4 Credit default swaps.................. 20 -- -- 20 -- -- --- --- --- --- --- --- Total............................... $30 $-- $ 5 $30 $-- $ 4 === === === === === ===
The above table does not include notional amounts for equity variance swaps. At both December 31, 2007 and 2006, the Company owned 500 equity variance swaps. Fair values of equity variance swaps were insignificant and were not included in the preceding table. 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) Foreign currency swaps.... $-- $10 $-- $-- $10 Credit default swaps...... -- 20 -- -- 20 --- --- --- --- --- Total................... $-- $30 $-- $-- $30 === === === === ===
Foreign currency swaps are used by the Company to reduce the risk from fluctuations in foreign currency exchange rates associated with its assets 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. 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 F-36 NEW ENGLAND LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) party to exchange amounts in the future, based on changes in equity volatility over a defined period. Equity variance swaps are not included 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. 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) Non-qualifying..................... $30 $-- $5 $30 $-- $4 --- --- -- --- --- -- Total............................ $30 $-- $5 $30 $-- $4 === === == === === ==
The Company did not have any qualifying hedges for the years ended December 31, 2007 and 2006. The Company recognized insignificant net investment income (expense) from settlement payments related to qualifying hedges for the year ended December 31, 2005. The Company recognized insignificant net investment gains (losses) from settlement payments related to non-qualifying hedges for each of the years ended December 31, 2007, 2006 and 2005. CASH FLOW HEDGES The Company designates and accounts for foreign currency swaps used to hedge the foreign currency cash flow exposure of foreign currency denominated investments as cash flow hedges, when they have met the requirements of SFAS 133. For the years ended December 31, 2007 and 2006, the Company did not recognize any net investment gains (losses) as the ineffective portion of all cash flow hedges. For the year ended December 31, 2005, the Company recognized an insignificant amount in net investment gains (losses) related to 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. 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. F-37 NEW ENGLAND LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The following table presents the components of other comprehensive income (loss), before income tax, related to cash flow hedges:
YEARS ENDED DECEMBER 31, ------------------------ 2007 2006 2005 ---- ---- ---- (IN MILLIONS) Other comprehensive income (loss) balance at the beginning of the year............................... $(3) $(3) $(5) Gains (losses) deferred in other comprehensive income (loss) on the effective portion of cash flow hedges.............................................. -- -- 2 Amounts reclassified to net investment gains (losses)............................................ 1 -- -- --- --- --- Other comprehensive income (loss) balance at the end of the year......................................... $(2) $(3) $(3) === === ===
At December 31, 2007, insignificant amounts of the deferred net gains (losses) 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) foreign currency swaps to economically hedge its exposure to adverse movements in exchange rates; (ii) credit default swaps to minimize its exposure to adverse movements in credit; and (iii) equity variance swaps to economically hedge liabilities embedded in certain variable annuity products. 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......................................... $-- $(1) $--
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 and guaranteed minimum accumulation contracts. The following table presents the fair value of the Company's embedded derivatives at:
DECEMBER 31, ----------- 2007 2006 ---- ---- (IN MILLIONS) Embedded derivatives assets.................................. $ 9 $-- Embedded derivatives liabilities............................. $-- $--
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)......................... $9 $-- $--
F-38 NEW ENGLAND LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 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. At both December 31, 2007 and 2006, the Company was not required to pledge and was not entitled to receive any collateral related to derivative instruments. 5. DEFERRED POLICY ACQUISITION COSTS Information regarding DAC is as follows:
DAC ------------- (IN MILLIONS) Balance at January 1, 2005.................................... $1,254 Capitalizations............................................. 131 ------ Subtotal................................................. 1,385 ------ Less: Amortization related to: Unrealized investment gains (losses)..................... (2) Other expenses........................................... 99 ------ Total amortization..................................... 97 ------ Balance at December 31, 2005.................................. 1,288 Capitalizations............................................. 118 ------ Subtotal................................................. 1,406 ------ Less: Amortization related to: Other expenses........................................... 93 ------ Total amortization..................................... 93 ------ Less: Dispositions and other................................ 3 ------ Balance at December 31, 2006.................................. 1,310 Capitalizations............................................. 136 ------ Subtotal................................................. 1,446 ------ Less: Amortization related to: Net investment gains (losses)............................ 2 Other expenses........................................... 95 ------ Total amortization..................................... 97 ------ Balance at December 31, 2007.................................. $1,349 ======
Amortization of 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 F-39 NEW ENGLAND LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) that would have been amortized if such gains and losses had been recognized; and (iii) other expenses to provide amounts related to the gross margins or profits originating from transactions other than investment gains and losses. 6. INSURANCE INSURANCE LIABILITIES Insurance liabilities are as follows:
DECEMBER 31, --------------------------------------- POLICY- OTHER FUTURE HOLDER POLICY- POLICY ACCOUNT HOLDER BENEFITS BALANCES FUNDS ----------- ----------- ----------- 2007 2006 2007 2006 2007 2006 ---- ---- ---- ---- ---- ---- (IN MILLIONS) Retirement & savings......................... $ -- $ -- $ 19 $ 26 $ -- $ -- Non-medical health & other................... 55 53 -- -- 2 4 Traditional life............................. 451 405 -- -- 9 5 Universal variable life...................... 61 61 483 588 421 389 Annuities.................................... 27 22 265 259 1 2 Other........................................ -- -- 46 49 -- -- ---- ---- ---- ---- ---- ---- Total...................................... $594 $541 $813 $922 $433 $400 ==== ==== ==== ==== ==== ====
Affiliated policyholder account balances, included in the table above, were less than $1 million at both December 31, 2007 and 2006. There were no affiliated other policyholder funds at December 31, 2007. Affiliated other policyholder funds, included in the table above, were less than $1 million at December 31, 2006. 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,.................................... $39 $33 $27 Capitalization........................................... 9 8 8 Amortization............................................. (6) (2) (2) --- --- --- Balance at December 31,.................................. $42 $39 $33 === === ===
