485BPOS 1 d485bpos.txt MLI MO CLASS C POST-EFFECTIVE AMENDMENT NO. 20 As filed with the Securities and Exchange Commission on April 14, 2009 File Nos. 333-59864 811-05200 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM N-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 Pre-Effective Amendment No. [] Post-Effective Amendment No. 20 [x] and REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 Amendment No. 199 [x] (Check Appropriate Box or Boxes) MetLife Investors Variable Annuity Account One (Exact Name of Registrant) MetLife Investors Insurance Company 5 Park Plaza, Suite 1900 Irvine, California 92614 (Address of Depositor's Principal Executive Offices) (Zip Code) Depositor's Telephone Number, including Area Code (800) 989-3752 (Name and Address of Agent for Service) Richard C. Pearson Vice President MetLife Investors Insurance Company 5 Park Plaza, Suite 1900 Irvine, CA 92614 (949) 223-5680 (Name and Address of Guarantor) General American Life Insurance Company 13045 Tesson Ferry Road St. Louis, Missouri 63128 COPIES TO: W. Thomas Conner Sutherland Asbill & Brennan LLP 1275 Pennsylvania Avenue, NW Washington, DC 20004-2415 (202) 383-0590 (Approximate Date of Proposed Public Offering) It is proposed that this filing will become effective (check appropriate box): [] immediately upon filing pursuant to paragraph (b) of Rule 485. [x] on May 1, 2009 pursuant to paragraph (b) of Rule 485. [] 60 days after filing pursuant to paragraph (a)(1) of Rule 485. [] on (date) pursuant to paragraph (a)(1) of Rule 485. If appropriate, check the following box: [] this post-effective amendment designates a new effective date for a previously filed post-effective amendment. Title of Securities Registered: (1) Individual Variable Annuity Contracts, and (2) Guarantee related to insurance obligations under variable annuity contracts. METLIFE INVESTORS USA INSURANCE COMPANY METLIFE INVESTORS USA SEPARATE ACCOUNT A METLIFE INVESTORS INSURANCE COMPANY METLIFE INVESTORS VARIABLE ANNUITY ACCOUNT ONE FIRST METLIFE INVESTORS INSURANCE COMPANY FIRST METLIFE INVESTORS VARIABLE ANNUITY ACCOUNT ONE SUPPLEMENT DATED MAY 1, 2009 TO PROSPECTUSES DATED MAY 1, 2009 This supplements the prospectuses dated May 1, 2009, for the Series C and Class C products issued by MetLife Investors USA Insurance Company, MetLife Investors Insurance Company, and First MetLife Investors Insurance Company (the "Companies"). Effective as of March 19, 2002 (October 31, 2002 for First MetLife Investors Insurance Company), the Companies suspended any allocations and/or transfers to the Fixed Account under the Series C and Class C contracts during the accumulation phase. This suspension is based on the authority granted to the Companies under the terms of the contracts and on the fact that the interest rate currently credited on account values allocated or transferred to the Fixed Account equals the minimum guaranteed interest rate. (See "Purchase - Allocation of Purchase Payments" and "Investment Options - Transfers" in the Prospectuses, and your contract.) This suspension will terminate at the discretion of the Companies or at such time as the Companies declare an interest rate to be credited on allocations and transfers to the Fixed Account in excess of the minimum guaranteed rate. Series/Class C SUPP-FXC09 THE VARIABLE ANNUITY CONTRACT ISSUED BY METLIFE INVESTORS INSURANCE COMPANY AND METLIFE INVESTORS VARIABLE ANNUITY ACCOUNT ONE CLASS C MAY 1, 2009 This prospectus describes the flexible premium deferred variable annuity contract offered by MetLife Investors Insurance Company (MetLife Investors or we or us). The contracts are offered for individuals and some tax qualified and non-tax qualified retirement plans. The annuity contract has 51 investment choices - a fixed account that offers an interest rate guaranteed by us, and 50 investment portfolios listed below. You can put your money in the fixed account and/or any of these investment portfolios. MET INVESTORS SERIES TRUST (CLASS B OR, AS NOTED, CLASS C): American Funds Bond Portfolio (Class C) American Funds Growth Portfolio (Class C) American Funds International Portfolio (Class C) BlackRock High Yield Portfolio Clarion Global Real Estate Portfolio Harris Oakmark International Portfolio Lazard Mid Cap Portfolio Legg Mason Partners Aggressive Growth Portfolio Legg Mason Value Equity Portfolio Loomis Sayles Global Markets Portfolio Lord Abbett Bond Debenture Portfolio Lord Abbett Growth and Income Portfolio Lord Abbett Mid Cap Value Portfolio Met/AIM Small Cap Growth Portfolio Met/Franklin Mutual Shares Portfolio Met/Templeton International Bond Portfolio* MFS (Reg. TM) Emerging Markets Equity Portfolio MFS (Reg. TM) Research International Portfolio PIMCO Inflation Protected Bond Portfolio PIMCO Total Return Portfolio Pioneer Fund Portfolio Rainier Large Cap Equity Portfolio RCM Technology Portfolio T. Rowe Price Mid Cap Growth Portfolio Third Avenue Small Cap Value Portfolio Turner Mid Cap Growth Portfolio Van Kampen Comstock Portfolio METROPOLITAN SERIES FUND, INC.: Barclays Capital Aggregate Bond Index Portfolio (Class G) BlackRock Money Market Portfolio (Class B) Davis Venture Value Portfolio (Class E) Jennison Growth Portfolio (Class B) Met/Artisan Mid Cap Value Portfolio (formerly Harris Oakmark Focused Value Portfolio) (Class B) Met/Dimensional International Small Company Portfolio (Class B) MetLife Mid Cap Stock Index Portfolio (Class G) MetLife Stock Index Portfolio (Class B) Morgan Stanley EAFE (Reg. TM) Index Portfolio (Class G) Russell 2000 (Reg. TM) Index Portfolio (Class G) Van Eck Global Natural Resources Portfolio (Class B)* Western Asset Management U.S. Government Portfolio (Class B) * These portfolios are only available for investment if certain optional riders are elected. (See "Purchase - Investment Allocation Restrictions for Certain Riders.") 1 MET INVESTORS SERIES TRUST - METLIFE ASSET ALLOCATION PROGRAM (CLASS B): MetLife Defensive Strategy Portfolio MetLife Moderate Strategy Portfolio MetLife Balanced Strategy Portfolio MetLife Growth Strategy Portfolio MetLife Aggressive Strategy Portfolio MET INVESTORS SERIES TRUST - AMERICAN FUNDS ASSET ALLOCATION PORTFOLIOS (CLASS C): American Funds Moderate Allocation Portfolio American Funds Balanced Allocation Portfolio American Funds Growth Allocation Portfolio MET INVESTORS SERIES TRUST - FRANKLIN TEMPLETON ASSET ALLOCATION PORTFOLIO (CLASS B): Met/Franklin Templeton Founding Strategy Portfolio MET INVESTORS SERIES TRUST - SSGA ETF PORTFOLIOS (CLASS B): SSgA Growth and Income ETF Portfolio SSgA Growth ETF Portfolio Please read this prospectus before investing and keep it on file for future reference. It contains important information about the MetLife Investors Variable Annuity Contract. To learn more about the MetLife Investors Variable Annuity Contract, you can obtain a copy of the Statement of Additional Information (SAI) dated May 1, 2009. The SAI has been filed with the Securities and Exchange Commission (SEC) and is legally a part of the prospectus. The SEC maintains a Web site (http://www.sec.gov) that contains the SAI, material incorporated by reference, and other information regarding companies that file electronically with the SEC. The Table of Contents of the SAI is on Page 80 of this prospectus. For a free copy of the SAI, call us at (800) 343-8496, visit our website at WWW.METLIFEINVESTORS.COM, or write to us at: 5 Park Plaza, Suite 1900, Irvine, CA 92614. The contracts: o are not bank deposits o are not FDIC insured o are not insured by any federal government agency o are not guaranteed by any bank or credit union o may be subject to loss of principal THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. May 1, 2009 2 TABLE OF CONTENTS PAGE PAGE INDEX OF SPECIAL TERMS.................. 4 HIGHLIGHTS.............................. 6 FEE TABLES AND EXAMPLES................. 8 1. THE ANNUITY CONTRACT................. 16 Market Timing...................... 16 2. PURCHASE............................. 17 Purchase Payments.................. 17 Termination for Low Account Value 17 . Allocation of Purchase Payments.... 17 Investment Allocation Restrictions for Certain Riders........................... 18 Free Look.......................... 20 Accumulation Units................. 20 Account Value...................... 21 Replacement of Contracts........... 21 3. INVESTMENT OPTIONS................... 21 Transfers.......................... 23 Dollar Cost Averaging Program 26 (DCA) . Automatic Rebalancing Program...... 27 Description of the MetLife Asset Allocation Program.......................... 27 Description of the American Funds Asset Allocation Portfolios....................... 28 Description of the Met/Franklin Templeton Founding Strategy Portfolio...... 28 Description of the SSgA ETF 28 Portfolios . Voting Rights...................... 29 Substitution of Investment Options 29 . 4. EXPENSES............................. 29 Product Charges.................... 29 Account Fee........................ 30 Guaranteed Minimum Income Benefit - Rider Charge........... 31 Lifetime Withdrawal Guarantee and Guaranteed Withdrawal Benefit - Rider 31 Charge . Guaranteed Minimum Accumulation Benefit - Rider Charge........... 33 Withdrawal Charge.................. 33 Premium and Other Taxes............ 33 Transfer Fee....................... 33 Income Taxes....................... 33 Investment Portfolio Expenses...... 33 5. ANNUITY PAYMENTS (THE INCOME PHASE)................. 33 Annuity Date....................... 33 Annuity Payments................... 34 Annuity Options.................... 34 Variable Annuity Payments.......... 36 Fixed Annuity Payments............. 36
6. ACCESS TO YOUR MONEY................. 36 Systematic Withdrawal Program...... 37 Suspension of Payments or 37 Transfers . 7. LIVING BENEFITS...................... 38 Overview of Living Benefit Riders 38 . Guaranteed Income Benefits......... 38 Description of GMIB Plus II........ 40 Description of GMIB Plus I......... 44 Description of GMIB II............. 45 Description of GMIB I.............. 46 Guaranteed Withdrawal Benefits..... 47 Description of the Lifetime Withdrawal Guarantee II............................... 48 Description of the Lifetime Withdrawal Guarantee I................................ 53 Description of the Enhanced Guaranteed Withdrawal Benefit............... 54 Description of the Guaranteed Withdrawal Benefit I................................ 58 Guaranteed Minimum Accumulation 58 Benefit . 8. PERFORMANCE.......................... 63 9. DEATH BENEFIT........................ 63 Upon Your Death.................... 63 Standard Death Benefit - Principal 64 Protection . Optional Death Benefit - Annual 64 Step-Up . Optional Death Benefit - Enhanced 64 Death Benefit Optional Death Benefit - 67 Compounded-Plus . Additional Death Benefit - Earnings Preservation Benefit.......................... 67 General Death Benefit Provisions... 68 Spousal Continuation............... 69 Death of the Annuitant............. 69 Controlled Payout.................. 69 10. FEDERAL INCOME TAX STATUS........... 69 Taxation of Non-Qualified 70 Contracts . Taxation of Qualified Contracts.... 72 Puerto Rico Tax Considerations..... 75 Tax Benefits Related to the Assets of the Separate Account.......................... 75 Possible Tax Law Changes........... 75 11. OTHER INFORMATION................... 75 MetLife Investors.................. 75 The Separate Account............... 76 Distributor........................ 76 Selling Firms...................... 77 Requests and Elections............. 78 Ownership.......................... 79 Legal Proceedings.................. 80 Financial Statements............... 80
3 TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION.................. 80 APPENDIX A.............................. A-1 Condensed Financial Information.... A-1 APPENDIX B.............................. B-1 Participating Investment B-1 Portfolios . APPENDIX C.............................. C-1 Guaranteed Minimum Income Benefit C-1 Examples . APPENDIX D.............................. D-1 Guaranteed Withdrawal Benefit D-1 Examples . APPENDIX E.............................. E-1 Death Benefit Examples............. E-1
4 INDEX OF SPECIAL TERMS Because of the complex nature of the contract, we have used certain words or terms in this prospectus which may need an explanation. We have identified the following as some of these words or terms. The page that is indicated here is where we believe you will find the best explanation for the word or term. These words and terms are in italics on the indicated page. PAGE Account Value............................................................ 21 Accumulation Phase....................................................... 16 Accumulation Unit........................................................ 20 Annual Benefit Payment..................................... 49 and 55 Annuitant................................................................ 80 Annuity Date............................................................. 33 Annuity Options.......................................................... 34 Annuity Payments......................................................... 33 Annuity Units............................................................ 34 Beneficiary.............................................................. 79 Benefit Base............................................................. 55 Business Day............................................................. 17 Death Benefit Base....................................................... 65 Fixed Account............................................................ 16 Good Order............................................................... 79 Guaranteed Accumulation Amount........................................... 59 Guaranteed Withdrawal Amount............................................. 56 GWB Withdrawal Rate...................................................... 55 Income Base.............................................................. 40 Income Phase............................................................. 16 Investment Portfolios.................................................... 21 Joint Owners............................................................. 79 Owner.................................................................... 79 Purchase Payment......................................................... 17 Remaining Guaranteed Withdrawal Amount................................... 48 Separate Account......................................................... 76 Total Guaranteed Withdrawal Amount....................................... 48 5 HIGHLIGHTS The variable annuity contract that we are offering is a contract between you, the owner, and us, the insurance company, where you agree to make at least one purchase payment to us and we agree to make a series of annuity payments at a later date. The contract has a maximum issue age and you should consult with your registered representative. The contract provides a means for investing on a tax-deferred basis in our fixed account and the investment portfolios. The contract is intended for retirement savings or other long-term investment purposes. When you purchase the contract, you can choose an optional death benefit and fixed and variable income options. You can also select the guaranteed minimum income benefit (GMIB) or a guaranteed withdrawal benefit (GWB). The contract, like all deferred annuity contracts, has two phases: the accumulation phase and the income phase. During the accumulation phase, earnings accumulate on a tax-deferred basis and are taxed as income when you make a withdrawal. If you make a withdrawal during the accumulation phase, we do not assess a withdrawal charge. The income phase occurs when you or a designated payee begin receiving regular annuity payments from your contract. You and the annuitant (the person on whose life we base annuity payments) do not have to be the same, unless you purchase a tax qualified contract or elect a GMIB (see "Living Benefits - Guaranteed Income Benefits"). You can have annuity payments made on a variable basis, a fixed basis, or a combination of both. If you choose variable annuity payments, the amount of the variable annuity payments will depend upon the investment performance of the investment portfolio(s) you select for the income phase. If you choose fixed annuity payments, the amount of each payment will not change during the income phase. TAX DEFERRAL AND QUALIFIED PLANS. The contracts are offered for individuals and some tax qualified and non-tax qualified retirement plans. For any tax qualified account (e.g., an IRA), the tax deferred accrual feature is provided by the tax qualified retirement plan. Therefore, there should be reasons other than tax deferral for acquiring the contract within a qualified plan. (See "Federal Income Tax Status.") STATE VARIATIONS. Contracts issued in your state may provide different features and benefits from, and impose different costs than, those described in this prospectus because of state law variations. These differences include, among other things, free look rights, age issuance limitations, transfer rights and limitations, the right to reject purchase payments, the right to assess transfer fees, requirements for unisex annuity rates, the general availability of certain riders, and the availability of certain features of riders. However, please note that the maximum fees and charges for all features and benefits are set forth in the fee table in this prospectus. This prospectus describes all the material features of the contract. If you would like to review a copy of the contract and any endorsements, contact our Annuity Service Center. FREE LOOK. You may cancel the contract within 10 days after receiving it (or whatever period is required in your state). If you mail your cancellation request, the request must be postmarked by the appropriate day; if you deliver your cancellation request by hand, it must be received by us by the appropriate day. Unless otherwise required by state law, you will receive whatever your contract is worth on the day that we receive your request. The amount you receive may be more or less than your payment depending upon the performance of the investment portfolios. You bear the risk of any decline in account value. We do not refund any charges or deductions assessed during the free look period. We will return your payment if required by law. TAX PENALTY. The earnings in your contract are not taxed until you take money out of your contract. If you take money out of a non-qualified contract during the accumulation phase, for tax purposes any earnings are deemed to come out first. If you are younger than 59 1/2 when you take money out, you may be charged a 10% federal tax penalty on those earnings. Payments during the income phase are considered partly a return of your original investment until your investment is returned. NON-NATURAL PERSONS AS OWNERS. If the owner of a non-qualified annuity contract is not a natural person (e.g., a corporation, partnership or certain trusts), gains under the contract are generally not eligible for tax deferral. The owner of this contract can be a natural person, a trust established for the exclusive benefit of a natural person, a charitable remainder trust or other trust arrangement (if approved by us). The owner of this contract can also be a beneficiary of a deceased person's contract that is an Individual Retirement Account or non-qualified deferred annuity. A contract generally may have two owners (both 6 of whom must be individuals). The contract is not available to corporations or other business organizations, except to the extent an employer is the purchaser of a SEP or SIMPLE IRA contract. Subject to state approval, certain retirement plans qualified under the Internal Revenue Code may purchase the contract. INQUIRIES. If you need more information, please contact our Annuity Service Center at: MetLife Investors Distribution Company P.O. Box 10366 Des Moines, Iowa 50306-0366 (800) 343-8496 ELECTRONIC DELIVERY. As an owner you may elect to receive electronic delivery of current prospectuses related to this contract, prospectuses and annual and semi-annual reports for the investment portfolios and other contract related documents. Contact us at WWW.METLIFEINVESTORS.COM for more information and to enroll. 7 FEE TABLES AND EXAMPLES THE FOLLOWING TABLES DESCRIBE THE FEES AND EXPENSES THAT YOU WILL PAY WHEN BUYING, OWNING, AND SURRENDERING THE CONTRACT. THE FIRST TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU WILL PAY AT THE TIME THAT YOU BUY THE CONTRACT, SURRENDER THE CONTRACT, OR TRANSFER ACCOUNT VALUE BETWEEN INVESTMENT OPTIONS. STATE PREMIUM TAXES OF 0% TO 3.5% MAY ALSO BE DEDUCTED. -------------------------------------------------------------------------------- OWNER TRANSACTION EXPENSES TABLE WITHDRAWAL CHARGE None TRANSFER FEE (Note 1) $0 (First 12 per year) $25 (Thereafter)
-------------------------------------------------------------------------------- Note 1. There is no charge for the first 12 transfers in a contract year; thereafter the fee is $25 per transfer. MetLife Investors is currently waiving the transfer fee, but reserves the right to charge the fee in the future. THE NEXT TABLES DESCRIBE THE FEES AND EXPENSES THAT YOU WILL PAY PERIODICALLY DURING THE TIME THAT YOU OWN THE CONTRACT, NOT INCLUDING INVESTMENT PORTFOLIO FEES AND EXPENSES. -------------------------------------------------------------------------------- ACCOUNT FEE (Note 1) $30
SEPARATE ACCOUNT ANNUAL EXPENSES* (referred to as Separate Account Product Charges) (as a percentage of average account value in the Separate Account) Mortality and Expense Charge 1.50% Administration Charge 0.25% ---- Total Separate Account Annual Expenses 1.75% Death Benefit Rider Charges (Optional)** (as a percentage of average account value in the Separate Account) Optional Death Benefit - Annual Step-Up 0.20% Optional Death Benefit - Compounded-Plus 0.35% Additional Death Benefit - Earnings 0.25% Preservation Benefit Total Separate Account Annual Expenses Including Highest Charges for Optional 2.35% Death Benefits+
-------------------------------------------------------------------------------- Note 1. An Account Fee of $30 is charged on the last day of each contract year if account value is less than $50,000. Different policies apply during the income phase of the contract. (See "Expenses.") *Certain charges and expenses for contracts issued before May 1, 2003, are different. Certain charges and expenses may not apply during the income phase of the contract. (See "Expenses.") **See below for an additional optional death benefit rider, the Enhanced Death Benefit, for which the charge is assessed on the Death Benefit Base and deducted annually from the account value. +This charge is determined by adding the Mortality and Expense Charge, the Administration Charge, the Optional Death Benefit - Compounded-Plus Charge, and the Additional Death Benefit - Earnings Preservation Benefit Charge. 8 ADDITIONAL OPTIONAL RIDER CHARGES* GUARANTEED MINIMUM INCOME BENEFIT RIDER CHARGES GMIB Plus II Prior to Optional Step-Up 1.00% of the Income Base (Note 1) GMIB Plus I Prior to Optional Reset 0.80% of the Income Base (Note 1) GMIB Plus II and I Upon Optional 1.50% of the Income Base (Note 1) Step-Up/Reset (maximum**) GMIB II and GMIB I 0.50% of the Income Base (Note 1) LIFETIME WITHDRAWAL GUARANTEE RIDER CHARGES Lifetime Withdrawal Guarantee II 1.25% of the Total Guaranteed Withdrawal Amount (Single Life Version) Prior to Automatic Annual (Note 2) Step-Up Lifetime Withdrawal Guarantee II 1.60% of the Total Guaranteed Withdrawal Amount (Single Life Version) Upon Automatic Annual Step-Up (Note 2) (maximum**) Lifetime Withdrawal Guarantee II 1.50% of the Total Guaranteed Withdrawal Amount (Joint Life Version) Prior to Automatic Annual (Note 2) Step-Up Lifetime Withdrawal Guarantee II 1.80% of the Total Guaranteed Withdrawal Amount (Joint Life Version) Upon Automatic Annual Step-Up (Note 2) (maximum**) Lifetime Withdrawal Guarantee I 0.50% of the Total Guaranteed Withdrawal Amount (Single Life Version) Prior to Automatic Annual (Note 2) Step-Up Lifetime Withdrawal Guarantee I 0.95% of the Total Guaranteed Withdrawal Amount (Single Life Version) Upon Automatic Annual Step-Up (Note 2) (maximum**) Lifetime Withdrawal Guarantee I 0.70% of the Total Guaranteed Withdrawal Amount (Joint Life Version) Prior to Automatic Annual (Note 2) Step-Up Lifetime Withdrawal Guarantee I 1.40% of the Total Guaranteed Withdrawal Amount (Joint Life Version) Upon Automatic Annual Step-Up (Note 2) (maximum**)
*You may only elect one living benefit rider at a time. Certain riders are no longer available for purchase. (See "Living Benefits.") The GMIB Plus II rider is the only living benefit rider that the Enhanced Death Benefit rider may be elected with. Certain rider charges for contracts issued before May 4, 2009 are different. Certain charges and expenses may not apply during the income phase of the contract. (See "Expenses.") **Certain rider charges may increase upon an Optional Step-Up or Optional Reset, but they will not exceed the maximum charges listed in this table. If, at the time your contract was issued, the current rider charge was equal to the maximum rider charge, that rider charge will not increase upon an Optional Step-Up or Optional Reset. (See "Expenses.") Note 1. On the issue date, the Income Base is equal to your initial purchase payment. The Income Base is adjusted for subsequent purchase payments and withdrawals. See "Living Benefits - Guaranteed Income Benefits" for a definition of the term Income Base. Note 2. The Total Guaranteed Withdrawal Amount is initially set at an amount equal to your initial purchase payment. The Total Guaranteed Withdrawal Amount may increase with additional purchase payments. See "Living Benefits - Guaranteed Withdrawal Benefits" for a definition of the term Total Guaranteed Withdrawal Amount. 9 GUARANTEED WITHDRAWAL BENEFIT RIDER CHARGES Enhanced Guaranteed Withdrawal 0.55% of the Guaranteed Withdrawal Amount Benefit Rider Charge Prior to Optional Reset (Note 3) Enhanced Guaranteed Withdrawal 1.00% of the Guaranteed Withdrawal Amount Benefit Rider Charge Upon Optional Reset (maximum**) (Note 3) Guaranteed Withdrawal Benefit Rider 0.50% of the Guaranteed Withdrawal Amount Charge Prior to Optional Reset (Note 3) Guaranteed Withdrawal Benefit Rider 0.95% of the Guaranteed Withdrawal Amount Charge Upon Optional Reset (maximum**) (Note 3) GUARANTEED MINIMUM ACCUMULATION BENEFIT 0.75% of the Guaranteed Accumulation Amount RIDER CHARGE (Note 4) ENHANCED DEATH BENEFIT RIDER CHARGES Enhanced Death Benefit Rider Charge 0.75% of the Death Benefit Base (Note 5) Prior to Optional Step-Up (issue age 69 or younger) Enhanced Death Benefit Rider Charge 0.95% of the Death Benefit Base (Note 5) Prior to Optional Step-Up (issue age 70-75) Enhanced Death Benefit Rider Charge 1.50% of the Death Benefit Base (Note 5) Upon Optional Step-Up (maximum**)
**Certain rider charges may increase upon an Optional Step-Up or Optional Reset, but they will not exceed the maximum charges listed in this table. If, at the time your contract was issued, the current rider charge was equal to the maximum rider charge, that rider charge will not increase upon an Optional Step-Up or Optional Reset. (See "Expenses.") Note 3. The Guaranteed Withdrawal Amount is initially set at an amount equal to your initial purchase payment plus the GWB Bonus Amount. The Guaranteed Withdrawal Amount may increase with additional purchase payments. See "Living Benefits - Guaranteed Withdrawal Benefits" for definitions of the terms Guaranteed Withdrawal Amount and GWB Bonus Amount. Note 4. The Guaranteed Accumulation Amount is initially set at an amount equal to a percentage of your initial purchase payment. The Guaranteed Accumulation Amount is adjusted for additional purchase payments made during the first 120 days of the contract and for withdrawals. See "Living Benefits - Guaranteed Minimum Accumulation Benefit" for a definition of the term Guaranteed Accumulation Amount. Note 5. The Death Benefit Base is initially set at an amount equal to your initial purchase payment. The Death Benefit Base is adjusted for subsequent purchase payments and withdrawals. See "Death Benefit - Enhanced Death Benefit" for a definition of the term Death Benefit Base. 10 -------------------------------------------------------------------------------- THE NEXT TABLE SHOWS THE MINIMUM AND MAXIMUM TOTAL OPERATING EXPENSES CHARGED BY THE INVESTMENT PORTFOLIOS THAT YOU MAY PAY PERIODICALLY DURING THE TIME THAT YOU OWN THE CONTRACT. CERTAIN INVESTMENT PORTFOLIOS MAY IMPOSE A REDEMPTION FEE IN THE FUTURE. MORE DETAIL CONCERNING EACH INVESTMENT PORTFOLIO'S FEES AND EXPENSES IS CONTAINED IN THE PROSPECTUSES FOR THE INVESTMENT PORTFOLIOS AND IN THE FOLLOWING TABLES. Minimum Maximum ---- ---- Total Annual Portfolio Expenses 0.54% 1.60% (expenses that are deducted from investment portfolio assets, including management fees, 12b-1/service fees, and other expenses)
-------------------------------------------------------------------------------- FOR INFORMATION CONCERNING COMPENSATION PAID FOR THE SALE OF THE CONTRACTS, SEE "OTHER INFORMATION - DISTRIBUTOR." 11 INVESTMENT PORTFOLIO EXPENSES (as a percentage of the average daily net assets of an investment portfolio) The following table is a summary. For more complete information on investment portfolio fees and expenses, please refer to the prospectus for each investment portfolio.
NET ACQUIRED TOTAL CONTRACTUAL TOTAL FUND ANNUAL EXPENSE ANNUAL MANAGEMENT 12B-1/SERVICE OTHER FEES AND PORTFOLIO SUBSIDY PORTFOLIO FEES FEES EXPENSES EXPENSES EXPENSES OR DEFERRAL EXPENSES ------------ --------------- ---------- ---------- ----------- ------------- ---------- MET INVESTORS SERIES TRUST American Funds Bond Portfolio 0.00% 0.55% 0.50% 0.40% 1.45% 0.40% 1.05% American Funds Growth Portfolio 0.00% 0.55% 0.37% 0.33% 1.25% 0.27% 0.98% American Funds International Portfolio 0.00% 0.55% 0.31% 0.52% 1.38% 0.21% 1.17% BlackRock High Yield Portfolio 0.60% 0.25% 0.09% 0.00% 0.94% 0.00% 0.94% Clarion Global Real Estate Portfolio 0.63% 0.25% 0.05% 0.00% 0.93% 0.00% 0.93% Harris Oakmark International Portfolio 0.78% 0.25% 0.07% 0.00% 1.10% 0.00% 1.10% Lazard Mid Cap Portfolio(1) 0.69% 0.25% 0.05% 0.00% 0.99% 0.00% 0.99% Legg Mason Partners Aggressive Growth 0.63% 0.25% 0.02% 0.00% 0.90% 0.00% 0.90% Portfolio Legg Mason Value Equity Portfolio 0.63% 0.25% 0.04% 0.00% 0.92% 0.00% 0.92% Loomis Sayles Global Markets Portfolio 0.68% 0.25% 0.05% 0.00% 0.98% 0.00% 0.98% Lord Abbett Bond Debenture Portfolio 0.50% 0.25% 0.03% 0.00% 0.78% 0.00% 0.78% Lord Abbett Growth and Income Portfolio 0.50% 0.25% 0.03% 0.00% 0.78% 0.00% 0.78% Lord Abbett Mid Cap Value Portfolio(2) 0.68% 0.25% 0.07% 0.00% 1.00% 0.00% 1.00% Met/AIM Small Cap Growth Portfolio 0.86% 0.25% 0.03% 0.00% 1.14% 0.00% 1.14% Met/Franklin Mutual Shares Portfolio 0.80% 0.25% 0.55% 0.00% 1.60% 0.45% 1.15% Met/Templeton International Bond 0.60% 0.25% 0.25% 0.00% 1.10% 0.00% 1.10% Portfolio(3) MFS (Reg. TM) Emerging Markets Equity 0.98% 0.25% 0.15% 0.00% 1.38% 0.00% 1.38% Portfolio MFS (Reg. TM) Research International 0.70% 0.25% 0.06% 0.00% 1.01% 0.00% 1.01% Portfolio PIMCO Inflation Protected Bond 0.49% 0.25% 0.04% 0.00% 0.78% 0.00% 0.78% Portfolio PIMCO Total Return Portfolio 0.48% 0.25% 0.05% 0.00% 0.78% 0.00% 0.78% Pioneer Fund Portfolio(4)(5)(6) 0.70% 0.25% 0.29% 0.00% 1.24% 0.00% 1.24% Rainier Large Cap Equity Portfolio 0.67% 0.25% 0.03% 0.00% 0.95% 0.00% 0.95% RCM Technology Portfolio 0.88% 0.25% 0.09% 0.00% 1.22% 0.00% 1.22% T. Rowe Price Mid Cap Growth Portfolio 0.75% 0.25% 0.03% 0.00% 1.03% 0.00% 1.03% Third Avenue Small Cap Value Portfolio 0.73% 0.25% 0.04% 0.00% 1.02% 0.00% 1.02% Turner Mid Cap Growth Portfolio 0.77% 0.25% 0.05% 0.00% 1.07% 0.00% 1.07% Van Kampen Comstock Portfolio 0.58% 0.25% 0.03% 0.00% 0.86% 0.00% 0.86%
12
NET ACQUIRED TOTAL CONTRACTUAL TOTAL FUND ANNUAL EXPENSE ANNUAL MANAGEMENT 12B-1/SERVICE OTHER FEES AND PORTFOLIO SUBSIDY PORTFOLIO FEES FEES EXPENSES EXPENSES EXPENSES OR DEFERRAL EXPENSES ------------ --------------- ---------- ---------- ----------- ------------- ---------- METROPOLITAN SERIES FUND, INC. Barclays Capital Aggregate Bond Index 0.25% 0.30% 0.04% 0.00% 0.59% 0.01% 0.58% Portfolio BlackRock Money Market Portfolio(7) 0.32% 0.25% 0.02% 0.00% 0.59% 0.01% 0.58% Davis Venture Value Portfolio 0.70% 0.15% 0.03% 0.00% 0.88% 0.04% 0.84% Jennison Growth Portfolio 0.63% 0.25% 0.04% 0.00% 0.92% 0.00% 0.92% Met/Artisan Mid Cap Value Portfolio 0.81% 0.25% 0.04% 0.00% 1.10% 0.00% 1.10% Met/Dimensional International Small 0.82% 0.25% 0.44% 0.00% 1.51% 0.11% 1.40% Company Portfolio(3) MetLife Mid Cap Stock Index Portfolio 0.25% 0.30% 0.08% 0.00% 0.63% 0.01% 0.62% MetLife Stock Index Portfolio 0.25% 0.25% 0.04% 0.00% 0.54% 0.01% 0.53% Morgan Stanley EAFE (Reg. TM) Index 0.30% 0.30% 0.12% 0.01% 0.73% 0.01% 0.72% Portfolio Russell 2000 (Reg. TM) Index Portfolio 0.25% 0.30% 0.07% 0.01% 0.63% 0.01% 0.62% Van Eck Global Natural Resources 0.80% 0.25% 0.29% 0.03% 1.37% 0.09% 1.28% Portfolio(3) Western Asset Management U.S. 0.48% 0.25% 0.04% 0.00% 0.77% 0.00% 0.77% Government Portfolio MET INVESTORS SERIES TRUST - METLIFE ASSET ALLOCATION PROGRAM MetLife Defensive Strategy Portfolio(8) 0.08% 0.25% 0.02% 0.60% 0.95% 0.00% 0.95% MetLife Moderate Strategy Portfolio(8) 0.07% 0.25% 0.00% 0.63% 0.95% 0.00% 0.95% MetLife Balanced Strategy Portfolio(8) 0.06% 0.25% 0.00% 0.67% 0.98% 0.00% 0.98% MetLife Growth Strategy Portfolio(8) 0.06% 0.25% 0.00% 0.71% 1.02% 0.00% 1.02% MetLife Aggressive Strategy 0.09% 0.25% 0.01% 0.74% 1.09% 0.00% 1.09% Portfolio(8) MET INVESTORS SERIES TRUST - AMERICAN FUNDS ASSET ALLOCATION PORTFOLIOS American Funds Moderate Allocation 0.10% 0.55% 0.05% 0.42% 1.12% 0.05% 1.07% Portfolio(9) American Funds Balanced Allocation 0.10% 0.55% 0.05% 0.40% 1.10% 0.05% 1.05% Portfolio(9) American Funds Growth Allocation 0.10% 0.55% 0.05% 0.38% 1.08% 0.05% 1.03% Portfolio(9) MET INVESTORS SERIES TRUST - FRANKLIN TEMPLETON ASSET ALLOCATION PORTFOLIO Met/Franklin Templeton Founding 0.05% 0.25% 0.08% 0.89% 1.27% 0.08% 1.19% Strategy Portfolio(10) MET INVESTORS SERIES TRUST - SSGA ETF PORTFOLIOS SSgA Growth and Income ETF 0.33% 0.25% 0.08% 0.20% 0.86% 0.03% 0.83% Portfolio(2)(5)(11) SSgA Growth ETF Portfolio(1)(5)(11) 0.33% 0.25% 0.08% 0.21% 0.87% 0.03% 0.84%
The Net Total Annual Portfolio Expenses have been restated to reflect contractual arrangements in effect as of May 1, 2009, under which investment advisers or managers of investment portfolios have agreed to waive and/or pay expenses of the portfolios. Each of these arrangements is in effect until at least April 30, 2010 (excluding optional extensions). Net Total Annual Portfolio Expenses have not been restated to reflect expense reductions that certain investment portfolios achieved as a result of directed brokerage arrangements. The investment portfolios provided the information on their expenses, and we have not independently verified the information. Unless otherwise indicated, the information provided is for the year ended December 31, 2008. (1) Other Expenses include 0.02% of deferred expense reimbursement from a prior period. (2) Other Expenses include 0.03% of deferred expense reimbursement from a prior period. 13 (3) The fees and expenses of the Portfolio are estimated for the year ending December 31, 2009. (4) This is a new share class for this Portfolio. Operating expenses are estimated based on the Class A share expense history for 2008. (5) The Management Fee has been restated to reflect an amended management fee agreement as if the fees had been in effect during the previous fiscal year. (6) Other Expenses include 0.01% of deferred expense reimbursement from a prior period. (7) Other Expenses include Treasury Guarantee Program expenses of 0.012% incurred for the period September 19, 2008 through December 31, 2008. (8) The Portfolio is a "fund of funds" that invests substantially all of its assets in other portfolios of the Met Investors Series Trust and the Metropolitan Series Fund, Inc. Because the Portfolio invests in other underlying portfolios, the Portfolio will bear its pro rata portion of the operating expenses of the underlying portfolios in which it invests, including the management fee. (9) The Portfolio is a "fund of funds" that invests substantially all of its assets in portfolios of the American Funds Insurance Series (Reg. TM). Because the Portfolio invests in other underlying portfolios, the Portfolio will bear its pro rata portion of the operating expenses of the underlying portfolios in which it invests, including the management fee. (10) The Portfolio is a "fund of funds" that invests equally in three other portfolios of the Met Investors Series Trust: the Met/Franklin Income Portfolio, the Met/Franklin Mutual Shares Portfolio and the Met/Templeton Growth Portfolio. Because the Portfolio invests in other underlying portfolios, the Portfolio will bear its pro rata portion of the operating expenses of the underlying portfolios in which it invests, including the management fee. (11) The Portfolio primarily invests its assets in other investment companies known as exchange-traded funds ("underlying ETFs"). As an investor in an underlying ETF or other investment company, the Portfolio will bear its pro rata portion of the operating expenses of the underlying ETF or other investment company, including the management fee. 14 EXAMPLES THESE EXAMPLES ARE INTENDED TO HELP YOU COMPARE THE COST OF INVESTING IN THE CONTRACT WITH THE COST OF INVESTING IN OTHER VARIABLE ANNUITY CONTRACTS. THESE COSTS INCLUDE CONTRACT OWNER TRANSACTION EXPENSES, CONTRACT FEES, SEPARATE ACCOUNT ANNUAL EXPENSES, AND INVESTMENT PORTFOLIO FEES AND EXPENSES. THE EXAMPLES ASSUME THAT YOU INVEST $10,000 IN THE CONTRACT FOR THE TIME PERIODS INDICATED. THE EXAMPLES ALSO ASSUME THAT YOUR INVESTMENT HAS A 5% RETURN EACH YEAR AND ASSUME: (A) MAXIMUM AND (B) MINIMUM FEES AND EXPENSES OF ANY OF THE INVESTMENT PORTFOLIOS (BEFORE SUBSIDY AND/OR DEFERRAL). ALTHOUGH YOUR ACTUAL COSTS MAY BE HIGHER OR LOWER, BASED ON THESE ASSUMPTIONS, YOUR COSTS WOULD BE: CHART 1. Chart 1 assumes you select the Enhanced Death Benefit (assuming the maximum 1.50% charge applies in all contract years), the Additional Death Benefit - Earnings Preservation Benefit and the Guaranteed Minimum Income Benefit Plus II rider (assuming the maximum 1.50% charge applies in all contract years), which is the most expensive way to purchase the contract. (1) IF YOU SURRENDER, DO NOT SURRENDER, OR ANNUITIZE YOUR CONTRACT AT THE END OF THE APPLICABLE TIME PERIOD:
Time Periods 1 year 3 years 5 years 10 years ---------- ------------ ------------ ------------ maximum (a)$680 (a)$2,065 (a)$3,488 (a)$7,210 minimum (b)$574 (b)$1,764 (b)$3,011 (b)$6,398
CHART 2. Chart 2 assumes you do not select optional death benefit riders, a Guaranteed Minimum Income Benefit rider, a Guaranteed Withdrawal Benefit rider, or the Guaranteed Minimum Accumulation Benefit rider, which is the least expensive way to purchase the contract. (1) IF YOU SURRENDER, DO NOT SURRENDER, OR ANNUITIZE YOUR CONTRACT AT THE END OF THE APPLICABLE TIME PERIOD:
Time Periods 1 year 3 years 5 years 10 years ---------- ------------ ------------ ------------ maximum (a)$340 (a)$1,035 (a)$1,751 (a)$3,639 minimum (b)$234 (b)$721 (b)$1,234 (b)$2,636
The Examples should not be considered a representation of past or future expenses or annual rates of return of any investment portfolio. Actual expenses and annual rates of return may be more or less than those assumed for the purpose of the Examples. Condensed financial information containing the accumulation unit value history appears in Appendix A of this prospectus as well as in the SAI. 15 1. THE ANNUITY CONTRACT This prospectus describes the Variable Annuity Contract offered by us. The variable annuity contract is a contract between you as the owner, and us, the insurance company, where we promise to pay an income to you, in the form of annuity payments, beginning on a designated date that you select. Until you decide to begin receiving annuity payments, your annuity is in the ACCUMULATION PHASE. Once you begin receiving annuity payments, your contract switches to the INCOME PHASE. The contract benefits from tax deferral. Tax deferral means that you are not taxed on earnings or appreciation on the assets in your contract until you take money out of your contract. For any tax qualified account (e.g., an IRA), the tax deferred accrual feature is provided by the tax qualified retirement plan. Therefore, there should be reasons other than tax deferral for acquiring the contract within a qualified plan. (See "Federal Income Tax Status.") The contract is called a variable annuity because you can choose among the investment portfolios and, depending upon market conditions, you can make or lose money in any of these portfolios. If you select the variable annuity portion of the contract, the amount of money you are able to accumulate in your contract during the accumulation phase depends upon the investment performance of the investment portfolio(s) you select. The amount of the annuity payments you receive during the income phase from the variable annuity portion of the contract also depends, in part, upon the investment performance of the investment portfolio(s) you select for the income phase. We do not guarantee the investment performance of the variable annuity portion. You bear the full investment risk for all amounts allocated to the variable annuity portion. However, there are certain optional features that provide guarantees that can reduce your investment risk (see "Living Benefits"). In most states, the contract also contains a FIXED ACCOUNT (contact your registered representative regarding your state). The fixed account is not offered by this prospectus. The fixed account offers an interest rate that is guaranteed by us. The minimum interest rate depends on the year your contract is issued but will not be less than 1%. Your registered representative can tell you the current and minimum interest rates that apply. If you select the fixed account, your money will be placed with our other general account assets, and the amount of money you are able to accumulate in your contract during the accumulation phase depends upon the total interest credited to your contract. The fixed account is part of our general account. Our general account consists of all assets owned by us other than those in the Separate Account and our other separate accounts. We have sole discretion over the investment of assets in the general account. If you select a fixed annuity payment option during the income phase, payments are made from our general account assets. The amount of the annuity payments you receive during the income phase from a fixed annuity payment option of the contract will remain level for the entire income phase. (Please see "Annuity Payments (The Income Phase)" for more information.) As owner of the contract, you exercise all interests and rights under the contract. You can change the owner at any time, subject to our underwriting rules (a change of ownership may terminate certain optional riders). The contract may be owned generally by joint owners (limited to two natural persons). We provide more information on this under "Other Information - Ownership." Because the contract proceeds must be distributed within the time periods required by the federal Internal Revenue Code, the right of a spouse to continue the contract, and all contract provisions relating to spousal continuation (see "Death Benefit - Spousal Continuation"), are available only to a person who is defined as a "spouse" under the federal Defense of Marriage Act, or any other applicable federal law. Therefore, under current federal law, a purchaser who has or is contemplating a civil union or same sex marriage should note that the rights of a spouse under the spousal continuation provisions of this contract will not be available to such partner or same sex marriage spouse. Accordingly, a purchaser who has or is contemplating a civil union or same sex marriage should note that such partner/spouse would not be able to receive continued payments after the death of the contract owner under the Joint Life version of the Lifetime Withdrawal Guarantee (see "Living Benefits - Guaranteed Withdrawal Benefits"). MARKET TIMING We have policies and procedures that attempt to detect transfer activity that may adversely affect other owners or investment portfolio shareholders in situations where there is potential for pricing inefficiencies or that involve certain other types of disruptive trading activity (I.E., market 16 timing). We employ various means to try to detect such transfer activity, such as periodically examining the frequency and size of transfers into and out of particular investment portfolios made by owners within given periods of time and/or investigating transfer activity identified by the investment portfolios on a case-by-case basis. We may revise these policies and procedures in our sole discretion at any time without prior notice. Our market timing policies and procedures are discussed in more detail in "Investment Options - Transfers - Market Timing." 2. PURCHASE The maximum issue age for the contract and certain of its riders may be reduced in connection with the offer of the contract through certain broker dealers ("selling firms"). In addition, certain riders may not be available through certain selling firms. You should discuss this with your registered representative. PURCHASE PAYMENTS A PURCHASE PAYMENT is the money you give us to invest in the contract. The initial purchase payment is due on the date the contract is issued. Subject to the minimum and maximum payment requirements (see below), you may make additional purchase payments. o The minimum initial purchase payment we will accept is $25,000. o If you want to make an initial purchase payment of $1 million or more, or an additional purchase payment that would cause your total purchase payments to exceed $1 million, you will need our prior approval. o You can make additional purchase payments of $500 or more to either type of contract (qualified and non-qualified) unless you have elected an electronic funds transfer program approved by us, in which case the minimum additional purchase payment is $100 per month. o We will accept a different amount if required by federal tax law. o We reserve the right to refuse purchase payments made via a personal check in excess of $100,000. Purchase payments over $100,000 may be accepted in other forms, including, but not limited to, EFT/wire transfers, certified checks, corporate checks, and checks written on financial institutions. The form in which we receive a purchase payment may determine how soon subsequent disbursement requests may be fulfilled. (See "Access to Your Money.") o We will not accept purchase payments made with cash, money orders, or travelers checks. We reserve the right to reject any application or purchase payment and to limit future purchase payments. TERMINATION FOR LOW ACCOUNT VALUE We may terminate your contract by paying you the account value in one sum if, prior to the annuity date, you do not make purchase payments for two consecutive contract years, the total amount of purchase payments made, less any partial withdrawals, is less than $2,000 or any lower amount required by federal tax laws, and the account value on or after the end of such two year period is less than $2,000. Accordingly, no contract will be terminated due solely to negative investment performance. Federal tax law may impose additional restrictions on our right to cancel your Traditional IRA, Roth IRA, SEP, SIMPLE IRA or other Qualified Contract. ALLOCATION OF PURCHASE PAYMENTS When you purchase a contract, we will allocate your purchase payment to the fixed account and/or any of the investment portfolios you have selected. You may not choose more than 18 investment portfolios (including the fixed account) at the time your initial purchase payment is allocated. Each allocation must be at least $500 and must be in whole numbers. We have reserved the right to restrict payments to the fixed account if any of the following conditions exist: o the credited interest rate on the fixed account is equal to the guaranteed minimum rate; or o your account value in the fixed account equals or exceeds our published maximum for fixed account allocation (currently, there is no limit); or o a transfer was made out of the fixed account within the previous 180 days. Once we receive your purchase payment and the necessary information (or a designee receives a payment and the necessary information in accordance with the designee's administrative procedures), we will issue your contract and allocate your first purchase payment within 2 business days. A BUSINESS DAY is each day that the New York Stock Exchange is open for business. A business day closes at the 17 close of normal trading on the New York Stock Exchange, usually 4:00 p.m. Eastern Time. If you do not give us all of the information we need, we will contact you to get it before we make any allocation. If for some reason we are unable to complete this process within 5 business days, we will either send back your money or get your permission to keep it until we get all of the necessary information. (See "Other Information - Requests and Elections.") However, if you allocate purchase payments to a discontinued investment portfolio (see Appendix A), we will request reallocation instructions or if unable to obtain such instructions, we will return your purchase payment to you. If you choose the Guaranteed Minimum Income Benefit Plus II, Lifetime Withdrawal Guarantee II, or Enhanced Death Benefit riders, until the rider terminates, we will require you to allocate your purchase payments and account value as described below under "Investment Allocation Restrictions for Certain Riders." If you choose the GMIB Plus I rider or the Lifetime Withdrawal Guarantee I rider, until the rider terminates, we will require you to allocate your purchase payments and account value solely among the fixed account, the BlackRock Money Market Portfolio, the American Funds Asset Allocation portfolios, the Met/Franklin Templeton Founding Strategy Portfolio, the SSgA Growth and Income ETF Portfolio, the SSgA Growth ETF Portfolio and/or the MetLife Asset Allocation Program portfolios, excluding the MetLife Aggressive Strategy Portfolio. If you choose the Guaranteed Minimum Accumulation Benefit rider, until the rider terminates, we will require you to allocate your purchase payments and account value solely to one of the MetLife Asset Allocation Program portfolios, excluding the MetLife Growth Strategy Portfolio and the MetLife Aggressive Strategy Portfolio. If you make additional purchase payments, we will allocate them in the same way as your first purchase payment unless you tell us otherwise. However, if you make an additional purchase payment and you have a Dollar Cost Averaging (DCA) program in effect, we will allocate your additional payments to the investment portfolios selected under the DCA program unless you tell us otherwise. (See "Investment Options - Dollar Cost Averaging Program.") You may change your allocation instructions at any time by notifying us in writing, by calling us or by Internet. You may not choose more than 18 investment portfolios (including the fixed account) at the time you submit a subsequent purchase payment. If you wish to allocate the payment to more than 18 investment portfolios (including the fixed account), we must have your request to allocate future purchase payments to more than 18 investment portfolios on record before we can apply your subsequent purchase payment to your chosen allocation. If there are joint owners, unless we are instructed to the contrary, we will accept allocation instructions from either joint owner. INVESTMENT ALLOCATION RESTRICTIONS FOR CERTAIN RIDERS ALLOCATION. If you elect the GMIB Plus II, the Lifetime Withdrawal Guarantee II, or the Enhanced Death Benefit, you must comply with certain investment allocation restrictions. SPECIFICALLY, YOU MUST ALLOCATE ACCORDING TO EITHER ------ (A) OR (B) BELOW: (A) You must allocate: o 100% of your purchase payments or account value among the MetLife Defensive Strategy Portfolio, MetLife Moderate Strategy Portfolio, MetLife Balanced Strategy Portfolio, American Funds Moderate Allocation Portfolio, American Funds Balanced Allocation Portfolio, SSgA Growth and Income ETF Portfolio, BlackRock Money Market Portfolio and/or the fixed account For contracts issued based on applications and necessary information received at our Annuity Service Center in good order before the close of the New York Stock Exchange on May 1, 2009, the following investment portfolios are also available under option (A): the MetLife Growth Strategy Portfolio, American Funds Growth Allocation Portfolio, Met/Franklin Templeton Founding Strategy Portfolio and SSgA Growth ETF Portfolio. OR (B) You must allocate: o AT LEAST 30% of purchase payments or account value to Platform 1 portfolios and/or to the fixed account; o UP TO 70% of purchase payments or account value to Platform 2 portfolios; o UP TO 15% of purchase payments or account value to Platform 3 portfolios; and o UP TO 15% of purchase payments or account value to Platform 4 portfolios. 18 For contracts issued based on applications and necessary information received at our Annuity Service Center in good order before the close of the New York Stock Exchange on May 1, 2009, the following invesment allocation restrictions apply under option (B): you must allocate at least 15% of purchase payments or ------------ account value to Platform 1 portfolios and/or to the fixed account and you may allocate up to 85% of purchase payments or account value to Platform 2 --------- portfolios (the percentages for Platforms 3 and 4 are the same as those listed above). The investment options in each Platform are: Platform 1 ---------- Fixed Account American Funds Bond Portfolio Barclays Capital Aggregate Bond Index Portfolio+ BlackRock Money Market Portfolio PIMCO Inflation Protected Bond Portfolio PIMCO Total Return Portfolio Western Asset Management U.S. Government Portfolio Platform 2 ---------- American Funds Balanced Allocation Portfolio American Funds Growth Allocation Portfolio American Funds Growth Portfolio American Funds International Portfolio American Funds Moderate Allocation Portfolio BlackRock High Yield Portfolio Davis Venture Value Portfolio Harris Oakmark International Portfolio Jennison Growth Portfolio Legg Mason Partners Aggressive Growth Portfolio Legg Mason Value Equity Portfolio Loomis Sayles Global Markets Portfolio Lord Abbett Bond Debenture Portfolio Lord Abbett Growth and Income Portfolio Met/Franklin Mutual Shares Portfolio Met/Franklin Templeton Founding Strategy Portfolio MetLife Aggressive Strategy Portfolio MetLife Balanced Strategy Portfolio MetLife Defensive Strategy Portfolio MetLife Growth Strategy Portfolio MetLife Moderate Strategy Portfolio Metlife Stock Index Portfolio MFS (Reg. TM) Research International Portfolio Morgan Stanley EAFE (Reg. TM) Index Portfolio+ Pioneer Fund Portfolio+ Rainier Large Cap Equity Portfolio SSgA Growth and Income ETF Portfolio SSgA Growth ETF Portfolio Van Kampen Comstock Portfolio Platform 3 ---------- Lazard Mid Cap Portfolio Lord Abbett Mid Cap Value Portfolio Met/Artisan Mid Cap Value Portfolio MetLife Mid Cap Stock Index Portfolio+ T. Rowe Price Mid Cap Growth Portfolio Turner Mid Cap Growth Portfolio Platform 4 ---------- Clarion Global Real Estate Portfolio Met/AIM Small Cap Growth Portfolio Met/Dimensional International Small Company Portfolio Met/Templeton International Bond Portfolio+ MFS (Reg. TM) Emerging Markets Equity Portfolio RCM Technology Portfolio Russell 2000 (Reg. TM) Index Portfolio+ Third Avenue Small Cap Value Portfolio Van Eck Global Natural Resources Portfolio+ + These portfolios are not available for investment prior to May 4, 2009. YOUR PURCHASE PAYMENTS AND TRANSFER REQUESTS MUST BE ALLOCATED IN ACCORDANCE WITH THE ABOVE LIMITATIONS. WE WILL REJECT ANY PURCHASE PAYMENTS OR TRANSFER REQUESTS THAT DO NOT COMPLY WITH THE ABOVE LIMITATIONS. Certain selling firms do not offer option (B) at the time your initial purchase payment is allocated. Please contact our Annuity Service Center if you wish to change your allocation selection to option (B). We determine whether an investment option is classified as Platform 1, Platform 2, Platform 3 or Platform 4. We may determine or change the classification of an investment option in the event that an investment option is added, deleted, substituted, merged or otherwise reorganized. In that case, any change in classification will only take effect as to your contract in the event you make a new purchase payment or request a transfer among investment options. We will provide you with prior written notice of any changes in classification of investment options. REBALANCING. If you choose to allocate according to (B) above, we will rebalance your account value on a quarterly basis based on your most recent allocation of purchase payments that complies with the allocation limitations described above. We will also rebalance your account value when we receive a subsequent purchase payment that is accompanied by new allocation instructions (in addition to the quarterly rebalancing). We will first rebalance your 19 account value on the date that is three months from the rider issue date; provided however, if a quarterly rebalancing date occurs on the 29th, 30th or 31st of a month, we will instead rebalance on the 1st day of the following month. We will subsequently rebalance your account value on each quarter thereafter on the same day. In addition, if a quarterly rebalancing date is not a business day the reallocation will occur on the next business day. Withdrawals from the contract will not result in rebalancing on the date of withdrawal. The rebalancing requirement described above does not apply if you choose to allocate according to (A) above. CHANGING PURCHASE PAYMENT ALLOCATION INSTRUCTIONS. You may change your purchase payment allocation instructions under (B) above at any time by providing notice to us, at our Annuity Service Center, or by any other method acceptable to us, provided that such instructions comply with the allocation limits described above. If you provide new allocation instructions for purchase payments and if these instructions conform to the allocation limits described under (B) above, then we will rebalance in accordance with the revised allocation instructions. Any future purchase payment and quarterly rebalancing allocations will be automatically updated in accordance with these new instructions. TRANSFERS. Please note that any transfer request must result in an account value that meets the allocation limits described above. Any transfer request will not cause your allocation instructions to change unless you provide us with a separate instruction at the time of transfer. FREE LOOK If you change your mind about owning this contract, you can cancel it within 10 days after receiving it (or the period required in your state). We ask that you submit your request to cancel in writing, signed by you, to our Annuity Service Center. Unless otherwise required by state law, you will receive back whatever your contract is worth on the day we receive your request. This may be more or less than your payment depending upon the performance of the portfolios you allocated your purchase payment to during the free look period. This means that you bear the risk of any decline in the value of your contract during the free look period. We do not refund any charges or deductions assessed during the free look period. In certain states, we are required to give you back your purchase payment if you decide to cancel your contract during the free look period. ACCUMULATION UNITS The portion of your account value allocated to the Separate Account will go up or down depending upon the investment performance of the investment portfolio(s) you choose. In order to keep track of this portion of your account value, we use a unit of measure we call an ACCUMULATION UNIT. (An accumulation unit works like a share of a mutual fund.) Every business day we determine the value of an accumulation unit for each of the investment portfolios by multiplying the accumulation unit value for the immediately preceding business day by a factor for the current business day. The factor is determined by: 1) dividing the net asset value per share of the investment portfolio at the end of the current business day, plus any dividend or capital gains per share declared on behalf of the investment portfolio as of that day, by the net asset value per share of the investment portfolio for the previous business day, and 2) multiplying it by one minus the Separate Account product charges (including any rider charge for the Annual Step-Up Death Benefit, the Compounded-Plus Death Benefit, and/or the Additional Death Benefit-Earnings Preservation Benefit) for each day since the last business day and any charges for taxes. The value of an accumulation unit may go up or down from day to day. When you make a purchase payment, we credit your contract with accumulation units. The number of accumulation units credited is determined by dividing the amount of the purchase payment allocated to an investment portfolio by the value of the accumulation unit for that investment portfolio. We calculate the value of an accumulation unit for each investment portfolio after the New York Stock Exchange closes each day (generally 4:00 p.m. Eastern Time) and then credit your contract. EXAMPLE: On Monday we receive an additional purchase payment of $5,000 from you before 4:00 p.m. Eastern Time. You have told us you want this to go to the Lord Abbett Growth and Income Portfolio. When the New York Stock Exchange closes on that Monday, we determine that the value of an accumulation unit for the Lord 20 Abbett Growth and Income Portfolio is $13.90. We then divide $5,000 by $13.90 and credit your contract on Monday night with 359.71 accumulation units for the Lord Abbett Growth and Income Portfolio. ACCOUNT VALUE ACCOUNT VALUE is equal to the sum of your interests in the investment portfolios and the fixed account. Your interest in each investment portfolio is determined by multiplying the number of accumulation units for that portfolio by the value of the accumulation unit. REPLACEMENT OF CONTRACTS Generally you can exchange one variable annuity contract for another in a tax-free exchange under Section 1035 of the Internal Revenue Code. Before making an exchange, you should compare both annuities carefully. If you exchange another annuity for the one described in this prospectus, you might have to pay a surrender charge on your old annuity, and other charges may be higher (or lower) and the benefits may be different. Also, because we will not issue the contract until we have received the initial premium from your existing insurance company, the issuance of the contract may be delayed. Generally, it is not advisable to purchase a contract as a replacement for an existing variable annuity contract. Before you exchange another annuity for our contract, ask your registered representative whether the exchange would be advantageous, given the contract features, benefits and charges. 3. INVESTMENT OPTIONS The contract offers 50 INVESTMENT PORTFOLIOS, which are listed below. Additional investment portfolios may be available in the future. YOU SHOULD READ THE PROSPECTUSES FOR THESE FUNDS CAREFULLY. COPIES OF THESE PROSPECTUSES WILL ACCOMPANY OR PRECEDE THE DELIVERY OF YOUR CONTRACT. YOU CAN OBTAIN COPIES OF THE FUND PROSPECTUSES BY CALLING OR WRITING TO US AT: METLIFE INVESTORS INSURANCE COMPANY, ANNUITY SERVICE CENTER, P.O. BOX 10366, DES MOINES, IOWA 50306-0366, (800) 343-8496. YOU CAN ALSO OBTAIN INFORMATION ABOUT THE FUNDS (INCLUDING A COPY OF THE STATEMENT OF ADDITIONAL INFORMATION) BY ACCESSING THE SECURITIES AND EXCHANGE COMMISSION'S WEBSITE AT HTTP:// WWW.SEC.GOV. CERTAIN INVESTMENT PORTFOLIOS DESCRIBED IN THE FUND PROSPECTUSES MAY NOT BE AVAILABLE WITH YOUR CONTRACT. (SEE APPENDIX A.) APPENDIX B CONTAINS A SUMMARY OF ADVISERS, SUBADVISERS, AND INVESTMENT OBJECTIVES FOR EACH INVESTMENT PORTFOLIO. The investment objectives and policies of certain of the investment portfolios may be similar to the investment objectives and policies of other mutual funds that certain of the portfolios' investment advisers manage. Although the objectives and policies may be similar, the investment results of the investment portfolios may be higher or lower than the results of such other mutual funds. The investment advisers cannot guarantee, and make no representation, that the investment results of similar funds will be comparable even though the funds may have the same investment advisers. Shares of the investment portfolios may be offered to insurance company separate accounts of both variable annuity and variable life insurance contracts and to qualified plans. Due to differences in tax treatment and other considerations, the interests of various owners participating in, and the interests of qualified plans investing in the investment portfolios may conflict. The investment portfolios will monitor events in order to identify the existence of any material irreconcilable conflicts and determine what action, if any, should be taken in response to any such conflict. CERTAIN PAYMENTS WE RECEIVE WITH REGARD TO THE INVESTMENT PORTFOLIOS. We do not receive compensation from any of the advisers or subadvisers of any of the investment portfolios of the Met Investors Series Trust or the Metropolitan Series Fund, Inc. (or their affiliates) for administrative or other services relating to the portfolios, excluding 12b-1 fees (see below). However, we and/or certain of our affiliated insurance companies have joint ownership interests in our affiliated investment adviser, MetLife Advisers, LLC, which is formed as a "limited liability company." Our ownership interests in MetLife Advisers, LLC entitle us to profit distributions if the adviser makes a profit with respect to the advisory fees it receives from the investment portfolios. We will benefit accordingly from assets allocated to the investment portfolios to the extent they result in profits to the adviser. (See "Fee Tables and Examples - Investment Portfolio Expenses" for information on the management fees paid by the investment portfolios and the Statement of Additional Information for the investment portfolios for information 21 on the management fees paid by the advisers to the subadvisers.) Additionally, an investment adviser or subadviser of an investment portfolio or its affiliates may provide us with wholesaling services that assist in the distribution of the contracts and may pay us and/or certain of our affiliates amounts to participate in sales meetings. These amounts may be significant and may provide the adviser or subadviser (or its affiliate) with increased access to persons involved in the distribution of the contracts. Each of the Met Investors Series Trust and the Metropolitan Series Fund, Inc. has adopted a Distribution Plan under Rule 12b-1 of the Investment Company Act of 1940. Each investment portfolio's 12b-1 Plan is described in more detail in the investment portfolio's prospectus. (See "Fee Tables and Examples - Investment Portfolio Expenses" and "Other Information - Distributor.") Any payments we receive pursuant to those 12b-1 Plans are paid to us or our distributor. Payments under an investment portfolio's 12b-1 Plan decrease the investment portfolio's investment return. We select the investment portfolios offered through this contract based on a number of criteria, including asset class coverage, the strength of the adviser's or subadviser's reputation and tenure, brand recognition, performance, and the capability and qualification of each investment firm. Another factor we consider during the selection process is whether the investment portfolio's adviser or subadviser is one of our affiliates or whether the investment portfolio, its adviser, its subadviser(s), or an affiliate will make payments to us or our affiliates. In this regard, the profit distributions we receive from our affiliated investment advisers are a component of the total revenue that we consider in configuring the features and investment choices available in the variable insurance products that we and our affiliated insurance companies issue. Since we and our affiliated insurance companies may benefit more from the allocation of assets to portfolios advised by our affiliates than to 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 investment portfolios periodically and may remove an investment portfolio or limit its availability to new purchase payments and/or transfers of account value if we determine that the investment portfolio no longer meets one or more of the selection criteria, and/or if the investment portfolio has not attracted significant allocations from contract owners. In some cases, we have included investment portfolios based on recommendations made by selling firms. These selling firms may receive payments from the investment portfolios they recommend and may benefit accordingly from the allocation of account value to such investment portfolios. WE DO NOT PROVIDE ANY INVESTMENT ADVICE AND DO NOT RECOMMEND OR ENDORSE ANY PARTICULAR INVESTMENT PORTFOLIO. YOU BEAR THE RISK OF ANY DECLINE IN THE ACCOUNT VALUE OF YOUR CONTRACT RESULTING FROM THE PERFORMANCE OF THE INVESTMENT PORTFOLIOS YOU HAVE CHOSEN. MET INVESTORS SERIES TRUST (CLASS B OR, AS NOTED, CLASS C) Met Investors Series Trust is a mutual fund with multiple portfolios. MetLife Advisers, LLC (MetLife Advisers), an affiliate of MetLife Investors, is the investment manager of Met Investors Series Trust. (Met Investors Advisory, LLC, the former investment manager of Met Investors Series Trust, merged into MetLife Advisers on May 1, 2009.) MetLife Advisers has engaged subadvisers to provide investment advice for the individual investment portfolios. (See Appendix B for the names of the subadvisers.) The following Class B or, as noted, Class C portfolios are available under the contract: American Funds Bond Portfolio (Class C) American Funds Growth Portfolio (Class C) American Funds International Portfolio (Class C) BlackRock High Yield Portfolio Clarion Global Real Estate Portfolio Harris Oakmark International Portfolio Lazard Mid Cap Portfolio Legg Mason Partners Aggressive Growth Portfolio Legg Mason Value Equity Portfolio Loomis Sayles Global Markets Portfolio Lord Abbett Bond Debenture Portfolio Lord Abbett Growth and Income Portfolio Lord Abbett Mid Cap Value Portfolio Met/AIM Small Cap Growth Portfolio Met/Franklin Mutual Shares Portfolio Met/Templeton International Bond Portfolio*+ MFS (Reg. TM) Emerging Markets Equity Portfolio MFS (Reg. TM) Research International Portfolio PIMCO Inflation Protected Bond Portfolio PIMCO Total Return Portfolio Pioneer Fund Portfolio+ Rainier Large Cap Equity Portfolio RCM Technology Portfolio T. Rowe Price Mid Cap Growth Portfolio Third Avenue Small Cap Value Portfolio 22 Turner Mid Cap Growth Portfolio Van Kampen Comstock Portfolio * This portfolio is only available for investment if certain optional riders are elected. (See "Purchase - Investment Allocation Restrictions for Certain Riders.") + These portfolios are not available for investment prior to May 4, 2009. METROPOLITAN SERIES FUND, INC. Metropolitan Series Fund, Inc. is a mutual fund with multiple portfolios. MetLife Advisers, an affiliate of MetLife Investors, is the investment adviser to the portfolios. MetLife Advisers has engaged subadvisers to provide investment advice for the individual investment portfolios. (See Appendix B for the names of the subadvisers.) The following portfolios are available under the contract: Barclays Capital Aggregate Bond Index Portfolio (Class G)+ BlackRock Money Market Portfolio (Class B) Davis Venture Value Portfolio (Class E) Jennison Growth Portfolio (Class B) Met/Artisan Mid Cap Value Portfolio (formerly Harris Oakmark Focused Value Portfolio) (Class B) Met/Dimensional International Small Company Portfolio (Class B) MetLife Mid Cap Stock Index Portfolio (Class G)+ MetLife Stock Index Portfolio (Class B) Morgan Stanley EAFE (Reg. TM) Index Portfolio (Class G)+ Russell 2000 (Reg. TM) Index Portfolio (Class G)+ Van Eck Global Natural Resources Portfolio (Class B)*+ Western Asset Management U.S. Government Portfolio (Class B) * This portfolio is only available for investment if certain optional riders are elected. (See "Purchase - Investment Allocation Restrictions for Certain Riders.") + These portfolios are not available for investment prior to May 4, 2009. MET INVESTORS SERIES TRUST - METLIFE ASSET ALLOCATION PROGRAM (CLASS B) In addition to the portfolios listed above under Met Investors Series Trust, the following Class B portfolios are available under the contract: MetLife Defensive Strategy Portfolio MetLife Moderate Strategy Portfolio MetLife Balanced Strategy Portfolio MetLife Growth Strategy Portfolio MetLife Aggressive Strategy Portfolio MET INVESTORS SERIES TRUST - AMERICAN FUNDS ASSET ALLOCATION PORTFOLIOS (CLASS C) In addition to the portfolios listed above under Met Investors Series Trust, the following Class C portfolios are also available under the contract: American Funds Moderate Allocation Portfolio American Funds Balanced Allocation Portfolio American Funds Growth Allocation Portfolio MET INVESTORS SERIES TRUST - FRANKLIN TEMPLETON ASSET ALLOCATION PORTFOLIOS (CLASS B) In addition to the portfolios listed above under Met Investors Series Trust, the following Class B portfolio is also available under the contract: Met/Franklin Templeton Founding Strategy Portfolio MET INVESTORS SERIES TRUST - SSGA ETF PORTFOLIOS (CLASS B) In addition to the portfolios listed above under Met Investors Series Trust, the following Class B portfolios are also available under the contract: SSgA Growth and Income ETF Portfolio SSgA Growth ETF Portfolio TRANSFERS GENERAL. You can transfer a portion of your account value among the fixed account and the investment portfolios. The contract provides that you can make a maximum of 12 transfers every year and that each transfer is made without charge. We measure a year from the anniversary of the day we issued your contract. We currently allow unlimited transfers but reserve the right to limit this in the future. We may also limit transfers in circumstances of market timing or other transfers we determine are or would be to the disadvantage of other contract owners. (See "Investment Options - Transfers - Market Timing.") We are not currently charging a transfer fee, but we reserve the right to charge such a fee in the future. If such a charge were to be imposed, it would be $25 for each transfer over 12 in a year. The transfer fee will be deducted from the investment portfolio or fixed account from which the transfer is made. However, if the entire interest in an account is being transferred, the transfer fee will be deducted from the amount which is transferred. 23 You can make a transfer to or from the fixed account and to or from any investment portfolio, subject to the limitations below. All transfers made on the same business day will be treated as one transfer. Transfers received before the close of trading on the New York Stock Exchange will take effect as of the end of the business day. The following apply to any transfer: o Your request for transfer must clearly state which investment portfolio(s) or the fixed account are involved in the transfer. o Your request for transfer must clearly state how much the transfer is for. o The minimum amount you can transfer is $500 from an investment portfolio, or your entire interest in the investment portfolio, if less (this does not apply to pre-scheduled transfer programs). o The minimum amount that may be transferred from the fixed account is $500, or your entire interest in the fixed account. Transfers out of the fixed account during the accumulation phase are limited to the greater of: (a) 25% of the fixed account value at the beginning of the contract year, or (b) the amount transferred out of the fixed account in the prior contract year. Currently we are not imposing these restrictions on transfers out of the fixed account, but we have the right to reimpose them at any time. o You may not make a transfer to more than 18 investment portfolios (including the fixed account) at any time if the request is made by telephone to our voice response system or by Internet. A request to transfer to more than 18 investment portfolios (including the fixed account) may be made by calling or writing our Annuity Service Center. o If you have elected to add the Enhanced Death Benefit, GMIB Plus I, GMIB Plus II, Lifetime Withdrawal Guarantee I or Lifetime Withdrawal Guarantee II rider to your contract, you may only make transfers between certain investment portfolios. Please refer to the sections "Purchase-Allocation of Purchase Payments" and "Purchase-Investment Allocation Restrictions for Certain Riders." o If you have elected to add the Guaranteed Minimum Accumulation Benefit rider to your contract, you may not transfer out of the MetLife Asset Allocation Program portfolio you chose at issue until the rider terminates. Please refer to the section "Living Benefits-Guaranteed Minimum Accumulation Benefit." During the accumulation phase, to the extent permitted by applicable law, during times of drastic economic or market conditions, we may suspend the transfer privilege temporarily without notice and treat transfer requests based on their separate components (a redemption order with simultaneous request for purchase of another investment portfolio). In such a case, the redemption order would be processed at the source investment portfolio's next determined accumulation unit value. However, the purchase of the new investment portfolio would be effective at the next determined accumulation unit value for the new investment portfolio only after we receive the proceeds from the source investment portfolio, or we otherwise receive cash on behalf of the source investment portfolio. For transfers during the accumulation phase, we have reserved the right to restrict transfers to the fixed account if any one of the following conditions exist: o The credited interest rate is equal to the guaranteed minimum rate; o Your account value in the fixed account equals or exceeds our published maximum for fixed account contract values (currently, there is no limit); or o A transfer was made out of the fixed account within the previous 180 days. During the income phase, you cannot make transfers from a fixed annuity payment option to the investment portfolios. You can, however, make transfers during the income phase from the investment portfolios to a fixed annuity payment option and among the investment portfolios. TRANSFERS BY TELEPHONE OR OTHER MEANS. You may elect to make transfers by telephone, Internet or other means acceptable to us. To elect this option, you must first provide us with a notice or agreement in a form that we may require. If you own the contract with a joint owner, unless we are instructed otherwise, we will accept instructions from either you or the other owner. (See "Other Information - Requests and Elections.") 24 All transfers made on the same day will be treated as one transfer. A transfer will be made as of the end of the business day when we receive a notice containing all the required information necessary to process the request. We will consider telephone and Internet requests received after 4:00 p.m. Eastern Time to be received the following business day. PRE-SCHEDULED TRANSFER PROGRAM. There are certain programs that involve transfers that are pre-scheduled. When a transfer is made as a result of such a program, we do not count the transfer in determining the applicability of any transfer fee and certain minimums do not apply. The current pre-scheduled transfers are made in conjunction with the following: Dollar Cost Averaging and Automatic Rebalancing Programs. MARKET TIMING. Frequent requests from contract owners to transfer account value may dilute the value of an investment portfolio'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 portfolio and the reflection of that change in the portfolio's share price ("arbitrage trading"). Regardless of the existence of pricing inefficiencies, frequent transfers may also increase brokerage and administrative costs of the underlying investment portfolios and may disrupt portfolio management strategy, requiring a portfolio to maintain a high cash position and possibly resulting in lost investment opportunities and forced liquidations ("disruptive trading"). Accordingly, arbitrage trading and disruptive trading activities (referred to collectively as "market timing") may adversely affect the long-term performance of the investment portfolios, which may in turn adversely affect contract owners and other persons who may have an interest in the contracts (E.G., annuitants and beneficiaries). We have policies and procedures that attempt to detect and deter frequent transfers in situations where we determine there is a potential for arbitrage trading. Currently, we believe that such situations may be presented in the international, small-cap, and high-yield investment portfolios (i.e., the American Funds International, BlackRock High Yield, Clarion Global Real Estate, Harris Oakmark International, Loomis Sayles Global Markets, Lord Abbett Bond Debenture, Met/AIM Small Cap Growth, Met/Dimensional International Small Company, Met/Templeton International Bond, MFS (Reg. TM) Emerging Markets Equity, MFS (Reg. TM) Research International, Morgan Stanley EAFE (Reg. TM) Index, Russell 2000 (Reg. TM) Index, Third Avenue Small Cap Value, and Van Eck Global Natural Resources Portfolios), and we monitor transfer activity in those portfolios (the "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 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 account value; and (3) two or more "round-trips" involving 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 investment portfolios present a significant opportunity to engage in arbitrage trading and therefore do not monitor transfer activity in those portfolios. We may change the Monitored Portfolios at any time without notice in our sole discretion. In addition to monitoring transfer activity in certain investment portfolios, we rely on the underlying investment portfolios 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. Our policies and procedures may result in transfer restrictions being applied to deter market timing. Currently, when we detect transfer activity in the Monitored Portfolios that exceeds our current transfer limits, or other transfer activity that we believe may be harmful to other owners or other persons who have an interest in the contracts, we require all future transfer requests to or from any Monitored Portfolios or other identified investment portfolios under that contract to be submitted with an original signature. Transfers made under a Dollar Cost Averaging Program, a rebalancing program or, if applicable, any asset allocation program described in this prospectus are not treated as transfers when we evaluate trading patterns for market timing. 25 The detection and deterrence of harmful transfer activity involves judgments that are inherently subjective, such as the decision to monitor only those investment portfolios that we believe are susceptible to arbitrage trading, or the determination of the transfer limits. Our ability to detect and/or restrict such transfer activity may be limited by operational and technological systems, as well as our ability to predict strategies employed by owners to avoid such detection. Our ability to restrict such transfer activity also may be limited by provisions of the contract. Accordingly, there is no assurance that we will prevent all transfer activity that may adversely affect owners and other persons with interests in the contracts. We do not accommodate market timing in any investment portfolios and there are no arrangements in place to permit any contract owner to engage in market timing; we apply our policies and procedures without exception, waiver, or special arrangement. The investment portfolios may have adopted their own policies and procedures with respect to frequent purchases and redemptions of their respective shares, and we reserve the right to enforce these policies and procedures. For example, investment portfolios may assess a redemption fee (which we reserve the right to collect) on shares held for a relatively short period. The prospectuses for the investment portfolios describe any such policies and procedures, which may be more or less restrictive than the policies and procedures we have adopted. Although we may not have the contractual authority or the operational capacity to apply the frequent trading policies and procedures of the investment portfolios, we have entered into a written agreement, as required by SEC regulation, with each investment portfolio or its principal underwriter that obligates us to provide to the investment portfolio promptly upon request certain information about the trading activity of individual contract owners, and to execute instructions from the investment portfolio to restrict or prohibit further purchases or transfers by specific contract owners who violate the frequent trading policies established by the investment portfolio. In addition, contract owners and other persons with interests in the contracts should be aware that the purchase and redemption orders received by the investment portfolios generally are "omnibus" orders from intermediaries, such as retirement plans or separate accounts funding variable insurance contracts. The omnibus orders reflect the aggregation and netting of multiple orders from individual owners of variable insurance contracts and/or individual retirement plan participants. The omnibus nature of these orders may limit the investment portfolios 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 investment portfolios (and thus contract owners) will not be harmed by transfer activity relating to other insurance companies and/or retirement plans that may invest in the investment portfolios. If an investment portfolio believes that an omnibus order reflects one or more transfer requests from contract owners engaged in disruptive trading activity, the investment portfolio 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 investment portfolios, including any refusal or restriction on purchases or redemptions of their shares as a result of their own policies and procedures on market timing activities (even if an entire omnibus order is rejected due to the market timing activity of a single contract owner). You should read the investment portfolio prospectuses for more details. DOLLAR COST AVERAGING PROGRAM (DCA) We offer a dollar cost averaging (DCA) program which is described below. By allocating amounts on a regular schedule as opposed to allocating the total amount at one particular time, you may be less susceptible to the impact of market fluctuations. The dollar cost averaging program is available only during the accumulation phase. This program is not available if you have selected the GMIB Plus I rider, the GMIB Plus II rider, the Lifetime Withdrawal Guarantee II rider, the GMAB rider, or the Enhanced Death Benefit rider. We reserve the right to modify, terminate or suspend the dollar cost averaging program. There is no additional charge for participating in the dollar cost averaging program. If you participate in the dollar cost averaging program, the transfers made under the program are not taken into account in determining any transfer fee. We may, from time to time, offer other dollar cost averaging 26 programs which have terms different from those described in this prospectus. The program allows you to systematically transfer a set amount each month from the fixed account or from a money market investment portfolio to any of the other investment portfolio(s) you select. We provide certain exceptions from our normal fixed account restrictions to accommodate dollar cost averaging programs. These transfers are made on a date you select or, if you do not select a date, on the date that a purchase payment or account value is allocated to the dollar cost averaging program. You can make subsequent purchase payments while you have an active DCA program in effect, provided, however, that no amount will be allocated to the DCA program without your express direction. (See "Purchase - Allocation of Purchase Payments.") If you make such an addition to your existing DCA program, the DCA transfer amount will not be increased; however, the number of months over which transfers are made is increased, unless otherwise elected in writing. You can terminate the program at any time, at which point transfers under the program will stop. AUTOMATIC REBALANCING PROGRAM Once your money has been allocated to the investment portfolios, the performance of each portfolio may cause your allocation to shift. You can direct us to automatically rebalance your contract to return to your original percentage allocations by selecting our Automatic Rebalancing Program. You can tell us whether to rebalance quarterly, semi-annually or annually. An automatic rebalancing program is intended to transfer account value from those portfolios that have increased in value to those that have declined or not increased as much in value. Over time, this method of investing may help you "buy low and sell high," although there can be no assurance that this objective will be achieved. Automatic rebalancing does not guarantee profits, nor does it assure that you will not have losses. We will measure the rebalancing periods from the anniversary of the date we issued your contract. If the dollar cost averaging program is in effect, rebalancing allocations will be based on your current DCA allocations. If you are not participating in the dollar cost averaging program, we will make allocations based upon your current purchase payment allocations, unless you tell us otherwise. The Automatic Rebalancing Program is available only during the accumulation phase. There is no additional charge for participating in the Automatic Rebalancing Program. If you participate in the Automatic Rebalancing Program, the transfers made under the program are not taken into account in determining any transfer fee. If you have selected the GMIB Plus II rider, the Lifetime Withdrawal Guarantee II rider, or the Enhanced Death Benefit rider, the fixed account is available for automatic rebalancing. The Automatic Rebalancing Program is not available if you have selected the GMAB rider. EXAMPLE: Assume that you want your initial purchase payment split between 2 investment portfolios. You want 40% to be in the Lord Abbett Bond Debenture Portfolio and 60% to be in the Legg Mason Partners Aggressive Growth Portfolio. Over the next 2 1/2 months the bond market does very well while the stock market performs poorly. At the end of the first quarter, the Lord Abbett Bond Debenture Portfolio now represents 50% of your holdings because of its increase in value. If you have chosen to have your holdings rebalanced quarterly, on the first day of the next quarter, we will sell some of your units in the Lord Abbett Bond Debenture Portfolio to bring its value back to 40% and use the money to buy more units in the Legg Mason Partners Aggressive Growth Portfolio to increase those holdings to 60%. DESCRIPTION OF THE METLIFE ASSET ALLOCATION PROGRAM The MetLife Asset Allocation Program consists of the following five MetLife asset allocation portfolios (Class B), each of which is a portfolio of the Met Investors Series Trust. MetLife Advisers, LLC (MetLife Advisers), an affiliate of ours, is the investment manager of the MetLife asset allocation portfolios. METLIFE ASSET ALLOCATION PROGRAM PORTFOLIOS ------------------------------------------- MetLife Defensive Strategy Portfolio MetLife Moderate Strategy Portfolio MetLife Balanced Strategy Portfolio MetLife Growth Strategy Portfolio MetLife Aggressive Strategy Portfolio Each portfolio is well diversified and was designed on established principles of asset allocation and risk tolerance. Each portfolio will invest substantially all of its assets in the Class A shares of other investment portfolios of the Met Investors Series Trust or of the Metropolitan Series Fund, Inc., which invest either in equity securities, fixed 27 income securities or cash equivalent money market securities, as applicable. Each portfolio has a target allocation among the three types of asset classes (equity, fixed income and cash/money market). MetLife Advisers establishes specific target investment percentages for the asset classes and the various components of each asset category and then selects the underlying investment portfolios in which a portfolio invests based on, among other things, the underlying investment portfolios' investment objectives and policies, MetLife Advisers' investment process, its outlook for the economy, interest rates, financial markets and historical performance of each underlying investment portfolio and/or asset class. At least annually, MetLife Advisers will evaluate each portfolio's target allocation between equity and fixed income securities, including the allocation among sub-classes of these asset classes, based on the portfolio's risk profile. At the same time, MetLife Advisers will also consider whether to make changes to each portfolio's underlying investment portfolio target. (See the fund prospectus for a description of each portfolio's target allocation.) MetLife Advisers has hired an independent consultant to provide research and consulting services with respect to the periodic asset allocation targets for each of the portfolios and to investment in the underlying investment portfolios, which may assist MetLife Advisers in determining the underlying investment portfolios that may be available for investment and with the selection of and allocation of each portfolio's investments among the underlying investment portfolios. MetLife Advisers is responsible for paying the consulting fees. DESCRIPTION OF THE AMERICAN FUNDS ASSET ALLOCATION PORTFOLIOS The following three American Funds Asset Allocation Portfolios (Class C) are each a portfolio of the Met Investors Series Trust. MetLife Advisers is the investment manager of the American Funds Asset Allocation Portfolios. AMERICAN FUNDS ASSET ALLOCATION PORTFOLIOS ------------------------------------------ American Funds Moderate Allocation Portfolio American Funds Balanced Allocation Portfolio American Funds Growth Allocation Portfolio Each portfolio was designed on established principles of asset allocation and risk tolerance. Each portfolio will invest substantially all of its assets in the Class 1 shares of certain funds of American Funds Insurance Series (Reg. TM) that invest either in equity securities, fixed income securities or cash equivalent money market securities, as applicable. Each portfolio has a target allocation among the three primary asset classes (equity, fixed income and cash/money market). MetLife Advisers establishes specific target investment percentages for the asset classes and the various components of each asset category and then selects the underlying investment portfolios in which a portfolio invests based on, among other things, the underlying investment portfolios' investment objectives, policies, investment process and portfolio analytical and management personnel. Periodically, MetLife Advisers will evaluate each portfolio's allocation among equity, fixed income and cash, inclusive of the exposure to various investment styles and asset sectors, relative to each portfolio's risk profile. At the same time, MetLife Advisers will also consider whether to make changes with respect to the underlying investment portfolios, such as selecting one or more new underlying investment portfolios. (See the fund prospectus for a description of each portfolio's target allocation.) DESCRIPTION OF THE MET/FRANKLIN TEMPLETON FOUNDING STRATEGY PORTFOLIO The Met/Franklin Templeton Founding Strategy Portfolio invests on a fixed percentage basis in a combination of Met Investors Series Trust portfolios sub-advised by Franklin Templeton, which, in turn, invest primarily in U.S. and foreign equity securities and, to a lesser extent, fixed-income and money market securities. The Met/Franklin Templeton Founding Strategy Portfolio's assets are allocated on an equal basis (33 1/3%) among the Class A shares of the Met/Franklin Income Portfolio, Met/Franklin Mutual Shares Portfolio and Met/Templeton Growth Portfolio. MetLife Advisers is the investment manager of the Met/Franklin Templeton Founding Strategy Portfolio. MetLife Advisers will periodically rebalance the portfolio's holdings as deemed necessary to bring the asset allocation of the portfolio back into alignment with its fixed percentage allocations. (See the fund prospectus for more information about the portfolio and the underlying investment portfolios in which it invests.) DESCRIPTION OF THE SSGA ETF PORTFOLIOS The SSgA Growth and Income ETF Portfolio (Class B) and the SSgA Growth ETF Portfolio (Class B) are each a 28 portfolio of the Met Investors Series Trust. MetLife Advisers is the investment manager of the SSgA ETF Portfolios. Each portfolio was designed on established principles of asset allocation. Each portfolio will primarily invest its assets in other investment companies known as exchange-traded funds ("underlying ETFs"). Each underlying ETF invests primarily in equity securities or in fixed income securities, as applicable, typically in an effort to replicate the performance of a market index. Each of the SSgA ETF Portfolios has a different allocation among various asset classes (including large-, mid- and small-capitalization domestic equity, foreign, fixed income, high yield, real estate investment trusts and cash/money market). SSgA Funds Management, Inc. (SSgA Funds Management), the portfolios' sub-adviser, establishes specific investment percentages for the asset classes and then selects the underlying ETFs in which a portfolio invests based on, among other things, the historical performance of each ETF and/or asset class, future risk/ return expectations, and SSgA Funds Management's outlook for the economy, interest rates and financial markets. These allocations reflect varying degrees of potential investment risk and reward. The allocation between equity and fixed income ETFs reflects greater or lesser emphasis on growth of capital and pursuing current income. SSgA Funds Management will regularly review each portfolio's asset allocation among equities, fixed income and cash/cash equivalents including the investment allocations within such asset classes and may make changes in the allocation as the market and economic outlook changes. SSgA Funds Management may add new underlying ETFs or replace existing underlying ETFs at its discretion. (See the fund prospectus for more information about each of the SSgA ETF Portfolios and the underlying ETFs.) VOTING RIGHTS We are the legal owner of the investment portfolio shares. However, we believe that when an investment portfolio solicits proxies in conjunction with a vote of shareholders, we are required to obtain from you and other affected owners instructions as to how to vote those shares. When we receive those instructions, we will vote all of the shares we own in proportion to those instructions. This will also include any shares that we own on our own behalf. The effect of this proportional voting is that a small number of contract owners may control the outcome of a vote. Should we determine that we are no longer required to comply with the above, we will vote the shares in our own right. SUBSTITUTION OF INVESTMENT OPTIONS If investment in the investment portfolios or a particular investment portfolio is no longer possible, in our judgment becomes inappropriate for purposes of the contract, or for any other reason in our sole discretion, we may substitute another investment portfolio or investment portfolios without your consent. The substituted investment portfolio may have different fees and expenses. Substitution may be made with respect to existing investments or the investment of future purchase payments, or both. However, we will not make such substitution without any necessary approval of the Securities and Exchange Commission and applicable state insurance departments. Furthermore, we may close investment portfolios to allocation of purchase payments or account value, or both, at any time in our sole discretion. 4. EXPENSES There are charges and other expenses associated with the contract that reduce the return on your investment in the contract. These charges and expenses are: PRODUCT CHARGES SEPARATE ACCOUNT PRODUCT CHARGES. Each day, we make a deduction for our Separate Account product charges (which consist of the mortality and expense charge, the administration charge and the charges related to certain death benefit riders). We do this as part of our calculation of the value of the accumulation units and the annuity units (I.E., during the accumulation phase and the income phase - although death benefit charges no longer continue in the income phase). MORTALITY AND EXPENSE CHARGE. We assess a daily mortality and expense charge that is equal, on an annual basis, to 1.50% of the average daily net asset value of each investment portfolio. For contracts issued prior to May 1, 2003, the mortality and expense charge on an annual basis is 1.60% of the average daily net asset value of each investment portfolio. This charge compensates us for mortality risks we assume for the annuity payment and death benefit guarantees made under the contract. These guarantees include making annuity payments that will not change based on our actual mortality experience, and providing a guaranteed minimum 29 death benefit under the contract. The charge also compensates us for expense risks we assume to cover contract maintenance expenses. These expenses may include issuing contracts, maintaining records, making and maintaining subaccounts available under the contract and performing accounting, regulatory compliance, and reporting functions. This charge also compensates us for costs associated with the establishment and administration of the contract, including programs like transfers and dollar cost averaging. If the mortality and expense charge is inadequate to cover the actual expenses of mortality, maintenance, and administration, we will bear the loss. If the charge exceeds the actual expenses, we will add the excess to our profit and it may be used to finance distribution expenses or for any other purpose. ADMINISTRATION CHARGE. This charge is equal, on an annual basis, to 0.25% of the average daily net asset value of each investment portfolio. This charge, together with the account fee (see below), is for the expenses associated with the administration of the contract. Some of these expenses are: issuing contracts, maintaining records, providing accounting, valuation, regulatory and reporting services, as well as expenses associated with marketing, sale and distribution of the contracts. DEATH BENEFIT RIDER CHARGES. If you select one of the following death benefit riders, we will deduct a charge that compensates us for the costs and risks we assume in providing the benefit. This charge (assessed during the accumulation phase) is equal, on an annual basis, to the percentages below of the average daily net asset value of each investment portfolio: Annual Step-Up Death Benefit 0.20 % Compounded-Plus Death Benefit 0.35%* Additional Death Benefit - Earnings Preservation Benefit 0.25 %
*For contracts issued prior to May 1, 2003, the percentage charge for the Compounded-Plus Death Benefit is 0.15% of the average daily net asset value of each investment portfolio. Please check with your registered representative regarding which death benefits are available in your state. If you select the Enhanced Death Benefit, and you are age 69 or younger at issue, we will assess a charge during the accumulation phase equal to 0.75% of the death benefit base. If you are age 70-75 at issue, we will assess a charge during the accumulation phase equal to 0.95% of the death benefit base (see "Death Benefit - Optional Death Benefit - Enhanced Death Benefit" for a discussion of how the death benefit base is determined). If your death benefit base is increased due to an Optional Step-Up, we may reset the rider charge to a rate that does not exceed the lower of: (a) the Maximum Optional Step-Up Charge (1.50%) or (b) the current rate that we charge for the same rider available for new contract purchases at the time of the Optional Step-Up. Starting with the first contract anniversary, the charge is assessed for the prior contract year at each contract anniversary before any Optional Step-Up. If you make a full withdrawal (surrender) or if you begin to receive annuity payments at the annuity date, a pro rata portion of the charge will be assessed based on the number of months from the last contract anniversary to the date of withdrawal or application to an annuity option. The charge is deducted from your account value pro rata from each investment portfolio and the fixed account in the ratio each portfolio/account bears to your total account value. We take amounts from the investment options that are part of the Separate Account by canceling accumulation units from the Separate Account. For contracts issued from February 24, 2009 through May 1, 2009, the percentage charge for the Enhanced Death Benefit is 0.65% of the death benefit base if you are age 69 or younger at issue and 0.90% of the death benefit base if you are age 70-75 at issue. For contracts issued prior to February 24, 2009, the percentage charge for the Enhanced Death Benefit is 0.65% of the death benefit base if you are age 69 or younger at issue and 0.85% of the death benefit base if you are age 70-75 at issue. For contracts issued prior to May 4, 2009, if you elected both the Enhanced Death Benefit rider and the GMIB Plus II rider (described below), the percentage charge for the Enhanced Death Benefit is reduced by 0.05%. ACCOUNT FEE During the accumulation phase, every contract year on your contract anniversary (the anniversary of the date when your contract was issued), we will deduct $30 from your contract as an account fee for the prior contract year if your account value is less than $50,000. If you make a complete withdrawal from your contract, the full account fee will be deducted from the account value regardless of the amount of your account value. During the accumulation phase, the account fee is deducted pro rata 30 from the investment portfolios. This charge is for administrative expenses (see above). This charge cannot be increased. A pro rata portion of the charge will be deducted from the account value on the annuity date if this date is other than a contract anniversary. If your account value on the annuity date is at least $50,000, then we will not deduct the account fee. After the annuity date, the charge will be collected monthly out of the annuity payment, regardless of the size of your contract. GUARANTEED MINIMUM INCOME BENEFIT - RIDER CHARGE We offer a Guaranteed Minimum Income Benefit ("GMIB") that you can select when you purchase the contract. There are four different versions of the GMIB under this contract: GMIB Plus II, GMIB Plus I, GMIB II, and GMIB I. Please check with your registered representative regarding whether GMIB Plus II or GMIB Plus I is available in your state. GMIB II is no longer available for sale, effective for contracts issued based on applications and necessary information received at our Annuity Service Center on and after May 4, 2009. GMIB I is not available for sale. If you select the GMIB Plus II rider, we will assess a charge during the accumulation phase equal to 1.00% of the income base (see "Living Benefits - Guaranteed Income Benefits" for a discussion of how the income base is determined) at the time the rider charge is assessed prior to any Optional Step-Up. If your income base is increased due to an Optional Step-Up under the GMIB Plus II rider, we may reset the rider charge to a rate that does not exceed the lower of: (a) the Maximum Optional Step-Up Charge (1.50%) or (b) the current rate that we charge for the same rider available for new contract purchases at the time of the Optional Step-Up. If you select the GMIB Plus I rider, we will assess a charge during the accumulation phase equal to 0.80% of the income base at the time the rider charge is assessed. If your income base is increased due to an Optional Reset under the GMIB Plus I rider, we may increase the rider charge to the charge applicable to contract purchases of the same rider at the time of the increase, but to no more than a maximum of 1.50%. For contracts issued prior to February 24, 2009 for which the GMIB Plus II was elected, the rider charge equals 0.80% of the income base. For contracts issued prior to February 26, 2007 for which the GMIB Plus I was elected, the rider charge equals 0.75% of the income base. If you selected the GMIB II rider or the GMIB I rider, the charge is 0.50% of the income base at the time the charge is assessed. For contracts issued from May 1, 2003 and prior to May 1, 2005 for which the GMIB II or GMIB I was elected, the rider charge is reduced to 0.45% of the income base if you elected either the optional Annual Step-Up Death Benefit or the Compounded-Plus Death Benefit. (See "Death Benefit.") For contracts issued on and after May 1, 2005, the rider charge is not reduced if you elected either the optional Annual Step-Up Death Benefit or the Compounded-Plus Death Benefit. For contracts issued prior to February 15, 2003, the GMIB I rider charge equals 0.35% of the income base. The rider charge is assessed at the first contract anniversary, and then at each subsequent contract anniversary, up to and including the anniversary on or immediately preceding the date the rider is exercised. If you make a full withdrawal (surrender) or if you begin to receive annuity payments at the annuity date, a pro rata portion of the rider charge will be assessed based on the number of months from the last contract anniversary to the date of withdrawal or application to an annuity option. The GMIB rider charge is deducted from your account value pro rata from each investment portfolio and the fixed account in the ratio each portfolio/account bears to your total account value. We take amounts from the investment options that are part of the Separate Account by canceling accumulation units from the Separate Account. LIFETIME WITHDRAWAL GUARANTEE AND GUARANTEED WITHDRAWAL BENEFIT - RIDER CHARGE There are two versions of the optional Lifetime Withdrawal Guarantee rider: the Lifetime Withdrawal Guarantee II rider and the Lifetime Withdrawal Guarantee I rider (collectively referred to as the Lifetime Withdrawal Guarantee riders). There are also two versions of the optional Guaranteed Withdrawal Benefit ("GWB") rider: the Enhanced GWB rider and the GWB I rider (collectively referred to as the Guaranteed Withdrawal Benefit riders). The GWB I rider is no longer available for purchase. Please check with your registered representative regarding which versions are available in your state. If you elect one of the Lifetime Withdrawal Guarantee riders or one of the Guaranteed Withdrawal Benefit riders, a charge is deducted from your account value during the accumulation phase on each contract anniversary. The charge for the Lifetime Withdrawal Guarantee II rider is equal to 1.25% (Single Life version) or 1.50% (Joint Life 31 version) of the Total Guaranteed Withdrawal Amount (see "Living Benefits - Guaranteed Withdrawal Benefits - Description of the Lifetime Withdrawal Guarantee II") on the applicable contract anniversary, after applying any 7.25% Compounding Income Amount and prior to taking into account any Automatic Annual Step-Up occurring on such contract anniversary. For contracts issued prior to February 24, 2009, the charge for the Lifetime Withdrawal Guarantee II rider is equal to 0.65% (Single Life version) or 0.85% (Joint Life version) of the Total Guaranteed Withdrawal Amount (see "Living Benefits - Guaranteed Withdrawal Benefits - Description of the Lifetime Withdrawal Guarantee II") on the applicable contract anniversary, after applying any 7.25% Compounding Income Amount and prior to taking into account any Automatic Annual Step-Up occurring on such contract anniversary. The charge for the Lifetime Withdrawal Guarantee I rider is equal to 0.50% (Single Life version) or 0.70% (Joint Life version) of the Total Guaranteed Withdrawal Amount on the applicable contract anniversary, after applying any 5% Compounding Income Amount and prior to taking into account any Automatic Annual Step-Up occurring on such contract anniversary. The charge for the Enhanced GWB rider is equal to 0.55% of the Guaranteed Withdrawal Amount (see "Living Benefits - Guaranteed Withdrawal Benefits - Description of the Enhanced Guaranteed Withdrawal Benefit") on the applicable contract anniversary, prior to taking into account any Optional Reset occurring on such contract anniversary. (For contracts issued prior to July 16, 2007, the charge for the Enhanced GWB rider is equal to 0.50% of the Guaranteed Withdrawal Amount on the applicable contract anniversary, prior to taking into account any Optional Reset occurring on such contract anniversary.) The charge for the GWB I rider is equal to 0.50% of the Guaranteed Withdrawal Amount on the applicable contract anniversary, prior to taking into account any Optional Reset occurring on such contract anniversary. The rider charge for the Lifetime Withdrawal Guarantee riders and the Guaranteed Withdrawal Benefit riders is deducted from your account value pro rata from each investment portfolio and the fixed account in the ratio each portfolio/account bears to your total account value. We take amounts from the investment options that are part of the Separate Account by canceling accumulation units from the Separate Account. If you make a full withdrawal (surrender) of your account value, you apply your account value to an annuity option, there is a change in owners, joint owners or annuitants (if the owner is a non-natural person), the contract terminates (except for a termination due to death), or (under the Lifetime Withdrawal Guarantee II rider) you assign your contract, a pro rata portion of the rider charge will be assessed based on the number of full months from the last contract anniversary to the date of the change. If the Enhanced GWB rider or a Lifetime Withdrawal Guarantee rider is cancelled pursuant to the cancellation provisions of each rider, a pro rata portion of the rider charge will not be assessed based on the period from the most recent contract anniversary to the date the cancellation takes effect. If an Automatic Annual Step-Up occurs under the Lifetime Withdrawal Guarantee II rider, we may reset the Lifetime Withdrawal Guarantee II rider charge to a rate that does not exceed the lower of: (a) the Maximum Optional Step-Up Charge (1.60% for the Single Life version or 1.80% for the Joint Life version) or (b) the current rate that we charge for the same rider available for new contract purchases at the time of the Automatic Annual Step-Up. For contracts issued prior to February 24, 2009, the Maximum Optional Step-Up Charge is 1.25% (Single Life version) or 1.50% (Joint Life version). If an Automatic Annual Step-Up occurs under the Lifetime Withdrawal Guarantee I rider, we may increase the Lifetime Withdrawal Guarantee I rider charge to the charge applicable to current contract purchases of the same rider at the time of the step-up, but to no more than a maximum of 0.95% (Single Life version) or 1.40% (Joint Life version) of the Total Guaranteed Withdrawal Amount. If you elect an Optional Reset as permitted under the Enhanced GWB rider or the GWB I rider, we may increase the rider charge to the Enhanced GWB/GWB I rider charge applicable to current contract purchases of the same rider at the time of the reset, but to no more than a maximum of 1.00% (for Enhanced GWB) or 0.95% (for GWB I) of the Guaranteed Withdrawal Amount. (For contracts issued prior to July 16, 2007, the maximum charge for the Enhanced GWB rider upon an Optional Reset is equal to 0.95% of the Guaranteed Withdrawal Amount.) If one of the Lifetime Withdrawal Guarantee riders is in effect, the rider charge will continue if your Remaining Guaranteed Withdrawal Amount (see "Living Benefits - Guaranteed Withdrawal Benefits - Description of the Lifetime Withdrawal Guarantee II") equals zero. If the Enhanced GWB or GWB I rider is in effect, the rider charge will not continue if your Benefit Base (see "Living 32 Benefits - Guaranteed Withdrawal Benefits - Description of the Enhanced Guaranteed Withdrawal Benefit") equals zero. GUARANTEED MINIMUM ACCUMULATION BENEFIT - RIDER CHARGE The Guaranteed Minimum Accumulation Benefit (GMAB) rider is no longer available for sale, effective for applications and necessary paperwork received on and after May 4, 2009. If you elected the GMAB, a charge is deducted from your account value during the accumulation phase on each contract anniversary. The charge is equal to 0.75% of the GMAB Guaranteed Accumulation Amount (see "Living Benefits-Guaranteed Minimum Accumulation Benefit") at the end of the prior contract year. The GMAB rider charge is deducted from your account value. We take amounts from the investment options that are part of the Separate Account by cancelling accumulation units from the Separate Account. If you make a full withdrawal (surrender) of your account value or you apply your account value to an annuity option, we will assess a pro rata portion of the GMAB rider charge based on the number of whole months since the last contract anniversary. WITHDRAWAL CHARGE During the accumulation phase, you can make a withdrawal from your contract (either a partial or a complete withdrawal). This contract has no withdrawal charge. PREMIUM AND OTHER TAXES We reserve the right to deduct from purchase payments, account balances, withdrawals, death benefits or income payments any taxes relating to the contracts (including, but not limited to, premium taxes) paid by us to any government entity. Examples of these taxes include, but are not limited to, premium tax, generation-skipping transfer tax or a similar excise tax under federal or state tax law which is imposed on payments we make to certain persons and income tax withholdings on withdrawals and income payments to the extent required by law. Premium taxes generally range from 0 to 3.5%, depending on the state. We will, at our sole discretion, determine when taxes relate to the contracts. We may, at our sole discretion, pay taxes when due and deduct that amount from the account balance at a later date. Payment at an earlier date does not waive any right we may have to deduct amounts at a later date. It is our current practice not to charge premium taxes until annuity payments begin. TRANSFER FEE We currently allow unlimited transfers without charge during the accumulation phase. However, we have reserved the right to limit the number of transfers to a maximum of 12 per year without charge and to charge a transfer fee of $25 for each transfer greater than 12 in any year. We are currently waiving the transfer fee, but reserve the right to charge it in the future. The transfer fee is deducted from the investment portfolio or fixed account from which the transfer is made. However, if the entire interest in an account is being transferred, the transfer fee will be deducted from the amount which is transferred. If the transfer is part of a pre-scheduled transfer program, it will not count in determining the transfer fee. INCOME TAXES We will deduct from the contract for any income taxes which we incur because of the contract. At the present time, we are not making any such deductions. INVESTMENT PORTFOLIO EXPENSES There are deductions from and expenses paid out of the assets of each investment portfolio, which are described in the fee table in this prospectus and the investment portfolio prospectuses. These deductions and expenses are not charges under the terms of the contract, but are represented in the share values of each investment portfolio. 5. ANNUITY PAYMENTS (THE INCOME PHASE) ANNUITY DATE Under the contract you can receive regular income payments (referred to as ANNUITY PAYMENTS). You can choose the month and year in which those payments begin. We call that date the ANNUITY DATE. Your annuity date must be the first day of a calendar month and must be at least 30 days after we issue the contract. Annuity payments must begin by the first day of the calendar month following the annuitant's 90th birthday or 10 years from the date we issue your contract, whichever is later (this requirement may be changed by us). When you purchase the contract, the annuity date will be the later of the first day of the calendar month after the annuitant's 90th birthday or 10 years from the date your contract was issued. You can change the annuity date at any time before the annuity date with 30 days prior notice to us, subject to restrictions that may apply in your state. 33 Please be aware that once your contract is annuitized, you are ineligible to receive the death benefit you have selected. Additionally, if you have selected a living benefit rider such as a Guaranteed Minimum Income Benefit, a Guaranteed Withdrawal Benefit, or the Guaranteed Minimum Accumulation Benefit, annuitizing your contract terminates the rider, including any death benefit provided by the rider and any Guaranteed Principal Adjustment (for the Guaranteed Minimum Income Benefit Plus or Lifetime Withdrawal Guarantee riders) or Guaranteed Accumulation Payment (for the Guaranteed Minimum Accumulation Benefit rider) that may also be provided by the rider. ANNUITY PAYMENTS You (unless another payee is named) will receive the annuity payments during the income phase. The annuitant is the natural person(s) whose life we look to in the determination of annuity payments. During the income phase, you have the same investment choices you had just before the start of the income phase. At the annuity date, you can choose whether payments will be: o fixed annuity payments, or o variable annuity payments, or o a combination of both. If you don't tell us otherwise, your annuity payments will be based on the investment allocations that were in place just before the start of the income phase. If you choose to have any portion of your annuity payments based on the investment portfolio(s), the dollar amount of your initial payment will vary and will depend upon three things: 1) the value of your contract in the investment portfolio(s) just before the start of the income phase, 2) the assumed investment return (AIR) (you select) used in the annuity table for the contract, and 3) the annuity option elected. Subsequent variable annuity payments will vary with the performance of the investment portfolios you selected. (For more information, see "Variable Annuity Payments" below.) At the time you choose an annuity option, you select the AIR, which must be acceptable to us. Currently, you can select an AIR of 3% or 4%. You can change the AIR with 30 days notice to us prior to the annuity date. If you do not select an AIR, we will use 3%. If the actual performance exceeds the AIR, your variable annuity payments will increase. Similarly, if the actual investment performance is less than the AIR, your variable annuity payments will decrease. Your variable annuity payment is based on ANNUITY UNITS. An annuity unit is an accounting device used to calculate the dollar amount of annuity payments. (For more information, see "Variable Annuity Payments" below.) When selecting an AIR, you should keep in mind that a lower AIR will result in a lower initial variable annuity payment, but subsequent variable annuity payments will increase more rapidly or decline more slowly as changes occur in the investment experience of the investment portfolios. On the other hand, a higher AIR will result in a higher initial variable annuity payment than a lower AIR, but later variable annuity payments will rise more slowly or fall more rapidly. A transfer during the income phase from a variable annuity payment option to a fixed annuity payment option may result in a reduction in the amount of annuity payments. If you choose to have any portion of your annuity payments be a fixed annuity payment, the dollar amount of each fixed annuity payment will not change, unless you make a transfer from a variable annuity payment option to the fixed annuity payment that causes the fixed annuity payment to increase. Please refer to the "Annuity Provisions" section of the Statement of Additional Information for more information. Annuity payments are made monthly (or at any frequency permitted under the contract) unless you have less than $5,000 to apply toward an annuity option. In that case, we may provide your annuity payment in a single lump sum instead of annuity payments. Likewise, if your annuity payments would be or become less than $100 a month, we have the right to change the frequency of payments so that your annuity payments are at least $100. ANNUITY OPTIONS You can choose among income plans. We call those ANNUITY OPTIONS. We ask you to choose an annuity option when you purchase the contract. You can change it at any time before the annuity date with 30 days notice to us. 34 If you do not choose an annuity option at the time you purchase the contract, Option 2, which provides a life annuity with 10 years of guaranteed annuity payments, will automatically be applied. You can choose one of the following annuity options or any other annuity option acceptable to us. After annuity payments begin, you cannot change the annuity option. OPTION 1. LIFE ANNUITY. Under this option, we will make annuity payments so long as the annuitant is alive. We stop making annuity payments after the annuitant's death. It is possible under this option to receive only one annuity payment if the annuitant dies before the due date of the second payment or to receive only two annuity payments if the annuitant dies before the due date of the third payment, and so on. OPTION 2. LIFE ANNUITY WITH 10 YEARS OF ANNUITY PAYMENTS GUARANTEED. Under this option, we will make annuity payments so long as the annuitant is alive. If, when the annuitant dies, we have made annuity payments for less than ten years, we will then continue to make annuity payments for the rest of the 10 year period. OPTION 3. JOINT AND LAST SURVIVOR ANNUITY. Under this option, we will make annuity payments so long as the annuitant and a second person (joint annuitant) are both alive. When either annuitant dies, we will continue to make annuity payments, so long as the survivor continues to live. We will stop making annuity payments after the last survivor's death. OPTION 4. JOINT AND LAST SURVIVOR ANNUITY WITH 10 YEARS OF ANNUITY PAYMENTS GUARANTEED. Under this option, we will make annuity payments so long as the annuitant and a second person (joint annuitant) are both alive. When either annuitant dies, we will continue to make annuity payments, so long as the survivor continues to live. If, at the last death of the annuitant and the joint annuitant, we have made annuity payments for less than ten years, we will then continue to make annuity payments for the rest of the 10 year period. OPTION 5. PAYMENTS FOR A DESIGNATED PERIOD. We currently offer an annuity option under which fixed or variable monthly annuity payments are made for a selected number of years as approved by us, currently not less than 10 years. This annuity option may be limited or withdrawn by us in our discretion. We may require proof of age or sex of an annuitant before making any annuity payments under the contract that are measured by the annuitant's life. If the age or sex of the annuitant has been misstated, the amount payable will be the amount that the account value would have provided at the correct age or sex. Once annuity payments have begun, any underpayments will be made up in one sum with the next annuity payment. Any overpayments will be deducted from future annuity payments until the total is repaid. You may withdraw the commuted value of the payments remaining under the variable Payments for a Designated Period annuity option (Option 5). You may not commute the fixed Payments for a Designated Period annuity option or any option involving a life contingency, whether fixed or variable, prior to the death of the last surviving annuitant. Upon the death of the last surviving annuitant, the beneficiary may choose to continue receiving income payments or to receive the commuted value of the remaining guaranteed payments. For variable annuity options, the calculation of the commuted value will be done using the AIR applicable to the contract. (See "Annuity Payments" above.) For fixed annuity options, the calculation of the commuted value will be done using the then current annuity option rates. There may be tax consequences resulting from the election of an annuity payment option containing a commutation feature (I.E., an annuity payment option that permits the withdrawal of a commuted value). (See "Federal Income Tax Status.") Due to underwriting, administrative or Internal Revenue Code considerations, there may be limitations on payments to the survivor under Options 3 and 4 and/or the duration of the guarantee period under Options 2, 4, and 5. In addition to the annuity options described above, we may offer an additional payment option that would allow your beneficiary to take distribution of the account value over a period not extending beyond his or her life expectancy. Under this option, annual distributions would not be made in the form of an annuity, but would be calculated in a manner similar to the calculation of required minimum distributions from IRAs. (See "Federal Income Tax Status.") We intend to make this payment option available to both tax qualified and non-tax qualified contracts. In the event that you purchased the contract as a tax qualified contract, you must take distribution of the account value in accordance with the minimum required distribution rules set forth in applicable tax law. (See "Federal Income Tax Status.") Under certain 35 circumstances, you may satisfy those requirements by electing an annuity option. You may choose any death benefit available under the contract, but certain other contract provisions and programs will not be available. Upon your death, if annuity payments have already begun, the death benefit would be required to be distributed to your beneficiary at least as rapidly as under the method of distribution in effect at the time of your death. VARIABLE ANNUITY PAYMENTS The Adjusted Contract Value (the account value, less any applicable premium taxes, account fee, and any prorated rider charge) is determined on the annuity calculation date, which is a business day no more than five (5) business days before the annuity date. The first variable annuity payment will be based upon the Adjusted Contract Value, the annuity option elected, the annuitant's age, the annuitant's sex (where permitted by law), and the appropriate variable annuity option table. Your annuity rates will not be less than those guaranteed in your contract at the time of purchase for the assumed investment return and annuity option elected. If, as of the annuity calculation date, the then current variable annuity option rates applicable to this class of contracts provide a first annuity payment greater than that which is guaranteed under the same annuity option under this contract, the greater payment will be made. The dollar amount of variable annuity payments after the first payment is determined as follows: o The dollar amount of the first variable annuity payment is divided by the value of an annuity unit for each applicable investment portfolio as of the annuity calculation date. This establishes the number of annuity units for each payment. The number of annuity units for each applicable investment portfolio remains fixed during the annuity period, provided that transfers among the subaccounts will be made by converting the number of annuity units being transferred to the number of annuity units of the subaccount to which the transfer is made, and the number of annuity units will be adjusted for transfers to a fixed annuity option. Please see the Statement of Additional Information for details about making transfers during the Annuity Phase. o The fixed number of annuity units per payment in each investment portfolio is multiplied by the annuity unit value for that investment portfolio for the business day for which the annuity payment is being calculated. This result is the dollar amount of the payment for each applicable investment portfolio, less any account fee. The account fee will be deducted pro rata out of each annuity payment. o The total dollar amount of each variable annuity payment is the sum of all investment portfolio variable annuity payments. ANNUITY UNIT. The initial annuity unit value for each investment portfolio of the Separate Account was set by us. The subsequent annuity unit value for each investment portfolio is determined by multiplying the annuity unit value for the immediately preceding business day by the net investment factor (see the Statement of Additional Information for a definition) for the investment portfolio for the current business day and multiplying the result by a factor for each day since the last business day which represents the daily equivalent of the AIR you elected. FIXED ANNUITY PAYMENTS The Adjusted Contract Value (defined above under "Variable Annuity Payments") on the day immediately preceding the annuity date will be used to determine a fixed annuity payment. The annuity payment will be based upon the annuity option elected, the annuitant's age, the annuitant's sex (where permitted by law), and the appropriate annuity option table. Your annuity rates will not be less than those guaranteed in your contract at the time of purchase. If, as of the annuity calculation date, the then current annuity option rates applicable to this class of contracts provide an annuity payment greater than that which is guaranteed under the same annuity option under this contract, the greater payment will be made. You may not make a transfer from the fixed annuity option to the variable annuity option. 6. ACCESS TO YOUR MONEY You (or in the case of a death benefit, your beneficiary) can have access to the money in your contract: (1) by making a withdrawal (either a partial or a complete withdrawal); (2) by electing to receive annuity payments; or (3) when a death benefit is paid to your beneficiary. 36 Under most circumstances, withdrawals can only be made during the accumulation phase. You may establish a withdrawal plan under which you can receive substantially equal periodic payments in order to comply with the requirements of Sections 72(q) or (t) of the Code. Premature modification or termination of such payments may result in substantial penalty taxes. (See "Federal Income Tax Status.") When you make a complete withdrawal, you will receive the withdrawal value of the contract. The withdrawal value of the contract is the account value of the contract at the end of the business day when we receive a written request for a withdrawal: o less any premium or other tax; o less any account fee; and o less any applicable pro rata GMIB, GWB, GMAB or Enhanced Death Benefit rider charge. Unless you instruct us otherwise, any partial withdrawal will be made pro rata from the fixed account and the investment portfolio(s) you selected. Under most circumstances the amount of any partial withdrawal must be for at least $500, or your entire interest in the investment portfolio or fixed account. We require that after a partial withdrawal is made you keep at least $2,000 in the contract. If the withdrawal would result in the account value being less than $2,000 after a partial withdrawal, we will treat the withdrawal request as a request for a full withdrawal. We will pay the amount of any withdrawal from the Separate Account within seven days of when we receive the request in good order unless the suspension of payments or transfers provision is in effect. We may withhold payment of withdrawal proceeds if any portion of those proceeds would be derived from a contract owner's check that has not yet cleared (I.E., that could still be dishonored by the contract owner's banking institution). We may use telephone, fax, Internet or other means of communication to verify that payment from the contract owner's check has been or will be collected. We will not delay payment longer than necessary for us to verify that payment has been or will be collected. Contract owners may avoid the possibility of delay in the disbursement of proceeds coming from a check that has not yet cleared by providing us with a certified check. How to withdraw all or part of your account value: o You must submit a request to our Annuity Service Center. (See "Other Information - Requests and Elections.") o You must state in your request whether you would like to apply the proceeds to a payment option (otherwise you will receive the proceeds in a lump sum and may be taxed on them). o We have to receive your withdrawal request in our Annuity Service Center prior to the annuity date or owner's death. There are limits to the amount you can withdraw from certain qualified plans including Qualified and TSA plans. (See "Federal Income Tax Status.") INCOME TAXES, TAX PENALTIES AND CERTAIN RESTRICTIONS MAY APPLY TO ANY WITHDRAWAL YOU MAKE. SYSTEMATIC WITHDRAWAL PROGRAM You may elect the Systematic Withdrawal Program at any time. We do not assess a charge for this program. This program provides an automatic payment to you of up to 20% of your total purchase payments each year. You can receive payments monthly or quarterly, provided that each payment must amount to at least $100 (unless we consent otherwise). We reserve the right to change the required minimum systematic withdrawal amount. If the New York Stock Exchange is closed on a day when the withdrawal is to be made, we will process the withdrawal on the next business day. While the Systematic Withdrawal Program is in effect you can make additional withdrawals. INCOME TAXES, TAX PENALTIES AND CERTAIN RESTRICTIONS MAY APPLY TO SYSTEMATIC WITHDRAWALS. SUSPENSION OF PAYMENTS OR TRANSFERS We may be required to suspend or postpone payments for withdrawals or transfers for any period when: o the New York Stock Exchange is closed (other than customary weekend and holiday closings); o trading on the New York Stock Exchange is restricted; o an emergency exists, as determined by the Securities and Exchange Commission, as a result of which disposal of shares of the investment portfolios is not reasonably practicable or we cannot reasonably value the shares of the investment portfolios; or 37 o during any other period when the Securities and Exchange Commission, by order, so permits for the protection of owners. We have reserved the right to defer payment for a withdrawal or transfer from the fixed account for the period permitted by law but not for more than six months. Federal laws designed to counter terrorism and prevent money laundering might, in certain circumstances, require us to block an owner's ability to make certain transactions and thereby refuse to accept any requests for transfers, withdrawals, surrenders, or death benefits until instructions are received from the appropriate regulator. We may also be required to provide additional information about you and your contract to government regulators. 