485BPOS 1 b68055a1e485bpos.txt GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN As filed with Securities and Exchange Commission on April 23, 2008 Registration No. 333-53477 --------------------- SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------------------------- FORM S-6 POST-EFFECTIVE AMENDMENT No. 11 to the REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 --------------------------- General American Separate Account Eleven (Exact Name of Trust) General American Life Insurance Company (Name of Depositor) 13045 Tesson Ferry Road St. Louis, MO 63128 (Address of depositor's principal executive offices) --------------------- Marie C. Swift, Esquire Associate General Counsel Metropolitan Life Insurance Company 501 Boylston Street Boston, Massachusetts 02117 (Name and address of agent for service) Copies to: Stephen E. Roth, Esquire Mary E. Thornton, Esquire Sutherland Asbill & Brennan LLP 1275 Pennsylvania Avenue, N.W. Washington, D.C. 20004 --------------------------- It is proposed that this filing will become effective (check appropriate box) [ ] immediately upon filing pursuant to paragraph (b) [X] on April 28, 2008 pursuant to paragraph (b) [ ] 60 days after filing pursuant to paragraph (a)(1) [ ] on (date) pursuant to paragraph (a)(1) of Rule 485 [ ] this post-effective amendment designates a new effective date for a previously filed post-effective amendment Title of Securities Being Registered: Units of Interest in Flexible Premium Variable Life Insurance Policies. This registration statement incorporates by reference the prospectus and supplements, dated May 1, 2002, May 1, 2003, May 1, 2004, May 1, 2005, May 1, 2006 and April 30, 2007, as filed April 30, 2002 in Post-Effective Amendment No. 5, April 30, 2003 in Post-Effective Amendment No. 6, April 30, 2004 in Post-Effective Amendment No. 7 and April 29, 2005 in Post-Effective Amendment No. 8 , April 28, 2006 in Post-Effective Amendment No. 9 and April 24, 2007 in Post-Effective No. 10 to the Registration Statement on Form S-6 (File No. 333-53477). GENERAL AMERICAN LIFE INSURANCE COMPANY Variable Life Insurance Policy (Destiny) Supplement dated April 28, 2008 to the Prospectus dated May 1, 2004 Flexible Premium Variable Life Insurance Policies (Variable Universal Life/Executive Benefit) Supplement dated April 28, 2008 to the Prospectuses dated May 1, 2002 Flexible Premium Joint and Last Survivor Variable Life Insurance Policy Supplement dated April 28, 2008 to the Prospectus dated May 1, 2002 Flexible Premium Variable Life Insurance Policies (VUL 95/VUL 100/VGSP/Russell VUL) Supplement dated April 28, 2008 to the Prospectuses dated May 1, 2000 This supplement updates certain information contained in the last full prospectus for each of the above-referenced variable life insurance policies, as annually and periodically supplemented. You should read and retain this supplement. We will send you an additional copy of the last full prospectus for your policy, without charge, on request. These policies are no longer available for sale. General American Life Insurance Company is an indirect wholly-owned subsidiary of Metropolitan Life Insurance Company ("MetLife"). MetLife is a wholly-owned subsidiary of MetLife, Inc., a publicly-traded company. General American's Home Office is 13045 Tesson Ferry Road, St. Louis, Missouri 63128. NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE POLICIES OR DETERMINED IF THIS SUPPLEMENT IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. THE SECURITIES AND EXCHANGE COMMISSION MAINTAINS A WEB SITE THAT CONTAINS MATERIAL INCORPORATED BY REFERENCE AND OTHER INFORMATION REGARDING REGISTRANTS THAT FILE ELECTRONICALLY WITH THE SECURITIES AND EXCHANGE COMMISSION. THE ADDRESS OF THE SITE IS HTTP://WWW.SEC.GOV. THE UNDERLYING FUND PROSPECTUSES ARE ATTACHED. INCLUDED ARE PROSPECTUSES FOR THE RUSSELL INVESTMENT FUNDS, WHICH MAY NOT BE AVAILABLE UNDER YOUR POLICY. PLEASE READ THE PROSPECTUSES CAREFULLY AND KEEP THEM FOR REFERENCE. WE DO NOT GUARANTEE HOW ANY OF THE DIVISIONS OR FUNDS WILL PERFORM. THE POLICIES AND THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, ANY FINANCIAL INSTITUTION AND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER GOVERNMENT AGENCY. THE COMPANY General American is principally engaged in writing individual life insurance policies and annuity contracts. It is admitted to do business in 49 states, the District of Columbia, Puerto Rico, and in ten Canadian provinces. The principal offices (Home Office) of General American are located at 13045 Tesson Ferry Road, St. Louis, Missouri 63128. The Administrative Office for various Policy transactions is as follows: Premium Payments General American P.O. Box 790201 St. Louis, MO 63179-0201 Payment Inquires and General American Correspondence Remittance Processing 18210 Crane Nest Drive Tampa, FL 33647 (800) 638-9294 Beneficiary and Ownership General American Changes P. O. Box 990059 Hartford, CT 06199-0059 Surrenders, Loans, General American Withdrawals and P.O. Box 990090 Division Transfers Hartford, CT 06199-0090 Death Claims General American P.O. Box 990090 Hartford, CT 06199-0090 All Telephone (800) 638-9294 Transactions and Inquiries
You may request an account transfer or reallocation of future premiums by written request (which may be telecopied) to our Administrative Office, by telephoning us, or over the Internet. To request a transfer or reallocation by telephone, you should contact your registered representative, or contact us at (800) 638-9294. To request a transfer or reallocation over the Internet, you may log on to our website at www.genamerica.com. We use reasonable procedures to confirm that instructions communicated by telephone, facsimile or Internet are genuine. Any telephone, facsimile or Internet instructions that we reasonably believe to be genuine will be your responsibility, including losses arising from any errors in the communication of instructions. However, because telephone and Internet transactions may be available to anyone who provides certain information about you and your Policy, you should protect that information. We may not be able to verify that you are the person providing telephone or Internet instructions, or that you have authorized any such person to act for you. Telephone, facsimile, and computer systems (including the Internet) may not always be available. Any telephone, facsimile, or computer system, whether it is yours, your service provider's, your registered representative's, or ours, can experience outages or slowdowns for a variety of reasons. These outages or slowdowns may delay or prevent our processing of your request. Although we have taken precautions to help our systems handle heavy use, we cannot promise complete reliability under all circumstances. If you are experiencing problems, you should make your request by writing to our Administrative Office. If you send premium payments or transaction requests to an address other than the one we have designated for receipt of such payments or requests, we may return the premium payment to you, or there may be a delay in applying the payment or transaction to your Policy. THE SEPARATE ACCOUNT. The separate account consists of divisions, each of which corresponds to an underlying Fund. Each division may either make money or lose money. Therefore if you invest in a division of the separate account, you may either make money or lose money, depending on the investment experience of that division. There is no guaranteed rate of return in the separate account. The following chart shows the Funds that are available under the policy along with the name of the investment adviser, sub-adviser (where applicable) and investment objective of each Fund. The Funds have different investment goals and strategies. You should review the prospectus of each Fund, or seek professional guidance in determining which Fund(s) best meet your objectives. 2 NOTE: THE RUSSELL INVESTMENT FUNDS ARE NOT AVAILABLE TO DESTINY OR EXECUTIVE BENEFIT POLICIES. FOR ALL OTHER POLICIES, THE RUSSELL INVESTMENT FUNDS ARE ONLY AVAILABLE FOR POLICIES WITH AN ISSUE DATE PRIOR TO JANUARY 1, 2000. AMERICAN FUNDS INSURANCE SERIES(R) Adviser: Capital Research and Management Company
FUND SUB-ADVISER INVESTMENT OBJECTIVE ---- ----------- -------------------- American Funds Global N/A Capital appreciation through stocks. Small Capitalization Fund American Funds Growth N/A Capital appreciation through stocks. Fund American Funds Growth- N/A Capital appreciation and income. Income Fund
FIDELITY(R) VARIABLE INSURANCE PRODUCTS ADVISER: FIDELITY MANAGEMENT & RESEARCH COMPANY
FUND SUB-ADVISER INVESTMENT OBJECTIVE ---- ----------- -------------------- Equity-Income Reasonable income. The fund will also Portfolio consider the potential for capital appreciation. The fund's goal is to achieve a yield which exceeds the composite yield of securities comprising the Standard & Poor's 500(SM) Index (S&P 500(R)). Mid Cap Portfolio Long-term growth of capital.
J.P. MORGAN SERIES TRUST II ADVISER: J.P. MORGAN INVESTMENT MANAGEMENT INC.
FUND SUB-ADVISER INVESTMENT OBJECTIVE ---- ----------- -------------------- JPMorgan Bond N/A To provide high total return consistent with Portfolio moderate risk of capital and maintenance of liquidity. JPMorgan Small Company N/A To provide high total return from a Portfolio portfolio of small company stocks.
MET INVESTORS SERIES TRUST ADVISER: MET INVESTORS ADVISORY LLC
FUND SUB-ADVISER INVESTMENT OBJECTIVE ---- ----------- -------------------- Clarion Global Real ING Clarion Real To provide total return through investment Estate Portfolio Estate Securities, in real estate securities, emphasizing both (formerly Neuberger L.P.(1) capital appreciation and current income. Berman Real Estate Portfolio) Harris Oakmark Harris Associates L.P. Long-term capital appreciation. International Portfolio Lazard Mid Cap Lazard Asset Long-term growth of capital. Portfolio Management, LLC Legg Mason Partners ClearBridge Advisors, Capital appreciation. Aggressive Growth LLC Portfolio Lord Abbett Bond Lord, Abbett & Co. LLC High current income and the opportunity for Debenture Portfolio capital appreciation to produce a high total return. Lord Abbett Growth and Lord, Abbett & Co. LLC Long-term growth of capital and income Income Portfolio without excessive fluctuation in market value.
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FUND SUB-ADVISER INVESTMENT OBJECTIVE ---- ----------- -------------------- Lord Abbett Mid Cap Lord, Abbett & Co. LLC Capital appreciation through investments, Value Portfolio primarily in equity securities, which are believed to be undervalued in the marketplace. Met/AIM Small Cap Invesco Aim Capital Long-term growth of capital. Growth Portfolio Management, Inc. MFS(R) Research Massachusetts Capital appreciation International Financial Services Portfolio Company Oppenheimer Capital OppenheimerFunds, Inc. Capital appreciation. Appreciation Portfolio PIMCO Total Return Pacific Investment Maximum total return, consistent with the Portfolio Management Company LLC preservation of capital and prudent investment management. RCM Technology RCM Capital Management Capital appreciation; no consideration is Portfolio LLC given to income. T. Rowe Price Mid Cap T. Rowe Price Long-term growth of capital. Growth Portfolio Associates, Inc.
METROPOLITAN SERIES FUND, INC. ADVISER: METLIFE ADVISERS, LLC
FUND SUB-ADVISER INVESTMENT OBJECTIVE ---- ----------- -------------------- BlackRock Aggressive BlackRock Advisors, Maximum capital appreciation. Growth Portfolio LLC BlackRock Bond Income BlackRock Advisors, A competitive total return primarily from Portfolio LLC investing in fixed-income securities. BlackRock Diversified BlackRock Advisors, High total return while attempting to limit Portfolio LLC investment risk and preserve capital. BlackRock Large Cap BlackRock Advisors, Long-term growth of capital. Value Portfolio LLC BlackRock Legacy Large BlackRock Advisors, Long-term growth of capital. Cap Growth Portfolio LLC BlackRock Money Market BlackRock Advisors, A high level of current income consistent Portfolio(2) LLC with preservation of capital. BlackRock Strategic BlackRock Advisors, High total return, consisting principally of Value Portfolio LLC capital appreciation. Davis Venture Value Davis Selected Growth of capital. Portfolio Advisers, L.P.(3) FI Mid Cap Pyramis Global Long-term growth of capital. Opportunities Advisors, LLC(4) Portfolio Harris Oakmark Focused Harris Associates L.P. Long-term capital appreciation. Value Portfolio Julius Baer Julius Baer Investment Long-term growth of capital. International Stock Management LLC(5) Portfolio (formerly FI International Stock Portfolio)
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FUND SUB-ADVISER INVESTMENT OBJECTIVE ---- ----------- -------------------- Lehman Brothers(R) MetLife Investment To equal the performance of the Lehman Aggregate Bond Index Advisors Company, LLC Brothers Aggregate Bond Index. Portfolio MetLife Mid Cap Stock MetLife Investment To equal the performance of the Standard & Index Portfolio Advisors Company, LLC Poor's Mid Cap 400 Composite Stock Price Index. MetLife Stock Index MetLife Investment To equal the performance of the Standard & Portfolio Advisors Company, LLC Poor's 500 Composite Stock Price Index. MFS(R) Total Return Massachusetts Favorable total return through investment in Portfolio Financial Services a diversified portfolio. Company MFS(R) Value Portfolio Massachusetts Capital appreciation and reasonable income. (formerly Harris Financial Services Oakmark Large Cap Company(6) Value Portfolio) Morgan Stanley EAFE(R) MetLife Investment To equal the performance of the MSCI EAFE Index Portfolio Advisors Company, LLC Index. Neuberger Berman Mid Neuberger Berman Capital growth. Cap Value Portfolio Management Inc. Russell 2000(R) Index MetLife Investment To equal the return of the Russell 2000 Portfolio Advisors Company, LLC Index. T. Rowe Price Large T. Rowe Price Long-term growth of capital, and Cap Growth Portfolio Associates, Inc. secondarily, dividend income. T. Rowe Price Small T. Rowe Price Long-term capital growth. Cap Growth Portfolio Associates, Inc. Western Asset Western Asset To maximize total return consistent with Management U.S. Management Company preservation of capital and maintenance of Government Portfolio liquidity.
RUSSELL INVESTMENT FUNDS ADVISER: FRANK RUSSELL INVESTMENT MANAGEMENT COMPANY
FUND SUB-ADVISER INVESTMENT OBJECTIVE ---- ----------- -------------------- Aggressive Equity Fund Multiple sub-advisers To provide long term capital growth. Core Bond Fund Multiple sub-advisers To provide current income, and as a secondary objective, capital appreciation. Multi-Style Equity Multiple sub-advisers To provide long-term capital growth. Fund Non-U.S. Fund Multiple sub-advisers To provide long-term capital growth.
VAN ECK WORLDWIDE INSURANCE TRUST ADVISER: VAN ECK ASSOCIATES CORPORATION
FUND SUB-ADVISER INVESTMENT OBJECTIVE ---- ----------- -------------------- Worldwide Emerging N/A Long-term capital appreciation by investing Markets Fund primarily in equity securities in emerging markets around the world. Worldwide Hard Assets N/A Long-term capital appreciation by investing Fund primarily in hard asset securities. Income is a secondary consideration.
5 --------------- (1) Prior to April 28, 2008, Neuberger Berman Management Inc. was the sub-adviser to the Portfolio. (2) An investment in the BlackRock Money Market Portfolio is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the Portfolio seeks to preserve the value of your investment at $100 per share, it is possible to lose money by investing in the Portfolio. During extended periods of low interest rates, the yields of the Division investing in the Money Market Portfolio may become extremely low and possibly negative. (3) Davis Selected Advisers, L.P. may also delegate any of its responsibilities to Davis Selected Advisers--NY, Inc., a wholly-owned subsidiary. (4) Prior to April 28, 2008, Fidelity Management & Research Company was the sub-adviser to the Portfolio. (5) Prior to January 7, 2008, Fidelity Management & Research Company was the sub-adviser to the Portfolio. (6) Prior to January 7, 2008, Harris Associates L.P. was the sub-adviser to the Portfolio. FOR MORE INFORMATION REGARDING THE FUNDS AND THEIR INVESTMENT ADVISERS AND SUB-ADVISERS, SEE THE FUND PROSPECTUSES ATTACHED AND THEIR STATEMENTS OF ADDITIONAL INFORMATION. OTHER FUNDS AND SHARE CLASSES The Russell Investment Funds may not be available under your Policy, even though they are described in the attached Fund prospectuses. The Real Estate Securities Fund described in the Russell Investment Funds prospectus is not available under any Policy. Some of the Funds offer various classes of shares, each of which has a different level of expenses. The prospectuses for the Funds may provide information for share classes that are not available through the Policy. When you consult the prospectus for any Fund, you should be careful to refer to only the information regarding the class of shares that is available through the Policy. For Fidelity Variable Insurance Products and the Van Eck Worldwide Insurance Trust, we offer Initial Class shares; for the Metropolitan Series Fund, Inc., we offer Class A shares; for the Met Investors Series Trust, we offer Class A shares; and for the American Funds Insurance Series, we offer Class 2 shares. 6 CHARGES AND DEDUCTIONS The following table describes the annual operating expenses for each Fund for the year ended December 31, 2007, before and after any applicable contractual fee waivers and expense reimbursements: ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
DISTRIBUTION ACQUIRED TOTAL CONTRACTUAL FEE NET TOTAL AND/OR FUND FEES ANNUAL WAIVER AND/OR ANNUAL MANAGEMENT SERVICE(12B-1) OTHER AND OPERATING EXPENSE OPERATING FEE FEES EXPENSES EXPENSES* EXPENSES REIMBURSEMENT EXPENSES** ---------- -------------- -------- --------- --------- --------------- ---------- AMERICAN FUNDS INSURANCE SERIES(R) -- CLASS 2 American Funds Global Small Capitalization Fund........ 0.70% 0.25% 0.03% -- 0.98% -- 0.98% American Funds Growth Fund... 0.32% 0.25% 0.01% -- 0.58% -- 0.58% American Funds Growth-Income Fund....................... 0.26% 0.25% 0.01% -- 0.52% -- 0.52% FIDELITY(R) VARIABLE INSURANCE PRODUCTS -- INITIAL CLASS Equity-Income Portfolio...... 0.46% -- 0.09% -- 0.55% -- 0.55% Mid Cap Portfolio............ 0.56% -- 0.11% -- 0.67% -- 0.67% J.P. MORGAN SERIES TRUST II JPMorgan Bond Portfolio...... 0.30% -- 0.48% 0.01% 0.79% 0.18% 0.61%(1) JPMorgan Small Company Portfolio.................. 0.60% -- 0.55% 0.01% 1.16% 0.07% 1.09%(2) MET INVESTORS SERIES TRUST -- CLASS A Clarion Global Real Estate Portfolio.................. 0.61% -- 0.04% -- 0.65% -- 0.65% Harris Oakmark International Portfolio.................. 0.77% -- 0.09% -- 0.86% -- 0.86% Lazard Mid Cap Portfolio..... 0.69% -- 0.07% -- 0.76% -- 0.76% Legg Mason Partners Aggressive Growth Portfolio.................. 0.62% -- 0.05% -- 0.67% -- 0.67% Lord Abbett Bond Debenture Portfolio.................. 0.49% -- 0.05% -- 0.54% -- 0.54% Lord Abbett Growth and Income Portfolio.................. 0.49% -- 0.03% -- 0.52% -- 0.52% Lord Abbett Mid Cap Value Portfolio.................. 0.67% -- 0.08% -- 0.75% -- 0.75% Met/AIM Small Cap Growth Portfolio.................. 0.86% -- 0.06% -- 0.92% -- 0.92% MFS(R)Research International Portfolio.................. 0.70% -- 0.09% -- 0.79% -- 0.79% Oppenheimer Capital Appreciation Portfolio..... 0.58% -- 0.04% -- 0.62% -- 0.62% PIMCO Total Return Portfolio.................. 0.48% -- 0.04% -- 0.52% -- 0.52%(3) RCM Technology Portfolio..... 0.88% -- 0.09% -- 0.97% -- 0.97% T. Rowe Price Mid Cap Growth Portfolio.................. 0.75% -- 0.05% -- 0.80% -- 0.80% METROPOLITAN SERIES FUND, INC. -- CLASS A BlackRock Aggressive Growth Portfolio.................. 0.71% -- 0.05% -- 0.76% -- 0.76%
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DISTRIBUTION ACQUIRED TOTAL CONTRACTUAL FEE NET TOTAL AND/OR FUND FEES ANNUAL WAIVER AND/OR ANNUAL MANAGEMENT SERVICE(12B-1) OTHER AND OPERATING EXPENSE OPERATING FEE FEES EXPENSES EXPENSES* EXPENSES REIMBURSEMENT EXPENSES** ---------- -------------- -------- --------- --------- --------------- ---------- BlackRock Bond Income Portfolio.................. 0.38% -- 0.06% -- 0.44% 0.01% 0.43%(4) BlackRock Diversified Portfolio.................. 0.44% -- 0.06% -- 0.50% -- 0.50% BlackRock Large Cap Value Portfolio.................. 0.68% -- 0.06% -- 0.74% -- 0.74% BlackRock Legacy Large Cap Growth Portfolio........... 0.73% -- 0.06% -- 0.79% -- 0.79% BlackRock Money Market Portfolio.................. 0.33% -- 0.07% -- 0.40% 0.01% 0.39%(5) BlackRock Strategic Value Portfolio.................. 0.82% -- 0.06% -- 0.88% -- 0.88% Davis Venture Value Portfolio.................. 0.69% -- 0.04% -- 0.73% -- 0.73% FI Mid Cap Opportunities Portfolio.................. 0.68% -- 0.05% -- 0.73% -- 0.73% Harris Oakmark Focused Value Portfolio.................. 0.72% -- 0.04% -- 0.76% -- 0.76% Julius Baer International Stock Portfolio............ 0.84% -- 0.12% -- 0.96% 0.04% 0.92%(6) Lehman Brothers(R) Aggregate Bond Index Portfolio....... 0.25% -- 0.05% -- 0.30% 0.01% 0.29%(7) MetLife Mid Cap Stock Index Portfolio.................. 0.25% -- 0.07% 0.01% 0.33% 0.01% 0.32%(8) MetLife Stock Index Portfolio.................. 0.25% -- 0.04% -- 0.29% 0.01% 0.28%(8) MFS(R)Total Return Portfolio.................. 0.53% -- 0.05% -- 0.58% -- 0.58% MFS(R)Value Portfolio........ 0.72% -- 0.05% -- 0.77% 0.07% 0.70%(9) Morgan Stanley EAFE(R) Index Portfolio.................. 0.30% -- 0.12% 0.01% 0.43% 0.01% 0.42%(10) Neuberger Berman Mid Cap Value Portfolio............ 0.64% -- 0.05% -- 0.69% -- 0.69% Russell 2000(R) Index Portfolio.................. 0.25% -- 0.07% 0.01% 0.33% 0.01% 0.32%(8) T. Rowe Price Large Cap Growth Portfolio........... 0.60% -- 0.07% -- 0.67% -- 0.67% T. Rowe Price Small Cap Growth Portfolio........... 0.51% -- 0.08% -- 0.59% -- 0.59% Western Asset Management U.S. Government Portfolio....... 0.49% -- 0.05% -- 0.54% -- 0.54% RUSSELL INVESTMENT FUNDS Aggressive Equity Fund....... 0.90% -- 0.24% -- 1.14% 0.08% 1.06%(11) Core Bond Fund............... 0.55% -- 0.22% 0.01% 0.78% 0.07% 0.71%(11) Multi-Style Equity Fund...... 0.73% -- 0.15% -- 0.88% -- 0.88%(11) Non-U.S. Fund................ 0.90% -- 0.28% 0.01% 1.19% 0.03% 1.16%(11) VAN ECK WORLDWIDE INSURANCE TRUST -- INITIAL CLASS Worldwide Emerging Markets Fund....................... 1.00% -- 0.23% -- 1.23% -- 1.23% Worldwide Hard Assets Fund... 1.00% -- 0.01% 0.01% 1.02% -- 1.02%
--------------- * Acquired Fund Fees and Expenses are fees and expenses incurred indirectly by a portfolio as a result of investing in shares of one or more underlying portfolios. ** Net Total Annual Operating Expenses do not reflect: (1) voluntary waivers of fees or expenses; (2) contractual waivers that are in effect for less than one year from the date of this prospectus supplement; or (3) expense reductions resulting from custodial fee credits or directed brokerage arrangements. (1) JPMorgan Funds Management, Inc. has contractually agreed to waive fees and/or reimburse expenses to the extent that total annual operating expenses (excluding acquired fund fees and expenses, dividend expenses 8 related to short sales, interest, taxes and extraordinary expenses) exceed 0.60% of the average daily net assets through 4/30/09. (2) JPMorgan Funds Management, Inc. has contractually agreed to waive fees and/or reimburse expenses to the extent that total annual operating expenses (excluding acquired fund fees and expenses, dividend expenses related to short sales, interest, taxes and extraordinary expenses ) exceed 1.08% of the average daily net assets through 4/30/09. (3) The Management Fee has been restated to reflect an amended management fee agreement, as if the agreement had been in effect during the preceding fiscal year. (4) MetLife Advisers, LLC has contractually agreed, for the period April 28, 2008 through April 30, 2009, to reduce the Management Fee for each Class of the Portfolio to the annual rate of 0.325% for the amounts over $1 billion but less than $2 billion. (5) MetLife Advisers, LLC has contractually agreed, for the period April 28, 2008 through April 30, 2009, to reduce the Management Fee for each Class of the Portfolio to the annual rate of 0.345% for the first $500 million of the Portfolio's average daily net assets and 0.335% for the next $500 million. (6) MetLife Advisers, LLC has contractually agreed, for the period April 28, 2008 through April 30, 2009, to reduce the Management Fee for each Class of the Portfolio to the annual rate of 0.81% for the first $500 million of the Portfolio's average daily net assets and 0.78% for the next $500 million. (7) MetLife Advisers, LLC has contractually agreed, for the period April 28, 2008 through April 30, 2009, to reduce the Management Fee for each Class of the Portfolio to 0.244%. (8) MetLife Advisers, LLC has contractually agreed, for the period April 28, 2008 through April 30, 2009, to reduce the Management Fee for each Class of the Portfolio to 0.243%. (9) MetLife Advisers, LLC has contractually agreed, for the period April 28, 2008 through April 30, 2009, to reduce the Management Fee for each Class of the Portfolio to the annual rate of 0.65% for the first $1.25 billion of the Portfolio's average daily net assets, 0.60% for the next $250 million and 0.50% for amounts over $1.5 billion. (10) MetLife Advisers, LLC has contractually agreed, for the period April 28, 2008 through April 30, 2009, to reduce the Management Fee for each Class of the Portfolio to 0.293%. (11) The Fund's Manager has contractually agreed to waive, at least until April 28, 2009, a portion of its management fee, up to the full amount of that fee, and to then reimburse the Fund for all remaining expenses, after fee waivers, in order to prevent total operating expenses, excluding "Acquired Fund Fees and Expenses", from exceeding the following amounts of the Fund's average daily net assets on an annual basis: 1.05% for the Aggressive Equity Fund; 0.70% for the Core Bond Fund; 0.87% for the Multi-Style Equity Fund; and, 1.15% for the Non-U.S. Fund. CERTAIN PAYMENTS WE RECEIVE WITH REGARD TO THE FUNDS An investment adviser (other than our affiliate, MetLife Advisers, LLC and Met Investors Advisory LLC) or sub-adviser or its affiliates may make payments to us and/or certain affiliates. These payments may be used for a variety of purposes, including payment for expenses for certain administrative, marketing and support services with respect to the Policies and, in our role as intermediary, with respect to the Funds. We and our affiliates may profit from these payments. These payments may be derived, in whole or in part, from the advisory fee deducted from Portfolio assets. Policy owners, through their indirect investment in the Portfolios, bear the costs of these advisory fees (see the Fund prospectuses for more information). The amount of the payments we receive is based on a percentage of assets of the Fund attributable to the Policies and certain other variable insurance products that we and our affiliates issue. These percentages differ and some advisers or sub-advisers (or other affiliates) may pay us more than others. These percentages currently range up to 0.50%. Additionally, an investment adviser or sub-adviser of a Fund or its affiliates may provide us with wholesaling services that assist in the distribution of the Policies and may pay us and/or certain affiliates amounts to participate in sales meetings. These amounts may be significant and may provide the adviser or sub-adviser (or other affiliate) with increased access to persons involved in the distribution of the Policies. We and certain of our affiliated insurance companies have joint ownership interests in our affiliated investment advisers, MetLife Advisers, LLC and Met Investors Advisory LLC, which are organized as limited liability companies. 9 Our owner interests in MetLife Advisers, LLC and Met Investors Advisory LLC entitle us to profit distributions if the adviser makes a profit with respect to the management fees it receives from a Fund. We will benefit accordingly from assets allocated to the Funds to the extent they result in profits to the advisers. (See "Charges and Deductions -- Annual Fund Operating Expenses" for information on the management fees paid to the advisers and the Statement of Additional Information for the Funds for information on the management fees paid by the adviser to sub-advisers.) The American Funds Global Small Capitalization Fund, the American Funds Growth Fund and the American Funds Growth-Income Fund have adopted a Distribution Plan under Rule 12b-1 of the Investment Company Act of 1940. A Fund's 12b-1 Plan, if any, is described in more detail in each Fund's prospectus. (See also "Charges and Deductions -- Annual Fund Operating Expenses.") Any payments we receive pursuant to a Fund's 12b-1 Plan are paid to us or our Distributor. Payments under a Fund's 12b-1 Plan decrease the Fund's investment return. We pay American Funds Distributors, Inc., principal underwriter for the American Funds Insurance Series, a percentage of all premiums allocated to the American Funds Global Small Capitalization Fund, the American Funds Growth Fund and the American Funds Growth-Income Fund for the services it provides in marketing the Funds' shares in connection with the Policies. SELECTION OF THE FUNDS We select the Funds offered through the Policy based on a number of criteria, including asset class coverage, the strength of the adviser's or sub-adviser's reputation and tenure, brand recognition, performance, and the capability and qualification of each investment firm. Another factor we consider during the selection process is whether the Fund's adviser or sub-adviser is one of our affiliates or whether the Fund, its adviser, its sub-adviser(s), or an affiliate will make payments to us or our affiliates. For additional information on these arrangements, see "Certain Payments We Receive with Regard to the Funds" above. In this regard, the profit distributions we receive from our affiliated investment advisers are a component of the total revenue that we consider in configuring the features and investment choices available in the variable insurance products that we and our affiliated insurance companies issue. Since we and our affiliated insurance companies may benefit more from the allocation of assets to portfolios advised by our affiliates than those that are not, we may be more inclined to offer portfolios advised by our affiliates in the variable insurance products we issue. We review the Funds periodically and may remove a Fund or limit its availability to new premium payments and/or transfers of cash value if we determine that the Fund no longer meets one or more of the selection criteria, and/or if the Fund has not attracted significant allocations from Policy Owners. WE DO NOT PROVIDE INVESTMENT ADVICE AND DO NOT RECOMMEND OR ENDORSE ANY PARTICULAR FUND. YOU BEAR THE RISK OF ANY DECLINE IN THE CASH VALUE OF YOUR POLICY RESULTING FROM THE PERFORMANCE OF THE FUNDS YOU HAVE CHOSEN. POLICY RIGHTS TRANSFERS Frequent requests from Policy Owners to transfer cash value may dilute the value of a Fund's shares if the frequent trading involves an attempt to take advantage of pricing inefficiencies created by a lag between a change in the value of the securities held by the Fund and the reflection of that change in the Fund's share price ("arbitrage trading"). Regardless of the existence of pricing inefficiencies, frequent transfers may also increase brokerage and administrative costs of the underlying Funds and may disrupt portfolio management strategy, requiring a Fund to maintain a high cash position and possibly resulting in lost investment opportunities and forced liquidations ("disruptive trading"). Accordingly, arbitrage trading and disruptive trading activities (referred to collectively as "market timing") may adversely affect the long-term performance of the Funds, which may in turn adversely affect Policy Owners and other persons who may have an interest in the Policies (e.g., beneficiaries). We have policies and procedures that attempt to detect and deter frequent transfers in situations where we determine there is a potential for arbitrage trading. Currently, we believe that such situations may be presented in the international, small-cap, and high-yield Funds (i.e., the BlackRock Strategic Value Portfolio, Julius Baer International Stock Portfolio, Morgan Stanley EAFE Index Portfolio, Russell 2000 Index Portfolio, T. Rowe Price Small Cap Growth Portfolio, Harris Oakmark International Portfolio, Lord Abbett Bond Debenture Portfolio, Met/AIM Small Cap Growth 10 Portfolio, MFS Research International Portfolio, Clarion Global Real Estate Portfolio, American Funds Global Small Capitalization Fund, JPMorgan Small Company Portfolio, Russell Aggressive Equity Fund, Russell Non-U.S. Fund, Van Eck Worldwide Emerging Markets Fund and Van Eck Worldwide Hard Assets Fund) and we monitor transfer activity in those Funds (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 transfer activity, such as examining the frequency and size of transfers into and out of the Monitored Portfolios within given periods of time. For example, we currently monitor transfer activity to determine if, for each category of international, small-cap, and high-yield Monitored Portfolios, in a 12-month period there were: (1) six or more transfers involving the given category; (2) cumulative gross transfers involving the given category that exceed the current Cash Value; and (3) two or more "round-trips" involving any Monitored Portfolio in the given category. A round-trip generally is defined as a transfer in followed by a transfer out within the next seven calendar days or a transfer out followed by a transfer in within the next seven calendar days, in either case subject to certain other criteria. We do not believe that other Funds present a significant opportunity to engage in arbitrage trading and therefore do not monitor transfer activity in those Funds. We may change the Monitored Portfolios at any time without notice in our sole discretion. In addition to monitoring transfer activity in certain Funds, we rely on the underlying Funds to bring any potential disruptive trading activity they identify to our attention for investigation on a case-by-case basis. We will also investigate any other harmful transfer activity that we identify from time to time. We may revise these policies and procedures in our sole discretion at any time without prior notice. AMERICAN FUNDS MONITORING POLICY. As a condition to making their portfolios available in our products, American Funds requires us to treat all American Funds portfolios as Monitored Portfolios under our current market timing and excessive trading policies and procedures. Further, American Funds requires us to impose additional specified monitoring criteria for all American Funds portfolios available under the Policy, regardless of the potential for arbitrage trading. We are required to monitor transfer activity in American Funds portfolios to determine if there were two or more transfers in followed by transfers out, in each case of a certain dollar amount or greater, in any 30- day period. A first violation of the American Funds monitoring policy will result in a written notice of violation; each additional violation will result in the imposition of a six-month restriction, during which period we will require all transfer requests to or from an American Funds portfolio to be submitted with an original signature. Further, as Monitored Portfolios, all American Funds portfolios also will be subject to our current market timing and excessive trading policies, procedures and restrictions (described below), and transfer restrictions may be imposed upon a violation of either monitoring policy. Our policies and procedures may result in transfer restrictions being applied to deter market timing. Currently, when we detect transfer activity in the Monitored Portfolios that exceeds our current transfer limits, or other transfer activity that we believe may be harmful to other Policy Owners or other persons who have an interest in the Policies, we require all future transfer requests to or from any Monitored Portfolios or other identified Portfolios under that Policy to be submitted either (i) in writing with an original signature or (ii) by telephone prior to 10:00 a.m. Transfers made under the dollar cost averaging program or the portfolio rebalancing program are not treated as transfers when we evaluate trading patterns for market timing. The detection and deterrence of harmful transfer activity involves judgments that are inherently subjective, such as the decision to monitor only those Funds that we believe are susceptible to arbitrage trading or the determination of the transfer limits. Our ability to detect and/or restrict such transfer activity may be limited by operational and technological systems, as well as our ability to predict strategies employed by Policy Owners to avoid such detection. Our ability to restrict such transfer activity may also be limited by provisions of the Policy. Accordingly, there is no assurance that we will prevent all transfer activity that may adversely affect Policy Owners and other persons with interests in the Policies. We do not accommodate market timing in any Funds and there are no arrangements in place to permit any Policy Owner to engage in market timing; we apply our policies and procedures without exception, waiver, or special arrangement. The Funds may have adopted their own policies and procedures with respect to frequent purchases and redemptions of their respective shares, and we reserve the right to enforce these policies and procedures. For example, Funds may assess a redemption fee (which we reserve the right to collect) on shares held for a relatively 11 short period. The prospectuses for the Funds describe any such policies and procedures, which may be more or less restrictive than the policies and procedures we have adopted. Although we may not have the contractual authority or the operational capacity to apply the frequent trading policies and procedures of the Funds, we have entered into a written agreement, as required by SEC regulation, with each Fund or its principal underwriter that obligates us to provide to the Fund promptly upon request certain information about the trading activity of individual Policy Owners, and to execute instructions from the Fund to restrict or prohibit further purchases or transfers by specific Policy Owners who violate the frequent trading policies established by the Fund. In addition, Policy Owners and other persons with interests in the Policies should be aware that the purchase and redemption orders received by the Funds are generally "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 policies and/or individual retirement plan participants. The omnibus nature of these orders may limit the Funds in their ability to apply their frequent trading policies and procedures. In addition, the other insurance companies and/or retirement plans may have different policies and procedures or may not have any such policies and procedures because of contractual limitations. For these reasons, we cannot guarantee that the Funds (and thus Policy Owners) will not be harmed by transfer activity relating to the other insurance companies and/or retirement plans that may invest in the Funds. If a Fund believes that an omnibus order reflects one or more transfer requests from Contract Owners engaged in disruptive trading activity, the Fund may reject the entire omnibus order. In accordance with applicable law, we reserve the right to modify or terminate the transfer privilege at any time. We also reserve the right to defer or restrict the transfer privilege at any time that we are unable to purchase or redeem shares of any of the Funds, including any refusal or restriction on purchases or redemptions of their shares as a result of their own policies and procedures on market timing activities (even if an entire omnibus order is rejected due to the market timing activity of a single Policy Owner). You should read the Fund prospectuses for more details. SEPARATE ACCOUNT CHARGES We will waive the following amount of the Mortality and Expense Risk Charge: the amount, if any, equal to the underlying fund expenses that are in excess of 0.68% for the Division investing in the Oppenheimer Capital Appreciation Portfolio, and that are in excess of 0.88% for the Division investing in the MFS Research International Portfolio. FEDERAL TAX MATTERS INTRODUCTION The following summary provides a general description of the Federal income tax considerations associated with the Policy and does not purport to be complete or to cover all situations. This discussion is not intended as tax advice. Counsel or other competent tax advisers should be consulted for more complete information. This discussion is based upon General American's understanding of the present Federal income tax laws as they are currently interpreted by the Internal Revenue Service. No representation is made as to the likelihood of continuation of the present Federal income tax laws or of the current interpretations by the Internal Revenue Service. IRS CIRCULAR 230 NOTICE: The tax information contained herein is not intended to (and cannot) be used by anyone to avoid IRS penalties. It is intended to support the sale of the Policy. The Policy Owner should seek tax advice based on the Policy Owner's particular circumstances from an independent tax adviser. TAX STATUS OF THE POLICY In order to qualify as a life insurance contract for Federal income tax purposes and to receive the tax treatment normally accorded life insurance contracts under Federal tax law, a Policy must satisfy certain requirements which are set forth in the Internal Revenue Code. Guidance as to how these requirements are to be applied is limited, in particular, with respect to joint and last survivor life insurance policies. Nevertheless, we believe that the Policies should satisfy the applicable requirements. However, the rules are not entirely clear with respect to Policies issued 12 on a substandard or guaranteed issue basis. We may take appropriate steps to bring the Policy into compliance with applicable requirements, and we reserve the right to restrict Policy transactions in order to do so. The insurance proceeds payable on the death of the insured will never be less than the minimum amount required for the Policy to be treated as life insurance under section 7702 of the Internal Revenue Code, as in effect on the date the Policy was issued. In some circumstances, owners of variable contracts who retain excessive control over the investment of the underlying separate account assets may be treated as the owners of those assets. Although published guidance in this area does not address certain aspects of the Policies, we believe that the Owner of a Policy should not be treated as the owner of the Separate Account assets. We reserve the right to modify the Policies to bring them into conformity with applicable standards should such modification be necessary to prevent Owners of the Policies from being treated as the owners of the underlying Separate Account assets. In addition, the Code requires that the investments of the Separate Account be "adequately diversified" in order for the Policies to be treated as life insurance contracts for Federal income tax purposes. It is intended that the Separate Account, through the Eligible Funds, will satisfy these diversification requirements. If Eligible Fund shares are sold directly to either non-qualified plans or to tax-qualified retirement plans that later lose their tax qualified status, the variable account investing in the Eligible Fund may fail the diversification requirements of Section 817(h) of the Internal Revenue Code. This could have adverse tax consequences for variable life insurance owners, including losing the benefit of tax deferral. The following discussion assumes that the Policy will qualify as a life insurance contract for Federal income tax purposes. 1. TAX TREATMENT OF POLICY BENEFITS. In general, the Company believes that the proceeds and Cash Value increases of a Policy should be treated in a manner consistent with a fixed-benefit life insurance policy for Federal income tax purposes. Thus, the death benefit under the Policy should be excludable from the gross income of the Beneficiary to the extent provided in under Section 101 of the Code. In the case of employer-owned life insurance as defined in Section 101(j), the amount of the death benefit excludable from gross income is limited to premiums paid unless the Policy falls within certain specified exceptions and a notice and consent requirement is satisfied before the Policy is issued. Certain specified exceptions are based on the status of an employee as highly compensated or recently employed. There are also exceptions for Policy proceeds paid to an employee's heirs. These exceptions only apply if proper notice is given to the insured employee and consent is received from the insured employee before the issuance of the Policy. These rules apply to Policies issued August 18, 2006 and later and also apply to policies issued before August 18, 2006 after a material increase in the death benefit or other material change. An IRS reporting requirement applies to employer-owned life insurance subject to these rules. Because these rules are complex and will affect the tax treatment of death benefits, it is advisable to consult tax counsel. The death benefit will also be taxable in the case of a transfer-for-value unless certain exceptions apply. Many changes or transactions involving a Policy may have tax consequences, depending on the circumstances. Such changes include, but are not limited to, the exchange of the Policy, a change of the Policy's Face Amount, a Policy Loan, an additional premium payment, a Policy lapse with an outstanding Policy Loan, a partial withdrawal, or a surrender of the Policy. The transfer of the Policy or designation of a Beneficiary may have Federal, state, and/or local transfer and inheritance tax consequences, including the imposition of gift, estate, and generation-skipping transfer taxes. For example, the transfer of the Policy to, or the designation as a Beneficiary of, or the payment of proceeds to, a person who is assigned to a generation which is two or more generations below the generation assignment of the Owner may have generation skipping transfer tax consequences under Federal tax law. The individual situation of each Owner or Beneficiary will determine the extent, if any, to which Federal, state, and local transfer and inheritance taxes may be imposed and how ownership or receipt of Policy proceeds will be treated for purposes of Federal, state and local estate, inheritance, generation skipping and other taxes. A Policy may also be used in various arrangements, including non-qualified deferred compensation or salary continuation plans, split dollar insurance plans, executive bonus plans, retiree medical benefit plans and others. The tax consequences of such plans may vary depending on the particular facts and circumstances of each individual arrangement. Therefore, if you are contemplating the use of a Policy in any arrangement the value of which depends in part on its tax consequences, you should be sure to consult a qualified tax adviser regarding the tax attributes of the particular arrangement. 13 Generally, the Owner will not be deemed to be in constructive receipt of the Policy's Cash Value, including increments thereof, under the Policy until there is a distribution. Under a complete surrender or lapse of any Policy, if the amount received plus the amount of outstanding Indebtedness exceeds the total investments in the Policy, the excess will generally be treated as ordinary income subject to tax. The tax consequences of other distributions from, and Policy Loans taken from or secured by, a Policy depend upon whether the Policy is classified as a "modified endowment contract". 2. MODIFIED ENDOWMENT CONTRACTS. A policy may be treated as a modified endowment contract depending upon the amount of premiums paid in relation to the death benefit provided under such Policy. The premium limitation rules for determining whether a Policy is a modified endowment contract are extremely complex. In general, however, a Policy will be a modified endowment contract if the accumulated premiums paid at any time during the first seven Policy Years exceed the sum of the net level premiums which would have been paid on or before such time if the Policy provided for paid-up future benefits after the payment of seven level annual premiums. In addition, if a Policy is "materially changed" it may cause such Policy to be treated as a modified endowment contract. The material change rules for determining whether a Policy is a modified endowment contract are also extremely complex. In general, however, the determination of whether a Policy will be a modified endowment contract after a material change generally depends upon the relationship among the death benefit at the time of such change, the Cash Value at the time of the change and the additional premiums paid in the seven Policy Years starting with the date on which the material change occurs. Moreover, a life insurance contract received in exchange for a life insurance contract classified as a modified endowment contract will also be treated as a modified endowment contract. A reduction in a Policy's benefits may also cause such Policy to become a modified endowment contract. Accordingly, a prospective Owner should contact a competent tax adviser before purchasing a Policy to determine the circumstances under which the Policy would be a modified endowment contract. In addition, an Owner should contact a competent tax adviser before paying any additional premiums or making any other change to, including an exchange of, a Policy to determine whether such premium or change would cause the Policy (or the new Policy in the case of an exchange) to be treated as a modified endowment contract. NOTE: MOST DESTINY POLICIES WERE MODIFIED ENDOWMENT CONTACTS FROM THE DATE OF ISSUE, THEREFORE, DISTRIBUTIONS FROM MOST DESTINY POLICIES ARE TAXED AS FOLLOWS: 3. DISTRIBUTIONS FROM POLICIES CLASSIFIED AS MODIFIED ENDOWMENT CONTRACT. Policies classified as modified endowment contracts will be subject to the following tax rules: First, all distributions, including distributions upon surrender, from such a Policy are treated as ordinary income subject to tax up to the amount equal to the excess (if any) of the Cash Value immediately before the distribution over the investment in the Policy (described below) at such time. Second, Policy Loans taken from, or secured by, such a Policy, as well as due but unpaid interest thereon, are treated as distributions from such a Policy and taxed accordingly. Third, a 10 percent additional income tax is imposed on the portion of any distribution from, or Policy Loan taken from or secured by, such a Policy that is included in income, except where the distribution or Policy Loan (a) is made on or after the Owner attains age 59 1/2, (b) is attributable to the Owner's becoming disabled, or (c) is part of a series of substantially equal periodic payments for the life (or life expectancy) of the Owner or the joint lives (or joint life expectancies) of the Owner and the Owner's Beneficiary. 4. DISTRIBUTIONS FROM POLICIES NOT CLASSIFIED AS MODIFIED ENDOWMENT CONTRACT. Distributions from Policies not classified as a modified endowment contracts are generally treated as first recovering the investment in the Policy (described below) and then, only after the return of all such investment in the Policy, as distributing taxable income. An exception to this general rule occurs in the case of a decrease in the Policy's death benefit (possibly including a partial withdrawal) or any other change that reduces benefits under the Policy in the first 15 years after the Policy is issued and that results in cash distribution to the Owner in order for the Policy to continue complying with the Section 7702 definitional limits. Such a cash distribution will be taxed in whole or in part as ordinary income (to the extent of any gain in the Policy) under rules prescribed in Section 7702. Policy Loans from, or secured by, a Policy that is not a modified endowment contract should generally not be treated as distributions. Instead, such loans should generally be treated as indebtedness of the Owner. However, because the tax consequences associated with Policy Loans are not always clear, in particular, with respect to Policy Loans outstanding after the tenth Policy year, you should consult a tax adviser prior to taking any Policy Loan. 14 Upon a complete surrender or lapse of a Policy that is not a modified endowment contract, if the amount received plus the amount of indebtedness exceeds the total investment in the Policy, the excess will generally be treated as ordinary income subject to tax. Neither distributions (including distributions upon surrender or lapse) nor Policy Loans from, or secured by, a Policy that is not a modified endowment contract are subject to the 10 percent additional income tax. If a Policy which is not a modified endowment contract subsequently becomes a modified endowment contract, then any distribution made from the Policy within two years prior to the date of such change in status may become taxable. 5. POLICY LOANS. Generally, interest paid on any loan under a life insurance Policy is not deductible. AN OWNER SHOULD CONSULT A COMPETENT TAX ADVISER IF THE DEDUCTIBILITY OF LOAN INTEREST IS A CONSIDERATION IN THE PURCHASE OF A POLICY. If a Policy Loan is outstanding when a Policy is canceled or lapses, the amount of the outstanding Indebtedness will be added to the amount distributed and will be taxed accordingly. 6. INTEREST EXPENSE ON UNRELATED INDEBTEDNESS. Under provisions added to the Code in 1997 for policies issued after June 8, 1997, if a business taxpayer owns or is the beneficiary of a Policy on the life of any individual who is not an officer, director, employee, or 20 percent owner of the business, and the taxpayer also has debt unrelated to the Policy, a portion of the taxpayer's unrelated interest expense deductions may be lost. No business taxpayer should purchase, exchange, or increase the death benefit under a Policy on the life of any individual who is not an officer, director, employee, or 20 percent owner of the business without first consulting a competent tax adviser. 7. INVESTMENT IN THE POLICY. Investment in the Policy means (i) the aggregate amount of any premiums or other consideration paid for a Policy, minus (ii) the aggregate amount received under the Policy which is excluded from gross income of the Owner (except that the amount of any Policy Loan from, or secured by, a Policy that is a modified endowment contract, to the extent such amount is excluded from gross income, will be disregarded), plus (iii) the amount of any Policy Loan from, or secured by, a Policy that is a modified endowment contract to the extent that such amount is included in the gross income of the Owner. 8. MULTIPLE POLICES. All modified endowment contracts that are issued by the Company (or its affiliates) to the same Owner during any calendar year are treated as one modified endowment contract for purposes of determining the amount includible in gross income under Section 72(e) of the Code. 9. LIFE INSURANCE PURCHASES BY NONRESIDENT ALIENS AND FOREIGN CORPORATIONS. Policy Owners that are not U.S. citizens or residents will generally be subject to U.S. Federal withholding tax on taxable distributions from life insurance policies at a 30% rate, unless a lower treaty rate applies. In addition, Policy Owners may be subject to state and/or municipal taxes and taxes that may be imposed by the Policy Owner's country of citizenship or residence. 10. WITHHOLDING. To the extent that Policy distributions are taxable, they are generally subject to withholding for the recipient's Federal income tax liability. Recipients can generally elect, however, not to have tax withheld from distributions. 11. ESTATE, GIFT AND GENERATION-SKIPPING TRANSFER TAXES. The transfer of the Policy or the designation of a beneficiary may have Federal, state, and/or local transfer and inheritance tax consequences, including the imposition of gift, estate, and generation-skipping transfer taxes. When the insured dies, the death proceeds will generally be includable in the Policy Owner's estate for purposes of the Federal estate tax if the Policy Owner was the insured. If the Policy Owner was not the insured, the fair market value of the Policy would be included in the Policy Owner's estate upon the Policy Owner's death. The Policy would not be includable in the insured's estate if the insured neither retained incidents of ownership at death nor had given up ownership within three years before death. Moreover, under certain circumstances, the Internal Revenue Code may impose a "generation-skipping transfer tax" when all or part of a life insurance policy is transferred to, or a death benefit is paid to, an individual two or more generations younger than the Policy Owner. Regulations issued under the Internal Revenue Code may require us to deduct the tax from your Policy, or from any applicable payment, and pay it directly to the IRS. Qualified tax advisers should be consulted concerning the estate and gift tax consequences of Policy ownership and distributions under Federal, state and local law. The individual situation of each Policy Owner or beneficiary will determine the extent, if any, to which Federal, state, and local transfer and inheritance taxes may be imposed and 15 how ownership or receipt of Policy proceeds will be treated for purposes of Federal, state and local estate, inheritance, generation-skipping and other taxes. The Economic Growth and Tax Relief Reconciliation Act of 2001 ("EGTRRA") repeals the Federal estate tax and replaces it with a carryover basis income tax regime effective for estates of decedents dying after December 31, 2009. EGTRRA also repeals the generation-skipping transfer tax, but not the gift tax, for transfers made after December 31, 2009. EGTRRA contains a sunset provision, which essentially returns the Federal estate, gift and generation-skipping transfer taxes to their pre-EGTRRA form, beginning in 2011. Congress may or may not enact permanent repeal between now and then. During the period prior to 2010, EGTRRA provides for periodic decreases in the maximum estate tax rate coupled with periodic increases in the estate tax exemption. The maximum estate tax rate for 2007-2009 is 45%. The estate tax exemption is $2,000,000 for 2006-2008 and $3,500,000 in 2009. The complexity of the new tax law, along with uncertainty as to how it might be modified in coming years, underscores the importance of seeking guidance from a qualified adviser to help ensure that your estate plan adequately addresses your needs and those of your beneficiaries under all possible scenarios. 12. CONTINUATION OF POLICY BEYOND ATTAINED AGE 100. The tax consequences of continuing the Policy beyond the Insured's Attained Age 100 birthday are unclear. You should consult a tax adviser if you intend to keep the Policy in force beyond the Insured's Attained Age 100. 13. Ownership of the Policy by a corporation, trust or other non-natural person could jeopardize some (or all) of such entity's interest deduction under Internal Revenue Code Section 264, even where such entity's indebtedness is in no way connected to the Policy. In addition, under Section 264(f)(5), if a business (other than a sole proprietorship) is directly or indirectly a beneficiary of the Policy, the Policy could be treated as held by the business for purposes of the Section 264(f) entity-holder rules. Therefore, it would be advisable to consult with a qualified tax adviser before any non-natural person is made an owner or holder of the Policy, or before a business (other than a sole proprietorship) is made a beneficiary of the Policy. 14. GUIDANCE ON SPLIT DOLLAR PLANS. The IRS has issued guidance on split dollar insurance plans. A tax adviser should be consulted with respect to this guidance if your Policy is, or may become, subject to a split dollar insurance plan. If your Policy is part of an equity split dollar arrangement taxed under the economic benefit regime, there is a risk that some portion of the Policy cash value may be taxed prior to any Policy distribution. In addition, the Sarbanes-Oxley Act of 2002 (the "Act") which was signed into law on July 30, 2002, prohibits, with exceptions, publicly-traded companies, including non-U.S. companies that have securities listed on U.S. exchanges, from extending, directly or indirectly or through a subsidiary, many types of personal loans to their directors or executive officers. It is possible that this prohibition may be interpreted to apply to split-dollar life insurance arrangements for directors and executive officers of such companies, since such arrangements can arguably be viewed as involving a loan from the employer for at least some purposes. Any affected business contemplating the payment of a premium on an existing Policy or the purchase of new Policy in connection with a split-dollar life insurance arrangement should consult legal counsel. Split dollar insurance plans that provide deferred compensation may be subject to recently enacted rules governing deferred compensation arrangements. Failure to adhere to these rules will result in adverse tax consequences. A tax adviser should be consulted with respect to such plans. 15. ALTERNATIVE MINIMUM TAX. There may also be an indirect tax upon the income in the Policy or the proceeds of a Policy under the Federal corporate alternative minimum tax, if the Owner is subject to that tax. 16. PUERTO RICO. We believe that Policies subject to Puerto Rican tax law will generally receive treatment similar, with certain modifications, to that described above. Among other differences, Policies governed by Puerto Rican tax law are not currently subject to the rules described above regarding Modified Endowment Contracts. You should consult your tax adviser with respect to Puerto Rican tax law governing the Policies. 17. POSSIBLE TAX LAW CHANGES. Although the likelihood of legislative changes is uncertain, there is always the possibility that the tax treatment of the Policy could change by legislation or otherwise. Consult a tax adviser with respect to legislative developments and their effect on the Policy. 16 18. FOREIGN TAX CREDITS. To the extent permitted under Federal tax law, we may claim the benefit of certain foreign tax credits attributable to taxes paid by certain Eligible Funds to foreign jurisdictions. 19. POSSIBLE CHARGE FOR TAXES. At the present time, the Company makes no charge to the Separate Account for any Federal, state, or local taxes (as opposed to Premium Tax Charges which are deducted from premium payments) that it incurs which may be attributable to such Separate Account or to the Policies. The Company, however, reserves the right in the future to make a charge for any such tax or other economic burden resulting from the application of the tax laws that it determines to be properly attributable to the Separate Account or to the Policies. MANAGEMENT The directors and executive officers of General American Life Insurance Company and their principal business experience are: DIRECTORS OF GENERAL AMERICAN
NAME AND PRINCIPAL BUSINESS ADDRESS PRINCIPAL BUSINESS EXPERIENCE ----------------------------------- ----------------------------- Michael K. Farrell* Director of General American since 2003 and Senior Vice President of Metropolitan Life Insurance Company since 2002. James L. Lipscomb** Director of General American since 2002 and Executive Vice-President and General Counsel of Metropolitan Life Insurance Company since 2003. Formerly, Senior Vice President and Deputy General Counsel 2001-2003 of Metropolitan Life. William J. Mullaney** Director of NELICO since 2007 and President of Institutional Business at Metropolitan Life Insurance Company since 2007. Formerly President 2004-2007 of Metropolitan Property and Casualty. Stanley J. Talbi** Director of General American since 2002 and Senior Vice President of Metropolitan Life Insurance Company since 1974. Michael J. Vietri**** Director of NELICO since 2005 and Executive Vice President of Metropolitan Life Insurance Company since 2005. Formerly, Senior Vice President 1999-2004 of Metropolitan Life Insurance Company. Lisa M. Weber** Chairman of the Board, President and Chief Executive Officer of General American since 2004 and President, Individual Business of Metropolitan Life Insurance Company since 2004; formerly, Director of General American since 2000 and Senior Executive Vice President and Chief Administrative Officer 2001- 2004. William J. Wheeler** Director of General American since 2002 and Executive Vice President and Chief Financial Officer of Metropolitan Life Insurance Company since 2003. Formerly, Senior Vice President 1997-2003 of Metropolitan Life.