SEPARATE ACCOUNTS Separate account assets and liabilities consist of pass-through separate accounts totaling $10,904 million and $10,490 million 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 fees and totaled $357 million, $348 million and $349 million for the years ended December 31, 2007, 2006 and 2005, respectively. For each of 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. F-40 NEW ENGLAND LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 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 or a guaranteed paid-up benefit. 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.......... $ 3,659 N/A $ 2,915 N/A Net amount at risk(2)........... $ 7(3) N/A $ --(3) N/A Average attained age of contractholders............... 59 years N/A 59 years N/A ANNIVERSARY CONTRACT VALUE OR MINIMUM RETURN Separate account value.......... $ 2,869 $ 2,886 $ 2,882 $ 2,501 Net amount at risk(2)........... $ 61(3) $ 34(4) $ 30(3) $ 6(4) Average attained age of contractholders............... 60 years 58 years 59 years 57 years
DECEMBER 31, ------------------------------------------------- 2007 2006 ----------------------- ----------------------- SECONDARY PAID UP SECONDARY PAID UP GUARANTEES GUARANTEES GUARANTEES GUARANTEES ---------- ---------- ---------- ---------- (IN MILLIONS) UNIVERSAL AND VARIABLE LIFE CONTRACTS(1) Account value (general and separate account)............................ $ 2,860 N/A $ 2,859 N/A Net amount at risk(2)................. $ 27,377(3) N/A $ 29,152(3) N/A Average attained age of policyholders....................... 47 years N/A 46 years N/A
- -------- (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-41 NEW ENGLAND LIFE INSURANCE COMPANY AND SUBSIDIARIES 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 CONTRACTS ------------- ANNUITY CONTRACTS -------------------------- GUARANTEED GUARANTEED DEATH ANNUITIZATION SECONDARY BENEFITS BENEFITS GUARANTEES TOTAL ---------- ------------- ------------- ----- (IN MILLIONS) Balance at January 1, 2005............. $ 2 $-- $-- $ 2 Incurred guaranteed benefits........... -- -- 1 1 Paid guaranteed benefits............... -- -- -- -- --- --- --- --- Balance at December 31, 2005........... 2 -- 1 3 Incurred guaranteed benefits........... (1) -- -- (1) Paid guaranteed benefits............... -- -- -- -- --- --- --- --- Balance at December 31, 2006........... 1 -- 1 2 Incurred guaranteed benefits........... -- 3 -- 3 Paid guaranteed benefits............... -- -- -- -- --- --- --- --- Balance at December 31, 2007........... $ 1 $ 3 $ 1 $ 5 === === === ===
Excluded from the table above are guaranteed death and annuitization benefit liabilities on the Company's annuity contracts of $4 million, $3 million and $2 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:
AT DECEMBER 31, --------------- 2007 2006 ------ ------ (IN MILLIONS) Mutual Fund Groupings Equity.................................................. $5,674 $6,358 Bond.................................................... 899 751 Balanced................................................ 1,646 504 Money Market............................................ 292 176 Specialty............................................... 112 138 ------ ------ Total................................................ $8,623 $7,927 ====== ======
7. 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. Until 2005, the Company reinsured up to 90% of the mortality risk for all new individual life insurance policies. This practice was initiated for different products starting at various points in time between the mid-1990's and 2000. During 2005, the Company changed its retention practices for certain individual life insurance. Amounts reinsured in prior years remain reinsured under the original reinsurance; however, under the new retention guidelines, the Company reinsures up to 90% of the mortality risk in excess of $1 million for most new F-42 NEW ENGLAND LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) individual life insurance policies that it writes. On a case by case basis, the Company may retain up to $5 million per life on single life individual policies and reinsure 100% of amounts in excess of the Company's retention limits. The Company evaluates its reinsurance programs routinely and may increase or decrease its retention at any time. Placement of reinsurance is done primarily on an automatic basis and also on a facultative basis for risks with specific characteristics. In addition to reinsuring mortality risk as described 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. The Company currently reinsures 100% of its new production of riders containing benefit guarantees related to variable annuities to an affiliate. 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....................................... $153 $ 183 $ 220 Reinsurance assumed................................... -- 14 36 Reinsurance ceded..................................... (73) (101) (150) ---- ----- ----- Net premiums.......................................... $ 80 $ 96 $ 106 ==== ===== ===== Reinsurance recoverables netted against policyholder benefits and claims.................... $ 59 $ 85 $ 145 ==== ===== =====
Unaffiliated reinsurance recoverables, included in premiums and other receivables, were $179 million and $186 million at December 31, 2007 and 2006, respectively. Unaffiliated reinsurance and ceded commissions payables, included in other liabilities, were $30 million and $31 million at December 31, 2007 and 2006, respectively RELATED PARTY REINSURANCE TRANSACTIONS The Company has reinsurance agreements with certain MetLife subsidiaries, including MLIC, Exeter Reassurance Company, Ltd., Reinsurance Group of America, Incorporated and MetLife Reinsurance Company of Vermont. At December 31, 2007, the Company had reinsurance-related assets and liabilities from these agreements totaling $83 million and $8 million, respectively. At December 31, 2006, comparable assets and liabilities were $72 million and $2 million, respectively. F-43 NEW ENGLAND LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The following table reflects the related party reinsurance information recorded in income for the:
YEARS ENDED DECEMBER 31, ------------------------ 2007 2006 2005 ---- ---- ---- (IN MILLIONS) Assumed premiums...................................... $-- $-- $ 8 Assumed fees, included in universal life and investment-type product policy fees................. $-- $-- $ 1 Assumed benefits, included in policyholder benefits and claims.......................................... $-- $ 1 $ 4 Assumed acquisition costs, included in other expenses............................................ $-- $-- $ 2 Ceded premiums........................................ $ 7 $ 3 $ 3 Ceded fees, included in universal life and investment- type product policy fees............................ $28 $24 $21 Interest earned on ceded reinsurance, included in other revenues...................................... $ 1 $ 1 $ 1 Ceded benefits, included in policyholder benefits and claims.............................................. $ 8 $16 $11 Ceded benefits, included in interest credited to policyholder account balances....................... $ 2 $ 2 $-- Interest costs on ceded reinsurance, included in other expenses............................................ $(2) $(1) $(1)
The Company has 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 agreements also contain embedded derivatives and changes in their fair value are included in net investment gains (losses). The ceded amounts, included in net investment gains (losses), were $17 million, ($5) million and ($2) million for the years ended December 31, 2007, 2006 and 2005, respectively. 8. PREFERRED STOCK Effective December 30, 1998, the Company issued 200,000 shares of Series A Adjustable Rate Cumulative Preferred Stock, which were held by MetLife Credit Corporation, an affiliate, at par value of $1,000 per share. Dividends were paid quarterly in arrears at the applicable rate which was recalculated on the first business day after each quarterly dividend payment date based on the product of (1 -- the highest federal income tax rate for corporations applicable during such dividend period) times (the "AA" Composite Commercial Paper (Financial) Rate + 180 basis points). The adoption of SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity ("SFAS 150"), as of January 1, 2004, required the Company to reclassify $100 million of mandatorily redeemable preferred stock from stockholder's equity to liabilities. In accordance with SFAS 150, dividends paid on the Company's preferred stock are treated as interest expense in 2005. The Company redeemed 100,000 shares on August 5, 2003 with the approval of the Massachusetts Commissioner of Insurance (the "Commissioner"), leaving 100,000 shares outstanding. On December 30, 2005, the Company redeemed the remaining $100 million of Preferred Stock with the approval of the Commissioner. NELICO paid no preferred dividends during each of the years ended December 31, 2007 and 2006. NELICO paid preferred dividends of $3 million during the year ended December 31, 2005 with prior approval of the Commissioner. F-44 NEW ENGLAND LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 9. INCOME TAXES The provision for income tax is as follows:
YEARS ENDED DECEMBER 31, ------------------ 2007 2006 2005 ---- ---- ---- (IN MILLIONS) Current: Federal................................................ $17 $(8) $15 State and local........................................ 1 1 1 --- --- --- Subtotal............................................... 18 (7) 16 --- --- --- Deferred: Federal................................................ 9 16 13 --- --- --- Provision for income tax................................. $27 $ 9 $29 === === ===
The reconciliation of the income tax provision at the U.S. statutory rate to the provision for income tax as reported is as follows:
YEARS ENDED DECEMBER 31, ------------------ 2007 2006 2005 ---- ---- ---- (IN MILLIONS) Tax provision at U.S. statutory rate.................... $ 48 $ 37 $30 Tax effect of: Tax-exempt investment income.......................... (25) (24) (4) Prior year tax........................................ 4 (6) 2 Other, net............................................ -- 2 1 ---- ---- --- Provision for income tax................................ $ 27 $ 9 $29 ==== ==== ===
F-45 NEW ENGLAND LIFE INSURANCE COMPANY AND SUBSIDIARIES 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: Policyholder liabilities and receivables.................. $315 $310 Employee benefits......................................... 6 6 Deferred intercompany losses.............................. 10 10 Investments............................................... -- 3 Other, net................................................ 7 1 ---- ---- 338 330 Less: Valuation allowance................................. 10 10 ---- ---- 328 320 ---- ---- Deferred income tax liabilities: Investments............................................... 4 -- DAC....................................................... 392 379 Net unrealized investment gains........................... 1 -- ---- ---- 397 379 ---- ---- Net deferred income tax liability........................... $(69) $(59) ==== ====
The Company recorded a valuation allowance related to a deferred intercompany loss from the sale prior to 2003 of Exeter Reassurance Company, Ltd. to MetLife within the same consolidated group. 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 deferred intercompany losses will not be realized. The Company participates in a tax sharing agreement with MetLife. Under the agreement, current income tax expense (benefit) is computed on a separate return basis and provides that members shall make payments (receive reimbursement) to (from) MetLife to the extent that their incomes (losses and other credits) contribute to (reduce) the consolidated income tax expense. The consolidating companies are reimbursed for net operating losses or other tax attributes they have generated when utilized in the consolidated return. Pursuant to the tax sharing agreement, the amount due to (from) affiliates is ($13) million and $3 million as of December 31, 2007 and 2006, respectively. The Company files income tax returns with the U.S. federal government and various state and local jurisdictions. The Company is under continuous examination by the Internal Revenue Service ("IRS") and other tax authorities in jurisdictions in which the Company has significant business operations. The income tax years under examination vary by jurisdiction. With a few exceptions, the Company is no longer subject to U.S. federal or state and local income tax examinations by tax authorities for years prior to 2000. In the first quarter of 2005, the IRS commenced an examination of the Company's U.S. income tax returns for 2000 through 2002 that is anticipated to be completed in 2008. As a result of the implementation of FIN 48, the Company recognized a $10 million decrease in the liability for unrecognized tax benefits, a $3 million decrease in the interest liability for unrecognized tax benefits, and a corresponding increase to the January 1, 2007 balance of retained earnings of $13 million. F-46 NEW ENGLAND LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 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 $24 million related to the separate account DRD. 10. CONTINGENCIES, COMMITMENTS AND GUARANTEES CONTINGENCIES LITIGATION 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 these 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. Wilmington Shipping Company ("WSC") and two of its employees have sued the Company for in excess of $5 million in damages in federal court in North Carolina. WSC asserts that the Company advised the investment of pension plan funds in a Developmental Property (real estate) account that it claims caused plan losses of over $2 million. WSC also alleges that the Company failed to give appropriate investment and plan termination advice. The Company's motion for summary judgment was granted. The plaintiffs appealed to the U.S. Court of Appeals for the 4th Circuit. In August 2007, the Fourth Circuit affirmed in part and reversed in part the lower court's decision and remanded the matter for further proceedings. The Company is vigorously defending against the remaining claims in federal court in North Carolina. Various litigation, claims and assessments against the Company, in addition to those discussed previously and those otherwise provided for in the Company's consolidated financial statements, have arisen in the course of the Company's business, including, but not limited to, in connection with its activities as an insurer, employer, investor, investment advisor or taxpayer. Further, state insurance regulatory authorities or other federal, state or industry authorities may conduct investigations or make inquiries, such as information requests, subpoenas, or books and records examinations, 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, except as noted previously in connection with specific matters. In some of the matters referred to above, 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 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 consolidated net income or cash flows. F-47 NEW ENGLAND LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 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. Assessments levied against the Company were less than $1 million for each of the years ended December 31, 2007, 2006 and 2005. At December 31, 2007 and 2006, the Company maintained a liability of $375 thousand and $302 thousand, respectively. The related asset for premium tax offsets was $282 thousand and $210 thousand, respectively, for undiscounted future assessments in respect of impaired, insolvent or failed insurers. The Company maintained at December 31, 2007 and 2006, an asset related to paid assessments representing currently available premium tax offsets of $118 thousand and $176 thousand, respectively. COMMITMENTS LEASES The Company, as lessee, has entered into various lease and sublease agreements for office space, data processing and other equipment. Future minimum sublease income and minimum gross rental payments relating to these lease agreements are as follows:
SUBLEASE GROSS RENTAL INCOME PAYMENTS -------- ------------ (IN MILLIONS) 2008................................................... $ 6 $22 2009................................................... $-- $12 2010................................................... $-- $10 2011................................................... $-- $ 6 2012................................................... $-- $ 3 Thereafter............................................. $-- $15