7. LIVING BENEFITS OVERVIEW OF LIVING BENEFIT RIDERS We offer a suite of optional living benefit riders that, for certain additional charges, offer protection against market risk (the risk that your investments may decline in value or underperform your expectations). Only one of these riders may be elected, and the rider must be elected at contract issue. These optional riders are described briefly below. Please see the more detailed description that follows for important information on the costs, restrictions and availability of each optional rider. We currently offer two types of living benefit riders - guaranteed income benefits and guaranteed withdrawal benefits: Guaranteed Income Benefits -------------------------- o Guaranteed Minimum Income Benefit Plus (GMIB Plus I and GMIB Plus II) o Guaranteed Minimum Income Benefit (GMIB I and GMIB II) Our guaranteed income benefit riders are designed to allow you to invest your account value in the market while at the same time assuring a specified guaranteed level of minimum fixed annuity payments if you elect the income phase. The fixed annuity payment amount is guaranteed regardless of investment performance or the actual account value at the time you annuitize. Prior to exercising the rider and annuitizing your contract, you may make withdrawals up to a maximum level specified in the rider and still maintain the benefit amount. Guaranteed Withdrawal Benefits ------------------------------ o Lifetime Withdrawal Guarantee (LWG I and LWG II) o Enhanced Guaranteed Withdrawal Benefit (Enhanced GWB) o Guaranteed Withdrawal Benefit I (GWB I) The GWB riders are designed to guarantee that at least the entire amount of purchase payments you make will be returned to you through a series of withdrawals without annuitizing, regardless of investment performance, as long as withdrawals in any contract year do not exceed the maximum amount allowed under the rider. With the LWG riders, you get the same benefits, but in addition, if you make your first withdrawal on or after the date you reach age 59 1/2, you are guaranteed income without annuitizing for your life (and the life of your spouse, if the Joint Life version of the rider was elected, and your spouse elects to continue the contract and is at least age 59 1/2 at continuation), even after the entire amount of purchase payments has been returned. Guaranteed Asset Accumulation Benefit ------------------------------------- Prior to May 4, 2009, we offered the Guaranteed Minimum Accumulation Benefit (GMAB). The GMAB is designed to guarantee that your account value will not be less than a minimum amount at the end of the 10-year waiting period. The amount of the guarantee depends on which of three permitted investment portfolios you select. GUARANTEED INCOME BENEFITS At the time you buy the contract, you may elect a guaranteed income benefit rider, called a Guaranteed Minimum Income Benefit (GMIB), for an additional charge. Each version of these riders is designed to guarantee a predictable, minimum level of fixed annuity payments, regardless of investment performance during the accumulation phase. HOWEVER, IF APPLYING YOUR ACTUAL ACCOUNT VALUE AT THE TIME YOU ANNUITIZE THE CONTRACT TO THEN CURRENT ANNUITY PURCHASE RATES (OUTSIDE OF THE RIDER) PRODUCES HIGHER INCOME PAYMENTS, YOU WILL RECEIVE THE HIGHER PAYMENTS, AND THUS YOU WILL HAVE PAID FOR THE RIDER EVEN THOUGH IT WAS NOT USED. Also, prior to exercising the rider, you may make specified withdrawals that reduce your income base (as explained below) during the accumulation phase and still leave the rider guarantees 38 intact, provided the conditions of the rider are met. Your registered representative can provide you an illustration of the amounts you would receive, with or without withdrawals, if you exercised the rider. There are four different versions of the GMIB under this contract: GMIB Plus II, GMIB Plus I, GMIB II, and GMIB I. Please check with your registered representative regarding whether GMIB Plus II or GMIB Plus I is available in your state. GMIB II is no longer available for sale, effective for contracts issued based on applications and necessary information received at our Annuity Service Center on and after May 4, 2009. GMIB I is not available for sale. Additionally, there may be versions of each rider that vary by issue date and state availability. Please check with your registered representative regarding which version(s) are available in your state. You may not have this benefit and a GWB or GMAB rider in effect at the same time. Once elected, the rider cannot be terminated except as discussed below. FACTS ABOUT GUARANTEED INCOME BENEFIT RIDERS INCOME BASE AND GMIB ANNUITY PAYMENTS. Under the GMIB, we calculate an "income base" (as described below) that determines, in part, the minimum amount you receive as an income payment upon exercising the GMIB rider and annuitizing the contract. IT IS IMPORTANT TO RECOGNIZE THAT THIS INCOME BASE IS NOT AVAILABLE FOR CASH WITHDRAWALS AND DOES NOT ESTABLISH OR GUARANTEE YOUR ACCOUNT VALUE OR A MINIMUM RETURN FOR ANY INVESTMENT PORTFOLIO. After a minimum 10-year waiting period, and then only within 30 days following a contract anniversary, you may exercise the rider. We then will apply the income base calculated at the time of exercise to the conservative GMIB Annuity Table (as described below) specified in the rider in order to determine your minimum guaranteed lifetime fixed monthly annuity payments (your actual payment may be higher than this minimum if, as discussed above, the base contract under its terms would provide a higher payment). THE GMIB ANNUITY TABLE. The GMIB Annuity Table is specified in the rider. For GMIB Plus II in contracts issued after May 1, 2009, this table is calculated based on the Annuity 2000 Mortality Table with a 10-year age set back with interest of 1.5% per annum. For GMIB Plus II in contracts issued from February 24, 2009 through May 1, 2009, this table is calculated based on the Annuity 2000 Mortality Table with a 7-year age set back with interest of 1.5% per annum. For GMIB Plus II in contracts issued before February 24, 2009, and for GMIB Plus I, GMIB II and GMIB I, this table is calculated based on the Annuity 2000 Mortality Table with a 7-year age set back with interest of 2.5% per annum. As with other pay-out types, the amount you receive as an income payment also depends on the annuity option you select, your age, and (where permitted by law) your sex. For GMIB Plus II, the annuity rates for attained ages 86 to 90 are the same as those for attained age 85. THE ANNUITY RATES IN THE GMIB ANNUITY TABLE ARE CONSERVATIVE, SO THE AMOUNT OF GUARANTEED MINIMUM LIFETIME INCOME THAT THE GMIB PRODUCES MAY BE LESS THAN THE AMOUNT OF ANNUITY INCOME THAT WOULD BE PROVIDED BY APPLYING YOUR ACCOUNT VALUE ON YOUR ANNUITY DATE TO THEN-CURRENT ANNUITY PURCHASE RATES. If you exercise the GMIB rider, your annuity payments will be the greater of: o the annuity payment determined by applying the amount of the income base to the GMIB Annuity Table, or o the annuity payment determined for the same annuity option in accordance with the base contract. (See "Annuity Payments (The Income Phase).") If you choose not to receive annuity payments as guaranteed under the GMIB, you may elect any of the annuity options available under the contract. OWNERSHIP. If you, the owner, are a natural person, you must also be the annuitant. If a non-natural person owns the contract, then the annuitant will be considered the owner in determining the income base and GMIB annuity payments. If joint owners are named, the age of the older joint owner will be used to determine the income base and GMIB annuity payments. For the purposes of the Guaranteed Income Benefits section of the prospectus, "you" always means the owner, oldest joint owner or the annuitant, if the owner is a non-natural person. GMIB, QUALIFIED CONTRACTS AND DECEDENT CONTRACTS. The GMIB may have limited usefulness in connection with a Qualified Contract, such as an IRA (see "Federal Income Tax Status - Taxation of Qualified Contracts"), in circumstances where, due to the ten-year waiting period after purchase (and, for the GMIB Plus II and GMIB Plus I, after an Optional Step-Up/Optional Reset) the owner is unable to exercise the rider until after the required beginning date of required minimum 39 distributions under the contract. In such event, required minimum distributions received from the contract during the 10-year waiting period will have the effect of reducing the income base either on a proportionate or dollar for dollar basis, as the case may be. This may have the effect of reducing or eliminating the value of annuity payments under the GMIB. You should consult your tax adviser prior to electing a GMIB rider. Additionally, the GMIB is not available for purchase by a beneficiary under a decedent's Non-Qualified Contract (see "Federal Income Tax Status - Taxation of Non-Qualified Contracts") or IRA (or where otherwise offered, under any other contract which is being "stretched" by a beneficiary after the death of the owner or after the death of the annuitant in certain cases). The GMIB benefit may not be exercised until 10 years after purchase (and, for the GMIB Plus II and GMIB Plus I, after an Optional Step-Up/ Optional Reset), and the benefit provides guaranteed monthly fixed income payments for life (or joint lives, if applicable), with payments guaranteed for a specified number of years. However, the tax rules require distributions prior to the end of the 10-year waiting period, commencing generally in the year after the owner's death, and also prohibit payments for as long as the beneficiary's life in certain circumstances. (See Appendix C for examples of the GMIB.) DESCRIPTION OF GMIB PLUS II In states where approved, the version of the GMIB Plus II described below is available for contracts issued based on applications and necessary information that we receive in good order at our Annuity Service Center on and after May 4, 2009. In order for us to issue you the previous version of this rider (that has different features), we must receive your application and necessary information at our Annuity Service Center, in good order, before the close of the New York Stock Exchange on May 1, 2009. In states where approved, the GMIB Plus II rider is available only for owners up through age 78, and you can only elect the GMIB Plus II at the time you purchase the contract. THE GMIB PLUS II MAY BE EXERCISED AFTER A 10-YEAR WAITING PERIOD AND THEN ONLY WITHIN 30 DAYS FOLLOWING A CONTRACT ANNIVERSARY, PROVIDED THAT THE EXERCISE MUST OCCUR NO LATER THAN THE 30-DAY PERIOD FOLLOWING THE CONTRACT ANNIVERSARY PRIOR TO THE OWNER'S 91ST BIRTHDAY. INCOME BASE. The INCOME BASE is the greater of (a) or (b) below. (a) Highest Anniversary Value: On the issue date, the "Highest Anniversary Value" is equal to your initial purchase payment. Thereafter, the Highest Anniversary Value will be increased by subsequent purchase payments and reduced proportionately by the percentage reduction in account value attributable to each subsequent withdrawal. On each contract anniversary prior to the owner's 81st birthday, the Highest Anniversary Value will be recalculated and set equal to the greater of the Highest Anniversary Value before the recalculation or the account value on the date of the recalculation. The Highest Anniversary Value does not change after the contract anniversary immediately preceding the owner's 81st birthday, except that it is increased for each subsequent purchase payment and reduced proportionally by the percentage reduction in account value attributable to each subsequent withdrawal. (b) Annual Increase Amount: On the issue date, the "Annual Increase Amount" is equal to your initial purchase payment. (For these purposes, all purchase payments credited within 120 days of the date we issued the contract will be treated as if they were received on the date we issue the contract.) Thereafter, the Annual Increase Amount is equal to (i) less (ii), where: (i) is purchase payments accumulated at the annual increase rate. The annual increase rate is 5% per year through the contract anniversary prior to the owner's 91st birthday and 0% thereafter; and (ii) is withdrawal adjustments accumulated at the annual increase rate. Withdrawal adjustments in a contract year are determined according to (1) or (2) as defined below: (1) The withdrawal adjustment for each withdrawal in a contract year is the value of the Annual Increase Amount immediately prior to the withdrawal multiplied by the percentage reduction in account value attributed to that withdrawal; or (2) If total withdrawals in a contract year are 5% or less of the Annual Increase Amount on the issue date or on the prior contract anniversary after the first contract year, and if these withdrawals are paid to you (or the annuitant if the contract is owned by a non-natural person) or to another payee we agree to, the total 40 withdrawal adjustments for that contract year will be set equal to the dollar amount of total withdrawals in that contract year. These withdrawal adjustments will replace the withdrawal adjustments defined in (1) above and be treated as though the corresponding withdrawals occurred at the end of that contract year. (See section (1) of Appendix C for examples of the calculation of the withdrawal adjustment.) In determining the GMIB Plus II annuity income, an amount equal to the amount of any premium and other taxes that may apply will be deducted from the income base. OPTIONAL STEP-UP. On each contract anniversary as permitted, you may elect to reset the Annual Increase Amount to the account value. An Optional Step-Up may be beneficial if your account value has grown at a rate above the 5% accumulation rate on the Annual Increase Amount. HOWEVER, IF YOU ELECT TO RESET THE ANNUAL INCREASE AMOUNT, WE WILL RESTART THE 10-YEAR WAITING PERIOD. IN ADDITION, WE MAY RESET THE GMIB PLUS II RIDER CHARGE TO A RATE THAT DOES NOT EXCEED THE LOWER OF: (A) THE MAXIMUM OPTIONAL STEP-UP CHARGE (1.50%) OR (B) THE CURRENT RATE THAT WE CHARGE FOR THE SAME RIDER AVAILABLE FOR NEW CONTRACT PURCHASES AT THE TIME OF THE OPTIONAL STEP-UP. An Optional Step-Up is permitted only if: (1) the account value exceeds the Annual Increase Amount immediately before the reset; and (2) the owner (or oldest joint owner or annuitant if the contract is owned by a non-natural person) is not older than age 80 on the date of the Optional Step-Up. You may elect either: (1) a one-time Optional Step-Up at any contract anniversary provided the above requirements are met, or (2) Optional Step-Ups to occur under the Automatic Annual Step-Up. If you elect Automatic Annual Step-Ups, on any contract anniversary while this election is in effect, the Annual Increase Amount will reset to the account value automatically, provided the above requirements are met. The same conditions described above will apply to each Automatic Step-Up. You may discontinue this election at any time by notifying us in writing, at our Annuity Service Center (or by any other method acceptable to us), at least 30 days prior to the contract anniversary on which a reset may otherwise occur. Otherwise, it will remain in effect through the seventh contract anniversary following the date you make this election, at which point you must make a new election if you want Automatic Annual Step-Ups to continue. If you discontinue or do not re-elect the Automatic Annual Step- Ups, no Optional Step-Up will occur automatically on any subsequent contract anniversary unless you make a new election under the terms described above. (If you discontinue Automatic Annual Step-Ups, the GMIB Plus II rider (and the rider charge) will continue, and you may choose to elect a one time Optional Step-Up or reinstate Automatic Annual Step-Ups as described above.) We must receive your request to exercise the Optional Step-Up in writing, at our Annuity Service Center, or any other method acceptable to us. We must receive your request prior to the contract anniversary for an Optional Step-Up to occur on that contract anniversary. The Optional Step-Up: (1) resets the Annual Increase Amount to the account value on the contract anniversary following the receipt of an Optional Step-Up election; (2) resets the GMIB Plus II waiting period to the tenth contract anniversary following the date the Optional Step-Up took effect; and (3) may reset the GMIB Plus II rider charge to a rate that does not exceed the lower of: (a) the Maximum Optional Step-Up Charge (1.50%) or (b) the current rate that we charge for the same rider available for new contract purchases at the time of the Optional Step-Up. On the date of the Optional Step-Up, the account value on that day will be treated as a single purchase payment received on the date of the step-up for purposes of determining the Annual Increase Amount after the reset. All purchase payments and withdrawal adjustments previously used to calculate the Annual Increase Amount will be set equal to zero on the date of the step-up. INVESTMENT ALLOCATION RESTRICTIONS. If you elect the GMIB Plus II, there are certain investment allocation restrictions. (See "Purchase - Investment Allocation Restrictions for Certain Riders.") If you elect the GMIB Plus II, you may not participate in the Dollar Cost Averaging (DCA) program. GUARANTEED PRINCIPAL OPTION. On each contract anniversary starting with the tenth contract anniversary and through the contract anniversary prior to the owner's 91st birthday, you may exercise the Guaranteed Principal 41 Option. If the owner is a non-natural person, the annuitant's age is the basis for determining the birthday. If there are joint owners, the age of the oldest owner is used for determining the birthday. We must receive your request to exercise the Guaranteed Principal Option in writing, or any other method that we agree to, within 30 days following the applicable contract anniversary. The Guaranteed Principal Option will take effect at the end of this 30-day period following that contract anniversary. By exercising the Guaranteed Principal Option, you elect to receive an additional amount to be added to your account value intended to restore your initial investment in the contract, in lieu of receiving GMIB payments. The additional amount is called the Guaranteed Principal Adjustment and is equal to (a) minus (b) where: (a) is purchase payments credited within 120 days of the date we issued the contract (reduced proportionately by the percentage reduction in account value attributable to each partial withdrawal prior to the exercise of the Guaranteed Principal Option) and (b) the account value on the contract anniversary immediately preceding exercise of the Guaranteed Principal Option. The Guaranteed Principal Option can only be exercised if (a) exceeds (b), as defined above. The Guaranteed Principal Adjustment will be added to each applicable investment portfolio in the ratio the portion of the account value in such investment portfolio bears to the total account value in all investment portfolios. IT IS IMPORTANT TO NOTE THAT ONLY PURCHASE PAYMENTS MADE DURING THE FIRST 120 DAYS THAT YOU HOLD THE CONTRACT ARE TAKEN INTO CONSIDERATION IN DETERMINING THE GUARANTEED PRINCIPAL ADJUSTMENT. IF YOU ANTICIPATE MAKING PURCHASE PAYMENTS AFTER 120 DAYS, YOU SHOULD UNDERSTAND THAT SUCH PAYMENTS WILL NOT INCREASE THE GUARANTEED PRINCIPAL ADJUSTMENT. However, because purchase payments made after 120 days will increase your account value, such payments may have a significant impact on whether or not a Guaranteed Principal Adjustment is due. Therefore, GMIB Plus II may not be appropriate for you if you intend to make additional purchase payments after the 120-day period and are purchasing the GMIB Plus II for this feature. The Guaranteed Principal Adjustment will never be less than zero. IF THE GUARANTEED PRINCIPAL OPTION IS EXERCISED, THE GMIB PLUS II RIDER WILL TERMINATE AS OF THE DATE THE OPTION TAKES EFFECT AND NO ADDITIONAL GMIB CHARGES WILL APPLY THEREAFTER. The variable annuity contract, however, will continue, and the GMIB Plus II investment allocation restrictions, described above, will no longer apply. EXERCISING THE GMIB PLUS II RIDER. If you exercise the GMIB Plus II, you must elect to receive annuity payments under one of the following fixed annuity options: (1) Life annuity with 5 years of annuity payments guaranteed. (2) Joint and last survivor annuity with 5 years of annuity payments guaranteed. Based on federal tax rules, this option is not available for Qualified Contracts where the difference in ages of the joint annuitants, who are not spouses, is greater than 10 years. (See "Annuity Payments (The Income Phase).") These options are described in the contract and the GMIB Plus II rider. The GMIB Annuity Table is specified in the rider. This table is calculated based on the Annuity 2000 Mortality Table with a 10-year age set back with interest of 1.5% per annum for GMIB Plus II. As with other payout types, the amount you receive as an income payment also depends on the annuity option you select, your age, and (where permitted by law) your sex. For GMIB Plus II, the annuity rates for attained ages 86 to 90 are the same as those for attained age 85. THE ANNUITY RATES IN THE GMIB ANNUITY TABLE ARE CONSERVATIVE, SO THE AMOUNT OF GUARANTEED MINIMUM LIFETIME INCOME THAT THE GMIB PRODUCES MAY BE LESS THAN THE AMOUNT OF ANNUITY INCOME THAT WOULD BE PROVIDED BY APPLYING YOUR ACCOUNT VALUE ON YOUR ANNUITY DATE TO THEN-CURRENT ANNUITY PURCHASE RATES. If you exercise the GMIB Plus II, your annuity payments will be the greater of: o the annuity payment determined by applying the amount of the income base to the GMIB Annuity Table, or o the annuity payment determined for the same annuity option in accordance with the base contract. (See "Annuity Payments (The Income Phase).") If the amount of the guaranteed minimum lifetime income that the GMIB Plus II produces is less than the amount of annuity income that would be provided by applying contract value on the annuity date to the then-current 42 annuity purchase rates, then you would have paid for a benefit that you did not use. If you take a full withdrawal of your account value, your contract is terminated by us due to its small account value and inactivity (see "Purchase - Purchase Payments"), or your contract lapses and there remains any income base, we will commence making income payments within 30 days of the date of the full withdrawal, termination or lapse. In such cases, your income payments under this benefit, if any, will be determined using the income base and any applicable withdrawal adjustment that was taken on account of the withdrawal, termination or lapse. The GMIB payout rates are enhanced under the following circumstances. If: o you begin withdrawals on or after your 62nd birthday; o your account value is fully withdrawn or decreases to zero at or after your 62nd birthday and there is an income base remaining; and o the annuity option you select is the single life annuity with 5 years of annuity payments guaranteed; then the annual annuity payments under the GMIB Plus II rider will equal or exceed 5.5% of the income base (calculated on the date the payments are determined). Alternatively, if: o you begin withdrawals on or after your 60th birthday; o your account value is fully withdrawn or decreases to zero at or after your 60th birthday and there is an income base remaining; and o the annuity option you select is the single life annuity with 5 years of annuity payments guaranteed; then the annual annuity payments under the GMIB Plus II rider will equal or exceed 5% of the income base (calculated on the date the payments are determined). If you choose not to receive annuity payments as guaranteed under the GMIB Plus II, you may elect any of the annuity options available under the contract. TERMINATING THE GMIB PLUS II RIDER. Except as otherwise provided in the GMIB Plus II rider, the GMIB Plus II will terminate upon the earliest of: a) The 30th day following the contract anniversary prior to your 91st birthday; b) The date you make a complete withdrawal of your account value (if there is an income base remaining you will receive payments based on the remaining income base); c) The date you elect to receive annuity payments under the contract and you do not elect to receive payments under the GMIB; d) Death of the owner or joint owner (unless the spouse (age 89 or younger) is the beneficiary and elects to continue the contract), or death of the annuitant if a non-natural person owns the contract; e) A change for any reason of the owner or joint owner or the annuitant, if a non-natural person owns the contract, subject to our administrative procedures; f) The effective date of the Guaranteed Principal Option; or g) The date you assign your contract, subject to our administrative procedures. When the GMIB Plus II rider terminates, the corresponding GMIB Plus II rider charge terminates and the GMIB Plus II investment allocation restrictions no longer apply. For contracts issued from February 24, 2009 through May 1, 2009, the following --------------------------------------------------------------- differences apply: (1) The annual increase rate is 6% through the contract anniversary immediately prior to your 91st birthday, and 0% per year thereafter. (2) If total withdrawals in a contract year are 6% or less of the Annual Increase Amount on the issue date or on the prior contract anniversary after the first contract year, and if these withdrawals are paid to you (or the annuitant if the contract is owned by a non-natural person) or to another payee we agree to, the total withdrawal adjustments for that contract year will be set equal to the dollar amount of total withdrawals in that contract year. (3) The fixed annuity options are the single life annuity with 10 years of annuity payments guaranteed (if you choose to start the Annuity Option after age 79, the year of the Guarantee Period component of the Annuity Option is reduced to: 9 years at age 80, 8 years at age 81, 7 years at age 82, 6 years at age 83, or 5 years at ages 84 through 90) or the joint and last survivor annuity with 10 years of annuity payments guaranteed (not available for Qualified Contracts where the difference in ages of the joint 43 annuitants is greater than 10 years; this limitation only applies to joint annuitants who are not spouses). (4) Different investment allocation restrictions apply. (See "Purchase - Investment Allocation Restrictions for Certain Riders.") (5) The GMIB Annuity Table is calculated based on the Annuity 2000 Mortality Table with a 7-year age set back with interest of 1.5% per annum. (6) The GMIB payout rates are enhanced to be at least (a) 6% of the income base (calculated on the date the payments are determined) in the event: (i) you begin withdrawals on or after your 62nd birthday; (ii) your account value is fully withdrawn or decreases to zero on or after your 62nd birthday and there is an income base remaining; and (iii) the annuity option you select is the single life annuity with 10 years of annuity payments guaranteed, or (b) 5% of the income base (calculated on the date the payments are determined) if: (i) you begin withdrawals on or after your 60th birthday; (ii) your account value is fully withdrawn or decreases to zero on or after your 60th birthday and there is an income base remaining; and (iii) the annuity option you select is the single life annuity with 10 years of annuity payments guaranteed. For contracts issued before February 24, 2009, differences (1) through (4) --------------------------------------------- above apply, and the following replaces differences (5) and (6): (5) The GMIB Annuity Table is calculated based on the Annuity 2000 Mortality Table with a 7-year age set back with interest of 2.5% per annum. (6) The GMIB payout rates are enhanced to be at least 6% of the income base (calculated on the date the payments are determined) in the event: (i) you begin withdrawals on or after your 60th birthday; (ii) your account value is fully withdrawn or decreases to zero on or after your 60th birthday and there is an income base remaining; and (iii) the annuity option you select is the single life annuity with 10 years of annuity payments guaranteed. (See Appendix C for examples illustrating the operation of the GMIB Plus II.) DESCRIPTION OF GMIB PLUS I In states where the GMIB Plus I has been approved and the GMIB Plus II has not been approved, the GMIB Plus I is available only for owners up through age 75, and you can only elect GMIB Plus I at the time you purchase the contract. GMIB Plus I may be exercised after a 10-year waiting period and then only within 30 days following a contract anniversary, provided that the exercise must occur no later than the 30-day period following the contract anniversary on or following the owner's 85th birthday. GMIB Plus I is otherwise identical to GMIB Plus II, with the following exceptions: (1) The GMIB Plus I Income Base is calculated as described above, except that the annual increase rate is 6% per year through the contract anniversary on or following the owner's 85th birthday and 0% thereafter. (2) An "Optional Step-Up" under the GMIB Plus II rider is referred to as an "Optional Reset" under the GMIB Plus I rider. An Optional Reset is permitted only if: (a) the account value exceeds the Annual Increase Amount immediately before the reset; and (b) the owner (or oldest joint owner or annuitant if the contract is owned by a non-natural person) is not older than age 75 on the date of the Optional Reset. (3) If your income base is increased due to an Optional Reset under the GMIB Plus I rider, we may increase the rider charge to the charge applicable to contract purchases of the same rider at the time of the increase, but to no more than a maximum of 1.50%. (4) The Guaranteed Principal Option may be exercised on each contract anniversary starting with the tenth contract anniversary and through the contract anniversary prior to the owner's 86th birthday. (5) We reserve the right to prohibit an Optional Reset if we no longer offer this benefit for this class of contract. We are waiving this right with respect to purchasers of the contract offered by this prospectus who elect or have elected the GMIB Plus I rider and will allow Optional Resets by those purchasers even if this benefit is no longer offered for this class of contract. (6) The fixed annuity options are the single life annuity with 10 years of annuity payments guaranteed (if you choose to start the Annuity Option after age 79, the year of the Guarantee Period component of the Annuity Option is reduced to: 9 years at age 80, 8 years at age 81, 7 years at age 82, 6 years at age 83, or 5 years at ages 84 and 85) or the joint and last survivor annuity with 10 years of annuity payments guaranteed (not available for Qualified Contracts where the difference in ages of the joint annuitants is greater than 44 10 years; this limitation only applies to joint annuitants who are not spouses). (7) Termination provision g) above does not apply, and the following replaces termination provision a), above: The 30th day following the contract anniversary on or following your 85th birthday. and the following replaces termination provision d), above: Death of the owner or joint owner (unless the spouse (age 84 or younger) is the beneficiary and elects to continue the contract), or death of the annuitant if a non-natural person owns the contract. (8) The GMIB Annuity Table is calculated based on the Annuity 2000 Mortality Table with a 7-year age set back with interest of 2.5% per annum. (9) If approved in your state, the GMIB payout rates are enhanced to be at least 6% of the income base (calculated on the date the payments are determined) in the event: (i) you begin withdrawals on or after your 60th birthday; (ii) your account value is fully withdrawn or decreases to zero on or after your 60th birthday and there is an income base remaining; and (iii) the annuity option you select is the single life annuity with 10 years of annuity payments guaranteed. (10) If you elect the GMIB Plus I, you are limited to allocating your purchase payments and account value among the fixed account and the following investment portfolios: (a) the MetLife Defensive Strategy Portfolio (b) the MetLife Moderate Strategy Portfolio (c) the MetLife Balanced Strategy Portfolio (d) the MetLife Growth Strategy Portfolio (e) the American Funds Moderate Allocation Portfolio (f) the American Funds Balanced Allocation Portfolio (g) the American Funds Growth Allocation Portfolio (h) the Met/Franklin Templeton Founding Strategy Portfolio (i) the SSgA Growth and Income ETF Portfolio (j) the SSgA Growth ETF Portfolio (k) the BlackRock Money Market Portfolio. If you elect the GMIB Plus I, you may not participate in the Dollar Cost Averaging (DCA) program. For contracts issued before July 16, 2007, the enhanced GMIB payout rates ----------------------------------------- described in item (9) above will not be applied. For contracts issued before February 26, 2007, we offered a version of the GMIB --------------------------------------------- Plus I that is no longer available. Under this prior version, when we calculate the Annual Increase Amount: (1) the annual increase rate is 5% per year through the contract anniversary on or following the owner's 85th birthday; and (2) the amount of total withdrawal adjustments for a contract year will be set equal to the dollar amount of total withdrawals in such contract year, provided that such total withdrawals do not exceed 5% of the Annual Increase Amount on the issue date or on the prior contract anniversary after the first contract year. The rider charge for this prior version of the GMIB Plus I is 0.75% of the income base (with a maximum charge of 1.50% of the income base applicable upon the exercise of the Optional Reset feature). (See Appendix D for examples of the GMIB.) For contracts issued before February 27, 2006, you may elect an Optional Reset --------------------------------------------- under the GMIB Plus I as described above, except that: 1) you may elect an Optional Reset on any contract anniversary only on or after the third contract anniversary, and you may then elect an Optional Reset at any subsequent contract anniversary only if it has been at least three years since the last Optional Reset; and 2) you are required to affirmatively elect an Optional Reset in accordance with the procedures described above; the Automatic Annual Step-Up feature is not available. By endorsement, we have enhanced your contract to change the frequency of the Optional Resets from every third contract anniversary to every contract anniversary. You will also be able to elect Automatic Annual Step-Ups, as described above. DESCRIPTION OF GMIB II The GMIB II rider is no longer available for sale, effective for contracts issued based on applications and necessary information received at our Annuity Service Center on and after May 4, 2009. In states where approved, GMIB II was available only for owners up through age 75, and you could only elect GMIB II at the time you purchased the contract. GMIB II may be exercised after a 10-year waiting period and then only 45 within 30 days following a contract anniversary, provided that the exercise must occur no later than the 30-day period following the contract anniversary on or following the owner's 85th birthday. GMIB II is otherwise identical to the GMIB Plus II, with the following exceptions: (1) The additional charge for GMIB II is lower (see "Expenses-Guaranteed Minimum Income Benefit-Rider Charge"). (2) The GMIB II Income Base is calculated as described above, except that, for purposes of calculating the Annual Increase Amount: a. the annual increase rate is 5% per year through the contract anniversary on or following the owner's 85th birthday and 0% thereafter, and b. the amount of total withdrawal adjustments for a contract year as calculated in paragraph (b)(ii)(2) of the "Income Base" section of "Description of GMIB Plus II" above will be set equal to the dollar amount of total withdrawals in such contract year provided that such total withdrawals do not exceed 5% of the Annual Increase Amount on the issue date or on the prior contract anniversary after the first contract year. (3) There is no Guaranteed Principal Option. (4) There is no Optional Reset feature. (5) The fixed annuity options are the single life annuity with 10 years of annuity payments guaranteed (if you choose to start the Annuity Option after age 79, the year of the Guarantee Period component of the Annuity Option is reduced to: 9 years at age 80, 8 years at age 81, 7 years at age 82, 6 years at age 83, or 5 years at ages 84 and 85) or the joint and last survivor annuity with 10 years of annuity payments guaranteed (not available for Qualified Contracts where the difference in ages of the joint annuitants is greater than 10 years; this limitation only applies to joint annuitants who are not spouses). (6) The GMIB Annuity Table is the Annuity 2000 Mortality Table with a 7-year age set back with interest of 2.5% per annum and GMIB payout rates are not enhanced. (7) The following replaces termination provision a), above: The 30th day following the contract anniversary on or following your 85th birthday. (8) The following replaces termination provision d), above: Death of the owner or joint owner (unless the spouse (age 84 or younger) is the beneficiary and elects to continue the contract), or death of the annuitant if a non-natural person owns the contract. (9) The following replaces termination provision e), above: A change for any reason of the owner or joint owner or the annuitant if a non-natural person owns the contract. (10) Termination provisions f) and g), above, do not apply. (11) There are no limitations to how you may allocate your purchase payments and account value among the investment portfolios, and you may participate in the Dollar Cost Averaging (DCA) program. (See Appendix C for examples illustrating the operation of GMIB II.) DESCRIPTION OF GMIB I The GMIB I rider is not available for sale. In states where approved, you could only elect the GMIB I rider at the time you purchased the contract and if you were age 75 or less. Once elected, the rider cannot be terminated except as described below. GMIB I may be exercised after a 10-year waiting period, up through age 85, within 30 days following a contract anniversary. GMIB I is identical to GMIB II, with the following exceptions: (1) The GMIB I Income Base is calculated as described above in "Description of GMIB Plus II-Income Base", except that: a) Withdrawals may be payable as you direct without affecting the withdrawal adjustments; b) The annual increase rate is 6% per year through the contract anniversary immediately prior to the owner's 81st birthday and 0% thereafter; and c) If total withdrawals in a contract year are 6% or less of the Annual Increase Amount on the issue date or previous contract anniversary, if later, the total withdrawal adjustments for that contract year will be 46 set equal to the dollar amount of total withdrawals in that contract year. (2) The following replaces termination provision d), above: Death of the owner or death of the annuitant if a non-natural person owns the contract. (3) If you take a full withdrawal of your account value, your contract is terminated by us due to its small account value and inactivity (see "Purchase - Purchase Payments"), or your contract lapses, the GMIB I rider terminates (even if there remains any income base) and no payments will be made under the rider. We currently waive the contractual requirement that terminates the GMIB I rider in the event of the death of the owner in circumstances where the spouse of the owner elects to continue the contract. (See "Death Benefit - General Death Benefit Provisions.") In such event, the GMIB I rider will automatically continue unless the spouse elects to terminate the rider. We are permanently waiving this requirement with respect to purchasers of the contract offered by this prospectus who have elected GMIB I. GUARANTEED WITHDRAWAL BENEFITS We offer optional guaranteed withdrawal benefit riders for an additional charge. There are four different versions of the GWB under this contract: Lifetime Withdrawal Guarantee II (LWG II), Lifetime Withdrawal Guarantee I (LWG I), Enhanced Guaranteed Withdrawal Benefit (Enhanced GWB), and Guaranteed Withdrawal Benefit I (GWB I). LWG I is only offered in states where LWG II has not yet been approved. GWB I is no longer available for purchase. Additionally, there may be versions of each rider that vary by issue date and state availability. Please check with your registered representative regarding which version(s) are available in your state. Each of the guaranteed withdrawal benefit riders guarantees that the entire amount of purchase payments you make will be returned to you through a series of withdrawals that you may begin taking immediately or at a later time, provided withdrawals in any contract year do not exceed the maximum amount allowed. This means that, regardless of negative investment performance, you can take specified annual withdrawals until the entire amount of the purchase payments you made during the time period specified in your rider has been returned to you. Moreover, if you make your first withdrawal on or after the date you reach age 59 1/2, the Lifetime Withdrawal Guarantee riders guarantee income, without annuitizing the contract, for your life (and the life of your spouse, if the Joint Life version of the rider was elected, and your spouse elects to continue the contract and is at least age 59 1/2 at continuation), even after the entire amount of purchase payments has been returned. (See "Description of the Lifetime Withdrawal Guarantee II" below.) If you purchase a guaranteed withdrawal benefit rider, you must elect one version at the time you purchase the contract, prior to age 86. You may not have this benefit and another living benefit (GMIB or GMAB) or the Enhanced Death Benefit rider in effect at the same time. Once elected, these riders may not be terminated except as stated below. FACTS ABOUT GUARANTEED WITHDRAWAL BENEFIT RIDERS MANAGING WITHDRAWALS. The GWB guarantee may be reduced if your annual withdrawals are greater than the maximum amount allowed, called the Annual Benefit Payment, which is described in more detail below. The GWB does not establish or guarantee an account value or minimum return for any investment portfolio. The Benefit Base (as described below) under the Enhanced GWB and GWB I, and the Remaining Guaranteed Withdrawal Amount (as described below) under the Lifetime Withdrawal Guarantee, cannot be taken as a lump sum. (However, if you cancel the Lifetime Withdrawal Guarantee riders after a waiting period of at least fifteen years, the Guaranteed Principal Adjustment will increase your account value to the purchase payments credited within the first 120 days of the date that we issue the contract, reduced proportionately for any withdrawals. See "Description of the Lifetime Withdrawal Guarantee II- Cancellation and Guaranteed Principal Adjustment" below.) Income taxes and penalties may apply to your withdrawals. IF IN ANY CONTRACT YEAR YOU TAKE CUMULATIVE WITHDRAWALS THAT EXCEED THE ANNUAL BENEFIT PAYMENT, THE TOTAL PAYMENTS THAT THE GWB GUARANTEES THAT YOU OR YOUR BENEFICIARY WILL RECEIVE FROM THE CONTRACT OVER TIME MAY BE LESS THAN THE INITIAL GUARANTEED WITHDRAWAL AMOUNT (TOTAL GUARANTEED WITHDRAWAL AMOUNT FOR THE LIFETIME WITHDRAWAL GUARANTEE RIDERS). THIS REDUCTION MAY BE SIGNIFICANT AND MEANS THAT RETURN OF YOUR PURCHASE PAYMENTS MAY BE LOST. THE GWB RIDER CHARGE WILL CONTINUE TO BE DEDUCTED AND CALCULATED BASED ON THE 47 GUARANTEED WITHDRAWAL AMOUNT (TOTAL GUARANTEED WITHDRAWAL AMOUNT FOR THE LIFETIME WITHDRAWAL GUARANTEE RIDERS) UNTIL TERMINATION OF THE RIDER. RIDER CHARGES. If a Lifetime Withdrawal Guarantee rider is in effect, we will continue to assess the GWB rider charge even in the case where your Remaining Guaranteed Withdrawal Amount, as described below, equals zero. However, if the Enhanced GWB or GWB I rider is in effect, we will not continue to assess the GWB rider charge if your Benefit Base, as described below, equals zero. TAXES. Withdrawals of taxable amounts will be subject to ordinary income tax and, if made prior to age 59 1/2, a 10% federal tax penalty may apply. TAX TREATMENT. THE TAX TREATMENT OF WITHDRAWALS UNDER THE GWB RIDERS IS UNCERTAIN. IT IS CONCEIVABLE THAT THE AMOUNT OF POTENTIAL GAIN COULD BE DETERMINED BASED ON THE BENEFIT BASE (REMAINING GUARANTEED WITHDRAWAL AMOUNT UNDER THE LIFETIME WITHDRAWAL GUARANTEE RIDERS) AT THE TIME OF THE WITHDRAWAL, IF THE BENEFIT BASE (OR REMAINING GUARANTEED WITHDRAWAL AMOUNT) IS GREATER THAN THE ACCOUNT VALUE. THIS COULD RESULT IN A GREATER AMOUNT OF TAXABLE INCOME REPORTED UNDER A WITHDRAWAL AND CONCEIVABLY A LIMITED ABILITY TO RECOVER ANY REMAINING BASIS IF THERE IS A LOSS ON SURRENDER OF THE CONTRACT. CONSULT YOUR TAX ADVISER PRIOR TO PURCHASE. GWB, LIFETIME WITHDRAWAL GUARANTEE AND DECEDENT CONTRACTS. The Lifetime Withdrawal Guarantee is not available for purchase under a decedent's Non-Qualified Contract (see "Federal Income Tax Status - Taxation of Non-Qualified Contracts") or IRA (or where otherwise offered, under any other contract which is being "stretched" by a beneficiary after the death of the owner or after the death of the annuitant in certain cases). Under the tax rules, such contracts generally require distributions to commence in accordance with tax regulations by the end of the calendar year following the year of the owner's death. However, these required distributions can in certain circumstances exceed the Annual Benefit Payment, and any such excess will have the effect of reducing the lifetime payments under the Lifetime Withdrawal Guarantee. Note that the Enhanced GWB and GWB I riders are not available for purchase by a beneficiary under a decedent's Non-Qualified Contract. (See Appendix D for examples of the GWB riders.) DESCRIPTION OF THE LIFETIME WITHDRAWAL GUARANTEE II In states where approved, the version of the Lifetime Withdrawal Guarantee II described below is available for contracts issued based on applications and necessary information that we receive in good order at our Annuity Service Center on and after May 4, 2009. In order for us to issue you the previous version of this rider (that has different investment allocation restrictions - see "Purchase - Investment Allocation Restrictions for Certain Riders"), we must receive your application and necessary information at our Annuity Service Center, in good order, before the close of the New York Stock Exchange on May 1, 2009. TOTAL GUARANTEED WITHDRAWAL AMOUNT. While the Lifetime Withdrawal Guarantee II rider is in effect, we guarantee that you will receive a minimum amount over time. We refer to this minimum amount as the TOTAL GUARANTEED WITHDRAWAL AMOUNT. The initial Total Guaranteed Withdrawal Amount is equal to your initial purchase payment. We increase the Total Guaranteed Withdrawal Amount (up to a maximum of $10,000,000) by each additional purchase payment. If you take a withdrawal that does not exceed the Annual Benefit Payment (see "Annual Benefit Payment" below), then we will not reduce the Total Guaranteed Withdrawal Amount. We refer to this type of withdrawal as a Non-Excess Withdrawal. IF, HOWEVER, YOU TAKE A WITHDRAWAL THAT RESULTS IN CUMULATIVE WITHDRAWALS FOR THE CURRENT CONTRACT YEAR THAT EXCEED THE ANNUAL BENEFIT PAYMENT, THEN WE WILL REDUCE THE TOTAL GUARANTEED WITHDRAWAL AMOUNT IN THE SAME PROPORTION THAT THE ENTIRE WITHDRAWAL REDUCED THE ACCOUNT VALUE. WE REFER TO THIS TYPE OF WITHDRAWAL AS AN EXCESS WITHDRAWAL. REMAINING GUARANTEED WITHDRAWAL AMOUNT. The REMAINING GUARANTEED WITHDRAWAL AMOUNT is the remaining amount you are guaranteed to receive over time. We increase the Remaining Guaranteed Withdrawal Amount (up to a maximum of $10,000,000) by additional purchase payments. If you take a Non-Excess Withdrawal, we will decrease the Remaining Guaranteed Withdrawal Amount by the amount of the Non-Excess Withdrawal. IF, HOWEVER, YOU TAKE AN EXCESS WITHDRAWAL, THEN WE WILL REDUCE THE REMAINING GUARANTEED 48 WITHDRAWAL AMOUNT IN THE SAME PROPORTION THAT THE WITHDRAWAL REDUCES THE ACCOUNT VALUE. 7.25% COMPOUNDING INCOME AMOUNT. On each contract anniversary until the earlier of: (a) the date of the second withdrawal from the contract or (b) the tenth contract anniversary, we increase the Total Guaranteed Withdrawal Amount and the Remaining Guaranteed Withdrawal Amount by an amount equal to 7.25% multiplied by the Total Guaranteed Withdrawal Amount and Remaining Guaranteed Withdrawal Amount before such increase (up to a maximum of $10,000,000). We may also increase the Total Guaranteed Withdrawal Amount and Remaining Guaranteed Withdrawal Amount by the Automatic Annual Step-Up (discussed below), if that would result in a higher Total Guaranteed Withdrawal Amount and Remaining Guaranteed Withdrawal Amount. ANNUAL BENEFIT PAYMENT. The initial ANNUAL BENEFIT PAYMENT is equal to the initial Total Guaranteed Withdrawal Amount multiplied by the 5% Withdrawal Rate (6% Withdrawal Rate if you make your first withdrawal on or after the date you reach age 76). If the Total Guaranteed Withdrawal Amount is later recalculated (for example, because of additional purchase payments, the 7.25% Compounding Income Amount, the Automatic Annual Step-Up, or Excess Withdrawals), the Annual Benefit Payment is reset equal to the new Total Guaranteed Withdrawal Amount multiplied by the 5% Withdrawal Rate (6% Withdrawal Rate if you make your first withdrawal on or after the date you reach age 76). IT IS IMPORTANT TO NOTE: o If you take your first withdrawal before the date you reach age 59 1/2, we will continue to pay the Annual Benefit Payment each year until the Remaining Guaranteed Withdrawal Amount is depleted, even if your account value declines to zero. This means if your account value is depleted due to a Non-Excess Withdrawal or the deduction of the rider charge, and your Remaining Guaranteed Withdrawal Amount is greater than zero, we will pay you the remaining Annual Benefit Payment, if any, not yet withdrawn during the contract year that the account value was depleted, and beginning in the following contract year, we will continue paying the Annual Benefit Payment to you each year until your Remaining Guaranteed Withdrawal Amount is depleted. This guarantees that you will receive your purchase payments regardless of market performance so long as you do not take Excess Withdrawals; however, you will not be guaranteed income for the rest of your life. o If you take your first withdrawal on or after the date you reach age 59 1/2, we will continue to pay the Annual Benefit Payment each year for the rest of your life (and the life of your spouse, if the Joint Life version of the rider was elected, and your spouse elects to continue the contract and is at least age 59 1/2 at continuation), even if your Remaining Guaranteed Withdrawal Amount and/or account value declines to zero. This means if your Remaining Guaranteed Withdrawal 49 Amount and/or your account value is depleted due to a Non-Excess Withdrawal or the deduction of the rider charge, we will pay to you the remaining Annual Benefit Payment, if any, not yet withdrawn during that contract year that the account value was depleted, and beginning in the following contract year, we will continue paying the Annual Benefit Payment to you each year for the rest of your life (and your spouse's life, if the Joint Life version of the rider was elected, and your spouse elects to continue the contract and is at least age 59 1/2 at continuation). Therefore, you will be guaranteed income for life. o If you take your first withdrawal on or after the date you reach age 76, your Annual Benefit payment will be set equal to a 6% Withdrawal Rate multiplied by the Total Guaranteed Withdrawal Amount. o IF YOU HAVE ELECTED THE LWG II, YOU SHOULD CAREFULLY CONSIDER WHEN TO BEGIN TAKING WITHDRAWALS. IF YOU BEGIN TAKING WITHDRAWALS TOO SOON, YOU MAY LIMIT THE VALUE OF THE LWG II. FOR EXAMPLE, WE NO LONGER INCREASE YOUR TOTAL GUARANTEED WITHDRAWAL AMOUNT BY THE 7.25% COMPOUNDING INCOME AMOUNT ONCE YOU MAKE YOUR SECOND WITHDRAWAL. HOWEVER, IF YOU DELAY TAKING WITHDRAWALS FOR TOO LONG, YOU MAY LIMIT THE NUMBER OF YEARS AVAILABLE FOR YOU TO TAKE WITHDRAWALS IN THE FUTURE (DUE TO LIFE EXPECTANCY) AND YOU MAY BE PAYING FOR A BENEFIT YOU ARE NOT USING. o At any time during the accumulation phase, you can elect to annuitize under current annuity rates in lieu of continuing the LWG II rider. Annuitization may provide higher income amounts if the current annuity option rates applied to the Adjusted Contract Value on the Annuity Date exceed the payments under the LWG II rider. Also, income amounts provided by annuitizing under current annuity rates may be higher due to different tax treatment of this income compared to the tax treatment of the payments received under the LWG II rider. (See "Federal Income Tax Status - Withdrawals.") MANAGING YOUR WITHDRAWALS. It is important that you carefully manage your annual withdrawals. To retain the full guarantees of this rider, your annual withdrawals cannot exceed the Annual Benefit Payment each contract year. In other words, you should not take Excess Withdrawals. IF YOU DO TAKE AN EXCESS WITHDRAWAL, WE WILL RECALCULATE THE TOTAL GUARANTEED WITHDRAWAL AMOUNT AND REDUCE THE ANNUAL BENEFIT PAYMENT TO THE NEW TOTAL GUARANTEED WITHDRAWAL AMOUNT MULTIPLIED BY THE 5% WITHDRAWAL RATE (6% WITHDRAWAL RATE IF YOU MAKE YOUR FIRST WITHDRAWAL ON OR AFTER THE DATE YOU REACH AGE 76). IN ADDITION, AS NOTED ABOVE, IF YOU TAKE AN EXCESS WITHDRAWAL, WE WILL REDUCE THE REMAINING GUARANTEED WITHDRAWAL AMOUNT IN THE SAME PROPORTION THAT THE WITHDRAWAL REDUCES THE ACCOUNT VALUE. THESE REDUCTIONS IN THE TOTAL GUARANTEED WITHDRAWAL AMOUNT, ANNUAL BENEFIT PAYMENT, AND REMAINING GUARANTEED WITHDRAWAL AMOUNT MAY BE SIGNIFICANT. You are still eligible to receive either lifetime payments or the remainder of the Remaining Guaranteed Withdrawal Amount so long as the withdrawal that exceeded the Annual Benefit Payment did not cause your account value to decline to zero. You can always take Non-Excess Withdrawals. However, if you choose to receive only a part of your Annual Benefit Payment in any given contract year, your Annual Benefit Payment is not cumulative and your Remaining Guaranteed Withdrawal Amount and Annual Benefit Payment will not increase. For example, since your Annual Benefit Payment is 5% of your Total Guaranteed Withdrawal Amount (or 6% if you make your first withdrawal on or after the date you reach age 76), you cannot withdraw 3% of the Total Guaranteed Withdrawal Amount in one year and then withdraw 7% of the Total Guaranteed Withdrawal Amount the next year without making an Excess Withdrawal in the second year. AUTOMATIC ANNUAL STEP-UP. On each contract anniversary prior to the owner's 91st birthday, an Automatic Annual Step-Up will occur, provided that the account value exceeds the Total Guaranteed Withdrawal Amount (after compounding) immediately before the step-up (and provided that you have not chosen to decline the step-up as described below). The Automatic Annual Step-Up: o resets the Total Guaranteed Withdrawal Amount and the Remaining Guaranteed Withdrawal Amount to the 50 account value on the date of the step-up, up to a maximum of $10,000,000, regardless of whether or not you have taken any withdrawals; o resets the Annual Benefit Payment equal to 5% of the Total Guaranteed Withdrawal Amount after the step-up (or 6% if you make your first withdrawal on or after the date you reach age 76); and o may reset the LWG II rider charge to a rate that does not exceed the lower of: (a) the Maximum Optional Step-Up Charge (1.60% for the Single Life version or 1.80% for the Joint Life version) or (b) the current rate that we charge for the same rider available for new contract purchases at the time of the Automatic Annual Step-Up. For contracts issued before February 24, 2009, the maximum charge upon an --------------------------------------------- Automatic Annual Step-Up is 1.25% (Single Life version) or 1.50% (Joint Life version). In the event that the charge applicable to contract purchases at the time of the step-up is higher than your current LWG II rider charge, we will notify you in writing a minimum of 30 days in advance of the applicable contract anniversary and inform you that you may choose to decline the Automatic Annual Step-Up. If you choose to decline the Automatic Annual Step-Up, you must notify us in accordance with our Administrative Procedures (currently we require you to submit your request in writing to our Annuity Service Center no less than seven calendar days prior to the applicable contract anniversary). Once you notify us of your decision to decline the Automatic Annual Step-Up, you will no longer be eligible for future Automatic Annual Step-Ups until you notify us in writing to our Annuity Service Center that you wish to reinstate the step-ups. This reinstatement will take effect at the next contract anniversary after we receive your request for reinstatement. Please note that the Automatic Annual Step-Up may be of limited benefit if you intend to make purchase payments that would cause your account value to approach $10,000,000, because the Total Guaranteed Withdrawal Amount and Remaining Guaranteed Withdrawal Amount cannot exceed $10,000,000. REQUIRED MINIMUM DISTRIBUTIONS. For IRAs and other contracts subject to Section 401(a)(9) of the Internal Revenue Code, you may be required to take withdrawals to fulfill minimum distribution requirements generally beginning at age 70 1/2. These required distributions may be larger than your Annual Benefit Payment. If you enroll in the Automated Required Minimum Distribution program and elect annual withdrawals, AFTER THE FIRST CONTRACT YEAR, we will increase your Annual Benefit Payment to equal your most recently calculated required minimum distribution amount, if such amount is greater than your Annual Benefit Payment. Otherwise, any cumulative withdrawals you make to satisfy your required minimum distribution amount will be treated as Excess Withdrawals if they exceed your Annual Benefit Payment. YOU MUST BE ENROLLED ONLY IN THE ---- AUTOMATED REQUIRED MINIMUM DISTRIBUTION PROGRAM TO QUALIFY FOR THIS INCREASE IN THE ANNUAL BENEFIT PAYMENT. YOU MAY NOT BE ENROLLED IN ANY OTHER SYSTEMATIC WITHDRAWAL PROGRAM. THE FREQUENCY OF YOUR WITHDRAWALS MUST BE ANNUAL. THE AUTOMATED REQUIRED MINIMUM DISTRIBUTION PROGRAM IS BASED ON INFORMATION RELATING TO THIS CONTRACT ONLY. To enroll in the Automated Required Minimum Distribution program, please contact our Annuity Service Center. INVESTMENT ALLOCATION RESTRICTIONS. If you elect the LWG II rider, there are certain investment allocation restrictions. Please see "Purchase - Investment Allocation Restrictions for Certain Riders" above. If you elect the LWG II, you may not participate in the Dollar Cost Averaging (DCA) program. JOINT LIFE VERSION. A Joint Life version of the LWG II rider is available for a charge of 1.50% (which may increase upon an Automatic Annual Step-Up to a maximum of 1.80%). Like the Single Life version of the LWG II rider, the Joint Life version must be elected at the time you purchase the contract, and the owner (or oldest joint owner) must be age 85 or younger. Under the Joint Life version, when the owner of the contract dies (or when the first joint owner dies), the LWG II rider will automatically remain in effect only if the spouse is the primary beneficiary and elects to continue the contract under the spousal continuation provisions. (See "Death Benefit-Spousal Continuation.") This means that if you purchase the Joint Life version and subsequently get divorced, or your spouse is no longer the primary beneficiary at the time of your death, he or she will not be eligible to receive payments under the LWG II rider. If the spouse is younger than age 59 1/2 when he or she elects to continue the contract, the spouse will receive the Annual Benefit Payment each year until the Remaining Guaranteed Withdrawal Amount is depleted. If the spouse is age 59 1/2 or older when he or she elects to continue the contract, the spouse will receive the Annual Benefit Payment each year 51 for the remainder of his or her life. If the first withdrawal was taken before the contract owner died (or before the first joint owner died), the Withdrawal Rate upon continuation of the contract and LWG II rider by the spouse will be based on the age of the contract owner, or oldest joint owner, at the time the first withdrawal was taken (see "Annual Benefit Payment" above). In situations in which a trust is both the owner and beneficiary of the contract, the Joint Life version of the LWG II would not apply. In addition, because of the definition of "spouse" under federal law, a purchaser who has or is contemplating a civil union or same sex marriage should note that such partner/spouse would not be able to receive continued payments after the death of the contract owner under the Joint Life version of the LWG II. For contracts issued prior to February 24, 2009, the current charge for the ----------------------------------------------- Joint Life version is 0.85% (which may increase upon an Automatic Annual Step-Up to a maximum of 1.50%). CANCELLATION AND GUARANTEED PRINCIPAL ADJUSTMENT. You may elect to cancel the LWG II rider on the contract anniversary every five contract years for the first 15 contract years and annually thereafter. We must receive your cancellation request within 30 days following the applicable contract anniversary in accordance with our Administrative Procedures (currently we require you to submit your request in writing to our Annuity Service Center). The cancellation will take effect upon our receipt of your request. If cancelled, the LWG II rider will terminate, we will no longer deduct the LWG II rider charge, and the investment allocation restrictions described in "Purchase - Investment Allocation Restrictions for Certain Riders" will no longer apply. The variable annuity contract, however, will continue. If you cancel the LWG II rider on the fifteenth contract anniversary or any contract anniversary thereafter, we will add a Guaranteed Principal Adjustment to your account value. The Guaranteed Principal Adjustment is intended to restore your initial investment in the contract in the case of poor investment performance. The Guaranteed Principal Adjustment is equal to (a) - (b) where: (a) is purchase payments credited within 120 days of the date that we issued the contract, reduced proportionately by the percentage reduction in account value attributable to any partial withdrawals taken and (b) is the account value on the date of cancellation. The Guaranteed Principal Adjustment will be added to each applicable investment portfolio in the ratio the portion of the account value in such investment portfolio bears to the total account value in all investment portfolios. The Guaranteed Principal Adjustment will never be less than zero. Only purchase payments made during the first 120 days that you hold the contract are taken into consideration in determining the Guaranteed Principal Adjustment. Contract owners who anticipate making purchase payments after 120 days should understand that such payments will not increase the Guaranteed Principal Adjustment. Purchase payments made after 120 days are added to your account value and impact whether or not a benefit is due. Therefore, the LWG II may not be appropriate for you if you intend to make additional purchase payments after the 120-day period and are purchasing the LWG II for its Guaranteed Principal Adjustment feature. TERMINATION OF THE LIFETIME WITHDRAWAL GUARANTEE II RIDER. The Lifetime Withdrawal Guarantee II rider will terminate upon the earliest of: (1) the date of a full withdrawal of the account value (a pro rata portion of the rider charge will be assessed; you are still eligible to receive either the Remaining Guaranteed Withdrawal Amount or lifetime payments, provided the withdrawal did not exceed the Annual Benefit Payment and the provisions and conditions of the rider have been met); (2) the date all of the account value is applied to an annuity option (a pro rata portion of the rider charge will be assessed); (3) the date there are insufficient funds to deduct the Lifetime Withdrawal Guarantee rider charge from the account value and your contract is thereby terminated (whatever account value is available will be applied to pay the rider charge and you are still eligible to receive either the Remaining Guaranteed Withdrawal Amount or lifetime payments, provided the provisions and conditions of the rider have been met; however, you will have no other benefits under the contract); (4) death of the owner or joint owner (or the annuitant if the owner is a non-natural person), except where the contract is issued under the Joint Life version of the Lifetime Withdrawal Guarantee, the primary beneficiary is the spouse, and the spouse elects to 52 continue the contract under the spousal continuation provisions of the contract; (5) change of the owner or joint owner for any reason (a pro rata portion of the rider charge will be assessed), subject to our administrative procedures; (6) the effective date of the cancellation of the rider; (7) termination of the contract to which the rider is attached (a pro rata portion of the rider charge will be assessed, except for a termination due to death); or (8) the date you assign your contract, subject to our administrative procedures (a pro rata portion of the rider charge will be assessed). Once the rider is terminated, the LWG II rider charge will no longer be deducted and the LWG II investment allocation restrictions will no longer apply. ADDITIONAL INFORMATION. The LWG II rider may affect the death benefit available under your contract. If the owner or joint owner should die while the LWG II rider is in effect, an alternate death benefit amount will be calculated under the LWG II rider that can be taken in a lump sum. The LWG II death benefit amount that may be taken as a lump sum will be equal to total purchase payments less any partial withdrawals (deducted on a dollar-for-dollar basis). If this death benefit amount is greater than the death benefit provided by your contract, and if you made no Excess Withdrawals, then this death benefit amount will be paid instead of the death benefit provided by the contract. All other provisions of your contract's death benefit will apply. Alternatively, the beneficiary may elect to receive the Remaining Guaranteed Withdrawal Amount as a death benefit, in which case we will pay the Remaining Guaranteed Withdrawal Amount on a monthly basis (or any mutually agreed upon frequency, but no less frequently than annually) until the Remaining Guaranteed Withdrawal Amount is exhausted. The beneficiary's withdrawal rights then come to an end. Currently, there is no minimum dollar amount for the payments; however, we reserve the right to accelerate any payment, in a lump sum, that is less than $500 (see below). This death benefit will be paid instead of the applicable contractual death benefit or the additional death benefit amount calculated under the LWG II as described above. Otherwise, the provisions of those contractual death benefits will determine the amount of the death benefit. Except as may be required by the Internal Revenue Code, an annual payment will not exceed the Annual Benefit Payment. If your beneficiary dies while such payments are made, we will continue making the payments to the beneficiary's estate unless we have agreed to another payee in writing. If the contract is a Non-Qualified Contract, any death benefit must be paid out over a time period and in a manner that satisfies Section 72(s) of the Internal Revenue Code. If the owner (or the annuitant, if the owner is not a natural person) dies prior to the "annuity starting date" (as defined under the Internal Revenue Code and regulations thereunder), the period over which the Remaining Guaranteed Withdrawal Amount is paid as a death benefit cannot exceed the remaining life expectancy of the payee under the appropriate IRS tables. For purposes of the preceding sentence, if the payee is a non-natural person, the Remaining Guaranteed Withdrawal Amount must be paid out within 5 years from the date of death. Payments under this death benefit must begin within 12 months following the date of death. We reserve the right to accelerate any payment, in a lump sum, that is less than $500 or to comply with requirements under the Internal Revenue Code (including minimum distribution requirements for IRAs and other contracts subject to Section 401(a)(9) of the Internal Revenue Code and Non-Qualified Contracts subject to Section 72(s)). If you terminate the LWG II rider because (1) you make a total withdrawal of your account value; (2) your account value is insufficient to pay the LWG II rider charge; or (3) the contract owner dies, except where the beneficiary or joint owner is the spouse of the owner and the spouse elects to continue the contract, you may not make additional purchase payments under the contract. DESCRIPTION OF THE LIFETIME WITHDRAWAL GUARANTEE I In states where the Lifetime Withdrawal Guarantee II is not yet approved, we offer (in states where approved) the Lifetime Withdrawal Guarantee I rider. The Lifetime Withdrawal Guarantee I rider is identical to the Lifetime Withdrawal Guarantee II, with the exceptions described below. TOTAL GUARANTEED WITHDRAWAL AMOUNT. The maximum Total Guaranteed Withdrawal Amount for the Lifetime Withdrawal Guarantee I rider is $5,000,000. If you elect the Lifetime Withdrawal Guarantee I rider and take an Excess Withdrawal, we will reduce the Total Guaranteed Withdrawal Amount by an amount equal to the difference between the Total Guaranteed Withdrawal 53 Amount after the withdrawal and the account value after the withdrawal (if lower). On the other hand, if you elect the LWG II rider and take an Excess Withdrawal, we will reduce the Total Guaranteed Withdrawal Amount in the same proportion that the withdrawal reduces the account value. REMAINING GUARANTEED WITHDRAWAL AMOUNT. The maximum Remaining Guaranteed Withdrawal Amount for the Lifetime Withdrawal Guarantee I rider is $5,000,000. If you elect the Lifetime Withdrawal Guarantee I rider and take a withdrawal, we will reduce the Remaining Guaranteed Withdrawal Amount by the amount of each withdrawal regardless of whether it is an Excess or Non-Excess withdrawal. However, if the withdrawal is an Excess Withdrawal, then we will additionally reduce the Remaining Guaranteed Withdrawal Amount to equal the difference between the Remaining Guaranteed Withdrawal Amount after the withdrawal and the account value after the withdrawal (if lower). On the other hand, if you elect the LWG II rider and take a withdrawal, we will reduce the Remaining Guaranteed Withdrawal Amount by the amount of each withdrawal for withdrawals that are Non-Excess Withdrawals and for Excess Withdrawals, we will reduce the Remaining Guaranteed Withdrawal Amount in the same proportion that the withdrawal reduces the account value. COMPOUNDING INCOME AMOUNT. If you elect the Lifetime Withdrawal Guarantee I rider, on each contract anniversary until the earlier of: (a) the date of the first withdrawal from the contract or (b) the tenth contract anniversary, we ----- increase the Total Guaranteed Withdrawal Amount and the Remaining Guaranteed Withdrawal Amount by an amount equal to 5% multiplied by the Total Guaranteed Withdrawal Amount and Remaining Guaranteed Withdrawal Amount before such increase. On the other hand, if you elect the LWG II rider, on each contract anniversary until the earlier of: (a) the date of the second withdrawal from ------ the contract or (b) the tenth contract anniversary, we increase the Total Guaranteed Withdrawal Amount and the Remaining Guaranteed Withdrawal Amount by an amount equal to 7.25% multiplied by the Total Guaranteed Withdrawal Amount and Remaining Guaranteed Withdrawal Amount before such increase. ANNUAL BENEFIT PAYMENT. Under the Lifetime Withdrawal Guarantee I, the Annual Benefit Payment is set equal to the Total Guaranteed Withdrawal Amount multiplied by the 5% Withdrawal Rate (there is no 6% Withdrawal Rate for taking later withdrawals). AUTOMATIC ANNUAL STEP-UP. If an Automatic Annual Step-Up occurs under the Lifetime Withdrawal Guarantee I rider, we may increase the Lifetime Withdrawal Guarantee I rider charge to the charge applicable to current contract purchases of the same rider at the time of the step-up, but to no more than a maximum of 0.95% (Single Life version) or 1.40% (Joint Life version) of the Total Guaranteed Withdrawal Amount. Automatic Annual Step-Ups may occur on each contract anniversary prior to the owner's 86th birthday. RIDER CHARGE. The charge for the Lifetime Withdrawal Guarantee I rider is 0.50% (Single Life version) or 0.70% (Joint Life version) of the Total Guaranteed Withdrawal Amount (see "Expenses - Guaranteed Withdrawal Benefit - Rider Charge"). INVESTMENT ALLOCATION RESTRICTIONS. If you elect the Lifetime Withdrawal Guarantee I rider, you are limited to allocating your purchase payments and account value among the fixed account and the following investment portfolios: (a) the MetLife Defensive Strategy Portfolio (b) the MetLife Moderate Strategy Portfolio (c) the MetLife Balanced Strategy Portfolio (d) the MetLife Growth Strategy Portfolio (e) the American Funds Moderate Allocation Portfolio (f) the American Funds Balanced Allocation Portfolio (g) the American Funds Growth Allocation Portfolio (h) the Met/Franklin Templeton Founding Strategy Portfolio (i) the SSgA Growth and Income ETF Portfolio (j) the SSgA Growth ETF Portfolio (k) the BlackRock Money Market Portfolio. You may also elect to participate in the DCA program, provided that your destination investment portfolios are one or more of the above listed investment portfolios. DESCRIPTION OF THE ENHANCED GUARANTEED WITHDRAWAL BENEFIT BENEFIT BASE. The Guaranteed Withdrawal Amount is the maximum TOTAL amount of money that you are guaranteed 54 to receive over time under the Enhanced GWB rider. At issue, the Guaranteed Withdrawal Amount and the Benefit Base are both equal to your initial purchase payment plus the GWB Bonus Amount. At any subsequent point in time, the BENEFIT BASE is the remaining amount of money that you are guaranteed to receive through withdrawals under the Enhanced GWB rider. Your Benefit Base will change with each purchase payment, or as the result of an Optional Reset. Also, each withdrawal will reduce your Benefit Base. If negative investment performance reduces your account value below the Benefit Base, you are still guaranteed to be able to withdraw the entire amount of your Benefit Base. The Benefit Base is equal to: o Your initial purchase payment, increased by the 5% GWB Bonus Amount; o Increased by each subsequent purchase payment, and by the 5% GWB Bonus Amount; o Reduced dollar for dollar by Benefits Paid, which are withdrawals and amounts applied to an annuity option (currently, you may not apply amounts less than your entire account value to an annuity option); and o If a Benefit Paid from your contract is not payable to the contract owner or the contract owner's bank account (or to the annuitant or the annuitant's bank account, if the owner is a non-natural person), or results in cumulative Benefits Paid for the current contract year exceeding the Annual Benefit Payment, and the resulting Benefit Base exceeds the account value, an additional reduction in the Benefit Base will be made. This additional reduction will be equal to the difference between the Benefit Base and your account value after the decrease for the Benefits Paid. The Benefit Base will also be reset as a result of an Optional Reset as described below. (See section D of Appendix D for examples of how withdrawals affect the Benefit Base.) ANNUAL BENEFIT PAYMENT. The ANNUAL BENEFIT PAYMENT is the maximum amount of your Benefit Base you may withdraw each contract year without adversely impacting the amount guaranteed to be available to you through withdrawals over time. The initial Annual Benefit Payment is equal to the initial Benefit Base multiplied by the GWB WITHDRAWAL RATE (7%). The Annual Benefit Payment is reset after each subsequent purchase payment to the greater of: (1) the Annual Benefit Payment before the subsequent purchase payment, and (2) the GWB Withdrawal Rate multiplied by the Benefit Base after the subsequent purchase payment. The Annual Benefit Payment will also be reset as a result of an Optional Reset as described below. You can continue to receive annual withdrawals in an amount equal to or less than your Annual Benefit Payment until your Benefit Base is depleted. MANAGING YOUR WITHDRAWALS. It is important that you carefully manage your annual withdrawals. To retain the guarantees of this rider, your annual withdrawals cannot exceed the Annual Benefit Payment each contract year. If a withdrawal from your contract does result in annual withdrawals during a contract year exceeding the Annual Benefit Payment, or if the withdrawal is not payable to the contract owner or the contract owner's bank account (or to the annuitant or the annuitant's bank account, if the owner is a non-natural person), the Annual Benefit Payment will be recalculated and may be reduced. The new Annual Benefit Payment will equal the lower of (1) the Annual Benefit Payment before the withdrawal and (2) your account value after the decrease for the withdrawal multiplied by the GWB Withdrawal Rate. This reduction may be significant. Furthermore, because the GWB rider charge is assessed as a percentage of the Guaranteed Withdrawal Amount, any decrease of the Annual Benefit Payment caused by an excess withdrawal results in an increase in the cost of the rider relative to the benefits you will receive. (See sections E and F of Appendix D for examples of how withdrawals and subsequent purchase payments affect the Annual Benefit Payment.) You can always take annual withdrawals less than the Annual Benefit Payment. However, if you choose to receive only a part of, or none of, your Annual Benefit Payment in any given contract year, your Annual Benefit Payment is not cumulative and your Benefit Base and Annual Benefit Payment will not increase. For example, if your Annual Benefit Payment is 7% of your Benefit Base and you withdraw only 4% one year, you cannot then withdraw 10% the next year without exceeding your Annual Benefit Payment. REQUIRED MINIMUM DISTRIBUTIONS. For IRAs and other contracts subject to Section 401(a)(9) of the Internal Revenue Code, you may be required to take withdrawals to fulfill minimum distribution requirements generally beginning at age 70 1/2. These required distributions may be larger than your Annual Benefit Payment. If you enroll in 55 the Automated Required Minimum Distribution program and elect annual withdrawals, AFTER THE FIRST CONTRACT YEAR, we will increase your Annual Benefit Payment to equal your most recently calculated required minimum distribution amount, if such amount is greater than your Annual Benefit Payment. Otherwise, any cumulative withdrawals you make to satisfy your required minimum distribution amount will be treated as Excess Withdrawals if they exceed your Annual Benefit Payment. YOU MUST BE ENROLLED ONLY IN THE ---- AUTOMATED REQUIRED MINIMUM DISTRIBUTION PROGRAM TO QUALIFY FOR THIS INCREASE IN THE ANNUAL BENEFIT PAYMENT. YOU MAY NOT BE ENROLLED IN ANY OTHER SYSTEMATIC WITHDRAWAL PROGRAM. THE FREQUENCY OF YOUR WITHDRAWALS MUST BE ANNUAL. THE AUTOMATED REQUIRED MINIMUM DISTRIBUTION PROGRAM IS BASED ON INFORMATION RELATING TO THIS CONTRACT ONLY. To enroll in the Automated Required Minimum Distribution program, please contact our Annuity Service Center. GUARANTEED WITHDRAWAL AMOUNT. We assess the GWB rider charge as a percentage of the GUARANTEED WITHDRAWAL AMOUNT, which is initially set at an amount equal to your initial purchase payment plus the GWB Bonus Amount. The Guaranteed Withdrawal Amount may increase with subsequent purchase payments. In this case, the Guaranteed Withdrawal Amount will be reset equal to the greater of: (1) the Guaranteed Withdrawal Amount before the purchase payment and (2) the Benefit Base after the purchase payment. Withdrawals do not decrease the Guaranteed Withdrawal Amount. The Guaranteed Withdrawal Amount will also be reset as a result of an Optional Reset as described below. If your Guaranteed Withdrawal Amount increases, the amount of the Enhanced GWB rider charge we deduct will increase because the rider charge is a percentage of your Guaranteed Withdrawal Amount. OPTIONAL RESET. At any contract anniversary prior to the 86th birthday of the owner (or oldest joint owner or annuitant if the contract is owned by a non-natural person), you may elect an Optional Reset. The purpose of an Optional Reset is to "lock-in" a higher Benefit Base, which may increase the amount of the Annual Benefit Payment and lengthen the period of time over which these withdrawals can be taken. We reserve the right to prohibit an Optional Reset election if we no longer offer this benefit. An Optional Reset will: o Reset your Guaranteed Withdrawal Amount and Benefit Base equal to the account value on the date of the reset; o Reset your Annual Benefit Payment equal to the account value on the date of the reset multiplied by the GWB Withdrawal Rate (7%); and o Reset the Enhanced GWB rider charge equal to the then current level we charge for the same rider at the time of the reset, up to the maximum charge of 1.00%. You may elect either a one-time Optional Reset or Automatic Annual Resets. A one-time Optional Reset is permitted only if: (1) your account value is larger than the Benefit Base immediately before the reset, and (2) the reset occurs prior to the 86th birthday of the owner (or oldest joint owner or annuitant if the contract is owned by a non-natural person). We must receive your request for a one-time Optional Reset in accordance with our administrative procedures (currently we require you to submit your request in writing to our Annuity Service Center) before the applicable contract anniversary. The Optional Reset will take effect on the next contract anniversary following our receipt of your written request. If you elect Automatic Annual Resets, a reset will occur automatically on any contract anniversary if: (1) your account value is larger than the Guaranteed Withdrawal Amount immediately before the reset, and (2) the contract anniversary is prior to the 86th birthday of the owner (or oldest joint owner or annuitant if the contract is owned by a non-natural person). The same conditions will apply to each Automatic Annual Reset. In the event that the charge applicable to contract purchases at the time of the Automatic Annual Reset is higher than your current Enhanced GWB rider charge, we will notify you in writing a minimum of 30 days in advance of the applicable contract anniversary and inform you that you may choose to decline the Automatic Annual Reset. You may discontinue Automatic Annual Resets by notifying us in writing, at our Annuity Service Center (or by any other method acceptable to us), prior to the contract anniversary on which a reset may otherwise occur. If you discontinue the Automatic Annual Resets, no reset will occur automatically on any subsequent contract anniversary unless you make a new election under the terms described above. (If you discontinue Automatic Annual Resets, the Enhanced GWB rider (and the rider 56 charge) will continue, and you may choose to elect a one-time Optional Reset or reinstate Automatic Annual Resets.) It is possible to elect a one-time Optional Reset when the account value is larger than the Benefit Base but smaller than the Guaranteed Withdrawal Amount. (By contrast, an Automatic Annual Reset will never occur if the the account value is smaller than the Guaranteed Withdrawal Amount.) If you elect a one-time Optional Reset when the account value before the reset was less than the Guaranteed Withdrawal Amount, you would lock in a higher Benefit Base, which would increase the total amount you are guaranteed to receive through withdrawals under the Enhanced GWB rider, and extend the period of time over which you could make those withdrawals. However, you would also decrease the Annual Benefit Payment and the Guaranteed Withdrawal Amount. You should consider electing a one-time Optional Reset when your account value is smaller than the Guaranteed Withdrawal Amount only if you are willing to accept the decrease in the Annual Benefit Payment and Guaranteed Withdrawal Amount in return for locking in the higher Benefit Base. Otherwise, you should only elect a one-time Optional Reset when your account value is larger than the Guaranteed Withdrawal Amount. Any benefit of a one-time Optional Reset or Automatic Annual Reset also depends on the current Enhanced GWB rider charge. If the current charge in effect at the time of the reset is higher than the charge you are paying, it may not be beneficial to elect a reset because we will begin applying the higher current charge at the time of the reset (even if a one-time Optional Reset results in a decrease of your Annual Benefit Payment and/or your Guaranteed Withdrawal Amount). For contracts issued prior to July 16, 2007, you may elect an Optional Reset ------------------------------------------- beginning with the third contract anniversary (as long as it is prior to the owner's 86th birthday) and at any subsequent contract anniversary prior to the owner's 86th birthday as long as it has been at least three years since the last Optional Reset. Automatic Annual Resets are not available. CANCELLATION OF THE ENHANCED GWB RIDER. You may elect to cancel the Enhanced GWB rider in accordance with our Administrative Procedures (currently we require you to submit your cancellation request in writing to our Annuity Service Center) during the 90-day period following your fifth contract anniversary. Such cancellation will take effect upon our receipt of your request. If cancelled, the Enhanced GWB rider will terminate and we will no longer deduct the Enhanced GWB rider charge. The variable annuity contract, however, will continue. If you cancel the Enhanced GWB rider, you may not re-elect it. TERMINATION OF THE ENHANCED GWB RIDER. The Enhanced GWB rider will terminate upon the earliest of: (1) the date you make a full withdrawal of your account value; (2) the date you apply all of your account value to an annuity option; (3) the date there are insufficient funds to deduct the Enhanced GWB rider charge from your account value (whatever account value is available will be applied to pay the annual Enhanced GWB rider charge); (4) the date we receive due proof of the owner's death and a beneficiary claim form, except where the beneficiary or joint owner is the spouse of the owner and the spouse elects to continue the contract and the spouse is less than 85 years old, or the annuitant dies if the owner is a non-natural person; note: (a) if the spouse elects to continue the contract (so long as the spouse is less than 85 years old and the Enhanced GWB rider is in effect at the time of continuation), all terms and conditions of the Enhanced GWB rider will apply to the surviving spouse; and (b) we will not terminate the rider until we receive both due proof of the owner's death and a beneficiary claim form (from certain beneficiaries, such as a trust, we may require additional information, such as the trust document), which means we will continue to deduct the Enhanced GWB rider charge until we receive this information; (5) a change of the owner or joint owner (or the annuitant if the owner is a non-natural person) for any reason; (6) the effective date of cancellation of the rider; or (7) the termination of your contract. ADDITIONAL INFORMATION. If you take a full withdrawal of your account value and the withdrawal does not exceed the Annual Benefit Payment, or your account value is reduced to zero because you do not have a sufficient account value to pay the Enhanced GWB rider charge and your Benefit Base after the withdrawal is greater than zero, we will commence making payments to the owner or joint owner (or to the annuitant if the owner is a non-natural person) on a monthly basis (or any mutually agreed upon 57 frequency, but not less frequently than annually) until the Benefit Base is exhausted. Your withdrawal rights then come to an end. Currently, there is no minimum dollar amount for the payments; however, we reserve the right to accelerate any payment, in a lump sum, that is less than $500 (see below). The total annual payments cannot exceed the Annual Benefit Payment, except to the extent required under the Internal Revenue Code. If you or the joint owner (or the annuitant if the owner is a non-natural person) should die while these payments are being made, your beneficiary will receive these payments. No other death benefit will be paid. If the owner or joint owner (or the annuitant if the owner is a non-natural person) should die while the Enhanced GWB rider is in effect, your beneficiary may elect to receive the Benefit Base as a death benefit in lieu of any other contractual death benefits. Otherwise, the provisions of those death benefits will determine the amount of the death benefit and no benefit will be payable under the Enhanced GWB rider. If the beneficiary elects the Benefit Base as a death benefit, we will pay the remaining Benefit Base on a monthly basis (or any mutually agreed upon frequency, but no less frequently than annually) until the Benefit Base is exhausted. Except as may be required by the Internal Revenue Code, an annual payment will not exceed the Annual Benefit Payment. If your beneficiary dies while such payments are made, we will continue making the payments to the beneficiary's estate unless we have agreed to another payee in writing. If the contract is a Non-Qualified Contract, any death benefit must be paid out over a time period and in a manner that satisfies Section 72(s) of the Internal Revenue Code. If the owner (or the annuitant, if the owner is not a natural person) dies prior to the "annuity starting date" (as defined under the Internal Revenue Code and regulations thereunder), the period over which the Benefit Base is paid as a death benefit cannot exceed the remaining life expectancy of the payee under the appropriate IRS tables. For purposes of the preceding sentence, if the payee is a non-natural person, the Benefit Base must be paid out within 5 years from the date of death. Payments under this death benefit must begin within 12 months following the date of death. We reserve the right to accelerate any payment, in a lump sum, that is less than $500 or to comply with requirements under the Internal Revenue Code (including minimum distribution requirements for IRAs and other contracts subject to Section 401(a)(9) of the Internal Revenue Code and Non-Qualified Contracts subject to Section 72(s)). If you terminate the Enhanced GWB rider because (1) you make a total withdrawal of your account value; (2) your account value is insufficient to pay the Enhanced GWB rider charge; or (3) the contract owner or joint owner (or the annuitant, if the owner is a non-natural person) dies, except where the beneficiary or joint owner is the spouse of the owner and the spouse elects to continue the contract and the spouse is less than 85 years old, you may not make additional purchase payments under the contract. DESCRIPTION OF THE GUARANTEED WITHDRAWAL BENEFIT I The GWB I rider is no longer available for purchase. The GWB I rider is the same as the Enhanced GWB rider described above with the following differences: (1) there is no favorable treatment of required minimum distributions; (2) the GWB I rider charge continues even if your Benefit Base equals zero; (3) you may only elect the Optional Reset once every five contract years instead of every contract year; (4) the GWB I rider charge is 0.50% and the maximum GWB I rider charge upon an Optional Reset is 0.95%; and (5) you do not have the ability to cancel the rider following your fifth contract anniversary. By endorsement, the GWB I rider has been enhanced so that items (1) and (2) above no longer apply and the interval between Optional Resets in item (3) has been decreased to every three contract years. You may now elect an Optional Reset under the GWB I starting with the third contract anniversary (as long as it is prior to the owner's 86th birthday), and you may elect an Optional Reset at any subsequent contract anniversary prior to the owner's 86th birthday, as long as it has been at least three years since the last Optional Reset. GUARANTEED MINIMUM ACCUMULATION BENEFIT The Guaranteed Minimum Accumulation Benefit (GMAB) rider is no longer available for sale, effective for applications and necessary paperwork received on and after May 4, 2009. The GMAB guarantees that your account value will not be less than a minimum amount at the end of a specified number of years (the "Rider Maturity Date"). If your account value is less than the minimum guaranteed amount 58 at the Rider Maturity Date, we will apply an additional amount to increase your account value so that it is equal to the guaranteed amount. If you have elected the GMAB rider, we require you to allocate your purchase payments and all of your account value to one of the MetLife Asset Allocation --- Program portfolios available in your contract (the MetLife Aggressive Strategy and the MetLife Growth Strategy Portfolios are not available for this purpose).No transfers are permitted while this rider is in effect. The MetLife Asset Allocation Program portfolio you choose will determine the percentage of purchase payments that equals the guaranteed amount. The MetLife Asset Allocation Program portfolios available if you chose the GMAB rider, the percentage of purchase payments that determines the guaranteed amount, and the number of years to the Rider Maturity Date for each, are:
Guaranteed Amount Years to (% of Purchase Rider Portfolio Payments) Maturity Date ------------------- ---------------- -------------- MetLife Defensive Strategy Portfolio 130% 10 years MetLife Moderate Strategy Portfolio 120% 10 years MetLife Balanced Strategy Portfolio 110% 10 years
For more information about the MetLife Asset Allocation Program portfolios, please see "Investment Options - Description of the MetLife Asset Allocation Program" and the prospectus for the MetLife Asset Allocation Program portfolios. This benefit is intended to protect you against poor investment performance during the accumulation phase of your contract. You may not have this benefit and a GMIB or GWB rider or the Enhanced Death Benefit rider in effect at the same time. BENEFIT DESCRIPTION. The GMAB rider guarantees that at the Rider Maturity Date, your account value will at least be equal to a percentage of the purchase payments you made during the first 120 days that you held the contract (the "GMAB Eligibility Period"), less reductions for any withdrawals that you made at any time before the Rider Maturity Date. The percentage of purchase payments made that determines the guaranteed amount range from 110% to 130%, depending on the MetLife Asset Allocation Program portfolio you selected. This guaranteed amount is the "GUARANTEED ACCUMULATION AMOUNT." The Guaranteed Accumulation Amount is used only to determine the amount of any benefit payable under the GMAB feature and the amount of the annual charge for the GMAB. There is a maximum Guaranteed Accumulation Amount for your contract that is shown on your contract schedule page (currently $5 million). Purchase payments made after this maximum Guaranteed Accumulation Amount is reached will not increase the Guaranteed Accumulation Amount above the maximum. However, if you make a withdrawal of account value during the GMAB Eligibility Period that reduces the Guaranteed Accumulation Amount below the maximum, then purchase payments you make AFTER the withdrawal, and during the GMAB Eligibility Period, will increase the Guaranteed Accumulation Amount until it reaches the maximum. Only purchase payments made during the first 120 days that you hold the contract are taken into consideration in determining the Guaranteed Accumulation Amount. If you anticipate making purchase payments after 120 days, you should understand that such payments will not increase the Guaranteed Accumulation Amount. Purchase payments made after 120 days are added to your account value and impact whether or not a benefit is due under the GMAB feature at the Rider Maturity Date. On your contract's issue date, the Guaranteed Accumulation Amount is equal to a percentage of your initial purchase payment. Subsequent purchase payments made during the GMAB Eligibility Period increase the Guaranteed Accumulation Amount by the percentage amount of the purchase payment (subject to the limit described above) depending on which MetLife Asset Allocation Program portfolio you have selected. When you make a withdrawal from the contract, the Guaranteed Accumulation Amount is reduced in the same proportion that the amount of the withdrawal bears to the total account value. EXAMPLE: Assume your account value is $100,000 and your Guaranteed Accumulation Amount is $120,000, prior to making a $10,000 withdrawal from the contract. The withdrawal amount is 10% of the account value. Therefore, after the withdrawal, your account value would be $90,000 and your Guaranteed Accumulation Amount would be $108,000 (90% of $120,000). The Guaranteed Accumulation Amount does not represent an amount of money available for withdrawal and is not 59 used to calculate any benefits under the contract prior to the Rider Maturity Date. At the Rider Maturity Date, after deduction of the annual charge for the GMAB rider, we will compare your contract's account value to its Guaranteed Accumulation Amount. If the account value is less than the Guaranteed Accumulation Amount, we will contribute to your account value the amount needed to make it equal the Guaranteed Accumulation Amount. (This added amount is the "Guaranteed Accumulation Payment.") The Guaranteed Accumulation Payment is allocated entirely to the MetLife Asset Allocation Program portfolio you have selected. If your account value is greater than or equal to the Guaranteed Accumulation Amount at the Rider Maturity Date, then no Guaranteed Accumulation Payment will be paid into your account value. The GMAB rider terminates at the Rider Maturity Date. We will not deduct the GMAB rider charge after that date, and the related investment requirements and restrictions will no longer apply. If your account value is reduced to zero for any reason other than a full withdrawal of the account value or application of the entire account value to an annuity option, but your contract has a positive Guaranteed Accumulation Amount remaining, the contract and the GMAB rider will remain in force. No charge for the GMAB rider will be deducted or accrue while there is insufficient account value to cover the deductions for the charge. At the Rider Maturity Date, the Guaranteed Accumulation Payment will be paid into the account value. Purchase payments made after the 120 day GMAB Eligibility Period may have a significant impact on whether or not a Guaranteed Accumulation Payment is due at the Rider Maturity Date. Even if purchase payments made during the 120 day GMAB Eligibility Period lose significant value, if the account value, which includes all purchase payments, is equal to or greater than the Guaranteed --- Accumulation Amount, which is a percentage of your purchase payments made during the 120 day period, then no Guaranteed Accumulation Payment is made. Therefore, the GMAB rider may not be appropriate for you if you intend to make additional purchase payments after the GMAB Eligibility Period. EXAMPLE: Assume that you make one $10,000 purchase payment during the 120 day GMAB Eligibility Period and you select the MetLife Balanced Strategy Porfolio. Therefore, the Guaranteed Accumulation Amount is $11,000 (110% of your $10,000 purchase payment). Assume that at the Rider Maturity Date, your account value is $0. The Guaranteed Accumulation Payment is $11,000 ($11,000 - $0 = $11,000). In contrast, assume that you make one $10,000 purchase payment during the 120 day GMAB Eligibility Period and you select the MetLife Balanced Strategy Porfolio. Therefore, the Guaranteed Accumulation Amount is $11,000. Also assume that on the day before the Rider Maturity Date your account value is $0. Assume that you decide to make one purchase payment on the day before the Rider Maturity Date of $11,000. At the Rider Maturity Date, assume there has not been any positive or negative investment experience for the one day between your purchase payment and the Rider Maturity Date. Consequently, your account value is $11,000. We would not pay a Guaranteed Accumulation Payment because the account value of $11,000 is equal to the Guaranteed Accumulation Amount of $11,000 ($11,000 - $11,000 = $0). RIDER TERMINATION. The GMAB rider will terminate at the earliest of: (1) the Rider Maturity Date; (2) the date you surrender the contract; (3) the date you cancel the GMAB rider, as described below; (4) the date you apply all of your account value to an annuity option; and (5) the date of death of the owner or joint owner (or annuitant if the owner is a non-natural person), unless the beneficiary is the spouse of the owner and elects to continue the contract under the spousal continuation provisions of the contract. Once the rider is terminated, the GMAB rider charge will no longer be deducted and the related investment requirements and limitations will no longer apply. If the rider is terminated before the Rider Maturity Date, the Guaranteed Accumulation Payment will not be paid. CANCELLATION. You have a one-time right to cancel this optional benefit to take effect on your fifth contract 60 anniversary. We must receive your request in writing within the 90-day period after your fifth contract anniversary. Such cancellation will take effect upon our receipt of your request. Once you have cancelled the GMAB rider, you will no longer be eligible to receive the Guaranteed Accumulation Payment or be bound by the investment requirements and restrictions, and we will no longer deduct the charge for this rider. GMAB AND DECEDENT CONTRACTS. The GMAB is not available for purchase by a beneficiary under a decedent's Non-Qualified Contract (see "Federal Income Tax Status - Taxation of Non-Qualified Contracts") or IRA contract (or where otherwise offered, under any other contract which is being "stretched" by a beneficiary after the death of the owner or after the death of the annuitant in certain cases) because, under tax rules, such contracts generally require distributions to commence by the end of the calendar year following the year of the owner's death and such distributions will have the effect of reducing the usefulness of the GMAB. 61 SUMMARY OF LIVING BENEFIT RIDERS The chart below highlights certain differences among the living benefit riders. Please refer to the detailed descriptions above for specific information about the features, costs and restrictions associated with the riders.*
INCOME GUARANTEES GMIB PLUS I & II LIFETIME INCOME Yes (after waiting period) BENEFIT RIDER INVOLVES Yes ANNUITIZATION WITHDRAWALS PERMITTED/1/ Prior to annuitization WAITING PERIOD Must wait 10 years to annuitize under rider; Optional Step-Up/2/ restarts waiting period; withdrawals available immediately RESET/STEP-UP Yes MAY INVEST IN VARIABLE Prior to annuitization INVESTMENT OPTIONS INVESTMENT ALLOCATION Yes REQUIREMENTS ABILITY TO CANCEL RIDER Yes, after 10 years, can take lump-sum option under the GPO provisions DEATH BENEFIT Prior to annuitization, contract death benefit available/3/ CURRENT RIDER CHARGES/4/ GMIB Plus II: 1.00%; GMIB Plus I: 0.80% WITHDRAWAL GUARANTEES LIFETIME WITHDRAWAL GUARANTEE I & II ENHANCED GWB LIFETIME INCOME Yes (if first withdrawal on or No after age 59 1/2) BENEFIT RIDER INVOLVES No No ANNUITIZATION WITHDRAWALS PERMITTED/1/ Yes Yes WAITING PERIOD None (age 59 1/2 for lifetime None withdrawals) RESET/STEP-UP Yes Yes MAY INVEST IN VARIABLE Yes Yes INVESTMENT OPTIONS INVESTMENT ALLOCATION Yes No REQUIREMENTS ABILITY TO CANCEL RIDER Yes, at 5th, 10th & 15th Yes, within 90 days after 5th contract anniversary, annually contract anniversary thereafter; or, lump-sum option under the GPA provisions after 15 years DEATH BENEFIT Contract death benefit or Ability to receive Benefit Base alternate rider death benefit in series of payments instead of available; ability to receive contract death benefit Remaining Guaranteed Withdrawal Amount in series of payments instead of contract death benefit CURRENT RIDER CHARGES/4/ LWG II: 1.25% (Single Life 0.55% version) or 1.50% (Joint Life version); LWG I: 0.50% (Single Life version) or 0.70% (Joint Life version)
-------- * For descriptions of the GMIB I, GMIB II, and GWB I riders, which are no longer available as of May 4, 2009, please see "Living Benefits" above. (1) Withdrawals will reduce the living and death benefits and account value. (2) For GMIB Plus I, the Optional Step-Up is called the "Optional Reset." (3) If the contract is annuitized, annuity payments may be guaranteed for a certain period of time (depending on the annuity option selected) and therefore payable upon death of the annuitant. See "Annuity Payments (The Income Phase)" and the rider descriptions for more information. (4) Certain rider charges may increase upon an Optional Step-Up or Optional Reset. Generally, rider charges are assessed as a percentage of the guaranteed benefit rather than account value. For example, the charge for GMIB Plus II is 1.00% of the income base. See the Expenses section and the individual rider descriptions for more information. 62 8. PERFORMANCE We periodically advertise subaccount performance relating to the investment portfolios. We will calculate performance by determining the percentage change in the value of an accumulation unit by dividing the increase (decrease) for that unit by the value of the accumulation unit at the beginning of the period. This performance number reflects the deduction of the Separate Account product charges (including certain death benefit rider charges) and the investment portfolio expenses. It does not reflect the deduction of any applicable account fee or applicable optional rider charges. The deduction of these charges would reduce the percentage increase or make greater any percentage decrease. Any advertisement will also include total return figures which reflect the deduction of the Separate Account product charges (including certain death benefit rider charges), account fee, applicable optional rider charges, and the investment portfolio expenses. For periods starting prior to the date the contract was first offered, the performance will be based on the historical performance of the corresponding investment portfolios for the periods commencing from the date on which the particular investment portfolio was made available through the Separate Account. In addition, the performance for the investment portfolios may be shown for the period commencing from the inception date of the investment portfolios. These figures should not be interpreted to reflect actual historical performance of the Separate Account. We may, from time to time, include in our advertising and sales materials performance information for funds or investment accounts related to the investment portfolios and/or their investment advisers or subadvisers. Such related performance information also may reflect the deduction of certain contract charges. We may also include in our advertising and sales materials tax deferred compounding charts and other hypothetical illustrations, which may include comparisons of currently taxable and tax deferred investment programs, based on selected tax brackets. We may advertise the living benefit and death benefit riders using illustrations showing how the benefit works with historical performance of specific investment portfolios or with a hypothetical rate of return (which rate will not exceed 12%) or a combination of historical and hypothetical returns. These illustrations will reflect the deduction of all applicable charges including the portfolio expenses of the underlying investment portfolios. You should know that for any performance we illustrate, future performance will vary and results shown are not necessarily representative of future results. 9. DEATH BENEFIT UPON YOUR DEATH If you die during the accumulation phase, we will pay a death benefit to your beneficiary(ies). The Principal Protection is the standard death benefit for your contract. At the time you purchase the contract, depending on availability in your state, you can select the optional Annual Step-Up Death Benefit rider, the Compounded-Plus Death Benefit rider, or the Enhanced Death Benefit rider and you can also select the Additional Death Benefit-Earnings Preservation Benefit. If you are 80 years old or older at the effective date of your contract, you are not eligible to select the Annual Step-Up Death Benefit rider, the Compounded-Plus Death Benefit rider or the Earnings Preservation Benefit. If you are 76 years old or older at the effective date of your contract, you are not eligible to select the Enhanced Death Benefit rider. For contracts issued prior to May 1, 2003, the Annual Step-Up is the standard death benefit for your contract. The death benefits are described below. Check your contract and riders for the specific provisions applicable. One or more optional death benefits may not be available in your state (check with your registered representative regarding availability). The death benefit is determined as of the end of the business day on which we receive both due proof of death and an election for the payment method. Where there are multiple beneficiaries, the death benefit will only be determined as of the time the first beneficiary submits the necessary documentation in good order. If the death benefit payable is an amount that exceeds the account value on the day it is determined, we will apply to the contract an amount equal to the difference between the death benefit payable and the account value, in accordance with the current allocation of the account value. This death benefit amount remains in the investment portfolios until each of the other beneficiaries submits the necessary documentation in good order to claim his/her death benefit. (See "General Death Benefit Provisions" below.) Any death 63 benefit amounts held in the investment portfolios on behalf of the remaining beneficiaries are subject to investment risk. There is no additional death benefit guarantee. If you have a joint owner, the death benefit will be paid when the first owner dies. Upon the death of either owner, the surviving joint owner will be the primary beneficiary. Any other beneficiary designation will be treated as a contingent beneficiary, unless instructed otherwise. If a non-natural person owns the contract, the annuitant will be deemed to be the owner in determining the death benefit. If there are joint owners, the age of the oldest owner will be used to determine the death benefit amount. STANDARD DEATH BENEFIT - PRINCIPAL PROTECTION The death benefit will be the greater of: (1) the account value; or (2) total purchase payments, reduced proportionately by the percentage reduction in account value attributable to each partial withdrawal. If the owner is a natural person and the owner is changed to someone other than a spouse, the death benefit amount will be determined as defined above; however, subsection (2) will be changed to provide as follows: "the account value as of the effective date of the change of owner, increased by purchase payments received after the date of the change of owner, reduced proportionately by the percentage reduction in account value attributable to each partial withdrawal made after such date." In the event that a beneficiary who is the spouse of the owner elects to continue the contract in his or her name after the owner dies, the death benefit amount will be determined in accordance with (1) or (2) above. (See Appendix E for examples of the Principal Protection death benefit rider.) OPTIONAL DEATH BENEFIT - ANNUAL STEP-UP If you select the Annual Step-Up death benefit rider, the death benefit will be the greatest of: (1) the account value; or (2) total purchase payments, reduced proportionately by the percentage reduction in account value attributable to each partial withdrawal; or (3) the highest anniversary value, as defined below. On the date we issue your contract, the highest anniversary value is equal to your initial purchase payment. Thereafter, the highest anniversary value (as recalculated) will be increased by subsequent purchase payments and reduced proportionately by the percentage reduction in account value attributable to each subsequent partial withdrawal. On each contract anniversary prior to your 81st birthday, the highest anniversary value will be recalculated and set equal to the greater of the highest anniversary value before the recalculation or the account value on the date of the recalculation. If the owner is a natural person and the owner is changed to someone other than a spouse, the death benefit is equal to the greatest of (1), (2) or (3); however, for purposes of calculating (2) and (3) above: o Subsection (2) is changed to provide: "The account value as of the effective date of the change of owner, increased by purchase payments received after the date of change of owner, and reduced proportionately by the percentage reduction in account value attributable to each partial withdrawal made after such date"; and o for subsection (3), the highest anniversary value will be recalculated to equal your account value as of the effective date of the change of owner. In the event that a beneficiary who is the spouse of the owner elects to continue the contract in his or her name after the owner dies, the death benefit is equal to the greatest of (1), (2) or (3). (See Appendix E for examples of the Annual Step-Up death benefit rider.) OPTIONAL DEATH BENEFIT - ENHANCED DEATH BENEFIT In states where approved, the version of the Enhanced Death Benefit described below is available for contracts issued based on applications and necessary information that we receive in good order at our Annuity Service Center on and after May 4, 2009. In order for us to issue you the previous version of this rider (that has a lower charge and different features), we must receive your application and necessary information at our Annuity Service Center, in good order, before the close of the New York Stock Exchange on May 1, 2009. In states where approved, you may select the Enhanced Death Benefit rider (subject to investment allocation restrictions) if you are age 75 or younger at the effective date of your contract and you either (a) have not elected any living benefit rider or (b) have elected the GMIB Plus II rider. 64 If you select the Enhanced Death Benefit rider, the amount of the death benefit will be the greater of: (1) the account value; or (2) the death benefit base. The DEATH BENEFIT BASE provides protection against adverse investment experience. It guarantees that the death benefit will not be less than the greater of: (1) the highest account value on any anniversary (adjusted for withdrawals), or (2) the amount of your initial investment (adjusted for withdrawals), accumulated at 5% per year. The death benefit base is the greater of (a) or (b) below: (a) Highest Anniversary Value: On the date we issue your contract, the Highest Anniversary Value is equal to your initial purchase payment. Thereafter, the Highest Anniversary Value will be increased by subsequent purchase payments and reduced proportionately by the percentage reduction in account value attributable to each partial withdrawal. The percentage reduction in account value is the dollar amount of the withdrawal divided by the account value immediately preceding such withdrawal. On each contract anniversary prior to your 81st birthday, the Highest Anniversary Value will be recalculated to equal the greater of the Highest Anniversary Value before the recalculation or the account value on the date of the recalculation. (b) Annual Increase Amount: On the date we issue your contract, the Annual Increase Amount is equal to your initial purchase payment. All purchase payments received within 120 days of the date we issue your contract will be treated as part of the initial purchase payment for this purpose. Thereafter, the Annual Increase Amount is equal to (i) less (ii), where: (i) is purchase payments accumulated at the annual increase rate. The annual increase rate is 5% per year through the contract anniversary immediately prior to your 91st birthday, and 0% per year thereafter; and (ii) is withdrawal adjustments accumulated at the annual increase rate. The annual increase rate is 5% per year through the contract anniversary immediately prior to your 91st birthday, and 0% per year thereafter. The withdrawal adjustment for any partial withdrawal in a contract year is equal to the Annual Increase Amount immediately prior to the withdrawal multiplied by the percentage reduction in account value attributable to that partial withdrawal. However, (1) if the partial withdrawal occurs before the contract anniversary immediately prior to your 91st birthday; (2) if all partial withdrawals in a contract year are payable to the owner (or the annuitant if the owner is a non-natural person) or other payees that we agree to; and (3) if total partial withdrawals in a contract year are not greater than 5% of the Annual Increase Amount on the previous contract anniversary, the total withdrawal adjustments for that contract year will be set equal to the dollar amount of total partial withdrawals in that contract year and will be treated as a single withdrawal at the end of that contract year. The Highest Anniversary Value does not change after the contract anniversary immediately preceding the owner's 81st birthday, except that it is increased for each subsequent purchase payment and reduced proportionately by the percentage reduction in account value attributable to each subsequent withdrawal. The Annual Increase Amount does not change after the contract anniversary immediately preceding the owner's 91st birthday, except that it is increased for each subsequent purchase payment and reduced by the withdrawal adjustments described in (b)(ii) above. For contracts issued based on applications and necessary information received ----------------------------------------------------------------------------- in good order at our Annuity Service Center on or before May 1, 2009, we -------------------------------------------------------------------- offered a version of the Enhanced Death Benefit rider that is no longer available. The prior version is the same as the current version except that: (1) the annual increase rate for the Annual Increase Amount and for withdrawal adjustments is 6% with respect to (b)(i) and (ii) above; (2) different investment allocation restrictions apply (see "Purchase - Investment Allocation Restrictions for Certain Riders"); and (3) different rider charges apply (see "Expenses - Death Benefit Rider Charges"). OPTIONAL STEP-UP. On each contract anniversary on or after the first anniversary following the effective date of the rider, you may elect an Optional Step-Up provided that (1) the account value exceeds the Annual Increase Amount immediately before the Optional Step-Up; and (2) the owner (or oldest joint owner or annuitant if the contract is 65 owned by a non-natural person) is not older than age 80 on the date of the Optional Step-Up. We must receive your request to exercise the Optional Step-Up in writing, at our Annuity Service Center, or any other method acceptable to us. We must receive your request prior to the contract anniversary for an Optional Step-Up to occur on that contract anniversary. The Optional Step-Up will: (a) Reset the Annual Increase Amount to the account value on the contract anniversary following the receipt of an Optional Step-Up election; and (b) Reset the Enhanced Death Benefit rider charge to a rate we shall determine that does not exceed the maximum Optional Step-Up charge (1.50%), provided that this rate will not exceed the rate currently applicable to the same rider available for new contract purchases at the time of the step-up. On the date of the Optional Step-Up, the account value on that day will be treated as a single purchase payment received on the date of the step-up for purposes of determining the Annual Increase Amount after the step-up. All purchase payments and withdrawal adjustments previously used to calculate the Annual Increase Amount will be set equal to zero on the date of the Optional Step-Up. When you elect the Optional Step-Up, provided the above requirements are met, you may elect either: 1) a one time Optional Step-Up at any contract anniversary; or 2) Optional Step-Ups to occur under the Automatic Annual Step-Up (on any contract anniversary while this election is in effect, the Annual Increase Amount will reset to the account value automatically). In the event that the charge applicable to contract purchases at the time of the step-up is higher than your current Enhanced Death Benefit rider charge, you will be notified in writing a minimum of 30 days in advance of the applicable contract anniversary and be informed that you may choose to decline the Automatic Annual Step-Up. If you decline the Automatic Annual Step-Up, you must notify us in accordance with our Administrative Procedures (currently we require you to submit your request in writing to our Annuity Service Center no less than seven calendar days prior to the applicable contract anniversary). Once you notify us of your decision to decline the Automatic Annual Step-Up, you will no longer be eligible for future Automatic Annual Step-Ups until you notify us in writing to our Annuity Service Center that you wish to reinstate the Automatic Annual Step-Ups. This reinstatement will take effect at the next contract anniversary after we receive your request for reinstatement. If you have also elected the GMIB Plus II rider and you elect Optional Step-Ups to occur under the Automatic Annual Step-up, it will remain in effect through the seventh contract anniversary following the date you make the election. You may make a new election if you want Automatic Annual Step-Ups to continue after the seventh contract anniversary. You may discontinue Automatic Annual Step-Ups at any time by notifying us in writing, at our Annuity Service Center (or by any other method acceptable to us), at least 30 days prior to the contract anniversary following the date you make this election. If you discontinue Automatic Annual Step-Ups, the Enhanced Death Benefit rider (and the rider charge) will continue, and you may choose to elect a one time Optional Step-Up or reinstate Automatic Annual Step-Ups as described above. INVESTMENT ALLOCATION RESTRICTIONS. If you select the Enhanced Death Benefit rider, there are certain investment allocation restrictions. (See "Purchase - Investment Allocation Restrictions for Certain Riders.") If you elect the Enhanced Death Benefit, you may not participate in the Dollar Cost Averaging (DCA) program. TERMINATION OF THE ENHANCED DEATH BENEFIT. The Enhanced Death Benefit will terminate upon the earliest of: a) The date you make a total withdrawal of your account value (a pro rata portion of the rider charge will be assessed); b) The date there are insufficient funds to deduct the Enhanced Death Benefit rider charge from your account value; c) The date you annuitize your contract (a pro rata portion of the rider charge will be assessed); d) A change of the owner or joint owner (or annuitant if the owner is a non-natural person), subject to our administrative procedures; e) The date you assign your contract, subject to our administrative procedures; 66 f) The date the death benefit amount is determined (excluding the determination of the death benefit amount under the spousal continuation option); or g) Termination of the contract to which this rider is attached. (See Appendix E for examples of the Enhanced Death Benefit.) OPTIONAL DEATH BENEFIT - COMPOUNDED-PLUS In states where the Compounded-Plus death benefit rider has been approved and the Enhanced Death Benefit has not been approved, you may select the Compounded-Plus death benefit rider if you are age 79 or younger at the effective date of your contract. If you select the Compounded-Plus death benefit rider, the death benefit will be the greater of: (1) the account value; or (2) the greater of (a) or (b) below: (a) Highest Anniversary Value: On the date we issue your contract, the highest anniversary value is equal to your initial purchase payment. Thereafter, the highest anniversary value (as recalculated) will be increased by subsequent purchase payments and reduced proportionately by the percentage reduction in account value attributable to each subsequent partial withdrawal. On each contract anniversary prior to your 81st birthday, the highest anniversary value will be recalculated and set equal to the greater of the highest anniversary value before the recalculation or the account value on the date of the recalculation. (b) Annual Increase Amount: On the date we issue your contract, the annual increase amount is equal to your initial purchase payment. Thereafter, the annual increase amount is equal to (i) less (ii), where: (i) is purchase payments accumulated at the annual increase rate. The annual increase rate is 5% per year through the contract anniversary immediately prior to your 81st birthday, and 0% per year thereafter; and (ii) is withdrawal adjustments accumulated at the annual increase rate. A withdrawal adjustment is equal to the value of the annual increase amount immediately prior to a withdrawal multiplied by the percentage reduction in account value attributable to that partial withdrawal. If the owner is a natural person and the owner is changed to someone other than a spouse, the death benefit is equal to the greatest of (1) or (2); however, for purposes of calculating the enhanced death benefit under (2) above: (a) for the highest anniversary value, the highest anniversary value will be recalculated to equal your account value as of the effective date of the owner change; and (b) for the annual increase amount, the current annual increase amount will be reset to equal your account value as of the effective date of the owner change. For purposes of the calculation of the annual increase amount thereafter, the account value on the effective date of the owner change will be treated as the initial purchase payment and purchase payments received and partial withdrawals taken prior to the change of owner will not be taken into account. In the event that a beneficiary who is the spouse of the owner elects to continue the contract in his or her name after the owner dies, the death benefit amount is equal to the greater of (1) or (2). (See Appendix E for examples of the Compounded-Plus death benefit rider.) ADDITIONAL DEATH BENEFIT - EARNINGS PRESERVATION BENEFIT The Additional Death Benefit - Earnings Preservation Benefit pays an additional death benefit that is intended to help pay part of the income taxes due at the time of death of the owner or joint owner. The benefit is only available up through age 79 (on the contract issue date). In certain situations, this benefit may not be available for qualified plans (check with your registered representative for details). Before the contract anniversary immediately prior to your 81st birthday, the additional death benefit is equal to the "benefit percentage" (determined in accordance with the table below) times the result of (a) - (b), where: (a) is the death benefit under your contract; and (b) is total purchase payments not withdrawn. For purposes of calculating this value, partial withdrawals are first applied against earnings in the contract, and then against purchase payments not withdrawn. 67 On or after the contract anniversary immediately prior to your 81st birthday, the additional death benefit is equal to the "benefit percentage" (determined in accordance with the table below) times the result of (a) - (b), where: (a) is the death benefit on the contract anniversary immediately prior to your 81st birthday, increased by subsequent purchase payments and reduced proportionately by the percentage reduction in account value attributable to each subsequent partial withdrawal; and (b) is total purchase payments not withdrawn. For purposes of calculating this value, partial withdrawals are first applied against earnings in the contract, and then against purchase payments not withdrawn. Benefit Percentage Issue Age Percentage ---------------------- Ages 69 or younger 40% Ages 70-79 25% Ages 80 and above 0%
If the owner is a natural person and the owner is changed to someone other than a spouse, the additional death benefit is as defined above; however, for the purposes of calculating subsection (b) above "total purchase payments not withdrawn" will be reset to equal the account value as of the effective date of the owner change, and purchase payments received and partial withdrawals taken prior to the change of owner will not be taken into account. In the event that a beneficiary who is the spouse of the owner elects to continue the contract in his or her name after the owner dies, the additional death benefit will be determined and payable upon receipt of due proof of death of the first spousal beneficiary. Alternatively, the spousal beneficiary may elect to have the additional death benefit determined and added to the account value upon the election, in which case the additional death benefit rider will terminate (and the corresponding death benefit rider charge will also terminate). GENERAL DEATH BENEFIT PROVISIONS The death benefit amount remains in the Separate Account until distribution begins. From the time the death benefit is determined until complete distribution is made, any amount in the Separate Account will continue to be subject to investment risk. This risk is borne by the beneficiary. Please check with your registered representative regarding the availability of the following in your state. If the beneficiary under a tax qualified contract is the annuitant's spouse, the tax law generally allows distributions to begin by the year in which the annuitant would have reached 70 1/2 (which may be more or less than five years after the annuitant's death). A beneficiary must elect the death benefit to be paid under one of the payment options (unless the owner has previously made the election). The entire death benefit must be paid within five years of the date of death unless the beneficiary elects to have the death benefit payable under an annuity option. The death benefit payable under an annuity option must be paid over the beneficiary's lifetime or for a period not extending beyond the beneficiary's life expectancy. For non-qualified contracts, payment must begin within one year of the date of death. For tax qualified contracts, payment must begin no later than the end of the calendar year immediately following the year of death. We may also offer a payment option, for both non-tax qualified contracts and certain tax qualified contracts, under which your beneficiary may receive payments, over a period not extending beyond his or her life expectancy, under a method of distribution similar to the distribution of required minimum distributions from Individual Retirement Accounts. If this option is elected, we will issue a new contract to your beneficiary in order to facilitate the distribution of payments. Your beneficiary may choose any optional death benefit available under the new contract. Upon the death of your beneficiary, the death benefit would be required to be distributed to your beneficiary's beneficiary at least as rapidly as under the method of distribution in effect at the time of your beneficiary's death. (See "Federal Income Tax Status.") To the extent permitted under the tax law, and in accordance with our procedures, your designated beneficiary is permitted under our procedures to make additional purchase payments consisting of monies which are direct transfers (as permitted under tax law) from other tax qualified or non-tax qualified contracts, depending on which type of contract you own, held in the name of the decedent. Your beneficiary is also permitted to choose some of the optional benefits available under the contract, but certain contract provisions or programs may not be available. 68 If a lump sum payment is elected and all the necessary requirements are met, the payment will be made within 7 days. Payment to the beneficiary under an annuity option may only be elected during the 60 day period beginning with the date we receive due proof of death. If the owner or a joint owner, who is not the annuitant, dies during the income phase, any remaining payments under the annuity option elected will continue at least as rapidly as under the method of distribution in effect at the time of the owner's death. Upon the death of the owner or a joint owner during the income phase, the beneficiary becomes the owner. SPOUSAL CONTINUATION If the primary beneficiary is the spouse of the owner, upon the owner's death, the beneficiary may elect to continue the contract in his or her own name. Upon such election, the account value will be adjusted upward (but not downward) to an amount equal to the death benefit amount determined upon such election and receipt of due proof of death of the owner. Any excess of the death benefit amount over the account value will be allocated to each applicable investment portfolio and/or the fixed account in the ratio that the account value in the investment portfolio and/or the fixed account bears to the total account value. The terms and conditions of the contract that applied prior to the owner's death will continue to apply, with certain exceptions described in the contract. For purposes of the death benefit on the continued contract, the death benefit is calculated in the same manner as it was prior to continuation except that all values used to calculate the death benefit, which may include a highest anniversary value and/or an annual increase amount (depending on whether you elected an optional death benefit), are reset on the date the spouse continues the contract. Spousal continuation will not satisfy minimum required distribution rules for Qualified Contracts other than IRAs (see "Federal Income Tax Status"). Because the contract proceeds must be distributed within the time periods required by the federal Internal Revenue Code, the right of a spouse to continue the contract, and all contract provisions relating to spousal continuation are available only to a person who is defined as a "spouse" under the federal Defense of Marriage Act, or any other applicable federal law. Therefore, under current federal law, a purchaser who has or is contemplating a civil union or same sex marriage should note that the rights of a spouse under the spousal continuation provisions of this contract will not be available to such partner or same sex marriage spouse. Accordingly, a purchaser who has or is contemplating a civil union or same sex marriage should note that such partner/spouse would not be able to receive continued payments after the death of the contract owner under the Joint Life version of the Lifetime Withdrawal Guarantee (see "Living Benefits - Guaranteed Withdrawal Benefits"). DEATH OF THE ANNUITANT If the annuitant, not an owner or joint owner, dies during the accumulation phase, you automatically become the annuitant. You can select a new annuitant if you do not want to be the annuitant (subject to our then current underwriting standards). However, if the owner is a non- natural person (for example, a trust), then the death of the primary annuitant will be treated as the death of the owner, and a new annuitant may not be named. Upon the death of the annuitant after annuity payments begin, the death benefit, if any, will be as provided for in the annuity option selected. Death benefits will be paid at least as rapidly as under the method of distribution in effect at the annuitant's death. CONTROLLED PAYOUT You may elect to have the death benefit proceeds paid to your beneficiary in the form of annuity payments for life or over a period of time that does not exceed your beneficiary's life expectancy. This election must be in writing in a form acceptable to us. You may revoke the election only in writing and only in a form acceptable to us. Upon your death, the beneficiary cannot revoke or modify your election. The Controlled Payout is only available to Non-Qualified Contracts (see "Federal Income Tax Status"). 10. FEDERAL INCOME TAX STATUS The following discussion is general in nature and is not intended as tax advice. Each person concerned should consult a competent tax adviser. No attempt is made to consider any applicable state tax or other tax laws, or to address any state and local estate, inheritance and other tax consequences of ownership or receipt of distributions under a contract. When you invest in an annuity contract, you usually do not pay taxes on your investment gains until you withdraw the money, generally for retirement purposes. If you invest in 69 an annuity contract as part of an individual retirement plan, pension plan or employer-sponsored retirement program, your contract is called a "Qualified Contract." The tax rules applicable to Qualified Contracts vary according to the type of retirement plan and the terms and conditions of the plan. You should note that for any Qualified Contract, the tax deferred accrual feature is provided by the tax qualified retirement plan, and as a result there should be reasons other than tax deferral for acquiring the contract within a qualified plan. If your annuity is independent of any formal retirement or pension plan, it is termed a "Non-Qualified Contract." Under current federal income tax law, the taxable portion of distributions under variable annuity contracts and qualified plans (including IRAs) is not eligible for the reduced tax rate applicable to long-term capital gains and qualifying dividends. TAXATION OF NON-QUALIFIED CONTRACTS NON-NATURAL PERSON. If a non-natural person (e.g., a trust) owns a Non-Qualified Contract, the taxpayer generally must include in income any increase in the excess of the account value over the investment in the contract (generally, the premiums or other consideration paid for the contract) during the taxable year. There are some exceptions to this rule and a prospective owner that is not a natural person should discuss these with a tax adviser. The following discussion generally applies to Non-Qualified Contracts owned by natural persons. WITHDRAWALS. When a withdrawal from a Non-Qualified Contract occurs, the amount received will be treated as ordinary income subject to tax up to an amount equal to the excess (if any) of the account value immediately before the distribution over the owner's investment in the contract (generally, the premiums or other consideration paid for the contract, reduced by any amount previously distributed from the contract that was not subject to tax) at that time. In the case of a surrender under a Non-Qualified Contract, the amount received generally will be taxable only to the extent it exceeds the owner's investment in the contract. In the case of a withdrawal under a Qualified Contract, a ratable portion of the amount received is taxable, generally based on the ratio of the "investment in the contract" to the individual's total account balance or accrued benefit under the retirement plan. The "investment in the contract" generally equals the amount of any non-deductible purchase payments paid by or on behalf of any individual. In many cases, the "investment in the contract" under a Qualified Contract can be zero. It is conceivable that certain benefits or the charges for certain benefits such as any of the guaranteed death benefits (including, but not limited to, the Earnings Preservation Benefit) and certain living benefits (E.G., the GWB riders or GMAB rider), could be considered to be taxable each year as deemed distributions from the contract to pay for non-annuity benefits. We currently treat these charges and benefits as an intrinsic part of the annuity contract and do not tax report these as taxable income until distributions are actually made. However, it is possible that this may change in the future if we determine that this is required by the IRS. If so, the charges or benefits could also be subject to a 10% penalty tax if the taxpayer is under age 59 1/2. The tax treatment of withdrawals under a Guaranteed Withdrawal Benefit is also uncertain. It is conceivable that the amount of potential gain could be determined based on the Benefit Base at the time of the withdrawal, if greater than the account value. This could result in a greater amount of taxable income in certain cases. In general, at the present time, we intend to tax report such withdrawals using the gross account value rather than the Benefit Base at the time of the withdrawal to determine gain. However, in cases where the maximum permitted withdrawal in any year under the GWB exceeds the gross account value, the portion of the withdrawal treated as taxable gain (not to exceed the amount of the withdrawal) should be measured as the difference between the maximum permitted withdrawal amount under the benefit and the remaining after-tax basis immediately preceding the withdrawal. Consult your tax adviser. We reserve the right to change our tax reporting practices if we determine that they are not in accordance with IRS guidance (whether formal or informal). ADDITIONAL PENALTY TAX ON CERTAIN WITHDRAWALS. In the case of a distribution (or a deemed distribution) from a Non-Qualified Contract, there may be imposed a federal tax penalty equal to 10% of the amount treated as income. In general, however, there is no penalty on distributions: o made on or after the taxpayer reaches age 59 1/2; o made on or after the death of an owner; o attributable to the taxpayer's becoming disabled; 70 o made as part of a series of substantially equal periodic payment (at least annually) for the life (or life expectancy) of the taxpayer or the joint lives (or joint life expectancies) of the taxpayer and his or her designated beneficiary; or o under certain immediate income annuities providing for substantially equal payments made at least annually. Other exceptions may be applicable under certain circumstances and special rules may be applicable in connection with the exceptions enumerated above. Also, additional exceptions apply to distributions from a Qualified Contract. You should consult a tax adviser with regard to exceptions from the penalty tax. ANNUITY PAYMENTS. Although tax consequences may vary depending on the payout option elected under an annuity contract, a portion of each annuity payment is generally not taxed and the remainder is taxed as ordinary income. The non-taxable portion of any annuity payment is generally determined in a manner that is designed to allow you to recover your investment in the contract ratably on a tax-free basis over the expected stream of annuity payments, as determined when annuity payments start. Once your investment in the contract has been fully recovered, however, the full amount of each annuity payment is subject to tax as ordinary income. In general, the amount of each payment under a variable annuity payment option that can be excluded from federal income tax is the remaining after-tax cost in the amount annuitized at the time such payments commence, divided by the number of expected payments, subject to certain adjustments. No deduction is permitted for any excess of such excludable amount for a year over the annuity payments actually received in that year. However, you may elect to increase the excludable amount attributable to future years by a ratable portion of such excess. Consult your tax adviser as to how to make such election and also as to how to treat the loss due to any unrecovered investment in the contract when the income stream is terminated. Once the investment in the contract has been recovered through the use of the excludable amount, the entire amount of all future payments are includable in taxable income. The IRS has not furnished explicit guidance as to how the excludable amount is to be determined each year under variable income annuities that permit transfers between the fixed account and variable investment portfolios, as well as transfers between investment portfolios after the annuity starting date. Consult your tax adviser. TAXATION OF DEATH BENEFIT PROCEEDS. Amounts may be distributed from a Non-Qualified Contract because of your death or the death of the annuitant. Generally, such amounts are includible in the income of the recipient as follows: (i) if distributed in a lump sum, they are taxed in the same manner as a surrender of the contract, or (ii) if distributed under a payout option, they are taxed in the same way as annuity payments. See the Statement of Additional Information as well as "Death Benefit - General Death Benefit Provisions" in this prospectus for a general discussion on the federal income tax rules applicable to how death benefits must be distributed. TRANSFERS, ASSIGNMENTS OR EXCHANGES OF A CONTRACT. Where otherwise permitted under the terms of the contract, a transfer or assignment of ownership of a Non-Qualified Contract, the designation or change of an annuitant, the selection of certain maturity dates, or the exchange of a contract may result in certain adverse tax consequences to you that are not discussed herein. An owner contemplating any such transfer, assignment, exchange or event should consult a tax adviser as to the tax consequences. WITHHOLDING. Annuity distributions 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. MULTIPLE CONTRACTS. The tax law provides that deferred annuities issued after October 21, 1988 by the same insurance company or an affiliate in the same calendar year to the same owner are combined for tax purposes. As a result, a greater portion of your withdrawals may be considered taxable income than you would otherwise expect. Please consult your own tax adviser. OWNERSHIP OF THE INVESTMENTS. In certain circumstances, owners of variable annuity contracts have been considered to be the owners of the assets of the underlying Separate Account for Federal income tax purposes due to their ability to exercise investment control over those assets. When this is the case, the contract owners have been currently taxed on income and gains attributable to the variable account assets. There is little guidance in this area, and some features of the contract, 71 such as the number of funds available and the flexibility of the contract owner to allocate premium payments and transfer amounts among the funding options, have not been addressed in public rulings. While we believe that the contract does not give the contract owner investment control over Separate Account assets, we reserve the right to modify the contract as necessary to prevent a contract owner from being treated as the owner of the Separate Account assets supporting the contract. FURTHER INFORMATION. We believe that the contracts will qualify as annuity contracts for federal income tax purposes and the above discussion is based on that assumption. Further details can be found in the Statement of Additional Information under the heading "Tax Status of the Contracts." TAXATION OF QUALIFIED CONTRACTS The tax rules applicable to Qualified Contracts vary according to the type of retirement plan and the terms and conditions of the plan. Your rights under a Qualified Contract may be subject to the terms of the retirement plan itself, regardless of the terms of the Qualified Contract. Adverse tax consequences may result if you do not ensure that contributions, distributions and other transactions with respect to the contract comply with the law. INDIVIDUAL RETIREMENT ACCOUNTS (IRAS). IRAs, as defined in Section 408 of the Internal Revenue Code (Code), permit individuals to make annual contributions of up to the lesser of the applicable dollar amount for the year (for 2009, $5,000 plus, for an owner age 50 or older, $1,000) or the amount of compensation includible in the individual's gross income for the year. The contributions may be deductible in whole or in part, depending on the individual's income. Distributions from certain retirement plans may be "rolled over" into an IRA on a tax-deferred basis without regard to these limits. Amounts in the IRA (other than non-deductible contributions) are taxed when distributed from the IRA. A 10% penalty tax generally applies to distributions made before age 59 1/2, unless an exception applies. The Internal Revenue Service (IRS) has approved the forms of the IRA and SIMPLE IRA endorsements, when used with the contract and certain of its riders (including enhanced death benefits), but your contract may differ from the approved version because of differences in riders or state insurance law requirements. Traditional IRAs/SEPs, SIMPLE IRAs and Roth IRAs may not invest in life insurance. The contract may provide death benefits that could exceed the greater of premiums paid or the account balance. The final required minimum distribution income tax regulations generally treat such benefits as part of the annuity contract and not as life insurance and require the value of such benefits to be included in the participant's interest that is subject to the required minimum distribution rules. SIMPLE IRA. A SIMPLE IRA permits certain small employers to establish SIMPLE plans as provided by Section 408(p) of the Code, under which employees may elect to defer to a SIMPLE IRA a percentage of compensation up to $11,500 for 2009. The sponsoring employer is generally required to make matching or non- elective contributions on behalf of employees. Distributions from SIMPLE IRA's are subject to the same restrictions that apply to IRA distributions and are taxed as ordinary income. Subject to certain exceptions, premature distributions prior to age 59 1/2 are subject to a 10% penalty tax, which is increased to 25% if the distribution occurs within the first two years after the commencement of the employee's participation in the plan. ROTH IRA. A Roth IRA, as described in Code section 408A, permits certain eligible individuals to make non-deductible contributions to a Roth IRA in cash or as a rollover or transfer from another Roth IRA or other IRA. A rollover from or conversion of an IRA to a Roth IRA is generally subject to tax, and other special rules apply. The owner may wish to consult a tax adviser before combining any converted amounts with any other Roth IRA contributions, including any other conversion amounts from other tax years. Distributions from a Roth IRA generally are not taxed, except that, once aggregate distributions exceed contributions to the Roth IRA, income tax and a 10% penalty tax may apply to distributions made (1) before age 59 1/2 (subject to certain exceptions) or (2) during the five taxable years starting with the year in which the first contribution is made to any Roth IRA. A 10% penalty tax may apply to amounts attributable to a conversion from an IRA if they are distributed during the five taxable years beginning with the year in which the conversion was made. PENSION PLANS. Corporate pension and profit-sharing plans under Section 401(a) of the Code allow corporate employers to establish various types of retirement plans for employees, and self-employed individuals to establish qualified plans for themselves and their employees. Adverse tax consequences to the retirement plan, the participant or both may result if the contract is transferred to any 72 individual as a means to provide benefit payments, unless the plan complies with all the requirements applicable to such benefits prior to transferring the contract. The contract includes optional death benefits that in some cases may exceed the greater of the premium payments or the account value. TAX SHELTERED ANNUITIES. Tax Sheltered Annuities (TSA) that qualify under section 403(b) of the Code allow employees of certain Section 501(c)(3) organizations and public schools to exclude from their gross income the premium payments made, within certain limits, on a contract that will provide an annuity for the employee's retirement. These premium payments may be subject to FICA (social security) tax. Distributions of (1) salary reduction contributions made in years beginning after December 31, 1988; (2) earnings on those contributions; and (3) earnings on amounts held as of the close of the last year beginning before January 1, 1989, are not allowed prior to age 59 1/2, severance from employment, death or disability. Salary reduction contributions may also be distributed upon hardship, but would generally be subject to penalties. Income tax regulations issued in July 2007 will require certain fundamental changes to these arrangements including (a) a requirement that there be a written plan document in addition to the annuity contract (or section 403(b)(7) custodial account), (b) significant restrictions on the ability of participants to direct proceeds between 403(b) annuity contracts and (c) new restrictions on withdrawals of amounts attributable to contributions other than elective deferrals. The regulations are generally effective for taxable years beginning after December 31, 2008. However, certain aspects, including a proposed prohibition on use of new life insurance under section 403(b) arrangements and rules affecting payroll taxes on certain types of contributions are currently effective. Please note that, in light of the regulations, this contract is not available for purchase via a "90-24" transfer. If your contract was issued previously in a 90-24 transfer completed on or before September 24, 2007, we urge you to consult with your tax adviser prior to making additional purchase payments. Recent income tax regulations also provide certain new restrictions on withdrawals of amounts from tax sheltered annuities that are not attributable to salary reduction contributions. Under these regulations, a Section 403(b) contract is permitted to distribute retirement benefits attributable to pre-tax contributions other than elective deferrals to the participant no earlier than upon the earlier of the participant's severance from employment or upon the prior occurrence of some event such as after a fixed number of years, the attainment of a stated age, or disability. This new withdrawal restriction is applicable for tax sheltered annuity contracts issued on or after January 1, 2009. SECTION 457(B) PLANS. An eligible 457(b) plan, while not actually a qualified plan as that term is normally used, provides for certain eligible deferred compensation plans with respect to service for state governments, local governments, political subdivisions, agencies, instrumentalities and certain affiliates of such entities, and tax exempt organizations. Under such plans a participant may specify the form of investment in which his or her participation will be made. Under a non-governmental plan, which must be a tax-exempt entity under section 501(c) of the Code, all such investments, however, are owned by and are subject to, the claims of the general creditors of the sponsoring employer. In general, all amounts received under a non-governmental section 457(b) plan are taxable and are subject to federal income tax withholding as wages. SEPARATE ACCOUNT CHARGES FOR DEATH BENEFITS. For contracts purchased under section 401(a) plans or 403(b) plans, certain death benefits could conceivably be characterized as an incidental benefit, the amount of which is limited in any pension or profit-sharing plan. Because the death benefits, in certain cases, may exceed this limitation employers using a contract in connection with such plans should consult their tax adviser. Additionally, it is conceivable that the explicit charges for, or the amount of the mortality and expense charges allocable to, such benefits may be considered taxable distributions. OTHER TAX ISSUES. Qualified Contracts (including contracts under section 457(b) plans) have minimum distribution rules that govern the timing and amount of distributions. You should refer to your retirement plan, adoption agreement, or consult a tax adviser for more information about these distribution rules. Failure to meet such rules generally results in the imposition of a 50% excise tax on the amount that should have been, but was not, distributed. Final income tax regulations regarding minimum distribution requirements were released in June 2004. These regulations affect both deferred and income 73 annuities. Under these new rules, effective with respect to minimum distributions required for the 2006 distribution year, in general, the value of all benefits under a deferred annuity (including death benefits in excess of account value, as well as all living benefits) must be added to the account value in computing the amount required to be distributed over the applicable period. (See "Living Benefits.") The final required minimum distribution regulations permit income payments to increase due to "actuarial gain" which includes the investment performance of the underlying assets, as well as changes in actuarial factors and assumptions under certain conditions. Additionally, withdrawals may also be permitted under certain conditions. The new rules are not entirely clear, and you should consult with your own tax adviser to determine whether your variable income annuity will satisfy these rules for your own situation. Under recently enacted legislation, you (and after your death, your designated beneficiaries) generally do not have to take the required minimum distribution for 2009. The waiver does not apply to any 2008 payments even if received in 2009, so for those payments, you are still required to receive your first required minimum distribution payment by April 1, 2009. In contrast, if your first required minimum distribution would have been due by April 1, 2010, you are not required to take such distribution; however, your 2010 required minimum distribution is due by December 31, 2010. For after-death required minimum distributions, the five year rule is applied without regard to calendar year 2009. For instance, if you died in 2007, the five year period ends in 2013 instead of 2012. This required minimum distribution waiver does not apply if you are receiving annuitized payments under your contract. The required minimum distribution rules are complex, so consult with your tax advisor before waiving your 2009 required minimum distribution payment. Distributions from Qualified Contracts generally are subject to withholding for the owner's federal income tax liability. The withholding rate varies according to the type of distribution and the owner's tax status. The owner will be provided the opportunity to elect not to have tax withheld from distributions. "Eligible rollover distributions" from section 401(a), 403(a), 403(b) and governmental section 457(b) plans are subject to a mandatory federal income tax withholding of 20%. An eligible rollover distribution is any distribution to an employee (or employee's spouse or former spouse as beneficiary or alternate payee) from such a plan, except certain distributions such as distributions required by the Code, distributions in a specified annuity form or hardship distributions. The 20% withholding does not apply, however, if the employee chooses a "direct rollover" from the plan to a tax-qualified plan, IRA or tax sheltered annuity or to a governmental 457(b) plan that agrees to separately account for rollover contributions. Effective March 28, 2005, certain mandatory distributions made to participants in an amount in excess of $1,000 must be rolled over to an IRA designated by the Plan, unless the participant elects to receive it in cash or roll it over to a different IRA or eligible retirement plan of his or her own choosing. General transitional rules apply as to when plans have to be amended. Special effective date rules apply for governmental plans and church plans. COMMUTATION FEATURES UNDER ANNUITY PAYMENT OPTIONS. Please be advised that the tax consequences resulting from the election of an annuity payment option containing a commutation feature are uncertain and the IRS may determine that the taxable amount of annuity payments and withdrawals received for any year could be greater than or less than the taxable amount reported by us. The exercise of the commutation feature also may result in adverse tax consequences including: o The imposition of a 10% penalty tax on the taxable amount of the commuted value, if the taxpayer has not attained age 59 1/2 at the time the withdrawal is made. This 10% penalty tax is in addition to the ordinary income tax on the taxable amount of the commuted value. o The retroactive imposition of the 10% penalty tax on annuity payments received prior to the taxpayer attaining age 59 1/2. o The possibility that the exercise of the commutation feature could adversely affect the amount excluded from federal income tax under any annuity payments made after such commutation. A payee should consult with his or her own tax adviser prior to electing to annuitize the contract and prior to exercising any commutation feature under an annuity payment option. 74 FEDERAL ESTATE TAXES. While no attempt is being made to discuss the federal estate tax implications of the contract, you should keep in mind that the value of an annuity contract owned by a decedent and payable to a beneficiary by virtue of surviving the decedent is included in the decedent's gross estate. Depending on the terms of the annuity contract, the value of the annuity included in the gross estate may be the value of the lump sum payment payable to the designated beneficiary or the actuarial value of the payments to be received by the beneficiary. Consult an estate planning adviser for more information. GENERATION-SKIPPING TRANSFER TAX. Under certain circumstances, the Code may impose a "generation-skipping transfer tax" when all or part of an annuity contract is transferred to, or a death benefit is paid to, an individual two or more generations younger than the contract owner. Regulations issued under the Code may require us to deduct the tax from your contract, or from any applicable payment, and pay it directly to the IRS. ANNUITY PURCHASE PAYMENTS BY NONRESIDENT ALIENS AND FOREIGN CORPORATIONS. The discussion above provides general information regarding U.S. federal income tax consequences to annuity purchasers that are U.S. citizens or residents. Purchasers that are not U.S. citizens or residents will generally be subject to the U.S. federal withholding tax on taxable distributions from annuity contracts at a 30% rate, unless a lower treaty rate applies. In addition, purchasers may be subject to state and/or municipal taxes and taxes that may be imposed by the purchaser's country of citizenship or residence. Prospective purchasers are advised to consult with a qualified tax adviser regarding U.S., state, and foreign taxation with respect to an annuity contract purchase. PUERTO RICO TAX CONSIDERATIONS The Puerto Rico Internal Revenue Code of 1994 (the "1994 Code") taxes distributions from non-qualified annuity contracts differently than in the U.S. Distributions that are not in the form of an annuity (including partial surrenders and period certain payments) are treated under the 1994 Code first as a return of investment. Therefore, a substantial portion of the amounts distributed generally will be excluded from gross income for Puerto Rico tax purposes until the cumulative amount paid exceeds your tax basis. The amount of income on annuity distributions (payable over your lifetime) is also calculated differently under the 1994 Code. Since Puerto Rico residents are also subject to U.S. income tax on all income other than income sourced to Puerto Rico and the Internal Revenue Service issued guidance in 2004 which indicated that the income from an annuity contract issued by a U.S. life insurer would be considered U.S. source income, the timing of recognition of income from an annuity contract could vary between the two jurisdictions. Although the 1994 Code provides a credit against the Puerto Rico income tax for U.S. income taxes paid, an individual may not get full credit because of the timing differences. You should consult with a personal tax adviser regarding the tax consequences of purchasing an annuity contract and/or any proposed distribution, particularly a partial distribution or election to annuitize. TAX BENEFITS RELATED TO THE ASSETS OF THE SEPARATE ACCOUNT We may be entitled to certain tax benefits related to the assets of the Separate Account. These tax benefits, which may include foreign tax credits and corporate dividends received deductions, are not passed back to the Separate Account or to contract owners because we are the owner of the assets from which the tax benefits are derived. POSSIBLE TAX LAW CHANGES Although the likelihood of legislative changes is uncertain, there is always the possibility that the tax treatment of the contract could change by legislation or otherwise. We will notify you of any changes to your contract. Consult a tax adviser with respect to legislative developments and their effect on the contract. We have the right to modify the contract in response to legislative changes that could otherwise diminish the favorable tax treatment that annuity contract owners currently receive. We make no guarantee regarding the tax status of the contract and do not intend the above discussion as tax advice. 11. OTHER INFORMATION METLIFE INVESTORS MetLife Investors Insurance Company (MetLife Investors) is a stock life insurance company incorporated on August 17, 1981, as Assurance Life Company, a Missouri corporation. It changed its name to Xerox Financial Services Life Insurance Company in 1985. On June 1, 1995, a wholly-owned subsidiary of General American Life Insurance Company (General American Life) purchased Xerox Financial Services Life Insurance Company, which on that date changed its name to Cova Financial Services 75 Life Insurance Company. On January 6, 2000, Metropolitan Life Insurance Company acquired GenAmerica Financial Corporation, the ultimate parent company of General American Life. Cova Financial Services Life Insurance Company changed its name to MetLife Investors Insurance Company on January 30, 2001. On December 31, 2002, MetLife Investors became an indirect subsidiary of MetLife, Inc., the holding company of Metropolitan Life Insurance Company and a listed company on the New York Stock Exchange. On October 1, 2004, MetLife Investors became a direct subsidary of MetLife, Inc. MetLife, Inc., through its subsidiaries and affiliates, is a leading provider of insurance and other financial services to individual and institutional customers. We are licensed to do business in the District of Columbia and all states except New Hampshire and New York. For contracts issued on or before December 31, 2002, General American Life agreed to ensure that MetLife Investors will have sufficient funds to meet obligations under the contracts. In the event an owner of such a contract presents a legitimate claim for payment, General American Life will pay such claim directly to the contract owner if MetLife Investors is unable to make such payment. This guarantee is enforceable by such contract owners against General American Life directly without any requirement that contract owners first file a claim against MetLife Investors. The guarantee agreement is binding on General American Life, its successors or assignees and shall terminate only if the guarantee is assigned to an organization having a financial rating from certain specified rating agencies equal to or better than General American Life's rating. With respect to the guarantee, General American Life is relying on the exemption provided by Rule 12h-7 under the Securities Exchange Act of 1934. We are a member of the Insurance Marketplace Standards Association (IMSA). Companies that belong to IMSA subscribe to a set of ethical standards covering the various aspects of sales and service for individually sold life insurance and annuities. THE SEPARATE ACCOUNT We have established a SEPARATE ACCOUNT, MetLife Investors Variable Annuity Account One (Separate Account), to hold the assets that underlie the contracts. Our Board of Directors adopted a resolution to establish the Separate Account under Missouri insurance law on February 24, 1987. We have registered the Separate Account with the Securities and Exchange Commission as a unit investment trust under the Investment Company Act of 1940. The Separate Account is divided into subaccounts. The assets of the Separate Account are held in our name on behalf of the Separate Account and legally belong to us. However, those assets that underlie the contracts, are not chargeable with liabilities arising out of any other business we may conduct. All the income, gains and losses (realized or unrealized) resulting from these assets are credited to or charged against the contracts and not against any other contracts we may issue. We reserve the right to transfer assets of the Separate Account to another account, and to modify the structure or operation of the Separate Account, subject to necessary regulatory approvals. If we do so, we guarantee that the modification will not affect your account value. The amount of the guaranteed death benefit that exceeds the account value is paid from our general account. In addition, portions of the contract's guaranteed living benefits payable may exceed the amount of the account value and be paid from our general account. Benefit amounts paid from the general account are subject to the claims-paying ability of MetLife Investors. DISTRIBUTOR We have entered into a distribution agreement with our affiliate, MetLife Investors Distribution Company (Distributor), 5 Park Plaza, Suite 1900, Irvine, CA 92614, for the distribution of the contracts. Distributor is a member of the Financial Industry Regulatory Authority (FINRA). FINRA maintains a Public Disclosure Program for investors. A brochure that includes information describing the Program is available by calling FINRA's Public Disclosure Program hotline at 1-800-289-9999, or by visiting FINRA's website at www.finra.org. Distributor, and in certain cases, we, have entered into selling agreements with other affiliated and unaffiliated selling firms for the sale of the contracts. We pay compensation to Distributor for sales of the contracts by selling firms. We also pay amounts to Distributor that may be used for its operating and other expenses, including the following sales expenses: compensation and bonuses for the Distributor's management team, advertising expenses, and other expenses of distributing the contracts. Distributor's management team also may be eligible for non-cash compensation items that we may provide jointly with Distributor. Non-cash items include conferences, seminars 76 and trips (including travel, lodging and meals in connection therewith), entertainment, merchandise and other similar items. All of the investment portfolios make payments to Distributor under their distribution plans in consideration of services provided and expenses incurred by Distributor in distributing shares of the investment portfolios. (See "Fee Tables and Examples - Investment Portfolio Expenses" and the fund prospectuses.) These payments range from 0.15% to 0.55% of Separate Account assets invested in the particular investment portfolio. SELLING FIRMS As noted above, Distributor, and in certain cases, we, have entered into selling agreements with affiliated and unaffiliated selling firms for the sale of the contracts. Affiliated selling firms include Metropolitan Life Insurance Company (MLIC); New England Securities Corporation; Tower Square Securities, Inc.; and Walnut Street Securities, Inc. All selling firms receive commissions, and they may also receive some form of non-cash compensation. Certain selected selling firms receive additional compensation (described below under "Additional Compensation for Selected Selling Firms"). These commissions and other incentives or payments are not charged directly to contract owners or the Separate Account. We intend to recoup commissions and other sales expenses through fees and charges deducted under the contract or from our general account. A portion of the payments made to selling firms may be passed on to their sales representatives in accordance with the selling firms' internal compensation programs. Those programs may also include other types of cash and non-cash compensation and other benefits. COMPENSATION PAID TO SELLING FIRMS. We and Distributor pay compensation to all affiliated and unaffiliated selling firms in the form of commissions and may also provide certain types of non-cash compensation. The maximum commission payable for contract sales and additional purchase payments by selling firms is 2.8% of purchase payments. Some selling firms may elect to receive a lower commission when a purchase payment is made, along with annual trail commissions beginning in year two up to 1.25% of account value (less purchase payments received within the previous 12 months) for so long as the contract remains in effect or as agreed in the selling agreement. We also pay commissions when a contract owner elects to begin receiving regular income payments (referred to as "annuity payments"). (See "Annuity Payments - The Income Phase.") Distributor may also provide non-cash compensation items that we may provide jointly with Distributor. Non-cash items include expenses for conference or seminar trips and certain gifts. With respect to the contracts, the compensation paid to affiliated selling firms is generally not expected to exceed, on a present value basis, the aggregate amount of commission that is paid by Distributor to all other selling firms as noted above. SALES BY OUR AFFILIATES. As previously noted, we and Distributor may offer the contracts through retail selling firms that are affiliates of ours. The amount of compensation the affiliated selling firms pass on to their sales representatives is determined in accordance with their own internal compensation programs. These programs may also include other types of cash compensation, such as bonuses, equity awards (such as stock options), training allowances, supplementary salary, financing arrangements, marketing support, medical and other insurance benefits, retirement benefits, non-qualified deferred compensation plans and other benefits. For sales representatives of certain affiliates, the amount of this additional compensation is based primarily on the amount of proprietary products sold and serviced by the representative. Proprietary products are those issued by us or our affiliates. The managers who supervise these sales representatives may also be entitled to additional cash compensation based on the sale of proprietary products sold by their representatives. Because the additional cash compensation paid to these sales representatives and their managers is primarily based on sales of proprietary products, these sales representatives and their managers have an incentive to favor the sale of proprietary products over other products issued by non-affiliates. Sales representatives of our affiliate, MLIC, receive cash payments for the products they sell and service based upon a "gross dealer concession" model. The cash payment received by the sales representative is equal to a percentage of the gross dealer concession. For MLIC sales represenatives other than those in its MetLife Resources (MLR) division, the percentage is determined by a formula that takes into consideration the amount of proprietary products that the sales representative sells and services. The percentage could be as high as 100%. (MLR sales representatives receive compensation based on premiums and purchase payments applied to all products sold and serviced by the representative.) In addition, MetLife sales 77 representatives may be entitled to the additional compensation described above based on sales of proprietary products. Because sales of proprietary products are a factor determining the percentage of gross dealer concession and/or the amount of additional compensation to which MLIC sales representatives are entitled, the sales representatives have an incentive to favor the sale of the contracts over other similar products issued by non-affiliates. In addition, because the MLIC sales managers' compensation is based upon the sales made by the sales representatives they supervise, the MLIC sales managers also have an incentive to favor the sale of proprietary products. We may also make certain payments to the business unit responsible for the operation of the distribution systems through which the contracts are sold. These amounts are part of the total compensation paid for the sale of the contracts. Ask your registered representative for further information about what payments your registered representative and the selling firm for which he or she works may receive in connection with your purchase of a contract. ADDITIONAL COMPENSATION FOR SELECTED SELLING FIRMS. We and Distributor have entered into distribution arrangements with certain selected selling firms. Under these arrangements we and Distributor may pay additional compensation to selected selling firms, including marketing allowances, introduction fees, persistency payments, preferred status fees and industry conference fees. Marketing allowances are periodic payments to certain selling firms based on cumulative periodic (usually quarterly) sales of our variable insurance contracts (including the contracts). Introduction fees are payments to selling firms in connection with the addition of our products to the selling firm's line of investment products, including expenses relating to establishing the data communications systems necessary for the selling firm to offer, sell and administer our products. Persistency payments are periodic payments based on account values of our variable insurance contracts (including account values of the contracts) or other persistency standards. Preferred status fees are paid to obtain preferred treatment of the contracts in selling firms' marketing programs, which may include marketing services, participation in marketing meetings, listings in data resources and increased access to their sales representatives. Industry conference fees are amounts paid to cover in part the costs associated with sales conferences and educational seminars for selling firms' sales representatives. We and Distributor have entered into such distribution agreements with our affiliates, Tower Square Securities, Inc. and Walnut Street Securities, Inc., as well as unaffiliated selling firms identified in the Statement of Additional Information. We and Distributor may enter into similar arrangements with other affiliates, such as MLIC and New England Securities Corporation. The additional types of compensation discussed above are not offered to all selling firms. The terms of any particular agreement governing compensation may vary among selling firms and the amounts may be significant. The prospect of receiving, or the receipt of, additional compensation as described above may provide selling firms and/or their sales representatives with an incentive to favor sales of the contracts over other variable annuity contracts (or other investments) with respect to which selling firm does not receive additional compensation, or lower levels of additional compensation. You may wish to take such payment arrangements into account when considering and evaluating any recommendation relating to the contracts. For more information about any such additional compensation arrangements, ask your registered representative. (See the Statement of Additional Information - "Distribution" for a list of selling firms that received compensation during 2008, as well as the range of additional compensation paid.) REQUESTS AND ELECTIONS We will treat your request for a contract transaction, or your submission of a purchase payment, as received by us if we receive a request conforming to our administrative procedures or a payment at our Annuity Service Center before the close of regular trading on the New York Stock Exchange on that day. We will treat your submission of a purchase payment as received by us if we receive a payment at our Annuity Service Center (or a designee receives a payment in accordance with the designee's administrative procedures) before the close of regular trading on the New York Stock Exchange on that day. If we receive the request, or if we (or our designee) receive the payment, after the close of trading on the New York Stock Exchange on that day, or if the New York Stock Exchange is not open that day, then the request or payment will be treated as received on the next day when the New York Stock Exchange is open. Our Annuity Service Center is located at P.O. Box 10366, Des Moines, IA 50306-0366. If you send your purchase payments or transaction requests to an address other than the one we have designated for receipt of such 78 purchase payments or requests, we may return the purchase payment to you, or there may be a delay in applying the purchase payment or transaction to your contract. Requests for service may be made: o Through your registered representative o By telephone at (800) 343-8496, between the hours of 7:30AM and 5:30PM Central Time Monday through Thursday and 7:30AM and 5:00PM Central Time on Friday o In writing to our Annuity Service Center o By fax at (515) 457-4400 or o By Internet at www.metlifeinvestors.com All other requests must be in written form, satisfactory to us. A request or transaction generally is considered in GOOD ORDER if it complies with our administrative procedures and the required information is complete and accurate. A request or transaction may be rejected or delayed if not in good order. If you have any questions, you should contact us or your registered representative before submitting the form or request. We will use reasonable procedures such as requiring certain identifying information, tape recording the telephone instructions, and providing written confirmation of the transaction, in order to confirm that instructions communicated by telephone, fax, Internet or other means are genuine. Any telephone, fax or Internet instructions reasonably believed by us to be genuine will be your responsibility, including losses arising from any errors in the communication of instructions. As a result of this policy, you will bear the risk of loss. If we do not employ reasonable procedures to confirm that instructions communicated by telephone, fax or Internet are genuine, we may be liable for any losses due to unauthorized or fraudulent transactions. All other requests and elections under your contract must be in writing signed by the proper party, must include any necessary documentation and must be received at our Annuity Service Center to be effective. If acceptable to us, requests or elections relating to beneficiaries and ownership will take effect as of the date signed unless we have already acted in reliance on the prior status. We are not responsible for the validity of any written request or action. Telephone and computer systems may not always be available. Any telephone or computer system, whether it is yours, your service provider's, your agent'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 experience technical difficulties or problems, you should make your transaction request in writing to our Annuity Service Center. CONFIRMING TRANSACTIONS. We will send out written statements confirming that a transaction was recently completed. Unless you inform us of any errors within 60 days of receipt, we will consider these communications to be accurate and complete. OWNERSHIP OWNER. You, as the OWNER of the contract, have all the interest and rights under the contract. These rights include the right to: o change the beneficiary. o change the annuitant before the annuity date (subject to our underwriting and administrative rules). o assign the contract (subject to limitation). o change the payment option. o exercise all other rights, benefits, options and privileges allowed by the contract or us. The owner is as designated at the time the contract is issued, unless changed. Any change of owner is subject to our underwriting rules in effect at the time of the request. JOINT OWNER. The contract can be owned by JOINT OWNERS, limited to two natural persons. Upon the death of either owner, the surviving owner will be the primary beneficiary. Any other beneficiary designation will be treated as a contingent beneficiary unless otherwise indicated. BENEFICIARY. The BENEFICIARY is the person(s) or entity you name to receive any death benefit. The beneficiary is named at the time the contract is issued unless changed at a later date. Unless an irrevocable beneficiary has been named, you can change the beneficiary at any time before you die. If joint owners are named, unless you tell us otherwise, the surviving joint owner will be the primary beneficiary. Any other beneficiary designation will be treated as a contingent beneficiary (unless you tell us otherwise). 79 ANNUITANT. The ANNUITANT is the natural person(s) on whose life we base annuity payments. You can change the annuitant at any time prior to the annuity date, unless an owner is not a natural person. Any reference to annuitant includes any joint annuitant under an annuity option. The owner and the annuitant do not have to be the same person except as required under certain sections of the Internal Revenue Code or under a GMIB rider (see "Living Benefits - Guaranteed Income Benefits"). ASSIGNMENT. You can assign a Non-Qualified Contract at any time during your lifetime. We will not be bound by the assignment until the written notice of the assignment is recorded by us. We will not be liable for any payment or other action we take in accordance with the contract before we record the assignment. AN ASSIGNMENT MAY BE A TAXABLE EVENT. If the contract is issued pursuant to a qualified plan, there may be limitations on your ability to assign the contract. LEGAL PROCEEDINGS In the ordinary course of business, MetLife Investors, similar to other life insurance companies, is involved in lawsuits (including class action lawsuits), arbitrations and other legal proceedings. Also, from time to time, state and federal regulators or other officials conduct formal and informal examinations or undertake other actions dealing with various aspects of the financial services and insurance industries. In some legal proceedings involving insurers, substantial damages have been sought and/or material settlement payments have been made. It is not possible to predict with certainty the ultimate outcome of any pending legal proceeding or regulatory action. However, MetLife Investors 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 MetLife Investors to meet its obligations under the contracts. FINANCIAL STATEMENTS Our financial statements and the financial statements of the Separate Account have been included in the SAI. The financial statements of General American Life have also been included in the SAI. TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION Company Independent Registered Public Accounting Firm Additional Information Custodian Distribution Calculation of Performance Information Annuity Provisions Tax Status of the Contracts Condensed Financial Information Financial Statements 80 APPENDIX A CONDENSED FINANCIAL INFORMATION The following charts list the Condensed Financial Information (the accumulation unit value information for the accumulation units outstanding) for contracts issued as of December 31, 2008. See "Purchase - Accumulation Units" in the prospectus for information on how accumulation unit values are calculated. Chart 1 presents accumulation unit values for the lowest possible combination of separate account product charges and death benefit rider charges, and Chart 2 presents accumulation unit values for the highest possible combination of such charges. The SAI contains the accumulation unit values for all other possible combinations of separate account product charges and death benefit rider charges. (See "Cover Page" for how to obtain a copy of the SAI.) CHART 1