17 EXECUTIVE OFFICERS OF GENERAL AMERICAN OTHER THAN DIRECTORS
NAME AND PRINCIPAL BUSINESS ADDRESS PRINCIPAL BUSINESS EXPERIENCE ----------------------------------- ----------------------------- Joseph J. Prochaska, Jr.** Executive Vice President and Chief Accounting Officer of NELICO since 2006 and Executive Vice President and Chief Accounting Officer of Metropolitan Life Insurance Company since 2006. Formerly Senior Vice President and Chief Accounting Officer 2004-2006 of NELICO and Senior Vice President and Chief Accounting Officer 2003-2006 of Metropolitan Life. Senior Vice President and Controller 2000-2003 of Aon Corporation.
--------------- The principal business address: * Metropolitan Life, 10 Park Avenue, Morristown, NJ 07962 ** Metropolitan Life, One MetLife Plaza, 27-01 Queens Plaza, North, Long Island City, NY 11101 *** Metropolitan Life, 501 Boylston Street, Boston, MA 02116 **** Metropolitan Life, 177 South Commons Drive, Aurora, IL 60504 VOTING RIGHTS Based on its understanding of current applicable legal requirements, the Company will vote the shares of the Funds held in the Separate Account at regular and special shareholder meetings of the mutual funds in accordance with the instructions received from persons having voting interests in the corresponding Divisions of the Separate Account. If, however, the 1940 Act or any regulation thereunder should be amended or if the present interpretation thereof should change, and as a result the Company determines that it is permitted to vote shares of the Fund in its own right, it may elect to do so. No voting privileges apply to the Policies with respect to Cash Value removed from the Separate Account as a result of a Policy Loan. The number of votes which an Owner has the right to instruct will be calculated separately for each Division. Voting rights reflect the dollar value of the total number of units of each Division of the Separate Account credited to the Owner at the record date, rather than the number of units alone. Fractional shares will be counted. The number of votes of the Fund which the Owner has the right to instruct will be determined as of the date coincident with the date established by that Fund for determining shareholders eligible. Voting instructions will be solicited by written communications prior to such meeting in accordance with procedures established by the mutual funds. The company will vote shares of a Fund for which no timely instructions are received in proportion to the voting instructions which are received with respect to that Fund. The Company will also vote any shares of the Funds which are not attributable to Policies in the same proportion. The effect of this proportional voting is that a smaller number of Policy Owners may control the outcome of a vote. Each person having a voting interest in a Division will receive any proxy material, reports, and other materials relating to the appropriate Fund. DISREGARD OF VOTING INSTRUCTIONS. The Company may, when required by state insurance regulatory authorities, disregard voting instructions if the instructions require that the shares be voted so as to cause a change in the subclassification or investment objective of the Fund or to approve or disapprove an investment Advisory contract for a Fund. In addition, the Company itself may disregard voting instructions in favor of changes initiated by an Owner in the investment policy or the investment adviser or sub-adviser of a Fund if the Company reasonably disapproves of such changes. A proposed change would be disapproved only if the proposed change is contrary to state law or prohibited by state regulatory authorities, or the Company determined that the change would have an adverse effect on its General Account in that the proposed investment policy for a Fund may result in overly speculative or unsound investments. If the Company disregards voting instructions, a summary of that action and the reasons for such action will be included in the next annual report to Owners. 18 RESTRICTIONS ON FINANCIAL TRANSACTIONS Applicable laws designed to counter terrorism and prevent money laundering might, in certain circumstances, require us to reject a premium payment and/or block or "freeze" your Policy. If these laws apply in a particular situation, we would not be allowed to process any request for withdrawals, surrenders, loans or death benefits, make transfers or continue making payments under your death benefit option until instructions are received from the appropriate regulator. We also may be required to provide additional information about you or your Policy to government regulators. LEGAL PROCEEDINGS In the ordinary course of business, General American, 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. In addition, in May 2004, General American received a Wells Notice stating that the SEC staff was considering recommending that the SEC bring a civil action alleging violations of the U.S. securities laws against General American with respect to market timing and late trading in a limited number of privately-placed variable insurance contracts that were sold through General American. General American responded to the SEC staff and cooperated with the investigation. On August 9, 2007, the SEC announced that it had settled an enforcement action regarding late trading against General American with, among other things, General American agreeing to pay a civil penalty and to comply with certain undertakings. General American consented to the SEC's order without admitting or denying the findings. It is not possible to predict with certainty the ultimate outcome of any pending legal proceeding or regulatory action. However, General American does not believe any such action or proceeding will have a material adverse effect upon the Separate Account or upon the ability of MetLife Investors Distribution Company to perform its contract with the Separate Account or of General American to meet its obligations under the Contracts. INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The financial statements of each of the Divisions of General American Separate Account Eleven included in this Prospectus Supplement have been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report appearing herein, and are included in reliance upon the report of such firm given upon their authority as experts in accounting and auditing. The principal address of Deloitte & Touche LLP is 201 East Kennedy Boulevard, Suite 1200, Tampa, Florida 33602-5827. The consolidated financial statements of General American Life Insurance Company (the "Company") included in this Prospectus Supplement have been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report appearing herein (which report expresses an unqualified opinion and includes an explanatory paragraph referring to the fact that the Company changed its method of accounting for deferred acquisition costs, and for income taxes, as required by accounting guidance adopted on January 1, 2007, and changed its method of accounting for defined benefit pension and other postretirement plans, as required by accounting guidance adopted on December 31, 2006), and are included in reliance upon the report of such firm given upon their authority as experts in accounting and auditing. The principal address of Deloitte & Touche LLP is 201 East Kennedy Boulevard, Suite 1200, Tampa, Florida 33602-5827. FINANCIAL STATEMENTS The financial statements of General American which are included in this prospectus supplement should be distinguished from the financial statements of the Separate Account, which are also included in this prospectus supplement, and should be considered only as bearing on the ability of General American to meet its obligations under the Policy. They should not be considered as bearing on the investment performance of the assets held in the Separate Account. 19 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Policy Owners of General American Separate Account Eleven and the Board of Directors of General American Life Insurance Company: We have audited the accompanying statements of assets and liabilities of General American Separate Account Eleven (the "Separate Account") of General American Life Insurance Company (the "Company") comprising each of the individual Divisions as listed in Appendix A as of December 31, 2007, and the related statements of operations and changes in net assets for each of the periods in the three years then ended. These financial statements are the responsibility of the Separate Account's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Separate Account is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Separate Account's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2007, by correspondence with the custodian. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of each of the Divisions constituting the Separate Account of the Company as of December 31, 2007, the results of their operations, and the changes in their net assets for each of the periods presented in the three years then ended, in conformity with accounting principles generally accepted in the United States of America. /S/ DELOITTE & TOUCHE LLP Certified Public Accountants Tampa, FL March 24, 2008 AA-1 APPENDIX A Fidelity VIP Equity-Income Division Fidelity VIP Growth Division Fidelity VIP Overseas Division Fidelity VIP Mid Cap Division Van Eck Worldwide Hard Assets Division Van Eck Worldwide Emerging Markets Division Russell Multi-Style Equity Division Russell Core Bond Division Russell Aggressive Equity Division Russell Non-US Division J.P. Morgan Bond Division J.P. Morgan Small Company Division MSF FI Mid Cap Opportunities Division MSF T. Rowe Price Small Cap Growth Division MSF T. Rowe Price Large Cap Growth Division MSF Neuberger Berman Mid Cap Value Division MSF FI International Stock Division MSF Morgan Stanley EAFE Index Division MSF MetLife Stock Index Division MSF MetLife Mid Cap Stock Index Division MSF BlackRock Large Cap Value Division MSF BlackRock Diversified Division MSF Lehman Brothers Aggregate Bond Index Division MSF BlackRock Strategic Value Division MSF Russell 2000 Index Division MSF Harris Oakmark Large Cap Value Division MSF BlackRock Legacy Large Cap Growth Division MSF Harris Oakmark Focused Value Division MSF Davis Venture Value Division MSF BlackRock Money Market Division MSF BlackRock Bond Income Division MSF BlackRock Aggressive Growth Division MSF MFS Total Return Division MSF Western Asset Management U.S. Government Division MSF MetLife Conservative Allocation Division MSF MetLife Conservative to Moderate Allocation Division MSF MetLife Moderate Allocation Division MSF MetLife Moderate to Aggressive Allocation Division MSF MetLife Aggressive Allocation Division MIST Legg Mason Partners Aggressive Growth Division MIST RCM Technology Division MIST PIMCO Total Return Division MIST T. Rowe Price Mid-Cap Growth Division MIST Met/AIM Small Cap Growth Division MIST Lazard Mid-Cap Division MIST Harris Oakmark International Division MIST Lord Abbett Growth and Income Division MIST Lord Abbett Mid-Cap Value Division MIST MFS Research International Division MIST Neuberger Berman Real Estate Division MIST Lord Abbett Bond Debenture Division MIST Oppenheimer Capital Appreciation Division American Funds Growth Division American Funds Growth-Income Division American Funds Global Small Capitalization Division AA-2 (This page intentionally left blank) AA-3 GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN OF GENERAL AMERICAN LIFE INSURANCE COMPANY STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 2007
VAN ECK FIDELITY VIP FIDELITY VIP FIDELITY VIP FIDELITY VIP WORLDWIDE EQUITY-INCOME GROWTH OVERSEAS MID CAP HARD ASSETS DIVISION DIVISION DIVISION DIVISION DIVISION --------------- --------------- --------------- --------------- --------------- ASSETS: Investments at fair value...... $ 27,752,097 $ 44,065,300 $ 17,709,293 $ 11,556,552 $ 5,865,538 Other receivables.............. -- 210 17 -- -- Due from General American Life Insurance Company........... -- 110,637 42,166 17,834 14,055 --------------- --------------- --------------- --------------- --------------- Total Assets.............. 27,752,097 44,176,147 17,751,476 11,574,386 5,879,593 --------------- --------------- --------------- --------------- --------------- LIABILITIES: Other payables................. 28 -- -- 200 -- Due to General American Life Insurance Company........... 3,061 -- -- -- -- --------------- --------------- --------------- --------------- --------------- Total Liabilities......... 3,089 -- -- 200 -- --------------- --------------- --------------- --------------- --------------- NET ASSETS....................... $ 27,749,008 $ 44,176,147 $ 17,751,476 $ 11,574,186 $ 5,879,593 =============== =============== =============== =============== =============== Units outstanding.............. 1,071,060 2,023,528 700,146 448,007 124,072 Unit value (accumulation)...... $15.39 - $39.72 $12.19 - $38.34 $17.04 - $34.92 $25.10 - $26.89 $41.44 - $56.62 VAN ECK WORLDWIDE EMERGING MARKETS DIVISION ---------------- ASSETS: Investments at fair value...... $ 5,548,388 Other receivables.............. -- Due from General American Life Insurance Company........... 11,054 --------------- Total Assets.............. 5,559,442 --------------- LIABILITIES: Other payables................. -- Due to General American Life Insurance Company........... -- --------------- Total Liabilities......... -- --------------- NET ASSETS....................... $ 5,559,442 =============== Units outstanding.............. 113,785 Unit value (accumulation)...... $40.34 - $63.87
The accompanying notes are an integral part of these financial statements. AA-4
RUSSELL RUSSELL RUSSELL RUSSELL J.P. MORGAN J.P. MORGAN MULTI-STYLE EQUITY CORE BOND AGGRESSIVE EQUITY NON-US BOND SMALL COMPANY DIVISION DIVISION DIVISION DIVISION DIVISION DIVISION ------------------ --------------- ----------------- --------------- --------------- --------------- $ 5,860,973 $ 1,944,613 $ 2,758,950 $ 2,662,878 $ 3,329,754 $ 3,559,207 -- -- -- -- -- -- -- 223 4,652 -- -- 4,948 --------------- --------------- --------------- --------------- --------------- --------------- 5,860,973 1,944,836 2,763,602 2,662,878 3,329,754 3,564,155 --------------- --------------- --------------- --------------- --------------- --------------- -- -- -- -- -- -- 617 -- -- 363 -- -- --------------- --------------- --------------- --------------- --------------- --------------- 617 -- -- 363 -- -- --------------- --------------- --------------- --------------- --------------- --------------- $ 5,860,356 $ 1,944,836 $ 2,763,602 $ 2,662,515 $ 3,329,754 $ 3,564,155 =============== =============== =============== =============== =============== =============== 334,463 115,267 136,128 130,428 234,905 188,190 $12.94 - $20.04 $15.55 - $17.97 $14.70 - $22.69 $17.62 - $20.79 $13.58 - $15.06 $16.52 - $19.87 MSF MSF MSF FI MID CAP T. ROWE PRICE T. ROWE PRICE OPPORTUNITIES SMALL CAP GROWTH LARGE CAP GROWTH DIVISION DIVISION DIVISION ------------- ---------------- ---------------- $ 2,943,278 $ 7,556,573 $ 4,416,991 -- -- -- 4,474 13,430 -- -------------- --------------- --------------- 2,947,752 7,570,003 4,416,991 -------------- --------------- --------------- -- -- -- -- -- 48,438 -------------- --------------- --------------- -- -- 48,438 -------------- --------------- --------------- $ 2,947,752 $ 7,570,003 $ 4,368,553 ============== =============== =============== 443,540 657,664 349,476 $6.37 - $16.74 $10.96 - $15.41 $11.67 - $15.71
The accompanying notes are an integral part of these financial statements. AA-5 GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN OF GENERAL AMERICAN LIFE INSURANCE COMPANY STATEMENT OF ASSETS AND LIABILITIES -- (CONTINUED) DECEMBER 31, 2007
MSF MSF MSF MSF MSF NEUBERGER BERMAN FI INTERNATIONAL MORGAN STANLEY METLIFE STOCK METLIFE MID CAP MID CAP VALUE STOCK EAFE INDEX INDEX STOCK INDEX DIVISION DIVISION DIVISION DIVISION DIVISION ---------------- ---------------- --------------- --------------- --------------- ASSETS: Investments at fair value..... $ 3,968,619 $ 4,251,407 $ 12,035,963 $ 81,429,880 $ 1,251,733 Other receivables............. -- -- -- -- -- Due from General American Life Insurance Company.......... 1,026 -- 21,524 91,975 59 --------------- --------------- --------------- --------------- --------------- Total Assets............. 3,969,645 4,251,407 12,057,487 81,521,855 1,251,792 --------------- --------------- --------------- --------------- --------------- LIABILITIES: Other payables................ 173 -- -- 9 -- Due to General American Life Insurance Company.......... -- -- -- -- -- --------------- --------------- --------------- --------------- --------------- Total Liabilities........ 173 -- -- 9 -- --------------- --------------- --------------- --------------- --------------- NET ASSETS...................... $ 3,969,472 $ 4,251,407 $ 12,057,487 $ 81,521,846 $ 1,251,792 =============== =============== =============== =============== =============== Units outstanding............. 220,140 231,925 518,569 3,903,605 66,473 Unit value (accumulation)..... $17.74 - $18.66 $17.97 - $18.91 $17.95 - $33.14 $12.92 - $57.36 $16.87 - $20.37 MSF BLACKROCK LARGE CAP VALUE DIVISION --------------- ASSETS: Investments at fair value..... $ 9,179,125 Other receivables............. -- Due from General American Life Insurance Company.......... -- --------------- Total Assets............. 9,179,125 --------------- LIABILITIES: Other payables................ -- Due to General American Life Insurance Company.......... 48,291 --------------- Total Liabilities........ 48,291 --------------- NET ASSETS...................... $ 9,130,834 =============== Units outstanding............. 307,864 Unit value (accumulation)..... $15.71 - $54.50
The accompanying notes are an integral part of these financial statements. AA-6
MSF LEHMAN BROTHERS MSF MSF BLACKROCK MSF BLACKROCK AGGREGATE MSF BLACKROCK MSF RUSSELL HARRIS OAKMARK LEGACY LARGE DIVERSIFIED BOND INDEX STRATEGIC VALUE 2000 INDEX LARGE CAP VALUE CAP GROWTH DIVISION DIVISION DIVISION DIVISION DIVISION DIVISION ------------- --------------- --------------- --------------- --------------- -------------- $ 9,751,729 $ 12,407,109 $ 12,150,528 $ 4,810,446 $ 4,225,983 $ 3,067,425 -- 9 -- -- -- -- 13,470 69,703 19,116 2,540 5,957 -- --------------- --------------- --------------- --------------- --------------- -------------- 9,765,199 12,476,821 12,169,644 4,812,986 4,231,940 3,067,425 --------------- --------------- --------------- --------------- --------------- -------------- -- -- -- -- -- -- -- -- -- -- -- 61 --------------- --------------- --------------- --------------- --------------- -------------- -- -- -- -- -- 61 --------------- --------------- --------------- --------------- --------------- -------------- $ 9,765,199 $ 12,476,821 $ 12,169,644 $ 4,812,986 $ 4,231,940 $ 3,067,364 =============== =============== =============== =============== =============== ============== 420,566 662,785 571,336 311,670 333,080 322,539 $14.15 - $50.00 $13.24 - $33.89 $14.84 - $22.35 $15.04 - $16.35 $12.48 - $13.13 $8.79 - $14.61 MSF HARRIS OAKMARK MSF DAVIS MSF BLACKROCK FOCUSED VALUE VENTURE VALUE MONEY MARKET DIVISION DIVISION DIVISION --------------- --------------- --------------- $ 5,626,697 $ 9,879,733 $ 17,186,091 -- -- -- 3,281 38,685 6,736 --------------- --------------- --------------- 5,629,978 9,918,418 17,192,827 --------------- --------------- --------------- 43 -- -- -- -- -- --------------- --------------- --------------- 43 -- -- --------------- --------------- --------------- $ 5,629,935 $ 9,918,418 $ 17,192,827 =============== =============== =============== 341,782 610,268 1,215,445 $14.68 - $17.42 $15.84 - $16.67 $11.63 - $22.24
The accompanying notes are an integral part of these financial statements. AA-7 GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN OF GENERAL AMERICAN LIFE INSURANCE COMPANY STATEMENT OF ASSETS AND LIABILITIES -- (CONTINUED) DECEMBER 31, 2007
MSF WESTERN MSF METLIFE MSF BLACKROCK MSF BLACKROCK MSF ASSET MANAGEMENT CONSERVATIVE BOND INCOME AGGRESSIVE GROWTH MFS TOTAL RETURN U.S. GOVERNMENT ALLOCATION DIVISION DIVISION DIVISION DIVISION DIVISION ------------- ----------------- ---------------- ----------------- ------------ ASSETS: Investments at fair value..... $ 2,431,468 $ 5,769,347 $ 4,643,661 $ 370,445 $10,538 Other receivables............. -- -- -- -- -- Due from General American Life Insurance Company.......... 159 25,920 -- -- -- --------------- --------------- --------------- ----------------- ------- Total Assets............. 2,431,627 5,795,267 4,643,661 370,445 10,538 --------------- --------------- --------------- ----------------- ------- LIABILITIES: Other payables................ -- -- -- -- -- Due to General American Life Insurance Company.......... -- -- -- 2,645 -- --------------- --------------- --------------- ----------------- ------- Total Liabilities........ -- -- -- 2,645 -- --------------- --------------- --------------- ----------------- ------- NET ASSETS...................... $ 2,431,627 $ 5,795,267 $ 4,643,661 $ 367,800 $10,538 =============== =============== =============== ================= ======= Units outstanding............. 187,044 320,136 260,624 1,918 89 Unit value (accumulation)..... $12.72 - $13.38 $13.14 - $23.18 $14.46 - $23.03 $183.05 - $205.98 $118.09 MSF METLIFE CONSERVATIVE TO MODERATE ALLOCATION DIVISION --------------- ASSETS: Investments at fair value..... $ 201 Other receivables............. -- Due from General American Life Insurance Company.......... 4 ------- Total Assets............. 205 ------- LIABILITIES: Other payables................ -- Due to General American Life Insurance Company.......... 8 ------- Total Liabilities........ 8 ------- NET ASSETS...................... $ 197 ======= Units outstanding............. 2 Unit value (accumulation)..... $122.74
The accompanying notes are an integral part of these financial statements. AA-8
MSF METLIFE MSF METLIFE MODERATE TO MSF METLIFE MIST MIST MODERATE AGGRESSIVE AGGRESSIVE LEGG MASON PARTNERS MIST MIST T. ROWE PRICE ALLOCATION ALLOCATION ALLOCATION AGGRESSIVE GROWTH RCM TECHNOLOGY PIMCO TOTAL RETURN MID-CAP GROWTH DIVISION DIVISION DIVISION DIVISION DIVISION DIVISION DIVISION ----------- ----------- ----------- ------------------- -------------- ------------------ --------------- $189,022 $407,825 $98,378 $ 538,597 $ 753,802 $ 10,946,634 $ 4,292,133 -- -- -- -- -- -- -- -- -- -- -- 148 -- 869 -------- -------- ------- -------------- -------------- --------------- --------------- 189,022 407,825 98,378 538,597 753,950 10,946,634 4,293,002 -------- -------- ------- -------------- -------------- --------------- --------------- -- -- -- -- -- -- -- 27 35 -- -- -- 10,266 -- -------- -------- ------- -------------- -------------- --------------- --------------- 27 35 -- -- -- 10,266 -- -------- -------- ------- -------------- -------------- --------------- --------------- $188,995 $407,790 $98,378 $ 538,597 $ 753,950 $ 10,936,368 $ 4,293,002 ======== ======== ======= ============== ============== =============== =============== 1,483 3,082 727 59,354 83,269 819,622 270,595 $ 127.44 $ 132.32 $135.38 $8.31 - $12.46 $8.36 - $14.59 $12.98 - $13.65 $15.45 - $17.07 MIST MET/AIM MIST SMALL CAP GROWTH LAZARD MID-CAP DIVISION DIVISION ---------------- --------------- $ 1,326,575 $ 837,059 -- -- 63 2,747 --------------- --------------- 1,326,638 839,806 --------------- --------------- -- -- -- -- --------------- --------------- -- -- --------------- --------------- $ 1,326,638 $ 839,806 =============== =============== 86,980 56,738 $14.87 - $16.11 $14.38 - $15.13
The accompanying notes are an integral part of these financial statements. AA-9 GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN OF GENERAL AMERICAN LIFE INSURANCE COMPANY STATEMENT OF ASSETS AND LIABILITIES -- (CONCLUDED) DECEMBER 31, 2007
MIST MIST MIST MIST HARRIS OAKMARK LORD ABBETT LORD ABBETT MFS RESEARCH INTERNATIONAL GROWTH AND INCOME MID-CAP VALUE INTERNATIONAL DIVISION DIVISION DIVISION DIVISION --------------- ----------------- --------------- --------------- ASSETS: Investments at fair value........... $ 9,056,079 $ 2,045,058 $ 2,896,558 $ 4,674,310 Other receivables................... 1 -- -- -- Due from General American Life Insurance Company................ -- 66 -- 22,286 --------------- --------------- --------------- --------------- Total Assets................... 9,056,080 2,045,124 2,896,558 4,696,596 --------------- --------------- --------------- --------------- LIABILITIES: Other payables...................... -- -- -- -- Due to General American Life Insurance Company................ 6,794 -- -- -- --------------- --------------- --------------- --------------- Total Liabilities.............. 6,794 -- -- -- --------------- --------------- --------------- --------------- NET ASSETS............................ $ 9,049,286 $ 2,045,124 $ 2,896,558 $ 4,696,596 =============== =============== =============== =============== Units outstanding................... 459,414 127,046 128,453 256,410 Unit value (accumulation)........... $19.36 - $20.37 $12.81 - $16.64 $19.19 - $23.38 $16.54 - $19.12 MIST NEUBERGER BERMAN REAL ESTATE DIVISION ----------------- ASSETS: Investments at fair value........... $ 1,980,546 Other receivables................... 213 Due from General American Life Insurance Company................ 106 ----------------- Total Assets................... 1,980,865 ----------------- LIABILITIES: Other payables...................... -- Due to General American Life Insurance Company................ -- ----------------- Total Liabilities.............. -- ----------------- NET ASSETS............................ $ 1,980,865 ================= Units outstanding................... 11,658 Unit value (accumulation)........... $167.58 - $173.19
The accompanying notes are an integral part of these financial statements. AA-10
MIST MIST AMERICAN FUNDS LORD ABBETT OPPENHEIMER AMERICAN FUNDS AMERICAN FUNDS GLOBAL SMALL BOND DEBENTURE CAPITAL APPRECIATION GROWTH GROWTH-INCOME CAPITALIZATION DIVISION DIVISION DIVISION DIVISION DIVISION ----------------- -------------------- --------------- --------------- --------------- $ 9,856,886 $ 5,516 $ 30,272,324 $ 17,497,553 $ 7,774,147 -- -- -- -- -- 827 41 11,570 12,868 -- ----------------- ------- --------------- --------------- --------------- 9,857,713 5,557 30,283,894 17,510,421 7,774,147 ----------------- ------- --------------- --------------- --------------- -- -- -- -- -- -- 20 -- -- 20,890 ----------------- ------- --------------- --------------- --------------- -- 20 -- -- 20,890 ----------------- ------- --------------- --------------- --------------- $ 9,857,713 $ 5,537 $ 30,283,894 $ 17,510,421 $ 7,753,257 ================= ======= =============== =============== =============== 45,574 48 1,743,283 1,169,131 295,374 $209.67 - $232.79 $115.51 $17.04 - $17.98 $14.70 - $15.46 $25.69 - $27.39
The accompanying notes are an integral part of these financial statements. AA-11 GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN OF GENERAL AMERICAN LIFE INSURANCE COMPANY STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2007, 2006, AND 2005
FIDELITY VIP FIDELITY VIP EQUITY-INCOME GROWTH DIVISION DIVISION --------------------------------------- --------------------------------------- 2007 2006 2005 2007 2006 2005 ----------- ---------- ---------- ---------- ---------- ----------- INVESTMENT INCOME: Dividends................................. $ 542,605 $ 956,881 $ 423,145 $ 308,612 $ 138,074 $ 186,475 ----------- ---------- ---------- ---------- ---------- ----------- EXPENSES: Mortality and expense risk charges........ 210,146 193,048 192,811 273,432 254,568 263,076 Administrative charges.................... -- -- -- -- -- -- ----------- ---------- ---------- ---------- ---------- ----------- Total expenses......................... 210,146 193,048 192,811 273,432 254,568 263,076 ----------- ---------- ---------- ---------- ---------- ----------- Net investment income (loss).............. 332,459 763,833 230,334 35,180 (116,494) (76,601) ----------- ---------- ---------- ---------- ---------- ----------- NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Realized gain distributions............... 2,391,536 3,514,567 929,873 32,278 -- -- Realized gains (losses) on sale of investments............................ 1,403,227 560,741 234,450 497,664 (614,843) (1,480,056) ----------- ---------- ---------- ---------- ---------- ----------- Net realized gains (losses)............ 3,794,763 4,075,308 1,164,323 529,942 (614,843) (1,480,056) ----------- ---------- ---------- ---------- ---------- ----------- Change in unrealized gains (losses) on investments............................ (3,464,208) 523,074 (29,623) 8,120,969 2,846,486 3,284,202 ----------- ---------- ---------- ---------- ---------- ----------- Net realized and unrealized gains (losses) on investments......................... 330,555 4,598,382 1,134,700 8,650,911 2,231,643 1,804,146 ----------- ---------- ---------- ---------- ---------- ----------- Net increase (decrease) in net assets resulting from operations.............. $ 663,014 $5,362,215 $1,365,034 $8,686,091 $2,115,149 $ 1,727,545 =========== ========== ========== ========== ========== ===========
(a) For the period May 1, 2005 to December 31, 2005. The accompanying notes are an integral part of these financial statements. AA-12
FIDELITY VIP FIDELITY VIP VAN ECK WORLDWIDE OVERSEAS MID CAP HARD ASSETS DIVISION DIVISION DIVISION -------------------------------------- --------------------------------------- ------------------------------------ 2007 2006 2005 2007 2006 2005 2007 2006 2005 ---------- ---------- ---------- ---------- ----------- ---------- ---------- -------- ---------- $ 553,613 $ 128,686 $ 90,155 $ 101,661 $ 41,202 $ -- $ 5,413 $ 2,267 $ 6,709 ---------- ---------- ---------- ---------- ----------- ---------- ---------- -------- ---------- 118,581 106,623 95,672 60,716 61,763 59,226 22,889 19,090 11,782 -- -- -- -- -- -- -- -- -- ---------- ---------- ---------- ---------- ----------- ---------- ---------- -------- ---------- 118,581 106,623 95,672 60,716 61,763 59,226 22,889 19,090 11,782 ---------- ---------- ---------- ---------- ----------- ---------- ---------- -------- ---------- 435,032 22,063 (5,517) 40,945 (20,561) (59,226) (17,476) (16,823) (5,073) ---------- ---------- ---------- ---------- ----------- ---------- ---------- -------- ---------- 1,059,807 89,460 70,556 1,010,118 1,395,085 172,432 528,105 192,896 -- 760,045 483,201 (25,251) 873,186 1,887,409 1,238,239 498,437 661,374 188,581 ---------- ---------- ---------- ---------- ----------- ---------- ---------- -------- ---------- 1,819,852 572,661 45,305 1,883,304 3,282,494 1,410,671 1,026,542 854,270 188,581 ---------- ---------- ---------- ---------- ----------- ---------- ---------- -------- ---------- 212,333 1,768,272 2,258,497 (456,321) (1,935,188) 473,913 718,261 (44,919) 844,433 ---------- ---------- ---------- ---------- ----------- ---------- ---------- -------- ---------- 2,032,185 2,340,933 2,303,802 1,426,983 1,347,306 1,884,584 1,744,803 809,351 1,033,014 ---------- ---------- ---------- ---------- ----------- ---------- ---------- -------- ---------- $2,467,217 $2,362,996 $2,298,285 $1,467,928 $ 1,326,745 $1,825,358 $1,727,327 $792,528 $1,027,941 ========== ========== ========== ========== =========== ========== ========== ======== ==========
The accompanying notes are an integral part of these financial statements. AA-13 GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN OF GENERAL AMERICAN LIFE INSURANCE COMPANY STATEMENTS OF OPERATIONS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2007, 2006, AND 2005
VAN ECK WORLDWIDE RUSSELL EMERGING MARKETS MULTI-STYLE EQUITY DIVISION DIVISION ------------------------------------ -------------------------------- 2007 2006 2005 2007 2006 2005 ---------- ---------- -------- -------- -------- -------- INVESTMENT INCOME: Dividends.................................... $ 19,958 $ 20,691 $ 15,201 $ 59,680 $ 55,781 $ 67,592 ---------- ---------- -------- -------- -------- -------- EXPENSES: Mortality and expense risk charges........... 25,073 16,373 12,344 39,509 38,182 40,721 Administrative charges....................... -- -- -- -- -- -- ---------- ---------- -------- -------- -------- -------- Total expenses............................ 25,073 16,373 12,344 39,509 38,182 40,721 ---------- ---------- -------- -------- -------- -------- Net investment income (loss)................. (5,115) 4,318 2,857 20,171 17,599 26,871 ---------- ---------- -------- -------- -------- -------- NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Realized gain distributions.................. 788,333 325,769 -- 234,677 -- -- Realized gains (losses) on sale of investments............................... 552,464 448,281 278,686 134,824 38,676 (45,726) ---------- ---------- -------- -------- -------- -------- Net realized gains (losses).................. 1,340,797 774,050 278,686 369,501 38,676 (45,726) ---------- ---------- -------- -------- -------- -------- Change in unrealized gains (losses) on investments............................... 167,768 323,029 365,666 170,443 605,899 409,281 ---------- ---------- -------- -------- -------- -------- Net realized and unrealized gains (losses) on investments............................... 1,508,565 1,097,079 644,352 539,944 644,575 363,555 ---------- ---------- -------- -------- -------- -------- Net increase (decrease) in net assets resulting from operations................. $1,503,450 $1,101,397 $647,209 $560,115 $662,174 $390,426 ========== ========== ======== ======== ======== ========
(a) For the period May 1, 2005 to December 31, 2005. The accompanying notes are an integral part of these financial statements. AA-14
RUSSELL RUSSELL RUSSELL CORE BOND AGGRESSIVE EQUITY NON-US DIVISION DIVISION DIVISION -------------------------------- ---------------------------------- --------------------------------- 2007 2006 2005 2007 2006 2005 2007 2006 2005 -------- -------- -------- --------- -------- --------- --------- -------- -------- $103,955 $ 87,830 $ 95,711 $ 10,630 $ 5,373 $ 74,565 $ 68,465 $ 60,506 $ 37,356 -------- -------- -------- --------- -------- --------- --------- -------- -------- 13,193 12,721 15,020 19,267 18,817 18,443 17,685 16,305 15,113 -- -- -- -- -- -- -- -- -- -------- -------- -------- --------- -------- --------- --------- -------- -------- 13,193 12,721 15,020 19,267 18,817 18,443 17,685 16,305 15,113 -------- -------- -------- --------- -------- --------- --------- -------- -------- 90,762 75,109 80,691 (8,637) (13,444) 56,122 50,780 44,201 22,243 -------- -------- -------- --------- -------- --------- --------- -------- -------- -- -- 8,588 365,519 370,848 186,157 500,025 52,392 -- 12,067 3,580 20,734 78,890 72,898 103,879 142,105 87,135 25,229 -------- -------- -------- --------- -------- --------- --------- -------- -------- 12,067 3,580 29,322 444,409 443,746 290,036 642,130 139,527 25,229 -------- -------- -------- --------- -------- --------- --------- -------- -------- 24,700 (20,836) (80,212) (347,648) (60,534) (206,066) (446,378) 334,483 222,527 -------- -------- -------- --------- -------- --------- --------- -------- -------- 36,767 (17,256) (50,890) 96,761 383,212 83,970 195,752 474,010 247,756 -------- -------- -------- --------- -------- --------- --------- -------- -------- $127,529 $ 57,853 $ 29,801 $ 88,124 $369,768 $ 140,092 $ 246,532 $518,211 $269,999 ======== ======== ======== ========= ======== ========= ========= ======== ========
The accompanying notes are an integral part of these financial statements. AA-15 GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN OF GENERAL AMERICAN LIFE INSURANCE COMPANY STATEMENTS OF OPERATIONS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2007, 2006, AND 2005
J.P. MORGAN J.P. MORGAN BOND SMALL COMPANY DIVISION DIVISION --------------------------------- ------------------------------------ 2007 2006 2005 2007 2006 2005 --------- -------- -------- ---------- -------- ---------- INVESTMENT INCOME: Dividends.................................... $ 251,810 $144,473 $109,098 $ 609 $ -- $ -- --------- -------- -------- ---------- -------- ---------- EXPENSES: Mortality and expense risk charges........... 19,889 20,666 17,244 28,938 30,189 28,741 Administrative charges....................... -- -- -- -- -- -- --------- -------- -------- ---------- -------- ---------- Total expenses............................ 19,889 20,666 17,244 28,938 30,189 28,741 --------- -------- -------- ---------- -------- ---------- Net investment income (loss)................. 231,921 123,807 91,854 (28,329) (30,189) (28,741) --------- -------- -------- ---------- -------- ---------- NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Realized gain distributions.................. -- 6,146 55,106 327,120 195,616 786,413 Realized gains (losses) on sale of investments............................... (34,962) (21,650) (34) 676,197 465,679 343,914 --------- -------- -------- ---------- -------- ---------- Net realized gains (losses).................. (34,962) (15,504) 55,072 1,003,317 661,295 1,130,327 --------- -------- -------- ---------- -------- ---------- Change in unrealized gains (losses) on investments............................... (168,773) 18,741 (76,466) (999,932) 319,395 (937,478) --------- -------- -------- ---------- -------- ---------- Net realized and unrealized gains (losses) on investments............................... (203,735) 3,237 (21,394) 3,385 980,690 192,849 --------- -------- -------- ---------- -------- ---------- Net increase (decrease) in net assets resulting from operations................. $ 28,186 $127,044 $ 70,460 $ (24,944) $950,501 $ 164,108 ========= ======== ======== ========== ======== ==========
(a) For the period May 1, 2005 to December 31, 2005. The accompanying notes are an integral part of these financial statements. AA-16
MSF FI MSF T. ROWE PRICE MSF T. ROWE PRICE MID CAP OPPORTUNITIES SMALL CAP GROWTH LARGE CAP GROWTH DIVISION DIVISION DIVISION --------------------------------- --------------------------------- --------------------------------- 2007 2006 2005 2007 2006 2005 2007 2006 2005 --------- -------- -------- -------- --------- -------- --------- -------- -------- $ 5,569 $ 146 $ -- $ -- $ -- $ -- $ 18,685 $ 10,752 $ 26,184 --------- -------- -------- -------- --------- -------- --------- -------- -------- 17,994 15,282 15,995 39,227 38,569 35,995 19,415 16,850 28,170 -- -- -- -- -- -- -- -- -- --------- -------- -------- -------- --------- -------- --------- -------- -------- 17,994 15,282 15,995 39,227 38,569 35,995 19,415 16,850 28,170 --------- -------- -------- -------- --------- -------- --------- -------- -------- (12,425) (15,136) (15,995) (39,227) (38,569) (35,995) (730) (6,098) (1,986) --------- -------- -------- -------- --------- -------- --------- -------- -------- -- -- -- -- -- -- 37,111 -- -- 592,579 13,540 (58,481) 580,431 360,971 354,479 953,085 464,824 281,004 --------- -------- -------- -------- --------- -------- --------- -------- -------- 592,579 13,540 (58,481) 580,431 360,971 354,479 990,196 464,824 281,004 --------- -------- -------- -------- --------- -------- --------- -------- -------- (225,747) 396,699 244,972 (18,766) (117,554) 285,418 (687,853) (7,786) (22,927) --------- -------- -------- -------- --------- -------- --------- -------- -------- 366,832 410,239 186,491 561,665 243,417 639,897 302,343 457,038 258,077 --------- -------- -------- -------- --------- -------- --------- -------- -------- $ 354,407 $395,103 $170,496 $522,438 $ 204,848 $603,902 $ 301,613 $450,940 $256,091 ========= ======== ======== ======== ========= ======== ========= ======== ========
The accompanying notes are an integral part of these financial statements. AA-17 GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN OF GENERAL AMERICAN LIFE INSURANCE COMPANY STATEMENTS OF OPERATIONS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2007, 2006, AND 2005
MSF NEUBERGER BERMAN MSF FI MID CAP VALUE INTERNATIONAL STOCK DIVISION DIVISION --------------------------------- --------------------------------- 2007 2006 2005 2007 2006 2005 --------- -------- -------- --------- -------- -------- INVESTMENT INCOME: Dividends..................................... $ 19,843 $ 15,488 $ 7,211 $ 47,701 $ 67,178 $ 17,879 --------- -------- -------- --------- -------- -------- EXPENSES: Mortality and expense risk charges............ 22,440 19,677 16,052 23,418 23,320 15,379 Administrative charges........................ -- -- -- -- -- -- --------- -------- -------- --------- -------- -------- Total expenses............................. 22,440 19,677 16,052 23,418 23,320 15,379 --------- -------- -------- --------- -------- -------- Net investment income (loss).................. (2,597) (4,189) (8,841) 24,283 43,858 2,500 --------- -------- -------- --------- -------- -------- NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Realized gain distributions................... 106,797 279,776 207,106 231,730 -- -- Realized gains (losses) on sale of investments................................ 109,236 165,337 157,475 316,487 563,898 155,229 --------- -------- -------- --------- -------- -------- Net realized gains (losses)................... 216,033 445,113 364,581 548,217 563,898 155,229 --------- -------- -------- --------- -------- -------- Change in unrealized gains (losses) on investments................................ (152,816) (81,503) (38,305) (156,181) (21,804) 370,431 --------- -------- -------- --------- -------- -------- Net realized and unrealized gains (losses) on investments................................ 63,217 363,610 326,276 392,036 542,094 525,660 --------- -------- -------- --------- -------- -------- Net increase (decrease) in net assets resulting from operations.................. $ 60,620 $359,421 $317,435 $ 416,319 $585,952 $528,160 ========= ======== ======== ========= ======== ========
(a) For the period May 1, 2005 to December 31, 2005. The accompanying notes are an integral part of these financial statements. AA-18
MSF MORGAN MSF METLIFE MSF METLIFE STANLEY EAFE INDEX STOCK INDEX MID CAP STOCK INDEX DIVISION DIVISION DIVISION ------------------------------------- ---------------------------------------- ------------------------------- 2007 2006 2005 2007 2006 2005 2007 2006 2005 --------- ---------- ---------- ----------- ----------- ---------- -------- -------- ------- $ 218,054 $ 176,831 $ 143,940 $ 903,433 $ 1,608,446 $1,322,184 $ 9,559 $ 10,134 $ 5,611 --------- ---------- ---------- ----------- ----------- ---------- -------- -------- ------- 68,547 57,754 49,688 575,976 541,266 544,842 5,209 3,596 3,035 -- -- -- -- -- -- -- -- -- --------- ---------- ---------- ----------- ----------- ---------- -------- -------- ------- 68,547 57,754 49,688 575,976 541,266 544,842 5,209 3,596 3,035 --------- ---------- ---------- ----------- ----------- ---------- -------- -------- ------- 149,507 119,077 94,252 327,457 1,067,180 777,342 4,350 6,538 2,576 --------- ---------- ---------- ----------- ----------- ---------- -------- -------- ------- 116,295 -- -- 1,756,163 2,744,774 -- 51,221 57,514 41,092 858,464 1,310,370 491,209 4,153,707 3,784,178 2,932,902 69,072 48,683 35,902 --------- ---------- ---------- ----------- ----------- ---------- -------- -------- ------- 974,759 1,310,370 491,209 5,909,870 6,528,952 2,932,902 120,293 106,197 76,994 --------- ---------- ---------- ----------- ----------- ---------- -------- -------- ------- (133,006) 624,769 445,022 (2,348,289) 3,685,325 (604,531) (51,465) (33,216) 10,095 --------- ---------- ---------- ----------- ----------- ---------- -------- -------- ------- 841,753 1,935,139 936,231 3,561,581 10,214,277 2,328,371 68,828 72,981 87,089 --------- ---------- ---------- ----------- ----------- ---------- -------- -------- ------- $ 991,260 $2,054,216 $1,030,483 $ 3,889,038 $11,281,457 $3,105,713 $ 73,178 $ 79,519 $89,665 ========= ========== ========== =========== =========== ========== ======== ======== =======
The accompanying notes are an integral part of these financial statements. AA-19 GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN OF GENERAL AMERICAN LIFE INSURANCE COMPANY STATEMENTS OF OPERATIONS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2007, 2006, AND 2005
MSF BLACKROCK LARGE MSF BLACKROCK CAP VALUE DIVERSIFIED DIVISION DIVISION ------------------------------------- --------------------------------- 2007 2006 2005 2007 2006 2005 ----------- ---------- -------- --------- -------- -------- INVESTMENT INCOME: Dividends................................... $ 96,643 $ 105,689 $ 79,968 $ 259,243 $246,761 $164,006 ----------- ---------- -------- --------- -------- -------- EXPENSES: Mortality and expense risk charges.......... 66,150 60,374 60,939 68,709 67,467 70,126 Administrative charges...................... -- -- -- -- -- -- ----------- ---------- -------- --------- -------- -------- Total expenses........................... 66,150 60,374 60,939 68,709 67,467 70,126 ----------- ---------- -------- --------- -------- -------- Net investment income (loss)................ 30,493 45,315 19,029 190,534 179,294 93,880 ----------- ---------- -------- --------- -------- -------- NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Realized gain distributions................. 367,515 517,755 86,120 -- -- -- Realized gains (losses) on sale of investments.............................. 1,921,910 833,805 360,163 518,700 413,901 168,515 ----------- ---------- -------- --------- -------- -------- Net realized gains (losses)................. 2,289,425 1,351,560 446,283 518,700 413,901 168,515 ----------- ---------- -------- --------- -------- -------- Change in unrealized gains (losses) on investments.............................. (2,254,387) 39,492 (36,838) (184,991) 342,183 (24,132) ----------- ---------- -------- --------- -------- -------- Net realized and unrealized gains (losses) on investments........................... 35,038 1,391,052 409,445 333,709 756,084 144,383 ----------- ---------- -------- --------- -------- -------- Net increase (decrease) in net assets resulting from operations................ $ 65,531 $1,436,367 $428,474 $ 524,243 $935,378 $238,263 =========== ========== ======== ========= ======== ========
(a) For the period May 1, 2005 to December 31, 2005. The accompanying notes are an integral part of these financial statements. AA-20
MSF LEHMAN BROTHERS MSF BLACKROCK MSF RUSSELL AGGREGATE BOND INDEX STRATEGIC VALUE 2000 INDEX DIVISION DIVISION DIVISION --------------------------------- --------------------------------------- ---------------------------------- 2007 2006 2005 2007 2006 2005 2007 2006 2005 -------- -------- --------- ----------- ---------- ---------- --------- -------- --------- $630,753 $570,221 $ 534,828 $ 38,793 $ 36,177 $ -- $ 42,935 $ 34,202 $ 28,544 -------- -------- --------- ----------- ---------- ---------- --------- -------- --------- 89,354 86,995 92,083 83,216 77,914 69,686 24,201 21,284 17,666 -- -- -- -- -- -- -- -- -- -------- -------- --------- ----------- ---------- ---------- --------- -------- --------- 89,354 86,995 92,083 83,216 77,914 69,686 24,201 21,284 17,666 -------- -------- --------- ----------- ---------- ---------- --------- -------- --------- 541,399 483,226 442,745 (44,423) (41,737) (69,686) 18,734 12,918 10,878 -------- -------- --------- ----------- ---------- ---------- --------- -------- --------- -- -- -- 1,489,931 2,139,143 690,365 351,365 158,351 139,757 32,060 (45,452) 9,237 546,548 618,591 486,866 118,422 116,323 229,319 -------- -------- --------- ----------- ---------- ---------- --------- -------- --------- 32,060 (45,452) 9,237 2,036,479 2,757,734 1,177,231 469,787 274,674 369,076 -------- -------- --------- ----------- ---------- ---------- --------- -------- --------- 337,511 (11,003) (265,050) (2,628,503) (927,574) (702,631) (592,035) 389,864 (207,834) -------- -------- --------- ----------- ---------- ---------- --------- -------- --------- 369,571 (56,455) (255,813) (592,024) 1,830,160 474,600 (122,248) 664,538 161,242 -------- -------- --------- ----------- ---------- ---------- --------- -------- --------- $910,970 $426,771 $ 186,932 $ (636,447) $1,788,423 $ 404,914 $(103,514) $677,456 $ 172,120 ======== ======== ========= =========== ========== ========== ========= ======== =========
The accompanying notes are an integral part of these financial statements. AA-21 GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN OF GENERAL AMERICAN LIFE INSURANCE COMPANY STATEMENTS OF OPERATIONS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2007, 2006, AND 2005
MSF HARRIS OAKMARK MSF BLACKROCK LEGACY LARGE CAP VALUE LARGE CAP GROWTH DIVISION DIVISION ---------------------------------- -------------------------------- 2007 2006 2005 2007 2006 2005 --------- -------- --------- -------- -------- -------- INVESTMENT INCOME: Dividends..................................... $ 34,971 $ 32,392 $ 25,528 $ 5,355 $ 2,870 $ 9,809 --------- -------- --------- -------- -------- -------- EXPENSES: Mortality and expense risk charges............ 24,160 22,827 19,962 14,246 12,603 11,963 Administrative charges........................ -- -- -- -- -- -- --------- -------- --------- -------- -------- -------- Total expenses............................. 24,160 22,827 19,962 14,246 12,603 11,963 --------- -------- --------- -------- -------- -------- Net investment income (loss).................. 10,811 9,565 5,566 (8,891) (9,733) (2,154) --------- -------- --------- -------- -------- -------- NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Realized gain distributions................... 122,253 -- -- -- -- -- Realized gains (losses) on sale of investments................................ 225,414 188,716 122,491 228,552 85,783 82,680 --------- -------- --------- -------- -------- -------- Net realized gains (losses)................... 347,667 188,716 122,491 228,552 85,783 82,680 --------- -------- --------- -------- -------- -------- Change in unrealized gains (losses) on investments................................ (523,098) 495,868 (189,982) 231,374 16,557 76,807 --------- -------- --------- -------- -------- -------- Net realized and unrealized gains (losses) on investments................................ (175,431) 684,584 (67,491) 459,926 102,340 159,487 --------- -------- --------- -------- -------- -------- Net increase (decrease) in net assets resulting from operations.................. $(164,620) $694,149 $ (61,925) $451,035 $ 92,607 $157,333 ========= ======== ========= ======== ======== ========
(a) For the period May 1, 2005 to December 31, 2005. The accompanying notes are an integral part of these financial statements. AA-22
MSF HARRIS OAKMARK MSF DAVIS MSF BLACKROCK FOCUSED VALUE VENTURE VALUE MONEY MARKET DIVISION DIVISION DIVISION -------------------------------------- ----------------------------------- -------------------------------- 2007 2006 2005 2007 2006 2005 2007 2006 2005 ----------- ---------- --------- --------- ---------- -------- -------- -------- -------- $ 38,635 $ 19,479 $ 2,975 $ 69,465 $ 85,332 $ 26,751 $811,494 $788,008 $580,548 ----------- ---------- --------- --------- ---------- -------- -------- -------- -------- 36,877 37,310 37,313 50,799 44,856 19,511 96,460 88,711 112,828 -- -- -- -- -- -- -- -- -- ----------- ---------- --------- --------- ---------- -------- -------- -------- -------- 36,877 37,310 37,313 50,799 44,856 19,511 96,460 88,711 112,828 ----------- ---------- --------- --------- ---------- -------- -------- -------- -------- 1,758 (17,831) (34,338) 18,666 40,476 7,240 715,034 699,297 467,720 ----------- ---------- --------- --------- ---------- -------- -------- -------- -------- 851,905 601,024 71,480 -- -- -- -- -- -- 111,867 412,354 672,476 665,607 743,693 223,191 -- -- -- ----------- ---------- --------- --------- ---------- -------- -------- -------- -------- 963,772 1,013,378 743,956 665,607 743,693 223,191 -- -- -- ----------- ---------- --------- --------- ---------- -------- -------- -------- -------- (1,393,084) (246,155) (142,831) (302,764) 298,057 241,761 -- -- -- ----------- ---------- --------- --------- ---------- -------- -------- -------- -------- (429,312) 767,223 601,125 362,843 1,041,750 464,952 -- -- -- ----------- ---------- --------- --------- ---------- -------- -------- -------- -------- $ (427,554) $ 749,392 $ 566,787 $ 381,509 $1,082,226 $472,192 $715,034 $699,297 $467,720 =========== ========== ========= ========= ========== ======== ======== ======== ========
The accompanying notes are an integral part of these financial statements. AA-23 GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN OF GENERAL AMERICAN LIFE INSURANCE COMPANY STATEMENTS OF OPERATIONS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2007, 2006, AND 2005
MSF BLACKROCK MSF BLACKROCK AGGRESSIVE BOND INCOME GROWTH DIVISION DIVISION -------------------------------- ------------------------------------ 2007 2006 2005 2007 2006 2005 -------- -------- -------- ---------- --------- --------- INVESTMENT INCOME: Dividends.................................... $ 76,540 $126,848 $ 80,448 $ -- $ -- $ -- -------- -------- -------- ---------- --------- --------- EXPENSES: Mortality and expense risk charges........... 12,488 11,569 9,659 39,146 38,434 41,673 Administrative charges....................... -- -- -- -- -- -- -------- -------- -------- ---------- --------- --------- Total expenses............................ 12,488 11,569 9,659 39,146 38,434 41,673 -------- -------- -------- ---------- --------- --------- Net investment income (loss)................. 64,052 115,279 70,789 (39,146) (38,434) (41,673) -------- -------- -------- ---------- --------- --------- NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Realized gain distributions.................. -- 2,170 23,243 -- -- -- Realized gains (losses) on sale of investments............................... (8,755) (25,544) (31,299) 392,239 591,190 756,356 -------- -------- -------- ---------- --------- --------- Net realized gains (losses).................. (8,755) (23,374) (8,056) 392,239 591,190 756,356 -------- -------- -------- ---------- --------- --------- Change in unrealized gains (losses) on investments............................... 83,441 (2,113) (21,556) 619,985 (272,451) (176,968) -------- -------- -------- ---------- --------- --------- Net realized and unrealized gains (losses) on investments............................... 74,686 (25,487) (29,612) 1,012,224 318,739 579,388 -------- -------- -------- ---------- --------- --------- Net increase (decrease) in net assets resulting from operations................. $138,738 $ 89,792 $ 41,177 $ 973,078 $ 280,305 $ 537,715 ======== ======== ======== ========== ========= =========
(a) For the period May 1, 2005 to December 31, 2005. The accompanying notes are an integral part of these financial statements. AA-24
MSF WESTERN ASSET MSF METLIFE MSF MANAGEMENT CONSERVATIVE MFS TOTAL RETURN U.S. GOVERNMENT ALLOCATION DIVISION DIVISION DIVISION --------------------------------- --------------------------- ----------------------- 2007 2006 2005 2007 2006 2005 2007 2006 2005(A) --------- -------- -------- ------- ------ ------ ---- ---- ------- $ 113,769 $170,385 $ 79,643 $ 5,876 $6,460 $1,276 $ -- $301 $ 29 --------- -------- -------- ------- ------ ------ ---- ---- ---- 32,721 30,932 30,063 1,421 1,039 652 -- -- -- -- -- -- -- -- -- -- -- -- --------- -------- -------- ------- ------ ------ ---- ---- ---- 32,721 30,932 30,063 1,421 1,039 652 -- -- -- --------- -------- -------- ------- ------ ------ ---- ---- ---- 81,048 139,453 49,580 4,455 5,421 624 -- 301 29 --------- -------- -------- ------- ------ ------ ---- ---- ---- 172,131 106,592 50,502 -- -- 1,741 6 115 8 200,426 58,870 62,123 24,005 (756) (275) 162 17 59 --------- -------- -------- ------- ------ ------ ---- ---- ---- 372,557 165,462 112,625 24,005 (756) 1,466 168 132 67 --------- -------- -------- ------- ------ ------ ---- ---- ---- (267,990) 200,714 (49,957) 4,605 2,043 (564) 361 142 57 --------- -------- -------- ------- ------ ------ ---- ---- ---- 104,567 366,176 62,668 28,610 1,287 902 529 274 124 --------- -------- -------- ------- ------ ------ ---- ---- ---- $ 185,615 $505,629 $112,248 $33,065 $6,708 $1,526 $529 $575 $153 ========= ======== ======== ======= ====== ====== ==== ==== ====
