485BPOS 1 e26671e485bpos.txt POST-EFFECTIVE AMENDMENT NO. 2 TO FORM N-4 REGISTRATION NOS. 333-122897/811-4001 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ FORM N-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X] PRE-EFFECTIVE AMENDMENT NO. [ ] POST-EFFECTIVE AMENDMENT NO. 2 AND/OR REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X] [X] AMENDMENT NO. 105 ------------------------ METROPOLITAN LIFE SEPARATE ACCOUNT E (EXACT NAME OF REGISTRANT) METROPOLITAN LIFE INSURANCE COMPANY (EXACT NAME OF DEPOSITOR) 200 PARK AVENUE, NEW YORK, NEW YORK 10166 (ADDRESS OF DEPOSITOR'S PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) (212) 578-9414 (DEPOSITOR'S TELEPHONE NUMBER, INCLUDING AREA CODE) ------------------------ JAMES L. LIPSCOMB, ESQ. EXECUTIVE VICE-PRESIDENT AND GENERAL COUNSEL METROPOLITAN LIFE INSURANCE COMPANY 200 PARK AVENUE NEW YORK, NEW YORK 10166 (NAME AND ADDRESS OF AGENT FOR SERVICE) ------------------------ Copies to: DIANE E. AMBLER, ESQ. KIRKPATRICK & LOCKHART PRESTON GATES ELLIS LLP 1601 K STREET, N.W. WASHINGTON, D.C. 20006 ------------------------ IT IS PROPOSED THAT THE FILING WILL BECOME EFFECTIVE: [ ] immediately upon filing pursuant to paragraph (b) of Rule 485 [X] on April 30, 2007 pursuant to paragraph (b) of Rule 485 [ ] 60 days after filing pursuant to paragraph (a)(1) of Rule 485 [ ] on (date) pursuant to paragraph (a)(1) of Rule 485 [ ] on the seventy-fifth day after filing pursuant to paragraph (a)(2) of Rule 485 [ ] on (date) pursuant to paragraph (a)(2) of Rule 485 PURSUANT TO RULE 24f-2 UNDER THE INVESTMENT COMPANY ACT OF 1940, THE REGISTRANT HAS REGISTERED AN INDEFINITE AMOUNT OF SECURITIES. REGISTRANT'S RULE 24f-2 NOTICE FOR THE YEAR ENDED DECEMBER 31, 2006 WAS FILED WITH THE COMMISSION ON OR ABOUT MARCH 31, 2007. -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- METROPOLITAN LIFE SEPARATE ACCOUNT E FORM N-4 UNDER THE SECURITIES ACT OF 1933 AND THE INVESTMENT COMPANY ACT OF 1940 CROSS REFERENCE SHEET (PURSUANT TO RULE 481(A))
FORM N-4 ITEM NO. PROSPECTUS HEADING -------- ------------------ 1. Cover Page................................ Cover Page 2. Definitions............................... Important Terms You Should Know 3. Synopsis.................................. Table of Expenses 4. Condensed Financial Information........... Annuity Unit Values Tables; General Information--Advertising Performance; General Information--Financial Statements 5. General Description of Registrant, Depositor, and Portfolio Companies...... MetLife; Metropolitan Life Separate Account E; Your Investment Choices; General Information--Voting Rights 6. Deductions and Expenses................... Table of Expenses; Income Annuities--Charges; Income Annuities--Withdrawal Option; Income Annuities--Premium and Other Taxes; General Information--Who Sells the Income Annuities; Appendix A--Premium Tax Table 7. General Description of Variable Annuity... Variable Annuities; Income Annuities--Income Payment Types; Income Annuities--Reallocation Privilege; General Information--Administration (Purchase Payments/Confirming Transactions/By Telephone/Changes to Your Income Annuity/ When We Can Cancel Your Income Annuity) 8. Annuity Period............................ Important Terms You Should Know; Income Annuities--Income Payment Types/The Value of Your Income Payments 9. Death Benefit............................. Income Annuities--Death Benefit 10. Purchases and Annuity Values.............. MetLife; Metropolitan Life Separate Account E; Income Annuities--Minimum Purchase Payment; Income Annuities--Income Payment Types; The Value of Your Income Payments; General Information--Administration (Purchase Payments) 11. Redemptions............................... General Information--When We Can Cancel Your Income Annuity; Income Annuities--Optional Two Year Withdrawal Feature; Standard Withdrawal Feature 12. Taxes..................................... Income Taxes 13. Legal Proceedings......................... Legal Proceedings 14. Table of Contents of the Statement of Additional Information.................. Table of Contents of the Statement of Additional Information 15. Cover Page................................ Cover Page 16. Table of Contents......................... Table of Contents
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FORM N-4 ITEM NO. PROSPECTUS HEADING -------- ------------------ 17. General Information and History........... Not Applicable 18. Services.................................. Independent Registered Public Accounting Firm; Distribution of Certificates and Interests in the Income Annuities 19. Purchase of Securities Being Offered...... Not Applicable 20. Underwriters.............................. Distribution of Certificates and Interests in the Income Annuities; Withdrawal Processing Fee 21. Annuity Payments.......................... Variable Income Payments 22. Financial Statements...................... Financial Statements of the Separate Account; Financial Statements of MetLife Appendix A................................ Premium Tax Table Appendix B................................ Annuity Unit Values Appendix C................................ Portfolio Legal and Marketing Names
2 (METLIFE LOGO) APRIL 30, 2007 METLIFE PERSONAL INCOMEPLUS(SM) ANNUITY CONTRACTS ISSUED BY METROPOLITAN LIFE INSURANCE COMPANY This Prospectus describes group non-qualified and qualified MetLife Personal IncomePlus variable income annuities ("Income Annuities"). -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- INCOME ANNUITIES AVAILABLE: -- Non-Qualified -- Qualified A WORD ABOUT INVESTMENT RISK: An investment in any of these variable annuities involves investment risk. You could lose money you invest. Money invested is NOT: -- a bank deposit or obligation; -- federally insured or guaranteed; or -- endorsed by any bank or other financial institution. -------------------------------------------------------------------------------- Income annuities are purchased to produce a predictable source of income. There is no accumulation of cash value in an income annuity. Although certain purchasers may make withdrawals of all or part of the value of future income payments, this Income Annuity is not designed for those seeking to accumulate cash values for future withdrawal. The investment choices available to allocate your purchase payment for the Income Annuity are listed in this Prospectus. Your choices may include the Fixed Income Option (not described in this Prospectus) and investment divisions available through Metropolitan Life Separate Account E which, in turn, invest in the following corresponding Portfolios of the Metropolitan Series Fund, Inc. ("Metropolitan Fund"), Portfolios of the Met Investors Series Trust ("Met Investors Fund") and funds of the American Funds Insurance Series ("American Funds"). For convenience, the portfolios and the funds are referred to as Portfolios in this Prospectus. AMERICAN FUNDS BOND LEGG MASON VALUE EQUITY AMERICAN FUNDS GLOBAL SMALL CAPITALIZATION LEHMAN BROTHERS(R) AGGREGATE BOND INDEX AMERICAN FUNDS GROWTH LOOMIS SAYLES SMALL CAP AMERICAN FUNDS GROWTH-INCOME LORD ABBETT BOND DEBENTURE BLACKROCK AGGRESSIVE GROWTH MFS(R) RESEARCH INTERNATIONAL BLACKROCK BOND INCOME MFS(R) TOTAL RETURN BLACKROCK DIVERSIFIED MET/AIM SMALL CAP GROWTH BLACKROCK LARGE-CAP CORE METLIFE MID CAP STOCK INDEX (FORMERLY, BLACKROCK INVESTMENT TRUST) METLIFE STOCK INDEX BLACKROCK LARGE CAP VALUE MORGAN STANLEY EAFE(R) INDEX BLACKROCK LEGACY LARGE CAP GROWTH NEUBERGER BERMAN MID CAP VALUE BLACKROCK STRATEGIC VALUE NEUBERGER BERMAN REAL ESTATE DAVIS VENTURE VALUE OPPENHEIMER CAPITAL APPRECIATION FI INTERNATIONAL STOCK OPPENHEIMER GLOBAL EQUITY FI LARGE CAP PIMCO INFLATION PROTECTED BOND FI MID CAP OPPORTUNITIES PIMCO TOTAL RETURN FI VALUE LEADERS RCM TECHNOLOGY FRANKLIN TEMPLETON SMALL CAP GROWTH (FORMERLY, RCM GLOBAL TECHNOLOGY) HARRIS OAKMARK FOCUSED VALUE RUSSELL 2000(R) INDEX HARRIS OAKMARK INTERNATIONAL T. ROWE PRICE LARGE CAP GROWTH HARRIS OAKMARK LARGE CAP VALUE T. ROWE PRICE MID-CAP GROWTH JENNISON GROWTH T. ROWE PRICE SMALL CAP GROWTH LAZARD MID-CAP WESTERN ASSET MANAGEMENT STRATEGIC BOND LEGG MASON PARTNERS AGGRESSIVE GROWTH OPPORTUNITIES (FORMERLY, JANUS AGGRESSIVE GROWTH) WESTERN ASSET MANAGEMENT U.S. GOVERNMENT INCOME ALLOCATION PORTFOLIOS METLIFE AGGRESSIVE ALLOCATION METLIFE MODERATE ALLOCATION METLIFE CONSERVATIVE ALLOCATION METLIFE MODERATE TO AGGRESSIVE METLIFE CONSERVATIVE TO MODERATE ALLOCATION ALLOCATION EXCHANGE TRADED FUND ("ETF") PORTFOLIOS CYCLICAL GROWTH AND INCOME ETF CYCLICAL GROWTH ETF
HOW TO LEARN MORE: Before investing, read this Prospectus. The Prospectus contains information about the Income Annuities and Metropolitan Life Separate Account E which you should know before investing. Keep this Prospectus for future reference. For more information, request a copy of the Statement of Additional Information ("SAI"), dated April 30, 2007. The SAI is considered part of this Prospectus as though it were included in the Prospectus. The Table of Contents of the SAI appears on page 60 of this Prospectus. To request a free copy of the SAI or to ask questions about the Income Annuity, write or call: Metropolitan Life Insurance Company Attn: MetLife Personal IncomePlus P.O. Box 14660 Lexington, KY 40512-4660 Toll Free Phone: (866) 438-6477 The Securities and Exchange Commission has a website (http://www.sec.gov) which you may visit to view this Prospectus, SAI and other information. The Securities and Exchange Commission has not approved or disapproved these securities or determined if this Prospectus is truthful or complete. Any representation otherwise is a criminal offense. This Prospectus is not valid unless attached to the current Metropolitan Fund, Met Investors Fund and American Funds prospectuses which are attached to the back of this Prospectus. You should also read these Prospectuses carefully before purchasing an Income Annuity. TABLE OF CONTENTS IMPORTANT TERMS YOU SHOULD KNOW.............. .............. 4 TABLE OF EXPENSES..................... ..................... 6 ANNUITY UNIT VALUES.................... .................... 12 METLIFE.......................... .......................... 13 METROPOLITAN LIFE SEPARATE ACCOUNT E............ ........... 13 VARIABLE ANNUITIES..................... .................... 13 YOUR INVESTMENT CHOICES.................. .................. 14 Certain Payments We Receive with Regard to the Portfolios............................................. 17 INCOME ANNUITIES...................... ..................... 18 Income Payment Types..................................... 19 Withdrawal Option........................................ 20 Requesting a Withdrawal............................... 21 Death Benefit............................................ 22 Minimum Purchase Payment................................. 22 The Value of Your Income Payments........................ 22 Reallocation Privilege................................... 24 Contract Fee............................................. 28 Charges.................................................. 28 Insurance-Related or Separate Account Charge.......... 28 Investment-Related Charge............................. 29 Withdrawal Processing Fee............................. 29 Premium and Other Taxes.................................. 29 Free Look................................................ 29 GENERAL INFORMATION.................... .................... 30 Administration........................................... 30 Purchase Payments..................................... 30 Confirming Transactions............................... 30 Processing Transactions............................... 30 By Telephone........................................ 31 After Your Death.................................... 31 Third Party Requests................................ 31 Valuation -- Suspension of Payments................. 31 Advertising Performance.................................. 32 Changes to Your Income Annuity........................... 33 Voting Rights............................................ 34 Who Sells the Income Annuities........................... 34 Financial Statements..................................... 36
2 Your Spouse's Rights..................................... 37 When We Can Cancel Your Income Annuity................... 37 INCOME TAXES........................ ....................... 37 LEGAL PROCEEDINGS..................... ..................... 44 APPENDIX A PREMIUM TAX TABLE................ ............... 45 APPENDIX B ANNUITY UNIT VALUES TABLE............ ........... 46 APPENDIX C PORTFOLIO LEGAL AND MARKETING NAMES....... ...... 59 TABLE OF CONTENTS FOR THE STATEMENT OF ADDITIONAL INFORMATION....................... ....................... 60
The Income Annuities are not intended to be offered anywhere they may not be lawfully offered and sold. MetLife has not authorized any information or representations about the Income Annuities other than the information in this Prospectus, the attached prospectuses, supplements to the prospectuses or any supplemental sales material we authorize. 3 IMPORTANT TERMS YOU SHOULD KNOW ANNUITY PURCHASE RATE The annuity purchase rate is the dollar amount you would need to purchase an Income Annuity paying $1 per payment period. For example, if it would cost $50 to buy an annuity that pays you $1 a month for the rest of your life, then the annuity purchase rate for that life income annuity is $50. The annuity purchase rate is a component in determining the number of annuity units credited to you with your purchase payment. (The other component is the amount of the purchase payment.) The annuity purchase rate is based on the annuity income payment type you purchase (which may include a withdrawal option), your age, sex, number of payments remaining and the Assumed Investment Return for variable income payments or an interest rate determined by MetLife for fixed income payments. Each time you request a reallocation between the Fixed Income Option and the investment divisions of the Separate Account or request a withdrawal (if your Income Annuity has this feature), the annuity purchase rate is reset to reflect any changes in these components. The reset annuity purchase rate represents the assumed investment return or interest rate and your age, sex and number of payments remaining as if you were purchasing the same annuity contract on the date of the reallocation or withdrawal. ANNUITY UNIT VALUE With an Income Annuity, the money paid-in or reallocated into an investment division of the Separate Account is held in the form of annuity units. Annuity units are established for each investment division. We determine the value of these annuity units at the close of the Exchange (see definition below) each day the Exchange is open for regular trading. The Exchange usually closes at 4 p.m. Eastern Time but may close earlier or later. The values increase or decrease based on the investment performance of the corresponding underlying Portfolios. ASSUMED INVESTMENT RETURN (AIR) Under an Income Annuity, the AIR is the assumed percentage rate of return used to determine the amount of the first variable income payment. The AIR is also the benchmark to which the investment performance of a given investment division is compared in order to determine all subsequent payments to you. You choose the AIR at application. The decision is irrevocable. The AIR may range from 3% to 6%. CONTRACT A Contract is the legal agreement between you and MetLife or between MetLife and the employer, plan trustee or other entity, or the certificate issued to you under a group annuity contract. You as the participant or annuitant receive a certificate under the Contract. This document contains relevant provisions of your Income Annuity. MetLife issues Contracts for each of the annuities described in this Prospectus. EXCHANGE In this Prospectus, the New York Stock Exchange is referred to as the "Exchange". INVESTMENT DIVISION Investment divisions are subdivisions of the Separate Account. When you allocate a purchase payment or make reallocations of your income payment to an investment division, the investment division purchases shares of a Portfolio (with the same name) within the Metropolitan Fund, Met Investors Fund or American Funds. METLIFE MetLife is Metropolitan Life Insurance Company, which is the company that issues the Income Annuities. Throughout this Prospectus, MetLife is also referred to as "we," "us" or "our." 4 METLIFE DESIGNATED OFFICE The MetLife Designated Office is the MetLife office that will generally handle the administration of your Income Annuity. Your payment statement and/or check stub will indicate the address of your MetLife Designated Office. The telephone number to call to initiate a request is 1-866-438-6477. SEPARATE ACCOUNT A separate account is an investment account. All assets contributed to investment divisions under the Income Annuities are pooled in the Separate Account and maintained for the benefit of investors in the Income Annuities. VARIABLE ANNUITY An annuity in which income payments are based upon the performance of investments such as stocks and bonds held by one or more underlying Portfolios. You assume the investment risk for any amounts allocated to the investment divisions in a variable annuity. YOU In this Prospectus, depending on the context, "you" is a natural person and may mean either the purchaser of the Income Annuity or the annuitant for whom money is invested under group arrangements. 5 TABLE OF EXPENSES -- METLIFE PERSONAL INCOMEPLUS INCOME ANNUITIES The following tables describe the expenses you will pay when you buy, hold or withdraw amounts from your Income Annuity. The first table describes charges you will pay at the time you purchase the Income Annuity, make withdrawals from your Income Annuity or make reallocations between the investment divisions of your Income Annuity. The tables do not show premium and other taxes which may apply. There are no fees for the Fixed Income Option. -------------------------------------------------------------------------------- CONTRACT OWNER TRANSACTION EXPENSES Sales Load Imposed on Purchase Payments.................. None Withdrawal Processing Fee(1)..............$95 for each withdrawal Reallocation Fee(2)..........................Current Charge: None Maximum Guaranteed Charge: $30
1 SUBJECT TO METLIFE'S UNDERWRITING REQUIREMENTS, WE MAY MAKE AVAILABLE A WITHDRAWAL OPTION UNDER YOUR INCOME ANNUITY. IF THE WITHDRAWAL OPTION IS AVAILABLE UNDER YOUR INCOME ANNUITY, YOU CAN CHOOSE TO ADD A WITHDRAWAL OPTION THAT PERMITS YOU TO WITHDRAW AMOUNTS FROM YOUR ANNUITY. THIS OPTION IS DESCRIBED IN MORE DETAIL LATER IN THIS PROSPECTUS. CHOOSING THIS OPTION WILL TYPICALLY RESULT IN LOWER INCOME PAYMENTS THAN IF THIS FEATURE HAD NOT BEEN CHOSEN. 2 WE RESERVE THE RIGHT TO LIMIT REALLOCATIONS AS DESCRIBED LATER IN THIS PROSPECTUS. WE RESERVE THE RIGHT TO IMPOSE A REALLOCATION FEE. THE AMOUNT OF THIS FEE WILL BE NO GREATER THAN $30 PER REALLOCATION. -------------------------------------------------------------------------------- The second table describes the fees and expenses that you will bear periodically during the time you hold the Income Annuity, but does not include fees and expenses for the Portfolios. Separate Account Charge (as a percentage of your average account value)(3) General Administrative Expenses Charge................... .20% Mortality and Expense Risk Charge........................ .75% Total Separate Account Annual Charge(3)........Maximum Guaranteed Charge: .95%
3 PURSUANT TO THE TERMS OF THE CONTRACT, OUR TOTAL SEPARATE ACCOUNT CHARGE WILL NOT EXCEED .95% OF THE AMOUNT OF UNDERLYING PORTFOLIO SHARES WE HAVE DESIGNATED IN THE INVESTMENT DIVISIONS TO GENERATE YOUR INCOME PAYMENTS FOR THE INCOME ANNUITIES. FOR PURPOSES OF PRESENTATION HERE, WE ESTIMATED THE ALLOCATION BETWEEN GENERAL ADMINISTRATIVE EXPENSES AND THE MORTALITY AND EXPENSE RISK CHARGE. THE RATE THAT APPLIES MAY BE LESS THAN THE MAXIMUM RATE, AS DESCRIBED IN MORE DETAIL LATER IN THIS PROSPECTUS. IF THE INCOME ANNUITY IS PURCHASED DIRECTLY FROM METLIFE, THE RATE THAT APPLIES ALSO MAY BE LESS THAN THE MAXIMUM RATE DEPENDING ON THE LEVEL OF DISTRIBUTION ASSISTANCE PROVIDED TO US BY YOUR EMPLOYER, ASSOCIATION OR GROUP. THE LEVELS DEPEND ON VARIOUS FACTORS PERTAINING TO THE AMOUNT OF ACCESS WE ARE GIVEN TO POTENTIAL PURCHASERS. THE RATE THAT APPLIES IS STATED IN YOUR INCOME ANNUITY. WE ARE WAIVING 0.08% OF THE SEPARATE ACCOUNT CHARGE FOR THE INVESTMENT DIVISION INVESTING IN THE BLACKROCK LARGE-CAP CORE PORTFOLIO. -------------------------------------------------------------------------------- The third table shows the minimum and maximum total operating expenses charged by the Portfolios, as well as the operating expenses for each Portfolio, that you may bear periodically while you hold the Income Annuity. All of the Portfolios listed below are Class A except for the Portfolios of the American Funds, which are Class 2 Portfolios. More details concerning the Metropolitan Fund, the Met Investors Fund and the American Funds fees and expenses are contained in their respective prospectuses.
Minimum Maximum Total Annual Metropolitan Fund, Met Investors Fund and American Funds ------- ------- Operating Expenses for the fiscal year ending December 31, 2006 (expenses that are deducted from these Funds' assets include management fees, distribution fees (12b-1 fees) and other expenses).................................................. 0.30% 1.05% After Waiver and/or Reimbursement of Expenses(4)(5).......... 0.29% 1.05%
4 MET INVESTORS ADVISORY LLC ("METLIFE INVESTORS") AND MET INVESTORS FUND HAVE ENTERED INTO AN EXPENSE LIMITATION AGREEMENT UNDER WHICH MET INVESTORS FUND HAS AGREED TO WAIVE OR LIMIT ITS FEES AND TO ASSUME OTHER EXPENSES SO THAT THE TOTAL ANNUAL EXPENSES OF EACH PORTFOLIO (OTHER THAN INTEREST, TAXES, BROKERAGE COMMISSIONS, OTHER EXPENDITURES WHICH ARE CAPITALIZED IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES AND OTHER EXTRAORDINARY EXPENSES NOT INCURRED IN THE ORDINARY COURSE OF EACH PORTFOLIO'S BUSINESS) WILL NOT EXCEED, AT ANY TIME PRIOR TO APRIL 30, 2008, EXCLUSIVE OF 12B-1 FEES, THE FOLLOWING PERCENTAGES: 0.55% FOR THE CYCLICAL GROWTH ETF PORTFOLIO, AND 0.55% FOR THE CYCLICAL GROWTH AND INCOME ETF PORTFOLIO. UNDER CERTAIN CIRCUMSTANCES, ANY FEES WAIVED OR EXPENSES REIMBURSED BY METLIFE INVESTORS MAY, WITH THE APPROVAL OF THE TRUST'S BOARD OF TRUSTEE, BE REPAID BY THE APPLICABLE PORTFOLIO TO METLIFE INVESTORS. THE EFFECT OF SUCH WAIVER AND REIMBURSEMENT IS THAT PERFORMANCE RESULTS ARE INCREASED. SEE THE ATTACHED PROSPECTUS FOR THE MET INVESTORS FUND FOR MORE INFORMATION ABOUT THE AGREEMENT TO WAIVE OR LIMIT FEES AND TO ASSUME OTHER EXPENSES BETWEEN METLIFE INVESTORS AND THE MET INVESTORS FUND. 6 TABLE OF EXPENSES (CONTINUED) 5 PURSUANT TO AN EXPENSE AGREEMENT, METLIFE ADVISERS, LLC ("METLIFE ADVISERS") HAS AGREED TO WAIVE ITS INVESTMENT MANAGEMENT FEE OR PAY OPERATING EXPENSES (EXCLUSIVE OF BROKERAGE COSTS, INTEREST, TAXES AND EXTRAORDINARY EXPENSES, UNDERLYING PORTFOLIO INVESTMENT MANAGEMENT FEES AND EXPENSES) AS NECESSARY TO LIMIT THE TOTAL OF SUCH EXPENSES TO THE ANNUAL PERCENTAGE OF AVERAGE DAILY NET ASSETS OF THE FOLLOWING PORTFOLIOS, EXCLUSIVE OF 12B-1 FEES, AS INDICATED:
PORTFOLIO PERCENTAGE --------- ---------- METLIFE CONSERVATIVE ALLOCATION PORTFOLIO 0.10 METLIFE CONSERVATIVE TO MODERATE ALLOCATION PORTFOLIO 0.10 METLIFE MODERATE ALLOCATION PORTFOLIO 0.10 METLIFE MODERATE TO AGGRESSIVE ALLOCATION PORTFOLIO 0.10 METLIFE AGGRESSIVE ALLOCATION PORTFOLIO 0.10
THIS WAIVER OR AGREEMENT TO PAY IS SUBJECT TO THE OBLIGATION OF EACH CLASS OF THE PORTFOLIO SEPARATELY TO REPAY METLIFE ADVISERS SUCH EXPENSES IN FUTURE YEARS, IF ANY, WHEN THE PORTFOLIO'S CLASS'S EXPENSES FALL BELOW THE ABOVE PERCENTAGES IF CERTAIN CONDITIONS ARE MET. THE AGREEMENT MAY BE TERMINATED AT ANY TIME AFTER APRIL 30, 2008. THE EFFECT OF SUCH WAIVER AND REIMBURSEMENT IS THAT PERFORMANCE RESULTS ARE INCREASED. METLIFE ADVISERS HAS ALSO AGREED TO WAIVE A PORTION OF ITS INVESTMENT MANAGEMENT FEE UNTIL AT LEAST APRIL 30, 2008 FOR THE FOLLOWING PORTFOLIOS IN THE PERCENTAGE AMOUNTS SPECIFIED BELOW:
PORTFOLIO PERCENTAGE BEFORE WAIVER PERCENTAGE AFTER WAIVER --------- ------------------------ ----------------------- METLIFE STOCK INDEX PORTFOLIO 0.25 0.243 T. ROWE PRICE LARGE CAP GROWTH PORTFOLIO 0.65 OF THE FIRST $50 MILLION 0.635 OF THE FIRST $50 MILLION 0.60 OF THE EXCESS OVER $50 MILLION 0.60 OF THE EXCESS OVER $50 MILLION METLIFE MID CAP STOCK INDEX PORTFOLIO 0.25 0.243 LOOMIS SAYLES SMALL CAP PORTFOLIO 0.90 OF THE FIRST $500 MILLION 0.85 OF THE FIRST $500 MILLION 0.85 OF THE EXCESS OVER $500 MILLION 0.80 OF THE EXCESS OVER $500 MILLION RUSSELL 2000(R) PORTFOLIO 0.25 0.243 MORGAN STANLEY EAFE(R) PORTFOLIO 0.30 0.293 LEHMAN BROTHERS(R) AGGREGATE BOND INDEX 0.25 0.244 PORTFOLIO BLACKROCK BOND INCOME PORTFOLIO 0.40 OF THE FIRST $1 BILLION 0.40 OF THE FIRST $1 BILLION 0.35 OF THE NEXT $1 BILLION 0.325 OF THE NEXT $1 BILLION 0.30 OF THE NEXT $1 BILLION 0.30 OF THE NEXT $1 BILLION 0.25 OF THE EXCESS OVER $3 BILLION 0.25 OF THE EXCESS OVER $3 BILLION
THE EFFECT OF SUCH WAIVER IS THAT PERFORMANCE RESULTS ARE INCREASED. SEE THE ATTACHED PROSPECTUS FOR THE METROPOLITAN FUND FOR MORE INFORMATION ABOUT THE AGREEMENT TO WAIVE OR LIMIT FEES AND TO ASSUME OTHER EXPENSES BETWEEN METLIFE ADVISERS AND THE METROPOLITAN FUND.
B A+B=C METROPOLITAN FUND ANNUAL EXPENSES A OTHER EXPENSES TOTAL EXPENSES for fiscal year ending December 31, 2006 MANAGEMENT BEFORE BEFORE WAIVER/ (as a percentage of average net assets) FEES REIMBURSEMENT REIMBURSEMENT -------------------------------------------------------------------------------------- BlackRock Aggressive Growth Portfolio(16)..................... 0.72% 0.06% 0.78% BlackRock Bond Income Portfolio(5)(9)(16)............... 0.39% 0.07% 0.46% BlackRock Diversified Portfolio(16)... 0.44% 0.07% 0.51% BlackRock Large Cap Value Portfolio(7)(16).................. 0.70% 0.11% 0.81% BlackRock Legacy Large Cap Growth Portfolio(16)..................... 0.73% 0.07% 0.80% BlackRock Strategic Value Portfolio(16)..................... 0.82% 0.06% 0.88% Davis Venture Value Portfolio....... 0.71% 0.04% 0.75% FI International Stock Portfolio(15)... 0.85% 0.13% 0.98% FI Large Cap Portfolio(24).......... 0.78% 0.06% 0.84% FI Mid Cap Opportunities Portfolio(14)..................... 0.68% 0.06% 0.74% FI Value Leaders Portfolio.......... 0.64% 0.07% 0.71% Franklin Templeton Small Cap Growth Portfolio(7)...................... 0.90% 0.15% 1.05% C-D=E METROPOLITAN FUND ANNUAL EXPENSES D TOTAL EXPENSES for fiscal year ending December 31, 2006 WAIVER/ AFTER WAIVER/ (as a percentage of average net assets) REIMBURSEMENT REIMBURSEMENT ---------------------------------------- ------------------------------ BlackRock Aggressive Growth Portfolio(16)..................... 0.00% 0.78% BlackRock Bond Income Portfolio(5)(9)(16)............... 0.01% 0.45% BlackRock Diversified Portfolio(16)... 0.00% 0.51% BlackRock Large Cap Value Portfolio(7)(16).................. 0.00% 0.81% BlackRock Legacy Large Cap Growth Portfolio(16)..................... 0.00% 0.80% BlackRock Strategic Value Portfolio(16)..................... 0.00% 0.88% Davis Venture Value Portfolio....... 0.00% 0.75% FI International Stock Portfolio(15)... 0.00% 0.98% FI Large Cap Portfolio(24).......... 0.00% 0.84% FI Mid Cap Opportunities Portfolio(14)..................... 0.00% 0.74% FI Value Leaders Portfolio.......... 0.00% 0.71% Franklin Templeton Small Cap Growth Portfolio(7)...................... 0.00% 1.05%
7 TABLE OF EXPENSES (CONTINUED)
B A+B=C METROPOLITAN FUND ANNUAL EXPENSES A OTHER EXPENSES TOTAL EXPENSES for fiscal year ending December 31, 2006 MANAGEMENT BEFORE BEFORE WAIVER/ (as a percentage of average net assets) FEES REIMBURSEMENT REIMBURSEMENT -------------------------------------------------------------------------------------- Harris Oakmark Focused Value Portfolio......................... 0.72 0.05 0.77 Harris Oakmark Large Cap Value Portfolio......................... 0.72 0.06 0.78 Jennison Growth Portfolio(17)....... 0.63 0.05 0.68 Lehman Brothers(R) Aggregate Bond Index Portfolio(5)...................... 0.25 0.06 0.31 Loomis Sayles Small Cap Portfolio(5)... 0.90 0.07 0.97 MFS(R) Total Return Portfolio(24)... 0.53 0.05 0.58 MetLife Mid Cap Stock Index Portfolio(5)(6)................... 0.25 0.07 0.33 MetLife Stock Index Portfolio(5).... 0.25 0.05 0.30 Morgan Stanley EAFE(R) Index Portfolio(5)(28).................. 0.30 0.13 0.45 Neuberger Berman Mid Cap Value Portfolio(24)..................... 0.65 0.06 0.71 Oppenheimer Global Equity Portfolio(18)..................... 0.53 0.09 0.62 Russell 2000(R) Index Portfolio(5)... 0.25 0.09 0.36 T. Rowe Price Large Cap Growth Portfolio(5)...................... 0.60 0.08 0.68 T. Rowe Price Small Cap Growth Portfolio......................... 0.51 0.07 0.58 Western Asset Management Strategic Bond Opportunities Portfolio(21)....... 0.63 0.07 0.70 Western Asset Management U.S. Government Portfolio(21)..................... 0.50 0.07 0.57 C-D=E METROPOLITAN FUND ANNUAL EXPENSES D TOTAL EXPENSES for fiscal year ending December 31, 2006 WAIVER/ AFTER WAIVER/ (as a percentage of average net assets) REIMBURSEMENT REIMBURSEMENT ---------------------------------------- ------------------------------ Harris Oakmark Focused Value Portfolio......................... 0.00 0.77 Harris Oakmark Large Cap Value Portfolio......................... 0.00 0.78 Jennison Growth Portfolio(17)....... 0.00 0.68 Lehman Brothers(R) Aggregate Bond Index Portfolio(5)...................... 0.01 0.30 Loomis Sayles Small Cap Portfolio(5)... 0.05 0.92 MFS(R) Total Return Portfolio(24)... 0.00 0.58 MetLife Mid Cap Stock Index Portfolio(5)(6)................... 0.01 0.32 MetLife Stock Index Portfolio(5).... 0.01 0.29 Morgan Stanley EAFE(R) Index Portfolio(5)(28).................. 0.01 0.44 Neuberger Berman Mid Cap Value Portfolio(24)..................... 0.00 0.71 Oppenheimer Global Equity Portfolio(18)..................... 0.00 0.62 Russell 2000(R) Index Portfolio(5)... 0.01 0.35 T. Rowe Price Large Cap Growth Portfolio(5)...................... 0.00 0.68 T. Rowe Price Small Cap Growth Portfolio......................... 0.00 0.58 Western Asset Management Strategic Bond Opportunities Portfolio(21)....... 0.00 0.70 Western Asset Management U.S. Government Portfolio(21)..................... 0.00 0.57
B A+B=C A OTHER EXPENSES TOTAL EXPENSES MANAGEMENT BEFORE BEFORE WAIVER/ INCOME ALLOCATION PORTFOLIOS(20) FEES REIMBURSEMENT REIMBURSEMENT ----------------------------------------------------------------------------------------- MetLife Conservative Allocation Portfolio(5)............................. 0.10 0.09 0.19 MetLife Conservative to Moderate Allocation Portfolio(5)............................. 0.10 0.02 0.12 MetLife Moderate Allocation Portfolio(5)... 0.10 0.01 0.11 MetLife Moderate to Aggressive Allocation Portfolio(5)............................. 0.10 0.01 0.11 MetLife Aggressive Allocation Portfolio(5)............................. 0.10 0.07 0.17 NET TOTAL ANNUAL C-D=E EXPENSES INCLUDING D NET TOTAL ESTIMATED NET EXPENSES WAIVER/ ANNUAL OF UNDERLYING INCOME ALLOCATION PORTFOLIOS(20) REIMBURSEMENT EXPENSES PORTFOLIOS ------------------------------------------- ---------------------------------------------------------------- MetLife Conservative Allocation Portfolio(5)............................. 0.09 0.10 0.71 MetLife Conservative to Moderate Allocation Portfolio(5)............................. 0.02 0.10 0.75 MetLife Moderate Allocation Portfolio(5)... 0.01 0.10 0.80 MetLife Moderate to Aggressive Allocation Portfolio(5)............................. 0.01 0.10 0.85 MetLife Aggressive Allocation Portfolio(5)............................. 0.07 0.10 0.85
B A+B=C MET INVESTORS FUND ANNUAL EXPENSES A OTHER EXPENSES TOTAL EXPENSES for fiscal year ending December 31, 2006 MANAGEMENT BEFORE BEFORE WAIVER/ (as a percentage of average net assets) FEES REIMBURSEMENT REIMBURSEMENT -------------------------------------------------------------------------------------- BlackRock Large-Cap Core Portfolio(8)(16)(26)............. 0.63 0.22 0.85 Harris Oakmark International Portfolio(10).................... 0.78 0.13 0.91 Lazard Mid-Cap Portfolio(23)....... 0.70 0.06 0.76 Legg Mason Partners Aggressive Growth(12)(27)................... 0.63 0.09 0.72 Legg Mason Value Equity Portfolio(7)(13)(24)............. 0.64 0.08 0.72 Lord Abbett Bond Debenture Portfolio(9)..................... 0.50 0.04 0.54 MFS(R) Research International Portfolio........................ 0.72 0.14 0.86 Met/AIM Small Cap Growth Portfolio(27).................... 0.87 0.06 0.93 Neuberger Berman Real Estate Portfolio........................ 0.64 0.04 0.68 Oppenheimer Capital Appreciation Portfolio(27).................... 0.57 0.05 0.62 PIMCO Inflation Protected Bond Portfolio........................ 0.50 0.05 0.55 PIMCO Total Return Portfolio....... 0.50 0.05 0.55 RCM Technology Portfolio(7)(19)(27)... 0.88 0.14 1.02 T. Rowe Price Mid-Cap Growth Portfolio(11).................... 0.75 0.04 0.79 C-D=E MET INVESTORS FUND ANNUAL EXPENSES D TOTAL EXPENSES for fiscal year ending December 31, 2006 WAIVER/ AFTER WAIVER/ (as a percentage of average net assets) REIMBURSEMENT REIMBURSEMENT ---------------------------------------- ------------------------------ BlackRock Large-Cap Core Portfolio(8)(16)(26)............. 0.00 0.85 Harris Oakmark International Portfolio(10).................... 0.00 0.91 Lazard Mid-Cap Portfolio(23)....... 0.00 0.76 Legg Mason Partners Aggressive Growth(12)(27)................... 0.00 0.72 Legg Mason Value Equity Portfolio(7)(13)(24)............. 0.00 0.72 Lord Abbett Bond Debenture Portfolio(9)..................... 0.00 0.54 MFS(R) Research International Portfolio........................ 0.00 0.86 Met/AIM Small Cap Growth Portfolio(27).................... 0.00 0.93 Neuberger Berman Real Estate Portfolio........................ 0.00 0.68 Oppenheimer Capital Appreciation Portfolio(27).................... 0.00 0.62 PIMCO Inflation Protected Bond Portfolio........................ 0.00 0.55 PIMCO Total Return Portfolio....... 0.00 0.55 RCM Technology Portfolio(7)(19)(27)... 0.00 1.02 T. Rowe Price Mid-Cap Growth Portfolio(11).................... 0.00 0.79
8 TABLE OF EXPENSES (CONTINUED)
A MANAGEMENT B A+B=C EXCHANGE-TRADED FUNDS PORTFOLIOS(22) FEES OTHER EXPENSES TOTAL EXPENSES ---------------------------------------------------------------------------------- Cyclical Growth and Income ETF Portfolio(4)........... 0.45 0.18 0.63 Cyclical Growth ETF Portfolio(4)... 0.45 0.15 0.60 NET TOTAL ANNUAL EXPENSES INCLUDING C-D=E ESTIMATED NET D NET TOTAL EXPENSES OF WAIVER/ ANNUAL UNDERLYING EXCHANGE-TRADED FUNDS PORTFOLIOS(22) REIMBURSEMENT EXPENSES PORTFOLIOS ------------------------------------ ------------------------------------------------ Cyclical Growth and Income ETF Portfolio(4)........... 0.08 0.55 0.80 Cyclical Growth ETF Portfolio(4)... 0.05 0.55 0.79
AMERICAN FUNDS CLASS 2 ANNUAL EXPENSES A B for fiscal year ending December 31, 2006 MANAGEMENT 12b-1 (as a percentage of average net assets) (25) FEES FEES ---------------------------------------------------------------- American Funds Bond Portfolio.... 0.41 0.25 American Funds Global Small Capitalization Portfolio...................... 0.72 0.25 American Funds Growth Portfolio... 0.32 0.25 American Funds Growth-Income Portfolio... 0.27 0.25 C A+B+C=D AMERICAN FUNDS CLASS 2 ANNUAL EXPENSES OTHER EXPENSES TOTAL EXPENSES for fiscal year ending December 31, 2006 BEFORE BEFORE WAIVER/ (as a percentage of average net assets) (25) REIMBURSEMENT REIMBURSEMENT -------------------------------------------- ------------------------------- American Funds Bond Portfolio.... 0.01 0.67 American Funds Global Small Capitalization Portfolio...................... 0.05 1.02 American Funds Growth Portfolio... 0.02 0.59 American Funds Growth-Income Portfolio... 0.01 0.53 D-E=F AMERICAN FUNDS CLASS 2 ANNUAL EXPENSES E TOTAL EXPENSES for fiscal year ending December 31, 2006 WAIVER/ AFTER WAIVER/ (as a percentage of average net assets) (25) REIMBURSEMENT REIMBURSEMENT -------------------------------------------- ------------------------------ American Funds Bond Portfolio.... 0.00 0.67 American Funds Global Small Capitalization Portfolio...................... 0.00 1.02 American Funds Growth Portfolio... 0.00 0.59 American Funds Growth-Income Portfolio... 0.00 0.53
6 OTHER EXPENSES INCLUDE 0.01% OF "ACQUIRED FUND FEES AND EXPENSES", WHICH ARE FEES AND EXPENSES ATTRIBUTABLE TO UNDERLYING PORTFOLIOS IN WHICH THE PORTFOLIO INVESTED DURING THE PRECEDING FISCAL YEAR. 7 FEES WAIVED OR EXPENSES REIMBURSED BY THE INVESTMENT MANAGER OF THESE PORTFOLIOS IN PRIOR YEARS WERE REPAID IN THE LAST FISCAL YEAR BY THE INVESTMENT MANAGER UNDER THE TERMS OF PRIOR EXPENSE LIMITATION AGREEMENTS. THESE AMOUNTS PER PORTFOLIO WERE:
PORTFOLIO PERCENTAGE --------- ---------- BLACKROCK LARGE CAP VALUE 0.02 FRANKLIN TEMPLETON SMALL CAP GROWTH 0.03 LEGG MASON VALUE EQUITY 0.02 RCM TECHNOLOGY 0.04
8 BLACKROCK INVESTMENT TRUST PORTFOLIO OF THE METROPOLITAN FUND WAS RENAMED BLACKROCK LARGE CAP PORTFOLIO ON OCTOBER 2, 2006. PRIOR TO THE OPENING OF BUSINESS ON APRIL 30, 2007, THE BLACKROCK LARGE CAP PORTFOLIO OF THE METROPOLITAN FUND WAS MERGED INTO THE BLACKROCK LARGE-CAP CORE PORTFOLIO OF THE MET INVESTORS FUND. 9 ON APRIL 29, 2002, THE STATE STREET RESEARCH INCOME PORTFOLIO OF THE METROPOLITAN FUND WAS MERGED INTO THE STATE STREET RESEARCH BOND INCOME PORTFOLIO OF THE NEW ENGLAND ZENITH FUND AND THE LOOMIS SAYLES HIGH YIELD BOND PORTFOLIO OF THE METROPOLITAN FUND WAS MERGED INTO THE LORD ABBETT BOND DEBENTURE PORTFOLIO OF THE MET INVESTORS FUND. 10 ON JANUARY 1, 2003, HARRIS ASSOCIATES L.P. BECAME THE SUB-INVESTMENT MANAGER FOR STATE STREET RESEARCH CONCENTRATED INTERNATIONAL PORTFOLIO, WHICH CHANGED ITS NAME TO HARRIS OAKMARK INTERNATIONAL PORTFOLIO. 11 ON JANUARY 1, 2003, T. ROWE PRICE ASSOCIATES INC. BECAME THE SUB-INVESTMENT MANAGER FOR THE MFS MID CAP GROWTH PORTFOLIO WHICH CHANGED ITS NAME TO T. ROWE PRICE MID-CAP GROWTH PORTFOLIO. 12 ON APRIL 28, 2003, THE JANUS GROWTH PORTFOLIO OF THE METROPOLITAN FUND WAS MERGED INTO THE JANUS AGGRESSIVE GROWTH PORTFOLIO OF THE MET INVESTORS FUND. ON OCTOBER 2, 2006, CLEARBRIDGE ADVISORS, LLC (FORMERLY KNOWN AS CAM NORTH AMERICA, LLC) BECAME SUB-INVESTMENT MANAGER FOR THE JANUS AGGRESSIVE GROWTH PORTFOLIO, WHICH CHANGED ITS NAME, EFFECTIVE NOVEMBER 13, 2006, TO LEGG MASON AGGRESSIVE GROWTH PORTFOLIO. LEGG MASON AGGRESSIVE GROWTH PORTFOLIO WAS RENAMED LEGG MASON PARTNERS AGGRESSIVE GROWTH PORTFOLIO, PRIOR TO THE OPENING OF BUSINESS ON APRIL 30, 2007. 13 PRIOR TO THE OPENING OF BUSINESS ON MAY 3, 2004, THE MFS(R) RESEARCH MANAGERS PORTFOLIO OF THE METROPOLITAN FUND WAS MERGED INTO THE MFS(R) INVESTORS TRUST PORTFOLIO OF THE METROPOLITAN FUND. PRIOR TO THE OPENING OF BUSINESS MAY 1, 2006, THE MFS(R) INVESTORS TRUST PORTFOLIO OF THE METROPOLITAN FUND WAS MERGED INTO THE LEGG MASON VALUE EQUITY PORTFOLIO OF THE MET INVESTORS FUND. 14 PRIOR TO THE OPENING OF BUSINESS ON MAY 3, 2004, THE FI MID CAP OPPORTUNITIES PORTFOLIO WAS MERGED INTO THE JANUS MID CAP PORTFOLIO AND FIDELITY MANAGEMENT & RESEARCH COMPANY BECAME THE SUB-INVESTMENT MANAGER FOR THE PORTFOLIO WHICH CHANGED ITS NAME TO FI MID CAP OPPORTUNITIES PORTFOLIO. 15 ON DECEMBER 16, 2003, FIDELITY RESEARCH & MANAGEMENT COMPANY BECAME THE SUB-INVESTMENT MANAGER FOR THE PUTNAM INTERNATIONAL STOCK PORTFOLIO WHICH CHANGED ITS NAME TO FI INTERNATIONAL STOCK PORTFOLIO. 16 EFFECTIVE JANUARY 31, 2005, BLACKROCK ADVISORS, INC. BECAME THE SUB-INVESTMENT MANAGER FOR THE STATE STREET RESEARCH BOND INCOME PORTFOLIO, THE STATE STREET RESEARCH DIVERSIFIED PORTFOLIO, THE STATE STREET RESEARCH LARGE CAP VALUE PORTFOLIO, THE STATE STREET RESEARCH INVESTMENT TRUST PORTFOLIO, THE STATE 9 TABLE OF EXPENSES (CONTINUED) STREET RESEARCH LARGE CAP GROWTH PORTFOLIO, THE STATE STREET RESEARCH AGGRESSIVE GROWTH PORTFOLIO AND THE STATE STREET RESEARCH AURORA PORTFOLIO, WHICH CHANGED THEIR NAMES AS SHOWN IN THE FOLLOWING TABLE:
PRIOR PORTFOLIO NAME NEW PORTFOLIO NAME -------------------- ------------------ STATE STREET RESEARCH AGGRESSIVE GROWTH PORTFOLIO BLACKROCK AGGRESSIVE GROWTH PORTFOLIO STATE STREET RESEARCH AURORA PORTFOLIO BLACKROCK STRATEGIC VALUE PORTFOLIO STATE STREET RESEARCH BOND INCOME PORTFOLIO BLACKROCK BOND INCOME PORTFOLIO STATE STREET RESEARCH DIVERSIFIED PORTFOLIO BLACKROCK DIVERSIFIED PORTFOLIO STATE STREET RESEARCH INVESTMENT TRUST PORTFOLIO BLACKROCK INVESTMENT TRUST PORTFOLIO STATE STREET RESEARCH LARGE CAP GROWTH PORTFOLIO BLACKROCK LEGACY LARGE CAP GROWTH PORTFOLIO STATE STREET RESEARCH LARGE CAP VALUE PORTFOLIO BLACKROCK LARGE CAP VALUE PORTFOLIO
17 PRIOR TO THE OPENING OF BUSINESS ON MAY 2, 2005, THE MET/PUTNAM VOYAGER PORTFOLIO OF THE METROPOLITAN FUND WAS MERGED INTO THE JENNISON GROWTH PORTFOLIO OF THE METROPOLITAN FUND. 18 ON MAY 1, 2005, OPPENHEIMERFUNDS, INC. BECAME THE SUB-INVESTMENT MANAGER FOR THE SCUDDER GLOBAL EQUITY PORTFOLIO WHICH CHANGED ITS NAME TO OPPENHEIMER GLOBAL EQUITY PORTFOLIO. 19 ON JANUARY 15, 2005, RCM CAPITAL MANAGEMENT LLC BECAME THE SUB-INVESTMENT MANAGER FOR THE PIMCO PEA INNOVATION PORTFOLIO WHICH CHANGED ITS NAME TO RCM GLOBAL TECHNOLOGY PORTFOLIO. RCM GLOBAL TECHNOLOGY PORTFOLIO OF THE MET INVESTORS SERIES TRUST WAS RENAMED RCM TECHNOLOGY PORTFOLIO, PRIOR TO THE OPENING OF BUSINESS ON APRIL 30, 2007. 20 THESE PORTFOLIOS ARE "FUNDS OF FUNDS" THAT INVEST SUBSTANTIALLY ALL OF THEIR ASSETS IN OTHER PORTFOLIOS OF THE MET INVESTORS SERIES TRUST AND THE METROPOLITAN SERIES FUND, INC. BECAUSE THE PORTFOLIOS INVEST IN OTHER UNDERLYING PORTFOLIOS, EACH PORTFOLIO WILL ALSO BEAR ITS PRO RATA PORTION OF THE OPERATING EXPENSES OF THE UNDERLYING PORTFOLIOS IN WHICH THE PORTFOLIO INVESTS, INCLUDING THE MANAGEMENT FEE. THE WEIGHTED AVERAGE OF THE TOTAL OPERATING EXPENSES OF THE UNDERLYING PORTFOLIOS, AFTER ANY APPLICABLE FEE WAIVERS AND EXPENSE REIMBURSEMENTS, AS OF DECEMBER 31, 2006, WERE: 0.61% FOR THE METLIFE CONSERVATIVE ALLOCATION PORTFOLIO, 0.65% FOR THE METLIFE CONSERVATIVE TO MODERATE ALLOCATION PORTFOLIO, 0.70% FOR THE METLIFE MODERATE ALLOCATION PORTFOLIO, 0.75% FOR THE METLIFE MODERATE TO AGGRESSIVE ALLOCATION PORTFOLIO AND 0.75% FOR THE METLIFE AGGRESSIVE STRATEGY PORTFOLIO. THE TOTAL OPERATING EXPENSES OF THE PORTFOLIOS, INCLUDING THE WEIGHTED AVERAGE OF THE TOTAL OPERATING EXPENSES OF THE UNDERLYING PORTFOLIOS, BEFORE ANY APPLICABLE FEE WAIVERS AND EXPENSE REIMBURSEMENTS, AS OF DECEMBER 31, 2006, WERE: 0.80% FOR THE METLIFE CONSERVATIVE ALLOCATION PORTFOLIO, 0.77% FOR THE METLIFE CONSERVATIVE TO MODERATE ALLOCATION PORTFOLIO, 0.81% FOR THE METLIFE MODERATE ALLOCATION PORTFOLIO, 0.86% FOR THE METLIFE MODERATE TO AGGRESSIVE ALLOCATION PORTFOLIO AND 0.92% FOR THE METLIFE AGGRESSIVE STRATEGY PORTFOLIO. CONTRACT OWNERS MAY BE ABLE TO REALIZE LOWER AGGREGATE EXPENSES BY INVESTING DIRECTLY IN THE UNDERLYING PORTFOLIOS INSTEAD OF INVESTING IN THE PORTFOLIOS. A CONTRACT OWNER WHO CHOOSES TO INVEST DIRECTLY IN THE UNDERLYING PORTFOLIOS WOULD NOT, HOWEVER, RECEIVE THE ASSET ALLOCATION SERVICES PROVIDED BY METLIFE ADVISERS. 21 ON APRIL 28, 2006, WESTERN ASSET MANAGEMENT BECAME THE SUB-INVESTMENT MANAGER FOR BOTH THE SALOMON BROTHERS U.S. GOVERNMENT PORTFOLIO AND THE SALOMON BROTHERS STRATEGIC OPPORTUNITIES BOND PORTFOLIO, WHICH CHANGED THEIR NAMES AS SET FORTH BELOW:
OLD PORTFOLIO NAME NEW PORTFOLIO NAME ------------------ ------------------ SALOMON BROTHERS STRATEGIC OPPORTUNITIES BOND WESTERN ASSET MANAGEMENT STRATEGIC PORTFOLIO OPPORTUNITIES BOND PORTFOLIO WESTERN ASSET MANAGEMENT U.S. GOVERNMENT SALOMON BROTHERS U.S. GOVERNMENT PORTFOLIO PORTFOLIO
22 EACH PORTFOLIO WILL PRIMARILY INVEST 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 ALSO BEAR ITS PRO-RATA PORTION OF THE OPERATING EXPENSES OF THE UNDERLYING ETF OR OTHER INVESTMENT COMPANY. THE WEIGHTED AVERAGE OF THE TOTAL OPERATING EXPENSES OF THE UNDERLYING ETFS OR OTHER INVESTMENT COMPANIES BASED UPON THE ALLOCATION OF ASSETS AS OF DECEMBER 31, 2006 WAS: 0.25% FOR CYCLICAL GROWTH AND INCOME ETF PORTFOLIO, AND 0.24% FOR CYCLICAL GROWTH ETF PORTFOLIO. SEE THE PROSPECTUS FOR THE PORTFOLIOS FOR A DESCRIPTION OF THE ALLOCATION TARGETS FOR EACH PORTFOLIO. THE TOTAL OPERATING EXPENSES OF THE PORTFOLIO, INCLUDING THE WEIGHTED AVERAGE OF THE TOTAL OPERATING EXPENSES OF THE UNDERLYING ETFS AND OTHER INVESTMENT COMPANIES AS OF DECEMBER 31, 2006, BEFORE ANY APPLICABLE FEE WAIVERS AND EXPENSE REIMBURSEMENTS, WERE 0.88% FOR THE CYCLICAL GROWTH AND INCOME ETF PORTFOLIO AND 0.84% FOR THE CYCLICAL GROWTH ETF PORTFOLIO. 23 ON DECEMBER 19, 2005, LAZARD ASSET MANAGEMENT LLC BECAME THE SUB-INVESTMENT MANAGER FOR THE MET/AIM MID CAP CORE EQUITY PORTFOLIO, WHICH CHANGED ITS NAME TO LAZARD MID-CAP PORTFOLIO. 24 THE MANAGEMENT FEE HAS BEEN RESTATED TO REFLECT CURRENT FEES, AS IF CURRENT FEES HAD BEEN IN EFFECT FOR THE PREVIOUS FISCAL YEAR. 25 THE AMERICAN FUNDS HAVE ADOPTED A DISTRIBUTION PLAN UNDER RULE 12B-1 OF THE INVESTMENT COMPANY ACT OF 1940. THE DISTRIBUTION PLAN IS DESCRIBED IN MORE DETAIL IN EACH FUND'S PROSPECTUS. WE ARE PAID THE RULE 12B-1 FEE IN CONNECTION WITH THE CLASS 2 SHARES OF THE AMERICAN FUNDS. 26 OTHER EXPENSES HAVE BEEN RESTATED TO REFLECT THE CURRENT MET INVESTORS SERIES TRUST FEE SCHEDULE, AS IF THAT SCHEDULE HAD APPLIED TO THE PORTFOLIO FOR THE ENTIRE FISCAL YEAR. 27 THE MANAGEMENT FEE HAS BEEN RESTATED TO REFLECT AN AMENDED MANAGEMENT FEE AGREEMENT, AS IF THE AGREEMENT HAD BEEN IN EFFECT DURING THE PREVIOUS FISCAL YEAR. 28 OTHER EXPENSES INCLUDE 0.02% OF "ACQUIRED FUND FEES AND EXPENSES", WHICH ARE FEES AND EXPENSES ATTRIBUTABLE TO UNDERLYING PORTFOLIOS IN WHICH THE PORTFOLIO INVESTED DURING THE PRECEDING FISCAL YEAR. 10 TABLE OF EXPENSES (CONTINUED) EXAMPLES The example is intended to help you compare the cost of investing in the Income Annuities with the cost of investing in other variable annuity contracts. These costs include the contract owner transaction expenses (described in the first table), the Separate Account and other costs you bear while you hold the Income Annuity (described in the second table) and the Portfolios and expenses (described in the third table). EXAMPLE This example shows the dollar amount of expenses that you would bear directly or indirectly on a $10,000 investment for an Income Annuity for the time periods indicated. Your actual costs may be higher or lower. ASSUMPTIONS: -- there was no allocation to the Fixed Income Option; -- reimbursement and/or waiver of expenses was not in effect; -- you bear the minimum or maximum fees and expenses of any of the Portfolios; -- there is a maximum Separate Account charge of 0.95%; -- no withdrawals have been taken; -- the underlying Portfolio earns a 5% annual return; and -- the AIR is 3%.
1 3 5 10 YEAR YEARS YEARS YEARS ---------------------------------------------------------------------------------------------------------------- Maximum..................................................... $196 $563 $892 $1519 Minimum..................................................... $123 $356 $569 $ 994
11 ANNUITY UNIT VALUES FOR EACH INVESTMENT DIVISION See Appendix B. 12 METLIFE Metropolitan Life Insurance Company ("MetLife" or the "Company") is a wholly-owned subsidiary of MetLife, Inc., a publicly traded company. Our home office is located at 200 Park Avenue, New York, New York 10166-0188. MetLife was formed under the laws of New York State in 1868. MetLife, Inc. is a leading provider of insurance and other financial services with operations throughout the United States and the Latin America, Europe and Asia Pacific regions. Through its domestic and international subsidiaries and affiliates, MetLife, Inc. reaches more than 70 million customers around the world and MetLife is the largest life insurer in the United States (based on life insurance in-force). The MetLife companies offer life insurance, annuities, auto and home insurance, retail banking and other financial services to individuals, as well as group insurance, reinsurance and retirement and savings products and services to corporations and other institutions. For more information, please visit www.metlife.com. METROPOLITAN LIFE SEPARATE ACCOUNT E We established Metropolitan Life Separate Account E on September 27, 1983. The purpose of the Separate Account is to hold the variable assets that underlie the Income Annuity Contracts and some other variable annuity contracts we issue. We have registered the Separate Account with the Securities and Exchange Commission as a unit investment trust under the Investment Company Act of 1940. The Separate Account's assets are solely for the benefit of those who invest in the Separate Account and no one else, including our creditors. We are obligated to pay all money we owe under the Income Annuities even if that amount exceeds the assets in the Separate Account. Any such amount that exceeds the assets in the Separate Account is paid from our general account. Benefit amounts paid from the general account are subject to the financial strength and claims paying ability of the company. The assets of the Separate Account are held in our name on behalf of the Separate Account and legally belong to us. All the income, gains and losses (realized or unrealized) resulting from these assets are credited to or charged against the Contracts issued from this Separate Account without regard to our other business. VARIABLE ANNUITIES Income annuities are usually purchased to produce a predictable source of income in retirement. There is no accumulation of cash value in an income annuity. Instead, you are purchasing a promise to receive periodic payments from the issuing insurance company under the terms of the contract. Typically, since income payments begin within twelve months, the annuity is known as an "immediate" annuity. The group Income Annuities described in this Prospectus are offered to employers, associations, trusts or other groups for their employees, members or participants. The Income Annuities are "variable" because the value of your income payment varies based on the investment performance of the investment divisions you choose. The income payments under your Income Annuity may go up or down. Since the investment performance is not guaranteed, your income payment amount is at risk. The degree of risk will depend on the investment divisions you select. The Annuity Unit Value for each investment division rises or falls based on the investment performance (or "experience") of the Portfolio with the same name. MetLife and its affiliates also offer other annuities not described in this Prospectus. Income annuities have a fixed payment option called the "Fixed Income Option." Under the Fixed Income Option, we guarantee the amount of your fixed income payments. These fixed options are not described in this Prospectus although we occasionally refer to them. You make a single purchase payment and select the type of income payment suited to your needs. Some of the income payment types guarantee an income stream for your lifetime; others guarantee an income stream for both 13 your lifetime, as well as the lifetime of another person (such as a spouse). Some Income Annuities guarantee a time period of your choice over which MetLife will make income payments. Income Annuities also have other features. The amount of the income payments you receive will depend on such things as the income payment type you choose, your investment choices and the amount of your purchase payment. WILL PREPARATION SERVICE AVAILABLE TO CERTAIN PURCHASERS FOR NO ADDITIONAL COST If approved in your state and made available by your employer, you may be able to obtain the Will Preparation Service at no additional cost from Hyatt Legal Plans, Inc. ("Hyatt"), a MetLife affiliate. The Will Preparation Service is available to employees of employers who purchase the group income annuity contract through a consortium of employers formed to purchase employee benefits. Please check with your employer to verify if it participates in the consortium. In order to qualify for the Will Preparation Service at no additional cost (1) your employer must have purchased the group income annuity contract which includes the Will Preparation Service through the Coalition; (2) your employer must have made available the Will Preparation Service option, and (3) you must purchase the non-qualified Income Annuity. You do not qualify for this service if you purchase the IRA version of the Income Annuity. The Will Preparation Service consists of preparation of wills and/or codicils or updating of wills for the purchaser of a non-qualified Income Annuity and his/her spouse. Hyatt is responsible for the cost of providing the Will Preparation Service, which may be delivered by a Hyatt participating attorney or an attorney outside of Hyatt's network of attorneys, if certain conditions are met. Reimbursement for legal services outside of the Hyatt network is limited to a set dollar amount. The Will Preparation Service does not include other expenses or costs, such as filing fees. Hyatt is not responsible for the legal work performed by an out of network attorney. The Will Preparation Service is available to domestic partners of the purchasers of the Income Annuity in lieu of a spouse if permitted by the employer. The Will Preparation Service is in effect for one year from the purchase of the Income Annuity and extends to completion of the will preparation or will update opened prior to the close of the one year period. "Opened" means the purchaser or his/her spouse has contacted Hyatt, received authorization from Hyatt and has commenced the Will Preparation Service through a participating or out of network attorney. The Will Preparation Service terminates if the Income Annuity is cancelled or commuted or if all the value within the annuity is withdrawn. YOUR INVESTMENT CHOICES The Metropolitan Fund, Met Investors Fund and American Funds and each of their Portfolios are more fully described in their respective prospectuses and SAIs. The SAIs are available upon your request. The Metropolitan Fund, Met Investors Fund and American Funds prospectuses are attached at the end of this Prospectus. You should read these prospectuses carefully before making purchase payments to the investment divisions. The Class A shares available to the Income Annuities do not impose any 12b-1 Plan fees. However, 12b-1 Plan fees are imposed on the American Funds Portfolios, which are Class 2. The investment choices are listed in alphabetical order (based upon the Portfolios' legal names). (See Appendix C Portfolio Legal and Marketing Names.) The investment divisions generally offer the opportunity for income payments to increase over the long term where our Fixed Income Payment Option will not increase. You should understand that each Portfolio incurs its own risk which will be dependent upon the investment decisions made by the respective Portfolio's investment manager. Furthermore, the name of a Portfolio may not be indicative of all the investments held by the Portfolio. The degree of investment risk you assume will depend on the investment divisions you choose. While the investment divisions and their comparably named Portfolios may have names, investment objectives and management which are identical or similar to publicly available mutual funds, these investment divisions and Portfolios are not those mutual funds. The Portfolios most likely will not have the same performance experience as any publicly available mutual fund. The lists are intended to be guides. Please consult the 14 appropriate Fund prospectus for more information regarding the investment objectives and investment practices of each Portfolio. Since your income payments are subject to the risks associated with investing in stocks and bonds, your variable income payments based on amounts allocated to the investment divisions may go down as well as up. INCOME ALLOCATION PORTFOLIOS The MetLife Conservative Allocation Portfolio, the MetLife Conservative to Moderate Allocation Portfolio, the MetLife Moderate Allocation Portfolio, the MetLife Moderate to Aggressive Allocation Portfolio, and the MetLife Aggressive Allocation Portfolio, also known as the "income allocation portfolios," are "fund of funds" Portfolios that invest substantially all of their assets in other Portfolios of the Metropolitan Fund or the Met Investors Fund. Therefore, each of these income allocation portfolios will bear its pro-rata portion of the fees and expenses incurred by the underlying Portfolio in which it invests in addition to its own management fees and expenses. This will reduce the investment return of each of the income allocation portfolios. The expense levels will vary over time, depending on the mix of underlying Portfolios in which the income allocation portfolio invests. Contract owners may be able to realize lower aggregate expenses by investing directly in the underlying Portfolios instead of investing in the income allocation portfolios. A contract owner who chooses to invest directly in the underlying Portfolios would not, however, receive the income allocation services provided by MetLife Advisers. For more information regarding the income allocation portfolios, please read the prospectus for these portfolios. EXCHANGE-TRADED FUNDS PORTFOLIOS The Cyclical Growth ETF Portfolio and the Cyclical Growth and Income ETF Portfolio are asset allocation portfolios and "fund of funds" Portfolios, which invest substantially all of their assets in other investment companies known as exchange-traded funds ("Underlying ETFs"). As an investor in an Underlying ETF or other investment company, each portfolio also will bear its pro-rata portion of the fees and expenses incurred by the Underlying ETF or other investment company in which it invests in addition to its own management fees and expenses. This will reduce the investment return of each of the portfolios. The expense levels will vary over time depending on the mix of Underlying ETFs in which these portfolios invest.
PORTFOLIOS INVESTMENT OBJECTIVES ---------- --------------------- American Fund Bond Portfolio Seeks to maximize current income and preserve capital by investing primarily in fixed-income securities American Funds Global Small Capitalization Seeks capital appreciation through stocks Portfolio American Funds Growth Portfolio Seeks capital appreciation through stocks American Funds Growth-Income Portfolio Seeks both capital appreciation and income BlackRock Aggressive Growth Portfolio Seeks maximum capital appreciation BlackRock Bond Income Portfolio Seeks competitive total return primarily from investing in fixed-income securities BlackRock Diversified Portfolio Seeks high total return while attempting to limit investment risk and preserve capital BlackRock Large-Cap Core Portfolio Seeks long-term capital growth BlackRock Large Cap Value Portfolio Seeks long-term growth of capital BlackRock Legacy Large Cap Growth Portfolio Seeks long-term growth of capital BlackRock Strategic Value Portfolio Seeks high total return, consisting principally of capital appreciation Davis Venture Value Portfolio Seeks growth of capital FI International Stock Portfolio Seeks long-term growth of capital FI Large Cap Portfolio Seeks long-term growth of capital FI Mid Cap Opportunities Portfolio Seeks long-term growth of capital FI Value Leaders Portfolio Seeks long-term-growth of capital Franklin Templeton Small Cap Growth Portfolio Seeks long-term capital growth Harris Oakmark Focused Value Portfolio Seeks long-term capital appreciation Harris Oakmark International Portfolio Seeks long-term capital appreciation Harris Oakmark Large Cap Value Portfolio Seeks long-term capital appreciation Jennison Growth Portfolio Seeks long-term growth of capital Lazard Mid-Cap Portfolio Seeks long-term growth of capital
15
PORTFOLIOS INVESTMENT OBJECTIVES ---------- --------------------- Legg Mason Partners Aggressive Growth Portfolio Seeks capital appreciation Legg Mason Value Equity Portfolio Seeks long-term growth of capital Lehman Brothers(R) Aggregate Bond Index Seeks to equal the performance of the Lehman Brothers(R) Portfolio Aggregate Bond Index Loomis Sayles Small Cap Portfolio Seeks long-term capital growth from investments in common stocks or other equity securities Lord Abbett Bond Debenture Portfolio Seeks to provide high current income and the opportunity for capital appreciation to produce a high total return Met/AIM Small Cap Growth Portfolio Seeks long-term growth of capital MetLife Mid Cap Stock Index Portfolio Seeks to equal the performance of the Standard & Poor's Mid Cap 400 Composite Stock Price Index ("S&P Mid Cap 400 Index") MetLife Stock Index Portfolio Seeks to equal the performance of the Standard & Poor's 500 Composite Stock Price Index ("S&P 500 Index") MFS(R) Research International Portfolio Seeks capital appreciation MFS(R) Total Return Portfolio Seeks a favorable total return through investment in a diversified portfolio Morgan Stanley EAFE(R) Index Portfolio Seeks to equal the performance of the MSCI EAFE(R) Index Neuberger Berman Mid Cap Value Portfolio Seeks capital growth Neuberger Berman Real Estate Portfolio Seeks to provide total return through investment in real estate securities, emphasizing both capital appreciation and current income Oppenheimer Capital Appreciation Portfolio Seeks capital appreciation Oppenheimer Global Equity Portfolio Seeks capital appreciation PIMCO Inflation Protected Bond Portfolio Seeks to provide maximum real return, consistent with preservation of capital and prudent investment management PIMCO Total Return Portfolio Seeks maximum total return, consistent with the preservation of capital and prudent investment management RCM Technology Portfolio Seeks capital appreciation; no consideration is given to income Russell 2000(R) Index Portfolio Seeks to equal the return of the Russell 2000(R) Index T. Rowe Price Large Cap Growth Portfolio Seeks long-term growth of capital and, secondarily, dividend income T. Rowe Price Mid-Cap Growth Portfolio Seeks long-term growth of capital T. Rowe Price Small Cap Growth Portfolio Seeks long-term capital growth Western Asset Management Strategic Bond Seeks to maximize total return consistent with preservation Opportunities Portfolio of capital Western Asset Management U.S. Government Seeks to maximize total return consistent with preservation Portfolio of capital and maintenance of liquidity INCOME ALLOCATION PORTFOLIOS MetLife Aggressive Allocation Portfolio Seeks growth of capital MetLife Conservative Allocation Portfolio Seeks high level of current income, with growth of capital as a secondary objective MetLife Conservative to Moderate Allocation Seeks high total return in the form of income and growth of Portfolio capital, with a greater emphasis on income MetLife Moderate Allocation Portfolio Seeks a balance between a high level of current income and growth of capital, with a greater emphasis on growth of capital MetLife Moderate to Aggressive Allocation Seeks growth of capital Portfolio EXCHANGE-TRADED FUNDS PORTFOLIOS Cyclical Growth and Income ETF Portfolio Seeks growth of capital and income Cyclical Growth ETF Portfolio Seeks growth of capital
Your investment choices may be limited because: * Your employer, association or other group contract holder limits the available investment divisions. * We have restricted the available investment divisions. The investment divisions buy and sell shares of corresponding mutual fund portfolios. These Portfolios, which are part of the Metropolitan Fund, the Met Investors Fund or the American Funds invest in stocks, bonds and other investments. All dividends declared by the Portfolios are earned by the Separate Account and reinvested. Therefore, no dividends are distributed to you under the Income Annuities. You pay no transaction expenses (i.e., front-end or back-end sales load charges) as a result of the Separate Account's purchase or sale of these mutual fund shares. The Portfolios of the Metropolitan Fund and the Met Investors Fund are available by purchasing annuities and life insurance policies from MetLife or certain of its affiliated insurance companies and are never sold directly to the public. The American Funds Portfolios are made available by the American Funds only through various insurance company annuities and insurance policies. 16 The Metropolitan Fund, the Met Investors Fund and the American Funds are each a "series" type fund registered with the Securities and Exchange Commission as an "open-end management investment company" under the Investment Company Act of 1940 (the "1940 Act"). A "series" fund means that each Portfolio is one of several available through the fund. The Portfolios of the Metropolitan Fund pay MetLife Advisers, LLC, a MetLife affiliate, a monthly fee for its services as their investment manager. The Portfolios of the Met Investors Fund pay Met Investors Advisory LLC, a MetLife affiliate, a monthly fee for its services as their investment manager. The Portfolios of the American Funds pay Capital Research and Management Company a monthly fee for its services as their investment manager. These fees, as well as other expenses paid by each Portfolio, are described in the applicable prospectuses and SAIs for the Metropolitan Fund, Met Investors Fund or American Funds. In addition, the Metropolitan Fund and the Met Investors Fund prospectuses each discuss other separate accounts of MetLife and its affiliated insurance companies and certain qualified retirement plans that invest in the Metropolitan Fund or the Met Investors Fund. The risks of these arrangements are also discussed in each Fund's prospectus. CERTAIN PAYMENTS WE RECEIVE WITH REGARD TO THE PORTFOLIOS An investment manager (other than our affiliates MetLife Advisers, LLC and Met Investors Advisory, LLC) or sub-investment manager of a Portfolio, 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 Contracts and, in the Company's role as an intermediary, with respect to the Portfolios. 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 Portfolio assets. Contract owners, through their indirect investment in the Portfolios, bear the costs of these advisory fees (see the Portfolios' prospectuses for more information). The amount of the payments we receive is based on a percentage of assets of the investment divisions attributable to the Contracts and certain other variable insurance products that we and our affiliates issue. These percentages differ and some investment managers or sub-investment managers (or other affiliates) may pay us more than others. These percentages currently range up to 0.50%. Additionally, an investment manager or sub-investment manager of a Portfolio or its affiliates may provide us with wholesaling services that assist in the distribution of the Contracts 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 Contracts. We and/or certain of our affiliated insurance companies have joint ownership interests in our affiliated investment managers 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 investment manager makes a profit with respect to the advisory fees it receives from the Portfolios. We will benefit accordingly from assets allocated to the Portfolios to the extent they result in profits to the advisers. See the Table of Expenses for information on the management fees paid by the Portfolios and the SAI for the Portfolios for information on the management fees paid by the investment managers to the sub-investment managers. Certain Portfolios have adopted a Distribution Plan under Rule 12b-1 of the Investment Company Act of 1940. The Distribution Plan is described in more detail in the Portfolio's prospectus. (See the Fee Table and "Who Sells the Income Annuities.") Any payments we receive pursuant to those 12b-1 Plans are paid to us or our distributor. Payments under a Portfolio's 12b-1 Plan decrease this Portfolio's investment return. We select the Portfolios offered through this Contract based on several criteria, including asset class coverage, the strength of the investment manager's or sub-investment manager's reputation and tenure, brand recognition, 17 performance, and the capability and qualification of each investment firm. Another factor we consider during the selection process is whether the Portfolio's investment manager or sub-investment manager is one of our affiliates or whether the Portfolio, its investment manager, its sub-investment manager(s), or an affiliate will make payments to us or our affiliates. In this regard, the profit distributions we receive from our affiliated investment advisers are a component of the total revenue that we consider in configuring the features and investment choices available in the variable insurance products that we and our affiliated insurance companies issue. Since we and our affiliated insurance companies may benefit more from the allocation of assets to Portfolios advised by our affiliates than those that are not, we may be more inclined to offer portfolios advised by our affiliates in the variable insurance products we issue. We review the Portfolios periodically and may remove a Portfolio or limit its availability to new purchase payments and/or transfers of contract value if we determine that the Portfolio no longer meets one or more of the selection criteria, and/or if the Portfolio has not attracted significant allocations from Contract Owners. In some cases, we have included Portfolios based on recommendations made by selling firms. WE DO NOT PROVIDE ANY INVESTMENT ADVICE AND DO NOT RECOMMEND OR ENDORSE ANY PARTICULAR PORTFOLIO. YOU BEAR THE RISK OF ANY DECLINE IN THE CONTRACT VALUE OF YOUR CONTRACT RESULTING FROM THE PERFORMANCE OF THE PORTFOLIOS YOU HAVE CHOSEN. We make certain payments to American Funds Distributors, Inc., principal underwriter for the American Funds Insurance Series. (See "Who Sells the Income Annuities.") INCOME ANNUITIES Income Annuities provide you with a regular stream of payments for either your lifetime or a specific period. You may choose the frequency of your income payments. For example, you may receive your payments on a monthly, quarterly, semi-annual or annual basis. You have the flexibility to select a stream of income to meet your needs. Income Annuities can be purchased so that you begin receiving payments immediately. You may defer receiving payments from us for one year after you have purchased an immediate annuity. You bear any investment risk during any deferral period. We do not guarantee that your variable payments will be a specific amount of money. You may choose to have a portion of the payment fixed and guaranteed under the Fixed Income Option. We guarantee the amount of the income payment paid to you from the Fixed Income Option based upon your current allocation to that option. The amount of the guaranteed payments will not change until you make a reallocation or withdrawal from the Fixed Income Option. Using proceeds from the following types of arrangements, you may purchase Income Annuities to receive immediate payments: * Non-Qualified * Qualified If you have accumulated amounts in any of your employer's, association's or group's qualified investment vehicles (for example, Traditional IRAs, Keoghs, 401(k)s, 401(a)s, 403(b)s, 457s or SIMPLE IRAs), your lump sum rollover or transfer from that investment vehicle may be used to purchase an appropriate Income Annuity as long as all applicable Federal income tax requirements are met. Your qualified retirement plan may also purchase the Income Annuity to facilitate distributions from the plan in the form of annuity pay-outs. If your retirement plan has purchased an Income Annuity, your choice of income payment type may be subject to the terms of the plan. We may rely on your employer's or plan administrator's statements to us as to the terms of the plan or your entitlement to any payments. We will not be responsible for interpreting the terms of your plan. You should review your plan document to see how you may be affected. 18 INCOME PAYMENT TYPES Currently, we provide you with a wide variety of income payment types to suit a range of personal preferences. You decide the income payment type for your Income Annuity at application. The decision is irrevocable. There are three people who are involved in payments under your Income Annuity: * Owner: the person or entity which has all rights under the Income Annuity including the right to direct who receives payment. * Annuitant: the person whose life is the measure for determining the duration and sometimes the dollar amount of payments. * Beneficiary: the person who receives continuing payments or a lump sum if the annuitant dies. Your income payment amount will depend in large part on the type of income payment you choose. For example, if you select a "Lifetime Income Annuity for Two," your payments will typically be lower than if you select a "Lifetime Income Annuity." Whether you choose a withdrawal option, if permitted under your Income Annuity, will affect the amount of your income payments. Typically, income payment types which have a withdrawal option will result in lower income payments than income payment types without this feature. (If you choose the Income Annuity for a Guaranteed Period, you must purchase the withdrawal option.) The terms of your contract will determine when your income payments start and the frequency with which you will receive your income payments. When you select an income type, it will apply to both fixed income payments and variable income payments. When deciding how to receive income, consider: * The amount of income you need; * The amount you expect to receive from other sources; * The growth potential of other investments; and * How long you would like your income to last. We reserve the right to limit or stop issuing any of the income types currently available based upon legal requirements or other considerations. We reserve the right to commute or otherwise pay the value of any remaining income payments over a period which would comply with Federal income tax law. The following income payment types are available: LIFETIME INCOME ANNUITY: A variable income that is paid as long as the annuitant is living. LIFETIME INCOME ANNUITY WITH A GUARANTEE PERIOD: A variable income that continues as long as the annuitant is living but is guaranteed to be paid for a number of years. If the annuitant dies before all of the guaranteed payments have been made, payments are made until the end of the guaranteed period. No payments are made once the guarantee period has expired and the annuitant is no longer living. LIFETIME INCOME ANNUITY FOR TWO: A variable income that is paid as long as either of the two annuitants is living. After one annuitant dies, payments continue to be made as long as the other annuitant is living. In that event, payments may be the same as those made while both annuitants were living or may be a smaller percentage that is selected when the annuity is purchased. No payments are made once both annuitants are no longer living. LIFETIME INCOME ANNUITY FOR TWO WITH A GUARANTEE PERIOD: A variable income that continues as long as either of the two annuitants is living but is guaranteed to be paid (unreduced by any percentage selected) for a number of years. If both annuitants die before all of the guaranteed payments have been made, payments are made until the end of the guaranteed period. If one annuitant dies after the guarantee period has expired, payments continue to be made as long as the other annuitant is living. In that event, payments may be the same as those made while both 19 annuitants were living or may be a smaller percentage that is selected when the annuity is purchased. No payments are made once the guarantee period has expired and both annuitants are no longer living. INCOME ANNUITY FOR A GUARANTEED PERIOD: A variable income payable for a guaranteed period of 5 to 30 years. As an administrative practice, we will consider factors such as your age and life expectancy in determining whether to issue a contract with this income payment type. If the annuitant dies before the end of the guarantee period, payments are made to the beneficiary until the end of the guarantee period. No payments are made after the guarantee period has expired. If you choose this income payment type, you must purchase the withdrawal option. WITHDRAWAL OPTION Subject to MetLife's underwriting requirements, we may make available a withdrawal option under your Income Annuity. If the withdrawal option is available under your Income Annuity, you can choose to add this optional withdrawal feature. The decision to add this feature is made at application, is irrevocable and varies by income payment type (described above). The withdrawal option may not be available in all states. Your employer, association or other group contract holder may limit the availability of the withdrawal option. If you purchase an Income Annuity with this feature, the income payments you receive typically will be lower than income payments that you would have received had you purchased the Income Annuity without this feature. The amount by which your income payment will be reduced will depend upon your life expectancy during the permitted withdrawal period (except where an Income Annuity for a Guaranteed Period is purchased), the income type you choose and the amount of the purchase payment. If you choose the Income Annuity for a Guaranteed Period for your income type, you must purchase the withdrawal option. Please refer to the discussion in the Tax Section of this Prospectus concerning the possibility that the purchase of an annuity with this option or the exercise of this option may result in the annuity not satisfying minimum distribution requirements or becoming an increasing annuity. Please also refer to the Tax Section of this Prospectus for a discussion of other possible adverse tax consequences as a result of the exercise of the withdrawal option, including the imposition and retroactive imposition of the 10% penalty tax in addition to ordinary income tax. Please note that the purchase of the withdrawal option may not be appropriate under certain deferred compensation or severance arrangements of an employer (including eligible Section 457(b) plans of tax-exempt employers). The mere availability of such a benefit may result in the immediate taxation to the employee of the entire benefit. Additionally, the withdrawal feature may not be appropriate under defined benefit plans. DURING THE FIRST TWO YEARS FOLLOWING PURCHASE You may withdraw up to an amount equal to the "fair market value" of the income payments under the Income Annuity during the first two years after we issue the Income Annuity. We calculate the "fair market value" as follows: -- First, we determine what your revised income payment would be based on the applicable Annuity Unit Value as of the date of the withdrawal; -- Then we calculate the maximum permissible withdrawal amount by multiplying the revised income payment by an updated annuity purchase rate. If you withdraw this maximum amount from the Income Annuity during the first two years, there will be no value left in the Income Annuity. Consequently, we will then have no further obligations to you; you will receive no further income payments. 20 If you withdraw less than the maximum amount permitted, each future income payment will be reduced proportionately by the percentage equal to the ratio of the withdrawal amount to the maximum permissible withdrawal amount. Consult your tax advisor prior to purchase of an income annuity providing this withdrawal option in the IRA and other tax qualified markets. It is unclear whether the reduction in remaining payments during the guarantee period only is permitted under the required distribution rules. AFTER THE FIRST TWO YEARS FOLLOWING PURCHASE You may make withdrawals after the first two years following issue of the Income Annuity with one of the following income types: -- Lifetime Income Annuity with a Guarantee Period; -- Lifetime Income Annuity for Two with a Guarantee Period; or -- Income Annuity for a Guaranteed Period. When we calculate the "withdrawal value" of the guaranteed payments, we use the "fair market value" calculation previously described except that in the last step the maximum permissible withdrawal calculation uses an updated annuity purchase rate that reflects only the payments in the remaining guarantee period of the Income Annuity. Each future income payment in the remaining guarantee period after a withdrawal during the guarantee period will be reduced proportionately by the percentage equal to the ratio of the withdrawal amount to the full "withdrawal value" of the payments in the remaining guarantee period at the time of the withdrawal. You may make an unlimited number of withdrawals during the guarantee period as long as no withdrawal reduces your revised income payments during the guarantee period to less than 25% of what those payments would have been had no withdrawals been made during this period, except for the Income Annuity for a Guaranteed Period. In that case, you may make an unlimited number of withdrawals and withdraw the full "withdrawal value" of the income payments in the guarantee period. Any income payments payable after the guarantee period will not be reduced by the withdrawals you made. REQUESTING A WITHDRAWAL At your request, we will provide an estimate for you of the maximum amount available for withdrawal and the amount by which your income payments would be reduced if a particular withdrawal were taken under the Income Annuity. You generally may make a withdrawal on any business day that the Exchange is open during the permitted withdrawal period. Your withdrawal request must be in good order and completed prior to the close of the Exchange on a business day if you want the withdrawal to take place on that day. All other withdrawals will be processed on the next business day. We will take the withdrawal proportionately from each investment division and the Fixed Income Option in which you then had an allocation. A withdrawal processing fee of $95 will be deducted from each withdrawal. Withdrawals must be at least $1,000. If any withdrawal during the first two years after purchase would decrease total expected annual payments below $1,200, then we will treat this as a request for a full withdrawal of the fair market value and we will make no further payments. We reserve the right to require receipt of a properly executed spousal consent to the extent applicable and required under the Internal Revenue Code, the Employee Retirement Income Security Act of 1974 or the Retirement Equity Act of 1984 prior to the payment of any withdrawal. 21 We may withhold payment of withdrawal if any portion of those proceeds would be derived from a Contract Owner's check that has not yet cleared (i.e., that could still be dishonored by your banking institution). We may use telephone, fax, Internet or other means of communication to verify that payment from the Contract has been or will be collected. We will not delay payment longer than necessary for us to verify that payment has been or will be collected. Contract Owners may avoid the possibility of delay in the disbursement of proceeds coming from a check that has not yet cleared by providing us with a certified check. We reserve the right to limit, reduce or eliminate this option in the future where required to comply with Federal tax law to protect you and other contract holders in the investment divisions from adverse tax consequences. DEATH BENEFIT Your Income Annuity provides you with a death benefit in the event of your death before you start receiving income payments. If you die before income payments begin, the owner or any beneficiaries will receive your purchase payment reduced for any prior withdrawals (if you have chosen the withdrawal option) in a lump sum once we receive satisfactory proof of your death. MINIMUM PURCHASE PAYMENT You must purchase the Income Annuity with one purchase payment of at least $25,000. ALLOCATION You decide what portion of your income payment is allocated to each of the variable investment divisions. If you choose to make an allocation to the income allocation investment divisions with your purchase payment, 100% of your allocation to the variable funding choices must be to only one of the income allocation investment divisions. After the purchase payment has been made, you may reallocate from any income allocation investment division to any investment choice or to one or more of the income allocation investment divisions. THE VALUE OF YOUR INCOME PAYMENTS INITIAL VARIABLE INCOME PAYMENT The initial variable income payment is a hypothetical payment which is calculated based on the amount of your purchase payment and the annuity purchase rate, which reflects the age and sex of the measuring lives and the income payment type selected (including the withdrawal option) and the AIR ("Assumed Investment Return"). This initial variable income payment is used to establish the number of annuity units credited to you. It is not the amount of your actual first variable income payment unless your first income payment is due within 10 days after we issue the Income Annuity. ANNUITY UNITS Annuity units are credited to you when you make a purchase payment or make a reallocation into an investment division. Before we determine the number of annuity units to credit to you, we reduce a purchase payment (but not a reallocation) by any premium taxes, if applicable. We then compute an initial income payment amount from the net purchase payment (or reallocation) and the current annuity purchase rate. We then divide the initial income payment allocated to an investment division by that investment division's Annuity Unit Value on the date of the transaction. The result is the number of annuity units credited for that investment division. When you reallocate an income payment from an investment division, annuity units supporting that portion of your income payment in that investment division are liquidated. 22 EXAMPLE: DETERMINING THE NUMBER OF ANNUITY UNITS Assume the following: -- We calculate an initial variable income payment based on the annuity purchase rate (which reflects the AIR, income payment type (including whether the withdrawal option was chosen and the age and sex of the measuring lives) and the amount of the net purchase payment. (For example, if we assume an annuity purchase rate of $100 and the net purchase payment is $100,000, the initial variable income payment is $1,000, $100,000 / $100 = $1,000.) -- You have chosen to allocate this $1,000 in equal amounts to two investment divisions (i.e., $500 to each); and -- On the day we receive all documents in good order and issue the Contract, the annuity unit values for investment division A is $10.00 and for investment division B is $12.50. We credit the Income Annuity with annuity units as follows: $500 / $10.00 = 50 ANNUITY UNITS ALLOCATED TO INVESTMENT DIVISION A $500 / $12.50 = 40 ANNUITY UNITS ALLOCATED TO INVESTMENT DIVISION B Then, to calculate your variable income payment, we multiply the number of annuity units by the current Annuity Unit Value. AIR AS A BENCHMARK FOR INCOME PAYMENTS Your income payments are determined by using the AIR to benchmark the investment experience of the investment divisions you select. The AIR is stated in your Contract and may range from 3% to 6%. The higher your AIR, the higher your initial variable income payment will be. Your next variable income payment will increase approximately in proportion to the amount by which the investment experience (for the time period between payments) for the underlying Portfolio minus the insurance-related charge (The resulting number is the net investment return.) exceeds the AIR (for the time period between payments). Likewise, your next variable income payment will decrease to the approximate extent the investment experience (for the time period between payments) for the underlying Portfolio minus the insurance-related charge (the net investment return) is less than the AIR (for the time period between payments). A lower AIR will result in a lower initial variable income payment, but subsequent variable income payments will increase more rapidly or decline more slowly than if you had elected a higher AIR as changes occur in the investment experience of the investment divisions. The amount of each variable income payment is determined 10 days prior to your income payment date. If your first income payment is scheduled to be paid less than 10 days after your Contract's issue date, then the amount of your payment will be determined on your Contract's issue date. THE EFFECT OF THE AIR ON SUBSEQUENT VARIABLE INCOME PAYMENTS (Assumes no reallocation between income payments). If the net investment experience: Your variable income payment will --------------------------------- (relative to the previous income payment): ---------------------------------- Exceeds the AIR Increase Equals the AIR Stay the same Is less than the AIR Decrease