1.75% SEPARATE ACCOUNT PRODUCT CHARGES NUMBER OF ACCUMULATION ACCUMULATION ACCUMULATION UNIT VALUE AT UNIT VALUE AT UNITS BEGINNING OF END OF OUTSTANDING AT PERIOD PERIOD END OF PERIOD --------------- --------------- ----------------- MET INVESTORS SERIES TRUST AMERICAN FUNDS BALANCED ALLOCATION SUB-ACCOUNT (CLASS C) 04/28/2008 to 12/31/2008 10.008082 6.994767 667,228.4700 ============= ==== ========== ========= ========= ============== AMERICAN FUNDS BOND SUB-ACCOUNT (CLASS C) 04/28/2008 to 12/31/2008 10.038080 8.930842 55,376.9498 ============= ==== ========== ========= ========= ============== AMERICAN FUNDS GROWTH ALLOCATION SUB-ACCOUNT (CLASS C) 04/28/2008 to 12/31/2008 9.998082 6.344471 1,190,292.0731 ============= ==== ========== ========= ========= ============== AMERICAN FUNDS GROWTH SUB-ACCOUNT (CLASS C) 04/28/2008 to 12/31/2008 9.988083 5.745775 109,505.6773 ============= ==== ========== ========= ========= ============== AMERICAN FUNDS INTERNATIONAL SUB-ACCOUNT (CLASS C) 04/28/2008 to 12/31/2008 10.088078 6.040337 51,496.4654 ============= ==== ========== ========= ========= ============== AMERICAN FUNDS MODERATE ALLOCATION SUB-ACCOUNT (CLASS C) 04/28/2008 to 12/31/2008 10.018081 7.666872 491,992.6105 ============= ==== ========== ========= ========= ============== BLACKROCK HIGH YIELD SUB-ACCOUNT (CLASS B) 04/28/2008 to 12/31/2008 16.140545 12.045782 5,023.4703 ============= ==== ========== ========= ========= ============== CLARION GLOBAL REAL ESTATE SUB-ACCOUNT (CLASS B) 05/01/2004 to 12/31/2004 9.998562 12.803566 163,702.3876 01/01/2005 to 12/31/2005 12.803566 14.253740 136,325.5664 01/01/2006 to 12/31/2006 14.253740 19.271313 157,880.1882 01/01/2007 to 12/31/2007 19.271313 16.093623 149,821.9519 01/01/2008 to 12/31/2008 16.093623 9.223364 132,254.2543 ============= ==== ========== ========= ========= ==============
A-1 APPENDIX A CONDENSED FINANCIAL INFORMATION (CONTINUED)
1.75% SEPARATE ACCOUNT PRODUCT CHARGES NUMBER OF ACCUMULATION ACCUMULATION ACCUMULATION UNIT VALUE AT UNIT VALUE AT UNITS BEGINNING OF END OF OUTSTANDING AT PERIOD PERIOD END OF PERIOD --------------- --------------- ----------------- GOLDMAN SACHS MID CAP VALUE SUB-ACCOUNT (CLASS B) 05/01/2004 to 12/31/2004 9.998562 11.943726 200,639.3919 01/01/2005 to 12/31/2005 11.943726 13.208544 307,360.8379 01/01/2006 to 12/31/2006 13.208544 15.016817 418,104.5508 01/01/2007 to 12/31/2007 15.016817 15.211790 415,804.5835 01/01/2008 to 12/31/2008 15.211790 9.554730 254,830.4232 ============ ==== ========== ========= ========= ============ HARRIS OAKMARK INTERNATIONAL SUB-ACCOUNT (CLASS B) 05/01/2003 to 12/31/2003 8.751972 11.728055 502,035.9448 01/01/2004 to 12/31/2004 11.728055 13.889348 733,353.6073 01/01/2005 to 12/31/2005 13.889348 15.592262 643,962.4400 01/01/2006 to 12/31/2006 15.592262 19.742895 742,984.0450 01/01/2007 to 12/31/2007 19.742895 19.181531 687,008.4094 01/01/2008 to 12/31/2008 19.181531 11.141818 564,235.6196 ============ ==== ========== ========= ========= ============ LAZARD MID CAP SUB-ACCOUNT (CLASS B) 05/01/2003 to 12/31/2003 9.728989 11.998433 263,550.1272 01/01/2004 to 12/31/2004 11.998433 13.487739 224,052.4404 01/01/2005 to 12/31/2005 13.487739 14.322557 160,332.2470 01/01/2006 to 12/31/2006 14.322557 16.140250 154,272.9954 01/01/2007 to 12/31/2007 16.140250 15.428895 144,273.1358 01/01/2008 to 12/31/2008 15.428895 9.353781 129,427.3998 ============ ==== ========== ========= ========= ============ LEGG MASON PARTNERS AGGRESSIVE GROWTH SUB-ACCOUNT (CLASS B) 05/01/2003 to 12/31/2003 5.505944 6.697139 707,471.8090 01/01/2004 to 12/31/2004 6.697139 7.136100 781,225.4021 01/01/2005 to 12/31/2005 7.136100 7.964706 525,101.1448 01/01/2006 to 12/31/2006 7.964706 7.690836 495,540.0535 01/01/2007 to 12/31/2007 7.690836 7.727995 422,370.8947 01/01/2008 to 12/31/2008 7.727995 4.628049 422,541.5303 ============ ==== ========== ========= ========= ============ LEGG MASON VALUE EQUITY SUB-ACCOUNT (CLASS B) 11/07/2005 to 12/31/2005 10.246575 10.619411 0.0000 01/01/2006 to 12/31/2006 10.619411 11.122610 59,256.6729 01/01/2007 to 12/31/2007 11.122610 10.283068 71,461.8140 01/01/2008 to 12/31/2008 10.283068 4.585552 73,675.7912 ============ ==== ========== ========= ========= ============ LOOMIS SAYLES GLOBAL MARKETS SUB-ACCOUNT (CLASS B) 05/01/2006 to 12/31/2006 9.988562 10.315213 2,215.1197 01/01/2007 to 12/31/2007 10.315213 12.958474 117,424.9721 01/01/2008 to 12/31/2008 12.958474 7.734002 104,320.5870 ============ ==== ========== ========= ========= ============
A-2 APPENDIX A CONDENSED FINANCIAL INFORMATION (CONTINUED)
1.75% SEPARATE ACCOUNT PRODUCT CHARGES NUMBER OF ACCUMULATION ACCUMULATION ACCUMULATION UNIT VALUE AT UNIT VALUE AT UNITS BEGINNING OF END OF OUTSTANDING AT PERIOD PERIOD END OF PERIOD --------------- --------------- ----------------- LORD ABBETT BOND DEBENTURE SUB-ACCOUNT (CLASS B) 05/01/2003 to 12/31/2003 14.697264 16.066264 652,133.2433 01/01/2004 to 12/31/2004 16.066264 17.076098 685,346.9420 01/01/2005 to 12/31/2005 17.076098 17.031269 537,149.8991 01/01/2006 to 12/31/2006 17.031269 18.267637 542,621.3729 01/01/2007 to 12/31/2007 18.267637 19.124730 519,702.0840 01/01/2008 to 12/31/2008 19.124730 15.296064 436,233.8823 ============ ==== ========== ========= ========= ============ LORD ABBETT GROWTH AND INCOME SUB-ACCOUNT (CLASS B) 05/01/2003 to 12/31/2003 34.555426 42.984805 334,537.2375 01/01/2004 to 12/31/2004 42.984805 47.578964 429,989.9089 01/01/2005 to 12/31/2005 47.578964 48.341721 351,515.8593 01/01/2006 to 12/31/2006 48.341721 55.954181 341,504.5455 01/01/2007 to 12/31/2007 55.954181 57.024330 308,668.0904 01/01/2008 to 12/31/2008 57.024330 35.674748 276,826.4960 ============ ==== ========== ========= ========= ============ LORD ABBETT MID CAP VALUE SUB-ACCOUNT (CLASS B) 04/28/2008 to 12/31/2008 24.259921 15.945964 27,784.5557 ============ ==== ========== ========= ========= ============ MET/AIM SMALL CAP GROWTH SUB-ACCOUNT (CLASS B) 05/01/2003 to 12/31/2003 8.707674 11.575448 303,307.8198 01/01/2004 to 12/31/2004 11.575448 12.105739 468,862.0298 01/01/2005 to 12/31/2005 12.105739 12.879664 362,246.6080 01/01/2006 to 12/31/2006 12.879664 14.451878 329,252.6982 01/01/2007 to 12/31/2007 14.451878 15.771940 291,662.2626 01/01/2008 to 12/31/2008 15.771940 9.495398 256,634.6839 ============ ==== ========== ========= ========= ============ MET/FRANKLIN MUTUAL SHARES SUB-ACCOUNT (CLASS B) 04/28/2008 to 12/31/2008 9.998082 6.584222 19,860.7173 ============ ==== ========== ========= ========= ============ MET/FRANKLIN TEMPLETON FOUNDING STRATEGY SUB-ACCOUNT (CLASS B) 04/28/2008 to 12/31/2008 9.998082 7.016687 271,009.5412 ============ ==== ========== ========= ========= ============ MET/PUTNAM RESEARCH SUB-ACCOUNT (CLASS B) 05/01/2003 to 12/31/2003 6.425734 7.704481 135,372.7607 01/01/2004 to 11/19/2004 7.704481 7.890285 166,048.9595 ============ ==== ========== ========= ========= ============ MFS (Reg. TM) EMERGING MARKETS EQUITY SUB-ACCOUNT (CLASS B) 05/01/2006 to 12/31/2006 9.988562 10.453918 3,471.4578 01/01/2007 to 12/31/2007 10.453918 14.033128 81,889.3680 01/01/2008 to 12/31/2008 14.033128 6.131668 70,413.5393 ============ ==== ========== ========= ========= ============
A-3 APPENDIX A CONDENSED FINANCIAL INFORMATION (CONTINUED)
1.75% SEPARATE ACCOUNT PRODUCT CHARGES NUMBER OF ACCUMULATION ACCUMULATION ACCUMULATION UNIT VALUE AT UNIT VALUE AT UNITS BEGINNING OF END OF OUTSTANDING AT PERIOD PERIOD END OF PERIOD --------------- --------------- ----------------- MFS (Reg. TM) RESEARCH INTERNATIONAL SUB-ACCOUNT (CLASS B) 05/01/2003 to 12/31/2003 7.334391 9.469098 216,291.5659 01/01/2004 to 12/31/2004 9.469098 11.124362 522,437.5979 01/01/2005 to 12/31/2005 11.124362 12.727210 405,795.7495 01/01/2006 to 12/31/2006 12.727210 15.829364 403,883.4304 01/01/2007 to 12/31/2007 15.829364 17.620509 445,604.3010 01/01/2008 to 12/31/2008 17.620509 9.978727 336,070.5402 ============ ==== ========== ========= ========= ============== OPPENHEIMER CAPITAL APPRECIATION SUB-ACCOUNT (CLASS B) 05/01/2003 to 12/31/2003 6.545686 7.945738 1,199,037.8673 01/01/2004 to 12/31/2004 7.945738 8.307522 1,304,920.5870 01/01/2005 to 12/31/2005 8.307522 8.548668 994,431.8974 01/01/2006 to 12/31/2006 8.548668 9.040556 971,145.3829 01/01/2007 to 12/31/2007 9.040556 10.152174 883,697.9359 01/01/2008 to 12/31/2008 10.152174 5.392685 799,549.8858 ============ ==== ========== ========= ========= ============== PIMCO INFLATION PROTECTED BOND SUB-ACCOUNT (CLASS B) 05/01/2003 to 12/31/2003 10.000000 10.411529 736,447.3370 01/01/2004 to 12/31/2004 10.411529 11.152314 986,886.9436 01/01/2005 to 12/31/2005 11.152314 11.111391 778,414.1933 01/01/2006 to 12/31/2006 11.111391 10.961391 713,291.4137 01/01/2007 to 12/31/2007 10.961391 11.933208 682,836.8400 01/01/2008 to 12/31/2008 11.933208 10.917813 746,570.3257 ============ ==== ========== ========= ========= ============== PIMCO TOTAL RETURN SUB-ACCOUNT (CLASS B) 05/01/2003 to 12/31/2003 11.613154 11.652364 706,866.7231 01/01/2004 to 12/31/2004 11.652364 12.019969 763,670.5952 01/01/2005 to 12/31/2005 12.019969 12.077499 699,133.5903 01/01/2006 to 12/31/2006 12.077499 12.404736 849,038.1120 01/01/2007 to 12/31/2007 12.404736 13.110413 719,451.5509 01/01/2008 to 12/31/2008 13.110413 12.935178 776,172.3023 ============ ==== ========== ========= ========= ============== RAINIER LARGE CAP EQUITY SUB-ACCOUNT (CLASS B) 11/12/2007 to 12/31/2007 9.564450 9.978019 6,824.1118 01/01/2008 to 12/31/2008 9.978019 5.705506 48,998.3368 ============ ==== ========== ========= ========= ============== RCM TECHNOLOGY SUB-ACCOUNT (CLASS B) 05/01/2003 to 12/31/2003 3.305316 4.589108 136,427.2265 01/01/2004 to 12/31/2004 4.589108 4.314826 312,990.2164 01/01/2005 to 12/31/2005 4.314826 4.707273 199,315.4728 01/01/2006 to 12/31/2006 4.707273 4.873139 208,861.1208 01/01/2007 to 12/31/2007 4.873139 6.297612 297,168.9507 01/01/2008 to 12/31/2008 6.297612 3.437283 217,688.2786 ============ ==== ========== ========= ========= ==============
A-4 APPENDIX A CONDENSED FINANCIAL INFORMATION (CONTINUED)
1.75% SEPARATE ACCOUNT PRODUCT CHARGES NUMBER OF ACCUMULATION ACCUMULATION ACCUMULATION UNIT VALUE AT UNIT VALUE AT UNITS BEGINNING OF END OF OUTSTANDING AT PERIOD PERIOD END OF PERIOD --------------- --------------- ----------------- SSGA GROWTH AND INCOME ETF SUB-ACCOUNT (CLASS B) 11/10/2008 to 12/31/2008 8.314090 8.474073 149,883.3162 ============ ==== ========== ========= ========= ============== SSGA GROWTH ETF SUB-ACCOUNT (CLASS B) 11/10/2008 to 12/31/2008 7.698088 7.769023 196,324.6389 ============ ==== ========== ========= ========= ============== T. ROWE PRICE MID CAP GROWTH SUB-ACCOUNT (CLASS B) 05/01/2003 to 12/31/2003 4.758231 6.110051 711,884.3786 01/01/2004 to 12/31/2004 6.110051 7.073886 539,705.6911 01/01/2005 to 12/31/2005 7.073886 7.968314 522,229.9930 01/01/2006 to 12/31/2006 7.968314 8.313116 501,887.7220 01/01/2007 to 12/31/2007 8.313116 9.608835 502,456.6517 01/01/2008 to 12/31/2008 9.608835 5.688596 413,669.4413 ============ ==== ========== ========= ========= ============== THIRD AVENUE SMALL CAP VALUE SUB-ACCOUNT (CLASS B) 05/01/2003 to 12/31/2003 8.471513 11.454065 510,324.5346 01/01/2004 to 12/31/2004 11.454065 14.238069 658,400.3957 01/01/2005 to 12/31/2005 14.238069 16.157491 582,506.2236 01/01/2006 to 12/31/2006 16.157491 17.962804 632,083.8801 01/01/2007 to 12/31/2007 17.962804 17.116257 590,073.6714 01/01/2008 to 12/31/2008 17.116257 11.802663 437,148.5686 ============ ==== ========== ========= ========= ============== TURNER MID CAP GROWTH SUB-ACCOUNT (CLASS B) 05/01/2004 to 12/31/2004 9.998562 11.088963 163,554.1683 01/01/2005 to 12/31/2005 11.088963 12.134782 122,346.8702 01/01/2006 to 12/31/2006 12.134782 12.648888 121,994.0982 01/01/2007 to 12/31/2007 12.648888 15.429601 147,231.5203 01/01/2008 to 12/31/2008 15.429601 7.838404 128,201.1462 ============ ==== ========== ========= ========= ============== VAN KAMPEN COMSTOCK SUB-ACCOUNT (CLASS B) 05/01/2005 to 12/31/2005 9.998562 10.451325 22,966.7521 01/01/2006 to 12/31/2006 10.451325 11.919227 85,062.7874 01/01/2007 to 12/31/2007 11.919227 11.419472 96,248.9567 01/01/2008 to 12/31/2008 11.419472 7.191079 93,244.9518 ============ ==== ========== ========= ========= ============== METROPOLITAN SERIES FUND, INC. BLACKROCK MONEY MARKET SUB-ACCOUNT (CLASS B) 05/01/2005 to 12/31/2005 9.892445 9.973519 458,380.6783 01/01/2006 to 12/31/2006 9.973519 10.247024 687,210.1040 01/01/2007 to 12/31/2007 10.247024 10.553046 1,015,568.2644 01/01/2008 to 12/31/2008 10.553046 10.639004 2,371,488.0135 ============ ==== ========== ========= ========= ==============
A-5 APPENDIX A CONDENSED FINANCIAL INFORMATION (CONTINUED)
1.75% SEPARATE ACCOUNT PRODUCT CHARGES NUMBER OF ACCUMULATION ACCUMULATION ACCUMULATION UNIT VALUE AT UNIT VALUE AT UNITS BEGINNING OF END OF OUTSTANDING AT PERIOD PERIOD END OF PERIOD --------------- --------------- ----------------- BLACKROCK MONEY MARKET SUB-ACCOUNT (CLASS B) (FORMERLY MET INVESTORS SERIES TRUST - MONEY MARKET SUB-ACCOUNT (CLASS B)) 05/01/2003 to 12/31/2003 10.096666 10.002057 107,542.8246 01/01/2004 to 12/31/2004 10.002057 9.891100 253,746.9493 01/01/2005 to 04/30/2005 9.891100 9.892743 0.0000 ============ ==== ========== ========= ========= ============== DAVIS VENTURE VALUE SUB-ACCOUNT (CLASS E) 05/01/2003 to 12/31/2003 8.556367 10.749521 812,394.0970 01/01/2004 to 12/31/2004 10.749521 11.845032 1,387,014.0070 01/01/2005 to 12/31/2005 11.845032 12.819984 1,232,480.4169 01/01/2006 to 12/31/2006 12.819984 14.413047 1,309,198.0454 01/01/2007 to 12/31/2007 14.413047 14.789310 1,315,469.2794 01/01/2008 to 12/31/2008 14.789310 8.797857 1,099,658.9712 ============ ==== ========== ========= ========= ============== HARRIS OAKMARK FOCUSED VALUE SUB-ACCOUNT (CLASS B) 05/01/2003 to 12/31/2003 10.939577 13.947388 619,951.3971 01/01/2004 to 12/31/2004 13.947388 15.027679 769,904.3927 01/01/2005 to 12/31/2005 15.027679 16.201314 750,785.7937 01/01/2006 to 12/31/2006 16.201314 17.859135 844,703.5159 01/01/2007 to 12/31/2007 17.859135 16.306100 761,548.8160 01/01/2008 to 12/31/2008 16.306100 8.630590 596,165.5651 ============ ==== ========== ========= ========= ============== JENNISON GROWTH SUB-ACCOUNT (CLASS B) 05/01/2003 to 12/31/2003 8.069248 9.732750 509,533.6949 01/01/2004 to 12/31/2004 9.732750 10.418212 663,087.6564 01/01/2005 to 12/31/2005 10.418212 11.623927 515,598.7796 01/01/2006 to 12/31/2006 11.623927 11.711098 513,916.9419 01/01/2007 to 12/31/2007 11.711098 12.817358 492,311.6930 01/01/2008 to 12/31/2008 12.817358 7.991434 434,112.6527 ============ ==== ========== ========= ========= ============== MET/DIMENSIONAL INTERNATIONAL SMALL COMPANY SUB-ACCOUNT (CLASS B) 11/10/2008 to 12/31/2008 10.064695 10.129881 0.0000 ============ ==== ========== ========= ========= ============== METLIFE STOCK INDEX SUB-ACCOUNT (CLASS B) 05/01/2003 to 12/31/2003 8.627802 10.428700 163,727.6214 01/01/2004 to 12/31/2004 10.428700 11.300646 287,263.4410 01/01/2005 to 12/31/2005 11.300646 11.591091 396,623.4327 01/01/2006 to 12/31/2006 11.591091 13.120340 392,218.9338 01/01/2007 to 12/31/2007 13.120340 13.532831 377,287.7898 01/01/2008 to 12/31/2008 13.532831 8.342698 293,287.0335 ============ ==== ========== ========= ========= ==============
A-6 APPENDIX A CONDENSED FINANCIAL INFORMATION (CONTINUED)
1.75% SEPARATE ACCOUNT PRODUCT CHARGES NUMBER OF ACCUMULATION ACCUMULATION ACCUMULATION UNIT VALUE AT UNIT VALUE AT UNITS BEGINNING OF END OF OUTSTANDING AT PERIOD PERIOD END OF PERIOD --------------- --------------- ------------------ WESTERN ASSET MANAGEMENT U.S. GOVERNMENT SUB-ACCOUNT (CLASS B) 05/01/2005 to 12/31/2005 15.232212 15.181339 490.4303 01/01/2006 to 12/31/2006 15.181339 15.502724 25,596.8450 01/01/2007 to 12/31/2007 15.502724 15.846744 29,409.6249 01/01/2008 to 12/31/2008 15.846744 15.488235 134,097.4692 ============ ==== ========== ========= ========= =============== MET INVESTORS SERIES TRUST - METLIFE ASSET ALLOCATION PROGRAM METLIFE AGGRESSIVE STRATEGY SUB-ACCOUNT (CLASS B) 11/22/2004 to 12/31/2004 10.300629 10.685617 496,059.1309 01/01/2005 to 12/31/2005 10.685617 11.590752 933,205.2691 01/01/2006 to 12/31/2006 11.590752 12.944726 1,106,411.7940 01/01/2007 to 12/31/2007 12.944726 13.086132 1,026,255.7098 01/01/2008 to 12/31/2008 13.086132 7.610366 968,970.0248 ============ ==== ========== ========= ========= =============== METLIFE BALANCED STRATEGY SUB-ACCOUNT (CLASS B) 11/22/2004 to 12/31/2004 10.100803 10.389680 3,598,348.2350 01/01/2005 to 12/31/2005 10.389680 10.937077 7,366,079.1747 01/01/2006 to 12/31/2006 10.937077 12.035216 10,524,181.7495 01/01/2007 to 12/31/2007 12.035216 12.402700 12,389,849.2039 01/01/2008 to 12/31/2008 12.402700 8.294780 12,007,765.4631 ============ ==== ========== ========= ========= =============== METLIFE DEFENSIVE STRATEGY SUB-ACCOUNT (CLASS B) 11/22/2004 to 12/31/2004 9.940942 10.105881 89,756.6426 01/01/2005 to 12/31/2005 10.105881 10.375938 551,207.4189 01/01/2006 to 12/31/2006 10.375938 11.075921 918,626.7875 01/01/2007 to 12/31/2007 11.075921 11.526954 1,598,877.3764 01/01/2008 to 12/31/2008 11.526954 8.987380 2,872,180.7332 ============ ==== ========== ========= ========= =============== METLIFE GROWTH STRATEGY SUB-ACCOUNT (CLASS B) 11/22/2004 to 12/31/2004 10.240681 10.600541 3,639,293.8540 01/01/2005 to 12/31/2005 10.600541 11.367691 6,735,952.1977 01/01/2006 to 12/31/2006 11.367691 12.689689 9,320,109.9604 01/01/2007 to 12/31/2007 12.689689 13.054701 12,268,807.7092 01/01/2008 to 12/31/2008 13.054701 7.969996 12,276,103.0249 ============ ==== ========== ========= ========= =============== METLIFE MODERATE STRATEGY SUB-ACCOUNT (CLASS B) 11/22/2004 to 12/31/2004 10.010881 10.226064 1,315,354.3950 01/01/2005 to 12/31/2005 10.226064 10.633274 2,644,268.1902 01/01/2006 to 12/31/2006 10.633274 11.518490 3,520,388.0639 01/01/2007 to 12/31/2007 11.518490 12.020101 4,956,840.2576 01/01/2008 to 12/31/2008 12.020101 8.690395 5,065,994.1323 ============ ==== ========== ========= ========= ===============
A-7 APPENDIX A CONDENSED FINANCIAL INFORMATION (CONTINUED) CHART 2
2.35% SEPARATE ACCOUNT PRODUCT CHARGES NUMBER OF ACCUMULATION ACCUMULATION ACCUMULATION UNIT VALUE AT UNIT VALUE AT UNITS BEGINNING OF END OF OUTSTANDING AT PERIOD PERIOD END OF PERIOD --------------- --------------- --------------- MET INVESTORS SERIES TRUST AMERICAN FUNDS BALANCED ALLOCATION SUB-ACCOUNT (CLASS C) 04/28/2008 to 12/31/2008 10.007424 6.965890 0.0000 ============ ==== ========== ========= ========= =========== AMERICAN FUNDS BOND SUB-ACCOUNT (CLASS C) 04/28/2008 to 12/31/2008 10.037422 8.894057 0.0000 ============ ==== ========== ========= ========= =========== AMERICAN FUNDS GROWTH ALLOCATION SUB-ACCOUNT (CLASS C) 04/28/2008 to 12/31/2008 9.997425 6.318254 0.0000 ============ ==== ========== ========= ========= =========== AMERICAN FUNDS GROWTH SUB-ACCOUNT (CLASS C) 04/28/2008 to 12/31/2008 9.987425 5.722011 0.0000 ============ ==== ========== ========= ========= =========== AMERICAN FUNDS INTERNATIONAL SUB-ACCOUNT (CLASS C) 04/28/2008 to 12/31/2008 10.087419 6.015385 0.0000 ============ ==== ========== ========= ========= =========== AMERICAN FUNDS MODERATE ALLOCATION SUB-ACCOUNT (CLASS C) 04/28/2008 to 12/31/2008 10.017424 7.635246 0.0000 ============ ==== ========== ========= ========= =========== BLACKROCK HIGH YIELD SUB-ACCOUNT (CLASS B) 04/28/2008 to 12/31/2008 15.049308 11.185814 0.0000 ============ ==== ========== ========= ========= =========== CLARION GLOBAL REAL ESTATE SUB-ACCOUNT (CLASS B) 05/01/2004 to 12/31/2004 9.998069 12.752164 588.0985 01/01/2005 to 12/31/2005 12.752164 14.111860 493.7380 01/01/2006 to 12/31/2006 14.111860 18.965814 713.1624 01/01/2007 to 12/31/2007 18.965814 15.743164 664.3877 01/01/2008 to 12/31/2008 15.743164 8.968204 546.5204 ============ ==== ========== ========= ========= =========== GOLDMAN SACHS MID CAP VALUE SUB-ACCOUNT (CLASS B) 05/01/2004 to 12/31/2004 9.998069 11.895751 970.3557 01/01/2005 to 12/31/2005 11.895751 13.077063 762.7763 01/01/2006 to 12/31/2006 13.077063 14.778664 586.1456 01/01/2007 to 12/31/2007 14.778664 14.880498 1,182.1895 01/01/2008 to 12/31/2008 14.880498 9.290430 490.8753 ============ ==== ========== ========= ========= =========== HARRIS OAKMARK INTERNATIONAL SUB-ACCOUNT (CLASS B) 05/01/2003 to 12/31/2003 8.751972 11.681191 7,211.5487 01/01/2004 to 12/31/2004 11.681191 13.750913 11,481.2594 01/01/2005 to 12/31/2005 13.750913 15.344806 5,708.3890 01/01/2006 to 12/31/2006 15.344806 19.313729 4,805.6963 01/01/2007 to 12/31/2007 19.313729 18.651655 5,000.1133 01/01/2008 to 12/31/2008 18.651655 10.768878 6,854.8372 ============ ==== ========== ========= ========= ===========
A-8 APPENDIX A CONDENSED FINANCIAL INFORMATION (CONTINUED)
2.35% SEPARATE ACCOUNT PRODUCT CHARGES NUMBER OF ACCUMULATION ACCUMULATION ACCUMULATION UNIT VALUE AT UNIT VALUE AT UNITS BEGINNING OF END OF OUTSTANDING AT PERIOD PERIOD END OF PERIOD --------------- --------------- --------------- LAZARD MID CAP SUB-ACCOUNT (CLASS B) 05/01/2003 to 12/31/2003 9.728989 11.950479 2,429.3721 01/01/2004 to 12/31/2004 11.950479 13.353272 1,648.8790 01/01/2005 to 12/31/2005 13.353272 14.095215 829.9912 01/01/2006 to 12/31/2006 14.095215 15.789320 807.8700 01/01/2007 to 12/31/2007 15.789320 15.002632 1,052.8345 01/01/2008 to 12/31/2008 15.002632 9.040658 797.1019 ============ ==== ========== ========= ========= =========== LEGG MASON PARTNERS AGGRESSIVE GROWTH SUB-ACCOUNT (CLASS B) 05/01/2003 to 12/31/2003 5.505944 6.670371 8,799.9818 01/01/2004 to 12/31/2004 6.670371 7.064944 13,872.1737 01/01/2005 to 12/31/2005 7.064944 7.838271 6,278.3740 01/01/2006 to 12/31/2006 7.838271 7.523570 3,972.1774 01/01/2007 to 12/31/2007 7.523570 7.514442 4,216.8731 01/01/2008 to 12/31/2008 7.514442 4.473088 4,260.3548 ============ ==== ========== ========= ========= =========== LEGG MASON VALUE EQUITY SUB-ACCOUNT (CLASS B) 11/07/2005 to 12/31/2005 10.245401 10.608943 0.0000 01/01/2006 to 12/31/2006 10.608943 11.045337 1,346.9813 01/01/2007 to 12/31/2007 11.045337 10.150171 1,346.9813 01/01/2008 to 12/31/2008 10.150171 4.499003 1,346.9813 ============ ==== ========== ========= ========= =========== LOOMIS SAYLES GLOBAL MARKETS SUB-ACCOUNT (CLASS B) 05/01/2006 to 12/31/2006 9.988068 10.273737 4,654.2324 01/01/2007 to 12/31/2007 10.273737 12.828800 4,637.4478 01/01/2008 to 12/31/2008 12.828800 7.610570 7,778.5611 ============ ==== ========== ========= ========= =========== LORD ABBETT BOND DEBENTURE SUB-ACCOUNT (CLASS B) 05/01/2003 to 12/31/2003 14.697264 16.001984 2,036.2211 01/01/2004 to 12/31/2004 16.001984 16.905783 2,845.4259 01/01/2005 to 12/31/2005 16.905783 16.760815 2,863.7383 01/01/2006 to 12/31/2006 16.760815 17.870324 2,638.7713 01/01/2007 to 12/31/2007 17.870324 18.596273 3,411.0649 01/01/2008 to 12/31/2008 18.596273 14.784122 1,989.4539 ============ ==== ========== ========= ========= =========== LORD ABBETT GROWTH AND INCOME SUB-ACCOUNT (CLASS B) 05/01/2003 to 12/31/2003 34.555426 42.813039 5,297.3453 01/01/2004 to 12/31/2004 42.813039 47.104675 6,160.5601 01/01/2005 to 12/31/2005 47.104675 47.574343 4,097.7586 01/01/2006 to 12/31/2006 47.574343 54.737578 1,984.3593 01/01/2007 to 12/31/2007 54.737578 55.448900 2,305.6030 01/01/2008 to 12/31/2008 55.448900 34.480350 1,859.5560 ============ ==== ========== ========= ========= =========== LORD ABBETT MID CAP VALUE SUB-ACCOUNT (CLASS B) 04/28/2008 to 12/31/2008 22.751813 14.893870 0.0000 ============ ==== ========== ========= ========= ===========
A-9 APPENDIX A CONDENSED FINANCIAL INFORMATION (CONTINUED)
2.35% SEPARATE ACCOUNT PRODUCT CHARGES NUMBER OF ACCUMULATION ACCUMULATION ACCUMULATION UNIT VALUE AT UNIT VALUE AT UNITS BEGINNING OF END OF OUTSTANDING AT PERIOD PERIOD END OF PERIOD --------------- --------------- --------------- MET/AIM SMALL CAP GROWTH SUB-ACCOUNT (CLASS B) 05/01/2003 to 12/31/2003 8.707674 11.529220 5,321.7740 01/01/2004 to 12/31/2004 11.529220 11.985058 6,330.1789 01/01/2005 to 12/31/2005 11.985058 12.675236 3,360.7710 01/01/2006 to 12/31/2006 12.675236 14.137630 2,356.6398 01/01/2007 to 12/31/2007 14.137630 15.336182 2,259.0743 01/01/2008 to 12/31/2008 15.336182 9.177504 2,079.9871 ============ ==== ========== ========= ========= =========== MET/FRANKLIN MUTUAL SHARES SUB-ACCOUNT (CLASS B) 04/28/2008 to 12/31/2008 9.997425 6.557021 0.0000 ============ ==== ========== ========= ========= =========== MET/FRANKLIN TEMPLETON FOUNDING STRATEGY SUB-ACCOUNT (CLASS B) 04/28/2008 to 12/31/2008 9.997425 6.987723 0.0000 ============ ==== ========== ========= ========= =========== MET/PUTNAM RESEARCH SUB-ACCOUNT (CLASS B) 05/01/2003 to 12/31/2003 6.425734 7.673689 10,613.5270 01/01/2004 to 11/19/2004 7.673689 7.817137 16,219.4233 ============ ==== ========== ========= ========= =========== MFS (Reg. TM) EMERGING MARKETS EQUITY SUB-ACCOUNT (CLASS B) 05/01/2006 to 12/31/2006 9.988068 10.411855 962.1545 01/01/2007 to 12/31/2007 10.411855 13.892661 962.1545 01/01/2008 to 12/31/2008 13.892661 6.033721 962.1545 ============ ==== ========== ========= ========= =========== MFS (Reg. TM) RESEARCH INTERNATIONAL SUB-ACCOUNT (CLASS B) 05/01/2003 to 12/31/2003 7.334391 9.431243 109.9281 01/01/2004 to 12/31/2004 9.431243 11.013465 1,759.8656 01/01/2005 to 12/31/2005 11.013465 12.525205 1,456.4851 01/01/2006 to 12/31/2006 12.525205 15.485230 594.5694 01/01/2007 to 12/31/2007 15.485230 17.133757 871.4572 01/01/2008 to 12/31/2008 17.133757 9.644708 2,994.7214 ============ ==== ========== ========= ========= =========== OPPENHEIMER CAPITAL APPRECIATION SUB-ACCOUNT (CLASS B) 05/01/2003 to 12/31/2003 6.545686 7.913983 24,969.0128 01/01/2004 to 12/31/2004 7.913983 8.224695 31,194.1479 01/01/2005 to 12/31/2005 8.224695 8.412962 25,112.0230 01/01/2006 to 12/31/2006 8.412962 8.843955 5,406.8555 01/01/2007 to 12/31/2007 8.843955 9.871674 5,205.0080 01/01/2008 to 12/31/2008 9.871674 5.212121 5,013.6262 ============ ==== ========== ========= ========= ===========
A-10 APPENDIX A CONDENSED FINANCIAL INFORMATION (CONTINUED)
2.35% SEPARATE ACCOUNT PRODUCT CHARGES NUMBER OF ACCUMULATION ACCUMULATION ACCUMULATION UNIT VALUE AT UNIT VALUE AT UNITS BEGINNING OF END OF OUTSTANDING AT PERIOD PERIOD END OF PERIOD --------------- --------------- --------------- PIMCO INFLATION PROTECTED BOND SUB-ACCOUNT (CLASS B) 05/01/2003 to 12/31/2003 10.000000 10.369837 1,638.0826 01/01/2004 to 12/31/2004 10.369837 11.041046 5,017.9856 01/01/2005 to 12/31/2005 11.041046 10.934894 4,874.3576 01/01/2006 to 12/31/2006 10.934894 10.722911 12,459.3082 01/01/2007 to 12/31/2007 10.722911 11.603399 4,994.4154 01/01/2008 to 12/31/2008 11.603399 10.552372 3,847.8709 ============ ==== ========== ========= ========= =========== PIMCO TOTAL RETURN SUB-ACCOUNT (CLASS B) 05/01/2003 to 12/31/2003 11.613154 11.605709 2,037.0466 01/01/2004 to 12/31/2004 11.605709 11.900034 2,339.2148 01/01/2005 to 12/31/2005 11.900034 11.885652 2,476.6487 01/01/2006 to 12/31/2006 11.885652 12.134866 8,439.9772 01/01/2007 to 12/31/2007 12.134866 12.748074 8,873.9900 01/01/2008 to 12/31/2008 12.748074 12.502261 7,542.4133 ============ ==== ========== ========= ========= =========== RAINIER LARGE CAP EQUITY SUB-ACCOUNT (CLASS B) 11/12/2007 to 12/31/2007 9.562548 9.967996 0.0000 01/01/2008 to 12/31/2008 9.967996 5.665476 6,775.3745 ============ ==== ========== ========= ========= =========== RCM TECHNOLOGY SUB-ACCOUNT (CLASS B) 05/01/2003 to 12/31/2003 3.305316 4.570789 4,260.9107 01/01/2004 to 12/31/2004 4.570789 4.271809 8,354.9193 01/01/2005 to 12/31/2005 4.271809 4.632556 4,528.6782 01/01/2006 to 12/31/2006 4.632556 4.767173 3,712.4112 01/01/2007 to 12/31/2007 4.767173 6.123650 3,408.2776 01/01/2008 to 12/31/2008 6.123650 3.322217 3,247.6374 ============ ==== ========== ========= ========= =========== SSGA GROWTH AND INCOME ETF SUB-ACCOUNT (CLASS B) 11/10/2008 to 12/31/2008 8.160076 8.310121 0.0000 ============ ==== ========== ========= ========= =========== SSGA GROWTH ETF SUB-ACCOUNT (CLASS B) 11/10/2008 to 12/31/2008 7.555460 7.618682 0.0000 ============ ==== ========== ========= ========= =========== T. ROWE PRICE MID CAP GROWTH SUB-ACCOUNT (CLASS B) 05/01/2003 to 12/31/2003 4.758231 6.085641 3,323.5617 01/01/2004 to 12/31/2004 6.085641 7.003377 2,387.4109 01/01/2005 to 12/31/2005 7.003377 7.841855 1,486.6672 01/01/2006 to 12/31/2006 7.841855 8.132360 3,771.0355 01/01/2007 to 12/31/2007 8.132360 9.343381 3,576.9147 01/01/2008 to 12/31/2008 9.343381 5.498168 3,888.4529 ============ ==== ========== ========= ========= ===========
A-11 APPENDIX A CONDENSED FINANCIAL INFORMATION (CONTINUED)
2.35% SEPARATE ACCOUNT PRODUCT CHARGES NUMBER OF ACCUMULATION ACCUMULATION ACCUMULATION UNIT VALUE AT UNIT VALUE AT UNITS BEGINNING OF END OF OUTSTANDING AT PERIOD PERIOD END OF PERIOD --------------- --------------- --------------- THIRD AVENUE SMALL CAP VALUE SUB-ACCOUNT (CLASS B) 05/01/2003 to 12/31/2003 8.471513 11.408322 4,747.7230 01/01/2004 to 12/31/2004 11.408322 14.096201 6,958.7275 01/01/2005 to 12/31/2005 14.096201 15.901147 3,515.5740 01/01/2006 to 12/31/2006 15.901147 17.572357 2,309.8907 01/01/2007 to 12/31/2007 17.572357 16.643438 2,689.9480 01/01/2008 to 12/31/2008 16.643438 11.407626 4,010.6616 ============ ==== ========== ========= ========= =========== TURNER MID CAP GROWTH SUB-ACCOUNT (CLASS B) 05/01/2004 to 12/31/2004 9.998069 11.044388 2,141.9886 01/01/2005 to 12/31/2005 11.044388 12.013937 1,373.0669 01/01/2006 to 12/31/2006 12.013937 12.448174 828.6302 01/01/2007 to 12/31/2007 12.448174 15.093470 775.7374 01/01/2008 to 12/31/2008 15.093470 7.621486 710.7684 ============ ==== ========== ========= ========= =========== VAN KAMPEN COMSTOCK SUB-ACCOUNT (CLASS B) 05/01/2005 to 12/31/2005 9.998068 10.409335 0.0000 01/01/2006 to 12/31/2006 10.409335 11.800531 5,579.7463 01/01/2007 to 12/31/2007 11.800531 11.237735 5,554.2161 01/01/2008 to 12/31/2008 11.237735 7.034058 5,519.6805 ============ ==== ========== ========= ========= =========== METROPOLITAN SERIES FUND, INC. BLACKROCK MONEY MARKET SUB-ACCOUNT (CLASS B) 05/01/2005 to 12/31/2005 9.774123 9.815105 2,229.8274 01/01/2006 to 12/31/2006 9.815105 10.024111 20,013.5876 01/01/2007 to 12/31/2007 10.024111 10.261390 11,598.6659 01/01/2008 to 12/31/2008 10.261390 10.282922 1,840.6419 ============ ==== ========== ========= ========= =========== BLACKROCK MONEY MARKET SUB-ACCOUNT (CLASS B) (FORMERLY MET INVESTORS SERIES TRUST - MONEY MARKET SUB-ACCOUNT (CLASS B)) 05/01/2003 to 12/31/2003 10.096666 9.962023 0.0000 01/01/2004 to 12/31/2004 9.962023 9.792414 2,091.9780 01/01/2005 to 04/30/2005 9.792414 9.774900 0.0000 ============ ==== ========== ========= ========= =========== DAVIS VENTURE VALUE SUB-ACCOUNT (CLASS E) 05/01/2003 to 12/31/2003 8.556367 10.706572 16,594.9520 01/01/2004 to 12/31/2004 10.706572 11.726961 23,407.0233 01/01/2005 to 12/31/2005 11.726961 12.616518 16,690.5783 01/01/2006 to 12/31/2006 12.616518 14.099703 7,359.6555 01/01/2007 to 12/31/2007 14.099703 14.380757 7,956.4157 01/01/2008 to 12/31/2008 14.380757 8.503333 8,580.7490 ============ ==== ========== ========= ========= ===========
A-12 APPENDIX A CONDENSED FINANCIAL INFORMATION (CONTINUED)
2.35% SEPARATE ACCOUNT PRODUCT CHARGES NUMBER OF ACCUMULATION ACCUMULATION ACCUMULATION UNIT VALUE AT UNIT VALUE AT UNITS BEGINNING OF END OF OUTSTANDING AT PERIOD PERIOD END OF PERIOD --------------- --------------- --------------- HARRIS OAKMARK FOCUSED VALUE SUB-ACCOUNT (CLASS B) 05/01/2003 to 12/31/2003 10.939577 13.891662 5,819.1667 01/01/2004 to 12/31/2004 13.891662 14.877853 6,201.6938 01/01/2005 to 12/31/2005 14.877853 15.944144 3,293.9709 01/01/2006 to 12/31/2006 15.944144 17.470824 3,007.8063 01/01/2007 to 12/31/2007 17.470824 15.855560 3,217.0586 01/01/2008 to 12/31/2008 15.855560 8.341605 4,905.7054 ============ ==== ========== ========= ========= =========== JENNISON GROWTH SUB-ACCOUNT (CLASS B) 05/01/2003 to 12/31/2003 8.069248 9.693860 5,939.3849 01/01/2004 to 12/31/2004 9.693860 10.314348 7,214.6851 01/01/2005 to 12/31/2005 10.314348 11.439440 3,380.7494 01/01/2006 to 12/31/2006 11.439440 11.456450 8,241.2225 01/01/2007 to 12/31/2007 11.456450 12.463244 8,168.6701 01/01/2008 to 12/31/2008 12.463244 7.723904 7,692.8836 ============ ==== ========== ========= ========= =========== MET/DIMENSIONAL INTERNATIONAL SMALL COMPANY SUB-ACCOUNT (CLASS B) 11/10/2008 to 12/31/2008 10.062876 10.119575 0.0000 ============ ==== ========== ========= ========= =========== METLIFE STOCK INDEX SUB-ACCOUNT (CLASS B) 05/01/2003 to 12/31/2003 8.627802 10.387019 0.0000 01/01/2004 to 12/31/2004 10.387019 11.187987 0.0000 01/01/2005 to 12/31/2005 11.187987 11.407097 0.0000 01/01/2006 to 12/31/2006 11.407097 12.835061 0.0000 01/01/2007 to 12/31/2007 12.835061 13.158957 0.0000 01/01/2008 to 12/31/2008 13.158957 8.063418 0.0000 ============ ==== ========== ========= ========= =========== WESTERN ASSET MANAGEMENT U.S. GOVERNMENT SUB-ACCOUNT (CLASS B) 05/01/2005 to 12/31/2005 14.301429 14.197067 0.0000 01/01/2006 to 12/31/2006 14.197067 14.411125 0.0000 01/01/2007 to 12/31/2007 14.411125 14.642329 0.0000 01/01/2008 to 12/31/2008 14.642329 14.225228 0.0000 ============ ==== ========== ========= ========= =========== MET INVESTORS SERIES TRUST - METLIFE ASSET ALLOCATION PROGRAM METLIFE AGGRESSIVE STRATEGY SUB-ACCOUNT (CLASS B) 11/22/2004 to 12/31/2004 10.297418 10.675448 0.0000 01/01/2005 to 12/31/2005 10.675448 11.510676 44,495.8639 01/01/2006 to 12/31/2006 11.510676 12.778614 44,340.7976 01/01/2007 to 12/31/2007 12.778614 12.840492 44,191.0612 01/01/2008 to 12/31/2008 12.840492 7.422578 36,297.0478 ============ ==== ========== ========= ========= ===========
A-13 APPENDIX A CONDENSED FINANCIAL INFORMATION (CONTINUED)
2.35% SEPARATE ACCOUNT PRODUCT CHARGES NUMBER OF ACCUMULATION ACCUMULATION ACCUMULATION UNIT VALUE AT UNIT VALUE AT UNITS BEGINNING OF END OF OUTSTANDING AT PERIOD PERIOD END OF PERIOD --------------- --------------- --------------- METLIFE BALANCED STRATEGY SUB-ACCOUNT (CLASS B) 11/22/2004 to 12/31/2004 10.097652 10.379787 44,271.0084 01/01/2005 to 12/31/2005 10.379787 10.861498 62,856.0056 01/01/2006 to 12/31/2006 10.861498 11.880756 118,158.9512 01/01/2007 to 12/31/2007 11.880756 12.169882 138,224.5698 01/01/2008 to 12/31/2008 12.169882 8.090149 103,215.7819 ============ ==== ========== ========= ========= ============ METLIFE DEFENSIVE STRATEGY SUB-ACCOUNT (CLASS B) 11/22/2004 to 12/31/2004 9.937838 10.096253 0.0000 01/01/2005 to 12/31/2005 10.096253 10.304219 2,570.8405 01/01/2006 to 12/31/2006 10.304219 10.933750 2,556.0845 01/01/2007 to 12/31/2007 10.933750 11.310560 6,430.7566 01/01/2008 to 12/31/2008 11.310560 8.765704 43,769.4811 ============ ==== ========== ========= ========= ============ METLIFE GROWTH STRATEGY SUB-ACCOUNT (CLASS B) 11/22/2004 to 12/31/2004 10.237488 10.590451 34,065.2052 01/01/2005 to 12/31/2005 10.590451 11.289148 30,607.5911 01/01/2006 to 12/31/2006 11.289148 12.526840 54,746.8137 01/01/2007 to 12/31/2007 12.526840 12.809648 42,845.5572 01/01/2008 to 12/31/2008 12.809648 7.773350 32,093.1003 ============ ==== ========== ========= ========= ============ METLIFE MODERATE STRATEGY SUB-ACCOUNT (CLASS B) 11/22/2004 to 12/31/2004 10.007756 10.216324 101,202.8567 01/01/2005 to 12/31/2005 10.216324 10.559785 106,216.6322 01/01/2006 to 12/31/2006 10.559785 11.370649 115,029.6087 01/01/2007 to 12/31/2007 11.370649 11.794457 108,613.3490 01/01/2008 to 12/31/2008 11.794457 8.476025 81,099.5136 ============ ==== ========== ========= ========= ============
A-14 APPENDIX A CONDENSED FINANCIAL INFORMATION (CONTINUED) DISCONTINUED INVESTMENT PORTFOLIOS. The following investment portfolios are no longer available for allocations of new purchase payments or transfers of account value (excluding rebalancing and dollar cost averaging programs in existence at the time of closing): (a) Met Investors Series Trust: Oppenheimer Capital Appreciation Portfolio (Class B) (closed effective November 12, 2007); and (b) Met Investors Series Trust: Goldman Sachs Mid Cap Value Portfolio (Class B) (closed effective April 28, 2008). YOU SHOULD READ THE PROSPECTUSES FOR THESE DISCONTINUED INVESTMENT PORTFOLIOS FOR MORE INFORMATION ON FEES, CHARGES, INVESTMENT OBJECTIVES AND RISKS. A COPY OF THE FUND PROSPECTUSES HAS PREVIOUSLY BEEN PROVIDED TO YOU. A-15 APPENDIX B PARTICIPATING INVESTMENT PORTFOLIOS Below are the advisers and subadvisers and investment objectives of each investment portfolio available under the contract. The fund prospectuses contain more complete information, including a description of the investment objectives, policies, restrictions and risks. THERE CAN BE NO ASSURANCE THAT THE INVESTMENT OBJECTIVES WILL BE ACHIEVED. MET INVESTORS SERIES TRUST (CLASS B OR, AS NOTED, CLASS C) Met Investors Series Trust is managed by MetLife Advisers, LLC, which is an affiliate of MetLife Investors. (Met Investors Advisory, LLC, the former investment manager of Met Investors Series Trust, merged into MetLife Advisers, LLC on May 1, 2009.) Met Investors Series Trust is a mutual fund with multiple portfolios. The following Class B or, as noted, Class C portfolios are available under the contract: AMERICAN FUNDS BOND PORTFOLIO (CLASS C) SUBADVISER: Capital Research and Management Company INVESTMENT OBJECTIVE: The American Funds Bond Portfolio seeks to maximize current income and preserve capital. AMERICAN FUNDS GROWTH PORTFOLIO (CLASS C) SUBADVISER: Capital Research and Management Company INVESTMENT OBJECTIVE: The American Funds Growth Portfolio seeks to achieve growth of capital. AMERICAN FUNDS INTERNATIONAL PORTFOLIO (CLASS C) SUBADVISER: Capital Research and Management Company INVESTMENT OBJECTIVE: The American Funds International Portfolio seeks to achieve growth of capital. BLACKROCK HIGH YIELD PORTFOLIO SUBADVISER: BlackRock Financial Management, Inc. INVESTMENT OBJECTIVE: The BlackRock High Yield Portfolio seeks to maximize total return, consistent with income generation and prudent investment management. CLARION GLOBAL REAL ESTATE PORTFOLIO SUBADVISER: ING Clarion Real Estate Securities L.P. INVESTMENT OBJECTIVE: The Clarion Global Real Estate Portfolio seeks to provide total return through investment in real estate securities, emphasizing both capital appreciation and current income. HARRIS OAKMARK INTERNATIONAL PORTFOLIO SUBADVISER: Harris Associates L.P. INVESTMENT OBJECTIVE: The Harris Oakmark International Portfolio seeks long-term capital appreciation. LAZARD MID CAP PORTFOLIO SUBADVISER: Lazard Asset Management LLC INVESTMENT OBJECTIVE: The Lazard Mid-Cap Portfolio seeks long-term growth of capital. LEGG MASON PARTNERS AGGRESSIVE GROWTH PORTFOLIO SUBADVISER: ClearBridge Advisors, LLC INVESTMENT OBJECTIVE: The Legg Mason Partners Aggressive Growth Portfolio seeks capital appreciation. LEGG MASON VALUE EQUITY PORTFOLIO SUBADVISER: Legg Mason Capital Management, Inc. INVESTMENT OBJECTIVE: The Legg Mason Value Equity Portfolio seeks long-term growth of capital. LOOMIS SAYLES GLOBAL MARKETS PORTFOLIO SUBADVISER: Loomis, Sayles & Company, L.P. INVESTMENT OBJECTIVE: The Loomis Sayles Global Markets Portfolio seeks high total investment return through a combination of capital appreciation and income. B-1 LORD ABBETT BOND DEBENTURE PORTFOLIO SUBADVISER: Lord, Abbett & Co. LLC INVESTMENT OBJECTIVE: The Lord Abbett Bond Debenture Portfolio seeks high current income and the opportunity for capital appreciation to produce a high total return. LORD ABBETT GROWTH AND INCOME PORTFOLIO SUBADVISER: Lord, Abbett & Co. LLC INVESTMENT OBJECTIVE: The Lord Abbett Growth and Income Portfolio seeks long-term growth of capital and income without excessive fluctuations in market value. LORD ABBETT MID CAP VALUE PORTFOLIO SUBADVISER: Lord, Abbett & Co. LLC INVESTMENT OBJECTIVE: The Lord Abbett Mid Cap Value Portfolio seeks capital appreciation through investments primarily in equity securities which are believed to be undervalued in the marketplace. MET/AIM SMALL CAP GROWTH PORTFOLIO SUBADVISER: Invesco Aim Capital Management, Inc. INVESTMENT OBJECTIVE: The Met/AIM Small Cap Growth Portfolio seeks long-term growth of capital. MET/FRANKLIN MUTUAL SHARES PORTFOLIO SUBADVISER: Franklin Mutual Advisers, LLC INVESTMENT OBJECTIVE: The Met/Franklin Mutual Shares Portfolio seeks capital appreciation, which may occasionally be short-term. The portfolio's secondary investment objective is income. MET/TEMPLETON INTERNATIONAL BOND PORTFOLIO*+ SUBADVISER: Franklin Advisers, Inc. INVESTMENT OBJECTIVE: The Met/Templeton International Bond Portfolio seeks current income with capital appreciation and growth of income. MFS (Reg. TM) EMERGING MARKETS EQUITY PORTFOLIO SUBADVISER: Massachusetts Financial Services Company INVESTMENT OBJECTIVE: The MFS (Reg. TM) Emerging Markets Equity Portfolio seeks capital appreciation. MFS (Reg. TM) RESEARCH INTERNATIONAL PORTFOLIO SUBADVISER: Massachusetts Financial Services Company INVESTMENT OBJECTIVE: The MFS (Reg. TM) Research International Portfolio seeks capital appreciation. PIMCO INFLATION PROTECTED BOND PORTFOLIO SUBADVISER: Pacific Investment Management Company LLC INVESTMENT OBJECTIVE: The PIMCO Inflation Protected Bond Portfolio seeks to provide maximum real return, consistent with preservation of capital and prudent investment management. PIMCO TOTAL RETURN PORTFOLIO SUBADVISER: Pacific Investment Management Company LLC INVESTMENT OBJECTIVE: The PIMCO Total Return Portfolio seeks maximum total return, consistent with the preservation of capital and prudent investment management. PIONEER FUND PORTFOLIO+ SUBADVISER: Pioneer Investment Management, Inc. INVESTMENT OBJECTIVE: The Pioneer Fund Portfolio seeks reasonable income and capital growth. RAINIER LARGE CAP EQUITY PORTFOLIO SUBADVISER: Rainier Investment Management, Inc. INVESTMENT OBJECTIVE: The Rainier Large Cap Equity Portfolio seeks to maximize long-term capital appreciation. RCM TECHNOLOGY PORTFOLIO SUBADVISER: RCM Capital Management LLC INVESTMENT OBJECTIVE: The RCM Technology Portfolio seeks capital appreciation; no consideration is given to income. T. ROWE PRICE MID CAP GROWTH PORTFOLIO SUBADVISER: T. Rowe Price Associates, Inc. INVESTMENT OBJECTIVE: The T. Rowe Price Mid-Cap Growth Portfolio seeks long-term growth of capital. THIRD AVENUE SMALL CAP VALUE PORTFOLIO SUBADVISER: Third Avenue Management LLC INVESTMENT OBJECTIVE: The Third Avenue Small Cap Value Portfolio seeks long-term capital appreciation. TURNER MID CAP GROWTH PORTFOLIO SUBADVISER: Turner Investment Partners, Inc. INVESTMENT OBJECTIVE: The Turner Mid-Cap Growth Portfolio seeks capital appreciation. B-2 VAN KAMPEN COMSTOCK PORTFOLIO SUBADVISER: Morgan Stanley Investment Management, Inc., doing business as Van Kampen INVESTMENT OBJECTIVE: The Van Kampen Comstock Portfolio seeks capital growth and income. *This portfolio is only available for investment if certain optional riders are elected. (See "Purchase - Investment Allocation Restrictions for Certain Riders.") +These portfolios are not available for investment prior to May 4, 2009. METROPOLITAN SERIES FUND, INC. Metropolitan Series Fund, Inc. is a mutual fund with multiple portfolios. MetLife Advisers, LLC, an affiliate of MetLife Investors, is the investment adviser to the portfolios. The following portfolios are available under the contract: BARCLAYS CAPITAL AGGREGATE BOND INDEX PORTFOLIO (CLASS G)+ SUBADVISER: MetLife Investment Advisors Company, LLC INVESTMENT OBJECTIVE: The Barclays Capital Aggregate Bond Index Portfolio seeks to equal the performance of the Barclays Capital U.S. Aggregate Bond Index. BLACKROCK MONEY MARKET PORTFOLIO (CLASS B) SUBADVISER: BlackRock Advisors, LLC INVESTMENT OBJECTIVE: The BlackRock Money Market Portfolio seeks a high level of current income consistent with preservation of capital. An investment in the BlackRock Money Market Portfolio is not insured or guaranteed by the Federal Deposit Insurance Company or any other government agency. Although the BlackRock Money Market Portfolio seeks to preserve the value of your investment at $100 per share, it is possible to lose money by investing in the BlackRock Money Market Portfolio. During extended periods of low interest rates, the yields of the BlackRock Money Market Portfolio may become extremely low and possibly negative. DAVIS VENTURE VALUE PORTFOLIO (CLASS E) SUBADVISER: Davis Selected Advisers, L.P. Davis Selected Advisers, L.P. may delegate any of its responsibilities to Davis Selected Advisers - NY, Inc., a wholly-owned subsidiary. INVESTMENT OBJECTIVE: The Davis Venture Value Portfolio seeks growth of capital. JENNISON GROWTH PORTFOLIO (CLASS B) SUBADVISER: Jennison Associates LLC INVESTMENT OBJECTIVE: The Jennison Growth Portfolio seeks long-term growth of capital. MET/ARTISAN MID CAP VALUE PORTFOLIO (CLASS B) (formerly Harris Oakmark Focused Value Portfolio) SUBADVISER: Artisan Partners Limited Partnership (formerly Harris Associates L.P.) INVESTMENT OBJECTIVE: The Met/Artisan Mid Cap Value Portfolio seeks long-term capital appreciation. MET/DIMENSIONAL INTERNATIONAL SMALL COMPANY PORTFOLIO (CLASS B) SUBADVISER: Dimensional Fund Advisors LP INVESTMENT OBJECTIVE: The Met/Dimensional International Small Company Portfolio seeks long-term capital appreciation. METLIFE MID CAP STOCK INDEX PORTFOLIO (CLASS G)+ SUBADVISER: MetLife Investment Advisors Company, LLC INVESTMENT OBJECTIVE: The MetLife Mid Cap Stock Index Portfolio seeks to equal the performance of the Standard & Poor's MidCap 400 Composite Stock Price Index. B-3 METLIFE STOCK INDEX PORTFOLIO (CLASS B) SUBADVISER: MetLife Investment Advisors Company, LLC INVESTMENT OBJECTIVE: The MetLife Stock Index Portfolio seeks to equal the performance of the Standard & Poor's 500 (Reg. TM) Composite Stock Price Index. MORGAN STANLEY EAFE (Reg. TM) INDEX PORTFOLIO (CLASS G)+ SUBADVISER: MetLife Investment Advisors Company, LLC INVESTMENT OBJECTIVE: The Morgan Stanley EAFE (Reg. TM) Index Portfolio seeks to equal the performance of the MSCI EAFE Index. RUSSELL 2000 (Reg. TM) INDEX PORTFOLIO (CLASS G)+ SUBADVISER: MetLife Investment Advisors Company, LLC INVESTMENT OBJECTIVE: The Russell 2000 (Reg. TM) Index Portfolio seeks to equal the return of the Russell 2000 (Reg. TM) Index. VAN ECK GLOBAL NATURAL RESOURCES PORTFOLIO (CLASS B)*+ SUBADVISER: Van Eck Associates Corporation INVESTMENT OBJECTIVE: The Van Eck Global Natural Resources Portfolio seeks long-term capital appreciation with income as a secondary consideration. WESTERN ASSET MANAGEMENT U.S. GOVERNMENT PORTFOLIO (CLASS B) SUBADVISER: Western Asset Management Company INVESTMENT OBJECTIVE: The Western Asset Management U.S. Government Portfolio seeks to maximize total return consistent with preservation of capital and maintenance of liquidity. *This portfolio is only available for investment if certain optional riders are elected. (See "Purchase - Investment Allocation Restrictions for Certain Riders.") +These portfolios are not available for investment prior to May 4, 2009. MET INVESTORS SERIES TRUST - METLIFE ASSET ALLOCATION PROGRAM (CLASS B) In addition to the Met Investors Series Trust Portfolios listed above, the following Class B portfolios managed by MetLife Advisers, LLC are available under the contract: METLIFE DEFENSIVE STRATEGY PORTFOLIO INVESTMENT OBJECTIVE: The MetLife Defensive Strategy Portfolio seeks to provide a high level of current income with growth of capital, a secondary objective. METLIFE MODERATE STRATEGY PORTFOLIO INVESTMENT OBJECTIVE: The MetLife Moderate Strategy Portfolio seeks to provide a high total return in the form of income and growth of capital, with a greater emphasis on income. METLIFE BALANCED STRATEGY PORTFOLIO INVESTMENT OBJECTIVE: The MetLife Balanced Strategy Portfolio seeks to provide a balance between a high level of current income and growth of capital with a greater emphasis on growth of capital. METLIFE GROWTH STRATEGY PORTFOLIO INVESTMENT OBJECTIVE: The MetLife Growth Strategy Portfolio seeks to provide growth of capital. METLIFE AGGRESSIVE STRATEGY PORTFOLIO INVESTMENT OBJECTIVE: The MetLife Aggressive Strategy Portfolio seeks to provide growth of capital. B-4 MET INVESTORS SERIES TRUST - AMERICAN FUNDS ASSET ALLOCATION PORTFOLIOS (CLASS C) In addition to the Met Investors Series Trust portfolios listed above, the following Class C portfolios managed by MetLife Advisers, LLC are also available under the contract: AMERICAN FUNDS MODERATE ALLOCATION PORTFOLIO INVESTMENT OBJECTIVE: The American Funds Moderate Allocation Portfolio seeks a high total return in the form of income and growth of capital, with a greater emphasis on income. AMERICAN FUNDS BALANCED ALLOCATION PORTFOLIO INVESTMENT OBJECTIVE: The American Funds Balanced Allocation Portfolio seeks a balance between a high level of current income and growth of capital with a greater emphasis on growth of capital. AMERICAN FUNDS GROWTH ALLOCATION PORTFOLIO INVESTMENT OBJECTIVE: The American Funds Growth Allocation Portfolio seeks growth of capital. MET INVESTORS SERIES TRUST - FRANKLIN TEMPLETON ASSET ALLOCATION PORTFOLIO (CLASS B) In addition to the Met Investors Series Trust portfolios listed above, the following Class B portfolio managed by MetLife Advisers, LLC is also available under the contract: MET/FRANKLIN TEMPLETON FOUNDING STRATEGY PORTFOLIO INVESTMENT OBJECTIVE: The Met/Franklin Templeton Founding Strategy Portfolio primarily seeks capital appreciation and secondarily seeks income. MET INVESTORS SERIES TRUST - SSGA ETF PORTFOLIOS (CLASS B) In addition to the Met Investors Series Trust portfolios listed above, the following Class B portfolios managed by MetLife Advisers, LLC are also available under the contract: SSGA GROWTH AND INCOME ETF PORTFOLIO SUBADVISER: SSgA Funds Management, Inc. INVESTMENT OBJECTIVE: The SSgA Growth and Income ETF Portfolio seeks growth of capital and income. SSGA GROWTH ETF PORTFOLIO SUBADVISER: SSgA Funds Management, Inc. INVESTMENT OBJECTIVE: The SSgA Growth ETF Portfolio seeks growth of capital. B-5 APPENDIX C GUARANTEED MINIMUM INCOME BENEFIT EXAMPLES The purpose of these examples is to illustrate the operation of the Guaranteed Minimum Income Benefit. (Unless otherwise noted, these examples are for the GMIB Plus II rider.) The investment results shown are hypothetical and are not representative of past or future performance. Actual investment results may be more or less than those shown and will depend upon a number of factors, including investment allocations and the investment experience of the investment portfolios chosen. THE EXAMPLES DO NOT REFLECT THE DEDUCTION OF FEES AND CHARGES, OR INCOME TAXES AND TAX PENALITIES. (1) WITHDRAWAL ADJUSTMENTS TO ANNUAL INCREASE AMOUNT Dollar-for-dollar adjustment when withdrawal is less than or equal to 5% of --------------------------------------------------------------------------- the Annual Increase Amount from the prior contract anniversary -------------------------------------------------------------- Assume the initial purchase payment is $100,000 and the GMIB Plus II is selected. Assume that during the first contract year, $5,000 is withdrawn. Because the withdrawal is less than or equal to 5% of the Annual Increase Amount from the prior contract anniversary, the Annual Increase Amount is reduced by the withdrawal on a dollar-for-dollar basis to $100,000 ($100,000 increased by 5% per year, compounded annually, less $5,000 = $100,000). Assuming no other purchase payments or withdrawals are made before the second contract anniversary, the Annual Increase Amount at the second contract anniversary will be $105,000 ($100,000 increased by 5% per year, compounded annually). Proportionate adjustment when withdrawal is greater than 5% of the Annual ------------------------------------------------------------------------- Increase Amount from the prior contract anniversary --------------------------------------------------- Assume the initial purchase payment is $100,000 and the GMIB Plus II is selected. Assume the account value at the first contract anniversary is $100,000. The Annual Increase Amount at the first contract anniversary will be $105,000 ($100,000 increased by 5% per year, compounded annually). Assume that on the first contract anniversary, $10,000 is withdrawn (leaving an account balance of $90,000). Because the withdrawal is greater than 5% of the Annual Increase Amount from the prior contract anniversary, the Annual Increase Amount is reduced by the value of the Annual Increase Amount immediately prior to the withdrawal ($105,000) multiplied by the percentage reduction in the account value attributed to that entire withdrawal: 10% (the $10,000 withdrawal reduced the $100,000 account value by 10%). Therefore, the new Annual Increase Amount is $94,500 ($105,000 x 10% = $10,500; $105,000 - $10,500 = $94,500). (If multiple withdrawals are made during a contract year - for example, two $5,000 withdrawals instead of one $10,000 withdrawal - and those withdrawals total more than 5% of the Annual Increase Amount from the prior contract anniversary, the Annual Increase Amount is reduced proportionately by each of the withdrawals made during that contract year and there will be no dollar-for-dollar withdrawal adjustment for the contract year.) Assuming no other purchase payments or withdrawals are made before the second contract anniversary, the Annual Increase Amount at the second contract anniversary will be $99,225 ($94,500 increased by 5% per year, compounded annually). (Based on the date a contract was issued with the GMIB Plus II rider or the GMIB Plus I rider, the annual increase rate may be higher than 5%. See "Living Benefits - Guaranteed Income Benefits.") (2) THE 5% ANNUAL INCREASE AMOUNT Example ------- Assume the owner of the contract is a male, age 55 at issue, and he elects the GMIB Plus II rider. He makes an initial purchase payment of $100,000, and makes no additional purchase payments or partial withdrawals. On the contract issue date, the 5% Annual Increase Amount is equal to $100,000 (the initial purchase payment). The 5% Annual Increase Amount is calculated at each contract anniversary (through the contract anniversary prior to the owner's 91st birthday). At the tenth contract anniversary, when the owner is age 65, the 5% Annual Increase Amount C-1 is $162,889 ($100,000 increased by 5% per year, compounded annually). See section (3) below for an example of the calculation of the Highest Anniversary Value. Graphic Example: Determining a value upon which future income payments can -------------------------------------------------------------------------- be based -------- Assume that you make an initial purchase payment of $100,000. Prior to annuitization, your account value fluctuates above and below your initial purchase payment depending on the investment performance of the investment options you selected. Your purchase payments accumulate at the annual increase rate of 5%, until the contract anniversary on or immediately after the contract owner's 90th birthday. Your purchase payments are also adjusted for any withdrawals made during this period. The line (your purchase payments accumulated at 5% a year adjusted for withdrawals and charges "the 5% Annual Increase Amount") is the value upon which future income payments can be based. [GRAPHIC APPEARS HERE] Graphic Example: Determining your guaranteed lifetime income stream ------------------------------------------------------------------- Assume that you decide to annuitize your contract and begin taking annuity payments after 20 years. In this example, your 5% Annual Increase Amount is higher than the Highest Anniversary Value and will produce a higher income benefit. Accordingly, the 5% Annual Increase Amount will be applied to the annuity pay-out rates in the Guaranteed Minimum Income Benefit Annuity Table to determine your lifetime annuity payments. THE INCOME BASE IS NOT AVAILABLE FOR CASH WITHDRAWALS AND IS ONLY USED FOR PURPOSES OF CALCULATING THE GUARANTEED MINIMUM INCOME BENEFIT PAYMENT AND THE CHARGE FOR THE BENEFIT. [GRAPHIC APPEARS HERE] (In contrast to the GMIB Plus II rider, for the GMIB II rider, purchase payments accumulate at the annual increase rate of 5% until the contract anniversary on or immediately after the contract owner's 85th birthday.) (3) THE "HIGHEST ANNIVERSARY VALUE" ("HAV") Example ------- Assume, as in the example in section (2) above, the owner of the contract is a male, age 55 at issue, and he elects the GMIB Plus II rider. He makes an initial purchase payment of $100,000, and makes no additional purchase payments or partial withdrawals. On the contract issue date, the Highest Anniversary Value is equal to $100,000 (the initial purchase payment). Assume the account value on the first contract anniversary is $108,000 due to good market performance. Because the account value is greater than the Highest Anniversary Value ($100,000), the Highest Anniversary Value is set equal to the account value ($108,000). Assume the account value on the second contract anniversary is $102,000 due to poor market performance. Because the account value is less than the Highest Anniversary Value ($108,000), the Highest Anniversary Value remains $108,000. Assume this process is repeated on each contract anniversary until the tenth contract anniversary, when the account value is $155,000 and the Highest Anniversary Value is $150,000. The Highest Anniversary Value is set equal to the account value ($155,000). See section (4) below for an example of the exercise of the GMIB Plus II rider. Graphic Example: Determining a value upon which future income payments can -------------------------------------------------------------------------- be based -------- Prior to annuitization, the Highest Anniversary Value begins to lock in growth. The Highest Anniversary Value is adjusted upward each contract anniversary if the account value at that time is greater than the C-2 amount of the current Highest Anniversary Value. Upward adjustments will continue until the contract anniversary immediately prior to the contract owner's 81st birthday. The Highest Anniversary Value also is adjusted for any withdrawals taken or any additional payments made. The Highest Anniversary Value line is the value upon which future income payments can be based. [GRAPHIC APPEARS HERE] Graphic Example: Determining your guaranteed lifetime income stream ------------------------------------------------------------------- Assume that you decide to annuitize your contract and begin taking annuity payments after 20 years. In this example, the Highest Anniversary Value is higher than the account value. Accordingly, the Highest Anniversary Value will be applied to the annuity payout rates in the Guaranteed Minimum Income Benefit Annuity Table to determine your lifetime annuity payments. THE INCOME BASE IS NOT AVAILABLE FOR CASH WITHDRAWALS AND IS ONLY USED FOR PURPOSES OF CALCULATING THE GUARANTEED MINIMUM INCOME BENEFIT PAYMENT AND THE CHARGE FOR THE BENEFIT. [GRAPHIC APPEARS HERE] (4) PUTTING IT ALL TOGETHER Example ------- Continuing the examples in sections (2) and (3) above, assume the owner chooses to exercise the GMIB Plus II rider at the tenth contract anniversary and elects a life annuity with 5 years of annuity payments guaranteed. Because the 5% Annual Increase Amount ($162,889) is greater than the Highest Anniversary Value ($155,000), the 5% Annual Increase Amount ($162,889) is used as the income base. The income base of $162,889 is applied to the GMIB Annuity Table. This yields annuity payments of $591 per month for life, with a minimum of 5 years guaranteed. (If the same owner were instead age 70, the income base of $162,889 would yield monthly payments of $673; if the owner were age 75, the income base of $162,889 would yield monthly payments of $785.) The above example does not take into account the impact of premium and other taxes. As with other pay-out types, the amount you receive as an income payment depends on the income type you select, your age, and (where permitted by law) your sex. THE INCOME BASE IS NOT AVAILABLE FOR CASH WITHDRAWALS AND IS ONLY USED FOR PURPOSES OF CALCULATING THE GUARANTEED MINIMUM INCOME BENEFIT PAYMENT AND THE CHARGE FOR THE BENEFIT. Graphic Example --------------- Prior to annuitization, the two calculations (the 5% Annual Increase Amount and the Highest Anniversary Value) work together to protect your future income. Upon annuitization of the contract, you will receive income payments for life and the income bases and the account value will cease to exist. Also, the GMIB Plus II may only be exercised no later than the contract anniversary on or following the contract owner's 90th birthday, after a 10 year waiting period, and then only within a 30 day period following the contract anniversary. (The GMIB II may only be exercised no later than the contract anniversary on or following the contract owner's 85th birthday, after a 10 year waiting period, and then only within a 30 day period following the contract anniversary.) C-3 [GRAPHIC APPEARS HERE] With the Guaranteed Minimum Income Benefit, the income base is applied to special, conservative Guaranteed Minimum Income Benefit annuity purchase factors, which are guaranteed at the time the contract is issued. However, if then-current annuity purchase factors applied to the account value would produce a greater amount of income, then you will receive the greater amount. In other words, when you annuitize your contract you will receive whatever amount produces the greatest income payment. Therefore, if your account value would provide greater income than would the amount provided under the Guaranteed Minimum Income Benefit, you will have paid for the Guaranteed Minimum Income Benefit although it was never used. [GRAPHIC APPEARS HERE] (5) THE GUARANTEED PRINCIPAL OPTION - GMIB PLUS II Assume your initial purchase payment is $100,000 and no withdrawals are taken. Assume that the account value at the 10th contract anniversary is $50,000 due to poor market performance, and you exercise the Guaranteed Principal Option at this time. The effects of exercising the Guaranteed Principal Option are: 1) A Guaranteed Principal Adjustment of $100,000 - $50,000 = $50,000 is added to the account value 30 days after the 10th contract anniversary bringing the account value back up to $100,000. 2) The GMIB Plus II rider and rider fee terminates as of the date that the adjustment is made to the account value; the variable annuity contract continues. 3) GMIB Plus allocation and transfer restrictions terminate as of the date that the adjustment is made to the account value. [GRAPHIC APPEARS HERE] *Withdrawals reduce the original purchase payment (I.E. those payments credited within 120 days of contract issue date) proportionately and therefore, may have a significant impact on the amount of the Guaranteed Principal Adjustment. (6) THE OPTIONAL RESET: AUTOMATIC ANNUAL STEP-UP - GMIB PLUS II Assume your initial investment is $100,000 and no withdrawals are taken. The 5% Annual Increase Amount increases to $105,000 on the first anniversary ($100,000 increased by 5% per year, compounded annually). Assume your account value at the first contract anniversary is $110,000 due to good market performance, and you elected Optional Resets to occur under the Automatic Annual Step-Up feature prior to the first contract anniversary. Because your account value is higher than your 5% Annual Increase Amount, an Optional Reset will automatically occur. The effect of the Optional Reset is: (1) The 5% Annual Increase Amount automatically resets from $105,000 to $110,000; C-4 (2) The 10-year waiting period to annuitize the contract under the GMIB Plus II is reset to 10 years from the first contract anniversary; (3) The GMIB Plus II rider charge is reset to the fee we charge new contract owners for the same GMIB Plus II rider at that time; and (4) The Guaranteed Principal Option can still be elected on the 10th contract anniversary. The 5% Annual Increase Amount increases to $115,500 on the second anniversary ($110,000 increased by 5% per year, compounded annually). Assume your account value at the second contract anniversary is $120,000 due to good market performance, and you have not discontinued the Automatic Annual Step-Up feature. Because your account value is higher than your 5% Annual Increase Amount, an Optional Reset will automatically occur. The effect of the Optional Reset is: (1) The 5% Annual Increase Amount automatically resets from $115,500 to $120,000; (2) The 10-year waiting period to annuitize the contract under the GMIB Plus II is reset to 10 years from the second contract anniversary; (3) The GMIB Plus II rider charge is reset to the fee we charge new contract owners for the same GMIB Plus II rider at that time; and (4) The Guaranteed Principal Option can still be elected on the 10th contract anniversary. Assume your account value increases by $10,000 at each contract anniversary in years three through seven. At each contract anniversary, your account value would exceed the 5% Annual Increase Amount and an Optional Reset would automatically occur (provided you had not discontinued the Automatic Annual Step-Up feature, and other requirements were met). The effect of each Optional Reset is: (1) The 5% Annual Increase Amount automatically resets to the higher account value; (2) The 10-year waiting period to annuitize the contract under the GMIB Plus II is reset to 10 years from the date of the Optional Reset; (3) The GMIB Plus II rider charge is reset to the fee we charge new contract owners for the same GMIB Plus II rider at that time; and (4) The Guaranteed Principal Option can still be elected on the 10th contract anniversary. After the seventh contract anniversary, the initial Automatic Annual Step-Up election expires. Assume you do not make a new election of the Automatic Annual Step-Up. The 5% Annual Increase Amount increases to $178,500 on the eighth anniversary ($170,000 increased by 5% per year, compounded annually). Assume your account value at the eighth contract anniversary is $160,000 due to poor market performance. An Optional Reset is NOT permitted because your account value is lower than your 5% Annual Increase Amount. However, because the Optional Reset has locked-in previous gains, the 5% Annual Increase Amount remains at $178,500 despite poor market performance, and, provided the rider continues in effect, will continue to grow at 5% annually (subject to adjustments for additional purchase payments and/or withdrawals) through the contract anniversary on or after your 90th birthday. Also, please note: (1) The 10-year waiting period to annuitize the contract under the GMIB Plus II remains at the 17th contract anniversary (10 years from the date of the last Optional Reset); (2) The GMIB Plus II rider charge remains at its current level; and (3) The Guaranteed Principal Option can still be elected on the 10th contract anniversary. [GRAPHIC APPEARS HERE] C-5 APPENDIX D GUARANTEED WITHDRAWAL BENEFIT EXAMPLES The purpose of these examples is to illustrate the operation of the Guaranteed Withdrawal Benefit. (Examples A, B and C are for the Lifetime Withdrawal Guarantee I and Lifetime Withdrawal Guarantee II riders. Examples D through K are for Enhanced GWB and GWB I.) The investment results shown are hypothetical and are not representative of past or future performance. Actual investment results may be more or less than those shown and will depend upon a number of factors, including investment allocations and the investment experience of the investment portfolios chosen. THE EXAMPLES DO NOT REFLECT THE DEDUCTION OF FEES AND CHARGES, OR INCOME TAXES AND TAX PENALTIES. The Guaranteed Withdrawal Benefit does not establish or guarantee an account value or minimum return for any investment portfolio. The Total Guaranteed Withdrawal Amount and the Remaining Guaranteed Withdrawal Amount (under the Lifetime Withdrawal Guarantee) and the Guaranteed Withdrawal Amount and the Benefit Base (under the Enhanced GWB and GWB I) cannot be taken as a lump sum. A. Lifetime Withdrawal Guarantee 1. When Withdrawals Do Not Exceed the Annual Benefit Payment Assume that a contract had an initial purchase payment of $100,000. The initial account value would be $100,000, the Total Guaranteed Withdrawal Amount would be $100,000, the initial Remaining Guaranteed Withdrawal Amount would be $100,000 and the initial Annual Benefit Payment would be $5,000 ($100,000 x 5%). Assume that $5,000 is withdrawn each year, beginning before the contract owner attains age 59 1/2. The Remaining Guaranteed Withdrawal Amount is reduced by $5,000 each year as withdrawals are taken (the Total Guaranteed Withdrawal Amount is not reduced by these withdrawals). The Annual Benefit Payment of $5,000 is guaranteed to be received until the Remaining Guaranteed Withdrawal Amount is depleted, even if the account value is reduced to zero. If the first withdrawal is taken after age 59 1/2, then the Annual Benefit Payment of $5,000 is guaranteed to be received for the owner's lifetime, even if the Remaining Guaranteed Withdrawal Amount and the account value are reduced to zero. (Under the Lifetime Withdrawal Guarantee II rider, if the contract owner makes the first withdrawal at or after age 76, the Withdrawal Rate is 6% instead of 5% and the Annual Benefit Payment is $6,000.) [GRAPHIC APPEARS HERE]
Remaining Annual Guaranteed Guaranteed Benefit Cumulative Account Withdrawal Withdrawal Payment Withdrawals Value Amount Amount $5,000 $5,000 $100,000 $100,000 $100,000 5,000 10,000 90,250 95,000 100,000 5,000 15,000 80,987.5 90,000 100,000 5,000 20,000 72,188.13 85,000 100,000 5,000 25,000 63,828.72 80,000 100,000 5,000 30,000 55,887.28 75,000 100,000 5,000 35,000 48,342.92 70,000 100,000 5,000 40,000 41,175.77 65,000 100,000 5,000 45,000 34,366.98 60,000 100,000 5,000 50,000 27,898.63 55,000 100,000 5,000 55,000 21,753.7 50,000 100,000 5,000 60,000 15,916.02 45,000 100,000 5,000 65,000 10,370.22 40,000 100,000 5,000 70,000 5,101.706 35,000 100,000 5,000 75,000 96.62093 30,000 100,000 5,000 80,000 0 0 100,000 5,000 85,000 0 0 100,000 5,000 90,000 0 0 100,000 5,000 95,000 0 0 100,000 5,000 100,000 0 0 100,000
2. When Withdrawals Do Exceed the Annual Benefit Payment a. Lifetime Withdrawal Guarantee II - Proportionate Reduction Assume that a contract with the Lifetime Withdrawal Guarantee II rider had an initial purchase payment of $100,000. The initial account value would be $100,000, the Total Guaranteed Withdrawal Amount would be $100,000, the initial Remaining Guaranteed Withdrawal Amount would be $100,000 and the initial Annual Benefit Payment would be $5,000 ($100,000 x 5%). (If the contract owner makes the first withdrawal on or after the date he or she reaches age 76, the D-1 Withdrawal Rate is 6% instead of 5% and the initial Annual Benefit Payment would be $6,000. For the purposes of this example, assume the contract owner makes the first withdrawal before he or she reaches age 76 and the Withdrawal Rate is therefore 5%.) Assume that the Remaining Guaranteed Withdrawal Amount is reduced to $95,000 due to a withdrawal of $5,000 in the first year. Assume the account value was further reduced to $80,000 at year two due to poor market performance. If you withdrew $10,000 at this time, your account value would be reduced to $80,000 - $10,000 = $70,000. Since the withdrawal of $10,000 exceeded the Annual Benefit Payment of $5,000, there would be a proportional reduction to the Remaining Guaranteed Withdrawal Amount and the Total Guaranteed Withdrawal Amount. The proportional reduction is equal to the withdrawal ($10,000) divided by the account value before the withdrawal ($80,000), or 12.5%. The Remaining Guaranteed Withdrawal Amount after the withdrawal would be $83,125 ($95,000 reduced by 12.5%). This new Remaining Guaranteed Withdrawal Amount of $83,125 would now be the amount guaranteed to be available to be withdrawn over time. The Total Guaranteed Withdrawal Amount would be reduced to $87,500 ($100,000 reduced by 12.5%). The Annual Benefit Payment would be set equal to 5% x $87,500 = $4,375. (Assume instead that you withdrew $10,000 during year two in two separate withdrawals of $4,000 and $6,000. Since the first withdrawal of $4,000 did not exceed the Annual Benefit Payment of $5,000, there would be no proportional reduction to the Remaining Guaranteed Withdrawal Amount and the Total Guaranteed Withdrawal Amount at the time of that withdrawal. The second withdrawal ($6,000), however, results in cumulative withdrawals of $10,000 during year two and causes a proportional reduction to the Remaining Guaranteed Withdrawal Amount and the Total Guaranteed Withdrawal Amount. The proportional reduction would be equal to the entire amount of the second withdrawal ($6,000) divided by the account value before that withdrawal.) b. Lifetime Withdrawal Guarantee I - Reduction to Account Value Assume that a contract with the Lifetime Withdrawal Guarantee I rider had an initial purchase payment of $100,000. The initial account value would be $100,000, the Total Guaranteed Withdrawal Amount would be $100,000, the initial Remaining Guaranteed Withdrawal Amount would be $100,000 and the initial Annual Benefit Payment would be $5,000 ($100,000 x 5%). Assume that the Remaining Guaranteed Withdrawal Amount is reduced to $95,000 due to a withdrawal of $5,000 in the first year. Assume the account value was further reduced to $75,000 at year two due to poor market performance. If you withdrew $10,000 at this time, your account value would be reduced to $75,000 - $10,000 = $65,000. Your Remaining Guaranteed Withdrawal Amount would be reduced to $95,000 - $10,000 = $85,000. Since the withdrawal of $10,000 exceeded the Annual Benefit Payment of $5,000 and the resulting Remaining Guaranteed Withdrawal Amount would be greater than the resulting account value, there would be an additional reduction to the Remaining Guaranteed Withdrawal Amount. The Remaining Guaranteed Withdrawal Amount after the withdrawal would be set equal to the account value after the withdrawal ($65,000). This new Remaining Guaranteed Withdrawal Amount of $65,000 would now be the amount guaranteed to be available to be withdrawn over time. The Total Guaranteed Withdrawal Amount would also be reduced to $65,000. The Annual Benefit Payment would be set equal to 5% x $65,000 = $3,250. B. Lifetime Withdrawal Guarantee - Compounding Income Amount Assume that a contract with the Lifetime Withdrawal Guarantee II rider had an initial purchase payment of $100,000. The initial Remaining Guaranteed Withdrawal Amount would be $100,000, the Total Guaranteed Withdrawal Amount would be $100,000, and the Annual Benefit Payment would be $5,000 ($100,000 x 5%). (If the contract owner makes the first withdrawal at or after age 76, the Withdrawal Rate is 6% instead of 5% and the Annual Benefit Payment would be $6,000. For the purposes of this example, assume the contract owner makes the first withdrawal before he or she reaches age 76 and the Withdrawal Rate is therefore 5%.) The Total Guaranteed Withdrawal Amount will increase by 7.25% of the previous year's Total Guaranteed Withdrawal Amount until the earlier of the second withdrawal or the 10th contract anniversary. The Annual Benefit Payment will be recalculated as 5% of the new Total Guaranteed Withdrawal Amount. D-2 If the second withdrawal is taken in the first contract year, then there would be no increase: the Total Guaranteed Withdrawal Amount would remain at $100,000 and the Annual Benefit Payment will remain at $5,000 ($100,000 x 5%). If the second withdrawal is taken in the second contract year, then the Total Guaranteed Withdrawal Amount would increase to $107,250 ($100,000 x 107.25%), and the Annual Benefit Payment would increase to $5,362 ($107,250 x 5%). If the second withdrawal is taken in the third contract year, then the Total Guaranteed Withdrawal Amount would increase to $115,025 ($107,250 x 107.25%), and the Annual Benefit Payment would increase to $5,751 ($115,025 x 5%). If the second withdrawal is taken after the 10th contract year, then the Total Guaranteed Withdrawal Amount would increase to $201,360 (the initial $100,000, increased by 7.25% per year, compounded annually for 10 years), and the Annual Benefit Payment would increase to $10,068 ($201,360 x 5%). (In contrast to the Lifetime Withdrawal Guarantee II rider, the Lifetime Withdrawal Guarantee I rider has a 5% Compounding Income Amount and the Total -- Guaranteed Withdrawal Amount is increased by 5% on each contract anniversary until the earlier of the date of the first withdrawal or the tenth contract ----- anniversary.) [GRAPHIC APPEARS HERE]
Year Annual of Second Benefit Withdrawal Payment 1 $5,000 2 5,363 3 5,751 4 6,168 5 6,615 6 7,095 7 7,609 8 8,161 9 8,753 10 9,387 11 10,068
C. Lifetime Withdrawal Guarantee - Automatic Annual Step-Ups and 7.25% Compounding Income Amount (No Withdrawals) Assume that a contract with the Lifetime Withdrawal Guarantee II rider had an initial purchase payment of $100,000. Assume that no withdrawals are taken. At the first contract anniversary, assuming that no withdrawals are taken, the Total Guaranteed Withdrawal Amount is increased to $107,250 ($100,000 increased by 7.25%, compounded annually). Assume the account value has increased to $110,000 at the first contract anniversary due to good market performance. The Automatic Annual Step-Up will increase the Total Guaranteed Withdrawal Amount from $107,250 to $110,000 and reset the Annual Benefit Payment to $5,500 ($110,000 x 5%). At the second contract anniversary, assuming that no withdrawals are taken, the Total Guaranteed Withdrawal Amount is increased to $117,975 ($110,000 increased by 7.25%, compounded annually). Assume the account value has increased to D-3 $120,000 at the second contract anniversary due to good market performance. The Automatic Annual Step-Up will increase the Total Guaranteed Withdrawal Amount from $117,975 to $120,000 and reset the Annual Benefit Payment to $6,000 ($120,000 x 5%). Assuming that no withdrawals are taken, each year the Total Guaranteed Withdrawal Amount would increase by 7.25%, compounded annually, from the second contract anniversary through the ninth contract anniversary, and at that point would be equal to $195,867. Assume that during these contract years the account value does not exceed the Total Guaranteed Withdrawal Amount due to poor market performance. Assume the account value at the ninth contract anniversary has increased to $200,000 due to good market performance. The Automatic Annual Step-Up will increase the Total Guaranteed Withdrawal Amount from $195,867 to $200,000 and reset the Annual Benefit Payment to $10,000 ($200,000 x 5%). At the 10th contract anniversary, assuming that no withdrawals are taken, the Total Guaranteed Withdrawal Amount is increased to $214,500 ($200,000 increased by 7.25%, compounded annually). Assume the account value is less than $214,500. There is no Automatic Annual Step-Up since the account value is below the Total Guaranteed Withdrawal Amount; however, due to the 7.25% increase in the Total Guaranteed Withdrawal Amount, the Annual Benefit Payment is increased to $10,725 ($214,500 x 5%). [GRAPHIC APPEARS HERE] D. Enhanced Guaranteed Withdrawal Benefit and GWB I - How Withdrawals Affect the Benefit Base 1. An initial purchase payment is made of $100,000. The initial Benefit Base would be $105,000 ($100,000 + 5% GWB Bonus Amount). Assume that the account value grew to $110,000 because of market performance. If a subsequent withdrawal of $10,000 were made, the Benefit Base would be reduced to $105,000 - $10,000 = $95,000. Assume the withdrawal of $10,000 exceeded the Annual Benefit Payment. Since the account value of $100,000 exceeds the Benefit Base of $95,000, no further reduction to the Benefit Base is made. 2. An initial purchase payment is made of $100,000. The initial Benefit Base would be $105,000. Assume that the account value shrank to $90,000 because of market performance. If a subsequent withdrawal of $10,000 were made, the Benefit Base would be reduced to $95,000 and the account value would be reduced to $80,000. Assume the withdrawal of $10,000 exceeded the Annual Benefit Payment. Since the account value of $80,000 is less than the Benefit Base of $95,000, a further reduction of the $15,000 difference is made, bringing the Benefit Base to $80,000. E. Enhanced Guaranteed Withdrawal Benefit and GWB I - How Withdrawals and Subsequent Purchase Payments Affect the Annual Benefit Payment An initial purchase payment is made of $100,000. The initial Benefit Base would be $105,000 and the initial Annual Benefit Payment would be $7,350 ($105,000 x 7%). If $7,000 withdrawals were then made for each of the next five years, the Benefit Base would be decreased to $70,000. If a subsequent purchase payment of $10,000 were made the next day, the D-4 Benefit Base would be increased to $70,000 + $10,000 + (5% x $10,000) = $80,500. The Annual Benefit Payment would be reset to the greater of a) $7,350 (the Annual Benefit Payment before the second purchase payment) and b) $5,635 (7% multiplied by the Benefit Base after the second purchase payment). In this case, the Annual Benefit Payment would remain at $7,350. F. Enhanced Guaranteed Withdrawal Benefit and GWB I - How Withdrawals Affect the Annual Benefit Payment 1. An initial purchase payment is made of $100,000. The initial Benefit Base would be $105,000 and the initial Annual Benefit Payment would be $7,350. If a withdrawal of $9,000 was made the next day, and negative market performance reduced the account value by an additional $1,000, the account value would be reduced to $100,000 - $9,000 - $1,000 = $90,000. Since the withdrawal of $9,000 exceeded the Annual Benefit Payment of $7,350, the Annual Benefit Payment would be reset to the lower of a) $7,350 (the Annual Benefit Payment before the withdrawal) and b) $6,300 (7% multiplied by the account value after the withdrawal). In this case the Annual Benefit Payment would be reset to $6,300. 2. An initial purchase payment is made of $100,000. The initial Benefit Base would be $105,000 and the initial Annual Benefit Payment would be $7,350. If a withdrawal of $10,000 was made two years later after the account value had increased to $150,000, the account value would be reduced to $140,000. Since the withdrawal of $10,000 exceeded the Annual Benefit Payment of $7,350, the Annual Benefit Payment would be reset to the lower of a) $7,350 (the Annual Benefit Payment before the withdrawal) and b) $9,800 (7% multiplied by the account value after the withdrawal). In this case the Annual Benefit Payment would remain at $7,350. G. Enhanced Guaranteed Withdrawal Benefit and GWB I - How Withdrawals and Subsequent Purchase Payments Affect the Guaranteed Withdrawal Amount An initial purchase payment is made of $100,000 and the initial Guaranteed Withdrawal Amount and initial Benefit Base would both be $105,000. Assume that over the next five years, withdrawals reduced the Benefit Base to $70,000. If a subsequent purchase payment of $10,000 was made, the Benefit Base would be increased to $70,000 + $10,000 + (5% x $10,000) = $80,500. The Guaranteed Withdrawal Amount would be reset to the greater of a) $105,000 (the Guaranteed Withdrawal Amount before the second purchase payment) and b) $80,500 (the Benefit Base after the second purchase payment). In this case, the Guaranteed Withdrawal Amount would remain at $105,000. D-5 H. Enhanced Guaranteed Withdrawal Benefit and GWB I - Putting It All Together 1. When Withdrawals Do Not Exceed the Annual Benefit Payment An initial purchase payment is made of $100,000. The initial Benefit Base would be $105,000, the Guaranteed Withdrawal Amount would be $105,000, and the Annual Benefit Payment would be $7,350. Assume that the Benefit Base was reduced to $82,950 due to 3 years of withdrawing $7,350 each year and assume that the account value was further reduced to $50,000 at year four due to poor market performance. If you withdrew $7,350 at this time, your account value would be reduced to $50,000 - $7,350 = $42,650. Your Benefit Base would be reduced to $82,950 - $7,350 = $75,600. Since the withdrawal of $7,350 did not exceed the Annual Benefit Payment, there would be no additional reduction to the Benefit Base. The Guaranteed Withdrawal Amount would remain at $105,000 and the Annual Benefit Payment would remain at $7,350. [GRAPHIC APPEARS HERE]
Annual Benefit Cumulative Account Benefit Payment Withdrawal Value Base 0 $0 $0 $100,000 $105,000 1 7,350 7,350 85,000 97,650 2 7,350 7,350 68,000 90,300 3 7,350 7,350 50,000 82,950 4 7,350 7,350 42,650 75,600 5 7,350 7,350 35,300 68,250 6 7,350 7,350 27,950 60,900 7 7,350 7,350 20,600 53,550 8 7,350 7,350 13,250 46,200 9 7,350 7,350 5,900 38,850 10 7,350 7,350 0 31,500 11 7,350 7,350 0 24,150 12 7,350 7,350 0 16,800 13 7,350 7,350 0 9,450 14 7,350 7,350 0 2,100 15 2,100 2,100 0 0 16 17 18
D-6 2. When Withdrawals Do Exceed the Annual Benefit Payment An initial purchase payment is made of $100,000. The initial Benefit Base would be $105,000, the Guaranteed Withdrawal Amount would be $105,000, and the Annual Benefit Payment would be $7,350. Assume that the Benefit Base was reduced to $82,950 due to 3 years of withdrawing $7,350 each year. Assume the account value was further reduced to $50,000 at year four due to poor market performance. If you withdrew $10,000 at this time, your account value would be reduced to $50,000 - $10,000 = $40,000. Your Benefit Base would be reduced to $82,950 - $10,000 = $72,950. Since the withdrawal of $10,000 exceeded the Annual Benefit Payment of $7,350 and the resulting Benefit Base would be greater than the resulting account value, there would be an additional reduction to the Benefit Base. The Benefit Base after the withdrawal would be set equal to the account value after the withdrawal = $40,000. The Annual Benefit Payment would be set equal to the lesser of $7,350 and 7% x $40,000 = $2,800. The Guaranteed Withdrawal Amount would remain at $105,000, but this amount now no longer would be guaranteed to be received over time. The new Benefit Base of $40,000 would be now the amount guaranteed to be available to be withdrawn over time. [GRAPHIC APPEARS HERE]
Annual Benefit Cumulative Account Benefit Payment Withdrawals Value Base 0 $0 $0 $100,000 $105,000 1 7,350 7,350 85,000 97,650 2 7,350 7,350 68,000 90,300 3 7,350 7,350 50,000 82,950 4 7,350 10,000 40,000 40,000 5 2,800 2,800 37,200 37,200 6 2,800 2,800 34,400 34,400 7 2,800 2,800 31,600 31,600 8 2,800 2,800 28,800 28,800 9 2,800 2,800 26,000 26,000 10 2,800 2,800 23,200 23,200 11 2,800 2,800 20,400 20,400 12 2,800 2,800 17,600 17,600 13 2,800 2,800 14,800 14,800 14 2,800 2,800 12,000 12,000 15 2,800 2,800 9,200 9,200 16 2,800 2,800 6,400 6,400 17 2,800 2,800 3,600 3,600 18 2,800 2,800 800 800
I. Enhanced GWB - How the Optional Reset Works (may be elected prior to age 86) Assume that a contract had an initial purchase payment of $100,000 and the fee is 0.55%. The initial account value would be $100,000, the initial Benefit Base would be $105,000, the Guaranteed Withdrawal Amount would be $105,000 and the Annual Benefit Payment would be $7,350 (assuming you began withdrawing in your first year). The account value on the third contract anniversary grew due to market performance to $148,350. Assume the fee remains at 0.55%. If an Optional Reset is elected or Automatic Annual Resets are in effect, the charge would remain at 0.55%, the Guaranteed Withdrawal Amount and the Benefit Base would both be reset to $148,350, and the Annual Benefit Payment would become 7% x $148,350 = $10,385. The account value on the sixth contract anniversary grew due to market performance to $179,859. Assume the fee has been increased to 0.60%. If an Optional Reset is elected or Automatic Annual Resets are in effect, the charge would increase to 0.60%, the Guaranteed Withdrawal Amount and the Benefit Base would both be reset to $179,859, and the Annual Benefit Payment would become 7% x $179,859 = $12,590. D-7 The account value on the ninth contract anniversary grew due to market performance to $282,582. Assume the fee is still 0.60%. If an Optional Reset is elected or Automatic Annual Resets are in effect, the charge would remain at 0.60%, the Guaranteed Withdrawal Amount and the Benefit Base would both be reset to $282,582, and the Annual Benefit Payment would become 7% x $282,582 = $19,781. The period of time over which the Annual Benefit Payment may be taken would be lengthened. [GRAPHIC APPEARS HERE]
Annual Benefit Cumulative Account Payment Withdrawal Value 1 7350 7350 105000 2 7350 14700 125000 3 7350 22050 130000 4 10385 32435 148350 5 10385 42819 185000 6 10385 53204 195000 7 12590 65794 179859 8 12590 78384 210000 9 12590 90974 223000 10 19781 110755 282582 11 19781 130535 270000 12 19781 150316 278000 13 0 0 315000
J. Enhanced GWB - How a one-time Optional Reset May Increase the Benefit Base While Decreasing the Guaranteed Withdrawal Amount and Annual Benefit Payment Assume that a contract had an initial purchase payment of $100,000. The initial account value would be $100,000, the initial Benefit Base would be $105,000, the Guaranteed Withdrawal Amount would be $105,000 and the Annual Benefit Payment would be $7,350. Assume that the Benefit Base is reduced to $70,000 due to 5 years of withdrawing $7,000 each year, but also assume that, due to positive market performance, the account value at the end of 5 years is $80,000. If a one-time Optional Reset is elected, the Benefit Base would be reset from $70,000 to $80,000, the Guaranteed Withdrawal Amount would be reduced from $105,000 to $80,000, and the Annual Benefit Payment would be reduced from $7,350 to $5,600 ($80,000 x 7%). (If you elect Automatic Annual Resets, a reset will not occur if the account value is lower than the Guaranteed Withdrawal Amount.) Under these circumstances, the one-time Optional Reset increases the Benefit Base (the remaining amount of money you are guaranteed to receive) by $10,000, but also reduces the Annual Benefit Payment, thereby lengthening the period of time over which you will receive the money. This Optional Reset also reduces the Guaranteed Withdrawal Amount, against which the GWB rider charge is calculated. If the GWB rider charge fee rate does not increase in connection with the Optional Reset, the reduced Guaranteed Withdrawal Amount will result in a reduction in the amount of the annual GWB rider charge. D-8 K. Enhanced GWB and GWB I - Annual Benefit Payment Continuing When Account Value Reaches Zero Assume that a contract had an initial purchase payment of $100,000. The initial account value would be $100,000, the initial Benefit Base would be $105,000 and the initial Annual Benefit Payment would be $7,350 ($105,000 x 7%). Assume that the Benefit Base was reduced to $31,500 due to 10 years of withdrawing $7,350 each year and assume that the account value was further reduced to $0 at year 11 due to poor market performance. We would commence making payments to you (equal, on an annual basis, to the Annual Benefit Payment) until the Benefit Base is exhausted. In this situation (assuming monthly payments), there would be 51 payments of $612.50 and a final payment of $262.50, which, in sum, would deplete the $31,500 Benefit Base. The total amount withdrawn over the life of the contract would then be $105,000. [GRAPHIC APPEARS HERE]
Annual Benefit Cumulative Account Benefit Payment Withdrawals Value Base $7350 $7,350 $100,000 $105,000 7350 14,700 73,000 97,650 7350 22,050 52,750 90,300 7350 29,400 37,562.5 82,950 7350 36,750 26,171.88 75,600 7350 44,100 17,628.91 68,250 7350 51,450 11,221.68 60,900 7350 58,800 6,416.26 53,550 7350 66,150 2,812.195 46,200 7350 73,500 109.1461 38,850 7350 80,850 0 31,500 7350 88,200 0 24,150 7350 95,550 0 16,800 7350 102,900 0 9,450 2,100 105,000 0 2,100 0 0
D-9 APPENDIX E DEATH BENEFIT EXAMPLES The purpose of these examples is to illustrate the operation of the Principal Protection death benefit, the Annual Step-Up death benefit, the Compounded-Plus death benefit and the Enhanced Death Benefit. The investment results shown are hypothetical and are not representative of past or future performance. Actual investment results may be more or less than those shown and will depend upon a number of factors, including the investment allocation made by a contract owner and the investment experience of the investment portfolios chosen. THE EXAMPLES DO NOT REFLECT THE DEDUCTION OF FEES AND CHARGES, OR INCOME TAXES AND TAX PENALTIES. PRINCIPAL PROTECTION DEATH BENEFIT The purpose of this example is to show how partial withdrawals reduce the Principal Protection death benefit proportionately by the percentage reduction in account value attributable to each partial withdrawal.
DATE AMOUNT ------------------------------ ------------------------- A Initial Purchase Payment 10/1/2009 $100,000 B Account Value 10/1/2010 $104,000 (First Contract Anniversary) C Death Benefit As of 10/1/2010 $104,000 (= greater of A and B) D Account Value 10/1/2011 $ 90,000 (Second Contract Anniversary) E Death Benefit 10/1/2011 $100,000 (= greater of A and D) F Withdrawal 10/2/2011 $ 9,000 G Percentage Reduction in Account 10/2/2011 10% Value (= F/D) H Account Value after Withdrawal 10/2/2011 $ 81,000 (= D-F) I Purchase Payments reduced for As of 10/2/2011 $ 90,000 Withdrawal (= A-(A x G)) J Death Benefit 10/2/2011 $ 90,000 (= greater of H and I)
Notes to Example ---------------- Purchaser is age 60 at issue. The account values on 10/1/11 and 10/2/11 are assumed to be equal prior to the withdrawal. E-1 ANNUAL STEP-UP DEATH BENEFIT The purpose of this example is to show how partial withdrawals reduce the Annual Step-Up death benefit proportionately by the percentage reduction in account value attributable to each partial withdrawal.
DATE AMOUNT ------------------------------ ------------------------- A Initial Purchase Payment 10/1/2009 $100,000 B Account Value 10/1/2010 $104,000 (First Contract Anniversary) C Death Benefit (Highest Anniversary As of 10/1/2010 $104,000 Value) (= greater of A and B) D Account Value 10/1/2011 $ 90,000 (Second Contract Anniversary) E Death Benefit (Highest Contract Year 10/1/2011 $104,000 Anniversary) (= greater of B and D) F Withdrawal 10/2/2011 $ 9,000 G Percentage Reduction in Account 10/2/2011 10% Value (= F/D) H Account Value after Withdrawal 10/2/2011 $ 81,000 (= D-F) I Highest Anniversary Value reduced for As of 10/2/2011 $ 93,600 Withdrawal (= E-(E x G)) J Death Benefit 10/2/2011 $ 93,600 (= greater of H and I)
Notes to Example ---------------- Purchaser is age 60 at issue. The account values on 10/1/11 and 10/2/11 are assumed to be equal prior to the withdrawal. E-2 COMPOUNDED-PLUS DEATH BENEFIT The purpose of this example is to show how partial withdrawals reduce the Compounded-Plus death benefit proportionately by the percentage reduction in account value attributable to each partial withdrawal.
DATE AMOUNT ---------------------------- ------------------------------ A Initial Purchase Payment 10/1/2009 $100,000 B Account Value 10/1/2010 (First Contract $104,000 Anniversary) C1 Account Value (Highest Anniversary 10/1/2010 $104,000 Value) (= greater of A and B) C2 5% Annual Increase Amount 10/1/2010 $105,000 (= A x 1.05) C3 Death Benefit As of 10/1/2010 $105,000 (= greater of C1 and C2) D Account Value 10/1/2011 (Second Contract $ 90,000 Anniversary) E1 Highest Anniversary Value 10/1/2011 $104,000 (= greater of C1 and D) E2 5% Annual Increase Amount As of 10/1/2011 $110,250 (= A x 1.05 x 1.05) E3 Death Benefit 10/1/2011 $110,250 (= greater of E1 and E2) F Withdrawal 10/2/2011 $ 9,000 G Percentage Reduction in Account 10/2/2011 10% Value (= F/D) H Account Value after Withdrawal 10/2/2011 $ 81,000 (= D-F) I1 Highest Anniversary Value reduced for As of 10/2/2011 $ 93,600 Withdrawal (= E1-(E1 x G)) I2 5% Annual Increase Amount reduced As of 10/2/2011 $ 99,238 for Withdrawal (= E2-(E2 x G). Note: E2 includes additional day of interest at 5%) I3 Death Benefit 10/2/2011 $ 99,238 (= greatest of H, I1 and I2)
Notes to Example ---------------- Purchaser is age 60 at issue. The account values on 10/1/11 and 10/02/11 are assumed to be equal prior to the withdrawal. E-3 ENHANCED DEATH BENEFIT The purpose of these examples is to illustrate the operation of the death benefit base under the Enhanced Death Benefit rider. (1) WITHDRAWAL ADJUSTMENTS TO ANNUAL INCREASE AMOUNT Dollar-for-dollar adjustment when withdrawal is less than or equal to 5% of --------------------------------------------------------------------------- the Annual Increase Amount from the prior contract anniversary -------------------------------------------------------------- Assume the initial purchase payment is $100,000 and the Enhanced Death Benefit is selected. Assume that during the first contract year, $5,000 is withdrawn. Because the withdrawal is less than or equal to 5% of the Annual Increase Amount from the prior contract anniversary, the Annual Increase Amount is reduced by the withdrawal on a dollar-for-dollar basis to $100,000 ($100,000 increased by 5% per year, compounded annually, less $5,000 = $100,000). Assuming no other purchase payments or withdrawals are made before the second contract anniversary, the Annual Increase Amount at the second contract anniversary will be $105,000 ($100,000 increased by 5% per year, compounded annually). Proportionate adjustment when withdrawal is greater than 5% of the Annual ------------------------------------------------------------------------- Increase Amount from the prior contract anniversary --------------------------------------------------- Assume the initial purchase payment is $100,000 and the Enhanced Death Benefit is selected. Assume the account value at the first contract anniversary is $100,000. The Annual Increase Amount at the first contract anniversary will be $105,000 ($100,000 increased by 5% per year, compounded annually). Assume that on the first contract anniversary, $10,000 is withdrawn (leaving an account balance of $90,000). Because the withdrawal is greater than 5% of the Annual Increase Amount from the prior contract anniversary, the Annual Increase Amount is reduced by the value of the Annual Increase Amount immediately prior to the withdrawal ($105,000) multiplied by the percentage reduction in the account value attributed to that withdrawal (10%). Therefore, the new Annual Increase Amount is $94,500 ($105,000 x 10% = $10,500; $105,000 - $10,500 = $94,500). Assuming no other purchase payments or withdrawals are made before the second contract anniversary, the Annual Increase Amount at the second contract anniversary will be $99,225 ($94,500 increased by 5% per year, compounded annually). (For contracts issued with the Enhanced Death Benefit rider based on applications and necessary information received in good order at our Annuity Service Center on or before May 1, 2009, the annual increase rate is 6% per year.) (2) THE 5% ANNUAL INCREASE AMOUNT Example ------- Assume the contract owner is a male, age 55 at issue, and he elects the Enhanced Death Benefit rider. He makes an initial purchase payment of $100,000, and makes no additional purchase payments or partial withdrawals. On the contract issue date, the 5% Annual Increase Amount is equal to $100,000 (the initial purchase payment). The 5% Annual Increase Amount is calculated at each contract anniversary (through the contract anniversary on or following the contract owner's 90th birthday). At the tenth contract anniversary, when the contract owner is age 65, the 5% Annual Increase Amount is $162,889 ($100,000 increased by 5% per year, compounded annually). See section (3) below for an example of the calculation of the Highest Anniversary Value. Determining a death benefit based on the Annual Increase Amount --------------------------------------------------------------- Assume that you make an initial purchase payment of $100,000. Prior to annuitization, your account value fluctuates above and below your initial purchase payment depending on the investment performance of the subaccounts you selected. The 5% Annual Increase Amount, however, accumulates an amount equal to your purchase payments at the Annual Increase Rate of 5% per year, until the contract anniversary on or following the contract owner's 90th birthday. The 5% Annual Increase Amount is also adjusted for any withdrawals made during this period. The 5% Annual Increase Amount is the value upon which a future death benefit amount can be based (if it is greater than the Highest Anniversary Value and account value on the date the death benefit amount is determined). E-4 (3) THE HIGHEST ANNIVERSARY VALUE (HAV) Example ------- Assume, as in the example in section (2) above, the contract owner is a male, age 55 at issue, and he elects the Enhanced Death Benefit rider. He makes an initial purchase payment of $100,000, and makes no additional purchase payments or partial withdrawals. On the contract issue date, the Highest Anniversary Value is equal to $100,000 (the initial purchase payment). Assume the account value on the first contract anniversary is $108,000 due to good market performance. Because the account value is greater than the Highest Anniversary Value ($100,000), the Highest Anniversary Value is set equal to the account value ($108,000). Assume the account value on the second contract anniversary is $102,000 due to poor market performance. Because the account value is less than the Highest Anniversary Value ($108,000), the Highest Anniversary Value remains $108,000. Assume this process is repeated on each contract anniversary until the tenth contract anniversary, when the account value is $155,000 and the Highest Anniversary Value is $150,000. The Highest Anniversary Value is set equal to the account value ($155,000). Determining a death benefit based on the Highest Anniversary Value ------------------------------------------------------------------ Prior to annuitization, the Highest Anniversary Value begins to lock in growth. The Highest Anniversary Value is adjusted upward each contract anniversary if the account value at that time is greater than the amount of the current Highest Anniversary Value. Upward adjustments will continue until the contract anniversary immediately prior to the contract owner's 81st birthday. The Highest Anniversary Value also is adjusted for any withdrawals taken or any additional payments made. The Highest Anniversary Value is the value upon which a future death benefit amount can be based (if it is greater than the Annual Increase Amount and account value on the date the death benefit amount is determined). (4) PUTTING IT ALL TOGETHER Example ------- Continuing the examples in sections (2) and (3) above, assume the contract owner dies after the tenth contract anniversary but prior to the eleventh contract anniversary, and on the date the death benefit amount is determined, the account value is $150,000 due to poor market performance. Because the 5% Annual Increase Amount ($162,889) is greater than the Highest Anniversary Value ($155,000), the 5% Annual Increase Amount ($162,889) is used as the death benefit base. Because the death benefit base ($162,889) is greater than the account value ($150,000), the death benefit base will be the death benefit amount. The above example does not take into account the impact of premium and other taxes. THE DEATH BENEFIT BASE IS NOT AVAILABLE FOR CASH WITHDRAWALS AND IS ONLY USED FOR PURPOSES OF CALCULATING THE DEATH BENEFIT AMOUNT AND THE CHARGE FOR THE BENEFIT. (5) THE OPTIONAL STEP-UP Assume your initial purchase payment is $100,000 and no withdrawals are taken. The 5% Annual Increase Amount increases to $105,000 on the first anniversary ($100,000 increased by 5% per year, compounded annually). Assume your account value at the first contract anniversary is $110,000 due to good market performance, and you elect an Optional Step-Up. The effect of the Optional Step-Up election is: (1) The 5% Annual Increase Amount resets from $105,000 to $110,000; and (2) The Enhanced Death Benefit rider charge is reset to the fee we charge new contract owners for the Enhanced Death Benefit at that time. E-5 The 5% Annual Increase Amount increases to $115,500 on the second anniversary ($110,000 increased by 5% per year, compounded annually). Assume your account value at the second contract anniversary is $112,000 due to poor market performance. You may NOT elect an Optional Step-Up at this time, because the account value is less than the 5% Annual Increase Amount (6) THE OPTIONAL STEP-UP: AUTOMATIC ANNUAL STEP-UP Assume your initial purchase payment is $100,000 and no withdrawals are taken. The 5% Annual Increase Amount increases to $105,000 on the first anniversary ($100,000 increased by 5% per year, compounded annually). Assume your account value at the first contract anniversary is $110,000 due to good market performance, and you elected Optional Step-Ups to occur under the Automatic Annual Step-Up feature prior to the first contract anniversary. Because your account value is higher than your 5% Annual Increase Amount, an Optional Step-Up will automatically occur. The effect of the Optional Step-Up is: (1) The 5% Annual Increase Amount automatically resets from $105,000 to $110,000; and (2) The Enhanced Death Benefit rider charge is reset to the fee we charge new contract owners for the Enhanced Death Benefit at that time. The 5% Annual Increase Amount increases to $115,500 on the second anniversary ($110,000 increased by 5% per year, compounded annually). Assume your account value at the second contract anniversary is $120,000 due to good market performance, and you have not discontinued the Automatic Annual Step-Up feature. Because your account value is higher than your 5% Annual Increase Amount, an Optional Step-Up will automatically occur. The effect of the Optional Step-Up is: (1) The 5% Annual Increase Amount automatically resets from $115,500 to $120,000; and (2) The Enhanced Death Benefit rider charge is reset to the fee we charge new contract owners for the Enhanced Death Benefit at that time. Assume your account value increases by $10,000 at each contract anniversary in years three through seven. At each contract anniversary, your account value would exceed the 5% Annual Increase Amount and an Optional Step-Up would automatically occur (provided you had not discontinued the Automatic Annual Step-Up feature, and other requirements were met). The effect of the Optional Step-Up is: (1) The 5% Annual Increase Amount automatically resets to the higher account value; and (2) The Enhanced Death Benefit rider charge is reset to the fee we charge new contract owners for the Enhanced Death Benefit at that time. After the seventh contract anniversary, the initial Automatic Annual Step-Up election expires. Assume you do not make a new election of the Automatic Annual Step-Up. The 5% Annual Increase Amount increases to $178,500 on the eighth anniversary ($170,000 increased by 5% per year, compounded annually). Assume your account value at the eighth contract anniversary is $160,000 due to poor market performance. An Optional Step-Up is NOT permitted because your account value is lower than your 5% Annual Increase Amount. However, because the Optional Step-Up has locked-in previous gains, the 5% Annual Increase Amount remains at $178,500 despite poor market performance, and, provided the rider continues in effect, will continue to grow at 5% annually (subject to adjustments for additional purchase payments and/or withdrawals) through the contract anniversary on or after your 90th birthday. Also, note the Enhanced Death Benefit rider charge remains at its current level. E-6 STATEMENT OF ADDITIONAL INFORMATION INDIVIDUAL VARIABLE DEFERRED ANNUITY CONTRACT ISSUED BY METLIFE INVESTORS VARIABLE ANNUITY ACCOUNT ONE AND METLIFE INVESTORS INSURANCE COMPANY CLASS C THIS IS NOT A PROSPECTUS. THIS STATEMENT OF ADDITIONAL INFORMATION SHOULD BE READ IN CONJUNCTION WITH THE PROSPECTUS DATED MAY 1, 2009, FOR THE INDIVIDUAL VARIABLE DEFERRED ANNUITY CONTRACT THAT IS DESCRIBED HEREIN. THE PROSPECTUS CONCISELY SETS FORTH INFORMATION THAT A PROSPECTIVE INVESTOR OUGHT TO KNOW BEFORE INVESTING. FOR A COPY OF THE PROSPECTUS WRITE US AT: P.O. BOX 10366, DES MOINES, IOWA 50306-0366, OR CALL (800) 343-8496. THIS STATEMENT OF ADDITIONAL INFORMATION IS DATED MAY 1, 2009. SAI-0509MOC TABLE OF CONTENTS PAGE COMPANY................................. 2 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM.................................... 2 ADDITIONAL INFORMATION.................. 3 CUSTODIAN............................... 3 DISTRIBUTION............................ 3 CALCULATION OF PERFORMANCE INFORMATION 4 . Total Return....................... 4 Historical Unit Values............. 5 Reporting Agencies................. 5 ANNUITY PROVISIONS...................... 6 Variable Annuity................... 6 Fixed Annuity...................... 7 Mortality and Expense Guarantee.... 7 Legal or Regulatory Restrictions 7 on Transactions . TAX STATUS OF THE CONTRACTS............. 7 CONDENSED FINANCIAL INFORMATION......... 10 FINANCIAL STATEMENTS.................... 56
1 COMPANY MetLife Investors Insurance Company (MetLife Investors or the Company) was incorporated on August 17, 1981, as Assurance Life Company, a Missouri corporation, and changed its name to Xerox Financial Services Life Insurance Company in 1985. On June 1, 1995, a wholly-owned subsidiary of General American Life Insurance Company (General American Life) purchased Xerox Financial Services Life Insurance Company, which on that date changed its name to Cova Financial Services Life Insurance Company. On January 6, 2000, Metropolitan Life Insurance Company acquired GenAmerica Financial Corporation, the ultimate parent company of General American Life. Cova Financial Services Life Insurance Company changed its name to MetLife Investors Insurance Company on January 30, 2001. On December 31, 2002, MetLife Investors became an indirect subsidiary of MetLife, Inc. (MetLife), the holding company of Metropolitan Life Insurance Company and a listed company on the New York Stock Exchange. On October 1, 2004, MetLife Investors became a direct subsidiary of MetLife. MetLife, through its subsidiaries and affiliates, is a leading provider of insurance and other financial services to individual and institutional customers. On December 31, 2002, MetLife entered into a net worth maintenance agreement with MetLife Investors. Under the agreement, MetLife agreed, without limitation as to the amount, to cause MetLife Investors to have certain minimum capital and surplus levels and liquidity necessary to enable it to meet its current obligations on a timely basis. At December 31, 2008, the capital and surplus of MetLife Investors was in excess of these minimum capital and surplus levels. MetLife and MetLife Investors entered into the agreement in part to enhance and maintain the financial strength of MetLife Investors as set forth in the agreement. Creditors of MetLife Investors (including its policyholders) have certain rights under the agreement to enforce the provisions of the agreement through certain state insurance regulators. However, the agreement provides, among other things, that it does not provide any creditor of MetLife Investors with recourse to or against any of the assets of MetLife. MetLife has the right to terminate the agreement upon thirty days written notice to MetLife Investors. MetLife has agreed not to terminate the agreement unless one of certain designated events occur, including if the Company attains a financial strength rating from Moody's Investors Service, Inc. without giving weight to the support of the agreement, that is the same as or better than its rating of such rating agency with such support. General American Life Insurance Company has entered into a contingent reinsurance agreement with MetLife Investors. Under this agreement, in the event that MetLife Investors' statutory capital and surplus fall below certain levels, General American Life Insurance Company would assume as assumption reinsurance, subject to regulatory approvals and required consents, all of MetLife Investors' life insurance and annuity contracts. At December 31, 2008, the capital and surplus of MetLife Investors was in excess of these minimum capital and surplus levels. We are licensed to do business in the District of Columbia and all states except New Hampshire and New York. We are a member of the Insurance Marketplace Standards Association (IMSA). Companies that belong to IMSA subscribe to a set of ethical standards covering the various aspects of sales and service for individually sold life insurance and annuities. INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The financial statements of each of the Sub-Accounts of MetLife Investors Variable Annuity Account One included in this Statement of Additional Information 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 financial statements of MetLife Investors Insurance Company (the "Company") included in this Statement of Additional Information 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 certain assets and liabilities to a fair value measurement approach as required by accounting guidance adopted on January 1, 2008, and changed its method of accounting for income taxes as required by accounting guidance adopted on January 1, 2007), and are included 2 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 and subsidiaries (the "Guarantor") included in this Statement of Additional Information 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 Guarantor changed its method of accounting for certain assets and liabilities to a fair value measurement approach as required by accounting guidance adopted on January 1, 2008, and changed its method of accounting for deferred acquisition costs and for income taxes as required by accounting guidance adopted on January 1, 2007), 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, Tampa, Florida 33602-5827. The consolidated financial statements, and the related financial statement schedules, incorporated in this Statement of Additional Information by reference from the MetLife, Inc. and subsidiaries' ("MetLife") Annual Report on Form 10-K, and the effectiveness of MetLife's internal control over financial reporting for the year ended December 31, 2008, have been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their reports (which (1) express an unqualified opinion on the consolidated financial statements and financial statement schedules and include an explanatory paragraph regarding changes in MetLife's method of accounting for certain assets and liabilities to a fair value measurement approach as required by accounting guidance adopted on January 1, 2008, and its method of accounting for deferred acquisition costs and for income taxes as required by accounting guidance adopted on January 1, 2007, and (2) express an unqualified opinion on MetLife's effectiveness of internal control over financial reporting), which are incorporated herein by reference. Such consolidated financial statements and financial statement schedules have been so incorporated in reliance upon the reports of such firm given upon their authority as experts in accounting and auditing. ADDITIONAL INFORMATION As noted above in the "The Company" section of this Statement of Additional Information, MetLife has entered into a net worth maintenance agreement with the Company. As permitted by SEC rules, we are incorporating by reference into this Statement of Additional Information the following documents which have been filed with the SEC, which means that these documents are legally a part of this Statement of Additional Information: The consolidated financial statements and financial schedules from MetLife and subsidiaries' Annual Report on Form 10-K for the year ended December 31, 2008, filed on March 2, 2009 (File No. 001-15787), can be viewed on the SEC website at www.sec.gov. You should only consider MetLife's financial statements (including notes and financial statement schedules thereto) and other financial information that we have incorporated by reference as noted above as bearing on the ability of MetLife to meet its obligations under the net worth maintenance agreement. CUSTODIAN MetLife Investors Insurance Company, 5 Park Plaza, Suite 1900, Irvine, CA 92614, is the custodian of the assets of the Separate Account. The custodian has custody of all cash of the Separate Account and handles the collection of proceeds of shares of the underlying funds bought and sold by the Separate Account. DISTRIBUTION Information about the distribution of the contracts is contained in the prospectus. (See "Other Information.") Additional information is provided below. 3 The contracts are offered to the public on a continuous basis. We anticipate continuing to offer the contracts, but reserve the right to discontinue the offering. MetLife Investors Distribution Company ("Distributor") serves as principal underwriter for the contracts. Distributor is a Missouri corporation and its home office is located at 5 Park Plaza, Suite 1900, Irvine, CA 92614. In December 2004, MetLife Investors Distribution Company, which was then a Delaware corporation, was merged into General American Distributors, Inc., and the name of the surviving corporation was changed to MetLife Investors Distribution Company. Distributor is an indirect, wholly-owned subsidiary of MetLife, Inc. Distributor is registered as a broker-dealer with the Securities and Exchange Commission under the Securities Exchange Act of 1934 and is a member of the Financial Industry Regulatory Authority ("FINRA"). Distributor is not a member of the Securities Investor Protection Corporation. Distributor has entered into selling agreements with other broker-dealers ("selling firms") and compensates them for their services. Distributor (including its predecessor) received sales compensation with respect to all contracts issued from the Separate Account in the following amounts during the periods indicated:
Aggregate Amount of Commissions Retained Aggregate Amount of by Distributor After Commissions Paid to Payments to Selling Fiscal year Distributor Firms ------------- --------------------- --------------------- 2006 $77,984,153 $0 2007 $93,514,576 $0 2008 $85,020,359 $0
Distributor passes through commissions to selling firms for their sales. In addition we pay compensation to Distributor to offset its expenses, including compensation costs, marketing and distribution expenses, advertising, wholesaling, printing and other expenses of distributing the contracts. As noted in the prospectus, we and Distributor pay compensation to all selling firms in the form of commissions and certain types of non-cash compensation. We and Distributor may pay additional compensation to selected firms, including marketing allowances, introduction fees, persistency payments, preferred status fees and industry conference fees. The terms of any particular agreement governing compensation may vary among selling firms and the amounts may be significant. The amount of additional compensation (non-commission amounts) paid to selected selling firms during 2008 ranged from $36,007 to $3,967,156. The amount of commissions paid to selected selling firms during 2008 ranged from $631,496 to $30,520,896. The amount of total compensation (includes non- commission as well as commission amounts) paid to selected selling firms during 2008 ranged from $667,503 to $34,015,296. For purposes of calculating such amounts, the amount of compensation received by a selling firm may include additional compensation received by the firm for the sale of insurance products issued by our affiliates within the MetLife Investors group of companies (First MetLife Investors Insurance Company and MetLife Investors USA Insurance Company). The following list sets forth the names of selling firms that received additional compensation in 2008 in connection with the sale of our variable annuity contracts, variable life policies and other insurance products (including the contracts). The selling firms are listed in alphabetical order. A.G. Edwards & Sons, Inc. Commonwealth Edward Jones J.J.B. Hilliard, W.L. Lyons, Inc. Linsco Private Ledger RBC Wealth Management Stifel, Nicolaus & Company, Incorporated UBS Financial Services Wachovia Securities, LLC There are other broker dealers who receive compensation for servicing our contracts, and the account value of the contracts or the amount of added purchase payments received may be included in determining their additional compensation, if any. CALCULATION OF PERFORMANCE INFORMATION TOTAL RETURN From time to time, the Company may advertise performance data. Such data will show the percentage change in the value of an accumulation unit based on the performance of an investment portfolio over a period of time, usually a calendar year, determined by dividing the 4 increase (decrease) in value for that unit by the accumulation unit value at the beginning of the period. Any such advertisement will include total return figures for the time periods indicated in the advertisement. Such total return figures will reflect the deduction of the separate account product charges (including certain death benefit rider charges), the expenses for the underlying investment portfolio being advertised, and any applicable account fee, Enhanced Death Benefit charge, and/or GMIB, GWB or GMAB rider charge. For purposes of calculating performance information, the Enhanced Death Benefit rider charge and the GWB rider charge are currently reflected as a percentage of account value. Premium taxes are not reflected. The deduction of such charges would reduce any percentage increase or make greater any percentage decrease. The hypothetical value of a contract purchased for the time periods described in the advertisement will be determined by using the actual accumulation unit values for an initial $1,000 purchase payment, and deducting any applicable account fee and any applicable sales charge to arrive at the ending hypothetical value. The average annual total return is then determined by computing the fixed interest rate that a $1,000 purchase payment would have to earn annually, compounded annually, to grow to the hypothetical value at the end of the time periods described. The formula used in these calculations is: P (1 + T)n = ERV Where: P = a hypothetical initial payment of $1,000 T = average annual total return n = number of years ERV = ending redeemable value at the end of the time periods used (or fractional portion thereof) of a hypothetical $1,000 payment made at the beginning of the 1, 5 or 10 year periods used. The Company may also advertise performance data which will be calculated in the same manner as described above but which will not reflect the deduction of any applicable Enhanced Death Benefit, GMIB, GWB, or GMAB rider charge. Premium taxes are not reflected. The deduction of such charges would reduce any percentage increase or make greater any percentage decrease. Owners should note that the investment results of each investment portfolio will fluctuate over time, and any presentation of the investment portfolio's total return for any period should not be considered as a representation of what an investment may earn or what the total return may be in any future period. HISTORICAL UNIT VALUES The Company may also show historical accumulation unit values in certain advertisements containing illustrations. These illustrations will be based on actual accumulation unit values. In addition, the Company may distribute sales literature which compares the percentage change in accumulation unit values for any of the investment portfolios against established market indices such as the Standard & Poor's 500 Composite Stock Price Index, the Dow Jones Industrial Average or other management investment companies which have investment objectives similar to the investment portfolio being compared. The Standard & Poor's 500 Composite Stock Price Index is an unmanaged, unweighted average of 500 stocks, the majority of which are listed on the New York Stock Exchange. The Dow Jones Industrial Average is an unmanaged, weighted average of thirty blue chip industrial corporations listed on the New York Stock Exchange. Both the Standard & Poor's 500 Composite Stock Price Index and the Dow Jones Industrial Average assume quarterly reinvestment of dividends. REPORTING AGENCIES The Company may also distribute sales literature which compares the performance of the accumulation unit values of the Contracts with the unit values of variable annuities issued by other insurance companies. Such information will be derived from the Lipper Variable Insurance Products Performance Analysis Service, the VARDS Report or from Morningstar. The Lipper Variable Insurance Products Performance Analysis Service is published by Lipper Analytical Services, Inc., a publisher of statistical data which currently tracks the performance of thousands of investment companies. The rankings compiled by Lipper may or may not reflect the deduction of asset-based insurance charges. The Company's sales literature utilizing these rankings will indicate whether or not such charges have been deducted. Where the charges have not been deducted, the sales 5 literature will indicate that if the charges had been deducted, the ranking might have been lower. The VARDS Report is a monthly variable annuity industry analysis compiled by Variable Annuity Research & Data Service. The VARDS rankings may or may not reflect the deduction of asset-based insurance charges. In addition, VARDS prepares risk adjusted rankings, which consider the effects of market risk on total return performance. This type of ranking may address the question as to which funds provide the highest total return with the least amount of risk. Other ranking services may be used as sources of performance comparison, such as CDA/Weisenberger. Morningstar rates a variable annuity against its peers with similar investment objectives. Morningstar does not rate any variable annuity that has less than three years of performance data. ANNUITY PROVISIONS VARIABLE ANNUITY A variable annuity is an annuity with payments which: (1) are not predetermined as to dollar amount; and (2) will vary in amount in proportion to the amount that the net investment factor exceeds the assumed investment return selected. The Adjusted Contract Value (the account value, less any applicable premium taxes, account fee, and any prorated rider charge) will be applied to the applicable Annuity Table to determine the first annuity payment. The Adjusted Contract Value is determined on the annuity calculation date, which is a business day no more than five (5) business days before the annuity date. The dollar amount of the first variable annuity payment is determined as follows: The first variable annuity payment will be based upon the annuity option elected, the annuitant's age, the annuitant's sex (where permitted by law), and the appropriate variable annuity option table. Your annuity rates will not be less than those guaranteed in your contract at the time of purchase for the assumed investment return and annuity option elected. If, as of the annuity calculation date, the then current variable annuity option rates applicable to this class of contracts provide a first annuity payment greater than that which is guaranteed under the same annuity option under this contract, the greater payment will be made. The dollar amount of variable annuity payments after the first payment is determined as follows: 1. the dollar amount of the first variable annuity payment is divided by the value of an annuity unit for each applicable investment portfolio as of the annuity calculation date. This establishes the number of annuity units for each monthly payment. The number of annuity units for each applicable investment portfolio remains fixed during the annuity period, unless you transfer values from the investment portfolio to another investment portfolio; 2. the fixed number of annuity units per payment in each investment portfolio is multiplied by the annuity unit value for that investment portfolio for the business day for which the annuity payment is being calculated. This result is the dollar amount of the payment for each applicable investment portfolio, less any account fee. The account fee will be deducted pro rata out of each annuity payment. The total dollar amount of each variable annuity payment is the sum of all investment portfolio variable annuity payments. ANNUITY UNIT - The initial annuity unit value for each investment portfolio of the Separate Account was set by us. The subsequent annuity unit value for each investment portfolio is determined by multiplying the annuity unit value for the immediately preceding business day by the net investment factor for the investment portfolio for the current business day and multiplying the result by a factor for each day since the last business day which represents the daily equivalent of the AIR you elected. (1) the dollar amount of the first annuity payment is divided by the value of an annuity unit as of the annuity date. This establishes the number of annuity units for each monthly payment. The number of annuity units remains fixed during the annuity payment period. (2) the fixed number of annuity units is multiplied by the annuity unit value for the last valuation period of the month preceding the month for which the payment is due. This result is the dollar amount of the payment. NET INVESTMENT FACTOR - The net investment factor for each investment portfolio is determined by dividing A by B and multiplying by (1-C) where: A is (i) the net asset value per share of the portfolio at the end of the current business day; plus (ii) any dividend or capital gains per share declared on 6 behalf of such portfolio that has an ex-dividend date as of the current business day. B is the net asset value per share of the portfolio for the immediately preceding business day. C is (i) the separate account product charges and for each day since the last business day. The daily charge is equal to the annual separate account product charges divided by 365; plus (ii) a charge factor, if any, for any taxes or any tax reserve we have established as a result of the operation of the Separate Account. Transfers During the Annuity Phase: o You may not make a transfer from the fixed account to the Separate Account; o Transfers among the subaccounts will be made by converting the number of annuity units being transferred to the number of annuity units of the subaccount to which the transfer is made, so that the next annuity payment if it were made at that time would be the same amount that it would have been without the transfer. Thereafter, annuity payments will reflect changes in the value of the new annuity units; and o You may make a transfer from the variable annuity option to the fixed annuity option. The amount transferred from a subaccount of the Separate Account will be equal to the product of "(a)" multiplied by "(b)" multiplied by "(c)", where (a) is the number of annuity units representing your interest in the subaccount per annuity payment; (b) is the annuity unit value for the subaccount; and (c) is the present value of $1.00 per payment period for the remaining annuity benefit period based on the attained age of the annuitant at the time of transfer, calculated using the same actuarial basis as the variable annuity rates applied on the annuity date for the annuity option elected. Amounts transferred to the fixed annuity option will be applied under the annuity option elected at the attained age of the annuitant at the time of the transfer using the fixed annuity option table. If at the time of transfer, the then current fixed annuity option rates applicable to this class of contracts provide a greater payment, the greater payment will be made. All amounts and annuity unit values will be determined as of the end of the business day on which the Company receives a notice. FIXED ANNUITY A fixed annuity is a series of payments made during the annuity phase which are guaranteed as to dollar amount by the Company and do not vary with the investment experience of the Separate Account. The Adjusted Contract Value on the day immediately preceding the annuity date will be used to determine the fixed annuity monthly payment. The monthly annuity payment will be based upon the annuity option elected, the annuitant's age, the annuitant's sex (where permitted by law), and the appropriate annuity option table. Your annuity rates will not be less than those guaranteed in your contract at the time of purchase. If, as of the annuity calculation date, the then current annuity option rates applicable to this class of contracts provide an annuity payment greater than that which is guaranteed under the same annuity option under this contract, the greater payment will be made. MORTALITY AND EXPENSE GUARANTEE The Company guarantees that the dollar amount of each annuity payment after the first annuity payment will not be affected by variations in mortality or expense experience. LEGAL OR REGULATORY RESTRICTIONS ON TRANSACTIONS If mandated under applicable law, the Company may be required to reject a premium payment. The Company may also be required to block a contract owner's account and thereby refuse to pay any request for transfers, withdrawals, surrenders, death benefits or continue making annuity payments until instructions are received from the appropriate regulator. TAX STATUS OF THE CONTRACTS Tax law imposes several requirements that variable annuities must satisfy in order to receive the tax treatment normally accorded to annuity contracts. DIVERSIFICATION. In order for your Non-Qualified Contract to be considered an annuity contract for federal income tax purposes, we must comply with certain diversification standards with respect to the investments underlying the contract. We believe that we satisfy and will continue to satisfy these diversification standards. However, the tax law concerning these rules is subject to change and to different interpretations. Inadvertent failure to meet these standards may be correctable. Failure to meet these standards would result in immediate taxation to contract owners of gains under their contracts. Consult your tax adviser prior to purchase. 7 If underlying fund shares are sold directly to tax-qualified retirement plans that later lose their tax-qualified status or to non-qualified plans, the separate accounts investing in the underlying fund may fail the diversification requirements of Section 817, which could have adverse tax consequences for variable contract owners, including losing the benefit of tax deferral. REQUIRED DISTRIBUTIONS. In order to be treated as an annuity contract for Federal income tax purposes, Section 72(s) of the Code generally requires any Non-Qualified Contract to contain certain provisions specifying how your interest in the contract will be distributed in the event of the death of an owner of the contract (or on the death of, or change in, any primary annuitant where the contract is owned by a non-natural person). Specifically, Section 72(s) requires that: (a) if any owner dies on or after the annuity starting date, but prior to the time the entire interest in the contract has been distributed, the entire interest in the contract will be distributed at least as rapidly as under the method of distribution being used as of the date of such owner's death; and (b) if any owner dies prior to the annuity starting date, the entire interest in the contract will be distributed within five years after the date of such owner's death. These requirements will be considered satisfied as to any portion of an owner's interest which is payable to or for the benefit of a designated beneficiary and which is distributed over the life of such designated beneficiary or over a period not extending beyond the life expectancy of that beneficiary, provided that such distributions begin within one year of the owner's death. The designated beneficiary refers to a natural person designated by the owner as a beneficiary and to whom ownership of the contract passes by reason of death. However, if the designated beneficiary is the surviving spouse of the deceased owner, the contract may be continued with the surviving spouse as the new owner. The Non-Qualified Contracts contain provisions that are intended to comply with these Code requirements, although no regulations interpreting these requirements have yet been issued. We intend to review such provisions and modify them if necessary to assure that they comply with the applicable requirements when such requirements are clarified by regulation or otherwise. Other rules may apply to Qualified Contracts. MANDATORY DISTRIBUTIONS FOR QUALIFIED PLANS. Federal tax law requires that minimum annual distributions begin by April 1st of the calendar year following the calendar year in which an IRA owner attains age 70 1/2. Participants in qualified plans and 403(b) annuities may defer minimum distributions until the later of April 1st of the calendar year following the calendar year in which they attain age 70 1/2 or the year of retirement (except for 5% or more owners). If you own more than one individual retirement annuity and/or account, you may satisfy the minimum distribution rules on an aggregate basis (i.e., determine the total amount of required distributions from all IRAs and take the required amount from any one or more IRAs). A similar aggregate approach is available to meet your 403(b) minimum distribution requirements if you have multiple 403(b) annuities. Recently promulgated Treasury regulations changed the distribution requirements; therefore, it is important that you consult your tax adviser as to the impact of these regulations on your personal situation. Final income tax regulations regarding minimum distribution requirements were released in June 2004. These regulations affect both deferred and income annuities. Under these new rules, effective with respect to minimum distributions required for the 2006 distribution year, in general, the value of all benefits under a deferred annuity (including death benefits in excess of cash value) must be added to the account value in computing the amount required to be distributed over the applicable period. We will provide you with additional information as to the amount of your interest in the contract that is subject to required minimum distributions under this new rule and either compute the required amount for you or offer to do so at your request. The new rules are not entirely clear and you should consult your tax adviser as to how these rules affect your contract. MINIMUM DISTRIBUTIONS FOR BENEFICIARIES UPON THE CONTRACT OWNER'S DEATH. Upon the death of the contract owner and/or annuitant of a Qualified Contract, the funds remaining in the contract must be completely withdrawn within 5 years from the date of death (including in a single lump sum) or minimum distributions may be taken over the life expectancy of the individual beneficiaries (and in certain situations, trusts for individuals), provided such distributions are payable at least annually and begin within one year from the date of death. Special rules apply in the case of an IRA where the beneficiary is the surviving spouse which allow the spouse to assume the contract as owner. Alternative rules permit a spousal beneficiary under a qualified contract, including an 8 IRA, to defer the minimum distribution requirements until the end of the year in which the deceased spouse would have attained age 70 1/2 or to rollover the death proceeds to his or her own IRA or to another eligible retirement plan in which he or she participates. Under recently enacted legislation, you (and after your death, your designated beneficiaries) generally do not have to take the required minimum distribution for 2009. The waiver does not apply to any 2008 payments even if received in 2009, so for those payments, you are still required to receive your first required minimum distribution payment by April 1, 2009. In contrast, if your first required minimum distribution would have been due by April 1, 2010, you are not required to take such distribution; however, your 2010 required minimum distribution is due by December 31, 2010. For after-death required minimum distributions, the five year rule is applied without regard to calendar year 2009. For instance, if you died in 2007, the five year period ends in 2013 instead of 2012. This required minimum distribution waiver does not apply if you are receiving annuitized payments under your contract. The required minimum distribution rules are complex, so consult with your tax adviser before waiving your 2009 required minimum distribution payment. 9 CONDENSED FINANCIAL INFORMATION The following charts list the Condensed Financial Information (the accumulation unit value information for the accumulation units outstanding) for contracts issued as of December 31, 2008. See "Purchase - Accumulation Units" in the prospectus for information on how accumulation unit values are calculated. The charts present accumulation unit values based upon which riders you select. The charts are in addition to the charts in the prospectus. CLASS C
1.85% SEPARATE ACCOUNT PRODUCT CHARGES NUMBER OF ACCUMULATION ACCUMULATION ACCUMULATION UNIT VALUE AT UNIT VALUE AT UNITS BEGINNING OF END OF OUTSTANDING AT PERIOD PERIOD END OF PERIOD --------------- --------------- --------------- MET INVESTORS SERIES TRUST AMERICAN FUNDS BALANCED ALLOCATION SUB-ACCOUNT (CLASS C) 04/28/2008 to 12/31/2008 10.007972 6.989945 86,085.4009 ============= ==== ========== ========= ========= ============ AMERICAN FUNDS BOND SUB-ACCOUNT (CLASS C) 04/28/2008 to 12/31/2008 10.037971 8.924700 793.5859 ============= ==== ========== ========= ========= ============ AMERICAN FUNDS GROWTH ALLOCATION SUB-ACCOUNT (CLASS C) 04/28/2008 to 12/31/2008 9.997973 6.340094 319,373.4472 ============= ==== ========== ========= ========= ============ AMERICAN FUNDS GROWTH SUB-ACCOUNT (CLASS C) 04/28/2008 to 12/31/2008 9.987973 5.741807 7,907.8826 ============= ==== ========== ========= ========= ============ AMERICAN FUNDS INTERNATIONAL SUB-ACCOUNT (CLASS C) 04/28/2008 to 12/31/2008 10.087968 6.036171 38,050.3407 ============= ==== ========== ========= ========= ============ AMERICAN FUNDS MODERATE ALLOCATION SUB-ACCOUNT (CLASS C) 04/28/2008 to 12/31/2008 10.017972 7.661591 100,502.7678 ============= ==== ========== ========= ========= ============ BLACKROCK HIGH YIELD SUB-ACCOUNT (CLASS B) 04/28/2008 to 12/31/2008 15.953305 11.897978 0.0000 ============= ==== ========== ========= ========= ============ CLARION GLOBAL REAL ESTATE SUB-ACCOUNT (CLASS B) 05/01/2004 to 12/31/2004 9.998479 12.794986 45,010.2252 01/01/2005 to 12/31/2005 12.794986 14.230000 30,250.8305 01/01/2006 to 12/31/2006 14.230000 19.220070 17,542.3557 01/01/2007 to 12/31/2007 19.220070 16.034691 12,649.5183 01/01/2008 to 12/31/2008 16.034691 9.180346 16,143.5228 ============= ==== ========== ========= ========= ============ GOLDMAN SACHS MID CAP VALUE SUB-ACCOUNT (CLASS B) 05/01/2004 to 12/31/2004 9.998479 11.935719 48,791.6765 01/01/2005 to 12/31/2005 11.935719 13.186545 51,120.5123 01/01/2006 to 12/31/2006 13.186545 14.976870 24,043.7225 01/01/2007 to 12/31/2007 14.976870 15.156081 29,292.2006 01/01/2008 to 12/31/2008 15.156081 9.510171 18,898.1368 ============= ==== ========== ========= ========= ============
10 CONDENSED FINANCIAL INFORMATION (CONTINUED)
1.85% SEPARATE ACCOUNT PRODUCT CHARGES NUMBER OF ACCUMULATION ACCUMULATION ACCUMULATION UNIT VALUE AT UNIT VALUE AT UNITS BEGINNING OF END OF OUTSTANDING AT PERIOD PERIOD END OF PERIOD --------------- --------------- --------------- HARRIS OAKMARK INTERNATIONAL SUB-ACCOUNT (CLASS B) 10/09/2001 to 12/31/2001 10.000000 10.924432 230.0297 01/01/2002 to 12/31/2002 10.924432 8.783853 57,487.9585 01/01/2003 to 12/31/2003 8.783853 11.638223 304,181.5684 01/01/2004 to 12/31/2004 11.638223 13.769159 230,863.0520 01/01/2005 to 12/31/2005 13.769159 15.441940 158,355.4956 01/01/2006 to 12/31/2006 15.441940 19.533086 108,165.6847 01/01/2007 to 12/31/2007 19.533086 18.958612 87,082.6944 01/01/2008 to 12/31/2008 18.958612 11.001265 72,349.0690 ============ ==== ========== ========= ========= ============ LAZARD MID CAP SUB-ACCOUNT (CLASS B) 10/09/2001 to 12/31/2001 10.000000 10.980009 751.3021 01/01/2002 to 12/31/2002 10.980009 9.612701 76,851.1001 01/01/2003 to 12/31/2003 9.612701 11.906570 223,876.1487 01/01/2004 to 12/31/2004 11.906570 13.371066 104,753.1368 01/01/2005 to 12/31/2005 13.371066 14.184521 78,015.2519 01/01/2006 to 12/31/2006 14.184521 15.968770 57,439.8739 01/01/2007 to 12/31/2007 15.968770 15.249632 31,820.5955 01/01/2008 to 12/31/2008 15.249632 9.235812 41,146.1818 ============ ==== ========== ========= ========= ============ LEGG MASON PARTNERS AGGRESSIVE GROWTH SUB-ACCOUNT (CLASS B) 04/27/2001 to 12/31/2001 8.648464 7.285714 4,989.1469 01/01/2002 to 12/31/2002 7.285714 5.161212 180,972.5151 01/01/2003 to 12/31/2003 5.161212 6.632300 467,763.6376 01/01/2004 to 12/31/2004 6.632300 7.059930 296,726.6949 01/01/2005 to 12/31/2005 7.059930 7.871843 162,040.2696 01/01/2006 to 12/31/2006 7.871843 7.593588 111,626.2618 01/01/2007 to 12/31/2007 7.593588 7.622609 105,497.1350 01/01/2008 to 12/31/2008 7.622609 4.560348 90,565.1704 ============ ==== ========== ========= ========= ============ LEGG MASON VALUE EQUITY SUB-ACCOUNT (CLASS B) 11/07/2005 to 12/31/2005 10.246380 10.617665 0.0000 01/01/2006 to 12/31/2006 10.617665 11.109693 1,423.2321 01/01/2007 to 12/31/2007 11.109693 10.260797 1,395.0066 01/01/2008 to 12/31/2008 10.260797 4.571011 410.6900 ============ ==== ========== ========= ========= ============ LOOMIS SAYLES GLOBAL MARKETS SUB-ACCOUNT (CLASS B) 05/01/2006 to 12/31/2006 9.988479 10.308289 255.2590 01/01/2007 to 12/31/2007 10.308289 12.936770 246.9440 01/01/2008 to 12/31/2008 12.936770 7.713291 202.6024 ============ ==== ========== ========= ========= ============
11 CONDENSED FINANCIAL INFORMATION (CONTINUED)
1.85% SEPARATE ACCOUNT PRODUCT CHARGES NUMBER OF ACCUMULATION ACCUMULATION ACCUMULATION UNIT VALUE AT UNIT VALUE AT UNITS BEGINNING OF END OF OUTSTANDING AT PERIOD PERIOD END OF PERIOD --------------- --------------- --------------- LORD ABBETT BOND DEBENTURE SUB-ACCOUNT (CLASS B) 04/27/2001 to 12/31/2001 14.059023 13.935729 1,156.5767 01/01/2002 to 12/31/2002 13.935729 13.601843 180,853.4305 01/01/2003 to 12/31/2003 13.601843 15.910789 445,540.6105 01/01/2004 to 12/31/2004 15.910789 16.893911 245,537.7569 01/01/2005 to 12/31/2005 16.893911 16.832770 166,981.9351 01/01/2006 to 12/31/2006 16.832770 18.036741 133,196.8672 01/01/2007 to 12/31/2007 18.036741 18.864032 104,356.1614 01/01/2008 to 12/31/2008 18.864032 15.072423 74,535.0710 ============ ==== ========== ========= ========= ============ LORD ABBETT GROWTH AND INCOME SUB-ACCOUNT (CLASS B) 04/27/2001 to 12/31/2001 42.815885 41.265681 4,186.2554 01/01/2002 to 12/31/2002 41.265681 33.168661 91,466.2895 01/01/2003 to 12/31/2003 33.168661 42.567883 242,255.9736 01/01/2004 to 12/31/2004 42.567883 47.070287 143,844.3722 01/01/2005 to 12/31/2005 47.070287 47.777236 94,583.9784 01/01/2006 to 12/31/2006 47.777236 55.245718 67,507.2311 01/01/2007 to 12/31/2007 55.245718 56.245743 51,982.2708 01/01/2008 to 12/31/2008 56.245743 35.152266 41,546.9647 ============ ==== ========== ========= ========= ============ LORD ABBETT MID CAP VALUE SUB-ACCOUNT (CLASS B) 04/28/2008 to 12/31/2008 24.001474 15.765375 1,085.6774 ============ ==== ========== ========= ========= ============ MET/AIM SMALL CAP GROWTH SUB-ACCOUNT (CLASS B) 10/09/2001 to 12/31/2001 10.000000 11.840229 2,093.4072 01/01/2002 to 12/31/2002 11.840229 8.426214 125,663.7839 01/01/2003 to 12/31/2003 8.426214 11.486783 209,435.4879 01/01/2004 to 12/31/2004 11.486783 12.000973 165,274.7164 01/01/2005 to 12/31/2005 12.000973 12.755483 108,774.4250 01/01/2006 to 12/31/2006 12.755483 14.298273 80,841.0473 01/01/2007 to 12/31/2007 14.298273 15.588625 57,486.6756 01/01/2008 to 12/31/2008 15.588625 9.375599 48,629.5042 ============ ==== ========== ========= ========= ============ MET/FRANKLIN MUTUAL SHARES SUB-ACCOUNT (CLASS B) 04/28/2008 to 12/31/2008 9.997973 6.579680 3,302.6415 ============ ==== ========== ========= ========= ============ MET/FRANKLIN TEMPLETON FOUNDING STRATEGY SUB-ACCOUNT (CLASS B) 04/28/2008 to 12/31/2008 9.997973 7.011851 30,557.0204 ============ ==== ========== ========= ========= ============ MET/PUTNAM RESEARCH SUB-ACCOUNT (CLASS B) 04/27/2001 to 12/31/2001 9.145551 8.041271 5,660.3405 01/01/2002 to 12/31/2002 8.041271 6.250922 135,373.8707 01/01/2003 to 12/31/2003 6.250922 7.629894 180,865.5493 01/01/2004 to 11/19/2004 7.629894 7.806990 132,358.1712 ============ ==== ========== ========= ========= ============
12 CONDENSED FINANCIAL INFORMATION (CONTINUED)