The accompanying notes are an integral part of these financial statements. AA-25 GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN OF GENERAL AMERICAN LIFE INSURANCE COMPANY STATEMENTS OF OPERATIONS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2007, 2006, AND 2005
MSF METLIFE CONSERVATIVE TO MSF METLIFE MODERATE ALLOCATION MODERATE ALLOCATION DIVISION DIVISION --------------------------- ------------------------------ 2007 2006 2005(A) 2007 2006 2005(A) ----- ----- ------- ------ ------- ------- INVESTMENT INCOME: Dividends........................................ $ -- $ 135 $-- $ 380 $ 1,352 $ 64 ----- ----- --- ------ ------- ---- EXPENSES: Mortality and expense risk charges............... -- -- -- -- -- -- Administrative charges........................... -- -- -- -- -- -- ----- ----- --- ------ ------- ---- Total expenses................................ -- -- -- -- -- -- ----- ----- --- ------ ------- ---- Net investment income (loss)..................... -- 135 -- 380 1,352 64 ----- ----- --- ------ ------- ---- NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Realized gain distributions...................... 1 92 -- 263 1,892 1 Realized gains (losses) on sale of investments... 19 (131) -- 3,542 97 85 ----- ----- --- ------ ------- ---- Net realized gains (losses)...................... 20 (39) -- 3,805 1,989 86 ----- ----- --- ------ ------- ---- Change in unrealized gains (losses) on investments................................... (2) 2 3 3,958 12,149 130 ----- ----- --- ------ ------- ---- Net realized and unrealized gains (losses) on investments................................... 18 (37) 3 7,763 14,138 216 ----- ----- --- ------ ------- ---- Net increase (decrease) in net assets resulting from operations............................... $18 $ 98 $ 3 $8,143 $15,490 $280 ===== ===== === ====== ======= ====
(a) For the period May 1, 2005 to December 31, 2005. The accompanying notes are an integral part of these financial statements. AA-26
MSF METLIFE MODERATE TO MSF METLIFE MIST LEGG MASON PARTNERS AGGRESSIVE ALLOCATION AGGRESSIVE ALLOCATION AGGRESSIVE GROWTH DIVISION DIVISION DIVISION ----------------------------- ---------------------------- -------------------------------- 2007 2006 2005(A) 2007 2006 2005(A) 2007 2006 2005 ------- ------- ------- ------- ------ ------- -------- --------- ------- $ 824 $ 1,523 $146 $ 163 $ 149 $ 8 $ 1,743 $ -- $ -- ------- ------- ---- ------- ------ ---- -------- --------- ------- -- -- -- -- -- -- 3,776 5,888 1,827 -- -- -- -- -- -- -- -- -- ------- ------- ---- ------- ------ ---- -------- --------- ------- -- -- -- -- -- -- 3,776 5,888 1,827 ------- ------- ---- ------- ------ ---- -------- --------- ------- 824 1,523 146 163 149 8 (2,033) (5,888) (1,827) ------- ------- ---- ------- ------ ---- -------- --------- ------- 471 3,878 3 104 628 5 70,981 79,770 438 6,531 834 28 5,185 183 -- (51,258) (42,062) 23,898 ------- ------- ---- ------- ------ ---- -------- --------- ------- 7,002 4,712 31 5,289 811 5 19,723 37,708 24,336 ------- ------- ---- ------- ------ ---- -------- --------- ------- 4,482 20,906 1 (4,758) 3,243 (14) 7,742 (119,887) 24,658 ------- ------- ---- ------- ------ ---- -------- --------- ------- 11,484 25,618 32 531 4,054 (9) 27,465 (82,179) 48,994 ------- ------- ---- ------- ------ ---- -------- --------- ------- $12,308 $27,141 $178 $ 694 $4,203 $ (1) $ 25,432 $ (88,067) $47,167 ======= ======= ==== ======= ====== ==== ======== ========= =======
The accompanying notes are an integral part of these financial statements. AA-27 GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN OF GENERAL AMERICAN LIFE INSURANCE COMPANY STATEMENTS OF OPERATIONS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2007, 2006, AND 2005
MIST MIST RCM TECHNOLOGY PIMCO TOTAL RETURN DIVISION DIVISION ------------------------------- -------------------------------- 2007 2006 2005 2007 2006 2005 -------- -------- ------- -------- -------- -------- INVESTMENT INCOME: Dividends...................................... $ -- $ -- $ -- $390,911 $227,321 $ 4,273 -------- -------- ------- -------- -------- -------- EXPENSES: Mortality and expense risk charges............. 2,234 1,705 1,865 43,749 35,240 28,318 Administrative charges......................... -- -- -- -- -- -- -------- -------- ------- -------- -------- -------- Total expenses.............................. 2,234 1,705 1,865 43,749 35,240 28,318 -------- -------- ------- -------- -------- -------- Net investment income (loss)................... (2,234) (1,705) (1,865) 347,162 192,081 (24,045) -------- -------- ------- -------- -------- -------- NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Realized gain distributions.................... 13,627 -- 3,570 -- 3,356 50,629 Realized gains (losses) on sale of investments................................. 119,477 48,944 (4,527) (47,128) (38,311) (14,099) -------- -------- ------- -------- -------- -------- Net realized gains (losses).................... 133,104 48,944 (957) (47,128) (34,955) 36,530 -------- -------- ------- -------- -------- -------- Change in unrealized gains (losses) on investments................................. 9,799 (22,876) 58,921 310,693 257,811 139,888 -------- -------- ------- -------- -------- -------- Net realized and unrealized gains (losses) on investments................................. 142,903 26,068 57,964 263,565 222,856 176,418 -------- -------- ------- -------- -------- -------- Net increase (decrease) in net assets resulting from operations............................. $140,669 $ 24,363 $56,099 $610,727 $414,937 $152,373 ======== ======== ======= ======== ======== ========
(a) For the period May 1, 2005 to December 31, 2005. The accompanying notes are an integral part of these financial statements. AA-28
MIST T. ROWE PRICE MIST MET/AIM MIST LAZARD MID-CAP GROWTH SMALL CAP GROWTH MID-CAP DIVISION DIVISION DIVISION --------------------------------- ------------------------------- -------------------------------- 2007 2006 2005 2007 2006 2005 2007 2006 2005 -------- --------- -------- -------- -------- ------- --------- ------- -------- $ 6,953 $ -- $ -- $ -- $ -- $ -- $ 6,724 $ 2,137 $ 1,291 -------- --------- -------- -------- -------- ------- --------- ------- -------- 15,719 19,736 11,912 6,336 5,407 4,711 3,495 1,621 1,350 -- -- -- -- -- -- -- -- -- -------- --------- -------- -------- -------- ------- --------- ------- -------- 15,719 19,736 11,912 6,336 5,407 4,711 3,495 1,621 1,350 -------- --------- -------- -------- -------- ------- --------- ------- -------- (8,766) (19,736) (11,912) (6,336) (5,407) (4,711) 3,229 516 (59) -------- --------- -------- -------- -------- ------- --------- ------- -------- 132,601 148,987 51,812 17,518 140,183 19,749 92,158 46,949 38,977 108,081 291,966 106,088 24,370 25,264 5,994 (9,795) 2,085 29,412 -------- --------- -------- -------- -------- ------- --------- ------- -------- 240,682 440,953 157,900 41,888 165,447 25,743 82,363 49,034 68,389 -------- --------- -------- -------- -------- ------- --------- ------- -------- 224,676 (342,560) 116,218 85,536 (32,890) 48,578 (108,193) 16,618 (41,895) -------- --------- -------- -------- -------- ------- --------- ------- -------- 465,358 98,393 274,118 127,424 132,557 74,321 (25,830) 65,652 26,494 -------- --------- -------- -------- -------- ------- --------- ------- -------- $456,592 $ 78,657 $262,206 $121,088 $127,150 $69,610 $ (22,601) $66,168 $ 26,435 ======== ========= ======== ======== ======== ======= ========= ======= ========
The accompanying notes are an integral part of these financial statements. AA-29 GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN OF GENERAL AMERICAN LIFE INSURANCE COMPANY STATEMENTS OF OPERATIONS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2007, 2006, AND 2005
MIST HARRIS MIST LORD OAKMARK INTERNATIONAL ABBETT GROWTH AND INCOME DIVISION DIVISION ------------------------------------- --------------------------------- 2007 2006 2005 2007 2006 2005 ----------- ---------- -------- --------- -------- -------- INVESTMENT INCOME: Dividends................................... $ 119,982 $ 160,738 $ 5,856 $ 26,713 $ 48,597 $ 28,824 ----------- ---------- -------- --------- -------- -------- EXPENSES: Mortality and expense risk charges.......... 56,393 38,176 22,067 13,988 15,369 16,140 Administrative charges...................... -- -- -- -- -- -- ----------- ---------- -------- --------- -------- -------- Total expenses........................... 56,393 38,176 22,067 13,988 15,369 16,140 ----------- ---------- -------- --------- -------- -------- Net investment income (loss)................ 63,589 122,562 (16,211) 12,725 33,228 12,684 ----------- ---------- -------- --------- -------- -------- NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Realized gain distributions................. 1,029,494 401,249 61,023 115,565 213,736 51,069 Realized gains (losses) on sale of investments.............................. 897,659 469,518 102,367 162,463 94,645 71,034 ----------- ---------- -------- --------- -------- -------- Net realized gains (losses)................. 1,927,153 870,767 163,390 278,028 308,381 122,103 ----------- ---------- -------- --------- -------- -------- Change in unrealized gains (losses) on investments.............................. (1,977,133) 1,040,476 374,891 (199,171) 83,506 (59,691) ----------- ---------- -------- --------- -------- -------- Net realized and unrealized gains (losses) on investments........................... (49,980) 1,911,243 538,281 78,857 391,887 62,412 ----------- ---------- -------- --------- -------- -------- Net increase (decrease) in net assets resulting from operations................ $ 13,609 $2,033,805 $522,070 $ 91,582 $425,115 $ 75,096 =========== ========== ======== ========= ======== ========
(a) For the period May 1, 2005 to December 31, 2005. The accompanying notes are an integral part of these financial statements. AA-30
MIST LORD ABBETT MIST MFS MIST NEUBERGER MID-CAP VALUE RESEARCH INTERNATIONAL BERMAN REAL ESTATE DIVISION DIVISION DIVISION ---------------------------------- --------------------------------- --------------------------------- 2007 2006 2005 2007 2006 2005 2007 2006 2005 --------- --------- -------- --------- -------- -------- --------- -------- -------- $ 30,792 $ 23,945 $ 30,713 $ 51,845 $ 59,399 $ 17,539 $ 31,677 $ 20,811 $ -- --------- --------- -------- --------- -------- -------- --------- -------- -------- 18,770 20,682 37,167 20,955 19,328 19,078 11,074 6,818 3,715 -- -- -- -- -- -- -- -- -- --------- --------- -------- --------- -------- -------- --------- -------- -------- 18,770 20,682 37,167 20,955 19,328 19,078 11,074 6,818 3,715 --------- --------- -------- --------- -------- -------- --------- -------- -------- 12,022 3,263 (6,454) 30,890 40,071 (1,539) 20,603 13,993 (3,715) --------- --------- -------- --------- -------- -------- --------- -------- -------- 435,106 298,073 190,959 505,127 233,521 149,886 253,834 98,859 1,811 118,229 482,362 150,874 245,222 348,045 145,205 248,866 123,403 20,666 --------- --------- -------- --------- -------- -------- --------- -------- -------- 553,335 780,435 341,833 750,349 581,566 295,091 502,700 222,262 22,477 --------- --------- -------- --------- -------- -------- --------- -------- -------- (544,881) (380,064) 57,145 (364,180) 143,517 201,096 (935,463) 348,153 157,099 --------- --------- -------- --------- -------- -------- --------- -------- -------- 8,454 400,371 398,978 386,169 725,083 496,187 (432,763) 570,415 179,576 --------- --------- -------- --------- -------- -------- --------- -------- -------- $ 20,476 $ 403,634 $392,524 $ 417,059 $765,154 $494,648 $(412,160) $584,408 $175,861 ========= ========= ======== ========= ======== ======== ========= ======== ========
The accompanying notes are an integral part of these financial statements. AA-31 GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN OF GENERAL AMERICAN LIFE INSURANCE COMPANY STATEMENTS OF OPERATIONS -- (CONCLUDED) FOR THE YEARS ENDED DECEMBER 31, 2007, 2006, AND 2005
MIST LORD ABBETT MIST OPPENHEIMER BOND DEBENTURE CAPITAL APPRECIATION DIVISION DIVISION ---------------------------------- ----------------------- 2007 2006 2005 2007 2006 2005(A) -------- -------- ---------- ---- ---- ------- INVESTMENT INCOME: Dividends........................................ $602,619 $618,328 $1,019,010 $ 7 $ 5 $-- -------- -------- ---------- ---- ---- --- EXPENSES: Mortality and expense risk charges............... 69,010 62,736 57,335 -- -- -- Administrative charges........................... -- -- -- -- -- -- -------- -------- ---------- ---- ---- --- Total expenses................................ 69,010 62,736 57,335 -- -- -- -------- -------- ---------- ---- ---- --- Net investment income (loss)..................... 533,609 555,592 961,675 7 5 -- -------- -------- ---------- ---- ---- --- NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Realized gain distributions...................... 13,898 -- -- 292 10 -- Realized gains (losses) on sale of investments... 65,263 (41) (968,045) 198 65 8 -------- -------- ---------- ---- ---- --- Net realized gains (losses)...................... 79,161 (41) (968,045) 490 75 8 -------- -------- ---------- ---- ---- --- Change in unrealized gains (losses) on investments................................... 25,466 272,472 131,919 149 33 (2) -------- -------- ---------- ---- ---- --- Net realized and unrealized gains (losses) on investments................................... 104,627 272,431 (836,126) 639 108 6 -------- -------- ---------- ---- ---- --- Net increase (decrease) in net assets resulting from operations............................... $638,236 $828,023 $ 125,549 $646 $113 $ 6 ======== ======== ========== ==== ==== ===
(a) For the period May 1, 2005 to December 31, 2005. The accompanying notes are an integral part of these financial statements. AA-32
AMERICAN FUNDS AMERICAN FUNDS AMERICAN FUNDS GROWTH GROWTH-INCOME GLOBAL SMALL CAPITALIZATION DIVISION DIVISION DIVISION --------------------------------------- -------------------------------------- -------------------------------------- 2007 2006 2005 2007 2006 2005 2007 2006 2005 ----------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- $ 242,573 $ 230,977 $ 145,549 $ 288,148 $ 262,716 $ 194,525 $ 225,909 $ 30,828 $ 49,218 ----------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- 169,094 147,197 102,857 102,364 89,321 77,625 41,432 33,534 27,250 -- -- -- -- -- -- -- -- -- ----------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- 169,094 147,197 102,857 102,364 89,321 77,625 41,432 33,534 27,250 ----------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- 73,479 83,780 42,692 185,784 173,395 116,900 184,477 (2,706) 21,968 ----------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- 2,289,978 173,890 -- 606,614 379,196 67,109 567,019 344,527 -- 2,362,469 1,201,489 945,991 831,249 364,204 954,686 1,095,718 872,316 402,138 ----------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- 4,652,447 1,375,379 945,991 1,437,863 743,400 1,021,795 1,662,737 1,216,843 402,138 ----------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- (1,060,086) 990,418 2,051,285 (833,407) 1,288,425 (305,127) (560,063) 76,639 736,865 ----------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- 3,592,361 2,365,797 2,997,276 604,456 2,031,825 716,668 1,102,674 1,293,482 1,139,003 ----------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- $ 3,665,840 $2,449,577 $3,039,968 $ 790,240 $2,205,220 $ 833,568 $1,287,151 $1,290,776 $1,160,971 =========== ========== ========== ========== ========== ========== ========== ========== ==========
The accompanying notes are an integral part of these financial statements. AA-33 GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN OF GENERAL AMERICAN LIFE INSURANCE COMPANY STATEMENTS OF CHANGES IN NET ASSETS FOR THE YEARS ENDED DECEMBER 31, 2007, 2006, AND 2005
FIDELITY VIP FIDELITY VIP EQUITY-INCOME GROWTH DIVISION DIVISION ----------------------------------------- ----------------------------------------- 2007 2006 2005 2007 2006 2005 ----------- ----------- ----------- ----------- ----------- ----------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss)............ $ 332,459 $ 763,833 $ 230,334 $ 35,180 $ (116,494) $ (76,601) Net realized gains (losses)............. 3,794,763 4,075,308 1,164,323 529,942 (614,843) (1,480,056) Change in unrealized gains (losses) on investments.......................... (3,464,208) 523,074 (29,623) 8,120,969 2,846,486 3,284,202 ----------- ----------- ----------- ----------- ----------- ----------- Net increase (decrease) in net assets resulting from operations.......... 663,014 5,362,215 1,365,034 8,686,091 2,115,149 1,727,545 ----------- ----------- ----------- ----------- ----------- ----------- POLICY TRANSACTIONS: Premium payments received from policy owners............................... 2,146,361 2,243,641 2,436,373 3,468,124 3,756,626 4,394,250 Net transfers (including fixed account)............................. (4,448,937) 1,984,500 (299,373) 4,251,459 (1,644,431) (3,518,242) Policy charges.......................... (1,617,300) (1,575,784) (570,062) (2,482,076) (2,514,139) (954,862) Transfers for policy benefits and terminations......................... (1,660,078) (2,616,673) (2,553,989) (4,507,461) (3,329,016) (4,319,541) ----------- ----------- ----------- ----------- ----------- ----------- Net increase (decrease) in net assets resulting from unit transactions... (5,579,954) 35,684 (987,051) 730,046 (3,730,960) (4,398,395) ----------- ----------- ----------- ----------- ----------- ----------- Net increase (decrease) in net assets... (4,916,940) 5,397,899 377,983 9,416,137 (1,615,811) (2,670,850) NET ASSETS: Beginning of period..................... 32,665,948 27,268,049 26,890,066 34,760,010 36,375,821 39,046,671 ----------- ----------- ----------- ----------- ----------- ----------- End of period........................... $27,749,008 $32,665,948 $27,268,049 $44,176,147 $34,760,010 $36,375,821 =========== =========== =========== =========== =========== ===========
(a) For the period May 1, 2005 to December 31, 2005. The accompanying notes are an integral part of these financial statements. AA-34
FIDELITY VIP FIDELITY VIP VAN ECK WORLDWIDE OVERSEAS MID CAP HARD ASSETS DIVISION DIVISION DIVISION ----------------------------------------- ----------------------------------------- ------------------------ 2007 2006 2005 2007 2006 2005 2007 2006 ----------- ----------- ----------- ----------- ----------- ----------- ---------- ---------- $ 435,032 $ 22,063 $ (5,517) $ 40,945 $ (20,561) $ (59,226) $ (17,476) $ (16,823) 1,819,852 572,661 45,305 1,883,304 3,282,494 1,410,671 1,026,542 854,270 212,333 1,768,272 2,258,497 (456,321) (1,935,188) 473,913 718,261 (44,919) ----------- ----------- ----------- ----------- ----------- ----------- ---------- ---------- 2,467,217 2,362,996 2,298,285 1,467,928 1,326,745 1,825,358 1,727,327 792,528 ----------- ----------- ----------- ----------- ----------- ----------- ---------- ---------- 1,011,821 1,395,371 1,205,656 783,544 875,752 1,027,318 249,534 212,056 1,452,496 (998,831) (958,569) 419,641 (2,095,034) (535,591) 667,066 109,813 (781,050) (789,562) (263,005) (542,352) (588,314) (214,472) (193,535) (164,451) (1,737,508) (945,917) (1,688,870) (1,115,896) (1,066,926) (1,308,173) (358,607) (305,670) ----------- ----------- ----------- ----------- ----------- ----------- ---------- ---------- (54,241) (1,338,939) (1,704,788) (455,063) (2,874,522) (1,030,918) 364,458 (148,252) ----------- ----------- ----------- ----------- ----------- ----------- ---------- ---------- 2,412,976 1,024,057 593,497 1,012,865 (1,547,777) 794,440 2,091,785 644,276 15,338,500 14,314,443 13,720,946 10,561,321 12,109,098 11,314,658 3,787,808 3,143,532 ----------- ----------- ----------- ----------- ----------- ----------- ---------- ---------- $17,751,476 $15,338,500 $14,314,443 $11,574,186 $10,561,321 $12,109,098 $5,879,593 $3,787,808 =========== =========== =========== =========== =========== =========== ========== ========== VAN ECK WORLDWIDE HARD ASSETS DIVISION ---------- 2005 ---------- $ (5,073) 188,581 844,433 ---------- 1,027,941 ---------- 200,432 817,806 (48,681) (90,407) ---------- 879,150 ---------- 1,907,091 1,236,441 ---------- $3,143,532 ==========
The accompanying notes are an integral part of these financial statements. AA-35 GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN OF GENERAL AMERICAN LIFE INSURANCE COMPANY STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2007, 2006, AND 2005
VAN ECK WORLDWIDE RUSSELL EMERGING MARKETS MULTI-STYLE EQUITY DIVISION DIVISION -------------------------------------- -------------------------------------- 2007 2006 2005 2007 2006 2005 ---------- ---------- ---------- ---------- ---------- ---------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss).............. $ (5,115) $ 4,318 $ 2,857 $ 20,171 $ 17,599 $ 26,871 Net realized gains (losses)............... 1,340,797 774,050 278,686 369,501 38,676 (45,726) Change in unrealized gains (losses) on investments............................ 167,768 323,029 365,666 170,443 605,899 409,281 ---------- ---------- ---------- ---------- ---------- ---------- Net increase (decrease) in net assets resulting from operations............ 1,503,450 1,101,397 647,209 560,115 662,174 390,426 ---------- ---------- ---------- ---------- ---------- ---------- POLICY TRANSACTIONS: Premium payments received from policy owners................................. 269,157 225,883 198,593 278,970 306,258 357,797 Net transfers (including fixed account)... 558,432 96,273 707,550 (465,521) (166,614) (429,459) Policy charges............................ (206,008) (164,563) (52,380) (227,208) (235,227) (109,562) Transfers for policy benefits and terminations........................... (669,538) (240,064) (119,892) (208,016) (443,354) (773,762) ---------- ---------- ---------- ---------- ---------- ---------- Net increase (decrease) in net assets resulting from unit transactions..... (47,957) (82,471) 733,871 (621,775) (538,937) (954,986) ---------- ---------- ---------- ---------- ---------- ---------- Net increase (decrease) in net assets..... 1,455,493 1,018,926 1,381,080 (61,660) 123,237 (564,560) NET ASSETS: Beginning of period....................... 4,103,949 3,085,023 1,703,943 5,922,016 5,798,779 6,363,339 ---------- ---------- ---------- ---------- ---------- ---------- End of period............................. $5,559,442 $4,103,949 $3,085,023 $5,860,356 $5,922,016 $5,798,779 ========== ========== ========== ========== ========== ==========
(a) For the period May 1, 2005 to December 31, 2005. The accompanying notes are an integral part of these financial statements. AA-36
RUSSELL RUSSELL RUSSELL CORE BOND AGGRESSIVE EQUITY NON-US DIVISION DIVISION DIVISION -------------------------------------- -------------------------------------- -------------------------------------- 2007 2006 2005 2007 2006 2005 2007 2006 2005 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- $ 90,762 $ 75,109 $ 80,691 $ (8,637) $ (13,444) $ 56,122 $ 50,780 $ 44,201 $ 22,243 12,067 3,580 29,322 444,409 443,746 290,036 642,130 139,527 25,229 24,700 (20,836) (80,212) (347,648) (60,534) (206,066) (446,378) 334,483 222,527 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- 127,529 57,853 29,801 88,124 369,768 140,092 246,532 518,211 269,999 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- 79,285 97,100 115,520 136,379 150,568 176,183 98,874 108,547 113,772 (169,894) 114,105 (74,734) (209,452) (26,433) (180,741) (128,165) (114,784) (163,482) (59,912) (59,309) (38,620) (101,262) (106,175) (36,945) (83,471) (80,380) (26,993) (82,998) (108,305) (416,370) (71,414) (146,210) (331,812) (146,865) (141,550) (218,230) ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- (233,519) 43,591 (414,204) (245,749) (128,250) (373,315) (259,627) (228,167) (294,933) ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- (105,990) 101,444 (384,403) (157,625) 241,518 (233,223) (13,095) 290,044 (24,934) 2,050,826 1,949,382 2,333,785 2,921,227 2,679,709 2,912,932 2,675,610 2,385,566 2,410,500 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- $1,944,836 $2,050,826 $1,949,382 $2,763,602 $2,921,227 $2,679,709 $2,662,515 $2,675,610 $2,385,566 ========== ========== ========== ========== ========== ========== ========== ========== ==========
The accompanying notes are an integral part of these financial statements. AA-37 GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN OF GENERAL AMERICAN LIFE INSURANCE COMPANY STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2007, 2006, AND 2005
J.P. MORGAN J.P. MORGAN BOND SMALL COMPANY DIVISION DIVISION -------------------------------------- --------------------------------------- 2007 2006 2005 2007 2006 2005 ---------- ---------- ---------- ----------- ---------- ---------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss).............. $ 231,921 $ 123,807 $ 91,854 $ (28,329) $ (30,189) $ (28,741) Net realized gains (losses)............... (34,962) (15,504) 55,072 1,003,317 661,295 1,130,327 Change in unrealized gains (losses) on investments............................ (168,773) 18,741 (76,466) (999,932) 319,395 (937,478) ---------- ---------- ---------- ----------- ---------- ---------- Net increase (decrease) in net assets resulting from operations............ 28,186 127,044 70,460 (24,944) 950,501 164,108 ---------- ---------- ---------- ----------- ---------- ---------- POLICY TRANSACTIONS: Premium payments received from policy owners................................. 174,942 207,066 322,057 392,373 554,439 588,541 Net transfers (including fixed account)... (276,197) (30,356) 1,790,651 (2,362,748) (311,829) 290,905 Policy charges............................ (114,360) (144,438) (58,527) (251,979) (324,876) (122,198) Transfers for policy benefits and terminations........................... (137,035) (244,401) (145,545) (1,181,168) (653,494) (884,083) ---------- ---------- ---------- ----------- ---------- ---------- Net increase (decrease) in net assets resulting from unit transactions..... (352,650) (212,129) 1,908,636 (3,403,522) (735,760) (126,835) ---------- ---------- ---------- ----------- ---------- ---------- Net increase (decrease) in net assets..... (324,464) (85,085) 1,979,096 (3,428,466) 214,741 37,273 NET ASSETS: Beginning of period....................... 3,654,218 3,739,303 1,760,207 6,992,621 6,777,880 6,740,607 ---------- ---------- ---------- ----------- ---------- ---------- End of period............................. $3,329,754 $3,654,218 $3,739,303 $ 3,564,155 $6,992,621 $6,777,880 ========== ========== ========== =========== ========== ==========
(a) For the period May 1, 2005 to December 31, 2005. The accompanying notes are an integral part of these financial statements. AA-38
MSF FI MID MSF T. ROWE PRICE MSF T. ROWE PRICE CAP OPPORTUNITIES SMALL CAP GROWTH LARGE CAP GROWTH DIVISION DIVISION DIVISION --------------------------------------- --------------------------------------- --------------------------------------- 2007 2006 2005 2007 2006 2005 2007 2006 2005 ----------- ---------- ---------- ----------- ---------- ---------- ---------- ----------- ---------- $ (12,425) $ (15,136) $ (15,995) $ (39,227) $ (38,569) $ (35,995) $ (730) $ (6,098) $ (1,986) 592,579 13,540 (58,481) 580,431 360,971 354,479 990,196 464,824 281,004 (225,747) 396,699 244,972 (18,766) (117,554) 285,418 (687,853) (7,786) (22,927) ----------- ---------- ---------- ----------- ---------- ---------- ---------- ----------- ---------- 354,407 395,103 170,496 522,438 204,848 603,902 301,613 450,940 256,091 ----------- ---------- ---------- ----------- ---------- ---------- ---------- ----------- ---------- 328,426 369,019 412,709 600,635 687,097 816,152 478,175 422,803 453,824 (733,412) 565,196 (498,688) 1,449,928 (55,337) (281,245) 455,357 (1,357,795) (528,951) (223,323) (206,851) (78,085) (295,528) (332,060) (117,729) (348,435) (270,123) (108,781) (386,663) (197,062) (350,688) (1,022,980) (423,905) (462,299) (267,749) (121,099) (54,875) ----------- ---------- ---------- ----------- ---------- ---------- ---------- ----------- ---------- (1,014,972) 530,302 (514,752) 732,055 (124,205) (45,121) 317,348 (1,326,214) (238,783) ----------- ---------- ---------- ----------- ---------- ---------- ---------- ----------- ---------- (660,565) 925,405 (344,256) 1,254,493 80,643 558,781 618,961 (875,274) 17,308 3,608,317 2,682,912 3,027,168 6,315,510 6,234,867 5,676,086 3,749,592 4,624,866 4,607,558 ----------- ---------- ---------- ----------- ---------- ---------- ---------- ----------- ---------- $ 2,947,752 $3,608,317 $2,682,912 $ 7,570,003 $6,315,510 $6,234,867 $4,368,553 $ 3,749,592 $4,624,866 =========== ========== ========== =========== ========== ========== ========== =========== ==========
The accompanying notes are an integral part of these financial statements. AA-39 GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN OF GENERAL AMERICAN LIFE INSURANCE COMPANY STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2007, 2006, AND 2005
MSF NEUBERGER BERMAN MSF FI MID CAP VALUE INTERNATIONAL STOCK DIVISION DIVISION -------------------------------------- -------------------------------------- 2007 2006 2005 2007 2006 2005 ---------- ---------- ---------- ---------- ---------- ---------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss).............. $ (2,597) $ (4,189) $ (8,841) $ 24,283 $ 43,858 $ 2,500 Net realized gains (losses)............... 216,033 445,113 364,581 548,217 563,898 155,229 Change in unrealized gains (losses) on investments............................ (152,816) (81,503) (38,305) (156,181) (21,804) 370,431 ---------- ---------- ---------- ---------- ---------- ---------- Net increase (decrease) in net assets resulting from operations............ 60,620 359,421 317,435 416,319 585,952 528,160 ---------- ---------- ---------- ---------- ---------- ---------- POLICY TRANSACTIONS: Premium payments received from policy owners................................. 462,736 588,051 453,353 413,978 800,996 483,324 Net transfers (including fixed account)... 520,223 (62,897) 374,582 (304,026) (156,320) 472,912 Policy charges............................ (263,721) (265,232) (91,552) (210,495) (231,838) (73,890) Transfers for policy benefits and terminations........................... (257,940) (225,164) (114,990) (439,094) (221,618) (153,863) ---------- ---------- ---------- ---------- ---------- ---------- Net increase (decrease) in net assets resulting from unit transactions..... 461,298 34,758 621,393 (539,637) 191,220 728,483 ---------- ---------- ---------- ---------- ---------- ---------- Net increase (decrease) in net assets..... 521,918 394,179 938,828 (123,318) 777,172 1,256,643 NET ASSETS: Beginning of period....................... 3,447,554 3,053,375 2,114,547 4,374,725 3,597,553 2,340,910 ---------- ---------- ---------- ---------- ---------- ---------- End of period............................. $3,969,472 $3,447,554 $3,053,375 $4,251,407 $4,374,725 $3,597,553 ========== ========== ========== ========== ========== ==========
(a) For the period May 1, 2005 to December 31, 2005. The accompanying notes are an integral part of these financial statements. AA-40
MSF MORGAN MSF METLIFE MSF METLIFE STANLEY EAFE INDEX STOCK INDEX MID CAP STOCK INDEX DIVISION DIVISION DIVISION ---------------------------------------- ----------------------------------------- ------------------------------------ 2007 2006 2005 2007 2006 2005 2007 2006 2005 ----------- ----------- ---------- ----------- ----------- ----------- ---------- ---------- -------- $ 149,507 $ 119,077 $ 94,252 $ 327,457 $ 1,067,180 $ 777,342 $ 4,350 $ 6,538 $ 2,576 974,759 1,310,370 491,209 5,909,870 6,528,952 2,932,902 120,293 106,197 76,994 (133,006) 624,769 445,022 (2,348,289) 3,685,325 (604,531) (51,465) (33,216) 10,095 ----------- ----------- ---------- ----------- ----------- ----------- ---------- ---------- -------- 991,260 2,054,216 1,030,483 3,889,038 11,281,457 3,105,713 73,178 79,519 89,665 ----------- ----------- ---------- ----------- ----------- ----------- ---------- ---------- -------- 903,862 838,689 878,646 8,089,617 8,582,173 10,087,927 197,940 154,021 172,642 1,599,065 (1,070,499) 207,674 (2,481,347) (6,158,512) (8,304,753) 48,214 (49,824) (44,332) (602,960) (571,115) (184,346) (5,538,239) (5,698,063) (2,051,598) (86,305) (72,228) (24,207) (749,133) (479,188) (774,495) (6,938,085) (5,353,079) (6,135,367) (33,759) 102,706 (50,656) ----------- ----------- ---------- ----------- ----------- ----------- ---------- ---------- -------- 1,150,834 (1,282,113) 127,479 (6,868,054) (8,627,481) (6,403,791) 126,090 134,675 53,447 ----------- ----------- ---------- ----------- ----------- ----------- ---------- ---------- -------- 2,142,094 772,103 1,157,962 (2,979,016) 2,653,976 (3,298,078) 199,268 214,194 143,112 9,915,393 9,143,290 7,985,328 84,500,862 81,846,886 85,144,964 1,052,524 838,330 695,218 ----------- ----------- ---------- ----------- ----------- ----------- ---------- ---------- -------- $12,057,487 $ 9,915,393 $9,143,290 $81,521,846 $84,500,862 $81,846,886 $1,251,792 $1,052,524 $838,330 =========== =========== ========== =========== =========== =========== ========== ========== ========
The accompanying notes are an integral part of these financial statements. AA-41 GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN OF GENERAL AMERICAN LIFE INSURANCE COMPANY STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2007, 2006, AND 2005
MSF BLACKROCK MSF BLACKROCK LARGE CAP VALUE DIVERSIFIED DIVISION DIVISION --------------------------------------- ----------------------------------------- 2007 2006 2005 2007 2006 2005 ----------- ---------- ---------- ----------- ----------- ----------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss)............. $ 30,493 $ 45,315 $ 19,029 $ 190,534 $ 179,294 $ 93,880 Net realized gains (losses).............. 2,289,425 1,351,560 446,283 518,700 413,901 168,515 Change in unrealized gains (losses) on investments........................... (2,254,387) 39,492 (36,838) (184,991) 342,183 (24,132) ----------- ---------- ---------- ----------- ----------- ----------- Net increase (decrease) in net assets resulting from operations........... 65,531 1,436,367 428,474 524,243 935,378 238,263 ----------- ---------- ---------- ----------- ----------- ----------- POLICY TRANSACTIONS: Premium payments received from policy owners................................ 1,001,339 873,072 926,952 779,985 956,318 961,034 Net transfers (including fixed account).. 210,685 203,292 (512,306) (328,886) (491,076) (366,170) Policy charges........................... (692,323) (597,910) (212,584) (673,450) (682,326) (257,568) Transfers for policy benefits and terminations.......................... (809,070) (974,472) (432,762) (667,455) (1,074,819) (328,521) ----------- ---------- ---------- ----------- ----------- ----------- Net increase (decrease) in net assets resulting from unit transactions.... (289,369) (496,018) (230,700) (889,806) (1,291,903) 8,775 ----------- ---------- ---------- ----------- ----------- ----------- Net increase (decrease) in net assets.... (223,838) 940,349 197,774 (365,563) (356,525) 247,038 NET ASSETS: Beginning of period...................... 9,354,672 8,414,323 8,216,549 10,130,762 10,487,287 10,240,249 ----------- ---------- ---------- ----------- ----------- ----------- End of period............................ $ 9,130,834 $9,354,672 $8,414,323 $ 9,765,199 $10,130,762 $10,487,287 =========== ========== ========== =========== =========== ===========
(a) For the period May 1, 2005 to December 31, 2005 The accompanying notes are an integral part of these financial statements. AA-42
MSF LEHMAN BROTHERS MSF BLACKROCK MSF RUSSELL AGGREGATE BOND INDEX STRATEGIC VALUE 2000 INDEX DIVISION DIVISION DIVISION ----------------------------------------- ----------------------------------------- -------------------------------------- 2007 2006 2005 2007 2006 2005 2007 2006 2005 ----------- ----------- ----------- ----------- ----------- ----------- ---------- ---------- ---------- $ 541,399 $ 483,226 $ 442,745 $ (44,423) $ (41,737) $ (69,686) $ 18,734 $ 12,918 $ 10,878 32,060 (45,452) 9,237 2,036,479 2,757,734 1,177,231 469,787 274,674 369,076 337,511 (11,003) (265,050) (2,628,503) (927,574) (702,631) (592,035) 389,864 (207,834) ----------- ----------- ----------- ----------- ----------- ----------- ---------- ---------- ---------- 910,970 426,771 186,932 (636,447) 1,788,423 404,914 (103,514) 677,456 172,120 ----------- ----------- ----------- ----------- ----------- ----------- ---------- ---------- ---------- 1,350,653 1,239,705 1,406,844 992,319 1,145,392 1,241,227 554,784 645,241 634,540 (337,386) 65,099 (372,505) (71,315) 153,347 (19,001) 401,851 52,569 (533,771) (735,332) (744,343) (269,950) (642,892) (627,149) (210,154) (277,238) (267,432) (88,052) (1,860,877) (1,333,249) (862,962) (507,428) (554,350) (497,427) (270,487) (276,085) (101,234) ----------- ----------- ----------- ----------- ----------- ----------- ---------- ---------- ---------- (1,582,942) (772,788) (98,573) (229,316) 117,240 514,645 408,910 154,293 (88,517) ----------- ----------- ----------- ----------- ----------- ----------- ---------- ---------- ---------- (671,972) (346,017) 88,359 (865,763) 1,905,663 919,559 305,396 831,749 83,603 13,148,793 13,494,810 13,406,451 13,035,407 11,129,744 10,210,185 4,507,590 3,675,841 3,592,238 ----------- ----------- ----------- ----------- ----------- ----------- ---------- ---------- ---------- $12,476,821 $13,148,793 $13,494,810 $12,169,644 $13,035,407 $11,129,744 $4,812,986 $4,507,590 $3,675,841 =========== =========== =========== =========== =========== =========== ========== ========== ==========
The accompanying notes are an integral part of these financial statements. AA-43 GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN OF GENERAL AMERICAN LIFE INSURANCE COMPANY STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2007, 2006, AND 2005
MSF HARRIS OAKMARK MSF BLACKROCK LARGE CAP VALUE LEGACY LARGE CAP GROWTH DIVISION DIVISION -------------------------------------- -------------------------------------- 2007 2006 2005 2007 2006 2005 ---------- ---------- ---------- ---------- ---------- ---------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss).............. $ 10,811 $ 9,565 $ 5,566 $ (8,891) $ (9,733) $ (2,154) Net realized gains (losses)............... 347,667 188,716 122,491 228,552 85,783 82,680 Change in unrealized gains (losses) on investments............................ (523,098) 495,868 (189,982) 231,374 16,557 76,807 ---------- ---------- ---------- ---------- ---------- ---------- Net increase (decrease) in net assets resulting from operations............ (164,620) 694,149 (61,925) 451,035 92,607 157,333 ---------- ---------- ---------- ---------- ---------- ---------- POLICY TRANSACTIONS: Premium payments received from policy owners................................. 429,403 512,958 624,164 444,001 476,899 508,916 Net transfers (including fixed account)... (58,531) (36,702) (49,312) 80,615 3,385 (214,760) Policy charges............................ (244,024) (268,489) (92,342) (231,717) (232,988) (90,043) Transfers for policy benefits and terminations........................... (314,156) (292,648) (169,606) (289,325) (193,391) (228,760) ---------- ---------- ---------- ---------- ---------- ---------- Net increase (decrease) in net assets resulting from unit transactions..... (187,308) (84,881) 312,904 3,574 53,905 (24,647) ---------- ---------- ---------- ---------- ---------- ---------- Net increase (decrease) in net assets..... (351,928) 609,268 250,979 454,609 146,512 132,686 NET ASSETS: Beginning of period....................... 4,583,868 3,974,600 3,723,621 2,612,755 2,466,243 2,333,557 ---------- ---------- ---------- ---------- ---------- ---------- End of period............................. $4,231,940 $4,583,868 $3,974,600 $3,067,364 $2,612,755 $2,466,243 ========== ========== ========== ========== ========== ==========
(a) For the period May 1, 2005 to December 31, 2005 The accompanying notes are an integral part of these financial statements. AA-44
MSF HARRIS MSF DAVIS MSF BLACKROCK OAKMARK FOCUSED VALUE VENTURE VALUE MONEY MARKET DIVISION DIVISION DIVISION --------------------------------------- -------------------------------------- ------------------------------------------ 2007 2006 2005 2007 2006 2005 2007 2006 2005 ----------- ---------- ---------- ---------- ---------- ---------- ----------- ----------- ------------ $ 1,758 $ (17,831) $ (34,338) $ 18,666 $ 40,476 $ 7,240 $ 715,034 $ 699,297 $ 467,720 963,772 1,013,378 743,956 665,607 743,693 223,191 -- -- -- (1,393,084) (246,155) (142,831) (302,764) 298,057 241,761 -- -- -- ----------- ---------- ---------- ---------- ---------- ---------- ----------- ----------- ------------ (427,554) 749,392 566,787 381,509 1,082,226 472,192 715,034 699,297 467,720 ----------- ---------- ---------- ---------- ---------- ---------- ----------- ----------- ------------ 796,826 916,745 981,726 822,591 1,006,574 795,681 3,472,499 4,146,633 5,879,443 (562,680) (97,348) (874,407) 768,060 1,198,013 2,867,431 1,541,622 (2,185,822) (11,567,377) (475,931) (521,963) (180,747) (529,347) (557,045) (150,166) (1,205,408) (1,455,192) (675,843) (630,997) (616,272) (622,035) (761,361) (587,817) (333,465) (4,344,277) (1,324,480) (2,320,575) ----------- ---------- ---------- ---------- ---------- ---------- ----------- ----------- ------------ (872,782) (318,838) (695,463) 299,943 1,059,725 3,179,481 (535,564) (818,861) (8,684,352) ----------- ---------- ---------- ---------- ---------- ---------- ----------- ----------- ------------ (1,300,336) 430,554 (128,676) 681,452 2,141,951 3,651,673 179,470 (119,564) (8,216,632) 6,930,271 6,499,717 6,628,393 9,236,966 7,095,015 3,443,342 17,013,357 17,132,921 25,349,553 ----------- ---------- ---------- ---------- ---------- ---------- ----------- ----------- ------------ $ 5,629,935 $6,930,271 $6,499,717 $9,918,418 $9,236,966 $7,095,015 $17,192,827 $17,013,357 $ 17,132,921 =========== ========== ========== ========== ========== ========== =========== =========== ============
The accompanying notes are an integral part of these financial statements. AA-45 GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN OF GENERAL AMERICAN LIFE INSURANCE COMPANY STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2007, 2006, AND 2005
MSF BLACKROCK MSF BLACKROCK BOND INCOME AGGRESSIVE GROWTH DIVISION DIVISION -------------------------------------- --------------------------------------- 2007 2006 2005 2007 2006 2005 ---------- ---------- ---------- ---------- ---------- ----------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss).............. $ 64,052 $ 115,279 $ 70,789 $ (39,146) $ (38,434) $ (41,673) Net realized gains (losses)............... (8,755) (23,374) (8,056) 392,239 591,190 756,356 Change in unrealized gains (losses) on investments............................ 83,441 (2,113) (21,556) 619,985 (272,451) (176,968) ---------- ---------- ---------- ---------- ---------- ----------- Net increase (decrease) in net assets resulting from operations............ 138,738 89,792 41,177 973,078 280,305 537,715 ---------- ---------- ---------- ---------- ---------- ----------- POLICY TRANSACTIONS: Premium payments received from policy owners................................. 271,234 310,348 348,562 545,695 701,080 650,061 Net transfers (including fixed account)... (35,737) 223,877 114,438 94,877 (215,679) (747,562) Policy charges............................ (135,050) (144,219) (55,533) (403,287) (415,881) (152,698) Transfers for policy benefits and terminations........................... (257,458) (284,410) (74,788) (634,263) (532,842) (1,015,674) ---------- ---------- ---------- ---------- ---------- ----------- Net increase (decrease) in net assets resulting from unit transactions..... (157,011) 105,596 332,679 (396,978) (463,322) (1,265,873) ---------- ---------- ---------- ---------- ---------- ----------- Net increase (decrease) in net assets..... (18,273) 195,388 373,856 576,100 (183,017) (728,158) NET ASSETS: Beginning of period....................... 2,449,900 2,254,512 1,880,656 5,219,167 5,402,184 6,130,342 ---------- ---------- ---------- ---------- ---------- ----------- End of period............................. $2,431,627 $2,449,900 $2,254,512 $5,795,267 $5,219,167 $ 5,402,184 ========== ========== ========== ========== ========== ===========
(a) For the period May 1, 2005 to December 31, 2005 The accompanying notes are an integral part of these financial statements. AA-46
MSF MFS MSF WESTERN ASSET MANAGEMENT MSF METLIFE TOTAL RETURN U.S. GOVERNMENT CONSERVATIVE ALLOCATION DIVISION DIVISION DIVISION -------------------------------------- ------------------------------- ----------------------------- 2007 2006 2005 2007 2006 2005 2007 2006 2005(A) ---------- ---------- ---------- -------- -------- ------- ------- ------- ------- $ 81,048 $ 139,453 $ 49,580 $ 4,455 $ 5,421 $ 624 $ -- $ 301 $ 29 372,557 165,462 112,625 24,005 (756) 1,466 168 132 67 (267,990) 200,714 (49,957) 4,605 2,043 (564) 361 142 57 ---------- ---------- ---------- -------- -------- ------- ------- ------- ------ 185,615 505,629 112,248 33,065 6,708 1,526 529 575 153 ---------- ---------- ---------- -------- -------- ------- ------- ------- ------ 616,666 602,117 665,193 58,998 33,532 11,372 2,105 2,858 -- (2,939) 22,105 (138,128) 73,971 82,348 20,398 (29) 29 9,109 (462,077) (486,551) (163,943) (17,846) (9,329) (2,392) (1,887) (2,623) (270) (574,902) (177,549) (343,335) 16,116 (8,142) (115) (12) 1 -- ---------- ---------- ---------- -------- -------- ------- ------- ------- ------ (423,252) (39,878) 19,787 131,239 98,409 29,263 177 265 8,839 ---------- ---------- ---------- -------- -------- ------- ------- ------- ------ (237,637) 465,751 132,035 164,304 105,117 30,789 706 840 8,992 4,881,298 4,415,547 4,283,512 203,496 98,379 67,590 9,832 8,992 -- ---------- ---------- ---------- -------- -------- ------- ------- ------- ------ $4,643,661 $4,881,298 $4,415,547 $367,800 $203,496 $98,379 $10,538 $ 9,832 $8,992 ========== ========== ========== ======== ======== ======= ======= ======= ======
The accompanying notes are an integral part of these financial statements. AA-47 GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN OF GENERAL AMERICAN LIFE INSURANCE COMPANY STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2007, 2006, AND 2005
MSF METLIFE CONSERVATIVE TO MSF METLIFE MODERATE ALLOCATION MODERATE ALLOCATION DIVISION DIVISION ----------------------------- -------------------------------- 2007 2006 2005(A) 2007 2006 2005(A) ------- ------- ------- -------- -------- -------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss).................... $ -- $ 135 $-- $ 380 $ 1,352 $ 64 Net realized gains (losses)..................... 20 (39) -- 3,805 1,989 85 Change in unrealized gains (losses) on investments.................................. (2) 2 3 3,958 12,149 130 ------- ------- --- -------- -------- -------- Net increase (decrease) in net assets resulting from operations.................. 18 98 3 8,143 15,490 279 ------- ------- --- -------- -------- -------- POLICY TRANSACTIONS: Premium payments received from policy owners.... 1,697 6,294 -- 58,660 90,842 24,984 Net transfers (including fixed account)......... (1,494) (4,600) 87 (12,445) 117,851 1,164 Policy charges.................................. (411) (1,334) (4) (46,959) (56,484) (11,323) Transfers for policy benefits and terminations.. (87) (70) -- (1,072) (101) (34) ------- ------- --- -------- -------- -------- Net increase (decrease) in net assets resulting from unit transactions........... (295) 290 83 (1,816) 152,108 14,791 ------- ------- --- -------- -------- -------- Net increase (decrease) in net assets........... (277) 388 86 6,327 167,598 15,070 NET ASSETS: Beginning of period............................. 474 86 -- 182,668 15,070 -- ------- ------- --- -------- -------- -------- End of period................................... $ 197 $ 474 $86 $188,995 $182,668 $ 15,070 ======= ======= === ======== ======== ========
(a) For the period May 1, 2005 to December 31, 2005 The accompanying notes are an integral part of these financial statements. AA-48
MSF METLIFE MODERATE TO MSF METLIFE MIST LEGG MASON PARTNERS AGGRESSIVE ALLOCATION AGGRESSIVE ALLOCATION AGGRESSIVE GROWTH DIVISION DIVISION DIVISION -------------------------------- ------------------------------ ---------------------------------- 2007 2006 2005(A) 2007 2006 2005(A) 2007 2006 2005 ---- -------- ------- -------- ------- ------- --------- --------- -------- $ 824 $ 1,523 $ 146 $ 163 $ 149 $ 8 $ (2,033) $ (5,888) $ (1,827) 7,002 4,712 31 5,289 811 5 19,723 37,708 24,336 4,482 20,906 1 (4,758) 3,243 (14) 7,742 (119,887) 24,658 --------- -------- ------- -------- ------- ------ --------- --------- -------- 12,308 27,141 178 694 4,203 (1) 25,432 (88,067) 47,167 --------- -------- ------- -------- ------- ------ --------- --------- -------- 135,145 108,490 1,758 72,785 37,133 600 93,032 422,140 84,196 55,983 218,383 36,730 50,429 20,691 1,440 (99,280) 157,167 (3,584) (104,831) (77,222) (1,482) (42,132) (9,245) (70) (58,868) (68,227) (15,875) (4,641) (152) 2 (32,952) (5,197) -- (248,579) (17,389) (53,048) --------- -------- ------- -------- ------- ------ --------- --------- -------- 81,656 249,499 37,008 48,130 43,382 1,970 (313,695) 493,691 11,689 --------- -------- ------- -------- ------- ------ --------- --------- -------- 93,964 276,640 37,186 48,824 47,585 1,969 (288,263) 405,624 58,856 313,826 37,186 -- 49,554 1,969 -- 826,860 421,236 362,380 --------- -------- ------- -------- ------- ------ --------- --------- -------- $ 407,790 $313,826 $37,186 $ 98,378 $49,554 $1,969 $ 538,597 $ 826,860 $421,236 ========= ======== ======= ======== ======= ====== ========= ========= ========
The accompanying notes are an integral part of these financial statements. AA-49 GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN OF GENERAL AMERICAN LIFE INSURANCE COMPANY STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2007, 2006, AND 2005
MIST RCM TECHNOLOGY MIST PIMCO TOTAL RETURN DIVISION DIVISION --------------------------------- ---------------------------------------- 2007 2006 2005 2007 2006 2005 -------- --------- -------- ----------- ----------- ---------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss)............... $ (2,234) $ (1,705) $ (1,865) $ 347,162 $ 192,081 $ (24,045) Net realized gains (losses)................ 133,104 48,944 (957) (47,128) (34,955) 36,530 Change in unrealized gains (losses) on investments............................. 9,799 (22,876) 58,921 310,693 257,811 139,888 -------- --------- -------- ----------- ----------- ---------- Net increase (decrease) in net assets resulting from operations............. 140,669 24,363 56,099 610,727 414,937 152,373 -------- --------- -------- ----------- ----------- ---------- POLICY TRANSACTIONS: Premium payments received from policy owners.................................. 101,242 76,234 86,242 807,619 903,979 846,296 Net transfers (including fixed account).... 281,937 (198,082) 155,027 79,516 2,227,410 100,501 Policy charges............................. (50,201) (41,099) (16,274) (428,684) (436,403) (147,181) Transfers for policy benefits and terminations............................ (46,571) (39,199) (81,139) (614,738) (556,503) (311,280) -------- --------- -------- ----------- ----------- ---------- Net increase (decrease) in net assets resulting from unit transactions...... 286,407 (202,146) 143,856 (156,287) 2,138,483 488,336 -------- --------- -------- ----------- ----------- ---------- Net increase (decrease) in net assets...... 427,076 (177,783) 199,955 454,440 2,553,420 640,709 NET ASSETS: Beginning of period........................ 326,874 504,657 304,702 10,481,928 7,928,508 7,287,799 -------- --------- -------- ----------- ----------- ---------- End of period.............................. $753,950 $ 326,874 $504,657 $10,936,368 $10,481,928 $7,928,508 ======== ========= ======== =========== =========== ==========
(a) For the period May 1, 2005 to December 31, 2005 The accompanying notes are an integral part of these financial statements. AA-50
MIST T. ROWE PRICE MID-CAP GROWTH MIST MET/AIM SMALL CAP GROWTH MIST LAZARD MID-CAP DIVISION DIVISION DIVISION -------------------------------------- ------------------------------------ --------------------------------- 2007 2006 2005 2007 2006 2005 2007 2006 2005 ---------- ---------- ---------- ---------- ---------- -------- --------- -------- -------- $ (8,766) $ (19,736) $ (11,912) $ (6,336) $ (5,407) $ (4,711) $ 3,229 $ 516 $ (59) 240,682 440,953 157,900 41,888 165,447 25,743 82,363 49,034 68,389 224,676 (342,560) 116,218 85,536 (32,890) 48,578 (108,193) 16,618 (41,895) ---------- ---------- ---------- ---------- ---------- -------- --------- -------- -------- 456,592 78,657 262,206 121,088 127,150 69,610 (22,601) 66,168 26,435 ---------- ---------- ---------- ---------- ---------- -------- --------- -------- -------- 360,282 644,275 286,454 120,633 103,435 111,968 146,173 81,406 73,308 1,073,494 300,846 265,707 41,838 121,660 21,148 3,575 438,424 14,513 (195,824) (234,584) (54,282) (65,984) (73,533) (23,369) (119,700) (46,249) (13,072) (319,411) (317,284) (77,613) (77,133) (57,260) (27,179) (48,828) (27,316) (76,586) ---------- ---------- ---------- ---------- ---------- -------- --------- -------- -------- 918,541 393,253 420,266 19,354 94,302 82,568 (18,780) 446,265 (1,837) ---------- ---------- ---------- ---------- ---------- -------- --------- -------- -------- 1,375,133 471,910 682,472 140,442 221,452 152,178 (41,381) 512,433 24,598 2,917,869 2,445,959 1,763,487 1,186,196 964,744 812,566 881,187 368,754 344,156 ---------- ---------- ---------- ---------- ---------- -------- --------- -------- -------- $4,293,002 $2,917,869 $2,445,959 $1,326,638 $1,186,196 $964,744 $ 839,806 $881,187 $368,754 ========== ========== ========== ========== ========== ======== ========= ======== ========
The accompanying notes are an integral part of these financial statements. AA-51 GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN OF GENERAL AMERICAN LIFE INSURANCE COMPANY STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2007, 2006 AND 2005
