As filed with the Securities and Exchange Commission on April 15, 2013

Registration No. 033-53342

811-07280

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.

Form N-4

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933
Post-Effective Amendment No. 27	x

and

REGISTRATION STATEMENT

UNDER

THE INVESTMENT COMPANY ACT OF 1940

Amendment No. 85 x

NYLIAC VARIABLE ANNUITY

SEPARATE ACCOUNT-I

(Exact Name of Registrant)

NEW YORK LIFE INSURANCE AND

ANNUITY CORPORATION

(Name of Depositor)

51 Madison Avenue,

New York, New York 10010

(Address of Depositor’s Principal Executive Office)

Depositor’s Telephone Number: (212) 576-7000

Richard P. Bowman, Esq.

New York Life Insurance and Annuity Corporation

51 Madison Avenue

New York, New York 10010

(Name and Address of Agent for Service)

Copy to:

Richard T. Choi, Esq. Jorden Burt LLP 1025 Thomas Jefferson Street, NW Suite 400 East Washington, DC 20007-5208 George S. Shively, Esq. Senior Vice President and Deputy General Counsel New York Life Insurance Company 51 Madison Avenue New York, New York 10010

Approximate Date of Proposed Public Offering: Continuous

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, 2013 pursuant to paragraph (b) of Rule 485.

¨ 60 days after filing pursuant to paragraph (a)(1) of Rule 485.

¨ on                    pursuant to paragraph (a)(1) of Rule 485.

If appropriate, check the following box:

¨ This post-effective amendment designates a new effective date for a previously filed post-effective amendment.

Title of Securities Being Registered: Units of interest in a separate account under variable annuity contracts.

PROSPECTUS DATED May 1, 2013

for the

New York Life Flexible Premium Variable Annuity

From

NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION

(A Delaware Corporation)

51 Madison Avenue, Room 251 New York, New York 10010

Investing in

NYLIAC Variable Annuity Separate Account-I

NYLIAC Variable Annuity Separate Account-II

NYLIAC Variable Annuity Separate Account-III

This Prospectus describes the individual New York Life Flexible Premium Variable Annuity policies. Policies investing in NYLIAC Variable Annuity Separate Account-I and NYLIAC Variable Annuity Separate Account II were policies that NYLIAC offered for sale prior to October 1, 1999. Prior to May 9, 2002, these policies continued to be offered where policies investing in NYLIAC Variable Annuity Separate Account III were not yet available. Policies investing in NYLIAC Variable Annuity Separate Account-III were policies that NYLIAC offered for sale prior to July 16, 2012. New York Life Insurance and Annuity Corporation (“NYLIAC”) issues these policies. We designed these policies to assist individuals with their long-term retirement planning or other long-term needs. You can use these policies with retirement plans that do or do not qualify for special federal income tax treatment. The policies offer flexible premium payments, access to your money through partial withdrawals (some withdrawals may be subject to a surrender charge and/or tax penalty), a choice of when Income Payments will commence, and a guaranteed death benefit if the owner or Annuitant dies before Income Payments have commenced.

Your premium payments accumulate on a tax-deferred basis. This means your earnings are not taxed until you take money out of your policy, which can be done in several ways. You can split your premium payments among a Fixed Account and the Investment Divisions listed below.

• MainStay VP Balanced — Service Class • MainStay VP Bond • MainStay VP Cash Management • MainStay VP Common Stock • MainStay VP Conservative Allocation — Service Class • MainStay VP Convertible • MainStay VP Cornerstone Growth • MainStay VP DFA/DuPont Capital Emerging Markets Equity • MainStay VP Eagle Small Cap Growth • MainStay VP Floating Rate — Service Class • MainStay VP Government • MainStay VP Growth Allocation — Service Class • MainStay VP High Yield Corporate Bond • MainStay VP ICAP Select Equity • MainStay VP Income Builder • MainStay VP International Equity • MainStay VP Janus Balanced • MainStay VP Large Cap Growth • MainStay VP Marketfield — Service Class • MainStay VP MFS^® Utilities — Service Class • MainStay VP Mid Cap Core • MainStay VP Moderate Allocation — Service Class • MainStay VP Moderate Growth Allocation — Service Class • MainStay VP PIMCO Real Return — Service Class • MainStay VP S&P 500 Index • MainStay VP T. Rowe Price Equity Income • MainStay VP Unconstrained Bond — Service Class • MainStay VP U.S. Small Cap • MainStay VP Van Eck Global Hard Assets — Initial Class • BlackRock^® Global Allocation V.I. Fund — Class III Shares • Columbia Variable Portfolio — Small Cap Value Fund — Class 2 • Dreyfus IP Technology Growth • Fidelity^® VIP Contrafund^® • Fidelity^® VIP Equity-Income • Fidelity^® VIP Mid Cap — Service Class 2 • Invesco V.I. American Value Fund — Series II • Janus Aspen Global Research Portfolio • MFS^® Investors Trust Series • MFS^® Research Series • Neuberger Berman AMT Mid-Cap Growth Portfolio — Class S • Royce Micro-Cap Portfolio — Investment Class • UIF U.S. Real Estate — Class II • Victory VIF Diversified Stock — Class A Shares

Some Investment Divisions offered in policies issued prior to June 2, 2003 differ from Investment Divisions offered in policies issued on or after June 2, 2003. Please refer to the Examples Section of this prospectus for the corresponding Investment Division with the highest portfolio company fees and expenses available to you.

We do not guarantee the investment performance of these variable investment divisions. Depending on current market conditions, you can make or lose money in any of the investment divisions.

You should read this Prospectus carefully before investing and keep it for future reference. This Prospectus is not valid unless it is accompanied by the current prospectuses for the MainStay VP Funds Trust, the BlackRock^® Variable Series Funds, Inc., the Columbia Funds Variable Insurance Trust, the Dreyfus Investment Portfolios, the Fidelity Variable Insurance Products Fund, AIM Variable Insurance Funds (Invesco Variable Insurance Funds), the Janus Aspen Series, the MFS^® Variable Insurance Trust, the Neuberger Berman Advisers Management Trust, The Royce Capital Fund, the Universal Institutional Funds, Inc. and the Victory Variable Insurance Funds (the “Funds,” and each individually, a “Fund”). Each Investment Division invests in shares of a corresponding Fund portfolio. Please contact us at

(800) 598-2019, or your registered representative if you do not have the accompanying book of underlying fund prospectuses.

To learn more about the policy you can obtain a copy of the Statement of Additional Information (“SAI”), dated May 1, 2013. The SAI has been filed with the Securities and Exchange Commission (“SEC”) and is incorporated by reference into this Prospectus. The table of contents for the SAI appears at the end of this Prospectus. For a free copy of the SAI, call Us at (800) 598-2019 or write to Us at the address noted above. The SEC maintains a website (http://www.sec.gov) that contains the SAI and other information that is filed electronically with the SEC.

The SEC has not approved or disapproved these securities or passed upon the adequacy or accuracy of this Prospectus. Any representation to the contrary is a criminal offense.

The policies involve risks, including potential loss of principal invested. The policies are not deposits or obligations of, or guaranteed or endorsed by, any bank, and are not federally insured by the FDIC, the Federal Reserve Board, or any other agency.

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TABLE OF CONTENTS

	Page
DEFINITIONS		3
TABLES OF FEES AND EXPENSES		5
QUESTIONS AND ANSWERS ABOUT NEW YORK LIFE FLEXIBLE PREMIUM VARIABLE ANNUITY		10
How Do I Contact NYLIAC?		14
FINANCIAL STATEMENTS		16
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION AND THE SEPARATE ACCOUNT		39
New York Life Insurance and Annuity Corporation		39
The Separate Accounts		39
The Portfolios		39
Additions, Deletions, or Substitutions of Investments		43
Reinvestment		43
THE POLICIES		43
Selecting the Variable Annuity That’s Right for You		44
Qualified and Non-Qualified Policies		44
Policy Application and Premium Payments		45
Tax-Free Section 1035 Exchanges		46
Payments Returned for Insufficient Funds		46
Your Right to Cancel (“Free Look”)		46
Issue Ages		46
Transfers		47
Limits on Transfers		47
Speculative Investing		49
Virtual Service Center and Interactive Voice Response System		49
Dollar Cost Averaging		51
Automatic Asset Allocation		52
Interest Sweep		52
Accumulation Period		53
(a) Crediting of Premium Payments		53
(b) Valuation of Accumulation Units		53
Riders		53
(a) Living Needs Benefit/Unemployment Rider		53
(b) Living Needs Benefit Rider		54
(c) Unemployment Benefit Rider		54
(d) Enhanced Beneficiary Benefit Rider (optional)		54
(e) Enhanced Spousal Continuance Rider (optional)		56
Policyowner Inquiries		57
Records and Reports		57
CHARGES AND DEDUCTIONS		57
Surrender Charges		57
Amount of Surrender Charge		58
Exceptions to Surrender Charges		58
Other Charges		58
(a) Mortality and Expense Risk Charges		58

	Page
(b) Administration Fee		59
(c) Policy Service Charge		59
(d) Fund Charges		59
(e) Transfer Fees		59
(f) Enhanced Beneficiary Benefit Rider Charge (optional)		59
Group and Sponsored Arrangements		59
Taxes		60
DISTRIBUTIONS UNDER THE POLICY		60
Surrenders and Withdrawals		60
(a) Surrenders		60
(b) Partial Withdrawals		60
(c) Periodic Partial Withdrawals		61
(d) Hardship Withdrawals		61
Required Minimum Distribution Option		61
Our Right to Cancel		61
Annuity Commencement Date		62
Death Before Annuity Commencement		62
Income Payments		63
(a) Election of Income Payment Options		63
(b) Proof of Survivorship		64
Delay of Payments		64
Designation of Beneficiary		64
Restrictions Under Code Section 403(b)(11)		65
Loans		65
THE FIXED ACCOUNT		66
(a) Interest Crediting		66
(b) Transfers to Investment Divisions		66
(c) Bail-Out (For Policies Investing in Separate Accounts-I and II)		67
FEDERAL TAX MATTERS		67
Introduction		67
Taxation of Annuities in General		67
3.8 Percent Tax in Certain Investment Income		69
Partial Section 1035 Exchanges		69
Qualified Policies		69
(a) 403(b) Plans		69
(b) Individual Retirement Annuities		70
(c) Roth Individual Retirement Annuities		70
(d) Deferred Compensation Plans		70
(e) SIMPLE IRAs		71
Taxation of Death Benefits		71
DISTRIBUTION AND COMPENSATION ARRANGEMENTS		71
VOTING RIGHTS		72
TABLE OF CONTENTS FOR THE STATEMENT OF ADDITIONAL INFORMATION		73

This Prospectus is not considered an offering in any state where the sale of this policy cannot lawfully be made. We do not authorize any information or representations regarding the offering other than as described in this Prospectus or in any accompanying supplement to this Prospectus or in any authorized supplemental sales material.

2

DEFINITIONS

Accumulation Unit—An accounting unit We use to calculate the Variable Accumulation Value prior to the Annuity Commencement Date. Each Investment Division of the Separate Account has a distinct Accumulation Unit value.

Accumulation Value—The sum of the Variable Accumulation Value and the Fixed Accumulation Value, of a policy.

Allocation Alternatives—The Investment Divisions of the Separate Account and the Fixed Account.

Annuitant—The person named on the Policy Data Page and whose life determines the Income Payments, and upon whose death prior to the Annuity Commencement Date, benefits under the policy may be paid.

Annuity Commencement Date—The date on which We are to make the first Income Payment under the policy.

Beneficiary—The person or entity having the right to receive the death benefit proceeds set forth in the policy and who is the “designated beneficiary” for purposes of Section 72 of the Code (as defined below) in the event of the Annuitant’s or the policyowner’s death.

Business Day—Generally, any day on which the New York Stock Exchange (“NYSE”) is open for trading. Our Business Day ends at 4:00 p.m. Eastern Time or the closing of regular trading on the NYSE, if earlier.

Code—The Internal Revenue Code of 1986, as amended.

Eligible Portfolios (“Portfolios”)—The mutual fund portfolios of the Funds that are available for investment through the Investment Divisions of the Separate Account.

Fixed Account—An account that is credited with a fixed interest rate which NYLIAC declares and is not part of the Separate Account. The Accumulation Value of the Fixed Account is supported by assets in NYLIAC’s general account, which are subject to the claims of Our general creditors.

Fixed Accumulation Value—The sum of premium payments and transfers allocated to the Fixed Account, plus interest credited on those premium payments and transfers, less any transfers and partial withdrawals from the Fixed Account, and less any surrender charges and policy service charges deducted from the Fixed Account.

Fund—An open-end management investment company.

Income Payments—Periodic payments NYLIAC makes after the Annuity Commencement Date.

Investment Division—The variable investment options available under the policy. Each Investment Division invests exclusively in shares of a specified Eligible Portfolio.

Non-Qualified Policies—Policies that are not available for use by individuals in connection with employee retirement plans intended to qualify for special federal income tax treatment under Sections 403(b), 408, 408A and 457 of the Code. Non-Qualified Policies include policies issued for other retirement plans or arrangements, including plans qualifying under Section 401(a) of the Code.

NYLIAC, We, Our or Us—New York Life Insurance and Annuity Corporation. All written service requests must be sent to the NYLIAC Variable Products Service Center (“VPSC”) at one of the addresses listed in Question 15 of the section of the Prospectus entitled, “Questions and Answers About New York Life Flexible Premium Variable Annuity.”

Policy Anniversary—An anniversary of the Policy Date shown on the Policy Data Page.

Policy Data Page—Page 2 of the policy, which contains the policy specifications.

Policy Date—The date from which We measure Policy Years, quarters, months, and Policy Anniversaries. It is shown on the Policy Data Page.

Policy Year—A year starting on the Policy Date. Subsequent Policy Years begin on each Policy Anniversary, unless otherwise indicated.

Qualified Policies—Policies for use by individuals under employee retirement plans that are intended to qualify for special federal income tax treatment under Sections 403(b), 408, 408A and 457 of the Code. Qualified Policies do not include policies issued for any other retirement plans or arrangements, including plans qualifying under Section 401(a) of the Code.

3

Separate Accounts—NYLIAC Variable Annuity Separate Account-I, NYLIAC Variable Annuity Separate Account-II and NYLIAC Variable Annuity Separate Account-III, each a segregated asset account We established to receive and invest premium payments paid under the policies. The Separate Accounts’ Investment Divisions, in turn, purchase shares of Eligible Portfolios.

Variable Accumulation Value—The sum of the products of the current Accumulation Unit value(s) for each of the Investment Divisions multiplied by the number of Accumulation Units held in the respective Investment Divisions.

4

TABLE OF FEES AND EXPENSES

The following tables describe the fees and expenses that you will pay when buying, owning, and surrendering the policy. The first table describes the fees and expenses that you will pay at the time that you buy the policy, surrender the policy, or transfer Accumulation Value between investment options. State premium taxes may also be deducted.

Policyowner Transaction Expenses

	Separate Accounts I and II			Separate Account III
Current and guaranteed maximum Surrender Charge as a percentage of the amount withdrawn.1		7.00	%		7.00	%
Current and guaranteed maximum Transfer Fee for each transfer over 12 in a Policy Year (currently no charge for the first 12 transfers in a Policy Year).	$	30		$	30

¹  The percentage applied to calculate the maximum surrender charge is reduced as follows: 7% during Policy Years 1 through 3; 6% during Policy Year 4; 5% during Policy Year 5; 4% during Policy Year 6; 3% during Policy Year 7; 2% during Policy Year 8; 1% during Policy Year 9; and 0% thereafter.

The next table describes the fees and expenses that you will pay periodically during the time that you own the policy, not including Fund fees and expenses.

Periodic Charges Other Than Fund Company Charges

	Separate Accounts I and II			Separate  Account III
Annual Policy Service Charge		Lesser of $30 or 2% of the Accumulation Value for policies with less than $10,000 of Accumulation Value.			$30 for policies with less than $20,000 of Accumulation Value.
Current and guaranteed maximum Separate Account Annual Expenses Charge (calculated as an annualized percentage of the daily average Variable Accumulation Value, including mortality and expense risk and administrative fees).		1.30	%		1.40	%
Optional Rider Charges
Guaranteed maximum Enhanced Beneficiary Benefit Rider Charge (calculated as an annualized percentage of the policy’s Accumulation Value, deducted on a quarterly basis).		N/A			1.00	%
Current Enhanced Beneficiary Benefit Rider Charge		N/A			0.30	%

The next table shows the minimum and maximum total operating expenses charged by the portfolio companies that you may pay periodically during the time that you own the policy (before any fee waiver or expense reimbursement). The expenses are expressed as a percentage of average net assets of the portfolios and may be higher or lower in the future. More detail concerning each portfolio company’s fees and expenses is contained in the prospectus for each portfolio company.

5

Total Annual Portfolio Company Operating Expenses^(#)

	Minimum			Maximum
For policies purchased on or after June 2, 2003: Expenses that are deducted from the Investment Division assets, including management fees, 12b-1 fees, administration fees and other expenses as of 12/31/12.		0.47	%		2.65	%
For policies purchased prior to June 2, 2003: Expenses that are deducted from the Investment Division assets, including management fees, 12b-1 fees, administration fees and other expenses as of 12/31/12.		0.29	%		2.65	%

(#) Shown as a percentage of average net assets for the fiscal year ended 12/31/2012. The Fund or its agents provided the fees and charges that are based on 2012 expenses, unless otherwise indicated. We have not verified the accuracy of the information provided by the Fund or its agents.

Annual Portfolio Company Operating Expenses^(#)

Fund	Management Fees			Distribution (12b-1) Fees(§)			Other Expenses			Underlying Portfolio Fees and Expenses			Total Fund Annual Expense
MainStay VP Conservative Allocation — Service Class		0.00	%		0.25	%		0.03	%		0.85	%		1.13	%
MainStay VP Growth Allocation — Service Class		0.00	%		0.25	%		0.04	%		1.14	%		1.43	%
MainStay VP Moderate Allocation — Service Class		0.00	%		0.25	%		0.03	%		0.98	%		1.26	%
MainStay VP Moderate Growth Allocation — Service Class		0.00	%		0.25	%		0.03	%		1.06	%		1.34	%

Please refer to the applicable fund prospectus for additional information.

# Shown as a percentage of average net assets for the fiscal year ended December 31, 2012, unless otherwise indicated. The Fund or its agents provided the fees and charges, which are based on 2012 expenses. We have not verified the accuracy of the information provided by the Fund or its agents.

§ Because the 12b-1 fee charge is an ongoing fee, the fee will increase the cost of your investment and may cost you more than paying other types of sales charges. The fees designated as “12b-1 fees” may reflect “Service Fees.”

Fund	Management Fees(¶)			Distribution (12b-1) Fees(§)			Other Expenses			Total  Fund Annual Expense(#)
MainStay VP Balanced — Service Class		0.70	%		0.25	%		0.09	%		1.04	%
MainStay VP Bond — Service Class		0.49	%		0.25	%		0.04	%		0.78	%
MainStay VP Bond — Initial Class		0.49	%		0.00	%		0.04	%		0.53	%
MainStay VP Cash Management		0.44	%		0.00	%		0.03	%		0.47	%
MainStay VP Common Stock — Service Class		0.55	%		0.25	%		0.04	%		0.84	%
MainStay VP Common Stock — Initial Class		0.55	%		0.00	%		0.04	%		0.59	%
MainStay VP Convertible — Service Class		0.60	%		0.25	%		0.04	%		0.89	%
MainStay VP Convertible — Initial Class		0.60	%		0.00	%		0.04	%		0.64	%
MainStay VP Cornerstone Growth — Service Class		0.70	%		0.25	%		0.04	%		0.99	%
MainStay VP Cornerstone Growth — Initial Class		0.70	%		0.00	%		0.04	%		0.74	%
MainStay VP DFA/DuPont Capital Emerging Markets Equity — Service Class		1.20	%(a)		0.25	%		0.23	%		1.68	%(b)
MainStay VP DFA/DuPont Capital Emerging Markets Equity — Initial Class		1.20	%(a)		0.00	%		0.23	%		1.43	%(b)
MainStay VP Eagle Small Cap Growth — Service Class		0.81	%(c)		0.25	%		0.05	%		1.11	%(b)
MainStay VP Eagle Small Cap Growth — Initial Class*		0.81	%(c)		0.00	%		0.05	%		0.86	%(b)
MainStay VP Floating Rate — Service Class		0.60	%		0.25	%		0.05	%		0.90	%
MainStay VP Government — Service Class		0.50	%		0.25	%		0.04	%		0.79	%
MainStay VP Government — Initial Class		0.50	%		0.00	%		0.04	%		0.54	%
MainStay VP High Yield Corporate Bond — Service Class		0.56	%		0.25	%		0.03	%		0.84	%
MainStay VP High Yield Corporate Bond — Initial Class		0.56	%		0.00	%		0.03	%		0.59	%
MainStay VP ICAP Select Equity — Service Class		0.76	%		0.25	%		0.03	%		1.04	%
MainStay VP ICAP Select Equity — Initial Class		0.76	%		0.00	%		0.03	%		0.79	%

6

Fund	Management Fees(¶)			Distribution (12b-1) Fees(§)			Other Expenses			Total  Fund Annual Expense(#)
MainStay VP Income Builder — Service Class		0.57	%		0.25	%		0.07	%		0.89	%
MainStay VP Income Builder — Initial Class		0.57	%		0.00	%		0.07	%		0.64	%
MainStay VP International Equity — Service Class		0.89	%		0.25	%		0.06	%		1.20	%
MainStay VP International Equity — Initial Class		0.89	%		0.00	%		0.06	%		0.95	%
MainStay VP Janus Balanced — Service Class		0.55	%(d)		0.25	%		0.04	%		0.84	%(b)
MainStay VP Janus Balanced — Initial Class*		0.55	%(d)		0.00	%		0.04	%		0.59	%(b)
MainStay VP Large Cap Growth — Service Class		0.74	%		0.25	%		0.04	%		1.03	%
MainStay VP Large Cap Growth — Initial Class		0.74	%		0.00	%		0.04	%		0.78	%
MainStay VP Marketfield — Service Class		1.40	%		0.25	%		1.00	%		2.65	%(e)
MainStay VP MFS® Utilities — Service Class		0.73	%(f)		0.25	%		0.07	%		1.05	%(b)
MainStay VP Mid Cap Core — Service Class		0.85	%		0.25	%		0.05	%		1.15	%(g)
MainStay VP Mid Cap Core — Initial Class		0.85	%		0.00	%		0.05	%		0.90	%(g)
MainStay VP PIMCO Real Return — Service Class		0.50	%		0.25	%		0.12	%(o)		0.87	%(p)
MainStay VP S&P 500 Index — Service Class		0.25	%		0.25	%		0.04	%		0.54	%
MainStay VP S&P 500 Index — Initial Class		0.25	%		0.00	%		0.04	%		0.29	%
MainStay VP T. Rowe Price Equity Income — Service Class		0.80	%(h)		0.25	%		0.04	%		1.09	%(b)
MainStay VP T. Rowe Price Equity Income — Initial Class		0.80	%(h)		0.00	%		0.04	%		0.84	%(b)
MainStay VP Unconstrained Bond — Service Class		0.60	%		0.25	%		0.05	%		0.90	%
MainStay VP U.S. Small Cap — Service Class		0.79	%		0.25	%		0.04	%		1.08	%
MainStay VP U.S. Small Cap — Initial Class		0.79	%		0.00	%		0.04	%		0.83	%
MainStay VP Van Eck Global Hard Assets — Initial Class		0.89	%(i)		0.00	%		0.05	%		0.94	%(b)
BlackRock® Global Allocation V.I. Fund — Class III Shares		0.63	%		0.25	%		0.27	%(j)		1.15	%
Columbia Variable Portfolio — Small Cap Value Fund — Class 2		0.87	%		0.25	%		0.13	%		1.25	%(k)
Dreyfus IP Technology Growth — Service Shares		0.75	%		0.25	%		0.08	%		1.08	%
Dreyfus IP Technology Growth — Initial Shares		0.75	%		0.00	%		0.08	%		0.83	%
Fidelity® VIP Contrafund® — Service Class 2		0.56	%		0.25	%		0.08	%		0.89	%
Fidelity® VIP Contrafund® — Initial Class		0.56	%		0.00	%		0.08	%		0.64	%
Fidelity® VIP Equity-Income — Service Class 2		0.46	%		0.25	%		0.10	%		0.81	%(l)
Fidelity® VIP Equity-Income — Initial Class		0.46	%		0.00	%		0.10	%		0.56	%(l)
Fidelity® VIP Mid Cap — Service Class 2		0.56	%		0.25	%		0.09	%		0.90	%
Invesco V.I. American Value Fund — Series II		0.72	%		0.25	%		0.28	%		1.25	%
Janus Aspen Global Research Portfolio — Service Shares		0.49	%		0.25	%		0.06	%		0.80	%
Janus Aspen Global Research Portfolio — Institutional Shares		0.49	%		0.00	%		0.06	%		0.55	%
MFS® Investors Trust Series — Service Class		0.75	%		0.25	%		0.07	%		1.07	%
MFS® Investors Trust Series — Initial Class		0.75	%		0.00	%		0.07	%		0.82	%
MFS® Research Series — Service Class		0.75	%		0.25	%		0.12	%		1.12	%
MFS® Research Series — Initial Class		0.75	%		0.00	%		0.12	%		0.87	%
Neuberger Berman AMT Mid-Cap Growth — Class S		0.84	%		0.25	%		0.16	%		1.25	%(m)
Royce Micro-Cap Portfolio — Investment Class		1.25	%		0.00	%		0.10	%		1.35	%
UIF U.S. Real Estate Portfolio — Class II		0.80	%		0.35	%(n)		0.30	%		1.45	%
Victory VIF Diversified Stock — Class A Shares		0.30	%		0.25	%		0.64	%		1.19	%

Please refer to the applicable fund prospectus for additional information.

¶ Management Fees may include Adviser and/or Administration Fees.

§ Because the distribution (12b-1) fee charge is an ongoing fee, the fee will increase the cost of your investment and may cost you more than paying other types of sales charges. The fees designated as “12b-1 fees” may reflect “Service Fees.”

# Shown as a percentage of average net assets for the fiscal year ended December 31, 2012, unless otherwise indicated. The Fund or its agents

7

provided the fees and charges, which are based on 2012 expenses. We have not verified the accuracy of the information provided by the Fund or its agents.

* New allocations to the MainStay VP Eagle Small Cap Growth – Initial Class or MainStay VP Janus Balanced – Initial Class Investment Divisions will not be accepted from policyowners who were not invested in the MainStay VP Eagle Small Cap Growth – Initial Class or MainStay VP Janus Balanced – Initial Class Investment Division on February 17, 2012. For existing policyowners, if you remove all of your Accumulation Value from the MainStay VP Eagle Small Cap Growth – Initial Class or MainStay VP Janus Balanced – Initial Class Investment Divisions on or after February 17, 2012, you will not be able to reinvest in these Investment Divisions.

(a) The management fee is 1.20% on all assets. New York Life Investments has contractually agreed to waive a portion of its management fee so that the management fee does not exceed: 1.20% on assets up to $1 billion; and 1.19% on assets over $1 billion. This agreement will remain in effect until May 1, 2014, and shall renew automatically for one-year terms unless New York Life Investments provides written notice of termination prior to the start of the next term or upon approval of the Board of Trustees of the Fund.

(b) New York Life Investments has contractually agreed to waive fees and/or reimburse expenses so that Total Fund Annual Expenses (excluding taxes, interest, litigation, extraordinary expenses, brokerage and other transaction expenses relating to the purchase or sale of portfolio investments, and acquired (underlying) fund fees and expenses) do not exceed 1.65%, 1.22%, 0.83%, 1.06%, and 1.10% of the average daily net assets of the Service Class shares of MainStay VP DFA/DuPont Capital Emerging Markets Equity, MainStay VP Eagle Small Cap Growth, MainStay VP Janus Balanced, MainStay VP MFS^® Utilities, and MainStay VP T. Rowe Price Equity Income portfolios, and 1.60%, 0.95%, 0.58%, 0.85% and 0.97% of the average daily net assets of the Initial Class shares of MainStay VP DFA/DuPont Capital Emerging Markets Equity, MainStay VP Eagle Small Cap Growth, MainStay VP Janus Balanced, MainStay VP T. Rowe Price Equity Income and MainStay VP Van Eck Global Hard Assets portfolios, respectively. This agreement expires on May 1, 2014 and may only be amended or terminated prior to that date by action of the Board.

(c) The management fee is 0.81% on all assets. New York Life Investments has contractually agreed to waive a portion of its management fee so that the management fee does not exceed: 0.81% on assets up to $1 billion; and 0.785% on assets over $1 billion. This agreement will remain in effect until May 1, 2014, and shall renew automatically for one-year terms unless New York Life Investments provides written notice of termination prior to the start of the next term or upon approval of the Board of Trustees of the Fund.

(d) The management fee is 0.55% on all assets. New York Life Investments has contractually agreed to waive a portion of its management fee so that the management fee does not exceed: 0.55% on assets up to $1 billion; and 0.525% on assets over $1 billion. This agreement will remain in effect until May 1, 2014, and shall renew automatically for one year terms unless New York Life Investments provides written notice of termination prior to the start of the next term or upon approval of the Board of Trustees of the Fund.

(e) New York Life Investments has contractually agreed to waive fees and/or reimburse expenses so that Total Annual Portfolio Operating Expenses (excluding taxes, interest, litigation, extraordinary expenses, brokerage and other transaction expenses relating to the purchase or sale of portfolio investments, and acquired (underlying) fund fees and expenses) for Service Class shares do not exceed 1.85% of its average daily net assets. This agreement expires on May 1, 2014, and may only be amended or terminated prior to that date by action of the Board.

(f) The management fee is 0.73% on all assets. New York Life Investments has contractually agreed to waive a portion of its management fee so that the management fee does not exceed: 0.73% on assets up to $1 billion; and 0.70% on assets over $1 billion. This agreement will remain in effect until May 1, 2014, and shall renew automatically for one-year terms unless New York Life Investments provides written notice of termination prior to the start of the next term or upon approval of the Board of Trustees of the Fund.

(g) New York Life Investments has contractually agreed to waive fees and/or reimburse expenses so that Total Annual Portfolio Operating Expenses of a class do not exceed the following percentages of average daily net assets: Initial Class, 0.84%; and Service Class, 1.09%. This agreement will remain in effect until May 1, 2014, and shall renew automatically for one-year terms unless New York Life Investments provides written notice of termination prior to the start of the next term or upon approval of the Board of Trustees of the Portfolio.

(h) The management fee is as follows: 0.80% on assets up to $500 million; and 0.775% on assets over $500 million. New York Life Investments has contractually agreed to waive its management fee to 0.75% on assets up to $500 million; and 0.725% on assets over $500 million. This agreement will remain in effect until May 1, 2014, and shall renew automatically for one-year terms unless New York Life Investments provides written notice of termination prior to the start of the next term or upon approval of the Board of Trustees of the Portfolio.

(i) The management fee is 0.89% on all assets. New York Life Investments has contractually agreed to waive a portion of its management fee so that the management fee does not exceed: 0.89% on assets up to $1 billion; and 0.88% on assets over $1 billion. This agreement will remain in effect until May 1, 2014, and shall renew automatically for one-year terms unless New York Life Investments provides written notice of termination prior to the start of the next term or upon approval of the Board of Trustees of the Fund.

(j) Other Expenses include acquired fund fees.

(k) Columbia Management Investment Advisers, LLC (the Investment Manager) and certain of its affiliates have contractually agreed to waive fees and/or to reimburse expenses (excluding certain fees and expenses, such as transaction costs and certain other investment related expenses, interest, taxes, acquired fund fees and expenses, and extraordinary expenses) until April 30, 2014, unless sooner terminated at the sole discretion of the Fund’s Board of Trustees. Under this agreement, the Fund’s net operating expenses, subject to applicable exclusions, will not exceed the annual rate of 1.03% for Class 2.

(l) Differs from the ratios of expenses to average net assets in the Financial Highlights section of the prospectus because of acquired fund fees and expenses.

(m) Neuberger Berman Management LLC (“NBM”) has undertaken through December 31, 2015 to waive fees and/or reimburse certain operating expenses, including the compensation of NBM and excluding taxes, interest, extraordinary expenses, brokerage commissions and transaction costs, that exceed, in the aggregate, 1.25% of the average daily net asset value of the Mid Cap Growth Portfolio; The expense limitation arrangements for the Portfolios are contractual and any excess expenses can be repaid to NBM within three years of the year incurred, provided such recoupment would not cause a Portfolio to exceed its respective limitation.

(n) The Portfolio’s “Distributor,” Morgan Stanley Distribution, Inc., has agreed to waive 0.10% of the 0.35% 12b-1 fee that it may receive. This waiver will continue for at least one year or until such time as the Fund’s Board of Directors acts to discontinue all or a portion of such waiver when it deems such action is appropriate.

(o) “Interest Expenses” are based on the amount incurred during the Portfolio’s most recent fiscal year as a result of entering into certain investments, such as dollar roll transactions. Under recently amended accounting guidance, certain dollar roll transactions are treated as secured borrowings and the components of the net income from such transactions are now presented in the financial statements as interest income and interest expense. These accounting changes did not affect the Portfolio’s overall results of operations, net asset value, total return or the amount of expenses paid directly from your investment in the Portfolio. The amount of “Interest Expenses” (if any) will vary based on the Portfolio’s use of such investments as an investment strategy.

(p) Prior to adopting the new accounting reporting requirement referenced in Footnote (o) above, New York Life Investment Management LLC contractually agreed to waive fees and/or reimburse expenses then included in the term Total Annual Portfolio Operating Expenses so that such expenses would not exceed 0.76% of the average daily net assets of Service Class shares. As a result of these new reporting requirements, the Portfolio may present in its financial statements “Total Annual Portfolio Operating Expenses After Waivers/Reimbursements” which is greater than this agreed upon expense limit. Absent the new accounting reporting requirement relating to dollar roll transactions, the Portfolio’s “Total Annual Portfolio Operating Expenses After Waivers/Reimbursements” would have been 0.76% of the average daily net assets of Service Class shares. This agreement expires on May 1, 2014, and may not be amended or terminated prior to that date.

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Examples

The table below will help you understand the various costs and expenses that you will bear directly and indirectly. The table reflects the Investment Division with the highest charges and expenses of the policy including, policyowner transaction expenses, contract fees, separate account annual expenses, portfolio company fees and expenses and optional rider charges where indicated. The annual policy service charge does not apply to policies with an Accumulation value of $20,000 or greater. Therefore, if your policy’s Accumulation Value exceeds that amount, the expenses would be slightly lower. For more information on the charges reflected in this table, see “CHARGES AND DEDUCTIONS” and the Fund prospectuses that accompany this Prospectus. NYLIAC may, where premium taxes are imposed by state law, deduct the premium taxes upon surrender of the policy or on the Annuity Commencement Date.

You would pay the following expenses on a $10,000 allocation in the Investment Division listed, assuming a 5% annual return on assets:

For Policies Purchased On or After June 2, 2003 in Separate Account—III:

	Expenses if you annuitize your policy								Expenses if you surrender your policy								Expenses if you do not surrender your policy
Investment Division	1 yr		3 yr		5 yr		10 yr		1 yr		3 yr		5 yr		10 yr		1 yr		3 yr		5 yr		10 yr
MainStay VP Marketfield—Service Class
without any Riders	$	1,089.96	$	1,342.85	$	2,268.31	$	4,617.17	$	1,089.96	$	2,013.36	$	2,760.03	$	4,647.17	$	425.25	$	1,342.85	$	2,268.31	$	4,617.17
with EBB Rider	$	1,118.88	$	1,431.71	$	2,410.00	$	4,867.71	$	1,118.88	$	2,096.33	$	2,894.65	$	4,897.71	$	456.11	$	1,431.71	$	2,410.00	$	4,867.71

For Policies Purchased Prior to June 2, 2003 in Separate Account—III:

	Expenses if you annuitize your policy								Expenses if you surrender your policy								Expenses if you do not surrender your policy
Investment Division	1 yr		3 yr		5 yr		10 yr		1 yr		3 yr		5 yr		10 yr		1 yr		3 yr		5 yr		10 yr
MainStay VP Marketfield—Service Class
without any Riders	$	1,089.96	$	1,342.85	$	2,268.31	$	4,617.17	$	1,089.96	$	2,013.36	$	2,760.03	$	4,647.17	$	425.25	$	1,342.85	$	2,268.31	$	4,617.17
with EBB Rider	$	1,118.88	$	1,431.71	$	2,410.00	$	4,867.71	$	1,118.88	$	2,096.33	$	2,894.65	$	4,897.71	$	456.11	$	1,431.71	$	2,410.00	$	4,867.71

For Policies Investing in Separate Account—I and II:

	Expenses if you annuitize your policy								Expenses if you surrender your policy								Expenses if you do not surrender your policy
Investment Division	1 yr		3 yr		5 yr		10 yr		1 yr		3 yr		5 yr		10 yr		1 yr		3 yr		5 yr		10 yr
MainStay VP Marketfield—Service Class
without any Riders	$	1,080.12	$	1,254.89	$	2,109.41	$	4,310.28	$	1,080.12	$	1,931.14	$	2,608.92	$	4,340.28	$	414.75	$	1,254.89	$	2,109.41	$	4,310.28

9

QUESTIONS AND ANSWERS ABOUT

NEW YORK LIFE FLEXIBLE PREMIUM VARIABLE ANNUITY

NOTE: The following section contains brief questions and answers about New York Life Flexible Premium Variable Annuity. You should refer to the body of this Prospectus for more detailed information.

1. What is New York Life Flexible Premium Variable Annuity?

A New York Life Flexible Premium Variable Annuity is a deferred variable annuity policy. NYLIAC issues the policy. You may allocate premium payments to the Investment Divisions of the applicable Separate Account, as well as the Fixed Account. The Accumulation Value will fluctuate according to the performance of the Investment Divisions selected and the interest credited to the amounts in the Fixed Account.

2. Where can I allocate my premium payments?

You can allocate your premium payments to one or more of the following Allocation Alternatives:

(a) SEPARATE ACCOUNTS

Separate Account I is used for Non-Qualified Policies and Separate Account II is used for Qualified Policies. Each of the Separate Accounts consists of 43 Investment Divisions, some of which may not be available under your policy. They offer investments in domestic and international markets. When you allocate a premium payment to one of the Investment Divisions, the Separate Account will invest your premium payment exclusively in shares of the corresponding Eligible Portfolio of the relevant Fund(s).

Separate Account III currently consists of 68 Investment Divisions, some of which may not be available under your policy. They offer investments in domestic and international markets. They are listed on the first page of this Prospectus. When you allocate a premium payment to one of the Investment Divisions, the Separate Account will invest your premium payment exclusively in shares of the corresponding Eligible Portfolio of the relevant Fund(s).

(b) FIXED ACCOUNT

Each premium payment, or the portion of any premium payment, you allocate to the Fixed Account will earn an interest rate at least equal to the guaranteed minimum interest rate.

3. Can I make transfers among the Investment Divisions and the Fixed Account?

You can transfer all or part of the Accumulation Value of your policy between the Investment Divisions or from the Investment Divisions to the Fixed Account at least 30 days before the Annuity Commencement Date but certain restrictions apply. Generally, you can transfer a minimum amount of $500, unless We agree otherwise. You can make transfers from the Fixed Account to the Investment Divisions but certain restrictions apply. (See “THE FIXED ACCOUNT.”)

You may not transfer money into the Fixed Account if you transferred money out of the Fixed Account during the previous six-month period.

4. What charges are assessed against the policy?

For Policies Investing in Separate Accounts-I & II:

Before the date We start making Income Payments to you, We will deduct a policy service charge on each Policy Anniversary and upon surrender of the policy if on that date the Accumulation Value is below $10,000. This charge will be the lesser of $30 or 2.00% of the Accumulation Value at the end of the Policy Year or on the date of surrender. In addition, We deduct on a daily basis a charge for policy administration expenses. This charge is equal, on an annual basis, to 0.10% of the net asset value of the applicable Separate Account. (See “OTHER CHARGES.”)

For Policies Investing in Separate Account-III:

Before the date We start making Income Payments to you, We will deduct a $30 policy service charge on each Policy Anniversary and upon surrender of the policy if on that date the Accumulation Value is below $20,000. In addition, We deduct on a daily basis a charge for policy administration expenses. This charge is equal, on an annual basis, to 0.20% of the net asset value of the Separate Account. (See “OTHER CHARGES.”)

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The policies are also subject to a charge for certain mortality and expense risks NYLIAC assumes. We also deduct this charge on a daily basis. This charge is equal, on an annual basis, to 1.20% of the daily net asset value of the Separate Account. (See “OTHER CHARGES.”)

We impose a surrender charge on certain partial withdrawals and surrenders of the policies. This charge is assessed as a percentage of the amount withdrawn during the first nine Policy Years. The percentage declines after the first three Policy Years as follows:

Policy Year	Surrender Charge
1		7	%
2		7	%
3		7	%
4		6	%
5		5	%
6		4	%
7		3	%
8		2	%
9		1	%
10+		0	%

In no event will the aggregate surrender charge applied under the policy exceed nine percent (9.0%) of the total Premium Payments.

You can make withdrawals from the policy free of surrender charges based on certain limitations. In any one Policy Year, you may withdraw free of a surrender charge the greatest of: (a) 10% of the Accumulation Value at the time of the withdrawal, less any prior Surrender Charge free withdrawals during the Policy Year; (b) the Accumula- tion Value less the accumulated premium payments; or (c) 10% of the Accumulation Value as of the prior Policy Anniversary (10% of the premium payment if the withdrawal is made in the first Policy Year), less any prior Surrender Charge free withdrawals during the Policy Year. (See “CHARGES AND DEDUCTIONS—Surrender Charges” and “EXCEPTIONS TO SURRENDER CHARGES.”)

If you select the Enhanced Beneficiary Benefit (“EBB”) Rider (in jurisdictions where available), We will deduct a charge each policy quarter that the rider is in effect. We will deduct this charge beginning in the first policy quarter after the Policy Date. This charge will be deducted from each Investment Division and the Fixed Account, in proportion to its percentage of the Accumulation Value. The maximum annual charge is 1.00% of the policy’s Accumulation Value, applied on a quarterly basis. We may set a lower charge at Our sole discretion. You should consult your registered representative to determine the percentage We are currently charging before you select this rider. The current charge for the EBB Rider is 0.30% of the policy’s Accumulation Value, applied on a quarterly basis (0.075% per quarter). The original percentage you are charged for the EBB Rider will not change once your policy is issued. NYLIAC may in the future, charge up to the maximum annual amount described above for new policies.

Finally, the value of the shares of each Fund reflects advisory fees, administration fees and other expenses deducted from the assets of each Fund. (See the Fund prospectuses which are attached to this Prospectus.)

5. What are the minimum initial and maximum additional premium payments?

The minimum initial premium payment for Qualified Policies is as follows:

(a) for Code Section 403(b) Tax Sheltered Annuities (“TSAs”), $50 per month or a $2,000 single premium;

(b) for IRAs and Roth IRAs, $1,200 initial premium payment plus pre-authorized monthly deductions of $100 per month, or pre-authorized monthly deductions of $165 per month or a $2,000 single premium;

(c) for deferred compensation plans, $50 per month; and

(d) for SEP plans, $600 initial premium payment or $50 per month if part of a pre-authorized billing arrangement.

(e) For SIMPLE IRAs, $4,000 initial premium payment and, if part of a pre-authorized billing arrangement; an additional $50 per month.

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For Qualified Policies you may not make premium payments in excess of the amount permitted by law for the plan indicated.

For Non-Qualified Policies, the minimum initial premium payment is a $5,000 single premium or a $2,500 premium payment plus $50 per month as either a pre-authorized monthly deduction or as part of a pre-authorized monthly billing arrangement. Additional premium payments must be at least $50 each or such lower amount as We may permit at any time. You have a choice of sending premium payments directly to NYLIAC at one of the addresses listed in Question 17 of this Prospectus or through pre-authorized monthly deductions from banks, credit unions or similar accounts and public or private employee payroll deductions. The maximum aggregate amount of premium payments We accept without prior approval is $1,000,000.

For policies investing in Separate Accounts–I and II that were issued for delivery in New York from August 1995 to August 1997, the following minimum initial and maximum additional premium payment requirements apply:

(a) For Non-Qualified Policies, the minimum single premium payment is $2,500 plus $50 per month as either a pre-authorized monthly deduction or as part of a pre-authorized monthly billing arrangement. The maximum total dollar amount of premium payments in any Policy Year may not exceed $4,999.99.

(b) For TSA policies, Section 457 deferred compensation plan policies, Simplified Employee Pension (“SEP”) plan policies and any other Qualified Policies, premium payments may only be made through a pre-authorized billing arrangement. The maximum dollar amount of scheduled premium payments may not exceed the applicable annual plan limit as specified in the Internal Revenue Code.

(c) For TSA transfer premium payments made to an existing TSA policy, the maximum dollar amount of transfer premium payments in the first Policy Year may not exceed $1,999.99. For any additional TSA transfer premium payments made in the second or subsequent Policy Years, the maximum total dollar amount of annual transfer premium payments may not exceed $4,999.99.

(d) For Individual Retirement Annuity (“IRA”) policies, the minimum premium payment is $1,200 initial and $100 scheduled under a pre-authorized monthly deduction arrangement, or $100 scheduled under a pre- authorized monthly deduction arrangement, or $2,000 lump sum. For any additional premium payments made in the second or subsequent Policy Years, the maximum total dollar amount of annual premium payments may not exceed $4,999.99.

6. How are premium payments allocated?

We will allocate the initial premium payment to the Investment Divisions and Fixed Account you have selected within two Business Days after receipt at the Cleveland or Dallas Service Center, subject to Our receipt of all information necessary to issue a policy. Subsequent premium payments will be allocated at the close of the Business Day on which they were received. (See “THE POLICIES—Policy Application and Premium Payments.”) You may raise or lower the percentages (which must be in whole numbers), of the premium payment you place in each Allocation Alternative at the time you make a premium payment. The minimum amount which you may place in any one Allocation Alternative is $25, or such lower amount as We may permit. We reserve the right to limit the amount of a premium payment that may be placed in any one Allocation Alternative and the number of Investment Divisions to which you may allocate your Accumulation Value. Acceptance of initial and additional premium payments is subject to Our suitability standards.

7. What happens if premium payments are not made?

If We do not receive any premium payments for a period of two years, and both the Accumulation Value of your policy and your total premium payments less any withdrawals, outstanding loans and surrender charges are less than $2,000, We reserve the right to terminate your policy. We will notify you of Our intention to exercise this right and give you 90 days to make a premium payment. If We terminate your policy, We will pay you the Accumulation Value of your policy in one lump sum.

8. Can I withdraw money from the policy before the Annuity Commencement Date?

You may make withdrawals from your policy before the Annuity Commencement Date and while the Annuitant is still alive. Your withdrawal request must be in a form that is acceptable to Us. Under most circumstances, you may make a minimum partial withdrawal of $500. Withdrawals may be subject to a surrender charge. In addition, you may have to pay income tax and a 10% penalty tax may apply if you are under age 59 ¹/₂. (See “DISTRIBUTIONS UNDER THE POLICY”

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and “FEDERAL TAX MATTERS.”) Please note that certain withdrawal requests must be made in writing and sent to NYLIAC’s Variable Products Service Center. (See “DISTRIBUTIONS UNDER THE POLICY—Surrenders and Withdrawals—Partial Withdrawals and Periodic Partial Withdrawals.”)

9. How will NYLIAC make Income Payments on the Annuity Commencement Date?

We will make Income Payments on a fixed basis. We do not currently offer a variable income payment option. We will make payments under the Life Income Payment Option over the life of the Annuitant with a guarantee of 10 years of payments, even if the Annuitant dies sooner. Fixed Income Payments will always be the same specified amount. (See “INCOME PAYMENTS.”) We may offer other options, at Our discretion, where permitted by state law.

10. What happens if I die or the Annuitant dies before the Annuity Commencement Date?

Unless amended by any rider attached to the policy, if you or the Annuitant dies before the Annuity Commencement Date, We will pay the Beneficiary(ies) under the policy an amount equal to the greater of:

(a) the Accumulation Value, less any outstanding loan balance,

(b) the sum of all premium payments made less any outstanding loan balance, partial withdrawals and surrender charges previously imposed, or

(c) the “reset value” (as described in this Prospectus), plus any additional premium payments made since the most recent “reset date,” less any outstanding loan balance, partial withdrawals and applicable surrender charges since the most recent “reset date.” This feature is only available for policies investing in Separate Account-III.

If the Beneficiary is the spouse (as defined under Federal law) of the Annuitant and the owner, see Question 11 below. (Also see “DEATH BEFORE ANNUITY COMMENCEMENT” and “FEDERAL TAX MATTERS.”)

11. What happens if my spouse is the Beneficiary?

If you are the owner and Annuitant and you die before the Annuity Commencement Date, your spouse (as defined under Federal law) may continue the policy as the new owner and Annuitant if he/she is also the sole primary Beneficiary of the policy (for Non-Qualified, IRA, Roth IRA, SIMPLE IRA and SEP policies only). If your spouse chooses to continue the policy, We will not pay the death benefit proceeds as a consequence of your death or the Annuitant’s death. If you elect the EBB Rider and the Enhanced Spousal Continuance Rider (“ESC”) Rider applies, see the EBB & ESC Riders.

12. Can I return the policy after it is delivered?

You can cancel the policy within 10 days of delivery of the policy or such longer period as required under state law. To cancel your policy, you must return it to the NYLIAC Variable Products Service Center at one of the addresses listed in Question 15 of this Prospectus or to the registered representative through whom you purchased it, along with a written request for cancellation in a form acceptable to Us. Except in jurisdictions where you are entitled by law to receive the total of premium payments made under the policy less any prior withdrawals, We will promptly return the Accumulation Value calculated as of the Business Day that either the registered representative through whom you purchased the policy or NYLIAC’s Variable Products Service Center receives the policy along with the written request for cancellation in a form acceptable to Us, but without any deduction for premium taxes or a surrender charge. (See “THE POLICIES—Your Right to Cancel (“Free Look”).”)

13. What about voting rights?

You can instruct NYLIAC how to vote shares of the Funds in which you have a voting interest through the Separate Account. (See “VOTING RIGHTS.”)

13

14. Are policy loans available?

If you have purchased your policy in connection with a Code Section 403(b) Tax-Sheltered Annuity (“TSA”) plan, you may be able to borrow some of your Accumulation Value subject to certain conditions. (See “LOANS.”)

15. Where do I send written service requests to the NYLIAC Variable Products Service Center?

Certain service requests, including but not limited to death benefit claims and surrenders, are required to be in writing. All written service requests must be sent to the NYLIAC Variable Products Service Center (“VPSC”) at one of the following addresses:

Regular Mail	NYLIAC Variable Products Service Center Madison Square Station P.O. Box 922 New York, NY 10159
Express Mail	NYLIAC Variable Products Service Center 51 Madison Avenue, Room 251 New York, NY 10010

Written service requests will be effective as of the Business Day they are received in a form acceptable to Us at VPSC at one of the addresses listed immediately above.

Faxed or e-mailed requests are not acceptable and will not be honored at any time. All NYLIAC requirements must be met in order for Us to process your service requests. Please review all service request forms carefully and provide all required information that is applicable to the transaction. If all requirements are not met, We will not be able to process your service request. We will make every reasonable attempt to notify you in writing of this situation. It is important that you inform NYLIAC of an address change so that you can receive important policy statements.

16. How do I contact NYLIAC by Telephone or by the Internet?

a. By Telephone:

Certain service requests, including but not limited to obtaining current unit values and speaking to a customer representative, may be effected by telephone. For telephonic requests, you must contact the NYLIAC Interactive Voice Response System (“IVR”) toll-free by calling: (800) 598-2019. (See “THE POLICIES—Virtual Service Center and Interactive Voice Response System.”)

b. By Internet:

Certain service requests, including but not limited to transferring assets between investment options and e-mailing your registered representative, may be effected via the internet. For Internet-based requests, you must contact the NYLIAC Virtual Service Center (“VSC”) at www.newyorklife.com/vsc and enter your user name and password. (See “THE POLICIES—Virtual Service Center and Interactive Voice Response System.”)

We make IVR and VSC services available at our discretion. In addition, availability of IVR and VSC services may be interrupted temporarily at certain times. We do not assume responsibility for any loss if service through IVR or VSC should become unavailable. We will not accept e-mailed requests for policy transactions or e-mails of imaged, signed service requests. E-mail inquiries that are non-transactional may be sent through Our Virtual Service Center once they have passed all security protocols to identify the policyowner.

You may authorize Us to accept electronic instructions from a registered representative or the registered service assistant assigned to your policy in order to make premium allocations, transfers, and changes to your investment objective and/or risk tolerance. You may also authorize your registered representative or registered service assistant to revise your Automatic Asset Reallocation (AAR) arrangement. Your AAR will be cancelled if a premium allocation change or transfer is submitted on your behalf that is inconsistent with your current AAR arrangements. You may prevent this cancellation if a conforming AAR change is processed within one Business Day of the inconsistent premium allocation change or transfer.

To authorize the registered representative(s) or registered service assistants assigned to your policy to make premium allocations and transfers, you must send a completed Trading Authorization Form to VPSC at one of the addresses listed in Question 15 of this Prospectus. We may revoke or deny Trading Authorization privileges for certain

14

policyowners (See “Limits on Transfers”). Trading Authorization may be elected, changed or cancelled at any time. We will confirm all transactions in writing. Not all transactions are available on the Internet.

NYLIAC is not liable for any loss, cost or expense for action on instructions which are believed to be genuine in accordance with the procedures. Transfer requests received after the close of regular trading on the New York Stock Exchange, generally 4:00 p.m. Eastern Time or received on a non-Business Day, will be priced as of the next Business Day.

17. Where do I send subsequent premium payments and loan repayments?

Subsequent premium payments and loan repayments must be sent to one of the following addresses:

Regular Mail	NYLIAC 75 Remittance Drive Suite 3021 Chicago, IL 60675-3021
Express Mail	NYLIAC, Suite 3021 c/o The Northern Trust Bank 350 North Orleans Street Receipt & Dispatch, 8th Floor Chicago, IL 60654

Subsequent premium payments and loan repayments will be credited as of the Business Day they are received in a form acceptable to Us at one of the addresses noted in this Question 17. Please note that initial premium payments are those made in connection with the issuance of a policy and are processed in accordance with our procedures. (See “THE POLICIES—Policy Application and Premium Payments.”)

15

FINANCIAL STATEMENTS

The consolidated balance sheet of NYLIAC as of December 31, 2012 and 2011, and the consolidated statements of income, of stockholder’s equity and of cash flows for each of the three years in the period ended December 31, 2012 (including the report of the independent registered public accounting firm); and each Separate Account’s statement of assets and liabilities as of December 31, 2012, and the statements of operations and of changes in net assets and the financial highlights for each of the periods indicated in the Financial Statements (including the report of the independent registered public accounting firm), are included in the SAI. The independent registered public accounting firm is PricewaterhouseCoopers LLP.

16

SEPARATE ACCOUNT-III

CONDENSED FINANCIAL INFORMATION

The following Accumulation Unit values and the number of Accumulation Units outstanding for each available Investment Division for the fiscal years ended December 31 presented below are derived from the financial statements audited by PricewaterhouseCoopers LLP, independent registered public accounting firm. The condensed financial information for the fiscal year ending December 31, 2008 and for each of the subsequent years is included in the SAI. The Accumulation Unit values and the number of Accumulation Units outstanding for each available Investment Division as of December 31, 2007 and preceding years are derived from financial statements not included herein. Values and units shown are for full year periods beginning January 1 except where indicated. The policies were first offered on May 1, 1995.

Some Investment Divisions offered in policies issued prior to June 2, 2003 differ from Investment Divisions offered in policies issued on or after June 2, 2003. Please refer to the Examples Section of this prospectus for the corresponding Investment Division with the highest portfolio company fees and expenses available to you.

	Accumulation unit value				Number of accumulation units
	Beginning of period		End of period
(Accumulation unit value in dollars and Number of accumulation units in thousands)
MainStay VP Balanced – Service Class
2012		11.63		12.82		2,202
2011		11.51		11.63		2,331
2010		10.30		11.51		2,442
2009		8.51		10.30		2,566
2008		11.51		8.51		2,966
2007		11.38		11.51		3,754
2006		10.46		11.38		4,111
2005(e)		10.00		10.46		3,115
MainStay VP Bond – Initial Class
2012		21.36		22.05		3,065
2011		20.20		21.36		3,423
2010		19.00		20.20		4,083
2009		17.87		19.00		4,350
2008		17.47		17.87		4,854
2007		16.64		17.47		5,935
2006		16.14		16.64		6,999
2005		16.01		16.14		8,911
2004		15.60		16.01		10,346
2003		15.14		15.60		12,616
MainStay VP Bond – Service Class
2012		13.22		13.48		2,831
2011		12.61		13.22		2,544
2010		11.88		12.61		2,338
2009		11.21		11.88		1,931
2008		10.99		11.21		1,868
2007		10.49		10.99		1,553
2006		10.20		10.49		1,297
2005		10.15		10.20		1,110
2004		9.91		10.15		737
2003(a)		10.00		9.91		296
MainStay VP Cash Management
2012		1.31		1.28		55,543
2011		1.33		1.31		74,223
2010		1.35		1.33		63,661
2009		1.36		1.35		81,717
2008		1.35		1.36		127,879
2007		1.31		1.35		90,100
2006		1.27		1.31		71,765
2005		1.25		1.27		82,631
2004		1.26		1.25		100,042
2003		1.27		1.26		130,435
MainStay VP Common Stock – Initial Class
2012		23.67		27.24		2,683
2011		23.63		23.67		3,190

17

	Accumulation unit value				Number of accumulation units
	Beginning of period		End of period
2010		21.28		23.63		3,746
2009		17.63		21.28		4,440
2008		28.11		17.63		5,082
2007		27.11		28.11		6,457
2006		23.61		27.11		8,043
2005		22.23		23.61		9,934
2004		20.33		22.23		12,168
2003		16.31		20.33		13,689
MainStay VP Common Stock – Service Class
2012		13.00		14.86		664
2011		13.02		13.00		699
2010		11.75		13.02		746
2009		9.76		11.75		764
2008		15.61		9.76		752
2007		15.09		15.61		745
2006		13.17		15.09		662
2005		12.44		13.17		539
2004		11.40		12.44		387
2003(a)		10.00		11.40		162
MainStay VP Conservative Allocation – Service Class
2012		12.12		13.13		6,481
2011		11.99		12.12		6,099
2010		10.88		11.99		5,257
2009		9.05		10.88		4,445
2008		11.28		9.05		3,955
2007		10.66		11.28		3,010
2006(f)		10.00		10.66		1,612
MainStay VP Convertible – Initial Class
2012		23.19		24.95		2,441
2011		24.69		23.19		2,884
2010		21.24		24.69		3,299
2009		14.75		21.24		3,805
2008		22.80		14.75		4,241
2007		20.13		22.80		5,245
2006		18.49		20.13		6,442
2005		17.59		18.49		7,778
2004		16.81		17.59		9,263
2003		13.95		16.81		10,078
MainStay VP Convertible – Service Class
2012		14.73		15.49		2,224
2011		15.87		14.73		2,164
2010		13.69		15.87		2,026
2009		9.53		13.69		1,830
2008		14.77		9.53		1,561
2007		13.07		14.77		1,392
2006		12.03		13.07		1,248
2005		11.48		12.03		1,105
2004		10.99		11.48		884
2003(a)		10.00		10.99		347
MainStay VP Cornerstone Growth – Initial Class
2012		17.49		19.82		4,493
2011		17.98		17.49		5,173
2010		16.25		17.98		5,925
2009		12.28		16.25		6,886
2008		20.37		12.28		7,796
2007		18.38		20.37		9,739
2006		17.85		18.38		12,330
2005		16.70		17.85		15,825
2004		16.26		16.70		20,255
2003		12.98		16.26		23,240
MainStay VP Cornerstone Growth – Service Class
2012		11.73		13.24		790
2011		12.11		11.73		824
2010		10.97		12.11		824

18

	Accumulation unit value				Number of accumulation units
	Beginning of period		End of period
2009		8.31		10.97		830
2008		13.83		8.31		841
2007		12.51		13.83		888
2006		12.17		12.51		859
2005		11.42		12.17		788
2004		11.15		11.42		653
2003(a)		10.00		11.15		248
MainStay VP DFA/DuPont Capital Emerging Markets Equity – Initial Class
2012(i)		10.00		10.00		2,830
MainStay VP DFA/DuPont Capital Emerging Markets Equity – Service Class
2012(i)		10.00		9.97		3,256
MainStay VP Eagle Small Cap Growth – Initial Class
2012(i)		10.00		9.87		4,194
MainStay VP Eagle Small Cap Growth – Service Class
2012(i)		10.00		9.85		858
MainStay VP Floating Rate – Service Class
2012		11.31		11.85		4,644
2011		11.27		11.31		4,520
2010		10.59		11.27		4,790
2009		8.06		10.59		4,742
2008		10.62		8.06		3,380
2007		10.52		10.62		4,749
2006		10.10		10.52		6,301
2005(e)		10.00		10.10		3,612
MainStay VP Government – Initial Class
2012		19.85		20.35		2,184
2011		18.99		19.85		2,650
2010		18.28		18.99		3,179
2009		18.24		18.28		3,659
2008		16.85		18.24		4,740
2007		16.02		16.85		4,166
2006		15.61		16.02		5,160
2005		15.46		15.61		6,756
2004		15.17		15.46		8,248
2003		15.10		15.17		11,183
MainStay VP Government – Service Class
2012		12.44		12.67		2,073
2011		11.98		12.44		2,203
2010		11.56		11.98		2,112
2009		11.57		11.56		1,877
2008		10.71		11.57		2,232
2007		10.21		10.71		1,190
2006		9.97		10.21		1,005
2005		9.91		9.97		881
2004		9.75		9.91		614
2003(a)		10.00		9.75		272
MainStay VP Growth Allocation – Service Class
2012		10.07		11.40		3,678
2011		10.53		10.07		3,692
2010		9.30		10.53		3,799
2009		7.39		9.30		3,697
2008		12.03		7.39		3,357
2007		11.08		12.03		2,631
2006(f)		10.00		11.08		1,524
MainStay VP High Yield Corporate Bond – Initial Class
2012		31.52		35.25		7,247
2011		30.08		31.52		8,021
2010		27.07		30.08		9,461
2009		19.22		27.07		10,751
2008		25.68		19.22		11,326
2007		25.46		25.68		14,914
2006		23.05		25.46		18,683
2005		22.70		23.05		23,132
2004		20.42		22.70		27,478

19

	Accumulation unit value				Number of accumulation units
	Beginning of period		End of period
2003		15.19		20.42		30,240
MainStay VP High Yield Corporate Bond – Service Class
2012		17.12		18.63		7,812
2011		16.51		17.12		7,049
2010		14.90		16.51		6,755
2009		10.60		14.90		6,001
2008		14.20		10.60		5,054
2007		14.12		14.20		5,387
2006		12.81		14.12		4,654
2005		12.65		12.81		3,920
2004		11.41		12.65		2,643
2003(a)		10.00		11.41		920
MainStay VP ICAP Select Equity – Initial Class
2012		12.81		14.61		7,995
2011		13.19		12.81		9,516
2010		11.32		13.19		11,339
2009		8.87		11.32		13,405
2008		14.42		8.87		11,955
2007		13.68		14.42		4,594
2006		11.63		13.68		2,640
2005		11.18		11.63		2,904
2004		10.18		11.18		3,342
2003		8.07		10.18		3,407
MainStay VP ICAP Select Equity – Service Class
2012		13.92		15.72		4,261
2011		14.41		13.92		4,480
2010		12.40		14.41		4,478
2009		9.74		12.40		4,366
2008		15.87		9.74		2,583
2007		15.10		15.87		1,166
2006		12.87		15.10		413
2005		12.40		12.87		332
2004		11.32		12.40		251
2003(a)		10.00		11.32		73
MainStay VP Income Builder – Initial Class
2012		21.88		24.81		2,699
2011		21.31		21.88		3,044
2010		18.82		21.31		3,491
2009		15.45		18.82		4,058
2008		21.45		15.45		4,775
2007		20.23		21.45		6,205
2006		18.74		20.23		7,691
2005		17.84		18.74		9,593
2004		17.01		17.84		12,145
2003		14.41		17.01		13,754
MainStay VP Income Builder – Service Class
2012		13.31		14.97		897
2011		13.21		13.31		846
2010		11.70		13.21		754
2009		9.63		11.70		743
2008		13.39		9.63		731
2007		12.66		13.39		746
2006		11.76		12.66		720
2005		11.23		11.76		665
2004		10.73		11.23		501
2003(a)		10.00		10.73		171
MainStay VP International Equity – Initial Class
2012		19.07		22.46		1,188
2011		23.03		19.07		1,448
2010		22.26		23.03		1,680
2009		18.92		22.26		1,985
2008		25.81		18.92		2,432
2007		24.94		25.81		3,273
2006		19.26		24.94		3,643

20

	Accumulation unit value				Number of accumulation units
	Beginning of period		End of period
2005		18.09		19.26		3,484
2004		15.63		18.09		2,925
2003		12.19		15.63		2,229
MainStay VP International Equity – Service Class
2012		13.94		16.26		2,093
2011		17.00		13.94		2,176
2010		16.47		17.00		2,071
2009		14.03		16.47		1,896
2008		19.19		14.03		1,863
2007		18.59		19.19		1,806
2006		14.39		18.59		1,339
2005		13.55		14.39		869
2004		11.74		13.55		441
2003(a)		10.00		11.74		114
MainStay VP Janus Balanced – Initial Class
2012(i)		10.00		10.42		17,731
MainStay VP Janus Balanced – Service Class
2012(i)		10.00		10.40		3,800
MainStay VP Large Cap Growth – Initial Class
2012		14.65		16.34		1,965
2011		14.90		14.65		2,165
2010		13.01		14.90		2,526
2009		9.42		13.01		2,923
2008		15.61		9.42		3,167
2007		13.04		15.61		3,618
2006		12.33		13.04		4,322
2005		11.98		12.33		5,180
2004		12.44		11.98		6,615
2003		9.85		12.44		7,818
MainStay VP Large Cap Growth – Service Class
2012		12.66		13.92		1,576
2011		13.07		12.66		1,415
2010		11.44		13.07		1,170
2009		8.31		11.44		994
2008		13.79		8.31		785
2007		11.56		13.79		586
2006		10.96		11.56		419
2005		10.67		10.96		278
2004		11.11		10.67		191
2003(a)		10.00		11.11		74
MainStay VP MFS® Utilities – Service Class
2012(i)		10.00		10.74		13,151
MainStay VP Mid Cap Core – Initial Class
2012		15.55		18.02		2,167
2011		16.26		15.55		2,583
2010		13.33		16.26		3,044
2009		9.87		13.33		3,684
2008		17.34		9.87		1,936
2007		16.74		17.34		2,539
2006		14.77		16.74		2,876
2005		12.92		14.77		3,204
2004		10.73		12.92		2,964
2003		8.03		10.73		2,245
MainStay VP Mid Cap Core – Service Class
2012		16.69		19.10		2,390
2011		17.57		16.69		2,527
2010		14.45		17.57		2,611
2009		10.73		14.45		2,647
2008		18.88		10.73		1,202
2007		18.28		18.88		1,176
2006		16.17		18.28		986
2005		14.19		16.17		740
2004		11.80		14.19		414
2003(a)		10.00		11.80		125