EXAMPLE OF A 3% AIR Assume that the initial variable income payment for an investment division is $1,000. Also assume that when we calculate your next income payment the investment experience for the underlying Portfolio (minus the insurance- 23 related charge) is up 10% (exceeds the AIR). Your variable income payment attributed to that investment division would be $1,067.96. The percentage change between the initial variable income payment and your next income payment is a 6.8% INCREASE. However, assume instead that the investment experience for the underlying Portfolio (minus the insurance-related charge) is down 10% (does not exceed the AIR). Your next variable income payment would be $873.79. Note that the percentage change between the initial variable income payment and your next income payment is a 12.6% DECREASE. VALUATION This is how we calculate the Annuity Unit Value for each investment division: * First, we determine the investment experience (which reflects the deduction for any investment-related charge) for the underlying Portfolio from the previous trading day to the current trading day; * Next, we subtract the daily equivalent of your insurance-related charge (general administrative expense and mortality and expense risk charges) for each day since the last day the Annuity Unit Value was calculated; the resulting number is the net investment return; * Then, we multiply by an adjustment based on your AIR for each day since the last Annuity Unit Value was calculated; and * Finally, we multiply the previous Annuity Unit Value by this result. EXAMPLE: CALCULATING THE ANNUITY UNIT VALUE Assume the following: -- Yesterday's Annuity Unit Value was $10.20; -- The number we calculate for today's change in investment experience (which reflects the deduction for the investment-related charge) is 1.02 (up 2%); -- The daily equivalent of the Separate Account charge is 0.000025905; and -- The daily equivalent of the adjustment for a 3% AIR is 0.99991902. The new Annuity Unit Value is: (1.02 - .000025905) X 0.99991902 X $10.20 = $10.40 However, now assume that today's change in investment experience (which reflects the deduction for the investment-related charge) is .98 (down 2%) instead of 1.02. The new Annuity Unit Value is: (.98 - .000025905) X 0.99991902 X $10.20 = $9.99 REALLOCATION PRIVILEGE You can reallocate among the investment divisions and the Fixed Income Option. There is no charge to make a reallocation. (We reserve the right to impose a reallocation fee in the future. The amount of this fee will be no greater than $30.) Your request for a reallocation tells us to move, in accordance with your instructions, the underlying portfolio shares or other funds we have designated in the investment divisions to generate your income payments. 24 For us to process a reallocation, you must tell us: -- The percentage of the income payment to be reallocated; -- The investment divisions (or Fixed Income Option) from which you want the income payment to be reallocated; and -- The investment divisions or Fixed Income Option (and the percentages allocated to each) to which you want the income payment to be reallocated. Reallocations will be made as of the end of a business day, at the close of the Exchange, if received in good order prior to the close of the Exchange on that business day. All other reallocation requests will be processed on the next business day. When you request a reallocation from an investment division to the Fixed Income Option, the payment amount will be adjusted at the time of reallocation. Your payment may either increase or decrease due to this adjustment. The adjusted payment will be calculated in the following manner. -- First, we update the income payment amount to be reallocated from the investment division based upon the applicable Annuity Unit Value at the time of the reallocation; -- Second, we use the AIR to calculate an updated annuity purchase rate based upon your age, if applicable, and expected future income payments at the time of the reallocation; -- Third, we calculate another updated annuity purchase rate using our current single premium fixed income annuity purchase rates on the date of your reallocation (but not less favorable than the annuity purchase rate guaranteed for your group); -- Finally, we determine the adjusted payment amount by multiplying the updated income amount determined in the first step by the ratio of the annuity purchase rate determined in the second step divided by the annuity purchase rate determined in the third step. When you request a reallocation from the Fixed Income Option to an investment division, a similar adjustment will be made to your payment at the time of the reallocation. However, in this case the payment adjustment will be determined by multiplying the income payment amount to be reallocated from the Fixed Income Option by the ratio of the annuity purchase rate determined in the third step above divided by the annuity purchase rate determined in the second step above. When you request a reallocation from one investment division to another, annuity units in one investment division are liquidated and annuity units in the other investment division are credited to you. There is no adjustment to the income payment amount. Future income payment amounts will be determined based on the Annuity Unit Value for the investment division to which you have reallocated. Here are examples of the effect of a reallocation on the income payment: -- Suppose you choose to reallocate 40% of your income payment supported by investment division A to the Fixed Income Option and the recalculated income payment supported by investment division A is $100. Assume that the updated annuity purchase rate based on the AIR is $125, while the updated annuity purchase rate based on fixed income annuity pricing is $100. In that case, your fixed income payment from the Fixed Income Option will be increased by $40 X ($125 / $100) or $50, and your income payment supported by investment division A will be decreased by $40. (The number of annuity units in investment division A will be decreased as well.) -- Suppose you choose to reallocate 40% of your $100 fixed payment supported by the Fixed Income Option to a variable income payment supported by investment division A. Assume again that the updated annuity purchase rate based on the AIR is $125, while the updated annuity purchase rate based on fixed income 25 annuity pricing is $100. In that case, your income payment supported by investment division A will be increased by $40 X ($100 / $125) or $32, and your fixed income payment supported by the Fixed Income Option will be decreased by $40. (The number of annuity units in investment division A will be increased as well.) -- Suppose you choose to reallocate 40% of your income payment supported by investment division A to investment division B and the recalculated income payment supported by investment division A is $100. Then, your income payment supported by investment division B will be increased by $40 and your income payment supported by investment division A will be decreased by $40. (Changes will also be made to the number of annuity units in both investment divisions.) You generally may make a reallocation on any day the Exchange is open. At a future date we may limit the number of reallocations you may make, but never to fewer than one a month. If we do so, we will give you advance written notice. We may limit a beneficiary's ability to make a reallocation. Frequent requests from contract owners or participants/annuitants to make reallocations/transfers may dilute the value of a Portfolio's shares if the frequent reallocations/transfers involve an attempt to take advantage of pricing inefficiencies created by a lag between a change in the value of the securities held by the Portfolio and the reflection of that change in the Portfolio's share price ("arbitrage trading"). Regardless of the existence of pricing inefficiencies, frequent reallocations/transfers may also increase brokerage and administrative costs of the underlying Portfolios and may disrupt Portfolio management strategy, requiring a Portfolio 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 Portfolios, which may in turn adversely affect contract owners and other persons who may have an interest in the Contracts (e.g., participants/annuitants). We have policies and procedures that attempt to detect and deter frequent reallocations/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 investment Portfolios (i.e., the Western Asset Management Strategic Bond Opportunities, FI International Stock, Harris Oakmark International, MFS(R) Research International, Morgan Stanley EAFE(R) Index, Oppenheimer Global Equity, BlackRock Strategic Value, Loomis Sayles Small Cap, Russell 2000(R) Index, Franklin Templeton Small Cap Growth, Met/AIM Small Cap Growth, T. Rowe Price Small Cap Growth, American Funds Global Small Capitalizations, and Lord Abbett Bond Debenture Portfolios) and we monitor reallocation/transfer activity in those Portfolios (the "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 allocation/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/reallocation activity to determine if, for each category of international, small-cap, and high-yield Portfolios, in a 12 month period there were (1) six or more transfers/reallocations involving the given category; (2) cumulative gross transfers/reallocations involving the given category that exceed the current account value; and (3) two or more "round-trips" involving any Monitored Portfolios in the given category. A round-trip generally is defined as a transfer/reallocation in followed by a transfer/reallocation out within the next seven calendar days or a transfer/reallocation out followed by a transfer/reallocation in within the next seven calendar days, in either case subject to certain other criteria. We do not believe that other Portfolios present a significant opportunity to engage in arbitrage trading and therefore do not monitor reallocation/transfer activity in those Portfolios. We may change the Monitored Portfolios at any time without notice in our sole discretion. In addition to monitoring reallocation/transfer activity in certain Portfolios, we rely on the underlying Portfolios to bring any potential disruptive reallocation/transfer activity they identify to our attention for investigation on a case-by-case basis. We will also investigate other harmful 26 reallocation/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 Distributors requires us to treat all American Funds portfolios as Monitored Portfolios under our current market timing and excessive trading policies and procedures. Further, American Funds requires us to impose additional specified monitoring criteria for all American Funds portfolios available under the Contract, regardless of the potential for arbitrage trading. We are required to monitor reallocation/transfer activity in American Funds portfolios to determine if there were two or more reallocations/transfers in followed by reallocations/transfers out, in each case of a certain dollar amount or greater, in any 30-day period. A first violation of the American Funds monitoring policy will result in a written notice of violation; any additional violation will result in the imposition of a six-month restriction during which period we will require all transfer reallocation/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 reallocation/transfer restrictions may be imposed upon a violation of either monitoring policy. Our policies and procedures may result in reallocation/transfer restrictions being applied to deter market timing. Currently, when we detect reallocation/transfer activity in the Monitored Portfolios that exceeds our current reallocation/transfer limits, or other reallocation/transfer activity that we believe may be harmful to other persons who have an interest in the Contracts, we require all future reallocation/transfer requests to or from any Monitored Portfolios or other identified Portfolios under that Contract to be submitted with an original signature. The detection and deterrence of harmful reallocation/transfer activity involves judgments that are inherently subjective, such as the decision to monitor only those Portfolios that we believe are susceptible to arbitrage trading or the determination of the reallocation/transfer limits. Our ability to detect and/or restrict such reallocation/transfer activity may be limited by operational and technological systems, as well as our ability to predict strategies employed by contract owners or participants/annuitants to avoid such detection. Our ability to restrict such reallocation/transfer activity also may be limited by provisions of the Contract. Accordingly, there is no assurance that we will prevent all reallocation/transfer activity that may adversely affect contract owners or participants/annuitants and other persons with interests in the Contracts. We do not accommodate market timing in any Portfolios and there are no arrangements in place to permit any contract owner or participant/annuitant to engage in market timing; we apply our policies and procedures without exception, waiver, or special arrangement. The Portfolios 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, Portfolios may assess a redemption fee (which we reserve the right to collect) on shares held for a relatively short period. The prospectuses for the Portfolios 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 Portfolios, we have entered into a written agreement as required by SEC regulation with each Portfolio or its principal underwriter that obligates us to provide to the Portfolio promptly upon request certain information about the trading activity of individual contract owners, and to execute instructions from the Portfolio to restrict or prohibit further purchases or reallocations/transfers by specific contract owners who violate the frequent trading policies established by the Portfolio. In addition, contract owners or participants/annuitants and other persons with interests in the Contracts should be aware that the purchase and redemption orders received by the Portfolios generally are "omnibus" orders from intermediaries, such as retirement plans or separate accounts funding variable insurance contracts. The omnibus orders reflect the aggregation and netting of multiple orders from individual owners of variable insurance contracts and/or individual retirement plan participants. The omnibus nature of these orders may limit the Portfolios in their 27 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 Portfolios, (and thus contract owners or participants/annuitants) will not be harmed by reallocation/transfer activity relating to the other insurance companies and/or retirement plans that may invest in the Portfolios. If a Portfolio believes that an omnibus order reflects one or more allocation/transfer requests from Contract owners engaged in disruptive trading activity, the Portfolio may reject the entire omnibus order. In accordance with applicable law, we reserve the right to modify or terminate the reallocation/transfer privilege at any time. We also reserve the right to defer or restrict the reallocation/transfer privilege at any time that we are unable to purchase or redeem shares of any of the Portfolios, including any refusal or restriction on purchases or redemptions of their shares as a result of their own policies and procedures on market timing activities (even if an entire omnibus order is rejected due to the market timing activity of a single contract owner or participant/annuitant). You should read the Portfolio prospectuses for more details. CONTRACT FEE There is no contract fee. CHARGES There are two types of charges you pay if you allocate any of your income payment to the investment divisions: * Insurance-related charge; and * Investment-related charge. We describe these charges below. The amount of a 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 the particular Contract. We can profit from certain contract charges. The Separate Account charge you pay will not reduce the number of annuity units credited to you. Instead, we deduct the charges as part of the calculation of the Annuity Unit Value. INSURANCE-RELATED OR SEPARATE ACCOUNT CHARGE You will pay an insurance-related charge for the Separate Account that is no more than .95% annually of the average value of the amounts in the Separate Account. This charge pays us for general administrative expenses and for mortality and expense risk of the Income Annuity. General administrative expenses we incur include financial, actuarial, accounting, and legal expenses. The mortality portion of the insurance-related charge pays us for the risk that you may live longer than we estimated. Then, we could be obligated to pay you more in payments than we anticipated. We also bear the risk that our expenses in administering the Income Annuities will be greater than we estimated (expense risk). This charge also pays us for distribution costs to both our licensed sales persons and other broker-dealers. The charge that applies may be less than the maximum charge depending on the service level or other category that applies to your employer, association or group. The categories depend on various factors pertaining to the level of administrative or service activity we provide. 28 The charge that applies also may be less than the maximum charge depending on the level of distribution assistance provided to us by your employer, association or group. The levels depend on various factors pertaining to the amount of access we are given to potential purchasers. The charge that applies is stated in your Income Annuity. INVESTMENT-RELATED CHARGE This charge has two components. The first pays the investment managers for managing money in the Portfolios. The second consists of Portfolio operating expenses and 12b-1 Plan fees. One class of shares available to the Income Annuities has 12b-1 Plan fees, which pay for distribution expenses. The percentage you pay for the investment-related charge depends on the investment divisions you select. Amounts for each investment division for the previous year are listed in the Table of Expenses. WITHDRAWAL PROCESSING FEE A withdrawal processing fee of $95 will be deducted from each withdrawal. The withdrawal processing fee pays us for our administrative costs relating to the withdrawal, such as financial, actuarial and accounting costs. PREMIUM AND OTHER TAXES Some jurisdictions tax what are called "annuity considerations." We deduct money to pay "premium" taxes (also known as "annuity" taxes) when you make the purchase payment. Premium taxes, if applicable, currently range from .5% to 3.5% depending on the Income Annuity you purchased and your home state or jurisdiction. A chart in the Appendix shows the jurisdictions where premium taxes are charged and the amount of these taxes. We also reserve the right to deduct from purchase payments, withdrawals or income payments, any taxes (including but not limited to premium taxes) paid by us to any government entity relating to the Income Annuities. Examples of these taxes include, but are not limited to, generation skipping transfer tax or a similar excise tax under Federal or state tax law which is imposed on payments we make to certain persons and income tax withholdings on withdrawals and income payments to the extent required by law. We will, at our sole discretion, determine when taxes relate to the Income Annuities. We may, at our sole discretion, pay taxes when due and deduct the corresponding amount from income payments at a later date. Payment at an earlier date does not waive any right we may have to deduct amounts at a later date. FREE LOOK You may cancel your Income Annuity within a certain time period. This is known as a "free look." Not all Contracts issued are subject to free look provisions under state law. We must receive your request to cancel in writing. The number of days for this "free look" varies from state to state. The "free look" may also vary depending on whether you purchased your Income Annuity through the mail or your age. Depending on state law, we may refund all of your purchase payment or the value of your annuity units as of the date your refund request is received at your MetLife Designated Office in good order. If you do not cancel your Income Annuity during the "free look" period, your decision to purchase the Income Annuity is irrevocable. 29 GENERAL INFORMATION ADMINISTRATION All transactions will be processed in the manner described below. PURCHASE PAYMENTS Send your purchase payment, by check, cashier's check or certified check, made payable to "MetLife," MetLife Personal Income Plus, P.O. Box 406904, Atlanta, GA 30384-6904. (We reserve the right to receive purchase payments by other means acceptable to us.) We do not accept cash, money orders or traveler's checks. We reserve the right to refuse purchase payments made via a personal check in excess of $100,000. Purchase payments over $100,000 may be accepted in other forms, including but not limited to, EFT/wire transfers, certified checks, corporate checks, and checks written on financial institutions. We will provide you with all necessary forms. We must have all documents in good order to credit your initial purchase payment. A purchase payment is effective and valued as of the close of the Exchange, on the day we receive it in good order at your MetLife Designated Office, except when it is received: * On a day when the Annuity Unit Value is not calculated, or * After the close of the Exchange. In those cases, the purchase payment will be effective the next day the Annuity Unit Value is calculated. We reserve the right to credit your purchase payment to you within two days after its receipt at your MetLife Designated Office. However, if you fill out our forms incorrectly or incompletely or other documentation is not completed properly or otherwise not in good order, we have up to five business days to credit the payment. If the problem cannot be resolved by the fifth business day, we will notify you and give you the reasons for the delay. At that time, you will be asked whether you agree to let us keep your money until the problem is resolved. If you do not agree or we cannot reach you by the fifth business day, your money will be returned. Under certain group Income Annuities, your employer, or the group in which you are a participant or member must identify you on their reports to us and tell us how your money should be allocated among the investment divisions and the Fixed Income Option. CONFIRMING TRANSACTIONS You will receive a statement confirming that a transaction was recently completed. You may elect to have your income payments sent to your residence or have us deposit payments directly into your bank account. Periodically, you may receive additional information from us about the Income Annuity. Unless you inform us of any errors within 60 days of receipt, we will consider these communications to be accurate and complete. PROCESSING TRANSACTIONS We permit you to request transactions by mail and telephone. We may suspend or eliminate telephone privileges at any time, without prior notice. We reserve the right not to accept requests for transactions by facsimile. If mandated by applicable law, including, but not limited to, Federal anti-money laundering laws, we may be required to reject a purchase payment. We may also be required to block an owner's account and, consequently, refuse to implement any requests for transfers/reallocations, withdrawals, surrenders or death benefits, until instructions are received from the appropriate governmental authority. 30 BY TELEPHONE You may obtain information and initiate transactions through our toll-free number, 866-438-6477. Our customer service consultants are available by telephone between 8 a.m. and 6 p.m. Eastern Time each business day. Your transaction must be in good order and completed prior to the close of the Exchange on one of our business days if you want the transaction to be valued and effective on that day. Transactions will not be valued and effective on a day when the Annuity Unit Value is not calculated or after the close of the Exchange. We will value and make effective these transactions on our next business day. We have put into place reasonable security procedures to insure that instructions communicated by telephone are genuine. For example, all telephone calls are recorded. Also, you will be asked to provide some personal data prior to giving your instructions over the telephone. When someone contacts us by telephone and follows our security procedures, we will assume that you are authorizing us to act upon those instructions. Neither the Separate Account nor MetLife will be liable for any loss, expense or cost arising out of any requests that we or the Separate Account reasonably believe to be authentic. In the unlikely event that you have trouble reaching us, requests should be made in writing to your MetLife Designated Office. Response times for the telephone may vary due to a variety of factors, including volumes, market conditions and performance of the systems. We are not responsible or liable for: * any inaccuracy, error, or delay in or omission of any information you transmit or deliver to us; or * any loss or damage you may incur because of such inaccuracy, error, delay or omission; non-performance; or any interruption of information beyond our control. AFTER YOUR DEATH If we are notified of your death before a requested transaction is completed, we will cancel the request. For Income Annuity reallocations, we will cancel the request and continue making payments to your beneficiary if your Income Annuity so provides. Or, depending on your Income Annuity's provisions, we may continue making payments to a joint annuitant. MISSTATEMENT We may require proof of age of the owner, beneficiary or annuitant before making any payments under the Income Annuity that are measured by the owner's, beneficiary's or annuitant's life. If the age of the measuring life has been misstated, the amount payable will be the amount that would have been provided at the correct age. Once income payments have begun, any underpayments will be deducted from or added to the payment or payments made after the adjustment. In certain states, we are required to pay interest on any under payments. THIRD PARTY REQUESTS Generally, we only accept requests for transactions or information from you. We reserve the right not to accept or to process transactions requested on your behalf by third parties. This includes processing transactions by an agent you designate, through a power of attorney or other authorization, who has the ability to control the amount and timing of reallocations for a number of other contract owners, and who simultaneously makes the same request or series of requests on behalf of other contract owners. VALUATION -- SUSPENSION OF PAYMENTS We separately determine the Annuity Unit Value for each investment division once each day when the Exchange is open for trading. If permitted by law, we may change the period between calculations but we will give you 30 days notice. 31 When you request a transaction, we will process the transaction using the next available Annuity Unit Value. Subject to our procedure, we will make withdrawals and reallocations at a later date, if you request. We reserve the right to suspend or postpone payment for a withdrawal, income payment or reallocation when: -- rules of the Securities and Exchange Commission so permit (trading on the Exchange is limited, the Exchange is closed other than for customary weekend or holiday closings or an emergency exists which makes pricing or sale of securities not practicable); or -- during any other period when the Securities and Exchange Commission by order so permits. ADVERTISING PERFORMANCE We periodically advertise the performance of the investment divisions. You may get performance information from a variety of sources including your quarterly statements, the Internet, annual reports and semiannual reports. All performance numbers are based upon historical earnings. These numbers are not intended to indicate future results. We may state performance in terms of "yield," "change in Annuity Unit Value," "average annual total return," or some combination of these terms. YIELD is the net income generated by an investment in a particular investment division for 30 days or a month. These figures are expressed as percentages. This percentage yield is compounded semiannually. CHANGE IN ANNUITY UNIT VALUE ("Non-Standard Performance") is calculated by determining the percentage change in the value of an annuity unit for a certain period. These numbers may also be annualized. Change in Annuity Unit Value may be used to demonstrate performance for a hypothetical investment (such as $10,000) over a specified period. These performance numbers reflect the deduction of the total Separate Account charges. AVERAGE ANNUAL TOTAL RETURN (also known as annualized change in annuity value) calculations ("Standard Performance") reflect all Separate Account charges since the investment division inception date, which is the date the corresponding Portfolio or predecessor Portfolio was first offered under the Separate Account that funds the Income Annuity. These presentations reflect a 3% benchmark AIR. These figures also assume a steady annual rate of return. For purposes of presentation (of Non-Standard Performance), we may assume that the Income Annuities were in existence prior to the inception date of the investment divisions in the Separate Account that funds the Income Annuities. In these cases, we calculate performance based on the historical performance of the underlying Metropolitan Fund, Met Investors Fund and American Funds Portfolios since the Portfolio inception date. We use the actual annuity unit data after the inception date. Any performance data that includes all or a portion of the time between the Portfolio inception date and the investment division inception date is hypothetical. Hypothetical returns indicate what the performance data would have been if the Income Annuity had been introduced as of the Portfolio inception date. We may also present average annual total return calculations which reflect all Separate Account charges since the Portfolio inception date. We use the actual annuity unit data after the inception date. Any performance data that includes all or a portion of the time between the Portfolio inception date and the investment division inception date is hypothetical. Hypothetical returns indicate what the performance data would have been if the Income Annuities had been introduced as of the Portfolio inception date. We may state performance for the investment divisions of the Income Annuity which reflect deduction of the insurance-related charge and investment-related charge, if accompanied by the annualized change in annuity unit value. Past performance is no guarantee of future results. 32 We may demonstrate hypothetical values of income payments over a specified period based on historical net asset values of the Portfolios and the historical Annuity Unit Values and the applicable annuity purchase rate, either for an individual for whom the illustration is to be produced or based upon certain assumed factors (e.g., male, age 65). These presentations reflect the deduction of the maximum insurance-related charge and investment-related charge. If the presentation is for an individual, we may also provide a presentation that reflects the applicable (rather than the maximum) insurance-related charge, as well as the Annuity Unit Values and the investment-related charge. We may assume that the Income Annuity was in existence prior to its inception date. When we do so, we calculate performance based on the historical performance of the underlying Portfolio for the period before the inception date of the Income Annuity and historical Annuity Unit Values. We may also demonstrate hypothetical future values of income payments over a specified period based on assumed rates of return (which will not exceed 12% and which will include an assumption of 0% as well) for the Portfolios, hypothetical Annuity Unit Values and the applicable annuity purchase rate, either for an individual for whom the illustration is to be produced or based upon certain assumed factors (e.g., male, age 65). These presentations reflect the deduction of the maximum insurance-related charge and the average of investment-related charges for all Portfolios to depict investment-related charges. If the presentation is for an individual, we may also provide a presentation that reflects the applicable (rather than the maximum) insurance-related charge, as well as the Annuity Unit Values and the investment-related charge. An illustration should not be relied upon as a guarantee of future results. Performance figures will vary among the Income Annuities as a result of different Separate Account charges and AIRs. CHANGES TO YOUR INCOME ANNUITY We have the right to make certain changes to your Income Annuity, but only as permitted by law. We make changes when we think they would best serve the interest of annuity owners or would be appropriate in carrying out the purposes of the Deferred Annuity or Income Annuity. If the law requires, we will also get your approval and the approval of any appropriate regulatory authorities. Examples of the changes we may make include: * To operate the Separate Account in any form permitted by law. * To take any action necessary to comply with or obtain and continue any exemptions under the law (including favorable treatment under the Federal income tax laws, including limiting the number, frequency or types of reallocations permitted). * To transfer any assets in an investment division to another investment division, or to one or more separate accounts, or to our general account, or to add, combine or remove investment divisions in the Separate Account. * To substitute for the Portfolio shares in any investment division, the shares of another class of the Metropolitan Fund, Met Investors Fund or the shares of another investment company or any other investment permitted by law. * To change the way we assess charges, but without increasing the aggregate amount charged to the Separate Account and any currently available portfolio in connection with the Income Annuities. * To make any necessary technical changes in the Income Annuities in order to conform with any of the above-described actions. If any changes result in a material change in the underlying investments of an investment division in which you have a balance or an allocation, we will notify you of the change. You may then make a new choice of investment 33 divisions. For Income Annuities where required by law, we will ask your approval before making any technical changes. VOTING RIGHTS Based on our current view of applicable law, you have voting interests under your Income Annuity concerning Metropolitan Fund, Met Investors Fund and American Funds proposals that are subject to a shareholder vote. Therefore, you are entitled to give us instructions for the number of shares which are deemed attributable to your Income Annuity. We will vote the shares of each of the underlying Portfolios held by the Separate Account based on instructions we receive from those having a voting interest in the corresponding investment divisions. However, if the law or the interpretation of the law changes, we may decide to exercise the right to vote the Portfolio's shares based on our own judgment. You will be entitled to give instructions regarding the votes attributable to your Income Annuity in your sole discretion. There are certain circumstances under which we may disregard voting instructions. However, in this event, a summary of our action and the reasons for such action will appear in the next semiannual report. If we do not receive your voting instructions, we will vote your interest in the same proportion as represented by the votes we receive from other investors. The effect of this proportional voting is that a small number of contract owners or annuitants may control the outcome of a vote. Shares of the Metropolitan Fund, Met Investors Fund or American Funds that are owned by our general account or by any of our unregistered separate accounts will be voted in the same proportion as the aggregate of: * The shares for which voting instructions are received, and * The shares that are voted in proportion to such voting instructions. However, if the law or the interpretation of the law changes, we may decide to exercise the right to vote the Portfolio's shares based on our judgment. WHO SELLS THE INCOME ANNUITIES On or about May 1, 2007, it is anticipated that MetLife Investors Distribution Company ("MLIDC") will become the principal underwriter and distributor of the securities offered through this prospectus. MLIDC, which is our affiliate, also acts as the principal underwriter and distributor of some of the other variable annuity contracts and variable life insurance policies we and our affiliated companies issue. We reimburse MLIDC for expenses MLIDC incurs in distributing the Income Annuities (e.g., commissions payable to the retail broker-dealers who sell the Income Annuities, including our affiliated broker-dealers). MLIDC does not retain any fees under the Income Annuities. MLIDC's principal executive offices are located at 5 Park Plaza, Suite 1900, Irvine, CA 92614. MLIDC is registered as a broker-dealer with the Securities and Exchange Commission ("SEC") under the Securities Exchange Act of 1934, as well as the securities commissions in the states in which it operates, and is a member of the National Association of Securities Dealers, Inc. ("NASD"). Income Annuities are sold through MetLife licensed sales representatives who are associated with MetLife Securities, Inc. ("MSI"), our affiliate and a broker-dealer, which is paid compensation for the promotion and sale of the Income Annuities. Previously, Metropolitan Life Insurance Company was the broker-dealer through which MetLife sales representatives sold the Income Annuities. The Income Annuities are also sold through the registered representatives of our other affiliated broker-dealers. MSI and our affiliated broker-dealers are registered with the SEC as broker-dealers under the Securities Exchange Act of 1934 and are also members of the NASD. The Income 34 Annuities may also be sold through other registered broker-dealers. Income Annuities also may be sold through the mail or over the Internet. There is no front-end sales load deducted from purchase payments to pay sales commissions. Distribution costs are recovered from the Separate Account charge. The commissions we pay range from 0% to 6% of purchase payments. Our sales representatives and their managers, and the sales representatives and managers of our affiliates, may be eligible for cash compensation such as bonuses, equity awards, such as stock options, training allowances, supplemental salary, payments based on a percentage of the Contract's account value, financial arrangements, marketing support, medical and other insurance benefits, retirement benefits and other benefits. The amount of this cash compensation is based primarily on the amount of proprietary products sold. Proprietary products are products issued by us or our affiliates. Sales representatives must meet a minimum level of sales of proprietary products in order to be eligible for the cash compensation and in order to maintain employment with us. Managers may be eligible for additional cash compensation based on the sales production of the sales representatives that the manager supervises. Sales representatives and their managers may also be eligible for various non-cash compensation programs, such as conferences, trips, prizes, and awards. Other payments may be made for other services that do not directly involve the sale of products. These services may include the recruitment and training of personnel, production of promotional literature, and similar services. Sales representatives who meet certain productivity, persistency, and length of service standards and/or their managers may be eligible for additional compensation. The receipt of this cash compensation may provide sales representatives and their managers with an incentive to favor the sale of proprietary products. MLIDC pays compensation for the sale of the Income Annuities by affiliated and unaffiliated broker-dealers. The compensation paid to broker-dealers for sales of the Income Annuities is generally not expected to exceed, on a present value basis, the aggregate amount of total compensation that MSI pays with respect to sales made through MetLife representatives. (The total compensation includes payments that we make to our business unit or the business unit of our affiliate that is responsible for the operation of the distribution systems through which the Income Annuities are sold.) These firms pay their sales representatives all or a portion of the commissions received for their sales of Income Annuities; some firms may retain a portion of commissions. The amount that selling firms pass on to their sales representatives is determined in accordance with their internal compensation programs. Those programs may also include other types of cash and non-cash compensation and other benefits. Sales representatives of affiliated broker-dealers and their managers may be eligible for various cash benefits and non-cash compensation (as described above) that we may provide jointly with affiliated broker-dealers. Because of the receipt of this cash and non-cash compensation, sales representatives and their managers of our affiliated broker-dealers have an incentive to favor the sale of proprietary products. MLIDC may also enter into preferred distribution arrangements with certain affiliated selling firms such as New England Securities Corporation, Walnut Street Securities, Inc. and Tower Square Securities, Inc. These arrangements are sometimes called "shelf space" arrangements. Under these arrangements, MLIDC and Distributor may pay separate, additional compensation to the selling firm for services the selling firm provides in connection with the distribution of the Contracts. These services may include providing us with access to the distribution network of the selling firm, the hiring and training of the selling firm's sales personnel, the sponsoring of conferences and seminars by the selling firm, or general marketing services performed by the selling firm. The selling firm may also provide other services or incur other costs in connection with distributing the Contracts. MLIDC also pays compensation for the sale of the Contracts by unaffiliated broker-dealers. Broker-dealers pay their sales representatives all or a portion of the commissions received for their sales of the Contracts. Some firms may 35 retain a portion of commissions. The amount that the broker-dealer passes on to its sales representatives is determined in accordance with its internal compensation programs. Those programs may also include other types of cash and non-cash compensation and other benefits. Sales representatives of non-affiliated broker-dealers and their managers may be eligible for various cash benefits and non-cash compensation items. We may also provide sales support in the form of training, sponsoring conferences, defraying expenses at vendor meetings, providing promotional literature and similar services. Ask your sales representative for further information about what your sales representative and the broker-dealer for which he or she works may receive in connection with your purchase of a Contract. We or our affiliates pay American Funds Distributors, Inc., the principal underwriter for the American Funds, a percentage of all purchase payments allocated to the American Funds Growth Portfolio, the American Funds Growth-Income Portfolio, the American Funds Global Small Capitalization Portfolio and the American Funds Bond Portfolio for the services it provides in marketing these Portfolios' shares in connection with the Income Annuity. Gallatin Asset Management, Inc., an affiliate of A.G. Edwards serves as the sub-investment manager of the Cyclical Growth and Income ETF Portfolio and the Cyclical Growth ETF Portfolio (the "ETF Portfolios"). Accordingly, A.G. Edwards may benefit from assets allocated to the ETF Portfolios to the extent such assets result in profits to Gallatin Asset Management, Inc. (See the Statement of Additional information for information on the management fees paid to Gallatin Asset Management, Inc. by Met Investors, the investment manager of the ETF Portfolios.) In addition, pursuant to agreements with A.G. Edwards, we or our affiliates pay to them a percentage fee on assets allocated to the ETF Portfolios in this and other contracts issued by us and/or our affiliates. It is conceivable that A.G. Edwards may have an incentive to recommend to customers that they allocate purchase payments and account value to the ETF Portfolios. ADDITIONAL COMPENSATION PAID TO SELLING FIRMS AND OTHER INTERMEDIARIES We enter into arrangements with a variety of agents, brokers, consultants, third party administrators, general agents, associations, and other parties that may participate in the sale of MetLife products (each an "Intermediary"). If you purchase a MetLife product through an Intermediary, we may pay the Intermediary base commission and other forms of compensation for the sale and renewal of MetLife products and fees for the administration and service of MetLife products, or remit compensation to the Intermediary on your behalf, if you are a plan sponsor. As recognized by the National Association of Insurance Commissioners in its Producer Licensing Model Act, compensation may include payments, commissions, fees awards, overrides, bonuses, contingent commissions, loans, gifts, prizes, stock options or any other form of valuable consideration. Additionally, we may have a variety of other relationships with your Intermediary or its affiliates that involve the payment of compensation and benefits that may or may not be related to your relationship with MetLife (e.g., consulting or reinsurance arrangements). The prospect of receiving, or the receipt of, additional compensation as described above may provide Intermediaries with an incentive to favor sales of MetLife products. If you would like further information, ask your Intermediary or a MetLife representative for specific details concerning your Intermediary's compensation arrangement with MetLife. FINANCIAL STATEMENTS The financial statements and related notes for the Separate Account and MetLife, which are in the SAI and are available from MetLife upon request have been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their reports appearing in the SAI and have been so incorporated in reliance upon the reports of such firm given upon their authority as experts in accounting and auditing. 36 YOUR SPOUSE'S RIGHTS If you received your Contract through a qualified retirement plan and your plan is subject to ERISA (the Employee Retirement Income Security Act of 1974) and you are married, the income payments, withdrawal provisions, and methods of payment of the death benefit under your Income Annuity may be subject to your spouse's rights. If your benefit is worth $5,000 or less, your plan may provide for distribution of your entire interest in a lump sum without your spouse's consent. For details or advice on how the law applies to your circumstances, consult your tax advisor or attorney. WHEN WE CAN CANCEL YOUR INCOME ANNUITY We may not cancel your Income Annuity, except as described in the Withdrawal Option section of this Prospectus. INCOME TAXES The following information on taxes is a general discussion of the subject. It is not intended as tax advice. The Internal Revenue Code ("Code") is complex and subject to change regularly. Consult your own tax adviser about your circumstances, any recent tax developments, and the impact of state income taxation. The SAI has additional tax information. You are responsible for determining whether your purchase of an Income Annuity, withdrawals, income payments and any other transactions under your Income Annuity satisfy applicable tax law. We are not responsible for determining if your employer's plan or arrangement satisfies the requirements of the Code and/or the Employee Retirement Income Security Act of 1974 (ERISA). Where otherwise permitted under the Income Annuities, the transfer of ownership of an Income Annuity, the designation (or change in such a designation) of an annuitant, beneficiary or other payee who is not also an owner, the exchange of an Income Annuity, or the receipt of an Income Annuity in an exchange, may result in income tax and other tax consequences, including estate tax, gift tax and generation skipping transfer tax, that are not discussed in this Prospectus. The SAI may contain additional information. Please consult your tax adviser. Annuity purchases by nonresident aliens and foreign corporations. Purchasers that are not U.S. citizens or residents will generally be subject to U.S. Federal withholding tax on taxable distributions from annuity contracts at a 30% rate, unless a lower treaty rate applies. In addition, purchasers may be subject to state and/or municipal taxes and taxes that may be imposed by the purchaser's country of citizenship or residence. Prospective purchasers are advised to consult with a qualified tax adviser regarding U.S. state and foreign taxation with respect to purchasing an annuity contract. MetLife does not expect to incur Federal, state or local income taxes on the earnings or realized capital gains attributable to the Separate Account. However, if we do incur such taxes in the future, we reserve the right to charge amounts allocated to the Separate Account for these taxes. To the extent permitted under Federal tax law, we may claim the benefit of certain foreign tax credits attributable to taxes paid by certain of the Portfolios to foreign jurisdictions. GENERAL All IRAs receive tax deferral under the Code. Although there are no additional tax benefits by funding your IRA or qualified plan with an annuity, it does provide you additional insurance benefits such as availability of a guaranteed income for life. 37 Under current Federal income tax law, the taxable portion of distributions under variable annuity contracts and qualified plans (including IRAs) is not eligible for the reduced tax rate applicable to long-term capital gains and qualifying dividends. WITHDRAWALS When money is withdrawn from your Contract (whether by you or your beneficiary), the amount treated as taxable income and taxed as ordinary income differs depending on the type of: annuity you purchase (e.g., Non-Qualified or IRA); and payment method or income payment type you elect. If you meet certain requirements, your Roth IRA earnings are free from Federal income taxes. We will withhold a portion of the amount of your withdrawal for income taxes, unless you elect otherwise. The amount we withhold is determined by the Code. WITHDRAWALS BEFORE AGE 59 1/2 Because these products are intended for retirement, if you make a taxable withdrawal before age 59 1/2 you may incur a 10% tax penalty, in addition to ordinary income taxes. Also, please see the section below titled Separate Account Charges for further information regarding withdrawals. As indicated in the chart below, some taxable distributions prior to age 59 1/2 are exempt from the penalty. Some of these exceptions include amounts received:
Type of Contract --------------------------------------------------- 401(a) 401(k) Trad. IRA/SEP Keogh 403(a) Non-Qualified SIMPLE IRA* 403(b) 457 ------------- ------------- ------------- In a series of substantially equal payments made annually (or more frequently) for life or life expectancy (SEPP) x x x(1) After you die x x x After you become totally disabled (as defined in the Code) x x x To pay deductible medical expenses x x To pay medical insurance premiums if you are unemployed x For qualified higher education expenses, or x For qualified first time home purchases up to $10,000 x After December 31, 1999 for IRS levies x x After separation from service if you are over age 55 at time of separation x Under certain income annuities providing for substantially equal payments over the "pay-out" period x * For SIMPLE IRA's the tax penalty for early withdrawals is generally increased to 25% for withdrawals within the first two years of your participation in the SIMPLE IRA. (1) You must also be separated from service.
INCOME OPTIONS FOR SUBSTANTIALLY EQUAL PERIODIC PAYMENTS (SEPP) If you are considering selecting an income option for the purpose of meeting the SEPP exception to the 10% tax penalty, consult with your tax adviser. It is not clear whether income payments will satisfy the SEPP exception. If you receive systematic payments that you intend to qualify for the SEPP exception, any modifications (except due to death or disability) to your payment before age 59 1/2 or within five years after beginning SEPP payments, whichever is later, will generally result in the retroactive imposition of the 10% penalty with interest. 38 If you have not attained age 59 1/2 at the time of purchase and intend to use the Income Annuity to meet the substantially equal periodic payment exception to the 10% penalty tax, note that the exercise of either withdrawal feature prior to the later of (a) your attaining age 59 1/2 or (b) five years after income payments had begun, will generally also result in the retroactive imposition of the 10% penalty tax (with interest) in addition to ordinary income tax on income payments previously received. In such cases, the taxable portion of the withdrawal, as well as the taxable portion of income payments received in the year of the withdrawal, will generally be subject to the 10% penalty tax in addition to ordinary income tax. In addition, if you are under age 59 1/2 when such payments are received, any future payments you receive will generally be subject to the 10% penalty tax. Consult your tax adviser. NON-QUALIFIED ANNUITIES GENERAL Purchase payments to Non-Qualified contracts are on an "after-tax" basis, so you only pay income taxes on your earnings. Generally, these earnings are taxed when received from the Contract. Once income payments commence, you may not be able to transfer withdrawals to another non-qualified annuity contract in a tax-free Section 1035 exchange. When a non-natural person owns a Non-Qualified contract, the annuity will generally not be treated as an annuity for tax purposes and thus loses the benefit of tax deferral. Corporations and certain other entities are generally considered non-natural persons. However, an annuity owned by a non-natural person as agent for an individual will be treated as an annuity for tax purposes. In those limited situations where the annuity is beneficially owned by a non-natural person and the annuity qualifies as such for Federal income tax purposes, the entity may have a limited ability to deduct interest. Certain Income annuities under section 72(u)(4) of the Code purchased with a single payment consisting of substantially equal periodic payments with an annuity starting date within 12 months of purchase may also be considered annuities for federal income tax purposes where owned by a non-natural person. PURCHASE PAYMENTS Although the Code does not limit the amount of your purchase payments, your Contract may limit them. PARTIAL AND FULL WITHDRAWALS EXERCISE OF OPTIONAL TWO YEAR WITHDRAWAL OR STANDARD WITHDRAWAL FEATURE If your Income Annuity has been purchased with an Optional Two Year Withdrawal Feature or is a term certain only annuity and is terminated as a result of the exercise of the withdrawal feature, the taxable portion of the payment will generally be the excess of the proceeds received over your remaining after-tax contributions. For Non-Qualified Annuities, amounts received under the exercise of a partial withdrawal may be fully includable in taxable income. The entire amount of the withdrawal could be treated as taxable income. Exercise of either withdrawal feature may adversely impact the amount of subsequent payments which can be treated as a nontaxable return of investment. INCOME PAYMENTS Income payments are subject to an "exclusion ratio" or "excludable amount" which determines how much of each payment is treated as: a non-taxable return of your purchase payments and a taxable payment of earnings. 39 We generally will tell you how much of each income payment is a non-taxable return of your purchase payments. We will determine such excludable amount for each income payment under the Contract as a whole by using the rules applicable to variable income payments in general (i.e., by dividing your after-tax purchase price, adjusted for any refund or guarantee feature, by the number of expected income payments from the appropriate IRS table). However, it is possible that the IRS could conclude that the taxable portion of income payments under a non-qualified contract is an amount greater (or less) than the taxable amount determined by us and reported by us to you and the IRS. Generally, once the total amount treated as a non-taxable return of your purchase payment equals your purchase payment, then all remaining payments are fully taxable. We will withhold a portion of the taxable amount of your income payment for income taxes, unless you elect otherwise. The amount we withhold is determined by the Code. If the amount of income payments received in any calendar year is less than the excludable amount applicable to the year, the excess is not allowable as a deduction. However, you may generally elect the year in which to begin to apply this excess ratably to increase the excludable amount attributable to future years. Consult your tax advisor as to the details and consequences of making such election. Also, consult your tax advisor as to the tax treatment of any unrecovered after-tax cost in the year that the Contract terminates. DEATH BENEFITS The death benefit under an annuity is generally taxable to the recipient in the same manner as if paid to the contract owner (under the rules for withdrawals or income payments, whichever is applicable). If you die before the annuity starting date, as defined under Treasury Regulations, payments must begin for a period and in a manner allowed by the Code (and any regulations thereunder) to your beneficiary within one year of the date of your death or, if not, payment of your entire interest in the Contract must be made within five years of the date of your death. If your spouse is your beneficiary, he or she may elect to continue as owner of the Contract. If you die on or after the annuity starting date, payments must continue to be made at least as rapidly as before your death in accordance with the income type selected. If you die before all purchase payments are returned, the unreturned amount may be deductible on your final income tax return or excluded from income by your beneficiary if income payments continue after your death. In the case of joint contract owners, the above rules will be applied on the death of any contract owner. Where the contract owner is not a natural person, these rules will be applied on the death of any annuitant (or on the change in annuitant, if permitted under the Contract). If death benefit payments are being made to your designated beneficiary and he/she dies prior to receiving the entire remaining interest in the Contract, such remaining interest will be paid out at least as rapidly as under the distribution method being used at the time of your designated beneficiary's death. DIVERSIFICATION In order for your Non-Qualified Contract to be considered an annuity contract for Federal income tax purposes, we must comply with certain diversification standards with respect to the investments underlying the Contract. We believe that we satisfy and will continue to satisfy these diversification standards. Inadvertent failure to meet these standards may be correctable. Failure to meet these standards would result in immediate taxation to contract owners of gains under their Contract. 40 INVESTOR CONTROL In certain circumstances, owners of variable annuity contracts have been considered to be the owners of the assets of the underlying Separate Account for Federal Income tax purposes due to their ability to exercise investment control over those assets. When this is the case, the Contract owners have been currently taxed on income and gains attributable to the variable account assets. There is little guidance in this area, and some features of the Contract, such as the number of funds available and the flexibility of the contract owner to allocate premium payments and transfer amounts among the funding options have not been addressed in public rulings. While we believe that the contract does not give the Contract owner investment control over Separate Account assets, we reserve the right to modify the Contract as necessary to prevent a contract owner from being treated as the owner of the Separate Account assets supporting the Contract. CHANGES TO TAX RULES AND INTERPRETATIONS Changes in applicable tax rules and interpretations can adversely affect the tax treatment of your contract. These changes may take effect retroactively. Examples of changes that could create adverse tax consequences include: -- Possible taxation of reallocations between investment divisions and/or reallocations from/between an investment division to/and a fixed option. -- Possible taxation as if you were the owner of your portion of the Separate Account's assets. -- Possible limits on the number of funding options available or the frequency of reallocations among them. We reserve the right to amend your Income Annuity where necessary to maintain its status as a variable annuity contract under Federal tax law and to protect you and other contract owners in the investment divisions from adverse tax consequences. INDIVIDUAL RETIREMENT ANNUITIES TRADITIONAL IRA, ROTH IRA, SIMPLE IRA AND SEPS The sale of a contract for use with an IRA may be subject to special disclosure requirements of the Internal Revenue Service. Purchasers of a contract for use with IRAs will be provided with supplemental information required by the Internal Revenue Service or other appropriate agency. A Contract issued in connection with an IRA may be amended as necessary to conform to the requirements of the Code. IRA Contracts may not invest in life insurance. The annuity may offer death benefits and optional benefits that in some cases may exceed the greater of the purchase payments or the Account Balance which could conceivably be characterized as life insurance. Consult your tax adviser prior to the purchase of the Contract as a Traditional Roth IRA, SIMPLE IRA or SEP. Generally, except for Roth IRAs, IRAs can accept deductible (or pre-tax) purchase payments. Deductible or pre-tax purchase payments will be taxed when distributed from the Contract. You must be both the contract owner and the annuitant under the Contract. Your IRA annuity is not forfeitable and you may not transfer, assign or pledge it to someone else. You are not permitted to borrow from the Contract. You can transfer your IRA proceeds to a similar IRA, certain eligible retirement plans of an employer (or a SIMPLE IRA to a Traditional IRA or eligible retirement plan after two years) without incurring Federal income taxes if certain conditions are satisfied. 41 TRADITIONAL IRA ANNUITIES PURCHASE PAYMENT The Contract may accept a single purchase payment consisting of a rollover to an IRA and an IRA contribution for the year of purchase. WITHDRAWALS AND INCOME PAYMENTS Withdrawals (other than tax free transfers or rollovers to other individual retirement arrangements or eligible retirement plans) and income payments are included in income except for the portion that represents a return of non-deductible purchase payments. This portion is generally determined based on a ratio of all non-deductible purchase payments to the total values of all your Traditional IRAs. We will withhold a portion of the taxable amount of your withdrawal for income taxes, unless you elect otherwise. The amount we withhold is determined by the Code. MINIMUM DISTRIBUTION REQUIREMENTS FOR IRAS Generally, for IRAs (see discussion below for Roth IRAs), you must begin receiving withdrawals by April 1 of the calendar year following the year in which you reach age 70 1/2. Complex rules apply to the calculation of these withdrawals. A tax penalty of 50% applies to withdrawals which should have been taken but were not. It is not clear whether income payments under a variable annuity will satisfy these rules. Consult your tax adviser prior to choosing a pay-out option. In general, Income Tax regulations permit income payments to increase based not only with respect to the investment experience of the underlying funds but also with respect to actuarial gains. Additionally, these regulations permit payments under income annuities to increase due to a full withdrawal or to a partial withdrawal under certain circumstances. The regulations also require that beginning for the 2006 distribution year, the value of all benefits under a deferred annuity including death benefits in excess of cash value must be added to the account value in computing the amount required to be distributed over the applicable period. The new rules are not entirely clear and you should consult your own tax advisors as to how these rules affect your own Contract. We will provide you with additional information regarding the amount that is subject to minimum distribution under this new rule. If you intend to receive your minimum distributions which are payable over the joint lives of you and a beneficiary who is not your spouse (or over a period not exceeding the joint life expectancy of you and your non-spousal beneficiary), be advised that Federal tax rules may require that payments be made over a shorter period or may require that payments to the beneficiary be reduced after your death to meet the minimum distribution incidental benefit rules and avoid the 50% excise tax. Consult your tax advisor. DEATH BENEFITS The death benefit is taxable to the recipient in the same manner as if paid to the contract owner (under the rules for withdrawals or income payments, whichever is applicable). If you die after required distributions begin, payments of your entire remaining interest must be made in a manner and over a period as provided under the Code (and any applicable regulations). If your spouse is your beneficiary, he or she may elect to continue as "contract owner" of the Contract. If the Contract is issued in your name after your death for the benefit of your designated beneficiary with a purchase payment which is directly transferred to the Contract from another IRA account or IRA annuity you owned, the death benefit must continue to be distributed to your beneficiary's beneficiary in a manner at least as rapidly as the method of distribution in effect at the time of your beneficiary's death. 42 WITHDRAWALS OR INCOME PAYMENTS Generally, withdrawals of earnings or Income Payments from Roth IRAs are free from Federal income tax if they meet the following two requirements: * The withdrawal is made at least five taxable years after your first purchase payment to a Roth IRA, AND * The withdrawal is made: on or after the date you reach age 59 1/2; upon your death or disability; or for a qualified first-time home purchase (up to $10,000). Withdrawals of earnings and Income Payments which do not meet these requirements are taxable and a 10% penalty tax may apply if made before age 59 1/2. See withdrawals chart above. Consult your tax adviser to determine if an exception applies. Withdrawals and Income Payments from a Roth IRA are made first from purchase payments and then from earnings. Generally, you do not pay income tax on withdrawals of purchase payments or on income payments. However, withdrawals of converted amounts from a non-Roth IRA prior to age 59 1/2 will be subject to the 10% penalty tax (unless you meet an exception) if made within 5 taxable years of such conversion. See withdrawals chart above. The order in which money is withdrawn from a Roth IRA is as follows: (All Roth IRAs owned by a taxpayer are combined for withdrawal purposes.) -- The first money withdrawn is any annual (non-conversion/rollover) contributions to the Roth IRA. These are received tax and penalty free. -- The next money withdrawn is from conversion/rollover contributions from a non-Roth IRA, on a first-in, first-out basis. For these purposes, distributions are treated as coming first from the taxable portion of the conversion/rollover contribution. As previously discussed, depending upon when it occurs, withdrawals of taxable converted amounts may be subject to a penalty tax, or result in the acceleration of inclusion of income. -- The next money withdrawn is from earnings in the Roth IRA. This is received tax-free if it meets the requirements previously discussed, otherwise it is subject to Federal income tax and an additional 10% penalty tax may apply if you are under age 59 1/2. -- We may be required to withhold a portion of your withdrawal for income taxes, unless you elect otherwise. The amount will be determined by the Code. REQUIRED DISTRIBUTIONS Required minimum distribution rules that apply to other types of IRAs while you are alive do not apply to Roth IRAs. However, in general, the same rules with respect to minimum distributions required to be made to a beneficiary after your death under Traditional IRAs do apply to Roth IRAs. Note that where payments under a Roth Income Annuity have begun prior to your death the remaining interest in the Contract must be paid to your designated beneficiary by the end of the 5th or over a period no longer than the beneficiary's remaining life expectancy at the time you die. 43 LEGAL PROCEEDINGS In the ordinary course of business, MetLife, similar to other life insurance companies, is involved in lawsuits (including class action lawsuits), arbitrations and other legal proceedings. Also, from time to time, state and federal regulators or other officials conduct formal and informal examinations or undertake other actions dealing with various aspects of the financial services and insurance industries. In some legal proceedings involving insurers, substantial damages have been sought and/or material settlement payments have been made. It is not possible to predict with certainty the ultimate outcome of any pending legal proceeding or regulatory action. However, MetLife does not believe any such action or proceeding will have a material adverse effect upon the Separate Account or upon the ability of MLIDC to act as principal underwriter or to meet its obligations under the Contracts. 44 APPENDIX A PREMIUM TAX TABLE If you are a resident of one of the following jurisdictions, the percentage amount listed by the jurisdiction is the premium tax rate applicable to your Income Annuity.
Keogh, 401(a), 401(k), and IRA Income 403(a) Non-Qualified Annuities(1) Income Annuities Income Annuities ------------ ---------------- ---------------- California........................................... 0.5%(2) 0.5% 2.35% Maine................................................ -- -- 2.0% Nevada............................................... -- -- 3.5% Puerto Rico(3)....................................... 3.0% 3.0% 3.0% South Dakota......................................... -- -- 1.25% West Virginia........................................ 1.0% 1.0% 1.0% Wyoming.............................................. -- -- 1.0%
---------------- 1 PREMIUM TAX RATES APPLICABLE TO IRA INCOME ANNUITIES PURCHASED FOR USE IN CONNECTION WITH INDIVIDUAL RETIREMENT TRUST OR CUSTODIAL ACCOUNTS MEETING THE REQUIREMENTS OF SEC.408(a) OF THE CODE ARE INCLUDED UNDER THE COLUMN HEADED "IRA INCOME ANNUITIES." 2 WITH RESPECT TO INCOME ANNUITIES PURCHASED FOR USE IN CONNECTION WITH INDIVIDUAL RETIREMENT TRUST OR CUSTODIAL ACCOUNTS MEETING REQUIREMENTS OF SEC.408(a) OF THE CODE, THE ANNUITY TAX RATE IN CALIFORNIA IS 2.35% INSTEAD OF 0.5%. 3 LEGISLATION HAS BEEN PASSED INCREASING THE TAX RATE TO 3%, HOWEVER, THE RATE INCREASE IS CONTINGENT UPON THE PASSAGE OF THE BUDGET BILL. NONETHELESS, THE DEPARTMENT OF INSURANCE HAS INDICATED THAT IT CONSIDERS THE RATE INCREASE TO BE EFFECTIVE. 45 APPENDIX B ANNUITY UNIT VALUES FOR EACH INVESTMENT DIVISION These tables show fluctuations in the Accumulation Unit Values for each investment division from year end to year end. The information in these tables has been derived from the Separate Account's full financial statements or other reports (such as the annual report). The first table shows the Income Annuity with the maximum guaranteed Separate Account charge of .95% and an AIR of 3% and the second table shows the Income Annuity with the minimum Separate Account charge of .75% with an AIR of 3%. Tables with annuity unit values for Income Annuities with Separate Account charges other than the maximum and other AIRs appear in the SAI, which is available upon request without charge by calling 1-866-438-6477.
------------------------------------------------------------------------------------------------------ BEGINNING OF END OF YEAR NUMBER OF YEAR ANNUITY ANNUITY ANNUITY UNITS TABLE 1 (3% AIR, .95% Separate Account charge) YEAR UNIT VALUE UNIT VALUE END OF YEAR ------------------------------------------------------------------------------------------------------ American Funds Bond Division(f).................... 2006 $15.44 $15.94 0.00 American Funds Global Small Capitalization Division(a)...................................... 2003 9.71 10.40 0.00 2004 10.40 12.09 0.00 2005 12.09 14.58 0.00 2006 14.58 17.40 0.00 American Funds Growth Division(a).................. 2003 9.80 10.41 0.00 2004 10.41 11.26 0.00 2005 11.26 12.58 0.00 2006 12.58 13.34 0.00 American Funds Growth-Income Division(a)........... 2003 9.81 10.57 0.00 2004 10.57 11.22 0.00 2005 11.22 11.42 0.00 2006 11.42 12.66 0.00 BlackRock Aggressive Growth Division(a)............ 2003 9.73 10.26 0.00 2004 10.26 11.14 0.00 2005 11.14 11.87 0.00 2006 11.87 12.18 0.00 BlackRock Bond Income Division(a).................. 2003 10.00 10.08 0.00 2004 10.08 10.12 0.00 2005 10.12 9.97 0.00 2006 9.97 10.01 0.00 BlackRock Diversified Division(a).................. 2003 9.86 10.33 0.00 2004 10.33 10.78 0.00 2005 10.78 10.69 0.00 2006 10.69 11.36 0.00
46 APPENDIX B ANNUITY UNIT VALUES FOR EACH INVESTMENT DIVISION (CONTINUED)
------------------------------------------------------------------------------------------------------ BEGINNING OF END OF YEAR NUMBER OF YEAR ANNUITY ANNUITY ANNUITY UNITS TABLE 1 (3% AIR, .95% Separate Account charge) YEAR UNIT VALUE UNIT VALUE END OF YEAR ------------------------------------------------------------------------------------------------------ BlackRock Large Cap Division (formerly BlackRock Investment Trust Division)(a).................... 2003 $ 9.78 $10.49 0.00 2004 10.49 11.18 0.00 2005 11.18 11.14 0.00 2006 11.14 12.23 0.00 BlackRock Large Cap Value Division(b).............. 2004 10.00 10.96 0.00 2005 10.96 11.17 0.00 2006 11.17 12.82 0.00 BlackRock Legacy Large Cap Growth Division(b)...... 2004 10.00 10.88 0.00 2005 10.88 11.20 0.00 2006 11.20 11.22 0.00 BlackRock Strategic Value Division(a).............. 2003 9.69 10.91 0.00 2004 10.91 12.10 0.00 2005 12.10 12.12 0.00 2006 12.12 13.61 0.00 Cyclical Growth ETF Portfolio(f)................... 2006 10.75 11.28 0.00 Cyclical Growth & Income ETF Portfolio(f).......... 2006 10.55 11.03 0.00 Davis Venture Value Division(a).................... 2003 9.84 10.66 0.00 2004 10.66 11.51 0.00 2005 11.51 12.22 0.00 2006 12.22 13.46 0.00 FI International Stock Division(a)................. 2003 10.00 10.81 0.00 2004 10.81 12.28 0.00 2005 12.28 13.94 0.00 2006 13.94 15.62 0.00 FI Large Cap Division(f)........................... 2006 18.29 18.19 0.00 FI Mid Cap Opportunities Division(a)............... 2003 9.80 10.27 0.00 2004 10.27 11.57 0.00 2005 11.57 11.90 0.00 2006 11.90 12.80 0.00
47 APPENDIX B ANNUITY UNIT VALUES FOR EACH INVESTMENT DIVISION (CONTINUED)
------------------------------------------------------------------------------------------------------ BEGINNING OF END OF YEAR NUMBER OF YEAR ANNUITY ANNUITY ANNUITY UNITS TABLE 1 (3% AIR, .95% Separate Account charge) YEAR UNIT VALUE UNIT VALUE END OF YEAR ------------------------------------------------------------------------------------------------------ FI Value Leaders Division(b)....................... 2004 $10.00 $11.20 0.00 2005 11.20 11.93 0.00 2006 11.93 12.84 0.00 Franklin Templeton Small Cap Growth Division(a).... 2003 9.60 10.41 0.00 2004 10.41 11.16 0.00 2005 11.16 11.23 0.00 2006 11.23 11.88 0.00 Harris Oakmark Focused Value Division(a)........... 2003 9.86 10.80 0.00 2004 10.80 11.42 0.00 2005 11.42 12.08 0.00 2006 12.08 13.07 0.00 Harris Oakmark International Division(b)........... 2004 10.00 11.46 0.00 2005 11.46 12.62 0.00 2006 12.62 15.69 0.00 Harris Oakmark Large Cap Value Division(a)......... 2003 9.88 10.57 0.00 2004 10.57 11.33 0.00 2005 11.33 10.74 0.00 2006 10.74 12.21 0.00 Jennison Growth Division(c)........................ 2005 9.42 11.16 0.00 2006 11.16 11.03 0.00 Jennison Growth Division (formerly Met/Putnam Voyager Division)(a)(c).......................... 2003 9.82 10.20 0.00 2004 10.20 10.30 0.00 2005 10.30 9.31 0.00 Lazard Mid-Cap Division(b)......................... 2004 10.00 10.73 0.00 2005 10.73 11.19 0.00 2006 11.19 12.36 0.00 Legg Mason Aggressive Growth (formerly Janus Aggressive Growth)(a)............................ 2003 9.77 10.34 0.00 2004 10.34 10.82 0.00 2005 10.82 11.85 0.00 2006 11.85 11.22 0.00
48 APPENDIX B ANNUITY UNIT VALUES FOR EACH INVESTMENT DIVISION (CONTINUED)
------------------------------------------------------------------------------------------------------ BEGINNING OF END OF YEAR NUMBER OF YEAR ANNUITY ANNUITY ANNUITY UNITS TABLE 1 (3% AIR, .95% Separate Account charge) YEAR UNIT VALUE UNIT VALUE END OF YEAR ------------------------------------------------------------------------------------------------------ Legg Mason Value Equity (formerly MFS Investors Trust Division)(a)(d)............................ 2003 $ 9.88 $10.52 0.00 2004 10.52 11.26 0.00 2005 11.26 11.62 0.00 2006 11.62 12.07 0.00 Lehman Brothers(R) Aggregate Bond Index Division(a)...................................... 2003 10.00 10.04 0.00 2004 10.04 10.05 0.00 2005 10.05 9.87 0.00 2006 9.87 9.88 0.00 Loomis Sayles Small Cap Division(a)................ 2003 9.76 10.19 0.00 2004 10.19 11.40 0.00 2005 11.40 11.73 0.00 2006 11.73 13.16 0.00 Lord Abbett Bond Debenture Division(a)............. 2003 9.94 10.27 0.00 2004 10.27 10.71 0.00 2005 10.71 10.49 0.00 2006 10.49 11.03 0.00 Met/AIM Small Cap Growth Division(b)............... 2004 10.00 10.64 0.00 2005 10.64 11.11 0.00 2006 11.11 12.18 0.00 MetLife Mid Cap Stock Index Division(a)............ 2003 9.78 10.44 0.00 2004 10.44 11.65 0.00 2005 11.65 12.58 0.00 2006 12.58 13.32 0.00 MetLife Stock Index Division(a).................... 2003 9.82 10.54 0.00 2004 10.54 11.20 0.00 2005 11.20 11.27 0.00 2006 11.27 12.52 0.00 MFS Research International Division(a)............. 2003 9.98 10.90 0.00 2004 10.90 12.55 0.00 2005 12.55 14.09 0.00 2006 14.09 17.20 0.00
49 APPENDIX B ANNUITY UNIT VALUES FOR EACH INVESTMENT DIVISION (CONTINUED)
------------------------------------------------------------------------------------------------------ BEGINNING OF END OF YEAR NUMBER OF YEAR ANNUITY ANNUITY ANNUITY UNITS TABLE 1 (3% AIR, .95% Separate Account charge) YEAR UNIT VALUE UNIT VALUE END OF YEAR ------------------------------------------------------------------------------------------------------ MFS Total Return Division(b)....................... 2004 $10.00 $10.75 0.00 2005 10.75 10.66 0.00 2006 10.66 11.51 0.00 Morgan Stanley EAFE(R) Index Division(a)........... 2003 9.94 10.92 0.00 2004 10.92 12.57 0.00 2005 12.57 13.69 0.00 2006 13.69 16.55 0.00 Neuberger Berman Mid Cap Value Division(a)......... 2003 9.82 10.61 0.00 2004 10.61 12.54 0.00 2005 12.54 13.54 0.00 2006 13.54 14.52 0.00 Neuberger Berman Real Estate Division(b)........... 2004 10.00 2.08 0.00 2005 2.08 2.27 0.00 2006 2.27 3.02 0.00 Oppenheimer Capital Appreciation Division(e)....... 2005 8.18 8.76 0.00 2006 8.76 9.08 0.00 Oppenheimer Global Equity Division(a).............. 2003 9.94 10.79 0.00 2004 10.79 12.08 0.00 2005 12.08 13.50 0.00 2006 13.50 15.14 0.00 PIMCO Inflation Protected Bond Division(f)......... 2006 11.22 11.16 0.00 PIMCO Total Return Division(a)..................... 2003 10.00 10.07 0.00 2004 10.07 10.19 0.00 2005 10.19 10.04 0.00 2006 10.04 10.12 0.00 RCM Technology Division (formerly RCM Global Technology Division)(a).......................... 2003 9.57 10.01 0.00 2004 10.01 9.22 0.00 2005 9.22 9.87 0.00 2006 9.87 10.02 0.00
50 APPENDIX B ANNUITY UNIT VALUES FOR EACH INVESTMENT DIVISION (CONTINUED)
------------------------------------------------------------------------------------------------------ BEGINNING OF END OF YEAR NUMBER OF YEAR ANNUITY ANNUITY ANNUITY UNITS TABLE 1 (3% AIR, .95% Separate Account charge) YEAR UNIT VALUE UNIT VALUE END OF YEAR ------------------------------------------------------------------------------------------------------ Russell 2000(R) Index Division(a).................. 2003 $ 9.76 $10.48 0.00 2004 10.48 11.87 0.00 2005 11.87 11.93 0.00 2006 11.93 13.54 0.00 T. Rowe Price Large Cap Growth Division(a)......... 2003 9.82 10.58 0.00 2004 10.58 11.18 0.00 2005 11.18 11.46 0.00 2006 11.46 12.48 0.00 T. Rowe Price Mid-Cap Growth Division(a)........... 2003 9.73 10.35 0.00 2004 10.35 11.76 0.00 2005 11.76 13.00 0.00 2006 13.00 13.32 0.00 T. Rowe Price Small Cap Growth Division(a)......... 2003 9.74 10.26 0.00 2004 10.26 10.97 0.00 2005 10.97 11.71 0.00 2006 11.71 11.70 0.00 Western Asset Management Strategic Bond Opportunities Division(a)........................ 2003 9.99 10.15 0.00 2004 10.15 10.40 0.00 2005 10.40 10.29 0.00 2006 10.29 10.40 0.00 Western Asset Management U.S. Government Division(a)...................................... 2003 10.00 10.03 0.00 2004 10.03 9.93 0.00 2005 9.93 9.72 0.00 2006 9.72 9.74 0.00 MetLife Aggressive Allocation Division(e).......... 2005 9.99 10.98 0.00 2006 10.98 12.25 0.00 MetLife Conservative Allocation Division(e)........ 2005 9.99 10.14 0.00 2006 10.14 10.49 0.00
51 APPENDIX B ANNUITY UNIT VALUES FOR EACH INVESTMENT DIVISION (CONTINUED)
------------------------------------------------------------------------------------------------------ BEGINNING OF END OF YEAR NUMBER OF YEAR ANNUITY ANNUITY ANNUITY UNITS TABLE 1 (3% AIR, .95% Separate Account charge) YEAR UNIT VALUE UNIT VALUE END OF YEAR ------------------------------------------------------------------------------------------------------ MetLife Conservative to Moderate Allocation Division(e)...................................... 2005 $ 9.99 $10.36 0.00 2006 10.36 10.96 0.00 MetLife Moderate Allocation Division(e)............ 2005 9.99 10.58 0.00 2006 10.58 11.42 0.00 MetLife Moderate to Aggressive Allocation Division(e)...................................... 2005 9.99 10.80 0.00 2006 10.80 11.90 0.00
------------------------------------------------------------------------------------------------------ BEGINNING OF END OF YEAR NUMBER OF YEAR ANNUITY ANNUITY ANNUITY UNITS TABLE 2 (3% AIR, .75% Separate Account charge) YEAR UNIT VALUE UNIT VALUE END OF YEAR ------------------------------------------------------------------------------------------------------ American Funds Bond Division(f).................... 2006 $15.71 $16.24 0.00 American Funds Global Small Capitalization Division(a)...................................... 2003 10.00 10.41 0.00 2004 10.41 12.12 0.00 2005 12.12 14.65 0.00 2006 14.65 17.51 0.00 American Funds Growth Division(a).................. 2003 10.00 10.41 0.00 2004 10.41 11.28 0.00 2005 11.28 12.64 0.00 2006 12.64 13.42 0.00 American Funds Growth-Income Division(a)........... 2003 10.00 10.58 0.00 2004 10.58 11.25 0.00 2005 11.25 11.47 0.00 2006 11.47 12.74 0.00 BlackRock Aggressive Growth Division(a)............ 2003 10.00 10.26 0.00 2004 10.26 11.17 0.00 2005 11.17 11.92 0.00 2006 11.92 12.26 0.00 BlackRock Bond Income Division(a).................. 2003 10.00 10.08 0.00 2004 10.08 10.14 0.00 2005 10.14 10.01 0.00 2006 10.01 10.07 0.00
52 APPENDIX B ANNUITY UNIT VALUES FOR EACH INVESTMENT DIVISION (CONTINUED)
------------------------------------------------------------------------------------------------------ BEGINNING OF END OF YEAR NUMBER OF YEAR ANNUITY ANNUITY ANNUITY UNITS TABLE 2 (3% AIR, .75% Separate Account charge) YEAR UNIT VALUE UNIT VALUE END OF YEAR ------------------------------------------------------------------------------------------------------ BlackRock Diversified Division(a).................. 2003 $10.00 $10.34 0.00 2004 10.34 10.81 0.00 2005 10.81 10.73 0.00 2006 10.73 11.43 0.00 BlackRock Large Cap Portfolio Division (formerly BlackRock Investment Trust Division)(a).......... 2003 10.00 10.49 0.00 2004 10.49 11.21 0.00 2005 11.21 11.19 0.00 2006 11.19 12.30 0.00 BlackRock Large Cap Value Division(b).............. 2004 10.00 10.97 0.00 2005 10.97 11.21 0.00 2006 11.21 12.89 0.00 BlackRock Legacy Large Cap Growth Division(b)...... 2004 10.00 10.89 0.00 2005 10.89 11.24 0.00 2006 11.24 11.28 0.00 BlackRock Strategic Value Division(a).............. 2003 10.00 10.91 0.00 2004 10.91 12.13 0.00 2005 12.13 12.17 0.00 2006 12.17 13.70 0.00 Cyclical Growth ETF Portfolio(f)................... 2006 10.76 11.31 0.00 Cyclical Growth & Income ETF Portfolio(f).......... 2006 10.56 11.06 0.00 Davis Venture Value Division(a).................... 2003 10.00 10.66 0.00 2004 10.66 11.54 0.00 2005 11.54 12.27 0.00 2006 12.27 13.55 0.00 FI International Stock Division(a)................. 2003 10.00 10.81 0.00 2004 10.81 12.31 0.00 2005 12.31 14.00 0.00 2006 14.00 15.72 0.00 FI Large Cap Division(f)........................... 2006 18.64 18.57 0.00
53 APPENDIX B ANNUITY UNIT VALUES FOR EACH INVESTMENT DIVISION (CONTINUED)
------------------------------------------------------------------------------------------------------ BEGINNING OF END OF YEAR NUMBER OF YEAR ANNUITY ANNUITY ANNUITY UNITS TABLE 2 (3% AIR, .75% Separate Account charge) YEAR UNIT VALUE UNIT VALUE END OF YEAR ------------------------------------------------------------------------------------------------------ FI Mid Cap Opportunities Division(a)............... 2003 $10.00 $10.27 0.00 2004 10.27 11.60 0.00 2005 11.60 11.95 0.00 2006 11.95 12.88 0.00 FI Value Leaders Division(b)....................... 2004 10.00 11.22 0.00 2005 11.22 11.97 0.00 2006 11.97 12.91 0.00 Franklin Templeton Small Cap Growth Division(a).... 2003 10.00 10.42 0.00 2004 10.42 11.18 0.00 2005 11.18 11.28 0.00 2006 11.28 11.96 0.00 Harris Oakmark Focused Value Division(a)........... 2003 10.00 10.80 0.00 2004 10.80 11.44 0.00 2005 11.44 12.13 0.00 2006 12.13 13.15 0.00 Harris Oakmark International Division(b)........... 2004 10.00 11.48 0.00 2005 11.48 12.67 0.00 2006 12.67 15.77 0.00 Harris Oakmark Large Cap Value Division(a)......... 2003 10.00 10.57 0.00 2004 10.57 11.35 0.00 2005 11.35 10.79 0.00 2006 10.79 12.28 0.00 Jennison Growth Division(c)........................ 2005 9.45 11.21 0.00 2006 11.21 11.10 0.00 Jennison Growth Division (formerly Met/Putnam Voyager Division)(a)(c).......................... 2003 10.00 10.20 0.00 2004 10.20 10.32 0.00 2005 10.32 9.34 0.00 Lazard Mid-Cap Division(b)......................... 2004 10.00 10.75 0.00 2005 10.75 11.23 0.00 2006 11.23 12.43 0.00
54 APPENDIX B ANNUITY UNIT VALUES FOR EACH INVESTMENT DIVISION (CONTINUED)
------------------------------------------------------------------------------------------------------ BEGINNING OF END OF YEAR NUMBER OF YEAR ANNUITY ANNUITY ANNUITY UNITS TABLE 2 (3% AIR, .75% Separate Account charge) YEAR UNIT VALUE UNIT VALUE END OF YEAR ------------------------------------------------------------------------------------------------------ Legg Mason Aggressive Growth (formerly Janus Aggressive Growth)(a)............................ 2003 $10.00 $10.35 0.00 2004 10.35 10.85 0.00 2005 10.85 11.90 0.00 2006 11.90 11.29 0.00 Legg Mason Value Equity (formerly MFS Investors Trust Division)(a)(d)............................ 2003 10.00 10.52 0.00 2004 10.52 11.29 0.00 2005 11.29 11.67 0.00 2006 11.67 12.13 0.00 Lehman Brothers(R) Aggregate Bond Index Division(a)...................................... 2003 10.00 10.04 0.00 2004 10.04 10.07 0.00 2005 10.07 9.91 0.00 2006 9.91 9.94 0.00 Loomis Sayles Small Cap Division(a)................ 2003 10.00 10.19 0.00 2004 10.19 11.42 0.00 2005 11.42 11.78 0.00 2006 11.78 13.24 0.00 Lord Abbett Bond Debenture Division(a)............. 2003 10.00 10.28 0.00 2004 10.28 10.74 0.00 2005 10.74 10.54 0.00 2006 10.54 11.10 0.00 Met/AIM Small Cap Growth Division(b)............... 2004 10.00 10.65 0.00 2005 10.65 11.15 0.00 2006 11.15 12.24 0.00 MetLife Mid Cap Stock Index Division(a)............ 2003 10.00 10.44 0.00 2004 10.44 11.68 0.00 2005 11.68 12.64 0.00 2006 12.64 13.41 0.00 MetLife Stock Index Division(a).................... 2003 10.00 10.54 0.00 2004 10.54 11.23 0.00 2005 11.23 11.32 0.00 2006 11.32 12.60 0.00
55 APPENDIX B ANNUITY UNIT VALUES FOR EACH INVESTMENT DIVISION (CONTINUED)
------------------------------------------------------------------------------------------------------ BEGINNING OF END OF YEAR NUMBER OF YEAR ANNUITY ANNUITY ANNUITY UNITS TABLE 2 (3% AIR, .75% Separate Account charge) YEAR UNIT VALUE UNIT VALUE END OF YEAR ------------------------------------------------------------------------------------------------------ MFS Research International Division(a)............. 2003 $10.00 $10.90 0.00 2004 10.90 12.58 0.00 2005 12.58 14.15 0.00 2006 14.15 17.31 0.00 MFS Total Return Division(b)....................... 2004 10.00 10.76 0.00 2005 10.76 10.70 0.00 2006 10.70 11.57 0.00 Morgan Stanley EAFE(R) Index Division(a)........... 2003 10.00 10.93 0.00 2004 10.93 12.60 0.00 2005 12.60 13.75 0.00 2006 13.75 16.66 0.00 Neuberger Berman Mid Cap Value Division(a)......... 2003 10.00 10.61 0.00 2004 10.61 12.57 0.00 2005 12.57 13.60 0.00 2006 13.60 14.61 0.00 Neuberger Berman Real Estate Division(b)........... 2004 10.00 2.08 0.00 2005 2.08 2.28 0.00 2006 2.28 3.03 0.00 Oppenheimer Capital Appreciation Division(e)....... 2005 8.25 8.84 0.00 2006 8.84 9.19 0.00 Oppenheimer Global Equity Division(a).............. 2003 10.00 10.79 0.00 2004 10.79 12.11 0.00 2005 12.11 13.56 0.00 2006 13.56 15.24 0.00 PIMCO Inflation Protected Bond Division(f)......... 2006 11.29 11.24 0.00 PIMCO Total Return Division(a)..................... 2003 10.00 10.07 0.00 2004 10.07 10.21 0.00 2005 10.21 10.09 0.00 2006 10.09 10.19 0.00
56 APPENDIX B ANNUITY UNIT VALUES FOR EACH INVESTMENT DIVISION (CONTINUED)
------------------------------------------------------------------------------------------------------ BEGINNING OF END OF YEAR NUMBER OF YEAR ANNUITY ANNUITY ANNUITY UNITS TABLE 2 (3% AIR, .75% Separate Account charge) YEAR UNIT VALUE UNIT VALUE END OF YEAR ------------------------------------------------------------------------------------------------------ RCM Technology Division (formerly RCM Global Technology Division)(a).......................... 2003 $10.00 $10.02 0.00 2004 10.02 9.24 0.00 2005 9.24 9.91 0.00 2006 9.91 10.08 0.00 Russell 2000(R) Index Division(a).................. 2003 10.00 10.49 0.00 2004 10.49 11.90 0.00 2005 11.90 11.98 0.00 2006 11.98 13.63 0.00 T. Rowe Price Large Cap Growth Division(a)......... 2003 10.00 10.58 0.00 2004 10.58 11.21 0.00 2005 11.21 11.51 0.00 2006 11.51 12.56 0.00 T. Rowe Price Mid-Cap Growth Division(a)........... 2003 10.00 10.35 0.00 2004 10.35 11.79 0.00 2005 11.79 13.05 0.00 2006 13.05 13.40 0.00 T. Rowe Price Small Cap Growth Division(a)......... 2003 10.00 10.27 0.00 2004 10.27 10.99 0.00 2005 10.99 11.76 0.00 2006 11.76 11.77 0.00 Western Asset Management Strategic Bond Opportunities Division(a)........................ 2003 10.00 10.15 0.00 2004 10.15 10.43 0.00 2005 10.43 10.33 0.00 2006 10.33 10.46 0.00 Western Asset Management U.S. Government Division(a)...................................... 2003 10.00 10.03 0.00 2004 10.03 9.96 0.00 2005 9.96 9.76 0.00 2006 9.76 9.80 0.00 MetLife Aggressive Allocation Division(e).......... 2005 9.99 10.99 0.00 2006 10.99 12.29 0.00
57 APPENDIX B ANNUITY UNIT VALUES FOR EACH INVESTMENT DIVISION (CONTINUED)
------------------------------------------------------------------------------------------------------ BEGINNING OF END OF YEAR NUMBER OF YEAR ANNUITY ANNUITY ANNUITY UNITS TABLE 2 (3% AIR, .75% Separate Account charge) YEAR UNIT VALUE UNIT VALUE END OF YEAR ------------------------------------------------------------------------------------------------------ MetLife Conservative Allocation Division(e)........ 2005 $ 9.99 $10.15 0.00 2006 10.15 10.53 0.00 MetLife Conservative to Moderate Allocation Division(e)...................................... 2005 9.99 10.38 0.00 2006 10.38 11.00 0.00 MetLife Moderate Allocation Division(e)............ 2005 9.99 10.59 0.00 2006 10.59 11.45 0.00 MetLife Moderate to Aggressive Allocation Division(e)...................................... 2005 9.99 10.82 0.00 2006 10.82 11.94 0.00
---------------- NOTES: a INCEPTION DATE: OCTOBER 27, 2003. b INCEPTION DATE: MAY 1, 2004. c THE ASSETS OF THE MET/PUTNAM VOYAGER INVESTMENT DIVISION MERGED INTO THE JENNISON GROWTH DIVISION PRIOR TO THE OPENING OF BUSINESS ON MAY 2, 2005. THE MET/PUTNAM VOYAGER INVESTMENT DIVISION IS NO LONGER AVAILABLE. d THE ASSETS OF MFS(R) INVESTORS TRUST DIVISION WERE MERGED INTO THE LEGG MASON VALUE EQUITY DIVISION PRIOR TO THE OPENING OF BUSINESS ON MAY 1, 2006. ANNUITY UNIT VALUES PRIOR TO MAY 1, 2006 ARE THOSE OF MFS(R) INVESTORS TRUST DIVISION. e INCEPTION DATE: MAY 1, 2005. f INCEPTION DATE: MAY 1, 2006. 58 APPENDIX C PORTFOLIO LEGAL AND MARKETING NAMES
-------------------------------------------------------------------------------------------- Series Fund/Trust Legal Name of Portfolio/Series Marketing Name -------------------------------------------------------------------------------------------- AMERICAN FUNDS INSURANCE SERIES Bond Fund American Funds Bond Portfolio AMERICAN FUNDS INSURANCE SERIES Global Small Capitalization Fund American Funds Global Small Capitalization Portfolio AMERICAN FUNDS INSURANCE SERIES Growth-Income Fund American Funds Growth-Income Portfolio AMERICAN FUNDS INSURANCE SERIES Growth Fund American Funds Growth Portfolio METROPOLITAN SERIES FUND, INC. FI International Stock Portfolio FI International Stock Portfolio (Fidelity) METROPOLITAN SERIES FUND, INC. FI Large Cap Portfolio FI Large Cap Portfolio (Fidelity) METROPOLITAN SERIES FUND, INC. FI Mid Cap Opportunities Portfolio FI Mid Cap Opportunities Portfolio (Fidelity) METROPOLITAN SERIES FUND, INC. FI Value Leaders Portfolio FI Value Leaders Portfolio (Fidelity)
59 TABLE OF CONTENTS FOR THE STATEMENT OF ADDITIONAL INFORMATION
PAGE COVER PAGE.................................................. 1 TABLE OF CONTENTS........................................... 1 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM............... 2 DISTRIBUTION OF CERTIFICATES AND INTERESTS IN THE INCOME ANNUITIES................................................. 2 WITHDRAWAL PROCESSING FEE................................... 3 EXPERIENCE FACTOR........................................... 3 VARIABLE INCOME PAYMENTS.................................... 3 INVESTMENT MANAGEMENT FEES.................................. 5 ADVERTISEMENT OF THE SEPARATE ACCOUNT....................... 9 VOTING RIGHTS............................................... 10 ERISA....................................................... 10 TAXES....................................................... 11 FINANCIAL STATEMENTS OF THE SEPARATE ACCOUNT................ F-1 FINANCIAL STATEMENTS OF METLIFE............................. F-1
60 REQUEST FOR A STATEMENT OF ADDITIONAL INFORMATION/CHANGE OF ADDRESS If you would like any of the following Statements of Additional Information, or have changed your address, please check the appropriate box below and return to the appropriate address below. [ ] Metropolitan Life Separate Account E [ ] Metropolitan Series Fund, Inc. [ ] Met Investors Series Trust [ ] American Funds Insurance Series [ ] I have changed my address. My current address is: ------------------------------- Name ------------------------------- (Contract Number) Address ------------------------------- ------------------------------- ------------------------------- (Signature) zip
Metropolitan Life Insurance Company Attn: MetLife Personal IncomePlus P.O. Box 14660 Lexington, KY 40512-4660 [METLIFE LOGO] Metropolitan Life Insurance Company Johnstown Office, 500 Schoolhouse Road Johnstown, PA 15904-2914 METROPOLITAN LIFE INSURANCE COMPANY METROPOLITAN LIFE SEPARATE ACCOUNT E METLIFE PERSONAL INCOME PLUS(SM) GROUP INCOME ANNUITY CONTRACTS STATEMENT OF ADDITIONAL INFORMATION FORM N-4 PART B April 30, 2007 This Statement of Additional Information is not a prospectus but contains information in addition to and more detailed than that set forth in the Prospectus for MetLife Personal IncomePlus(SM) Contracts and should be read in conjunction with the Prospectus. Copies of the Prospectus may be obtained from Metropolitan Life Insurance Company, P.O. Box 14660, Lexington, KY 40512-4660. A Statement of Additional Information for the Metropolitan Series Fund, Inc., the Met Investors Series Trust ("Met Investors Fund") and the American Funds Insurance Series ("American Funds") are attached at the end of this Statement of Additional Information. Unless otherwise indicated, the Statement of Additional Information continues the use of certain terms as set forth in the Section titled "Important Terms You Should Know" of the Prospectuses for MetLife Personal IncomePlus(SM) Contracts dated April 30, 2007. ------------------------ TABLE OF CONTENTS
PAGE ---- Independent Registered Public Accounting Firm............... 2 Distribution of Certificates and Interests in the Income Annuities................................................. 2 Withdrawal Processing Fee................................... 3 Experience Factor........................................... 3 Variable Income Payments.................................... 3 Investment Management Fees.................................. 5 Advertisement of the Separate Account....................... 9 Voting Rights............................................... 10 ERISA....................................................... 10 Taxes....................................................... 11 Financial Statements of the Separate Account................ F-1 Financial Statements of MetLife............................. F-1
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The financial statements of Metropolitan Life Separate Account E and the consolidated financial statements of Metropolitan Life Insurance Company (the "Company") (which report expresses an unqualified opinion and includes an explanatory paragraph referring to the change in the method of accounting for defined benefit pension and other post retirement plans, and for certain non-traditional long duration contracts and separate accounts as required by new accounting guidance which the Company adopted on December 31, 2006, and January 1, 2004, respectively), included in this Statement of Additional Information have been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their reports appearing herein, and are included in reliance upon the reports of such firm given upon their authority as experts in accounting and auditing. The principal address of Deloitte & Touche LLP is 201 East Kennedy Boulevard, Suite 1200, Tampa, Florida 33602-5827. DISTRIBUTION OF CERTIFICATES AND INTERESTS IN THE INCOME ANNUITIES MetLife is both the depositor and the underwriter (issuer) of the annuities. On or about May 1, 2007, it is anticipated that MetLife Investors Distribution Company ("MLIDC") will become the principal underwriter and distributor of the securities offered through this prospectus. MLIDC, which is our affiliate, also acts as the principal underwriter and distributor of some of the other variable annuity contracts and variable life insurance policies we and our affiliated companies issue. We reimburse MLIDC for expenses MLIDC incurs in distributing the Income Annuities (e.g., commissions payable to the retail broker-dealers who sell the Income Annuities, including our affiliated broker dealers. MLIDC does not retain any fees under the Income Annuities. MLIDC's principal executive offices are located at 5 Park Plaza, Suite 1900, Irvine, CA 92614. MLIDC is registered as a broker-dealer with the Securities and Exchange Commission ("SEC") under the Securities Exchange Act of 1934, as well as the securities commissions in the states in which it operates, and is a member of the National Association of Securities Dealers, Inc. ("NASD"). WHO SELLS THE INCOME ANNUITIES Income Annuities are sold through MetLife licensed sales representatives who are associated with MetLife Securities, Inc. ("MSI"), our affiliate and a broker-dealer, which is paid compensation for the promotion and sale of the Income Annuities. Previously, Metropolitan Life Insurance Company was the broker-dealer through which MetLife representatives sold the Income Annuity. The Income Annuities are also sold through the registered representatives of our other affiliated broker-dealers. MSI and our affiliated broker-dealers are registered with the SEC as broker-dealers under the Securities Exchange Act of 1934 and are also members of the NASD. The Income Annuities may also be sold through other registered broker-dealers. Income Annuities are also may be sold through the mail or over the Internet. There is no front-end sales load deducted from purchase payments to pay sales commissions. Distribution costs are recovered from the Separate Account charge. The commissions paid range from 0% to 6% of purchase payments. Our sales representatives and their managers, and the sales representatives and managers of our affiliates, may be eligible for cash compensation such as bonuses, equity awards, such as stock options, training allowances, supplemental salary, payments based on a percentage of the Contract's account value, financial arrangements, marketing support, medical and other insurance benefits, retirement benefits and other benefits. The amount of this cash compensation is based primarily on the amount of proprietary products sold. Proprietary products are products issued by us or our affiliates. Sales representatives must meet a minimum level of sales of proprietary products in order to be eligible for the cash compensation and in order to maintain employment with us. Managers may be eligible for additional cash compensation based on the sales production of the sales representatives that the manager supervises. Sales representatives who meet certain productivity, persistency, and length of service standards and/or their managers may be eligible for additional compensation. The receipt of this cash compensation may provide sales representatives and their managers with an incentive to favor the sale of proprietary products. Sales representatives and their managers are also eligible for various non-cash compensation programs that we offer such as conferences, trips, prizes, and awards. Other payments may be made for other services that do not directly involve the sale of products. These services may include the recruitment and training of personnel, production of promotional literature, and similar services. MLIDC also pays compensation for the sale of the Deferred Annuities by affiliated and unaffiliated broker-dealers. The compensation paid to affiliated broker-dealers for sales of the Deferred Annuities is generally not expected to exceed, on a present value basis, the aggregate amount of total compensation that MSI pays with respect to sales made through MetLife representa- 2 tives. The total compensation includes payments that we make to our business unit or the business unit of our affiliate that is responsible for the operation of the distribution systems through which the Deferred Annuities are sold. These firms pay their sales representatives all or a portion of the commissions received for their sales of Deferred Annuities some firms may retain a portion of commissions. The amount that selling firms pass on to their sales representatives is determined in accordance with their internal compensation programs. Those programs may also include other types of cash and non-cash compensation and other benefits. Sales representatives of affiliated broker-dealers and their managers may be eligible for various cash benefits and non-cash compensation (as described above) that we may provide jointly with affiliated broker-dealers. Because of the receipt of this cash and non-cash compensation sales representatives and their managers of our affiliated broker-dealers have an incentive to favor the sale of proprietary products. MLIDC may also enter into preferred distribution arrangements with certain affiliated selling firms such as New England Securities Corporation, Walnut Street Securities, Inc. and Tower Square Securities, Inc. These arrangements are sometimes called "shelf space" arrangements. Under these arrangements, MLIDC may pay separate, additional compensation to the broker-dealer firm for services the selling firm provides in connection with the distribution of the Contracts. We or our affiliates pay American Funds Distributors, Inc., the principal underwriter for the American Funds, a percentage of all purchase payments allocated to the American Funds Growth Portfolio, the American Funds Growth-Income Portfolio, the American Funds Global Small Capitalization Portfolio and the American Funds Bond Portfolio for the services it provides in marketing these Portfolios' shares in connection with the Income Annuity. The offering of all Income Annuities is continuous. Owners and participants under the Income Annuities may not be offered all investment choices. Each Contract will indicate those investment choices available under the Income Annuity. There were no underwriting commissions paid or amounts retained by the principal underwriter for each of the last three fiscal years. WITHDRAWAL PROCESSING FEE The total amount of this fee paid to and retained by MetLife for the years 2004, 2005 and 2006 was $0 in each such year. EXPERIENCE FACTOR We use the term "experience factor" to describe the investment performance for an investment division. The experience factor changes from Valuation Period (described later) to Valuation Period to reflect the upward or downward performance of the assets in the underlying Portfolios. The experience factor is calculated as of the end of each Valuation Period using the net asset value per share of the underlying Portfolio. The net asset value includes the per share amount of any dividend or capital gain distribution paid by the Portfolio during the current Valuation Period, and subtracts any per share charges for taxes and reserve for taxes. We then divide that amount by the net asset value per share as of the end of the last Valuation Period to obtain a factor that reflects investment performance. We then subtract a charge for each day in the Valuation Period not to exceed .000025905 (the daily equivalent of an effective annual rate of 0.95%) for the Income Annuities. VARIABLE INCOME PAYMENTS "Variable income payments" include variable income payments made under the various Income Annuities. ASSUMED INVESTMENT RETURN (AIR) The following discussion concerning the amount of variable income payments is based on an Assumed Investment Return of 3% per year. It should not be inferred that such rates will bear any relationship to the actual net investment experience of the Separate Account. AMOUNT OF INCOME PAYMENTS The cash you receive periodically from an investment division (after your first payment if paid within 10 days of the issue date) will depend upon the number of annuity units held in that investment division (described below) and the Annuity Unit Value (described later) as of the 10th day prior to a payment date. The Income Annuity specifies the dollar amount of the initial variable income payment for each investment division (this equals the first payment amount if paid within 10 days of the issue date). This initial variable income payment is computed based on the amount of the purchase payment applied to the specific investment division (net any applicable premium tax owed or Contract charge), the AIR, the age and/or sex of the measuring lives and the income payment type selected. The initial payment amount is then divided by the Annuity Unit Value for the investment division to determine the number of annuity units held in that investment division. The number of annuity units held remains fixed for the duration of the Contract (if no reallocations or withdrawals are made). The dollar amount of subsequent variable income payments will vary with the amount by which investment 3 performance is greater or less than the AIR and Separate Account charges. ANNUITY UNIT VALUE The Annuity Unit Value is calculated and is based on the change in investment performance in the Separate Account. (See "The Value of Your Income Payment" in the Prospectus.) CALCULATING THE ANNUITY UNIT VALUE We calculate Annuity Unit Values once a day on every day the New York Stock Exchange is open for trading. We call the time between two consecutive Annuity Unit Value calculations the "Valuation Period." We have the right to change the basis for the Valuation Period, on 30 days' notice, as long as it is consistent with the law. All purchase payments and reallocations are valued as of the end of the Valuation Period during which the transaction occurred. The Annuity Unit Values can increase or decrease, based on the investment performance of the corresponding underlying Portfolios. If the investment performance is positive, after payment of Separate Account expenses and the deduction for the AIR, Annuity Unit Values will go up. Conversely, if the investment performance is negative, after payment of Separate Account expenses and the deduction for the AIR, Annuity Unit Values will go down. To calculate an Annuity Unit Value, we first adjust the experience factor for the period by a factor based on the AIR and the number of days in the Valuation Period. The resulting number is then multiplied by the last previously calculated Annuity Unit Value to produce the new Annuity Unit Value. The following page contains an example of this calculation for an AIR of 3% and an one day Valuation Period. (Subject to the laws of your state, the AIR may be in the range of 3% to 6%. The exact value of your AIR is defined in your Income Annuity). 4 The following illustrations show, by use of hypothetical examples, the method of determining the Annuity Unit Value and the amount of variable income payments upon annuitization. ILLUSTRATION OF CALCULATION OF ANNUITY UNIT VALUE FOR METLIFE PERSONAL INCOMEPLUS(SM) 1. Annuity Unit Value, beginning of period................. $ 10.20 2. "Experience factor" for period.......................... 1.023558 3. Daily adjustment for 3% Assumed Investment Return....... 0.99991902 4. (2) X (3)............................................... 1.023475 5. Annuity Unit Value, end of period (1) X (4)............. $ 10.44
ILLUSTRATION OF ANNUITY PAYMENTS (ASSUMES THE FIRST MONTHLY PAYMENT IS MADE WITHIN 10 DAYS OF THE ISSUE DATE OF THE INCOME ANNUITY) Annuitant age 65, Life Annuity with 120 Payments Guaranteed 1. Purchase Payment........................................ $25,000.00 2. First monthly income payment per $1,000................. $ 5.52 3. First monthly income payment (1) X (2) / 1,000.......... $ 138.00 4. Assume Annuity Unit Value as of the date Purchase Payment and all other information received in good order equal to (see Illustration of Calculation of Annuity Unit Value above for example)........................... $ 10.80 5. Number of Annuity Units (3) / (4)....................... 12.77778 6. Assume Annuity Unit Value for the second month equal to (10 days prior to payment).............................. $ 10.97 7. Second monthly Annuity Payment (5) X (6)................ $ 140.17 8. Assume Annuity Unit Value for third month equal to...... $ 10.53 9. Next monthly Annuity Payment (5) X (8).................. $ 134.55
DETERMINING THE VARIABLE INCOME PAYMENT Variable income payments can go up or down based upon the investment performance of the investment divisions in the Separate Account. AIR is the rate used to determine the first variable income payment and serves as a benchmark against which the investment performance of the investment divisions is compared. The higher the AIR, the higher the first variable income payment will be. Subsequent variable income payments will increase only to the extent that the investment performance of the investment divisions exceeds the AIR (and Separate Account charges). Variable income payments will decline if the investment performance of the Separate Account does not exceed the AIR (and Separate Account charges). A lower AIR will result in a lower initial variable income payment, but subsequent variable income payments will increase more rapidly or decline more slowly as changes occur in the investment performance of the investment divisions. INVESTMENT MANAGEMENT FEES METLIFE ADVISERS Each of the currently available Metropolitan Fund Portfolios pays MetLife Advisers, the investment adviser of the Metropolitan Fund an investment management fee. 5 The following table shows the fee schedules for the investment management fees for the Metropolitan Fund as a percentage per annum of the average net assets for each Portfolio:
ANNUAL PERCENTAGE AVERAGE DAILY NET PORTFOLIO RATE ASSET VALUE LEVELS --------- ---------- ---------------------- BlackRock Aggressive Growth .75% First $500 million .70% Next $500 million .65% Over $1 billion BlackRock Strategic Value .85% First $500 million .80% Next $500 million .75% Over $1 billion BlackRock Bond Income .40% First $1 billion .35% Next $1 billion .30% Next $1 billion .25% Over $3 billion BlackRock Diversified .50% First $500 million .45% Next $500 million .40% Over $1 billion BlackRock Legacy Large Cap .73% First $1 billion Growth(a) .65% Over $1 billion BlackRock Large Cap Value .70% First $250 million .65% Next $500 million .60% Over $750 million Davis Venture Value(e) .75% First $1 billion .70% Next $2 billion .65% Over $3 billion FI International Stock .86% First $500 million .80% Next $500 million .75% Over $1 billion FI Large Cap .80% First $250 million .75% Next $500 million .70% Over $750 million FI Mid Cap Opportunities .75% First $100 million .70% Next $400 million .65% Over $500 million FI Value Leaders .70% First $200 million .65% Next $300 million .60% Next $1.5 billion .55% Over $2 billion Franklin Templeton Small Cap .90% First $500 million Growth .85% Over $500 million Harris Oakmark Focused Value(i) .75% First $1 billion .70% Next $1.5 billion .675% Next $2.5 billion .65% Over $5 billion Harris Oakmark Large Cap .75% First $250 million Value(j) .70% Next $2.25 billion .675% Next $2.5 billion .65% Over $5 billion Jennison Growth .70% First $200 million .65% Next $300 million .60% Next $1.5 billion .55% Over $2 billion Lehman Brothers Aggregate Bond .25% All Assets Index Loomis Sayles Small Cap .90% First $500 million .85% Over $500 million
ANNUAL PERCENTAGE AVERAGE DAILY NET PORTFOLIO RATE ASSET VALUE LEVELS --------- ---------- ---------------------- MetLife Aggressive Allocation .10% First $500 million Portfolio(b) .075% Next $500 million .05% Over $1 billion MetLife Conservative Allocation .10% First $500 million Portfolio(b) .075% Next $500 million .05% Over $1 billion MetLife Conservative to .10% First $500 million Moderate Allocation .075% Next $500 million Portfolio(b) .05% Over $1 billion MetLife Mid Cap Stock Index .25% All Assets MetLife Moderate Allocation .10% First $500 million Portfolio(b) .075% Next $500 million .05% Over $1 billion MetLife Moderate to Aggressive .10% First $500 million Allocation Portfolio(b) .075% Next $500 million .05% Over $1 billion MetLife Stock Index .25% All Assets MFS Total Return(h) .60% First $250 million .55% Next $500 million .50% Over $750 million Morgan Stanley EAFE Index .30% All Assets Neuberger Berman Mid Cap .65% First $1 billion Value(k) .60% Over $1 billion Oppenheimer Global Equity .90% First $50 million .55% Next $50 million .50% Next $400 million .475% Over $500 million Russell 2000 Index .25% All Assets T. Rowe Price Large Cap .65% First $50 million Growth(c) .60% Over $50 million T. Rowe Price Small Cap Growth .55% First $100 million .50% Next $300 million .45% Over $400 million Western Asset Management .65% First $500 million Strategic Bond .55% Over $500 million Opportunities(f) Western Asset Management U.S. .55% First $500 million Government(g) .45% Over $500 million
(a) Prior to May 1, 2004, the advisory fee payable by BLACKROCK LEGACY LARGE CAP GROWTH was at the annual rate of 0.75% of the first $1 billion of the Portfolio's average daily net assets and 0.70% of such assets in excess of $1 billion. (b) Prior to November 9, 2006, the advisory fee rate for each ASSET ALLOCATION PORTFOLIO was at the annual rate of 0.10% of the Portfolio's average daily net assets. In addition to the advisory fees set out above for each ASSET ALLOCATION PORTFOLIO, MetLife Advisers receives advisory fees as investment adviser to the Underlying Portfolios of the Fund in which an ASSET ALLOCATION PORTFOLIO invests. (c) Prior to August 5, 2004, the advisory fee rate for T. ROWE PRICE LARGE CAP GROWTH was at the annual rate of 0.70% of the first $50 million of the Portfolio's average daily net assets and 0.60% of such assets over $50 million. (e) Prior to November 9, 2006, the advisory fee rate for DAVIS VENTURE VALUE was at the annual rate of 0.75% of the first $1 billion of the Portfolio's average daily net assets, 0.70% of the next $2 billion and 0.675% of such assets over $3 billion. (f) Prior to November 4, 2005, the advisory fee rate for WESTERN ASSET MANAGEMENT STRATEGIC BOND OPPORTUNITIES was at the annual rate of 0.65% of the Portfolio's average daily net assets. 6 (g) Prior to November 4, 2005, the advisory fee rate for WESTERN ASSET MANAGEMENT U.S. GOVERNMENT was at the annual rate of 0.55% of the Portfolio's average daily net assets. (h) Prior to May 1, 2006, the advisory fee rate for MFS TOTAL RETURN was at the annual rate of 0.50% of the Portfolio's average daily net assets. (i) Prior to January 1, 2007, the advisory fee rate for HARRIS OAKMARK FOCUSED VALUE was at the annual rate of 0.75% for the first $1 billion of the Portfolio's average daily net assets and 0.70% of such assets over $1 billion. (j) Prior to January 1, 2007, the advisory fee rate for HARRIS OAKMARK LARGE CAP VALUE was at the annual rate of 0.75% of the first $250 million of the Portfolio's average daily net assets and 0.70% of such assets over $250 million. (k) Prior to November 9, 2006 the advisory fee rate for NEUBERGER BERMAN MID CAP VALUE was at the annual rate of 0.70% of the first $100 million of the Portfolio's average daily net assets, 0.675% of the next $250 million, 0.65% of the next $500 million, 0.625% of the next $750 million and 0.60% of such assets over $1.6 billion. MetLife Advisers pays the following entities for providing services as sub-investment manager of the Metropolitan Fund portfolio(s) indicated below. These fees are solely the responsibility of MetLife Advisers.