MIST HARRIS MIST LORD ABBETT OAKMARK INTERNATIONAL GROWTH AND INCOME DIVISION DIVISION ---------------------------------------- -------------------------------------- 2007 2006 2005 2007 2006 2005 ----------- ----------- ---------- ---------- ---------- ---------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss)............. $ 63,589 $ 122,562 $ (16,211) $ 12,725 $ 33,228 $ 12,684 Net realized gains (losses).............. 1,927,153 870,767 163,390 278,028 308,381 122,103 Change in unrealized gains (losses) on investments........................... (1,977,133) 1,040,476 374,891 (199,171) 83,506 (59,691) ----------- ----------- ---------- ---------- ---------- ---------- Net increase (decrease) in net assets resulting from operations........... 13,609 2,033,805 522,070 91,582 425,115 75,096 ----------- ----------- ---------- ---------- ---------- ---------- POLICY TRANSACTIONS: Premium payments received from policy owners................................ 946,031 809,498 454,356 256,804 297,100 340,514 Net transfers (including fixed account).. (1,473,663) 3,957,014 2,083,335 (504,840) (116,971) (282,138) Policy charges........................... (587,215) (435,617) (106,015) (224,606) (264,620) (94,948) Transfers for policy benefits and terminations.......................... (648,141) (783,732) (138,078) (252,160) (288,685) (410,250) ----------- ----------- ---------- ---------- ---------- ---------- Net increase (decrease) in net assets resulting from unit transactions.... (1,762,988) 3,547,163 2,293,598 (724,802) (373,176) (446,822) ----------- ----------- ---------- ---------- ---------- ---------- Net increase (decrease) in net assets.... (1,749,379) 5,580,968 2,815,668 (633,220) 51,939 (371,726) NET ASSETS: Beginning of period...................... 10,798,665 5,217,697 2,402,029 2,678,344 2,626,405 2,998,131 ----------- ----------- ---------- ---------- ---------- ---------- End of period............................ $ 9,049,286 $10,798,665 $5,217,697 $2,045,124 $2,678,344 $2,626,405 =========== =========== ========== ========== ========== ==========
(a) For the period May 1, 2005 to December 31, 2005 The accompanying notes are an integral part of these financial statements. AA-52
MIST LORD ABBETT MIST MFS MIST NEUBERGER BERMAN MID-CAP VALUE RESEARCH INTERNATIONAL REAL ESTATE DIVISION DIVISION DIVISION --------------------------------------- -------------------------------------- -------------------------------------- 2007 2006 2005 2007 2006 2005 2007 2006 2005 ---------- ----------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- $ 12,022 $ 3,263 $ (6,454) $ 30,890 $ 40,071 $ (1,539) $ 20,603 $ 13,993 $ (3,715) 553,335 780,435 341,833 750,349 581,566 295,091 502,700 222,262 22,477 (544,881) (380,064) 57,145 (364,180) 143,517 201,096 (935,463) 348,153 157,099 ---------- ----------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- 20,476 403,634 392,524 417,059 765,154 494,648 (412,160) 584,408 175,861 ---------- ----------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- 295,275 366,941 456,426 328,432 355,597 430,380 282,992 249,019 147,589 (188,271) (2,029,056) (679,844) 1,227,840 (177,773) (359,525) (271,827) 428,837 1,046,543 (202,972) (228,437) (116,552) (214,464) (240,424) (93,675) (154,531) (95,817) (21,816) (271,140) (634,661) (306,869) (421,956) (666,711) (524,010) (141,903) (16,932) (34,463) ---------- ----------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- (367,108) (2,525,213) (646,839) 919,852 (729,311) (546,830) (285,269) 565,107 1,137,853 ---------- ----------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- (346,632) (2,121,579) (254,315) 1,336,911 35,843 (52,182) (697,429) 1,149,515 1,313,714 3,243,190 5,364,769 5,619,084 3,359,685 3,323,842 3,376,024 2,678,294 1,528,779 215,065 ---------- ----------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- $2,896,558 $ 3,243,190 $5,364,769 $4,696,596 $3,359,685 $3,323,842 $1,980,865 $2,678,294 $1,528,779 ========== =========== ========== ========== ========== ========== ========== ========== ==========
The accompanying notes are an integral part of these financial statements. AA-53 GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN OF GENERAL AMERICAN LIFE INSURANCE COMPANY STATEMENTS OF CHANGES IN NET ASSETS -- (CONCLUDED) FOR THE YEARS ENDED DECEMBER 31, 2007, 2006 AND 2005
MIST LORD ABBETT MIST OPPENHEIMER BOND DEBENTURE CAPITAL APPRECIATION DIVISION DIVISION ---------------------------------------- ----------------------------- 2007 2006 2005 2007 2006 2005(A) ----------- ----------- ---------- ------- ------- ------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss)................. $ 533,609 $ 555,592 $ 961,675 $ 7 $ 5 $ -- Net realized gains (losses).................. 79,161 (41) (968,045) 490 75 8 Change in unrealized gains (losses) on investments............................... 25,466 272,472 131,919 149 33 (2) ----------- ----------- ---------- ------- ------- ----- Net increase (decrease) in net assets resulting from operations............... 638,236 828,023 125,549 646 113 6 ----------- ----------- ---------- ------- ------- ----- POLICY TRANSACTIONS: Premium payments received from policy owners.................................... 719,179 818,058 825,056 3,754 2,655 371 Net transfers (including fixed account)...... (1,244,458) 1,510,157 615,458 4,063 983 386 Policy charges............................... (470,830) (487,406) (166,223) (1,922) (736) (150) Transfers for policy benefits and terminations.............................. (797,680) (472,240) (740,045) (2,574) (2,056) (2) ----------- ----------- ---------- ------- ------- ----- Net increase (decrease) in net assets resulting from unit transactions........ (1,793,789) 1,368,569 534,246 3,321 846 605 ----------- ----------- ---------- ------- ------- ----- Net increase (decrease) in net assets........ (1,155,553) 2,196,592 659,795 3,967 959 611 NET ASSETS: Beginning of period.......................... 11,013,266 8,816,674 8,156,879 1,570 611 -- ----------- ----------- ---------- ------- ------- ----- End of period................................ $ 9,857,713 $11,013,266 $8,816,674 $ 5,537 $ 1,570 $ 611 =========== =========== ========== ======= ======= =====
(a) For the period May 1, 2005 to December 31, 2005 The accompanying notes are an integral part of these financial statements. AA-54
AMERICAN FUNDS AMERICAN FUNDS AMERICAN FUNDS GROWTH GROWTH-INCOME GLOBAL SMALL CAPITALIZATION DIVISION DIVISION DIVISION ----------------------------------------- ----------------------------------------- --------------------------------------- 2007 2006 2005 2007 2006 2005 2007 2006 2005 ----------- ----------- ----------- ----------- ----------- ----------- ---------- ----------- ---------- $ 73,479 $ 83,780 $ 42,692 $ 185,784 $ 173,395 $ 116,900 $ 184,477 $ (2,706) $ 21,968 4,652,447 1,375,379 945,991 1,437,863 743,400 1,021,795 1,662,737 1,216,843 402,138 (1,060,086) 990,418 2,051,285 (833,407) 1,288,425 (305,127) (560,063) 76,639 736,865 ----------- ----------- ----------- ----------- ----------- ----------- ---------- ----------- ---------- 3,665,840 2,449,577 3,039,968 790,240 2,205,220 833,568 1,287,151 1,290,776 1,160,971 ----------- ----------- ----------- ----------- ----------- ----------- ---------- ----------- ---------- 2,805,343 4,592,815 2,556,795 1,806,714 2,882,892 1,973,430 671,182 772,410 718,898 (2,728,670) 4,101,580 1,656,714 23,540 778,038 (1,962,765) 701,443 (831,416) 104,361 (1,689,815) (1,661,763) (497,642) (1,064,824) (1,056,532) (352,234) (475,083) (430,914) (135,890) (2,098,169) (2,042,148) (1,013,496) (2,428,194) (947,764) (1,099,654) (870,393) (617,171) (189,789) ----------- ----------- ----------- ----------- ----------- ----------- ---------- ----------- ---------- (3,711,311) 4,990,484 2,702,371 (1,662,764) 1,656,634 (1,441,223) 27,149 (1,107,091) 497,580 ----------- ----------- ----------- ----------- ----------- ----------- ---------- ----------- ---------- (45,471) 7,440,061 5,742,339 (872,524) 3,861,854 (607,655) 1,314,300 183,685 1,658,551 30,329,365 22,889,304 17,146,965 18,382,945 14,521,091 15,128,746 6,438,957 6,255,272 4,596,721 ----------- ----------- ----------- ----------- ----------- ----------- ---------- ----------- ---------- $30,283,894 $30,329,365 $22,889,304 $17,510,421 $18,382,945 $14,521,091 $7,753,257 $ 6,438,957 $6,255,272 =========== =========== =========== =========== =========== =========== ========== =========== ==========
The accompanying notes are an integral part of these financial statements. AA-55 GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN OF GENERAL AMERICAN LIFE INSURANCE COMPANY NOTES TO THE FINANCIAL STATEMENTS 1. ORGANIZATION General American Separate Account Eleven (the "Separate Account"), a separate account of General American Life Insurance Company (the "Company"), was established by the Company's Board of Directors on January 30, 1985 to support operations of the Company with respect to certain variable life policies (the "Policies"). The Company is an indirect wholly-owned subsidiary of MetLife, Inc., a Delaware corporation. The Separate Account is registered as a unit investment trust under the Investment Company Act of 1940, as amended, and exists in accordance with the regulations of the Missouri Insurance Department. The Separate Account is divided into Divisions, each of which is treated as an individual accounting entity for financial reporting purposes. Each Division invests in shares of the corresponding portfolio, series, or fund (with the same name) of registered investment management companies (the "Trusts") which are presented below: Fidelity Variable Insurance Products Fund ("Fidelity VIP") Van Eck Worldwide Insurance Trust ("Van Eck") Russell Investment Funds ("Russell") J.P Morgan Series Trust II ("J.P Morgan") Metropolitan Series Fund, Inc. ("MSF") Met Investors Series Trust ("MIST") American Funds Insurance Series ("American Funds") The assets of the Separate Account are registered in the name of the Company. Under applicable insurance law, the assets and liabilities of the Separate Account are clearly identified and distinguished from the Company's other assets and liabilities. The portion of the Separate Account's assets applicable to the Policies is not chargeable with liabilities arising out of any other business the Company may conduct. Premium payments applied to the Separate Account are invested in one or more Divisions in accordance with the selection made by the policy owner. The following Divisions were available for investment as of December 31, 2007: Fidelity VIP Equity-Income MSF BlackRock Diversified Division* Division Fidelity VIP Growth Division MSF Lehman Brothers Aggregate Bond Index Division Fidelity VIP Overseas Division MSF BlackRock Strategic Value Division Fidelity VIP Mid Cap Division MSF Russell 2000 Index Division Van Eck Worldwide Hard Assets MSF Harris Oakmark Large Cap Value Division Division Van Eck Worldwide Emerging MSF BlackRock Legacy Large Cap Growth Markets Division Division Russell Multi-Style Equity MSF Harris Oakmark Focused Value Division Division Russell Core Bond Division MSF Davis Venture Value Division Russell Aggressive Equity MSF BlackRock Money Market Division Division Russell Non-US Division MSF BlackRock Bond Income Division J.P. Morgan Bond Division MSF BlackRock Aggressive Growth Division J.P. Morgan Small Company MSF MFS Total Return Division Division MSF FI Mid Cap Opportunities MSF Western Asset Management U.S. Government Division Division MSF T. Rowe Price Small Cap MSF MetLife Conservative Allocation Division Growth Division MSF T. Rowe Price Large Cap MSF MetLife Conservative to Moderate Growth Division Allocation Division MSF Neuberger Berman Mid Cap MSF MetLife Moderate Allocation Division Value Division MSF FI International Stock MSF MetLife Moderate to Aggressive Division Allocation Division MSF Morgan Stanley EAFE Index MSF MetLife Aggressive Allocation Division Division MSF MetLife Stock Index MIST Legg Mason Partners Aggressive Growth Division Division MSF MetLife Mid Cap Stock MIST RCM Technology Division Index Division MSF BlackRock Large Cap Value MIST PIMCO Total Return Division Division
AA-56 GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN OF GENERAL AMERICAN LIFE INSURANCE COMPANY NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) 1. ORGANIZATION -- (CONTINUED) MIST T. Rowe Price Mid-Cap MIST Neuberger Berman Real Estate Division Growth Division MIST Met/AIM Small Cap Growth MIST Lord Abbett Bond Debenture Division Division MIST Lazard Mid-Cap Division MIST Oppenheimer Capital Appreciation Division MIST Harris Oakmark American Funds Growth Division International Division MIST Lord Abbett Growth and American Funds Growth-Income Division Income Division MIST Lord Abbett Mid-Cap Value American Funds Global Small Capitalization Division Division MIST MFS Research International Division
* This Division invests in two or more share classes within the underlying portfolio, series, or fund of the Trusts that may assess 12b-1 fees. The operations of the Divisions were affected by the following changes that occurred during the year ended December 31, 2007: NAME CHANGES:
OLD NAME NEW NAME -------- -------- Legg Mason Aggressive Growth Portfolio Legg Mason Partners Aggressive Growth Portfolio RCM Global Technology Portfolio RCM Technology Portfolio
This report is prepared for the general information of policy owners and is not an offer of units of the Separate Account or shares of the Separate Account's underlying investments. It should not be used in connection with any offer except in conjunction with the prospectus for the Separate Account products offered by the Company and the prospectus of the underlying portfolio, series, or fund which collectively contain all the pertinent information, including additional information on charges and expenses. 2. SIGNIFICANT ACCOUNTING POLICIES BASIS OF ACCOUNTING The financial statements included herein have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for variable life separate accounts registered as unit investment trusts. VALUATION OF INVESTMENTS Investments are reported at fair value and are based on the net asset value per share as determined by the underlying assets of the portfolio, series, or fund of the Trusts, which value their investment securities at fair value. Changes in fair value are recorded in the statements of operations. SECURITY TRANSACTIONS Security transactions are recorded on a trade date basis. Realized gains and losses on the sales of investments are computed on the basis of the identified cost of the investment sold. Income from dividends and realized gain distributions are recorded on the ex-distribution date. FEDERAL INCOME TAXES The operations of the Separate Account form a part of the total operations of the Company and are not taxed separately. The Company is taxed as a life insurance company under the provisions of the Internal Revenue Code ("IRC"). Under the current provisions of the IRC, the Company does not expect to incur federal income taxes on the earnings of the Separate Account to the extent the earnings are credited under the Policies. Accordingly, no charge is being made currently to the Separate Account for federal income taxes. The Company will periodically review the status of this policy in the event of changes in the tax law. A charge may be made in future years for any federal income taxes that would be attributable to the Policies. AA-57 GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN OF GENERAL AMERICAN LIFE INSURANCE COMPANY NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) 2. SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED) PREMIUM PAYMENTS The Company deducts a sales charge and a state premium tax charge from premiums before amounts are allocated to the Separate Account. In the case of certain Policies, the Company also deducts a federal income tax charge before amounts are allocated to the Separate Account. The federal income tax charge is imposed in connection with certain Policies to recover a portion of the federal income tax adjustment attributable to policy acquisition expenses. Net premiums are credited as accumulation units as of the end of the valuation period in which received, as provided in the prospectus. NET TRANSFERS The policy owner has the opportunity to transfer funds between Divisions within the Separate Account or the fixed account, which is an investment option in the Company's general account. USE OF ESTIMATES The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect amounts reported herein. Actual results could differ from these estimates. ADOPTION OF NEW ACCOUNTING PRONOUNCEMENT Effective January 1, 2007, the Company adopted Financial Accounting Standards Board ("FASB") Interpretation ("FIN") No. 48, Accounting for Uncertainty in Income Taxes -- An Interpretation of FASB Statement No. 109 ("FIN 48"). FIN 48 clarifies the accounting for uncertainty in income tax recognized in a company's financial statements. FIN 48 requires companies to determine whether it is "more likely than not" that a tax position will be sustained upon examination by the appropriate taxing authorities before any part of the benefit can be recorded in the financial statements. It also provides guidance on the recognition, measurement, and classification of income tax uncertainties, along with any related interest and penalties. Previously recorded income tax benefits that no longer meet this standard are required to be charged to earnings in the period that such determination is made. The adoption of FIN 48 had no impact on the financial statements of the Separate Account. FUTURE ADOPTION OF NEW ACCOUNTING PRONOUNCEMENT In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157, Fair Value Measurements ("SFAS 157"). SFAS 157 defines fair value, establishes a framework for measuring fair value under GAAP and requires enhanced disclosures about fair value measurements. SFAS 157 does not require additional fair value measurements. The pronouncement is effective for fiscal years beginning after November 15, 2007. The guidance in SFAS 157 will be applied prospectively with certain exceptions. The Company believes the adoption of SFAS 157 will have no material impact on the financial statements of the Separate Account. CHANGE IN BASIS OF PRESENTATION In prior year statements of changes in net assets, the Separate Account reported cost of insurance ("COI") in the financial statement line item "Transfers for policy benefits and terminations." COI has been reclassified and now appears separately in the line item "Policy charges." This reclassification presents COI more consistent with the intent of what COI charges represent. The reclassification had no effect on the net assets of the Divisions or unit values of the Policies. AA-58 GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN OF GENERAL AMERICAN LIFE INSURANCE COMPANY NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) 3. EXPENSES AND RELATED PARTY TRANSACTIONS The following annual Separate Account charge is an asset-based charge and assessed through a daily reduction in unit values which is recorded as an expense in the accompanying statements of operations: Mortality and Expense Risk -- The mortality risk assumed by the Company is the risk that those insured may die sooner than anticipated and therefore, the Company will pay an aggregate amount of death benefits greater than anticipated. The expense risk assumed is where expenses incurred in issuing and administering the Policies will exceed the amounts realized from the administrative charges assessed against the Policies. The table below represents the range of effective annual rates for the Mortality and Expense Risk charge for the year ended December 31, 2007: ------------------------------------------------------------------------ Mortality and Expense Risk 0.55%-0.90% ------------------------------------------------------------------------
The above referenced charge may not necessarily correspond to the costs associated with providing the services or benefits indicated by the designation of the charge or associated with a particular policy. For some Policies, the Mortality and Expense Risk charge which ranges from .15% to .75% is assessed on a monthly basis through the redemption of units. Other policy charges that are assessed through the redemption of units generally include: COI charges, administrative charges, a policy fee, and charges for benefits provided by rider. The COI charge is the primary charge under the policy for the death benefit provided by the Company. Administrative charges range from $.01 to $1 for every $1,000 of the policy face amount and are assessed per month for the first 10 policy years. Policy fees range from $4 to $25 and are assessed monthly depending on the policy and the policy year. In addition, a surrender charge is imposed if the policy is partially or fully surrendered within the specified surrender charge period that ranges from 0% to 45%. For those policy owners who choose optional living benefit riders, these charges range from $.01 to $83.33 per $100 or $1,000 face amount of the policy cash value and are deducted monthly. These charges are assessed through the redemption of units and are recorded as policy charges in the accompanying statements of changes in net assets. Certain investments in the various portfolios, series or funds of the MIST and MSF Trusts hold shares which are managed by Met Investors Advisory, LLC and MetLife Advisers, LLC respectively. Both act in the capacity of investment advisor and are indirect affiliates of the Company. AA-59 GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN OF GENERAL AMERICAN LIFE INSURANCE COMPANY NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) 4. STATEMENT OF INVESTMENTS
FOR THE YEAR ENDED DECEMBER AS OF DECEMBER 31 31 ---------------------- ---------------------------- COST OF PROCEEDS FROM SHARES COST ($) PURCHASES($) SALES($) --------- ---------- ------------ ------------- Fidelity VIP Equity-Income Division...... 1,160,690 27,511,297 4,922,278 8,043,461 Fidelity VIP Growth Division............. 976,625 36,171,223 7,967,952 7,290,788 Fidelity VIP Overseas Division........... 699,419 12,513,241 4,294,472 2,897,771 Fidelity VIP Mid Cap Division............ 319,595 10,269,140 3,875,664 3,296,654 Van Eck Worldwide Hard Assets Division... 142,402 4,110,196 1,855,295 1,071,874 Van Eck Worldwide Emerging Markets Division............................... 200,158 4,308,521 2,265,739 1,541,849 Russell Multi-Style Equity Division...... 374,503 4,617,607 477,513 844,851 Russell Core Bond Division............... 188,432 1,967,658 286,080 429,061 Russell Aggressive Equity Division....... 212,391 2,796,564 504,134 398,101 Russell Non-US Division.................. 201,886 2,218,888 783,731 492,358 J.P. Morgan Bond Division................ 297,831 3,540,475 450,258 571,098 J.P. Morgan Small Company Division....... 221,619 3,701,834 1,170,033 4,283,170 MSF FI Mid Cap Opportunities Division.... 139,228 2,355,601 593,617 1,626,119 MSF T. Rowe Price Small Cap Growth Division............................... 437,555 6,589,345 2,693,823 2,014,751 MSF T. Rowe Price Large Cap Growth Division............................... 268,022 4,468,515 4,677,974 4,273,813 MSF Neuberger Berman Mid Cap Value Division............................... 186,670 3,853,471 1,532,051 966,894 MSF FI International Stock Division...... 265,050 3,620,400 617,588 901,990 MSF Morgan Stanley EAFE Index Division... 700,172 8,832,539 3,022,566 1,623,778 MSF MetLife Stock Index Division......... 2,200,808 60,094,066 6,426,922 11,328,369 MSF MetLife Mid Cap Stock Index Division............................... 83,282 1,240,075 754,644 424,299 MSF BlackRock Large Cap Value Division... 674,440 9,114,899 5,620,184 5,511,704 MSF BlackRock Diversified Division....... 536,420 7,925,916 1,173,491 1,891,547 MSF Lehman Brothers Aggregate Bond Index Division............................... 1,131,004 12,034,241 4,699,502 5,812,215 MSF BlackRock Strategic Value Division... 800,958 13,398,250 3,605,467 2,406,565 MSF Russell 2000 Index Division.......... 339,241 4,663,750 1,325,648 550,698 MSF Harris Oakmark Large Cap Value Division............................... 296,352 4,054,954 1,191,565 1,103,918 MSF BlackRock Legacy Large Cap Growth Division............................... 114,713 2,365,632 668,904 674,601 MSF Harris Oakmark Focused Value Division............................... 25,641 6,253,893 1,422,257 1,440,933 MSF Davis Venture Value Division......... 271,122 9,099,691 3,789,705 3,510,336 MSF BlackRock Money Market Division...... 171,860 17,186,091 11,246,501 11,079,156 MSF BlackRock Bond Income Division....... 21,766 2,341,669 605,202 698,499 MSF BlackRock Aggressive Growth Division............................... 199,701 4,183,215 597,882 1,058,415 MSF MFS Total Return Division............ 30,054 4,362,648 1,276,681 1,447,301 MSF Western Asset Management U.S. Government Division.................... 29,659 363,525 960,825 822,524 MSF MetLife Conservative Allocation Division............................... 943 9,978 2,963 2,781 MSF MetLife Conservative to Moderate Allocation Division.................... 17 198 386 684
AA-60 GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN OF GENERAL AMERICAN LIFE INSURANCE COMPANY NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) 4. STATEMENT OF INVESTMENTS -- (CONTINUED)
FOR THE YEAR ENDED DECEMBER AS OF DECEMBER 31 31 ---------------------- ---------------------------- COST OF PROCEEDS FROM SHARES COST ($) PURCHASES($) SALES($) --------- ---------- ------------ ------------- MSF MetLife Moderate Allocation Division............................... 15,752 172,819 54,211 55,384 MSF MetLife Moderate to Aggressive Allocation Division.................... 32,810 382,436 166,806 83,855 MSF MetLife Aggressive Allocation Division............................... 7,771 99,907 116,704 68,305 MIST Legg Mason Partners Aggressive Growth Division........................ 71,432 572,210 176,057 420,805 MIST RCM Technology Division............. 110,528 708,763 752,887 457,393 MIST PIMCO Total Return Division......... 890,694 10,420,096 4,852,397 4,652,363 MIST T. Rowe Price Mid-Cap Growth Division............................... 436,636 4,045,596 2,499,748 1,553,085 MIST Met/AIM Small Cap Growth Division... 89,271 1,178,002 430,994 304,873 MIST Lazard Mid-Cap Division............. 68,781 929,498 358,439 284,579 MIST Harris Oakmark International Division............................... 524,382 9,294,708 4,347,449 5,012,736 MIST Lord Abbett Growth and Income Division............................... 70,788 1,892,800 395,550 992,979 MIST Lord Abbett Mid-Cap Value Division.. 147,033 3,046,859 829,717 749,966 MIST MFS Research International Division............................... 323,930 4,235,326 2,254,020 820,673 MIST Neuberger Berman Real Estate Division............................... 140,664 2,401,162 1,451,384 1,462,705 MIST Lord Abbett Bond Debenture Division............................... 780,434 9,525,254 1,775,018 3,022,696 MIST Oppenheimer Capital Appreciation Division............................... 555 5,336 7,879 4,300 American Funds Growth Division........... 453,722 25,917,416 6,045,132 7,404,969 American Funds Growth-Income Division.... 414,045 15,576,745 3,251,294 4,004,582 American Funds Global Small Capitalization Division................ 288,466 6,685,642 3,214,435 2,411,974
AA-61 GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN OF GENERAL AMERICAN LIFE INSURANCE COMPANY NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) 5. SCHEDULES OF UNITS For the years ended December 31, 2007, 2006, and 2005
FIDELITY FIDELITY FIDELITY VIP EQUITY-INCOME VIP GROWTH VIP OVERSEAS DIVISION DIVISION DIVISION --------------------------------- --------------------------------- ------------------- 2007 2006 2005 2007 2006 2005 2007 2006 --------- --------- --------- --------- --------- --------- -------- -------- Units beginning of year.......... 1,343,580 1,222,942 1,229,677 1,750,107 1,958,718 2,195,040 671,833 739,654 Units issued and transferred from other funding options.......... 225,452 445,478 275,066 678,765 300,901 376,946 168,612 140,194 Units redeemed and transferred to other funding options.......... (497,972) (324,840) (281,801) (405,344) (509,512) (613,268) (140,299) (208,015) --------- --------- --------- --------- --------- --------- -------- -------- Units end of year................ 1,071,060 1,343,580 1,222,942 2,023,528 1,750,107 1,958,718 700,146 671,833 ========= ========= ========= ========= ========= ========= ======== ======== RUSSELL RUSSELL RUSSELL CORE BOND AGGRESSIVE EQUITY NON-US DIVISION DIVISION DIVISION --------------------------------- --------------------------------- ------------------- 2007 2006 2005 2007 2006 2005 2007 2006 --------- --------- --------- --------- --------- --------- -------- -------- Units beginning of year.......... 130,542 127,263 153,051 147,167 154,299 175,705 143,290 156,749 Units issued and transferred from other funding options.......... 12,848 17,739 16,030 10,801 14,641 14,404 6,550 9,454 Units redeemed and transferred to other funding options.......... (28,123) (14,460) (41,818) (21,840) (21,773) (35,810) (19,412) (22,913) --------- --------- --------- --------- --------- --------- -------- -------- Units end of year................ 115,267 130,542 127,263 136,128 147,167 154,299 130,428 143,290 ========= ========= ========= ========= ========= ========= ======== ======== MSF T. ROWE PRICE MSF NEUBERGER BERMAN MSF FI LARGE CAP GROWTH MID CAP VALUE INTERNATIONAL STOCK DIVISION DIVISION DIVISION --------------------------------- --------------------------------- ------------------- 2007 2006 2005 2007 2006 2005 2007 2006 --------- --------- --------- --------- --------- --------- -------- -------- Units beginning of year.......... 326,614 466,875 497,847 196,697 193,015 149,047 262,114 249,702 Units issued and transferred from other funding options.......... 399,142 94,238 103,014 99,173 92,145 117,022 37,291 151,181 Units redeemed and transferred to other funding options.......... (376,279) (234,499) (133,986) (75,730) (88,463) (73,054) (67,480) (138,769) --------- --------- --------- --------- --------- --------- -------- -------- Units end of year................ 349,476 326,614 466,875 220,140 196,697 193,015 231,925 262,114 ========= ========= ========= ========= ========= ========= ======== ======== MSF BLACKROCK MSF LEHMAN BROTHERS MSF BLACKROCK DIVERSIFIED AGGREGATE BOND INDEX STRATEGIC VALUE DIVISION DIVISION DIVISION --------------------------------- --------------------------------- ------------------- 2007 2006 2005 2007 2006 2005 2007 2006 --------- --------- --------- --------- --------- --------- -------- -------- Units beginning of year.......... 465,064 510,436 501,929 728,785 774,171 773,395 584,701 575,468 Units issued and transferred from other funding options.......... 62,545 56,511 76,872 303,307 149,966 202,434 137,829 119,168 Units redeemed and transferred to other funding options.......... (107,043) (101,883) (68,365) (369,307) (195,352) (201,658) (151,194) (109,935) --------- --------- --------- --------- --------- --------- -------- -------- Units end of year................ 420,566 465,064 510,436 662,785 728,785 774,171 571,336 584,701 ========= ========= ========= ========= ========= ========= ======== ======== FIDELITY VIP OVERSEAS DIVISION -------- 2005 -------- Units beginning of year.......... 828,485 Units issued and transferred from other funding options.......... 145,414 Units redeemed and transferred to other funding options.......... (234,245) -------- Units end of year................ 739,654 ======== RUSSELL NON-US DIVISION -------- 2005 -------- Units beginning of year.......... 178,514 Units issued and transferred from other funding options.......... 9,899 Units redeemed and transferred to other funding options.......... (31,664) -------- Units end of year................ 156,749 ======== MSF FI INTERNA- TIONAL STOCK DIVISION -------- 2005 -------- Units beginning of year.......... 190,766 Units issued and transferred from other funding options.......... 126,466 Units redeemed and transferred to other funding options.......... (67,530) -------- Units end of year................ 249,702 ======== MSF BLACK- ROCK STRATE- GIC VALUE DIVISION -------- 2005 -------- Units beginning of year.......... 544,826 Units issued and transferred from other funding options.......... 165,637 Units redeemed and transferred to other funding options.......... (134,995) -------- Units end of year................ 575,468 ========
AA-62
FIDELITY VAN ECK WORLDWIDE VAN ECK WORLDWIDE RUSSELL VIP MID CAP HARD ASSETS EMERGING MARKETS MULTI-STYLE EQUITY DIVISION DIVISION DIVISION DIVISION ---------------------------- --------------------------------- ---------------------------- ---------------------------- 2007 2006 2005 2007 2006 2005 2007 2006 2005 2007 2006 2005 -------- -------- -------- --------- ---------- ---------- -------- -------- -------- -------- -------- -------- 471,636 604,861 663,974 114,594 118,357 69,488 114,425 122,268 83,987 374,311 410,599 473,528 157,167 137,703 240,066 77,339 68,137 92,683 66,288 57,880 84,795 18,952 30,479 34,355 (180,796) (270,928) (299,179) (67,861) (71,900) (43,814) (66,928) (65,723) (46,514) (58,800) (66,767) (97,284) -------- -------- -------- --------- ---------- ---------- -------- -------- -------- -------- -------- -------- 448,007 471,636 604,861 124,072 114,594 118,357 113,785 114,425 122,268 334,463 374,311 410,599 ======== ======== ======== ========= ========== ========== ======== ======== ======== ======== ======== ======== J.P. MORGAN J.P. MORGAN MSF FI MSF T. ROWE PRICE BOND SMALL COMPANY MID CAP OPPORTUNITIES SMALL CAP GROWTH DIVISION DIVISION DIVISION DIVISION ---------------------------- --------------------------------- ---------------------------- ---------------------------- 2007 2006 2005 2007 2006 2005 2007 2006 2005 2007 2006 2005 -------- -------- -------- --------- ---------- ---------- -------- -------- -------- -------- -------- -------- 259,967 275,424 130,618 349,728 386,091 391,632 582,298 484,150 583,280 607,155 619,816 625,307 23,323 44,788 192,982 40,702 145,626 289,274 95,199 205,304 99,449 254,966 167,961 258,950 (48,385) (60,245) (48,176) (202,240) (181,989) (294,815) (233,957) (107,156) (198,579) (204,457) (180,622) (264,441) -------- -------- -------- --------- ---------- ---------- -------- -------- -------- -------- -------- -------- 234,905 259,967 275,424 188,190 349,728 386,091 443,540 582,298 484,150 657,664 607,155 619,816 ======== ======== ======== ========= ========== ========== ======== ======== ======== ======== ======== ======== MSF MORGAN STANLEY MSF METLIFE MSF METLIFE MSF BLACKROCK EAFE INDEX STOCK INDEX MID CAP STOCK INDEX LARGE CAP VALUE DIVISION DIVISION DIVISION DIVISION ---------------------------- --------------------------------- ---------------------------- ---------------------------- 2007 2006 2005 2007 2006 2005 2007 2006 2005 2007 2006 2005 -------- -------- -------- --------- ---------- ---------- -------- -------- -------- -------- -------- -------- 451,194 536,803 511,333 4,165,289 4,641,378 4,958,034 59,555 52,235 47,846 316,215 316,595 316,114 176,875 91,490 277,563 509,486 608,691 807,909 34,870 26,315 25,757 310,952 112,331 93,393 (109,500) (177,099) (252,093) (771,170) (1,084,780) (1,124,565) (27,952) (18,995) (21,368) (319,303) (112,711) (92,912) -------- -------- -------- --------- ---------- ---------- -------- -------- -------- -------- -------- -------- 518,569 451,194 536,803 3,903,605 4,165,289 4,641,378 66,473 59,555 52,235 307,864 316,215 316,595 ======== ======== ======== ========= ========== ========== ======== ======== ======== ======== ======== ======== MSF RUSSELL MSF HARRIS OAKMARK MSF BLACKROCK MSF HARRIS OAKMARK 2000 INDEX LARGE CAP VALUE LEGACY LARGE CAP GROWTH FOCUSED VALUE DIVISION DIVISION DIVISION DIVISION ---------------------------- --------------------------------- ---------------------------- ---------------------------- 2007 2006 2005 2007 2006 2005 2007 2006 2005 2007 2006 2005 -------- -------- -------- --------- ---------- ---------- -------- -------- -------- -------- -------- -------- 286,087 274,071 278,388 345,027 351,694 322,712 327,528 321,441 326,113 388,813 407,084 452,011 85,135 95,855 113,081 99,127 96,334 139,196 89,555 79,119 84,753 74,152 106,557 173,821 (59,552) (83,839) (117,398) (111,074) (103,001) (110,214) (94,544) (73,032) (89,425) (121,183) (124,828) (218,748) -------- -------- -------- --------- ---------- ---------- -------- -------- -------- -------- -------- -------- 311,670 286,087 274,071 333,080 345,027 351,694 322,539 327,528 321,441 341,782 388,813 407,084 ======== ======== ======== ========= ========== ========== ======== ======== ======== ======== ======== ========
AA-63 GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN OF GENERAL AMERICAN LIFE INSURANCE COMPANY NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) 5. SCHEDULES OF UNITS -- (CONTINUED)
MSF DAVIS MSF BLACKROCK MSF BLACKROCK VENTURE VALUE MONEY MARKET BOND INCOME DIVISION DIVISION DIVISION ------------------------------ ---------------------------------- ----------------- 2007 2006 2005 2007 2006 2005 2007 2006 -------- -------- -------- --------- --------- ---------- ------- ------- Units beginning of year............ 596,300 516,399 277,400 1,288,704 1,349,216 2,059,937 199,342 190,536 Units issued and transferred from other funding options............ 272,067 402,562 347,650 820,035 569,864 853,612 54,151 70,128 Units redeemed and transferred to other funding options............ (258,099) (322,661) (108,651) (893,294) (630,376) (1,564,333) (66,449) (61,322) -------- -------- -------- --------- --------- ---------- ------- ------- Units end of year.................. 610,268 596,300 516,399 1,215,445 1,288,704 1,349,216 187,044 199,342 ======== ======== ======== ========= ========= ========== ======= ======= MSF METLIFE MODERATE MSF METLIFE CONSERVATIVE MSF METLIFE MODERATE TO AGGRESSIVE TO MODERATE ALLOCATION ALLOCATION ALLOCATION DIVISION DIVISION DIVISION ------------------------------ ---------------------------------- ----------------- 2007 2006 2005 2007 2006 2005 2007 2006 -------- -------- -------- --------- --------- ---------- ------- ------- Units beginning of year............ 4 1 -- 1,499 139 -- 2,469 335 Units issued and transferred from other funding options............ 3 60 1 531 1,856 258 1,449 2,786 Units redeemed and transferred to other funding options............ (5) (57) -- (547) (496) (119) (836) (652) -------- -------- -------- --------- --------- ---------- ------- ------- Units end of year.................. 2 4 1 1,483 1,499 139 3,082 2,469 ======== ======== ======== ========= ========= ========== ======= ======= MIST T. ROWE PRICE MIST MET/AIM MIST LAZARD MID-CAP GROWTH SMALL CAP GROWTH MID-CAP DIVISION DIVISION DIVISION ------------------------------ ---------------------------------- ----------------- 2007 2006 2005 2007 2006 2005 2007 2006 -------- -------- -------- --------- --------- ---------- ------- ------- Units beginning of year............ 214,791 191,552 158,648 86,128 79,545 72,410 57,984 27,741 Units purchases and transferred from other funding options....... 190,222 255,710 84,521 25,244 25,725 21,660 21,657 36,308 Units redeemed and transferred to other funding options............ (134,418) (232,471) (51,617) (24,392) (19,142) (14,525) (22,903) (6,065) -------- -------- -------- --------- --------- ---------- ------- ------- Units end of year.................. 270,595 214,791 191,552 86,980 86,128 79,545 56,738 57,984 ======== ======== ======== ========= ========= ========== ======= ======= MIST OPPENHEIMER MIST NEUBERGER MIST LORD ABBETT CAPITAL BERMAN REAL ESTATE BOND DEBENTURE APPRECIATION DIVISION DIVISION DIVISION ------------------------------ ---------------------------------- ----------------- 2007 2006 2005 2007 2006 2005 2007 2006 -------- -------- -------- --------- --------- ---------- ------- ------- Units beginning of year............ 13,311 10,429 1,665 54,196 47,168 666,856 16 7 Units purchases and transferred from other funding options....... 7,459 10,071 12,256 7,446 19,738 158,801 72 38 Units redeemed and transferred to other funding options............ (9,112) (7,189) (3,492) (16,068) (12,710) (778,489) (40) (29) -------- -------- -------- --------- --------- ---------- ------- ------- Units end of year.................. 11,658 13,311 10,429 45,574 54,196 47,168 48 16 ======== ======== ======== ========= ========= ========== ======= ======= MSF BLACK- ROCK BOND INCOME DIVI- SION ------- 2005 ------- Units beginning of year............ 161,638 Units issued and transferred from other funding options............ 88,755 Units redeemed and transferred to other funding options............ (59,857) ------- Units end of year.................. 190,536 ======= MSF METLIFE MODER- ATE TO AGGRES- SIVE ALLOCA- TION DIVI- SION ------- 2005 ------- Units beginning of year............ -- Units issued and transferred from other funding options............ 349 Units redeemed and transferred to other funding options............ (14) ------- Units end of year.................. 335 ======= MIST LAZARD MID-CAP DIVI- SION ------- 2005 ------- Units beginning of year............ 28,005 Units purchases and transferred from other funding options....... 13,247 Units redeemed and transferred to other funding options............ (13,511) ------- Units end of year.................. 27,741 ======= MIST OPPEN- HEIMER CAPITAL APPRE- CIATION DIVI- SION ------- 2005 ------- Units beginning of year............ -- Units purchases and transferred from other funding options....... 9 Units redeemed and transferred to other funding options............ (2) ------- Units end of year.................. 7 =======
AA-64
MSF WESTERN MSF BLACKROCK MSF MFS ASSET MANAGEMENT MSF METLIFE AGGRESSIVE GROWTH TOTAL RETURN U.S. GOVERNMENT CONSERVATIVE ALLOCATION DIVISION DIVISION DIVISION DIVISION ---------------------------- --------------------------- -------------------------- ---------------------------- 2007 2006 2005 2007 2006 2005 2007 2006 2005 2007 2006 2005 -------- -------- -------- -------- -------- ------- ------- -------- ------- -------- -------- -------- 342,898 374,916 455,675 282,839 281,072 280,684 1,102 556 393 88 86 -- 59,322 95,853 90,094 78,254 65,379 69,993 4,806 924 2,265 20 26 89 (82,084) (127,871) (170,853) (100,469) (63,612) (69,605) (3,991) (378) (2,102) (19) (24) (3) -------- -------- -------- -------- -------- ------- ------- -------- ------- -------- -------- -------- 320,136 342,898 374,916 260,624 282,839 281,072 1,918 1,102 556 89 88 86 ======== ======== ======== ======== ======== ======= ======= ======== ======= ======== ======== ======== MSF METLIFE MIST LEGG MASON PARTNERS MIST RCM MIST PIMCO AGGRESSIVE ALLOCATION AGGRESSIVE GROWTH TECHNOLOGY TOTAL RETURN DIVISION DIVISION DIVISION DIVISION ---------------------------- --------------------------- -------------------------- ---------------------------- 2007 2006 2005 2007 2006 2005 2007 2006 2005 2007 2006 2005 -------- -------- -------- -------- -------- ------- ------- -------- ------- -------- -------- -------- 379 17 -- 96,700 47,764 46,651 45,217 77,982 52,000 844,496 665,767 624,680 907 481 18 15,145 179,089 19,411 78,111 29,580 57,405 404,811 427,951 335,305 (559) (119) (1) (52,491) (130,153) (18,298) (40,059) (62,345) (31,423) (429,685) (249,222) (294,218) -------- -------- -------- -------- -------- ------- ------- -------- ------- -------- -------- -------- 727 379 17 59,354 96,700 47,764 83,269 45,217 77,982 819,622 844,496 665,767 ======== ======== ======== ======== ======== ======= ======= ======== ======= ======== ======== ======== MIST HARRIS MIST LORD ABBETT MIST LORD ABBETT MIST MFS OAKMARK INTERNATIONAL GROWTH AND INCOME MID-CAP VALUE RESEARCH INTERNATIONAL DIVISION DIVISION DIVISION DIVISION ---------------------------- --------------------------- -------------------------- ---------------------------- 2007 2006 2005 2007 2006 2005 2007 2006 2005 2007 2006 2005 -------- -------- -------- -------- -------- ------- ------- -------- ------- -------- -------- -------- 537,704 335,810 175,927 171,216 197,707 232,871 145,153 282,587 317,812 203,764 252,773 298,069 301,028 327,712 215,868 25,343 33,867 34,937 20,355 24,142 37,943 122,546 48,339 50,310 (379,318) (125,818) (55,985) (69,513) (60,358) (70,101) (37,055) (161,576) (73,168) (69,900) (97,348) (95,606) -------- -------- -------- -------- -------- ------- ------- -------- ------- -------- -------- -------- 459,414 537,704 335,810 127,046 171,216 197,707 128,453 145,153 282,587 256,410 203,764 252,773 ======== ======== ======== ======== ======== ======= ======= ======== ======= ======== ======== ========
AMERICAN FUNDS AMERICAN FUNDS AMERICAN FUNDS GROWTH GROWTH-INCOME GLOBAL SMALL CAPITALIZATION DIVISION DIVISION DIVISION ------------------------------- ------------------------------- ---------------------------- 2007 2006 2005 2007 2006 2005 2007 2006 2005 --------- --------- --------- --------- --------- --------- -------- -------- -------- 1,946,707 1,610,626 1,394,808 1,282,556 1,161,565 1,270,481 296,547 354,785 325,647 458,166 927,355 1,101,490 222,808 382,025 492,834 148,890 123,095 226,647 (661,590) (591,274) (885,672) (336,233) (261,034) (601,750) (150,063) (181,333) (197,509) --------- --------- --------- --------- --------- --------- -------- -------- -------- 1,743,283 1,946,707 1,610,626 1,169,131 1,282,556 1,161,565 295,374 296,547 354,785 ========= ========= ========= ========= ========= ========= ======== ======== ========
AA-65 GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN OF GENERAL AMERICAN LIFE INSURANCE COMPANY NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) 6. FINANCIAL HIGHLIGHTS The following table is a summary of unit values and units outstanding for the Policies, net investment income ratios, and expense ratios, excluding expenses for the underlying portfolio, series, or fund for each of the five years in the period ended December 31, 2007:
FOR THE YEAR ENDED DECEMBER 31 AS OF DECEMBER 31 ------------------------------------------------- ----------------------------------------- EXPENSE(3) UNIT VALUE(1) INVESTMENT(2) RATIO LOWEST TO INCOME LOWEST TO TOTAL RETURN(4) UNITS HIGHEST ($) NET ASSETS ($) RATIO (%) HIGHEST (%) LOWEST TO HIGHEST (%) --------- ------------- -------------- ------------- ----------- --------------------- Fidelity VIP Equity-Income Division 2007 1,071,060 15.39-39.72 27,749,008 1.70 0.55-0.90 0.62-1.53 2006 1,343,580 15.16-39.39 32,665,948 3.36 0.00-0.90 19.12-20.19 2005 1,222,942 12.61-33.00 27,268,049 1.56 0.00-0.90 4.92-5.87 2004 1,229,677 11.91-31.39 26,890,066 1.54 0.00-0.90 10.53-11.53 2003 1,287,334 10.68-28.34 25,786,854 1.71 0.00-0.90 29.19-30.41 Fidelity VIP Growth Division 2007 2,023,528 12.19-38.34 44,176,147 0.81 0.55-0.90 25.83-26.96 2006 1,750,107 9.60-30.45 34,760,010 0.39 0.00-0.90 5.90-6.85 2005 1,958,718 8.99-28.74 36,375,821 0.49 0.00-0.90 4.86-5.80 2004 2,195,040 8.49-27.40 39,046,671 0.26 0.00-0.90 2.45-3.38 2003 2,372,685 8.22-26.73 41,478,246 0.27 0.00-0.90 31.63-32.94 Fidelity VIP Overseas Division 2007 700,146 17.04-34.92 17,751,476 3.34 0.55-0.90 16.26-17.31 2006 671,833 14.52-30.02 15,338,500 0.86 0.00-0.90 17.03-18.08 2005 739,654 12.30-25.64 14,314,443 0.64 0.00-0.90 17.99-19.05 2004 828,485 10.33-21.72 13,720,946 1.07 0.00-0.90 12.62-13.64 2003 854,881 9.09-19.28 12,743,753 0.72 0.00-0.90 42.14-43.44 Fidelity VIP Mid Cap Division 2007 448,007 25.10-26.89 11,574,186 0.92 0.55-0.90 14.59-15.63 2006 471,636 21.91-23.25 10,561,321 0.36 0.00-0.90 11.70-12.70 2005 604,861 19.61-20.63 12,109,098 -- 0.00-0.90 17.25-18.30 2004 663,974 16.73-17.44 11,314,658 -- 0.00-0.90 23.80-24.92 2003 490,805 13.51-13.96 6,697,365 0.38 0.00-0.90 37.41-38.65 Van Eck Worldwide Hard Assets Division 2007 124,072 41.44-56.62 5,879,593 0.12 0.55-0.90 44.05-45.36 2006 114,594 28.77-39.04 3,787,808 0.06 0.00-0.90 23.38-24.49 2005 118,357 23.31-31.53 3,143,532 0.31 0.00-0.90 50.32-51.67 2004 69,488 15.51-20.90 1,236,441 0.34 0.00-0.90 22.87-23.98 2003 57,580 12.62-16.95 802,863 0.32 0.00-0.90 43.76-45.06 Van Eck Worldwide Emerging Markets Division 2007 113,785 40.34-63.87 5,559,442 0.41 0.55-0.90 36.38-37.61 2006 114,425 29.58-46.52 4,103,949 0.61 0.00-0.90 38.25-39.49 2005 122,268 21.40-33.53 3,085,023 0.63 0.00-0.90 30.82-32.00 2004 83,987 16.36-25.54 1,703,943 0.54 0.00-0.90 24.77-25.89 2003 81,692 13.11-20.40 1,313,563 0.08 0.00-0.90 52.79-54.21 Russell Multi-Style Equity Division 2007 334,463 12.94-20.04 5,860,356 1.00 0.55-0.90 9.37-9.81 2006 374,311 11.83-18.25 5,922,016 0.96 0.00-0.90 11.74-12.19 2005 410,599 10.59-16.27 5,798,779 1.11 0.00-0.90 6.32-6.74 2004 473,528 9.96-15.06 6,363,339 0.76 0.00-0.90 8.83-9.26 2003 536,328 9.15-13.95 6,622,319 0.71 0.00-0.90 27.79-28.19 Russell Core Bond Division 2007 115,267 15.55-17.97 1,944,836 5.14 0.55-0.90 6.28-6.70 2006 130,542 14.58-16.85 2,050,826 4.49 0.00-0.90 2.80-3.20 2005 127,263 14.13-16.32 1,949,382 3.77 0.00-0.90 1.11-1.65 2004 153,051 13.93-16.08 2,333,785 2.59 0.00-0.90 3.73-4.14 2003 186,408 13.38-15.44 2,756,194 3.50 0.00-0.90 5.17-5.61 Russell Aggressive Equity Division 2007 136,128 14.70-22.69 2,763,602 0.37 0.55-0.90 2.49-2.90 2006 147,167 14.34-22.05 2,921,227 0.19 0.00-0.90 13.77-14.22 2005 154,299 12.61-19.30 2,679,709 0.17 0.00-0.90 5.41-5.83 2004 175,705 11.96-18.24 2,912,932 0.16 0.00-0.90 13.71-14.16 2003 189,819 10.52-15.98 2,735,905 0.10 0.00-0.90 44.29-44.86
AA-66 GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN OF GENERAL AMERICAN LIFE INSURANCE COMPANY NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) 6. FINANCIAL HIGHLIGHTS -- (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31 AS OF DECEMBER 31 ------------------------------------------------- ----------------------------------------- EXPENSE(3) UNIT VALUE(1) INVESTMENT(2) RATIO LOWEST TO INCOME LOWEST TO TOTAL RETURN(4) UNITS HIGHEST ($) NET ASSETS ($) RATIO (%) HIGHEST (%) LOWEST TO HIGHEST (%) --------- ------------- -------------- ------------- ----------- --------------------- Russell Non-US Division 2007 130,428 17.62-20.79 2,662,515 2.53 0.55-0.90 9.13-9.57 2006 143,290 16.15-19.01 2,675,610 2.43 0.00-0.90 22.54-23.03 2005 156,749 13.18-15.48 2,385,566 1.56 0.00-0.90 12.68-13.12 2004 178,514 11.69-13.72 2,410,500 1.87 0.00-0.90 17.24-17.71 2003 215,765 9.97-11.68 2,479,537 2.64 0.00-0.90 37.58-38.10 J.P. Morgan Bond Division 2007 234,905 13.58-15.06 3,329,754 7.17 0.55-0.90 0.42-1.33 2006 259,967 13.53-14.86 3,654,218 3.94 0.00-0.90 3.21-4.14 2005 275,424 13.11-14.27 3,739,303 3.97 0.00-0.90 0.14-1.04 2004 130,618 13.09-14.12 1,760,207 3.22 0.00-0.90 3.36-4.29 2003 123,078 12.66-13.54 1,596,525 3.43 0.00-0.90 2.78-3.68 J.P. Morgan Small Company Division 2007 188,190 16.52-19.87 3,564,155 0.01 0.55-0.90 (6.52)-(5.67) 2006 349,728 17.67-21.18 6,992,621 -- 0.00-0.90 13.98-15.01 2005 386,091 15.50-18.52 6,777,880 -- 0.00-0.90 2.50-3.42 2004 391,632 15.13-18.01 6,740,607 -- 0.00-0.90 26.03-27.17 2003 251,683 12.00-14.24 3,431,255 -- 0.00-0.90 34.70-36.00 MSF FI Mid Cap Opportunities Division 2007 443,540 6.37-16.74 2,947,752 0.16 0.55-0.90 7.36-8.33 2006 582,298 5.94-15.45 3,608,317 0.00 0.00-0.90 10.86-11.85 2005 484,150 5.35-13.81 2,682,912 0.00 0.00-0.90 5.96-6.92 2004 583,280 5.05-12.92 3,027,168 0.48 0.00-0.90 16.15-17.19 2003 647,063 4.35-11.02 2,867,969 -- 0.00-0.90 33.28-34.62 MSF T. Rowe Price Small Cap Growth Division 2007 657,664 10.96-15.41 7,570,003 -- 0.55-0.90 8.87-9.86 2006 607,155 10.07-14.02 6,315,510 -- 0.00-0.90 2.97-3.90 2005 619,816 9.78-13.50 6,234,867 -- 0.00-0.90 10.02-11.01 2004 625,307 8.89-12.19 5,676,086 -- 0.00-0.90 10.09-11.33 2003 693,690 8.07-10.95 5,699,332 -- 0.00-0.90 39.66-40.92 MSF T. Rowe Price Large Cap Growth Division 2007 349,476 11.67-15.71 4,368,553 0.34 0.55-0.90 8.40-9.39 2006 326,614 10.76-14.36 3,749,592 0.32 0.00-0.90 12.23-13.24 2005 466,875 9.59-12.68 4,624,866 0.57 0.00-0.90 5.64-6.59 2004 497,847 9.08-11.90 4,607,558 0.26 0.00-0.90 8.94-9.93 2003 579,476 8.33-10.82 4,919,137 0.12 0.00-0.90 29.59-30.88 MSF Neuberger Berman Mid Cap Value Division 2007 220,140 17.74-18.66 3,969,472 0.51 0.55-0.90 2.52-3.45 2006 196,697 17.30-17.95 3,447,554 0.48 0.00-0.90 10.46-11.45 2005 193,015 15.66-16.19 3,053,375 0.28 0.00-0.90 11.27-12.27 2004 149,047 14.08-14.42 2,114,547 0.23 0.00-0.90 21.81-22.91 2003 96,783 11.56-11.73 1,123,704 0.19 0.00-0.90 35.32-36.56 MSF FI International Stock Division 2007 231,925 17.97-18.91 4,251,407 1.08 0.55-0.90 9.34-10.33 2006 262,114 16.43-17.14 4,374,725 1.56 0.00-0.90 15.45-16.49 2005 249,702 14.24-14.71 3,597,553 0.60 0.00-0.90 16.95-18.00 2004 190,766 12.17-12.47 2,340,910 1.26 0.00-0.90 17.14-18.19 2003 175,973 10.37-10.55 1,836,930 0.51 0.00-0.90 26.87-28.05 MSF Morgan Stanley EAFE Index Division 2007 518,569 17.95-33.14 12,057,487 1.96 0.55-0.90 9.82-10.82 2006 451,194 16.20-30.16 9,915,393 1.85 0.00-0.90 24.60-25.72 2005 536,803 12.88-24.19 9,143,290 1.68 0.00-0.90 12.24-13.24 2004 511,333 11.38-21.54 7,985,328 0.67 0.00-0.90 18.57-19.64 2003 445,795 9.51-18.16 6,115,366 0.01 0.00-0.90 37.70-38.81
AA-67 GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN OF GENERAL AMERICAN LIFE INSURANCE COMPANY NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) 6. FINANCIAL HIGHLIGHTS -- (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31 AS OF DECEMBER 31 ------------------------------------------------- ----------------------------------------- EXPENSE(3) UNIT VALUE(1) INVESTMENT(2) RATIO LOWEST TO INCOME LOWEST TO TOTAL RETURN(4) UNITS HIGHEST ($) NET ASSETS ($) RATIO (%) HIGHEST (%) LOWEST TO HIGHEST (%) --------- ------------- -------------- ------------- ----------- --------------------- MSF MetLife Stock Index Division 2007 3,903,605 12.92-57.36 81,521,846 1.05 0.55-0.90 4.29-5.23 2006 4,165,289 12.28-54.97 84,500,862 1.98 0.00-0.90 14.43-15.46 2005 4,641,378 10.63-48.01 81,846,886 1.58 0.00-0.90 3.71-4.64 2004 4,958,034 10.16-46.27 85,144,964 0.85 0.00-0.90 9.55-10.53 2003 4,946,613 9.19-42.22 78,876,531 0.01 0.00-0.90 22.02-28.22 MSF MetLife Mid Cap Stock Index Division 2007 66,473 16.87-20.37 1,251,792 0.76 0.55-0.90 6.81-7.78 2006 59,555 15.65-18.90 1,052,524 1.19 0.00-0.90 9.12-10.10 2005 52,235 14.22-17.17 838,330 0.73 0.00-0.90 11.28-39.67 2004 47,846 12.29-15.15 695,218 0.41 0.00-0.90 (6.72)-16.05 2003 22,410 10.91-13.18 279,439 0.07 0.00-0.90 30.99-34.89 MSF BlackRock Large Cap Value Division 2007 307,864 15.71-54.50 9,130,834 0.89 0.55-0.90 2.47-3.39 2006 316,215 15.19-53.16 9,354,672 1.27 0.00-0.90 18.26-19.32 2005 316,595 12.73-44.93 8,414,323 0.96 0.00-0.90 5.04-5.98 2004 316,114 12.01-42.75 8,216,549 -- 0.00-0.90 12.39-13.40 2003 324,396 10.59-38.02 7,586,675 1.38 0.00-0.90 30.41-35.65 MSF BlackRock Diversified Division 2007 420,566 14.15-50.00 9,765,199 2.54 0.55-0.90 4.95-5.90 2006 465,064 13.38-47.62 10,130,762 2.44 0.00-0.90 9.55-10.53 2005 510,436 12.13-43.45 10,487,287 1.58 0.00-0.90 2.13-3.05 2004 501,929 11.78-42.52 10,240,249 1.90 0.00-0.90 7.54-8.51 2003 548,998 10.88-39.52 10,537,825 0.00 0.00-0.90 14.28-20.38 MSF Lehman Brothers Aggregate Bond Index Division 2007 662,785 13.24-33.89 12,476,821 4.41 0.55-0.90 5.92-6.87 2006 728,785 12.39-31.98 13,148,793 4.36 0.00-0.90 3.07-4.12 2005 774,171 11.89-30.98 13,494,810 3.98 0.00-0.90 1.16-2.06 2004 773,395 11.65-30.61 13,406,451 2.97 0.00-0.90 3.17-4.10 2003 811,587 11.20-29.65 13,820,073 0.08 0.00-0.90 1.15-3.66 MSF BlackRock Strategic Value Division 2007 571,336 14.84-22.35 12,169,644 0.29 0.55-0.90 (4.32)-(3.45) 2006 584,701 15.37-23.31 13,035,407 0.30 0.00-0.90 15.69-16.73 2005 575,468 13.17-20.11 11,129,744 -- 0.00-0.90 3.23-4.15 2004 544,826 12.65-19.44 10,210,185 -- 0.00-0.90 14.31-15.34 2003 518,555 10.96-16.98 8,449,926 -- 0.00-0.90 48.96-50.18 MSF Russell 2000 Index Division 2007 311,670 15.04-16.35 4,812,986 0.90 0.55-0.90 (2.40)-(1.51) 2006 286,087 15.41-16.60 4,507,590 0.82 0.00-0.90 16.91-17.96 2005 274,071 13.18-14.07 3,675,841 0.79 0.00-0.90 3.57-4.50 2004 278,388 12.72-13.46 3,592,238 0.43 0.00-0.90 16.71-17.77 2003 209,637 10.90-11.43 2,300,275 0.19 0.00-0.90 44.77-46.02 MSF Harris Oakmark Large Cap Value Division 2007 333,080 12.48-13.13 4,231,940 0.78 0.55-0.90 (4.65)-(3.79) 2006 345,027 13.08-13.64 4,583,868 0.77 0.00-0.90 17.06-18.11 2005 351,694 11.18-11.55 3,974,600 0.66 0.00-0.90 (2.26)-(1.38) 2004 322,712 11.44-11.71 3,723,621 0.64 0.00-0.90 10.42-11.42 2003 392,322 10.28-10.51 4,097,776 -- 0.00-0.90 24.33-25.46 MSF BlackRock Legacy Large Cap Growth Division 2007 322,539 8.79-14.61 3,067,364 0.20 0.55-0.90 17.65-18.72 2006 327,528 7.47-12.30 2,612,755 0.12 0.00-0.90 3.20-4.13 2005 321,441 7.24-11.81 2,466,243 0.41 0.00-0.90 6.05-7.00 2004 326,113 6.83-11.04 2,333,557 -- 0.00-0.90 7.84-8.81 2003 327,120 6.33-10.15 2,138,190 0.05 0.00-0.90 33.83-35.17