21

	Accumulation unit value				Number of accumulation units
	Beginning of period		End of period
MainStay VP Moderate Allocation – Service Class
2012		11.49		12.68		7,985
2011		11.60		11.49		7,965
2010		10.42		11.60		7,937
2009		8.53		10.42		7,000
2008		11.59		8.53		6,063
2007		10.83		11.59		4,704
2006(f)		10.00		10.83		2,780
MainStay VP Moderate Growth Allocation – Service Class
2012		10.85		12.18		8,459
2011		11.20		10.85		8,532
2010		9.96		11.20		8,494
2009		7.88		9.96		7,701
2008		11.87		7.88		6,919
2007		11.03		11.87		5,620
2006(f)		10.00		11.03		3,194
MainStay VP PIMCO Real Return – Service Class
2012(i)		10.00		10.43		3,871
MainStay VP S&P 500 Index – Initial Class
2012		24.23		27.64		5,643
2011		24.13		24.23		6,423
2010		21.33		24.13		7,461
2009		17.13		21.33		8,848
2008		27.58		17.13		10,145
2007		26.58		27.58		12,943
2006		23.35		26.58		16,021
2005		22.60		23.35		19,872
2004		20.74		22.60		23,603
2003		16.41		20.74		25,814
MainStay VP S&P 500 Index – Service Class
2012		12.86		14.52		3,373
2011		12.87		12.86		3,316
2010		11.40		12.87		3,357
2009		9.18		11.40		3,362
2008		14.82		9.18		3,315
2007		14.32		14.82		3,356
2006		12.61		14.32		3,049
2005		12.24		12.61		2,570
2004		11.26		12.24		1,713
2003(a)		10.00		11.26		606
MainStay VP T. Rowe Price Equity Income – Initial Class
2012(i)		10.00		10.66		4,312
MainStay VP T. Rowe Price Equity Income – Service Class
2012(i)		10.00		10.63		3,135
MainStay VP Unconstrained Bond – Service Class
2012		9.76		10.93		1,100
2011(h)		10.00		9.76		304
MainStay VP U.S. Small Cap – Initial Class
2012		12.20		13.57		1,209
2011		12.72		12.20		1,449
2010		10.32		12.72		1,768
2009		7.42		10.32		2,129
2008		14.26		7.42		1,006
2007		10.62		14.26		1,275
2006		9.57		10.62		1,389
2005		8.66		9.57		1,609
2004		8.30		8.66		2,817
2003		6.07		8.30		3,094
MainStay VP U.S. Small Cap – Service Class
2012		16.70		18.27		1,103
2011		17.53		16.70		1,146
2010		14.25		17.53		1,190
2009		10.27		14.25		1,198
2008		19.79		10.27		423

22

	Accumulation unit value				Number of accumulation units
	Beginning of period		End of period
2007		14.78		19.79		404
2006		13.34		14.78		316
2005		12.11		13.34		235
2004		11.63		12.11		161
2003(a)		10.00		11.63		55
MainStay VP Van Eck Global Hard Assets – Initial Class
2012(i)		10.00		8.97		11,090
BlackRock® Global Allocation V.I. Fund – Class III Shares
2012		8.94		9.69		1,484
2011(h)		10.00		8.94		614
Columbia Variable Portfolio – Small Cap Value Fund – Class 2
2012		12.54		13.60		944
2011		13.59		12.54		1,016
2010		10.89		13.59		1,102
2009		8.84		10.89		1,060
2008		12.48		8.84		1,131
2007		12.99		12.48		1,274
2006		11.03		12.99		1,275
2005		10.61		11.03		704
2004(c)		10.00		10.61		49
Dreyfus IP Technology Growth – Service Shares
2012		14.15		15.81		871
2011		15.76		14.15		790
2010		12.33		15.76		733
2009		7.96		12.33		661
2008		13.74		7.96		538
2007		12.18		13.74		525
2006		11.87		12.18		476
2005		11.63		11.87		396
2004		11.77		11.63		277
2003 (a)		10.00		11.77		104
Dreyfus IP Technology Growth – Initial Shares
2012		10.85		12.37		757
2011		11.93		10.85		676
2010		9.31		11.93		896
2009		5.99		9.31		1,003
2008		10.32		5.99		817
2007		9.12		10.32		1,065
2006		8.87		9.12		1,284
2005		8.67		8.87		1,423
2004		8.75		8.67		1,936
2003		5.88		8.75		2,027
Fidelity® VIP Contrafund® – Service Class 2
2012		16.09		18.14		3,857
2011		16.89		16.09		3,960
2010		14.65		16.89		3,939
2009		10.97		14.65		3,793
2008		19.41		10.97		3,621
2007		16.78		19.41		3,275
2006		15.27		16.78		2,697
2005		13.27		15.27		1,792
2004		11.69		13.27		955
2003(a)		10.00		11.69		318
Fidelity® VIP Contrafund® – Initial Class
2012		26.07		29.92		4,232
2011		27.12		26.07		4,975
2010		23.46		27.12		5,843
2009		17.53		23.46		6,908
2008		30.93		17.53		8,044
2007		26.67		30.93		10,034
2006		24.21		26.67		12,342
2005		21.00		24.21		14,328
2004		18.44		21.00		15,206
2003		14.56		18.44		15,836

23

	Accumulation unit value				Number of accumulation units
	Beginning of period		End of period
Fidelity® VIP Equity-Income – Service Class 2
2012		12.62		14.52		2,024
2011		12.72		12.62		2,124
2010		11.23		12.72		2,189
2009		8.77		11.23		2,193
2008		15.54		8.77		2,184
2007		15.57		15.54		2,168
2006		13.16		15.57		1,806
2005		12.64		13.16		1,344
2004		11.53		12.64		810
2003(a)		10.00		11.53		251
Fidelity® VIP Equity Income – Initial Class
2012		17.97		20.78		2,544
2011		18.04		17.97		2,957
2010		15.89		18.04		3,504
2009		12.38		15.89		4,177
2008		21.89		12.38		4,926
2007		21.86		21.89		6,579
2006		18.45		21.86		8,089
2005		17.67		18.45		9,399
2004		16.07		17.67		10,725
2003		12.50		16.07		11,179
Fidelity® VIP Mid Cap – Service Class 2
2012		18.37		20.34		2,903
2011		21.14		18.37		3,095
2010		16.68		21.14		3,189
2009		12.10		16.68		3,057
2008		20.32		12.10		3,172
2007		17.87		20.32		3,593
2006		16.12		17.87		3,833
2005		13.85		16.12		3,580
2004		11.27		13.85		2,037
2003(b)		10.00		11.27		199
Janus Aspen Global Research Portfolio – Service Shares
2012		11.00		12.86		744
2011		13.03		11.00		699
2010		11.44		13.03		693
2009		8.44		11.44		649
2008		15.51		8.44		589
2007		14.38		15.51		545
2006		12.37		14.38		476
2005		11.88		12.37		416
2004		11.53		11.88		297
2003(a)		10.00		11.53		121
Janus Aspen Global Research Portfolio – Institutional Shares
2012		14.38		17.03		3,436
2011		16.90		14.38		3,988
2010		14.80		16.90		4,556
2009		10.90		14.80		5,317
2008		19.97		10.90		6,031
2007		18.48		19.97		7,468
2006		15.85		18.48		9,403
2005		15.18		15.85		11,939
2004		14.70		15.18		15,251
2003		12.02		14.70		18,103
MFS® Investors Trust Series – Service Class
2012		13.02		15.10		139
2011		13.60		13.02		133
2010		12.44		13.60		133
2009		9.97		12.44		127
2008		15.14		9.97		124
2007		13.96		15.14		104
2006		12.56		13.96		100
2005		11.91		12.56		92

24

	Accumulation unit value				Number of accumulation units
	Beginning of period		End of period
2004		10.86		11.91		70
2003(a)		10.00		10.86		12
MFS® Investors Trust Series – Initial Class
2012		10.46		12.29		559
2011		10.84		10.46		608
2010		9.90		10.84		735
2009		7.91		9.90		897
2008		11.99		7.91		1,050
2007		11.03		11.99		1,374
2006		9.90		11.03		1,764
2005		9.35		9.90		2,160
2004		8.52		9.35		2,599
2003		7.07		8.52		2,885
MFS® Research Series – Service Class
2012		14.52		16.43		149
2011		14.84		14.52		146
2010		13.01		14.84		150
2009		10.14		13.01		147
2008		16.13		10.14		141
2007		14.48		16.13		143
2006		13.33		14.48		130
2005		12.56		13.33		112
2004		11.02		12.56		74
2003(a)		10.00		11.02		35
MFS® Research Series – Initial Class
2012		11.88		13.74		612
2011		12.10		11.88		725
2010		10.59		12.10		855
2009		8.22		10.59		1,022
2008		13.05		8.22		1,211
2007		11.69		13.05		1,536
2006		10.73		11.69		2,180
2005		10.09		10.73		2,867
2004		8.84		10.09		3,422
2003		7.19		8.84		3,779
Neuberger Berman AMT Mid-Cap Growth Portfolio – Class S
2012		17.06		18.28		615
2011		17.40		17.06		530
2010		13.70		17.40		508
2009		10.58		13.70		463
2008		18.99		10.58		525
2007		15.76		18.99		514
2006		13.96		15.76		349
2005		12.48		13.96		236
2004(d)		10.91		12.48		109
Royce Micro-Cap Portfolio – Investment Class
2012		14.22		14.78		1,697
2011		16.63		14.22		1,727
2010		12.97		16.63		1,697
2009		8.32		12.97		1,531
2008		14.88		8.32		1,370
2007		14.51		14.88		1,353
2006		12.16		14.51		1,051
2005(e)		10.00		12.16		159
Victory VIF Diversified Stock – Class A Shares
2012		11.40		13.05		357
2011		12.40		11.40		428
2010		11.20		12.40		497
2009		8.94		11.20		550
2008		14.59		8.94		567
2007		13.45		14.59		545
2006		12.00		13.45		578
2005		11.19		12.00		483
2004(d)		10.00		11.19		184

25

(a) For the period June 2, 2003 (commencement of operations in the Separate Account) through December 31, 2003.

(b) For the period September 5, 2003 (commencement of operations in the Separate Account) through December 31, 2003.

(c) For the period November 15, 2004 (commencement of operations in the Separate Account) through December 31, 2004.

(d) For the period May 1, 2004 (commencement of operations in the Separate Account) through December 31, 2004.

(e) For the period May 1, 2005 (commencement of operations in the Separate Account) through December 31, 2005.

(f) For the period February 13, 2006 (commencement of operations in the Separate Account) through December 31, 2006.

(g) For the period May 1, 2010 (commencement of operations in the Separate Account) through December 31, 2010.

(h) For the period May 1, 2011 (commencement of operations in the Separate Account) through December 31, 2011.

(i) For the period February 17, 2012 (commencement of operations in the Separate Account) through December 31, 2012.

26

SEPARATE ACCOUNTS-I AND II

CONDENSED FINANCIAL INFORMATION

The following Accumulation Unit values and the number of Accumulation Units outstanding for each available Investment Division for the fiscal years ended December 31 presented below are derived from the financial statements audited by PricewaterhouseCoopers LLP, independent registered public accounting firm. The financial statements for the fiscal year ending December 31, 2007 and for each of the subsequent years are included in the Statement of Additional Information. The Accumulation Unit values and the number of Accumulation Units outstanding for each available Investment Division as of December 31, 2006 and preceding years, are derived from financial statements not included herein. Values and units shown are for full year periods beginning January 1, except where indicated. The policies were first offered on January 29, 1993.

	Accumulation unit value				Number of accumulation units
Separate Account II	Beginning of period		End of period
(Accumulation unit value in dollars and Number of accumulation units in thousands)
MainStay VP Balanced – Service Class
2012		11.72		12.97		268
2011		11.58		11.72		299
2010		10.35		11.58		339
2009		8.54		10.35		375
2008		11.55		8.54		482
2007		11.41		11.55		636
2006		10.47		11.41		659
2005(d)		10.00		10.47		529
MainStay VP Bond – Initial Class
2012		22.80		23.55		778
2011		21.54		22.80		848
2010		20.23		21.54		938
2009		19.02		20.23		970
2008		18.57		19.02		1,055
2007		17.67		18.57		1,230
2006		17.12		17.67		1,391
2005		16.97		17.12		1,679
2004		16.52		16.97		1,915
2003		16.01		16.52		2,337
MainStay VP Cash Management
2012		1.40		1.38		8,941
2011		1.42		1.40		10,867
2010		1.44		1.42		11,031
2009		1.46		1.44		15,559
2008		1.44		1.46		22,009
2007		1.39		1.44		15,515
2006		1.35		1.39		13,408
2005		1.33		1.35		14,418
2004		1.34		1.33		18,047
2003		1.34		1.34		23,965
MainStay VP Common Stock – Initial Class
2012		27.56		31.75		992
2011		27.49		27.56		1,186
2010		24.73		27.49		1,366
2009		20.47		24.73		1,584
2008		32.60		20.47		1,768
2007		31.41		32.60		2,135
2006		27.32		31.41		2,492
2005		25.70		27.32		2,965
2004		23.48		25.70		3,497
2003		18.82		23.48		3,816
MainStay VP Conservative Allocation – Service Class
2012		12.09		13.18		973
2011		11.93		12.09		925
2010		10.82		11.93		831
2009		8.99		10.82		733

27

	Accumulation unit value				Number of accumulation units
Separate Account II	Beginning of period		End of period
2008		11.19		8.99		681
2007		10.57		11.19		459
2006(e)		10.00		10.57		239
MainStay VP Convertible – Initial Class
2012		23.40		25.21		433
2011		24.89		23.40		486
2010		21.39		24.89		523
2009		14.84		21.39		577
2008		22.92		14.84		589
2007		20.22		22.92		684
2006		18.55		20.22		787
2005		17.63		18.55		896
2004		16.83		17.63		1,020
2003		13.95		16.83		1,049
MainStay VP Cornerstone Growth – Initial Class
2012		22.52		25.56		2,314
2011		23.14		22.52		2,633
2010		20.89		23.14		2,942
2009		15.77		20.89		3,358
2008		26.14		15.77		3,774
2007		23.56		26.14		4,474
2006		22.85		23.56		5,408
2005		21.36		22.85		6,632
2004		20.77		21.36		8,178
2003		16.57		20.77		9,184
MainStay VP DFA/DuPont Capital Emerging Markets Equity – Initial Class
2012(h)		10.00		10.00		949
MainStay VP Eagle Small Cap Growth – Initial Class
2012(h)		10.00		9.88		888
MainStay VP Floating Rate – Service Class
2012		11.40		12.03		608
2011		11.33		11.40		640
2010		10.65		11.33		749
2009		8.09		10.65		589
2008		10.65		8.09		448
2007		10.54		10.65		715
2006		10.10		10.54		591
2005(d)		10.00		10.10		199
MainStay VP Government – Initial Class
2012		22.24		22.82		611
2011		21.26		22.24		691
2010		20.44		21.26		878
2009		20.38		20.44		940
2008		18.80		20.38		1,105
2007		17.86		18.80		1,035
2006		17.38		17.86		1,218
2005		17.20		17.38		1,467
2004		16.87		17.20		1,756
2003		16.77		16.87		2,373
MainStay VP Growth Allocation – Service Class
2012		10.07		11.45		344
2011		10.50		10.07		389
2010		9.27		10.50		413
2009		7.36		9.27		465
2008		11.97		7.36		502
2007		11.01		11.97		448
2006(e)		10.00		11.01		282
MainStay VP High Yield Corporate Bond – Initial Class
2012		32.21		36.06		1,818
2011		30.71		32.21		1,934
2010		27.61		30.71		2,162
2009		19.59		27.61		2,364
2008		26.15		19.59		2,507
2007		25.89		26.15		3,279

28

	Accumulation unit value				Number of accumulation units
Separate Account II	Beginning of period		End of period
2006		23.41		25.89		3,783
2005		23.04		23.41		4,572
2004		20.71		23.04		5,066
2003		15.38		20.71		5,231
MainStay VP ICAP Select Equity – Initial Class
2012		13.48		15.38		2.273
2011		13.86		13.48		2,654
2010		11.88		13.86		3,013
2009		9.30		11.88		3,446
2008		15.10		9.30		3,156
2007		14.32		15.10		746
2006		12.16		14.32		353
2005		11.68		12.16		354
2004		10.63		11.68		382
2003		8.41		10.63		343
MainStay VP Income Builder – Initial Class
2012		26.71		30.32		1,418
2011		25.99		26.71		1,621
2010		22.94		25.99		1,822
2009		18.81		22.94		2,037
2008		26.08		18.81		2,315
2007		24.57		26.08		2,895
2006		22.74		24.57		3,445
2005		21.63		22.74		4,280
2004		20.60		21.63		5,209
2003		17.44		20.60		5,915
MainStay VP International Equity – Initial Class
2012		18.72		22.08		404
2011		22.59		18.72		487
2010		21.82		22.59		563
2009		18.52		21.82		656
2008		25.24		18.52		757
2007		24.37		25.24		912
2006		18.80		24.37		937
2005		17.64		18.80		880
2004		15.23		17.64		671
2003		11.87		15.23		535
MainStay VP Janus Balanced – Initial Class
2012(h)		10.00		10.43		4,077
MainStay VP Large Cap Growth – Initial Class
2012		15.22		16.99		375
2011		15.45		15.22		411
2010		13.48		15.45		430
2009		9.75		13.48		474
2008		16.14		9.75		488
2007		13.47		16.14		478
2006		12.73		13.47		534
2005		12.36		12.73		568
2004		12.82		12.36		732
2003		10.14		12.82		811
MainStay VP MFS® Utilities – Service Class
2012(h)		10.00		10.75		1,912
MainStay VP Mid Cap Core – Initial Class
2012		15.98		18.53		567
2011		16.69		15.98		664
2010		13.67		16.69		774
2009		10.12		13.67		910
2008		17.74		10.12		458
2007		17.11		17.74		590
2006		15.08		17.11		631
2005		13.19		15.08		628
2004		10.93		13.19		427
2003		8.17		10.93		257

29

	Accumulation unit value				Number of accumulation units
Separate Account II	Beginning of period		End of period
MainStay VP Moderate Allocation – Service Class
2012		11.53		12.78		1,325
2011		11.60		11.53		1,330
2010		10.42		11.60		1,357
2009		8.51		10.42		1,326
2008		11.56		8.51		1,214
2007		10.79		11.56		1,055
2006(e)		10.00		10.79		566
MainStay VP Moderate Growth Allocation – Service Class
2012		10.95		12.36		986
2011		11.26		10.95		1,112
2010		10.00		11.26		1,206
2009		7.91		10.00		1,203
2008		11.89		7.91		1,246
2007		11.04		11.89		1,065
2006(e)		10.00		11.04		723
MainStay VP PIMCO Real Return – Service Class
2012(h)		10.00		10.44		547
MainStay VP S&P 500 Index – Initial Class
2012		30.65		34.99		1,883
2011		30.49		30.65		2,137
2010		26.92		30.49		2,446
2009		21.60		26.92		2,799
2008		34.75		21.60		3,169
2007		33.45		34.75		3,820
2006		29.36		33.45		4,553
2005		28.39		29.36		5,363
2004		26.03		28.39		6,123
2003		20.57		26.03		6,574
MainStay VP T. Rowe Price Equity Income – Initial Class
2012(h)		10.00		10.67		1,107
MainStay VP Unconstrained Bond – Service Class
2012		9.76		10.95		103
2011(g)		10.00		9.76		39
MainStay VP U.S. Small Cap – Initial Class
2012		13.65		15.19		240
2011		14.21		13.65		289
2010		11.52		14.21		327
2009		8.27		11.52		390
2008		15.88		8.27		205
2007		11.82		15.88		234
2006		10.63		11.82		248
2005		9.61		10.63		252
2004		9.20		9.61		284
2003		6.73		9.20		302
MainStay VP Van Eck Global Hard Assets – Initial Class
2012(h)		10.00		8.98		1,488
BlackRock Global Allocation V.I. Fund – Class III Shares
2012		8.94		9.71		244
2011(g)		10.00		8.94		86
Columbia Variable Portfolio – Small Cap Value Fund – Class 2
2012		12.62		13.86		90
2011		13.62		12.62		105
2010		10.91		13.62		125
2009		8.84		10.91		140
2008		12.47		8.84		147
2007		12.97		12.47		178
2006		11.01		12.97		199
2005		10.57		11.01		148
2004(b)		10.00		10.57		2
Dreyfus IP Technology Growth – Initial Shares
2012		10.86		12.39		181
2011		11.93		10.86		227
2010		9.30		11.93		213

30

	Accumulation unit value				Number of accumulation units
Separate Account II	Beginning of period		End of period
2009		5.98		9.30		236
2008		10.29		5.98		190
2007		9.09		10.29		223
2006		8.83		9.09		245
2005		8.62		8.83		238
2004		8.69		8.62		287
2003		5.83		8.69		297
Fidelity® VIP Contrafund® – Initial Class
2012		25.84		29.70		1,398
2011		26.86		25.84		1,633
2010		23.21		26.86		1,868
2009		17.33		23.21		2,147
2008		30.54		17.33		2,435
2007		26.31		30.54		2,842
2006		23.86		26.31		3,259
2005		20.67		23.86		3,556
2004		18.13		20.67		3,549
2003		14.30		18.13		3,592
Fidelity® VIP Equity-Income – Initial Class
2012		18.29		21.17		634
2011		18.35		18.29		729
2010		16.14		18.35		861
2009		12.56		16.14		978
2008		22.19		12.56		1,111
2007		22.14		22.19		1,365
2006		18.66		22.14		1,526
2005		17.86		18.66		1,698
2004		16.22		17.86		1,735
2003		12.61		16.22		1,716
Fidelity® VIP Mid Cap – Service Class 2
2012		19.01		21.49		406
2011		21.60		19.01		491
2010		17.02		21.60		560
2009		12.34		17.02		576
2008		20.70		12.34		634
2007		18.18		20.70		740
2006		16.39		18.18		811
2005		14.07		16.39		702
2004		11.43		14.07		361
2003(a)		10.00		11.43		30
Janus Aspen Global Research Portfolio – Institutional Shares
2012		14.63		17.34		1,044
2011		17.18		14.63		1,178
2010		15.03		17.18		1,331
2009		11.06		15.03		1,499
2008		20.24		11.06		1,684
2007		18.71		20.24		1,986
2006		16.03		18.71		2,371
2005		15.34		16.03		2,835
2004		14.83		15.34		3,485
2003		12.12		14.83		3,957
MFS® Investors Trust Series – Initial Class
2012		10.76		12.66		79
2011		11.14		10.76		80
2010		10.16		11.14		92
2009		8.11		10.16		104
2008		12.28		8.11		111
2007		11.28		12.28		128
2006		10.12		11.28		163
2005		9.55		10.12		194
2004		8.69		9.55		207
2003		7.21		8.69		219
MFS® Research Series – Initial Class
2012		11.88		13.76		79

31

	Accumulation unit value				Number of accumulation units
Separate Account II	Beginning of period		End of period
2011		12.09		11.88		96
2010		10.57		12.09		113
2009		8.20		10.57		130
2008		13.01		8.20		155
2007		11.64		13.01		181
2006		10.67		11.64		210
2005		10.03		10.67		277
2004		8.77		10.03		291
2003		7.13		8.77		289
Neuberger Berman AMT Mid-Cap Growth Portfolio – Class S
2012		15.56		17.22		87
2011		15.72		15.56		72
2010		12.37		15.72		68
2009		9.54		12.37		61
2008		17.11		9.54		67
2007		14.19		17.11		72
2006		12.56		14.19		60
2005		11.22		12.56		46
2004(c)		10.00		11.22		22
Royce Micro-Cap Portfolio – Investment Class
2012		14.35		15.25		197
2011		16.54		14.35		175
2010		12.90		16.54		179
2009		8.27		12.90		178
2008		14.76		8.27		168
2007		14.38		14.76		189
2006		12.04		14.38		169
2005(d)		10.00		12.04		26
Victory VIF Diversified Stock – Class A Shares
2012		11.36		13.04		62
2011		12.35		11.36		76
2010		11.14		12.35		85
2009		8.88		11.14		95
2008		14.48		8.88		119
2007		13.34		14.48		110
2006		11.89		13.34		108
2005		11.07		11.89		104
2004(c)		10.00		11.07		24

(a) For the period September 5, 2003 (commencement of operations in the Separate Account) through December 31, 2003.

(b) For the period November 15, 2004 (commencement of operations in the Separate Account) through December 31, 2004.

(c) For the period May 1, 2004 (commencement of operations in the Separate Account) through December 31, 2004.

(d) For the period May 1, 2005 (commencement of operations in the Separate Account) through December 31, 2005.

(e) For the period February 13, 2006 (commencement of operations in the Separate Account) through December 31, 2006.

(f) For the period May 1, 2010 (commencement of operations in the Separate Account) through December 31, 2010.

(g) For the period May 1, 2011 (commencement of operations in the Separate Account) through December 31, 2011.

(h) For the period February 17, 2012 (commencement of operations in the Separate Account) through December 31, 2012.

32

	Accumulation unit value				Number of accumulation units
Separate Account I	Beginning of period		End of period
(Accumulation unit value in dollars and Number of accumulation units in thousands)
MainStay VP Balanced – Service Class
2012		11.72		12.96		182
2011		11.58		11.72		203
2010		10.35		11.58		239
2009		8.54		10.35		281
2008		11.55		8.54		374
2007		11.41		11.55		504
2006		10.47		11.41		522
2005(d)		10.00		10.47		384
MainStay VP Bond – Initial Class
2012		22.80		23.55		585
2011		21.54		22.80		642
2010		20.23		21.54		735
2009		19.02		20.23		814
2008		18.57		19.02		879
2007		17.67		18.57		1,074
2006		17.12		17.67		1,291
2005		16.97		17.12		1,633
2004		16.52		16.97		1,924
2003		16.01		16.52		2,485
MainStay VP Cash Management
2012		1.40		1.38		6,226
2011		1.42		1.40		8,756
2010		1.44		1.42		7,956
2009		1.46		1.44		10,684
2008		1.44		1.46		17,809
2007		1.39		1.44		12,112
2006		1.35		1.39		10,856
2005		1.33		1.35		11,934
2004		1.34		1.33		14,156
2003		1.34		1.34		20,884
2002		1.34		1.34		34,967
MainStay VP Common Stock – Initial Class
2012		27.56		31.75		641
2011		27.49		27.56		752
2010		24.73		27.49		895
2009		20.47		24.73		1,057
2008		32.60		20.47		1,254
2007		31.41		32.60		1,551
2006		27.32		31.41		1,891
2005		25.70		27.32		2,370
2004		23.48		25.70		2,865
2003		18.82		23.48		3,264
MainStay VP Conservative Allocation – Service Class
2012		12.12		13.21		520
2011		11.96		12.12		570
2010		10.85		11.96		634
2009		9.01		10.85		614
2008		11.22		9.01		706
2007		10.60		11.22		578
2006(e)		10.00		10.60		274
MainStay VP Convertible – Initial Class
2012		23.46		25.28		297
2011		24.96		23.46		357
2010		21.45		24.96		414
2009		14.88		21.45		464
2008		22.98		14.88		513
2007		20.27		22.98		632
2006		18.60		20.27		785
2005		17.67		18.60		961
2004		16.87		17.67		1,191

33

	Accumulation unit value				Number of accumulation units
Separate Account I	Beginning of period		End of period
2003		13.99		16.87		1,293
MainStay VP Cornerstone Growth – Initial Class
2012		22.52		25.56		1,444
2011		23.14		22.52		1,614
2010		20.89		23.14		1,840
2009		15.77		20.89		2,159
2008		26.14		15.77		2,553
2007		23.56		26.14		3,168
2006		22.85		23.56		4,037
2005		21.36		22.85		5,068
2004		20.77		21.36		6,529
2003		16.57		20.77		7,820
MainStay VP DFA/DuPont Capital Emerging Markets Equity – Initial Class
2012(h)		10.00		10.00		588
MainStay VP Eagle Small Cap Growth – Initial Class
2012(h)		10.00		9.88		432
MainStay VP Floating Rate – Service Class
2012		11.40		12.03		470
2011		11.33		11.40		388
2010		10.65		11.33		421
2009		8.09		10.65		438
2008		10.65		8.09		365
2007		10.54		10.65		764
2006		10.10		10.54		790
2005(d)		10.00		10.10		285
MainStay VP Government – Initial Class
2012		22.24		22.82		498
2011		21.26		22.24		600
2010		20.44		21.26		711
2009		20.38		20.44		853
2008		18.80		20.38		1,076
2007		17.86		18.80		1,022
2006		17.38		17.86		1,249
2005		17.20		17.38		1,569
2004		16.87		17.20		1,963
2003		16.77		16.87		2,819
MainStay VP Growth Allocation – Service Class
2012		9.98		11.35		204
2011		10.41		9.98		240
2010		9.19		10.41		277
2009		7.29		9.19		317
2008		11.87		7.29		345
2007		10.92		11.87		370
2006(e)		10.00		10.92		190
MainStay VP High Yield Corporate Bond – Initial Class
2012		32.25		36.10		1,770
2011		30.75		32.25		1,882
2010		27.64		30.75		2,212
2009		19.61		27.64		2,408
2008		26.18		19.61		2,640
2007		25.92		26.18		3,670
2006		23.44		25.92		4,543
2005		23.07		23.44		5,729
2004		20.73		23.07		6,804
2003		15.40		20.73		7,248
MainStay VP ICAP Select Equity – Initial Class
2012		13.30		15.17		1,534
2011		13.67		13.30		1,781
2010		11.73		13.67		2,038
2009		9.18		11.73		2,411
2008		14.90		9.18		2,381
2007		14.13		14.90		583
2006		12.00		14.13		207
2005		11.53		12.00		216

34

	Accumulation unit value				Number of accumulation units
Separate Account I	Beginning of period		End of period
2004		10.49		11.53		301
2003		8.30		10.49		253
MainStay VP Income Builder – Initial Class
2012		26.71		30.32		1,097
2011		25.99		26.71		1,233
2010		22.94		25.99		1,412
2009		18.81		22.94		1,646
2008		26.08		18.81		1,979
2007		24.57		26.08		2,532
2006		22.74		24.57		3,104
2005		21.63		22.74		3,755
2004		20.60		21.63		4,717
2003		17.44		20.60		5,524
MainStay VP International Equity – Initial Class
2012		18.72		22.07		297
2011		22.58		18.72		353
2010		21.81		22.58		394
2009		18.51		21.81		459
2008		25.23		18.51		564
2007		24.36		25.23		743
2006		18.79		24.36		800
2005		17.63		18.79		792
2004		15.22		17.63		728
2003		11.86		15.22		607
MainStay VP Janus Balanced – Initial Class
2012(h)		10.00		10.43		1,935
MainStay VP Large Cap Growth – Initial Class
2012		15.08		16.84		258
2011		15.32		15.08		228
2010		13.36		15.32		225
2009		9.67		13.36		279
2008		16.00		9.67		262
2007		13.36		16.00		283
2006		12.62		13.36		368
2005		12.25		12.62		400
2004		12.71		12.25		526
2003		10.05		12.71		668
MainStay VP MFS® Utilities – Service Class
2012(h)		10.00		10.75		952
MainStay VP Mid Cap Core – Initial Class
2012		15.95		18.50		353
2011		16.66		15.95		435
2010		13.65		16.66		505
2009		10.10		13.65		577
2008		17.71		10.10		316
2007		17.08		17.71		411
2006		15.06		17.08		484
2005		13.16		15.06		577
2004		10.91		13.16		438
2003		8.16		10.91		262
MainStay VP Moderate Allocation – Service Class
2012		11.45		12.70		615
2011		11.52		11.45		595
2010		10.35		11.52		658
2009		8.45		10.35		754
2008		11.48		8.45		694
2007		10.72		11.48		596
2006(e)		10.00		10.72		318
MainStay VP Moderate Growth Allocation – Service Class
2012		10.79		12.18		609
2011		11.09		10.79		674
2010		9.85		11.09		706
2009		7.79		9.85		695
2008		11.72		7.79		766

35

	Accumulation unit value				Number of accumulation units
Separate Account I	Beginning of period		End of period
2007		10.88		11.72		735
2006(e)		10.00		10.88		394
MainStay VP PIMCO Real Return – Service Class
2012(h)		10.00		10.44		381
MainStay VP S&P 500 Index – Initial Class
2012		30.65		34.99		1,200
2011		30.49		30.65		1,373
2010		26.92		30.49		1,554
2009		21.60		26.92		1,790
2008		34.75		21.60		2,167
2007		33.45		34.75		2,726
2006		29.36		33.45		3,363
2005		28.39		29.36		4,183
2004		26.03		28.39		5,051
2003		20.57		26.03		5,621
MainStay VP T. Rowe Price Equity Income – Initial Class
2012(h)		10.00		10.67		577
MainStay VP Unconstrained Bond – Service Class
2012		9.76		10.95		90
2011(g)		10.00		9.76		35
MainStay VP U.S. Small Cap – Initial Class
2012		13.62		15.16		169
2011		14.18		13.62		178
2010		11.49		14.18		210
2009		8.26		11.49		239
2008		15.85		8.26		106
2007		11.80		15.85		158
2006		10.61		11.80		177
2005		9.59		10.61		203
2004		9.18		9.59		219
2003		6.72		9.18		248
MainStay VP Van Eck Global Hard Assets – Initial Class
2012(h)		10.00		8.98		818
BlackRock® Global Allocation V.I. Fund – Class III Shares
2012		8.94		9.71		88
2011(g)		10.00		8.94		44
Columbia Variable Portfolio – Small Cap Value Fund – Class 2
2012		12.62		13.86		48
2011		13.62		12.62		59
2010		10.91		13.62		73
2009		8.84		10.91		92
2008		12.47		8.84		117
2007		12.97		12.47		138
2006		11.01		12.97		169
2005		10.57		11.01		102
2004(b)		10.00		10.57		13
Dreyfus IP Technology Growth – Initial Shares
2012		11.19		12.77		80
2011		12.29		11.19		68
2010		9.58		12.29		71
2009		6.16		9.58		82
2008		10.61		6.16		72
2007		9.37		10.61		108
2006		9.10		9.37		109
2005		8.88		9.10		141
2004		8.95		8.88		192
2003		6.01		8.95		216
Fidelity® VIP Contrafund® – Initial Class
2012		26.35		30.28		742
2011		27.38		26.35		857
2010		23.67		27.38		1,001
2009		17.67		23.67		1,168
2008		31.14		17.67		1,436
2007		26.82		31.14		1,758

36

	Accumulation unit value				Number of accumulation units
Separate Account I	Beginning of period		End of period
2006		24.33		26.82		2,074
2005		21.07		24.33		2,341
2004		18.49		21.07		2,497
2003		14.58		18.49		2,584
Fidelity® VIP Equity-Income – Initial Class
2012		18.42		21.33		351
2011		18.48		18.42		413
2010		16.26		18.48		489
2009		12.65		16.26		614
2008		22.35		12.65		802
2007		22.30		22.35		1,018
2006		18.80		22.30		1,207
2005		17.99		18.80		1,382
2004		16.34		17.99		1,509
2003		12.70		16.34		1,556
Fidelity® VIP Mid Cap – Service Class 2
2012		18.69		21.13		199
2011		21.24		18.69		225
2010		16.73		21.24		263
2009		12.13		16.73		296
2008		20.35		12.13		343
2007		17.87		20.35		441
2006		16.11		17.87		499
2005		13.83		16.11		501
2004		11.24		13.83		309
2003(a)		10.00		11.24		38
Janus Aspen Global Research Portfolio – Institutional Shares
2012		14.60		17.31		570
2011		17.15		14.60		663
2010		15.00		17.15		757
2009		11.03		15.00		895
2008		20.20		11.03		1,045
2007		18.67		20.20		1,301
2006		16.00		18.67		1,550
2005		15.31		16.00		2,010
2004		14.80		15.31		2,646
2003		12.10		14.80		3,265
MFS® Investors Trust Series – Initial Class
2012		10.47		12.32		43
2011		10.84		10.47		48
2010		9.89		10.84		50
2009		7.89		9.89		66
2008		11.95		7.89		76
2007		10.98		11.95		92
2006		9.84		10.98		111
2005		9.29		9.84		135
2004		8.45		9.29		155
2003		7.01		8.45		175
MFS® Research Series – Initial Class
2012		12.04		13.94		46
2011		12.25		12.04		45
2010		10.71		12.25		52
2009		8.31		10.71		67
2008		13.17		8.31		80
2007		11.79		13.17		118
2006		10.81		11.79		143
2005		10.16		10.81		175
2004		8.89		10.16		197
2003		7.22		8.89		212
Neuberger Berman AMT Mid-Cap Growth Portfolio – Class S
2012		16.32		18.05		51
2011		16.49		16.32		43
2010		12.97		16.49		51
2009		10.01		12.97		49

37

	Accumulation unit value				Number of accumulation units
Separate Account I	Beginning of period		End of period
2008		17.95		10.01		59
2007		14.88		17.95		68
2006		13.17		14.88		41
2005		11.76		13.17		40
2004(c)		10.00		11.76		18
Royce Micro-Cap Portfolio – Investment Class
2012		14.32		15.21		92
2011		16.50		14.32		117
2010		12.86		16.50		126
2009		8.25		12.86		124
2008		14.73		8.25		146
2007		14.35		14.73		164
2006		12.01		14.35		122
2005(d)		10.00		12.01		26
Victory VIF Diversified Stock – Class A Shares
2012		11.05		12.69		24
2011		12.02		11.05		26
2010		10.84		12.02		38
2009		8.64		10.84		51
2008		14.09		8.64		64
2007		12.98		14.09		87
2006		11.57		12.98		91
2005		10.78		11.57		64
2004(c)		10.00		10.78		22

(a) For the period September 5, 2003 (commencement of operations in the Separate Account) through December 31, 2003.

(b) For the period November 15, 2004 (commencement of operations in the Separate Account) through December 31, 2004.

(c) For the period May 1, 2004 (commencement of operations in the Separate Account) through December 31, 2004.

(d) For the period May 1, 2005 (commencement of operations in the Separate Account) through December 31, 2005.

(e) For the period February 13, 2006 (commencement of operations in the Separate Account) through December 31, 2006.

(f) For the period May 1, 2010 (commencement of operations in the Separate Account) through December 31, 2010.

(g) For the period May 1, 2011 (commencement of operations in the Separate Account) through December 31, 2011.

(h) For the period February 17, 2012 (commencement of operations in the Separate Account) through December 31, 2012.

38

NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION

AND THE SEPARATE ACCOUNT

New York Life Insurance and Annuity Corporation

New York Life Insurance and Annuity Corporation (“NYLIAC”) is a stock life insurance company incorporated in Delaware in 1980. NYLIAC is licensed to sell life, accident and health insurance and annuities in the District of Columbia and all states. In addition to the policies We describe in this Prospectus, NYLIAC offers life insurance policies and other annuities.

NYLIAC is a wholly-owned subsidiary of New York Life Insurance Company, a mutual life insurance company doing business in New York since 1845. NYLIAC held assets of $125.2 billion at the end of 2012. New York Life Insurance Company has invested in NYLIAC, and will occasionally make additional contributions to NYLIAC in order to maintain capital and surplus in accordance with state requirements. The obligations under the policies are obligations of NYLIAC.

The Separate Accounts

Separate Accounts-I and II were established on October 5, 1992; Separate Account-III was established on November 30, 1994, pursuant to resolutions of the NYLIAC Board of Directors. Each Separate Account is registered as a unit investment trust with the Securities and Exchange Commission under the Investment Company Act of 1940. The Securities and Exchange Commission, however, does not supervise the management, or the investment practices or policies, of the Separate Accounts.

Although the assets of each Separate Account belong to NYLIAC, these assets are held separately from Our other assets. The Separate Account assets are not chargeable with liabilities incurred in any of NYLIAC’s other business operations (except to the extent that assets in the Separate Account exceed the reserves and other liabilities of that Separate Account). The income, capital gains and capital losses incurred on the assets of the Separate Account are credited to or charged against the assets of the Separate Account, without regard to the income, capital gains or capital losses arising out of any other business NYLIAC may conduct. Therefore, the investment performance of the Separate Account is entirely independent of both the investment performance of the Fixed Account and any other separate account of NYLIAC.

Separate Accounts-I and II currently have 43 Investment Divisions, some of which may not be available under your policy; Separate Account-III currently has 68 Investment Divisions, some of which may not be available under your policy. Premium payments allocated to the Investment Divisions are invested solely in the corresponding Eligible Portfolios of the relevant Fund.

The Portfolios

The assets of each Eligible Portfolio are separate from the others and each such Portfolio has different investment objectives and policies. As a result, each Eligible Portfolio operates as a separate investment fund and the investment performance of one Portfolio has no effect on the investment performance of any other Portfolio. You can make or lose money in any of the Investment Divisions. Portfolios described in this Prospectus are different from portfolios that may have similar names but are available directly to the general public. The funds available directly to the general public may have the same adviser, same name, same investment objectives and policies, and substantially similar portfolio securities, but the investment performance may not be the same.

We offer no assurance that any of the Eligible Portfolios will attain their respective stated objectives.

The Funds also make their shares available to certain other separate accounts funding variable life insurance policies offered by NYLIAC. This is called “mixed funding.” The Funds also may make their shares available to separate accounts of insurance companies unaffiliated with NYLIAC. This is called “shared funding.” Although We do not anticipate any inherent difficulties arising from mixed and shared funding, it is theoretically possible that, due to differences in tax treatment or other considerations, the interests of owners of various policies participating in a certain Fund might at some time be in conflict. The Board of Directors/Trustees of each Fund, each Fund’s investment advisers, and NYLIAC are required to monitor events to identify any material conflicts that arise from the use of the Funds for mixed and shared funding. For more information about the risks of mixed and shared funding, please refer to the relevant Fund prospectus.

The Funds and Eligible Portfolios offered through this product are selected by NYLIAC based on several criteria, including asset class coverage, the strength of the manager’s reputation and tenure, brand recognition, performance, and the capability and qualification of each sponsoring investment firm. An affiliate of NYLIAC manages the Mainstay VP Funds Trust and that was a factor in its selection. Another factor that NYLIAC considers during the selection process is

39

whether the Fund or Eligible Portfolio or an affiliate of the Fund will compensate NYLIAC for providing administrative, marketing, and support services that would otherwise be provided by the Fund, the Fund’s investment adviser, or its distributor.

We receive payments or compensation from the Funds or their investment advisers, or from other service providers of the Funds (who may be affiliates of NYLIAC) in connection with administration, distribution, and other services We provide with respect to the Eligible Portfolios and their availability through the policies. These payments may be derived, in whole or in part, from the advisory fee charged by the Fund and deducted from Fund assets and/or from “Rule 12b-1” fees charged by the Fund and deducted from Fund assets. NYLIAC may use these payments for any corporate purpose, including payment of expenses that NYLIAC and/or its affiliates incur in promoting, marketing, and administering the policies, and in its role as an intermediary of the Funds. Policyowners, through their indirect investment in the Funds, bear the costs of these advisory and 12b-1 fees.

The amounts We receive may be substantial, may vary by Eligible Portfolio, and may depend on how much policy value is invested in the particular Eligible Portfolio or Fund. NYLIAC and its affiliates may profit from these payments. Currently, We receive payments or revenue under various arrangements in amounts ranging from 0.15% to 0.35% annually of the aggregate net asset value of the shares of some of the Eligible Portfolios held by the Investment Divisions. We also receive compensation under various distribution services arrangements in amounts ranging from 0.05% to 0.25% annually of the aggregate net asset value of the shares of some of the Eligible Portfolios held by the Investment Divisions. The compensation that your registered representative receives remains the same regardless of which Investment Divisions you choose or the particular arrangements applicable to those Investment Divisions.

40

The Eligible Portfolios of the relevant Funds, along with their investment advisers, are listed in the following table:

FUND	INVESTMENT ADVISERS	ELIGIBLE PORTFOLIOS
MainStay VP Funds Trust	New York Life Investment Management LLC	MainStay VP Bond MainStay VP Cash Management MainStay VP Conservative Allocation MainStay VP Floating Rate MainStay VP Growth Allocation MainStay VP Moderate Allocation MainStay VP Moderate Growth Allocation
	Subadviser: Cornerstone Capital Management Holdings LLC	MainStay VP Balanced MainStay VP Common Stock MainStay VP Cornerstone Growth MainStay VP International Equity MainStay VP Mid Cap Core MainStay VP S&P 500 Index
	Subadvisers: Dimensional Fund Advisors LP; DuPont Capital Management Corporation	MainStay VP DFA/DuPont Capital Emerging Markets Equity
	Subadviser: Eagle Asset Management, Inc.	MainStay VP Eagle Small Cap Growth*
	Subadviser: Janus Capital Management LLC	MainStay VP Janus Balanced*
	Subadviser: Marketfield Asset Management LLC	MainStay VP Marketfield
	Subadviser: Massachusetts Financial Services Company (“MFS”)	MainStay VP MFS® Utilities Portfolio
	Subadviser: Pacific Investment Management Company LLC	MainStay VP PIMCO Real Return
	Subadviser: T. Rowe Price Associates, Inc.	MainStay VP T. Rowe Price Equity Income
	Subadviser: Van Eck Associates Corporation	MainStay VP Van Eck Global Hard Assets
	Subadviser: MacKay Shields LLC (“MacKay”)	MainStay VP Convertible MainStay VP Government; MainStay VP High Yield Corporate Bond MainStay VP Unconstrained Bond
	Subadviser: Institutional Capital LLC	MainStay VP ICAP Select Equity
	Subadviser: Winslow Capital Management, Inc.	MainStay VP Large Cap Growth
	Subadvisers: Epoch Investment Partners, Inc. (“Epoch”) and MacKay	MainStay VP Income Builder
	Subadviser: Epoch	MainStay VP U.S. Small Cap

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FUND	INVESTMENT ADVISERS	ELIGIBLE PORTFOLIOS
AIM Variable Insurance Funds (Invesco Variable Insurance Funds)	Invesco Advisers, Inc.	Invesco V.I. American Value Fund
BlackRock® Variable Series Funds, Inc.	BlackRock Advisors, LLC Subadvisers: BlackRock Investment Management, LLC and BlackRock International Limited	BlackRock® Global Allocation V.I. Fund
Columbia Funds Variable Insurance Trust	Columbia Management Investment Advisers, LLC	Columbia Variable Portfolio — Small Cap Value Fund
Dreyfus Investment Portfolios	The Dreyfus Corporation	Dreyfus IP Technology Growth
Fidelity® Variable Insurance Products Fund	Fidelity Management and Research Company (“FMR”) Subadvisers: FMR Co., Inc. (“FMRC”) and other affiliates of FMR	Fidelity® VIP Contrafund® Fidelity® VIP Equity-Income Fidelity® VIP Mid Cap
Janus Aspen Series	Janus Capital Management LLC	Janus Aspen Global Research Portfolio
MFS® Variable Insurance Trust	Massachusetts Financial Services Company (“MFS”)	MFS® Investors Trust Series; MFS® Research Series;
Neuberger Berman Advisers Management Trust	Neuberger Berman Management LLC Subadviser: Neuberger Berman LLC	Neuberger Berman AMT Mid-Cap Growth Portfolio
The Royce Capital Fund	Royce & Associates, LLC	Royce Micro-Cap Portfolio
The Universal Institutional Funds, Inc.	Morgan Stanley Investment Management Inc.	UIF U.S. Real Estate Portfolio
Victory Variable Insurance Funds	Victory Capital Management Inc.	Victory VIF Diversified Stock

* New allocations to the MainStay VP Eagle Small Cap Growth – Initial Class or MainStay VP Janus Balanced – Initial Class Investment Divisions will not be accepted from policyowners who were not invested in the MainStay VP Eagle Small Cap Growth – Initial Class or MainStay VP Janus Balanced – Initial Class Investment Division on February 17, 2012. For existing policyowners, if you remove all of your Accumulation Value from the MainStay VP Eagle Small Cap Growth – Initial Class or MainStay VP Janus Balanced – Initial Class Investment Divisions on or after February 17, 2012, you will not be able to reinvest in these Investment Divisions.

Please refer to the attached prospectuses of the respective Funds for a complete description of the Funds, the investment advisers, subadvisors, and the Portfolios. The Funds’ prospectuses should be read carefully before any decision is made concerning the allocation of premium payments to an Investment Division corresponding to a particular Eligible Portfolio.

NYLIAC does not provide investment advice and does not recommend or endorse any particular Eligible Portfolio or Portfolios. NYLIAC is not responsible for choosing the Investment Divisions or the amounts allocated to each. You are responsible for determining that these decisions are appropriate for your own individual circumstances and your investment goals, financial situation, and risk tolerance. Decisions regarding investment allocations should be carefully considered. You bear the risk of any decline in the value of your policy resulting from the performance of the Portfolios you have chosen.

Investment selections should be based on a thorough investigation of all of the information regarding the Eligible Portfolios that are available to you, including each Fund’s prospectus, statement of additional information, and annual and semi-annual reports. Other sources, such as the Fund’s website or newspapers and financial and other magazines, provide more current information, including information about any regulatory actions or investigations relating to a Fund or Eligible Portfolio. After you select Investment Divisions for your initial premium, you should monitor and periodically re-evaluate your allocations to determine if they are still appropriate.

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Additions, Deletions, or Substitutions of Investments

NYLIAC retains the right, subject to any applicable law, to make additions to, deletions from, or substitutions for, the Eligible Portfolio shares held by any Investment Division. NYLIAC reserves the right to eliminate the shares of any of the Eligible Portfolios and to substitute shares of another portfolio of a Fund, or of another registered open-end management investment company. We may do this if the shares of the Eligible Portfolios are no longer available for investment or if We believe investment in any Eligible Portfolio would become inappropriate in view of the purposes of the Separate Account. To the extent required by law, We will not make substitutions of shares attributable to your interest in an Investment Division until you have been notified of the change. This does not prevent the Separate Account from purchasing other securities for other series or classes of policies, or from processing a conversion between series or classes of policies on the basis of requests made by policyowners.

We may establish new Investment Divisions when We determine, in Our sole discretion, that marketing, tax, investment, or other conditions so warrant. We will make any new Investment Divisions available to existing policyowners on a basis We determine. We may also eliminate one or more Investment Divisions, if We determine, in Our sole discretion, that marketing, tax, investment, or other conditions warrant.

In the event of any substitution or change, NYLIAC may, by appropriate endorsement, change the policies to reflect such substitution or change. We also reserve the right to: (a) operate the Separate Account as a management company under the Investment Company Act of 1940, (b) deregister it under such Act in the event such registration is no longer required, (c) combine it with one or more other separate accounts, and (d) restrict or eliminate the voting rights of persons having voting rights as to the Separate Account as permitted by law.

Reinvestment

We automatically reinvest all dividends and capital gain distributions from Eligible Portfolios in shares of the distributing Portfolio at their net asset value on the payable date.

THE POLICIES

This is a flexible premium policy which means additional premium payments can be made. It is issued on the lives of individual Annuitants.

The policies are variable. This means that the Accumulation Value will fluctuate based on the investment experience of the Investment Divisions you select, as well as the interest credited on the Fixed Accumulation Value. NYLIAC does not guarantee the investment performance of the Separate Account or of the Eligible Portfolios. You bear the entire investment risk with respect to amounts allocated to the Investment Divisions of the Separate Account . We offer no assurance that the investment objectives of the Investment Divisions will be achieved. Accordingly, amounts allocated to the Investment Divisions of the Separate Account are subject to the risks inherent in the securities markets and, specifically, to price fluctuations in the Eligible Portfolios’ investments.

As the owner of the policy, you have the right to (a) change the Beneficiary, (b) name a new owner (on Non-Qualified Policies only), (c) receive Income Payments, (d) name a payee to receive Income Payments, and (e) transfer funds among the Investment Divisions. You cannot lose these rights. However, all rights of ownership cease upon your death.

The current policyowner of a Non-Qualified Policy has the right to transfer ownership to another person(s) or entity. To transfer ownership, the policyowner must complete Our approved “Transfer of Ownership” form in effect at the time of the request. This change will take effect as of the date you signed the form, subject to any payment We made or other action We took before recording the change. Federal law requires all financial institutions to obtain, verify, and record information that identifies each person or entity that becomes the owner of an existing policy. This means the new policyowner(s) will be required to provide their name, address, date of birth, and other identifying information. To complete a transfer of ownership, the new policyowner(s) will also be required to submit financial and suitability information.

Certain provisions of the policies may be different than the general description in this Prospectus, and certain riders and options may not be available, because of legal requirements or restrictions in your state. See your policy for specific variations because any such state variations will be included in your policy or in riders or endorsements attached to your policy. See your registered representative or contact Us for specific information that may be applicable to your state.

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Selecting the Variable Annuity That’s Right for You

In addition to the policies described in this Prospectus, We offer other variable annuities, each having different features, fees, and charges. Your registered representative can help you decide which is best for you based on your individual circumstances, time horizon, and policy feature preferences.

The availability of optional policy features may increase the cost of the policy. Therefore, when selecting a policy, you should consider what policy features you plan to use within your variable annuity. You should also consider the different surrender charge period associated with each policy in light of the length of time you plan to hold your policy (i.e., your time horizon). If you intend to make multiple contributions to your policy over time, you may want to consider a surrender charge period that is based on the Policy Date. If you intend to make a single contribution or limited contributions over time, you may want to consider a policy with a surrender charge period that is based on each premium payment. In addition to the surrender charges, you should also evaluate the available policy features and the different fees associated with each of the features and of the policy.

You should consider the investment objectives, risks, charges and expenses of an investment carefully before investing. Both the product and underlying Fund prospectuses contain this and other information about the variable annuities and underlying investment options. Your registered representative can provide you with prospectuses for one or more of these variable annuities and the underlying Funds. Please read the prospectuses carefully before investing.

Qualified and Non-Qualified Policies

We designed the policies primarily for the accumulation of retirement savings, and to provide income at a future date. We issue both Qualified and Non-Qualified Policies. Both types of policies offer tax-deferred accumulation. You may purchase a Non-Qualified Policy to provide for retirement income other than through a tax-qualified plan. You may purchase a Qualified Policy for use with any one of the tax-qualified plans listed below.

(1) Section 403(b) TSAs purchased by employees of certain tax-exempt organizations and certain state-supported educational institutions, in each case in accordance with the employer’s plan document and/or applicable tax requirements (see FEDERAL TAX MATTERS—Qualified Policies—Important Information Regarding Final Code Section 403 (b) Regulations). We will no longer be accepting contributions or issuing new policies for ERISA 403(b) plans;

(2) Section 408 or 408A Individual Retirement Annuities (IRAs), including: Roth IRAs, SEP IRAs and SIMPLE IRAs

(3) Section 457 Deferred Compensation Plans.

Please see “FEDERAL TAX MATTERS” for a detailed description of these plans.

If you are considering the purchase of a Qualified Policy or a Non-Qualified Policy to fund another type of tax-qualified retirement plan, such as a plan qualifying under Section 401(a) of the Code, you should be aware that this policy will fund a retirement plan that already provides tax deferral under the Code. Therefore, the tax deferral of the annuity does not provide additional benefits. However, this annuity is designed to provide certain payment guarantees and features other than tax deferral, some of which may not be available in other investments. There are fees and charges in an annuity that may not be included in other types of investments. These additional features and benefits include:

• A guaranteed death benefit, as explained in this Prospectus.

• The option for you to receive a guaranteed stream of income payments for life after you have owned the policy for one year.

• A Fixed Account that features a guaranteed fixed interest rate.

• An optional Interest Sweep feature that automatically allocates interest earned on monies in the Fixed Account to other Investment Divisions offered under the policy.

• The flexibility to easily transfer money among Investment Divisions in the annuity managed by different investment managers and to have your investment mix automatically rebalanced periodically.

These features are explained in detail in this Prospectus. You should purchase this annuity with tax-qualified money because of the additional features the annuity provides and not for the tax deferral to which the tax-qualified plan is already entitled. You should consult with your tax or legal adviser to determine if the policy is suitable for your tax qualified plan.

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Policy Application and Premium Payments

To purchase a policy, you must complete an application. The application is sent by your registered representative to NYLIAC’s Cleveland or Dallas Service Center with your initial premium payment. (Initial premium payments received in connection with 1035 exchanges, rollovers and TSAs must be sent to either the Cleveland or Dallas Service Center, or one of the addresses noted in Question 17 of this Prospectus.) If the application is complete and accurate, and We have received all other information necessary to process the application, We will credit the initial premium payment to the investment options you have selected within two Business Days after receipt at the Cleveland or Dallas Service Center. (Or, in the case of initial premium payments received in connection with 1035 exchanges, rollovers and TSAs, at the Cleveland or Dallas Service Centers or at one of the addresses noted in Question 17 of this Prospectus.) If We cannot credit the initial premium payment within five Business Days after We receive it because the application is incomplete or inaccurate, We will contact you and explain the reason for the delay. Unless you consent to NYLIAC’s retaining the initial premium payment and crediting it as soon as the necessary requirements are fulfilled, We will refund the initial premium payment immediately.

Acceptance of applications is subject to NYLIAC’s rules. We reserve the right to reject any application or initial premium payment. Generally, only one policyowner is named. If We issue a jointly owned policy, ownership rights and privileges under the policy must be exercised jointly and benefits under the policy will be paid upon the death of any joint owner. Acceptance of initial and subsequent premium payments is subject to Our suitability standards.

Separate Account III currently consists of 68 Investment Divisions, some of which may not be available under your policy, as well as the Fixed Account. You may increase or decrease the percentages of the premium payments (which must be in whole number percentages) allocated to each Allocation Alternative at the time a premium payment is made.

The minimum initial premium payment for Qualified Policies is as follows:

(a) for TSAs, $50 per month or a $2,000 single premium;

(b) for IRAs, $1,200 initial premium payment plus pre-authorized monthly deductions of $100 per month, or pre-authorized monthly deductions of $165 per month or a $2,000 single premium;

(c) for deferred compensation plans, $50 per month; and

(d) for SEP plans, $600 initial premium payment or $50 per month if part of a pre-authorized billing arrangement.

(e) For SIMPLE IRAs, $4,000 initial premium payment and, if part of a pre-authorized billing arrangement, an additional $50 per month.

For Non-Qualified Policies, the minimum initial premium payment is $5,000 single premium or a $2,500 premium payment plus $50 per month as either pre-authorized monthly deduction or as part of a pre-authorized monthly billing arrangement. You may make additional premium payments of at least $50 each or such lower amount as We may permit at any time. Acceptance of initial and additional premium payments is subject to Our suitability standards. The currently available methods of payment are direct payments to NYLIAC, pre- authorized monthly deductions from your bank, a credit union or similar accounts, public and private employee payroll deductions, and any other method agreed to by us. You may make premium payments at any time before the Annuity Commencement Date and while you and the Annuitant are living. The maximum aggregate amount of premium payments We accept is $1,000,000 without prior approval. NYLIAC reserves the right to limit the dollar amount of any premium payment.

For Qualified Policies, you may not make premium payments in any Policy Year that exceed the amount permitted by the plan or applicable law. NYLIAC also reserves the right in its discretion to accept premium payments of less than $50, provided such discretion is exercised in a non-discriminatory manner.

For policies investing in Separate Accounts–I and II that were issued for delivery in New York from August 1995 to August 1997, the following minimum initial and maximum additional premium payment requirements apply:

(a) For Non-Qualified Policies, the minimum single premium payment is $2,500 plus $50 per month as either a pre-authorized monthly deduction or as part of a pre-authorized monthly billing arrangement. The maximum total dollar amount of premium payments in any Policy Year may not exceed $4,999.99.

(b) For TSA policies, Section 457 deferred compensation plan policies, Simplified Employee Pension (“SEP”) plan policies and any other Qualified Policies, premium payments may only be made through a pre-authorized billing arrangement. The maximum dollar amount of scheduled premium payments may not exceed the applicable annual plan limit as specified in the Internal Revenue Code.

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(c) For TSA transfer premium payments made to an existing TSA policy, the maximum dollar amount of transfer premium payments in the first Policy Year may not exceed $1,999.99. For any additional TSA transfer premium payments made in the second or subsequent Policy Years, the maximum total dollar amount of annual transfer premium payments may not exceed $4,999.99.

(d) For Individual Retirement Annuity (“IRA”) policies, the minimum premium payment is $1,200 initial and $100 scheduled under a pre-authorized monthly deduction arrangement, or $100 scheduled under a pre- authorized monthly deduction arrangement, or $2,000 lump sum. For any additional premium payments made in the second or subsequent Policy Years, the maximum total dollar amount of annual premium payments may not exceed $4,999.99.

Tax-Free Section 1035 Exchanges

Subject to certain restrictions, you can make a tax-free exchange under Section 1035 of the Code of all or a portion of one annuity contract, or all of a life insurance policy for an annuity contract. Section 1035 also provides that an annuity contract may be exchanged in a tax-free transaction for a long-term care insurance policy. Before making an exchange, you should compare both contracts carefully. Remember that if you exchange a life insurance policy or annuity contract for the Contract described in this Prospectus:

• you might have to pay a withdrawal charge on your previous contract,

• there may be a new withdrawal charge period for this Contract,

• other charges under this Contract may be higher (or lower),

• the benefits may be different,

• you will no longer have access to any benefits from your previous contract (or the benefits may be different), and

• access to your cash value following a partial exchange may be subject to tax-related limitations.

If the exchange does not qualify for Section 1035 treatment, you also may have to pay federal income tax, including a 10 percent federal penalty tax, on the exchange. You should not exchange an existing life insurance policy or another annuity contract for this Contract unless you determine that the exchange is in your best interest. New York Life may accept standard electronic instructions from another insurance carrier for purpose of effecting a 1035 exchange or Rollover. If you contemplate such an exchange, you should consult a tax advisor to discuss the potential tax effects of such a transaction.

Payments Returned for Insufficient Funds

If your premium payment is returned for insufficient funds, We reserve the right to reverse the investment options chosen and charge you a $20 fee for each returned payment. In addition, the Fund may also redeem shares to cover any losses it incurs as result of a returned payment. If a payment is returned for insufficient funds for two consecutive periods, the privileges to pay by check or electronically will be suspended until VPSC receives a written request to reinstate it in a form acceptable to us at one of the addresses noted in Question 15 of this Prospectus, and We agree.

Your Right to Cancel (“Free Look”)

You can cancel the policy within 10 days of delivery of the policy or such longer period as required under state law. To cancel your policy, you must return it to VPSC at one of the addresses listed in Question 15 of this Prospectus or to the registered representative through whom you purchased it, with a written request for cancellation. Except where you are entitled by law to receive the total of premium payments less any prior partial withdrawals, We will promptly return the Accumulation Value calculated as of the Business Day that either the registered representative through whom you purchased the policy or VPSC receives the policy along with a written request for cancellation in a form acceptable to Us, but without any deduction for premium taxes or a surrender charge. We will set forth the provision in your policy.

Issue Ages

To purchase a Non-Qualified Policy you and the Annuitant must not be older than age 75. We will accept additional premium payments until 12 months after either you or the Annuitant reaches the age of 85.

For IRA, Roth IRA, SIMPLE IRA, TSA and SEP plans, you must also be the Annuitant. We can issue Qualified Policies if the Owner/Annuitant is between the ages of 18 and 75. We will accept additional premium payments until 12 months after the Owner/Annuitant reaches the age of 80, unless otherwise limited by the terms of a particular plan.

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Transfers

You may transfer amounts between Investment Divisions of the Separate Account or to the Fixed Account at least 30 days before the Annuity Commencement Date. Except in connection with transfers made pursuant to the Dollar Cost Averaging, Automatic Asset Reallocation, and Interest Sweep options, the minimum that you may transfer from one Investment Division to other Investment Divisions or to the Fixed Account is $500. Except for the Dollar Cost Averaging, Automatic Asset Reallocation and Interest Sweep options, if the value of the remaining Accumulation Units in an Investment Division or the Fixed Account would be less than $500 after you make a transfer, We will transfer the entire value unless NYLIAC in its discretion determines otherwise. The amount(s) transferred to other Investment Divisions must be a minimum of $25 for each Investment Division.

There is no charge for the first twelve transfers in any one Policy Year. NYLIAC reserves the right to charge up to $30 for each transfer in excess of twelve, subject to any applicable state insurance law requirements. Any transfer made in connection with the Dollar Cost Averaging, Automatic Asset Reallocation and Interest Sweep options will not count as a transfer toward the twelve transfer limit. You may make transfers from the Fixed Account to the Investment Divisions in connection with the Interest Sweep option and in certain other situations. Transfers into the Fixed Account may be subject to restrictions. (See the “FIXED ACCOUNT.”)

You can request a transfer by any of the four methods listed below. Transfer requests are subject to limitations and must be made in accordance with our established procedures. (See “Virtual Service Center (VSC) and Interactive Voice Response System (IVR)”).

• submit your request in writing on a form We approve to the VPSC at one of the addresses listed in Question 15 of this prospectus (or any other address We indicate to you in writing);

• use the IVR at 800-598-2019;

• speak to a Customer Service Representative at 800-598-2019 on Business Days between the hours of 9:00 a.m. and 6:00 p.m. (Eastern Time); or

• make your request through the Virtual Service Center.

NYLIAC is not liable for any loss, cost or expense for action based on telephone instructions which are believed to be genuine in accordance with these procedures. Transfer requests received after the close of regular trading on the New York Stock Exchange, generally 4:00 p.m. Eastern Time or received on a non-Business Day, will be priced as of the next Business Day.

Limits on Transfers

Procedures Designed to Limit Potentially Harmful Transfers—This policy is not intended as a vehicle for market timing. Accordingly, your ability to make transfers under the policy is subject to limitation if We determine, in Our sole opinion, that the exercise of that privilege may disadvantage or potentially hurt the rights or interests of other policyowners.

Any modification of the transfer privilege could be applied to transfers to or from some or all of the Investment Divisions. If not expressly prohibited by the policy, We may, for example:

• reject a transfer request from you or from any person acting on your behalf;

• restrict the method of making a transfer;

• charge you for any redemption fee imposed by an underlying Fund; or

• limit the dollar amount, frequency, or number of transfers.

Currently, if you or someone acting on your behalf requests by telephone and/or electronically transfers into or out of one or more Investment Divisions on three or more days within any 60-day period, We will send you a letter notifying you that the transfer limitation has been exceeded. If We receive an additional transfer request that would result in transfers into or out of one or more Investment Divisions on three or more days within any 60-day period, We will process the transfer request. Thereafter, We will immediately suspend your ability to make transfers electronically and by telephone, regardless of whether you have received the warning letter. All subsequent transfer requests for your policy must then be made in writing through the U.S. mail or an overnight courier and received by VPSC at one of the addresses listed in Question 15 of this Prospectus. We will provide you with written notice when We take this action.

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We currently do not include the following transfers in these limitations, although we reserve the right to include them in the future: transfers to and from the Fixed Account, the first transfer out of the MainStay VP Cash Management Investment Division within six months of the issuance of a policy, and transfers made pursuant to the Dollar Cost Averaging, Automatic Asset Reallocation, and Interest Sweep options.