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 ranging from less than $1 million to $45 million, with a cumulative maximum of $90 million, while in other cases such limitations are not specified or applicable. Since certain of these obligations are not subject to limitations, the Company does not believe that it is possible to determine the maximum potential amount that could become due under these guarantees in the future. In addition, the Company indemnifies its directors and officers as provided in its charters and by-laws. Also, the Company indemnifies its agents for liabilities incurred as a result of their representation of the Company's F-48 NEW ENGLAND LIFE INSURANCE COMPANY AND SUBSIDIARIES 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. The Company's recorded liabilities at both December 31, 2007 and 2006 for indemnities, guarantees and commitments were insignificant. 11. EMPLOYEE BENEFIT PLANS PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS The Company's employees, sales representatives and retirees participate in funded qualified and unfunded non-qualified defined benefit pension plans and other postretirement plans sponsored by MLIC. Pension benefits are provided utilizing either a traditional formula or cash balance formula. The traditional formula provides benefits based upon years of credited service and either final average or career average earnings. The cash balance formula utilizes hypothetical or notional accounts which credit participants with benefits equal to a percentage of eligible pay as well as earnings credits, determined annually based upon the average annual rate of interest on 30-year U.S. Treasury securities, for each account balance. The non-qualified plan provides supplemental pension benefits to certain executive level employees and retirees. The Company also provides certain postemployment benefits and certain postretirement medical and life insurance benefits for retired employees through a plan sponsored by MLIC. Employees of the Company who were hired prior to 2003 (or, in certain cases, rehired during or after 2003) and meet age and service criteria while working for the Company, may become eligible for these other postretirement benefits, at various levels, in accordance with the applicable plans. Virtually all retirees, or their beneficiaries, contribute a portion of the total cost of postretirement medical benefits. Employees hired after 2003 are not eligible for any employer subsidy for postretirement medical benefits. The Company is allocated both pension and other postretirement expenses from MLIC associated with benefits provided to its employees and does not bear direct obligation for benefits under these benefit plans. Therefore, the assets and obligations of these benefit plans are not included in the accompanying consolidated balance sheets. The Company's share of pension expense was $4 million for the year ended December 31, 2007 and $6 million for each of the years ended December 31, 2006 and 2005. In addition, the Company's share of postretirement expense was less than $1 million, $2 million, and $3 million for the years ended December 31, 2007, 2006 and 2005, respectively. The combined allocated pension and other postretirement benefit expense is included in the accompanying consolidated income statements. The Company sponsors the Non-Qualified Retirement Plan for Managing Partners (the "MPRP Plan"), a non-qualified defined benefit pension plan. The MPRP Plan supplements earned benefits to participants under the Agency Employees' Retirement Plan (the "AERP Plan"), a multiple employer pension plan. The assets and obligations of the AERP Plan are not included in the accompanying consolidated balance sheets or the disclosure below. The Company made contributions of less than $1 million, $10 million and $8 million for the years ended December 31, 2007, 2006 and 2005, respectively, to the AERP Plan. The assets and obligations of the MPRP Plan along with the related net periodic pension expense, are included in the accompanying consolidated financial statements and disclosures below. Effective March 1, 2005, the Company amended and revalued its multi- employer postretirement plan to a new single employer plan. Prior to March 1, 2005, the Company made contributions of $2 million to the former multi-employer plan in 2005. The assets and obligations of the new postretirement plan, along with the related net periodic other postretirement expense, are included in the accompanying consolidated financial statements and disclosures below. F-49 NEW ENGLAND LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) As described more fully in Note 1, effective December 31, 2006, the Company adopted SFAS 158. The adoption of SFAS 158 required the recognition of the funded status of defined benefit pension and other postretirement plans and eliminated the additional minimum pension liability provision of SFAS 87. Upon adoption of SFAS 158, the Company recognized as an adjustment to accumulated other comprehensive loss, net of income tax, those amounts of actuarial gains and losses, prior service costs and credits, and the remaining net transition asset or obligation that had not yet been included in net periodic benefit cost at the date of adoption. The following table summarizes the adjustments to the December 31, 2006 consolidated balance sheet as a result of recognizing the funded status of the defined benefit plans.
DECEMBER 31, 2006 ---------------------------------------------------- ADDITIONAL MINIMUM PRE PENSION ADOPTION OF POST SFAS 158 LIABILITY SFAS 158 SFAS 158 ADJUSTMENTS ADJUSTMENT ADJUSTMENT ADJUSTMENTS BALANCE SHEET CAPTION ----------- ---------- ----------- ----------- (IN MILLIONS) Other liabilities: Accrued pension benefit cost..................................... $(21) $-- $ -- $(21) Other liabilities: Accrued postretirement benefit cost............................. $ (7) $-- $(16) $(23) --- ---- Accumulated other comprehensive loss, before income tax: Defined benefit plans.................... $-- $(16) $(16) Deferred income tax........................ $-- $ 6 --- ---- Accumulated other comprehensive loss, net of income tax: Defined benefit plans.................... $-- $(10) $(10) === ====
A December 31 measurement date is used for all of the Company's defined benefit pension and other postretirement benefit plans. F-50 NEW ENGLAND LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) OBLIGATIONS, FUNDED STATUS AND NET PERIODIC BENEFIT COSTS
DECEMBER 31, ------------------------- OTHER POSTRETIRE- PENSION MENT BENEFITS BENEFITS ----------- ----------- 2007 2006 2007 2006 ---- ---- ---- ---- (IN MILLIONS) Change in benefit obligation: Benefit obligation at beginning of year............ $ 21 $ 20 $ 23 $ 23 Service cost..................................... -- 1 1 1 Interest cost.................................... 2 1 1 2 Plan participants' contributions................. -- -- 3 3 Net actuarial (gains) losses..................... 1 (1) (1) (2) Change in benefits............................... 6 -- -- -- Benefits paid.................................... (1) -- (3) (4) ---- ---- ---- ---- Benefit obligation at end of year.................. 29 21 24 23 ---- ---- ---- ---- Change in plan assets: Fair value of plan assets at beginning of year..... -- -- -- -- Actual return on plan assets..................... -- -- -- -- Employer contribution............................ 1 -- -- -- Benefits paid.................................... (1) -- -- -- ---- ---- ---- ---- Fair value of plan assets at end of year........... -- -- -- -- ---- ---- ---- ---- Funded status at end of year....................... $(29) $(21) $(24) $(23) ==== ==== ==== ==== Amounts recognized in consolidated balance sheet consist of: Other liabilities................................ $(29) $(21) $(24) $(23) ==== ==== ==== ==== Accumulated other comprehensive loss: Net actuarial (gains) losses..................... $ -- $ -- $ (4) $ (2) Prior service cost (credit)...................... 1 -- 18 18 ---- ---- ---- ---- 1 -- 14 16 Deferred income tax.............................. -- -- (5) (6) ---- ---- ---- ---- $ 1 $ -- $ 9 $ 10 ==== ==== ==== ====
The accumulated benefit obligation for the defined benefit pension plan was $28 million and $19 million at December 31, 2007 and 2006, respectively. Information for pension plans with an accumulated benefit obligation in excess of plan assets is as follows:
DECEMBER 31, ----------- 2007 2006 ---- ---- (IN MILLIONS) Projected benefit obligation................................. $29 $21 Accumulated benefit obligation............................... $28 $19 Fair value of plan assets.................................... $-- $--
F-51 NEW ENGLAND LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The projected benefit obligation exceeded assets for all pension and postretirement plans at December 31, 2007 and 2006. The components of net periodic benefit cost and other changes in plan assets and benefit obligations recognized in other comprehensive income (loss) were as follows:
YEARS ENDED DECEMBER 31, -------------------------------- OTHER PENSION POSTRETIREMENT BENEFITS BENEFITS ----------- ------------------ 2007 2006 2007 2006 2005 ---- ---- ---- ---- ---- (IN MILLIONS) NET PERIODIC BENEFIT COST Service cost.................................. $-- $ 1 $ 1 $1 $-- Interest cost................................. 2 1 1 2 1 Amortization of prior service cost............ 5 -- 2 2 2 --- --- --- -- --- Net periodic benefit cost.................. $ 7 $ 2 $ 4 $5 $ 3 --- === --- == === OTHER CHANGES IN PLAN ASSETS AND BENEFIT OBLIGATIONS RECOGNIZED IN OTHER COMPREHENSIVE INCOME (LOSS) Net acturial (gains) losses................... -- -- Prior Service cost (credit)................... 6 -- Amortization of prior service (cost) credit... (5) (2) --- --- Total recognized in other comprehensive income (loss)............................ 1 (2) --- --- Total recognized in net periodic benefit cost and other comprehensive income (loss)................................... $ 8 $ 2 === ===
Included within other comprehensive income (loss) are other changes in plan assets and benefit obligations associated with pension benefits of $1 million and other postretirement benefits of ($2) million for an aggregate reduction in other comprehensive income of ($1) million before income tax and less than ($1) million, net of income tax. The estimated prior service cost for the pension plans that will be amortized from accumulated other comprehensive loss into net periodic benefit over the next year is $1 million. The estimated net actuarial gains and prior service cost for the defined benefit postretirement plans that will be amortized from accumulated other comprehensive loss into net periodic benefit cost over the next year is less than $1 million and $2 million, respectively. In 2004, the Company adopted the guidance in FSP 106-2, Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003, to account for future subsidies to be received under the Prescription Drug Act. The Company began receiving these subsidies during 2007. The reduction in the accumulated postretirement obligation was $1 million and $2 million for the years ended December 31, 2007 and 2006, respectively. The reduction of the net periodic postretirement benefit cost resulting from the Prescription Drug Act was less than $1 million for each of the years ended December 31, 2007, 2006 and 2005. The Company received subsidies of less than $1 million for the year ended December 31, 2007. F-52 NEW ENGLAND LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) ASSUMPTIONS Assumptions used in determining benefit obligations were as follows:
DECEMBER 31, --------------------------- OTHER PENSION POSTRETIRE- BENEFITS MENT BENEFITS ----------- ------------- 2007 2006 2007 2006 ---- ---- ---- ---- Discount rate...................................... 6.65% 6.00% 6.65% 6.00% Rate of compensation increase...................... 4.00% 4.00% N/A N/A
Assumptions used in determining net periodic benefit cost were as follows:
DECEMBER 31, -------------------------------- OTHER PENSION POSTRETIREMENT BENEFITS BENEFITS ----------- ------------------ 2007 2006 2007 2006 2005 ---- ---- ---- ---- ---- Discount rate................................. 6.00% 5.80% 6.00% 5.80% 5.70% Expected rate of return on plan assets........ N/A N/A N/A N/A N/A Rate of compensation increase................. 4.00% 4.00% N/A N/A N/A
The discount rate is determined annually based on the yield, measured on a yield to worst basis, of a hypothetical portfolio constructed of high quality debt instruments available on the valuation date, which would provide the necessary future cash flows to pay the aggregate projected benefit obligation when due. The assumed healthcare cost trend rates used in measuring the accumulated postretirement benefit obligation and net periodic benefit cost were as follows:
DECEMBER 31, --------------------------------------------------- 2007 2006 ------------------------ ------------------------ Pre-Medicare eligible claims..... 8.5% down to 5% in 2014 9.0% down to 5% in 2014 Medicare eligible claims......... 10.5% down to 5% in 2018 11.0% down to 5% in 2018
Assumed healthcare cost trend rates may have a significant effect on the amounts reported for healthcare plans. A one-percentage point change in assumed healthcare cost trend rates would have the following effects:
ONE PERCENT ONE PERCENT INCREASE DECREASE ----------- ----------- (IN THOUSANDS) Effect on total service and interest cost components......................................... $ 55 $ (49) Effect on accumulated postretirement benefit obligation......................................... $491 $(458)
CASH FLOWS Benefit payments due under the non-qualified pension plan are funded from the Company's general assets as they become due under the provision of the plan. In 2008, the Company does not anticipate making any contributions other than benefit payments to its non-qualified pension plan. Other postretirement benefits represent a non-vested, non-guaranteed obligation of the Company and current regulations do not require specific funding levels for these benefits. Total payments were $4 million and $3 million for the years ended December 31, 2007 and 2006, respectively. It is the Company's practice to use its general assets to pay claims as they come due. F-53 NEW ENGLAND LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Gross benefit payments for the next ten years, which reflect expected future service as appropriate, net of gross subsidies to be received under the Prescription Drug Act for the postretirement plan are expected to be as follows:
OTHER POSTRETIREMENT BENEFITS ------------------------------------- PENSION PRESCRIPTION DRUG BENEFITS GROSS SUBSIDIES NET -------- ------- ----------------- ------- (IN THOUSANDS) 2008.................................. $ 1,117 $ 2,034 $(414) $ 1,620 2009.................................. $ 1,863 $ 2,049 $(456) $ 1,593 2010.................................. $ 2,210 $ 2,065 $(494) $ 1,571 2011.................................. $ 2,383 $ 2,107 $ -- $ 2,107 2012.................................. $ 2,433 $ 2,030 $ -- $ 2,030 2013 -- 2017.......................... $11,772 $10,443 $ -- $10,443
SAVINGS AND INVESTMENT PLANS The Company sponsors savings and investment plans for substantially all employees, under which a portion of employee contributions are matched. The Company contributed less than $1 million for each of the years ended December 31, 2007, 2006 and 2005, respectively. 12. EQUITY 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. NELICO exceeded the minimum RBC requirements for all periods presented herein. The NAIC adopted the Codification of Statutory Accounting Principles ("Codification") in 2001. Codification was intended to standardize regulatory accounting and reporting to state insurance departments. However, statutory accounting principles continue to be established by individual state laws and permitted practices. Modifications by the various state insurance departments may impact the effect of Codification on the statutory capital and surplus of NELICO. Statutory accounting principles differ from GAAP primarily by charging policy acquisition costs to expense as incurred, establishing future policy benefit liabilities using different actuarial assumptions and valuing securities on a different basis. In addition, certain assets are not admitted under statutory accounting principles and are charged directly to surplus. The most significant 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. Statutory net income of NELICO, as filed with the Commonwealth of Massachusetts Division of Insurance, was $122 million, $109 million and $50 million for the years ended December 31, 2007, 2006 and 2005, respectively. Statutory capital and surplus, as filed, was $544 million and $435 million at December 31, 2007 and 2006, respectively. F-54 NEW ENGLAND LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) DIVIDEND RESTRICTIONS Stockholder dividends or other distributions proposed to be paid by NELICO must be approved by the Commissioner if such dividends or distributions, together with other dividends or distributions made within the preceding calendar year, exceed the greater of: (i) 10% of NELICO's statutory surplus as of the immediately preceding calendar year; or (ii) NELICO's statutory net gain from operations for the immediately preceding calendar year. In addition, dividends cannot be paid from a source other than statutory unassigned funds surplus without prior approval of the Commissioner. The maximum amount of the dividend which NELICO may pay to MLIC in 2008 without prior approval is $94 million. NELICO paid no common stockholder dividends for the years ended December 31, 2007, 2006 and 2005. 