1.85% SEPARATE ACCOUNT PRODUCT CHARGES NUMBER OF ACCUMULATION ACCUMULATION ACCUMULATION UNIT VALUE AT UNIT VALUE AT UNITS BEGINNING OF END OF OUTSTANDING AT PERIOD PERIOD END OF PERIOD --------------- --------------- --------------- MFS (Reg. TM) EMERGING MARKETS EQUITY SUB-ACCOUNT (CLASS B) 05/01/2006 to 12/31/2006 9.988479 10.446896 561.6269 01/01/2007 to 12/31/2007 10.446896 14.009617 6,318.9796 01/01/2008 to 12/31/2008 14.009617 6.115232 13,715.8085 ============ ==== ========== ========= ========= ============ MFS (Reg. TM) RESEARCH INTERNATIONAL SUB-ACCOUNT (CLASS B) 04/27/2001 to 12/31/2001 9.519967 8.355529 3,201.1207 01/01/2002 to 12/31/2002 8.355529 7.234336 191,290.0357 01/01/2003 to 12/31/2003 7.234336 9.377452 246,723.7472 01/01/2004 to 12/31/2004 9.377452 11.005663 231,891.2239 01/01/2005 to 12/31/2005 11.005663 12.578868 149,421.7636 01/01/2006 to 12/31/2006 12.578868 15.629281 103,323.8811 01/01/2007 to 12/31/2007 15.629281 17.380306 89,520.3580 01/01/2008 to 12/31/2008 17.380306 9.832803 72,073.4187 ============ ==== ========== ========= ========= ============ OPPENHEIMER CAPITAL APPRECIATION SUB-ACCOUNT (CLASS B) 04/27/2001 to 12/31/2001 9.472551 8.441032 8,309.2834 01/01/2002 to 12/31/2002 8.441032 6.236469 345,505.6672 01/01/2003 to 12/31/2003 6.236469 7.868815 814,274.9180 01/01/2004 to 12/31/2004 7.868815 8.218854 507,432.8159 01/01/2005 to 12/31/2005 8.218854 8.449002 373,192.9489 01/01/2006 to 12/31/2006 8.449002 8.926249 266,484.6490 01/01/2007 to 12/31/2007 8.926249 10.013742 165,790.0289 01/01/2008 to 12/31/2008 10.013742 5.313801 148,548.9957 ============ ==== ========== ========= ========= ============ PIMCO INFLATION PROTECTED BOND SUB-ACCOUNT (CLASS B) 05/01/2003 to 12/31/2003 10.000000 10.404570 440,904.7429 01/01/2004 to 12/31/2004 10.404570 11.133696 258,616.5552 01/01/2005 to 12/31/2005 11.133696 11.081785 162,046.1937 01/01/2006 to 12/31/2006 11.081785 10.921289 110,090.4464 01/01/2007 to 12/31/2007 10.921289 11.877609 76,135.2715 01/01/2008 to 12/31/2008 11.877609 10.856050 68,051.1627 ============ ==== ========== ========= ========= ============ PIMCO TOTAL RETURN SUB-ACCOUNT (CLASS B) 04/27/2001 to 12/31/2001 9.985193 10.504077 5,915.2516 01/01/2002 to 12/31/2002 10.504077 11.269887 491,708.6071 01/01/2003 to 12/31/2003 11.269887 11.539697 765,503.8113 01/01/2004 to 12/31/2004 11.539697 11.891821 537,346.2811 01/01/2005 to 12/31/2005 11.891821 11.936829 452,829.9286 01/01/2006 to 12/31/2006 11.936829 12.248038 362,322.0875 01/01/2007 to 12/31/2007 12.248038 12.931798 232,378.7300 01/01/2008 to 12/31/2008 12.931798 12.746166 199,190.2100 ============ ==== ========== ========= ========= ============
13 CONDENSED FINANCIAL INFORMATION (CONTINUED)
1.85% SEPARATE ACCOUNT PRODUCT CHARGES NUMBER OF ACCUMULATION ACCUMULATION ACCUMULATION UNIT VALUE AT UNIT VALUE AT UNITS BEGINNING OF END OF OUTSTANDING AT PERIOD PERIOD END OF PERIOD --------------- --------------- --------------- RAINIER LARGE CAP EQUITY SUB-ACCOUNT (CLASS B) 11/12/2007 to 12/31/2007 9.564133 9.976347 697.8087 01/01/2008 to 12/31/2008 9.976347 5.698814 3,950.2942 ============ ==== ========== ========= ========= ============ RCM TECHNOLOGY SUB-ACCOUNT (CLASS B) 04/27/2001 to 12/31/2001 7.816198 6.074755 2,198.6644 01/01/2002 to 12/31/2002 6.074755 2.937996 37,673.8747 01/01/2003 to 12/31/2003 2.937996 4.544634 86,030.6613 01/01/2004 to 12/31/2004 4.544634 4.268726 112,515.1426 01/01/2005 to 12/31/2005 4.268726 4.652342 73,377.0202 01/01/2006 to 12/31/2006 4.652342 4.811473 53,797.5681 01/01/2007 to 12/31/2007 4.811473 6.211678 46,342.0644 01/01/2008 to 12/31/2008 6.211678 3.386970 41,013.4280 ============ ==== ========== ========= ========= ============ SSGA GROWTH AND INCOME ETF SUB-ACCOUNT (CLASS B) 11/10/2008 to 12/31/2008 8.288218 8.446522 0.0000 ============ ==== ========== ========= ========= ============ SSGA GROWTH ETF SUB-ACCOUNT (CLASS B) 11/10/2008 to 12/31/2008 7.674129 7.743759 216.5608 ============ ==== ========== ========= ========= ============ T. ROWE PRICE MID CAP GROWTH SUB-ACCOUNT (CLASS B) 04/27/2001 to 12/31/2001 9.586900 8.211448 5,365.0259 01/01/2002 to 12/31/2002 8.211448 4.510946 277,746.1369 01/01/2003 to 12/31/2003 4.510946 6.050840 471,204.7293 01/01/2004 to 12/31/2004 6.050840 6.998318 192,077.1363 01/01/2005 to 12/31/2005 6.998318 7.875340 178,974.5052 01/01/2006 to 12/31/2006 7.875340 8.207928 123,352.6902 01/01/2007 to 12/31/2007 8.207928 9.477722 83,985.0394 01/01/2008 to 12/31/2008 9.477722 5.605335 76,620.0010 ============ ==== ========== ========= ========= ============ THIRD AVENUE SMALL CAP VALUE SUB-ACCOUNT (CLASS B) 05/01/2002 to 12/31/2002 10.000000 8.207727 114,493.3927 01/01/2003 to 12/31/2003 8.207727 11.394974 355,234.1295 01/01/2004 to 12/31/2004 11.394974 14.150432 216,689.5114 01/01/2005 to 12/31/2005 14.150432 16.042051 136,348.5913 01/01/2006 to 12/31/2006 16.042051 17.816693 95,197.2973 01/01/2007 to 12/31/2007 17.816693 16.959964 64,849.6031 01/01/2008 to 12/31/2008 16.959964 11.683140 56,372.5825 ============ ==== ========== ========= ========= ============ TURNER MID CAP GROWTH SUB-ACCOUNT (CLASS B) 05/01/2004 to 12/31/2004 9.998479 11.081524 46,150.8224 01/01/2005 to 12/31/2005 11.081524 12.114562 20,890.7638 01/01/2006 to 12/31/2006 12.114562 12.615221 15,653.1315 01/01/2007 to 12/31/2007 12.615221 15.373078 13,501.0891 01/01/2008 to 12/31/2008 15.373078 7.801833 12,591.8381 ============ ==== ========== ========= ========= ============
14 CONDENSED FINANCIAL INFORMATION (CONTINUED)
1.85% SEPARATE ACCOUNT PRODUCT CHARGES NUMBER OF ACCUMULATION ACCUMULATION ACCUMULATION UNIT VALUE AT UNIT VALUE AT UNITS BEGINNING OF END OF OUTSTANDING AT PERIOD PERIOD END OF PERIOD --------------- --------------- --------------- VAN KAMPEN COMSTOCK SUB-ACCOUNT (CLASS B) 05/01/2005 to 12/31/2005 9.998479 10.444315 2,333.5840 01/01/2006 to 12/31/2006 10.444315 11.899361 3,784.6458 01/01/2007 to 12/31/2007 11.899361 11.388978 27,043.4696 01/01/2008 to 12/31/2008 11.388978 7.164665 24,855.0391 ============ ==== ========== ========= ========= ============ METROPOLITAN SERIES FUND, INC. BLACKROCK MONEY MARKET SUB-ACCOUNT (CLASS B) 05/01/2005 to 12/31/2005 9.783649 9.857293 158,562.9097 01/01/2006 to 12/31/2006 9.857293 10.117516 245,463.4248 01/01/2007 to 12/31/2007 10.117516 10.409201 67,437.9218 01/01/2008 to 12/31/2008 10.409201 10.483469 75,342.9405 ============ ==== ========== ========= ========= ============ BLACKROCK MONEY MARKET SUB-ACCOUNT (CLASS B) (FORMERLY MET INVESTORS SERIES TRUST - MONEY MARKET SUB-ACCOUNT (CLASS B)) 04/27/2001 to 12/31/2001 10.064193 10.123246 999.6137 01/01/2002 to 12/31/2002 10.123246 10.046614 108,769.9214 01/01/2003 to 12/31/2003 10.046614 9.905288 213,430.3093 01/01/2004 to 12/31/2004 9.905288 9.785589 117,982.8461 01/01/2005 to 04/30/2005 9.785589 9.784024 0.0000 ============ ==== ========== ========= ========= ============ DAVIS VENTURE VALUE SUB-ACCOUNT (CLASS E) 04/27/2001 to 12/31/2001 10.855312 10.125565 10,510.5805 01/01/2002 to 12/31/2002 10.125565 8.294725 378,816.4961 01/01/2003 to 12/31/2003 8.294725 10.645503 622,433.1875 01/01/2004 to 12/31/2004 10.645503 11.718663 523,987.2435 01/01/2005 to 12/31/2005 11.718663 12.670581 346,375.7520 01/01/2006 to 12/31/2006 12.670581 14.230888 258,935.3902 01/01/2007 to 12/31/2007 14.230888 14.587722 205,153.2710 01/01/2008 to 12/31/2008 14.587722 8.669209 158,674.9582 ============ ==== ========== ========= ========= ============ HARRIS OAKMARK FOCUSED VALUE SUB-ACCOUNT (CLASS B) 04/27/2001 to 12/31/2001 10.589457 11.911307 10,435.3024 01/01/2002 to 12/31/2002 11.911307 10.632791 229,254.1958 01/01/2003 to 12/31/2003 10.632791 13.812463 414,471.7987 01/01/2004 to 12/31/2004 13.812463 14.867391 223,812.3240 01/01/2005 to 12/31/2005 14.867391 16.012543 153,793.3601 01/01/2006 to 12/31/2006 16.012543 17.633463 115,611.2611 01/01/2007 to 12/31/2007 17.633463 16.083868 92,906.8769 01/01/2008 to 12/31/2008 16.083868 8.504402 75,050.6081 ============ ==== ========== ========= ========= ============
15 CONDENSED FINANCIAL INFORMATION (CONTINUED)
1.85% SEPARATE ACCOUNT PRODUCT CHARGES NUMBER OF ACCUMULATION ACCUMULATION ACCUMULATION UNIT VALUE AT UNIT VALUE AT UNITS BEGINNING OF END OF OUTSTANDING AT PERIOD PERIOD END OF PERIOD --------------- --------------- ----------------- JENNISON GROWTH SUB-ACCOUNT (CLASS B) 05/01/2002 to 12/31/2002 10.000000 7.605115 241,184.2311 01/01/2003 to 12/31/2003 7.605115 9.682520 379,418.7099 01/01/2004 to 12/31/2004 9.682520 10.354060 235,347.4933 01/01/2005 to 12/31/2005 10.354060 11.540848 146,853.3755 01/01/2006 to 12/31/2006 11.540848 11.615805 107,480.6946 01/01/2007 to 12/31/2007 11.615805 12.700292 87,597.7229 01/01/2008 to 12/31/2008 12.700292 7.910484 71,979.9718 ============ ==== ========== ========= ========= ============== MET/DIMENSIONAL INTERNATIONAL SMALL COMPANY SUB-ACCOUNT (CLASS B) 11/10/2008 to 12/31/2008 10.064392 10.128163 0.0000 ============ ==== ========== ========= ========= ============== METLIFE STOCK INDEX SUB-ACCOUNT (CLASS B) 10/09/2001 to 12/31/2001 10.000000 10.838729 2,332.7322 01/01/2002 to 12/31/2002 10.838729 8.244099 178,742.7047 01/01/2003 to 12/31/2003 8.244099 10.348811 177,746.8588 01/01/2004 to 12/31/2004 10.348811 11.202844 248,811.6175 01/01/2005 to 12/31/2005 11.202844 11.479328 168,158.7522 01/01/2006 to 12/31/2006 11.479328 12.980887 52,226.3920 01/01/2007 to 12/31/2007 12.980887 13.375541 150,853.5443 01/01/2008 to 12/31/2008 13.375541 8.237445 182,863.0177 ============ ==== ========== ========= ========= ============== WESTERN ASSET MANAGEMENT U.S. GOVERNMENT SUB-ACCOUNT (CLASS B) 05/01/2005 to 12/31/2005 15.072970 15.012670 0.0000 01/01/2006 to 12/31/2006 15.012670 15.315203 0.0000 01/01/2007 to 12/31/2007 15.315203 15.639329 0.0000 01/01/2008 to 12/31/2008 15.639329 15.270192 1,846.5180 ============ ==== ========== ========= ========= ============== MET INVESTORS SERIES TRUST - METLIFE ASSET ALLOCATION PROGRAM METLIFE AGGRESSIVE STRATEGY SUB-ACCOUNT (CLASS B) 11/22/2004 to 12/31/2004 10.300094 10.683922 313,506.4839 01/01/2005 to 12/31/2005 10.683922 11.577371 430,425.4406 01/01/2006 to 12/31/2006 11.577371 12.916899 300,780.4970 01/01/2007 to 12/31/2007 12.916899 13.044878 246,987.2177 01/01/2008 to 12/31/2008 13.044878 7.578746 205,542.7781 ============ ==== ========== ========= ========= ============== METLIFE BALANCED STRATEGY SUB-ACCOUNT (CLASS B) 11/22/2004 to 12/31/2004 10.100278 10.388031 1,095,460.4190 01/01/2005 to 12/31/2005 10.388031 10.924448 1,518,509.1122 01/01/2006 to 12/31/2006 10.924448 12.009340 1,353,876.9222 01/01/2007 to 12/31/2007 12.009340 12.363600 992,096.7154 01/01/2008 to 12/31/2008 12.363600 8.260324 1,040,094.8640 ============ ==== ========== ========= ========= ==============
16 CONDENSED FINANCIAL INFORMATION (CONTINUED)
1.85% SEPARATE ACCOUNT PRODUCT CHARGES NUMBER OF ACCUMULATION ACCUMULATION ACCUMULATION UNIT VALUE AT UNIT VALUE AT UNITS BEGINNING OF END OF OUTSTANDING AT PERIOD PERIOD END OF PERIOD --------------- --------------- ----------------- METLIFE DEFENSIVE STRATEGY SUB-ACCOUNT (CLASS B) 11/22/2004 to 12/31/2004 9.940425 10.104276 153,591.7352 01/01/2005 to 12/31/2005 10.104276 10.363953 251,534.7318 01/01/2006 to 12/31/2006 10.363953 11.052104 313,292.4537 01/01/2007 to 12/31/2007 11.052104 11.490612 147,079.7652 01/01/2008 to 12/31/2008 11.490612 8.950055 162,193.1192 ============ ==== ========== ========= ========= ============== METLIFE GROWTH STRATEGY SUB-ACCOUNT (CLASS B) 11/22/2004 to 12/31/2004 10.240149 10.598859 942,922.3404 01/01/2005 to 12/31/2005 10.598859 11.354567 1,421,066.3342 01/01/2006 to 12/31/2006 11.354567 12.662408 1,388,212.2759 01/01/2007 to 12/31/2007 12.662408 13.013546 1,241,592.4764 01/01/2008 to 12/31/2008 13.013546 7.936885 1,095,212.2294 ============ ==== ========== ========= ========= ============== METLIFE MODERATE STRATEGY SUB-ACCOUNT (CLASS B) 11/22/2004 to 12/31/2004 10.010360 10.224440 261,597.0194 01/01/2005 to 12/31/2005 10.224440 10.620994 516,230.8694 01/01/2006 to 12/31/2006 10.620994 11.493723 439,888.5144 01/01/2007 to 12/31/2007 11.493723 11.982205 424,132.3580 01/01/2008 to 12/31/2008 11.982205 8.654300 444,337.2995 ============ ==== ========== ========= ========= ==============
17 CONDENSED FINANCIAL INFORMATION (CONTINUED)
1.95% SEPARATE ACCOUNT PRODUCT CHARGES NUMBER OF ACCUMULATION ACCUMULATION ACCUMULATION UNIT VALUE AT UNIT VALUE AT UNITS BEGINNING OF END OF OUTSTANDING AT PERIOD PERIOD END OF PERIOD --------------- --------------- ----------------- MET INVESTORS SERIES TRUST AMERICAN FUNDS BALANCED ALLOCATION SUB-ACCOUNT (CLASS C) 04/28/2008 to 12/31/2008 10.007863 6.985129 247,128.3951 ============ ==== ========== ========= ========= ============ AMERICAN FUNDS BOND SUB-ACCOUNT (CLASS C) 04/28/2008 to 12/31/2008 10.037861 8.918564 26,625.6577 ============ ==== ========== ========= ========= ============ AMERICAN FUNDS GROWTH ALLOCATION SUB-ACCOUNT (CLASS C) 04/28/2008 to 12/31/2008 9.997863 6.335721 342,467.7940 ============ ==== ========== ========= ========= ============ AMERICAN FUNDS GROWTH SUB-ACCOUNT (CLASS C) 04/28/2008 to 12/31/2008 9.987864 5.737844 34,292.0623 ============ ==== ========== ========= ========= ============ AMERICAN FUNDS INTERNATIONAL SUB-ACCOUNT (CLASS C) 04/28/2008 to 12/31/2008 10.087858 6.032009 9,037.7003 ============ ==== ========== ========= ========= ============ AMERICAN FUNDS MODERATE ALLOCATION SUB-ACCOUNT (CLASS C) 04/28/2008 to 12/31/2008 10.017862 7.656316 91,299.7077 ============ ==== ========== ========= ========= ============ BLACKROCK HIGH YIELD SUB-ACCOUNT (CLASS B) 04/28/2008 to 12/31/2008 15.768304 11.752040 7,008.9842 ============ ==== ========== ========= ========= ============ CLARION GLOBAL REAL ESTATE SUB-ACCOUNT (CLASS B) 05/01/2004 to 12/31/2004 9.998397 12.786410 114,502.2619 01/01/2005 to 12/31/2005 12.786410 14.206292 88,848.7729 01/01/2006 to 12/31/2006 14.206292 19.168944 85,305.6392 01/01/2007 to 12/31/2007 19.168944 15.975954 62,137.9382 01/01/2008 to 12/31/2008 15.975954 9.137520 52,954.4948 ============ ==== ========== ========= ========= ============ GOLDMAN SACHS MID CAP VALUE SUB-ACCOUNT (CLASS B) 05/01/2004 to 12/31/2004 9.998397 11.927714 142,065.1794 01/01/2005 to 12/31/2005 11.927714 13.164574 122,093.5893 01/01/2006 to 12/31/2006 13.164574 14.937015 134,081.5147 01/01/2007 to 12/31/2007 14.937015 15.100556 129,774.7861 01/01/2008 to 12/31/2008 15.100556 9.465811 101,137.0765 ============ ==== ========== ========= ========= ============ HARRIS OAKMARK INTERNATIONAL SUB-ACCOUNT (CLASS B) 05/01/2003 to 12/31/2003 8.677177 11.612325 458,863.7871 01/01/2004 to 12/31/2004 11.612325 13.724756 550,471.8629 01/01/2005 to 12/31/2005 13.724756 15.376806 396,646.9291 01/01/2006 to 12/31/2006 15.376806 19.431318 329,647.6518 01/01/2007 to 12/31/2007 19.431318 18.840873 252,360.2886 01/01/2008 to 12/31/2008 18.840873 10.921961 229,162.4980 ============ ==== ========== ========= ========= ============
18 CONDENSED FINANCIAL INFORMATION (CONTINUED)
1.95% SEPARATE ACCOUNT PRODUCT CHARGES NUMBER OF ACCUMULATION ACCUMULATION ACCUMULATION UNIT VALUE AT UNIT VALUE AT UNITS BEGINNING OF END OF OUTSTANDING AT PERIOD PERIOD END OF PERIOD --------------- --------------- ----------------- LAZARD MID CAP SUB-ACCOUNT (CLASS B) 05/01/2003 to 12/31/2003 9.645900 11.880101 236,782.5026 01/01/2004 to 12/31/2004 11.880101 13.327972 181,957.0913 01/01/2005 to 12/31/2005 13.327972 14.124717 143,287.1714 01/01/2006 to 12/31/2006 14.124717 15.885596 124,762.9820 01/01/2007 to 12/31/2007 15.885596 15.154954 91,522.2990 01/01/2008 to 12/31/2008 15.154954 9.169250 81,268.0723 ============ ==== ========== ========= ========= ============ LEGG MASON PARTNERS AGGRESSIVE GROWTH SUB-ACCOUNT (CLASS B) 05/01/2003 to 12/31/2003 5.445302 6.614545 659,409.3523 01/01/2004 to 12/31/2004 6.614545 7.033972 629,095.3018 01/01/2005 to 12/31/2005 7.033972 7.835087 338,041.3072 01/01/2006 to 12/31/2006 7.835087 7.550591 286,797.7153 01/01/2007 to 12/31/2007 7.550591 7.571829 237,113.8146 01/01/2008 to 12/31/2008 7.571829 4.525416 206,204.9924 ============ ==== ========== ========= ========= ============ LEGG MASON VALUE EQUITY SUB-ACCOUNT (CLASS B) 11/07/2005 to 12/31/2005 10.246184 10.615920 0.0000 01/01/2006 to 12/31/2006 10.615920 11.096791 59,037.7205 01/01/2007 to 12/31/2007 11.096791 10.238575 52,383.1459 01/01/2008 to 12/31/2008 10.238575 4.556518 42,040.1580 ============ ==== ========== ========= ========= ============ LOOMIS SAYLES GLOBAL MARKETS SUB-ACCOUNT (CLASS B) 05/01/2006 to 12/31/2006 9.988397 10.301369 4,177.1932 01/01/2007 to 12/31/2007 10.301369 12.915102 12,581.8406 01/01/2008 to 12/31/2008 12.915102 7.692637 31,110.2550 ============ ==== ========== ========= ========= ============ LORD ABBETT BOND DEBENTURE SUB-ACCOUNT (CLASS B) 05/01/2003 to 12/31/2003 14.535517 15.868232 576,631.2348 01/01/2004 to 12/31/2004 15.868232 16.831840 507,597.9918 01/01/2005 to 12/31/2005 16.831840 16.754206 320,167.1522 01/01/2006 to 12/31/2006 16.754206 17.934664 283,524.5148 01/01/2007 to 12/31/2007 17.934664 18.738425 236,021.3704 01/01/2008 to 12/31/2008 18.738425 14.957050 184,746.6375 ============ ==== ========== ========= ========= ============ LORD ABBETT GROWTH AND INCOME SUB-ACCOUNT (CLASS B) 05/01/2003 to 12/31/2003 34.174237 42.453930 291,365.1814 01/01/2004 to 12/31/2004 42.453930 46.897242 274,129.0778 01/01/2005 to 12/31/2005 46.897242 47.554144 197,837.6370 01/01/2006 to 12/31/2006 47.554144 54.932958 162,621.3318 01/01/2007 to 12/31/2007 54.932958 55.871106 131,605.0359 01/01/2008 to 12/31/2008 55.871106 34.883018 113,425.9250 ============ ==== ========== ========= ========= ============ LORD ABBETT MID CAP VALUE SUB-ACCOUNT (CLASS B) 04/28/2008 to 12/31/2008 23.746226 15.587128 712.8621 ============ ==== ========== ========= ========= ============
19 CONDENSED FINANCIAL INFORMATION (CONTINUED)
1.95% SEPARATE ACCOUNT PRODUCT CHARGES NUMBER OF ACCUMULATION ACCUMULATION ACCUMULATION UNIT VALUE AT UNIT VALUE AT UNITS BEGINNING OF END OF OUTSTANDING AT PERIOD PERIOD END OF PERIOD --------------- --------------- ----------------- MET/AIM SMALL CAP GROWTH SUB-ACCOUNT (CLASS B) 05/01/2003 to 12/31/2003 8.633255 11.461223 296,888.1301 01/01/2004 to 12/31/2004 11.461223 11.962265 389,543.2718 01/01/2005 to 12/31/2005 11.962265 12.701673 244,690.7282 01/01/2006 to 12/31/2006 12.701673 14.223758 206,722.6073 01/01/2007 to 12/31/2007 14.223758 15.491799 155,547.7398 01/01/2008 to 12/31/2008 15.491799 9.308000 124,361.7001 ============ ==== ========== ========= ========= ============== MET/FRANKLIN MUTUAL SHARES SUB-ACCOUNT (CLASS B) 04/28/2008 to 12/31/2008 9.997863 6.575143 15,357.3792 ============ ==== ========== ========= ========= ============== MET/FRANKLIN TEMPLETON FOUNDING STRATEGY SUB-ACCOUNT (CLASS B) 04/28/2008 to 12/31/2008 9.997863 7.007020 115,128.7654 ============ ==== ========== ========= ========= ============== MET/PUTNAM RESEARCH SUB-ACCOUNT (CLASS B) 05/01/2003 to 12/31/2003 6.354971 7.609468 141,144.6679 01/01/2004 to 11/19/2004 7.609468 7.779203 199,335.3635 ============ ==== ========== ========= ========= ============== MFS (Reg. TM) EMERGING MARKETS EQUITY SUB-ACCOUNT (CLASS B) 05/01/2006 to 12/31/2006 9.988397 10.439878 3,565.7911 01/01/2007 to 12/31/2007 10.439878 13.986146 14,212.1079 01/01/2008 to 12/31/2008 13.986146 6.098843 31,768.9897 ============ ==== ========== ========= ========= ============== MFS (Reg. TM) RESEARCH INTERNATIONAL SUB-ACCOUNT (CLASS B) 05/01/2003 to 12/31/2003 7.253635 9.352342 196,957.6079 01/01/2004 to 12/31/2004 9.352342 10.965198 398,085.6997 01/01/2005 to 12/31/2005 10.965198 12.520131 273,659.5838 01/01/2006 to 12/31/2006 12.520131 15.540801 223,874.8190 01/01/2007 to 12/31/2007 15.540801 17.264543 189,253.7645 01/01/2008 to 12/31/2008 17.264543 9.757497 151,119.3154 ============ ==== ========== ========= ========= ============== OPPENHEIMER CAPITAL APPRECIATION SUB-ACCOUNT (CLASS B) 05/01/2003 to 12/31/2003 6.473585 7.847734 1,081,173.7210 01/01/2004 to 12/31/2004 7.847734 8.188620 1,044,422.4200 01/01/2005 to 12/31/2005 8.188620 8.409532 701,660.1404 01/01/2006 to 12/31/2006 8.409532 8.875691 591,961.3704 01/01/2007 to 12/31/2007 8.875691 9.947020 420,173.0208 01/01/2008 to 12/31/2008 9.947020 5.273087 348,504.1932 ============ ==== ========== ========= ========= ==============
20 CONDENSED FINANCIAL INFORMATION (CONTINUED)
1.95% SEPARATE ACCOUNT PRODUCT CHARGES NUMBER OF ACCUMULATION ACCUMULATION ACCUMULATION UNIT VALUE AT UNIT VALUE AT UNITS BEGINNING OF END OF OUTSTANDING AT PERIOD PERIOD END OF PERIOD --------------- --------------- ----------------- PIMCO INFLATION PROTECTED BOND SUB-ACCOUNT (CLASS B) 05/01/2003 to 12/31/2003 10.000000 10.397609 539,508.6193 01/01/2004 to 12/31/2004 10.397609 11.115098 681,673.5676 01/01/2005 to 12/31/2005 11.115098 11.052243 474,048.0283 01/01/2006 to 12/31/2006 11.052243 10.881314 457,046.4540 01/01/2007 to 12/31/2007 10.881314 11.822245 321,537.7538 01/01/2008 to 12/31/2008 11.822245 10.794618 270,041.0819 ============ ==== ========== ========= ========= ============ PIMCO TOTAL RETURN SUB-ACCOUNT (CLASS B) 05/01/2003 to 12/31/2003 11.485434 11.508812 668,488.1415 01/01/2004 to 12/31/2004 11.508812 11.848106 601,369.3975 01/01/2005 to 12/31/2005 11.848106 11.881093 473,717.8830 01/01/2006 to 12/31/2006 11.881093 12.178696 471,678.8699 01/01/2007 to 12/31/2007 12.178696 12.845665 385,393.4232 01/01/2008 to 12/31/2008 12.845665 12.648587 302,282.6793 ============ ==== ========== ========= ========= ============ RAINIER LARGE CAP EQUITY SUB-ACCOUNT (CLASS B) 11/12/2007 to 12/31/2007 9.563816 9.974677 1,619.1407 01/01/2008 to 12/31/2008 9.974677 5.692132 2,463.4583 ============ ==== ========== ========= ========= ============ RCM TECHNOLOGY SUB-ACCOUNT (CLASS B) 05/01/2003 to 12/31/2003 3.268861 4.532449 130,319.9198 01/01/2004 to 12/31/2004 4.532449 4.253011 254,330.4214 01/01/2005 to 12/31/2005 4.253011 4.630596 169,396.8606 01/01/2006 to 12/31/2006 4.630596 4.784208 156,555.0341 01/01/2007 to 12/31/2007 4.784208 6.170276 104,826.6730 01/01/2008 to 12/31/2008 6.170276 3.361013 115,851.3457 ============ ==== ========== ========= ========= ============ SSGA GROWTH AND INCOME ETF SUB-ACCOUNT (CLASS B) 11/10/2008 to 12/31/2008 8.262436 8.419070 0.0000 ============ ==== ========== ========= ========= ============ SSGA GROWTH ETF SUB-ACCOUNT (CLASS B) 11/10/2008 to 12/31/2008 7.650252 7.718586 0.0000 ============ ==== ========== ========= ========= ============ T. ROWE PRICE MID CAP GROWTH SUB-ACCOUNT (CLASS B) 05/01/2003 to 12/31/2003 4.705778 6.034637 642,188.4717 01/01/2004 to 12/31/2004 6.034637 6.972583 502,913.3232 01/01/2005 to 12/31/2005 6.972583 7.838563 437,854.0038 01/01/2006 to 12/31/2006 7.838563 8.161451 392,154.8810 01/01/2007 to 12/31/2007 8.161451 9.414586 290,700.1249 01/01/2008 to 12/31/2008 9.414586 5.562399 269,233.9306 ============ ==== ========== ========= ========= ============
21 CONDENSED FINANCIAL INFORMATION (CONTINUED)
1.95% SEPARATE ACCOUNT PRODUCT CHARGES NUMBER OF ACCUMULATION ACCUMULATION ACCUMULATION UNIT VALUE AT UNIT VALUE AT UNITS BEGINNING OF END OF OUTSTANDING AT PERIOD PERIOD END OF PERIOD --------------- --------------- ----------------- THIRD AVENUE SMALL CAP VALUE SUB-ACCOUNT (CLASS B) 05/01/2003 to 12/31/2003 8.425003 11.375998 439,795.7450 01/01/2004 to 12/31/2004 11.375998 14.112717 495,535.8478 01/01/2005 to 12/31/2005 14.112717 15.983358 360,659.7052 01/01/2006 to 12/31/2006 15.983358 17.733811 309,021.3235 01/01/2007 to 12/31/2007 17.733811 16.864090 246,718.3199 01/01/2008 to 12/31/2008 16.864090 11.605429 209,387.3045 ============ ==== ========== ========= ========= ============== TURNER MID CAP GROWTH SUB-ACCOUNT (CLASS B) 05/01/2004 to 12/31/2004 9.998397 11.074086 118,629.4368 01/01/2005 to 12/31/2005 11.074086 12.094369 66,687.1437 01/01/2006 to 12/31/2006 12.094369 12.581631 58,131.3721 01/01/2007 to 12/31/2007 12.581631 15.316742 48,922.0146 01/01/2008 to 12/31/2008 15.316742 7.765426 45,343.6480 ============ ==== ========== ========= ========= ============== VAN KAMPEN COMSTOCK SUB-ACCOUNT (CLASS B) 05/01/2005 to 12/31/2005 9.998397 10.437309 22,937.3191 01/01/2006 to 12/31/2006 10.437309 11.879528 26,217.2389 01/01/2007 to 12/31/2007 11.879528 11.358566 37,571.1133 01/01/2008 to 12/31/2008 11.358566 7.138352 24,956.2525 ============ ==== ========== ========= ========= ============== METROPOLITAN SERIES FUND, INC. BLACKROCK MONEY MARKET SUB-ACCOUNT (CLASS B) 05/01/2005 to 12/31/2005 9.744446 9.811288 241,354.8437 01/01/2006 to 12/31/2006 9.811288 10.060259 322,787.7269 01/01/2007 to 12/31/2007 10.060259 10.339891 319,708.0392 01/01/2008 to 12/31/2008 10.339891 10.403231 934,354.7917 ============ ==== ========== ========= ========= ============== BLACKROCK MONEY MARKET SUB-ACCOUNT (CLASS B) (FORMERLY MET INVESTORS SERIES TRUST - MONEY MARKET SUB-ACCOUNT (CLASS B)) 05/01/2003 to 12/31/2003 9.985579 9.878798 163,130.1689 01/01/2004 to 12/31/2004 9.878798 9.749636 109,338.1582 01/01/2005 to 04/30/2005 9.749636 9.744900 0.0000 ============ ==== ========== ========= ========= ============== DAVIS VENTURE VALUE SUB-ACCOUNT (CLASS E) 05/01/2003 to 12/31/2003 8.462180 10.617019 716,842.8785 01/01/2004 to 12/31/2004 10.617019 11.675597 1,053,601.8886 01/01/2005 to 12/31/2005 11.675597 12.611440 802,856.7278 01/01/2006 to 12/31/2006 12.611440 14.150347 732,582.4672 01/01/2007 to 12/31/2007 14.150347 14.490582 629,818.0045 01/01/2008 to 12/31/2008 14.490582 8.602823 555,745.0783 ============ ==== ========== ========= ========= ==============
22 CONDENSED FINANCIAL INFORMATION (CONTINUED)
1.95% SEPARATE ACCOUNT PRODUCT CHARGES NUMBER OF ACCUMULATION ACCUMULATION ACCUMULATION UNIT VALUE AT UNIT VALUE AT UNITS BEGINNING OF END OF OUTSTANDING AT PERIOD PERIOD END OF PERIOD --------------- --------------- ----------------- HARRIS OAKMARK FOCUSED VALUE SUB-ACCOUNT (CLASS B) 05/01/2003 to 12/31/2003 10.819204 13.775530 517,942.4855 01/01/2004 to 12/31/2004 13.775530 14.812774 500,096.7418 01/01/2005 to 12/31/2005 14.812774 15.937823 389,606.5195 01/01/2006 to 12/31/2006 15.937823 17.533687 337,766.4585 01/01/2007 to 12/31/2007 17.533687 15.976777 276,169.6016 01/01/2008 to 12/31/2008 15.976777 8.439282 260,352.7391 ============ ==== ========== ========= ========= ============== JENNISON GROWTH SUB-ACCOUNT (CLASS B) 05/01/2003 to 12/31/2003 8.024909 9.666362 454,042.0306 01/01/2004 to 12/31/2004 9.666362 10.326422 507,473.3565 01/01/2005 to 12/31/2005 10.326422 11.498576 346,313.9722 01/01/2006 to 12/31/2006 11.498576 11.561718 319,208.0828 01/01/2007 to 12/31/2007 11.561718 12.628450 239,909.6417 01/01/2008 to 12/31/2008 12.628450 7.857833 211,494.9256 ============ ==== ========== ========= ========= ============== MET/DIMENSIONAL INTERNATIONAL SMALL COMPANY SUB-ACCOUNT (CLASS B) 11/10/2008 to 12/31/2008 10.064089 10.126445 0.0000 ============ ==== ========== ========= ========= ============== METLIFE STOCK INDEX SUB-ACCOUNT (CLASS B) 05/01/2003 to 12/31/2003 8.554059 10.325768 51,831.4584 01/01/2004 to 12/31/2004 10.325768 11.166699 90,897.0379 01/01/2005 to 12/31/2005 11.166699 11.430888 81,239.2777 01/01/2006 to 12/31/2006 11.430888 12.913228 80,451.7821 01/01/2007 to 12/31/2007 12.913228 13.292451 60,675.2015 01/01/2008 to 12/31/2008 13.292451 8.178048 52,142.2977 ============ ==== ========== ========= ========= ============== WESTERN ASSET MANAGEMENT U.S. GOVERNMENT SUB-ACCOUNT (CLASS B) 05/01/2005 to 12/31/2005 14.915392 14.845874 0.0000 01/01/2006 to 12/31/2006 14.845874 15.129948 826.1882 01/01/2007 to 12/31/2007 15.129948 15.434629 4,544.4055 01/01/2008 to 12/31/2008 15.434629 15.055223 5,437.8876 ============ ==== ========== ========= ========= ============== MET INVESTORS SERIES TRUST - METLIFE ASSET ALLOCATION PROGRAM METLIFE AGGRESSIVE STRATEGY SUB-ACCOUNT (CLASS B) 11/22/2004 to 12/31/2004 10.299558 10.682226 720,542.9887 01/01/2005 to 12/31/2005 10.682226 11.564000 1,422,692.4881 01/01/2006 to 12/31/2006 11.564000 12.889121 1,366,621.9717 01/01/2007 to 12/31/2007 12.889121 13.003740 739,099.8134 01/01/2008 to 12/31/2008 13.003740 7.547252 567,489.0033 ============ ==== ========== ========= ========= ==============
23 CONDENSED FINANCIAL INFORMATION (CONTINUED)
1.95% SEPARATE ACCOUNT PRODUCT CHARGES NUMBER OF ACCUMULATION ACCUMULATION ACCUMULATION UNIT VALUE AT UNIT VALUE AT UNITS BEGINNING OF END OF OUTSTANDING AT PERIOD PERIOD END OF PERIOD --------------- --------------- ------------------- METLIFE BALANCED STRATEGY SUB-ACCOUNT (CLASS B) 11/22/2004 to 12/31/2004 10.099753 10.386382 3,243,153.4270 01/01/2005 to 12/31/2005 10.386382 10.911828 5,730,298.7006 01/01/2006 to 12/31/2006 10.911828 11.983511 6,332,633.9474 01/01/2007 to 12/31/2007 11.983511 12.324609 7,367,553.0499 01/01/2008 to 12/31/2008 12.324609 8.226006 7,414,553.6920 ============ ==== ========== ========= ========= ============== METLIFE DEFENSIVE STRATEGY SUB-ACCOUNT (CLASS B) 11/22/2004 to 12/31/2004 9.939907 10.102671 234,166.1241 01/01/2005 to 12/31/2005 10.102671 10.351978 756,252.6071 01/01/2006 to 12/31/2006 10.351978 11.028330 1,098,774.8711 01/01/2007 to 12/31/2007 11.028330 11.454372 1,061,716.3459 01/01/2008 to 12/31/2008 11.454372 8.912878 1,513,159.0459 ============ ==== ========== ========= ========= ============== METLIFE GROWTH STRATEGY SUB-ACCOUNT (CLASS B) 11/22/2004 to 12/31/2004 10.239617 10.597177 2,940,895.9305 01/01/2005 to 12/31/2005 10.597177 11.341452 5,946,430.6290 01/01/2006 to 12/31/2006 11.341452 12.635176 6,787,420.1380 01/01/2007 to 12/31/2007 12.635176 12.972506 7,732,298.4253 01/01/2008 to 12/31/2008 12.972506 7.903906 6,983,613.4484 ============ ==== ========== ========= ========= ============== METLIFE MODERATE STRATEGY SUB-ACCOUNT (CLASS B) 11/22/2004 to 12/31/2004 10.009839 10.222816 890,632.4624 01/01/2005 to 12/31/2005 10.222816 10.608723 2,313,944.8267 01/01/2006 to 12/31/2006 10.608723 11.469001 2,762,263.2341 01/01/2007 to 12/31/2007 11.469001 11.944416 3,518,448.6251 01/01/2008 to 12/31/2008 11.944416 8.618348 3,538,670.1699 ============ ==== ========== ========= ========= ==============
24 CONDENSED FINANCIAL INFORMATION (CONTINUED)
2.00% SEPARATE ACCOUNT PRODUCT CHARGES NUMBER OF ACCUMULATION ACCUMULATION ACCUMULATION UNIT VALUE AT UNIT VALUE AT UNITS BEGINNING OF END OF OUTSTANDING AT PERIOD PERIOD END OF PERIOD --------------- --------------- --------------- MET INVESTORS SERIES TRUST AMERICAN FUNDS BALANCED ALLOCATION SUB-ACCOUNT (CLASS C) 04/28/2008 to 12/31/2008 10.007808 6.982721 52,463.3721 ============ ==== ========== ========= ========= =========== AMERICAN FUNDS BOND SUB-ACCOUNT (CLASS C) 04/28/2008 to 12/31/2008 10.037806 8.915497 1,716.0188 ============ ==== ========== ========= ========= =========== AMERICAN FUNDS GROWTH ALLOCATION SUB-ACCOUNT (CLASS C) 04/28/2008 to 12/31/2008 9.997808 6.333535 22,201.5163 ============ ==== ========== ========= ========= =========== AMERICAN FUNDS GROWTH SUB-ACCOUNT (CLASS C) 04/28/2008 to 12/31/2008 9.987809 5.735862 480.8070 ============ ==== ========== ========= ========= =========== AMERICAN FUNDS INTERNATIONAL SUB-ACCOUNT (CLASS C) 04/28/2008 to 12/31/2008 10.087803 6.029928 0.0000 ============ ==== ========== ========= ========= =========== AMERICAN FUNDS MODERATE ALLOCATION SUB-ACCOUNT (CLASS C) 04/28/2008 to 12/31/2008 10.017807 7.653679 21,949.1109 ============ ==== ========== ========= ========= =========== BLACKROCK HIGH YIELD SUB-ACCOUNT (CLASS B) 04/28/2008 to 12/31/2008 15.676575 11.679717 0.0000 ============ ==== ========== ========= ========= =========== CLARION GLOBAL REAL ESTATE SUB-ACCOUNT (CLASS B) 05/01/2004 to 12/31/2004 9.998356 12.782124 13,333.2561 01/01/2005 to 12/31/2005 12.782124 14.194452 4,611.3398 01/01/2006 to 12/31/2006 14.194452 19.143432 5,630.2057 01/01/2007 to 12/31/2007 19.143432 15.946665 7,496.8842 01/01/2008 to 12/31/2008 15.946665 9.116180 6,648.5865 ============ ==== ========== ========= ========= =========== GOLDMAN SACHS MID CAP VALUE SUB-ACCOUNT (CLASS B) 05/01/2004 to 12/31/2004 9.998356 11.923714 10,450.6397 01/01/2005 to 12/31/2005 11.923714 13.153602 7,623.7011 01/01/2006 to 12/31/2006 13.153602 14.917127 6,070.2771 01/01/2007 to 12/31/2007 14.917127 15.072869 6,341.9985 01/01/2008 to 12/31/2008 15.072869 9.443707 5,022.7438 ============ ==== ========== ========= ========= =========== HARRIS OAKMARK INTERNATIONAL SUB-ACCOUNT (CLASS B) 10/09/2001 to 12/31/2001 10.000000 10.920707 10.0000 01/01/2002 to 12/31/2002 10.920707 8.767679 9,029.9842 01/01/2003 to 12/31/2003 8.767679 11.599408 55,165.3654 01/01/2004 to 12/31/2004 11.599408 13.702620 66,678.8731 01/01/2005 to 12/31/2005 13.702620 15.344356 35,083.5705 01/01/2006 to 12/31/2006 15.344356 19.380650 28,226.4570 01/01/2007 to 12/31/2007 19.380650 18.782294 27,457.1850 01/01/2008 to 12/31/2008 18.782294 10.882531 28,601.3949 ============ ==== ========== ========= ========= ===========
25 CONDENSED FINANCIAL INFORMATION (CONTINUED)
2.00% SEPARATE ACCOUNT PRODUCT CHARGES NUMBER OF ACCUMULATION ACCUMULATION ACCUMULATION UNIT VALUE AT UNIT VALUE AT UNITS BEGINNING OF END OF OUTSTANDING AT PERIOD PERIOD END OF PERIOD --------------- --------------- --------------- LAZARD MID CAP SUB-ACCOUNT (CLASS B) 10/09/2001 to 12/31/2001 10.000000 10.976269 104.3987 01/01/2002 to 12/31/2002 10.976269 9.595007 13,761.3072 01/01/2003 to 12/31/2003 9.595007 11.866859 51,183.3036 01/01/2004 to 12/31/2004 11.866859 13.306444 27,809.2191 01/01/2005 to 12/31/2005 13.306444 14.094875 19,662.4351 01/01/2006 to 12/31/2006 14.094875 15.844132 17,492.7856 01/01/2007 to 12/31/2007 15.844132 15.107798 16,118.8973 01/01/2008 to 12/31/2008 15.107798 9.136124 15,902.8562 ============ ==== ========== ========= ========= =========== LEGG MASON PARTNERS AGGRESSIVE GROWTH SUB-ACCOUNT (CLASS B) 08/01/2001 to 12/31/2001 7.718332 7.289812 155.3789 01/01/2002 to 12/31/2002 7.289812 5.156360 24,686.3637 01/01/2003 to 12/31/2003 5.156360 6.616144 75,072.8937 01/01/2004 to 12/31/2004 6.616144 7.032146 62,707.5702 01/01/2005 to 12/31/2005 7.032146 7.829149 25,984.5683 01/01/2006 to 12/31/2006 7.829149 7.541105 13,713.0445 01/01/2007 to 12/31/2007 7.541105 7.558515 11,961.5755 01/01/2008 to 12/31/2008 7.558515 4.515188 11,971.1822 ============ ==== ========== ========= ========= =========== LEGG MASON VALUE EQUITY SUB-ACCOUNT (CLASS B) 11/07/2005 to 12/31/2005 10.246086 10.615048 0.0000 01/01/2006 to 12/31/2006 10.615048 11.090346 4,124.1062 01/01/2007 to 12/31/2007 11.090346 10.227481 4,288.0187 01/01/2008 to 12/31/2008 10.227481 4.549288 4,634.3944 ============ ==== ========== ========= ========= =========== LOOMIS SAYLES GLOBAL MARKETS SUB-ACCOUNT (CLASS B) 05/01/2006 to 12/31/2006 9.988356 10.297910 2,758.2841 01/01/2007 to 12/31/2007 10.297910 12.904282 2,749.4513 01/01/2008 to 12/31/2008 12.904282 7.682330 5,959.4567 ============ ==== ========== ========= ========= =========== LORD ABBETT BOND DEBENTURE SUB-ACCOUNT (CLASS B) 08/01/2001 to 12/31/2001 13.997431 13.943623 7.1442 01/01/2002 to 12/31/2002 13.943623 13.589148 16,561.3157 01/01/2003 to 12/31/2003 13.589148 15.872127 80,162.2800 01/01/2004 to 12/31/2004 15.872127 16.827533 68,536.8793 01/01/2005 to 12/31/2005 16.827533 16.741568 41,825.0854 01/01/2006 to 12/31/2006 16.741568 17.912204 35,750.0599 01/01/2007 to 12/31/2007 17.912204 18.705553 34,798.0264 01/01/2008 to 12/31/2008 18.705553 14.923321 24,624.9274 ============ ==== ========== ========= ========= ===========
26 CONDENSED FINANCIAL INFORMATION (CONTINUED)
2.00% SEPARATE ACCOUNT PRODUCT CHARGES NUMBER OF ACCUMULATION ACCUMULATION ACCUMULATION UNIT VALUE AT UNIT VALUE AT UNITS BEGINNING OF END OF OUTSTANDING AT PERIOD PERIOD END OF PERIOD --------------- --------------- --------------- LORD ABBETT GROWTH AND INCOME SUB-ACCOUNT (CLASS B) 08/01/2001 to 12/31/2001 42.151033 41.289644 40.0381 01/01/2002 to 12/31/2002 41.289644 33.138079 20,465.8014 01/01/2003 to 12/31/2003 33.138079 42.464964 47,913.7885 01/01/2004 to 12/31/2004 42.464964 46.885921 39,259.4652 01/01/2005 to 12/31/2005 46.885921 47.518965 20,457.2287 01/01/2006 to 12/31/2006 47.518965 54.864963 19,189.0896 01/01/2007 to 12/31/2007 54.864963 55.773897 19,022.8501 01/01/2008 to 12/31/2008 55.773897 34.804809 18,419.7450 ============ ==== ========== ========= ========= =========== LORD ABBETT MID CAP VALUE SUB-ACCOUNT (CLASS B) 04/28/2008 to 12/31/2008 23.619576 15.498729 0.0000 ============ ==== ========== ========= ========= =========== MET/AIM SMALL CAP GROWTH SUB-ACCOUNT (CLASS B) 10/09/2001 to 12/31/2001 10.000000 11.836197 98.7674 01/01/2002 to 12/31/2002 11.836197 8.410685 16,647.1744 01/01/2003 to 12/31/2003 8.410685 11.448459 46,140.0597 01/01/2004 to 12/31/2004 11.448459 11.942952 57,561.5874 01/01/2005 to 12/31/2005 11.942952 12.674847 35,490.0774 01/01/2006 to 12/31/2006 12.674847 14.186639 32,083.1735 01/01/2007 to 12/31/2007 14.186639 15.443604 26,980.6352 01/01/2008 to 12/31/2008 15.443604 9.274377 28,117.2900 ============ ==== ========== ========= ========= =========== MET/FRANKLIN MUTUAL SHARES SUB-ACCOUNT (CLASS B) 04/28/2008 to 12/31/2008 9.997808 6.572875 0.0000 ============ ==== ========== ========= ========= =========== MET/FRANKLIN TEMPLETON FOUNDING STRATEGY SUB-ACCOUNT (CLASS B) 04/28/2008 to 12/31/2008 9.997808 7.004605 3,679.0925 ============ ==== ========== ========= ========= =========== MET/PUTNAM RESEARCH SUB-ACCOUNT (CLASS B) 08/01/2001 to 12/31/2001 8.702129 8.045779 11.4914 01/01/2002 to 12/31/2002 8.045779 6.245031 6,957.0328 01/01/2003 to 12/31/2003 6.245031 7.611301 21,275.8013 01/01/2004 to 11/19/2004 7.611301 7.777635 18,278.4033 ============ ==== ========== ========= ========= =========== MFS (Reg. TM) EMERGING MARKETS EQUITY SUB-ACCOUNT (CLASS B) 05/01/2006 to 12/31/2006 9.988356 10.436370 0.0000 01/01/2007 to 12/31/2007 10.436370 13.974426 1,827.1664 01/01/2008 to 12/31/2008 13.974426 6.090664 3,825.1409 ============ ==== ========== ========= ========= ===========
27 CONDENSED FINANCIAL INFORMATION (CONTINUED)
2.00% SEPARATE ACCOUNT PRODUCT CHARGES NUMBER OF ACCUMULATION ACCUMULATION ACCUMULATION UNIT VALUE AT UNIT VALUE AT UNITS BEGINNING OF END OF OUTSTANDING AT PERIOD PERIOD END OF PERIOD --------------- --------------- --------------- MFS (Reg. TM) RESEARCH INTERNATIONAL SUB-ACCOUNT (CLASS B) 08/01/2001 to 12/31/2001 9.030039 8.360216 134.5703 01/01/2002 to 12/31/2002 8.360216 7.227526 41,398.0384 01/01/2003 to 12/31/2003 7.227526 9.354589 51,538.1236 01/01/2004 to 12/31/2004 9.354589 10.962337 54,327.5799 01/01/2005 to 12/31/2005 10.962337 12.510627 34,777.9654 01/01/2006 to 12/31/2006 12.510627 15.521265 33,235.5079 01/01/2007 to 12/31/2007 15.521265 17.234173 27,961.0586 01/01/2008 to 12/31/2008 17.234173 9.735436 26,164.1498 ============ ==== ========== ========= ========= ============ OPPENHEIMER CAPITAL APPRECIATION SUB-ACCOUNT (CLASS B) 08/01/2001 to 12/31/2001 9.149152 8.445763 132.6626 01/01/2002 to 12/31/2002 8.445763 6.230588 54,600.7036 01/01/2003 to 12/31/2003 6.230588 7.849613 181,964.4460 01/01/2004 to 12/31/2004 7.849613 8.186475 171,216.7095 01/01/2005 to 12/31/2005 8.186475 8.403139 91,948.5743 01/01/2006 to 12/31/2006 8.403139 8.864521 78,934.7952 01/01/2007 to 12/31/2007 8.864521 9.929508 71,711.9768 01/01/2008 to 12/31/2008 9.929508 5.261155 64,679.0512 ============ ==== ========== ========= ========= ============ PIMCO INFLATION PROTECTED BOND SUB-ACCOUNT (CLASS B) 05/01/2003 to 12/31/2003 10.000000 10.394134 75,558.6112 01/01/2004 to 12/31/2004 10.394134 11.105815 93,839.0293 01/01/2005 to 12/31/2005 11.105815 11.037506 50,658.5510 01/01/2006 to 12/31/2006 11.037506 10.861386 33,384.9054 01/01/2007 to 12/31/2007 10.861386 11.794665 29,563.9404 01/01/2008 to 12/31/2008 11.794665 10.764035 20,235.7624 ============ ==== ========== ========= ========= ============ PIMCO TOTAL RETURN SUB-ACCOUNT (CLASS B) 08/01/2001 to 12/31/2001 10.291670 10.509943 9.7166 01/01/2002 to 12/31/2002 10.509943 11.259283 45,146.7409 01/01/2003 to 12/31/2003 11.259283 11.511554 110,672.6700 01/01/2004 to 12/31/2004 11.511554 11.844988 138,041.2961 01/01/2005 to 12/31/2005 11.844988 11.872043 116,827.9137 01/01/2006 to 12/31/2006 11.872043 12.163353 111,539.2523 01/01/2007 to 12/31/2007 12.163353 12.823035 115,633.6858 01/01/2008 to 12/31/2008 12.823035 12.619976 109,416.1020 ============ ==== ========== ========= ========= ============ RAINIER LARGE CAP EQUITY SUB-ACCOUNT (CLASS B) 11/12/2007 to 12/31/2007 9.563658 9.973841 0.0000 01/01/2008 to 12/31/2008 9.973841 5.688793 0.0000 ============ ==== ========== ========= ========= ============
28 CONDENSED FINANCIAL INFORMATION (CONTINUED)
2.00% SEPARATE ACCOUNT PRODUCT CHARGES NUMBER OF ACCUMULATION ACCUMULATION ACCUMULATION UNIT VALUE AT UNIT VALUE AT UNITS BEGINNING OF END OF OUTSTANDING AT PERIOD PERIOD END OF PERIOD --------------- --------------- --------------- RCM TECHNOLOGY SUB-ACCOUNT (CLASS B) 08/01/2001 to 12/31/2001 7.023113 6.078185 14.2387 01/01/2002 to 12/31/2002 6.078185 2.935223 5,383.0572 01/01/2003 to 12/31/2003 2.935223 4.533561 20,840.3739 01/01/2004 to 12/31/2004 4.533561 4.251921 45,311.2102 01/01/2005 to 12/31/2005 4.251921 4.627103 29,125.9559 01/01/2006 to 12/31/2006 4.627103 4.778214 26,879.0961 01/01/2007 to 12/31/2007 4.778214 6.159452 21,835.1960 01/01/2008 to 12/31/2008 6.159452 3.353429 16,626.0517 ============ ==== ========== ========= ========= =========== SSGA GROWTH AND INCOME ETF SUB-ACCOUNT (CLASS B) 11/10/2008 to 12/31/2008 8.249570 8.405373 0.0000 ============ ==== ========== ========= ========= =========== SSGA GROWTH ETF SUB-ACCOUNT (CLASS B) 11/10/2008 to 12/31/2008 7.638337 7.706026 0.0000 ============ ==== ========== ========= ========= =========== T. ROWE PRICE MID CAP GROWTH SUB-ACCOUNT (CLASS B) 08/01/2001 to 12/31/2001 8.712005 8.216069 11.4784 01/01/2002 to 12/31/2002 8.216069 4.506699 43,098.4569 01/01/2003 to 12/31/2003 4.506699 6.036086 91,538.9027 01/01/2004 to 12/31/2004 6.036086 6.970762 59,303.0571 01/01/2005 to 12/31/2005 6.970762 7.832612 48,954.5280 01/01/2006 to 12/31/2006 7.832612 8.151187 44,819.1091 01/01/2007 to 12/31/2007 8.151187 9.398020 40,749.5257 01/01/2008 to 12/31/2008 9.398020 5.549820 40,350.0734 ============ ==== ========== ========= ========= =========== THIRD AVENUE SMALL CAP VALUE SUB-ACCOUNT (CLASS B) 05/01/2002 to 12/31/2002 10.000000 8.199490 16,756.6891 01/01/2003 to 12/31/2003 8.199490 11.366509 74,926.8634 01/01/2004 to 12/31/2004 11.366509 14.093881 67,854.5964 01/01/2005 to 12/31/2005 14.093881 15.954074 47,591.4425 01/01/2006 to 12/31/2006 15.954074 17.692495 34,113.6584 01/01/2007 to 12/31/2007 17.692495 16.816338 31,107.5482 01/01/2008 to 12/31/2008 16.816338 11.566752 27,819.8089 ============ ==== ========== ========= ========= =========== TURNER MID CAP GROWTH SUB-ACCOUNT (CLASS B) 05/01/2004 to 12/31/2004 9.998356 11.070369 11,978.0632 01/01/2005 to 12/31/2005 11.070369 12.084285 5,688.5853 01/01/2006 to 12/31/2006 12.084285 12.564869 3,027.6685 01/01/2007 to 12/31/2007 12.564869 15.288651 2,807.4339 01/01/2008 to 12/31/2008 15.288651 7.747284 2,979.8496 ============ ==== ========== ========= ========= ===========
29 CONDENSED FINANCIAL INFORMATION (CONTINUED)
2.00% SEPARATE ACCOUNT PRODUCT CHARGES NUMBER OF ACCUMULATION ACCUMULATION ACCUMULATION UNIT VALUE AT UNIT VALUE AT UNITS BEGINNING OF END OF OUTSTANDING AT PERIOD PERIOD END OF PERIOD --------------- --------------- --------------- VAN KAMPEN COMSTOCK SUB-ACCOUNT (CLASS B) 05/01/2005 to 12/31/2005 9.998356 10.433808 0.0000 01/01/2006 to 12/31/2006 10.433808 11.869623 2,076.9520 01/01/2007 to 12/31/2007 11.869623 11.343390 3,350.9521 01/01/2008 to 12/31/2008 11.343390 7.125230 3,450.8149 ============ ==== ========== ========= ========= ============ METROPOLITAN SERIES FUND, INC. BLACKROCK MONEY MARKET SUB-ACCOUNT (CLASS B) 05/01/2005 to 12/31/2005 9.740285 9.803847 3,097.1410 01/01/2006 to 12/31/2006 9.803847 10.047619 18,744.6900 01/01/2007 to 12/31/2007 10.047619 10.321710 2,918.7384 01/01/2008 to 12/31/2008 10.321710 10.379732 10,147.4692 ============ ==== ========== ========= ========= ============ BLACKROCK MONEY MARKET SUB-ACCOUNT (CLASS B) (FORMERLY MET INVESTORS SERIES TRUST - MONEY MARKET SUB-ACCOUNT (CLASS B)) 08/01/2001 to 12/31/2001 10.118298 10.128944 9.8831 01/01/2002 to 12/31/2002 10.128944 10.037211 27,961.1702 01/01/2003 to 12/31/2003 10.037211 9.881184 24,492.9905 01/01/2004 to 12/31/2004 9.881184 9.747102 12,492.9116 01/01/2005 to 04/30/2005 9.747102 9.740779 0.0000 ============ ==== ========== ========= ========= ============ DAVIS VENTURE VALUE SUB-ACCOUNT (CLASS E) 08/01/2001 to 12/31/2001 10.447860 10.131238 165.5321 01/01/2002 to 12/31/2002 10.131238 8.286912 66,240.5750 01/01/2003 to 12/31/2003 8.286912 10.619550 146,752.5980 01/01/2004 to 12/31/2004 10.619550 11.672528 153,950.0918 01/01/2005 to 12/31/2005 11.672528 12.601842 92,005.2372 01/01/2006 to 12/31/2006 12.601842 14.132531 74,754.4337 01/01/2007 to 12/31/2007 14.132531 14.465062 67,513.0736 01/01/2008 to 12/31/2008 14.465062 8.583353 59,983.3763 ============ ==== ========== ========= ========= ============ HARRIS OAKMARK FOCUSED VALUE SUB-ACCOUNT (CLASS B) 08/01/2001 to 12/31/2001 11.572706 11.917960 97.2344 01/01/2002 to 12/31/2002 11.917960 10.622765 59,885.3250 01/01/2003 to 12/31/2003 10.622765 13.778783 100,285.6024 01/01/2004 to 12/31/2004 13.778783 14.808845 74,111.3091 01/01/2005 to 12/31/2005 14.808845 15.925655 44,092.0624 01/01/2006 to 12/31/2006 15.925655 17.511568 32,906.1501 01/01/2007 to 12/31/2007 17.511568 15.948596 28,640.2936 01/01/2008 to 12/31/2008 15.948596 8.420158 30,902.7667 ============ ==== ========== ========= ========= ============
30 CONDENSED FINANCIAL INFORMATION (CONTINUED)
2.00% SEPARATE ACCOUNT PRODUCT CHARGES NUMBER OF ACCUMULATION ACCUMULATION ACCUMULATION UNIT VALUE AT UNIT VALUE AT UNITS BEGINNING OF END OF OUTSTANDING AT PERIOD PERIOD END OF PERIOD --------------- --------------- --------------- JENNISON GROWTH SUB-ACCOUNT (CLASS B) 05/01/2002 to 12/31/2002 10.000000 7.597472 44,024.9225 01/01/2003 to 12/31/2003 7.597472 9.658301 72,122.8253 01/01/2004 to 12/31/2004 9.658301 10.312638 57,329.7716 01/01/2005 to 12/31/2005 10.312638 11.477507 24,617.5534 01/01/2006 to 12/31/2006 11.477507 11.534778 21,951.5352 01/01/2007 to 12/31/2007 11.534778 12.592692 21,974.2301 01/01/2008 to 12/31/2008 12.592692 7.831644 22,252.9952 ============ ==== ========== ========= ========= ============ MET/DIMENSIONAL INTERNATIONAL SMALL COMPANY SUB-ACCOUNT (CLASS B) 11/10/2008 to 12/31/2008 10.063937 10.125586 0.0000 ============ ==== ========== ========= ========= ============ METLIFE STOCK INDEX SUB-ACCOUNT (CLASS B) 10/09/2001 to 12/31/2001 10.000000 10.835035 105.3863 01/01/2002 to 12/31/2002 10.835035 8.228910 8,618.0709 01/01/2003 to 12/31/2003 8.228910 10.314288 24,672.9505 01/01/2004 to 12/31/2004 10.314288 11.148694 26,460.3400 01/01/2005 to 12/31/2005 11.148694 11.406769 41,035.6655 01/01/2006 to 12/31/2006 11.406769 12.879559 41,312.2018 01/01/2007 to 12/31/2007 12.879559 13.251129 41,675.5899 01/01/2008 to 12/31/2008 13.251129 8.148526 20,318.7527 ============ ==== ========== ========= ========= ============ WESTERN ASSET MANAGEMENT U.S. GOVERNMENT SUB-ACCOUNT (CLASS B) 05/01/2005 to 12/31/2005 14.837222 14.763172 0.0000 01/01/2006 to 12/31/2006 14.763172 15.038163 35.1964 01/01/2007 to 12/31/2007 15.038163 15.333285 53.0323 01/01/2008 to 12/31/2008 15.333285 14.948873 52.9161 ============ ==== ========== ========= ========= ============ MET INVESTORS SERIES TRUST - METLIFE ASSET ALLOCATION PROGRAM METLIFE AGGRESSIVE STRATEGY SUB-ACCOUNT (CLASS B) 11/22/2004 to 12/31/2004 10.299291 10.681379 50,889.6879 01/01/2005 to 12/31/2005 10.681379 11.557321 204,623.8015 01/01/2006 to 12/31/2006 11.557321 12.875254 221,223.5060 01/01/2007 to 12/31/2007 12.875254 12.983219 216,091.0039 01/01/2008 to 12/31/2008 12.983219 7.531553 200,283.8844 ============ ==== ========== ========= ========= ============ METLIFE BALANCED STRATEGY SUB-ACCOUNT (CLASS B) 11/22/2004 to 12/31/2004 10.099490 10.385557 136,592.1743 01/01/2005 to 12/31/2005 10.385557 10.905523 464,762.8098 01/01/2006 to 12/31/2006 10.905523 11.970617 633,308.9436 01/01/2007 to 12/31/2007 11.970617 12.305159 616,624.2159 01/01/2008 to 12/31/2008 12.305159 8.208898 579,002.4167 ============ ==== ========== ========= ========= ============
31 CONDENSED FINANCIAL INFORMATION (CONTINUED)
2.00% SEPARATE ACCOUNT PRODUCT CHARGES NUMBER OF ACCUMULATION ACCUMULATION ACCUMULATION UNIT VALUE AT UNIT VALUE AT UNITS BEGINNING OF END OF OUTSTANDING AT PERIOD PERIOD END OF PERIOD --------------- --------------- --------------- METLIFE DEFENSIVE STRATEGY SUB-ACCOUNT (CLASS B) 11/22/2004 to 12/31/2004 9.939649 10.101868 14,945.8261 01/01/2005 to 12/31/2005 10.101868 10.345995 119,666.9780 01/01/2006 to 12/31/2006 10.345995 11.016462 59,384.7414 01/01/2007 to 12/31/2007 11.016462 11.436295 56,696.8388 01/01/2008 to 12/31/2008 11.436295 8.894345 76,512.9820 ============ ==== ========== ========= ========= ============ METLIFE GROWTH STRATEGY SUB-ACCOUNT (CLASS B) 11/22/2004 to 12/31/2004 10.239351 10.596336 302,812.7407 01/01/2005 to 12/31/2005 10.596336 11.334900 592,279.2799 01/01/2006 to 12/31/2006 11.334900 12.621582 871,871.2044 01/01/2007 to 12/31/2007 12.621582 12.952034 781,362.9324 01/01/2008 to 12/31/2008 12.952034 7.887466 702,511.9448 ============ ==== ========== ========= ========= ============ METLIFE MODERATE STRATEGY SUB-ACCOUNT (CLASS B) 11/22/2004 to 12/31/2004 10.009579 10.222004 23,895.0235 01/01/2005 to 12/31/2005 10.222004 10.602593 49,051.8261 01/01/2006 to 12/31/2006 10.602593 11.456660 49,197.6711 01/01/2007 to 12/31/2007 11.456660 11.925566 137,663.7950 01/01/2008 to 12/31/2008 11.925566 8.600426 206,000.6764 ============ ==== ========== ========= ========= ============
32 CONDENSED FINANCIAL INFORMATION (CONTINUED)
2.10% SEPARATE ACCOUNT PRODUCT CHARGES NUMBER OF ACCUMULATION ACCUMULATION ACCUMULATION UNIT VALUE AT UNIT VALUE AT UNITS BEGINNING OF END OF OUTSTANDING AT PERIOD PERIOD END OF PERIOD --------------- --------------- --------------- MET INVESTORS SERIES TRUST AMERICAN FUNDS BALANCED ALLOCATION SUB-ACCOUNT (CLASS C) 04/28/2008 to 12/31/2008 10.007698 6.977907 0.0000 ============ ==== ========== ========= ========= ============ AMERICAN FUNDS BOND SUB-ACCOUNT (CLASS C) 04/28/2008 to 12/31/2008 10.037696 8.909365 0.0000 ============ ==== ========== ========= ========= ============ AMERICAN FUNDS GROWTH ALLOCATION SUB-ACCOUNT (CLASS C) 04/28/2008 to 12/31/2008 9.997699 6.329165 15,316.7881 ============ ==== ========== ========= ========= ============ AMERICAN FUNDS GROWTH SUB-ACCOUNT (CLASS C) 04/28/2008 to 12/31/2008 9.987699 5.731901 0.0000 ============ ==== ========== ========= ========= ============ AMERICAN FUNDS INTERNATIONAL SUB-ACCOUNT (CLASS C) 04/28/2008 to 12/31/2008 10.087694 6.025769 0.0000 ============ ==== ========== ========= ========= ============ AMERICAN FUNDS MODERATE ALLOCATION SUB-ACCOUNT (CLASS C) 04/28/2008 to 12/31/2008 10.017698 7.648408 48,595.7005 ============ ==== ========== ========= ========= ============ BLACKROCK HIGH YIELD SUB-ACCOUNT (CLASS B) 04/28/2008 to 12/31/2008 15.494717 11.536403 0.0000 ============ ==== ========== ========= ========= ============ CLARION GLOBAL REAL ESTATE SUB-ACCOUNT (CLASS B) 05/01/2004 to 12/31/2004 9.998274 12.773556 23,606.7833 01/01/2005 to 12/31/2005 12.773556 14.170803 14,471.7768 01/01/2006 to 12/31/2006 14.170803 19.092510 15,389.3290 01/01/2007 to 12/31/2007 19.092510 15.888249 11,000.6843 01/01/2008 to 12/31/2008 15.888249 9.073650 7,426.0118 ============ ==== ========== ========= ========= ============ GOLDMAN SACHS MID CAP VALUE SUB-ACCOUNT (CLASS B) 05/01/2004 to 12/31/2004 9.998274 11.915717 25,671.3247 01/01/2005 to 12/31/2005 11.915717 13.131686 16,322.1751 01/01/2006 to 12/31/2006 13.131686 14.877430 22,458.8643 01/01/2007 to 12/31/2007 14.877430 15.017648 16,978.1071 01/01/2008 to 12/31/2008 15.017648 9.399653 7,180.7793 ============ ==== ========== ========= ========= ============ HARRIS OAKMARK INTERNATIONAL SUB-ACCOUNT (CLASS B) 10/09/2001 to 12/31/2001 10.000000 10.918227 617.4345 01/01/2002 to 12/31/2002 10.918227 8.756916 19,257.4078 01/01/2003 to 12/31/2003 8.756916 11.573593 109,747.8646 01/01/2004 to 12/31/2004 11.573593 13.658428 127,103.3458 01/01/2005 to 12/31/2005 13.658428 15.279629 97,654.6279 01/01/2006 to 12/31/2006 15.279629 19.279670 93,429.3201 01/01/2007 to 12/31/2007 19.279670 18.665644 66,192.2212 01/01/2008 to 12/31/2008 18.665644 10.804075 50,570.2764 ============ ==== ========== ========= ========= ============
33 CONDENSED FINANCIAL INFORMATION (CONTINUED)
2.10% SEPARATE ACCOUNT PRODUCT CHARGES NUMBER OF ACCUMULATION ACCUMULATION ACCUMULATION UNIT VALUE AT UNIT VALUE AT UNITS BEGINNING OF END OF OUTSTANDING AT PERIOD PERIOD END OF PERIOD --------------- --------------- --------------- LAZARD MID CAP SUB-ACCOUNT (CLASS B) 10/09/2001 to 12/31/2001 10.000000 10.973778 10.0000 01/01/2002 to 12/31/2002 10.973778 9.583231 14,444.5680 01/01/2003 to 12/31/2003 9.583231 11.840454 93,114.6661 01/01/2004 to 12/31/2004 11.840454 13.263532 57,847.2871 01/01/2005 to 12/31/2005 13.263532 14.035421 42,428.8887 01/01/2006 to 12/31/2006 14.035421 15.761575 39,330.5795 01/01/2007 to 12/31/2007 15.761575 15.013969 35,531.9549 01/01/2008 to 12/31/2008 15.013969 9.070258 26,184.9877 ============ ==== ========== ========= ========= ============ LEGG MASON PARTNERS AGGRESSIVE GROWTH SUB-ACCOUNT (CLASS B) 04/27/2001 to 12/31/2001 8.648464 7.273333 916.6381 01/01/2002 to 12/31/2002 7.273333 5.139555 49,571.4742 01/01/2003 to 12/31/2003 5.139555 6.587999 149,411.8497 01/01/2004 to 12/31/2004 6.587999 6.995213 129,966.4412 01/01/2005 to 12/31/2005 6.995213 7.780271 78,690.3080 01/01/2006 to 12/31/2006 7.780271 7.486550 74,968.8422 01/01/2007 to 12/31/2007 7.486550 7.496290 55,625.0173 01/01/2008 to 12/31/2008 7.496290 4.473515 38,500.1730 ============ ==== ========== ========= ========= ============ LEGG MASON VALUE EQUITY SUB-ACCOUNT (CLASS B) 11/07/2005 to 12/31/2005 10.245890 10.613303 0.0000 01/01/2006 to 12/31/2006 10.613303 11.077471 7,956.0069 01/01/2007 to 12/31/2007 11.077471 10.205338 10,281.4933 01/01/2008 to 12/31/2008 10.205338 4.534866 3,157.1309 ============ ==== ========== ========= ========= ============ LOOMIS SAYLES GLOBAL MARKETS SUB-ACCOUNT (CLASS B) 05/01/2006 to 12/31/2006 9.988274 10.291000 0.0000 01/01/2007 to 12/31/2007 10.291000 12.882676 774.0518 01/01/2008 to 12/31/2008 12.882676 7.661761 690.8218 ============ ==== ========== ========= ========= ============ LORD ABBETT BOND DEBENTURE SUB-ACCOUNT (CLASS B) 04/27/2001 to 12/31/2001 14.059023 13.912076 232.5383 01/01/2002 to 12/31/2002 13.912076 13.544852 88,925.7123 01/01/2003 to 12/31/2003 13.544852 15.804598 247,342.2358 01/01/2004 to 12/31/2004 15.804598 16.739148 141,156.7642 01/01/2005 to 12/31/2005 16.739148 16.637034 107,695.3345 01/01/2006 to 12/31/2006 16.637034 17.782619 81,772.1091 01/01/2007 to 12/31/2007 17.782619 18.551568 58,603.6934 01/01/2008 to 12/31/2008 18.551568 14.785626 44,351.7361 ============ ==== ========== ========= ========= ============
34 CONDENSED FINANCIAL INFORMATION (CONTINUED)
2.10% SEPARATE ACCOUNT PRODUCT CHARGES NUMBER OF ACCUMULATION ACCUMULATION ACCUMULATION UNIT VALUE AT UNIT VALUE AT UNITS BEGINNING OF END OF OUTSTANDING AT PERIOD PERIOD END OF PERIOD --------------- --------------- --------------- LORD ABBETT GROWTH AND INCOME SUB-ACCOUNT (CLASS B) 04/27/2001 to 12/31/2001 42.815885 41.195623 189.3865 01/01/2002 to 12/31/2002 41.195623 33.029514 33,921.1012 01/01/2003 to 12/31/2003 33.029514 42.283588 86,851.5227 01/01/2004 to 12/31/2004 42.283588 46.638882 60,587.8231 01/01/2005 to 12/31/2005 46.638882 47.221474 46,980.4616 01/01/2006 to 12/31/2006 47.221474 54.467151 32,610.6988 01/01/2007 to 12/31/2007 54.467151 55.313838 23,980.0518 01/01/2008 to 12/31/2008 55.313838 34.482997 17,133.8294 ============ ==== ========== ========= ========= ============ LORD ABBETT MID CAP VALUE SUB-ACCOUNT (CLASS B) 04/28/2008 to 12/31/2008 23.368296 15.323431 0.0000 ============ ==== ========== ========= ========= ============ MET/AIM SMALL CAP GROWTH SUB-ACCOUNT (CLASS B) 10/09/2001 to 12/31/2001 10.000000 11.833517 860.3962 01/01/2002 to 12/31/2002 11.833517 8.400363 26,650.6546 01/01/2003 to 12/31/2003 8.400363 11.423010 63,566.6504 01/01/2004 to 12/31/2004 11.423010 11.904457 81,790.4398 01/01/2005 to 12/31/2005 11.904457 12.621405 64,414.3390 01/01/2006 to 12/31/2006 12.621405 14.112737 48,152.1274 01/01/2007 to 12/31/2007 14.112737 15.347712 31,524.0355 01/01/2008 to 12/31/2008 15.347712 9.207525 16,754.1838 ============ ==== ========== ========= ========= ============ MET/FRANKLIN MUTUAL SHARES SUB-ACCOUNT (CLASS B) 04/28/2008 to 12/31/2008 9.997699 6.568341 0.0000 ============ ==== ========== ========= ========= ============ MET/FRANKLIN TEMPLETON FOUNDING STRATEGY SUB-ACCOUNT (CLASS B) 04/28/2008 to 12/31/2008 9.997699 6.999777 0.0000 ============ ==== ========== ========= ========= ============ MET/PUTNAM RESEARCH SUB-ACCOUNT (CLASS B) 04/27/2001 to 12/31/2001 9.145551 8.027613 1,845.0851 01/01/2002 to 12/31/2002 8.027613 6.224695 43,010.0212 01/01/2003 to 12/31/2003 6.224695 7.578934 114,110.1185 01/01/2004 to 11/19/2004 7.578934 7.737709 50,821.3431 ============ ==== ========== ========= ========= ============ MFS (Reg. TM) EMERGING MARKETS EQUITY SUB-ACCOUNT (CLASS B) 05/01/2006 to 12/31/2006 9.988274 10.429362 0.0000 01/01/2007 to 12/31/2007 10.429362 13.951021 976.6153 01/01/2008 to 12/31/2008 13.951021 6.074342 904.3259 ============ ==== ========== ========= ========= ============
35 CONDENSED FINANCIAL INFORMATION (CONTINUED)
2.10% SEPARATE ACCOUNT PRODUCT CHARGES NUMBER OF ACCUMULATION ACCUMULATION ACCUMULATION UNIT VALUE AT UNIT VALUE AT UNITS BEGINNING OF END OF OUTSTANDING AT PERIOD PERIOD END OF PERIOD --------------- --------------- --------------- MFS (Reg. TM) RESEARCH INTERNATIONAL SUB-ACCOUNT (CLASS B) 04/27/2001 to 12/31/2001 9.519967 8.341342 1,164.3505 01/01/2002 to 12/31/2002 8.341342 7.203994 49,951.0295 01/01/2003 to 12/31/2003 7.203994 9.314826 91,596.7494 01/01/2004 to 12/31/2004 9.314826 10.904804 82,231.1802 01/01/2005 to 12/31/2005 10.904804 12.432570 49,731.1707 01/01/2006 to 12/31/2006 12.432570 15.409054 44,998.0483 01/01/2007 to 12/31/2007 15.409054 17.092381 24,762.5437 01/01/2008 to 12/31/2008 17.092381 9.645634 20,905.0450 ============ ==== ========== ========= ========= ============ OPPENHEIMER CAPITAL APPRECIATION SUB-ACCOUNT (CLASS B) 04/27/2001 to 12/31/2001 9.472551 8.426695 1,926.7612 01/01/2002 to 12/31/2002 8.426695 6.210289 165,563.0482 01/01/2003 to 12/31/2003 6.210289 7.816236 354,898.7038 01/01/2004 to 12/31/2004 7.816236 8.143496 268,850.7477 01/01/2005 to 12/31/2005 8.143496 8.350692 195,472.5738 01/01/2006 to 12/31/2006 8.350692 8.800411 171,005.0173 01/01/2007 to 12/31/2007 8.800411 9.847790 132,758.1190 01/01/2008 to 12/31/2008 9.847790 5.212608 111,742.1373 ============ ==== ========== ========= ========= ============ PIMCO INFLATION PROTECTED BOND SUB-ACCOUNT (CLASS B) 05/01/2003 to 12/31/2003 10.000000 10.387187 202,936.1077 01/01/2004 to 12/31/2004 10.387187 11.087270 137,354.6996 01/01/2005 to 12/31/2005 11.087270 11.008089 66,579.3134 01/01/2006 to 12/31/2006 11.008089 10.821638 56,731.0990 01/01/2007 to 12/31/2007 10.821638 11.739694 39,357.7906 01/01/2008 to 12/31/2008 11.739694 10.703126 30,441.7664 ============ ==== ========== ========= ========= ============ PIMCO TOTAL RETURN SUB-ACCOUNT (CLASS B) 04/27/2001 to 12/31/2001 9.985193 10.486253 903.0245 01/01/2002 to 12/31/2002 10.486253 11.222686 144,298.8834 01/01/2003 to 12/31/2003 11.222686 11.462669 245,347.3877 01/01/2004 to 12/31/2004 11.462669 11.782865 137,552.5511 01/01/2005 to 12/31/2005 11.782865 11.798004 108,858.2197 01/01/2006 to 12/31/2006 11.798004 12.075448 94,330.3341 01/01/2007 to 12/31/2007 12.075448 12.717570 80,304.5570 01/01/2008 to 12/31/2008 12.717570 12.503640 67,672.3059 ============ ==== ========== ========= ========= ============ RAINIER LARGE CAP EQUITY SUB-ACCOUNT (CLASS B) 11/12/2007 to 12/31/2007 9.563341 9.972171 0.0000 01/01/2008 to 12/31/2008 9.972171 5.682120 510.1699 ============ ==== ========== ========= ========= ============
36 CONDENSED FINANCIAL INFORMATION (CONTINUED)
2.10% SEPARATE ACCOUNT PRODUCT CHARGES NUMBER OF ACCUMULATION ACCUMULATION ACCUMULATION UNIT VALUE AT UNIT VALUE AT UNITS BEGINNING OF END OF OUTSTANDING AT PERIOD PERIOD END OF PERIOD --------------- --------------- --------------- RCM TECHNOLOGY SUB-ACCOUNT (CLASS B) 04/27/2001 to 12/31/2001 7.816198 6.064428 12.7939 01/01/2002 to 12/31/2002 6.064428 2.925649 44,858.5172 01/01/2003 to 12/31/2003 2.925649 4.514266 67,665.0228 01/01/2004 to 12/31/2004 4.514266 4.229578 92,831.3259 01/01/2005 to 12/31/2005 4.229578 4.598203 66,663.1902 01/01/2006 to 12/31/2006 4.598203 4.743636 62,680.0498 01/01/2007 to 12/31/2007 4.743636 6.108737 52,982.2295 01/01/2008 to 12/31/2008 6.108737 3.322473 46,316.4894 ============ ==== ========== ========= ========= ============ SSGA GROWTH AND INCOME ETF SUB-ACCOUNT (CLASS B) 11/10/2008 to 12/31/2008 8.223898 8.378044 0.0000 ============ ==== ========== ========= ========= ============ SSGA GROWTH ETF SUB-ACCOUNT (CLASS B) 11/10/2008 to 12/31/2008 7.614564 7.680966 0.0000 ============ ==== ========== ========= ========= ============ T. ROWE PRICE MID CAP GROWTH SUB-ACCOUNT (CLASS B) 04/27/2001 to 12/31/2001 9.586900 8.197496 1,229.1056 01/01/2002 to 12/31/2002 8.197496 4.492007 65,444.2870 01/01/2003 to 12/31/2003 4.492007 6.010409 222,615.7353 01/01/2004 to 12/31/2004 6.010409 6.934155 130,198.3966 01/01/2005 to 12/31/2005 6.934155 7.783715 115,269.9705 01/01/2006 to 12/31/2006 7.783715 8.092224 99,367.9308 01/01/2007 to 12/31/2007 8.092224 9.320662 82,022.4422 01/01/2008 to 12/31/2008 9.320662 5.498605 55,715.7929 ============ ==== ========== ========= ========= ============ THIRD AVENUE SMALL CAP VALUE SUB-ACCOUNT (CLASS B) 05/01/2002 to 12/31/2002 10.000000 8.194000 33,124.5825 01/01/2003 to 12/31/2003 8.194000 11.347568 138,201.1328 01/01/2004 to 12/31/2004 11.347568 14.056302 112,268.4431 01/01/2005 to 12/31/2005 14.056302 15.895686 85,093.5695 01/01/2006 to 12/31/2006 15.895686 17.610172 71,916.5790 01/01/2007 to 12/31/2007 17.610172 16.721258 53,980.2664 01/01/2008 to 12/31/2008 16.721258 11.489798 36,807.8368 ============ ==== ========== ========= ========= ============ TURNER MID CAP GROWTH SUB-ACCOUNT (CLASS B) 05/01/2004 to 12/31/2004 9.998274 11.062939 21,049.4933 01/01/2005 to 12/31/2005 11.062939 12.064142 11,092.4612 01/01/2006 to 12/31/2006 12.064142 12.531413 10,224.9311 01/01/2007 to 12/31/2007 12.531413 15.232623 6,697.5488 01/01/2008 to 12/31/2008 15.232623 7.711128 4,876.0248 ============ ==== ========== ========= ========= ============
37 CONDENSED FINANCIAL INFORMATION (CONTINUED)
2.10% SEPARATE ACCOUNT PRODUCT CHARGES NUMBER OF ACCUMULATION ACCUMULATION ACCUMULATION UNIT VALUE AT UNIT VALUE AT UNITS BEGINNING OF END OF OUTSTANDING AT PERIOD PERIOD END OF PERIOD --------------- --------------- --------------- VAN KAMPEN COMSTOCK SUB-ACCOUNT (CLASS B) 05/01/2005 to 12/31/2005 9.998274 10.426811 3,814.3937 01/01/2006 to 12/31/2006 10.426811 11.849847 4,270.3416 01/01/2007 to 12/31/2007 11.849847 11.313110 4,010.8639 01/01/2008 to 12/31/2008 11.313110 7.099065 4,235.0029 ============ ==== ========== ========= ========= ============ METROPOLITAN SERIES FUND, INC. BLACKROCK MONEY MARKET SUB-ACCOUNT (CLASS B) 05/01/2005 to 12/31/2005 9.685895 9.742643 122,300.8727 01/01/2006 to 12/31/2006 9.742643 9.974944 150,977.5341 01/01/2007 to 12/31/2007 9.974944 10.236758 75,130.2681 01/01/2008 to 12/31/2008 10.236758 10.283985 163,633.9383 ============ ==== ========== ========= ========= ============ BLACKROCK MONEY MARKET SUB-ACCOUNT (CLASS B) (FORMERLY MET INVESTORS SERIES TRUST - MONEY MARKET SUB-ACCOUNT (CLASS B)) 04/27/2001 to 12/31/2001 10.064193 10.106064 9.9362 01/01/2002 to 12/31/2002 10.106064 10.004520 80,549.9800 01/01/2003 to 12/31/2003 10.004520 9.839155 58,500.8813 01/01/2004 to 12/31/2004 9.839155 9.695915 56,789.9075 01/01/2005 to 04/30/2005 9.695915 9.686465 0.0000 ============ ==== ========== ========= ========= ============ DAVIS VENTURE VALUE SUB-ACCOUNT (CLASS E) 04/27/2001 to 12/31/2001 10.855312 10.108370 2,258.4017 01/01/2002 to 12/31/2002 10.108370 8.259938 128,378.1291 01/01/2003 to 12/31/2003 8.259938 10.574416 234,395.2975 01/01/2004 to 12/31/2004 10.574416 11.611272 239,016.4107 01/01/2005 to 12/31/2005 11.611272 12.523219 161,062.2936 01/01/2006 to 12/31/2006 12.523219 14.030361 155,403.9527 01/01/2007 to 12/31/2007 14.030361 14.346053 127,188.0148 01/01/2008 to 12/31/2008 14.346053 8.504174 105,299.4611 ============ ==== ========== ========= ========= ============ HARRIS OAKMARK FOCUSED VALUE SUB-ACCOUNT (CLASS B) 04/27/2001 to 12/31/2001 10.589457 11.891112 1,123.1872 01/01/2002 to 12/31/2002 11.891112 10.588230 56,700.0481 01/01/2003 to 12/31/2003 10.588230 13.720284 147,229.4814 01/01/2004 to 12/31/2004 13.720284 14.731192 94,297.2614 01/01/2005 to 12/31/2005 14.731192 15.826360 81,222.1675 01/01/2006 to 12/31/2006 15.826360 17.385041 63,657.1619 01/01/2007 to 12/31/2007 17.385041 15.817440 39,339.1909 01/01/2008 to 12/31/2008 15.817440 8.342512 27,482.0075 ============ ==== ========== ========= ========= ============
38 CONDENSED FINANCIAL INFORMATION (CONTINUED)
2.10% SEPARATE ACCOUNT PRODUCT CHARGES NUMBER OF ACCUMULATION ACCUMULATION ACCUMULATION UNIT VALUE AT UNIT VALUE AT UNITS BEGINNING OF END OF OUTSTANDING AT PERIOD PERIOD END OF PERIOD --------------- --------------- --------------- JENNISON GROWTH SUB-ACCOUNT (CLASS B) 05/01/2002 to 12/31/2002 10.000000 7.592378 64,509.3442 01/01/2003 to 12/31/2003 7.592378 9.642193 133,829.6900 01/01/2004 to 12/31/2004 9.642193 10.285121 99,361.3574 01/01/2005 to 12/31/2005 10.285121 11.435478 71,831.3218 01/01/2006 to 12/31/2006 11.435478 11.481079 75,190.2164 01/01/2007 to 12/31/2007 11.481079 12.521471 58,926.2563 01/01/2008 to 12/31/2008 12.521471 7.779522 39,421.6928 ============ ==== ========== ========= ========= ============ MET/DIMENSIONAL INTERNATIONAL SMALL COMPANY SUB-ACCOUNT (CLASS B) 11/10/2008 to 12/31/2008 10.063634 10.123868 0.0000 ============ ==== ========== ========= ========= ============ METLIFE STOCK INDEX SUB-ACCOUNT (CLASS B) 10/09/2001 to 12/31/2001 10.000000 10.832576 10.0000 01/01/2002 to 12/31/2002 10.832576 8.218811 25,182.7191 01/01/2003 to 12/31/2003 8.218811 10.291333 41,229.0733 01/01/2004 to 12/31/2004 10.291333 11.112736 51,661.4167 01/01/2005 to 12/31/2005 11.112736 11.358647 65,034.9359 01/01/2006 to 12/31/2006 11.358647 12.812441 38,650.4243 01/01/2007 to 12/31/2007 12.812441 13.168826 28,921.6342 01/01/2008 to 12/31/2008 13.168826 8.089776 25,011.8675 ============ ==== ========== ========= ========= ============ WESTERN ASSET MANAGEMENT U.S. GOVERNMENT SUB-ACCOUNT (CLASS B) 05/01/2005 to 12/31/2005 14.682163 14.599207 0.0000 01/01/2006 to 12/31/2006 14.599207 14.856324 685.5072 01/01/2007 to 12/31/2007 14.856324 15.132660 685.5072 01/01/2008 to 12/31/2008 15.132660 14.738491 1,183.7814 ============ ==== ========== ========= ========= ============ MET INVESTORS SERIES TRUST - METLIFE ASSET ALLOCATION PROGRAM METLIFE AGGRESSIVE STRATEGY SUB-ACCOUNT (CLASS B) 11/22/2004 to 12/31/2004 10.298755 10.679684 7,365.9548 01/01/2005 to 12/31/2005 10.679684 11.543973 106,891.2154 01/01/2006 to 12/31/2006 11.543973 12.847566 112,281.4015 01/01/2007 to 12/31/2007 12.847566 12.942275 102,865.7320 01/01/2008 to 12/31/2008 12.942275 7.500252 78,513.9929 ============ ==== ========== ========= ========= ============ METLIFE BALANCED STRATEGY SUB-ACCOUNT (CLASS B) 11/22/2004 to 12/31/2004 10.098965 10.383908 348,044.8269 01/01/2005 to 12/31/2005 10.383908 10.892925 528,764.2470 01/01/2006 to 12/31/2006 10.892925 11.944871 656,115.1216 01/01/2007 to 12/31/2007 11.944871 12.266352 682,998.8439 01/01/2008 to 12/31/2008 12.266352 8.174790 576,925.8689 ============ ==== ========== ========= ========= ============
39 CONDENSED FINANCIAL INFORMATION (CONTINUED)
2.10% SEPARATE ACCOUNT PRODUCT CHARGES NUMBER OF ACCUMULATION ACCUMULATION ACCUMULATION UNIT VALUE AT UNIT VALUE AT UNITS BEGINNING OF END OF OUTSTANDING AT PERIOD PERIOD END OF PERIOD --------------- --------------- ------------------ METLIFE DEFENSIVE STRATEGY SUB-ACCOUNT (CLASS B) 11/22/2004 to 12/31/2004 9.939131 10.100263 8,966.3246 01/01/2005 to 12/31/2005 10.100263 10.334041 17,178.4495 01/01/2006 to 12/31/2006 10.334041 10.992764 17,934.3279 01/01/2007 to 12/31/2007 10.992764 11.400225 30,125.4116 01/01/2008 to 12/31/2008 11.400225 8.857396 88,243.9076 ============ ==== ========== ========= ========= ============== METLIFE GROWTH STRATEGY SUB-ACCOUNT (CLASS B) 11/22/2004 to 12/31/2004 10.238819 10.594654 543,643.4629 01/01/2005 to 12/31/2005 10.594654 11.321808 884,419.6739 01/01/2006 to 12/31/2006 11.321808 12.594437 1,000,328.7331 01/01/2007 to 12/31/2007 12.594437 12.911188 802,415.3970 01/01/2008 to 12/31/2008 12.911188 7.854688 815,706.3966 ============ ==== ========== ========= ========= ============== METLIFE MODERATE STRATEGY SUB-ACCOUNT (CLASS B) 11/22/2004 to 12/31/2004 10.009058 10.220381 273,801.2683 01/01/2005 to 12/31/2005 10.220381 10.590343 410,652.0364 01/01/2006 to 12/31/2006 10.590343 11.432017 568,087.9664 01/01/2007 to 12/31/2007 11.432017 11.887955 731,529.3852 01/01/2008 to 12/31/2008 11.887955 8.564694 693,776.9670 ============ ==== ========== ========= ========= ==============
40 CONDENSED FINANCIAL INFORMATION (CONTINUED)
2.20% SEPARATE ACCOUNT PRODUCT CHARGES NUMBER OF ACCUMULATION ACCUMULATION ACCUMULATION UNIT VALUE AT UNIT VALUE AT UNITS BEGINNING OF END OF OUTSTANDING AT PERIOD PERIOD END OF PERIOD --------------- --------------- --------------- MET INVESTORS SERIES TRUST AMERICAN FUNDS BALANCED ALLOCATION SUB-ACCOUNT (CLASS C) 04/28/2008 to 12/31/2008 10.007589 6.973097 16,631.1534 ============ ==== ========== ========= ========= ============ AMERICAN FUNDS BOND SUB-ACCOUNT (CLASS C) 04/28/2008 to 12/31/2008 10.037587 8.903238 0.0000 ============ ==== ========== ========= ========= ============ AMERICAN FUNDS GROWTH ALLOCATION SUB-ACCOUNT (CLASS C) 04/28/2008 to 12/31/2008 9.997589 6.324798 14,778.8498 ============ ==== ========== ========= ========= ============ AMERICAN FUNDS GROWTH SUB-ACCOUNT (CLASS C) 04/28/2008 to 12/31/2008 9.987590 5.727942 0.0000 ============ ==== ========== ========= ========= ============ AMERICAN FUNDS INTERNATIONAL SUB-ACCOUNT (CLASS C) 04/28/2008 to 12/31/2008 10.087584 6.021612 0.0000 ============ ==== ========== ========= ========= ============ AMERICAN FUNDS MODERATE ALLOCATION SUB-ACCOUNT (CLASS C) 04/28/2008 to 12/31/2008 10.017588 7.643140 12,301.3023 ============ ==== ========== ========= ========= ============ BLACKROCK HIGH YIELD SUB-ACCOUNT (CLASS B) 04/28/2008 to 12/31/2008 15.314967 11.394847 0.0000 ============ ==== ========== ========= ========= ============ CLARION GLOBAL REAL ESTATE SUB-ACCOUNT (CLASS B) 05/01/2004 to 12/31/2004 9.998192 12.764997 31,565.0512 01/01/2005 to 12/31/2005 12.764997 14.147202 17,997.4337 01/01/2006 to 12/31/2006 14.147202 19.041742 20,642.5617 01/01/2007 to 12/31/2007 19.041742 15.830068 16,553.3006 01/01/2008 to 12/31/2008 15.830068 9.031329 14,313.0589 ============ ==== ========== ========= ========= ============ GOLDMAN SACHS MID CAP VALUE SUB-ACCOUNT (CLASS B) 05/01/2004 to 12/31/2004 9.998192 11.907728 31,370.0740 01/01/2005 to 12/31/2005 11.907728 13.109814 29,408.5086 01/01/2006 to 12/31/2006 13.109814 14.837854 36,303.7736 01/01/2007 to 12/31/2007 14.837854 14.962649 33,835.6747 01/01/2008 to 12/31/2008 14.962649 9.355816 29,874.2059 ============ ==== ========== ========= ========= ============ HARRIS OAKMARK INTERNATIONAL SUB-ACCOUNT (CLASS B) 05/01/2003 to 12/31/2003 8.751972 11.692887 87,666.4696 01/01/2004 to 12/31/2004 11.692887 13.785392 107,551.7072 01/01/2005 to 12/31/2005 13.785392 15.406303 86,238.7524 01/01/2006 to 12/31/2006 15.406303 19.420146 75,280.4714 01/01/2007 to 12/31/2007 19.420146 18.782747 62,901.8688 01/01/2008 to 12/31/2008 18.782747 10.860931 52,037.6731 ============ ==== ========== ========= ========= ============
41 CONDENSED FINANCIAL INFORMATION (CONTINUED)
2.20% SEPARATE ACCOUNT PRODUCT CHARGES NUMBER OF ACCUMULATION ACCUMULATION ACCUMULATION UNIT VALUE AT UNIT VALUE AT UNITS BEGINNING OF END OF OUTSTANDING AT PERIOD PERIOD END OF PERIOD --------------- --------------- --------------- LAZARD MID CAP SUB-ACCOUNT (CLASS B) 05/01/2003 to 12/31/2003 9.728989 11.962451 49,809.4994 01/01/2004 to 12/31/2004 11.962451 13.386766 35,384.6763 01/01/2005 to 12/31/2005 13.386766 14.151717 28,226.7573 01/01/2006 to 12/31/2006 14.151717 15.876342 22,835.6573 01/01/2007 to 12/31/2007 15.876342 15.108094 20,617.3624 01/01/2008 to 12/31/2008 15.108094 9.117948 12,659.8112 ============ ==== ========== ========= ========= ============ LEGG MASON PARTNERS AGGRESSIVE GROWTH SUB-ACCOUNT (CLASS B) 05/01/2003 to 12/31/2003 5.505944 6.677059 143,010.0163 01/01/2004 to 12/31/2004 6.677059 7.082674 133,941.9579 01/01/2005 to 12/31/2005 7.082674 7.869701 95,505.9231 01/01/2006 to 12/31/2006 7.869701 7.565054 88,931.1267 01/01/2007 to 12/31/2007 7.565054 7.567283 57,741.7189 01/01/2008 to 12/31/2008 7.567283 4.511342 35,156.0070 ============ ==== ========== ========= ========= ============ LEGG MASON VALUE EQUITY SUB-ACCOUNT (CLASS B) 11/07/2005 to 12/31/2005 10.245695 10.611559 0.0000 01/01/2006 to 12/31/2006 10.611559 11.064607 0.0000 01/01/2007 to 12/31/2007 11.064607 10.183235 1,316.4803 01/01/2008 to 12/31/2008 10.183235 4.520486 1,702.2688 ============ ==== ========== ========= ========= ============ LOOMIS SAYLES GLOBAL MARKETS SUB-ACCOUNT (CLASS B) 05/01/2006 to 12/31/2006 9.988192 10.284091 0.0000 01/01/2007 to 12/31/2007 10.284091 12.861098 1,148.7826 01/01/2008 to 12/31/2008 12.861098 7.641242 5,822.0995 ============ ==== ========== ========= ========= ============ LORD ABBETT BOND DEBENTURE SUB-ACCOUNT (CLASS B) 05/01/2003 to 12/31/2003 14.697264 16.018030 144,853.2736 01/01/2004 to 12/31/2004 16.018030 16.948206 114,971.4284 01/01/2005 to 12/31/2005 16.948206 16.828031 81,992.6511 01/01/2006 to 12/31/2006 16.828031 17.968847 69,707.3441 01/01/2007 to 12/31/2007 17.968847 18.727017 51,977.7890 01/01/2008 to 12/31/2008 18.727017 14.910488 39,405.5049 ============ ==== ========== ========= ========= ============ LORD ABBETT GROWTH AND INCOME SUB-ACCOUNT (CLASS B) 05/01/2003 to 12/31/2003 34.555426 42.855921 72,881.9582 01/01/2004 to 12/31/2004 42.855921 47.222817 71,324.8972 01/01/2005 to 12/31/2005 47.222817 47.765062 64,077.4105 01/01/2006 to 12/31/2006 47.765062 55.039266 59,327.2282 01/01/2007 to 12/31/2007 55.039266 55.838679 56,554.2577 01/01/2008 to 12/31/2008 55.838679 34.775173 48,092.0215 ============ ==== ========== ========= ========= ============ LORD ABBETT MID CAP VALUE SUB-ACCOUNT (CLASS B) 04/28/2008 to 12/31/2008 23.119688 15.150115 0.0000 ============ ==== ========== ========= ========= ============
42 CONDENSED FINANCIAL INFORMATION (CONTINUED)
2.20% SEPARATE ACCOUNT PRODUCT CHARGES NUMBER OF ACCUMULATION ACCUMULATION ACCUMULATION UNIT VALUE AT UNIT VALUE AT UNITS BEGINNING OF END OF OUTSTANDING AT PERIOD PERIOD END OF PERIOD --------------- --------------- --------------- MET/AIM SMALL CAP GROWTH SUB-ACCOUNT (CLASS B) 05/01/2003 to 12/31/2003 8.707674 11.540760 42,998.4318 01/01/2004 to 12/31/2004 11.540760 12.015117 73,108.5388 01/01/2005 to 12/31/2005 12.015117 12.726042 54,225.5085 01/01/2006 to 12/31/2006 12.726042 14.215555 46,531.9722 01/01/2007 to 12/31/2007 14.215555 15.443992 33,809.0099 01/01/2008 to 12/31/2008 15.443992 9.255971 26,590.9386 ============ ==== ========== ========= ========= ============ MET/FRANKLIN MUTUAL SHARES SUB-ACCOUNT (CLASS B) 04/28/2008 to 12/31/2008 9.997589 6.563810 0.0000 ============ ==== ========== ========= ========= ============ MET/FRANKLIN TEMPLETON FOUNDING STRATEGY SUB-ACCOUNT (CLASS B) 04/28/2008 to 12/31/2008 9.997589 6.994952 2,002.1388 ============ ==== ========== ========= ========= ============ MET/PUTNAM RESEARCH SUB-ACCOUNT (CLASS B) 05/01/2003 to 12/31/2003 6.425734 7.681378 44,988.5086 01/01/2004 to 11/19/2004 7.681378 7.835364 41,129.1322 ============ ==== ========== ========= ========= ============ MFS (Reg. TM) EMERGING MARKETS EQUITY SUB-ACCOUNT (CLASS B) 05/01/2006 to 12/31/2006 9.988192 10.422355 0.0000 01/01/2007 to 12/31/2007 10.422355 13.927648 234.7302 01/01/2008 to 12/31/2008 13.927648 6.058060 6,355.1636 ============ ==== ========== ========= ========= ============ MFS (Reg. TM) RESEARCH INTERNATIONAL SUB-ACCOUNT (CLASS B) 05/01/2003 to 12/31/2003 7.334391 9.440699 46,229.8593 01/01/2004 to 12/31/2004 9.440699 11.041095 81,060.3535 01/01/2005 to 12/31/2005 11.041095 12.575417 53,351.8014 01/01/2006 to 12/31/2006 12.575417 15.570576 52,843.7563 01/01/2007 to 12/31/2007 15.570576 17.254194 36,962.8244 01/01/2008 to 12/31/2008 17.254194 9.727162 39,001.9045 ============ ==== ========== ========= ========= ============ OPPENHEIMER CAPITAL APPRECIATION SUB-ACCOUNT (CLASS B) 05/01/2003 to 12/31/2003 6.545686 7.921912 232,072.7023 01/01/2004 to 12/31/2004 7.921912 8.245328 217,351.0950 01/01/2005 to 12/31/2005 8.245328 8.446691 156,074.4244 01/01/2006 to 12/31/2006 8.446691 8.892708 137,534.0808 01/01/2007 to 12/31/2007 8.892708 9.941074 105,567.2421 01/01/2008 to 12/31/2008 9.941074 5.256691 79,095.0097 ============ ==== ========== ========= ========= ============
43 CONDENSED FINANCIAL INFORMATION (CONTINUED)
2.20% SEPARATE ACCOUNT PRODUCT CHARGES NUMBER OF ACCUMULATION ACCUMULATION ACCUMULATION UNIT VALUE AT UNIT VALUE AT UNITS BEGINNING OF END OF OUTSTANDING AT PERIOD PERIOD END OF PERIOD --------------- --------------- ----------------- PIMCO INFLATION PROTECTED BOND SUB-ACCOUNT (CLASS B) 05/01/2003 to 12/31/2003 10.000000 10.380246 159,927.6384 01/01/2004 to 12/31/2004 10.380246 11.068762 171,205.7546 01/01/2005 to 12/31/2005 11.068762 10.978760 118,754.1884 01/01/2006 to 12/31/2006 10.978760 10.782048 102,141.5173 01/01/2007 to 12/31/2007 10.782048 11.684998 76,454.2246 01/01/2008 to 12/31/2008 11.684998 10.642578 73,796.8698 ============ ==== ========== ========= ========= ============ PIMCO TOTAL RETURN SUB-ACCOUNT (CLASS B) 05/01/2003 to 12/31/2003 11.613154 11.617358 131,171.1083 01/01/2004 to 12/31/2004 11.617358 11.929910 99,283.6491 01/01/2005 to 12/31/2005 11.929910 11.933334 77,461.3139 01/01/2006 to 12/31/2006 11.933334 12.201788 67,915.9234 01/01/2007 to 12/31/2007 12.201788 12.837722 50,466.3402 01/01/2008 to 12/31/2008 12.837722 12.609123 45,246.6944 ============ ==== ========== ========= ========= ============ RAINIER LARGE CAP EQUITY SUB-ACCOUNT (CLASS B) 11/12/2007 to 12/31/2007 9.563024 9.970501 0.0000 01/01/2008 to 12/31/2008 9.970501 5.675456 2,703.1348 ============ ==== ========== ========= ========= ============ RCM TECHNOLOGY SUB-ACCOUNT (CLASS B) 05/01/2003 to 12/31/2003 3.305316 4.575366 21,277.4770 01/01/2004 to 12/31/2004 4.575366 4.282527 39,694.1716 01/01/2005 to 12/31/2005 4.282527 4.651129 26,372.5236 01/01/2006 to 12/31/2006 4.651129 4.793453 25,059.5151 01/01/2007 to 12/31/2007 4.793453 6.166694 19,180.7770 01/01/2008 to 12/31/2008 6.166694 3.350622 24,747.6760 ============ ==== ========== ========= ========= ============ SSGA GROWTH AND INCOME ETF SUB-ACCOUNT (CLASS B) 11/10/2008 to 12/31/2008 8.198306 8.350805 0.0000 ============ ==== ========== ========= ========= ============ SSGA GROWTH ETF SUB-ACCOUNT (CLASS B) 11/10/2008 to 12/31/2008 7.590864 7.655988 0.0000 ============ ==== ========== ========= ========= ============ T. ROWE PRICE MID CAP GROWTH SUB-ACCOUNT (CLASS B) 05/01/2003 to 12/31/2003 4.758231 6.091734 139,482.7721 01/01/2004 to 12/31/2004 6.091734 7.020938 76,592.0630 01/01/2005 to 12/31/2005 7.020938 7.873283 67,565.1172 01/01/2006 to 12/31/2006 7.873283 8.177181 60,257.8152 01/01/2007 to 12/31/2007 8.177181 9.409055 47,391.3719 01/01/2008 to 12/31/2008 9.409055 5.545172 55,171.7026 ============ ==== ========== ========= ========= ============
44 CONDENSED FINANCIAL INFORMATION (CONTINUED)
2.20% SEPARATE ACCOUNT PRODUCT CHARGES NUMBER OF ACCUMULATION ACCUMULATION ACCUMULATION UNIT VALUE AT UNIT VALUE AT UNITS BEGINNING OF END OF OUTSTANDING AT PERIOD PERIOD END OF PERIOD --------------- --------------- --------------- THIRD AVENUE SMALL CAP VALUE SUB-ACCOUNT (CLASS B) 05/01/2003 to 12/31/2003 8.471513 11.419748 98,541.2877 01/01/2004 to 12/31/2004 11.419748 14.131547 89,629.8076 01/01/2005 to 12/31/2005 14.131547 15.964866 71,366.0317 01/01/2006 to 12/31/2006 15.964866 17.669187 66,421.5343 01/01/2007 to 12/31/2007 17.669187 16.760427 57,369.8572 01/01/2008 to 12/31/2008 16.760427 11.505142 42,665.7820 ============ ==== ========== ========= ========= ============ TURNER MID CAP GROWTH SUB-ACCOUNT (CLASS B) 05/01/2004 to 12/31/2004 9.998192 11.055516 28,818.4921 01/01/2005 to 12/31/2005 11.055516 12.044039 17,565.5306 01/01/2006 to 12/31/2006 12.044039 12.498059 17,750.3036 01/01/2007 to 12/31/2007 12.498059 15.176821 13,442.9782 01/01/2008 to 12/31/2008 15.176821 7.675150 24,983.6965 ============ ==== ========== ========= ========= ============ VAN KAMPEN COMSTOCK SUB-ACCOUNT (CLASS B) 05/01/2005 to 12/31/2005 9.998192 10.419817 692.9001 01/01/2006 to 12/31/2006 10.419817 11.830096 6,191.2777 01/01/2007 to 12/31/2007 11.830096 11.282900 6,385.4138 01/01/2008 to 12/31/2008 11.282900 7.072990 7,082.6776 ============ ==== ========== ========= ========= ============ METROPOLITAN SERIES FUND, INC. BLACKROCK MONEY MARKET SUB-ACCOUNT (CLASS B) 05/01/2005 to 12/31/2005 9.803573 9.854474 47,629.7585 01/01/2006 to 12/31/2006 9.854474 10.079384 2,602.5395 01/01/2007 to 12/31/2007 10.079384 10.333545 22,406.4230 01/01/2008 to 12/31/2008 10.333545 10.370813 221,348.7191 ============ ==== ========== ========= ========= ============ BLACKROCK MONEY MARKET SUB-ACCOUNT (CLASS B) (FORMERLY MET INVESTORS SERIES TRUST - MONEY MARKET SUB-ACCOUNT (CLASS B)) 05/01/2003 to 12/31/2003 10.096666 9.972016 57,382.7046 01/01/2004 to 12/31/2004 9.972016 9.816994 64,078.0296 01/01/2005 to 04/30/2005 9.816994 9.804231 0.0000 ============ ==== ========== ========= ========= ============ DAVIS VENTURE VALUE SUB-ACCOUNT (CLASS E) 05/01/2003 to 12/31/2003 8.556367 10.717292 130,577.3700 01/01/2004 to 12/31/2004 10.717292 11.756369 186,488.7410 01/01/2005 to 12/31/2005 11.756369 12.667083 145,251.1574 01/01/2006 to 12/31/2006 12.667083 14.177401 130,843.6964 01/01/2007 to 12/31/2007 14.177401 14.481835 110,456.1032 01/01/2008 to 12/31/2008 14.481835 8.576031 89,302.0400 ============ ==== ========== ========= ========= ============
45 CONDENSED FINANCIAL INFORMATION (CONTINUED)
2.20% SEPARATE ACCOUNT PRODUCT CHARGES NUMBER OF ACCUMULATION ACCUMULATION ACCUMULATION UNIT VALUE AT UNIT VALUE AT UNITS BEGINNING OF END OF OUTSTANDING AT PERIOD PERIOD END OF PERIOD --------------- --------------- ----------------- HARRIS OAKMARK FOCUSED VALUE SUB-ACCOUNT (CLASS B) 05/01/2003 to 12/31/2003 10.939577 13.905578 102,993.4673 01/01/2004 to 12/31/2004 13.905578 14.915178 73,451.5810 01/01/2005 to 12/31/2005 14.915178 16.008064 60,351.3600 01/01/2006 to 12/31/2006 16.008064 17.567121 50,802.4709 01/01/2007 to 12/31/2007 17.567121 15.967034 47,062.7862 01/01/2008 to 12/31/2008 15.967034 8.412940 37,561.1265 ============ ==== ========== ========= ========= ============ JENNISON GROWTH SUB-ACCOUNT (CLASS B) 05/01/2003 to 12/31/2003 8.069248 9.703565 99,507.4759 01/01/2004 to 12/31/2004 9.703565 10.340216 106,217.6620 01/01/2005 to 12/31/2005 10.340216 11.485287 75,623.7424 01/01/2006 to 12/31/2006 11.485287 11.519592 63,261.1803 01/01/2007 to 12/31/2007 11.519592 12.550851 46,376.8323 01/01/2008 to 12/31/2008 12.550851 7.789937 47,747.4059 ============ ==== ========== ========= ========= ============ MET/DIMENSIONAL INTERNATIONAL SMALL COMPANY SUB-ACCOUNT (CLASS B) 11/10/2008 to 12/31/2008 10.063331 10.122150 0.0000 ============ ==== ========== ========= ========= ============ METLIFE STOCK INDEX SUB-ACCOUNT (CLASS B) 05/01/2003 to 12/31/2003 8.627802 10.397428 29,927.0459 01/01/2004 to 12/31/2004 10.397428 11.216052 39,193.2251 01/01/2005 to 12/31/2005 11.216052 11.452829 39,175.2801 01/01/2006 to 12/31/2006 11.452829 12.905807 38,596.6065 01/01/2007 to 12/31/2007 12.905807 13.251461 31,128.0186 01/01/2008 to 12/31/2008 13.251461 8.132357 27,448.3477 ============ ==== ========== ========= ========= ============ WESTERN ASSET MANAGEMENT U.S. GOVERNMENT SUB-ACCOUNT (CLASS B) 05/01/2005 to 12/31/2005 14.528669 14.437002 0.0000 01/01/2006 to 12/31/2006 14.437002 14.676618 0.0000 01/01/2007 to 12/31/2007 14.676618 14.934588 0.0000 01/01/2008 to 12/31/2008 14.934588 14.530999 0.0000 ============ ==== ========== ========= ========= ============ MET INVESTORS SERIES TRUST - METLIFE ASSET ALLOCATION PROGRAM METLIFE AGGRESSIVE STRATEGY SUB-ACCOUNT (CLASS B) 11/22/2004 to 12/31/2004 10.298220 10.677989 155,892.6343 01/01/2005 to 12/31/2005 10.677989 11.530646 300,066.3359 01/01/2006 to 12/31/2006 11.530646 12.819947 316,630.1193 01/01/2007 to 12/31/2007 12.819947 12.901474 201,025.7269 01/01/2008 to 12/31/2008 12.901474 7.469089 193,840.1801 ============ ==== ========== ========= ========= ============
46 CONDENSED FINANCIAL INFORMATION (CONTINUED)
2.20% SEPARATE ACCOUNT PRODUCT CHARGES NUMBER OF ACCUMULATION ACCUMULATION ACCUMULATION UNIT VALUE AT UNIT VALUE AT UNITS BEGINNING OF END OF OUTSTANDING AT PERIOD PERIOD END OF PERIOD --------------- --------------- ----------------- METLIFE BALANCED STRATEGY SUB-ACCOUNT (CLASS B) 11/22/2004 to 12/31/2004 10.098439 10.382260 735,259.9208 01/01/2005 to 12/31/2005 10.382260 10.880346 1,274,871.8928 01/01/2006 to 12/31/2006 10.880346 11.919190 1,261,307.8705 01/01/2007 to 12/31/2007 11.919190 12.227681 1,154,152.2595 01/01/2008 to 12/31/2008 12.227681 8.140832 1,057,818.0630 ============ ==== ========== ========= ========= ============== METLIFE DEFENSIVE STRATEGY SUB-ACCOUNT (CLASS B) 11/22/2004 to 12/31/2004 9.938614 10.098659 38,552.2936 01/01/2005 to 12/31/2005 10.098659 10.322104 49,536.5123 01/01/2006 to 12/31/2006 10.322104 10.969126 142,746.2810 01/01/2007 to 12/31/2007 10.969126 11.364282 136,203.1626 01/01/2008 to 12/31/2008 11.364282 8.820609 292,950.0882 ============ ==== ========== ========= ========= ============== METLIFE GROWTH STRATEGY SUB-ACCOUNT (CLASS B) 11/22/2004 to 12/31/2004 10.238287 10.592973 455,800.3961 01/01/2005 to 12/31/2005 10.592973 11.308736 1,160,486.5045 01/01/2006 to 12/31/2006 11.308736 12.567360 1,328,693.1090 01/01/2007 to 12/31/2007 12.567360 12.870484 1,672,461.4158 01/01/2008 to 12/31/2008 12.870484 7.822055 1,377,841.0656 ============ ==== ========== ========= ========= ============== METLIFE MODERATE STRATEGY SUB-ACCOUNT (CLASS B) 11/22/2004 to 12/31/2004 10.008537 10.218758 1,048,355.7398 01/01/2005 to 12/31/2005 10.218758 10.578112 1,421,861.3912 01/01/2006 to 12/31/2006 10.578112 11.407435 1,583,591.4467 01/01/2007 to 12/31/2007 11.407435 11.850475 1,682,525.0732 01/01/2008 to 12/31/2008 11.850475 8.529120 1,032,117.3334 ============ ==== ========== ========= ========= ==============
47 CONDENSED FINANCIAL INFORMATION (CONTINUED)
2.25% SEPARATE ACCOUNT PRODUCT CHARGES NUMBER OF ACCUMULATION ACCUMULATION ACCUMULATION UNIT VALUE AT UNIT VALUE AT UNITS BEGINNING OF END OF OUTSTANDING AT PERIOD PERIOD END OF PERIOD --------------- --------------- --------------- MET INVESTORS SERIES TRUST AMERICAN FUNDS BALANCED ALLOCATION SUB-ACCOUNT (CLASS C) 04/28/2008 to 12/31/2008 10.007534 6.970693 0.0000 ============ ==== ========== ========= ========= ========== AMERICAN FUNDS BOND SUB-ACCOUNT (CLASS C) 04/28/2008 to 12/31/2008 10.037532 8.900176 0.0000 ============ ==== ========== ========= ========= ========== AMERICAN FUNDS GROWTH ALLOCATION SUB-ACCOUNT (CLASS C) 04/28/2008 to 12/31/2008 9.997534 6.322615 0.0000 ============ ==== ========== ========= ========= ========== AMERICAN FUNDS GROWTH SUB-ACCOUNT (CLASS C) 04/28/2008 to 12/31/2008 9.987535 5.725964 0.0000 ============ ==== ========== ========= ========= ========== AMERICAN FUNDS INTERNATIONAL SUB-ACCOUNT (CLASS C) 04/28/2008 to 12/31/2008 10.087529 6.019535 0.0000 ============ ==== ========== ========= ========= ========== AMERICAN FUNDS MODERATE ALLOCATION SUB-ACCOUNT (CLASS C) 04/28/2008 to 12/31/2008 10.017533 7.640507 0.0000 ============ ==== ========== ========= ========= ========== BLACKROCK HIGH YIELD SUB-ACCOUNT (CLASS B) 04/28/2008 to 12/31/2008 15.225875 11.324722 0.0000 ============ ==== ========== ========= ========= ========== CLARION GLOBAL REAL ESTATE SUB-ACCOUNT (CLASS B) 05/01/2004 to 12/31/2004 9.998151 12.760718 691.7403 01/01/2005 to 12/31/2005 12.760718 14.135411 629.8552 01/01/2006 to 12/31/2006 14.135411 19.016399 510.2260 01/01/2007 to 12/31/2007 19.016399 15.801046 600.2649 01/01/2008 to 12/31/2008 15.801046 9.010237 688.1218 ============ ==== ========== ========= ========= ========== GOLDMAN SACHS MID CAP VALUE SUB-ACCOUNT (CLASS B) 05/01/2004 to 12/31/2004 9.998151 11.903734 1,456.4520 01/01/2005 to 12/31/2005 11.903734 13.098888 1,378.1494 01/01/2006 to 12/31/2006 13.098888 14.818098 1,358.5969 01/01/2007 to 12/31/2007 14.818098 14.935215 1,350.2325 01/01/2008 to 12/31/2008 14.935215 9.333969 1,353.4617 ============ ==== ========== ========= ========= ========== HARRIS OAKMARK INTERNATIONAL SUB-ACCOUNT (CLASS B) 10/09/2001 to 12/31/2001 10.000000 10.914501 10.0000 01/01/2002 to 12/31/2002 10.914501 8.740772 4,088.1828 01/01/2003 to 12/31/2003 8.740772 11.534955 9,766.1243 01/01/2004 to 12/31/2004 11.534955 13.592384 4,862.7364 01/01/2005 to 12/31/2005 13.592384 15.183030 4,574.0224 01/01/2006 to 12/31/2006 15.183030 19.129168 4,207.8110 01/01/2007 to 12/31/2007 19.129168 18.492014 4,122.3406 01/01/2008 to 12/31/2008 18.492014 10.687443 4,145.1732 ============ ==== ========== ========= ========= ==========
48 CONDENSED FINANCIAL INFORMATION (CONTINUED)
2.25% SEPARATE ACCOUNT PRODUCT CHARGES NUMBER OF ACCUMULATION ACCUMULATION ACCUMULATION UNIT VALUE AT UNIT VALUE AT UNITS BEGINNING OF END OF OUTSTANDING AT PERIOD PERIOD END OF PERIOD --------------- --------------- --------------- LAZARD MID CAP SUB-ACCOUNT (CLASS B) 10/09/2001 to 12/31/2001 10.000000 10.970039 10.0000 01/01/2002 to 12/31/2002 10.970039 9.565587 1,349.6073 01/01/2003 to 12/31/2003 9.565587 11.800961 4,786.2285 01/01/2004 to 12/31/2004 11.800961 13.199431 606.0453 01/01/2005 to 12/31/2005 13.199431 13.946723 571.2357 01/01/2006 to 12/31/2006 13.946723 15.638567 563.6990 01/01/2007 to 12/31/2007 15.638567 14.874343 561.6689 01/01/2008 to 12/31/2008 14.874343 8.972364 353.8433 ============ ==== ========== ========= ========= =========== LEGG MASON PARTNERS AGGRESSIVE GROWTH SUB-ACCOUNT (CLASS B) 08/01/2001 to 12/31/2001 7.718332 7.282231 12.9562 01/01/2002 to 12/31/2002 7.282231 5.138103 10,170.4578 01/01/2003 to 12/31/2003 5.138103 6.576276 14,542.0419 01/01/2004 to 12/31/2004 6.576276 6.972272 6,557.9732 01/01/2005 to 12/31/2005 6.972272 7.743170 6,461.5170 01/01/2006 to 12/31/2006 7.743170 7.439708 6,646.9290 01/01/2007 to 12/31/2007 7.439708 7.438159 6,957.2151 01/01/2008 to 12/31/2008 7.438159 4.432133 6,125.1331 ============ ==== ========== ========= ========= =========== LEGG MASON VALUE EQUITY SUB-ACCOUNT (CLASS B) 11/07/2005 to 12/31/2005 10.245597 10.610687 0.0000 01/01/2006 to 12/31/2006 10.610687 11.058180 0.0000 01/01/2007 to 12/31/2007 11.058180 10.172202 0.0000 01/01/2008 to 12/31/2008 10.172202 4.513313 0.0000 ============ ==== ========== ========= ========= =========== LOOMIS SAYLES GLOBAL MARKETS SUB-ACCOUNT (CLASS B) 05/01/2006 to 12/31/2006 9.988151 10.280639 0.0000 01/01/2007 to 12/31/2007 10.280639 12.850323 0.0000 01/01/2008 to 12/31/2008 12.850323 7.631003 0.0000 ============ ==== ========== ========= ========= =========== LORD ABBETT BOND DEBENTURE SUB-ACCOUNT (CLASS B) 08/01/2001 to 12/31/2001 13.997431 13.929118 7.1442 01/01/2002 to 12/31/2002 13.929118 13.541111 14,183.6325 01/01/2003 to 12/31/2003 13.541111 15.776564 14,654.5107 01/01/2004 to 12/31/2004 15.776564 16.684351 2,567.5166 01/01/2005 to 12/31/2005 16.684351 16.557788 2,642.1963 01/01/2006 to 12/31/2006 16.557788 17.671470 2,681.0203 01/01/2007 to 12/31/2007 17.671470 18.407838 2,670.2775 01/01/2008 to 12/31/2008 18.407838 14.649004 1,986.6327 ============ ==== ========== ========= ========= ===========
49 CONDENSED FINANCIAL INFORMATION (CONTINUED)
2.25% SEPARATE ACCOUNT PRODUCT CHARGES NUMBER OF ACCUMULATION ACCUMULATION ACCUMULATION UNIT VALUE AT UNIT VALUE AT UNITS BEGINNING OF END OF OUTSTANDING AT PERIOD PERIOD END OF PERIOD --------------- --------------- --------------- LORD ABBETT GROWTH AND INCOME SUB-ACCOUNT (CLASS B) 08/01/2001 to 12/31/2001 42.151033 41.246677 2.3724 01/01/2002 to 12/31/2002 41.246677 33.020784 7,140.4844 01/01/2003 to 12/31/2003 33.020784 42.209120 8,095.4393 01/01/2004 to 12/31/2004 42.209120 46.486801 2,360.3992 01/01/2005 to 12/31/2005 46.486801 46.997154 2,373.4738 01/01/2006 to 12/31/2006 46.997154 54.127409 2,295.3560 01/01/2007 to 12/31/2007 54.127409 54.885985 2,275.5985 01/01/2008 to 12/31/2008 54.885985 34.164659 2,321.4692 ============ ==== ========== ========= ========= ========== LORD ABBETT MID CAP VALUE SUB-ACCOUNT (CLASS B) 04/28/2008 to 12/31/2008 22.996377 15.064193 0.0000 ============ ==== ========== ========= ========= ========== MET/AIM SMALL CAP GROWTH SUB-ACCOUNT (CLASS B) 10/09/2001 to 12/31/2001 10.000000 11.829489 10.0000 01/01/2002 to 12/31/2002 11.829489 8.384889 5,328.4335 01/01/2003 to 12/31/2003 8.384889 11.384898 4,951.0324 01/01/2004 to 12/31/2004 11.384898 11.846906 3,754.6974 01/01/2005 to 12/31/2005 11.846906 12.541624 3,695.4200 01/01/2006 to 12/31/2006 12.541624 14.002566 3,643.3735 01/01/2007 to 12/31/2007 14.002566 15.204950 3,471.7992 01/01/2008 to 12/31/2008 15.204950 9.108126 3,159.5991 ============ ==== ========== ========= ========= ========== MET/FRANKLIN MUTUAL SHARES SUB-ACCOUNT (CLASS B) 04/28/2008 to 12/31/2008 9.997534 6.561545 0.0000 ============ ==== ========== ========= ========= ========== MET/FRANKLIN TEMPLETON FOUNDING STRATEGY SUB-ACCOUNT (CLASS B) 04/28/2008 to 12/31/2008 9.997534 6.992541 0.0000 ============ ==== ========== ========= ========= ========== MET/PUTNAM RESEARCH SUB-ACCOUNT (CLASS B) 08/01/2001 to 12/31/2001 8.702129 8.037404 11.4914 01/01/2002 to 12/31/2002 8.037404 6.222927 3,948.8738 01/01/2003 to 12/31/2003 6.222927 7.565436 2,257.7675 01/01/2004 to 11/19/2004 7.565436 7.713685 1,538.7286 ============ ==== ========== ========= ========= ========== MFS (Reg. TM) EMERGING MARKETS EQUITY SUB-ACCOUNT (CLASS B) 05/01/2006 to 12/31/2006 9.988151 10.418854 0.0000 01/01/2007 to 12/31/2007 10.418854 13.915976 0.0000 01/01/2008 to 12/31/2008 13.915976 6.049936 0.0000 ============ ==== ========== ========= ========= ==========
50 CONDENSED FINANCIAL INFORMATION (CONTINUED)
2.25% SEPARATE ACCOUNT PRODUCT CHARGES NUMBER OF ACCUMULATION ACCUMULATION ACCUMULATION UNIT VALUE AT UNIT VALUE AT UNITS BEGINNING OF END OF OUTSTANDING AT PERIOD PERIOD END OF PERIOD --------------- --------------- --------------- MFS (Reg. TM) RESEARCH INTERNATIONAL SUB-ACCOUNT (CLASS B) 08/01/2001 to 12/31/2001 9.030039 8.351514 11.0741 01/01/2002 to 12/31/2002 8.351514 7.201956 6,719.0481 01/01/2003 to 12/31/2003 7.201956 9.298241 5,591.0673 01/01/2004 to 12/31/2004 9.298241 10.869038 3,088.7507 01/01/2005 to 12/31/2005 10.869038 12.373282 2,905.7055 01/01/2006 to 12/31/2006 12.373282 15.312662 2,593.4564 01/01/2007 to 12/31/2007 15.312662 16.959863 2,457.6178 01/01/2008 to 12/31/2008 16.959863 9.556424 2,201.0620 ============ ==== ========== ========= ========= =========== OPPENHEIMER CAPITAL APPRECIATION SUB-ACCOUNT (CLASS B) 08/01/2001 to 12/31/2001 9.149152 8.436969 10.9300 01/01/2002 to 12/31/2002 8.436969 6.208524 25,592.6115 01/01/2003 to 12/31/2003 6.208524 7.802322 30,010.7212 01/01/2004 to 12/31/2004 7.802322 8.116785 5,380.3409 01/01/2005 to 12/31/2005 8.116785 8.310865 5,448.4007 01/01/2006 to 12/31/2006 8.310865 8.745347 5,593.7394 01/01/2007 to 12/31/2007 8.745347 9.771427 5,202.4167 01/01/2008 to 12/31/2008 9.771427 5.164385 5,798.2568 ============ ==== ========== ========= ========= =========== PIMCO INFLATION PROTECTED BOND SUB-ACCOUNT (CLASS B) 05/01/2003 to 12/31/2003 10.000000 10.376770 12,834.2573 01/01/2004 to 12/31/2004 10.376770 11.059510 4,032.7931 01/01/2005 to 12/31/2005 11.059510 10.964113 4,250.9772 01/01/2006 to 12/31/2006 10.964113 10.762294 4,481.6727 01/01/2007 to 12/31/2007 10.762294 11.657729 4,541.6343 01/01/2008 to 12/31/2008 11.657729 10.612417 3,532.5145 ============ ==== ========== ========= ========= =========== PIMCO TOTAL RETURN SUB-ACCOUNT (CLASS B) 08/01/2001 to 12/31/2001 10.291670 10.499015 9.7166 01/01/2002 to 12/31/2002 10.499015 11.219500 28,113.6688 01/01/2003 to 12/31/2003 11.219500 11.442232 18,301.0775 01/01/2004 to 12/31/2004 11.442232 11.744182 3,084.2633 01/01/2005 to 12/31/2005 11.744182 11.741695 2,985.5125 01/01/2006 to 12/31/2006 11.741695 11.999853 3,091.1308 01/01/2007 to 12/31/2007 11.999853 12.618917 3,046.5048 01/01/2008 to 12/31/2008 12.618917 12.388003 1,528.9454 ============ ==== ========== ========= ========= =========== RAINIER LARGE CAP EQUITY SUB-ACCOUNT (CLASS B) 11/12/2007 to 12/31/2007 9.562865 9.969666 0.0000 01/01/2008 to 12/31/2008 9.969666 5.672126 0.0000 ============ ==== ========== ========= ========= ===========
51 CONDENSED FINANCIAL INFORMATION (CONTINUED)
2.25% SEPARATE ACCOUNT PRODUCT CHARGES NUMBER OF ACCUMULATION ACCUMULATION ACCUMULATION UNIT VALUE AT UNIT VALUE AT UNITS BEGINNING OF END OF OUTSTANDING AT PERIOD PERIOD END OF PERIOD --------------- --------------- --------------- RCM TECHNOLOGY SUB-ACCOUNT (CLASS B) 08/01/2001 to 12/31/2001 7.023113 6.071856 14.2387 01/01/2002 to 12/31/2002 6.071856 2.924829 14.2387 01/01/2003 to 12/31/2003 2.924829 4.506250 1,507.1567 01/01/2004 to 12/31/2004 4.506250 4.215719 1,912.2277 01/01/2005 to 12/31/2005 4.215719 4.576290 1,942.7854 01/01/2006 to 12/31/2006 4.576290 4.713972 1,991.8701 01/01/2007 to 12/31/2007 4.713972 6.061397 1,834.4363 01/01/2008 to 12/31/2008 6.061397 3.291754 1,722.7733 ============ ==== ========== ========= ========= =========== SSGA GROWTH AND INCOME ETF SUB-ACCOUNT (CLASS B) 11/10/2008 to 12/31/2008 8.185540 8.337218 0.0000 ============ ==== ========== ========= ========= =========== SSGA GROWTH ETF SUB-ACCOUNT (CLASS B) 11/10/2008 to 12/31/2008 7.579041 7.643530 0.0000 ============ ==== ========== ========= ========= =========== T. ROWE PRICE MID CAP GROWTH SUB-ACCOUNT (CLASS B) 08/01/2001 to 12/31/2001 8.712005 8.207514 11.4784 01/01/2002 to 12/31/2002 8.207514 4.490732 14,915.8652 01/01/2003 to 12/31/2003 4.490732 5.999707 14,483.8006 01/01/2004 to 12/31/2004 5.999707 6.911409 1,813.9419 01/01/2005 to 12/31/2005 6.911409 7.746594 1,752.4464 01/01/2006 to 12/31/2006 7.746594 8.041590 1,610.8620 01/01/2007 to 12/31/2007 8.041590 9.248387 1,691.3908 01/01/2008 to 12/31/2008 9.248387 5.447743 1,105.4424 ============ ==== ========== ========= ========= =========== THIRD AVENUE SMALL CAP VALUE SUB-ACCOUNT (CLASS B) 05/01/2002 to 12/31/2002 10.000000 8.185772 2,920.9162 01/01/2003 to 12/31/2003 8.185772 11.319216 8,426.1391 01/01/2004 to 12/31/2004 11.319216 14.000125 2,798.6279 01/01/2005 to 12/31/2005 14.000125 15.808516 2,623.9024 01/01/2006 to 12/31/2006 15.808516 17.487423 2,603.1522 01/01/2007 to 12/31/2007 17.487423 16.579668 2,643.7512 01/01/2008 to 12/31/2008 16.579668 11.375342 2,545.6550 ============ ==== ========== ========= ========= =========== TURNER MID CAP GROWTH SUB-ACCOUNT (CLASS B) 05/01/2004 to 12/31/2004 9.998151 11.051806 1,555.5226 01/01/2005 to 12/31/2005 11.051806 12.033997 1,484.0005 01/01/2006 to 12/31/2006 12.033997 12.481408 1,512.6276 01/01/2007 to 12/31/2007 12.481408 15.148986 1,395.0740 01/01/2008 to 12/31/2008 15.148986 7.657220 1,462.8232 ============ ==== ========== ========= ========= ===========
52 CONDENSED FINANCIAL INFORMATION (CONTINUED)
2.25% SEPARATE ACCOUNT PRODUCT CHARGES NUMBER OF ACCUMULATION ACCUMULATION ACCUMULATION UNIT VALUE AT UNIT VALUE AT UNITS BEGINNING OF END OF OUTSTANDING AT PERIOD PERIOD END OF PERIOD --------------- --------------- --------------- VAN KAMPEN COMSTOCK SUB-ACCOUNT (CLASS B) 05/01/2005 to 12/31/2005 9.998151 10.416322 0.0000 01/01/2006 to 12/31/2006 10.416322 11.820233 0.0000 01/01/2007 to 12/31/2007 11.820233 11.267825 0.0000 01/01/2008 to 12/31/2008 11.267825 7.059988 0.0000 ============ ==== ========== ========= ========= =========== METROPOLITAN SERIES FUND, INC. BLACKROCK MONEY MARKET SUB-ACCOUNT (CLASS B) 05/01/2005 to 12/31/2005 9.649307 9.696191 2,321.7378 01/01/2006 to 12/31/2006 9.696191 9.912546 2,137.3918 01/01/2007 to 12/31/2007 9.912546 10.157392 1,959.4666 01/01/2008 to 12/31/2008 10.157392 10.188914 1,712.9557 ============ ==== ========== ========= ========= =========== BLACKROCK MONEY MARKET SUB-ACCOUNT (CLASS B) (FORMERLY MET INVESTORS SERIES TRUST - MONEY MARKET SUB-ACCOUNT (CLASS B)) 08/01/2001 to 12/31/2001 10.118298 10.118399 9.8831 01/01/2002 to 12/31/2002 10.118399 10.001729 2,098.7479 01/01/2003 to 12/31/2003 10.001729 9.821664 12,497.3791 01/01/2004 to 12/31/2004 9.821664 9.664132 2,520.7846 01/01/2005 to 04/30/2005 9.664132 9.649994 0.0000 ============ ==== ========== ========= ========= =========== DAVIS VENTURE VALUE SUB-ACCOUNT (CLASS E) 08/01/2001 to 12/31/2001 10.447860 10.120696 9.5713 01/01/2002 to 12/31/2002 10.120696 8.257592 18,367.5619 01/01/2003 to 12/31/2003 8.257592 10.555580 18,703.6948 01/01/2004 to 12/31/2004 10.555580 11.573176 10,644.3345 01/01/2005 to 12/31/2005 11.573176 12.463486 10,561.5481 01/01/2006 to 12/31/2006 12.463486 13.942576 10,411.3474 01/01/2007 to 12/31/2007 13.942576 14.234807 10,347.2470 01/01/2008 to 12/31/2008 14.234807 8.425503 10,223.8497 ============ ==== ========== ========= ========= =========== HARRIS OAKMARK FOCUSED VALUE SUB-ACCOUNT (CLASS B) 08/01/2001 to 12/31/2001 11.572706 11.905572 8.6410 01/01/2002 to 12/31/2002 11.905572 10.585189 7,628.2307 01/01/2003 to 12/31/2003 10.585189 13.695808 9,617.1836 01/01/2004 to 12/31/2004 13.695808 14.682813 3,091.7558 01/01/2005 to 12/31/2005 14.682813 15.750820 3,014.0966 01/01/2006 to 12/31/2006 15.750820 17.276208 3,111.0651 01/01/2007 to 12/31/2007 17.276208 15.694721 3,158.2603 01/01/2008 to 12/31/2008 15.694721 8.265299 3,540.1869 ============ ==== ========== ========= ========= ===========
53 CONDENSED FINANCIAL INFORMATION (CONTINUED)
2.25% SEPARATE ACCOUNT PRODUCT CHARGES NUMBER OF ACCUMULATION ACCUMULATION ACCUMULATION UNIT VALUE AT UNIT VALUE AT UNITS BEGINNING OF END OF OUTSTANDING AT PERIOD PERIOD END OF PERIOD --------------- --------------- --------------- JENNISON GROWTH SUB-ACCOUNT (CLASS B) 05/01/2002 to 12/31/2002 10.000000 7.584747 10,801.3343 01/01/2003 to 12/31/2003 7.584747 9.618084 8,297.5845 01/01/2004 to 12/31/2004 9.618084 10.243989 3,259.6126 01/01/2005 to 12/31/2005 10.243989 11.372735 3,136.9346 01/01/2006 to 12/31/2006 11.372735 11.401015 3,309.3020 01/01/2007 to 12/31/2007 11.401015 12.415415 3,178.2729 01/01/2008 to 12/31/2008 12.415415 7.702003 3,145.5283 ============ ==== ========== ========= ========= =========== MET/DIMENSIONAL INTERNATIONAL SMALL COMPANY SUB-ACCOUNT (CLASS B) 11/10/2008 to 12/31/2008 10.063179 10.121291 0.0000 ============ ==== ========== ========= ========= =========== METLIFE STOCK INDEX SUB-ACCOUNT (CLASS B) 10/09/2001 to 12/31/2001 10.000000 10.828879 10.0000 01/01/2002 to 12/31/2002 10.828879 8.203658 2,069.6926 01/01/2003 to 12/31/2003 8.203658 10.256991 1,372.7361 01/01/2004 to 12/31/2004 10.256991 11.059014 228.6102 01/01/2005 to 12/31/2005 11.059014 11.286846 219.0196 01/01/2006 to 12/31/2006 11.286846 12.712427 225.8881 01/01/2007 to 12/31/2007 12.712427 13.046340 218.7032 01/01/2008 to 12/31/2008 13.046340 8.002451 0.0000 ============ ==== ========== ========= ========= =========== WESTERN ASSET MANAGEMENT U.S. GOVERNMENT SUB-ACCOUNT (CLASS B) 05/01/2005 to 12/31/2005 14.452524 14.356577 0.0000 01/01/2006 to 12/31/2006 14.356577 14.587582 0.0000 01/01/2007 to 12/31/2007 14.587582 14.836526 0.0000 01/01/2008 to 12/31/2008 14.836526 14.428350 0.0000 ============ ==== ========== ========= ========= =========== MET INVESTORS SERIES TRUST - METLIFE ASSET ALLOCATION PROGRAM METLIFE AGGRESSIVE STRATEGY SUB-ACCOUNT (CLASS B) 11/22/2004 to 12/31/2004 10.297953 10.677142 0.0000 01/01/2005 to 12/31/2005 10.677142 11.523985 0.0000 01/01/2006 to 12/31/2006 11.523985 12.806154 0.0000 01/01/2007 to 12/31/2007 12.806154 12.881114 0.0000 01/01/2008 to 12/31/2008 12.881114 7.453552 0.0000 ============ ==== ========== ========= ========= =========== METLIFE BALANCED STRATEGY SUB-ACCOUNT (CLASS B) 11/22/2004 to 12/31/2004 10.098177 10.381436 61,371.3286 01/01/2005 to 12/31/2005 10.381436 10.874060 60,330.1087 01/01/2006 to 12/31/2006 10.874060 11.906365 58,864.5957 01/01/2007 to 12/31/2007 11.906365 12.208384 57,350.1480 01/01/2008 to 12/31/2008 12.208384 8.123901 55,173.9689 ============ ==== ========== ========= ========= ===========
54 CONDENSED FINANCIAL INFORMATION (CONTINUED)
2.25% SEPARATE ACCOUNT PRODUCT CHARGES NUMBER OF ACCUMULATION ACCUMULATION ACCUMULATION UNIT VALUE AT UNIT VALUE AT UNITS BEGINNING OF END OF OUTSTANDING AT PERIOD PERIOD END OF PERIOD --------------- --------------- --------------- METLIFE DEFENSIVE STRATEGY SUB-ACCOUNT (CLASS B) 11/22/2004 to 12/31/2004 9.938355 10.097857 10,220.2457 01/01/2005 to 12/31/2005 10.097857 10.316139 9,202.7619 01/01/2006 to 12/31/2006 10.316139 10.957321 0.0000 01/01/2007 to 12/31/2007 10.957321 11.346346 0.0000 01/01/2008 to 12/31/2008 11.346346 8.802268 0.0000 ============ ==== ========== ========= ========= =========== METLIFE GROWTH STRATEGY SUB-ACCOUNT (CLASS B) 11/22/2004 to 12/31/2004 10.238020 10.592132 32,390.2315 01/01/2005 to 12/31/2005 10.592132 11.302203 32,286.8846 01/01/2006 to 12/31/2006 11.302203 12.553839 39,577.6363 01/01/2007 to 12/31/2007 12.553839 12.850173 20,233.2255 01/01/2008 to 12/31/2008 12.850173 7.805785 18,874.9879 ============ ==== ========== ========= ========= =========== METLIFE MODERATE STRATEGY SUB-ACCOUNT (CLASS B) 11/22/2004 to 12/31/2004 10.008277 10.217947 2,835.5240 01/01/2005 to 12/31/2005 10.217947 10.572000 2,659.6651 01/01/2006 to 12/31/2006 10.572000 11.395160 2,494.3115 01/01/2007 to 12/31/2007 11.395160 11.831773 22,221.2601 01/01/2008 to 12/31/2008 11.831773 8.511384 21,949.6725 ============ ==== ========== ========= ========= ===========
55 FINANCIAL STATEMENTS The financial statements of the Separate Account, the Company and of General American Life Insurance Company are included herein. The financial statements of the Company should be considered only as bearing upon the ability of the Company to meet its obligations under the contract. The consolidated financial statements of General American Life Insurance Company are included because for contracts issued on or before December 31, 2002, General American Life Insurance Company agreed to ensure that the Company will have sufficient funds to meet its obligations under the contracts. 56 ANNUAL REPORT DECEMBER 31, 2008 METLIFE INVESTORS VARIABLE ANNUITY ACCOUNT ONE OF METLIFE INVESTORS INSURANCE COMPANY REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Contract Owners of MetLife Investors Variable Annuity Account One and the Board of Directors of MetLife Investors Insurance Company: We have audited the accompanying statements of assets and liabilities of MetLife Investors Variable Annuity Account One (the "Separate Account") of MetLife Investors Insurance Company (the "Company") comprising each of the individual Sub-Accounts listed in Appendix A as of December 31, 2008, the related statements of operations for each of the periods presented in the year then ended, and the statements of changes in net assets for each of the periods presented in the two years then ended. 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, 2008, by correspondence with the custodian. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of each of the Sub-Accounts constituting the Separate Account of the Company as of December 31, 2008, the results of their operations for each of the periods presented in the year then ended, and the changes in their net assets for each of the periods presented in the two years then ended, in conformity with accounting principles generally accepted in the United States of America. /s/ DELOITTE & TOUCHE LLP Certified Public Accountants Tampa, FL March 31, 2009 APPENDIX A MIST Lord Abbett Growth and Income Sub-Account MIST Lord Abbett Bond Debenture Sub-Account MIST Van Kampen Mid Cap Growth Sub-Account MIST Lord Abbett Mid Cap Value Sub-Account MIST Oppenheimer Capital Appreciation Sub-Account MIST PIMCO Inflation Protected Bond Sub-Account MIST Legg Mason Partners Aggressive Growth Sub-Account MIST PIMCO Total Return Sub-Account MIST RCM Technology Sub-Account MIST T. Rowe Price Mid Cap Growth Sub-Account MIST MFS Research International Sub-Account MIST Met/AIM Small Cap Growth Sub-Account MIST Lazard Mid Cap Sub-Account MIST Harris Oakmark International Sub-Account MIST Third Avenue Small Cap Value Sub-Account MIST Clarion Global Real Estate Sub-Account MIST Turner Mid Cap Growth Sub-Account MIST Goldman Sachs Mid Cap Value Sub-Account MIST MetLife Defensive Strategy Sub-Account MIST MetLife Moderate Strategy Sub-Account MIST MetLife Balanced Strategy Sub-Account MIST MetLife Growth Strategy Sub-Account MIST MetLife Aggressive Strategy Sub-Account MIST Van Kampen Comstock Sub-Account MIST SSgA Growth ETF Sub-Account MIST SSgA Growth and Income ETF Sub-Account MIST Legg Mason Value Equity Sub-Account MIST Met/AIM Capital Appreciation Sub-Account MIST Pioneer Fund Sub-Account MIST Pioneer Strategic Income Sub-Account MIST MFS Emerging Markets Equity Sub-Account MIST Loomis Sayles Global Markets Sub-Account MIST Rainier Large Cap Equity Sub-Account MIST American Funds Growth Sub-Account MIST American Funds Balanced Allocation Sub-Account MIST American Funds Bond Sub-Account MIST American Funds Growth Allocation Sub-Account MIST American Funds International Sub-Account MIST American Funds Moderate Allocation Sub-Account MIST BlackRock High Yield Sub-Account MIST Dreman Small Cap Value Sub-Account MIST Met/Templeton Growth Sub-Account MIST Met/Franklin Mutual Shares Sub-Account MIST Met/Franklin Templeton Founding Strategy Sub-Account Russell Multi-Style Equity Sub-Account Russell Aggressive Equity Sub-Account Russell Non-U.S. Sub-Account Russell Core Bond Sub-Account Russell Real Estate Securities Sub-Account AIM V.I. International Growth Sub-Account DWS Government & Agency Securities Sub-Account MSF Davis Venture Value Sub-Account MSF Harris Oakmark Focused Value Sub-Account MSF Jennison Growth Sub-Account MSF MFS Total Return Sub-Account MSF Capital Guardian U.S. Equity Sub-Account MSF Julius Baer International Stock Sub-Account MSF BlackRock Money Market Sub-Account MSF MetLife Stock Index Sub-Account MSF BlackRock Bond Income Sub-Account MSF BlackRock Strategic Value Sub-Account MSF Franklin Templeton Small Cap Growth Sub-Account MSF Western Asset Management Strategic Bond Opportunities Sub-Account MSF Western Asset Management U.S. Government Sub-Account MSF T. Rowe Price Small Cap Growth Sub-Account MSF T. Rowe Price Large Cap Growth Sub-Account MSF Oppenheimer Global Equity Sub-Account MSF MFS Value Sub-Account MSF Met/Dimensional International Small Company Sub-Account Putnam VT Growth and Income Sub-Account Putnam VT Vista Sub-Account Putnam VT Equity Income Sub-Account FTVIPT Templeton Growth Securities Sub-Account FTVIPT Templeton Foreign Securities Sub-Account Fidelity VIP Growth Opportunities Sub-Account Fidelity VIP Equity-Income Sub-Account PIMCO VIT High Yield Sub-Account PIMCO VIT Low Duration Sub-Account PIMCO VIT StocksPLUS Growth and Income Sub-Account PIMCO VIT Total Return Bond Sub-Account American Funds Global Growth Sub-Account American Funds Global Small Capitalization Sub-Account American Funds Growth Sub-Account METLIFE INVESTORS VARIABLE ANNUITY ACCOUNT ONE OF METLIFE INVESTORS INSURANCE COMPANY STATEMENTS OF ASSETS AND LIABILITIES DECEMBER 31, 2008 MIST LORD ABBETT MIST LORD ABBETT MIST VAN KAMPEN MIST LORD ABBETT GROWTH AND INCOME BOND DEBENTURE MID CAP GROWTH MID CAP VALUE SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT ----------------- ---------------- --------------- ---------------- ASSETS: Investments at fair value $ 576,806,455 $ 202,718,885 $ 30,205,990 $ 157,250,699 Due from MetLife Investors Insurance Company -- -- -- -- ----------------- ---------------- --------------- ---------------- Total Assets 576,806,455 202,718,885 30,205,990 157,250,699 ----------------- ---------------- --------------- ---------------- LIABILITIES: Due to MetLife Investors Insurance Company 1,265 1,251 766 1,177 ----------------- ---------------- --------------- ---------------- Total Liabilities 1,265 1,251 766 1,177 ----------------- ---------------- --------------- ---------------- NET ASSETS $ 576,805,190 $ 202,717,634 $ 30,205,224 $ 157,249,522 ================= ================ =============== ================ CONTRACT OWNERS' EQUITY Net Assets from accumulation units 572,974,097 202,010,152 30,142,257 156,821,357 Net Assets from contracts in payouts 3,831,093 707,482 62,967 428,165 ----------------- ---------------- --------------- ---------------- Total Net Assets $ 576,805,190 $ 202,717,634 $ 30,205,224 $ 157,249,522 ================= ================ =============== ================
The accompanying notes are an integral part of these financial statements. 1 MIST PIMCO MIST LEGG MASON MIST OPPENHEIMER INFLATION PROTECTED PARTNERS AGGRESSIVE MIST PIMCO TOTAL MIST RCM MIST T. ROWE PRICE CAPITAL APPRECIATION BOND GROWTH RETURN TECHNOLOGY MID CAP GROWTH SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT -------------------- ------------------- ------------------- ---------------- ----------- ------------------ $ 63,889,877 $ 52,630,531 $ 46,377,707 $ 284,742,732 $ 6,573,875 $ 47,741,931 -- 6 -- -- -- -- -------------------- ------------------- ------------------- ---------------- ----------- ------------------ 63,889,877 52,630,537 46,377,707 284,742,732 6,573,875 47,741,931 -------------------- ------------------- ------------------- ---------------- ----------- ------------------ 1,489 559 698 1,185 987 1,313 -------------------- ------------------- ------------------- ---------------- ----------- ------------------ 1,489 559 698 1,185 987 1,313 -------------------- ------------------- ------------------- ---------------- ----------- ------------------ $ 63,888,388 $ 52,629,978 $ 46,377,009 $ 284,741,547 $ 6,572,888 $ 47,740,618 ==================== =================== =================== ================ =========== ================== 63,758,294 52,598,208 46,336,039 284,444,781 6,572,479 47,703,376 130,094 31,770 40,970 296,766 409 37,242 -------------------- ------------------- ------------------- ---------------- ----------- ------------------ $ 63,888,388 $ 52,629,978 $ 46,377,009 $ 284,741,547 $ 6,572,888 $ 47,740,618 ==================== =================== =================== ================ =========== ==================
The accompanying notes are an integral part of these financial statements. 2 METLIFE INVESTORS VARIABLE ANNUITY ACCOUNT ONE OF METLIFE INVESTORS INSURANCE COMPANY STATEMENTS OF ASSETS AND LIABILITIES -- (CONTINUED) DECEMBER 31, 2008 MIST MIST MFS RESEARCH MIST MET/AIM MIST LAZARD HARRIS OAKMARK INTERNATIONAL SMALL CAP GROWTH MID CAP INTERNATIONAL SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT ----------------- ---------------- ------------ -------------- ASSETS: Investments at fair value $ 103,319,918 $ 37,770,050 $ 31,592,293 $ 44,092,227 Due from MetLife Investors Insurance Company -- -- -- -- ----------------- ---------------- ------------ -------------- Total Assets 103,319,918 37,770,050 31,592,293 44,092,227 ----------------- ---------------- ------------ -------------- LIABILITIES: Due to MetLife Investors Insurance Company 1,665 785 1,397 476 ----------------- ---------------- ------------ -------------- Total Liabilities 1,665 785 1,397 476 ----------------- ---------------- ------------ -------------- NET ASSETS $ 103,318,253 $ 37,769,265 $ 31,590,896 $ 44,091,751 ================= ================ ============ ============== CONTRACT OWNERS' EQUITY Net Assets from accumulation units 102,996,927 37,745,595 31,506,060 44,086,783 Net Assets from contracts in payouts 321,326 23,670 84,836 4,968 ----------------- ---------------- ------------ -------------- Total Net Assets $ 103,318,253 $ 37,769,265 $ 31,590,896 $ 44,091,751 ================= ================ ============ ==============
The accompanying notes are an integral part of these financial statements. 3 MIST MIST THIRD AVENUE MIST CLARION GLOBAL MIST TURNER GOLDMAN SACHS MIST METLIFE MIST METLIFE SMALL CAP VALUE REAL ESTATE MID CAP GROWTH MID CAP VALUE DEFENSIVE STRATEGY MODERATE STRATEGY SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT ----------------- ------------------- -------------- ------------- ------------------ ----------------- $ 45,190,547 $ 26,465,801 $ 7,842,048 $ 15,273,123 $ 171,856,462 $ 402,407,116 -- -- -- -- -- -- ----------------- ------------------- -------------- ------------- ------------------ ----------------- 45,190,547 26,465,801 7,842,048 15,273,123 171,856,462 402,407,116 ----------------- ------------------- -------------- ------------- ------------------ ----------------- 1,007 972 947 838 642 448 ----------------- ------------------- -------------- ------------- ------------------ ----------------- 1,007 972 947 838 642 448 ----------------- ------------------- -------------- ------------- ------------------ ----------------- $ 45,189,540 $ 26,464,829 $ 7,841,101 $ 15,272,285 $ 171,855,820 $ 402,406,668 ================= =================== ============== ============= ================== ================= 45,180,397 26,400,984 7,840,517 15,270,479 171,855,820 402,406,668 9,143 63,845 584 1,806 -- -- ----------------- ------------------- -------------- ------------- ------------------ ----------------- $ 45,189,540 $ 26,464,829 $ 7,841,101 $ 15,272,285 $ 171,855,820 $ 402,406,668 ================= =================== ============== ============= ================== =================
The accompanying notes are an integral part of these financial statements. 4 METLIFE INVESTORS VARIABLE ANNUITY ACCOUNT ONE OF METLIFE INVESTORS INSURANCE COMPANY STATEMENTS OF ASSETS AND LIABILITIES -- (CONTINUED) DECEMBER 31, 2008 MIST METLIFE MIST METLIFE MIST METLIFE MIST VAN KAMPEN BALANCED STRATEGY GROWTH STRATEGY AGGRESSIVE STRATEGY COMSTOCK SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT ----------------- --------------- ------------------- --------------- ASSETS: Investments at fair value $ 1,162,918,426 $ 1,094,835,460 $ 142,626,675 $ 53,621,066 Due from MetLife Investors Insurance Company -- -- -- -- ----------------- --------------- ------------------- --------------- Total Assets 1,162,918,426 1,094,835,460 142,626,675 53,621,066 ----------------- --------------- ------------------- --------------- LIABILITIES: Due to MetLife Investors Insurance Company 557 473 555 1,329 ----------------- --------------- ------------------- --------------- Total Liabilities 557 473 555 1,329 ----------------- --------------- ------------------- --------------- NET ASSETS $ 1,162,917,869 $ 1,094,834,987 $ 142,626,120 $ 53,619,737 ================= =============== =================== =============== CONTRACT OWNERS' EQUITY Net Assets from accumulation units 1,162,634,697 1,094,816,185 142,626,120 53,560,869 Net Assets from contracts in payouts 283,172 18,802 -- 58,868 ----------------- --------------- ------------------- --------------- Total Net Assets $ 1,162,917,869 $ 1,094,834,987 $ 142,626,120 $ 53,619,737 ================= =============== =================== ===============
The accompanying notes are an integral part of these financial statements. 5 MIST MIST SSGA GROWTH MIST LEGG MASON MIST MET/AIM MIST PIONEER SSGA GROWTH ETF AND INCOME ETF VALUE EQUITY CAPITAL APPRECIATION MIST PIONEER FUND STRATEGIC INCOME SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT --------------- ---------------- --------------- -------------------- ----------------- ---------------- $ 19,273,074 $ 48,008,036 $ 14,356,638 $ 7,733,536 $ 1,434,084 $ 2,519,478 -- -- -- -- -- -- --------------- ---------------- --------------- -------------------- ----------------- ---------------- 19,273,074 48,008,036 14,356,638 7,733,536 1,434,084 2,519,478 --------------- ---------------- --------------- -------------------- ----------------- ---------------- 352 241 1,071 1,219 841 944 --------------- ---------------- --------------- -------------------- ----------------- ---------------- 352 241 1,071 1,219 841 944 --------------- ---------------- --------------- -------------------- ----------------- ---------------- $ 19,272,722 $ 48,007,795 $ 14,355,567 $ 7,732,317 $ 1,433,243 $ 2,518,534 =============== ================ =============== ==================== ================= ================ 19,272,722 48,007,795 14,353,033 7,700,468 1,433,243 2,518,534 -- -- 2,534 31,849 -- -- --------------- ---------------- --------------- -------------------- ----------------- ---------------- $ 19,272,722 $ 48,007,795 $ 14,355,567 $ 7,732,317 $ 1,433,243 $ 2,518,534 =============== ================ =============== ==================== ================= ================
The accompanying notes are an integral part of these financial statements. 6 METLIFE INVESTORS VARIABLE ANNUITY ACCOUNT ONE OF METLIFE INVESTORS INSURANCE COMPANY STATEMENTS OF ASSETS AND LIABILITIES -- (CONTINUED) DECEMBER 31, 2008 MIST MFS EMERGING MIST LOOMIS SAYLES MIST RAINIER MIST AMERICAN MARKETS EQUITY GLOBAL MARKETS LARGE CAP EQUITY FUNDS GROWTH SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT ----------------- ------------------ ---------------- ------------- ASSETS: Investments at fair value $ 23,850,369 $ 6,019,119 $ 4,430,243 $ 8,376,255 Due from MetLife Investors Insurance Company -- -- -- -- ----------------- ------------------ ---------------- ------------- Total Assets 23,850,369 6,019,119 4,430,243 8,376,255 ----------------- ------------------ ---------------- ------------- LIABILITIES: Due to MetLife Investors Insurance Company 1,095 843 929 599 ----------------- ------------------ ---------------- ------------- Total Liabilities 1,095 843 929 599 ----------------- ------------------ ---------------- ------------- NET ASSETS $ 23,849,274 $ 6,018,276 $ 4,429,314 $ 8,375,656 ================= ================== ================ ============= CONTRACT OWNERS' EQUITY Net Assets from accumulation units 23,835,908 6,018,276 4,429,314 8,375,656 Net Assets from contracts in payouts 13,366 -- -- -- ----------------- ------------------ ---------------- ------------- Total Net Assets $ 23,849,274 $ 6,018,276 $ 4,429,314 $ 8,375,656 ================= ================== ================ =============
The accompanying notes are an integral part of these financial statements. 7 MIST AMERICAN MIST AMERICAN MIST AMERICAN FUNDS BALANCED MIST AMERICAN FUNDS GROWTH MIST AMERICAN FUNDS MODERATE MIST BLACKROCK ALLOCATION FUNDS BOND ALLOCATION FUNDS INTERNATIONAL ALLOCATION HIGH YIELD SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT -------------- ------------- ------------- ------------------- -------------- -------------- $ 82,849,897 $ 5,095,717 $ 90,490,433 $ 5,547,055 $ 50,407,172 $ 717,586 -- -- -- -- -- -- -------------- ------------- ------------- ------------------- -------------- -------------- 82,849,897 5,095,717 90,490,433 5,547,055 50,407,172 717,586 -------------- ------------- ------------- ------------------- -------------- -------------- 517 545 493 634 437 476 -------------- ------------- ------------- ------------------- -------------- -------------- 517 545 493 634 437 476 -------------- ------------- ------------- ------------------- -------------- -------------- $ 82,849,380 $ 5,095,172 $ 90,489,940 $ 5,546,421 $ 50,406,735 $ 717,110 ============== ============= ============= =================== ============== ============== 82,849,380 5,095,172 90,489,940 5,546,421 50,406,735 717,110 -- -- -- -- -- -- -------------- ------------- ------------- ------------------- -------------- -------------- $ 82,849,380 $ 5,095,172 $ 90,489,940 $ 5,546,421 $ 50,406,735 $ 717,110 ============== ============= ============= =================== ============== ==============
The accompanying notes are an integral part of these financial statements. 8 METLIFE INVESTORS VARIABLE ANNUITY ACCOUNT ONE OF METLIFE INVESTORS INSURANCE COMPANY STATEMENTS OF ASSETS AND LIABILITIES -- (CONTINUED) DECEMBER 31, 2008 MIST MET/FRANKLIN MIST DREMAN MIST MET/TEMPLETON MIST MET/FRANKLIN TEMPLETON FOUNDING SMALL CAP VALUE GROWTH MUTUAL SHARES STRATEGY SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT --------------- ------------------ ----------------- ------------------ ASSETS: Investments at fair value $ 799,104 $ 2,342,436 $ 12,244,161 $ 50,104,077 Due from MetLife Investors Insurance Company -- -- -- -- --------------- ------------------ ----------------- ------------------ Total Assets 799,104 2,342,436 12,244,161 50,104,077 --------------- ------------------ ----------------- ------------------ LIABILITIES: Due to MetLife Investors Insurance Company 348 469 929 823 --------------- ------------------ ----------------- ------------------ Total Liabilities 348 469 929 823 --------------- ------------------ ----------------- ------------------ NET ASSETS $ 798,756 $ 2,341,967 $ 12,243,232 $ 50,103,254 =============== ================== ================= ================== CONTRACT OWNERS' EQUITY Net Assets from accumulation units 798,756 2,341,967 12,243,232 50,103,254 Net Assets from contracts in payouts -- -- -- -- --------------- ------------------ ----------------- ------------------ Total Net Assets $ 798,756 $ 2,341,967 $ 12,243,232 $ 50,103,254 =============== ================== ================= ==================
The accompanying notes are an integral part of these financial statements. 9 RUSSELL RUSSELL RUSSELL AIM V.I. MULTI-STYLE EQUITY AGGRESSIVE EQUITY RUSSELL NON-U.S. RUSSELL CORE BOND REAL ESTATE SECURITIES INTERNATIONAL GROWTH SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT ------------------ ----------------- ---------------- ----------------- ---------------------- -------------------- $ 9,661,339 $ 2,064,259 $ 4,740,878 $ 11,537,831 $ 1,174,461 $ 6,039,726 -- -- 55 -- -- -- ------------------ ----------------- ---------------- ----------------- ---------------------- -------------------- 9,661,339 2,064,259 4,740,933 11,537,831 1,174,461 6,039,726 ------------------ ----------------- ---------------- ----------------- ---------------------- -------------------- 91 58 112 72 988 1,122 ------------------ ----------------- ---------------- ----------------- ---------------------- -------------------- 91 58 112 72 988 1,122 ------------------ ----------------- ---------------- ----------------- ---------------------- -------------------- $ 9,661,248 $ 2,064,201 $ 4,740,821 $ 11,537,759 $ 1,173,473 $ 6,038,604 ================== ================= ================ ================= ====================== ==================== 9,570,548 2,043,447 4,732,146 11,520,306 1,173,473 5,968,754 90,700 20,754 8,675 17,453 -- 69,850 ------------------ ----------------- ---------------- ----------------- ---------------------- -------------------- $ 9,661,248 $ 2,064,201 $ 4,740,821 $ 11,537,759 $ 1,173,473 $ 6,038,604 ================== ================= ================ ================= ====================== ====================
The accompanying notes are an integral part of these financial statements. 10 METLIFE INVESTORS VARIABLE ANNUITY ACCOUNT ONE OF METLIFE INVESTORS INSURANCE COMPANY STATEMENTS OF ASSETS AND LIABILITIES -- (CONTINUED) DECEMBER 31, 2008 MSF DWS GOVERNMENT & MSF DAVIS VENTURE HARRIS OAKMARK MSF AGENCY SECURITIES VALUE FOCUSED VALUE JENNISON GROWTH SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT ----------------- ----------------- -------------- --------------- ASSETS: Investments at fair value $ 854,318 $ 158,678,559 $ 30,546,719 $ 39,059,312 Due from MetLife Investors Insurance Company -- -- 11 -- ----------------- ----------------- -------------- --------------- Total Assets 854,318 158,678,559 30,546,730 39,059,312 ----------------- ----------------- -------------- --------------- LIABILITIES: Due to MetLife Investors Insurance Company 367 1,149 685 1,623 ----------------- ----------------- -------------- --------------- Total Liabilities 367 1,149 685 1,623 ----------------- ----------------- -------------- --------------- NET ASSETS $ 853,951 $ 158,677,410 $ 30,546,045 $ 39,057,689 ================= ================= ============== =============== CONTRACT OWNERS' EQUITY Net Assets from accumulation units 850,301 158,590,949 30,527,475 39,034,038 Net Assets from contracts in payouts 3,650 86,461 18,570 23,651 ----------------- ----------------- -------------- --------------- Total Net Assets $ 853,951 $ 158,677,410 $ 30,546,045 $ 39,057,689 ================= ================= ============== ===============
The accompanying notes are an integral part of these financial statements. 11 MSF MFS TOTAL MSF CAPITAL MSF JULIUS BAER MSF BLACKROCK MSF METLIFE STOCK MSF BLACKROCK RETURN GUARDIAN U.S. EQUITY INTERNATIONAL STOCK MONEY MARKET INDEX BOND INCOME SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT ------------- -------------------- ------------------- ------------- ----------------- ------------- $ 63,254,843 $ 77,349,333 $ 4,668,174 $ 220,018,483 $ 22,343,375 $ 33,140,320 19 -- -- 27 -- 2 ------------- -------------------- ------------------- ------------- ----------------- ------------- 63,254,862 77,349,333 4,668,174 220,018,510 22,343,375 33,140,322 ------------- -------------------- ------------------- ------------- ----------------- ------------- 792 832 876 884 741 1,187 ------------- -------------------- ------------------- ------------- ----------------- ------------- 792 832 876 884 741 1,187 ------------- -------------------- ------------------- ------------- ----------------- ------------- $ 63,254,070 $ 77,348,501 $ 4,667,298 $ 220,017,626 $ 22,342,634 $ 33,139,135 ============= ==================== =================== ============= ================= ============= 63,114,210 76,919,408 4,665,691 219,951,276 22,342,634 33,135,545 139,860 429,093 1,607 66,350 -- 3,590 ------------- -------------------- ------------------- ------------- ----------------- ------------- $ 63,254,070 $ 77,348,501 $ 4,667,298 $ 220,017,626 $ 22,342,634 $ 33,139,135 ============= ==================== =================== ============= ================= =============
The accompanying notes are an integral part of these financial statements. 12 METLIFE INVESTORS VARIABLE ANNUITY ACCOUNT ONE OF METLIFE INVESTORS INSURANCE COMPANY STATEMENTS OF ASSETS AND LIABILITIES -- (CONTINUED) DECEMBER 31, 2008 MSF MSF WESTERN ASSET MSF WESTERN ASSET MSF BLACKROCK FRANKLIN TEMPLETON MANAGEMENT STRATEGIC MANAGEMENT STRATEGIC VALUE SMALL CAP GROWTH BOND OPPORTUNITIES U.S. GOVERNMENT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT --------------- ------------------ -------------------- ----------------- ASSETS: Investments at fair value $ 1,539,234 $ 9,058,898 $ 4,233,316 $ 6,538,078 Due from MetLife Investors Insurance Company -- -- -- -- --------------- ------------------ -------------------- ----------------- Total Assets 1,539,234 9,058,898 4,233,316 6,538,078 --------------- ------------------ -------------------- ----------------- LIABILITIES: Due to MetLife Investors Insurance Company 512 978 403 878 --------------- ------------------ -------------------- ----------------- Total Liabilities 512 978 403 878 --------------- ------------------ -------------------- ----------------- NET ASSETS $ 1,538,722 $ 9,057,920 $ 4,232,913 $ 6,537,200 =============== ================== ==================== ================= CONTRACT OWNERS' EQUITY Net Assets from accumulation units 1,538,722 9,057,243 4,227,207 6,537,200 Net Assets from contracts in payouts -- 677 5,706 -- --------------- ------------------ -------------------- ----------------- Total Net Assets $ 1,538,722 $ 9,057,920 $ 4,232,913 $ 6,537,200 =============== ================== ==================== =================
The accompanying notes are an integral part of these financial statements. 13 MSF MET/DIMENSIONAL MSF T. ROWE PRICE MSF T. ROWE PRICE MSF OPPENHEIMER INTERNATIONAL SMALL PUTNAM VT SMALL CAP GROWTH LARGE CAP GROWTH GLOBAL EQUITY MSF MFS VALUE COMPANY GROWTH AND INCOME SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT ----------------- ----------------- --------------- ------------- ------------------- ----------------- $ 6,523,956 $ 37,443,067 $ 11,110,916 $ 2,098,943 $ 36,420 $ 7,865,238 -- -- -- -- -- -- ----------------- ----------------- --------------- ------------- ------------------- ----------------- 6,523,956 37,443,067 11,110,916 2,098,943 36,420 7,865,238 ----------------- ----------------- --------------- ------------- ------------------- ----------------- 1,019 690 1,239 620 23 1,221 ----------------- ----------------- --------------- ------------- ------------------- ----------------- 1,019 690 1,239 620 23 1,221 ----------------- ----------------- --------------- ------------- ------------------- ----------------- $ 6,522,937 $ 37,442,377 $ 11,109,677 $ 2,098,323 $ 36,397 $ 7,864,017 ================= ================= =============== ============= =================== ================= 6,512,093 37,395,262 11,098,511 2,098,323 36,397 7,841,544 10,844 47,115 11,166 -- -- 22,473 ----------------- ----------------- --------------- ------------- ------------------- ----------------- $ 6,522,937 $ 37,442,377 $ 11,109,677 $ 2,098,323 $ 36,397 $ 7,864,017 ================= ================= =============== ============= =================== =================
The accompanying notes are an integral part of these financial statements. 14 METLIFE INVESTORS VARIABLE ANNUITY ACCOUNT ONE OF METLIFE INVESTORS INSURANCE COMPANY STATEMENTS OF ASSETS AND LIABILITIES -- (CONTINUED) DECEMBER 31, 2008 PUTNAM VT EQUITY FTVIPT TEMPLETON FTVIPT TEMPLETON PUTNAM VT VISTA INCOME GROWTH SECURITIES FOREIGN SECURITIES SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT --------------- ---------------- ----------------- ------------------ ASSETS: Investments at fair value $ 1,714,861 $ 26,039,909 $ 10,774,636 $ 25,905,267 Due from MetLife Investors Insurance Company -- -- -- -- --------------- ---------------- ----------------- ------------------ Total Assets 1,714,861 26,039,909 10,774,636 25,905,267 --------------- ---------------- ----------------- ------------------ LIABILITIES: Due to MetLife Investors Insurance Company 434 930 1,094 707 --------------- ---------------- ----------------- ------------------ Total Liabilities 434 930 1,094 707 --------------- ---------------- ----------------- ------------------ NET ASSETS $ 1,714,427 $ 26,038,979 $ 10,773,542 $ 25,904,560 =============== ================ ================= ================== CONTRACT OWNERS' EQUITY Net Assets from accumulation units 1,707,015 25,980,532 10,739,333 25,842,287 Net Assets from contracts in payouts 7,412 58,447 34,209 62,273 --------------- ---------------- ----------------- ------------------ Total Net Assets $ 1,714,427 $ 26,038,979 $ 10,773,542 $ 25,904,560 =============== ================ ================= ==================
The accompanying notes are an integral part of these financial statements. 15 PIMCO VIT FIDELITY VIP GROWTH FIDELITY VIP PIMCO VIT PIMCO VIT STOCKSPLUS GROWTH PIMCO VIT OPPORTUNTIES EQUITY-INCOME HIGH YIELD LOW DURATION AND INCOME TOTAL RETURN SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT ------------------- ------------- ----------- ------------ ----------------- ------------ $ 108,077 $ 3,778,768 $ 5,373,780 $ 9,399,958 $ 939,267 $ 14,101,854 -- -- -- -- -- -- ------------------- ------------- ----------- ------------ ----------------- ------------ 108,077 3,778,768 5,373,780 9,399,958 939,267 14,101,854 ------------------- ------------- ----------- ------------ ----------------- ------------ 40 552 588 447 685 198 ------------------- ------------- ----------- ------------ ----------------- ------------ 40 552 588 447 685 198 ------------------- ------------- ----------- ------------ ----------------- ------------ $ 108,037 $ 3,778,216 $ 5,373,192 $ 9,399,511 $ 938,582 $ 14,101,656 =================== ============= =========== ============ ================= ============ 108,037 3,778,216 5,372,272 9,398,581 937,658 13,842,747 -- -- 920 930 924 258,909 ------------------- ------------- ----------- ------------ ----------------- ------------ $ 108,037 $ 3,778,216 $ 5,373,192 $ 9,399,511 $ 938,582 $ 14,101,656 =================== ============= =========== ============ ================= ============
The accompanying notes are an integral part of these financial statements. 16 METLIFE INVESTORS VARIABLE ANNUITY ACCOUNT ONE OF METLIFE INVESTORS INSURANCE COMPANY STATEMENTS OF ASSETS AND LIABILITIES -- (CONCLUDED) DECEMBER 31, 2008 AMERICAN FUNDS AMERICAN FUNDS GLOBAL SMALL AMERICAN FUNDS GLOBAL GROWTH CAPITALIZATION GROWTH SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT -------------- -------------- -------------- ASSETS: Investments at fair value $ 22,462,556 $ 3,144,617 $ 14,184,467 Due from MetLife Investors Insurance Company -- -- -- -------------- -------------- -------------- Total Assets 22,462,556 3,144,617 14,184,467 -------------- -------------- -------------- LIABILITIES: Due to MetLife Investors Insurance Company 1,204 532 703 -------------- -------------- -------------- Total Liabilities 1,204 532 703 -------------- -------------- -------------- NET ASSETS $ 22,461,352 $ 3,144,085 $ 14,183,764 ============== ============== ============== CONTRACT OWNERS' EQUITY Net Assets from accumulation units 22,461,352 3,144,085 14,183,764 Net Assets from contracts in payouts -- -- -- -------------- -------------- -------------- Total Net Assets $ 22,461,352 $ 3,144,085 $ 14,183,764 ============== ============== ==============
The accompanying notes are an integral part of these financial statements. 17 This page is intentionally left blank. METLIFE INVESTORS VARIABLE ANNUITY ACCOUNT ONE OF METLIFE INVESTORS INSURANCE COMPANY STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2008 MIST LORD ABBETT MIST LORD ABBETT MIST VAN KAMPEN MIST LORD ABBETT GROWTH AND INCOME BOND DEBENTURE MID CAP GROWTH MID CAP VALUE SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT -------------------- ------------------- ------------------ ------------------- INVESTMENT INCOME: Dividends $ 14,337,957 $ 11,221,674 $ 688,687 $ 1,440,691 -------------------- ------------------- ------------------ ------------------- EXPENSES: Mortality and expense risk charges 9,777,346 2,956,698 473,118 2,350,871 Administrative charges 1,681,919 583,434 107,840 527,607 -------------------- ------------------- ------------------ ------------------- Total expenses 11,459,265 3,540,132 580,958 2,878,478 -------------------- ------------------- ------------------ ------------------- Net investment income (loss) 2,878,692 7,681,542 107,729 (1,437,787) -------------------- ------------------- ------------------ ------------------- NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Realized gain distributions 88,950,508 4,023,045 4,588,507 34,968,912 Realized gains (losses) on sale of investments (13,462,487) (3,366,096) (116,515) (14,235,301) -------------------- ------------------- ------------------ ------------------- 75,488,021 656,949 4,471,992 20,733,611 -------------------- ------------------- ------------------ ------------------- Change in unrealized gains (losses) on investments (447,777,295) (61,541,630) (32,591,068) (130,229,067) -------------------- ------------------- ------------------ ------------------- Net realized and unrealized gains (losses) on investments (372,289,274) (60,884,681) (28,119,076) (109,495,456) -------------------- ------------------- ------------------ ------------------- Net increase (decrease) in net assets resulting from operations $ (369,410,582) $ (53,203,139) $ (28,011,347) $ (110,933,243) ==================== =================== ================== ===================
(a) For the period April 28, 2008 to December 31, 2008. (b) For the period November 10, 2008 to December 31, 2008. The accompanying notes are an integral part of these financial statements. 19 MIST PIMCO MIST LEGG MASON MIST OPPENHEIMER INFLATION PROTECTED PARTNERS AGGRESSIVE MIST PIMCO TOTAL MIST RCM MIST T. ROWE PRICE CAPITAL APPRECIATION BOND GROWTH RETURN TECHNOLOGY MID CAP GROWTH SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT ----------------------- ---------------------- ---------------------- ------------------- --------------- --------------------- $ 3,763,046 $ 2,142,577 $ 1,550 $ 10,623,530 $ 1,448,645 $ 8,872 ----------------------- ---------------------- ---------------------- ------------------- --------------- --------------------- 1,351,588 856,155 915,514 3,446,927 150,533 983,968 243,830 146,021 162,510 668,648 25,972 180,064 ----------------------- ---------------------- ---------------------- ------------------- --------------- --------------------- 1,595,418 1,002,176 1,078,024 4,115,575 176,505 1,164,032 ----------------------- ---------------------- ---------------------- ------------------- --------------- --------------------- 2,167,628 1,140,401 (1,076,474) 6,507,955 1,272,140 (1,155,160) ----------------------- ---------------------- ---------------------- ------------------- --------------- --------------------- 29,691,783 118,412 581,238 6,794,178 3,069,712 9,029,882 (4,068,951) 426,379 (1,321,529) 1,450,706 (695,078) (517,709) ----------------------- ---------------------- ---------------------- ------------------- --------------- --------------------- 25,622,832 544,791 (740,291) 8,244,884 2,374,634 8,512,173 ----------------------- ---------------------- ---------------------- ------------------- --------------- --------------------- (86,056,623) (6,836,010) (30,593,166) (17,376,018) (9,505,545) (42,460,534) ----------------------- ---------------------- ---------------------- ------------------- --------------- --------------------- (60,433,791) (6,291,219) (31,333,457) (9,131,134) (7,130,911) (33,948,361) ----------------------- ---------------------- ---------------------- ------------------- --------------- --------------------- $ (58,266,163) $ (5,150,818) $ (32,409,931) $ (2,623,179) $ (5,858,771) $ (35,103,521) ======================= ====================== ====================== =================== =============== =====================
The accompanying notes are an integral part of these financial statements. 20 METLIFE INVESTORS VARIABLE ANNUITY ACCOUNT ONE OF METLIFE INVESTORS INSURANCE COMPANY STATEMENTS OF OPERATIONS -- (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2008 MIST MIST MFS RESEARCH MIST MET/AIM MIST LAZARD HARRIS OAKMARK INTERNATIONAL SMALL CAP GROWTH MID CAP INTERNATIONAL SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT -------------------- ------------------- ---------------- ----------------- INVESTMENT INCOME: Dividends $ 3,299,582 $ -- $ 520,260 $ 1,088,152 -------------------- ------------------- ---------------- ----------------- EXPENSES: Mortality and expense risk charges 1,965,768 758,316 602,329 953,316 Administrative charges 358,085 135,403 99,890 163,838 -------------------- ------------------- ---------------- ----------------- Total expenses 2,323,853 893,719 702,219 1,117,154 -------------------- ------------------- ---------------- ----------------- Net investment income (loss) 975,729 (893,719) (181,959) (29,002) -------------------- ------------------- ---------------- ----------------- NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Realized gain distributions 18,285,739 5,286,646 3,744,249 11,330,154 Realized gains (losses) on sale of investments (3,599,802) (501,334) (3,057,544) (2,977,790) -------------------- ------------------- ---------------- ----------------- 14,685,937 4,785,312 686,705 8,352,364 -------------------- ------------------- ---------------- ----------------- Change in unrealized gains (losses) on investments (100,286,811) (29,976,745) (21,651,761) (42,639,657) -------------------- ------------------- ---------------- ----------------- Net realized and unrealized gains (losses) on investments (85,600,874) (25,191,433) (20,965,056) (34,287,293) -------------------- ------------------- ---------------- ----------------- Net increase (decrease) in net assets resulting from operations $ (84,625,145) $ (26,085,152) $ (21,147,015) $ (34,316,295) ==================== =================== ================ =================
(a) For the period April 28, 2008 to December 31, 2008. (b) For the period November 10, 2008 to December 31, 2008. The accompanying notes are an integral part of these financial statements. 21 MIST MIST THIRD AVENUE MIST CLARION MIST TURNER GOLDMAN SACHS MIST METLIFE MIST METLIFE SMALL CAP VALUE GLOBAL REAL ESTATE MID CAP GROWTH MID CAP VALUE DEFENSIVE STRATEGY MODERATE STRATEGY SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT -------------------- --------------------- ----------------- ---------------- --------------------- -------------------- $ 495,301 $ 717,937 $ -- $ 195,465 $ 2,423,629 $ 8,182,429 -------------------- --------------------- ----------------- ---------------- --------------------- -------------------- 917,997 527,760 196,474 356,342 2,458,467 6,380,142 158,159 95,633 34,161 61,352 441,605 1,164,245 -------------------- --------------------- ----------------- ---------------- --------------------- -------------------- 1,076,156 623,393 230,635 417,694 2,900,072 7,544,387 -------------------- --------------------- ----------------- ---------------- --------------------- -------------------- (580,855) 94,544 (230,635) (222,229) (476,443) 638,042 -------------------- --------------------- ----------------- ---------------- --------------------- -------------------- 4,464,671 4,123,365 1,341,414 2,115,254 3,408,935 12,396,107 (506,225) (1,313,799) (386,265) (1,519,446) (1,969,090) (2,600,487) -------------------- --------------------- ----------------- ---------------- --------------------- -------------------- 3,958,446 2,809,566 955,149 595,808 1,439,845 9,795,620 -------------------- --------------------- ----------------- ---------------- --------------------- -------------------- (24,557,518) (22,764,007) (8,720,370) (10,493,383) (43,824,472) (156,198,486) -------------------- --------------------- ----------------- ---------------- --------------------- -------------------- (20,599,072) (19,954,441) (7,765,221) (9,897,575) (42,384,627) (146,402,866) -------------------- --------------------- ----------------- ---------------- --------------------- -------------------- $ (21,179,927) $ (19,859,897) $ (7,995,856) $ (10,119,804) $ (42,861,070) $ (145,764,824) ==================== ===================== ================= ================ ===================== ====================
The accompanying notes are an integral part of these financial statements. 22 METLIFE INVESTORS VARIABLE ANNUITY ACCOUNT ONE OF METLIFE INVESTORS INSURANCE COMPANY STATEMENTS OF OPERATIONS -- (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2008 MIST METLIFE MIST METIFE MIST METLIFE MIST VAN KAMPEN BALANCED STRATEGY GROWTH STRATEGY AGGRESSIVE STRATEGY COMSTOCK SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT -------------------- ------------------ ---------------------- ------------------ INVESTMENT INCOME: Dividends $ 56,918,603 $ 42,711,247 $ 3,501,880 $ 1,231,530 -------------------- ------------------ ---------------------- ------------------ EXPENSES: Mortality and expense risk charges 15,684,760 16,492,125 1,532,988 636,100 Administrative charges 2,975,385 3,051,812 266,649 171,912 -------------------- ------------------ ---------------------- ------------------ Total expenses 18,660,145 19,543,937 1,799,637 808,012 -------------------- ------------------ ---------------------- ------------------ Net investment income (loss) 38,258,458 23,167,310 1,702,243 423,518 -------------------- ------------------ ---------------------- ------------------ NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Realized gain distributions 77,056,274 84,334,841 12,202,932 2,716,657 Realized gains (losses) on sale of investments (6,067,431) (5,309,568) (3,774,213) (1,321,755) -------------------- ------------------ ---------------------- ------------------ 70,988,843 79,025,273 8,428,719 1,394,902 -------------------- ------------------ ---------------------- ------------------ Change in unrealized gains (losses) on investments (561,336,623) (666,449,701) (60,284,139) (32,472,657) -------------------- ------------------ ---------------------- ------------------ Net realized and unrealized gains (losses) on investments (490,347,780) (587,424,428) (51,855,420) (31,077,755) -------------------- ------------------ ---------------------- ------------------ Net increase (decrease) in net assets resulting from operations $ (452,089,322) $ (564,257,118) $ (50,153,177) $ (30,654,237) ==================== ================== ====================== ==================
(a) For the period April 28, 2008 to December 31, 2008. (b) For the period November 10, 2008 to December 31, 2008. The accompanying notes are an integral part of these financial statements. 23 MIST MIST SSGA GROWTH MIST LEGG MASON MIST MET/AIM MIST PIONEER SSGA GROWTH ETF AND INCOME ETF VALUE EQUITY CAPITAL APPRECIATION MIST PIONEER FUND STRATEGIC INCOME SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT ------------------ ------------------- ------------------ ----------------------- -------------------- ------------------- $ 374,733 $ 1,000,565 $ 3,825 $ 253,553 $ 7,105 $ 139,338 ------------------ ------------------- ------------------ ----------------------- -------------------- ------------------- 296,103 648,085 264,524 151,001 6,498 17,589 61,742 137,204 52,797 24,294 2,279 5,682 ------------------ ------------------- ------------------ ----------------------- -------------------- ------------------- 357,845 785,289 317,321 175,295 8,777 23,271 ------------------ ------------------- ------------------ ----------------------- -------------------- ------------------- 16,888 215,276 (313,496) 78,258 (1,672) 116,067 ------------------ ------------------- ------------------ ----------------------- -------------------- ------------------- 562,898 1,243,459 936,183 1 -- -- (343,174) (932,489) (675,910) (834,450) (11,061) (8,044) ------------------ ------------------- ------------------ ----------------------- -------------------- ------------------- 219,724 310,970 260,273 (834,449) (11,061) (8,044) ------------------ ------------------- ------------------ ----------------------- -------------------- ------------------- (10,587,025) (17,291,850) (16,435,096) (6,020,995) (390,089) (418,059) ------------------ ------------------- ------------------ ----------------------- -------------------- ------------------- (10,367,301) (16,980,880) (16,174,823) (6,855,444) (401,150) (426,103) ------------------ ------------------- ------------------ ----------------------- -------------------- ------------------- $ (10,350,413) $ (16,765,604) $ (16,488,319) $ (6,777,186) $ (402,822) $ (310,036) ================== =================== ================== ======================= ==================== ===================
The accompanying notes are an integral part of these financial statements. 24 METLIFE INVESTORS VARIABLE ANNUITY ACCOUNT ONE OF METLIFE INVESTORS INSURANCE COMPANY STATEMENTS OF OPERATIONS -- (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2008 MIST MFS EMERGING MIST LOOMIS SAYLES MIST RAINIER MIST AMERICAN MARKETS EQUITY GLOBAL MARKETS LARGE CAP EQUITY FUNDS GROWTH SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT (A) -------------------- --------------------- ------------------- ------------------ INVESTMENT INCOME: Dividends $ 194,862 $ 412,704 $ -- $ 332,037 -------------------- --------------------- ------------------- ------------------ EXPENSES: Mortality and expense risk charges 377,531 124,983 81,104 42,637 Administrative charges 65,935 21,414 14,904 7,941 -------------------- --------------------- ------------------- ------------------ Total expenses 443,466 146,397 96,008 50,578 -------------------- --------------------- ------------------- ------------------ Net investment income (loss) (248,604) 266,307 (96,008) 281,459 -------------------- --------------------- ------------------- ------------------ NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Realized gain distributions 1,416,999 541,712 85,791 -- Realized gains (losses) on sale of investments (1,259,832) (1,665,761) (588,888) (244,423) -------------------- --------------------- ------------------- ------------------ 157,167 (1,124,049) (503,097) (244,423) -------------------- --------------------- ------------------- ------------------ Change in unrealized gains (losses) on investments (26,807,070) (3,950,906) (1,839,760) (3,082,009) -------------------- --------------------- ------------------- ------------------ Net realized and unrealized gains (losses) on investments (26,649,903) (5,074,955) (2,342,857) (3,326,432) -------------------- --------------------- ------------------- ------------------ Net increase (decrease) in net assets resulting from operations $ (26,898,507) $ (4,808,648) $ (2,438,865) $ (3,044,973) ==================== ===================== =================== ==================
(a) For the period April 28, 2008 to December 31, 2008. (b) For the period November 10, 2008 to December 31, 2008. The accompanying notes are an integral part of these financial statements. 25 MIST AMERICAN MIST AMERICAN MIST AMERICAN FUNDS BALANCED MIST AMERICAN FUNDS GROWTH MIST AMERICAN FUNDS MODERATE MIST BLACKROCK ALLOCATION FUNDS BOND ALLOCATION FUNDS INTERNATIONAL ALLOCATION HIGH YIELD SUB-ACCOUNT (A) SUB-ACCOUNT (A) SUB-ACCOUNT (A) SUB-ACCOUNT (A) SUB-ACCOUNT (A) SUB-ACCOUNT (A) ------------------ ------------------ ------------------ ---------------------- ------------------ ------------------ $ 2,959,810 $ 254,922 $ 3,907,447 $ 364,947 $ 1,802,636 $ -- ------------------ ------------------ ------------------ ---------------------- ------------------ ------------------ 393,531 23,374 507,874 27,598 216,513 5,565 71,522 4,415 92,737 5,199 39,491 1,021 ------------------ ------------------ ------------------ ---------------------- ------------------ ------------------ 465,053 27,789 600,611 32,797 256,004 6,586 ------------------ ------------------ ------------------ ---------------------- ------------------ ------------------ 2,494,757 227,133 3,306,836 332,150 1,546,632 (6,586) ------------------ ------------------ ------------------ ---------------------- ------------------ ------------------ 4,616 -- 1,652 117 1,612 -- (92,303) (47,436) (158,181) (333,117) (32,387) (93,076) ------------------ ------------------ ------------------ ---------------------- ------------------ ------------------ (87,687) (47,436) (156,529) (333,000) (30,775) (93,076) ------------------ ------------------ ------------------ ---------------------- ------------------ ------------------ (19,128,434) (480,363) (31,509,925) (1,746,438) (7,661,392) (148,411) ------------------ ------------------ ------------------ ---------------------- ------------------ ------------------ (19,216,121) (527,799) (31,666,454) (2,079,438) (7,692,167) (241,487) ------------------ ------------------ ------------------ ---------------------- ------------------ ------------------ $ (16,721,364) $ (300,666) $ (28,359,618) $ (1,747,288) $ (6,145,535) $ (248,073) ================== ================== ================== ====================== ================== ==================
The accompanying notes are an integral part of these financial statements. 26 METLIFE INVESTORS VARIABLE ANNUITY ACCOUNT ONE OF METLIFE INVESTORS INSURANCE COMPANY STATEMENTS OF OPERATIONS -- (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2008 MIST MET/FRANKLIN MIST DREMAN MIST MET/TEMPLETON MIST MET/FRANKLIN TEMPLETON FOUNDING SMALL CAP VALUE GROWTH MUTUAL SHARES STRATEGY SUB-ACCOUNT (A) SUB-ACCOUNT (A) SUB-ACCOUNT (A) SUB-ACCOUNT (A) ------------------ --------------------- -------------------- --------------------- INVESTMENT INCOME: Dividends $ -- $ 11,126 $ 342,153 $ 920,644 ------------------ --------------------- -------------------- --------------------- EXPENSES: Mortality and expense risk charges 1,610 4,780 27,899 168,072 Administrative charges 599 1,808 8,866 40,497 ------------------ --------------------- -------------------- --------------------- Total expenses 2,209 6,588 36,765 208,569 ------------------ --------------------- -------------------- --------------------- Net investment income (loss) (2,209) 4,538 305,388 712,075 ------------------ --------------------- -------------------- --------------------- NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Realized gain distributions -- -- -- -- Realized gains (losses) on sale of investments (2,760) (8,281) (1,777) (22,288) ------------------ --------------------- -------------------- --------------------- (2,760) (8,281) (1,777) (22,288) ------------------ --------------------- -------------------- --------------------- Change in unrealized gains (losses) on investments (110,891) (434,777) (2,457,683) (9,495,004) ------------------ --------------------- -------------------- --------------------- Net realized and unrealized gains (losses) on investments (113,651) (443,058) (2,459,460) (9,517,292) ------------------ --------------------- -------------------- --------------------- Net increase (decrease) in net assets resulting from operations $ (115,860) $ (438,520) $ (2,154,072) $ (8,805,217) ================== ===================== ==================== =====================
(a) For the period April 28, 2008 to December 31, 2008. (b) For the period November 10, 2008 to December 31, 2008. The accompanying notes are an integral part of these financial statements. 27 RUSSELL RUSSELL RUSSELL AIM V.I. MULTI-STYLE EQUITY AGGRESSIVE EQUITY RUSSELL NON-U.S. RUSSELL CORE BOND REAL ESTATE SECURITIES INTERNATIONAL GROWTH SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT --------------------- -------------------- ------------------- -------------------- ------------------------- --------------------- $ 210,131 $ 26,750 $ -- $ 511,891 $ 35,771 $ 43,745 --------------------- -------------------- ------------------- -------------------- ------------------------- --------------------- 181,062 39,692 87,837 163,104 23,341 119,478 21,727 4,761 10,539 19,572 2,800 20,506 --------------------- -------------------- ------------------- -------------------- ------------------------- --------------------- 202,789 44,453 98,376 182,676 26,141 139,984 --------------------- -------------------- ------------------- -------------------- ------------------------- --------------------- 7,342 (17,703) (98,376) 329,215 9,630 (96,239) --------------------- -------------------- ------------------- -------------------- ------------------------- --------------------- 150,888 769 69,789 258,721 -- 114,488 (323,155) (157,381) (171,738) (124,083) (71,213) 416,096 --------------------- -------------------- ------------------- -------------------- ------------------------- --------------------- (172,267) (156,612) (101,949) 134,638 (71,213) 530,584 --------------------- -------------------- ------------------- -------------------- ------------------------- --------------------- (7,030,963) (1,520,429) (3,571,608) (1,131,063) (663,582) (5,341,219) --------------------- -------------------- ------------------- -------------------- ------------------------- --------------------- (7,203,230) (1,677,041) (3,673,557) (996,425) (734,795) (4,810,635) --------------------- -------------------- ------------------- -------------------- ------------------------- --------------------- $ (7,195,888) $ (1,694,744) $ (3,771,933) $ (667,210) $ (725,165) $ (4,906,874) ===================== ==================== =================== ==================== ========================= =====================