SUB-INVESTMENT MANAGER PORTFOLIO(S) ---------------------- ------------ MetLife Investment Advisors MetLife Stock Index Company, LLC ("MLIAC") Lehman Brothers(R) Aggregate Bond Index Russell 2000(R) Index Morgan Stanley EAFE(R) Index MetLife Mid Cap Stock Index BlackRock Advisors, Inc. BlackRock Diversified BlackRock Bond Income BlackRock Aggressive Growth BlackRock Strategic Value BlackRock Large Cap Value BlackRock Legacy Large Cap Growth Jennison Associates LLC Jennison Growth T. Rowe Price Associates, Inc. T. Rowe Price Small Cap Growth T. Rowe Price Large Cap Growth OppenheimerFunds, Inc. Oppenheimer Global Equity Harris Associates, L.P. Harris Oakmark Large Cap Value Harris Oakmark Focused Value Neuberger Berman Management Inc. Neuberger Berman Mid Cap Value Franklin Advisers, Inc. Franklin Templeton Small Cap Growth Western Asset Management Inc Western Asset Management U.S. Government Western Asset Management Strategic Opportunities Bond
SUB-INVESTMENT MANAGER PORTFOLIO(S) ---------------------- ------------ Massachusetts Financial Services MFS Total Return Company Davis Selected Advisers, L.P. Davis Venture Value Loomis Sayles, & Company, L.P. Loomis Sayles Small Cap Fidelity Management & Research FI Value Leaders Company FI Mid Cap Opportunities FI Large Cap FI International Stock
MetLife Advisers has hired Standard & Poor's Investment Advisory Services, LLC ("SPIAS") to provide research and consulting services with respect to the periodic income allocation targets for the MetLife Conservative Allocation, the MetLife Conservative to Moderate Allocation, the MetLife Moderate Allocation, the MetLife Moderate to Aggressive Allocation and the MetLife Aggressive Allocation Portfolios and to investments in the underlying Portfolios. MetLife Advisers pays consulting fees to SPIAS for these services. MET INVESTORS ADVISORY LLC Met Investors Advisory LLC, the investment manager of Met Investors Fund, has overall responsibility for the general management and administration of all of Met Investors Fund Portfolios. Met Investors Advisory LLC is an indirect wholly-owned subsidiary of Metropolitan Life Insurance Company. As compensation for its services to the Met Investor Fund Portfolios, Met Investors Advisory LLC receives monthly compensation at an annual rate of a percentage of the average daily net assets of each Portfolio. The investment management fees for each Portfolio are:
PORTFOLIO ADVISORY FEE --------- ------------ PIMCO Total Return Portfolio 0.50% PIMCO Inflation Protected 0.50% Bond Portfolio RCM Technology Portfolio 0.90% of first $500 million of such assets plus 0.85% of such assets over $500 million T. Rowe Price Mid-Cap Growth 0.75% Portfolio
7
PORTFOLIO ADVISORY FEE --------- ------------ MFS Research International 0.80% of first $200 million of Portfolio such assets plus 0.75% of such assets over $200 million up to $500 million plus 0.70% of such assets over $500 million up to $1 billion plus 0.65% of such assets over $1 billion Lord Abbett Bond Debenture 0.60% of first $250 million of Portfolio such assets plus 0.55% of such assets over $250 million up to $500 million plus 0.50% of such assets over $500 million up to $1 billion plus 0.45% of such assets over $1 billion Lazard Mid Cap Portfolio 0.70% of first $500 million of such assets plus 0.675% of such assets over $500 million up to $1 billion plus 0.60% of such assets over $1 billion Met/AIM Small Cap Growth 0.90% of first $500 million of Portfolio such assets plus 0.85% of such assets over $500 million Harris Oakmark International 0.85% of first $100 million of Portfolio such assets plus 0.80% of such assets over $100 million up to $1 billion plus 0.75% of such assets over $1 billion Cyclical Growth ETF 0.45% first $300 million, 0.43% Portfolio $300 million to $600 million, 0.40% over $600 million Cyclical Growth and Income 0.45% first $300 million, 0.43% ETF Portfolio $300 million to $600 million, 0.40% over $600 million BlackRock Large-Cap Core 0.775% of first 250 million of Portfolio such assets plus 0.750% of such assets over $250 million up to $500 million plus 0.725% of such assets over $500 million up to $1 billion plus 0.700% on such assets over $1 billion up to $2 billion plus 0.650% of such assets over $2 billion Legg Mason Partners 0.65% of first $500 million of Aggressive Growth such assets plus Portfolio 0.60% of such assets over $500 million up to $1 billion plus 0.55% of such assets over $250 million up to $1 billion up to 0.50% of such assets over $2 billion Neuberger Berman Real Estate 0.70% of first $200 million of Portfolio such assets plus 0.65% of such assets over $200 million up to $750 million plus 0.55% of such assets over $750 million
PORTFOLIO ADVISORY FEE --------- ------------ Legg Mason Value Equity 0.70% of the first $350 million of Portfolio such assets On the date such assets reach $350 million, whether or not such assets remain above or below $350 million, the fee schedule shall be: 0.65% of the first $200 million of such assets plus 0.63% of such assets over $200 million Oppenheimer Capital 0.65% of first $150 million of Appreciation such assets plus 0.625% of such assets over $150 million up to $300 million plus 0.60% of such assets over $300 million up to $500 million plus 0.55% of such assets over $500 million
When average monthly net assets exceed $1 billion, a discount of 2.5% will be applied to the portfolio's total advisory fees for the month. Met Investors Advisory LLC pays each Met Investors Fund Portfolio's investment managers a fee based on the Portfolio's average daily net assets. These fees are solely the responsibility of Met Investors Advisory LLC. BlackRock Advisors, Inc. is the sub-investment manager to the BlackRock Large-Cap Core Portfolio. Massachusetts Financial Services Company is the investment manager to the MFS Research International Portfolio. Pacific Investment Management Company LLC is the investment manager to PIMCO Total Return and PIMCO Inflation Protected Bond Portfolios. Lord Abbett & Co. LLC is the investment manager to the Lord Abbett Bond Debenture Portfolio. A I M Capital Management, Inc. is the investment manager to the Met/AIM Small Cap Growth Portfolio. Lazard Asset Management LLC is the investment manager to the Lazard Mid-Cap Portfolio. Gallatin Asset Management, Inc. is the investment manager to the Cyclical Growth ETF and the Cyclical Growth and Income ETF Portfolios. Legg Mason Capital Management, Inc is the investment manager to the Legg Mason Value Equity Portfolio. Harris Associates L.P. is the investment manager to the Harris Oakmark International Portfolio. T. Rowe Price Associates, Inc. is the investment manager to the T. Rowe Price Mid-Cap Growth Portfolio. Neuberger Berman Management Inc is the investment manager to the Neuberger Berman Real Estate Portfolio. RCM Capital Management LLC is the investment manager to the RCM Technology Portfolio. OppenheimerFunds, Inc. is the investment manager to the Oppenheimer Capital Appreciation Portfolio. ClearBridge Advisors LLS is the sub-investment manager to the Legg Mason Partners Aggressive Growth Portfolio. 8 CAPITAL RESEARCH AND MANAGEMENT COMPANY As compensation for its services, Capital Research and Management Company, the American Funds' investment manager, receives a monthly fee which is accrued daily, calculated at the annual rate of: American Funds Global Small Capitalization Fund*: 0.80% of first $600 million of net assets, plus 0.74% on assets in excess of $600 million but not exceeding $1 billion, plus 0.70% on net assets greater than $1 billion but not exceeding $2 billion, plus 0.67% on net assets in excess of $2 billion, plus 0.67% on net assets from $2 billion to $3 billion, plus 0.65% on net assets in excess of $3 billion; American Funds Growth Fund: 0.50% of the first $600 million of net assets, plus 0.45% on net assets greater than $600 million but not exceeding $1 billion, plus 0.42% on net assets greater than $1 billion but not exceeding $2 billion, plus 0.37% on net assets greater than $2 billion but not exceeding $3 billion, plus 0.35% on net assets greater than $3 billion but not exceeding $5 billion, plus 0.33% on net assets greater than $5 billion but not exceeding $8 billion, plus 0.315% on net assets greater than $8 billion but not exceeding $13 billion, plus 0.30% on net assets greater than $13 billion but not exceeding $21 billion, plus 0.29% on net assets greater than $21 billion but not exceeding $27 billion, plus 0.285% on net assets in excess of $27 billion; American Funds Growth-Income Fund*: 0.50% of first $600 million of net assets, plus 0.45% on net assets greater than $600 million but not exceeding $1.5 billion, plus 0.40% on net assets greater than $1.5 billion but not exceeding $2.5 billion, plus 0.32% on net assets greater than $2.5 billion but not exceeding $4 billion, plus 0.285% on net assets greater than $4 billion but not exceeding $6.5 billion, plus 0.256% on net assets greater than $6.5 billion but not exceeding $10.5 billion, plus 0.242% on net assets greater than $10.5 billion but not exceeding $13 billion, plus 0.235% on net assets greater than $13 billion but not exceeding $17 billion, plus 0.23% on net assets greater than $17 billion but not exceeding $21 billion, plus 0.225% on net assets greater than $21 billion but not exceeding $27 billion, plus 0.222% on net assets in excess of $27 billion; and American Funds Bond Fund*: 0.48% of the first $600 million of net assets, plus 0.44% on net assets greater than $600 million but not exceeding $1.0 billion, plus 0.40% on net assets greater than $1.0 billion but not exceeding $2.0 billion, plus 0.38% on net assets greater than $2.0 billion but not exceeding $3.0 billion, plus 0.36% on net assets in excess of $3.0 billion. Note: The Metropolitan Fund, the Met Investors Fund and the American Funds are more fully described in their respective prospectuses and the Statements of Additional Information that the prospectuses refer to. The Metropolitan Fund, the Met Investors Fund and the American Funds prospectuses are attached at the end of this prospectus. The SAIs are available upon request. ADVERTISEMENT OF THE SEPARATE ACCOUNT From time to time we advertise the performance of various Separate Account investment divisions. The performance will be stated in terms of either yield, "change in Annuity Unit Value" or "average annual total return" or some combination of the foregoing. Yield figures quoted in advertisements will refer to the net income generated by an investment in a particular investment division for a thirty-day period or month, which is specified in the advertisement, and then expressed as a percentage yield of that investment. This percentage yield is then compounded semiannually. Yield is calculated by dividing the net investment income per share earned during the period by the maximum offering price per share on the last day of the period, according to this formula 2 [((a-b)--(c d+) 1)(6) - 1], where "a" represents dividends and interest earned during the period; "b" represents expenses accrued for the period (net of reimbursements); "c" represents the average daily number of shares outstanding during the period that were entitled to receive dividends; and "d" represents the maximum offering price per share on the last day of the period. Change in Annuity Unit Value ("Non-Standard Performance") refers to the comparison between values of annuity units over specified periods in which an investment division has been in operation, expressed as a percentage and may also be expressed as an annualized figure. In addition, change in Annuity Unit Value may be used to illustrate performance for a hypothetical investment (such as $10,000) over the time period specified. Average annual total return (also known as annualized change in annuity value) calculations ("Standard Performance") differs from the change in Annuity Unit Value because it assumes a steady rate of return and reflects all expenses. Average annual total return is calculated by finding the average annual compounded rates of return over the 1-, 5-, and 10-year periods that would equate the initial amount invested to the ending redeemable value, according to this formula P(1+T)(n)=ERV, where "P" represents a hypothetical initial payment of $1,000; "T" represents average annual total return; "n" represents number of years; and "ERV" represents ending redeemable value of a hypothetical $1,000 payment made at the beginning of the 1-, 5-, or 10-year periods at the end of the 1-, 5-, or 10-year period (or fractional portion). Performance figures will vary as a result of different AIRs since the investment division inception date, which is the date the corresponding Portfolio or predecessor Portfolio was first offered under the Separate Account that funds the Income Annuity. 9 These presentations for the Income Annuities reflect a 3% benchmark AIR. Performance may be calculated based upon historical performance of the underlying performance Portfolios of the Metropolitan Fund, Met Investors Fund and American Funds. After the inception date, actual Annuity Unit Value data is used. Historical performance information should not be relied on as a guarantee of future performance results. Advertisements regarding the Separate Account may contain comparisons of hypothetical after-tax returns of currently taxable investments versus returns of tax deferred investments. From time to time, the Separate Account may compare the performance of its investment divisions with the performance of common stocks, long-term government bonds, long-term corporate bonds, intermediate-term government bonds, Treasury Bills, certificates of deposit and savings accounts. The Separate Account may use the Consumer Price Index in its advertisements as a measure of inflation for comparison purposes. From time to time, the Separate Account may advertise its performance ranking among similar investments or compare its performance to averages as compiled by independent organizations, such as Lipper Analytical Services, Inc., Morningstar, Inc., VARDS(R) and The Wall Street Journal. The Separate Account may also advertise its performance in comparison to appropriate indices, such as the Standard & Poor's 500 Composite Stock Price Index, the Standard & Poor's Mid Cap 400 Index, the Standard & Poor's Small Cap 600 Index, the Russell 2000(R) Index, the Russell Mid Cap Growth Index, the Russell 2500(TM) Growth Index, the Russell 2000(R) Growth Index, the Russell 2000(R) Value Index, the Russell 1000 Growth Index, the Lehman Brothers(R) Aggregate Bond Index, the Lehman Brothers Intermediate Bond Index, the Lehman Brothers(R) Government/Corporate Bond Index, the Merrill Lynch High Yield Bond Index, the Morgan Stanley Capital International All Country World Index, the Salomon Smith Barney World Small Cap Index and the Morgan Stanley Capital International Europe, Australasia, Far East Index. We may state performance for the investment divisions of the Income Annuities which reflect deduction of the Separate Account charge and investment-related charge, when accompanied by the annualized change in Annuity Unit Value. Past performance is no guarantee of future results. We may demonstrate hypothetical values of income payments over a specified period based on historical net asset values of the Portfolios and the historical Annuity Unit Values and the applicable annuity purchase rate, either for an individual for whom the illustration is to be produced or based upon certain assumed factors (e.g., male, age 65). These presentations reflect the deduction of the maximum Separate Account charge and the investment-related charge. If the presentation is for an individual, we may also provide a presentation that reflects the applicable Separate Account charge, as well as the Annuity Unit Values and the investment-related charge. We may assume that the Income Annuity was in existence prior to its inception date. When we do so, we calculate performance based on the historical performance of the underlying Portfolio for the period before the inception date of the Income Annuity and historical Annuity Unit Values. Historical performance information should not be relied on as a guarantee of future performance results. We may also demonstrate hypothetical future values of income payments over a specified period based on assumed rates of return (which will not exceed 12% and which will include an assumption of 0% as well) for the Portfolios, hypothetical Annuity Unit Values and the applicable annuity purchase rate, either for an individual for whom the illustration is to be produced or based upon certain assumed factors (e.g., male, age 65). These presentations reflect the deduction of the maximum Separate Account charge and the average of investment-related charges for all Portfolios to depict investment-related charges. If the presentation is for an individual, we may also provide a presentation that reflects the applicable Separate Account charge, as well as the Annuity Unit Values and the investment-related charge. An illustration should not be replied upon as a guarantee of future results. VOTING RIGHTS In accordance with our view of the present applicable law, we will vote the shares of each of the Portfolios held by the Separate Account (which are deemed attributable to the Income Annuities described in the Prospectus) at regular and special meetings of the shareholders of the Portfolio based on instructions received from those having the voting interest in corresponding investment divisions of the Separate Account. However, if the 1940 Act or any rules thereunder should be amended or if the present interpretation thereof should change, and as a result we determine that we are permitted to vote the shares of the Portfolios in our own right, we may elect to do so. Accordingly, you have voting interests under the Income Annuities described in the Prospectus. The number of shares held in each Separate Account investment division deemed attributable to you is determined by dividing the value of annuity units attributable to you in that investment division, if any, by the net asset value of one share in the Portfolio in which the assets in that Separate Account investment division are invested. Fractional votes will be counted. The number of shares 10 for which you have the right to give instructions will be determined as of the record date for the meeting. Portfolio shares held in each registered separate account of MetLife or any affiliate that are or are not attributable to life insurance policies or annuities (including the Income Annuities described in the Prospectuses) and for which no timely instructions are received will be voted in the same proportion as the shares for which voting instructions are received by that separate account. Portfolio shares held in the general accounts or unregistered separate accounts of MetLife or its affiliates will be voted in the same proportion as the aggregate of (i) the shares for which voting instructions are received and (ii) the shares that are voted in proportion to such voting instructions. However, if we or an affiliate determine that we are permitted to vote any such shares, in our own right, we may elect to do so subject to the then current interpretation of the 1940 Act or any rules thereunder. Qualified retirement plans that do not have voting interests through life insurance or annuity contracts do not vote these interests based upon the number of shares held in the Separate Account investment division deemed attributable to those qualified retirement plans. Shares are held by the plans themselves and are voted directly; the instruction process does not apply. You will be entitled to give instructions regarding the votes attributable to your Income Annuity, in your sole discretion. You may give instructions regarding, among other things, the election of the board of directors, ratification of the election of an independent registered public accounting firm, and the approval of investment and sub- investment managers. DISREGARDING VOTING INSTRUCTIONS MetLife may disregard voting instructions under the following circumstances (1) to make or refrain from making any change in the investments or investment policies for any Portfolio if required by any insurance regulatory authority; (2) to refrain from making any change in the investment policies or any investment manager or principal underwriter or any Portfolio which may be initiated by those having voting interests or the Metropolitan Fund's, Met Investors Fund's or American Fund's boards of directors, provided MetLife's disapproval of the change is reasonable and, in the case of a change in investment policies or investment manager, based on a good faith determination that such change would be contrary to state law or otherwise inappropriate in light of the Portfolio's objective and purposes; or (3) to enter into or refrain from entering into any advisory agreement or underwriting contract, if required by any insurance regulatory authority. In the event that MetLife does disregard voting instructions, a summary of the action and the reasons for such action will be included in the next semiannual report. ERISA If your plan is subject to ERISA (the Employee Retirement Income Security Act of 1974) and you are married, the income payments, withdrawal provisions, and methods of payment of the death benefit under your Deferred Annuity or Income Annuity may be subject to your spouse's rights as described below. Generally, the spouse must give qualified consent whenever you elect to: a. choose income payments other than on a qualified joint and survivor annuity basis ("QJSA") (one under which we make payments to you during your lifetime and then make payments reduced by no more than 50% to your spouse for his or her remaining life, if any); or choose to waive the qualified pre-retirement survivor annuity benefit ("QPSA") (the benefit payable to the surviving spouse of a participant who dies with a vested interest in an accrued retirement benefit under the plan before payment of the benefit has begun); b. make certain withdrawals under plans for which a qualified consent is required; c. name someone other than the spouse as your beneficiary; d. use your accrued benefit as security for a loan exceeding $5,000. Generally, there is no limit to the number of your elections as long as a qualified consent is given each time. The consent to waive the QJSA must meet certain requirements, including that it be in writing, that it acknowledges the identity of the designated beneficiary and the form of benefit selected, dated, signed by your spouse, witnessed by a notary public or plan representative, and that it be in a form satisfactory to us. The waiver of a QJSA generally must be executed during the 90-day period ending on the date on which income payments are to commence, or the withdrawal or the loan is to be made, as the case may be. If you die before benefits commence, your surviving spouse will be your beneficiary unless he or she has given a qualified consent otherwise. The qualified consent to waive the QPSA benefit and the beneficiary designation must be made in writing that acknowledges the designated beneficiary, dated, signed by your spouse, witnessed by a notary public or plan representative and in a form satisfactory to us. Generally, there is no limit to the number of beneficiary designations as long as a qualified consent accompanies each designation. The waiver of and the qualified consent for the 11 QPSA benefit generally may not be given until the plan year in which you attain age 35. The waiver period for the QPSA ends on the date of your death. If the present value of your benefit is worth $5,000 or less, your plan generally may provide for distribution of your entire interest in a lump sum without spousal consent. TAXES GENERAL Contributions to Non-Qualified and Roth IRA Annuities, as well as non-deductible contributions to IRA Annuities, are made on an "after-tax basis," meaning purchase payments do not reduce the taxes you pay. Earnings under Non-Qualified and IRA Annuities are generally not taxed until withdrawn, if you, as the owner, are an individual. Thus, that portion of any withdrawal that represents income is taxed when you receive it, but that portion that represents purchase payments is not, to the extent previously taxed. Generally, Non-Qualified Income Annuities are issued on an "after-tax basis," meaning a purchase payment does not reduce the taxes you pay. That portion of any income payment that represents income is taxed when you receive it, but that portion that represents the purchase payment is a nontaxable return of principal. Once the investment in the contract has been recovered through the use of the excludable amount, the entire amounts of all future payments are includable in taxable income. The IRS has not specifically approved the use of an exclusion ratio or recovery amount with respect to a variable income annuity where transfers and/or reallocations are permitted between funding options or between a funding option and a guaranteed interest option after the annuity starting date. At the present time MetLife intends to report the taxable income payments made to you under general tax principles for using an excludable amount under variables annuities (i.e. by dividing your after-tax purchase price, as adjusted for any refund or guarantee feature, by the number of expected income payments from the appropriate IRS table). We will determine such excludable amount for each income payment under the Contract as a whole by using the rules applicable to variable income payments in general, however, the IRS may determine that the excludable amount is different from our computation. We withhold amounts as required under the Code from withdrawals or income payments unless you properly elect out of such withholding. For both the Qualified and Non-Qualified Income Annuity, you may be subject to a 10% penalty tax if a withdrawal is taken before attaining age 59 1/2. If you have not attained age 59 1/2 on the date of purchase of the Income Annuity or the date of annuitization of your Deferred Annuity and intend to use the Annuity to meet the substantially equal periodic payment exception to the 10% penalty tax, note that the exercise of either withdrawal feature prior to the later of (a) your attaining age 59 1/2 or (b) five years after income payments began, will generally result in the retroactive imposition of the 10% penalty tax (with interest) in addition to ordinary income tax on income payments previously received. In such cases, the taxable portion of the withdrawal, as well as the taxable portion of income payments previously received, will generally be subject to the 10% penalty tax in addition to ordinary income tax. If you are under age 59 1/2 when such payments are received, any future payments you receive may also be subject to the 10% penalty tax. Consult your tax independent adviser prior to the exercise of either withdrawal feature if you have not attained age 59 1/2 at the time of purchase and intend to use the Income Annuity to meet the substantially equal periodic payment exception to the 10% penalty tax. Effective March 28, 2005, certain mandatory distributions made to participants in an amount in excess of $1,000 must be automatically rolled over to an IRA designated by the plan, unless the participant elects to receive it in cash or roll it over to a different IRA or eligible retirement plan of his or her own choosing. Generally, transitional rules apply as to when plans have to be amended. Special effective date rules apply for governmental plans and church plans. All taxable distributions from Keogh, Enhanced Unallocated Keogh, 403(a), TSA Annuities and 457(b) plans that are not eligible rollover distributions and all taxable distributions from IRAs and Non-Qualified Annuities will be subject to federal income tax withholding, unless the payee elects to have no withholding. The rate of withholding is as determined by the Code and Regulations thereunder at the time of payment. PURCHASE PAYMENT The Non-Qualified Contract will only accept as a single deposit an after-tax purchase payment that may consist in full or in part of a Section 1035 tax-free exchange. However, we reserve the right to refuse to accept any amount (e.g., the transfer of a partial exchange 1035 exchange) if it would result in our inability to administer the Contract properly in accordance with Federal income tax rules. For example, we may refuse to accept a partial 1035 transfer from another non-qualified annuity contract or a partial annuitization of a deferred 12 annuity contract where aggregation of the income annuity and the remaining transferor contract is required for Federal income tax reporting purposes. The Qualified (Traditional IRA/SEP) Contract is intended to be used as an IRA rollover annuity and will accept as a single purchase payment (a) a transfer or rollover from another traditional IRA, or a rollover from an eligible retirement plan of an employer (i.e, a 401(a), 403(a), 403(b) or governmental 457(b) plan). It will also accept a rollover or transfer from a SIMPLE IRA after the taxpayer has participated in such arrangement for at least two years. For income annuities established as annuitizations of SIMPLE IRAs, the Contract will only accept a single purchase payment consisting of a transfer or rollover from another Simple IRA. For income annuities established in accordance with a distribution option under a retirement plan of an employer (e.g., 401(a), 403(a), 403(b) or 457(b) plan), the Contract will only accept as its single purchase payment a transfer from such employer retirement plan. INCOME PAYMENTS--NON-QUALIFIED INCOME ANNUITY The following discussion assumes that you are an individual or that the Contract is held by an entity as agent for an individual or that the Contract is treated as a non-qualified annuity contract under other exceptions permitted under the Code. Each type of Annuity is subject to various tax limitations. Typically, except for the Non-Qualified Annuities, the maximum amount of purchase payment is limited under federal tax law and there are limitations on how long money can be left under the Annuities before withdrawals must begin. Additionally, state insurance law may require the contract to be surrendered or annuitized by a certain age. Income payments are subject to an "exclusion ratio" or "excludable amount," which determines how much of each income payment is a non-taxable return of your "purchase payment" (the amount you used to annuitize) and how much is a taxable payment of earnings. Generally, once the total amount treated as non-taxable returns of your purchase payment equals the amount of such purchase payment all remaining income payments received are fully taxable. If you die before the purchase payment is returned, the unreturned amount may be deductible on your final income tax return or deductible by your beneficiary if income payments continue after your death. We will tell you what your purchase payment was and how much of each income payment is a non-taxable return of your purchase payment. The IRS has not specifically approved the use of an exclusion ratio or recovery amount with respect to a variable income annuity where reallocations are permitted between funding options or between a funding option and a guaranteed interest option. At the present time MetLife intends to report the taxable income payments made to you under general tax principles for using an excludable amount under variables annuities by treating the income annuity as one variable contract (i.e. by dividing your after-tax purchase price, as adjusted for any refund or guarantee feature, by the number of expected income payments from the appropriate IRS table). We generally will tell you how much of each income payment is a non-taxable return of your purchase payment. The IRS has not specifically approved the use of an exclusion ration or excludable amount for income annuities such as yours, where transfers are permitted between investment divisions and between investment divisions and the fixed income options. We intend to determine an excludable amount for each income payment by treating the Income Annuity as one variable contract and dividing the after-tax purchase payment (adjusted for any guaranteed payment or refund feature) by the number of expected payments (using the appropriate IRS table). However, it is possible that the IRS could conclude that the taxable portion of income payments under a non-qualified contract is an amount greater (or less) than the taxable amount determined by us and reported by us to you and the IRS. Generally, once the total amount treated as a non-taxable return of your purchase payment equals your purchase payment, then all remaining payments are fully taxable. We will withhold a portion of the taxable amount of your income payment for income taxes, unless you elect otherwise. The amount we withhold is determined by the Code. If the amount of income payments received in any calendar year is less than the excludable amount applicable to the year, the excess is not allowable as a deduction. However, you may generally elect the year in which to begin to ratably apply this excess to increase the excludable amount attributable to future years. Consult your tax advisor as to the details and consequences of making such election. Also, consult your tax advisor as to the tax treatment of any unrecovered after-tax cost in the year that the contract terminates. If you die before the purchase payment has been returned, the unreturned amount may be deductible on your final income tax return or by your beneficiary if income payments continue after your death. Each type of Annuity is subject to various tax limitations. Typically, except for the Non-Qualified Annuities, the maximum amount of purchase payment is limited under federal tax law and there are limitations on how long money can be left under the Annuities before withdrawals must begin. Additionally, state insurance law 13 may require the contract to be surrendered or annuitized by a certain age. Once income payments commence, you may not be able to transfer withdrawals to another non-qualified annuity contract in a tax-free Section 1035 exchange. DEATH ON/AFTER INCOME ANNUITY BEGINS If you die after income payments begin, payments must continue to be made at least as rapidly as under the method of distribution that was used at the time of your death in accordance with the income type selected. If the owner is a non-natural person, the above rules will be applied on the death of any annuitant or, if otherwise permitted under your Contract, on the change of any annuitant. The ability to make a tax-free Section 1035 transfer is generally not available once income payments have irrevocably commenced (except for possible acceleration). Thus both withdrawals and income payments will be treated as taxable distributions, regardless of whom they are paid to. OPTIONAL BENEFITS It is conceivable that charges for certain benefits under a variable contract may be considered as deemed distributions subject to immediate taxation. As a result, you should consult your own tax advisor about these features. We intend to take the position that these features are an intrinsic part of the annuity. However, the IRS might argue that these are separate benefits and the periodic asset-based charge should be treated as though it were a distribution or withdrawal under the annuity contract. If so, that charge would be subject to tax to the extent there were undistributed earnings, and the tax may be increased by a 10% penalty. 14 ANNUITY UNIT VALUES TABLES FOR METLIFE PERSONAL INCOMEPLUS(SM) ANNUITY CONTRACTS These tables show Annuity Unit Values for Income Annuities with Separate Account charges other than the maximum guaranteed Separate Account charge of .95% with an AIR of 3% and the minimum guaranteed Separate Account charge of .75% with an AIR or 3% (which are in Appendix B to the Prospectus) for each investment division from year end to year end. The information in these tables has been derived from the Separate Account's full financial statements or other reports (such as the annual report).
---------------------------------------------------------------------------------------------------------- BEGINNING OF END OF YEAR NUMBER OF YEAR ANNUITY ANNUITY ANNUITY UNITS TABLE I CHART II (4% AIR, .75% Separate Account charge) YEAR UNIT VALUE UNIT VALUE END OF YEAR ---------------------------------------------------------------------------------------------------------- American Funds Bond Division(f)....................... 2006 $15.71 $16.14 0.00 American Funds Global Small Capitalization Division(a)......................................... 2003 10.00 10.39 0.00 2004 10.39 11.99 0.00 2005 11.99 14.34 0.00 2006 14.34 16.98 0.00 American Funds Growth Division(a)..................... 2003 10.00 10.39 0.00 2004 10.39 11.16 0.00 2005 11.16 12.37 0.00 2006 12.37 13.02 0.00 American Funds Growth-Income Division(a).............. 2003 10.00 10.56 0.00 2004 10.56 11.12 0.00 2005 11.12 11.24 0.00 2006 11.24 12.35 0.00 BlackRock Aggressive Growth Division(a)............... 2003 10.00 10.24 0.00 2004 10.24 11.04 0.00 2005 11.04 11.67 0.00 2006 11.67 11.89 0.00 BlackRock Bond Income Division(a)..................... 2003 10.00 10.06 0.00 2004 10.06 10.03 0.00 2005 10.03 9.80 0.00 2006 9.80 9.77 0.00 BlackRock Diversified Division(a)..................... 2003 10.00 10.32 0.00 2004 10.32 10.69 0.00 2005 10.69 10.51 0.00 2006 10.51 11.09 0.00 BlackRock Large Cap Division (formerly BlackRock Investment Trust Division)(a)....................... 2003 10.00 10.47 0.00 2004 10.47 11.08 0.00 2005 11.08 10.96 0.00 2006 10.96 11.93 0.00 BlackRock Large Cap Value Division(b)................. 2004 10.00 10.90 0.00 2005 10.90 11.03 0.00 2006 11.03 12.56 0.00 BlackRock Legacy Large Cap Growth Division(b)......... 2004 10.00 10.82 0.00 2005 10.82 11.06 0.00 2006 11.06 10.99 0.00
15 ANNUITY UNIT VALUES TABLES FOR METLIFE PERSONAL INCOMEPLUS(SM) ANNUITY CONTRACTS (CONTINUED)
---------------------------------------------------------------------------------------------------------- BEGINNING OF END OF YEAR NUMBER OF YEAR ANNUITY ANNUITY ANNUITY UNITS TABLE I CHART II (4% AIR, .75% Separate Account charge) YEAR UNIT VALUE UNIT VALUE END OF YEAR ---------------------------------------------------------------------------------------------------------- BlackRock Strategic Value Division(a)................. 2003 $10.00 $10.89 0.00 2004 10.89 11.99 0.00 2005 11.99 11.92 0.00 2006 11.92 13.28 0.00 Cyclical Growth ETF Division(f)....................... 2006 10.76 11.24 0.00 Cyclical Growth & Income ETF Division(f).............. 2006 10.56 10.99 0.00 Davis Venture Value Division(a)....................... 2003 10.00 10.64 0.00 2004 10.64 11.41 0.00 2005 11.41 12.01 0.00 2006 12.01 13.14 0.00 FI International Stock Division(a).................... 2003 10.00 10.79 0.00 2004 10.79 12.17 0.00 2005 12.17 13.71 0.00 2006 13.71 15.25 0.00 FI Large Cap Division(f).............................. 2006 18.64 18.45 0.00 FI Mid Cap Opportunities Division(a).................. 2003 10.00 10.25 0.00 2004 10.25 11.47 0.00 2005 11.47 11.70 0.00 2006 11.70 12.50 0.00 FI Value Leaders Division(b).......................... 2004 10.00 11.14 0.00 2005 11.14 11.77 0.00 2006 11.77 12.58 0.00 Franklin Templeton Small Cap Growth Division(a)....... 2003 10.00 10.40 0.00 2004 10.40 11.06 0.00 2005 11.06 11.04 0.00 2006 11.04 11.60 0.00 Harris Oakmark Focused Value Division(a).............. 2003 10.00 10.79 0.00 2004 10.79 11.32 0.00 2005 11.32 11.88 0.00 2006 11.88 12.75 0.00 Harris Oakmark International Division(b).............. 2004 10.00 11.41 0.00 2005 11.41 12.46 0.00 2006 12.46 15.37 0.00 Harris Oakmark Large Cap Value Division(a)............ 2003 10.00 10.56 0.00 2004 10.56 11.22 0.00 2005 11.22 10.57 0.00 2006 10.57 11.91 0.00 Jennison Growth Division(c)........................... 2005 9.32 10.97 0.00 2006 10.97 10.76 0.00 Jennison Growth Division (formerly Met/Putnam Voyager Division)(a)(c)..................................... 2003 10.00 10.19 0.00 2004 10.19 10.21 0.00 2005 10.21 9.21 0.00
16 ANNUITY UNIT VALUES TABLES FOR METLIFE PERSONAL INCOMEPLUS(SM) ANNUITY CONTRACTS (CONTINUED)
---------------------------------------------------------------------------------------------------------- BEGINNING OF END OF YEAR NUMBER OF YEAR ANNUITY ANNUITY ANNUITY UNITS TABLE I CHART II (4% AIR, .75% Separate Account charge) YEAR UNIT VALUE UNIT VALUE END OF YEAR ---------------------------------------------------------------------------------------------------------- Lazard Mid-Cap Division(b)............................ 2004 $10.00 $10.68 0.00 2005 10.68 11.05 0.00 2006 11.05 12.11 0.00 Legg Mason Aggressive Growth (formerly Janus Aggressive Growth Division)(a)................................. 2003 10.00 10.33 0.00 2004 10.33 10.73 0.00 2005 10.73 11.66 0.00 2006 11.66 10.95 0.00 Legg Mason Value Equity(d)............................ 2006 Legg Mason Value Equity (formerly MFS Investors Trust Division)(a)(d)..................................... 2003 10.00 10.50 0.00 2004 10.50 11.16 0.00 2005 11.16 11.43 0.00 2006 11.43 11.84 0.00 Lehman Brothers(R) Aggregate Bond Index Division(a)... 2003 10.00 10.03 0.00 2004 10.03 9.96 0.00 2005 9.96 9.70 0.00 2006 9.70 9.64 0.00 Loomis Sayles Small Cap Division(a)................... 2003 10.00 10.17 0.00 2004 10.17 11.30 0.00 2005 11.30 11.53 0.00 2006 11.53 12.84 0.00 Lord Abbett Bond Debenture Division(a)................ 2003 10.00 10.26 0.00 2004 10.26 10.62 0.00 2005 10.62 10.32 0.00 2006 10.32 10.77 0.00 Met/AIM Small Cap Growth Division(b).................. 2004 10.00 10.59 0.00 2005 10.59 10.97 0.00 2006 10.97 11.93 0.00 MetLife Mid Cap Stock Index Division(a)............... 2003 10.00 10.43 0.00 2004 10.43 11.55 0.00 2005 11.55 12.37 0.00 2006 12.37 13.00 0.00 MetLife Stock Index Division(a)....................... 2003 10.00 10.53 0.00 2004 10.53 11.10 0.00 2005 11.10 11.09 0.00 2006 11.09 12.22 0.00 MFS Research International Division(a)................ 2003 10.00 10.88 0.00 2004 10.88 12.44 0.00 2005 12.44 13.86 0.00 2006 13.86 16.79 0.00 MFS Total Return Division(b).......................... 2004 10.00 10.69 0.00 2005 10.69 10.53 0.00 2006 10.53 11.27 0.00
17 ANNUITY UNIT VALUES TABLES FOR METLIFE PERSONAL INCOMEPLUS(SM) ANNUITY CONTRACTS (CONTINUED)
---------------------------------------------------------------------------------------------------------- BEGINNING OF END OF YEAR NUMBER OF YEAR ANNUITY ANNUITY ANNUITY UNITS TABLE I CHART II (4% AIR, .75% Separate Account charge) YEAR UNIT VALUE UNIT VALUE END OF YEAR ---------------------------------------------------------------------------------------------------------- Morgan Stanley EAFE(R) Index Division(a).............. 2003 $10.00 $10.91 0.00 2004 10.91 12.46 0.00 2005 12.46 13.46 0.00 2006 13.46 16.16 0.00 Neuberger Berman Mid Cap Value Division(a)............ 2003 10.00 10.60 0.00 2004 10.60 12.43 0.00 2005 12.43 13.32 0.00 2006 13.32 14.17 0.00 Neuberger Berman Real Estate Division(b).............. 2004 10.00 2.07 0.00 2005 2.07 2.25 0.00 2006 2.25 2.96 0.00 Oppenheimer Capital Appreciation Division(e).......... 2005 8.25 8.79 0.00 2006 8.79 9.04 0.00 Oppenheimer Global Equity Division(a)................. 2003 10.00 10.78 0.00 2004 10.78 11.97 0.00 2005 11.97 13.28 0.00 2006 13.28 14.78 0.00 PIMCO Inflation Protected Bond Division(f)............ 2006 11.29 11.16 0.00 PIMCO Total Return Division(a)........................ 2003 10.00 10.06 0.00 2004 10.06 10.10 0.00 2005 10.10 9.88 0.00 2006 9.88 9.88 0.00 RCM Global Technology Division(a)..................... 2003 10.00 10.00 0.00 2004 10.00 9.13 0.00 2005 9.13 9.71 0.00 2006 9.71 9.77 0.00 Russell 2000(R) Index Division(a)..................... 2003 10.00 10.47 0.00 2004 10.47 11.77 0.00 2005 11.77 11.74 0.00 2006 11.74 13.22 0.00 T. Rowe Price Large Cap Growth Division(a)............ 2003 10.00 10.56 0.00 2004 10.56 11.08 0.00 2005 11.08 11.27 0.00 2006 11.27 12.18 0.00 T. Rowe Price Mid-Cap Growth Division(a).............. 2003 10.00 10.34 0.00 2004 10.34 11.66 0.00 2005 11.66 12.78 0.00 2006 12.78 13.00 0.00 T. Rowe Price Small Cap Growth Division(a)............ 2003 10.00 10.25 0.00 2004 10.25 10.87 0.00 2005 10.87 11.51 0.00 2006 11.51 11.42 0.00
18 ANNUITY UNIT VALUES TABLES FOR METLIFE PERSONAL INCOMEPLUS(SM) ANNUITY CONTRACTS (CONTINUED)
---------------------------------------------------------------------------------------------------------- BEGINNING OF END OF YEAR NUMBER OF YEAR ANNUITY ANNUITY ANNUITY UNITS TABLE I CHART II (4% AIR, .75% Separate Account charge) YEAR UNIT VALUE UNIT VALUE END OF YEAR ---------------------------------------------------------------------------------------------------------- Western Asset Management Strategic Bond Opportunities Division(a)......................................... 2003 $10.00 $10.13 0.00 2004 10.13 10.31 0.00 2005 10.31 10.12 0.00 2006 10.12 10.15 0.00 Western Asset Management U.S. Government Division(a).. 2003 10.00 10.01 0.00 2004 10.01 9.84 0.00 2005 9.84 9.56 0.00 2006 9.56 9.50 0.00 MetLife Aggressive Allocation Division(e)............. 2005 9.99 10.92 0.00 2006 10.92 12.10 0.00 MetLife Conservative Allocation Division(e)........... 2005 9.99 10.09 0.00 2006 10.09 10.36 0.00 MetLife Conservative to Moderate Allocation Division(e)......................................... 2005 9.99 10.31 0.00 2006 10.31 10.82 0.00 MetLife Moderate Allocation Division(e)............... 2005 9.99 10.53 0.00 2006 10.53 11.27 0.00 MetLife Moderate to Aggressive Allocation Division(e)......................................... 2005 9.99 10.75 0.00 2006 10.75 11.75 0.00
----------------------------------------------------------------------------------------------------------- BEGINNING OF END OF YEAR NUMBER OF YEAR ANNUITY ANNUITY ANNUITY UNITS TABLE I CHART III (5% AIR, .75% Separate Account charge) YEAR UNIT VALUE UNIT VALUE END OF YEAR ----------------------------------------------------------------------------------------------------------- American Funds Bond Division(f)........................ 2006 $15.71 $16.03 0.00 American Funds Global Small Capitalization Division(a).......................................... 2003 10.00 10.37 0.00 2004 10.37 11.85 0.00 2005 11.85 14.05 0.00 2006 14.05 16.48 0.00 American Funds Growth Division(a)...................... 2003 10.00 10.38 0.00 2004 10.38 11.03 0.00 2005 11.03 12.12 0.00 2006 12.12 12.63 0.00 American Funds Growth-Income Division(a)............... 2003 10.00 10.54 0.00 2004 10.54 11.00 0.00 2005 11.00 11.00 0.00 2006 11.00 11.99 0.00 BlackRock Aggressive Growth Division(a)................ 2003 10.00 10.23 0.00 2004 10.23 10.92 0.00 2005 10.92 11.43 0.00 2006 11.43 11.53 0.00 BlackRock Bond Income Division(a)...................... 2003 10.00 10.05 0.00 2004 10.05 9.92 0.00 2005 9.92 9.60 0.00 2006 9.60 9.48 0.00
19 ANNUITY UNIT VALUES TABLES FOR METLIFE PERSONAL INCOMEPLUS(SM) ANNUITY CONTRACTS (CONTINUED)
----------------------------------------------------------------------------------------------------------- BEGINNING OF END OF YEAR NUMBER OF YEAR ANNUITY ANNUITY ANNUITY UNITS TABLE I CHART III (5% AIR, .75% Separate Account charge) YEAR UNIT VALUE UNIT VALUE END OF YEAR ----------------------------------------------------------------------------------------------------------- BlackRock Diversified Division(a)...................... 2003 $10.00 $10.30 0.00 2004 10.30 10.57 0.00 2005 10.57 10.30 0.00 2006 10.30 10.76 0.00 BlackRock Large Cap Division (formerly BlackRock Investment Trust Division)(a)........................ 2003 10.00 10.46 0.00 2004 10.46 10.96 0.00 2005 10.96 10.73 0.00 2006 10.73 11.58 0.00 BlackRock Large Cap Value Division(b).................. 2004 10.00 10.83 0.00 2005 10.83 10.86 0.00 2006 10.86 12.25 0.00 BlackRock Legacy Large Cap Growth Division(b).......... 2004 10.00 10.75 0.00 2005 10.75 10.88 0.00 2006 10.88 10.71 0.00 BlackRock Strategic Value Division(a).................. 2003 10.00 10.88 0.00 2004 10.88 11.86 0.00 2005 11.86 11.68 0.00 2006 11.68 12.89 0.00 Cyclical Growth ETF Division(f)........................ 2006 10.76 11.16 0.00 Cyclical Growth & Income ETF Division(f)............... 2006 10.56 10.92 0.00 Davis Venture Value Division(a)........................ 2003 10.00 10.62 0.00 2004 10.62 11.28 0.00 2005 11.28 11.77 0.00 2006 11.77 12.75 0.00 FI International Stock Division(a)..................... 2003 10.00 10.78 0.00 2004 10.78 12.04 0.00 2005 12.04 13.43 0.00 2006 13.43 14.79 0.00 FI Large Cap Division(f)............................... 2006 18.64 18.33 0.00 FI Mid Cap Opportunities Division(a)................... 2003 10.00 10.24 0.00 2004 10.24 11.34 0.00 2005 11.34 11.46 0.00 2006 11.46 12.12 0.00 FI Value Leaders Division(b)........................... 2004 10.00 11.07 0.00 2005 11.07 11.59 0.00 2006 11.59 12.27 0.00 Franklin Templeton Small Cap Growth Division(a)........ 2003 10.00 10.38 0.00 2004 10.38 10.93 0.00 2005 10.93 10.82 0.00 2006 10.82 11.25 0.00
20 ANNUITY UNIT VALUES TABLES FOR METLIFE PERSONAL INCOMEPLUS(SM) ANNUITY CONTRACTS (CONTINUED)
----------------------------------------------------------------------------------------------------------- BEGINNING OF END OF YEAR NUMBER OF YEAR ANNUITY ANNUITY ANNUITY UNITS TABLE I CHART III (5% AIR, .75% Separate Account charge) YEAR UNIT VALUE UNIT VALUE END OF YEAR ----------------------------------------------------------------------------------------------------------- Harris Oakmark Focused Value Division(a)............... 2003 $10.00 $10.77 0.00 2004 10.77 11.19 0.00 2005 11.19 11.64 0.00 2006 11.64 12.37 0.00 Harris Oakmark International Division(b)............... 2004 10.00 11.33 0.00 2005 11.33 12.27 0.00 2006 12.27 14.98 0.00 Harris Oakmark Large Cap Value Division(a)............. 2003 10.00 10.54 0.00 2004 10.54 11.10 0.00 2005 11.10 10.35 0.00 2006 10.35 11.56 0.00 Jennison Growth Division(c)............................ 2005 9.18 10.75 0.00 2006 10.75 10.44 0.00 Jennison Growth Division (formerly Met/Putnam Voyager Division)(a)(c)...................................... 2003 10.00 10.17 0.00 2004 10.17 10.09 0.00 2005 10.09 9.08 0.00 Lazard Mid-Cap Division(b)............................. 2004 10.00 10.61 0.00 2005 10.61 10.87 0.00 2006 10.87 11.81 0.00 Legg Mason Aggressive Growth (formerly Janus Aggressive Growth Division)(a).................................. 2003 10.00 10.31 0.00 2004 10.31 10.61 0.00 2005 10.61 11.42 0.00 2006 11.42 10.62 0.00 Legg Mason Value Equity (formerly MFS Investors Trust Division)(a)(d)...................................... 2003 10.00 10.48 0.00 2004 10.48 11.04 0.00 2005 11.04 11.19 0.00 2006 11.19 11.56 0.00 Lehman Brothers(R) Aggregate Bond Index Division(a).... 2003 10.00 10.01 0.00 2004 10.01 9.85 0.00 2005 9.85 9.50 0.00 2006 9.50 9.36 0.00 Loomis Sayles Small Cap Division(a).................... 2003 10.00 10.16 0.00 2004 10.16 11.17 0.00 2005 11.17 11.30 0.00 2006 11.30 12.46 0.00 Lord Abbett Bond Debenture Division(a)................. 2003 10.00 10.24 0.00 2004 10.24 10.50 0.00 2005 10.50 10.10 0.00 2006 10.10 10.45 0.00 Met/AIM Small Cap Growth Division(b)................... 2004 10.00 10.52 0.00 2005 10.52 10.80 0.00 2006 10.80 11.63 0.00
21 ANNUITY UNIT VALUES TABLES FOR METLIFE PERSONAL INCOMEPLUS(SM) ANNUITY CONTRACTS (CONTINUED)
----------------------------------------------------------------------------------------------------------- BEGINNING OF END OF YEAR NUMBER OF YEAR ANNUITY ANNUITY ANNUITY UNITS TABLE I CHART III (5% AIR, .75% Separate Account charge) YEAR UNIT VALUE UNIT VALUE END OF YEAR ----------------------------------------------------------------------------------------------------------- MetLife Mid Cap Stock Index Division(a)................ 2003 $10.00 $10.41 0.00 2004 10.41 11.42 0.00 2005 11.42 12.12 0.00 2006 12.12 12.62 0.00 MetLife Stock Index Division(a)........................ 2003 10.00 10.51 0.00 2004 10.51 10.98 0.00 2005 10.98 10.86 0.00 2006 10.86 11.86 0.00 MFS Research International Division(a)................. 2003 10.00 10.87 0.00 2004 10.87 12.30 0.00 2005 12.30 13.58 0.00 2006 13.58 16.29 0.00 MFS Total Return Division(b)........................... 2004 10.00 10.63 0.00 2005 10.63 10.36 0.00 2006 10.36 10.99 0.00 Morgan Stanley EAFE(R) Index Division(a)............... 2003 10.00 10.89 0.00 2004 10.89 12.32 0.00 2005 12.32 13.19 0.00 2006 13.19 15.67 0.00 Neuberger Berman Mid Cap Value Division(a)............. 2003 10.00 10.58 0.00 2004 10.58 12.29 0.00 2005 12.29 13.04 0.00 2006 13.04 13.75 0.00 Neuberger Berman Real Estate Division(b)............... 2004 10.00 2.06 0.00 2005 2.06 2.21 0.00 2006 2.21 2.88 0.00 Oppenheimer Capital Appreciation Division(e)........... 2005 8.25 8.73 0.00 2006 8.73 8.90 0.00 Oppenheimer Global Equity Division(a).................. 2003 10.00 10.76 0.00 2004 10.76 11.84 0.00 2005 11.84 13.01 0.00 2006 13.01 14.34 0.00 PIMCO Inflation Protected Bond Division(f)............. 2006 11.29 11.09 0.00 PIMCO Total Return Division(a)......................... 2003 10.00 10.04 0.00 2004 10.04 9.99 0.00 2005 9.99 9.67 0.00 2006 9.67 9.59 0.00 RCM Global Technology Division(a)...................... 2003 10.00 9.98 0.00 2004 9.98 9.03 0.00 2005 9.03 9.51 0.00 2006 9.51 9.48 0.00
22 ANNUITY UNIT VALUES TABLES FOR METLIFE PERSONAL INCOMEPLUS(SM) ANNUITY CONTRACTS (CONTINUED)
----------------------------------------------------------------------------------------------------------- BEGINNING OF END OF YEAR NUMBER OF YEAR ANNUITY ANNUITY ANNUITY UNITS TABLE I CHART III (5% AIR, .75% Separate Account charge) YEAR UNIT VALUE UNIT VALUE END OF YEAR ----------------------------------------------------------------------------------------------------------- Russell 2000(R) Index Division(a)...................... 2003 $10.00 $10.45 0.00 2004 10.45 11.64 0.00 2005 11.64 11.50 0.00 2006 11.50 12.82 0.00 T. Rowe Price Large Cap Growth Division(a)............. 2003 10.00 10.54 0.00 2004 10.54 10.96 0.00 2005 10.96 11.04 0.00 2006 11.04 11.82 0.00 T. Rowe Price Mid-Cap Growth Division(a)............... 2003 10.00 10.32 0.00 2004 10.32 11.53 0.00 2005 11.53 12.52 0.00 2006 12.52 12.61 0.00 T. Rowe Price Small Cap Growth Division(a)............. 2003 10.00 10.24 0.00 2004 10.24 10.75 0.00 2005 10.75 11.28 0.00 2006 11.28 11.08 0.00 Western Asset Management Strategic Bond Opportunities Division(a).......................................... 2003 10.00 10.12 0.00 2004 10.12 10.20 0.00 2005 10.20 9.91 0.00 2006 9.91 9.85 0.00 Western Asset Management U.S. Government Division(a)... 2003 10.00 10.00 0.00 2004 10.00 9.73 0.00 2005 9.73 9.36 0.00 2006 9.36 9.22 0.00 MetLife Aggressive Allocation Division(e).............. 2005 9.99 10.85 0.00 2006 10.85 11.91 0.00 MetLife Conservative Allocation Division(e)............ 2005 9.99 10.02 0.00 2006 10.02 10.19 0.00 MetLife Conservative to Moderate Allocation Division(e).......................................... 2005 9.99 10.24 0.00 2006 10.24 10.65 0.00 MetLife Moderate Allocation Division(e)................ 2005 9.99 10.46 0.00 2006 10.46 11.09 0.00 MetLife Moderate to Aggressive Allocation Division(e)... 2005 9.99 10.68 0.00 2006 10.68 11.56 0.00
23 ANNUITY UNIT VALUES TABLES FOR METLIFE PERSONAL INCOMEPLUS(SM) ANNUITY CONTRACTS (CONTINUED)
---------------------------------------------------------------------------------------------------------- BEGINNING OF END OF YEAR NUMBER OF YEAR ANNUITY ANNUITY ANNUITY UNITS TABLE I CHART IV (6% AIR, .75% Separate Account charge) YEAR UNIT VALUE UNIT VALUE END OF YEAR ---------------------------------------------------------------------------------------------------------- American Funds Bond Division(f)....................... 2006 $15.71 $15.93 0.00 American Funds Global Small Capitalization Division(a)......................................... 2003 10.00 10.36 0.00 2004 10.36 11.72 0.00 2005 11.72 13.76 0.00 2006 13.76 15.99 0.00 American Funds Growth Division(a)..................... 2003 10.00 10.36 0.00 2004 10.36 10.91 0.00 2005 10.91 11.87 0.00 2006 11.87 12.26 0.00 American Funds Growth-Income Division(a).............. 2003 10.00 10.53 0.00 2004 10.53 10.88 0.00 2005 10.88 10.78 0.00 2006 10.78 11.63 0.00 BlackRock Aggressive Growth Division(a)............... 2003 10.00 10.21 0.00 2004 10.21 10.80 0.00 2005 10.80 11.20 0.00 2006 11.20 11.19 0.00 BlackRock Bond Income Division(a)..................... 2003 10.00 10.03 0.00 2004 10.03 9.81 0.00 2005 9.81 9.41 0.00 2006 9.41 9.20 0.00 BlackRock Diversified Division(a)..................... 2003 10.00 10.29 0.00 2004 10.29 10.45 0.00 2005 10.45 10.09 0.00 2006 10.09 10.44 0.00 BlackRock Large Cap Division (formerly BlackRock Investment Trust Division)(a)....................... 2003 10.00 10.44 0.00 2004 10.44 10.84 0.00 2005 10.84 10.51 0.00 2006 10.51 11.24 0.00 BlackRock Large Cap Value Division(b)................. 2004 10.00 10.76 0.00 2005 10.76 10.69 0.00 2006 10.69 11.94 0.00 BlackRock Legacy Large Cap Growth Division(b)......... 2004 10.00 10.69 0.00 2005 10.69 10.71 0.00 2006 10.71 10.44 0.00 BlackRock Strategic Value Division(a)................. 2003 10.00 10.86 0.00 2004 10.86 11.73 0.00 2005 11.73 11.44 0.00 2006 11.44 12.51 0.00 Cyclical Growth ETF Division(f)....................... 2006 10.76 11.09 0.00 Cyclical Growth & Income ETF Division(f).............. 2006 10.56 10.85 0.00
24 ANNUITY UNIT VALUES TABLES FOR METLIFE PERSONAL INCOMEPLUS(SM) ANNUITY CONTRACTS (CONTINUED)
---------------------------------------------------------------------------------------------------------- BEGINNING OF END OF YEAR NUMBER OF YEAR ANNUITY ANNUITY ANNUITY UNITS TABLE I CHART IV (6% AIR, .75% Separate Account charge) YEAR UNIT VALUE UNIT VALUE END OF YEAR ---------------------------------------------------------------------------------------------------------- Davis Venture Value Division(a)....................... 2003 $10.00 $10.61 0.00 2004 10.61 11.16 0.00 2005 11.16 11.53 0.00 2006 11.53 12.37 0.00 FI International Stock Division(a).................... 2003 10.00 10.76 0.00 2004 10.76 11.91 0.00 2005 11.91 13.16 0.00 2006 13.16 14.36 0.00 FI Large Cap Division(f).............................. 2006 18.64 18.22 0.00 FI Mid Cap Opportunities Division(a).................. 2003 10.00 10.22 0.00 2004 10.22 11.22 0.00 2005 11.22 11.23 0.00 2006 11.23 11.76 0.00 FI Value Leaders Division(b).......................... 2004 10.00 11.00 0.00 2005 11.00 11.41 0.00 2006 11.41 11.96 0.00 Franklin Templeton Small Cap Growth Division(a)....... 2003 10.00 10.37 0.00 2004 10.37 10.81 0.00 2005 10.81 10.60 0.00 2006 10.60 10.92 0.00 Harris Oakmark Focused Value Division(a).............. 2003 10.00 10.75 0.00 2004 10.75 11.07 0.00 2005 11.07 11.40 0.00 2006 11.40 12.01 0.00 Harris Oakmark International Division(b).............. 2004 10.00 11.26 0.00 2005 11.26 12.07 0.00 2006 12.07 14.61 0.00 Harris Oakmark Large Cap Value Division(a)............ 2003 10.00 10.52 0.00 2004 10.52 10.98 0.00 2005 10.98 10.14 0.00 2006 10.14 11.21 0.00 Jennison Growth Division(c)........................... 2005 9.05 10.53 0.00 2006 10.53 10.13 0.00 Jennison Growth Division (formerly Met/Putnam Voyager Division)(a)(c)..................................... 2003 10.00 10.16 0.00 2004 10.16 9.98 0.00 2005 9.98 8.95 0.00 Lazard Mid-Cap Division(b)............................ 2004 10.00 10.54 0.00 2005 10.54 10.70 0.00 2006 10.70 11.51 0.00
25 ANNUITY UNIT VALUES TABLES FOR METLIFE PERSONAL INCOMEPLUS(SM) ANNUITY CONTRACTS (CONTINUED)
---------------------------------------------------------------------------------------------------------- BEGINNING OF END OF YEAR NUMBER OF YEAR ANNUITY ANNUITY ANNUITY UNITS TABLE I CHART IV (6% AIR, .75% Separate Account charge) YEAR UNIT VALUE UNIT VALUE END OF YEAR ---------------------------------------------------------------------------------------------------------- Legg Mason Aggressive Growth (formerly Janus Aggressive Growth Division)(a)................................. 2003 $10.00 $10.30 0.00 2004 10.30 10.49 0.00 2005 10.49 11.18 0.00 2006 11.18 10.31 0.00 Legg Mason Value Equity (formerly MFS Investors Trust Division)(a)(d)..................................... 2003 10.00 10.47 0.00 2004 10.47 10.92 0.00 2005 10.92 10.97 0.00 2006 10.97 11.29 0.00 Lehman Brothers(R) Aggregate Bond Index Division(a)... 2003 10.00 10.00 0.00 2004 10.00 9.74 0.00 2005 9.74 9.31 0.00 2006 9.31 9.08 0.00 Loomis Sayles Small Cap Division(a)................... 2003 10.00 10.14 0.00 2004 10.14 11.05 0.00 2005 11.05 11.07 0.00 2006 11.07 12.09 0.00 Lord Abbett Bond Debenture Division(a)................ 2003 10.00 10.23 0.00 2004 10.23 10.38 0.00 2005 10.38 9.90 0.00 2006 9.90 10.14 0.00 Met/AIM Small Cap Growth Division(b).................. 2004 10.00 10.45 0.00 2005 10.45 10.63 0.00 2006 10.63 11.34 0.00 MetLife Mid Cap Stock Index Division(a)............... 2003 10.00 10.39 0.00 2004 10.39 11.29 0.00 2005 11.29 11.87 0.00 2006 11.87 12.24 0.00 MetLife Stock Index Division(a)....................... 2003 10.00 10.49 0.00 2004 10.49 10.86 0.00 2005 10.86 10.64 0.00 2006 10.64 11.51 0.00 MFS Research International Division(a)................ 2003 10.00 10.85 0.00 2004 10.85 12.16 0.00 2005 12.16 13.30 0.00 2006 13.30 15.81 0.00 MFS Total Return Division(b).......................... 2004 10.00 10.56 0.00 2005 10.56 10.20 0.00 2006 10.20 10.72 0.00 Morgan Stanley EAFE(R) Index Division(a).............. 2003 10.00 10.87 0.00 2004 10.87 12.18 0.00 2005 12.18 12.92 0.00 2006 12.92 15.21 0.00
26 ANNUITY UNIT VALUES TABLES FOR METLIFE PERSONAL INCOMEPLUS(SM) ANNUITY CONTRACTS (CONTINUED)
---------------------------------------------------------------------------------------------------------- BEGINNING OF END OF YEAR NUMBER OF YEAR ANNUITY ANNUITY ANNUITY UNITS TABLE I CHART IV (6% AIR, .75% Separate Account charge) YEAR UNIT VALUE UNIT VALUE END OF YEAR ---------------------------------------------------------------------------------------------------------- Neuberger Berman Mid Cap Value Division(a)............ 2003 $10.00 $10.56 0.00 2004 10.56 12.15 0.00 2005 12.15 12.78 0.00 2006 12.78 13.34 0.00 Neuberger Berman Real Estate Division(b).............. 2004 10.00 2.04 0.00 2005 2.04 2.17 0.00 2006 2.17 2.81 0.00 Oppenheimer Capital Appreciation Division(e).......... 2005 8.25 8.67 0.00 2006 8.67 8.76 0.00 Oppenheimer Global Equity Division(a)................. 2003 10.00 10.74 0.00 2004 10.74 11.71 0.00 2005 11.71 12.74 0.00 2006 12.74 13.92 0.00 PIMCO Inflation Protected Bond Division(f)............ 2006 11.28 11.02 0.00 PIMCO Total Return Division(a)........................ 2003 10.00 10.02 0.00 2004 10.02 9.88 0.00 2005 9.88 9.48 0.00 2006 9.48 9.30 0.00 RCM Global Technology Division(a)..................... 2003 10.00 9.97 0.00 2004 9.97 8.93 0.00 2005 8.93 9.32 0.00 2006 9.32 9.20 0.00 Russell 2000(R) Index Division(a)..................... 2003 10.00 10.44 0.00 2004 10.44 11.51 0.00 2005 11.51 11.26 0.00 2006 11.26 12.44 0.00 T. Rowe Price Large Cap Growth Division(a)............ 2003 10.00 10.53 0.00 2004 10.53 10.84 0.00 2005 10.84 10.82 0.00 2006 10.82 11.47 0.00 T. Rowe Price Mid-Cap Growth Division(a).............. 2003 10.00 10.31 0.00 2004 10.31 11.40 0.00 2005 11.40 12.26 0.00 2006 12.26 12.24 0.00 T. Rowe Price Small Cap Growth Division(a)............ 2003 10.00 10.22 0.00 2004 10.22 10.63 0.00 2005 10.63 11.05 0.00 2006 11.05 10.75 0.00 Western Asset Management Strategic Bond Opportunities Division(a)......................................... 2003 10.00 10.10 0.00 2004 10.10 10.08 0.00 2005 10.08 9.71 0.00 2006 9.71 9.55 0.00
27 ANNUITY UNIT VALUES TABLES FOR METLIFE PERSONAL INCOMEPLUS(SM) ANNUITY CONTRACTS (CONTINUED)
---------------------------------------------------------------------------------------------------------- BEGINNING OF END OF YEAR NUMBER OF YEAR ANNUITY ANNUITY ANNUITY UNITS TABLE I CHART IV (6% AIR, .75% Separate Account charge) YEAR UNIT VALUE UNIT VALUE END OF YEAR ---------------------------------------------------------------------------------------------------------- Western Asset Management U.S. Government Division(a).. 2003 $10.00 $ 9.98 0.00 2004 9.98 9.63 0.00 2005 9.63 9.17 0.00 2006 9.17 8.95 0.00 MetLife Aggressive Allocation Division(e)............. 2005 9.99 10.78 0.00 2006 10.78 11.72 0.00 MetLife Conservative Allocation Division(e)........... 2005 9.99 9.96 0.00 2006 9.96 10.03 0.00 MetLife Conservative to Moderate Allocation Division(e)......................................... 2005 9.99 10.18 0.00 2006 10.18 10.48 0.00 MetLife Moderate Allocation Division(e)............... 2005 9.99 10.39 0.00 2006 10.39 10.92 0.00 MetLife Moderate to Aggressive Allocation Division(e)......................................... 2005 9.99 10.61 0.00 2006 10.61 11.38 0.00
----------------------------------------------------------------------------------------------------------- BEGINNING OF END OF YEAR NUMBER OF YEAR ANNUITY ANNUITY ANNUITY UNITS TABLE II CHART II (4% AIR, .95% Separate Account charge) YEAR UNIT VALUE UNIT VALUE END OF YEAR ----------------------------------------------------------------------------------------------------------- American Funds Bond Division(f)........................ 2006 $15.43 $15.83 0.00 American Funds Global Small Capitalization Division(a).......................................... 2003 9.37 10.03 0.00 2004 10.03 11.54 0.00 2005 11.54 13.79 0.00 2006 13.79 16.29 0.00 American Funds Growth Division(a)...................... 2003 7.34 7.79 0.00 2004 7.79 8.35 0.00 2005 8.35 9.24 0.00 2006 9.24 9.70 0.00 American Funds Growth-Income Division(a)............... 2003 8.59 9.25 0.00 2004 9.25 9.73 0.00 2005 9.73 9.81 0.00 2006 9.81 10.76 0.00 BlackRock Aggressive Growth Division(a)................ 2003 9.73 10.24 0.00 2004 10.24 11.02 0.00 2005 11.02 11.62 0.00 2006 11.62 11.81 0.00 BlackRock Bond Income Division(a)...................... 2003 12.46 12.54 0.00 2004 12.54 12.47 0.00 2005 12.47 12.16 0.00 2006 12.16 12.10 0.00 BlackRock Diversified Division(a)...................... 2003 13.47 14.08 0.00 2004 14.08 14.55 0.00 2005 14.55 14.28 0.00 2006 14.28 15.04 0.00
28 ANNUITY UNIT VALUES TABLES FOR METLIFE PERSONAL INCOMEPLUS(SM) ANNUITY CONTRACTS (CONTINUED)
----------------------------------------------------------------------------------------------------------- BEGINNING OF END OF YEAR NUMBER OF YEAR ANNUITY ANNUITY ANNUITY UNITS TABLE II CHART II (4% AIR, .95% Separate Account charge) YEAR UNIT VALUE UNIT VALUE END OF YEAR ----------------------------------------------------------------------------------------------------------- BlackRock Large Cap Division (formerly BlackRock Investment Trust Division)(a)........................ 2003 $13.99 $14.97 0.00 2004 14.97 15.80 0.00 2005 15.80 15.59 0.00 2006 15.59 16.95 0.00 BlackRock Large Cap Value Division(b).................. 2004 10.00 10.89 0.00 2005 10.89 10.99 0.00 2006 10.99 12.50 0.00 BlackRock Legacy Large Cap Growth Division(b).......... 2004 10.00 10.81 0.00 2005 10.81 11.02 0.00 2006 11.02 10.93 0.00 BlackRock Strategic Value Division(a).................. 2003 12.68 14.24 0.00 2004 14.24 15.65 0.00 2005 15.65 15.52 0.00 2006 15.52 17.26 0.00 Cyclical Growth ETF Division(f)........................ 2006 10.75 11.21 0.00 Cyclical Growth & Income ETF Division(f)............... 2006 10.55 10.96 0.00 Davis Venture Value Division(a)........................ 2003 7.78 8.41 0.00 2004 8.41 9.00 0.00 2005 9.00 9.46 0.00 2006 9.46 10.33 0.00 FI International Stock Division(a)..................... 2003 5.99 6.46 0.00 2004 6.46 7.27 0.00 2005 7.27 8.18 0.00 2006 8.18 9.08 0.00 FI Large Cap Portfolio(f).............................. 2006 18.29 18.08 0.00 FI Mid Cap Opportunities Division(a)................... 2003 11.06 11.57 0.00 2004 11.57 12.92 0.00 2005 12.92 13.16 0.00 2006 13.16 14.02 0.00 FI Value Leaders Division(b)........................... 2004 10.00 11.13 0.00 2005 11.13 11.74 0.00 2006 11.74 12.52 0.00 Franklin Templeton Small Cap Growth Division(a)........ 2003 7.52 8.15 0.00 2004 8.15 8.65 0.00 2005 8.65 8.62 0.00 2006 8.62 9.04 0.00 Harris Oakmark Focused Value Division(a)............... 2003 10.94 11.97 0.00 2004 11.97 12.54 0.00 2005 12.54 13.13 0.00 2006 13.13 14.07 0.00
29 ANNUITY UNIT VALUES TABLES FOR METLIFE PERSONAL INCOMEPLUS(SM) ANNUITY CONTRACTS (CONTINUED)
----------------------------------------------------------------------------------------------------------- BEGINNING OF END OF YEAR NUMBER OF YEAR ANNUITY ANNUITY ANNUITY UNITS TABLE II CHART II (4% AIR, .95% Separate Account charge) YEAR UNIT VALUE UNIT VALUE END OF YEAR ----------------------------------------------------------------------------------------------------------- Harris Oakmark International Division(b)............... 2004 $10.00 $11.39 0.00 2005 11.39 12.42 0.00 2006 12.42 15.29 0.00 Harris Oakmark Large Cap Value Division(a)............. 2003 9.46 10.11 0.00 2004 10.11 10.72 0.00 2005 10.72 10.07 0.00 2006 10.07 11.34 0.00 Jennison Growth Division(c)............................ 2005 3.53 4.15 0.00 2006 4.15 4.07 0.00 Jennison Growth Division (formerly Met/Putnam Voyager Division)(a)(c)...................................... 2003 3.73 3.87 0.00 2004 3.87 3.87 0.00 2005 3.87 3.49 0.00 Lazard Mid-Cap Division(b)............................. 2004 10.00 10.66 0.00 2005 10.66 11.01 0.00 2006 11.01 12.05 0.00 Legg Mason Aggressive Growth (formerly Janus Aggressive Growth Division)(a).................................. 2003 5.86 6.19 0.00 2004 6.19 6.42 0.00 2005 6.42 6.96 0.00 2006 6.96 6.52 0.00 Legg Mason Value Equity (formerly MFS Investors Trust Division)(a)(d)...................................... 2003 7.19 7.65 0.00 2004 7.65 8.11 0.00 2005 8.11 8.29 0.00 2006 8.29 8.58 0.00 Lehman Brothers(R) Aggregate Bond Index Division(a).... 2003 10.60 10.64 0.00 2004 10.64 10.55 0.00 2005 10.55 10.25 0.00 2006 10.25 10.17 0.00 Loomis Sayles Small Cap Division(a).................... 2003 7.87 8.20 0.00 2004 8.20 9.08 0.00 2005 9.08 9.26 0.00 2006 9.26 10.29 0.00 Lord Abbett Bond Debenture Division(a)................. 2003 9.51 9.81 0.00 2004 9.81 10.13 0.00 2005 10.13 9.83 0.00 2006 9.83 10.24 0.00 Met/AIM Small Cap Growth Division(b)................... 2004 10.00 10.57 0.00 2005 10.57 10.94 0.00 2006 10.94 11.87 0.00 MetLife Mid Cap Stock Index Division(a)................ 2003 9.60 10.23 0.00 2004 10.23 11.30 0.00 2005 11.30 12.09 0.00 2006 12.09 12.68 0.00
30 ANNUITY UNIT VALUES TABLES FOR METLIFE PERSONAL INCOMEPLUS(SM) ANNUITY CONTRACTS (CONTINUED)
----------------------------------------------------------------------------------------------------------- BEGINNING OF END OF YEAR NUMBER OF YEAR ANNUITY ANNUITY ANNUITY UNITS TABLE II CHART II (4% AIR, .95% Separate Account charge) YEAR UNIT VALUE UNIT VALUE END OF YEAR ----------------------------------------------------------------------------------------------------------- MetLife Stock Index Division(a)........................ 2003 $16.84 $18.06 0.00 2004 18.06 19.01 0.00 2005 19.01 18.95 0.00 2006 18.95 20.84 0.00 MFS Research International Division(a)................. 2003 8.29 9.04 0.00 2004 9.04 10.31 0.00 2005 10.31 11.46 0.00 2006 11.46 13.86 0.00 MFS Total Return Division(b)........................... 2004 10.00 10.68 0.00 2005 10.68 10.49 0.00 2006 10.49 11.21 0.00 Morgan Stanley EAFE(R) Index Division(a)............... 2003 7.36 8.07 0.00 2004 8.07 9.19 0.00 2005 9.19 9.92 0.00 2006 9.92 11.88 0.00 Neuberger Berman Mid Cap Value Division(a)............. 2003 14.06 15.17 0.00 2004 15.17 17.76 0.00 2005 17.76 18.99 0.00 2006 18.99 20.17 0.00 Neuberger Berman Real Estate Division(b)............... 2004 10.00 2.07 0.00 2005 2.07 2.24 0.00 2006 2.24 2.94 0.00 Oppenheimer Capital Appreciation Division(e)........... 2005 8.18 8.70 0.00 2006 8.70 8.94 0.00 Oppenheimer Global Equity Division(a).................. 2003 9.51 10.32 0.00 2004 10.32 11.44 0.00 2005 11.44 12.66 0.00 2006 12.66 14.07 0.00 PIMCO Inflation Protected Bond Division(f)............. 2006 11.22 11.08 0.00 PIMCO Total Return Division(a)......................... 2003 10.64 10.69 0.00 2004 10.69 10.72 0.00 2005 10.72 10.46 0.00 2006 10.46 10.44 0.00 RCM Global Technology Division(a)...................... 2003 4.91 5.14 0.00 2004 5.14 4.68 0.00 2005 4.68 4.97 0.00 2006 4.97 4.99 0.00 Russell 2000(R) Index Division(a)...................... 2003 10.58 11.36 0.00 2004 11.36 12.74 0.00 2005 12.74 12.68 0.00 2006 12.68 14.25 0.00
31 ANNUITY UNIT VALUES TABLES FOR METLIFE PERSONAL INCOMEPLUS(SM) ANNUITY CONTRACTS (CONTINUED)
----------------------------------------------------------------------------------------------------------- BEGINNING OF END OF YEAR NUMBER OF YEAR ANNUITY ANNUITY ANNUITY UNITS TABLE II CHART II (4% AIR, .95% Separate Account charge) YEAR UNIT VALUE UNIT VALUE END OF YEAR ----------------------------------------------------------------------------------------------------------- T. Rowe Price Large Cap Growth Division(a)............. 2003 $ 8.78 $ 9.44 0.00 2004 9.44 9.88 0.00 2005 9.88 10.03 0.00 2006 10.03 10.83 0.00 T. Rowe Price Mid-Cap Growth Division(a)............... 2003 5.39 5.73 0.00 2004 5.73 6.44 0.00 2005 6.44 7.05 0.00 2006 7.05 7.16 0.00 T. Rowe Price Small Cap Growth Division(a)............. 2003 9.15 9.63 0.00 2004 9.63 10.19 0.00 2005 10.19 10.77 0.00 2006 10.77 10.66 0.00 Western Asset Management Strategic Bond Opportunities Division(a).......................................... 2003 11.08 11.25 0.00 2004 11.25 11.42 0.00 2005 11.42 11.19 0.00 2006 11.19 11.20 0.00 Western Asset Management U.S. Government Division(a)... 2003 10.05 10.06 0.00 2004 10.06 9.87 0.00 2005 9.87 9.57 0.00 2006 9.57 9.49 0.00 MetLife Aggressive Allocation Division(e).............. 2005 9.99 10.90 0.00 2006 10.90 12.06 0.00 MetLife Conservative Allocation Division(e)............ 2005 9.99 10.07 0.00 2006 10.07 10.32 0.00 MetLife Conservative to Moderate Allocation Division(e).......................................... 2005 9.99 10.30 0.00 2006 10.30 10.79 0.00 MetLife Moderate Allocation Division(e)................ 2005 9.99 10.51 0.00 2006 10.51 11.23 0.00 MetLife Moderate to Aggressive Allocation Division(e)... 2005 9.99 10.73 0.00 2006 10.73 11.71 0.00
------------------------------------------------------------------------------------------------------------- BEGINNING OF END OF YEAR NUMBER OF YEAR ANNUITY ANNUITY ANNUITY UNITS TABLE II CHART III (5% AIR, .95% Separate Account charge) YEAR UNIT VALUE UNIT VALUE END OF YEAR ------------------------------------------------------------------------------------------------------------- American Funds Bond Division(f)........................ 2006 $15.43 $15.73 0.00 American Funds Global Small Capitalization Division(a).. 2003 9.72 10.37 0.00 2004 10.37 11.82 0.00 2005 11.82 13.99 0.00 2006 13.99 16.37 0.00 American Funds Growth Division(a)...................... 2003 9.80 10.37 0.00 2004 10.37 11.01 0.00 2005 11.01 12.07 0.00 2006 12.07 12.55 0.00
32 ANNUITY UNIT VALUES TABLES FOR METLIFE PERSONAL INCOMEPLUS(SM) ANNUITY CONTRACTS (CONTINUED)
------------------------------------------------------------------------------------------------------------- BEGINNING OF END OF YEAR NUMBER OF YEAR ANNUITY ANNUITY ANNUITY UNITS TABLE II CHART III (5% AIR, .95% Separate Account charge) YEAR UNIT VALUE UNIT VALUE END OF YEAR ------------------------------------------------------------------------------------------------------------- American Funds Growth-Income Division(a)............... 2003 $ 9.81 $10.54 0.00 2004 10.54 10.97 0.00 2005 10.97 10.96 0.00 2006 10.96 11.91 0.00 BlackRock Aggressive Growth Division(a)................ 2003 9.74 10.22 0.00 2004 10.22 10.90 0.00 2005 10.90 11.38 0.00 2006 11.38 11.46 0.00 BlackRock Bond Income Division(a)...................... 2003 10.18 10.22 0.00 2004 10.22 10.07 0.00 2005 10.07 9.73 0.00 2006 9.73 9.59 0.00 BlackRock Diversified Division(a)...................... 2003 7.42 7.74 0.00 2004 7.74 7.93 0.00 2005 7.93 7.71 0.00 2006 7.71 8.04 0.00 BlackRock Large Cap Division (formerly BlackRock Investment Trust Division)[FOOTNOTE(S) TO COME]...... 2003 5.63 6.01 0.00 2004 6.01 6.29 0.00 2005 6.29 6.14 0.00 2006 6.14 6.62 0.00 BlackRock Large Cap Value Division(b).................. 2004 10.00 10.82 0.00 2005 10.82 10.82 0.00 2006 10.82 12.18 0.00 BlackRock Legacy Large Cap Growth Division(b).......... 2004 10.00 10.74 0.00 2005 10.74 10.84 0.00 2006 10.84 10.65 0.00 BlackRock Strategic Value Division(a).................. 2003 12.28 13.77 0.00 2004 13.77 14.99 0.00 2005 14.99 14.73 0.00 2006 14.73 16.22 0.00 Cyclical Growth ETF Division(f)........................ 2006 10.75 11.14 0.00 Cyclical Growth & Income ETF Division(f)............... 2006 10.55 10.89 0.00 Davis Venture Value Division(a)........................ 2003 7.53 8.14 0.00 2004 8.14 8.62 0.00 2005 8.62 8.98 0.00 2006 8.98 9.71 0.00 FI International Stock Division(a)..................... 2003 10.01 10.77 0.00 2004 10.77 12.01 0.00 2005 12.01 13.37 0.00 2006 13.37 14.70 0.00 FI Large Cap Division(f)............................... 2006 18.28 17.96 0.00
33 ANNUITY UNIT VALUES TABLES FOR METLIFE PERSONAL INCOMEPLUS(SM) ANNUITY CONTRACTS (CONTINUED)
------------------------------------------------------------------------------------------------------------- BEGINNING OF END OF YEAR NUMBER OF YEAR ANNUITY ANNUITY ANNUITY UNITS TABLE II CHART III (5% AIR, .95% Separate Account charge) YEAR UNIT VALUE UNIT VALUE END OF YEAR ------------------------------------------------------------------------------------------------------------- FI Mid Cap Opportunities Division(a)................... 2003 $ 9.80 $10.23 0.00 2004 10.23 11.31 0.00 2005 11.31 11.41 0.00 2006 11.41 12.05 0.00 FI Value Leaders Division(b)........................... 2004 10.00 11.06 0.00 2005 11.06 11.55 0.00 2006 11.55 12.20 0.00 Franklin Templeton Small Cap Growth Division(a)........ 2003 9.60 10.38 0.00 2004 10.38 10.91 0.00 2005 10.91 10.77 0.00 2006 10.77 11.18 0.00 Harris Oakmark Focused Value Division(a)............... 2003 9.86 10.77 0.00 2004 10.77 11.16 0.00 2005 11.16 11.59 0.00 2006 11.59 12.29 0.00 Harris Oakmark International Division(b)............... 2004 10.00 11.32 0.00 2005 11.32 12.23 0.00 2006 12.23 14.91 0.00 Harris Oakmark Large Cap Value Division(a)............. 2003 8.44 9.01 0.00 2004 9.01 9.46 0.00 2005 9.46 8.81 0.00 2006 8.81 9.82 0.00 Jennison Growth Division(c)............................ 2005 3.37 3.94 0.00 2006 3.94 3.82 0.00 Jennison Growth Division (formerly Met/Putnam Voyager Division)(a)(c)...................................... 2003 3.61 3.74 0.00 2004 3.74 3.71 0.00 2005 3.71 3.33 0.00 Lazard Mid-Cap Division(b)............................. 2004 10.00 10.59 0.00 2005 10.59 10.84 0.00 2006 10.84 11.75 0.00 Legg Mason Aggressive Growth (formerly Janus Aggressive Growth Division)(a).................................. 2003 9.77 10.31 0.00 2004 10.31 10.58 0.00 2005 10.58 11.37 0.00 2006 11.37 10.55 0.00 Legg Mason Value Equity (formerly MFS Investors Trust Division)(a)(d)...................................... 2003 9.88 10.48 0.00 2004 10.48 11.01 0.00 2005 11.01 11.15 0.00 2006 11.15 11.50 0.00 Lehman Brothers(R) Aggregate Bond Index Division(a).... 2003 10.34 10.35 0.00 2004 10.35 10.16 0.00 2005 10.16 9.79 0.00 2006 9.79 9.62 0.00
34 ANNUITY UNIT VALUES TABLES FOR METLIFE PERSONAL INCOMEPLUS(SM) ANNUITY CONTRACTS (CONTINUED)
------------------------------------------------------------------------------------------------------------- BEGINNING OF END OF YEAR NUMBER OF YEAR ANNUITY ANNUITY ANNUITY UNITS TABLE II CHART III (5% AIR, .95% Separate Account charge) YEAR UNIT VALUE UNIT VALUE END OF YEAR ------------------------------------------------------------------------------------------------------------- Loomis Sayles Small Cap Division(a).................... 2003 $ 7.62 $ 7.93 0.00 2004 7.93 8.70 0.00 2005 8.70 8.78 0.00 2006 8.78 9.67 0.00 Lord Abbett Bond Debenture Division(a)................. 2003 10.31 10.62 0.00 2004 10.62 10.86 0.00 2005 10.86 10.44 0.00 2006 10.44 10.77 0.00 Met/AIM Small Cap Growth Division(b)................... 2004 10.00 10.50 0.00 2005 10.50 10.76 0.00 2006 10.76 11.57 0.00 MetLife Mid Cap Stock Index Division(a)................ 2003 9.30 9.89 0.00 2004 9.89 10.83 0.00 2005 10.83 11.47 0.00 2006 11.47 11.92 0.00 MetLife Stock Index Division(a)........................ 2003 5.97 6.39 0.00 2004 6.39 6.66 0.00 2005 6.66 6.58 0.00 2006 6.58 7.17 0.00 MFS Research International Division(a)................. 2003 9.98 10.86 0.00 2004 10.86 12.27 0.00 2005 12.27 13.52 0.00 2006 13.52 16.19 0.00 MFS Total Return Division(b)........................... 2004 10.00 10.61 0.00 2005 10.61 10.32 0.00 2006 10.32 10.93 0.00 Morgan Stanley EAFE(R) Index Division(a)............... 2003 9.94 10.89 0.00 2004 10.89 12.29 0.00 2005 12.29 13.13 0.00 2006 13.13 15.58 0.00 Neuberger Berman Mid Cap Value Division(a)............. 2003 9.82 10.58 0.00 2004 10.58 12.26 0.00 2005 12.26 12.99 0.00 2006 12.99 13.66 0.00 Neuberger Berman Real Estate Division(b)............... 2004 10.00 2.05 0.00 2005 2.05 2.20 0.00 2006 2.20 2.87 0.00 Oppenheimer Capital Appreciation Division(e)........... 2005 8.18 8.64 0.00 2006 8.64 8.79 0.00 Oppenheimer Global Equity Division(a).................. 2003 9.94 10.75 0.00 2004 10.75 11.81 0.00 2005 11.81 12.95 0.00 2006 12.95 14.25 0.00 PIMCO Inflation Protected Bond Division(f)............. 2006 11.22 11.01 0.00
35 ANNUITY UNIT VALUES TABLES FOR METLIFE PERSONAL INCOMEPLUS(SM) ANNUITY CONTRACTS (CONTINUED)
------------------------------------------------------------------------------------------------------------- BEGINNING OF END OF YEAR NUMBER OF YEAR ANNUITY ANNUITY ANNUITY UNITS TABLE II CHART III (5% AIR, .95% Separate Account charge) YEAR UNIT VALUE UNIT VALUE END OF YEAR ------------------------------------------------------------------------------------------------------------- PIMCO Total Return Division(a)......................... 2003 $10.01 $10.04 0.00 2004 10.04 9.96 0.00 2005 9.96 9.63 0.00 2006 9.63 9.53 0.00 RCM Global Technology Division(a)...................... 2003 9.57 9.98 0.00 2004 9.98 9.01 0.00 2005 9.01 9.47 0.00 2006 9.47 9.42 0.00 Russell 2000(R) Index Division(a)...................... 2003 9.76 10.45 0.00 2004 10.45 11.61 0.00 2005 11.61 11.45 0.00 2006 11.45 12.74 0.00 T. Rowe Price Large Cap Growth Division(a)............. 2003 7.09 7.62 0.00 2004 7.62 7.90 0.00 2005 7.90 7.94 0.00 2006 7.94 8.49 0.00 T. Rowe Price Mid-Cap Growth Division(a)............... 2003 9.73 10.32 0.00 2004 10.32 11.50 0.00 2005 11.50 12.47 0.00 2006 12.47 12.53 0.00 T. Rowe Price Small Cap Growth Division(a)............. 2003 9.75 10.23 0.00 2004 10.23 10.72 0.00 2005 10.72 11.23 0.00 2006 11.23 11.01 0.00 Western Asset Management Strategic Bond Opportunities Division(a).......................................... 2003 9.99 10.11 0.00 2004 10.11 10.17 0.00 2005 10.17 9.87 0.00 2006 9.87 9.78 0.00 Western Asset Management U.S. Government Division(a)... 2003 10.01 10.00 0.00 2004 10.00 9.71 0.00 2005 9.71 9.32 0.00 2006 9.32 9.16 0.00 MetLife Aggressive Allocation Division(e).............. 2005 9.99 10.83 0.00 2006 10.83 11.87 0.00 MetLife Conservative Allocation Division(e)............ 2005 9.99 10.01 0.00 2006 10.01 10.16 0.00 MetLife Conservative to Moderate Allocation Division(e).. 2005 9.99 10.23 0.00 2006 10.23 10.62 0.00 MetLife Moderate Allocation Division(e)................ 2005 9.99 10.44 0.00 2006 10.44 11.06 0.00 MetLife Moderate to Aggressive Allocation Division(e)... 2005 9.99 10.66 0.00 2006 10.66 11.53 0.00
36 ANNUITY UNIT VALUES TABLES FOR METLIFE PERSONAL INCOMEPLUS(SM) ANNUITY CONTRACTS (CONTINUED)
----------------------------------------------------------------------------------------------------------- BEGINNING OF END OF YEAR NUMBER OF YEAR ANNUITY ANNUITY ANNUITY UNITS TABLE II CHART IV (6% AIR, .95% Separate Account charge) YEAR UNIT VALUE UNIT VALUE END OF YEAR ----------------------------------------------------------------------------------------------------------- American Funds Bond Division(f)........................ 2006 $15.43 $15.63 0.00 American Funds Global Small Capitalization Division(b).......................................... 2003 9.72 10.35 0.00 2004 10.35 11.69 0.00 2005 11.69 13.70 0.00 2006 13.70 15.89 0.00 American Funds Growth Division(a)...................... 2003 9.80 10.36 0.00 2004 10.36 10.89 0.00 2005 10.89 11.82 0.00 2006 11.82 12.18 0.00 American Funds Growth-Income Division(a)............... 2003 9.81 10.52 0.00 2004 10.52 10.85 0.00 2005 10.85 10.73 0.00 2006 10.73 11.56 0.00 BlackRock Aggressive Growth Division(a)................ 2003 9.74 10.21 0.00 2004 10.21 10.77 0.00 2005 10.77 11.15 0.00 2006 11.15 11.12 0.00 BlackRock Bond Income Division(a)...................... 2003 10.01 10.03 0.00 2004 10.03 9.78 0.00 2005 9.78 9.37 0.00 2006 9.37 9.14 0.00 BlackRock Diversified Division(a)...................... 2003 9.88 10.28 0.00 2004 10.28 10.43 0.00 2005 10.43 10.04 0.00 2006 10.04 10.38 0.00 BlackRock Large Cap Portfolio (formerly BlackRock Investment Trust Division)(a)........................ 2003 9.80 10.44 0.00 2004 10.44 10.81 0.00 2005 10.81 10.47 0.00 2006 10.47 11.16 0.00 BlackRock Large Cap Value Division(b).................. 2004 10.00 10.75 0.00 2005 10.75 10.65 0.00 2006 10.65 11.88 0.00 BlackRock Legacy Large Cap Growth Division(b).......... 2004 10.00 10.67 0.00 2005 10.67 10.67 0.00 2006 10.67 10.39 0.00 BlackRock Strategic Value Division(a).................. 2003 9.69 10.86 0.00 2004 10.86 11.70 0.00 2005 11.70 11.39 0.00 2006 11.39 12.43 0.00 Cyclical Growth ETF Division(f)........................ 2006 10.75 11.07 0.00 Cyclical Growth & Income ETF Division(f)............... 2006 10.54 10.82 0.00
37 ANNUITY UNIT VALUES TABLES FOR METLIFE PERSONAL INCOMEPLUS(SM) ANNUITY CONTRACTS (CONTINUED)
----------------------------------------------------------------------------------------------------------- BEGINNING OF END OF YEAR NUMBER OF YEAR ANNUITY ANNUITY ANNUITY UNITS TABLE II CHART IV (6% AIR, .95% Separate Account charge) YEAR UNIT VALUE UNIT VALUE END OF YEAR ----------------------------------------------------------------------------------------------------------- Davis Venture Value Division(a)........................ 2003 $ 9.84 $10.60 0.00 2004 10.60 11.13 0.00 2005 11.13 11.48 0.00 2006 11.48 12.29 0.00 FI International Stock Division(a)..................... 2003 10.01 10.76 0.00 2004 10.76 11.88 0.00 2005 11.88 13.10 0.00 2006 13.10 14.27 0.00 FI Large Cap Division(f)............................... 2006 18.28 17.85 0.00 FI Mid Cap Opportunities Division(a)................... 2003 9.80 10.22 0.00 2004 10.22 11.19 0.00 2005 11.19 11.18 0.00 2006 11.18 11.69 0.00 FI Value Leaders Division(b)........................... 2004 10.00 10.99 0.00 2005 10.99 11.37 0.00 2006 11.37 11.90 0.00 Franklin Templeton Small Cap Growth Division(a)........ 2003 9.60 10.36 0.00 2004 10.36 10.79 0.00 2005 10.79 10.55 0.00 2006 10.55 10.85 0.00 Harris Oakmark Focused Value Division(a)............... 2003 9.86 10.75 0.00 2004 10.75 11.04 0.00 2005 11.04 11.35 0.00 2006 11.35 11.93 0.00 Harris Oakmark International Division(b)............... 2004 10.00 11.25 0.00 2005 11.25 12.03 0.00 2006 12.03 14.53 0.00 Harris Oakmark Large Cap Value Division(a)............. 2003 9.88 10.52 0.00 2004 10.52 10.95 0.00 2005 10.95 10.09 0.00 2006 10.09 11.14 0.00 Jennison Growth Division(a)............................ 2005 9.03 10.49 0.00 2006 10.49 10.07 0.00 Jennison Growth Division (formerly Met/Putnam Voyager Division)(a)(c)...................................... 2003 9.83 10.15 0.00 2004 10.15 9.96 0.00 2005 9.96 8.92 0.00 Lazard Mid-Cap Division(b)............................. 2004 10.00 10.53 0.00 2005 10.53 10.67 0.00 2006 10.67 11.45 0.00
38 ANNUITY UNIT VALUES TABLES FOR METLIFE PERSONAL INCOMEPLUS(SM) ANNUITY CONTRACTS (CONTINUED)
----------------------------------------------------------------------------------------------------------- BEGINNING OF END OF YEAR NUMBER OF YEAR ANNUITY ANNUITY ANNUITY UNITS TABLE II CHART IV (6% AIR, .95% Separate Account charge) YEAR UNIT VALUE UNIT VALUE END OF YEAR ----------------------------------------------------------------------------------------------------------- Legg Mason Aggressive Growth (formerly Janus Aggressive Growth Division)(a).................................. 2003 $ 9.78 $10.29 0.00 2004 10.29 10.47 0.00 2005 10.47 11.14 0.00 2006 11.14 10.24 0.00 Legg Mason Value Equity (formerly MFS Investors Trust Division)(a)(d)...................................... 2003 9.88 10.46 0.00 2004 10.46 10.89 0.00 2005 10.89 10.92 0.00 2006 10.92 11.24 0.00 Lehman Brothers(R) Aggregate Bond Index Division(a).... 2003 10.00 9.99 0.00 2004 9.99 9.72 0.00 2005 9.72 9.27 0.00 2006 9.27 9.02 0.00 Loomis Sayles Small Cap Division(a).................... 2003 9.77 10.14 0.00 2004 10.14 11.02 0.00 2005 11.02 11.02 0.00 2006 11.02 12.02 0.00 Lord Abbett Bond Debenture Division(a)................. 2003 9.94 10.22 0.00 2004 10.22 10.36 0.00 2005 10.36 9.86 0.00 2006 9.86 10.08 0.00 Met/AIM Small Cap Growth Division(b)................... 2004 10.00 10.44 0.00 2005 10.44 10.59 0.00 2006 10.59 11.28 0.00 MetLife Mid Cap Stock Index Division(a)................ 2003 9.80 10.39 0.00 2004 10.39 11.27 0.00 2005 11.27 11.82 0.00 2006 11.82 12.17 0.00 MetLife Stock Index Division(a)........................ 2003 9.82 10.49 0.00 2004 10.49 10.83 0.00 2005 10.83 10.59 0.00 2006 10.59 11.43 0.00 MFS Research International Division(a)................. 2003 9.99 10.85 0.00 2004 10.85 12.13 0.00 2005 12.13 13.24 0.00 2006 13.24 15.71 0.00 MFS Total Return Division(b)........................... 2004 10.00 10.54 0.00 2005 10.54 10.16 0.00 2006 10.16 10.66 0.00 Morgan Stanley EAFE(R) Index Division(a)............... 2003 9.94 10.87 0.00 2004 10.87 12.15 0.00 2005 12.15 12.86 0.00 2006 12.86 15.12 0.00
39 ANNUITY UNIT VALUES TABLES FOR METLIFE PERSONAL INCOMEPLUS(SM) ANNUITY CONTRACTS (CONTINUED)
----------------------------------------------------------------------------------------------------------- BEGINNING OF END OF YEAR NUMBER OF YEAR ANNUITY ANNUITY ANNUITY UNITS TABLE II CHART IV (6% AIR, .95% Separate Account charge) YEAR UNIT VALUE UNIT VALUE END OF YEAR ----------------------------------------------------------------------------------------------------------- Neuberger Berman Mid Cap Value Division(a)............. 2003 $ 9.82 $10.56 0.00 2004 10.56 12.13 0.00 2005 12.13 12.72 0.00 2006 12.72 13.26 0.00 Neuberger Berman Real Estate Division(b)............... 2004 10.00 2.04 0.00 2005 2.04 2.17 0.00 2006 2.17 2.80 0.00 Oppenheimer Capital Appreciation Division(e)........... 2005 8.18 8.59 0.00 2006 8.59 8.66 0.00 Oppenheimer Global Equity Division(a).................. 2003 9.94 10.74 0.00 2004 10.74 11.68 0.00 2005 11.68 12.69 0.00 2006 12.69 13.83 0.00 PIMCO Inflation Protected Bond Division(f)............. 2006 11.22 10.94 0.00 PIMCO Total Return Division(a)......................... 2003 10.01 10.02 0.00 2004 10.02 9.85 0.00 2005 9.85 9.44 0.00 2006 9.44 9.24 0.00 RCM Global Technology Division(a)...................... 2003 9.57 9.97 0.00 2004 9.97 8.91 0.00 2005 8.91 9.28 0.00 2006 9.28 9.15 0.00 Russell 2000(R) Index Division(a)...................... 2003 9.76 10.43 0.00 2004 10.43 11.48 0.00 2005 11.48 11.21 0.00 2006 11.21 12.36 0.00 T. Rowe Price Large Cap Growth Division(a)............. 2003 9.82 10.52 0.00 2004 10.52 10.81 0.00 2005 10.81 10.77 0.00 2006 10.77 11.40 0.00 T. Rowe Price Mid-Cap Growth Division(a)............... 2003 9.73 10.30 0.00 2004 10.30 11.37 0.00 2005 11.37 12.21 0.00 2006 12.21 12.16 0.00 T. Rowe Price Small Cap Growth Division(a)............. 2003 9.75 10.22 0.00 2004 10.22 10.60 0.00 2005 10.60 11.00 0.00 2006 11.00 10.68 0.00 Western Asset Management Strategic Bond Opportunities Division(a).......................................... 2003 9.99 10.10 0.00 2004 10.10 10.06 0.00 2005 10.06 9.67 0.00 2006 9.67 9.49 0.00
40 ANNUITY UNIT VALUES TABLES FOR METLIFE PERSONAL INCOMEPLUS(SM) ANNUITY CONTRACTS (CONTINUED)
----------------------------------------------------------------------------------------------------------- BEGINNING OF END OF YEAR NUMBER OF YEAR ANNUITY ANNUITY ANNUITY UNITS TABLE II CHART IV (6% AIR, .95% Separate Account charge) YEAR UNIT VALUE UNIT VALUE END OF YEAR ----------------------------------------------------------------------------------------------------------- Western Asset Management U.S. Government Division(a)... 2003 $10.01 $ 9.98 0.00 2004 9.98 9.60 0.00 2005 9.60 9.13 0.00 2006 9.13 8.89 0.00 MetLife Aggressive Allocation Division(e).............. 2005 9.99 10.77 0.00 2006 10.77 11.68 0.00 MetLife Conservative Allocation Division(e)............ 2005 9.99 9.95 0.00 2006 9.95 10.00 0.00 MetLife Conservative to Moderate Allocation Division(e).......................................... 2005 9.99 10.16 0.00 2006 10.16 10.45 0.00 MetLife Moderate Allocation Division(e)................ 2005 9.99 10.38 0.00 2006 10.38 10.88 0.00 MetLife Moderate to Aggressive Allocation Division(e)... 2005 9.99 10.60 0.00 2006 10.60 11.35 0.00
Notes: (a) Inception Date: October 27, 2003. (b) Inception Date: May 1, 2004. (c) The assets of the Met/Putnam Voyager investment division merged into the Jennison Growth Division prior to the opening of business on May 2, 2005. The Met/Putnam Voyager investment division is no longer available. (d) The assets of MFS(R) Investors Trust Division were merged into the Legg Mason Value Equity Division prior to the opening of business on May 1, 2006. Annuity unit values prior to May 1, 2006 are those of MFS(R) Investors Trust Division. (e) Inception Date: May 1, 2005. (f) Inception Date: May 1, 2006. 41 ANNUAL REPORT OF METROPOLITAN LIFE SEPARATE ACCOUNT E OF METROPOLITAN LIFE INSURANCE COMPANY AT DECEMBER 31, 2006 F-1 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Contract Owners of Metropolitan Life Separate Account E and the Board of Directors of New England Life Insurance Company: We have audited the accompanying statement of assets and liabilities of the Investment Divisions (as disclosed in Appendix A) comprising Metropolitan Life Separate Account E (the "Separate Account") of Metropolitan Life Insurance Company ("Metropolitan Life") as of December 31, 2006, the related statement of operations for the period in the year then ended, and the statements of changes in net assets for each of the periods in the two years then ended. These financial statements are the responsibility of the Separate Account's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Separate Account is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Separate Account's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2006, by correspondence with the custodian. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of each of the Investment Divisions comprising the Separate Account of Metropolitan Life as of December 31, 2006, the results of their operations for the period in the year then ended, and the changes in their net assets for each of the periods in the two years then ended, in conformity with accounting principles generally accepted in the United States of America. /S/ DELOITTE & TOUCHE LLP Certified Public Accountants Tampa, FL March 26, 2007 F-2 APPENDIX A American Funds Bond Investment Lehman Brothers Aggregate Bond Division Index Investment Division American Funds Global Small Loomis Sayles Small Cap Investment Capitalization Investment Division Division American Funds Growth and Income Lord Abbett Bond Debenture Investment Investment Division Division American Funds Growth Investment Met/AIM Small Cap Growth Investment Division Division BlackRock Large Cap Value Investment Metlife Aggressive Allocation Division Investment Division BlackRock Aggressive Growth Metlife Conservative Allocation Investment Division Investment Division BlackRock Bond Income Investment Metlife Conservative to Moderate Division Allocation Investment Division BlackRock Diversified Investment MetLife Mid Cap Stock Index Division Investment Division BlackRock Large Cap Investment Metlife Moderate Allocation Division Investment Division BlackRock Legacy Large Cap Growth Metlife Moderate to Aggressive Investment Division Allocation Investment Division BlackRock Money Market Investment MetLife Stock Index Investment Division Division BlackRock Strategic Value Investment MFS Total Return Investment Division Division MFS Investors Trust Investment Calvert Social Balanced Investment Division Division MFS Research International Investment Calvert Social Mid Cap Growth Division Investment Division Morgan Stanley EAFE Index Investment Cyclical Growth and Income ETF Division Investment Division Neuberger Berman Mid Cap Value Cyclical Growth ETF Investment Investment Division Division Neuberger Berman Real Estate Davis Venture Value Investment Investment Division Division Harris Oakmark Large Cap Value FI International Stock Investment Investment Division Division Oppenheimer Capital Appreciation FI Large Cap Investment Division Investment Division FI Mid Cap Opportunities Investment PIMCO Inflation Protected Bond Division Investment Division FI Value Leaders Investment Division PIMCO Total Return Investment Division Fidelity Investment Grade Bond RCM Global Technology Investment Investment Division Division Fidelity Equity-Income Investment Russell 2000 Index Investment Division Division T. Rowe Price Large Cap Growth Fidelity Growth Investment Division Investment Division Fidelity Money Market Investment T. Rowe Price Mid Cap Growth Division Investment Division Fidelity Overseas Investment Division T. Rowe Price Small Cap Growth Franklin Templeton Small Cap Growth Investment Division Investment Division Third Avenue Small Cap Value Oppenheimer Global Equity Investment Investment Division Division Variable B Investment Division Harris Oakmark Focused Value Variable C Investment Division Investment Division Western Asset Management Strategic Harris Oakmark International Bond Opportunities Investment Division Investment Division Western Asset Management U.S. Jennison Growth Investment Division Government Investment Division Lazard Mid Cap Investment Division Legg Mason Value Equity Investment Division Legg Mason Aggressive Growth Investment Division F-3 METROPOLITAN LIFE SEPARATE ACCOUNT E OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 2006