AA-68 GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN OF GENERAL AMERICAN LIFE INSURANCE COMPANY NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) 6. FINANCIAL HIGHLIGHTS -- (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31 AS OF DECEMBER 31 ------------------------------------------------- ----------------------------------------- EXPENSE(3) UNIT VALUE(1) INVESTMENT(2) RATIO LOWEST TO INCOME LOWEST TO TOTAL RETURN(4) UNITS HIGHEST ($) NET ASSETS ($) RATIO (%) HIGHEST (%) LOWEST TO HIGHEST (%) --------- ------------- -------------- ------------- ----------- --------------------- MSF Harris Oakmark Focused Value Division 2007 341,782 14.68-17.42 5,629,935 0.59 0.55-0.90 (7.67)-(6.84) 2006 388,813 15.76-18.69 6,930,271 0.30 0.00-0.90 11.45-12.45 2005 407,084 14.02-16.62 6,499,717 0.05 0.00-0.90 9.06-11.75 2004 452,011 12.74-15.11 6,628,393 0.05 0.00-0.90 6.27-9.93 2003 493,898 11.59-13.75 6,677,075 0.12 0.00-0.90 31.48-32.71 MSF Davis Venture Value Division 2007 610,268 15.84-16.67 9,918,418 0.80 0.55-0.90 3.64-4.58 2006 596,300 15.28-15.94 9,236,966 0.93 0.00-0.90 13.56-14.58 2005 516,399 13.46-13.91 7,095,015 0.51 0.00-0.90 9.32-10.30 2004 277,400 12.31-12.61 3,443,342 0.54 0.00-0.90 11.36-12.37 2003 205,707 11.06-11.22 2,284,513 0.17 0.00-0.90 29.71-30.94 MSF BlackRock Money Market Division 2007 1,215,445 11.63-22.24 17,192,827 4.89 0.55-0.90 4.14-5.08 2006 1,288,704 11.07-21.34 17,013,357 4.69 0.00-0.90 3.88-4.81 2005 1,349,216 10.56-20.54 17,132,921 2.73 0.00-0.90 1.98-2.89 2004 2,059,937 10.26-20.13 25,349,553 0.90 0.00-0.90 0.08-0.99 2003 2,759,691 10.16-20.10 33,535,072 1.04 0.00-0.90 (0.10)-0.83 MSF BlackRock Bond Income Division 2007 187,044 12.72-13.38 2,431,627 3.17 0.55-0.90 5.34-6.29 2006 199,342 12.08-12.59 2,449,900 5.55 0.00-0.90 3.48-4.41 2005 190,536 11.67-12.06 2,254,512 3.89 0.00-0.90 1.50-2.41 2004 161,638 11.50-11.78 1,880,656 3.96 0.00-0.90 3.50-4.43 2003 89,894 11.11-11.28 1,005,344 3.95 0.00-0.90 4.89-5.87 MSF BlackRock Aggressive Growth Division 2007 320,136 13.14-23.18 5,795,267 -- 0.55-0.90 19.50-20.58 2006 342,898 10.90-19.36 5,219,167 -- 0.00-0.90 5.78-6.73 2005 374,916 10.21-18.27 5,402,184 -- 0.00-0.90 9.72-10.70 2004 455,675 9.23-16.62 6,130,342 -- 0.00-0.90 11.97-12.98 2003 562,001 8.17-14.81 6,463,575 -- 0.00-0.90 29.51-30.45 MSF MFS Total Return Division 2007 260,624 14.46-23.03 4,643,661 2.29 0.55-0.90 3.44-4.38 2006 282,839 14.21-22.22 4,881,298 3.65 0.00-0.90 11.21-12.21 2005 281,072 12.35-19.94 4,415,547 1.83 0.00-0.90 2.20-3.12 2004 280,684 11.98-19.48 4,283,512 -- 0.00-0.90 9.95-10.94 2003 267,110 10.79-17.68 3,706,693 3.26 0.00-0.90 16.90-18.00 MSF Western Asset Management U.S. Government Division 2007 1,918 183.05-205.98 367,800 1.19 0.55-0.90 3.42-4.35 2006 1,102 177.00-197.39 203,496 3.62 0.00-0.90 3.23-4.16 2005 556 171.45-189.50 98,379 1.54 0.00-0.90 0.82-1.72 2004 393 170.06-186.29 67,590 -- 0.00-0.90 2.79-3.41 MSF MetLife Conservative Allocation Division 2007 89 118.09 10,538 -- 0.55-0.90 5.74 2006 88 111.68 9,832 3.54 0.00-0.90 7.25 2005 86 104.13 8,992 0.66 0.00-0.90 4.13 MSF MetLife Conservative to Moderate Allocation Division 2007 2 122.74 197 -- 0.55-0.90 5.06 2006 4 116.82 474 12.28 0.00-0.90 9.77 2005 1 106.43 86 0.77 0.00-0.90 6.43 MSF MetLife Moderate Allocation Division 2007 1,483 127.44 188,995 0.23 0.55-0.90 4.55 2006 1,499 121.90 182,668 1.29 0.00-0.90 12.18 2005 139 108.66 15,070 0.84 0.00-0.90 8.66
AA-69 GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN OF GENERAL AMERICAN LIFE INSURANCE COMPANY NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) 6. FINANCIAL HIGHLIGHTS -- (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31 AS OF DECEMBER 31 ------------------------------------------------- ----------------------------------------- EXPENSE(3) UNIT VALUE(1) INVESTMENT(2) RATIO LOWEST TO INCOME LOWEST TO TOTAL RETURN(4) UNITS HIGHEST ($) NET ASSETS ($) RATIO (%) HIGHEST (%) LOWEST TO HIGHEST (%) --------- ------------- -------------- ------------- ----------- --------------------- MSF MetLife Moderate to Aggressive Allocation Division 2007 3,082 132.32 407,790 0.25 0.55-0.90 4.12 2006 2,469 127.08 313,826 0.90 0.00-0.90 14.55 2005 335 110.94 37,186 0.78 0.00-0.90 10.94 MSF MetLife Aggressive Allocation Division 2007 727 135.38 98,378 0.34 0.55-0.90 3.48 2006 379 130.83 49,554 0.62 0.00-0.90 16.07 2005 17 112.72 1,969 0.73 0.00-0.90 12.72 MIST Legg Mason Partners Aggressive Growth Division 2007 59,354 8.31-12.46 538,597 0.26 0.55-0.90 1.68-2.60 2006 96,700 8.17-12.15 826,860 -- 0.00-0.90 (2.47)-(1.60) 2005 47,764 8.38-12.34 421,236 -- 0.00-0.90 12.83-13.84 2004 46,651 7.43-10.84 362,380 -- 0.00-0.90 7.85-8.82 2003 48,911 6.89-9.96 350,477 -- 0.00-0.90 28.75-29.93 MIST RCM Technology Division 2007 83,269 8.36-14.59 753,950 -- 0.55-0.90 30.49-31.67 2006 45,217 6.40-11.08 326,874 -- 0.00-0.90 4.54-5.48 2005 77,982 6.13-10.51 504,657 -- 0.00-0.90 10.36-11.35 2004 52,000 5.55-9.45 304,702 -- 0.00-0.90 (5.13)-(4.09) 2003 51,401 5.85-9.86 311,410 -- 0.00-0.90 56.43-57.97 MIST PIMCO Total Return Division 2007 819,622 12.98-13.65 10,936,368 4.00 0.55-0.90 6.88-7.85 2006 844,496 12.14-12.66 10,481,928 2.51 0.00-0.90 3.87-4.80 2005 665,767 11.69-12.08 7,928,508 0.06 0.00-0.90 1.55-2.46 2004 624,680 11.51-11.79 7,287,799 6.51 0.00-0.90 4.31-5.25 2003 671,765 11.04-11.20 7,482,568 2.55 0.00-0.90 3.62-4.50 MIST T. Rowe Price Mid-Cap Growth Division 2007 270,595 15.45-17.07 4,293,002 0.21 0.55-0.90 16.80-17.85 2006 214,791 13.23-14.48 2,917,869 -- 0.00-0.90 5.62-6.56 2005 191,552 12.52-13.59 2,445,959 -- 0.00-0.90 13.85-14.87 2004 158,648 11.00-11.83 1,763,487 -- 0.00-0.90 17.10-18.15 2003 95,295 9.39-10.01 900,833 -- 0.00-0.90 35.87-37.22 MIST Met/AIM Small Cap Growth Division 2007 86,980 14.87-16.11 1,326,638 -- 0.55-0.90 10.40-11.40 2006 86,128 13.47-14.47 1,186,196 -- 0.00-0.90 12.90-13.91 2005 79,545 11.93-12.70 964,744 -- 0.00-0.90 7.62-8.59 2004 72,410 11.08-11.69 812,566 -- 0.00-0.90 5.78-6.73 2003 71,510 10.48-10.96 754,362 -- 0.00-0.90 37.88-39.04 MIST Lazard Mid-Cap Division 2007 56,738 14.38-15.13 839,806 0.69 0.55-0.90 (3.35)-(2.47) 2006 57,984 14.87-15.51 881,187 0.45 0.00-0.90 13.85-14.87 2005 27,741 13.06-13.50 368,754 0.36 0.00-0.90 7.44-8.40 2004 28,005 12.16-12.45 344,156 -- 0.00-0.90 13.57-14.60 2003 26,423 10.71-10.87 284,663 0.11 0.00-0.90 25.22-26.47 MIST Harris Oakmark International Division 2007 459,414 19.36-20.37 9,049,286 1.03 0.55-0.90 (1.75)-(0.86) 2006 537,704 19.71-20.55 10,798,665 2.13 0.00-0.90 28.05-29.20 2005 335,810 15.39-15.90 5,217,697 0.15 0.00-0.90 13.46-14.48 2004 175,927 13.56-13.89 2,402,029 0.03 0.00-0.90 19.72-20.80 2003 165,210 11.28-11.50 1,886,703 1.69 0.00-0.90 34.19-35.31 MIST Lord Abbett Growth and Income Division 2007 127,046 12.81-16.64 2,045,124 1.12 0.55-0.90 3.08-4.01 2006 171,216 12.43-16.09 2,678,344 1.84 0.00-0.90 16.98-18.03 2005 197,707 10.62-13.71 2,626,405 1.02 0.00-0.90 2.75-3.68 2004 232,871 10.34-13.29 2,998,131 0.46 0.00-0.90 12.93-13.95 2003 257,105 9.16-11.73 2,898,835 1.33 0.00-0.90 28.22-29.36
AA-70 GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN OF GENERAL AMERICAN LIFE INSURANCE COMPANY NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) 6. FINANCIAL HIGHLIGHTS -- (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31 AS OF DECEMBER 31 ------------------------------------------------- ----------------------------------------- EXPENSE(3) UNIT VALUE(1) INVESTMENT(2) RATIO LOWEST TO INCOME LOWEST TO TOTAL RETURN(4) UNITS HIGHEST ($) NET ASSETS ($) RATIO (%) HIGHEST (%) LOWEST TO HIGHEST (%) --------- ------------- -------------- ------------- ----------- --------------------- MIST Lord Abbett Mid-Cap Value Division 2007 128,453 19.19-23.38 2,896,558 0.97 0.55-0.90 (0.01)-0.90 2006 145,153 19.19-23.17 3,243,190 0.71 0.00-0.90 11.49-12.49 2005 282,587 17.21-20.65 5,364,769 0.56 0.00-0.90 7.32-8.28 2004 317,812 16.04-19.18 5,619,084 0.49 0.00-0.90 21.45-22.54 2003 325,257 13.21-15.73 4,702,696 1.10 0.00-0.90 27.85-28.93 MIST MFS Research International Division 2007 256,410 16.54-19.12 4,696,596 1.45 0.55-0.90 12.59-13.60 2006 203,764 14.70-16.93 3,359,685 1.82 0.00-0.90 25.78-26.91 2005 252,773 11.68-13.41 3,323,842 0.52 0.00-0.90 15.73-16.77 2004 298,069 10.09-11.55 3,376,024 -- 0.00-0.90 16.23-17.28 2003 353,269 8.69-9.90 3,417,761 0.71 0.00-0.90 23.37-24.47 MIST Neuberger Berman Real Estate Division 2007 11,658 167.58-173.19 1,980,865 1.24 0.55-0.90 (15.56)-(14.79) 2006 13,311 198.46-203.25 2,678,294 1.08 0.00-0.90 36.67-37.90 2005 10,429 145.21-147.40 1,528,779 -- 0.00-0.90 12.60-13.61 2004 1,665 128.97-129.74 215,065 3.26 0.00-0.90 28.98-29.74 MIST Lord Abbett Bond Debenture Division 2007 45,574 209.67-232.79 9,857,713 5.73 0.55-0.90 5.89-6.85 2006 54,196 198.01-217.87 11,013,266 6.41 0.00-0.90 8.38-9.35 2005 47,167 182.69-199.23 8,816,674 4.67 0.00-0.90 0.90-1.81 2004 666,855 10.21-195.69 8,156,879 6.51 0.00-0.90 6.99-9.61 2003 685,443 9.32-13.10 7,737,904 6.37 0.00-0.90 26.11-27.33 MIST Oppenheimer Capital Appreciation Division 2007 48 115.51 5,537 0.16 0.55-0.90 14.45 2006 16 100.93 1,570 0.43 0.00-0.90 7.81 2005 7 93.61 611 0.01 0.00-0.90 9.86 American Funds Growth Division 2007 1,743,283 17.04-17.98 30,283,894 0.77 0.55-0.90 11.34-12.35 2006 1,946,707 15.30-16.01 30,329,365 0.83 0.00-0.90 9.24-10.22 2005 1,610,626 14.01-14.52 22,889,304 0.73 0.00-0.90 15.16-16.19 2004 1,394,808 12.17-12.50 17,146,965 0.19 0.00-0.90 11.49-12.50 2003 939,452 10.91-11.11 10,298,184 0.17 0.00-0.90 35.55-36.84 American Funds Growth-Income Division 2007 1,169,131 14.70-15.46 17,510,421 1.55 0.55-0.90 4.10-5.04 2006 1,282,556 14.12-14.72 18,382,945 1.63 0.00-0.90 14.18-15.20 2005 1,161,565 12.36-12.78 14,521,091 1.31 0.00-0.90 4.89-5.83 2004 1,270,481 11.79-12.07 15,128,746 1.09 0.00-0.90 9.39-10.37 2003 660,092 10.78-10.94 7,145,490 1.39 0.00-0.90 31.25-32.43 American Funds Global Small Capitalization Division 2007 295,374 25.69-27.39 7,753,257 2.93 0.55-0.90 20.34-21.43 2006 296,547 21.34-22.55 6,438,957 0.48 0.00-0.90 22.95-24.05 2005 354,785 17.36-18.18 6,255,272 0.91 0.00-0.90 24.24-25.35 2004 325,647 13.97-14.50 4,596,721 -- 0.00-0.90 19.80-20.88 2003 210,796 11.66-12.00 2,470,138 0.24 0.00-0.90 52.07-53.56
AA-71 GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN OF GENERAL AMERICAN LIFE INSURANCE COMPANY NOTES TO THE FINANCIAL STATEMENTS -- (CONCLUDED) 6. FINANCIAL HIGHLIGHTS -- (CONCLUDED) (1.) The company sells a number of variable life products which have unique combinations of features and fees that are charged against the policy owner's account balance. Differences in the fee structures result in a variety of unit values, expense ratios, and total returns. (2.) These amounts represent the dividends, excluding distributions of capital gains, received by the Division from the underlying portfolio, series, or fund, net of management fees assessed by the fund manager, divided by the average net assets. These ratios exclude those expenses, such as mortality and expense risk charges, that are assessed against policy owner accounts either through reductions in unit values or the redemption of units. The investment income ratio is calculated for each period indicated or from the effective date through the end of the reporting period. The recognition of investment income by the Division is affected by the timing of the declaration of dividends by the underlying portfolio, series, or fund in which the Division invests. (3.) These amounts represent the annualized policy 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 policy owner accounts through the redemption of units and expenses of the underlying portfolio, series, or fund have been excluded. (4.) These amounts represent the total return for the period indicated, including changes in the value of the underlying portfolio, series, or fund, and expenses assessed through the reduction of unit values. These ratios do not include any expenses assessed through the redemption of units. The total return is calculated for each period indicated or from the effective date through the end of the reporting period. As the total return is presented as a range of minimum to maximum values, based on the product grouping representing the minimum and maximum expense ratio amounts, some individual policy total returns are not within the ranges presented. AA-72 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS for the Years Ended December 31, 2007, 2006 and 2005 and Report of Independent Registered Public Accounting Firm F-1 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholder of General American Life Insurance Company: We have audited the accompanying consolidated balance sheets of General American Life Insurance Company and subsidiaries (the "Company") as of December 31, 2007 and 2006, and the related consolidated statements of income, stockholder's equity, and cash flows for each of the three years in the period ended December 31, 2007. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the consolidated financial statements based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of General American Life Insurance Company and subsidiaries as of December 31, 2007 and 2006, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2007, in conformity with accounting principles generally accepted in the United States of America. As discussed in Note 1, the Company changed its method of accounting for deferred acquisition costs and for income taxes as required by accounting guidance adopted on January 1, 2007, and changed its method of accounting for defined benefit pension and other postretirement plans as required by accounting guidance adopted on December 31, 2006. /s/ DELOITTE & TOUCHE LLP Certified Public Accountants Tampa, Florida April 14, 2008 F-2 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2007 AND 2006 (IN MILLIONS, EXCEPT SHARE AND PER SHARE DATA)
2007 2006 ------- ------- ASSETS Investments: Fixed maturity securities available-for-sale, at estimated fair value (amortized cost: $16,422 and $15,282, respectively).............................................. $17,317 $16,134 Equity securities available-for-sale, at estimated fair value (cost: $187 and $205, respectively)........................ 168 210 Mortgage loans on real estate................................. 1,073 971 Policy loans.................................................. 2,716 2,664 Real estate and real estate joint ventures held-for- investment................................................. 55 56 Other limited partnership interests........................... 33 20 Short-term investments........................................ 312 435 Other invested assets......................................... 4,735 4,068 ------- ------- Total investments.......................................... 26,409 24,558 Cash and cash equivalents....................................... 507 357 Accrued investment income....................................... 185 183 Premiums and other receivables.................................. 3,482 3,256 Deferred policy acquisition costs and value of business acquired...................................................... 3,650 3,388 Current income tax recoverable.................................. 86 168 Other assets.................................................... 327 339 Separate account assets......................................... 2,097 2,210 ------- ------- Total assets............................................... $36,743 $34,459 ======= ======= LIABILITIES AND STOCKHOLDER'S EQUITY LIABILITIES: Future policy benefits........................................ $11,285 $10,291 Policyholder account balances................................. 10,791 10,398 Other policyholder funds...................................... 2,492 2,202 Policyholder dividends payable................................ 102 108 Short-term debt -- affiliated................................. 50 -- Long-term debt................................................ 628 408 Collateral financing arrangements............................. 850 850 Junior subordinated debt securities........................... 399 399 Shares subject to mandatory redemption........................ 159 159 Deferred income tax liability................................. 973 1,022 Payables for collateral under securities loaned and other transactions............................................... 1,438 1,642 Other liabilities............................................. 2,201 1,736 Separate account liabilities.................................. 2,097 2,210 ------- ------- Total liabilities.......................................... 33,465 31,425 ------- ------- CONTINGENCIES, COMMITMENTS AND GUARANTEES (NOTE 14) STOCKHOLDER'S EQUITY: Common stock, par value $1.00 per share; 5,000,000 shares authorized; 3,000,000 shares issued and outstanding........... 3 3 Additional paid-in capital...................................... 1,849 1,839 Retained earnings............................................... 969 775 Accumulated other comprehensive income.......................... 457 417 ------- ------- Total stockholder's equity................................. 3,278 3,034 ------- ------- Total liabilities and stockholder's equity................. $36,743 $34,459 ======= =======
See accompanying notes to consolidated financial statements. F-3 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31, 2007, 2006 AND 2005 (IN MILLIONS)
2007 2006 2005 ------ ------ ------ REVENUES Premiums.................................................. $5,218 $4,647 $4,179 Universal life and investment-type product policy fees.... 188 226 149 Net investment income..................................... 1,419 1,302 1,171 Other revenues............................................ 104 67 57 Net investment gains (losses)............................. (268) (14) 57 ------ ------ ------ Total revenues....................................... 6,661 6,228 5,613 ------ ------ ------ EXPENSES Policyholder benefits and claims.......................... 4,474 3,935 3,714 Interest credited to policyholder account balances........ 409 405 374 Policyholder dividends.................................... 163 170 171 Other expenses............................................ 1,293 1,361 1,147 ------ ------ ------ Total expenses....................................... 6,339 5,871 5,406 ------ ------ ------ Income before provision for income tax.................... 322 357 207 Provision for income tax.................................. 123 125 66 ------ ------ ------ Net income................................................ $ 199 $ 232 $ 141 ====== ====== ======
See accompanying notes to consolidated financial statements. F-4 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY FOR THE YEARS ENDED DECEMBER 31, 2007, 2006 AND 2005 (IN MILLIONS)
ACCUMULATED OTHER COMPREHENSIVE INCOME ----------------------------------------- NET FOREIGN DEFINED ADDITIONAL UNREALIZED CURRENCY BENEFIT COMMON PAID-IN RETAINED INVESTMENT TRANSLATION PLANS STOCK CAPITAL EARNINGS GAINS (LOSSES) ADJUSTMENT ADJUSTMENT TOTAL ------- ---------- -------- -------------- ----------- ---------- ------- Balance at January 1, 2005.......... $ 3 $ 1,843 $ 428 $ 356 $ 38 $ (6) $ 2,662 Sale of subsidiary.................. 7 7 Equity transactions of majority owned subsidiary.................. (14) (14) Dividends on common stock........... (13) (13) Comprehensive income: Net income........................ 141 141 Other comprehensive income (loss): Unrealized investment gains (losses), net of related offsets and income tax....... 75 75 Foreign currency translation adjustments, net of income tax.......................... 3 3 Additional minimum pension liability adjustment, net of income tax................... 2 2 ------- Other comprehensive income (loss)....................... 80 ------- Comprehensive income.............. 221 ------- -------- ------ ----------- ----------- --------- ------- Balance at December 31, 2005........ 3 1,836 556 431 41 (4) 2,863 Sale of subsidiary.................. (9) (9) Equity transactions of majority owned subsidiary.................. 12 12 Dividends on common stock........... (13) (13) Comprehensive income: Net income........................ 232 232 Other comprehensive income (loss): Unrealized investment gains (losses), net of related offsets and income tax....... (62) (62) Foreign currency translation adjustments, net of income tax.......................... 11 11 Additional minimum pension liability adjustment, net of income tax................... 1 1 ------- Other comprehensive income (loss)....................... (50) ------- Comprehensive income.............. 182 ------- Adoption of SFAS 158, net of income tax..................... (1) (1) ------- -------- ------ ----------- ----------- --------- ------- Balance at December 31, 2006........ 3 1,839 775 369 52 (4) 3,034 Cumulative effect of a change in accounting principle, net of income tax (Note 1)............... (5) (5) ------- -------- ------ ----------- ----------- --------- ------- Balance at January 1, 2007.......... 3 1,839 770 369 52 (4) 3,029 Equity transactions of majority owned subsidiary.................. 10 10 Comprehensive income: Net income........................ 199 199 Other comprehensive income (loss): Unrealized investment gains (losses), net of related offsets and income tax....... (21) (21) Foreign currency translation adjustments, net of income tax.......................... 60 60 Defined benefit plans adjustment, net of income tax.......................... 1 1 ------- Other comprehensive income (loss)....................... 40 ------- Comprehensive income.............. 239 ------- -------- ------ ----------- ----------- --------- ------- Balance at December 31, 2007........ $3 $1,849 $969 $348 $112 $(3) $3,278 ======= ======== ====== =========== =========== ========= =======
See accompanying notes to consolidated financial statements. F-5 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2007, 2006 AND 2005 (IN MILLIONS)
2007 2006 2005 ------- ------- ------- CASH FLOWS FROM OPERATING ACTIVITIES Net income.............................................. $ 199 $ 232 $ 141 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization expenses............. 7 8 12 Amortization of premiums and accretion of discounts associated with investments, net................. (33) (13) (11) (Gains) losses from sales of investments and businesses, net.................................. 268 14 (57) Interest credited to policyholder account balances......................................... 409 405 374 Universal life and investment-type product policy fees............................................. (188) (226) (149) Change in premiums and other receivables........... (226) (511) (25) Change in deferred policy acquisition costs, net... (339) (306) (219) Change in insurance-related liabilities............ 1,348 963 874 Change in income tax payable....................... 65 194 (14) Change in other assets............................. 117 87 (93) Change in other liabilities........................ 432 97 52 Other, net......................................... 3 (24) (2) ------- ------- ------- Net cash provided by operating activities............... 2,062 920 883 ------- ------- ------- CASH FLOWS FROM INVESTING ACTIVITIES Sales, maturities and repayments of: Fixed maturity securities.......................... 2,974 4,623 5,353 Equity securities.................................. 34 68 -- Mortgage loans on real estate...................... 26 87 194 Real estate and real estate joint ventures......... 1 -- 6 Other limited partnership interests................ 1 5 2 Purchases of: Fixed maturity securities.......................... (4,116) (6,056) (6,686) Equity securities.................................. (12) (40) (28) Mortgage loans on real estate...................... (129) (160) (38) Real estate and real estate joint ventures......... (1) (3) (1) Other limited partnership interests................ (19) -- -- Net change in short-term investments.................. 123 (282) (67) Proceeds from sales of businesses, net of cash disposed of $0, $5 and $0, respectively............ -- 71 37 Net change in other invested assets................... (976) (705) (521) Other, net............................................ (43) (50) (18) ------- ------- ------- Net cash used in investing activities................... $(2,137) $(2,442) $(1,767) ------- ------- -------
See accompanying notes to consolidated financial statements. F-6 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2007, 2006 AND 2005 (IN MILLIONS)
2007 2006 2005 ------ ------ ------ CASH FLOWS FROM FINANCING ACTIVITIES Policyholder account balances: Deposits............................................. $1,147 $1,446 $1,424 Withdrawals.......................................... (986) (828) (953) Net change in payables for collateral under securities loaned and other transactions........................ (204) 259 (78) Net change in short-term debt -- affiliated............. 50 -- -- Long-term debt issued................................... 297 -- -- Long-term debt repaid................................... (79) (100) (3) Collateral financing arrangements issued................ -- 850 -- Capital contribution from parent from sales of subsidiaries, net.................................... -- -- 7 Junior subordinated debt securities issued.............. -- -- 397 Dividends on common stock............................... -- (13) (13) Debt issuance costs..................................... -- (13) (6) Other, net.............................................. -- 10 5 ------ ------ ------ Net cash provided by financing activities................. 225 1,611 780 ------ ------ ------ Change in cash and cash equivalents....................... 150 89 (104) Cash and cash equivalents, beginning of year.............. 357 268 372 ------ ------ ------ CASH AND CASH EQUIVALENTS, END OF YEAR.................... $ 507 $ 357 $ 268 ====== ====== ====== Supplemental disclosures of cash flow information: Net cash paid (received) during the year for: Interest............................................. $ 129 $ 73 $ 48 ====== ====== ====== Income tax........................................... $ (85) $ -- $ 143 ====== ====== ====== Non-cash transactions during the year: Business dispositions: Assets disposed.................................... $ -- $ 321 $ 40 Less: liabilities disposed......................... -- 236 3 ------ ------ ------ Net assets disposed................................ -- 85 37 Less: cash disposed................................ -- 5 -- ------ ------ ------ Business dispositions, net of cash disposed........ $ -- $ 80 $ 37 ====== ====== ====== Return of capital to parent from sale of subsidiary.. $ -- $ (9) $ -- ====== ====== ======
See accompanying notes to consolidated financial statements. F-7 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. BUSINESS, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BUSINESS General American Life Insurance Company ("General American") and its subsidiaries (collectively the "Company"), is a wholly-owned subsidiary of GenAmerica Financial, LLC ("GenAmerica" or the "Holding Company"). General American is a Missouri corporation incorporated in 1933. GenAmerica is a wholly- owned subsidiary of Metropolitan Life Insurance Company ("MLIC"), which is a wholly-owned subsidiary of MetLife, Inc. ("MetLife"). The Company provides insurance and financial services to individual and institutional customers. The Company offers life insurance and annuities to individuals, group insurance and reinsurance. The Company distributes its products and services primarily through a nationwide network of general agencies and independent brokers. The Company is licensed to conduct business in forty- nine states, ten Canadian provinces, Puerto Rico, and the District of Columbia. Through its subsidiaries, the Company has operations in Europe, Pacific Rim countries, Latin America, Africa and Australia. On May 1, 2006, the Company sold its wholly-owned subsidiary, Paragon Life Insurance Company ("Paragon"), to its ultimate parent, MetLife. Immediately following the sale, Paragon was merged with and into MLIC. Paragon is included in the accompanying consolidated financial statements until the date of its sale. See Note 2. BASIS OF PRESENTATION The accompanying consolidated financial statements include the accounts of General American and its subsidiaries, including Reinsurance Group of America, Incorporated ("RGA"). Intercompany accounts and transactions have been eliminated. General American owned approximately 52% of RGA in 2007 and 53% in 2006 and 2005. See Note 14. The Company uses the equity method of accounting for investments in equity securities in which it has more than a 20% interest and for real estate joint ventures and other limited partnership interests in which it has more than a minor equity interest or more than a minor influence over the joint venture's or partnership's operations, but does not have a controlling interest and is not the primary beneficiary. The Company uses the cost method of accounting for investments in real estate joint ventures and other limited partnership interests in which it has a minor equity investment and virtually no influence over the joint venture's or partnership's operations. Minority interest related to consolidated entities included in other liabilities was $1,534 million and $1,347 million at December 31, 2007 and 2006, respectively. Certain amounts in the prior years' consolidated financial statements have been reclassified to conform with the 2007 presentation. Such reclassifications include $850 million relating to long-term debt reclassified to collateral financing arrangements on the consolidated balance sheet at December 31, 2006 and the consolidated statement of cash flows for the year ended December 31, 2006. See Note 10 for a description of the transaction. Since the Company is a member of a controlled group of affiliated companies, its results may not be indicative of those of a stand-alone entity. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND CRITICAL ACCOUNTING ESTIMATES The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP") requires management to adopt accounting policies and make estimates and F-8 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) assumptions that affect amounts reported in the consolidated financial statements. The most critical estimates include those used in determining: (i) the fair value of investments in the absence of quoted market values; (ii) investment impairments; (iii) the recognition of income on certain investments; (iv) the application of the consolidation rules to certain investments; (v) the fair value of and accounting for derivatives; (vi) the capitalization and amortization of deferred policy acquisition costs ("DAC") and the establishment and amortization of value of business acquired ("VOBA"); (vii) the 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 follows. In applying these policies, management makes subjective and complex judgments that frequently require estimates about matters that are inherently uncertain. Many of these policies, estimates and related judgments are common in the insurance and financial services industries; others are specific to the Company's businesses and operations. Actual results could differ from these estimates. Investments The Company's investments are in fixed maturity and equity securities, mortgage loans on real estate, policy loans, real estate, real estate joint ventures and other limited partnerships, short-term investments and other invested assets. The accounting policies related to each are as follows: Fixed Maturity and Equity Securities. The Company's fixed maturity and equity securities are classified as available-for-sale and are reported at their estimated fair value. Unrealized investment gains and losses on these securities are recorded as a separate component of other comprehensive income or loss, net of policyholder related amounts and deferred income taxes. All security transactions are recorded on a trade date basis. Investment gains and losses on sales of securities are determined on a specific identification basis. Interest income on fixed maturity securities is recorded when earned using an effective yield method giving effect to amortization of premiums and accretion of discounts. Dividends on equity securities are recorded when declared. These dividends and interest income are recorded as part of net investment income. Included within fixed maturity securities are loan-backed securities including mortgage-backed and asset-backed securities. Amortization of the premium or discount from the purchase of these securities considers the estimated timing and amount of prepayments of the underlying loans. Actual prepayment experience is periodically reviewed and effective yields are recalculated when differences arise between the prepayments originally anticipated and the actual prepayments received and currently anticipated. Prepayment assumptions for single class and multi-class mortgage-backed and asset-backed securities are obtained from 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. F-9 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) For all other mortgage-backed and asset-backed securities, the effective yield is recalculated on a retrospective basis. The cost of fixed maturity and equity securities is adjusted for impairments in value deemed to be other-than-temporary in the period in which the determination is made. These impairments are included within net investment gains (losses) and the cost basis of the fixed maturity and equity securities is reduced accordingly. The Company does not change the revised cost basis for subsequent recoveries in value. The assessment of whether impairments have occurred is based on management's case-by-case evaluation of the underlying reasons for the decline in fair value. The Company's review of its fixed maturity and equity securities for impairments includes an analysis of the total gross unrealized losses by three categories of securities: (i) securities where the estimated fair value had declined and remained below cost or amortized cost by less than 20%; (ii) securities where the estimated fair value had declined and remained below cost or amortized cost by 20% or more for less than six months; and (iii) securities where the estimated fair value had declined and remained below cost or amortized cost by 20% or more for six months or greater. Additionally, management considers a wide range of factors about the security issuer and uses its best judgment in evaluating the cause of the decline in the estimated fair value of the security and in assessing the prospects for near-term recovery. Inherent in management's evaluation of the security are assumptions and estimates about the operations of the issuer and its future earnings potential. Considerations used by the Company in the impairment evaluation process include, but are not limited to: (i) the length of time and the extent to which the market value has been below cost or amortized cost; (ii) the potential for impairments of securities when the issuer is experiencing significant financial difficulties; (iii) the potential for impairments in an entire industry sector or sub-sector; (iv) the potential for impairments in certain economically depressed geographic locations; (v) the potential for impairments of securities where the issuer, series of issuers or industry has suffered a catastrophic type of loss or has exhausted natural resources; (vi) the Company's ability and intent to hold the security for a period of time sufficient to allow for the recovery of its value to an amount equal to or greater than cost or amortized cost (See also Note 3); (vii) unfavorable changes in forecasted cash flows on mortgage-backed and asset-backed securities; and (viii) other subjective factors, including concentrations and information obtained from regulators and rating agencies. 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 such 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). 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 Loans on Real Estate. Mortgage loans on real estate are stated at unpaid principal balance, adjusted for any unamortized premium or discount, deferred fees or expenses, net of valuation allowances. F-10 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Interest income is accrued on the principal amount of the loan based on the loan's contractual interest rate. Amortization of premiums and discounts is recorded using the effective yield method. Interest income, amortization of premiums and discounts, and prepayment fees are reported in net investment income. Loans are considered to be impaired when it is probable that, based upon current information and events, the Company will be unable to collect all amounts due under the contractual terms of the loan agreement. Valuation allowances are established for the excess carrying value of the loan over the present value of expected future cash flows discounted at the loan's original effective interest rate, the value of the loan's collateral if the loan is in the process of foreclosure or otherwise collateral dependent, or the loan's market value if the loan is being sold. The Company also establishes allowances for loan losses when a loss contingency exists for pools of loans with similar characteristics, such as mortgage loans based on similar property types or loan to value risk factors. A loss contingency exists when the likelihood that a future event will occur is probable based on past events. Interest income earned on impaired loans is accrued on the principal amount of the loan based on the loan's contractual interest rate. However, interest ceases to be accrued for loans on which interest is generally more than 60 days past due and/or where the collection of interest is not considered probable. Cash receipts on such impaired loans are recorded as a reduction of the recorded investment. Gains and losses from the sale of loans and changes in valuation allowances are reported in net investment gains (losses). Policy Loans. Policy loans are stated at unpaid principal balances. Interest income on such loans is recorded as earned using the contractually agreed upon interest rate. Generally, interest is capitalized on the policy's anniversary date. 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. 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 Joint Ventures and Other Limited Partnership Interests. The Company uses the equity method of accounting for investments in real estate joint ventures and other limited partnership interests in which it has more than a minor equity interest or more than a minor influence over the joint ventures or partnership's operations, but does not have a controlling interest and is not the primary beneficiary. The Company uses the cost method of accounting for investments in real estate joint ventures and other limited partnership interests in which it has a minor equity investment and virtually no influence over the joint ventures or the partnership's operations. In addition to the investees performing regular evaluations for the impairment of underlying investments, the Company routinely evaluates its investments in real estate joint ventures and other limited partnerships for impairments. For its cost method investments, the Company follows an impairment analysis which is similar to the process followed for its fixed maturity and equity securities as described previously. For equity method investees, the Company considers financial and other information provided by the investee, other known information and inherent risks in the underlying investments, as well as F-11 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) future capital commitments, in determining whether an impairment has occurred. When an other-than-temporary impairment is deemed to have occurred, the Company records a realized capital loss within net investment gains (losses) to record the investment at its fair value. Short-term Investments. Short-term investments include investments with remaining maturities of one year or less, but greater than three months, at the time of acquisition and are stated at amortized cost, which approximates fair value. Other Invested Assets. Other invested assets consist primarily of funds withheld at interest. 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 previously by investment type. The determination of such allowances and impairments is highly subjective and is based upon the Company's periodic evaluation and assessment of known and inherent risks associated with the respective asset class. Such evaluations and assessments are revised as conditions change and new information becomes available. Management updates its evaluations regularly and reflects changes in allowances and impairments in operations as such evaluations are revised. The recognition of income on certain investments (e.g., loan-backed securities including mortgage-backed and asset-backed securities, certain investment transactions, etc.) is dependent upon market conditions, which could result in prepayments and changes in amounts to be earned. The fair values of publicly held fixed maturity securities and publicly held equity securities are based on quoted market prices or estimates from independent pricing services. However, in cases where quoted market prices are not available, such as for private fixed maturity securities, fair values are estimated using present value or valuation techniques. The determination of fair values is based on: (i) valuation methodologies; (ii) securities the Company deems to be comparable; and (iii) assumptions deemed appropriate given the circumstances. The fair value estimates are made at a specific point in time, based on available market information and judgments about financial instruments, including estimates of the timing and amounts of expected future cash flows and the credit standing of the issuer or counterparty. Factors considered in estimating fair value include: coupon rate, maturity, estimated duration, call provisions, sinking fund requirements, credit rating, industry sector of the issuer, and quoted market prices of comparable securities. The use of different methodologies and assumptions may have a material effect on the estimated fair value amounts. Additionally, when the Company enters into certain 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 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 F-12 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) entity, an estimate of the entity's expected losses and expected residual returns and the allocation of such estimates to each party. The use of different methodologies and assumptions as to the determination of the fair value of investments, the timing and amount of impairments, the recognition of income, or consolidation of investments may have a material effect on the amounts presented within the consolidated financial statements. 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 and futures, to manage the risk associated with variability in cash flows or changes in fair values related to the Company's financial instruments. The Company also uses derivative instruments to hedge its currency exposure associated with net investments in certain foreign operations. To a lesser extent, the Company uses credit derivatives, such as credit default swaps, to synthetically replicate investment risks and returns which are not readily available in the cash market. The Company also purchases certain securities, issues certain insurance policies and investment contracts and engages in certain reinsurance contracts that have embedded derivatives. Freestanding derivatives are carried on the Company's consolidated balance sheet either as assets within other invested assets or as liabilities within other liabilities at fair value as determined by quoted market prices or through the use of pricing models. The determination of fair value, when quoted market values are not available, is based on valuation methodologies and assumptions deemed appropriate under the circumstances. Derivative valuations can be affected by changes in interest rates, foreign currency exchange rates, financial indices, credit spreads, market volatility, and liquidity. Values can also be affected by changes in estimates and assumptions used in pricing models. Such assumptions include estimates of volatility, interest rates, foreign currency exchange rates, other financial indices and credit ratings. Essential to the analysis of the fair value is risk of counterparty default. The use of different assumptions may have a material effect on the estimated derivative fair value amounts, as well as the amount of reported net income. If a derivative is not designated as an accounting hedge or its use in managing risk does not qualify for hedge accounting, changes in the fair value of the derivative are generally reported in net investment gains (losses). The fluctuations in fair value of derivatives which have not been designated for hedge accounting can result in significant volatility in net income. To qualify for hedge accounting, at the inception of the hedging relationship, the Company formally documents its risk management objective and strategy for undertaking the hedging transaction, as well as its designation of the hedge as either (i) a hedge of the fair value of a recognized asset or liability or an unrecognized firm commitment ("fair value hedge"); (ii) a hedge of a forecasted transaction or of the variability of cash flows to be received or paid related to a recognized asset or liability ("cash flow hedge"); or (iii) a hedge of a net investment in a foreign operation. In this documentation, the Company sets forth how the hedging instrument is expected to hedge the designated risks related to the hedged item and sets forth the method that will be used to retrospectively and prospectively assess the hedging instrument's effectiveness and the method which will be used to measure ineffectiveness. A derivative designated as a hedging instrument must be assessed as being highly effective in offsetting the designated risk of the hedged item. Hedge effectiveness is formally assessed at inception and periodically throughout the life of the designated hedging relationship. Assessments of hedge effectiveness and measurements of ineffectiveness are also subject to interpretation and estimation and different interpretations or estimates may have a material effect on the amount reported in net income. The accounting for derivatives is complex and interpretations of the primary accounting standards continue to evolve in practice. Judgment is applied in determining the availability and application of hedge accounting designations and the appropriate accounting treatment under these accounting standards. If it was determined that F-13 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 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 (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). F-14 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The Company is also a party to financial instruments that contain terms which are deemed to be embedded derivatives. The Company assesses each identified embedded derivative to determine whether it is required to be bifurcated. If the instrument would not be accounted for in its entirety at fair value and it is determined that the terms of the embedded derivative are not clearly and closely related to the economic characteristics of the host contract, and that a separate instrument with the same terms would qualify as a derivative instrument, the embedded derivative is bifurcated from the host contract and accounted for as a freestanding derivative. Such embedded derivatives are carried on the consolidated balance sheet at fair value with the host contract and changes in their fair value are reported currently in net investment gains (losses) or interest credited to policyholder balances. 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) or interest credited to policyholder balances. 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) or interest credited to policyholder account balances, 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 $106 million and $105 million at December 31, 2007 and 2006, respectively. Accumulated depreciation and amortization of property, equipment and leasehold improvements was $71 million at both December 31, 2007 and 2006, respectively. Related depreciation and amortization expense was $7 million for each of the years ended December 31, 2007, 2006 and 2005. Computer software, which is included in other assets, is stated at cost, less accumulated amortization. Purchased software costs, as well as certain internal and external costs incurred to develop internal-use computer software during the application development stage, are capitalized. Such costs are amortized generally over a four-year period using the straight-line method. The cost basis of computer software was $59 million and $56 million at December 31, 2007 and 2006, respectively. Accumulated amortization of capitalized software was $37 million and $30 million at December 31, 2007 and 2006, respectively. Related amortization expense was $7 million, $6 million and $11 million for the years ended December 31, 2007, 2006 and 2005, respectively. Deferred Policy Acquisition Costs and Value of Business Acquired The Company incurs significant costs in connection with acquiring new and renewal insurance business. Costs that vary with and relate to the production of new business are deferred as DAC. Such costs consist principally of commissions and agency and policy issue expenses. VOBA is an intangible asset that reflects the estimated fair value of in-force contracts in a life insurance company acquisition and represents the portion of the purchase price that is allocated to the value of the right to receive future cash flows from the business in- force at the acquisition date. VOBA is based on actuarially determined projections, by each block of business, of future policy and contract charges, premiums, mortality and morbidity, separate account performance, surrenders, operating expenses, F-15 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) investment returns and other factors. Actual experience on the purchased business may vary from these projections. The recovery of DAC and VOBA is dependent upon the future profitability of the related business. DAC and VOBA are aggregated in the financial statements for reporting purposes. DAC and VOBA on life insurance or investment-type contracts are amortized in proportion to gross premiums, 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 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, 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 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 F-16 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 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. Prior to 2007, DAC related to any internally replaced contract was generally expensed at the date of replacement. As described more fully in "Adoption of New Accounting Pronouncements", effective January 1, 2007, the Company adopted Statement of Position ("SOP") 05-1, Accounting by Insurance Enterprises for Deferred Acquisition Costs in Connection with Modifications or Exchanges of Insurance Contracts ("SOP 05-1"). Under SOP 05-1, an internal replacement is defined as a modification in product benefits, features, rights or coverages that occur by the exchange of a contract for a new contract, or by amendment, endorsement, or rider to a contract, or by election or coverage within a contract. If the modification substantially changes the contract, the DAC is written off immediately through income and any new deferrable costs associated with the replacement contract are deferred. If the modification does not substantially change the contract, the DAC amortization on the original contract will continue and any acquisition costs associated with the related modification are expensed. Goodwill Goodwill, which is included in other assets, 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. If the carrying value of goodwill exceeds its fair value, the excess is recognized as an impairment and recorded as a charge against net income. The fair value is 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 F-17 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) interest rate, ranging from 3% to 6%, and mortality rates guaranteed in calculating the cash surrender values described in such contracts); and (ii) the liability for terminal dividends. Future policy benefit liabilities for non-participating traditional life insurance policies are equal to the aggregate of the present value of expected future benefit payments and related expenses less the present value of expected future net premiums. Assumptions as to mortality and persistency are based upon the Company's experience when the basis of the liability is established. Interest rates for the aggregate future policy benefit liabilities range from 3% to 7%. Participating business represented approximately 30% and 31% of General American's life insurance in-force, and 52% and 56% of the number of its life insurance policies in-force, at December 31, 2007 and 2006, respectively. Participating policies represented approximately 95%, 99% and 98% of gross life insurance premiums for the years ended December 31, 2007, 2006 and 2005, respectively. Total premiums for General American were $302 million, $299 million and $311 million for the years ended December 31, 2007, 2006 and 2005, respectively. Future policy benefit liabilities for individual and group traditional fixed annuities after annuitization are equal to the present value of expected future payments. Interest rates used in establishing such liabilities range from 4% to 11%. Future policy benefit liabilities for non-medical health insurance are calculated using the net level premium method and assumptions as to future morbidity, withdrawals and interest, which provide a margin for adverse deviation. The interest rate used in establishing such liabilities is 5%. Future policy benefit liabilities for disabled lives are estimated using the present value of benefits method and experience assumptions as to claim terminations, expenses and interest. Interest rates used in establishing such liabilities range from 3% to 6%. Liabilities for unpaid claims 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. Liabilities for universal and variable life secondary guarantees are determined by estimating the expected value of death benefits payable when the account balance is projected to be zero and recognizing those benefits ratably over the accumulation period based on total expected assessments. The Company regularly evaluates estimates used and adjusts the additional liability balances, with a related charge or credit to benefit expense, if actual experience or other evidence suggests that earlier assumptions should be revised. The assumptions used in estimating the secondary guarantee liabilities are consistent with those used for amortizing DAC, and are thus subject to the same variability and risk. The assumptions of investment performance and volatility for variable products are consistent with historical Standard & Poor's 500 Index experience. The benefits used in calculating the liabilities are based on the average benefits payable over a range of scenarios. 