We may change these limitations or restrictions or add new ones at any time without prior notice; your policy will be subject to these changes regardless of the issue date of your policy. All transfers are subject to the limits set forth in this Prospectus in effect on the date of the transfer request, regardless of when your policy was issued. Note, also, that any applicable transfer rules, either as indicated above or that We may utilize in the future, will be applied even if We cannot identify any specific harmful effect from any particular transfer.

We apply Our limits on transfers procedures to all owners of this policy without exception.

Orders for the purchase of Fund portfolio shares are subject to acceptance by the relevant Fund. We will reject or reverse, without prior notice, any transfer request into an Investment Division if the purchase of shares in the corresponding Fund portfolio is not accepted by the Fund for any reason. For transfers into multiple Investment Divisions, the entire transfer request will be rejected or reversed if any part of it is not accepted by any one of the Funds. We will provide you with written notice of any transfer request We reject or reverse. You should read the Fund prospectuses for more details regarding their ability to refuse or restrict purchases or redemptions of their shares. In addition, a Fund may require Us to share specific policyowner transactional data with them, such as taxpayer identification numbers and transfer information.

Risks Associated with Potentially Harmful Transfers—Our procedures are designed to limit potentially harmful transfers. However, We cannot guarantee that Our procedures will be effective in detecting and preventing all transfer activity that could disadvantage or potentially hurt the rights or interests of other policyowners. The risks described below apply to policyowners and other persons having material rights under the policies.

• We do not currently impose redemption fees on transfers or expressly limit the number or size of transfers in a given period. Redemption fees, transfer limits, and other procedures or restrictions may be more or less successful than Our procedures in deterring or preventing potentially harmful transfer activity.

• Our ability to detect and deter potentially harmful transfer activity may be limited by policy provisions.

(1) The underlying Fund portfolios may have adopted their own policies and procedures with respect to trading of their respective shares. The prospectuses for the underlying Fund portfolios, in effect at the time of any trade, describe any such policies and procedures. The trading policies and procedures of an underlying Fund portfolio may vary from Ours and be more or less effective at preventing harm. Accordingly, the sole protection you may have against potentially harmful frequent transfers is the protection provided by the procedures described herein.

(2) The purchase and redemption orders received by the underlying Fund portfolios reflect the aggregation and netting of multiple orders from owners of this policy and other variable policies issued by Us. The nature of these combined orders may limit the underlying Fund portfolios’ ability to apply their respective trading policies and procedures. In addition, if an underlying Fund portfolio believes that a combined order We submit may reflect one or more transfer requests from owners engaged in potentially harmful transfer activity, the underlying Fund portfolio may reject the entire order and thereby prevent Us from implementing any transfers that day. We do not generally expect this to happen. Alternatively, Funds may request information on individual policyowner transactions and may impose restrictions on individual policyowner transfer activity.

• Other insurance companies that invest in the Fund portfolios underlying this policy, may have adopted their own policies and procedures to detect and prevent potentially harmful transfer activity. The policies and procedures of other insurance companies may vary from Ours and be more or less effective at preventing harm. If their policies and procedures fail to successfully discourage potentially harmful transfer activity, there could be a negative effect on the owners of all of the variable policies, including Ours, whose variable investment options correspond to the affected underlying Fund portfolios.

• Potentially harmful transfer activity could result in reduced performance results for one or more Investment Divisions, due to among other things:

(1) an adverse effect on portfolio management, such as:

a) impeding a portfolio manager’s ability to sustain an investment objective;

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b) causing the underlying Fund portfolio to maintain a higher level of cash than would otherwise be the case; or

c) causing an underlying Fund portfolio to liquidate investments prematurely (or at an otherwise inopportune time) in order to pay withdrawals or transfers out of the underlying Fund portfolio.

(2) increased administrative and Fund brokerage expenses.

(3) dilution of the interests of long-term investors in an Investment Division if purchases or redemptions into or out of an underlying Fund portfolio are made when, and if, the underlying Fund portfolio’s investments do not reflect an accurate value (sometimes referred to as “time-zone arbitrage” and “liquidity arbitrage”).

Speculative Investing

Do not purchase this policy if you plan to use it, or any of its riders, for speculation, arbitrage, viatication or any other type of collective investment scheme. Your policy may not be traded on any stock exchange or secondary market. By purchasing this policy you represent and warrant that you are not using this policy, or any of its riders, for speculation, arbitrage, viatication or any other type of collective investment scheme.

Virtual Service Center (VSC) and Interactive Voice Response System (IVR)

Through the VSC and the IVR, you can get up-to-date information about your policy and request transfers. We may revoke VSC and IVR privileges for certain policyowners (see “Limits on Transfers”).

To enable you to access the IVR, you will automatically receive a Personal Identification Number (PIN). Along with your Social Security Number, the PIN will give you access to the IVR using the toll-free number 1-800-598-2019. You should protect your PIN and your Social Security number, because Our self-service options will be available to anyone who provides your Social Security number and your PIN; We will not be able to verify that the person providing electronic service instructions via the VSC or IVR is you or is authorized by you.

In order to obtain policy information online via the VSC, you are required to register for access. Visit www.newyorklife.com/vsc and click the “Register Now” button to enroll. You will be required to register a unique User Name and Password to gain access. In a safe and secure environment, you can, among other things, access policy values, change your address, download service forms, view policy statements, and submit policy transactions.

As described herein, We will use reasonable procedures to make sure that the instructions We receive through the VSC and IVR are genuine. We are not responsible for any loss, cost, or expense for any actions We take based on instructions received through IVR or VSC that We believe are genuine. We will confirm all transactions in writing.

Service requests are binding on all owners if the policy is jointly owned. Financial requests received after 4:00 p.m. (Eastern Time) or on non Business Days will be processed as of the next Business Day.

We make the VSC or IVR available at Our discretion. In addition, availability of the VSC or IVR may temporarily be interrupted at certain times. We do not assume responsibility for any loss while the VSC or IVR is unavailable. If you are experiencing problems, you can send service requests to Us at one of the addresses listed in Question 15 of this Prospectus.

VSC

The VSC is open Monday through Friday, from 7 a.m. until 4 a.m., Saturday, from 7 a.m. until 10 p.m. and Sunday from 2 p.m. until 8 p.m. (Eastern Time).

The VSC enables you to:

• e-mail your registered representative or VPSC;

• obtain current policy values;

• transfer assets between investment options;

• change the allocation of future premium payments;

• reset your password;

• change your address;

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• obtain service forms;

• view and download policy statements;

• modify an existing Automatic Asset Reallocation arrangement;

• change your phone number or e-mail address;

• view and update beneficiary information; and

• update your Investor Profile.

The VSC enables you to sign-up to receive future prospectuses and policyowner annual and semi-annual reports for your Policy online at www.newyorklife.com/vsc. Electronic delivery is not available for policies that are owned by corporations, trusts or organizations at this time.

IVR

The IVR is available 24 hours a day, seven days a week. We record all calls.

The IVR enables you to:

• obtain current Policy values;

• transfer assets between investment options;

• change the allocation of future premium payments; and

• speak with one of Our Customer Service Representatives on Business Days, between the hours of 9:00 a.m. to 6:00 p.m. (Eastern Time).

Registered Representative Actions

You may authorize a third party to have access to your policy information and to make fund transfers, allocation changes and other permitted transactions by completing a telephone request form. To authorize a third party to have access to your policy information and to make fund transfers between investment options, allocation changes and other permitted transactions, you must send VPSC a Telephone Request Form completed in a form acceptable to Us to one of the addresses noted in Question 15 of this Prospectus. The Customer Service Representative will require certain identifying information (Social Security Number, address of record, date of birth) before taking any requests or providing any information to ensure that the individual giving instructions is authorized. See “The Policies—Transfers” for information on how to transfer assets between Investment Divisions.

NYLIAC does not permit current or former registered representatives to obtain authorization to effect policy transactions through the Telephone Request Form. Authorization to these registered representatives will be limited to accessing policy information only.

You may authorize Us to accept electronic instructions from a registered representative or a registered service assistant assigned to your policy in order to make premium allocations, transfers among investment options, Automatic Asset Reallocation (AAR) updates (if applicable) and changes to your investment objective and/or risk tolerance. Your AAR will be cancelled if a premium allocation change or fund transfer is submitted on your behalf and the AAR is not also modified at that time to be consistent with your investment option transfer and premium allocation changes. To authorize the registered representative(s) or registered service assistants assigned to your policy to make premium allocations and transfers, you must send a completed Trading Authorization Form to VPSC at one of the addresses listed in Question 15 of this Prospectus. We may revoke Trading Authorization privileges for certain policyowners (See “Limits on Transfers”). Trading Authorization may be elected, changed or canceled at any time. We will confirm all transactions in writing. Not all transactions are available on the Internet.

NYLIAC is not liable for any loss, cost or expense for action on instructions which are believed to be genuine in accordance with the procedures. As these parties act on your behalf, you are responsible for and bear the consequences of their instructions and other actions, including any limits on transfers.

Faxed requests are not acceptable and will not be honored at any time. In addition, We will not accept e-mailed requests for policy transactions or emails of imaged, signed service requests. E-mail inquires that are non-transactional may be sent through Our Virtual Service Center once they have passed all security protocols to identify the policyowner.

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Dollar Cost Averaging

The main objective of dollar cost averaging is to achieve an average cost per share that is lower than the average price per share during volatile market conditions. Since you transfer the same dollar amount to an Investment Division with each transfer, you purchase more units in an Investment Division if the value per unit is low and fewer units if the value per unit is high. Therefore, you achieve a lower than average cost per unit if prices fluctuate over the long term. Similarly, for each transfer out of an Investment Division, you sell more units in an Investment Division if the value per unit is low and fewer units if the value per unit is high. Dollar cost averaging does not assure a profit or protect against a loss in declining markets. Because it involves continuous investing regardless of price levels, you should consider your financial ability to continue to make purchases during periods of low price levels. We do not count transfers under Dollar Cost Averaging as part of your 12 free transfers each Policy Year.

Under this option, which is available at no additional cost, you may specify, prior to the Annuity Commencement Date, a specific dollar amount to be transferred from any Investment Divisions to any combination of Investment Divisions and/or the Fixed Account. You will specify the Investment Divisions to transfer money from, the Investment Divisions and/or Fixed Account to transfer money to, the amounts to be transferred, the date on which transfers will be made, subject to Our rules, and the frequency of the transfers (either monthly, quarterly, semi-annually or annually). You may not make transfers from the Fixed Account, but you may make transfers into the Fixed Account. Each transfer from an Investment Division must be at least $100. You must have a minimum Accumulation Value of $2,500 to elect this option. Once all money has been allocated to the Investment Divisions of your choice or the balance remaining in the Investment Division you are transferring from is less than $100, the traditional Dollar Cost Averaging option will cease. A new request must be submitted to reactive this feature. NYLIAC may reduce the minimum transfer amount and minimum Accumulation Value at its discretion.

NYLIAC will make all traditional Dollar Cost Averaging transfers on the day of each calendar month that you specify or on the next Business Day (if the day you have specified is not a Business Day). You may specify any day of the month with the exception of the 29th, 30th or 31st of a month. In order to process transfers under Our Traditional Dollar Cost Averaging Option, VPSC must have received a completed Traditional Dollar Cost Averaging request form at one of the addresses listed in Question 15 of this Prospectus no later than five Business Days prior to the date transfers are to begin. You may also process a Traditional Dollar Cost Averaging transfer by any other method we make available. If your Traditional Dollar Cost Averaging request form for this option is received less than five Business Days prior to the date you request it to begin, the transfers will begin on the day of the month you specify in the month following the receipt of your request. All completed Traditional Dollar Cost Averaging request forms must be sent to VPSC at one of the addresses listed in Question 15 of this prospectus. Facsimile requests will not be accepted or processed. In addition, we will not accept e-mailed requests or e-mails of imaged, signed requests.

You may cancel the Dollar Cost Averaging option at any time. To cancel the Traditional Dollar Cost Averaging Option, you must send a written cancellation request in a form acceptable to Us to VPSC at one of the addresses listed in Question 15 of this Prospectus or contact Us by phone at the number provided in Question 16 of this Prospectus. NYLIAC may also cancel this option if the Accumulation Value is less than $2,500, or such lower amount as We may determine. You may not elect the Dollar Cost Averaging option if you have selected the Automatic Asset Reallocation option.

We have set forth below an example of how dollar cost averaging works. In the example, We have assumed that you want to transfer $100 from the MainStay VP Cash Management Investment Division to the MainStay VP Common Stock Investment Division each month. Assuming the Accumulation Unit values below, you would purchase the following number of Accumulation Units:

Month	Amount Transferred		Accumulation Unit Value		Accumulation Units Purchased
1	$	100	$	10.00		10.00
2	$	100	$	8.00		12.50
3	$	100	$	12.50		8.00
4	$	100	$	7.50		13.33
Total	$	400	$	38.00		43.83

The average unit price is calculated as follows:

Total share price	=	$38.00	=	$9.50
Number of months		4

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The average unit cost is calculated as follows:

Total amount transferred	=	$400.00	=	$9.13
Total units purchased		43.83

In this example, you would have paid an average cost of $9.13 per unit while the average price per unit is $9.50.

Automatic Asset Reallocation

This option, which is available at no additional cost, allows you to maintain the percentage allocated to each Investment Division at a pre-set level. For example, you might specify that 50% of the Variable Accumulation Value of your policy be allocated to the MainStay VP Convertible – Service Class Investment Division and 50% of the Variable Accumulation Value be allocated to the MainStay VP International Equity – Service Class Investment Division. Over time, the fluctuations in each of these Investment Division’s investment results will shift the percentages. If you elect this Automatic Asset Reallocation option, NYLIAC will automatically transfer your Variable Accumulation Value back to the percentages you specify. You may choose to have reallocations made quarterly, semi-annually or annually. You must also specify the day of the month that reallocations are to occur (with the exception of the 29th, 30th or 31st of a month). To process an Automatic Asset Reallocation transfer, you must send a completed Automatic Asset Reallocation request form to VPSC at one of the addresses listed in Question 15 of this Prospectus. You may also process an Automatic Asset Reallocation transfer by any other method we make available. VPSC must receive the completed Automatic Asset Reallocation request form at least five Business days before the date transfers are scheduled to begin. If your completed Automatic Asset Reallocation request form for this option is received less than five Business Days prior to the date you request it to begin, the reallocation will begin on the day of the month you specify in the month following the receipt of your request. Facsimile requests will not be accepted or processed. In addition, we will not accept e-mailed requests or e-mails of imaged, signed requests. You may modify an existing Automatic Asset Reallocation Option by contacting Us by phone at the number provided in Question 16 of this Prospectus. The minimum Accumulation Value required to elect this option is $2,500. We will suspend this feature automatically if the Separate Account Value is less than $2,000 on a reallocation date. Once the Separate Account Value equals or exceeds this amount, Automatic Asset Reallocation will resume automatically as scheduled. There is no minimum amount that you must allocate among the Investment Divisions under this option. Your Automatic Asset Reallocation will be cancelled if a premium allocation change or transfer is submitted on your behalf that is inconsistent with your current Automatic Asset Reallocation arrangements. You may prevent this cancellation if a conforming Automatic Asset Reallocation change is processed within one Business Day of the inconsistent premium allocation change or transfer.

You may cancel the Automatic Asset Reallocation option at any time. To cancel the Automatic Asset Reallocation Option, you may send a written cancellation request in a form acceptable to Us to VPSC at one of the addresses listed in Question 15 of this Prospectus or contact us by phone at the number provided in Question 16 of this Prospectus. You may not elect the Automatic Asset Reallocation option if you have selected the traditional Dollar Cost Averaging option. However, you have the option of alternating between these two features.

Interest Sweep

This option, which is available at no additional cost, allows the interest earned on monies allocated to the Fixed Account to be transferred from the Fixed Account to one or any combination of Investment Divisions. You must specify the Investment Divisions, the frequency of the transfers (either monthly, quarterly, semi-annually or annually), and the day of each calendar month to make the transfers (except the 29th, 30th and 31st of a month). To process an Interest Sweep transfer you must send a completed Interest Sweep request form to VPSC at one of the addresses listed in Question 15 of this Prospectus. VPSC must receive a completed Interest Sweep request form at least five Business Days prior to the date transfers are scheduled to begin. If VPSC does not receive a completed Interest Sweep request form within the five Business Days prior to the date you request it to begin, the transfer will begin on the day of the month you specify in the month following the receipt of your request. Facsimile requests will not be accepted or processed. In addition, we will not accept e-mailed requests or e-mails of imaged, signed requests. The minimum Fixed Accumulation Value required to elect this option is $2,500, but this amount may be reduced at Our discretion. NYLIAC will make all Interest Sweep transfers on the day of each calendar month you have specified or on the next Business Day (if the day you have specified is not a Business Day). There is no charge imposed for the Interest Sweep option.

You may request the Interest Sweep option in addition to either traditional Dollar Cost Averaging or Automatic Asset Reallocation. If an Interest Sweep transfer is scheduled for the same day as a transfer related to the traditional Dollar Cost Averaging option or the Automatic Asset Reallocation option. We will process the Interest Sweep transfer first.

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You can cancel the Interest Sweep option at any time. To cancel the Interest Sweep Option, you must send a written cancellation request in a form acceptable to Us to VPSC at one of the addresses listed in Question 15 of this Prospectus or contact Us by phone at the number provided in Question 16 of this Prospectus. We may also cancel this option if the Fixed Accumulation Value is less than $2,500, or such a lower amount as We may determine.

To establish a new Interest Sweep transfer after the option has been cancelled, you must send a completed Interest Sweep request form to VPSC at one of the addresses listed in Question 15 of this Prospectus. You may also process Interest Sweep transfers by any other method we make available. VPSC must receive a completed Interest Sweep request form at least five Business Days prior to the date transfers are scheduled to begin. If VPSC does not receive a completed Interest Sweep request form at least five Business Days prior to the date you request it to begin, transfers will begin on the day of the month you specify in the month following the receipt of your request. Faxed requests will not be accepted or processed. In addition, we will not accept e-mailed requests or e-mails of imaged, signed requests. The minimum Fixed Accumulation Value required to elect this option is $2,500, but this amount may be reduced at Our discretion.

Accumulation Period

(a) Crediting of Premium Payments

You can allocate a portion of each premium payment to one or more Investment Divisions or the Fixed Account. The minimum amount that you may allocate to any one Investment Division or the Fixed Account is $25 (or such lower amount as We may permit). Unless We notify you otherwise, We will allocate all premium payments to the Investment Divisions and/or the Fixed Account as requested.

We will credit that portion of each premium payment you allocate to an Investment Division in the form of Accumulation Units at the value next determined after We receive such premium payment. We determine the value of an Accumulation Unit each Business Day. We determine the number of Accumulation Units We credit to a policy by dividing the amount allocated to each Investment Division by the Accumulation Unit value for that Investment Division as of the close of the Business Day We are making this calculation. The value of an Accumulation Unit will vary with the investment experience of the Portfolio in which the Investment Division invests and reflects the deduction of Separate Account charges. The number of Accumulation Units We credit to a policy will not, however, change as a result of any fluctuations in the value of an Accumulation Unit. (See “THE FIXED ACCOUNT” for a description of interest crediting.)

(b) Valuation of Accumulation Units

The value of Accumulation Units in each Investment Division will change daily to reflect the investment experience of the corresponding Portfolio as well as the daily deduction of the Separate Account charges. The Statement of Additional Information contains a detailed description of how We value the Accumulation Units.

Riders

At no additional charge, We include a Living Needs Benefit/Unemployment Rider for all types of policies. As described below, these riders provide for an increase in the amount that can be withdrawn from your policy which will not be subject to the imposition of a surrender charge upon the happening of certain qualifying events. We also offer the EBB Rider for an additional charge. The Enhanced Spousal Continuance (“ESC”) Rider is available at no additional charge if the EBB Rider is elected. The riders are only available in those states where they have been approved. Please consult with your registered representative regarding the availability of these riders in your state. Please note that benefits under the riders are payable from NYLIAC’s general account and are subject to the claims paying ability of NYLIAC.

(a) Living Needs Benefit/Unemployment Rider

This Rider is available in jurisdictions where approved. Please contact your registered representative to determine the availability of this rider. Rider benefits and requirements to qualify for the rider benefits may not be the same in all jurisdictions. In Connecticut, the rider is named the “Living Needs Benefit Rider” and the Unemployment and disability portions of the rider are not available. In New York, the rider is named “Waiver Of Surrender Charges For Living Needs Qualifying Events” and the Unemployment portion of the rider is not available. In New Jersey, the rider is named the “Living Needs Benefit Rider” and the Unemployment portion of the rider is not available.

You may be eligible to receive all or a portion of the Accumulation Value of your policy without paying a surrender charge if you provide satisfactory proof that a Qualifying Event (as defined below) has occurred. In order to receive the benefit associated with this rider, your policy must have been in force for at least one year and have a minimum Accumulation Value of $5,000 and the Qualifying Event must occur on or after the Policy Date. For the Disability portion

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of the rider, any withdrawal after your 66th birthday will not be eligible for the rider benefit and surrender charges may apply. In addition, none of the benefits of this rider are available for policies where any Owner(s) has attained their 86th birthday on the Policy Date.

The types of Qualifying Events are defined as follows:

Health Care Facility: The Owner is enrolled and living in a Health Care Facility for 60 consecutive days.

Terminal Illness: A determination by a licensed physician that the Owner has a life expectancy of 12 months or less.

Disability: A determination by a licensed physician that the Owner has a disability that prevents them from performing any work for pay or profit for at least 12 consecutive months.

Unemployment: A determination letter from the applicable state’s Department of Labor that the Owner qualifies for and has been receiving state unemployment benefits for 60 consecutive days.

A Health Care Facility is defined as a state licensed/certified nursing home/assisted living facility. In addition, we may also require proof of continued disability as of the date of the withdrawal.

You will be able to receive benefits under this rider the later of the date you meet the above requirements or the date we receive your documentation in a form acceptable to Us at VPSC at one of the addresses listed in question 15 of this Prospectus. There is no additional charge for this rider.

(b) Living Needs Benefit Rider

If the Annuitant enters a nursing home, becomes terminally ill or disabled you, the policyowner, may be eligible to receive all or a portion of the Accumulation Value without paying a surrender charge. The policy must have been inforce for at least one year and have a minimum Accumulation Value of $5,000. We must be provided with proof that the Annuitant has spent 60 or more consecutive days in a nursing home, is terminally ill or disabled. Withdrawals will be taxable to the extent of gain and, prior to age 59¹/₂, may be subject to a 10% IRS penalty. This rider is in effect in all jurisdictions where approved. To qualify for the disability benefit of this rider, the Annuitant must be classified as disabled by the Social Security Administration. You, the policyowner, are no longer eligible for the disability benefit once the Annuitant begins collecting Social Security retirement benefits. The rider will be effective the later of the date you meet the above requirements or the date We receive your documentation in a form acceptable to Us at VPSC. There is no additional charge for this rider.

(c) Unemployment Benefit Rider

For all Non-Qualified, IRA, SEP IRA, Roth IRA and SIMPLE IRA policies, if you become unemployed, you may be eligible to increase the amount that can be withdrawn from your policy to 50% of the policy’s Accumulation Value without paying surrender charges. This rider can only be used once. The policy must have been inforce for at least one year and have a minimum Accumulation Value of $5,000. You also must have been unemployed for at least 60 consecutive days. Withdrawals may be taxable transactions and, prior to age 59¹/₂, may be subject to a 10% IRS penalty. This rider is in effect in all states where approved. To apply for this benefit, you must submit a determination letter from the applicable state’s Department of Labor indicating that you qualify for and are receiving unemployment benefits. The rider will be effective the later of the date you meet the above requirements or the date We receive your notification at VPSC. There is no additional charge for this rider.

(d) Enhanced Beneficiary Benefit Rider (optional)

The EBB Rider is available only at the time of application, in jurisdictions where approved. The EBB Rider is available on Non-Qualified Policies and, where permitted by the IRS, also on Qualified Policies. The EBB Rider can increase the death benefit if you or the Annuitant die before the Annuity Commencement Date. If you select this rider, the EBB, in addition to the amount payable under the terms of your policy, may be payable to your Beneficiary(ies) if you (if you are not the Annuitant) or the Annuitant die(s) prior to the Annuity Commencement Date. Therefore, under this Rider, the total death benefit payable will be the greatest of any of the amounts payable as described in the Death Before Annuity Commencement section of the Prospectus plus the EBB, if any.

While this Rider is in effect, We will deduct a charge from your Accumulation Value on each policy quarter. (See “CHARGES AND DEDUCTIONS—Other Charges—Enhanced Beneficiary Benefit Rider Charge.”) The payment under the EBB Rider is calculated as a percentage of any Gain in the policy as of the date We receive all necessary

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requirements to pay death benefit proceeds at VPSC. The applicable percentage varies based upon the issue age of you or the Annuitant, whoever is older. As of the date of this Prospectus, the applicable percentages are as follows: 50% where the oldest owner or Annuitant is 70 or younger, and 25% where the oldest owner or Annuitant is 71 to 75 inclusive. We may change the applicable percentages under the EBB Rider from time to time, within the following ranges:

Age of Oldest Owner or Annuitant at Issue	Range of Applicable Percentages
70 or younger	Not less than 40% nor greater than 60%
71 to 75 inclusive	Not less than 20% nor greater than 40%

When you select the EBB Rider, the applicable percentage will appear on your Policy Data Page. The applicable percentage for the policy will not change once the policy is issued. Please check with your registered representative for further details.

The Gain equals the policy’s Accumulation Value minus the Adjusted Premium Payments. Adjusted Premium Payments are the total of all premium payments less Proportional Withdrawals. Proportional Withdrawals are the amount(s) withdrawn from the policy divided by the policy’s Accumulation Value immediately preceding the withdrawal, multiplied by the total of all Adjusted Premium Payments immediately preceding the withdrawal.

If more than one Beneficiary is named, each Beneficiary will be paid a pro rata portion of the EBB. The EBB will be calculated for a Beneficiary on each date that We receive all necessary requirements to pay such Beneficiary at VPSC. Due to market fluctuations, the EBB may increase or decrease and Beneficiaries may therefore be paid different amounts.

The maximum amount payable under the EBB Rider, regardless of the Gain, is equal to a percentage of Adjusted Premium Payments. As of the date of this Prospectus, the applicable percentages are as follows: 100% where the oldest owner or Annuitant is 70 or younger, and 75% where the oldest owner or Annuitant is 71 to 75 inclusive. We may change the applicable percentages under the EBB Rider from time to time, but the maximum amount payable will not exceed 200% of Adjusted Premium Payments. If you select this rider, the applicable percentage will appear on your Policy Data Page. Please check with your registered representative for further details.

There will be no payment under the EBB Rider if on the date We calculate the EBB: 1) there is no Gain, 2) the policy’s Accumulation Value is less than your premium payments made and not previously withdrawn, or 3) the Rider has ended or terminated. The EBB Rider will end on the earliest of the following: 1) on the Annuity Commencement Date, 2) if you surrender the policy, 3) if your spouse, as the sole primary Beneficiary, elects to continue the policy upon your death, (see THE POLICIES—Riders—Enhanced Spousal Continuance Rider) 4) if the Annuitant was your spouse and you, as the sole primary Beneficiary, elect to continue the policy upon your spouse’s death, or 5) if you transfer ownership of the policy. As discussed below in THE POLICIES—Riders— Enhanced Spousal Continuance Rider, if upon your death prior to the Annuity Commencement Date your spouse elects to continue the policy as the new owner (and Annuitant, if you are the Annuitant), the Accumulation Value will be adjusted (as of the date We receive due proof of death and all other requirements at VPSC) to equal the greatest of any of the amounts payable as described in the Death Before Annuity Commencement section of the Prospectus, plus, if applicable, any EBB provided by the EBB Rider. This rider cannot be cancelled without surrendering your policy. You will forfeit any benefits under the EBB Rider if you elect to receive Income Payments, or surrender or transfer your policy. If you expect to do any of these, the EBB Rider may not be appropriate for you.

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Below is an example of how the benefit of this rider may be realized and how withdrawals impact the benefit under this Rider. In this example, We assume the following:

1. The rider is elected at the time of application;

2. You purchase this policy with a $200,000 initial premium payment (no additional premium payments are made);

3. A withdrawal of $20,000 is made in the fourth Policy Year;

4. Immediately preceding the withdrawal, the Accumulation Value has increased to $250,000, and the total Adjusted Premium Payments equaled $200,000 (since there have been no previous withdrawals);

5. You (or the Annuitant, if you are not the Annuitant) die in the fifth Policy Year and the Accumulation Value of the policy has increased once again to $250,000 as of the date We receive the necessary requirements to pay the death benefit; and

6. The Enhanced Beneficiary Benefit Rider percentage equals 50%.

First, the Proportional Withdrawal amount is calculated (withdrawal amount divided by the Accumulation Value immediately preceding the withdrawal, multiplied by the Adjusted Premium Payments immediately preceding the withdrawal):

Proportional Withdrawal = ($20,000/$250,000) X $200,000 = $16,000

Second, the amount of current Adjusted Premium Payments (after the withdrawal) is calculated (total of all premium payments minus Proportional Withdrawals):

Adjusted Premium Payments = $200,000 – $16,000 = $184,000

Third, the Gain is calculated (Accumulation Value – Adjusted Premium Payments):

Gain = $250,000 – $184,000 = $66,000

Finally, the Enhanced Beneficiary Benefit amount is calculated (Gain multiplied by the applicable EBB rider percentage):

Enhanced Beneficiary Benefit = $66,000 X 50% = $33,000

In this example, the Enhanced Beneficiary Benefit is equal to $33,000. This amount would be payable in addition to the guaranteed death benefit amount under the policy.

(e) Enhanced Spousal Continuance Rider (optional)

If you elect the EBB Rider at the time of application (see above), your policy will, subject to state availability, also include the ESC Rider at no charge. The ESC Rider will not be included on policies sold in connection with TSAs or Section 457 deferred compensation plans.

Under the ESC Rider, if your spouse is the sole primary Beneficiary, upon your death prior to the Annuity Commencement Date, your spouse may elect to continue the policy as the new owner (and Annuitant, if you are the Annuitant). If the election is made, the Accumulation Value will be adjusted (as of the date We receive due proof of death and all necessary requirements at VPSC) to equal the greatest of any of the amounts payable as described in the Death Before Annuity Commencement section of the Prospectus, plus, if applicable, any EBB provided by the EBB Rider. Unless We notify you otherwise, any additional Accumulation Value calculated under the ESC Rider will be allocated to the policy according to the premium allocation instructions on record.

The ESC Rider ends upon the earliest of the following: 1) if you surrender the policy, 2) if Income Payments begin, 3) once the ESC Rider has been exercised, or 4) if you transfer ownership of the policy to someone other than your spouse. This rider cannot be cancelled without surrendering your policy.

Upon exercising the ESC Rider and continuing the policy, the EBB Rider and the quarterly charges for the EBB Rider will cease. All other policy provisions will continue as if your spouse had purchased the policy on the original Policy Date.

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Policyowner Inquiries

Your inquiries and written requests for service must be addressed to NYLIAC as indicated in the response to Questions 15, 16 and 17 of this Prospectus. Facsimile requests for service will not be accepted or processed. In addition, we will not accept e-mailed requests or e-mails of imaged, signed requests. All phone calls for service requests are recorded. We will confirm all transactions in writing. If you feel that a transaction has been processed incorrectly, it is your responsibility to contact Us in writing and provide Us with all relevant details. To correct an error, We must receive your request for correction within 15 days of the date of the confirmation with the transaction in question. You must provide Us with the nature of the error, the date of the error, the corresponding telephone reference number (if applicable) and any other relevant details.

Records and Reports

NYLIAC will mail to you at your last known address of record, at least semi-annually after the first Policy Year, reports containing information required under the federal securities laws or by any other applicable law or regulation. Generally, NYLIAC will immediately mail to you confirmation of any transactions involving the Separate Account. When We receive premium payments on your behalf involving the Separate Account initiated through pre-authorized monthly deductions from banks (“Check-o-Matic”), payments forwarded by your employer (“list billing”), or through other payments made by pre-authorized deductions to which We agree, a summary of these policy transactions will only appear on your quarterly statement and you will not receive a confirmation statement after each such transaction. It is important that your confirmation and quarterly statements be reviewed immediately to ensure that there are no errors. In order to correct an error, you must call it to Our attention within 15 days of the date of the statement. It is important that you inform NYLIAC of an address change so that you can receive these policy statements (see Question 16 of this Prospectus). In the event your statement is returned from the US Postal Service as undeliverable, We reserve the right to suspend mailing future correspondence and also suspend current transaction processing until an accurate address is obtained. In addition, no new service requests can be processed until a valid current address is provided.

CHARGES AND DEDUCTIONS

Surrender Charges

Since no deduction for a sales charge is made from premium payments, We impose a surrender charge on certain partial withdrawals and surrenders of the policies. The surrender charge covers certain expenses relating to the sale of the policies, including commissions to registered representatives and other promotional expenses. We measure the surrender charge as a percentage of the amount withdrawn or surrendered. The surrender charge may apply if you elect to receive Income Payments during the first Policy Year.

If you surrender your policy, We deduct the surrender charge from the amount paid to you. In the case of a partial withdrawal, you can direct NYLIAC to take surrender charges either from the remaining value of the Allocation Alternatives from which the partial withdrawals are made, or from the amount paid to you. If the remaining value in an Allocation Alternative is less than the necessary surrender charge, We will deduct the remainder of the charge from the amount withdrawn from that Allocation Alternative.

The surrender charge is 7% of the amounts withdrawn or surrendered during the first three Policy Years. The percentage of the charge declines 1% for each additional Policy Year, until the ninth Policy Year, after which no surrender charge is made, as shown in the following chart:

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Amount of Surrender Charge

Policy Year	Charge
1		7	%
2		7	%
3		7	%
4		6	%
5		5	%
6		4	%
7		3	%
8		2	%
9		1	%
10+		0

The duration of the surrender charge schedule is based solely on the Policy Date. Additional premium payments do not begin their own surrender charge schedules.

Exceptions to Surrender Charges

We will not assess a surrender charge:

(a) on amounts you withdraw in any one Policy Year that are less than or equal to the greater of: (i) 10% of the Accumulation Value at the time of surrender or withdrawal, less any prior Surrender Charge free withdrawals during the Policy Year; (ii) 10% of the Accumulation Value as of the prior Policy Anniversary (10% of the premium payment if the withdrawal is made in the first Policy Year), less any prior Surrender Charge free withdrawals during the Policy Year; or (iii) the Accumulation Value less accumulated premium payments.

(b) if NYLIAC cancels the policy;

(c) when We pay proceeds upon the death of the policyowner or the Annuitant;

(d) when you elect to receive a Life Income Payment in any Policy Year after the first Policy Anniversary;

(e) when a required minimum distribution calculated based on the value of this policy is made under a Qualified Policy (this amount will, however, count against the first exception);

(f) on withdrawals at age 59¹/₂ or older if the policy is tax-qualified and if the money withdrawn from the policy was transferred or rolled over from a NYLIAC fixed deferred annuity policy;

(g) on withdrawals you make under the Living Needs Benefit Rider or Unemployment Benefit Rider;

(h) when the aggregate surrender charges under a policy exceed 9.0% of the total premium payments; and

(i) on monthly or quarterly periodic partial withdrawals made pursuant to Section 72(t)(2)(A)(iv) of the Code.

Other Charges

(a) Mortality and Expense Risk Charges

Prior to the Annuity Commencement Date, NYLIAC imposes risk charges to compensate it for bearing certain mortality and expense risks under the policies. This charge is equal, on an annual basis, to 1.20% (annualized) of the daily average Variable Accumulation Value and is deducted daily. We guarantee that these charges will not increase. If these charges are insufficient to cover actual costs and assumed risks, the loss will fall on NYLIAC. We expect to profit from this charge. We may use these funds for any corporate purpose, including expenses relating to the sale of the policies, to the extent that surrender charges do not adequately cover sales expenses.

The mortality risk assumed is the risk that Annuitants as a group will live for a longer time than Our actuarial tables predict. As a result, We would be paying more Income Payments than We planned. We also assume a risk that the mortality assumptions reflected in Our guaranteed annuity payment tables, shown in each policy, will differ from actual mortality experience. Lastly, We assume a mortality risk that, at the time of death, the guaranteed minimum death benefit will exceed the policy’s Accumulation Value. The expense risk assumed is the risk that the cost of issuing and administering the policies will exceed the amount We charge for these services.

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(b) Administration Fee

Prior to the Annuity Commencement Date, We impose an administration fee intended to cover the cost of providing policy administration services. This charge is equal, on an annual basis, to 0.20% for policies investing in Separate Account III and, 0.10% for policies investing in Separate Accounts-I and II of the daily average Variable Accumulation Value.

(c) Policy Service Charge

For policies investing in Separate Account III, We deduct a $30 annual policy service charge each Policy Year on the Policy Anniversary and upon surrender of the policy if on the Policy Anniversary and date of surrender the Accumulation Value is less than $20,000. For policies investing in Separate Accounts-I and II, this charge will be lesser of $30 or 2% of the Accumulation Value if at the end of the Policy Year or on the date of surrender the Accumulation Value is less than $10,000. We deduct the annual policy service charge from each Allocation Alternative in proportion to its percentage of the Accumulation Value on the Policy Anniversary or date of surrender. This charge is designed to cover the costs for providing services under the policy such as collecting, processing and confirming premium payments and establishing and maintaining the available methods of payment.

(d) Fund Charges

The value of the assets in the Separate Account will indirectly reflect the Funds’ total fees and expenses. The Funds’ total fees and expenses are not part of the policy. They may vary in amount from year to year. These fees and expenses are described in detail in the relevant Fund’s prospectus and/or Statement of Additional Information.

(e) Transfer Fees

There is no charge for the first 12 transfers in any one Policy Year. NYLIAC reserves the right to charge up to $30 for each transfer in excess of 12, subject to any applicable state insurance law requirements. Transfers made under Dollar Cost Averaging, Interest Sweep and Automatic Asset Reallocation do not count toward this transfer limit.

(f) Enhanced Beneficiary Benefit Rider Charge (optional)

If you elect the EBB Rider (in jurisdictions where available), We will deduct a charge each policy quarter that the Rider is in effect based on the Accumulation Value. We will deduct this charge beginning with the first policy quarter after the Policy Date. This charge will be deducted quarterly from each Allocation Alternative in proportion to its percentage of the Accumulation Value.

The maximum annual charge is 1.00% of the policy’s Accumulation Value, applied on a quarterly basis. We may set a lower charge at Our sole discretion. The current charge for the EBB Rider is 0.30% of the policy’s Accumulation Value, applied on a quarterly basis (0.075% per quarter). You should check with your registered representative to determine the percentage We are currently charging before you elect this rider.

Group and Sponsored Arrangements

For certain group or sponsored arrangements, We may reduce the surrender charge and the policy service charge or change the minimum initial and additional premium payment requirements. Group arrangements include those in which a trustee or an employer, for example, purchases policies covering a group of individuals on a group basis. Sponsored arrangements include those in which an employer allows Us to sell policies to its employees or retirees on an individual basis.

Our costs for sales, administration, and mortality generally vary with the size and stability of the group among other factors. We take all these factors into account when reducing charges. To qualify for reduced charges, a group or sponsored arrangement must meet certain requirements, including Our requirements for size and number of years in existence. Group or sponsored arrangements that have been set up solely to buy policies or that have been in existence less than six months will not qualify for reduced charges.

We will make any reductions according to Our rules in effect when an application or enrollment form for a policy is approved. We may change these rules from time to time. Any variation in the surrender charge or policy service charge will reflect differences in costs or services and will not be unfairly discriminatory.

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Taxes

NYLIAC may, where premium taxes are imposed by state law, deduct such taxes from your policy either: (i) when a surrender or cancellation occurs, or (ii) at the Annuity Commencement Date. Applicable premium tax rates depend upon such factors as your current state of residency, and the insurance laws and NYLIAC’s status in states where premium taxes are incurred. Current premium tax rates range from 0% to 3.5%. Applicable premium tax rates are subject to change by legislation, administrative interpretations or judicial acts.

We may in the future seek to amend the policies to deduct premium taxes when a premium payment is received.

Under present laws, NYLIAC will also incur state and local taxes (in addition to the premium taxes described above) in several states. NYLIAC may assess charges for such taxes.

NYLIAC does not expect to incur any federal income tax liability attributable to investment income or capital gains retained as part of the Separate Account reserves under the policies. (See “FEDERAL TAX MATTERS.”) Based upon these expectations, no charge is being made currently for corporate federal income taxes which may be attributable to the Separate Account. Such a charge may be made in future years for any federal income taxes NYLIAC incurs.

DISTRIBUTIONS UNDER THE POLICY

Surrenders and Withdrawals

You can make partial withdrawals, periodic partial withdrawals, hardship withdrawals or surrender the policy to receive part or all of the Accumulation Value at any time before the Annuity Commencement Date and while the Annuitant is living. To request a surrender or withdrawal, you must send a written request on a form acceptable to Us to VPSC at one of the addresses listed on Question 15 of this Prospectus, or utilize any other method we make available. Fax transmissions are not acceptable and will not be honored at any time. In addition, we will not accept e-mailed requests or e-mails of imaged, signed requests. If the request is complete and We have received all other information necessary to process the request, the amount available for withdrawal is the Accumulation Value at the end of the Business Day that VPSC receives the written request, less any outstanding loan balance, surrender charges, taxes that We may deduct, and the annual policy service charge, if applicable. If you have not provided Us with a written election not to withhold federal income taxes at the time you make a withdrawal or surrender request, NYLIAC must by law withhold such taxes from the taxable portion of any surrender or withdrawal. We will remit that amount to the federal government. In addition, some states have enacted legislation requiring withholding. NYLIAC will pay all surrenders or withdrawals within seven days of receipt of all documents (including documents necessary to comply with federal and state tax law), subject to postponement in certain circumstances. (See “DELAY OF PAYMENTS.”)

Since you assume the investment risk with respect to amounts allocated to the Separate Account and because certain surrenders or withdrawals are subject to a surrender charge and premium tax deduction, the total amount paid upon surrender of the policy (taking into account any prior withdrawals) may be more or less than the total premium payments made.

Surrenders and withdrawals may be taxable transactions, and the Code provides that a 10% penalty tax may be imposed on certain early surrenders or withdrawals (the penalty tax is increased to 25% in the case of a distribution from a SIMPLE IRA within the first two years of your participation in the SIMPLE IRA Plan.) (See “FEDERAL TAX MATTERS—TAXATION OF ANNUITIES IN GENERAL.”) In addition, taxable surrenders and withdrawals may be subject to an additional 3.8 percent tax on net investment income. (See “FEDERAL TAX MATTERS—3.8 Percent Tax on Certain Investment Income.”)

(a) Surrenders

We may deduct a surrender charge and any state premium tax, if applicable, any outstanding loan balance, and the annual policy service charge, if applicable, from the amount paid. We will pay the proceeds in a lump sum to you unless you elect a different Income Payment method. (See “INCOME PAYMENTS.”) Surrenders may be taxable transactions and the 10% penalty tax provisions may be applicable. (See “FEDERAL TAX MATTERS—TAXATION OF ANNUITIES IN GENERAL.”)

(b) Partial Withdrawals

The minimum amount that can be withdrawn is $500, unless We agree otherwise. We will withdraw the amount from the Allocation Alternatives in accordance with your request. If you do not specify how to allocate a partial withdrawal among the Allocation Alternatives, We will allocate the partial withdrawal on a pro-rata basis. We will pay any partial withdrawals generally within seven days after we receive all of the necessary documentation and information. Your

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requested partial withdrawal will be effective on the date we receive your written request. However, if the day we receive your request is not a Business Day or if your request is received after the close of the NYSE, then the requested partial withdrawal will be effective on the next Business Day. Partial withdrawals may be taxable transactions and the 10% penalty tax provisions may be applicable. (See “FEDERAL TAX MATTERS— TAXATION OF ANNUITIES IN GENERAL.”)

If the requested partial withdrawal is equal to the value in any of the Allocation Alternatives from which the partial withdrawal is being made, We will pay the entire value of that Allocation Alternative, less any surrender charge that may apply to you. For policies investing in Separate Account-III, if honoring a partial withdrawal request would result in an Accumulation Value of less than $2,000, We reserve the right to terminate your policy, subject to any applicable state insurance law or regulation. We will notify you of Our intention to exercise this right and give you 90 days to make a premium payment. If We terminate your policy, We will pay you the Accumulation Value of your policy in one lump sum.

Also note that partial withdrawal requests for amounts greater than $50,000 must be received in a form acceptable by Us and include a notarized confirmation of the owner(s) signature. In addition, partial withdrawal requests made from policies that are less than 90 days old or that effected an address or ownership change within 30 days of such partial withdrawal request must be made in writing and sent to VPSC at one of the addresses noted in Question 15 of this Prospectus. Faxed requests are not acceptable and will not be honored at any time. In addition, we will not accept e-mailed partial withdrawal requests or e-mails of imaged, signed requests.

(c) Periodic Partial Withdrawals

You may elect to receive regularly scheduled withdrawals from the policy. These periodic partial withdrawals may be paid on a monthly, quarterly, semi-annual, or annual basis. You will elect the frequency of the withdrawals, and the day of the month for the withdrawals to be made (may not be the 29th, 30th, or 31st of a month). To process Periodic Partial Withdrawals you must send a written request in a form acceptable to Us to VPSC at one of the addresses listed in Question 15 of this Prospectus. NYLIAC must receive a request in writing no later than five Business Days prior to the date the withdrawals are to begin. If your request for this option is received less than five Business Days prior to the date you request it to begin, the withdrawals will begin on the day of the month you specify in the month following the receipt of your request. Facsimile requests will not be accepted or processed. In addition, we will not accept e-mailed requests or e-mails of imaged, signed requests. We will make all withdrawals on the day of each calendar month you specify, or on the next Business Day (if the day you have specified is not a Business Day). You must specify which Allocation Alternatives from which the periodic withdrawals will be made. The minimum amount under this feature is $100, or such lower amount as We may permit. Periodic partial withdrawals may be taxable transactions and the 10% penalty tax provisions may be applicable. (See “FEDERAL TAX MATTERS—TAXATION OF ANNUITIES IN GENERAL.”) If you do not specify otherwise, We will withdraw money on a pro rata basis from each Investment Division and/or the Fixed Account.

You can elect to receive “Interest Only” periodic partial withdrawals for the interest earned on monies allocated to the Fixed Account. If this option is chosen, the $100 minimum for periodic partial withdrawals will be waived. However, you must have at least $5,000 in the Fixed Account at the time of each periodic partial withdrawal, unless We agree otherwise.

(d) Hardship Withdrawals

Under certain Qualified Policies, the Plan Administrator (as defined in Code Section 414(g)) may allow, in its sole discretion, certain withdrawals it determines to be “Hardship Withdrawals.” The surrender charge and 10% penalty tax, if applicable, and provisions applicable to partial withdrawals apply to Hardship Withdrawals.

Required Minimum Distribution Option

For IRAs, SIMPLE IRAs and SEP IRAs, the policyowner is generally not required to elect the required minimum distribution option until April 1st of the year following the calendar year he or she attains age 70 ¹/₂. For TSAs, the policyowner is generally not required to elect the required minimum distribution option until April 1st of the year following the calendar year he or she attains age 70 ¹/₂ or until April 1st of the year following the calendar year he or she retires, whichever occurs later. For Inherited IRAs, the policyowner is required to take the first required minimum distribution on or before December 31 of the calendar year following the year of the original owner’s death.

Our Right to Cancel

If We do not receive any premium payments for a period of two years, and both the Accumulation Value of your policy and your total premium payments less any withdrawals, outstanding loans and surrender charges are less than $2,000, We reserve the right to terminate your policy subject to any applicable state insurance law or regulation. We will

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notify you of Our intention to exercise this right and give you 90 days to make a premium payment. If We terminate your policy, We will pay you the Accumulation Value of your policy in one lump sum.

Annuity Commencement Date

The Annuity Commencement Date is the date specified on the Policy Data Page. The Annuity Commencement Date is the day that Income Payments are scheduled to commence under the policy unless the policy has been surrendered or an amount has been paid as proceeds to the designated Beneficiary prior to that date. If We agree, you may change the Annuity Commencement Date to an earlier date. The earliest possible Annuity Commencement Date is the first Policy Anniversary. However, Income Payments generally must begin by the later of age 85 or ten years after the date your policy is issued. If We agree, you may defer the Annuity Commencement Date to a later date provided that We receive written notice of the request at least one month before the last selected Annuity Commencement Date. To request to change or defer the Annuity Commencement Date to a later date, subject to the constraints noted above, you must send a written notice in a form acceptable to Us to VPSC at one of the addresses listed in Question 15 of this Prospectus. The Annuity Commencement Date and Income Payment method for Qualified Policies may also be controlled by endorsements, the plan, or applicable law.

Death Before Annuity Commencement

Unless amended by any rider attached to the policy, if you or the Annuitant dies prior to the Annuity Commencement Date, We will pay an amount as proceeds to the designated Beneficiary, as of the date VPSC receives proof of death and all requirements necessary to make the payment at one of the addresses listed in Question 15 of this Prospectus. For policies owned by a grantor trust, all of whose grantors are individuals, benefits will be paid upon the death of any grantor. That amount will be the greater of:

(a) the Accumulation Value, less any outstanding loan balance;

(b) the sum of all premium payments made less any outstanding loan balance, partial withdrawals and urrender charges on those withdrawals less any rider charges; or

(c) the “reset value” plus any additional premium payments made since the most recent “Reset Anniversary,” less any outstanding loan balance, partial withdrawals made since the most recent Reset Anniversary and any surrender charges applicable to such partial withdrawals less any rider charges. This feature is only available for policies investing in Separate Account-III.

In states where approved, We recalculate the reset value, with respect to any policy, every three years from the date of the initial premium payment (“Reset Anniversary”) until you or the Annuitant reaches age 85. For policies owned by a grantor trust, the Reset Value will be recalculated until any grantor reaches age 85. We calculate the reset value on the Reset Anniversary based on a comparison between (a) the current Reset Anniversary’s Accumulation Value, and (b) the prior Reset Anniversary’s value, plus any premiums since the prior Reset Anniversary date, less any partial withdrawals and surrender charges on those partial withdrawals and any rider charges since the last Reset Anniversary date. The greater of the compared values will be the new reset value. Please consult with your registered representative regarding the reset value that is available under your particular policy.

We have set forth below an example of how the death benefit is calculated. In this example, We have assumed the following:

(1) you purchase a policy with a $200,000 premium payment;

(2) the Accumulation Value is $250,000 in the second Policy Year;

(3) $20,000 withdrawal is made prior to the policy’s third Policy Anniversary;

(4) the Accumulation Value is $220,000 on the third Policy Anniversary (Reset Anniversary); and

(5) you die in the fourth Policy Year and the Accumulation Value of the policy has decreased to $175,000.

The death benefit is the greater of:

(a) Accumulation Value = $175,000

(b) Premium payments less

any partial withdrawals; or = $180,000 ($200,000 – $20,000)

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(c) Reset value (Accumulation

Value on third Policy Anniversary) = $220,000

The formula guarantees that the amount We pay will at least equal the sum of all premium payments (less any outstanding loan balance, partial withdrawals and surrender charges on such partial withdrawals), independent of the investment experience of the Separate Account. The Beneficiary may receive the amount payable in a lump sum or under any Life Income Payment option which is then available. If more than one Beneficiary is named, each Beneficiary will be paid a pro rata portion from each Allocation Alternative in which the policy is invested as of the date We receive proof of death and all requirements necessary to make the payment to that Beneficiary. We will keep the remaining balance in the policy to pay the other Beneficiaries. Due to market fluctuations the remaining Accumulation Value may increase or decrease and We may pay subsequent Beneficiaries a different amount. Beneficiary(ies) may not make transfers between Investment Divisions of the Separate Account, the Fixed Account or any other investment option that We may offer at any time.

We will make payments in a lump sum to the Beneficiary unless you have elected or the Beneficiary elects otherwise in a signed written notice which gives Us the information that We need. If such an election is properly made, We will apply all or part of these proceeds:

(i) under the Life Income Payment Option to provide an immediate annuity for the Beneficiary who will be the policyowner and Annuitant; or

(ii) under another Income Payment Option We may offer at the time.

Payments under the annuity or under any other method of payment We make available must be for the life of the Beneficiary, or for a number of years that is not more than the life expectancy of the Beneficiary at the time of the policyowner’s death (as determined for federal tax purposes), and must begin within one year after the Owner’s death. (See “INCOME PAYMENTS.”)

If your spouse is the sole primary Beneficiary, We can pay the proceeds to the surviving spouse if you die before the Annuity Commencement Date or the policy can continue with the surviving spouse as (a) the new policyowner, and, (b) the Annuitant, if you were the Annuitant. Generally, NYLIAC will not issue a policy to joint owners. However, if NYLIAC makes an exception and issues a jointly owned policy, ownership rights and privileges under the policy must be exercised jointly and benefits under the policy will be paid upon the death of any joint owner. (See “FEDERAL TAX MATTERS—Taxation of Annuities in General.”)

If the Annuitant and, where applicable under another Income Payment option, the joint Annuitant, if any, die after the Annuity Commencement Date, NYLIAC will pay the sum required by the Income Payment option in effect.

We will make any distribution or application of policy proceeds within 7 days after VPSC receives all documents (including documents necessary to comply with federal and state tax law) in connection with the event or election that causes the distribution to take place at one of the addresses listed in Question 15 of this Prospectus, subject to postponement in certain circumstances. (See “DELAY OF PAYMENTS” below.)

Income Payments

(a) Election of Income Payment Options

We will make Income Payments under the Life Income Payment Option or under such other option We may offer at that time where permitted by state laws. We will require that a lump sum payment be made if the Accumulation Value is less than $2,000. You may not request a lump sum payment to be made prior to the maturity date listed on the policy data page of your policy. Under the Life Income Payment Option, We will make payments in the same specified amount over the life of the Annuitant with a guarantee that payments will be made for at least 10 years. If the Annuitant dies before all guaranteed payments have been made, the rest will be made to the Beneficiary. NYLIAC does not currently offer variable Income Payment options.

If the Life Income Payment Option is not chosen, you may request another method of payment, if We agree to it, at any time before the Annuity Commencement Date. To change the Income Payment Option or to request another method of payment prior to the Annuity Commencement Date, you must send a written request in a form acceptable to Us to VPSC at one of the addresses listed in Question 15 of this Prospectus. However, once payments begin, you may not change the option. Under the Life Income Payment Option, We may require proof of birth date before Income Payments begin. For Income Payment Options involving life income, the actual age of the Annuitant will affect the amount of each

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payment. Since payments based on older Annuitants are expected to be fewer in number, the amount of each annuity payment should be greater.

Effective for amounts received in taxable years beginning after December 31, 2010, a policyholder may elect to apply a portion of the Accumulation Value toward one of the Income Payment options we may offer, while the remainder of the policy continues to accumulate income on a tax-deferred basis. This is called a partial annuitization. A partial annuitization will reduce the benefits provided under this policy. The Accumulation Value will be reduced by the amount placed under one of the Income Payment options We may offer. Under a partial annuitization, the policy’s Accumulation Value, any riders under the policy and any charges assessed will be treated the same as they would under any other withdrawal from the policy’s Accumulation Value, except that surrender charges will not be assessed. (See “FEDERAL TAX MATTERS.”)

Under Income Payment Options involving life income, the payee may not receive Income Payments equal to the total premium payments made under the policy if the Annuitant dies before the actuarially predicted date of death. We base Income Payment Options involving life income on annuity tables that vary on the basis of gender, unless the policy was issued under an employer sponsored plan or in a state which requires unisex rates.

Once Income Payments begin, you may not surrender your policy or make any partial withdrawals.

Taxable Income Payments may be subject to an additional 3.8 percent tax on net investment income. (See “FEDERAL TAX MATTERS—3.8 Percent Tax on Certain Investment Income.”)

(b) Proof of Survivorship

We may require satisfactory proof of survival from time to time, before We pay any Income Payments or other benefits. We will request the proof at least 30 days prior to the next scheduled payment date.

Delay of Payments

We will pay any amounts due from the Separate Account under the policy within seven days of the date VPSC receives all documents (including documents necessary to comply with federal and state tax law) in connection with a request at one of the addresses listed in Question 15 of this Prospectus.

Situations where payment may be delayed:

1. We may delay payment of any amounts due from the Separate Account under the policy and transfers among Investment Divisions during any period that:

(a) The New York Stock Exchange (NYSE) is closed for other than usual weekends or holidays, trading is restricted by the Securities and Exchange Commission (SEC); or the SEC declares that an emergency exists;

(b) The SEC, by order, permits Us to delay payment in order to protect Our policyowners; or

(c) The check used to pay the premium has not cleared through the banking system. This may take up to 15 days.

2. We may delay payment of any amounts due from the Fixed Account. When permitted by law, We may defer payment of any partial withdrawal or full surrender request for up to six months from the date of surrender from the Fixed Account. We will pay interest of at least 3.50% per year on any partial withdrawal or full surrender request deferred for 30 days or more.

3. Federal laws made to combat terrorism and prevent money laundering by criminals might, in certain circumstances, require Us to reject a premium payment and/or “freeze” a policy. If these laws apply in a particular policy(ies), We would not be allowed to pay any request for transfers, partial withdrawals, surrenders or death benefits. If a policy or an account is frozen, the Accumulation Value would be moved to a special segregated interest-bearing account and held in that account until We receive instructions from the appropriate federal regulator.

Designation of Beneficiary

You may select one or more Beneficiaries and name them in the application. Thereafter, before the Annuity Commencement Date and while the Annuitant is living, you may change the Beneficiary by written notice to NYLIAC. To change the Beneficiary, you must send a written request in a form acceptable to Us to VPSC at one of the addresses listed in Question 15 of this Prospectus. If before the Annuity Commencement Date, the Annuitant dies before you and

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no Beneficiary for the proceeds or for a stated share of the proceeds survives, the right to the proceeds or shares of the proceeds passes to you. If you are the Annuitant, the proceeds pass to your estate. However, if the policyowner who is not the Annuitant dies before the Annuity Commencement Date, and no Beneficiary for the proceeds or for a stated share of the proceeds survives, the right to the proceeds or shares of the proceeds passes to the policyowner’s estate.

Restrictions Under Code Section 403(b)(11)

With respect to 403(b) TSAs, distributions attributable to salary reduction contributions made in years beginning after December 31, 1988 (including the earnings on these contributions), as well as to earnings in such years on salary reduction accumulations held as of the end of the last year beginning before January 1, 1989, may not begin before the employee attains age 59 ¹/₂, has a severance from employment, dies or becomes disabled. The Code section 403(b) plan may also provide for distribution in the case of hardship. However, hardship distributions are limited to amounts contributed by salary reduction. The earnings on such amounts may not be withdrawn. Even though a distribution may be permitted under these rules (e.g. for hardship or due to a severance from employment), it may still be subject to a 10% additional income tax as a premature distribution.

Under the final Code section 403(b) regulations, which the Department of Treasury published on July 26, 2007, employer contributions made to Code section 403(b) TSA contracts will be subject to new withdrawal restrictions. Under the new rules, amounts attributable to employer contributions to a Code section 403(b) TSA contract that is issued after December 31, 2008 may not be distributed earlier than the earliest of severance from employment or upon the occurrence of a certain event, such as after a fixed number of years, the attainment of a stated age, or disability. These new withdrawal restrictions do not apply to Code section 403(b) TSA contracts issued before January 1, 2009.

Under the terms of your Code section 403(b) plan, you may have the option to invest in other funding vehicles, including Code section 403(b)(7) custodial accounts. You should consult your plan document to make this determination.

Loans

Loans are available only if you have purchased your policy in connection with a 403(b) plan and may not be available in all states for plans subject to the Employment Retirement Income Security Act of 1974 (ERISA). To request a TSA loan, you must send a written request on a form acceptable to Us to VPSC. Under your 403(b) policy, you may borrow against your policy’s Accumulation Value after the first Policy Year and prior to the Annuity Commencement Date. Unless We agree otherwise, only one loan may be outstanding at a time. There must be a minimum Accumulation Value of $5,000 in the policy at the time of the loan. The minimum loan amount is $500. The maximum loan that you may take is the lesser of: (a) 50% of the policy’s Accumulation Value on the date of the loan or (b) $50,000 minus your highest outstanding principal balance in the previous 12 months from your policy and any qualified employer plan (as defined under Sections 72(p)(4) and 72(p)(2)(D) of the Code). Please note that adverse tax consequences could result from your failure to comply with this limitation. NYLIAC, and its affiliates and agents do not provide legal or tax advice nor assume responsibility or liability for any legal or tax consequences of any TSA loan taken under a 403(b) policy or the compliance of such loan with the Code limitations set forth in this paragraph or for determining whether any plan or loan is subject to and/or complies with ERISA.

We withdraw a loan processing fee of $25 from the Accumulation Value on a pro rata basis, unless prohibited by applicable state law or regulation. If on the date of the loan you do not have a Fixed Accumulation Value equal to at least 125% (110% in New York) of the loan amount, We will transfer sufficient Accumulation Value from the Investment Divisions on a pro rata basis so that the Fixed Accumulation Value equals 125% (110% in New York) of the loan amount. While a loan is outstanding, you may not make partial withdrawals or transfers which would reduce the Fixed Accumulation Value to an amount less than 125% (110% in New York) of the outstanding loan balance.

For all loans, of the assets being held in the Fixed Account to secure 125% (110% in New York) of the loan amount, the interest rate credited to the amount representing the outstanding loan balance will be 2% less than the interest rate charged on the loan. The additional 25% (10% in New York) being held in the Fixed Account to secure the loan will be credited with the current declared interest rate for both non-ERISA and ERISA subject plans, but will always be at least equal to the minimum guaranteed interest rate stated on the data page of your policy.

For plans subject to ERISA, interest charged will be based on the Prime Rate, as reported in the Wall Street Journal on the first business day of a calendar year or the Moody’s Corporate Bond Yield Average as of two months before the date the rate is determined. The rate is determined on the first business day of the calendar year. We will assess interest in arrears as part of the periodic loan repayments.

You must repay the loan on a periodic basis not less frequent than quarterly and over a period no greater than five years from the date it is taken. If a loan repayment is in default We will withdraw the amount in default from the Fixed

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Accumulation Value to the extent permitted by federal income tax rules. We will take such a repayment on a first-in, first-out (FIFO) basis from amounts allocated to the Fixed Account.

We permit loans to acquire a principal residence under the same terms described above, except that:

(a) the minimum loan amount is $5,000; and

(b) repayment of the loan amount may be extended to a maximum of twenty-five years.

We deduct any outstanding loan balance including any accrued interest from the Fixed Accumulation Value prior to payment of a surrender or the commencement of the annuity benefits. On death of the policyowner or Annuitant, We deduct any outstanding loan balance from the Fixed Accumulation Value as a partial withdrawal as of the date We receive the notice of death.

Loans are subject to the terms of the policy, your 403(b) plan and the Code, which may impose restrictions upon them. We reserve the right to suspend, modify, or terminate the availability of loans under this policy at any time. However, any action taken by Us will not affect already outstanding loans. We also deduct any outstanding loan balance from the Fixed Accumulation Value as a partial withdrawal upon default of a loan repayment, including any applicable surrender charges.

THE FIXED ACCOUNT

The Fixed Account is supported by the assets in NYLIAC’s general account, which includes all of NYLIAC’s assets except those assets specifically allocated to NYLIAC’s separate accounts. NYLIAC has sole discretion to invest the assets of the Fixed Account subject to applicable law. The Fixed Account is not registered under the federal securities laws and is not generally subject to their provision. Therefore, generally you do not have the benefits and protections of these statutes for amounts allocated to the Fixed Account. Furthermore, the staff of the SEC has not reviewed the disclosures in this Prospectus relating to the Fixed Account. These disclosures regarding the Fixed Account may be subject to certain applicable provisions of the federal securities laws relating to the accuracy and completeness of statements made in prospectuses.

(a) Interest Crediting

NYLIAC guarantees that it will credit interest at an effective rate of at least the minimum guaranteed interest rate stated on the data page of your policy to amounts allocated or transferred to the Fixed Account under the policies. For policies purchased prior to May 1, 2012, please see your Policy’s Data Page for the guaranteed minimum interest rate applicable to your policy. For policies purchased on and after May 1, 2012, the guaranteed minimum interest rate is 1%. Please contact your Registered Representative for the current guaranteed minimum interest rate. We credit interest on a daily basis. NYLIAC may, at its sole discretion, credit a higher rate or rates of interest to amounts allocated or transferred to the Fixed Account.

Interest rates will be set quarterly on the first day of each new calendar quarter. All premium payments and additional payments (including transfers from other Investment Divisions) allocated to the Fixed Account during a calendar quarter will receive the interest rate declared for that quarter until the end of that Policy Year. All other amounts in the Fixed Account are credited with the rate set for the quarter in which the last Policy Anniversary occurred, guaranteed for the current Policy Year.

(b) Transfers to Investment Divisions

You may transfer amounts from the Fixed Account to the Investment Divisions up to 30 days prior to the Annuity Commencement Date, subject to the following conditions.

1. The maximum amount you are allowed to transfer from the Fixed Account to the Investment Divisions during any Policy Year is 20% of the Fixed Accumulation Value at the beginning of the Policy Year.

2. The minimum amount that you may transfer from the Fixed Account to the Investment Divisions is the lesser of (i) $500 or (ii) 20% of the Fixed Accumulation value at the beginning of the Policy Year. Additionally, the remaining values in the Fixed Account must be at least $500. If, after a contemplated transfer, the remaining values in the Fixed Account would be less than $500, that amount must be included in the transfer, unless NYLIAC in its discretion determines otherwise. We determine amounts transferred from the Fixed Account on a first-in, first-out (“FIFO”) basis, for purposes of determining the rate at which We credit interest on monies remaining in the Fixed Account.

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3. For policies investing in Separate Accounts-I and II whose applications were signed prior to April 1, 1999, you may transfer an amount from the Fixed Account to the Investment Divisions if on any Policy Anniversary: (i) the interest rate set for that amount falls more than 2.5 percentage points below the rate which was set for the immediately preceding Policy Year, or below the minimum rate specified on your Policy Data Page, and (ii) within 60 days after that Policy Anniversary, you make a request for such transfer. There is no minimum transfer requirement and no charges will be imposed under this condition.

(c) Bail-Out (For Policies Investing in Separate Accounts-I and II)

Surrender Charges may be applied to withdrawals from the Fixed Account. (See “SURRENDER CHARGES.”) For policies applied for prior to April 1, 1999, in addition to the “Exceptions to Surrender Charges”, subject to any applicable state insurance law or regulation, a surrender charge will not be imposed on any amount which is withdrawn from the Fixed Account if on any Policy Anniversary: (1) the interest rate set for that amount falls more than 2.5 percentage points below the rate which was set for the immediately preceding Policy Year, or below the minimum rate specified on your Policy Data Page, and (2) within 60 days after that Policy Anniversary, you withdraw part or all of that amount allocated to the Fixed Account. We reserve the right to set a separate yearly interest rate and period for which this rate is guaranteed for amounts transferred to the Fixed Account.

The exception described above does not apply to policies applied for on or after April 1, 1999, in states where approved. You should check with your registered representative to determine whether this provision is still available in your state.

Except as part of an existing request relating to the Dollar Cost Averaging or Interest Sweep options, you may not transfer money into the Fixed Account if you made a transfer out of the Fixed Account during the previous six- month period.