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.................................................. $ 1 $(7) $(24) Income tax effect of holding gains (losses)............. -- 3 9 Reclassification adjustments: Recognized holding (gains) losses included in current year income........................................ -- 2 3 Amortization of premium and accretion of discounts associated with investments........................ 1 -- 2 Income tax effect....................................... (1) (1) (2) Allocation of holding gains on investments relating to other policyholder amounts............................ -- -- 2 Income tax effect of allocation of holding gains to other policyholder amounts............................ -- -- (1) --- --- ---- Other comprehensive income (loss)....................... $ 1 $(3) $(11) === === ====
F-55 NEW ENGLAND LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 13. OTHER EXPENSES Information on other expenses is as follows:
YEARS ENDED DECEMBER 31, --------------------- 2007 2006 2005 ----- ----- ----- (IN MILLIONS) Compensation......................................... $ 54 $ 54 $ 56 Commissions.......................................... 154 128 124 Interest and dividends............................... -- 2 4 Amortization of DAC.................................. 97 93 99 Capitalization of DAC................................ (136) (118) (131) Insurance tax, license and fees...................... 16 17 16 Agency allowances.................................... 63 58 60 Sub-advisory fees and related expenses............... 169 155 123 Minority interest.................................... -- 4 (1) Other................................................ 90 93 111 ----- ----- ----- Total other expenses............................... $ 507 $ 486 $ 461 ===== ===== =====
For the years ended December 31, 2007, 2006 and 2005, commissions and capitalization of DAC include the impact of affiliated reinsurance transactions. See Note 7. See also Note 15 for discussion of affiliated expenses included in the table above. 14. FAIR VALUE INFORMATION The estimated fair value of financial instruments has 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. Amounts related to the Company's financial instruments are as follows:
CARRYING ESTIMATED VALUE FAIR VALUE -------- ---------- (IN MILLIONS) DECEMBER 31, 2007 Assets: Fixed maturity securities............................. $821 $821 Equity securities..................................... $ -- $ -- Mortgage loans on real estate......................... $ 2 $ 2 Policy loans.......................................... $411 $411 Short-term investments................................ $123 $123 Cash.................................................. $ 51 $ 51 Accrued investment income............................. $ 20 $ 20 Liabilities: Policyholder account balances......................... $329 $318
F-56 NEW ENGLAND LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CARRYING ESTIMATED VALUE FAIR VALUE -------- ---------- (IN MILLIONS) DECEMBER 31, 2006 Assets: Fixed maturity securities............................. $886 $886 Equity securities..................................... $ 7 $ 7 Mortgage loans on real estate......................... $ 2 $ 2 Policy loans.......................................... $357 $357 Short-term investments................................ $141 $141 Cash.................................................. $ 12 $ 12 Accrued investment income............................. $ 21 $ 21 Liabilities: Policyholder account balances......................... $329 $319
The methods and assumptions used to estimate the fair value of financial instruments are summarized as follows: FIXED MATURITY SECURITIES AND EQUITY SECURITIES The fair values of publicly held fixed maturity securities and publicly held equity securities are based on quoted market prices or estimates from independent pricing services. However, in cases where quoted market prices are not available, such as for private fixed maturity securities, fair values are estimated using present value or valuation techniques. The determination of fair values is based on: (i) valuation methodologies; (ii) securities the Company deems to be comparable; and (iii) assumptions deemed appropriate given the circumstances. The fair value estimates are based on available market information and judgments about financial instruments, including estimates of the timing and amounts of expected future cash flows and the credit standing of the issuer or counterparty. Factors considered in estimating fair value include: coupon rate, maturity, estimated duration, call provisions, sinking fund requirements, credit rating, industry sector of the issuer, and quoted market prices of comparable securities. MORTGAGE LOANS ON REAL ESTATE Fair values for mortgage loans on real estate are estimated by discounting expected future cash flows, using current interest rates for similar loans with similar credit risk. POLICY LOANS The carrying values for policy loans approximate fair value. CASH AND SHORT-TERM INVESTMENTS The carrying values for cash 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. F-57 NEW ENGLAND LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 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. DERIVATIVE FINANCIAL INSTRUMENTS The fair value of derivative financial instruments are based upon quotations obtained from dealers or other reliable sources. See Note 4 for derivative fair value disclosures. 15. 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 $14 million, $1 million and $5 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 entered into a Service Agreement with MetLife Group, Inc. ("MetLife Group"), a wholly-owned subsidiary of MetLife, under which MetLife Group provides personnel services, as needed, to support the activities of the Company. MetLife Group charged the Company $28 million, $29 million and $36 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 agreements with other affiliates to provide and receive services necessary to conduct its activities. Typical services provided under these agreements include management, policy administrative functions and distribution services. Expenses incurred, net of income earned, related to these agreements and recorded in other expenses, were $69 million, $18 million and $4 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 $1 million, $3 million and $4 million, included in other expenses, for the years ended December 31, 2007, 2006 and 2005, respectively. The Company received fees for this service of $37 million, $36 million and $13 million, included in other expenses, for the years ended December 31, 2007, 2006 and 2005, respectively. At December 31, 2007 and 2006, amounts due to affiliates were $2 million and $17 million, respectively. These receivables exclude affiliated reinsurance balances discussed in Note 7. MLIC charged the Company $1 million for the use of certain computers, furniture and other fixed assets during each of the years ended December 31, 2007 and 2005. There were no such charges to the Company during the year ended December 31, 2006. See Notes 3, 6 and 7 for additional related party transactions. F-58 Part II UNDERTAKING TO FILE REPORTS Subject to the terms and conditions of Section 15(d) of the Securities Exchange Act of 1934, the undersigned Registrant hereby undertakes to file with the Securities and Exchange Commission such supplementary and periodic information, documents, and reports as may be prescribed by any rule or regulation of the Commission heretofore or hereafter duly adopted pursuant to authority conferred in that section. RULE 484 UNDERTAKING Section 9 of NELICO's By-Laws provides that NELICO shall, to the extent legally permissible, indemnify its directors and officers against liabilities and expenses relating to lawsuits and proceedings based on such persons' roles as directors