The accompanying notes are an integral part of these financial statements. 28 METLIFE INVESTORS VARIABLE ANNUITY ACCOUNT ONE OF METLIFE INVESTORS INSURANCE COMPANY STATEMENTS OF OPERATIONS -- (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2008 MSF DWS GOVERNMENT & MSF DAVIS VENTURE HARRIS OAKMARK MSF AGENCY SECURITIES VALUE FOCUSED VALUE JENNISON GROWTH SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT -------------------- -------------------- ----------------- ---------------- INVESTMENT INCOME: Dividends $ 43,970 $ 2,761,410 $ 20,431 $ 1,274,205 -------------------- -------------------- ----------------- ---------------- EXPENSES: Mortality and expense risk charges 11,888 2,859,980 738,715 778,947 Administrative charges 1,890 563,430 125,745 142,387 -------------------- -------------------- ----------------- ---------------- Total expenses 13,778 3,423,410 864,460 921,334 -------------------- -------------------- ----------------- ---------------- Net investment income (loss) 30,192 (662,000) (844,029) 352,871 -------------------- -------------------- ----------------- ---------------- NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Realized gain distributions -- 1,316,244 6,230,725 4,977,419 Realized gains (losses) on sale of investments 2,741 2,495,398 (4,575,794) (617,242) -------------------- -------------------- ----------------- ---------------- 2,741 3,811,642 1,654,931 4,360,177 -------------------- -------------------- ----------------- ---------------- Change in unrealized gains (losses) on investments (3,036) (113,323,254) (29,688,547) (30,142,871) -------------------- -------------------- ----------------- ---------------- Net realized and unrealized gains (losses) on investments (295) (109,511,612) (28,033,616) (25,782,694) -------------------- -------------------- ----------------- ---------------- Net increase (decrease) in net assets resulting from operations $ 29,897 $ (110,173,612) $ (28,877,645) $ (25,429,823) ==================== ==================== ================= ================
(a) For the period April 28, 2008 to December 31, 2008. (b) For the period November 10, 2008 to December 31, 2008. The accompanying notes are an integral part of these financial statements. 29 MSF MFS TOTAL MSF CAPITAL MSF JULIUS BAER MSF BLACKROCK MSF METLIFE STOCK MSF BLACKROCK RETURN GUARDIAN U.S. EQUITY INTERNATIONAL STOCK MONEY MARKET INDEX BOND INCOME SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT ---------------- ----------------------- ---------------------- ------------- -------------------- -------------- $ 2,591,335 $ 1,226,197 $ 190,125 $ 3,992,860 $ 520,372 $ 1,467,185 ---------------- ----------------------- ---------------------- ------------- -------------------- -------------- 611,737 1,243,416 79,776 2,151,507 431,121 310,853 184,834 251,671 16,371 382,010 76,320 68,931 ---------------- ----------------------- ---------------------- ------------- -------------------- -------------- 796,571 1,495,087 96,147 2,533,517 507,441 379,784 ---------------- ----------------------- ---------------------- ------------- -------------------- -------------- 1,794,764 (268,890) 93,978 1,459,343 12,931 1,087,401 ---------------- ----------------------- ---------------------- ------------- -------------------- -------------- 6,019,035 16,755,615 808,514 -- 1,309,842 -- (956,044) (4,760,426) 3,164 -- (1,415,744) (61,016) ---------------- ----------------------- ---------------------- ------------- -------------------- -------------- 5,062,991 11,995,189 811,678 -- (105,902) (61,016) ---------------- ----------------------- ---------------------- ------------- -------------------- -------------- (26,370,639) (69,902,195) (4,769,119) -- (14,143,982) (2,502,023) ---------------- ----------------------- ---------------------- ------------- -------------------- -------------- (21,307,648) (57,907,006) (3,957,441) -- (14,249,884) (2,563,039) ---------------- ----------------------- ---------------------- ------------- -------------------- -------------- $ (19,512,884) $ (58,175,896) $ (3,863,463) $ 1,459,343 $ (14,236,953) $ (1,475,638) ================ ======================= ====================== ============= ==================== ==============
The accompanying notes are an integral part of these financial statements. 30 METLIFE INVESTORS VARIABLE ANNUITY ACCOUNT ONE OF METLIFE INVESTORS INSURANCE COMPANY STATEMENTS OF OPERATIONS -- (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2008 MSF WESTERN MSF ASSET MANAGEMENT MSF WESTERN ASSET MSF BLACKROCK FRANKLIN TEMPLETON STRATEGIC MANAGEMENT STRATEGIC VALUE SMALL CAP GROWTH BOND OPPORTUNITIES U.S. GOVERNMENT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT ------------------ --------------------- --------------------- ------------------ INVESTMENT INCOME: Dividends $ 4,333 $ -- $ 228,765 $ 104,389 ------------------ --------------------- --------------------- ------------------ EXPENSES: Mortality and expense risk charges 24,284 123,675 68,855 53,631 Administrative charges 4,868 28,140 12,973 9,148 ------------------ --------------------- --------------------- ------------------ Total expenses 29,152 151,815 81,828 62,779 ------------------ --------------------- --------------------- ------------------ Net investment income (loss) (24,819) (151,815) 146,937 41,610 ------------------ --------------------- --------------------- ------------------ NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Realized gain distributions 193,762 1,181,016 35,644 -- Realized gains (losses) on sale of investments (178,468) (332,527) (161,643) (54,425) ------------------ --------------------- --------------------- ------------------ 15,294 848,489 (125,999) (54,425) ------------------ --------------------- --------------------- ------------------ Change in unrealized gains (losses) on investments (925,119) (6,718,746) (987,962) (64,899) ------------------ --------------------- --------------------- ------------------ Net realized and unrealized gains (losses) on investments (909,825) (5,870,257) (1,113,961) (119,324) ------------------ --------------------- --------------------- ------------------ Net increase (decrease) in net assets resulting from operations $ (934,644) $ (6,022,072) $ (967,024) $ (77,714) ================== ===================== ===================== ==================
(a) For the period April 28, 2008 to December 31, 2008. (b) For the period November 10, 2008 to December 31, 2008. The accompanying notes are an integral part of these financial statements. 31 MSF MET/DIMENSIONAL MSF T. ROWE PRICE MSF T. ROWE PRICE MSF OPPENHEIMER INTERNATIONAL SMALL PUTNAM VT SMALL CAP GROWTH LARGE CAP GROWTH GLOBAL EQUITY MSF MFS VALUE COMPANY GROWTH AND INCOME SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT (A) SUB-ACCOUNT (B) SUB-ACCOUNT -------------------- -------------------- ------------------ ------------------ ---------------------- ------------------ $ -- $ 203,530 $ 293,974 $ -- $ -- $ 291,972 -------------------- -------------------- ------------------ ------------------ ---------------------- ------------------ 112,506 688,518 127,203 3,445 17 135,958 19,140 131,868 37,060 1,323 3 20,925 -------------------- -------------------- ------------------ ------------------ ---------------------- ------------------ 131,646 820,386 164,263 4,768 20 156,883 -------------------- -------------------- ------------------ ------------------ ---------------------- ------------------ (131,646) (616,856) 129,711 (4,768) (20) 135,089 -------------------- -------------------- ------------------ ------------------ ---------------------- ------------------ 1,866,055 3,289,435 592,386 -- -- 2,218,415 (197,984) (618,346) (390,534) (2,047) -- (1,328,521) -------------------- -------------------- ------------------ ------------------ ---------------------- ------------------ 1,668,071 2,671,089 201,852 (2,047) -- 889,894 -------------------- -------------------- ------------------ ------------------ ---------------------- ------------------ (5,486,077) (31,591,773) (8,211,330) (275,836) 1,427 (6,641,584) -------------------- -------------------- ------------------ ------------------ ---------------------- ------------------ (3,818,006) (28,920,684) (8,009,478) (277,883) 1,427 (5,751,690) -------------------- -------------------- ------------------ ------------------ ---------------------- ------------------ $ (3,949,652) $ (29,537,540) $ (7,879,767) $ (282,651) $ 1,407 $ (5,616,601) ==================== ==================== ================== ================== ====================== ==================
The accompanying notes are an integral part of these financial statements. 32 METLIFE INVESTORS VARIABLE ANNUITY ACCOUNT ONE OF METLIFE INVESTORS INSURANCE COMPANY STATEMENTS OF OPERATIONS -- (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2008 PUTNAM VT EQUITY FTVIPT TEMPLETON FTVIPT TEMPLETON PUTNAM VT VISTA INCOME GROWTH SECURITIES FOREIGN SECURITIES SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT ------------------ ------------------- -------------------- --------------------- INVESTMENT INCOME: Dividends $ -- $ 719,718 $ 293,262 $ 960,307 ------------------ ------------------- -------------------- --------------------- EXPENSES: Mortality and expense risk charges 34,801 274,016 124,698 473,354 Administrative charges 4,515 88,868 38,393 87,947 ------------------ ------------------- -------------------- --------------------- Total expenses 39,316 362,884 163,091 561,301 ------------------ ------------------- -------------------- --------------------- Net investment income (loss) (39,316) 356,834 130,171 399,006 ------------------ ------------------- -------------------- --------------------- NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Realized gain distributions -- 1,724,992 1,139,119 3,803,892 Realized gains (losses) on sale of investments (96,973) (948,491) (667,674) 346,936 ------------------ ------------------- -------------------- --------------------- (96,973) 776,501 471,445 4,150,828 ------------------ ------------------- -------------------- --------------------- Change in unrealized gains (losses) on investments (1,415,151) (14,412,375) (9,081,182) (24,255,313) ------------------ ------------------- -------------------- --------------------- Net realized and unrealized gains (losses) on investments (1,512,124) (13,635,874) (8,609,737) (20,104,485) ------------------ ------------------- -------------------- --------------------- Net increase (decrease) in net assets resulting from operations $ (1,551,440) $ (13,279,040) $ (8,479,566) $ (19,705,479) ================== =================== ==================== =====================
(a) For the period April 28, 2008 to December 31, 2008. (b) For the period November 10, 2008 to December 31, 2008. The accompanying notes are an integral part of these financial statements. 33 PIMCO VIT FIDELITY VIP GROWTH FIDELITY VIP PIMCO VIT PIMCO VIT STOCKSPLUS GROWTH PIMCO VIT OPPORTUNTIES EQUITY-INCOME HIGH YIELD LOW DURATION AND INCOME TOTAL RETURN SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT ---------------------- ---------------- --------------- --------------- -------------------- --------------- $ 782 $ 129,554 $ 565,478 $ 400,286 $ 82,351 $ 745,669 ---------------------- ---------------- --------------- --------------- -------------------- --------------- 2,068 77,774 88,122 124,037 14,469 211,036 247 14,053 17,911 24,100 2,768 37,843 ---------------------- ---------------- --------------- --------------- -------------------- --------------- 2,315 91,827 106,033 148,137 17,237 248,879 ---------------------- ---------------- --------------- --------------- -------------------- --------------- (1,533) 37,727 459,445 252,149 65,114 496,790 ---------------------- ---------------- --------------- --------------- -------------------- --------------- -- 6,668 17,989 157,489 -- 271,222 (972) (723,605) (285,605) (39,754) (21,068) 138,297 ---------------------- ---------------- --------------- --------------- -------------------- --------------- (972) (716,937) (267,616) 117,735 (21,068) 409,519 ---------------------- ---------------- --------------- --------------- -------------------- --------------- (121,192) (2,670,905) (2,115,063) (573,936) (667,123) (399,549) ---------------------- ---------------- --------------- --------------- -------------------- --------------- (122,164) (3,387,842) (2,382,679) (456,201) (688,191) 9,970 ---------------------- ---------------- --------------- --------------- -------------------- --------------- $ (123,697) $ (3,350,115) $ (1,923,234) $ (204,052) $ (623,077) $ 506,760 ====================== ================ =============== =============== ==================== ===============
The accompanying notes are an integral part of these financial statements. 34 METLIFE INVESTORS VARIABLE ANNUITY ACCOUNT ONE OF METLIFE INVESTORS INSURANCE COMPANY STATEMENTS OF OPERATIONS -- (CONCLUDED) FOR THE YEAR ENDED DECEMBER 31, 2008 AMERICAN FUNDS AMERICAN FUNDS GLOBAL SMALL AMERICAN FUNDS GLOBAL GROWTH CAPITALIZATION GROWTH SUB-ACCOUNT SUB-ACCOUNT (A) SUB-ACCOUNT (A) ----------------- ------------------ ------------------ INVESTMENT INCOME: Dividends $ 513,658 $ -- $ 139,071 ----------------- ------------------ ------------------ EXPENSES: Mortality and expense risk charges 117,780 5,084 23,234 Administrative charges 41,365 2,089 9,476 ----------------- ------------------ ------------------ Total expenses 159,145 7,173 32,710 ----------------- ------------------ ------------------ Net investment income (loss) 354,513 (7,173) 106,361 ----------------- ------------------ ------------------ NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Realized gain distributions 1,300,253 51,632 169,546 Realized gains (losses) on sale of investments (407,936) (145) (2,619) ----------------- ------------------ ------------------ 892,317 51,487 166,927 ----------------- ------------------ ------------------ Change in unrealized gains (losses) on investments (9,875,582) (925,619) (3,403,192) ----------------- ------------------ ------------------ Net realized and unrealized gains (losses) on investments (8,983,265) (874,132) (3,236,265) ----------------- ------------------ ------------------ Net increase (decrease) in net assets resulting from operations $ (8,628,752) $ (881,305) $ (3,129,904) ================= ================== ==================
(a) For the period April 28, 2008 to December 31, 2008. (b) For the period November 10, 2008 to December 31, 2008. The accompanying notes are an integral part of these financial statements. 35 This page is intentionally left blank. METLIFE INVESTORS VARIABLE ANNUITY ACCOUNT ONE OF METLIFE INVESTORS INSURANCE COMPANY STATEMENTS OF CHANGES IN NET ASSETS FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007 MIST LORD ABBETT GROWTH MIST LORD ABBETT BOND MIST VAN KAMPEN MID CAP AND INCOME DEBENTURE GROWTH SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT ---------------------------------- --------------------------------- ---------------------------- 2008 2007 2008 2007 2008 2007 ---------------- ----------------- ---------------- ---------------- --------------- ------------ INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) $ 2,878,692 $ (4,994,131) $ 7,681,542 $ 11,452,349 $ 107,729 $ (751,452) Net realized gains (losses) 75,488,021 115,178,646 656,949 6,040,166 4,471,992 8,239,289 Change in unrealized gains (losses) on investments (447,777,295) (79,135,154) (61,541,630) (2,410,074) (32,591,068) 4,492,175 ---------------- ----------------- ---------------- ---------------- --------------- ----------- Net increase (decrease) in net assets resulting from operations (369,410,582) 31,049,361 (53,203,139) 15,082,441 (28,011,347) 11,980,012 ---------------- ----------------- ---------------- ---------------- --------------- ----------- CONTRACT TRANSACTIONS: Purchase payments received from contract owners 7,681,417 11,212,350 2,953,663 4,240,291 1,187,834 1,504,132 Net transfers (including fixed account) (30,488,682) (54,262,515) (13,437,194) 11,783,676 215,484 (117,997) Contract charges (1,544,323) (1,668,932) (645,941) (612,646) (90,732) (85,621) Transfers for contract benefits and terminations (105,238,732) (164,838,040) (30,892,819) (40,523,084) (5,809,831) (7,307,159) ---------------- ----------------- ---------------- ---------------- --------------- ----------- Net increase (decrease) in net assets resulting from contract transactions (129,590,320) (209,557,137) (42,022,291) (25,111,763) (4,497,245) (6,006,645) ---------------- ----------------- ---------------- ---------------- --------------- ----------- Net increase (decrease) in net assets (499,000,902) (178,507,776) (95,225,430) (10,029,322) (32,508,592) 5,973,367 NET ASSETS: Beginning of period 1,075,806,092 1,254,313,868 297,943,064 307,972,386 62,713,816 56,740,449 ---------------- ----------------- ---------------- ---------------- --------------- ----------- End of period $ 576,805,190 $1,075,806,092 $ 202,717,634 $ 297,943,064 $ 30,205,224 $62,713,816 ================ ================= ================ ================ =============== ===========
(a) For the period November 12, 2007 to December 31, 2007. (b) For the period April 28, 2008 to December 31, 2008. (c) For the period November 10, 2008 to December 31, 2008. The accompanying notes are an integral part of these financial statements. 37 MIST OPPENHEIMER CAPITAL MIST PIMCO INFLATION MIST LEGG MASON PARTNERS MIST LORD ABBETT MID CAP VALUE APPRECIATION PROTECTED BOND AGGRESSIVE GROWTH SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT --------------------------------- -------------------------------- ------------------------------- ------------------------------- 2008 2007 2008 2007 2008 2007 2008 2007 ---------------- ---------------- --------------- ---------------- --------------- --------------- --------------- --------------- $ (1,437,787) $ (1,949,084) $ 2,167,628 $ (2,158,233) $ 1,140,401 $ 293,469 $ (1,076,474) $ (1,466,510) 20,733,611 63,221,508 25,622,832 12,572,235 544,791 (311,237) (740,291) 12,102,031 (130,229,067) (66,496,374) (86,056,623) 6,087,101 (6,836,010) 5,102,007 (30,593,166) (9,681,223) ---------------- ---------------- --------------- ---------------- --------------- --------------- --------------- --------------- (110,933,243) (5,223,950) (58,266,163) 16,501,103 (5,150,818) 5,084,239 (32,409,931) 954,298 ---------------- ---------------- --------------- ---------------- --------------- --------------- --------------- --------------- 2,738,203 4,043,298 1,042,536 2,855,465 2,668,082 1,107,113 826,015 1,029,435 (8,691,481) 30,314,787 (4,986,998) (5,712,512) 3,170,544 (4,135,018) (3,473,834) (11,218,628) (548,249) (587,954) (333,836) (370,835) (255,613) (212,872) (248,809) (260,696) (25,494,498) (32,984,406) (10,774,536) (18,448,880) (6,187,370) (8,108,229) (6,190,991) (11,475,909) ---------------- ---------------- --------------- ---------------- --------------- --------------- --------------- --------------- (31,996,025) 785,725 (15,052,834) (21,676,762) (604,357) (11,349,006) (9,087,619) (21,925,798) ---------------- ---------------- --------------- ---------------- --------------- --------------- --------------- --------------- (142,929,268) (4,438,225) (73,318,997) (5,175,659) (5,755,175) (6,264,767) (41,497,550) (20,971,500) 300,178,790 304,617,015 137,207,385 142,383,044 58,385,153 64,649,920 87,874,559 108,846,059 ---------------- ---------------- --------------- ---------------- --------------- --------------- --------------- --------------- $ 157,249,522 $ 300,178,790 $ 63,888,388 $ 137,207,385 $ 52,629,978 $ 58,385,153 $ 46,377,009 $ 87,874,559 ================ ================ =============== ================ =============== =============== =============== ===============
The accompanying notes are an integral part of these financial statements. 38 METLIFE INVESTORS VARIABLE ANNUITY ACCOUNT ONE OF METLIFE INVESTORS INSURANCE COMPANY STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007 MIST T. ROWE PRICE MIST PIMCO TOTAL RETURN MIST RCM TECHNOLOGY MID CAP GROWTH SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT --------------------------------- ------------------------------ ------------------------------- 2008 2007 2008 2007 2008 2007 ---------------- ---------------- -------------- --------------- --------------- --------------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) $ 6,507,955 $ 5,229,885 $ 1,272,140 $ (193,572) $ (1,155,160) $ (1,506,226) Net realized gains (losses) 8,244,884 2,331,006 2,374,634 1,611,755 8,512,173 18,345,680 Change in unrealized gains (losses) on investments (17,376,018) 8,899,903 (9,505,545) 1,394,620 (42,460,534) (2,363,951) ---------------- ---------------- -------------- --------------- --------------- --------------- Net increase (decrease) in net assets resulting from operations (2,623,179) 16,460,794 (5,858,771) 2,812,803 (35,103,521) 14,475,503 ---------------- ---------------- -------------- --------------- --------------- --------------- CONTRACT TRANSACTIONS: Purchase payments received from contract owners 14,360,343 6,705,950 313,863 623,149 2,098,306 1,858,117 Net transfers (including fixed account) 17,043,691 (36,672,842) 62,062 1,020,488 (5,518,318) (21,806,132) Contract charges (906,270) (746,145) (50,202) (39,441) (299,770) (304,641) Transfers for contract benefits and terminations (26,667,003) (29,825,925) (1,273,202) (1,857,208) (5,759,962) (9,828,883) ---------------- ---------------- -------------- --------------- --------------- --------------- Net increase (decrease) in net assets resulting from contract transactions 3,830,761 (60,538,962) (947,479) (253,012) (9,479,744) (30,081,539) ---------------- ---------------- -------------- --------------- --------------- --------------- Net increase (decrease) in net assets 1,207,582 (44,078,168) (6,806,250) 2,559,791 (44,583,265) (15,606,036) NET ASSETS: Beginning of period 283,533,965 327,612,133 13,379,138 10,819,347 92,323,883 107,929,919 ---------------- ---------------- -------------- --------------- --------------- --------------- End of period $ 284,741,547 $ 283,533,965 $ 6,572,888 $ 13,379,138 $ 47,740,618 $ 92,323,883 ================ ================ ============== =============== =============== ===============
(a) For the period November 12, 2007 to December 31, 2007. (b) For the period April 28, 2008 to December 31, 2008. (c) For the period November 10, 2008 to December 31, 2008. The accompanying notes are an integral part of these financial statements. 39 MIST MFS RESEARCH MIST MET/AIM MIST HARRIS OAKMARK INTERNATIONAL SMALL CAP GROWTH MIST LAZARD MID CAP INTERNATIONAL SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT --------------------------------- ------------------------------- ------------------------------- ------------------------------- 2008 2007 2008 2007 2008 2007 2008 2007 ---------------- ---------------- --------------- --------------- --------------- --------------- --------------- --------------- $ 975,729 $ (234,867) $ (893,719) $ (1,253,245) $ (181,959) $ (849,008) $ (29,002) $ (961,214) 14,685,937 53,178,619 4,785,312 5,567,084 686,705 3,649,383 8,352,364 19,096,850 (100,286,811) (28,438,195) (29,976,745) 2,748,635 (21,651,761) (8,367,898) (42,639,657) (20,427,971) ---------------- ---------------- --------------- --------------- --------------- --------------- --------------- --------------- (84,625,145) 24,505,557 (26,085,152) 7,062,474 (21,147,015) (5,567,523) (34,316,295) (2,292,335) ---------------- ---------------- --------------- --------------- --------------- --------------- --------------- --------------- 1,564,709 3,091,828 770,644 1,104,874 1,212,086 970,650 1,854,893 3,589,805 (8,854,055) (20,789,635) (2,702,702) (11,524,866) (1,658,871) 38,717,032 (7,695,975) (7,371,011) (440,880) (467,382) (225,926) (248,344) (116,437) (122,812) (281,959) (366,378) (16,861,098) (27,464,298) (5,003,155) (8,793,334) (4,694,679) (8,322,280) (6,704,144) (14,345,886) ---------------- ---------------- --------------- --------------- --------------- --------------- --------------- --------------- (24,591,324) (45,629,487) (7,161,139) (19,461,670) (5,257,901) 31,242,590 (12,827,185) (18,493,470) ---------------- ---------------- --------------- --------------- --------------- --------------- --------------- --------------- (109,216,469) (21,123,930) (33,246,291) (12,399,196) (26,404,916) 25,675,067 (47,143,480) (20,785,805) 212,534,722 233,658,652 71,015,556 83,414,752 57,995,812 32,320,745 91,235,231 112,021,036 ---------------- ---------------- --------------- --------------- --------------- --------------- --------------- --------------- $ 103,318,253 $ 212,534,722 $ 37,769,265 $ 71,015,556 $ 31,590,896 $ 57,995,812 $ 44,091,751 $ 91,235,231 ================ ================ =============== =============== =============== =============== =============== ===============
The accompanying notes are an integral part of these financial statements. 40 METLIFE INVESTORS VARIABLE ANNUITY ACCOUNT ONE OF METLIFE INVESTORS INSURANCE COMPANY STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007 MIST THIRD AVENUE SMALL CAP VALUE MIST CLARION GLOBAL REAL ESTATE MIST TURNER MID CAP GROWTH SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT ---------------------------------- ---------------------------------- -------------------------- 2008 2007 2008 2007 2008 2007 --------------- -------------- --------------- ------------------ -------------- ------------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) $ (580,855) $ (617,092) $ 94,544 $ (394,985) $ (230,635) $ (230,973) Net realized gains (losses) 3,958,446 12,461,171 2,809,566 13,924,010 955,149 1,182,006 Change in unrealized gains (losses) on investments (24,557,518) (15,368,056) (22,764,007) (22,726,254) (8,720,370) 1,656,841 --------------- -------------- --------------- ------------------ -------------- ------------- Net increase (decrease) in net assets resulting from operations (21,179,927) (3,523,977) (19,859,897) (9,197,229) (7,995,856) 2,607,874 --------------- -------------- --------------- ------------------ -------------- ------------- CONTRACT TRANSACTIONS: Purchase payments received from contract owners 1,747,128 2,373,546 1,111,512 1,380,038 632,260 316,041 Net transfers (including fixed account) (7,020,888) (9,566,979) (464,633) (16,110,806) 1,687,752 1,405,514 Contract charges (267,497) (306,577) (137,301) (172,173) (67,583) (49,879) Transfers for contract benefits and terminations (5,543,381) (11,509,670) (3,920,981) (5,909,025) (1,669,608) (1,551,821) --------------- -------------- --------------- ------------------ -------------- ------------- Net increase (decrease) in net assets resulting from contract transactions (11,084,638) (19,009,680) (3,411,403) (20,811,966) 582,821 119,855 --------------- -------------- --------------- ------------------ -------------- ------------- Net increase (decrease) in net assets (32,264,565) (22,533,657) (23,271,300) (30,009,195) (7,413,035) 2,727,729 NET ASSETS: Beginning of period 77,454,105 99,987,762 49,736,129 79,745,324 15,254,136 12,526,407 --------------- -------------- --------------- ------------------ -------------- ------------- End of period $ 45,189,540 $ 77,454,105 $ 26,464,829 $ 49,736,129 $ 7,841,101 $ 15,254,136 =============== =============== =============== ================== ============== =============
(a) For the period November 12, 2007 to December 31, 2007. (b) For the period April 28, 2008 to December 31, 2008. (c) For the period November 10, 2008 to December 31, 2008. The accompanying notes are an integral part of these financial statements. 41 MIST GOLDMAN SACHS MID CAP VALUE MIST METLIFE DEFENSIVE STRATEGY MIST METLIFE MODERATE STRATEGY MIST METLIFE BALANCED STRATEGY SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT ------------------------------- --------------------------------- ------------------------------- --------------------------------- 2008 2007 2008 2007 2008 2007 2008 2007 --------------- ------------- ---------------- ----------------- --------------- --------------- ----------------- --------------- $ (222,229) $ (461,424) $ (476,443) $ 72,624 $ 638,042 $ 793,370 $ 38,258,458 $ (594,130) 595,808 5,857,376 1,439,845 5,763,804 9,795,620 11,340,759 70,988,843 33,913,027 (10,493,383) (4,801,691) (43,824,472) (1,339,403) (156,198,486) 3,240,393 (561,336,623) (6,671,966) --------------- ------------- ---------------- ----------------- --------------- --------------- ----------------- --------------- (10,119,804) 594,261 (42,861,070) 4,497,025 (145,764,824) 15,374,522 (452,089,322) 26,646,931 --------------- ------------- ---------------- ----------------- --------------- --------------- ----------------- --------------- 113,289 1,763,452 23,335,865 18,083,629 64,203,413 88,123,674 145,691,405 248,140,018 (5,169,433) (2,913,613) 66,071,547 50,416,359 39,435,766 90,812,816 307,409,420 161,679,772 (107,326) (131,808) (884,121) (421,775) (2,215,505) (1,418,022) (6,189,656) (3,691,226) (2,464,874) (4,431,382) (17,858,871) (20,031,173) (33,630,419) (28,457,799) (72,023,161) (94,872,655) --------------- ------------- ---------------- ----------------- --------------- --------------- ----------------- --------------- (7,628,344) (5,713,351) 70,664,420 48,047,040 67,793,255 149,060,669 374,888,008 311,255,909 --------------- ------------- ---------------- ----------------- --------------- --------------- ----------------- --------------- (17,748,148) (5,119,090) 27,803,350 52,544,065 (77,971,569) 164,435,191 (77,201,314) 337,902,840 33,020,433 38,139,523 144,052,470 91,508,405 480,378,237 315,943,046 1,240,119,183 902,216,343 --------------- ------------- ---------------- ----------------- --------------- --------------- ----------------- --------------- $ 15,272,285 $33,020,433 $ 171,855,820 $ 144,052,470 $ 402,406,668 $ 480,378,237 $1,162,917,869 $1,240,119,183 =============== ============= ================ ================= =============== =============== ================= ===============
The accompanying notes are an integral part of these financial statements. 42 METLIFE INVESTORS VARIABLE ANNUITY ACCOUNT ONE OF METLIFE INVESTORS INSURANCE COMPANY STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007 MIST METLIFE GROWTH STRATEGY MIST METLIFE AGGRESSIVE STRATEGY MIST VAN KAMPEN COMSTOCK SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT ----------------------------------- ----------------------------------- ---------------------------- 2008 2007 2008 2007 2008 2007 --------------- -------------- ------------- -------------- ------------ ------------ INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) $ 23,167,310 $ (6,635,427) $ 1,702,243 $ (606,381) $ 423,518 $ 129,545 Net realized gains (losses) 79,025,273 40,655,333 8,428,719 19,847,925 1,394,902 2,986,429 Change in unrealized gains (losses) on investments (666,449,701) (9,782,182) (60,284,139) (16,495,905) (32,472,657) (6,500,013) --------------- --------------- ------------- -------------- ------------ ------------ Net increase (decrease) in net assets resulting from operations (564,257,118) 24,237,724 (50,153,177) 2,745,639 (30,654,237) (3,384,039) --------------- --------------- ------------- -------------- ------------ ------------ CONTRACT TRANSACTIONS: Purchase payments received from contract owners 144,008,397 359,280,576 4,299,562 8,773,830 3,019,266 5,084,048 Net transfers (including fixed account) 203,930,812 100,035,711 72,518,370 (16,236,835) 5,672,326 5,074,707 Contract charges (7,218,167) (4,214,074) (506,808) (521,857) (195,629) (178,491) Transfers for contract benefits and terminations (63,568,795) (83,736,881) (9,086,394) (23,365,665) (6,547,124) (6,023,327) --------------- --------------- ------------- -------------- ------------ ------------ Net increase (decrease) in net assets resulting from contract transactions 277,152,247 371,365,332 67,224,730 (31,350,527) 1,948,839 3,956,937 --------------- --------------- ------------- -------------- ------------ ------------ Net increase (decrease) in net assets (287,104,871) 395,603,056 17,071,553 (28,604,888) (28,705,398) 572,898 NET ASSETS: Beginning of period 1,381,939,858 986,336,802 125,554,567 154,159,455 82,325,135 81,752,237 --------------- --------------- ------------- -------------- ------------ ------------ End of period $1,094,834,987 $1,381,939,858 $142,626,120 $ 125,554,567 $ 53,619,737 $ 82,325,135 =============== =============== ============= ============== ============ ============
(a) For the period November 12, 2007 to December 31, 2007. (b) For the period April 28, 2008 to December 31, 2008. (c) For the period November 10, 2008 to December 31, 2008. The accompanying notes are an integral part of these financial statements. 43 MIST SSGA GROWTH AND MIST MET/AIM CAPITAL MIST SSGA GROWTH ETF INCOME ETF MIST LEGG MASON VALUE EQUITY APPRECIATION SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT ------------------------------- ------------------------------- ------------------------------- ------------------------------ 2008 2007 2008 2007 2008 2007 2008 2007 --------------- --------------- --------------- --------------- --------------- --------------- -------------- --------------- $ 16,888 $ (482,507) $ 215,276 $ (598,720) $ (313,496) $ (493,962) $ 78,258 $ (270,530) 219,724 688,517 310,970 493,233 260,273 717,707 (834,449) (1,083,063) (10,587,025) 961,089 (17,291,850) 992,983 (16,435,096) (2,403,673) (6,020,995) 3,322,820 --------------- --------------- --------------- --------------- --------------- --------------- -------------- --------------- (10,350,413) 1,167,099 (16,765,604) 887,496 (16,488,319) (2,179,928) (6,777,186) 1,969,227 --------------- --------------- --------------- --------------- --------------- --------------- -------------- --------------- 1,014,397 6,953,032 5,296,169 21,569,605 566,166 610,917 2,976 27,164 (5,756,466) 641,745 4,436,746 10,800,285 2,999,774 (7,944,133) (750,162) (1,443,656) (92,437) (99,194) (288,857) (86,387) (82,171) (109,257) (20,818) (23,940) (785,691) (1,304,305) (1,929,541) (1,492,568) (1,296,955) (1,930,339) (2,165,781) (3,664,772) --------------- --------------- --------------- --------------- --------------- --------------- -------------- --------------- (5,620,197) 6,191,278 7,514,517 30,790,935 2,186,814 (9,372,812) (2,933,785) (5,105,204) --------------- --------------- --------------- --------------- --------------- --------------- -------------- --------------- (15,970,610) 7,358,377 (9,251,087) 31,678,431 (14,301,505) (11,552,740) (9,710,971) (3,135,977) 35,243,332 27,884,955 57,258,882 25,580,451 28,657,072 40,209,812 17,443,288 20,579,265 --------------- --------------- --------------- --------------- --------------- --------------- -------------- --------------- $ 19,272,722 $ 35,243,332 $ 48,007,795 $ 57,258,882 $ 14,355,567 $ 28,657,072 $ 7,732,317 $ 17,443,288 =============== =============== =============== =============== =============== =============== ============== ===============
The accompanying notes are an integral part of these financial statements. 44 METLIFE INVESTORS VARIABLE ANNUITY ACCOUNT ONE OF METLIFE INVESTORS INSURANCE COMPANY STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007 MIST MFS EMERGING MIST PIONEER FUND MIST PIONEER STRATEGIC INCOME MARKETS EQUITY SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT ----------------------------- -------------------------------- ------------------------------ 2008 2007 2008 2007 2008 2007 -------------- -------------- -------------- ----------------- --------------- -------------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) $ (1,672) $ (1,134) $ 116,067 $ (4,342) $ (248,604) $ (81,160) Net realized gains (losses) (11,061) 14,144 (8,044) 1,498 157,167 1,806,676 Change in unrealized gains (losses) on investments (390,089) (1,486) (418,059) 60,651 (26,807,070) (483,026) -------------- -------------- -------------- ----------------- --------------- -------------- Net increase (decrease) in net assets resulting from operations (402,822) 11,524 (310,036) 57,807 (26,898,507) 1,242,490 -------------- -------------- -------------- ----------------- --------------- -------------- CONTRACT TRANSACTIONS: Purchase payments received from contract owners 232,593 37,715 169,689 120,856 1,313,055 816,921 Net transfers (including fixed account) 962,060 342,557 1,322,095 1,042,216 45,043,323 (6,771,533) Contract charges (1,859) (1,078) (4,109) (1,762) (85,645) (22,391) Transfers for contract benefits and terminations (50,715) (70,842) (174,342) (67,625) (2,307,931) (627,808) -------------- -------------- -------------- ----------------- --------------- -------------- Net increase (decrease) in net assets resulting from contract transactions 1,142,079 308,352 1,313,333 1,093,685 43,962,802 (6,604,811) -------------- -------------- -------------- ----------------- --------------- -------------- Net increase (decrease) in net assets 739,257 319,876 1,003,297 1,151,492 17,064,295 (5,362,321) NET ASSETS: Beginning of period 693,986 374,110 1,515,237 363,745 6,784,979 12,147,300 -------------- -------------- -------------- ----------------- --------------- -------------- End of period $ 1,433,243 $ 693,986 $ 2,518,534 $ 1,515,237 $ 23,849,274 $ 6,784,979 ============== ============== ============== ================= =============== ==============
(a) For the period November 12, 2007 to December 31, 2007. (b) For the period April 28, 2008 to December 31, 2008. (c) For the period November 10, 2008 to December 31, 2008. The accompanying notes are an integral part of these financial statements. 45 MIST AMERICAN MIST AMERICAN MIST LOOMIS SAYLES MIST AMERICAN FUNDS BALANCED MIST AMERICAN FUNDS GROWTH GLOBAL MARKETS MIST RAINIER LARGE CAP EQUITY FUNDS GROWTH ALLOCATION FUNDS BOND ALLOCATION SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT ------------------------------ -------------------------------- ---------------- ----------------- ---------------- -------------- 2008 2007 2008 2007 (A) 2008 (B) 2008 (B) 2008 (B) 2008 (B) -------------- --------------- -------------- ----------------- ---------------- ----------------- ---------------- -------------- $ 266,307 $ (54,750) $ (96,008) $ (536) $ 281,459 $ 2,494,757 $ 227,133 $ 3,306,836 (1,124,049) 83,104 (503,097) 27 (244,423) (87,687) (47,436) (156,529) (3,950,906) 384,134 (1,839,760) 11,289 (3,082,009) (19,128,434) (480,363) (31,509,925) -------------- --------------- -------------- ----------------- ---------------- ----------------- ---------------- -------------- (4,808,648) 412,488 (2,438,865) 10,780 (3,044,973) (16,721,364) (300,666) (28,359,618) -------------- --------------- -------------- ----------------- ---------------- ----------------- ---------------- -------------- 2,281,996 740,921 270,825 10,612 5,932,527 54,106,258 3,651,708 66,217,183 (4,739,324) 12,610,746 6,836,351 1,132,471 5,542,435 46,719,640 1,782,471 53,565,291 (30,205) (5,199) (39,719) (486) (3,837) (86,818) (3,008) (104,701) (708,070) (99,502) (1,348,908) (3,747) (50,496) (1,168,336) (35,333) (828,215) -------------- --------------- -------------- ----------------- ---------------- ----------------- ---------------- -------------- (3,195,603) 13,246,966 5,718,549 1,138,850 11,420,629 99,570,744 5,395,838 118,849,558 -------------- --------------- -------------- ----------------- ---------------- ----------------- ---------------- -------------- (8,004,251) 13,659,454 3,279,684 1,149,630 8,375,656 82,849,380 5,095,172 90,489,940 14,022,527 363,073 1,149,630 -- -- -- -- -- -------------- --------------- -------------- ----------------- ---------------- ----------------- ---------------- -------------- $ 6,018,276 $ 14,022,527 $ 4,429,314 $ 1,149,630 $ 8,375,656 $ 82,849,380 $ 5,095,172 $ 90,489,940 ============== =============== ============== ================= ================ ================= ================ ==============
The accompanying notes are an integral part of these financial statements. 46 METLIFE INVESTORS VARIABLE ANNUITY ACCOUNT ONE OF METLIFE INVESTORS INSURANCE COMPANY STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007 MIST AMERICAN MIST AMERICAN FUNDS MIST MIST DREMAN MIST MET/ MIST MET/ FUNDS MODERATE BLACKROCK SMALL CAP TEMPLETON FRANKLIN INTERNATIONAL ALLOCATION HIGH YIELD VALUE GROWTH MUTUAL SHARES SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT ---------------- ---------------- -------------- -------------- -------------- ---------------- 2008 (B) 2008 (B) 2008 (B) 2008 (B) 2008 (B) 2008 (B) ---------------- ---------------- -------------- -------------- -------------- ---------------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) $ 332,150 $ 1,546,632 $ (6,586) $ (2,209) $ 4,538 $ 305,388 Net realized gains (losses) (333,000) (30,775) (93,076) (2,760) (8,281) (1,777) Change in unrealized gains (losses) on investments (1,746,438) (7,661,392) (148,411) (110,891) (434,777) (2,457,683) ---------------- ---------------- -------------- -------------- -------------- ---------------- Net increase (decrease) in net assets resulting from operations (1,747,288) (6,145,535) (248,073) (115,860) (438,520) (2,154,072) ---------------- ---------------- -------------- -------------- -------------- ---------------- CONTRACT TRANSACTIONS: Purchase payments received from contract owners 3,386,433 24,835,473 698,261 172,090 674,944 4,406,661 Net transfers (including fixed account) 3,938,494 32,363,334 544,700 744,639 2,113,934 10,058,873 Contract charges (2,742) (53,075) (156) (119) (266) (1,776) Transfers for contract benefits and terminations (28,476) (593,462) (277,622) (1,994) (8,125) (66,454) ---------------- ---------------- -------------- -------------- -------------- ---------------- Net increase (decrease) in net assets resulting from contract transactions 7,293,709 56,552,270 965,183 914,616 2,780,487 14,397,304 ---------------- ---------------- -------------- -------------- -------------- ---------------- Net increase (decrease) in net assets 5,546,421 50,406,735 717,110 798,756 2,341,967 12,243,232 NET ASSETS: Beginning of period -- -- -- -- -- -- ---------------- ---------------- -------------- -------------- -------------- ---------------- End of period $ 5,546,421 $ 50,406,735 $ 717,110 $ 798,756 $ 2,341,967 $ 12,243,232 ================ ================ ============== ============== ============== ================
(a) For the period November 12, 2007 to December 31, 2007. (b) For the period April 28, 2008 to December 31, 2008. (c) For the period November 10, 2008 to December 31, 2008. The accompanying notes are an integral part of these financial statements. 47 MIST MET/ FRANKLIN TEMPLETON FOUNDING STRATEGY RUSSELL MULTI-STYLE EQUITY RUSSELL AGGRESSIVE EQUITY RUSSELL NON-U.S. SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT --------------- ------------------------------ ----------------------------- ----------------------------- 2008 (B) 2008 2007 2008 2007 2008 2007 --------------- -------------- --------------- -------------- -------------- -------------- -------------- $ 712,075 $ 7,342 $ (84,295) $ (17,703) $ (50,324) $ (98,376) $ 103,834 (22,288) (172,267) 1,394,489 (156,612) 806,705 (101,949) 2,710,802 (9,495,004) (7,030,963) 592,416 (1,520,429) (630,885) (3,571,608) (1,924,328) --------------- -------------- --------------- -------------- -------------- -------------- -------------- (8,805,217) (7,195,888) 1,902,610 (1,694,744) 125,496 (3,771,933) 890,308 --------------- -------------- --------------- -------------- -------------- -------------- -------------- 27,288,722 41,600 3,000 9,517 5,463 1,450 1,500 32,165,020 (64,063) (885,723) 11,466 (111,636) 121,349 (424,537) (23,373) (5,035) (5,573) (980) (1,152) (2,187) (2,554) (521,898) (1,893,953) (6,311,113) (390,627) (1,170,972) (924,644) (2,539,176) --------------- -------------- --------------- -------------- -------------- -------------- -------------- 58,908,471 (1,921,451) (7,199,409) (370,624) (1,278,297) (804,032) (2,964,767) --------------- -------------- --------------- -------------- -------------- -------------- -------------- 50,103,254 (9,117,339) (5,296,799) (2,065,368) (1,152,801) (4,575,965) (2,074,459) -- 18,778,587 24,075,386 4,129,569 5,282,370 9,316,786 11,391,245 --------------- -------------- --------------- -------------- -------------- -------------- -------------- $ 50,103,254 $ 9,661,248 $ 18,778,587 $ 2,064,201 $ 4,129,569 $ 4,740,821 $ 9,316,786 =============== ============== =============== ============== ============== ============== ==============
The accompanying notes are an integral part of these financial statements. 48 METLIFE INVESTORS VARIABLE ANNUITY ACCOUNT ONE OF METLIFE INVESTORS INSURANCE COMPANY STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007 RUSSELL CORE BOND RUSSELL REAL ESTATE SECURITIES AIM V.I. INTERNATIONAL GROWTH SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT ----------------------------- --------------------------------- -------------------------------- 2008 2007 2008 2007 2008 2007 ------------- --------------- -------------- ------------------ -------------- ----------------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) $ 329,215 $ 552,643 $ 9,630 $ 22,552 $ (96,239) $ (147,117) Net realized gains (losses) 134,638 (2,625) (71,213) 654,085 530,584 2,774,652 Change in unrealized gains (losses) on investments (1,131,063) 269,128 (663,582) (1,146,552) (5,341,219) (916,127) ------------- --------------- -------------- ------------------ -------------- ----------------- Net increase (decrease) in net assets resulting from operations (667,210) 819,146 (725,165) (469,915) (4,906,874) 1,711,408 ------------- --------------- -------------- ------------------ -------------- ----------------- CONTRACT TRANSACTIONS: Purchase payments received from contract owners -- -- 2,250 -- 57,336 237,958 Net transfers (including fixed account) (687,594) 591,776 12,936 (83,243) (1,817,140) (2,862,172) Contract charges (3,369) (3,283) (451) (565) (25,210) (29,000) Transfers for contract benefits and terminations (1,578,395) (2,287,628) (228,543) (550,204) (1,109,135) (1,612,501) ------------- --------------- -------------- ------------------ -------------- ----------------- Net increase (decrease) in net assets resulting from contract transactions (2,269,358) (1,699,135) (213,808) (634,012) (2,894,149) (4,265,715) ------------- --------------- -------------- ------------------ -------------- ----------------- Net increase (decrease) in net assets (2,936,568) (879,989) (938,973) (1,103,927) (7,801,023) (2,554,307) NET ASSETS: Beginning of period 14,474,327 15,354,316 2,112,446 3,216,373 13,839,627 16,393,934 ------------- --------------- -------------- ------------------ -------------- ----------------- End of period $ 11,537,759 $ 14,474,327 $ 1,173,473 $ 2,112,446 $ 6,038,604 $ 13,839,627 ============= =============== ============== ================== ============== =================
(a) For the period November 12, 2007 to December 31, 2007. (b) For the period April 28, 2008 to December 31, 2008. (c) For the period November 10, 2008 to December 31, 2008. The accompanying notes are an integral part of these financial statements. 49 DWS GOVERNMENT & AGENCY SECURITIES MSF DAVIS VENTURE VALUE MSF HARRIS OAKMARK FOCUSED VALUE MSF JENNISON GROWTH SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT ----------------------------- --------------------------------- ----------------------------------- ------------------------------- 2008 2007 2008 2007 2008 2007 2008 2007 ------------ ---------------- ---------------- ---------------- --------------- ------------------- --------------- --------------- $ 30,192 $ 44,208 $ (662,000) $ (2,716,298) $ (844,029) $ (1,127,587) $ 352,871 $ (1,046,814) 2,741 (2,240) 3,811,642 26,405,264 1,654,931 14,505,871 4,360,177 7,883,237 (3,036) 3,658 (113,323,254) (14,384,112) (29,688,547) (19,716,259) (30,142,871) (53,240) ------------ ---------------- ---------------- ---------------- --------------- ------------------- --------------- --------------- 29,897 45,626 (110,173,612) 9,304,854 (28,877,645) (6,337,975) (25,429,823) 6,783,183 ------------ ---------------- ---------------- ---------------- --------------- ------------------- --------------- --------------- 1,281 767 7,585,238 9,227,908 748,033 1,561,994 1,105,987 2,021,231 (60,257) (62,290) (4,358,461) (36,082,691) (4,258,045) (5,363,293) (2,359,853) (12,266,830) (1,376) (1,213) (826,197) (894,124) (214,593) (280,871) (232,382) (241,555) (164,359) (255,573) (20,193,584) (29,176,963) (4,325,206) (10,713,648) (4,750,130) (9,657,087) ------------ ---------------- ---------------- ---------------- --------------- ------------------- --------------- --------------- (224,711) (318,309) (17,793,004) (56,925,870) (8,049,811) (14,795,818) (6,236,378) (20,144,241) ------------ ---------------- ---------------- ---------------- --------------- ------------------- --------------- --------------- (194,814) (272,683) (127,966,616) (47,621,016) (36,927,456) (21,133,793) (31,666,201) (13,361,058) 1,048,765 1,321,448 286,644,026 334,265,042 67,473,501 88,607,294 70,723,890 84,084,948 ------------ ---------------- ---------------- ---------------- --------------- ------------------- --------------- --------------- $ 853,951 $ 1,048,765 $ 158,677,410 $ 286,644,026 $ 30,546,045 $ 67,473,501 $ 39,057,689 $ 70,723,890 ============ ================ ================ ================ =============== =================== =============== ===============
The accompanying notes are an integral part of these financial statements. 50 METLIFE INVESTORS VARIABLE ANNUITY ACCOUNT ONE OF METLIFE INVESTORS INSURANCE COMPANY STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007 MSF CAPITAL GUARDIAN MSF JULIUS BAER MSF MFS TOTAL RETURN U.S. EQUITY INTERNATIONAL STOCK SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT ------------------------------- ------------------------------- ----------------------------- 2008 2007 2008 2007 2008 2007 --------------- --------------- --------------- --------------- -------------- -------------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) $ 1,794,764 $ 764,627 $ (268,890) $ (1,581,140) $ 93,978 $ (56,061) Net realized gains (losses) 5,062,991 4,238,118 11,995,189 19,980,858 811,678 2,741,083 Change in unrealized gains (losses) on investments (26,370,639) (2,480,780) (69,902,195) (19,731,356) (4,769,119) (1,871,753) --------------- --------------- --------------- --------------- -------------- -------------- Net increase (decrease) in net assets resulting from operations (19,512,884) 2,521,965 (58,175,896) (1,331,638) (3,863,463) 813,269 --------------- --------------- --------------- --------------- -------------- -------------- CONTRACT TRANSACTIONS: Purchase payments received from contract owners 1,844,816 2,971,797 577,040 1,826,006 80,963 118,021 Net transfers (including fixed account) 1,666,610 5,661,719 (5,878,278) (5,604,110) 88,103 (3,454,663) Contract charges (167,407) (154,144) (217,655) (240,222) (30,089) (32,136) Transfers for contract benefits and terminations (7,347,556) (8,149,348) (12,860,790) (21,814,215) (528,760) (555,807) --------------- --------------- --------------- --------------- -------------- -------------- Net increase (decrease) in net assets resulting from contract transactions (4,003,537) 330,024 (18,379,683) (25,832,541) (389,783) (3,924,585) --------------- --------------- --------------- --------------- -------------- -------------- Net increase (decrease) in net assets (23,516,421) 2,851,989 (76,555,579) (27,164,179) (4,253,246) (3,111,316) NET ASSETS: Beginning of period 86,770,491 83,918,502 153,904,080 181,068,259 8,920,544 12,031,860 --------------- --------------- --------------- --------------- -------------- -------------- End of period $ 63,254,070 $ 86,770,491 $ 77,348,501 $153,904,080 $ 4,667,298 $ 8,920,544 =============== =============== =============== =============== ============== ==============
(a) For the period November 12, 2007 to December 31, 2007. (b) For the period April 28, 2008 to December 31, 2008. (c) For the period November 10, 2008 to December 31, 2008. The accompanying notes are an integral part of these financial statements. 51 MSF BLACKROCK MONEY MARKET MSF METLIFE STOCK INDEX MSF BLACKROCK BOND INCOME MSF BLACKROCK STRATEGIC VALUE SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT ------------------------------- ------------------------------- ------------------------------- -------------------------------- 2008 2007 2008 2007 2008 2007 2008 2007 --------------- --------------- --------------- --------------- --------------- --------------- -------------- ----------------- $ 1,459,343 $ 3,239,963 $ 12,931 $ (329,656) $ 1,087,401 $ 432,948 $ (24,819) $ (37,534) -- -- (105,902) 4,282,606 (61,016) (157,357) 15,294 229,921 -- -- (14,143,982) (2,637,207) (2,502,023) 1,003,600 (925,119) (324,702) --------------- --------------- --------------- --------------- --------------- --------------- -------------- ----------------- 1,459,343 3,239,963 (14,236,953) 1,315,743 (1,475,638) 1,279,191 (934,644) (132,315) --------------- --------------- --------------- --------------- --------------- --------------- -------------- ----------------- 25,860,624 24,525,877 706,646 831,403 1,786,820 1,231,591 7,237 28,675 150,514,889 82,824,803 (154,326) 266,696 6,670,340 (7,094,151) 166,031 (319,905) (518,549) (318,953) (118,449) (123,990) (70,103) (54,741) (8,607) (8,907) (67,186,602) (91,619,481) (2,269,533) (3,686,152) (3,172,434) (2,251,227) (80,705) (179,167) --------------- --------------- --------------- --------------- --------------- --------------- -------------- ----------------- 108,670,362 15,412,246 (1,835,662) (2,712,043) 5,214,623 (8,168,528) 83,956 (479,304) --------------- --------------- --------------- --------------- --------------- --------------- -------------- ----------------- 110,129,705 18,652,209 (16,072,615) (1,396,300) 3,738,985 (6,889,337) (850,688) (611,619) 109,887,921 91,235,712 38,415,249 39,811,549 29,400,150 36,289,487 2,389,410 3,001,029 --------------- --------------- --------------- --------------- --------------- --------------- -------------- ----------------- $220,017,626 $109,887,921 $ 22,342,634 $ 38,415,249 $ 33,139,135 $ 29,400,150 $ 1,538,722 $ 2,389,410 =============== =============== =============== =============== =============== =============== ============== =================
The accompanying notes are an integral part of these financial statements. 52 METLIFE INVESTORS VARIABLE ANNUITY ACCOUNT ONE OF METLIFE INVESTORS INSURANCE COMPANY STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007 MSF FRANKLIN TEMPLETON MSF WESTERN ASSET MANAGEMENT MSF WESTERN ASSET MANAGEMENT SMALL CAP GROWTH STRATEGIC BOND OPPORTUNITIES U.S. GOVERNMENT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT ------------------------------ ------------------------------- ------------------------------- 2008 2007 2008 2007 2008 2007 -------------- --------------- -------------- ---------------- -------------- ---------------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) $ (151,815) $ (200,740) $ 146,937 $ 56,877 $ 41,610 $ 5,790 Net realized gains (losses) 848,489 1,840,066 (125,999) 31,871 (54,425) 6,291 Change in unrealized gains (losses) on investments (6,718,746) (1,127,390) (987,962) 45,831 (64,899) 22,512 -------------- --------------- -------------- ---------------- -------------- ---------------- Net increase (decrease) in net assets resulting from operations (6,022,072) 511,936 (967,024) 134,579 (77,714) 34,593 -------------- --------------- -------------- ---------------- -------------- ---------------- CONTRACT TRANSACTIONS: Purchase payments received from contract owners 739,587 1,211,623 18,349 138,787 1,076,198 588,059 Net transfers (including fixed account) 1,736,129 (8,429,640) (204,765) 11,202 4,028,292 309,580 Contract charges (38,339) (40,179) (18,508) (16,322) (7,352) (2,997) Transfers for contract benefits and terminations (720,716) (610,551) (472,449) (545,786) (422,821) (57,170) -------------- --------------- -------------- ---------------- -------------- ---------------- Net increase (decrease) in net assets resulting from contract transaction 1,716,661 (7,868,747) (677,373) (412,119) 4,674,317 837,472 -------------- --------------- -------------- ---------------- -------------- ---------------- Net increase (decrease) in net assets (4,305,411) (7,356,811) (1,644,397) (277,540) 4,596,603 872,065 NET ASSETS: Beginning of period 13,363,331 20,720,142 5,877,310 6,154,850 1,940,597 1,068,532 -------------- --------------- -------------- ---------------- -------------- ---------------- End of period $ 9,057,920 $ 13,363,331 $ 4,232,913 $ 5,877,310 $ 6,537,200 $ 1,940,597 ============== =============== ============== ================ ============== ================
(a) For the period November 12, 2007 to December 31, 2007. (b) For the period April 28, 2008 to December 31, 2008. (c) For the period November 10, 2008 to December 31, 2008. The accompanying notes are an integral part of these financial statements. 53 MSF MET/ DIMENSIONAL MSF T. ROWE PRICE SMALL CAP MSF T. ROWE PRICE LARGE CAP MSF MFS INTERNATIONAL GROWTH GROWTH MSF OPPENHEIMER GLOBAL EQUITY VALUE SMALL COMPANY SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT -------------------------------- ------------------------------- -------------------------------- ---------------------------- 2008 2007 2008 2007 2008 2007 2008 (B) 2008 (C) ------------- ------------- --------------- --------------- --------------- ---------------- -------------- ----------- $ (131,646) $ (174,843) $ (616,856) $ (966,497) $ 129,711 $ (35,192) $ (4,768) $ (20) 1,668,071 613,009 2,671,089 6,886,356 201,852 678,988 (2,047) -- (5,486,077) 540,791 (31,591,773) 497,289 (8,211,330) 247,590 (275,836) 1,427 ------------- ------------- --------------- --------------- --------------- ---------------- -------------- ----------- (3,949,652) 978,957 (29,537,540) 6,417,148 (7,879,767) 891,386 (282,651) 1,407 ------------- ------------- --------------- --------------- --------------- ---------------- -------------- ----------- 83,282 128,842 590,582 1,180,528 308,140 593,732 530,667 34,889 (347,798) (482,627) (1,877,989) (42,288,504) 494,518 2,688,988 1,861,328 610 (23,340) (22,563) (194,280) (219,216) (33,937) (34,234) (419) -- (844,938) (1,438,408) (4,764,742) (6,567,377) (1,276,247) (1,775,559) (10,602) (509) ------------- ------------- --------------- --------------- --------------- ---------------- -------------- ----------- (1,132,794) (1,814,756) (6,246,429) (47,894,569) (507,526) 1,472,927 2,380,974 34,990 ------------- ------------- --------------- --------------- --------------- ---------------- -------------- ----------- (5,082,446) (835,799) (35,783,969) (41,477,421) (8,387,293) 2,364,313 2,098,323 36,397 11,605,383 12,441,182 73,226,346 114,703,767 19,496,970 17,132,657 -- -- ------------- ------------- --------------- --------------- --------------- ---------------- -------------- ----------- $ 6,522,937 $ 11,605,383 $ 37,442,377 $ 73,226,346 $ 11,109,677 $ 19,496,970 $ 2,098,323 $ 36,397 ============= ============= =============== =============== =============== ================ ============== ===========
The accompanying notes are an integral part of these financial statements. 54 METLIFE INVESTORS VARIABLE ANNUITY ACCOUNT ONE OF METLIFE INVESTORS INSURANCE COMPANY STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007 PUTNAM VT GROWTH AND INCOME PUTNAM VT VISTA PUTNAM VT EQUITY INCOME SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT ------------------------------ ----------------------------- ------------------------------- 2008 2007 2008 2007 2008 2007 -------------- --------------- -------------- -------------- --------------- --------------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) $ 135,089 $ 37,708 $ (39,316) $ (62,496) $ 356,834 $ 121,566 Net realized gains (losses) 889,894 3,284,631 (96,973) (91,634) 776,501 3,453,450 Change in unrealized gains (losses) on investments (6,641,584) (4,429,636) (1,415,151) 303,960 (14,412,375) (2,799,230) -------------- --------------- -------------- -------------- --------------- --------------- Net increase (decrease) in net assets resulting from operations (5,616,601) (1,107,297) (1,551,440) 149,830 (13,279,040) 775,786 -------------- --------------- -------------- -------------- --------------- --------------- CONTRACT TRANSACTIONS: Purchase payments received from contract owners 154,486 173,693 37,962 45,530 329,561 2,042,424 Net transfers (including fixed account) (1,033,975) (332,401) (21,599) (640,816) (1,601,167) 5,143,454 Contract charges (12,089) (13,766) (1,759) (2,196) (85,355) (82,070) Transfers for contract benefits and terminations (1,371,375) (3,855,070) (413,006) (952,330) (3,716,681) (3,298,665) -------------- --------------- -------------- -------------- --------------- --------------- Net increase (decrease) in net assets resulting from contract transaction (2,262,953) (4,027,544) (398,402) (1,549,812) (5,073,642) 3,805,143 -------------- --------------- -------------- -------------- --------------- --------------- Net increase (decrease) in net assets (7,879,554) (5,134,841) (1,949,842) (1,399,982) (18,352,682) 4,580,929 NET ASSETS: Beginning of period 15,743,571 20,878,412 3,664,269 5,064,251 44,391,661 39,810,732 -------------- --------------- -------------- -------------- --------------- --------------- End of period $ 7,864,017 $ 15,743,571 $ 1,714,427 $ 3,664,269 $ 26,038,979 $ 44,391,661 ============== =============== ============== ============== =============== ===============
(a) For the period November 12, 2007 to December 31, 2007. (b) For the period April 28, 2008 to December 31, 2008. (c) For the period November 10, 2008 to December 31, 2008. The accompanying notes are an integral part of these financial statements. 55 FTVIPT TEMPLETON GROWTH FTVIPT TEMPLETON FOREIGN SECURITIES SECURITIES FIDELITY VIP GROWTH OPPORTUNTIES FIDELITY VIP EQUITY-INCOME SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT -------------------------------- ------------------------------- ----------------------------------- ----------------------------- 2008 2007 2008 2007 2008 2007 2008 2007 --------------- ---------------- --------------- --------------- ------------ ------------------ -------------- -------------- $ 130,171 $ 37,661 $ 399,006 $ 267,150 $ (1,533) $ (3,102) $ 37,727 $ 9,362 471,445 1,071,572 4,150,828 11,333,908 (972) 1,990 (716,937) 1,052,696 (9,081,182) (1,077,442) (24,255,313) (4,646,750) (121,192) 44,671 (2,670,905) (1,072,377) --------------- ---------------- --------------- --------------- ------------ ------------------ -------------- -------------- (8,479,566) 31,791 (19,705,479) 6,954,308 (123,697) 43,559 (3,350,115) (10,319) --------------- ---------------- --------------- --------------- ------------ ------------------ -------------- -------------- 329,132 2,446,243 338,447 1,159,342 17,178 1,250 78,119 68,011 1,122,885 6,683,188 (3,325,795) (18,625,145) 25,413 (6,290) (1,121,943) 518,279 (34,758) (26,308) (121,029) (131,977) (148) (189) (20,905) (24,212) (1,152,048) (1,105,032) (3,456,818) (4,984,549) (8,566) (65,156) (654,528) (860,963) --------------- ---------------- --------------- --------------- ------------ ------------------ -------------- -------------- 265,211 7,998,091 (6,565,195) (22,582,329) 33,877 (70,385) (1,719,257) (298,885) --------------- ---------------- --------------- --------------- ------------ ------------------ -------------- -------------- (8,214,355) 8,029,882 (26,270,674) (15,628,021) (89,820) (26,826) (5,069,372) (309,204) 18,987,897 10,958,015 52,175,234 67,803,255 197,857 224,683 8,847,588 9,156,792 --------------- ---------------- --------------- --------------- ------------ ------------------ -------------- -------------- $ 10,773,542 $ 18,987,897 $ 25,904,560 $ 52,175,234 $ 108,037 $ 197,857 $ 3,778,216 $ 8,847,588 =============== ================ =============== =============== ============ ================== ============== ==============
The accompanying notes are an integral part of these financial statements. 56 METLIFE INVESTORS VARIABLE ANNUITY ACCOUNT ONE OF METLIFE INVESTORS INSURANCE COMPANY STATEMENTS OF CHANGES IN NET ASSETS -- (CONCLUDED) FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007 PIMCO VIT HIGH YIELD PIMCO VIT LOW DURATION SUB-ACCOUNT SUB-ACCOUNT ----------------------------- ----------------------------- 2008 2007 2008 2007 -------------- -------------- -------------- -------------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) $ 459,445 $ 509,321 $ 252,149 $ 292,400 Net realized gains (losses) (267,616) 107,324 117,735 (23,753) Change in unrealized gains (losses) on investments (2,115,063) (393,524) (573,936) 232,553 -------------- -------------- -------------- -------------- Net increase (decrease) in net assets resulting from operations (1,923,234) 223,121 (204,052) 501,200 -------------- -------------- -------------- -------------- CONTRACT TRANSACTIONS: Purchase payments received from contract owners 45,484 236,367 105,035 85,852 Net transfers (including fixed account) (588,046) (5,917,985) 1,239,819 (109,712) Contract charges (29,574) (29,500) (37,730) (28,171) Transfers for contract benefits and terminations (577,569) (499,934) (696,452) (1,159,110) -------------- -------------- -------------- -------------- Net increase (decrease) in net assets resulting from contract transaction (1,149,705) (6,211,052) 610,672 (1,211,141) -------------- -------------- -------------- -------------- Net increase (decrease) in net assets (3,072,939) (5,987,931) 406,620 (709,941) NET ASSETS: Beginning of period 8,446,130 14,434,061 8,992,891 9,702,832 -------------- -------------- -------------- -------------- End of period $ 5,373,192 $ 8,446,130 $ 9,399,511 $ 8,992,891 ============== ============== ============== ==============
(a) For the period November 12, 2007 to December 31, 2007. (b) For the period April 28, 2008 to December 31, 2008. (c) For the period November 10, 2008 to December 31, 2008. The accompanying notes are an integral part of these financial statements. 57 AMERICAN FUNDS AMERICAN PIMCO VIT STOCKSPLUS GROWTH GLOBAL SMALL FUNDS AND INCOME PIMCO VIT TOTAL RETURN AMERICAN FUNDS GLOBAL GROWTH CAPITALIZATION GROWTH SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT ------------------------------ ------------------------------- ------------------------------- ----------------- --------------- 2008 2007 2008 2007 2008 2007 2008 (B) 2008 (B) ------------ ----------------- --------------- --------------- --------------- --------------- ----------------- --------------- $ 65,114 $ 96,156 $ 496,790 $ 646,032 $ 354,513 $ 149,045 $ (7,173) $ 106,361 (21,068) 51,946 409,519 90,176 892,317 220,803 51,487 166,927 (667,123) (69,013) (399,549) 558,878 (9,875,582) 111,988 (925,619) (3,403,192) ------------ ----------------- --------------- --------------- --------------- --------------- ----------------- --------------- (623,077) 79,089 506,760 1,295,086 (8,628,752) 481,836 (881,305) (3,129,904) ------------ ----------------- --------------- --------------- --------------- --------------- ----------------- --------------- 3,912 55,775 5,666 5,445 3,599,210 1,764,876 802,399 4,160,363 158,854 2,522 (2,359,150) (3,013,968) 17,940,820 8,265,449 3,239,814 13,240,482 (3,880) (4,149) (36,973) (33,199) (23,611) (5,398) (224) (1,596) (110,206) (75,136) (2,580,385) (2,974,796) (943,913) (314,508) (16,599) (85,581) ------------ ----------------- --------------- --------------- --------------- --------------- ----------------- --------------- 48,680 (20,988) (4,970,842) (6,016,518) 20,572,506 9,710,419 4,025,390 17,313,668 ------------ ----------------- --------------- --------------- --------------- --------------- ----------------- --------------- (574,397) 58,101 (4,464,082) (4,721,432) 11,943,754 10,192,255 3,144,085 14,183,764 1,512,979 1,454,878 18,565,738 23,287,170 10,517,598 325,343 -- -- ------------ ----------------- --------------- --------------- --------------- --------------- ----------------- --------------- $ 938,582 $ 1,512,979 $ 14,101,656 $ 18,565,738 $ 22,461,352 $ 10,517,598 $ 3,144,085 $ 14,183,764 ============ ================= =============== =============== =============== =============== ================= ===============
The accompanying notes are an integral part of these financial statements. 58 METLIFE INVESTORS VARIABLE ANNUITY ACCOUNT ONE OF METLIFE INVESTORS INSURANCE COMPANY NOTES TO THE FINANCIAL STATEMENTS 1. ORGANIZATION MetLife Investors Variable Annuity Account One (the "Separate Account"), a separate account of MetLife Investors Insurance Company (the "Company"), was established by the Company's Board of Directors on February 24, 1987 to support operations of the Company with respect to certain variable annuity contracts (the "Contracts"). The Company is a direct wholly-owned subsidiary of MetLife, Inc., a Delaware corporation. The Separate Account is registered as a unit investment trust under the Investment Company Act of 1940, as amended, and exists in accordance with the regulations of the Missouri Department of Insurance. The Separate Account is divided into Sub-Accounts, each of which is treated as an individual accounting entity for financial reporting purposes. Each Sub-Account invests in shares of the corresponding portfolio, series, or fund (with the same name) of registered investment management companies (the "Trusts"), which are presented below: Met Investors Series Trust ("MIST")* Russell Investment Funds ("Russell") AIM Variable Insurance Funds ("AIM V.I.") DWS Variable Series II ("DWS") Metropolitan Series Fund, Inc. ("MSF")* Putnam Variable Trust ("Putnam VT") Franklin Templeton Variable Insurance Products Trust ("FTVIPT") Fidelity Variable Insurance Products ("Fidelity VIP") PIMCO Variable Insurance Trust ("PIMCO VIT") American Funds Insurance Series ("American Funds") * See Note 3 for discussion of additional information on related party transactions. The assets of each of the Sub-Accounts of the Separate Account are registered in the name of the Company. Under applicable insurance law, the assets and liabilities of the Separate Account are clearly identified and distinguished from the Company's other assets and liabilities. The portion of the Separate Account's assets applicable to the Contracts is not chargeable with liabilities arising out of any other business the Company may conduct. Purchase payments, less any applicable charges, applied to the Separate Account are invested in one or more Sub-Accounts in accordance with the selection made by the contract owner. The following Sub-Accounts were available for investment as of December 31, 2008: MIST Lord Abbett Growth and Income Sub-Account* MIST Lord Abbett Bond Debenture Sub-Account* MIST Van Kampen Mid Cap Growth Sub-Account MIST Lord Abbett Mid Cap Value Sub-Account* MIST Oppenheimer Capital Appreciation Sub-Account* MIST PIMCO Inflation Protected Bond Sub-Account MIST Legg Mason Partners Aggressive Growth Sub-Account* MIST PIMCO Total Return Sub-Account* MIST RCM Technology Sub-Account MIST T. Rowe Price Mid Cap Growth Sub-Account* MIST MFS Research International Sub-Account* MIST Met/AIM Small Cap Growth Sub-Account* MIST Lazard Mid Cap Sub-Account* MIST Harris Oakmark International Sub-Account MIST Third Avenue Small Cap Value Sub-Account* MIST Clarion Global Real Estate Sub-Account* MIST Turner Mid Cap Growth Sub-Account MIST Goldman Sachs Mid Cap Value Sub-Account MIST MetLife Defensive Strategy Sub-Account MIST MetLife Moderate Strategy Sub-Account MIST MetLife Balanced Strategy Sub-Account MIST MetLife Growth Strategy Sub-Account MIST MetLife Aggressive Strategy Sub-Account MIST Van Kampen Comstock Sub-Account MIST SSgA Growth ETF Sub-Account MIST SSgA Growth and Income ETF Sub-Account 59 METLIFE INVESTORS VARIABLE ANNUITY ACCOUNT ONE OF METLIFE INVESTORS INSURANCE COMPANY NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) 1. ORGANIZATION -- (CONTINUED) MIST Legg Mason Value Equity Sub-Account MIST Met/AIM Capital Appreciation Sub-Account* MIST Pioneer Fund Sub-Account MIST Pioneer Strategic Income Sub-Account MIST MFS Emerging Markets Equity Sub-Account* MIST Loomis Sayles Global Markets Sub-Account MIST Rainier Large Cap Equity Sub-Account MIST American Funds Growth Sub-Account (a) MIST American Funds Balanced Allocation Sub-Account (a) MIST American Funds Bond Sub-Account (a) MIST American Funds Growth Allocation Sub-Account (a) MIST American Funds International Sub-Account (a) MIST American Funds Moderate Allocation Sub-Account (a) MIST BlackRock High Yield Sub-Account (a) MIST Dreman Small Cap Value Sub-Account (a) MIST Met/Templeton Growth Sub-Account (a) MIST Met/Franklin Mutual Shares Sub-Account (a) MIST Met/Franklin Templeton Founding Strategy Sub-Account (a) Russell Multi-Style Equity Sub-Account Russell Aggressive Equity Sub-Account Russell Non-U.S. Sub-Account Russell Core Bond Sub-Account Russell Real Estate Securities Sub-Account AIM V.I. International Growth Sub-Account DWS Government & Agency Securities Sub-Account MSF Davis Venture Value Sub-Account* MSF Harris Oakmark Focused Value Sub-Account MSF Jennison Growth Sub-Account MSF MFS Total Return Sub-Account* MSF Capital Guardian U.S. Equity Sub-Account* MSF Julius Baer International Stock Sub-Account* MSF BlackRock Money Market Sub-Account* MSF MetLife Stock Index Sub-Account* MSF BlackRock Bond Income Sub-Account* MSF BlackRock Strategic Value Sub-Account MSF Franklin Templeton Small Cap Growth Sub-Account MSF Western Asset Management Strategic Bond Opportunities Sub-Account* MSF Western Asset Management U.S. Government Sub-Account MSF T. Rowe Price Small Cap Growth Sub-Account* MSF T. Rowe Price Large Cap Growth Sub-Account* MSF Oppenheimer Global Equity Sub-Account MSF MFS Value Sub-Account (a) MSF Met/Dimensional International Small Company Sub-Account (a) Putnam VT Growth and Income Sub-Account* Putnam VT Vista Sub-Account* Putnam VT Equity Income Sub-Account FTVIPT Templeton Growth Securities Sub-Account* FTVIPT Templeton Foreign Securities Sub-Account Fidelity VIP Growth Opportunties Sub-Account Fidelity VIP Equity-Income Sub-Account* PIMCO VIT High Yield Sub-Account PIMCO VIT Low Duration Sub-Account PIMCO VIT StocksPLUS Growth and Income Sub-Account PIMCO VIT Total Return Sub-Account American Funds Global Growth Sub-Account American Funds Global Small Capitalization Sub-Account (a) American Funds Growth Sub-Account (a) * This Sub-Account invests in two or more share classes within the underlying portfolio, series, or fund of the Trusts that may assess 12b-1 fees. (a) This Sub-Account began operations during the year ended December 31, 2008. The following Sub-Accounts ceased operations during the year ended December 31, 2008: FTVIPT Templeton Developing Markets Securities Sub-Account MIST Strategic Conservative Growth Sub-Account MIST Strategic Growth and Income Sub-Account MIST Strategic Growth Sub-Account 60 METLIFE INVESTORS VARIABLE ANNUITY ACCOUNT ONE OF METLIFE INVESTORS INSURANCE COMPANY NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) 1. ORGANIZATION -- (CONCLUDED) The operations of the Sub-Accounts were affected by the following changes that occurred during the year ended December 31, 2008: NAME CHANGES: OLD NAME Neuberger Berman Real Estate Portfolio FI International Stock Portfolio Cyclical Growth and Income ETF Portfolio Cyclical Growth ETF Portfolio NEW NAME Clarion Global Estate Portfolio Julius Baer International Stock Portfolio SSgA Growth and Income ETF Portfolio SSgA Growth ETF Portfolio SUBSTITUTION: OLD NAME Templeton Developing Markets Securities Fund NEW NAME MFS Emerging Markets Equity Portfolio MERGERS: OLD NAME Strategic Conservative Growth Portfolio Strategic Growth and Income Portfolio Strategic Growth Portfolio NEW NAME MetLife Growth Strategy Portfolio MetLife Balanced Strategy Portfolio MetLife Aggressive Strategy Portfolio This report is prepared for the general information of contract owners and is not an offer of units of the Separate Account or shares of the Separate Account's underlying investments. It should not be used in connection with any offer except in conjunction with the prospectus for the Separate Account products offered by the Company and the prospectus of the underlying portfolio, series, or fund which collectively contain all the pertinent information, including additional information on charges and expenses. 2. SIGNIFICANT ACCOUNTING POLICIES BASIS OF ACCOUNTING The financial statements included herein have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") applicable to variable annuity separate accounts registered as unit investment trusts. SECURITY TRANSACTIONS Security transactions are recorded on a trade date basis. Realized gains and losses on the sales of investments are computed on the basis of the average cost of the investment sold. Income from dividends and realized gain distributions are recorded on the ex-distribution date. SECURITY VALUATION The Sub-Accounts' investment in shares of the portfolio, series or fund of the Trusts is valued at fair value based on the closing net asset value or price per share as determined by the Trusts as of the end of year. All changes in fair value are recorded as changes in unrealized gains (losses) on investments in the statements of operations of the applicable Sub-Accounts. FEDERAL INCOME TAXES The operations of the Separate Account form a part of the total operations of the Company and are not taxed separately. The Company is taxed as a life insurance company under the provisions of the Internal Revenue Code ("IRC"). Under the current provisions of the IRC, the Company does not expect to incur federal income taxes on the earnings of the Separate Account to the extent the earnings are credited under the Contracts. Accordingly, no 61 METLIFE INVESTORS VARIABLE ANNUITY ACCOUNT ONE OF METLIFE INVESTORS INSURANCE COMPANY NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) 2. SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED) charge is being made to the Separate Account for federal income taxes. The Company will periodically review the status of this policy in the event of changes in the tax law. A charge may be made in future years for any federal income taxes that would be attributable to the Contracts. ANNUITY PAYOUTS Net assets allocated to Contracts in the payout period are computed according to industry standard mortality tables. The assumed investment return is 3.0 percent. The mortality risk is fully borne by the Company and may result in additional amounts being transferred into the Separate Account by the Company to cover greater longevity of annuitants than expected. Conversely, if amounts allocated exceed amounts required, transfers may be made to the Company. PURCHASE PAYMENTS Purchase payments received from contract owners by the Company are credited as accumulation units as of the end of the valuation period in which received, as provided in the prospectus, and are reported as contract transactions on the statements of changes in net assets of the applicable Sub-Accounts. NET TRANSFERS Funds transferred by the contract owner into or out of Sub-Accounts within the Separate Account or into or out of the fixed account (an investment option in the Company's general account) are recorded on a net basis as net transfers in the statements of changes in net assets of the applicable Sub-Accounts. 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 PRONOUNCEMENTS In September 2006, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 157, FAIR VALUE MEASUREMENTS ("SFAS 157"). SFAS 157 defines fair value, establishes a consistent framework for measuring fair value, establishes a fair value hierarchy based on the observability of inputs used to measure fair value, and requires enhanced disclosures about fair value measurements. SFAS 157 defines fair value as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. SFAS 157 prioritizes the inputs to fair valuation techniques and allows for the use of unobservable inputs to the extent that observable inputs are not available. The Separate Account has categorized its assets and liabilities based on the priority of the inputs to the respective valuation technique. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). An asset or liability's classification within the fair value hierarchy is based on the lowest level of significant input to its valuation. SFAS 157 defines the input levels as follows: Level 1 Unadjusted quoted prices in active markets for identical assets or liabilities. Level 2 Quoted prices in markets that are not active or inputs that are observable either directly or indirectly. Level 3 Unobservable inputs that are supported by little or no market activity and are significant to the fair value of the assets or liabilities. Effective January 1, 2008, the Separate Account adopted SFAS 157 and applied provisions of the statement prospectively to assets and liabilities measured at fair value. The adoption of SFAS 157 had no impact on the fair value of items measured at fair value. Each Sub-Account invests in shares of open-end mutual funds which calculate a daily net asset value based on the value of the underlying securities in its portfolios. As a result, and as required by law, shares of open-end mutual funds are purchased and redeemed at their quoted daily net asset value as reported by the Trusts at the close of each business day. On that basis, the fair value measurements of all shares held by the Separate Account are reported as Level 1. 62 METLIFE INVESTORS VARIABLE ANNUITY ACCOUNT ONE OF METLIFE INVESTORS INSURANCE COMPANY NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) 2. SIGNIFICANT ACCOUNTING POLICIES -- (CONCLUDED) Effective January 1, 2007, the Company adopted 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. The adoption of FIN 48 had no impact on the financial statements of each of the Sub-Accounts. FUTURE ADOPTION OF NEW ACCOUNTING PRONOUNCEMENT In December 2007, the FASB issued SFAS No. 160, NONCONTROLLING INTERESTS IN CONSOLIDATED FINANCIAL STATEMENTS -- AN AMENDMENT OF ACCOUNTING RESEARCH BULLETIN NO. 51 ("SFAS 160"). SFAS 160 defines and establishes accounting and reporting standards for noncontrolling interests in a subsidiary. The pronouncement is effective for fiscal years beginning on or after December 15, 2008. The Separate Account believes the adoption of SFAS 160 will have no material impact on the financial statements of each of the Sub-Accounts. 3. EXPENSES AND RELATED PARTY TRANSACTIONS The following annual Separate Account charges are asset-based charges and assessed through a daily reduction in unit values, which are recorded as expenses in the accompanying statements of operations of the applicable Sub-Accounts: MORTALITY AND EXPENSE RISK -- The mortality risk assumed by the Company is the risk that those insured may die sooner than anticipated and therefore, the Company will pay an aggregate amount of death benefits greater than anticipated.The expense risk assumed is where expenses incurred in issuing and administering the Contracts will exceed the amounts realized from the administrative charges assessed against the Contracts. In addition, the charge compensates the Company for the risk that the investor may live longer than estimated and the Company would be obligated to pay more in income payments than anticipated. ADMINISTRATIVE -- The Company has responsibility for the administration of the Contracts and the Separate Account. Generally, the administrative charge is related to the maintenance, including distribution, of each contract and the Separate Account. OPTIONAL DEATH BENEFIT RIDER -- For an additional charge, the total death benefit payable may be increased based on the earnings in the Contracts. The table below represents the range of effective annual rates for each respective charge for the year ended December 31, 2008: Mortality and Expense Risk 0.50% - 1.60% --------------- Administrative 0.15% - 0.25% --------------- Optional Death Benefit Rider 0.15% - 0.35% ===============
The above referenced charges may not necessarily correspond to the costs associated with providing the services or benefits indicated by the designation of the charge or associated with a particular contract. A contract maintenance fee of $30 is assessed on an annual basis for Contracts with a value of less than $50,000. A transfer fee of $25 may be deducted after twelve transfers are made in a contract year or, if less, 2% of the amount transferred from the contract value. In addition, most Contracts impose a surrender charge which ranges from 0% to 8% if the contract is partially or fully surrendered within the specified surrender charge period. A transaction charge of the lesser of $10 or 2% of the surrender is imposed on surrenders as well as $10 for annuitizations. For those contract owners who choose optional living benefit riders or certain optional death benefit riders, these charges range from .35% to 1.50% of the account value and are charged at each contract anniversary date. These charges are assessed through the redemption of units and are recorded as contract charges in the accompanying statements of changes in net assets of the applicable Sub-Accounts. Certain investments in the various portfolios, series, or funds in the MIST and MSF Trusts hold shares which are managed by Met Investors Advisory, LLC and Metlife Advisers, LLC, respectively. Both act in the capacity of investment advisor and are indirect affiliates of the Company. 63 METLIFE INVESTORS VARIABLE ANNUITY ACCOUNT ONE OF METLIFE INVESTORS INSURANCE COMPANY NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) 4. STATEMENTS OF INVESTMENTS FOR THE YEAR ENDED AS OF DECEMBER 31, 2008 DECEMBER 31, 2008 ------------------------- ---------------------------- COST OF PROCEEDS SHARES COST ($) PURCHASES ($) FROM SALES ($) ----------- ------------- ------------- -------------- MIST Lord Abbett Growth and Income Sub-Account 35,204,348 849,466,231 106,426,691 144,187,236 MIST Lord Abbett Bond Debenture Sub-Account 20,944,447 252,279,078 17,252,315 47,569,757 MIST Van Kampen Mid Cap Growth Sub-Account 5,393,396 48,493,165 7,375,317 7,175,888 MIST Lord Abbett Mid Cap Value Sub-Account 15,272,238 292,395,645 40,673,598 39,137,832 MIST Oppenheimer Capital Appreciation Sub-Account 16,398,859 128,733,347 35,904,946 19,097,687 MIST PIMCO Inflation Protected Bond Sub-Account 5,370,463 57,402,360 20,128,861 19,474,241 MIST Legg Mason Partners Aggressive Growth Sub-Account 10,302,481 73,195,760 1,396,122 10,978,658 MIST PIMCO Total Return Sub-Account 24,769,818 284,372,780 56,764,659 39,631,268 MIST RCM Technology Sub-Account 2,809,348 12,733,262 7,335,876 3,941,202 MIST T. Rowe Price Mid Cap Growth Sub-Account 9,165,948 71,543,680 18,015,823 19,619,950 MIST MFS Research International Sub-Account 14,024,614 168,733,005 30,207,987 35,537,131 MIST Met/AIM Small Cap Growth Sub-Account 4,591,128 57,109,290 10,184,434 12,952,235 MIST Lazard Mid Cap Sub-Account 4,575,346 59,322,952 7,429,098 9,124,217 MIST Harris Oakmark International Sub-Account 5,205,694 77,885,379 16,511,048 18,036,769 MIST Third Avenue Small Cap Value Sub-Account 4,408,206 63,761,365 8,582,451 15,782,726 MIST Clarion Global Real Estate Sub-Account 3,589,266 48,770,719 7,173,291 6,366,338 MIST Turner Mid Cap Growth Sub-Account 1,084,655 12,672,523 6,450,733 4,756,860 MIST Goldman Sachs Mid Cap Value Sub-Account 1,916,327 25,421,248 3,916,310 9,651,283 MIST MetLife Defensive Strategy Sub-Account 19,867,799 209,936,436 105,593,982 31,996,852 MIST MetLife Moderate Strategy Sub-Account 48,717,569 522,912,730 116,816,168 35,988,633 MIST MetLife Balanced Strategy Sub-Account 159,961,270 1,611,215,188 530,876,998 40,674,009 MIST MetLfie Growth Strategy Sub-Account 153,985,297 1,621,008,814 455,952,294 71,297,734 MIST MetLife Aggressive Strategy Sub-Account 22,603,277 193,459,678 103,784,841 22,654,697 MIST Van Kampen Comstock Sub-Account 7,850,815 83,288,272 11,658,932 6,569,411 MIST SSgA Growth ETF Sub-Account 2,474,079 26,791,611 2,702,844 7,743,070 MIST SSgA Growth and Income ETF Sub-Account 5,674,709 62,818,302 14,251,128 5,277,690 MIST Legg Mason Value Equity Sub-Account 3,141,496 31,014,656 4,583,241 1,773,440 MIST Met/AIM Capital Appreciation Sub-Account 1,136,434 13,043,846 499,030 3,354,171 MIST Pioneer Fund Sub-Account 141,568 1,812,147 1,244,409 103,705 MIST Pioneer Strategic Income Sub-Account 301,373 2,888,344 2,534,641 1,105,144 MIST MFS Emerging Markets Equity Sub-Account 4,173,476 50,006,174 50,894,150 5,762,459 MIST Loomis Sayles Global Markets Sub-Account 831,370 9,554,620 9,990,355 12,377,821 MIST Rainier Large Cap Equity Sub-Account 769,139 6,258,714 9,539,292 3,830,482 MIST American Funds Growth Sub-Account (a) 1,501,121 11,458,264 12,182,289 479,602 MIST American Funds Balanced Allocation Sub-Account (a) 12,148,079 101,978,331 102,932,282 861,648 MIST American Funds Bond Sub-Account (a) 593,906 5,576,080 6,304,179 680,662 MIST American Funds Growth Allocation Sub-Account (a) 14,737,856 122,000,358 122,769,501 610,962 MIST American Funds International Sub-Account (a) 971,463 7,293,493 10,080,602 2,453,992 MIST American Funds Moderate Allocation Sub-Account (a) 6,738,927 58,068,564 58,292,105 191,153 MIST BlackRock High Yield Sub-Account (a) 123,722 865,997 1,609,175 650,103 MIST Dreman Small Cap Value Sub-Account (a) 81,624 909,995 926,380 13,625 MIST Met/Templeton Growth Sub-Account (a) 354,914 2,777,213 2,866,795 81,301 MIST Met/Franklin Mutual Shares Sub-Account (a) 1,892,451 14,701,844 14,728,936 25,315 MIST Met/Franklin Templeton Founding Strategy Sub-Account (a) 7,188,533 59,599,081 59,701,337 79,967 Russell Multi-Style Equity Sub-Account 1,062,853 15,042,109 649,170 2,412,366 Russell Aggressive Equity Sub-Account 281,234 3,733,078 99,995 487,564 Russell Non-U.S. Sub-Account 629,606 7,306,585 312,033 1,145,203 Russell Core Bond Sub-Account 1,232,674 12,579,646 1,111,605 2,792,995 Russell Real Estate Securities Sub-Account 124,049 1,988,395 127,928 331,118
64 METLIFE INVESTORS VARIABLE ANNUITY ACCOUNT ONE OF METLIFE INVESTORS INSURANCE COMPANY NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) 4. STATEMENTS OF INVESTMENTS -- (CONTINUED) FOR THE YEAR ENDED AS OF DECEMBER 31, 2008 DECEMBER 31, 2008 ----------------------- ---------------------------- COST OF PROCEEDS SHARES COST ($) PURCHASES ($) FROM SALES ($) ---------- ------------ ------------- -------------- AIM V.I. International Growth Sub-Account 311,776 7,565,197 725,599 3,597,167 DWS Government & Agency Securities Sub-Account 68,897 832,260 110,164 304,636 MSF Davis Venture Value Sub-Account 7,342,050 201,768,243 10,922,652 28,060,911 MSF Harris Oakmark Focused Value Sub-Account 295,738 65,064,540 9,685,986 12,348,756 MSF Jennison Growth Sub-Account 5,033,351 54,738,134 9,819,423 10,724,620 MSF MFS Total Return Sub-Account 593,538 83,466,454 11,810,379 7,999,895 MSF Capital Guardian U.S. Equity Sub-Account 12,002,895 135,037,531 18,686,398 20,578,903 MSF Julius Baer International Stock Sub-Account 606,761 7,268,993 1,673,424 1,160,499 MSF BlackRock Money Market Sub-Account 2,200,186 220,018,483 183,169,392 73,039,909 MSF MetLife Stock Index Sub-Account 1,042,329 34,512,829 9,030,964 9,543,500 MSF BlackRock Bond Income Sub-Account 326,681 34,446,460 9,949,448 3,646,941 MSF BlackRock Strategic Value Sub-Account 184,339 2,751,241 674,062 421,172 MSF Franklin Templeton Small Cap Growth Sub-Account 1,629,298 15,835,786 3,699,061 952,875 MSF Western Asset Management Strategic Bond Opportunities Sub-Account 411,429 5,060,710 1,103,469 1,598,216 MSF Western Asset Management U.S. Government Sub-Account 550,807 6,564,647 8,071,308 3,355,076 MSF T. Rowe Price Small Cap Growth Sub-Account 732,511 9,792,915 3,131,825 2,530,011 MSF T. Rowe Price Large Cap Growth Sub-Account 4,152,443 57,321,732 6,565,646 10,139,326 MSF Oppenheimer Global Equity Sub-Account 1,126,868 17,435,765 2,492,013 2,276,919 MSF MFS Value Sub-Account (a) 227,404 2,374,779 2,412,397 35,570 MSF Met/Dimensional International Small Company Sub-Account (b) 3,585 34,993 34,993 -- Putnam VT Growth and Income Sub-Account 682,803 15,841,415 3,079,236 2,988,432 Putnam VT Vista Sub-Account 202,313 3,038,275 146,892 584,516 Putnam VT Equity Income Sub-Account 2,692,856 36,895,750 3,222,306 6,213,806 FTVIPT Templeton Growth Securities Sub-Account 1,312,437 19,296,371 3,500,771 1,966,069 FTVIPT Templeton Foreign Securities Sub-Account 2,396,724 35,726,083 5,794,180 8,156,180 Fidelity VIP Growth Opportunties Sub-Account 10,818 197,342 45,801 13,479 Fidelity VIP Equity-Income Sub-Account 290,178 6,817,568 953,639 2,628,374 PIMCO VIT High Yield Sub-Account 949,416 7,613,342 1,200,113 1,872,134 PIMCO VIT Low Duration Sub-Account 971,060 9,902,789 3,946,386 2,925,940 PIMCO VIT StocksPLUS Growth and Income Sub-Account 159,198 1,457,986 372,417 258,361 PIMCO VIT Total Return Sub-Account 1,367,784 13,963,079 1,459,189 5,661,889 American Funds Global Growth Sub-Account 1,618,340 32,222,814 23,167,525 939,905 American Funds Global Small Capitalization Sub-Account (a) 285,097 4,070,236 4,070,642 261 American Funds Growth Sub-Account (a) 426,344 17,587,659 17,603,682 13,404
(a) For the period April 28, 2008 to December 31, 2008. (b) For the period November 10, 2008 to December 31, 2008. 65 This page is intentionally left blank. METLIFE INVESTORS VARIABLE ANNUITY ACCOUNT ONE OF METLIFE INVESTORS INSURANCE COMPANY NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) 5. SCHEDULES OF UNITS FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007 MIST LORD ABBETT MIST LORD ABBETT MIST VAN KAMPEN GROWTH AND INCOME BOND DEBENTURE MID CAP GROWTH SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT --------------------------- --------------------------- -------------------------- 2008 2007 2008 2007 2008 2007 ------------- ------------- ------------- ------------- ------------ ------------- Units beginning of year 18,549,732 22,197,014 15,243,991 16,590,983 4,713,956 5,207,161 Units issued and transferred from other funding options 693,651 758,098 890,890 2,414,744 569,466 566,343 Units redeemed and transferred to other funding options (3,459,124) (4,405,380) (3,253,347) (3,761,736) (975,493) (1,059,547) ------------- ------------- ------------- ------------- ------------ ------------- Units end of year 15,784,259 18,549,732 12,881,534 15,243,991 4,307,929 4,713,956 ============= ============= ============= ============= ============ =============
MIST LEGG MASON PARTNERS MIST PIMCO MIST RCM AGGRESSIVE GROWTH TOTAL RETURN TECHNOLOGY SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT --------------------------- --------------------------- --------------------------- 2008 2007 2008 2007 2008 2007 ------------- ------------- ------------- ------------- ------------- ------------- Units beginning of year 10,825,029 13,441,619 21,297,880 26,133,024 2,132,403 2,231,169 Units issued and transferred from other funding options 531,044 821,885 6,736,163 2,663,362 783,889 913,172 Units redeemed and transferred to other funding options (1,822,020) (3,438,475) (6,487,362) (7,498,506) (1,000,979) (1,011,938) ------------- ------------- ------------- ------------- ------------- ------------- Units end of year 9,534,053 10,825,029 21,546,681 21,297,880 1,915,313 2,132,403 ============= ============= ============= ============= ============= =============
MIST LAZARD MIST HARRIS MIST THIRD AVENUE MID CAP OAKMARK INTERNATIONAL SMALL CAP VALUE SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT ------------------------- --------------------------- --------------------------- 2008 2007 2008 2007 2008 2007 ------------ ------------ ------------- ------------- ------------- ------------- Units beginning of year 3,770,936 2,006,766 4,762,025 5,683,024 4,502,597 5,547,538 Units issued and transferred from other funding options 476,970 2,592,898 659,045 1,038,029 607,813 479,229 Units redeemed and transferred to other funding options (877,766) (828,728) (1,462,163) (1,959,028) (1,304,945) (1,524,170) ------------ ------------ ------------- ------------- ------------- ------------- Units end of year 3,370,140 3,770,936 3,958,907 4,762,025 3,805,465 4,502,597 ============ ============ ============= ============= ============= =============
(a) For the period November 12, 2007 to December 31, 2007. (b) For the period April 28, 2008 to December 31, 2008. (c) For the period November 10, 2008 to December 31, 2008. 67 MIST LORD ABBETT MIST OPPENHEIMER MIST PIMCO MID CAP VALUE CAPITAL APPRECIATION INFLATION PROTECTED BOND SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT --------------------------- --------------------------- --------------------------- 2008 2007 2008 2007 2008 2007 ------------- ------------- ------------- ------------- ------------- ------------- 10,670,585 10,813,416 13,026,225 15,156,483 4,886,261 5,893,926 768,861 2,728,519 1,240,753 1,865,281 2,140,031 539,286 (2,196,741) (2,871,350) (2,892,876) (3,995,539) (2,216,965) (1,546,952) ------------- ------------- ------------- ------------- ------------- ------------- 9,242,705 10,670,585 11,374,102 13,026,225 4,809,327 4,886,261 ============= ============= ============= ============= ============= =============
MIST T. ROWE PRICE MIST MFS MIST MET/AIM MID CAP GROWTH RESEARCH INTERNATIONAL SMALL CAP GROWTH SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT --------------------------- --------------------------- --------------------------- 2008 2007 2008 2007 2008 2007 ------------- ------------- ------------- ------------- ------------- ------------- 9,539,996 12,903,767 10,899,017 13,357,797 4,651,987 5,984,113 1,861,683 2,124,155 1,285,188 1,089,410 657,760 447,020 (3,088,363) (5,487,926) (2,848,208) (3,548,191) (1,210,411) (1,779,146) ------------- ------------- ------------- ------------- ------------- ------------- 8,313,316 9,539,996 9,335,997 10,899,017 4,099,336 4,651,987 ============= ============= ============= ============= ============= =============
MIST CLARION GLOBAL MIST TURNER MIST GOLDMAN SACHS REAL ESTATE MID CAP GROWTH MID CAP VALUE SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT -------------------------- ----------------------- ------------------------- 2008 2007 2008 2007 2008 2007 ------------ ------------- ----------- ----------- ------------ ------------ 2,938,688 3,924,423 986,986 989,402 2,167,077 2,536,265 423,871 554,362 514,926 241,837 192,676 603,616 (630,052) (1,540,097) (504,340) (244,254) (765,044) (972,804) ------------ ------------- ----------- ----------- ------------ ------------ 2,732,507 2,938,688 997,572 986,986 1,594,709 2,167,077 ============ ============= =========== =========== ============ ============
68 METLIFE INVESTORS VARIABLE ANNUITY ACCOUNT ONE OF METLIFE INVESTORS INSURANCE COMPANY NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) 5. SCHEDULES OF UNITS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007
MIST METLIFE MIST METLIFE MIST METLIFE DEFENSIVE STRATEGY MODERATE STRATEGY BALANCED STRATEGY SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT --------------------------- ---------------------------- --------------------------- 2008 2007 2008 2007 2008 2007 ------------- ------------- -------------- ------------- ------------ -------------- Units beginning of year 12,464,828 8,262,424 39,851,796 27,420,828 99,569,767 74,894,089 Units issued and transferred from other funding options 14,081,932 8,777,923 16,359,927 17,398,719 58,841,270 37,005,670 Units redeemed and transferred to other funding options (7,538,229) (4,575,519) (10,250,284) (4,967,751) (19,594,042) (12,329,992) ------------- ------------- -------------- ------------- ------------ -------------- Units end of year 19,008,531 12,464,828 45,961,439 39,851,796 138,816,995 99,569,767 ============= ============= ============== ============= ============ ==============
MIST SSGA MIST SSGA MIST LEGG MASON GROWTH ETF GROWTH AND INCOME ETF VALUE EQUITY SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT ------------------------- ------------------------- -------------------------- 2008 2007 2008 2007 2008 2007 ------------ ------------ ------------ ------------ ------------ ------------- Units beginning of year 2,966,761 2,443,105 4,939,205 2,292,596 2,772,017 3,604,696 Units issued and transferred from other funding options 278,061 969,920 1,422,389 3,296,626 797,749 216,238 Units redeemed and transferred to other funding options (788,763) (446,264) (757,159) (650,017) (464,042) (1,048,917) ------------ ------------ ------------ ------------ ------------ ------------- Units end of year 2,456,059 2,966,761 5,604,435 4,939,205 3,105,724 2,772,017 ============ ============ ============ ============ ============ =============
MIST MFS EMERGING MIST LOOMIS MIST RAINIER MARKETS EQUITY SAYLES GLOBAL MARKETS LARGE CAP EQUITY SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT -------------------------- -------------------------- ----------------------- 2008 2007 2008 2007 2008 2007 (A) ------------ ------------- ------------- ------------ ------------ ---------- Units beginning of year 482,984 1,163,479 1,085,823 35,233 115,191 -- Units issued and transferred from other funding options 4,011,685 826,922 914,183 1,103,169 1,174,676 115,322 Units redeemed and transferred to other funding options (823,309) (1,507,417) (1,223,642) (52,579) (514,393) (131) ------------ ------------- ------------- ------------ ------------ ---------- Units end of year 3,671,360 482,984 776,364 1,085,823 775,474 115,191 ============ ============= ============= ============ ============ ==========
(a) For the period November 12, 2007 to December 31, 2007. (b) For the period April 28, 2008 to December 31, 2008. (c) For the period November 10, 2008 to December 31, 2008. 69 MIST METLIFE MIST METLIFE MIST VAN KAMPEN GROWTH STRATEGY AGGRESSIVE STRATEGY COMSTOCK SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT -------------------------- --------------------------- --------------------------- 2008 2007 2008 2007 2008 2007 ----------- -------------- ------------- ------------- ------------- ------------- 105,495,650 77,651,335 9,584,925 11,904,491 7,096,082 6,796,669 50,518,175 40,086,102 11,981,073 2,445,664 1,700,038 2,139,027 (19,777,101) (12,241,787) (2,930,340) (4,765,230) (1,507,547) (1,839,614) -------------------------- ------------- ------------- ------------- ------------- 136,236,724 105,495,650 18,635,658 9,584,925 7,288,573 7,096,082 =========== ============== ============= ============= ============= =============
MIST MET/AIM MIST PIONEER MIST PIONEER CAPITAL APPRECIATION FUND STRATEGIC INCOME SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT --------------------------- ------------------- --------------------- 2008 2007 2008 2007 2008 2007 ------------- ------------- --------- --------- ---------- ---------- 6,414,526 1,713,687 32,107 18,039 72,551 18,435 216,118 8,040,816 74,607 20,488 129,743 68,000 (1,627,740) (3,339,977) (8,155) (6,420) (66,579) (13,884) ------------- ------------- --------- --------- ---------- ---------- 5,002,904 6,414,526 98,559 32,107 135,715 72,551 ============= ============= ========= ========= ========== ==========
MIST MIST MIST MIST AMERICAN MIST AMERICAN MIST AMERICAN AMERICAN FUNDS AMERICAN FUNDS AMERICAN FUNDS FUNDS BALANCED FUNDS GROWTH FUNDS MODERATE GROWTH ALLOCATION BOND ALLOCATION INTERNATIONAL ALLOCATION SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT -------------- -------------- -------------- -------------- ---------------- -------------- 2008 (B) 2008 (B) 2008 (B) 2008 (B) 2008 (B) 2008 (B) -------------- -------------- -------------- -------------- ---------------- -------------- -- -- -- -- -- -- 1,666,244 12,638,685 705,356 15,027,569 1,279,011 6,909,066 (210,236) (805,668) (135,480) (779,085) (361,846) (340,983) -------------- -------------- -------------- -------------- ---------------- -------------- 1,456,008 11,833,017 569,876 14,248,484 917,165 6,568,083 ============== ============== ============== ============== ================ ==============
70 METLIFE INVESTORS VARIABLE ANNUITY ACCOUNT ONE OF METLIFE INVESTORS INSURANCE COMPANY NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) 5. SCHEDULES OF UNITS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007 MIST MIST MET/FRANKLIN MIST DREMAN MIST MIST TEMPLETON BLACKROCK SMALL CAP MET/TEMPLETON MET/FRANKLIN FOUNDING HIGH YIELD VALUE GROWTH MUTUAL SHARES STRATEGY SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT -------------- -------------- ---------------- ---------------- --------------- 2008 (B) 2008 (B) 2008 (B) 2008 (B) 2008 (B) -------------- -------------- ---------------- ---------------- --------------- Units beginning of year -- -- -- -- -- Units issued and transferred from other funding options 123,836 82,385 386,732 1,954,373 7,455,542 Units redeemed and transferred to other funding options (64,935) (2,789) (31,446) (104,379) (340,851) -------------- -------------- ---------------- ---------------- --------------- Units end of year 58,901 79,596 355,286 1,849,994 7,114,691 ============== ============== ================ ================ ===============
RUSSELL RUSSELL AIM V.I. CORE BOND REAL ESTATE SECURITIES INTERNATIONAL GROWTH SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT ------------------------ ------------------------- ----------------------- 2008 2007 2008 2007 2008 2007 ----------- ------------ ---------- -------------- ----------- ----------- Units beginning of year 962,148 1,079,274 73,964 93,434 647,307 855,393 Units issued and transferred from other funding options 29,603 59,738 5,254 3,870 47,179 146,205 Units redeemed and transferred to other funding options (185,195) (176,864) (13,403) (23,340) (215,458) (354,291) ----------- ------------ ---------- -------------- ----------- ----------- Units end of year 806,556 962,148 65,815 73,964 479,028 647,307 =========== ============ ========== ============== =========== ===========
MSF JENNISON MSF MFS MSF CAPITAL GUARDIAN GROWTH TOTAL RETURN U.S. EQUITY SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT --------------------------- ------------------------- --------------------------- 2008 2007 2008 2007 2008 2007 ------------- ------------- ------------ ------------ ------------- ------------- Units beginning of year 5,787,011 7,501,567 3,404,791 3,537,012 12,051,365 13,997,926 Units issued and transferred from other funding options 779,609 606,542 324,689 434,036 417,491 1,445,517 Units redeemed and transferred to other funding options (1,466,990) (2,321,098) (618,037) (566,257) (2,186,554) (3,392,078) ------------- ------------- ------------ ------------ ------------- ------------- Units end of year 5,099,630 5,787,011 3,111,443 3,404,791 10,282,302 12,051,365 ============= ============= ============ ============ ============= =============
(a) For the period November 12, 2007 to December 31, 2007. (b) For the period April 28, 2008 to December 31, 2008. (c) For the period November 10, 2008 to December 31, 2008. 71 RUSSELL RUSSELL RUSSELL MULTI-STYLE EQUITY AGGRESSIVE EQUITY NON-U.S. SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT ------------------------- --------------------- ---------------------- 2008 2007 2008 2007 2008 2007 ------------ ------------ ---------- ---------- ---------- ----------- 1,311,535 1,829,723 267,701 349,188 494,438 656,427 54,185 24,410 13,296 8,669 32,548 8,676 (214,337) (542,598) (43,252) (90,156) (83,895) (170,665) ------------ ------------ ---------- ---------- ---------- ----------- 1,151,383 1,311,535 237,745 267,701 443,091 494,438 ============ ============ ========== ========== ========== ===========
DWS GOVERNMENT & AGENCY MSF DAVIS MSF HARRIS OAKMARK SECURITIES VENTURE VALUE FOCUSED VALUE SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT -------------------------- --------------------------- --------------------------- 2008 2007 2008 2007 2008 2007 ------------- ------------ ------------- ------------- ------------- ------------- 72,036 94,778 17,773,074 21,712,702 4,151,214 4,979,605 9,021 3,139 2,063,389 2,366,154 583,888 549,758 (24,322) (25,881) (3,739,119) (6,305,782) (1,185,532) (1,378,149) ------------- ------------ ------------- ------------- ------------- ------------- 56,735 72,036 16,097,344 17,773,074 3,549,570 4,151,214 ============= ============ ============= ============= ============= =============
MSF JULIUS BAER MSF BLACKROCK MSF METLIFE INTERNATIONAL STOCK MONEY MARKET STOCK INDEX SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT ---------------------- --------------------------- -------------------------- 2008 2007 2008 2007 2008 2007 ---------- ----------- ------------ -------------- ------------ ------------- 432,898 632,428 10,356,826 8,885,438 2,846,982 3,050,585 60,712 62,065 24,934,207 22,874,297 822,255 1,365,097 (81,441) (261,595) (14,767,376) (21,402,909) (988,919) (1,568,700) ---------- ----------- ------------ -------------- ------------ ------------- 412,169 432,898 20,523,657 10,356,826 2,680,318 2,846,982 ========== =========== ============ ============== ============ =============
72 METLIFE INVESTORS VARIABLE ANNUITY ACCOUNT ONE OF METLIFE INVESTORS INSURANCE COMPANY NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) 5. SCHEDULES OF UNITS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007 MSF BLACKROCK MSF BLACKROCK MSF FRANKLIN TEMPLETON BOND INCOME STRATEGIC VALUE SMALL CAP GROWTH SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT ----------------------- --------------------- -------------------------- 2008 2007 2008 2007 2008 2007 ----------- ----------- ---------- ---------- ------------ ------------- Units beginning of year 580,953 772,347 118,620 141,367 1,193,998 1,914,092 Units issued and transferred from other funding options 247,296 202,309 35,318 19,449 464,888 345,178 Units redeemed and transferred to other funding options (155,063) (393,703) (27,567) (42,196) (272,680) (1,065,272) ----------- ----------- ---------- ---------- ------------ ------------- Units end of year 673,186 580,953 126,371 118,620 1,386,206 1,193,998 =========== =========== ========== ========== ============ =============
MSF MET/ DIMENSIONAL INTERNATIONAL MSF T. ROWE PRICE MSF OPPENHEIMER MSF MFS SMALL LARGE CAP GROWTH GLOBAL EQUITY VALUE COMPANY SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT -------------------------- ----------------------- -------------- ---------------- 2008 2007 2008 2007 2008 (B) 2008 (C) ------------ ------------- ----------- ----------- -------------- ---------------- Units beginning of year 4,816,195 8,132,948 928,692 857,647 -- -- Units issued and transferred from other funding options 485,689 308,170 171,226 239,186 186,530 3,592 Units redeemed and transferred to other funding options (996,970) (3,624,923) (201,554) (168,141) (8,329) -- ------------ ------------- ----------- ----------- -------------- ---------------- Units end of year 4,304,914 4,816,195 898,364 928,692 178,201 3,592 ============ ============= =========== =========== ============== ================
FTVIPT TEMPLETON FTVIPT TEMPLETON FIDELITY VIP GROWTH SECURITIES FOREIGN SECURITIES GROWTH OPPORTUNITIES SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT ----------------------- -------------------------- ----------------------- 2008 2007 2008 2007 2008 2007 ----------- ----------- ------------ ------------- --------- ------------- Units beginning of year 963,068 560,530 2,895,980 4,229,198 16,783 23,148 Units issued and transferred from other funding options 187,112 542,132 157,522 244,352 5,177 497 Units redeemed and transferred to other funding options (190,961) (139,594) (628,394) (1,577,570) (1,299) (6,862) ----------- ----------- ------------ ------------- --------- ------------- Units end of year 959,219 963,068 2,425,108 2,895,980 20,661 16,783 =========== =========== ============ ============= ========= =============
(a) For the period November 12, 2007 to December 31, 2007. (b) For the period April 28, 2008 to December 31, 2008. (c) For the period November 10, 2008 to December 31, 2008. 73 MSF WESTERN MSF WESTERN ASSET MANAGEMENT ASSET MANAGEMENT MSF T. ROWE PRICE STRATEGIC BOND OPPORTUNITIES U.S. GOVERNMENT SMALL CAP GROWTH SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT ------------------------------- ---------------------- ----------------------- 2008 2007 2008 2007 2008 2007 ---------- -------------------- ----------- ---------- ----------- ----------- 279,280 298,802 123,153 69,720 724,186 887,179 43,563 57,703 557,444 91,375 109,025 161,850 (82,740) (77,225) (261,549) (37,942) (185,510) (324,843) ---------- -------------------- ----------- ---------- ----------- ----------- 240,103 279,280 419,048 123,153 647,701 724,186 ========== ==================== =========== ========== =========== ===========
PUTNAM VT PUTNAM VT PUTNAM VT GROWTH AND INCOME VISTA EQUITY INCOME SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT ------------------------- ---------------------- ------------------------- 2008 2007 2008 2007 2008 2007 ------------ ------------ ---------- ----------- ------------ ------------ 1,019,458 1,289,872 264,111 374,568 2,648,811 2,427,699 60,364 57,241 14,880 13,881 168,323 600,522 (230,360) (327,655) (49,428) (124,338) (538,525) (379,410) ------------ ------------ ---------- ----------- ------------ ------------ 849,462 1,019,458 229,563 264,111 2,278,609 2,648,811 ============ ============ ========== =========== ============ ============
FIDELITY VIP PIMCO VIT PIMCO VIT EQUITY-INCOME HIGH YIELD LOW DURATION SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT ----------------------- ------------------------ ----------------------- 2008 2007 2008 2007 2008 2007 ----------- ----------- ----------- ------------ ----------- ----------- 506,284 549,152 589,348 1,027,968 689,390 786,353 69,500 89,166 65,140 66,199 277,908 82,220 (189,089) (132,034) (156,849) (504,819) (231,987) (179,183) ----------- ----------- ----------- ------------ ----------- ----------- 386,695 506,284 497,639 589,348 735,311 689,390 =========== =========== =========== ============ =========== ===========
74 METLIFE INVESTORS VARIABLE ANNUITY ACCOUNT ONE OF METLIFE INVESTORS INSURANCE COMPANY NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) 5. SCHEDULES OF UNITS -- (CONCLUDED) FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007 PIMCO VIT STOCKSPLUS PIMCO VIT AMERICAN FUNDS GROWTH AND INCOME TOTAL RETURN GLOBAL GROWTH SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT ----------------------- ------------------------- ----------------------- 2008 2007 2008 2007 2008 2007 ---------- ------------ ------------ ------------ ------------ ---------- Units beginning of year 135,574 138,195 1,271,571 1,708,329 344,425 12,186 Units issued and transferred from other funding options 40,568 22,082 54,620 121,089 982,523 362,190 Units redeemed and transferred to other funding options (26,595) (24,703) (391,089) (557,847) (138,231) (29,951) ---------- ------------ ------------ ------------ ------------ ---------- Units end of year 149,547 135,574 935,102 1,271,571 1,188,717 344,425 ========== ============ ============ ============ ============ ==========
(a) For the period November 12, 2007 to December 31, 2007. (b) For the period April 28, 2008 to December 31, 2008. (c) For the period November 10, 2008 to December 31, 2008. 75 AMERICAN FUNDS AMERICAN GLOBAL SMALL FUNDS CAPITALIZATION GROWTH SUB-ACCOUNT SUB-ACCOUNT ----------------- -------------- 2008 (B) 2008 (B) ----------------- -------------- -- -- 186,461 129,983 (3,212) (3,117) ----------------- -------------- 183,249 126,866 ================= ==============
76 METLIFE INVESTORS VARIABLE ANNUITY ACCOUNT ONE OF METLIFE INVESTORS 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 Contracts, net investment income ratios, and expense ratios, excluding expenses for the underlying portfolio, series, or fund for each of the five years in the period ended December 31, 2008: UNIT VALUE(1) INVESTMENT(2) EXPENSE RATIO(3) TOTAL RETURN(4) LOWEST TO NET INCOME LOWEST TO LOWEST TO UNITS HIGHEST ($) ASSETS ($) RATIO (%) HIGHEST (%) HIGHEST (%) ---------- ------------- ------------- ------------- ---------------- ------------------- MIST Lord Abbett Growth 2008 15,784,259 10.86 - 41.08 576,805,190 1.71 0.75 - 2.35 (37.82) - (36.73) and Income Sub-Account 2007 18,549,732 17.17 - 64.94 1,075,806,092 0.98 0.75 - 2.35 1.30 - 3.13 2006 22,197,014 16.65 - 62.97 1,254,313,868 1.73 0.75 - 2.35 15.06 - 16.91 2005 26,137,911 12.48 - 52.55 1,266,968,938 0.94 0.75 - 2.35 1.00 - 2.62 2004 29,905,303 11.76 - 52.34 1,416,012,804 0.43 0.75 - 2.35 10.02 - 11.80 MIST Lord Abbett Bond Debenture 2008 12,881,534 11.27 - 16.77 202,717,634 4.34 0.75 - 2.35 (20.50) - (19.09) Sub-Account 2007 15,243,991 14.04 - 20.75 297,943,064 5.12 0.75 - 2.35 4.06 - 5.94 2006 16,590,983 13.37 - 19.63 307,972,386 6.82 0.75 - 2.35 6.62 - 8.33 2005 19,002,390 12.42 - 18.12 327,280,969 -- 0.75 - 2.35 (0.86) - 0.74 2004 18,478,641 12.78 - 17.98 317,240,246 2.98 0.75 - 2.35 5.65 - 7.36 MIST Van Kampen Mid Cap 2008 4,307,929 6.61 - 7.31 30,205,224 1.42 0.75 - 1.90 (47.76) - (47.13) Growth Sub-Account 2007 4,713,956 12.65 - 13.83 62,713,816 -- 0.75 - 1.90 21.15 - 22.78 (Commenced 11/7/2005) 2006 5,207,161 10.44 - 11.26 56,740,449 -- 0.75 - 1.90 6.34 - 7.56 MIST Lord Abbett Mid Cap Value 2008 9,242,705 15.59 - 17.87 157,249,522 0.62 0.75 - 1.95 (39.96) - (39.18) Sub-Account 2007 10,670,585 26.10 - 29.40 300,178,790 0.67 0.75 - 1.90 (1.30) - 0.04 2006 10,813,416 26.44 - 29.45 304,617,015 0.61 0.75 - 1.90 10.07 - 11.34 2005 12,134,519 24.02 - 26.45 308,454,585 0.50 0.75 - 1.90 6.02 - 7.24 2004 11,567,876 22.66 - 24.66 275,539,168 3.16 0.75 - 1.90 22.15 - 23.57 MIST Oppenheimer Capital 2008 11,374,102 5.16 - 6.80 63,888,388 3.58 0.75 - 2.35 (47.20) - (46.34) Appreciation Sub-Account 2007 13,026,225 9.77 - 12.72 137,207,385 0.02 0.75 - 2.35 11.62 - 13.43 (Commenced 5/3/2004) 2006 15,156,483 8.75 - 11.27 142,383,044 0.14 0.75 - 2.35 5.12 - 6.81 2005 16,165,489 8.31 - 10.60 144,482,219 0.02 0.75 - 2.35 2.29 - 3.93 2004 17,566,329 8.12 - 10.24 148,102,308 7.09 1.30 - 2.35 3.93 - 5.03 MIST PIMCO Inflation 2008 4,809,327 10.55 - 11.20 52,629,978 3.70 1.30 - 2.35 (9.22) - (8.26) Protected Bond 2007 4,886,261 11.60 - 12.19 58,385,153 2.21 1.30 - 2.35 8.21 - 9.36 Sub-Account 2006 5,893,926 10.72 - 11.14 64,649,920 3.73 1.30 - 2.35 (1.94 - 0.91) 2005 6,511,274 10.93 - 11.25 72,384,448 -- 1.30 - 2.35 (0.96) - 0.08 2004 8,692,539 11.04 - 11.24 96,965,591 4.57 1.30 - 2.35 6.47 - 7.60 MIST Legg Mason Partners 2008 9,534,053 4.43 - 6.56 46,377,009 -- 1.30 - 2.35 (40.47) - (39.80) Aggressive Growth 2007 10,825,029 7.44 - 10.90 87,874,559 0.04 1.30 - 2.35 (0.12) - 1.17 Sub-Account 2006 13,441,619 7.44 - 10.77 108,846,059 -- 1.30 - 2.35 (4.01) - (3.00) 2005 15,958,225 7.74 - 11.10 134,458,398 -- 1.30 - 2.35 10.95 - 12.11 2004 20,250,042 6.97 - 9.89 152,910,724 -- 1.30 - 2.35 5.92 - 7.04 MIST PIMCO Total Return 2008 21,546,681 12.39 - 14.06 284,741,547 3.75 0.75 - 2.35 (1.93) - (0.22) Sub-Account 2007 21,297,880 12.62 - 14.09 283,533,965 3.30 0.75 - 2.35 5.05 - 6.93 (Commenced 5/3/2004) 2006 26,133,024 12.00 - 13.17 327,612,133 2.60 0.75 - 2.35 2.10 - 3.74 2005 27,888,652 11.74 - 12.68 339,140,105 0.01 0.75 - 2.35 (0.12) - 1.49 2004 28,087,932 11.74 - 12.48 338,736,886 6.52 0.75 - 2.35 2.54 - 4.19 MIST RCM Technology 2008 1,915,313 3.29 - 3.53 6,572,888 13.87 1.30 - 2.35 (45.75) - (45.17) Sub-Account 2007 2,132,403 6.06 - 6.43 13,379,138 -- 1.30 - 2.35 28.45 - 29.82 2006 2,231,169 4.71 - 4.95 10,819,347 -- 1.30 - 2.35 2.91 - 3.99 2005 2,539,048 4.58 - 4.76 11,888,282 -- 1.30 - 2.35 8.44 - 9.59 2004 3,357,357 4.22 - 4.35 14,409,596 0.08 1.30 - 2.35 (6.54) - (5.55)
77 METLIFE INVESTORS VARIABLE ANNUITY ACCOUNT ONE OF METLIFE INVESTORS INSURANCE COMPANY NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) 6. FINANCIAL HIGHLIGHTS -- (CONTINUED) UNIT VALUE(1) INVESTMENT(2) EXPENSE RATIO(3) TOTAL RETURN(4) LOWEST TO NET INCOME LOWEST TO LOWEST TO UNITS HIGHEST ($) ASSETS ($) RATIO (%) HIGHEST (%) HIGHEST (%) ---------- ------------- ----------- ------------- ---------------- ------------------- MIST T. Rowe Price Mid Cap 2008 8,313,316 5.45 - 6.02 47,740,618 0.01 0.85 - 2.35 (41.15) - (40.26) Growth Sub-Account 2007 9,539,996 9.25 - 10.08 92,323,883 0.04 0.85 - 2.35 14.89 - 16.64 (Commenced 5/3/2004) 2006 12,903,767 8.04 - 8.75 107,929,919 -- 0.75 - 2.35 3.70 - 5.37 2005 15,203,506 7.75 - 8.30 121,624,335 -- 0.85 - 2.35 11.97 - 13.66 2004 15,078,256 6.91 - 7.30 106,863,377 -- 0.75 - 2.35 15.08 - 16.94 MIST MFS Research International 2008 9,335,997 9.56 - 14.87 103,318,253 2.02 0.75 - 2.35 (43.71) - (42.75) Sub-Account 2007 10,899,017 16.96 - 25.97 212,534,722 1.33 0.75 - 2.35 10.65 - 12.64 2006 13,357,797 15.31 - 23.06 233,658,652 1.75 0.75 - 2.35 23.63 - 25.62 2005 15,507,023 12.37 - 18.32 219,052,682 0.46 0.75 - 2.35 13.73 - 15.55 2004 12,888,678 10.87 - 15.82 159,862,343 0.25 0.75 - 2.35 16.78 - 18.66 MIST Met/AIM Small Cap Growth 2008 4,099,336 5.57 - 9.74 37,769,265 -- 1.30 - 2.35 (40.16) - (39.46) Sub-Account 2007 4,651,987 9.20 - 16.11 71,015,556 -- 1.30 - 2.35 8.48 - 9.85 2006 5,984,113 8.37 - 14.69 83,414,752 -- 1.30 - 2.35 11.54 - 12.71 2005 7,550,815 7.45 - 13.04 93,177,860 -- 1.30 - 2.35 5.76 - 6.87 2004 4,667,993 11.85 - 12.20 56,301,565 -- 1.30 - 2.35 3.95 - 5.05 MIST Lazard Mid Cap 2008 3,370,140 8.97 - 10.09 31,590,896 1.14 0.75 - 2.35 (39.74) - (38.67) Sub-Account 2007 3,770,936 14.87 - 16.45 57,995,812 0.21 0.75 - 2.35 (4.98) - (1.86) 2006 2,006,766 15.64 - 16.41 32,320,745 0.31 1.30 - 2.35 12.02 - 13.20 2005 2,227,684 13.95 - 14.50 31,807,254 0.06 1.30 - 2.35 5.56 - 6.67 2004 2,722,902 13.20 - 13.59 36,591,722 -- 1.30 - 2.35 11.74 - 12.92 MIST Harris Oakmark International 2008 3,958,907 10.69 - 11.43 44,091,751 1.64 1.30 - 2.35 (42.26) - (41.65) Sub-Account 2007 4,762,025 18.49 - 19.59 91,235,231 0.82 1.30 - 2.35 (3.43) - (2.40) 2006 5,683,024 19.13 - 20.07 112,021,036 2.59 1.30 - 2.35 25.86 - 27.19 2005 6,295,353 15.18 - 15.78 97,858,342 -- 1.30 - 2.35 11.59 - 12.77 2004 6,954,807 13.59 - 13.99 96,251,804 -- 1.30 - 2.35 17.72 - 18.96 MIST Third Avenue Small Cap Value 2008 3,805,465 11.38 - 13.43 45,189,540 0.76 1.30 - 2.35 (31.46) - (30.67) Sub-Account 2007 4,502,597 16.58 - 19.37 77,454,105 1.01 1.30 - 2.35 (5.29) - (4.15) 2006 5,547,538 17.49 - 20.21 99,987,762 0.45 1.30 - 2.35 10.51 - 11.67 2005 5,920,257 15.81 - 18.08 95,982,000 -- 1.30 - 2.35 12.8 - 13.99 2004 6,296,258 14.00 - 14.35 89,472,332 2.06 1.30 - 2.35 23.56 - 24.87 MIST Clarion Global Real Estate 2008 2,732,507 8.97 - 13.76 26,464,829 1.77 0.75 - 2.35 (43.03) - (42.11) Sub-Account 2007 2,938,688 15.74 - 23.87 49,736,129 0.92 1.30 - 2.35 (16.99) - (15.99) (Commenced 5/3/2004) 2006 3,924,423 18.97 - 28.41 79,745,324 1.10 1.00 - 2.35 34.40 - 36.22 2005 4,868,446 14.11 - 20.89 73,434,177 -- 1.30 - 2.35 10.66 - 11.83 2004 1,552,403 12.75 - 12.87 19,879,342 5.12 1.30 - 2.35 27.52 - 28.68 MIST Turner Mid Cap Growth 2008 997,572 7.62 - 8.01 7,841,101 -- 1.30 - 2.35 (49.50) - (48.97) Sub-Account 2007 986,986 15.09 - 15.69 15,254,136 -- 1.30 - 2.35 21.25 - 22.54 (Commenced 5/3/2004) 2006 989,402 12.45 - 12.96 12,526,407 -- 0.85 - 2.35 3.61 - 5.18 2005 1,029,884 12.01 - 12.32 12,503,351 -- 1.30 - 2.35 8.78 - 9.92 2004 1,457,917 11.04 - 11.16 16,169,474 -- 0.85 - 2.35 10.44 - 11.56 MIST Goldman Sachs Mid Cap Value 2008 1,594,709 9.29 - 9.76 15,272,285 0.79 1.30 - 2.35 (37.57) - (36.90) Sub-Account 2007 2,167,077 14.88 - 15.47 33,020,433 0.50 1.30 - 2.35 0.69 - 1.76 (Commenced 5/3/2004) 2006 2,536,265 14.78 - 15.38 38,139,523 -- 0.85 - 2.35 13.01 - 14.71 2005 2,181,767 13.08 - 13.41 28,841,121 0.72 1.30 - 2.35 9.93 - 11.09 2004 1,750,355 11.90 - 12.02 20,909,564 1.57 0.85 - 2.35 18.96 - 20.16
78 METLIFE INVESTORS VARIABLE ANNUITY ACCOUNT ONE OF METLIFE INVESTORS INSURANCE COMPANY NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) 6. FINANCIAL HIGHLIGHTS -- (CONTINUED) UNIT VALUE(1) INVESTMENT(2) EXPENSE RATIO(3) TOTAL RETURN(4) LOWEST TO NET INCOME LOWEST TO LOWEST TO UNITS HIGHEST ($) ASSETS ($) RATIO (%) HIGHEST (%) HIGHEST (%) ----------- ------------- ------------- ------------- ---------------- ------------------- MIST MetLife Defensive Strategy 2008 19,008,531 8.77 - 9.37 171,855,820 1.38 0.75 - 2.35 (22.50) - (21.24) Sub-Account 2007 12,464,828 11.31 - 11.90 144,052,470 1.78 0.75 - 2.35 3.45 - 5.12 2006 8,262,424 10.93 - 11.32 91,508,405 0.01 0.75 - 2.35 6.11 - 7.82 2005 6,322,085 10.30 - 10.43 65,586,282 1.03 1.30 - 2.35 2.06 - 3.13 2004 1,937,189 10.10 - 10.11 19,576,879 8.88 1.30 - 2.35 0.96 - 1.13 MIST MetLife Moderate Strategy 2008 45,961,439 8.48 - 9.06 402,406,668 1.75 0.75 - 2.35 (28.14) - (26.97) Sub-Account 2007 39,851,796 11.79 - 12.41 480,378,237 1.90 0.75 - 2.35 3.73 - 5.41 2006 27,420,828 11.37 - 11.77 315,943,046 0.01 0.75 - 2.35 7.68 - 9.41 2005 21,366,533 10.56 - 10.69 227,166,091 1.28 1.30 - 2.35 3.36 - 4.45 2004 10,636,014 10.22 - 10.23 108,759,780 6.77 1.30 - 2.35 2.16 - 2.33 MIST MetLife Balanced Strategy 2008 138,816,995 7.24 - 8.65 1,162,917,869 4.76 0.75 - 2.35 (33.52) - (1.69) Sub-Account 2007 99,569,767 12.17 - 12.80 1,240,119,183 1.62 0.75 - 2.35 2.43 - 4.09 2006 74,894,089 11.88 - 12.30 902,216,343 0.01 0.75 - 2.35 9.38 - 11.14 2005 59,266,853 10.86 - 10.99 648,361,282 1.20 1.30 - 2.35 4.64 - 5.74 2004 31,037,036 10.38 - 10.40 322,474,174 5.05 1.30 - 2.35 3.80 - 3.97 MIST MetLfie Growth Strategy 2008 136,236,724 6.79 - 8.31 1,094,834,987 3.47 0.75 - 2.35 (39.32) - (2.40) Sub-Account 2007 105,495,650 12.81 - 13.47 1,381,939,858 1.13 0.75 - 2.35 2.26 - 3.92 2006 77,651,335 12.53 - 12.97 986,336,802 0.01 0.75 - 2.35 10.96 - 12.75 2005 58,883,485 11.29 - 11.43 669,542,343 1.12 1.30 - 2.35 6.60 - 7.72 2004 31,746,255 10.59 - 10.61 336,536,558 3.18 1.30 - 2.35 5.90 - 6.08 MIST MetLife Aggressive Strategy 2008 18,635,658 6.51 - 7.93 142,626,120 3.22 0.75 - 2.35 (42.19) - (2.98) Sub-Account 2007 9,584,925 12.84 - 13.51 125,554,567 1.31 0.75 - 2.35 0.48 - 2.11 2006 11,904,491 12.78 - 13.23 154,159,455 0.01 0.75 - 2.35 11.02 - 12.80 2005 12,099,254 11.51 - 11.65 140,266,322 0.87 1.30 - 2.35 7.82 - 8.96 2004 7,251,678 10.68 - 10.69 77,491,222 1.17 1.30 - 2.35 6.75 - 6.93 MIST Van Kampen Comstock 2008 7,288,573 7.03 - 7.46 53,619,737 1.74 0.75 - 2.35 (37.41) - (36.39) Sub-Account 2007 7,096,082 11.24 - 11.73 82,325,135 1.33 0.75 - 2.35 (4.77) - (3.22) (Commenced 5/1/2005) 2006 6,796,669 11.80 - 12.12 81,752,237 -- 0.75 - 2.35 13.36 - 15.19 2005 3,599,394 10.41 - 10.52 37,740,754 2.41 0.75 - 2.20 4.22 - 5.22 MIST SSgA Growth ETF 2008 2,456,059 7.73 - 7.88 19,272,722 1.49 1.30 - 1.90 (34.23) - 0.02 Sub-Account 2007 2,966,761 11.76 - 11.92 35,243,332 -- 1.30 - 1.90 3.62 - 4.25 (Commenced 9/30/2005) 2006 2,443,105 11.34 - 11.43 27,884,955 1.53 1.30 - 1.90 11.71 - 12.38 2005 820,546 10.16 - 10.17 8,343,251 3.11 1.30 - 1.65 1.62 - 1.71 MIST SSgA Growth and Income ETF 2008 5,604,435 8.39 - 8.60 48,007,795 1.81 1.30 - 2.05 (26.47) - 1.20 Sub-Account 2007 4,939,205 11.47 - 11.63 57,258,882 -- 1.30 - 1.90 3.40 - 4.03 (Commenced 9/30/2005) 2006 2,292,596 11.09 - 11.17 25,580,451 2.21 1.30 - 1.90 9.63 - 10.29 2005 405,183 10.12 - 10.13 4,104,208 2.73 1.30 - 1.90 1.17 - 1.33 MIST Legg Mason Value Equity 2008 3,105,724 4.50 - 4.72 14,355,567 0.02 0.85 - 2.35 (55.68) - (55.00) Sub-Account 2007 2,772,017 10.15 - 10.49 28,657,072 -- 0.85 - 2.35 (8.10) - (6.71) (Commenced 11/7/2005) 2006 3,604,696 11.05 - 11.25 40,209,812 -- 0.75 - 2.35 4.11 - 5.79 2005 31,606 10.61 - 10.63 335,617 -- 1.55 - 1.90 (1.35) - (1.34) MIST Met/AIM Capital Appreciation 2008 5,002,904 0.92 - 9.92 7,732,317 2.00 0.85 - 1.80 (43.74) - (43.13) Sub-Account 2007 6,414,526 1.63 - 17.43 17,443,288 - 1.30 - 1.80 9.91 - 55.14 2006 1,713,687 6.90 - 23.85 20,579,265 0.05 1.30 - 1.90 4.07 - 5.51 2005 2,204,039 6.54 - 22.78 25,322,763 0.06 0.85 - 1.80 6.90 - 7.92 2004 2,771,084 6.06 - 21.25 29,706,684 -- 0.85 - 1.90 4.33 - 5.72
79 METLIFE INVESTORS VARIABLE ANNUITY ACCOUNT ONE OF METLIFE INVESTORS INSURANCE COMPANY NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) 6. FINANCIAL HIGHLIGHTS -- (CONTINUED) UNIT VALUE(1) INVESTMENT(2) EXPENSE RATIO(3) TOTAL RETURN(4) LOWEST TO NET INCOME LOWEST TO LOWEST TO UNITS HIGHEST ($) ASSETS ($) RATIO (%) HIGHEST (%) HIGHEST (%) ---------- ------------- ---------- ------------- ---------------- ------------------- MIST Pioneer Fund 2008 98,559 12.72 - 14.88 1,433,243 0.75 0.75 - 1.80 (34.04) - (33.34) Sub-Account 2007 32,107 19.29 - 22.32 693,986 0.77 0.75 - 1.80 3.12 - 4.22 (Commenced 5/1/2006) 2006 18,039 18.46 - 21.42 374,110 -- 0.75 - 1.90 13.75 - 15.06 MIST Pioneer Strategic Income 2008 135,715 16.54 - 19.16 2,518,534 6.21 0.75 - 1.90 (12.43) - (11.41) Sub-Account 2007 72,551 19.14 - 21.63 1,515,237 0.61 0.75 - 1.80 4.73 - 5.85 (Commenced 5/1/2006) 2006 18,435 18.05 - 20.43 363,745 12.02 0.75 - 1.90 4.31 - 5.51 MIST MFS Emerging Markets 2008 3,671,360 6.03 - 10.96 23,849,274 0.70 0.75 - 2.35 (56.57) - (53.96) Equity Sub-Account 2007 482,984 13.89 - 14.14 6,784,979 0.08 1.30 - 2.35 33.43 - 34.85 (Commenced 5/1/2006) 2006 1,163,479 10.41 - 10.49 12,147,300 2.49 1.30 - 2.35 4.12 - 4.86 MIST Loomis Sayles Global 2008 776,364 7.61 - 7.83 6,018,276 4.79 1.30 - 2.35 (40.68) - (40.05) Markets Sub-Account 2007 1,085,823 12.83 - 13.06 14,022,527 -- 1.30 - 2.35 24.87 - 26.19 (Commenced 5/1/2006) 2006 35,233 10.27 - 10.35 363,073 1.42 1.30 - 2.35 2.74 - 3.46 MIST Rainier Large Cap Equity 2008 775,474 5.67 - 5.74 4,429,314 -- 1.30 - 2.35 (43.16) - (42.56) Sub-Account 2007 115,191 9.97 - 9.98 1,149,630 0.07 1.40 - 2.05 (0.27) - (0.16) (Commenced 11/12/2007) MIST American Funds Growth Sub-Account (Commenced 4/28/2008) 2008 1,456,008 5.73 - 5.76 8,375,656 6.93 1.30 - 2.15 (42.70) - (42.36) MIST American Funds Balanced Allocation Sub-Account (Commenced 4/28/2008) 2008 11,833,017 6.97 - 7.02 82,849,380 6.79 1.30 - 2.20 (30.26) - (29.83) MIST American Funds Bond Sub-Account (Commenced 4/28/2008) 2008 569,876 8.91 - 8.96 5,095,172 9.62 1.30 - 2.05 (10.87) - (10.41) MIST American Funds Growth Allocation Sub-Account (Commenced 4/28/2008) 2008 14,248,484 6.32 - 6.36 90,489,940 7.03 1.30 - 2.20 (36.75) - (36.36) MIST American Funds International Sub-Account (Commenced 4/28/2008) 2008 917,165 6.02 - 6.06 5,546,421 11.57 1.30 - 2.15 (39.76) - (39.41) MIST American Funds Moderate Allocation Sub-Account (Commenced 4/28/2008) 2008 6,568,083 7.64 - 7.69 50,406,735 7.56 1.30 - 2.20 (23.56) - (23.09) MIST BlackRock High Yield Sub-Account (Commenced 4/28/2008) 2008 58,901 11.75 - 12.73 717,110 -- 1.30 - 1.95 (25.29) - (24.95) MIST Dreman Small Cap Value Sub-Account (Commenced 4/28/2008) 2008 79,596 9.75 - 10.08 798,756 -- 0.75 - 1.65 (25.66) - (25.19) MIST Met/Templeton Growth Sub-Account (Commenced 4/28/2008) 2008 355,286 6.56 - 6.60 2,341,967 1.00 0.75 - 1.65 (34.42) - (34.01)
80 METLIFE INVESTORS VARIABLE ANNUITY ACCOUNT ONE OF METLIFE INVESTORS INSURANCE COMPANY NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) 6. FINANCIAL HIGHLIGHTS -- (CONTINUED) UNIT VALUE(1) INVESTMENT(2) EXPENSE RATIO(3) TOTAL RETURN(4) LOWEST TO NET INCOME LOWEST TO LOWEST TO UNITS HIGHEST ($) ASSETS ($) RATIO (%) HIGHEST (%) HIGHEST (%) ---------- ------------- ----------- ------------- ---------------- ------------------- MIST Met/Franklin Mutual Shares Sub-Account (Commenced 4/28/2008) 2008 1,849,994 6.57 - 6.63 12,243,232 6.20 0.75 - 2.05 (34.29) - (33.70) MIST Met/Franklin Templeton Founding Strategy Sub-Account (Commenced 4/28/2008) 2008 7,114,691 6.99 - 7.07 50,103,254 3.70 0.75 - 2.20 (30.05) - (29.35) Russell Multi-Style Equity 2008 1,151,383 8.39 9,661,248 1.44 1.40 (41.40) Sub-Account 2007 1,311,535 14.32 18,778,587 1.02 1.40 8.82 2006 1,829,723 13.16 24,075,386 0.98 1.40 11.18 2005 2,495,854 11.83 29,537,014 1.12 1.40 5.78 2004 3,502,648 11.19 39,185,661 0.76 1.40 8.28 Russell Aggressive Equity 2008 237,745 8.68 2,064,201 0.83 1.40 (43.72) Sub-Account 2007 267,701 15.43 4,129,569 0.36 1.40 1.97 2006 349,188 15.13 5,282,370 0.17 1.40 13.2 2005 502,797 13.36 6,719,215 0.17 1.40 4.89 2004 691,249 12.74 8,807,286 3.49 1.40 13.13 Russell Non-U.S. Sub-Account 2008 443,091 10.70 4,740,821 -- 1.40 (43.22) 2007 494,438 18.84 9,316,786 2.39 1.40 8.58 2006 656,427 17.35 11,391,245 2.18 1.40 21.93 2005 901,452 14.23 12,830,073 1.58 1.40 12.11 2004 1,261,708 12.7 16,017,662 1.87 1.40 16.65 Russell Core Bond Sub-Account 2008 806,556 14.30 11,537,759 3.94 1.40 (4.91) 2007 962,148 15.04 14,474,327 5.14 1.40 5.74 2006 1,079,274 14.23 15,354,316 4.38 1.40 2.28 2005 1,392,616 13.91 19,370,351 3.51 1.40 (0.06) 2004 1,719,866 13.83 23,779,833 4.13 1.40 3.21 Russell Real Estate Securities 2008 65,815 17.83 1,173,473 1.91 1.40 (37.57) Sub-Account 2007 73,964 28.56 2,112,446 2.21 1.40 (17.03) 2006 93,434 34.42 3,216,373 1.87 1.40 33.96 2005 125,482 25.7 3,224,635 2.04 1.40 11.39 2004 167,353 23.07 3,860,845 8.13 1.40 33.01 AIM V.I. International Growth 2008 479,028 7.86 - 17.70 6,038,604 0.45 0.85 - 1.90 (41.65) - (40.87) Sub-Account 2007 647,307 13.29 - 30.15 13,839,627 0.39 0.85 - 1.90 12.25 - 13.71 2006 855,393 11.69 - 26.70 16,393,934 1.06 0.85 - 1.90 25.48 - 27.15 2005 894,527 9.19 - 21.15 13,361,653 0.76 0.85 - 1.90 15.49 - 16.93 2004 511,893 7.86 - 18.21 6,219,932 0.63 0.85 - 1.90 21.37 - 22.95 DWS Government & Agency 2008 56,735 14.65 - 15.11 853,951 4.64 1.40 - 1.80 3.06 - 3.47 Securities Sub-Account 2007 72,036 14.22 - 14.61 1,048,765 5.24 1.40 - 1.80 4.05 - 4.47 2006 94,778 13.67 - 13.98 1,321,448 4.15 1.40 - 1.80 2.31 - 2.72 2005 128,534 13.36 - 13.61 1,745,552 4.17 1.40 - 1.80 0.75 - 1.15 2004 166,555 13.26 - 13.46 2,237,156 3.82 1.40 - 1.80 1.90 - 2.31 MSF Davis Venture Value 2008 16,097,344 8.43 - 25.63 158,677,410 1.20 0.75 - 2.35 (40.87) - (39.91) Sub-Account 2007 17,773,074 14.23 - 42.65 286,644,026 0.67 0.75 - 2.35 1.99 - 3.65 2006 21,712,702 13.94 - 41.15 334,265,042 0.71 0.75 - 2.35 11.76 - 13.55 2005 23,065,635 12.46 - 36.24 307,539,950 0.52 0.75 - 2.35 7.59 - 9.32 2004 22,830,671 11.57 - 33.15 274,155,409 0.46 0.75 - 2.35 9.53 - 11.30
81 METLIFE INVESTORS VARIABLE ANNUITY ACCOUNT ONE OF METLIFE INVESTORS INSURANCE COMPANY NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) 6. FINANCIAL HIGHLIGHTS -- (CONTINUED) UNIT VALUE(1) INVESTMENT(2) EXPENSE RATIO(3) TOTAL RETURN(4) LOWEST TO NET INCOME LOWEST TO LOWEST TO UNITS HIGHEST ($) ASSETS ($) RATIO (%) HIGHEST (%) HIGHEST (%) ---------- ------------- ----------- ------------- ---------------- ------------------- MSF Harris Oakmark Focused Value 2008 3,549,570 8.27 - 8.85 30,546,045 0.04 1.30 - 2.35 (47.39) - (46.83) Sub-Account 2007 4,151,214 15.69 - 16.65 67,473,501 0.34 1.30 - 2.35 (9.25) - (8.28) 2006 4,979,605 17.28 - 18.16 88,607,294 0.09 1.30 - 2.35 9.58 - 10.73 2005 5,521,791 15.75 - 16.40 89,084,192 -- 1.30 - 2.35 7.17 - 8.29 2004 6,638,629 14.68 - 15.14 99,304,225 1.21 1.30 - 2.35 7.10 - 8.23 MSF Jennison Growth 2008 5,099,630 3.41 - 9.62 39,057,689 2.21 0.75 - 2.35 (38.03) - (37.02) Sub-Account 2007 5,787,011 5.45 - 15.28 70,723,890 0.19 0.75 - 2.35 8.79 - 10.55 2006 7,501,567 4.96 - 13.84 84,084,948 -- 0.75 - 2.35 0.15 - 1.76 2005 7,810,159 4.90 - 13.61 86,296,723 -- 0.75 - 2.35 10.91 - 11.52 2004 7,626,777 10.24 - 10.50 79,365,969 0.01 0.75 - 2.35 6.40 - 7.53 MSF MFS Total Return 2008 3,111,443 9.85 - 40.51 63,254,070 3.38 0.75 - 1.90 (23.81) - (22.93) Sub-Account 2007 3,404,791 12.91 - 52.56 86,770,491 1.94 0.75 - 1.90 2.15 - 3.34 2006 3,537,012 12.63 - 50.86 83,918,502 3.25 0.75 - 1.90 9.83 - 11.10 2005 3,290,732 11.49 - 45.78 65,221,333 1.44 0.75 - 1.90 0.92 - 2.08 2004 2,647,889 11.37 - 44.85 40,836,250 3.02 0.75 - 1.90 8.90 - 10.16 MSF Capital Guardian U.S. Equity 2008 10,282,302 7.17 - 7.82 77,348,501 1.03 0.75 - 1.90 (41.53) - (40.74) Sub-Account 2007 12,051,365 12.26 - 13.19 153,904,080 0.37 0.75 - 1.90 (2.21) - (0.93) 2006 13,997,926 9.67 - 13.31 181,068,259 2.36 0.75 - 1.90 3.39 - 11.13 2005 21,252,919 8.69 - 12.19 219,601,065 0.09 0.75 - 1.90 3.52 - 5.59 2004 14,805,068 8.29 - 11.62 242,802,695 0.21 0.75 - 1.90 6.95 - 10.34 MSF Julius Baer International Stock 2008 412,169 7.07 - 12.02 4,667,298 2.81 0.85 - 1.90 (45.29) - (44.71) Sub-Account 2007 432,898 12.83 - 21.73 8,920,544 0.83 0.85 - 1.80 8.10 - 9.13 2006 632,428 11.79 - 19.91 12,031,860 1.25 0.75 - 1.90 14.05 - 15.36 2005 837,397 10.26 - 17.28 13,941,243 0.44 0.85 - 1.90 15.38 - 16.59 2004 930,015 8.82 - 14.82 13,351,662 1.33 0.75 - 1.90 15.75 - 17.09 MSF BlackRock Money Market 2008 20,523,657 10.19 - 11.42 220,017,626 2.49 0.75 - 2.35 0.21 - 1.98 Sub-Account 2007 10,356,826 10.16 - 11.22 109,887,921 4.74 0.75 - 2.35 2.37 - 4.18 2006 8,885,438 9.91 - 10.78 91,235,712 4.58 0.75 - 2.35 2.13 - 3.77 2005 5,790,856 9.70 - 10.39 57,767,677 3.20 0.75 - 2.35 0.42 - 1.49 2004 2,068,250 9.91 - 10.01 20,502,724 1.06 0.85 - 1.40 (0.42) - 0.13 MSF MetLife Stock Index 2008 2,680,318 6.40 - 8.56 22,342,634 1.68 1.30 - 2.25 (38.66) - (37.95) Sub-Account 2007 2,846,982 10.31 - 13.82 38,415,249 0.87 1.30 - 2.25 2.63 - 3.80 2006 3,050,585 9.93 - 13.34 39,811,549 1.74 1.30 - 2.35 12.52 - 13.70 2005 3,159,767 8.72 - 11.73 36,333,127 1.33 1.30 - 2.25 2.06 - 3.03 2004 3,058,217 11.06 - 11.39 34,452,591 0.77 1.30 - 2.25 7.71 - 8.85 MSF BlackRock Bond Income 2008 673,186 40.59 - 54.34 33,139,135 4.78 0.75 - 1.90 (5.48) - (4.39) Sub-Account 2007 580,953 42.95 - 56.83 29,400,150 2.87 0.75 - 1.90 4.02 - 5.23 (Commenced 5/3/2004) 2006 772,347 41.29 - 54.01 36,289,487 5.17 0.75 - 1.90 2.18 - 3.36 2005 700,921 40.41 - 52.26 31,894,139 3.33 0.75 - 1.90 0.24 - 1.39 2004 253,118 40.31 - 47.26 11,838,393 -- 0.30 - 1.90 2.21 - 2.82 MSF BlackRock Strategic Value 2008 126,371 11.76 - 12.38 1,538,722 0.22 1.30 - 1.90 (39.72) - (39.35) Sub-Account 2007 118,620 19.51 - 20.41 2,389,410 0.06 1.30 - 1.90 (5.51) - (4.94) (Commenced 5/3/2004) 2006 141,367 20.65 - 22.25 3,001,029 0.08 0.75 - 1.90 14.26 - 15.57 2005 222,081 18.07 - 19.25 4,106,357 -- 1.30 - 1.90 1.96 - 2.57 2004 276,925 17.72 - 18.66 5,002,257 -- 0.75 - 1.90 12.89 - 14.20
82 METLIFE INVESTORS VARIABLE ANNUITY ACCOUNT ONE OF METLIFE INVESTORS INSURANCE COMPANY NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) 6. FINANCIAL HIGHLIGHTS -- (CONTINUED) UNIT VALUE(1) INVESTMENT(2) EXPENSE RATIO(3) TOTAL RETURN(4) LOWEST TO NET INCOME LOWEST TO LOWEST TO UNITS HIGHEST ($) ASSETS ($) RATIO (%) HIGHEST (%) HIGHEST (%) --------- ------------- ----------- ------------- ---------------- ------------------- MSF Franklin Templeton 2008 1,386,206 6.22 - 6.80 9,057,920 -- 0.75 - 1.90 (42.42) - (41.75) Small Cap Growth 2007 1,193,998 10.81 - 11.67 13,363,331 -- 0.75 - 1.90 2.34 - 3.53 Sub-Account 2006 1,914,092 10.56 - 11.01 20,720,142 -- 1.30 - 1.90 7.66 - 8.31 (Commenced 5/3/2004) 2005 1,835,415 9.81 - 10.15 18,385,352 -- 1.30 - 1.90 2.43 - 3.05 2004 173,767 9.58 - 9.83 1,692,231 -- 1.30 - 1.90 9.05 - 9.71 MSF Western Asset Management 2008 240,103 16.47 - 18.27 4,232,913 4.13 1.30 - 1.90 (16.82) - (16.20) Strategic Bond Opportunities 2007 279,280 19.80 - 21.80 5,877,310 2.46 1.30 - 1.90 1.74 - 2.58 Sub-Account 2006 298,802 19.46 - 22.38 6,154,850 4.79 0.75 - 1.90 2.86 - 4.04 (Commenced 5/3/2004) 2005 329,226 18.92 - 21.51 6,568,086 3.05 1.30 - 1.90 0.64 - 1.24 2004 335,209 18.80 - 21.13 6,620,128 -- 0.75 - 1.90 4.29 - 5.50 MSF Western Asset Management 2008 419,048 14.63 - 16.51 6,537,200 2.78 1.30 - 2.15 (2.65) - (1.82) U.S. Government 2007 123,153 15.03 - 16.81 1,940,597 2.18 1.30 - 2.15 1.81 - 2.68 Sub-Account 2006 69,720 14.41 - 17.30 1,068,532 0.98 0.85 - 2.35 1.51 - 3.04 (Commenced 5/3/2004) 2005 4,435 14.20 - 16.79 68,021 -- 1.55 - 2.15 (0.60) - (0.20) MSF T. Rowe Price Small Cap Growth 2008 647,701 9.41 - 10.91 6,522,937 -- 0.85 - 1.90 (37.52) - (36.73) Sub-Account 2007 724,186 15.07 - 17.25 11,605,383 -- 0.85 - 1.90 7.46 - 8.93 (Commenced 5/3/2004) 2006 887,179 9.67 - 15.83 12,441,182 -- 0.75 - 1.90 1.68 - 2.86 2005 1,020,337 9.35 - 15.37 13,929,124 -- 0.85 - 1.90 8.64 - 10.07 2004 1,124,853 8.89 - 13.96 27,932,877 -- 0.75 - 1.90 8.89 - 10.15 MSF T. Rowe Price Large Cap Growth 2008 4,304,914 8.27 - 9.39 37,442,377 0.35 0.85 - 1.90 (43.10) - (42.38) Sub-Account 2007 4,816,195 14.53 - 16.29 73,226,346 0.24 0.85 - 1.90 7.13 - 8.45 2006 8,132,948 13.56 - 15.02 114,703,767 0.20 0.75 - 1.90 10.76 - 12.04 2005 4,655,618 12.24 - 13.38 59,163,838 0.42 0.85 - 1.90 4.33 - 5.69 2004 3,763,068 11.73 - 12.66 45,683,381 -- 0.75 - 1.90 7.64 - 8.89 MSF Oppenheimer Global Equity 2008 898,364 11.17 - 12.80 11,109,677 1.87 0.75 - 1.90 (41.68) - (41.00) Sub-Account 2007 928,692 19.16 - 21.70 19,496,970 0.87 0.75 - 1.90 4.25 - 5.46 (Commenced 5/3/2004) 2006 857,647 18.38 - 20.58 17,132,657 2.02 0.75 - 1.90 14.17 - 15.48 2005 305,962 16.10 - 17.82 5,298,650 -- 0.75 - 1.90 16.73 - 17.62 MSF MFS Value Sub-Account (Commenced 4/28/2008) 2008 178,201 10.69 - 11.93 2,098,323 -- 0.75 - 1.80 (30.51) - (30.01) MSF - Met/Dimensional International Small Company Sub-Account (Commenced 11/10/2008) 2008 3,592 10.13 - 10.14 36,397 -- 1.30 - 1.80 0.43 - 0.50 Putnam VT Growth and Income 2008 849,462 7.95 - 36.89 7,864,017 2.47 0.75 - 1.90 (39.86) - (39.16) Sub-Account 2007 1,019,458 13.20 - 60.63 15,743,571 1.55 0.75 - 1.90 (7.82) - (6.74) 2006 1,289,872 14.30 - 65.01 20,878,412 1.78 0.75 - 1.90 13.74 - 15.05 2005 1,598,305 12.56 - 56.51 22,007,752 1.76 0.75 - 1.90 3.25 - 4.44 2004 1,842,883 12.16 - 54.11 23,304,488 1.82 0.75 - 1.90 9.02 - 10.28 Putnam VT Vista 2008 229,563 7.11 - 8.97 1,714,427 -- 1.30 - 1.90 (46.57) - (46.17) Sub-Account 2007 264,111 13.29 - 16.69 3,664,269 -- 1.30 - 1.90 1.84 - 2.62 2006 374,568 13.04 - 16.29 5,064,251 -- 1.30 - 1.90 3.47 - 4.09 2005 475,451 12.59 - 15.65 6,165,382 -- 1.30 - 1.90 10.04 - 10.70 2004 566,204 11.43 - 14.13 6,616,254 -- 1.30 - 1.90 16.37 - 17.07
83 METLIFE INVESTORS VARIABLE ANNUITY ACCOUNT ONE OF METLIFE INVESTORS INSURANCE COMPANY NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) 6. FINANCIAL HIGHLIGHTS -- (CONTINUED) UNIT VALUE(1) INVESTMENT(2) EXPENSE RATIO(3) TOTAL RETURN(4) LOWEST TO NET INCOME LOWEST TO LOWEST TO UNITS HIGHEST ($) ASSETS ($) RATIO (%) HIGHEST (%) HIGHEST (%) --------- ------------- ---------- ------------- ---------------- ------------------- Putnam VT Equity Income 2008 2,278,609 10.86 - 11.59 26,038,979 1.97 0.75 - 1.90 (32.44) - (31.66) Sub-Account 2007 2,648,811 16.07 - 16.96 44,391,661 1.30 0.75 - 1.90 1.24 - 2.41 2006 2,427,699 15.87 - 16.56 39,810,732 1.07 0.75 - 1.90 16.61 - 17.96 2005 1,760,798 13.61 - 14.04 24,525,877 0.80 0.75 - 1.90 3.53 - 4.72 2004 869,958 13.15 - 13.40 11,601,025 0.08 0.75 - 1.90 9.71 - 10.98 FTVIPT Templeton Growth Securities 2008 959,219 9.57 - 11.97 10,773,542 1.84 0.75 - 1.90 (43.41) - (42.63) Sub-Account 2007 963,068 16.68 - 20.94 18,987,897 1.32 0.75 - 1.90 0.41 - 1.68 2006 560,530 16.40 - 20.46 10,958,015 1.12 0.75 - 1.90 19.52 - 20.90 2005 263,350 13.54 - 17.08 4,406,685 1.18 0.85 - 1.80 6.93 - 8.14 2004 326,660 12.52 - 15.83 5,089,682 1.24 0.85 - 1.80 13.95 - 15.26 FTVIPT Templeton Foreign Securities 2008 2,425,108 9.21 - 23.04 25,904,560 2.43 0.85 - 1.90 (41.51) - (40.74) Sub-Account 2007 2,895,980 15.73 - 39.15 52,175,234 1.92 0.85 - 1.90 13.27 - 14.80 2006 4,229,198 13.80 - 37.24 67,803,255 1.29 0.75 - 1.90 19.17 - 20.54 2005 5,193,955 11.44 - 30.90 67,994,861 1.17 0.85 - 1.90 8.10 - 9.54 2004 4,880,998 10.44 - 28.26 55,594,415 1.06 0.75 - 1.90 16.29 - 17.64 Fidelity VIP Growth Opportunties 2008 20,661 5.23 108,037 0.47 1.40 (55.65) Sub-Account 2007 16,783 11.79 197,857 -- 1.40 21.46 2006 23,148 9.71 224,683 0.91 1.40 3.99 2005 37,228 9.33 347,477 0.99 1.40 7.38 2004 52,541 8.69 456,684 0.58 1.40 (5.70) Fidelity VIP Equity-Income 2008 386,695 8.61 - 37.13 3,778,216 2.08 1.30 - 1.90 (43.89) - (43.46) Sub-Account 2007 506,284 15.32 - 65.79 8,847,588 1.62 1.30 - 1.90 (0.64) - 0.11 2006 549,152 15.41 - 65.81 9,156,792 3.01 1.30 - 1.90 17.68 - 18.38 2005 639,119 13.08 - 55.59 8,889,375 1.50 1.30 - 1.90 3.59 - 4.21 2004 703,824 12.61 - 53.35 9,118,491 1.71 1.30 - 1.90 9.13 - 9.79 PIMCO VIT High Yield 2008 497,639 10.37 - 11.06 5,373,192 7.80 1.30 - 1.90 (24.95) - (24.50) Sub-Account 2007 589,348 13.82 - 14.64 8,446,130 6.83 1.30 - 1.90 1.55 - 2.16 2006 1,027,968 13.61 - 14.33 14,434,061 6.97 1.30 - 1.90 7.06 - 7.70 2005 910,444 12.71 - 13.31 11,879,844 6.41 1.30 - 1.90 2.17 - 2.78 2004 332,838 12.44 - 12.95 4,215,670 7.15 1.30 - 1.90 7.50 - 8.14 PIMCO VIT Low Duration 2008 735,311 12.30 - 13.05 9,399,511 4.09 1.30 - 1.90 (2.30) - (1.71) Sub-Account 2007 689,390 12.59 - 13.28 8,992,891 4.73 1.30 - 1.90 5.34 - 5.98 2006 786,353 11.95 - 12.53 9,702,832 4.18 1.30 - 1.90 2.03 - 2.64 2005 863,341 11.71 - 12.21 10,399,997 2.75 1.30 - 1.90 (0.88) - (0.29) 2004 966,209 11.82 - 12.24 11,692,980 1.58 1.30 - 1.90 (0.09) - (0.52) PIMCO VIT StocksPLUS Growth 2008 149,547 5.99 - 9.10 938,582 6.88 1.30 - 1.90 (43.71) - (43.37) and Income Sub-Account 2007 135,574 10.63 - 16.07 1,512,979 7.64 1.30 - 1.90 4.84 - 5.47 2006 138,195 10.13 - 15.24 1,454,878 4.90 1.30 - 1.90 12.74 - 13.42 2005 154,607 8.97 - 13.44 1,430,485 2.26 1.30 - 1.90 1.55 - 2.16 2004 176,526 8.83 - 13.15 1,585,771 1.76 1.30 - 1.90 8.72 - 9.38 PIMCO VIT Total Return 2008 935,102 14.72 - 15.18 14,101,656 4.48 1.40 - 1.80 2.92 - 3.33 Sub-Account 2007 1,271,571 14.30 - 14.69 18,565,738 4.74 1.40 - 1.80 6.81 - 7.24 2006 1,708,329 13.39 - 13.70 23,287,170 4.40 1.40 - 1.80 2.00 - 2.41 2005 2,134,374 13.13 - 13.38 28,433,489 3.37 1.40 - 1.80 0.63 - 1.03 2004 2,624,882 13.04 - 13.24 34,640,594 3.44 1.40 - 1.80 2.97 - 3.39
84 METLIFE INVESTORS VARIABLE ANNUITY ACCOUNT ONE OF METLIFE INVESTORS INSURANCE COMPANY NOTES TO THE FINANCIAL STATEMENTS -- (CONCLUDED) 6. FINANCIAL HIGHLIGHTS -- (CONCLUDED) UNIT VALUE(1) INVESTMENT(2) EXPENSE RATIO(3) TOTAL RETURN(4) LOWEST TO NET INCOME LOWEST TO LOWEST TO UNITS HIGHEST ($) ASSETS ($) RATIO (%) HIGHEST (%) HIGHEST (%) --------- -------------- ---------- ------------- ---------------- ------------------- American Funds Global Growth 2008 1,188,717 16.81 - 19.22 22,461,352 3.08 0.75 - 1.90 (39.55) - (38.85) Sub-Account 2007 344,425 27.80 - 31.43 10,517,598 3.93 0.75 - 1.90 12.68 - 13.99 (Commenced 5/1/2006) 2006 12,186 24.68 - 27.58 325,343 -- 0.75 - 1.90 18.17 - 19.53 American Funds Global Small Capitalization Sub-Account (Commenced 4/28/2008) 2008 183,249 15.77 - 17.36 3,144,085 -- 0.75 - 1.65 (49.16) - (48.84) American Funds Growth Sub-Account (Commenced 4/28/2008) 2008 126,866 89.43 - 114.72 14,183,764 2.31 0.75 - 1.75 (42.37) - (41.97)
1 The Company sells a number of variable annuity products which have unique combinations of features and fees that are charged against the contract owner's account balance. Differences in the fee structures result in a variety of unit values, expense ratios, and total returns. 2 These amounts represent the dividends, excluding distributions of capital gains, received by the Sub-Account 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 contract owner accounts either through reductions in the unit values or the redemption of units. The recognition of investment income by the Sub-Account is affected by the timing of the declaration of dividends by the underlying portfolio, series, or fund in which the Sub-Account invests. 3 These amounts represent the annualized contract expenses of each of the applicable Sub-Accounts, consisting primarily of mortality and expense risk charges, for each period indicated. The ratios include only those expenses that result in a direct reduction to unit values. Charges made directly to contract owner accounts through the redemption of units and expenses of the underlying portfolio, series, or fund have been excluded. 4 These amounts represent the total return for the period indicated, including changes in the value of the underlying portfolio, series, or fund, and expenses assessed through the reduction of unit values. These ratios do not include any expenses assessed through the redemption of units. The total return is calculated for each period indicated or from the effective date through the end of the reporting period. The total return is presented as a range of minimum to maximum returns, based on minimum and maximum returns within each product grouping of the applicable Sub-Account. 85 METLIFE INVESTORS INSURANCE COMPANY Financial Statements for the Years Ended December 31, 2008, 2007 and 2006 and Report of Independent Registered Public Accounting Firm REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholder of MetLife Investors Insurance Company: We have audited the accompanying balance sheets of MetLife Investors Insurance Company (the "Company") as of December 31, 2008 and 2007, and the related statements of income, stockholder's equity, and cash flows for each of the three years in the period ended December 31, 2008. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our 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 Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such financial statements present fairly, in all material respects, the financial position of MetLife Investors Insurance Company as of December 31, 2008 and 2007, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2008, 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 certain assets and liabilities to a fair value measurement approach as required by accounting guidance adopted on January 1, 2008, and charged its method of accounting for income taxes as required by accounting guidance adopted on January 1, 2007. DELOITTE & TOUCHE LLP Certified Public Accountants Tampa, Florida April 10, 2009 METLIFE INVESTORS INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) BALANCE SHEETS DECEMBER 31, 2008 AND 2007 (IN MILLIONS, EXCEPT SHARE AND PER SHARE DATA)
2008 2007 ------- ------- ASSETS Investments: Fixed maturity securities available-for-sale, at estimated fair value (amortized cost: $1,878 and $2,043, respectively)............................................ $ 1,576 $ 2,017 Equity securities available-for-sale, at estimated fair value (cost: $21 and $21, respectively).................. 9 18 Mortgage loans on real estate............................... 76 74 Policy loans................................................ 28 29 Real estate joint ventures.................................. -- 1 Other limited partnership interests......................... 2 2 Short-term investments...................................... 189 74 Other invested assets....................................... 109 28 ------- ------- Total investments........................................ 1,989 2,243 Cash and cash equivalents..................................... 517 81 Accrued investment income..................................... 16 20 Premiums and other receivables................................ 1,711 906 Deferred policy acquisition costs and value of business acquired.................................................... 567 598 Current income tax recoverable................................ 33 2 Other assets.................................................. 129 131 Separate account assets....................................... 6,633 9,432 ------- ------- Total assets............................................. $11,595 $13,413 ======= ======= LIABILITIES AND STOCKHOLDER'S EQUITY LIABILITIES: Future policy benefits...................................... $ 372 $ 292 Policyholder account balances............................... 2,790 2,167 Other policyholder funds.................................... 46 34 Deferred income tax liability............................... 147 116 Payables for collateral under securities loaned and other transactions............................................. 385 541 Other liabilities........................................... 365 43 Separate account liabilities................................ 6,633 9,432 ------- ------- Total liabilities........................................ 10,738 12,625 ------- ------- CONTINGENCIES, COMMITMENTS AND GUARANTEES (NOTE 8) STOCKHOLDER'S EQUITY: Common stock, par value $2 per share; 5,000,000 shares authorized; 2,899,446 shares issued and outstanding..................... 6 6 Additional paid-in capital.................................... 636 586 Retained earnings............................................. 371 210 Accumulated other comprehensive loss.......................... (156) (14) ------- ------- Total stockholder's equity............................... 857 788 ------- ------- Total liabilities and stockholder's equity............... $11,595 $13,413 ======= =======
See accompanying notes to the financial statements. 2 METLIFE INVESTORS INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006 (IN MILLIONS)
2008 2007 2006 ---- ---- ---- REVENUES Premiums..................................................... $ 9 $ 12 $ 65 Universal life and investment-type product policy fees....... 160 162 143 Net investment income........................................ 108 104 106 Other revenues............................................... 43 59 62 Net investment gains (losses)................................ 330 99 (60) ---- ---- ---- Total revenues............................................. 650 436 316 ---- ---- ---- EXPENSES Policyholder benefits and claims............................. 89 36 91 Interest credited to policyholder account balances........... 84 100 114 Other expenses............................................... 244 205 122 ---- ---- ---- Total expenses............................................. 417 341 327 ---- ---- ---- Income (loss) before provision (benefit) for income tax...... 233 95 (11) Provision (benefit) for income tax........................... 72 23 (17) ---- ---- ---- Net income................................................... $161 $ 72 $ 6 ==== ==== ====
See accompanying notes to the financial statements. 3 METLIFE INVESTORS INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) STATEMENTS OF STOCKHOLDER'S EQUITY FOR THE YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006 (IN MILLIONS)
ACCUMULATED ADDITIONAL OTHER COMMON PAID-IN RETAINED COMPREHENSIVE STOCK CAPITAL EARNINGS LOSS TOTAL ------- ---------- -------- ------------- ----- Balance at January 1, 2006............. $6 $586 $127 $ (4) $ 715 Comprehensive income: Net income........................... 6 6 Other comprehensive income (loss): Unrealized investment gains (losses), net of related offsets and income tax.................. 1 1 ----- Other comprehensive income (loss).......................... 1 ----- Comprehensive income................. 7 ------- ---- ---- ----- ----- Balance at December 31, 2006........... 6 586 133 (3) 722 Cumulative effect of a change in accounting principle, net of income tax (Note 1)......................... 5 5 ------- ---- ---- ----- ----- Balance at January 1, 2007............. 6 586 138 (3) 727 Comprehensive income: Net income........................... 72 72 Other comprehensive income (loss): Unrealized investment gains (losses), net of related offsets and income tax.................. (11) (11) ----- Other comprehensive income (loss).......................... (11) ----- Comprehensive income................. 61 ------- ---- ---- ----- ----- Balance at December 31, 2007........... 6 586 210 (14) 788 Capital contribution from MetLife, Inc. (Note 9)............................. 50 50 Comprehensive income: Net income........................... 161 161 Other comprehensive income (loss): Unrealized gains (losses) on derivative instruments, net of income tax...................... 3 3 Unrealized investment gains (losses), net of related offsets and income tax.................. (145) (145) ----- Other comprehensive income (loss).......................... (142) ----- Comprehensive income................. 19 ------- ---- ---- ----- ----- Balance at December 31, 2008........... $ 6 $636 $371 $(156) $ 857 ======= ==== ==== ===== =====
See accompanying notes to the financial statements. 4 METLIFE INVESTORS INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006 (IN MILLIONS)
2008 2007 2006 ------- ------- ------- CASH FLOWS FROM OPERATING ACTIVITIES Net income............................................... $ 161 $ 72 $ 6 Adjustments to reconcile net income to net cash provided by operating activities: Amortization of premiums and accretion of discounts associated with investments, net.................... (3) -- 4 (Gains) losses from sales of investments, net.......... (330) (99) 60 Undistributed equity earnings of real estate joint ventures............................................ (1) -- -- Interest credited to policyholder account balances..... 84 100 114 Universal life and investment-type product policy fees................................................ (160) (162) (143) Change in accrued investment income.................... 4 2 2 Change in premiums and other receivables............... (307) 206 (28) Change in deferred policy acquisition costs, net....... 95 38 (27) Change in insurance-related liabilities................ 78 (1) 52 Change in income tax payable........................... 77 102 (15) Change in other assets................................. 115 132 121 Change in other liabilities............................ 322 9 1 ------- ------- ------- Net cash provided by operating activities................ 135 399 147 ------- ------- ------- CASH FLOWS FROM INVESTING ACTIVITIES Sales, maturities and repayments of: Fixed maturity securities........................... 662 925 1,435 Mortgage loans on real estate....................... 6 16 32 Real estate joint ventures.......................... 2 1 1 Purchases of: Fixed maturity securities........................... (522) (910) (1,162) Equity securities................................... -- (21) -- Mortgage loans on real estate....................... (8) -- (58) Net change in short-term investments................... (115) 9 (4) Net change in other invested assets.................... (10) 1 1 Other, net............................................. 1 -- -- ------- ------- ------- Net cash provided by investing activities................ 16 21 245 ------- ------- ------- CASH FLOWS FROM FINANCING ACTIVITIES Policyholder account balances: Deposits............................................ 1,446 1,579 1,421 Withdrawals......................................... (1,055) (2,047) (1,733) Net change in payables for collateral under securities loaned and other transactions....................... (156) 12 20 Capital contribution from MetLife, Inc. ............... 50 -- -- ------- ------- ------- Net cash provided by (used in) financing activities...... 285 (456) (292) ------- ------- ------- Change in cash and cash equivalents...................... 436 (36) 100 Cash and cash equivalents, beginning of year............. 81 117 17 ------- ------- ------- CASH AND CASH EQUIVALENTS, END OF YEAR................... $ 517 $ 81 $ 117 ======= ======= ======= Supplemental disclosures of cash flow information: Net cash received during the year for: Income tax.......................................... $ 4 $ 84 $ 2 ======= ======= =======