You must make transfer requests in writing in a form acceptable to Us and sent to VPSC at one of the addresses listed in Question 15 of this Prospectus, by telephone in accordance with established procedures or through our Virtual Service Center. Facsimile requests will not be accepted or processed. In addition, we will not accept e-mailed requests or e-mails of imaged, signed requests.

We will deduct partial withdrawals and apply any surrender charges to the Fixed Account in the following sequence: first, from any value in the Fixed Account as of the last Policy Anniversary, then from any value in the Fixed Account attributed to additional premium payments or transfers from Investment Divisions in the same order in which you allocated such payments to the Fixed Account during the current Policy Year.

See the policy itself for details and a description of the Fixed Account.

FEDERAL TAX MATTERS

Introduction

The following discussion is general and is not intended as tax advice. The Qualified Policies are designed for use by individuals in retirement plans which are intended to qualify as plans qualified for special income tax treatment under Sections 219, 403, 408, 408A or 457 of the Code. The ultimate effect of federal income taxes on the Accumulation Value, on Income Payments and on the economic benefit to you, the Annuitant or the Beneficiary depends on the type of retirement plan for which the Qualified Policy is purchased, on the tax and employment status of the individual concerned and on NYLIAC’s tax status. The following discussion assumes that Qualified Policies are used in retirement plans that qualify for the special federal income tax treatment described above. This discussion is not intended to address the tax consequences resulting from all of the situations in which a person may be entitled to or may receive a distribution under a policy. Any person concerned about these tax implications should consult a tax adviser before making a premium payment. This discussion is based upon NYLIAC’s understanding of the present federal income tax laws as they are currently interpreted by the Internal Revenue Service. We cannot predict the likelihood of continuation of the present federal income tax laws or of the current interpretations by the Internal Revenue Service, which may change from time to time without notice. Any such change could have retroactive effects regardless of the date of enactment. Moreover, this discussion does not take into consideration any applicable state or other tax laws except with respect to the imposition of any state premium taxes. We suggest you consult with your tax adviser.

Taxation of Annuities in General

The following discussion assumes that the policies will qualify as annuity contracts for federal income tax purposes. The Statement of Additional Information discusses such qualifications.

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Section 72 of the Code governs taxation of annuities in general. NYLIAC believes that an annuity policyowner generally is not taxed on increases in the value of a policy until distribution occurs either in the form of a lump sum received by withdrawing all or part of the Accumulation Value (i.e., surrenders or partial withdrawals), or as Income Payments under the Income Payment option elected. The exception to this rule is that generally, a policyowner of any deferred annuity policy who is not a natural person must include in income any increase in the excess of the policyowner’s Accumulation Value over the policyowner’s investment in the contract during the taxable year. However, there are some exceptions to this exception. You may wish to discuss these with your tax counsel. The taxable portion of a distribution (in the form of an annuity or lump sum payment), is generally taxed as ordinary income. For this purpose, the assignment, pledge, or agreement to assign or pledge any portion of the Accumulation Value generally will be treated as a distribution.

In the case of a withdrawal or surrender distributed to a participant or Beneficiary under a Qualified Policy (other than a Qualified Policy used in a retirement plan that qualifies for special federal income tax treatment under Section 457 of the Code as to which there are special rules), a ratable portion of the amount received is taxable, generally based on the ratio of the investment in the contract to the total policy value. The “investment in the contract” generally equals the portion, if any, of any premium payments paid by or on behalf of an individual under a policy which is not excluded from the individual’s gross income. For policies issued in connection with qualified plans, the “investment in the contract” can be zero. The law requires the use of special simplified methods to determine the taxable amount of payments that are based in whole or in part on the Annuitant’s life and that are paid from TSAs.

Generally, in the case of a withdrawal under a Non-Qualified Policy before the Annuity Commencement Date, amounts received are first treated as taxable income to the extent that the Accumulation Value immediately before the withdrawal exceeds the “investment in the contract” at that time. Any additional amount withdrawn is not taxable. On the other hand, upon a full surrender of a Non-Qualified Policy, if the “investment in the contract” exceeds the Accumulation Value (less any surrender charges), the loss is treated as an ordinary loss for federal income tax purposes. However, limitations may apply to the amount of the loss that may be deductible. It is the IRS’s view that a loss on the surrender of a variable annuity contract is treated as a miscellaneous itemized deduction subject to the 2% of adjusted gross income limit.

Although the tax consequences may vary depending on the Income Payment option elected under the policy, in general, only the portion of the Income Payment that represents the amount by which the Accumulation Value exceeds the “investment in the contract” will be taxed. After the investment in the Policy is recovered, the full amount of any additional Income Payments is taxable. For fixed Income Payments, in general, there is no tax on the portion of each payment which represents the same ratio that the “investment in the contract” bears to the total expected value of the Income Payments for the term of the payments. However, the remainder of each Income Payment is taxable until the recovery of the investment in the contract, and thereafter the full amount of each annuity payment is taxable. If death occurs before full recovery of the investment in the contract, the unrecovered amount may be deducted on the Annuitant’s final tax return.

Effective for amounts received in taxable years beginning after December 31, 2010, a policyowner may elect to apply a portion of the Accumulation Value towards one of the Income Payment options we may offer, while the remainder of the policy continues to accumulate income on a tax-deferred basis. This is called a partial annuitization. If a policyowner chooses to partially annuitize a policy, the resulting payments will be taxed as fixed Income Payments described above, only if such payments are received for one of the following periods: (1) the annuitant’s life (or the lives of the joint annuitants, if applicable), or (2) a period of 10 years or more. Provided such requirements are met, the “investment in the contract” will be allocated pro rata between each portion of the policy from which amounts are received as an annuity and the portion of the policy from which amounts are not received as an annuity.

In the case of a distribution, a penalty tax equal to 10% of the amount treated as taxable income may be imposed. The penalty tax is not imposed in certain circumstances, including, generally, distributions: (1) made on or after the date on which the policyowner attains age 59 ¹/₂, (2) made as a result of the policyowner’s (or, where the policyowner is not an individual, the Annuitant’s) death, (3) made as a result of the policyowner’s disability, (4) which are part of a series of substantially equal periodic payments (at least annually) made for the life (or life expectancy) of the policyowner or the joint lives (or joint life expectancies) of the policyowner and his or her designed beneficiary (5) received distributions from an Inherited IRA. Other tax penalties may apply to certain distributions pursuant to a Qualified Policy.

All non-qualified, deferred annuity contracts issued by NYLIAC (or its affiliates), to the same policyowner during any calendar year are to be treated as one annuity contract for purposes of determining the amount includible in an individual’s gross income. In addition, there may be other situations in which the Treasury Department may conclude (under its authority to issue regulations) that it would be appropriate to aggregate two or more annuity contracts

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purchased by the same policyowner. Accordingly, a policyowner should consult a tax adviser before purchasing more than one policy or other annuity contract.

A transfer of ownership of a policy, or designation of an Annuitant or other Beneficiary who is not also the policyowner, may result in certain income or gift tax consequences to the policyowner. A policyowner contemplating any transfer or assignment of a policy should consult a tax adviser with respect to the potential tax effects of such a transaction.

3.8 Percent Tax on Certain Investment Income

Beginning in 2013, in general, a tax of 3.8 percent will apply to net investment income (“NII”) received by an individual taxpayer to the extent his or her modified adjusted gross income (“MAGI”) exceeds certain thresholds (e.g., $250,000 in the case of taxpayers filing jointly, $125,000 in the case of a married taxpayer filing separately and $200,000 in the case of other individual taxpayers). For this purpose, NII includes (i) gross income from various investments, including gross income received with respect to annuities that are not held through a tax-qualified plan (e.g., a traditional IRA or Section 403(b) plan) and (ii) net gain attributable to the disposition of property. Such NII (as well as gross income from tax qualified plans) will also increase a taxpayer’s MAGI for purposes of the taxable thresholds described above. This tax also applies to trusts and estates under a special set of rules. In 2012 the IRS and the Treasury Department issued guidance regarding this new tax in the form of proposed regulations. However, these regulations have not been finalized. You should consult your tax advisor to determine the applicability of this tax in your individual circumstances and with respect to any amount received in connection with the surrender of this policy, distributions or withdrawals from this policy or the exercise of other rights and features under this annuity contract.

Partial Section 1035 Exchanges

Section 1035 of the Code provides that an annuity contract may be exchanged in a tax-free transaction for another annuity contract or a long-term care insurance policy. The IRS has issued guidance which provides that the direct transfer of a portion of an annuity contract into another annuity contract can qualify as a tax-free exchange, provided that no amounts (other than annuity payments made for life or for a term of at least 10 years) are distributed from either contract involved in the exchange for 180 days following the date of the transfer. If a taxpayer takes a distribution during this 180-day waiting period, the IRS guidance provides that the IRS will apply general tax principles to determine the tax treatment of the transfer and/or the distribution (e.g., in appropriate circumstances, as taxable “boot” or as a taxable distribution, effectively negating the tax-free exchange).

This IRS guidance, however, does not address the tax treatment of a partial exchange of an annuity contract for a long-term care insurance policy. Although we believe that taking a distribution or withdrawal from the Contract described in this prospectus within 180 days of a partial exchange of such Contract for a long-term care insurance policy should not cause such prior partial exchange to be treated as taxable, there can be no assurance that the IRS will not expand the 180-day rule described above to partial exchanges of an annuity contract for a long-term care insurance policy, or that the IRS will not provide other guidance with respect to such partial exchanges. If you contemplate such an exchange, you should consult a tax advisor to discuss the potential tax effects of such a transaction.

Qualified Policies

Qualified Policies are designed for use with retirement plans that qualify for special federal income tax treatment under Sections 219, 403(b), 408, 408A and 457 of the Code. The tax rules applicable to participants and beneficiaries in these plans vary according to the type of plan and the terms and conditions of the plan itself. Special favorable tax treatment may be available for certain types of contributions and distributions (including special rules for certain lump sum distributions to individuals who attained the age of 50 by January 1, 1986). Adverse tax consequences may result from contributions in excess of specified limits, distributions prior to age 59 ¹/₂ (subject to certain exceptions), distributions that do not conform to specified minimum distribution rules and in certain other circumstances. Therefore, this discussion only provides general information about the use of Qualified Policies with the plans described below. Policyowners and participants under these plans, as well as Annuitants and Beneficiaries are cautioned that the rights of any person to any benefits under the plans may be subject to the terms and conditions of the plans themselves, regardless of the terms and conditions of the policy issued in connection with the plan. Purchasers of Qualified Policies should seek legal and tax advice regarding the suitability of the policy.

(a) 403(b) Plans. Under Section 403(b) of the Code, payments made by public school systems and certain tax exempt organizations to purchase annuity policies for their employees are excludible from the gross income of the employee, subject to certain limitations. However, such payments may be subject to FICA (“Social Security”) taxes.

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Important Information Regarding Final Code Section 403(b) Regulations

On July 26, 2007, the Department of the Treasury published final Code section 403(b) regulations that were largely effective on January 1, 2009. These comprehensive regulations include several new rules and requirements, such as a requirement that employers maintain their Code section 403(b) plans pursuant to a written plan. The final regulations, subsequent IRS guidance, and the terms of the written plan and/or the written information sharing agreement between the employer and NYLIAC may impose new restrictions on both new and existing Code section 403(b) TSA contracts, including restrictions on the availability of loans, distributions, transfers and exchanges, regardless of when a contract was purchased.

Prior to the effective date of the final regulations, IRS guidance applicable to tax-free transfers and exchanges of Code section 403(b) TSA contracts or custodial accounts became effective September 25, 2007, replacing existing rules under IRS Revenue Ruling 90-24 previously applicable to such transfers and exchanges (a “90-24 transfer”). Under this guidance, transfers and exchanges (both referred to below as “transfers”) are available only to the extent permitted under the employer’s written Code section 403(b) plan.

Transfers occurring after September 24, 2007 that do not comply with this guidance can result in the applicable contract becoming taxable on January 1, 2009, or the date of the transfer, whichever is later. If you make a transfer to a contract or custodial account that is not part of the employer’s Code section 403(b) plan (other than a transfer to a different plan), and the contract provider and employer fail to enter into an information sharing agreement by January 1, 2009, the transfer would be considered a “failed” transfer, resulting in the applicable contract becoming subject to tax. Additional guidance issued by the IRS generally permits a failed transfer to be corrected no later than June 30, 2009, by re-transferring to a contract or custodial account that is part of the employer’s Code section 403(b) plan and/or that is subject to an information-sharing agreement with the employer.

In general, certain contracts originally established by a 90-24 transfer prior to September 25, 2007, are exempt (or grandfathered) from some of the requirements of the final regulations; provided that no salary reduction or other contributions have ever been made to such contracts, and that no additional transfers are made to such contracts on or after September 25, 2007. Further, contracts that are not grandfathered are generally required to be part of, and subject to the requirements of, an employer’s written Code section 403(b) plan no later than by January 1, 2009.

The new rules in the final regulations generally do not affect a participant’s ability to transfer some or all of a Code section 403(b) TSA contract to a state-defined benefit plan to purchase service credits, where such a transfer is otherwise consistent with applicable rules and requirements and with the terms of the employer’s plan.

You should discuss with your tax advisor the final Code section 403(b) regulations and other applicable IRS guidance in order to determine the impact they may have on any existing Code section 403(b) TSA contracts that you may own and/or on any Code section 403(b) TSA contract that you may consider purchasing.

(b) Individual Retirement Annuities. Sections 219 and 408 of the Code permit individuals or their employers to contribute to an individual retirement program known as an “Individual Retirement Annuity” or “IRA”, including an employer-sponsored Simplified Employee Pension or “SEP”. Individual Retirement Annuities are subject to limitations on the amount which may be contributed and deducted and the time when distributions may commence. In addition, distributions from certain other types of qualified plans may be placed into Individual Retirement Annuities on a tax-deferred basis.

(c) Roth Individual Retirement Annuities. Section 408A of the Code permits individuals with incomes below a certain level to contribute to an individual retirement program known as a “Roth Individual Retirement Annuity” or “Roth IRA.” Roth IRAs are subject to limitations on the amount that may be contributed. Contributions to Roth IRAs are not deductible, but distributions from Roth IRAs that meet certain requirements are not included in gross income. Individuals generally may convert their existing non-Roth IRAs into Roth IRAs. Beginning in 2008, a direct rollover may also be made from an eligible retirement plan other than a non- Roth IRA (such as a qualified retirement plan, section 403(b) tax sheltered annuity, or eligible governmental section 457 plan) to a Roth IRA provided applicable requirements are met. Such conversions and rollovers will be subject to income tax at the time of conversion or rollover.

(d) Deferred Compensation Plans. Section 457 of the Code, while not actually providing for a qualified plan as that term is normally used, provides for certain 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 which enjoy special treatment. The policies can be used with such plans. Under such plans, a participant may specify the form of investment in which his or her participation will be made. Such investments are generally owned by, and are subject to the claims of the general creditors of, the sponsoring

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employer, except that Section 457 plans of state and local government must be held and used for the exclusive benefit of participants and beneficiaries in a trust or annuity contract.

(e) Simple IRAs. SIMPLE IRAs permit certain small employers to establish SIMPLE IRA 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 $12,000 for 2013 (and thereafter, adjusted for cost-of-living increases in accordance with the Code). Employees who attain age 50 or over by the end of the relevant calendar year may also elect to make an additional catch-up contribution. Such additional contribution may be up to $2,500 for 2013 (and thereafter adjusted for cost-of-living increases in accordance with the Code). The sponsoring employer is generally required to make matching or non-elective contributions on behalf of the employees. Distributions from SIMPLE IRAs are subject to the same restrictions that apply to IRA distributions and are taxed as ordinary income. Subject to certain exceptions, 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 SIMPLE IRA plan. All references in this Prospectus to the 10% penalty tax should be read to include this limited 25% penalty tax if your Qualified Policy is used as a SIMPLE IRA.

The Qualified Policies are subject to the required minimum distribution (“RMD”) rules under Code section 401(a)(9) and the regulations issued thereunder. Under these rules, generally, distributions under your Qualified Policy must begin no later than the beginning date required by the Internal Revenue Service (“IRS”). The beginning date is determined by the type of Qualified Policy that you own. For each calendar year that an RMD is not timely made, a 50% excise tax is imposed on the amount that should have been distributed, but was not.

Unless the distributions are made in the form of an annuity that complies with Code section 401(a)(9) and the regulations issued thereunder, the minimum amount required to be distributed for each calendar year is generally determined by dividing the value of the Qualified Policy as of the end of the prior calendar year by the applicable distribution period (determined under IRS tables).

Beginning in 2006, regulations under Code section 401(a)(9) provide a new method for calculating the amount of RMDs from Qualified Policies. Under these regulations, during the accumulation phase of the Qualified Policy, the actuarial present value of certain additional benefits provided under the policy (such as guaranteed death benefits) must be taken into account in calculating the value of the Qualified Policy for purposes of determining the annual RMD for the Qualified Policy. As a result, under these regulations, it is possible that, after taking account of the value of such benefits, there may not be sufficient Accumulation Value to satisfy the applicable RMD requirement. This generally will depend on the investment performance of your policy. You may need to satisfy such RMD from other tax-qualified plans that you own. You should consult with your tax advisor regarding these requirements and the implications of purchasing any riders or other benefits in connection with your Qualified Policy.

Taxation of Death Benefits

The tax treatment of amounts distributed from your contract upon the death of the policyowner or annuitant depends on whether the policyowner or annuitant dies before or after the Annuity Commencement Date. If death occurs prior to the Annuity Commencement Date, and the Beneficiary receives payments under an annuity payout option, the benefits are generally taxed in the manner described above for annuity payouts. If the benefits are received in a lump sum, they are taxed to the extent they exceed the remaining investment in the contract. If death occurs after the Annuity Commencement Date, amounts received by the Beneficiary are not taxed until they exceed the remaining investment in the contract.

DISTRIBUTION AND COMPENSATION ARRANGEMENTS

NYLIFE Distributors LLC (“NYLIFE Distributors”), the underwriter and distributor of the policies, is registered with the SEC and the Financial Industry Regulatory Authority, Inc. (FINRA) as a broker-dealer. The firm is an indirect wholly-owned subsidiary of New York Life, and an affiliate of NYLIAC. Its principal business address is 169 Lackawanna Avenue, Parsippany, New Jersey 07054.

The policies are sold by registered representatives of NYLIFE Securities, LLC (“NYLIFE Securities”), a broker- dealer that is an affiliate of NYLIFE Distributors. Your registered representative is also a licensed insurance agent with New York Life. He or she may be qualified to offer other forms of life insurance, annuities, and other investment products. In certain circumstances, NYLIFE Securities registered representatives can sell both products manufactured and issued by New York Life or its affiliates and products provided by other companies.

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The selling broker-dealer, and in turn your registered representative, will receive compensation for selling you this policy or any other investment product. Compensation may consist of commissions, asset-based compensation, allowances for expenses, and other compensation programs. The amount of compensation received by your registered representative will vary depending on the policy that he or she sells, on sales production goals, and on the specific payment arrangements of the relevant broker-dealer. Differing compensation arrangements have the potential to influence the recommendation made by your registered representative or broker-dealer.

The maximum commission paid to broker-dealers who have entered into dealer agreements with NYLIFE Distributors is 6.25% of all premiums received. The total commissions paid for the New York Life Flexible Premium Variable Annuity policies were as follows:

For Policies Investing in Separate Accounts-I and II:

For the years ended December 31, 2012, 2011, and 2010, NYLIAC paid commissions of $2,829,989, $2,560,621 and $2,290,990, respectively. NYLIFE Distributors did not retain any of these commissions. The policies are sold and premium payments are accepted on a continuous basis.

For Policies Investing in Separate Account-III:

For the years ended December 31, 2012, 2011 and 2010, NYLIAC paid commissions of $4,408,692, $6,370,454 and $7,125,112, respectively. NYLIFE Distributors did not retain any of these commissions. The policies are sold and premium payments are accepted on a continuous basis.

New York Life also has other compensation programs where registered representatives, managers, and employees involved in the sales process receive additional compensation related to the sale of products manufactured and issued by New York Life or its affiliates. NYLIFE Securities registered representatives who are members of the General Office management team receive compensation based on a number of incentive programs designed to compensate for education, supervision, training, and recruiting of agents.

NYLIFE Securities registered representatives can qualify to attend New York Life-sponsored educational, training, and development conferences based on the sales they make of life insurance, annuities, and investment products during a particular twelve-month period. In addition, qualification for recognition programs sponsored by New York Life depends on the sale of products manufactured and issued by New York Life or its affiliates.

VOTING RIGHTS

The Funds are not required to and typically do not hold routine annual stockholder meetings. Special stockholder meetings will be called when necessary. To the extent required by law, NYLIAC will vote the Eligible Portfolio shares held in the Investment Divisions at special shareholder meetings of the Funds in accordance with instructions We receive from persons having voting interests in the corresponding Investment Division. If, however, the federal securities laws are amended, or if NYLIAC’s present interpretation should change, and as a result, NYLIAC determines that it is allowed to vote the Eligible Portfolio shares in its own right, We may elect to do so.

Prior to the Annuity Commencement Date, you hold a voting interest in each Investment Division to which you have money allocated. We will determine the number of votes which are available to you by dividing the Accumulation Value attributable to an Investment Division by the net asset value per share of the applicable Eligible Portfolios. We will calculate the number of votes which are available to you separately for each Investment Division. We will determine that number by applying your percentage interest, if any, in a particular Investment Division to the total number of votes attributable to the Investment Division.

We will determine the number of votes of the Eligible Portfolio which are available as of the date established by the Portfolio of the relevant Fund. Voting instructions will be solicited by written or electronic communication prior to such meeting in accordance with procedures established by the relevant Fund.

If We do not receive timely instructions, We will vote those shares in proportion to the voting instructions which are received with respect to all policies participating in that Investment Division. As a result, a small number of policyholders may control the outcome of the vote. We will apply voting instructions to abstain on any item to be voted upon on a pro rata basis to reduce the votes eligible to be cast. Each person having a voting interest in an Investment Division will receive proxy material, reports and other materials relating to the appropriate Eligible Portfolio.

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TABLE OF CONTENTS FOR THE

STATEMENT OF ADDITIONAL INFORMATION (SAI)

The SAI contains more details concerning the subjects discussed in this Prospectus. The following is the Table of Contents for the SAI:

	Page
THE POLICIES		2
Valuation of Accumulation Units		2
ANNUITY PAYMENTS		2
GENERAL MATTERS		2
FEDERAL TAX MATTERS		3
Taxation of New York Life Insurance and Annuity Corporation		3
Tax Status of the Policies		3
SAFEKEEPING OF SEPARATE ACCOUNT ASSETS		4
STATE REGULATION		4
RECORDS AND REPORTS		4
LEGAL PROCEEDINGS		5
FINANCIAL STATEMENTS		5
OTHER INFORMATION		5
NYLIAC AND SEPARATE ACCOUNT FINANCIAL STATEMENTS		F-1

How to obtain a New York Life Flexible Premium Variable Annuity Statement of Additional Information.

The New York Life Flexible Premium Variable Annuity Statement of Additional Information is posted on Our website, www.newyorklife.com. For a paper copy of the Statement of Additional Information, call (800) 598-2019 or send this request form to:

            NYLIAC Variable Products Service Center

            Madison Square Station

            P.O. Box 922

            New York, NY 10159

Please send me a New York Life Flexible Premium Variable Annuity Statement of Additional Information

dated May 1, 2013:

Name

Address

City State Zip

73

Statement of Additional Information

May 1, 2013

for

New York Life Flexible Premium Variable Annuity

From

NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION

(A Delaware Corporation)

51 Madison Avenue, Room 251

New York, New York 10010

Investing in

NYLIAC Variable Annuity Separate Account-I

NYLIAC Variable Annuity Separate Account-II

NYLIAC Variable Annuity Separate Account-III

This Statement of Additional Information (“SAI”) is not a prospectus. This SAI contains information that expands upon subjects discussed in the current New York Life Flexible Premium Variable Annuity Prospectus. You should read the SAI in conjunction with the current New York Life Flexible Premium Variable Annuity Prospectus dated May 1, 2013. You may obtain a copy of the Prospectus by calling New York Life Insurance and Annuity Corporation (“NYLIAC”) at (800) 598-2019 or writing to NYLIAC at Madison Square Station, P.O. Box 922, New York, NY 10159. Terms used but not defined in this SAI have the same meaning as in the current New York Life Flexible Premium Variable Annuity Prospectus.

TABLE OF CONTENTS

	Page
THE POLICIES		2
Valuation of Accumulation Units		2
ANNUITY PAYMENTS		2
GENERAL MATTERS		2
FEDERAL TAX MATTERS		3
Taxation of New York Life Insurance and Annuity Corporation		3
Tax Status of the Policies		3
SAFEKEEPING OF SEPARATE ACCOUNT ASSETS		4
STATE REGULATION		4
RECORDS AND REPORTS		4
LEGAL PROCEEDINGS		5
FINANCIAL STATEMENTS		5
OTHER INFORMATION		5
NYLIAC AND SEPARATE ACCOUNT FINANCIAL STATEMENTS		F-1

THE POLICIES

The following provides additional information about the policies and supplements the description in the Prospectus.

Valuation of Accumulation Units

Accumulation Units are valued separately for each Investment Division of the Separate Account. The method used for valuing Accumulation Units in each Investment Division is the same. We arbitrarily set the value of each Accumulation Unit as of the date operations began for the Investment Division. Thereafter, the value of an Accumulation Unit of an Investment Division for any Business Day equals the value of an Accumulation Unit in that Investment Division as of the immediately preceding Business Day multiplied by the “Net Investment Factor” for that Investment Division for the current Business Day.

We determine the Net Investment Factor for each Investment Division for any period from the close of the preceding Business Day to the close of the current Business Day (the “Valuation Period”) is determined by the following formula:

(a/b) – c

Where: a = the result of

(1) the net asset value per share of the Eligible Portfolio shares held in the Investment Division determined at the end of the current Valuation Period, plus

(2) the per share amount of any dividend or capital gain distribution made by the Eligible Portfolio for shares held in the Investment Division if the “ex-dividend” date occurs during the current Valuation Period;

  b = the net asset value per share of the Eligible Portfolio shares held in the Investment Division determined as of the end of the immediately preceding Valuation Period; and

  c = a factor representing the charges deducted from the applicable Investment Division on a daily basis. Such factor is equal to 1.40% (annualized) for policies investing in Separate Account-III (1.30% (annualized) for policies investing in Separate Accounts-I and II) of the daily average Variable Accumulation Value. (See “Other Charges” in the Prospectus.)

The Net Investment Factor may be greater or less than one. Therefore, the value of an Accumulation Unit in an Investment Division may increase or decrease from Valuation Period to Valuation Period.

ANNUITY PAYMENTS

We will make equal annuity payments each month under the Life Income Payment Option during the lifetime of the Annuitant. Once payments begin, they do not change and are guaranteed for 10 years even if the Annuitant dies sooner. If the Annuitant dies before all guaranteed payments have been made, the rest will be made to the Beneficiary. We may require that the payee submit proof of the Annuitant’s survivorship as a condition for future payments beyond the 10-year guaranteed payment period.

On the Annuity Commencement Date, We will determine the Accumulation Value of your policy and use that value to calculate the amount of each annuity payment. We determine each annuity payment by applying the Accumulation Value, less any premium taxes, to the annuity factors specified in the annuity table set forth in the policy. Those factors are based on a set amount per $1,000 of proceeds applied. The appropriate rate must be determined by the gender (except where, as in the case of certain Qualified Policies and other employer-sponsored retirement plans, such classification is not permitted), date of application and age of the Annuitant. The dollars applied are then divided by 1,000 and the result multiplied by the appropriate annuity factor from the table to compute the amount of the each monthly annuity payment.

GENERAL MATTERS

Non-Participating. The policies are non-participating. Dividends are not paid.

Misstatement of Age or Gender. If the Annuitant’s stated age and/or gender in the policy are incorrect, NYLIAC will change the benefits payable to those which the premium payments would have purchased for the correct age and gender. Gender is not a factor when annuity benefits are based on unisex annuity payment rate tables. (See “Income Payments—Election of Income Payment Options” in the Prospectus.) If We made payments based on incorrect age or gender, We will increase or reduce a later payment or payments to adjust for the error. Any adjustment will include interest, at 3.5% per year, from the date of the wrong payment to the date the adjustment is made.

2

Assignments. If permitted by the plan or by law for the plan indicated in the application for the policy, you may assign your interest in a Non-Qualified Policy or any interest in it prior to the Annuity Commencement Date and during the Owner’s lifetime. In order to effect an assignment of all or any part of your interest in a Non-Qualified Policy prior to the Annuity Commencement Date and during the Owner’s lifetime, you must send a duly executed instrument of assignment to VPSC at one of the addresses listed in 15 of the Prospectus. NYLIAC will not be deemed to know of an assignment unless it receives a copy of a duly executed instrument evidencing such assignment. Further, NYLIAC assumes no responsibility for the validity of any assignment. (See “Federal Tax Matters—Taxation of Annuities in General” of the Prospectus.)

Modification. NYLIAC may not modify the policy without your consent except to make the policy meet the requirements of the Investment Company Act of 1940, or to make the policy comply with any changes in the Code or as required by the Code in order to continue treatment of the policy as an annuity, or by any other applicable law.

Incontestability. We rely on statements made in the application or a Policy Request. They are representations, not warranties. We will not contest the policy after it has been in force during the lifetime of the Annuitant for two years from the Policy Date.

FEDERAL TAX MATTERS

Taxation of New York Life Insurance and Annuity Corporation

NYLIAC is taxed as a life insurance company. Because the Separate Account is not an entity separate from NYLIAC, and its operations form a part of NYLIAC, it will not be taxed separately as a “regulated investment company” under Subchapter M of the Code. As a result, NYLIAC takes into account applicable tax attributes of the assets of the Separate Account on its corporate income tax return, including corporate dividends received deductions and foreign tax credits that may be produced by assets of the Separate Account. Investment income and realized net capital gains on the assets of the Separate Account are reinvested and are taken into account in determining the Accumulation Value. As a result, such investment income and realized net capital gains are automatically retained as part of the reserves under the policy. Under existing federal income tax law, NYLIAC believes that Separate Account investment income and realized net capital gains should not be taxed to the extent that such income and gains are retained as part of the tax-deductible reserves under the policy.

Tax Status of the Policies

Section 817(h) of the Code requires that the investments of the Separate Account must be “adequately diversified” in accordance with Treasury regulations in order for the policies to qualify as annuity contracts under Section 72 of the Code. The Separate Account intends to comply with the diversification requirements prescribed by the Treasury under Treasury Regulation Section 1.817-5.

To comply with regulations under Section 817(h) of the Code, the Separate Account is required to diversify its investments, so that on the last day of each quarter of a calendar year, no more than 55% of the value of its assets is represented by any one investment, no more than 70% is represented by any two investments, no more than 80% is represented by any three investments, and no more than 90% is represented by any four investments. For this purpose, securities of a single issuer are treated as one investment and each U.S. Government agency or instrumentality is treated as a separate issuer. Any security issued, guaranteed, or insured (to the extent so guaranteed or insured) by the U.S. Government or an agency or instrumentality of the U.S. Government is treated as a security issued by the U.S. Government or its agency or instrumentality, whichever is applicable.

Although the Treasury Department has issued regulations on the diversification requirements, such regulations do not provide guidance concerning the extent to which policyowners may direct their investments to particular subaccounts of a separate account, or the permitted number of such subaccounts. It is unclear whether additional guidance in this regard will be issued in the future. It is possible that if such guidance is issued, the policy may need to be modified to comply with such additional guidance. For these reasons, NYLIAC reserves the right to modify the policy as necessary to attempt to prevent the policyowner from being considered the owner of the assets of the Separate Account or otherwise to qualify the policy for favorable tax treatment.

The Code also requires that non-qualified annuity contracts contain specific provisions for distribution of the policy proceeds upon the death of any policyowner. In order to be treated as an annuity contract for federal income tax purposes, the Code requires that such policies provide that (a) if any policyowner dies on or after the Annuity Commencement Date and before the entire interest in the policy has been distributed, the remaining portion must be distributed at least as rapidly as under the method in effect on the policyowner’s death; and (b) if any policyowner dies

3

before the Annuity Commencement Date, the entire interest in the policy must generally be distributed within 5 years after the policyowner’s date of death. For policies owned by a grantor trust, all of whose grantors are individuals, these distribution requirements apply at the death of any grantor. These requirements will be considered satisfied if the entire interest of the policy is used to purchase an immediate annuity under which payments will begin within one year of the policyowner’s death and will be made for the life of the Beneficiary or for a period not extending beyond the life expectancy of the Beneficiary. If the Beneficiary is the policyowner’s surviving spouse (as defined under Federal law), the Policy may be continued with the surviving spouse as the new policyowner. If the policyowner is not a natural person, these “death of Owner” rules apply when the primary Annuitant dies or is changed. Non-Qualified Policies contain provisions intended to comply with these requirements of the Code. No regulations interpreting these requirements of the Code have yet been issued and thus no assurance can be given that the provisions contained in these policies satisfy all such Code requirements. The provisions contained in these policies will be reviewed and modified if necessary to assure that they comply with the Code requirements when clarified by regulation or otherwise.

Withholding of federal income taxes on the taxable portion of all distributions may be required unless the recipient elects not to have any such amounts withheld and properly notifies NYLIAC of that election. Different rules may apply to United States citizens or expatriates living abroad. In addition, some states have enacted legislation requiring withholding.

Even if a recipient elects no withholding, special rules may require NYLIAC to disregard the recipient’s election if the recipient fails to supply NYLIAC with a “TIN” or taxpayer identification number (social security number for individuals) or if the Internal Revenue Service notifies NYLIAC that the TIN provided by the recipient is incorrect.

Under the Foreign Account Tax Compliance Act (“FATCA”), as reflected in Sections 1471 through 1474 of the IRC, U.S. withholding agents (such as NYLIAC) may be required to obtain certain information to establish the U.S. or non-U.S. status of its account or contract holders (e.g., a Form W-9 or W-8BEN may be required) and perform certain due diligence to ensure that information is accurate. In certain cases, if this information is not obtained, withholding agents, such as NYLIAC may be required to withhold at a 30 percent rate on certain payments beginning in 2014.

SAFEKEEPING OF SEPARATE ACCOUNT ASSETS

NYLIAC holds title to assets of the Separate Accounts. The assets are kept physically segregated and held separate and apart from NYLIAC’s general corporate assets. Records are maintained of all purchases and redemptions of Eligible Portfolio shares held by each of the Investment Divisions.

STATE REGULATION

NYLIAC is a stock life insurance company organized under the laws of Delaware, and is subject to regulation by the Delaware State Insurance Department. We file an annual statement with the Delaware Commissioner of Insurance on or before March 1 of each year covering the operations and reporting on the financial condition of NYLIAC as of December 31 of the preceding calendar year. Periodically, the Delaware Commissioner of Insurance examines the financial condition of NYLIAC, including the liabilities and reserves of the Separate Account.

In addition, NYLIAC is subject to the insurance laws and regulations of all the states where it is licensed to operate. The availability of certain policy rights and provisions depends on state approval and/or filing and review processes. Where required by state law or regulation, the policies will be modified accordingly.

RECORDS AND REPORTS

NYLIAC maintains all records and accounts relating to the Separate Account. As presently required by the federal securities laws, NYLIAC will mail to you at your last known address of record, at least semi-annually after the first Policy Year, reports containing information required under the federal securities laws or by any other applicable law or regulation. It is important that your confirmation and Quarterly Statements be reviewed immediately to ensure that there are no errors. In order to correct an error, you must call it to Our attention within 15 days of the date of the statement.

It is important that you inform NYLIAC of an address change so that you can receive these policy statements (See “How do I contact NYLIAC by Telephone or by the Internet?” in the Prospectus). In the event your statement is returned from the US Postal Service as undeliverable, We reserve the right to suspend mailing future correspondence and also suspend current transaction processing until an accurate address is obtained. Additionally, no new service requests can be processed until a valid current address is provided.

4

LEGAL PROCEEDINGS

NYLIAC is a defendant in lawsuits arising from its agency sales force, insurance (including variable contracts registered under the federal securities laws) and/or other operations. Most of these actions seek substantial or unspecified compensatory and punitive damages. NYLIAC is from time to time involved in various governmental, administrative, and investigative proceedings and inquiries.

Notwithstanding the uncertain nature of litigation and regulatory inquiries, the outcome of which cannot be predicted, NYLIAC believes that, after provisions made in the financial statements, the ultimate liability that could result from litigation and proceedings would not have a material adverse effect on NYLIAC’s financial position; however, it is possible that settlements or adverse determinations in one or more actions or other proceedings in the future could have a material adverse effect on NYLIAC’s operating results for a given year.

FINANCIAL STATEMENTS

The consolidated balance sheet of NYLIAC as of December 31, 2012 and 2011, and the consolidated statements of income, of stockholder’s equity and of cash flows for each of the three years in the period ended December 31, 2012 included in this SAI have been so included in reliance on the report of PricewaterhouseCoopers LLP, independent registered public accounting firm, given on the authority of said firm as experts in auditing and accounting. The Separate Account statement of assets and liabilities as of December 31, 2012 and the statements of operations and of changes in net assets and the financial highlights for each of the periods indicated in the financial statements have been so included in reliance on the report of PricewaterhouseCoopers LLP, independent registered public accounting firm, given on the authority of said firm as experts in auditing and accounting.

OTHER INFORMATION

NYLIAC filed a Registration Statement with the Securities and Exchange Commission, under the Securities Act of 1933 as amended, with respect to the policies discussed in this Prospectus and Statement of Additional Information. We have not included all of the information set forth in the registration statement, amendments and exhibits to the registration statement in the Prospectus and this Statement of Additional Information. We intend the statements contained in the Prospectus and this Statement of Additional Information concerning the content of the policies and other legal instruments to be summaries. For a complete statement of the terms of these documents, you should refer to the instruments filed with the Securities and Exchange Commission. The omitted information may be obtained at the principal offices of the Securities and Exchange Commission in Washington, D.C., upon payment of prescribed fees, or through the Commission’s website at www.sec.gov.

5

NYLIAC Variable Annuity Separate Account-I

NYLIAC Variable Annuity Separate Account-II

Financial Statements

F-1

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F-2

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F-3

Statement of Assets and Liabilities

As of December 31, 2012

	MainStay VP Balanced— Service Class			MainStay VP Bond— Initial Class			MainStay VP Cash Management
ASSETS:
Investment at net asset value	$	2,350,028		$	13,745,278		$	8,600,799
Dividends due and accrued		—			—			77
Net receivable from (payable to) New York Life Insurance and Annuity Corporation		(12,528	)		(23,916	)		(1,673	)
Net receivable from (payable to) the Fund for shares sold or purchased		12,528			23,916			1,596
LIABILITIES:
Liability to New York Life Insurance and Annuity Corporation for:
Mortality and expense risk charges		230			1,355			553
Administrative charges		19			113			47
Total net assets	$	2,349,779		$	13,743,810		$	8,600,199
Total shares outstanding		194,478			931,659			8,602,593
Net asset value per share (NAV)	$	12.15		$	14.78		$	1.00
Total units outstanding		182,270			584,612			6,225,828
Variable accumulation unit value	$	12.96		$	23.55		$	1.38
Identified cost of investment	$	2,089,673		$	13,368,098		$	8,602,395
Statement of Operations For the year ended December 31, 2012
	MainStay VP Balanced— Service Class			MainStay VP Bond— Initial Class			MainStay VP Cash Management
INVESTMENT INCOME (LOSS):
Dividend income	$	25,895		$	337,901		$	936
Mortality and expense risk charges		(28,131	)		(171,430	)		(112,253	)
Administrative charges		(2,568	)		(15,307	)		(10,655	)
Net investment income (loss)		(4,804	)		151,164			(121,972	)
REALIZED AND UNREALIZED GAIN (LOSS):
Proceeds from sale of investments		717,535			2,272,001			8,365,619
Cost of investments sold		(720,260	)		(2,001,392	)		(8,365,641	)
Net realized gain (loss) on investments		(2,725	)		270,609			(22	)
Realized gain distribution received		—			467,565			—
Change in unrealized appreciation (depreciation) on investments		244,167			(424,373	)		22
Net gain (loss) on investments		241,442			313,801			—
Net increase (decrease) in net assets resulting from operations	$	236,638		$	464,965		$	(121,972	)

Not all investment options are available under all policies.

(a) For the period February 17, 2012 (commencement of Investment Division) through December 31, 2012.

The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements.

F-4

NYLIAC Variable Annuity Separate Account-I

Non-Qualified Policies

MainStay VP Common Stock— Initial Class			MainStay VP Conservative Allocation— Service Class			MainStay VP Convertible— Initial Class			MainStay VP DFA/ DuPont Capital Emerging Markets Equity— Initial Class			MainStay VP Eagle Small Cap Growth— Initial Class			MainStay VP Flexible Bond Opportunities— Service Class			MainStay VP Floating Rate— Service Class
$	20,336,960		$	6,832,369		$	7,519,859		$	5,874,377		$	4,270,333		$	999,217		$	5,678,449
	—			—			—			—			—			—			19,820
	(12,438	)		(42,590	)		15,321			(9,123	)		112			15,379			23,329
	12,438			42,590			(15,321	)		9,123			(112	)		(15,379	)		(43,149	)
	1,968			672			731			573			411			97			556
	164			56			61			48			34			8			46
$	20,334,828		$	6,831,641		$	7,519,067		$	5,873,756		$	4,269,888		$	999,112		$	5,677,847
	1,105,914			595,887			641,672			581,483			427,218			95,523			604,356
$	18.40		$	11.54		$	11.70		$	10.12		$	10.00		$	10.30		$	9.32
	640,895			520,408			296,886			588,028			432,027			89,861			470,136
$	31.75		$	13.21		$	25.28		$	10.00		$	9.88		$	10.95		$	12.03
$	19,284,572		$	6,529,902		$	6,076,133		$	5,804,628		$	4,271,540		$	959,939		$	5,495,612
MainStay VP Common Stock— Initial Class			MainStay VP Conservative Allocation— Service Class			MainStay VP Convertible— Initial Class			MainStay VP DFA/ DuPont Capital Emerging Markets Equity— Initial Class(a)			MainStay VP Eagle Small Cap Growth— Initial Class(a)			MainStay VP Flexible Bond Opportunities— Service Class			MainStay VP Floating Rate— Service Class
$	340,738		$	133,524		$	229,005		$	—		$	—		$	45,546		$	186,325
	(255,959	)		(84,536	)		(96,909	)		(60,270	)		(46,156	)		(7,926	)		(56,608	)
	(24,711	)		(7,623	)		(8,828	)		(5,811	)		(4,615	)		(676	)		(5,103	)
	60,068			41,365			123,268			(66,081	)		(50,771	)		36,944			124,614
	3,785,541			1,815,202			1,860,050			1,210,116			828,904			46,618			789,270
	(4,072,324	)		(1,432,438	)		(2,175,190	)		(1,292,021	)		(857,986	)		(44,285	)		(686,453	)
	(286,783	)		382,764			(315,140	)		(81,905	)		(29,082	)		2,333			102,817
	—			386,940			28,958			—			—			7,651			—
	3,225,123			(200,922	)		769,976			78,871			(1,319	)		24,768			21,226
	2,938,340			568,782			483,794			(3,034	)		(30,401	)		34,752			124,043
$	2,998,408		$	610,147		$	607,062		$	(69,115	)	$	(81,172	)	$	71,696		$	248,657

The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements.

F-5

Statement of Assets and Liabilities (Continued)

As of December 31, 2012

	MainStay VP Government— Initial Class			MainStay VP Growth Allocation— Service Class			MainStay VP Growth Equity— Initial Class
ASSETS:
Investment at net asset value	$	11,341,116		$	2,317,420		$	36,874,129
Dividends due and accrued		—			—			—
Net receivable from (payable to) New York Life Insurance and Annuity Corporation		(29,303	)		—			(22,779	)
Net receivable from (payable to) the Fund for shares sold or purchased		29,303			—			22,779
LIABILITIES:
Liability to New York Life Insurance and Annuity Corporation for:
Mortality and expense risk charges		1,118			225			3,555
Administrative charges		93			19			296
Total net assets	$	11,339,905		$	2,317,176		$	36,870,278
Total shares outstanding		960,247			229,966			1,334,947
Net asset value per share (NAV)	$	11.84		$	10.08		$	27.64
Total units outstanding		498,266			204,177			1,443,783
Variable accumulation unit value	$	22.82		$	11.35		$	25.56
Identified cost of investment	$	11,140,896		$	2,215,298		$	38,761,690
Statement of Operations (Continued) For the year ended December 31, 2012
	MainStay VP Government— Initial Class			MainStay VP Growth Allocation— Service Class			MainStay VP Growth Equity— Initial Class
INVESTMENT INCOME (LOSS):
Dividend income	$	356,758		$	17,824		$	155,628
Mortality and expense risk charges		(150,276	)		(28,172	)		(460,706	)
Administrative charges		(13,881	)		(2,636	)		(48,138	)
Net investment income (loss)		192,601			(12,984	)		(353,216	)
REALIZED AND UNREALIZED GAIN (LOSS):
Proceeds from sale of investments		3,069,192			467,091			5,108,911
Cost of investments sold		(2,886,240	)		(558,313	)		(6,609,591	)
Net realized gain (loss) on investments		182,952			(91,222	)		(1,500,680	)
Realized gain distribution received		—			153,291			—
Change in unrealized appreciation (depreciation) on investments		(45,642	)		261,092			6,642,604
Net gain (loss) on investments		137,310			323,161			5,141,924
Net increase (decrease) in net assets resulting from operations	$	329,911		$	310,177		$	4,788,708

(a) For the period February 17, 2012 (commencement of Investment Division) through December 31, 2012.

The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements.

F-6

NYLIAC Variable Annuity Separate Account-I

Non-Qualified Policies

MainStay VP High Yield Corporate Bond— Initial Class			MainStay VP ICAP Select Equity— Initial Class			MainStay VP Income Builder— Initial Class			MainStay VP International Equity— Initial Class			MainStay VP Janus Balanced— Initial Class			MainStay VP Large Cap Growth— Initial Class			MainStay VP MFS® Utilities— Service Class
$	63,932,517		$	23,252,606		$	33,463,955		$	6,559,467		$	20,174,174		$	4,352,746		$	10,180,325
	—			—			—			—			—			—			—
	21,211			(28,230	)		201,723			(6,131	)		(15,520	)		(2	)		(56,825	)
	(21,211	)		28,230			(201,723	)		6,131			15,520			2			56,825
	6,284			2,256			3,249			640			1,968			420			996
	524			188			271			53			164			35			83
$	63,925,709		$	23,250,162		$	33,460,435		$	6,558,774		$	20,172,042		$	4,352,291		$	10,179,246
	6,272,040			1,692,254			2,128,181			540,951			1,913,761			257,921			941,723
$	10.19		$	13.76		$	15.63		$	12.14		$	10.55		$	16.88		$	10.87
	1,770,163			1,534,330			1,096,989			297,467			1,935,291			258,429			952,318
$	36.10		$	15.17		$	30.32		$	22.07		$	10.43		$	16.84		$	10.75
$	57,372,130		$	20,793,847		$	30,338,589		$	7,462,483		$	19,139,850		$	3,640,983		$	9,425,430
MainStay VP High Yield Corporate Bond— Initial Class			MainStay VP ICAP Select Equity— Initial Class			MainStay VP Income Builder— Initial Class			MainStay VP International Equity— Initial Class			MainStay VP Janus Balanced— Initial Class(a)			MainStay VP Large Cap Growth— Initial Class			MainStay VP MFS® Utilities— Service Class(a)
$	3,566,718		$	504,837		$	1,425,452		$	120,709		$	—		$	—		$	—
	(758,417	)		(288,790	)		(402,844	)		(82,426	)		(220,462	)		(51,569	)		(107,792	)
	(67,597	)		(27,491	)		(37,457	)		(7,523	)		(21,117	)		(4,833	)		(9,867	)
	2,740,704			188,556			985,151			30,760			(241,579	)		(56,402	)		(117,659	)
	7,956,950			4,173,744			4,605,015			1,426,612			3,595,074			1,017,464			1,929,661
	(7,836,466	)		(4,421,485	)		(4,318,008	)		(2,200,728	)		(3,529,580	)		(852,316	)		(1,888,987	)
	120,484			(247,741	)		287,007			(774,116	)		65,494			165,148			40,674
	—			—			—			—			—			—			—
	4,233,406			3,208,623			2,968,175			1,863,931			1,049,844			290,390			811,720
	4,353,890			2,960,882			3,255,182			1,089,815			1,115,338			455,538			852,394
$	7,094,594		$	3,149,438		$	4,240,333		$	1,120,575		$	873,759		$	399,136		$	734,735

The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements.

F-7

Statement of Assets and Liabilities (Continued)

As of December 31, 2012

	MainStay VP Mid Cap Core— Initial Class			MainStay VP Moderate Allocation— Service Class			MainStay VP Moderate Growth Allocation— Service Class
ASSETS:
Investment at net asset value	$	6,528,247		$	7,805,924		$	7,418,792
Dividends due and accrued		—			—			—
Net receivable from (payable to) New York Life Insurance and Annuity Corporation		(8,280	)		—			(6	)
Net receivable from (payable to) the Fund for shares sold or purchased		8,280			—			6
LIABILITIES:
Liability to New York Life Insurance and Annuity Corporation for:
Mortality and expense risk charges		632			760			721
Administrative charges		53			63			60
Total net assets	$	6,527,562		$	7,805,101		$	7,418,011
Total shares outstanding		534,331			702,799			673,455
Net asset value per share (NAV)	$	12.23		$	11.11		$	11.02
Total units outstanding		353,257			614,735			608,927
Variable accumulation unit value	$	18.50		$	12.70		$	12.18
Identified cost of investment	$	5,252,432		$	7,072,071		$	6,573,969
Statement of Operations (Continued) For the year ended December 31, 2012
	MainStay VP Mid Cap Core— Initial Class			MainStay VP Moderate Allocation— Service Class			MainStay VP Moderate Growth Allocation— Service Class
INVESTMENT INCOME (LOSS):
Dividend income	$	52,717		$	117,065		$	73,824
Mortality and expense risk charges		(83,931	)		(90,479	)		(90,039	)
Administrative charges		(7,511	)		(8,021	)		(8,038	)
Net investment income (loss)		(38,725	)		18,565			(24,253	)
REALIZED AND UNREALIZED GAIN (LOSS):
Proceeds from sale of investments		1,665,687			1,277,820			1,306,307
Cost of investments sold		(1,161,096	)		(1,137,607	)		(1,394,796	)
Net realized gain (loss) on investments		504,591			140,213			(88,489	)
Realized gain distribution received		556,187			498,247			290,675
Change in unrealized appreciation (depreciation) on investments		(2,432	)		106,817			737,672
Net gain (loss) on investments		1,058,346			745,277			939,858
Net increase (decrease) in net assets resulting from operations	$	1,019,621		$	763,842		$	915,605

(a) For the period February 17, 2012 (commencement of Investment Division) through December 31, 2012.

The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements.

F-8

NYLIAC Variable Annuity Separate Account-I

Non-Qualified Policies

MainStay VP PIMCO Real Return— Service Class			MainStay VP S&P 500 Index— Initial Class			MainStay VP T. Rowe Price Equity Income— Initial Class			MainStay VP U.S. Small Cap— Initial Class			MainStay VP Van Eck Global Hard Assets— Initial Class			Alger Small Cap Growth Portfolio— Class I-2 Shares			BlackRock® Global Allocation V.I. Fund— Class III Shares
$	4,009,661		$	41,937,719		$	6,140,654		$	2,561,853		$	7,327,493		$	—		$	853,077
	—			—			—			—			—			—			—
	30,747			(50,308	)		(10,049	)		—			(16,963	)		—			—
	(30,747	)		50,308			10,049			—			16,963			—			—
	392			4,058			596			248			703			—			83
	33			338			50			21			59			—			7
$	4,009,236		$	41,933,323		$	6,140,008		$	2,561,584		$	7,326,731		$	—		$	852,987
	376,786			1,451,267			570,200			254,591			808,691			—			59,489
$	10.56		$	28.93		$	10.79		$	10.06		$	9.08		$	—		$	14.34
	381,023			1,199,833			576,615			168,965			817,801			—			87,890
$	10.44		$	34.99		$	10.67		$	15.16		$	8.98		$	—		$	9.71
$	3,803,492		$	34,150,983		$	5,705,551		$	1,933,847		$	8,065,550		$	—		$	837,626
MainStay VP PIMCO Real Return— Service Class(a)			MainStay VP S&P 500 Index— Initial Class			MainStay VP T. Rowe Price Equity Income— Initial Class(a)			MainStay VP U.S. Small Cap— Initial Class			MainStay VP Van Eck Global Hard Assets— Initial Class(a)			Alger Small Cap Growth Portfolio— Class I-2 Shares			BlackRock® Global Allocation V.I. Fund— Class III Shares
$	—		$	704,993		$	—		$	11,796		$	—		$	—		$	12,465
	(37,325	)		(521,274	)		(66,114	)		(30,985	)		(89,157	)		(5,765	)		(8,272	)
	(3,216	)		(50,829	)		(5,784	)		(2,827	)		(8,246	)		(531	)		(728	)
	(40,541	)		132,890			(71,898	)		(22,016	)		(97,403	)		(6,296	)		3,465
	630,137			6,936,353			1,306,283			375,387			2,849,129			3,930,390			184,299
	(620,980	)		(7,308,071	)		(1,274,175	)		(279,596	)		(3,238,316	)		(2,893,214	)		(196,159	)
	9,157			(371,718	)		32,108			95,791			(389,187	)		1,037,176			(11,860	)
	—			—			—			—			—			—			2,796
	175,421			5,962,101			445,152			192,153			(721,095	)		(608,959	)		46,399
	184,578			5,590,383			477,260			287,944			(1,110,282	)		428,217			37,335
$	144,037		$	5,723,273		$	405,362		$	265,928		$	(1,207,685	)	$	421,921		$	40,800

The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements.

F-9

Statement of Assets and Liabilities (Continued)

As of December 31, 2012

	Calvert VP SRI Balanced Portfolio			Columbia Variable Portfolio— Small Cap Value Fund— Class 2 Shares			Dreyfus IP Technology Growth Portfolio— Initial Shares
ASSETS:
Investment at net asset value	$	—		$	664,259		$	1,025,646
Dividends due and accrued		—			—			—
Net receivable from (payable to) New York Life Insurance and Annuity Corporation		—			57			(430	)
Net receivable from (payable to) the Fund for shares sold or purchased		—			(57	)		430
LIABILITIES:
Liability to New York Life Insurance and Annuity Corporation for:
Mortality and expense risk charges		—			64			99
Administrative charges		—			5			8
Total net assets	$	—		$	664,190		$	1,025,539
Total shares outstanding		—			43,242			74,138
Net asset value per share (NAV)	$	—		$	15.36		$	13.84
Total units outstanding		—			47,931			80,347
Variable accumulation unit value	$	—		$	13.86		$	12.77
Identified cost of investment	$	—		$	643,333		$	996,368
Statement of Operations (Continued) For the year ended December 31, 2012
	Calvert VP SRI Balanced Portfolio			Columbia Variable Portfolio— Small Cap Value Fund— Class 2 Shares			Dreyfus IP Technology Growth Portfolio— Initial Shares
INVESTMENT INCOME (LOSS):
Dividend income	$	—		$	2,060		$	—
Mortality and expense risk charges		(1,424	)		(8,633	)		(11,667	)
Administrative charges		(124	)		(786	)		(1,091	)
Net investment income (loss)		(1,548	)		(7,359	)		(12,758	)
REALIZED AND UNREALIZED GAIN (LOSS):
Proceeds from sale of investments		936,634			237,899			208,973
Cost of investments sold		(902,911	)		(218,320	)		(173,336	)
Net realized gain (loss) on investments		33,723			19,579			35,637
Realized gain distribution received		—			33,120			—
Change in unrealized appreciation (depreciation) on investments		20,095			18,892			69,388
Net gain (loss) on investments		53,818			71,591			105,025
Net increase (decrease) in net assets resulting from operations	$	52,270		$	64,232		$	92,267

(a) For the period February 17, 2012 (commencement of Investment Division) through December 31, 2012.

The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements.

F-10

NYLIAC Variable Annuity Separate Account-I

Non-Qualified Policies

Fidelity® VIP Contrafund® Portfolio— Initial Class			Fidelity® VIP Equity-Income Portfolio— Initial Class			Fidelity® VIP Mid Cap Portfolio— Service Class 2			Janus Aspen Balanced Portfolio— Institutional Shares			Janus Aspen Worldwide Portfolio— Institutional Shares			MFS® Investors Trust Series— Initial Class			MFS® Research Series— Initial Class
$	22,448,500		$	7,492,481		$	4,190,394		$	—		$	9,857,894		$	533,276		$	647,615
	—			—			—			—			—			—			—
	(17,543	)		431			(10,198	)		—			(8	)		—			—
	17,543			(431	)		10,198			—			8			—			—
	2,170			727			405			—			953			52			63
	181			61			34			—			79			4			5
$	22,446,149		$	7,491,693		$	4,189,955		$	—		$	9,856,862		$	533,220		$	647,547
	849,699			375,730			140,113			—			320,686			23,257			29,639
$	26.44		$	19.94		$	29.98		$	—		$	30.74		$	22.93		$	21.85
	742,064			351,234			198,778			—			569,561			43,250			46,468
$	30.28		$	21.33		$	21.13		$	—		$	17.31		$	12.32		$	13.94
$	22,928,464		$	8,235,071		$	3,974,696		$	—		$	9,435,923		$	474,190		$	556,061
Fidelity® VIP Contrafund® Portfolio— Initial Class			Fidelity® VIP Equity-Income Portfolio— Initial Class			Fidelity® VIP Mid Cap Portfolio— Service Class 2			Janus Aspen Balanced Portfolio— Institutional Shares			Janus Aspen Worldwide Portfolio— Institutional Shares			MFS® Investors Trust Series— Initial  Class			MFS® Research Series— Initial Class
$	302,242		$	231,017		$	16,260		$	—		$	84,293		$	4,961		$	4,473
	(281,391	)		(94,468	)		(51,989	)		(32,967	)		(118,450	)		(6,493	)		(6,997	)
	(27,092	)		(9,035	)		(4,605	)		(3,101	)		(12,586	)		(607	)		(735	)
	(6,241	)		127,514			(40,334	)		(36,068	)		(46,743	)		(2,139	)		(3,259	)
	4,613,538			1,819,197			737,960			21,798,918			1,870,658			158,641			92,910
	(5,536,590	)		(2,271,336	)		(750,243	)		(18,914,325	)		(2,870,325	)		(137,071	)		(74,762	)
	(923,052	)		(452,139	)		(12,283	)		2,884,593			(999,667	)		21,570			18,148
	—			490,693			336,211			—			—			—			—
	4,195,833			981,440			249,981			(1,410,772	)		2,726,926			68,435			67,883
	3,272,781			1,019,994			573,909			1,473,821			1,727,259			90,005			86,031
$	3,266,540		$	1,147,508		$	533,575		$	1,437,753		$	1,680,516		$	87,866		$	82,772

The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements.

F-11

Statement of Assets and Liabilities (Continued)

As of December 31, 2012

	MFS® Utilities Series— Service Class			Neuberger Berman AMT Mid-Cap Growth Portfolio— Class S			PIMCO Real Return Portfolio— Advisor Class
ASSETS:
Investment at net asset value	$	—		$	903,656		$	—
Dividends due and accrued		—			—			—
Net receivable from (payable to) New York Life Insurance and Annuity Corporation		—			(13,475	)		—
Net receivable from (payable to) the Fund for shares sold or purchased		—			13,475			—
LIABILITIES:
Liability to New York Life Insurance and Annuity Corporation for:
Mortality and expense risk charges		—			89			—
Administrative charges		—			7			—
Total net assets	$	—		$	903,560		$	—
Total shares outstanding		—			30,369			—
Net asset value per share (NAV)	$	—		$	30.20		$	—
Total units outstanding		—			50,796			—
Variable accumulation unit value	$	—		$	18.05		$	—
Identified cost of investment	$	—		$	752,812		$	—
Statement of Operations (Continued) For the year ended December 31, 2012
	MFS® Utilities Series— Service Class			Neuberger Berman AMT Mid-Cap Growth Portfolio— Class S			PIMCO Real Return Portfolio— Advisor Class
INVESTMENT INCOME (LOSS):
Dividend income	$	—		$	—		$	—
Mortality and expense risk charges		(16,684	)		(10,216	)		(4,639	)
Administrative charges		(1,529	)		(903	)		(400	)
Net investment income (loss)		(18,213	)		(11,119	)		(5,039	)
REALIZED AND UNREALIZED GAIN (LOSS):
Proceeds from sale of investments		11,257,535			158,649			3,407,187
Cost of investments sold		(11,421,672	)		(128,815	)		(3,349,543	)
Net realized gain (loss) on investments		(164,137	)		29,834			57,644
Realized gain distribution received		—			—			—
Change in unrealized appreciation (depreciation) on investments		594,287			59,359			(2,969	)
Net gain (loss) on investments		430,150			89,193			54,675
Net increase (decrease) in net assets resulting from operations	$	411,937		$	78,074		$	49,636

The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements.

F-12

NYLIAC Variable Annuity Separate Account-I

Non-Qualified Policies

Royce Micro- Cap Portfolio— Investment Class			Royce Small- Cap Portfolio— Investment Class			T. Rowe Price Equity Income Portfolio			UIF Emerging Markets Equity Portfolio— Class I			Van Eck VIP Global Hard Assets			Victory VIF Diversified Stock Fund— Class A Shares
$	1,398,582		$	—		$	—		$	—		$	—		$	305,840
	—			—			—			—			—			—
	(6	)		—			—			—			—			—
	6			—			—			—			—			—
	135			—			—			—			—			30
	11			—			—			—			—			2
$	1,398,436		$	—		$	—		$	—		$	—		$	305,808
	127,725			—			—			—			—			29,351
$	10.95		$	—		$	—		$	—		$	—		$	10.42
	91,972			—			—			—			—			24,112
$	15.21		$	—		$	—		$	—		$	—		$	12.69
$	1,188,029		$	—		$	—		$	—		$	—		$	259,651
Royce Micro- Cap Portfolio— Investment Class			Royce Small- Cap Portfolio— Investment Class			T. Rowe Price Equity Income Portfolio			UIF Emerging Markets Equity Portfolio— Class I			Van Eck VIP Global Hard Assets			Victory VIF Diversified Stock Fund— Class A Shares
$	—		$	—		$	—		$	—		$	—		$	2,875
	(18,764	)		(1,939	)		(10,256	)		(10,120	)		(16,437	)		(3,523	)
	(1,635	)		(171	)		(965	)		(934	)		(1,548	)		(311	)
	(20,399	)		(2,110	)		(11,221	)		(11,054	)		(17,985	)		(959	)
	562,174			1,332,879			6,862,057			6,905,796			11,213,281			45,817
	(501,956	)		(1,037,914	)		(7,229,891	)		(7,319,880	)		(10,932,076	)		(52,351	)
	60,218			294,965			(367,834	)		(414,084	)		281,205			(6,534	)
	30,360			—			—			—			731,732			—
	36,470			(173,936	)		905,465			1,154,111			288,685			48,943
	127,048			121,029			537,631			740,027			1,301,622			42,409
$	106,649		$	118,919		$	526,410		$	728,973		$	1,283,637		$	41,450

The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements.

F-13

Statement of Changes in Net Assets

For the years ended December 31, 2012

and December 31, 2011

	MainStay VP Balanced— Service Class						MainStay VP Bond— Initial Class
	2012			2011			2012			2011
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income (loss)	$	(4,804	)	$	761		$	151,164		$	268,741
Net realized gain (loss) on investments		(2,725	)		(16,812	)		270,609			321,655
Realized gain distribution received		—			—			467,565			213,013
Change in unrealized appreciation (depreciation) on investments		244,167			49,167			(424,373	)		18,258
Net increase (decrease) in net assets resulting from operations		236,638			33,116			464,965			821,667
Contributions and (Withdrawals):
Payments received from policyowners		66,004			5,395			337,450			287,245
Policyowners’ surrenders		(355,299	)		(210,640	)		(1,242,018	)		(1,575,243	)
Policyowners’ annuity and death benefits		(57,052	)		(2,909	)		(380,276	)		(208,260	)
Net transfers from (to) Fixed Account		(82,115	)		(65,941	)		(232,761	)		(478,671	)
Transfers between Investment Divisions		138,457			(84,657	)		160,912			(3,193	)
Net contributions and (withdrawals)		(290,005	)		(358,752	)		(1,356,693	)		(1,978,122	)
Increase (decrease) in net assets		(53,367	)		(325,636	)		(891,728	)		(1,156,455	)
NET ASSETS:
Beginning of period		2,403,146			2,728,782			14,635,538			15,791,993
End of period	$	2,349,779		$	2,403,146		$	13,743,810		$	14,635,538
	MainStay VP DFA/DuPont Capital Emerging Markets Equity— Initial  Class			MainStay VP Eagle Small Cap Growth— Initial Class			MainStay VP Flexible  Bond Opportunities— Service Class
	2012(a)			2012(a)			2012			2011
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income (loss)	$	(66,081	)	$	(50,771	)	$	36,944		$	7,480
Net realized gain (loss) on investments		(81,905	)		(29,082	)		2,333			(2,372	)
Realized gain distribution received		—			—			7,651			—
Change in unrealized appreciation (depreciation) on investments		78,871			(1,319	)		24,768			(869	)
Net increase (decrease) in net assets resulting from operations		(69,115	)		(81,172	)		71,696			4,239
Contributions and (Withdrawals):
Payments received from policyowners		176,887			37,672			152,373			62,692
Policyowners’ surrenders		(522,381	)		(390,247	)		(41,641	)		(36,321	)
Policyowners’ annuity and death benefits		(42,860	)		(25,217	)		—			—
Net transfers from (to) Fixed Account		(116,046	)		(139,405	)		24,223			1,085
Transfers between Investment Divisions		6,447,271			4,868,257			449,411			311,355
Net contributions and (withdrawals)		5,942,871			4,351,060			584,366			338,811
Increase (decrease) in net assets		5,873,756			4,269,888			656,062			343,050
NET ASSETS:
Beginning of period		—			—			343,050			—
End of period	$	5,873,756		$	4,269,888		$	999,112		$	343,050

Not all investment options are available under all policies.

(a) For the period February 17, 2012 (commencement of Investment Division) through December 31, 2012.

The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements.