or officers. However, Section 9 further provides that no such indemnification shall be made with respect to any matter as to which a director or officer is adjudicated not to have acted in good faith in the reasonable belief that his action was in the best interest of the corporation. Section 9 also provides that in the event a matter is disposed of by a settlement payment by a director or officer, indemnification will be provided only if the settlement is approved as in the best interest of the corporation by (a) a disinterested majority of the directors then in office, (b) a majority of the disinterested directors then in office, or (c) the holders of a majority of outstanding voting stock (exclusive of any stock owned by any interested director or officer). Insofar as indemnification for liability arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of NELICO pursuant to the foregoing provisions, or otherwise, NELICO 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 will be, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than payment by NELICO of expenses incurred or paid by a director, officer, or controlling person of NELICO 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, NELICO 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. REPRESENTATIONS New England Life Insurance Company hereby represents that the fees and charges deducted under the variable ordinary life insurance policies described in this registration statement, in the aggregate, are reasonable in relation to the services rendered, the expenses expected to be incurred, and the risks assumed by New England Life Insurance Company. CONTENTS OF REGISTRATION STATEMENT This Registration Statement comprises the following papers and documents: The facing sheet. A reconciliation and tie-in of the information shown in the prospectus with the items of Form N-8B-2. The prospectuses and supplements consisting of 957 pages. The undertaking to file reports. The undertaking pursuant to Rule 484(b) under the Securities Act of 1933. Representations. The signatures. Written consents of the following persons: James J. Reilly, Jr., F.S.A., M.A.A.A. (see Exhibit 3(i) below) Marie C. Swift, Esq. (see Exhibit 3(ii) below) Independent Auditor (see Exhibit 11 below) The following exhibits: 1.A.(1) January 31, 1983 resolution of the Board of Directors of NEVLICO 5 (2) None (3) (a) Distribution Agreement between NEVLICO and NELESCO 6 (b)(i) Form of Contract between NELICO and its General Agents 5 (ii) Form of contract between NELICO and its Agents 6 (c) Commission Schedule for Policies 6 (d) Form of contract among NES, NELICO and other broker dealers 4 (4) None (5) (a) Specimen of Policy, including Application 6 (b) Riders to Policy 6 (c) Acceleration of Benefits Rider 3 (d) Additional Form of application 7 (e) Additional Riders and Endorsements 9 (6) (a) Amended and restated Articles of Organization 2 (b) Amendments to Amended and restated Articles of Organization 8 (c) Amended and Restated By-Laws of NELICO 12 (7) None (8) None (9) None (10) See Exhibit 1.A.(5)(a) 2. See Exhibit 3(i) 3. (i) Opinion and consent of James J. Reilly, Jr., F.S.A., M.A.A.A. 13 (ii) Opinion and consent of Marie C. Swift, Esquire 16 4. None 5. Inapplicable 6. Inapplicable 7. (i) Powers of Attorney 20 (ii) Powers of Attorney for Lisa M. Weber and James J. Reilly 8. Notice of Withdrawal Right for Policies 6 9. Inapplicable 10. Inapplicable 11. Consent of Independent Registered Public Accounting Firm
12. Schedule for computation of performance quotations 6 13. (i) Consolidated memorandum describing certain procedures, filed pursuant to Rule 6e-2(b)(12)(ii) and Rule 6e-3(T)(b)(12)(iii) 19 (ii) Second Addendum to Consolidated Memorandum 9 14. (i) Participation Agreement among Variable Insurance Products Fund, Fidelity Distributors Corporation and New England Variable Life Insurance Company 6 (ii) Amendment No. 1 to Participation Agreement among Variable Insurance Products Fund, Fidelity Distributors Corporation and New England Variable Life Insurance Company 1 (iii) Participation Agreement among Variable Insurance Products Fund II, Fidelity Distributors Corporation and New England Variable Life Insurance Company 1 (iv) Participation Agreement among Metropolitan Series Fund, Inc., Metropolitan Life Insurance Company and New England Life Insurance Company 10 (v) Amendment No. 2 to Participation Agreement among Variable Insurance Products Fund, Fidelity Distributors Corporation and New England Life Insurance Company 11 (vi) Amendment No. 1 to Participation Agreement among Variable Insurance Products Fund II, Fidelity Distributors Corporation and New England Life Insurance Company 11 (vii) Participation Agreement among Met Investors Series Trust, Met Investors Advisory Corp., Met Investors Distributors Inc. and New England Life Insurance Company 15 (viii) Participation Agreement among American Funds Insurance Series, Capital Research and Management Company and New England Life Insurance Company 14 (ix) Participation Agreement among Metropolitan Series Fund, Inc., MetLife Advisers, LLC, MetLife Investors Distribution Company and New England Life Insurance Company (8/31/07) 21 (x) Net Worth Maintenance Agreement 18
- ---------- 1 Incorporated herein by reference to Pre-Effective Amendment No. 1 to the Variable Account's Form S-6 Registration Statement, File No. 033-88082, filed June 22, 1995. 2 Incorporated herein by reference to the Variable Account's Form S-6 Registration Statement, File No. 333-21767, filed February 13, 1997. 3 Incorporated herein by reference to Post-Effective Amendment No. 8 to the Variable Account's Form S-6 Registration Statement, File No. 033-52050, filed April 30, 1997. 4 Incorporated herein by reference to the Pre-effective Amendment No. 1 to the Variable Account's Form S-6 Registration Statement, File No. 333-21767, filed July 16, 1997. 5 Incorporated herein by reference to Post-Effective Amendment No. 9 to the Variable Account's Form S-6 Registration Statement, File No. 033-66864, filed February 25, 1998. 6 Incorporated herein by reference to Post-Effective Amendment No. 9 to the Variable Account's Form S-6 Registration Statement, File No. 033-52050, filed April 24, 1998. 7 Incorporated herein by reference to Post-Effective Amendment No. 4 to the Variable Account's Form S-6 Registration Statement, File No. 033-88082, filed January 20, 1999. 8 Incorporated herein by reference to the Post-Effective Amendment No. 4 to the Variable Account's Form S-6 Registration Statement, File No. 033-65263, filed February 24, 1999. 9 Incorporated herein by reference to the Post-Effective Amendment No. 10 to the Variable Account's Form S-6 Registration Statement, File No. 033-52050, filed April 26, 1999. 10 Incorporated herein by reference to the Post-Effective Amendment No. 11 to the Variable Account's Form S-6 Registration Statement, File No. 033-88082, filed November 9, 2000. 11 Incorporated herein by reference to the Post-Effective Amendment No. 2 to the Variable Account's Form S-6 Registration Statement, File No. 333-89409, filed February 26, 2001. 12 Incorporated herein by reference to the Post-Effective Amendment No. 4 to the Variable Account's Form S-6 Registration Statement, File No. 333-21767, filed April 25, 2001. 13 Incorporated herein by reference to the Post-Effective Amendment No. 12 to the Variable Account's Form S-6 Registration Statement, File No. 033-52050, filed April 26, 2001. 14 Incorporated herein by reference to the Post-Effective Amendment No. 4 to the Variable Account's Form S-6 Registration Statement, File No. 333-89409, filed July 20, 2001. 15 Incorporated herein by reference to the Variable Account's Form S-6 Registration Statement, File No. 333-73676, filed November 19, 2001. 16 Incorporated herein by reference to the Post-Effective Amendment No. 16 to the Variable Account's Form S-6 Registration Statement, File No. 033-52050, filed April 30, 2004. 17 Incorporated herein by reference to the Post-Effective Amendment No. 10 to New England Variable Annuity Separate Account's Form N-4 Registration Statement, File No. 333-51676, filed October 20, 2005. 18 Incorporated herein by reference to the Post-Effective Amendment No. 11 to the Variable Account's Form N-6 Registration Statement, File 333-46401, filed April 26, 2006. 19 Incorporated herein by reference to the Post-Effective Amendment No. 13 to the Variable Account's Form N-6 Registration Statement, File 333-73676, filed April 19, 2007. 