See accompanying notes to the financial statements. 5 METLIFE INVESTORS INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE FINANCIAL STATEMENTS 1. BUSINESS, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BUSINESS MetLife Investors Insurance Company ("MLIIC"), a Missouri domiciled life insurance company (the "Company") is a wholly-owned subsidiary of MetLife, Inc. ("MetLife"). On November 9, 2006, MetLife Investors Insurance Company of California, a California domiciled life insurance company was merged into MLIIC. The Company markets and administers traditional life, universal life, variable annuity and fixed annuity products. The Company is licensed to conduct business in 49 states and the District of Columbia. Most of the policies issued present no significant mortality or longevity risk to the Company, but rather represent investment deposits by the policyholders. BASIS OF PRESENTATION The accompanying financial statements include the accounts of MLIIC and its former subsidiary through the date of merger. Intercompany transactions have been eliminated for all periods presented on a consolidated basis. 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. Certain amounts in the prior years' financial statements have been reclassified to conform with the 2008 presentation. Since the Company is a member of a controlled group of affiliated companies, its results may not be indicative of those of a stand-alone entity. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND CRITICAL ACCOUNTING ESTIMATES The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP") requires management to adopt accounting policies and make estimates and assumptions that affect amounts reported in the financial statements. The most critical estimates include those used in determining: (i) the estimated fair value of investments in the absence of quoted market values; (ii) investment impairments; (iii) the recognition of income on certain investments; (iv) the existence and estimated fair value of embedded derivatives requiring bifurcation; (v) the estimated 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; and (x) the liability for litigation and regulatory matters. 6 METLIFE INVESTORS INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) A description of such critical estimates is incorporated within the discussion of the related accounting policies which follow. In applying these policies, management makes subjective and complex judgments that frequently require estimates about matters that are inherently uncertain. Many of these policies, estimates and related judgments are common in the insurance and financial services industries; others are specific to the Company's businesses and operations. Actual results could differ from these estimates. Fair Value As described below, certain assets and liabilities are measured at estimated fair value on the Company's balance sheets. In addition, the footnotes to the financial statements include disclosures of estimated fair values. Effective January 1, 2008, the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 157, Fair Value Measurements ("SFAS 157"). SFAS 157 defines fair value as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. In many cases, the exit price and the transaction (or entry) price will be the same at initial recognition. However, in certain cases, the transaction price may not represent fair value. Under SFAS 157, fair value of a liability is based on the amount that would be paid to transfer a liability to a third party with the same credit standing. SFAS 157 requires that fair value be a market-based measurement in which the fair value is determined based on a hypothetical transaction at the measurement date, considered from the perspective of a market participant. When quoted prices are not used to determine fair value, SFAS 157 requires consideration of three broad valuation techniques: (i) the market approach, (ii) the income approach, and (iii) the cost approach. The approaches are not new, but SFAS 157 requires that entities determine the most appropriate valuation technique to use, given what is being measured and the availability of sufficient inputs. SFAS 157 prioritizes the inputs to fair valuation techniques and allows for the use of unobservable inputs to the extent that observable inputs are not available. The Company has categorized its assets and liabilities measured at estimated fair value into a three-level hierarchy, based on the priority of the inputs to the respective valuation technique. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). An asset or liability's classification within the fair value hierarchy is based on the lowest level of significant input to its valuation. SFAS 157 defines the input levels as follows: Level 1 Unadjusted quoted prices in active markets for identical assets or liabilities. The Company defines active markets based on average trading volume for equity securities. The size of the bid/ask spread is used as an indicator of market activity for fixed maturity securities. Level 2 Quoted prices in markets that are not active or inputs that are observable either directly or indirectly. Level 2 inputs include quoted prices for similar assets or liabilities other than quoted prices in Level 1; quoted prices in markets that are not active; or other inputs that are observable or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3 Unobservable inputs that are supported by little or no market activity and are significant to the estimated fair value of the assets or liabilities. Unobservable inputs reflect the reporting entity's own assumptions about the assumptions that market participants would use in pricing the asset or liability. Level 3 assets and liabilities include financial instruments whose values are determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of estimated fair value requires significant management judgment or estimation. The measurement and disclosures under SFAS 157 in the accompanying financial statements and footnotes exclude certain items such as nonfinancial assets and nonfinancial liabilities initially measured at estimated fair value in a business combination, reporting units measured at estimated fair value in the first step of a goodwill 7 METLIFE INVESTORS INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) impairment test and indefinite-lived intangible assets measured at estimated fair value for impairment assessment. The effective date for these items was deferred to January 1, 2009. Prior to adoption of SFAS 157, estimated fair value was determined based solely upon the perspective of the reporting entity. Therefore, methodologies used to determine the estimated fair value of certain financial instruments prior to January 1, 2008, while being deemed appropriate under existing accounting guidance, may not have produced an exit value as defined in SFAS 157. Investments The Company's principal investments are in fixed maturity and equity securities, mortgage loans on real estate, policy loans, real estate joint ventures and other limited partnership interests, short-term investments and other invested assets. The accounting policies related to each are as follows: Fixed Maturity and Equity Securities. The Company's fixed maturity and equity securities are classified as available-for-sale and are reported at their estimated fair value. Unrealized investment gains and losses on these securities are recorded as a separate component of other comprehensive income (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 in 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 estimated by management using inputs obtained from third party specialists, including broker-dealers, and based on management's knowledge of the current market. For credit-sensitive mortgage-backed and asset-backed securities and certain prepayment- sensitive securities, the effective yield is recalculated on a prospective basis. For all other mortgage-backed and asset-backed securities, the effective yield is recalculated on a retrospective basis. The cost or amortized 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 estimated 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. An extended and severe unrealized loss position on a fixed maturity security may not have any impact on the ability of the issuer to service all scheduled interest and principal payments and the Company's evaluation of 8 METLIFE INVESTORS INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) recoverability of all contractual cash flows, as well as the Company's ability and intent to hold the security, including holding the security until the earlier of a recovery in value, or until maturity. In contrast, for certain equity securities, greater weight and consideration are given by the Company to a decline in market value and the likelihood such market value decline will recover. See also Note 2. 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 2); (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. In periods subsequent to the recognition of an other-than-temporary impairment on a debt security, the Company accounts for the impaired security as if it had been purchased on the measurement date of the impairment. Accordingly, the discount (or reduced premium) based on the new cost basis is accreted into net investment income over the remaining term of the debt security in a prospective manner based on the amount and timing of estimated future cash flows. Securities Lending. Securities loaned transactions, whereby blocks of securities, which are included in fixed maturity securities and short-term investments, are loaned to third parties, are treated as financing arrangements and the associated liability is recorded at the amount of cash received. The Company generally obtains collateral in an amount equal to 102% of the estimated fair value of the securities loaned. The Company monitors the estimated fair 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 and commercial banks. 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. 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. Based on the facts and circumstances of the individual loans being impaired, valuation allowances are established for the excess carrying value of the loan over either: (i) the present value of expected future cash flows discounted at the loan's original effective interest rate, (ii) the estimated fair value of the loan's underlying collateral if the loan is in the process of foreclosure or otherwise collateral dependent, or (iii) the loan's estimated fair value. 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 9 METLIFE INVESTORS INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) contractual interest rate. However, interest ceases to be accrued for loans on which interest is generally more than 60 days past due and/or when 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 Joint Ventures and Other Limited Partnership Interests. The Company uses the equity method of accounting for investments in real estate joint ventures consisting of leveraged buy-out funds and other private equity funds, 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. The Company reports the distributions from real estate joint ventures and other limited partnership interests accounted for under the cost method and equity in earnings from real estate joint ventures accounted for under the equity method in net investment income. 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. The Company considers its cost method investments for other-than-temporary impairment when the carrying value of real estate joint ventures and other limited partnership interests exceeds the net asset value ("NAV"). The Company takes into consideration the severity and duration of this excess when deciding if the cost method investment is other-than-temporarily impaired. For equity method investees, the Company considers financial and other information provided by the investee, other known information and inherent risks in the underlying investments, as well as future capital commitments, in determining whether an impairment has occurred. When an other-than- temporary impairment is deemed to have occurred, the Company records a realized capital loss within net investment gains (losses) to record the investment at its estimated 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 estimated fair value, or stated at estimated fair value, if available. Short-term investments also include investments in affiliated money market pools. Other Invested Assets. Other invested assets consist principally of freestanding derivatives with positive estimated fair values, which are more fully described in the derivatives accounting policy which follows. Estimates and Uncertainties. The Company's investments are exposed to four primary sources of risk: credit, interest rate, liquidity risk and market valuation. The financial statement risks, stemming from such investment risks, are those associated with the determination of estimated fair values, the diminished ability to sell certain investments in times of strained market conditions, the recognition of impairments, the recognition of income on certain investments, and the potential consolidation of variable interest entities ("VIEs"). The use of different methodologies, assumptions and inputs relating to these financial statement risks may have a material effect on the amounts presented within the financial statements. When available, the estimated fair value of the Company's fixed maturity and equity securities are based on quoted prices in active markets that are readily and regularly obtainable. Generally, these are the most liquid of the Company's securities holdings and valuation of these securities does not involve management judgment. When quoted prices in active markets are not available, the determination of estimated fair value is based on market standard valuation methodologies. The market standard valuation methodologies utilized include: discounted cash flow methodologies, matrix pricing or other similar techniques. The assumptions and inputs in 10 METLIFE INVESTORS INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) applying these market standard valuation methodologies include, but are not limited to: interest rates, credit standing of the issuer or counterparty, industry sector of the issuer, coupon rate, call provisions, sinking fund requirements, maturity, estimated duration and management's assumptions regarding liquidity and estimated future cash flows. Accordingly, the estimated fair values are based on available market information and management's judgments about financial instruments. The significant inputs to the market standard valuation methodologies for certain types of securities with reasonable levels of price transparency are inputs that are observable in the market or can be derived principally from or corroborated by observable market data. Such observable inputs include benchmarking prices for similar assets in active, liquid markets, quoted prices in markets that are not active and observable yields and spreads in the market. When observable inputs are not available, the market standard valuation methodologies for determining the estimated fair value of certain types of securities that trade infrequently, and therefore have little or no price transparency, rely on inputs that are significant to the estimated fair value that are not observable in the market or cannot be derived principally from or corroborated by observable market data. These unobservable inputs can be based in large part on management judgment or estimation, and cannot be supported by reference to market activity. Even though unobservable, these inputs are based on assumptions deemed appropriate given the circumstances and consistent with what other market participants would use when pricing such securities. Financial markets are susceptible to severe events evidenced by rapid depreciation in asset values accompanied by a reduction in asset liquidity. The Company's ability to sell securities, or the price ultimately realized for these securities, depends upon the demand and liquidity in the market and increases the use of judgment in determining the estimated fair value of certain securities. The determination of the amount of allowances and impairments, as applicable, is 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) is dependent upon market conditions, which could result in prepayments and changes in amounts to be earned. The accounting rules under Financial Accounting Standards Board ("FASB") Interpretation ("FIN") No. 46(r), Consolidation of Variable Interest Entities -- An Interpretation of Accounting Research Bulletin No. 51 ("FIN 46(r)") for the determination of when an entity is a VIE and when to consolidate a VIE are complex. The determination of the VIEs primary beneficiary requires an evaluation of the contractual rights and obligations associated with each party involved in the entity, an estimate of the entity's expected losses and expected residual returns and the allocation of such estimates to each party involved in the entity. FIN 46(r) defines the primary beneficiary as the entity that will absorb a majority of a VIEs expected losses, receive a majority of a VIEs expected residual returns if no single entity absorbs a majority of expected losses, or both. When determining the primary beneficiary for structured investment products such as asset-backed securitizations and collateralized debt obligations, the Company uses historical default probabilities based on the credit rating of each issuer and other inputs including maturity dates, industry classifications and geographic location. Using computational algorithms, the analysis simulates default scenarios resulting in a range of expected losses and the probability associated with each occurrence. For other investment structures such as trust preferred securities, joint ventures, limited partnerships and limited liability companies, the 11 METLIFE INVESTORS INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) Company gains an understanding of the design of the VIE and generally uses a qualitative approach to determine if it is the primary beneficiary. This approach includes an analysis of all contractual rights and obligations held by all parties including profit and loss allocations, repayment or residual value guarantees, put and call options and other derivative instruments. If the primary beneficiary of a VIE can not be identified using this qualitative approach, the Company calculates the expected losses and expected residual returns of the VIE using a probability-weighted cash flow model. The use of different methodologies, assumptions and inputs in the determination of the primary beneficiary could have a material effect on the amounts presented within the financial statements. The Company did not consolidate any of its VIEs at December 31, 2008 and 2007. 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 option contracts, to manage the risk associated with variability in cash flows or changes in estimated fair values related to the Company's financial instruments. 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 balance sheet either as assets within other invested assets or as liabilities within other liabilities at estimated fair value as determined through the use of quoted market prices for exchange-traded derivatives or through the use of pricing models for over-the-counter derivatives. The determination of estimated fair value, when quoted market values are not available, is based on market standard valuation methodologies and inputs that are assumed to be consistent with what other market participants would use when pricing the instruments. Derivative valuations can be affected by changes in interest rates, foreign currency exchange rates, financial indices, credit spreads, default risk (including the counterparties to the contract), volatility, liquidity and changes in estimates and assumptions used in the pricing models. The significant inputs to the pricing models for most over-the-counter derivatives are inputs that are observable in the market or can be derived principally from or corroborated by observable market data. Significant inputs that are observable generally include: interest rates, foreign currency exchange rates, interest rate curves, credit curves and volatility. However, certain over-the-counter derivatives may rely on inputs that are significant to the estimated fair value that are not observable in the market or cannot be derived principally from or corroborated by observable market data. Significant inputs that are unobservable generally include: independent broker quotes, credit correlation assumptions, references to emerging market currencies and inputs that are outside the observable portion of the interest rate curve, credit curve, volatility or other relevant market measure. These unobservable inputs may involve significant management judgment or estimation. Even though unobservable, these inputs are based on assumptions deemed appropriate given the circumstances and consistent with what other market participants would use when pricing such instruments. Most inputs for over-the-counter derivatives are mid market inputs but, in certain cases, bid level inputs are used when they are deemed more representative of exit value. Market liquidity as well as the use of different methodologies, assumptions and inputs may have a material effect on the estimated fair values of the Company's derivatives and could materially affect net income. The credit risk of both the counterparty and the Company are considered in determining the estimated fair value for all over-the-counter derivatives after taking into account the effects of netting agreements and collateral arrangements. Credit risk is monitored and consideration of any potential credit adjustment is based on a net exposure by counterparty. This is due to the existence of netting agreements and collateral arrangements which effectively serve to mitigate credit risk. The Company values its derivative positions using the standard swap curve 12 METLIFE INVESTORS INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) which includes a credit risk adjustment. This credit risk adjustment is appropriate for those parties that execute trades at pricing levels consistent with the standard swap curve. As the Company and its significant derivative counterparties consistently execute trades at such pricing levels, additional credit risk adjustments are not currently required in the valuation process. The need for such additional credit risk adjustments is monitored by the Company. The Company's ability to consistently execute at such pricing levels is in part due to the netting agreements and collateral arrangements that are in place with all of its significant derivative counterparties. The evaluation of the requirement to make additional credit risk adjustments is performed by the Company each reporting period. 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 estimated fair value of the derivative are generally reported in net investment gains (losses). The fluctuations in estimated 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 estimated fair value of a recognized asset or liability or an unrecognized firm commitment ("fair value hedge"); or (ii) a hedge of a forecasted transaction or of the variability of cash flows to be received or paid related to a recognized asset or liability ("cash flow hedge"). In this documentation, the Company sets forth how the hedging instrument is expected to hedge the designated risks related to the hedged item and sets forth the method that will be used to retrospectively and prospectively assess the hedging instrument's effectiveness and the method which will be used to measure ineffectiveness. A derivative designated as a hedging instrument must be assessed as being highly effective in offsetting the designated risk of the hedged item. Hedge effectiveness is formally assessed at inception and periodically throughout the life of the designated hedging relationship. Assessments of hedge effectiveness and measurements of ineffectiveness are also subject to interpretation and estimation and different interpretations or estimates may have a material effect on the amount reported in net income. The accounting for derivatives is complex and interpretations of the primary accounting standards continue to evolve in practice. Judgment is applied in determining the availability and application of hedge accounting designations and the appropriate accounting treatment under these accounting standards. If it was determined that hedge accounting designations were not appropriately applied, reported net income could be materially affected. Differences in judgment as to the availability and application of hedge accounting designations and the appropriate accounting treatment may result in a differing impact on the financial statements of the Company from that previously reported. Under a fair value hedge, changes in the estimated fair value of the hedging derivative, including amounts measured as ineffectiveness, and changes in the estimated fair value of the hedged item related to the designated risk being hedged, are reported within net investment gains (losses). The estimated fair values of the hedging derivatives are exclusive of any accruals that are separately reported in the statement of income within interest income or interest expense to match the location of the hedged item. However, balances that are not scheduled to settle until maturity are included in the estimated fair value of derivatives. Under a cash flow hedge, changes in the estimated 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 statement of income when the Company's earnings are affected by the variability in cash flows of the hedged item. Changes in the estimated fair value of the hedging instrument measured as ineffectiveness are reported within net investment gains (losses). The estimated fair values of the hedging derivatives are exclusive of any accruals that are separately reported in the statement of income within interest income or interest expense to match the location of the hedged item. However, balances that are not scheduled to settle until maturity are included in the estimated fair value of derivatives. 13 METLIFE INVESTORS INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) The Company discontinues hedge accounting prospectively when: (i) it is determined that the derivative is no longer highly effective in offsetting changes in the estimated 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 estimated fair value or cash flows of a hedged item, the derivative continues to be carried on the balance sheet at its estimated fair value, with changes in estimated 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 estimated 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 estimated fair value of derivatives recorded in other comprehensive income (loss) related to discontinued cash flow hedges are released into the 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 balance sheet at its estimated fair value, with changes in estimated fair value recognized currently in net investment gains (losses). Any asset or liability associated with a recognized firm commitment is derecognized from the 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 estimated fair value on the balance sheet, with changes in its estimated fair value recognized in the current period as net investment gains (losses). The Company is also a party to financial instruments that contain terms which are deemed to be embedded derivatives. The Company assesses each identified embedded derivative to determine whether it is required to be bifurcated. If the instrument would not be accounted for in its entirety at estimated 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 balance sheet at estimated fair value with the host contract and changes in their estimated fair value are reported currently in net investment gains (losses). If the Company is unable to properly identify and measure an embedded derivative for separation from its host contract, the entire contract is carried on the balance sheet at estimated fair value, with changes in estimated fair value recognized in the current period in net investment gains (losses). Additionally, the Company may elect to carry an entire contract on the balance sheet at estimated fair value, with changes in estimated fair value recognized in the current period in net investment gains (losses) if that contract contains an embedded derivative that requires bifurcation. There is a risk that embedded derivatives requiring bifurcation may not be identified and reported at estimated fair value in the financial statements and that their related changes in estimated 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. 14 METLIFE INVESTORS INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) Deferred Policy Acquisition Costs and Value of Business Acquired The Company incurs significant costs in connection with acquiring new and renewal insurance business. Costs that vary with and relate to the production of new business are deferred as DAC. Such costs consist principally of commissions and agency and policy issuance expenses. VOBA is an intangible asset that reflects the estimated fair value of in-force contracts in a life insurance company acquisition and represents the portion of the purchase price that is allocated to the value of the right to receive future cash flows from the business in-force at the acquisition date. VOBA is based on actuarially determined projections, by each block of business, of future policy and contract charges, premiums, mortality, separate account performance, surrenders, operating expenses, investment returns and other factors. Actual experience on the purchased business may vary from these projections. The recovery of DAC and VOBA is dependent upon the future profitability of the related business. DAC and VOBA are aggregated in the financial statements for reporting purposes. DAC and VOBA on life insurance or investment-type contracts are amortized in proportion to gross profits, depending on the type of contract as described below. 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. When expected future gross profits are below those previously estimated, the DAC and VOBA amortization will increase, resulting in a current period charge to earnings. The opposite result occurs when the expected future gross profits are above the previously estimated expected future gross profits. Total DAC and VOBA amortization during a particular period may increase or decrease depending upon the relative size of the amortization change resulting from the adjustment to DAC and VOBA for the update of actual gross profits and the re-estimation of expected future gross profits. Each period, the Company also reviews the estimated gross profits for each block of business to determine the recoverability of DAC and VOBA balances. 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 which can result in significant fluctuations in amortization of DAC and VOBA. Returns that are higher than the Company's long- term expectation produce higher account balances, which increases the Company's future fee expectations and decreases future benefit payment expectations on minimum death and living benefit guarantees, resulting in higher expected future gross profits. The opposite result occurs when returns are lower than the Company's long-term expectation. The Company's practice to determine the impact of gross profits resulting from returns on separate accounts assumes that long- term appreciation in equity markets is not changed by short-term market fluctuations, but is only changed when sustained interim deviations are expected. The Company monitors these changes and only changes the assumption when its long-term expectation changes. The Company also reviews periodically other long-term assumptions underlying the projections of estimated gross profits. These include investment returns, interest crediting rates, mortality, persistency, and expenses to 15 METLIFE INVESTORS INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) administer business. Management annually updates assumptions used in the calculation of estimated gross profits which may have significantly changed. If the update of assumptions causes expected future gross profits to increase, DAC and VOBA amortization will decrease, resulting in a current period increase to earnings. The opposite result occurs when the assumption update causes expected future gross profits to decrease. Prior to 2007, DAC related to any internally replaced contract was generally expensed at the date of replacement. As described more fully in "Adoption of New Accounting Pronouncements," effective January 1, 2007, the Company adopted Statement of Position ("SOP") 05-1, Accounting by Insurance Enterprises for Deferred Acquisition Costs in Connection with Modifications or Exchanges of Insurance Contracts ("SOP 05-1"). Under SOP 05-1, an internal replacement is defined as a modification in product benefits, features, rights or coverages that occur by the exchange of a contract for a new contract, or by amendment, endorsement, or rider to a contract, or by election or coverage within a contract. If the modification substantially changes the contract, the DAC is written off immediately through income and any new deferrable costs associated with the replacement contract are deferred. If the modification does not substantially change the contract, the DAC amortization on the original contract will continue and any acquisition costs associated with the related modification are expensed. Sales Inducements The Company has two different types of sales inducements which are included in other assets: (i) the policyholder receives a bonus whereby the policyholder's initial account balance is increased by an amount equal to a specified percentage of the customer's deposit; and (ii) the policyholder receives a higher interest rate using a dollar cost averaging method than would have been received based on the normal general account interest rate credited. The Company defers sales inducements and amortizes them over the life of the policy using the same methodology and assumptions used to amortize DAC. The amortization of sales inducements is included in interest credited to policyholder account balances. Each year the Company reviews the deferred sales inducements to determine the recoverability of these balances. Goodwill Goodwill, which is included in other assets, is the excess of cost over the estimated 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. The Company performs its annual goodwill impairment testing during the third quarter of each year based upon data as of the close of the second quarter. Impairment testing is performed using the fair value approach, which requires the use of estimates and judgment, at the "reporting unit" level. A reporting unit is the operating segment or a business one level below the operating segment, if discrete financial information is prepared and regularly reviewed by management at that level. Management has concluded that the Company has one reporting unit. For purposes of goodwill impairment testing, if the carrying value of a reporting unit's goodwill exceeds its estimated fair value, there is an indication of impairment and the implied fair value of the goodwill is determined in the same manner as the amount of goodwill would be determined in a business acquisition. The excess of the carrying value of goodwill over the implied fair value of goodwill is recognized as an impairment and recorded as a charge against net income. In performing its goodwill impairment tests, when management believes meaningful comparable market data are available, the estimated fair value of the reporting unit is determined using a market multiple approach. When relevant comparables are not available, the Company uses a discounted cash flow model. Management applies significant judgment when determining the estimated fair value of the reporting unit. The valuation methodologies utilized are subject to key assumptions that are sensitive to change. Estimates of fair value 16 METLIFE INVESTORS INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) are inherently uncertain and represent only management's reasonable expectation regarding future developments. These estimates and the judgments and assumptions upon which the estimates are based will, in all likelihood, differ in some respects from actual future results. Declines in the estimated fair value of the Company's reporting unit could result in goodwill impairments in future periods. Management concluded it was appropriate to perform an interim goodwill impairment test at December 31, 2008. Based upon the tests performed management concluded no impairment of goodwill had occurred at December 31, 2008. Additionally, the Company recognized no impairments of goodwill during the years ended December 31, 2007 and 2006. Goodwill was $33 million at both December 31, 2008 and 2007. Liability for Future Policy Benefits and Policyholder Account Balances The Company establishes liabilities for amounts payable under insurance policies, including traditional life insurance and traditional annuities. Generally, amounts are payable over an extended period of time and related liabilities are calculated as the present value of future expected benefits to be paid reduced by the present value of future expected premiums. Such liabilities are established based on methods and underlying assumptions in accordance with GAAP and applicable actuarial standards. Principal assumptions used in the establishment of liabilities for future policy benefits are mortality, policy lapse, renewal, investment returns, inflation, expenses and other contingent events as appropriate to the respective product type. Utilizing these assumptions, liabilities are established on a block of business basis. Future policy benefit liabilities for non-participating traditional life insurance policies are equal to the aggregate of the present value of expected future benefit payments and related expenses less the present value of expected future net premiums. Assumptions as to mortality and persistency are based upon the Company's experience when the basis of the liability is established. Interest rate assumptions for the aggregate future policy benefit liabilities are approximately 5%. Future policy benefit liabilities for individual and group traditional fixed annuities after annuitization are equal to the present value of expected future payments. Interest rate assumptions used in establishing such liabilities range from 3% to 8%. The Company establishes future policy benefit liabilities for minimum death and income benefit guarantees relating to certain annuity contracts as follows: - Guaranteed minimum death benefit ("GMDB") liabilities are determined by estimating the expected value of death benefits in excess of the projected account balance and recognizing the excess ratably over the accumulation period based on total expected assessments. The Company regularly evaluates estimates used and adjusts the additional liability 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 GMDB liabilities are consistent with those used for amortizing DAC, and are thus subject to the same variability and risk. The assumptions of investment performance and volatility are consistent with the historical experience of the Standard & Poor's ("S&P") 500 Index. The benefit assumptions used in calculating the liabilities are based on the average benefits payable over a range of scenarios. - Guaranteed minimum income benefit ("GMIB") liabilities are determined by estimating the expected value of the income benefits in excess of the projected account balance at any future date of annuitization and recognizing the excess ratably over the accumulation period based on total expected assessments. The Company regularly evaluates estimates used and adjusts the additional liability balance, with a related charge or credit to benefit expense, if actual experience or other evidence suggests that earlier assumptions should be revised. The assumptions used for estimating the GMIB liabilities are consistent with those used for estimating the GMDB liabilities. In addition, the calculation of guaranteed annuitization benefit liabilities incorporates an assumption for the percentage of the potential annuitizations that may be elected 17 METLIFE INVESTORS INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) by the contractholder. Certain GMIBs have settlement features that result in a portion of that guarantee being accounted for as an embedded derivative and are recorded in policyholder account balances as described below. The Company establishes policyholder account balances for guaranteed minimum benefit riders relating to certain variable annuity products as follows: - Guaranteed minimum withdrawal benefit riders ("GMWB") guarantee the contractholder a return of their purchase payment via partial withdrawals, even if the account value is reduced to zero, provided that the contractholder's cumulative withdrawals in a contract year do not exceed a certain limit. The initial guaranteed withdrawal amount is equal to the initial benefit base as defined in the contract (typically, the initial purchase payments plus applicable bonus amounts). The GMWB is an embedded derivative, which is measured at estimated fair value separately from the host variable annuity product. The risk associated with GMWB riders written is ceded 100% to an affiliate through a reinsurance agreement. - Guaranteed minimum accumulation benefit riders ("GMAB") provide the contractholder, after a specified period of time determined at the time of issuance of the variable annuity contract, with a minimum accumulation of their purchase payments even if the account value is reduced to zero. The initial guaranteed accumulation amount is equal to the initial benefit base as defined in the contract (typically, the initial purchase payments plus applicable bonus amounts). The GMAB is an embedded derivative, which is measured at estimated fair value separately from the host variable annuity product. The risk associated with GMAB riders written is ceded 100% to an affiliate through a reinsurance agreement. For GMWB, GMAB and certain GMIB, the initial benefit base is increased by additional purchase payments made within a certain time period and decreases by benefits paid and/or withdrawal amounts. After a specified period of time, the benefit base may also increase as a result of an optional reset as defined in the contract. At the inception, the GMWB, GMAB and certain GMIB are accounted for as embedded derivatives with changes in estimated fair value reported in net investment gains (losses). The Company attributes to the embedded derivative a portion of the expected future rider fees to be collected from the policyholder equal to the present value of expected future guaranteed benefits. Any additional fees represent "excess" fees and are reported in universal life and investment-type product policy fees. The fair value for these riders is estimated using the present value of future benefits minus the present value of future fees using actuarial and capital market assumptions related to the projected cash flows over the expected lives of the contracts. The projections of future benefits and future fees require capital market and actuarial assumptions including expectations concerning policyholder behavior. A risk neutral valuation methodology is used under which the cash flows from the riders are projected under multiple capital market scenarios using observable risk free rates. Beginning in 2008, the valuation of these embedded derivatives now includes an adjustment for the Company's own credit and risk margins for non capital market inputs. The Company's own credit adjustment is determined taking into consideration publicly available information relating to the Company's claims paying ability. Risk margins are established to capture the non-capital market risks of the instrument which represent the additional compensation a market participant would require to assume the risks related to the uncertainties of such actuarial assumptions as annuitization, premium persistency, partial withdrawal and surrenders. The establishment of risk margins requires the use of significant management judgment. These riders may be more costly than expected in volatile or declining equity markets. Market conditions including, but not limited to, changes in interest rates, equity indices, market volatility and foreign currency exchange rates; changes in the Company's own credit standing; and variations in actuarial assumptions regarding policyholder behavior, and risk margins related to non- capital market inputs may result in significant fluctuations in the estimated fair value of the riders that could materially affect net income. 18 METLIFE INVESTORS INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) The Company cedes the risks associated with certain of the GMIB, GMAB and GMWB riders described in the preceding paragraphs to an affiliated reinsurance company. These reinsurance contracts contain embedded derivatives which are included in premiums and other receivables with changes in estimated fair value reported in net investment gains (losses). The value of the embedded derivatives on the ceded risks is determined using a methodology consistent with that described previously for the riders directly written by the Company. In addition to ceding risks associated with riders that are accounted for as embedded derivatives, the Company also cedes to an affiliated reinsurance company certain directly written GMIB riders that are accounted for as insurance (i.e., not as embedded derivatives) but where the reinsurance contract contains an embedded derivative. These embedded derivatives are included in premiums and other receivables with changes in estimated fair value reported in net investment gains (losses). The value of the embedded derivatives on these ceded risks is determined using a methodology consistent with that described previously for the riders directly written by the Company. The Company periodically reviews its estimates of actuarial liabilities for future policy benefits and compares them with its actual experience. Differences between actual experience and the assumptions used in pricing these policies, guarantees and riders and in the establishment of the related liabilities result in variances in profit and could result in losses. The effects of changes in such estimated liabilities are included in the results of operations in the period in which the changes occur. Policyholder account balances relate to investment-type contracts, universal life-type policies and certain guaranteed minimum benefit riders. Investment-type contracts principally include traditional individual fixed annuities in the accumulation phase and non-variable group annuity contracts. Policyholder account balances for these contracts are equal to: (i) policy account values, which consist of an accumulation of gross premium payments; and (ii) credited interest, ranging from 3% to 14% less expenses, mortality charges, and withdrawals. Other Policyholder Funds Other policyholder funds include policy and contract claims and unearned revenue liabilities. The liability for policy and contract claims generally relates to incurred but not reported death claims as well as claims which have been reported but not yet settled. The liability for these claims is based on the Company's estimated ultimate cost of settling all claims. The Company derives estimates for the development of incurred but not reported claims principally from actuarial analyses of historical patterns of claims and claims development for each line of business. The methods used to determine these estimates are continually reviewed. Adjustments resulting from this continuous review process and differences between estimates and payments for claims are recognized in policyholder benefits and claims expense in the period in which the estimates are changed or payments are made. The unearned revenue liability relates to universal life-type and investment-type products and represents policy charges for services to be provided in future periods. The charges are deferred as unearned revenue and amortized using the product's estimated gross profits, similar to DAC. Such amortization is recorded in universal life and investment-type product policy fees. Recognition of Insurance Revenue and Related Benefits Premiums related to traditional life and annuity policies with life contingencies are recognized as revenues when due from policyholders. Policyholder benefits and expenses are provided against such revenues to recognize profits over the estimated lives of the policies. When premiums are due over a significantly shorter period than the period over which benefits are provided, any excess profit is deferred and recognized into operations in a constant relationship to insurance in-force or, for annuities, the amount of expected future policy benefit payments. Deposits related to universal life-type and investment-type products are credited to policyholder account balances. Revenues from such contracts consist of amounts assessed against policyholder account balances for 19 METLIFE INVESTORS INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) 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. The portion of fees allocated to embedded derivatives described previously is recognized within net investment gains (losses) as part of the estimated fair value of the embedded derivative. Other Revenues Other revenues primarily include, in addition to items described elsewhere herein, fee income on financial reinsurance treaties. Such fees are recognized in the period in which services are performed. Income Taxes The Company joins with MetLife and its includable life insurance and non- life insurance subsidiaries in filing a consolidated U.S. federal income tax return in accordance with the provisions of the Internal Revenue Code of 1986, as amended. The Company's accounting for income taxes represents management's best estimate of various events and transactions. Deferred tax assets and liabilities resulting from temporary differences between the financial reporting and tax bases of assets and liabilities are measured at the balance sheet date using enacted tax rates expected to apply to taxable income in the years the temporary differences are expected to reverse. The realization of deferred tax assets depends upon the existence of sufficient taxable income within the carryback or carryforward periods under the tax law in the applicable tax jurisdiction. Valuation allowances are established when management determines, based on available information, that it is more likely than not that deferred income tax assets will not be realized. Significant judgment is required in determining whether valuation allowances should be established as well as the amount of such allowances. When making such determination, consideration is given to, among other things, the following: (i) future taxable income exclusive of reversing temporary differences and carryforwards; (ii) future reversals of existing taxable temporary differences; (iii) taxable income in prior carryback years; and (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 7) 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 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 20 METLIFE INVESTORS INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) likely of being realized upon settlement. Unrecognized tax benefits due to tax uncertainties that do not meet the threshold are included within other liabilities and are charged to earnings in the period that such determination is made. The Company classifies interest recognized as interest expense and penalties recognized as a component of income tax. Reinsurance The Company enters into reinsurance agreements primarily as a purchaser of reinsurance for its various insurance products. For each of its reinsurance agreements, the Company determines if the agreement provides indemnification against loss or liability relating to insurance risk in accordance with applicable accounting standards. The Company reviews all contractual features, particularly those that may limit the amount of insurance risk to which the reinsurer is subject or features that delay the timely reimbursement of claims. For reinsurance of existing in-force blocks of long-duration contracts that transfer significant insurance risk, the difference, if any, between the amounts paid, and the liabilities ceded related to the underlying contracts is considered the net cost of reinsurance at the inception of the reinsurance agreement. The net cost of reinsurance is recorded as an adjustment to DAC and recognized as a component of other expenses on a basis consistent with the way the acquisition costs on the underlying reinsured contracts would be recognized. Subsequent amounts paid on the reinsurance of in-force blocks, as well as amounts paid related to new business, are recorded as ceded premiums and ceded future policy benefit liabilities are established. The assumptions used to account for long-duration reinsurance agreements 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 agreements are included in premiums and other receivables and amounts currently payable are included in other liabilities. Such assets and liabilities relating to reinsurance agreements with the same reinsurer may be recorded net on the balance sheet, if a right of offset exists within the reinsurance agreement. Premiums, fees and policyholder benefits and claims are net of reinsurance ceded. Amounts received from reinsurers for policy administration are reported in other revenues. If the Company determines that a reinsurance agreement does not expose the reinsurer to a reasonable possibility of a significant loss from insurance risk, the Company records the agreement 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. Accounting for reinsurance requires extensive use of assumptions and estimates, particularly related to the future performance of the underlying business and the potential impact of counterparty credit risks. The Company periodically reviews actual and anticipated experience compared to the aforementioned assumptions used to establish assets and liabilities relating to ceded reinsurance and evaluates the financial strength of counterparties to its reinsurance agreements using criteria similar to that evaluated in the security impairment process discussed previously. 21 METLIFE INVESTORS INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) 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 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 net income or cash flows. 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. Assets within the Company's separate accounts primarily include actively traded mutual funds. 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 which is based on the estimated fair values of the underlying assets comprising the portfolios of an individual separate account. 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 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. ADOPTION OF NEW ACCOUNTING PRONOUNCEMENTS Fair Value Effective January 1, 2008, the Company adopted SFAS 157, which defines fair value, establishes a consistent framework for measuring fair value, establishes a fair value hierarchy based on the observability of inputs used to measure fair value, and requires enhanced disclosures about fair value measurements and applied the provisions of the statement prospectively to assets and liabilities measured at fair value. The adoption of SFAS 157 changed the valuation of certain freestanding derivatives by moving from a mid to bid pricing convention as it relates to certain volatility inputs as well as the addition of liquidity adjustments and adjustments for risks inherent in a particular input or valuation technique. The adoption of SFAS 157 also changed the valuation of the Company's embedded derivatives, most significantly the valuation of embedded derivatives associated with certain riders on variable annuity contracts. The change in valuation of embedded derivatives associated with riders on annuity contracts resulted from the incorporation of risk margins associated with non capital market inputs and the inclusion of the Company's own credit standing in their valuation. At January 1, 2008, the impact of adopting SFAS 157 on assets and liabilities measured at estimated fair value was $20 million ($13 million, net of income tax) and was recognized as a change in estimate in the accompanying statement of income where it was presented in the respective income statement caption to which the item measured at estimated fair value is presented. There were no significant changes in estimated fair value of items measured at fair value and reflected in accumulated other comprehensive income (loss). 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 net income in future periods. 22 METLIFE INVESTORS INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) Note 11 presents the estimated fair value of all assets and liabilities required to be measured at estimated fair value as well as the expanded fair value disclosures required by SFAS 157. 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 recognize related unrealized gains and losses in earnings. The fair value option is applied on an instrument-by-instrument basis upon adoption of the standard, upon the acquisition of an eligible financial asset, financial liability or firm commitment or when certain specified reconsideration events occur. The fair value election is an irrevocable election. Effective January 1, 2008, the Company did not elect the fair value option for any instruments. Effective January 1, 2008, the Company adopted FASB Staff Position ("FSP") No. FAS 157-2, Effective Date of FASB Statement No. 157 which delays the effective date of SFAS 157 for certain nonfinancial assets and liabilities that are recorded at fair value on a nonrecurring basis. The effective date is delayed until January 1, 2009 and impacts balance sheet items including nonfinancial assets and liabilities in a business combination and the impairment testing of goodwill and long-lived assets. Effective September 30, 2008, the Company adopted FSP No. FAS 157-3, Determining the Fair Value of a Financial Asset When the Market for That Asset is Not Active ("FSP 157-3"). FSP 157-3 provides guidance on how a company's internal cash flow and discount rate assumptions should be considered in the measurement of fair value when relevant market data does not exist, how observable market information in an inactive market affects fair value measurement and how the use of market quotes should be considered when assessing the relevance of observable and unobservable data available to measure fair value. The adoption of FSP 157-3 did not have a material impact on the Company's financial statements. Investments Effective December 31, 2008, the Company adopted FSP No. FAS 140-4 and FIN 46(r)-8, Disclosures by Public Entities (Enterprises) about Transfers of Financial Assets and Interests in Variable Interest Entities ("FSP 140-4 and FIN 46(r)-8"). FSP 140-4 and FIN 46(r)-8 requires additional qualitative and quantitative disclosures about a transferors' continuing involvement in transferred financial assets and involvement in a VIE. The exact nature of the additional required VIE disclosures vary and depend on whether or not the VIE is a qualifying special-purpose entity ("QSPE"). For VIEs that are QSPEs, the additional disclosures are only required for a non-transferor sponsor holding a variable interest or a non-transferor servicer holding a significant variable interest. For VIEs that are not QSPEs, the additional disclosures are only required if the Company is the primary beneficiary, and if not the primary beneficiary, only if the Company holds a significant variable interest or is the sponsor. The Company provided all of the material required disclosures in its financial statements. Effective December 31, 2008, the Company adopted FSP No. EITF 99-20-1, Amendments to the Impairment Guidance of EITF Issue No. 99-20 ("FSP EITF 99-20- 1"). FSP EITF 99-20-1 amends the guidance in EITF Issue No. 99-20, Recognition of Interest Income and Impairment on Purchased Beneficial Interests and Beneficial Interests That Continue to Be Held by a Transferor in Securitized Financial Assets, to more closely align the guidance to determine whether an other-than-temporary impairment has occurred for a beneficial interest in a securitized financial asset with the guidance in SFAS 115, Accounting for Certain Investments in Debt and Equity Securities, for debt securities classified as available-for-sale or held-to-maturity. The adoption of FSP EITF 99-20-1 did not have an impact on the Company's financial statements. Derivative Financial Instruments Effective December 31, 2008, the Company adopted FSP No. FAS 133-1 and FIN 45-4, Disclosures about Credit Derivatives and Certain Guarantees -- An Amendment of FASB Statement No. 133 and FASB Interpretation 23 METLIFE INVESTORS INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) No. 45; and Clarification of the Effective Date of FASB Statement No. 161 ("FSP 133-1 and FIN 45-4"). FSP 133-1 and FIN 45-4 amends SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities ("SFAS 133") to require certain enhanced disclosures by sellers of credit derivatives by requiring additional information about the potential adverse effects of changes in their credit risk, financial performance, and cash flows. It also amends FIN No. 45, Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others -- An Interpretation of FASB Statements No. 5, 57, and 107 and Rescission of FASB Interpretation No. 34 ("FIN 45"), to require an additional disclosure about the current status of the payment/performance risk of a guarantee. The Company provided all of the material required disclosures in its financial statements. Effective January 1, 2008, the Company adopted SFAS 133 Implementation Issue No. E-23, Clarification of the Application of the Shortcut Method ("Issue E-23"). Issue E-23 amended SFAS 133 by permitting interest rate swaps to have a non-zero fair value at inception when applying the shortcut method of assessing hedge effectiveness, 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 are not precluded from applying the shortcut method of assessing hedge effectiveness 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. The adoption of Issue E-23 did not have an impact on the Company's financial statements. Effective January 1, 2006, the Company adopted prospectively SFAS No. 155, Accounting for Certain Hybrid Instruments ("SFAS 155"). SFAS 155 amends SFAS 133 and SFAS No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities ("SFAS 140"). SFAS 155 allows financial instruments that have embedded derivatives to be accounted for as a whole, eliminating the need to bifurcate the derivative from its host, if the holder elects to account for the whole instrument on a fair value basis. In addition, among other changes, SFAS 155: (i) clarifies which interest-only strips and principal-only strips are not subject to the requirements of SFAS 133; (ii) establishes a requirement to evaluate interests in securitized financial assets to identify interests that are freestanding derivatives or that are hybrid financial instruments that contain an embedded derivative requiring bifurcation; (iii) clarifies that concentrations of credit risk in the form of subordination are not embedded derivatives; and (iv) amends SFAS 140 to eliminate the prohibition on a 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 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 financial statements. 24 METLIFE INVESTORS INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) 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 financial statements. 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 $5 million decrease in the liability for unrecognized tax benefits and a corresponding increase to the January 1, 2007 balance of retained earnings. Upon adoption of FIN 48, the Company did not have any unrecognized tax benefits. See also Note 7. 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 No. 97, Accounting and Reporting by Insurance Enterprises for Certain Long- Duration Contracts and for Realized Gains and Losses from the Sale of Investments. SOP 05-1 defines an internal replacement and is effective for internal replacements occurring in fiscal years beginning after December 15, 2006. In addition, in February 2007, the American Institute of Certified Public Accountants 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 did not have an impact on the Company's financial statements. Other Pronouncements Effective January 1, 2008, the Company adopted FSP No. FIN 39-1, Amendment of FASB Interpretation No. 39 ("FSP 39-1"). FSP 39-1 amends FASB Interpretation 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 25 METLIFE INVESTORS INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) have been offset in accordance with FIN 39. FSP 39-1 also amends FIN 39 for certain terminology modifications. Upon adoption of FSP 39-1, the Company did not change its accounting policy of not offsetting fair value amounts recognized for derivative instruments under master netting arrangements. The adoption of FSP 39-1 did not have an impact on the Company's financial statements. Effective January 1, 2008, the Company adopted Emerging Issues Task Force ("EITF") Issue No. 07-6, Accounting for the Sale of Real Estate When the Agreement Includes a Buy-Sell Clause ("EITF 07-6") prospectively. 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. EITF 07-6 concludes that the existence of a buy-sell clause does not necessarily preclude partial sale treatment under current guidance. The adoption of EITF 07-6 did not have a material impact on the Company's financial statements. 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 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 at 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 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 financial statements. FUTURE ADOPTION OF NEW ACCOUNTING PRONOUNCEMENTS 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"). In April 2009, the FASB also issued FSP 141(r)-1, Accounting for Assets Acquired and Liabilities Assumed in a Business Combination that Arise from Contingencies ("FSP 141(r)-1"). Under these pronouncements: - 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. 26 METLIFE INVESTORS INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) - The fair value of the purchase price, including the issuance of equity securities, is determined on the acquisition date. - Assets acquired and liabilities assumed in a business combination that arise from contingencies are recognized at fair value if the acquisition- date fair value can be reasonably determined. If the fair value is not estimable, an asset or liability is recorded if existence or incurrence at the acquisition date is probable and its amount is reasonably estimable. - Certain acquired contingent liabilities are recorded at fair value at the acquisition date and subsequently measured at either the higher of such amount or the amount determined under existing guidance for non-acquired contingencies. - Changes in deferred tax asset valuation allowances and income tax uncertainties after the acquisition date generally affect income tax expense. - Noncontrolling interests (formerly known as "minority interests") are valued at fair value at the acquisition date and are presented as equity rather than liabilities. - When control is attained on previously noncontrolling interests, the previously held equity interests are remeasured at fair value and a gain or loss is recognized. - Purchases or sales of equity interests that do not result in a change in control are accounted for as equity transactions. - When control is lost in a partial disposition, realized gains or losses are recorded on equity ownership sold and the remaining ownership interest is remeasured and holding gains or losses are recognized. The pronouncements are effective for fiscal years beginning on or after December 15, 2008 and apply prospectively to business combinations after that date. Presentation and disclosure requirements related to noncontrolling interests must be retrospectively applied. The Company will apply the guidance in SFAS 141(r) and FSP 141(r)-1 prospectively on its accounting for future acquisitions and does not expect the adoption of SFAS 160 to have a material impact on the Company's financial statements. In November 2008, the FASB ratified the consensus on EITF Issue No. 08-6, Equity Method Investment Accounting Considerations ("EITF 08-6"). EITF 08-6 addresses a number of issues associated with the impact that SFAS 141(r) and SFAS 160 might have on the accounting for equity method investments, including how an equity method investment should initially be measured, how it should be tested for impairment, and how changes in classification from equity method to cost method should be treated. EITF 08-6 is effective prospectively for fiscal years beginning on or after December 15, 2008. The Company does not expect the adoption of EITF 08-6 to have a material impact on the Company's financial statements. In November 2008, the FASB ratified the consensus on EITF Issue No. 08-7, Accounting for Defensive Intangible Assets ("EITF 08-7"). EITF 08-7 requires that an acquired defensive intangible asset (i.e., an asset an entity does not intend to actively use, but rather, intends to prevent others from using) be accounted for as a separate unit of accounting at time of acquisition, not combined with the acquirer's existing intangible assets. In addition, the EITF concludes that a defensive intangible asset may not be considered immediately abandoned following its acquisition or have indefinite life. The Company will apply the guidance of EITF 08-7 prospectively to its intangible assets acquired after fiscal years beginning on or after December 15, 2008. In April 2008, the FASB issued FSP No. FAS 142-3, Determination of the Useful Life of Intangible Assets ("FSP 142-3"). FSP 142-3 amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under SFAS No. 142, Goodwill and Other Intangible Assets ("SFAS 142"). This change is intended to improve the consistency between the useful life of a recognized intangible asset under SFAS 142 and the period of expected cash flows used to measure the fair value of the asset under SFAS 141(r) and other GAAP. FSP 142-3 is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. The requirement for 27 METLIFE INVESTORS INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) determining useful lives and related disclosures will be applied prospectively to intangible assets acquired as of, and subsequent to, the effective date. Derivative Financial Instruments 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 will provide all of the material required disclosures in the appropriate future annual periods. Other Pronouncements In September 2008, the FASB ratified the consensus on EITF Issue No. 08-5, Issuer's Accounting for Liabilities Measured at Fair Value with a Third-Party Credit Enhancement ("EITF 08-5"). EITF 08-5 concludes that an issuer of a liability with a third-party credit enhancement should not include the effect of the credit enhancement in the fair value measurement of the liability. In addition, EITF 08-5 requires disclosures about the existence of any third-party credit enhancement related to liabilities that are measured at fair value. EITF 08-5 is effective in the first reporting period beginning after December 15, 2008 and will be applied prospectively, with the effect of initial application included in the change in fair value of the liability in the period of adoption. The Company does not expect the adoption of EITF 08-5 to have a material impact on the Company's 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 does not expect the adoption of FSP 140-3 to have a material impact on its financial statements. 28 METLIFE INVESTORS INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) 2. INVESTMENTS FIXED MATURITY AND EQUITY SECURITIES AVAILABLE-FOR-SALE The following tables present the cost or amortized cost, gross unrealized gain and loss, estimated fair value of the Company's fixed maturity and equity securities, and the percentage that each sector represents by the respective total holdings at:
DECEMBER 31, 2008 -------------------------------------------- GROSS COST OR UNREALIZED AMORTIZED ----------- ESTIMATED % OF COST GAIN LOSS FAIR VALUE TOTAL --------- ---- ---- ---------- ----- (IN MILLIONS) U.S. corporate securities............... $ 712 $ 4 $ 90 $ 626 39.7% Residential mortgage-backed securities.. 373 6 68 311 19.7 Commercial mortgage-backed securities... 311 -- 96 215 13.7 U.S. Treasury/agency securities......... 175 11 -- 186 11.8 Asset-backed securities................. 190 -- 43 147 9.3 Foreign corporate securities............ 110 -- 27 83 5.3 Foreign government securities........... 7 1 -- 8 0.5 --------- ---- ---- ---------- ----- Total fixed maturity securities (1),(2)............................ $1,878 $22 $324 $1,576 100.0% ========= ==== ==== ========== ===== Non-redeemable preferred stock (1)...... $ 21 $ -- $ 12 $ 9 100.0% --------- ---- ---- ---------- ----- Total equity securities............... $ 21 $-- $ 12 $ 9 100.0% ========= ==== ==== ========== =====
DECEMBER 31, 2007 -------------------------------------------- GROSS COST OR UNREALIZED AMORTIZED ----------- ESTIMATED % OF COST GAIN LOSS FAIR VALUE TOTAL --------- ---- ---- ---------- ----- (IN MILLIONS) U.S. corporate securities............... $ 825 $ 6 $16 $ 815 40.4% Residential mortgage-backed securities.. 459 2 6 455 22.6 Commercial mortgage-backed securities... 289 1 6 284 14.1 U.S. Treasury/agency securities......... 225 3 -- 228 11.3 Asset-backed securities................. 95 -- 9 86 4.2 Foreign corporate securities............ 136 1 4 133 6.6 Foreign government securities........... 14 2 -- 16 0.8 --------- ---- ---- ---------- ----- Total fixed maturities (1),(2)........ $2,043 $15 $41 $2,017 100.0% ========= ==== ==== ========== ===== Non-redeemable preferred stock (1)...... $ 21 $ -- $ 3 $ 18 100.0% --------- ---- ---- ---------- ----- Total equity securities............... $ 21 $-- $ 3 $ 18 100.0% ========= ==== ==== ========== =====
-------- (1) The Company classifies perpetual securities that have attributes of both debt and equity as fixed maturity securities if the security has a punitive interest rate step-up feature as it believes in most instances this feature will compel the issuer to redeem the security at the specified call date. Perpetual securities that do not have a punitive interest rate step-up feature are classified as non-redeemable preferred stock. Many of such securities have been issued by non-U.S. financial institutions that are accorded Tier 1 and Upper Tier 2 capital treatment by their respective regulatory bodies and are commonly referred to as "perpetual hybrid securities." There were no such perpetual hybrid securities classified as non-redeemable preferred stock held by the Company at 29 METLIFE INVESTORS INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) December 31, 2008 and 2007. In addition, the Company held $9 million and $18 million at estimated fair value at December 31, 2008 and 2007, respectively, of other perpetual hybrid securities, primarily U.S. financial institutions, also included in non-redeemable preferred stock. Perpetual hybrid securities held by the Company and included within fixed maturity securities (primarily within foreign corporate securities) at December 31, 2008 and 2007 had an estimated fair value of $11 million and $24 million, respectively. (2) At December 31, 2008 and 2007, the Company also held $8 million and $13 million at estimated fair value, respectively, of redeemable preferred stock which have stated maturity dates which are included within fixed maturity securities. These securities are primarily issued by U.S. financial institutions, have cumulative interest deferral features and are commonly referred to as "capital securities" within U.S. corporate securities. The Company held foreign currency derivatives with notional amounts of $8 million to hedge the exchange rate risk associated with foreign denominated fixed maturity securities at both December 31, 2008 and 2007. Below Investment Grade or Non Rated Fixed Maturity Securities. 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 $61 million and $88 million at December 31, 2008 and 2007, respectively. These securities had net unrealized losses of $17 million and less than $1 million at December 31, 2008 and 2007, respectively. Non-Income Producing Fixed Maturity Securities. Non-income producing fixed maturity securities at estimated fair value were less than $1 million at both December 31, 2008 and 2007. Net unrealized gains associated with non-income producing fixed maturity securities were less than $1 million at both December 31, 2008 and 2007. Fixed Maturity Securities Credit Enhanced by Financial Guarantee Insurers. At December 31, 2008, $3 million of the estimated fair value of the Company's fixed maturity securities were credit enhanced by financial guarantee insurers, all of which are included within asset-backed securities and 5% and 95% were guaranteed by financial guarantee insurers who were Aa and Baa rated, respectively. As described below, all of the asset-backed securities that are credit enhanced by financial guarantee insurers are asset-backed securities which are backed by sub-prime mortgage loans. Concentrations of Credit Risk (Fixed Maturity Securities). The following section contains a summary of the concentrations of credit risk related to fixed maturity securities holdings. The Company is not exposed to any concentrations of credit risk of any single issuer greater than 10% of the Company's stockholder's equity, other than securities of the U.S. government and certain U.S. government agencies. At December 31, 2008 and 2007, the Company's holdings in U.S. Treasury and agency fixed maturity securities at estimated fair value were $186 million and $228 million, respectively. As shown in the sector table above, at December 31, 2008 the Company's three largest exposures in its fixed maturity security portfolio were U.S. corporate fixed maturity securities (39.7%), residential mortgage- backed securities (19.7%), and commercial mortgage-backed securities (13.7%); and at December 31, 2007 were U.S. corporate fixed maturity securities (40.4%), residential mortgage-backed securities (22.6%), and commercial mortgage-backed securities (14.1%). Concentrations of Credit Risk (Fixed Maturity Securities) -- U.S. and Foreign Corporate Securities. At December 31, 2008 and 2007, the Company's holdings in U.S. corporate and foreign corporate fixed maturity securities at estimated fair value were $709 million and $948 million, respectively. The Company maintains a diversified portfolio of corporate securities across industries and issuers. The portfolio does not have exposure to any single issuer in excess of 1% of total cash and invested assets. The exposure to the largest single issuer of corporate fixed maturity securities held at December 31, 2008 and 2007 was $24 million and $20 million, respectively. At December 31, 2008 and 2007, the Company's combined holdings in the ten issuers to which it had the greatest exposure totaled $159 million and $188 million, respectively, the total of these ten issuers being less 30 METLIFE INVESTORS INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) than 7% and 9% of the Company's total cash and invested assets at such dates. The table below shows the major industry types that comprise the corporate fixed maturity holdings at:
DECEMBER 31, --------------------------------------- 2008 2007 ------------------ ------------------ ESTIMATED % OF ESTIMATED % OF FAIR VALUE TOTAL FAIR VALUE TOTAL ---------- ----- ---------- ----- (IN MILLIONS) Finance..................................... $ 151 21.3% $ 284 30.0% Industrial.................................. 146 20.6 192 20.2 Consumer.................................... 105 14.8 156 16.5 Utility..................................... 104 14.7 101 10.6 Foreign (1)................................. 83 11.7 133 14.0 Communications.............................. 70 9.9 71 7.5 Other....................................... 50 7.0 11 1.2 ---------- ----- ---------- ----- Total..................................... $709 100.0% $948 100.0% ========== ===== ========== =====
-------- (1) Includes U.S. dollar-denominated debt obligations of foreign obligors and other fixed maturity foreign investments. Concentrations of Credit Risk (Fixed Maturity Securities) -- Residential Mortgage-Backed Securities - The Company's residential mortgage-backed securities consist of the following holdings at:
DECEMBER 31, --------------------------------------- 2008 2007 ------------------ ------------------ ESTIMATED % OF ESTIMATED % OF FAIR VALUE TOTAL FAIR VALUE TOTAL ---------- ----- ---------- ----- (IN MILLIONS) Residential mortgage-backed securities: Collateralized mortgage obligations....... $ 228 73.3% $ 304 66.8% Pass-through securities................... 83 26.7 151 33.2 ---------- ----- ---------- ----- Total residential mortgage-backed securities................................ $311 100.0% $455 100.0% ========== ===== ========== =====
Collateralized mortgage obligations are a type of mortgage-backed security that creates separate pools or tranches of pass-through cash flows for different classes of bondholders with varying maturities. Pass-through mortgage-backed securities are a type of asset-backed security that is secured by a mortgage or collection of mortgages. The monthly mortgage payments from homeowners pass from the originating bank through an intermediary, such as a government agency or investment bank, which collects the payments, and for a fee, remits or passes these payments through to the holders of the pass-through securities. At December 31, 2008, the exposures in the Company's residential mortgage- backed securities portfolio consist of agency, prime, and alternative residential mortgage loans ("Alt-A") securities of 59%, 29%, and 12% of the total holdings, respectively. At December 31, 2008 and 2007, $272 million and $455 million, respectively, or 87% and 100% respectively, of the residential mortgage-backed securities were rated Aaa/AAA by Moody's Investors Service ("Moody's"), S&P, or Fitch Ratings ("Fitch"). The majority of the residential mortgage-backed securities are guaranteed or otherwise supported by the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation or the Government National Mortgage Association. Prime residential mortgage lending includes the origination of residential mortgage loans to the most credit-worthy customers with high quality credit profiles. Alt-A residential mortgage loans are a classification of mortgage loans where the risk profile of the 31 METLIFE INVESTORS INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) borrower falls between prime and sub-prime. At December 31, 2008 and 2007, the Company's Alt-A residential mortgage-backed securities exposure was $39 million and $79 million, respectively, with an unrealized loss of $29 million and $1 million respectively. At December 31, 2008 and 2007, $7 million and $79 million, respectively, or 18% and 100% respectively, of the Company's Alt-A residential mortgage-backed securities were rated Aa/AAA or better by Moody's, S&P or Fitch. In December 2008, certain Alt-A residential mortgage-backed securities experienced ratings downgrades from investment grade to below investment grade, contributing to the decrease year over year cited above in those securities rated Aa/AA or better. At December 31, 2008, the Company's Alt-A holdings are distributed as follows: 7% 2007 vintage year, 74% 2006 vintage year; and 19% 2005 and prior vintage years. In January 2009, Moody's revised its loss projections for Alt-A residential mortgage-backed securities, and the Company anticipates that Moody's will be downgrading virtually all 2006 and 2007 vintage year Alt-A securities to below investment grade, which will increase the percentage of the Company's Alt-A residential mortgage-backed securities portfolio that will be rated below investment grade. Vintage year refers to the year of origination and not to the year of purchase. Concentrations of Credit Risk (Fixed Maturity Securities) -- Commercial Mortgage-Backed Securities. At December 31, 2008 and 2007, the Company's holdings in commercial mortgage-backed securities was $215 million and $284 million, respectively, at estimated fair value. At December 31, 2008 and 2007, $185 million and $206 million, respectively, of the estimated fair value, or 86% and 72%, respectively, of the commercial mortgage-backed securities were rated Aaa/AAA by Moody's, S&P, or Fitch. At December 31, 2008, the rating distribution of the Company's commercial mortgage-backed securities holdings was as follows: 86% Aaa, 8% Aa, 5% A, and 1% Baa. At December 31, 2008, 91% of the holdings are in the 2005 and prior vintage years. At December 31, 2008, the Company had no exposure to CMBX securities or commercial real estate collateralized debt obligations securities. Concentrations of Credit Risk (Fixed Maturity Securities) -- Asset-Backed Securities. At December 31, 2008 and 2007, the Company's holdings in asset- backed securities was $147 million and $86 million, respectively, at estimated fair value. The Company's asset-backed securities are diversified both by sector and by issuer. At December 31, 2008 and 2007, $129 million and $41 million, respectively, or 88% and 48%, respectively, of total asset-backed securities were rated Aaa/AAA by Moody's, S&P or Fitch. At December 31, 2008, the largest exposures in the Company's asset-backed securities portfolio were credit card receivables, student loan receivables, and residential mortgage-backed securities backed by sub-prime mortgage loans of 60%, 10% and 5% of the total holdings, respectively. Sub-prime mortgage lending is the origination of residential mortgage loans to customers with weak credit profiles. At December 31, 2008 and 2007, the Company had exposure to fixed maturity securities backed by sub-prime mortgage loans with estimated fair values of $7 million and $19 million, respectively, and unrealized losses of $14 million and $7 million, respectively. At December 31, 2008, 48% of the asset-backed securities backed by sub-prime mortgage loans have been guaranteed by financial guarantee insurers, of which 5% and 95% were guaranteed by financial guarantee insurers who were Aa and Baa rated, respectively. Concentrations of Credit Risk (Equity Securities). The Company is not exposed to any significant concentrations of credit risk of any single issuer greater than 10% of the Company's stockholder's equity in its equity securities holdings. 32 METLIFE INVESTORS INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE 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, ----------------------------------------------- 2008 2007 ---------------------- ---------------------- AMORTIZED ESTIMATED AMORTIZED ESTIMATED COST FAIR VALUE COST FAIR VALUE --------- ---------- --------- ---------- (IN MILLIONS) Due in one year or less................. $ 78 $ 75 $ 74 $ 74 Due after one year through five years... 426 395 508 506 Due after five years through ten years.. 286 245 311 306 Due after ten years..................... 214 188 307 306 --------- ---------- --------- ---------- Subtotal.............................. 1,004 903 1,200 1,192 Mortgage-backed and asset-backed securities............................ 874 673 843 825 --------- ---------- --------- ---------- Total fixed maturity securities....... $1,878 $1,576 $2,043 $2,017 ========= ========== ========= ==========
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. NET UNREALIZED INVESTMENT GAINS (LOSSES) The components of net unrealized investment gains (losses), included in accumulated other comprehensive loss, are as follows:
YEARS ENDED DECEMBER 31, ------------------------ 2008 2007 2006 ------ ------ ------ (IN MILLIONS) Fixed maturity securities........................... $(302) $(26) $(9) Equity securities................................... (12) (3) -- Derivatives......................................... 3 -- -- ------ ------ ------ Subtotal.......................................... (311) (29) (9) ------ ------ ------ Amounts allocated from DAC and VOBA................. 71 8 4 Deferred income tax................................. 84 7 2 ------ ------ ------ Subtotal.......................................... 155 15 6 ------ ------ ------ Net unrealized investment gains (losses)............ $(156) $ (14) $ (3) ====== ====== ======
33 METLIFE INVESTORS INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) The changes in net unrealized investment gains (losses) are as follows:
YEARS ENDED DECEMBER 31, ------------------------ 2008 2007 2006 ------ ------ ------ (IN MILLIONS) Balance, January 1,................................. $ (14) $ (3) $(4) Unrealized investment gains (losses) during the year.............................................. (282) (20) -- Unrealized investment gains (losses) relating to: DAC and VOBA...................................... 63 4 1 Deferred income tax............................... 77 5 -- ------ ------ ------ Balance, December 31,............................... $(156) $(14) $(3) ====== ====== ====== Change in net unrealized investment gains (losses).. $(142) $ (11) $ 1 ====== ====== ======
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, 2008 ----------------------------------------------------------------------------- EQUAL TO OR GREATER LESS THAN 12 MONTHS THAN 12 MONTHS TOTAL ----------------------- ----------------------- ------------------------- GROSS GROSS GROSS ESTIMATED UNREALIZED ESTIMATED UNREALIZED ESTIMATED UNREALIZED FAIR VALUE LOSS FAIR VALUE LOSS FAIR VALUE LOSS ---------- ---------- ---------- ---------- ------------ ---------- (IN MILLIONS, EXCEPT NUMBER OF SECURITIES) U.S. corporate securities.......... $ 437 $ 60 $ 92 $ 30 $ 529 $ 90 Residential mortgage-backed securities....................... 50 11 85 57 135 68 Commercial mortgage-backed securities....................... 114 22 101 74 215 96 Asset-backed securities............ 96 19 31 24 127 43 Foreign corporate securities....... 49 9 33 18 82 27 Foreign government securities...... 1 -- -- -- 1 -- ---------- ---------- ---------- ---------- ------------ ---------- Total fixed maturity securities.. $747 $121 $342 $203 $1,089 $324 ========== ========== ========== ========== ============ ========== Equity securities.................. $ -- $ -- $ 8 $ 12 $ 8 $ 12 ========== ========== ========== ========== ============ ========== Total number of securities in an unrealized loss position......... 209 127 ========== ==========
34 METLIFE INVESTORS INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 2007 ----------------------------------------------------------------------------- EQUAL TO OR GREATER LESS THAN 12 MONTHS THAN 12 MONTHS TOTAL ----------------------- ----------------------- ------------------------- GROSS GROSS GROSS ESTIMATED UNREALIZED ESTIMATED UNREALIZED ESTIMATED UNREALIZED FAIR VALUE LOSS FAIR VALUE LOSS FAIR VALUE LOSS ---------- ---------- ---------- ---------- ------------ ---------- (IN MILLIONS, EXCEPT NUMBER OF SECURITIES) U.S. corporate securities.......... $ 305 $ 11 $ 143 $ 5 $ 448 $ 16 Residential mortgage-backed securities....................... 215 5 68 1 283 6 Commercial mortgage-backed securities....................... 16 -- 174 6 190 6 Asset-backed securities............ 51 6 17 3 68 9 Foreign corporate securities....... 78 4 23 -- 101 4 ---------- ---------- ---------- ---------- ------------ ---------- Total fixed maturity securities.. $665 $26 $425 $15 $1,090 $41 ========== ========== ========== ========== ============ ========== Equity securities.................. $ 18 $ 3 $ -- $-- $ 18 $ 3 ========== ========== ========== ========== ============ ========== Total number of securities in an unrealized loss position......... 154 103 ========== ==========
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, 2008 ------------------------------------------------------- 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) FIXED MATURITY SECURITIES: Less than six months...................... $ 322 $ 517 $ 21 $ 206 86 132 Six months or greater but less than nine months.................................. 195 6 18 4 41 2 Nine months or greater but less than twelve months........................... 160 38 24 24 25 7 Twelve months or greater.................. 170 5 23 4 40 2 --------- ------ --------- ------ Total................................... $847 $566 $86 $238 ========= ====== ========= ====== EQUITY SECURITIES: Less than six months...................... $ -- $ -- $-- $ -- -- -- Six months or greater but less than nine months.................................. -- -- -- -- -- -- Nine months or greater but less than twelve months........................... -- 20 -- 12 -- 1 Twelve months or greater.................. -- -- -- -- -- -- --------- ------ --------- ------ Total................................... $ -- $ 20 $-- $ 12 ========= ====== ========= ======
35 METLIFE INVESTORS INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
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) FIXED MATURITY SECURITIES: Less than six months.................... $ 431 $ 11 $ 11 $ 4 88 5 Six months or greater but less than nine months................................ 152 -- 7 -- 44 -- Nine months or greater but less than twelve months......................... 98 -- 5 -- 18 -- Twelve months or greater................ 439 -- 14 -- 101 -- ----------- ------ --------- ------- Total................................. $1,120 $11 $37 $ 4 =========== ====== ========= ======= EQUITY SECURITIES: Less than six months.................... $ -- $-- $-- $ -- -- -- Six months or greater but less than nine months................................ -- -- -- -- -- -- Nine months or greater but less than twelve months......................... 21 -- 3 -- 2 -- Twelve months or greater................ -- -- -- -- -- -- ----------- ------ --------- ------- Total................................. $ 21 $-- $ 3 $-- =========== ====== ========= =======
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. At December 31, 2008 and 2007, $86 million and $37 million, respectively, of unrealized losses related to fixed maturity securities with an unrealized loss position of less than 20% of cost or amortized cost, which represented 10% and 3%, respectively, of the cost or amortized cost of such securities. At December 31, 2008, there were no unrealized losses related to equity securities with an unrealized loss position of less than 20% of cost. At December 31, 2007, $3 million of unrealized losses related to equity securities with an unrealized loss position of less than 20% of cost, which represented 14% of the cost of such securities. At December 31, 2008, $238 million and $12 million of unrealized losses related to fixed maturity securities and equity securities, respectively, with an unrealized loss position of 20% or more of cost or amortized cost, which represented 42% and 60% of the cost or amortized cost of such fixed maturity securities and equity securities, respectively. Of such unrealized losses of $238 million, $206 million were related to fixed maturity securities that were in an unrealized loss position for a period of less than six months. Of such unrealized losses of $12 million, all were related to equity securities that were in an unrealized loss position for a period of nine months or more. At December 31, 2007, $4 million of unrealized losses related to fixed maturity securities, with an unrealized loss position of 20% or more of cost or amortized cost, which 36 METLIFE INVESTORS INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) represented 36% of the cost or amortized cost of such fixed maturity securities, respectively. Of such unrealized losses all were in an unrealized loss position for a period of less than six months. The Company held two fixed maturity securities and one equity security, each with a gross unrealized loss at December 31, 2008 of greater than $10 million. The two fixed maturity securities represented 15%, or $47 million in the aggregate, of the gross unrealized loss on fixed maturity securities. The one equity security represented all, or $12 million in the aggregate, of the gross unrealized loss on equity securities. The Company held no fixed maturity securities or equity securities with a gross unrealized loss of greater than $10 million at December 31, 2007. These securities with a gross unrealized loss greater than $10 million were included in the regular evaluation of whether such securities are other-than-temporarily impaired. Based upon the Company's current evaluation of these securities in accordance with its impairment policy, the cause of the decline being primarily attributable to a rise in market yields caused principally by an extensive widening of credit spreads which resulted from a lack of market liquidity and a short-term market dislocation versus a long-term deterioration in credit quality, 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 these securities are not other-than-temporarily impaired. In the Company's impairment review process, the duration of, and severity of, an unrealized loss position, such as unrealized losses of 20% or more for equity securities, which was $12 million and $0 at December 31, 2008 and 2007, respectively, is given greater weight and consideration, than for fixed maturity securities. An extended and severe unrealized loss position on a fixed maturity security may not have any impact on the ability of the issuer to service all scheduled interest and principal payments and the Company's evaluation of recoverability of all contractual cash flows, as well as the Company's ability and intent to hold the security, including holding the security until the earlier of a recovery in value, or until maturity. In contrast, for an equity security, greater weight and consideration is given by the Company to a decline in market value and the likelihood such market value decline will recover. Equity securities with an unrealized loss of 20% or more for nine months or more was $12 million as of December 31, 2008, all of which are financial services investment grade non-redeemable preferred securities that are rated A or higher. There were no equity securities with an unrealized loss of 20% or more for twelve months or greater. In connection with the equity securities impairment review process during 2008, the Company evaluated its holdings in non-redeemable preferred securities, particularly those of financial services industry companies. The Company considered several factors including whether there has been any deterioration in credit of the issuer and the likelihood of recovery in value of non-redeemable preferred securities with a severe or an extended unrealized loss. Also, the Company believes the unrealized loss position is not necessarily predictive of the ultimate performance of these securities, and with respect to fixed maturity securities, it has the ability and intent to hold until the earlier of the recovery in value, or until maturity, and with respect to equity securities, it has the ability and intent to hold until the recovery in value. Future other-than-temporary impairments will depend primarily on economic fundamentals, issuer performance, changes in collateral valuation, changes in interest rates, and changes in credit spreads. If economic fundamentals and other of the above factors continue to deteriorate, additional other-than- temporary impairments may be incurred in upcoming periods. 37 METLIFE INVESTORS INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) At December 31, 2008 and 2007, the Company's gross unrealized losses related to its fixed maturity and equity securities of $336 million and $44 million, respectively, were concentrated, calculated as a percentage of gross unrealized loss, as follows:
DECEMBER 31, ----------- 2008 2007 ---- ---- SECTOR: Commercial mortgage-backed securities........................ 29% 14% U.S. corporate securities.................................... 27 36 Residential mortgage-backed securities....................... 20 14 Asset-backed securities...................................... 13 20 Foreign corporate securities................................. 8 9 Other........................................................ 3 7 --- --- Total...................................................... 100% 100% === === INDUSTRY: Mortgage-backed.............................................. 49% 28% Finance...................................................... 23 35 Asset-backed................................................. 13 20 Consumer..................................................... 7 -- Utility...................................................... 4 3 Industrial................................................... 1 13 Other........................................................ 3 1 --- --- Total...................................................... 100% 100% === ===
NET INVESTMENT GAINS (LOSSES) The components of net investment gains (losses) are as follows:
YEARS ENDED DECEMBER 31, ------------------ 2008 2007 2006 ---- ---- ---- (IN MILLIONS) Fixed maturity securities.................................... $(25) $(6) $(17) Equity securities............................................ -- (1) -- Other limited partnership interests.......................... -- -- (1) Freestanding derivatives..................................... 81 15 (12) Embedded derivatives......................................... 274 91 (30) ---- ---- ---- Net investment gains (losses).............................. $330 $99 $(60) ==== ==== ====
See Note 6 for discussion of affiliated net investment gains (losses) included in embedded derivatives in the table above. 38 METLIFE INVESTORS INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) Proceeds from sales or disposals of fixed maturity securities and the components of fixed maturity and equity securities net investment gains (losses) are as follows:
FIXED MATURITY SECURITIES EQUITY SECURITIES TOTAL ---------------------- ---------------------- ---------------------- 2008 2007 2006 2008 2007 2006 2008 2007 2006 ------ ------ ------ ------ ------ ------ ------ ------ ------ (IN MILLIONS) Proceeds..................... $464 $657 $1,051 $ -- $ -- $ -- $464 $657 $1,051 ====== ====== ====== ====== ====== ====== ====== ====== ====== Gross investment gains....... 1 1 4 -- -- -- 1 1 4 ------ ------ ------ ------ ------ ------ ------ ------ ------ Gross investment losses...... (18) (6) (21) -- -- -- (18) (6) (21) ------ ------ ------ ------ ------ ------ ------ ------ ------ Writedowns Credit-related.......... (8) (1) -- -- (1) -- (8) (2) -- ------ ------ ------ ------ ------ ------ ------ ------ ------ Net investment gains (losses)................ $(25) $ (6) $ (17) $-- $(1) $-- $(25) $ (7) $ (17) ====== ====== ====== ====== ====== ====== ====== ====== ======
The Company periodically disposes of fixed maturity and equity securities at a loss. Generally, such losses are insignificant in amount or in relation to the cost basis of the investment, are attributable to declines in fair value occurring in the period of the disposition or are as a result of management's decision to sell securities based on current conditions or the Company's need to shift the portfolio to maintain its portfolio management objectives. Losses from fixed maturity and equity securities deemed other-than- temporarily impaired, included within net investment gains (losses), were $8 million and $2 million for the years ended December 31, 2008 and 2007, respectively. There were no losses from fixed maturity and equity securities deemed other-than-temporarily impaired, included within net investment gains (losses) during 2006. The substantial increase in 2008 over 2007 was driven by writedowns totaling $3 million of financial services industry securities holdings and $5 million on asset-backed (substantially all are backed by or exposed to sub-prime mortgage loans) all of which were fixed maturity securities. NET INVESTMENT INCOME The components of net investment income are as follows:
YEARS ENDED DECEMBER 31, ---------------------- 2008 2007 2006 ---- ---- ---- (IN MILLIONS) Fixed maturity securities............................ $110 $118 $119 Equity securities.................................... 1 1 -- Mortgage loans on real estate........................ 5 5 5 Policy loans......................................... 2 2 2 Other limited partnership interests.................. 1 1 1 Cash, cash equivalents and short-term investments.... 4 8 7 Other................................................ 1 -- -- ---- ---- ---- Total investment income............................ 124 135 134 Less: Investment expenses............................ 16 31 28 ---- ---- ---- Net investment income.............................. $108 $104 $106 ==== ==== ====
Net investment income from other limited partnership interests represents distributions from other limited partnership interests accounted for under the cost method. Overall for 2008, the net amount recognized by the 39 METLIFE INVESTORS INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) Company was a gain of $1 million resulting principally from gains on cost method investments. Such earnings and losses recognized for other limited partnership interests are impacted by volatility in the equity and credit markets. Affiliated investment expenses, included in the table above, were $1 million for each of the years ended December 31, 2008, 2007 and 2006. See "-- Related Party Investment Transactions" for discussion of affiliated net investment income related to short-term investments included in the table above. SECURITIES LENDING The Company participates in securities lending programs whereby blocks of securities, which are included in fixed maturity securities and short-term investments, are loaned to third parties, primarily major brokerage firms and commercial banks. The Company generally obtains collateral in an amount equal to 102% of the estimated fair value of the securities loaned. Securities with a cost or amortized cost of $319 million and $523 million and an estimated fair value of $322 million and $525 million were on loan under the program at December 31, 2008 and 2007, 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 $324 million and $541 million at December 31, 2008 and 2007, respectively. Of this $324 million of cash collateral at December 31, 2008, $189 million was on open terms, meaning that the related loaned security could be returned to the Company on the next business day requiring return of cash collateral, and $128 million and $7 million, respectively, were due within 30 days and 60 days. Of the $188 million of estimated fair value of the securities related to the cash collateral on open at December 31, 2008, $186 million were U.S. Treasury and agency securities which, if put to the Company, can be immediately sold to satisfy the cash requirements. The remainder of the securities on loan are primarily U.S. Treasury and agency securities, and very liquid residential mortgage-backed securities. The estimated fair value of the reinvestment portfolio acquired with the cash collateral was $272 million at December 31, 2008, and consisted principally of fixed maturity securities (including residential mortgage-backed, asset-backed, U.S. corporate and foreign corporate securities). Security collateral of $6 million on deposit from counterparties in connection with the securities lending transactions at December 31, 2008 may not be sold or repledged and is not reflected in the financial statements. There was no security collateral on deposit from counterparties in connection with the securities lending transactions at December 31, 2007. ASSETS ON DEPOSIT AND ASSETS PLEDGED AS COLLATERAL The Company had investment assets on deposit with regulatory agencies with an estimated fair value of $8 million and $7 million at December 31, 2008 and 2007, respectively, consisting primarily of fixed maturity securities. Certain of the Company's fixed maturity securities are pledged as collateral for various derivative transactions as described in Note 3. MORTGAGE LOANS ON REAL ESTATE Mortgage loans on real estate are categorized as follows:
DECEMBER 31, ----------------------------------- 2008 2007 ---------------- ---------------- AMOUNT PERCENT AMOUNT PERCENT ------ ------- ------ ------- (IN MILLIONS) Agricultural mortgage loans................... $ 48 63.2% $ 40 54.1% Commercial mortgage loans..................... 28 36.8 34 45.9 ------ ------- ------ ------- Total mortgage loans on real estate........... $76 100.0% $74 100.0% ====== ======= ====== =======
40 METLIFE INVESTORS INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) Mortgage loans on real estate are collateralized by properties located in the United States. At December 31, 2008, 20%, 16% and 12% of the value of the Company's mortgage loans on real estate were located in District of Columbia, Alabama and Arizona, respectively. Generally, the Company, as the lender, only loans up to 75% of the purchase price of the underlying real estate. OTHER LIMITED PARTNERSHIP INTERESTS The carrying value of other limited partnership interests (which primarily represent ownership interests in pooled investment funds that principally make private equity investments in companies in the United States and overseas) was $2 million at both December 31, 2008 and 2007. For each of the years ended December 31, 2008, 2007 and 2006, net investment income from other limited partnership interests was $1 million. OTHER INVESTED ASSETS At December 31, 2008 and 2007, the carrying value of freestanding derivatives with positive fair values, included in other invested assets, was $109 million and $28 million, respectively. See Note 3 regarding the freestanding derivatives with positive estimated fair values. RELATED PARTY INVESTMENT TRANSACTIONS At December 31, 2008 and 2007, the Company held $2 million and $70 million, respectively, of its total invested assets in the MetLife Intermediate Income Pool, which is an affiliated partnership. These amounts are included in short- term investments. Net investment income from these invested assets was $2 million, $4 million and $3 million for the years ended December 31, 2008, 2007 and 2006, respectively. In the normal course of business, the Company transfers invested assets, primarily consisting of fixed maturity securities, to and from affiliates. Assets transferred to and from affiliates, inclusive of amounts related to reinsurance agreements, are as follows:
YEARS ENDED DECEMBER 31, ------------------ 2008 2007 2006 ---- ---- ---- (IN MILLIONS) Estimated fair value of assets transferred to affiliates............................................ $ -- $23 $127 Amortized cost of assets transferred to affiliates...... $-- $23 $129 Net investment gains (losses) recognized on transfers... $-- $ -- $ (2) Estimated fair value of assets transferred from affiliates............................................ $-- $-- $ 21
41 METLIFE INVESTORS INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) 3. DERIVATIVE FINANCIAL INSTRUMENTS TYPES OF DERIVATIVE FINANCIAL INSTRUMENTS The following table presents the notional amount and current market or estimated fair value of derivative financial instruments, excluding embedded derivatives, held at:
DECEMBER 31, 2008 DECEMBER 31, 2007 ------------------------------ ------------------------------ CURRENT MARKET CURRENT MARKET OR FAIR VALUE OR FAIR VALUE ------------------- ------------------- NOTIONAL LIABILI- NOTIONAL LIABILI- AMOUNT ASSETS TIES AMOUNT ASSETS TIES -------- -------- -------- -------- -------- -------- (IN MILLIONS) Interest rate swaps............... $ -- $ -- $ -- $ 9 $ -- $ -- Interest rate floors.............. 2,040 105 -- 2,460 27 -- Foreign currency swaps............ 8 4 -- 8 1 -- Financial forwards................ -- -- -- 25 -- -- Credit default swaps.............. 41 -- -- 30 -- -- ------ ---- ---- ------ ---- ---- Total........................... $2,089 $109 $-- $2,532 $28 $-- ====== ==== ==== ====== ==== ====
The following table presents the notional amount of derivative financial instruments by maturity at December 31, 2008:
REMAINING LIFE ------------------------------------------------------- AFTER AFTER ONE YEAR FIVE YEARS ONE YEAR THROUGH THROUGH AFTER TEN OR LESS FIVE YEARS TEN YEARS YEARS TOTAL -------- ---------- ---------- --------- ------ (IN MILLIONS) Interest rate floors.................... $ -- $ -- $ 2,040 $ -- $2,040 Foreign currency swaps.................. -- -- -- 8 8 Credit default swaps.................... -- 34 7 -- 41 -------- ---------- ---------- --------- ------ Total................................. $-- $34 $2,047 $ 8 $2,089 ======== ========== ========== ========= ======
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. Interest rate floors are used by the Company primarily to protect its minimum rate guarantee liabilities against declines in interest rates below a specified level. Foreign currency swaps are used by the Company to reduce the risk from fluctuations in foreign currency exchange rates associated with its denominated in foreign currencies. In a foreign currency swap transaction, the Company agrees with another party to exchange, at specified intervals, the difference between one currency and another at a fixed exchange rate, generally set at inception, calculated by reference to an agreed upon principal amount. The principal amount of each currency is exchanged at the inception and termination of the currency swap by each party. Equity variance swaps are used by the Company primarily as a macro hedge on certain invested assets. In an equity variance swap, the Company agrees with another party to exchange amounts in the future, based on changes 42 METLIFE INVESTORS INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) 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 the estimated fair value of derivatives by type of hedge designation at:
DECEMBER 31, 2008 DECEMBER 31, 2007 ------------------------------ ------------------------------ FAIR VALUE FAIR VALUE ------------------- ------------------- NOTIONAL LIABILI- NOTIONAL LIABILI- AMOUNT ASSETS TIES AMOUNT ASSETS TIES -------- -------- -------- -------- -------- -------- (IN MILLIONS) Fair value.................. $ -- $ -- $ -- $ 8 $ 1 $ -- Cash flow................... 8 4 -- 4 -- -- Non-qualifying.............. 2,081 105 -- 2,520 27 -- ------ ---- ---- ------ --- ---- Total..................... $2,089 $109 $-- $2,532 $28 $-- ====== ==== ==== ====== === ====
The Company recognized insignificant net investment income (expense) from settlement payments related to qualifying hedges for the years ended December 31, 2008, 2007 and 2006. The Company recognized insignificant net investment gains (losses) from settlement payments related to non-qualifying hedges for each of the years ended December 31, 2008, 2007 and 2006. FAIR VALUE HEDGES The Company designates and accounts for interest rate swaps to convert fixed rate investments to floating rate investments as fair value hedges when they have met the requirements of SFAS 133. The Company recognized insignificant amounts in net investment gains (losses) representing the ineffective portion of all fair value hedges for the years ended December 31, 2008 and 2007. The Company did not have any fair value hedges during the year ended December 31, 2006. 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 foreign currency swaps used to hedge the foreign currency cash flow exposure of foreign currency denominated investments and liabilities as cash flow hedges, when they have met the requirements of SFAS 133. 43 METLIFE INVESTORS INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) For each of the years ended December 31, 2008, 2007 and 2006, the Company did not recognize any net investment gains (losses) which represented the ineffective portion of all cash flow hedges. All components of each derivative's gain or loss were included in the assessment of hedge effectiveness. 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, 2008, 2007, and 2006. For the year ended December 31, 2008, the net amount deferred in other comprehensive income (loss) relating to cash flow hedges was $4 million, which represents the net gain on the effective portion of cash flow hedges. For the years ended December 31, 2007 and 2006, the net amounts deferred in other comprehensive income (loss) relating to cash flow hedges was insignificant. At December 31, 2008, insignificant amounts of the deferred net gains (losses) on derivatives accumulated in other comprehensive income (loss) are expected to be reclassified to earnings during the year ending December 31, 2009. 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 purchased floors to economically hedge its exposure to interest rates; (ii) foreign currency swaps to economically hedge its exposure to adverse movements in exchange rates; (iii) credit default swaps to economically hedge exposure to adverse movements in credit; (iv) equity variance swaps as a macro hedge on certain invested assets; and (v) credit default swaps to synthetically create investments. The following table presents changes in estimated fair value related to derivatives that do not qualify for hedge accounting:
YEARS ENDED DECEMBER 31, ---------------------- 2008 2007 2006 ---- ---- ---- (IN MILLIONS) Net investment gains (losses), excluding embedded derivatives........................................ $81 $15 $(12)
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 principally include: variable annuities with guaranteed minimum withdrawal, guaranteed minimum accumulation and certain guaranteed minimum income riders; affiliated ceded reinsurance contracts related to guaranteed minimum withdrawal, guaranteed minimum accumulation and certain guaranteed minimum income riders. The following table presents the estimated fair value of the Company's embedded derivatives at:
DECEMBER 31, ----------- 2008 2007 ---- ---- (IN MILLIONS) Net embedded derivatives within asset host contracts: Ceded guaranteed minimum benefit riders.................... $569 $73 Net embedded derivatives within liability host contracts: Direct guaranteed minimum benefit riders................... $226 $17
44 METLIFE INVESTORS INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) The following table presents changes in the estimated fair value related to embedded derivatives:
YEARS ENDED DECEMBER 31, ------------------ 2008 2007 2006 ---- ---- ---- (IN MILLIONS) Net investment gains (losses) (1)....................... $274 $91 $(30)
-------- (1) Effective January 1, 2008, upon adoption of SFAS 157, the valuation of the Company's guaranteed minimum benefit riders includes an adjustment for the Company's own credit. Included in net investment gains (losses) for the year ended December 31, 2008 are gains of $136 million in connection with this adjustment. 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 net positive estimated fair value of derivative contracts at the reporting date after taking into consideration the existence of netting agreements and any collateral received pursuant to credit support annexes. 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. See Note 11 for a description of the impact of credit risk on the valuation of derivative instruments. The Company enters into various collateral arrangements, which require both the pledging and accepting of collateral in connection with its derivative instruments. At December 31, 2008, the Company was obligated to return cash collateral under its control of $61 million. This unrestricted cash collateral is included in cash and cash equivalents or in short-term investments and the obligation to return it is included in payables for collateral under securities loaned and other transactions in the balance sheets. The Company had no cash collateral under its control at December 31, 2007. In addition, the Company may have exchange-traded futures, which require the pledging of collateral. At December 31, 2008, the Company did not provide any securities collateral for exchange traded futures. At December 31, 2007, the Company pledged securities collateral for exchange-traded futures of $3 million, which is included in fixed maturity securities. The counterparties are permitted by contract to sell or repledge this collateral. In connection with synthetically created investment transactions, the Company writes credit default swaps for which it receives a premium to insure credit risk. If a credit event, as defined by the contract, occurs, generally the contract will require the Company to pay the counterparty the specified swap notional amount in exchange for the delivery of par quantities of the referenced credit obligation. The Company's maximum amount at risk, assuming the value of all referenced credit obligations is zero, was $26 million at December 31, 2008. The Company can terminate these contracts at any time through cash settlement with the counterparty at an amount equal to the then current fair value of the credit default swaps. At December 31, 2008, the Company would have paid an insignificant amount to terminate all of these contracts. 45 METLIFE INVESTORS INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) The following table presents the estimated fair value, maximum amount of future payments and weighted average years to maturity of written credit default swaps at December 31, 2008:
DECEMBER 31, 2008 ----------------------------------------------------------- MAXIMUM AMOUNT FAIR VALUE OF OF FUTURE PAYMENTS WEIGHTED RATING AGENCY DESIGNATION OF REFERENCED CREDIT DEFAULT UNDER CREDIT AVERAGE YEARS CREDIT OBLIGATIONS (1) SWAPS DEFAULT SWAPS (2) TO MATURITY (3) ------------------------------------------ -------------- ------------------ --------------- (IN MILLIONS) Aaa/Aa/A Single name credit default swaps (corporate).......................... $ -- $ 2 5.0 Credit default swaps referencing indices.............................. -- 24 4.0 ---- --- Subtotal............................. -- 26 4.1 ---- --- Baa Single name credit default swaps (corporate).......................... -- -- -- Credit default swaps referencing indices.............................. -- -- -- ---- --- Subtotal............................. -- -- -- ---- --- Ba Single name credit default swaps (corporate).......................... -- -- -- Credit default swaps referencing indices.............................. -- -- -- ---- --- Subtotal............................. -- -- -- ---- --- B Single name credit default swaps (corporate).......................... -- -- -- Credit default swaps referencing indices.............................. -- -- -- ---- --- Subtotal............................. -- -- -- ---- --- Caa and lower Single name credit default swaps (corporate).......................... -- -- -- Credit default swaps referencing indices.............................. -- -- -- ---- --- Subtotal............................. -- -- -- ---- --- In or near default Single name credit default swaps (corporate).......................... -- -- -- Credit default swaps referencing indices.............................. -- -- -- ---- --- Subtotal............................. -- -- -- ---- --- $-- $26 4.1 ==== ===
-------- (1) The rating agency designations are based on availability and the midpoint of the applicable ratings among Moody's, S&P, and Fitch. If no rating is available from a rating agency, then the MetLife rating is used. (2) Assumes the value of the referenced credit obligations is zero. (3) The weighted average years to maturity of the credit default swaps is calculated based on weighted average notional amounts. 46 METLIFE INVESTORS INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) 4. 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, 2006............................. $441 $163 $604 Capitalizations...................................... 80 -- 80 ---- ---- ---- Subtotal........................................ 521 163 684 ---- ---- ---- Less: Amortization related to: Net investment gains (losses)..................... (13) (3) (16) Other expenses.................................... 85 (17) 68 ---- ---- ---- Total amortization.............................. 72 (20) 52 ---- ---- ---- Less: Unrealized investment gains (losses)........... -- (1) (1) ---- ---- ---- Balance at December 31, 2006........................... 449 184 633 Capitalizations...................................... 89 -- 89 ---- ---- ---- Subtotal........................................ 538 184 722 ---- ---- ---- Less: Amortization related to: Net investment gains (losses)..................... 34 6 40 Other expenses.................................... 63 25 88 ---- ---- ---- Total amortization.............................. 97 31 128 ---- ---- ---- Less: Unrealized investment gains (losses)........... (3) (1) (4) ---- ---- ---- Balance at December 31, 2007........................... 444 154 598 Capitalizations...................................... 89 -- 89 ---- ---- ---- Subtotal........................................ 533 154 687 ---- ---- ---- Less: Amortization related to: Net investment gains (losses)..................... 31 -- 31 Other expenses.................................... 117 35 152 ---- ---- ---- Total amortization.............................. 148 35 183 ---- ---- ---- Less: Unrealized investment gains (losses)........... (50) (13) (63) ---- ---- ---- Balance at December 31, 2008........................... $435 $132 $567 ==== ==== ====
The estimated future amortization expense allocated to other expenses for the next five years for VOBA is $17 million in 2009, $15 million in 2010, $14 million in 2011, $12 million in 2012, and $11 million in 2013. Amortization of VOBA and DAC is attributed to both investment gains and losses and other expenses for the amount of gross profits originating from transactions other than investment gains and losses. Unrealized investment gains and losses provide information regarding the amount of DAC and VOBA that would have been amortized if such gains and losses had been recognized. 47 METLIFE INVESTORS INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) 5. INSURANCE INSURANCE LIABILITIES Insurance liabilities are as follows:
POLICYHOLDER OTHER FUTURE POLICY ACCOUNT POLICYHOLDER BENEFITS BALANCES FUNDS --------------- --------------- --------------- DECEMBER 31, --------------------------------------------------- 2008 2007 2008 2007 2008 2007 ------ ------ ------ ------ ------ ------ (IN MILLIONS) Traditional life................. $ 8 $ 8 $ -- $ -- $ -- $ -- Variable & universal life........ -- -- 130 134 1 3 Annuities........................ 364 284 2,660 2,033 45 31 ---- ---- -- --- -- --- ---- ---- Total............................ $372 $292 $2,790 $2,167 $46 $34 ==== ==== == === == === ==== ====
SALES INDUCEMENTS Information regarding deferred sales inducements, which are reported in other assets, is as follows:
YEARS ENDED DECEMBER 31, ---------------------- 2008 2007 2006 ---- ---- ---- (IN MILLIONS) Balance at January 1,.................................. $ 90 $80 $ 75 Capitalization......................................... 18 19 19 Amortization........................................... (20) (9) (14) ---- --- ---- Balance at December 31,................................ $ 88 $90 $ 80 ==== === ====
SEPARATE ACCOUNTS Separate account assets and liabilities consist of pass-through separate accounts totaling $6,633 million and $9,432 million at December 31, 2008 and 2007, respectively, for which the policyholder assumes all investment risk. Fees charged to the separate accounts by the Company (including mortality charges, policy administration fees and surrender charges) are reflected in the Company's revenues as universal life and investment-type product policy fees and totaled $141 million, $138 million and $115 million for the years ended December 31, 2008, 2007 and 2006, respectively. For each of the years ended December 31, 2008, 2007 and 2006, there were no investment gains (losses) on transfers of assets from the general account to the separate accounts. GUARANTEES The Company issues annuity contracts which may include contractual guarantees to the contractholder for: (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"). These guarantees include benefits that are payable in the event of death or at annuitization. 48 METLIFE INVESTORS INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) Information regarding the types of guarantees relating to annuity contracts is as follows:
DECEMBER 31, --------------------------------------------------------------- 2008 2007 ------------------------------ ------------------------------ IN THE AT IN THE AT EVENT OF DEATH ANNUITIZATION EVENT OF DEATH ANNUITIZATION -------------- ------------- -------------- ------------- (IN MILLIONS) ANNUITY CONTRACTS (1) RETURN OF NET DEPOSITS Separate account value................ $ 2,382 N/A $ 2,635 N/A Net amount at risk (2)................ $ 675 (3) N/A $ 10 (3) N/A Average attained age of contractholders..................... 62 years N/A 60 years N/A ANNIVERSARY CONTRACT VALUE OR MINIMUM RETURN Separate account value................ $ 5,390 $ 4,239 $ 8,070 $ 5,516 Net amount at risk (2)................ $ 2,256 (3) $ 2,003 (4) $ 225 (3) $ 89 (4) Average attained age of contractholders..................... 62 years 62 years 63 years 62 years
-------- (1) The Company's annuity 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 GMDB in excess of the current account balance at the balance sheet date. (4) The net amount at risk for guarantees of amounts at annuitization is defined as the present value of the minimum guaranteed annuity payments available to the contractholder determined in accordance with the terms of the contract in excess of the current account balance. Information regarding the liabilities for guarantees (excluding base policy liabilities) relating to annuity contracts is as follows:
ANNUITY CONTRACTS ------------- GUARANTEED ANNUITIZATION BENEFITS ------------- (IN MILLIONS) Balance at January 1, 2006................................... $ -- Incurred guaranteed benefits................................. -- Paid guaranteed benefits..................................... -- ------------- Balance at December 31, 2006................................. -- Incurred guaranteed benefits................................. 8 Paid guaranteed benefits..................................... -- ------------- Balance at December 31, 2007................................. 8 Incurred guaranteed benefits................................. 41 Paid guaranteed benefits..................................... -- ------------- Balance at December 31, 2008................................. $49 =============
49 METLIFE INVESTORS INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) Excluded from the table above are guaranteed annuitization benefit liabilities on the Company's annuity contracts of $67 million, $21 million and $24 million at December 31, 2008, 2007 and 2006, respectively, which were reinsured 100% to an affiliate and had corresponding recoverables from affiliated reinsurers related to such guarantee liabilities. Account balances of contracts with insurance guarantees are invested in separate account asset classes as follows:
DECEMBER 31, --------------- 2008 2007 ------ ------ (IN MILLIONS) Mutual Fund Groupings Equity.................................................. $4,134 $4,670 Balanced................................................ 1,838 4,073 Bond.................................................... 346 445 Money Market............................................ 242 125 Specialty............................................... 30 58 ------ ------ Total................................................ $6,590 $9,371 ====== ======
6. REINSURANCE The Company's life insurance operations participate in reinsurance activities in order to limit losses, minimize exposure to large risks, and provide additional capacity for future growth. The Company has historically reinsured the mortality risk on new individual life insurance policies primarily on an excess of retention basis or a quota share basis. Starting in 2002, the Company reinsured up to 90% of the mortality risk for all new individual life insurance policies. During 2005, the Company changed its retention practices for individual life insurance. Amounts reinsured in prior years remain reinsured under the original reinsurance; however, under the new retention guidelines, the Company retains up to $100,000 per life and reinsures 100% of amounts in excess of the Company's retention limits. The Company evaluates its reinsurance programs routinely and may increase or decrease its retention at any time. Placement of reinsurance is done primarily on an automatic basis and also on a facultative basis for risks with specific characteristics. The Company reinsures 90% of its new production of fixed annuities to an affiliated reinsurer. The Company reinsures 100% of the living and death benefit riders associated with its variable annuities issued since 2001 to an affiliated reinsurer. Under these reinsurance agreements, the Company pays a reinsurance premium generally based on rider fees collected from policyholders and receives reimbursements for benefits paid or accrued in excess of account values, subject to certain limitations. The Company enters into similar agreements for new or in-force business depending on market conditions. 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. In the event that reinsurers do not meet their obligations to the Company under the terms of the reinsurance agreements, reinsurance balances recoverable could become uncollectible. Cessions under reinsurance arrangements do not discharge the Company's obligations as the primary insurer. 50 METLIFE INVESTORS INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) The amounts in the statements of income are presented net of reinsurance ceded. Information regarding the effect of reinsurance is as follows:
YEARS ENDED DECEMBER 31, ---------------------- 2008 2007 2006 ---- ---- ---- (IN MILLIONS) PREMIUMS: Direct premiums.................................... $ 9 $ 13 $ 65 Reinsurance ceded.................................. -- (1) -- ---- ---- ---- Net premiums.................................... $ 9 $ 12 $ 65 ==== ==== ==== UNIVERSAL LIFE AND INVESTMENT-TYPE PRODUCT POLICY FEES: Direct universal life and investment-type product policy fees..................................... $191 $201 $177 Reinsurance ceded.................................. (31) (39) (34) ---- ---- ---- Net universal life and investment-type product policy fees................................... $160 $162 $143 ==== ==== ==== POLICYHOLDER BENEFITS AND CLAIMS: Direct policyholder benefits and claims............ $150 $ 43 $ 99 Reinsurance ceded.................................. (61) (7) (8) ---- ---- ---- Net policyholder benefits and claims............ $ 89 $ 36 $ 91 ==== ==== ====
Information regarding ceded reinsurance recoverable balances, included in premiums and other receivables is as follows:
DECEMBER 31, ---------------- 2008 2007 ------ ------- (IN MILLIONS) UNAFFILIATED RECOVERABLES: Future policy benefit recoverables........................ $ 7 $ -- Claim recoverables........................................ 1 -- ------ ------- Total................................................... $ 8 $ -- ====== ======= AFFILIATED RECOVERABLES: Deposit recoverables...................................... $1,033 $738 Future policy benefit recoverables........................ 636 103 Claim recoverables........................................ 4 1 All other recoverables.................................... 32 58 ------ ------- Total................................................... $1,705 $900 ====== =======
Reinsurance recoverable balances are stated net of allowances for uncollectible balances, which are immaterial. The Company analyzes recent trends in arbitration and litigation outcomes in disputes, if any, with reinsurers. The Company also monitors ratings and evaluates the financial strength of the Company's reinsurers by analyzing their financial statements. Recoverability of reinsurance recoverable balances is evaluated based on these analyses. The Company has secured certain reinsurance recoverable balances with various forms of collateral, including secured trusts and irrevocable letters of credit. At December 31, 2008, the Company has $276 million of affiliated reinsurance recoverable balances secured through irrevocable letters of credit issued and $139 million of affiliated reinsurance recoverable balances secured by funds held in trust as collateral. 51 METLIFE INVESTORS INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) The Company's five largest unaffiliated reinsurers account for $8 million, or 100%, of its total unaffiliated reinsurance recoverable balances at December 31, 2008. Reinsurance balances payable to unaffiliated reinsurers, included in other liabilities, were insignificant at both December 31, 2008 and 2007. Reinsurance balances payable to affiliated reinsurers, included in liabilities, were $91 million and $5 million at December 31, 2008 and 2007, respectively. RELATED PARTY REINSURANCE TRANSACTIONS The Company has reinsurance agreements with certain MetLife subsidiaries including Metropolitan Life Insurance Company ("MLIC") and Exeter Reassurance Company, Ltd. The Company also has reinsurance agreements with Reinsurance Group of America, Incorporated, ("RGA"), a former affiliate, which was split-off from MetLife in September 2008. The table below includes amounts related to transactions with RGA through the date of the split-off. The following table reflects related party reinsurance information:
YEARS ENDED DECEMBER 31, ------------------ 2008 2007 2006 ---- ---- ---- (IN MILLIONS) Ceded fees, included in universal life and investment- type product policy fees............................... $30 $38 $33 Income from deposit contracts, included in other revenues............................................... $29 $45 $45 Ceded benefits, included in policyholder benefits and claims................................................. $61 $ 7 $ 8 Interest costs on ceded reinsurance, included in other expenses............................................... $(1) $(2) $(2)
The Company has ceded risks to an affiliate related to guaranteed minimum benefit riders written directly by the Company. These ceded reinsurance agreements contain embedded derivatives and changes in their fair value are also included within net investment gains (losses). The embedded derivatives ceded are included within premiums and other receivables and were assets of $569 million and $73 million at December 31, 2008 and 2007, respectively. For the years ended December 31, 2008, 2007 and 2006, net investment gains (losses) included $496 million, $110 million and ($36) million, respectively, in changes in fair value of such embedded derivatives. 7. INCOME TAX The provision (benefit) for income tax is as follows:
YEARS ENDED DECEMBER 31, ---------------------- 2008 2007 2006 ---- ---- ---- (IN MILLIONS) Current: Federal............................................. $(36) $(4) $(81) Deferred: Federal............................................. 108 27 64 ---- --- ---- Provision (benefit) for income tax.................... $ 72 $23 $(17) ==== === ====
52 METLIFE INVESTORS INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) The reconciliation of the income tax provision (benefit) at the U.S. statutory rate to the provision (benefit) for income tax as reported is as follows:
YEARS ENDED DECEMBER 31, ---------------------- 2008 2007 2006 ---- ---- ---- (IN MILLIONS) Tax provision at U.S. statutory rate.................. $ 82 $ 33 $ (4) Tax effect of: Tax-exempt investment income........................ (10) (9) (9) Prior year tax...................................... -- (2) (3) Other, net.......................................... -- 1 (1) ---- ---- ---- Provision (benefit) for income tax.................... $ 72 $23 $(17) ==== ==== ====
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, ------------- 2008 2007 ----- ----- (IN MILLIONS) Deferred income tax assets: Policyholder liabilities and receivables................. $ -- $ 73 Net unrealized investment losses......................... 84 7 Other.................................................... 1 1 ----- ----- 85 81 ----- ----- Deferred income tax liabilities: Investments.............................................. 35 13 Policyholder liabilities and receivables................. 24 -- DAC...................................................... 173 184 ----- ----- 232 197 ----- ----- Net deferred income tax liability.......................... $(147) $(116) ===== =====
A valuation allowance is provided when it is more likely than not that some portion of the deferred income tax assets will not be realized. Management believes that it is more likely than not that the results of future operations will generate sufficient taxable income to realize the remaining deferred income tax assets. The Company has not recorded a valuation allowance against the deferred tax asset of $84 million recognized in connection with unrealized investment losses at December 31, 2008. The Company has the intent and ability to hold such securities until their recovery or maturity and the Company has available to it tax-planning strategies that include sources of future taxable income against which such losses could be offset. Effective January 1, 2006, the Company joined with MetLife and its includable affiliates in filing a federal income tax return. The Company 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. 53 METLIFE INVESTORS INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) Pursuant to the tax sharing agreement, the amount due from affiliates is $33 million and $2 million as of December 31, 2008 and 2007, respectively. The Company files income tax returns with the U.S. federal government and various state and local jurisdictions. The Company is under continuous examination by the Internal Revenue Service ("IRS") and other tax authorities in jurisdictions in which the Company has significant business operations. The income tax years under examination vary by jurisdiction. With a few exceptions, the Company is no longer subject to U.S. federal, state and local income tax examinations by tax authorities for years prior to 2004. The Company believes that any adjustments that might be required for open years will not have a material effect on the Company's financial statements. As a result of the implementation of FIN 48, the Company recognized a $5 million decrease in the liability for unrecognized tax benefits and a corresponding increase to the January 1, 2007 balance of retained earnings. Upon adoption of FIN 48, the Company did not have any unrecognized tax benefits. 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 years ended December 31, 2008 and 2007, the Company recognized an income tax benefit of $10 million and $9 million, respectively, related to the separate account DRD. 8. CONTINGENCIES, COMMITMENTS AND GUARANTEES CONTINGENCIES LITIGATION The Company and certain of its 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. Additional litigation relating to the Company's marketing and sales of individual life insurance, annuities, mutual funds or other products may be commenced in the future. Various litigation, claims and assessments against the Company, in addition to those discussed above and those otherwise provided for in the Company's financial statements, have arisen in the course of the Company's business. Further, state insurance regulatory authorities and other federal and state authorities regularly make inquiries and conduct investigations concerning the Company's compliance with applicable insurance and other laws and regulations. It is not possible to predict the ultimate outcome of all pending investigations and legal proceedings or provide reasonable ranges of potential losses, except as noted above in connection with specific matters. In some of the matters, large and/or indeterminate amounts, including punitive and treble damages, may be 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 pending investigations and legal proceedings are not likely to have such an effect. However, given the large and/or indeterminate amounts that may be sought in certain matters and the inherent unpredictability of litigation, it is possible that an adverse outcome in certain matters could, from time to 54 METLIFE INVESTORS INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) time, have a material adverse effect on the Company's net income or cash flows in particular quarterly or annual periods. INSOLVENCY ASSESSMENTS Most of the jurisdictions in which the Company is admitted to transact business require insurers doing business within the jurisdiction to participate in guaranty associations, which are organized to pay contractual benefits owed pursuant to insurance policies issued by impaired, insolvent or failed insurers. These associations levy assessments, up to prescribed limits, on all member insurers in a particular state on the basis of the proportionate share of the premiums written by member insurers in the lines of business in which the impaired, insolvent or failed insurer engaged. Some states permit member insurers to recover assessments paid through full or partial premium tax offsets. Assessments levied against the Company were less than $1 million for each of the years ended December 31, 2008, 2007 and 2006. At both December 31, 2008 and 2007, the Company maintained a liability of $8 million, and a related asset for premium tax offsets of $800 thousand for undiscounted future assessments in respect of impaired, insolvent or failed insurers. At December 31, 2007, the Company also held a receivable of $7 million, recorded in other assets, for reimbursement of assessments incurred in a prior acquisition. There were no such receivables at December 31, 2008. COMMITMENTS COMMITMENTS TO FUND PARTNERSHIP INVESTMENTS The Company makes commitments to fund partnership investments in the normal course of business. The amount of this unfunded commitment was $1 million at December 31, 2008. The Company did not have unfunded commitments at December 31, 2007. The Company anticipates that this amount will be invested in partnerships over the next five years. GUARANTEES In the normal course of its business, the Company has provided certain indemnities, guarantees and commitments to third parties pursuant to which it may be required to make payments now or in the future. In the context of acquisition, disposition, investment and other transactions, the Company has provided indemnities and guarantees, including those related to tax, environmental and other specific liabilities, and other indemnities and guarantees that are triggered by, among other things, breaches of representations, warranties or covenants provided by the Company. In addition, in the normal course of business, the Company provides indemnifications to counterparties in contracts with triggers similar to the foregoing, as well as for certain other liabilities, such as third party lawsuits. These obligations are often subject to time limitations that vary in duration, including contractual limitations and those that arise by operation of law, such as applicable statutes of limitation. In some cases, the maximum potential obligation under the indemnities and guarantees is subject to a contractual limitation, while in other cases such limitations are not specified or applicable. Since certain of these obligations are not subject to limitations, the Company does not believe that it is possible to determine the maximum potential amount that could become due under these guarantees in the future. Management believes that it is unlikely the Company will have to make any material payments under these indemnities, guarantees, or commitments. 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. Management believes that it is unlikely the Company will have to make any material payments under these indemnities, guarantees, or commitments. 55 METLIFE INVESTORS INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) The Company had no liability for indemnities, guarantees and commitments at both December 31, 2008 and 2007. 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 all referenced credit obligations is zero, was $26 million at December 31, 2008. The Company can terminate these contracts at any time through cash settlement with the counterparty at an amount equal to the then current fair value of the credit default swaps. As of December 31, 2008, the Company would have paid an insignificant amount to terminate all of these contracts. See Note 3 for further disclosures related to credit default swap obligations. 9. EQUITY CAPITAL CONTRIBUTIONS The Company received a cash contribution of $50 million from MetLife during the year ended December 31, 2008. There were no contributions received for the years ended December 31, 2007 and 2006. STATUTORY EQUITY AND INCOME The Company's state of domicile imposes minimum risk-based capital ("RBC") requirements that were developed by the National Association of Insurance Commissioners ("NAIC"). The formulas for determining the amount of RBC specify various weighting factors that are applied to financial balances or various levels of activity based on the perceived degree of risk. Regulatory compliance is determined by a ratio of total adjusted capital, as defined by the NAIC, to authorized control level RBC, as defined by the NAIC. Companies below specific trigger points or ratios are classified within certain levels, each of which requires specified corrective action. The Company exceeded the minimum RBC requirements for all periods presented herein. The NAIC has adopted the Codification of Statutory Accounting Principles ("Codification"). Codification is intended to standardize regulatory accounting and reporting to state insurance departments. However, statutory accounting principles continue to be established by individual state laws and permitted practices. The Missouri State Department of Insurance (the "Department") has adopted Codification with certain modifications for the preparation of statutory financial statements of insurance companies domiciled in Missouri. Modifications by state insurance departments may impact the effect of Codification on the statutory capital and surplus of the Company. Statutory accounting principles differ from GAAP primarily by charging policy acquisition costs to expense as incurred, establishing future policy benefit liabilities using different actuarial assumptions and valuing securities on a different basis. In addition, certain assets are not admitted under statutory accounting principles and are charged directly to surplus. The most significant assets not admitted by the Company are net deferred income tax assets resulting from temporary differences between statutory accounting principles basis and tax basis not expected to reverse and become recoverable within a year. Statutory net income (loss) of the Company, as filed with the Department, was ($35) million, $40 million and $116 million for the years ended December 31, 2008, 2007 and 2006, respectively. Statutory capital and surplus, as filed with the Department, was $398 million and $329 million at December 31, 2008 and 2007, respectively. 56 METLIFE INVESTORS INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) DIVIDEND RESTRICTIONS Under Missouri State Insurance Law, the maximum amount of dividends the Company is permitted to pay, without prior insurance regulatory clearance, is the greater of: (i) 10% of its statutory surplus to policyholders as of the end of the immediately preceding calendar year, or (ii) its statutory net gain from operations for the immediately preceding calendar year (excluding realized capital gains). However, dividends may only be paid from positive balances in statutory unassigned funds. Since the Company's statutory unassigned funds surplus is less than zero, no dividends are permissible in 2009 without prior approval of the Missouri Commissioner of Insurance. OTHER COMPREHENSIVE INCOME (LOSS) The following table sets forth the reclassification adjustments required for the years ended December 31, 2008, 2007 and 2006 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 years:
YEARS ENDED DECEMBER 31, --------------------- 2008 2007 2006 ----- ----- ----- (IN MILLIONS) Holding gains (losses) on investments arising during the year........................................... $(305) $ (27) $(22) Income tax effect of holding gains (losses).......... 107 9 8 Reclassification adjustments: Recognized holding (gains) losses included in current year income............................. 26 7 18 Amortization of premiums and accretion of discounts associated with investments .................... (3) -- 4 Income tax effect.................................. (8) (3) (8) Allocation of holding losses on investments relating to other policyholder amounts...................... 63 4 1 Income tax effect of allocation of holding losses to other policyholder amounts......................... (22) (1) -- -- -- -- -- - -- Other comprehensive income (loss).................... $(142) $(11) $ 1 == == == == = ==
10. OTHER EXPENSES Information on other expenses is as follows:
YEARS ENDED DECEMBER 31, --------------------- 2008 2007 2006 ----- ----- ----- (IN MILLIONS) Compensation......................................... $ 18 $ 16 $ 14 Commissions.......................................... 85 95 82 Amortization of DAC and VOBA......................... 183 128 52 Capitalization of DAC................................ (89) (89) (80) Insurance tax........................................ 2 3 3 Other................................................ 45 52 51 ---- ---- ---- Total other expenses................................. $244 $205 $122 ==== ==== ====
For the years ended December 31, 2008, 2007 and 2006, commissions and capitalization of DAC include the impact of affiliated reinsurance transactions. See Note 6. See also Note 12 for discussion of affiliated expenses included in the table above. 57 METLIFE INVESTORS INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) See Note 4 for a rollforward of DAC including impacts of amortization and capitalization. 11. FAIR VALUE FAIR VALUE OF FINANCIAL INSTRUMENTS As described in Note 1, the Company prospectively adopted the provisions of SFAS 157 effective January 1, 2008. As a result, the methodologies used to determine the estimated fair value for certain financial instruments at December 31, 2008 may have been modified from those utilized at December 31, 2007, which, while being deemed appropriate under existing accounting guidance, may not have produced an exit value as defined in SFAS 157. Accordingly, the estimated fair value of financial instruments, and the description of the methodologies used to derive those estimated fair values, are presented separately at December 31, 2007 and December 31, 2008. Considerable judgment is often required in interpreting market data to develop estimates of fair value and the use of different assumptions or valuation methodologies may have a material effect on the estimated fair value amounts. Amounts related to the Company's financial instruments are as follows:
ESTIMATED NOTIONAL CARRYING FAIR DECEMBER 31, 2007 AMOUNT VALUE VALUE ----------------- --------- --------- --------- (IN MILLIONS) Assets: Fixed maturity securities......................... $ 2,017 $ 2,017 Equity securities................................. $ 18 $ 18 Mortgage loans on real estate..................... $ 74 $ 76 Policy loans...................................... $ 29 $ 29 Short-term investments............................ $ 74 $ 74 Cash and cash equivalents......................... $ 81 $ 81 Accrued investment income......................... $ 20 $ 20 Liabilities: Policyholder account balances..................... $2,033 $1,956 Payables for collateral under securities loaned transactions................................... $ 541 $ 541
The methods and assumptions used to estimate the fair value of financial instruments are summarized as follows: Fixed Maturity Securities and Equity Securities -- The estimated 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 estimated fair values is based on: (i) market standard valuation methodologies; (ii) securities the Company deems to be comparable; and (iii) assumptions deemed appropriate given the circumstances. The fair value estimates are based on available market information and judgments about financial instruments, including estimates of the timing and amounts of expected future cash flows and the credit standing of the issuer or counterparty. Factors considered in estimating fair value include; coupon rate, maturity, estimated duration, call provisions, sinking fund requirements, credit rating, industry sector of the issuer, and quoted market prices of comparable securities. Mortgage Loans on Real Estate -- Fair values for mortgage loans on real estate are estimated by discounting expected future cash flows, using current interest rates for similar loans with similar credit risk. Policy Loans -- The estimated fair values for policy loans approximate carrying values. 58 METLIFE INVESTORS INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) Cash and Cash Equivalents and Short-term Investments -- The estimated fair values for cash and cash equivalents and short-term investments approximate carrying values due to the short-term maturities of these instruments. Accrued Investment Income -- The estimated fair value for accrued investment income approximates carrying 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 estimated fair value of policyholder account balances without final contractual maturities are assumed to equal their current net surrender value. Payables for Collateral Under Securities Loaned Transactions -- The estimated fair value for payables for collateral under securities loaned transactions approximates carrying value. Derivative Financial Instruments -- The estimated fair value of derivative financial instruments, including financial forwards, interest rate, credit default and foreign currency swaps and interest rate floors are based upon quotations obtained from dealers or other reliable sources. See Note 3 for derivative fair value disclosures.