F-14

NYLIAC Variable Annuity Separate Account-I

Non-Qualified Policies

MainStay VP Cash Management						MainStay VP Common Stock— Initial Class						MainStay VP Conservative Allocation— Service Class						MainStay VP Convertible— Initial Class
2012			2011			2012			2011			2012			2011			2012			2011
$	(121,972	)	$	(147,638	)	$	60,068		$	27,367		$	41,365		$	49,519		$	123,268		$	92,628
	(22	)		(878	)		(286,783	)		(2,347,896	)		382,764			159,948			(315,140	)		99,688
	—			—			—			—			386,940			28,670			28,958			—
	22			1,074			3,225,123			2,344,399			(200,922	)		(137,946	)		769,976			(790,907	)
	(121,972	)		(147,442	)		2,998,408			23,870			610,147			100,191			607,062			(598,591	)
	33,688			804,715			107,753			320,885			294,973			203,113			125,779			84,366
	(3,138,317	)		(4,242,192	)		(1,985,982	)		(2,286,448	)		(883,764	)		(687,249	)		(677,984	)		(1,647,462	)
	(1,612	)		(118,328	)		(271,246	)		(327,036	)		(44,980	)		(112,376	)		(145,561	)		(52,425	)
	(1,281,499	)		(1,278,702	)		(337,268	)		(784,524	)		(420,605	)		(299,312	)		(242,950	)		(130,648	)
	891,170			5,956,977			(857,629	)		(861,431	)		364,902			126,664			(572,141	)		444,673
	(3,496,570	)		1,122,470			(3,344,372	)		(3,938,554	)		(689,474	)		(769,160	)		(1,512,857	)		(1,301,496	)
	(3,618,542	)		975,028			(345,964	)		(3,914,684	)		(79,327	)		(668,969	)		(905,795	)		(1,900,087	)
	12,218,741			11,243,713			20,680,792			24,595,476			6,910,968			7,579,937			8,424,862			10,324,949
$	8,600,199		$	12,218,741		$	20,334,828		$	20,680,792		$	6,831,641		$	6,910,968		$	7,519,067		$	8,424,862
MainStay VP Floating Rate— Service Class						MainStay VP Government— Initial Class						MainStay VP Growth Allocation— Service Class						MainStay VP Growth Equity Initial Class
2012			2011			2012			2011			2012			2011			2012			2011
$	124,614		$	125,987		$	192,601		$	262,396		$	(12,984	)	$	(18,031	)	$	(353,216	)	$	(344,998	)
	102,817			105,671			182,952			227,777			(91,222	)		(97,803	)		(1,500,680	)		(2,772,088	)
	—			—			—			109,473			153,291			—			—			—
	21,226			(212,113	)		(45,642	)		2,380			261,092			4,244			6,642,604			2,130,116
	248,657			19,545			329,911			602,026			310,177			(111,590	)		4,788,708			(986,970	)
	343,302			252,502			317,550			157,316			33,247			33,610			342,523			372,308
	(425,997	)		(497,458	)		(1,109,272	)		(1,283,241	)		(191,030	)		(252,042	)		(2,837,741	)		(3,540,018	)
	(25,206	)		(58,841	)		(506,077	)		(227,353	)		—			(6,937	)		(565,620	)		(577,531	)
	(68,034	)		(252,331	)		(730,709	)		(199,116	)		(38,865	)		(98,333	)		(625,487	)		(594,556	)
	1,192,325			177,276			(294,737	)		(823,317	)		(193,712	)		(52,121	)		(616,285	)		(844,343	)
	1,016,390			(378,852	)		(2,323,245	)		(2,375,711	)		(390,360	)		(375,823	)		(4,302,610	)		(5,184,140	)
	1,265,047			(359,307	)		(1,993,334	)		(1,773,685	)		(80,183	)		(487,413	)		486,098			(6,171,110	)
	4,412,800			4,772,107			13,333,239			15,106,924			2,397,359			2,884,772			36,384,180			42,555,290
$	5,677,847		$	4,412,800		$	11,339,905		$	13,333,239		$	2,317,176		$	2,397,359		$	36,870,278		$	36,384,180

The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements.

F-15

Statement of Changes in Net Assets (Continued)

For the years ended December 31, 2012

and December 31, 2011

	MainStay VP High Yield Corporate Bond— Initial Class						MainStay VP ICAP Select Equity— Initial Class
	2012			2011			2012			2011
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income (loss)	$	2,740,704		$	2,993,812		$	188,556		$	20,825
Net realized gain (loss) on investments		120,484			16,211			(247,741	)		(488,986	)
Realized gain distribution received		—			—			—			—
Change in unrealized appreciation (depreciation) on investments		4,233,406			71,243			3,208,623			(213,023	)
Net increase (decrease) in net assets resulting from operations		7,094,594			3,081,266			3,149,438			(681,184	)
Contributions and (Withdrawals):
Payments received from policyowners		1.239,544			1,122,909			229,050			268,999
Policyowners’ surrenders		(5,581,408	)		(7,097,588	)		(1,737,970	)		(2,119,171	)
Policyowners’ annuity and death benefits		(1,323,872	)		(1,417,061	)		(289,007	)		(523,759	)
Net transfers from (to) Fixed Account		(743,821	)		(1,453,468	)		(794,136	)		(524,711	)
Transfers between Investment Divisions		2,502,200			(1,502,059	)		(991,652	)		(492,570	)
Net contributions and (withdrawals)		(3,907,357	)		(10,347,267	)		(3,583,715	)		(3,391,212	)
Increase (decrease) in net assets		3,187,237			(7,266,001	)		(434,277	)		(4,072,396	)
NET ASSETS:
Beginning of period		60,738,472			68,004,473			23,684,439			27,756,835
End of period	$	63,925,709		$	60,738,472		$	23,250,162		$	23,684,439

	MainStay VP MFS® Utilities— Service Class			MainStay VP Mid Cap Core— Initial Class
	2012(a)			2012			2011
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income (loss)	$	(117,659	)	$	(38,725	)	$	(36,230	)
Net realized gain (loss) on investments		40,674			504,591			(45,729	)
Realized gain distribution received		—			556,187			—
Change in unrealized appreciation (depreciation) on investments		811,720			(2,432	)		(208,351	)
Net increase (decrease) in net assets resulting from operations		734,735			1,019,621			(290,310	)
Contributions and (Withdrawals):
Payments received from policyowners		233,147			65,895			142,878
Policyowners’ surrenders		(763,152	)		(556,720	)		(756,833	)
Policyowners’ annuity and death benefits		(91,616	)		(57,770	)		(16,374	)
Net transfers from (to) Fixed Account		(350,020	)		(153,018	)		(197,434	)
Transfers between Investment Divisions		10,416,152			(711,621	)		(371,961	)
Net contributions and (withdrawals)		9,444,511			(1,413,234	)		(1,199,724	)
Increase (decrease) in net assets		10,179,246			(393,613	)		(1,490,034	)
NET ASSETS:
Beginning of period		—			6,921,175			8,411,209
End of period	$	10,179,246		$	6,527,562		$	6,921,175

(a) For the period February 17, 2012 (commencement of Investment Division) through December 31, 2012.

The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements.

F-16

NYLIAC Variable Annuity Separate Account-I

Non-Qualified Policies

MainStay VP Income Builder— Initial Class						MainStay VP International Equity— Initial Class						MainStay VP Janus Balanced— Initial Class			MainStay VP Large Cap Growth— Initial Class
2012			2011			2012			2011			2012(a)			2012			2011
$	985,151		$	868,484		$	30,760		$	150,165		$	(241,579	)	$	(56,402	)	$	(48,010	)
	287,007			(994,218	)		(774,116	)		(347,755	)		65,494			165,148			100,060
	—			—			—			—			—			—			—
	2,968,175			1,060,382			1,863,931			(1,212,842	)		1,049,844			290,390			(108,078	)
	4,240,333			934,648			1,120,575			(1,410,432	)		873,759			399,136			(56,028	)
	518,386			256,040			61,520			121,712			169,472			165,841			83,502
	(2,698,602	)		(3,021,327	)		(590,993	)		(651,668	)		(2,151,122	)		(250,049	)		(312,277	)
	(988,602	)		(916,327	)		(41,641	)		(46,725	)		(226,169	)		(26,706	)		(10,229	)
	(456,834	)		(649,845	)		(174,629	)		(155,340	)		(623,860	)		(98,676	)		(102,293	)
	(84,463	)		(268,572	)		(456,540	)		(102,941	)		22,129,962			738,028			389,927
	(3,710,115	)		(4,600,031	)		(1,202,283	)		(834,962	)		19,298,283			528,438			48,630
	530,218			(3,665,383	)		(81,708	)		(2,245,394	)		20,172,042			927,574			(7,398	)
	32,930,217			36,595,600			6,640,482			8,885,876			—			3,424,717			3,432,115
$	33,460,435		$	32,930,217		$	6,558,774		$	6,640,482		$	20,172,042		$	4,352,291		$	3,424,717
MainStay VP Moderate Allocation— Service Class						MainStay VP Moderate Growth Allocation— Service Class						MainStay VP PIMCO Real Return— Service Class			MainStay VP S&P 500 Index— Initial Class
2012			2011			2012			2011			2012(a)			2012			2011
$	18,565		$	19,866		$	(24,253	)	$	(23,293	)	$	(40,541	)	$	132,890		$	155,835
	140,213			(15,743	)		(88,489	)		(176,660	)		9,157			(371,718	)		(966,587	)
	498,247			16,172			290,675			—			—			—			—
	106,817			(80,439	)		737,672			(39,017	)		175,421			5,962,101			1,129,167
	763,842			(60,144	)		915,605			(238,970	)		144,037			5,723,273			318,415
	288,597			231,442			44,750			301,224			263,645			631,186			382,685
	(506,212	)		(926,165	)		(512,362	)		(739,334	)		(191,909	)		(3,826,642	)		(3,570,843	)
	(46,513	)		(249,756	)		(1,266	)		(1,671	)		(24,669	)		(680,444	)		(498,759	)
	(384,305	)		(114,190	)		(286,826	)		(281,052	)		13,321			(1,166,237	)		(853,420	)
	876,314			352,712			(10,712	)		396,915			3,804,811			(817,910	)		(1,032,592	)
	227,881			(705,957	)		(766,416	)		(323,918	)		3,865,199			(5,860,047	)		(5,572,929	)
	991,723			(766,101	)		149,189			(562,888	)		4,009,236			(136,774	)		(5,254,514	)
	6,813,378			7,579,479			7,268,822			7,831,710			—			42,070,097			47,324,611
$	7,805,101		$	6,813,378		$	7,418,011		$	7,268,822		$	4,009,236		$	41,933,323		$	42,070,097

The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements.

F-17

Statement of Changes in Net Assets (Continued)

For the years ended December 31, 2012

and December 31, 2011

	MainStay VP T. Rowe Price Equity Income— Initial Class			MainStay VP U.S. Small Cap— Initial Class
	2012(a)			2012			2011
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income (loss)	$	(71,898	)	$	(22,016	)	$	(12,009	)
Net realized gain (loss) on investments		32,108			95,791			221,781
Realized gain distribution received		—			—			—
Change in unrealized appreciation (depreciation) on investments		445,152			192,153			(319,721	)
Net increase (decrease) in net assets resulting from operations		405,362			265,928			(109,949	)
Contributions and (Withdrawals):
Payments received from policyowners		187,786			13,647			14,553
Policyowners’ surrenders		(740,140	)		(166,912	)		(204,447	)
Policyowners’ annuity and death benefits		(30,125	)		(13,227	)		(6,464	)
Net transfers from (to) Fixed Account		(197,020	)		(16,098	)		(66,919	)
Transfers between Investment Divisions		6,514,145			42,244			(174,960	)
Net contributions and (withdrawals)		5,734,646			(140,346	)		(438,237	)
Increase (decrease) in net assets		6,140,008			125,582			(548,186	)
NET ASSETS:
Beginning of period		—			2,436,002			2,984,188
End of period	$	6,140,008		$	2,561,584		$	2,436,002

	Columbia Variable Portfolio— Small Cap Value Fund— Class 2 Shares						Dreyfus IP Technology Growth Portfolio— Initial Shares
	2012			2011			2012			2011
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income (loss)	$	(7,359	)	$	(3,842	)	$	(12,758	)	$	(12,435	)
Net realized gain (loss) on investments		19,579			34,313			35,637			240,965
Realized gain distribution received		33,120			87,503			—			—
Change in unrealized appreciation (depreciation) on investments		18,892			(173,317	)		69,388			(323,603	)
Net increase (decrease) in net assets resulting from operations		64,232			(55,343	)		92,267			(95,073	)
Contributions and (Withdrawals):
Payments received from policyowners		11,541			21,005			8,812			6,361
Policyowners’ surrenders		(84,340	)		(148,875	)		(72,172	)		(134,298	)
Policyowners’ annuity and death benefits		(1,443	)		(2,391	)		(825	)		(8,785	)
Net transfers from (to) Fixed Account		(17,099	)		(9,126	)		(1,729	)		(66,155	)
Transfers between Investment Divisions		(66,420	)		(43,285	)		240,544			179,983
Net contributions and (withdrawals)		(157,761	)		(182,672	)		174,630			(22,894	)
Increase (decrease) in net assets		(93,529	)		(238,015	)		266,897			(117,967	)
NET ASSETS:
Beginning of period		757,719			995,734			758,642			876,609
End of period	$	664,190		$	757,719		$	1,025,539		$	758,642

(a) For the period February 17, 2012 (commencement of Investment Division) through December 31, 2012.

The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements.

F-18

NYLIAC Variable Annuity Separate Account-I

Non-Qualified Policies

MainStay VP Van Eck Global Hard Assets— Initial Class			Alger Small Cap Growth Portfolio— Class I-2 Shares						BlackRock® Global Allocation V.I. Fund— Class III Shares						Calvert VP SRI Balanced Portfolio
2012(a)			2012			2011			2012			2011			2012			2011
$	(97,403	)	$	(6,296	)	$	(52,066	)	$	3,465		$	7,114		$	(1,548	)	$	(458	)
	(389,187	)		1,037,176			383,327			(11,860	)		(3,124	)		33,723			(8,910	)
	—			—			—			2,796			9,428			—			—
	(721,095	)		(608,959	)		(468,879	)		46,399			(30,947	)		20,095			38,747
	(1,207,685	)		421,921			(137,618	)		40,800			(17,529	)		52,270			29,379
	183,593			2,013			42,447			65,883			2,016			405			5,828
	(794,398	)		(51,440	)		(447,685	)		(101,678	)		(26,382	)		(1,883	)		(83,131	)
	(126,200	)		—			(41,826	)		—			—			—			(6,440	)
	(390,833	)		(14,434	)		(41,802	)		(70,008	)		(62	)		52			(33,877	)
	9,662,254			(3,859,936	)		(282,320	)		526,333			433,614			(929,397	)		30,999
	8,534,416			(3,923,797	)		(771,186	)		420,530			409,186			(930,823	)		(86,621	)
	7,326,731			(3,501,876	)		(908,804	)		461,330			391,657			(878,553	)		(57,242	)
	—			3,501,876			4,410,680			391,657			—			878,553			935,795
$	7,326,731		$	—		$	3,501,876		$	852,987		$	391,657		$	—		$	878,553

Fidelity® VIP Contrafund® Portfolio— Initial Class						Fidelity® VIP Equity-Income Portfolio— Initial Class						Fidelity® VIP Mid Cap Portfolio— Service Class 2						Janus Aspen Balanced Portfolio— Institutional Shares
2012			2011			2012			2011			2012			2011			2012			2011
$	(6,241	)	$	(88,179	)	$	127,514		$	88,767		$	(40,334	)	$	(63,294	)	$	(36,068	)	$	240,684
	(923,052	)		(15,071	)		(452,139	)		(522,220	)		(12,283	)		(49,176	)		2,884,593			580,833
	—			—			490,693			—			336,211			8,098			—			1,125,185
	4,195,833			(807,952	)		981,440			375,450			249,981			(477,846	)		(1,410,772	)		(1,853,339	)
	3,266,540			(911,202	)		1,147,508			(58,003	)		533,575			(582,218	)		1,437,753			93,363
	274,419			300,485			54,319			140,842			72,468			101,500			17,510			193,452
	(2,468,005	)		(2,756,131	)		(1,013,150	)		(838,091	)		(355,103	)		(396,032	)		(116,500	)		(1,725,119	)
	(115,489	)		(281,367	)		(62,650	)		(102,726	)		(26,005	)		(16,287	)		(21,552	)		(272,180	)
	(646,340	)		(294,958	)		(170,418	)		(179,274	)		(92,571	)		(155,004	)		(23,093	)		(273,545	)
	(486,636	)		(828,046	)		(129,269	)		(318,623	)		(149,177	)		(334,500	)		(21,583,019	)		(289,867	)
	(3,442,051	)		(3,860,017	)		(1,321,168	)		(1,297,872	)		(550,388	)		(800,323	)		(21,726,654	)		(2,367,259	)
	(175,511	)		(4,771,219	)		(173,660	)		(1,355,875	)		(16,813	)		(1,382,541	)		(20,288,901	)		(2,273,896	)
	22,621,660			27,392,879			7,665,353			9,021,228			4,206,768			5,589,309			20,288,901			22,562,797
$	22,446,149		$	22,621,660		$	7,491,693		$	7,665,353		$	4,189,955		$	4,206,768		$	—		$	20,288,901

The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements.

F-19

Statement of Changes in Net Assets (Continued)

For the years ended December 31, 2012

and December 31, 2011

	Janus Aspen Worldwide Portfolio— Institutional Shares						MFS® Investors  Trust Series— Initial Class
	2012			2011			2012			2011
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income (loss)	$	(46,743	)	$	(85,363	)	$	(2,139	)	$	(1,989	)
Net realized gain (loss) on investments		(999,667	)		(933,437	)		21,570			8,119
Realized gain distribution received		—			—			—			—
Change in unrealized appreciation (depreciation) on investments		2,726,926			(721,096	)		68,435			(24,288	)
Net increase (decrease) in net assets resulting from operations		1,680,516			(1,739,896	)		87,866			(18,158	)
Contributions and (Withdrawals):
Payments received from policyowners		274,903			299,051			5,196			7,379
Policyowners’ surrenders		(996,369	)		(1,103,055	)		(78,930	)		(14,740	)
Policyowners’ annuity and death benefits		(172,809	)		(147,907	)		(13,087	)		—
Net transfers from (to) Fixed Account		(294,690	)		(246,065	)		1,612			(1,629	)
Transfers between Investment Divisions		(320,465	)		(353,165	)		26,549			(9,240	)
Net contributions and (withdrawals)		(1,509,430	)		(1,551,141	)		(58,660	)		(18,230	)
Increase (decrease) in net assets		171,086			(3,291,037	)		29,206			(36,388	)
NET ASSETS:
Beginning of period		9,685,776			12,976,813			504,014			540,402
End of period	$	9,856,862		$	9,685,776		$	533,220		$	504,014

	Royce Micro-Cap Portfolio— Investment Class						Royce Small-Cap Portfolio— Investment Class
	2012			2011			2012			2011
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income (loss)	$	(20,399	)	$	20,232		$	(2,110	)	$	(12,632	)
Net realized gain (loss) on investments		60,218			(129,497	)		294,965			12,801
Realized gain distribution received		30,360			—			—			—
Change in unrealized appreciation (depreciation) on investments		36,470			(154,918	)		(173,936	)		(51,490	)
Net increase (decrease) in net assets resulting from operations		106,649			(264,183	)		118,919			(51,321	)
Contributions and (Withdrawals):
Payments received from policyowners		16,183			72,289			1,940			32,122
Policyowners’ surrenders		(231,367	)		(118,023	)		(21,681	)		(60,869	)
Policyowners’ annuity and death benefits		(802	)		—			—			—
Net transfers from (to) Fixed Account		(56,287	)		(110,961	)		(15,438	)		(33,127	)
Transfers between Investment Divisions		(123,026	)		27,734			(1,286,194	)		(80,968	)
Net contributions and (withdrawals)		(395,299	)		(128,961	)		(1,321,373	)		(142,842	)
Increase (decrease) in net assets		(288,650	)		(393,144	)		(1,202,454	)		(194,163	)
NET ASSETS:
Beginning of period		1,687,086			2,080,230			1,202,454			1,396,617
End of period	$	1,398,436		$	1,687,086		$	—		$	1,202,454

The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements.

F-20

NYLIAC Variable Annuity Separate Account-I

Non-Qualified Policies

MFS® Research Series— Initial Class						MFS® Utilities  Series— Service Class						Neuberger Berman AMT Mid-Cap Growth Portfolio— Class S						PIMCO Real Return Portfolio— Advisor Class
2012			2011			2012			2011			2012			2011			2012			2011
$	(3,259	)	$	(2,806	)	$	(18,213	)	$	189,263		$	(11,119	)	$	(9,525	)	$	(5,039	)	$	6,717
	18,148			29,099			(164,137	)		(328,015	)		29,834			6,273			57,644			35,782
	—			—			—			—			—			—			—			77,093
	67,883			(32,861	)		594,287			701,289			59,359			(62	)		(2,969	)		11,100
	82,772			(6,568	)		411,937			562,537			78,074			(3,314	)		49,636			130,692
	5,651			6,354			30,210			174,390			20,255			15,898			102,488			101,928
	(44,824	)		(82,902	)		(167,273	)		(1,145,018	)		(73,648	)		(19,670	)		(26,927	)		(135,110	)
	(1,443	)		—			(31,859	)		(103,690	)		(9,235	)		(6,856	)		—			—
	(24,305	)		(2,969	)		(171,706	)		(372,861	)		(3,276	)		(3,469	)		(7,425	)		2,899
	85,932			(12,168	)		(10,703,748	)		462,750			192,413			(132,391	)		(2,863,891	)		1,817,154
	21,011			(91,685	)		(11,044,376	)		(984,429	)		126,509			(146,488	)		(2,795,755	)		1,786,871
	103,783			(98,253	)		(10,632,439	)		(421,892	)		204,583			(149,802	)		(2,746,119	)		1,917,563
	543,764			642,017			10,632,439			11,054,331			698,977			848,779			2,746,119			828,556
$	647,547		$	543,764		$	—		$	10,632,439		$	903,560		$	698,977		$	—		$	2,746,119
T. Rowe Price Equity Income Portfolio						UIF Emerging Markets Equity Portfolio— Class I						Van Eck VIP Global Hard Assets						Victory VIF Diversified Stock Fund— Class A Shares
2012			2011			2012			2011			2012			2011			2012			2011
$	(11,221	)	$	29,346		$	(11,054	)	$	(66,591	)	$	(17,985	)	$	(7,186	)	$	(959	)	$	(2,552	)
	(367,834	)		(168,877	)		(414,084	)		(753,639	)		281,205			(57,093	)		(6,534	)		(50,969	)
	—			—			—			—			731,732			165,716			—			—
	905,465			3,675			1,154,111			(707,524	)		288,685			(2,255,020	)		48,943			22,435
	526,410			(135,856	)		728,973			(1,527,754	)		1,283,637			(2,153,583	)		41,450			(31,086	)
	9,069			64,855			6,316			153,396			65,155			192,778			4,859			1,716
	(87,659	)		(658,779	)		(62,153	)		(580,515	)		(77,154	)		(909,236	)		(5,537	)		(80,472	)
	(10,220	)		(54,139	)		—			(38,971	)		—			(179,884	)		(2,978	)		—
	(10,209	)		(175,800	)		2,232			(247,449	)		(68,819	)		(179,562	)		(4,597	)		(12,332	)
	(6,730,446	)		(119,352	)		(6,753,170	)		(541,989	)		(10,661,347	)		(1,105,025	)		(17,042	)		(43,078	)
	(6,829,465	)		(943,215	)		(6,806,775	)		(1,255,528	)		(10,742,165	)		(2,180,929	)		(25,295	)		(134,166	)
	(6,303,055	)		(1,079,071	)		(6,077,802	)		(2,783,282	)		(9,458,528	)		(4,334,512	)		16,155			(165,252	)
	6,303,055			7,382,126			6,077,802			8,861,084			9,458,528			13,793,040			289,653			454,905
$	—		$	6,303,055		$	—		$	6,077,802		$	—		$	9,458,528		$	305,808		$	289,653

The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements.

F-21

Statement of Assets and Liabilities

As of December 31, 2012

	MainStay VP Balanced— Service Class			MainStay VP Bond— Initial Class			MainStay VP Cash Management
ASSETS:
Investment at net asset value	$	3,479,643		$	18,329,799		$	12,363,467
Dividends due and accrued		—			—			106
Net receivable from (payable to) New York Life Insurance and Annuity Corporation		2			1,072			7,407
Net receivable from (payable to) the Fund for shares sold or purchased		(2	)		(1,072	)		(7,513	)
LIABILITIES:
Liability to New York Life Insurance and Annuity Corporation for:
Mortality and expense risk charges		339			1,804			810
Administrative charges		28			150			68
Total net assets	$	3,479,276		$	18,327,845		$	12,362,589
Total shares outstanding		286,432			1,240,168			12,356,238
Net asset value per share (NAV)	$	12.15		$	14.78		$	1.00
Total units outstanding		268,380			778,179			8,940,899
Variable accumulation unit value		$12.97			$23.55			$1.38
Identified cost of investment	$	3,092,445		$	17,826,511		$	12,355,908
Statement of Operations For the year ended December 31, 2012
	MainStay VP Balanced— Service Class			MainStay VP Bond— Initial Class			MainStay VP Cash Management
INVESTMENT INCOME (LOSS):
Dividend income	$	39,169		$	448,921		$	1,317
Mortality and expense risk charges		(42,092	)		(228,070	)		(157,934	)
Administrative charges		(4,172	)		(22,848	)		(17,500	)
Net investment income (loss)		(7,095	)		198,003			(174,117	)
REALIZED AND UNREALIZED GAIN (LOSS):
Proceeds from sale of investments		756,447			3,796,285			6,816,514
Cost of investments sold		(741,486	)		(3,352,548	)		(6,816,917	)
Net realized gain (loss) on investments		14,961			443,737			(403	)
Realized gain distribution received		—			621,186			—
Change in unrealized appreciation (depreciation) on investments		342,687			(650,290	)		403
Net gain (loss) on investments		357,648			414,633			—
Net increase (decrease) in net assets resulting from operations	$	350,553		$	612,636		$	(174,117	)

Not all investment options are available under all policies.

(a) For the period February 17, 2012 (commencement of Investment Division) through December 31, 2012.

The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements.

F-22

NYLIAC Variable Annuity Separate Account-II

Tax-Qualified Policies

MainStay VP Common Stock— Initial Class			MainStay VP Conservative Allocation— Service Class			MainStay VP Convertible— Initial Class			MainStay VP DFA/DuPont Capital Emerging Markets Equity— Initial Class			MainStay VP Eagle Small Cap Growth— Initial Class			MainStay VP Flexible Bond Opportunities— Service Class			MainStay VP Floating Rate— Service Class
$	31,499,017		$	12,934,129		$	10,904,063		$	9,497,518		$	8,780,701		$	1,131,289		$	7,327,838
	—			—			—			—			—			—			25,419
	1,388			107,403			229			(456	)		(145	)		61,263			10,872
	(1,388	)		(107,403	)		(229	)		456			145			(61,263	)		(36,291	)
	3,045			1,253			1,062			926			844			105			720
	254			104			88			77			70			9			60
$	31,495,718		$	12,932,772		$	10,902,913		$	9,496,515		$	8,779,787		$	1,131,175		$	7,327,058
	1,711,778			1,111,755			932,328			938,712			878,489			109,829			781,980
$	18.40		$	11.54		$	11.70		$	10.12		$	10.00		$	10.30		$	9.32
	991,983			973,385			432,509			949,278			888,377			103,327			608,326
$	31.75		$	13.18		$	25.21		$	10.00		$	9.88		$	10.95		$	12.03
$	29,821,437		$	11,982,400		$	9,602,698		$	9,365,222		$	8,781,221		$	1,063,202		$	7,190,537
MainStay VP Common Stock— Initial Class			MainStay VP Conservative Allocation— Service Class			MainStay VP Convertible— Initial Class			MainStay VP DFA/DuPont Capital Emerging Markets Equity— Initial Class(a)			MainStay VP Eagle Small Cap Growth— Initial Class(a)			MainStay VP Flexible Bond Opportunities— Service Class			MainStay VP Floating Rate— Service Class
$	517,285		$	244,998		$	328,610		$	—		$	—		$	48,154		$	272,202
	(394,165	)		(147,638	)		(135,825	)		(97,862	)		(95,836	)		(7,475	)		(82,915	)
	(50,278	)		(13,638	)		(14,376	)		(11,260	)		(11,704	)		(662	)		(7,627	)
	72,842			83,722			178,409			(109,122	)		(107,540	)		40,017			181,660
	6,467,650			1,720,716			1,884,319			1,550,757			1,672,649			156,798			1,923,431
	(8,762,312	)		(1,569,630	)		(1,882,844	)		(1,661,207	)		(1,742,501	)		(152,749	)		(1,794,722	)
	(2,294,662	)		151,086			1,475			(110,450	)		(69,852	)		4,049			128,709
	—			709,985			41,529			—			—			7,782			—
	6,889,271			84,515			624,635			132,752			(374	)		14,988			57,307
	4,594,609			945,586			667,639			22,302			(70,226	)		26,819			186,016
$	4,667,451		$	1,029,308		$	846,048		$	(86,820	)	$	(177,766	)	$	66,836		$	367,676

The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements.

F-23

Statement of Assets and Liabilities (Continued)

As of December 31, 2012

	MainStay VP Government— Initial Class			MainStay VP Growth Allocation— Service Class			MainStay VP Growth Equity— Initial Class
ASSETS:
Investment at net asset value	$	13,955,838		$	3,942,171		$	59,090,625
Dividends due and accrued		—			—			—
Net receivable from (payable to) New York Life Insurance and Annuity Corporation		4,382			1,601			(34,675	)
Net receivable from (payable to) the Fund for shares sold or purchased		(4,382	)		(1,601	)		34,675
LIABILITIES:
Liability to New York Life Insurance and Annuity Corporation for:
Mortality and expense risk charges		1,372			382			5,697
Administrative charges		114			32			475
Total net assets	$	13,954,352		$	3,941,757		$	59,084,453
Total shares outstanding		1,178,219			391,037			2,139,181
Net asset value per share (NAV)	$	11.84		$	10.08		$	27.64
Total units outstanding		611,359			344,263			2,313,506
Variable accumulation unit value		$22.82			$11.45			$25.56
Identified cost of investment	$	13,629,671		$	3,494,110		$	66,090,606
Statement of Operations (Continued) For the year ended December 31, 2012
	MainStay VP Government— Initial Class			MainStay VP Growth Allocation— Service Class			MainStay VP Growth Equity— Initial Class
INVESTMENT INCOME (LOSS):
Dividend income	$	426,101		$	29,933		$	247,564
Mortality and expense risk charges		(175,729	)		(47,931	)		(742,865	)
Administrative charges		(18,891	)		(5,126	)		(107,327	)
Net investment income (loss)		231,481			(23,124	)		(602,628	)
REALIZED AND UNREALIZED GAIN (LOSS):
Proceeds from sale of investments		2,598,259			778,401			8,973,798
Cost of investments sold		(2,388,480	)		(830,312	)		(12,071,154	)
Net realized gain (loss) on investments		209,779			(51,911	)		(3,097,356	)
Realized gain distribution received		—			257,433			—
Change in unrealized appreciation (depreciation) on investments		(64,571	)		336,377			11,446,934
Net gain (loss) on investments		145,208			541,899			8,349,578
Net increase (decrease) in net assets resulting from operations	$	376,689		$	518,775		$	7,746,950

(a) For the period February 17, 2012 (commencement of Investment Division) through December 31, 2012.

The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements.

F-24

NYLIAC Variable Annuity Separate Account-II

Tax-Qualified Policies

MainStay VP High Yield Corporate Bond— Initial Class			MainStay VP ICAP Select Equity— Initial Class			MainStay VP Income Builder— Initial Class			MainStay VP International Equity— Initial Class			MainStay VP Janus Balanced— Initial Class			MainStay VP Large Cap Growth— Initial Class			MainStay VP MFS® Utilities— Service Class
$	65,558,701		$	34,940,998		$	43,004,457		$	8,918,915		$	42,525,037		$	6,366,951		$	20,533,101
	—			—			—			—			—			—			—
	(20,026	)		(23,270	)		(1,447	)		3			(12,511	)		(179	)		(16,750	)
	20,026			23,270			1,447			(3	)		12,511			179			16,750
	6,448			3,388			4,200			870			4,146			614			2,000
	537			282			350			72			345			51			167
$	65,551,716		$	34,937,328		$	42,999,907		$	8,917,973		$	42,520,546		$	6,366,286		$	20,530,934
	6,435,675			2,541,507			2,751,600			734,845			4,032,092			377,283			1,890,397
$	10.19		$	13.76		$	15.63		$	12.14		$	10.55		$	16.88		$	10.87
	1,818,298			2,273,337			1,418,288			403,890			4,077,453			374,782			1,911,663
$	36.06		$	15.38		$	30.32		$	22.08		$	10.43		$	16.99		$	10.75
$	59,628,021		$	31,312,776		$	39,071,957		$	10,197,329		$	40,324,377		$	5,034,812		$	18,906,134
MainStay VP High Yield Corporate Bond— Initial Class			MainStay VP ICAP Select Equity— Initial Class			MainStay VP Income Builder— Initial Class			MainStay VP International Equity— Initial Class			MainStay VP Janus Balanced— Initial Class(a)			MainStay VP Large Cap Growth— Initial Class			MainStay VP MFS® Utilities— Service Class(a)
$	3,613,184		$	749,448		$	1,830,003		$	162,645		$	—		$	—		$	—
	(769,055	)		(432,325	)		(525,326	)		(111,087	)		(455,088	)		(80,898	)		(213,707	)
	(79,873	)		(50,131	)		(62,510	)		(11,295	)		(56,248	)		(9,548	)		(20,942	)
	2,764,256			266,992			1,242,167			40,263			(511,336	)		(90,446	)		(234,649	)
	6,516,919			6,258,271			6,936,613			2,035,170			6,092,638			1,283,163			2,950,245
	(6,206,053	)		(6,626,991	)		(8,360,286	)		(3,017,853	)		(5,993,869	)		(850,461	)		(2,874,411	)
	310,866			(368,720	)		(1,423,673	)		(982,683	)		98,769			432,702			75,834
	—			—			—			—			—			—			—
	4,112,994			4,844,571			5,696,689			2,476,534			2,213,172			377,264			1,643,717
	4,423,860			4,475,851			4,273,016			1,493,851			2,311,941			809,966			1,719,551
$	7,188,116		$	4,742,843		$	5,515,183		$	1,534,114		$	1,800,605		$	719,520		$	1,484,902

The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements.

F-25

Statement of Assets and Liabilities (Continued)

As of December 31, 2012

	MainStay VP Mid Cap Core— Initial Class			MainStay VP Moderate Allocation— Service Class			MainStay VP Moderate Growth Allocation— Service Class
ASSETS:
Investment at net asset value	$	10,513,512		$	16,951,715		$	12,187,264
Dividends due and accrued		—			—			—
Net receivable from (payable to) New York Life Insurance and Annuity Corporation		(1,725	)		7,052			914
Net receivable from (payable to) the Fund for shares sold or purchased		1,725			(7,052	)		(914	)
LIABILITIES:
Liability to New York Life Insurance and Annuity Corporation for:
Mortality and expense risk charges		1,016			1,651			1,184
Administrative charges		85			138			99
Total net assets	$	10,512,411		$	16,949,926		$	12,185,981
Total shares outstanding		859,573			1,525,596			1,106,239
Net asset value per share (NAV)	$	12.23		$	11.11		$	11.02
Total units outstanding		567,295			1,325,244			985,915
Variable accumulation unit value		$18.53			$12.78			$12.36
Identified cost of investment	$	8,368,414		$	15,413,414		$	11,122,412
Statement of Operations (Continued) For the year ended December 31, 2012
	MainStay VP Mid Cap Core— Initial Class			MainStay VP Moderate Allocation— Service Class			MainStay VP Moderate Growth Allocation— Service Class
INVESTMENT INCOME (LOSS):
Dividend income	$	80,725		$	248,948		$	122,076
Mortality and expense risk charges		(128,698	)		(197,876	)		(148,663	)
Administrative charges		(12,891	)		(18,732	)		(14,511	)
Net investment income (loss)		(60,864	)		32,340			(41,098	)
REALIZED AND UNREALIZED GAIN (LOSS):
Proceeds from sale of investments		2,049,084			2,967,311			2,562,975
Cost of investments sold		(1,374,029	)		(2,873,032	)		(2,754,424	)
Net realized gain (loss) on investments		675,055			94,279			(191,449	)
Realized gain distribution received		851,684			1,059,557			480,662
Change in unrealized appreciation (depreciation) on investments		119,022			497,315			1,256,245
Net gain (loss) on investments		1,645,761			1,651,151			1,545,458
Net increase (decrease) in net assets resulting from operations	$	1,584,897		$	1,683,491		$	1,504,360

(a) For the period February 17, 2012 (commencement of Investment Division) through December 31, 2012.

The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements.

F-26

NYLIAC Variable Annuity Separate Account-II

Tax-Qualified Policies

MainStay VP PIMCO Real Return— Service Class			MainStay VP S&P 500 Index— Initial Class			MainStay VP T. Rowe Price Equity Income— Initial Class			MainStay VP U.S. Small Cap— Initial Class			MainStay VP Van Eck Global Hard Assets— Initial Class			Alger Small Cap Growth Portfolio— Class I-2 Shares			BlackRock® Global Allocation V.I. Fund— Class III Shares
$	5,720,274		$	65,915,616		$	11,799,496		$	3,643,442		$	13,335,361		$	—		$	2,371,563
	—			—			—			—			—			—			—
	9,483			18,596			(3,663	)		844			(31,494	)		—			—
	(9,483	)		(18,596	)		3,663			(844	)		31,494			—			—
	563			6,369			1,144			352			1,280			—			231
	47			531			95			29			107			—			19
$	5,719,664		$	65,908,716		$	11,798,257		$	3,643,061		$	13,333,974		$	—		$	2,371,313
	540,787			2,277,654			1,094,209			361,993			1,471,812			—			165,381
$	10.56		$	28.93		$	10.79		$	10.06		$	9.08		$	—		$	14.34
	546,869			1,882,941			1,106,521			239,742			1,488,392			—			244,336
$	10.44		$	34.99		$	10.67		$	15.19		$	8.98		$	—		$	9.71
$	5,474,022		$	54,738,160		$	10,941,047		$	2,735,806		$	14,627,628		$	—		$	2,315,027
MainStay VP PIMCO Real Return— Service Class(a)			MainStay VP S&P 500 Index— Initial Class			MainStay VP T. Rowe Price Equity Income— Initial Class(a)			MainStay VP U.S. Small Cap— Initial Class			MainStay VP Van Eck Global Hard Assets— Initial Class(a)			Alger Small Cap Growth Portfolio— Class I-2 Shares			BlackRock® Global Allocation V.I. Fund— Class III Shares
$	—		$	1,097,808		$	—		$	16,932		$	—		$	—		$	34,609
	(51,446	)		(809,703	)		(124,833	)		(46,167	)		(148,360	)		(11,917	)		(19,642	)
	(4,648	)		(105,955	)		(12,706	)		(5,062	)		(15,041	)		(1,513	)		(1,785	)
	(56,094	)		182,150			(137,539	)		(34,297	)		(163,401	)		(13,430	)		13,182
	1,057,468			9,772,536			2,542,697			917,207			2,598,724			8,193,152			258,821
	(1,038,348	)		(10,565,340	)		(2,501,615	)		(634,418	)		(2,900,683	)		(5,261,691	)		(268,636	)
	19,120			(792,804	)		41,082			282,789			(301,959	)		2,931,461			(9,815	)
	—			—			—			—			—			—			7,757
	236,769			9,475,339			862,113			170,296			(1,260,773	)		(2,049,041	)		106,977
	255,889			8,682,535			903,195			453,085			(1,562,732	)		882,420			104,919
$	199,795		$	8,864,685		$	765,656		$	418,788		$	(1,726,133	)	$	868,990		$	118,101

The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements.

F-27

Statement of Assets and Liabilities (Continued)

As of December 31, 2012

	Calvert VP SRI Balanced Portfolio			Columbia Variable Portfolio— Small Cap Value Fund— Class 2 Shares			Dreyfus IP Technology Growth Portfolio— Initial Shares
ASSETS:
Investment at net asset value	$	—		$	1,251,371		$	2,231,320
Dividends due and accrued		—			—			—
Net receivable from (payable to) New York Life Insurance and Annuity Corporation		—			44			(16,928	)
Net receivable from (payable to) the Fund for shares sold or purchased		—			(44	)		16,928
LIABILITIES:
Liability to New York Life Insurance and Annuity Corporation for:
Mortality and expense risk charges		—			121			217
Administrative charges		—			10			18
Total net assets	$	—		$	1,251,240		$	2,231,085
Total shares outstanding		—			81,467			162,446
Net asset value per share (NAV)	$	—		$	15.36		$	13.84
Total units outstanding		—			90,271			181,405
Variable accumulation unit value	$	—		$	13.86		$	12.39
Identified cost of investment	$	—		$	1,249,341		$	2,077,693
Statement of Operations (Continued) For the year ended December 31, 2012
	Calvert VP SRI Balanced Portfolio			Columbia Variable Portfolio— Small Cap Value Fund— Class 2 Shares			Dreyfus IP Technology Growth Portfolio— Initial Shares
INVESTMENT INCOME (LOSS):
Dividend income	$	—		$	3,698		$	—
Mortality and expense risk charges		(4,702	)		(15,591	)		(29,272	)
Administrative charges		(641	)		(1,498	)		(2,913	)
Net investment income (loss)		(5,343	)		(13,391	)		(32,185	)
REALIZED AND UNREALIZED GAIN (LOSS):
Proceeds from sale of investments		3,124,926			337,890			1,142,311
Cost of investments sold		(3,019,593	)		(345,000	)		(870,454	)
Net realized gain (loss) on investments		105,333			(7,110	)		271,857
Realized gain distribution received		—			59,443			—
Change in unrealized appreciation (depreciation) on investments		72,071			80,226			109,008
Net gain (loss) on investments		177,404			132,559			380,865
Net increase (decrease) in net assets resulting from operations	$	172,061		$	119,168		$	348,680

The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements.

F-28

NYLIAC Variable Annuity Separate Account-II

Tax-Qualified Policies

Fidelity® VIP Contrafund® Portfolio— Initial Class			Fidelity® VIP Equity-Income Portfolio— Initial Class			Fidelity® VIP Mid Cap Portfolio— Service Class 2			Janus Aspen Balanced Portfolio— Institutional Shares			Janus Aspen Worldwide Portfolio— Institutional Shares			MFS® Investors Trust Series— Initial Class			MFS® Research Series— Initial Class
$	41,500,433		$	13,422,522		$	8,721,085		$	—		$	18,129,351		$	1,001,196		$	1,091,317
	—			—			—			—			—			—			—
	(17,080	)		1,192			976			—			23,619			12			20
	17,080			(1,192	)		(976	)		—			(23,619	)		(12	)		(20	)
	4,011			1,303			842			—			1,751			97			105
	334			109			70			—			146			8			9
$	41,496,088		$	13,421,110		$	8,720,173		$	—		$	18,127,454		$	1,001,091		$	1,091,203
	1,570,254			673,086			290,864			—			588,996			43,663			49,945
$	26.44		$	19.94		$	29.98		$	—		$	30.74		$	22.93		$	21.85
	1,398,049			633,860			405,676			—			1,044,022			79,034			79,323
$	29.70		$	21.17		$	21.49		$	—		$	17.34		$	12.66		$	13.76
$	43,249,095		$	14,865,017		$	8,143,135		$	—		$	19,092,202		$	857,272		$	839,244
Fidelity® VIP Contrafund® Portfolio— Initial Class			Fidelity® VIP Equity-Income Portfolio— Initial Class			Fidelity® VIP Mid Cap Portfolio— Service Class 2			Janus Aspen Balanced Portfolio— Institutional Shares			Janus Aspen Worldwide Portfolio— Institutional Shares			MFS® Investors Trust Series— Initial Class			MFS® Research Series— Initial Class
$	555,566		$	410,527		$	33,614		$	—		$	152,455		$	8,779		$	8,868
	(522,719	)		(163,457	)		(111,624	)		(65,654	)		(213,079	)		(11,541	)		(13,565	)
	(63,680	)		(19,643	)		(10,720	)		(7,945	)		(32,080	)		(1,541	)		(1,723	)
	(30,833	)		227,427			(88,730	)		(73,599	)		(92,704	)		(4,303	)		(6,420	)
	7,453,188			2,200,682			2,093,251			43,553,967			2,558,125			100,258			320,304
	(6,764,282	)		(2,641,621	)		(2,176,702	)		(37,478,881	)		(3,910,838	)		(85,149	)		(211,057	)
	688,906			(440,939	)		(83,451	)		6,075,086			(1,352,713	)		15,109			109,247
	—			853,600			695,511			—			—			—			—
	5,355,508			1,347,039			612,761			(3,141,736	)		4,445,340			138,525			67,319
	6,044,414			1,759,700			1,224,821			2,933,350			3,092,627			153,634			176,566
$	6,013,581		$	1,987,127		$	1,136,091		$	2,859,751		$	2,999,923		$	149,331		$	170,146

The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements.

F-29

Statement of Assets and Liabilities (Continued)

As of December 31, 2012

	MFS® Utilities Series— Service  Class			Neuberger Berman AMT Mid-Cap Growth Portfolio— Class S			PIMCO Real Return Portfolio— Advisor Class
ASSETS:
Investment at net asset value	$	—		$	1,491,578		$	—
Dividends due and accrued		—			—			—
Net receivable from (payable to) New York Life Insurance and Annuity Corporation		—			(2,363	)		—
Net receivable from (payable to) the Fund for shares sold or purchased		—			2,363			—
LIABILITIES:
Liability to New York Life Insurance and Annuity Corporation for:
Mortality and expense risk charges		—			144			—
Administrative charges		—			12			—
Total net assets	$	—		$	1,491,422		$	—
Total shares outstanding		—			49,468			—
Net asset value per share (NAV)	$	—		$	30.20		$	—
Total units outstanding		—			86,761			—
Variable accumulation unit value	$	—		$	17.22		$	—
Identified cost of investment	$	—		$	1,331,827		$	—
Statement of Operations (Continued) For the year ended December 31, 2012
	MFS® Utilities Series— Service Class			Neuberger Berman AMT Mid-Cap Growth Portfolio— Class S			PIMCO Real Return Portfolio— Advisor Class
INVESTMENT INCOME (LOSS):
Dividend income	$	—		$	—		$	—
Mortality and expense risk charges		(31,803	)		(17,276	)		(6,247	)
Administrative charges		(3,081	)		(1,681	)		(562	)
Net investment income (loss)		(34,884	)		(18,957	)		(6,809	)
REALIZED AND UNREALIZED GAIN (LOSS):
Proceeds from sale of investments		21,046,353			277,641			4,493,662
Cost of investments sold		(21,091,012	)		(155,479	)		(4,420,981	)
Net realized gain (loss) on investments		(44,659	)		122,162			72,681
Realized gain distribution received		—			—			—
Change in unrealized appreciation (depreciation) on investments		867,888			20,006			891
Net gain (loss) on investments		823,229			142,168			73,572
Net increase (decrease) in net assets resulting from operations	$	788,345		$	123,211		$	66,763

The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements.

F-30

NYLIAC Variable Annuity Separate Account-II

Tax-Qualified Policies

Royce Micro-Cap Portfolio— Investment Class			Royce Small-Cap Portfolio— Investment Class			T. Rowe Price Equity Income Portfolio			UIF Emerging Markets Equity Portfolio— Class I			Van Eck VIP Global Hard Assets			Victory VIF Diversified Stock Fund— Class A Shares
$	2,980,174		$	—		$	—		$	—		$	—		$	809,320
	—			—			—			—			—			—
	(18,417	)		—			—			—			—			425
	18,417			—			—			—			—			(425	)
	289			—			—			—			—			78
	24			—			—			—			—			7
$	2,979,861		$	—		$	—		$	—		$	—		$	809,235
	273,844			—			—			—			—			77,629
$	10.95		$	—		$	—		$	—		$	—		$	10.42
	196,667			—			—			—			—			62,054
$	15.25		$	—		$	—		$	—		$	—		$	13.04
$	2,678,309		$	—		$	—		$	—		$	—		$	667,068
Royce Micro-Cap Portfolio— Investment Class			Royce Small-Cap Portfolio— Investment Class			T. Rowe Price Equity Income Portfolio			UIF Emerging Markets Equity Portfolio— Class I			Van Eck VIP Global Hard Assets			Victory VIF Diversified Stock Fund— Class A Shares
$	—		$	—		$	—		$	—		$	—		$	7,898
	(30,516	)		(3,738	)		(19,246	)		(16,262	)		(25,457	)		(10,061	)
	(2,914	)		(339	)		(1,882	)		(1,691	)		(2,529	)		(1,040	)
	(33,430	)		(4,077	)		(21,128	)		(17,953	)		(27,986	)		(3,203	)
	643,530			2,544,037			12,859,517			11,050,962			17,417,635			213,291
	(447,653	)		(1,985,931	)		(13,133,369	)		(11,581,962	)		(17,508,325	)		(260,994	)
	195,877			558,106			(273,852	)		(531,000	)		(90,690	)		(47,703	)
	64,545			—			—			—			1,123,528			—
	(33,715	)		(321,879	)		1,281,956			1,732,221			991,988			167,482
	226,707			236,227			1,008,104			1,201,221			2,024,826			119,779
$	193,277		$	232,150		$	986,976		$	1,183,268		$	1,996,840		$	116,576

The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements.

F-31

Statement of Changes in Net Assets

For the years ended December 31, 2012

and December 31, 2011

	MainStay VP Balanced— Service Class						MainStay VP Bond— Initial Class
	2012			2011			2012			2011
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income (loss)	$	(7,095	)	$	(96	)	$	198,003		$	360,001
Net realized gain (loss) on investments		14,961			21,692			443,737			359,775
Realized gain distribution received		—			—			621,186			285,006
Change in unrealized appreciation (depreciation) on investments		342,687			24,472			(650,290	)		86,725
Net increase (decrease) in net assets resulting from operations		350,553			46,068			612,636			1,091,507
Contributions and (Withdrawals):
Payments received from policyowners		99,828			124,465			461,415			547,448
Policyowners’ surrenders		(325,048	)		(369,180	)		(2,515,411	)		(2,364,836	)
Policyowners’ annuity and death benefits		(13,509	)		(15,143	)		(150,444	)		(98,885	)
Net transfers from (to) Fixed Account		(98,632	)		(48,274	)		(162,189	)		(543,700	)
Transfers between Investment Divisions		(43,128	)		(151,803	)		744,905			497,620
Net contributions and (withdrawals)		(380,489	)		(459,935	)		(1,621,724	)		(1,962,353	)
Increase (decrease) in net assets		(29,936	)		(413,867	)		(1,009,088	)		(870,846	)
NET ASSETS:
Beginning of period		3,509,212			3,923,079			19,336,933			20,207,779
End of period	$	3,479,276		$	3,509,212		$	18,327,845		$	19,336,933

	MainStay VP DFA/DuPont Capital Emerging Markets Equity— Initial Class			MainStay VP Eagle Small Cap Growth— Initial Class
	2012(a)			2012(a)
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income (loss)	$	(109,122	)	$	(107,540	)
Net realized gain (loss) on investments		(110,450	)		(69,852	)
Realized gain distribution received		—			—
Change in unrealized appreciation/(depreciation) on investments		132,752			(374	)
Net increase (decrease) in net assets resulting from operations		(86,820	)		(177,766	)
Contributions and (Withdrawals):
Payments received from policyowners		268,467			280,646
Policyowners’ surrenders		(885,987	)		(904,379	)
Policyowners’ annuity and death benefits		(19,152	)		(16,627	)
Net transfers from (to) Fixed Account		(173,164	)		(210,038	)
Transfers between Investment Divisions		10,393,171			9,807,951
Net contributions and (withdrawals)		9,583,335			8,957,553
Increase (decrease) in net assets		9,496,515			8,779,787
NET ASSETS:
Beginning of period		—			—
End of period	$	9,496,515		$	8,779,787

Not all investment options are available under all policies.

(a) For the period February 17, 2012 (commencement of Investment Division) through December 31, 2012.

The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements.

F-32

NYLIAC Variable Annuity Separate Account-II

Tax-Qualified Policies

MainStay VP Cash Management						MainStay VP Common Stock— Initial Class						MainStay VP Conservative Allocation— Service Class						MainStay VP Convertible— Initial Class
2012			2011			2012			2011			2012			2011			2012			2011
$	(174,117	)	$	(198,186	)	$	72,842		$	52,252		$	83,722		$	88,515		$	178,409		$	126,047
	(403	)		(709	)		(2,294,662	)		(3,042,001	)		151,086			110,993			1,475			167,020
	—			—			—			—			709,985			44,815			41,529			—
	403			992			6,889,271			3,133,929			84,515			(136,105	)		624,635			(1,047,868	)
	(174,117	)		(197,903	)		4,667,451			144,180			1,029,308			108,218			846,048			(754,801	)
	963,959			1,140,826			714,769			935,584			318,056			282,021			486,903			558,743
	(3,745,016	)		(4,297,249	)		(3,838,589	)		(3,367,678	)		(1,399,798	)		(1,054,452	)		(1,561,931	)		(1,528,973	)
	(7,732	)		(45,311	)		(70,204	)		(142,843	)		(81,084	)		(13,524	)		(23,235	)		(58,465	)
	(1,122,601	)		(1,603,345	)		(837,308	)		(811,839	)		(471,909	)		(370,353	)		(171,039	)		(189,430	)
	1,286,027			4,552,271			(1,792,763	)		(1,657,592	)		2,357,076			2,317,386			(44,375	)		335,051
	(2,625,363	)		(252,808	)		(5,824,095	)		(5,044,368	)		722,341			1,161,078			(1,313,677	)		(883,074	)
	(2,799,480	)		(450,711	)		(1,156,644	)		(4,900,188	)		1,751,649			1,269,296			(467,629	)		(1,637,875	)
	15,162,069			15,612,780			32,652,362			37,552,550			11,181,123			9,911,827			11,370,542			13,008,417
$	12,362,589		$	15,162,069		$	31,495,718		$	32,652,362		$	12,932,772		$	11,181,123		$	10,902,913		$	11,370,542

MainStay VP Flexible Bond Opportunities— Service Class						MainStay VP Floating Rate— Service Class						MainStay VP Government— Initial Class						MainStay VP Growth Allocation— Service Class
2012			2011			2012			2011			2012			2011			2012			2011
$	40,017		$	7,584		$	181,660		$	208,693		$	231,481		$	295,797		$	(23,124	)	$	(27,315	)
	4,049			(1,108	)		128,709			198,492			209,779			433,422			(51,911	)		(201,341	)
	7,782			—			—			—			—			126,347			257,433			—
	14,988			(8,165	)		57,307			(357,574	)		(64,571	)		(142,039	)		336,377			40,490
	66,836			(1,689	)		367,676			49,611			376,689			713,527			518,775			(188,166	)
	45,808			17,130			135,170			320,414			309,554			377,980			143,676			190,652
	(50,196	)		(5,242	)		(533,736	)		(1,130,601	)		(1,602,773	)		(2,734,502	)		(521,023	)		(437,607	)
	—			—			(1,068,439	)		(32,233	)		(52,499	)		(80,114	)		(1,857	)		—
	6,934			(7,356	)		(71,494	)		(162,900	)		(189,772	)		(528,727	)		(27,718	)		(200,838	)
	682,181			376,769			1,198,158			(232,384	)		(254,904	)		(981,330	)		(90,607	)		216,312
	684,727			381,301			(340,341	)		(1,237,704	)		(1,790,394	)		(3,946,693	)		(497,529	)		(231,481	)
	751,563			379,612			27,335			(1,188,093	)		(1,413,705	)		(3,233,166	)		21,246			(419,647	)
	379,612			—			7,299,723			8,487,816			15,368,057			18,601,223			3,920,511			4,340,158
$	1,131,175		$	379,612		$	7,327,058		$	7,299,723		$	13,954,352		$	15,368,057		$	3,941,757		$	3,920,511

The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements.

F-33

Statement of Changes in Net Assets (Continued)

For the years ended December 31, 2012

and December 31, 2011

	MainStay VP Growth Equity— Initial Class						MainStay VP High Yield Corporate Bond— Initial Class
	2012			2011			2012			2011
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income (loss)	$	(602,628	)	$	(564,458	)	$	2,764,256		$	3,143,864
Net realized gain (loss) on investments		(3,097,356	)		(2,370,903	)		310,866			413,562
Realized gain distribution received		—			—			—			—
Change in unrealized appreciation (depreciation) on investments		11,446,934			1,334,980			4,112,994			(442,739	)
Net increase (decrease) in net assets resulting from operations		7,746,950			(1,600,381	)		7,188,116			3,114,687
Contributions and (Withdrawals):
Payments received from policyowners		1,506,854			1,622,047			1,716,618			1,839,806
Policyowners’ surrenders		(6,502,225	)		(5,706,702	)		(6,939,367	)		(8,101,662	)
Policyowners’ annuity and death benefits		(205,092	)		(220,715	)		(227,394	)		(444,262	)
Net transfers from (to) Fixed Account		(1,080,029	)		(831,294	)		(998,865	)		(1,323,852	)
Transfers between Investment Divisions		(1,679,564	)		(2,050,695	)		2,532,428			826,515
Net contributions and (withdrawals)		(7,960,056	)		(7,187,359	)		(3,916,580	)		(7,203,455	)
Increase (decrease) in net assets		(213,106	)		(8,787,740	)		3,271,536			(4,088,768	)
NET ASSETS:
Beginning of period		59,297,559			68,085,299			62,280,180			66,368,948
End of period	$	59,084,453		$	59,297,559		$	65,551,716		$	62,280,180

	MainStay VP Large Cap Growth— Initial Class						MainStay VP MFS®  Utilities— Service Class
	2012			2011			2012(a)
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income (loss)	$	(90,446	)	$	(87,569	)	$	(234,649	)
Net realized gain (loss) on investments		432,702			320,631			75,834
Realized gain distribution received		—			—			—
Change in unrealized appreciation/(depreciation) on investments		377,264			(341,947	)		1,643,717
Net increase (decrease) in net assets resulting from operations		719,520			(108,885	)		1,484,902
Contributions and (Withdrawals):
Payments received from policyowners		284,046			199,822			588,366
Policyowners’ surrenders		(1,031,650	)		(574,848	)		(1,878,308	)
Policyowners’ annuity and death benefits		(338	)		(10,663	)		(49,905	)
Net transfers from (to) Fixed Account		(69,468	)		(137,391	)		(487,619	)
Transfers between Investment Divisions		227,814			225,904			20,873,498
Net contributions and (withdrawals)		(589,596	)		(297,176	)		19,046,032
Increase (decrease) in net assets		129,924			(406,061	)		20,530,934
NET ASSETS:
Beginning of period		6,236,362			6,642,423			—
End of period	$	6,366,286		$	6,236,362		$	20,530,934

(a) For the period February 17, 2012 (commencement of Investment Division) through December 31, 2012.

The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements.

F-34

NYLIAC Variable Annuity Separate Account-II

Tax-Qualified Policies

MainStay VP ICAP Select Equity— Initial Class						MainStay VP Income Builder— Initial Class						MainStay VP International Equity— Initial Class						MainStay VP Janus Balanced— Initial Class
2012			2011			2012			2011			2012			2011			2012(a)
$	266,992		$	33,243		$	1,242,167		$	1,129,447		$	40,263		$	204,993		$	(511,336	)
	(368,720	)		(709,485	)		(1,423,673	)		(2,460,205	)		(982,683	)		(446,281	)		98,769
	—			—			—			—			—			—			—
	4,844,571			(380,170	)		5,696,689			2,575,268			2,476,534			(1,728,857	)		2,213,172
	4,742,843			(1,056,412	)		5,515,183			1,244,510			1,534,114			(1,970,145	)		1,800,605
	969,712			997,450			728,642			750,077			249,341			349,218			1,194,143
	(4,230,651	)		(4,013,688	)		(5,267,085	)		(4,454,260	)		(926,709	)		(1,322,598	)		(4,393,364	)
	(97,147	)		(184,900	)		(216,480	)		(188,561	)		(32,007	)		(80,534	)		(49,546	)
	(952,206	)		(723,020	)		(894,616	)		(767,665	)		(189,493	)		(244,430	)		(667,814	)
	(1,269,069	)		(981,913	)		(170,696	)		(624,814	)		(822,823	)		(358,827	)		44,636,522
	(5,579,361	)		(4,906,071	)		(5,820,235	)		(5,285,223	)		(1,721,691	)		(1,657,171	)		40,719,941
	(836,518	)		(5,962,483	)		(305,052	)		(4,040,713	)		(187,577	)		(3,627,316	)		42,520,546
	35,773,846			41,736,329			43,304,959			47,345,672			9,105,550			12,732,866			—
$	34,937,328		$	35,773,846		$	42,999,907		$	43,304,959		$	8,917,973		$	9,105,550		$	42,520,546
MainStay VP Mid Cap Core— Initial Class						MainStay VP Moderate Allocation— Service Class						MainStay VP Moderate Growth Allocation— Service Class						MainStay VP PIMCO Real Return— Service Class
2012			2011			2012			2011			2012			2011			2012(a)
$	(60,864	)	$	(57,880	)	$	32,340		$	50,905		$	(41,098	)	$	(47,657	)	$	(56,094	)
	675,055			(253,122	)		94,279			(173,026	)		(191,449	)		(136,782	)		19,120
	851,684			—			1,059,557			36,297			480,662			—			—
	119,022			(139,627	)		497,315			(41,709	)		1,256,245			(198,770	)		236,769
	1,584,897			(450,629	)		1,683,491			(127,533	)		1,504,360			(383,209	)		199,795
	288,918			473,031			667,929			824,222			401,855			375,917			185,796
	(1,213,516	)		(1,321,429	)		(2,020,860	)		(1,223,699	)		(1,852,023	)		(1,233,642	)		(535,092	)
	(34,756	)		(54,108	)		(40,087	)		(2,175	)		(34,210	)		(6,995	)		—
	(227,477	)		(447,954	)		(552,914	)		(622,840	)		(454,165	)		(352,763	)		(46,043	)
	(496,495	)		(515,332	)		1,881,583			739,644			443,841			211,058			5,915,208
	(1,683,326	)		(1,865,792	)		(64,349	)		(284,848	)		(1,494,702	)		(1,006,425	)		5,519,869
	(98,429	)		(2,316,421	)		1,619,142			(412,381	)		9,658			(1,389,634	)		5,719,664
	10,610,840			12,927,261			15,330,784			15,743,165			12,176,323			13,565,957			—
$	10,512,411		$	10,610,840		$	16,949,926		$	15,330,784		$	12,185,981		$	12,176,323		$	5,719,664

The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements.

F-35

Statement of Changes in Net Assets (Continued)

For the years ended December 31, 2012

and December 31, 2011

	MainStay VP S&P 500 Index— Initial Class						MainStay VP T. Rowe Price Equity Income— Initial Class
	2012			2011			2012(a)
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income (loss)	$	182,150		$	234,293		$	(137,539	)
Net realized gain (loss) on investments		(792,804	)		(1,075,003	)		41,082
Realized gain distribution received		—			—			—
Change in unrealized appreciation (depreciation) on investments		9,475,339			1,302,018			862,113
Net increase (decrease) in net assets resulting from operations		8,864,685			461,308			765,656
Contributions and (Withdrawals):
Payments received from policyowners		1,676,341			1,691,192			503,430
Policyowners’ surrenders		(6,458,109	)		(7,241,688	)		(1,560,494	)
Policyowners’ annuity and death benefits		(200,838	)		(239,555	)		(35,985	)
Net transfers from (to) Fixed Account		(1,386,266	)		(1,527,609	)		(218,171	)
Transfers between Investment Divisions		(2,088,417	)		(2,170,615	)		12,343,821
Net contributions and (withdrawals)		(8,457,289	)		(9,488,275	)		11,032,601
Increase (decrease) in net assets		407,396			(9,026,967	)		11,798,257
NET ASSETS:
Beginning of period		65,501,320			74,528,287			—
End of period	$	65,908,716		$	65,501,320		$	11,798,257

	Calvert VP SRI Balanced Portfolio						Columbia Variable Portfolio— Small Cap Value Fund— Class 2 Shares
	2012			2011			2012			2011
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income (loss)	$	(5,343	)	$	(1,341	)	$	(13,391	)	$	(6,460	)
Net realized gain (loss) on investments		105,333			6,201			(7,110	)		111,381
Realized gain distribution received		—			—			59,443			163,302
Change in unrealized appreciation/(depreciation) on investments		72,071			92,573			80,226			(378,070	)
Net increase (decrease) in net assets resulting from operations		172,061			97,433			119,168			(109,847	)
Contributions and (Withdrawals):
Payments received from policyowners		12,448			86,312			54,181			68,270
Policyowners’ surrenders		(49,012	)		(305,664	)		(146,849	)		(210,396	)
Policyowners’ annuity and death benefits		(1,994	)		(1,248	)		(5,022	)		(7,179	)
Net transfers from (to) Fixed Account		(1,409	)		(22,901	)		(73,666	)		(16,997	)
Transfers between Investment Divisions		(3,044,129	)		39,732			(26,802	)		(93,625	)
Net contributions and (withdrawals)		(3,084,096	)		(203,769	)		(198,158	)		(259,927	)
Increase (decrease) in net assets		(2,912,035	)		(106,336	)		(78,990	)		(369,774	)
NET ASSETS:
Beginning of period		2,912,035			3,018,371			1,330,230			1,700,004
End of period	$	—		$	2,912,035		$	1,251,240		$	1,330,230

(a) For the period February 17, 2012 (commencement of Investment Division) through December 31, 2012.

The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements.

F-36

NYLIAC Variable Annuity Separate Account-II

Tax-Qualified Policies

MainStay VP U.S. Small Cap— Initial Class						MainStay VP Van Eck Global Hard Assets— Initial Class			Alger Small Cap Growth Portfolio— Class 2 Shares						BlackRock® Global  Allocation V.I. Fund— Class III Shares
2012			2011			2012(a)			2012			2011			2012			2011
$	(34,297	)	$	(19,274	)	$	(163,401	)	$	(13,430	)	$	(106,694	)	$	13,182		$	13,630
	282,789			294,734			(301,959	)		2,931,461			797,138			(9,815	)		(5,680	)
	—			—			—			—			—			7,757			16,836
	170,296			(460,261	)		(1,260,773	)		(2,049,041	)		(1,003,670	)		106,977			(50,442	)
	418,788			(184,801	)		(1,726,133	)		868,990			(313,226	)		118,101			(25,656	)
	77,199			264,322			387,235			32,793			153,224			136,581			30,260
	(472,962	)		(423,009	)		(1,197,512	)		(164,398	)		(773,073	)		(178,372	)		(58,860	)
	(8,723	)		(7,553	)		(27,513	)		(270	)		(19,276	)		—			—
	(87,469	)		(95,931	)		(244,346	)		1,059			(163,776	)		6,141			23,554
	(228,961	)		(262,948	)		16,142,243			(8,000,952	)		(307,597	)		1,524,079			795,485
	(720,916	)		(525,119	)		15,060,107			(8,131,768	)		(1,110,498	)		1,488,429			790,439
	(302,128	)		(709,920	)		13,333,974			(7,262,778	)		(1,423,724	)		1,606,530			764,783
	3,945,189			4,655,109			—			7,262,778			8,686,502			764,783			—
$	3,643,061		$	3,945,189		$	13,333,974		$	—		$	7,262,778		$	2,371,313		$	764,783

Dreyfus IP Technology Growth Portfolio— Initial Shares						Fidelity® VIP Contrafund® Portfolio— Initial Class						Fidelity® VIP Equity-Income Portfolio— Initial Class						Fidelity® VIP Mid Cap Portfolio— Service Class 2
2012			2011			2012			2011			2012			2011			2012			2011
$	(32,185	)	$	(33,849	)	$	(30,833	)	$	(164,107	)	$	227,427		$	151,741		$	(88,730	)	$	(141,377	)
	271,857			455,080			688,906			1,154,631			(440,939	)		(730,600	)		(83,451	)		(109,591	)
	—			—			—			—			853,600			—			695,511			18,019
	109,008			(589,591	)		5,355,508			(2,687,675	)		1,347,039			549,155			612,761			(1,086,139	)
	348,680			(168,360	)		6,013,581			(1,697,151	)		1,987,127			(29,704	)		1,136,091			(1,319,088	)
	86,275			82,832			1,128,572			1,214,713			361,438			462,662			303,909			516,370
	(278,010	)		(274,819	)		(4,991,899	)		(5,553,281	)		(1,413,474	)		(1,756,100	)		(1,253,696	)		(1,175,190	)
	—			(1,156	)		(187,610	)		(88,491	)		(52,127	)		(97,035	)		(17,826	)		(8,294	)
	(118,139	)		(175,433	)		(877,833	)		(611,576	)		(329,098	)		(399,056	)		(148,108	)		(168,538	)
	(271,795	)		459,111			(1,774,864	)		(1,241,170	)		(452,637	)		(648,226	)		(627,585	)		(614,247	)
	(581,669	)		90,535			(6,703,634	)		(6,279,805	)		(1,885,898	)		(2,437,755	)		(1,743,306	)		(1,449,899	)
	(232,989	)		(77,825	)		(690,053	)		(7,976,956	)		101,229			(2,467,459	)		(607,215	)		(2,768,987	)
	2,464,074			2,541,899			42,186,141			50,163,097			13,319,881			15,787,340			9,327,388			12,096,375
$	2,231,085		$	2,464,074		$	41,496,088		$	42,186,141		$	13,421,110		$	13,319,881		$	8,720,173		$	9,327,388

The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements.