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 and guarantees and in the establishment of the related liabilities result in variances in profit and could result in losses. The effects of changes in such estimated liabilities are included in the results of operations in the period in which the changes occur. Policyholder account balances relate to investment-type contracts and universal life-type policies. Investment-type contracts principally include traditional individual fixed annuities in the accumulation phase and non- variable group annuity contracts. Policyholder account balances are equal to (i) policy account values, which consist of an accumulation of gross premium payments and (ii) credited interest, ranging from 3% to 6%, less expenses, mortality charges, and withdrawals. F-18 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Other Policyholder Funds Other policyholder funds include policy and contract claims, unearned revenue liabilities, premiums received in advance, policyholder dividends due and unpaid, and policyholder dividends left on deposit. The liability for policy and contract claims generally relates to incurred but not reported death and disability claims as well as claims which have been reported but not yet settled. The liability for these claims is based on the Company's estimated ultimate cost of settling all claims. The Company derives estimates for the development of incurred but not reported claims principally from actuarial analyses of historical patterns of claims and claims development for each line of business. The methods used to determine these estimates are continually reviewed. Adjustments resulting from this continuous review process and differences between estimates and payments for claims are recognized in policyholder benefits and claims expense in the period in which the estimates are changed or payments are made. The unearned revenue liability relates to universal life-type and investment-type products and represents policy charges for services to be provided in future periods. The charges are deferred as unearned revenue and amortized using the product's estimated gross profits, similar to DAC. Such amortization is recorded in universal life and investment-type product policy fees. The Company accounts for the prepayment of premiums on its group life and health contracts as premium received in advance and applies the cash received to premiums when due. Also included in other policyholder funds are policyholder dividends due and unpaid on participating policies and policyholder dividends left on deposit. Such liabilities are presented at amounts contractually due to policyholders. Recognition of Insurance Revenue and Related Benefits Premiums related to traditional life and annuity policies with life contingencies are recognized as revenues when due from policyholders. Policyholder benefits and expenses are provided against such revenues to recognize profits over the estimated lives of the policies. When premiums are due over a significantly shorter period than the period over which benefits are provided, any excess profit is deferred and recognized into operations in a constant relationship to insurance in-force or, for annuities, the amount of expected future policy benefit payments. Premiums related to non-medical health and disability contracts are recognized on a pro rata basis over the applicable contract term. Deposits related to universal life-type and investment-type products are credited to policyholder account balances. Revenues from such contracts consist of amounts assessed against policyholder account balances for mortality, policy administration and surrender charges and are recorded in universal life and investment-type product policy fees in the period in which services are provided. Amounts that are charged to operations include interest credited and benefit claims incurred in excess of related policyholder account balances. Premiums, policy fees, policyholder benefits and expenses are presented net of reinsurance. Other Revenues Other revenues include advisory fees, broker-dealer commissions and fees and administrative service fees. Such fees and commissions are recognized in the period in which services are performed. 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. F-19 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Policyholder Dividends Policyholder dividends are approved annually by General American's board of directors. The aggregate amount of policyholder dividends is related to actual interest, mortality, morbidity and expense experience for the year, as well as management's judgment as to the appropriate level of statutory surplus to be retained by General American. Income Taxes General American joins with MetLife and its includable life insurance and non-life insurance subsidiaries in filing a consolidated U.S. federal income tax return in accordance with the provisions of the Internal Revenue Code of 1986, as amended. Non-includable subsidiaries file either a separate individual corporate tax returns or separate consolidated tax returns. The Company's accounting for income taxes represents management's best estimate of various events and transactions. Deferred tax assets and liabilities resulting from temporary differences between the financial reporting and tax bases of assets and liabilities are measured at the balance sheet date using enacted tax rates expected to apply to taxable income in the years the temporary differences are expected to reverse. The realization of deferred tax assets depends upon the existence of sufficient taxable income within the carryback or carryforward periods under the tax law in the applicable tax jurisdiction. Valuation allowances are established when management determines, based on available information, that it is more likely than not that deferred income tax assets will not be realized. Significant judgment is required in determining whether valuation allowances should be established as well as the amount of such allowances. When making such determination, consideration is given to, among other things, the following: (i) future taxable income exclusive of reversing temporary differences and carryforwards; (ii) future reversals of existing taxable temporary differences; (iii) taxable income in prior carryback years; and (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 laws, tax regulations, or interpretations of such laws or regulations, could have an impact on the provision for income tax and the effective tax rate. Any such changes could significantly affect the amounts reported in the consolidated financial statements in the year these changes occur. As described more fully in "Adoption of New Accounting Pronouncements", the Company adopted FIN No. 48, Accounting for Uncertainty in Income Taxes -- An Interpretation of FASB Statement No. 109 ("FIN 48") effective January 1, 2007. Under FIN 48, the Company determines whether it is more-likely-than-not that a tax position will be sustained upon examination by the appropriate taxing authorities before any part of the benefit can be recorded in the financial statements. A tax position is measured at the largest amount of benefit that is greater than 50 percent likely of being realized upon settlement. Unrecognized tax benefits due to tax uncertainties that do not meet the threshold are included within other liabilities and are charged to earnings in the period that such determination is made. The Company classifies interest recognized as interest expense and penalties recognized as a component of income tax. F-20 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Reinsurance The Company enters into reinsurance transactions as both a provider and a purchaser of reinsurance for its life insurance products. For each of its reinsurance contracts, the Company determines if the contract provides indemnification against loss or liability relating to insurance risk in accordance with applicable accounting standards. The Company reviews all contractual features, particularly those that may limit the amount of insurance risk to which the reinsurer is subject or features that delay the timely reimbursement of claims. For reinsurance of existing in-force blocks of long-duration contracts that transfer significant insurance risk, the difference, if any, between the amounts paid (received), and the liabilities ceded (assumed) related to the underlying contracts is considered the net cost of reinsurance at the inception of the contract. The net cost of reinsurance is recorded as an adjustment to DAC and recognized as a component of other expenses on a basis consistent with the way the acquisition costs on the underlying reinsured contracts would be recognized. Subsequent amounts paid (received) on the reinsurance of in-force blocks, as well as amounts paid (received) related to new business, are recorded as ceded (assumed) premiums and ceded (assumed) future policy benefit liabilities are established. For prospective reinsurance of short-duration contracts that meet the criteria for reinsurance accounting, amounts paid (received) are recorded as ceded (assumed) premiums and ceded (assumed) unearned premiums and are reflected as a component of premiums and other receivables (future policy benefits). Such amounts are amortized through earned premiums over the remaining contract period in proportion to the amount of protection provided. For retroactive reinsurance of short-duration contracts that meet the criteria of reinsurance accounting, amounts paid (received) in excess of (which do not exceed) the related insurance liabilities ceded (assumed) are recognized immediately as a loss. Any gains on such retroactive contracts are deferred and recorded in other liabilities. The gains are amortized primarily using the recovery method. The assumptions used to account for both long and short-duration reinsurance contracts are consistent with those used for the underlying contracts. Ceded policyholder and contract related liabilities, other than those currently due, are reported gross on the balance sheet. Amounts currently recoverable under reinsurance contracts are included in premiums and other receivables and amounts currently payable are included in other liabilities. Such assets and liabilities relating to reinsurance contracts with the same reinsurer may be recorded net on the balance sheet, if a right of offset exists within the reinsurance contract. Premiums, fees and policyholder benefits and claims include amounts assumed under reinsurance contracts and are net of reinsurance ceded. If the Company determines that a reinsurance contract does not expose the reinsurer to a reasonable possibility of a significant loss from insurance risk, the Company records the contract using the deposit method of accounting. Deposits received are included in other liabilities and deposits made are included within other assets. As amounts are paid or received, consistent with the underlying contracts, the deposit assets or liabilities are adjusted. Interest on such deposits is recorded as other revenues or other expenses, as appropriate. Periodically, the Company evaluates the adequacy of the expected payments or recoveries and adjusts the deposit asset or liability through other revenues or other expenses, as appropriate. Amounts received from reinsurers for policy administration are reported in other revenues. Accounting for reinsurance requires extensive use of assumptions and estimates, particularly related to the future performance of the underlying business and the potential impact of counterparty credit risks. The Company periodically reviews actual and anticipated experience compared to the aforementioned assumptions used to establish assets and liabilities relating to ceded and assumed reinsurance and evaluates the financial strength of F-21 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) counterparties to its reinsurance agreements using criteria similar to that evaluated in the security impairment process discussed previously. Separate Accounts Separate accounts are established in conformity with insurance laws and are generally not chargeable with liabilities that arise from any other business of the Company. Separate account assets are subject to general account claims only to the extent the value of such assets exceeds the separate account liabilities. The Company reports separately, as assets and liabilities, investments held in separate accounts and liabilities of the separate accounts if (i) such separate accounts are legally recognized; (ii) assets supporting the contract liabilities are legally insulated from the Company's general account liabilities; (iii) investments are directed by the contractholder; and (iv) all investment performance, net of contract fees and assessments, is passed through to the contractholder. The Company reports separate account assets meeting such criteria at their fair value. Investment performance (including investment income, net investment gains (losses) and changes in unrealized gains (losses)) and the corresponding amounts credited to contractholders of such separate accounts are offset within the same line in the consolidated statements of income. The Company's revenues reflect fees charged to the separate accounts, including mortality charges, risk charges, policy administration fees, investment management fees and surrender charges. Employee Benefit Plans The Company's employees, who meet specified eligibility requirements, participate in pension, other postretirement and postemployment plans in various forms. These benefit plans are accounted for following the guidance outlined in Statement of Financial Accounting Standards ("SFAS") No. 87, Employers' Accounting for Pensions ("SFAS 87"), SFAS No. 106, Employers Accounting for Postretirement Benefits Other Than Pensions, SFAS No. 112, Employers Accounting for Postemployment Benefits -- An Amendment of FASB Statements No. 5 and No. 43 and as of December 31, 2006, SFAS No. 158, Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements No. 87, 88, 106 and SFAS No. 132(r) ("SFAS 158"). The obligations and expenses associated with these plans require an extensive use of assumptions such as the discount rate, expected rate of return on plan assets, rate of future compensation increases, healthcare cost trend rates, as well as assumptions regarding participant demographics such as rate and age of retirements, withdrawal rates, and mortality. Management, in consultation with its external actuarial firm, determines these assumptions based upon a variety of factors such as historical performance of the plan and its assets, currently available market and industry data, and expected benefit payout streams. The assumptions used may differ materially from actual results due to, among other factors, changing market and economic conditions and changes in participant demographics. These differences may have a significant effect on the Company's consolidated financial statements and liquidity. As described more fully in "Adoption of New Accounting Pronouncements", effective December 31, 2006, the Company adopted SFAS 158. Effective with the adoption of SFAS 158 on December 31, 2006, the Company recognizes the funded status of the benefit obligations for each of its plans on the consolidated balance sheet. The actuarial gains or losses, prior service costs and credits, and the remaining net transition asset or obligation that had not yet been included in net periodic benefit costs as of December 31, 2006 are now charged, net of income tax, to accumulated other comprehensive income. Additionally, these changes eliminated the additional minimum pension liability provisions of SFAS 87. Foreign Currency Balance sheet accounts of foreign operations are translated at the exchange rates in effect at each year-end and income and expense accounts are translated at the average rates of exchange prevailing during the year. The local currencies of foreign operations generally are the functional currencies unless the local economy is highly F-22 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 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. Litigation Contingencies The Company is a party to a number of legal actions and is involved in a number of regulatory investigations. Given the inherent unpredictability of these matters, it is difficult to estimate the impact on the Company's financial position. Liabilities are established when it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. On a quarterly and annual basis, the Company reviews relevant information with respect to liabilities for litigation, regulatory investigations and litigation-related contingencies to be reflected in the Company's consolidated financial statements. It is possible that an adverse outcome in certain of the Company's litigation and regulatory investigations, or the use of different assumptions in the determination of amounts recorded could have a material effect upon the Company's consolidated net income or cash flows. ADOPTION OF NEW ACCOUNTING PRONOUNCEMENTS Income Taxes Effective January 1, 2007, the Company adopted FIN 48. FIN 48 clarifies the accounting for uncertainty in income tax recognized in a company's financial statements. FIN 48 requires companies to determine whether it is "more likely than not" that a tax position will be sustained upon examination by the appropriate taxing authorities before any part of the benefit can be recorded in the financial statements. It also provides guidance on the recognition, measurement, and classification of income tax uncertainties, along with any related interest and penalties. Previously recorded income tax benefits that no longer meet this standard are required to be charged to earnings in the period that such determination is made. As a result of the implementation of FIN 48, the Company recognized a $6 million increase in the liability for unrecognized tax benefits and a $5 million increase in the interest liability for unrecognized tax benefits, offset by $11 million of minority interest, resulting in no corresponding change to the January 1, 2007 balance of retained earnings. See also Note 13. Insurance Contracts Effective January 1, 2007, the Company adopted SOP 05-1 which provides guidance on accounting by insurance enterprises for DAC on internal replacements of insurance and investment contracts other than those specifically described in SFAS 97, Accounting and Reporting by Insurance Enterprises for Certain Long- Duration Contracts and for Realized Gains and Losses from the Sale of Investments. SOP 05-1 defines an internal replacement and is effective for internal replacements occurring in fiscal years beginning after December 15, 2006. In addition, in February 2007, the American Institute of Certified Public Accountants ("AICPA") issued related Technical Practice Aids ("TPAs") to provide further clarification of SOP 05-1. The TPAs became effective concurrently with the adoption of SOP 05-1. As a result of the adoption of SOP 05-1 and the related TPAs, if an internal replacement modification substantially changes a contract, then the DAC is written off immediately through income and any new deferrable costs associated with the new replacement are deferred. If a contract modification does not substantially change the contract, the DAC amortization on the original contract will continue and any acquisition costs associated with the related modification are immediately expensed. The adoption of SOP 05-1 and the related TPAs resulted in a reduction to DAC and VOBA on January 1, 2007 and an acceleration of the amortization period relating primarily to the Company's group life and health insurance contracts that contain certain rate reset provisions. Prior to the adoption of SOP 05-1, DAC on such contracts was amortized over the expected renewable life of the contract. Upon adoption of SOP 05-1, DAC on such contracts is to F-23 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) be amortized over the rate reset period. The impact as of January 1, 2007 was a cumulative effect adjustment of ($5) million, net of income tax of ($3) million, which was recorded as a reduction to retained earnings. 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 $1 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 was no impact of adoption due to changes in measurement date. See also "Summary of Significant Accounting Policies and Critical Accounting Estimates" and Note 15. Derivative Financial Instruments The Company has adopted guidance relating to derivative financial instruments as follows: - Effective January 1, 2006, the Company adopted prospectively SFAS No. 155, Accounting for Certain Hybrid Instruments ("SFAS 155"). SFAS 155 amends SFAS No. 133, Accounting for Derivative Instruments and Hedging ("SFAS 133"), and SFAS No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities ("SFAS 140"). SFAS 155 allows financial instruments that have embedded derivatives to be accounted for as a whole, eliminating the need to bifurcate the derivative from its host, if the holder elects to account for the whole instrument on a fair value basis. In addition, among other changes, SFAS 155: (i) clarifies which interest-only strips and principal-only strips are not subject to the requirements of SFAS 133; (ii) establishes a requirement to evaluate interests in securitized financial assets to identify interests that are freestanding derivatives or that are hybrid financial instruments that contain an embedded derivative requiring bifurcation; (iii) clarifies that concentrations of credit risk in the form of subordination are not embedded derivatives; and F-24 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (iv) amends SFAS 140 to eliminate the prohibition on a qualifying special-purpose entity ("QSPE") from holding a derivative financial instrument that pertains to a beneficial interest other than another derivative financial interest. The adoption of SFAS 155 did not have a material impact on the Company's consolidated financial statements. - Effective October 1, 2006, the Company adopted SFAS 133 Implementation Issue No. B40, Embedded Derivatives: Application of Paragraph 13(b) to Securitized Interests in Prepayable Financial Assets ("Issue B40"). Issue B40 clarifies that a securitized interest in prepayable financial assets is not subject to the conditions in paragraph 13(b) of SFAS 133, if it meets both of the following criteria: (i) the right to accelerate the settlement if the securitized interest cannot be controlled by the investor; and (ii) the securitized interest itself does not contain an embedded derivative (including an interest rate-related derivative) for which bifurcation would be required other than an embedded derivative that results solely from the embedded call options in the underlying financial assets. The adoption of Issue B40 did not have a material impact on the Company's consolidated financial statements. - Effective January 1, 2006, the Company adopted prospectively SFAS 133 Implementation Issue No. B38, Embedded Derivatives: Evaluation of Net Settlement with Respect to the Settlement of a Debt Instrument through Exercise of an Embedded Put Option or Call Option ("Issue B38") and SFAS 133 Implementation Issue No. B39, Embedded Derivatives: Application of Paragraph 13(b) to Call Options That Are Exercisable Only by the Debtor ("Issue B39"). Issue B38 clarifies that the potential settlement of a debtor's obligation to a creditor occurring upon exercise of a put or call option meets the net settlement criteria of SFAS 133. Issue B39 clarifies that an embedded call option, in which the underlying is an interest rate or interest rate index, that can accelerate the settlement of a debt host financial instrument should not be bifurcated and fair valued if the right to accelerate the settlement can be exercised only by the debtor (issuer/borrower) and the investor will recover substantially all of its initial net investment. The adoption of Issues B38 and B39 did not have a material impact on the Company's consolidated financial statements. Other Effective January 1, 2007, the Company adopted SFAS No. 156, Accounting for Servicing of Financial Assets -- an amendment of FASB Statement No. 140 ("SFAS 156"). Among other requirements, SFAS 156 requires an entity to recognize a servicing asset or servicing liability each time it undertakes an obligation to service a financial asset by entering into a servicing contract in certain situations. The adoption of SFAS 156 did not have an impact on the Company's consolidated financial statements. Effective November 15, 2006, the Company adopted U.S. Securities and Exchange Commission Staff Accounting Bulletin ("SAB") No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements ("SAB 108"). SAB 108 provides guidance on how prior year misstatements should be considered when quantifying misstatements in current year financial statements for purposes of assessing materiality. SAB 108 requires that registrants quantify errors using both a balance sheet and income statement approach and evaluate whether either approach results in quantifying a misstatement that, when relevant quantitative and qualitative factors are considered, is material. SAB 108 permits companies to initially apply its provisions by either restating prior financial statements or recording a cumulative effect adjustment to the carrying values of assets and liabilities as of January 1, 2006 with an offsetting adjustment to retained earnings for 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 F-25 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 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 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. F-26 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Effective July 1, 2005, the Company adopted EITF Issue No. 05-6, Determining the Amortization Period for Leasehold Improvements ("EITF 05-6"). EITF 05-6 provides guidance on determining the amortization period for leasehold improvements acquired in a business combination or acquired subsequent to lease inception. As required by EITF 05-6, the Company adopted this guidance on a prospective basis which had no material impact on the Company's consolidated financial statements. In June 2005, the FASB completed its review of EITF Issue No. 03-1, The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments ("EITF 03-1"). EITF 03-1 provides accounting guidance regarding the determination of when an impairment of debt and marketable equity securities and investments accounted for under the cost method should be considered other-than- temporary and recognized in income. EITF 03-1 also requires certain quantitative and qualitative disclosures for debt and marketable equity securities classified as available-for-sale or held-to-maturity under SFAS No. 115, Accounting for Certain Investments in Debt and Equity Securities, that are impaired at the balance sheet date but for which an other-than-temporary impairment has not been recognized. The FASB decided not to provide additional guidance on the meaning of other-than-temporary impairment but has issued FSP Nos. FAS 115-1 and FAS 124-1, The Meaning of Other-Than-Temporary Impairment and its Application to Certain Investments ("FSP 115-1"), which nullifies the accounting guidance on the determination of whether an investment is other-than-temporarily impaired as set forth in EITF 03-1. As required by FSP 115-1, the Company adopted this guidance on a prospective basis, which had no material impact on the Company's consolidated financial statements, and has provided the required disclosures. FUTURE ADOPTION OF NEW ACCOUNTING PRONOUNCEMENTS Fair Value In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements ("SFAS 157"). SFAS 157 defines fair value, establishes a framework for measuring fair value and requires enhanced disclosures about fair value measurements. Effective January 1, 2008, the Company adopted SFAS 157 and applied the provisions of the statement prospectively to assets and liabilities measured and disclosed at fair value. In addition to new disclosure requirements, the adoption of SFAS 157 changes the valuation of certain freestanding derivatives by moving from a mid to bid pricing convention as well as changing the valuation of embedded derivatives associated with annuity contracts. The change in valuation of embedded derivatives associated with annuity contracts results from the incorporation of risk margins and the Company's own credit standing in their valuation. While the Company does not expect such changes in valuation to have a material impact on the Company's financial statements at January 1, 2008, the addition of risk margins and the Company's own credit spread in the valuation of embedded derivatives associated with annuity contracts may result in significant volatility in the Company's consolidated net income. In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities ("SFAS 159"). SFAS 159 permits entities the option to measure most financial instruments and certain other items at fair value at specified election dates and to report related unrealized gains and losses in earnings. The fair value option is generally applied on an instrument-by-instrument basis and is generally an irrevocable election. Effective January 1, 2008, the Company did not elect the fair value option for any instruments. Accordingly, there was no impact on the Company's retained earnings or equity as of January 1, 2008. In June 2007, the AICPA issued SOP 07-1, Clarification of the Scope of the Audit and Accounting Guide Investment Companies and Accounting by Parent Companies and Equity Method Investors for Investments in Investment Companies ("SOP 07-1") . Upon adoption of SOP 07-1, the Company must also adopt the provisions of FASB Staff Position No. FIN 46(r)-7, Application of FASB Interpretation No. 46 to Investment Companies ("FSP FIN 46(r)-7"), which permanently exempts investment companies from applying the provisions of FIN No. 46(r), Consolidation of Variable Interest Entities -- An Interpretation of Accounting Research Bulletin No. 51, and its December 2003 revision ("FIN 46(r)") to investments carried at fair value. SOP 07-1 provides guidance for determining whether an entity falls within the scope of the AICPA Audit and Accounting Guide Investment Companies and whether investment company accounting should be retained by a parent company upon F-27 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) consolidation of an investment company subsidiary or by an equity method investor in an investment company. In certain circumstances, SOP 07-1 precludes retention of specialized accounting for investment companies (i.e., fair value accounting), when similar direct investments exist in the consolidated group and are measured on a basis inconsistent with that applied to investment companies. Additionally, SOP 07-1 precludes retention of specialized accounting for investment companies if the reporting entity does not distinguish through documented policies the nature and type of investments to be held in the investment companies from those made in the consolidated group where other accounting guidance is being applied. In February 2008, the FASB issued FSP No. SOP 7-1-1, Effective Date of AICPA Statement of Position 07-1, which delays indefinitely the effective date of SOP 07-1. The Company is closely monitoring further FASB developments. In May 2007, the FASB issued FSP No. FIN 39-1, Amendment of FASB Interpretation No. 39 ("FSP 39-1"). FSP 39-1 amends FIN No. 39, Offsetting of Amounts Related to Certain Contracts ("FIN 39"), to permit a reporting entity to offset fair value amounts recognized for the right to reclaim cash collateral (a receivable) or the obligation to return cash collateral (a payable) against fair value amounts recognized for derivative instruments executed with the same counterparty under the same master netting arrangement that have been offset in accordance with FIN 39. FSP 39-1 also amends FIN 39 for certain terminology modifications. FSP 39-1 applies to fiscal years beginning after November 15, 2007. FSP 39-1 will be applied retrospectively, unless it is impracticable to do so. Upon adoption of FSP 39-1, the Company is permitted to change its accounting policy to offset or not offset fair value amounts recognized for derivative instruments under master netting arrangements. The adoption of FSP 39-1 will not have an impact on the Company's financial statements. Business Combinations In December 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations -- A Replacement of FASB Statement No. 141 ("SFAS 141(r)") and SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements -- An Amendment of ARB No. 51 ("SFAS 160") which are effective for fiscal years beginning after December 15, 2008. Under SFAS 141(r) and SFAS 160: - All business combinations (whether full, partial, or "step" acquisitions) result in all assets and liabilities of an acquired business being recorded at fair value, with limited exceptions. - Acquisition costs are generally expensed as incurred; restructuring costs associated with a business combination are generally expensed as incurred subsequent to the acquisition date. - The fair value of the purchase price, including the issuance of equity securities, is determined on the acquisition date. - Certain acquired contingent liabilities are recorded at fair value at the acquisition date and subsequently measured at either the higher of such amount or the amount determined under existing guidance for non-acquired contingencies. - Changes in deferred tax asset valuation allowances and income tax uncertainties after the acquisition date generally affect income tax expense. - Noncontrolling interests (formerly known as "minority interests") are valued at fair value at the acquisition date and are presented as equity rather than liabilities. - When control is attained on previously noncontrolling interests, the previously held equity interests are remeasured at fair value and a gain or loss is recognized. - Purchases or sales of equity interests that do not result in a change in control are accounted for as equity transactions. - When control is lost in a partial disposition, realized gains or losses are recorded on equity ownership sold and the remaining ownership interest is remeasured and holding gains or losses are recognized. F-28 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The pronouncements are effective for fiscal years beginning on or after December 15, 2008 and apply prospectively to business combinations. Presentation and disclosure requirements related to noncontrolling interests must be retrospectively applied. The Company is currently evaluating the impact of SFAS 141(r) on its accounting for future acquisitions and the impact of SFAS 160 on its consolidated financial statements. Other In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities -- An Amendment of FASB Statement No. 133 ("SFAS 161"). SFAS 161 requires enhanced qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of and gains and losses on derivative instruments, and disclosures about credit-risk-related contingent features in derivative agreements. SFAS 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. The Company is currently evaluating the impact of SFAS 161 on its consolidated financial statements. In February 2008, the FASB issued FSP No. FAS 140-3, Accounting for Transfers of Financial Assets and Repurchase Financing Transactions ("FSP 140- 3"). FSP 140-3 provides guidance for evaluating whether to account for a transfer of a financial asset and repurchase financing as a single transaction or as two separate transactions. FSP 140-3 is effective prospectively for financial statements issued for fiscal years beginning after November 15, 2008. The Company is currently evaluating the impact of FSP 140-3 on its consolidated financial statements. In January 2008, the FASB cleared SFAS 133 Implementation Issue E23, Clarification of the Application of the Shortcut Method ("Issue E23"). Issue E23 amends SFAS 133 by permitting interest rate swaps to have a non-zero fair value at inception, as long as the difference between the transaction price (zero) and the fair value (exit price), as defined by SFAS 157, is solely attributable to a bid-ask spread. In addition, entities would not be precluded from assuming no ineffectiveness in a hedging relationship of interest rate risk involving an interest bearing asset or liability in situations where the hedged item is not recognized for accounting purposes until settlement date as long as the period between trade date and settlement date of the hedged item is consistent with generally established conventions in the marketplace. Issue E23 is effective for hedging relationships designated on or after January 1, 2008. The Company does not expect the adoption of Issue E23 to have a material impact on its consolidated financial statements. In December 2007, the FASB ratified as final the consensus on EITF Issue No. 07-6, Accounting for the Sale of Real Estate When the Agreement Includes a Buy-Sell Clause ("EITF 07-6"). EITF 07-6 addresses whether the existence of a buy-sell arrangement would preclude partial sales treatment when real estate is sold to a jointly owned entity. The consensus concludes that the existence of a buy-sell clause does not necessarily preclude partial sale treatment under current guidance. EITF 07-6 applies prospectively to new arrangements entered into and assessments on existing transactions performed in fiscal years beginning after December 15, 2008. The Company does not expect the adoption of EITF 07-6 to have a material impact on its consolidated financial statements. 2. DISPOSITIONS On May 1, 2006, the Company sold Paragon to its ultimate parent, MetLife. The Company received consideration of $71 million, net of cash sold of $5 million. Immediately following the sale, MetLife merged Paragon with and into MLIC. The amount received below book value was recorded as a return of capital to MLIC of $9 million. Total assets and total liabilities of Paragon at December 31, 2005 were $727 million and $643 million, respectively. Total revenues of Paragon included in the Company's consolidated revenues were $23 million and $61 million for the years ended December 31, 2006 and 2005, respectively. In March 2005, the Company sold its White Oak and Krisman subsidiaries to MLIC for consideration of $44 million. The amount received above book value was recorded as a capital contribution from MLIC of $7 million. F-29 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Total assets and total liabilities of the entities sold at December 31, 2004 were $40 million and $3 million, respectively. Total revenues of the entities sold included in the Company's consolidated revenues were less than $1 million for the year ended December 31, 2005. 3. INVESTMENTS FIXED MATURITY AND EQUITY SECURITIES AVAILABLE-FOR-SALE The following tables present the cost or amortized cost, gross unrealized gain and loss, and estimated fair value of the Company's fixed maturity and equity securities, the percentage that each sector represents by the total fixed maturity securities holdings and by the total equity securities holdings at:
DECEMBER 31, 2007 ---------------------------------------------- GROSS COST OR UNREALIZED AMORTIZED ------------- ESTIMATED % OF COST GAIN LOSS FAIR VALUE TOTAL --------- ------ ---- ---------- ----- (IN MILLIONS) U.S. corporate securities............. $ 5,940 $ 129 $163 $ 5,906 34.1% Foreign government securities......... 2,486 868 8 3,346 19.3 Residential mortgage-backed securities.......................... 3,142 25 26 3,141 18.2 Foreign corporate securities.......... 1,986 170 39 2,117 12.2 Commercial mortgage-backed securities.......................... 1,517 20 19 1,518 8.8 Asset-backed securities............... 820 2 48 774 4.5 U.S. Treasury/agency securities....... 372 14 -- 386 2.2 State and political subdivision securities.......................... 56 -- 1 55 0.3 Other fixed maturity securities....... 103 -- 29 74 0.4 ------- ------ ---- ------- ----- Total fixed maturity securities..... $16,422 $1,228 $333 $17,317 100.0% ======= ====== ==== ======= ===== Non-redeemable preferred stocks....... $ 159 $ 2 $ 21 $ 140 83.3% Common stocks......................... 28 -- -- 28 16.7 ------- ------ ---- ------- ----- Total equity securities............. $ 187 $ 2 $ 21 $ 168 100.0% ======= ====== ==== ======= =====
F-30 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 2006 ---------------------------------------------- GROSS COST OR UNREALIZED AMORTIZED ------------- ESTIMATED % OF COST GAIN LOSS FAIR VALUE TOTAL --------- ------ ---- ---------- ----- (IN MILLIONS) U.S. corporate securities............. $ 5,714 $ 153 $ 71 $ 5,796 35.9% Foreign government securities......... 1,947 687 5 2,629 16.3 Residential mortgage-backed securities.......................... 3,158 13 33 3,138 19.5 Foreign corporate securities.......... 1,519 153 13 1,659 10.3 Commercial mortgage-backed securities.......................... 1,259 14 14 1,259 7.8 Asset-backed securities............... 854 4 2 856 5.3 U.S. Treasury/agency securities....... 657 3 5 655 4.1 State and political subdivision securities.......................... 72 1 1 72 0.4 Other fixed maturity securities....... 102 -- 32 70 0.4 ------- ------ ---- ------- ----- Total fixed maturity securities..... $15,282 $1,028 $176 $16,134 100.0% ======= ====== ==== ======= ===== Non-redeemable preferred stocks....... $ 191 $ 4 $ 2 $ 193 91.9% Common stocks......................... 14 3 -- 17 8.1 Total equity securities............. $ 205 $ 7 $ 2 $ 210 100.0% ======= ====== ==== ======= =====
The Company held foreign currency derivatives with notional amounts of $839 million and $670 million to hedge the exchange rate risk associated with foreign denominated fixed maturity securities at December 31, 2007 and 2006, respectively. The Company is not exposed to any significant concentrations of credit risk in its equity securities portfolio. The Company is exposed to concentrations of credit risk related to U.S. Treasury securities and obligations of U.S. government corporations and agencies. Additionally, at December 31, 2007 and 2006, the Company had exposure to fixed maturity securities backed by sub-prime mortgages with estimated fair values of $285 million and $349 million, respectively, and unrealized losses of $28 million and less than $1 million, respectively. These securities are classified within asset-backed securities in the immediately preceding table. At December 31, 2007, 14% have been guaranteed by financial guarantors, of which 27% was guaranteed by financial guarantors who remain Aaa rated through March 2008. Overall, at December 31, 2007, $729 million of the estimated fair value of the Company's fixed maturity securities were credit enhanced by financial guarantors of which $375 million, $227 million and $127 million at December 31, 2007, are included within asset-backed securities, corporate securities and state and political subdivision securities, respectively, and 86% were guaranteed by financial guarantors who remained Aaa rated through March 2008. The Company held fixed maturity securities at estimated fair values that were below investment grade or not rated by an independent rating agency that totaled $488 million and $452 million at December 31, 2007 and 2006, respectively. These securities had net unrealized gains of $4 million and $18 million at December 31, 2007 and 2006, respectively. Non-income producing fixed maturity securities were less than $1 million at December 31, 2007. There were no non-income producing fixed maturity securities at December 31, 2006. Net unrealized gains associated with non-income producing fixed maturity securities were less than $1 million at December 31, 2007. F-31 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The amortized cost and estimated fair value of fixed maturity securities, by contractual maturity date (excluding scheduled sinking funds), are as follows:
DECEMBER 31, ----------------------------------------------- 2007 2006 ---------------------- ---------------------- AMORTIZED ESTIMATED AMORTIZED ESTIMATED COST FAIR VALUE COST FAIR VALUE --------- ---------- --------- ---------- (IN MILLIONS) Due in one year or less................. $ 269 $ 276 $ 326 $ 331 Due after one year through five years... 2,290 2,348 2,052 2,103 Due after five years through ten years.. 2,615 2,668 2,649 2,680 Due after ten years..................... 5,769 6,592 4,984 5,767 ------- ------- ------- ------- Subtotal.............................. 10,943 11,884 10,011 10,881 Mortgage-backed and other asset-backed securities............................ 5,479 5,433 5,271 5,253 ------- ------- ------- ------- Total fixed maturity securities....... $16,422 $17,317 $15,282 $16,134 ======= ======= ======= =======
Fixed maturity securities not due at a single maturity date have been included in the above table in the year of final contractual maturity. Actual maturities may differ from contractual maturities due to the exercise of prepayment options. Sales or disposals of fixed maturity and equity securities classified as available-for-sale are as follows:
YEARS ENDED DECEMBER 31, ------------------------ 2007 2006 2005 ------ ------ ------ (IN MILLIONS) Proceeds............................................ $2,572 $3,989 $5,608 Gross investment gains.............................. $ 36 $ 47 $ 99 Gross investment losses............................. $ (59) $ (67) $ (65)
F-32 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) UNREALIZED LOSS FOR FIXED MATURITY AND EQUITY SECURITIES AVAILABLE-FOR-SALE The following tables present the estimated fair value and gross unrealized loss of the Company's fixed maturity (aggregated by sector) and equity securities in an unrealized loss position, aggregated by length of time that the securities have been in a continuous unrealized loss position at:
DECEMBER 31, 2007 --------------------------------------------------------------------------- EQUAL TO OR GREATER THAN LESS THAN 12 MONTHS 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.......... $1,914 $105 $1,048 $ 58 $2,962 $163 Foreign government securities...... 231 3 101 5 332 8 Residential mortgage-backed securities....................... 690 14 705 12 1,395 26 Foreign corporate securities....... 510 23 254 16 764 39 Commercial mortgage-backed securities....................... 154 6 529 13 683 19 Asset-backed securities............ 557 37 117 11 674 48 U.S. Treasury/agency securities.... 1 -- -- -- 1 -- State and political subdivision securities....................... 28 1 15 -- 43 1 Other fixed maturity securities.... 74 29 -- -- 74 29 ------ ---- ------ ---- ------ ---- Total fixed maturity securities.. $4,159 $218 $2,769 $115 $6,928 $333 ====== ==== ====== ==== ====== ==== Equity securities.................. $ 92 $ 19 $ 15 $ 2 $ 107 $ 21 ====== ==== ====== ==== ====== ==== Total number of securities in an unrealized loss position......... 1,160 607 ====== ======
DECEMBER 31, 2006 --------------------------------------------------------------------------- EQUAL TO OR GREATER THAN LESS THAN 12 MONTHS 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.......... $1,397 $19 $1,322 $ 52 $2,719 $ 71 Foreign government securities...... 267 4 31 1 298 5 Residential mortgage-backed securities....................... 855 7 1,267 26 2,122 33 Foreign corporate securities....... 407 8 139 5 546 13 Commercial mortgage-backed securities....................... 319 1 508 13 827 14 Asset-backed securities............ 272 1 60 1 332 2 U.S. Treasury/agency securities.... 458 4 60 1 518 5 State and political subdivision securities....................... 29 -- 13 1 42 1 Other fixed maturity securities.... 71 32 -- -- 71 32 ------ --- ------ ---- ------ ---- Total fixed maturity securities.. $4,075 $76 $3,400 $100 $7,475 $176 ====== === ====== ==== ====== ==== Equity securities.................. $ 49 $ 1 $ 16 $ 1 $ 65 $ 2 ====== === ====== ==== ====== ==== Total number of securities in an unrealized loss position......... 907 676 ====== ======
F-33 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) AGING OF GROSS UNREALIZED LOSS FOR FIXED MATURITY AND EQUITY SECURITIES AVAILABLE-FOR-SALE The following tables present the cost or amortized cost, gross unrealized loss and number of securities for fixed maturity and equity securities, where the estimated fair value had declined and remained below cost or amortized cost by less than 20%, or 20% or more at:
DECEMBER 31, 2007 ------------------------------------------------------------ COST OR AMORTIZED GROSS UNREALIZED NUMBER OF COST LOSS SECURITIES ------------------ ------------------ ------------------ LESS 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.................... $2,388 $159 $ 94 $43 550 88 Six months or greater but less than nine months................................ 1,243 10 64 3 340 8 Nine months or greater but less than twelve months......................... 715 -- 40 -- 186 -- Twelve months or greater................ 2,864 10 107 3 595 4 ------ ---- ---- --- Total................................. $7,210 $179 $305 $49 ====== ==== ==== ===
DECEMBER 31, 2006 ------------------------------------------------------------ COST OR AMORTIZED GROSS UNREALIZED NUMBER OF COST LOSS SECURITIES ------------------ ------------------ ------------------ LESS THAN 20% OR LESS THAN 20% OR LESS THAN 20% OR 20% MORE 20% MORE 20% MORE --------- ------ --------- ------ --------- ------ (IN MILLIONS, EXCEPT NUMBER OF SECURITIES) Less than six months.................... $3,369 $ 8 $ 58 $ 2 621 4 Six months or greater but less than nine months................................ 184 -- 3 -- 78 -- Nine months or greater but less than twelve months......................... 640 -- 14 -- 204 -- Twelve months or greater................ 3,516 1 101 -- 675 1 ------ --- ---- --- Total................................. $7,709 $ 9 $176 $ 2 ====== === ==== ===
At December 31, 2007 and 2006, $305 million and $176 million, respectively, of unrealized losses related to securities with an unrealized loss position of less than 20% of cost or amortized cost, which represented 4% and 2%, respectively, of the cost or amortized cost of such securities. At December 31, 2007, $49 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 $49 million, $43 million related to securities that were in an unrealized loss position for a period of less than six months. At December 31, 2006, $2 million of unrealized losses related to securities with an unrealized loss position of 20% or more of cost or amortized cost, which represented 22% of the cost or amortized cost of such securities. All such unrealized losses related to securities that were in an unrealized loss position for a period of less than six months. The Company held no fixed maturity and equity securities with a gross unrealized loss at December 31, 2007 of greater than $10 million. The Company held one fixed maturity security with a gross unrealized loss at December 31, 2006 of equal to or greater than $10 million. This security represented 6%, or $10 million in the aggregate, of the gross unrealized loss on fixed maturity and equity securities. F-34 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) At December 31, 2007 and 2006, the Company had $354 million and $178 million, respectively, of gross unrealized losses related to its fixed maturity and equity securities. These securities are concentrated, calculated as a percentage of gross unrealized loss, as follows:
DECEMBER 31, ----------- 2007 2006 ---- ---- SECTOR: U.S. corporate securities.................................... 46% 40% Asset-backed securities...................................... 14 1 Foreign corporate securities................................. 11 7 Residential mortgage-backed securities....................... 7 19 Commercial mortgage-backed securities........................ 5 8 Other........................................................ 17 25 --- --- Total...................................................... 100% 100% === === INDUSTRY: Finance...................................................... 37% 11% Asset-backed................................................. 14 1 Mortgage-backed.............................................. 12 27 Utility...................................................... 8 13 Industrial................................................... 6 16 Government................................................... 2 6 Other........................................................ 21 26 --- --- Total...................................................... 100% 100% === ===
As described more fully in Note 1, the Company performs a regular evaluation, on a security-by-security basis, of its investment holdings in accordance with its impairment policy in order to evaluate whether such securities are other-than-temporarily impaired. One of the criteria which the Company considers in its other-than-temporary impairment analysis is its intent and ability to hold securities for a period of time sufficient to allow for the recovery of their value to an amount equal to or greater than cost or amortized cost. The Company's intent and ability to hold securities considers broad portfolio management objectives such as asset/liability duration management, issuer and industry segment exposures, interest rate views and the overall total return focus. In following these portfolio management objectives, changes in facts and circumstances that were present in past reporting periods may trigger a decision to sell securities that were held in prior reporting periods. Decisions to sell are based on current conditions or the Company's need to shift the portfolio to maintain its portfolio management objectives including liquidity needs or duration targets on asset/liability managed portfolios. The Company attempts to anticipate these types of changes and if a sale decision has been made on an impaired security and that security is not expected to recover prior to the expected time of sale, the security will be deemed other-than- temporarily impaired in the period that the sale decision was made and an other- than-temporary impairment loss will be recognized. Based upon the Company's current evaluation of the securities in accordance with its impairment policy, the cause of the decline being principally attributable to the general rise in interest rates during the holding period, and the Company's current intent and ability to hold the fixed maturity and equity securities with unrealized losses for a period of time sufficient for them to recover, the Company has concluded that the aforementioned securities are not other-than-temporarily impaired. F-35 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES 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 $1,372 million and $1,566 million and an estimated fair value of $1,392 million and $1,587 million were on loan under the program at December 31, 2007 and 2006, respectively. Securities loaned under such transactions may be sold or repledged by the transferee. The Company was liable for cash collateral under its control of $1,434 million and $1,640 million at December 31, 2007 and 2006, respectively. There was no security collateral on deposit from customers in connection with the securities lending transactions at December 31, 2007 and 2006. ASSETS ON DEPOSIT AND HELD IN TRUST AND ASSETS PLEDGED AS COLLATERAL The Company had investment assets on deposit with regulatory agencies with a fair market value of $1,368 million and $1,009 million at December 31, 2007 and 2006, respectively, consisting primarily of fixed maturity securities. Company securities held in trust to satisfy collateral requirements had a cost or amortized cost of $2,307 million and $2,228 million at December 31, 2007 and 2006, respectively, consisting primarily of fixed maturity and equity securities. Certain of the Company's fixed maturity securities are pledged as collateral for various derivative transactions as described in Note 4. MORTGAGE LOANS ON REAL ESTATE Mortgage loans on real estate are categorized as follows:
DECEMBER 31, ----------------------------------- 2007 2006 ---------------- ---------------- AMOUNT PERCENT AMOUNT PERCENT ------ ------- ------ ------- (IN MILLIONS) Commercial mortgage loans..................... $1,033 96% $925 95% Agricultural mortgage loans................... 42 4 46 5 ------ --- ---- --- Total....................................... 1,075 100% 971 100% === === Less: Valuation allowances.................... 2 -- ------ ---- Mortgage loans on real estate............... $1,073 $971 ====== ====
Mortgage loans on real estate are collateralized by properties primarily located in the United States. At December 31, 2007, 22%, 12% and 7% of the value of the Company's mortgage loans on real estate were collateralized by property located in California, Florida and Illinois, respectively. Generally, the Company, as the lender, only loans up to 75% of the purchase price of the underlying real estate. Information regarding loan valuation allowances for mortgage loans on real estate is as follows:
YEARS ENDED DECEMBER 31, ------------------------ 2007 2006 2005 ---- ---- ---- (IN MILLIONS) Balance at January 1,.................................. $-- $ 1 $ 3 Additions.............................................. 2 -- -- Deductions............................................. -- (1) (2) --- --- --- Balance at December 31,................................ $ 2 $-- $ 1 === === ===
F-36 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) A portion of the Company's mortgage loans on real estate was impaired and consisted of the following:
DECEMBER 31, ----------- 2007 2006 ---- ---- (IN MILLIONS) Impaired loans with valuation allowances..................... $6 $ 6 Less: Valuation allowances on impaired loans................. 2 -- -- --- Impaired loans............................................. $4 $ 6 == ===
The average investment on impaired loans was $6 million, $1 million and $3 million for the years ended December 31, 2007, 2006 and 2005, respectively. Interest income on impaired loans was less than $1 million for each of the years ended December 31, 2007, 2006 and 2005. REAL ESTATE HOLDINGS Real estate holdings consisted of the following:
DECEMBER 31, ----------- 2007 2006 ---- ---- (IN MILLIONS) Real estate.................................................. $ 68 $ 68 Accumulated depreciation..................................... (16) (14) ---- ---- Net real estate.............................................. 52 54 Real estate joint ventures................................... 3 2 ---- ---- Total real estate holdings................................. $ 55 $ 56 ==== ====
All of the Company's real estate holdings are classified as held-for- investment. Related depreciation expense on real estate was $2 million, $1 million and $1 million for the years ended December 31, 2007, 2006 and 2005, respectively. Real estate holdings were categorized as follows:
DECEMBER 31, ----------------------------------- 2007 2006 ---------------- ---------------- AMOUNT PERCENT AMOUNT PERCENT ------ ------- ------ ------- (IN MILLIONS) Office........................................ $37 67% $37 66% Industrial.................................... 16 29 17 30 Retail........................................ 2 4 2 4 --- --- --- --- Total real estate holdings.................. $55 100% $56 100% === === === ===
The Company's real estate holdings are located in the United States. At December 31, 2007, 95% of the Company's real estate holdings were located in California. OTHER LIMITED PARTNERSHIP INTERESTS The carrying value of other limited partnership interests (which primarily represent ownership interests in pooled investment funds that make private equity investments in companies in the United States and overseas) was $33 million and $20 million at December 31, 2007 and 2006, respectively. Included within other limited partnership interests at December 31, 2007 are $9 million of hedge funds. The Company had no hedge funds included within other limited partnership interests at December 31, 2006. For the year ended December 31, 2007, net investment F-37 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) income from other limited partnership interests included a loss of less than $1 million, related to hedge funds. The Company did not have net investment income from other limited partnership interests related to hedge funds for the years ended December 31, 2006 and 2005. FUNDS WITHHELD AT INTEREST Funds withheld at interest, included in other invested assets, were $4,508 million and $3,806 million at December 31, 2007 and 2006, respectively. NET INVESTMENT INCOME The components of net investment income are as follows:
YEARS ENDED DECEMBER 31, ------------------------ 2007 2006 2005 ------ ------ ------ (IN MILLIONS) Fixed maturity securities........................... $ 951 $ 864 $ 772 Equity securities................................... 15 16 11 Mortgage loans on real estate....................... 65 63 75 Policy loans........................................ 164 154 159 Real estate and real estate joint ventures.......... 11 12 11 Other limited partnership interests................. (4) (1) (5) Cash, cash equivalents and short-term investments... 29 17 11 Interest on funds held at interest.................. 277 257 192 Other............................................... 16 16 9 ------ ------ ------ Total investment income........................... 1,524 1,398 1,235 Less: Investment expenses........................... 105 96 64 ------ ------ ------ Net investment income............................. $1,419 $1,302 $1,171 ====== ====== ======
For the years ended December 31, 2007 and 2006, there was no affiliated net investment income related to fixed maturity securities. For the year ended December 31, 2005, affiliated net investment income related to fixed maturity securities was less than $1 million and is included in the table above. For each of the years ended December 31, 2007 and 2006, affiliated investment expenses of $5 million are included in the table above. For the year ended December 31, 2005, there were no affiliated investment expenses. See Related Party Investment Transactions for discussion of affiliated net investment income related to short-term investments included in the table above. F-38 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) NET INVESTMENT GAINS (LOSSES) The components of net investment gains (losses) are as follows:
YEARS ENDED DECEMBER 31, ------------------- 2007 2006 2005 ----- ---- ---- (IN MILLIONS) Fixed maturity securities.............................. $ (32) $(27) $ 32 Equity securities...................................... -- 6 -- Mortgage loans on real estate.......................... (2) 1 10 Real estate and real estate joint ventures............. 1 -- 4 Derivatives............................................ (257) 8 (15) Other.................................................. 22 (2) 26 ----- ---- ---- Net investment gains (losses)........................ $(268) $(14) $ 57 ===== ==== ====
For the years ended December 31, 2007 and 2005, affiliated net investment gains of less then $1 million and $29 million, respectively, are included in the table above. There were no affiliated net investment gains (losses) for the year ended December 31, 2006. 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 $9 million, $1 million and $2 million for the years ended December 31, 2007, 2006 and 2005, respectively. 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, --------------------- 2007 2006 2005 ----- ----- ----- (IN MILLIONS) Fixed maturity securities............................ $ 893 $ 852 $ 997 Equity securities.................................... (19) 5 2 Derivatives.......................................... (2) (2) (2) Minority interest.................................... (150) (159) (171) Other................................................ (28) (20) (39) ----- ----- ----- Subtotal........................................... 694 676 787 ----- ----- ----- Amounts allocated from DAC and VOBA.................. (97) (27) (45) Deferred income tax.................................. (249) (280) (311) ----- ----- ----- Subtotal........................................... (346) (307) (356) ----- ----- ----- Net unrealized investment gains (losses)............. $ 348 $ 369 $ 431 ===== ===== =====
F-39 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The changes in net unrealized investment gains (losses) are as follows:
YEARS ENDED DECEMBER 31, ------------------- 2007 2006 2005 ---- ----- ---- (IN MILLIONS) Balance, January 1,................................... $369 $ 431 $356 Unrealized investment gains (losses) during the year.. 18 (111) 94 Unrealized gains (losses) relating to: DAC and VOBA........................................ (70) 18 42 Deferred income tax................................. 31 31 (61) ---- ----- ---- Balance, December 31,................................. $348 $ 369 $431 ==== ===== ==== Net change in unrealized investment gains (losses).... $(21) $ (62) $ 75 ==== ===== ====
VARIABLE INTEREST ENTITIES The following table presents the total assets of and maximum exposure to loss relating to variable interest entities ("VIEs") for which the Company has concluded that it holds significant variable interests but it is not the primary beneficiary and which have not been consolidated:
DECEMBER 31, 2007 ----------------------- NOT PRIMARY BENEFICIARY ----------------------- MAXIMUM TOTAL EXPOSURE TO ASSETS(1) LOSS(2) --------- ----------- (IN MILLIONS) Other limited partnership interest(3).................. $ 7 $ 5 Trust preferred securities(4).......................... 5,275 67 ------ --- Total................................................ $5,282 $72 ====== ===
-------- (1) The assets of the other limited partnership interests and trust preferred securities are reflected at the carrying amounts at which such assets would have been reflected on the Company's consolidated balance sheet had the Company consolidated the VIE from the date of its initial investment in the entity. (2) The maximum exposure to loss relating to other limited partnership interests and trust preferred securities is equal to the carrying amounts plus any unfunded commitments, reduced by amounts guaranteed by other partners. Such a maximum loss would be expected to occur only upon bankruptcy of the issuer or investee. (3) Other limited partnership interests include partnerships established for the purpose of investing in public and private debt and equity securities. (4) Trust preferred securities are complex, uniquely structured investments which contain features of both equity and debt, may have an extended or no stated maturity, and may be callable at the issuer's option after a defined period of time. RELATED PARTY INVESTMENT TRANSACTIONS As of December 31, 2007 and 2006, the Company held $224 million and $238 million, respectively, of its total invested assets in the MetLife Intermediate Income Pool, an affiliated partnership. These amounts are included in short-term investments. Net investment income from these invested assets was $15 million, $4 million and less than $1 million for the years ended December 31, 2007, 2006 and 2005, respectively. F-40 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) In the normal course of business, the Company transfers invested assets, primarily consisting of fixed maturity securities, to and from affiliates. Assets transferred to and from affiliates, inclusive of amounts related to reinsurance agreements, are as follows:
YEARS ENDED DECEMBER 31, ---------------------- 2007 2006 2005 ---- ---- ---- (IN MILLIONS) Estimated fair value of assets transferred to affiliates......................................... $19 $-- $536 Amortized cost of assets transferred to affiliates... $19 $-- $501 Net investment gains (losses) recognized on transfers.......................................... $-- $-- $ 35 Estimated fair value of assets transferred from affiliates......................................... $10 $-- $382
4. DERIVATIVE FINANCIAL INSTRUMENTS TYPES OF DERIVATIVE FINANCIAL INSTRUMENTS The following table presents the notional amount and current market or fair value of derivative financial instruments held at:
DECEMBER 31, 2007 DECEMBER 31, 2006 ------------------------------- ------------------------------- CURRENT MARKET CURRENT MARKET OR FAIR VALUE OR FAIR VALUE NOTIONAL -------------------- NOTIONAL -------------------- AMOUNT ASSETS LIABILITIES AMOUNT ASSETS LIABILITIES -------- ------ ----------- -------- ------ ----------- (IN MILLIONS) Interest rate swaps...................... $ 422 $38 $ 1 $ 359 $29 $ 2 Financial futures........................ 213 1 2 213 2 -- Foreign currency swaps................... 226 -- 11 31 -- 4 Foreign currency forwards................ 815 38 -- 643 20 -- Financial forwards....................... -- -- -- -- -- 1 Credit default swaps..................... 395 1 2 241 -- -- ------ --- --- ------ --- --- Total.................................. $2,071 $78 $16 $1,487 $51 $ 7 ====== === === ====== === ===
The above table does not include notional amounts for equity futures and equity variance swaps. At December 31, 2007, the Company owned 160 equity futures. The Company did not own equity futures at December 31, 2006. Fair values of equity futures are included in financial futures in the preceding table. At both December 31, 2007 and 2006, the Company owned 4,500 equity variance swaps. Fair values of equity variance swaps are included in financial forwards in the preceding table. F-41 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The following table presents the notional amount of derivative financial instruments by maturity at December 31, 2007:
REMAINING LIFE ------------------------------------------------------------------------------------ AFTER ONE YEAR AFTER FIVE YEARS ONE YEAR OR LESS THROUGH FIVE YEARS THROUGH TEN YEARS AFTER TEN YEARS TOTAL ---------------- ------------------ ----------------- --------------- ------ (IN MILLIONS) Interest rate swaps..... $ 18 $ 91 $ 66 $247 $ 422 Financial futures....... 213 -- -- -- 213 Foreign currency swaps.. -- 5 20 201 226 Foreign currency forwards.............. 807 -- -- 8 815 Credit default swaps.... -- 147 23 225 395 ------ ---- ---- ---- ------ Total................. $1,038 $243 $109 $681 $2,071 ====== ==== ==== ==== ======
Interest rate swaps are used by the Company primarily to reduce market risks from changes in interest rates and to alter interest rate exposure arising from mismatches between assets and liabilities (duration mismatches). In an interest rate swap, the Company agrees with another party to exchange, at specified intervals, the difference between fixed rate and floating rate interest amounts as calculated by reference to an agreed notional principal amount. These transactions are entered into pursuant to master agreements that provide for a single net payment to be made by the counterparty at each due date. In exchange-traded interest rate (Treasury and swap) and equity futures transactions, the Company agrees to purchase or sell a specified number of contracts, the value of which is determined by the different classes of interest rate and equity securities, and to post variation margin on a daily basis in an amount equal to the difference in the daily market values of those contracts. The Company enters into exchange-traded futures with regulated futures commission merchants that are members of the exchange. Exchange-traded interest rate (Treasury and swap) futures are used primarily to hedge mismatches between the duration of assets in a portfolio and the duration of liabilities supported by those assets, to hedge against changes in value of securities the Company owns or anticipates acquiring and to hedge against changes in interest rates on anticipated liability issuances by replicating Treasury or swap curve performance. The value of interest rate futures is substantially impacted by changes in interest rates and they can be used to modify or hedge existing interest rate risk. Exchange-traded equity futures are used primarily to hedge liabilities embedded in certain variable annuity products offered by the Company. Foreign currency derivatives, including foreign currency swaps and foreign currency forwards, are used by the Company to reduce the risk from fluctuations in foreign currency exchange rates associated with its assets and liabilities denominated in foreign currencies. 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. F-42 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Equity variance swaps are used by the Company primarily to hedge minimum guarantees embedded in certain variable annuity products offered by the Company. In an equity variance swap, the Company agrees with another party to exchange amounts in the future, based on changes in equity volatility over a defined period. Equity variance swaps are included in financial forwards in the preceding table. Certain credit default swaps are used by the Company to hedge against credit-related changes in the value of its investments and to diversify its credit risk exposure in certain portfolios. In a credit default swap transaction, the Company agrees with another party, at specified intervals, to pay a premium to insure credit risk. If a credit event, as defined by the contract, occurs, generally the contract will require the swap to be settled gross by the delivery of par quantities of the referenced investment equal to the specified swap notional in exchange for the payment of cash amounts by the counterparty equal to the par value of the investment surrendered. Credit default swaps are also used to synthetically create investments that are either more expensive to acquire or otherwise unavailable in the cash markets. These transactions are a combination of a derivative and a cash instrument such as a U.S. Treasury or Agency security. HEDGING The following table presents the notional amount and fair value of derivatives by type of hedge designation at:
DECEMBER 31, 2007 DECEMBER 31, 2006 ------------------------------- ------------------------------- FAIR VALUE FAIR VALUE NOTIONAL -------------------- NOTIONAL -------------------- AMOUNT ASSETS LIABILITIES AMOUNT ASSETS LIABILITIES -------- ------ ----------- -------- ------ ----------- (IN MILLIONS) Fair value...................... $ 17 $-- $ 1 $ 3 $-- $-- Cash flow....................... 4 -- -- 9 -- -- Foreign operations.............. 197 -- 5 -- -- -- Non-qualifying.................. 1,853 78 10 1,475 51 7 ------ --- --- ------ --- --- Total......................... $2,071 $78 $16 $1,487 $51 $ 7 ====== === === ====== === ===
The Company recognized insignificant net investment income (expense) from settlement payments related to qualifying hedges for the years ended December 31, 2007, 2006 and 2005. The Company recognized net investment gains (losses) from settlement payments related to non-qualifying hedges of $3 million, $3 million, and $11 million for the years ended December 31, 2007, 2006 and 2005, respectively. FAIR VALUE HEDGES The Company utilizes interest rate swaps to convert fixed rate investments to floating rate investments. The Company designates and accounts for these interest rate swaps as fair value hedges when they have met the requirements of SFAS 133. The Company recognized net investment gains (losses) representing the ineffective portion of all fair value hedges as follows:
YEARS ENDED DECEMBER 31, ------------------------ 2007 2006 2005 ---- ---- ---- (IN MILLIONS) Changes in the fair value of derivatives.............. $(1) $-- $-- Changes in the fair value of the items hedged......... 1 -- -- --- --- --- Net ineffectiveness of fair value hedging activities.. $-- $-- $-- === === ===
F-43 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) All components of each derivative's gain or loss were included in the assessment of hedge effectiveness. There were no instances in which the Company discontinued fair value hedge accounting due to a hedged firm commitment no longer qualifying as a fair value hedge. CASH FLOW HEDGES The Company designates and accounts for the following as cash flow hedges, when they have met the requirements of SFAS 133: (i) interest rate swaps to convert floating rate investments to fixed rate investments; (ii) interest rate swaps to convert floating rate liabilities to fixed rate liabilities; and (iii) foreign currency swaps to hedge the foreign currency cash flow exposure of foreign currency denominated investments. For the years ended December 31, 2007 and 2006, the Company did not recognize any net investment gains (losses) as the ineffective portion of all cash flow hedges. For the year ended December 31, 2005, the Company recognized an insignificant amount in net investment gains (losses), 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 effectiveness. There were no instances in which the Company discontinued cash flow hedge accounting because the forecasted transactions did not occur on the anticipated date or in the additional time period permitted by SFAS 133. There were no hedged forecasted transactions, other than the receipt or payment of variable interest payments for the years ended December 31, 2007, 2006 and 2005. For the years ended December 31, 2007 and 2006, the net amount deferred in other comprehensive income (loss) relating to cash flow hedges was insignificant. For the year ended December 31, 2005, the net amount deferred in other comprehensive income (loss) relating to cash flow hedges was ($2) million. At December 31, 2007, 2006 and 2005, the net amount accumulated in other comprehensive income (loss) relating to cash flow hedges was ($2) million. At December 31, 2007, insignificant amounts of the deferred net gains (losses) on derivatives accumulated in other comprehensive income (loss) is expected to be reclassified to earnings during the year ending December 31, 2008. HEDGES OF NET INVESTMENTS IN FOREIGN OPERATIONS The Company uses forward exchange contracts 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, 2007, 2006 and 2005. The Company's consolidated statement of stockholder's equity for the year ended December 31, 2007 includes gains (losses) of ($5) million related to foreign currency contracts used to hedge its net investments in foreign operations. The Company did not record any gains (losses) on foreign currency contracts for the years ended December 31, 2006 and 2005. At December 31, 2007, the cumulative foreign currency translation gain (loss) recorded in accumulated other comprehensive income related to these hedges was approximately ($5) million. There was no foreign currency translation gain (loss) recorded in 2006. When substantially all of the net investments in foreign operations are sold or 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 and interest rate futures to economically hedge its exposure to interest rate volatility; (ii) foreign currency forwards and swaps to economically hedge its exposure to adverse movements in exchange rates; (iii) credit default swaps to minimize its exposure to adverse movements in credit; F-44 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (iv) equity variance swaps, equity futures and interest rate futures to economically hedge liabilities embedded in certain variable annuity products; and (v) credit default swaps to synthetically create investments. The following table presents changes in fair value related to derivatives that do not qualify for hedge accounting:
YEARS ENDED DECEMBER 31, ------------------------- 2007 2006 2005 ----- ---- ---- (IN MILLIONS) Net investment gains (losses), excluding embedded derivatives....................................... $(110) $(3) $(34)
EMBEDDED DERIVATIVES The Company has certain embedded derivatives that are required to be separated from their host contracts and accounted for as derivatives. These host contracts include modified coinsurance contracts. The following table presents the fair value of the Company's embedded derivatives at:
DECEMBER 31, ----------- 2007 2006 ---- ---- (IN MILLIONS) Embedded derivatives assets.................................. $ 66 $57 Embedded derivatives liabilities............................. $628 $52
The following table presents changes in fair value related to embedded derivatives:
YEARS ENDED DECEMBER 31, ------------------- 2007 2006 2005 ----- ---- ---- (IN MILLIONS) Net investment gains (losses).......................... $(150) $ 7 $ 7 Interest credited to policyholder account balances..... $ (66) $(80) $(45)
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 the accepting of collateral in connection with its derivative instruments. As of December 31, 2007 and 2006, the Company was obligated to return cash collateral under its control of $4 million and $2 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. The Company has exchange traded futures, which require the pledging of collateral. At both December 31, 2007 and 2006, the Company pledged collateral of $2 million, which is included in fixed maturity securities. The counterparties are permitted by contract to sell or repledge this collateral. F-45 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES 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, 2005.......................... $2,617 $648 $3,265 Capitalizations................................... 649 -- 649 ------ ---- ------ Subtotal....................................... 3,266 648 3,914 ------ ---- ------ Less: Amortization related to: Net investment gains (losses).................. 12 2 14 Unrealized investment gains (losses)........... (28) (14) (42) Other expenses................................. 652 31 683 ------ ---- ------ Total amortization........................... 636 19 655 ------ ---- ------ Less: Dispositions and other...................... 120 -- 120 ------ ---- ------ Balance at December 31, 2005........................ 2,510 629 3,139 Capitalizations................................... 761 -- 761 ------ ---- ------ Subtotal....................................... 3,271 629 3,900 ------ ---- ------ Less: Amortization related to: Net investment gains (losses).................. 2 (2) -- Unrealized investment gains (losses)........... (3) (15) (18) Other expenses................................. 570 (15) 555 ------ ---- ------ Total amortization........................ 569 (32) 537 ------ ---- ------ Less: Dispositions and other...................... (52) 27 (25) ------ ---- ------ Balance at December 31, 2006........................ 2,754 634 3,388 Effect of SOP 05-1 adoption....................... (3) (5) (8) Capitalizations................................... 810 -- 810 ------ ---- ------ Subtotal....................................... 3,561 629 4,190 ------ ---- ------ Less: Amortization related to: Net investment gains (losses).................. (112) (2) (114) Unrealized investment gains (losses)........... (1) 71 70 Other expenses................................. 644 12 656 ------ ---- ------ Total amortization........................ 531 81 612 ------ ---- ------ Less: Dispositions and other...................... (72) -- (72) ------ ---- ------ Balance at December 31, 2007........................ $3,102 $548 $3,650 ====== ==== ======
The estimated future amortization expense allocated to other expenses for the next five years for VOBA is $39 million in 2008, $33 million in 2009, $33 million in 2010, $35 million in 2011 and $36 million in 2012. Amortization of VOBA and DAC is related to (i) investment gains and losses and the impact of such gains and losses on the amount of the amortization; (ii) unrealized investment gains and losses to provide information regarding the amount that would have been amortized if such gains and losses had been recognized; and (iii) other F-46 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) expenses to provide amounts related to the gross margins or profits originating from transactions other than investment gains and losses. 6. GOODWILL Goodwill, which is included in other assets, is the excess of cost over the fair value of net assets acquired. Information regarding goodwill is as follows:
DECEMBER 31, ----------- 2007 2006 ---- ---- (IN MILLIONS) Balance at January 1,....................................... $131 $134 Dispositions and other, net................................. -- (3) ---- ---- Balance at December 31,..................................... $131 $131 ==== ====
7. INSURANCE INSURANCE LIABILITIES Insurance liabilities are as follows:
DECEMBER 31, ------------------------------------------------------- POLICYHOLDER OTHER FUTURE POLICY ACCOUNT POLICYHOLDER BENEFITS BALANCES FUNDS ----------------- ----------------- --------------- 2007 2006 2007 2006 2007 2006 ------- ------- ------- ------- ------ ------ (IN MILLIONS) Group life.................... $ 34 $ 39 $ -- $ -- $ 1 $ 1 Retirement & savings.......... 35 36 42 65 -- -- Non-medical health & other.... 329 352 -- -- 5 4 Traditional life.............. 4,596 4,616 -- -- 118 113 Universal variable life....... 64 65 3,079 3,069 58 59 Annuities..................... 87 76 886 926 -- -- Reinsurance................... 6,159 5,140 6,657 6,212 2,297 1,978 Other......................... (19) (33) 127 126 13 47 ------- ------- ------- ------- ------ ------ Total....................... $11,285 $10,291 $10,791 $10,398 $2,492 $2,202 ======= ======= ======= ======= ====== ======
Affiliated future policy benefits, included in the table above, were less than $1 million at both December 31, 2007 and 2006. Affiliated policyholder account balances, included in the table above, were less than $1 million at both December 31, 2007 and 2006. Affiliated other policyholder funds, included in the table above, were ($227) million and ($163) million at December 31, 2007 and 2006, respectively. SEPARATE ACCOUNTS Separate account assets and liabilities include two categories of account types: pass-through separate accounts totaling $2,020 million and $1,997 million at December 31, 2007 and 2006, 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 $77 million and $213 million at December 31, 2007 and 2006, respectively. The average interest rate credited on these contracts was 4.14% and 4.02% at December 31, 2007 and 2006, respectively. F-47 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Fees charged to the separate accounts by the Company (including mortality charges, policy administration fees and surrender charges) are reflected in the Company's revenues as universal life and investment-type product policy fees and totaled $57 million, $84 million and $113 million for the years ended December 31, 2007, 2006 and 2005, respectively. For each of the years ended December 31, 2007, 2006 and 2005, there were no investment gains (losses) on transfers of assets from the general account to the separate accounts. OBLIGATIONS UNDER GUARANTEED INTEREST CONTRACT PROGRAM RGA 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, 2007, 2006 and 2005, there were no new issuances by RGA under the GIC program. During the years ended December 31, 2007, 2006 and 2005, RGA repaid $5 million, $3 million and $23 million, respectively, of GICs under this program. At December 31, 2007 and 2006, GICs outstanding, which are included in policyholder account balances, were $15 million and $17 million, respectively. During each of the years ended December 31, 2007, 2006 and 2005, interest credited on the contracts, which is included in interest credited to policyholder account balances, was $1 million. 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 benefit. F-48 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Information regarding the types of guarantees relating to annuity contracts and universal and variable life contracts is as follows:
DECEMBER 31, ----------------------------------------------------------------- 2007 2006 ------------------------------- ------------------------------- IN THE EVENT OF AT IN THE EVENT OF AT DEATH ANNUITIZATION DEATH ANNUITIZATION --------------- ------------- --------------- ------------- (IN MILLIONS) ANNUITY CONTRACTS (1) TWO TIER ANNUITIES General account value....... N/A $ 286 N/A $ 296 Net amount at risk (2)...... N/A $ 51(4) N/A $ 53(4) Average attained age of contractholders.......... N/A 60 years N/A 58 years DECEMBER 31, ----------------------------------------------------------------- 2007 2006 ------------------------------- ------------------------------- SECONDARY PAID UP SECONDARY PAID UP GUARANTEES GUARANTEES GUARANTEES GUARANTEES --------------- ------------- --------------- ------------- (IN MILLIONS) UNIVERSAL AND VARIABLE LIFE CONTRACTS (1) Account value (general and separate account)........... $ 1,107 N/A $ 1,024 N/A Net amount at risk (2)........ $ 18,250(3) N/A $ 19,066(3) N/A Average attained age of policyholders............... 57 years N/A 56 years N/A
-------- (1) The Company's annuity and life contracts with guarantees may offer more than one type of guarantee in each contract. Therefore, the amounts listed above may not be mutually exclusive. (2) The net amount at risk is based on the direct amount at risk (excluding reinsurance). (3) The net amount at risk for guarantees of amounts in the event of death is defined as the current guaranteed minimum death benefit in excess of the current account balance at the balance sheet date. (4) The net amount at risk for two tier annuities is based on the excess of the upper tier, adjusted for a profit margin, less the lower tier. F-49 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Information regarding the liabilities for guarantees (excluding base policy liabilities) relating to annuity and universal and variable life contracts is as follows:
UNIVERSAL AND VARIABLE LIFE CONTRACTS ------------- ANNUITY CONTRACTS ------------- GUARANTEED ANNUITIZATION SECONDARY BENEFITS GUARANTEES TOTAL ------------- ------------- ----- (IN MILLIONS) Balance at January 1, 2005..................... $ 7 $ 5 $12 Incurred guaranteed benefits................... -- 1 1 Paid guaranteed benefits....................... -- -- -- --- --- --- Balance at December 31, 2005................... 7 6 13 Incurred guaranteed benefits................... -- -- -- Paid guaranteed benefits....................... -- -- -- --- --- --- Balance at December 31, 2006................... 7 6 13 Incurred guaranteed benefits................... -- -- -- Paid guaranteed benefits....................... -- -- -- --- --- --- Balance at December 31, 2007................... $ 7 $ 6 $13 === === ===
Account balances of contracts with insurance guarantees are invested in separate account asset classes as follows:
DECEMBER 31, ----------- 2007 2006 ---- ---- (IN MILLIONS) Mutual Fund Groupings Equity..................................................... $18 $16 Bond....................................................... 1 1 Balanced................................................... 2 -- Money Market............................................... 2 3 --- --- Total................................................... $23 $20 === ===
8. REINSURANCE General American's life insurance operations participate in reinsurance activities in order to limit losses, minimize exposure to large risks, and to provide additional capacity for future growth. General American 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, General American reinsured up to 90% of the mortality risk for all new individual life insurance. This practice was initiated for different products starting at various points in time between the mid-1990's and 2000. During 2005, General American 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, General American reinsures up to 90% of the mortality risk in excess of $1 million for most new individual life insurance policies that it writes and for certain individual life policies the retention limits remained unchanged. On a case by case basis, General American may retain up to $2.5 million per life and reinsure 100% of amounts in excess of General American retention limits. RGA retains a maximum of $6 million of coverage per individual life with respect to its assumed business. The Company evaluates its reinsurance programs F-50 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) routinely and may increase or decrease its retention at any time. Placement of reinsurance is done primarily on an automatic basis and also on a facultative basis for risks with specific characteristics. In addition to reinsuring mortality risk as described previously, the Company reinsures other risks, as well as specific coverages. The Company routinely reinsures certain classes of risks in order to limit its exposure to particular travel, avocation and lifestyle hazards. The Company has exposure to catastrophes, which could contribute to significant fluctuations in the Company's results of operations. The Company uses excess of retention and quota share reinsurance arrangements to provide greater diversification of risk and minimize exposure to larger risks. The Company reinsures its business through a diversified group of reinsurers. No single unaffiliated reinsurer has a material obligation to the Company nor is the Company's business substantially dependent upon any reinsurance contracts. The Company is contingently liable with respect to ceded reinsurance should any reinsurer be unable to meet its obligations under these agreements. The amounts in the consolidated statements of income are presented net of reinsurance ceded. Information regarding the effect of reinsurance is as follows:
YEARS ENDED DECEMBER 31, ------------------------ 2007 2006 2005 ------ ------ ------ (IN MILLIONS) Direct premiums..................................... $ 412 $ 415 $ 445 Reinsurance assumed................................. 5,575 4,737 4,222 Reinsurance ceded................................... (769) (505) (488) ------ ------ ------ Net premiums........................................ $5,218 $4,647 $4,179 ====== ====== ====== Reinsurance recoverables netted against policyholder benefits and claims............................... $ 372 $ 375 $ 321 ====== ====== ======
Reinsurance assumed premiums for the years ended December 31, 2007, 2006 and 2005 include $5,394 million, $4,735 million and $4,220 million, respectively, from RGA, a life reinsurer. Reinsurance recoverables, included in premiums and other receivables, were $1,246 million and $1,137 million at December 31, 2007 and 2006, respectively. Reinsurance and ceded commissions payables, included in other liabilities, were $331 million and $245 million at December 31, 2007 and 2006, respectively. RELATED PARTY REINSURANCE TRANSACTIONS The Company has reinsurance agreements with certain MetLife subsidiaries, including Exeter Reassurance Company, Ltd. ("Exeter Re"), MetLife Insurance Company of Connecticut, MetLife Investors USA Insurance Company ("MLI USA"), Metropolitan Tower Life Insurance Company, New England Life Insurance Company, MLIC and Missouri Reinsurance (Barbados), Inc. ("Missouri Re"), all of which are related parties. At December 31, 2007, the Company had reinsurance-related assets and liabilities from these agreements totaling $760 million and $227 million, respectively. At December 31, 2006, comparable assets and liabilities were $653 million and $171 million, respectively. F-51 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The following table reflects the related party reinsurance information recorded in income for the:
YEARS ENDED DECEMBER 31, ------------------ 2007 2006 2005 ---- ---- ---- (IN MILLIONS) Assumed premiums....................................... $129 $129 $129 Assumed benefits, included in policyholder benefits and claims............................................... $194 $155 $174 Assumed benefits, included in policyholder dividends... $ 9 $ 7 $ 6 Assumed acquisition costs, included in other expenses.. $ -- $ 1 $ -- Ceded premiums......................................... $ 80 $ 85 $108 Ceded fees, included in universal life and investment- type product policy fees............................. $ 65 $ 90 $260 Interest earned on ceded reinsurance, included in other revenues............................................. $ 2 $ 2 $ 5 Ceded benefits, included in policyholder benefits and claims............................................... $ 25 $ 10 $ 90 Ceded benefits, included in interest credited to policyholder account balances........................ $ 58 $ 54 $ 54 Ceded benefits, included in policyholder dividends..... $ 9 $ 7 $ 6 Interest costs on ceded reinsurance, included in other expenses............................................. $ 5 $ 45 $106
Effective September 30, 2005, the Company recaptured its reinsurance agreement with Missouri Re. This agreement ceded, on a coinsurance basis, all business owned life insurance policies. As a result of the recapture of this agreement, the Company paid a recapture fee of $15 million to Missouri Re and $276 million in assets representing the liabilities on this treaty were transferred from Missouri Re to the Company. Effective January 1, 2005, the Company entered into a reinsurance agreement to cede an in-force block of business to MLI USA. This agreement covers certain term and universal life policies issued by the Company on and after January 1, 2000 through December 31, 2004. The agreement also covers certain term and universal life policies issued on or after January 1, 2005. Under this agreement, the Company 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, the Company realized a gain of $20 million, net of income taxes. The Company 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, the Company ceded premiums and related fees of $121 million, $119 million and $192 million and ceded benefits and related costs of $86 million, $98 million and $143 million for the years ended December 31, 2007, 2006 and 2005, respectively. Reinsurance recoverables, included in premiums and other receivables, related to this reinsurance agreement as of December 31, 2007 and 2006 were $1,096 million and $1,020 million, respectively. Effective January 1, 2005, the Company recaptured its reinsurance agreement with Exeter Re. This agreement ceded, on a modified coinsurance basis, certain policies issued by the Company with universal life secondary guarantees. There was no recapture fee paid since the terms of the recapture agreement for this treaty resulted in no fees due to either party. For the year ended December 31, 2005, the final treaty settlement resulted in a pre-tax gain of $1 million. F-52 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 9. LONG-TERM DEBT AND SHORT-TERM DEBT -- AFFILIATED Long-term debt and short-term debt -- affiliated outstanding is as follows:
INTEREST RATES DECEMBER ------------------------ 31, WEIGHTED ----------- RANGE AVERAGE MATURITY 2007 2006 ------------- -------- --------- ---- ---- (IN MILLIONS) Senior notes..................... 5.63% - 6.75% 6.08% 2011-2017 $497 $200 Fixed rate notes................. 7.25% 7.25% 2008 30 107 Surplus notes.................... 7.63% 7.63% 2024 100 100 Other notes...................... 8% - 12% 9.44% 2009-2016 1 1 ---- ---- Total long-term debt............. 628 408 Total short-term debt -- affiliated............. 50 -- ---- ---- Total.......................... $678 $408 ==== ====
The aggregate maturities of long-term debt as of December 31, 2007 for the next five years are $30 million in 2008, less than $1 million in 2009, less than $1 million in 2010, $200 million in 2011, less than $1 million in 2012 and $398 million thereafter. Unsecured senior debt ranks highest in priority and consists of senior notes, fixed rate notes and other notes with varying interest rates; followed by subordinated debt which consists of junior subordinated debentures and surplus notes. Payments of interest and principal on the Company's surplus notes, which are subordinate to all other debt, may be made only with the prior approval of the insurance department of the state of domicile. SENIOR NOTES In March 2007, RGA issued $300 million of 10-year senior notes with a fixed rate of 5.625%, payable semiannually. RGA used $50 million of the net proceeds of the offering to repay existing debt during the year ended December 31, 2007. RGA repaid a $100 million 7.25% senior note which matured in April 2006. SHORT-TERM DEBT -- AFFILIATED On December 31, 2007, MetLife Credit Corp., an affiliate, issued a $50 million short-term loan to the Company with a fixed rate of 4.82%, which was repaid at maturity on January 2, 2008. The Company used the net proceeds of the loan for general corporate purposes. INTEREST EXPENSE Interest expense related to the Company's indebtedness included in other expenses was $42 million, $30 million and $35 million for the years ended December 31, 2007, 2006 and 2005, respectively, and does not include interest expense on collateral financing arrangements, junior subordinated debt securities or shares subject to mandatory redemption. See Notes 10, 11, and 12. F-53 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) CREDIT AND COMMITTED FACILITIES AND LETTERS OF CREDIT Credit Facilities. RGA maintains committed and unsecured credit facilities aggregating $824 million as of December 31, 2007. When drawn upon, these facilities bear interest at varying rates in accordance with the respective agreements. Information on these credit facilities as of December 31, 2007 is as follows:
LETTER OF CREDIT UNUSED BORROWER(S) EXPIRATION CAPACITY ISSUANCES DRAWDOWNS COMMITMENTS ----------- ---------- -------- --------- --------- ----------- (IN MILLIONS) Reinsurance Group of America, Incorporated....................... May 2008 $ 30 $ -- $30 $ -- Reinsurance Group of America, Incorporated....................... September 2012(1) 750 406 -- 344 Reinsurance Group of America, Incorporated....................... March 2011 44 -- -- 44 ---- ---- --- ---- Total.............................. $824 $406 $30 $388 ==== ==== === ====
-------- (1) In September 2007, RGA and certain of its subsidiaries entered into a credit agreement with various financial institutions. Under the credit agreement, RGA may borrow and obtain letters of credit for general corporate purposes for its own account or for the account of its subsidiaries with an overall credit facility amount of up to $750 million. The credit agreement replaced a former credit agreement in the amount of up to $600 million which was scheduled to expire on September 29, 2010. Committed Facilities. Information on committed facilities as of December 31, 2007 is as follows:
LETTER OF CREDIT UNUSED MATURITY ACCOUNT PARTY/BORROWER(S) EXPIRATION CAPACITY DRAWDOWNS ISSUANCES COMMITMENTS (YEARS) ------------------------- ------------ -------- --------- --------- ----------- -------- (IN MILLIONS) Timberlake Financial L.L.C. ................... June 2036(1) $1,000 $850 $-- $150 29 ====== ==== === ====
-------- (1) As described in Note 10, RGA may, at its option, offer up to $150 million of additional notes under this facility in the future. Letters of Credit. At December 31, 2007, the Company had outstanding $482 million in letters of credit from various financial institutions, of which $406 million were part of credit facilities. As 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. 10. COLLATERAL FINANCING ARRANGEMENTS In June 2006, Timberlake Financial L.L.C. ("Timberlake Financial"), a subsidiary of RGA, completed an offering of $850 million of Series A Floating Rate Insured Notes due June 2036 in a private placement. Interest on the notes accrues at an annual rate of 1-month LIBOR plus 29 basis points payable monthly. The payment of interest and principal on the notes is insured through a financial guaranty insurance policy with a third party. The notes represent senior, secured indebtedness of Timberlake Financial with no recourse to RGA or its other subsidiaries. Up to $150 million of additional notes may be offered in the future. In order to make payments of principal and interest on the notes, Timberlake Financial will rely upon the receipt of interest and principal payments on surplus notes and dividend payments from its wholly-owned subsidiary, Timberlake Reinsurance Company II ("Timberlake Re"), a South Carolina captive insurance company. The ability of Timberlake Re to make interest and principal payments on the surplus note and dividend payments to Timberlake Financial is contingent upon South Carolina regulatory approval and the performance of specified term life insurance policies with guaranteed level premiums retroceded by RGA's subsidiary, RGA Reinsurance Company ("RGA Reinsurance"), to Timberlake Re. F-54 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Proceeds from the offering of the notes, along with a $113 million direct investment by RGA, collateralize the notes and are not available to satisfy the general obligations of RGA or the Company. Most of these assets were placed in a trust and provide long-term collateral as support for statutory reserves required by U.S. Valuation of Life Policies Model Regulation (commonly referred to as Regulation XXX) on term life insurance policies with guaranteed level premium periods reinsured by RGA Reinsurance. The trust is consolidated by Timberlake Re which in-turn is consolidated by Timberlake Financial. Timberlake Financial is considered to be a VIE and RGA is considered to be the primary beneficiary. As such, the results of Timberlake Financial have been consolidated by RGA and ultimately by the Company. At December 31, 2007, the Company held assets in trust of $899 million associated with the transaction. In addition, the Company held $50 million in custody as of December 31, 2007. The Company's consolidated balance sheets include the assets of Timberlake Financial recorded as fixed maturity securities and other invested assets, which consists of the restricted cash and cash equivalents held in custody. The Company's consolidated statements of income include the investment returns on the assets held as collateral as investment income and the interest on the notes is included as a component of other expenses. Issuance costs associated with the offering of the notes of $13 million have been capitalized, are included in other assets, and are amortized using the effective interest method over the estimated life of the notes. Total interest expense was $52 million and $26 million for the years ended December 31, 2007 and 2006, respectively. 11. JUNIOR SUBORDINATED DEBENTURES In December 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, December 15, 2015. The debentures 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 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 debentures are not redeemed on or before the scheduled redemption date of December 15, 2015, interest on these debentures will accrue at an annual rate of 3-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. Upon an optional or mandatory deferral of interest payments, RGA is generally not permitted to pay common stock dividends or make payments of interest or principal on securities which rank equal or junior to the subordinated debentures, until the accrued and unpaid interest on the subordinated debentures is paid. Interest compounds during periods of deferral. Issuance costs associated with the offering of the debentures of $6 million have been capitalized, are included in other assets, and are amortized using the effective interest method over the period from the issuance date of the debentures until their scheduled redemption. Interest expense on the debentures was $27 million, $27 million and $2 million for the years ended December 31, 2007, 2006 and 2005, respectively. 12. SHARES SUBJECT TO MANDATORY REDEMPTION AND COMPANY-OBLIGATED MANDATORILY REDEEMABLE SECURITIES OF SUBSIDIARY TRUSTS RGA Capital Trust I. In December 2001, RGA, through its wholly-owned trust, RGA Capital Trust I (the "RGA Trust"), issued 4,500,000 Preferred Income Equity Redeemable Securities ("PIERS") Units. Each PIERS unit consists of: (i) a preferred security issued by the RGA Trust, having a stated liquidation amount of $50 per unit, representing an undivided beneficial ownership interest in the assets of the RGA 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. F-55 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 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, 2007 and 2006. Interest expense on these instruments is included in other expenses and was $13 million for each of the years ended December 31, 2007, 2006 and 2005. 13. INCOME TAXES The provision for income tax is as follows:
YEARS ENDED DECEMBER 31, ------------------- 2007 2006 2005 ---- ----- ---- (IN MILLIONS) Current: Federal.............................................. $(41) $(154) $ 23 Foreign.............................................. 60 41 70 ---- ----- ---- Subtotal............................................. 19 (113) 93 ---- ----- ---- Deferred: Federal.............................................. 93 228 (31) Foreign.............................................. 11 10 4 ---- ----- ---- Subtotal............................................. 104 238 (27) ---- ----- ---- Provision for income tax............................... $123 $ 125 $ 66 ==== ===== ====
The reconciliation of the income tax provision at the U.S. statutory rate to the provision for income tax as reported is as follows:
YEARS ENDED DECEMBER 31, ---------------------- 2007 2006 2005 ---- ---- ---- (IN MILLIONS) Tax provision at U.S. statutory rate.................. $113 $125 $72 Tax effect of: Foreign tax rate differing from U.S. tax rate....... (2) (2) (2) Tax-exempt investment income........................ 2 (2) (1) State and local income taxes........................ -- 1 1 Prior year tax...................................... 8 (2) (2) Valuation allowance for carryforward items.......... 1 -- (2) Other, net.......................................... 1 5 -- ---- ---- --- Provision for income tax.............................. $123 $125 $66 ==== ==== ===
F-56 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Deferred income tax represents the tax effect of the differences between the book and tax basis of assets and liabilities. Net deferred income tax assets and liabilities consisted of the following:
DECEMBER 31, ---------------- 2007 2006 ------ ------- (IN MILLIONS) Deferred income tax assets: Employee benefits...................................... $ 64 $ 35 Investments............................................ -- 27 Loss and credit carryforwards.......................... 334 781 Other.................................................. 13 71 ------ ------- 411 914 Less: Valuation allowance.............................. 8 5 ------ ------- 403 909 ------ ------- Deferred income tax liabilities: DAC.................................................... 885 1,141 Liability for future poicy benefits.................... 27 486 Investments............................................ 200 -- Net unrealized investment gains........................ 249 280 Other.................................................. 15 24 ------ ------- 1,376 1,931 ------ ------- Net deferred income tax liability........................ $ (973) $(1,022) ====== =======