ESTIMATED NOTIONAL CARRYING FAIR DECEMBER 31, 2008 AMOUNT VALUE VALUE ------------------ --------- --------- --------- (IN MILLIONS) Assets: Fixed maturity securities.......................... $1,576 $1,576 Equity securities.................................. $ 9 $ 9 Mortgage loans on real estate...................... $ 76 $ 78 Policy loans....................................... $ 28 $ 35 Other limited partnership interests................ $ 2 $ 2 Short-term investments............................. $ 189 $ 189 Other invested assets (1).......................... $2,075 $ 109 $ 109 Cash and cash equivalents.......................... $ 517 $ 517 Accrued investment income.......................... $ 16 $ 16 Premiums and other receivables (2)................. $1,057 $ 898 Separate account assets............................ $6,633 $6,633 Net embedded derivatives within asset host contracts (3)................................... $ 569 $ 569 Liabilities: Policyholder account balances (2).................. $1,874 $1,627 Payables for collateral under securities loaned and other transactions.............................. $ 385 $ 385 Other liabilities: (2) Derivative liabilities.......................... $ 14 $ -- $ -- Other........................................... $ 1 $ 1 Net embedded derivatives within liability host contracts (3)................................... $ 226 $ 226
-------- (1) Other invested assets is comprised of freestanding derivatives with positive estimated fair values. (2) Carrying values presented herein differ from those presented on the balance sheet because certain items within the respective financial statement caption are not considered financial instruments. Financial statement captions omitted from the table above are not considered financial instruments. 59 METLIFE INVESTORS INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) (3) Net embedded derivatives within asset host contracts are presented within premiums and other receivables. Net embedded derivatives within liability host contracts are presented within policyholder account balances. The methods and assumptions used to estimate the fair value of financial instruments are summarized as follows: Fixed Maturity Securities and Equity Securities -- When available, the estimated fair value of the Company's fixed maturity and equity securities are based on quoted prices in active markets that are readily and regularly obtainable. Generally, these are the most liquid of the Company's securities holdings and valuation of these securities does not involve management judgment. When quoted prices in active markets are not available, the determination of estimated fair value is based on market standard valuation methodologies. The market standard valuation methodologies utilized include: discounted cash flow methodologies, matrix pricing or other similar techniques. The assumptions and inputs in applying these market standard valuation methodologies include, but are not limited to: interest rates, credit standing of the issuer or counterparty, industry sector of the issuer, coupon rate, call provisions, sinking fund requirements, maturity, estimated duration and management's assumptions regarding liquidity and estimated future cash flows. Accordingly, the estimated fair values are based on available market information and management's judgments about financial instruments. The significant inputs to the market standard valuation methodologies for certain types of securities with reasonable levels of price transparency are inputs that are observable in the market or can be derived principally from or corroborated by observable market data. Such observable inputs include benchmarking prices for similar assets in active, liquid markets, quoted prices in markets that are not active and observable yields and spreads in the market. When observable inputs are not available, the market standard valuation methodologies for determining the estimated fair value of certain types of securities that trade infrequently, and therefore have little or no price transparency, rely on inputs that are significant to the estimated fair value that are not observable in the market or cannot be derived principally from or corroborated by observable market data. These unobservable inputs can be based in large part on management judgment or estimation, and cannot be supported by reference to market activity. Even though unobservable, these inputs are based on assumptions deemed appropriate given the circumstances and consistent with what other market participants would use when pricing such securities. The use of different methodologies, assumptions and inputs may have a material effect on the estimated fair values of the Company's securities holdings. Mortgage Loans on Real Estate -- The Company originates mortgage loans on real estate principally for investment purposes. These loans are carried at amortized cost within the financial statements. The fair value for mortgage loans on real estate is primarily determined by estimating expected future cash flows and discounting those using current interest rates for similar loans with similar credit risk. Policy Loans -- For policy loans with fixed interest rates, estimated fair values are determined using a discounted cash flow model applied to groups of similar policy loans determined by the nature of the underlying insurance liabilities. Cash flow estimates are developed applying a weighted-average interest rate to the outstanding principal balance of the respective group of loans and an estimated average maturity determined through experience studies of the past performance of policyholder repayment behavior for similar loans. These cash flows are discounted using current risk-free interest rates with no adjustment for borrower credit risk as these loans are fully collateralized by the cash surrender value of the underlying insurance policy. The estimated fair value for policy loans with variable interest rates approximates carrying value due to the absence of borrower credit risk and the short time period between interest rate resets, which presents minimal risk of a material change in estimated fair value due to changes in market interest rates. 60 METLIFE INVESTORS INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) Other Limited Partnership Interests -- Other limited partnerships included in the preceding table consist of those investments accounted for using the cost method. The estimated fair values for other limited partnership interests accounted for under the cost method are generally based on the Company's share of the NAV as provided in the financial statements of the investees. In certain circumstances, management may adjust the NAV by a premium or discount when it has sufficient evidence to support applying such adjustments. Short-term Investments -- Certain short-term investments do not qualify as securities and are recognized at amortized cost in the balance sheet. For these instruments, the Company believes that there is minimal risk of material changes in interest rates or credit of the issuer such that estimated fair value approximates carrying value. In light of recent market conditions, short-term investments have been monitored to ensure there is sufficient demand and maintenance of issuer credit quality and the Company has determined additional adjustment is not required. Short-term investments that meet the definition of a security are recognized at estimated fair value in the balance sheet in the same manner described above for similar instruments that are classified within captions of other major investment classes. Other Invested Assets -- Other invested assets in the balance sheet is comprised of freestanding derivatives with positive estimated fair values. The estimated fair value of derivatives -- with positive and negative estimated fair values -- is described in the respectively labeled section which follows. Cash and Cash Equivalents -- Due to the short-term maturities of cash and cash equivalents, the Company believes there is minimal risk of material changes in interest rates or credit of the issuer such that estimated fair value generally approximates carrying value. In light of recent market conditions, cash and cash equivalent instruments have been monitored to ensure there is sufficient demand and maintenance of issuer credit quality, or sufficient solvency in the case of depository institutions, and the Company has determined additional adjustment is not required. Accrued Investment Income -- Due to the short-term until settlement of accrued investment income, the Company believes there is minimal risk of material changes in interest rates or credit of the issuer such that estimated fair value approximates carrying value. In light of recent market conditions, the Company has monitored the credit quality of the issuers and has determined additional adjustment is not required. Premiums and Other Receivables -- Premiums and other receivables in the balance sheet is principally comprised of premiums due and unpaid for insurance contracts, amounts recoverable under reinsurance contracts, fees and general operating receivables, and embedded derivatives related to the ceded reinsurance of certain variable annuity riders. Amounts recoverable under ceded reinsurance contracts which the Company has determined do not transfer sufficient risk such that they are accounted for using the deposit method of accounting have been included in the preceding table with the estimated fair value determined as the present value of expected future cash flows under the related contracts discounted using an interest rate determined to reflect the appropriate credit standing of the assuming counterparty. Embedded derivatives recognized in connection with ceded reinsurance of certain variable annuity riders are included in this caption in the financial statements but excluded from this caption in the preceding table as they are separately presented. Separate Account Assets -- Separate account assets are carried at estimated fair value and reported as a summarized total on the balance sheet in accordance with SOP 03-1, Accounting and Reporting by Insurance Enterprises for Certain Nontraditional Long-Duration Contracts and for Separate Accounts ("SOP 03-1"). The estimated fair value of separate account assets are based on the estimated fair value of the underlying assets owned by the separate account. Assets within the Company's separate accounts are comprised of actively traded mutual 61 METLIFE INVESTORS INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) funds. The fair value of mutual funds is based upon quoted prices or reported NAVs provided by the fund manager and are reviewed by management to determine whether such values require adjustment to represent exit value. Policyholder Account Balances -- Policyholder account balances in the table above include investment contracts. Embedded derivatives on investment contracts and certain variable annuity riders accounted for as embedded derivatives are included in this caption in the financial statements but excluded from this caption in the table above as they are separately presented therein. The remaining difference between the amounts reflected as policyholder account balances in the preceding table and those recognized in the balance sheet represents those amounts due under contracts that satisfy the definition of insurance contracts and are not considered financial instruments. The investment contracts primarily include fixed deferred annuities, modified guaranteed annuities and fixed term payout annuities. The fair values for these investment contracts are estimated by discounting best estimate future cash flows using current market risk-free interest rates and adding a spread for the Company's own credit determined using market standard swap valuation models and observable market inputs that take into consideration publicly available information relating to the Company's claims paying ability. Payables for Collateral Under Securities Loaned and Other Transactions -- The estimated fair value for payables for collateral under securities loaned and other transactions approximates carrying value. The related agreements to loan securities are short-term in nature such that the Company believes there is limited risk of a material change in market interest rates. Additionally, because borrowers are cross-collateralized by the borrowed securities, the Company believes no additional consideration for changes in its own credit are necessary. Other Liabilities -- Other liabilities in the balance sheet is principally comprised of freestanding derivatives with negative estimated fair values; tax and litigation contingency liabilities; interest due on cash collateral held in relation to securities lending; amounts due under assumed reinsurance contracts; and general operating accruals and payables. The estimated fair value of derivatives -- with positive and negative estimated fair values -- is described in the respectively labeled section which follows. The amounts included in the table above reflect those other liabilities that satisfy the definition of financial instruments subject to disclosure. These items consist primarily of interest due on cash collateral held in relation to securities lending. The Company evaluates the specific terms, facts and circumstances of each instrument to determine the appropriate estimated fair values, which were not materially different from the recognized carrying values. Derivatives -- The estimated fair value of derivatives is determined through the use of quoted market prices for exchange-traded derivatives or through the use of pricing models for over-the-counter derivatives. The determination of estimated fair value, when quoted market values are not available, is based on market standard valuation methodologies and inputs that are assumed to be consistent with what other market participants would use when pricing the instruments. Derivative valuations can be affected by changes in interest rates, foreign currency exchange rates, financial indices, credit spreads, default risk (including the counterparties to the contract), volatility, liquidity and changes in estimates and assumptions used in the pricing models. The significant inputs to the pricing models for most over-the-counter derivatives are inputs that are observable in the market or can be derived principally from or corroborated by observable market data. Significant inputs that are observable generally include: interest rates, foreign currency exchange rates, interest rate curves, credit curves and volatility. However, certain over-the-counter derivatives may rely on inputs that are significant to the estimated fair value that are not observable in the market or cannot be derived principally from or corroborated by observable market data. Significant inputs that are unobservable generally include: independent broker quotes, credit correlation assumptions, references to emerging market currencies and inputs that are outside the observable portion of 62 METLIFE INVESTORS INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) the interest rate curve, credit curve, volatility or other relevant market measure. These unobservable inputs may involve significant management judgment or estimation. Even though unobservable, these inputs are based on assumptions deemed appropriate given the circumstances and consistent with what other market participants would use when pricing such instruments. The credit risk of both the counterparty and the Company are considered in determining the estimated fair value for all over-the-counter derivatives after taking into account the effects of netting agreements and collateral arrangements. Credit risk is monitored and consideration of any potential credit adjustment is based on net exposure by counterparty. This is due to the existence of netting agreements and collateral arrangements which effectively serve to mitigate risk. The Company values its derivative positions using the standard swap curve which includes a credit risk adjustment. This credit risk adjustment is appropriate for those parties that execute trades at pricing levels consistent with the standard swap curve. As the Company and its significant derivative counterparties consistently execute trades at such pricing levels, additional credit risk adjustments are not currently required in the valuation process. The need for such additional credit risk adjustments is monitored by the Company. The Company's ability to consistently execute at such pricing levels is in part due to the netting agreements and collateral arrangements that are in place with all of its significant derivative counterparties. Most inputs for over-the-counter derivatives are mid market inputs but, in certain cases, bid level inputs are used when they are deemed more representative of exit value. Market liquidity as well as the use of different methodologies, assumptions and inputs, may have a material effect on the estimated fair values of the Company's derivatives and could materially affect net income. Embedded Derivatives within Asset and Liability Host Contracts -- Embedded derivatives principally include certain direct variable annuity riders and certain affiliated ceded reinsurance contracts related to such variable annuity riders. Embedded derivatives are recorded in the financial statements at estimated fair value with changes in estimated fair value adjusted through net income. The Company issues certain variable annuity products with guaranteed minimum benefit riders. GMWB, GMAB and certain GMIB riders are embedded derivatives, which are measured at estimated fair value separately from the host variable annuity contract, with changes in estimated fair value reported in net investment gains (losses). These embedded derivatives are classified within policyholder account balances. The fair value for these riders is estimated using the present value of future benefits minus the present value of future fees using actuarial and capital market assumptions related to the projected cash flows over the expected lives of the contracts. A risk neutral valuation methodology is used under which the cash flows from the riders are projected under multiple capital market scenarios using observable risk free rates. Effective January 1, 2008, upon adoption of SFAS 157, the valuation of these riders now includes an adjustment for the Company's own credit and risk margins for non-capital market inputs. The Company's own credit adjustment is determined taking into consideration publicly available information relating to the Company's claims paying ability. Risk margins are established to capture the non-capital market risks of the instrument which represent the additional compensation a market participant would require to assume the risks related to the uncertainties of such actuarial assumptions as annuitization, premium persistency, partial withdrawal and surrenders. The establishment of risk margins requires the use of significant management judgment. These riders may be more costly than expected in volatile or declining equity markets. Market conditions including, but not limited to, changes in interest rates, equity indices, market volatility and foreign currency exchange rates; changes in the Company's own credit standing; and variations in actuarial assumptions regarding policyholder behavior and risk margins related to non-capital market inputs may result in significant fluctuations in the estimated fair value of the riders that could materially affect net income. The Company cedes the risks associated with certain of the GMIB, GMAB and GMWB riders described in the preceding paragraph. These reinsurance contracts contain embedded derivatives which are included in premiums and other receivables with changes in estimated fair value reported in net investment gains (losses). The value of the 63 METLIFE INVESTORS INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) embedded derivatives on the ceded risks is determined using a methodology consistent with that described previously for the riders directly written by the Company. In addition to ceding risks associated with riders that are accounted for as embedded derivatives, the Company also cedes to an affiliated reinsurance company certain directly written GMIB riders that are accounted for as insurance (i.e., not as embedded derivatives) but where the reinsurance contract contains an embedded derivative. These embedded derivatives are included in premiums and other receivables with changes in estimated fair value reported in net investment gains (losses). The value of the embedded derivatives on these ceded risks is determined using a methodology consistent with that described previously for the riders directly written by the Company. Because the direct rider is not accounted for at fair value, significant fluctuations in net income may occur as the change in fair value of the embedded derivative on the ceded risk is being recorded in net income without a corresponding and offsetting change in fair value of the direct rider. The accounting for embedded derivatives is complex and interpretations of the primary accounting standards continue to evolve in practice. If interpretations change, there is a risk that features previously not bifurcated may require bifurcation and reporting at estimated fair value in the financial statements and respective changes in estimated fair value could materially affect net income. 64 METLIFE INVESTORS INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) ASSETS AND LIABILITIES MEASURED AT FAIR VALUE RECURRING FAIR VALUE MEASUREMENTS The fair value of assets and liabilities measured at estimated fair value on a recurring basis, are determined as described in the preceding section. These estimated fair values and their corresponding fair value hierarchy are summarized as follows:
DECEMBER 31, 2008 -------------------------------------------------------- FAIR VALUE MEASUREMENTS AT REPORTING DATE USING -------------------------------------------- QUOTED PRICES IN ACTIVE MARKETS SIGNIFICANT FOR IDENTICAL OTHER SIGNIFICANT ASSETS AND OBSERVABLE UNOBSERVABLE TOTAL LIABILITIES INPUTS INPUTS ESTIMATED (LEVEL 1) (LEVEL 2) (LEVEL 3) FAIR VALUE ----------------- ----------- ------------ ---------- (IN MILLIONS) ASSETS Fixed maturity securities: U.S. corporate securities.................. $ -- $ 618 $ 8 $ 626 Residential mortgage-backed securities..... -- 306 5 311 Commercial mortgage-backed securities...... -- 215 -- 215 U.S. Treasury/agency securities............ 72 114 -- 186 Asset-backed securities.................... -- 122 25 147 Foreign corporate securities............... -- 64 19 83 Foreign government securities.............. -- 8 -- 8 ------ ------ ---- ------ Total fixed maturity securities......... 72 1,447 57 1,576 ------ ------ ---- ------ Equity securities: Non-redeemable preferred stock............. -- -- 9 9 ------ ------ ---- ------ Total equity securities................. -- -- 9 9 ------ ------ ---- ------ Short-term investments....................... 144 45 -- 189 Derivative assets (1)........................ -- 109 -- 109 Net embedded derivatives within asset host contracts (2).............................. -- -- 569 569 Separate account assets (3).................. 6,633 -- -- 6,633 ------ ------ ---- ------ Total assets............................ $6,849 $1,601 $635 $9,085 ====== ====== ==== ====== LIABILITIES Net embedded derivatives within liability host contracts (2)......................... $ -- $ -- $226 $ 226 ====== ====== ==== ======
-------- (1) Derivative assets are presented within other invested assets on the balance sheet. (2) Net embedded derivatives within asset host contracts are presented within premiums and other receivables. Net embedded derivatives within liability host contracts are presented within policyholder account balances. (3) Separate account assets are measured at estimated fair value. Investment performance related to separate account assets is fully offset by corresponding amounts credited to contractholders whose liability is reflected within separate account liabilities. Separate account liabilities are set equal to the estimated fair value of separate account assets as prescribed by SOP 03-1. The Company has categorized its assets and liabilities into the three-level fair value hierarchy, as defined in Note 1, based upon the priority of the inputs to the respective valuation technique. The following summarizes the types of assets and liabilities included within the three-level fair value hierarchy presented in the preceding table. 65 METLIFE INVESTORS INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) Level 1 This category includes certain U.S. Treasury and agency fixed maturity securities and certain short-term money market securities. Separate account assets classified within this level principally include mutual funds. Level 2 This category includes fixed maturity securities priced principally by independent pricing services using observable inputs. These fixed maturity securities include most U.S. Treasury and agency securities as well as the majority of U.S. and foreign corporate securities, residential mortgage-backed securities, commercial mortgage-backed securities, foreign government securities and asset-backed securities. Short-term investments included within Level 2 are of a similar nature to these fixed maturity securities. As it relates to derivatives, this level includes derivatives for which all the inputs used, are observable; including interest rate floors, foreign currency swaps and credit default swaps. Level 3 This category includes fixed maturity securities priced principally through independent broker quotations or market standard valuation methodologies using inputs that are not market observable or cannot be derived principally from or corroborated by observable market data. This level consists of less liquid fixed maturity securities with very limited trading activity or where less price transparency exists around the inputs to the valuation methodologies including: U.S. and foreign corporate securities -- including below investment grade private placements; residential mortgage-backed securities; and asset backed securities -- including all of those supported by sub-prime mortgage loans. Equity securities classified as Level 3 securities consist of non-redeemable preferred stock where there has been very limited trading activity or where less price transparency exists around the inputs to the valuation. As it relates to derivatives this category includes: credit default swaps having unobservable credit correlations and priced through independent broker quotations. Embedded derivatives classified within this level include embedded derivatives associated with certain variable annuity riders as well as those on the cession of the risks associated with those riders to affiliates. A rollforward of all assets and liabilities measured at estimated fair value on a recurring basis using significant unobservable (Level 3) inputs for year ended December 31, 2008 is as follows:
FAIR VALUE MEASUREMENTS USING SIGNIFICANT UNOBSERVABLE INPUTS (LEVEL 3) --------------------------------------------------------------------------------------------------------- TOTAL REALIZED/UNREALIZED GAINS (LOSSES) INCLUDED IN: ----------------------------- PURCHASES, BALANCE, IMPACT OF BALANCE, OTHER SALES, TRANSFER IN BALANCE, DECEMBER 31, SFAS 157 BEGINNING COMPREHENSIVE ISSUANCES AND AND/OR OUT END OF 2007 ADOPTION (1) OF PERIOD EARNINGS (2, 3) INCOME (LOSS) SETTLEMENTS (4) OF LEVEL 3 (5) PERIOD ------------ ------------ --------- --------------- ------------- --------------- -------------- -------- (IN MILLIONS) Fixed maturity securities............. $115 $ -- $115 $ (8) $(29) $(27) $ 6 $ 57 Equity securities........ 18 -- 18 -- (9) -- -- 9 Net embedded derivatives (6).................... 56 30 86 244 -- 13 -- 343
-------- (1) Impact of SFAS 157 adoption represents the amount recognized in earnings as a change in estimate upon the adoption of SFAS 157 associated with Level 3 financial instruments held at January 1, 2008. The net impact of adoption on Level 3 assets and liabilities presented in the table above was a $30 million increase to net assets. Such amount was also impacted by a decrease to DAC of $10 million for a total impact of $20 million on Level 3 assets and liabilities and also reflects the total net impact of the adoption of SFAS 157, as described in Note 1. (2) Amortization of premium/discount is included within net investment income which is reported within the earnings caption of total gains/losses. Impairments are included within net investment gains (losses) which is reported within the earnings caption of total gains/losses. Lapses associated with embedded derivatives are included with the earnings caption of total gains/losses. 66 METLIFE INVESTORS INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) (3) Interest and dividend accruals, as well as cash interest coupons and dividends received, are excluded from the rollforward. (4) The amount reported within purchases, sales, issuances and settlements is the purchase/issuance price (for purchases and issuances) and the sales/settlement proceeds (for sales and settlements) based upon the actual date purchased/issued or sold/settled. Items purchased/issued and sold/settled in the same period are excluded from the rollforward. For embedded derivatives, attributed fees are included within this caption along with settlements, if any. (5) Total gains and losses (in earnings and other comprehensive income (loss)) are calculated assuming transfers in (out) of Level 3 occurred at the beginning of the period. Items transferred in and out in the same period are excluded from the rollforward. (6) Embedded derivative assets and liabilities are presented net for purposes of the rollforward. (7) Amounts presented do not reflect any associated hedging activities. Actual earnings associated with Level 3, inclusive of hedging activities, could differ materially. The table below summarizes both realized and unrealized gains and losses for the year ended December 31, 2008 due to changes in estimated fair value recorded in earnings for Level 3 assets and liabilities:
TOTAL GAINS AND LOSSES -------------------------------------------- CLASSIFICATION OF REALIZED/UNREALIZED GAINS (LOSSES) INCLUDED IN EARNINGS -------------------------------------------- NET NET INVESTMENT INVESTMENT INCOME GAINS (LOSSES) TOTAL ----------- -------------- ----------- (IN MILLIONS) Fixed maturity securities................ $ -- $ (8) $ (8) Net embedded derivatives................. -- 244 244
The table below summarizes the portion of unrealized gains and losses recorded in earnings for the year ended December 31, 2008 for Level 3 assets and liabilities that are still held at December 31, 2008.
CHANGES IN UNREALIZED GAINS (LOSSES) RELATING TO ASSETS AND LIABILITIES HELD AT DECEMBER 31, 2008 ------------------------------------------ NET NET INVESTMENT INVESTMENT INCOME GAINS (LOSSES) TOTAL ----------- -------------- ----------- (IN MILLIONS) Fixed maturity securities................. $ -- $ (8) $ (8) Net embedded derivatives.................. -- 244 244
12. RELATED PARTY TRANSACTIONS The Company has entered into a master service agreement with MLIC who provides administrative, accounting, legal and similar services to the Company. MLIC charged the Company $31 million, $37 million and $24 million, included in other expenses, for services performed under the master service agreement for the years ended December 31, 2008, 2007 and 2006, respectively. The Company has 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 $21 million, $20 million and $30 million, included in other expenses, for services performed under the service agreement for the years ended December 31, 2008, 2007 and 2006, respectively. 67 METLIFE INVESTORS INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) The Company has entered into a distribution agreement with MetLife Investors Distribution Company ("MDC"), in which MDC agrees to sell, on the Company's behalf, insurance products through authorized retailers. The Company agrees to compensate MDC for the sale and servicing of such insurance products in accordance with the terms of the agreement. MDC charged the Company $61 million, $94 million and $80 million, included in other expenses, for the years ended December 31, 2008, 2007 and 2006, respectively. In addition, the Company has entered into a service agreement with MDC, in which the Company agrees to provide certain administrative services to MDC. MDC agrees to compensate the Company for the administrative services provided in accordance with the terms of the agreements. The Company received fee revenue of $14 million, $15 million and $16 million, included in other revenues, for the years ended December 31, 2008, 2007 and 2006, respectively. The Company has entered into an investment service agreement with several affiliates ("Advisors"), in which the Advisors provide investment advisory and administrative services to registered investment companies which serve as investment vehicles for certain insurance contracts issued by the Company. Per the agreement, the net profit or loss of the Advisors is allocated to the Company resulting in revenue of $22 million, $21 million and $25 million included in universal life and investment-type product policy fees, for the years ended December 31, 2008, 2007 and 2006, respectively. The Company had net payables to affiliates of $21 million and $11 million at December 31, 2008 and 2007, respectively, related to the items discussed above. These payables exclude affiliated reinsurance balances discussed in Note 6. See Notes 2, 5 and 6 for additional related party transactions. 68 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES Consolidated Financial Statements for the Years Ended December 31, 2008, 2007 and 2006 and Report of Independent Registered Public Accounting Firm 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, 2008 and 2007, 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, 2008. 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 also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of General American Life Insurance Company and subsidiaries as of December 31, 2008 and 2007, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2008, 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 certain assets and liabilities to a fair value measurement approach as required by accounting guidance adopted on January 1, 2008, and changed its method of accounting for deferred acquisition costs and for income taxes as required by accounting guidance adopted on January 1, 2007. /s/ DELOITTE & TOUCHE LLP Certified Public Accountants Tampa, Florida April 09, 2009 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2008 AND 2007 (IN MILLIONS, EXCEPT SHARE AND PER SHARE DATA)
2008 2007 ------- ------- ASSETS Investments: Fixed maturity securities available-for-sale, at estimated fair value (amortized cost: $6,582 and $7,508, respectively)..... $ 6,140 $ 7,919 Equity securities available-for-sale, at estimated fair value (cost: $166 and $31, respectively).......................... 135 31 Mortgage loans on real estate.................................. 219 241 Policy loans................................................... 1,691 1,657 Real estate and real estate joint ventures held-for- investment.................................................. 55 55 Other limited partnership interests............................ 81 33 Short-term investments......................................... 514 237 Other invested assets.......................................... 126 80 ------- ------- Total investments........................................... 8,961 10,253 Cash and cash equivalents........................................ 152 103 Accrued investment income........................................ 99 107 Premiums and other receivables................................... 2,177 2,154 Deferred policy acquisition costs and value of business acquired....................................................... 279 137 Current income tax recoverable................................... 23 119 Deferred income tax assets....................................... 210 -- Other assets..................................................... 136 140 Assets of subsidiary held-for-sale............................... -- 22,037 Separate account assets.......................................... 1,484 2,080 ------- ------- Total assets................................................ $13,521 $37,130 ======= ======= LIABILITIES AND STOCKHOLDER'S EQUITY LIABILITIES: Future policy benefits......................................... $ 5,176 $ 5,197 Policyholder account balances.................................. 4,143 4,134 Other policyholder funds....................................... 249 229 Policyholder dividends payable................................. 107 102 Short-term debt -- affiliated.................................. -- 50 Long-term debt................................................. 101 101 Deferred income tax liability.................................. -- 32 Payables for collateral under securities loaned and other transactions................................................ 806 1,438 Other liabilities.............................................. 446 531 Liabilities of subsidiary held-for-sale........................ -- 19,958 Separate account liabilities................................... 1,484 2,080 ------- ------- Total liabilities........................................... 12,512 33,852 ------- ------- CONTINGENCIES, COMMITMENTS AND GUARANTEES (NOTE 10) 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....................................... 1,243 1,849 Retained earnings................................................ 71 969 Accumulated other comprehensive income (loss).................... (308) 457 ------- ------- Total stockholder's equity.................................. 1,009 3,278 ------- ------- Total liabilities and stockholder's equity.................. $13,521 $37,130 ======= =======
See accompanying notes to the consolidated financial statements. 2 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006 (IN MILLIONS)
2008 2007 2006 ------ ---- ------ REVENUES Premiums................................................... $ 284 $308 $ 299 Universal life and investment-type product policy fees..... 160 188 226 Net investment income...................................... 474 511 521 Other revenues............................................. 6 37 10 Net investment gains (losses).............................. 137 (91) (21) ------ ---- ------ Total revenues........................................... 1,061 953 1,035 ------ ---- ------ EXPENSES Policyholder benefits and claims........................... 454 485 445 Interest credited to policyholder account balances......... 140 147 151 Policyholder dividends..................................... 168 163 170 Other expenses............................................. 84 77 143 ------ ---- ------ Total expenses........................................... 846 872 909 ------ ---- ------ Income from continuing operations before provision for income tax............................................... 215 81 126 Provision for income tax................................... 95 39 44 ------ ---- ------ Income from continuing operations.......................... 120 42 82 Income (loss) from discontinued operations, net of income tax...................................................... (295) 157 150 ------ ---- ------ Net income (loss).......................................... $ (175) $199 $ 232 ====== ==== ======
See accompanying notes to the consolidated financial statements. 3 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY FOR THE YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006 (IN MILLIONS)
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) ------------------------------------- NET UNREALIZED FOREIGN DEFINED ADDITIONAL INVESTMENT CURRENCY BENEFIT COMMON PAID-IN RETAINED GAINS TRANSLATION PLANS STOCK CAPITAL EARNINGS (LOSSES) ADJUSTMENTS ADJUSTMENT TOTAL ------ ---------- -------- ---------- ----------- ---------- ------- Balance at January 1, 2006......... $3 $1,836 $ 556 $ 431 $ 41 $(4) $ 2,863 Sale of subsidiary (Note 2)........ (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 Equity transactions of majority owned subsidiary................. (11) (11) Dividend of interests in subsidiary (Note 2)......................... (595) (723) (1,318) Comprehensive loss: Net loss......................... (175) (175) Other comprehensive income (loss): Unrealized investment gains (losses), net of related offsets and income tax...... (647) (647) Foreign currency translation adjustments, net of income tax......................... (122) (122) Defined benefit plans adjustment, net of income tax......................... 4 4 ------- Other comprehensive income (loss)...................... (765) ------- Comprehensive loss............... (940) -- ------ ----- ----- ----- --- ------- Balance at December 31, 2008....... $3 $1,243 $ 71 $(299) $ (10) $ 1 $ 1,009 == ====== ===== ===== ===== === =======
See accompanying notes to the consolidated financial statements. 4 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006 (IN MILLIONS)
2008 2007 2006 ------- ------- ------- CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss)........................................ $ (175) $ 199 $ 232 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization expenses.............. 7 7 8 Amortization of premiums and accretion of discounts associated with investments, net.................. (32) (33) (13) (Gains) losses from sales of investments and businesses, net................................... 502 268 14 Interest credited to policyholder account balances.. 248 409 405 Universal life and investment-type product policy fees.............................................. (160) (188) (226) Change in premiums and other receivables............ (116) (226) (511) Change in deferred policy acquisition costs, net.... (262) (339) (306) Change in insurance-related liabilities............. 294 1,348 963 Change in income tax payable........................ 124 65 194 Change in other assets.............................. (96) 117 87 Change in other liabilities......................... 257 432 97 Other, net.......................................... (2) 3 (24) ------- ------- ------- Net cash provided by operating activities................ 589 2,062 920 ------- ------- ------- CASH FLOWS FROM INVESTING ACTIVITIES Sales, maturities and repayments of: Fixed maturity securities........................... 3,221 2,974 4,623 Equity securities................................... 41 34 68 Mortgage loans on real estate....................... 74 26 87 Real estate and real estate joint ventures.......... -- 1 -- Other limited partnership interests................. 4 1 5 Purchases of: Fixed maturity securities........................... (3,167) (4,116) (6,056) Equity securities................................... (59) (12) (40) Mortgage loans on real estate....................... (5) (129) (160) Real estate and real estate joint ventures.......... (2) (1) (3) Other limited partnership interests................. (66) (19) -- Net change in short-term investments................... (255) 123 (282) Proceeds from sales of businesses, net of cash disposed of $0, $0 and $5, respectively...................... -- -- 71 Dividend of subsidiary................................. (270) -- -- Net change in other invested assets.................... (416) (976) (705) Other, net............................................. (24) (43) (50) ------- ------- ------- Net cash used in investing activities.................... $ (924) $(2,137) $(2,442) ------- ------- -------
See accompanying notes to the consolidated financial statements. 5 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006 (IN MILLIONS)
2008 2007 2006 ------- ------ ------ CASH FLOWS FROM FINANCING ACTIVITIES Policyholder account balances: Deposits............................................. $ 1,379 $1,147 $1,446 Withdrawals.......................................... (714) (986) (828) Net change in payables for collateral under securities loaned and other transactions........................ (632) (204) 259 Net change in short-term debt -- affiliated............. (50) 50 -- Long-term debt issued................................... -- 297 -- Long-term debt repaid................................... (3) (79) (100) Collateral financing arrangements issued................ -- -- 850 Dividends on common stock............................... -- -- (13) Debt issuance costs..................................... -- -- (13) Other, net.............................................. -- -- 10 ------- ------ ------ Net cash (used in) provided by financing activities....... (20) 225 1,611 ------- ------ ------ Change in cash and cash equivalents....................... (355) 150 89 Cash and cash equivalents, beginning of year.............. 507 357 268 ------- ------ ------ CASH AND CASH EQUIVALENTS, END OF YEAR.................... $ 152 $ 507 $ 357 ======= ====== ====== Cash and cash equivalents, subsidiaries held-for-sale, beginning of year....................................... $ 404 $ 164 $ 129 ======= ====== ====== CASH AND CASH EQUIVALENTS, SUBSIDIARIES HELD-FOR-SALE, END OF YEAR................................................. $ -- $ 404 $ 164 ======= ====== ====== Cash and cash equivalents, from continuing operations, beginning of year....................................... $ 103 $ 193 $ 139 ======= ====== ====== CASH AND CASH EQUIVALENTS, FROM CONTINUING OPERATIONS, END OF YEAR................................................. $ 152 $ 103 $ 193 ======= ====== ====== Supplemental disclosures of cash flow information: Net cash paid (received) during the year for: Interest............................................. $ 84 $ 129 $ 73 ======= ====== ====== Income tax........................................... $ (26) $ (85) $ -- ======= ====== ====== Non-cash transactions during the year: Business dispositions: Assets disposed.................................... $ -- $ -- $ 321 Less: liabilities disposed......................... -- -- 236 ------- ------ ------ Net assets disposed................................ -- -- 85 Less: cash disposed................................ -- -- 5 ------- ------ ------ Business disposition, net of cash disposed......... $ -- $ -- $ 80 ======= ====== ====== Dividend of subsidiary: Assets disposed.................................... $22,135 $ -- $ -- Less: liabilities disposed......................... 20,689 -- -- ------- ------ ------ Net assets disposed................................ 1,446 -- -- Add: cash disposed................................. 270 -- -- Less: dividend of interests in subsidiary.......... 1,318 -- -- ------- ------ ------ Loss on dividend of interests in subsidiary........ $ 398 $ -- $ -- ======= ====== ====== Return of capital to parent from sale of subsidiary.. $ -- $ -- $ (9) ======= ====== ======
See accompanying notes to the consolidated financial statements. 6 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO THE 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 and group insurance. 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 49 states, Puerto Rico, and the District of Columbia. BASIS OF PRESENTATION The accompanying consolidated financial statements include the accounts of General American and its subsidiaries. Intercompany accounts and transactions have been eliminated. See Note 2 for discussion concerning the dispositions of certain subsidiaries. The Company has invested in certain structured transactions that are variable interest entities ("VIEs") under Financial Accounting Standards Board ("FASB") Interpretation ("FIN") No. 46(r), Consolidation of Variable Interest Entities -- An Interpretation of Accounting Research Bulletin No. 51 ("FIN 46(r)"). These structured transactions include trust preferred securities and other limited partnership interests. The Company is required to consolidate those VIEs for which it is deemed to be the primary beneficiary. The Company reconsiders whether it is the primary beneficiary for investments designated as VIEs on an annual basis. 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 the partnership's operations. Certain amounts in the prior years' consolidated financial statements have been reclassified to conform with the 2008 presentation. See Note 14 for reclassifications related to discontinued operations. Since the Company is a member of a controlled group of affiliated companies, its results may not be indicative of those of a stand-alone entity. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND CRITICAL ACCOUNTING ESTIMATES The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP") requires management to adopt accounting policies and make estimates and assumptions that affect amounts reported in the consolidated financial statements. The most critical estimates include those used in determining: (i) the estimated fair value of investments in the absence of quoted market values; (ii) investment impairments; (iii) the recognition of income on certain investment entities; (iv) the application of the consolidation rules to certain investments; 7 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (v) the estimated 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 follow. In applying these policies, management makes subjective and complex judgments that frequently require estimates about matters that are inherently uncertain. Many of these policies, estimates and related judgments are common in the insurance and financial services industries; others are specific to the Company's businesses and operations. Actual results could differ from these estimates. Fair Value As described below, certain assets and liabilities are measured at estimated fair value on the Company's consolidated balance sheets. In addition, the footnotes to the consolidated financial statements include disclosures of estimated fair values. Effective January 1, 2008, the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 157, Fair Value Measurements ("SFAS 157"). SFAS 157 defines fair value as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. In many cases, the exit price and the transaction (or entry) price will be the same at initial recognition. However, in certain cases, the transaction price may not represent fair value. Under SFAS 157, fair value of a liability is based on the amount that would be paid to transfer a liability to a third party with the same credit standing. SFAS 157 requires that fair value be a market-based measurement in which the fair value is determined based on a hypothetical transaction at the measurement date, considered from the perspective of a market participant. When quoted prices are not used to determine fair value, SFAS 157 requires consideration of three broad valuation techniques: (i) the market approach, (ii) the income approach, and (iii) the cost approach. The approaches are not new, but SFAS 157 requires that entities determine the most appropriate valuation technique to use, given what is being measured and the availability of sufficient inputs. SFAS 157 prioritizes the inputs to fair valuation techniques and allows for the use of unobservable inputs to the extent that observable inputs are not available. The Company has categorized its assets and liabilities measured at estimated fair value into a three-level hierarchy, based on the priority of the inputs to the respective valuation technique. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). An asset or liability's classification within the fair value hierarchy is based on the lowest level of significant input to its valuation. SFAS 157 defines the input levels as follows: Level 1 Unadjusted quoted prices in active markets for identical assets or liabilities. The Company defines active markets based on average trading volume for equity securities. The size of the bid/ask spread is used as an indicator of market activity for fixed maturity securities. Level 2 Quoted prices in markets that are not active or inputs that are observable either directly or indirectly. Level 2 inputs include quoted prices for similar assets or liabilities other than quoted prices in Level 1; quoted prices in markets that are not active; or other inputs that are observable or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities. 8 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Level 3 Unobservable inputs that are supported by little or no market activity and are significant to the estimated fair value of the assets or liabilities. Unobservable inputs reflect the reporting entity's own assumptions about the assumptions that market participants would use in pricing the asset or liability. Level 3 assets and liabilities include financial instruments whose values are determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of estimated fair value requires significant management judgment or estimation. The measurement and disclosures under SFAS 157 in the accompanying consolidated financial statements and footnotes exclude certain items such as nonfinancial assets and nonfinancial liabilities initially measured at estimated fair value in a business combination, reporting units measured at estimated fair value in the first step of a goodwill impairment test and indefinite-lived intangible assets measured at estimated fair value for impairment assessment. The effective date for these items was deferred to January 1, 2009. Prior to adoption of SFAS 157, estimated fair value was determined based solely upon the perspective of the reporting entity. Therefore, methodologies used to determine the estimated fair value of certain financial instruments prior to January 1, 2008, while being deemed appropriate under existing accounting guidance, may not have produced an exit value as defined in SFAS 157. Investments The Company's principal investments are in fixed maturity and equity securities, mortgage loans on real estate, policy loans, real estate, real estate joint ventures and other limited partnership interests, short-term investments and other invested assets. The accounting policies related to each are as follows: Fixed Maturity and Equity Securities. The Company's fixed maturity and equity securities are classified as available-for-sale. Available-for- sale securities are reported at estimated fair value with unrealized investment gains and losses on these securities recorded as a separate component of other comprehensive income (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 in 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 estimated by management using inputs obtained from third party specialists, including broker dealers, and based on management's knowledge of the current market. For credit-sensitive mortgage-backed and asset-backed securities and certain prepayment- sensitive securities, the effective yield is recalculated on a prospective basis. For all other mortgage-backed and asset-backed securities, the effective yield is recalculated on a retrospective basis. The cost or amortized 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. 9 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The assessment of whether impairments have occurred is based on management's case-by-case evaluation of the underlying reasons for the decline in estimated 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. An extended and severe unrealized loss position on a fixed maturity security may not have any impact on the ability of the issuer to service all scheduled interest and principal payments and the Company's evaluation of recoverability of all contractual cash flows, as well as the Company's ability and intent to hold the security, including holding the security until the earlier of a recovery in value, or until maturity. In contrast, for certain equity securities, greater weight and consideration are given by the Company to a decline in market value and the likelihood such market value decline will recover. See also Note 3. 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. In periods subsequent to the recognition of an other-than-temporary impairment on a debt security, the Company accounts for the impaired security as if it had been purchased on the measurement date of the impairment. Accordingly, the discount (or reduced premium) based on the new cost basis is accreted into net investment income over the remaining term of the debt security in a prospective manner based on the amount and timing of estimated future cash flows. 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, whereby blocks of securities, which are included in fixed maturity securities and short-term investments, are loaned to third parties, are treated as financing arrangements and the associated liability is recorded at the amount of cash received. The Company generally obtains collateral in an amount equal to 102% of the estimated fair value of the securities loaned. The Company monitors the estimated fair 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 10 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) brokerage firms and commercial banks. 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. 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. Based on the facts and circumstances of the individual loans being impaired, valuation allowances are established for the excess carrying value of the loan over either: (i) the present value of expected future cash flows discounted at the loan's original effective interest rate, (ii) the estimated fair value of the loan's underlying collateral if the loan is in the process of foreclosure or otherwise collateral dependent, or (iii) the loan's estimated fair value. 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 when 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 estimated 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 estimated fair value. Properties whose carrying values are greater than their undiscounted cash flows are written down to their estimated 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 consisting of leveraged buy-out funds, hedge funds and other private equity funds 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. The 11 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Company reports the distributions from real estate joint ventures and other limited partnership interests accounted for under the cost method and equity in earnings from real estate joint ventures and other limited partnership interests accounted for under the equity method in net investment income. 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. The Company considers its cost method investments for other-than-temporary impairment when the carrying value of real estate joint ventures and other limited partnership interests exceeds the net asset value. The Company takes into consideration the severity and duration of this excess when deciding if the cost method investment is other-than-temporarily impaired. For equity method investees, the Company considers financial and other information provided by the investee, other known information and inherent risks in the underlying investments, as well as future capital commitments, in determining whether an impairment has occurred. When an other-than-temporary impairment is deemed to have occurred, the Company records a realized capital loss within net investment gains (losses) to record the investment at its estimated 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 estimated fair value, or stated at estimated fair value, if available. Short-term investments also include investments in an affiliated money market pool. Other Invested Assets. Other invested assets consist principally of freestanding derivatives with positive estimated fair values and tax credit partnerships. Freestanding derivatives with positive estimated fair values are more fully described in the derivatives accounting policy which follows. Tax credit partnerships are established for the purpose of investing in low-income housing and other social causes, where the primary return on investment is in the form of tax credits and are accounted for under the equity method. The Company reports the equity in earnings of tax credit partnerships in net investment income. Estimates and Uncertainties. The Company's investments are exposed to four primary sources of risk: credit, interest rate, liquidity risk and market valuation. The financial statement risks, stemming from such investment risks, are those associated with the determination of estimated fair values, the diminished ability to sell certain investments in times of strained market conditions, the recognition of impairments, the recognition of income on certain investments, and the potential consolidation of VIEs. The use of different methodologies, assumptions and inputs relating to these financial statement risks may have a material effect on the amounts presented within the consolidated financial statements. When available, the estimated fair value of the Company's fixed maturity and equity securities are based on quoted prices in active markets that are readily and regularly obtainable. Generally, these are the most liquid of the Company's securities holdings and valuation of these securities does not involve management judgment. When quoted prices in active markets are not available, the determination of estimated fair value is based on market standard valuation methodologies. The market standard valuation methodologies utilized include: discounted cash flow methodologies, matrix pricing or other similar techniques. The assumptions and inputs in applying these market standard valuation methodologies include, but are not limited to: interest rates, credit standing of the issuer or counterparty, industry sector of the issuer, coupon rate, call provisions, sinking fund requirements, maturity, estimated duration and management's assumptions regarding liquidity and estimated future cash flows. Accordingly, the estimated fair values are based on available market information and management's judgments about financial instruments. The significant inputs to the market standard valuation methodologies for certain types of securities with reasonable levels of price transparency are inputs that are observable in the market or can be derived 12 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) principally from or corroborated by observable market data. Such observable inputs include benchmarking prices for similar assets in active, liquid markets, quoted prices in markets that are not active and observable yields and spreads in the market. When observable inputs are not available, the market standard valuation methodologies for determining the estimated fair value of certain types of securities that trade infrequently, and therefore have little or no price transparency, rely on inputs that are significant to the estimated fair value that are not observable in the market or cannot be derived principally from or corroborated by observable market data. These unobservable inputs can be based in large part on management judgment or estimation, and cannot be supported by reference to market activity. Even though unobservable, these inputs are based on assumptions deemed appropriate given the circumstances and consistent with what other market participants would use when pricing such securities. Financial markets are susceptible to severe events evidenced by rapid depreciation in asset values accompanied by a reduction in asset liquidity. The Company's ability to sell securities, or the price ultimately realized for these securities, depends upon the demand and liquidity in the market and increases the use of judgment in determining the estimated fair value of certain securities. The determination of the amount of allowances and impairments, as applicable, is 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 structured investment transactions, etc.) is dependent upon market conditions, which could result in prepayments and changes in amounts to be earned. The accounting rules under FIN 46(r) for the determination of when an entity is a VIE and when to consolidate a VIE are complex. The determination of the VIE's primary beneficiary requires an evaluation of the contractual rights and obligations associated with each party involved in the entity, an estimate of the entity's expected losses and expected residual returns and the allocation of such estimates to each party involved in the entity. FIN 46(r) defines the primary beneficiary as the entity that will absorb a majority of a VIE's expected losses, receive a majority of a VIE's expected residual returns if no single entity absorbs a majority of expected losses, or both. When determining the primary beneficiary for structured investment products such as asset-backed securitizations and collateralized debt obligations, the Company uses historical default probabilities based on the credit rating of each issuer and other inputs including maturity dates, industry classifications and geographic location. Using computational algorithms, the analysis simulates default scenarios resulting in a range of expected losses and the probability associated with each occurrence. For other investment structures such as trust preferred securities, joint ventures, limited partnerships and limited liability companies, the Company gains an understanding of the design of the VIE and generally uses a qualitative approach to determine if it is the primary beneficiary. This approach includes an analysis of all contractual rights and obligations held by all parties including profit and loss allocations, repayment or residual value guarantees, put and call options and other derivative instruments. If the primary beneficiary of a VIE can not be identified using this qualitative approach, the Company calculates the expected losses and expected residual returns of the VIE using a probability-weighted cash flow model. The use of different methodologies, assumptions and inputs in the determination of the primary beneficiary could have a material effect on the amounts presented within the consolidated financial statements. 13 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Derivative Financial Instruments Derivatives are financial instruments whose values are derived from interest rates, foreign currency exchange rates, or other financial indices. Derivatives may be exchange-traded or contracted in the over-the-counter market. The Company uses a variety of derivatives, including swaps, forwards and futures, to manage the risk associated with variability in cash flows or changes in estimated 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. The Company's embedded derivatives are substantially held by Reinsurance Group of America, Incorporated ("RGA"), a majority-owned subsidiary, and are included in assets of subsidiaries held-for-sale and liabilities of subsidiaries held-for-sale. See Note 2. 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 estimated fair value as determined through the use of quoted market prices for exchange-traded derivatives or through the use of pricing models for over-the-counter derivatives. The determination of estimated fair value, when quoted market values are not available, is based on market standard valuation methodologies and inputs that are assumed to be consistent with what other market participants would use when pricing the instruments. Derivative valuations can be affected by changes in interest rates, foreign currency exchange rates, financial indices, credit spreads, default risk (including the counterparties to the contract), volatility, liquidity and changes in estimates and assumptions used in the pricing models. The significant inputs to the pricing models for most over-the-counter derivatives are inputs that are observable in the market or can be derived principally from or corroborated by observable market data. Significant inputs that are observable generally include: interest rates, foreign currency exchange rates, interest rate curves, credit curves and volatility. However, certain over-the-counter derivatives may rely on inputs that are significant to the estimated fair value that are not observable in the market or cannot be derived principally from or corroborated by observable market data. Significant inputs that are unobservable generally include: independent broker quotes, credit correlation assumptions, references to emerging market currencies and inputs that are outside the observable portion of the interest rate curve, credit curve, volatility or other relevant market measure. These unobservable inputs may involve significant management judgment or estimation. Even though unobservable, these inputs are based on assumptions deemed appropriate given the circumstances and consistent with what other market participants would use when pricing such instruments. Most inputs for over-the-counter derivatives are mid market inputs but, in certain cases, bid level inputs are used when they are deemed more representative of exit value. Market liquidity as well as the use of different methodologies, assumptions and inputs may have a material effect on the estimated fair values of the Company's derivatives and could materially affect net income. The credit risk of both the counterparty and the Company are considered in determining the estimated fair value for all over-the-counter derivatives after taking into account the effects of netting agreements and collateral arrangements. Credit risk is monitored and consideration of any potential credit adjustment is based on a net exposure by counterparty. This is due to the existence of netting agreements and collateral arrangements which effectively serve to mitigate credit risk. The Company values its derivative positions using the standard swap curve which includes a credit risk adjustment. This credit risk adjustment is appropriate for those parties that execute trades at pricing levels consistent with the standard swap curve. As the Company and its significant derivative counterparties consistently execute trades at such pricing levels, additional credit risk adjustments are not currently required in the valuation process. The need for such additional credit risk adjustments is monitored by the Company. The Company's ability to consistently execute at such pricing levels is in part due to the netting agreements and collateral arrangements that are in place with all of its significant derivative counterparties. The evaluation of the requirement to make additional credit risk adjustments is performed by the Company each reporting period. 14 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 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 estimated fair value of the derivative are generally reported in net investment gains (losses). The fluctuations in estimated 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 estimated fair value of a recognized asset or liability or an unrecognized firm commitment ("fair value hedge"); (ii) a hedge of a forecasted transaction or of the variability of cash flows to be received or paid related to a recognized asset or liability ("cash flow hedge"); or (iii) a hedge of a net investment in a foreign operation. In this documentation, the Company sets forth how the hedging instrument is expected to hedge the designated risks related to the hedged item and sets forth the method that will be used to retrospectively and prospectively assess the hedging instrument's effectiveness and the method which will be used to measure ineffectiveness. A derivative designated as a hedging instrument must be assessed as being highly effective in offsetting the designated risk of the hedged item. Hedge effectiveness is formally assessed at inception and periodically throughout the life of the designated hedging relationship. Assessments of hedge effectiveness and measurements of ineffectiveness are also subject to interpretation and estimation and different interpretations or estimates may have a material effect on the amount reported in net income. The accounting for derivatives is complex and interpretations of the primary accounting standards continue to evolve in practice. Judgment is applied in determining the availability and application of hedge accounting designations and the appropriate accounting treatment under these accounting standards. If it was determined that hedge accounting designations were not appropriately applied, reported net income could be materially affected. Differences in judgment as to the availability and application of hedge accounting designations and the appropriate accounting treatment may result in a differing impact on the consolidated financial statements of the Company from that previously reported. Under a fair value hedge, changes in the estimated fair value of the hedging derivative, including amounts measured as ineffectiveness, and changes in the estimated fair value of the hedged item related to the designated risk being hedged, are reported within net investment gains (losses). The estimated 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. However, balances that are not scheduled to settle until maturity are included in the estimated fair value of derivatives. Under a cash flow hedge, changes in the estimated 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 estimated fair value of the hedging instrument measured as ineffectiveness are reported within net investment gains (losses). The estimated 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. However, balances that are not scheduled to settle until maturity are included in the estimated fair value of derivatives. In a hedge of a net investment in a foreign operation, changes in the estimated 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 estimated fair value of the hedging instrument measured as ineffectiveness are reported within net investment gains (losses). The Company's net investment gains (losses) on foreign operations are substantially related to the operations of RGA, and are included in income (loss) from discontinued operations, net of income tax. See Note 2. 15 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The Company discontinues hedge accounting prospectively when: (i) it is determined that the derivative is no longer highly effective in offsetting changes in the estimated 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 estimated fair value or cash flows of a hedged item, the derivative continues to be carried on the consolidated balance sheet at its estimated fair value, with changes in estimated 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 estimated 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 estimated 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 estimated fair value, with changes in estimated 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 estimated fair value on the consolidated balance sheet, with changes in its estimated fair value recognized in the current period as net investment gains (losses). The Company is also a party to financial instruments that contain terms which are deemed to be embedded derivatives. The Company assesses each identified embedded derivative to determine whether it is required to be bifurcated. If the instrument would not be accounted for in its entirety at estimated 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 estimated fair value with the host contract and changes in their estimated fair value are reported currently in net investment gains (losses). If the Company is unable to properly identify and measure an embedded derivative for separation from its host contract, the entire contract is carried on the balance sheet at estimated fair value, with changes in estimated fair value recognized in the current period in net investment gains (losses). Additionally, the Company may elect to carry an entire contract on the balance sheet at estimated fair value, with changes in estimated fair value recognized in the current period in net investment gains (losses) if that contract contains an embedded derivative that requires bifurcation. There is a risk that embedded derivatives requiring bifurcation may not be identified and reported at estimated fair value in the consolidated financial statements and that their related changes in estimated 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. 16 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 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 property, equipment and leasehold improvements was $74 million and $75 million at December 31, 2008 and 2007, respectively. Accumulated depreciation and amortization of property, equipment and leasehold improvements was $60 million and $58 million at December 31, 2008 and 2007, respectively. Related depreciation and amortization expense was $2 million, $3 million and $3 million for the years ended December 31, 2008, 2007 and 2006, respectively. Computer software, which is included in other assets, is stated at cost, less accumulated amortization. Purchased software costs, as well as certain internal and external costs incurred to develop internal-use computer software during the application development stage, are capitalized. Such costs are amortized generally over a four-year period using the straight-line method. The cost basis of computer software was $27 million and $25 million at December 31, 2008 and 2007, respectively. Accumulated amortization of capitalized software was $21 million and $19 million at December 31, 2008 and 2007, respectively. Related amortization expense was $2 million, $2 million and $3 million for the years ended December 31, 2008, 2007 and 2006, 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, agency and policy issuance expenses. VOBA is an intangible asset that reflects the estimated fair value of in-force contracts in a life insurance company acquisition and represents the portion of the purchase price that is allocated to the value of the right to receive future cash flows from the business in- force at the acquisition date. VOBA is based on actuarially determined projections, by each block of business, of future policy and contract charges, premiums, mortality and morbidity, separate account performance, surrenders, operating expenses, investment returns and other factors. Actual experience on the purchased business may vary from these projections. The recovery of DAC and VOBA is dependent upon the future profitability of the related business. DAC and VOBA are aggregated in the financial statements for reporting purposes. DAC and VOBA on life insurance or investment-type contracts are amortized in proportion to gross premiums, 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 17 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) administer the business, creditworthiness of reinsurance counterparties, and certain economic variables, such as inflation. 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. When expected future gross margins are below those previously estimated, the DAC and VOBA amortization will increase, resulting in a current period charge to earnings. The opposite result occurs when the expected future gross margins are above the previously estimated expected future gross margins. Total DAC and VOBA amortization during a particular period may increase or decrease depending upon the relative size of the amortization change resulting from the adjustment to DAC and VOBA for the update of actual gross margins and the re-estimation of expected future gross margins. Each period, the Company also reviews the estimated gross margins for each block of business to determine the recoverability of DAC and VOBA balances. 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. When expected future gross profits are below those previously estimated, the DAC and VOBA amortization will increase, resulting in a current period charge to earnings. The opposite result occurs when the expected future gross profits are above the previously estimated expected future gross profits. Total DAC and VOBA amortization during a particular period may increase or decrease depending upon the relative size of the amortization change resulting from the adjustment to DAC and VOBA for the update of actual gross profits and the re-estimation of expected future gross profits. Each period, the Company also reviews the estimated gross profits for each block of business to determine the recoverability of DAC and VOBA balances. 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 which can result in significant fluctuations in amortization of DAC and VOBA. Returns that are higher than the Company's long- term expectation produce higher account balances, which increases the Company's future fee expectations and decreases future benefit payment expectations on minimum death and living 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. 18 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 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 estimated 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. The Company performs its annual goodwill impairment testing during the third quarter of each year based upon data as of the close of the second quarter. Impairment testing is performed using the fair value approach, which requires the use of estimates and judgment, at the "reporting unit" level. A reporting unit is the operating segment or a business one level below the operating segment, if discrete financial information is prepared and regularly reviewed by management at that level. Management has concluded that the Company has one reporting unit. For purposes of goodwill impairment testing, if the carrying value of a reporting unit's goodwill exceeds its estimated fair value, there is an indication of impairment and the implied fair value of the goodwill is determined in the same manner as the amount of goodwill would be determined in a business acquisition. The excess of the carrying value of goodwill over the implied fair value of goodwill is recognized as an impairment and recorded as a charge against net income. In performing its goodwill impairment tests, when management believes meaningful comparable market data are available, the estimated fair value of the reporting unit is determined using a market multiple approach. When relevant comparables are not available, the Company uses a discounted cash flow model. Management applies significant judgment when determining the estimated fair value of the reporting unit. The valuation methodologies utilized are subject to key assumptions that are sensitive to change. Estimates of fair value are inherently uncertain and represent only management's reasonable expectation regarding future developments. These estimates and the judgments and assumptions upon which the estimates are based will, in all likelihood, differ in some respects from actual future results. Declines in the estimated fair value of the Company's reporting unit could result in goodwill impairments in future periods. Management concluded it was appropriate to perform an interim goodwill impairment test at December 31, 2008. Based upon the tests performed, management concluded no impairment of goodwill had occurred at December 31, 2008. Additionally, the Company recognized no impairments of goodwill during the years ended December 31, 2007 and 2006. Goodwill was $35 million at both December 31, 2008 and 2007. 19 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Liability for Future Policy Benefits and Policyholder Account Balances The Company establishes liabilities for amounts payable under insurance policies, including traditional life insurance, traditional annuities and non- medical health insurance. Generally, amounts are payable over an extended period of time and related liabilities are calculated as the present value of future expected benefits to be paid reduced by the present value of future expected premiums. Such liabilities are established based on methods and underlying assumptions in accordance with GAAP and applicable actuarial standards. Principal assumptions used in the establishment of liabilities for future policy benefits are mortality, morbidity, policy lapse, renewal, retirement, disability incidence, disability terminations, investment returns, inflation, expenses and other contingent events as appropriate to the respective product type. Utilizing these assumptions, liabilities are established on a block of business basis. Future policy benefit liabilities for participating traditional life insurance policies are equal to the aggregate of: (i) net level premium reserves for death and endowment policy benefits (calculated based upon the non- forfeiture interest rate, ranging from 3% to 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 rate assumptions for the aggregate future policy benefit liabilities range from 5% to 7%. Participating business represented approximately 72% of General American's life insurance in-force, and 75% of the number of life insurance policies in- force, at both December 31, 2008 and 2007. Participating policies represented approximately 95% and 94%, 95% and 94%, and 99% and 99% of gross and net life insurance premiums for the years ended December 31, 2008, 2007 and 2006, 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 rate assumptions used in establishing such liabilities range from 4% to 9%. Future policy benefit liabilities for non-medical health insurance are calculated using the net level premium method and assumptions as to future morbidity, withdrawals and interest, which provide a margin for adverse deviation. Interest rate assumptions 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 rate assumptions used in establishing such liabilities range from 3% to 6%. 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 ("S&P") 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 20 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 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 for these contracts are equal to: (i) policy account values, which consist of an accumulation of gross premium payments; plus (ii) credited interest, ranging from 3% to 6%, less expenses, mortality charges, and withdrawals. Other Policyholder Funds Other policyholder funds include policy and contract claims, unearned revenue liabilities, premiums received in advance, policyholder dividends due and unpaid, and policyholder dividends left on deposit. The liability for policy and contract claims generally relates to incurred but not reported death and disability claims as well as claims which have been reported but not yet settled. The liability for these claims is based on the Company's estimated ultimate cost of settling all claims. The Company derives estimates for the development of incurred but not reported claims principally from actuarial analyses of historical patterns of claims and claims development for each line of business. The methods used to determine these estimates are continually reviewed. Adjustments resulting from this continuous review process and differences between estimates and payments for claims are recognized in policyholder benefits and claims expense in the period in which the estimates are changed or payments are made. The unearned revenue liability relates to universal life-type and investment-type products and represents policy charges for services to be provided in future periods. The charges are deferred as unearned revenue and amortized using the product's estimated gross profits, similar to DAC. Such amortization is recorded in universal life and investment-type product policy fees. The Company accounts for the prepayment of premiums on its individual life, 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. 21 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Other Revenues Other revenues include, in addition to items described elsewhere herein, broker-dealer commissions and fees and administrative service fees. Such fees and commissions are recognized in the period in which services are performed. Other revenues also include changes in account value relating to corporate-owned life insurance ("COLI"). Under certain COLI contracts, if the Company reports certain unlikely adverse results in its consolidated financial statements, withdrawals would not be immediately available and would be subject to market value adjustment, which could result in a reduction of the account value. Policyholder Dividends Policyholder dividends are approved annually by 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 (the "Code"). 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 9) or when estimates used in determining valuation allowances on deferred tax assets significantly change or when receipt of new information indicates the need for adjustment in valuation allowances. Additionally, future events, such as changes in tax laws, tax regulations, or interpretations of such laws or regulations, could have an impact on the provision for income tax and the effective tax rate. Any such changes could significantly affect the amounts reported in the consolidated financial statements in the year these changes occur. As described more fully in "Adoption of New Accounting Pronouncements," the Company adopted FIN No. 48, Accounting for Uncertainty in Income Taxes -- An Interpretation of FASB Statement No. 109 ("FIN 48") effective January 1, 2007. Under FIN 48, the Company determines whether it is more-likely-than-not that a tax position will 22 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) be sustained upon examination by the appropriate taxing authorities before any part of the benefit can be recorded in the financial statements. A tax position is measured at the largest amount of benefit that is greater than 50 percent likely of being realized upon settlement. Unrecognized tax benefits due to tax uncertainties that do not meet the threshold are included within other liabilities and are charged to earnings in the period that such determination is made. The Company classifies interest recognized as interest expense and penalties recognized as a component of income tax. Reinsurance The Company enters into reinsurance agreements primarily as a purchaser of reinsurance for its various insurance products and also as a provider of reinsurance for some insurance products issued by third parties. For each of its reinsurance agreements, the Company determines if the agreement 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 reinsurance agreement. 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 agreements 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 agreements 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 agreements are included in premiums and other receivables and amounts currently payable are included in other liabilities. Such assets and liabilities relating to reinsurance agreements with the same reinsurer may be recorded net on the balance sheet, if a right of offset exists within the reinsurance agreement. Premiums, fees and policyholder benefits and claims include amounts assumed under reinsurance agreements and are net of reinsurance ceded. Amounts received from reinsurers for policy administration are reported in other revenues. If the Company determines that a reinsurance agreement does not expose the reinsurer to a reasonable possibility of a significant loss from insurance risk, the Company records the agreement 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 23 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 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. Accounting for reinsurance requires extensive use of assumptions and estimates, particularly related to the future performance of the underlying business and the potential impact of counterparty credit risks. The Company periodically reviews actual and anticipated experience compared to the aforementioned assumptions used to establish assets and liabilities relating to ceded and assumed reinsurance and evaluates the financial strength of counterparties to its reinsurance agreements using criteria similar to that evaluated in the security impairment process discussed previously. Employee Benefit Plans The Company's employees, who meet specified eligibility requirements, participate in pension, other postretirement and postemployment plans. These benefit plans are accounted for following the guidance outlined in 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 (loss). 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 inflationary. Translation adjustments are charged or credited directly to other comprehensive income (loss). Gains and losses from foreign currency transactions are reported as net investment gains (losses) in the period in which they occur. The Company's net investment gains (losses) on foreign operations are substantially related to the operations of RGA, and are included in income (loss) from discontinued operations, net of income tax. See Note 2. Discontinued Operations The results of operations of a component of the Company that either has been disposed of or is classified as held-for-sale are reported in discontinued operations if the operations and cash flows of the component have been or will be eliminated from the ongoing operations of the Company as a result of the disposal transaction and the 24 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Company will not have any significant continuing involvement in the operations of the component after the disposal transaction. Litigation Contingencies The Company is a party to a number of legal actions and is involved in a number of regulatory investigations. Given the inherent unpredictability of these matters, it is difficult to estimate the impact on the Company's 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. 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. Assets within the Company's separate accounts primarily include mutual funds, fixed maturity and equity securities, mortgage loans, derivatives, hedge funds, short term investments and cash and cash equivalents. 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 which is based on the estimated fair values of the underlying assets comprising the portfolios of an individual separate account. 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. ADOPTION OF NEW ACCOUNTING PRONOUNCEMENTS Fair Value Effective January 1, 2008, the Company adopted SFAS 157 which defines fair value, establishes a consistent framework for measuring fair value, establishes a fair value hierarchy based on the observability of inputs used to measure fair value, and requires enhanced disclosures about fair value measurements and applied the provisions of the statement prospectively to assets and liabilities measured at fair value. At January 1, 2008, adopting SFAS 157 did not have a material impact on the Company's consolidated financial statements. There were no significant changes in estimated fair value of items measured at fair value and reflected in accumulated other comprehensive income (loss). Note 15 presents the estimated fair value of all assets and liabilities required to be measured at estimated fair value as well as the expanded fair value disclosures required by SFAS 157. 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 recognize related unrealized gains and losses in earnings. The fair value option is applied on an instrument-by-instrument basis upon adoption of the standard, upon the 25 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) acquisition of an eligible financial asset, financial liability or firm commitment or when certain specified reconsideration events occur. The fair value election is an irrevocable election. Effective January 1, 2008, the Company did not elect the fair value option for any instruments. Effective January 1, 2008, the Company adopted FASB Staff Position ("FSP") No. FAS 157-1, Application of FASB Statement No. 157 to FASB Statement No. 13 and Other Accounting Pronouncements That Address Fair Value Measurements for Purposes of Lease Classification or Measurement under Statement 13 ("FSP 157- 1"). FSP 157-1 amends SFAS 157 to provide a scope out exception for lease classification and measurement under SFAS No. 13, Accounting for Leases. The Company also adopted FSP No. FAS 157-2, Effective Date of FASB Statement No. 157 which delays the effective date of SFAS 157 for certain nonfinancial assets and liabilities that are recorded at fair value on a nonrecurring basis. The effective date is delayed until January 1, 2009 and impacts balance sheet items including nonfinancial assets and liabilities in a business combination and the impairment testing of goodwill and long-lived assets. Effective September 30, 2008, the Company adopted FSP No. FAS 157-3, Determining the Fair Value of a Financial Asset When the Market for That Asset is Not Active ("FSP 157-3"). FSP 157-3 provides guidance on how a company's internal cash flow and discount rate assumptions should be considered in the measurement of fair value when relevant market data does not exist, how observable market information in an inactive market affects fair value measurement and how the use of market quotes should be considered when assessing the relevance of observable and unobservable data available to measure fair value. The adoption of FSP 157-3 did not have a material impact on the Company's consolidated financial statements. Investments Effective December 31, 2008, the Company adopted FSP No. FAS 140-4 and FIN 46(r)-8, Disclosures by Public Entities (Enterprises) about Transfers of Financial Assets and Interests in Variable Interest Entities ("FSP 140-4 and FIN 46(r)-8"). FSP 140-4 and FIN 46(r)-8 requires additional qualitative and quantitative disclosures about a transferors' continuing involvement in transferred financial assets and involvement in a VIE. The exact nature of the additional required VIE disclosures vary and depend on whether or not the VIE is a qualifying special-purpose entity ("QSPE"). For VIEs that are QSPEs, the additional disclosures are only required for a non-transferor sponsor holding a variable interest or a non-transferor servicer holding a significant variable interest. For VIEs that are not QSPEs, the additional disclosures are only required if the Company is the primary beneficiary, and if not the primary beneficiary, only if the Company holds a significant variable interest or is the sponsor. The Company provided all of the material required disclosures in its consolidated financial statements. Effective December 31, 2008, the Company adopted FSP No. EITF 99-20-1, Amendments to the Impairment Guidance of EITF Issue No. 99-20 ("FSP EITF 99-20- 1"). FSP EITF 99-20-1 amends the guidance in EITF Issue No. 99-20, Recognition of Interest Income and Impairment on Purchased Beneficial Interests and Beneficial Interests That Continue to Be Held by a Transferor in Securitized Financial Assets, to more closely align the guidance to determine whether an other-than-temporary impairment has occurred for a beneficial interest in a securitized financial asset with the guidance in SFAS 115, Accounting for Certain Investments in Debt and Equity Securities for debt securities classified as available-for-sale or held-to-maturity. The adoption of FSP EITF 99-20-1 did not have an impact on the Company's consolidated financial statements. Derivative Financial Instruments Effective December 31, 2008, the Company adopted FSP No. FAS 133-1 and FIN 45-4, Disclosures about Credit Derivatives and Certain Guarantees -- An Amendment of FASB Statement No. 133 and FASB Interpretation No. 45; and Clarification of the Effective Date of FASB Statement No. 161 ("FSP 133-1 and FIN 45-4"). FSP 133-1 and FIN 45-4 amends SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities ("SFAS 133") to require certain enhanced disclosures by sellers of credit derivatives by requiring additional information about the potential adverse effects of changes in their credit risk, financial performance, and cash flows. It also amends 26 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) FIN No. 45, Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others -- An Interpretation of FASB Statements No. 5, 57, and 107 and Rescission of FASB Interpretation No. 34 ("FIN 45"), to require an additional disclosure about the current status of the payment/performance risk of a guarantee. The Company provided all of the material required disclosures in its consolidated financial statements. Effective January 1, 2008, the Company adopted SFAS 133 Implementation Issue No. E-23, Clarification of the Application of the Shortcut Method ("Issue E-23"). Issue E-23 amended SFAS 133 by permitting interest rate swaps to have a non-zero fair value at inception when applying the shortcut method of assessing hedge effectiveness, 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 are not precluded from applying the shortcut method of assessing hedge effectiveness 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. The adoption of Issue E-23 did not have an impact on the Company's consolidated financial statements. Effective January 1, 2006, the Company adopted prospectively SFAS No. 155, Accounting for Certain Hybrid Instruments ("SFAS 155"). SFAS 155 amends SFAS 133 and SFAS No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities ("SFAS 140"). SFAS 155 allows financial instruments that have embedded derivatives to be accounted for as a whole, eliminating the need to bifurcate the derivative from its host, if the holder elects to account for the whole instrument on a fair value basis. In addition, among other changes, SFAS 155: (i) clarifies which interest-only strips and principal-only strips are not subject to the requirements of SFAS 133; (ii) establishes a requirement to evaluate interests in securitized financial assets to identify interests that are freestanding derivatives or that are hybrid financial instruments that contain an embedded derivative requiring bifurcation; (iii) clarifies that concentrations of credit risk in the form of subordination are not embedded derivatives; and (iv) amends SFAS 140 to eliminate the prohibition on a 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 had no 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 27 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 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 had no impact on the Company's consolidated financial statements. 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 an $11 million decrease in the liability for unrecognized tax benefits, no change in the interest liability for unrecognized tax benefits, offset by $11 million of minority interest included in liabilities of subsidiary held-for-sale, resulting in no corresponding change to the January 1, 2007 balance of retained earnings. See also Note 9. Insurance Contracts Effective January 1, 2007, the Company adopted SOP 05-1 which provides guidance on accounting by insurance enterprises for DAC on internal replacements of insurance and investment contracts other than those specifically described in SFAS No. 97, Accounting and Reporting by Insurance Enterprises for Certain Long- Duration Contracts and for Realized Gains and Losses from the Sale of Investments. SOP 05-1 defines an internal replacement and is effective for internal replacements occurring in fiscal years beginning after December 15, 2006. In addition, in February 2007, the American Institute of Certified Public Accountants ("AICPA") issued related Technical Practice Aids ("TPAs") to provide further clarification of SOP 05-1. The TPAs became effective concurrently with the adoption of SOP 05-1. 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 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 benefit 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 estimated 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 benefit plans; 28 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (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 11. Other Pronouncements Effective January 1, 2008, the Company adopted FSP No. FIN 39-1, Amendment of FASB Interpretation No. 39 ("FSP 39-1"). FSP 39-1 amends FASB Interpretation 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. Upon adoption of FSP 39-1, the Company did not change its accounting policy of not offsetting fair value amounts recognized for derivative instruments under master netting arrangements. The adoption of FSP 39-1 did not have an impact on the Company's consolidated financial statements. Effective January 1, 2008, the Company adopted Emerging Issues Task Force ("EITF") Issue No. 07-6, Accounting for the Sale of Real Estate When the Agreement Includes a Buy-Sell Clause ("EITF 07-6") prospectively. 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. EITF 07-6 concludes that the existence of a buy-sell clause does not necessarily preclude partial sale treatment under current guidance. The adoption of EITF 07-6 did not have a material impact on the Company's consolidated financial statements. 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 29 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) errors that were previously deemed immaterial but are material under the guidance in SAB 108. The adoption of SAB 108 did not have a material impact on the Company's consolidated financial statements. Effective January 1, 2006, the Company adopted prospectively EITF Issue No. 05-7, Accounting for Modifications to Conversion Options Embedded in Debt Instruments and Related Issues ("EITF 05-7"). EITF 05-7 provides guidance on whether a modification of conversion options embedded in debt results in an extinguishment of that debt. In certain situations, companies may change the terms of an embedded conversion option as part of a debt modification. The EITF concluded that the change in the fair value of an embedded conversion option upon modification should be included in the analysis of EITF Issue No. 96-19, Debtor's Accounting for a Modification or Exchange of Debt Instruments, to determine whether a modification or extinguishment has occurred and that a change in the fair value of a conversion option should be recognized upon the modification as a discount (or premium) associated with the debt, and an increase (or decrease) in additional paid-in capital. The adoption of EITF 05-7 did not have a material impact on the Company's consolidated financial statements. Effective January 1, 2006, the Company adopted EITF Issue No. 05-8, Income Tax Consequences of Issuing Convertible Debt with a Beneficial Conversion Feature ("EITF 05-8"). EITF 05-8 concludes that: (i) the issuance of convertible debt with a beneficial conversion feature results in a basis difference that should be accounted for as a temporary difference; and (ii) the establishment of the deferred tax liability for the basis difference should result in an adjustment to additional paid-in capital. EITF 05-8 was applied retrospectively for all instruments with a beneficial conversion feature accounted for in accordance with EITF Issue No. 98-5, Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable 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. FUTURE ADOPTION OF NEW ACCOUNTING PRONOUNCEMENTS 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"). In April 2009, the FASB also issued FSP 141(r)-1, Accounting for Assets Acquired and Liabilities Assumed in a Business Combination that Arise from Contingencies ("FSP 141(r)-1"). Under these pronouncements: - 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. - Assets acquired and liabilities assumed in a business combination that arise from contingencies are recognized at fair value if the acquisition- date fair value can be reasonably determined. If the fair value 30 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) is not estimable, an asset or liability is recorded if existence or incurrence at the acquisition date is probable and its amount is reasonably estimable. - Certain acquired contingent liabilities are recorded at fair value at the acquisition date and subsequently measured at either the higher of such amount or the amount determined under existing guidance for non-acquired contingencies. - Changes in deferred tax asset valuation allowances and income tax uncertainties after the acquisition date generally affect income tax expense. - Noncontrolling interests (formerly known as "minority interests") are valued at fair value at the acquisition date and are presented as equity rather than liabilities. - When control is attained on previously noncontrolling interests, the previously held equity interests are remeasured at fair value and a gain or loss is recognized. - Purchases or sales of equity interests that do not result in a change in control are accounted for as equity transactions. - When control is lost in a partial disposition, realized gains or losses are recorded on equity ownership sold and the remaining ownership interest is remeasured and holding gains or losses are recognized. The pronouncements are effective for fiscal years beginning on or after December 15, 2008 and apply prospectively to business combinations after that date. Presentation and disclosure requirements related to noncontrolling interests must be retrospectively applied. The Company will apply the guidance in SFAS 141(r) and FSP 141(r)-1 prospectively on its accounting for future acquisitions and does not expect the adoption of SFAS 160 to have a material impact on the Company's consolidated financial statements. In November 2008, the FASB ratified the consensus on EITF Issue No. 08-6, Equity Method Investment Accounting Considerations ("EITF 08-6"). EITF 08-6 addresses a number of issues associated with the impact that SFAS 141(r) and SFAS 160 might have on the accounting for equity method investments, including how an equity method investment should initially be measured, how it should be tested for impairment, and how changes in classification from equity method to cost method should be treated. EITF 08-6 is effective prospectively for fiscal years beginning on or after December 15, 2008. The Company does not expect the adoption of EITF 08-6 to have a material impact on the Company's consolidated financial statements. In November 2008, the FASB ratified the consensus on EITF Issue No. 08-7, Accounting for Defensive Intangible Assets ("EITF 08-7"). EITF 08-7 requires that an acquired defensive intangible asset (i.e., an asset an entity does not intend to actively use, but rather, intends to prevent others from using) be accounted for as a separate unit of accounting at time of acquisition, not combined with the acquirer's existing intangible assets. In addition, the EITF concludes that a defensive intangible asset may not be considered immediately abandoned following its acquisition or have indefinite life. The Company will apply the guidance of EITF 08-7 prospectively to its intangible assets acquired after fiscal years beginning on or after December 15, 2008. In April 2008, the FASB issued FSP No. FAS 142-3, Determination of the Useful Life of Intangible Assets ("FSP 142-3"). FSP 142-3 amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under SFAS No. 142, Goodwill and Other Intangible Assets ("SFAS 142"). This change is intended to improve the consistency between the useful life of a recognized intangible asset under SFAS 142 and the period of expected cash flows used to measure the fair value of the asset under SFAS 141(r) and other GAAP. FSP 142-3 is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. The requirement for determining useful lives and related disclosures will be applied prospectively to intangible assets acquired as of, and subsequent to, the effective date. 31 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Derivative Financial Instruments 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 will provide all of the material required disclosures in the appropriate future annual periods. Other Pronouncements In December 2008, the FASB issued FSP No. FAS 132(r)-1, Employers' Disclosures about Postretirement Benefit Plan Assets ("FSP 132(r)-1"). FSP 132(r)-1 amends SFAS No. 132(r), Employers' Disclosures about Pensions and Other Postretirement Benefits to enhance the transparency surrounding the types of assets and associated risks in an employer's defined benefit pension or other postretirement plan. The FSP requires an employer to disclose information about the valuation of plan assets similar to that required under SFAS 157. FSP 132(r)-1 is effective for fiscal years ending after December 15, 2009. The Company will provide all of the material required disclosures in the appropriate future annual period. In September 2008, the FASB ratified the consensus on EITF Issue No. 08-5, Issuer's Accounting for Liabilities Measured at Fair Value with a Third-Party Credit Enhancement ("EITF 08-5"). EITF 08-5 concludes that an issuer of a liability with a third-party credit enhancement should not include the effect of the credit enhancement in the fair value measurement of the liability. In addition, EITF 08-5 requires disclosures about the existence of any third-party credit enhancement related to liabilities that are measured at fair value. EITF 08-5 is effective in the first reporting period beginning after December 15, 2008 and will be applied prospectively, with the effect of initial application included in the change in fair value of the liability in the period of adoption. The Company does not expect the adoption of EITF 08-5 to have a material impact on the Company's 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 does not expect the adoption of FSP 140-3 to have a material impact on its consolidated financial statements. 2. DISPOSITIONS DISPOSITION OF REINSURANCE GROUP OF AMERICA, INCORPORATED On September 12, 2008, MetLife completed a tax-free split-off of RGA. In connection with this transaction, General American dividended to MLIC and MLIC dividended to MetLife substantially all of its interests in RGA at a value of $1,318 million. The net book value of RGA at the time of the dividend was $1,716 million. The loss recognized in connection with the dividend was $398 million. General American retained 3,000,000 shares of RGA Class A common stock. These shares are marketable equity securities which do not constitute significant continuing involvement in the operations of RGA; accordingly, they have been classified within equity securities available for sale in the Company's consolidated financial statements at a cost basis of $157 million which is equivalent to the net book value of the shares. The carrying value will be adjusted to fair value at each subsequent reporting date. General American has agreed to dispose of the remaining shares of RGA within the next five years. In connection with General American's agreement to dispose of the remaining shares, General American also recognized, in its 32 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) provision for income tax on continuing operations, a deferred tax liability of $16 million which represents the difference between the book and taxable basis of the remaining investment in RGA. The impact of the disposition of the Company's investment in RGA is reflected in the Company's consolidated financial statements as discontinued operations. See Note 14 for reclassifications related to discontinued operations. DISPOSITION OF PARAGON LIFE INSURANCE COMPANY On May 1, 2006, the Company sold Paragon Life Insurance Company ("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 revenues of Paragon included in the Company's consolidated revenues were $23 million for the year ended December 31, 2006. 3. INVESTMENTS FIXED MATURITY AND EQUITY SECURITIES AVAILABLE-FOR-SALE The following tables present the cost or amortized cost, gross unrealized gain and loss, estimated fair value of the Company's fixed maturity and equity securities, and the percentage that each sector represents by the respective total holdings at:
DECEMBER 31, 2008 ----------------------------------------------- GROSS COST OR UNREALIZED AMORTIZED -------------- ESTIMATED % OF COST GAIN LOSS FAIR VALUE TOTAL --------- ---- ---- ---------- ----- (IN MILLIONS) U.S. corporate securities................... $2,434 $ 36 $235 $2,235 36.4% Residential mortgage-backed securities...... 1,063 19 121 961 15.7 Foreign corporate securities................ 900 53 121 832 13.5 Foreign government securities............... 592 196 14 774 12.6 Commercial mortgage-backed securities....... 876 1 215 662 10.8 U.S. Treasury/agency securities............. 292 80 -- 372 6.1 Asset-backed securities..................... 409 -- 120 289 4.7 State and political subdivision securities.. 16 -- 1 15 0.2 Other fixed maturity securities............. -- -- -- -- 0.0 ------ ---- ---- ------ ----- Total fixed maturity securities(1),(2).... $6,582 $385 $827 $6,140 100.0% ====== ==== ==== ====== ===== Common stock................................ $ 157 $ -- $ 28 $ 129 95.6 Non-redeemable preferred stock(1)........... 9 -- 3 6 4.4 ------ ---- ---- ------ ----- Total equity securities................... $ 166 $ -- $ 31 $ 135 100.0% ====== ==== ==== ====== =====
33 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 2007 ----------------------------------------------- GROSS COST OR UNREALIZED AMORTIZED -------------- ESTIMATED % OF COST GAIN LOSS FAIR VALUE TOTAL --------- ---- ---- ---------- ----- (IN MILLIONS) U.S. corporate securities................... $2,559 $ 99 $ 66 $2,592 32.7% Residential mortgage-backed securities...... 1,728 13 14 1,727 21.8 Foreign corporate securities................ 945 135 13 1,067 13.5 Foreign government securities............... 598 294 2 890 11.2 Commercial mortgage-backed securities....... 876 11 14 873 11.0 U.S. Treasury/agency securities............. 369 13 -- 382 4.8 Asset-backed securities..................... 326 1 17 310 3.9 State and political subdivision securities.. 4 -- -- 4 0.2 Other fixed maturity securities............. 103 -- 29 74 0.9 ------ ---- ---- ------ ----- Total fixed maturity securities(1),(2).... $7,508 $566 $155 $7,919 100.0% ====== ==== ==== ====== ===== Common stock................................ $ 17 $ -- $ -- $ 17 54.8 Non-redeemable preferred stock(1)........... 14 1 1 14 45.2 ------ ---- ---- ------ ----- Total equity securities................... $ 31 $ 1 $ 1 $ 31 100.0% ====== ==== ==== ====== =====
-------- (1) The Company classifies perpetual securities that have attributes of both debt and equity as fixed maturity securities if the security has a punitive interest rate step-up feature as it believes in most instances this feature will compel the issuer to redeem the security at the specified call date. Perpetual securities that do not have a punitive interest rate step-up feature are classified as non-redeemable preferred stock. Many of such securities have been issued by non-U.S. financial institutions that are accorded Tier 1 and Upper Tier 2 capital treatment by their respective regulatory bodies and are commonly referred to as "perpetual hybrid securities." Perpetual hybrid securities classified as non-redeemable preferred stock held by the Company at December 31, 2008 and 2007 had an estimated fair value of $3 million and $12 million, respectively. In addition, the Company held $3 million and $2 million at estimated fair value, respectively, at December 31, 2008 and 2007 of other perpetual hybrid securities, primarily U.S. financial institutions, also included in non-redeemable preferred stock. Perpetual hybrid securities held by the Company and included within fixed maturity securities (primarily within foreign corporate securities) at December 31, 2008 and 2007 had an estimated fair value of $33 million and $74 million, respectively. (2) At December 31, 2008 and 2007 the Company also held $65 million and $113 million at estimated fair value, respectively, of redeemable preferred stock which have stated maturity dates which are included within fixed maturity securities. These securities are primarily issued by U.S. financial institutions, have cumulative interest deferral features and are commonly referred to as "capital securities" within U.S. corporate securities. The Company held foreign currency derivatives with notional amounts of $623 million and $831 million to hedge the exchange rate risk associated with foreign denominated fixed maturity securities at December 31, 2008 and 2007, respectively. Below Investment Grade or Non Rated Fixed Maturity Securities. 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 $209 million and $229 million at December 31, 2008 and 2007, respectively. These securities had net unrealized gains (losses) of ($55) million and $10 million at December 31, 2008 and 2007, respectively. Non-Income Producing Fixed Maturity Securities. Non-income producing fixed maturity securities at estimated fair value were $2 million and less than $1 million at December 31, 2008 and 2007, respectively. 34 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Net unrealized gains associated with non-income producing fixed maturity securities were less than $1 million at both December 31, 2008 and 2007. Fixed Maturity Securities Credit Enhanced by Financial Guarantee Insurers. At December 31, 2008, $59 million of the estimated fair value of the Company's fixed maturity securities were credit enhanced by financial guarantee insurers of which $35 million, $11 million, $9 million and $4 million, are included within U.S. corporate securities, asset-backed securities, state and political subdivision securities and residential mortgage-backed securities, respectively, and 3% and 92% were guaranteed by financial guarantee insurers who were Aa and Baa rated, respectively. Approximately 85% of the asset-backed securities that are credit enhanced by financial guarantee insurers are asset- backed securities which are backed by sub-prime mortgage loans. Concentrations of Credit Risk (Fixed Maturity Securities). The following section contains a summary of the concentrations of credit risk related to fixed maturity securities holdings. The Company is not exposed to any concentrations of credit risk of any single issuer greater than 10% of the Company's stockholder's equity, other than securities of the U.S. government and certain U.S. government agencies. At December 31, 2008 and 2007, the Company's holdings in U.S. Treasury and agency fixed maturity securities at estimated fair value were $372 million and $382 million, respectively. As shown in the sector table above, at December 31, 2008 the Company's three largest exposures in its fixed maturity security portfolio were U.S. corporate securities (36.4%), residential mortgage-backed securities (15.7%), and foreign corporate securities (13.5%); and at December 31, 2007 were U.S. corporate securities (32.7%), residential mortgage-backed securities (21.8%), and foreign corporate securities (13.5%). Concentrations of Credit Risk (Fixed Maturity Securities) -- U.S. and Foreign Corporate Securities. At December 31, 2008 and 2007, the Company's holdings in U.S. corporate and foreign corporate fixed maturity securities at estimated fair value were $3,067 million and $3,659 million, respectively. The Company maintains a diversified portfolio of corporate securities across industries and issuers. The portfolio does not have exposure to any single issuer in excess of 1% of total invested assets. The exposure to the largest single issuer of corporate fixed maturity securities held at December 31, 2008 and 2007 was $76 million and $84 million, respectively. At December 31, 2008 and 2007, the Company's combined holdings in the ten issuers to which it had the greatest exposure totaled $442 million and $467 million, respectively, the total of these ten issuers being less than 5% of the Company's total invested assets at such dates. The table below shows the major industry types that comprise the corporate fixed maturity holdings at:
DECEMBER 31, --------------------------------------- 2008 2007 ------------------ ------------------ ESTIMATED % OF ESTIMATED % OF FAIR VALUE TOTAL FAIR VALUE TOTAL ---------- ----- ---------- ----- (IN MILLIONS) Foreign(1).................................. $ 832 27.1% $1,067 29.2% Industrial.................................. 527 17.2 582 15.9 Utility..................................... 514 16.8 512 14.0 Finance..................................... 441 14.4 697 19.0 Consumer.................................... 421 13.7 522 14.3 Communications.............................. 140 4.6 198 5.4 Other....................................... 192 6.2 81 2.2 ------ ----- ------ ----- Total..................................... $3,067 100.0% $3,659 100.0% ====== ===== ====== =====
-------- (1) Includes U.S. dollar-denominated debt obligations of foreign obligors, and other fixed maturity foreign investments. 35 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Concentrations of Credit Risk (Fixed Maturity Securities) -- Residential Mortgage-Backed Securities. The Company's residential mortgage-backed securities consist of the following holdings at:
DECEMBER 31, --------------------------------------- 2008 2007 ------------------ ------------------ ESTIMATED % OF ESTIMATED % OF FAIR VALUE TOTAL FAIR VALUE TOTAL ---------- ----- ---------- ----- (IN MILLIONS) Residential mortgage-backed securities: Collateralized mortgage obligations....... $796 82.8% $1,094 63.3% Pass-through securities................... 165 17.2 633 36.7 ---- ----- ------ ----- Total residential mortgage-backed securities................................ $961 100.0% $1,727 100.0% ==== ===== ====== =====
Collateralized mortgage obligations are a type of mortgage-backed security that creates separate pools or tranches of pass-through cash flows for different classes of bondholders with varying maturities. Pass-through mortgage-backed securities are a type of asset-backed security that is secured by a mortgage or collection of mortgages. The monthly mortgage payments from homeowners pass from the originating bank through an intermediary, such as a government agency or investment bank, which collects the payments, and for a fee, remits or passes these payments through to the holders of the pass-through securities. At December 31, 2008, the exposures in the Company's residential mortgage- backed securities portfolio consist of agency, prime, and alternative residential mortgage loans ("Alt-A") securities of 65%, 23%, and 12% of the total holdings, respectively. At December 31, 2008 and 2007, $843 million and $1,726 million, respectively, or 88% and 99% respectively, of the residential mortgage-backed securities were rated Aaa/AAA by Moody's Investors Service ("Moody's"), S&P, or Fitch Ratings ("Fitch"). The majority of the agency residential mortgage-backed securities are guaranteed or otherwise supported by the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation or the Government National Mortgage Association. Prime residential mortgage lending includes the origination of residential mortgage loans to the most credit-worthy customers with high quality credit profiles. Alt-A residential mortgage loans are a classification of mortgage loans where the risk profile of the borrower falls between prime and sub-prime. At December 31, 2008 and 2007, the Company's Alt-A residential mortgage-backed securities exposure at estimated fair value was $118 million and $197 million, respectively, with an unrealized loss of $58 million and $4 million respectively. At December 31, 2008 and 2007, $72 million and $197 million, respectively, or 61% and 100% respectively, of the Company's Alt-A residential mortgage-backed securities were rated Aa/AA or better by Moody's, S&P or Fitch. In December 2008, certain Alt-A residential mortgage-backed securities experienced ratings downgrades from investment grade to below investment grade, contributing to the decrease year over year cited above in those securities rated Aa/AA or better. At December 31, 2008 the Company's Alt-A holdings are distributed as follows: 25% 2007 vintage year, 40% 2006 vintage year and 35% 2005 and prior vintage years. In January 2009, Moody's revised its loss projections for Alt-A residential mortgage-backed securities, and the Company anticipates that Moody's will be downgrading virtually all 2006 and 2007 vintage year Alt-A securities to below investment grade, which will increase the percentage of the Company's Alt-A residential mortgage-backed securities portfolio that will be rated below investment grade. Vintage year refers to the year of origination and not to the year of purchase. Concentrations of Credit Risk (Fixed Maturity Securities) -- Commercial Mortgage-Backed Securities. At December 31, 2008 and 2007, the Company's holdings in commercial mortgage-backed securities was $662 million and $873 million, respectively, at estimated fair value. At December 31, 2008 and 2007, $575 million and $695 million, respectively, of the estimated fair value, or 87% and 80%, respectively, of the commercial mortgage-backed securities were rated Aaa/AAA by Moody's, S&P, or Fitch. At December 31, 2008, the rating distribution of the Company's commercial mortgage-backed securities holdings was as follows: 87% Aaa, 11% Aa and 2% A. At December 31, 2008, 95% of the holdings are in the 2005 and prior vintage years. At December 31, 2008, the 36 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Company had no exposure to CMBX securities and its holdings of commercial real estate collateralized debt obligations securities was $10 million at estimated fair value. Concentrations of Credit Risk (Fixed Maturity Securities) -- Asset-Backed Securities. At December 31, 2008 and 2007, the Company's holdings in asset- backed securities was $289 million and $310 million, respectively, at estimated fair value. The Company's asset-backed securities are diversified both by sector and by issuer. At December 31, 2008 and 2007, $203 million and $158 million, respectively, or 70% and 51%, respectively, of total asset-backed securities were rated Aaa/AAA by Moody's, S&P or Fitch. At December 31, 2008, the largest exposures in the Company's asset-backed securities portfolio were credit card receivables, student loan receivables, residential mortgage-backed securities backed by sub-prime mortgage loans and automobile receivables of 56%, 10%, 6% and 6% of the total holdings, respectively. Sub-prime mortgage lending is the origination of residential mortgage loans to customers with weak credit profiles. At December 31, 2008 and 2007, the Company had exposure to fixed maturity securities backed by sub-prime mortgage loans with estimated fair values of $18 million and $39 million, respectively, and unrealized losses of $26 million and $7 million, respectively. At December 31, 2008, 50% of the asset-backed securities backed by sub-prime mortgage loans have been guaranteed by financial guarantee insurers, of which 23% and 77% were guaranteed by financial guarantee insurers who were Aa and Baa rated, respectively. Concentrations of Credit Risk (Equity Securities). The Company is not exposed to any concentrations of credit risk of any single issuer in its equity securities holdings, except for the RGA shares retained, which had an estimated fair value of $128 million or 13% of the Company's stockholder's equity. See Note 2. The amortized cost and estimated fair value of fixed maturity securities, by contractual maturity date (excluding scheduled sinking funds), are as follows:
DECEMBER 31, ----------------------------------------------- 2008 2007 ---------------------- ---------------------- AMORTIZED ESTIMATED AMORTIZED ESTIMATED COST FAIR VALUE COST FAIR VALUE --------- ---------- --------- ---------- (IN MILLIONS) Due in one year or less................. $ 132 $ 131 $ 105 $ 113 Due after one year through five years... 823 808 1,198 1,261 Due after five years through ten years.. 1,050 1,010 905 955 Due after ten years..................... 2,229 2,279 2,370 2,680 ------ ------ ------ ------ Subtotal.............................. 4,234 4,228 4,578 5,009 Mortgage-backed and other asset-backed securities............................ 2,348 1,912 2,930 2,910 ------ ------ ------ ------ Total fixed maturity securities....... $6,582 $6,140 $7,508 $7,919 ====== ====== ====== ======
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. 37 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) NET UNREALIZED INVESTMENT GAINS (LOSSES) The components of net unrealized investment gains (losses), included in accumulated other comprehensive income (loss), are as follows:
YEARS ENDED DECEMBER 31, ------------------------- 2008 2007 2006 ----- ----- ----- (IN MILLIONS) Fixed maturity securities........................... $(442) $ 894 $ 852 Equity securities................................... (31) (19) 5 Derivatives......................................... (3) (3) (2) Minority interest................................... -- (150) (159) Short-term investments.............................. (45) -- -- Other............................................... -- (28) (20) ----- ----- ----- Subtotal.......................................... (521) 694 676 ----- ----- ----- Amounts allocated from DAC and VOBA................. 60 (97) (27) Deferred income tax................................. 162 (249) (280) ----- ----- ----- Subtotal.......................................... 222 (346) (307) ----- ----- ----- Net unrealized investment gains (losses)............ $(299) $ 348 $ 369 ===== ===== =====
The changes in net unrealized investment gains (losses) are as follows:
YEARS ENDED DECEMBER 31, -------------------------- 2008 2007 2006 ------- ---- ----- (IN MILLIONS) Balance, at January 1,............................. $ 348 $369 $ 431 Unrealized investment gains (losses) during the year............................................. (1,302) 18 (111) Unrealized investment loss of subsidiary at the date of dividend of interests.................... 87 -- -- Unrealized investment gains (losses) relating to: DAC and VOBA..................................... 175 (70) 18 DAC and VOBA of subsidiary at date of dividend of interests..................................... (18) -- -- Deferred income tax.............................. 457 31 31 Deferred income tax of subsidiary at date of dividend of interests......................... (46) -- -- ------- ---- ----- Balance, at December 31,........................... $ (299) $348 $ 369 ======= ==== ===== Change in net unrealized investment gains (losses)......................................... $ (647) $(21) $ (62) ======= ==== =====
38 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO THE 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, 2008 --------------------------------------------------------------------------- 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............. $ 797 $ 94 $ 612 $141 $1,409 $235 Residential mortgage-backed securities.......................... 276 65 107 56 383 121 Foreign corporate securities.......... 353 62 144 59 497 121 Foreign government securities......... 94 9 44 5 138 14 Commercial mortgage-backed securities.......................... 319 55 328 160 647 215 Asset-backed securities............... 157 30 124 90 281 120 State and political subdivision securities.......................... 14 1 1 -- 15 1 ------ ---- ------ ---- ------ ---- Total fixed maturity securities..... $2,010 $316 $1,360 $511 $3,370 $827 ====== ==== ====== ==== ====== ==== Equity securities..................... $ 131 $ 30 $ -- $ 1 $ 131 $ 31 ====== ==== ====== ==== ====== ==== Total number of securities in an unrealized loss position............ 462 347 ====== ======
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............. $ 607 $32 $ 548 $34 $1,155 $ 66 Residential mortgage-backed securities.......................... 390 8 356 6 746 14 Foreign corporate securities.......... 206 3 95 10 301 13 Foreign government securities......... 25 -- 22 2 47 2 Commercial mortgage-backed securities.......................... 44 1 483 13 527 14 Asset-backed securities............... 209 12 49 5 258 17 State and political subdivision securities.......................... 1 -- -- -- 1 -- Other fixed maturity securities....... 74 29 -- -- 74 29 ------ --- ------ --- ------ ---- Total fixed maturity securities..... $1,556 $85 $1,553 $70 $3,109 $155 ====== === ====== === ====== ==== Equity securities..................... $ 2 $-- $ 3 $ 1 $ 5 $ 1 ====== === ====== === ====== ==== Total number of securities in an unrealized loss position............ 290 227 ====== ======
39 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO THE 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, 2008 ------------------------------------------------------------ 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) FIXED MATURITY SECURITIES: Less than six months.................... $ 872 $1,285 $ 59 $457 216 234 Six months or greater but less than nine months................................ 485 59 48 31 93 15 Nine months or greater but less than twelve months......................... 400 98 48 56 58 22 Twelve months or greater................ 966 32 110 18 166 9 ------ ------ ---- ---- Total................................. $2,723 $1,474 $265 $562 ====== ====== ==== ==== EQUITY SECURITIES: Less than six months.................... $ 156 $ 2 $ 28 $ 2 1 1 Six months or greater but less than nine months................................ -- -- -- -- -- -- Nine months or greater but less than twelve months......................... 2 2 -- 1 1 1 Twelve months or greater................ -- -- -- -- -- -- ------ ------ ---- ---- Total................................. $ 158 $ 4 $ 28 $ 3 ====== ====== ==== ====
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) FIXED MATURITY SECURITIES: Less than six months................... $1,067 $24 $ 54 $ 6 165 12 Six months or greater but less than nine months.......................... 290 1 14 -- 76 1 Nine months or greater but less than twelve months........................ 285 -- 19 -- 47 -- Twelve months or greater............... 1,587 10 59 3 214 4 ------ --- ---- --- Total................................ $3,229 $35 $146 $ 9 ====== === ==== === EQUITY SECURITIES: Less than six months................... $ -- $-- $ -- $-- -- -- Six months or greater but less than nine months.......................... -- -- -- -- -- -- Nine months or greater but less than twelve months........................ 2 -- -- -- 1 -- Twelve months or greater............... 4 -- 1 -- 1 -- ------ --- ---- --- Total................................ $ 6 $-- $ 1 $-- ====== === ==== ===
40 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 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. At December 31, 2008 and 2007, $265 million and $146 million, respectively, of unrealized losses related to fixed maturity securities with an unrealized loss position of less than 20% of cost or amortized cost, which represented 10% and 5%, respectively, of the cost or amortized cost of such securities. At December 31, 2008 and 2007, $28 million and $1 million, respectively, of unrealized losses related to equity securities with an unrealized loss position of less than 20% of cost, which represented 18% and 17%, respectively, of the cost of such securities. At December 31, 2008, $562 million and $3 million of unrealized losses related to fixed maturity securities and equity securities, respectively, with an unrealized loss position of 20% or more of cost or amortized cost, which represented 38% and 75% of the cost or amortized cost of such fixed maturity securities and equity securities, respectively. Of such unrealized losses of $562 million and $3 million, $457 million and $2 million related to fixed maturity securities and equity securities, respectively, that were in an unrealized loss position for a period of less than six months. At December 31, 2007, $9 million of unrealized losses were all related to fixed maturity securities with an unrealized loss position of 20% or more of amortized cost, which represented 26% of amortized cost of such fixed maturity securities. Of such unrealized losses of $9 million, $6 million related to fixed maturity securities that were in an unrealized loss position for a period of less than six months. At December 31, 2007, there were no equity securities with an unrealized loss of 20% or more. The Company held five fixed maturity securities and one equity security, each with a gross unrealized loss at December 31, 2008 of greater than $10 million. These five fixed maturity securities represented 8% or $65 million in the aggregate, of the gross unrealized loss on fixed maturity securities. The one equity security, represented by the RGA shares retained is 90%, or $28 million in the aggregate, of the gross unrealized loss on equity securities. The Company held no fixed maturity securities or equity securities, with a gross unrealized loss at December 31, 2007 of greater than $10 million. These securities were included in the regular evaluation of whether such securities are other-than-temporarily impaired. Based upon the Company's current evaluation of these securities in accordance with its impairment policy, the cause of the decline being primarily attributable to a rise in market yields caused principally by an extensive widening of credit spreads which resulted from a lack of market liquidity and a short-term market dislocation versus a long-term deterioration in credit quality, 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 these securities are not other-than-temporarily impaired. In the Company's impairment review process, the duration of, and severity of, an unrealized loss position, such as unrealized losses of 20% or more for equity securities, which was $3 million at December 31, 2008 is given greater weight and consideration, than for fixed maturity securities. An extended and severe unrealized loss position on a fixed maturity security may not have any impact on the ability of the issuer to service all scheduled interest and principal payments and the Company's evaluation of recoverability of all contractual cash flows, as well as the Company's ability and intent to hold the security, including holding the security until the earlier of a recovery in 41 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) value, or until maturity. In contrast, for an equity security, greater weight and consideration is given by the Company to a decline in market value and the likelihood such market value decline will recover. Equity securities with an unrealized loss of 20% or more was $3 million at December 31, 2008, all of which are for investment grade financial services industry non-redeemable preferred securities, that were rated A or higher. There were no equity securities with an unrealized loss of 20% or more for twelve months or greater. In connection with the equity securities impairment review process during 2008, the Company evaluated its holdings in non-redeemable preferred securities, particularly those of financial services industry companies. The Company considered several factors including whether there has been any deterioration in credit of the issuer and the likelihood of recovery in value of non-redeemable preferred securities with a severe or an extended unrealized loss. With respect to common stock holdings, the Company considered the duration and severity of the securities in an unrealized loss position of 20% or more; and the duration of securities in an unrealized loss position of 20% or less with in an extended unrealized loss position (i.e., 12 months or more). The Company believes the unrealized loss position is not necessarily predictive of the ultimate performance of these securities, and with respect to fixed maturity securities, it has the ability and intent to hold until the earlier of the recovery in value, or until maturity, and with respect to equity securities, it has the ability and intent to hold until the recovery in value. Future other-than-temporary impairments will depend primarily on economic fundamentals, issuer performance, changes in collateral valuation, changes in interest rates, and changes in credit spreads. If economic fundamentals and other of the above factors continue to deteriorate, additional other-than- temporary impairments may be incurred in upcoming periods. 42 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) At December 31, 2008 and 2007, the Company's gross unrealized losses related to its fixed maturity and equity securities of $858 million and $156 million, respectively, were concentrated, calculated as a percentage of gross unrealized loss, as follows:
DECEMBER 31, ------------ 2008 2007 ---- ---- SECTOR: U.S. corporate securities.................................. 27% 42% Commercial mortgage-backed securities...................... 25 9 Asset-backed securities.................................... 14 11 Foreign corporate securities............................... 14 8 Residential mortgage-backed securities..................... 14 9 Other...................................................... 6 21 --- --- Total................................................. 100% 100% === === INDUSTRY: Mortgage-backed............................................ 39% 18% Finance.................................................... 19 22 Asset-backed............................................... 14 11 Utility.................................................... 10 13 Consumer................................................... 6 1 Industrial................................................. 2 13 Government................................................. 2 2 Communication.............................................. 2 -- Other...................................................... 6 20 --- --- Total................................................. 100% 100% === ===
NET INVESTMENT GAINS (LOSSES) The components of net investment gains (losses) are as follows:
YEARS ENDED DECEMBER 31, ------------------- 2008 2007 2006 ---- ----- ---- (IN MILLIONS) Fixed maturity securities............................ $(87) $ (6) $(30) Equity securities.................................... (2) -- 6 Mortgage loans on real estate........................ -- (2) 1 Real estate and real estate joint ventures........... -- 1 -- Freestanding derivatives............................. 215 (103) 1 Other................................................ 11 19 1 ---- ----- ---- Net investment gains (losses)..................... $137 $ (91) $(21) ==== ===== ====
43 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Proceeds from sales or disposals of fixed maturity and equity securities and the components of fixed maturity and equity securities net investment gains (losses) are as follows:
FIXED MATURITY SECURITIES EQUITY SECURITIES TOTAL ------------------------ ------------------ ------------------------ 2008 2007 2006 2008 2007 2006 2008 2007 2006 ------ ------ ------ ---- ---- ---- ------ ------ ------ (IN MILLIONS) Proceeds....................... $1,594 $1,029 $1,774 $-- $-- $ 9 $1,594 $1,029 $1,783 ====== ====== ====== === === === ====== ====== ====== Gross investment gains......... 16 9 12 -- -- 6 16 9 18 ------ ------ ------ --- --- --- ------ ------ ------ Gross investment losses........ (28) (14) (42) -- -- -- (28) (14) (42) ------ ------ ------ --- --- --- ------ ------ ------ Writedowns Credit-related............ (69) (1) -- (2) -- -- (71) (1) -- Other than credit- related(1).............. (6) -- -- -- -- -- (6) -- -- ------ ------ ------ --- --- --- ------ ------ ------ Total writedowns.......... (75) (1) -- (2) -- -- (77) (1) -- ------ ------ ------ --- --- --- ------ ------ ------ Net investment gains (losses).................. $ (87) $ (6) $ (30) $(2) $-- $ 6 $ (89) $ (6) $ (24) ====== ====== ====== === === === ====== ====== ======
-------- (1) Other-than credit related writedowns include items such as fixed maturity securities where an interest-rate related writedown was taken. 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 losses, were $77 million and $1 million for the years ended December 31, 2008 and 2007, respectively. The substantial increase in 2008 over 2007 was driven by writedowns totaling $65 million of financial services industry securities holdings, comprised of $63 million of fixed maturity securities and $2 million of equity securities. There were no losses from fixed maturity and equity securities deemed other-than- temporarily impaired for the year ended December 31, 2006. Overall, of the $75 million of fixed maturity security writedowns in 2008, $63 million were on financial services industry services holdings; $5 million were on communication industry holdings; $2 million on asset-backed (substantially all are backed by or exposed to sub-prime mortgage loans); and $5 million in fixed maturity security holdings that the Company either lacked the intent to hold, or due to extensive credit spread widening, the Company was uncertain of its intent to hold these fixed maturity securities for a period of time sufficient to allow for recovery of the market value decline. The $2 million of writedowns on equity securities in 2008, were all related to the financial services industry holdings. 44 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) NET INVESTMENT INCOME The components of net investment income are as follows:
YEARS ENDED DECEMBER 31, ------------------------ 2008 2007 2006 ---- ---- ---- (IN MILLIONS) Fixed maturity securities........................... $385 $459 $460 Equity securities................................... 1 1 -- Mortgage loans on real estate....................... 14 15 20 Policy loans........................................ 106 101 100 Real estate and real estate joint ventures.......... 11 11 12 Other limited partnership interests................. (4) (4) (1) Cash, cash equivalents and short-term investments... 10 19 12 Other............................................... -- 1 2 ---- ---- ---- Total investment income........................... 523 603 605 Less: Investment expenses........................... 49 92 84 ---- ---- ---- Net investment income............................. $474 $511 $521 ==== ==== ====
Net investment income from other limited partnership interests, including hedge funds, represents distributions from other limited partnership interests accounted for under the cost method and equity in earnings from other limited partnership interests accounted for under the equity method. Overall for 2008, the net amount recognized by the Company was a loss of $4 million resulting principally from losses on equity method investments. Such earnings and losses recognized for other limited partnership interests are impacted by volatility in the equity and credit markets. Affiliated administrative service charges, included in investment expenses, included in the table above, were $6 million, $5 million and $5 million, for the years ended December 31, 2008, 2007 and 2006, respectively. See "-- Related Party Investment Transactions" for discussion of affiliated net investment income related to short-term investments included in the table above. SECURITIES LENDING The Company participates in securities lending programs whereby blocks of securities, which are included in fixed maturity securities and short-term investments, are loaned to third parties, primarily major brokerage firms and commercial banks. The Company generally obtains collateral in an amount equal to 102% of the estimated fair value of the securities loaned. Securities with a cost or amortized cost of $679 million and $1,372 million and an estimated fair value of $737 million and $1,392 million were on loan under the program at December 31, 2008 and 2007, 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 $742 million and $1,434 million at December 31, 2008 and 2007, respectively. Of this $742 million of cash collateral at December 31, 2008, $113 million was on open terms, meaning that the related loaned security could be returned to the Company on the next business day requiring return of cash collateral and $517 million and $112 million, respectively, were due within 30 days and 60 days. Of the $108 million of estimated fair value of the securities related to the cash collateral on open at December 31, 2008, $55 million were U.S. Treasury and agency securities which, if put to the Company, can be immediately sold to satisfy the cash requirements. The remainder of the securities on loan are primarily U.S. Treasury and agency securities, and very liquid residential mortgage-backed securities. The estimated fair value of the reinvestment portfolio acquired with the cash collateral was $585 million at December 31, 2008, and consisted principally of fixed maturity securities (including residential mortgage-backed, asset-backed, U.S. corporate and foreign corporate securities). 45 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Security collateral of $25 million on deposit from counterparties in connection with the securities lending transactions at December 31, 2008 may not be sold or repledged, unless the counterparty is in default, and is not reflected in the consolidated financial statements. There was no security collateral on deposit from counterparties in connection with the securities lending transactions at December 31, 2007. ASSETS ON DEPOSIT AND ASSETS PLEDGED AS COLLATERAL The Company had investment assets on deposit with regulatory agencies with an estimated fair value of $1,060 million and $1,356 million at December 31, 2008 and 2007, respectively, consisting primarily of fixed maturity 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, ----------------------------------- 2008 2007 ---------------- ---------------- AMOUNT PERCENT AMOUNT PERCENT ------ ------- ------ ------- (IN MILLIONS) Commercial mortgage loans..................... $177 80.8% $201 82.7% Agricultural mortgage loans................... 42 19.2 42 17.3 ---- ----- ---- ----- Total....................................... 219 100.0% 243 100.0% ===== ===== Less: Valuation allowances.................... -- 2 ---- ---- Mortgage loans on real estate............... $219 $241 ==== ====
Mortgage loans on real estate are collateralized by properties primarily located in the United States. At December 31, 2008, 34%, 9% and 8% of the value of the Company's mortgage loans on real estate were located in California, Florida and Texas, 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, ---------------------------- 2008 2007 2006 ---- ---- ---- (IN MILLIONS) Balance at January 1,............................... $ 2 $-- $ 1 Additions........................................... -- 2 -- Deductions.......................................... (2) -- (1) --- --- --- Balance at December 31,............................. $-- $ 2 $-- === === ===
There were no impaired mortgage loans at December 31, 2008. The Company had $4 million of impaired mortgage loans, net of $2 million of valuation allowances at December 31, 2007. The average investment in impaired mortgage loans was $2 million, $6 million and $1 million for the years ended December 31, 2008, 2007 and 2006, respectively. There was no interest income on impaired mortgage loans for the year ended December 31, 2008. Interest income on impaired mortgage loans was less than $1 million for the years ended December 31, 2007 and 2006. 46 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) REAL ESTATE HOLDINGS Real estate holdings consisted of the following:
DECEMBER 31, ---------------- 2008 2007 ---- ---- (IN MILLIONS) Real estate............................................... $ 69 $ 68 Accumulated depreciation.................................. (17) (16) ---- ---- Net real estate........................................... 52 52 Real estate joint ventures................................ 3 3 ---- ---- Total real estate holdings.............................. $ 55 $ 55 ==== ====
All of the Company's real estate holdings are classified as held-for- investment. Related depreciation expense on real estate was $1 million, $2 million and $1 million for the years ended December 31, 2008, 2007 and 2006, respectively. The Company's real estate holdings are located in the United States. At December 31, 2008, 95% of the Company's real estate holdings were located in California. Real estate holdings were categorized as follows:
DECEMBER 31, ----------------------------------- 2008 2007 ---------------- ---------------- AMOUNT PERCENT AMOUNT PERCENT ------ ------- ------ ------- (IN MILLIONS) Office........................................ $37 67% $37 67% Industrial.................................... 15 27 15 27 Real estate investment funds.................. 3 6 3 6 --- --- --- --- Total real estate holdings.................. $55 100% $55 100% === === === ===
OTHER LIMITED PARTNERSHIP INTERESTS The carrying value of other limited partnership interests (which primarily represent ownership interests in pooled investment funds that principally make private equity investments in companies in the United States and overseas) was $81 million and $33 million at December 31, 2008 and 2007, respectively. Included within other limited partnership interests at December 31, 2008 and 2007 are $34 million and $9 million, respectively, of hedge funds. For the years ended December 31, 2008, 2007 and 2006, net investment loss from other limited partnership interests was $4 million, $4 million and $1 million, respectively. 47 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) OTHER INVESTED ASSETS The following table presents the carrying value of the Company's other invested assets at:
DECEMBER 31, --------------------------------------------- 2008 2007 --------------------- --------------------- CARRYING CARRYING VALUE % OF TOTAL VALUE % OF TOTAL -------- ---------- -------- ---------- (IN MILLIONS) Freestanding derivatives with positive fair values............................ $113 89.7% $77 96.3% Tax credit partnerships.................. 10 7.9 -- 0 Other.................................... 3 2.4 3 3.7 ---- ----- --- ----- Total.................................. $126 100.0% $80 100.0% ==== ===== === =====
See Note 4 regarding the freestanding derivatives with positive estimated fair values. Tax credit partnerships are established for the purpose of investing in low-income housing and other social causes, where the primary return on investment is in the form of tax credits, and are accounted for under the equity method. VARIABLE INTEREST ENTITIES The following table presents the carrying amount and maximum exposure to loss relating to VIEs for which the Company holds significant variable interests but it is not the primary beneficiary and which have not been consolidated at December 31, 2008:
DECEMBER 31, 2008 ----------------------- MAXIMUM CARRYING EXPOSURE TO AMOUNT(1) LOSS(2) --------- ----------- (IN MILLIONS) Fixed maturity securities, available-for-sale(3) Foreign corporate securities........................ $14 $14 U.S. Treasury/agency securities..................... 16 16 Other limited partnership interests(4)................ 38 38 Other invested assets(5).............................. 3 3 --- --- Total............................................... $71 $71 === ===
-------- (1) See Note 1 for further discussion of the Company's significant accounting policies with regards to the carrying amounts of these investments. (2) The maximum exposure to loss relating to the fixed maturity securities available-for-sale is equal to the carrying amounts or carrying amounts of retained interests. The maximum exposure to loss relating to other limited partnership interests is equal to the carrying amounts plus any unfunded commitments. Such a maximum loss would be expected to occur only upon bankruptcy of the issuer or investee. For certain of its investments in other invested assets, the Company's return is in the form of tax credits which are guaranteed by a creditworthy third party. For such investments, the maximum exposure to loss is equal to the carrying amounts plus any unfunded commitments, reduced by amounts guaranteed by third parties. (3) These assets are reflected at estimated fair value within fixed maturity securities available-for-sale. (4) Other limited partnership interests include partnerships established for the purpose of investing in public and private debt and equity securities. 48 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (5) Other invested assets include tax credit partnerships and other investments established for the purpose of investing in low-income housing and other social causes, where the primary return on investment is in the form of tax credits. As described in Note 10, the Company makes commitments to fund partnership investments in the normal course of business. Excluding these commitments, the Company did not provide financial or other support to investees designated as VIEs during the years ended December 31, 2008, 2007 and 2006. RELATED PARTY INVESTMENT TRANSACTIONS At December 31, 2008 and 2007, the Company held $514 million and $224 million, respectively, of its total invested assets in the MetLife Intermediate Income Pool which is an affiliated partnership. These amounts are included in short-term investments. Net investment income from these invested assets was $9 million, $15 million and $4 million for the years ended December 31, 2008, 2007 and 2006, respectively. In the normal course of business, the Company transfers invested assets, primarily consisting of fixed maturity securities, to and from affiliates. The Company did not transfer any invested assets to or from affiliates during the years ended December 31, 2008 and 2006. Assets transferred to and from affiliates, inclusive of amounts related to reinsurance agreements, for 2007 are as follows:
YEAR ENDED DECEMBER 31, 2007 ------------- (IN MILLIONS) Estimated fair value of assets transferred to affiliates..... $19 Amortized cost of assets transferred to affiliates........... $19 Net investment gains (losses) recognized on transfers........ $-- Estimated fair value of assets transferred from affiliates... $10
4. DERIVATIVE FINANCIAL INSTRUMENTS TYPES OF DERIVATIVE FINANCIAL INSTRUMENTS The following table presents the notional amount and current market or estimated fair value of derivative financial instruments, held at:
DECEMBER 31, 2008 DECEMBER 31, 2007 ------------------------------- ------------------------------- CURRENT MARKET CURRENT MARKET OR FAIR VALUE OR FAIR VALUE NOTIONAL -------------------- NOTIONAL -------------------- AMOUNT ASSETS LIABILITIES AMOUNT ASSETS LIABILITIES -------- ------ ----------- -------- ------ ----------- (IN MILLIONS) Interest rate swaps................... $ 220 $ 81 $-- $ 313 $37 $ 1 Financial futures..................... 135 -- 2 213 1 2 Foreign currency swaps................ 31 5 1 29 -- 6 Foreign currency forwards............. 595 22 -- 807 38 -- Financial forwards.................... -- -- -- 45 -- -- Credit default swaps.................. 164 5 1 170 1 -- ------ ---- --- ------ --- --- Total............................... $1,145 $113 $ 4 $1,577 $77 $ 9 ====== ==== === ====== === ===
49 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The following table presents the notional amount of derivative financial instruments by maturity at December 31, 2008:
REMAINING LIFE -------------------------------------------------------------------- AFTER ONE YEAR AFTER FIVE YEARS ONE YEAR OR THROUGH FIVE THROUGH TEN AFTER TEN LESS YEARS YEARS YEARS TOTAL ----------- -------------- ---------------- --------- ------ (IN MILLIONS) Interest rate swaps............... $ 33 $39 $ 10 $138 $ 220 Financial futures................. 135 -- -- -- 135 Foreign currency swaps............ -- 5 23 3 31 Foreign currency forwards......... 595 -- -- -- 595 Credit default swaps.............. -- -- 121 43 164 ---- --- ---- ---- ------ Total........................... $763 $44 $154 $184 $1,145 ==== === ==== ==== ======
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) 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 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. 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 fixed exchange rate, generally set at inception, calculated by reference to an agreed upon principal amount. The principal amount of each currency is exchanged at the inception and termination of the currency swap by each party. In a foreign currency forward transaction, the Company agrees with another party to deliver a specified amount of an identified currency at a specified future date. The price is agreed upon at the time of the contract and payment for such a contract is made in a different currency at the specified future date. Equity variance swaps are used by the Company primarily as a macro hedge on certain invested assets. 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 50 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 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 the estimated fair value of derivatives by type of hedge designation at:
DECEMBER 31, 2008 DECEMBER 31, 2007 ------------------------------- ------------------------------- FAIR VALUE FAIR VALUE NOTIONAL -------------------- NOTIONAL -------------------- AMOUNT ASSETS LIABILITIES AMOUNT ASSETS LIABILITIES -------- ------ ----------- -------- ------ ----------- (IN MILLIONS) Fair value...................... $ -- $ -- $-- $ 17 $-- $ 1 Cash flow....................... -- -- -- 4 -- -- Non-qualifying.................. 1,145 113 4 1,556 77 8 ------ ---- --- ------ --- --- Total......................... $1,145 $113 $ 4 $1,577 $77 $ 9 ====== ==== === ====== === ===
The Company recognized insignificant net investment income (expense) from settlement payments related to qualifying hedges for the years ended December 31, 2008, 2007 and 2006. The Company recognized net investment gains (losses) from settlement payments related to non-qualifying hedges of $8 million, $2 million, and $3 million for the years ended December 31, 2008, 2007 and 2006, 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 insignificant amounts in net investment gains (losses) representing the ineffective portion of all fair value hedges for the years ended December 31, 2008, 2007 and 2006. Changes in the fair value of the derivatives and the hedged items were insignificant for the years ended December 31, 2008, 2007 and 2006. 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 each of the years ended December 31, 2008, 2007 and 2006, the Company did not recognize any net investment gains (losses) which represented the ineffective portion of all cash flow hedges. All components of each derivative's gain or loss were included in the assessment of hedge effectiveness. 51 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 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, 2008, 2007, and 2006. The following table presents the components of other comprehensive income (loss), before income tax, related to cash flow hedges:
YEARS ENDED DECEMBER 31, ------------------------ 2008 2007 2006 ---- ---- ---- (IN MILLIONS) Other comprehensive income (loss) balance at January 1,.................................................. $(2) $(2) $(2) Gains (losses) deferred in other comprehensive income (loss) on the effective portion of the cash flow hedges.............................................. 1 -- 1 Amounts reclassified to net investment gains (losses)............................................ -- -- (1) --- --- --- Other comprehensive income (loss) balance at December 31,................................................. $(1) $(2) $(2) === === ===
At December 31, 2008, insignificant amounts of the deferred net gains (losses) on derivatives accumulated in other comprehensive income (loss) are expected to be reclassified to earnings during the year ending December 31, 2009. 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, 2008, 2007 and 2006. The Company's consolidated statements of stockholder's equity for the years ended December 31, 2008 and 2007 include gains (losses) of $5 million and ($5) million, respectively, 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 year ended December 31, 2006. There was no foreign currency translation gain (loss) recorded in 2008. At December 31, 2007, the cumulative foreign currency translation gain (loss) recorded in accumulated other comprehensive income (loss) related to these hedges was ($5) million. When net investments in foreign operations are sold or substantially liquidated, the amounts in accumulated other comprehensive income (loss) 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; (iv) equity variance swaps as a macro hedge on certain invested assets; (v) interest rate futures to economically hedge liabilities embedded in certain variable annuity products; and (vi) credit default swaps to synthetically create investments. 52 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The following table presents changes in estimated fair value related to derivatives that do not qualify for hedge accounting:
YEARS ENDED DECEMBER 31, ------------------------- 2008 2007 2006 ---- ----- ---- (IN MILLIONS) Net investment gains (losses)....................... $207 $(105) $(4)
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 net positive estimated fair value of derivative contracts at the reporting date after taking into consideration the existence of netting agreements and any collateral received pursuant to credit support annexes. 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. See Note 15 for a description of the impact of credit risk on the valuation of derivative instruments. The Company enters into various collateral arrangements, which require the accepting of collateral in connection with its derivative instruments. At December 31, 2008 and 2007, the Company was obligated to return cash collateral under its control of $64 million and $4 million, respectively. This unrestricted cash collateral is included in cash and cash equivalents or in short-term investments 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 December 31, 2008, the Company did not provide any securities collateral for exchange traded futures. At December 31, 2007, the Company pledged securities collateral for exchange-traded futures of $2 million, which is included in fixed maturity securities. The counterparties are permitted by contract to sell or repledge this collateral. At December 31, 2008, the Company provided cash collateral for exchange-traded futures of $3 million, which is included in premiums and other receivables. At December 31, 2007, the Company did not provide cash collateral for exchange-traded futures. In connection with synthetically created investment transactions, the Company writes credit default swaps for which it receives a premium to insure credit risk. If a credit event, as defined by the contract, occurs generally the contract will require the Company to pay the counterparty the specified swap notional amount in exchange for the delivery of par quantities of the referenced credit obligation. The Company's maximum amount at risk, assuming the value of all referenced credit obligations is zero, was $74 million at December 31, 2008. The Company can terminate these contracts at any time through cash settlement with the counterparty at an amount equal to the then current fair value of the credit default swaps. At December 31, 2008, the Company would have paid $1 million to terminate all of these contracts. 53 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The following table presents the estimated fair value, maximum amount of future payments and weighted average years to maturity of written credit default swaps at December 31, 2008:
DECEMBER 31, 2008 ---------------------------------------------------------- MAXIMUM AMOUNT FAIR VALUE OF OF FUTURE PAYMENTS RATING AGENCY DESIGNATION OF REFERENCED CREDIT DEFAULT UNDER CREDIT WEIGHTED AVERAGE CREDIT OBLIGATIONS(1) SWAPS DEFAULT SWAPS(2) YEARS TO MATURITY(3) --------------------------------------- -------------- ------------------ -------------------- (IN MILLIONS) Aaa/Aa/A Single name credit default swaps (corporate).......................... $-- $ 7 5.0 Credit default swaps referencing indices.............................. (1) 67 4.0 --- --- Subtotal........................... (1) 74 4.1 Baa Single name credit default swaps (corporate).......................... -- -- -- Credit default swaps referencing indices.............................. -- -- -- --- --- Subtotal........................... -- -- -- Ba Single name credit default swaps (corporate).......................... -- -- -- Credit default swaps referencing indices.............................. -- -- -- --- --- Subtotal........................... -- -- -- B Single name credit default swaps (corporate).......................... -- -- -- Credit default swaps referencing indices.............................. -- -- -- --- --- Subtotal........................... -- -- -- Caa and lower Single name credit default swaps (corporate).......................... -- -- -- Credit default swaps referencing indices.............................. -- -- -- --- --- Subtotal........................... -- -- -- In or near default Single name credit default swaps (corporate).......................... -- -- -- Credit default swaps referencing indices.............................. -- -- -- --- --- Subtotal........................... -- -- -- --- --- $(1) $74 4.1 === ===
-------- (1) The rating agency designations are based on availability and the midpoint of the applicable ratings among Moody's, S&P, and Fitch. If no rating is available from a rating agency, then the MetLife rating is used. (2) Assumes the value of the referenced credit obligations is zero. (3) The weighted average years to maturity of the credit default swaps is calculated based on weighted average notional amounts. 54 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO THE 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, 2006............................ $231 $ 93 $ 324 Capitalizations..................................... 20 -- 20 ---- ----- ----- Subtotal....................................... 251 93 344 ---- ----- ----- Less: Amortization related to: Net investment gains (losses).................... -- (2) (2) Other expenses................................... 79 (28) 51 ---- ----- ----- Total amortization............................. 79 (30) 49 ---- ----- ----- Less: Unrealized investment gains (losses).......... (3) (15) (18) Less: Other......................................... 50 27 77 ---- ----- ----- Balance at December 31, 2006.......................... 125 111 236 Effect of SOP 05-1 adoption......................... (3) (5) (8) Capitalizations..................................... 7 -- 7 ---- ----- ----- Subtotal....................................... 129 106 235 ---- ----- ----- Less: Amortization related to: Net investment gains (losses).................... (2) (2) (4) Other expenses................................... 15 14 29 ---- ----- ----- Total amortization............................. 13 12 25 ---- ----- ----- Less: Unrealized investment gains (losses).......... (1) 71 70 Less: Other......................................... 3 -- 3 ---- ----- ----- Balance at December 31, 2007.......................... 114 23 137 Less: Amortization related to: Net investment gains (losses).................... 3 (4) (1) Other expenses................................... 10 9 19 ---- ----- ----- Total amortization............................. 13 5 18 ---- ----- ----- Less: Unrealized investment gains (losses).......... (3) (154) (157) Less: Other......................................... (2) (1) (3) ---- ----- ----- Balance at December 31, 2008.......................... $106 $ 173 $ 279 ==== ===== =====
The estimated future amortization expense allocated to other expenses for the next five years for VOBA is $10 million in 2009, $9 million in 2010, $9 million in 2011, $8 million in 2012, and $8 million in 2013. Amortization of VOBA and DAC is attributed to both investment gains and losses and to other expenses for the amount of gross margins or profits originating from transactions other than investment gains and losses. Unrealized investment gains and losses provide information regarding the amount of DAC and VOBA that would have been amortized if such gains and losses had been recognized. 55 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 6. INSURANCE INSURANCE LIABILITIES Insurance liabilities are as follows:
OTHER FUTURE POLICY POLICYHOLDER ACCOUNT POLICYHOLDER BENEFITS BALANCES FUNDS ------------------ --------------------- ----------------- DECEMBER 31, -------------------------------------------------------------------- 2008 2007 2008 2007 2008 2007 ------ ------ ------ ------ ---- ---- (IN MILLIONS) Group life................. $ 15 $ 34 $ 1 $ -- $ 1 $ 1 Retirement & savings....... 33 35 19 42 -- -- Non-medical health & other.................... 317 329 -- -- 4 5 Traditional life........... 4,559 4,596 -- -- 121 118 Variable & universal life.. 80 64 3,125 3,079 67 58 Annuities.................. 88 87 863 886 -- -- Other...................... 84 52 135 127 56 47 ------ ------ ------ ------ ---- ---- Total................. $5,176 $5,197 $4,143 $4,134 $249 $229 ====== ====== ====== ====== ==== ====
Affiliated insurance liabilities included in the table above include reinsurance assumed and ceded. Affiliated future policy benefits, included in the table above, were less than $1 million at both December 31, 2008 and 2007. Affiliated policyholder account balances, included in the table above, were less than $1 million at both December 31, 2008 and 2007. Affiliated other policyholder funds, included in the table above, were ($196) million and ($227) million at December 31, 2008 and 2007, respectively. SEPARATE ACCOUNTS Separate account assets and liabilities include two categories of account types: pass-through separate accounts totaling $1,406 million and $2,003 million at December 31, 2008 and 2007, 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 $78 million and $77 million at December 31, 2008 and 2007, respectively. The average interest rate credited on these contracts was 3.92% and 4.14% at December 31, 2008 and 2007, respectively. Fees charged to the separate accounts by the Company (including mortality charges, policy administration fees and surrender charges) are reflected in the Company's revenues as universal life and investment-type product policy fees and totaled $49 million, $57 million and $84 million for the years ended December 31, 2008, 2007 and 2006, respectively. For each of the years ended December 31, 2008, 2007 and 2006, there were no investment gains (losses) on transfers of assets from the general account to the separate accounts. GUARANTEES The Company issues annuity contracts which may include contractual guarantees to the contractholder for: (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 56 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 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. Information regarding the types of guarantees relating to annuity contracts and universal and variable life contracts is as follows:
DECEMBER 31, -------------------------------- 2008 2007 ------------- ------------- AT AT ANNUITIZATION ANNUITIZATION ------------- ------------- (IN MILLIONS) ANNUITY CONTRACTS (1) TWO TIER ANNUITIES General account value.................................... $ 283 $ 286 Net amount at risk (2)................................... $ 50 (4) $ 51 (4) Average attained age of contractholders.................. 60 years 60 years DECEMBER 31, -------------------------------- 2008 2007 ------------- ------------- SECONDARY SECONDARY GUARANTEES GUARANTEES ------------- ------------- (IN MILLIONS) UNIVERSAL AND VARIABLE LIFE CONTRACTS (1) Account value (general and separate account)............. $ 1,183 $ 1,107 Net amount at risk (2)................................... $ 17,496 (3) $ 18,250 (3) Average attained age of policyholders.................... 58 years 57 years
-------- (1) The Company's annuity and life contracts with guarantees may offer more than one type of guarantee in each contract. Therefore, the amounts listed above may not be mutually exclusive. (2) The net amount at risk is based on the direct amount at risk (excluding reinsurance). (3) The net amount at risk for guarantees of amounts in the event of death is defined as the current guaranteed minimum death benefit in excess of the current account balance at the balance sheet date. (4) The net amount at risk for two tier annuities is based on the excess of the upper tier, adjusted for a profit margin, less the lower tier. 57 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO THE 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 ANNUITY VARIABLE LIFE CONTRACTS CONTRACTS ------------- ------------- GUARANTEED ANNUITIZATION SECONDARY BENEFITS GUARANTEES TOTAL ------------- ------------- ----- (IN MILLIONS) Balance at January 1, 2006..................... $ 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 Incurred guaranteed benefits................... -- -- -- Paid guaranteed benefits....................... -- -- -- --- --- --- Balance at December 31, 2008................... $ 7 $ 6 $13 === === ===
Account balances of contracts with insurance guarantees are invested in separate account asset classes as follows:
DECEMBER 31, ------------- 2008 2007 ---- ---- (IN MILLIONS) Mutual Fund Groupings Equity..................................................... $12 $18 Bond....................................................... 1 1 Balanced................................................... -- 2 Money Market............................................... 2 2 Specialty.................................................. 1 -- --- --- Total................................................... $16 $23 === ===
7. 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. The Company evaluates its reinsurance programs 58 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO THE 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. In the event that reinsurers do not meet their obligations to the Company under the terms of the reinsurance agreements, reinsurance balances recoverable could become uncollectible. Cessions under reinsurance arrangements do not discharge the Company's obligations as the primary insurer. 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, ------------------------- 2008 2007 2006 ----- ----- ----- (IN MILLIONS) PREMIUMS: Direct premiums................................... $ 384 $ 410 $ 412 Reinsurance assumed............................... 211 181 170 Reinsurance ceded................................. (311) (283) (283) ----- ----- ----- Net premiums................................... $ 284 $ 308 $ 299 ===== ===== ===== UNIVERSAL LIFE AND INVESTMENT-TYPE PRODUCT POLICY FEES: Direct universal life and investment-type product policy fees.................................... $ 357 $ 302 $ 363 Reinsurance ceded................................. (197) (114) (137) ----- ----- ----- Net universal life and investment-type product policy fees.................................. $ 160 $ 188 $ 226 ===== ===== ===== POLICYHOLDER BENEFITS AND CLAIMS: Direct policyholder benefits and claims........... $ 574 $ 652 $ 694 Reinsurance assumed............................... 186 175 175 Reinsurance ceded................................. (306) (342) (424) ----- ----- ----- Net policyholder benefits and claims........... $ 454 $ 485 $ 445 ===== ===== =====
59 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Information regarding ceded reinsurance recoverable balances, included in premiums and other receivables is as follows:
DECEMBER 31, --------------- 2008 2007 ------ ------ (IN MILLIONS) UNAFFILIATED RECOVERABLES: Future policy benefit recoverables........................ $ 650 $ 468 Claim recoverables........................................ 80 92 Deposit recoverables...................................... 16 29 All other recoverables.................................... 4 5 ------ ------ Total................................................... $ 750 $ 594 ====== ====== AFFILIATED RECOVERABLES: Future policy benefit recoverables........................ $1,238 $1,257 Deposit recoverables...................................... 136 127 All other recoverables.................................... 9 6 ------ ------ Total................................................... $1,383 $1,390 ====== ======
Reinsurance recoverable balances are stated net of allowances for uncollectible balances, which are immaterial. The Company analyzes recent trends in arbitration and litigation outcomes in disputes, if any, with reinsurers. The Company also monitors ratings and evaluates the financial strength of the Company's reinsurers by analyzing their financial statements. Recoverability of reinsurance recoverable balances is evaluated based on these analyses. The Company has secured certain reinsurance recoverable balances with various forms of collateral, including funds withheld accounts and irrevocable letters of credit. At December 31, 2008, the Company has $212 million of unaffiliated reinsurance recoverable balances secured by funds withheld accounts and $16 million of unaffiliated reinsurance recoverable balances secured through irrevocable letters of credit issued by various financial institutions. All of the affiliated reinsurance recoverable balances except $1,198 million of reserves and $8 million of other receivables are secured by funds withheld accounts or irrevocable letters of credit issued by various financial institutions. The Company's five largest unaffiliated reinsurers account for $528 million, or 70%, of its total unaffiliated reinsurance recoverable balance of $750 million at December 31, 2008. Of these reinsurance recoverable balances, $212 million were secured by funds withheld accounts. Reinsurance balances payable to unaffiliated reinsurers, included in other liabilities, were $271 million and $331 million at December 31, 2008 and 2007, respectively. Reinsurance balances receivable from affiliated reinsurers, included in other policyholder funds were $196 million and $227 million, at December 31, 2008 and 2007, respectively. RELATED PARTY REINSURANCE TRANSACTIONS The Company has reinsurance agreements with certain MetLife subsidiaries including MLIC, Exeter Reassurance Company, Ltd., MetLife Insurance Company of Connecticut, MetLife Investors USA Insurance Company, Metropolitan Tower Life Insurance Company, New England Life Insurance Company, and Missouri Reinsurance (Barbados), Inc., all of which are related parties. The table below includes amounts related to transactions between these related parties and RGA through September 12, 2008, the date of the Company's dividend of its interests in RGA. 60 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The following table reflects related party reinsurance information:
YEARS ENDED DECEMBER 31, ------------------ 2008 2007 2006 ---- ---- ---- (IN MILLIONS) Assumed premiums............................................. $ 43 $129 $129 Assumed benefits, included in policyholder benefits and claims..................................................... $120 $194 $155 Assumed benefits, included in policyholder dividends......... $ -- $ 9 $ 7 Assumed acquisition costs, included in other expenses........ $ -- $ -- $ 1 Ceded premiums............................................... $ 15 $ 80 $ 85 Ceded fees, included in universal life and investment-type product policy fees........................................ $118 $ 65 $ 90 Income from deposit contracts, included in other revenues.... $ 3 $ 2 $ 2 Ceded benefits, included in policyholder benefits and claims..................................................... $ 18 $ 25 $ 10 Ceded benefits, included in interest credited to policyholder account balances........................................... $ 61 $ 58 $ 54 Ceded benefits, included in policyholder dividends........... $ -- $ 9 $ 7 Interest costs on ceded reinsurance, included in other expenses................................................... $ 49 $ 5 $ 45
8. LONG-TERM DEBT AND SHORT-TERM DEBT- AFFILIATED Long-term and short-term debt outstanding is as follows:
INTEREST RATES ------------------- DECEMBER 31, WEIGHTED ------------- RANGE AVERAGE MATURITY 2008 2007 -------- -------- --------- ---- ---- (IN MILLIONS) Surplus notes............................. 7.63% 7.63% 2024 $100 $100 Other notes............................... 8% - 12% 8.40% 2009-2016 1 1 ---- ---- Total long-term debt...................... 101 101 Total short-term debt -- affiliated....... -- 50 ---- ---- Total................................... $101 $151 ==== ====
The aggregate maturities of long-term debt at December 31, 2008 for the next five years are less than $1 million in each of the years 2009 through 2013 and $100 million thereafter. Unsecured senior debt ranks highest in priority and consists of other notes with varying interest rates. Payments of interest and principal on the Company's surplus notes, which are subordinate to all other obligations, may be made only with the prior approval of the insurance department of the state of domicile. SHORT-TERM DEBT -- AFFILIATED There was no short-term debt outstanding at December 31, 2008. On December 31, 2007, MetLife Credit Corporation, 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. 61 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) INTEREST EXPENSE Interest expense related to the Company's indebtedness included in other expenses was $9 million for each of the years ended December 31, 2008, 2007 and 2006. 9. INCOME TAX The provision for income tax from continuing operations is as follows:
YEARS ENDED DECEMBER 31, ----------------------- 2008 2007 2006 ---- ---- ----- (IN MILLIONS) Current: Federal............................................ $(10) $(41) $(156) Foreign............................................ 75 50 29 ---- ---- ----- Subtotal........................................... 65 9 (127) ---- ---- ----- Deferred: Federal............................................ 30 30 171 ---- ---- ----- Provision for income tax............................. $ 95 $ 39 $ 44 ==== ==== =====
The reconciliation of the income tax provision at the U.S. statutory rate to the provision for income tax as reported for continuing operations is as follows:
YEARS ENDED DECEMBER 31, ---------------------- 2008 2007 2006 ---- ---- ---- (IN MILLIONS) Tax provision at U.S. statutory rate................... $ 75 $ 28 $ 44 Tax effect of: Tax-exempt investment income......................... 9 2 (2) State and local income taxes......................... -- -- 1 Prior year tax....................................... (7) 8 (2) RGA dividend of interest(1).......................... 16 -- -- Other, net........................................... 2 1 3 ---- ---- ---- Provision for income tax............................... $95 $39 $44 ==== ==== ====
-------- (1) See Notes 2 and 14 for discussion concerning the dividend of interest in RGA. 62 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO THE 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, ------------- 2008 2007 ---- ---- (IN MILLIONS) Deferred income tax assets: Policyholder liabilities and receivables................. $ 33 $ 64 Employee benefits........................................ 19 22 Tax credit carryforwards................................. 55 -- Net unrealized investment losses......................... 162 -- Other.................................................... 8 162 ---- ---- 277 248 Less: Valuation allowance................................ -- -- ---- ---- 277 248 ---- ---- Deferred income tax liabilities: Investments.............................................. 37 68 DAC...................................................... 10 (46) Net unrealized investment gains.......................... -- 249 Other.................................................... 20 9 ---- ---- 67 280 ---- ---- Net deferred income tax asset/(liability).................. $210 $(32) ==== ====
A valuation allowance is provided when it is more likely than not that some portion of the deferred income tax assets will not be realized. Management believes that it is more likely than not that the results of future operations will generate sufficient taxable income to realize the remaining deferred income tax assets. The Company has not recorded a valuation allowance against the deferred tax asset of $162 million recognized in connection with unrealized investment losses at December 31, 2008. The Company has the intent and ability to hold such securities until their recovery or maturity and the Company has available to it tax-planning strategies that include sources of future taxable income against which such losses could be offset. At December 31, 2008, the Company had tax credit carryforwards of $55 million, which begin to expire in 2018. The tax credit carryfowards 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 $16 million and $120 million as of December 31, 2008 and 2007, respectively. The Company files income tax returns with the U.S. federal government and various state and local jurisdictions, as well as foreign jurisdictions. The Company is under continuous examination by the Internal Revenue Service ("IRS") and other tax authorities in jurisdictions in which the Company has significant business operations. The income tax years under examination vary by jurisdiction. With a few exceptions, the Company is no 63 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 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 and 2004 tax years are no longer subject to audit. In the first quarter of 2005, the IRS commenced an examination of the Company's U.S. income tax returns for 2000 through 2002 that is anticipated to be completed in 2009. As a result of the implementation of FIN 48 on January 1, 2007, the Company recognized an $11 million decrease in the liability for unrecognized tax benefits, no increase/decrease in the interest liability for unrecognized tax benefits, as well as a $17 million increase in the liability for unrecognized tax benefits and a $5 million increase in the interest liability for unrecognized tax benefits which are included in liabilities of subsidiaries held-for-sale. The corresponding reduction to the January 1, 2007 balance of retained earnings was $0, net of $11 million of minority interest included in liabilities of subsidiaries held-for-sale. The Company's total amount of unrecognized tax benefits upon adoption of FIN 48 was $21 million. The Company reclassified, at adoption, $32 million of current income tax payables to the liability for unrecognized tax benefits included within other liabilities. The Company did not reclassify, at adoption, any 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. The total amount of unrecognized tax benefits as of January 1, 2007 that would affect the effective tax rate, if recognized, was $21 million. The Company also had $3 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. At December 31, 2008, the Company's total amount of unrecognized tax benefits was $18 million and the total amount of unrecognized tax benefits that would affect the effective tax rate, if recognized, is $18 million. The total amount of unrecognized tax benefits decreased by $6 million from December 31, 2007 due to lapses in the statutes of limitations. At December 31, 2007, the Company's total amount of unrecognized tax benefits was $24 million, an increase of $3 million from the date of adoption, and the total amount of unrecognized tax benefits that would affect the effective tax rate, if recognized, was $24 million, an increase of $3 million from the date of adoption. 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 years ended December 31, 2008 and December 31, 2007, is as follows:
DECEMBER 31, ------------- 2008 2007 ---- ---- (IN MILLIONS) Balance as of the beginning of the period.................... $24 $21 Additions for tax positions of current year.................. -- 7 Lapses of statutes of limitations............................ (6) (4) --- --- Balance as of the end of the period.......................... $18 $24 === ===
During the year ended December 31, 2008, the Company recognized $1 million in interest expense associated with the liability for unrecognized tax benefits. At December 31, 2008, the Company had $5 million of accrued interest associated with the liability for unrecognized tax benefits, an increase of $1 million from December 31, 2007. During the year ended December 31, 2007, the Company recognized $1 million in interest expense associated with the liability for unrecognized tax benefits. At December 31, 2007, the Company had $4 million of accrued interest associated with the liability for unrecognized tax benefits, an increase of $1 million from the date of adoption. 64 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO THE 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 years ended December 31, 2008 and 2007, the Company recognized an income tax benefit of $1 million and $1 million, respectively, related to the separate account DRD. 10. CONTINGENCIES, COMMITMENTS AND GUARANTEES CONTINGENCIES LITIGATION The Company has faced numerous claims, including class action lawsuits, alleging improper marketing or sales of individual life insurance policies, annuities, mutual funds or other products. The Company continues to vigorously defend against the claims in all pending matters. Some sales practices claims may be resolved through settlement. Other sales practices claims may be won by dispositive motion or may go to trial. The current cases may seek substantial damages, including in some cases punitive and treble damages and attorneys' fees. Additional litigation relating to the Company's marketing and sales of individual life insurance, annuities, mutual funds or other products may be commenced in the future. 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. North American National Marketing, LLC, et al. v. General American Life Insurance Co., et al. (Dist. Ct, Colo., Arapahoe Cty., filed March 21, 2007) North American National Marketing ("North American") and its affiliate sued the Company and MetLife, Inc. alleging breach of a contract between the Company and North American for the design, development and distribution of certain universal life insurance products for the Company during the period from 2001 to 2004. Plaintiffs seek damages comprised of fees and commissions relating to sales of the life insurance products designed by North American. The Company and MetLife, Inc. dispute these alleged damages and are vigorously defending the lawsuit, which is currently scheduled for a jury trial in April 2009. 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, federal, state or industry regulatory or governmental authorities may conduct investigations, serve subpoenas, or make other inquiries, concerning a wide variety of issues, including the Company's compliance with applicable insurance and other laws and regulations. It is not possible to predict the ultimate outcome of all pending investigations and legal proceedings or provide reasonable ranges of potential losses. In some of the matters large and/or indeterminate amounts, including punitive and treble damages, may be 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 pending investigations and legal proceedings are not likely to have such an effect. However, given the large and/or indeterminate amounts that may be sought in certain matters and the inherent unpredictability of litigation, it is possible that an adverse outcome in 65 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 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. 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, 2008, 2007 and 2006. At both December 31, 2008 and 2007, the Company maintained a liability of $4 million, a related asset for premium tax offsets of $3 million for undiscounted future assessments in respect of impaired, insolvent or failed insurers, and an asset related to paid assessments representing currently available premium tax offsets of less than $1 million. COMMITMENTS Leases In accordance with industry practice, certain of the Company's income from lease agreements with retail tenants are contingent upon the level of the tenants' sales revenues. Future minimum rental income relating to these lease agreements are as follows:
RENTAL INCOME ------------- (IN MILLIONS) 2009.......................................................... $8 2010.......................................................... $4 2011.......................................................... $3 2012.......................................................... $3 2013.......................................................... $1 Thereafter.................................................... $1
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 $182 million and $57 million at December 31, 2008 and 2007, respectively. The Company anticipates that these amounts will be invested in partnerships over the next five years. COMMITMENTS TO FUND PRIVATE CORPORATE BOND INVESTMENTS The Company commits to lend funds under private corporate bond investments. The amount of these unfunded commitments was $6 million at December 31, 2008. At December 31, 2007, there were no unfunded commitments to fund private corporate bond investments. 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 66 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 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 $61 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. Management believes that it is unlikely the Company will have to make any material payments under these indemnities, guarantees or commitments. 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, 2008, 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, 2008 and 2007. 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 all referenced credit obligations is zero, was $74 million at December 31, 2008. The Company can terminate these contracts at any time through cash settlement with the counterparty at an amount equal to the then current fair value of the credit default swaps. As of December 31, 2008, the Company would have paid $1 million to terminate all of these contracts. See Note 4 for further disclosures related to credit default swap obligations. 11. 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 formula utilizes hypothetical or notional accounts which credit participants with benefits equal to a percentage of eligible pay, as well as earnings credits, determined annually, based upon the average annual rate of interest on 30-year U.S. Treasury securities, for each account balance. At December 31, 2008, the majority of active participants are accruing benefits under the cash balance formula; however, approximately 95% of the obligations result from benefits calculated with 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 67 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 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, $7 million and $8 million for the years ended December 31, 2008, 2007 and 2006, respectively. In addition, General American's share of other postretirement expense was less than $1 million, less than $1 million and $3 million for the years ended December 31, 2008, 2007 and 2006, 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. As described more fully in Note 1, effective December 31, 2006, the Company adopted SFAS 158. The adoption of SFAS 158 required the recognition of the funded status of defined benefit pension and other postretirement plans and eliminated the additional minimum pension liability provision of SFAS 87. The Company's additional minimum pension liability was $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 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 BALANCE SHEET CAPTION ADJUSTMENTS ADJUSTMENT ADJUSTMENT ADJUSTMENTS --------------------------------------------- ----------- ---------- ----------- ----------- (IN MILLIONS) Other assets: Prepaid pension benefit cost... $(38) $-- $ 9 $(29) Other liabilities: Accrued postretirement benefit cost............................... $ -- -- -- $ -- --- ---- Subtotal................................... -- 9 Net liability of subsidiary held-for-sale.... 1 (17) --- ---- 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) === ====
68 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) A December 31 measurement date is used for all of the Company's defined benefit pension and other postretirement benefit plans. 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 ----------- ----------- 2008 2007 2008 2007 ---- ---- ---- ---- (IN MILLIONS) Change in projected benefit obligation: Projected benefit obligation at beginning of year............................................ $ 26 $ 29 $ -- $ -- Service cost.................................... -- -- -- -- Interest cost................................... 2 2 -- -- Net actuarial (gains) losses.................... -- (2) -- -- Change in benefits.............................. -- -- -- -- Benefits paid................................... (3) (3) -- -- ---- ---- ---- ---- Benefit obligation at end of year................. 25 26 -- -- ---- ---- ---- ---- Change in plan assets: Fair value of plan assets at beginning of year.... -- -- -- -- Actual return on plan assets.................... -- -- -- -- Employer contribution........................... 3 3 -- -- Benefits paid................................... (3) (3) -- -- ---- ---- ---- ---- Fair value of plan assets at end of year.......... -- -- -- -- ---- ---- ---- ---- Funded status at end of year...................... $(25) $(26) $-- $-- ==== ==== ==== ==== Amounts recognized in consolidated balance sheet consist of: Other liabilities............................... $(25) $(26) $-- $-- ==== ==== ==== ==== Accumulated other comprehensive (income) loss: Net actuarial losses............................ $ 12 $ 19 $-- $ 2 Prior service credit............................ (13) (11) -- -- ---- ---- ---- ---- (1) 8 -- 2 Deferred income tax and minority interest....... -- (6) -- (1) ---- ---- ---- ---- $ (1) $ 2 $-- $ 1 ==== ==== ==== ====
The accumulated benefit obligation for all defined benefit pension plans was $25 million and $26 million at December 31, 2008 and 2007, respectively. 69 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Information for pension plans with an accumulated benefit obligation in excess of plan assets is as follows:
DECEMBER 31, ------------- 2008 2007 ---- ---- (IN MILLIONS) Projected benefit obligation................................. $25 $26 Accumulated benefit obligation............................... $25 $26 Fair value of plan assets.................................... $-- $--
The projected benefit obligation exceeded assets for all pension plans at both December 31, 2008 and 2007. The components of net periodic benefit cost and other changes in plan assets and benefit obligations recognized in other comprehensive income (loss) were as follows:
YEARS ENDED DECEMBER 31, -------------------------------------------------- OTHER POSTRETIREMENT PENSION BENEFITS BENEFITS ---------------------- ----------------------- 2008 2007 2006 2008 2007 2006 ---- ---- ---- ---- ---- ---- (IN MILLIONS) NET PERIODIC BENEFIT COST Service cost............................... $-- $-- $-- $-- $-- $-- Interest cost.............................. 2 2 2 -- -- -- Expected return on plan assets............. -- -- -- -- -- -- Amortization of net actuarial (gains) losses.................................. 1 -- (2) -- -- -- Amortization of prior service cost (credit)................................ (3) (2) -- -- -- -- --- --- --- --- --- --- Net periodic benefit cost............... -- -- $-- -- -- $-- === === Net periodic cost of asset held-for- sale.................................. -- 4 -- 1 --- --- --- --- -- 4 -- 1 --- --- --- --- OTHER CHANGES IN PLAN ASSETS AND BENEFIT OBLIGATIONS RECOGNIZED IN OTHER COMPREHENSIVE INCOME (LOSS) Net actuarial (gains) losses............... (7) (3) (2) (3) Prior service cost (credit)................ 2 1 -- -- Amortization of net actuarial gains (losses)................................ (1) (1) -- -- Amortization of prior service (cost) credit.................................. 3 2 -- -- --- --- --- --- Total recognized in other comprehensive income (loss)......................... (3) (1) (2) (3) --- --- --- --- Total recognized in net periodic benefit cost and other comprehensive income (loss)................................ $(3) $ 3 $(2) $(2) === === === ===
Included within other comprehensive income (loss) are other changes in plan assets and benefit obligations associated with pension benefits of ($3) million and other postretirement benefits of ($2) million for an aggregate reduction in other comprehensive income (loss) of ($5) million before income tax and ($4) million, net of income tax and minority interest. The estimated net actuarial losses and prior service credit for the defined benefit pension plans that will be amortized from accumulated other comprehensive income (loss) into net periodic benefit cost over the next year are less than $1 million and ($2) million, respectively. 70 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) ASSUMPTIONS Assumptions used in determining benefit obligations were as follows:
DECEMBER 31, ------------------------------- OTHER PENSION POSTRETIRE- BENEFITS MENT BENEFITS ------------- ------------- 2008 2007 2008 2007 ---- ---- ---- ---- Weighted average discount rate................... 6.60% 6.65% -- -- Rate of compensation increase.................... N/A N/A N/A N/A
Assumptions used in determining net periodic benefit cost were as follows:
DECEMBER 31, --------------------------------------- OTHER POSTRETIREMENT PENSION BENEFITS BENEFITS ------------------ ------------------ 2008 2007 2006 2008 2007 2006 ---- ---- ---- ---- ---- ---- Weighted average discount rate.................. 6.65% 6.00% 5.80% -- -- -- Expected rate of return on plan assets.......... N/A N/A N/A N/A N/A N/A Rate of compensation increase................... N/A N/A N/A 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. CASH FLOWS In 2009, the Company expects to make contributions of $2 million to its pension plans. Benefit payments are funded from the Company's general assets as they become due under the provision of the plans. Gross benefit payments for the next ten years are expected to be as follows:
PENSION BENEFITS ---------------- (IN MILLIONS) 2009........................................................ $ 2 2010........................................................ $ 3 2011........................................................ $ 3 2012........................................................ $ 3 2013........................................................ $ 3 2014 - 2018................................................. $12
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 less than $1 million for each of the years ended December 31, 2008, 2007 and 2006. 12. EQUITY STATUTORY EQUITY AND INCOME Each insurance company's state of domicile imposes minimum risk-based capital ("RBC") requirements that were developed by the National Association of Insurance Commissioners ("NAIC"). The formulas for determining the amount of RBC specify various weighting factors that are applied to financial balances or various levels of 71 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) activity based on the perceived degree of risk. Regulatory compliance is determined by a ratio of total adjusted capital, as defined by the NAIC, to authorized control level RBC, as defined by the NAIC. Companies below specific trigger points or ratios are classified within certain levels, each of which requires specified corrective action. General American exceeded the minimum RBC requirements for all periods presented herein. The NAIC has adopted the Codification of Statutory Accounting Principles ("Codification"). Codification is 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. 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. General American, domiciled in Missouri, applied to its state insurance regulator and was permitted to admit the lesser of the amount of the deferred tax asset expected to be realized within three years of the balance sheet date or 15% of statutory capital and surplus for the most recently filed statement with the domiciliary state commissioner. The NAIC statutory accounting principles currently admit the lesser of the amount of the deferred tax asset expected to be realized within one year of the balance sheet date or 10% of the statutory capital and surplus for the most recently filed statement with the domiciliary state commissioner. As a result of the relief, the Company's minimum statutory capital requirement was reduced by $58 million as of December 31, 2008. Statutory net income (loss) of General American, a Missouri domiciled insurer, was $1,177 million, $106 million and $316 million for the years ended December 31, 2008, 2007 and 2006, respectively. Statutory capital and surplus, as filed with the Missouri State Department of Insurance, was $1,079 million and $2,280 million at December 31, 2008 and 2007, 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 end 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 Commissioner of Insurance (the "Commissioner"). As described in Note 2, the Company paid an in-kind extraordinary dividend of $1,318 million to GenAmerica for the year ended December 31, 2008. For the year ended December 31, 2007, the Company did not pay any dividends to GenAmerica. The Company paid $13 million for the year ended December 31, 2006 in dividends for which prior insurance regulatory clearance was not required. Based on amounts at December 31, 2008, General American could pay to GenAmerica a stockholder dividend of $107 million without prior approval of the Commissioner in 2009. 72 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) OTHER COMPREHENSIVE INCOME (LOSS) The following table sets forth the reclassification adjustments required for the years ended December 31, 2008, 2007 and 2006 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, ---------------------- 2008 2007 2006 ------- ---- ----- (IN MILLIONS) Holding gains (losses) on investments arising during the year........................................... $(1,370) $ 22 $(115) Income tax effect of holding gains (losses).......... 544 (13) 38 Reclassification adjustments: Recognized holding (gains) losses included in current year income............................. 105 29 16 Amortization of premiums and accretion of discounts associated with investments..................... (37) (33) (12) Income tax effect.................................. (26) 2 (1) Allocation of holding (gains) losses on investments relating to other policyholder amounts............. 175 (70) 18 Income tax effect of allocation of holding (gains) losses to other policyholder amounts............... (61) 42 (6) Unrealized investment loss of dividend of interest in subsidiary......................................... 69 -- -- Deferred income tax on unrealized investment loss on dividend of interests in subsidiary................ (46) -- -- ------- ---- ----- Net unrealized investment gains (losses), net of income tax......................................... (647) (21) (62) ------- ---- ----- Foreign currency translation adjustment.............. (122) 60 11 Minimum pension liability adjustment, net of income tax................................................ -- -- 1 Defined benefit plan adjustment, net of income tax... 4 1 -- ------- ---- ----- Other comprehensive income (loss).................... $ (765) $ 40 $ (50) ======= ==== =====
13. OTHER EXPENSES Information on other expenses is as follows:
YEARS ENDED DECEMBER 31, ---------------------- 2008 2007 2006 ---- ---- ---- (IN MILLIONS) Compensation.......................................... $ 22 $ 10 $ 21 Commissions........................................... 13 15 36 Reinsurance allowances................................ (17) (22) (43) Interest and debt issue costs......................... 10 10 9 Amortization of DAC and VOBA.......................... 18 25 49 Capitalization of DAC................................. -- (7) (20) Insurance tax......................................... 11 13 17 Other................................................. 27 33 74 ---- ---- ---- Total other expenses.................................. $ 84 $ 77 $143 ==== ==== ====
73 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) For the years ended December 31, 2008, 2007 and 2006 commissions, reinsurance allowances and capitalization of DAC include the impact of affiliated reinsurance transactions. See Note 7. See also Note 16 for discussion of affiliated expenses included in the table above. Amortization and Capitalization of DAC and VOBA See Note 5 for the rollforward of DAC and VOBA including impacts of amortization and capitalization. 14. DISCONTINUED OPERATIONS OPERATIONS As more fully described in Note 2, on September 12, 2008 MetLife completed a tax-free split-off of its majority-owned subsidiary, RGA. In connection with this transaction, General American dividended to MLIC and MLIC dividended to MetLife, substantially all of its interests in RGA. RGA's assets and liabilities were reclassified to assets and liabilities of subsidiaries held for sale and its operating results were reclassified to discontinued operations for all periods presented. The following tables present the amounts related to the operations and financial position of RGA that have been reflected as discontinued operations in the consolidated statements of income:
YEARS ENDED DECEMBER 31, ------------------------ 2008 2007 2006 ------ ------ ------ (IN MILLIONS) Premiums.................................................. $3,535 $4,910 $4,348 Net investment income..................................... 597 908 781 Other revenues............................................ 69 77 66 Net investment gains (losses)............................. (249) (177) 7 ------ ------ ------ Total revenues.......................................... 3,952 5,718 5,202 ------ ------ ------ Policyholder benefits and claims.......................... 2,989 3,989 3,490 Interest credited to policyholder account balances........ 108 262 254 Other expenses............................................ 699 1,226 1,227 ------ ------ ------ Total expenses.......................................... 3,796 5,477 4,971 ------ ------ ------ Income before provision for income tax.................... 156 241 231 Provision for income tax.................................. 53 84 81 ------ ------ ------ Income from operations of discontinued operations, net of income tax.............................................. 103 157 150 Loss in connection with the dividend of interests in subsidiary, net of income tax........................... (398) -- -- ------ ------ ------ Income (loss) from operations of discontinued operations, net of income tax....................................... $ (295) $ 157 $ 150 ====== ====== ======
74 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 2007 ----------------- (IN MILLIONS) Fixed maturity securities................................. $ 9,398 Equity securities......................................... 137 Mortgage loans on real estate, net........................ 832 Policy loans.............................................. 1,059 Short-term investments.................................... 75 Other invested assets..................................... 4,897 ------- Total investments....................................... 16,398 Cash and cash equivalents................................. 404 Accrued investment income................................. 78 Premiums and other receivables............................ 1,440 Deferred policy acquisition costs and VOBA................ 3,513 Goodwill.................................................. 96 Other assets.............................................. 91 Separate account assets................................... 17 ------- Total assets held-for-sale........................... $22,037 ======= Future policy benefits.................................... $ 6,159 Policyholder account balances............................. 6,657 Other policyholder funds.................................. 2,297 Long-term debt............................................ 528 Collateral financing arrangements......................... 850 Junior subordinated debt securities....................... 399 Shares subject to mandatory redemption.................... 159 Current income tax payable................................ 33 Deferred income tax liability............................. 941 Other liabilities......................................... 1,918 Separate account liabilities.............................. 17 ------- Total liabilities held-for-sale...................... $19,958 =======
The operations of RGA include direct policies and reinsurance agreements with MetLife and some of its affiliates. These agreements are generally terminable by either party upon 90 days written notice with respect to future new business. Agreements related to existing business generally are not terminable, unless the underlying policies terminate or are recaptured. These direct policies and reinsurance agreements do not constitute significant continuing involvement by the Company with RGA. Included in continuing operations in the Company's consolidated statements of operations are amounts related to these affiliated transactions, including ceded amounts that reduced premiums and fees by $23 million, $38 million, and $32 million and ceded amounts that reduced policyholder benefits and claims by $13 million, $33 million, and $44 million for the years ended December 31, 2008, 2007 and 2006, respectively, that have not been eliminated as these transactions are expected to continue after the RGA divestiture. Related amounts included in the Company's consolidated balance sheets that have not been eliminated include assets totaling $456 million, and liabilities totaling $361 million at December 31, 2007. 75 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 15. FAIR VALUE FAIR VALUE OF FINANCIAL INSTRUMENTS As described in Note 1, the Company prospectively adopted the provisions of SFAS 157 effective January 1, 2008. As a result, the methodologies used to determine the estimated fair value for certain financial instruments at December 31, 2008 may have been modified from those utilized at December 31, 2007, which, while being deemed appropriate under existing accounting guidance, may not have produced an exit value as defined in SFAS 157. Accordingly, the estimated fair value of financial instruments, and the description of the methodologies used to derive those estimated fair values, are presented separately at December 31, 2007 and December 31, 2008. Considerable judgment is often required in interpreting market data to develop estimates of fair value and the use of different assumptions or valuation methodologies may have a material effect on the estimated fair value amounts. Amounts related to the Company's financial instruments are as follows:
NOTIONAL CARRYING ESTIMATED DECEMBER 31, 2007 AMOUNT VALUE FAIR VALUE ----------------- -------- -------- ---------- (IN MILLIONS) ASSETS: Fixed maturity securities........................ $ 7,919 $ 7,919 Equity securities................................ $ 31 $ 31 Mortgage loans on real estate.................... $ 241 $ 247 Policy loans..................................... $ 1,657 $ 1,657 Short-term investments........................... $ 237 $ 237 Cash and cash equivalents........................ $ 103 $ 103 Accrued investment income........................ $ 107 $ 107 Assets of subsidiaries held-for-sale............. $11,983 $11,992 LIABILITIES: Policyholder account balances.................... $ 1,055 $ 1,030 Short-term debt -- affiliated.................... $ 50 $ 50 Long-term debt................................... $ 101 $ 121 Payables for collateral under securities loaned and other transactions......................... $ 1,438 $ 1,438 Liabilities of subsidiaries held-for-sale........ $ 6,915 $ 6,044
The methods and assumptions used to estimate the fair value of financial instruments are summarized as follows: Fixed Maturity Securities and Equity Securities -- The estimated 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 estimated fair values is based on: (i) market standard valuation methodologies; (ii) securities the Company deems to be comparable; and (iii) assumptions deemed appropriate given the circumstances. The value estimates are based on available market information and judgments about financial instruments, including estimates of the timing and amounts of expected future cash flows and the credit standing of the issuer or counterparty. Factors considered in estimating fair value include; coupon rate, maturity, estimated duration, call provisions, sinking fund requirements, credit rating, industry sector of the issuer, and quoted market prices of comparable securities. Mortgage Loans on Real Estate -- Fair values for mortgage loans on real estate are estimated by discounting expected future cash flows, using current interest rates for similar loans with similar credit risk. 76 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Policy Loans -- The estimated fair values for policy loans approximate carrying values. Cash and Cash Equivalents and Short-term Investments -- The estimated fair values for cash and cash equivalents and short-term investments approximate carrying values due to the short-term maturities of these instruments. Accrued Investment Income -- The estimated fair value for accrued investment income approximates carrying 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 estimated fair value of policyholder account balances without final contractual maturities are assumed to equal their current net surrender value. Affiliated Short-term Debt and Long-term Debt -- The estimated fair value of short-term debt-affiliated approximates fair value due to the short-term duration of the instrument. Long-term debt is 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 estimated fair value for payables for collateral under securities loaned and other transactions approximates carrying value. Assets and Liabilities of Subsidiaries Held-For-Sale -- The carrying values of assets and liabilities of subsidiaries held-for-sale reflect those assets and liabilities which were previously determined to be financial instruments and which were reflected in other financial statement captions in the table above in previous periods but have been reclassified to this caption to reflect the discontinued nature of the operations. The estimated fair value of the assets and liabilities of subsidiaries held-for-sale have been determined on a basis consistent with similar instruments as described herein. Derivative Financial Instruments -- The estimated fair value of derivative financial instruments, including financial futures, financial forwards, interest rate, credit default and foreign currency swaps and foreign currency forwards are based upon quotations obtained from dealers or other reliable sources. See Note 4 for derivative fair value disclosures. 77 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTIONAL CARRYING ESTIMATED DECEMBER 31, 2008 AMOUNT VALUE FAIR VALUE ----------------- -------- -------- ---------- (IN MILLIONS) ASSETS: Fixed maturity securities.............................. $6,140 $6,140 Equity securities...................................... $ 135 $ 135 Mortgage loans on real estate.......................... $ 219 $ 213 Policy loans........................................... $1,691 $2,088 Other limited partnership interests(1)................. $ 2 $ 2 Short-term investments................................. $ 514 $ 514 Other invested assets:(1) Derivative assets.................................... $910 $ 113 $ 113 Other................................................ $ 3 $ 3 Cash and cash equivalents.............................. $ 152 $ 152 Accrued investment income.............................. $ 99 $ 99 Premiums and other receivables(1)...................... $ 153 $ 121 Separate account assets................................ $1,484 $1,484 LIABILITIES: Policyholder account balances(1)....................... $1,016 $ 843 Long-term debt......................................... $ 101 $ 74 Payables for collateral under securities loaned and other transactions................................... $ 806 $ 806 Other liabilities:(1) Derivative liabilities............................... $235 $ 4 $ 4 Other................................................ $ 9 $ 9 Separate account liabilities(1)........................ $ 189 $ 189 COMMITMENTS:(2) Commitments to fund private corporate bond investments.......................................... $ 6 $ -- $ --
-------- (1) Carrying values presented herein differ from those presented on the consolidated balance sheet because certain items within the respective financial statement caption are not considered financial instruments. Financial statement captions omitted from the table above are not considered financial instruments. (2) Commitments are off-balance sheet obligations. The methods and assumptions used to estimate the fair value of financial instruments are summarized as follows: Fixed Maturity Securities and Equity Securities -- When available, the estimated fair value of the Company's fixed maturity and equity securities are based on quoted prices in active markets that are readily and regularly obtainable. Generally, these are the most liquid of the Company's securities holdings and valuation of these securities does not involve management judgment. When quoted prices in active markets are not available, the determination of estimated fair value is based on market standard valuation methodologies. The market standard valuation methodologies utilized include: discounted cash flow methodologies, matrix pricing or other similar techniques. The assumptions and inputs in applying these market standard valuation methodologies include, but are not limited to: interest rates, credit standing of the issuer or counterparty, industry sector of the issuer, coupon rate, call provisions, sinking fund requirements, maturity, estimated duration and management's assumptions regarding liquidity and estimated future 78 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) cash flows. Accordingly, the estimated fair values are based on available market information and management's judgments about financial instruments. The significant inputs to the market standard valuation methodologies for certain types of securities with reasonable levels of price transparency are inputs that are observable in the market or can be derived principally from or corroborated by observable market data. Such observable inputs include benchmarking prices for similar assets in active, liquid markets, quoted prices in markets that are not active and observable yields and spreads in the market. When observable inputs are not available, the market standard valuation methodologies for determining the estimated fair value of certain types of securities that trade infrequently, and therefore have little or no price transparency, rely on inputs that are significant to the estimated fair value that are not observable in the market or cannot be derived principally from or corroborated by observable market data. These unobservable inputs can be based in large part on management judgment or estimation, and cannot be supported by reference to market activity. Even though unobservable, these inputs are based on assumptions deemed appropriate given the circumstances and consistent with what other market participants would use when pricing such securities. The use of different methodologies, assumptions and inputs may have a material effect on the estimated fair values of the Company's securities holdings. Mortgage Loans on Real Estate -- The Company originates mortgage loans on real estate principally for investment purposes. These loans are carried at amortized cost within the consolidated financial statements. The fair value for mortgage loans on real estate is primarily determined by estimating expected future cash flows and discounting those using current interest rates for similar loans with similar credit risk. Policy Loans -- For policy loans with fixed interest rates, estimated fair values are determined using a discounted cash flow model applied to groups of similar policy loans determined by the nature of the underlying insurance liabilities. Cash flow estimates are developed applying a weighted-average interest rate to the outstanding principal balance of the respective group of loans and an estimated average maturity determined through experience studies of the past performance of policyholder repayment behavior for similar loans. These cash flows are discounted using current risk-free interest rates with no adjustment for borrower credit risk as these loans are fully collateralized by the cash surrender value of the underlying insurance policy. The estimated fair value for policy loans with variable interest rates approximates carrying value due to the absence of borrower credit risk and the short time period between interest rate resets, which presents minimal risk of a material change in estimated fair value due to changes in market interest rates. Other Limited Partnership Interests -- Other limited partnerships included in the preceding table consist of those investments accounted for using the cost method. The remaining carrying value recognized in the consolidated balance sheet represents investments in other limited partnerships accounted for using the equity method, which do not satisfy the definition of financial instruments for which fair value is required to be disclosed. The estimated fair values for other limited partnership interests accounted for under the cost method are generally based on the Company's share of the net asset value ("NAV") as provided in the financial statements of the investees. In certain circumstances, management may adjust the NAV by a premium or discount when it has sufficient evidence to support applying such adjustments. Short-term Investments -- Certain short-term investments do not qualify as securities and are recognized at amortized cost in the consolidated balance sheet. For these instruments, the Company believes that there is minimal risk of material changes in interest rates or credit of the issuer such that estimated fair value approximates carrying value. In light of recent market conditions, short-term investments have been monitored to ensure there is sufficient demand and maintenance of issuer credit quality and the Company has determined additional adjustment is not required. Short-term investments that meet the definition of a security are recognized at estimated fair value in the 79 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) consolidated balance sheet in the same manner described above for similar instruments that are classified within captions of other major investment classes. Other Invested Assets -- Other invested assets in the consolidated balance sheet is principally comprised of freestanding derivatives with positive estimated fair values, cash held in trust and investments in tax credit partnerships. Investments in tax credit partnerships, which are accounted for under the equity method, are not financial instruments subject to fair value disclosure. Accordingly, they have been excluded from the preceding table. Cash held in trust is treated as cash and cash equivalents where estimated fair value generally approximates carrying value. The estimated fair value of derivatives -- with positive and negative estimated fair values -- is described in the respectively labeled section which follows. Cash and Cash Equivalents -- Due to the short-term maturities of cash and cash equivalents, the Company believes there is minimal risk of material changes in interest rates or credit of the issuer such that estimated fair value generally approximates carrying value. In light of recent market conditions, cash and cash equivalent instruments have been monitored to ensure there is sufficient demand and maintenance of issuer credit quality, or sufficient solvency in the case of depository institutions, and the Company has determined additional adjustment is not required. Accrued Investment Income -- Due to the short-term until settlement of accrued investment income, the Company believes there is minimal risk of material changes in interest rates or credit of the issuer such that estimated fair value approximates carrying value. In light of recent market conditions, the Company has monitored the credit quality of the issuers and has determined additional adjustment is not required. Premiums and Other Receivables -- Premiums and other receivables in the consolidated balance sheet is principally comprised of premiums due and unpaid for insurance contracts, amounts recoverable under reinsurance contracts, amounts on deposit with financial institutions to facilitate daily settlements related to certain derivative positions, amounts receivable for securities sold but not yet settled and fees and general operating receivables. Premiums receivable and those amounts recoverable under reinsurance treaties determined to transfer sufficient risk are not financial instruments subject to disclosure and thus have been excluded from the amounts presented in the preceding table. Amounts recoverable under ceded reinsurance contracts which the Company has determined do not transfer sufficient risk such that they are accounted for using the deposit method of accounting have been included in the preceding table with the estimated fair value determined as the present value of expected future cash flows under the related contracts discounted using an interest rate determined to reflect the appropriate credit standing of the assuming counterparty. The amounts on deposit for derivative settlements essentially represent the equivalent of demand deposit balances and amounts due for securities sold are generally received over very short periods such that the estimated fair value approximate their carrying values. In light of recent market conditions, the Company has monitored the solvency position of the financial institutions and has determined additional adjustments are not required. Separate Account Assets -- Separate account assets are carried at estimated fair value and reported as a summarized total on the consolidated balance sheet in accordance with SOP O3-1, Accounting and Reporting by Insurance Enterprises for Certain Nontraditional Long-Duration Contracts and for Separate Accounts ("SOP 03-1"). The estimated fair value of separate account assets are based on the estimated fair value of the underlying assets owned by the separate account. Assets within the Company's separate accounts include: mutual funds, fixed maturity securities, equity securities, mortgage loans, derivatives, hedge funds short-term investments and cash and cash equivalents. The estimated fair value of mutual funds is based upon quoted prices or reported NAVs provided by the fund manager and are reviewed by management to determine whether such values require adjustment to represent exit value. The estimated fair values of fixed maturity securities, equity securities, derivatives, short-term investments and cash and cash equivalents held by separate accounts are determined on 80 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) a basis consistent with the methodologies described herein for similar financial instruments held within the general account. The estimated fair value of hedge funds is based upon NAVs provided by the fund manager and are reviewed by management to determine whether such values require adjustment to represent exit value. The estimated fair value of mortgage loans is determined by discounting expected future cash flows, using current interest rates for similar loans with similar credit risk. Policyholder Account Balances -- Policyholder account balances in the table above include investment contracts. The difference between the amounts reflected as policyholder account balances in the preceding table and those recognized in the consolidated balance sheet represents those amounts due under contracts that satisfy the definition of insurance contracts and are not considered financial instruments. The investment contracts primarily include certain funding arrangements, fixed deferred annuities and total control accounts. The fair values for these investment contracts are estimated by discounting best estimate future cash flows using current market risk-free interest rates and adding a spread for the Company's own credit determined using market standard swap valuation models as well as its claims paying ability. Long-term Debt -- The estimated fair values of long-term debt securities are generally determined by discounting expected future cash flows using market rates currently available for debt with similar remaining maturities and reflecting the credit risk of the Company including inputs, when available, from other companies with similar types of borrowing arrangements. Risk-adjusted discount rates applied to the expected future cash flows can vary significantly based upon the specific terms of each individual arrangement, including, but not limited to: subordinated rights; contractual interest rates in relation to current market rates; the structuring of the arrangement; and the nature and observability of the applicable valuation inputs. Use of different risk-adjusted discount rates could result in different estimated fair values. Payables for Collateral Under Securities Loaned and Other Transactions -- The estimated fair value for payables for collateral under securities loaned and other transactions approximates carrying value. The related agreements to loan securities are short-term in nature such that the Company believes there is limited risk of a material change in market interest rates. Additionally, because borrowers are cross-collateralized by the borrowed securities, the Company believes no additional consideration for changes in its own credit are necessary. Other Liabilities -- Other liabilities in the consolidated balance sheet is principally comprised of freestanding derivatives with negative estimated fair values; tax and litigation contingency liabilities; obligations for employee- related benefits; amounts due on cash collateral held in relation to securities lending; interest payable; amounts due for securities purchased but not yet settled; amounts due under assumed reinsurance contracts; and general operating accruals and payables. The estimated fair value of derivatives -- with positive and negative estimated fair values -- is described in the respectively labeled section which follows. The amounts included in the table above reflect those other liabilities that satisfy the definition of financial instruments subject to disclosure. These items consist primarily of interest payable; amounts due on cash collateral held in relation to securities lending; and amounts due for securities purchased but not yet settled. The Company evaluates the specific terms, facts and circumstances of each instrument to determine the appropriate estimated fair values, which were not materially different from the recognized carrying values. Separate Account Liabilities -- Separate account liabilities included in the table above represent those balances due to policyholders under contracts that are classified as investment contracts. The difference between the separate account liabilities reflected above and the amounts presented in the consolidated balance sheet represents those contracts classified as insurance contracts which do not satisfy the criteria of financial instruments for which estimated fair value is to be disclosed. 81 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Separate account liabilities classified as investment contracts primarily represent variable annuities with no significant mortality risk to the Company such that the death benefit is equal to the account balance and certain contracts that provide for benefit funding under institutional retirement & savings products. Separate account liabilities, whether related to investment or insurance contracts, are recognized in the consolidated balance sheet at an equivalent summary total of the separate account assets as prescribed by SOP 03-1. Separate account assets, which equal net deposits, net investment income and realized and unrealized capital gains and losses, are fully offset by corresponding amounts credited to the contractholders' liability which is reflected in separate account liabilities. Since separate account liabilities are fully funded by cash flows from the separate account assets which are recognized at estimated fair value as described above, the Company believes the value of those assets approximates the estimated fair value of the related separate account liabilities. Derivatives -- The estimated fair value of derivatives is determined through the use of quoted market prices for exchange-traded derivatives or through the use of pricing models for over-the-counter derivatives. The determination of estimated fair value, when quoted market values are not available, is based on market standard valuation methodologies and inputs that are assumed to be consistent with what other market participants would use when pricing the instruments. Derivative valuations can be affected by changes in interest rates, foreign currency exchange rates, financial indices, credit spreads, default risk (including the counterparties to the contract), volatility, liquidity and changes in estimates and assumptions used in the pricing models. The significant inputs to the pricing models for most over-the-counter derivatives are inputs that are observable in the market or can be derived principally from or corroborated by observable market data. Significant inputs that are observable generally include: interest rates, foreign currency exchange rates, interest rate curves, credit curves and volatility. However, certain over-the-counter derivatives may rely on inputs that are significant to the estimated fair value that are not observable in the market or cannot be derived principally from or corroborated by observable market data. Significant inputs that are unobservable generally include: independent broker quotes, credit correlation assumptions, references to emerging market currencies and inputs that are outside the observable portion of the interest rate curve, credit curve, volatility or other relevant market measure. These unobservable inputs may involve significant management judgment or estimation. Even though unobservable, these inputs are based on assumptions deemed appropriate given the circumstances and consistent with what other market participants would use when pricing such instruments. The credit risk of both the counterparty and the Company are considered in determining the estimated fair value for all over-the-counter derivatives after taking into account the effects of netting agreements and collateral arrangements. Credit risk is monitored and consideration of any potential credit adjustment is based on net exposure by counterparty. This is due to the existence of netting agreements and collateral arrangements which effectively serve to mitigate risk. The Company values its derivative positions using the standard swap curve which includes a credit risk adjustment. This credit risk adjustment is appropriate for those parties that execute trades at pricing levels consistent with the standard swap curve. As the Company and its significant derivative counterparties consistently execute trades at such pricing levels, additional credit risk adjustments are not currently required in the valuation process. The need for such additional credit risk adjustments is monitored by the Company. The Company's ability to consistently execute at such pricing levels is in part due to the netting agreements and collateral arrangements that are in place with all of its significant derivative counterparties. Most inputs for over-the-counter derivatives are mid market inputs but, in certain cases, bid level inputs are used when they are deemed more representative of exit value. Market liquidity as well as the use of different methodologies, assumptions and inputs, may have a material effect on the estimated fair values of the Company's derivatives and could materially affect net income. 82 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Commitments to Fund Private Corporate Bond Investments -- The estimated fair values for commitments to fund private corporate bond investments reflected in the above table represent the difference between the discounted expected future cash flows using interest rates that incorporate current credit risk for similar instruments on the reporting date and the principal amounts of the original commitments. ASSETS AND LIABILITIES MEASURED AT FAIR VALUE RECURRING FAIR VALUE MEASUREMENTS The assets and liabilities measured at estimated fair value on a recurring basis are determined as described in the preceding section. These estimated fair values and their corresponding fair value hierarchy are summarized as follows:
DECEMBER 31, 2008 ------------------------------------------------------------------ FAIR VALUE MEASUREMENTS AT REPORTING DATE USING ----------------------------------------------------- QUOTED PRICES IN ACTIVE MARKETS FOR SIGNIFICANT IDENTICAL ASSETS SIGNIFICANT OTHER UNOBSERVABLE TOTAL AND LIABILITIES OBSERVABLE INPUTS INPUTS ESTIMATED (LEVEL 1) (LEVEL 2) (LEVEL 3) FAIR VALUE ------------------ ----------------- ------------ ---------- (IN MILLIONS) ASSETS Fixed maturity securities: U.S. corporate securities......... $ -- $2,070 $165 $2,235 Residential mortgage-backed securities..................... -- 959 2 961 Foreign corporate securities...... -- 782 50 832 Foreign government securities..... -- 679 95 774 Commercial mortgage-backed securities..................... -- 648 14 662 U.S. Treasury/agency securities... 289 83 -- 372 Asset-backed securities........... -- 225 64 289 State and political subdivision securities..................... -- 15 -- 15 ---- ------ ---- ------ Total fixed maturity securities................... 289 5,461 390 6,140 ---- ------ ---- ------ Equity securities: Common stock...................... -- 128 1 129 Non-redeemable preferred stock.... -- 1 5 6 ---- ------ ---- ------ Total equity securities........ -- 129 6 135 ---- ------ ---- ------ Short-term investments.............. -- 514 -- 514 Derivative assets(1)................ -- 113 -- 113 Separate account assets(2).......... 660 729 95 1,484 ---- ------ ---- ------ Total assets................... $949 $6,946 $491 $8,386 ==== ====== ==== ====== LIABILITIES Derivative liabilities(1)........... $ 2 $ 1 $ 1 $ 4 ==== ====== ==== ======
-------- (1) Derivative assets are presented within other invested assets and derivatives liabilities are presented within other liabilities. The amounts are presented gross in the table above to reflect the presentation in the consolidated balance sheet, but are presented net for purposes of the rollforward in the following tables. 83 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (2) Separate account assets are measured at estimated fair value. Investment performance related to separate account assets is fully offset by corresponding amounts credited to contractholders whose liability is reflected within separate account liabilities. Separate account liabilities are set equal to the estimated fair value of separate account assets as prescribed by SOP 03-1. The Company has categorized its assets and liabilities into the three-level fair value hierarchy, as defined in Note 1, based upon the priority of the inputs to the respective valuation technique. The following summarizes the types of assets and liabilities included within the three-level fair value hierarchy presented in the preceding table. Level 1 This category includes certain U.S. Treasury and agency fixed maturity securities. As it relates to derivatives, this level includes financial futures including interest rate futures. Separate account assets classified within this level principally include mutual funds. Also included are assets held within separate accounts which are similar in nature to those classified in this level for the general account. Level 2 This category includes fixed maturity and equity securities priced principally by independent pricing services using observable inputs. These fixed maturity securities include U.S. Treasury and agency securities as well as the majority of U.S. and foreign corporate securities, residential mortgage-backed securities, commercial mortgage-backed securities, state and political subdivision securities, foreign government securities and asset- backed securities. Equity securities classified as Level 2 securities consist principally of common stock and certain equity securities where market quotes are available but are not considered actively traded. Short-term investments included within Level 2 are of a similar nature to these fixed maturity and equity securities. As it relates to derivatives, this level includes derivatives for which all the inputs used are observable; including foreign currency forwards, foreign currency swaps, interest rate swaps and credit default swaps. Separate account assets classified within this level are generally similar to those classified within this level for the general account. Hedge funds owned by separate accounts are also included within this level. Level 3 This category includes fixed maturity securities priced principally through independent broker quotations or market standard valuation methodologies using inputs that are not market observable or cannot be derived principally from or corroborated by observable market data. This level consists of less liquid fixed maturity securities with very limited trading activity or where less price transparency exists around the inputs to the valuation methodologies including: U.S. and foreign corporate securities -- including below investment grade private placements; residential mortgage-backed securities; commercial mortgage backed securities; foreign government securities and asset-backed securities -- including all of those supported by sub-prime mortgage loans. Equity securities classified as Level 3 securities consist of common stock of privately held companies and non-redeemable preferred stock where there has been very limited trading activity or where less price transparency exists around the inputs to the valuation. As it relates to derivatives this category includes credit default swaps having unobservable credit correlations. Separate account assets classified within this level are generally similar to those classified within this level for the general account; however, they also include mortgage loans. 84 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) A rollforward of all assets and liabilities measured at estimated fair value on a recurring basis using significant unobservable (Level 3) inputs for year ended December 31, 2008 is as follows:
FAIR VALUE MEASUREMENTS USING SIGNIFICANT UNOBSERVABLE INPUTS (LEVEL 3) ----------------------------------------------------------------------------------------------------- TOTAL REALIZED/UNREALIZED GAINS (LOSSES) INCLUDED IN: ---------------------------- PURCHASES, BALANCE, IMPACT OF BALANCE, OTHER SALES, TRANSFER IN BALANCE, DECEMBER 31, SFAS 157 BEGINNING COMPREHENSIVE ISSUANCES AND AND/OR OUT END OF 2007 ADOPTION(1) OF PERIOD EARNINGS(2, 3) INCOME (LOSS) SETTLEMENTS(4) OF LEVEL 3(5) PERIOD ------------ ----------- --------- -------------- ------------- -------------- ------------- -------- (IN MILLIONS) Fixed maturity securities............ $612 $-- $612 $(56) $(97) $(62) $(7) $390 Equity securities....... 12 -- 12 (1) (1) (4) -- 6 Net derivatives(6)...... -- -- -- -- -- (1) -- (1) Separate account assets(7)............. 124 -- 124 (25) -- (1) (3) 95
-------- (1) Impact of SFAS 157 adoption represents the amount recognized in earnings as a change in estimate upon the adoption of SFAS 157 associated with Level 3 financial instruments held at January 1, 2008. As described in Note 1, there was no material impact of adoption on Level 3 assets and liabilities. (2) Amortization of premium/discount is included within net investment income which is reported within the earnings caption of total gains/losses. Impairments are included within net investment gains (losses) which is reported within the earnings caption of total gains/losses. (3) Interest and dividend accruals, as well as cash interest coupons and dividends received, are excluded from the rollforward. (4) The amount reported within purchases, sales, issuances and settlements is the purchase/issuance price (for purchases and issuances) and the sales/settlement proceeds (for sales and settlements) based upon the actual date purchased/issued or sold/settled. Items purchased/issued and sold/settled in the same period are excluded from the rollforward. (5) Total gains and losses (in earnings and other comprehensive income (loss)) are calculated assuming transfers in (out) of Level 3 occurred at the beginning of the period. Items transferred in and out in the same period are excluded from the rollforward. (6) Freestanding derivative assets and liabilities are presented net for purposes of the rollforward. (7) Investment performance related to separate account assets is fully offset by corresponding amounts credited to contractholders whose liability is reflected within separate account liabilities. (8) Amounts presented do not reflect any associated hedging activities. Actual earnings associated with Level 3, inclusive of hedging activities, could differ materially. The table below summarizes both realized and unrealized gains and losses for the year ended December 31, 2008 due to changes in estimated fair value recorded in earnings for Level 3 assets and liabilities:
TOTAL GAINS AND LOSSES --------------------------------------- CLASSIFICATION OF REALIZED/UNREALIZED GAINS (LOSSES) INCLUDED IN EARNINGS --------------------------------------- NET NET INVESTMENT INVESTMENT INCOME GAINS (LOSSES) TOTAL ---------- -------------- ----- (IN MILLIONS) Fixed maturity securities.................... $ 8 $(64) $(56) Equity securities............................ -- (1) (1)
85 GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The table below summarizes the portion of unrealized gains and losses recorded in earnings for the year ended December 31, 2008 for Level 3 assets and liabilities that are still held at December 31, 2008.
CHANGES IN UNREALIZED GAINS (LOSSES) RELATING TO ASSETS AND LIABILITIES HELD AT DECEMBER 31, 2008 ----------------------------------------- NET NET INVESTMENT INVESTMENT INCOME GAINS (LOSSES) TOTAL ---------- -------------- ----- (IN MILLIONS) Fixed maturity securities........................ $ 9 $(63) $(54) Equity securities................................ -- (2) (2) Net derivatives.................................. -- (1) (1)
16. RELATED PARTY TRANSACTIONS 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 $36 million, $44 million and $50 million, included in other expenses, for services performed under the master service agreement for the years ended December 31, 2008, 2007 and 2006, respectively. The Company has entered into a service agreement with MetLife Group, Inc. ("MetLife Group"), a wholly-owned subsidiary of MetLife, under which MetLife Group provides personnel services, as needed, to support the activities of the Company. MetLife Group charged the Company $28 million, $5 million and $8 million, included in other expenses, for services performed under the service agreement for the years ended December 31, 2008, 2007 and 2006, respectively. The Company has entered into marketing and selling agreements with several affiliates ("Distributors"), in which the Distributors agree to sell, on the Company's behalf, 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 $6 million, $14 million and $21 million, included in other expenses, for the years ended December 31, 2008, 2007 and 2006, respectively. The Company received fees for this service of $28 million, $26 million and $11 million, included in other expenses, for the years ended December 31, 2008, 2007 and 2006, respectively. The Company has entered into a distribution agreement with MetLife Investors Distribution Company ("MDC"), in which MDC agrees to sell, on the Company's behalf, insurance products through authorized retailers. The Company agrees to compensate MDC for the sale and servicing of such insurance products in accordance with the terms of the agreement. MDC charged the Company $2 million, $4 million and $5 million, included in other expenses, for the years ended December 31, 2008, 2007 and 2006, respectively. The Company has entered into an investment service agreement with several affiliates ("Advisors"), in which the Advisors provide investment advisory and administrative services to registered investment companies which serve as investment vehicles for certain insurance contracts issued by the Company. Per the agreement, the net profit or loss of the Advisors is allocated to the Company resulting in revenue of $1 million, $2 million and $2 million included in universal life and investment-type product policy fees, for the years ended December 31, 2008, 2007 and 2006, respectively. The Company had net receivables from affiliates of $9 million and $32 million at December 31, 2008 and 2007, respectively, related to the items discussed above. These net receivables exclude affiliated reinsurance balances discussed in Note 7. See Notes 3, 6 and 8 for additional related party transactions. 86 PART C OTHER INFORMATION ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS a. Financial Statements ----------------------------------------------------------------------------------------- The following financial statements of the Separate Account are included in Part B hereof: 1. Report of Independent Registered Public Accounting Firm. 2. Statement of Assets and Liabilities as of December 31, 2008. 3. Statement of Operations for the year ended December 31, 2008. 4. Statements of Changes in Net Assets for the years ended December 31, 2008 and 2007. 5. Notes to Financial Statements The following financial statements of the Company are included in Part B hereof: 1. Report of Independent Registered Public Accounting Firm. 2. Balance Sheets as of December 31, 2008 and 2007. 3. Statements of Income for the years ended December 31, 2008, 2007 and 2006. 4. Statements of Stockholder's Equity for the years ended December 31, 2008, 2007 and 2006. 5. Statements of Cash Flows for the years ended December 31, 2008, 2007 and 2006. 6. Notes to Financial Statements.
The Following Consolidated financial statements of General American Life Insurance Company (the "Guarantor") are included in Part B hereof: 1. Report of Independent Registered Public Accounting Firm. 2. Consolidated Balance Sheets as of December 31, 2008 and 2007. 3. Consolidated Statements of Income for the years ended December 31, 2008, 2007 and 2006. 4. Consolidated Statements of Stockholder's Equity for the years ended December 31, 2008, 2007 and 2006. 5. Consolidated Statements of Cash Flows for the years ended December 31, 2008, 2007 and 2006. 6. Notes to Consolidated Financial Statements.
b. Exhibits --------- 1. (i) Resolution of Board of Directors of the Company authorizing the establishment of the Variable Account(2) (ii) Revised and Restated Resolutions of Board of Directors (adopted June 11, 2004)(9) 2. Not Applicable. 3. (i) Form of Principal Underwriter's Agreement(2) (ii) Principal Underwriter's and Selling Agreement (effective January 1, 2001)(9) (iii) Amendment to Principal Underwriter's and Selling Agreement (effective January 1, 2002)(9) (iv) Amendment No. 2 to Principal Underwriter's and Selling Agreement (effective December 2, 2002)(9) (v) Form of Retail Sales Agreement (MLIDC 7-1-05 (LTC)) (16) (vi) Agreement and Plan of Merger (12-01-04)(MLIDC into GAD) (19) 4. (i) Individual Flexible Purchase Payment Deferred Variable Annuity Contract(4) (ii) Enhanced Dollar Cost Averaging Rider(4) (iii) Three Month Market Entry Rider(4) (iv) Death Benefit Rider - (Compounded-Plus)(4) (v) Death Benefit Rider - (Annual)(4) (vi) Death Benefit Rider - (Annual Step-Up)(4)
(vii) Guaranteed Minimum Income Benefit Rider - (Living Benefit)(4) (viii) Additional Death Benefit Rider - (Earnings Preservation Benefit)(4) (ix) Waiver of Withdrawal Charge for Nursing Home or Hospital Confinement Rider(4) (x) Terminal Illness Rider(4) (xi) Individual Retirement Annuity Endorsement(4) (xii) Roth Individual Retirement Annuity Endorsement(4) (xiii) 401 Plan Endorsement(4) (xiv) Tax Sheltered Annuity Endorsement(4) (xv) Unisex Annuity Rates Rider(4) (xvi) Form of Endorsement (Name Change effective February 5, 2001. MetLife Investors Insurance Company; formerly, Cova Financial Services Life Insurance Company.)(3) (xvii) Form of Guaranteed Minimum Income Benefit Rider - (Living Benefit) (GMIB II 03/03)(7) (xviii) Form of Guaranteed Withdrawal Benefit Rider MLI-690-1 (7/04)(8) (xix) Form of Contract Schedule [Class AA, B, C, L, VA or XC 7028-2] (7/04)(9) (xx) Individual Retirement Annuity Endorsement 7023.1 (9/02)(9) (xxi) Roth Individual Retirement Annuity Endorsement 7024.1 (9/02)(9) (xxii) 401(a)/403(a) Plan Endorsement 7026.1 (9/02)(9) (xxiii) Tax Sheltered Annuity Endorsement 7026.1 (9/02)(9) (xxiv) Simple Individual Retirement Annuity Endorsement 7276 (9/02)(9) (xxv) Form of Guaranteed Minimum Income Benefit Rider (GMIB Plus or GMIB III) 7018-2(5/05)(10) (xxvi) Form of Enhanced Dollar Cost Averaging Rider 7013-1 (5/05)(10) (xxvii) Form of Three Month Market Entry Rider 7013-1 (5/05)(10) (xxviii) Form of Contract Schedule 7028-3 (5/05)(10) (xxix) Form of Contract Schedule [Class AA, B, C, L, VA or XC] 7028-4 (11/05)(11) (xxx) Guaranteed Minimum Accumulation Benefit Rider MLI-670-1 (11/05)(11) (xxxi) Guaranteed Withdrawal Benefit Endorsement MLI-GWB (11/05)(11) (xxxii) Guaranteed Withdrawal Benefit Rider MLI-690-2 (11/05)-E (12) (xxxiii) Designated Beneficiary Non-Qualified Annuity Endorsement MLI-NQ-1 (11/05)-I (13) (xxxiv) Lifetime Guaranteed Withdrawal Benefit Rider MLIU-690-3 (6/06) (15) (xxxv) Form of Contract Schedule [Class AA, B, C, L, VA or XC] 7028-5 (6/06) (15) (xxxvi) Form of Guaranteed Minimum Death Benefit Rider MLI-640-1 (4/08) (23) (xxxvii) Form of Contract Schedule MLI-EDB (4/08) (23) (xxxviii) Form of Guaranteed Minimum Income Benefit Rider-Living Benefit MLI-560-4 (4/08)(23) (xxxix) Form of Lifetime Guaranteed Withdrawal Benefit Rider MLI-690-4 (4/08) (23) 5. (i) Form of Variable Annuity Application(4) (ii) Form of Variable Annuity Application Class C: [Class VA 7029 (7/04) APPVA-504VA](8) (iii) Form of Variable Annuity Application [Class VA] 7029 (1/05) APPVA105VA(8) (iv) Form of Variable Annuity Application [Class VA] 7029 (4/05) APPVA1105VA (11) (v) Form of Variable Annuity Application [Class VA] 7029 (1/06) APPVAVA 606 (15) (vi) Form of Variable Annuity Application [Class XC] 7029 (10/07) APPXC April 2008 (24) 6. (i) Copy of Articles of Incorporation of the Company(1) (ii) Copy of the Bylaws of the Company(1)
7. (i) Reinsurance Agreement between MetLife Investors Insurance Company and Metropolitan Life Insurance Company(6) (ii) Automatic Reinsurance Agreement between MetLife Investors Insurance Company and Exeter Reassurance Company, Ltd(6) (iii) Contingent Reinsurance Agreement between MetLife Investors Insurance Company and General American Life Insurance Company (15) 8. (i) Participation Agreement Among Met Investors Series Trust, Met Investors Advisory Corp., Met Investors Distribution Company and MetLife Investors Insurance Company (February 12, 2001)(6) (ii) First Amendment to Participation Agreement Among Met Investors Series Trust, Met Investors Advisory Corp., Met Investors Distribution Company and MetLife Investors Insurance Company (September 14, 2001)(6) (iii) Participation Agreement Among Metropolitan Series Fund, Inc., Metropolitan Life Insurance Company and Cova Financial Services Life Insurance Company (effective September 1, 2000)(9) (iv) Participation Agreement Among Metropolitan Series Fund, Inc., MetLife Advisors, LLC, Metropolitan Life Insurance Company and MetLife Investors Insurance Company (effective July 1, 2004) (14) (v) Net Worth Agreement among MetLife, Inc. and MetLife Investors Insurance Company (effective December 31, 2002) (15) (vi) Guarantee Agreement (June 1, 1995)(General American Life Insurance Company)(17) (vii) Participation Agreement Among Metropolitan Series Fund, Inc., MetLife Advisers, LLC, MetLife Securities, Inc. and MetLife Investors Insurance Company (effective April 30, 2007) (19) (viii) Participation Agreement Among Metropolitan Series Fund, Inc., MetLife Advisers, LLC, MetLife Investors Distribution Company and MetLife Investors Company (effective August 31, 2007)(22) 9. (i) Opinion of Counsel (20) (ii) Opinion and Consent of Counsel (General American Life Insurance Company)(18) 10. (i) Consent of Independent Registered Public Accounting Firm (Deloitte & Touche LLP) for the Depositor, Registrant and the Guarantor (filed herewith) (ii) Consent of Independent Registered Public Accounting Firm (MetLife, Inc.) (filed herewith) 11. Not Applicable. 12. Agreement Governing Contribution (5) 13. (i) Powers of Attorney for Michael K. Farrell, Jay S. Kaduson, Susan A. Buffum, Margaret C. Fechtmann, Paul A. Sylvester, Richard C. Pearson, Elizabeth M. Forget, Jeffrey A. Tupper, Charles V. Curcio and George Foulke (20) (ii) Powers of Attorney (General American Life Insurance Company) for Lisa M. Weber, Michael K. Farrell, William J. Mullaney, James L. Lipscomb, Catherine A. Rein, Stanley J. Talbi, Michael J. Vietri, William J. Wheeler, Anthony J. Williamson, Charles V. Curcio and Joseph J. Prochaska, Jr. (20) (iii) Power of Attorney (General American Life Insurance Company) for James J. Reilly (21) (iv) Power of Attorney (MetLife Investors Insurance Company) for James J. Reilly (25) (v) Power of Attorney (MetLife Investors Insurance Company) for Bennett D. Kleinberg (filed herewith) (1) incorporated herein by reference to Registrant's Form N-4 (File Nos. 333-34741 and 811-05200) filed electronically on August 29, 1997. (2) incorporated herein by reference to Registrant's Pre-Effective Amendment No. 1 on Form N-4 (File Nos. 333-50540 and 811-05200) filed electronically on March 6, 2001. (3) incorporated herein by reference to Registrant's Post-Effective Amend No.1 on Form N-4 (File Nos. 333-50540 and 811-05200) filed electronically on May 1, 2001. (4) incorporated herein by reference to Registrant's N-4 (File Nos. 333-50540 and 811-05200) filed electronically on November 22, 2000. (5) incorporated herein by reference to Registrant's Post-Effective Amendment No. 15 on Form N-4 (File Nos. 033-39100 and 811-05200) filed electronically on April 29, 1999. (6) incorporated herein by reference to Registrant's Post-Effective Amendment No. 3 on Form N-4 (File Nos. 333-59864 and 811-05200) filed electronically on April 30, 2003.
(7) incorporated herein by reference to MetLife Investors USA Separate Account A's Post-Effective Amendment No. 5 to Form N-4 (File Nos. 333-54464 and 811-03365) filed electronically on April 27, 2004. (8) incorporated herein by reference to Registrant's Post-Effective Amendment No. 8 to Form N-4 (Files Nos. 333-50540 and 811-05200) filed electronically on May 19, 2004. (9) incorporated herein by reference to Registrant's Post-Effective Amendment No. 9 to Form N-4 (Files Nos. 333-50540 and 811-05200) filed electronically on July 15, 2004. (10) incorporated herein by reference to Registrant's Post-Effective Amendment No. 11 to Form N-4 (Files Nos. 333-50540 and 811-05200) filed electronically on April 26, 2005. (11) incorporated herein by reference to Registrant's Post-Effective Amendment No. 12 to Form N-4 (Files Nos. 333-50540 and 811-05200) filed electronically on July 13, 2005. (12) incorporated herein by reference to Registrant's Post-Effective Amendment No. 7 to Form N-4 (Files Nos. 333-54358 and 811-05200) filed electronically on July 13, 2005. (13) incorporated herein by reference to Registrant's Post-Effective Amendment No. 13 to Form N-4 (Files Nos. 333-50540 and 811-5200) filed electronically on September 9, 2005. (14) incorporated herein by reference to Registrant's Post-Effective Amendment No. 14 to Form N-4 (Files Nos. 333-50540 and 811-05200) filed electronically on October 7, 2005. (15) incorporated herein by reference to Registrant's Post-Effective Amendment No. 16 to Form N-4 (Files Nos. 333-50540 and 811-05200) filed electronically on April 19, 2006. (16) incorporated herein by reference to MetLife Investors USA Separate Account A's Post-Effective Amendment No. 19 to Form N-4 (File Nos. 333-54464 and 811-03365) filed electronically on April 24, 2006. (17) incorporated herein by reference to First MetLife Investors Variable Annuity Account One's Post-Effective Amendment No. 11 to Form N-4 (Files Nos. 333-96795 and 811-08306) filed electronically on July 27, 2006. (18) incorporated herein by reference to Registrant's Post-Effective Amendment No.17 to Form N-4 (Files Nos. 333-50540 and 811-05200) filed electronically on July 28, 2006. (19) incorporated herein by reference to Registrant's Post-Effective Amendment No.15 to Form N-4 (Files Nos. 333-51950 and 811-05200) filed electronically on April 19, 2007. (20) incorporated herein by reference to Registrant's Post-Effective Amendment No.14 to Form N-4 (Files Nos. 333-59864 and 811-05200) filed electronically on April 19, 2007. (21) incorporated herein by reference to Registrant's Post-Effective Amendment No. 15 to Form N-4 (File Nos. 333-59864 and 811-05200) filed electronically on July 12, 2007. (22) incorporated herein by reference to Registrant's Post-Effective Amendment No. 17 to Form N-4 (File Nos. 333-51950 and 811-05200) filed electronically on October 31, 2007. (23) incorporated herein by reference to Registrant's Post-Effective Amendment No. 18 to Form N-4 (File Nos. 333-51950 and 811-05200) filed electronically on December 21, 2007. (24) incorporated herein by reference to Registrant's Post-Effective Amendment No. 22 to Form N-4 (File Nos. 333-51950 and 811-05200) filed electronically on April 22, 2008. (25) incorporated herein by reference to Registrant's Post-Effective Amendment No. 19 to Form N-4 (File Nos. 333-59864 and 811-80306) filed electronically on December 5, 2008.
ITEM 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR The following are the Officers and Directors who are engaged directly or indirectly in activities relating to the Registrant or the variable annuity contracts offered by the Registrant and the executive officers of the Company:
NAME AND PRINCIPAL BUSINESS ADDRESS POSITIONS AND OFFICES WITH DEPOSITOR ------------------------------------- ------------------------------------- Michael K. Farrell Chairman of the Board, President, 10 Park Avenue Chief Executive Officer and Director Morristown, NJ 07962 Susan A. Buffum Director 10 Park Avenue Morristown, NJ 07962
NAME AND PRINCIPAL BUSINESS ADDRESS POSITIONS AND OFFICES WITH DEPOSITOR ------------------------------------- ------------------------------------------------------------------ George Foulke Director 334 Madison Avenue Convent Station, NJ 07961 Jay S. Kaduson Vice President and Director 10 Park Avenue Morristown, NJ 07962 Elizabeth M. Forget Executive Vice President and Director 1095 Avenue of the Americas New York, NY 10016 Bennett D. Kleinberg Vice President and Director 1300 Hall Boulevard Bloomfield, CT 06002-2910 Richard C. Pearson Vice President, 5 Park Plaza, Suite 1900 Associate General Counsel, Secretary and Director Irvine, CA 92614 Paul A. Sylvester Director 10 Park Avenue, Morristown, NJ 07967 Jeffrey A. Tupper Assistant Vice President and Director 5 Park Plaza, Suite 1900 Irvine, CA 92614 Eric T. Steigerwalt Treasurer 1095 Avenue of the Americas New York, NY 10016 James J. Reilly Vice President-Finance (principal financial officer and principal 501 Boylston Street accounting officer) Boston, MA 02116 Kevin J. Paulson Senior Vice President 4700 Westown Parkway West Des Moines, IA 50266 Stewart M. Ashkenazy Vice President, Appointed Actuary 1095 Avenue of the Americas New York, NY 10016 Debora L. Buffington Vice President, Director of Compliance 5 Park Plaza, Suite 1900 Irvine, CA 92614 Johnathan L. Rosenthal Vice President, Chief Hedging Officer 10 Park Avenue Morristown, NJ 07962 George Luecke Vice President, Annuity Finance 1095 Avenue of the Americas New York, NY 10036 Jeffrey N. Altman Vice President 1095 Avenue of the Americas New York, NY 10016 Roberto Baron Vice President 1095 Avenue of the Americas New York, NY 10036 Betty E. Davis Vice President 1 MetLife Plaza 27-01 Queens Plaza North Long Island City, NY 11101
NAME AND PRINCIPAL BUSINESS ADDRESS POSITIONS AND OFFICES WITH DEPOSITOR ------------------------------------- ------------------------------------- Jeffrey P. Halperin Vice President 1095 Avenue of the Americas New York, NY 10036 Gregory E. Illson Vice President 501 Boylston Street Boston, MA 02116 Christopher A. Kremer Vice President 501 Boylston Street Boston, MA 02116 Karen A. Johnson Vice President 501 Boylston Street Boston, MA 02116 Deron J. Richens Vice President 5 Park Plaza, Suite 1900 Irvine, CA 92614 Marian J. Zeldin Vice President 300 Davidson Avenue Somerset, NY 08873 Paul L. LeClair Vice President 501 Boylston Street Boston, MA 02116 Robert L. Staffier Vice President 501 Boylston Street Boston, MA 02116 Mark S. Reilly Vice President 1300 Hall Boulevard Bloomfield, CT 06002-2910 Gene L. Lunman Vice President 1300 Hall Boulevard Bloomfield, CT 06002-2910 Lisa S. Kuklinski Vice President 1095 Avenue of the Americas New York, NY 10036
ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR REGISTRANT The Registrant is a separate account of MetLife Investors Insurance Company under Missouri insurance law. MetLife Investors Insurance Company is a wholly-owned direct subsidiary of MetLife, Inc., a publicly traded company. The following outline indicates those entities that are controlled by MetLife, Inc. or are under the common control of MetLife, Inc. No person is controlled by the Registrant. ORGANIZATIONAL STRUCTURE OF METLIFE, INC. AND SUBSIDIARIES AS OF DECEMBER 31, 2008 The following is a list of subsidiaries of MetLife, Inc. updated as of December 31, 2008. Those entities which are listed at the left margin (labeled with capital letters) are direct subsidiaries of MetLife, Inc. Unless otherwise indicated, each entity which is indented under another entity is a subsidiary of that other entity and, therefore, an indirect subsidiary of MetLife, Inc. Certain inactive subsidiaries have been omitted from the MetLife, Inc. organizational listing. The voting securities (excluding directors' qualifying shares, (if any)) of the subsidiaries listed are 100% owned by their respective parent corporations, unless otherwise indicated. The jurisdiction of domicile of each subsidiary listed is set forth in the parenthetical following such subsidiary. A. MetLife Group, Inc. (NY) B. MetLife Bank National Association (USA) C. Exeter Reassurance Company, Ltd. (Bermuda) D. MetLife Taiwan Insurance Company Limited (Taiwan) E. Metropolitan Tower Life Insurance Company (DE) 1. TH Tower NGP, LLC (DE) 2. Partners Tower, L.P. (DE) - a 99% limited partnership interest of Partners Tower, L.P. is held by Metropolitan Tower Life Insurance Company and 1% general partnership interest is held by TH Tower NGP, LLC (DE) 3. TH Tower Leasing, LLC (DE) 4. MetLife Reinsurance Company of Vermont (VT) 5. EntreCap Real Estate II LLC (DE) a) PREFCO Dix-Huit LLC (CT) b) PREFCO X Holdings LLC (CT) c) PREFCO Ten Limited Partnership (CT) - a 99.9% limited partnership interest of PREFCO Ten Limited Partnership is held by EntreCap Real Estate II LLC and 0.1% general partnership is held by PREFCO X Holdings LLC. d) PREFCO Vingt LLC (CT) e) PREFCO Twenty Limited Partnership (CT) - a 99% limited partnership interest of PREFCO Twenty Limited Partnership is held by EntreCap Real Estate II LLC and 1% general partnership is held by PREFCO Vingt LLC. 6. Plaza Drive Properties, LLC (DE) 7. MTL Leasing, LLC (DE) a) PREFCO IX Realty LLC (CT) b) PREFCO XIV Holdings LLC (CT) c) PREFCO Fourteen Limited Partnership (CT) - a 99.9% limited partnership interest of PREFCO Fourteen Limited Partnership is held by MTL Leasing, LLC and 0.1% general partnership is held by PREFCO XIV Holdings LLC. F. MetLife Pensiones Mexico S.A. (Mexico)- 97.4738% is owned by MetLife, Inc. and 2.5262% is owned by MetLife International Holdings, Inc. G. MetLife Chile Inversiones Limitada (Chile)- 99.9999999% is owned by MetLife, Inc. and 0.0000001% is owned by Natiloportem Holdings, Inc. 1. MetLife Chile Seguros de Vida S.A. (Chile)- 99.99% is owned by MetLife Chile Inversiones Limitada and 0.01% is owned by MetLife International Holdings, Inc. a) MetLife Chile Administradora de Mutuos Hipotecarios S.A. (Chile)- 99.99% is owned by MetLife Chile Seguros de Vida S.A. and 0.01% is owned by MetLife Chile Inversiones Limitada. H. MetLife Mexico S.A. (Mexico)- 98.70541% is owned by MetLife, Inc., 1.29459% is owned by MetLife International Holdings, Inc. 1. MetLife Afore, S.A. de C.V. (Mexico)- 99.99% is owned by MetLife Mexico S.A. and 0.01% is owned by MetLife Pensiones Mexico S.A. a) Met1 SIEFORE, S.A. de C.V. (Mexico)- 99.99% is owned by MetLife Afore, S.A. de C.V. and 0.01% is owned by MetLife Mexico S.A. b) Met2 SIEFORE, S.A. de C.V. (Mexico)- 99.99% is owned by MetLife Afore, S.A. de C.V. and 0.01% is owned by MetLife Mexico S.A. c) MetA SIEFORE Adicional, S.A. de C.V. (Mexico)- 99.99% is owned by MetLife Afore, S.A. de C.V. and .01% is owned by MetLife Mexico S.A. d) Met3 SIEFORE Basica, S.A. de C.V. (Mexico) - 99.99% is owned by MetLife Afore, S.A. de C.V. and .01% is owned by MetLife Mexico S.A. e) Met4 SIEFORE, S.A. de C.V. (Mexico) - 99.99% is owned by MetLife Afore, S.A. de C.V. and .01% is owned by MetLife Mexico S.A. f) Met5 SIEFORE, S.A. de C.V. (Mexico) - 99.99% is owned by MetLife Afore, S.A. de C.V. and .01% is owned by MetLife Mexico S.A. 2. ML Capacitacion Comercial S.A. de C.V. (Mexico) - 99% is owned by MetLife Mexico S.A. and 1% is owned by MetLife Mexico Cares, S.A. de C.V. I. MetLife Mexico Servicios, S.A. de C.V. (Mexico)- 98% is owned by MetLife, Inc. and 2% is owned by MetLife International Holdings, Inc. J. Metropolitan Life Seguros de Vida S.A. (Uruguay) K. MetLife Securities, Inc. (DE) L. Enterprise General Insurance Agency, Inc. (DE) 1. MetLife General Insurance Agency of Texas, Inc. (DE) 2. MetLife General Insurance Agency of Massachusetts, Inc. (MA) 1 M. Metropolitan Property and Casualty Insurance Company (RI) 1. Metropolitan General Insurance Company (RI) 2. Metropolitan Casualty Insurance Company (RI) 3. Metropolitan Direct Property and Casualty Insurance Company (RI) 4. Met P&C Managing General Agency, Inc. (TX) 5. MetLife Auto & Home Insurance Agency, Inc. (RI) 6. Metropolitan Group Property and Casualty Insurance Company (RI) a) Metropolitan Reinsurance Company (U.K.) Limited (United Kingdom) 7. Metropolitan Lloyds, Inc. (TX) a) Metropolitan Lloyds Insurance Company of Texas (TX)- Metropolitan Lloyds Insurance Company of Texas, an affiliated association, provides automobile, homeowner and related insurance for the Texas market. It is an association of individuals designated as underwriters. Metropolitan Lloyds, Inc., a subsidiary of Metropolitan Property and Casualty Insurance Company, serves as the attorney-in-fact and manages the association. 8. Economy Fire & Casualty Company (IL) a) Economy Preferred Insurance Company (IL) b) Economy Premier Assurance Company (IL) N. Cova Corporation (MO) 1. Texas Life Insurance Company (TX) O. MetLife Investors Insurance Company (MO) P. First MetLife Investors Insurance Company (NY) Q. Walnut Street Securities, Inc. (MO) R. Newbury Insurance Company, Limited (BERMUDA) S. MetLife Investors Group, Inc. (DE) 1. MetLife Investors Distribution Company (MO) 2. Met Investors Advisory, LLC (DE) 3. MetLife Investors Financial Agency, Inc. (TX) 2 T. MetLife International Holdings, Inc. (DE) 1. MetLife Mexico Cares, S.A. de C.V. (Mexico) a) Fundacion MetLife Mexico, A.C. (Mexico) 2. Natiloportem Holdings, Inc. (DE) a) Servicios Administrativos Gen, S.A. de C.V. (Mexico) i) MLA Comercial, S.A. de C.V. (Mexico) 99% is owned by Servicios Administrativos Gen, S.A. de C.V. and 1% is owned by MetLife Mexico Cares, S.A. de C.V. ii) MLA Servicios, S.A. de C.V. (Mexico) 99% is owned by Servicios Administrativos Gen, S.A. de C.V. and 1% is owned by MetLife Mexico Cares, S.A. de C.V. 3. MetLife India Insurance Company Limited (India)- 26% is owned by MetLife International Holdings, Inc. and 74% is owned by third parties. 4. Metropolitan Life Insurance Company of Hong Kong Limited (Hong Kong)- 99.99924% is owned by MetLife International Holdings, Inc. and 0.00076% is owned by Natiloporterm Holdings, Inc. 5. MetLife Seguros de Vida S.A. (Argentina)- 95.2499% is owned by MetLife International Holdings, Inc. and 4.7473% is owned by Natiloportem Holdings, Inc. 6. MetLife Insurance Company of Korea Limited (South Korea)- 14.64% of MetLife Insurance Company of Korea Limited is owned by MetLife, Mexico, S.A. and 85.36% is owned by Metlife International Holdings, Inc. 7. Metropolitan Life Seguros e Previdencia Privada S.A. (Brazil)- 66.6617540% is owned by MetLife International Holdings, Inc. and 33.3382457% is owned by MetLife Worldwide Holdings, Inc. and 0.0000003% is owned by Natiloportem Holdings, Inc. 8. MetLife Global, Inc. (DE) 9. MetLife Administradora de Fundos Multipatrocinados Ltda (Brazil) - 95.4635% is owned by MetLife International Holdings, Inc. and 4.5364% is owned by Natiloportem Holdings, Inc. 10. MetLife Insurance Limited (United Kingdom) 11. MetLife General Insurance Limited (Australia) 12. MetLife Limited (United Kingdom) 13. MetLife Insurance S.A./NV (Belgium) 14. MetLife Services Limited (United Kingdom) 15. MetLife Insurance Limited (Australia) a) MetLife Investments Pty Limited (Australia) i) MetLife Insurance and Investment Trust (Australia) - MetLife Insurance and Investment Trust is a trust vehicle, the trustee of which is MetLife Investment Pty Limited. MetLife Investments Pty Limited is a wholly owned subsidiary of MetLife Insurance Limited. b) MetLife Services (Singapore) PTE Limited (Australia) 16. MetLife Seguros de Retiro S.A. (Argentina) - 96.8819% is owned by MetLife International Holdings, Inc. and 3.1180% is owned by Natiloportem Holdings, Inc. 17. Best Market S.A. (Argentina) - 5% of the shares are held by Natiloportem Holdings, Inc. and 94.9999% is owned by MetLife International Holdings Inc. 18. Compania Previsional MetLife S.A. (Brazil) - 95.4635% is owned by MetLife International Holdings, Inc. and 4.5364% is owned by Natiloportem Holdings, Inc. (a) Met AFJP S.A. (Argentina) - 75.4088% of the shares of Met AFJP S.A. are held by Compania Previsional MetLife SA, 19.5912% is owned by MetLife Seguros de Vida SA, 3.9689% is held by Natiloportem Holdings, Inc. and 1.0310% is held by MetLife Seguros de Retiro SA. 19. MetLife Worldwide Holdings, Inc. (DE) a) MetLife Towarzystwo Ubezpieczen na Zycie Spolka Akcyjna. (Poland) b) MetLife Direct Co., Ltd. (Japan) c) MetLife Limited (Hong Kong) U. Metropolitan Life Insurance Company (NY) 1. 334 Madison Euro Investments, Inc. (DE) a) Park Twenty Three Investments Company (United Kingdom)- 1% voting control of Park Twenty Three Investments Company is held by St. James Fleet Investments Two Limited. 1% of the shares of Park Twenty Three Investments Company is held by Metropolitan Life Insurance Company. 99% is owned by 334 Madison Euro Investment, Inc. i) Convent Station Euro Investments Four Company (United Kingdom)- 1% voting control of Convent Station Euro Investments Four Company is held by 334 Madison Euro Investments, Inc. as nominee for Park Twenty Three Investments Company. 99% is owned by Park Twenty Three Investments Company. 2. St. James Fleet Investments Two Limited (Cayman Islands)- 34% of the shares of St. James Fleet Investments Two Limited is held by Metropolitan Life Insurance Company. 3. One Madison Investments (Cayco) Limited (Cayman Islands)- 10.1% voting control of One Madison Investments (Cayco) Limited is held by Convent Station Euro Investments Four Company. 89.9% of the shares of One Madison Investments (Cayco) Limited is held by Metropolitan Life Insurance Company. 4. CRB Co, Inc. (MA)- AEW Real Estate Advisors, Inc. holds 49,000 preferred non-voting shares and AEW Advisors, Inc. holds 1,000 preferred non-voting shares of CRB, Co., Inc. 5. GA Holding Corp. (MA) 3 6. Thorngate, LLC (DE) 7. Alternative Fuel I, LLC (DE) 8. Transmountain Land & Livestock Company (MT) 9. MetPark Funding, Inc. (DE) 10. HPZ Assets LLC (DE) 11. Missouri Reinsurance (Barbados), Inc. (Barbados) 12. Metropolitan Tower Realty Company, Inc. (DE) a) Midtown Heights, LLC (DE) 13. MetLife Real Estate Cayman Company (Cayman Islands) 14. Metropolitan Marine Way Investments Limited (Canada) 15. MetLife Private Equity Holdings, LLC (DE) 16. 23rd Street Investments, Inc. (DE) a) Mezzanine Investment Limited Partnership-BDR (DE)- 1% General Partnership interest is held by 23rd Street Investments, Inc., 99% Limited Partnership Interest is held by Metropolitan Life Insurance Company. b) Mezzanine Investment Limited Partnership-LG (DE)- 1% General Partnership interest is held by 23rd Street Investments, Inc., 99% Limited Partnership Interest is held by Metropolitan Life Insurance Company. c) MetLife Capital Credit L.P. (DE)- 1% General Partnership interest is held by 23rd Street Investments, Inc., 99% Limited Partnership Interest is held by Metropolitan Life Insurance Company. d) MetLife Capital Limited Partnership (DE)- 1% General Partnership interest is held by 23rd Street Investments, Inc., 99% Limited Partnership Interest is held by Metropolitan Life Insurance Company. 17. Hyatt Legal Plans, Inc. (DE) a) Hyatt Legal Plans of Florida, Inc. (FL) 18. MetLife Holdings, Inc. (DE) a) MetLife Credit Corp. (DE) b) MetLife Funding, Inc. (DE) 4 19. Bond Trust Account A (MA) 20. MetLife Investments Asia Limited (Hong Kong). 21. MetLife Investments Limited (United Kingdom)- 23rd Street Investments, Inc. holds one share of MetLife Investments Limited. 22. MetLife Latin America Asesorias e Inversiones Limitada (Chile)- 23rd Street Investments, Inc. holds 0.01% of MetLife Latin America Asesorias e Inversiones Limitada. 23. New England Life Insurance Company (MA) a) MetLife Advisers, LLC (MA) b) New England Securities Corporation (MA) 24. GenAmerica Financial, LLC (MO) a) GenAmerica Capital I (DE) b) General American Life Insurance Company (MO) i) GenAmerica Management Corporation (MO) 5 25. Corporate Real Estate Holdings, LLC (DE) 26. Ten Park SPC (CAYMAN ISLANDS ) - 1% voting control of Ten Park SPC is held by 23rd Street Investments, Inc. 27. MetLife Tower Resources Group, Inc. (DE) 28. Headland - Pacific Palisades, LLC (CA) 29. Headland Properties Associates (CA) - 1% is owned by Headland - Pacific Palisades, LLC and 99% is owned by Metropolitan Life Insurance Company. 30. Krisman, Inc. (MO) 31. Special Multi-Asset Receivables Trust (DE) 32. White Oak Royalty Company (OK) 33. 500 Grant Street GP LLC (DE) 34. 500 Grant Street Associates Limited Partnership (CT) - 99% of 500 Grant Street Associates Limited Partnership is held by Metropolitan Life Insurance Company and 1% by 500 Grant Street GP LLC 35. MetLife Canada/MetVie Canada (Canada) 36. MetLife Retirement Services LLC (NJ) a) MetLife Investment Funds Services LLC (NJ) (i) MetLife Investment Funds Management LLC (NJ) (ii) MetLife Associates LLC (DE) 37. Euro CL Investments LLC (DE) 38. MEX DF Properties, LLC (DE) 39. MSV Irvine Property, LLC (DE) - 4% of MSV Irvine Property, LLC is owned by Metropolitan Tower Realty Company, Inc. and 96% is owned by Metropolitan Life Insurance Company 40. MetLife Properties Ventures, LLC (DE) a) Citypoint Holdings II Limited (UK) 41. Housing Fund Manager, LLC (DE) a) MTC Fund I, LLC (DE) 0.01% of MTC Fund I, LLC is held by Housing Fund Manager, LLC. - Housing Fund Manager, LLC is the managing member LLC and the remaining interests are held by a third party member. b) MTC Fund II, LLC (DE) - 0.01% of MTC Fund II, LLC is held by Housing Fund Manager, LLC. - Housing Fund Manager, LLC is the managing member LLC and the remaining interests are held by a third party member. c) MTC Fund III, LLC (DE) - 0.01% of MTC Fund III, LLC is held by Housing Fund Manager, LLC. - Housing Fund Manager, LLC is the managing member LLC and the remaining interests are held by a third party member. 42. MLIC Asset Holdings, LLC (DE) 43. 85 Brood Street LLC (CT) 44. The Building at 575 LLC (DE) V. MetLife Capital Trust III (DE) W. MetLife Capital Trust IV (DE) X. MetLife Insurance Company of Connecticut (CT) 1. MetLife Property Ventures Canada ULC (Canada) 2. Pilgrim Alternative Investments Opportunity Fund I, LLC (DE) - 67% is owned by MetLife Insurance Company of Connecticut, and 33% is owned by third party. 3. Pilgrim Alternative Investments Opportunity Fund III Associates, LLC (CT) - 67% is owned by MetLife Insurance Company of Connecticut, and 33% is owned by third party. 4. Pilgrim Investments Highland Park, LLC (DE) 5. Metropolitan Connecticut Properties Ventures, LLC (DE) 6. MetLife Canadian Property Ventures LLC (NY) 7. Euro TI Investments LLC (DE) 8. Greenwich Street Investments, LLC (DE) a) Greenwich Street Capital Offshore Fund, Ltd. (Virgin Islands) b) Greenwich Street Investments, L.P. (DE) 9. One Financial Place Corporation (DE) - 100% is owned in the aggregate by MetLife Insurance Company of Connecticut. 10. Plaza LLC (CT) a) Tower Square Securities, Inc. (CT) 11. TIC European Real Estate LP, LLC (DE) 12. MetLife European Holdings, Inc. (UK) a) MetLife Europe Limited (IRELAND) i) MetLife Pensions Trustees Limited (UK) b) MetLife Assurance Limited (UK) 13. Travelers International Investments Ltd. (Cayman Islands) 14. Euro TL Investments LLC (DE) 15. Corrigan TLP LLC (DE) 16. TLA Holdings LLC (DE) a) The Prospect Company (DE) i) Panther Valley, Inc. (NJ) 17. TRAL & Co. (CT) - TRAL & Co. is a general partnership. Its partners are MetLife Insurance Company of Connecticut and Metropolitan Life Insurance Company. 18. Tribeca Distressed Securities, L.L.C. (DE) 19. MetLife Investors USA Insurance Comapny (DE) Y. MetLife Reinsurance Company of South Carolina (SC) Z. MetLife Investment Advisors Company, LLC (DE) AA. MetLife Standby I, LLC (DE) 1. MetLife Exchange Trust I (DE) BB. MetLife Services and Solutions, LLC (DE) 1. MetLife Solutions Pte. Ltd. (Singapore) i) MetLife Services East Private Limited (India) ii) MetLife Global Operations Support Center Private Limited - 99.99999% is owned by MetLife Solutions Pte. Ltd. and 0.00001% is owned by Natiloportem Holdings, Inc. CC. SafeGuard Health Enterprises, Inc. (DE) 1. SafeGuard Dental Services, Inc. (DE) 2. SafeGuard Health Plans, Inc. (CA) 3. SafeHealth Life Insurance Company (CA) 4. SafeGuard Health Plans, Inc. (FL) 5. SafeGuard Health Plans, Inc. (NV) 6. SafeGuard Health Plans, Inc. (TX) DD. MetLife Capital Trust X (DE) EE. Cova Life Management Company (DE) FF. MetLife Reinsurance Company of Charleston (SC) GG. Federal Flood Certification Corp (TX) HH. MetLife Planos Odontologicos Ltda. (Brazil) II. Metropolitan Realty Management, Inc. (DE) The voting securities (excluding directors' qualifying shares, if any) of each subsidiary shown on the organizational chart are 100% owned by their respective parent corporation, unless otherwise indicated. In addition to the entities shown on the organizational chart, MetLife, Inc. (or where indicated, a subsidiary) also owns interests in the following entities: 1) Metropolitan Life Insurance Company owns varying interests in certain mutual funds distributed by its affiliates. These ownership interests are generally expected to decrease as shares of the funds are purchased by unaffiliated investors. 2) Mezzanine Investment Limited Partnerships ("MILPs"), Delaware limited partnerships, are investment vehicles through which investments in certain entities are held. A wholly owned subsidiary of Metropolitan Life Insurance Company serves as the general partner of the limited partnerships and Metropolitan Life Insurance Company directly owns a 99% limited partnership interest in each MILP. The MILPs have various ownership and/or debt interests in certain companies. 3) The Metropolitan Money Market Pool and MetLife Intermediate Income Pool are pass-through investment pools, of which Metropolitan Life Insurance Company and/or its subsidiaries and/or affiliates are general partners. NOTE: THE METLIFE, INC. ORGANIZATIONAL CHART DOES NOT INCLUDE REAL ESTATE JOINT ---- VENTURES AND PARTNERSHIPS OF WHICH METLIFE, INC. AND/OR ITS SUBSIDIARIES IS AN INVESTMENT PARTNER. IN ADDITION, CERTAIN INACTIVE SUBSIDIARIES HAVE ALSO BEEN OMITTED. 6 ITEM 27. NUMBER OF CONTRACT OWNERS As of January 31, 2009, there were 937 qualified contract owners and 1,182 non-qualified contract owners of Class C contracts. ITEM 28. INDEMNIFICATION The Depositor's parent, MetLife, Inc. has secured a Financial Institutions Bond in the amount of $50,000,000, subject to a $5,000,000 deductible. MetLife, Inc. also maintains a Directors and Officers Liability and Corporate Reimbursement Insurance Policy with limits of $400 million under which the Depositor and MetLife Investors Distribution Company, the Registrant's underwriter (the "underwriter"), as well as certain other subsidiaries of MetLife are covered. A provision in MetLife, Inc.'s by-laws provides for the indemnification (under certain circumstances) of individuals serving as directors or officers of certain organizations, including the Depositor and the Underwriter. The Bylaws of the Company (Article IV, Section 1) provide that: Each person who is or was a director, officer or employee of the corporation or is or was serving at the request of the corporation as a director, officer or employee of another corporation, partnership, joint venture, trust or other enterprise (including the heirs, executors, administrators or estate of such person) shall be indemnified by the corporation as of right to the full extent permitted or authorized by the laws of the State of Missouri, as now in effect and as hereafter amended, against any liability, judgment, fine, amount paid in settlement, cost and expenses (including attorney's fees) asserted or threatened against and incurred by such person in his capacity as or arising out of his status as a director, officer or employee of the corporation or if serving at the request of the corporation, as a director, officer or employee of another corporation, partnership, joint venture, trust or other enterprise. The indemnification provided by this bylaw provision shall not be exclusive of any other rights to which those indemnified may be entitled under any other bylaw or under any agreement, vote of shareholders or disinterested directors or otherwise, and shall not limit in any way any right which the corporation may have to make different or further indemnification with respect to the same or different persons or classes of persons. Insofar as indemnification for liability arising under the Securities Act of 1933 may be permitted to directors and officers or controlling persons of the Company pursuant to the foregoing, or otherwise, the Company 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 Company of expenses incurred or paid by a director, officer or controlling person of the Company 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 Company will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. ITEM 29. PRINCIPAL UNDERWRITERS (a) MetLife Investors Distribution Company is the principal underwriter for the following investment companies (other than Registrant): Met Investors Series Trust MetLife Investors USA Separate Account A MetLife Investors USA Variable Life Account A First MetLife Investors Variable Annuity Account One MetLife Investors Variable Annuity Account Five MetLife Investors Variable Life Account One MetLife Investors Variable Life Account Five General American Separate Account Eleven General American Separate Account Twenty-Eight General American Separate Account Twenty-Nine General American Separate Account Two Security Equity Separate Account Twenty-Six Security Equity Separate Account Twenty-Seven MetLife of CT Separate Account QPN for Variable Annuities MetLife of CT Fund UL for Variable Life Insurance MetLife of CT Fund UL III for Variable Life Insurance MetLife of CT Separate Account Eleven for Variable Annuities Metropolitan Life Separate Account E Metropolitan Series Fund, Inc. Metropolitan Tower Life Separate Account One Metropolitan Tower Life Separate Account Two Metropolitan Life Separate Account UL Paragon Separate Account A Paragon Separate Account B Paragon Separate Account C Paragon Separate Account D Metropolitan Series Fund, Inc. Metropolitan Life Variable Annuity Separate Account II Metropolitan Life Variable Annuity Separate Account I (b) MetLife Investors Distribution Company is the principal underwriter for the Contracts. The following persons are the officers and directors of MetLife Investors Distribution Company. The principal business address for MetLife Investors Distribution Company is 5 Park Plaza, Suite 1900, Irvine, CA 92614.
NAME AND PRINCIPAL BUSINESS ADDRESS POSITIONS AND OFFICES WITH UNDERWRITER ------------------------------------- -------------------------------------------------------------------- Michael K. Farrell Director 10 Park Avenue Morristown, NJ 07962 Craig W. Markham Director and Vice President 13045 Tesson Ferry Road St. Louis, MO 63128 William J. Toppeta Director 1095 Avenue of the Americas New York, NY 10036 Paul A. Sylvester President, National Sales Manager-Annuities & LTC 10 Park Avenue Morristown, NJ 07962 Elizabeth M. Forget Executive Vice President, Investment Fund Management & Marketing 1095 Avenue of the Americas New York, NY 10036 Paul A. LaPiana Executive Vice President, National Sales Manager-Life 5 Park Plaza, Suite 1900 Irvine, CA 92614 Richard C. Pearson Executive Vice President, General Counsel and Secretary 5 Park Plaza, Suite 1900 Irvine, CA 92614 Peter Gruppuso Vice President, Chief Financial Officer 485-E US Highway 1 South Iselin, NJ 08830 John C. Kennedy Senior Vice President, National Sales Manager, Bank and 1 MetLife Plaza Broker/Dealer 27-01 Queens Plaza North Long Island City, NY 11101 Douglas P. Rodgers Senior Vice President, Channel Head-LTC 10 Park Avenue Morristown, NJ 07962 Curtis Wohlers Senior Vice President, National Sales Manager, Independent Planners 1 MetLife Plaza and Insurance Advisors 27-01 Queens Plaza North Long Island City, NY 11101 Jeffrey A. Barker Senior Vice President, Channel Head-Independent Accounts 1 MetLife Plaza 27-01 Queens Plaza North Long Island City, NY 11101 Andrew Aiello Senior Vice President, Channel Head-National Accounts 5 Park Plaza, Suite 1900 Irvine, CA 92614 Jay S. Kaduson Senior Vice President 10 Park Avenue Morristown, NJ 07962 Eric T. Steigerwalt Treasurer 1095 Avenue of the Americas New York, NY 10036 Debora L. Buffington Vice President, Director of Compliance 5 Park Plaza, Suite 1900 Irvine, CA 92614 David DeCarlo Vice President 5 Park Plaza, Suite 1900 Irvine, CA 92614
NAME AND PRINCIPAL BUSINESS ADDRESS POSITIONS AND OFFICES WITH UNDERWRITER ------------------------------------- --------------------------------------- Paul M. Kos Vice President 5 Park Plaza, Suite 1900 Irvine, CA 92614 Deron J. Richens Vice President 5 Park Plaza, Suite 1900 Irvine, CA 92614 Cathy Sturdivant Vice President 5 Park Plaza, Suite 1900 Irvine, CA 92614 Paulina Vakouros Vice President 1095 Avenue of the Americas New York, NY 10036
(c) Compensation From the Registrant: The following commissions and other compensation were received by the Distributor, directly or indirectly, from the Registrant during the Registrant's last fiscal year:
(1) (2) (3) (4) (5) Net Underwriting Discounts And Compensation Brokerage Other Name of Principal Underwriter Commissions On Redemption Commissions Compensation ----------------------------------------- ----------------- --------------- ------------- ------------- MetLife Investors Distribution Company $85,020,359 $0 $0 $0
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS The following companies will maintain possession of the documents required by Section 31(a) of the Investment Company Act of 1940 and the Rules thereunder: (a) Registrant (b) MetLife Annuity Operations, 4700 Westown Parkway, Bldg. 4, Suite 200, West Des Moines, IA 50266 (c) State Street Bank & Trust Company, 225 Franklin Street, Boston, MA 02110 (d) MetLife Investors Distribution Company, 5 Park Plaza, Suite 1900, Irvine, CA 92614 (e) MetLife Investors Insurance Company, 5 Park Plaza, Suite 1900, Irvine, CA 92614 (f) MetLife, 4010 Boy Scout Blvd., Tampa, FL 33607 (g) MetLife, 501 Boylston Street, Boston, MA 02116 (h) MetLife, 200 Park Avenue, New York, NY 10166 (i) General American Life Insurance Company, 13045 Tesson Ferry Road, St. Louis, MO 63128 (with respect to the Guarantee Agreement only) ITEM 31. MANAGEMENT SERVICES Not Applicable. ITEM 32. UNDERTAKINGS a. Registrant hereby undertakes to file a post-effective amendment to this registration statement as frequently as is necessary to ensure that the audited financial statements in the registration statement are never more than sixteen (16) months old for so long as payment under the variable annuity contracts may be accepted. b. Registrant hereby undertakes to include either (1) as part of any application to purchase a contract offered by the Prospectus, a space that an applicant can check to request a Statement of Additional Information, or (2) a postcard or similar written communication affixed to or included in the Prospectus that the applicant can remove to send for a Statement of Additional Information. c. Registrant hereby undertakes to deliver any Statement of Additional Information and any financial statement required to be made available under this Form promptly upon written or oral request. d. During any time there are insurance obligations outstanding and covered by the guarantee issued by General American Life Insurance Company ("Guarantee Period"), previously filed as an exhibit with the SEC (the "Guarantee"), the Depositor hereby undertakes to provide notice to contract owners covered by the Guarantee promptly after the happening of significant events related to the Guarantee. These significant events include: (i) termination of the Guarantee that has a material adverse effect on the contract owner's rights under the Guarantee; (ii) a default under the Guarantee that has a material adverse effect on the contract owner's rights under the Guarantee; or (iii) the insolvency of General American Life Insurance Company ("Guarantor"). Depositor hereby undertakes during the Guarantee Period to cause Registrant to file post-effective amendments to this Registration Statement as frequently as is necessary to ensure that the current annual audited financial statements of the Guarantor in the Registration Statement are updated to be as of a date not more than 16 months prior to the effective date of this Registration Statement, and to cause Registrant to include as an exhibit to this Registration Statement the consent of the independent registered public accounting firm of the Guarantor regarding such financial statements. During the Guarantee Period, the Depositor hereby undertakes to include in the prospectus to contract owners, an offer to supply the Statement of Additional Information which shall contain the annual audited financial statements of the Guarantor, free of charge upon a contract owner's request. REPRESENTATIONS MetLife Investors Insurance Company ("Company") hereby represents that the fees and charges deducted under the Contracts described in the Prospectus, in the aggregate, are reasonable in relation to the services rendered, the expenses to be incurred and the risks assumed by the Company. The Company hereby represents that it is relying upon a No-Action Letter issued to the American Council of Life Insurance dated November 28, 1988 (Commission ref. IP-6-88) and that the following provisions have been complied with: 1. Include appropriate disclosure regarding the redemption restrictions imposed by Section 403(b)(11) in each registration statement, including the prospectus, used in connection with the offer of the contract; 2. Include appropriate disclosure regarding the redemption restrictions imposed by Section 403(b)(11) in any sales literature used in connection with the offer of the contract; 3. Instruct sales representatives who solicit participants to purchase the contract specifically to bring the redemption restrictions imposed by Section 403(b)(11) to the attention of the potential participants; 4. Obtain from each plan participant who purchases a Section 403(b) annuity contract, prior to or at the time of such purchase, a signed statement acknowledging the participant's understanding of (1) the restrictions on redemption imposed by Section 403(b)(11), and (2) other investment alternatives available under the employer's Section 403(b) arrangement to which the participant may elect to transfer his contract value. SIGNATURES As required by the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant certifies that it meets the requirements of Securities Act Rule 485(b) for effectiveness of this Registration Statement and has caused this Post-Effective Amendment to the Registration Statement to be signed on its behalf, in the City of Irvine, and State of California, on this 14th day of April, 2009. METLIFE INVESTORS VARIABLE ANNUITY ACCOUNT ONE (Registrant) By: METLIFE INVESTORS INSURANCE COMPANY By: /s/ Richard C. Pearson ------------------------------------ Richard C. Pearson Vice President and Associate General Counsel METLIFE INVESTORS INSURANCE COMPANY (Depositor) By: /s/ Richard C. Pearson ------------------------------------ Richard C. Pearson Vice President and Associate General Counsel As required by the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities indicated on April 14, 2009. /s/ Michael K. Farrell* Chairman of the Board, Chief Executive ------------------------------------ Officer, President and Director Michael K. Farrell /s/ Jay S. Kaduson* Director and Vice President ------------------------------------- Jay S. Kaduson /s/ James J. Reilly* Vice President-Finance (principal ------------------------------------- financial officer and principal James J. Reilly accounting officer) /s/ Susan A. Buffum* Director ------------------------------------- Susan A. Buffum /s/ Elizabeth M. Forget* Director ------------------------------------ Elizabeth M. Forget /s/ George Foulke* Director ------------------------------------- George Foulke /s/ Paul A. Sylvester* Director ------------------------------------- Paul A. Sylvester /s/ Richard C. Pearson* Director, Vice President, Associate ------------------------------------- General Counsel and Secretary Richard C. Pearson /s/ Jeffrey A. Tupper* Director and Assistant Vice President ------------------------------------- Jeffrey A. Tupper /s/ Bennett D. Kleinberg* ------------------------------------- Director and Vice President Bennett D. Kleinberg *By: /s/ Michele H. Abate ----------------------------------- Michele H. Abate, Attorney-In-Fact April 14, 2009 * MetLife Investors Insurance Company. Executed by Michele H. Abate, Esquire on behalf of those indicated, pursuant to powers of attorney incorporated herein by reference to Registrant's Post-Effective Amendment No. 14 to Form N-4 (File Nos. 333-59864/811-05200) filed as Exhibit 13(i) on April 19, 2007, except the power of attorney for James J. Reilly, which is incorporated herein by reference to Registrant's Post-Effective Amendment No. 19 to Form N-4 (File Nos. 333-59864/811-05200) filed as Exhibit 13(iv) on December 5, 2008, and the power of attorney for Bennett D. Kleinberg, which is filed herewith. As required by the Securities Act of 1933, General American Life Insurance Company has caused this Post-Effective Amendment to the Registration Statement to be signed on its behalf, in the City of St. Louis, and State of Missouri, on this 14th day of April, 2009. GENERAL AMERICAN LIFE INSURANCE COMPANY (Guarantor) By: /s/ William C. Lane ------------------------------------ William C. Lane Vice President and Associate General Counsel As required by the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities indicated on April 14, 2009. /s/ Lisa M. Weber* Chairman of the Board, Chief Executive ------------------------------------- Officer, President and Director Lisa M. Weber /s/ Michael K. Farrell* Director ------------------------------------- Michael K. Farrell /s/ William J. Mullaney* Director ------------------------------------- William J. Mullaney /s/ James L. Lipscomb* Director ------------------------------------- James L. Lipscomb /s/ Joseph J. Prochaska, Jr.* Executive Vice President and Chief ------------------------------------- Accounting Officer Joseph J. Prochaska, Jr. /s/ Stanley J. Talbi* Director ------------------------------------- Stanley J. Talbi /s/ Michael J. Vietri* Director ------------------------------------- Michael J. Vietri /s/ William J. Wheeler* Director ------------------------------------- William J. Wheeler /s/ James J. Reilly* Vice President (principal financial ------------------------------------- officer) James J. Reilly ------------------------------------- Senior Vice President, Treasurer and Eric T. Steigerwalt Director *By: /s/ Michele H. Abate ----------------------------------- Michele H. Abate, Attorney-In-Fact April 14, 2009 * General American Life Insurance Company. Executed by Michele H. Abate, Esquire on behalf of those indicated pursuant to powers of attorney incorporated herein by reference to Registrant's Post-Effective Amendment No. 14 to Form N-4 (File Nos. 333-59864/811-05200) filed as Exhibit 13(ii) on April 19, 2007, except for the Power of Attorney for James J. Reilly, which is incorporated herein by reference to Registrant's Post-Effective Amendment No. 15 to Form N-4 (File Nos. 333-59864/811-05200) filed as Exhibit 13(iii) on July 12, 2007. INDEX TO EXHIBITS 10 (i) Consent of Independent Registered Public Accounting Firm (Deloitte & Touche LLP) for the Depositor, Registrant and the Guarantor 10 (ii) Consent of Independent Registered Public Accounting Firm (MetLife, Inc.) (Deloitte & Touche LLP) 13 (v) Power of Attorney for Bennett D. Kleinberg