F-37

Statement of Changes in Net Assets (Continued)

For the years ended December 31, 2012

and December 31, 2011

	Janus Aspen Balanced Portfolio— Institutional Shares						Janus Aspen Worldwide Portfolio— Institutional Shares
	2012			2011			2012			2011
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income (loss)	$	(73,599	)	$	477,438		$	(92,704	)	$	(155,391	)
Net realized gain (loss) on investments		6,075,086			1,067,256			(1,352,713	)		(1,834,011	)
Realized gain distribution received		—			2,276,002			—			—
Change in unrealized appreciation (depreciation) on investments		(3,141,736	)		(3,632,647	)		4,445,340			(1,112,770	)
Net increase (decrease) in net assets resulting from operations		2,859,751			188,049			2,999,923			(3,102,172	)
Contributions and (Withdrawals):
Payments received from policyowners		93,829			1,077,268			524,113			552,049
Policyowners’ surrenders		(721,910	)		(5,137,386	)		(1,722,721	)		(1,972,712	)
Policyowners’ annuity and death benefits		(11,769	)		(226,333	)		(10,626	)		(36,488	)
Net transfers from (to) Fixed Account		(23,666	)		(1,150,776	)		(347,383	)		(249,582	)
Transfers between Investment Divisions		(42,762,291	)		223,865			(543,946	)		(818,641	)
Net contributions and (withdrawals)		(43,425,807	)		(5,213,362	)		(2,100,563	)		(2,525,374	)
Increase (decrease) in net assets		(40,566,056	)		(5,025,313	)		899,360			(5,627,546	)
NET ASSETS:
Beginning of period		40,566,056			45,591,369			17,228,094			22,855,640
End of period	$	—		$	40,566,056		$	18,127,454		$	17,228,094
	PIMCO Real Return Portfolio— Advisor Class						Royce Micro-Cap Portfolio— Investment Class
	2012			2011			2012			2011
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income (loss)	$	(6,809	)	$	8,200		$	(33,430	)	$	30,797
Net realized gain (loss) on investments		72,681			44,778			195,877			(81,214	)
Realized gain distribution received		—			106,400			64,545			—
Change in unrealized appreciation/(depreciation) on investments		891			11,237			(33,715	)		(340,665	)
Net increase (decrease) in net assets resulting from operations		66,763			170,615			193,277			(391,082	)
Contributions and (Withdrawals):
Payments received from policyowners		35,607			132,033			112,252			108,622
Policyowners’ surrenders		(10,599	)		(470,790	)		(242,008	)		(357,003	)
Policyowners’ annuity and death benefits		—			—			—			—
Net transfers from (to) Fixed Account		1,007			(102,679	)		(101,706	)		(32,351	)
Transfers between Investment Divisions		(3,712,370	)		2,608,415			502,194			236,842
Net contributions and (withdrawals)		(3,686,355	)		2,166,979			270,732			(43,890	)
Increase (decrease) in net assets		(3,619,592	)		2,337,594			464,009			(434,972	)
NET ASSETS:
Beginning of period		3,619,592			1,281,998			2,515,852			2,950,824
End of period	$	—		$	3,619,592		$	2,979,861		$	2,515,852

The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements.

F-38

NYLIAC Variable Annuity Separate Account-II

Tax-Qualified Policies

MFS® Investors Trust Series— Initial Class						MFS® Research Series— Initial Class						MFS® Utilities Series— Service Class						Neuberger Berman AMT Mid-Cap Growth Portfolio— Class S
2012			2011			2012			2011			2012			2011			2012			2011
$	(4,303	)	$	(3,783	)	$	(6,420	)	$	(5,925	)	$	(34,884	)	$	356,652		$	(18,957	)	$	(14,521	)
	15,109			35,136			109,247			87,660			(44,659	)		(353,542	)		122,162			91,634
	—			—			—			—			—			—			—			—
	138,525			(57,959	)		67,319			(96,878	)		867,888			1,019,262			20,006			(101,838	)
	149,331			(26,606	)		170,146			(15,143	)		788,345			1,022,372			123,211			(24,725	)
	22,494			24,405			17,010			15,759			73,303			896,776			58,847			203,537
	(43,115	)		(79,678	)		(251,608	)		(122,180	)		(176,387	)		(2,118,186	)		(101,989	)		(188,831	)
	(338	)		(8,470	)		(403	)		(6,473	)		(687	)		(119,539	)		(2,633	)		(342	)
	(13,752	)		(30,516	)		(15,552	)		(27,281	)		(161,602	)		(731,470	)		4,589			(30,858	)
	29,335			(68,288	)		27,442			(67,157	)		(20,603,690	)		600,647			290,185			80,600
	(5,376	)		(162,547	)		(223,111	)		(207,332	)		(20,869,063	)		(1,471,772	)		248,999			64,106
	143,955			(189,153	)		(52,965	)		(222,475	)		(20,080,718	)		(449,400	)		372,210			39,381
	857,136			1,046,289			1,144,168			1,366,643			20,080,718			20,530,118			1,119,212			1,079,831
$	1,001,091		$	857,136		$	1,091,203		$	1,144,168		$	—		$	20,080,718		$	1,491,422		$	1,119,212
Royce Small-Cap Portfolio— Investment Class						T. Rowe Price Equity Income Portfolio						UIF Emerging Markets Equity Portfolio— Class I						Van Eck VIP Global Hard Assets
2012			2011			2012			2011			2012			2011			2012			2011
$	(4,077	)	$	(23,412	)	$	(21,128	)	$	53,889		$	(17,953	)	$	(109,293	)	$	(27,986	)	$	(16,520	)
	558,106			19,083			(273,852	)		(267,326	)		(531,000	)		(939,995	)		(90,690	)		624,155
	—			—			—			—			—			—			1,123,528			240,629
	(321,879	)		(100,207	)		1,281,956			(40,229	)		1,732,221			(1,477,842	)		991,988			(4,203,414	)
	232,150			(104,536	)		986,976			(253,666	)		1,183,268			(2,527,130	)		1,996,840			(3,355,150	)
	9,286			101,158			25,075			406,316			25,192			471,704			60,543			649,165
	(9,172	)		(194,663	)		(140,608	)		(1,931,671	)		(172,980	)		(1,124,059	)		(154,641	)		(1,832,613	)
	—			—			—			(44,023	)		(673	)		(9,031	)		—			(14,900	)
	482			(28,544	)		(5,417	)		(153,034	)		(8,954	)		(186,198	)		(22,660	)		(422,359	)
	(2,466,470	)		(13,411	)		(12,670,467	)		24,892			(10,850,820	)		(1,192,029	)		(16,903,909	)		(289,987	)
	(2,465,874	)		(135,460	)		(12,791,417	)		(1,697,520	)		(11,008,235	)		(2,039,613	)		(17,020,667	)		(1,910,694	)
	(2,233,724	)		(239,996	)		(11,804,441	)		(1,951,186	)		(9,824,967	)		(4,566,743	)		(15,023,827	)		(5,265,844	)
	2,233,724			2,473,720			11,804,441			13,755,627			9,824,967			14,391,710			15,023,827			20,289,671
$	—		$	2,233,724		$	—		$	11,804,441		$	—		$	9,824,967		$	—		$	15,023,827

The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements.

F-39

Statement of Changes in Net Assets (Continued)

For the years ended December 31, 2012

and December 31, 2011

	Victory VIF Diversified Stock Fund— Class A Shares
	2012			2011
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income (loss)	$	(3,203	)	$	(6,287	)
Net realized gain (loss) on investments		(47,703	)		(73,950	)
Realized gain distribution received		—			—
Change in unrealized appreciation (depreciation) on investments		167,482			(3,638	)
Net increase (decrease) in net assets resulting from operations		116,576			(83,875	)
Contributions and (Withdrawals):
Payments received from policyowners		16,756			35,058
Policyowners’ surrenders		(24,606	)		(106,785	)
Policyowners’ annuity and death benefits		—			(2,868	)
Net transfers from (to) Fixed Account		(19,068	)		3,605
Transfers between Investment Divisions		(145,132	)		(25,490	)
Net contributions and (withdrawals)		(172,050	)		(96,480	)
Increase (decrease) in net assets		(55,474	)		(180,355	)
NET ASSETS:
Beginning of period		864,709			1,045,064
End of period	$	809,235		$	864,709

The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements.

F-40

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Notes to Financial Statements

NOTE 1—Organization and Significant Accounting Policies:

N

YLIAC Variable Annuity Separate Account-I (“Separate Account-I”) and NYLIAC Variable Annuity Separate Account-II (“Separate Account-II”) were established on October 5, 1992, under Delaware law by New York Life Insurance and Annuity Corporation (“NYLIAC”), a wholly-owned subsidiary of New York Life Insurance Company (“NYLIC”). These accounts were established to receive and invest premium payments under Non-Qualified Flexible Premium Multi-Funded Variable Retirement Annuity Policies (“Separate Account-I”) and Tax-Qualified Flexible Premium Multi-Funded Variable Retirement Annuity Policies (“Separate Account-II”) issued by NYLIAC. Separate Account-I policies are designed to establish retirement benefits to provide individuals with supplemental retirement income. Separate Account-II policies are designed to establish retirement benefits for individuals who participate in tax-qualified pension, profit sharing or annuity plans. The policies are distributed by NYLIFE Distributors LLC and sold by registered representatives of NYLIFE Securities LLC. NYLIFE Securities LLC and NYLIFE Distributors LLC are both indirect, wholly-owned subsidiaries of NYLIC. Separate Account-I and Separate Account-II are registered under the Investment Company Act of 1940, as amended, as unit investment trusts. Sales of these policies were discontinued effective May 10, 2002.

The assets of Separate Account-I and Separate Account-II are invested in shares of eligible portfolios of the MainStay VP Funds Trust, the BlackRock Variable Series Funds, Inc., the Columbia Funds Variable Insurance Trust, the Dreyfus Investment Portfolios, the Fidelity Variable Insurance Products Fund, the Janus Aspen Series, the MFS^® Variable Insurance Trust^SM, the Neuberger Berman Advisers Management Trust, the Royce Capital Fund and the Victory Variable Insurance Funds (collectively “Funds”). These assets are clearly identified and distinguished from the other assets and liabilities of NYLIAC. These assets are the property of NYLIAC; however, the portion of the assets attributable to the policies will not be charged with liabilities arising out of any other business NYLIAC may conduct. The Fixed Account represents the general account assets of NYLIAC and is not included in this report. NYLIAC’s Fixed Account may be charged with liabilities arising out of other business NYLIAC may conduct.

New York Life Investment Management LLC (“New York Life Investments”) provides investment advisory services to the MainStay VP Funds Trust, for a fee. New York Life Investments retains several sub-advisors, including Dimensional Fund Advisors LP (“DFA”), DuPont Capital Management Corporation (“DuPont Capital”), Eagle Asset Management, Inc. (“Eagle”), Epoch Investment Partners, Inc. (“Epoch”), Institutional Capital LLC (“ICAP”), Janus Capital Management LLC (“Janus Capital”), MacKay Shields LLC (“MacKay Shields”), Madison Square Investors LLC (“Madison Square Investors”), Massachusetts Financial Services Company (“MFS”), Pacific Investment Management Company LLC (“PIMCO”), T. Rowe Price Associates, Inc. (“T. Rowe Price”), Van Eck Associates Corporation (“Van Eck”) and Winslow Capital Management Inc. (“Winslow Capital”) to provide investment advisory services to certain portfolios of the MainStay VP Funds Trust.

New York Life Investments, MacKay Shields, Madison Square Investors and ICAP are all indirect, wholly-owned subsidiaries of NYLIC. Eagle is a wholly-owned subsidiary of Raymond James Financial, Inc.; Epoch is a wholly-owned subsidiary of Epoch Holding Corporation. Janus is a wholly-owned subsidiary of Janus Capital Group, Inc., (“JCGI”). MFS is an indirect majority-owned subsidiary of Sun Life Financial Inc., Winslow Capital is a wholly-owned subsidiary of Nuveen Investments, Inc., DFA, DuPont Capital, PIMCO, T. Rowe Price and Van Eck are independent investment advisory firms.

As of February 17, 2012, as a result of a restructuring of our investment options offered under the policies, some Funds that were previously offered are no longer available as investment options to our policyowners and those funds are now closed to our policyowners (“Closed Funds”). The assets in those funds were transferred into new MainStay VP Portfolios (“Replacement Funds”). New York Life Investments is the investment manager of the Replacement Funds. For most of the Funds, the advisor of the Closed Fund is the sub-advisor of the corresponding Replacement Fund and will continue to provide day-to-day Fund management services for our policyowners. The following is a listing of the Closed Funds (Column A) and the Replacement Funds (Column B).

F-42

NYLIAC Variable Annuity Separate Accounts-I and -II

Non-Qualified and Tax-Qualified Policies

Column A—Closed Funds	Column B—Replacement Funds
Van Eck VIP Global Hard Assets	MainStay VP Van Eck Global Hard Assets—Initial Class
Janus Aspen Balanced Portfolio—Institutional Shares	MainStay VP Janus Balanced—Initial Class
MFS® Utilities Series—Service Class	MainStay VP MFS® Utilities—Service Class
T. Rowe Price Equity Income Portfolio	MainStay VP T. Rowe Price Equity Income—Initial Class
PIMCO Real Return Portfolio—Advisor Class	MainStay VP PIMCO Real Return—Service Class
Universal Institution Funds, Inc. (“UIF”) Emerging Markets Equity Portfolio—Class I	MainStay VP DFA /DuPont Capital Emerging Markets Equity—Initial Class
Alger Small Cap Growth Portfolio—Class I-2 Shares	MainStay VP Eagle Small Cap Growth—Initial Class
Royce Small-Cap Portfolio—Investment Class	MainStay VP Eagle Small Cap Growth—Initial Class
Calvert VP SRI Balanced Portfolio	MainStay VP Janus Balanced—Initial Class

Not all of the Closed Funds were offered in each policy impacted by the restructure. If the Closed Fund was not offered, then the corresponding Replacement Fund was not offered.

As of February 17, 2012, any policyowner allocations that remained in the Closed Funds were redeemed. Those redemptions were used to purchase accumulation units in the corresponding Replacement Funds. After February 17, 2012, the Closed Funds were no longer available as investment options under the policies.

Therefore, the following Investment Divisions, with their respective Fund portfolios, are available in Separate Account-I and Separate Account-II:

MainStay VP Balanced—Service Class

MainStay VP Bond—Initial Class

MainStay VP Cash Management

MainStay VP Common Stock—Initial Class

MainStay VP Conservative Allocation—Service Class

MainStay VP Convertible—Initial Class

MainStay VP DFA/DuPont Capital Emerging Markets Equity—Initial Class

MainStay VP Eagle Small Cap Growth—Initial Class

MainStay VP Flexible Bond Opportunities—Service Class

MainStay VP Floating Rate—Service Class

MainStay VP Government—Initial Class

MainStay VP Growth Allocation—Service Class

MainStay VP Growth Equity—Initial Class

MainStay VP High Yield Corporate Bond—Initial Class

MainStay VP ICAP Select Equity—Initial Class

MainStay VP Income Builder—Initial Class

MainStay VP International Equity—Initial Class

MainStay VP Janus Balanced—Initial Class

MainStay VP Large Cap Growth—Initial Class

MainStay VP MFS^® Utilities—Service Class

MainStay VP Mid Cap Core—Initial Class

MainStay VP Moderate Allocation—Service Class

MainStay VP Moderate Growth Allocation—Service Class

MainStay VP PIMCO Real Return—Service Class

MainStay VP S&P 500 Index—Initial Class

MainStay VP T. Rowe Price Equity Income—Initial Class

MainStay VP U.S. Small Cap—Initial Class

MainStay VP Van Eck Global Hard Assets— Initial Class

BlackRock^® Global Allocation V.I. Fund—Class III Shares

Columbia Variable Portfolio—Small Cap Value Fund—Class 2 Shares

Dreyfus IP Technology Growth Portfolio—Initial Shares

Fidelity^® VIP Contrafund^® Portfolio—Initial Class

Fidelity^® VIP Equity-Income Portfolio—Initial Class

Fidelity^® VIP Mid Cap Portfolio—Service Class 2

Janus Aspen Worldwide Portfolio—Institutional Shares

MFS^® Investors Trust Series—Initial Class

MFS^® Research Series—Initial Class

Neuberger Berman AMT Mid-Cap Growth Portfolio—Class S

Royce Micro-Cap Portfolio—Investment Class

Victory VIF Diversified Stock Fund—Class A Shares

Not all investment options are available under all policies.

Initial premium payments were allocated to the MainStay VP Cash Management Investment Division until 15 days after the policy issue date. Subsequent premium payments are allocated to the Investment Divisions of Separate Account-I or Separate Account-II and the Fixed Account at the close of the business day they are received, in accordance with the policyowner’s instructions. In addition, the policyowner has the option to transfer amounts between the Investment Divisions of Separate Account-I or Separate Account-II and the Fixed Account of NYLIAC, subject to certain restrictions.

F-43

Notes to Financial Statements (Continued)

NOTE 1—Organization and Significant Accounting Policies (Continued):

No Federal income tax is payable on investment income or capital gains of Separate Account-I or Separate Account-II under current Federal income tax law.

Security Valuation—The investments are valued at the net asset value (“NAV“) of shares of the respective Fund portfolios.

Security Transactions—Realized gains and losses from security transactions are reported on the identified cost basis. Security transactions are accounted for as of the date the securities are purchased or sold (trade date).

Distributions Received—Dividend income and capital gain distributions are recorded on the ex-dividend date and reinvested in the corresponding Fund portfolio.

The authoritative guidance defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The authoritative guidance also establishes a framework for measuring fair value that includes a hierarchy used to classify the inputs used in measuring fair value. The hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three levels. The level in the fair value hierarchy within which the fair value measurement falls is determined based on the lowest level input that is significant to the fair value measurement.

The levels of the fair value hierarchy are based on the inputs to the valuation as follows:

Level 1—Fair value is based on unadjusted quoted prices for identical assets or liabilities in an active market. Active markets are defined as a market in which many transactions occur with sufficient frequency and volume to provide pricing information on an ongoing basis.

Level 2—Observable inputs other than Level 1 prices, such as quoted prices for similar instruments, quoted prices in markets that are not active, and inputs to model-derived valuations that are directly observable or can be corroborated by observable market data for substantially the full term of the asset.

Level 3—Instruments who values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. These inputs reflect management’s own assumptions in pricing of the asset or liability.

Investments in the mutual funds represent open-end mutual funds in which the valuation is based on the aggregate NAV of the shares held at the valuation date, which represents fair value, and are classified as level 1.

The amounts shown as net receivable from (payable to) NYLIAC on the Statement of Assets and Liabilities reflect transactions that occurred on the last business day of the reporting period. These amounts will be deposited to or withdrawn from the separate account in accordance with the policyowners’ instructions on the first business day subsequent to the close of the period presented. The amounts shown as net receivable from (payable to) the Fund for shares sold or purchased represent unsettled trades.

The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates.

As of January 25, 2013, Madison Square Investors changed its name to Cornerstone Capital Management Holdings LLC. As a result, all references in the prospectuses to Madison Square Investors as a subadvisor are hereby deleted and replaced with Cornerstone Capital Management Holdings LLC.

F-44

NYLIAC Variable Annuity Separate Accounts-I and -II

Non-Qualified and Tax-Qualified Policies

(This page intentionally left blank)

F-45

Notes to Financial Statements (Continued)

NOTE 2—Purchases and Sales (in 000’s)

T

he cost of purchases and proceeds from sales of investments for the year ended December 31, 2012 were as follows:

	Purchases		Sales
Separate Account—I (Non-Qualified Policies)
MainStay VP Balanced—Service Class	$	457	$	718
MainStay VP Bond—Initial Class		1,552		2,272
MainStay VP Cash Management		4,710		8,366
MainStay VP Common Stock—Initial Class		485		3,786
MainStay VP Conservative Allocation—Service Class		1,597		1,815
MainStay VP Convertible—Initial Class		540		1,860
MainStay VP DFA/DuPont Capital Emerging Markets Equity—Initial Class		7,097		1,210
MainStay VP Eagle Small Cap Growth—Initial Class		5,130		829
MainStay VP Flexible Bond Opportunities—Service Class		660		47
MainStay VP Floating Rate—Service Class		1,892		789
MainStay VP Government—Initial Class		951		3,069
MainStay VP Growth Allocation—Service Class		217		467
MainStay VP Growth Equity—Initial Class		509		5,109
MainStay VP High Yield Corporate Bond—Initial Class		6,809		7,957
MainStay VP ICAP Select Equity—Initial Class		814		4,174
MainStay VP Income Builder—Initial Class		1,681		4,605
MainStay VP International Equity—Initial Class		290		1,427
MainStay VP Janus Balanced—Initial Class		22,669		3,595
MainStay VP Large Cap Growth—Initial Class		1,472		1,017
MainStay VP MFS® Utilities—Service Class		11,314		1,930
MainStay VP Mid Cap Core—Initial Class		765		1,666
MainStay VP Moderate Allocation—Service Class		2,023		1,278
MainStay VP Moderate Growth Allocation—Service Class		807		1,306
MainStay VP PIMCO Real Return—Service Class		4,424		630
MainStay VP S&P 500 Index—Initial Class		1,262		6,936
MainStay VP T. Rowe Price Equity Income—Initial Class		6,980		1,306
MainStay VP U.S. Small Cap—Initial Class		226		375
MainStay VP Van Eck Global Hard Assets—Initial Class		11,304		2,849
Alger Small Cap Growth Portfolio—Class I-2 Shares		8		3,930
BlackRock® Global Allocation V.I. Fund—Class III Shares		611		184
Calvert VP SRI Balanced Portfolio		4		937
Columbia Variable Portfolio—Small Cap Value Fund—Class 2 Shares		123		238
Dreyfus IP Technology Growth Portfolio—Initial Shares		371		209
Fidelity® VIP Contrafund® Portfolio—Initial Class		1,231		4,614
Fidelity® VIP Equity-Income Portfolio—Initial Class		1,173		1,819
Fidelity® VIP Mid Cap Portfolio—Service Class 2		488		738
Janus Aspen Balanced Portfolio—Institutional Shares		35		21,799
Janus Aspen Worldwide Portfolio—Institutional Shares		315		1,871
MFS® Investors Trust Series—Initial Class		98		159
MFS® Research Series—Initial Class		111		93
MFS® Utilities Series—Service Class		195		11,258
Neuberger Berman AMT Mid-Cap Growth Portfolio—Class S		288		159
PIMCO Real Return Portfolio—Advisor Class		606		3,407
Royce Micro-Cap Portfolio—Investment Class		185		562
Royce Small-Cap Portfolio—Investment Class		5		1,333
T. Rowe Price Equity Income Portfolio		3		6,862
UIF Emerging Markets Equity Portfolio—Class I		96		6,906
Van Eck VIP Global Hard Assets		1,185		11,213
Victory VIF Diversified Stock Fund—Class A Shares		20		46
Total	$	105,788	$	149,725

F-46

NYLIAC Variable Annuity Separate Accounts-I and -II

Non-Qualified and Tax-Qualified Policies

	Purchases		Sales
Separate Account—II (Tax-Qualified Policies)
MainStay VP Balanced—Service Class	$	369	$	756
MainStay VP Bond—Initial Class		2,992		3,796
MainStay VP Cash Management		3,958		6,817
MainStay VP Common Stock—Initial Class		697		6,468
MainStay VP Conservative Allocation—Service Class		3,130		1,721
MainStay VP Convertible—Initial Class		783		1,884
MainStay VP DFA/DuPont Capital Emerging Markets Equity—Initial Class		11,026		1,551
MainStay VP Eagle Small Cap Growth—Initial Class		10,524		1,673
MainStay VP Flexible Bond Opportunities—Service Class		828		157
MainStay VP Floating Rate—Service Class		1,755		1,923
MainStay VP Government—Initial Class		1,039		2,598
MainStay VP Growth Allocation—Service Class		514		778
MainStay VP Growth Equity—Initial Class		443		8,974
MainStay VP High Yield Corporate Bond—Initial Class		5,373		6,517
MainStay VP ICAP Select Equity—Initial Class		969		6,258
MainStay VP Income Builder—Initial Class		2,365		6,937
MainStay VP International Equity—Initial Class		348		2,035
MainStay VP Janus Balanced—Initial Class		46,318		6,093
MainStay VP Large Cap Growth—Initial Class		591		1,283
MainStay VP MFS® Utilities—Service Class		21,781		2,950
MainStay VP Mid Cap Core—Initial Class		1,159		2,049
MainStay VP Moderate Allocation—Service Class		3,989		2,967
MainStay VP Moderate Growth Allocation—Service Class		1,508		2,563
MainStay VP PIMCO Real Return—Service Class		6,512		1,057
MainStay VP S&P 500 Index—Initial Class		1,471		9,773
MainStay VP T. Rowe Price Equity Income—Initial Class		13,443		2,543
MainStay VP U.S. Small Cap—Initial Class		161		917
MainStay VP Van Eck Global Hard Assets—Initial Class		17,528		2,599
Alger Small Cap Growth Portfolio—Class I-2 Shares		45		8,193
BlackRock® Global Allocation V.I. Fund—Class III Shares		1,768		259
Calvert VP SRI Balanced Portfolio		35		3,125
Columbia Variable Portfolio—Small Cap Value Fund—Class 2 Shares		186		338
Dreyfus IP Technology Growth Portfolio—Initial Shares		546		1,142
Fidelity® VIP Contrafund® Portfolio—Initial Class		734		7,453
Fidelity® VIP Equity-Income Portfolio—Initial Class		1,394		2,201
Fidelity® VIP Mid Cap Portfolio—Service Class 2		957		2,093
Janus Aspen Balanced Portfolio—Institutional Shares		49		43,554
Janus Aspen Worldwide Portfolio—Institutional Shares		339		2,558
MFS® Investors Trust Series—Initial Class		91		100
MFS® Research Series—Initial Class		91		320
MFS® Utilities Series—Service Class		142		21,046
Neuberger Berman AMT Mid-Cap Growth Portfolio—Class S		510		278
PIMCO Real Return Portfolio—Advisor Class		801		4,494
Royce Micro-Cap Portfolio—Investment Class		964		644
Royce Small-Cap Portfolio—Investment Class		74		2,544
T. Rowe Price Equity Income Portfolio		47		12,860
UIF Emerging Markets Equity Portfolio—Class I		24		11,051
Van Eck VIP Global Hard Assets		1,489		17,418
Victory VIF Diversified Stock Fund—Class A Shares		38		213
Total	$	171,898	$	237,521

Not all investment options are available under all policies.

F-47

Notes to Financial Statements (Continued)

NOTE 3—Expenses and Related Party Transactions:

N

YLIAC deducts a surrender charge on certain partial withdrawals and surrenders. This charge is 7% during the first three policy years and declines 1% per year for each additional policy year, until the ninth policy year, after which no charge is made. Surrender charges are paid to NYLIAC. This charge is shown with policyowners’ surrenders in the accompanying Statements of Changes in Net Assets.

NYLIAC also deducts an annual policy service charge from the policy’s accumulation value on each policy anniversary date and upon surrender, if on the policy anniversary and/or date of surrender the accumulation value is less than $10,000. This charge is the lesser of $30 or 2% of the accumulation value. This charge is shown as a reduction to payments received from policyowners in the accompanying Statements of Changes in Net Assets.

Separate Account-I and Separate Account-II are charged for mortality and expense risks assumed and administrative services provided by NYLIAC. These charges are made daily at an annual rate of 1.20% and .10%, respectively, of the daily average variable accumulation value of each Investment Division, and is the same rate for each of the five periods presented in the Financial Highlights Section. These charges are disclosed on the accompanying Statement of Operations.

Separate Account-I and Separate Account-II policyowners may pay certain Fund portfolio company operating expenses during the time they own their policy, which are reflected in the daily computation of NAVs for the Funds. NYLIAC may receive payment or compensation from the Funds resulting from certain of these operating expenses in connection with the administration, distribution and other services it provides to the Funds, some of whom may be affiliates of either NYLIAC or Separate Account-I and Separate Account-II. Management Fees (which may include administration and/or advisory fees) range from 0.00% to 1.25%, distribution (12b-1) fees range from 0.00% to 0.25%, and other expenses range from 0.04% to 1.06%. These ranges are shown as a percentage of average net assets as of December 31, 2011, and approximate the ranges as of December 31, 2012.

NOTE 4—Distribution of Net Income:

S

eparate Account-I and Separate Account-II do not expect to declare dividends to policyowners from accumulated net investment income and realized gains. The income and gains are distributed to policyowners as part of withdrawals of amounts (in the form of surrenders, death benefits, transfers, or annuity payments) in excess of the net premium payments.

F-48

NYLIAC Variable Annuity Separate Accounts-I and -II

Non-Qualified and Tax-Qualified Policies

(This page intentionally left blank)

F-49

Notes to Financial Statements (Continued)

NOTE 5—Changes in Units Outstanding (in 000’s)

T

he changes in units outstanding for the years ended December 31, 2012 and 2011 were as follows:

	2012								2011
	Units Issued		Units Redeemed			Net Increase (Decrease)			Units Issued		Units Redeemed			Net Increase (Decrease)
Separate Account—I (Non-Qualified Policies)
MainStay VP Balanced—Service Class		35		(56	)		(21	)		8		(44	)		(36	)
MainStay VP Bond—Initial Class		35		(92	)		(57	)		55		(148	)		(93	)
MainStay VP Cash Management		3,405		(5,935	)		(2,530	)		7404		(6,604	)		800
MainStay VP Common Stock—Initial Class		5		(116	)		(111	)		9		(152	)		(143	)
MainStay VP Conservative Allocation—Service Class		86		(136	)		(50	)		116		(180	)		(64	)
MainStay VP Convertible—Initial Class		12		(72	)		(60	)		42		(99	)		(57	)
MainStay VP DFA/DuPont Capital Emerging Markets Equity—Initial Class		713		(125	)		588			—		—			—
MainStay VP Eagle Small Cap Growth—Initial Class		514		(82	)		432			—		—			—
MainStay VP Flexible Bond Opportunities—Service Class		59		(4	)		55			42		(7	)		35
MainStay VP Floating Rate—Service Class		146		(64	)		82			94		(127	)		(33	)
MainStay VP Government—Initial Class		27		(129	)		(102	)		38		(149	)		(111	)
MainStay VP Growth Allocation—Service Class		5		(41	)		(36	)		12		(49	)		(37	)
MainStay VP Growth Equity—Initial Class		16		(186	)		(170	)		5		(231	)		(226	)
MainStay VP High Yield Corporate Bond—Initial Class		103		(215	)		(112	)		82		(412	)		(330	)
MainStay VP ICAP Select Equity—Initial Class		22		(269	)		(247	)		25		(282	)		(257	)
MainStay VP Income Builder—Initial Class		11		(147	)		(136	)		12		(191	)		(179	)
MainStay VP International Equity—Initial Class		9		(65	)		(56	)		15		(56	)		(41	)
MainStay VP Janus Balanced—Initial Class		2,268		(333	)		1,935			—		—			—
MainStay VP Large Cap Growth—Initial Class		89		(59	)		30			56		(53	)		3
MainStay VP MFS® Utilities—Service Class		1,134		(182	)		952			—		—			—
MainStay VP Mid Cap Core—Initial Class		9		(91	)		(82	)		21		(91	)		(70	)
MainStay VP Moderate Allocation—Service Class		119		(99	)		20			83		(146	)		(63	)
MainStay VP Moderate Growth Allocation—Service Class		39		(104	)		(65	)		71		(103	)		(32	)
MainStay VP PIMCO Real Return—Service Class		441		(60	)		381			—		—			—
MainStay VP S&P 500 Index—Initial Class		18		(191	)		(173	)		9		(190	)		(181	)
MainStay VP T. Rowe Price Equity Income—Initial Class		700		(123	)		577			—		—			—
MainStay VP U.S. Small Cap—Initial Class		15		(24	)		(9	)		10		(42	)		(32	)
MainStay VP Van Eck Global Hard Assets—Initial Class		1,136		(318	)		818			—		—			—
Alger Small Cap Growth Portfolio—Class I-2 Shares		1		(248	)		(247	)		2		(54	)		(52	)
BlackRock® Global Allocation V.I. Fund—Class III Shares		63		(19	)		44			48		(4	)		44
Calvert VP SRI Balanced Portfolio		1		(44	)		(43	)		1		(7	)		(6	)
Columbia Variable Portfolio—Small Cap Value Fund—Class 2 Shares		7		(18	)		(11	)		9		(23	)		(14	)
Dreyfus IP Technology Growth Portfolio—Initial Shares		28		(16	)		12			49		(52	)		(3	)
Fidelity® VIP Contrafund® Portfolio—Initial Class		34		(149	)		(115	)		19		(163	)		(144	)
Fidelity® VIP Equity-Income Portfolio—Initial Class		24		(86	)		(62	)		24		(100	)		(76	)
Fidelity® VIP Mid Cap Portfolio—Service Class 2		8		(34	)		(26	)		17		(55	)		(38	)
Janus Aspen Balanced Portfolio—Institutional Shares		1		(705	)		(704	)		10		(90	)		(80	)
Janus Aspen Worldwide Portfolio—Institutional Shares		17		(110	)		(93	)		15		(109	)		(94	)
MFS® Investors Trust Series—Initial Class		8		(13	)		(5	)		3		(5	)		(2	)
MFS® Research Series—Initial Class		8		(7	)		1			2		(9	)		(7	)
MFS® Utilities Series—Service Class		10		(486	)		(476	)		38		(83	)		(45	)
Neuberger Berman AMT Mid-Cap Growth Portfolio—Class S		16		(8	)		8			7		(15	)		(8	)
PIMCO Real Return Portfolio—Advisor Class		53		(295	)		(242	)		216		(50	)		166
Royce Micro-Cap Portfolio—Investment Class		11		(36	)		(25	)		22		(31	)		(9	)
Royce Small-Cap Portfolio—Investment Class		—		(95	)		(95	)		11		(21	)		(10	)
T. Rowe Price Equity Income Portfolio		—		(424	)		(424	)		22		(83	)		(61	)
UIF Emerging Markets Equity Portfolio—Class I		4		(287	)		(283	)		16		(66	)		(50	)
Van Eck VIP Global Hard Assets		12		(286	)		(274	)		35		(90	)		(55	)
Victory VIF Diversified Stock Fund—Class A Shares		2		(4	)		(2	)		1		(13	)		(12	)

F-50

NYLIAC Variable Annuity Separate Accounts-I and -II

Non-Qualified and Tax-Qualified Policies

	2012								2011
	Units Issued		Units Redeemed			Net Increase (Decrease)			Units Issued		Units Redeemed			Net Increase (Decrease)
Separate Account—II (Tax-Qualified Policies)
MainStay VP Balanced—Service Class		28		(59	)		(31	)		30		(70	)		(40	)
MainStay VP Bond—Initial Class		86		(156	)		(70	)		68		(158	)		(90	)
MainStay VP Cash Management		2,884		(4,810	)		(1,926	)		5790		(5,954	)		(164	)
MainStay VP Common Stock—Initial Class		6		(200	)		(194	)		12		(192	)		(180	)
MainStay VP Conservative Allocation—Service Class		176		(128	)		48			226		(132	)		94
MainStay VP Convertible—Initial Class		19		(72	)		(53	)		42		(79	)		(37	)
MainStay VP DFA/DuPont Capital Emerging Markets Equity—Initial Class		1,108		(159	)		949			—		—			—
MainStay VP Eagle Small Cap Growth—Initial Class		1,055		(167	)		888			—		—			—
MainStay VP Flexible Bond Opportunities—Service Class		80		(16	)		64			46		(7	)		39
MainStay VP Floating Rate—Service Class		128		(160	)		(32	)		139		(248	)		(109	)
MainStay VP Government—Initial Class		29		(109	)		(80	)		35		(222	)		(187	)
MainStay VP Growth Allocation—Service Class		24		(69	)		(45	)		48		(72	)		(24	)
MainStay VP Growth Equity—Initial Class		11		(330	)		(319	)		12		(321	)		(309	)
MainStay VP High Yield Corporate Bond—Initial Class		57		(173	)		(116	)		86		(314	)		(228	)
MainStay VP ICAP Select Equity—Initial Class		19		(400	)		(381	)		28		(387	)		(359	)
MainStay VP Income Builder—Initial Class		21		(224	)		(203	)		27		(228	)		(201	)
MainStay VP International Equity—Initial Class		10		(93	)		(83	)		17		(93	)		(76	)
MainStay VP Janus Balanced—Initial Class		4,637		(560	)		4,077			—		—			—
MainStay VP Large Cap Growth—Initial Class		37		(73	)		(36	)		50		(69	)		(19	)
MainStay VP MFS® Utilities—Service Class		2,187		(275	)		1,912			—		—			—
MainStay VP Mid Cap Core—Initial Class		14		(111	)		(97	)		34		(144	)		(110	)
MainStay VP Moderate Allocation—Service Class		226		(231	)		(5	)		169		(196	)		(27	)
MainStay VP Moderate Growth Allocation—Service Class		82		(208	)		(126	)		76		(170	)		(94	)
MainStay VP PIMCO Real Return—Service Class		649		(102	)		547			—		—			—
MainStay VP S&P 500 Index—Initial Class		14		(268	)		(254	)		10		(319	)		(309	)
MainStay VP T. Rowe Price Equity Income—Initial Class		1,348		(241	)		1,107			—		—			—
MainStay VP U.S. Small Cap—Initial Class		12		(61	)		(49	)		27		(65	)		(38	)
MainStay VP Van Eck Global Hard Assets—Initial Class		1,767		(279	)		1,488			—		—			—
Alger Small Cap Growth Portfolio—Class I-2 Shares		3		(517	)		(514	)		8		(81	)		(73	)
BlackRock® Global Allocation V.I. Fund—Class III Shares		185		(27	)		158			97		(11	)		86
Calvert VP SRI Balanced Portfolio		2		(146	)		(144	)		9		(19	)		(10	)
Columbia Variable Portfolio—Small Cap Value Fund—Class 2 Shares		10		(25	)		(15	)		12		(32	)		(20	)
Dreyfus IP Technology Growth Portfolio—Initial Shares		44		(90	)		(46	)		119		(105	)		14
Fidelity® VIP Contrafund® Portfolio—Initial Class		8		(243	)		(235	)		20		(255	)		(235	)
Fidelity® VIP Equity-Income Portfolio—Initial Class		8		(103	)		(95	)		36		(168	)		(132	)
Fidelity® VIP Mid Cap Portfolio—Service Class 2		13		(98	)		(85	)		27		(96	)		(69	)
Janus Aspen Balanced Portfolio—Institutional Shares		2		(1,405	)		(1,403	)		27		(207	)		(180	)
Janus Aspen Worldwide Portfolio—Institutional Shares		15		(149	)		(134	)		18		(171	)		(153	)
MFS® Investors Trust Series—Initial Class		7		(8	)		(1	)		4		(16	)		(12	)
MFS® Research Series—Initial Class		7		(24	)		(17	)		1		(18	)		(17	)
MFS® Utilities Series—Service Class		7		(883	)		(876	)		62		(128	)		(66	)
Neuberger Berman AMT Mid-Cap Growth Portfolio—Class S		31		(16	)		15			30		(26	)		4
PIMCO Real Return Portfolio—Advisor Class		70		(389	)		(319	)		266		(71	)		195
Royce Micro-Cap Portfolio—Investment Class		64		(42	)		22			30		(34	)		(4	)
Royce Small-Cap Portfolio—Investment Class		5		(171	)		(166	)		23		(32	)		(9	)
T. Rowe Price Equity Income Portfolio		3		(788	)		(785	)		44		(155	)		(111	)
UIF Emerging Markets Equity Portfolio—Class I		1		(456	)		(455	)		19		(102	)		(83	)
Van Eck VIP Global Hard Assets		10		(438	)		(428	)		48		(98	)		(50	)
Victory VIF Diversified Stock Fund—Class A Shares		3		(17	)		(14	)		6		(15	)		(9	)

Not all investment options are available under all policies.

F-51

Notes to Financial Statements (Continued)

NOTE 6—Financial Highlights:

T

he following table presents financial highlights for each Investment Division as of December 31, 2012, 2011, 2010, 2009 and 2008:

		Net Assets (in 000’s)		Units Outstanding (in 000’s)		Variable Accumulation Unit Value	Total Return1	Investment Income Ratio2
Separate Account—I (Non-Qualified Policies)
MainStay VP Balanced—Service Class	2012	$	2,350		182	$12.96	10.6%		1.1	%
	2011		2,403		203	11.72	1.2%		1.3	%
	2010		2,729		239	11.58	11.9%		1.2	%
	2009		2,911		281	10.35	21.2%		2.8	%
	2008		3,193		374	8.54	(26.0%)		0.0	%
MainStay VP Bond—Initial Class	2012	$	13,744		585	$23.55	3.3%		2.4	%
	2011		14,636		642	22.80	5.9%		3.1	%
	2010		15,792		735	21.54	6.5%		3.1	%
	2009		16,463		814	20.23	6.4%		4.7	%
	2008		16,721		879	19.02	2.4%		4.0	%
MainStay VP Cash Management	2012	$	8,600		6,226	$  1.38	(1.3%)		0.0	%
	2011		12,219		8,756	1.40	(1.3%)		0.0	%
	2010		11,244		7,956	1.42	(1.3%)		0.0	%
	2009		15,141		10,684	1.44	(1.2%)		0.0	%
	2008		25,777		17,809	1.46	0.9%		2.1	%
MainStay VP Common Stock—Initial Class	2012	$	20,335		641	$31.75	15.2%		1.6	%
	2011		20,681		752	27.56	0.3%		1.4	%
	2010		24,595		895	27.49	11.2%		1.6	%
	2009		26,124		1,057	24.73	20.8%		2.1	%
	2008		25,673		1,254	20.47	(37.2%)		1.4	%
MainStay VP Conservative Allocation—Service Class	2012	$	6,832		520	$13.21	9.0%		1.9	%
	2011		6,911		570	12.12	1.3%		2.0	%
	2010		7,580		634	11.96	10.3%		2.3	%
	2009		6,661		614	10.85	20.4%		2.9	%
	2008		6,358		706	9.01	(19.7%)		0.0	%
MainStay VP Convertible—Initial Class	2012	$	7,519		297	$25.28	7.7%		2.9	%
	2011		8,425		357	23.46	(6.0%)		2.2	%
	2010		10,325		414	24.96	16.3%		2.8	%
	2009		10,046		464	21.45	44.2%		2.2	%
	2008		7,622		513	14.88	(35.3%)		2.1	%
MainStay VP DFA/DuPont Capital Emerging Markets Equity—Initial Class	2012	$	5,874		588	$10.00	0.0%		0.0	%
MainStay VP Eagle Small Cap Growth—Initial Class	2012	$	4,270		432	$  9.88	(1.2%)		0.0	%
MainStay VP Flexible Bond Opportunities—Service Class	2012	$	999		90	$10.95	12.1%		6.7	%
	2011		343		35	9.76	(2.4%)		8.4	%
MainStay VP Floating Rate—Service Class	2012	$	5,678		470	$12.03	5.5%		3.9	%
	2011		4,413		388	11.40	0.6%		4.0	%
	2010		4,772		421	11.33	6.5%		3.8	%
	2009		4,769		438	10.65	31.5%		3.4	%
	2008		2,959		365	8.09	(24.0%)		5.2	%
MainStay VP Government—Initial Class	2012	$	11,340		498	$22.82	2.6%		2.9	%
	2011		13,333		600	22.24	4.6%		3.2	%
	2010		15,107		711	21.26	4.0%		3.0	%
	2009		17,425		853	20.44	0.3%		3.4	%
	2008		21,921		1,076	20.38	8.4%		3.0	%

F-52

NYLIAC Variable Annuity Separate Accounts-I and -II

Non-Qualified and Tax-Qualified Policies

		Net Assets (in 000’s)		Units Outstanding (in 000’s)		Variable Accumulation Unit Value	Total Return1	Investment Income Ratio2
MainStay VP Growth Allocation—Service Class	2012	$	2,317		204	$11.35	13.7%		0.8	%
	2011		2,397		240	9.98	(4.1%)		0.6	%
	2010		2,885		277	10.41	13.3%		1.0	%
	2009		2,769		317	9.19	26.1%		2.1	%
	2008		2,515		345	7.29	(38.6%)		0.5	%
MainStay VP Growth Equity—Initial Class	2012	$	36,870		1,444	$25.56	13.5%		0.4	%
	2011		36,384		1,614	22.52	(2.6%)		0.5	%
	2010		42,555		1,840	23.14	10.8%		0.5	%
	2009		45,099		2,159	20.89	32.5%		0.6	%
	2008		40,225		2,553	15.77	(39.7%)		0.5	%
MainStay VP High Yield Corporate Bond—Initial Class	2012	$	63,926		1,770	$36.10	12.0%		5.6	%
	2011		60,738		1,882	32.25	4.9%		6.0	%
	2010		68,004		2,212	30.75	11.2%		5.8	%
	2009		66,530		2,408	27.64	41.0%		7.7	%
	2008		51,777		2,640	19.61	(25.1%)		8.3	%
MainStay VP ICAP Select Equity—Initial Class	2012	$	23,250		1,534	$15.17	14.1%		2.1	%
	2011		23,684		1,781	13.30	(2.7%)		1.4	%
	2010		27,757		2,038	13.67	16.6%		0.8	%
	2009		28,265		2,411	11.73	27.7%		1.8	%
	2008		21,855		2,381	9.18	(38.4%)		0.7	%
MainStay VP Income Builder—Initial Class	2012	$	33,460		1,097	$30.32	13.5%		4.3	%
	2011		32,930		1,233	26.71	2.8%		3.8	%
	2010		36,596		1,412	25.99	13.3%		3.0	%
	2009		37,725		1,646	22.94	21.9%		3.5	%
	2008		37,231		1,979	18.81	(27.9%)		3.1	%
MainStay VP International Equity—Initial Class	2012	$	6,559		297	$22.07	17.9%		1.8	%
	2011		6,640		353	18.72	(17.1%)		3.2	%
	2010		8,886		394	22.58	3.5%		3.2	%
	2009		10,001		459	21.81	17.8%		6.9	%
	2008		10,440		564	18.51	(26.6%)		1.4	%
MainStay VP Janus Balanced—Initial Class	2012	$	20,172		1,935	$10.43	4.3%		0.0	%
MainStay VP Large Cap Growth—Initial Class	2012	$	4,352		258	$16.84	11.6%		0.0	%
	2011		3,425		228	15.08	(1.6%)		0.0	%
	2010		3,432		225	15.32	14.7%		0.0	%
	2009		3,731		279	13.36	38.2%		0.0	%
	2008		2,531		262	9.67	(39.6%)		0.1	%
MainStay VP MFS® Utilities—Service Class	2012	$	10,179		952	$10.75	7.5%		0.0	%
MainStay VP Mid Cap Core—Initial Class	2012	$	6,528		353	$18.50	16.0%		0.8	%
	2011		6,921		435	15.95	(4.2%)		0.8	%
	2010		8,411		505	16.66	22.0%		0.3	%
	2009		7,878		577	13.65	35.2%		0.5	%
	2008		3,186		316	10.10	(43.0%)		0.3	%
MainStay VP Moderate Allocation—Service Class	2012	$	7,805		615	$12.70	10.9%		1.5	%
	2011		6,813		595	11.45	(0.6%)		1.6	%
	2010		7,579		658	11.52	11.4%		1.9	%
	2009		7,800		754	10.35	22.4%		2.7	%
	2008		5,865		694	8.45	(26.3%)		0.2	%
MainStay VP Moderate Growth Allocation—Service Class	2012	$	7,418		609	$12.18	12.9%		1.0	%
	2011		7,269		674	10.79	(2.7%)		1.0	%
	2010		7,832		706	11.09	12.6%		1.4	%
	2009		6,833		695	9.85	26.4%		2.6	%
	2008		5,968		766	7.79	(33.5%)		0.4	%

F-53

Notes to Financial Statements (Continued)

NOTE 6—Financial Highlights (Continued):

		Net Assets (in 000’s)		Units Outstanding (in 000’s)		Variable Accumulation Unit Value	Total Return1	Investment Income Ratio2
MainStay VP PIMCO Real Return—Service Class	2012	$	4,009		381	$10.44	4.4%		0.0	%
MainStay VP S&P 500 Index—Initial Class	2012	$	41,933		1,200	$34.99	14.2%		1.6	%
	2011		42,070		1,373	30.65	0.5%		1.7	%
	2010		47,325		1,554	30.49	13.2%		1.8	%
	2009		48,165		1,790	26.92	24.6%		2.8	%
	2008		46,819		2,167	21.60	(37.8%)		2.2	%
MainStay VP T. Rowe Price Equity Income—Initial Class	2012	$	6,140		577	$10.67	6.7%		0.0	%
MainStay VP U.S. Small Cap—Initial Class	2012	$	2,562		169	$15.16	11.3%		0.5	%
	2011		2,436		178	13.62	(4.0%)		0.9	%
	2010		2,984		210	14.18	23.4%		0.1	%
	2009		2,743		239	11.49	39.2%		0.0	%
	2008		879		106	8.26	(47.9%)		0.0	%
MainStay VP Van Eck Global Hard Assets—Initial Class	2012	$	7,327		818	$  8.98	(10.2%)		0.0	%
Alger Small Cap Growth Portfolio—Class I-2 Shares	2012	$	—		—	$     —	—		—
	2011		3,502		247	14.14	(4.4%)		0.0	%
	2010		4,411		299	14.80	23.7%		0.0	%
	2009		4,453		372	11.97	43.6%		0.0	%
	2008		3,969		476	8.33	(47.3%)		0.0	%
BlackRock® Global Allocation V.I. Fund— Class III Shares	2012	$	853		88	$  9.71	8.5%		1.8	%
	2011		392		44	8.94	(10.6%)		5.6	%
Calvert VP SRI Balanced Portfolio	2012	$	—		—	$    —	—		—
	2011		879		43	20.22	3.2%		1.3	%
	2010		936		49	19.59	10.7%		1.4	%
	2009		978		55	17.71	23.7%		2.0	%
	2008		994		69	14.32	(32.2%)		2.2	%
Columbia Variable Portfolio—Small Cap Value Fund—Class 2 Shares	2012	$	664		48	$13.86	9.8%		0.3	%
	2011		758		59	12.62	(7.3%)		0.8	%
	2010		996		73	13.62	24.8%		1.1	%
	2009		1,009		92	10.91	23.4%		0.9	%
	2008		1,034		117	8.84	(29.1%)		0.4	%
Dreyfus IP Technology Growth Portfolio—Initial Shares	2012	$	1,026		80	$12.77	14.1%		0.0	%
	2011		759		68	11.19	(9.0%)		0.0	%
	2010		877		71	12.29	28.3%		0.0	%
	2009		786		82	9.58	55.6%		0.4	%
	2008		445		72	6.16	(41.9%)		0.0	%
Fidelity® VIP Contrafund® Portfolio—Initial Class	2012	$	22,446		742	$30.28	14.9%		1.3	%
	2011		22,622		857	26.35	(3.8%)		1.0	%
	2010		27,393		1,001	27.38	15.7%		1.2	%
	2009		27,629		1,168	23.67	34.0%		1.3	%
	2008		25,342		1,436	17.67	(43.3%)		0.9	%
Fidelity® VIP Equity-Income Portfolio—Initial Class	2012	$	7,492		351	$21.33	15.8%		2.9	%
	2011		7,665		413	18.42	(0.3%)		2.3	%
	2010		9,021		489	18.48	13.7%		1.7	%
	2009		9,965		614	16.26	28.5%		2.2	%
	2008		10,150		802	12.65	(43.4%)		2.3	%
Fidelity® VIP Mid Cap Portfolio—Service Class 2	2012	$	4,190		199	$21.13	13.1%		0.4	%
	2011		4,207		225	18.69	(12.0%)		0.0	%
	2010		5,589		263	21.24	26.9%		0.1	%
	2009		4,956		296	16.73	37.9%		0.5	%
	2008		4,155		343	12.13	(40.4%)		0.2	%

F-54

NYLIAC Variable Annuity Separate Accounts-I and -II

Non-Qualified and Tax-Qualified Policies

		Net Assets (in 000’s)		Units Outstanding (in 000’s)		Variable Accumulation Unit Value	Total Return1	Investment Income Ratio2
Janus Aspen Balanced Portfolio—Institutional Shares	2012	$	—		—	$     —	—		—
	2011		20,289		704	28.84	0.3%		2.4	%
	2010		22,563		784	28.74	7.0%		2.8	%
	2009		24,038		895	26.87	24.3%		3.0	%
	2008		23,033		1,065	21.62	(16.9%)		2.6	%
Janus Aspen Worldwide Portfolio—Institutional Shares	2012	$	9,857		570	$17.31	18.5%		0.9	%
	2011		9,686		663	14.60	(14.9%)		0.6	%
	2010		12,977		757	17.15	14.3%		0.6	%
	2009		13,411		895	15.00	35.9%		1.4	%
	2008		11,536		1,045	11.03	(45.4%)		1.2	%
MFS® Investors Trust Series—Initial Class	2012	$	533		43	$12.32	17.6%		0.9	%
	2011		504		48	10.47	(3.4%)		0.9	%
	2010		540		50	10.84	9.7%		1.3	%
	2009		652		66	9.89	25.3%		1.7	%
	2008		603		76	7.89	(33.9%)		0.9	%
MFS® Research Series—Initial Class	2012	$	648		46	$13.94	15.8%		0.8	%
	2011		544		45	12.04	(1.7%)		0.8	%
	2010		642		52	12.25	14.4%		0.9	%
	2009		716		67	10.71	28.9%		1.5	%
	2008		667		80	8.31	(36.9%)		0.6	%
MFS® Utilities Series—Service Class	2012	$	—		—	$     —	—		—
	2011		10,632		476	22.32	5.1%		3.0	%
	2010		11,054		521	21.23	12.0%		3.1	%
	2009		12,418		656	18.95	31.2%		4.9	%
	2008		11,515		797	14.45	(38.6%)		1.4	%
Neuberger Berman AMT Mid-Cap Growth Portfolio—Class S	2012	$	904		51	$18.05	10.6%		0.0	%
	2011		699		43	16.32	(1.0%)		0.0	%
	2010		849		51	16.49	27.1%		0.0	%
	2009		636		49	12.97	29.6%		0.0	%
	2008		591		59	10.01	(44.2%)		0.0	%
PIMCO Real Return Portfolio—Advisor Class	2012	$	—		—	$     —	—		—
	2011		2,746		242	11.35	10.1%		1.7	%
	2010		829		76	10.31	3.1%		1.1	%
Royce Micro-Cap Portfolio—Investment Class	2012	$	1,398		92	$15.21	6.2%		0.0	%
	2011		1,687		117	14.32	(13.2%)		2.4	%
	2010		2,080		126	16.50	28.3%		2.0	%
	2009		1,589		124	12.86	56.0%		0.0	%
	2008		1,200		146	8.25	(44.0%)		2.6	%
Royce Small-Cap Portfolio—Investment Class	2012	$	—		—	$     —	—		—
	2011		1,202		95	12.71	(4.5%)		0.3	%
	2010		1,397		105	13.31	19.0%		0.1	%
	2009		1,224		109	11.19	33.5%		0.0	%
	2008		955		114	8.38	(28.1%)		0.6	%
T. Rowe Price Equity Income Portfolio	2012	$	—		—	$     —	—		—
	2011		6,303		424	14.92	(2.0%)		1.7	%
	2010		7,382		485	15.23	13.5%		1.9	%
	2009		7,469		557	13.41	24.0%		2.0	%
	2008		7,380		682	10.82	(36.9%)		2.3	%
UIF Emerging Markets Equity Portfolio—Class I	2012	$	—		—	$     —	—		—
	2011		6,078		283	21.45	(19.3%)		0.4	%
	2010		8,861		333	26.57	17.5%		0.4	%
	2009		8,655		380	22.61	67.7%		0.0	%
	2008		5,806		430	13.49	(57.2%)		0.0	%

F-55

Notes to Financial Statements (Continued)

NOTE 6—Financial Highlights (Continued):

		Net Assets (in 000’s)		Units Outstanding (in 000’s)		Variable Accumulation Unit Value	Total Return1	Investment Income Ratio2
Van Eck VIP Global Hard Assets	2012	$	—		—	$     —	—		—
	2011		9,459		274	34.55	(17.5%)		1.2	%
	2010		13,793		329	41.90	27.6%		0.6	%
	2009		12,531		383	32.84	55.5%		0.3	%
	2008		8,710		412	21.12	(46.8%)		0.3	%
Victory VIF Diversified Stock Fund—Class A Shares	2012	$	306		24	$12.69	14.8%		1.0	%
	2011		290		26	11.05	(8.0%)		0.6	%
	2010		455		38	12.02	10.9%		0.7	%
	2009		555		51	10.84	25.4%		0.8	%
	2008		550		64	8.64	(38.7%)		0.8	%
Separate Account—II (Tax-Qualified Policies)
MainStay VP Balanced—Service Class	2012	$	3,479		268	$12.97	10.6%		1.1	%
	2011		3,509		299	11.72	1.2%		1.3	%
	2010		3,923		339	11.58	11.9%		1.2	%
	2009		3,885		375	10.35	21.2%		2.8	%
	2008		4,121		482	8.54	(26.0%)		0.0	%
MainStay VP Bond—Initial Class	2012	$	18,328		778	$23.55	3.3%		2.4	%
	2011		19,337		848	22.80	5.9%		3.2	%
	2010		20,208		938	21.54	6.5%		3.2	%
	2009		19,634		970	20.23	6.4%		4.6	%
	2008		20,052		1,055	19.02	2.4%		4.1	%
MainStay VP Cash Management	2012	$	12,363		8,941	$  1.38	(1.3%)		0.0	%
	2011		15,162		10,867	1.40	(1.3%)		0.0	%
	2010		15,613		11,031	1.42	(1.3%)		0.0	%
	2009		22,355		15,559	1.44	(1.2%)		0.0	%
	2008		31,702		22,009	1.46	0.9%		2.1	%
MainStay VP Common Stock—Initial Class	2012	$	31,496		992	$31.75	15.2%		1.6	%
	2011		32,652		1,186	27.56	0.3%		1.5	%
	2010		37,553		1,366	27.49	11.2%		1.6	%
	2009		39,106		1,584	24.73	20.8%		2.1	%
	2008		36,193		1,768	20.47	(37.2%)		1.4	%
MainStay VP Conservative Allocation—Service Class	2012	$	12,933		973	$13.18	9.0%		2.0	%
	2011		11,181		925	12.09	1.3%		2.1	%
	2010		9,912		831	11.93	10.3%		2.4	%
	2009		7,931		733	10.82	20.4%		3.1	%
	2008		6,121		681	8.99	(19.7%)		0.0	%
MainStay VP Convertible—Initial Class	2012	$	10,903		433	$25.21	7.7%		2.9	%
	2011		11,371		486	23.40	(6.0%)		2.3	%
	2010		13,008		523	24.89	16.3%		2.8	%
	2009		12,395		577	21.39	44.2%		2.2	%
	2008		8,744		589	14.84	(35.3%)		2.0	%
MainStay VP DFA/DuPont Capital Emerging Markets Equity—Initial Class	2012	$	9,497		949	$10.00	0.0%		0.0	%
MainStay VP Eagle Small Cap Growth—Initial Class	2012	$	8,780		888	$  9.88	(1.2%)		0.0	%
MainStay VP Flexible Bond Opportunities—Service Class	2012	$	1,131		103	$10.95	12.1%		7.4	%
	2011		380		39	9.76	(2.4%)		5.8	%
MainStay VP Floating Rate—Service Class	2012	$	7,327		608	$12.03	5.5%		4.0	%
	2011		7,300		640	11.40	0.6%		4.0	%
	2010		8,488		749	11.33	6.5%		3.8	%
	2009		6,274		589	10.65	31.5%		3.4	%
	2008		3,625		448	8.09	(24.0%)		5.1	%

F-56

NYLIAC Variable Annuity Separate Accounts-I and -II

Non-Qualified and Tax-Qualified Policies

		Net Assets (in 000’s)		Units Outstanding (in 000’s)		Variable Accumulation Unit Value	Total Return1	Investment Income Ratio2
MainStay VP Government—Initial Class	2012	$	13,954		611	$22.82	2.6%		2.9	%
	2011		15,368		691	22.24	4.6%		3.1	%
	2010		18,601		878	21.26	4.0%		3.1	%
	2009		19,222		940	20.44	0.3%		3.5	%
	2008		22,516		1,105	20.38	8.4%		3.1	%
MainStay VP Growth Allocation—Service Class	2012	$	3,942		344	$11.45	13.7%		0.8	%
	2011		3,921		389	10.07	(4.1%)		0.7	%
	2010		4,340		413	10.50	13.3%		0.9	%
	2009		4,240		465	9.27	26.1%		2.1	%
	2008		3,690		502	7.36	(38.6%)		0.5	%
MainStay VP Growth Equity—Initial Class	2012	$	59,084		2,314	$25.56	13.5%		0.4	%
	2011		59,298		2,633	22.52	(2.6%)		0.5	%
	2010		68,085		2,942	23.14	10.8%		0.5	%
	2009		70,148		3,358	20.89	32.5%		0.6	%
	2008		59,445		3,774	15.77	(39.7%)		0.5	%
MainStay VP High Yield Corporate Bond—Initial Class	2012	$	65,552		1,818	$36.06	12.0%		5.6	%
	2011		62,280		1,934	32.21	4.9%		6.2	%
	2010		66,369		2,162	30.71	11.2%		5.8	%
	2009		65,285		2,364	27.61	41.0%		7.8	%
	2008		49,095		2,507	19.59	(25.1%)		8.5	%
MainStay VP ICAP Select Equity—Initial Class	2012	$	34,937		2,273	$15.38	14.1%		2.1	%
	2011		35,774		2,654	13.48	(2.7%)		1.4	%
	2010		41,736		3,013	13.86	16.6%		0.8	%
	2009		40,846		3,446	11.88	27.7%		1.8	%
	2008		29,350		3,156	9.30	(38.4%)		0.7	%
MainStay VP Income Builder—Initial Class	2012	$	43,000		1,418	$30.32	13.5%		4.2	%
	2011		43,305		1,621	26.71	2.8%		3.8	%
	2010		47,346		1,822	25.99	13.3%		3.1	%
	2009		46,725		2,037	22.94	21.9%		3.6	%
	2008		43,533		2,315	18.81	(27.9%)		3.1	%
MainStay VP International Equity—Initial Class	2012	$	8,918		404	$22.08	17.9%		1.8	%
	2011		9,106		487	18.72	(17.1%)		3.1	%
	2010		12,733		563	22.59	3.5%		3.2	%
	2009		14,283		656	21.82	17.8%		7.1	%
	2008		14,018		757	18.52	(26.6%)		1.4	%
MainStay VP Janus Balanced—Initial Class	2012	$	42,521		4,077	$10.43	4.3%		0.0	%
MainStay VP Large Cap Growth—Initial Class	2012	$	6,366		375	$16.99	11.6%		0.0	%
	2011		6,236		411	15.22	(1.6%)		0.0	%
	2010		6,642		430	15.45	14.7%		0.0	%
	2009		6,376		474	13.48	38.2%		0.0	%
	2008		4,753		488	9.75	(39.6%)		0.1	%
MainStay VP MFS® Utilities—Service Class	2012	$	20,531		1,912	$10.75	7.5%		0.0	%
MainStay VP Mid Cap Core—Initial Class	2012	$	10,512		567	$18.53	16.0%		0.8	%
	2011		10,611		664	15.98	(4.2%)		0.8	%
	2010		12,927		774	16.69	22.0%		0.3	%
	2009		12,403		910	13.67	35.2%		0.5	%
	2008		4,626		458	10.12	(43.0%)		0.3	%
MainStay VP Moderate Allocation—Service Class	2012	$	16,950		1,325	$12.78	10.9%		1.5	%
	2011		15,331		1,330	11.53	(0.6%)		1.6	%
	2010		15,743		1,357	11.60	11.4%		2.0	%
	2009		13,838		1,326	10.42	22.4%		2.7	%
	2008		10,334		1,214	8.51	(26.3%)		0.2	%

F-57

Notes to Financial Statements (Continued)

NOTE 6—Financial Highlights (Continued):

		Net Assets (in 000’s)		Units Outstanding (in 000’s)		Variable Accumulation Unit Value	Total Return1	Investment Income Ratio2
MainStay VP Moderate Growth Allocation—Service Class	2012	$	12,186		986	$12.36	12.9%		1.0	%
	2011		12,176		1,112	10.95	(2.7%)		0.9	%
	2010		13,566		1,206	11.26	12.6%		1.4	%
	2009		12,032		1,203	10.00	26.4%		2.7	%
	2008		9,867		1,246	7.91	(33.5%)		0.4	%
MainStay VP PIMCO Real Return—Service Class	2012	$	5,720		547	$10.44	4.4%		0.0	%
MainStay VP S&P 500 Index—Initial Class	2012	$	65,909		1,883	$34.99	14.2%		1.6	%
	2011		65,501		2,137	30.65	0.5%		1.7	%
	2010		74,528		2,446	30.49	13.2%		1.8	%
	2009		75,324		2,799	26.92	24.6%		2.8	%
	2008		68,453		3,169	21.60	(37.8%)		2.2	%
MainStay VP T. Rowe Price Equity Income—Initial Class	2012	$	11,798		1,107	$10.67	6.7%		0.0	%
MainStay VP U.S. Small Cap—Initial Class	2012	$	3,643		240	$15.19	11.3%		0.4	%
	2011		3,945		289	13.65	(4.0%)		0.9	%
	2010		4,655		327	14.21	23.4%		0.1	%
	2009		4,444		390	11.52	39.2%		0.0	%
	2008		1,693		205	8.27	(47.9%)		0.0	%
MainStay VP Van Eck Global Hard Assets—Initial Class	2012	$	13,334		1,488	$  8.98	(10.2%)		0.0	%
Alger Small Cap Growth Portfolio—Class I-2 Shares	2012	$	—		—	$     —	—		—
	2011		7,263		514	14.14	(4.4%)		0.0	%
	2010		8,687		587	14.80	23.7%		0.0	%
	2009		8,396		706	11.96	43.6%		0.0	%
	2008		6,450		774	8.33	(47.3%)		0.0	%
BlackRock® Global Allocation V.I. Fund—Class III Shares	2012	$	2,371		244	$  9.71	8.5%		2.0	%
	2011		765		86	8.94	(10.6%)		6.4	%
Calvert VP SRI Balanced Portfolio	2012	$	—		—	$     —	—		—
	2011		2,912		144	20.25	3.2%		1.3	%
	2010		3,018		154	19.62	10.7%		1.4	%
	2009		3,134		177	17.73	23.7%		2.1	%
	2008		2,731		191	14.34	(32.2%)		2.4	%
Columbia Variable Portfolio— Small Cap Value Fund—Class 2 Shares	2012	$	1,251		90	$13.86	9.8%		0.3	%
	2011		1,330		105	12.62	(7.3%)		0.9	%
	2010		1,700		125	13.62	24.8%		1.2	%
	2009		1,532		140	10.91	23.4%		0.9	%
	2008		1,302		147	8.84	(29.1%)		0.4	%
Dreyfus IP Technology Growth Portfolio—Initial Shares	2012	$	2,231		181	$12.39	14.1%		0.0	%
	2011		2,464		227	10.86	(9.0%)		0.0	%
	2010		2,542		213	11.93	28.3%		0.0	%
	2009		2,192		236	9.30	55.6%		0.4	%
	2008		1,133		190	5.98	(41.9%)		0.0	%
Fidelity® VIP Contrafund® Portfolio—Initial Class	2012	$	41,496		1,398	$29.70	14.9%		1.3	%
	2011		42,186		1,633	25.84	(3.8%)		1.0	%
	2010		50,163		1,868	26.86	15.7%		1.2	%
	2009		49,789		2,147	23.21	34.0%		1.4	%
	2008		42,195		2,435	17.33	(43.3%)		0.9	%
Fidelity® VIP Equity-Income Portfolio—Initial Class	2012	$	13,421		634	$21.17	15.8%		3.0	%
	2011		13,320		729	18.29	(0.3%)		2.3	%
	2010		15,787		861	18.35	13.7%		1.8	%
	2009		15,797		978	16.14	28.5%		2.3	%
	2008		13,947		1,111	12.56	(43.4%)		2.3	%

F-58

NYLIAC Variable Annuity Separate Accounts-I and -II

Non-Qualified and Tax-Qualified Policies

		Net Assets (in 000’s)		Units Outstanding (in 000’s)		Variable Accumulation Unit Value	Total Return1	Investment Income Ratio2
Fidelity® VIP Mid Cap Portfolio—Service Class 2	2012	$	8,720		406	$21.49	13.1%		0.4	%
	2011		9,327		491	19.01	(12.0%)		0.0	%
	2010		12,096		560	21.60	26.9%		0.1	%
	2009		9,765		576	17.02	37.9%		0.5	%
	2008		7,826		634	12.34	(40.4%)		0.2	%
Janus Aspen Balanced Portfolio—Institutional Shares	2012	$	—		—	$     —	—		—
	2011		40,566		1,403	28.92	0.3%		2.4	%
	2010		45,591		1,583	28.82	7.0%		2.8	%
	2009		47,854		1,776	26.94	24.3%		3.0	%
	2008		43,068		1,987	21.68	(16.9%)		2.6	%
Janus Aspen Worldwide Portfolio—Institutional Shares	2012	$	18,127		1,044	$17.34	18.5%		0.9	%
	2011		17,228		1,178	14.63	(14.9%)		0.6	%
	2010		22,856		1,331	17.18	14.3%		0.6	%
	2009		22,498		1,499	15.03	35.9%		1.4	%
	2008		18,623		1,684	11.06	(45.4%)		1.2	%
MFS® Investors Trust Series—Initial Class	2012	$	1,001		79	$12.66	17.6%		0.9	%
	2011		857		80	10.76	(3.4%)		0.9	%
	2010		1,046		92	11.14	9.7%		1.2	%
	2009		1,050		104	10.16	25.3%		1.7	%
	2008		900		111	8.11	(33.9%)		0.8	%
MFS® Research Series—Initial Class	2012	$	1,091		79	$13.76	15.8%		0.8	%
	2011		1,144		96	11.88	(1.7%)		0.8	%
	2010		1,367		113	12.09	14.4%		0.9	%
	2009		1,378		130	10.57	28.9%		1.5	%
	2008		1,276		155	8.20	(36.9%)		0.5	%
MFS® Utilities Series—Service Class	2012	$	—		—	$     —	—		—
	2011		20,081		876	22.92	5.1%		3.0	%
	2010		20,530		942	21.80	12.0%		3.1	%
	2009		20,281		1,043	19.45	31.2%		4.7	%
	2008		17,458		1,177	14.83	(38.6%)		1.3	%
Neuberger Berman AMT Mid-Cap Growth Portfolio—Class S	2012	$	1,491		87	$17.22	10.6%		0.0	%
	2011		1,119		72	15.56	(1.0%)		0.0	%
	2010		1,080		68	15.72	27.1%		0.0	%
	2009		761		61	12.37	29.6%		0.0	%
	2008		637		67	9.54	(44.2%)		0.0	%
PIMCO Real Return Portfolio—Advisor Class	2012	$	—		—	$     —	—		—
	2011		3,620		319	11.35	10.1%		1.7	%
	2010		1,282		124	10.31	3.1%		1.1	%
Royce Micro-Cap Portfolio—Investment Class	2012	$	2,980		197	$15.25	6.2%		0.0	%
	2011		2,516		175	14.35	(13.2%)		2.4	%
	2010		2,951		179	16.54	28.3%		2.0	%
	2009		2,297		178	12.90	56.0%		0.0	%
	2008		1,389		168	8.27	(44.0%)		2.5	%
Royce Small-Cap Portfolio—Investment Class	2012	$	—		—	$     —	—		—
	2011		2,234		166	13.49	(4.5%)		0.3	%
	2010		2,474		175	14.13	19.0%		0.1	%
	2009		2,005		169	11.88	33.5%		0.0	%
	2008		1,594		178	8.90	(28.1%)		0.7	%
T. Rowe Price Equity Income Portfolio	2012	$	—		—	$     —	—		—
	2011		11,804		785	15.04	(2.0%)		1.7	%
	2010		13,756		896	15.35	13.5%		1.9	%
	2009		13,368		991	13.52	24.0%		2.0	%
	2008		12,248		1,124	10.90	(36.9%)		2.3	%

F-59

Notes to Financial Statements (Continued)

NOTE 6—Financial Highlights (Continued):

		Net Assets (in 000’s)		Units Outstanding (in 000’s)		Variable Accumulation Unit Value	Total Return1	Investment Income Ratio2
UIF Emerging Markets Equity Portfolio—Class I	2012	$	—		—	$     —	—		—
	2011		9,825		455	21.61	(19.3%)		0.4	%
	2010		14,392		538	26.77	17.5%		0.6	%
	2009		13,681		601	22.78	67.7%		0.0	%
	2008		8,475		624	13.59	(57.2%)		0.0	%
Van Eck VIP Global Hard Assets	2012	$	—		—	$     —	—		—
	2011		15,024		428	35.10	(17.5%)		1.2	%
	2010		20,290		478	42.56	27.6%		0.4	%
	2009		17,957		539	33.36	55.5%		0.3	%
	2008		11,971		558	21.45	(46.8%)		0.3	%
Victory VIF Diversified Stock Fund—Class A Shares	2012	$	809		62	$13.04	14.8%		0.9	%
	2011		865		76	11.36	(8.0%)		0.7	%
	2010		1,045		85	12.35	10.9%		0.7	%
	2009		1,057		95	11.14	25.4%		0.8	%
	2008		1,057		119	8.88	(38.7%)		0.8	%

Not all investment options are available under all policies.