BLACKROCK LARGE CAP VARIABLE B INVESTMENT DIVISION INVESTMENT DIVISION ------------------- ------------------- ASSETS: INVESTMENTS AT FAIR VALUE: METROPOLITAN SERIES FUND, INC. ("METROPOLITAN FUND") BlackRock Large Cap Portfolio 38,784,169 shares; cost $1,270,408,523............. $ 1,213,697,639 $ -- BlackRock Large Cap Portfolio 1,024,447 shares; cost $33,901,415................. -- 32,075,445 BlackRock Large Cap Portfolio 72,022 shares; cost $1,823,176..................... -- -- BlackRock Diversified Portfolio 72,921,431 shares; cost $1,222,015,130............. -- -- BlackRock Aggressive Growth Portfolio 27,477,477 shares; cost $634,764,643............... -- -- MetLife Stock Index Portfolio 94,515,365 shares; cost $2,885,828,342............. -- -- FI International Stock Portfolio 19,072,085 shares; cost $201,333,294............... -- -- FI Mid Cap Opportunities Portfolio 33,947,556 shares; cost $695,860,403............... -- -- T. Rowe Price Small Cap Growth Portfolio 15,441,338 shares; cost $180,182,299............... -- -- Oppenheimer Global Equity Portfolio 14,926,243 shares; cost $196,177,982............... -- -- Harris Oakmark Large Cap Value Portfolio 28,242,062 shares; cost $337,512,670............... -- -- Neuberger Berman Mid Cap Value Portfolio 27,556,282 shares; cost $510,199,824............... -- -- T. Rowe Price Large Cap Growth Portfolio 14,478,327 shares; cost $177,193,328............... -- -- Lehman Brothers Aggregate Bond Index Portfolio 79,551,816 shares; cost $849,536,072............... -- -- Morgan Stanley EAFE Index Portfolio 26,691,198 shares; cost $283,393,619............... -- -- Russell 2000 Index Portfolio 20,470,593 shares; cost $248,567,978............... -- -- Jennison Growth Portfolio 3,089,876 shares; cost $34,120,135................. -- -- BlackRock Strategic Value Portfolio 32,894,934 shares; cost $523,102,133............... -- -- MetLife Mid Cap Stock Index Portfolio 23,020,958 shares; cost $286,246,272............... -- -- Franklin Templeton Small Cap Growth Portfolio 4,564,443 shares; cost $45,201,569................. -- -- BlackRock Large Cap Value Portfolio 13,041,491 shares; cost $160,509,189............... -- -- BlackRock Bond Income Portfolio 4,589,489 shares; cost $495,570,329................ -- -- BlackRock Money Market Portfolio 298,694 shares; cost $29,869,403................... -- -- Davis Venture Value Portfolio 14,268,986 shares; cost $399,738,138............... -- -- Loomis Sayles Small Cap Portfolio 408,104 shares; cost $91,866,158................... -- -- ---------------- ----------------- Total investments................................... 1,213,697,639 32,075,445 Due from Metropolitan Life Insurance Company........ 22 -- ---------------- ----------------- Total Assets........................................ 1,213,697,661 32,075,445 LIABILITIES: Due to Metropolitan Life Insurance Company.......... (121) -- ---------------- ----------------- NET ASSETS.......................................... $ 1,213,697,540 $ 32,075,445 ================ ================= Outstanding Units................................... 30,422,708 202,085 Unit Fair Values.................................... $13.80 to $82.16 $45.46 to $169.07
The accompanying notes are an integral part of these financial statements. F-4
BLACKROCK BLACKROCK METLIFE FI FI MID CAP VARIABLE C DIVERSIFIED AGGRESSIVE GROWTH STOCK INDEX INTERNATIONAL STOCK OPPORTUNITIES INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ------------------- ------------------- ------------------- ------------------- ------------------- ------------------- $ -- $ -- $ -- $ -- $ -- $ -- -- -- -- -- -- -- 2,255,006 -- -- -- -- -- -- 1,283,710,537 -- -- -- -- -- -- 657,496,903 -- -- -- -- -- -- 3,412,276,818 -- -- -- -- -- -- 294,564,006 -- -- -- -- -- -- 662,043,243 -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- ------------------ ---------------- ---------------- ---------------- ---------------- ---------------- 2,255,006 1,283,710,537 657,496,903 3,412,276,818 294,564,006 662,043,243 -- -- -- -- -- -- ------------------ ---------------- ---------------- ---------------- ---------------- ---------------- 2,255,006 1,283,710,537 657,496,903 3,412,276,818 294,564,006 662,043,243 -- -- (287) (370) (513) (174) ------------------ ---------------- ---------------- ---------------- ---------------- ---------------- $ 2,255,006 $ 1,283,710,537 $ 657,496,616 $ 3,412,276,448 $ 294,563,493 $ 662,043,069 ================== ================ ================ ================ ================ ================ 11,969 37,524,987 19,462,810 78,739,098 14,686,869 33,093,245 $169.07 to $207.39 $13.19 to $48.72 $14.68 to $49.89 $12.91 to $49.92 $15.35 to $21.74 $13.33 to $20.62
T. ROWE PRICE SMALL CAP GROWTH INVESTMENT DIVISION ------------------- $ -- -- -- -- -- -- -- -- 241,933,841 -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- ---------------- 241,933,841 287 ---------------- 241,934,128 (171) ---------------- $ 241,933,957 ================ 15,920,124 $13.48 to $16.09
F-5 METROPOLITAN LIFE SEPARATE ACCOUNT E OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENT OF ASSETS AND LIABILITIES -- (CONTINUED) DECEMBER 31, 2006
OPPENHEIMER HARRIS OAKMARK GLOBAL EQUITY LARGE CAP VALUE INVESTMENT DIVISION INVESTMENT DIVISION ------------------- ------------------- ASSETS: INVESTMENTS AT FAIR VALUE: METROPOLITAN SERIES FUND, INC. ("METROPOLITAN FUND') BlackRock Large Cap Portfolio 38,784,169 shares; cost $1,270,408,523............. $ -- $ -- BlackRock Large Cap Portfolio 1,024,447 shares; cost $33,901,415................. -- -- BlackRock Large Cap Portfolio 72,022 shares; cost $1,823,176..................... -- -- BlackRock Diversified Portfolio 72,921,431 shares; cost $1,222,015,130............. -- -- BlackRock Aggressive Growth Portfolio 27,477,477 shares; cost $634,764,643............... -- -- MetLife Stock Index Portfolio 94,515,365 shares; cost $2,885,828,342............. -- -- FI International Stock Portfolio 19,072,085 shares; cost $201,333,294............... -- -- FI Mid Cap Opportunities Portfolio 33,947,556 shares; cost $695,860,403............... -- -- T. Rowe Price Small Cap Growth Portfolio 15,441,338 shares; cost $180,182,299............... -- -- Oppenheimer Global Equity Portfolio 14,926,243 shares; cost $196,177,982............... 251,447,003 -- Harris Oakmark Large Cap Value Portfolio 28,242,062 shares; cost $337,512,670............... -- 432,262,259 Neuberger Berman Mid Cap Value Portfolio 27,556,282 shares; cost $510,199,824............... -- -- T. Rowe Price Large Cap Growth Portfolio 14,478,327 shares; cost $177,193,328............... -- -- Lehman Brothers Aggregate Bond Index Portfolio 79,551,816 shares; cost $849,536,072............... -- -- Morgan Stanley EAFE Index Portfolio 26,691,198 shares; cost $283,393,619............... -- -- Russell 2000 Index Portfolio 20,470,593 shares; cost $248,567,978............... -- -- Jennison Growth Portfolio 3,089,876 shares; cost $34,120,135................. -- -- BlackRock Strategic Value Portfolio 32,894,934 shares; cost $523,102,133............... -- -- MetLife Mid Cap Stock Index Portfolio 23,020,958 shares; cost $286,246,272............... -- -- Franklin Templeton Small Cap Growth Portfolio 4,564,443 shares; cost $45,201,569................. -- -- BlackRock Large Cap Value Portfolio 13,041,491 shares; cost $160,509,189............... -- -- BlackRock Bond Income Portfolio 4,589,489 shares; cost $495,570,329................ -- -- BlackRock Money Market Portfolio 298,694 shares; cost $29,869,403................... -- -- Davis Venture Value Portfolio 14,268,986 shares; cost $399,738,138............... -- -- Loomis Sayles Small Cap Portfolio 408,104 shares; cost $91,866,158................... -- -- ---------------- ---------------- Total investments................................... 251,447,003 432,262,259 Due from Metropolitan Life Insurance Company........ -- -- ---------------- ---------------- Total Assets........................................ 251,447,003 432,262,259 LIABILITIES: Due to Metropolitan Life Insurance Company.......... (157) (99) ---------------- ---------------- NET ASSETS.......................................... $ 251,446,846 $ 432,262,160 ================ ================ Outstanding Units................................... 12,575,044 28,712,177 Unit Fair Values.................................... $15.47 to $20.69 $12.48 to $15.88
The accompanying notes are an integral part of these financial statements. F-6
NEUBERGER BERMAN T. ROWE PRICE LEHMAN BROTHERS MORGAN STANLEY RUSSELL JENNISON MID CAP VALUE LARGE CAP GROWTH AGGREGATE BOND INDEX EAFE INDEX 2000 INDEX GROWTH INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ------------------- ------------------- -------------------- ------------------- ------------------- ------------------- $ -- $ -- $ -- $ -- $ -- $ -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- 583,684,287 -- -- -- -- -- -- 220,662,277 -- -- -- -- -- -- 849,544,019 -- -- -- -- -- -- 424,305,466 -- -- -- -- -- -- 319,432,706 -- -- -- -- -- -- 39,203,857 -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- ---------------- ---------------- ---------------- ---------------- ---------------- --------------- 583,684,287 220,662,277 849,544,019 424,305,466 319,432,706 39,203,857 -- -- -- -- -- -- ---------------- ---------------- ---------------- ---------------- ---------------- --------------- 583,684,287 220,662,277 849,544,019 424,305,466 319,432,706 39,203,857 (718) (159) (333) (162) (203) (218) ---------------- ---------------- ---------------- ---------------- ---------------- --------------- $ 583,683,569 $ 220,662,118 $ 849,543,686 $ 424,305,304 $ 319,432,503 $ 39,203,639 ================ ================ ================ ================ ================ =============== 21,851,504 15,304,972 63,513,866 27,068,654 16,898,875 7,806,353 $14.20 to $28.20 $12.95 to $14.90 $10.74 to $14.13 $14.24 to $19.48 $16.66 to $19.79 $4.65 to $12.47
BLACKROCK STRATEGIC VALUE INVESTMENT DIVISION ------------------- $ -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- 580,737,476 -- -- -- -- -- -- -- ---------------- 580,737,476 -- ---------------- 580,737,476 (65) ---------------- $ 580,737,411 ================ 26,813,221 $15.78 to $22.61
F-7 METROPOLITAN LIFE SEPARATE ACCOUNT E OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENT OF ASSETS AND LIABILITIES -- (CONTINUED) DECEMBER 31, 2006
METLIFE MID CAP FRANKLIN TEMPLETON STOCK INDEX SMALL CAP GROWTH INVESTMENT DIVISION INVESTMENT DIVISION ------------------- ------------------- ASSETS: INVESTMENTS AT FAIR VALUE: METROPOLITAN SERIES FUND, INC. ("METROPOLITAN FUND") BlackRock Large Cap Portfolio 38,784,169 shares; cost $1,270,408,523............. $ -- $ -- BlackRock Large Cap Portfolio 1,024,447 shares; cost $33,901,415................. -- -- BlackRock Large Cap Portfolio 72,022 shares; cost $1,823,176..................... -- -- BlackRock Diversified Portfolio 72,921,431 shares; cost $1,222,015,130............. -- -- BlackRock Aggressive Growth Portfolio 27,477,477 shares; cost $634,764,643............... -- -- MetLife Stock Index Portfolio 94,515,365 shares; cost $2,885,828,342............. -- -- FI International Stock Portfolio 19,072,085 shares; cost $201,333,294............... -- -- FI Mid Cap Opportunities Portfolio 33,947,556 shares; cost $695,860,403............... -- -- T. Rowe Price Small Cap Growth Portfolio 15,441,338 shares; cost $180,182,299............... -- -- Oppenheimer Global Equity Portfolio 14,926,243 shares; cost $196,177,982............... -- -- Harris Oakmark Large Cap Value Portfolio 28,242,062 shares; cost $337,512,670............... -- -- Neuberger Berman Mid Cap Value Portfolio 27,556,282 shares; cost $510,199,824............... -- -- T. Rowe Price Large Cap Growth Portfolio 14,478,327 shares; cost $177,193,328............... -- -- Lehman Brothers Aggregate Bond Index Portfolio 79,551,816 shares; cost $849,536,072............... -- -- Morgan Stanley EAFE Index Portfolio 26,691,198 shares; cost $283,393,619............... -- -- Russell 2000 Index Portfolio 20,470,593 shares; cost $248,567,978............... -- -- Jennison Growth Portfolio 3,089,876 shares; cost $34,120,135................. -- -- BlackRock Strategic Value Portfolio 32,894,934 shares; cost $523,102,133............... -- -- MetLife Mid Cap Stock Index Portfolio 23,020,958 shares; cost $286,246,272............... 335,946,087 -- Franklin Templeton Small Cap Growth Portfolio 4,564,443 shares; cost $45,201,569................. -- 49,635,200 BlackRock Large Cap Value Portfolio 13,041,491 shares; cost $160,509,189............... -- -- BlackRock Bond Income Portfolio 4,589,489 shares; cost $495,570,329................ -- -- BlackRock Money Market Portfolio 298,694 shares; cost $29,869,403................... -- -- Davis Venture Value Portfolio 14,268,986 shares; cost $399,738,138............... -- -- Loomis Sayles Small Cap Portfolio 408,104 shares; cost $91,866,158................... -- -- ---------------- ---------------- Total investments................................... 335,946,087 49,635,200 Due from Metropolitan Life Insurance Company........ -- -- ---------------- ---------------- Total Assets........................................ 335,946,087 49,635,200 LIABILITIES: Due to Metropolitan Life Insurance Company.......... (241) (96) ---------------- ---------------- NET ASSETS.......................................... $ 335,945,846 $ 49,635,104 ================ ================ Outstanding Units................................... 21,158,755 4,513,538 Unit Fair Values.................................... $13.61 to $16.55 $10.33 to $12.64
The accompanying notes are an integral part of these financial statements. F-8
BLACKROCK BLACKROCK BLACKROCK DAVIS LOOMIS SAYLES LARGE CAP VALUE BOND INCOME MONEY MARKET VENTURE VALUE SMALL CAP INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ------------------- ------------------- ------------------- ------------------- ------------------- $ -- $ -- $ -- $ -- $ -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- 179,447,573 -- -- -- -- -- 496,636,591 -- -- -- -- -- 29,869,403 -- -- -- -- -- 499,121,572 -- -- -- -- -- 101,108,900 ---------------- ---------------- ---------------- ---------------- ---------------- 179,447,573 496,636,591 29,869,403 499,121,572 101,108,900 -- -- -- -- -- ---------------- ---------------- ---------------- ---------------- ---------------- 179,447,573 496,636,591 29,869,403 499,121,572 101,108,900 (184) (122) -- (1,018) (233) ---------------- ---------------- ---------------- ---------------- ---------------- $ 179,447,389 $ 496,636,469 $ 29,869,403 $ 499,120,554 $ 101,108,667 ================ ================ ================ ================ ================ 12,384,350 15,090,608 1,356,596 13,009,427 3,097,546 $13.60 to $15.04 $11.91 to $57.26 $18.95 to $24.22 $13.39 to $41.95 $13.75 to $35.91
F-9 METROPOLITAN LIFE SEPARATE ACCOUNT E OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENT OF ASSETS AND LIABILITIES -- (CONTINUED) DECEMBER 31, 2006
WESTERN ASSET HARRIS OAKMARK MANAGEMENT FOCUSED VALUE STRATEGIC BOND OPPORTUNITIES INVESTMENT DIVISION INVESTMENT DIVISION ------------------- ---------------------------- ASSETS: INVESTMENTS AT FAIR VALUE: METROPOLITAN FUND -- (CONTINUED) Harris Oakmark Focused Value Portfolio 1,567,645 shares; cost $349,308,073............................. $ 418,653,371 $ -- Western Asset Mgmt Strategic Bond Opportunities Portfolio 22,463,324 shares; cost $280,820,622............................ -- 281,812,474 Western Asset Mgmt U.S. Government Portfolio 16,492,742 shares; cost $201,075,768............................ -- -- FI Values Leaders Portfolio 481,730 shares; cost $90,752,858................................ -- -- MFS Total Return Portfolio 757,059 shares; cost $106,826,144............................... -- -- BlackRock Legacy Large Cap Growth Portfolio 995,055 shares; cost $20,794,360................................ -- -- MetLife Conservative Allocation Portfolio 3,960,392 shares; cost $40,552,380.............................. -- -- MetLife Conservative to Moderate Allocation Portfolio 19,256,654 shares; cost $203,967,153............................ -- -- MetLife Moderate Allocation Portfolio 42,160,217 shares; cost $459,205,698............................ -- -- MetLife Moderate to Aggressive Allocation Portfolio 33,608,157 shares; cost $377,978,554............................ -- -- MetLife Aggressive Allocation Portfolio 3,524,840 shares; cost $40,259,651.............................. -- -- FI Large Cap Portfolio 188,158 shares; cost $2,643,657................................. -- -- FIDELITY VARIABLE INSURANCE PRODUCTS FUNDS ("FIDELITY VIP FUNDS") Fidelity VIP Money Market Portfolio 11,180,161 shares; cost $11,180,161............................. -- -- Fidelity VIP Equity-Income Portfolio 5,046,088 shares; cost $116,851,890............................. -- -- Fidelity VIP Growth Portfolio 3,564,830 shares; cost $143,207,753............................. -- -- Fidelity VIP Overseas Portfolio 1,657,140 shares; cost $25,648,151.............................. -- -- Fidelity VIP Investment Grade Bond Portfolio 1,523,725 shares; cost $19,829,338.............................. -- -- CALVERT VARIABLE SERIES, INC. ("CALVERT FUND") Calvert Social Balanced Portfolio 31,066,867 shares; cost $60,267,753............................. -- -- Calvert Social Mid Cap Growth Portfolio 422,761 shares; cost $9,948,855................................. -- -- ---------------- ---------------- Total investments................................................ 418,653,371 281,812,474 Due from Metropolitan Life Insurance Company..................... -- -- ---------------- ---------------- Total assets..................................................... 418,653,371 281,812,474 LIABILITIES Due to Metropolitan Life Insurance Company....................... (41) (347) ---------------- ---------------- NET ASSETS....................................................... $ 418,653,330 $ 281,812,127 ================ ================ Outstanding Units................................................ 10,325,748 13,411,635 Unit Fair Values................................................. $13.34 to $44.24 $11.23 to $23.07
The accompanying notes are an integral part of these financial statements. F-10
WESTERN ASSET BLACKROCK METLIFE METLIFE MANAGEMENT FI MFS LEGACY LARGE CONSERVATIVE CONSERVATIVE TO U.S. GOVERNMENT VALUE LEADERS TOTAL RETURN CAP GROWTH ALLOCATION MODERATE ALLOCATION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ------------------- ------------------- ------------------- ------------------- ------------------- ------------------- $ -- $ -- $ -- $ -- $ -- $ -- -- -- -- -- -- -- 202,291,070 -- -- -- -- -- -- 100,021,609 -- -- -- -- -- -- 117,960,982 -- -- -- -- -- -- 22,123,871 -- -- -- -- -- -- 41,777,696 -- -- -- -- -- -- 212,346,265 -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- 202,291,070 100,021,609 117,960,982 22,123,871 41,777,696 212,346,265 -- -- -- -- -- -- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- 202,291,070 100,021,609 117,960,982 22,123,871 41,777,696 212,346,265 (585) (93) (458) (248) (171) (1,061) ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- $ 202,290,485 $ 100,021,516 $ 117,960,524 $ 22,123,623 41,777,525 212,345,204 ================ ================ ================ ================ ================ ================ 12,285,154 3,178,325 3,947,313 1,062,045 3,839,929 18,680,783 $10.63 to $18.04 $13.63 to $35.20 $12.31 to $53.42 $11.95 to $28.26 $10.70 to $11.02 $11.18 to $11.52
METLIFE MODERATE ALLOCATION INVESTMENT DIVISION ------------------- $ -- -- -- -- -- -- -- -- 484,210,161 -- -- -- -- -- -- -- -- -- -- ---------------- 484,210,161 -- ---------------- 484,210,161 (342) ---------------- 484,209,819 ================ 40,790,100 $11.68 to $12.03
F-11 METROPOLITAN LIFE SEPARATE ACCOUNT E OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENT OF ASSETS AND LIABILITIES -- (CONTINUED) DECEMBER 31, 2006
METLIFE METLIFE MODERATE TO AGGRESSIVE ALLOCATION AGGRESSIVE ALLOCATION INVESTMENT DIVISION INVESTMENT DIVISION --------------------------------- --------------------- ASSETS: INVESTMENTS AT FAIR VALUE: METROPOLITAN FUND -- (CONTINUED) Harris Oakmark Focused Value Portfolio 1,567,645 shares; cost $349,308,073............................. $ -- $ -- Western Asst Mgmt Strategic Bond Opportunities Portfolio 22,463,324 shares; cost $280,820,622............................ -- -- Western Asst Mgmt U.S. Government Portfolio 16,492,742 shares; cost $201,075,768............................ -- -- FI Values Leaders Portfolio 481,730 shares; cost $90,752,858................................ -- -- MFS Total Return Portfolio 757,059 shares; cost $106,826,144............................... -- -- BlackRock Legacy Large Cap Growth Portfolio 995,055 shares; cost $20,794,360................................ -- -- MetLife Conservative Allocation Portfolio 3,960,392 shares; cost $40,552,380.............................. -- -- MetLife Conservative to Moderate Allocation Portfolio 19,256,654 shares; cost $203,967,153............................ -- -- MetLife Moderate Allocation Portfolio 42,160,217 shares; cost $459,205,698............................ -- -- MetLife Moderate to Aggressive Allocation Portfolio 33,608,157 shares; cost $377,978,554............................ 401,420,316 -- MetLife Aggressive Allocation Portfolio 3,524,840 shares; cost $40,259,651.............................. -- 43,191,989 FI Large Cap Portfolio 188,158 shares; cost $2,643,657................................. -- -- FIDELITY VARIABLE INSURANCE PRODUCTS FUNDS ("FIDELITY VIP FUNDS") Fidelity VIP Money Market Portfolio 11,180,161 shares; cost $11,180,161............................. -- -- Fidelity VIP Equity-Income Portfolio 5,046,088 shares; cost $116,851,890............................. -- -- Fidelity VIP Growth Portfolio 3,564,830 shares; cost $143,207,753............................. -- -- Fidelity VIP Overseas Portfolio 1,657,140 shares; cost $25,648,151.............................. -- -- Fidelity VIP Investment Grade Bond Portfolio 1,523,725 shares; cost $19,829,338.............................. -- -- CALVERT VARIABLE SERIES, INC. ("CALVERT FUND") Calvert Social Balanced Portfolio 31,066,867 shares; cost $60,267,753............................. -- -- Calvert Social Mid Cap Growth Portfolio 422,761 shares; cost $9,948,855................................. -- -- ---------------- ---------------- Total investments................................................ 401,420,316 43,191,989 Due from Metropolitan Life Insurance Company..................... -- -- ---------------- ---------------- Total assets..................................................... 401,420,316 43,191,989 LIABILITIES Due to Metropolitan Life Insurance Company....................... (3,045) (95) ---------------- ---------------- NET ASSETS....................................................... 401,417,271 43,191,894 ================ ================ Outstanding Units................................................ 32,440,518 3,386,241 Unit Fair Values................................................. $12.18 to $12.55 $12.53 to $12.91
The accompanying notes are an integral part of these financial statements. F-12
FI FIDELITY FIDELITY FIDELITY FIDELITY FIDELITY LARGE CAP MONEY MARKET EQUITY-INCOME GROWTH OVERSEAS INVESTMENT GRADE BOND INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ------------------- ------------------- ------------------- ------------------- ------------------- --------------------- $ -- $ -- $ -- $ -- $ -- $ -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- 2,830,188 -- -- -- -- -- -- 11,180,161 -- -- -- -- -- -- 132,207,499 -- -- -- -- -- -- 127,870,436 -- -- -- -- 39,721,653 -- -- -- -- -- -- 19,442,734 -- -- -- -- -- -- -- -- -- -- -- -- ---------------- ----------- ------------ ------------ ----------- ----------- 2,830,188 11,180,161 132,207,499 127,870,436 39,721,653 19,442,734 -- -- -- -- -- -- ---------------- ----------- ------------ ------------ ----------- ----------- 2,830,188 11,180,161 132,207,499 127,870,436 39,721,653 19,442,734 (31) -- -- -- -- -- ---------------- ----------- ------------ ------------ ----------- ----------- 2,830,157 11,180,161 132,207,499 127,870,436 39,721,653 19,442,734 ================ =========== ============ ============ =========== =========== 161,937 692,783 2,516,843 3,115,761 1,300,083 809,998 $15.92 to $18.31 $ 16.14 $ 52.53 $ 41.04 $ 30.55 $ 24.00
CALVERT SOCIAL BALANCED INVESTMENT DIVISION ------------------- $ -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- 63,065,741 -- ---------------- 63,065,741 -- ---------------- 63,065,741 (178) ---------------- 63,065,563 ================ 2,131,161 $23.31 to $30.39
F-13 METROPOLITAN LIFE SEPARATE ACCOUNT E OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENT OF ASSETS AND LIABILITIES -- (CONTINUED) DECEMBER 31, 2006
CALVERT SOCIAL MID CAP GROWTH INVESTMENT DIVISION ------------------- ASSETS: INVESTMENTS AT FAIR VALUE: METROPOLITAN FUND -- (CONTINUED) Harris Oakmark Focused Value Portfolio 1,567,645 shares; cost $349,308,073............................. $ -- Western Asst Mgmt Strategic Bond Opportunities Portfolio 22,463,324 shares; cost $280,820,622............................ -- Western Asst Mgmt U.S. Government Portfolio 16,492,742 shares; cost $201,075,768............................ -- FI Values Leaders Portfolio 481,730 shares; cost $90,752,858................................ -- MFS Total Return Portfolio 757,059 shares; cost $106,826,144............................... -- BlackRock Legacy Large Cap Growth Portfolio 995,055 shares; cost $20,794,360................................ -- MetLife Conservative Allocation Portfolio 3,960,392 shares; cost $40,552,380.............................. -- MetLife Conservative to Moderate Allocation Portfolio 19,256,654 shares; cost $203,967,153............................ -- MetLife Moderate Allocation Portfolio 42,160,217 shares; cost $459,205,698............................ -- MetLife Moderate to Aggressive Allocation Portfolio 33,608,157 shares; cost $377,978,554............................ -- MetLife Aggressive Allocation Portfolio 3,524,840 shares; cost $40,259,651.............................. -- FI Large Cap Portfolio 188,158 shares; cost $2,643,657................................. -- FIDELITY VARIABLE INSURANCE PRODUCTS FUNDS ("FIDELITY VIP FUNDS") Fidelity VIP Money Market Portfolio 11,180,161 shares; cost $11,180,161............................. -- Fidelity VIP Equity-Income Portfolio 5,046,088 shares; cost $116,851,890............................. -- Fidelity VIP Growth Portfolio 3,564,830 shares; cost $143,207,753............................. Fidelity VIP Overseas Portfolio 1,657,140 shares; cost $25,648,151.............................. -- Fidelity VIP Investment Grade Bond Portfolio 1,523,725 shares; cost $19,829,338.............................. -- CALVERT VARIABLE SERIES, INC. ("CALVERT FUND") Calvert Social Balanced Portfolio 31,066,867 shares; cost $60,267,753............................. -- Calvert Social Mid Cap Growth Portfolio 422,761 shares; cost $9,948,855................................. 11,959,917 ----------- Total investments................................................ 11,959,917 Due from Metropolitan Life Insurance Company..................... -- ----------- Total assets..................................................... 11,959,917 LIABILITIES Due to Metropolitan Life Insurance Company....................... -- ----------- NET ASSETS....................................................... 11,959,917 =========== Outstanding Units................................................ 419,490 Unit Fair Values................................................. $ 28.51
The accompanying notes are an integral part of these financial statements. F-14 [THIS PAGE INTENTIONALLY LEFT BLANK] METROPOLITAN LIFE SEPARATE ACCOUNT E OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENT OF ASSETS AND LIABILITIES -- (CONTINUED) DECEMBER 31, 2006
LORD ABBETT MFS RESEARCH BOND DEBENTURE INTERNATIONAL INVESTMENT DIVISION INVESTMENT DIVISION ------------------- ------------------- ASSETS: INVESTMENTS AT FAIR VALUE: MET INVESTORS SERIES TRUST ("MET INVESTORS FUND") Lord Abbett Bond Debenture Portfolio 16,916,616 shares; cost $202,775,306............... $ 210,830,212 $ -- MFS Research International Portfolio 9,820,318 shares; cost $129,700,131................ -- 147,231,396 T. Rowe Price Mid Cap Growth Portfolio 13,687,544 shares; cost $106,211,612............... -- -- PIMCO Total Return Portfolio 37,293,027 shares; cost $429,147,320............... -- -- RCM Global Technology Portfolio 9,563,158 shares; cost $45,518,800................. -- -- Lazard Mid Cap Portfolio 4,018,222 shares; cost $53,322,682................. -- -- Met/AIM Small Cap Growth Portfolio 1,930,410 shares; cost $24,926,573................. -- -- Harris Oakmark International Portfolio 18,093,305 shares; cost $291,793,124............... -- -- Oppenheimer Capital Appreciation Portfolio 1,387,117 shares; cost $12,078,851................. -- -- Legg Mason Aggressive Growth Portfolio 3,986,486 shares; cost $31,374,353................. -- -- Third Avenue Small Cap Value Portfolio 278,138 shares; cost $4,509,157.................... -- -- Neuberger Berman Real Estate Portfolio 21,158,123 shares; cost $303,402,290............... -- -- Legg Mason Value Equity Portfolio 3,104,923 shares; cost $32,684,789................. Cyclical Growth ETF Portfolio 324,202 shares; cost $3,513,209.................... -- -- Cyclical Growth and Income ETF Portfolio 268,070 shares; cost $2,849,967.................... -- -- PIMCO Inflation Protected Bond Portfolio 1,356,218 shares; cost $13,692,508................. -- -- AMERICAN FUNDS INSURANCE SERIES ("AMERICAN FUNDS") American Funds Growth Portfolio 17,649,409 shares; cost $869,015,103............... -- -- American Funds Growth and Income Portfolio 19,570,983 shares; cost $665,185,498............... -- -- American Funds Global Small Capitalization Portfolio 20,343,116 shares; cost $388,582,707............... -- -- American Funds Bond Portfolio 4,876,089 shares; cost $55,091,206................. -- -- ---------------- ---------------- Total investments................................... 210,830,212 147,231,396 Due from Metropolitan Life Insurance Company........ -- -- ---------------- ---------------- Total assets........................................ 210,830,212 147,231,396 LIABILITIES Due to Metropolitan Life Insurance Company.......... (255) (333) ---------------- ---------------- NET ASSETS.......................................... 210,829,957 $ 147,231,063 ================ ================ Outstanding......................................... 13,210,287 8,960,338 Unit Fair Values.................................... $11.69 to $20.16 $15.21 to $17.32
The accompanying notes are an integral part of these financial statements. F-16
T. ROWE PRICE PIMCO RCM GLOBAL LAZARD MET/AIM HARRIS OAKMARK MID CAP GROWTH TOTAL RETURN TECHNOLOGY MID-CAP SMALL CAP GROWTH INTERNATIONAL INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ------------------- ------------------- ------------------- ------------------- ------------------- ------------------- $ -- $ -- $ -- $ -- $ -- $ -- -- -- -- -- -- -- 118,849,966 -- -- -- -- -- -- 438,011,525 -- -- -- -- -- -- 51,235,939 -- -- -- -- -- -- 54,993,164 -- -- -- -- -- -- 25,970,826 -- -- -- -- -- -- 341,782,189 -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- --------------- ---------------- -------------- ---------------- ---------------- ---------------- 118,849,966 438,011,525 51,235,939 54,993,164 25,970,826 341,782,189 -- -- -- -- -- -- --------------- ---------------- -------------- ---------------- ---------------- ---------------- 118,849,966 438,011,525 51,235,939 54,993,164 25,970,826 341,782,189 (172) (438) (151) (298) (90) (256) --------------- ---------------- -------------- ---------------- ---------------- ---------------- $ 118,849,794 $ 438,011,087 $ 51,235,788 $ 54,992,866 $ 25,970,736 $ 341,781,933 =============== ================ ============== ================ ================ ================ 13,821,848 34,594,371 9,455,156 3,342,852 1,763,663 16,996,340 $7.99 to $13.82 $10.91 to $13.25 $4.68 to $6.24 $13.18 to $16.84 $13.18 to $15.26 $16.51 to $20.96
OPPENHEIMER CAPITAL APPRECIATION INVESTMENT DIVISION -------------------- $ -- -- -- -- -- -- -- -- 12,773,920 -- -- -- -- -- -- -- -- -- -- --------------- 12,773,920 -- --------------- 12,773,920 (149) --------------- $ 12,773,771 =============== 1,339,707 $8.74 to $11.66
F-17 METROPOLITAN LIFE SEPARATE ACCOUNT E OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENT OF ASSETS AND LIABILITIES -- (CONTINUED) DECEMBER 31, 2006
LEGG MASON THIRD AVENUE AGGRESSIVE GROWTH SMALL CAP VALUE INVESTMENT DIVISION INVESTMENT DIVISION ------------------- ------------------- ASSETS: INVESTMENTS AT FAIR VALUE: MET INVESTORS SERIES TRUST ("MET INVESTORS FUND") Lord Abbett Bond Debenture Portfolio 16,916,616 shares; cost $202,775,306............... $ -- $ -- MFS Research International Portfolio 9,820,318 shares; cost $129,700,131................ -- -- T. Rowe Price Mid Cap Growth Portfolio 13,687,544 shares; cost $106,211,612............... -- -- PIMCO Total Return Portfolio 37,293,027 shares; cost $429,147,320............... -- -- RCM Global Technology Portfolio 9,563,158 shares; cost $45,518,800................. -- -- Lazard Mid Cap Portfolio 4,018,222 shares; cost $53,322,682................. -- -- Met/AIM Small Cap Growth Portfolio 1,930,410 shares; cost $24,926,573................. -- -- Harris Oakmark International Portfolio 18,093,305 shares; cost $291,793,124............... -- -- Oppenheimer Capital Appreciation Portfolio 1,387,117 shares; cost $12,078,851................. -- -- Legg Mason Aggressive Growth Portfolio 3,986,486 shares; cost $31,374,353................. 32,049,679 -- Third Avenue Small Cap Value Portfolio 278,138 shares; cost $4,509,157.................... -- 4,845,170 Neuberger Berman Real Estate Portfolio 21,158,123 shares; cost $303,402,290............... -- -- Legg Mason Value Equity Portfolio 3,104,923 shares; cost $32,684,789................. Cyclical Growth ETF Portfolio 324,202 shares; cost $3,513,209.................... -- -- Cyclical Growth and Income ETF Portfolio 268,070 shares; cost $2,849,967.................... -- -- PIMCO Inflation Protected Bond Portfolio 1,356,218 shares; cost $13,692,508................. -- -- AMERICAN FUNDS INSURANCE SERIES ("AMERICAN FUNDS") American Funds Growth Portfolio 17,649,409 shares; cost $869,015,103............... -- -- American Funds Growth and Income Portfolio 19,570,983 shares; cost $665,185,498............... -- -- American Funds Global Small Capitalization Portfolio 20,343,116 shares; cost $388,582,707............... -- -- American Funds Bond Portfolio 4,876,089 shares; cost $55,091,206................. -- -- --------------- ---------------- Total investments................................... 32,049,679 4,845,170 Due from Metropolitan Life Insurance Company........ -- -- --------------- ---------------- Total assets........................................ 32,049,679 4,845,170 LIABILITIES Due to Metropolitan Life Insurance Company.......... -- (122) --------------- ---------------- NET ASSETS.......................................... $ 32,049,679 $ 4,845,048 =============== ================ Outstanding......................................... 4,041,330 263,473 Unit Fair Values.................................... $7.39 to $12.09 $18.07 to $18.97
The accompanying notes are an integral part of these financial statements. F-18
NEUBERGER BERMAN LEGG MASON CYCLICAL CYCLICAL PIMCO AMERICAN FUNDS REAL ESTATE VALUE EQUITY GROWTH ETF GROWTH AND INCOME ETF INFLATION PROTECTED BOND GROWTH INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ------------------- ------------------- ------------------- --------------------- ------------------------ ------------------- $ -- $ -- $ -- $ -- $ -- $ -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- 382,244,057 -- -- -- -- -- 34,609,899 -- -- 3,692,662 -- -- -- -- -- -- 2,982,696 -- -- -- -- -- -- 13,684,386 -- -- -- -- -- -- 1,130,974,124 -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- --------------- --------------- ---------------- ---------------- ---------------- ----------------- 382,244,057 34,609,899 3,692,662 2,982,696 13,684,386 1,130,974,124 -- -- -- -- -- -- --------------- --------------- ---------------- ---------------- ---------------- ----------------- 382,244,057 34,609,899 3,692,662 2,982,696 13,684,386 1,130,974,124 (587) -- (61) (46) (250) (982) --------------- --------------- ---------------- ---------------- ---------------- ----------------- $ 382,243,470 $ 34,609,899 $ 3,692,601 $ 2,982,650 $ 13,684,136 $ 1,130,973,142 =============== =============== ================ ================ ================ ================= 19,640,662 3,401,505 322,952 266,996 1,228,621 7,208,741 $3.27 to $19.92 $9.36 to $10.58 $11.30 to $11.50 $11.05 to $11.23 $10.74 to $11.51 $13.81 to $185.02
AMERICAN FUNDS GROWTH AND INCOME INVESTMENT DIVISION ------------------- $ -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- 825,699,757 -- -- ----------------- 825,699,757 -- ----------------- 825,699,757 (768) ----------------- $ 825,698,989 ================= 7,224,552 $12.99 to $134.49
F-19 METROPOLITAN LIFE SEPARATE ACCOUNT E OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENT OF ASSETS AND LIABILITIES -- (CONCLUDED) DECEMBER 31, 2006
AMERICAN FUNDS AMERICAN FUNDS GLOBAL SMALL CAPITALIZATION BOND INVESTMENT DIVISION INVESTMENT DIVISION --------------------------- ------------------- ASSETS: INVESTMENTS AT FAIR VALUE: MET INVESTORS SERIES TRUST ("MET INVESTORS FUND") Lord Abbett Bond Debenture Portfolio 16,916,616 shares; cost $202,775,306............... $ -- $ -- MFS Research International Portfolio 9,820,318 shares; cost $129,700,131................ -- -- T. Rowe Price Mid Cap Growth Portfolio 13,687,544 shares; cost $106,211,612............... -- -- PIMCO Total Return Portfolio 37,293,027 shares; cost $429,147,320............... -- -- RCM Global Technology Portfolio 9,563,158 shares; cost $45,518,800................. -- -- Lazard Mid Cap Portfolio 4,018,222 shares; cost $53,322,682................. -- -- Met/AIM Small Cap Growth Portfolio 1,930,410 shares; cost $24,926,573................. -- -- Harris Oakmark International Portfolio 18,093,305 shares; cost $291,793,124............... -- -- Oppenheimer Capital Appreciation Portfolio 1,387,117 shares; cost $12,078,851................. -- -- Legg Mason Aggressive Growth Portfolio 3,986,486 shares; cost $31,374,353................. -- -- Third Avenue Small Cap Value Portfolio 278,138 shares; cost $4,509,157.................... -- -- Neuberger Berman Real Estate Portfolio 21,158,123 shares; cost $303,402,290............... -- -- Legg Mason Value Equity Portfolio 3,104,923 shares; cost $32,684,789................. Cyclical Growth ETF Portfolio 324,202 shares; cost $3,513,209.................... -- -- Cyclical Growth and Income ETF Portfolio 268,070 shares; cost $2,849,967.................... -- -- PIMCO Inflation Protected Bond Portfolio 1,356,218 shares; cost $13,692,508................. -- -- AMERICAN FUNDS INSURANCE SERIES ("AMERICAN FUNDS") American Funds Growth Portfolio 17,649,409 shares; cost $869,015,103............... -- -- American Funds Growth and Income Portfolio 19,570,983 shares; cost $665,185,498............... -- -- American Funds Global Small Capitalization Portfolio 20,343,116 shares; cost $388,582,707............... 501,254,385 -- American Funds Bond Portfolio 4,876,089 shares; cost $55,091,206................. -- 56,221,306 ---------------- ---------------- Total investments................................... 501,254,385 56,221,306 Due from Metropolitan Life Insurance Company........ -- -- ---------------- ---------------- Total assets........................................ 501,254,385 56,221,306 LIABILITIES Due to Metropolitan Life Insurance Company.......... (221) (429) ---------------- ---------------- NET ASSETS.......................................... $ 501,254,164 $ 56,220,877 ================ ================ Outstanding......................................... 17,064,435 3,656,960 Unit Fair Values.................................... $17.31 to $31.23 $13.92 to $16.74
The accompanying notes are an integral part of these financial statements. F-20 [THIS PAGE INTENTIONALLY LEFT BLANK] METROPOLITAN LIFE SEPARATE ACCOUNT E OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2006
BLACKROCK LARGE CAP VARIABLE B VARIABLE C INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ------------------- ------------------- ------------------- 2006 2006 2006 ------------------- ------------------- ------------------- INVESTMENT INCOME (LOSS): Income: Dividends........................................................ $ 16,113,903 $ 450,656 $ 33,918 Expenses: Mortality and expense risk charges............................... 15,155,954 324,300 12,656 ------------ ----------- -------- Net investment income (loss)....................................... 957,949 126,356 21,262 ------------ ----------- -------- NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Realized gains (losses) from security transactions................. (46,296,059) (1,299,720) (91,377) Realized gain distributions........................................ -- -- -- ------------ ----------- -------- Net realized gains (losses) on investments......................... (46,296,059) (1,299,720) (91,377) Change in net unrealized appreciation (depreciation) of investments 189,712,187 5,225,213 384,603 ------------ ----------- -------- Net realized and unrealized gains (losses) on investments.......... 143,416,128 3,925,493 293,226 ------------ ----------- -------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS........................................................ $144,374,077 $ 4,051,849 $314,488 ============ =========== ========
(a) For the period January 1, 2006 to April 30, 2006 (b) For the period May 1, 2006 to December 31, 2006 The accompanying notes are an integral part of these financial statements. F-22
BLACKROCK BLACKROCK METLIFE FI FI T. ROWE PRICE DIVERSIFIED AGGRESSIVE GROWTH STOCK INDEX INTERNATIONAL STOCK MID CAP OPPORTUNITIES SMALL CAP GROWTH INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ------------------- ------------------- ------------------- ------------------- --------------------- ------------------- 2006 2006 2006 2006 2006 2006 ------------------- ------------------- ------------------- ------------------- --------------------- ------------------- $ 32,173,776 $ -- $ 64,013,807 $ 3,885,697 $ 33,906 $ -- 16,453,909 8,381,066 40,920,272 3,444,264 8,139,243 3,109,098 ------------ ------------ ------------ ----------- ------------ ----------- 15,719,867 (8,381,066) 23,093,535 441,433 (8,105,337) (3,109,098) ------------ ------------ ------------ ----------- ------------ ----------- (19,936,803) (47,448,722) 36,278,597 14,122,229 (42,902,657) 13,540,948 -- -- 112,377,173 -- -- -- ------------ ------------ ------------ ----------- ------------ ----------- (19,936,803) (47,448,722) 148,655,770 14,122,229 (42,902,657) 13,540,948 116,715,614 91,882,111 259,030,308 22,842,792 115,576,551 (4,631,796) ------------ ------------ ------------ ----------- ------------ ----------- 96,778,811 44,433,389 407,686,078 36,965,021 72,673,894 8,909,152 ------------ ------------ ------------ ----------- ------------ ----------- $112,498,678 $ 36,052,323 $430,779,613 $37,406,454 $ 64,568,557 $ 5,800,054 ============ ============ ============ =========== ============ ===========
F-23 METROPOLITAN LIFE SEPARATE ACCOUNT E OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENT OF OPERATIONS -- (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2006
OPPENHEIMER HARRIS OAKMARK NEUBERGER BERMAN GLOBAL EQUITY LARGE CAP VALUE MID CAP VALUE INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ------------------- ------------------- ------------------- 2006 2006 2006 ------------------- ------------------- ------------------- INVESTMENT INCOME (LOSS): Income: Dividends........................................................ $ 5,810,395 $ 2,807,148 $ 2,273,663 Expenses: Mortality and expense risk charges............................... 2,848,127 5,197,835 7,134,235 ----------- ----------- ------------ Net investment income (loss)....................................... 2,962,268 (2,390,687) (4,860,572) ----------- ----------- ------------ NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Realized gains (losses) from security transactions................. 4,574,580 15,683,928 24,292,179 Realized gain distributions........................................ 4,563,484 -- 49,907,547 ----------- ----------- ------------ Net realized gains (losses) on investments......................... 9,138,064 15,683,928 74,199,726 Change in net unrealized appreciation (depreciation) of investments 20,077,478 48,930,039 (18,020,276) ----------- ----------- ------------ Net realized and unrealized gains (losses) on investments.......... 29,215,542 64,613,967 56,179,450 ----------- ----------- ------------ NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS........................................................ $32,177,810 $62,223,280 $ 51,318,878 =========== =========== ============
(a) For the period January 1, 2006 to April 30, 2006 (b) For the period May 1, 2006 to December 31, 2006 The accompanying notes are an integral part of these financial statements. F-24
T. ROWE PRICE LEHMAN BROTHERS MORGAN STANLEY RUSSELL JENNISON BLACKROCK LARGE CAP GROWTH AGGREGATE BOND INDEX EAFE INDEX 2000 INDEX GROWTH STRATEGIC VALUE INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ------------------- -------------------- ------------------- ------------------- ------------------- ------------------- 2006 2006 2006 2006 2006 2006 ------------------- -------------------- ------------------- ------------------- ------------------- ------------------- $ 540,533 $33,491,038 $ 5,885,879 $ 2,169,487 $ -- $ 1,339,030 2,561,420 10,496,661 4,702,120 3,665,861 485,715 7,121,890 ----------- ----------- ----------- ----------- ---------- ------------ (2,020,887) 22,994,377 1,183,759 (1,496,374) (485,715) (5,782,860) ----------- ----------- ----------- ----------- ---------- ------------ 2,474,859 (311,746) 17,322,950 10,582,205 1,446,992 19,634,629 -- -- -- 10,957,590 34,588 103,276,223 ----------- ----------- ----------- ----------- ---------- ------------ 2,474,859 (311,746) 17,322,950 21,539,795 1,481,580 122,910,852 22,117,285 (2,085,917) 60,074,408 23,274,100 (514,633) (39,026,250) ----------- ----------- ----------- ----------- ---------- ------------ 24,592,144 (2,397,663) 77,397,358 44,813,895 966,947 83,884,602 ----------- ----------- ----------- ----------- ---------- ------------ $22,571,257 $20,596,714 $78,581,117 $43,317,521 $ 481,232 $ 78,101,742 =========== =========== =========== =========== ========== ============
F-25 METROPOLITAN LIFE SEPARATE ACCOUNT E OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENT OF OPERATIONS -- (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2006
METLIFE MID CAP FRANKLIN TEMPLETON BLACKROCK STOCK INDEX SMALL CAP GROWTH LARGE CAP VALUE INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ------------------- ------------------- ------------------- 2006 2006 2006 ------------------- ------------------- ------------------- INVESTMENT INCOME (LOSS): Income: Dividends........................................................ $ 3,399,322 $ -- $ 899,571 Expenses: Mortality and expense risk charges............................... 4,025,452 628,279 1,385,986 ----------- ---------- ----------- Net investment income (loss)....................................... (626,130) (628,279) (486,415) ----------- ---------- ----------- NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Realized gains (losses) from security transactions................. 9,300,992 2,217,097 1,544,754 Realized gain distributions........................................ 21,307,420 2,406,439 5,108,753 ----------- ---------- ----------- Net realized gains (losses) on investments......................... 30,608,412 4,623,536 6,653,507 Change in net unrealized appreciation (depreciation) of investments (4,366,410) (457,219) 12,455,703 ----------- ---------- ----------- Net realized and unrealized gains (losses) on investments.......... 26,242,002 4,166,317 19,109,210 ----------- ---------- ----------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS........................................................ $25,615,872 $3,538,038 $18,622,795 =========== ========== ===========
(a) For the period January 1, 2006 to April 30, 2006 (b) For the period May 1, 2006 to December 31, 2006 The accompanying notes are an integral part of these financial statements. F-26
BLACKROCK BLACKROCK DAVIS LOOMIS SAYLES MFS HARRIS OAKMARK BOND INCOME MONEY MARKET VENTURE VALUE SMALL CAP INVESTORS TRUST FOCUSED VALUE INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ------------------- ------------------- ------------------- ------------------- ------------------- ------------------- 2006 2006 2006 2006 2006(A) 2006 ------------------- ------------------- ------------------- ------------------- ------------------- ------------------- $28,136,577 $1,293,874 $ 2,808,300 $ -- $ 208,846 $ 915,876 6,343,020 428,798 5,302,096 1,041,754 112,033 5,270,290 ----------- ---------- ----------- ----------- ----------- ------------ 21,793,557 865,076 (2,493,796) (1,041,754) 96,813 (4,354,414) ----------- ---------- ----------- ----------- ----------- ------------ (297,903) -- 4,982,999 3,504,506 2,843,538 22,377,150 489,068 -- -- 6,698,551 2,004,687 39,138,843 ----------- ---------- ----------- ----------- ----------- ------------ 191,165 -- 4,982,999 10,203,057 4,848,225 61,515,993 (7,478,355) -- 50,274,049 226,128 (3,782,849) (15,217,073) ----------- ---------- ----------- ----------- ----------- ------------ (7,287,190) -- 55,257,048 10,429,185 1,065,376 46,298,920 ----------- ---------- ----------- ----------- ----------- ------------ $14,506,367 $ 865,076 $52,763,252 $ 9,387,431 $ 1,162,189 $ 41,944,506 =========== ========== =========== =========== =========== ============
F-27 METROPOLITAN LIFE SEPARATE ACCOUNT E OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENT OF OPERATIONS -- (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2006
WESTERN ASSET MANAGEMENT WESTERN ASSET MANAGEMENT STRATEGIC BOND OPPORTUNITIES U.S. GOVERNMENT INVESTMENT DIVISION INVESTMENT DIVISION ---------------------------- ------------------------ 2006 2006 ---------------------------- ------------------------ INVESTMENT INCOME (LOSS): Income: Dividends.............................................. $12,531,545 $5,802,412 Expenses: Mortality and expense risk charges..................... 3,485,483 2,486,385 ----------- ---------- Net investment income (loss)............................. 9,046,062 3,316,027 ----------- ---------- NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Realized gains (losses) from security transactions....... 751,554 (474,718) Realized gain distributions.............................. 2,073,763 -- ----------- ---------- Net realized gains (losses) on investments............... 2,825,317 (474,718) Change in net unrealized appreciation (depreciation) of investments............................................. (2,640,796) 2,133,509 ----------- ---------- Net realized and unrealized gains (losses) on investments 184,521 1,658,791 ----------- ---------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS......................................... $ 9,230,583 $4,974,818 =========== ==========
FI VALUE LEADERS INVESTMENT DIVISION ------------------- 2006 ------------------- INVESTMENT INCOME (LOSS): Income: Dividends.............................................. $ 661,658 Expenses: Mortality and expense risk charges..................... 1,095,840 ---------- Net investment income (loss)............................. (434,182) ---------- NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Realized gains (losses) from security transactions....... 2,524,663 Realized gain distributions.............................. 1,949,693 ---------- Net realized gains (losses) on investments............... 4,474,356 Change in net unrealized appreciation (depreciation) of investments............................................. 3,640,058 ---------- Net realized and unrealized gains (losses) on investments 8,114,414 ---------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS......................................... $7,680,232 ==========
(a) For the period January 1, 2006 to April 30, 2006 (b) For the period May 1, 2006 to December 31, 2006 The accompanying notes are an integral part of these financial statements. F-28
MFS BLACKROCK METLIFE METLIFE CONSERVATIVE METLIFE TOTAL RETURN LEGACY LARGE CAP GROWTH CONSERVATIVE ALLOCATION TO MODERATE ALLOCATION MODERATE ALLOCATION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ------------------- ----------------------- ----------------------- ---------------------- ------------------- 2006 2006 2006 2006 2006 ------------------- ----------------------- ----------------------- ---------------------- ------------------- $ 3,478,184 $ 5 $ 720,680 $ 2,608,603 $ 3,528,456 1,185,242 244,896 353,295 1,602,956 3,283,043 ----------- --------- ---------- ----------- ----------- 2,292,942 (244,891) 367,385 1,005,647 245,413 ----------- --------- ---------- ----------- ----------- 905,042 556,239 (70,905) 111,436 320,394 2,259,849 -- 280,666 1,821,229 5,053,918 ----------- --------- ---------- ----------- ----------- 3,164,891 556,239 209,761 1,932,665 5,374,312 5,611,141 218,184 1,128,045 7,743,098 23,338,620 ----------- --------- ---------- ----------- ----------- 8,776,032 774,423 1,337,806 9,675,763 28,712,932 ----------- --------- ---------- ----------- ----------- $11,068,974 $ 529,532 $1,705,191 $10,681,410 $28,958,345 =========== ========= ========== =========== ===========
METLIFE MODERATE TO AGGRESSIVE ALLOCATION INVESTMENT DIVISION ------------------------ 2006 ------------------------ $ 1,801,861 2,469,266 ----------- (667,405) ----------- 208,474 4,744,322 ----------- 4,952,796 21,988,468 ----------- 26,941,264 ----------- $26,273,859 ===========
F-29 METROPOLITAN LIFE SEPARATE ACCOUNT E OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENT OF OPERATIONS -- (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2006
METLIFE FI FIDELITY AGGRESSIVE ALLOCATION LARGE CAP MONEY MARKET INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION --------------------- ------------------- ------------------- 2006 2006 (B) 2006 --------------------- ------------------- ------------------- INVESTMENT INCOME (LOSS): Income: Dividends........................................................ $ 212,694 $ -- $540,532 Expenses: Mortality and expense risk charges............................... 334,225 12,907 104,213 ---------- -------- -------- Net investment income (loss)....................................... (121,531) (12,907) 436,319 ---------- -------- -------- NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Realized gains (losses) from security transactions................. 209,911 2,511 -- Realized gain distributions........................................ 922,274 -- -- ---------- -------- -------- Net realized gains (losses) on investments......................... 1,132,185 2,511 -- Change in net unrealized appreciation (depreciation) of investments 2,759,207 186,531 -- ---------- -------- -------- Net realized and unrealized gains (losses) on investments.......... 3,891,392 189,042 -- ---------- -------- -------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS........................................................ $3,769,861 $176,135 $436,319 ========== ======== ========
(a) For the period January 1, 2006 to April 30, 2006 (b) For the period May 1, 2006 to December 31, 2006 The accompanying notes are an integral part of these financial statements. F-30
FIDELITY FIDELITY FIDELITY FIDELITY CALVERT SOCIAL CALVERT SOCIAL EQUITY-INCOME GROWTH OVERSEAS INVESTMENT GRADE BOND BALANCED MID CAP GROWTH INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ------------------- ------------------- ------------------- --------------------- ------------------- ------------------- 2006 2006 2006 2006 2006 2006 ------------------- ------------------- ------------------- --------------------- ------------------- ------------------- $ 4,189,089 $ 540,910 $ 315,576 $ 798,106 $1,412,565 $ -- 1,161,737 1,235,772 344,539 183,238 703,241 114,143 ----------- ----------- ---------- --------- ---------- ---------- 3,027,352 (694,862) (28,963) 614,868 709,324 (114,143) ----------- ----------- ---------- --------- ---------- ---------- 891,780 (4,239,529) 2,025,319 (182,102) 113,705 (273,525) 15,144,271 -- 219,385 47,791 1,083,954 -- ----------- ----------- ---------- --------- ---------- ---------- 16,036,051 (4,239,529) 2,244,704 (134,311) 1,197,659 (273,525) 2,787,431 12,604,530 3,579,948 144,400 2,520,036 1,125,302 ----------- ----------- ---------- --------- ---------- ---------- 18,823,482 8,365,001 5,824,652 10,089 3,717,695 851,777 ----------- ----------- ---------- --------- ---------- ---------- $21,850,834 $ 7,670,139 $5,795,689 $ 624,957 $4,427,019 $ 737,634 =========== =========== ========== ========= ========== ==========
F-31 METROPOLITAN LIFE SEPARATE ACCOUNT E OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENT OF OPERATIONS -- (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2006
LORD ABBETT MFS RESEARCH T. ROWE PRICE BOND DEBENTURE INTERNATIONAL MID-CAP GROWTH INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ------------------- ------------------- ------------------- 2006 2006 2006 ------------------- ------------------- ------------------- INVESTMENT INCOME (LOSS): Income: Dividends........................................................ $11,732,422 $ 1,495,372 $ -- Expenses: Mortality and expense risk charges............................... 2,373,179 1,276,333 1,485,639 ----------- ----------- ----------- Net investment income (loss)....................................... 9,359,243 219,039 (1,485,639) ----------- ----------- ----------- NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Realized gains (losses) from security transactions................. 1,596,391 4,058,635 7,024,004 Realized gain distributions........................................ -- 6,152,857 3,805,825 ----------- ----------- ----------- Net realized gains (losses) on investments......................... 1,596,391 10,211,492 10,829,829 Change in net unrealized appreciation (depreciation) of investments 3,032,569 10,374,621 (4,404,620) ----------- ----------- ----------- Net realized and unrealized gains (losses) on investments.......... 4,628,960 20,586,113 6,425,209 ----------- ----------- ----------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS........................................................ $13,988,203 $20,805,152 $ 4,939,570 =========== =========== ===========
(a) For the period January 1, 2006 to April 30, 2006 (b) For the period May 1, 2006 to December 31, 2006 The accompanying notes are an integral part of these financial statements. F-32
PIMCO RCM GLOBAL LAZARD MET/AIM HARRIS OAKMARK OPPENHEIMER TOTAL RETURN TECHNOLOGY MID-CAP SMALL CAP GROWTH INTERNATIONAL CAPITAL APPRECIATION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ------------------- ------------------- ------------------- ------------------- ------------------- -------------------- 2006 2006 2006 2006 2006 2006 ------------------- ------------------- ------------------- ------------------- ------------------- -------------------- $11,484,191 $ -- $ 159,290 $ -- $ 5,330,773 $ 9,954 5,574,393 676,756 582,584 302,685 3,093,070 113,530 ----------- ---------- ---------- ---------- ----------- --------- 5,909,798 (676,756) (423,294) (302,685) 2,237,703 (103,576) ----------- ---------- ---------- ---------- ----------- --------- 1,258,037 649,346 556,985 568,842 9,395,909 41,772 177,489 -- 5,119,575 3,027,712 14,305,522 53,902 ----------- ---------- ---------- ---------- ----------- --------- 1,435,526 649,346 5,676,560 3,596,554 23,701,431 95,674 6,453,586 1,808,074 362,830 (698,241) 31,114,541 594,079 ----------- ---------- ---------- ---------- ----------- --------- 7,889,112 2,457,420 6,039,390 2,898,313 54,815,972 689,753 ----------- ---------- ---------- ---------- ----------- --------- $13,798,910 $1,780,664 $5,616,096 $2,595,628 $57,053,675 $ 586,177 =========== ========== ========== ========== =========== =========
F-33 METROPOLITAN LIFE SEPARATE ACCOUNT E OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENT OF OPERATIONS -- (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2006
LEGG MASON THIRD AVENUE NEUBERGER BERMAN AGGRESSIVE GROWTH SMALL CAP VALUE REAL ESTATE INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ------------------- ------------------- ------------------- 2006 2006 2006 ------------------- ------------------- ------------------- INVESTMENT INCOME (LOSS): Income: Dividends........................................................ $ -- $ 14,368 $ 2,465,505 Expenses: Mortality and expense risk charges............................... 419,475 41,630 3,506,203 ----------- -------- ----------- Net investment income (loss)....................................... (419,475) (27,262) (1,040,698) ----------- -------- ----------- NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Realized gains (losses) from security transactions................. 1,781,718 56,257 4,709,695 Realized gain distributions........................................ 1,901,076 217,356 12,980,584 ----------- -------- ----------- Net realized gains (losses) on investments......................... 3,682,794 273,613 17,690,279 Change in net unrealized appreciation (depreciation) of investments (4,438,090) 141,550 61,645,842 ----------- -------- ----------- Net realized and unrealized gains (losses) on investments.......... (755,296) 415,163 79,336,121 ----------- -------- ----------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS........................................................ $(1,174,771) $387,901 $78,295,423 =========== ======== ===========
(a) For the period January 1, 2006 to April 30, 2006 (b) For the period May 1, 2006 to December 31, 2006 The accompanying notes are an integral part of these financial statements. F-34
LEGG MASON CYCLICAL CYCLICAL PIMCO INFLATION AMERICAN FUNDS AMERICAN FUNDS VALUE EQUITY GROWTH ETF GROWTH AND INCOME ETF PROTECTED BOND GROWTH GROWTH-INCOME INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ------------------- ------------------- --------------------- ------------------- ------------------- ------------------- 2006 (B) 2006 (B) 2006 (B) 2006 (B) 2006 2006 ------------------- ------------------- --------------------- ------------------- ------------------- ------------------- $ 22,516 $ 34,010 $ 35,964 $ -- $ 8,510,844 $11,901,053 262,827 15,788 12,761 69,864 14,431,572 10,351,145 ---------- -------- -------- -------- ----------- ----------- (240,311) 18,222 23,203 (69,864) (5,920,728) 1,549,908 ---------- -------- -------- -------- ----------- ----------- (8,517) 19,274 11,632 25,327 10,384,274 7,278,287 642,631 8,011 -- -- 6,235,007 17,021,991 ---------- -------- -------- -------- ----------- ----------- 634,114 27,285 11,632 25,327 16,619,281 24,300,278 1,925,110 179,453 132,729 (8,122) 73,139,372 67,505,598 ---------- -------- -------- -------- ----------- ----------- 2,559,224 206,738 144,361 17,205 89,758,653 91,805,876 ---------- -------- -------- -------- ----------- ----------- $2,318,913 $224,960 $167,564 $(52,659) $83,837,925 $93,355,784 ========== ======== ======== ======== =========== ===========
F-35 METROPOLITAN LIFE SEPARATE ACCOUNT E OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENT OF OPERATIONS -- (CONCLUDED) FOR THE YEAR ENDED DECEMBER 31, 2006
AMERICAN FUNDS AMERICAN FUNDS GLOBAL SMALL CAPITALIZATION BOND INVESTMENT DIVISION INVESTMENT DIVISION --------------------------- ------------------- 2006 2006 (B) --------------------------- ------------------- INVESTMENT INCOME (LOSS): Income: Dividends........................................................ $ 1,960,859 $ 156,661 Expenses: Mortality and expense risk charges............................... 6,051,299 203,672 ----------- ---------- Net investment income (loss)....................................... (4,090,440) (47,011) ----------- ---------- NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Realized gains (losses) from security transactions................. 22,678,634 7,666 Realized gain distributions........................................ 21,914,416 -- ----------- ---------- Net realized gains (losses) on investments......................... 44,593,050 7,666 Change in net unrealized appreciation (depreciation) of investments 38,349,644 1,130,100 ----------- ---------- Net realized and unrealized gains (losses) on investments.......... 82,942,694 1,137,766 ----------- ---------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS.... $78,852,254 $1,090,755 =========== ==========
(a) For the period January 1, 2006 to April 30, 2006 (b) For the period May 1, 2006 to December 31, 2006 The accompanying notes are an integral part of these financial statements. F-36 [THIS PAGE INTENTIONALLY LEFT BLANK] METROPOLITAN LIFE SEPARATE ACCOUNT E OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF CHANGES IN NET ASSETS FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005
BLACKROCK LARGE CAP VARIABLE B INVESTMENT DIVISION INVESTMENT DIVISION ------------------------------ ------------------------ 2006 2005 2006 2005 -------------- -------------- ----------- ----------- INCREASE (DECREASE) IN NET ASSETS: From operations: Net investment income (loss)......................................... $ 957,949 $ (1,611,573) $ 126,356 $ 56,021 Total realized gains (losses) from investments....................... (46,296,059) (39,298,584) (1,299,720) (987,083) Change in net unrealized appreciation (deprecation) of investments... 189,712,187 68,346,971 5,225,213 1,788,703 -------------- -------------- ----------- ----------- Net increase (decrease) in net assets resulting from operations...... 144,374,077 27,436,814 4,051,849 857,641 -------------- -------------- ----------- ----------- From capital transactions: Payments received from contract owners............................... 34,349,830 40,930,417 35,830 76,535 Transfers between investment divisions (including fixed account), net (96,990,484) (85,256,124) 6 37,401 Transfers from contract benefits and terminations.................... (135,704,502) (138,963,905) (6,443,188) (4,797,630) Contract maintenance charges......................................... -- -- -- -------------- -------------- ----------- ----------- Net increase (decrease) in net assets resulting from capital transactions....................................................... (198,345,156) (183,289,612) (6,407,352) (4,683,694) -------------- -------------- ----------- ----------- NET CHANGE IN NET ASSETS.............................................. (53,971,079) (155,852,798) (2,355,503) (3,826,053) NET ASSETS - BEGINNING OF PERIOD...................................... 1,267,668,619 1,423,521,417 34,430,948 38,257,001 -------------- -------------- ----------- ----------- NET ASSETS - END OF PERIOD............................................ $1,213,697,540 $1,267,668,619 $32,075,445 $34,430,948 ============== ============== =========== ===========
(a) For the period January 1, 2006 to April 30, 2006 (b) For the period May 1, 2006 to December 31, 2006 (c) For the period May 1, 2005 to December 31, 2005 The accompanying notes are an integral part of these financial statements. F-38
BLACKROCK BLACKROCK METLIFE VARIABLE C DIVERSIFIED AGGRESSIVE GROWTH STOCK INDEX INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ---------------------- ------------------------------ -------------------------- ------------------------------ 2006 2005 2006 2005 2006 2005 2006 2005 ---------- ---------- -------------- -------------- ------------ ------------ -------------- -------------- $ 21,262 $ 16,585 $ 15,719,867 $ 4,951,024 $ (8,381,066) $ (8,613,160) $ 23,093,535 $ 10,656,148 (91,377) (79,462) (19,936,803) (7,976,947) (47,448,722) (68,050,584) 148,655,770 1,420,997 384,603 136,566 116,715,614 26,194,695 91,882,111 138,949,377 259,030,308 92,252,646 ---------- ---------- -------------- -------------- ------------ ------------ -------------- -------------- 314,488 73,689 112,498,678 23,168,772 36,052,323 62,285,633 430,779,613 104,329,791 ---------- ---------- -------------- -------------- ------------ ------------ -------------- -------------- 12,045 262,213 37,174,704 49,320,130 21,386,853 23,467,028 235,457,047 292,297,982 13 (25,686) (80,436,444) (62,879,398) (38,176,940) (38,816,106) (143,055,783) (43,923,599) (602,437) (350,917) (149,550,543) (154,733,837) (75,566,378) (68,809,878) (328,120,499) (291,371,136) -- -- -- -- ---------- ---------- -------------- -------------- ------------ ------------ -------------- -------------- (590,379) (114,390) (192,812,283) (168,293,105) (92,356,465) (84,158,956) (235,719,235) (42,996,753) ---------- ---------- -------------- -------------- ------------ ------------ -------------- -------------- (275,891) (40,701) (80,313,605) (145,124,333) (56,304,142) (21,873,323) 195,060,378 61,333,038 2,530,897 2,571,598 1,364,024,142 1,509,148,475 713,800,758 735,674,081 3,217,216,070 3,155,883,032 ---------- ---------- -------------- -------------- ------------ ------------ -------------- -------------- $2,255,006 $2,530,897 $1,283,710,537 $1,364,024,142 $657,496,616 $713,800,758 $3,412,276,448 $3,217,216,070 ========== ========== ============== ============== ============ ============ ============== ==============
F-39 METROPOLITAN LIFE SEPARATE ACCOUNT E OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005
FI FI INTERNATIONAL STOCK MID CAP OPPORTUNITIES INVESTMENT DIVISION INVESTMENT DIVISION -------------------------- -------------------------- 2006 2005 2006 2005 ------------ ------------ ------------ ------------ INCREASE (DECREASE) IN NET ASSETS: From operations: Net investment income (loss)......................................... $ 441,433 $ (1,336,288) $ (8,105,337) $ (8,151,770) Total realized gains (losses) from investments....................... 14,122,229 6,451,261 (42,902,657) (78,218,630) Change in net unrealized appreciation (deprecation) of investments... 22,842,792 29,273,691 115,576,551 121,074,896 ------------ ------------ ------------ ------------ Net increase (decrease) in net assets resulting from operations...... 37,406,454 34,388,664 64,568,557 34,704,496 ------------ ------------ ------------ ------------ From capital transactions: Payments received from contract owners............................... 22,659,871 16,900,649 36,657,483 (27,276,561) Transfers between investment divisions (including fixed account), net 12,694,940 10,398,241 (43,721,000) (50,987,306) Transfers from contract benefits and terminations.................... (24,467,901) (19,238,058) (67,487,893) (131,789) Contract maintenance charges......................................... -- -- -- ------------ ------------ ------------ ------------ Net increase (decrease) in net assets resulting from capital transactions....................................................... 10,886,910 8,060,832 (74,551,410) (78,395,656) ------------ ------------ ------------ ------------ NET CHANGE IN NET ASSETS.............................................. 48,293,364 42,449,497 (9,982,853) (43,691,160) NET ASSETS - BEGINNING OF PERIOD...................................... 246,270,129 203,820,632 672,025,922 715,717,082 ------------ ------------ ------------ ------------ NET ASSETS - END OF PERIOD............................................ $294,563,493 $246,270,129 $662,043,069 $672,025,922 ============ ============ ============ ============
(a) For the period January 1, 2006 to April 30, 2006 (b) For the period May 1, 2006 to December 31, 2006 (c) For the period May 1, 2005 to December 31, 2005 The accompanying notes are an integral part of these financial statements. F-40
T. ROWE PRICE OPPENHEIMER HARRIS OAKMARK NEUBERGER BERMAN SMALL CAP GROWTH GLOBAL EQUITY LARGE CAP VALUE MID CAP VALUE INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION -------------------------- -------------------------- -------------------------- -------------------------- 2006 2005 2006 2005 2006 2005 2006 2005 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ $ (3,109,098) $ (2,912,535) $ 2,962,268 $ (1,236,484) $ (2,390,687) $ (2,601,116) $ (4,860,572) $ (4,520,931) 13,540,948 9,560,832 9,138,064 1,818,749 15,683,928 7,641,683 74,199,726 46,549,790 (4,631,796) 15,268,897 20,077,478 25,605,072 48,930,039 (15,864,023) (18,020,276) 5,286,823 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ 5,800,054 21,917,194 32,177,810 26,187,337 62,223,280 (10,823,456) 51,318,878 47,315,682 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ 18,024,486 16,831,899 20,931,240 15,506,023 33,399,231 51,307,981 68,483,136 64,666,722 (8,428,762) (8,452,821) 7,801,220 12,101,542 (37,339,424) 3,175,576 (11,690,943) 80,908,710 (23,810,917) (23,415,426) (20,034,932) (15,974,206) (34,172,523) (30,623,388) (41,726,841) (33,624,410) -- -- -- -- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ (14,215,193) (15,036,348) 8,697,528 11,633,359 (38,112,716) 23,860,169 15,065,352 111,951,022 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ (8,415,139) 6,880,846 40,875,338 37,820,696 24,110,564 13,036,713 66,384,230 159,266,704 250,349,096 243,468,250 210,571,508 172,750,812 408,151,596 395,114,883 517,299,339 358,032,635 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ $241,933,957 $250,349,096 $251,446,846 $210,571,508 $432,262,160 $408,151,596 $583,683,569 $517,299,339 ============ ============ ============ ============ ============ ============ ============ ============
F-41 METROPOLITAN LIFE SEPARATE ACCOUNT E OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005
T. ROWE PRICE LEHMAN BROTHERS LARGE CAP GROWTH AGGREGATE BOND INDEX INVESTMENT DIVISION INVESTMENT DIVISION -------------------------- -------------------------- 2006 2005 2006 2005 ------------ ------------ ------------ ------------ INCREASE (DECREASE) IN NET ASSETS: From operations: Net investment income (loss)......................................... $ (2,020,887) $ (1,367,576) $ 22,994,377 $ 16,127,633 Total realized gains (losses) from investments....................... 2,474,859 (2,051,147) (311,746) 1,757,274 Change in net unrealized appreciation (deprecation) of investments... 22,117,285 13,286,058 (2,085,917) (13,468,805) ------------ ------------ ------------ ------------ Net increase (decrease) in net assets resulting from operations...... 22,571,257 9,867,335 20,596,714 4,416,102 ------------ ------------ ------------ ------------ From capital transactions: Payments received from contract owners............................... 18,831,497 22,099,396 128,375,546 124,276,621 Transfers between investment divisions (including fixed account), net 1,807,069 2,160,340 (1,225,278) 32,166,878 Transfers from contract benefits and terminations.................... (17,198,220) (14,111,423) (66,489,361) (136,656) Contract maintenance charges......................................... -- -- -- ------------ ------------ ------------ ------------ Net increase (decrease) in net assets resulting from capital transactions....................................................... 3,440,346 10,148,313 60,660,907 156,306,843 ------------ ------------ ------------ ------------ NET CHANGE IN NET ASSETS.............................................. 26,011,603 20,015,648 81,257,621 160,722,945 NET ASSETS - BEGINNING OF PERIOD...................................... 194,650,515 174,634,867 768,286,065 607,563,120 ------------ ------------ ------------ ------------ NET ASSETS - END OF PERIOD............................................ $220,662,118 $194,650,515 $849,543,686 $768,286,065 ============ ============ ============ ============
(a) For the period January 1, 2006 to April 30, 2006 (b) For the period May 1, 2006 to December 31, 2006 (c) For the period May 1, 2005 to December 31, 2005 The accompanying notes are an integral part of these financial statements. F-42
MORGAN STANLEY RUSSELL JENNISON BLACKROCK EAFE INDEX 2000 INDEX GROWTH STRATEGIC VALUE INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION -------------------------- -------------------------- ------------------------ -------------------------- 2006 2005 2006 2005 2006 2005 2006 2005 ------------ ------------ ------------ ------------ ----------- ----------- ------------ ------------ $ 1,183,759 $ 704,739 $ (1,496,374) $ (1,363,619) $ (485,715) $ (290,646) $ (5,782,860) $ (6,850,298) 17,322,950 10,030,049 21,539,795 18,374,209 1,481,580 966,967 122,910,852 56,396,267 60,074,408 22,293,331 23,274,100 (8,363,689) (514,633) 5,598,355 (39,026,250) (34,906,982) ------------ ------------ ------------ ------------ ----------- ----------- ------------ ------------ 78,581,117 33,028,119 43,317,521 8,646,901 481,232 6,274,676 78,101,742 14,638,987 ------------ ------------ ------------ ------------ ----------- ----------- ------------ ------------ 54,577,278 60,968,023 31,554,712 32,109,644 4,337,987 2,367,162 41,047,211 51,661,184 3,439,574 (368,645) 9,210,140 (1,045,682) 776,865 30,576,435 (30,405,883) (26,462,830) (26,836,889) (20,660,113) (24,080,336) (22,411,541) (3,507,419) (2,103,299) (46,307,185) (43,925,381) -- -- -- -- ------------ ------------ ------------ ------------ ----------- ----------- ------------ ------------ 31,179,963 39,939,265 16,684,516 8,652,421 1,607,433 30,840,298 (35,665,857) (18,727,027) ------------ ------------ ------------ ------------ ----------- ----------- ------------ ------------ 109,761,080 72,967,384 60,002,037 17,299,322 2,088,665 37,114,974 42,435,885 (4,088,040) 314,544,224 241,576,840 259,430,466 242,131,144 37,114,974 -- 538,301,526 542,389,566 ------------ ------------ ------------ ------------ ----------- ----------- ------------ ------------ $424,305,304 $314,544,224 $319,432,503 $259,430,466 $39,203,639 $37,114,974 $580,737,411 $538,301,526 ============ ============ ============ ============ =========== =========== ============ ============
F-43 METROPOLITAN LIFE SEPARATE ACCOUNT E OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005
METLIFE MID CAP FRANKLIN TEMPLETON STOCK INDEX SMALL CAP GROWTH INVESTMENT DIVISION INVESTMENT DIVISION -------------------------- ------------------------ 2006 2005 2006 2005 ------------ ------------ ----------- ----------- INCREASE (DECREASE) IN NET ASSETS: From operations: Net investment income (loss)......................................... $ (626,130) $ (1,665,021) $ (628,279) $ (533,049) Total realized gains (losses) from investments....................... 30,608,412 19,825,389 4,623,536 4,088,641 Change in net unrealized appreciation (deprecation) of investments... (4,366,410) 8,391,642 (457,219) (2,024,097) ------------ ------------ ----------- ----------- Net increase (decrease) in net assets resulting from operations...... 25,615,872 26,552,010 3,538,038 1,531,495 ------------ ------------ ----------- ----------- From capital transactions: Payments received from contract owners............................... 40,357,816 39,602,445 5,108,203 5,692,970 Transfers between investment divisions (including fixed account), net 9,219,029 11,831,439 1,816,541 336,182 Transfers from contract benefits and terminations.................... (22,555,708) (17,943,698) (3,885,607) (3,446,057) Contract maintenance charges......................................... -- -- ------------ ------------ ----------- ----------- Net increase (decrease) in net assets resulting from capital transactions....................................................... 27,021,137 33,490,186 3,039,137 2,583,095 ------------ ------------ ----------- ----------- NET CHANGE IN NET ASSETS.............................................. 52,637,009 60,042,196 6,577,175 4,114,590 NET ASSETS - BEGINNING OF PERIOD...................................... 283,308,837 223,266,641 43,057,929 38,943,339 ------------ ------------ ----------- ----------- NET ASSETS - END OF PERIOD............................................ $335,945,846 $283,308,837 $49,635,104 $43,057,929 ============ ============ =========== ===========
(a) For the period January 1, 2006 to April 30, 2006 (b) For the period May 1, 2006 to December 31, 2006 (c) For the period May 1, 2005 to December 31, 2005 The accompanying notes are an integral part of these financial statements. F-44
BLACKROCK BLACKROCK BLACKROCK DAVIS LARGE CAP VALUE BOND INCOME MONEY MARKET VENTURE VALUE INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ------------------------- -------------------------- ------------------------ -------------------------- 2006 2005 2006 2005 2006 2005 2006 2005 ------------ ----------- ------------ ------------ ----------- ----------- ------------ ------------ $ (486,415) $ (321,267) $ 21,793,557 $ 12,790,647 $ 865,076 $ 275,092 $ (2,493,796) $ (1,834,694) 6,653,507 2,771,642 191,165 7,801,041 -- -- 4,982,999 1,502,572 12,455,703 218,549 (7,478,355) (15,445,189) -- -- 50,274,049 23,743,397 ------------ ----------- ------------ ------------ ----------- ----------- ------------ ------------ 18,622,795 2,668,924 14,506,367 5,146,499 865,076 275,092 52,763,252 23,411,275 ------------ ----------- ------------ ------------ ----------- ----------- ------------ ------------ 28,951,101 12,211,448 41,515,410 49,588,861 7,004,164 8,406,946 71,850,716 62,315,737 72,932,257 4,144,484 (9,024,442) 11,749,493 (242,654) 117,783 73,715,427 68,267,356 (7,216,039) (3,848,900) (50,331,163) (46,044,283) (4,198,191) (5,349,540) (27,045,387) (17,170,910) -- -- -- -- ------------ ----------- ------------ ------------ ----------- ----------- ------------ ------------ 94,667,319 12,507,032 (17,840,195) 15,294,071 2,563,319 3,175,189 118,520,756 113,412,183 ------------ ----------- ------------ ------------ ----------- ----------- ------------ ------------ 113,290,114 15,175,956 (3,333,828) 20,440,570 3,428,395 3,450,281 171,284,008 136,823,458 66,157,275 50,981,319 499,970,297 479,529,727 26,441,007 22,990,726 327,836,546 191,013,088 ------------ ----------- ------------ ------------ ----------- ----------- ------------ ------------ $179,447,389 $66,157,275 $496,636,469 $499,970,297 $29,869,403 $26,441,007 $499,120,554 $327,836,546 ============ =========== ============ ============ =========== =========== ============ ============
F-45 METROPOLITAN LIFE SEPARATE ACCOUNT E OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005
LOOMIS SAYLES MFS SMALL CAP INVESTORS TRUST INVESTMENT DIVISION INVESTMENT DIVISION ------------------------- ------------------------- 2006 2005 2006 (A) 2005 ------------ ----------- ------------ ----------- INCREASE (DECREASE) IN NET ASSETS: From operations: Net investment income (loss)......................................... $ (1,041,754) $ (575,589) $ 96,813 $ (257,739) Total realized gains (losses) from investments....................... 10,203,057 2,527,312 4,848,225 762,712 Change in net unrealized appreciation (deprecation) of investments... 226,128 876,668 (3,782,849) 817,021 ------------ ----------- ------------ ----------- Net increase (decrease) in net assets resulting from operations...... 9,387,431 2,828,391 1,162,189 1,321,994 ------------ ----------- ------------ ----------- From capital transactions: Payments received from contract owners............................... 13,913,544 8,366,730 933,681 2,401,461 Transfers between investment divisions (including fixed account), net 29,415,556 7,296,191 (25,874,503) 2,385,517 Transfers from contract benefits and terminations.................... (5,248,520) (3,486,184) (752,026) (1,885,784) Contract maintenance charges......................................... -- -- ------------ ----------- ------------ ----------- Net increase (decrease) in net assets resulting from capital transactions....................................................... 38,080,580 12,176,737 (25,692,848) 2,901,194 ------------ ----------- ------------ ----------- NET CHANGE IN NET ASSETS.............................................. 47,468,011 15,005,128 (24,530,659) 4,223,188 NET ASSETS - BEGINNING OF PERIOD...................................... 53,640,656 38,635,528 24,530,659 20,307,471 ------------ ----------- ------------ ----------- NET ASSETS - END OF PERIOD............................................ $101,108,667 $53,640,656 $ -- $24,530,659 ============ =========== ============ ===========
(a) For the period January 1, 2006 to April 30, 2006 (b) For the period May 1, 2006 to December 31, 2006 (c) For the period May 1, 2005 to December 31, 2005 The accompanying notes are an integral part of these financial statements. F-46
HARRIS OAKMARK WESTERN ASSET MANAGEMENT WESTERN ASSET MANAGEMENT FI FOCUSED VALUE STRATEGIC BOND OPPORTUNITIES U.S. GOVERNMENT VALUE LEADERS INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION -------------------------- -------------------------- -------------------------- ------------------------- 2006 2005 2006 2005 2006 2005 2006 2005 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ----------- $ (4,354,414) $ (4,679,373) $ 9,046,062 $ 2,564,723 $ 3,316,027 $ (182,049) $ (434,182) $ (157,408) 61,515,993 13,019,564 2,825,317 4,380,764 (474,718) 2,623,923 4,474,356 1,715,633 (15,217,073) 21,366,130 (2,640,796) (4,387,279) 2,133,509 (2,105,055) 3,640,058 2,647,155 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ----------- 41,944,506 29,706,321 9,230,583 2,558,208 4,974,818 336,819 7,680,232 4,205,380 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ----------- 36,045,476 48,857,152 40,502,979 43,589,308 29,306,103 38,805,080 20,348,324 12,535,818 (40,301,143) 35,862,086 22,698,121 53,890,284 6,971,272 26,362,982 22,262,237 17,837,481 (32,707,930) (28,369,753) (19,579,996) (12,554,794) (15,291,501) (13,481,998) (4,911,671) (2,533,702) -- -- -- -- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ----------- (36,963,597) 56,349,485 43,621,104 84,924,798 20,985,874 51,686,064 37,698,890 27,839,597 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ----------- 4,980,909 86,055,806 52,851,687 87,483,006 25,960,692 52,022,883 45,379,122 32,044,977 413,672,421 327,616,615 228,960,440 141,477,434 176,329,793 124,306,910 54,642,394 22,597,417 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ----------- $418,653,330 $413,672,421 $281,812,127 $228,960,440 $202,290,485 $176,329,793 $100,021,516 $54,642,394 ============ ============ ============ ============ ============ ============ ============ ===========
F-47 METROPOLITAN LIFE SEPARATE ACCOUNT E OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005
MFS BLACKROCK TOTAL RETURN LEGACY LARGE CAP GROWTH INVESTMENT DIVISION INVESTMENT DIVISION ------------------------- ------------------------ 2006 2005 2006 2005 ------------ ----------- ----------- ----------- INCREASE (DECREASE) IN NET ASSETS: From operations: Net investment income (loss)......................................... $ 2,292,942 $ 515,322 $ (244,891) $ (107,255) Total realized gains (losses) from investments....................... 3,164,891 2,083,703 556,239 184,292 Change in net unrealized appreciation (deprecation) of investments... 5,611,141 (521,531) 218,184 683,008 ------------ ----------- ----------- ----------- Net increase (decrease) in net assets resulting from operations...... 11,068,974 2,077,494 529,532 760,045 ------------ ----------- ----------- ----------- From capital transactions: Payments received from contract owners............................... 12,171,477 15,108,736 4,770,396 3,849,789 Transfers between investment divisions (including fixed account), net 6,736,469 19,240,330 4,944,278 3,349,368 Transfers from contract benefits and terminations.................... (11,006,826) (8,734,202) (1,211,536) (478,465) Contract maintenance charges......................................... -- -- ------------ ----------- ----------- ----------- Net increase (decrease) in net assets resulting from capital transactions....................................................... 7,901,120 25,614,864 8,503,138 6,720,692 ------------ ----------- ----------- ----------- NET CHANGE IN NET ASSETS.............................................. 18,970,094 27,692,358 9,032,670 7,480,737 NET ASSETS - BEGINNING OF PERIOD...................................... 98,990,430 71,298,072 13,090,953 5,610,216 ------------ ----------- ----------- ----------- NET ASSETS - END OF PERIOD............................................ $117,960,524 $98,990,430 $22,123,623 $13,090,953 ============ =========== =========== ===========
(a) For the period January 1, 2006 to April 30, 2006 (b) For the period May 1, 2006 to December 31, 2006 (c) For the period May 1, 2005 to December 31, 2005 The accompanying notes are an integral part of these financial statements. F-48
METLIFE METLIFE METLIFE METLIFE CONSERVATIVE ALLOCATION CONSERVATIVE TO MODERATE ALLOCATION MODERATE ALLOCATION MODERATE TO AGGRESSIVE ALLOCATION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ------------------------ ---------------------------------- ------------------------- -------------------------------- 2006 2005 (C) 2006 2005 (C) 2006 2005 (C) 2006 2005 (C) ----------- ----------- ------------ ----------- ------------ ----------- ------------ ----------- $ 367,385 $ (11,344) $ 1,005,647 $ (3,223) $ 245,413 $ 22,600 $ (667,405) $ (285) 209,761 23,707 1,932,665 65,983 5,374,312 113,227 4,952,796 47,342 1,128,045 97,271 7,743,098 636,014 23,338,620 1,665,844 21,988,468 1,453,294 ----------- ----------- ------------ ----------- ------------ ----------- ------------ ----------- 1,705,191 109,634 10,681,410 698,774 28,958,345 1,801,671 26,273,859 1,500,351 ----------- ----------- ------------ ----------- ------------ ----------- ------------ ----------- 15,354,139 5,109,349 88,250,619 26,244,514 222,975,475 50,958,994 196,850,414 35,896,977 14,671,406 7,847,626 71,458,396 21,710,230 156,234,630 35,508,298 124,512,359 23,145,157 (2,653,577) (366,243) (5,675,045) (1,023,694) (11,452,055) (775,539) (6,361,669) (400,177) -- -- -- -- ----------- ----------- ------------ ----------- ------------ ----------- ------------ ----------- 27,371,968 12,590,732 154,033,970 46,931,050 367,758,050 85,691,753 315,001,104 58,641,957 ----------- ----------- ------------ ----------- ------------ ----------- ------------ ----------- 29,077,159 12,700,366 164,715,380 47,629,824 396,716,395 87,493,424 341,274,963 60,142,308 12,700,366 -- 47,629,824 -- 87,493,424 -- 60,142,308 -- ----------- ----------- ------------ ----------- ------------ ----------- ------------ ----------- $41,777,525 $12,700,366 $212,345,204 $47,629,824 $484,209,819 $87,493,424 $401,417,271 $60,142,308 =========== =========== ============ =========== ============ =========== ============ ===========
F-49 METROPOLITAN LIFE SEPARATE ACCOUNT E OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005
METLIFE FI AGGRESSIVE ALLOCATION LARGE CAP INVESTMENT DIVISION INVESTMENT DIVISION ----------------------- ------------------- 2006 2005 (C) 2006 (B) ----------- ---------- ------------------- INCREASE (DECREASE) IN NET ASSETS: From operations: Net investment income (loss)......................................... $ (121,531) $ 1,693 $ (12,907) Total realized gains (losses) from investments....................... 1,132,185 54,145 2,511 Change in net unrealized appreciation (deprecation) of investments... 2,759,207 173,131 186,531 ----------- ---------- ---------- Net increase (decrease) in net assets resulting from operations...... 3,769,861 228,969 176,135 ----------- ---------- ---------- From capital transactions: Payments received from contract owners............................... 16,486,401 4,120,526 1,051,270 Transfers between investment divisions (including fixed account), net 17,073,323 3,121,840 1,663,151 Transfers from contract benefits and terminations.................... (1,486,409) (122,617) (60,399) Contract maintenance charges......................................... -- -- ----------- ---------- ---------- Net increase (decrease) in net assets resulting from capital transactions....................................................... 32,073,315 7,119,749 2,654,022 ----------- ---------- ---------- NET CHANGE IN NET ASSETS.............................................. 35,843,176 7,348,718 2,830,157 NET ASSETS - BEGINNING OF PERIOD...................................... 7,348,718 -- -- ----------- ---------- ---------- NET ASSETS - END OF PERIOD............................................ $43,191,894 $7,348,718 $2,830,157 =========== ========== ==========
(a) For the period January 1, 2006 to April 30, 2006 (b) For the period May 1, 2006 to December 31, 2006 (c) For the period May 1, 2005 to December 31, 2005 The accompanying notes are an integral part of these financial statements. F-50
FIDELITY FIDELITY FIDELITY FIDELITY MONEY MARKET EQUITY-INCOME GROWTH OVERSEAS INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ------------------------ -------------------------- -------------------------- ------------------------ 2006 2005 2006 2005 2006 2005 2006 2005 ----------- ----------- ------------ ------------ ------------ ------------ ----------- ----------- $ 436,319 $ 150,701 $ 3,027,352 $ 925,194 $ (694,862) $ (614,198) $ (28,963) $ (88,578) -- -- 16,036,051 5,284,011 (4,239,529) (2,593,520) 2,244,704 1,288,359 -- -- 2,787,431 (483,290) 12,604,530 9,442,722 3,579,948 3,985,942 ----------- ----------- ------------ ------------ ------------ ------------ ----------- ----------- 436,319 150,701 21,850,834 5,725,915 7,670,139 6,235,004 5,795,689 5,185,723 ----------- ----------- ------------ ------------ ------------ ------------ ----------- ----------- 2,594,451 2,569,045 6,000,261 7,499,907 7,450,729 8,881,884 2,599,211 2,536,836 6,062,232 (432,032) (1,909,987) (5,668,032) (7,700,700) (12,732,941) 1,686,442 253,657 (4,113,763) (3,825,949) (17,906,700) (17,250,269) (20,909,643) (18,125,575) (4,405,967) (4,990,791) -- -- -- -- -- ----------- ----------- ------------ ------------ ------------ ------------ ----------- ----------- 4,542,920 (1,688,936) (13,816,426) (15,418,394) (21,159,614) (21,976,632) (120,314) (2,200,298) ----------- ----------- ------------ ------------ ------------ ------------ ----------- ----------- 4,979,239 (1,538,235) 8,034,408 (9,692,479) (13,489,475) (15,741,628) 5,675,375 2,985,425 6,200,922 7,739,157 124,173,091 133,865,570 141,359,911 157,101,539 34,046,278 31,060,853 ----------- ----------- ------------ ------------ ------------ ------------ ----------- ----------- $11,180,161 $ 6,200,922 $132,207,499 $124,173,091 $127,870,436 $141,359,911 $39,721,653 $34,046,278 =========== =========== ============ ============ ============ ============ =========== ===========
F-51 METROPOLITAN LIFE SEPARATE ACCOUNT E OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005
FIDELITY CALVERT SOCIAL INVESTMENT GRADE BOND BALANCED INVESTMENT DIVISION INVESTMENT DIVISION ------------------------ ------------------------ 2006 2005 2006 2005 ----------- ----------- ----------- ----------- INCREASE (DECREASE) IN NET ASSETS: From operations: Net investment income (loss).............................................. $ 614,868 $ 581,378 $ 709,324 $ 383,557 Total realized gains (losses) from investments............................ (134,311) 464,121 1,197,659 464,408 Change in net unrealized appreciation (deprecation) of investments........ 144,400 (776,961) 2,520,036 1,723,358 ----------- ----------- ----------- ----------- Net increase (decrease) in net assets resulting from operations........... 624,957 268,538 4,427,019 2,571,323 ----------- ----------- ----------- ----------- From capital transactions: Payments received from contract owners.................................... 1,923,063 3,076,796 5,317,660 5,019,996 Transfers between investment divisions (including fixed account), net..... (899,521) (774,101) (1,818,498) (577,644) Transfers from contract benefits and terminations......................... (3,009,570) (3,379,237) (5,171,946) (4,997,065) Contract maintenance charges.............................................. -- -- ----------- ----------- ----------- ----------- Net increase (decrease) in net assets resulting from capital transactions. (1,986,028) (1,076,542) (1,672,784) (554,713) ----------- ----------- ----------- ----------- NET CHANGE IN NET ASSETS.................................................... (1,361,071) (808,004) 2,754,235 2,016,610 NET ASSETS - BEGINNING OF PERIOD............................................ 20,803,805 21,611,809 60,311,328 58,294,718 ----------- ----------- ----------- ----------- NET ASSETS - END OF PERIOD.................................................. $19,442,734 $20,803,805 $63,065,563 $60,311,328 =========== =========== =========== ===========
(a) For the period January 1, 2006 to April 30, 2006 (b) For the period May 1, 2006 to December 31, 2006 (c) For the period May 1, 2005 to December 31, 2005 The accompanying notes are an integral part of these financial statements. F-52