The Company has not recognized a deferred tax liability for the undistributed earnings of its foreign subsidiaries, except for RGA International Reinsurance Company Ltd. and RGA Global Reinsurance Company, Ltd., because the Company considers these earnings to be permanently reinvested and does not expect these earnings to be repatriated in the foreseeable future. The Company believes that it is more likely than not that the deferred tax assets established will be realized except for the amount of the valuation allowance. As of December 31, 2007, and 2006, a valuation allowance for deferred tax assets of approximately $8 million and $5 million respectively, was provided on the foreign tax credits, net operating and capital losses of General American Argentina Seguros de Vida, S.A., RGA South Africa Holdings, RGA Financial Products Limited, RGA UK Services Limited, and RGA Reinsurance Company. At December 31, 2007 the Company's subsidiaries had net operating loss carryforwards of $932 million, which begin to expire in 2019, capital loss carryforwards of $11 million, which begin to expire in 2010, and tax credit carryforwards of $4 million, which begin to expire in 2009. The remaining loss carryforwards and tax credit carryforwards are expected to be utilized during the period allowed. Effective January 1, 2006, General American joined with MetLife and its includable affiliates in filing a federal income tax return. General American participates in a tax sharing agreement with MetLife. Under the agreement, current federal income tax expense (benefit) is computed on a separate return basis and provides that members shall make payments or receive reimbursements to the extent that their income (loss) contributes to or reduces consolidated federal tax expense. The consolidating companies are reimbursed for net operating losses or other tax attributes they have generated when utilized in the consolidated return. Pursuant to the tax sharing agreement, the amount due from affiliates is $120 million and $238 million as of December 31, 2007 and 2006, respectively. F-57 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The Company files income tax returns with the U.S. federal government and various state and local jurisdictions, as well as foreign jurisdictions. General American is under continuous examination by the Internal Revenue Service ("IRS") and other tax authorities in jurisdictions in which General American has significant business operations. The income tax years under examination vary by jurisdiction. With a few exceptions, General American is no longer subject to U.S. federal, state and local, or foreign income tax examinations by tax authorities for years prior to 2001. Due to a lapse of the statute of limitations, the 2003 tax year is no longer subject to audit. In the first quarter of 2005, the IRS commenced an examination of General American's U.S. income tax returns for 2001 and 2002 that is anticipated to be completed in 2008. RGA files income tax returns with the U.S. federal government and various state and non U.S. jurisdictions. RGA is under continuous examination by the IRS and is subject to audit by taxing authorities in other non U.S. jurisdictions in which RGA has significant business operations. The income tax years under examination vary by jurisdiction. With a few exceptions, RGA is no longer subject to U.S. federal, state and non U.S. income tax examinations by tax authorities for years prior to 2003. As a result of the implementation of FIN 48, the Company recognized a $6 million increase in the liability for unrecognized tax benefits, and a $5 million increase in the interest liability for unrecognized tax benefits, offset by $11 million of minority interest, resulting in no corresponding change to the January 1, 2007 balance of retained earnings. The Company's total amount of unrecognized tax benefits upon adoption of FIN 48 was $217 million. The Company reclassified, at adoption, $41 million of current income tax payables to the liability for unrecognized tax benefits included within other liabilities. The Company also reclassified, at adoption, $170 million of deferred income tax liabilities, for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility, to the liability for unrecognized tax benefits. Because of the impact of deferred tax accounting, other than interest and penalties, the disallowance of the shorter deductibility period would not affect the annual effective tax rate but would accelerate the payment of cash to the taxing authority to an earlier period. The total amount of unrecognized tax benefits as of January 1, 2007 that would affect the effective tax rate, if recognized, was $47 million. The Company also had $33 million of accrued interest, included within other liabilities, as of January 1, 2007. The Company classifies interest accrued related to unrecognized tax benefits in interest expense, while penalties are included within income tax expense. As of December 31, 2007, the Company's total amount of unrecognized tax benefits is $222 million, an increase of $5 million from the date of adoption, and the total amount of unrecognized tax benefits that would affect the effective tax rate, if recognized, is $52 million. The Company does not anticipate any material change in the total amount of unrecognized tax benefits over the ensuing 12 month period. A reconciliation of the beginning and ending amount of unrecognized tax benefits, for the year ended December 31, 2007, is as follows:
TOTAL UNRECOGNIZED TAX BENEFITS ------------------ (IN MILLIONS) Balance at January 1, 2007 (date of adoption)............. $217 Reductions for tax positions of prior years............... (6) Additions for tax positions of current year............... 15 Lapses of statutes of limitations......................... (4) ---- Balance at December 31, 2007.............................. $222 ====
During the year ended December 31, 2007, the Company recognized $5 million in interest expense associated with the liability for unrecognized tax benefits. As of December 31, 2007, the Company had $38 million of accrued interest associated with the liability for unrecognized tax benefits. The $5 million increase from the date of adoption in accrued interest resulted from an increase of $19 million of interest expense and a decrease of $14 million primarily related to effectively settled positions. F-58 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) On September 25, 2007, the IRS issued Revenue Ruling 2007-61, which announced its intention to issue regulations with respect to certain computational aspects of the Dividends Received Deduction ("DRD") on separate account assets held in connection with variable annuity contracts. Revenue Ruling 2007-61 suspended a revenue ruling issued in August 2007 that would have changed accepted industry and IRS interpretations of the statutes governing these computational questions. Any regulations that the IRS ultimately proposes for issuance in this area will be subject to public notice and comment, at which time insurance companies and other interested parties will have the opportunity to raise legal and practical questions about the content, scope and application of such regulations. As a result, the ultimate timing and substance of any such regulations are unknown at this time. For the year ended December 31, 2007, the Company recognized an income tax benefit of $1 million related to the separate account DRD. 14. CONTINGENCIES, COMMITMENTS AND GUARANTEES CONTINGENCIES LITIGATION The Company and certain affiliates have faced numerous claims, including class action lawsuits, alleging improper marketing or sales of individual life insurance policies, annuities, mutual funds or other products. The Company and its affiliates continue to vigorously defend against the claims in these matters. Some sales practices claims have been resolved through settlement. Other sales practices claims have been won by dispositive motions or have gone to trial. Most of the current cases seek substantial damages, including in some cases punitive and treble damages and attorneys' fees. Additional litigation relating to the Company and its affiliates' marketing and sales of individual life insurance, annuities, mutual funds or other products may be commenced in the future. Regulators 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 has been cooperating fully with these inquiries. The Company is not aware of any systemic problems with respect to such matters that may have a material adverse effect on the Company's financial position. Various litigation, claims and assessments against the Company, in addition to those discussed previously and those otherwise provided for in the Company's consolidated financial statements, have arisen in the course of the Company's business, including, but not limited to, in connection with its activities as an insurer, employer, investor, investment advisor or taxpayer. Further, state insurance regulatory authorities or other federal, state or industry authorities may conduct investigations or make inquiries, such as information requests, subpoenas, or books and records examinations, concerning a wide variety of issues, including the Company's compliance with applicable insurance and other laws and regulations. It is not possible to predict the ultimate outcome of all pending investigations and legal proceedings or provide reasonable ranges of potential losses. In some of the matters referred to above, large and/or indeterminate amounts, including punitive and treble damages, are sought. Although in light of these considerations it is possible that an adverse outcome in certain cases could have a material adverse effect upon the Company's financial position, based on information currently known by the Company's management, in its opinion, the outcomes of such pending investigations and legal proceedings are not likely to have such an effect. However, given the large and/or indeterminate amounts sought in certain of these matters and the inherent unpredictability of litigation, it is possible that an adverse outcome in certain matters could, from time to time, have a material adverse effect on the Company's consolidated net income or cash flows. In 2007, the Company received $39 million, included in other revenues, based on the resolution of an indemnification claim associated with the 2000 acquisition of the Company by MLIC. F-59 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) INSOLVENCY ASSESSMENTS Most of the jurisdictions in which the Company is admitted to transact business require insurers doing business within the jurisdiction to participate in guaranty associations, which are organized to pay contractual benefits owed pursuant to insurance policies issued by impaired, insolvent or failed insurers. These associations levy assessments, up to prescribed limits, on all member insurers in a particular state on the basis of the proportionate share of the premiums written by member insurers in the lines of business in which the impaired, insolvent or failed insurer engaged. Some states permit member insurers to recover assessments paid through full or partial premium tax offsets. Assessments levied against the Company were less than $1 million for each of the years ended December 31, 2007, 2006, and 2005. At December 31, 2007 and 2006, the Company maintained a liability of $4 million and $5 million, respectively. The related asset for premium tax offsets was $3 million at both December 31, 2007 and 2006 for undiscounted future assessments in respect of impaired, insolvent or failed insurers. The Company maintained at both December 31, 2007 and 2006, an asset related to paid assessments representing currently available premium tax offsets of less than $1 million. COMMITMENTS LEASES 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) 2008............................................... $7 $ 4 $ 9 2009............................................... $4 $ 4 $ 8 2010............................................... $3 $-- $ 7 2011............................................... $2 $-- $ 4 2012............................................... $2 $-- $ 4 Thereafter......................................... $1 $-- $11
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 $164 million and $34 million at December 31, 2007 and 2006, respectively. The Company anticipates that these amounts will be invested in partnerships over the next five years. MORTGAGE LOAN COMMITMENTS The Company commits to lend funds under mortgage loan commitments. The amounts of these mortgage loan commitments were $5 million and $20 million at December 31, 2007 and 2006, respectively. COMMITMENTS TO FUND BANK CREDIT FACILITIES The Company commits to lend funds under bank credit facilities. At December 31, 2007, there were no unfunded commitments. The amount of these unfunded commitments was $11 million at December 31, 2006. F-60 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) OTHER COMMITMENTS In December 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 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. 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 $2 million to $45 million, with a cumulative maximum of $106 million, while in other cases such limitations are not specified or applicable. Since certain of these obligations are not subject to limitations, the Company does not believe that it is possible to determine the maximum potential amount that could become due under these guarantees in the future. In addition, the Company indemnifies its directors and officers as provided in its charters and by-laws. Also, the Company indemnifies its agents for liabilities incurred as a result of their representation of the Company's 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, 2007, the Company did not record any liabilities for indemnities, guarantees and commitments. The Company had no liability for indemnities, guarantees and commitments at both December 31, 2007 and 2006. In connection with synthetically created investment transactions, the Company writes credit default swap obligations that generally require payment of principal outstanding due in exchange for the referenced credit obligation. If a credit event, as defined by the contract, occurs the Company's maximum amount at risk, assuming the value of the referenced credits becomes worthless, was $3 million at December 31, 2007. The credit default swaps expire at various times during the next five years. 15. EMPLOYEE BENEFIT PLANS PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS General American's employees, sales representatives and retirees participate in qualified and non-qualified defined benefit pension plans and other postretirement employee benefit plans sponsored by MLIC. Pension benefits are provided utilizing either a traditional formula or cash balance formula. The traditional formula provides benefits based upon years of credited service and either final average or career average earnings. The cash balance F-61 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 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, for each account balance. The majority of the plan's obligation is calculated using the traditional formula. The non-qualified plan provides supplemental pension benefits to certain executive level employees and retirees. General American also provides certain postemployment benefits and certain postretirement medical and life insurance benefits for retired employees through a plan sponsored by MLIC. Employees of General American who were hired prior to 2003 (or, in certain cases, rehired during or after 2003) and meet age and service criteria while working for General American, 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. General American is allocated both pension and other postretirement expenses from MLIC associated with benefits provided to its employees and does not bear direct obligation for benefits under these benefit plans. Therefore, the assets and obligations of these benefit plans are not included in the accompanying consolidated balance sheets or the additional disclosure below. General American's share of pension expense was $7 million, $8 million and $8 million for the years ended December 31, 2007, 2006 and 2005, respectively. In addition, General American's share of other postretirement expense was less than $1 million, $3 million and $3 million for the years ended December 31, 2007, 2006 and 2005, respectively. The combined allocated benefit expense is included in the accompanying consolidated statements of income. General American continues to sponsor non-qualified defined benefit pension plans. Accordingly, the obligations and related net periodic expense associated with these plans are included in the accompanying financial statements and the additional disclosures below. These non-qualified plans have ceased accepting new participants. Participants with accrued benefits continue to earn vesting service credits while employed, but are not accruing additional benefits in these plans. RGA sponsors separate defined benefit pension plans for its eligible employees. Also, RGA sponsors a postretirement plan. Employees of RGA may also become eligible for certain postretirement medical and life insurance benefits if they attain retirement age, with sufficient service, while working for RGA. The assets and obligations of the RGA plans, along with the related net periodic expense, are included in the accompanying consolidated financial statements and additional disclosures below. 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 $7 million at December 31, 2005, $4 million net of income tax, and 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 $6 million, $4 million, net of income tax of $2 million, and remained as a reduction of accumulated other comprehensive income. 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, and prior service costs and credits that had not yet been included in net periodic benefit cost at the date of adoption. The following table summarizes the F-62 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) adjustments to the December 31, 2006 consolidated balance sheet as a result of recognizing the funded status of the defined benefit plans:
DECEMBER 31, 2006 ------------------------------------------------- ADDITIONAL MINIMUM PRE PENSION ADOPTION OF POST SFAS 158 LIABILITY SFAS 158 SFAS 158 ADJUSTMENTS ADJUSTMENT ADJUSTMENT ADJUSTMENTS BALANCE SHEET CAPTION ----------- ---------- ----------- ----------- (IN MILLIONS) Other liabilities: Accrued pension benefit cost.......................................... $ (47) $ 1 $ (3) $ (49) Other liabilities: Accrued postretirement benefit cost.................................. $ (7) $-- $(5) $(12) -------- ------- Accumulated other comprehensive income (loss), before income tax: Defined benefit plans......................... $ (7) $ 1 $(8) $(14) Minority interest............................... $-- $ 8 Deferred income tax............................. $-- $(1) Accumulated other comprehensive income (loss), net of income tax: -------- ------- Defined benefit plans......................... $ (4) $ 1 $(1) $ (4) ======== =======
A December 31 measurement date is used for all of the Company's defined benefit pension and other postretirement benefit plans. F-63 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) OBLIGATIONS, FUNDED STATUS AND NET PERIODIC BENEFIT COSTS The aggregate projected benefit obligation and aggregate fair value of plan assets for the pension plans were as follows:
DECEMBER 31, ------------------------- OTHER POSTRETIRE- PENSION MENT BENEFITS BENEFITS ----------- ----------- 2007 2006 2007 2006 ---- ---- ---- ---- (IN MILLIONS) Change in projected benefit obligation: Projected benefit obligation at beginning of year.. $ 71 $ 60 $ 12 $ 10 Service cost..................................... 3 3 1 1 Interest cost.................................... 4 4 -- -- Net actuarial (gains) losses..................... (3) 2 (2) 1 Change in benefits............................... -- 5 -- -- Benefits paid.................................... (4) (3) -- -- ---- ---- ---- ---- Benefit obligation at end of year.................. 71 71 11 12 ---- ---- ---- ---- Change in plan assets: Fair value of plan assets at beginning of year..... 22 16 -- -- Actual return on plan assets..................... 1 2 -- -- Employer contribution............................ 5 7 -- -- Benefits paid.................................... (4) (3) -- -- ---- ---- ---- ---- Fair value of plan assets at end of year........... 24 22 -- -- ---- ---- ---- ---- Funded status at end of year....................... $(47) $(49) $(11) $(12) ==== ==== ==== ==== Amounts recognized in consolidated balance sheet consist of: Other liabilities................................ $(47) $(49) $(11) $(12) ==== ==== ==== ==== Accumulated other comprehensive (income) loss: Net actuarial losses............................. $ 19 $ 23 $ 2 $ 5 Prior service credit............................. (11) (14) -- -- ---- ---- ---- ---- 8 9 2 5 Deferred income tax and minority interest........ (6) (7) (1) (3) ---- ---- ---- ---- $ 2 $ 2 $ 1 $ 2 ==== ==== ==== ====
The aggregate projected benefit obligation and aggregate fair value of plan assets for the pension plans were as follows:
NON- QUALIFIED QUALIFIED PLAN PLAN TOTAL ----------- ----------- ----------- 2007 2006 2007 2006 2007 2006 ---- ---- ---- ---- ---- ---- (IN MILLIONS) Aggregate fair value of plan assets....... $24 $22 $ -- $ -- $ 24 $ 22 Aggregate projected benefit obligation.... 26 25 45 46 71 71 --- --- ---- ---- ---- ---- Over (under) funded....................... $(2) $(3) $(45) $(46) $(47) $(49) === === ==== ==== ==== ====
F-64 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The accumulated benefit obligation for all defined benefit pension plans was $65 million and $61 million at December 31, 2007 and 2006, respectively. Information for pension plans with an accumulated benefit obligation in excess of plan assets is as follows:
DECEMBER 31, ----------- 2007 2006 ---- ---- (IN MILLIONS) Projected benefit obligation................................. $45 $45 Accumulated benefit obligation............................... $42 $40 Fair value of plan assets.................................... $-- $--
The projected benefit obligation exceeded assets for all pension and postretirement plans at December 31, 2007 and 2006. The components of net periodic benefit cost and other changes in plan assets and benefit obligations recognized in other comprehensive income were as follows:
OTHER POSTRETIREMENT PENSION BENEFITS BENEFITS ------------------ ------------------ 2007 2006 2005 2007 2006 2005 ---- ---- ---- ---- ---- ---- (IN MILLIONS) NET PERIODIC BENEFIT COST Service cost............................. $ 3 $ 3 $ 2 $ 1 $ 1 $ 1 Interest cost............................ 4 4 3 -- -- -- Expected return on plan assets........... (2) (2) (1) -- -- -- Amortization of net actuarial (gains) losses................................ 1 1 1 -- -- -- Amortization of prior service cost (credit).............................. (2) (2) (2) -- -- -- --- --- --- --- --- --- Net periodic benefit cost................ 4 $ 4 $ 3 1 $ 1 $ 1 --- === === --- === === OTHER CHANGES IN PLAN ASSETS AND BENEFIT OBLIGATIONS RECOGNIZED IN OTHER COMPREHENSIVE INCOME Net acturial (gains) losses.............. (3) (3) Prior Service cost (credit).............. 1 -- Amortization of net actuarial gains (losses).............................. (1) -- Amortization of prior service (cost) credit................................ 2 -- --- --- Total recognized in other comprehensive income................ (1) (3) --- --- Total recognized in net periodic benefit cost and other comprehensive income.............................. $ 3 $(2) === ===
Included in other comprehensive income for the year ended December 31, 2007 are other changes in plan assets and benefit obligations associated with pension benefits of ($1) million and other postretirement benefits of ($3) million for an aggregate reduction in other comprehensive losses of ($4) million before income tax and ($1) million, net of income tax and minority interest for the year ended December 31, 2007. The estimated net actuarial loss and prior service credit for the defined benefit pension plans that will be amortized from accumulated other comprehensive income into net periodic benefit cost over the next year are less than $1 million and $2 million, respectively. It is anticipated that no net actuarial loss will be amortized from accumulated other comprehensive income into net periodic benefit cost for the other postretirement plans over the next year. F-65 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) ASSUMPTIONS Assumptions used in determining benefit obligations were as follows:
DECEMBER 31, ---------------------------------- OTHER PENSION POSTRETIREMENT BENEFITS BENEFITS -------------- -------------- 2007 2006 2007 2006 ---- ---- ---- ---- Weighted average discount rate............... 6.24% 5.85% 6.00% 5.75% Rate of compensation increase................ 4.25% 4.25% N/A N/A
Assumptions used in determining net periodic benefit cost were as follows:
DECEMBER 31, --------------------------------------- OTHER POSTRETIREMENT PENSION BENEFITS BENEFITS ------------------ ------------------ 2007 2006 2005 2007 2006 2005 ---- ---- ---- ---- ---- ---- Weighted average discount rate............ 5.75% 5.75% 5.76% 5.75% 5.75% 5.75% Expected rate of return on plan assets.... 8.50% 8.50% 8.50% N/A N/A N/A Rate of compensation increase............. 4.25% 4.25% 4.25% N/A N/A N/A
The discount rate is determined annually based on the yield, measured on a yield to worst basis, of a hypothetical portfolio constructed of high quality debt instruments available on the valuation date, which would provide the necessary future cash flows to pay the aggregate projected benefit obligation when due. The 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 expected return on plan assets for use in the plan's valuation in 2008 is currently anticipated to be 8.50% for pension benefits. The assumed healthcare cost trend rates used in measuring the accumulated postretirement benefit obligation and net periodic benefit cost were as follows:
DECEMBER 31, ---------------------------------------------- 2007 2006 --------------------- ---------------------- Pre-Medicare eligible claims........ 9% down to 5% in 2012 10% down to 5% in 2012 Medicare eligible claims............ 9% down to 5% in 2012 10% down to 5% in 2012
Assumed healthcare cost trend rates may have a significant effect on the amounts reported for healthcare plans. A one-percentage point change in assumed healthcare cost trend rates would have the following effects:
ONE PERCENT ONE PERCENT INCREASE DECREASE ----------- ----------- (IN THOUSANDS) Effect on total of service and interest cost components......................................... $ 314 $ (235) Effect on accumulated postretirement benefit obligation......................................... $2,372 $(1,827)
F-66 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) PLAN ASSETS The targeted and weighted average allocations of the pension plan assets are as follows:
DECEMBER TARGET 31, ------ ----------- 2008 2007 2006 ASSET CATEGORY ------ ---- ---- Equity securities....................................... 75% 75% 76% Fixed maturity securities............................... 25% 25% 24% --- --- --- Total................................................. 100% 100% 100% === === ===
Target allocations of assets are determined with the objective of maximizing returns and minimizing volatility of net assets through adequate asset diversification and partial liability immunization. Adjustments are made to target allocations based on an assessment of the impact of economic factors and market conditions. CASH FLOWS In 2008, the Company expects to make contributions of $4 million to its pension plans, which includes $3 million of benefit payments for its non- qualified pension plans. Benefit payments are funded from the Company's general assets as they become due under the provision of the plans. 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. The Company uses its general assets to pay claims as they come due. The Company does not anticipate making any contributions other than benefits payments to its postretirement plan. Gross benefit payments for the next ten years, which reflect expected future service as appropriate, are expected to be as follows:
PENSION BENEFITS OTHER POSTRETIREMENT BENEFITS ---------------- ----------------------------- (IN MILLIONS) 2008...................................... $ 4 $-- 2009...................................... $ 5 $-- 2010...................................... $ 5 $-- 2011...................................... $ 5 $-- 2012...................................... $ 6 $-- 2013 -- 2017.............................. $31 $ 2
SAVINGS AND INVESTMENT PLANS The Company's employees participate in savings and investment plans for which a portion of employee contributions are matched. The Company's expense was $3 million, $2 million and $3 million to these plans during the years ended December 31, 2007, 2006 and 2005, respectively. 16. EQUITY STATUTORY EQUITY AND INCOME Each insurance company's state of domicile imposes minimum risk-based capital ("RBC") requirements that were developed by the National Association of Insurance Commissioners ("NAIC"). The formulas for determining the amount of RBC specify various weighting factors that are applied to financial balances or various levels of activity based on the perceived degree of risk. Regulatory compliance is determined by a ratio of total adjusted capital, as defined by the NAIC, to authorized control level RBC, as defined by the NAIC. Companies below specific trigger points or ratios are classified within certain levels, each of which requires specified corrective F-67 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) action. General American and RGA's U.S. insurance subsidiaries each 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 state insurance departments may impact the effect of Codification on the statutory capital and surplus of General American and RGA's U.S. 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. In addition, certain assets are not admitted under statutory accounting principles and are charged directly to surplus. The most significant assets not admitted by General American are net deferred income tax assets resulting from temporary differences between statutory accounting principles basis and tax basis not expected to reverse and become recoverable within a year. Further, statutory accounting principles do not give recognition to purchase accounting adjustments. Statutory net income (loss) of General American, a Missouri domiciled insurer, was $106 million, $316 million and ($50) million for the years ended December 31, 2007, 2006 and 2005, respectively. Statutory capital and surplus, as filed with the Missouri State Department of Insurance, was $2,280 million and $2,142 million at December 31, 2007 and 2006, respectively. DIVIDEND RESTRICTIONS Under Missouri State Insurance Law, General American is permitted, without prior insurance regulatory clearance, to pay a stockholder dividend to its parent as long as the aggregate amount of all such dividends in any calendar year does not exceed the greater of: (i) 10% of its statutory surplus to policyholders as of the immediately preceding calendar year or (ii) its statutory net gain from operations for the immediately preceding calendar year (excluding realized investment gains). General American will be permitted to pay a stockholder dividend to GenAmerica in excess of the greater of such two amounts only if it files notice of its intention to declare such a dividend and the amount thereof with the Missouri Director of Insurance (the "Director"). For the year ended December 31, 2007, the Company did not pay any dividends to GenAmerica. The Company paid $13 million for each of the years ended December 31, 2006 and 2005 in dividends for which prior insurance regulatory clearance was not required. Based on amounts at December 31, 2007, General American could pay to GenAmerica a stockholder dividend of $228 million without prior approval of the Director in 2008. F-68 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) OTHER COMPREHENSIVE INCOME (LOSS) The following table sets forth the reclassification adjustments required for the years ended December 31, 2007, 2006 and 2005 in other comprehensive income (loss) that are included as part of net income for the current year that have been reported as a part of other comprehensive income (loss) in the current or prior year:
YEARS ENDED DECEMBER 31, ----------------- 2007 2006 2005 ---- ----- ---- (IN MILLIONS) Holding gains (losses) on investments arising during the year...................................................... $ 22 $(115) $137 Income tax effect of holding gains (losses)................. (13) 38 (61) Reclassification adjustments: Recognized holding (gains) losses included in current year income................................................. 29 16 (35) Amortization of premiums and accretion of discounts associated with investments............................ (33) (12) (8) Income tax effect........................................... 2 (1) 21 Allocation of holding gains (losses) on investments relating to other policyholder amounts............................. (70) 18 42 Income tax effect of allocation of holding gains (losses) to other policyholder amounts................................ 42 (6) (21) ---- ----- ---- Net unrealized investment gains (losses).................... (21) (62) 75 Foreign currency translation adjustment..................... 60 11 3 Minimum pension liability adjustment........................ -- 1 2 Defined benefit plans adjustment............................ 1 -- -- ---- ----- ---- Other comprehensive income (loss)........................... $ 40 $ (50) $ 80 ==== ===== ====
17. OTHER EXPENSES Information on other expenses is as follows:
YEARS ENDED DECEMBER 31, ------------------------ 2007 2006 2005 ------ ------ ------ (IN MILLIONS) Compensation........................................ $ 10 $ 21 $ 39 Commissions......................................... 877 904 493 Interest and debt issue costs....................... 139 96 50 Amortization of DAC and VOBA........................ 542 555 697 Capitalization of DAC............................... (810) (761) (649) Minority interest................................... 217 211 164 Insurance tax....................................... 267 239 186 Other............................................... 51 96 167 ------ ------ ------ Total other expenses.............................. $1,293 $1,361 $1,147 ====== ====== ======
For the years ended December 31, 2007, 2006 and 2005, commissions and capitalization of DAC include the impact of affiliated reinsurance transactions. See Note 8. See also Note 19 for discussion of affiliated expenses included in the table above. 18. FAIR VALUE INFORMATION The estimated fair value of financial instruments has been determined by using available market information and the valuation methodologies described below. Considerable judgment is often required in interpreting market data to develop estimates of fair value. Accordingly, the estimates presented herein may not necessarily be F-69 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) indicative of amounts that could be realized in a current market exchange. The use of different assumptions or valuation methodologies may have a material effect on the estimated fair value amounts. The implementation of SFAS 157 may impact the fair value assumptions and methodologies associated with the valuation of assets and liabilities. See also Note 1 regarding the adoption of SFAS 157. Amounts related to the Company's financial instruments are as follows:
NOTIONAL CARRYING ESTIMATED AMOUNT VALUE FAIR VALUE -------- -------- ---------- (IN MILLIONS) DECEMBER 31, 2007 Assets: Fixed maturity securities...................... $17,317 $17,317 Equity securities.............................. $ 168 $ 168 Mortgage loans on real estate.................. $ 1,073 $ 1,088 Policy loans................................... $ 2,716 $ 2,716 Short-term investments......................... $ 312 $ 312 Cash and cash equivalents...................... $ 507 $ 507 Accrued investment income...................... $ 185 $ 185 Mortgage loan commitments...................... $5 $ -- $ -- Liabilities: Policyholder account balances.................. $ 6,034 $ 5,262 Short-term debt -- affiliated.................. $ 50 $ 50 Long-term debt................................. $ 628 $ 638 Collateral financing arrangements.............. $ 850 $ 761 Junior subordinated debt securities............ $ 399 $ 356 Shares subject to mandatory redemption......... $ 159 $ 178 Payables for collateral under securities loaned and other transactions...................... $ 1,438 $ 1,438
F-70 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTIONAL CARRYING ESTIMATED AMOUNT VALUE FAIR VALUE -------- -------- ---------- (IN MILLIONS) DECEMBER 31, 2006 Assets: Fixed maturity securities...................... $16,134 $16,134 Equity securities.............................. $ 210 $ 210 Mortgage loans on real estate.................. $ 971 $ 943 Policy loans................................... $ 2,664 $ 2,664 Short-term investments......................... $ 435 $ 435 Cash and cash equivalents...................... $ 357 $ 357 Accrued investment income...................... $ 183 $ 183 Mortgage loan commitments...................... $20 $ -- $ -- Commitments to fund bank credit facilities..... $11 $ -- $ -- Liabilities: Policyholder account balances.................. $ 5,739 $ 4,999 Long-term debt................................. $ 408 $ 443 Collateral financing arrangements.............. $ 850 $ 850 Junior subordinated debt securities............ $ 399 $ 400 Shares subject to mandatory redemption........... $ 159 $ 226 Payables for collateral under securities loaned and other transactions...................... $ 1,642 $ 1,642
The methods and assumptions used to estimate the fair value of financial instruments are summarized as follows: FIXED MATURITY SECURITIES AND EQUITY SECURITIES The fair values of publicly held fixed maturity securities and publicly held equity securities are based on quoted market prices or estimates from independent pricing services. However, in cases where quoted market prices are not available, such as for private fixed maturity securities, fair values are estimated using present value or valuation techniques. The determination of fair values is based on: (i) valuation methodologies; (ii) securities the Company deems to be comparable; and (iii) assumptions deemed appropriate given the circumstances. The fair value estimates are based on available market information and judgments about financial instruments, including estimates of the timing and amounts of expected future cash flows and the credit standing of the issuer or counterparty. Factors considered in estimating fair value include: coupon rate, maturity, estimated duration, call provisions, sinking fund requirements, credit rating, industry sector of the issuer, and quoted market prices of comparable securities. MORTGAGE LOANS ON REAL ESTATE, MORTGAGE LOAN COMMITMENTS AND COMMITMENTS TO FUND BANK CREDIT FACILITIES Fair values for mortgage loans on real estate are estimated by discounting expected future cash flows using current interest rates for similar loans with similar credit risk. For mortgage loan commitments and commitments to fund bank credit facilities, the estimated fair value is the net premium or discount of the commitments. POLICY LOANS The carrying values for policy loans approximate fair value. F-71 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) CASH AND CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS The carrying values for cash and cash equivalents and short-term investments approximate fair values due to the short-term maturities of these instruments. ACCRUED INVESTMENT INCOME The carrying value for accrued investment income approximates fair value. POLICYHOLDER ACCOUNT BALANCES The fair value of policyholder account balances which have final contractual maturities are estimated by discounting expected future cash flows based upon interest rates currently being offered for similar contracts with maturities consistent with those remaining for the agreements being valued. The fair value of policyholder account balances without final contractual maturities are assumed to equal their current net surrender value. SHORT-TERM DEBT -- AFFILIATED, LONG-TERM DEBT, COLLATERAL FINANCING ARRANGEMENTS, JUNIOR SUBORDINATED DEBT SECURITIES AND SHARES SUBJECT TO MANDATORY REDEMPTION The carrying value for short-term debt -- affiliated approximates fair value due to the short-term duration of the instrument. The fair values of long- term debt, collateral financing arrangements, 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 are based upon quotations obtained from dealers or other reliable sources. See Note 4 for derivative fair value disclosures. 19. RELATED PARTY TRANSACTIONS SERVICE AGREEMENTS The Company has entered into a Master Service Agreement with MLIC which provides administrative, accounting, legal and similar services to the Company. MLIC charged the Company $44 million, $50 million and $60 million, included in other expenses, for services performed under the Master Service Agreement for the years ended December 31, 2007, 2006 and 2005, respectively. The Company entered into a Service Agreement with MetLife Group, Inc. ("MetLife Group"), a wholly-owned subsidiary of MetLife, under which MetLife Group provides personnel services, as needed, to support the activities of the Company. MetLife Group charged the Company $5 million, $8 million and $16 million, included in other expenses, for services performed under the Service Agreement for the years ended December 31, 2007, 2006 and 2005, respectively. The Company has entered into various additional agreements with other affiliates to provide and receive services necessary to conduct its activities. Typical services provided under these agreements include management, policy administrative functions and distribution services. Expenses and (fees) related to these agreements and recorded in other expenses, were $11 million, $31 million and ($13) million for the years ended December 31, 2007, 2006 and 2005, respectively. F-72 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) In 2005, the Company entered into broker-dealer wholesale sales agreements with several affiliates ("Distributors"), in which the Distributors agree to sell, on the Company's behalf, fixed rate insurance products through authorized retailers. The Company agrees to compensate the Distributors for the sale and servicing of such insurance products in accordance with the terms of the agreements. The Distributors charged the Company $1 million, $2 million and $10 million, included in other expenses, for the years ended December 31, 2007, 2006 and 2005, respectively. The Company received fees for this service of $26 million, $11 million and $4 million, included in other expenses, for the years ended December 31, 2007, 2006 and 2005. At December 31, 2007 and 2006, amounts due from affiliates were $32 million and $4 million, respectively, related to the net expenses discussed previously. These receivables exclude affiliated reinsurance balances discussed in Note 8. See Notes 3, 7, 8 and 9 for additional related party transactions. F-73 PART II UNDERTAKING TO FILE REPORTS Subject to the terms and conditions of Section 15(d) of the Securities and Exchange Act of 1934, the undersigned registrant hereby undertakes to file with the Securities and Exchange Commission such supplementary and periodic information, documents, and reports as may be prescribed by any rule or regulation of the Commission heretofore, or hereafter duly adopted pursuant to authority conferred in that section. RULE 484 UNDERTAKING Section 351.355 of the Missouri General and Business Corporation Law, in brief, allows a corporation to indemnify any person who is a party or is threatened to be made a party to any threatened, pending, or completed action, suit, or proceeding, whether civil, criminal, administrative, or investigative by reason of the fact that he is or was a director, officer, employee, or agent of the corporation, against expenses, including attorneys' fees, judgments, fines, and amounts paid in settlement actually and reasonably incurred by him in connection with such action if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation. When any person was or is a party or is threatened to be made a party in an action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the Fact that he is or was a director, officer, employee, or agent of the corporation, indemnification may be paid unless such person shall have been adjudged to be liable for negligence or misconduct in the performance of his duty to the corporation. In the event of such a determination indemnification is allowed if a court determines that the person is fairly and reasonably entitled to indemnity. A corporation has the power to give any further indemnity to any person who is or was a director, officer, employee, or agent, provided for in the articles of incorporation or as authorized by any by-law which has been adopted by vote of the shareholders, provided that no such indemnity shall indemnify any person's conduct which was finally adjudged to have been knowingly fraudulent, deliberately dishonest, or willful misconduct. In accordance with Missouri law, General American's Board of Directors, at its meeting on 19 November 1987, and the policyholders of General American at the annual meeting held on 26 January 1988, adopted the following resolutions: "BE IT RESOLVED THAT 1. The company shall indemnify any person who is, or was a director, officer, or employee of the company, or is or was serving at the request of the company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against any and all expenses (including attorneys' fees), judgments, fines, and amounts paid in settlement, actually and reasonably incurred by him or her in connection with any civil, criminal, administrative, or investigative action, proceeding, or claim (including an action by or in the right of the company), by reason of the fact that he or she was serving in such capacity if he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the company; provided that such person's conduct is not finally adjudged to have been knowingly fraudulent, deliberately dishonest, or willful misconduct. 2. The indemnification provided herein shall not be deemed exclusive of any other rights to which a director, officer, or employee may be entitled under any agreement, vote of policyholders or disinterested directors, or otherwise, both as to action in his or her official capacity and as to action in another capacity which holding such office, and shall continue as to a person who has ceased to be a director, officer, or employee and shall inure to the benefit of the heirs, executors and administrators of such a person." Insofar as indemnification for liability arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer, or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer, or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. REPRESENTATIONS PURSUANT TO SECTION 26(F) General American Life Insurance Company hereby represents that the fees and charges deducted under the Policies described in the prospectus are, in the aggregate, reasonable in relation to the services rendered, the expenses expected to be incurred, and the risks assumed by General American Life Insurance Company. CONTENTS OF REGISTRATION STATEMENT This Registration Statement comprises the following papers and documents: The facing sheet. A reconciliation and tie-in of the information shown in the prospectus with the items of Form N-8B-2. The prospectus and supplements consisting of 789 pages. The undertaking to file reports required by Section 15(d) of the 1934 Act. The undertaking pursuant to Rule 484(b) under the Securities Act of 1933. Representations. The signatures. Written consents of the following persons: Marie C. Swift, Esq. (see Exhibit 3(ii) below) Karen A. King, FSA, MAAA (see Exhibit 3(i) below) Independent Auditors (see Exhibit 11 below) The following exhibits:
1.A.(1) Resolution of the Board of Directors of General American authorizing establishment of the Separate Account 3 (2) None (3) (a) Principal Underwriting Agreement between General American Distributors, Inc. and General American Life Insurance Company 6 (b) Proposed Form of Selling Agreement 3 (c) Form of Selling Agreement between General American Life Insurance Company, General American Distributors, Inc. and other companies 6 (d) Commission Schedule for Policies 3 (e) Forms of Selling Agreement 8 (4) None (5) (a) Forms of Variable Universal Life 98 Policy 2 (b) Riders to the Policy 2 (6) (a) Amended Charter and Articles of Incorporation of General American 1 (b) Amended and restated By-Laws of General American 1 (c) Amended and restated Articles of Incorporation 11 (7) None (8) None (9) None (10) (i) Form of Application for each insured 2 (ii) Form of Application 8 2. See Exhibit 3(i) 3.(i) Opinion and Consent of Karen A. King, FSA,MAAA 7 (ii) Opinion and Consent of Marie C. Swift, Esq. 9 4. None 5. Inapplicable 6. Inapplicable 7. (i) Powers of Attorney 12 (ii) Power of Attorney for James J. Reilly 8. Inapplicable 9. Inapplicable 10. Inapplicable 11. Consent of Independent Registered Public Accounting Firm 12. Inapplicable 13.(i) Memorandum describing General American's issuance, transfer, and redemption procedures for the Policies pursuant to Rule 6e-3(T)(b)(13)(v)(B) and General American's procedure for conversion to a fixed benefit policy pursuant to Rule 6e-3(T)(b)(13)(v)(B). 3
(ii) Addendum to memorandum 11 14.(i) Form of Agreement to Purchase Shares of General American Capital Company 3 (ii) Participation Agreement among Variable Insurance Products Fund, Fidelity Distributors Corporation and General American Life Insurance Company 4 (iii) Participation Agreement among Variable Insurance Products Fund II, Fidelity Distributors Corporation and General American Life Insurance Company 4 (iv) Form of Fund Participation Agreement between General American and J.P. Morgan Series Trust II 2 (v) Form of Fund Participation Agreement among General American, Van Eck Investment Trust and Van Eck Associates Corporation 2 (vi) Form of Shareholder Services Agreement with American Century Investment Management, Inc. for Variable Portfolios 2 (vii) Participation Agreement among Metropolitan Series Fund, Inc., Metropolitan Life Insurance Company and General American Life Insurance Company 5 (viii) Form of Participation Agreement among Met Investors Series Trust, Met Investors Advisory Corp., General American Distributors, Inc. and General American Life Insurance Company 7 (ix) Form of Participation Agreement among American Funds Insurance Series, Capital Research and Management Company, General American Distributors, Inc. and General American Life Company 7 (x) Participation Agreement among Metropolitan Series Fund, Inc., MetLife Advisers, LLC, MetLife Investors Distribution Company and General American Life Insurance Company (8/31/2007) 13 (xi) Amended and Restated Net Worth Maintenance Agreement 10
1 Incorporated by reference to the initial filing of the Registration Statement, File No. 333-53477 (VUL 98), on May 22, 1998. 2 Incorporated by reference to Pre-Effective Amendment No. 1 to the Registration Statement, File No. 333-53477 (VUL 98), July 31, 1998. 3 Incorporated by reference to the Post-Effective Amendment No. 16 to the Registration Statement, File No. 33-10146, (VUL 95), April 28, 2000. 4 Incorporated by reference to Post-Effective Amendment No. 3 to the Registration Statement, File No. 333-53477 (VUL 98), April 28, 2000. 5 Incorporated by reference to Post-Effective Amendment No. 2 to the Registration Statement, File No. 333-83625 (Destiny), May 1, 2001. 6 Incorporated by reference to the Registration Statement, File No. 333-64216 (EBVUL), filed June 29, 2001. 7 Incorporated by reference to Post-Effective Amendment No. 5 to the Registration Statement on Form S-6, File No. 333-53477, April 30, 2002. 8 Incorporated by reference to Post-Effective Amendment No. 3 to the Registration Statement, File No. 333-73672, filed on April 29, 2004. 9 Incorporated by reference to Post-Effective Amendment No. 7 to the Registration Statement, File No. 333-53477, filed on April 30, 2004 10 Incorporated by reference to Post-Effective Amendment No. 5 to the Registration Statement, File No. 333-73672, filed on April 28, 2006. 11 Incorporated herein by reference to Post-Effective Amendment No. 6 to the Registration Statement, File No. 333-73672, filed April 23, 2007. 12 Incorporated herein by reference to Post-Effective Amendment No. 10 to the Registration Statement, File No. 333- 53477, filed April 24, 2007. 13 Incorporated herein by reference to Post-Effective Amendment No. 7 to the Registration Statement, File No. 333-73672, filed April 22, 2008. SIGNATURES Pursuant to the requirements of the Securities Act of 1933, General American Separate Account Eleven represents that this Post-Effective Amendment meets all of the requirements for effectiveness under Rule 485(b) of that Act and has duly caused this amended Registration Statement to be signed on their behalf by the undersigned thereunto duly authorized, and the seal of General American Life Insurance Company to be hereunto affixed and attested, all in the City of St. Louis, State of Missouri, on the 22nd day of April, 2008. General American Separate Account Eleven (Registrant) By: General American Life Insurance Company (Depositor) By: /s/ William C. Lane ----------------------------------------------------- William C. Lane Vice President and Associate General Counsel SIGNATURES Pursuant to the requirements of the Securities Act of 1933, General American Life Insurance Company represents that this Post-Effective Amendment meets all of the requirements for effectiveness under Rule 485(b) of that Act and has duly caused this amended Registration Statement to be signed on their behalf by the undersigned thereunto duly authorized, and the seal of General American Life Insurance Company to be hereunto affixed and attested, all in the City of St. Louis, State of Missouri, on the 22nd day of April, 2008. General American Life Insurance Company (Depositor) By: /s/ William C. Lane ----------------------------------------------------- William C. Lane Vice President and Associate General Counsel Pursuant to the requirements of the Securities Act of 1933, this amended Registration Statement has been signed below by the following persons in the capacities indicated on April 22, 2008.
Signature Title --------- ----- Chairman of the Board, Chief Executive * Officer and President ------------------------ Lisa M. Weber * Director ------------------------ Michael K. Farrell * Director ------------------------ William J. Mullaney * Director ------------------------ James L. Lipscomb * Executive Vice President and ------------------------ Chief Accounting Officer Joseph J. Prochaska, Jr. * Vice President (principal financial officer) ------------------------ James J. Reilly Director, Senior Vice President and Treasurer ------------------------ Eric T. Steigerwalt * Director ------------------------ Stanley J. Talbi
Signature Title --------- ----- * Director ------------------------ Michael J. Vietri * Director ------------------------ William J. Wheeler
By: /s/ Marie C. Swift ----------------------------------------------------- Marie C. Swift, Esq. Attorney-in-fact * Executed by Marie C. Swift, Esquire on behalf of those indicated pursuant to powers of attorney filed herewith and with Post-Effective Amendment No. 10 to Registrant's Registration Statement on Form S-6, File No. 333-53477, filed April 23, 2007. Index to Exhibits
Exhibit Number Description -------------- ----------- 7.(ii) Power of Attorney for James J. Reilly 11. Consent of the Independent Registered Public Accounting Firm