Charges and fees levied by NYLIAC are disclosed in Note 3.

Expenses as a percent of average variable accumulation value were 1.30%, excluding expenses of the underlying Funds, surrender charges and the annual policy fee.

¹  Total returns are not annualized for periods less than a year. These amounts represent the total return for the periods indicated, including changes in the value of the underlying Fund, and expenses assessed through the reduction of unit values. These ratios do not include any expenses assessed through the redemption of units. Investment options with a date notation indicate the effective date of that investment option in the variable account. The total returns are calculated for each period indicated or from the effective date through the end of the reporting period.

²  These amounts represent the dividends excluding distributions of capital gains, received by an Investment Division from the underlying Fund, net of management fees assessed by the Fund manager, divided by the average investment at net asset value. These ratios exclude those expenses, such as mortality and expense 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 Investment Division is affected by the timing of the declaration of dividends by the underlying Fund in which the Investment Division invests. Annualized percentages are shown for the Investment Income Ratio for all Investment Divisions in all periods.

F-60

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors of New York Life Insurance and Annuity Corporation

and the Variable Annuity Separate Accounts-I and-II Policyowners:

In our opinion, the accompanying statement of assets and liabilities and the related statements of operations andof changes in net assets present fairly, in all material respects, the financial position of the investment divisions listed in Note 1 of the New York Life Insurance and Annuity Corporation Variable Annuity Separate Account-I and the New York Life Insurance and Annuity Corporation Variable Annuity Separate Account-II as of December 31, 2012, and the results of each of their operations and the changes in each of their net assets for each of the two years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of New York Life Insurance and Annuity Corporation management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements 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. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of investments by correspondence with the underlying funds’ transfer agents at December 31, 2012, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

New York, New York

March 8, 2013

F-61

NYLIAC Variable Annuity Separate Account-III

Financial Statements

F-1

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F-2

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F-3

Statement of Assets and Liabilities

As of December 31, 2012

	MainStay VP Bond— Initial Class			MainStay VP Cash Management			MainStay VP Common Stock— Initial Class
ASSETS:
Investment at net asset value	$	96,969,157		$	216,199,498		$	84,989,389
Dividends due and accrued		—			1,847			—
Net receivable from (payable to) New York Life Insurance and Annuity Corporation		(21,151	)		294,328			(63,437	)
Net receivable from (payable to) the Fund for shares sold or purchased		21,151			(296,175	)		63,437
LIABILITIES:
Liability to New York Life Insurance and Annuity Corporation for:
Mortality and expense risk charges		10,528			17,036			8,766
Administrative charges		989			979			976
Total net assets	$	96,957,640		$	216,181,483		$	84,979,647
Total shares outstanding		6,562,610			215,908,288			4,622,303
Net asset value per share (NAV)	$	14.78		$	1.00		$	18.40
Total units outstanding		4,822,479			171,513,563			3,836,045
Variable accumulation unit value (lowest to highest)		$14.65 to $22.05			$0.97 to $9.55			$9.39 to $27.24
Identified cost of investment	$	93,175,710		$	215,903,317		$	79,729,756
Statement of Operations For the year ended December 31, 2012
	MainStay VP Bond— Initial Class			MainStay VP Cash Management			MainStay VP Common Stock— Initial Class
INVESTMENT INCOME (LOSS):
Dividend income	$	2,396,467		$	22,139		$	1,409,774
Mortality and expense risk charges		(1,368,414	)		(3,169,560	)		(1,148,951	)
Administrative charges		(180,197	)		(442,861	)		(179,682	)
Net investment income (loss)		847,856			(3,590,282	)		81,141
REALIZED AND UNREALIZED GAIN (LOSS):
Proceeds from sale of investments		20,568,159			223,560,822			18,679,020
Cost of investments sold		(18,568,113	)		(223,563,502	)		(20,455,479	)
Net realized gain (loss) on investments		2,000,046			(2,680	)		(1,776,459	)
Realized gain distribution received		3,316,070			—			—
Change in unrealized appreciation (depreciation) on investments		(3,004,554	)		2,698			14,285,887
Net gain (loss) on investments		2,311,562			18			12,509,428
Net increase (decrease) in net assets resulting from operations	$	3,159,418		$	(3,590,264	)	$	12,590,569

Not all investment options are available under all policies.

(a) For the period February 17, 2012 (commencement of Investment Division) through December 31, 2012.

The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements.

F-4

NYLIAC Variable Annuity Separate Account-III

MainStay VP Convertible— Initial Class			MainStay VP DFA/DuPont Capital Emerging Markets Equity— Initial Class			MainStay VP Eagle Small Cap Growth— Initial Class			MainStay VP Government— Initial Class			MainStay VP Growth Equity— Initial Class			MainStay VP High Yield Corporate Bond— Initial Class			MainStay VP ICAP Select Equity— Initial Class
$	83,973,481		$	36,812,889		$	85,013,619		$	66,750,865		$	99,074,051		$	343,363,744		$	159,727,046
	—			—			—			—			—			—			—
	1,838			(118,061	)		(17,119	)		(16,111	)		(58,610	)		(122,132	)		(111,724	)
	(1,838	)		118,061			17,119			16,111			58,610			122,132			111,724
	8,947			3,911			9,333			7,285			10,093			36,991			16,938
	878			401			770			664			1,175			3,566			1,670
$	83,963,656		$	36,808,577		$	85,003,516		$	66,742,916		$	99,062,783		$	343,323,187		$	159,708,438
	7,179,959			3,649,992			8,506,985			5,638,561			3,586,666			33,708,543			11,618,473
$	11.70		$	10.12		$	10.00		$	11.84		$	27.64		$	10.19		$	13.76
	4,071,628			3,695,465			8,616,296			3,641,097			5,804,812			11,286,345			11,186,380
	$13.26 to $24.95			$9.96 to $10.00			$9.84 to $9.88			$13.55 to $20.35			$6.67 to $19.82			$21.58 to $35.25			$13.12 to $18.29
$	70,636,669		$	36,460,063		$	84,994,712		$	65,494,052		$	78,043,840		$	308,852,371		$	135,060,425
MainStay VP Convertible— Initial Class			MainStay VP DFA/DuPont Capital Emerging Markets Equity— Initial Class(a)			MainStay VP Eagle Small Cap Growth— Initial Class(a)			MainStay VP Government— Initial Class			MainStay VP Growth Equity— Initial Class			MainStay VP High Yield Corporate Bond— Initial Class			MainStay VP ICAP Select Equity— Initial Class
$	2,611,475		$	—		$	—		$	2,084,026		$	422,020		$	19,279,998		$	3,488,685
	(1,208,988	)		(442,655	)		(1,080,239	)		(970,543	)		(1,328,935	)		(4,506,408	)		(2,221,426	)
	(164,739	)		(68,754	)		(172,897	)		(132,318	)		(240,437	)		(595,653	)		(315,876	)
	1,237,748			(511,409	)		(1,253,136	)		981,165			(1,147,352	)		14,177,937			951,383
	19,851,432			9,717,130			17,636,933			17,740,248			17,283,093			67,199,215			36,280,642
	(19,710,031	)		(10,408,754	)		(18,352,565	)		(16,611,779	)		(15,343,609	)		(61,013,825	)		(38,193,584	)
	141,401			(691,624	)		(715,632	)		1,128,469			1,939,484			6,185,390			(1,912,942	)
	330,913			—			—			—			—			—			—
	5,051,453			470,887			36,026			(351,716	)		12,241,975			17,508,722			23,001,223
	5,523,767			(220,737	)		(679,606	)		776,753			14,181,459			23,694,112			21,088,281
$	6,761,515		$	(732,146	)	$	(1,932,742	)	$	1,757,918		$	13,034,107		$	37,872,049		$	22,039,664

The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements.

F-5

Statement of Assets and Liabilities (Continued)

As of December 31, 2012

	MainStay VP Income Builder— Initial Class			MainStay VP International Equity— Initial Class			MainStay VP Janus Balanced— Initial Class
ASSETS:
Investment at net asset value	$	76,984,013		$	38,334,862		$	236,322,707
Dividends due and accrued		—			—			—
Net receivable from (payable to) New York Life Insurance and Annuity Corporation		30,158			(9,302	)		(147,090	)
Net receivable from (payable to) the Fund for shares sold or purchased		(30,158	)		9,302			147,090
LIABILITIES:
Liability to New York Life Insurance and Annuity Corporation for:
Mortality and expense risk charges		7,998			4,124			24,921
Administrative charges		894			387			2,618
Total net assets	$	76,975,121		$	38,330,351		$	236,295,168
Total shares outstanding		4,923,655			3,159,242			22,414,736
Net asset value per share (NAV)	$	15.63		$	12.14		$	10.55
Total units outstanding		3,543,141			2,009,328			22,693,037
Variable accumulation unit value (lowest to highest)		$10.74 to $24.81			$13.51 to $22.46			$10.38 to $10.43
Identified cost of investment	$	69,851,043		$	41,444,580		$	224,152,726
Statement of Operations (Continued) For the year ended December 31, 2012
	MainStay VP Income Builder— Initial Class			MainStay VP International Equity— Initial Class			MainStay VP Janus Balanced— Initial Class(a)
INVESTMENT INCOME (LOSS):
Dividend income	$	3,247,269		$	703,905		$	—
Mortality and expense risk charges		(985,758	)		(539,580	)		(2,790,382	)
Administrative charges		(155,278	)		(72,663	)		(446,478	)
Net investment income (loss)		2,106,233			91,662			(3,236,860	)
REALIZED AND UNREALIZED GAIN (LOSS):
Proceeds from sale of investments		12,350,585			10,686,950			39,072,190
Cost of investments sold		(12,637,402	)		(16,672,256	)		(38,359,595	)
Net realized gain (loss) on investments		(286,817	)		(5,985,306	)		712,595
Realized gain distribution received		—			—			—
Change in unrealized appreciation (depreciation) on investments		7,800,438			12,605,601			12,317,071
Net gain (loss) on investments		7,513,621			6,620,295			13,029,666
Net increase (decrease) in net assets resulting from operations	$	9,619,854		$	6,711,957		$	9,792,806

(a) For the period February 17, 2012 (commencement of Investment Division) through December 31, 2012.

The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements.

F-6

NYLIAC Variable Annuity Separate Account-III

MainStay VP Large Cap Growth— Initial Class			MainStay VP MFS® Utilities— Initial Class			MainStay VP Mid Cap Core— Initial Class			MainStay VP S&P 500 Index— Initial Class			MainStay VP T. Rowe Price Equity Income— Initial Class			MainStay VP U.S. Small Cap— Initial Class			MainStay VP Van Eck Global Hard Assets— Initial Class
$	40,624,008		$	2,518,577		$	59,195,359		$	185,901,528		$	66,556,841		$	25,638,656		$	276,594,931
	—			—			—			—			—			—			—
	(1,224	)		(103	)		15,480			(159,753	)		(22,415	)		(1,374	)		(248,648	)
	1,224			103			(15,480	)		159,753			22,415			1,374			248,648
	4,230			288			6,328			19,266			7,139			2,751			31,266
	448			17			589			2,092			658			253			2,147
$	40,619,330		$	2,518,272		$	59,188,442		$	185,880,170		$	66,549,044		$	25,635,652		$	276,561,518
	2,407,237			231,183			4,837,685			6,430,991			6,172,215			2,548,048			30,482,996
$	16.88		$	10.89		$	12.23		$	28.93		$	10.79		$	10.06		$	9.08
	2,921,262			234,174			3,265,294			8,406,020			6,249,736			1,869,710			30,876,115
	$7.67 to $16.34			$10.72 to $10.76			$18.02 to $20.81			$10.02 to $27.64			$10.61 to $10.66			$12.83 to $20.63			$8.94 to $10.19
$	30,602,918		$	2,321,695		$	47,076,236		$	147,716,988		$	61,732,430		$	18,874,398		$	302,858,914
MainStay VP Large Cap Growth— Initial Class			MainStay VP MFS® Utilities— Initial Class(a)			MainStay VP Mid Cap Core— Initial Class			MainStay VP S&P 500 Index— Initial Class			MainStay VP T. Rowe Price Equity Income— Initial Class(a)			MainStay VP U.S. Small Cap— Initial Class			MainStay VP Van Eck Global Hard Assets— Initial Class(a)
$	—		$	—		$	463,332		$	3,156,636		$	—		$	119,837		$	—
	(583,020	)		(32,220	)		(837,426	)		(2,484,637	)		(809,009	)		(365,340	)		(3,662,154	)
	(94,035	)		(2,987	)		(118,445	)		(388,835	)		(108,138	)		(50,331	)		(601,746	)
	(677,055	)		(35,207	)		(492,539	)		283,164			(917,147	)		(295,834	)		(4,263,900	)
	10,571,904			887,573			14,850,223			33,802,925			14,782,064			6,639,318			59,012,060
	(7,235,924	)		(866,878	)		(10,448,534	)		(28,996,869	)		(14,440,935	)		(4,901,691	)		(66,202,004	)
	3,335,980			20,695			4,401,689			4,806,056			341,129			1,737,627			(7,189,944	)
	—			—			4,888,326			—			—			—			—
	1,863,890			196,985			331,293			20,044,416			4,846,827			1,437,054			(26,015,335	)
	5,199,870			217,680			9,621,308			24,850,472			5,187,956			3,174,681			(33,205,279	)
$	4,522,815		$	182,473		$	9,128,769		$	25,133,636		$	4,270,809		$	2,878,847		$	(37,469,179	)

The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements.

F-7

Statement of Assets and Liabilities (Continued)

As of December 31, 2012

	Alger Small Cap Growth Portfolio— Class I-2 Shares			Calvert VP SRI Balanced Portfolio			Dreyfus IP Technology Growth Portfolio— Initial Shares
ASSETS:
Investment at net asset value	$	—		$	—		$	14,984,919
Dividends due and accrued		—			—			—
Net receivable from (payable to) New York Life Insurance and Annuity Corporation		—			—			(3,937	)
Net receivable from (payable to) the Fund for shares sold or purchased		—			—			3,937
LIABILITIES:
Liability to New York Life Insurance and Annuity Corporation for:
Mortality and expense risk charges		—			—			1,626
Administrative charges		—			—			141
Total net assets	$	—		$	—		$	14,983,152
Total shares outstanding		—			—			1,083,010
Net asset value per share (NAV)	$	—		$	—		$	13.84
Total units outstanding		—			—			1,187,515
Variable accumulation unit value (lowest to highest)	$	—		$	—			$12.34 to $19.23
Identified cost of investment	$	—		$	—		$	13,547,639
Statement of Operations (Continued) For the year ended December 31, 2012
	Alger Small Cap Growth Portfolio— Class I-2 Shares			Calvert VP SRI Balanced Portfolio			Dreyfus IP Technology Growth Portfolio— Initial Shares
INVESTMENT INCOME (LOSS):
Dividend income	$	—		$	—		$	—
Mortality and expense risk charges		(54,673	)		(52,161	)		(213,523	)
Administrative charges		(8,068	)		(8,606	)		(32,065	)
Net investment income (loss)		(62,741	)		(60,767	)		(245,588	)
REALIZED AND UNREALIZED GAIN (LOSS):
Proceeds from sale of investments		34,467,097			30,522,827			4,935,906
Cost of investments sold		(21,035,527	)		(29,312,805	)		(3,582,354	)
Net realized gain (loss) on investments		13,431,570			1,210,022			1,353,552
Realized gain distribution received		—			—			—
Change in unrealized appreciation (depreciation) on investments		(9,678,735	)		489,664			611,314
Net gain (loss) on investments		3,752,835			1,699,686			1,964,866
Net increase (decrease) in net assets resulting from operations	$	3,690,094		$	1,638,919		$	1,719,278

The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements.

F-8

NYLIAC Variable Annuity Separate Account-III

Fidelity® VIP Contrafund® Portfolio— Initial Class			Fidelity® VIP Equity-Income Portfolio— Initial Class			Janus Aspen Balanced Portfolio— Institutional Shares			Janus Aspen Worldwide Portfolio— Institutional Shares			MFS® Investors Trust Series— Initial Class			MFS® Research Series— Initial Class			MFS® Utilities Series— Initial Class
$	156,094,079		$	68,195,982		$	—		$	65,409,986		$	9,194,258		$	10,833,709		$	—
	—			—			—			—			—			—			—
	(80,039	)		(53,537	)		—			(2,740	)		(173	)		116,983			—
	80,039			53,537			—			2,740			173			(116,983	)		—
	16,253			7,200			—			6,682			974			1,125			—
	1,726			731			—			784			95			114			—
$	156,076,100		$	68,188,051		$	—		$	65,402,520		$	9,193,189		$	10,832,470		$	—
	5,906,737			3,422,744			—			2,127,935			400,978			490,468			—
$	26.44		$	19.94		$	—		$	30.74		$	22.93		$	21.85		$	—
	6,126,966			3,709,162			—			4,350,371			764,351			842,253			—
	$14.84 to $29.92			$13.09 to $20.78		$	—			$6.55 to $17.03			$10.53 to $17.25			$9.16 to $17.64		$	—
$	160,594,872		$	75,378,047		$	—		$	59,653,256		$	7,464,297		$	7,421,284		$	—
Fidelity® VIP Contrafund® Portfolio— Initial Class			Fidelity® VIP Equity-Income Portfolio— Initial Class			Janus Aspen Balanced Portfolio— Institutional Shares			Janus Aspen Worldwide Portfolio— Institutional Shares			MFS® Investors Trust Series— Initial Class			MFS® Research Series— Initial Class			MFS® Utilities Series— Initial  Class
$	2,085,423		$	2,082,094		$	—		$	559,223		$	81,625		$	86,608		$	—
	(2,156,820	)		(916,014	)		(383,548	)		(834,550	)		(120,846	)		(144,599	)		(5,517	)
	(317,917	)		(130,966	)		(57,495	)		(150,948	)		(16,558	)		(22,176	)		(437	)
	(389,314	)		1,035,114			(441,043	)		(426,275	)		(55,779	)		(80,167	)		(5,954	)
	34,117,901			14,280,180			236,674,234			12,131,878			1,940,824			2,492,612			3,054,007
	(35,476,499	)		(17,691,463	)		(204,862,489	)		(14,683,272	)		(1,519,675	)		(1,698,654	)		(2,880,989	)
	(1,358,598	)		(3,411,283	)		31,811,745			(2,551,394	)		421,149			793,958			173,018
	—			4,382,745			—			—			—			—			—
	24,752,702			8,166,714			(15,855,157	)		13,919,229			1,094,406			883,095			(52,641	)
	23,394,104			9,138,176			15,956,588			11,367,835			1,515,555			1,677,053			120,377
$	23,004,790		$	10,173,290		$	15,515,545		$	10,941,560		$	1,459,776		$	1,596,886		$	114,423

The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements.

F-9

Statement of Assets and Liabilities (Continued)

As of December 31, 2012

	Neuberger Berman AMT Mid-Cap Growth— Class I			Royce Micro-Cap Portfolio— Investment Class			Royce Small-Cap Portfolio— Investment Class
ASSETS:
Investment at net asset value	$	2,187,222		$	78,619,967		$	—
Dividends due and accrued		—			—			—
Net receivable from (payable to) New York Life Insurance and Annuity Corporation		464			(216,632	)		—
Net receivable from (payable to) the Fund for shares sold or purchased		(464	)		216,632			—
LIABILITIES:
Liability to New York Life Insurance and Annuity Corporation for:
Mortality and expense risk charges		252			8,996			—
Administrative charges		14			581			—
Total net assets	$	2,186,956		$	78,610,390		$	—
Total shares outstanding		70,609			7,199,689			—
Net asset value per share (NAV)	$	30.97		$	10.95		$	—
Total units outstanding		138,982			5,369,492			—
Variable accumulation unit value (lowest to highest)		$15.11 to $21.67			$8.42 to $15.29		$	—
Identified cost of investment	$	1,707,683		$	69,568,426		$	—
Statement of Operations (Continued) For the year ended December 31, 2012
	Neuberger Berman AMT Mid-Cap Growth— Class I			Royce Micro-Cap Portfolio— Investment Class			Royce Small-Cap Portfolio— Investment Class
INVESTMENT INCOME (LOSS):
Dividend income	$	—		$	—		$	—
Mortality and expense risk charges		(33,126	)		(1,145,696	)		(119,484	)
Administrative charges		(3,377	)		(202,434	)		(18,463	)
Net investment income (loss)		(36,503	)		(1,348,130	)		(137,947	)
REALIZED AND UNREALIZED GAIN (LOSS):
Proceeds from sale of investments		523,512			14,165,045			69,638,264
Cost of investments sold		(357,814	)		(12,005,868	)		(55,125,627	)
Net realized gain (loss) on investments		165,698			2,159,177			14,512,637
Realized gain distribution received		—			1,716,226			—
Change in unrealized appreciation (depreciation) on investments		83,026			1,821,590			(8,146,604	)
Net gain (loss) on investments		248,724			5,696,993			6,366,033
Net increase (decrease) in net assets resulting from operations	$	212,221		$	4,348,863		$	6,228,086

The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements.

F-10

NYLIAC Variable Annuity Separate Account-III

T. Rowe Price Equity Income Portfolio			UIF Emerging Markets Equity Portfolio— Class I			Van Eck VIP Global Hard Assets
$	—		$	—		$	—
	—			—			—
	—			—			—
	—			—			—
	—			—			—
	—			—			—
$	—		$	—		$	—
	—			—			—
$	—		$	—		$	—
	—			—			—
$	—		$	—		$	—
$	—		$	—		$	—
T. Rowe Price Equity Income Portfolio			UIF Emerging Markets Equity Portfolio— Class I			Van Eck VIP Global Hard Assets
$	—		$	—		$	—
	(128,718	)		(76,409	)		(629,685	)
	(16,442	)		(11,250	)		(97,460	)
	(145,160	)		(87,659	)		(727,145	)
	77,483,871			47,623,414			361,428,669
	(80,320,518	)		(44,228,362	)		(352,035,615	)
	(2,836,647	)		3,395,052			9,393,054
	—			—			23,371,244
	8,905,084			1,667,193			9,513,780
	6,068,437			5,062,245			42,278,078
$	5,923,277		$	4,974,586		$	41,550,933

The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements.

F-11

Statement of Assets and Liabilities (Continued)

As of December 31, 2012

	MainStay VP Balanced— Service Class			MainStay VP Bond— Service Class			MainStay VP Common Stock— Service Class
ASSETS:
Investment at net asset value	$	87,566,507		$	199,217,097		$	37,062,216
Dividends due and accrued		—			—			—
Net receivable from (payable to) New York Life Insurance and Annuity Corporation		51,314			227,791			(41,022	)
Net receivable from (payable to) the Fund for shares sold or purchased		(51,314	)		(227,791	)		41,022
LIABILITIES:
Liability to New York Life Insurance and Annuity Corporation for:
Mortality and expense risk charges		10,214			23,903			4,270
Administrative charges		619			1,199			296
Total net assets	$	87,555,674		$	199,191,995		$	37,057,650
Total shares outstanding		7,203,958			13,588,520			2,026,343
Net asset value per share (NAV)	$	12.15		$	14.64		$	18.31
Total units outstanding		6,859,165			15,300,012			2,538,282
Variable accumulation unit value (lowest to highest)		$10.32 to $13.30			$10.02 to $13.69			$10.26 to $14.93
Identified cost of investment	$	78,068,163		$	198,718,912		$	34,077,918
Statement of Operations (Continued) For the year ended December 31, 2012
	MainStay VP Balanced— Service Class			MainStay VP Bond— Service Class			MainStay VP Common Stock— Service Class
INVESTMENT INCOME (LOSS):
Dividend income	$	994,448		$	4,344,499		$	517,935
Mortality and expense risk charges		(1,255,498	)		(2,858,548	)		(546,745	)
Administrative charges		(180,972	)		(353,326	)		(78,265	)
Net investment income (loss)		(442,022	)		1,132,625			(107,075	)
REALIZED AND UNREALIZED GAIN (LOSS):
Proceeds from sale of investments		14,341,995			36,702,936			7,501,625
Cost of investments sold		(13,340,882	)		(34,418,336	)		(10,251,048	)
Net realized gain (loss) on investments		1,001,113			2,284,600			(2,749,423	)
Realized gain distribution received		—			6,551,522			—
Change in unrealized appreciation (depreciation) on investments		7,850,356			(4,876,223	)		8,023,094
Net gain (loss) on investments		8,851,469			3,959,899			5,273,671
Net increase (decrease) in net assets resulting from operations	$	8,409,447		$	5,092,524		$	5,166,596

(a) For the period February 17, 2012 (commencement of Investment Division) through December 31, 2012.

The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements.

F-12

NYLIAC Variable Annuity Separate Account-III

MainStay VP Conservative Allocation— Service Class			MainStay VP Convertible— Service Class			MainStay VP DFA/DuPont Capital Emerging Markets Equity— Service Class			MainStay VP Eagle Small Cap Growth— Service Class			MainStay VP Flexible Bond Opportunities— Service Class			MainStay VP Floating Rate— Service Class			MainStay VP Government— Service Class
$	297,223,283		$	160,865,153		$	109,447,289		$	29,980,900		$	60,961,081		$	218,404,437		$	118,068,603
	—			—			—			—			—			762,397			—
	(116,232	)		(15,897	)		(26,274	)		(40,378	)		840,352			334,975			291,635
	116,232			15,897			26,274			40,378			(840,352	)		(1,097,372	)		(291,635	)
	35,075			18,996			12,648			3,430			7,180			25,843			14,010
	1,868			1,033			862			246			281			1,400			777
$	297,186,340		$	160,845,124		$	109,433,779		$	29,977,224		$	60,953,620		$	218,377,194		$	118,053,816
	25,771,878			13,852,643			10,842,752			3,010,046			5,837,272			23,305,046			10,029,042
$	11.54		$	11.61		$	10.10		$	9.97		$	10.30		$	9.32		$	11.74
	22,894,895			10,683,811			10,982,326			3,049,396			5,524,862			18,529,393			9,610,974
	$10.23 to $13.21			$9.34 to $15.96			$9.94 to $10.92			$9.81 to $10.46			$10.41 to $10.94			$10.20 to $11.94			$10.01 to $12.78
$	278,359,102		$	143,544,101		$	107,937,717		$	30,047,430		$	59,648,319		$	209,769,740		$	117,395,239
MainStay VP Conservative Allocation— Service Class			MainStay VP Convertible— Service Class			MainStay VP DFA/DuPont Capital Emerging Markets Equity— Service Class(a)			MainStay VP Eagle Small Cap Growth— Service Class(a)			MainStay VP Flexible Bond Opportunities— Service Class			MainStay VP Floating Rate— Service Class			MainStay VP Government— Service Class
$	5,584,613		$	4,500,611		$	—		$	—		$	2,641,558		$	8,312,339		$	3,259,560
	(4,095,173	)		(2,460,123	)		(1,343,025	)		(396,200	)		(478,646	)		(3,054,683	)		(1,709,505	)
	(512,941	)		(326,587	)		(245,596	)		(60,798	)		(55,693	)		(390,339	)		(226,274	)
	976,499			1,713,901			(1,588,621	)		(456,998	)		2,107,219			4,867,317			1,323,781
	40,152,733			30,844,476			18,307,318			6,514,298			4,410,472			42,833,592			29,395,775
	(36,628,581	)		(31,290,436	)		(19,772,420	)		(6,767,543	)		(4,238,957	)		(38,737,483	)		(28,576,166	)
	3,524,152			(445,960	)		(1,465,102	)		(253,245	)		171,515			4,096,109			819,609
	16,183,740			623,481			—			—			429,809			—			—
	2,029,078			9,503,076			1,535,847			(26,153	)		752,945			1,555,368			206,812
	21,736,970			9,680,597			70,745			(279,398	)		1,354,269			5,651,477			1,026,421
$	22,713,469		$	11,394,498		$	(1,517,876	)	$	(736,396	)	$	3,461,488		$	10,518,794		$	2,350,202

The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements.

F-13

Statement of Assets and Liabilities (Continued)

As of December 31, 2012

	MainStay VP Growth Allocation— Service Class			MainStay VP Growth Equity— Service Class			MainStay VP High Yield Corporate Bond— Service Class
ASSETS:
Investment at net asset value	$	92,741,091		$	33,320,252		$	873,173,220
Dividends due and accrued		—			—			—
Net receivable from (payable to) New York Life Insurance and Annuity Corporation		(84,219	)		8,275			1,461,370
Net receivable from (payable to) the Fund for shares sold or purchased		84,219			(8,275	)		(1,461,370	)
LIABILITIES:
Liability to New York Life Insurance and Annuity Corporation for:
Mortality and expense risk charges		10,304			3,856			106,097
Administrative charges		862			244			4,765
Total net assets	$	92,729,925		$	33,316,152		$	873,062,358
Total shares outstanding		9,211,380			1,210,607			86,318,770
Net asset value per share (NAV)	$	10.08		$	27.52		$	10.10
Total units outstanding		8,127,765			2,537,501			50,257,706
Variable accumulation unit value (lowest to highest)		$9.92 to $13.90			$10.15 to $13.55			$10.40 to $19.27
Identified cost of investment	$	85,435,103		$	28,409,512		$	797,360,576
Statement of Operations (Continued) For the year ended December 31, 2012
	MainStay VP Growth Allocation— Service Class			MainStay VP Growth Equity— Service Class			MainStay VP High Yield Corporate Bond— Service Class
INVESTMENT INCOME (LOSS):
Dividend income	$	717,450		$	65,263		$	45,806,312
Mortality and expense risk charges		(1,274,779	)		(497,964	)		(11,818,290	)
Administrative charges		(261,956	)		(73,191	)		(1,467,642	)
Net investment income (loss)		(819,285	)		(505,892	)		32,520,380
REALIZED AND UNREALIZED GAIN (LOSS):
Proceeds from sale of investments		13,818,829			7,513,131			76,250,166
Cost of investments sold		(15,426,279	)		(5,915,772	)		(74,135,759	)
Net realized gain (loss) on investments		(1,607,450	)		1,597,359			2,114,407
Realized gain distribution received		6,170,372			—			—
Change in unrealized appreciation (depreciation) on investments		7,570,928			2,829,811			49,314,922
Net gain (loss) on investments		12,133,850			4,427,170			51,429,329
Net increase (decrease) in net assets resulting from operations	$	11,314,565		$	3,921,278		$	83,949,709

(a) For the period February 17, 2012 (commencement of Investment Division) through December 31, 2012.

The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements.

F-14

NYLIAC Variable Annuity Separate Account-III

MainStay VP ICAP Select Equity— Service Class			MainStay VP Income Builder— Service Class			MainStay VP International Equity— Service Class			MainStay VP Janus Balanced— Service Class			MainStay VP Large Cap Growth— Service Class			MainStay VP MFS® Utilities— Service Class			MainStay VP Mid Cap Core— Service Class
$	258,996,716		$	53,741,815		$	134,802,383		$	160,792,315		$	92,846,342		$	409,465,606		$	163,697,148
	—			—			—			—			—			—			—
	(129,078	)		95,719			(19,734	)		126,166			71,273			385,682			(75,031	)
	129,078			(95,719	)		19,734			(126,166	)		(71,273	)		(385,682	)		75,031
	30,095			6,430			15,676			18,858			10,788			47,212			18,872
	1,906			321			1,024			1,074			619			3,128			1,275
$	258,964,715		$	53,735,064		$	134,785,683		$	160,772,383		$	92,834,935		$	409,415,266		$	163,677,001
	19,005,737			3,451,200			11,197,887			15,262,412			5,601,869			37,631,577			13,496,821
$	13.63		$	15.54		$	12.04		$	10.53		$	16.56		$	10.87		$	12.13
	16,868,551			3,654,874			8,845,473			15,465,081			6,638,581			38,131,018			8,807,769
	$10.18 to $15.88			$10.26 to $15.41			$9.14 to $16.50			$10.24 to $10.40			$9.90 to $14.59			$10.39 to $10.74			$9.97 to $19.39
$	212,619,793		$	49,337,303		$	153,725,890		$	152,869,463		$	75,734,358		$	376,866,462		$	132,818,865
MainStay VP ICAP Select Equity— Service Class			MainStay VP Income Builder— Service Class			MainStay VP International Equity— Service Class			MainStay VP Janus Balanced— Service Class(a)			MainStay VP Large Cap Growth— Service Class			MainStay VP MFS® Utilities— Service Class(a)			MainStay VP Mid Cap Core— Service Class
$	4,962,050		$	2,036,280		$	2,092,328		$	—		$	—		$	—		$	846,606
	(3,804,321	)		(701,120	)		(1,944,909	)		(1,994,389	)		(1,366,555	)		(5,023,411	)		(2,399,758	)
	(529,879	)		(80,805	)		(295,241	)		(316,383	)		(204,105	)		(741,140	)		(352,202	)
	627,850			1,254,355			(147,822	)		(2,310,772	)		(1,570,660	)		(5,764,551	)		(1,905,354	)
	46,031,427			8,025,300			24,953,354			19,894,054			18,693,262			57,074,342			31,667,594
	(47,609,750	)		(9,168,501	)		(36,944,339	)		(19,556,490	)		(15,684,714	)		(55,495,409	)		(25,374,938	)
	(1,578,323	)		(1,143,201	)		(11,990,985	)		337,564			3,008,548			1,578,933			6,292,656
	—			—			—			—			—			—			13,450,457
	33,987,439			5,480,938			33,647,633			7,796,687			7,455,465			32,213,462			5,777,215
	32,409,116			4,337,737			21,656,648			8,134,251			10,464,013			33,792,395			25,520,328
$	33,036,966		$	5,592,092		$	21,508,826		$	5,823,479		$	8,893,353		$	28,027,844		$	23,614,974

The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements.

F-15

Statement of Assets and Liabilities (Continued)

As of December 31, 2012

	MainStay VP Moderate Allocation— Service Class			MainStay VP Moderate Growth Allocation— Service Class			MainStay VP PIMCO Real Return— Service Class
ASSETS:
Investment at net asset value	$	333,661,783		$	301,591,037		$	169,581,578
Dividends due and accrued		—			—			—
Net receivable from (payable to) New York Life Insurance and Annuity Corporation		395,913			378,943			576,565
Net receivable from (payable to) the Fund for shares sold or purchased		(395,913	)		(378,943	)		(576,565	)
LIABILITIES:
Liability to New York Life Insurance and Annuity Corporation for:
Mortality and expense risk charges		38,771			34,368			20,196
Administrative charges		2,240			2,136			881
Total net assets	$	333,620,772		$	301,554,533		$	169,560,501
Total shares outstanding		30,005,260			27,343,091			16,004,046
Net asset value per share (NAV)	$	11.11		$	11.02		$	10.56
Total units outstanding		26,359,577			24,373,331			16,217,063
Variable accumulation unit value (lowest to highest)		$10.31 to $13.15			$10.11 to $13.35			$10.10 to $10.44
Identified cost of investment	$	311,226,555		$	275,321,641		$	162,072,260
Statement of Operations (Continued) For the year ended December 31, 2012
	MainStay VP Moderate Allocation— Service Class			MainStay VP Moderate Growth Allocation— Service Class			MainStay VP PIMCO Real Return— Service Class(a)
INVESTMENT INCOME (LOSS):
Dividend income	$	4,996,767		$	2,906,917		$	—
Mortality and expense risk charges		(4,692,974	)		(3,994,514	)		(1,852,524	)
Administrative charges		(730,849	)		(875,379	)		(261,865	)
Net investment income (loss)		(427,056	)		(1,962,976	)		(2,114,389	)
REALIZED AND UNREALIZED GAIN (LOSS):
Proceeds from sale of investments		51,970,359			36,403,736			23,736,627
Cost of investments sold		(49,151,837	)		(38,514,452	)		(23,077,917	)
Net realized gain (loss) on investments		2,818,522			(2,110,716	)		658,710
Realized gain distribution received		21,266,947			11,445,725			—
Change in unrealized appreciation (depreciation) on investments		7,629,914			24,998,348			6,932,753
Net gain (loss) on investments		31,715,383			34,333,357			7,591,463
Net increase (decrease) in net assets resulting from operations	$	31,288,327		$	32,370,381		$	5,477,074

(a) For the period February 17, 2012 (commencement of Investment Division) through December 31, 2012.

The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements.

F-16

NYLIAC Variable Annuity Separate Account-III

MainStay VP S&P 500 Index— Service Class			MainStay VP T. Rowe Price Equity Income— Service Class			MainStay VP U.S. Small Cap— Service Class			Alger Small Cap Growth Portfolio— Class S Shares			BlackRock® Global Allocation V.I. Fund— Class III Shares			Columbia Variable Portfolio— Small Cap Value Fund— Class 2 Shares			Dreyfus IP Technology Growth Portfolio— Service Shares
$	161,979,811		$	141,769,511		$	67,973,042		$	—		$	77,649,943		$	41,108,068		$	49,805,925
	—			—			—			—			—			—			—
	53,280			(66,288	)		(45,905	)		—			279,321			(25,111	)		(198,143	)
	(53,280	)		66,288			45,905			—			(279,321	)		25,111			198,143
	18,644			16,514			7,807			—			9,094			4,674			5,728
	1,265			1,045			542			—			319			320			372
$	161,959,902		$	141,751,952		$	67,964,693		$	—		$	77,640,530		$	41,103,074		$	49,799,825
	5,615,430			13,177,716			6,939,800			—			5,395,441			2,677,941			3,717,775
$	28.84		$	10.76		$	9.80		$	—		$	14.34		$	15.36		$	13.45
	11,277,626			13,353,813			3,788,420			—			7,981,724			3,031,710			3,182,752
	$10.16 to $14.66			$10.36 to $10.64			$9.87 to $18.60		$	—			$9.63 to $10.29			$9.57 to $14.25			$9.72 to $16.26
$	140,435,932		$	131,879,183		$	51,467,014		$	—		$	75,961,257		$	40,391,203		$	42,251,398
MainStay VP S&P 500 Index— Service Class			MainStay VP T. Rowe Price Equity Income— Service Class(a)			MainStay VP U.S. Small Cap— Service Class			Alger Small Cap Growth Portfolio— Class S Shares			BlackRock® Global Allocation V.I. Fund— Class III Shares			Columbia Variable Portfolio— Small Cap Value Fund— Class 2 Shares			Dreyfus IP Technology Growth Portfolio— Service Shares
$	2,304,117		$	—		$	146,569		$	—		$	1,130,996		$	118,809		$	—
	(2,344,394	)		(1,800,614	)		(989,830	)		(64,591	)		(827,759	)		(590,929	)		(725,060	)
	(343,488	)		(245,913	)		(154,721	)		(9,535	)		(156,407	)		(91,570	)		(130,057	)
	(383,765	)		(2,046,527	)		(997,982	)		(74,126	)		146,830			(563,690	)		(855,117	)
	31,044,558			24,973,220			13,255,066			36,887,187			8,448,521			9,854,949			11,316,555
	(26,989,973	)		(24,463,930	)		(9,675,796	)		(28,660,709	)		(8,908,106	)		(10,278,098	)		(7,869,609	)
	4,054,585			509,290			3,579,270			8,226,478			(459,585	)		(423,149	)		3,446,946
	—			—			—			—			253,518			1,909,690			—
	16,884,489			9,956,615			4,353,531			(4,240,168	)		3,847,536			2,791,964			2,942,944
	20,939,074			10,465,905			7,932,801			3,986,310			3,641,469			4,278,505			6,389,890
$	20,555,309		$	8,419,378		$	6,934,819		$	3,912,184		$	3,788,299		$	3,714,815		$	5,534,773

The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements.

F-17

Statement of Assets and Liabilities (Continued)

As of December 31, 2012

	Fidelity® VIP Contrafund® Portfolio— Service Class 2			Fidelity® VIP Equity-Income Portfolio— Service Class 2			Fidelity® VIP Mid Cap Portfolio— Service Class 2
ASSETS:
Investment at net asset value	$	265,175,535		$	108,277,588		$	167,119,501
Dividends due and accrued		—			—			—
Net receivable from (payable to) New York Life Insurance and Annuity Corporation		(10,910	)		111,509			(6,038	)
Net receivable from (payable to) the Fund for shares sold or purchased		10,910			(111,509	)		6,038
LIABILITIES:
Liability to New York Life Insurance and Annuity Corporation for:
Mortality and expense risk charges		30,462			12,591			18,921
Administrative charges		2,033			817			1,337
Total net assets	$	265,143,040		$	108,264,180		$	167,099,243
Total shares outstanding		10,199,479			5,513,052			5,574,568
Net asset value per share (NAV)	$	26.00		$	19.62		$	29.98
Total units outstanding		15,126,608			7,608,082			8,508,499
Variable accumulation unit value (lowest to highest)		$10.08 to $18.67			$10.29 to $14.58			$9.31 to $21.17
Identified cost of investment	$	256,896,277		$	113,649,591		$	160,026,933
Statement of Operations (Continued) For the year ended December 31, 2012
	Fidelity® VIP Contrafund® Portfolio— Service Class 2			Fidelity® VIP Equity-Income Portfolio— Service Class 2			Fidelity® VIP Mid Cap Portfolio— Service Class 2
INVESTMENT INCOME (LOSS):
Dividend income	$	2,944,081		$	3,073,096		$	647,833
Mortality and expense risk charges		(3,848,695	)		(1,563,361	)		(2,439,337	)
Administrative charges		(596,603	)		(209,076	)		(371,270	)
Net investment income (loss)		(1,501,217	)		1,300,659			(2,162,774	)
REALIZED AND UNREALIZED GAIN (LOSS):
Proceeds from sale of investments		43,762,204			20,197,912			30,902,196
Cost of investments sold		(52,668,938	)		(25,081,969	)		(31,375,906	)
Net realized gain (loss) on investments		(8,906,734	)		(4,884,057	)		(473,710	)
Realized gain distribution received		—			6,929,865			13,345,424
Change in unrealized appreciation (depreciation) on investments		45,771,511			11,843,470			9,642,893
Net gain (loss) on investments		36,864,777			13,889,278			22,514,607
Net increase (decrease) in net assets resulting from operations	$	35,363,560		$	15,189,937		$	20,351,833

The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements.

F-18

NYLIAC Variable Annuity Separate Account-III

Janus Aspen Balanced Portfolio— Service Shares			Janus Aspen Worldwide Portfolio— Service Shares			MFS® Investors Trust Series— Service Class			MFS® Research Series— Service Class			MFS® Utilities Series— Service Class			Neuberger Berman AMT Mid-Cap Growth Portfolio— Class S			PIMCO Real Return Portfolio— Advisor Class
$	—		$	31,668,104		$	8,342,390		$	9,074,902		$	—		$	35,910,876		$	—
	—			—			—			—			—			—			—
	—			(11,358	)		(30,069	)		(4,959	)		—			(212,044	)		—
	—			11,358			30,069			4,959			—			212,044			—
	—			3,624			975			1,048			—			4,173			—
	—			241			59			67			—			259			—
$	—		$	31,664,239		$	8,341,356		$	9,073,787		$	—		$	35,906,444		$	—
	—			1,044,837			367,536			418,427			—			1,196,123			—
$	—		$	30.32		$	22.78		$	21.70		$	—		$	30.20		$	—
	—			2,502,714			563,877			569,615			—			1,983,091			—
$	—			$9.38 to $13.06			$10.36 to $15.42			$10.28 to $16.75		$	—			$9.95 to $19.64		$	—
$	—		$	28,775,814		$	7,136,037		$	7,530,443		$	—		$	31,692,593		$	—
Janus Aspen Balanced Portfolio— Service Shares			Janus Aspen Worldwide Portfolio— Service Shares			MFS® Investors Trust Series— Service Class			MFS® Research Series— Service Class			MFS® Utilities Series— Service Class			Neuberger Berman AMT Mid-Cap Growth Portfolio— Class S			PIMCO Real Return Portfolio— Advisor Class
$	—		$	238,550		$	53,831		$	46,651		$	—		$	—		$	—
	(290,148	)		(433,085	)		(108,623	)		(117,879	)		(739,723	)		(537,763	)		(221,680	)
	(40,638	)		(67,774	)		(16,411	)		(19,706	)		(105,665	)		(78,339	)		(28,221	)
	(330,786	)		(262,309	)		(71,203	)		(90,934	)		(845,388	)		(616,102	)		(249,901	)
	161,259,607			6,213,306			1,805,408			1,794,673			415,383,339			10,757,648			130,401,967
	(150,724,833	)		(6,972,369	)		(1,776,150	)		(1,578,334	)		(415,310,721	)		(8,619,384	)		(127,282,187	)
	10,534,774			(759,063	)		29,258			216,339			72,618			2,138,264			3,119,780
	—			—			—			—			—			—			—
	221,875			5,843,416			1,176,438			985,522			16,146,810			1,636,267			(996,547	)
	10,756,649			5,084,353			1,205,696			1,201,861			16,219,428			3,774,531			2,123,233
$	10,425,863		$	4,822,044		$	1,134,493		$	1,110,927		$	15,374,040		$	3,158,429		$	1,873,332

The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements.

F-19

Statement of Assets and Liabilities (Continued)

As of December 31, 2012

	T. Rowe Price Equity Income Portfolio—II			UIF Emerging Markets Equity Portfolio— Class II			Victory VIF Diversified Stock Fund— Class A Shares
ASSETS:
Investment at net asset value	$	—		$	—		$	16,204,110
Dividends due and accrued		—			—			—
Net receivable from (payable to) New York Life Insurance and Annuity Corporation		—			—			(16,681	)
Net receivable from (payable to) the Fund for shares sold or purchased		—			—			16,681
LIABILITIES:
Liability to New York Life Insurance and Annuity Corporation for:
Mortality and expense risk charges		—			—			1,822
Administrative charges		—			—			143
Total net assets	$	—		$	—		$	16,202,145
Total shares outstanding		—			—			1,556,698
Net asset value per share (NAV)	$	—		$	—		$	10.42
Total units outstanding		—			—			1,280,281
Variable accumulation unit value (lowest to highest)	$	—		$	—			$9.97 to $13.07
Identified cost of investment	$	—		$	—		$	13,593,264
Statement of Operations (Continued) For the year ended December 31, 2012
	T. Rowe Price Equity Income Portfolio—II			UIF Emerging Markets Equity Portfolio— Class II			Victory VIF Diversified Stock Fund— Class A Shares
INVESTMENT INCOME (LOSS):
Dividend income	$	—		$	—		$	162,208
Mortality and expense risk charges		(275,555	)		(214,540	)		(239,116	)
Administrative charges		(36,427	)		(37,686	)		(43,070	)
Net investment income (loss)		(311,982	)		(252,226	)		(119,978	)
REALIZED AND UNREALIZED GAIN (LOSS):
Proceeds from sale of investments		153,651,540			122,784,641			4,572,112
Cost of investments sold		(156,358,042	)		(114,905,172	)		(5,379,656	)
Net realized gain (loss) on investments		(2,706,502	)		7,879,469			(807,544	)
Realized gain distribution received		—			—			—
Change in unrealized appreciation (depreciation) on investments		14,720,560			5,446,605			3,265,584
Net gain (loss) on investments		12,014,058			13,326,074			2,458,040
Net increase (decrease) in net assets resulting from operations	$	11,702,076		$	13,073,848		$	2,338,062

The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements.

F-20

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F-21

Statement of Changes in Net Assets

For the years ended December 31, 2012

and December 31, 2011

	MainStay VP Bond— Initial Class						MainStay VP Cash Management
	2012			2011			2012			2011
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income (loss)	$	847,856		$	1,795,603		$	(3,590,282	)	$	(4,252,905	)
Net realized gain (loss) on investments		2,000,046			2,645,956			(2,680	)		(15,275	)
Realized gain distribution received		3,316,070			1,609,876			—			—
Change in unrealized appreciation (depreciation) on investments		(3,004,554	)		136,597			2,698			19,769
Net increase (decrease) in net assets resulting from operations		3,159,418			6,188,032			(3,590,264	)		(4,248,411	)
Contributions and (Withdrawals):
Payments received from policyowners		979,469			1,273,826			28,604,119			31,470,094
Policyowners’ surrenders		(14,720,999	)		(17,853,551	)		(67,061,759	)		(81,319,004	)
Policyowners’ annuity and death benefits		(1,363,241	)		(1,866,932	)		(1,944,708	)		(2,881,129	)
Net transfers from (to) Fixed Account		(2,125,091	)		(2,309,228	)		(9,999,557	)		(11,640,076	)
Transfers between Investment Divisions		2,913,720			(2,107,016	)		(61,831,506	)		165,568,711
Net contributions and (withdrawals)		(14,316,142	)		(22,862,901	)		(112,233,411	)		101,198,596
Increase (decrease) in net assets		(11,156,724	)		(16,674,869	)		(115,823,675	)		96,950,185
NET ASSETS:
Beginning of year		108,114,364			124,789,233			332,005,158			235,054,973
End of year	$	96,957,640		$	108,114,364		$	216,181,483		$	332,005,158
	MainStay VP Government— Initial Class						MainStay VP Growth Equity— Initial Class
	2012			2011			2012			2011
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income (loss)	$	981,165		$	1,394,253		$	(1,147,352	)	$	(1,109,511	)
Net realized gain (loss) on investments		1,128,469			1,605,542			1,939,484			(253,314	)
Realized gain distribution received		—			651,574			—			—
Change in unrealized appreciation (depreciation) on investments		(351,716	)		(160,791	)		12,241,975			(1,431,738	)
Net increase (decrease) in net assets resulting from operations		1,757,918			3,490,578			13,034,107			(2,794,563	)
Contributions and (Withdrawals):
Payments received from policyowners		1,010,882			765,799			1,085,256			1,408,721
Policyowners’ surrenders		(10,965,008	)		(11,471,230	)		(10,286,242	)		(11,950,270	)
Policyowners’ annuity and death benefits		(1,281,017	)		(1,538,437	)		(2,039,699	)		(1,310,941	)
Net transfers from (to) Fixed Account		(1,304,083	)		(1,467,165	)		(1,777,562	)		(1,401,600	)
Transfers between Investment Divisions		(1,536,435	)		(4,183,794	)		(1,564,893	)		(2,765,853	)
Net contributions and (withdrawals)		(14,075,661	)		(17,894,827	)		(14,583,140	)		(16,019,943	)
Increase (decrease) in net assets		(12,317,743	)		(14,404,249	)		(1,549,033	)		(18,814,506	)
NET ASSETS:
Beginning of year		79,060,659			93,464,908			100,611,816			119,426,322
End of year	$	66,742,916		$	79,060,659		$	99,062,783		$	100,611,816

Not all investment options are available under all policies.

(a) For the period February 17, 2012 (commencement of Investment Division) through December 31, 2012.

The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements.

F-22

NYLIAC Variable Annuity Separate Account-III

MainStay VP Common Stock— Initial Class						MainStay VP Convertible— Initial Class						MainStay VP DFA/DuPont Capital Emerging Markets Equity— Initial Class			MainStay VP Eagle Small Cap Growth— Initial Class
2012			2011			2012			2011			2012(a)			2012(a)
$	81,141		$	10,466		$	1,237,748		$	870,755		$	(511,409	)	$	(1,253,136	)
	(1,776,459	)		(3,077,077	)		141,401			2,828,778			(691,624	)		(715,632	)
	—			—			330,913			—			—			—
	14,285,887			3,462,362			5,051,453			(10,189,565	)		470,887			36,026
	12,590,569			395,751			6,761,515			(6,490,032	)		(732,146	)		(1,932,742	)
	869,697			867,728			827,119			1,347,886			430,131			1,594,754
	(11,223,134	)		(11,629,349	)		(11,936,581	)		(14,478,998	)		(4,258,855	)		(7,997,991	)
	(1,326,768	)		(1,223,273	)		(917,290	)		(1,522,032	)		(425,094	)		(630,627	)
	(2,009,951	)		(1,486,200	)		(2,285,140	)		(2,451,996	)		(1,155,665	)		(833,316	)
	(3,096,343	)		(3,716,533	)		(3,099,232	)		206,434			42,950,206			94,803,438
	(16,786,499	)		(17,187,627	)		(17,411,124	)		(16,898,706	)		37,540,723			86,936,258
	(4,195,930	)		(16,791,876	)		(10,649,609	)		(23,388,738	)		36,808,577			85,003,516
	89,175,577			105,967,453			94,613,265			118,002,003			—			—
$	84,979,647		$	89,175,577		$	83,963,656		$	94,613,265		$	36,808,577		$	85,003,516

MainStay VP High Yield Corporate Bond— Initial Class						MainStay VP ICAP Select Equity— Initial Class						MainStay VP Income Builder— Initial Class						MainStay VP International Equity— Initial Class
2012			2011			2012			2011			2012			2011			2012			2011
$	14,177,937		$	16,044,637		$	951,383		$	(206,640	)	$	2,106,233		$	1,916,610		$	91,662		$	834,120
	6,185,390			4,043,897			(1,912,942	)		(5,198,984	)		(286,817	)		(2,013,613	)		(5,985,306	)		(4,319,870	)
	—			—			—			—			—			—			—			—
	17,508,722			(2,840,794	)		23,001,223			(49,267	)		7,800,438			2,292,609			12,605,601			(5,536,270	)
	37,872,049			17,247,740			22,039,664			(5,454,891	)		9,619,854			2,195,606			6,711,957			(9,022,020	)
	4,465,214			4,845,078			1,880,094			1,623,653			874,084			936,097			376,099			526,212
	(46,207,527	)		(54,246,816	)		(22,095,215	)		(26,951,221	)		(8,664,810	)		(9,285,079	)		(5,492,049	)		(7,282,199	)
	(8,025,162	)		(6,435,760	)		(2,023,962	)		(2,463,711	)		(1,883,934	)		(1,719,321	)		(325,556	)		(494,698	)
	(3,363,896	)		(7,337,154	)		(3,442,927	)		(3,132,407	)		(1,198,698	)		(1,077,902	)		(1,245,074	)		(873,165	)
	17,957,026			(4,765,226	)		(6,954,364	)		(7,093,670	)		2,147,036			(1,232,073	)		(2,478,239	)		(760,119	)
	(35,174,345	)		(67,939,878	)		(32,636,374	)		(38,017,356	)		(8,726,322	)		(12,378,278	)		(9,164,819	)		(8,883,969	)
	2,697,704			(50,692,138	)		(10,596,710	)		(43,472,247	)		893,532			(10,182,672	)		(2,452,862	)		(17,905,989	)
	340,625,483			391,317,621			170,305,148			213,777,395			76,081,589			86,264,261			40,783,213			58,689,202
$	343,323,187		$	340,625,483		$	159,708,438		$	170,305,148		$	76,975,121		$	76,081,589		$	38,330,351		$	40,783,213

The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements.

F-23

Statement of Changes in Net Assets (Continued)

For the years ended December 31, 2012

and December 31, 2011

	MainStay VP Janus Balanced— Initial Class			MainStay VP Large Cap Growth— Initial Class
	2012(a)			2012			2011
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income (loss)	$	(3,236,860	)	$	(677,055	)	$	(689,945	)
Net realized gain (loss) on investments		712,595			3,335,980			2,051,968
Realized gain distribution received		—			—			—
Change in unrealized appreciation (depreciation) on investments		12,317,071			1,863,890			(2,149,848	)
Net increase (decrease) in net assets resulting from operations		9,792,806			4,522,815			(787,825	)
Contributions and (Withdrawals):
Payments received from policyowners		1,654,090			536,951			557,356
Policyowners’ surrenders		(25,152,200	)		(5,917,865	)		(6,707,483	)
Policyowners’ annuity and death benefits		(2,950,652	)		(511,160	)		(481,257	)
Net transfers from (to) Fixed Account		(3,489,213	)		(850,929	)		(584,665	)
Transfers between Investment Divisions		256,440,337			1,714,136			252,810
Net contributions and (withdrawals)		226,502,362			(5,028,867	)		(6,963,239	)
Increase (decrease) in net assets		236,295,168			(506,052	)		(7,751,064	)
NET ASSETS:
Beginning of year		—			41,125,382			48,876,446
End of year	$	236,295,168		$	40,619,330		$	41,125,382

	MainStay VP U.S. Small Cap— Initial Class						MainStay VP Van Eck Global Hard Assets— Initial Class
	2012			2011			2012(a)
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income (loss)	$	(295,834	)	$	(211,794	)	$	(4,263,900	)
Net realized gain (loss) on investments		1,737,627			3,069,432			(7,189,944	)
Realized gain distribution received		—			—			—
Change in unrealized appreciation (depreciation) on investments		1,437,054			(4,163,757	)		(26,015,335	)
Net increase (decrease) in net assets resulting from operations		2,878,847			(1,306,119	)		(37,469,179	)
Contributions and (Withdrawals):
Payments received from policyowners		316,515			323,439			9,495,979
Policyowners’ surrenders		(3,946,088	)		(4,837,228	)		(26,169,800	)
Policyowners’ annuity and death benefits		(223,814	)		(199,081	)		(2,227,529	)
Net transfers from (to) Fixed Account		(608,113	)		(538,044	)		(726,917	)
Transfers between Investment Divisions		(889,284	)		(2,527,849	)		333,658,964
Net contributions and (withdrawals)		(5,350,784	)		(7,778,763	)		314,030,697
Increase (decrease) in net assets		(2,471,937	)		(9,084,882	)		276,561,518
NET ASSETS:
Beginning of year		28,107,589			37,192,471			—
End of year	$	25,635,652		$	28,107,589		$	276,561,518

(a) For the period February 17, 2012 (commencement of Investment Division) through December 31, 2012.

The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements.