CALVERT SOCIAL LORD ABBETT MFS RESEARCH T. ROWE PRICE MID CAP GROWTH BOND DEBENTURE INTERNATIONAL MID CAP GROWTH INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ------------------------ -------------------------- ------------------------- ------------------------- 2006 2005 2006 2005 2006 2005 2006 2005 ----------- ----------- ------------ ------------ ------------ ----------- ------------ ----------- $ (114,143) $ (124,547) $ 9,359,243 $ 5,131,929 $ 219,039 $ (304,641) $ (1,485,639) $ (941,218) (273,525) (737,962) 1,596,391 2,182,129 10,211,492 5,533,181 10,829,829 5,306,668 1,125,302 791,771 3,032,569 (6,441,840) 10,374,621 1,345,305 (4,404,620) 5,448,667 ----------- ----------- ------------ ------------ ------------ ----------- ------------ ----------- 737,634 (70,738) 13,988,203 872,218 20,805,152 6,573,845 4,939,570 9,814,117 ----------- ----------- ------------ ------------ ------------ ----------- ------------ ----------- 1,176,651 1,338,690 27,764,289 27,146,739 19,054,573 7,780,322 18,147,597 12,818,016 (988,498) (618,035) 24,544,402 17,983,892 59,687,861 11,361,343 9,434,550 14,171,794 (1,530,925) (1,773,795) (15,285,877) (11,920,213) (6,588,223) (3,162,519) (8,334,967) (5,142,101) -- -- -- -- ----------- ----------- ------------ ------------ ------------ ----------- ------------ ----------- (1,342,772) (1,053,140) 37,022,814 33,210,418 72,154,211 15,979,146 19,247,180 21,847,709 ----------- ----------- ------------ ------------ ------------ ----------- ------------ ----------- (605,138) (1,123,878) 51,011,017 34,082,636 92,959,363 22,552,991 24,186,750 31,661,827 12,565,055 13,688,933 159,818,940 125,736,304 54,271,700 31,718,709 94,663,044 63,001,217 ----------- ----------- ------------ ------------ ------------ ----------- ------------ ----------- $11,959,917 $12,565,055 $210,829,957 $159,818,940 $147,231,063 $54,271,700 $118,849,794 $94,663,044 =========== =========== ============ ============ ============ =========== ============ ===========
F-53 METROPOLITAN LIFE SEPARATE ACCOUNT E OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005
PIMCO RCM GLOBAL TOTAL RETURN TECHNOLOGY INVESTMENT DIVISION INVESTMENT DIVISION -------------------------- ------------------------ 2006 2005 2006 2005 ------------ ------------ ----------- ----------- INCREASE (DECREASE) IN NET ASSETS: From operations: Net investment income (loss)......................................... $ 5,909,798 $ (4,574,955) $ (676,756) $ (633,688) Total realized gains (losses) from investments....................... 1,435,526 3,894,806 649,346 (300,688) Change in net unrealized appreciation (deprecation) of investments... 6,453,586 4,112,147 1,808,074 5,000,978 ------------ ------------ ----------- ----------- Net increase (decrease) in net assets resulting from operations...... 13,798,910 3,431,998 1,780,664 4,066,602 ------------ ------------ ----------- ----------- From capital transactions: Payments received from contract owners............................... 57,977,013 73,427,657 5,370,512 3,967,764 Transfers between investment divisions (including fixed account), net (5,669,753) 57,029,334 (3,002,320) (6,386,968) Transfers from contract benefits and terminations.................... (34,363,949) (26,006,648) (4,811,753) (4,020,938) Contract maintenance charges......................................... -- -- ------------ ------------ ----------- ----------- Net increase (decrease) in net assets resulting from capital transactions....................................................... 17,943,311 104,450,343 (2,443,561) (6,440,142) ------------ ------------ ----------- ----------- NET CHANGE IN NET ASSETS.............................................. 31,742,221 107,882,341 (662,897) (2,373,540) NET ASSETS - BEGINNING OF PERIOD...................................... 406,268,866 298,386,525 51,898,685 54,272,225 ------------ ------------ ----------- ----------- NET ASSETS - END OF PERIOD............................................ $438,011,087 $406,268,866 $51,235,788 $51,898,685 ============ ============ =========== ===========
(a) For the period January 1, 2006 to April 30, 2006 (b) For the period May 1, 2006 to December 31, 2006 (c) For the period May 1, 2005 to December 31, 2005 The accompanying notes are an integral part of these financial statements. F-54
LAZARD MET/AIM HARRIS OAKMARK OPPENHEIMER MID-CAP SMALL CAP GROWTH INTERNATIONAL CAPITAL APPRECIATION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ------------------------ ------------------------ -------------------------- ----------------------- 2006 2005 2006 2005 2006 2005 2006 2005 ----------- ----------- ----------- ----------- ------------ ------------ ----------- ---------- $ (423,294) $ (422,837) $ (302,685) $ (224,681) $ 2,237,703 $ (1,368,670) $ (103,576) $ (18,156) 5,676,560 6,378,125 3,596,554 1,199,620 23,701,431 4,780,389 95,674 47,129 362,830 (3,372,554) (698,241) 232,220 31,114,541 10,805,618 594,079 94,410 ----------- ----------- ----------- ----------- ------------ ------------ ----------- ---------- 5,616,096 2,582,734 2,595,628 1,207,159 57,053,675 14,217,337 586,177 123,383 ----------- ----------- ----------- ----------- ------------ ------------ ----------- ---------- 5,445,770 5,368,971 2,778,187 2,950,087 49,228,663 30,902,629 4,382,611 1,893,057 5,045,463 2,105,055 2,746,564 1,855,183 90,520,634 53,072,017 4,241,724 1,724,734 (2,982,881) (2,342,148) (1,445,966) (845,515) (13,049,354) (5,919,112) (480,388) (54,640) -- -- -- -- ----------- ----------- ----------- ----------- ------------ ------------ ----------- ---------- 7,508,352 5,131,878 4,078,785 3,959,755 126,699,943 78,055,534 8,143,947 3,563,151 ----------- ----------- ----------- ----------- ------------ ------------ ----------- ---------- 13,124,448 7,714,612 6,674,413 5,166,914 183,753,618 92,272,871 8,730,124 3,686,534 41,868,418 34,153,806 19,296,323 14,129,409 158,028,315 65,755,444 4,043,647 357,113 ----------- ----------- ----------- ----------- ------------ ------------ ----------- ---------- $54,992,866 $41,868,418 $25,970,736 $19,296,323 $341,781,933 $158,028,315 $12,773,771 $4,043,647 =========== =========== =========== =========== ============ ============ =========== ==========
F-55 METROPOLITAN LIFE SEPARATE ACCOUNT E OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005
LEGG MASON THIRD AVENUE AGGRESSIVE GROWTH SMALL CAP VALUE INVESTMENT DIVISION INVESTMENT DIVISION ------------------------ ---------------------- 2006 2005 2006 2005 ----------- ----------- ---------- ---------- INCREASE (DECREASE) IN NET ASSETS: From operations: Net investment income (loss)......................................... $ (419,475) $ (289,867) $ (27,262) $ (13,775) Total realized gains (losses) from investments....................... 3,682,794 1,607,154 273,613 52,343 Change in net unrealized appreciation (deprecation) of investments... (4,438,090) 1,528,359 141,550 141,813 ----------- ----------- ---------- ---------- Net increase (decrease) in net assets resulting from operations...... (1,174,771) 2,845,646 387,901 180,381 ----------- ----------- ---------- ---------- From capital transactions: Payments received from contract owners............................... 5,915,164 3,776,771 1,918,829 1,294,932 Transfers between investment divisions (including fixed account), net 1,547,267 2,543,204 320,744 410,287 Transfers from contract benefits and terminations.................... (2,328,418) (1,793,160) (58,859) (12,757) Contract maintenance charges......................................... -- -- ----------- ----------- ---------- ---------- Net increase (decrease) in net assets resulting from capital transactions....................................................... 5,134,013 4,526,815 2,180,714 1,692,462 ----------- ----------- ---------- ---------- NET CHANGE IN NET ASSETS.............................................. 3,959,242 7,372,461 2,568,615 1,872,843 NET ASSETS - BEGINNING OF PERIOD...................................... 28,090,437 20,717,976 2,276,433 403,590 ----------- ----------- ---------- ---------- NET ASSETS - END OF PERIOD............................................ $32,049,679 $28,090,437 $4,845,048 $2,276,433 =========== =========== ========== ==========
(a) For the period January 1, 2006 to April 30, 2006 (b) For the period May 1, 2006 to December 31, 2006 (c) For the period May 1, 2005 to December 31, 2005 The accompanying notes are an integral part of these financial statements. F-56
CYCLICAL NEUBERGER BERMAN LEGG MASON CYCLICAL GROWTH AND PIMCO INFLATION REAL ESTATE VALUE EQUITY GROWTH ETF INCOME ETF PROTECTED BOND INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION -------------------------- ------------------- ------------------- ------------------- ------------------- 2006 2005 2006 (B) 2006 (B) 2006 (B) 2006 (B) ------------ ------------ ------------------- ------------------- ------------------- ------------------- $ (1,040,698) $ (1,411,056) $ (240,311) $ 18,222 $ 23,203 $ (69,864) 17,690,279 3,792,043 634,114 27,285 11,632 25,327 61,645,842 11,809,478 1,925,110 179,453 132,729 (8,122) ------------ ------------ ----------- ---------- ---------- ----------- 78,295,423 14,190,465 2,318,913 224,960 167,564 (52,659) ------------ ------------ ----------- ---------- ---------- ----------- 53,283,902 39,480,037 2,948,364 370,064 266,900 3,341,184 106,343,823 53,988,430 30,805,406 3,122,552 2,572,439 10,682,873 (15,668,554) (5,567,042) (1,462,784) (24,975) (24,253) (287,262) -- -- -- -- -- ------------ ------------ ----------- ---------- ---------- ----------- 143,959,171 87,901,425 32,290,986 3,467,641 2,815,086 13,736,795 ------------ ------------ ----------- ---------- ---------- ----------- 222,254,594 102,091,890 34,609,899 3,692,601 2,982,650 13,684,136 159,988,876 57,896,986 -- -- -- -- ------------ ------------ ----------- ---------- ---------- ----------- $382,243,470 $159,988,876 $34,609,899 $3,692,601 $2,982,650 $13,684,136 ============ ============ =========== ========== ========== ===========
AMERICAN FUNDS GROWTH INVESTMENT DIVISION ---------------------------- 2006 2005 -------------- ------------ $ (5,920,728) $ (4,328,983) 16,619,281 4,556,577 73,139,372 99,079,089 -------------- ------------ 83,837,925 99,306,683 -------------- ------------ 166,051,231 138,333,004 103,360,648 108,667,378 (65,280,668) (45,385,720) -- -------------- ------------ 204,131,211 201,614,662 -------------- ------------ 287,969,136 300,921,345 843,004,006 542,082,661 -------------- ------------ $1,130,973,142 $843,004,006 ============== ============
F-57 METROPOLITAN LIFE SEPARATE ACCOUNT E OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF CHANGES IN NET ASSETS -- (CONCLUDED) FOR THE YEARS ENDED DECEMBER 31, 2006, 2005, AND 2004
AMERICAN FUNDS AMERICAN FUNDS GROWTH AND INCOME GLOBAL SMALL CAPITALIZATION INVESTMENT DIVISION INVESTMENT DIVISION -------------------------- -------------------------- 2006 2005 2006 2005 ------------ ------------ ------------ ------------ INCREASE (DECREASE) IN NET ASSETS: From operations: Net investment income (loss)......................................... $ 1,549,908 $ 113,385 $ (4,090,440) $ (1,010,944) Total realized gains (losses) from investments....................... 24,300,278 6,317,200 44,593,050 7,027,014 Change in net unrealized appreciation (deprecation) of investments... 67,505,598 21,411,282 38,349,644 43,129,018 ------------ ------------ ------------ ------------ Net increase (decrease) in net assets resulting from operations...... 93,355,784 27,841,867 78,852,254 49,145,088 ------------ ------------ ------------ ------------ From capital transactions: Payments received from contract owners............................... 93,483,336 105,404,652 67,557,037 39,382,502 Transfers between investment divisions (including fixed account), net 43,044,854 50,258,038 78,241,529 75,179,349 Transfers from contract benefits and terminations.................... (52,831,786) (40,821,053) (27,644,609) (16,248,098) Contract maintenance charges......................................... -- -- ------------ ------------ ------------ ------------ Net increase (decrease) in net assets resulting from capital transactions....................................................... 83,696,404 114,841,637 118,153,957 98,313,753 ------------ ------------ ------------ ------------ NET CHANGE IN NET ASSETS.............................................. 177,052,188 142,683,504 197,006,211 147,458,841 NET ASSETS - BEGINNING OF PERIOD...................................... 648,646,801 505,963,297 304,247,953 156,789,112 ------------ ------------ ------------ ------------ NET ASSETS - END OF PERIOD............................................ $825,698,989 $648,646,801 $501,254,164 $304,247,953 ============ ============ ============ ============
(a) For the period January 1, 2006 to April 30, 2006 (b) For the period May 1, 2006 to December 31, 2006 (c) For the period May 1, 2005 to December 31, 2005 The accompanying notes are an integral part of these financial statements. F-58
AMERICAN FUNDS BOND INVESTMENT DIVISION ------------------- 2006 (B) ------------------- $ (47,011) 7,666 1,130,100 ----------- 1,090,755 ----------- 14,215,104 41,926,664 (1,011,646) -- ----------- 55,130,122 ----------- 56,220,877 -- ----------- $56,220,877 ===========
F-59 METROPOLITAN LIFE SEPARATE ACCOUNT E OF METROPOLITAN LIFE INSURANCE COMPANY NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2006 1. BUSINESS Metropolitan Life Separate Account E (the "Separate Account"), a Separate Account of Metropolitan Life Insurance Company ("Metropolitan Life"), was established by the board of director of Metropolitan Life on September 27, 1983 to support Metropolitan Life's operations with respect to certain variable annuity contracts ("Contracts"). Metropolitan Life is a wholly owned subsidiary of MetLife Inc. ("MetLife"). The Separate Account was registered as a unit investment trust on April 6, 1984 under the Investment Company Act of 1940, as amended, and exists in accordance with the regulations of the New York Insurance Department. The Separate Account supports various Contracts (VestMet, Preference Plus Account, Preference Plus Account for Enhanced Contracts, Preference Plus Select, Personal IncomePlus, Preference Plus Income Advantage, Enhanced Preference Plus Account, Financial Freedom Account, MetLife Asset Builder, MetLife Income Security Plan, MetLife Settlement Plus, and MetLife Financial Freedom Select). The Separate Account is divided into Investment Divisions, each of which is treated as an individual separate account for financial reporting purposes. When the contractholder allocates or transfers money to an investment division, the investment division purchases shares of a portfolio, series or fund (with the same name) within the Metropolitan Fund, Fidelity VIP Funds, Calvert Fund, Met Investors Fund or the American Funds (collectively, the "Funds"). For convenience, the portfolios, series, and funds are referred to as "portfolios." The assets of the Separate Account are registered in the name of Metropolitan Life. Under applicable insurance law, the assets and liabilities of the Separate Account are clearly identified and distinguished from Metropolitan Life's other assets and liabilities. The portion of the Separate Account's assets applicable to the Contracts is not chargeable with liabilities arising out of any other business Metropolitan Life may conduct. The following Investment Divisions were available for investment as of December 31, 2006: BlackRock Large Cap MetLife Conservative Investment Division* Allocation Investment Division* Variable B Investment MetLife Conservative to Division (a) Moderate Allocation Investment Division* Variable C Investment MetLife Moderate Division (a) Allocation Investment Division* Variable D Investment MetLife Moderate to Division** Aggressive Allocation Investment Division* BlackRock Diversified MetLife Aggressive Investment Division* Allocation Investment Division* BlackRock Aggressive Growth Investment FI Large Cap Investment Division* Division* MetLife Stock Index Fidelity Money Market Investment Division* Investment Division FI International Stock Fidelity Equity-Income Investment Division* Investment Division FI Mid Cap Opportunities Fidelity Growth Investment Division* Investment Division T. Rowe Price Small Cap Growth Investment Fidelity Overseas Division* Investment Division Oppenheimer Global Equity Fidelity Investment Grade Investment Division* Bond Investment Division Harris Oakmark Large Cap Value Investment Calvert Social Balanced Division* Investment Division Neuberger Berman Mid Cap Calvert Social Mid Cap Value Investment Growth Investment Division* Division T. Rowe Price Large Cap Lord Abbett Bond Growth Investment Debenture Investment Division* Division* Lehman Brothers Aggregate MFS Research Bond Index Investment International Investment Division* Division* Morgan Stanley EAFE Index T. Rowe Price Mid Cap Investment Division* Growth Investment Division* Russell 2000 Index PIMCO Total Return Investment Division* Investment Division* Jennison Growth RCM Global Technology Investment Division* Investment Division* BlackRock Strategic Value Lazard Mid-Cap Investment Investment Division* Division* MetLife Mid Cap Stock Index Investment Met/AIM Small Cap Growth Division* Investment Division* Franklin Templeton Small Harris Oakmark Cap Growth Investment International Investment Division* Division* BlackRock Large Cap Value Oppenheimer Capital Investment Division* Appreciation Investment Division* BlackRock Bond Income Legg Mason Aggressive Investment Division* Growth Investment Division* BlackRock Money Market Third Avenue Small Cap Investment Division* Value Investment Division Davis Venture Value Neuberger Berman Real Investment Division* Estate Investment Division* Loomis Sayles Small Cap Legg Mason Value Equity Investment Division* Investment Division* MFS Investors Trust Cyclical Growth ETF Investment Division** Investment Division* Harris Oakmark Focused Cyclical Growth and Value Investment Income ETF Investment Division* Division* F-60 METROPOLITAN LIFE SEPARATE ACCOUNT E OF METROPOLITAN LIFE INSURANCE COMPANY NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) 1. BUSINESS -- (CONTINUED) Western Asset Management PIMCO Inflation Protected Strategic Bond Bond Investment Division* Opportunities Investment Division* Western Asset Management U.S. Government American Funds Growth Investment Division* Investment Division FI Value Leaders American Funds Growth and Investment Division* Income Investment Division MFS Total Return American Funds Global Investment Division* Small Capitalization Investment Division BlackRock Legacy Large Cap Growth Investment American Funds Bond Division* Investment Division (a) Variable B Investment Division and Variable C Investment Division have contracts that only invest in the BlackRock Large Cap Portfolio. * These investment divisions within the Separate Account invest in two or more share classes within the underlying portfolios of the funds that may assess 12b-1 fees. ** These investment divisions had no net assets as of December 31, 2006. The operations of the investment divisions changed as follows during the years ended 2006, and 2005: For the year ended December 31, 2006: ------------------ NAME CHANGES: Old Name New Name -------- -------- Salomon Brothers U.S. Western Asset Management Government Investment U.S. Government Division Investment Division Salomon Brothers Western Asset Management Strategic Bond Strategic Bond Opportunities Investment Opportunities Investment Division Division Janus Aggressive Growth Legg Mason Aggressive Investment Division Growth Investment Division BlackRock Investment BlackRock Large Cap Trust Investment Division Investment Division MERGERS: Old Portfolio New Portfolio ------------- ------------- MFS Investors Trust Legg Mason Value Equity Portfolio Portfolio AIM VI Core Stock AIM VI Core Equity Portfolio Portfolio ADDITIONS: FI Large Cap Investment Division American Funds Bond Investment Division Legg Mason Value Equity Investment Division Cyclical Growth ETF Investment Division Cyclical Growth and Income ETF Investment Division PIMCO Inflation Protected Bond Investment Division For the year ended December 31, 2005: ------------------ NAME CHANGES: Old Name New Name -------- -------- Met/AIM Mid Cap Core Equity Investment Lazard Mid-Cap Investment Division Division Neuberger Berman Partners Mid Cap Value Investment Neuberger Berman Mid Cap Division Value Investment Division Scudder Global Equity Oppenheimer Global Equity Investment Division Investment Division PIMCO PEA Innovation RCM Global Technology Investment Division Investment Division State Street Research Investment Trust BlackRock Investment Investment Division Trust Investment Division State Street Research Diversified Investment BlackRock Diversified Division Investment Division State Street Research BlackRock Aggressive Aggressive Growth Growth Investment Investment Division Division State Street Research Large Cap Value BlackRock Large Cap Value Investment Division Investment Division State Street Research Bond Income Investment BlackRock Bond Income Division Investment Division State Street Research Money Market Investment BlackRock Money Market Division Investment Division State Street Research BlackRock Legacy Large Large Cap Growth Cap Growth Investment Investment Division Division State Street Research Aurora Investment BlackRock Strategic Value Division Investment Division F-61 METROPOLITAN LIFE SEPARATE ACCOUNT E OF METROPOLITAN LIFE INSURANCE COMPANY NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) 1. BUSINESS -- (CONCLUDED) MERGERS: Old Portfolio New Portfolio ------------- ------------- Met/Putnam Voyager Portfolio Jennison Growth Portfolio 2. SIGNIFICANT ACCOUNTING POLICIES The financial statements included herein have been prepared in accordance with accounting principles generally accepted in the United States of America for variable annuity separate accounts registered as unit investment trusts. A. VALUATION OF INVESTMENTS Investments are made in the portfolios of the Funds and are valued at the reported net asset values of these portfolios. The investments of the portfolios are valued at fair value. Money market portfolio investments in the Funds are valued utilizing the amortized cost method of valuation. Changes in fair values are recorded in the Statement of Operations. B. SECURITY TRANSACTIONS Purchases and sales are recorded on the 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 gains from realized gain distributions are recorded on the ex-distribution date. C. FEDERAL INCOME TAXES The operations of the Separate Account are included in the Federal income tax return of Metropolitan Life, which is taxed as a life insurance company under the provisions of the Internal Revenue Code ("IRC"). Under the current provisions of the IRC, Metropolitan Life does not expect to incur Federal income taxes on the earnings of the Separate Account to the extent the earnings are credited under the Contracts. Accordingly, no charge is being made currently to the Separate Account for Federal income taxes. Metropolitan Life will review periodically 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 attributed to the Contracts. D. USE OF ESTIMATES The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect amounts reported herein. Actual results could differ from these estimates. E. PURCHASE PAYMENTS Purchase payments received by Metropolitan Life are credited as Accumulation or Annuity Units as of the end of the valuation period in which received, as provided in the prospectus. F. ANNUITY PAYOUTS Net Assets allocated to Contracts in the payout period are computed according to the 1983 Adjusted Individual Annuitant Mortality Table A. The assumed investment return is 4.0%. The mortality risk is fully borne by Metropolitan Life and may result in additional amounts being transferred into the variable annuity account by Metropolitan Life to cover greater longevity of annuitants than expected. Conversely, if amounts allocated exceeds amounts required, transfers may be made to Metropolitan Life. F-62 METROPOLITAN LIFE SEPARATE ACCOUNT E OF METROPOLITAN LIFE INSURANCE COMPANY NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) 2. SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED) G. RECLASSIFICATION In prior year Statement of Operations, the Separate Account reported dividend income and realized gain distributions collectively as dividend income. The realized gain distributions have been reclassified and now appear as a separate line item in the Statement of Operations for all periods presented. In the prior year financial statements, the realized gain distributions were included in the calculations of the investment income ratios. These distributions were appropriately excluded from the current year calculations and prior year periods have been adjusted to conform to the current year presentation. These reclassifications had no effect on the net assets of the investment division or unit values of the Contracts. Certain amounts in the prior year financial statements have been reclassified to conform with the amounts in the current year financial statements. 3. EXPENSES AND RELATED PARTY TRANSACTIONS With respect to assets in the Separate Account that support certain Contracts, Metropolitan Life deducts a charge from the net assets of the Separate Account for the assumption of general administrative expenses and mortality and expense risks. This charge is equivalent to an effective annual rate of 1.5% of the average daily values of the net assets in the Separate Account for VestMet Contracts and 1.25% for Preference Plus Contracts. Of this charge, Metropolitan Life estimates .75% is for general administrative expenses for VestMet Contracts and 0.50% is for Preference Plus Contracts and .75% is for the mortality and expense risk on both Contracts. However, for the Enhanced Preference Plus Account, Preference Plus Account for Enhanced Contracts and Financial Freedom Account Contracts, the charge is equivalent to an effective annual rate of .95% of the average daily value of the assets for these Contracts. Of this charge, Metropolitan Life estimates .20% is for general administrative expenses and .75% is for mortality and expense risk. These charges result in the reduction of unit values. The Variable B Investment Division and Variable C Investment Division Contracts are charged for administrative expenses, mortality and expense risk of 1.00% for their respective Contracts. The Separate Account charges for Preference Plus Select Contracts, except for the American Funds Growth and Income, American Funds Growth, American Funds Global Small Capitalization, and American Funds Bond Investment Divisions, with the basic death benefit are as follows: 1.25% for the B class; 1.50% for the L class; 1.65% for the C class; and 1.70% for the first seven years of the Bonus Class (after which this reverts to the B class charge). These charges result in the reduction of unit values. The Separate Account charge for the Preference Plus Select Contracts with the basic death benefit for the American Funds Growth and Income, American Funds Growth, American Funds Global Small Capitalization, and American Funds Bond Investment Divisions are as follows: 1.50% for the B Class; 1.75% for the L class; 1.90% for the C class and 1.95% for the first seven years of the Bonus Class (after which this reverts to the B class charge). These charges result in the reduction of unit values. There are additional Separate Account charges associated with available optional riders. These are as follows: 0.20% for the Annual Step-Up Death Benefit; 0.35% for the Greater of Annual Step-Up 5% Annual Increase Benefit, and 0.25% for the Earnings Preservation Benefit. The charge for the Guaranteed Minimum Income Benefit Version I and Version II is 0.50% of the "guaranteed minimum income base" as defined in the Contract. The charge for the Guaranteed Minimum Income Benefit Version III is 0.75% of the "guaranteed minimum income base" as defined in the Contract with a maximum charge of 1.50% of the income base appreciable upon exercise of the optional reset feature. The charge for the Guaranteed Withdrawal Benefit is 0.50% of the "guaranteed withdrawal amount" as defined in the Contract. The charge for the Optional Enhanced Guaranteed withdrawal benefit is .50% of the "guaranteed withdrawal amount" as defined in the Contract. The charge for the Guaranteed Minimum Accumulation Benefit is 0.75% of the 'guaranteed accumulation amount" as defined in the Contract. The charge for the Optional Lifetime Withdrawal F-63 METROPOLITAN LIFE SEPARATE ACCOUNT E OF METROPOLITAN LIFE INSURANCE COMPANY NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) 3. EXPENSES AND RELATED PARTY TRANSACTIONS -- (CONTINUED) Guarantee Benefit is 0.50% for the Single Life Version and 0.70% for the Joint Life Version of the Total Guarantee Withdrawal Amount each Contract Anniversary, prior to taking into account any Automatic Annual Step-Up. These charges result in the reduction of unit values. For MetLife Settlement Plus and MetLife Income Security Plan Contracts, the charge is equivalent to an effective annual rate of 1.25% of the average daily value of the assets for these Contracts. This charge results in the reduction of unit values. The Separate Account charge for the MetLife Financial Freedom Select Contracts with the standard death benefit, except for the American Funds Growth-Income, American Funds Growth, American Funds Global Small Cap, and American Funds Bond Investment Divisions, are as follows: 1.15% for the B class; 1.30% for the L class; 1.45% for the C class; 0.50% for the e class; and 0.95% for the e Bonus Class. The Separate Account Charge for the MetLife Financial Freedom Select Contracts with the standard death benefit for the American Funds Growth-Income, American Funds Growth, American Funds Global Small Cap, and American Funds Bond Investment Divisions, are as follows: 1.40% for the B class; 1.55% for the L class; 1.70% for the C class; 0.75% for the e class; and 1.20% for the e Bonus class. The additional Separate Account charge associated with the available optional Annual Step-Up Death Benefit is 0.10%. The charge for the Guaranteed Minimum Income Benefit is 0.35% of the guaranteed minimum "income base" as defined in the Contract. These charges result in the reduction of unit values. The Separate Account charge for the Personal IncomePlus Contracts cannot be greater than 0.95%. The Separate Account charge for the Preference Plus Income Advantage Annuity Contracts except for the American Funds Growth-Income, American Funds Growth, American Funds Global Small Cap and American Funds Bond Investment Divisions is 1.25%. The Separate Account charge for the Preference Plus Income Advantage Annuity Contracts with the American Funds Growth-Income, American Funds Growth, American Funds Global Small Cap, and American Funds Bond Investment Divisions is 1.50%. The charge for MetLife Asset Builder is a minimum of 0.45% but can not be greater than 0.95% during the pay in phase and during the pay-out phase. These charges result in the reduction of unit values. For a full explanation of product charges and associated product features and benefits, please refer to your product prospectus. 4. PURCHASES AND SALES OF INVESTMENTS The cost of purchases and proceeds from the sales of investments for the year ended December 31, 2006 were as follows:
PURCHASES SALES ------------ ------------ BlackRock Large Cap Investment Division................. $ 28,075,384 $225,462,624 Variable B Investment Division.......................... 514,839 6,795,836 Variable C Investment Division.......................... 44,902 614,019 BlackRock Diversified Investment Division............... 50,594,551 227,686,967 BlackRock Aggressive Growth Investment Division......... 14,919,610 115,657,142 MetLife Stock Index Investment Division................. 454,034,708 554,282,917 FI International Stock Investment Division.............. 55,772,139 44,443,284 FI Mid Cap Opportunities Investment Division............ 27,329,500 109,986,227 T. Rowe Price Small Cap Growth Investment Division...... 21,954,612 39,278,849 Oppenheimer Global Equity Investment Division........... 44,897,481 28,674,043 Harris Oakmark Large Cap Value Investment Division...... 35,326,414 75,829,860 Neuberger Berman Mid Cap Value Investment Division...... 148,062,020 87,949,024 T. Rowe Price Large Cap Growth Investment Division...... 31,758,475 30,338,924 Lehman Brothers Aggregate Bond Index Investment Division 169,562,511 85,907,061 Morgan Stanley EAFE Index Investment Division........... 78,183,327 45,819,569
F-64 METROPOLITAN LIFE SEPARATE ACCOUNT E OF METROPOLITAN LIFE INSURANCE COMPANY NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) 4. PURCHASES AND SALES OF INVESTMENTS -- (CONTINUED)
PURCHASES SALES -------------- -------------- Russell 2000 Index Investment Division................................... $ 63,185,420 $ 37,039,618 Jennison Growth Investment Division...................................... 10,649,486 9,493,003 BlackRock Strategic Value Investment Division............................ 143,408,044 81,580,553 MetLife Mid Cap Stock Index Investment Division.......................... 80,787,847 33,085,316 Franklin Templeton Small Cap Growth Investment Division.................. 14,912,946 10,095,636 BlackRock Large Cap Value Investment Division............................ 106,681,865 7,392,245 BlackRock Bond Income Investment Division................................ 77,317,451 72,875,010 BlackRock Money Market Investment Division............................... 42,320,895 38,892,494 Davis Venture Value Investment Division.................................. 135,597,193 19,569,431 Loomis Sayles Small Cap Investment Division.............................. 56,898,041 13,160,579 MFS Investors Trust Investment Division (a).............................. 4,432,385 28,023,732 Harris Oakmark Focused Value Investment Division......................... 76,905,376 79,084,636 Western Asset Management Strategic Bond Opportunities Investment Division 86,783,650 32,042,472 Western Asset Management U.S. Government Investment Division............. 49,356,857 25,054,585 FI Value Leaders Investment Division..................................... 52,382,450 13,168,044 MFS Total Return Investment Division..................................... 27,294,102 14,839,916 BlackRock Legacy Large Cap Growth Investment Division.................... 12,501,954 4,243,584 MetLife Conservative Allocation Investment Division...................... 36,887,734 8,867,625 MetLife Conservative to Moderate Allocation Investment Division.......... 165,591,003 8,729,334 MetLife Moderate Allocation Investment Division.......................... 381,658,266 8,600,703 MetLife Moderate to Aggressive Allocation Investment Division............ 324,016,074 4,935,112 MetLife Aggressive Allocation Investment Division........................ 41,034,350 8,160,280 FI Large Cap Investment Division (b)..................................... 3,595,188 954,043 Fidelity Money Market Investment Division................................ 19,985,416 15,006,180 Fidelity Equity-Income Investment Division............................... 23,185,801 18,830,602 Fidelity Growth Investment Division...................................... 1,414,185 23,268,659 Fidelity Overseas Investment Division.................................... 5,636,010 5,565,903 Fidelity Investment Grade Bond Investment Division....................... 2,449,664 3,773,033 Calvert Social Balanced Investment Division.............................. 5,087,579 4,967,065 Calvert Social Mid Cap Growth Investment Division........................ 699,110 2,155,329 Lord Abbett Bond Debenture Investment Division........................... 62,102,099 15,719,899 MFS Research International Investment Division........................... 128,318,549 49,792,294 T. Rowe Price Mid-Cap Growth Investment Division......................... 44,734,082 23,166,670 PIMCO Total Return Investment Division................................... 79,210,263 55,179,377 RCM Global Technology Investment Division................................ 14,270,544 17,390,889 Lazard Mid-Cap Investment Division....................................... 19,437,328 7,232,559 Met/AIM Small Cap Growth Investment Division............................. 11,446,461 4,642,697 Harris Oakmark International Investment Division......................... 191,245,109 48,001,768 Oppenheimer Capital Appreciation Investment Division..................... 9,193,251 1,098,929 Legg Mason Aggressive Growth Investment Division......................... 14,643,330 8,027,718 Third Avenue Small Cap Value Investment Division......................... 2,676,042 305,263 Neuberger Berman Real Estate Investment Division......................... 172,487,438 16,587,862 Legg Mason Value Equity Investment Division (b).......................... 44,390,668 11,697,362 Cyclical Growth ETF Investment Division (b).............................. 4,294,571 800,637 Cyclical Growth and Income ETF Investment Division (b)................... 3,396,598 558,263 PIMCO Inflation Protected Bond Investment Division....................... 16,090,599 2,423,419 American Funds Growth Investment Division................................ 239,931,352 35,484,956 American Funds Growth-Income Investment Division......................... 133,405,024 31,136,098 American Funds Global Small Capitalization Investment Division........... 182,206,389 46,228,332 American Funds Bond Investment Division (b).............................. 58,185,700 3,102,161 -------------- -------------- Total.................................................................... $4,645,352,212 $2,690,758,221 ============== ==============
(a) For the period January 1, 2006 to April 30, 2006 (b) For the period May 1, 2006 to December 31, 2006 F-65 METROPOLITAN LIFE SEPARATE ACCOUNT E OF METROPOLITAN LIFE INSURANCE COMPANY NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) 5. CHANGES IN OUTSTANDING UNITS The changes in units outstanding for the years ended December 31, 2006, and 2005 were as follows:
BLACKROCK BLACKROCK LARGE CAP VARIABLE B VARIABLE C DIVERSIFIED INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ------------------- ------------------- ------------------- ------------------- Outstanding at December 31, 2005 35,962,693 256,179 16,427 43,701,026 Activity during 2006: Issued........................ 1,624,601 1,299 78 2,339,811 Redeemed...................... (7,164,586) (55,393) (4,536) (8,515,850) ---------- ------- ------ ---------- Outstanding at December 31, 2006 30,422,708 202,085 11,969 37,524,987 ========== ======= ====== ========== Outstanding at December 31, 2004 41,533,677 280,320 16,427 49,414,541 Activity during 2005: Issued........................ 1,916,602 2,539 1,785 2,730,164 Redeemed...................... (7,487,586) (26,680) (1,785) (8,443,679) ---------- ------- ------ ---------- Outstanding at December 31, 2005 35,962,693 256,179 16,427 43,701,026 ========== ======= ====== ==========
(a) For the period January 1, 2006 to April 30, 2006 (b) For the period May 1, 2006 to December 31, 2006 F-66
BLACKROCK METLIFE FI FI T. ROWE PRICE OPPENHEIMER AGGRESSIVE GROWTH STOCK INDEX INTERNATIONAL STOCK MID CAP OPPORTUNITIES SMALL CAP GROWTH GLOBAL EQUITY INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ------------------- ------------------- ------------------- --------------------- ------------------- ------------------- 22,315,188 84,618,319 13,964,525 37,066,246 16,882,027 12,088,855 1,999,851 14,018,445 5,003,817 4,504,291 3,236,946 3,489,462 (4,852,229) (19,897,666) (4,281,473) (8,477,292) (4,198,849) (3,003,273) ---------- ----------- ---------- ---------- ---------- ---------- 19,462,810 78,739,098 14,686,869 33,093,245 15,920,124 12,575,044 ========== =========== ========== ========== ========== ========== 25,212,280 85,759,354 13,332,626 41,657,278 17,980,002 11,372,844 2,024,678 14,771,371 3,485,724 4,163,241 2,809,918 3,260,127 (4,921,770) (15,912,406) (2,853,825) (8,754,273) (3,907,893) (2,544,116) ---------- ----------- ---------- ---------- ---------- ---------- 22,315,188 84,618,319 13,964,525 37,066,246 16,882,027 12,088,855 ========== =========== ========== ========== ========== ==========
HARRIS OAKMARK LARGE CAP VALUE INVESTMENT DIVISION ------------------- 31,545,152 5,195,790 (8,028,765) ---------- 28,712,177 ========== 29,629,917 8,287,977 (6,372,742) ---------- 31,545,152 ==========
F-67 METROPOLITAN LIFE SEPARATE ACCOUNT E OF METROPOLITAN LIFE INSURANCE COMPANY NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) 5. CHANGES IN OUTSTANDING UNITS -- (CONTINUED) The changes in units outstanding for the years ended December 31, 2006, and 2005 were as follows:
NEUBERGER BERMAN T. ROWE PRICE LEHMAN BROTHERS MORGAN STANLEY MID CAP VALUE LARGE CAP GROWTH AGGREGATE BOND INDEX EAFE INDEX INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ------------------- ------------------- -------------------- ------------------- Outstanding at December 31, 2005 21,232,326 15,057,106 58,769,971 24,828,115 Activity during 2006: Issued........................ 7,345,188 3,779,338 17,631,546 9,070,365 Redeemed...................... (6,726,010) (3,531,472) (12,887,651) (6,829,826) ---------- ---------- ----------- ---------- Outstanding at December 31, 2006 21,851,504 15,304,972 63,513,866 27,068,654 ========== ========== =========== ========== Outstanding at December 31, 2004 16,214,942 14,178,974 46,560,646 21,202,631 Activity during 2005: Issued........................ 9,429,145 3,974,098 20,882,151 8,402,289 Redeemed...................... (4,411,761) (3,095,966) (8,672,826) (4,776,805) ---------- ---------- ----------- ---------- Outstanding at December 31, 2005 21,232,326 15,057,106 58,769,971 24,828,115 ========== ========== =========== ==========
(a) For the period January 1, 2006 to April 30, 2006 (b) For the period May 1, 2006 to December 31, 2006 F-68
RUSSELL JENNISON BLACKROCK METLIFE MID CAP FRANKLIN TEMPLETON BLACKROCK 2000 INDEX GROWTH STRATEGIC VALUE STOCK INDEX SMALL CAP GROWTH LARGE CAP VALUE INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ------------------- ------------------- ------------------- ------------------- ------------------- ------------------- 15,924,763 7,462,775 28,603,886 19,346,717 4,244,927 5,368,892 5,262,649 3,131,031 4,675,750 6,741,450 1,760,087 8,762,821 (4,288,537) (2,787,453) (6,466,415) (4,929,412) (1,491,476) (1,747,363) ---------- ---------- ---------- ---------- ---------- ---------- 16,898,875 7,806,353 26,813,221 21,158,755 4,513,538 12,384,350 ========== ========== ========== ========== ========== ========== 15,279,970 -- 29,576,684 16,857,835 3,958,098 4,308,811 4,965,024 9,619,831 5,567,470 6,380,620 1,515,862 2,301,157 (4,320,231) (2,157,056) (6,540,268) (3,891,738) (1,229,033) (1,241,076) ---------- ---------- ---------- ---------- ---------- ---------- 15,924,763 7,462,775 28,603,886 19,346,717 4,244,927 5,368,892 ========== ========== ========== ========== ========== ==========
BLACKROCK BOND INCOME INVESTMENT DIVISION ------------------- 16,263,054 2,574,843 (3,747,289) ---------- 15,090,608 ========== 16,511,060 2,902,153 (3,150,159) ---------- 16,263,054 ==========
F-69 METROPOLITAN LIFE SEPARATE ACCOUNT E OF METROPOLITAN LIFE INSURANCE COMPANY NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) 5. CHANGES IN OUTSTANDING UNITS -- (CONTINUED) The changes in units outstanding for the years ended December 31, 2006, and 2005 were as follows:
BLACKROCK DAVIS LOOMIS SAYLES MFS MONEY MARKET VENTURE VALUE SMALL CAP INVESTORS TRUST INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION (A) ------------------- ------------------- ------------------- ----------------------- Outstanding at December 31, 2005 1,240,999 9,616,873 1,880,156 2,689,053 Activity during 2006: Issued........................ 2,053,318 5,394,725 2,126,954 317,297 Redeemed...................... (1,937,721) (2,002,171) (909,564) (3,006,350) ---------- ---------- --------- ---------- Outstanding at December 31, 2006 1,356,596 13,009,427 3,097,546 -- ========== ========== ========= ========== Outstanding at December 31, 2004 1,089,932 6,061,573 1,424,451 2,351,228 Activity during 2005: Issued........................ 773,102 4,796,482 844,808 799,868 Redeemed...................... (622,035) (1,241,182) (389,103) (462,043) ---------- ---------- --------- ---------- Outstanding at December 31, 2005 1,240,999 9,616,873 1,880,156 2,689,053 ========== ========== ========= ==========
(a) For the period January 1, 2006 to April 30, 2006 (b) For the period May 1, 2006 to December 31, 2006 F-70
WESTERN ASSET MANAGEMENT WESTERN ASSET HARRIS OAKMARK STRATEGIC BOND MANAGEMENT FI MFS BLACKROCK FOCUSED VALUE OPPORTUNITIES U.S. GOVERNMENT VALUE LEADERS TOTAL RETURN LEGACY LARGE CAP GROWTH INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ------------------- ------------------- ------------------- ------------------- ------------------- ----------------------- 11,283,242 11,262,819 10,976,124 1,911,983 3,604,722 640,982 2,378,911 5,464,345 4,328,751 2,099,346 1,329,962 812,332 (3,336,405) (3,315,529) (3,019,721) (833,004) (987,371) (391,269) ---------- ---------- ---------- --------- ---------- --------- 10,325,748 13,411,635 12,285,154 3,178,325 3,947,313 1,062,045 ========== ========== ========== ========= ========== ========= 9,659,217 7,027,888 7,714,000 856,897 2,312,843 301,836 3,697,325 5,711,610 5,162,073 1,516,467 2,370,547 549,733 (2,073,300) (1,476,679) (1,899,949) (461,381) (1,078,668) (210,587) ---------- ---------- ---------- --------- ---------- --------- 11,283,242 11,262,819 10,976,124 1,911,983 3,604,722 640,982 ========== ========== ========== ========= ========== =========
METLIFE CONSERVATIVE ALLOCATION INVESTMENT DIVISION ------------------- 1,232,690 4,180,579 (1,573,340) ---------- 3,839,929 ========== -- 1,472,711 (240,021) ---------- 1,232,690 ==========
F-71 METROPOLITAN LIFE SEPARATE ACCOUNT E OF METROPOLITAN LIFE INSURANCE COMPANY NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) 5. CHANGES IN OUTSTANDING UNITS -- (CONTINUED) The changes in units outstanding for the years ended December 31, 2006, and 2005 were as follows:
METLIFE METLIFE CONSERVATIVE TO MODERATE TO MODERATE METLIFE AGGRESSIVE METLIFE ALLOCATION MODERATE ALLOCATION ALLOCATION AGGRESSIVE ALLOCATION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ------------------- ------------------- ------------------- --------------------- Outstanding at December 31, 2005 4,525,054 8,136,943 5,478,129 659,010 Activity during 2006: Issued........................ 16,681,800 36,022,444 28,990,092 3,778,992 Redeemed...................... (2,526,071) (3,369,287) (2,027,703) (1,051,761) ---------- ---------- ---------- ---------- Outstanding at December 31, 2006 18,680,783 40,790,100 32,440,518 3,386,241 ========== ========== ========== ========== Outstanding at December 31, 2004 -- -- -- -- Activity during 2005: Issued........................ 5,001,929 8,640,654 5,779,726 774,412 Redeemed...................... (476,875) (503,711) (301,597) (115,402) ---------- ---------- ---------- ---------- Outstanding at December 31, 2005 4,525,054 8,136,943 5,478,129 659,010 ========== ========== ========== ==========
(a) For the period January 1, 2006 to April 30, 2006 (b) For the period May 1, 2006 to December 31, 2006 F-72
FI FIDELITY FIDELITY FIDELITY FIDELITY FIDELITY LARGE CAP MONEY MARKET EQUITY-INCOME GROWTH OVERSEAS INVESTMENT GRADE BOND INVESTMENT DIVISION (B) INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ----------------------- ------------------- ------------------- ------------------- ------------------- --------------------- -- 398,745 2,814,629 3,645,885 1,302,806 896,213 225,400 1,426,632 262,598 241,006 326,056 143,835 (63,463) (1,132,594) (560,384) (771,130) (328,779) (230,050) ------- ---------- --------- --------- --------- -------- 161,937 692,783 2,516,843 3,115,761 1,300,083 809,998 ======= ========== ========= ========= ========= ======== -- 508,676 3,181,549 4,247,099 1,402,715 942,267 -- 502,625 244,063 299,161 215,684 182,284 -- (612,556) (610,983) (900,375) (315,593) (228,338) ------- ---------- --------- --------- --------- -------- -- 398,745 2,814,629 3,645,885 1,302,806 896,213 ======= ========== ========= ========= ========= ========
CALVERT SOCIAL BALANCED INVESTMENT DIVISION ------------------- 2,181,124 265,307 (315,270) --------- 2,131,161 ========= 2,197,291 461,013 (477,180) --------- 2,181,124 =========
F-73 METROPOLITAN LIFE SEPARATE ACCOUNT E OF METROPOLITAN LIFE INSURANCE COMPANY NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) 5. CHANGES IN OUTSTANDING UNITS -- (CONTINUED) The changes in units outstanding for the years ended December 31, 2006, and 2005 were as follows:
CALVERT SOCIAL LORD ABBETT MFS RESEARCH T. ROWE PRICE MID CAP GROWTH BOND DEBENTURE INTERNATIONAL MID CAP GROWTH INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ------------------- ------------------- ------------------- ------------------- Outstanding at December 31, 2005 466,889 11,143,052 4,118,785 11,533,257 Activity during 2006: Issued........................ 52,051 4,645,758 9,856,218 7,188,713 Redeemed...................... (99,450) (2,578,523) (5,014,665) (4,900,122) -------- ---------- ---------- ---------- Outstanding at December 31, 2006 419,490 13,210,287 8,960,338 13,821,848 ======== ========== ========== ========== Outstanding at December 31, 2004 506,064 9,177,096 2,756,605 8,669,095 Activity during 2005: Issued........................ 67,817 4,160,296 2,730,755 5,407,984 Redeemed...................... (106,992) (2,194,340) (1,368,575) (2,543,822) -------- ---------- ---------- ---------- Outstanding at December 31, 2005 466,889 11,143,052 4,118,785 11,533,257 ======== ========== ========== ==========
(a) For the period January 1, 2006 to April 30, 2006 (b) For the period May 1, 2006 to December 31, 2006 F-74
OPPENHEIMER PIMCO RCM GLOBAL LAZARD MET/AIM HARRIS OAKMARK CAPITAL TOTAL RETURN TECHNOLOGY MID-CAP SMALL CAP GROWTH INTERNATIONAL APPRECIATION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ------------------- ------------------- ------------------- ------------------- ------------------- ------------------- 33,143,919 9,833,932 2,877,414 1,475,123 9,989,980 448,382 10,047,457 4,410,771 1,192,945 796,743 12,226,430 1,099,980 (8,597,005) (4,789,547) (727,507) (508,203) (5,220,070) (208,655) ---------- ---------- --------- --------- ---------- --------- 34,594,371 9,455,156 3,342,852 1,763,663 16,996,340 1,339,707 ========== ========== ========= ========= ========== ========= 24,585,923 11,146,560 2,505,486 1,153,716 4,686,847 42,330 13,256,698 3,664,483 1,111,291 657,961 7,279,668 468,801 (4,698,702) (4,977,111) (739,363) (336,554) (1,976,535) (62,749) ---------- ---------- --------- --------- ---------- --------- 33,143,919 9,833,932 2,877,414 1,475,123 9,989,980 448,382 ========== ========== ========= ========= ========== =========
LEGG MASON AGGRESSIVE GROWTH INVESTMENT DIVISION ------------------- 3,428,990 2,290,121 (1,677,781) ---------- 4,041,330 ========== 2,835,847 1,642,901 (1,049,758) ---------- 3,428,990 ==========
F-75 METROPOLITAN LIFE SEPARATE ACCOUNT E OF METROPOLITAN LIFE INSURANCE COMPANY NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) 5. CHANGES IN OUTSTANDING UNITS -- (CONTINUED) The changes in units outstanding for the years ended December 31, 2006, and 2005 were as follows:
THIRD AVENUE NEUBERGER BERMAN LEGG MASON CYCLICAL SMALL CAP VALUE REAL ESTATE VALUE EQUITY GROWTH ETF INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION (B) INVESTMENT DIVISION (B) ------------------- ------------------- ----------------------- ----------------------- Outstanding at December 31, 2005 138,389 11,156,645 -- -- Activity during 2006: Issued........................ 174,972 12,321,018 3,948,332 419,071 Redeemed...................... (49,888) (3,837,001) (546,827) (96,119) ------- ---------- --------- ------- Outstanding at December 31, 2006 263,473 19,640,662 3,401,505 322,952 ======= ========== ========= ======= Outstanding at December 31, 2004 27,952 4,508,731 -- -- Activity during 2005: Issued........................ 127,347 9,258,310 -- -- Redeemed...................... (16,910) (2,610,396) -- -- ------- ---------- --------- ------- Outstanding at December 31, 2005 138,389 11,156,645 -- -- ======= ========== ========= =======
(a) For the period January 1, 2006 to April 30, 2006 (b) For the period May 1, 2006 to December 31, 2006 F-76
AMERICAN FUNDS CYCLICAL PIMCO AMERICAN FUNDS AMERICAN FUNDS GLOBAL SMALL GROWTH AND INCOME ETF INFLATION PROTECTED BOND GROWTH GROWTH AND INCOME CAPITALIZATION INVESTMENT DIVISION (B) INVESTMENT DIVISION (B) INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ----------------------- ------------------------ ------------------- ------------------- ------------------- -- -- 5,817,927 6,416,996 12,642,767 330,294 1,459,749 2,561,534 2,033,946 9,433,328 (63,298) (231,128) (1,170,720) (1,226,390) (5,011,660) ------- --------- ---------- ---------- ---------- 266,996 1,228,621 7,208,741 7,224,552 17,064,435 ======= ========= ========== ========== ========== -- -- 4,245,543 5,181,523 8,037,895 -- -- 2,359,943 2,215,037 7,056,512 -- -- (787,559) (979,564) (2,451,640) ------- --------- ---------- ---------- ---------- -- -- 5,817,927 6,416,996 12,642,767 ======= ========= ========== ========== ==========
AMERICAN FUNDS BOND INVESTMENT DIVISION (B) ----------------------- -- 3,947,258 (290,298) --------- 3,656,960 ========= -- -- -- --------- -- =========
F-77 METROPOLITAN LIFE SEPARATE ACCOUNT E OF METROPOLITAN LIFE INSURANCE COMPANY NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) 6. UNIT VALUES -- (CONTINUED) The following table is a summary of unit values and units outstanding for the Contracts and the expenses as a percentage of average net assets, excluding expenses for the underlying portfolios, for the five years ended December 31, 2006, 2005, 2004, 2003 and 2002 or lesser time period if applicable.
BLACKROCK LARGE CAP VARIABLE B VARIABLE C INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ------------------- ------------------- ------------------- 2006 Units............................................................. 30,422,708 202,085 11,969 Unit Fair Value, Lowest to Highest (1)............................ $13.80 to $82.16 $45.46 to $169.07 $169.07 to $207.39 Net Assets........................................................ $1,213,697,540 $32,075,445 $2,255,006 Investment Income Ratio to Net Assets (2)......................... 1.32% 1.35% 1.36% Expenses as a Percent of Average Net Assets, Lowest to Highest (3) 0.95% to 2.30% 1.00% 1.00% Total Return, Lowest to Highest (4)............................... 11.26% to 13.04% 13.22% 13.61% 2005 Units............................................................. 35,962,693 256,179 16,427 Unit Fair Value, Lowest to Highest (1)............................ $12.20 to $72.68 $39.84 to $149.63 $149.63 to $181.74 Net Assets........................................................ $1,267,668,619 $34,430,948 $2,530,897 Investment Income Ratio to Net Assets (2)......................... 1.10% 1.11% 1.22% Expenses as a Percent of Average Net Assets, Lowest to Highest (3) 0.95% to 2.30% 1.00% 1.00% Total Return, Lowest to Highest (4)............................... 0.97% to 2.64% 2.64% to 4.24% 2.64% to 3.66% 2004 Units............................................................. 41,533,677 280,320 16,427 Unit Fair Value, Lowest to Highest (1)............................ $11.89 to $70.82 $38.22 to $145.78 $145.78 to $175.32 Net Assets........................................................ $1,423,521,417 $35,610,341 $2,571,598 Investment Income Ratio to Net Assets (2)......................... 0.73% 0.76% 0.45% Expenses as a Percent of Average Net Assets, Lowest to Highest (3) 0.95% to 2.30% 1.00% 0.00% Total Return, Lowest to Highest (4)............................... 6.33% to 10.46% 7.09% to 9.21% 9.21% to 10.31% 2003 Units............................................................. 46,131,601 282,208 17,037 Unit Fair Value, Lowest to Highest (1)............................ $10.83 to $64.50 $133.49 $133.49 Net Assets........................................................ $1,436,555,863 $42,740,424 $1,145,818 Investment Income Ratio to Net Assets (2)......................... 0.84% 0.92% 0.88% Expenses as a Percent of Average Net Assets, Lowest to Highest (3) 0.95% to 2.30% 1.00% 1.00% Total Return, Lowest to Highest (4)............................... 25.82% to 29.08% 28.06% 28.06% 2002 Units............................................................. 49,889,535 305,507 7,818 Unit Fair Value, Lowest to Highest (1)............................ $8.39 to $49.99 $104.24 $104.24 Net Assets........................................................ $1,196,193,511 $36,937,355 $1,170,621 Investment Income Ratio to Net Assets (2)......................... 0.57% 0.55% 0.54% Expenses as a Percent of Average Net Assets, Lowest to Highest (3) 0.95% to 2.20% 1.0% 0% Total Return, Lowest to Highest (4)............................... -28% to -3% -27% -27%
(1) Metropolitan Life sells a number of variable annuity products, which have unique combinations of features and fees that are charged against the Contract owners' account balance. Differences in the fee structures result in a variety of unit values, expense ratios and total returns. (2) These amounts represent the dividends, excluding distributions of capital gains, received by the investment division from the underlying portfolio, net of management fees assessed by the portfolio manager, divided by the average net assets. These ratios exclude those expenses, such as mortality and expense risk charges, that are assessed against Contract owner accounts either through reductions in unit values or the redemption of units. The recognition of investment income by the investment division is affected by the timing of the declaration of dividends by the underlying portfolio in which the investment divisions invest. (3) These amounts represent the annualized Contract expenses of the Separate Account, consisting primarily of mortality and expense risk charges, for each period indicated. The ratios include only those expenses that result in a direct reduction to unit values. Charges made directly to Contract owner accounts through the redemption of units and expenses of the underlying portfolio are excluded. (4) These amounts represent the total return for the periods indicated, including changes in the value of the underlying portfolio and expenses assessed through the reduction of unit values. The total return does not include any expenses assessed through the redemption of units. Investment options with a date notation indicate the effective date of that investment option in the Separate Account. The total return is calculated for each period indicated or from the effective date through the end of the reporting period. (a) For the period January 1, 2006 to April 30, 2006 (b) For the period May 1, 2006 to December 31, 2006 F-78
BLACKROCK BLACKROCK METLIFE FI FI T. ROWE PRICE DIVERSIFIED AGGRESSIVE GROWTH STOCK INDEX INTERNATIONAL STOCK MID CAP OPPORTUNITIES SMALL CAP GROWTH INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ------------------- ------------------- ------------------- ------------------- --------------------- ------------------- 37,524,987 19,462,810 78,739,098 14,686,869 33,093,245 15,920,124 $13.19 to $48.72 $14.68 to $49.89 $12.91 to $49.92 $15.35 to $21.74 $13.33 to $20.62 $13.48 to $16.09 $1,283,710,537 $657,496,616 $3,412,276,448 $294,563,493 $662,043,069 $241,933,957 2.46% 0.00% 1.96% 1.40% 0.01% 0.00% 0.95% to 2.30% 0.95% to 2.30% 0.50% to 2.30% 0.95% to 2.30% 0.65% to 2.30% 0.50% to 2.30% 7.76% to 9.49% 4.04% to 5.72% -2.44% to 14.72% 13.58% to 15.41% 9.00% to 11.13% 1.28% to 12.45% 43,701,026 22,315,188 84,618,319 13,964,525 37,066,246 16,882,027 $12.04 to $44.49 $13.88 to $47.19 $11.56 to $43.55 $13.72 to $18.84 $12.04 to $18.61 $13.31 to $15.24 $1,364,024,142 $713,800,758 $3,217,216,070 $246,270,129 $672,025,922 $250,349,096 1.59% 0.00% 1.56% 0.58% 0.00% 0.00% 0.95% to 2.30% 0.95% to 2.30% 0.95% to 2.30% 0.95% to 1.25% 0.65% to 2.30% 0.65% to 2.30% 0.48% to 2.09% 7.94% to 9.67% 2.02% to 4.01% 14.93% to 16.95% 4.27% to 6.21% .65% to 10.22% 49,414,541 25,212,280 85,759,354 13,332,626 41,657,278 17,980,002 $11.80 to $43.58 $12.66 to $43.03 $11.11 to $41.93 $11.94 to $16.11 $11.44 to $17.57 $12.30 to $13.86 $1,509,148,475 $735,674,081 $3,155,883,032 $203,820,632 $715,717,082 $243,468,250 1.89% 0.00% 0.83% 1.28% 0.49% 0.00% 0.95% to 2.30% 0.95% to 2.30% 0.50% to 2.30% 0.95% to 2.30% 0.65% to 2.30% 0.65% to 2.30% 5.75% to 8.00% 9.86% to 11.94% 7.71% to 9.78% 13.55% to 17.11% 12.01% to 16.38% 5.98% to 10.41% . 53,723,371 27,593,291 80,944,392 13,732,594 43,573,347 18,783,855 $10.97 to $40.55 $11.31 to $38.45 $10.82 to $38.22 $10.48 to $13.76 $11.28 to $15.14 $11.38 to $12.60 $1,521,354,910 $718,243,154 $2,724,568,861 $181,194,465 $647,159,872 $231,644,470 3.72% 0.00% 1.66% 0.67% 0.00% 0.00% 0.95% to 2.30% 0.95% to 2.30% 0.50% to 2.30% 0.95% to 2.30% 0.95% to 2.30% 0.95% to 2.30% 17.67% to 19.44% 37.39% to 39.46% 25.08% to 27.23% 24.99% to 26.82% 31.50% to 33.33% 37.43% to 40.23% 58,214,858 28,888,640 80,995,688 14,131,444 46,924,968 18,480,398 $9.19 to $33.95 $8.11 to $27.57 $8.52 to $29.70 $8.48 to $10.85 $8.46 to $11.36 $8.26 to $9.03 $1,375,721,650 $539,038,205 $2,148,997,728 $148,302,248 $524,360,926 $163,890,306 2.43% 0.00% 0.88% 0.90% 0.00% 0.00% 0.95% to 2.20% 0.95% to 2.20% 0.95% to 2.20% 0.95% to 2.20% 0.95% to 2.20% 0.95% to 2.20% -16% to -8% -30% to -19% -24% to 0% -19% to -14% -31% to -15% -28% to 2%
OPPENHEIMER GLOBAL EQUITY INVESTMENT DIVISION ------------------- 12,575,044 $15.47 to $20.69 $251,446,846 2.50% 0.95% to 2.30% 13.71% to 15.53% 12,088,855 $14.88 to $17.91 $210,571,508 0.54% 0.95% to 2.30% 13.36% to 15.13% 11,372,844 $12.93 to $15.56 $172,750,812 1.57% 0.95% to 2.30% 11.68% to 15.47% 11,753,027 $11.21 to $13.49 $155,401,839 2.07% 0.95% to 2.30% 27.40% to 29.30% 11,877,060 $8.67 to $10.44 $121,961,430 1.76% 0.95% to 2.20% -18% to -13%
F-79 METROPOLITAN LIFE SEPARATE ACCOUNT E OF METROPOLITAN LIFE INSURANCE COMPANY NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) 6. UNIT VALUES -- (CONTINUED) The following table is a summary of unit values and units outstanding for the Contracts and the expenses as a percentage of average net assets, excluding expenses for the underlying portfolios, for the five years ended December 31, 2006, 2005, 2004, 2003 and 2002 or lesser time period if applicable.
HARRIS OAKMARK NEUBERGER BERMAN T. ROWE PRICE LARGE CAP VALUE MID CAP VALUE LARGE CAP GROWTH INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ------------------- ------------------- ------------------- 2006 Units............................................................. 28,712,177 21,851,504 15,304,972 Unit Fair Value, Lowest to Highest (1)............................ $12.48 to $15.88 $14.20 to $28.20 $12.95 to $14.90 Net Assets........................................................ $432,262,160 $583,683,569 $220,662,118 Investment Income Ratio to Net Assets (2)......................... 0.69% 0.41% 0.27% Expenses as a Percent of Average Net Assets, Lowest to Highest (3) 0.50% to 2.30% 0.50% to 2.30% 0.95% to 2.30% Total Return, Lowest to Highest (4)............................... 15.16% to 17.35% 8.67% to 10.64% 10.30% to 15.81% 2005 Units............................................................. 31,545,152 21,232,326 15,057,106 Unit Fair Value, Lowest to Highest (1)............................ $11.58 to $13.45 $12.86 to $25.48 $11.90 to $13.29 Net Assets........................................................ $408,151,596 $517,299,339 $194,650,515 Investment Income Ratio to Net Assets (2)......................... 0.64% 0.24% 0.50% Expenses as a Percent of Average Net Assets, Lowest to Highest (3) 0.60% to 2.30% 0.50% to 2.30% 0.95% to 2.30% Total Return, Lowest to Highest (4)............................... -3.87% to -1.98% 9.39% to 11.20% 2.31 to 5.61% 2004 Units............................................................. 29,629,917 16,214,942 14,178,974 Unit Fair Value, Lowest to Highest (1)............................ $11.85 to $13.75 $14.37 to $22.61 $11.45 to $12.58 Net Assets........................................................ $395,114,883 $358,032,635 $174,634,867 Investment Income Ratio to Net Assets (2)......................... 0.46% 0.22% 0.19% Expenses as a Percent of Average Net Assets, Lowest to Highest (3) 0.60% to 2.30% 0.95% to 2.30% 0.95% to 2.30% Total Return, Lowest to Highest (4)............................... 7.27% to 10.72% 11.76% to 21.78% 7.30% to 10.18% 2003 Units............................................................. 25,185,615 11,300,706 12,978,905 Unit Fair Value, Lowest to Highest (1)............................ $10.74 to $12.45 $11.80 to $18.57 $10.71 to $11.56 Net Assets........................................................ $306,337,319 $206,461,099 $147,759,339 Investment Income Ratio to Net Assets (2)......................... 0.00% 0.31% 0.11% Expenses as a Percent of Average Net Assets, Lowest to Highest (3) 0.50% to 2.30% 0.95% to 2.30% 0.95% to 2.30% Total Return, Lowest to Highest (4)............................... 22.49% to 24.32% 33.28% to 35.25% 27.61% to 29.63% 2002 Units............................................................. 22,098,826 10,130,647 11,767,306 Unit Fair Value, Lowest to Highest (1)............................ $8.64 to $9.95 $8.73 to $13.73 $8.64 to $8.92 Net Assets........................................................ $217,357,181 $137,491,102 $103,789,751 Investment Income Ratio to Net Assets (2)......................... 0.86% 0.11% 0.28% Expenses as a Percent of Average Net Assets, Lowest to Highest (3) 0.95% to 2.20% 0.95% to 2.20% 0.95% to 2.20% Total Return, Lowest to Highest (4)............................... -16% to -2% -13% to -2% -25% to 2%
(1) Metropolitan Life sells a number of variable annuity products, which have unique combinations of features and fees that are charged against the Contract owners' account balance. Differences in the fee structures result in a variety of unit values, expense ratios and total returns. (2) These amounts represent the dividends, excluding distributions of capital gains, received by the investment division from the underlying portfolio, net of management fees assessed by the portfolio manager, divided by the average net assets. These ratios exclude those expenses, such as mortality and expense risk charges, that are assessed against Contract owner accounts either through reductions in unit values or the redemption of units. The recognition of investment income by the investment division is affected by the timing of the declaration of dividends by the underlying portfolio in which the investment divisions invest. (3) These amounts represent the annualized Contract expenses of the Separate Account, consisting primarily of mortality and expense risk charges, for each period indicated. The ratios include only those expenses that result in a direct reduction to unit values. Charges made directly to Contract owner accounts through the redemption of units and expenses of the underlying portfolio are excluded. (4) These amounts represent the total return for the periods indicated, including changes in the value of the underlying portfolio and expenses assessed through the reduction of unit values. The total return does not include any expenses assessed through the redemption of units. Investment options with a date notation indicate the effective date of that investment option in the Separate Account. The total return is calculated for each period indicated or from the effective date through the end of the reporting period. (a) For the period January 1, 2006 to April 30, 2006 (b) For the period May 1, 2006 to December 31, 2006 F-80
LEHMAN BROTHERS MORGAN STANLEY RUSSELL JENNISON BLACKROCK METLIFE MID AGGREGATE BOND INDEX EAFE INDEX 2000 INDEX GROWTH STRATEGIC VALUE CAP STOCK INDEX INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION -------------------- ------------------- ------------------- ------------------- ------------------- ------------------- 63,513,866 27,068,654 16,898,875 7,806,353 26,813,221 21,158,755 $10.74 to $14.13 $14.24 to $19.48 $16.66 to $19.79 $4.65 to $12.47 $15.78 to $22.61 $13.61 to $16.55 $849,543,686 $424,305,304 $319,432,503 $39,203,639 $580,737,411 $335,945,846 4.21% 1.62% 0.75% 0.00% 0.24% 1.09% 0.50% to 2.30% 0.50% to 2.30% 0.50% to 2.30% 0.65% to 2.30% 0.50% to 2.30% 0.50% to 2.30% 1.48% to 3.45% 22.65% to 24.81% 14.88% to 17.20% 0.20% to 2.09% 13.79% to 15.98% 7.32% to 13.52% 58,769,971 24,828,115 15,924,763 7,462,775 28,603,886 19,346,717 $10.42 to $13.68 $11.61 to $15.64 $14.26 to $16.92 $4.64 to $12.25 $13.65 to $19.26 $13.72 to $15.07 $768,286,065 $314,544,224 $259,430,466 $37,114,974 $538,301,526 $283,308,837 3.67% 1.52% 0.71% 0.00% 0.00% 0.61% 0.50% to 2.30% 0.50% to 2.30% 0.50% to 2.30% 0.65% to 2.30% 0.65% to 2.30% 0.65% to 2.30% -0.48% to 1.39% 10.33% to 12.43% 1.97% to 3.80% 9.94% to 11.90% 1.57% to 3.51% 6.82% to 11.38% 46,560,646 21,202,631 15,279,970 -- 29,576,684 16,857,835 $11.21 to $13.50 $10.52 to $13.94 $13.77 to $16.30 $-- $13.23 to $18.67 $12.53 to $13.53 $607,563,120 $241,576,840 $242,131,144 $-- $542,389,566 $223,266,641 2.63% 0.73% 0.47% -- 0.00% 0.52% 0.50% to 2.30% 0.50% to 2.30% 0.50% to 2.30% -- 0.65% to 2.30% 0.60% to 2.30% 0.17% to 3.46% 14.75% to 18.74% 13.80% to 16.85% -- 11.83% to 14.57% 11.33% to 15.05% 30,485,159 19,519,582 14,716,651 -- 24,672,525 16,640,765 $10.88 to $13.07 $9.15 to $11.77 $11.81 to $13.95 $-- $11.58 to $16.34 $11.14 to $11.76 $389,701,037 $189,195,386 $200,997,329 $-- $398,038,205 $192,970,729 5.38% 1.45% 0.61% -- 0.00% 0.43% 0.50% to 2.30% 0.50% to 2.30% 0.50% to 2.30% -- 0.95% to 2.30% 0.50% to 2.30% 1.13% to 2.91% 34.19% to 36.50% 42.69% to 45.01% -- 46.51% to 50.60% 31.71% to 33.69% 23,589,333 14,677,925 11,623,809 -- 20,893,360 12,279,701 $10.59 to $12.69 $6.85 to $8.63 $8.16 to $9.61 $-- $7.78 to $10.98 $8.43 to $8.78 $295,466,638 $104,947,903 $110,231,824 $-- $227,655,295 $107,024,585 2.88% 0.50% 0.60% -- 0.07% 0.38% 0.95% to 2.20% 0.95% to 2.20% 0.95% to 2.20% -- 0.95% to 2.20% 0.95% to 2.20% 4% to 9% -18% to -3% -21% to -1% -- -23% to -5% -17% to -1%
FRANKLIN TEMPLETON SMALL CAP GROWTH INVESTMENT DIVISION ------------------- 4,513,538 $10.33 to $12.64 $49,635,104 0.00% 0.60% to 2.30% 1.88% to 9.11% 4,244,927 $9.63 to $11.60 $43,057,929 0.00% 0.60% to 2.30% 2.03% to 9.46% 3,958,098 $9.44 to $11.19 $38,943,339 0.00% 0.60% to 2.30% 8.68% to 23.51% 3,288,203 $8.72 to $9.09 $29,155,697 0.00% 0.50% to 2.30% 41.34% to 43.58% 1,861,007 $6.18 to $6.31 $11,664,106 0.00% 0.95% to 2.20% -29% to 1%
F-81 METROPOLITAN LIFE SEPARATE ACCOUNT E OF METROPOLITAN LIFE INSURANCE COMPANY NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) 6. UNIT VALUES -- (CONTINUED) The following table is a summary of unit values and units outstanding for the Contracts and the expenses as a percentage of average net assets, excluding expenses for the underlying portfolios, for the five years ended December 31, 2006, 2005, 2004, 2003 and 2002 or lesser time period if applicable.
BLACKROCK BLACKROCK BLACKROCK LARGE CAP VALUE BOND INCOME MONEY MARKET INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ------------------- ------------------- ------------------- 2006 Units............................................................. 12,384,350 15,090,608 1,356,596 Unit Fair Value, Lowest to Highest (1)............................ $13.60 to $15.04 $11.91 to $57.26 $18.95 to $24.22 Net Assets........................................................ $179,447,389 $496,636,469 $29,869,403 Investment Income Ratio to Net Assets (2)......................... 0.86% 5.68% 4.59% Expenses as a Percent of Average Net Assets, Lowest to Highest (3) 0.50% to 2.30% 0.50% to 2.30% 0.95% to 2.30% Total Return, Lowest to Highest (4)............................... 16.41% to 18.54% 1.78% to 3.74% 2.26% to 3.83% 2005 Units............................................................. 5,368,892 16,263,054 1,240,999 Unit Fair Value, Lowest to Highest (1)............................ $11.74 to $12.53 $11.51 to $54.04 $18.53 to $23.43 Net Assets........................................................ $66,157,275 $499,970,297 $26,441,007 Investment Income Ratio to Net Assets (2)......................... 0.81% 3.88% 2.48% Expenses as a Percent of Average Net Assets, Lowest to Highest (3) 0.95% to 2.30% 0.65% to 2.30% 0.95% to 2.30% Total Return, Lowest to Highest (4)............................... 3.18% to 5.01% -0.16% to 1.73% 0.34% to 12.20% 2004 Units............................................................. 4,308,811 16,511,060 1,089,932 Unit Fair Value, Lowest to Highest (1)............................ $11.18 to $11.97 $11.35 to $53.22 $18.26 to $23.09 Net Assets........................................................ $50,981,319 $479,529,727 $22,990,726 Investment Income Ratio to Net Assets (2)......................... 0.00% 4.02% 0.86% Expenses as a Percent of Average Net Assets, Lowest to Highest (3) 0.95% to 2.30% 0.60% to 2.30% 0.95% to 2.30% Total Return, Lowest to Highest (4)............................... 1.54% to 12.29% -6.04% to 3.77% -1.46% to 0.05% 2003 Units............................................................. 1,872,159 17,412,347 701,222 Unit Fair Value, Lowest to Highest (1)............................ $10.42 to $10.66 $10.97 to $48.34 $18.73 to $23.19 Net Assets........................................................ $19,817,443 $470,409,429 $14,346,188 Investment Income Ratio to Net Assets (2)......................... 1.16% 3.20% 0.68% Expenses as a Percent of Average Net Assets, Lowest to Highest (3) 0.95% to 2.30% 0.95% to 2.30% 0.95% to 2.30% Total Return, Lowest to Highest (4)............................... 32.33% to 34.09% 3.28% to 6.42% -1.13% to -0.14% 2002 Units............................................................. 395,703 18,888,740 459,011 Unit Fair Value, Lowest to Highest (1)............................ $7.88 to $7.95 $10.46 to $46.31 $19.98 to $21.75 Net Assets........................................................ $3,130,580 $474,778,079 $9,162,959 Investment Income Ratio to Net Assets (2)......................... 0.86% 5.78% 1.33% Expenses as a Percent of Average Net Assets, Lowest to Highest (3) 0.95% to 2.20% 0.95% to 2.20% 1.25% to 1.50% Total Return, Lowest to Highest (4)............................... -21% to -3% 4% to 7% 0%
(1) Metropolitan Life sells a number of variable annuity products, which have unique combinations of features and fees that are charged against the Contract owners' account balance. Differences in the fee structures result in a variety of unit values, expense ratios and total returns. (2) These amounts represent the dividends, excluding distributions of capital gains, received by the investment division from the underlying portfolio, net of management fees assessed by the portfolio manager, divided by the average net assets. These ratios exclude those expenses, such as mortality and expense risk charges, that are assessed against Contract owner accounts either through reductions in unit values or the redemption of units. The recognition of investment income by the investment division is affected by the timing of the declaration of dividends by the underlying portfolio in which the investment divisions invest. (3) These amounts represent the annualized Contract expenses of the Separate Account, consisting primarily of mortality and expense risk charges, for each period indicated. The ratios include only those expenses that result in a direct reduction to unit values. Charges made directly to Contract owner accounts through the redemption of units and expenses of the underlying portfolio are excluded. (4) These amounts represent the total return for the periods indicated, including changes in the value of the underlying portfolio and expenses assessed through the reduction of unit values. The total return does not include any expenses assessed through the redemption of units. Investment options with a date notation indicate the effective date of that investment option in the Separate Account. The total return is calculated for each period indicated or from the effective date through the end of the reporting period. (a) For the period January 1, 2006 to April 30, 2006 (b) For the period May 1, 2006 to December 31, 2006 F-82
DAVIS LOOMIS SAYLES MFS HARRIS OAKMARK WESTERN ASSET MANAGEMENT VENTURE VALUE SMALL CAP INVESTORS TRUST FOCUSED VALUE STRATEGIC BOND OPPORTUNITIES INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION (A) INVESTMENT DIVISION INVESTMENT DIVISION ------------------- ------------------- ----------------------- ------------------- ---------------------------- 13,009,427 3,097,546 -- 10,325,748 13,411,635 $13.39 to $41.95 $13.75 to $35.91 -- $13.34 to $44.24 $11.23 to $23.07 $499,120,554 $101,108,667 $-- $418,653,330 $281,812,127 0.69% 0.00% 0.82% 0.22% 4.83% 0.50% to 2.30% 0.50% to 2.30% 0.95% to 2.30% 0.50% to 2.30% 0.50% to 2.30% 11.71% to 13.84% 13.76% to 15.82% 3.77% to 6.46% 9.63% to 11.61% 2.46% to 4.38% 9,616,873 1,880,156 2,689,053 11,283,242 11,262,819 $11.80 to $36.05 $11.90 to $30.17 $8.53 to $9.41 $11.97 to $39.14 $10.79 to $21.59 $327,836,546 $53,640,656 $24,530,659 $413,672,421 $228,960,440 0.55% 0.00% 0.34% 0.02% 2.72% 0.65% to 2.30% 0.95% to 2.30% 0.95% to 2.30% 0.95% to 2.30% 0.95% to 2.30% 7.52% to 9.60% 4.28% to 5.97% 4.44% to 6.26% 7.22% to 9.06% 0.23% to 1.89% 6,061,573 1,424,451 2,351 9,659,217 7,027,888 $12.62 to $32.99 $12.66 to $28.47 $8.10 to $8.86 $10.99 to $35.89 $18.05 to $21.19 $191,013,088 $38,635,528 $20,307 $327,616,615 $141,477,434 0.49% 0.00% 0.42% 0.03% 2.86% 0.65% to 2.30% 0.95% to 2.30% 0.95% to 2.30% 0.60% to 2.30% 0.95% to 2.30% 6.99% to 11.58% 12.61% to 15.30% 8.61% to 10.96% 7.27% to 9.90% 2.39% to 6.12% 3,616,999 1,146,443 1,527 7,756,076 4,303,532 $11.45 to $29.64 $10.98 to $24.70 $7.49 to $8.03 $27.98 to $32.93 $17.50 to $20.06 $103,646,451 $27,095,353 $12,018 $243,812,067 $82,972,143 0.31% 0.00% 0.26% 0.12% 1.63% 0.95% to 2.30% 0.95% to 2.30% 0.95% to 2.30% 0.50% to 2.30% 0.95% to 2.30% 27.77% to 30.08% 33.19% to 35.93% 18.74% to 20.75% 29.01% to 31.89% 9.94% to 12.06% 2,652,523 904,325 1,023 6,025,452 1,690,783 $8.83 to $22.86 $8.12 to $18.27 $6.33 to $6.65 $21.83 to $24.83 $16.05 to $17.99 $59,152,035 $15,933,407 $6,719 $145,221,494 $29,511,785 0.88% 0.11% 0.41% 0.23% 6.20% 0.95% to 2.20% 0.95% to 2.20% 0.95% to 2.20% 0.95% to 2.20% 0.95% to 2.20% -18% to 0% -23% to -3% -22% to -21% -11% to 3% 7% to 9%
WESTERN ASSET MANAGEMENT FI U.S. GOVERNMENT VALUE LEADERS INVESTMENT DIVISION INVESTMENT DIVISION ------------------------ ------------------- 12,285,154 3,178,325 $10.63 to $18.04 $13.63 to $35.20 $202,290,485 $100,021,516 3.09% 0.81% 0.50% to 2.30% 0.50% to 2.30% 1.53% to 3.38% 9.13% to 11.10% 10,976,124 1,911,983 $10.30 to $17.46 $12.53 to $30.30 $176,329,793 $54,642,394 1.22% 0.98% 0.50% to 2.30% 0.95% to 2.30% -0.89% to 92% 5.45% to 9.66% 7,714,000 856,897 $14.41 to $17.30 $11.43 to $27.67 $124,306,910 $22,597,417 1.09% 1.05% 0.50% to 2.30% 0.95% to 2.30% 0.46% to 2.49% 9.66% to 14.30% 6,224,918 419,382 $14.46 to $16.93 $21.25 to $24.60 $99,373,490 $9,895,281 0.73% 0.27% 0.50% to 2.30% 0.95% to 2.30% -0.76% to 1.16% 23.86% to 26.43% 5,667,522 56,394 $14.69 to $16.46 $17.32 to $19.59 $90,530,462 $1,071,595 2.07% 0.17% 0.95% to 2.20% 0.95% to 2.20% 2% to 7% -21% to 0%
F-83 METROPOLITAN LIFE SEPARATE ACCOUNT E OF METROPOLITAN LIFE INSURANCE COMPANY NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) 6. UNIT VALUES -- (CONTINUED) The following table is a summary of unit values and units outstanding for the Contracts and the expenses as a percentage of average net assets, excluding expenses for the underlying portfolios, for the five years ended December 31, 2006, 2005, 2004, 2003 and 2002 or lesser time period if applicable.
MFS BLACKROCK TOTAL RETURN LEGACY LARGE CAP GROWTH INVESTMENT DIVISION INVESTMENT DIVISION ------------------- ----------------------- 2006 Units............................................................. 3,947,313 1,062,045 Unit Fair Value, Lowest to Highest (1)............................ $12.31 to $53.42 $11.95 to $28.26 Net Assets........................................................ $117,960,524 $22,123,623 Investment Income Ratio to Net Assets (2)......................... 3.32% 0.00% Expenses as a Percent of Average Net Assets, Lowest to Highest (3) 0.50% to 2.30% 0.95% to 2.30% Total Return, Lowest to Highest (4)............................... 9.40% to 11.38% 1.51% to 3.57% 2005 Units............................................................. 3,604,722 640,982 Unit Fair Value, Lowest to Highest (1)............................ $11.12 to $47.08 $11.67 to $27.51 Net Assets........................................................ $98,990,430 $13,090,953 Investment Income Ratio to Net Assets (2)......................... 1.80% 0.15% Expenses as a Percent of Average Net Assets, Lowest to Highest (3) 0.60% to 2.30% 0.95% to 2.30% Total Return, Lowest to Highest (4)............................... .51% to 2.24% 4.35% to 6.06% 2004 Units............................................................. 2,312,843 1,424,451 Unit Fair Value, Lowest to Highest (1)............................ $10.94 to $46.05 $11.06 to $26.07 Net Assets........................................................ $71,298,072 $5,610,216 Investment Income Ratio to Net Assets (2)......................... 0.03% 0.00% Expenses as a Percent of Average Net Assets, Lowest to Highest (3) 0.60% to 2.30% 0.95% to 2.30% Total Return, Lowest to Highest (4)............................... 6.22% to 10.33% -4.31% to 9.68% 2003 Units............................................................. 2,113,742 1,146,443 Unit Fair Value, Lowest to Highest (1)............................ $25.09 to $41.74 $23.63 to $24.29 Net Assets........................................................ $53,115,421 $88,767 Investment Income Ratio to Net Assets (2)......................... 0.39% 0.00% Expenses as a Percent of Average Net Assets, Lowest to Highest (3) 0.50% to 1.45% 1.15% to 1.45% Total Return, Lowest to Highest (4)............................... 14.23% to 16.86% 33.28% to 34.61% 2002 Units............................................................. 2,124,969 -- Unit Fair Value, Lowest to Highest (1)............................ $21.47 to $33.00 $-- Net Assets........................................................ $45,665,325 $-- Investment Income Ratio to Net Assets (2)......................... 0.00% -- Expenses as a Percent of Average Net Assets, Lowest to Highest (3) 0.95% to 1.30% -- Total Return, Lowest to Highest (4)............................... -.10% to 2% --
METLIFE CONSERVATIVE ALLOCATION INVESTMENT DIVISION ----------------------- 2006 Units............................................................. 3,839,929 Unit Fair Value, Lowest to Highest (1)............................ $10.70 to $11.02 Net Assets........................................................ $41,777,525 Investment Income Ratio to Net Assets (2)......................... 2.77% Expenses as a Percent of Average Net Assets, Lowest to Highest (3) 0.50% to 2.30% Total Return, Lowest to Highest (4)............................... 4.47% to 6.36% 2005 Units............................................................. 1,232,690 Unit Fair Value, Lowest to Highest (1)............................ $10.24 to $10.35 Net Assets........................................................ $12,700,366 Investment Income Ratio to Net Assets (2)......................... 0.57% Expenses as a Percent of Average Net Assets, Lowest to Highest (3) 0.95% to 2.30% Total Return, Lowest to Highest (4)............................... 2.32 to 3.35% 2004 Units............................................................. -- Unit Fair Value, Lowest to Highest (1)............................ $-- Net Assets........................................................ $-- Investment Income Ratio to Net Assets (2)......................... -- Expenses as a Percent of Average Net Assets, Lowest to Highest (3) -- Total Return, Lowest to Highest (4)............................... -- 2003 Units............................................................. -- Unit Fair Value, Lowest to Highest (1)............................ $-- Net Assets........................................................ $-- Investment Income Ratio to Net Assets (2)......................... -- Expenses as a Percent of Average Net Assets, Lowest to Highest (3) -- Total Return, Lowest to Highest (4)............................... -- 2002 Units............................................................. -- Unit Fair Value, Lowest to Highest (1)............................ $-- Net Assets........................................................ $-- Investment Income Ratio to Net Assets (2)......................... -- Expenses as a Percent of Average Net Assets, Lowest to Highest (3) -- Total Return, Lowest to Highest (4)............................... --
(1) Metropolitan Life sells a number of variable annuity products, which have unique combinations of features and fees that are charged against the Contract owners' account balance. Differences in the fee structures result in a variety of unit values, expense ratios and total returns. (2) These amounts represent the dividends, excluding distributions of capital gains, received by the investment division from the underlying portfolio, net of management fees assessed by the portfolio manager, divided by the average net assets. These ratios exclude those expenses, such as mortality and expense risk charges, that are assessed against Contract owner accounts either through reductions in unit values or the redemption of units. The recognition of investment income by the investment division is affected by the timing of the declaration of dividends by the underlying portfolio in which the investment divisions invest. (3) These amounts represent the annualized Contract expenses of the Separate Account, consisting primarily of mortality and expense risk charges, for each period indicated. The ratios include only those expenses that result in a direct reduction to unit values. Charges made directly to Contract owner accounts through the redemption of units and expenses of the underlying portfolio are excluded. (4) These amounts represent the total return for the periods indicated, including changes in the value of the underlying portfolio and expenses assessed through the reduction of unit values. The total return does not include any expenses assessed through the redemption of units. Investment options with a date notation indicate the effective date of that investment option in the Separate Account. The total return is calculated for each period indicated or from the effective date through the end of the reporting period. (a) For the period January 1, 2006 to April 30, 2006 (b) For the period May 1, 2006 to December 31, 2006 F-84
METLIFE METLIFE METLIFE METLIFE CONSERVATIVE TO MODERATE ALLOCATION MODERATE ALLOCATION MODERATE TO AGGRESSIVE ALLOCATION AGGRESSIVE ALLOCATION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ----------------------------------- ------------------- --------------------------------- --------------------- 18,680,783 40,790,100 32,440,518 3,386,241 $11.18 to $11.52 $11.68 to $12.03 $12.18 to $12.55 $12.53 to $12.91 $212,345,204 $484,209,819 $401,417,271 $43,191,894 2.17% 1.42% 0.96% 0.83% 0.50% to 2.30% 0.50% to 2.30% 0.50% to 2.30% 0.50% to 2.30% 6.94% to 8.88% 9.30% to 11.28% 11.63% to 13.65% 13.04% to 15.08% 4,525,054 8,136,943 5,478,129 659,010 $10.45 to $10.58 $10.68 to $10.80 $10.91 to $11.02 $11.08 to $11.20 $47,629,824 $87,493,424 $60,142,308 $7,348,718 0.68% 0.73% 0.68% 0.65% 0.95% to 2.30% 0.95% to 2.30% 0.95% to 2.30% 0.95% to 2.30% 4.35% to 5.44% 6.40 to 7.38% 9.03% to 9.29% 9.78% to 10.72% -- -- -- -- $-- $-- $-- $-- $-- $-- $-- $-- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- $-- $-- $-- $-- $-- $-- $-- $-- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- $-- $-- $-- $-- $-- $-- $-- $-- -- -- -- -- -- -- -- -- -- -- -- --
FI FIDELITY FIDELITY LARGE CAP MONEY MARKET EQUITY-INCOME INVESTMENT DIVISION (B) INVESTMENT DIVISION INVESTMENT DIVISION ----------------------- ------------------- ------------------- 161,937 692,783 2,516,843 $15.92 to $18.31 $16.14 $52.53 $2,830,157 $11,180,161 $132,207,499 0.00% 4.94% 3.39% 0.95% to 2.20% 0.95% 0.95% 3.62% to 5.00% 3.90% 19.07% -- 398,745 2,814,629 $-- $15.53 $44.12 $-- $6,200,922 $124,173,091 -- 3.16% 1.64% -- 0.95% 0.95% -- 2.05% 4.84% -- 508,676 3,181,549 $-- $15.22 $42.08 $-- $7,739,157 $133,865,570 -- 1.12% 1.52% -- 0.95% 0.95% -- 0.20% 9.02% -- 607,233 3,527,530 $-- $15.18 $38.08 $-- $8,972,674 $134,229,848 -- 1.14% 1.69% -- 0.95% 0.95% -- 0.07% 29.08% -- 745,991 3,627,921 $-- $15.17 $29.50 $-- $11,063,485 $107,048,117 -- 1.54% 1.86% -- 0.95% 0.95% -- 1% -18%
F-85 METROPOLITAN LIFE SEPARATE ACCOUNT E OF METROPOLITAN LIFE INSURANCE COMPANY NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) 6. UNIT VALUES -- (CONTINUED) The following table is a summary of unit values and units outstanding for the Contracts and the expenses as a percentage of average net assets, excluding expenses for the underlying portfolios, for the five years ended December 31, 2006, 2005, 2004, 2003 and 2002 or lesser time period if applicable.
FIDELITY FIDELITY FIDELITY GROWTH OVERSEAS INVESTMENT GRADE BOND INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ------------------- ------------------- --------------------- 2006 Units............................................................. 3,115,761 1,300,083 809,998 Unit Fair Value, Lowest to Highest (1)............................ $41.04 $30.55 $24.00 Net Assets........................................................ $127,870,436 $39,721,653 $19,442,734 Investment Income Ratio to Net Assets (2)......................... 0.41% 0.86% 4.10% Expenses as a Percent of Average Net Assets, Lowest to Highest (3) 0.95% 0.95% 0.95% Total Return, Lowest to Highest (4)............................... 5.85% 16.97% 3.37% 2005 Units............................................................. 3,645,885 1,302,806 896,213 Unit Fair Value, Lowest to Highest (1)............................ $38.77 $26.12 $23.22 Net Assets........................................................ $141,359,911 $34,046,278 $20,803,805 Investment Income Ratio to Net Assets (2)......................... 0.50% 0.62% 3.69% Expenses as a Percent of Average Net Assets, Lowest to Highest (3) 0.95% 0.95% 0.95% Total Return, Lowest to Highest (4)............................... 4.82% 17.92% 1.27% 2004 Units............................................................. 4,247,099 1,402,715 942,267 Unit Fair Value, Lowest to Highest (1)............................ $36.99 $22.15 $22.93 Net Assets........................................................ $157,101,539 $31,060,853 $21,620,889 Investment Income Ratio to Net Assets (2)......................... 0.26% 1.09% 4.15% Expenses as a Percent of Average Net Assets, Lowest to Highest (3) 0.95% 0.95% 0.95% Total Return, Lowest to Highest (4)............................... 8.19% 14.00% 0.88% 2003 Units............................................................. 4,594,501 1,387,716 1,035,631 Unit Fair Value, Lowest to Highest (1)............................ $36.13 $19.68 $22.17 Net Assets........................................................ $165,751,953 $27,274,426 $23,036,958 Investment Income Ratio to Net Assets (2)......................... 0.25% 0.74% 3.97% Expenses as a Percent of Average Net Assets, Lowest to Highest (3) 0.95% 0.95% 0.95% Total Return, Lowest to Highest (4)............................... 31.62% 42.09% 3.79% 2002 Units............................................................. 4,626,451 1,400,081 1,040,228 Unit Fair Value, Lowest to Highest (1)............................ $27.45 $13.85 $21.36 Net Assets........................................................ $126,972,358 $19,411,860 $22,209,564 Investment Income Ratio to Net Assets (2)......................... 0.25% 0.81% 3.29% Expenses as a Percent of Average Net Assets, Lowest to Highest (3) 0.95% 0.95% 0.95% Total Return, Lowest to Highest (4)............................... -31% -21% 9%
(1) Metropolitan Life sells a number of variable annuity products, which have unique combinations of features and fees that are charged against the Contract owners' account balance. Differences in the fee structures result in a variety of unit values, expense ratios and total returns. (2) These amounts represent the dividends, excluding distributions of capital gains, received by the investment division from the underlying portfolio, net of management fees assessed by the portfolio manager, divided by the average net assets. These ratios exclude those expenses, such as mortality and expense risk charges, that are assessed against Contract owner accounts either through reductions in unit values or the redemption of units. The recognition of investment income by the investment division is affected by the timing of the declaration of dividends by the underlying portfolio in which the investment divisions invest. (3) These amounts represent the annualized Contract expenses of the Separate Account, consisting primarily of mortality and expense risk charges, for each period indicated. The ratios include only those expenses that result in a direct reduction to unit values. Charges made directly to Contract owner accounts through the redemption of units and expenses of the underlying portfolio are excluded. (4) These amounts represent the total return for the periods indicated, including changes in the value of the underlying portfolio and expenses assessed through the reduction of unit values. The total return does not include any expenses assessed through the redemption of units. Investment options with a date notation indicate the effective date of that investment option in the Separate Account. The total return is calculated for each period indicated or from the effective date through the end of the reporting period. (a) For the period January 1, 2006 to April 30, 2006 (b) For the period May 1, 2006 to December 31, 2006 F-86
CALVERT SOCIAL CALVERT SOCIAL LORD ABBET MFS RESEARCH T. ROWE PRICE PIMCO BALANCED MID CAP GROWTH BOND DEBENTURE INTERNATIONAL MID CAP GROWTH TOTAL RETURN INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ------------------- ------------------- ------------------- ------------------- ------------------- ------------------- 2,131,161 419,490 13,210,287 8,960,338 13,821,848 34,594,371 $23.31 to $30.39 $28.51 $11.69 to $20.16 $15.21 to $17.32 $7.99 to $13.82 $10.91 to $13.25 $63,065,563 $11,959,917 $210,829,957 $147,231,063 $118,849,794 $438,011,087 2.32% 0.00% 6.45% 1.54% 0.00% 2.71% 0.50% to 1.55% 0.95% 0.50% to 2.30% 0.50% to 2.30% 0.50% to 2.30% 0.50% to 2.30% 7.10% to 8.23% 5.87% 6.70% to 8.65% 23.65% to 29.56% 3.73% to 5.64% 2.13% to 4.13% 2,181,124 466,889 11,143,052 4,118,785 11,533,257 33,143,919 $21.77 to $28.29 $26.93 $10.79 to $17.43 $12.30 to $13.77 $7.70 to $13.09 $10.57 to $12.74 $60,311,328 $12,565,055 $159,818,940 $54,271,700 $94,663,044 $406,268,866 1.79% 0.00% 4.90% 0.56% 0.00% 0.02% 0.50% to 1.55% 0.95% 0.65% to 2.30% 0.95% to 2.30% 0.50% to 2.30% 0.50% to 2.30% 4.05% to 5.13% -.52% -0.83 to 3.23% 12.23% to 15.67% 11.89% to 13.73% -0.05% to 1.76% 2,197,291 506,064 9,177,096 2,756,605 8,669,095 24,585,923 $20.92 to $27.11 $27.07 $12.27 to $21.73 $10.81 to $11.91 $6.87 to $11.51 $11.61 to $12.52 $58,294,718 $13,688,933 $125,736,304 $31,718,709 $63,001,217 $298,386,525 1.72% 0.00% 3.67% 0.00% 0.00% 7.25% 0.50% to 1.55% 0.95% 0.65% to 2.30% 0.95% to 2.30% 0.95% to 2.30% 0.50% to 2.30% 0.28% to 7.70% 8.28% 3.58% to 7.68% -14.39% to 18.63% 11.63% to 17.14% 0.83% to 4.42% 2,146,302 496,082 7,504,913 1,791,537 5,569,955 18,545,938 $19.85 to $25.35 $25.00 $11.60 to $16.24 $9.28 to $10.04 $5.99 to $6.36 $11.31 to $11.99 $53,336,592 $12,360,300 $94,258,153 $17,501,323 $34,865,426 $217,219,652 1.95% 0.00% 1.98% 0.89% 0.00% 1.35% 0.50% to 1.45% 0.95% 0.95% to 2.30% 0.95% to 2.30% 0.95% to 2.30% 0.50% to 2.30% 17.59% to 18.72% 30.48% 16.49% to 18.44% 29.10% to 30.90% 33.67% to 35.90% 2.06% to 3.81% 2,114,482 468,326 5,370,358 1,105,190 2,939,251 12,099,826 $20.02 to 21.51 $19.16 $9.96 to $13.79 $7.63 to $7.67 $4.66 to $4.68 $11.11 to $11.47 $44,583,585 $8,957,889 $57,316,343 $8,338,351 $13,645,467 $137,802,804 2.69% 0.00% 11.49% 0.23% 0.60% 0.00% 0.95% to 1.25% 0.95% 0.95% to 2.20% 0.95% to 2.20% 0.95% to 2.20% 0.95% to 2.20% -13% to 0% -29% -3% to 4% -14% to -1% -45% 4% to 9%
RCM GLOBAL TECHNOLOGY INVESTMENT DIVISION ------------------- 9,455,156 $4.68 to $6.24 $51,235,788 0.00% 0.50% to 2.30% 2.83% to 4.82% 9,833,932 $4.55 to $5.97 $51,898,685 0.00% 0.95% to 2.30% 8.57% to 10.35% 11,146,560 $4.19 to $5.41 $54,272,225 0.00% 0.95% to 2.30% -6.49% to 15.20% 10,122,784 $4.49 to $5.71 $53,817,082 0.00% 0.95% to 2.30% 53.81% to 56.44% 3,261,683 $2.93 to 3.65 $11,592,649 0.00% 0.95% to 2.20% -52% to -5%
F-87 METROPOLITAN LIFE SEPARATE ACCOUNT E OF METROPOLITAN LIFE INSURANCE COMPANY NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) 6. UNIT VALUES -- (CONTINUED) The following table is a summary of unit values and units outstanding for the Contracts and the expenses as a percentage of average net assets, excluding expenses for the underlying portfolios, for the five years ended December 31, 2006, 2005, 2004, 2003 and 2002 or lesser time period if applicable.