20 Incorporated herein by reference to the Post-Effective Amendment No. 19 to the Variable Account's Form S-6 Registration Statement, File 033-52050, filed April 20, 2007. 21 Incorporated herein by reference to the Post-Effective Amendment No. 14 to the Variable Account's Form N-6 Registration Statement, File 333-73676, filed April 22, 2008. SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant, New England Variable Life Separate Account, certifies that it meets all of the requirements for effectiveness of this amendment to the Registration Statement pursuant to Rule 485(b) under the Securities Act of 1933 and has duly caused this amendment to the Registration Statement to be signed on its behalf by the undersigned thereunto duly authorized, and its seal to be hereunto affixed and attested, all in the city of Boston, and the Commonwealth of Massachusetts, on the 22nd day of April, 2008. New England Variable Life Separate Account (Registrant) By: New England Life Insurance Company (Depositor) By: /s/ Marie C. Swift -------------------------------------- Marie C. Swift, Esq. Vice President and Counsel Attest: /s/ John E. Connolly, Jr. - ------------------------------------ John E. Connolly, Jr. Counsel Pursuant to the requirements of the Securities Act of 1933, New England Life Insurance Company certifies that it meets all of the requirements for effectiveness of this amendment to the Registration Statement pursuant to Rule 485(b) under the Securities Act of 1933 and has duly caused this amendment to the Registration Statement to be signed on its behalf by the undersigned thereunto duly authorized, and its seal to be hereunto affixed and attested, all in the city of Boston, and the Commonwealth of Massachusetts, on the 22nd day of April, 2008. New England Life Insurance Company (Seal) Attest: /s/ John E. Connolly, Jr. By: /s/ Marie C. Swift ---------------------------- -------------------------------------- John E. Connolly, Jr. Marie C. Swift, Esq. Counsel Vice President and Counsel Pursuant to the requirements of the Securities Act of 1933, this amended Registration Statement has been signed below by the following persons, in the capacities indicated, on April 22, 2008. * Chairman, President and Chief - ------------------------------------ Executive Officer Lisa M. Weber * - ------------------------------------ Michael K. Farrell Director * - ------------------------------------ Gene L. Lunman Director * - ------------------------------------ William J. Mullaney Director * Executive Vice President and Chief - ------------------------------------ Accounting Officer Joseph J. Prochaska, Jr. * - ------------------------------------ Michael J. Vietri Director * - ------------------------------------ William J. Wheeler Director * Vice President (Principal Financial - ------------------------------------ Officer) James J. Reilly By: /s/ John E. Connolly, Jr. -------------------------------------- John E. Connolly, Jr., Esq. Attorney-in-fact * Executed by John E. Connolly, Jr., Esquire on behalf of those indicated pursuant to powers of attorney filed herewith and with Post-Effective Amendment No. 19 to the Registrant's Registration Statement on Form S-6, File No. 033-52050, filed April 20, 2007. EXHIBIT LIST
Sequentially Exhibit Number Title Numbered Page* - -------------- ------------------------------------------------------------ -------------- 7.(ii) Powers of Attorney 11. Consent of the Independent Registered Public Accounting Firm
EX-99.7(II) 2 dex997ii.txt POWERS OF ATTORNEY New England Life Insurance Company Power of Attorney James J. Reilly Vice President KNOW ALL MEN BY THESE PRESENTS, that I, Vice President of New England Life Insurance Company, a Massachusetts company, do hereby appoint Michele H. Abate, John E. Connolly, Jr., Gina C. Sandonato 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: .. New England Variable Life Separate Account (Zenith Life File No. 002-82838, Zenith Life One File No. 033-10954, Zenith Life Plus File No.033-19540, Zenith Life Plus II File No. 033-52050, Zenith Life Executive 65 File No. 033-64170, Zenith Survivorship Life File No. 033-66864, Zenith Flexible Life File No. 033-88082, Zenith Flexible Life 2001 File No. 333-103193, American Gateway Series File No. 033-65263, Zenith Variable Whole Life File No. 333-21767, Enterprise Executive Advantage File No. 333-46401, Zenith Survivorship Life 2002 File No. 333-89409, Zenith Flexible Life 2002 File No. 333-73676), and .. New England Variable Annuity Separate Account (American Growth Series File No. 033-85442, American Forerunner Series File No. 333-51676), or any other separate accounts for variable contracts of said Company created in the future, and to have full power and authority to do or cause to be done in my name, place and stead each and every act and thing necessary or appropriate in order to effectuate the same, as fully to all intents and purposes as I might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact or any of them, may do or cause to be done by virtue hereof. Each said attorney-in-fact shall have power to act hereunder with or without the others. IN WITNESS WHEREOF, I have hereunto set my hand this 18th day of June, 2007. /s/ James J. Reilly ---------------------------------------- James J. Reilly New England Life Insurance Company Power of Attorney Lisa M. Weber Director KNOW ALL MEN BY THESE PRESENTS, that I, Chairman of the Board, President and Chief Executive Officer of New England Life Insurance Company, a Massachusetts company, do hereby appoint Michele H. Abate, John E. Connolly, Jr., Gina C. Sandonato 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: .. New England Variable Life Separate Account (Zenith Life File No. 002-82838, Zenith Life One File No. 033-10954, Zenith Life Plus File No.033-19540, Zenith Life Plus II File No. 033-52050, Zenith Life Executive 65 File No. 033-64170, Zenith Survivorship Life File No. 033-66864, Zenith Flexible Life File No. 033-88082, Zenith Flexible Life 2001 File No. 333-103193, American Gateway Series File No. 033-65263, Zenith Variable Whole Life File No. 333-21767, Enterprise Executive Advantage File No. 333-46401, Zenith Survivorship Life 2002 File No. 333-89409, Zenith Flexible Life 2002 File No. 333-73676), and .. New England Variable Annuity Separate Account (American Growth Series File No. 033-85442, American Forerunner Series File No. 333-51676), or any other separate accounts for variable contracts of said Company created in the future, and to have full power and authority to do or cause to be done in my name, place and stead each and every act and thing necessary or appropriate in order to effectuate the same, as fully to all intents and purposes as I might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact or any of them, may do or cause to be done by virtue hereof. Each said attorney-in-fact shall have power to act hereunder with or without the others. IN WITNESS WHEREOF, I have hereunto set my hand this 30th day of April, 2007. /s/ Lisa M. Weber ---------------------------------------- Lisa M. Weber EX-99.11 3 dex9911.txt CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Exhibit 11 CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM We consent to the use in this Post-Effective Amendment No. 20 to Registration Statement No. 033-52050 on Form S-6 of our report dated March 24, 2008, relating to the financial statements of each of the Subaccounts of New England Variable Life Separate Account and our report dated April 14, 2008, relating to the consolidated financial statements of New England Life Insurance Company (the "Company") (which report expresses an unqualified opinion and includes an explanatory paragraph referring to the fact that the Company changed its method of accounting for income taxes as required by accounting guidance adopted on January 1, 2007, and changed its method of accounting for defined benefit pension and other postretirement plans, as required by accounting guidance adopted on December 31, 2006), both appearing in the Prospectus Supplement, which is part of such Registration Statement, and to the reference to us under the heading "Independent Registered Public Accounting Firm" in the Prospectus Supplement, also in the Registration Statement. /s/ DELOITTE & TOUCHE LLP Tampa, Florida April 22, 2008 -----END PRIVACY-ENHANCED MESSAGE-----