LAZARD MET/AIM HARRIS OAKMARK MID-CAP SMALL CAP GROWTH INTERNATIONAL INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ------------------- ------------------- ------------------- 2006 Units............................................................. 3,342,852 1,763,663 16,996,340 Unit Fair Value, Lowest to Highest (1)............................ $13.18 to $16.84 $13.18 to $15.26 $16.51 to $20.96 Net Assets........................................................ $54,992,866 $25,970,736 $341,781,933 Investment Income Ratio to Net Assets (2)......................... 0.36% 0.00% 2.25% Expenses as a Percent of Average Net Assets, Lowest to Highest (3) 0.95% to 2.30% 0.60% to 2.30% 0.50% to 2.30% Total Return, Lowest to Highest (4)............................... 12.05% to 13.87% 11.55% to 13.48% 25.93% to 28.37% 2005 Units............................................................. 2,877,414 1,475,123 9,989,980 Unit Fair Value, Lowest to Highest (1)............................ $11.76 to $14.81 $11.68 to $13.45 $12.90 to $16.11 Net Assets........................................................ $41,868,418 $19,296,323 $158,028,315 Investment Income Ratio to Net Assets (2)......................... 0.21% 0.00% 0.05% Expenses as a Percent of Average Net Assets, Lowest to Highest (3) 0.95% to 2.30% 0.60% to 2.30% 0.95% to 2.30% Total Return, Lowest to Highest (4)............................... 5.63% to 7.40% 5.85% to 7.60% 11.65% to 13.40% 2004 Units............................................................. 2,505,486 1,153,716 4,686,847 Unit Fair Value, Lowest to Highest (1)............................ $10.95 to $13.82 $10.86 to $12.50 $11.70 to $14.23 Net Assets........................................................ $34,153,806 $142,129,409 $65,755,444 Investment Income Ratio to Net Assets (2)......................... 0.00% 0.00% 0.01% Expenses as a Percent of Average Net Assets, Lowest to Highest (3) 0.95% to 2.30% 0.60% to 2.30% 0.95% to 2.30% Total Return, Lowest to Highest (4)............................... 7.34% to 13.37% 4.15% to 8.60% 12.68% to 19.58% 2003 Units............................................................. 1,639,487 738,910 1,186,711 Unit Fair Value, Lowest to Highest (1)............................ $11.82 to $12.19 $11.41 to $11.77 $11.54 to $11.90 Net Assets........................................................ $19,818,859 $8,617,886 $14,031,601 Investment Income Ratio to Net Assets (2)......................... 0.00% 0.00% 1.51% Expenses as a Percent of Average Net Assets, Lowest to Highest (3) 0.95% to 2.30% 0.95% to 2.30% 0.95% to 2.30% Total Return, Lowest to Highest (4)............................... 23.48% to 25.15% 35.85% to 37.82% 32.08% to 33.86% 2002 Units............................................................. 453,569 208,088 89,776 Unit Fair Value, Lowest to Highest (1)............................ $9.58 to $9.74 $8.41 to $8.54 $8.86 to $8.89 Net Assets........................................................ $4,412,747 $1,769,568 $794,444 Investment Income Ratio to Net Assets (2)......................... 0.10% 0.00% 0.25% Expenses as a Percent of Average Net Assets, Lowest to Highest (3) 0.95% to 2.20% 0.95% to 2.20% 0.95% to 2.20% Total Return, Lowest to Highest (4)............................... -15% to 0% -29% to 0% -16%
(1) Metropolitan Life sells a number of variable annuity products, which have unique combinations of features and fees that are charged against the Contract owners' account balance. Differences in the fee structures result in a variety of unit values, expense ratios and total returns. (2) These amounts represent the dividends, excluding distributions of capital gains, received by the investment division from the underlying portfolio, net of management fees assessed by the portfolio manager, divided by the average net assets. These ratios exclude those expenses, such as mortality and expense risk charges, that are assessed against Contract owner accounts either through reductions in unit values or the redemption of units. The recognition of investment income by the investment division is affected by the timing of the declaration of dividends by the underlying portfolio in which the investment divisions invest. (3) These amounts represent the annualized Contract expenses of the Separate Account, consisting primarily of mortality and expense risk charges, for each period indicated. The ratios include only those expenses that result in a direct reduction to unit values. Charges made directly to Contract owner accounts through the redemption of units and expenses of the underlying portfolio are excluded. (4) These amounts represent the total return for the periods indicated, including changes in the value of the underlying portfolio and expenses assessed through the reduction of unit values. The total return does not include any expenses assessed through the redemption of units. Investment options with a date notation indicate the effective date of that investment option in the Separate Account. The total return is calculated for each period indicated or from the effective date through the end of the reporting period. (a) For the period January 1, 2006 to April 30, 2006 (b) For the period May 1, 2006 to December 31, 2006 F-88
OPPENHEIMER LEGG MASON THIRD AVENUE NEUBERGER BERMAN LEGG MASON CYCLICAL CAPITAL APPRECIATION AGGRESSIVE GROWTH SMALL CAP VALUE REAL ESTATE VALUE EQUITY GROWTH ETF INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION (B) INVESTMENT DIVISION (B) -------------------- ------------------- ------------------- ------------------- ----------------------- ----------------------- 1,339,707 4,041,330 263,473 19,640,662 3,401,505 322,952 $8.74 to $11.66 $7.39 to $12.09 $18.07 to $18.97 $3.27 to $19.92 $9.36 to $10.58 $11.30 to $11.50 $12,773,771 $32,049,679 $4,845,048 $382,243,470 $34,609,899 $3,692,601 0.12% 0.00% 0.40% 0.93% 0.08% 1.65% 0.95% to 2.20% 0.95% to 2.30% 0.50% to 1.55% 0.50% to 2.30% 0.95% to 2.30% 0.95% to 2.20% 5.28% to 6.80% -3.91% to -2.50% 11.39% to 12.57% 34.50% to 37.01% 10.59% to 12.34% 11.38% to 12.93% 448,382 3,428,990 138,389 11,156,645 -- -- $8.36 to $10.93 $7.69 to $12.41 $16.22 to $16.46 $2.39 to $14.51 $-- $-- $4,043,647 $28,090,437 $2,276,433 $159,988,876 $-- $-- 0.02% 0.00% 0.00% 0.00% -- -- 0.95% to 2.05% 0.95% to 2.30% 1.15% to 1.55% 0.95% to 2.30% -- -- 3.23% to 3.55% 10.93% to 12.78% 13.74% to 14.15% 10.69% to 12.61% -- -- 42 2,835,847 27,952 4,508,731 -- -- $8.34 to $8.44 $6.93 to $11.00 $14.26 to $14.42 $12.76 to $12.89 $-- $-- $357 $20,717,976 $403,590 $57,896,986 $-- $-- 0.74% 0.00% 0.43% 3.20% -- -- 1.15% to 1.45% 0.95% to 2.30% 1.15% to 1.55% 0.95% to 2.30% -- -- 4.89% to 5.24% 6.11% to 10.53% 24.54% to 25.07% 27.56% to 28.90% -- -- 13 2,454,927 11,639 -- -- -- $7.95 to $8.00 $6.62 to $6.88 $11.47 to $11.53 $-- $-- $-- $101 $16,719,126 $134,143 $-- $-- $-- 0.00% 0.00% 0.46% -- -- -- 1.15% to 1.30% 0.95% to 2.30% 1.15% to 1.30% -- -- -- 26.59% to 27.23% 26.94% to 28.84% 39.37% to 39.76% -- -- -- 499 46,924,968 -- -- -- -- $6.30 to $6.31 $8.46 to $11.36 $-- $-- $-- $-- $3 $524,360,926 $-- $-- $-- $-- 0.00% 0.00% -- -- -- -- 1.15% to 1.25% 0.95% to 2.20% -- -- -- -- 1% to 2% -31% to -15% -- -- -- --
CYCLICAL GROWTH AND INCOME ETF INVESTMENT DIVISION (B) ----------------------- 266,996 $11.05 to $11.23 $2,982,650 2.24% 0.95% to 2.20% 9.30% to 10.72% -- $-- $-- -- -- -- -- $-- $-- -- -- -- -- $-- $-- -- -- -- -- $-- $-- -- -- --
F-89 METROPOLITAN LIFE SEPARATE ACCOUNT E OF METROPOLITAN LIFE INSURANCE COMPANY NOTES TO FINANCIAL STATEMENTS -- (CONCLUDED) 6. UNIT VALUES -- (CONCLUDED) The following table is a summary of unit values and units outstanding for the Contracts and the expenses as a percentage of average net assets, excluding expenses for the underlying portfolios, for the five years ended December 31, 2006, 2005, 2004, 2003 and 2002 or lesser time period if applicable.
PIMCO AMERICAN FUNDS INFLATION PROTECTED BOND GROWTH INVESTMENT DIVISION (B) INVESTMENT DIVISION ------------------------ ------------------- 2006 Units............................................................. 1,228,621 7,208,741 Unit Fair Value, Lowest to Highest (1)............................ $10.74 to $11.51 $13.81 to $185.02 Net Assets........................................................ $13,684,136 $1,130,973,142 Investment Income Ratio to Net Assets (2)......................... 0.00% 0.85% Expenses as a Percent of Average Net Assets, Lowest to Highest (3) 0.65% to 2.30% 0.50% to 2.55% Total Return, Lowest to Highest (4)............................... -1.89% to 0.00% 5.17% to 11.04% 2005 Units............................................................. -- 5,817,927 Unit Fair Value, Lowest to Highest (1)............................ $-- $12.65 to $165.46 Net Assets........................................................ $-- $843,004,006 Investment Income Ratio to Net Assets (2)......................... -- 0.74% Expenses as a Percent of Average Net Assets, Lowest to Highest (3) -- 0.60% to 2.30% Total Return, Lowest to Highest (4)............................... -- 8.32% to 15.21% 2004 Units............................................................. -- 4,245,543 Unit Fair Value, Lowest to Highest (1)............................ $-- $100.66 to $143.62 Net Assets........................................................ $-- $542,082,661 Investment Income Ratio to Net Assets (2)......................... -- 0.20% Expenses as a Percent of Average Net Assets, Lowest to Highest (3) -- 0.85% to 2.30% Total Return, Lowest to Highest (4)............................... -- 3.61% to 11.54% 2003 Units............................................................. -- 2,563,562 Unit Fair Value, Lowest to Highest (1)............................ $-- $93.64 to $128.76 Net Assets........................................................ $-- $298,879,317 Investment Income Ratio to Net Assets (2)......................... -- 0.13% Expenses as a Percent of Average Net Assets, Lowest to Highest (3) -- 0.50% to 2.45% Total Return, Lowest to Highest (4)............................... -- 33.11% to 37.49% 2002 Units............................................................. -- 1,193,799 Unit Fair Value, Lowest to Highest (1)............................ $-- $71.44 to $93.21 Net Assets........................................................ $-- $104,487,140 Investment Income Ratio to Net Assets (2)......................... -- 0.05% Expenses as a Percent of Average Net Assets, Lowest to Highest (3) -- 0.95% to 2.20% Total Return, Lowest to Highest (4)............................... -- -26% to 3%
AMERICAN FUNDS GROWTH AND INCOME INVESTMENT DIVISION ------------------- 2006 Units............................................................. 7,224,552 Unit Fair Value, Lowest to Highest (1)............................ $12.99 to $134.49 Net Assets........................................................ $825,698,989 Investment Income Ratio to Net Assets (2)......................... 1.64% Expenses as a Percent of Average Net Assets, Lowest to Highest (3) 0.50% to 2.55% Total Return, Lowest to Highest (4)............................... 9.93% to 16.07% 2005 Units............................................................. 6,416,996 Unit Fair Value, Lowest to Highest (1)............................ $11.36 to $115.07 Net Assets........................................................ $648,646,801 Investment Income Ratio to Net Assets (2)......................... 1.42% Expenses as a Percent of Average Net Assets, Lowest to Highest (3) 0.60% to 2.30% Total Return, Lowest to Highest (4)............................... -1.34% to 4.93% 2004 Units............................................................. 5,181,523 Unit Fair Value, Lowest to Highest (1)............................ $76.86 to $109.66 Net Assets........................................................ $506,094,791 Investment Income Ratio to Net Assets (2)......................... 1.02% Expenses as a Percent of Average Net Assets, Lowest to Highest (3) 0.85% to 2.30% Total Return, Lowest to Highest (4)............................... 4.85% to 9.44% 2003 Units............................................................. 3,156,560 Unit Fair Value, Lowest to Highest (1)............................ $72.87 to $100.20 Net Assets........................................................ $286,012,415 Investment Income Ratio to Net Assets (2)......................... 1.21% Expenses as a Percent of Average Net Assets, Lowest to Highest (3) 0.50% to 2.45% Total Return, Lowest to Highest (4)............................... 27.64% to 31.17% 2002 Units............................................................. 1,478,426 Unit Fair Value, Lowest to Highest (1)............................ $57.44 to $74.94 Net Assets........................................................ $103,900,891 Investment Income Ratio to Net Assets (2)......................... 1.50% Expenses as a Percent of Average Net Assets, Lowest to Highest (3) 0.95% to 2.20% Total Return, Lowest to Highest (4)............................... -20% to -1%
(1) Metropolitan Life sells a number of variable annuity products, which have unique combinations of features and fees that are charged against the Contract owners' account balance. Differences in the fee structures result in a variety of unit values, expense ratios and total returns. (2) These amounts represent the dividends, excluding distributions of capital gains, received by the investment division from the underlying portfolio, net of management fees assessed by the portfolio manager, divided by the average net assets. These ratios exclude those expenses, such as mortality and expense risk charges, that are assessed against Contract owner accounts either through reductions in unit values or the redemption of units. The recognition of investment income by the investment division is affected by the timing of the declaration of dividends by the underlying portfolio in which the investment divisions invest. (3) These amounts represent the annualized Contract expenses of the Separate Account, consisting primarily of mortality and expense risk charges, for each period indicated. The ratios include only those expenses that result in a direct reduction to unit values. Charges made directly to Contract owner accounts through the redemption of units and expenses of the underlying portfolio are excluded. (4) These amounts represent the total return for the periods indicated, including changes in the value of the underlying portfolio and expenses assessed through the reduction of unit values. The total return does not include any expenses assessed through the redemption of units. Investment options with a date notation indicate the effective date of that investment option in the Separate Account. The total return is calculated for each period indicated or from the effective date through the end of the reporting period. (a) For the period January 1, 2006 to April 30, 2006 (b) For the period May 1, 2006 to December 31, 2006 F-90
AMERICAN FUNDS AMERICAN FUNDS GLOBAL SMALL CAPITALIZATION BOND INVESTMENT DIVISION INVESTMENT DIVISION (B) --------------------------- ----------------------- 17,064,435 3,656,960 $17.31 to $31.23 $13.92 to $16.74 $501,254,164 $56,220,877 0.46% 0.65% 0.50% to 2.55% 0.50% to 2.55% 20.10% to 23.25% 3.55% to 6.42% 12,642,767 -- $14.09 to $25.17 $-- $304,247,953 $-- 0.88% -- 0.60% to 2.30% -- 21.12% to 24.46% -- 8,037,895 -- $18.07 to $20.25 $-- $156,789,112 $-- 0.00% -- 0.85% to 2.30% -- 11.42% to 35.71% -- 4,021,904 -- $15.43 to $16.80 $-- $66,037,812 $-- 0.40% -- 0.95% to 2.45% -- 49.82% to 52.14% -- 1,732,723 -- $10.35 to $11.05 $-- $18,827,591 $-- 0.91% -- 0.95% to 2.20% -- -21% to -4% --
F-91 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE ---- Report of Independent Registered Public Accounting Firm................. F-1 Financial Statements at December 31, 2006 and 2005 and for the years ended December 31, 2006, 2005 and 2004: Consolidated Balance Sheets........................................... F-2 Consolidated Statements of Income..................................... F-3 Consolidated Statements of Stockholder's Equity....................... F-4 Consolidated Statements of Cash Flows................................. F-5 Notes to Consolidated Financial Statements............................ F-7
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholder of Metropolitan Life Insurance Company: We have audited the accompanying consolidated balance sheets of Metropolitan Life Insurance Company and subsidiaries (the "Company") as of December 31, 2006 and 2005, 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, 2006. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the 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 Metropolitan Life Insurance Company and subsidiaries as of December 31, 2006 and 2005, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2006, 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 defined benefit pension and other postretirement plans and for certain non- traditional long duration contracts and separate accounts as required by accounting guidance which the Company adopted on December 31, 2006 and January 1, 2004, respectively. /s/ DELOITTE & TOUCHE LLP DELOITTE & TOUCHE LLP New York, New York April 2, 2007 F-1 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of MetLife, Inc.) CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2006 AND 2005 (IN MILLIONS, EXCEPT SHARE AND PER SHARE DATA)
2006 2005 -------- -------- ASSETS Investments: Fixed maturity securities available-for-sale, at estimated fair value (amortized cost: $157,673 and $141,929, respectively).............................................. $162,385 $147,897 Trading securities, at fair value (cost: $548 and $373, respectively).............................................. 563 373 Equity securities available-for-sale, at estimated fair value (cost: $3,000 and $1,989, respectively).................... 3,487 2,217 Mortgage and consumer loans................................... 35,939 33,094 Policy loans.................................................. 8,587 8,412 Real estate and real estate joint ventures held-for- investment................................................. 4,485 3,778 Real estate held-for-sale..................................... -- 309 Other limited partnership interests........................... 3,670 3,256 Short-term investments........................................ 1,244 883 Other invested assets......................................... 6,960 5,839 -------- -------- Total investments.......................................... 227,320 206,058 Cash and cash equivalents....................................... 1,455 1,787 Accrued investment income....................................... 2,328 2,030 Premiums and other receivables.................................. 9,707 6,678 Deferred policy acquisition costs and value of business acquired...................................................... 12,043 11,438 Other assets.................................................... 6,240 6,183 Separate account assets......................................... 80,965 73,152 -------- -------- Total assets............................................... $340,058 $307,326 ======== ======== LIABILITIES AND STOCKHOLDER'S EQUITY LIABILITIES: Future policy benefits........................................ $ 96,599 $ 94,372 Policyholder account balances................................. 80,498 72,793 Other policyholder funds...................................... 7,372 6,918 Policyholder dividends payable................................ 957 915 Policyholder dividend obligation.............................. 1,063 1,607 Short-term debt............................................... 833 453 Long-term debt................................................ 3,219 2,562 Junior subordinated debt securities........................... 399 399 Shares subject to mandatory redemption........................ 278 278 Current income tax payable.................................... 781 444 Deferred income tax liability................................. 2,453 2,729 Payables for collateral under securities loaned and other transactions............................................... 32,119 21,009 Other liabilities............................................. 13,330 11,228 Separate account liabilities.................................. 80,965 73,152 -------- -------- Total liabilities.......................................... 320,866 288,859 -------- -------- CONTINGENCIES, COMMITMENTS AND GUARANTEES (NOTE 14) STOCKHOLDER'S EQUITY: Common stock, par value $0.01 per share; 1,000,000,000 shares authorized; 494,466,664 shares issued and outstanding at December 31, 2006 and 2005.................................... 5 5 Additional paid-in capital...................................... 14,343 13,808 Retained earnings............................................... 3,812 2,749 Accumulated other comprehensive income.......................... 1,032 1,905 -------- -------- Total stockholder's equity.................................... 19,192 18,467 -------- -------- Total liabilities and stockholder's equity.................... $340,058 $307,326 ======== ========
See accompanying notes to consolidated financial statements. F-2 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of MetLife, Inc.) CONSOLIDATED STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31, 2006, 2005 AND 2004 (IN MILLIONS)
2006 2005 2004 ------- ------- ------- REVENUES Premiums............................................... $20,284 $19,256 $17,437 Universal life and investment-type product policy fees................................................. 2,183 1,948 2,009 Net investment income.................................. 12,307 11,729 10,795 Other revenues......................................... 890 820 862 Net investment gains (losses).......................... (827) 179 282 ------- ------- ------- Total revenues....................................... 34,837 33,932 31,385 ------- ------- ------- EXPENSES Policyholder benefits and claims....................... 21,137 20,445 18,736 Interest credited to policyholder account balances..... 3,247 2,596 2,357 Policyholder dividends................................. 1,671 1,647 1,636 Other expenses......................................... 6,314 5,717 5,583 ------- ------- ------- Total expenses....................................... 32,369 30,405 28,312 ------- ------- ------- Income from continuing operations before provision for income tax........................................... 2,468 3,527 3,073 Provision for income tax............................... 640 1,098 868 ------- ------- ------- Income (loss) from continuing operations............... 1,828 2,429 2,205 Income (loss) from discontinued operations, net of income tax........................................... 98 824 86 ------- ------- ------- Income before cumulative effect of a change in accounting, net of income tax........................ 1,926 3,253 2,291 Cumulative effect of a change in accounting, net of income tax........................................... -- -- (52) ------- ------- ------- Net income............................................. $ 1,926 $ 3,253 $ 2,239 ======= ======= =======
See accompanying notes to consolidated financial statements. F-3 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of MetLife, Inc.) CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY FOR THE YEARS ENDED DECEMBER 31, 2006, 2005 AND 2004 (IN MILLIONS)
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) PARENT'S ----------------------------------- INTEREST IN NET PREFERRED UNREALIZED FOREIGN DEFINED STOCK ADDITIONAL INVESTMENT CURRENCY BENEFIT OF A COMMON PAID-IN RETAINED GAINS TRANSLATION PLANS SUBSIDIARY STOCK CAPITAL EARNINGS (LOSSES) ADJUSTMENT ADJUSTMENT TOTAL ----------- ------ ---------- -------- ---------- ----------- ---------- ------- Balance at January 1, 2004................ $ 93 $5 $13,730 $ 1,261 $2,405 $107 $(128) $17,473 Contribution of preferred stock by Holding Company to subsidiary and retirement thereof.................. (93) (93) Issuance of shares -- by subsidiary....... 4 4 Issuance of stock options -- by subsidiary.............................. 2 2 Capital contribution from the Holding Company................................. 94 94 Return of capital to the Holding Company.. (3) (3) Dividends on preferred stock.............. (7) (7) Dividends on common stock................. (797) (797) Comprehensive income (loss): Net income.............................. 2,239 2,239 Other comprehensive income (loss): Unrealized gains (losses) on derivative instruments, net of income tax......................... (77) (77) Unrealized investment gains (losses), net of related offsets and income tax................................ 19 19 Cumulative effect of a change in accounting, net of income tax...... 61 61 Foreign currency translation adjustments, net of income tax..... 79 79 Additional minimum pension liability adjustment, net of income tax......................... (2) (2) ------- Other comprehensive income (loss).... 80 ------- Comprehensive income (loss)............. 2,319 ---- -- ------- ------- ------ ---- ----- ------- Balance at December 31, 2004.............. -- 5 13,827 2,696 2,408 186 (130) 18,992 Treasury stock transactions, net -- by subsidiary.............................. (15) (15) Issuance of stock options -- by subsidiary.............................. (4) (4) Dividends on common stock................. (3,200) (3,200) Comprehensive income (loss): Net income.............................. 3,253 3,253 Other comprehensive income (loss): Unrealized gains (losses) on derivative instruments, net of income tax......................... 184 184 Unrealized investment gains (losses), net of related offsets and income tax................................ (783) (783) Foreign currency translation adjustments, net of income tax..... (49) (49) Additional minimum pension liability adjustment, net of income tax......................... 89 89 ------- Other comprehensive income (loss).... (559) ------- Comprehensive income (loss)............. 2,694 ---- -- ------- ------- ------ ---- ----- ------- Balance at December 31, 2005.............. -- 5 13,808 2,749 1,809 137 (41) 18,467 Treasury stock transactions, net -- by subsidiary.............................. 12 12 Excess tax benefits related to stock-based compensation............................ 34 34 Capital contribution from Holding Company -- See Notes 2 and 16........... 489 489 Dividends on common stock................. (863) (863) Comprehensive income (loss): Net income.............................. 1,926 1,926 Other comprehensive income (loss): Unrealized gains (losses) on derivative instruments, net of income tax......................... (20) (20) Unrealized investment gains (losses), net of related offsets and income tax................................ (93) (93) Foreign currency translation adjustments, net of income tax..... 7 7 Additional minimum pension liability adjustment, net of income tax......................... (18) (18) ------- Other comprehensive income (loss)......... (124) ------- Comprehensive income (loss)............. 1,802 ------- Adoption of SFAS 158, net of income tax................................ (749) (749) ---- -- ------- ------- ------ ---- ----- ------- Balance at December 31, 2006.............. $ -- $5 $14,343 $ 3,812 $1,696 $144 $(808) $19,192 ==== == ======= ======= ====== ==== ===== =======
See accompanying notes to consolidated financial statements. F-4 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of MetLife, Inc.) CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2006, 2005 AND 2004 (IN MILLIONS)
2006 2005 2004 -------- --------- -------- CASH FLOWS FROM OPERATING ACTIVITIES Net income............................................. $ 1,926 $ 3,253 $ 2,239 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization expenses............... 308 299 344 Amortization of premiums and accretion of discounts associated with investments, net.................. (467) (203) (15) (Gains) losses from sales of investments and businesses, net................................... 687 (1,379) (289) Equity earnings of real estate joint ventures and other limited partnership interests............... (376) (399) (167) Interest credited to policyholder account balances... 3,247 2,596 2,357 Universal life and investment-type product policy fees.............................................. (2,183) (1,948) (2,009) Change in accrued investment income.................. (295) (24) (67) Change in premiums and other receivables............. (3,565) (734) 460 Change in deferred policy acquisition costs, net..... (672) (504) (752) Change in insurance-related liabilities.............. 3,743 3,794 3,829 Change in trading securities......................... (196) (375) -- Change in income tax payable......................... 144 147 (101) Change in other assets............................... 772 (236) (385) Change in other liabilities.......................... 1,109 1,878 1,279 Other, net........................................... (37) 24 29 -------- --------- -------- Net cash provided by operating activities.............. 4,145 6,189 6,752 -------- --------- -------- CASH FLOWS FROM INVESTING ACTIVITIES Sales, maturities and repayments of: Fixed maturity securities............................ 73,351 118,459 78,494 Equity securities.................................... 858 777 1,587 Mortgage and consumer loans.......................... 7,632 7,890 3,961 Real estate and real estate joint ventures........... 847 1,922 436 Other limited partnership interests.................. 1,253 953 800 Purchases of: Fixed maturity securities............................ (90,163) (119,375) (83,243) Equity securities.................................... (731) (1,057) (2,107) Mortgage and consumer loans.......................... (10,535) (9,473) (8,639) Real estate and real estate joint ventures........... (1,069) (1,323) (737) Other limited partnership interests.................. (1,551) (1,012) (893) Net change in short-term investments................... (362) 409 215 Purchases of subsidiaries, net of cash received of $0, $0 and $0, respectively.............................. (193) -- -- Proceeds from sales of businesses, net of cash disposed of $0, $43 and $7, respectively...................... 48 260 18 Net change in policy loans............................. (176) (156) (77) Net change in other invested assets.................... (1,084) (598) (379) Net change in property, equipment and leasehold improvements......................................... (109) (114) 17 Other, net............................................. (4) (69) 7 -------- --------- -------- Net cash used in investing activities.................. $(21,988) $ (2,507) $(10,540) -------- --------- --------
See accompanying notes to consolidated financial statements. F-5 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of MetLife, Inc.) CONSOLIDATED STATEMENTS OF CASH FLOWS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2006, 2005 AND 2004 (IN MILLIONS)
2006 2005 2004 -------- -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES Policyholder account balances: Deposits.......................................... $ 37,411 $ 30,008 $ 28,347 Withdrawals....................................... (31,366) (26,732) (22,804) Net change in payables for collateral under securities loaned and other transactions.......... 11,110 (4,221) 1,166 Net change in short-term debt........................ 380 (992) (2,072) Long-term debt issued................................ 858 1,216 28 Long-term debt repaid................................ (112) (794) (38) Capital contribution from the Holding Company........ 93 -- -- Junior subordinated debt securities issued........... -- 399 -- Dividends on preferred stock......................... -- -- (7) Dividends on common stock............................ (863) (3,200) (797) Other, net........................................... -- (7) -- -------- -------- -------- Net cash provided by (used in) financing activities.... 17,511 (4,323) 3,823 -------- -------- -------- Change in cash and cash equivalents.................... (332) (641) 35 Cash and cash equivalents, beginning of year........... 1,787 2,428 2,393 -------- -------- -------- CASH AND CASH EQUIVALENTS, END OF YEAR................. $ 1,455 $ 1,787 $ 2,428 ======== ======== ======== Cash and cash equivalents, subsidiaries held-for-sale, beginning of year.................................... $ -- $ 58 $ 57 ======== ======== ======== CASH AND CASH EQUIVALENTS, SUBSIDIARIES HELD-FOR-SALE, END OF YEAR.......................................... $ -- $ -- $ 58 ======== ======== ======== Cash and cash equivalents, from continuing operations, beginning of year.................................... $ 1,787 $ 2,370 $ 2,336 ======== ======== ======== CASH AND CASH EQUIVALENTS, FROM CONTINUING OPERATIONS, END OF YEAR.......................................... $ 1,455 $ 1,787 $ 2,370 ======== ======== ======== Supplemental disclosures of cash flow information: Net cash paid during the year for: Interest.......................................... $ 256 $ 203 $ 140 ======== ======== ======== Income tax........................................ $ 197 $ 1,385 $ 950 ======== ======== ======== Non-cash transactions during the year: Business dispositions: Assets disposed................................. $ -- $ 366 $ 42 Less: liabilities disposed...................... -- 269 17 -------- -------- -------- Net assets disposed............................. $ -- $ 97 $ 25 Plus: equity securities received................ -- 43 -- Less: cash disposed............................. -- 43 7 ======== ======== ======== Business disposition, net of cash disposed...... $ -- $ 97 $ 18 ======== ======== ======== Contribution of equity securities to MetLife Foundation...................................... $ -- $ 1 $ 50 ======== ======== ======== Purchase money mortgage on real estate sale....... $ -- $ -- $ 2 ======== ======== ======== Real estate acquired in satisfaction of debt...... $ 6 $ 1 $ 7 ======== ======== ======== Transfer from funds withheld at interest to fixed maturity securities............................. $ -- $ -- $ 606 ======== ======== ======== Contribution of other intangible assets, net of income tax...................................... $ 377 $ -- $ -- ======== ======== ======== Excess of net assets over purchase price for subsidiary...................................... $ 19 $ -- $ -- ======== ======== ========
-------- See Note 8 for non-cash reinsurance transactions. See accompanying notes to consolidated financial statements. F-6 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. BUSINESS, BASIS OF PRESENTATION, AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BUSINESS Metropolitan Life Insurance Company ("Metropolitan Life") and its subsidiaries (collectively the "Company") is a leading provider of insurance and other financial services with operations throughout the United States. The Company offers life insurance and annuities to individuals, as well as group insurance, reinsurance and retirement & savings products and services to corporations and other institutions. Metropolitan Life is a wholly-owned subsidiary of MetLife, Inc. (the "Holding Company"). Outside of the United States, the Company has direct insurance operations in Canada. BASIS OF PRESENTATION The accompanying consolidated financial statements include the accounts of (i) Metropolitan Life and its subsidiaries; (ii) partnerships and joint ventures in which the Company has control; and (iii) variable interest entities ("VIEs") for which the Company is deemed to be the primary beneficiary. Closed block assets, liabilities, revenues and expenses are combined on a line-by-line basis with the assets, liabilities, revenues and expenses outside the closed block based on the nature of the particular item. See Note 9. Assets, liabilities, revenues, and expenses of the general account for 2005 and 2004 include amounts related to certain separate accounts previously reported in separate account assets and liabilities. See "Adoption of New Accounting Pronouncements." Intercompany accounts and transactions have been eliminated. The Company uses the equity method of accounting for investments in equity securities in which it has more than a 20% interest and for real estate joint ventures and other limited partnership interests in which it has more than a minor equity interest or more than a minor influence over the joint ventures and partnership's operations, but does not have a controlling interest and is not the primary beneficiary. The Company uses the cost method of accounting for real estate joint ventures and other limited partnership interests in which it has a minor equity investment and virtually no influence over the joint ventures and partnership's operations. Minority interest related to consolidated entities included in other liabilities was $1.5 billion and $1.4 billion at December 31, 2006 and 2005, respectively. Certain amounts in the prior year periods' consolidated financial statements have been reclassified to conform with the 2006 presentation. Since the Company is a member of a controlled group of affiliate companies, its results may not be indicative of those of a stand-alone entity. 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; (vi) the capitalization and amortization of deferred policy acquisition costs ("DAC") and the establishment and amortization of value of business acquired ("VOBA"); F-7 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (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 principal investments are in fixed maturity and equity securities, mortgage and consumer loans, policy loans, real estate, real estate joint ventures and other limited partnerships, short-term investments, and other invested assets. The accounting policies related to each are as follows: Fixed Maturity and Equity Securities. The Company's fixed maturity and equity securities are classified as available-for-sale, except for trading securities, 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 F-8 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) amortized cost by 20% or more for less than six months; and (iii) securities where the estimated fair value had declined and remained below cost or amortized cost by 20% or more for six months or greater. Additionally, management considers a wide range of factors about the security issuer and uses its best judgment in evaluating the cause of the decline in the estimated fair value of the security and in assessing the prospects for near-term recovery. Inherent in management's evaluation of the security are assumptions and estimates about the operations of the issuer and its future earnings potential. Considerations used by the Company in the impairment evaluation process include, but are not limited to: (i) the length of time and the extent to which the market value has been below cost or amortized cost; (ii) the potential for impairments of securities when the issuer is experiencing significant financial difficulties; (iii) the potential for impairments in an entire industry sector or sub-sector; (iv) the potential for impairments in certain economically depressed geographic locations; (v) the potential for impairments of securities where the issuer, series of issuers or industry has suffered a catastrophic type of loss or has exhausted natural resources; (vi) the Company's ability and intent to hold the security for a period of time sufficient to allow for the recovery of its value to an amount equal to or greater than cost or amortized cost (See also Note 3); (vii) unfavorable changes in forecasted cash flows on asset-backed securities; and (viii) other subjective factors, including concentrations and information obtained from regulators and rating agencies. The Company purchases and receives beneficial interests in special purpose entities ("SPEs"), which enhance the Company's total return on its investment portfolio principally by providing equity-based returns on debt securities. These investments are generally made through structured notes and similar instruments (collectively, "Structured Investment Transactions"). The Company has not guaranteed the performance, liquidity or obligations of the SPEs and its exposure to loss is limited to its carrying value of the beneficial interests in the SPEs. The Company does not consolidate the SPEs as it has determined it is not the primary beneficiary. These Structured Investment Transactions are included in fixed maturity securities and their income is generally recognized using the retrospective interest method. Impairments of these investments are included in net investment gains (losses). Trading Securities. The Company's trading securities portfolio, principally consisting of fixed maturity and equity securities, supports investment strategies that involve the active and frequent purchase and sale of securities and the execution of short sale agreements and supports asset and liability matching strategies for certain insurance products. Trading securities and short sale agreement liabilities are recorded at fair value with subsequent changes in fair value recognized in net investment income. Related dividends and investment income are also included in net investment income. Securities Lending. Securities loaned transactions are treated as financing arrangements and are recorded at the amount of cash received. The Company obtains collateral in an amount equal to 102% of the fair value of the securities loaned. The Company monitors the market value of the securities loaned on a daily basis with additional collateral obtained as necessary. Substantially all of the Company's securities loaned transactions are with large brokerage firms. Income and expenses associated with securities loaned transactions are reported as investment income and investment expense, respectively, within net investment income. Mortgage and Consumer Loans. Mortgage and consumer loans are stated at unpaid principal balance, adjusted for any unamortized premium or discount, deferred fees or expenses, net of valuation allowances. Interest income is accrued on the principal amount of the loan based on the loan's contractual interest rate. Amortization of premiums and discounts is recorded using the effective yield method. Interest income, amortization of premiums and discounts, and prepayment fees are reported in net investment income. Loans are considered to be impaired when it is probable that, based upon current information and events, the Company will be unable to collect all amounts due under the contractual terms of the loan agreement. Valuation allowances are established for the excess carrying value of the loan over the present value of expected future cash flows discounted at the loan's original effective interest rate, the value of the loan's collateral if the loan is in the F-9 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) process of foreclosure or otherwise collateral dependent, or the loan's market value if the loan is being sold. The Company also establishes allowances for loan losses when a loss contingency exists for pools of loans with similar characteristics, such as mortgage loans based on similar property types or loan to value risk factors. A loss contingency exists when the likelihood that a future event will occur is probable based on past events. Interest income earned on impaired loans is accrued on the principal amount of the loan based on the loan's contractual interest rate. However, interest ceases to be accrued for loans on which interest is generally more than 60 days past due and/or where the collection of interest is not considered probable. Cash receipts on such impaired loans are recorded as a reduction of the recorded investment. Gains and losses from the sale of loans and changes in valuation allowances are reported in net investment gains (losses). Policy Loans. Policy loans are stated at unpaid principal balances. Interest income on such loans is recorded as earned using the contractually agreed upon interest rate. Generally, interest is capitalized on the policy's anniversary date. Real Estate. Real estate held-for-investment, including related improvements, is stated at cost less accumulated depreciation. Depreciation is provided on a straight-line basis over the estimated useful life of the asset (typically 20 to 55 years). Rental income is recognized on a straight-line basis over the term of the respective leases. The Company classifies a property as held-for-sale if it commits to a plan to sell a property within one year and actively markets the property in its current condition for a price that is reasonable in comparison to its fair value. The Company classifies the results of operations and the gain or loss on sale of a property that either has been disposed of or classified as held-for-sale as discontinued operations, if the ongoing operations of the property will be eliminated from the ongoing operations of the Company and if the Company will not have any significant continuing involvement in the operations of the property after the sale. Real estate held-for-sale is stated at the lower of depreciated cost or fair value less expected disposition costs. Real estate is not depreciated while it is classified as held-for-sale. The Company periodically reviews its properties held-for-investment for impairment and tests properties for recoverability whenever events or changes in circumstances indicate the carrying amount of the asset may not be recoverable and the carrying value of the property exceeds its fair value. Properties whose carrying values are greater than their undiscounted cash flows are written down to their fair value, with the impairment loss included in net investment gains (losses). Impairment losses are based upon the estimated fair value of real estate, which is generally computed using the present value of expected future cash flows from the real estate discounted at a rate commensurate with the underlying risks. Real estate acquired upon foreclosure of commercial and agricultural mortgage loans is recorded at the lower of estimated fair value or the carrying value of the mortgage loan at the date of foreclosure. Real Estate Joint Ventures and Other Limited Partnership Interests. The Company uses the equity method of accounting for investments in real estate joint ventures and other limited partnership interests in which it has more than a minor equity interest or more than a minor influence over the joint ventures and partnership's operations, but does not have a controlling interest and is not the primary beneficiary. The Company uses the cost method of accounting for real estate joint ventures and other limited partnership interests in which it has a minor equity investment and virtually no influence over the joint ventures and the partnership's operations. In addition to the investees performing regular evaluations for the impairment of underlying investments, the Company routinely evaluates its investments in real estate joint ventures and limited partnerships for impairments. For its cost method investments it follows an impairment analysis which is similar to the process followed for its fixed maturity and equity securities as described previously. For equity method investees, the Company considers financial and other information provided by the investee, other known information and inherent risks in the underlying investments, as well as future capital commitments, in determining whether an impairment has occurred. When an other-than-temporary impairment is deemed to have occurred, the Company records a realized capital loss within net investment gains (losses) to record the investment at its fair value. F-10 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Short-term Investments. Short-term investments include investments with remaining maturities of one year or less, but greater than three months, at the time of acquisition and are stated at amortized cost, which approximates fair value. Other Invested Assets. Other invested assets consist principally of leveraged leases and funds withheld at interest. The leveraged leases are recorded net of non-recourse debt. The Company participates in lease transactions which are diversified by industry, asset type and geographic area. The Company recognizes income on the leveraged leases by applying the leveraged lease's estimated rate of return to the net investment in the lease. The Company regularly reviews residual values and impairs them to expected values as needed. Funds withheld represent amounts contractually withheld by ceding companies in accordance with reinsurance agreements. For agreements written on a modified coinsurance basis and certain agreements written on a coinsurance basis, assets supporting the reinsured policies, and equal to the net statutory reserves, are withheld and continue to be legally owned by the ceding companies. The Company records a funds withheld receivable rather than the underlying investments. The Company recognizes interest on funds withheld at rates defined by the treaty terms which may be contractually specified or directly related to the investment portfolio and records it in net investment income. Other invested assets also include stand-alone derivatives with positive fair values and the fair value of embedded derivatives related to funds withheld and modified coinsurance contracts. Estimates and Uncertainties. The Company's investments are exposed to three primary sources of risk: credit, interest rate and market valuation. The financial statement risks, stemming from such investment risks, are those associated with the recognition of impairments, the recognition of income on certain investments, and the determination of fair values. The determination of the amount of allowances and impairments, as applicable, are described above by investment type. The determination of such allowances and impairments is highly subjective and is based upon the Company's periodic evaluation and assessment of known and inherent risks associated with the respective asset class. Such evaluations and assessments are revised as conditions change and new information becomes available. Management updates it 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, trading securities, 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 Structured Investment Transactions, real estate joint ventures and other limited partnerships for which the Company may be deemed to be the primary beneficiary under Financial Accounting Standards Board ("FASB") Interpretation ("FIN") No. 46(r), Consolidation of F-11 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Variable Interest Entities -- An Interpretation of ARB No. 51, it may be required to consolidate such investments. The accounting rules for the determination of the primary beneficiary are complex and require evaluation of the contractual rights and obligations associated with each party involved in the entity, an estimate of the entity's expected losses and expected residual returns and the allocation of such estimates to each party. The use of different methodologies and assumptions as to the timing and amount of impairments, recognition of income and the determination of the fair value of investments may have a material effect on the amounts presented within the consolidated financial statements. Derivative Financial Instruments Derivatives are financial instruments whose values are derived from interest rates, foreign currency exchange rates, or other financial indices. Derivatives may be exchange-traded or contracted in the over-the-counter market. The Company uses a variety of derivatives, including swaps, forwards, futures and option contracts, to manage the risk associated with variability in cash flows or changes in fair values related to the Company's financial instruments. The Company also uses derivative instruments to hedge its currency exposure associated with net investments in certain foreign operations. To a lesser extent, the Company uses credit derivatives 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 pursuant to Statement of Financial Accounting Standards ("SFAS") No. 133, Accounting for Derivative Instruments and Hedging Activities ("SFAS 133"), as amended, changes in the fair value of the derivative are reported in net investment gains (losses), in policyholder benefits and claims for economic hedges of liabilities embedded in certain variable annuity products offered by the Company or in net investment income for economic hedges of equity method investments in joint ventures. The fluctuations in fair value of derivatives which have not been designated for hedge accounting can result in significant volatility in net income. To qualify for hedge accounting, at the inception of the hedging relationship, the Company formally documents its risk management objective and strategy for undertaking the hedging transaction, as well as its designation of the hedge as either (i) a hedge of the fair value of a recognized asset or liability or an unrecognized firm commitment ("fair value hedge"); (ii) a hedge of a forecasted transaction or of the variability of cash flows to be received or paid related to a recognized asset or liability ("cash flow hedge"); or (iii) a hedge of a net investment in a foreign operation. In this documentation, the Company sets forth how the hedging instrument is expected to hedge the designated risks related to the hedged item and sets forth the method that will be used to retrospectively and prospectively assess the hedging instrument's effectiveness and the method which will be used to measure ineffectiveness. A derivative designated as a hedging instrument must be assessed as being highly effective in offsetting the designated risk of the hedged item. Hedge effectiveness is formally assessed at inception and periodically throughout the life of the designated hedging relationship. Assessments and F-12 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) measurement of hedge effectiveness are also subject to interpretation and estimation and different interpretations or estimates may have a material effect on the amount reported in net income. The accounting for derivatives is complex and interpretations of the primary accounting standards continue to evolve in practice. Judgment is applied in determining the availability and application of hedge accounting designations and the appropriate accounting treatment under these accounting standards. If it was determined that hedge accounting designations were not appropriately applied, reported net income could be materially affected. Differences in judgment as to the availability and application of hedge accounting designations and the appropriate accounting treatment may result in a differing impact on the consolidated financial statements of the Company from that previously reported. Under a fair value hedge, changes in the fair value of the hedging derivative, including amounts measured as ineffectiveness, and changes in the fair value of the hedged item related to the designated risk being hedged, are reported within net investment gains (losses). The fair values of the hedging derivatives are exclusive of any accruals that are separately reported in the consolidated statement of income within interest income or interest expense to match the location of the hedged item. Under a cash flow hedge, changes in the fair value of the hedging derivative measured as effective are reported within other comprehensive income (loss), a separate component of 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. In a hedge of a net investment in a foreign operation, changes in the fair value of the hedging derivative that are measured as effective are reported within other comprehensive income (loss) consistent with the translation adjustment for the hedged net investment in the foreign operation. Changes in the fair value of the hedging instrument measured as ineffectiveness are reported within net investment gains (losses). The Company discontinues hedge accounting prospectively when: (i) it is determined that the derivative is no longer highly effective in offsetting changes in the fair value or cash flows of a hedged item; (ii) the derivative expires, is sold, terminated, or exercised; (iii) it is no longer probable that the hedged forecasted transaction will occur; (iv) a hedged firm commitment no longer meets the definition of a firm commitment; or (v) the derivative is de- designated as a hedging instrument. When hedge accounting is discontinued because it is determined that the derivative is not highly effective in offsetting changes in the fair value or cash flows of a hedged item, the derivative continues to be carried on the consolidated balance sheet at its fair value, with changes in fair value recognized currently in net investment gains (losses). The carrying value of the hedged recognized asset or liability under a fair value hedge is no longer adjusted for changes in its fair value due to the hedged risk, and the cumulative adjustment to its carrying value is amortized into income over the remaining life of the hedged item. Provided the hedged forecasted transaction is still probable of occurrence, the changes in fair value of derivatives recorded in other comprehensive income (loss) related to discontinued cash flow hedges are released into the consolidated statement of income when the Company's earnings are affected by the variability in cash flows of the hedged item. When hedge accounting is discontinued because it is no longer probable that the forecasted transactions will occur by the end of the specified time period or the hedged item no longer meets the definition of a firm commitment, the derivative continues to be carried on the consolidated balance sheet at its fair value, with changes in fair value recognized currently in net investment gains (losses). Any asset or liability associated with a recognized firm commitment is derecognized from the consolidated balance sheet, and recorded currently in net investment gains (losses). Deferred gains and losses of a derivative recorded in other comprehensive income F-13 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (loss) pursuant to the cash flow hedge of a forecasted transaction are recognized immediately in net investment gains (losses). In all other situations in which hedge accounting is discontinued, the derivative is carried at its fair value on the consolidated balance sheet, with changes in its fair value recognized in the current period as net investment gains (losses). The Company is also a party to financial instruments that contain terms which are deemed to be embedded derivatives. The Company assesses each identified embedded derivative to determine whether it is required to be bifurcated under SFAS 133. If the instrument would not be accounted for in its entirety at fair value and it is determined that the terms of the embedded derivative are not clearly and closely related to the economic characteristics of the host contract, and that a separate instrument with the same terms would qualify as a derivative instrument, the embedded derivative is bifurcated from the host contract and accounted for as a freestanding derivative. Such embedded derivatives are carried on the consolidated balance sheet at fair value with the host contract and changes in their fair value are reported currently in net investment gains (losses). If the Company is unable to properly identify and measure an embedded derivative for separation from its host contract, the entire contract is carried on the balance sheet at fair value, with changes in fair value recognized in the current period in net investment gains (losses). Additionally, the Company may elect to carry an entire contract on the balance sheet at fair value, with changes in fair value recognized in the current period in net investment gains (losses) if that contract contains an embedded derivative that requires bifurcation. There is a risk that embedded derivatives requiring bifurcation may not be identified and reported at fair value in the consolidated financial statements and that their related changes in fair value could materially affect reported net income. Cash and Cash Equivalents The Company considers all highly liquid investments purchased with an original or remaining maturity of three months or less at the date of purchase to be cash equivalents. 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. The estimated life for company occupied real estate property is generally 40 years. 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 $1.1 billion at both December 31, 2006 and 2005. Accumulated depreciation and amortization of property, equipment and leasehold improvements was $538 million and $445 million at December 31, 2006 and 2005, respectively. Related depreciation and amortization expense was $101 million, $94 million and $93 million for the years ended December 31, 2006, 2005 and 2004, respectively. Computer software, which is included in other assets, is stated at cost, less accumulated amortization. Purchased software costs, as well as 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 $1.0 billion and $877 million at December 31, 2006 and 2005, respectively. Accumulated amortization of capitalized software was $664 million and $584 million at December 31, 2006 and 2005, respectively. Related amortization expense was $93 million, $97 million and $126 million for the years ended December 31, 2006, 2005 and 2004, respectively. F-14 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Deferred Policy Acquisition Costs and Value of Business Acquired The Company incurs significant costs in connection with acquiring new and renewal insurance business. Costs that vary with and relate to the production of new business are deferred as DAC. Such costs consist principally of commissions and agency and policy issue expenses. VOBA is an intangible asset that reflects the estimated fair value of in-force contracts in a life insurance company acquisition and represents the portion of the purchase price that is allocated to the value of the right to receive future cash flows from the business in- force at the acquisition date. VOBA is based on actuarially determined projections, by each block of business, of future policy and contract charges, premiums, mortality and morbidity, separate account performance, surrenders, operating expenses, investment returns and other factors. Actual experience on the purchased business may vary from these projections. The recovery of DAC and VOBA is dependent upon the future profitability of the related business. DAC and VOBA are aggregated in the financial statements for reporting purposes. DAC related to internally replaced contracts are generally expensed at the date of replacement. DAC and VOBA on life insurance or investment-type contracts are amortized in proportion to gross premiums, gross margins or gross profits, depending on the type of contract as described below. The Company amortizes DAC and VOBA 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, or policy acquisition, as it relates to VOBA, that include provisions for adverse deviation and are consistent with the assumptions used to calculate future policyholder benefit liabilities. These assumptions are not revised after policy issuance or acquisition unless the DAC or VOBA balance is deemed to be unrecoverable from future expected profits. Absent a premium deficiency, variability in amortization after policy issuance or acquisition is caused only by variability in premium volumes. The Company amortizes DAC and VOBA related to 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 or acquisition 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 (dividend paying traditional contracts within the closed block) 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 policyholder dividend scales are reasonably likely to impact significantly the rate of DAC and VOBA 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 and VOBA 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 and VOBA 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 and VOBA related to fixed and variable universal life contracts and fixed and variable deferred annuity contracts over the estimated lives of the contracts in proportion to actual and expected future gross profits. The amortization includes interest based on rates in effect at inception or acquisition of the contracts. The amount of future gross profits is dependent principally upon returns in excess of the amounts credited to policyholders, mortality, persistency, interest crediting rates, expenses to administer F-15 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) the business, creditworthiness of reinsurance counterparties, the effect of any hedges used, and certain economic variables, such as inflation. Of these factors, the Company anticipates that investment returns, expenses, and persistency are reasonably likely to impact significantly the rate of DAC and VOBA amortization. Each reporting period, the Company updates the estimated gross profits with the actual gross profits for that period. When the actual gross profits change from previously estimated gross profits, the cumulative DAC and VOBA amortization is re-estimated and adjusted by a cumulative charge or credit to current operations. When actual gross profits exceed those previously estimated, the DAC and VOBA amortization will increase, resulting in a current period charge to earnings. The opposite result occurs when the actual gross profits are below the previously estimated gross profits. Each reporting period, the Company also updates the actual amount of business remaining in-force, which impacts expected future gross profits. Separate account rates of return on variable universal life contracts and variable deferred annuity contracts affect in-force account balances on such contracts each reporting period. Returns that are higher than the Company's long-term expectation produce higher account balances, which increases the Company's future fee expectations and decreases future benefit payment expectations on minimum death benefit guarantees, resulting in higher expected future gross profits. The opposite result occurs when returns are lower than the Company's long-term expectation. The Company's practice to determine the impact of gross profits resulting from returns on separate accounts assumes that long- term appreciation in equity markets is not changed by short-term market fluctuations, but is only changed when sustained interim deviations are expected. The Company monitors these changes and only changes the assumption when its long-term expectation changes. The Company also reviews periodically other long-term assumptions underlying the projections of estimated gross 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 and VOBA amortization will decrease, resulting in a current period increase to earnings. The opposite result occurs when the assumption update causes expected future gross margins and profits to decrease. Sales Inducements The Company has two different types of sales inducements which are included in other assets: (i) the policyholder receives a bonus whereby the policyholder's initial account balance is increased by an amount equal to a specified percentage of the customer's deposit; and (ii) the policyholder receives a higher interest rate using a dollar cost averaging method than would have been received based on the normal general account interest rate credited. The Company defers sales inducements and amortizes them over the life of the policy using the same methodology and assumptions used to amortize DAC. Goodwill Goodwill is the excess of cost over the fair value of net assets acquired. Goodwill is not amortized but is tested for impairment at least annually or more frequently if events or circumstances, such as adverse changes in the business climate, indicate that there may be justification for conducting an interim test. Impairment testing is performed using the fair value approach, which requires the use of estimates and judgment, at the "reporting unit" level. A reporting unit is the operating segment or a business one level below the operating segment, if discrete financial information is prepared and regularly reviewed by management at that level. For purposes of goodwill impairment testing, goodwill within Corporate & Other is allocated to reporting units within the Company's business segments. If the carrying value of a reporting unit's goodwill exceeds its fair value, the excess is recognized as an impairment and recorded as a charge against net income. The fair values of the reporting units F-16 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) are determined using a market multiple, a discounted cash flow model, or a cost approach. The critical estimates necessary in determining fair value are projected earnings, comparative market multiples and the discount rate. Liability for Future Policy Benefits and Policyholder Account Balances The Company establishes liabilities for amounts payable under insurance policies, including traditional life insurance, traditional annuities and non- medical health insurance. Generally, amounts are payable over an extended period of time and related liabilities are calculated as the present value of future expected benefits to be paid reduced by the present value of future expected premiums. Such liabilities are established based on methods and underlying assumptions in accordance with GAAP and applicable actuarial standards. Principal assumptions used in the establishment of liabilities for future policy benefits are mortality, morbidity, policy lapse, renewal, retirement, 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 3% to 7% and mortality rates guaranteed in calculating the cash surrender values described in such contracts); and (ii) the liability for terminal dividends. Future policy benefits for non-participating traditional life insurance policies are equal to the aggregate of the present value of future benefit payments and related expenses less the present value of future net premiums. Assumptions as to mortality and persistency are based upon the Company's experience when the basis of the liability is established. Interest rates for the aggregate future policy benefit liabilities range from 5% to 7%. Participating business represented approximately 9% and 10% of the Company's life insurance in-force, and 76% and 86% of the number of life insurance policies in-force, at December 31, 2006 and 2005, respectively. Participating policies represented approximately 34% and 33%, 35% and 34%, and 37% and 37% of gross and net life insurance premiums for the years ended December 31, 2006, 2005 and 2004, respectively. The percentages indicated are calculated excluding the business of the reinsurance segment. 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 3% to 11%. Future policy benefit liabilities for non-medical health insurance are calculated using the net level premium method and assumptions as to future morbidity, withdrawals and interest, which provide a margin for adverse deviation. Interest rates used in establishing such liabilities range from 3% 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 3% to 8%. 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-17 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of MetLife, Inc.) 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 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 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 ("PAB") for guaranteed minimum benefit riders relating to certain variable annuity products as follows: - Guaranteed minimum withdrawal benefit riders ("GMWB") guarantee the contractholder a return of their purchase payment via partial withdrawals, even if the account value is reduced to zero, provided that the contractholder's cumulative withdrawals in a contract year do not exceed a certain limit. The initial guaranteed withdrawal amount is equal to the initial benefit base as defined in the contract (typically, the initial purchase payments plus applicable bonus amounts). The GMWB is an embedded derivative, which is measured at fair value separately from the host variable annuity product. - Guaranteed minimum accumulation benefit riders ("GMAB") provide the contractholder, after a specified period of time determined at the time of issuance of the variable annuity contract, with a minimum accumulation of their purchase payments even if the account value is reduced to zero. The initial guaranteed accumulation amount is equal to the initial benefit base as defined in the contract (typically, the initial purchase payments plus applicable bonus amounts). The GMAB is also an embedded derivative, which is measured at fair value separately from the host variable annuity product. F-18 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of MetLife, Inc.) 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. PABs 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. PABs are equal to (i) policy account values, which consist of an accumulation of gross premium payments; (ii) credited interest, ranging from 2% to 10%, less expenses, mortality charges, and withdrawals; and (iii) fair value adjustments relating to business combinations. 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, disability, long-term care and dental 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 and margins, 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-19 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of MetLife, Inc.) 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 PABs. Revenues from such contracts consist of amounts assessed against PABs for mortality, policy administration and surrender charges and are recorded in universal life and investment-type product policy fees in the period in which services are provided. Amounts that are charged to operations include interest credited and benefit claims incurred in excess of related PABs. Premiums, policy fees, policyholder benefits and expenses are presented net of reinsurance. Other Revenues Other revenues include advisory fees, broker-dealer commissions and fees, and administrative service fees. Such fees and commissions are recognized in the period in which services are performed. Other revenues also include changes in account value relating to corporate-owned life insurance ("COLI"). Under certain COLI contracts, if the Company reports certain unlikely adverse results in its consolidated financial statements, withdrawals would not be immediately available and would be subject to market value adjustment, which could result in a reduction of the account value. Policyholder Dividends Policyholder dividends are approved annually by Metropolitan Life and its insurance subsidiaries' boards 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 the insurance subsidiaries. Income Taxes The Company joins with the Holding Company 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 "Code"). The Company participates in a tax sharing agreement with the Holding Company. 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) the Holding Company 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. 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. F-20 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 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 (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 13) 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 legislation could have an impact on the provision for income tax and the effective tax rate. Any such changes could significantly affect the amounts reported in the consolidated financial statements in the year these changes occur. The Company classifies interest recognized as interest expense and penalties recognized as a component of income tax. Reinsurance The Company enters into reinsurance transactions as 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. F-21 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 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. 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 as a deposit, net of related expenses. Deposits received are included in other liabilities and deposits made are included within other assets. As amounts are paid or received, consistent with the underlying contracts, the deposit assets or liabilities are adjusted. Interest on such deposits is recorded as other revenue or other expenses, as appropriate. Periodically, the Company evaluates the adequacy of the expected payments or recoveries and adjusts the deposit asset or liability through other revenue or other expenses, as appropriate. Amounts received from reinsurers for policy administration are reported in other revenues. Accounting for reinsurance requires extensive use of assumptions and estimates, particularly related to the future performance of the underlying business and the potential impact of counterparty credit risks. The Company periodically reviews actual and anticipated experience compared to the aforementioned assumptions used to establish assets and liabilities relating to ceded and assumed reinsurance and evaluates the financial strength of counterparties to its reinsurance agreements using criteria similar to that evaluated in the security impairment process discussed previously. Separate Accounts Separate accounts are established in conformity with insurance laws and are generally not chargeable with liabilities that arise from any other business of the Company. Separate account assets are subject to general account claims only to the extent the value of such assets exceeds the separate account liabilities. The Company reports separately, as assets and liabilities, investments held in separate accounts and liabilities of the separate accounts if (i) such separate accounts are legally recognized; (ii) assets supporting the contract liabilities are legally insulated from the Company's general account liabilities; (iii) investments are directed by the contractholder; and (iv) all investment performance, net of contract fees and assessments, is passed through to the contractholder. The Company reports separate account assets meeting such criteria at their fair value. Investment performance (including investment income, net investment gains (losses) and changes in unrealized gains (losses)) and the corresponding amounts credited to contractholders of such separate accounts are offset within the same line in the consolidated statements of income. The Company's revenues reflect fees charged to the separate accounts, including mortality charges, risk charges, policy administration fees, investment management fees and surrender charges. Separate accounts not meeting the above criteria are combined on a line-by-line basis with the Company's general account assets, liabilities, revenues and expenses. Employee Benefit Plans The Company sponsors and administers various qualified and non-qualified defined benefit pension plans and other postretirement employee benefit plans covering eligible employees and sales representatives who meet F-22 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) specified eligibility requirements of the sponsor and its participating affiliates. A December 31 measurement date is used for all the Company's defined benefit pension and other postretirement benefit plans. 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 Treasury securities, for each account balance. As of December 31, 2006, virtually all the obligations are calculated using the traditional formula. The Company also provides certain postemployment benefits and certain postretirement medical and life insurance benefits for retired participants. Participants that 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. Participants hired after 2003 are not eligible for any employer subsidy for postretirement medical benefits. SFAS No. 87, Employers' Accounting for Pensions ("SFAS 87"), as amended, established the accounting for pension plan obligations. Under SFAS 87, the projected pension benefit obligation ("PBO") is defined as the actuarially calculated present value of vested and non-vested pension benefits accrued based on future salary levels. The accumulated pension benefit obligation ("ABO") is the actuarial present value of vested and non-vested pension benefits accrued based on current salary levels. Obligations, both PBO and ABO, of the defined benefit pension plans are determined using a variety of actuarial assumptions, from which actual results may vary, as described below. SFAS No. 106, Employers' Accounting for Postretirement Benefits Other than Pensions ("SFAS 106"), as amended, established the accounting for expected postretirement plan benefit obligations ("EPBO") which represents the actuarial present value of all other postretirement benefits expected to be paid after retirement to employees and their dependents. Unlike for pensions, the EPBO is not recorded in the financial statements but is used in measuring the periodic expense. The accumulated postretirement plan benefit obligations ("APBO") represents the actuarial present value of future other postretirement benefits attributed to employee services rendered through a particular date and is the valuation basis upon which liabilities are established. The APBO is determined using a variety of actuarial assumptions, from which actual results may vary, as described below. Prior to December 31, 2006, the funded status of the pension and other postretirement plans, which is the difference between the fair value of plan assets and the PBO for pension plans and the APBO for other postretirement plans (collectively, the "Benefit Obligations"), were offset by the unrecognized actuarial gains or losses, prior service cost and transition obligations to determine prepaid or accrued benefit cost, as applicable. The net amount was recorded as a prepaid or accrued benefit cost, as applicable. Further, for pension plans, if the ABO exceeded the fair value of the plan assets, that excess was recorded as an additional minimum pension liability with a corresponding intangible asset. Recognition of the intangible asset was limited to the amount of any unrecognized prior service cost. Any additional minimum pension liability in excess of the allowable intangible asset was charged, net of income tax, to accumulated other comprehensive income. As described more fully in "Adoption of New Accounting Pronouncements", effective December 31, 2006, the Company adopted 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"). 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 F-23 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) comprehensive income. Additionally, these changes eliminated the additional minimum pension liability provisions of SFAS 87. Net periodic benefit cost is determined using management estimates and actuarial assumptions to derive service cost, interest cost, and expected return on plan assets for a particular year. Net periodic benefit cost also includes the applicable amortization of any prior service cost (credit) arising from the increase (decrease) in prior years' benefit costs due to plan amendments or initiation of new plans. These costs are amortized into net periodic benefit cost over the expected service years of employees whose benefits are affected by such plan amendments. Actual experience related to plan assets and/or the benefit obligations may differ from that originally assumed when determining net periodic benefit cost for a particular period, resulting in gains or losses. To the extent such aggregate gains or losses exceed 10 percent of the greater of the benefit obligations or the market-related asset value of the plans, they are amortized into net periodic benefit cost over the expected service years of employees expected to receive benefits under the plans. 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 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 consulting 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. The Company also sponsors defined contribution savings and investment plans ("SIP") for substantially all employees under which a portion of participant contributions are matched. Applicable matching contributions are made each payroll period. Accordingly, the Company recognizes compensation cost for current matching contributions. As all contributions are transferred currently as earned to the SIP trust, no liability for matching contributions is recognized in the consolidated balance sheets. Stock-Based Compensation Stock-based compensation recognized in the Company's consolidated results of operations is allocated from the Holding Company. The accounting policies described below represent those that the Holding Company applies in determining such allocated expense. Stock-based compensation grants prior to January 1, 2003 were accounted for using the intrinsic value method prescribed by Accounting Principles Board ("APB") Opinion No. 25, Accounting for Stock Issued to Employees ("APB 25"), and related interpretations. Compensation expense, if any, was recorded based upon the excess of the quoted market price at grant date over the amount the employee was required to pay to acquire the stock. Under the provisions of APB 25, there was no compensation expense resulting from the issuance of stock options as the exercise price was equivalent to the fair market value at the date of grant. Compensation expense was recognized under the Long-Term Performance Compensation Plan ("LTPCP"), as described more fully in Note 16. Stock-based awards granted after December 31, 2002, but prior to January 1, 2006, were accounted for on a prospective basis using the fair value accounting method prescribed by SFAS No. 123, Accounting for Stock-Based Compensation ("SFAS 123"), as amended by SFAS No. 148, Accounting for Stock-Based Compensation -- Transition and Disclosure ("SFAS 148"). The fair value method of SFAS 123 required compensation expense to be measured based on the fair value of the equity instrument at the grant or award date. Stock-based compensation was accrued over the vesting period of the grant or award, including grants or awards to F-24 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) retirement-eligible employees. As required by SFAS 148, the Company discloses the pro forma impact as if the stock options granted prior to January 1, 2003 had been accounted for using the fair value provisions of SFAS 123 rather than the intrinsic value method prescribed by APB 25. See Note 16. Effective January 1, 2006, the Holding Company adopted, using the modified prospective transition method, SFAS No. 123 (revised 2004), Share-Based Payment ("SFAS 123(r)"), which replaces SFAS 123 and supersedes APB 25. The adoption of SFAS 123(r) did not have a significant impact on the Company's financial position or results of operations. SFAS 123(r) requires that the cost of all stock-based transactions be measured at fair value and recognized over the period during which a grantee is required to provide goods or services in exchange for the award. Although the terms of the Holding Company's stock-based plans do not accelerate vesting upon retirement, or the attainment of retirement eligibility, the requisite service period subsequent to attaining such eligibility is considered nonsubstantive. Accordingly, the Company recognizes compensation expense related to stock-based awards over the shorter of the requisite service period or the period to attainment of retirement eligibility. SFAS 123(r) also requires an estimation of future forfeitures of stock-based awards to be incorporated into the determination of compensation expense when recognizing expense over the requisite service period. Foreign Currency Balance sheet accounts of foreign operations are translated at the exchange rates in effect at each year-end and income and expense accounts are translated at the average rates of exchange prevailing during the year. The local currencies of foreign operations are the functional currencies unless the local economy is highly inflationary. Translation adjustments are charged or credited directly to other comprehensive income or loss. Gains and losses from foreign currency transactions are reported as net investment gains (losses) in the period in which they occur. Discontinued Operations The results of operations of a component of the Company that either has been disposed of or is classified as held-for-sale are reported in discontinued operations if the operations and cash flows of the component have been or will be eliminated from the ongoing operations of the Company as a result of the disposal transaction and the Company will not have any significant continuing involvement in the operations of the component after the disposal transaction. Litigation Contingencies The Company is a party to 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 consolidated financial position. Liabilities are established when it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. On a quarterly and annual basis, the Company reviews relevant information with respect to liabilities for litigation, regulatory investigations and litigation-related contingencies to be reflected in the Company's consolidated financial statements. It is possible that an adverse outcome in certain of the Company's litigation and regulatory investigations, or the use of different assumptions in the determination of amounts recorded, could have a material effect upon the Company's consolidated net income or cash flows in particular quarterly or annual periods. F-25 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) ADOPTION OF NEW ACCOUNTING PRONOUNCEMENTS 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 income (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 a reduction of $749 million, net of income tax, to accumulated other comprehensive income, 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 is no impact of adoption due to changes in measurement date. See also Summary of "Significant Accounting Policies and Critical Accounting Estimates" and Note 15. Stock Compensation Plans As described previously, effective January 1, 2006, the Holding Company adopted SFAS 123(r) including supplemental application guidance issued by the SEC in Staff Accounting Bulletin ("SAB") No. 107, Share-Based Payment ("SAB 107") -- using the modified prospective transition method. In accordance with the modified prospective transition method, results for prior periods have not been restated. SFAS 123(r) requires that the cost of all stock-based transactions be measured at fair value and recognized over the period during which a grantee is required to provide goods or services in exchange for the award. The Holding Company had previously adopted the fair value method of accounting for stock-based awards as prescribed by SFAS 123 on a prospective basis effective January 1, 2003, and prior to January 1, 2003, accounted for its stock-based awards to employees under the intrinsic value method prescribed by APB 25. The Holding Company did not modify the substantive terms of any existing awards prior to adoption of SFAS 123(r). Under the modified prospective transition method, compensation expense recognized during the year ended December 31, 2006 includes: (a) compensation expense for all stock-based awards granted prior to, but not yet vested as of January 1, 2006, based on the grant date fair value estimated in accordance with the original provisions of SFAS 123, and (b) compensation expense for all stock- based awards granted beginning January 1, 2006, based on the grant date fair value estimated in accordance with the provisions of SFAS 123(r). The adoption of SFAS 123(r) did not have a significant impact on the Company's financial position or results of operations as all stock-based awards accounted for under the intrinsic value method prescribed by APB 25 had vested prior to the adoption date and the Company, in conjunction with the Holding Company, had adopted the fair value recognition provisions of SFAS 123 on January 1, 2003. As required by SFAS 148, and F-26 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) carried forward in the provisions of SFAS 123(r), the Company discloses the pro forma impact as if stock-based awards accounted for under APB 25 had been accounted for under the fair value method in Note 16. SFAS 123 allowed forfeitures of stock-based awards to be recognized as a reduction of compensation expense in the period in which the forfeiture occurred. Upon adoption of SFAS 123(r), the Holding Company changed its policy and now incorporates an estimate of future forfeitures into the determination of compensation expense when recognizing expense over the requisite service period. The impact of this change in accounting policy was not significant to the Company's consolidated financial position or results of operations for the year ended December 31, 2006. Additionally, for awards granted after adoption, the Holding Company changed its policy from recognizing expense for stock-based awards over the requisite service period to recognizing such expense over the shorter of the requisite service period or the period to attainment of retirement-eligibility. The pro forma impact of this change in expense recognition policy for stock- based compensation is detailed in Note 16. Prior to the adoption of SFAS 123(r), the Company presented tax benefits of deductions resulting from the exercise of stock options within operating cash flows in the consolidated statements of cash flows. SFAS 123(r) requires tax benefits resulting from tax deductions in excess of the compensation cost recognized for those options be classified and reported as a financing cash inflow upon adoption of SFAS 123(r). Derivative Financial Instruments The Company has adopted guidance relating to derivative financial instruments as follows: - Effective January 1, 2006, the Company adopted prospectively SFAS No. 155, Accounting for Certain Hybrid Instruments ("SFAS 155"). SFAS 155 amends SFAS 133 and SFAS No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities ("SFAS 140"). SFAS 155 allows financial instruments that have embedded derivatives to be accounted for as a whole, eliminating the need to bifurcate the derivative from its host, if the holder elects to account for the whole instrument on a fair value basis. In addition, among other changes, SFAS 155: (i) clarifies which interest-only strips and principal-only strips are not subject to the requirements of SFAS 133; (ii) establishes a requirement to evaluate interests in securitized financial assets to identify interests that are freestanding derivatives or that are hybrid financial instruments that contain an embedded derivative requiring bifurcation; (iii) clarifies that concentrations of credit risk in the form of subordination are not embedded derivatives; and (iv) amends SFAS 140 to eliminate the prohibition on a qualifying special-purpose entity ("QSPE") from holding a derivative financial instrument that pertains to a beneficial interest other than another derivative financial interest. The adoption of SFAS 155 did not have a material impact on the Company's consolidated financial statements. - Effective October 1, 2006, the Company adopted SFAS 133 Implementation Issue No. B40, Embedded Derivatives: Application of Paragraph 13(b) to Securitized Interests in Prepayable Financial Assets ("Issue B40"). Issue B40 clarifies that a securitized interest in prepayable financial assets is not subject to the conditions in paragraph 13(b) of SFAS 133, if it meets both of the following criteria: (i) the right to accelerate the settlement if the securitized interest cannot be controlled by the investor; and (ii) the securitized interest itself does not contain an embedded derivative (including an interest rate-related F-27 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 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 Pronouncements Effective November 15, 2006, the Company adopted SAB No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements ("SAB 108"). SAB 108 provides guidance on how prior year misstatements should be considered when quantifying misstatements in current year financial statements for purposes of assessing materiality. SAB 108 requires that registrants quantify errors using both a balance sheet and income statement approach and evaluate whether either approach results in quantifying a misstatement that, when relevant quantitative and qualitative factors are considered, is material. SAB 108 permits companies to initially apply its provisions by either restating prior financial statements or recording a cumulative effect adjustment to the carrying values of assets and liabilities as of January 1, 2006 with an offsetting adjustment to retained earnings for errors that were previously deemed immaterial but are material under the guidance in SAB 108. The adoption of SAB 108 did not have a material impact on the Company's consolidated financial statements. Effective January 1, 2006, the Company adopted prospectively Emerging Issues Task Force ("EITF") Issue No. 05-7, Accounting for Modifications to Conversion Options Embedded in Debt Instruments and Related Issues ("EITF 05- 7"). EITF 05-7 provides guidance on whether a modification of conversion options embedded in debt results in an extinguishment of that debt. In certain situations, companies may change the terms of an embedded conversion option as part of a debt modification. The EITF concluded that the change in the fair value of an embedded conversion option upon modification should be included in the analysis of EITF Issue No. 96-19, Debtor's Accounting for a Modification or Exchange of Debt Instruments, to determine whether a modification or extinguishment has occurred and that a change in the fair value of a conversion option should be recognized upon the modification as a discount (or premium) associated with the debt, and an increase (or decrease) in additional paid-in capital. The adoption of EITF 05-7 did not have a material impact on the Company's consolidated financial statements. Effective January 1, 2006, the Company adopted EITF Issue No. 05-8, Income Tax Consequences of Issuing Convertible Debt with a Beneficial Conversion Feature ("EITF 05-8"). EITF 05-8 concludes that: (i) the issuance of convertible debt with a beneficial conversion feature results in a basis difference that should be accounted for as a temporary difference; and (ii) the establishment of the deferred tax liability for the basis difference should result in an adjustment to additional paid-in capital. EITF 05-8 was applied retrospectively for all instruments with a beneficial conversion feature accounted for in accordance with EITF Issue No. 98-5, Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable F-28 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Conversion Ratios, and EITF Issue No. 00-27, Application of Issue No. 98-5 to Certain Convertible Instruments. The adoption of EITF 05-8 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 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 F-29 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Investments in Debt and Equity Securities, that are impaired at the balance sheet date but for which an other-than-temporary impairment has not been recognized. The FASB decided not to provide additional guidance on the meaning of other-than-temporary impairment but has issued FSP Nos. FAS 115-1 and FAS 124-1, The Meaning of Other-Than-Temporary Impairment and its Application to Certain Investments ("FSP 115-1"), which nullifies the accounting guidance on the determination of whether an investment is other-than-temporarily impaired as set forth in EITF 03-1. As required by FSP 115-1, the Company adopted this guidance on a prospective basis, which had no material impact on the Company's consolidated financial statements, and has provided the required disclosures. Effective July 1, 2004, the Company prospectively adopted FSP No. FAS 106- 2, Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003 ("FSP 106-2"). FSP 106-2 provides accounting guidance to employers that sponsor postretirement health care plans that provide prescription drug benefits. The Company began receiving subsidies on prescription drug benefits during 2006 under the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the "Prescription Drug Act") based on the Company's determination that the prescription drug benefits offered under certain postretirement plans are actuarially equivalent to the benefits offered under Medicare Part D. The postretirement benefit plan assets and accumulated benefit obligation were remeasured to determine the effect of the expected subsidies on net periodic postretirement benefit cost. As a result, the accumulated postretirement benefit obligation was reduced by $213 million at July 1, 2004. See also Note 15. Effective July 1, 2004, the Company adopted EITF Issue No. 03-16, Accounting for Investments in Limited Liability Companies ("EITF 03-16"). EITF 03-16 provides guidance regarding whether a limited liability company should be viewed as similar to a corporation or similar to a partnership for purposes of determining whether a noncontrolling investment should be accounted for using the cost method or the equity method of accounting. EITF 03-16 did not have a material impact on the Company's consolidated financial statements. Effective January 1, 2004, the Company adopted Statement of Position ("SOP") 03-1, Accounting and Reporting by Insurance Enterprises for Certain Nontraditional Long-Duration Contracts and for Separate Accounts ("SOP 03-1"), as interpreted by a Technical Practice Aid ("TPA"), issued by the American Institute of Certified Public Accountants ("AICPA") and FSP No. FAS 97-1, Situations in Which Paragraphs 17(b) and 20 of FASB Statement No 97, Accounting and Reporting by Insurance Enterprises for Certain Long-Duration Contracts and for Realized Gains and Losses from the Sale of Investments, Permit or Require Accrual of an Unearned Revenue Liability. SOP 03-1 provides guidance on: (i) the classification and valuation of long-duration contract liabilities; (ii) the accounting for sales inducements; and (iii) separate account presentation and valuation. As a result of the adoption of SOP 03-1, effective January 1, 2004, the Company decreased the liability for future policyholder benefits for changes in the methodology relating to various guaranteed death and annuitization benefits and for determining liabilities for certain universal life insurance contracts by $8 million, which was reported as a cumulative effect of a change in accounting. This amount is net of corresponding changes in DAC, including VOBA and unearned revenue liability, under certain variable annuity and life contracts and income tax. Certain other contracts sold by the Company provide for a return through periodic crediting rates, surrender adjustments or termination adjustments based on the total return of a contractually referenced pool of assets owned by the Company. To the extent that such contracts are not accounted for as derivatives under the provisions of SFAS 133 and not already credited to the contract account balance, under SOP 03-1 the change relating to the fair value of the referenced pool of assets is recorded as a liability with the change in the liability recorded as policyholder benefits and claims. Prior to the adoption of SOP 03-1, the Company recorded the change in such liability as other comprehensive income. At adoption, this change decreased net income and increased other comprehensive income by $33 million, net of income tax, which were recorded as cumulative effects of changes in accounting. Effective with the adoption of SOP 03-1, costs associated with enhanced or bonus crediting rates to contractholders must be deferred and amortized over the life F-30 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) of the related contract using assumptions consistent with the amortization of DAC. Since the Company followed a similar approach prior to adoption of SOP 03- 1, the provisions of SOP 03-1 relating to sales inducements had no significant impact on the Company's consolidated financial statements. In accordance with SOP 03-1's guidance for the reporting of certain separate accounts, at adoption, the Company also reclassified $1.7 billion of separate account assets to general account investments and $1.7 billion of separate account liabilities to future policy benefits and PABs. This reclassification decreased net income and increased other comprehensive income by $27 million, net of income tax, which were reported as cumulative effects of changes in accounting. As a result of the adoption of SOP 03-1, the Company recorded a cumulative effect of a change in accounting of $52 million, net of income tax of $27 million, for the year ended December 31, 2004. FUTURE ADOPTION OF NEW ACCOUNTING PRONOUNCEMENTS In February 2007, the FASB issued SFAS No. 159, the Fair Value Option for Financial Assets and Financial Liabilities ("SFAS 159"). SFAS 159 permits all entities the option to measure most financial instruments and certain other items at fair value at specified election dates and to report related unrealized gains and losses in earnings. The fair value option will generally be applied on an instrument-by-instrument basis and is generally an irrevocable election. SFAS 159 is effective for fiscal years beginning after November 15, 2007. The Company is evaluating which eligible financial instruments, if any, it will elect to account for at fair value under SFAS 159 and the related impact on the Company's consolidated financial statements. In December 2006, the FASB issued FSP EITF 00-19-2, Accounting for Registration Payment Arrangements ("FSP EITF 00-19-2"). FSP EITF 00-19-2 specifies that the contingent obligation to make future payments or otherwise transfer consideration under a registration payment arrangement should be separately recognized and measured in accordance with SFAS No. 5, Accounting for Contingencies. FSP EITF 00-19-2 is effective immediately for registration payment arrangements and the financial instruments subject to those arrangements that are entered into or modified subsequent to December 21, 2006. For registration payment arrangements and financial instruments subject to those arrangements that were entered into prior to December 21, 2006, the guidance in the FSP is effective for fiscal years beginning after December 15, 2006. The Company does not expect FSP EITF 00-19-2 to have a material impact on the Company's consolidated financial statements. In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements ("SFAS 157"). SFAS 157 defines fair value, establishes a framework for measuring fair value in GAAP and requires enhanced disclosures about fair value measurements. SFAS 157 does not require any new fair value measurements. The pronouncement is effective for fiscal years beginning after November 15, 2007. The guidance in SFAS 157 will be applied prospectively with the exception of: (i) block discounts of financial instruments; and (ii) certain financial and hybrid instruments measured at initial recognition under SFAS 133 which is to be applied retrospectively as of the beginning of initial adoption (a limited form of retrospective application). The Company is currently evaluating the impact of SFAS 157 on the Company's consolidated financial statements. Implementation of SFAS 157 will require additional disclosures in the Company's consolidated financial statements. In July 2006, the FASB issued FSP No. FAS 13-2, Accounting for a Change or Projected Change in the Timing of Cash Flows Relating to Income Taxes Generated by a Leveraged Lease Transaction ("FSP 13-2"). FSP 13-2 amends SFAS No. 13, Accounting for Leases, to require that a lessor review the projected timing of income tax cash flows generated by a leveraged lease annually or more frequently if events or circumstances indicate that a change in timing has occurred or is projected to occur. In addition, FSP 13-2 requires that the change in the net investment balance resulting from the recalculation be recognized as a gain or loss from continuing operations in the same line item in which leveraged lease income is recognized in the year in which the assumption is changed. The guidance in FSP 13-2 is effective for fiscal years beginning after December 15, 2006. F-31 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The Company does not expect FSP 13-2 to have a material impact on the Company's consolidated financial statements. In June 2006, the FASB issued FIN No. 48, Accounting for Uncertainty in Income Taxes -- an interpretation of FASB Statement No. 109 ("FIN 48"). FIN 48 clarifies the accounting for uncertainty in income tax recognized in a company's financial statements. FIN 48 requires companies to determine whether it is "more likely than not" that a tax position will be sustained upon examination by the appropriate taxing authorities before any part of the benefit can be recorded in the financial statements. It also provides guidance on the recognition, measurement and classification of income tax uncertainties, along with any related interest and penalties. Previously recorded income tax benefits that no longer meet this standard are required to be charged to earnings in the period that such determination is made. FIN 48 will also require significant additional disclosures. FIN 48 is effective for fiscal years beginning after December 15, 2006. Based upon the Company's preliminary evaluation work, the Company expects to recognize a reduction to the January 1, 2007 balance of retained earnings of between $10 million and $30 million. In March 2006, the FASB issued SFAS No. 156, Accounting for Servicing of Financial Assets -- an amendment of FASB Statement No. 140 ("SFAS 156"). Among other requirements, SFAS 156 requires an entity to recognize a servicing asset or servicing liability each time it undertakes an obligation to service a financial asset by entering into a servicing contract in certain situations. SFAS 156 will be applied prospectively and is effective for fiscal years beginning after September 15, 2006. The Company does not expect SFAS 156 to have a material impact on the Company's consolidated financial statements. In September 2005, the AICPA issued SOP 05-1, Accounting by Insurance Enterprises for Deferred Acquisition Costs in Connection with Modifications or Exchanges of Insurance Contracts ("SOP 05-1"). SOP 05-1 provides guidance on accounting by insurance enterprises for DAC on internal replacements of insurance and investment contracts other than those specifically described in SFAS No. 97, Accounting and Reporting by Insurance Enterprises for Certain Long- Duration Contracts and for Realized Gains and Losses from the Sale of Investments. SOP 05-1 defines an internal replacement as a modification in product benefits, features, rights, or coverages that occurs by the exchange of a contract for a new contract, or by amendment, endorsement, or rider to a contract, or by the election of a feature or coverage within a contract. It is effective for internal replacements occurring in fiscal years beginning after December 15, 2006. In addition, in February 2007 related TPAs were issued by the AICPA to provide further clarification of SOP 05-1. The TPAs are effective concurrently with the adoption of the SOP. Based on the Company's interpretation of SOP 05-1 and related TPAs, the adoption of SOP 05-1 will result in a reduction to DAC and VOBA relating primarily to the Company's group life and health insurance contracts that contain certain rate reset provisions. The Company estimates that the adoption of SOP 05-1 as of January 1, 2007 will result in a cumulative effect adjustment of between $180 million and $220 million, net of income tax, which will be recorded as a reduction to retained earnings. In addition, the Company estimates that accelerated DAC and VOBA amortization will reduce 2007 net income by approximately $15 million to $30 million, net of income tax. 2. ACQUISITIONS AND DISPOSITIONS On October 20, 2006, the Holding Company sold its subsidiary, Citicorp Life Insurance Company and its subsidiary, First Citicorp Life Insurance Company (collectively, "CLIC") to the Company for $135 million in cash consideration. The net assets of CLIC acquired by the Company were $154 million. The excess of the net assets of CLIC received over the purchase price resulted in an increase of $19 million in additional paid-in capital. In connection with the sale and merger of CLIC, the Holding Company contributed $17 million to the Company. See Note 16. F-32 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) On September 30, 2006, the Company acquired MetLife Retirement Services LLC ("MRS") (formerly, CitiStreet Retirement Services LLC), and its subsidiaries from an affiliate, Metropolitan Tower Life Insurance Company ("MTL") for approximately $58 million in cash consideration settled in the fourth quarter of 2006. The assets acquired are principally comprised of $52 million related to the value of customer relationships acquired ("VOCRA"). On July 1, 2005, the Holding Company completed the acquisition of The Travelers Insurance Company, excluding certain assets, most significantly, Primerica, from Citigroup Inc. ("Citigroup"), and substantially all of Citigroup's international insurance business (collectively, "Travelers"). On September 30, 2006, the Company received a capital contribution from the Holding Company of $377 million in the form of intangible assets related to the value of distribution agreements ("VODA") of $389 million, net of deferred income tax of $12 million, for which the Company receives the benefit. The VODA originated through the Holding Company's acquisition of Travelers and was transferred at its amortized cost basis. See Notes 7 and 16. Newbury Insurance Company, Limited which was sold to the Holding Company and New England Pension and Annuity Company which was sold to MTL, both in 2004, are included in the accompanying consolidated financial statements until the respective dates of sale. See Note 19 for information on the disposition of P.T. Sejahtera ("MetLife Indonesia") and SSRM Holdings, Inc. ("SSRM"). 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, 2006 ------------------------------------------------ GROSS COST OR UNREALIZED AMORTIZED --------------- ESTIMATED % OF COST GAIN LOSS FAIR VALUE TOTAL --------- ------ ------ ---------- ----- (IN MILLIONS) U.S. corporate securities.................. $ 51,003 $1,829 $ 492 $ 52,340 32.2% Residential mortgage-backed securities..... 34,617 312 204 34,725 21.4 Foreign corporate securities............... 23,599 1,618 226 24,991 15.4 U.S. Treasury/agency securities............ 20,662 944 108 21,498 13.2 Commercial mortgage-backed securities...... 11,794 164 72 11,886 7.3 Asset-backed securities.................... 9,369 55 41 9,383 5.8 Foreign government securities.............. 4,653 1,001 12 5,642 3.5 State and political subdivision securities............................... 1,743 27 12 1,758 1.1 Other fixed maturity securities............ 233 6 77 162 0.1 -------- ------ ------ -------- ----- Total fixed maturity securities.......... $157,673 $5,956 $1,244 $162,385 100.0% ======== ====== ====== ======== ===== Common stock............................... $ 1,454 $ 457 $ 14 $ 1,897 54.4% Non-redeemable preferred stock............. 1,546 59 15 1,590 45.6 -------- ------ ------ -------- ----- Total equity securities.................. $ 3,000 $ 516 $ 29 $ 3,487 100.0% ======== ====== ====== ======== =====
F-33 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 2005 ------------------------------------------------ GROSS COST OR UNREALIZED AMORTIZED --------------- ESTIMATED % OF COST GAIN LOSS FAIR VALUE TOTAL --------- ------ ------ ---------- ----- (IN MILLIONS) U.S. corporate securities.................. $ 48,056 $2,507 $ 358 $ 50,205 33.9% Residential mortgage-backed securities..... 30,213 315 292 30,236 20.4 Foreign corporate securities............... 22,922 1,625 258 24,289 16.4 U.S. Treasury/agency securities............ 17,858 1,333 18 19,173 13.0 Commercial mortgage-backed securities...... 10,793 194 102 10,885 7.4 Asset-backed securities.................... 6,412 74 29 6,457 4.4 Foreign government securities.............. 4,734 999 10 5,723 3.9 State and political subdivision securities............................... 738 21 10 749 0.5 Other fixed maturity securities............ 203 10 33 180 0.1 -------- ------ ------ -------- ----- Total fixed maturity securities.......... $141,929 $7,078 $1,110 $147,897 100.0% ======== ====== ====== ======== ===== Common stock............................... $ 1,616 $ 229 $ 25 $ 1,820 82.1% Non-redeemable preferred stock............. 373 27 3 397 17.9 -------- ------ ------ -------- ----- Total equity securities.................. $ 1,989 $ 256 $ 28 $ 2,217 100.0% ======== ====== ====== ======== =====
The Company held foreign currency derivatives with notional amounts of $7.3 billion and $4.9 billion to hedge the exchange rate risk associated with foreign denominated fixed maturity securities at December 31, 2006 and 2005, respectively. Excluding investments in U.S. Treasury securities and obligations of U.S. government corporations and agencies, the Company is not exposed to any significant concentration of credit risk in its fixed maturity securities portfolio. The Company held fixed maturity securities at estimated fair values that were below investment grade or not rated by an independent rating agency that totaled $12.0 billion and $10.2 billion at December 31, 2006 and 2005, respectively. These securities had a net unrealized gain of $534 million and $388 million at December 31, 2006 and 2005, respectively. Non-income producing fixed maturity securities were $10 million at both December 31, 2006 and 2005. Unrealized gains (losses) associated with non-income producing fixed maturity securities were $3 million and $1 million at December 31, 2006 and 2005, respectively. F-34 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The cost or amortized cost and estimated fair value of fixed maturity securities, by contractual maturity date (excluding scheduled sinking funds), are shown below:
DECEMBER 31, ----------------------------------------------- 2006 2005 ---------------------- ---------------------- COST OR COST OR AMORTIZED ESTIMATED AMORTIZED ESTIMATED COST FAIR VALUE COST FAIR VALUE --------- ---------- --------- ---------- (IN MILLIONS) Due in one year or less................. $ 4,531 $ 4,616 $ 4,271 $ 4,320 Due after one year through five years... 28,494 29,095 20,419 20,899 Due after five years through ten years.. 25,535 26,071 29,365 30,335 Due after ten years..................... 43,333 46,609 40,456 44,765 -------- -------- -------- -------- Subtotal.............................. 101,893 106,391 94,511 100,319 Mortgage-backed, commercial mortgage- backed and other asset-backed securities............................ 55,780 55,994 47,418 47,578 -------- -------- -------- -------- Total fixed maturity securities....... $157,673 $162,385 $141,929 $147,897 ======== ======== ======== ========
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, --------------------------- 2006 2005 2004 ------- ------- ------- (IN MILLIONS) Proceeds......................................... $57,861 $97,347 $53,639 Gross investment gains........................... $ 387 $ 623 $ 792 Gross investment losses.......................... $ (855) $ (956) $ (468)
F-35 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) UNREALIZED LOSS FOR FIXED MATURITY AND EQUITY SECURITIES AVAILABLE-FOR-SALE The following tables present the estimated fair values and gross unrealized loss of the Company's fixed maturity securities (aggregated by sector) and equity securities in an unrealized loss position, aggregated by length of time that the securities have been in a continuous unrealized loss position at:
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..... $11,033 $152 $ 8,162 $340 $19,195 $ 492 Residential mortgage-backed securities.................. 10,108 52 8,329 152 18,437 204 Foreign corporate securities.. 4,319 61 4,411 165 8,730 226 U.S. Treasury/agency securities.................. 9,075 99 377 9 9,452 108 Commercial mortgage-backed securities.................. 3,799 21 2,058 51 5,857 72 Asset-backed securities....... 3,184 27 662 14 3,846 41 Foreign government securities.................. 409 6 242 6 651 12 State and political subdivision securities...... 217 9 104 3 321 12 Other fixed maturity securities.................. 122 77 -- -- 122 77 ------- ---- ------- ---- ------- ------ Total fixed maturity securities............... $42,266 $504 $24,345 $740 $66,611 $1,244 ======= ==== ======= ==== ======= ====== Equity securities............. $ 613 $ 17 $ 287 $ 12 $ 900 $ 29 ======= ==== ======= ==== ======= ====== Total number of securities in an unrealized loss position.................... 4,134 2,129 6,263 ======= ======= =======
F-36 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 2005 --------------------------------------------------------------------------- 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..... $12,171 $275 $2,295 $ 83 $14,466 $ 358 Residential mortgage-backed securities.................. 18,839 267 884 25 19,723 292 Foreign corporate securities.. 6,995 200 1,621 58 8,616 258 U.S. Treasury/agency securities.................. 2,856 16 107 2 2,963 18 Commercial mortgage-backed securities.................. 5,323 89 401 13 5,724 102 Asset-backed securities....... 2,289 21 239 8 2,528 29 Foreign government securities.................. 429 9 161 1 590 10 State and political subdivision securities...... 327 10 -- -- 327 10 Other fixed maturity securities.................. -- 29 38 4 38 33 ------- ---- ------ ---- ------- ------ Total fixed maturity securities............... $49,229 $916 $5,746 $194 $54,975 $1,110 ======= ==== ====== ==== ======= ====== Equity securities............. $ 409 $ 24 $ 57 $ 4 $ 466 $ 28 ======= ==== ====== ==== ======= ====== Total number of securities in an unrealized loss position.................... 3,607 675 4,282 ======= ====== =======
AGING OF GROSS UNREALIZED LOSS FOR FIXED MATURITY AND EQUITY SECURITIES AVAILABLE-FOR-SALE The following tables present the cost or amortized cost, gross unrealized loss and number of securities for fixed maturity securities and equity securities, where the estimated fair value had declined and remained below cost or amortized cost by less than 20%, or 20% or more at:
DECEMBER 31, 2006 ------------------------------------------------------------ COST OR GROSS NUMBER OF AMORTIZED COST UNREALIZED LOSSES SECURITIES ------------------ ------------------ ------------------ LESS THAN 20% OR LESS THAN 20% OR LESS THAN 20% OR 20% MORE 20% MORE 20% MORE --------- ------ --------- ------ --------- ------ (IN MILLIONS, EXCEPT NUMBER OF SECURITIES) Less than six months............ $32,410 $25 $ 346 $ 7 3,112 62 Six months or greater but less than nine months.............. 1,657 3 28 1 300 1 Nine months or greater but less than twelve months............ 9,305 -- 139 -- 659 -- Twelve months or greater........ 25,356 28 746 6 2,123 6 ------- --- ------ --- ----- -- Total......................... $68,728 $56 $1,259 $14 6,194 69 ======= === ====== === ===== ==
F-37 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 2005 ------------------------------------------------------------ COST OR GROSS NUMBER OF AMORTIZED COST UNREALIZED LOSSES SECURITIES ------------------ ------------------ ------------------ LESS THAN 20% OR LESS THAN 20% OR LESS THAN 20% OR 20% MORE 20% MORE 20% MORE --------- ------ --------- ------ --------- ------ (IN MILLIONS, EXCEPT NUMBER OF SECURITIES) Less than six months............ $43,966 $68 $ 732 $18 2,827 89 Six months or greater but less than nine months.............. 2,666 4 82 2 268 7 Nine months or greater but less than twelve months............ 3,874 -- 106 -- 415 1 Twelve months or greater........ 5,980 21 193 5 668 7 ------- --- ------ --- ----- --- Total......................... $56,486 $93 $1,113 $25 4,178 104 ======= === ====== === ===== ===
At December 31, 2006 and 2005, $1.3 billion and $1.1 billion, respectively, of unrealized losses related to securities with an unrealized loss position of less than 20% of cost or amortized cost, which represented 2% of the cost or amortized cost of such securities. At December 31, 2006, $14 million of unrealized losses related to securities with an unrealized loss position of 20% or more of cost or amortized cost, which represented 25% of the cost or amortized cost of such securities. Of such unrealized losses of $14 million, $7 million related to securities that were in an unrealized loss position for a period of less than six months. At December 31, 2005, $25 million of unrealized losses related to securities with an unrealized loss position of 20% or more of cost or amortized cost, which represented 27% of the cost or amortized cost of such securities. Of such unrealized losses of $25 million, $18 million related to securities that were in an unrealized loss position for a period of less than six months. The Company held four fixed maturity securities and equity securities each with a gross unrealized loss at December 31, 2006 each greater than $10 million. These securities represented 7%, or $95 million in the aggregate, of the gross unrealized loss on fixed maturity securities and equity securities. There were no securities with a gross unrealized loss greater than $10 million at December 31, 2005. F-38 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) At December 31, 2006 and 2005, the Company had $1.3 billion and $1.1 billion, respectively, of gross unrealized loss related to its fixed maturity and equity securities. These securities are concentrated, calculated as a percentage of gross unrealized loss, as follows:
DECEMBER 31, ----------- 2006 2005 ---- ---- SECTOR: U.S. corporate securities.................................. 39% 31% Residential mortgage-backed securities..................... 16 26 Foreign corporate securities............................... 18 23 U.S. Treasury/agency securities............................ 8 2 Commercial mortgage-backed securities...................... 6 9 Other...................................................... 13 9 --- --- Total................................................... 100% 100% === === INDUSTRY: Industrial................................................. 24% 25% Mortgage-backed............................................ 22 35 Utility.................................................... 12 8 Government................................................. 9 3 Finance.................................................... 7 7 Other...................................................... 26 22 --- --- Total................................................... 100% 100% === ===
As described more fully in Note 1, the Company performs a regular evaluation, on a security-by-security basis, of its investment holdings in accordance with its impairment policy in order to evaluate whether such securities are other-than-temporarily impaired. One of the criteria which the Company considers in its other-than-temporary impairment analysis is its intent and ability to hold securities for a period of time sufficient to allow for the recovery of their value to an amount equal to or greater than cost or amortized cost. The Company's intent and ability to hold securities considers broad portfolio management objectives such as asset/liability duration management, issuer and industry segment exposures, interest rate views and the overall total return focus. In following these portfolio management objectives, changes in facts and circumstances that were present in past reporting periods may trigger a decision to sell securities that were held in prior reporting periods. Decisions to sell are based on current conditions or the Company's need to shift the portfolio to maintain its portfolio management objectives including liquidity needs or duration targets on asset/liability managed portfolios. The Company attempts to anticipate these types of changes and if a sale decision has been made on an impaired security and that security is not expected to recover prior to the expected time of sale, the security will be deemed other-than- temporarily impaired in the period that the sale decision was made and an other- than-temporary impairment loss will be recognized. Based upon the Company's current evaluation of the securities in accordance with its impairment policy, the cause of the decline being principally attributable to the general rise in rates during the holding period, and the Company's current intent and ability to hold the fixed maturity and equity securities with unrealized losses for a period of time sufficient for them to recover, the Company has concluded that the aforementioned securities are not other-than-temporarily impaired. F-39 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) SECURITIES LENDING The Company participates in a securities lending program whereby blocks of securities, which are included in fixed maturity and equity securities, are loaned to third parties, primarily major brokerage firms. The Company requires a minimum of 102% of the fair value of the loaned securities to be separately maintained as collateral for the loans. Securities with a cost or amortized cost of $30.1 billion and $19.5 billion and an estimated fair value of $31.0 billion and $20.4 billion were on loan under the program at December 31, 2006 and 2005, respectively. Securities loaned under such transactions may be sold or repledged by the transferee. The Company was liable for cash collateral under its control of $32.0 billion and $21.0 billion at December 31, 2006 and 2005, respectively. Security collateral of $17 million and $33 million on deposit from customers in connection with the securities lending transactions at December 31, 2006 and 2005, respectively, may not be sold or repledged and is not reflected in the consolidated financial statements. ASSETS ON DEPOSIT AND HELD IN TRUST The Company had investment assets on deposit with regulatory agencies with a fair market value of $1.2 billion and $1.5 billion at December 31, 2006 and 2005, respectively, consisting primarily of fixed maturity and equity securities. Company securities held in trust to satisfy collateral requirements had an amortized cost of $2.3 billion and $1.5 billion at December 31, 2006 and 2005, respectively, consisting primarily of fixed maturity and equity securities. MORTGAGE AND CONSUMER LOANS Mortgage and consumer loans are categorized as follows:
DECEMBER 31, ------------------------------------- 2006 2005 ----------------- ----------------- AMOUNT PERCENT AMOUNT PERCENT ------- ------- ------- ------- (IN MILLIONS) Commercial mortgage loans................... $28,369 78% $26,574 80% Agricultural mortgage loans................. 7,527 21 6,242 19 Consumer loans.............................. 203 1 427 1 ------- --- ------- --- Subtotal.................................. 36,099 100% 33,243 100% === === Less: Valuation allowances.................. 160 149 ------- ------- Mortgage and consumer loans............... $35,939 $33,094 ======= =======
Mortgage loans are collateralized by properties primarily located in the United States. At December 31, 2006, 19%, 7% and 6% of the value of the Company's mortgage and consumer loans were located in California, New York and Texas, respectively. Generally, the Company, as the lender, only loans up to 75% of the purchase price of the underlying real estate. Of the mortgage loans held at December 31, 2006 and 2005, $0 and $781 million, respectively, of the loans granted, were in connection with Metropolitan Insurance and Annuity Company's ("MIAC"), a related party, purchase of real estate from the Company in 2001 and 2003. MIAC was merged into MTL, also a related party, in 2004. In 2006, MTL sold Peter Cooper Village and Stuyvesant Town real estate properties located in New York City, to a third party for $5.4 billion. Concurrent with the sale, MTL repaid the related $770 million mortgage, including accrued interest, it owed to the Company. In 2005, MTL sold its 200 Park Avenue real estate property located in New York City, to a third party for $1.72 billion. Concurrent with the sale, MTL repaid the related $690 million mortgage, including accrued interest, it owed the Company. F-40 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Certain of the Company's real estate joint ventures have mortgage loans with the Company. The carrying values of such mortgages were $372 million and $379 million at December 31, 2006 and 2005, respectively. Information regarding loan valuation allowances for mortgage and consumer loans is as follows:
YEARS ENDED DECEMBER 31, ------------------ 2006 2005 2004 ---- ---- ---- (IN MILLIONS) Balance at January 1,.................................. $149 $154 $126 Additions.............................................. 28 43 56 Deductions............................................. (17) (48) (28) ---- ---- ---- Balance at December 31,................................ $160 $149 $154 ==== ==== ====
A portion of the Company's mortgage and consumer loans was impaired and consists of the following:
DECEMBER 31, ----------- 2006 2005 ---- ---- (IN MILLIONS) Impaired loans with valuation allowances..................... $371 $11 Impaired loans without valuation allowances.................. 39 86 ---- --- Subtotal................................................... 410 97 Less: Valuation allowances on impaired loans................. 20 2 ---- --- Impaired loans............................................. $390 $95 ==== ===
The average investment in impaired loans was $145 million, $152 million and $376 million for the years ended December 31, 2006, 2005 and 2004, respectively. Interest income on impaired loans was $1 million, $6 million and $25 million for the years ended December 31, 2006, 2005 and 2004, respectively. The investment in restructured loans was $9 million and $37 million at December 31, 2006 and 2005, respectively. Interest income of $1 million, $2 million and $9 million was recognized on restructured loans for the years ended December 31, 2006, 2005 and 2004, respectively. Gross interest income that would have been recorded in accordance with the original terms of such loans amounted to $1 million, $3 million and $11 million for the years ended December 31, 2006, 2005 and 2004, respectively. Mortgage and consumer loans with scheduled payments of 90 days or more past due on which interest is still accruing, had an amortized cost of $7 million and $17 million at December 31, 2006 and 2005, respectively. Mortgage and consumer loans on which interest is no longer accrued had an amortized cost of $35 million and $0 at December 31, 2006 and 2005, respectively. Mortgage and consumer loans in foreclosure had an amortized cost of $30 million and $7 million at December 31, 2006 and 2005, respectively. F-41 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) REAL ESTATE AND REAL ESTATE JOINT VENTURES Real estate and real estate joint ventures consisted of the following:
DECEMBER 31, ---------------- 2006 2005 ------- ------ (IN MILLIONS) Real estate.............................................. $ 4,297 $4,187 Accumulated depreciation................................. (1,140) (962) ------- ------ Net real estate.......................................... 3,157 3,225 Real estate joint ventures............................... 1,328 862 ------- ------ Real estate and real estate joint ventures............. $ 4,485 $4,087 ======= ======
The components of real estate and real estate joint ventures are as follows:
DECEMBER 31, --------------- 2006 2005 ------ ------ (IN MILLIONS) Real estate and real estate joint ventures held-for- investment.............................................. $4,485 $3,778 Real estate held-for-sale................................. -- 309 ------ ------ Real estate and real estate joint ventures.............. $4,485 $4,087 ====== ======
Related depreciation expense was $110 million, $120 million and $162 million for the years ended December 31, 2006, 2005 and 2004, respectively. These amounts include $3 million, $17 million and $45 million of depreciation expense related to discontinued operations for the years ended December 31, 2006, 2005 and 2004, respectively. Real estate and real estate joint ventures held-for-sale recognized impairments of $8 million, $5 million and $13 million for the years ended December 31, 2006, 2005 and 2004, respectively. The carrying value of non-income producing real estate and real estate joint ventures was $8 million and $30 million at December 31, 2006 and 2005, respectively. The Company owned real estate acquired in satisfaction of debt of less than $1 million at both December 31, 2006 and 2005. Real estate and real estate joint ventures were categorized as follows:
DECEMBER 31, ----------------------------------- 2006 2005 ---------------- ---------------- AMOUNT PERCENT AMOUNT PERCENT ------ ------- ------ ------- (IN MILLIONS) Office........................................ $2,335 52% $2,529 62% Apartments.................................... 737 17 447 11 Retail........................................ 534 12 612 15 Real estate investment funds.................. 307 7 45 1 Industrial.................................... 291 6 276 7 Development joint ventures.................... 169 4 -- -- Land.......................................... 50 1 40 1 Other......................................... 62 1 138 3 ------ --- ------ --- Total....................................... $4,485 100% $4,087 100% ====== === ====== ===
F-42 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The Company's real estate holdings are primarily located in the United States. At December 31, 2006, 26%, 16% and 16% of the Company's real estate holdings were located in New York, California and Texas, respectively. LEVERAGED LEASES Investment in leveraged leases, included in other invested assets, consisted of the following:
DECEMBER 31, --------------- 2006 2005 ------ ------ (IN MILLIONS) Rental receivables, net................................... $1,055 $ 991 Estimated residual values................................. 887 735 ------ ------ Subtotal................................................ 1,942 1,726 Unearned income........................................... (694) (645) ------ ------ Investment in leveraged leases.......................... $1,248 $1,081 ====== ======
The Company's deferred income tax liability related to leveraged leases was $670 million and $679 million at December 31, 2006 and 2005, respectively. The rental receivables set forth are generally due in periodic installments. The payment periods generally range from one to 15 years, but in certain circumstances are as long as 30 years. The components of net income from investment in leveraged leases are as follows:
YEARS ENDED DECEMBER 31, ------------------ 2006 2005 2004 ---- ---- ---- (IN MILLIONS) Income from investment in leveraged leases (included in net investment income).................................... $ 51 $ 54 $26 Income tax expense on leveraged leases.................. (18) (19) (9) ---- ---- --- Net income from leveraged leases........................ $ 33 $ 35 $17 ==== ==== ===
FUNDS WITHHELD AT INTEREST Funds withheld at interest, included in other invested assets, were $4.0 billion and $3.5 billion at December 31, 2006 and 2005, respectively. F-43 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) NET INVESTMENT INCOME The components of net investment income are as follows:
YEARS ENDED DECEMBER 31, --------------------------- 2006 2005 2004 ------- ------- ------- (IN MILLIONS) Fixed maturity securities........................ $ 9,551 $ 8,588 $ 8,085 Equity securities................................ 58 53 65 Mortgage and consumer loans...................... 2,315 2,246 1,957 Policy loans..................................... 495 497 492 Real estate and real estate joint ventures....... 750 545 436 Other limited partnership interests.............. 705 676 324 Cash, cash equivalents and short-term investments.................................... 201 113 64 Other............................................ 465 381 179 ------- ------- ------- Total investment income........................ 14,540 13,099 11,602 Less: Investment expenses........................ 2,233 1,370 807 ------- ------- ------- Net investment income.......................... $12,307 $11,729 $10,795 ======= ======= =======
For the years ended December 31, 2006, 2005 and 2004, affiliated investment income of $20 million, $16 million and $14 million, respectively, related to fixed maturity securities and $112 million, $189 million and $117 million, respectively, related to mortgage and consumer loans, are included in the table above. In the fourth quarter of 2006, MTL sold its Peter Cooper Village and Stuyvesant Town properties for $5.4 billion. Upon the closing of the transaction, MTL repaid the mortgage of $770 million, including accrued interest, held by the Company on these properties and paid a prepayment fee of $68 million which was recognized as affiliated investment income. In the second quarter of 2005, MTL sold its 200 Park Avenue real estate property located in New York City, to a third party for $1.72 billion. Concurrent with the sale, MTL repaid the related $690 million mortgage, including accrued interest, it owed to the Company. Based on the terms of the loan agreement, the Company also received a $120 million prepayment fee from MTL, which was recognized as affiliated investment income when received. F-44 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) NET INVESTMENT GAINS (LOSSES) The components of net investment gains (losses) are as follows:
YEARS ENDED DECEMBER 31, --------------------- 2006 2005 2004 ----- ----- ----- (IN MILLIONS) Fixed maturity securities............................ $(572) $(518) $ 81 Equity securities.................................... 67 121 150 Mortgage and consumer loans.......................... (16) 31 54 Real estate and real estate joint ventures........... 38 7 5 Other limited partnership interests.................. 2 43 53 Derivatives.......................................... (458) 410 (232) Other................................................ 112 85 171 ----- ----- ----- Net investment gains (losses)...................... $(827) $ 179 $ 282 ===== ===== =====
For the years ended December 31, 2006, 2005 and 2004, affiliated investment gains (losses) of ($20) million, $28 million and $15 million, respectively, are included within Other 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 $37 million, $64 million and $93 million for the years ended December 31, 2006, 2005 and 2004, respectively. F-45 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) NET UNREALIZED INVESTMENT GAINS (LOSSES) The components of net unrealized investment gains (losses), included in accumulated other comprehensive income, are as follows:
YEARS ENDED DECEMBER 31, --------------------------- 2006 2005 2004 ------- ------- ------- (IN MILLIONS) Fixed maturity securities........................ $ 4,685 $ 5,972 $ 8,571 Equity securities................................ 483 225 270 Derivatives...................................... (238) (207) (494) Minority interest................................ (159) (171) (103) Other............................................ -- (82) 34 ------- ------- ------- Subtotal....................................... 4,771 5,737 8,278 ------- ------- ------- Amounts allocated from: Future policy benefit loss recognition......... (806) (1,259) (1,953) DAC and VOBA................................... (239) (148) (407) Policyholder dividend obligation............... (1,062) (1,492) (2,119) ------- ------- ------- Subtotal.................................... (2,107) (2,899) (4,479) ------- ------- ------- Deferred income tax......................... (968) (1,029) (1,391) ------- ------- ------- Subtotal............................... (3,075) (3,928) (5,870) ------- ------- ------- Net unrealized investment gains (losses)......... $ 1,696 $ 1,809 $ 2,408 ======= ======= =======
The changes in net unrealized investment gains (losses) are as follows:
YEARS ENDED DECEMBER 31, ------------------------- 2006 2005 2004 ------ ------- ------ (IN MILLIONS) Balance, January 1,................................ $1,809 $ 2,408 $2,405 Unrealized investment gains (losses) during the year............................................. (966) (2,556) 281 Unrealized investment gains (losses) of subsidiaries at the date of sale..................................... -- 15 -- Unrealized investment gains (losses) relating to: Future policy benefit gains (losses) recognition................................... 453 694 (500) DAC and VOBA..................................... (91) 259 88 Participating contracts.......................... -- -- 117 Policyholder dividend obligation................. 430 627 11 Deferred income tax.............................. 61 362 6 ------ ------- ------ Balance, December 31, ............................. $1,696 $ 1,809 $2,408 ====== ======= ====== Net change in unrealized investment gains (losses)......................................... $ (113) $ (599) $ 3 ====== ======= ======
TRADING SECURITIES During 2005, the Company established a trading securities portfolio to support investment strategies that involve the active and frequent purchase and sale of securities, the execution of short sale agreements and asset F-46 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) and liability matching strategies for certain insurance products. Trading securities and short sale agreement liabilities are recorded at fair value with subsequent changes in fair value recognized in net investment income related to fixed maturity securities. At December 31, 2006 and 2005, trading securities were $563 million and $373 million, respectively, and liabilities associated with the short sale agreements in the trading securities portfolio, which were included in other liabilities, were $387 million and $271 million, respectively. The Company had pledged $614 million and $375 million of its assets, primarily consisting of trading securities, as collateral to secure the liabilities associated with the short sale agreements in the trading securities portfolio for the years ended December 31, 2006 and 2005, respectively. During the years ended December 31, 2006 and 2005, interest and dividends earned on trading securities in addition to the net realized and unrealized gains (losses) recognized on the trading securities and the related short sale agreement liabilities totaled $32 million and ($3) million, respectively. Changes in the fair value of such trading securities and short sale agreement liabilities, totaled $3 million and less than $1 million for the years ended December 31, 2006 and 2005, respectively. The Company did not hold any trading securities during the year ended December 31, 2004. STRUCTURED INVESTMENT TRANSACTIONS The Company invests in structured notes and similar type instruments, which generally provide equity-based returns on debt securities. The carrying value of such investments, included in fixed maturity securities, was $354 million and $362 million at December 31, 2006 and 2005, respectively. The related net investment income recognized was $43 million, $28 million and $44 million for the years ended December 31, 2006, 2005 and 2004, respectively. VARIABLE INTEREST ENTITIES The following table presents the total assets of and maximum exposure to loss relating to VIEs for which the Company has concluded that: (i) it is the primary beneficiary and which are consolidated in the Company's consolidated financial statements at December 31, 2006; and (ii) it holds significant variable interests but it is not the primary beneficiary and which have not been consolidated:
DECEMBER 31, 2006 ------------------------------------------------- PRIMARY BENEFICIARY NOT PRIMARY BENEFICIARY ----------------------- ----------------------- MAXIMUM MAXIMUM TOTAL EXPOSURE TO TOTAL EXPOSURE TO ASSETS(1) LOSS(2) ASSETS(1) LOSS(2) --------- ----------- --------- ----------- (IN MILLIONS) Asset-backed securitizations and collateralized debt obligations....... $ -- $-- $ 1,909 $ 207 Real estate joint ventures(3)........... 53 45 269 6 Other limited partnership interests(4).. 84 3 19,152 1,478 Other investments(5).................... -- -- 20,620 1,452 ---- --- ------- ------ Total................................. $137 $48 $41,950 $3,143 ==== === ======= ======
-------- (1) The assets of the asset-backed securitizations and collateralized debt obligations are reflected at fair value at December 31, 2006. The assets of the real estate joint ventures, other limited partnership interests and other investments are reflected at the carrying amounts at which such assets would have been reflected on the Company's balance sheet had the Company consolidated the VIE from the date of its initial investment in the entity. F-47 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (2) The maximum exposure to loss of the asset-backed securitizations and collateralized debt obligations is equal to the carrying amounts of retained interests. In addition, the Company provides collateral management services for certain of these structures for which it collects a management fee. The maximum exposure to loss relating to real estate joint ventures, other limited partnership interests and other investments is equal to the carrying amounts plus any unfunded commitments, reduced by amounts guaranteed by other partners. (3) Real estate joint ventures include partnerships and other ventures which engage in the acquisition, development, management and disposal of real estate investments. (4) Other limited partnership interests include partnerships established for the purpose of investing in public and private debt and equity securities, as well as limited partnerships. (5) Other investments include securities that are not asset-backed securitizations or collateralized debt obligations. 4. DERIVATIVE FINANCIAL INSTRUMENTS TYPES OF DERIVATIVE FINANCIAL INSTRUMENTS The following table presents the notional amounts and current market or fair value of derivative financial instruments held at:
DECEMBER 31, 2006 DECEMBER 31, 2005 ------------------------------- ------------------------------- CURRENT MARKET OR CURRENT MARKET OR FAIR VALUE FAIR VALUE NOTIONAL -------------------- NOTIONAL -------------------- AMOUNT ASSETS LIABILITIES AMOUNT ASSETS LIABILITIES -------- ------ ----------- -------- ------ ----------- (IN MILLIONS) Interest rate swaps............ $17,865 $207 $ 79 $12,857 $294 $ 12 Interest rate floors........... 25,955 193 -- 6,515 80 -- Interest rate caps............. 19,754 119 -- 24,970 224 -- Financial futures.............. 6,824 52 19 63 1 -- Foreign currency swaps......... 14,952 287 1,102 9,256 74 852 Foreign currency forwards...... 1,204 22 4 2,333 26 41 Options........................ 1 1 -- 221 2 2 Financial forwards............. 2,900 12 24 2,446 13 1 Credit default swaps........... 5,023 4 16 4,789 11 9 Synthetic GICs................. 3,739 -- -- 5,477 -- -- Other.......................... 250 56 -- 250 9 -- ------- ---- ------ ------- ---- ---- Total........................ $98,467 $953 $1,244 $69,177 $734 $917 ======= ==== ====== ======= ==== ====
The above table does not include notional values for equity financial forwards. At both December 31, 2006 and 2005, the Company owned 132,000 equity financial forwards. Market values of equity financial forwards are included in financial forwards in the preceding table. F-48 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The following table presents the notional amounts of derivative financial instruments by maturity at December 31, 2006:
REMAINING LIFE -------------------------------------------------------- AFTER AFTER ONE YEAR FIVE YEARS ONE YEAR THROUGH THROUGH AFTER TEN OR LESS FIVE YEARS TEN YEARS YEARS TOTAL -------- ---------- ---------- --------- ------- (IN MILLIONS) Interest rate swaps............... $ 754 $10,427 $ 3,478 $3,206 $17,865 Interest rate floors.............. -- 7,068 18,887 -- 25,955 Interest rate caps................ 2,770 16,984 -- -- 19,754 Financial futures................. 6,824 -- -- -- 6,824 Foreign currency swaps............ 493 7,125 6,015 1,319 14,952 Foreign currency forwards......... 1,204 -- -- -- 1,204 Options........................... -- -- 1 -- 1 Financial forwards................ -- -- -- 2,900 2,900 Credit default swaps.............. 487 4,330 206 -- 5,023 Synthetic GICs.................... 3,427 312 -- -- 3,739 Other............................. -- 250 -- -- 250 ------- ------- ------- ------ ------- Total........................... $15,959 $46,496 $28,587 $7,425 $98,467 ======= ======= ======= ====== =======
Interest rate swaps are used by the Company primarily to reduce market risks from changes in interest rates and to alter interest rate exposure arising from mismatches between assets and liabilities (duration mismatches). In an interest rate swap, the Company agrees with another party to exchange, at specified intervals, the difference between fixed rate and floating rate interest amounts as calculated by reference to an agreed notional principal amount. These transactions are entered into pursuant to master agreements that provide for a single net payment to be made by the counterparty at each due date. The Company also enters into basis swaps to better match the cash flows from assets and related liabilities. In a basis swap, both legs of the swap are floating with each based on a different index. Generally, no cash is exchanged at the outset of the contract and no principal payments are made by either party. A single net payment is usually made by one counterparty at each due date. Basis swaps are included in interest rate swaps in the preceding table. Interest rate caps and floors are used by the Company primarily to protect its floating rate liabilities against rises in interest rates above a specified level, and against interest rate exposure arising from mismatches between assets and liabilities (duration mismatches), as well as to protect its minimum rate guarantee liabilities against declines in interest rates below a specified level, respectively. In exchange-traded interest rate (Treasury and swap) and equity futures transactions, the Company agrees to purchase or sell a specified number of contracts, the value of which is determined by the different classes of interest rate and equity securities, and to post variation margin on a daily basis in an amount equal to the difference in the daily market values of those contracts. The Company enters into exchange-traded futures with regulated futures commission merchants that are members of the exchange. Exchange-traded interest rate (Treasury and swap) futures are used primarily to hedge mismatches between the duration of assets in a portfolio and the duration of liabilities supported by those assets, to hedge against changes in value of securities the Company owns or anticipates acquiring, and to hedge against changes in interest rates on anticipated liability issuances by replicating Treasury or swap curve performance. The value of F-49 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) interest rate futures is substantially impacted by changes in interest rates and they can be used to modify or hedge existing interest rate risk. Exchange-traded equity futures are used primarily to hedge liabilities embedded in certain variable annuity products offered by the Company. Foreign currency derivatives, including foreign currency swaps, foreign currency forwards and currency option contracts, are used by the Company to reduce the risk from fluctuations in foreign currency exchange rates associated with its assets and liabilities denominated in foreign currencies. The Company also uses foreign currency forwards and swaps to hedge the foreign currency risk associated with certain of its net investments in foreign operations. In a foreign currency swap transaction, the Company agrees with another party to exchange, at specified intervals, the difference between one currency and another at a forward exchange rate calculated by reference to an agreed upon principal amount. The principal amount of each currency is exchanged at the inception and termination of the currency swap by each party. In a foreign currency forward transaction, the Company agrees with another party to deliver a specified amount of an identified currency at a specified future date. The price is agreed upon at the time of the contract and payment for such a contract is made in a different currency at the specified future date. The Company enters into currency option contracts that give it the right, but not the obligation, to sell the foreign currency amount in exchange for a functional currency amount within a limited time at a contracted price. The contracts may also be net settled in cash, based on differentials in the foreign exchange rate and the strike price. Currency option contracts are included in options in the preceding table. Swaptions are used by the Company primarily to sell, or monetize, embedded call options in its fixed rate liabilities. A swaption is an option to enter into a swap with an effective date equal to the exercise date of the embedded call and a maturity date equal to the maturity date of the underlying liability. The Company receives a premium for entering into the swaption. Swaptions are included in options in the preceding table. Equity index options are used by the Company primarily to hedge minimum guarantees embedded in certain variable annuity products offered by the Company. To hedge against adverse changes in equity indices, the Company enters into contracts to sell the equity index within a limited time at a contracted price. The contracts will be net settled in cash based on differentials in the indices at the time of exercise and the strike price. Equity index options are included in options in the preceding table. The Company enters into financial forwards to buy and sell securities. The price is agreed upon at the time of the contract and payment for such a contract is made at a specified future date. Equity variance swaps are used by the Company primarily to hedge minimum guarantees embedded in certain variable annuity products offered by the Company. In an equity variance swap, the Company agrees with another party to exchange amounts in the future, based on changes in equity volatility over a defined period. Equity variance swaps are included in financial forwards in the preceding table. Swap spread locks are used by the Company to hedge invested assets on an economic basis against the risk of changes in credit spreads. Swap spread locks are forward starting swaps where the Company agrees to pay a coupon based on a predetermined reference swap spread in exchange for receiving a coupon based on a floating rate. The Company has the option to cash settle with the counterparty in lieu of maintaining the swap after the effective date. Swap spread locks are included in financial forwards in the preceding table. Certain credit default swaps are used by the Company to hedge against credit-related changes in the value of its investments and to diversify its credit risk exposure in certain portfolios. In a credit default swap transaction, the Company agrees with another party, at specified intervals, to pay a premium to insure credit risk. If a credit F-50 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) event, as defined by the contract, occurs, generally the contract will require the swap to be settled gross by the delivery of par quantities of the referenced investment equal to the specified swap notional in exchange for the payment of cash amounts by the counterparty equal to the par value of the investment surrendered. Credit default swaps are also used to synthetically create investments that are either more expensive to acquire or otherwise unavailable in the cash markets. These transactions are a combination of a derivative and usually a U.S. Treasury or Agency security. A synthetic guaranteed interest contract ("GIC") is a contract that simulates the performance of a traditional GIC through the use of financial instruments. Under a synthetic GIC, the policyholder owns the underlying assets. The Company guarantees a rate return on those assets for a premium. Total rate of return swaps ("TRRs") are swaps whereby the Company agrees with another party to exchange, at specified intervals, the difference between the economic risk and reward of an asset or a market index and LIBOR, calculated by reference to an agreed notional principal amount. No cash is exchanged at the outset of the contract. Cash is paid and received over the life of the contract based on the terms of the swap. These transactions are entered into pursuant to master agreements that provide for a single net payment to be made by the counterparty at each due date. TRRs can be used as hedges or to synthetically create investments and are included in the other classification in the preceding table. HEDGING The following table presents the notional amounts and fair value of derivatives by type of hedge designation at:
DECEMBER 31, 2006 DECEMBER 31, 2005 ------------------------------- ------------------------------- FAIR VALUE FAIR VALUE NOTIONAL -------------------- NOTIONAL -------------------- AMOUNT ASSETS LIABILITIES AMOUNT ASSETS LIABILITIES -------- ------ ----------- -------- ------ ----------- (IN MILLIONS) Fair value..................... $ 7,890 $290 $ 84 $ 4,419 $ 50 $104 Cash flow...................... 2,656 33 149 6,233 29 437 Foreign operations............. 489 -- 39 834 2 37 Non-qualifying................. 87,432 630 972 57,691 653 339 ------- ---- ------ ------- ---- ---- Total........................ $98,467 $953 $1,244 $69,177 $734 $917 ======= ==== ====== ======= ==== ====
The following table presents the settlement payments recorded in income for the:
YEARS ENDED DECEMBER 31, ------------------- 2006 2005 2004 ---- ---- ----- (IN MILLIONS) Qualifying hedges: Net investment income............................... $ 48 $ 42 $(144) Interest credited to policyholder account balances.. (26) 17 45 Non-qualifying hedges: Net investment gains (losses)....................... 225 86 51 ---- ---- ----- Total............................................ $247 $145 $ (48) ==== ==== =====
FAIR VALUE HEDGES The Company designates and accounts for the following as fair value hedges when they have met the requirements of SFAS 133: (i) interest rate swaps to convert fixed rate investments to floating rate investments; F-51 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (ii) foreign currency swaps to hedge the foreign currency fair value exposure of foreign currency denominated investments and liabilities; and (iii) interest rate futures to hedge against changes in value of fixed rate securities. The Company recognized net investment gains (losses) representing the ineffective portion of all fair value hedges as follows:
YEARS ENDED DECEMBER 31, -------------------- 2006 2005 2004 ----- ----- ---- (IN MILLIONS) Changes in the fair value of derivatives............. $ 278 $(118) $ 64 Changes in the fair value of the items hedged........ (278) 116 (49) ----- ----- ---- Net ineffectiveness of fair value hedging activities......................................... $ -- $ (2) $ 15 ===== ===== ====
All components of each derivative's gain or loss were included in the assessment of hedge ineffectiveness. There were no instances in which the Company discontinued fair value hedge accounting due to a hedged firm commitment no longer qualifying as a fair value hedge. CASH FLOW HEDGES The Company designates and accounts for the following as cash flow hedges, when they have met the requirements of SFAS 133: (i) interest rate swaps to convert floating rate investments to fixed rate investments; (ii) interest rate swaps to convert floating rate liabilities into fixed rate liabilities; (iii) foreign currency swaps to hedge the foreign currency cash flow exposure of foreign currency denominated investments and liabilities; and (iv) financial forwards to buy and sell securities. For the year ended December 31, 2006, the Company recognized no net investment gains (losses) as the ineffective portion of all cash flow hedges. For the years ended December 31, 2005 and 2004, the Company recognized net investment gains (losses) of ($21) million and ($31) million, respectively, which represent the ineffective portion of all cash flow hedges. All components of each derivative's gain or loss were included in the assessment of hedge ineffectiveness. In certain instances, the Company 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. The net amounts reclassified into net investment gains (losses) for the years ended December 31, 2006, 2005 and 2004 related to such discontinued cash flow hedges were $3 million, $42 million and $29 million, respectively. There were no hedged forecasted transactions, other than the receipt or payment of variable interest payments for the years ended December 31, 2006, 2005 and 2004. The following table presents the components of other comprehensive income (loss), before income tax, related to cash flow hedges:
YEARS ENDED DECEMBER 31, --------------------- 2006 2005 2004 ----- ----- ----- (IN MILLIONS) Other comprehensive income (loss) balance at January 1,................................................. $(207) $(447) $(385) Gains (losses) deferred in other comprehensive income (loss) on the effective portion of cash flow hedges............................................. (44) 196 (98) Amounts reclassified to net investment gains (losses)........................................... (1) 44 41 Amounts reclassified to net investment income........ 15 2 2 Amortization of transition adjustment................ (1) (2) (7) ----- ----- ----- Other comprehensive income (loss) balance at December 31,................................................ $(238) $(207) $(447) ===== ===== =====
F-52 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) At December 31, 2006, $52 million of the deferred net loss on derivatives accumulated in other comprehensive income (loss) is expected to be reclassified to earnings during the year ending December 31, 2007. HEDGES OF NET INVESTMENTS IN FOREIGN OPERATIONS The Company uses forward exchange contracts, foreign currency swaps, options and non-derivative financial instruments to hedge portions of its net investments in foreign operations against adverse movements in exchange rates. The Company measures ineffectiveness on the forward exchange contracts based upon the change in forward rates. There was no ineffectiveness recorded for the years ended December 31, 2006, 2005 and 2004. The Company's consolidated statements of stockholder's equity for the years ended December 31, 2006, 2005 and 2004 include losses of $7 million, $27 million and $47 million, respectively, related to foreign currency contracts and non- derivative financial instruments used to hedge its net investments in foreign operations. At December 31, 2006 and 2005, the cumulative foreign currency translation loss recorded in accumulated other comprehensive income related to these hedges was $91 million and $84 million, respectively. When net investments in foreign operations are sold or substantially liquidated, the amounts in accumulated other comprehensive income are reclassified to the consolidated statements of income, while a pro rata portion will be reclassified upon partial sale of the net investments in foreign operations. NON-QUALIFYING DERIVATIVES AND DERIVATIVES FOR PURPOSES OTHER THAN HEDGING The Company enters into the following derivatives that do not qualify for hedge accounting under SFAS 133 or for purposes other than hedging: (i) interest rate swaps, purchased caps and floors, and interest rate futures to economically hedge its exposure to interest rate volatility; (ii) foreign currency forwards, swaps and option contracts to economically hedge its exposure to adverse movements in exchange rates; (iii) swaptions to sell embedded call options in fixed rate liabilities; (iv) credit default swaps to minimize its exposure to adverse movements in credit; (v) credit default swaps to diversify credit risk exposure to certain portfolios; (vi) equity futures, equity index options, interest rate futures and equity variance swaps to economically hedge liabilities embedded in certain variable annuity products; (vii) swap spread locks to economically hedge invested assets against the risk of changes in credit spreads; (viii) financial forwards to buy and sell securities; (ix) GICs to synthetically create traditional GICs; (x) credit default swaps and TRRs to synthetically create investments; and (xi) basis swaps to better match the cash flows of assets and related liabilities. For the years ended December 31, 2006, 2005 and 2004, the Company recognized as net investment gains (losses), excluding embedded derivatives, changes in fair value of ($701) million, $372 million and ($141) million, respectively, related to derivatives that do not qualify for hedge accounting. EMBEDDED DERIVATIVES The Company has certain embedded derivatives which are required to be separated from their host contracts and accounted for as derivatives. These host contracts include guaranteed minimum withdrawal contracts, guaranteed minimum accumulation contracts and modified coinsurance contracts. The fair value of the Company's embedded derivative assets was $57 million and $50 million at December 31, 2006 and 2005, respectively. The fair value of the Company's embedded derivative liabilities was $113 million and $10 million at December 31, 2006 and 2005, respectively. The amounts recorded and included in net investment gains (losses) during the years ended December 31, 2006, 2005 and 2004 were gains (losses) of $12 million, $29 million and $34 million, respectively. F-53 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of MetLife, Inc.) 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. Because exchange traded futures are effected through regulated exchanges, and positions are marked to market on a daily basis, the Company has minimal exposure to credit-related losses in the event of nonperformance by counterparties to such derivative instruments. The Company enters into various collateral arrangements, which require both the pledging and accepting of collateral in connection with its derivative instruments. As of December 31, 2006 and 2005, the Company was obligated to return cash collateral under its control of $94 million and $34 million, respectively. This unrestricted cash collateral is included in cash and cash equivalents and the obligation to return it is included in payables for collateral under securities loaned and other transactions in the consolidated balance sheets. As of December 31, 2006 and 2005, the Company had also accepted collateral consisting of various securities with a fair market value of $16 million and $0, respectively, which are held in separate custodial accounts. The Company is permitted by contract to sell or repledge this collateral, but as of December 31, 2006 and 2005, none of the collateral had been sold or repledged. As of December 31, 2006 and 2005, the Company provided collateral of $80 million and $0, respectively, which is included in fixed maturity securities in the consolidated balance sheets. In addition, the Company has exchange traded futures, which require the pledging of collateral. As of December 31, 2006 and 2005, the Company pledged collateral of $23 million and $15 million, respectively, which is included in fixed maturity securities. The counterparties are permitted by contract to sell or repledge this collateral. F-54 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 5. DEFERRED POLICY ACQUISITION COSTS AND VALUE OF BUSINESS ACQUIRED Information regarding DAC and VOBA is as follows:
DAC VOBA TOTAL ------- ---- ------- (IN MILLIONS) Balance at January 1, 2004......................... $ 9,390 $836 $10,226 Capitalizations.................................. 1,817 -- 1,817 ------- ---- ------- Subtotal.................................... 11,207 836 12,043 ------- ---- ------- Less: Amortization related to: Net investment gains (losses)................. 5 1 6 Unrealized investment gains (losses).......... (12) (76) (88) Other expenses................................ 1,058 81 1,139 ------- ---- ------- Total amortization.......................... 1,051 6 1,057 ------- ---- ------- Less: Dispositions and other..................... (99) 23 (76) ------- ---- ------- Balance at December 31, 2004....................... 10,255 807 11,062 Capitalizations.................................. 1,619 -- 1,619 ------- ---- ------- Subtotal.................................... 11,874 807 12,681 ------- ---- ------- Less: Amortization related to: Net investment gains (losses)................. 13 2 15 Unrealized investment gains (losses).......... (244) (15) (259) Other expenses................................ 1,304 66 1,370 ------- ---- ------- Total amortization.......................... 1,073 53 1,126 ------- ---- ------- Less: Dispositions and other..................... 120 (3) 117 ------- ---- ------- Balance at December 31, 2005....................... 10,681 757 11,438 Capitalizations.................................. 1,677 -- 1,677 ------- ---- ------- Subtotal.................................... 12,358 757 13,115 ------- ---- ------- Less: Amortization related to: Net investment gains (losses)................. (136) (2) (138) Unrealized investment gains (losses).......... 105 (14) 91 Other expenses................................ 1,248 (21) 1,227 ------- ---- ------- Total amortization.......................... 1,217 (37) 1,180 ------- ---- ------- Less: Dispositions and other..................... (85) (23) (108) ------- ---- ------- Balance at December 31, 2006....................... $11,226 $817 $12,043 ======= ==== =======
The estimated future amortization expense allocated to other expenses for the next five years for VOBA is $67 million in 2007, $69 million in 2008, $66 million in 2009, $40 million in 2010, and $43 million in 2011. Amortization of VOBA and DAC is related to (i) investment gains and losses and the impact of such gains and losses on the amount of the amortization; (ii) unrealized investment gains and losses to provide information regarding the amount that would have been amortized if such gains and losses had been recognized; and F-55 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (iii) other expenses to provide amounts related to the gross margins or profits originating from transactions other than investment gains and losses. 6. GOODWILL Goodwill is the excess of cost over the fair value of net assets acquired. Information regarding goodwill is as follows:
DECEMBER 31, ----------- 2006 2005 ---- ---- (IN MILLIONS) Balance at January 1,....................................... $200 $217 Acquisitions................................................ 2 1 Dispositions and other, net................................. -- (18) ---- ---- Balance at December 31,..................................... $202 $200 ==== ====
7. INSURANCE VALUE OF DISTRIBUTION AGREEMENTS AND CUSTOMER RELATIONSHIPS ACQUIRED VODA and VOCRA, which are reported within other assets in the consolidated balance sheet, were $439 million, net of amortization accumulation of $2 million, at December 31, 2006 due to the VODA of $389 million contributed by the Holding Company and the VOCRA of $52 million acquired from MRS. Amortization expense for the year ended December 31, 2006 was $2 million. See Notes 2 and 16. The value of the other identifiable intangibles discussed above reflects the estimated fair value of Citigroup/Travelers distribution agreement and customer relationships acquired at the original acquisition date and will be amortized in relation to the expected economic benefits of the agreement. The weighted average amortization period of the other intangible assets is 16 years. If actual experience under the distribution agreements or with customer relationships differs from expectations, the amortization of these intangibles will be adjusted to reflect actual experience. The use of discount rates was necessary to establish the fair value of the other identifiable intangible assets. In selecting the appropriate discount rates, management considered its weighted average cost of capital as well as the weighted average cost of capital required by market participants. A discounted rate of 11.5% was used to value these intangible assets. The estimated future amortization expense allocated to other expenses for the next five years for VODA and VOCRA is $8 million in 2007, $12 million in 2008, $15 million in 2009, $18 million in 2010 and $21 million in 2011. F-56 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) SALES INDUCEMENTS Information regarding deferred sales inducements, which are reported in other assets, is as follows:
YEARS ENDED DECEMBER 31, ---------------------- 2006 2005 2004 ---- ---- ---- (IN MILLIONS) Balance at January 1,.................................. $ 95 $75 $52 Capitalization......................................... 31 29 29 Amortization........................................... (5) (9) (6) ---- --- --- Balance at December 31, ............................... $121 $95 $75 ==== === ===
SEPARATE ACCOUNTS Separate account assets and liabilities include two categories of account types: pass-through separate accounts totaling $64.5 billion and $57.4 billion at December 31, 2006 and 2005, respectively, for which the policyholder assumes all investment risk, and separate accounts with a minimum return or account value for which the Company contractually guarantees either a minimum return or account value to the policyholder which totaled $16.5 billion and $15.7 billion at December 31, 2006 and 2005, respectively. The latter category consisted primarily of Met Managed GICs and participating close-out contracts. The average interest rates credited on these contracts were 4.7% and 4.5% at December 31, 2006 and 2005, respectively. 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 $1.2 billion, $1.1 billion and $998 million for the years ended December 31, 2006, 2005 and 2004, respectively. The Company's proportional interest in separate accounts is included in the consolidated balance sheets as follows:
DECEMBER 31, ----------- 2006 2005 ---- ---- (IN MILLIONS) Fixed maturity securities.................................... $ 5 $-- Equity securities............................................ $35 $30 Cash and cash equivalents.................................... $ 1 $ 1
For the years ended December 31, 2006, 2005 and 2004, there were no investment gains (losses) on transfers of assets from the general account to the separate accounts. OBLIGATIONS UNDER GUARANTEED INTEREST CONTRACT PROGRAM The Company issues fixed and floating rate obligations under its GIC program which are denominated in either U.S. dollars or foreign currencies. During the years ended December 31, 2006, 2005 and 2004, the Company issued $5.2 billion, $4.0 billion and $4.0 billion, respectively, and repaid $1.5 billion, $1.1 billion and $150 million, respectively, of GICs under this program. Accordingly, at December 31, 2006 and 2005, GICs outstanding, which are included in policyholder account balances, were $16.8 billion and $12.1 billion, respectively. During the years ended December 31, 2006, 2005 and 2004, interest credited on the contracts, which are included in interest credited to policyholder account balances, was $673 million, $384 million and $142 million, respectively. F-57 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) LIABILITIES FOR UNPAID CLAIMS AND CLAIM EXPENSES Information regarding the liabilities for unpaid claims and claim expenses relating to group accident and non-medical health policies and contracts, which are reported in future policy benefits and other policyholder funds, is as follows:
YEARS ENDED DECEMBER 31, --------------------------- 2006 2005 2004 ------- ------- ------- (IN MILLIONS) Balance at January 1, ........................... $ 4,191 $ 3,847 $ 3,560 Less: Reinsurance recoverables................. (295) (292) (289) ------- ------- ------- Net balance at January 1, ....................... 3,896 3,555 3,271 ------- ------- ------- Incurred related to: Current year................................... 2,997 2,791 2,491 Prior years.................................... (28) (41) (9) ------- ------- ------- 2,969 2,750 2,482 ------- ------- ------- Paid related to: Current year................................... (1,814) (1,667) (1,519) Prior years.................................... (819) (742) (679) ------- ------- ------- (2,633) (2,409) (2,198) ------- ------- ------- Net Balance at December 31, ..................... 4,232 3,896 3,555 Add: Reinsurance recoverables.................. 268 295 292 ------- ------- ------- Balance at December 31,.......................... $ 4,500 $ 4,191 $ 3,847 ======= ======= =======
As a result of changes in estimates of insured events in the prior years, the claims and claim adjustment expenses decreased by $28 million in 2006 due to improved loss ratio liabilities for non-medical health claim liabilities and improved claims management. In 2005, the claims and claim adjustment expenses decreased by $41 million due to a refinement in the estimation methodology for non-medical health long- term care claim liabilities, improved loss ratio liabilities for non-medical health claim liabilities and improved claims management. In 2004, the claims and claim adjustment expenses decreased by $9 million due to improved loss ratios in non-medical health claim liabilities and improved claims management. 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 annuity contracts that apply a lower rate of funds deposited if the contractholder elects to surrender the contract for cash and a higher rate if the contractholder elects to annuitize ("two tier annuities"). These guarantees include benefits that are payable in the event of death or at annuitization. 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. F-58 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Information regarding the types of guarantees relating to annuity contracts and universal and variable life contracts is as follows:
DECEMBER 31, --------------------------------------------------------------- 2006 2005 ------------------------------ ------------------------------ 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.............. $ 3,233 N/A $ 2,527 N/A Net amount at risk(2)............... $ --(3) N/A $ 1(3) N/A Average attained age of contractholders.................. 59 years N/A 58 years N/A ANNIVERSARY CONTRACT VALUE OR MINIMUM RETURN Separate account value.............. $ 34,362 $ 5,273 $ 31,646 $ 3,847 Net amount at risk(2)............... $ 354(3) $ 16(4) $ 521(3) $ 17(4) Average attained age of contractholders.................. 61 years 57 years 60 years 57 years TWO TIER ANNUITIES General account value............... N/A $ 296 N/A $ 229 Net amount at risk(2)............... N/A $ 53(5) N/A $ 36(5) Average attained age of contractholders.................. N/A 58 years N/A 58 years
DECEMBER 31, ------------------------------------------------------- 2005 ------------------------- 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)................................ $ 6,094 $ 1,770 $ 5,413 $ 1,680 Net amount at risk(2)..................... $ 101,431(3) $ 14,500(3) $ 98,907(3) $ 15,633(3) Average attained age of policyholders..... 46 years 53 years 45 years 52 years
-------- (1) The Company's annuity and life contracts with guarantees may offer more than one type of guarantee in each contract. Therefore, the amounts listed above may not be mutually exclusive. (2) The net amount at risk is based on the direct amount at risk (excluding reinsurance). (3) The net amount at risk for guarantees of amounts in the event of death is defined as the current guaranteed minimum death benefit in excess of the current account balance at the balance sheet date. (4) The net amount at risk for guarantees of amounts at annuitization is defined as the present value of the minimum guaranteed annuity payments available to the contractholder determined in accordance with the terms of the contract in excess of the current account balance. (5) The net amount at risk for two tier annuities is based on the excess of the upper tier, adjusted for a profit margin, less the lower tier. F-59 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Information regarding the liabilities for guarantees (excluding base policy liabilities) relating to annuity and universal and variable life contracts is as follows:
UNIVERSAL AND VARIABLE ANNUITY CONTRACTS LIFE CONTRACTS ------------------------------ ----------------------- GUARANTEED GUARANTEED ANNUITIZATION SECONDARY PAID UP DEATH BENEFITS BENEFITS GUARANTEES GUARANTEES TOTAL -------------- ------------- ---------- ---------- ----- (IN MILLIONS) Balance at January 1, 2004..... $ 8 $16 $ 6 $ 6 $ 36 Incurred guaranteed benefits... 4 (9) 4 1 -- Paid guaranteed benefits....... (6) -- (4) -- (10) --- --- --- --- ---- Balance at December 31, 2004... 6 7 6 7 26 Incurred guaranteed benefits... 4 -- 3 3 10 Paid guaranteed benefits....... (2) -- (1) -- (3) --- --- --- --- ---- Balance at December 31, 2005... 8 7 8 10 33 Incurred guaranteed benefits... 1 -- 1 (1) 1 Paid guaranteed benefits....... (3) -- -- -- (3) --- --- --- --- ---- Balance at December 31, 2006... $ 6 $ 7 $ 9 $ 9 $ 31 === === === === ====
Account balances of contracts with insurance guarantees are invested in separate account asset classes as follows:
DECEMBER 31, ----------------- 2006 2005 ------- ------- (IN MILLIONS) Mutual Fund Groupings Equity................................................ $23,510 $21,143 Bond.................................................. 2,757 2,606 Balanced.............................................. 1,125 1,074 Money Market.......................................... 220 206 Specialty............................................. 522 229 ------- ------- Total.............................................. $28,134 $25,258 ======= =======
8. REINSURANCE The Company's life insurance operations participate in reinsurance activities in order to limit losses, minimize exposure to large risks, and provide additional capacity for future growth. The Company has historically reinsured the mortality risk on new individual life insurance policies primarily on an excess of retention basis or a quota share basis. Until 2005, the Company reinsured up to 90% of the mortality risk for all new individual life insurance policies that it wrote through its various franchises. This practice was initiated by the different franchises for different products starting at various points in time between 1992 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 individual life insurance policies that it writes through its various franchises and for certain individual life policies the retention limits remained unchanged. On a case by case basis, the Company may retain up to $25 million per life on single life individual policies and $30 million per life on survivorship individual policies and reinsure 100% of amounts in F-60 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) excess of the Company's retention limits. The Company evaluates its reinsurance programs routinely and may increase or decrease its retention at any time. In addition, the Company reinsures a significant portion of the mortality risk on its individual universal life policies issued since 1983. Placement of reinsurance is done primarily on an automatic basis and also on a facultative basis for risks with specific characteristics. In addition to reinsuring mortality risk as described above, the Company reinsures other 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 had also protected itself through the purchase of combination risk coverage. This reinsurance coverage pooled risks from several lines of business and included individual and group life claims in excess of $2 million per policy. This combination risk coverage was commuted during 2005. 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. In the Reinsurance Segment, Reinsurance Group of America, Incorporated ("RGA") retains a maximum of $6 million of coverage per individual life with respect to its assumed reinsurance business. 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, --------------------------- 2006 2005 2004 ------- ------- ------- (IN MILLIONS) Direct premiums.................................. $16,960 $16,466 $15,347 Reinsurance assumed.............................. 5,569 5,046 4,348 Reinsurance ceded................................ (2,245) (2,256) (2,258) ------- ------- ------- Net premiums..................................... $20,284 $19,256 $17,437 ======= ======= ======= Reinsurance recoverables netted against policyholder benefits and claims............... $ 1,552 $ 1,495 $ 1,626 ======= ======= =======
Reinsurance recoverables, included in premiums and other receivables, were $5.2 billion and $3.8 billion at December 31, 2006 and 2005, respectively, including $1.2 billion and $1.3 billion, respectively, relating to reinsurance of long-term GICs and structured settlement lump sum contracts accounted for as a financing transaction, and $1.4 billion at December 31, 2006, relating to the reinsurance of investment-type contracts held by small market defined contribution plans. Reinsurance and ceded commissions payables, included in other liabilities, were $202 million and $263 million at December 31, 2006 and 2005, respectively. Included in premiums and other receivables are reinsurance due from Exeter Reassurance Company, Ltd., Texas Life Insurance Company ("TLIC''), First MetLife Investors Insurance Company, MetLife Insurance Company of Connecticut ("MICC"), MetLife Investors USA Insurance Company ("MLI USA"), and MetLife Investors Insurance Company, all of which are related parties, of $1.7 billion and $1.4 billion at December 31, 2006 and 2005, respectively. Included in future policy benefits, other policyholder funds, policyholder account balances, and other liabilities are reinsurance liabilities assumed from TLIC, MTL, First MetLife Investors Group, Inc., MetLife Investors Insurance Company, Exeter Reassurance Company, Ltd., MLI USA, and MICC related parties of F-61 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) $422 million, $278 million, $361 million and $4.5 billion at December 31, 2006. Included in future policy benefits, other policyholder funds, policyholder account balances, and other liabilities are reinsurance liabilities assumed from MTL, First MetLife Investors Insurance Company, MetLife Investors Insurance Company, MLI USA, MICC, Exeter Reassurance Company, Ltd. and TLIC, all of which are related parties, of $1.2 billion, $268 million, $389 million and $3.1 billion at December 31, 2005. On December 1, 2006, TLIC, an affiliate of the Company recaptured business previously ceded under a 2002 reinsurance treaty with the Company. The agreement required the Company to assume, on a co-insurance basis, certain structured settlement business from TLIC. The Company will transfer cash in the amount of $984 million, which represents the fair value of the returned future policy benefits. As a result of this transaction, the Company recognized an expense of $184 million. Effective January 1, 2005, a subsidiary of the Company, General American Life Insurance Company ("General American") entered into a reinsurance agreement to cede an in force block of business to MLI USA, an affiliate. This agreement covered certain term and universal life policies issued by General American on and after January 1, 2000 through December 31, 2004. This agreement also covers certain term and universal life policies issued on or after January 1, 2005. Under this agreement, General American transferred $797 million of liabilities and $411 million in assets to MLI USA related to the policies in-force as of December 31, 2004. As a result of the transfer of assets, General American recognized a realized gain of $19 million, net of income taxes. General American also received and deferred 100% of a $386 million ceding commission resulting in no gain or loss on the transfer of the in-force business as of January 1, 2005. For the policies issued on or after January 1, 2005, General American ceded premiums and related fees of $119 million and $192 million, respectively, and ceded benefits and related costs of $98 million and $143 million, respectively, for the years ended December 31, 2006 and 2005. Reinsurance recoverables, included in premiums and other receivables, related to this reinsurance agreement as of December 31, 2006 and 2005 were $1.0 billion and $932 million, respectively. For the years ended December 31, 2006, 2005 and 2004, reinsurance ceded and assumed include affiliated transactions of $508 million, $529 million and $466 million, respectively. For the years ended December 31, 2006 and 2005, premiums, policyholder benefits and claims, and commission expenses include assumed related party transactions of $42 million, $86 million and $30 million, and $37 million, $108 million and $137 million, respectively. 9. CLOSED BLOCK On April 7, 2000 (the "Demutualization Date"), Metropolitan Life converted from a mutual life insurance company to a stock life insurance company and became a wholly-owned subsidiary of MetLife, Inc. The conversion was pursuant to an order by the New York Superintendent of Insurance (the "Superintendent") approving Metropolitan Life's plan of reorganization, as amended (the "Plan"). On the Demutualization Date, Metropolitan Life established a closed block for the benefit of holders of certain individual life insurance policies of Metropolitan Life. Assets have been allocated to the closed block in an amount that has been determined to produce cash flows which, together with anticipated revenues from the policies included in the closed block, are reasonably expected to be sufficient to support obligations and liabilities relating to these policies, including, but not limited to, provisions for the payment of claims and certain expenses and taxes, and to provide for the continuation of policyholder dividend scales in effect for 1999, if the experience underlying such dividend scales continues, and for appropriate adjustments in such scales if the experience changes. At least annually, the Company compares actual and projected experience against the experience assumed in the then-current dividend scales. Dividend scales are adjusted periodically to give effect to changes in experience. The closed block assets, the cash flows generated by the closed block assets and the anticipated revenues from the policies in the closed block will benefit only the holders of the policies in the closed block. To the extent F-62 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) that, over time, cash flows from the assets allocated to the closed block and claims and other experience related to the closed block are, in the aggregate, more or less favorable than what was assumed when the closed block was established, total dividends paid to closed block policyholders in the future may be greater than or less than the total dividends that would have been paid to these policyholders if the policyholder dividend scales in effect for 1999 had been continued. Any cash flows in excess of amounts assumed will be available for distribution over time to closed block policyholders and will not be available to stockholders. If the closed block has insufficient funds to make guaranteed policy benefit payments, such payments will be made from assets outside of the closed block. The closed block will continue in effect as long as any policy in the closed block remains in-force. The expected life of the closed block is over 100 years. The Company uses the same accounting principles to account for the participating policies included in the closed block as it used prior to the Demutualization Date. However, the Company establishes a policyholder dividend obligation for earnings that will be paid to policyholders as additional dividends as described below. The excess of closed block liabilities over closed block assets at the effective date of the demutualization (adjusted to eliminate the impact of related amounts in accumulated other comprehensive income) represents the estimated maximum future earnings from the closed block expected to result from operations attributed to the closed block after income taxes. Earnings of the closed block are recognized in income over the period the policies and contracts in the closed block remain in-force. Management believes that over time the actual cumulative earnings of the closed block will approximately equal the expected cumulative earnings due to the effect of dividend changes. If, over the period the closed block remains in existence, the actual cumulative earnings of the closed block is greater than the expected cumulative earnings of the closed block, the Company will pay the excess of the actual cumulative earnings of the closed block over the expected cumulative earnings to closed block policyholders as additional policyholder dividends unless offset by future unfavorable experience of the closed block and, accordingly, will recognize only the expected cumulative earnings in income with the excess recorded as a policyholder dividend obligation. If over such period, the actual cumulative earnings of the closed block is less than the expected cumulative earnings of the closed block, the Company will recognize only the actual earnings in income. However, the Company may change policyholder dividend scales in the future, which would be intended to increase future actual earnings until the actual cumulative earnings equal the expected cumulative earnings. F-63 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Information regarding the closed block liabilities and assets designated to the closed block is as follows:
DECEMBER 31, ----------------- 2006 2005 ------- ------- (IN MILLIONS) CLOSED BLOCK LIABILITIES Future policy benefits.................................. $43,089 $42,759 Other policyholder funds................................ 282 257 Policyholder dividends payable.......................... 701 693 Policyholder dividend obligation........................ 1,063 1,607 Payables for collateral under securities loaned and other transactions.................................... 6,483 4,289 Other liabilities....................................... 192 200 ------- ------- Total closed block liabilities..................... 51,810 49,805 ------- ------- ASSETS DESIGNATED TO THE CLOSED BLOCK Investments: Fixed maturities available-for-sale, at fair value (amortized cost: $30,286 and $27,892, respectively)...................................... 31,255 29,270 Trading securities, at fair value (cost: $0 and $3, respectively)...................................... -- 3 Equity securities available-for-sale, at fair value (cost: $1,184 and $1,180, respectively)........... 1,484 1,341 Mortgage loans on real estate......................... 7,848 7,790 Policy loans.......................................... 4,212 4,148 Real estate and real estate joint ventures held-for- investment......................................... 242 227 Short-term investments................................ 62 41 Other invested assets................................. 644 250 ------- ------- Total investments.................................. 45,747 43,070 Cash and cash equivalents............................... 255 512 Accrued investment income............................... 517 506 Deferred income tax assets.............................. 754 902 Premiums and other receivables.......................... 156 270 ------- ------- Total assets designated to the closed block........ 47,429 45,260 ------- ------- Excess of closed block liabilities over assets designated to the closed block........................ 4,381 4,545 ------- ------- Amounts included in accumulated other comprehensive income (loss): Unrealized investment gains (losses), net of deferred income tax of $457 and $554, respectively......... 812 985 Unrealized gains (losses) on derivative instruments, net of deferred income tax of ($18) and ($17), respectively....................................... (32) (31) Allocated to policyholder dividend obligation, net of deferred income tax benefit of ($381) and ($538), respectively....................................... (681) (954) ------- ------- Total amounts included in accumulated other comprehensive income (loss)..................... 99 -- ------- ------- Maximum future earnings to be recognized from closed block assets and liabilities......................... $ 4,480 $ 4,545 ======= =======
F-64 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Information regarding the closed block policyholder dividend obligation is as follows:
YEARS ENDED DECEMBER 31, ------------------------ 2006 2005 2004 ------ ------ ------ (IN MILLIONS) Balance at January 1,............................... $1,607 $2,243 $2,130 Impact on revenues, net of expenses and income tax.. (114) (9) 124 Change in unrealized investment and derivative gains (losses).......................................... (430) (627) (11) ------ ------ ------ Balance at December 31,............................. $1,063 $1,607 $2,243 ====== ====== ======
Information regarding the closed block revenues and expenses is as follows:
YEARS ENDED DECEMBER 31, ------------------------ 2006 2005 2004 ------ ------ ------ (IN MILLIONS) REVENUES Premiums............................................ $2,959 $3,062 $3,156 Net investment income and other revenues............ 2,355 2,382 2,504 Net investment gains (losses)....................... (130) 10 (19) ------ ------ ------ Total revenues.................................... 5,184 5,454 5,641 ------ ------ ------ EXPENSES Policyholder benefits and claims.................... 3,474 3,478 3,480 Policyholder dividends.............................. 1,479 1,465 1,458 Change in policyholder dividend obligation.......... (114) (9) 124 Other expenses...................................... 247 263 275 ------ ------ ------ Total expenses.................................... 5,086 5,197 5,337 ------ ------ ------ Revenues, net of expenses before income tax......... 98 257 304 Income tax.......................................... 34 90 109 ------ ------ ------ Revenues, net of expenses and income tax from continuing operations............................. 64 167 195 Revenues, net of expenses and income tax from discontinued operations........................... 1 -- -- ------ ------ ------ Revenues, net of expenses and income taxes and discontinued operations........................... $ 65 $ 167 $ 195 ====== ====== ======
The change in the maximum future earnings of the closed block is as follows:
YEARS ENDED DECEMBER 31, ------------------------ 2006 2005 2004 ------ ------ ------ (IN MILLIONS) Balance at December 31, ............................ $4,480 $4,545 $4,712 Balance at January 1, .............................. 4,545 4,712 4,907 ------ ------ ------ Change during year.................................. $ (65) $ (167) $ (195) ====== ====== ======
Metropolitan Life charges the closed block with federal income taxes, state and local premium taxes, and other additive state or local taxes, as well as investment management expenses relating to the closed block as F-65 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) provided in the Plan. Metropolitan Life also charges the closed block for expenses of maintaining the policies included in the closed block. 10. LONG-TERM AND SHORT-TERM DEBT Long-term and short-term debt outstanding is as follows:
INTEREST RATES ---------------------- DECEMBER 31, WEIGHTED --------------- RANGE AVERAGE MATURITY 2006 2005 ----------- -------- --------- ------ ------ (IN MILLIONS) Senior notes.................... 6.19%-6.75% 6.30% 2011-2036 $1,050 $ 300 Surplus notes -- affiliated..... 5.00% 5.00% 2007 800 800 Surplus notes................... 7.63%-7.88% 7.76% 2015-2025 697 696 Capital notes -- affiliated..... 7.13% 7.13% 2032-2033 500 500 Fixed rate notes................ 5.76%-6.47% 5.95% 2007-2011 107 102 Other notes with varying interest rates................ 4.45%-4.50% 4.47% 2010-2012 3 93 Capital lease obligations....... 62 71 ------ ------ Total long-term debt............ 3,219 2,562 Total short-term debt........... 833 453 ------ ------ Total......................... $4,052 $3,015 ====== ======
The aggregate maturities of long-term debt as of December 31, 2006 for the next five years are $840 million in 2007, $12 million in 2008, $13 million in 2009, $52 million in 2010, $229 million in 2011 and $2,073 million thereafter. Collateralized debt, which consists of capital lease obligations, ranks highest in priority, followed by unsecured senior debt which consists of senior notes, fixed rate notes and other notes with varying interest rates, followed by subordinated debt which consists of junior subordinated debentures. Payments of interest and principal on the Company's surplus notes, may be made only with the prior approval of the insurance department of the state of domicile. SENIOR NOTES RGA repaid a $100 million 7.25% senior note which matured on April 1, 2006. On June 28, 2006, Timberlake Financial L.L.C., ("Timberlake"), a subsidiary of RGA, completed an offering of $850 million of Series A Floating Rate Insured Notes due June 2036, which is included in the Company's long-term debt. Interest on the notes will accrue at an annual rate of 1-month LIBOR plus a base margin, payable monthly. The notes represent senior, secured indebtedness of Timberlake Financial, L.L.C. with no recourse to RGA or its other subsidiaries. Up to $150 million of additional notes may be offered in the future. The proceeds of the offering provide long-term collateral to support Regulation XXX statutory reserves on 1.5 million term life insurance policies with guaranteed level premium periods reinsured by RGA Reinsurance Company, a U.S. subsidiary of RGA. Issuance costs associated with the offering of the notes of $13 million have been capitalized, are included in other assets, and will be amortized using the effective interest method over the period from the issuance date of the notes until their maturity. F-66 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) SURPLUS NOTES Metropolitan Life repaid a $250 million, 7% surplus note which matured on November 1, 2005. On December 22, 2005, the Company issued an $800 million, 5% surplus note to the Holding Company which matures on December 31, 2007. SHORT-TERM DEBT During the years ended December 31, 2006 and 2005, the Company's short-term debt consisted of commercial paper with a weighted average interest rate of 5.1% and 3.3%, respectively. The average daily balance of commercial paper outstanding was $768 million and $944 million during the years ended December 31, 2006 and 2005, respectively. The commercial paper was outstanding for an average of 53 days and 47 days during the years ended December 31, 2006 and 2005, respectively. INTEREST EXPENSE Interest expense related to the Company's indebtedness included in other expenses was $244 million, $187 million and $201 million for the years ended December 31, 2006, 2005 and 2004, respectively, and does not include interest expense on junior subordinated debt securities. See Note 11. CREDIT FACILITIES AND LETTERS OF CREDIT Credit Facilities. The Company maintains committed and unsecured credit facilities aggregating $3.7 billion as of December 31, 2006. When drawn upon, these facilities bear interest at varying rates in accordance with the respective agreements. The facilities can be used for general corporate purposes and at December 31, 2006, $3.0 billion of the facilities also served as back-up lines of credit for the Company's commercial paper programs. Information on these facilities as of December 31, 2006 is as follows:
COMPANY METLIFE, INC. LETTERS OF LETTERS OF CREDIT CREDIT UNUSED BORROWER(S) EXPIRATION CAPACITY ISSUANCES ISSUANCES DRAWDOWNS COMMITMENTS ------------------------------- ---------- -------- ---------- ------------- --------- ----------- (IN MILLIONS) MetLife, Inc. and MetLife Funding, Inc. ............... April 2009 $1,500(1) $138 $349 $ -- $1,013 MetLife, Inc. and MetLife Funding, Inc. ............... April 2010 1,500(1) -- 483 -- 1,017 Reinsurance Group of America, Incorporated................. May 2007 29 -- -- 29 -- Reinsurance Group of America, Incorporated................. September 2010 600 315 -- 50 235 Reinsurance Group of America, Incorporated................. March 2011 39 -- -- 28 11 ------ ---- ---- ---- ------ Total........................ $3,668 $453 $832 $107 $2,276 ====== ==== ==== ==== ======
-------- (1) These facilities serve as back up lines of credit for the Company's commercial paper programs. Letters of Credit. At December 31, 2006, the Company had outstanding $637 million in letters of credit from various banks, of which $453 million were part of committed credit facilities. Since commitments associated with letters of credit and financing arrangements may expire unused, these amounts do not necessarily reflect the Company's actual future cash funding requirements. 11. JUNIOR SUBORDINATED DEBENTURES On December 8, 2005, RGA issued junior subordinated debentures with a face amount of $400 million. Interest is payable semi-annually at a fixed rate of 6.75% up to but not including the scheduled redemption date. The securities may be redeemed (i) in whole or in part, at any time on or after December 15, 2015 at their principal amount plus accrued and unpaid interest to the date of redemption, or (ii) in whole or in part, prior to F-67 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) December 15, 2015 at their principal amount plus accrued and unpaid interest to the date of redemption or, if greater, a make-whole price. In the event the junior subordinated debentures are not redeemed on or before the scheduled redemption date of December 15, 2015, interest on these junior subordinated debentures will accrue at an annual rate of three-month LIBOR plus a margin equal to 2.665%, payable quarterly in arrears. The final maturity of the debentures is December 15, 2065. RGA has the right to, and in certain circumstances the requirement to, defer interest payments on the debentures for a period up to ten years. Interest compounds during periods of deferral. Issuance costs associated with the offering of the junior subordinated debentures of $6 million have been capitalized, are included in other assets, and will be amortized using the effective interest method over the period from the issuance date of the junior subordinated debentures until their scheduled redemption. Interest expense on the junior subordinated debentures was $27 million and $2 million for the years ended December 31, 2006 and 2005, respectively. 12. SHARES SUBJECT TO MANDATORY REDEMPTION AND COMPANY-OBLIGATED MANDATORILY REDEEMABLE SECURITIES OF SUBSIDIARY TRUSTS GenAmerica Capital I. In June 1997, GenAmerica Corporation ("GenAmerica") issued $125 million of 8.525% capital securities through a wholly-owned subsidiary trust, GenAmerica Capital I. GenAmerica has fully and unconditionally guaranteed, on a subordinated basis, the obligation of the trust under the capital securities and is obligated to mandatorily redeem the securities on June 30, 2027. GenAmerica may prepay the securities any time after June 30, 2007. Capital securities outstanding were $119 million, net of unamortized discounts of $6 million at both December 31, 2006 and 2005. Interest expense on these instruments is included in other expenses and was $11 million for each of the years ended December 31, 2006, 2005 and 2004. RGA Capital Trust I. In December 2001, RGA, through its wholly-owned trust, RGA Capital Trust I (the "Trust"), issued 4,500,000 Preferred Income Equity Redeemable Securities ("PIERS") Units. Each PIERS unit consists of: (i) a preferred security issued by the Trust, having a stated liquidation amount of $50 per unit, representing an undivided beneficial ownership interest in the assets of the Trust, which consist solely of junior subordinated debentures issued by RGA which have a principal amount at maturity of $50 and a stated maturity of March 18, 2051; and (ii) a warrant to purchase, at any time prior to December 15, 2050, 1.2508 shares of RGA stock at an exercise price of $50. The fair market value of the warrant on the issuance date was $14.87 and is detachable from the preferred security. RGA fully and unconditionally guarantees, on a subordinated basis, the obligations of the Trust under the preferred securities. The preferred securities and subordinated debentures were issued at a discount (original issue discount) to the face or liquidation value of $14.87 per security. The securities will accrete to their $50 face/liquidation value over the life of the security on a level yield basis. The weighted average effective interest rate on the preferred securities and the subordinated debentures is 8.25% per annum. Capital securities outstanding were $159 million, net of unamortized discounts of $66 million at both December 31, 2006 and 2005. F-68 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 13. INCOME TAX The provision for income tax from continuing operations is as follows:
YEARS ENDED DECEMBER 31, -------------------- 2006 2005 2004 ---- ------ ---- (IN MILLIONS) Current: Federal............................................. $496 $ 833 $812 State and local..................................... 5 64 45 Foreign............................................. 20 21 5 ---- ------ ---- Subtotal............................................ 521 918 862 ---- ------ ---- Deferred: Federal............................................. $100 $ 169 $ 13 State and local..................................... 19 11 (7) Foreign............................................. -- -- -- ---- ------ ---- Subtotal............................................ 119 180 6 ---- ------ ---- Provision for income tax.............................. $640 $1,098 $868 ==== ====== ====
The reconciliation of the income tax provision at the U.S. statutory rate to the provision for income tax as reported for continuing operations is as follows:
YEARS ENDED DECEMBER 31, ----------------------- 2006 2005 2004 ----- ------ ------ (IN MILLIONS) Tax provision at U.S. statutory rate................ $ 864 $1,234 $1,076 Tax effect of: Tax-exempt investment income...................... (167) (84) (69) State and local income tax........................ 19 33 17 Prior year tax.................................... (26) (20) (104) Foreign operations, net of foreign income tax..... (23) (25) (25) Other, net........................................ (27) (40) (27) ----- ------ ------ Provision for income tax............................ $ 640 $1,098 $ 868 ===== ====== ======
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. In 2004, the Company recorded an adjustment of $91 million for the settlement of all federal income tax issues relating to the IRS's audit of the Company's tax returns for the years 1997-1999. Such settlement is reflected in the current year tax expense as an adjustment to prior year tax. The Company also received $22 million in interest on such settlements and incurred an $8 million tax expense on such settlement for a total impact to net income of $105 million. The current IRS examination covers the years 2000-2002 and the Company expects it to be completed in 2007. The Company regularly assesses the likelihood of additional assessments in each taxing jurisdiction resulting from current and subsequent years' examinations. Liabilities for income tax have been established for future income tax assessments when it is probable there will be future assessments and the amount thereof can be reasonably estimated. Once established, liabilities for uncertain tax positions are adjusted only when there is more information available or when an event occurs necessitating a change to the liabilities. The Company believes that the resolution of income tax matters for open F-69 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) years will not have a material effect on its consolidated financial statements although the resolution of income tax matters could impact the Company's effective tax rate for a particular future period. 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, --------------- 2006 2005 ------ ------ (IN MILLIONS) Deferred income tax assets: Policyholder liabilities and receivables................ $2,122 $2,477 Net operating loss carryforwards........................ 788 574 Employee benefits....................................... 440 23 Capital loss carryforwards.............................. -- 59 Tax credit carryforwards................................ -- 100 Litigation-related...................................... 62 62 Other................................................... 32 42 ------ ------ 3,444 3,337 Less: Valuation allowance............................... 11 9 ------ ------ 3,433 3,328 ------ ------ Deferred income tax liabilities: Investments............................................. 1,475 1,802 DAC..................................................... 3,441 3,134 Net unrealized investment gains......................... 968 1,029 Other................................................... 2 92 ------ ------ 5,886 6,057 ------ ------ Net deferred income tax liability......................... $2,453 $2,729 ====== ======
Domestic net operating loss carryforwards amount to $2.2 billion at December 31, 2006 and will expire beginning in 2016. Foreign net operating loss carryforwards amount to $50 million at December 31, 2006 and were generated in various foreign countries with expiration periods of five years to infinity. The Company has recorded a valuation allowance related to tax benefits of certain foreign net operating loss carryforwards. The valuation allowance reflects management's assessment, based on available information, that it is more likely than not that the deferred income tax asset for certain foreign net operating loss carryforwards will not be realized. The tax benefit will be recognized when management believes that it is more likely than not that these deferred income tax assets are realizable. In 2006, the Company recorded $2 million of additional deferred income tax valuation allowance related to certain foreign net operating loss carryforwards. 14. CONTINGENCIES, COMMITMENTS, AND GUARANTEES CONTINGENCIES LITIGATION The Company is a defendant in a large number of litigation matters. In some of the matters, very large and/or indeterminate amounts, including punitive and treble damages, are sought. Modern pleading practice in the United States permits considerable variation in the assertion of monetary damages or other relief. F-70 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Jurisdictions may permit claimants not to specify the monetary damages sought or may permit claimants to state only that the amount sought is sufficient to invoke the jurisdiction of the trial court. In addition, jurisdictions may permit plaintiffs to allege monetary damages in amounts well exceeding reasonably possible verdicts in the jurisdiction for similar matters. This variability in pleadings, together with the actual experience of the Company in litigating or resolving through settlement numerous claims over an extended period of time, demonstrate to management that the monetary relief which may be specified in a lawsuit or claim bears little relevance to its merits or disposition value. Thus, unless stated below, the specific monetary relief sought is not noted. Due to the vagaries of litigation, the outcome of a litigation matter and the amount or range of potential loss at particular points in time may normally be inherently impossible to ascertain with any degree of certainty. Inherent uncertainties can include how fact finders will view individually and in their totality documentary evidence, the credibility and effectiveness of witnesses' testimony, and how trial and appellate courts will apply the law in the context of the pleadings or evidence presented, whether by motion practice, or at trial or on appeal. Disposition valuations are also subject to the uncertainty of how opposing parties and their counsel will themselves view the relevant evidence and applicable law. On a quarterly and yearly basis, the Company reviews relevant information with respect to liabilities for litigation and contingencies to be reflected in the Company's consolidated financial statements. The review includes senior legal and financial personnel. Unless stated below, estimates of possible additional losses or ranges of loss for particular matters cannot in the ordinary course be made with a reasonable degree of certainty. Liabilities are established when it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. Liabilities have been established for a number of the matters noted below. It is possible that some of the matters could require the Company to pay damages or make other expenditures or establish accruals in amounts that could not be estimated as of December 31, 2006. Demutualization Actions Several lawsuits were brought in 2000 challenging the fairness of Metropolitan Life's plan of reorganization, as amended and the adequacy and accuracy of Metropolitan Life's disclosure to policyholders regarding the Plan. These actions discussed below named as defendants some or all of Metropolitan Life, the Holding Company, the individual directors, the Superintendent and the underwriters for MetLife, Inc.'s initial public offering, Goldman Sachs & Company and Credit Suisse First Boston. Metropolitan Life, the Holding Company, and the individual directors believe they have meritorious defenses to the plaintiffs' claims and are contesting vigorously all of the plaintiffs' claims in these actions. Fiala, et al. v. Metropolitan Life Ins. Co., et al. (Sup. Ct., N.Y. County, filed March 17, 2000). Another putative class action filed in New York State court in Kings County has been consolidated with this action. The plaintiffs in the consolidated state court class actions seek compensatory relief and punitive damages. In 2003, the trial court granted the defendants' motions to dismiss these two putative class actions. In 2004, the appellate court modified the trial court's order by reinstating certain claims against Metropolitan Life, the Holding Company and the individual directors. Plaintiffs in these actions have filed a consolidated amended complaint. On January 30, 2007, the trial court signed an order certifying a litigation class for plaintiffs' claim that defendants violated section 7312 of the New York Insurance Law, but denying plaintiffs' motion to certify a litigation class with respect to a common law fraud claim. The January 30, 2007 order implemented the trial court's May 2, 2006 memorandum deciding plaintiffs' class certification motion. Defendants have filed a notice of appeal from this decision. Meloy, et al. v. Superintendent of Ins., et al. ( Sup. Ct., N.Y. County, filed April 14, 2000). Five persons brought a proceeding under Article 78 of New York's Civil Practice Law and Rules challenging the Opinion and Decision of the Superintendent who approved the Plan. In this proceeding, petitioners sought to vacate the Superintendent's Opinion and Decision and enjoin him from granting final approval of the Plan. On F-71 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) November 10, 2005, the trial court granted respondents' motions to dismiss this proceeding. On March 15, 2007, the appellate court dismissed petitioners' appeal. In re MetLife Demutualization Litig. (E.D.N.Y., filed April 18, 2000). In this class action against Metropolitan Life and the Holding Company, plaintiffs served a second consolidated amended complaint in 2004. Plaintiffs assert violations of the Securities Act of 1933 and the Securities Exchange Act of 1934 in connection with the Plan, claiming that the Policyholder Information Booklets failed to disclose certain material facts and contained certain material misstatements. They seek rescission and compensatory damages. On June 22, 2004, the court denied the defendants' motion to dismiss the claim of violation of the Securities Exchange Act of 1934. The court had previously denied defendants' motion to dismiss the claim for violation of the Securities Act of 1933. In 2004, the court reaffirmed its earlier decision denying defendants' motion for summary judgment as premature. On July 19, 2005, this federal trial court certified this lawsuit as a class action against Metropolitan Life and the Holding Company. Fotia, et al. v. MetLife, Inc., et al. (Ont. Super. Ct., filed April 3, 2001). This lawsuit was filed in Ontario, Canada on behalf of a proposed class of certain former Canadian policyholders against the Holding Company, Metropolitan Life, and Metropolitan Life Insurance Company of Canada. Plaintiffs' allegations concern the way that their policies were treated in connection with the demutualization of Metropolitan Life; they seek damages, declarations, and other non-pecuniary relief. Asbestos-Related Claims Metropolitan Life is and has been a defendant in a large number of asbestos-related suits filed primarily in state courts. These suits principally allege that the plaintiff or plaintiffs suffered personal injury resulting from exposure to asbestos and seek both actual and punitive damages. Metropolitan Life has never engaged in the business of manufacturing, producing, distributing or selling asbestos or asbestos-containing products nor has Metropolitan Life issued liability or workers' compensation insurance to companies in the business of manufacturing, producing, distributing or selling asbestos or asbestos- containing products. The lawsuits principally have focused on allegations with respect to certain research, publication and other activities of one or more of Metropolitan Life's employees during the period from the 1920's through approximately the 1950's and allege that Metropolitan Life learned or should have learned of certain health risks posed by asbestos and, among other things, improperly publicized or failed to disclose those health risks. Metropolitan Life believes that it should not have legal liability in these cases. The outcome of most asbestos litigation matters, however, is uncertain and can be impacted by numerous variables, including differences in legal rulings in various jurisdictions, the nature of the alleged injury, and factors unrelated to the ultimate legal merit of the claims asserted against Metropolitan Life. Metropolitan Life employs a number of resolution strategies to manage its asbestos loss exposure, including seeking resolution of pending litigation by judicial rulings and settling litigation under appropriate circumstances. Claims asserted against Metropolitan Life have included negligence, intentional tort and conspiracy concerning the health risks associated with asbestos. Metropolitan Life's defenses (beyond denial of certain factual allegations) include that: (i) Metropolitan Life owed no duty to the plaintiffs -- it had no special relationship with the plaintiffs and did not manufacture, produce, distribute or sell the asbestos products that allegedly injured plaintiffs; (ii) plaintiffs did not rely on any actions of Metropolitan Life; (iii) Metropolitan Life's conduct was not the cause of the plaintiffs' injuries; (iv) that plaintiffs' exposure occurred after the dangers of asbestos were known; and (v) the applicable time with respect to filing suit has expired. Since 2002, trial courts in California, Utah, Georgia, New York, Texas, and Ohio have granted motions dismissing claims against Metropolitan Life. Some courts have denied Metropolitan Life's motions to dismiss. There can be no assurance that Metropolitan Life will receive favorable decisions on motions in the future. While most cases brought to date F-72 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) have settled, Metropolitan Life intends to continue to defend aggressively against claims based on asbestos exposure. The approximate total number of asbestos personal injury claims pending against Metropolitan Life as of the dates indicated, the approximate number of new claims during the years ended on those dates and the approximate total settlement payments made to resolve asbestos personal injury claims during those years are set forth in the following table:
AT OR FOR THE YEARS ENDED DECEMBER 31, ----------------------------- 2006 2005 2004 ------- -------- -------- (IN MILLIONS, EXCEPT NUMBER OF CLAIMS) Asbestos personal injury claims at year end (approximate)................................. 87,070 100,250 108,000 Number of new claims during the year (approximate)................................. 7,870 18,500 23,900 Settlement payments during the year(1).......... $ 35.5 $ 74.3 $ 85.5
-------- (1) Settlement payments represent payments made by Metropolitan Life during the year in connection with settlements made in that year and in prior years. Amounts do not include Metropolitan Life's attorneys' fees and expenses and do not reflect amounts received from insurance carriers. In 2003, Metropolitan Life received approximately 58,750 new claims, ending the year with a total of approximately 111,700 claims, and paid approximately $84.2 million for settlements reached in 2003 and prior years. The number of asbestos cases that may be brought or the aggregate amount of any liability that Metropolitan Life may ultimately incur is uncertain. The Company believes adequate provision has been made in its consolidated financial statements for all probable and reasonably estimable losses for asbestos-related claims. Metropolitan Life's recorded asbestos liability is based on Metropolitan Life's estimation of the following elements, as informed by the facts presently known to it, its understanding of current law, and its past experiences: (i) the reasonably probable and estimable liability for asbestos claims already asserted against Metropolitan Life including claims settled but not yet paid; (ii) the reasonably probable and estimable liability for asbestos claims not yet asserted against Metropolitan Life, but which Metropolitan Life believes are reasonably probable of assertion; and (iii) the legal defense costs associated with the foregoing claims. Significant assumptions underlying Metropolitan Life's analysis of the adequacy of its liability with respect to asbestos litigation include: (i) the number of future claims; (ii) the cost to resolve claims; and (iii) the cost to defend claims. Metropolitan Life regularly re-evaluates its exposure from asbestos litigation, including studying its claims experience, reviewing external literature regarding asbestos claims experience in the United States, assessing relevant trends impacting asbestos liability and considering numerous variables that can affect its asbestos liability exposure on an overall or per claim basis. These variables include bankruptcies of other companies involved in asbestos litigation, legislative and judicial developments, the number of pending claims involving serious disease, the number of new claims filed against it and other defendants, and the jurisdictions in which claims are pending. As previously disclosed, in 2002 Metropolitan Life increased its recorded liability for asbestos-related claims by $402 million from approximately $820 million to $1,225 million. Metropolitan Life regularly re-evaluates its exposure from asbestos litigation and has updated its liability analysis for asbestos-related claims through December 31, 2006. The ability of Metropolitan Life to estimate its ultimate asbestos exposure is subject to considerable uncertainty and the conditions impacting its liability can be dynamic and subject to change. The availability of reliable data is limited and it is difficult to predict with any certainty the numerous variables that can affect liability estimates, including the number of future claims, the cost to resolve claims, the disease mix and severity of disease in pending and future claims, the impact of the number of new claims filed in a particular jurisdiction F-73 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) and variations in the law in the jurisdictions in which claims are filed, the possible impact of tort reform efforts, the willingness of courts to allow plaintiffs to pursue claims against Metropolitan Life when exposure to asbestos took place after the dangers of asbestos exposure were well known, and the impact of any possible future adverse verdicts and their amounts. The ability to make estimates regarding ultimate asbestos exposure declines significantly as the estimates relate to years further in the future. In the Company's judgment, there is a future point after which losses cease to be reasonably probable and estimable. It is reasonably possible that the Company's total exposure to asbestos claims may be materially greater than the asbestos liability currently accrued and that future charges to income may be necessary. While the potential future charges could be material in the particular quarterly or annual periods in which they are recorded, based on information currently known by management, management does not believe any such charges are likely to have a material adverse effect on the Company's consolidated financial position. During 1998, Metropolitan Life paid $878 million in premiums for excess insurance policies for asbestos-related claims. The excess insurance policies for asbestos-related claims provide for recovery of losses up to $1.5 billion, which is in excess of a $400 million self-insured retention. The asbestos- related policies are also subject to annual and per-claim sublimits. Amounts are recoverable under the policies annually with respect to claims paid during the prior calendar year. Although amounts paid by Metropolitan Life in any given year that may be recoverable in the next calendar year under the policies will be reflected as a reduction in the Company's operating cash flows for the year in which they are paid, management believes that the payments will not have a material adverse effect on the Company's liquidity. Each asbestos-related policy contains an experience fund and a reference fund that provides for payments to Metropolitan Life at the commutation date if the reference fund is greater than zero at commutation or pro rata reductions from time to time in the loss reimbursements to Metropolitan Life if the cumulative return on the reference fund is less than the return specified in the experience fund. The return in the reference fund is tied to performance of the Standard & Poor's 500 Index and the Lehman Brothers Aggregate Bond Index. A claim with respect to the prior year was made under the excess insurance policies in each of 2003, 2004, 2005 and 2006 for the amounts paid with respect to asbestos litigation in excess of the retention. As the performance of the indices impacts the return in the reference fund, it is possible that loss reimbursements to the Company and the recoverable amount with respect to later periods may be less than the amount of the recorded losses. Foregone loss reimbursements may be recovered upon commutation depending upon future performance of the reference fund. If at some point in the future, the Company believes the liability for probable and reasonably estimable losses for asbestos-related claims should be increased, an expense would be recorded and the insurance recoverable would be adjusted subject to the terms, conditions and limits of the excess insurance policies. Portions of the change in the insurance recoverable would be recorded as a deferred gain and amortized into income over the estimated remaining settlement period of the insurance policies. The foregone loss reimbursements were approximately $8.3 million with respect to 2002 claims, $15.5 million with respect to 2003 claims, $15.1 million with respect to 2004 claims, $12.7 million with respect to 2005 claims, and estimated to be approximately $5.0 million with respect to 2006 claims and are estimated, as of December 31, 2006, to be approximately $72.2 million in the aggregate, including future years. Sales Practices Claims Over the past several years, Metropolitan Life, New England Mutual Life Insurance Company ("New England Mutual"), New England Life Insurance Company ("NELICO") and General American Life Insurance Company ("General American"), have faced numerous claims, including class action lawsuits, alleging improper marketing and sales of individual life insurance policies or annuities. In addition, claims have been brought relating to the sale of mutual funds and other products. F-74 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) As of December 31, 2006, there were approximately 280 sales practices litigation matters pending against Metropolitan Life; approximately 41 sales practices litigation matters pending against New England Mutual, New England Life Insurance Company, and New England Securities Corporation (collectively, "New England"); and approximately 37 sales practices litigation matters pending against General American. Metropolitan Life, New England, and General American, continue to vigorously defend against the claims in these matters. Some sales practices claims have been resolved through settlement, others 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, mutual funds and other products may be commenced in the future. Two putative class action lawsuits involving sales practices claims were filed against Metropolitan Life in Canada. In Jacynthe Evoy-Larouche v. Metropolitan Life Ins. Co. (Que. Super. Ct., filed March 1998), plaintiff alleges misrepresentations regarding dividends and future payments for life insurance policies and seeks unspecified damages. In Ace Quan v. Metropolitan Life Ins. Co. (Ont. Gen. Div., filed April 1997), plaintiff alleges breach of contract and negligent misrepresentations relating to, among other things, life insurance premium payments and seeks damages, including punitive damages. By agreement of the parties, Metropolitan Life has not yet filed a response in this action. Regulatory authorities in a small number of states have had investigations or inquiries relating to Metropolitan Life's, New England's, or General American's sales of individual life insurance policies or annuities or other products. Over the past several years, these and a number of investigations by other regulatory authorities were resolved for monetary payments and certain other relief. The Company may continue to resolve investigations in a similar manner. The Company believes adequate provision has been made in its consolidated financial statements for all probable and reasonably estimable losses for sales practices claims against Metropolitan Life, New England, and General American. Regulatory Matters and Related Litigation Regulatory bodies have contacted the Company and have requested information relating to market timing and late trading of mutual funds and variable insurance products and, generally, the marketing of products. The Company believes that many of these inquiries are similar to those made to many financial services companies as part of industry-wide investigations by various regulatory agencies. The SEC has commenced an investigation with respect to market timing and late trading in a limited number of privately-placed variable insurance contracts that were sold through General American. As previously reported, in May 2004, General American received a Wells Notice stating that the SEC staff is considering recommending that the SEC bring a civil action alleging violations of the U.S. securities laws against General American. Under the SEC procedures, General American can avail itself of the opportunity to respond to the SEC staff before it makes a formal recommendation regarding whether any action alleging violations of the U.S. securities laws should be considered. General American has responded to the Wells Notice. The Company is fully cooperating with regard to these information requests and investigations. The Company at the present time is not aware of any systemic problems with respect to such matters that may have a material adverse effect on the Company's consolidated financial position. In December 2006, Metropolitan Life resolved a previously disclosed investigation by the Office of the Attorney General of the State of New York related to payments to intermediaries in the marketing and sale of group life and disability, group long-term care and group accidental death and dismemberment insurance and related matters. In the settlement, Metropolitan Life did not admit liability as to any issue of fact or law. Among other things, Metropolitan Life has agreed to certain business reforms relating to compensation of producers of group insurance, compensation disclosures to group insurance clients and the adoption of related standards of conduct, some of which it had implemented following the commencement of the investigation. Metropolitan Life has paid a fine and has made a payment to a restitution fund. It is the opinion of management that F-75 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Metropolitan Life's resolution of this matter will not adversely affect its business. The Holding Company and/or subsidiaries have received subpoenas and/or other discovery requests from regulators, state attorneys general or other governmental authorities in other states, including Connecticut, Massachusetts, California, Florida and Ohio seeking, among other things, information and documents regarding contingent commission payments to brokers, the Holding Company's and/or subsidiaries' awareness of any "sham" bids for business, bids and quotes that the Holding Company and/or subsidiaries submitted to potential customers, incentive agreements entered into with brokers, or compensation paid to intermediaries. The Holding Company and/or subsidiaries also have received a subpoena from the Office of the U.S. Attorney for the Southern District of California asking for documents regarding the insurance broker, Universal Life Resources. The Holding Company and/or subsidiaries continue to cooperate fully with these inquiries and are responding to the subpoenas and other discovery requests. Approximately sixteen broker-related lawsuits in which the Holding Company and/or subsidiaries were named as a defendant were filed. Voluntary dismissals and consolidations have reduced the number of pending actions to two: The People of the State of California, by and through John Garamendi, Ins. Commissioner of the State of California v. MetLife, Inc., et al. (Cal. Super. Ct., County of San Diego, filed November 18, 2004). The California Insurance Commissioner filed suit against Metropolitan Life and other non-affiliated companies alleging that the defendants violated certain provisions of the California Insurance Code. This action seeks injunctive relief relating to compensation disclosures. In Re Ins. Brokerage Antitrust Litig. (D. N.J., filed in February 24, 2005). In this multi-district proceeding, plaintiffs have filed an amended class action complaint consolidating the claims from separate actions that had been filed in or transferred to the District of New Jersey in 2004 and 2005. The consolidated amended complaint alleges that the Holding Company, Metropolitan Life, several non-affiliated insurance companies and several insurance brokers violated RICO, ERISA, and antitrust laws and committed other misconduct in the context of providing insurance to employee benefit plans and to persons who participate in such employee benefit plans. Plaintiffs seek to represent classes of employers that established employee benefit plans and persons who participated in such employee benefit plans. A motion for class certification has been filed. A motion to dismiss has not been fully decided. Plaintiffs in several other actions have voluntarily dismissed their claims. The Holding Company and/or subsidiaries are vigorously defending against the claims in these matters. In February 2006, the Company learned that the SEC commenced a formal investigation of New England Securities ("NES") in connection with the suitability of its sales of variable universal life insurance policies. The Company believes that others in the insurance industry are the subject of similar investigations by the SEC. NES is cooperating fully with the SEC. Other Litigation Roberts, et al. v. Tishman Speyer Properties, et al. (Sup. Ct., N.Y. County, filed January 22, 2007). This lawsuit was filed by a putative class of "market rate" tenants at Stuyvesant Town and Peter Cooper Village against parties including Metropolitan Tower Life Insurance Company and Metropolitan Insurance and Annuity Company. Metropolitan Life was initially a named defendant but the action has been discontinued as to Metropolitan Life since it did not own the properties during the time period in question. This group of tenants claims that the MetLife entities, and since the sale of the properties, Tishman Speyer as current owner, improperly charged market rents when only lower regulated rents were permitted. The allegations are based on the impact of so- called J-51 tax abatements. The lawsuit seeks declaratory relief and damages. A second purported class action, originally titled Carroll v. Tishman Speyer Properties, et. al (Sup. Ct., N.Y. County, filed February 14, 2007), was filed against the same defendants alleging similar claims as in the Roberts case, and in addition includes a claim of unjust enrichment and purported violation of New York General Business Law F-76 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Section 349. The Carroll action was consolidated into the Roberts action, and the MetLife entities are vigorously defending against these claims. Brubaker, et al. v. Metropolitan Life Ins. Co., et al. (D.C. Cir, filed October 20, 2000). Plaintiffs, in this putative class action lawsuit, allege that they were denied certain ad hoc pension increases awarded to retirees under the Metropolitan Life retirement plan. The ad hoc pension increases were awarded only to retirees (i.e., individuals who were entitled to an immediate retirement benefit upon their termination of employment) and not available to individuals like these plaintiffs whose employment, or whose spouses' employment, had terminated before they became eligible for an immediate retirement benefit. The plaintiffs seek to represent a class consisting of former Metropolitan Life employees, or their surviving spouses, who are receiving deferred vested annuity payments under the retirement plan and who were allegedly eligible to receive the ad hoc pension increases. In September 2005, Metropolitan Life's motion for summary judgment was granted. Plaintiffs' motion for reconsideration was denied. Plaintiffs appealed to the United States Court of Appeals for the District of Columbia Circuit. The court heard oral argument on March 15, 2007. The American Dental Association, et al. v. MetLife Inc., et al. (S.D. Fla., filed May 19, 2003). The American Dental Association and three individual providers have sued the Holding Company, Metropolitan Life, and other non- affiliated insurance companies in a putative class action lawsuit. The plaintiffs purport to represent a nationwide class of in-network providers who allege that their claims are being wrongfully reduced by downcoding, bundling, and the improper use and programming of software. The complaint alleges federal racketeering and various state law theories of liability. The district court has granted in part and denied in part Metropolitan Life's and the Holding Company's motion to dismiss. Metropolitan Life and the Holding Company have filed another motion to dismiss. The court has issued a tag-along order, related to a medical managed care trial, which stays the lawsuit indefinitely. Thomas, et al. v. Metropolitan Life Ins. Co., et al. (W.D. Okla., filed January 31, 2007). A putative class action complaint was filed against Metropolitan Life, MetLife Securities, Inc. and MetLife Investment Advisors Company, LLC. Plaintiff asserts legal theories of violations of the federal securities laws and violations of state laws with respect to the sale of certain proprietary products (as opposed to non-proprietary products) by the Company's agency distribution group. Plaintiff seeks rescission, compensatory damages, interest, punitive damages and attorneys' fees and expenses. The Company intends to vigorously defend against the claims in this matter. Metropolitan Life also has been named as a defendant in a number of silicosis, welding and mixed dust cases in various states. The Company intends to vigorously defend against the claims in these matters. Summary Putative or certified class action litigation and other litigation and claims and assessments against the Company, in addition to those discussed above and those otherwise provided for in the Company's consolidated financial statements, have arisen in the course of the Company's business, including, but not limited to, in connection with its activities as an insurer, employer, investor, investment advisor and taxpayer. Further, state insurance regulatory authorities and other federal and state authorities regularly make inquiries and conduct investigations concerning 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 above in connection with specific matters. In some of the matters referred to above, very 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 consolidated financial position, based on information currently known by the Company's management, in its opinion, the outcomes of such pending F-77 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 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 in particular quarterly or annual periods. INSOLVENCY ASSESSMENTS Most of the jurisdictions in which the Company is admitted to transact business require life insurers doing business within the jurisdiction to participate in guaranty associations, which are organized to pay contractual benefits owed pursuant to insurance policies issued by impaired, insolvent or failed life insurers. These associations levy assessments, up to prescribed limits, on all member insurers in a particular state on the basis of the proportionate share of the premiums written by member insurers in the lines of business in which the impaired, insolvent or failed insurer engaged. Some states permit member insurers to recover assessments paid through full or partial premium tax offsets. Assets and liabilities held for insolvency assessments are as follows:
DECEMBER 31, ----------- 2006 2005 ---- ---- (IN MILLIONS) Other Assets: Premium tax offset for future undiscounted assessments..... $28 $28 Premium tax offsets currently available for paid assessments............................................. 5 6 --- --- $33 $34 === === Liability: Insolvency assessments..................................... $49 $48 === ===
Assessments levied against the Company were $1 million for both the years ended December 31, 2006 and 2005. For the year ended December 31, 2004, the assessment was $1 million less a refund of $2 million related to prior years assessments. IMPACT OF HURRICANES On August 29, 2005, Hurricane Katrina made landfall in the states of Louisiana, Mississippi and Alabama, causing catastrophic damage to these coastal regions. The Company's cumulative gross losses were $21 million at December 31, 2005. During the year ended December 31, 2005, the Company recognized total net losses, related to the catastrophe of $14 million, net of income tax and reinsurance recoverables and including reinstatement premiums and other reinsurance-related premium adjustments. There were no additional losses recognized for the year ended December 31, 2006. Additional hurricane-related losses may be recorded in future periods as claims are received from insureds and claims to reinsurers are processed. Reinsurance recoveries are dependent upon the continued creditworthiness of the reinsurers, which may be affected by their other reinsured losses in connection with Hurricanes Katrina and otherwise. In addition, lawsuits, including purported class actions, have been filed in Louisiana, Mississippi and Alabama challenging denial of claims for damages caused to property during Hurricane Katrina. The Company is a named party in some of these lawsuits. In addition, rulings in cases in which the Company is not a party may affect interpretation of its policies. The Company intends to vigorously defend these matters. However, any adverse rulings could result in an increase in the Company's hurricane-related claim exposure and losses. Based on information known by management, it does not believe that additional claim losses resulting from Hurricane Katrina will have a material adverse impact on the Company's consolidated financial statements. F-78 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) COMMITMENTS LEASES In accordance with industry practice, certain of the Company's income from lease agreements with retail tenants are contingent upon the level of the tenants' sales revenues. Additionally, the Company, as lessee, has entered into various lease and sublease agreements for office space, data processing and other equipment. Future minimum rental and sublease income, and minimum gross rental payments relating to these lease agreements are as follows:
GROSS RENTAL SUBLEASE RENTAL INCOME INCOME PAYMENTS ------ -------- -------- (IN MILLIONS) 2007............................................... $326 $20 $ 177 2008............................................... $276 $18 $ 148 2009............................................... $224 $10 $ 158 2010............................................... $184 $ 5 $ 149 2011............................................... $155 $ 5 $ 124 Thereafter......................................... $564 $10 $1,180
COMMITMENTS TO FUND PARTNERSHIP INVESTMENTS The Company makes commitments to fund partnership investments in the normal course of business. The amounts of these unfunded commitments were $2.4 billion and $2.0 billion at December 31, 2006 and 2005, respectively. The Company anticipates that these amounts will be invested in partnerships over the next five years. MORTGAGE LOAN COMMITMENTS The Company commits to lend funds under mortgage loan commitments. The amounts of these mortgage loan commitments were $3.3 billion and $2.6 billion at December 31, 2006 and 2005, respectively. COMMITMENTS TO FUND BANK CREDIT FACILITIES AND BRIDGE LOANS The Company commits to lend funds under bank credit facilities and bridge loans. The amounts of these unfunded commitments were $1.7 billion and $323 million at December 31, 2006 and 2005, respectively. OTHER COMMITMENTS Metropolitan Life is a member of the Federal Home Loan Bank of New York (the "FHLB of NY") and holds $136 million of common stock of the FHLB of NY, which is included in equity securities on the Company's consolidated balance sheet. Metropolitan Life had no funding agreements with the FHLB of NY at December 31, 2006 or 2005. On December 12, 2005, RGA repurchased 1.6 million shares of its outstanding common stock at an aggregate price of $76 million under an accelerated share repurchase agreement with a major bank. The bank borrowed the stock sold to RGA from third parties and purchased the shares in the open market over the subsequent few months to return to the lenders. RGA would either pay or receive an amount based on the actual amount paid by the bank to purchase the shares. These repurchases resulted in an increase in the Company's ownership percentage of RGA to approximately 53% at December 31, 2005 from approximately 52% at December 31, 2004. In February 2006, the final purchase price was determined, resulting in a cash settlement F-79 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) substantially equal to the aggregate cost. RGA recorded the initial repurchase of shares as treasury stock and recorded the amount received as an adjustment to the cost of the treasury stock. At December 31, 2006, the Company's ownership was approximately 53% of RGA. 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 $800 million, with a cumulative maximum of $1.5 billion, while in other cases such limitations are not specified or applicable. Since certain of these obligations are not subject to limitations, the Company does not believe that it is possible to determine the maximum potential amount that could become due under these guarantees in the future. In addition, the Company indemnifies its directors and officers as provided in its charters and by-laws. Also, the Company indemnifies its agents for liabilities incurred as a result of their representation of the Company's interests. Since these indemnities are generally not subject to limitation with respect to duration or amount, the Company does not believe that it is possible to determine the maximum potential amount that could become due under these indemnities in the future. During the year ended December 31, 2006, the Company did not record any additional liabilities for indemnities, guarantees and commitments. In the fourth quarter of 2006, the Company eliminated $4 million of a liability that was previously recorded with respect to indemnities provided in connection with a certain disposition. The Company had no liability for indemnities, guarantees and commitments at December 31, 2006. The Company's recorded liabilities at December 31, 2005 for indemnities, guarantees and commitments were $4 million. In connection with synthetically created investment transactions, the Company writes credit default swap obligations requiring payment of principal due in exchange for the referenced credit obligation, depending on the nature or occurrence of specified credit events for the referenced entities. In the event of a specified credit event, the Company's maximum amount at risk, assuming the value of the referenced credits becomes worthless, was $342 million at December 31, 2006. The credit default swaps expire at various times during the next ten years. 15. EMPLOYEE BENEFIT PLANS PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS The Company sponsors and administers various qualified and non-qualified defined benefit pension plans and other postretirement employee benefit plans covering eligible employees and sales representatives who meet specified eligibility requirements of the sponsor and its participating affiliates. Participating affiliates have no legal obligation for benefits under the pension plans; however, participating affiliates are allocated a proportionate share of net expense related to the plans. 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 F-80 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 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. As of December 31, 2006, virtually all of the plans' benefit obligations have been calculated using the traditional formula. The non- qualified pension plans provide supplemental benefits, in excess of amounts permitted by governmental agencies, to certain executive level employees. The Company's proportionate share of net pension expense related to the pension plans was $161 million or 90% for the year ended December 31, 2006. The Company also provides certain postemployment benefits and certain postretirement medical and life insurance benefits for retired employees. The other postretirement plans cover eligible employees of the sponsor and its participating affiliates 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 or its participating affiliates, 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. Participating affiliates have no legal obligation for benefits under these other postretirement plans; however, participating affiliates are allocated a proportionate share of net expense related to the postretirement plan. The Company's proportionate share of net expense related to the postretirement plan was $49 million or 86% for the year ended December 31, 2006. Other postretirement plans are sponsored and administered by subsidiaries of the Company. 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. The Company's additional minimum pension liability was $78 million, and the intangible asset was $12 million, at December 31, 2005. The excess of the additional minimum pension liability over the intangible asset of $66 million, $41 million, net of income tax, was recorded as a reduction of accumulated other comprehensive income. At December 31, 2006, immediately prior to adopting SFAS 158, the Company's additional minimum pension liability was $92 million. The additional minimum pension liability of $59 million, net of income tax of $33 million, was recorded as a reduction of accumulated other comprehensive income. The change in the additional minimum pension liability of $18 million, net of income tax, was reflected as a component of comprehensive income for the year ended December 31, 2006. Upon adoption of SFAS 158, the Company eliminated the additional minimum pension liability and recognized as an adjustment to accumulated other comprehensive income, 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 F-81 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 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 ---------------------------------------------------- MINIMUM PRE PENSION ADOPTION OF POST SFAS 158 LIABILITY SFAS 158 SFAS 158 BALANCE SHEET CAPTION ADJUSTMENTS ADJUSTMENT ADJUSTMENTS ADJUSTMENTS --------------------- ----------- ---------- ----------- ----------- (IN MILLIONS) Other assets: Prepaid pension benefit cost..................................... $1,878 $ -- $ (999) $ 879 Other assets: Intangible asset............. $ 12 (12) -- $ -- Other liabilities: Accrued pension benefit cost..................................... $ (482) (14) (79) $ (575) Other liabilities: Accrued postretirement benefit cost............................. $ (696) -- (100) $ (796) ---- ------- Accumulated other comprehensive income (loss), before income tax: Defined benefit plans...................... $ (66) (26) (1,178) $(1,270) Minority interest.......................... -- 8 Deferred income tax........................ 8 421 ---- ------- Accumulated other comprehensive income (loss), net of income tax: Defined benefit plans...................... $ (41) $(18) $ (749) $ (808) ==== =======
A December 31 measurement date is used for all of the Company's defined benefit pension and other postretirement benefit plans. F-82 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) OBLIGATIONS, FUNDED STATUS AND NET PERIODIC BENEFIT COSTS
DECEMBER 31, ---------------------------------- OTHER PENSION POSTRETIREMENT BENEFITS BENEFITS --------------- ---------------- 2006 2005 2006 2005 ------ ------ ------ ------- (IN MILLIONS) Change in benefit obligation: Benefit obligation at beginning of year......... $5,717 $5,481 $2,160 $ 1,962 Service cost.................................. 158 141 35 36 Interest cost................................. 330 315 116 120 Plan participants' contributions.............. -- -- 29 28 Acquisitions and divestitures................. (3) -- -- 1 Net acturial (gains) losses................... 15 90 (1) 168 Change in benefits............................ (2) -- (143) 3 Prescription drug subsidy..................... -- -- 10 -- Benefits paid................................. (319) (310) (151) (158) ------ ------ ------ ------- Benefit obligation at end of year............... 5,896 5,717 2,055 2,160 ------ ------ ------ ------- Change in plan assets: Fair value of plan assets at beginning of year.. 5,471 5,351 1,091 1,059 Actual return on plan assets.................. 715 397 103 61 Divestitures.................................. (3) -- -- -- Employer contribution......................... 385 33 1 1 Benefits paid................................. (319) (310) (26) (30) ------ ------ ------ ------- Fair value of plan assets at end of year........ 6,249 5,471 1,169 1,091 ------ ------ ------ ------- Funded status at end of year.................... $ 353 (246) $ (886) (1,069) ====== ====== Unrecognized net acturial (gains) losses...... 1,526 376 Unrecognized prior service cost (credit)...... 52 (123) ------ ------- Net prepaid (accrued) benefit cost recognized... $1,332 $ (816) ====== ======= Components of net amount recognized: Qualified plan prepaid pension cost........... $1,691 $ -- Non-qualified plan accrued pension cost....... (359) (816) ------ ------- Net prepaid (accrued) benefit cost recognized................................. 1,332 (816) Intangible assets............................. 12 -- Additional minimum pension liability.......... (78) -- ------ ------- Net amount recognized.................... $1,266 $ (816) ====== ======= Amounts recognized in the consolidated balance sheet consist of: Other assets.................................. $ 935 $1,703 $ -- $ -- Other liabilities............................. (582) (437) (886) (816) ------ ------ ------ ------- Net amount recognized.................... $ 353 $1,266 $ (886) $ (816) ====== ====== ====== ======= Accumulated other comprehensive (income) loss: Net actuarial (gains) losses.................. $1,126 $ -- $ 328 $ -- Prior service cost (credit)................... 39 -- (230) -- Additional minimum pension liability.......... -- 66 -- -- ------ ------ ------ ------- Accumulated other comprehensive (income) loss:.................................... $1,165 $ 66 $ 98 $ -- ====== ====== ====== =======
F-83 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The aggregate projected benefit obligation and aggregate fair value of plan assets for the pension plans were as follows:
DECEMBER 31, ------------------------------------------------- NON-QUALIFIED QUALIFIED PLAN PLAN TOTAL --------------- ------------- --------------- 2006 2005 2006 2005 2006 2005 ------ ------ ----- ----- ------ ------ (IN MILLIONS) Aggregate fair value of plan assets (principally Company contracts)...................... $6,249 $5,471 $ -- $ -- $6,249 $5,471 Aggregate projected benefit obligation...................... 5,318 5,209 578 508 5,896 5,717 ------ ------ ----- ----- ------ ------ Over (under) funded............... $ 931 $ 262 $(578) $(508) $ 353 $ (246) ====== ====== ===== ===== ====== ======
The accumulated benefit obligation for all defined benefit pension plans was $5,457 million and $5,308 million at December 31, 2006 and 2005, respectively. Information for pension plans with an accumulated benefit obligation in excess of plan assets is as follows:
DECEMBER 31, ----------- 2006 2005 ---- ---- (IN MILLIONS) Projected benefit obligation................................ $578 $530 Accumulated benefit obligation.............................. $497 $442 Fair value of plan assets................................... $ -- $ 16
Information for pension and other postretirement plans with a projected benefit obligation in excess of plan assets is as follows:
DECEMBER 31, ----------------------------- OTHER PENSION POSTRETIREMENT BENEFITS BENEFITS ----------- --------------- 2006 2005 2006 2005 ---- ---- ------ ------ (IN MILLIONS) Projected benefit obligation.................... $603 $530 $2,055 $2,160 Fair value of plan assets....................... $ 22 $ 16 $1,169 $1,091
The components of net periodic benefit cost recognized in net income were as follows:
YEARS ENDED DECEMBER 31, ------------------------------------------ OTHER POSTRETIREMENT PENSION BENEFITS BENEFITS --------------------- ------------------ 2006 2005 2004 2006 2005 2004 ----- ----- ----- ---- ---- ---- (IN MILLIONS) Service cost......................... $ 158 $ 141 $ 128 $ 35 $ 36 $ 31 Interest cost........................ 330 315 308 116 120 118 Expected return on plan assets....... (448) (443) (425) (79) (78) (77) Amortization of net acturial (gains) losses............................. 128 116 102 22 14 7 Amortization of prior service cost (credit)........................... 10 16 16 (37) (18) (19) ----- ----- ----- ---- ---- ---- Net periodic benefit cost............ $ 178 $ 145 $ 129 $ 57 $ 74 $ 60 ===== ===== ===== ==== ==== ====
F-84 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The estimated net actuarial losses and prior service cost for the pension plans that will be amortized from accumulated other comprehensive income into net periodic benefit cost over the next year are $54 million and $12 million, respectively. The estimated net actuarial losses and prior service credit for the other postretirement plans that will be amortized from accumulated other comprehensive income into net periodic benefit cost over the next year are $14 million and $36 million, respectively. As discussed more fully in Note 1, the Company adopted the guidance in FSP 106-2 to account for future subsidies to be received under the Prescription Drug Act. The Company began receiving these subsidies during 2006. The APBO was remeasured effective July 1, 2004 in order to determine the effect of the expected subsidies on net periodic other postretirement benefit cost. As a result, the APBO was reduced by $213 million at July 1, 2004. A summary of the reduction to the APBO and related reduction to the components of net periodic other postretirement benefit cost is as follows:
DECEMBER 31, ------------------ 2006 2005 2004 ---- ---- ---- (IN MILLIONS) Cumulative reduction in benefit obligation: Beginning of year.................................... $298 $230 $ -- Service cost......................................... 6 6 3 Interest cost........................................ 19 16 6 Net actuarial gains (losses)......................... 15 46 221 Prescription drug subsidy............................ (10) -- -- ---- ---- ---- End of year....................................... $328 $298 $230 ==== ==== ====
YEARS ENDED DECEMBER 31, ------------------ 2006 2005 2004 ---- ---- ---- (IN MILLIONS) Reduction in net periodic benefit cost: Service cost........................................... $ 6 $ 6 $ 3 Interest cost.......................................... 19 16 6 Amortization of net actuarial gains (losses)........... 30 23 8 --- --- --- Total reduction in net periodic benefit cost........ $55 $45 $17 === === ===
The Company received subsidies of $8 million for prescription claims processed from January 1, 2006 through September 30, 2006 and expects to receive an additional $2 million in 2007 for prescription claims processed October 1, 2006 through December 31, 2006. ASSUMPTIONS Assumptions used in determining benefit obligations were as follows:
DECEMBER 31, ----------------------------- OTHER PENSION POSTRETIRE- BENEFITS MENT BENEFITS ------------- ------------- 2006 2005 2006 2005 ----- ----- ----- ----- Weighted average discount rate................ 6.00% 5.80% 6.00% 5.79% Rate of compensation increase................. 4%-8% 4%-8% N/A N/A
F-85 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Assumptions used in determining net periodic benefit cost were as follows:
DECEMBER 31, --------------------------------------------- OTHER POSTRETIREMENT PENSION BENEFITS BENEFITS --------------------- --------------------- 2006 2005 2004 2006 2005 2004 ----- ----- ----- ----- ----- ----- Weighted average discount rate... 5.80% 5.85% 6.10% 5.79% 5.83% 6.74% Weighted average expected rate of return on plan assets.......... 8.25% 8.49% 8.49% 7.42% 7.50% 7.91% Rate of compensation increase.... 4%-8% 4%-8% 4%-8% N/A N/A N/A
The discount rate is based on the yield of a hypothetical portfolio constructed of bonds rated AA or better by Moody's Investors Services available on the valuation date measured on a yield to worst basis, which would provide the necessary future cash flows to pay the aggregate projected benefit obligation when due. The expected rate of return on plan assets is based on anticipated performance of the various asset sectors in which the plan invests, weighted by target allocation percentages. Anticipated future performance is based on long- term historical returns of the plan assets by sector, adjusted for the Company's long-term expectations on the performance of the markets. While the precise expected return derived using this approach will fluctuate from year to year, the Company's policy is to hold this long-term assumption constant as long as it remains within reasonable tolerance from the derived rate. The weighted average expected return on plan assets for use in that plan's valuation in 2007 is currently anticipated to be 8.25% for pension benefits and postretirement medical benefits and 6.25% for postretirement life benefits. The assumed healthcare cost trend rates used in measuring the APBO and net periodic benefit cost were as follows:
DECEMBER 31, -------------------------------------------------- 2006 2005 ----------------------- ------------------------ Pre-Medicare eligible claims...... 9.0% down to 5% in 2014 9.5% down to 5% in 2014 Medicare eligible claims.......... 11% down to 5% in 2018 11.5% 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 MILLIONS) Effect on total of service and interest cost components.......................................... $ 14 $ (12) Effect of accumulated postretirement benefit obligation.......................................... $176 $(147)
PLAN ASSETS The Company has issued group annuity and life insurance contracts supporting approximately 98% of all pension and other postretirement benefit plans assets. The account values of the group annuity and life insurance contracts issued by the Company and held as assets of the pension and other postretirement benefit plans were $7,321 million and $6,471 million as of December 31, 2006 and 2005, respectively. The majority of such account values are held in separate accounts established by the Company. Total revenue from these contracts recognized in the consolidated statements of income was $29 million, $28 million and $28 million for the years ended December 31, 2006, 2005 and 2004, respectively, and includes policy charges, net investment income from investments backing the contracts and F-86 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) administrative fees. Total investment income, including realized and unrealized gains and losses, credited to the account balances was $818 million, $460 million and $519 million for the years ended December 31, 2006, 2005 and 2004, respectively. The terms of these contracts are consistent in all material respects with those the Company offers to unaffiliated parties that are similarly situated. The weighted-average allocations of pension plan and other postretirement benefit plan assets were as follows:
DECEMBER 31, ------------------------------- OTHER POSTRETIRE- PENSION MENT BENEFITS BENEFITS ------------- ------------- 2006 2005 2006 2005 ---- ---- ---- ---- ASSET CATEGORY Equity securities................................. 42% 47% 37% 42% Fixed maturity securities......................... 42% 37% 57% 53% Other (Real Estate and Alternative Investments)... 16% 16% 6% 5% --- --- --- --- Total........................................... 100% 100% 100% 100% === === === ===
The weighted-average target allocations of pension plan and other postretirement benefit plan assets for 2007 is as follows:
OTHER PENSION POSTRETIREMENT BENEFITS BENEFITS -------- -------------- ASSET CATEGORY Equity securities.................................... 30%-65% 30%-45% Fixed maturity securities............................ 20%-70% 45%-70% Other (Real Estate and Alternative Investments)...... 0%-25% 0%-10%
Target allocations of assets are determined with the objective of maximizing returns and minimizing volatility of net assets through adequate asset diversification. Adjustments are made to target allocations based on an assessment of the impact of economic factors and market conditions. CASH FLOWS It is the Company's practice to make contributions to the qualified pension plans to comply with minimum funding requirements of the Employee Retirement Income Security Act of 1974, as amended, and/or to maintain a fully funded ABO. In accordance with such practice, no contributions were required for the years ended December 31, 2006 or 2005. No contributions will be required for 2007. The Company elected to make discretionary contributions to the qualified pension plans of $335 million during the year ended December 31, 2006. No contributions were made during the year ended December 31, 2005. The Company expects to make additional discretionary contributions of $145 million in 2007. Benefit payments due under the non-qualified pension plans are funded from the Company's general assets as they become due under the provision of the plans. These payments totaled $35 million and $33 million for the years ended December 31, 2006 and 2005, respectively. These payments are expected to be at approximately the same level in 2007. 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. While the Company has partially funded such plans in advance, it has been the Company's practice to use its general assets to pay claims as they F-87 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) come due in lieu of utilizing plan assets. These payments totaled $151 million and $158 million for the years ended December 31, 2006 and 2005, respectively. The Company expects to make contributions up to $131 million, based upon expected gross benefit payments, towards the other postretirement plan obligations in 2007. As noted previously, the Company expects to receive subsidies under the Prescription Drug Act to partially offset such payments. Gross benefit payments for the next ten years, which reflect expected future service where appropriate, and gross subsidies to be received under the Prescription Drug Act are expected to be as follows:
OTHER POSTRETIREMENT BENEFITS -------------------------------- PENSION PRESCRIPTION DRUG BENEFITS GROSS SUBSIDIES NET -------- ----- ----------------- ---- (IN MILLIONS) 2007....................................... $ 335 $131 $(14) $117 2008....................................... $ 346 $135 $(14) $121 2009....................................... $ 364 $141 $(15) $126 2010....................................... $ 370 $146 $(16) $130 2011....................................... $ 383 $152 $(16) $136 2012-2016.................................. $2,136 $824 $(98) $726
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 $73 million, $70 million and $60 million for the years ended December 31, 2006, 2005 and 2004, respectively. 16. EQUITY CAPITAL CONTRIBUTIONS On October 20, 2006, the Holding Company contributed $17 million to the Company in connection with the sale and merger of CLIC. See Note 2. On September 30, 2006, the Holding Company contributed $377 million to the Company in the form of intangible assets. See Note 2. On May 1, 2006, General American, an indirect insurance subsidiary of the Company, sold its wholly-owned insurance subsidiary, Paragon Life Insurance Company ("Paragon"), to its ultimate parent, the Holding Company. Immediately following the sale, the Holding Company merged Paragon, an affiliate of the Company, with and into the Company. In connection with the transaction, the Holding Company contributed $76 million to the Company. PARENT'S INTEREST IN PREFERRED STOCK OF A SUBSIDIARY On December 21, 2004, the Holding Company contributed the 93,402 Preferred Shares to a subsidiary of the Company. The subsidiary of the Company retired the shares and recorded a contribution of capital of $93 million from MetLife, Inc. F-88 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) DIVIDEND RESTRICTIONS The table below sets forth the dividends permitted to be paid to the Holding Company without insurance regulatory approval and dividends paid to the Holding Company:
2005 2006 2007 ----------------------- ----------------------- ------------- PERMITTED W/O PERMITTED W/O PERMITTED W/O COMPANY APPROVAL(1) PAID(2) APPROVAL(1) PAID(2) APPROVAL(3) ------- ------------- ------- ------------- ------- ------------- (IN MILLIONS) Metropolitan Life............ $880 $3,200 $863 $863 $919
-------- (1) Reflects dividend amounts paid during the relevant year without prior regulatory approval. (2) Includes amounts paid including those requiring regulatory approval. (3) Reflects dividend amounts that may be paid during 2007 without prior regulatory approval. If paid before a specified date during 2007, some or all of such dividend amounts may require regulatory approval. Under New York State Insurance Law, Metropolitan Life is permitted, without prior insurance regulatory clearance, to pay stockholder dividends to the Holding Company as long as the aggregate amount of all such dividends in any calendar year does not exceed the lesser of: (i) 10% of its surplus to policyholders as of the end of the immediately preceding calendar year; or (ii) its statutory net gain from operations for the immediately preceding calendar year (excluding realized capital gains). Metropolitan Life will be permitted to pay a cash dividend to the Holding Company in excess of the lesser of such two amounts only if it files notice of its intention to declare such a dividend and the amount thereof with the Superintendent and the Superintendent does not disapprove the distribution within 30 days of its filing. Under New York State Insurance Law, the Superintendent has broad discretion in determining whether the financial condition of a stock life insurance company would support the payment of such dividends to its shareholders. The New York State Department of Insurance (the "Department") has established informal guidelines for such determinations. The guidelines, among other things, focus on the insurer's overall financial condition and profitability under statutory accounting practices. Stockholder dividends or other distributions proposed to be paid by NELICO to its parent, Metropolitan Life, must be approved by the Massachusetts Commissioner of Insurance (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. Since NELICO's statutory unassigned funds surplus is less than zero, NELICO cannot pay any dividends without prior approval of the Commissioner. NELICO paid no common stockholder dividends for the years ended December 31, 2006, 2005 and 2004. For the years ended December 31, 2006, 2005 and 2004, Metropolitan Life received dividends from subsidiaries of $34 million, $77 million and $14 million, respectively. STOCK-BASED COMPENSATION PLANS Overview As described more fully in Note 1, effective January 1, 2006, in conjunction with the Holding Company, the Company adopted SFAS 123(r), using the modified prospective transition method. The adoption of SFAS 123(r) did not have a significant impact on the Company's consolidated financial position or consolidated results of operations. The stock-based compensation expense recognized by the Company is related to awards under incentive plans of the Holding Company, as described herein. F-89 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Description of Plans The MetLife, Inc. 2000 Stock Incentive Plan, as amended (the "Stock Incentive Plan"), authorized the granting of awards in the form of options to buy shares of Holding Company common stock ("Stock Options") that either qualify as incentive Stock Options under Section 422A of the Internal Revenue Code or are non-qualified. Under the MetLife, Inc. 2005 Stock and Incentive Compensation Plan, as amended (the "2005 Stock Plan"), awards granted may be in the form of Stock Options, Stock Appreciation Rights, Restricted Stock or Restricted Stock Units, Performance Shares or Performance Share Units, Cash-Based Awards, and Stock-Based Awards (each as defined in the 2005 Stock Plan). The Stock Incentive Plan, 2005 Stock Plan, and the LTPCP, as described below, are hereinafter collectively referred to as the "Incentive Plans." The aggregate number of shares of Holding Company common stock reserved for issuance under the 2005 Stock Plan and the LTPCP is 68,000,000, plus those shares available but not utilized under the Stock Incentive Plan and those shares utilized under the Stock Incentive Plan that are recovered due to forfeiture of Stock Options. Additional shares of Holding Company common stock carried forward from the Stock Incentive Plan and available for issuance under the 2005 Stock Plan were 12,423,881 as of December 31, 2006. Each share issued under the 2005 Stock Plan in connection with a Stock Option or Stock Appreciation Right reduces the number of shares remaining for issuance under that plan by one, and each share issued under the 2005 Stock Plan in connection with awards other than Stock Options or Stock Appreciation Rights reduces the number of shares remaining for issuance under that plan by 1.179 shares. As of December 31, 2006, the aggregate number of shares of Holding Company common stock remaining available for issuance pursuant to the 2005 Stock Plan was 66,712,241. Stock Option exercises and other stock-based awards to employees settled in shares are satisfied through the issuance of shares held in treasury by the Holding Company. The Company does not issue any of its own shares in satisfaction of stock-based compensation awards to employees. The Holding Company allocated 90%, 92% and 91% of stock-based compensation to the Company for the years ended December 31, 2006, 2005 and 2004, respectively. This allocation represents substantially all stock-based compensation recognized in the Company's consolidated results of operations. Accordingly, the discussion herein addresses the Holding Company's practices for recognizing expense for awards under the Incentive Plans. Underlying awards are expressed in their entirety with related expense amounts representing the resulting allocation to the Company. Compensation expense related to awards under the Incentive Plans is recognized based on the number of awards expected to vest, which represents the awards granted less expected forfeitures over the life of the award, as estimated at the date of grant. Unless a material deviation from the assumed rate is observed during the term in which the awards are expensed, any adjustment necessary to reflect differences in actual experience is recognized in the period the award becomes payable or exercisable. Compensation expense of $130 million, $112 million and $82 million, and income tax benefits of $46 million, $39 million and $29 million, related to the Incentive Plans was allocated to the Company for the years ended December 31, 2006, 2005 and 2004, respectively. Compensation expense is principally related to the issuance of Stock Options, Performance Shares and LTPCP arrangements. Stock Options All Stock Options granted had an exercise price equal to the closing price of the Holding Company's stock as reported on the New York Stock Exchange on the date of grant, and have a maximum term of ten years. Certain Stock Options granted under the Stock Incentive Plan and the 2005 Stock Plan have or will become exercisable over a three year period commencing with the date of grant, while other Stock Options have or will become exercisable three years after the date of grant. F-90 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) A summary of the activity related to Stock Options for the year ended December 31, 2006 is presented below. The aggregate intrinsic value was computed using the Holding Company's closing share price on December 29, 2006 of $59.01 and December 30, 2005 of $49.00, as applicable.
WEIGHTED WEIGHTED AVERAGE NUMBER OF AVERAGE REMAINING SHARES UNDER EXERCISE PRICE CONTRACTUAL AGGREGATE OPTION PER SHARE TERM INTRINSIC VALUE ------------ -------------- ----------- --------------- (YEARS) (IN MILLIONS) Outstanding at January 1, ........ 24,304,315 $31.83 6.69 $417 ====== ==== ==== Granted......................... 3,758,955 $50.21 Exercised....................... (2,754,390) $30.00 Cancelled/Expired............... (153,494) $32.04 Forfeited....................... (341,403) $37.14 ---------- Outstanding at December 31, ...... 24,813,983 $34.69 6.58 $604 ========== ====== ==== ==== Aggregate number of stock options expected to vest at December 31, 2006............................ 24,312,689 $34.49 6.54 $596 ========== ====== ==== ==== Exercisable, December 31, 2006.... 16,957,320 $30.66 5.72 $481 ========== ====== ==== ====
Prior to January 1, 2005, the Black-Scholes model was used to determine the fair value of Stock Options granted and recognized in the financial statements or as reported in the pro forma disclosure which follows. The fair value of Stock Options issued on or after January 1, 2005 was estimated on the date of grant using a binomial lattice model. The Holding Company made this change because lattice models produce more accurate option values due to the ability to incorporate assumptions about grantee exercise behavior resulting from changes in the price of the underlying shares. In addition, lattice models allow for changes in critical assumptions over the life of the option in comparison to closed-form models like Black-Scholes, which require single-value assumptions at the time of grant. The Holding Company used daily historical volatility since the inception of trading when calculating Stock Option values using the Black-Scholes model. In conjunction with the change to the binomial lattice model, the Holding Company began estimating expected future volatility based upon an analysis of historical prices of the Holding Company's common stock and call options on that common stock traded on the open market. The Holding Company uses a weighted-average of the implied volatility for publicly traded call options with the longest remaining maturity nearest to the money as of each valuation date and the historical volatility, calculated using monthly closing prices of the Holding Company's common stock. The Holding Company chose a monthly measurement interval for historical volatility as it believes this better depicts the nature of employee option exercise decisions being based on longer-term trends in the price of the underlying shares rather than on daily price movements. The risk-free rate is based on observed interest rates for instruments with maturities similar to the expected term of the Stock Options. Whereas the Black- Scholes model requires a single spot rate for instruments with a term matching the expected life of the option at the valuation date, the binomial lattice model allows for the use of different rates for each year over the contractual term of the option. The table below presents the full range of imputed forward rates for U.S. Treasury Strips that was used in the binomial lattice model over the contractual term of all Stock Options granted in the period. Dividend yield is determined based on historical dividend distributions compared to the price of the underlying common stock as of the valuation date and held constant over the life of the Stock Option. F-91 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Use of the Black-Scholes model requires an input of the expected life of the Stock Options, or the average number of years before Stock Options will be exercised or expired. The Holding Company estimated expected life using the historical average years to exercise or cancellation and average remaining years outstanding for vested Stock Options. Alternatively, the binomial model used by the Holding Company incorporates the contractual term of the Stock Options and then considers expected exercise behavior and a post-vesting termination rate, or the rate at which vested options are exercised or expire prematurely due to termination of employment, to derive an expected life. The post-vesting termination rate is determined from actual historical exercise and expiration activity under the Incentive Plans. Exercise behavior in the binomial lattice model used by the Holding Company is expressed using an exercise multiple, which reflects the ratio of exercise price to the strike price of Stock Options granted at which holders of the Stock Options are expected to exercise. The exercise multiple is derived from actual historical exercise activity. The following weighted average assumptions, with the exception of risk-free rate, which is expressed as a range, were used to determine the fair value of Stock Options issued during the:
YEARS ENDED DECEMBER 31, ---------------------------------- 2006 2005 2004 ----------- ----------- ------ Dividend yield.............................. 1.04% 1.19% 0.70% Risk-free rate of return.................... 4.17%-4.96% 3.34%-5.41% 3.69% Expected volatility......................... 22.00% 23.24% 34.85% Exercise multiple........................... 1.52 1.48 N/A Post-vesting termination rate............... 4.09% 5.19% N/A Contractual term (years).................... 10 10 10 Expected Life (years)....................... 6 6 6 Weighted average exercise price of stock options granted........................... $50.21 $38.70 $35.28 Weighted average fair value of stock options granted................................... $13.84 $10.09 $13.25
Compensation expense related to Stock Option awards expected to vest and granted prior to January 1, 2006 is recognized ratably over the requisite service period, which equals the vesting term. Compensation expense related to Stock Option awards expected to vest and granted on or after January 1, 2006 is recognized ratably over the requisite service period or the period to retirement eligibility, if shorter. Compensation expense of $51 million, $47 million and $37 million related to Stock Options was allocated to the Company for the years ended December 31, 2006, 2005 and 2004, respectively. Had compensation expense for grants awarded prior to January 1, 2003 been determined based on the fair value at the date of grant rather than the intrinsic value method, the Company's earnings would have been reduced to the following pro forma amounts for the following:
YEARS ENDED DECEMBER 31, --------------- 2005 2004 ------ ------ (IN MILLIONS) Net income................................................ $3,253 $2,239 Add: Stock option-based employee compensation expense included in reported net income, net of income tax..... 30 24 Deduct: Total stock option-based employee compensation determined under fair value based method for all awards, net of income tax............................... (32) (42) ------ ------ Pro forma net income...................................... $3,251 $2,221 ====== ======
F-92 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) As of December 31, 2006, the Holding Company had $41 million of total unrecognized compensation costs related to Stock Options. It is expected that these costs will be recognized over a weighted average period of 1.67 years. The Company's allocated portion of Stock Option expense is 91%. This allocated percentage of Stock Option expense is not expected to significantly change. Performance Shares Beginning in 2005, the Holding Company awarded certain members of management Performance Shares under (and as defined in) the 2005 Stock Plan. Participants are awarded an initial target number of Performance Shares with the final number of Performance Shares payable being determined by the product of the initial target multiplied by a factor of 0.0 to 2.0. The factor applied is based on measurements of the Holding Company's performance with respect to: (i) the change in annual net operating earnings per share, as defined; and (ii) the proportionate total shareholder return, as defined, with reference to the three- year performance period relative to other companies in the S&P Insurance Index with reference to the same three-year period. Performance Share awards will normally vest in their entirety at the end of the three-year performance period (subject to certain contingencies) and will be payable entirely in shares of the Holding Company's common stock. The following is a summary of Performance Share activity for the year ended December 31, 2006:
WEIGHTED AVERAGE PERFORMANCE GRANT DATE SHARES FAIR VALUE ----------- ---------- Outstanding at January 1, 2006........................ 1,029,700 $36.87 Granted............................................. 884,875 $48.43 Forfeited........................................... (65,000) $41.37 --------- Outstanding at December 31, 2006...................... 1,849,575 $42.24 ========= Performance Shares expected to vest at December 31, 2006................................................ 1,820,742 $42.16 =========
Performance Share amounts above represent aggregate initial target awards and do not reflect potential increases or decreases resulting from the final performance factor to be determined at the end of the respective performance period. None of the Performance Shares vested during the year ended December 31, 2006. Performance Share awards are accounted for as equity awards but are not credited with dividend-equivalents for actual dividends paid on the Holding Company's common stock during the performance period. Accordingly, the fair value of Performance Shares is based upon the closing price of the Holding Company's common stock on the date of grant, reduced by the present value of estimated dividends to be paid on that stock during the performance period. Compensation expense related to initial Performance Shares granted prior to January 1, 2006 and expected to vest is recognized ratably during the performance period. Compensation expense related to initial Performance Shares granted on or after January 1, 2006 and expected to vest is recognized ratably over the performance period or the period to retirement eligibility, if shorter. Performance Shares expected to vest and the related compensation expenses may be further adjusted by the performance factor most likely to be achieved, as estimated by management, at the end of the performance period. Compensation expense of $67 million and $22 million, related to Performance Shares was allocated to the Company for the years ended December 31, 2006 and 2005, respectively. As of December 31, 2006, the Holding Company had $59 million of total unrecognized compensation costs related to Performance Share awards. It is expected that these costs will be recognized over a weighted average F-93 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) period of 1.59 years. The Company's allocated portion of Performance Share expense was 90%. This allocated percentage of Performance Share expense is not expected to significantly change. Long-Term Performance Compensation Plan Prior to January 1, 2005, the Holding Company granted stock-based compensation to certain members of management under the LTPCP. Each participant was assigned a target compensation amount (an "Opportunity Award") at the inception of the performance period with the final compensation amount determined based on the total shareholder return on the Holding Company's common stock over the three-year performance period, subject to limited further adjustment approved by the Holding Company's Board of Directors. Payments on the Opportunity Awards are normally payable in their entirety (subject to certain contingencies) at the end of the three-year performance period, and may be paid in whole or in part with shares of the Holding Company's common stock, as approved by the Holding Company's Board of Directors. There were no new grants under the LTPCP during the years ended December 31, 2006 and 2005. A portion of each Opportunity Award under the LTPCP is expected to be settled in shares of the Holding Company's common stock while the remainder will be settled in cash. The portion of the Opportunity Award expected to be settled in shares of the Holding Company's common stock is accounted for as an equity award with the fair value of the award determined based upon the closing price of the Holding Company's common stock on the date of grant. The compensation expense associated with the equity award, based upon the grant date fair value, is recognized into expense ratably over the respective three-year performance period. The portion of the Opportunity Award expected to be settled in cash is accounted for as a liability and is remeasured using the closing price of the Holding Company's common stock on the final day of each subsequent reporting period during the three-year performance period. Compensation expense of $12 million, $43 million and $45 million, related to LTPCP Opportunity Awards was allocated to the Company the years ended December 31, 2006, 2005 and 2004, respectively. The Holding Company had LTPCP Opportunity Awards with an aggregate fair value of $41 million outstanding at December 31, 2006, all of which has been recognized. The Company's allocated portion of LTPCP expense is 90%. This allocated percentage of LTPCP expense is not expected to significantly change. 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. Each of the Company's U.S. insurance subsidiaries 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 Metropolitan Life and its insurance subsidiaries. Statutory accounting principles differ from GAAP primarily by charging policy acquisition costs to expense as incurred, establishing future policy benefit liabilities using different actuarial assumptions, reporting surplus notes as surplus instead of debt and valuing securities on a different basis. F-94 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Statutory net income of Metropolitan Life, a New York domiciled insurer, was $1.0 billion, $2.2 billion and $2.6 billion for the years ended December 31, 2006, 2005 and 2004, respectively. Statutory capital and surplus, as filed with the Department, was $9.2 billion and $8.8 billion at December 31, 2006 and 2005, respectively. Due to the mergers of Paragon and CLIC with Metropolitan Life, the 2005 statutory net income and statutory capital and surplus balances were adjusted. OTHER COMPREHENSIVE INCOME (LOSS) The following table sets forth the reclassification adjustments required for the years ended December 31, 2006, 2005 and 2004 in other comprehensive income (loss) that are included as part of net income for the current year that have been reported as a part of other comprehensive income (loss) in the current or prior year:
YEARS ENDED DECEMBER 31, ----------------------- 2006 2005 2004 ----- ------- ----- (IN MILLIONS) Holding gains (losses) on investments arising during the year.......................................... $(926) $(2,611) $ 795 Income tax effect of holding gains (losses)......... 324 984 (281) Reclassification adjustments: Recognized holding (gains) losses included in current year income............................ 403 241 (511) Amortization of premiums and accretion of discounts associated with investments.......... (443) (186) (3) Income tax effect................................. 14 (21) 185 Allocation of holding losses on investments relating to other policyholder amounts..................... 792 1,580 (284) Income tax effect of allocation of holding losses to other policyholder amounts.............................. (277) (596) 102 Unrealized investment gains of subsidiary at date of sale.............................................. -- 15 -- Deferred income tax on unrealized investment gains of subsidiary at date of sale................................... -- (5) -- ----- ------- ----- Net unrealized investment gains (losses)............ (113) (599) 3 ----- ------- ----- Foreign currency translation adjustments arising during the year................................... 7 (54) 79 Foreign currency translation adjustments of subsidiary at due date of sale................... -- 5 -- ----- ------- ----- Foreign currency translation adjustment............. 7 (49) 79 Minimum pension liability adjustment................ (18) 89 (2) ----- ------- ----- Other comprehensive income (loss)................... $(124) $ (559) $ 80 ===== ======= =====
F-95 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 17. OTHER EXPENSES Information on other expenses is as follows:
YEARS ENDED DECEMBER 31, --------------------------- 2006 2005 2004 ------- ------- ------- (IN MILLIONS) Compensation..................................... $ 2,187 $ 2,284 $ 2,242 Commissions...................................... 1,701 1,334 1,782 Interest and debt issue cost..................... 332 245 183 Amortization of DAC and VOBA..................... 1,089 1,385 1,145 Capitalization of DAC............................ (1,677) (1,619) (1,817) Rent, net of sublease income..................... 201 227 216 Minority interest................................ 249 181 168 Insurance tax.................................... 527 417 343 Other............................................ 1,705 1,263 1,321 ------- ------- ------- Total other expenses........................... $ 6,314 $ 5,717 $ 5,583 ======= ======= =======
As discussed in Note 8, the Company recognized an expense related to the recapture of a reinsurance treaty by an affiliate for the year ended December 31, 2006. For the year ended December 31, 2005, the Company entered into a reinsurance agreement with an affiliate and it received a ceding commission which is included in the table above. 18. BUSINESS SEGMENT INFORMATION The Company is a leading provider of insurance and other financial services with operations throughout the United States and Canada. The Company's business is divided into three operating segments: Institutional, Individual and Reinsurance, as well as Corporate & Other. These segments are managed separately because they either provide different products and services, require different strategies or have different technology requirements. In connection with the Travelers acquisition by the Holding Company, management has utilized its economic capital model to evaluate the deployment of capital based upon the unique and specific nature of the risks inherent in the Company's existing and newly acquired businesses and has adjusted such allocations based upon this model. Economic capital is an internally developed risk capital model, the purpose of which is to measure the risk in the business and to provide a basis upon which capital is deployed. The economic capital model accounts for the unique and specific nature of the risks inherent in Company's businesses. As a part of the economic capital process, a portion of net investment income is credited to the segments based on the level of allocated equity. Institutional offers a broad range of group insurance and retirement & savings products and services, including group life insurance, non-medical health insurance, such as short and long-term disability, long-term care, and dental insurance, and other insurance products and services. Individual offers a wide variety of protection and asset accumulation products, including life insurance, annuities and mutual funds. Through the Company's majority-owned subsidiary, RGA, the Reinsurance segment provides reinsurance of life and annuity policies in North America and various international markets. Additionally, reinsurance of critical illness policies is provided in select international markets. Corporate & Other contains the excess capital not allocated to the business segments, various start-up entities and run-off entities, the Company's ancillary international operations consisting of the Company's Canadian branch and a joint venture in China, as well as interest expense related to the majority of the Company's outstanding debt and expenses associated with certain legal proceedings and income tax audit issues. Corporate & Other also includes the elimination of all intersegment amounts, which generally relate to F-96 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) intersegment loans, which bear interest rates commensurate with related borrowings, as well as intersegment transactions. Additionally, the Company's asset management business, including amounts reported as discontinued operations, is included in the results of operations for Corporate & Other. See Note 19 for disclosures regarding discontinued operations, including real estate. Set forth in the tables below is certain financial information with respect to the Company's segments, as well as Corporate & Other, for the years ended December 31, 2006, 2005 and 2004. The accounting policies of the segments are the same as those of the Company, except for the method of capital allocation and the accounting for gains (losses) from intercompany sales, which are eliminated in consolidation. The Company allocates equity to each segment based upon the economic capital model that allows the Company to effectively manage its capital. The Company evaluates the performance of each segment based upon net income excluding net investment gains (losses), net of income tax, adjustments related to net investment gains (losses), net of income tax, the impact from the cumulative effect of changes in accounting, net of income tax and discontinued operations, other than discontinued real estate, net of income tax. The Company allocates certain non-recurring items, such as expenses associated with certain legal proceedings, to Corporate & Other.
CORPORATE & FOR THE YEAR ENDED DECEMBER 31, 2006 INSTITUTIONAL INDIVIDUAL REINSURANCE OTHER TOTAL ------------------------------------ ------------- ---------- ----------- ----------- -------- (IN MILLIONS) STATEMENT OF INCOME: Premiums............................ $ 11,801 $ 4,129 $ 4,348 $ 6 $ 20,284 Universal life and investment-type product policy fees............... 750 1,433 -- -- 2,183 Net investment income............... 5,817 5,481 732 277 12,307 Other revenues...................... 677 114 66 33 890 Net investment gains (losses)....... (348) (394) 7 (92) (827) Policyholder benefits and claims.... 12,918 4,712 3,490 17 21,137 Interest credited to policyholder account balances.................. 1,944 1,049 254 -- 3,247 Policyholder dividends.............. -- 1,669 -- 2 1,671 Other expenses...................... 2,483 2,213 1,227 391 6,314 -------- -------- ------- ------- -------- Income (loss) from continuing operations before provision (benefit) for income tax......... 1,352 1,120 182 (186) 2,468 Provision (benefit) for income tax.. 446 400 64 (270) 640 Income (loss) from discontinued operations, net of income tax..... 41 18 -- 39 98 Cumulative effect of a change in accounting, net of income tax..... -- -- -- -- -- -------- -------- ------- ------- -------- Net income.......................... $ 947 $ 738 $ 118 $ 123 $ 1,926 ======== ======== ======= ======= ======== BALANCE SHEET: Total assets........................ $157,673 $150,617 $18,818 $12,950 $340,058 DAC and VOBA........................ $ 1,205 $ 7,677 $ 3,152 $ 9 $ 12,043 Separate account assets............. $ 44,546 $ 36,403 $ 16 $ -- $ 80,965 Policyholder liabilities............ $ 86,359 $ 86,473 $13,332 $ 325 $186,489 Separate account liabilities........ $ 44,546 $ 36,403 $ 16 $ -- $ 80,965
F-97 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CORPORATE & FOR THE YEAR ENDED DECEMBER 31, 2005 INSTITUTIONAL INDIVIDUAL REINSURANCE OTHER TOTAL ------------------------------------ ------------- ---------- ----------- ----------- -------- (IN MILLIONS) STATEMENT OF INCOME: Premiums............................ $ 11,271 $ 4,113 $ 3,869 $ 3 $ 19,256 Universal life and investment-type product policy fees............... 753 1,193 -- 2 1,948 Net investment income............... 5,232 5,555 606 336 11,729 Other revenues...................... 642 92 58 28 820 Net investment gains (losses)....... 76 83 22 (2) 179 Policyholder benefits and claims.... 12,448 4,823 3,206 (32) 20,445 Interest credited to policyholder account balances.................. 1,347 1,029 220 -- 2,596 Policyholder dividends.............. 1 1,644 -- 2 1,647 Other expenses...................... 2,199 2,173 991 354 5,717 -------- -------- ------- ------- -------- Income (loss) from continuing operations before provision (benefit) for income tax......... 1,979 1,367 138 43 3,527 Provision (benefit) for income tax.. 662 487 46 (97) 1,098 Income (loss) from discontinued operations, net of income tax..... 174 296 -- 354 824 Cumulative effect of a change in accounting, net of income tax..... -- -- -- -- -- -------- -------- ------- ------- -------- Net income.......................... $ 1,491 $ 1,176 $ 92 $ 494 $ 3,253 ======== ======== ======= ======= ======== BALANCE SHEET: Total assets........................ $139,680 $140,413 $16,049 $11,184 $307,326 DAC and VOBA........................ $ 1,098 $ 7,513 $ 2,815 $ 12 $ 11,438 Separate account assets............. $ 42,063 $ 31,075 $ 14 $ -- $ 73,152 Policyholder liabilities............ $ 78,011 $ 86,565 $11,751 $ 278 $176,605 Separate account liabilities........ $ 42,063 $ 31,075 $ 14 $ -- $ 73,152
F-98 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CORPORATE & FOR THE YEAR ENDED DECEMBER 31, 2004 INSTITUTIONAL INDIVIDUAL REINSURANCE OTHER TOTAL ------------------------------------ ------------- ---------- ----------- ----------- ------- (IN MILLIONS) STATEMENT OF INCOME: Premiums............................. $10,037 $4,046 $3,348 $ 6 $17,437 Universal life and investment-type product policy fees................ 710 1,299 -- -- 2,009 Net investment income................ 4,564 5,348 538 345 10,795 Other revenues....................... 654 131 56 21 862 Net investment gains (losses)........ 162 85 59 (24) 282 Policyholder benefits and claims..... 11,172 4,836 2,694 34 18,736 Interest credited to policyholder account balances................... 1,014 1,131 212 -- 2,357 Policyholder dividends............... -- 1,634 1 1 1,636 Other expenses....................... 1,972 2,348 957 306 5,583 ------- ------ ------ ----- ------- Income (loss) from continuing operations before provision (benefit) for income tax........... 1,969 960 137 7 3,073 Provision (benefit) for income tax... 671 312 46 (161) 868 Income (loss) from discontinued operations, net of income tax...... 28 25 -- 33 86 Cumulative effect of a change in accounting, net of income tax...... (59) 9 -- (2) (52) ------- ------ ------ ----- ------- Net income........................... $ 1,267 $ 682 $ 91 $ 199 $ 2,239 ======= ====== ====== ===== =======
Net investment income and net investment gains (losses) are based upon the actual results of each segment's specifically identifiable asset portfolio adjusted for allocated equity. Other costs are allocated to each of the segments based upon: (i) a review of the nature of such costs; (ii) time studies analyzing the amount of employee compensation costs incurred by each segment; and (iii) cost estimates included in the Company's product pricing. Revenues derived from any customer did not exceed 10% of consolidated revenues for the years ended December 31, 2006, 2005 and 2004. Revenues from U.S. operations were $33.0 billion, $32.4 billion and $29.5 billion for the years ended December 31, 2006, 2005 and 2004, respectively, which represented 95%, 95% and 94%, respectively, of consolidated revenues. 19. DISCONTINUED OPERATIONS REAL ESTATE The Company actively manages its real estate portfolio with the objective of maximizing earnings through selective acquisitions and dispositions. Income related to real estate classified as held-for-sale or sold is presented in discontinued operations. These assets are carried at the lower of depreciated cost or fair value less expected disposition costs. F-99 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The following information presents the components of income from discontinued real estate operations:
YEARS ENDED DECEMBER 31, --------------------- 2006 2005 2004 ---- ------ ----- (IN MILLIONS) Investment income.................................... $ 26 $ 134 $ 227 Investment expense................................... (15) (73) (139) Net investment gains................................. 91 961 27 ---- ------ ----- Total revenues..................................... 102 1,022 115 Provision for income tax............................. 36 366 39 ---- ------ ----- Income from discontinued operations, net of income tax............................................. $ 66 $ 656 $ 76 ==== ====== =====
There was no real estate classified as held-for-sale at December 31, 2006. The carrying value of real estate related to discontinued operations was $309 million at December 31, 2005. The following table presents the discontinued real estate operations by segment:
YEARS ENDED DECEMBER 31, ---------------------- 2006 2005 2004 ---- ---- ---- (IN MILLIONS) Net investment income Institutional........................................ $ 6 $ 28 $37 Individual........................................... 4 20 30 Corporate & Other.................................... 1 13 21 --- ---- --- Total net investment income....................... $11 $ 61 $88 === ==== === Net investment gains (losses) Institutional........................................ $58 $242 $ 9 Individual........................................... 23 443 4 Corporate & Other.................................... 10 276 14 --- ---- --- Total net investment gains (losses)............... $91 $961 $27 === ==== ===
In the second quarter of 2005, the Company sold its One Madison Avenue property in Manhattan, New York for $918 million resulting in a gain, net of income tax, of $431 million. Net investment income on One Madison Avenue was $13 million and $44 million, respectively, for the years ended December 31, 2005 and 2004. OPERATIONS On September 29, 2005, the Company completed the sale of MetLife Indonesia to a third party, resulting in a gain upon disposal of $10 million, net of income tax. As a result of this sale, the Company recognized income (loss) from discontinued operations of $5 million and ($9) million, net of income tax, for the years ended December 31, 2005 and 2004, respectively. The Company reclassified the operations of MetLife Indonesia into discontinued operations for all years presented. F-100 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The following table presents the amounts related to the operations of MetLife Indonesia that have been combined with the discontinued real estate operations in the consolidated statements of income:
YEARS ENDED DECEMBER 31, ------------------- 2005 2004 ------- ------- (IN MILLIONS) Revenues............................................... $ 5 $ 5 Expenses............................................... 10 14 --- --- Income before provision for income tax................. (5) (9) Provision for income tax............................... -- -- --- --- Loss from discontinued operations, net of income tax............................................... (5) (9) Net investment gain, net of income tax................. 10 -- --- --- Income (loss) from discontinued operations, net of income tax........................................ $ 5 $(9) === ===
On January 31, 2005, the Company completed the sale of SSRM to a third party for $328 million in cash and stock. As a result of the sale of SSRM, the Company recognized income from discontinued operations of $157 million, net of income tax, comprised of a realized gain of $165 million, net of income tax, and an operating expense related to a lease abandonment of $8 million, net of income tax. Under the terms of the sale agreement, MetLife will have an opportunity to receive additional payments based on, among other things, certain revenue retention and growth measures. The purchase price is also subject to reduction over five years, depending on retention of certain Company-related business. Also under the terms of such agreement, the Company had the opportunity to receive additional consideration for the retention of certain customers for a specific period in 2005. Upon finalization of the computation, the Company received payments of $30 million, net of income tax, in the second quarter of 2006 and $12 million, net of income tax, in the fourth quarter of 2005 due to the retention of these specific customer accounts. In the fourth quarter of 2006, the Company eliminated $4 million of a liability that was previously recorded with respect to the indemnities provided in connection with the sale of SSRM, resulting in a benefit to the Company of $2 million, net of income tax. The Company believes that future payments relating to these indemnities are not probable. The Company reported the operations of SSRM in discontinued operations. Additionally, the sale of SSRM resulted in the elimination of the Company's Asset Management segment. The Company's discontinued operations for the year ended December 31, 2005 included expenses of $6 million, net of income tax, related to the sale of SSRM. F-101 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The operations of SSRM include affiliated revenues of $5 million and $59 million for the years ended December 31, 2005 and 2004, respectively, related to asset management services provided by SSRM to the Company that have not been eliminated from discontinued operations as these transactions continued after the sale of SSRM. The following table presents the amounts related to operations of SSRM that have been combined with the discontinued real estate operations in the consolidated statements of income:
YEARS ENDED DECEMBER 31, ---------------------- 2006 2005 2004 ---- ---- ---- (IN MILLIONS) Revenues.............................................. $-- $ 19 $328 Expenses.............................................. -- 38 296 --- ---- ---- Income before provision for income tax................ -- (19) 32 Provision for income tax.............................. -- (5) 13 --- ---- ---- Income (loss) from discontinued operations, net of income tax....................................... -- (14) 19 Net investment gain, net of income tax................ 32 177 -- --- ---- ---- Income from discontinued operations, net of income tax.............................................. $32 $163 $ 19 === ==== ====
F-102 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 20. FAIR VALUE INFORMATION The estimated fair value of financial instruments have been determined by using available market information and the valuation methodologies described below. Considerable judgment is often required in interpreting market data to develop estimates of fair value. Accordingly, the estimates presented herein may not necessarily be indicative of amounts that could be realized in a current market exchange. The use of different assumptions or valuation methodologies may have a material effect on the estimated fair value amounts. Amounts related to the Company's financial instruments are as follows:
NOTIONAL CARRYING ESTIMATED AMOUNT VALUE FAIR VALUE -------- -------- ---------- (IN MILLIONS) DECEMBER 31, 2006 Assets: Fixed maturity securities..................... $162,385 $162,385 Trading securities............................ $ 563 $ 563 Equity securities............................. $ 3,487 $ 3,487 Mortgage and consumer loans................... $ 35,939 $ 36,184 Policy loans.................................. $ 8,587 $ 8,587 Short-term investments........................ $ 1,244 $ 1,244 Cash and cash equivalents..................... $ 1,455 $ 1,455 Accrued investment income..................... $ 2,328 $ 2,328 Mortgage loan commitments..................... $3,290 $ -- $ -- Commitments to fund bank credit facilities and bridge loans............................... $1,662 $ -- $ -- Liabilities: Policyholder account balances................. $ 69,198 $ 66,965 Short-term debt............................... $ 833 $ 833 Long-term debt................................ $ 3,219 $ 3,364 Junior subordinated debt securities........... $ 399 $ 400 Shares subject to mandatory redemption........ $ 278 $ 357 Payables for collateral under securities loaned and other transactions.............. $ 32,119 $ 32,119
F-103 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTIONAL CARRYING ESTIMATED AMOUNT VALUE FAIR VALUE -------- -------- ---------- (IN MILLIONS) DECEMBER 31, 2005 Assets: Fixed maturity securities..................... $147,897 $147,897 Trading securities............................ $ 373 $ 373 Equity securities............................. $ 2,217 $ 2,217 Mortgage and consumer loans................... $ 33,094 $ 33,710 Policy loans.................................. $ 8,412 $ 8,412 Short-term investments........................ $ 883 $ 883 Cash and cash equivalents..................... $ 1,787 $ 1,787 Accrued investment income..................... $ 2,030 $ 2,030 Mortgage loan commitments..................... $2,603 $ -- $ (3) Commitments to bank credit facilities and bridge loans............................... $ 323 $ -- $ -- Liabilities: Policyholder account balances................. $ 61,700 $ 60,749 Short-term debt............................... $ 453 $ 453 Long-term debt................................ $ 2,562 $ 2,840 Junior subordinated debt securities........... $ 399 $ 406 Shares subject to mandatory redemption........ $ 278 $ 362 Payables for collateral under securities loaned and other transactions.............. $ 21,009 $ 21,009
The methods and assumptions used to estimate the fair value of financial instruments are summarized as follows: FIXED MATURITY SECURITIES, TRADING 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 based on available market information and judgments about financial instruments, including estimates of the timing and amounts of expected future cash flows and the credit standing of the issuer or counterparty. Factors considered in estimating fair value include; coupon rate, maturity, estimated duration, call provisions, sinking fund requirements, credit rating, industry sector of the issuer, and quoted market prices of comparable securities. MORTGAGE AND CONSUMER LOANS, MORTGAGE LOAN COMMITMENTS, AND COMMITMENTS TO FUND BANK CREDIT FACILITIES AND BRIDGE LOANS Fair values for mortgage and consumer loans are estimated by discounting expected future cash flows, using current interest rates for similar loans with similar credit risk. For mortgage loan commitments and commitments to fund bank credit facilities and bridge loans, the estimated fair value is the net premium or discount of the commitments. F-104 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) POLICY LOANS The carrying values for policy loans approximate fair value. CASH AND CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS The carrying values for cash and cash equivalents and short-term investments approximated fair values due to the short-term maturities of these instruments. ACCRUED INVESTMENT INCOME The carrying value for accrued investment income approximates fair value. POLICYHOLDER ACCOUNT BALANCES The fair value of PABs which have final contractual maturities are estimated by discounting expected future cash flows based upon interest rates currently being offered for similar contracts with maturities consistent with those remaining for the agreements being valued. The fair value of PABs without final contractual maturities are assumed to equal their current net surrender value. SHORT-TERM AND LONG-TERM DEBT, JUNIOR SUBORDINATED DEBT SECURITIES AND SHARES SUBJECT TO MANDATORY REDEMPTION The fair values of short-term and long-term debt, junior subordinated debt securities, and shares subject to mandatory redemption are determined by discounting expected future cash flows using risk rates currently available for debt with similar terms and remaining maturities. PAYABLES FOR COLLATERAL UNDER SECURITIES LOANED AND OTHER TRANSACTIONS The carrying value for payables for collateral under securities loaned and other transactions approximates fair value. DERIVATIVE FINANCIAL INSTRUMENTS The fair value of derivative financial instruments, including financial futures, financial forwards, interest rate, credit default and foreign currency swaps, foreign currency forwards, caps, floors, and options are based upon quotations obtained from dealers or other reliable sources. See Note 4 for derivative fair value disclosures. 21. RELATED PARTIES MetLife Group, Incorporated, a wholly owned subsidiary of the Holding Company, was formed as a personnel services company to provide personnel, as needed, to support the activities of the Company. Charges for these services were approximately $1.9 billion, $1.9 billion and $1.7 billion in 2006, 2005 and 2004, respectively. As of December 31, 2006 and 2005, the Company held $222 million and $103 million, respectively, of assets in the Metropolitan Money Market Pool, an affiliated partnership. These amounts are recorded as short-term investments on the consolidated balance sheets of the Company. Net investment income from these invested assets was $10 million, $6 million and $4 million for the years ended December 31, 2006, 2005 and 2004, respectively. The MetLife Intermediate Income Pool (the "MIIP") was formed as a New York general partnership consisting solely of U.S. domestic insurance companies owned directly or indirectly by MetLife, Inc. and F-105 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) is managed by Metropolitan Life. Each partner's investment in the MIIP represents such partner's pro rata ownership interest in the pool. The affiliated companies' ownership interests in the pooled money market securities held by the MIIP was $210 million and $198 million as of December 31, 2006 and 2005 respectively. Net investment income allocated to affiliates from the MIIP was $8 million, $7 million, and $9 million for the years ended December 31, 2006, 2005 and 2004, respectively. In the normal course of business, the Company transfers invested assets, primarily consisting of fixed maturity securities, to and from affiliates. Assets transferred to and from affiliates are as follows:
YEARS ENDED DECEMBER 31, ------------------ 2006 2005 2004 ---- ---- ---- (IN MILLIONS) Fair market value of assets transferred to affiliates.. $ 97 $762 $382 Amortized cost of assets transferred to affiliates..... $ 99 $723 $367 Net investment gains (losses) recognized on transfers.. $ (2) $ 39 $ 15 Fair market value of assets transferred from affiliates........................................... $307 $691 $849
See Notes 3 and 8 for additional related party transactions. 22. SUBSEQUENT EVENTS On March 9, 2007, RGA issued $300 million of 10-year senior notes with a fixed rate of 5.625%, payable semiannually. RGA expects to use the net proceeds of the offering to repay $50 million of indebtedness under a bank credit facility and for general corporate purposes. F-106 PART II OTHER INFORMATION ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS (a) FINANCIAL STATEMENTS The following financial statements are included in Part B of this Post-Effective Amendment on Form N-4: Metropolitan Life Separate Account E Independent Registered Public Accounting Firm's Report Financial Statements for the Years Ended December 31, 2005 and 2006 Statements of Assets and Liabilities Statements of Operations Statements of Changes in Net Assets Notes to Financial Statements Metropolitan Life Insurance Company Independent Registered Public Accounting Firm's Report Financial Statements for the Years Ended December 31, 2006, 2005 and 2004 Consolidated Balance Sheets Consolidated Statements of Income Consolidated Statements of Cash Flow Consolidated Statements of Equity Notes to Consolidated Financial Statements (b) EXHIBITS (1) -- Resolution of the Board of Directors of Metropolitan Life establishing Separate Account E.(1) (2) -- Not applicable. (3) (a) -- Not applicable. (b) -- Form of Metropolitan Life Insurance Company Sales Agreement.(2) (b)(i) -- Form of Retail Sales Agreement (MLIDC Retail Sales Agreement 7-1-05) (LTC)(6) (c) -- Participation Agreement--American Funds Insurance Series(3) (d) -- Participation Agreement--Met Investors Series Trust(4) (4) (a) -- Form of Single Premium Variable Immediate Income Annuity Certificate (Group Version)(G. 4333-28).(2) (b) -- Single Premium Variable Immediate Income Annuity Non-Qualified Tax Endorsement.(2) (c) -- Single Premium Variable Immediate Income Annuity SIMPLE/IRA Tax Endorsement.(2) (d) -- Single Premium Variable Immediate Income Annuity Traditional IRA/SEP Tax Endorsement.(2) (e) -- Single Premium Variable Immediate Income Annuity 403(b) Tax Disclosure Statement.(2) (f) -- Single Premium Variable Immediate Income Annuity 457(b) Tax Disclosure Statement.(2) (g) -- Single Premium Variable Immediate Income Annuity 401(a)/401(k)/ Keogh Tax Disclosure Statement.(2) (h) -- Single Premium Variable Immediate Income Annuity 403(a) Tax Disclosure Statement.(2) (5) (a) -- Application Form for MetLife Retirement Income Optimizer.(2) (5) (b) -- MetLife Personal Income Plus Application (Form G. 20391)(7) (6) (a) -- Amended and Restated By-Laws of Metropolitan Life Insurance Company.(5) (6) (b) -- Amended and Restated Charter of Metropolitan Life Insurance Company.(4) (7) -- Not applicable. (8) -- Not applicable. (9) -- Opinion and consent of counsel as to the legality of the securities being registered.(8)
II-1 (10) -- Consent of Deloitte & Touche(7) (11) -- Not applicable. (12) -- Not applicable. (13) (a) -- Powers of Attorney.(7)
--------------- 1. Filed with Post-Effective Amendment No. 19 to Registration Statement No. 002-90380 for Metropolitan Life Separate Account E on Form N-4 on February 27, 1996. As incorporated herein by reference. 2. Filed with Post-Effective Amendment No. 30 to Registration Statement No. 002-90380 for Metropolitan Life Separate Account E on Form N-4 on October 22, 2003. As incorporated herein by reference. 3. Filed with Pre-Effective Amendment No. 1 to Registration Statement No. 333-52366 for Metropolitan Life Separate Account E on Form N-4 on August 3, 2001. As incorporated herein by reference. 4. Filed with Registration Statement No. 333-83716/811-4001 for Metropolitan Life Separate Account E on Form N-4 on March 5, 2002. As incorporated herein by reference. 5. Filed with Registration Statement No. 333-122883 for Metropolitan Life Separate Account E on Form N-4 on February 17, 2005. As incorporated herein by reference. 6. Filed with Post Effective Amendment No. 13 to Registration Statement No. 333-52366/811-4001 for Metropolitan Life Separate Account E on Form N-4 on April 25, 2006. 7. Filed herewith. Power of Attorney for C. Robert Henrikson, Curtis H. Burnette, Burton A. Dole, Jr., Cheryl W. Grise, James R. Houghton, Harry P. Kamen, Helene L. Kaplan, John M. Keane, James M. Kilts, Charles M. Leighton, Sylvia M. Mathews, Hugh B. Price, Kenton J. Sicchitano, William C. Steere, William J. Wheeler and James J. Prochaska, Jr. 8. Filed with Post-Effective Amendment No. 1 to this Registration Statement No. 333-122897 on Form N-4 on April 26, 2006. II-2 ITEM 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR.
PRINCIPAL OCCUPATION & POSITIONS AND OFFICES NAME BUSINESS ADDRESS WITH DEPOSITOR ---- ---------------------- --------------------- C. Robert Henrikson.................... Chairman, President and Chief Executive Chairman, President, Chief Officer, MetLife, Inc. and Metropolitan Life Executive Officer and Insurance Company, Director 200 Park Avenue New York, NY 10166 Curtis H. Barnette..................... Of Counsel, Director Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates, 1440 New York Avenue, N.W. Washington, DC 20005 Burton A. Dole, Jr. ................... Retired Chairman, Director Nellcor Puritan Bennett, Inc., Pauma Valley Country Club, 15835 Pauma Valley Drive Pauma Valley, CA 92061 Cheryl W. Grise........................ Executive Vice President, Director Northeast Utilities, 107 Selden Street, Berlin, CT 06037 James R. Houghton...................... Chairman of the Board, Director Corning Incorporated, One Riverfront Plaza, MP HQ02-E6, Corning, NY 14831 R. Glenn Hubbard....................... Dean and Russell L. Carson Professor of Director Finance and Economics, Graduate School of Business, Columbia University, Uris Hall, Room 101, 3022 Broadway, New York, NY 10027-6902 Harry P. Kamen......................... Retired Chairman and Chief Executive Officer, Director Metropolitan Life Insurance Company, 200 Park Avenue, 32nd Floor, New York, NY 10166-0188 Helene L. Kaplan....................... Of Counsel, Skadden, Arps, Slate, Meagher & Director Flom, LLP, Four Times Square, New York, NY 10036 John M. Keane.......................... General (Retired), Director United States Army, 2020 K Street, N.W. Suite 300, Washington, D.C. 20006 James M. Kilts......................... Founding Partner, Director Centerview Partners Management, LLC, 16 School Street, Rye, NY 10580 Charles M. Leighton.................... Retired Chairman and Chief Executive Officer, Director CML Group, Inc., U.S. Sailing, 15 Maritime Drive, Portsmith, RI 02871 Sylvia M. Mathews...................... President, Global Development Program, Director The Bill and Melinda Gates Foundation, 1551 Eastlake Avenue East, Seattle, WA 98102
II-3
PRINCIPAL OCCUPATION & POSITIONS AND OFFICES NAME BUSINESS ADDRESS WITH DEPOSITOR ---- ---------------------- --------------------- Hugh B. Price.......................... Senior Fellow, Director Brookings Institution, 1775 Massachusetts Avenue, N.W., Washington, D.C. 20036 David Satcher.......................... Professor of Family Medicine and Community Director Health, Director of Center of Excellence on Health Disparity, Morehouse School of Medicine, 720 Westview Drive, SW, Suite 238 Atlanta, GA 30310-1495 Kenton J. Sicchitano................... Retired Global Managing Partner, Director PricewaterhouseCoopers, LLC, 25 Phillips Pond Road, Natick, MA 01760 William C. Steere, Jr. ................ Retired Chairman of the Board, Director Pfizer Inc., 235 East 42nd Street, 22nd Floor, New York, NY 10017.
Set forth below is a list of certain principal officers of Metropolitan Life. The principal business address of Metropolitan Life is 200 Park Avenue, New York, New York 10166.
NAME OF OFFICER POSITION WITH METROPOLITAN LIFE --------------- ------------------------------- C. Robert Henrikson..................................... President, Chief Executive Officer and Chairman of the Board William J. Toppeta...................................... President, International William J. Mullaney..................................... President, Institutional Business Catherine A. Rein....................................... Senior Executive Vice-President and Chief Administrative Officer Lisa M. Weber........................................... President, Individual Business James L. Lipscomb....................................... Executive Vice President and General Counsel Steven A. Kandarian..................................... Executive Vice President and Chief Investment Officer Steven Z. Sheinheit..................................... Executive Vice President and Chief Information Officer William J. Wheeler...................................... Executive Vice President and Chief Financial Officer Joseph J. Prochaska..................................... Executive Vice President and Chief Accounting Officer Joseph A. Reali......................................... Senior Vice-President and Tax Director Anthony Williamson...................................... Senior Vice-President and Treasurer Gwenn L. Carr........................................... Senior Vice-President and Secretary Timothy Journy.......................................... Senior Vice-President and General Auditor
ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR REGISTRANT. The registrant is a separate account of Metropolitan Life Insurance Company under the New York Insurance law. Under said law the assets allocated to the Separate Account are the property of Metropolitan Life Insurance Company. Metropolitan Life Insurance Company is a wholly-owned subsidiary of MetLife, Inc., a publicly traded company. The following outline indicates those persons who are controlled by or under common control with Metropolitan Life Insurance Company: II-4 ORGANIZATIONAL STRUCTURE OF METLIFE, INC. AND SUBSIDIARIES AS OF DECEMBER 31, 2006 The following is a list of subsidiaries of MetLife, Inc. updated as of December 31, 2006. Those entities which are listed at the left margin (labeled with capital letters) are direct subsidiaries of MetLife, Inc. Unless otherwise indicated, each entity which is indented under another entity is a subsidiary of that other entity and, therefore, an indirect subsidiary of MetLife, Inc. Certain inactive subsidiaries have been omitted from the MetLife, Inc. organizational listing. The voting securities (excluding directors' qualifying shares, (if any)) of the subsidiaries listed are 100% owned by their respective parent corporations, unless otherwise indicated. The jurisdiction of domicile of each subsidiary listed is set forth in the parenthetical following such subsidiary. A. MetLife Group, Inc. (NY) B. MetLife Bank National Association (USA) C. Exeter Reassurance Company, Ltd. (Bermuda) D. MetLife Taiwan Insurance Company Limited (Taiwan) E. Metropolitan Tower Life Insurance Company (DE) 1. TH Tower NGP, LLC (DE) 2. Partners Tower, L.P. (DE) - a 99% limited partnership interest of Partners Tower, L.P. is held by Metropolitan Tower Life Insurance Company and 1% general partnership interest is held by TH Tower NGP, LLC (DE) 3. TH Tower Leasing, LLC (DE) 4. MetLife Reinsurance Company of Charleston (SC) F. MetLife Pensiones S.A. (Mexico)- 97.4738% is owned by Metlife, Inc. and 2.5262% is owned by Metropolitan Asset Management Corporation. G. MetLife Chile Inversiones Limitada (Chile)- 99.9999999% is owned by MetLife, Inc. and 0.0000001% is owned by Natiloportem Holdings, Inc. 1. MetLife Chile Seguros de Vida S.A. (Chile)- 99.99% is owned by MetLife Chile Inversiones Limitada, and 0.01% is owned by MetLife International Holdings, Inc. a) MetLife Chile Administradora de Mutuos Hipotecarios S.A. (Chile)- 99.99% is owned by MetLife Chile Seguros de Vida S.A., and 0.01% is owned by MetLife Chile Inversiones Limitada. H. MetLife Mexico S.A. (Mexico)- 98.70541% is owned by Metlife, Inc., 1.27483% is owned by Metropolitan Asset Management Corporation and 0.01976% is owned by Metlife International Holdings, Inc. 1. MetLife Afore, S.A. de C.V. (Mexico)- 99.99% is owned by MetLife Mexico S.A. (Mexico) and 0.01% is owned by MetLife Pensiones S.A. a) Met1 SIEFORE, S.A. de C.V. (Mexico)- 99.99% is owned by MetLife Afore, S.A. de C.V. and 0.01% is owned by MetLife Mexico S.A. (Mexico) b) Met2 SIEFORE, S.A. de C.V. (Mexico)- 99.99% is owned by MetLife Afore, S.A. de C.V. and 0.01% is owned by MetLife Mexico S.A. (Mexico) c) Met3 SIEFORE, S.A. de C.V. (Mexico)- 99.9% is owned by MetLife Afore, S.A. de C.V. and 0.01% is owned by MetLife Mexico S.A. (Mexico) I. MetLife Mexico Servicios, S.A. de C.V. (Mexico)- 98% is owned by MetLife, Inc. and 2% is owned by MetLife International Holdings, Inc. J. Metropolitan Life Seguros de Vida S.A. (Uruguay) K. MetLife Securities, Inc. (DE) L. Enterprise General Insurance Agency, Inc. (DE) 1. MetLife General Insurance Agency of Texas, Inc. (DE) 2. MetLife General Insurance Agency of Massachusetts, Inc. (MA) 1 M. Metropolitan Property and Casualty Insurance Company (RI) 1. Metropolitan General Insurance Company (RI) 2. Metropolitan Casualty Insurance Company (RI) 3. Metropolitan Direct Property and Casualty Insurance Company (RI) 4. Met P&C Managing General Agency, Inc. (TX) 5. MetLife Auto & Home Insurance Agency, Inc. (RI) 6. Metropolitan Group Property and Casualty Insurance Company (RI) a) Metropolitan Reinsurance Company (U.K.) Limited (United Kingdom) 7. Metropolitan Lloyds, Inc. (TX) a) Metropolitan Lloyds Insurance Company of Texas (TX)- Metropolitan Lloyds Insurance Company of Texas, an affiliated association, provides automobile, homeowner and related insurance for the Texas market. It is an association of individuals designated as underwriters. Metropolitan Lloyds, Inc., a subsidiary of Metropolitan Property and Casualty Insurance Company, serves as the attorney-in-fact and manages the association. 8. Economy Fire & Casualty Company (IL) a) Economy Preferred Insurance Company (IL) b) Economy Premier Assurance Company (IL) N. Cova Corporation (MO) 1. Texas Life Insurance Company (TX) 2. Cova Life Management Company (DE) O. MetLife Investors Insurance Company (MO) P. First MetLife Investors Insurance Company (NY) Q. Walnut Street Securities, Inc. (MO) R. Newbury Insurance Company, Limited (BERMUDA) S. MetLife Investors Group, Inc. (DE) 1. MetLife Investors Distribution Company (MO) 2. Met Investors Advisory, LLC (DE) 3. MetLife Investors Financial Agency, Inc. (TX) 2 T. MetLife International Holdings, Inc. (DE) 1. MetLife Mexico Cares, S.A. de C.V. (Mexico) a) Fundacion MetLife Mexico, A.C. (Mexico) 2. Natiloportem Holdings, Inc. (DE) a) Servicios Administrativos Gen, S.A. de C.V. (Mexico) (1) MLA Comercial, S.A. de C.V. (Mexico) 99% is owned by Servicios Administrativos Gen, S.A. de C.V. and 1% is owned by MetLife Mexico Cares, S.A. de C.V. (2) MLA Servicios, S.A. de C.V. (Mexico) 99% is owned by Servicios Administrativos Gen, S.A. de C.V. and 1% is owned by MetLife Mexico Cares, S.A. de C.V. 3. MetLife India Insurance Company Private Limited (India)- 26% is owned by MetLife International Holdings, Inc. and 74% is owned by third parties. 4. Metropolitan Life Insurance Company of Hong Kong Limited (Hong Kong)- 99.9989% is owned by MetLife International Holdings, Inc. and 0.0011% is owned by Natiloporterm Holdings, Inc. 5. Metropolitan Life Seguros de Retiro S.A. (Argentina)- 95.23% is owned by MetLife International Holdings, Inc. and 4.77% is owned by Natiloportem Holdings, Inc. 6. Metropolitan Life Seguros de Vida S.A. (Argentina)- 95.2499% is owned by MetLife International Holdings, Inc. and 4.7473% is owned by Natiloportem Holdings, Inc. 7. MetLife Insurance Company of Korea Limited (South Korea)- 21.22% of MetLife Insurance Company of Korea Limited is owned by MetLife, Mexico, S.A. and 78.78% is owned by Metlife International Holdings, Inc. 8. Metropolitan Life Seguros e Previdencia Privada S.A. (Brazil)- 91.227896580% is owned by MetLife International Holdings, Inc. and 8.772103054% is owned by MetLife Vida e Previdencia S.A., and 0.000000366% is owned by Natiloportem Holdings, Inc. 9. MetLife Global, Inc. (DE) 10. MetLife Administradora de Fundos Multipatrocinados Ltda (Brazil) - 95.4635% is owned by MetLife International Holdings, Inc. and 4.5364% is owned by Natiloportem Holdings, Inc. 11. MetLife Insurance Limited (United Kingdom) 12. MetLife General Insurance Limited (Australia) 13. MetLife Limited (United Kingdom) 14. MetLife Insurance S.A./NV (Belgium) - 99.9% is owned by MetLife International Holdings, Inc. and 0.1% is owned by third parties. 15. MetLife Services Limited (United Kingdom) 16. Siembra Seguros de Vida S.A. (Argentina) - 97.9327% is owned by MetLife International Holdings, Inc. and 2.0672% is owned by Natiloportem Holdings, Inc. 17. MetLife International Insurance Ltd. (Bermuda) 18. MetLife Insurance Limited (Australia) a) MetLife Insurance and Investment Trust (Australia) b) MetLife Investments Pty Limited (Australia) c) MetLife Trustee Pty Limited (Australia) d) MetLife Services (Singapore) PTE Limited (Australia) 19. Siembra Seguros de Retiro S.A. (Argentina) - 96.8819% is owned by MetLife International Holdings, Inc. and 3.1180% is owned by; Natiloportem Holdings, Inc. 20. Best Market S.A. (Argentina) - 5% of the shares are held by Natiloportem Holdings, Inc., and 94.9999% is owned by MetLife International Holdings Inc. 21. Compania Previsional MetLife S.A. (Brazil) - 95.4635% is owned by MetLife International Holdings, Inc. and 4.5364% is owned by Natiloportem Holdings, Inc. (a) Met AFJP S.A. (Argentina) - 75.4088% of the shares of Met AFJP S.A. are held by Compania Previsional MetLife SA, 19.5912% is owned by Metropolitan Life Seguros de Vida SA, 3.9689% is held by Natiloportem Holdings, Inc., and 1.0310% is held by Metropolitan Life Seguros de Retiro SA. 22. MetLife Worldwide Holdings, Inc. (DE) a) MetLife Towarzystwo Ubezpieczen na Zycie S.A. (Poland) b) MetLife Reinsurance (Bermuda) Ltd. (Bermuda) c) MetLife Direct Co., Ltd. (Japan) d) MetLife Vida e Previdencia S.A. (Brazil) U. Metropolitan Life Insurance Company (NY) 1. 334 Madison Euro Investments, Inc. (DE) a) Park Twenty Three Investments Company (United Kingdom)- 1% voting control of Park Twenty Three Investments Company is held by St. James Fleet Investments Two Limited. (1) Convent Station Euro Investments Four Company (United Kingdom)- 1% voting control of Convent Station Euro Investments Four Company is held by 334 Madison Euro Investments, Inc. as nominee for Park Twenty Three Investments Company. 2. St. James Fleet Investments Two Limited (Cayman Islands)- 34% of the shares of St. James Fleet Investments Two Limited is held by Metropolitan Life Insurance Company. 3. One Madison Investments (Cayco) Limited (Cayman Islands)- 10.1% voting control of One Madison Investments (Cayco) Limited is held by Convent Station Euro Investments Four Company. 4. CRB Co, Inc. (MA)- AEW Real Estate Advisors, Inc. holds 49,000 preferred non-voting shares and AEW Advisors, Inc. holds 1,000 preferred non-voting shares of CRB, Co., Inc. 5. GA Holding Corp. (MA) 3 6. Thorngate, LLC (DE) 7. Alternative Fuel I, LLC (DE) 8. Transmountain Land & Livestock Company (MT) 9. MetPark Funding, Inc. (DE) 10. HPZ Assets LLC (DE) 11. Missouri Reinsurance (Barbados), Inc. (Barbados) 12. Metropolitan Tower Realty Company, Inc. (DE) a) Midtown Heights, LLC (DE) 13. MetLife (India) Private Ltd. (India) 14. Metropolitan Marine Way Investments Limited (Canada) 15. MetLife Private Equity Holdings, LLC (DE) 16. 23rd Street Investments, Inc. (DE) a) Mezzanine Investment Limited Partnership-BDR (DE). Metropolitan Life Insurance Company holds a 99% limited partnership interest in Mezzanine Investment Limited Partnership-BDR and 23rd Street Investments, Inc. is a 1% general partner. b) Mezzanine Investment Limited Partnership-LG (DE). 23rd Street Investments, Inc. is a 1% general partner of Mezzanine Investment Limited Partnership-LG. Metropolitan Life Insurance Company holds a 99% limited partnership interest in Mezzanine Investment Limited Partnership-LG. 17. Metropolitan Realty Management, Inc. (DE) 18. Dewey Square South, LLC (NY) 19. Hyatt Legal Plans, Inc. (DE) a) Hyatt Legal Plans of Florida, Inc. (FL) 20. MetLife Holdings, Inc. (DE) a) MetLife Credit Corp. (DE) b) MetLife Funding, Inc. (DE) 4 21. Bond Trust Account A (MA) 22. Metropolitan Asset Management Corporation (DE) a) MetLife Capital Credit L.P. (DE)- 90% of MetLife Capital Credit L.P. is held directly by Metropolitan Life Insurance Company. b) MetLife Capital Limited Partnership (DE)- 73.78% Limited Partnership interest is held directly by Metropolitan Life Insurance Company. c) MetLife Investments Asia Limited (Hong Kong)- One share of MetLife Investments Asia Limited is held by W&C Services, Inc., a nominee of Metropolitan Asset Management Corporation. d) MetLife Investments Limited (United Kingdom)- 23rd Street Investments, Inc. holds one share of MetLife Investments Limited and LA Investments, S.A. and 1% of MetLife Latin America Asesorias e Inversiones Limitada. e) LA Investments, S.A. (Argentina)- 23rd Street Investments, Inc. holds one share of MetLife Investments Limited and LA Investments, S.A. and 1% of MetLife Latin America Asesorias e Inversiones Limitada. f) MetLife Latin America Asesorias e Inversiones Limitada (Chile)- 23rd Street Investments, Inc. holds one share of MetLife Investments Limited and LA Investments, S.A. and 1% of MetLife Latin America Asesorias e Inversiones Limitada. 23. New England Life Insurance Company (MA) a) MetLife Advisers, LLC (MA) b) New England Securities Corporation (MA) c) Omega Reinsurance Corporation (AZ) 24. GenAmerica Financial, LLC (MO) a) GenAmerica Capital I (DE) b) General American Life Insurance Company (MO) (1) GenAmerica Management Corporation (MO) 5 (2) Reinsurance Group of America, Incorporated (MO) - (52.8%) (a) Reinsurance Company of Missouri, Incorporated (MO) (i) Timberlake Financial, L.L.C. (DE) (A) Timberlake Reinsurance Company II (SC) (ii) RGA Reinsurance Company (MO) (A) Fairfield Management Group, Inc. (MO) (aa) Reinsurance Partners, Inc. (MO) (b) RGA Worldwide Reinsurance Company, Ltd. (Barbados) (c) RGA Americas Reinsurance Company, Ltd. (Barbados) (d) RGA Reinsurance Company (Barbados) Ltd. (Barbados) (80%) (i) RGA Financial Group, L.L.C. (DE)- RGA Reinsurance Company also owns a 20% non- equity membership in RGA Financial Group, L.L.C. (e) RGA Life Reinsurance Company of Canada (Canada) (f) RGA International Corporation (Nova Scotia) (g) RGA Holdings Limited (U.K.) (United Kingdom) (i) RGA UK Services Limited (United Kingdom) (ii) RGA Capital Limited U.K. (United Kingdom) (iii) RGA Reinsurance (UK) Limited (United Kingdom) (iv) RGA Services India Private Limited (India) (h) RGA South African Holdings (Pty) Ltd. (South Africa) (i) RGA Reinsurance Company of South Africa Limited (South Africa) (i) RGA Australian Holdings PTY Limited (Australia) (i) RGA Reinsurance Company of Australia Limited (Australia) (ii) RGA Asia Pacific PTY, Limited (Australia) (j) General American Argentina Seguros de Vida, S.A. (Argentina) - 95% of General American Argentina Seguros de Vida, S.A. is owned by Reinsurance Group of America, Incorporated and 5% is owned by RGA Reinsurance Company (Barbados) Ltd. 6 (k) RGA Technology Partners, Inc. (MO) (l) RGA International Reinsurance Company (Ireland) (m) RGA Capital Trust I (DE) (n) RGA Global Reinsurance Company, Ltd. (Bermuda) 25. Corporate Real Estate Holdings, LLC (DE) 26. Ten Park SPC (CAYMAN ISLANDS ) - 1% voting control of Ten Park SPC is held by Metropolitan Asset Management Corporation 27. MetLife Tower Resources Group, Inc. (DE) 28. Headland - Pacific Palisades, LLC (CA) 29. Headland Properties Associates (CA) 30. Krisman, Inc. (MO) 31. Special Multi-Asset Receivables Trust (DE) 32. White Oak Royalty Company (OK) 33. 500 Grant Street GP LLC (DE) 34. 500 Grant Street Associates Limited Partnership (CT) - 99% of 500 Grant Street Associates Limited Partnership is held by Metropolitan Life Insurance Company and 1% by 500 Grant Street GP LLC 35. MetLife Canada/MetVie Canada (Canada) 36. MetLife Retirement Services LLC (NJ) a) MetLife Investment Funds Services LLC (NJ) b) MetLife Investment Funds Management LLC (NJ) c) MetLife Associates LLC (DE) 37. Euro CL Investments LLC (DE) 38. MEXDF Properties, LLC (DE) 39. MSV Irvine Property, LLC (DE) - 4% of MSV Irvine Property, LLC is owned by Metropolitan Tower Realty Company, Inc. and 96% is owned by Metropolitan Life Insurance Company V. MetLife Capital Trust II (DE) W. MetLife Capital Trust III (DE) X. MetLife Insurance Company of Connecticut (Life Department) (Accident Department) (CT) 1. 440 South LaSalle LLC (DE) 2. Pilgrim Investments Oakmont Lane, LLC (DE) - 50% is owned by MetLife Insurance Company of Connecticut and 50% is owned by a third party 3. Pilgrim Alternative Investments Opportunity Fund I, LLC (DE) - 67% is owned by MetLife Insurance Company of Connecticut, and 33% is owned by third party 4. Pilgrim Alternative Investments Opportunity Fund III Associates, LLC (CT) - 67% is owned by MetLife Insurance Company of Connecticut, and 33% is owned by third party 5. Pilgrim Investments Highland Park, LLC (DE) 6. Pilgrim Investments Schaumberg Windy Point, LLC (DE) 7. Pilgrim Investments York Road, LLC (DE) 8. Euro TI Investments LLC (DE) 9. Greenwich Street Investments, LLC (DE) a) Greenwich Street Capital Offshore Fund, Ltd. (Virgin Islands) b) Greenwich Street Investments, L.P. (DE) 10. Hollow Creek, L.L.C. (CT) 11. One Financial Place Corporation (DE) - 100% is owned in the aggregate by MetLife Insurance Company of Connecticut and MetLife Life and Annuity Company of Connecticut. 12. One Financial Place Holdings, LLC (DE)-100% is owned in the aggregate by MetLife Insurance Company of Connecticut and MetLife Life and Annuity Company of Connecticut. 13. Plaza LLC (CT) a) Travelers Asset Management International Company LLC (NY) b) Tower Square Securities, Inc. (CT) 1) Tower Square Securities Insurance Agency of New Mexico, Inc. (NM) 2) Tower Square Securities Insurance Agency of Ohio, Inc. (OH) (99%) c) Travelers Investment Adviser, Inc. (DE) 14. TIC European Real Estate LP, LLC (DE) 15. MetLife European Holdings, Inc. (UK) a) MetLife Europe Limited, Inc. (UK) b) MetLife Pensions Trustees Limited (UK) 16. Travelers European Investments LLC (CT) 17. Travelers International Investments Ltd. (Cayman Islands) 18. Trumbull Street Equity Investments LLC (DE) a) Tandem EGI/C Investments, L.P. (DE) - The General Partner is Trumbull Street Equity Investments LLC. 19. MetLife Life and Annuity Company of Connecticut (CT) a) Euro TL Investments LLC (DE) 20. TLA Holdings LLC (DE) a) The Prospect Company (DE) 1) Panther Valley, Inc. (NJ) 21. TRAL & Co. (CT) - TRAL & Co. is a general partnership. Its partners are MetLife Insurance Company of Connecticut and MetLife Life and Annuity Company of Connecticut. 22. Tribeca Distressed Securities L.L.C. (DE) 23. MetLife Investors USA Insurance Comapny (DE) Y. MetLife Reinsurance Company of South Carolina (SC) Z. MetLife Investment Advisors Company, LLC (DE) AA. Trumbull Street Investments LLC (DE) BB. MetLife Standby I, LLC (DE) 1. MetLife Exchange Trust I (DE) The voting securities (excluding directors' qualifying shares, if any) of each subsidiary shown on the organizational chart are 100% owned by their respective parent corporation, unless otherwise indicated. In addition to the entities shown on the organizational chart, MetLife, Inc. (or where indicated, a subsidiary) also owns interests in the following entities: 1) Metropolitan Life Insurance Company owns varying interests in certain mutual funds distributed by its affiliates. These ownership interests are generally expected to decrease as shares of the funds are purchased by unaffiliated investors. 2) Metropolitan Life Insurance Company indirectly owns 100% of the non-voting preferred stock of Nathan and Lewis Associates Ohio, Incorporated, an insurance agency. 100% of the voting common stock of this company is held by an individual who has agreed to vote such shares at the direction of N.L. HOLDING CORP. (DEL), a direct wholly owned subsidiary of MetLife, Inc. 3) Mezzanine Investment Limited Partnerships ("MILPs"), Delaware limited partnerships, are investment vehicles through which investments in certain entities are held. A wholly owned subsidiary of Metropolitan Life Insurance Company serves as the general partner of the limited partnerships and Metropolitan Life Insurance Company directly owns a 99% limited partnership interest in each MILP. The MILPs have various ownership and/or debt interests in certain companies. 4) New England Life Insurance Company ("NELICO"), owns 100% of the voting common stock of Omega Reinsurance Corporation, which is 100% of all the stock outstanding as of 12/31/06. 5) The Metropolitan Money Market Pool and MetLife Intermediate Income Pool are pass-through investment pools, of which Metropolitan Life Insurance Company and/or its subsidiaries and/or affiliates are general partners. NOTE: THE METLIFE, INC. ORGANIZATIONAL CHART DOES NOT INCLUDE REAL ESTATE JOINT VENTURES AND PARTNERSHIPS OF WHICH METLIFE, INC. AND/OR ITS SUBSIDIARIES IS AN INVESTMENT PARTNER. IN ADDITION, CERTAIN INACTIVE SUBSIDIARIES HAVE ALSO BEEN OMITTED. 7 ITEM 27. NUMBER OF CONTRACTOWNERS. As of February 28, 2007:
NUMBER OF TITLE OF CLASS HOLDERS -------------- --------- Contract holders Qualified................................................. 0 Non-Qualified............................................. 0
ITEM 28. INDEMNIFICATION UNDERTAKING PURSUANT TO RULE 484(b)(1) UNDER THE SECURITIES ACT OF 1933 MetLife, Inc. has secured a Financial Institutions Bond in the amount of $50,000,000, subject to a $5,000,000 deductible. MetLife, Inc. maintains Directors' and Officers' Liability insurance coverage with limits of $400 million. The directors and officers of Metropolitan Life Insurance Company ("Metropolitan"), a subsidiary of MetLife, Inc., are also covered under the Financial Institutions Bond as well as under the directors' and officers' policy. A provision in Metropolitan's by-laws provides for the indemnification (under certain circumstances) of individuals serving as directors or officers of Metropolitan. Insofar as indemnification for liability arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of Metropolitan pursuant to the foregoing provisions, or otherwise, Metropolitan has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by Metropolitan of expenses incurred or paid by a director, officer or controlling person or Metropolitan 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, Metropolitan will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. ITEM 29. PRINCIPAL UNDERWRITERS. (a) On or about May 1, 2007, it is anticipated that MetLife Investors Distribution Company will become the principal underwriter and distributor of the registrant. Previously, Metropolitan Life Insurance Company was the principal underwriter. Metropolitan Life Insurance Company acts in the following capacities with respect to the following investment companies as of the date of this registration statement: Metropolitan Tower Life Separate Account One (principal underwriter) Metropolitan Tower Life Separate Account Two (principal underwriter) Metropolitan Life Separate Account UL (principal underwriter) The New England Variable Account (depositor) New England Variable Annuity Fund I (depositor) New England Life Retirement Investment Account (depositor) Security Equity Separate Account Thirteen (depositor) Security Equity Separate Account 26 (depositor) Security Equity Separate Account 27 (depositor) Paragon Separate Account A (principal underwriter) Paragon Separate Account B (principal underwriter) Paragon Separate Account C (principal underwriter) Paragon Separate Account D (principal underwriter) (b) See response to Item 25 above. II-5 (c) (1) (2) NAME OF PRINCIPAL UNDERWRITER NET UNDERWRITING DISCOUNTS AND COMMISSIONS ---------------------------------------------- ---------------------------------------------- Metropolitan Life Insurance Company N/A (3) (4) COMPENSATION ON REDEMPTION OR ANNUITIZATION BROKERAGE COMMISSIONS ---------------------------------------------- ---------------------------------------------- $0 (withdrawal processing fee) $0 (5) COMPENSATION ---------------------------------------------- $0 (Separate Account charge)
ITEM 30. LOCATION OF ACCOUNT AND RECORDS. Metropolitan Life Insurance Company 200 Park Avenue New York, N.Y. 10166 ITEM 31. MANAGEMENT SERVICES. Not Applicable ITEM 32. UNDERTAKINGS. (a) The undersigned registrant hereby undertakes to file a post-effective amendment to this registration statement as frequently as is necessary to ensure that the financial statements in this registration statement are not more than 16 months old for as long as payments under these variable annuity contracts may be accepted. (b) The undersigned registrant hereby undertakes to include a post card or similar written communication affixed to or included in the prospectus that the applicant can remove to send for a Statement of Additional Information. (c) The undersigned registrant hereby undertakes to deliver any Statement of Additional Information and any financial statements required to be made available under this form promptly upon written or oral request. (d) The undersigned registrant represents that it is relying on the exemptions from certain provisions of Sections 22(e) and 27 of the Investment Company Act of 1940 provided by Rule 6c-7 under the Act. The registrant further represents that the provisions of paragraph (a)-(d) of Rule 6c-7 have been complied with. (e) Metropolitan Life Insurance Company represents that the fees and charges deducted under the annuities described in this Registration Statement, in the aggregate, are reasonable in relation to the services rendered, the expenses to be incurred, and the risks assumed by Metropolitan Life Insurance Company under the annuities. II-6 SIGNATURES AS REQUIRED BY THE SECURITIES ACT OF 1933 AND THE INVESTMENT COMPANY ACT OF 1940, THE REGISTRANT CERTIFIES THAT IT MEETS THE REQUIREMENTS OF SECURITIES ACT RULE 485(B) FOR EFFECTIVENESS OF THIS REGISTRATION STATEMENT AND HAS CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF, IN THE CITY OF NEW YORK, AND STATE OF NEW YORK ON THIS 18TH DAY OF APRIL, 2007. METROPOLITAN LIFE SEPARATE ACCOUNT E (Registrant) METROPOLITAN LIFE INSURANCE COMPANY (Depositor) by: /s/ PAUL G. CELLUPICA --------------------------------------- (Paul G. Cellupica) Chief Counsel - Securities Products and Registration METROPOLITAN LIFE INSURANCE COMPANY (Depositor) by: /s/ PAUL G. CELLUPICA --------------------------------------- (Paul G. Cellupica) Chief Counsel - Securities Products and Registration II-7 SIGNATURES AS REQUIRED BY THE SECURITIES ACT OF 1933, THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE --------- ----- ---- * President, Chief Executive Officer and Chairman ----------------------------------------------------- of the Board C. Robert Henrikson * Executive Vice President and Chief Accounting ----------------------------------------------------- Officer (Principal Financial Officer) Joseph J. Prochaska, Jr. * Executive Vice President and Chief Financial ----------------------------------------------------- Officer William J. Wheeler * Director ----------------------------------------------------- Curtis H. Barnette * Director ----------------------------------------------------- Burton A. Dole, Jr. Director ----------------------------------------------------- Cheryl W. Grise * Director ----------------------------------------------------- James R. Houghton Director ----------------------------------------------------- R. Glenn Hubbard * Director ----------------------------------------------------- Harry P. Kamen * Director ----------------------------------------------------- Helene L. Kaplan * Director ----------------------------------------------------- John M. Keane Director ----------------------------------------------------- James M. Kilts * Director ----------------------------------------------------- Charles M. Leighton * Director ----------------------------------------------------- Sylvia M. Mathews * Director ----------------------------------------------------- Hugh B. Price Director ----------------------------------------------------- David Satcher * Director ----------------------------------------------------- William C. Steere, Jr. * Director ----------------------------------------------------- Kenton J. Sicchitano *By: /s/ MYRA L. SAUL, ESQ. April 18, 2007 ------------------------------------------------ Myra L. Saul, Esq. Attorney-in-Fact
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