F-24

NYLIAC Variable Annuity Separate Account-III

MainStay VP MFS® Utilities— Initial Class			MainStay VP Mid Cap Core— Initial Class						MainStay VP S&P 500 Index— Initial Class						MainStay VP T. Rowe Price Equity Income— Initial Class
2012(a)			2012			2011			2012			2011			2012(a)
$	(35,207	)	$	(492,539	)	$	(473,514	)	$	283,164		$	378,974		$	(917,147	)
	20,695			4,401,689			1,044,825			4,806,056			869,920			341,129
	—			4,888,326			—			—			—			—
	196,985			331,293			(3,410,421	)		20,044,416			(35,543	)		4,846,827
	182,473			9,128,769			(2,839,110	)		25,133,636			1,213,351			4,270,809
	1,075			721,493			681,823			2,033,360			1,835,245			425,069
	(292,687	)		(8,824,790	)		(10,156,352	)		(20,547,063	)		(24,259,295	)		(10,051,612	)
	(57,246	)		(686,616	)		(307,879	)		(3,070,638	)		(2,169,557	)		(811,309	)
	(25,043	)		(937,343	)		(976,091	)		(3,068,069	)		(3,490,479	)		(1,330,723	)
	2,709,700			(2,588,608	)		(2,543,178	)		(2,769,299	)		(6,322,776	)		74,046,810
	2,335,799			(12,315,864	)		(13,301,677	)		(27,421,709	)		(34,406,862	)		62,278,235
	2,518,272			(3,187,095	)		(16,140,787	)		(2,288,073	)		(33,193,511	)		66,549,044
	—			62,375,537			78,516,324			188,168,243			221,361,754			—
$	2,518,272		$	59,188,442		$	62,375,537		$	185,880,170		$	188,168,243		$	66,549,044

Alger Small Cap Growth Portfolio— Class I-2 Shares						Calvert VP SRI Balanced Portfolio						Dreyfus IP Technology Growth Portfolio— Initial Shares						Fidelity® VIP Contrafund® Portfolio— Initial Class
2012			2011			2012			2011			2012			2011			2012			2011
$	(62,741	)	$	(509,948	)	$	(60,767	)	$	(59,780	)	$	(245,588	)	$	(253,777	)	$	(389,314	)	$	(962,014	)
	13,431,570			3,844,383			1,210,022			(249,169	)		1,353,552			2,840,694			(1,358,598	)		731,605
	—			—			—			—			—			—			—			—
	(9,678,735	)		(4,691,826	)		489,664			1,100,239			611,314			(4,230,360	)		24,752,702			(6,437,351	)
	3,690,094			(1,357,391	)		1,638,919			791,290			1,719,278			(1,643,443	)		23,004,790			(6,667,760	)
	34,854			179,149			293,905			2,084,911			238,494			203,503			1,743,740			1,986,783
	(437,559	)		(4,685,578	)		(305,815	)		(2,941,921	)		(2,198,048	)		(2,359,452	)		(20,602,834	)		(23,990,702	)
	(53,364	)		(201,192	)		(12,861	)		(419,379	)		(186,623	)		(239,869	)		(1,895,376	)		(2,118,293	)
	(30,521	)		(505,084	)		121,251			461,240			(166,894	)		(265,586	)		(3,781,980	)		(3,452,681	)
	(33,859,590	)		(1,415,156	)		(28,995,305	)		277,943			2,935,826			(2,005,983	)		(6,012,637	)		(7,159,029	)
	(34,346,180	)		(6,627,861	)		(28,898,825	)		(537,206	)		622,755			(4,667,387	)		(30,549,087	)		(34,733,922	)
	(30,656,086	)		(7,985,252	)		(27,259,906	)		254,084			2,342,033			(6,310,830	)		(7,544,297	)		(41,401,682	)
	30,656,086			38,641,338			27,259,906			27,005,822			12,641,119			18,951,949			163,620,397			205,022,079
$	—		$	30,656,086		$	—		$	27,259,906		$	14,983,152		$	12,641,119		$	156,076,100		$	163,620,397

The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements.

F-25

Statement of Changes in Net Assets (Continued)

For the years ended December 31, 2012

and December 31, 2011

	Fidelity® VIP Equity-Income Portfolio— Initial Class						Janus Aspen Balanced Portfolio— Institutional Shares
	2012			2011			2012			2011
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income (loss)	$	1,035,114		$	676,245		$	(441,043	)	$	2,253,007
Net realized gain (loss) on investments		(3,411,283	)		(3,903,989	)		31,811,745			9,663,133
Realized gain distribution received		4,382,745			—			—			12,572,974
Change in unrealized appreciation (depreciation) on investments		8,166,714			3,119,543			(15,855,157	)		(23,367,603	)
Net increase (decrease) in net assets resulting from operations		10,173,290			(108,201	)		15,515,545			1,121,511
Contributions and (Withdrawals):
Payments received from policyowners		722,995			641,129			293,569			2,643,217
Policyowners’ surrenders		(8,641,711	)		(10,733,904	)		(3,071,280	)		(31,936,170	)
Policyowners’ annuity and death benefits		(911,210	)		(1,068,455	)		(492,593	)		(3,373,909	)
Net transfers from (to) Fixed Account		(1,519,061	)		(1,533,146	)		(465,241	)		(3,057,641	)
Transfers between Investment Divisions		(1,291,046	)		(2,755,260	)		(232,191,640	)		(6,959,469	)
Net contributions and (withdrawals)		(11,640,033	)		(15,449,636	)		(235,927,185	)		(42,683,972	)
Increase (decrease) in net assets		(1,466,743	)		(15,557,837	)		(220,411,640	)		(41,562,461	)
NET ASSETS:
Beginning of year		69,654,794			85,212,631			220,411,640			261,974,101
End of year	$	68,188,051		$	69,654,794		$	—		$	220,411,640
	Neuberger Berman AMT Mid-Cap Growth— Class I						Royce Micro-Cap Portfolio— Investment Class
	2012			2011			2012			2011
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income (loss)	$	(36,503	)	$	(39,624	)	$	(1,348,130	)	$	705,139
Net realized gain (loss) on investments		165,698			335,733			2,159,177			(2,110,437	)
Realized gain distribution received		—			—			1,716,226			—
Change in unrealized appreciation (depreciation) on investments		83,026			(304,640	)		1,821,590			(10,843,936	)
Net increase (decrease) in net assets resulting from operations		212,221			(8,531	)		4,348,863			(12,249,234	)
Contributions and (Withdrawals):
Payments received from policyowners		2,194			4,513			4,977,948			7,128,277
Policyowners’ surrenders		(291,627	)		(877,139	)		(6,816,374	)		(6,305,170	)
Policyowners’ annuity and death benefits		(59,230	)		(5,897	)		(354,925	)		(532,859	)
Net transfers from (to) Fixed Account		(26,064	)		(131,636	)		513,448			1,233,146
Transfers between Investment Divisions		241,353			92,204			(1,847,923	)		(4,319,727	)
Net contributions and (withdrawals)		(133,374	)		(917,955	)		(3,527,826	)		(2,796,333	)
Increase (decrease) in net assets		78,847			(926,486	)		821,037			(15,045,567	)
NET ASSETS:
Beginning of year		2,108,109			3,034,595			77,789,353			92,834,920
End of year	$	2,186,956		$	2,108,109		$	78,610,390		$	77,789,353

The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements.

F-26

NYLIAC Variable Annuity Separate Account-III

Janus Aspen Worldwide Portfolio— Institutional Shares						MFS® Investors Trust Series— Initial Class						MFS® Research Series— Initial Class						MFS® Utilities Series— Initial Class
2012			2011			2012			2011			2012			2011			2012			2011
$	(426,275	)	$	(685,120	)	$	(55,779	)	$	(56,190	)	$	(80,167	)	$	(78,290	)	$	(5,954	)	$	49,535
	(2,551,394	)		(2,753,467	)		421,149			322,215			793,958			737,867			173,018			(107,418	)
	—			—			—			—			—			—			—			—
	13,919,229			(8,341,813	)		1,094,406			(587,021	)		883,095			(859,812	)		(52,641	)		184,998
	10,941,560			(11,780,400	)		1,459,776			(320,996	)		1,596,886			(200,235	)		114,423			127,115
	888,062			918,640			67,798			66,728			83,104			89,771			(35	)		4,581
	(7,351,484	)		(8,481,327	)		(1,010,320	)		(1,321,441	)		(1,571,882	)		(1,505,899	)		(15,915	)		(468,459	)
	(1,016,100	)		(871,214	)		(206,519	)		(286,232	)		(158,425	)		(143,112	)		(1,318	)		(53,477	)
	(918,750	)		(865,138	)		(143,277	)		(90,256	)		(233,523	)		(272,333	)		(3,016	)		(6,793	)
	(1,528,376	)		(1,850,789	)		336,444			(241,444	)		191,945			(358,050	)		(3,012,177	)		740,398
	(9,926,648	)		(11,149,828	)		(955,874	)		(1,872,645	)		(1,688,781	)		(2,189,623	)		(3,032,461	)		216,250
	1,014,912			(22,930,228	)		503,902			(2,193,641	)		(91,895	)		(2,389,858	)		(2,918,038	)		343,365
	64,387,608			87,317,836			8,689,287			10,882,928			10,924,365			13,314,223			2,918,038			2,574,673
$	65,402,520		$	64,387,608		$	9,193,189		$	8,689,287		$	10,832,470		$	10,924,365		$	—		$	2,918,038
Royce Small-Cap Portfolio— Investment Class						T. Rowe Price Equity Income Portfolio						UIF Emerging Markets Equity Portfolio— Class I						Van Eck VIP Global Hard Assets
2012			2011			2012			2011			2012			2011			2012			2011
$	(137,947	)	$	(803,543	)	$	(145,160	)	$	186,734		$	(87,659	)	$	(580,832	)	$	(727,145	)	$	(1,380,302	)
	14,512,637			199,405			(2,836,647	)		(1,801,815	)		3,395,052			(5,434,430	)		9,393,054			8,209,865
	—			—			—			—			—			—			23,371,244			5,111,789
	(8,146,604	)		(2,641,832	)		8,905,084			67,554			1,667,193			(5,412,643	)		9,513,780			(83,775,969	)
	6,228,086			(3,245,970	)		5,923,277			(1,547,527	)		4,974,586			(11,427,905	)		41,550,933			(71,834,617	)
	383,299			5,207,309			60,471			653,784			82,492			610,307			1,375,370			21,290,180
	(601,556	)		(5,460,316	)		(1,157,837	)		(12,477,074	)		(634,838	)		(6,776,926	)		(3,479,981	)		(32,638,669	)
	(29,422	)		(433,894	)		(83,616	)		(744,364	)		(518,583	)		(588,948	)		(241,723	)		(2,420,658	)
	(33,292	)		97,269			(153,620	)		(1,811,357	)		(51,901	)		(620,037	)		(301,150	)		(1,055,086	)
	(67,544,033	)		(1,723,886	)		(75,768,983	)		(1,703,347	)		(45,989,970	)		(8,071,871	)		(353,961,160	)		(22,068,840	)
	(67,825,004	)		(2,313,518	)		(77,103,585	)		(16,082,358	)		(47,112,800	)		(15,447,475	)		(356,608,644	)		(36,893,073	)
	(61,596,918	)		(5,559,488	)		(71,180,308	)		(17,629,885	)		(42,138,214	)		(26,875,380	)		(315,057,711	)		(108,727,690	)
	61,596,918			67,156,406			71,180,308			88,810,193			42,138,214			69,013,594			315,057,711			423,785,401
$	—		$	61,596,918		$	—		$	71,180,308		$	—		$	42,138,214		$	—		$	315,057,711

The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements.

F-27

Statement of Changes in Net Assets (Continued)

For the years ended December 31, 2012

and December 31, 2011

	MainStay VP Balanced— Service Class						MainStay VP Bond— Service Class
	2012			2011			2012			2011
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income (loss)	$	(442,022	)	$	(207,709	)	$	1,132,625		$	2,676,011
Net realized gain (loss) on investments		1,001,113			289,118			2,284,600			3,062,395
Realized gain distribution received		—			—			6,551,522			2,722,980
Change in unrealized appreciation (depreciation) on investments		7,850,356			574,501			(4,876,223	)		560,474
Net increase (decrease) in net assets resulting from operations		8,409,447			655,910			5,092,524			9,021,860
Contributions and (Withdrawals):
Payments received from policyowners		4,364,991			3,853,928			15,441,893			14,000,775
Policyowners’ surrenders		(8,029,014	)		(6,701,209	)		(22,786,977	)		(15,664,874	)
Policyowners’ annuity and death benefits		(789,737	)		(754,213	)		(1,724,732	)		(1,522,731	)
Net transfers from (to) Fixed Account		502,853			293,011			4,563,348			2,472,986
Transfers between Investment Divisions		(1,166,798	)		(2,108,799	)		10,166,056			(555,459	)
Net contributions and (withdrawals)		(5,117,705	)		(5,417,282	)		5,659,588			(1,269,303	)
Increase (decrease) in net assets		3,291,742			(4,761,372	)		10,752,112			7,752,557
NET ASSETS:
Beginning of year		84,263,932			89,025,304			188,439,883			180,687,326
End of year	$	87,555,674		$	84,263,932		$	199,191,995		$	188,439,883

	MainStay VP Eagle Small Cap Growth— Service Class			MainStay VP Flexible Bond Opportunities— Service Class
	2012(a)			2012			2011
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income (loss)	$	(456,998	)	$	2,107,219		$	315,063
Net realized gain (loss) on investments		(253,245	)		171,515			(75,901	)
Realized gain distribution received		—			429,809			—
Change in unrealized appreciation (depreciation) on investments		(26,153	)		752,945			(280,536	)
Net increase (decrease) in net assets resulting from operations		(736,396	)		3,461,488			(41,374	)
Contributions and (Withdrawals):
Payments received from policyowners		439,742			11,102,471			3,160,598
Policyowners’ surrenders		(3,408,004	)		(2,550,309	)		(734,748	)
Policyowners’ annuity and death benefits		(162,052	)		(80,778	)		—
Net transfers from (to) Fixed Account		(307,543	)		4,865,118			1,204,601
Transfers between Investment Divisions		34,151,477			27,591,159			12,975,394
Net contributions and (withdrawals)		30,713,620			40,927,661			16,605,845
Increase (decrease) in net assets		29,977,224			44,389,149			16,564,471
NET ASSETS:
Beginning of year		—			16,564,471			—
End of year	$	29,977,224		$	60,953,620		$	16,564,471

(a) For the period February 17, 2012 (commencement of Investment Division) through December 31, 2012.

The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements.

F-28

NYLIAC Variable Annuity Separate Account-III

MainStay VP Common Stock— Service Class						MainStay VP Conservative Allocation— Service Class						MainStay VP Convertible— Service Class						MainStay VP DFA/DuPont Capital Emerging Markets Equity— Service Class
2012			2011			2012			2011			2012			2011			2012(a)
$	(107,075	)	$	(141,948	)	$	976,499		$	1,289,744		$	1,713,901		$	1,075,614		$	(1,588,621	)
	(2,749,423	)		(2,893,247	)		3,524,152			1,334,944			(445,960	)		435,066			(1,465,102	)
	—			—			16,183,740			1,010,233			623,481			—			—
	8,023,094			2,970,962			2,029,078			(1,227,917	)		9,503,076			(14,386,383	)		1,535,847
	5,166,596			(64,233	)		22,713,469			2,407,004			11,394,498			(12,875,703	)		(1,517,876	)
	1,096,878			955,490			20,102,070			22,612,203			8,309,199			13,937,684			4,083,589
	(3,835,603	)		(3,423,986	)		(25,819,367	)		(21,889,826	)		(16,282,249	)		(13,453,441	)		(7,227,778	)
	(196,276	)		(528,250	)		(2,277,104	)		(2,699,420	)		(1,374,882	)		(1,445,856	)		(442,022	)
	(464,767	)		(156,791	)		8,104,398			2,118,948			810,375			2,381,870			62,337
	(1,778,621	)		(3,086,424	)		19,104,626			22,695,698			(9,577,714	)		(1,013,848	)		114,475,529
	(5,178,389	)		(6,239,961	)		19,214,623			22,837,603			(18,115,271	)		406,409			110,951,655
	(11,793	)		(6,304,194	)		41,928,092			25,244,607			(6,720,773	)		(12,469,294	)		109,433,779
	37,069,443			43,373,637			255,258,248			230,013,641			167,565,897			180,035,191			—
$	37,057,650		$	37,069,443		$	297,186,340		$	255,258,248		$	160,845,124		$	167,565,897		$	109,433,779

MainStay VP Floating Rate— Service Class						MainStay VP Government— Service Class						MainStay VP Growth Allocation— Service Class						MainStay VP Growth Equity— Service Class
2012			2011			2012			2011			2012			2011			2012			2011
$	4,867,317		$	5,383,686		$	1,323,781		$	1,827,484		$	(819,285	)	$	(827,628	)	$	(505,892	)	$	(465,220	)
	4,096,109			(1,817,627	)		819,609			1,071,731			(1,607,450	)		(3,109,082	)		1,597,359			1,103,108
	—			—			—			985,264			6,170,372			—			—			—
	1,555,368			(3,307,174	)		206,812			657,502			7,570,928			(174,038	)		2,829,811			(1,682,579	)
	10,518,794			258,885			2,350,202			4,541,981			11,314,565			(4,110,748	)		3,921,278			(1,044,691	)
	13,845,019			18,657,772			8,930,235			7,718,797			5,472,736			5,945,884			1,475,091			1,323,037
	(24,747,273	)		(21,410,942	)		(16,227,326	)		(11,168,165	)		(6,783,088	)		(6,778,749	)		(4,299,266	)		(3,382,554	)
	(1,397,217	)		(2,315,803	)		(763,302	)		(1,205,523	)		(217,443	)		(114,821	)		(240,722	)		(250,957	)
	2,825,332			573,844			1,874,738			449,251			(510,701	)		106,982			162,732			(350,972	)
	7,815,081			(15,150,275	)		76,284			(5,468,655	)		(3,705,598	)		(4,118,234	)		1,196,175			(957,309	)
	(1,659,058	)		(19,645,404	)		(6,109,371	)		(9,674,295	)		(5,744,094	)		(4,958,938	)		(1,705,990	)		(3,618,755	)
	8,859,736			(19,386,519	)		(3,759,169	)		(5,132,314	)		5,570,471			(9,069,686	)		2,215,288			(4,663,446	)
	209,517,458			228,903,977			121,812,985			126,945,299			87,159,454			96,229,140			31,100,864			35,764,310
$	218,377,194		$	209,517,458		$	118,053,816		$	121,812,985		$	92,729,925		$	87,159,454		$	33,316,152		$	31,100,864

The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements.

F-29

Statement of Changes in Net Assets (Continued)

For the years ended December 31, 2012

and December 31, 2011

	MainStay VP High Yield Corporate Bond— Service Class						MainStay VP ICAP Select Equity— Service Class
	2012			2011			2012			2011
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income (loss)	$	32,520,380		$	31,553,626		$	627,850		$	(1,048,267	)
Net realized gain (loss) on investments		2,114,407			332,292			(1,578,323	)		(5,645,274	)
Realized gain distribution received		—			—			—			—
Change in unrealized appreciation (depreciation) on investments		49,314,922			(2,652,543	)		33,987,439			(2,769,323	)
Net increase (decrease) in net assets resulting from operations		83,949,709			29,233,375			33,036,966			(9,462,864	)
Contributions and (Withdrawals):
Payments received from policyowners		80,595,743			59,963,959			10,626,571			12,728,951
Policyowners’ surrenders		(84,836,590	)		(56,771,417	)		(25,639,726	)		(21,117,653	)
Policyowners’ annuity and death benefits		(5,503,767	)		(5,199,079	)		(2,340,310	)		(2,114,914	)
Net transfers from (to) Fixed Account		18,564,173			7,208,216			(912,329	)		(139,678	)
Transfers between Investment Divisions		72,395,505			(15,218,215	)		(12,951,661	)		(14,536,403	)
Net contributions and (withdrawals)		81,215,064			(10,016,536	)		(31,217,455	)		(25,179,697	)
Increase (decrease) in net assets		165,164,773			19,216,839			1,819,511			(34,642,561	)
NET ASSETS:
Beginning of year		707,897,585			688,680,746			257,145,204			291,787,765
End of year	$	873,062,358		$	707,897,585		$	258,964,715		$	257,145,204

	MainStay VP MFS® Utilities— Service Class			MainStay VP Mid Cap Core— Service Class
	2012(a)			2012			2011
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income (loss)	$	(5,764,551	)	$	(1,905,354	)	$	(1,719,014	)
Net realized gain (loss) on investments		1,578,933			6,292,656			(5,400,515	)
Realized gain distribution received		—			13,450,457			—
Change in unrealized appreciation (depreciation) on investments		32,213,462			5,777,215			(1,051,882	)
Net increase (decrease) in net assets resulting from operations		28,027,844			23,614,974			(8,171,411	)
Contributions and (Withdrawals):
Payments received from policyowners		19,710,663			5,692,089			5,399,249
Policyowners’ surrenders		(33,697,505	)		(16,928,656	)		(13,760,511	)
Policyowners’ annuity and death benefits		(2,812,064	)		(970,304	)		(1,091,374	)
Net transfers from (to) Fixed Account		2,150,032			(675,437	)		(951,353	)
Transfers between Investment Divisions		396,036,296			(9,313,778	)		(6,800,892	)
Net contributions and (withdrawals)		381,387,422			(22,196,086	)		(17,204,881	)
Increase (decrease) in net assets		409,415,266			1,418,888			(25,376,292	)
NET ASSETS:
Beginning of year		—			162,258,113			187,634,405
End of year	$	409,415,266		$	163,677,001		$	162,258,113

(a) For the period February 17, 2012 (commencement of Investment Division) through December 31, 2012.

The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements.

F-30

NYLIAC Variable Annuity Separate Account-III

MainStay VP Income Builder— Service Class						MainStay VP International Equity— Service Class						MainStay VP Janus Balanced— Service Class			MainStay VP Large Cap Growth— Service Class
2012			2011			2012			2011			2012(a)			2012			2011
$	1,254,355		$	919,820		$	(147,822	)	$	2,211,748		$	(2,310,772	)	$	(1,570,660	)	$	(1,344,984	)
	(1,143,201	)		(1,238,375	)		(11,990,985	)		(6,077,852	)		337,564			3,008,548			1,807,553
	—			—			—			—			—			—			—
	5,480,938			1,209,411			33,647,633			(23,893,174	)		7,796,687			7,455,465			(2,618,155	)
	5,592,092			890,856			21,508,826			(27,759,278	)		5,823,479			8,893,353			(2,155,586	)
	5,417,789			3,187,826			5,115,673			7,820,708			9,945,234			7,739,643			8,334,096
	(5,750,328	)		(3,770,162	)		(12,220,711	)		(10,514,673	)		(12,932,660	)		(8,367,798	)		(5,361,236	)
	(472,651	)		(572,279	)		(803,016	)		(776,553	)		(1,400,866	)		(576,368	)		(479,291	)
	644,669			535,562			442,103			392,471			2,790,428			1,383,465			1,070,950
	6,234,528			462,172			(8,482,554	)		287,039			156,546,768			2,046,809			1,077,829
	6,074,007			(156,881	)		(15,948,505	)		(2,791,008	)		154,948,904			2,225,751			4,642,348
	11,666,099			733,975			5,560,321			(30,550,286	)		160,772,383			11,119,104			2,486,762
	42,068,965			41,334,990			129,225,362			159,775,648			—			81,715,831			79,229,069
$	53,735,064		$	42,068,965		$	134,785,683		$	129,225,362		$	160,772,383		$	92,834,935		$	81,715,831
MainStay VP Moderate Allocation— Service Class						MainStay VP Moderate Growth Allocation— Service Class						MainStay VP PIMCO Real Return— Service Class			MainStay VP S&P 500 Index— Service Class
2012			2011			2012			2011			2012(a)			2012			2011
$	(427,056	)	$	25,743		$	(1,962,976	)	$	(1,529,093	)	$	(2,114,389	)	$	(383,765	)	$	(227,892	)
	2,818,522			2,155,031			(2,110,716	)		(2,318,736	)		658,710			4,054,585			2,357,022
	21,266,947			678,385			11,445,725			—			—			—			—
	7,629,914			(6,308,587	)		24,998,348			(4,495,683	)		6,932,753			16,884,489			(2,021,749	)
	31,288,327			(3,449,428	)		32,370,381			(8,343,512	)		5,477,074			20,555,309			107,381
	22,871,177			24,168,431			26,693,665			32,536,717			20,706,269			8,045,344			5,983,603
	(26,318,607	)		(22,639,756	)		(18,728,982	)		(17,542,527	)		(12,528,206	)		(18,158,652	)		(12,809,093	)
	(2,096,304	)		(1,401,607	)		(1,542,573	)		(1,314,394	)		(811,794	)		(1,123,229	)		(1,104,026	)
	5,096,375			4,977,488			12,070,476			7,973,984			10,197,210			(769,477	)		(1,043,044	)
	11,316,247			(19,224,305	)		(6,120,376	)		(9,790,798	)		146,519,948			(2,447,955	)		(6,425,976	)
	10,868,888			(14,119,749	)		12,372,210			11,862,982			164,083,427			(14,453,969	)		(15,398,536	)
	42,157,215			(17,569,177	)		44,742,591			3,519,470			169,560,501			6,101,340			(15,291,155	)
	291,463,557			309,032,734			256,811,942			253,292,472			—			155,858,562			171,149,717
$	333,620,772		$	291,463,557		$	301,554,533		$	256,811,942		$	169,560,501		$	161,959,902		$	155,858,562

The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements.

F-31

Statement of Changes in Net Assets (Continued)

For the years ended December 31, 2012

and December 31, 2011

	MainStay VP T. Rowe Price Equity Income— Service Class			MainStay VP U.S. Small Cap— Service Class
	2012(a)			2012			2011
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income (loss)	$	(2,046,527	)	$	(997,982	)	$	(686,552	)
Net realized gain (loss) on investments		509,290			3,579,270			4,022,028
Realized gain distribution received		—			—			—
Change in unrealized appreciation (depreciation) on investments		9,956,615			4,353,531			(6,680,108	)
Net increase (decrease) in net assets resulting from operations		8,419,378			6,934,819			(3,344,632	)
Contributions and (Withdrawals):
Payments received from policyowners		5,310,136			2,766,832			2,686,068
Policyowners’ surrenders		(14,507,142	)		(7,947,734	)		(5,526,502	)
Policyowners’ annuity and death benefits		(1,026,397	)		(311,069	)		(285,870	)
Net transfers from (to) Fixed Account		(59,916	)		(55,677	)		(531,901	)
Transfers between Investment Divisions		143,615,893			(1,418,172	)		(6,028,119	)
Net contributions and (withdrawals)		133,332,574			(6,965,820	)		(9,686,324	)
Increase (decrease) in net assets		141,751,952			(31,001	)		(13,030,956	)
NET ASSETS:
Beginning of year		—			67,995,694			81,026,650
End of year	$	141,751,952		$	67,964,693		$	67,995,694

	Fidelity® VIP Contrafund® Portfolio— Service Class 2						Fidelity® VIP Equity-Income Portfolio— Service Class 2
	2012			2011			2012			2011
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income (loss)	$	(1,501,217	)	$	(2,273,774	)	$	1,300,659		$	718,978
Net realized gain (loss) on investments		(8,906,734	)		(11,714,086	)		(4,884,057	)		(5,706,838	)
Realized gain distribution received		—			—			6,929,865			—
Change in unrealized appreciation (depreciation) on investments		45,771,511			2,223,549			11,843,470			3,992,126
Net increase (decrease) in net assets resulting from operations		35,363,560			(11,764,311	)		15,189,937			(995,734	)
Contributions and (Withdrawals):
Payments received from policyowners		13,251,528			13,393,035			3,896,088			4,191,694
Policyowners’ surrenders		(25,657,687	)		(19,659,011	)		(10,860,942	)		(8,400,229	)
Policyowners’ annuity and death benefits		(1,912,829	)		(1,617,845	)		(973,049	)		(673,394	)
Net transfers from (to) Fixed Account		574,046			698,524			(714,462	)		(870,400	)
Transfers between Investment Divisions		(11,637,817	)		(16,278,277	)		(2,861,029	)		(6,136,836	)
Net contributions and (withdrawals)		(25,382,759	)		(23,463,574	)		(11,513,394	)		(11,889,165	)
Increase (decrease) in net assets		9,980,801			(35,227,885	)		3,676,543			(12,884,899	)
NET ASSETS:
Beginning of year		255,162,239			290,390,124			104,587,637			117,472,536
End of year	$	265,143,040		$	255,162,239		$	108,264,180		$	104,587,637

(a) For the period February 17, 2012 (commencement of Investment Division) through December 31, 2012.

The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements.

F-32

NYLIAC Variable Annuity Separate Account-III

Alger Small Cap Growth Portfolio— Class S Shares						BlackRock® Global Allocation  V.I. Fund— Class III Shares						Columbia Variable Portfolio— Small Cap Value Fund— Class 2 Shares						Dreyfus IP Technology Growth Portfolio— Service Shares
2012			2011			2012			2011			2012			2011			2012			2011
$	(74,126	)	$	(581,496	)	$	146,830		$	600,529		$	(563,690	)	$	(318,246	)	$	(855,117	)	$	(766,965	)
	8,226,478			1,667,056			(459,585	)		(149,999	)		(423,149	)		(1,249,549	)		3,446,946			4,154,432
	—			—			253,518			765,891			1,909,690			4,992,227			—			—
	(4,240,168	)		(2,673,165	)		3,847,536			(2,438,171	)		2,791,964			(6,952,048	)		2,942,944			(8,407,171	)
	3,912,184			(1,587,605	)		3,788,299			(1,221,750	)		3,714,815			(3,527,616	)		5,534,773			(5,019,704	)
	56,693			454,266			18,034,153			8,492,550			1,980,345			2,302,001			3,557,621			4,468,194
	(405,887	)		(3,189,025	)		(3,565,165	)		(705,643	)		(4,275,864	)		(3,389,283	)		(4,869,448	)		(3,514,224	)
	(9,504	)		(144,949	)		(182,781	)		(9,361	)		(253,973	)		(334,198	)		(215,483	)		(255,654	)
	(22,209	)		(260,625	)		11,119,561			2,570,520			(59,800	)		159,587			791,892			318,235
	(36,405,904	)		(2,166,803	)		14,623,210			24,696,937			(1,655,107	)		(2,818,638	)		3,342,524			(2,511,851	)
	(36,786,811	)		(5,307,136	)		40,028,978			35,045,003			(4,264,399	)		(4,080,531	)		2,607,106			(1,495,300	)
	(32,874,627	)		(6,894,741	)		43,817,277			33,823,253			(549,584	)		(7,608,147	)		8,141,879			(6,515,004	)
	32,874,627			39,769,368			33,823,253			—			41,652,658			49,260,805			41,657,946			48,172,950
$	—		$	32,874,627		$	77,640,530		$	33,823,253		$	41,103,074		$	41,652,658		$	49,799,825		$	41,657,946
Fidelity® VIP Mid Cap Portfolio— Service Class 2						Janus Aspen Balanced Portfolio— Service Shares						Janus Aspen Worldwide Portfolio— Service Shares						MFS® Investors Trust Series— Service Class
2012			2011			2012			2011			2012			2011			2012			2011
$	(2,162,774	)	$	(2,940,098	)	$	(330,786	)	$	923,009		$	(262,309	)	$	(351,471	)	$	(71,203	)	$	(60,228	)
	(473,710	)		(590,610	)		10,534,774			2,242,066			(759,063	)		178,310			29,258			32,684
	13,345,424			317,490			—			7,683,969			—			—			—			—
	9,642,893			(20,785,815	)		221,875			(11,371,720	)		5,843,416			(4,959,870	)		1,176,438			(265,569	)
	20,351,833			(23,999,033	)		10,425,863			(522,676	)		4,822,044			(5,133,031	)		1,134,493			(293,113	)
	6,814,313			11,617,456			1,508,505			11,844,575			2,169,916			1,529,960			345,191			255,349
	(15,841,576	)		(15,877,795	)		(1,771,375	)		(12,316,568	)		(3,208,313	)		(2,574,159	)		(778,353	)		(542,388	)
	(1,136,025	)		(1,265,980	)		(80,334	)		(516,432	)		(126,364	)		(145,178	)		(9,090	)		(13,577	)
	(855,092	)		379,493			530,191			3,082,936			329,534			(158,747	)		40,851			5,452
	(6,809,490	)		(11,394,738	)		(158,790,934	)		(1,599,429	)		511,799			(651,808	)		872,355			(304,977	)
	(17,827,870	)		(16,541,564	)		(158,603,947	)		495,082			(323,428	)		(1,999,932	)		470,954			(600,141	)
	2,523,963			(40,540,597	)		(148,178,084	)		(27,594	)		4,498,616			(7,132,963	)		1,605,447			(893,254	)
	164,575,280			205,115,877			148,178,084			148,205,678			27,165,623			34,298,586			6,735,909			7,629,163
$	167,099,243		$	164,575,280		$	—		$	148,178,084		$	31,664,239		$	27,165,623		$	8,341,356		$	6,735,909

The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements.

F-33

Statement of Changes in Net Assets (Continued)

For the years ended December 31, 2012

and December 31, 2011

	MFS® Research Series— Service Class						MFS® Utilities Series— Service Class
	2012			2011			2012			2011
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income (loss)	$	(90,934	)	$	(76,009	)	$	(845,388	)	$	5,929,580
Net realized gain (loss) on investments		216,339			196,300			72,618			(2,901,228	)
Realized gain distribution received		—			—			—			—
Change in unrealized appreciation (depreciation) on investments		985,522			(296,444	)		16,146,810			14,849,893
Net increase (decrease) in net assets resulting from operations		1,110,927			(176,153	)		15,374,040			17,878,245
Contributions and (Withdrawals):
Payments received from policyowners		429,651			262,978			2,862,704			23,578,803
Policyowners’ surrenders		(954,469	)		(670,932	)		(4,191,928	)		(33,844,864	)
Policyowners’ annuity and death benefits		(4,442	)		(59,087	)		(360,619	)		(3,343,345	)
Net transfers from (to) Fixed Account		29,813			94,754			(4,563	)		(677,489	)
Transfers between Investment Divisions		896,705			(203,063	)		(406,450,840	)		(2,982,966	)
Net contributions and (withdrawals)		397,258			(575,350	)		(408,145,246	)		(17,269,861	)
Increase (decrease) in net assets		1,508,185			(751,503	)		(392,771,206	)		608,384
NET ASSETS:
Beginning of year		7,565,602			8,317,105			392,771,206			392,162,822
End of year	$	9,073,787		$	7,565,602		$	—		$	392,771,206
	UIF Emerging Markets Equity Portfolio— Class II						Victory VIF Diversified Stock Fund— Class A Shares
	2012			2011			2012			2011
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income (loss)	$	(252,226	)	$	(1,574,907	)	$	(119,978	)	$	(174,702	)
Net realized gain (loss) on investments		7,879,469			(11,322,473	)		(807,544	)		(1,419,378	)
Realized gain distribution received		—			—			—			—
Change in unrealized appreciation (depreciation) on investments		5,446,605			(14,264,063	)		3,265,584			(82,998	)
Net increase (decrease) in net assets resulting from operations		13,073,848			(27,161,443	)		2,338,062			(1,677,078	)
Contributions and (Withdrawals):
Payments received from policyowners		928,219			7,985,450			486,643			433,959
Policyowners’ surrenders		(1,161,312	)		(8,600,747	)		(1,574,429	)		(1,477,306	)
Policyowners’ annuity and death benefits		(25,367	)		(537,930	)		(73,224	)		(220,334	)
Net transfers from (to) Fixed Account		78,194			744,015			(236,374	)		(17,876	)
Transfers between Investment Divisions		(120,055,779	)		(13,050,419	)		(2,030,653	)		(1,190,797	)
Net contributions and (withdrawals)		(120,236,045	)		(13,459,631	)		(3,428,037	)		(2,472,354	)
Increase (decrease) in net assets		(107,162,197	)		(40,621,074	)		(1,089,975	)		(4,149,432	)
NET ASSETS:
Beginning of year		107,162,197			147,783,271			17,292,120			21,441,552
End of year	$	—		$	107,162,197		$	16,202,145		$	17,292,120

The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements.

F-34

NYLIAC Variable Annuity Separate Account-III

Neuberger Berman AMT Mid-Cap Growth Portfolio— Class S						PIMCO Real Return Portfolio— Advisor Class						T. Rowe Price Equity Income Portfolio—II
2012			2011			2012			2011			2012			2011
$	(616,102	)	$	(499,503	)	$	(249,901	)	$	96,093		$	(311,982	)	$	(125,799	)
	2,138,264			602,484			3,119,780			721,538			(2,706,502	)		(2,984,082	)
	—			—			—			2,949,891			—			—
	1,636,267			(717,163	)		(996,547	)		1,420,981			14,720,560			(838,076	)
	3,158,429			(614,182	)		1,873,332			5,188,503			11,702,076			(3,947,957	)
	3,397,344			2,142,917			2,736,228			16,442,345			590,493			6,945,690
	(4,074,191	)		(2,774,972	)		(2,574,927	)		(5,398,078	)		(2,019,656	)		(12,068,962	)
	(207,912	)		(124,532	)		(7,568	)		(194,702	)		(275,860	)		(954,861	)
	793,453			64,029			1,216,928			7,315,000			(7,176	)		(239,252	)
	2,502,404			732,717			(111,801,280	)		45,749,519			(150,815,946	)		(5,371,004	)
	2,411,098			40,159			(110,430,619	)		63,914,084			(152,528,145	)		(11,688,389	)
	5,569,527			(574,023	)		(108,557,287	)		69,102,587			(140,826,069	)		(15,636,346	)
	30,336,917			30,910,940			108,557,287			39,454,700			140,826,069			156,462,415
$	35,906,444		$	30,336,917		$	—		$	108,557,287		$	—		$	140,826,069

The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements.

F-35

Notes to Financial Statements

NOTE 1—Organization and Significant Accounting Policies:

N

YLIAC Variable Annuity Separate Account-III (the “Separate Account”) was established on November 30, 1994, under Delaware law by New York Life Insurance and Annuity Corporation (“NYLIAC”), a wholly-owned subsidiary of New York Life Insurance Company (“NYLIC”). The Separate Account funds Series I policies (New York Life Variable Annuity, New York Life Flexible Premium Variable Annuity, New York Life Plus Variable Annuity and New York Life Flexible Premium Variable Annuity II), Series II policies (New York Life Access Variable Annuity), Series III policies (New York Life Premium Plus Variable Annuity), Series IV policies (New York Life Essentials Variable Annuity and New York Life Plus II Variable Annuity), Series V policies (New York Life Select Variable Annuity), Series VI policies (New York Life Premium Plus II Variable Annuity), Series VII policies (New York Life Complete Access Variable Annuity), Series VIII policies (New York Life Premier Variable Annuity) , Series IX policies (New York Life Premier Plus Variable Annuity) and Series X policies (New York Life Income Plus Variable Annuity). Effective December 4, 2006, sales of the New York Life Variable Annuity and New York Life Plus Variable Annuity were discontinued. Sales of the Series II policies formerly known as MainStay Access Variable Annuity were discontinued effective October 14, 2002. Effective January 1, 2009, sales of all Series III, IV, V and VI policies formerly known as MainStay Variable Annuities were discontinued. Effective July 27, 2009, sales of Series V policies known as New York Life Select Variable Annuity were discontinued. Effective August 16, 2010, sales of all the remaining Series II, Series III, Series IV and Series VI policies were discontinued. Effective July 16, 2012 sales of the New York Life Flexible Premium Variable Annuity were discontinued.

The Separate Account was established to receive and invest premium payments under Non-Qualified Deferred and Tax-Qualified Deferred Flexible Premium Variable Annuity Policies issued by NYLIAC. The Non-Qualified policies are designed to establish retirement benefits to provide individuals with supplemental retirement income. The Qualified policies are designed to establish retirement benefits for individuals who participate in tax-qualified pension, profit sharing or annuity plans. The policies are distributed by NYLIFE Distributors LLC and sold by registered representatives of NYLIFE Securities LLC and certain banking and financial institutions that have entered into selling agreements with NYLIAC and registered representatives of unaffiliated broker-dealers. NYLIFE Securities LLC and NYLIFE Distributors LLC are both indirect, wholly-owned subsidiaries of NYLIC. The Separate Account is registered under the Investment Company Act of 1940, as amended, as a unit investment trust.

The assets of the Separate Account are invested in shares of eligible portfolios of the MainStay VP Funds Trust, the BlackRock Variable Series Funds, Inc., the Columbia Funds Variable Insurance Trust, the Dreyfus Investment Portfolios, the Fidelity Variable Insurance Products Fund, the Janus Aspen Series, the MFS^® Variable Insurance Trust^SM, the Neuberger Berman Advisers Management Trust, the Royce Capital Fund and the Victory Variable Insurance Funds (collectively “Funds”). These assets are clearly identified and distinguished from the other assets and liabilities of NYLIAC. These assets are the property of NYLIAC; however, the portion of the assets attributable to the policies will not be charged with liabilities arising out of any other business NYLIAC may conduct. The Fixed Account and the Dollar Cost Averaging Advantage Plan Accounts represent the general account assets of NYLIAC and are not included in this report. NYLIAC’s Fixed Account and the Dollar Cost Averaging Advantage Plan Accounts may be charged with liabilities arising out of other business NYLIAC may conduct.

New York Life Investment Management LLC (“New York Life Investments”) provides investment advisory services to the MainStay VP Funds Trust, for a fee. New York Life Investments retains several sub-advisors, including Dimensional Fund Advisors LP (“DFA”), DuPont Capital Management Corporation (“DuPont Capital”), Eagle Asset Management, Inc. (“Eagle”), Epoch Investment Partners, Inc. (“Epoch”), Institutional Capital LLC (“ICAP”), Janus Capital Management LLC (“Janus Capital”), MacKay Shields LLC (“MacKay Shields”), Madison Square Investors LLC (“Madison Square Investors”), Massachusetts Financial Services Company (“MFS”), Pacific Investment Management Company LLC (“PIMCO”), T. Rowe Price Associates, Inc. (“T. Rowe Price”), Van Eck Associates Corporation (“Van Eck”) and Winslow Capital Management Inc. (“Winslow Capital”) to provide investment advisory services to certain portfolios of the MainStay VP Funds Trust.

New York Life Investments, MacKay Shields, Madison Square Investors and ICAP are all indirect, wholly-owned subsidiaries of NYLIC. Eagle is a wholly-owned subsidiary of Raymond James Financial, Inc.; Epoch is a wholly-owned subsidiary of Epoch Holding Corporation. Janus is a wholly-owned subsidiary of Janus Capital Group, Inc., (“JCGI”). MFS is an indirect majority-owned subsidiary of Sun Life Financial Inc., Winslow Capital is a wholly-owned subsidiary of Nuveen Investments, Inc., DFA, DuPont Capital, PIMCO, T. Rowe Price and Van Eck are independent investment advisory firms.

The MainStay VP Cash Management, MainStay VP Van Eck Global Hard Assets Portfolio—Initial Class and the Royce Micro-Cap Portfolio—Investment Class offer one class of shares under this Separate Account which are presented

F-36

NYLIAC Variable Annuity Separate Account-III

within the initial class section. The MainStay VP Balanced—Service Class, MainStay VP Conservative Allocation—Service Class, MainStay VP Flexible Bond Opportunities—Service Class, MainStay VP Floating Rate—Service Class, MainStay VP Growth Allocation—Service Class, MainStay VP Moderate Allocation—Service Class, MainStay VP Moderate Growth Allocation—Service Class, MainStay VP PIMCO Real Return Portfolio—Service Class , BlackRock^® Global Allocation V.I. Fund—Class III Shares, Columbia Variable Portfolio—Small Cap Value Fund—Class 2, Fidelity^® VIP Mid Cap—Service Class 2 and Victory VIF Diversified Stock—Class A Shares offer one class of shares under this Separate Account which are presented within the service class section.

As of February 17, 2012, as a result of a restructuring of our investment options offered under the policies, some Funds that were previously offered are no longer available as investment options to our policyowners and those Funds are now closed to our policyowners (“Closed Funds”). The assets in those Funds were transferred into new MainStay VP Portfolios (“Replacement Funds”). New York Life Investments is the investment manager of the Replacement Funds. For most of the Funds, the advisor of the Closed Fund is the sub-advisor of the corresponding Replacement Fund and will continue to provide day-to-day Fund management services for our policyowners. The following is a listing of the Closed Funds (Column A) and the Replacement Funds (Column B).

Column A—Closed Funds	Column B—Replacement Funds
Van Eck VIP Global Hard Assets	MainStay VP Van Eck Global Hard Assets—Initial Class
Janus Aspen Balanced Portfolio—Institutional Shares	MainStay VP Janus Balanced—Initial Class
Janus Aspen Balanced Portfolio—Service Shares	MainStay VP Janus Balanced—Service Class
MFS® Utilities Series—Initial Class	MainStay VP MFS® Utilities—Initial Class
MFS® Utilities Series—Service Class	MainStay VP MFS® Utilities—Service Class
T. Rowe Price Equity Income Portfolio	MainStay VP T. Rowe Price Equity Income—Initial Class
T. Rowe Price Equity Income Portfolio—II	MainStay VP T. Rowe Price Equity Income—Service Class
PIMCO Real Return Portfolio—Advisor Class	MainStay VP PIMCO Real Return—Service Class
Universal Institution Funds, Inc. (“UIF”) Emerging Markets Equity Portfolio—Class I	MainStay VP DFA /DuPont Capital Emerging Markets Equity—Initial Class
UIF Emerging Markets Equity Portfolio—Class II	MainStay VP DFA /DuPont Capital Emerging Markets Equity—Service Class
Alger Small Cap Growth Portfolio—Class I-2 Shares	MainStay VP Eagle Small Cap Growth—Initial Class
Alger Small Cap Growth Portfolio—Class S Shares	MainStay VP Eagle Small Cap Growth—Service Class
Royce Small-Cap Portfolio—Investment Class	MainStay VP Eagle Small Cap Growth—Initial Class
Calvert VP SRI Balanced Portfolio	MainStay VP Janus Balanced—Initial Class

Not all of the Closed Funds were offered in each policy impacted by the restructure. If the Closed Fund was not offered, then the corresponding Replacement Fund was not offered.

As of February 17, 2012, any policyowner allocations that remained in the Closed Funds were redeemed. Those redemptions were used to purchase accumulation units in the corresponding Replacement Funds. After February 17, 2012, the Closed Funds were no longer available as investment options under the policies.

Therefore, the following Investment Divisions, with their respective Fund portfolios, are available in this Separate Account:

MainStay VP Bond—Initial Class

MainStay VP Cash Management

MainStay VP Common Stock—Initial Class

MainStay VP Convertible—Initial Class

MainStay VP DFA/DuPont Capital Emerging Markets Equity—Initial Class

MainStay VP Eagle Small Cap Growth — Initial Class

MainStay VP Government—Initial Class

MainStay VP Growth Equity—Initial Class

MainStay VP High Yield Corporate Bond—Initial Class

MainStay VP ICAP Select Equity—Initial Class

MainStay VP Income Builder—Initial Class

MainStay VP International Equity—Initial Class

MainStay VP Janus Balanced—Initial Class

MainStay VP Large Cap Growth—Initial Class

MainStay VP MFS^® Utilities—Initial Class

MainStay VP Mid Cap Core—Initial Class

MainStay VP S&P 500 Index—Initial Class

F-37

Notes to Financial Statements (Continued)

NOTE 1—Organization and Significant Accounting Policies (Continued):

MainStay VP T. Rowe Price Equity Income—Initial Class

MainStay VP U.S. Small Cap—Initial Class

MainStay VP Van Eck Global Hard Assets—Initial Class

Dreyfus IP Technology Growth Portfolio—Initial Shares

Fidelity^® VIP Contrafund^® Portfolio—Initial Class

Fidelity^® VIP Equity-Income Portfolio—Initial Class

Janus Aspen Worldwide Portfolio—Institutional Shares

MFS^® Investors Trust Series—Initial Class

MFS^® Research Series—Initial Class

Neuberger Berman AMT Mid-Cap Growth—Class I

Royce Micro-Cap Portfolio—Investment Class

MainStay VP Balanced—Service Class

MainStay VP Bond—Service Class

MainStay VP Common Stock—Service Class

MainStay VP Conservative Allocation—Service Class

MainStay VP Convertible—Service Class

MainStay VP DFA/DuPont Capital Emerging Markets Equity—Service Class

MainStay VP Eagle Small Cap Growth—Service Class

MainStay VP Flexible Bond Opportunities—Service Class

MainStay VP Floating Rate—Service Class

MainStay VP Government—Service Class

MainStay VP Growth Allocation—Service Class

MainStay VP Growth Equity—Service Class

MainStay VP High Yield Corporate Bond—Service Class

MainStay VP ICAP Select Equity—Service Class

MainStay VP Income Builder—Service Class

MainStay VP International Equity—Service Class

MainStay VP Janus Balanced—Service Class

MainStay VP Large Cap Growth—Service Class

MainStay VP MFS^® Utilities—Service Class

MainStay VP Mid Cap Core—Service Class

MainStay VP Moderate Allocation—Service Class

MainStay VP Moderate Growth Allocation—Service Class

MainStay VP PIMCO Real Return—Service Class

MainStay VP S&P 500 Index—Service Class

MainStay VP T. Rowe Price Equity Income—Service Class

MainStay VP U.S. Small Cap—Service Class

BlackRock^® Global Allocation V.I. Fund—Class III Shares

Columbia Variable Portfolio—Small Cap Value Fund—Class 2 Shares

Dreyfus IP Technology Growth Portfolio—Service Shares

Fidelity^® VIP Contrafund^® Portfolio—Service Class 2

Fidelity^® VIP Equity-Income Portfolio—Service Class 2

Fidelity^® VIP Mid Cap Portfolio—Service Class 2

Janus Aspen Worldwide Portfolio—Service Shares

MFS^® Investors Trust Series—Service Class

MFS^® Research Series—Service Class

Neuberger Berman AMT Mid-Cap Growth Portfolio—Class S

Victory VIF Diversified Stock Fund—Class A Shares

Not all investment options are available under all policies.

For Series I policies known as New York Life Flexible Premium Variable Annuity and Series VII, VIII, IX and X policies, initial premium payments are allocated to the Investment Divisions, Fixed Account (where available) and/or Dollar Cost Averaging Advantage Plan Accounts (where available) within two business days after receipt. For Series I, III, IV, V, VI, VII, VIII,IX and X policies, subsequent premium payments are allocated to the Investment Divisions, one year Fixed Account (where available), three year Fixed Account (where available), and/or Dollar Cost Averaging Plan Accounts (where available) at the close of the business day they are received. For Series II policies, known as New York Life Access Variable Annuity, subsequent premium payments are not permitted for policies purchased prior to November 15, 2004. For Series II policies, known as New York Life (formerly MainStay) Access Variable Annuity, subsequent premium payments are not permitted. In those states where NYLIAC offers a single premium version of the Series III, VI, VIII and IX policies, only one premium payment is allowed. In those states where NYLIAC offers a modified premium version of the Series IV and V policies, subsequent premium payments are allowed only during the first policy year. In addition, for Series I, II, III, VI, VII, VIII and IX policies, the policyowner has the option to transfer amounts between the Investment Divisions of the Separate Account and the Fixed Account of NYLIAC subject to certain restrictions. For Series IV policies, the policyowner has the option to transfer amounts between the Investment Divisions of the Separate Account and the one-year Fixed Account of NYLIAC subject to certain restrictions. On the accompanying Statement of Changes in Net Assets, all references to the Fixed Account include the Fixed Account and the Dollar Cost Averaging Advantage Accounts.

No Federal income tax is payable on investment income or capital gains of the Separate Account under current Federal income tax law.

Security Valuation—The investments are valued at the net asset value (“NAV”) of shares of the respective Fund portfolios.

Security Transactions—Realized gains and losses from security transactions are reported on the identified cost basis. Security transactions are accounted for as of the date the securities are purchased or sold (trade date).

Distributions Received—Dividend income and capital gain distributions are recorded on the ex-dividend date and reinvested in the corresponding Fund portfolio.

F-38

NYLIAC Variable Annuity Separate Account-III

The authoritative guidance defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The authoritative guidance also establishes a framework for measuring fair value that includes a hierarchy used to classify the inputs used in measuring fair value. The hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three levels. The level in the fair value hierarchy within which the fair value measurement falls is determined based on the lowest level input that is significant to the fair value measurement.

The levels of the fair value hierarchy are based on the inputs to the valuation as follows:

Level 1—Fair Value is based on unadjusted quoted prices for identical assets or liabilities in an active market. Active markets are defined as a market in which many transactions occur with sufficient frequency and volume to provide pricing information on an ongoing basis.

Level 2—Observable inputs other than Level 1 prices, such as quoted prices for similar instruments, quoted prices in markets that are not active, and inputs to model-derived valuations that are directly observable or can be corroborated by observable market data for substantially the full term of the asset.

Level 3—Instruments whose values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. These inputs reflect management’s own assumptions in pricing the asset or liability.

Investments in the mutual funds represent open-end mutual funds in which the valuation is based on the aggregate NAV of the shares held at the valuation date, which represents fair value, and are classified as level 1.

The amounts shown as net receivable from (payable to) NYLIAC on the Statement of Assets and Liabilities reflect transactions that occurred on the last business day of the reporting period. These amounts will be deposited to or withdrawn from the separate account in accordance with the policyowners’ instructions on the first business day subsequent to the close of the period presented. The amounts shown as net receivable from (payable to) the Fund for shares sold or purchased represent unsettled trades.

The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates.

As of January 25, 2013, Madison Square Investors changed its name to Cornerstone Capital Management Holdings LLC. As a result, all references in the prospectuses to Madison Square Investors as a subadvisor are hereby deleted and replaced with Cornerstone Capital Management Holdings LLC.

F-39

Notes to Financial Statements (Continued)

NOTE 2—Purchases and Sales (in 000’s):

T

he cost of purchases and proceeds from sales of investments for the year ended December 31, 2012 were as follows:

	Purchases		Sales
MainStay VP Bond—Initial Class	$	10,418	$	20,568
MainStay VP Cash Management		107,046		223,561
MainStay VP Common Stock—Initial Class		2,003		18,679
MainStay VP Convertible—Initial Class		3,987		19,851
MainStay VP DFA/DuPont Capital Emerging Markets Equity—Initial Class		46,869		9,717
MainStay VP Eagle Small Cap Growth—Initial Class		103,347		17,637
MainStay VP Government—Initial Class		4,628		17,740
MainStay VP Growth Equity—Initial Class		1,594		17,283
MainStay VP High Yield Corporate Bond—Initial Class		46,361		67,199
MainStay VP ICAP Select Equity—Initial Class		4,700		36,281
MainStay VP Income Builder—Initial Class		5,619		12,351
MainStay VP International Equity—Initial Class		1,595		10,687
MainStay VP Janus Balanced—Initial Class		262,512		39,072
MainStay VP Large Cap Growth—Initial Class		4,879		10,572
MainStay VP MFS® Utilities—Initial Class		3,189		888
MainStay VP Mid Cap Core—Initial Class		6,886		14,850
MainStay VP S&P 500 Index—Initial Class		6,786		33,803
MainStay VP T. Rowe Price Equity Income—Initial Class		76,173		14,782
MainStay VP U.S. Small Cap—Initial Class		986		6,639
MainStay VP Van Eck Global Hard Assets—Initial Class		369,061		59,012
Alger Small Cap Growth Portfolio—Class I-2 Shares		53		34,467
Calvert VP SRI Balanced Portfolio		1,562		30,523
Dreyfus IP Technology Growth Portfolio—Initial Shares		5,327		4,936
Fidelity® VIP Contrafund® Portfolio—Initial Class		3,192		34,118
Fidelity® VIP Equity-Income Portfolio—Initial Class		8,089		14,280
Janus Aspen Balanced Portfolio—Institutional Shares		200		236,674
Janus Aspen Worldwide Portfolio—Institutional Shares		1,714		12,132
MFS® Investors Trust Series—Initial Class		929		1,941
MFS® Research Series—Initial Class		604		2,493
MFS® Utilities Series—Initial Class		15		3,054
Neuberger Berman AMT Mid-Cap Growth—Class I		353		524
Royce Micro-Cap Portfolio—Investment Class		11,217		14,165
Royce Small-Cap Portfolio—Investment Class		1,675		69,638
T. Rowe Price Equity Income Portfolio		218		77,484
UIF Emerging Markets Equity Portfolio—Class I		415		47,623
Van Eck VIP Global Hard Assets		27,374		361,429
MainStay VP Balanced—Service Class		8,745		14,342
MainStay VP Bond—Service Class		49,871		36,703
MainStay VP Common Stock—Service Class		2,259		7,502
MainStay VP Conservative Allocation—Service Class		76,964		40,153
MainStay VP Convertible—Service Class		15,162		30,844
MainStay VP DFA/DuPont Capital Emerging Markets Equity—Service Class		127,710		18,307
MainStay VP Eagle Small Cap Growth—Service Class		36,815		6,514
MainStay VP Flexible Bond Opportunities—Service Class		47,127		4,410
MainStay VP Floating Rate—Service Class		45,177		42,834
MainStay VP Government—Service Class		24,329		29,396
MainStay VP Growth Allocation—Service Class		13,558		13,819
MainStay VP Growth Equity—Service Class		5,276		7,513
MainStay VP High Yield Corporate Bond—Service Class		188,807		76,250
MainStay VP ICAP Select Equity—Service Class		15,208		46,031
MainStay VP Income Builder—Service Class		15,258		8,025
MainStay VP International Equity—Service Class		8,821		24,953
MainStay VP Janus Balanced—Service Class		172,426		19,894

F-40

NYLIAC Variable Annuity Separate Account-III

	Purchases		Sales
MainStay VP Large Cap Growth—Service Class	$	19,425	$	18,693
MainStay VP MFS® Utilities—Service Class		432,362		57,074
MainStay VP Mid Cap Core—Service Class		21,037		31,668
MainStay VP Moderate Allocation—Service Class		83,187		51,970
MainStay VP Moderate Growth Allocation—Service Class		57,587		36,404
MainStay VP PIMCO Real Return—Service Class		185,150		23,737
MainStay VP S&P 500 Index—Service Class		16,138		31,045
MainStay VP T. Rowe Price Equity Income—Service Class		156,343		24,973
MainStay VP U.S. Small Cap—Service Class		5,335		13,255
Alger Small Cap Growth Portfolio—Class S Shares		19		36,887
BlackRock® Global Allocation V.I. Fund—Class III Shares		48,866		8,449
Columbia Variable Portfolio—Small Cap Value Fund—Class 2 Shares		6,931		9,855
Dreyfus IP Technology Growth Portfolio—Service Shares		13,253		11,317
Fidelity® VIP Contrafund® Portfolio—Service Class 2		16,878		43,762
Fidelity® VIP Equity-Income Portfolio—Service Class 2		16,500		20,198
Fidelity® VIP Mid Cap Portfolio—Service Class 2		24,221		30,902
Janus Aspen Balanced Portfolio—Service Shares		2,335		161,260
Janus Aspen Worldwide Portfolio—Service Shares		5,639		6,213
MFS® Investors Trust Series—Service Class		2,236		1,805
MFS® Research Series—Service Class		2,112		1,795
MFS® Utilities Series—Service Class		6,361		415,383
Neuberger Berman AMT Mid-Cap Growth Portfolio—Class S		12,903		10,758
PIMCO Real Return Portfolio—Advisor Class		20,220		130,402
T. Rowe Price Equity Income Portfolio—II		788		153,652
UIF Emerging Markets Equity Portfolio—Class II		2,241		122,785
Victory VIF Diversified Stock Fund—Class A Shares		1,039		4,572
Total	$	3,144,195	$	3,482,957

Not all investment options are available under all policies.

F-41

Notes to Financial Statements (Continued)

NOTE 3—Expenses and Related Party Transactions:

N

YLIAC deducts a surrender charge on certain partial withdrawals and surrenders of Series I, III, IV, V, VI, VIII, IX and X policies. Policies in Series II and VII are not subject to surrender charges on partial withdrawals and surrenders. For New York Life Variable Annuity and New York Life Plus Variable Annuity policies which are part of Series I, the percentage of the surrender charge varies, depending upon the length of time a premium payment is in the policy before it is withdrawn. This charge is 7% during the first three payment years and declines 1% per year for each additional payment year, until the sixth payment year, after which no charge is made. For New York Life Flexible Premium Variable Annuity and New York Life Flexible Premium Variable Annuity II policies, which are also part of Series I, this charge is 7% for the first three policy years and declines to 1% per year for each additional policy year, until the ninth policy year, after which no charge is made.

For New York Life Premium Plus Variable Annuity policies, which are part of Series III and New York Life Premium Plus II Variable Annuity policies, which are part of Series VI, the percentage of the surrender charge varies; depending upon the length of time a premium payment is in the policy before it is withdrawn. This charge is 8% during the first three payment years (8% during the first four payment years for policies sold by registered representatives of broker-dealers that have selling agreements with NYLIFE Distributors and NYLIAC or banks) and declines 1% per year for each additional payment year, until the eighth payment year, after which no charge is made. In those states where NYLIAC offered a single premium version of the New York Life Premium Plus Variable Annuity and New York Life Premium Plus II Variable Annuity, the surrender charge was lower.

For the New York Life Essentials Variable Annuity and New York Life Plus II Variable Annuity policies, which are part of Series IV, the percentage of the surrender charge varies; depending upon the length of time a premium payment is in the policy before it is withdrawn. This charge is 7% during the first three payment years, 6% during the fourth and fifth payment years and declines 1% per year for each additional payment year, until the seventh payment year, after which no charge is made.

For New York Life Select Variable Annuity policies, which are part of Series V, the percentage of the surrender charge varies, depending upon the length of time a premium payment is in the policy before it is withdrawn. This charge is 8% during the first two payment years and declines to 7% for the third payment year, after which no charge is made.

For New York Life Premier Variable Annuity policies, which are part of Series VIII, the percentage of the surrender charge varies, depending upon the length of time a premium payment is in the policy before it is withdrawn. This charge is 8% during the first payment year and declines by 1% per year for each additional payment year, until the seventh payment year, after which no charge is made.

For New York Life Premier Plus Variable Annuity policies, which are part of Series IX, the percentage of the surrender charge varies, depending upon the length of time a premium payment is in the policy before it is withdrawn. This charge is 8% during the first two payment years and declines by 1% per year for each additional payment year, until the eighth payment year, after which no charge is made.

For New York Life Income Plus Variable Annuity policies with the Income Benefit Rider, which are part of Series X, the percentage of the surrender charge varies; depending upon the length of time a premium payment is in the policy before it is withdrawn. This charge is 8% during the first payment year and declines by 1% per year for each additional payment year, until the seventh payment year, after which no charge is made.

For New York Life Income Plus Variable Annuity policies with the Guaranteed Future Income Benefit Rider, which are also part of Series X, the product becomes a single premium product where surrender charges are based on the Policy Year. This charge is 8% during the first Policy Year and declines by 1% per year for each Policy Year, until the seventh Policy Year, after which no charge is made.

All surrender charges are recorded with policyowners’ surrenders in the accompanying Statement of Changes in Net Assets. Surrender charges are paid to NYLIAC.

NYLIAC also deducts an annual policy service charge from the policy’s accumulation value on each policy anniversary date and upon surrender, if on the policy anniversary and/or date of surrender the accumulation value is less than $20,000 for Series I policies, $50,000 for Series II and IV policies and $100,000 for Series III, V and VI policies. For New York Life Variable Annuity and New York Life Plus Variable Annuity policies which are part of Series I, this charge is the lesser of $30 or 2% of the accumulation value per policy. For New York Life Flexible Premium Variable Annuity and New York Life Flexible Premium Variable Annuity II, which are also part of Series I, this charge is $30 per policy. For Series II and VII policies, this charge is $40 per policy (may be lower in some states). For Series III, IV, VI, VIII

F-42

NYLIAC Variable Annuity Separate Account-III

and IX policies, this charge is $30 per policy. For Series V policies, this charge is $50 per policy. For Series X policies, the charge is $30 per policy and is waived either upon (a) registration with delivery of all available materials that we normally mail, (b) the Variable Account Annuity Commencement Date, or (c) the Income Benefit/GFIB Payment Commencement Date (whichever comes first). These charges are shown as a reduction to payments received from policyowners in the accompanying Statement of Changes in Net Assets.

Additionally, NYLIAC reserves the right to charge Series I, II, III, IV, V, VI, VII, VIII, IX and X policies $30 for each transfer in excess of 12 in any one policy year, subject to certain restrictions.

The Separate Account is charged for administrative services provided and the mortality and expense risks assumed by NYLIAC. For Series I, II, III, IV, V, VI, VII, VIII, IX and X policies, these charges are made daily at an annual rate of 1.40%, 1.55%, 1.60%, 1.45%, 1.85%, 1.75%, 1.65%, 1.35%, 1.65% and 1.35%, respectively, of the daily average variable accumulation value of each Investment Division, and is the same rate for each of the five periods presented in the Financial Highlights section. These charges are disclosed in the accompanying Statement of Operations.

In addition, New York Life Income Plus Variable Annuity policies, which are part of Series X, are subject to a Guaranteed Future Income Benefit Charge if the Guaranteed Future Income Benefit Rider is chosen. This charge is an annualized percentage of the average daily Unfunded Income Benefit Base (as defined in the New York Life Income Plus Variable Annuity prospectus) each policy quarter, deducted from the variable accumulation unit value on a quarterly basis. On an annual basis, the charge equals 1.00% (0.25% quarterly) of the Unfunded Income Benefit Base.

Separate Account policyowners may pay certain Fund portfolio company operating expenses during the time they own their policy, which are reflected in the daily computation of NAVs for the Funds. NYLIAC may receive payment or compensation from the Funds resulting from certain of these operating expenses in connection with the administration, distribution and other services it provides to the Funds, some of whom may be affiliates of either NYLIAC or the Separate Account. Management Fees (which may include administration and/or advisory fees) range from 0.00% to 1.25%, distribution (12b-1) fees range from 0.00% to 0.25%, and other expenses range from 0.04% to 1.06%. These ranges are shown as a percentage of average net assets as of December 31, 2011, and approximate the ranges as of December 31, 2012.

NOTE 4—Distribution of Net Income:

T

he Separate Account does not expect to declare dividends to policyowners from accumulated net investment income and realized gains. The income and gains are distributed to policyowners as part of withdrawals of amounts (in the form of surrenders, death benefits, transfers, or annuity payments) in excess of the net premium payments.

F-43

Notes to Financial Statements (Continued)

NOTE 5—Changes in Units Outstanding (in 000’s):

T

he changes in units outstanding for the years ended December 31, 2012 and 2011 were as follows:

	2012								2011
	Units Issued		Units Redeemed			Net Increase (Decrease)			Units Issued		Units Redeemed			Net Increase (Decrease)
MainStay VP Bond—Initial Class		258		(1,012	)		(754	)		327		(1,581	)		(1,254	)
MainStay VP Cash Management		78,492		(175,878	)		(97,386	)		228,950		(158,522	)		70,428
MainStay VP Common Stock—Initial Class		44		(928	)		(884	)		30		(1,010	)		(980	)
MainStay VP Convertible—Initial Class		66		(1,000	)		(934	)		193		(1,115	)		(922	)
MainStay VP DFA/DuPont Capital Emerging Markets Equity—Initial Class		4,700		(1,005	)		3,695			—		—			—
MainStay VP Eagle Small Cap Growth—Initial Class		10,358		(1,742	)		8,616			—		—			—
MainStay VP Government—Initial Class		160		(938	)		(778	)		399		(1,460	)		(1,061	)
MainStay VP Growth Equity—Initial Class		131		(1,004	)		(873	)		85		(1,189	)		(1,104	)
MainStay VP High Yield Corporate Bond—Initial Class		1,192		(2,430	)		(1,238	)		1,321		(3,991	)		(2,670	)
MainStay VP ICAP Select Equity—Initial Class		104		(2,523	)		(2,419	)		156		(3,177	)		(3,021	)
MainStay VP Income Builder—Initial Class		168		(590	)		(422	)		75		(784	)		(709	)
MainStay VP International Equity—Initial Class		56		(593	)		(537	)		131		(646	)		(515	)
MainStay VP Janus Balanced—Initial Class		26,266		(3,573	)		22,693			—		—			—
MainStay VP Large Cap Growth—Initial Class		369		(805	)		(436	)		406		(977	)		(571	)
MainStay VP MFS® Utilities—Initial Class		318		(84	)		234			—		—			—
MainStay VP Mid Cap Core—Initial Class		94		(817	)		(723	)		135		(943	)		(808	)
MainStay VP S&P 500 Index—Initial Class		198		(1,628	)		(1,430	)		96		(2,078	)		(1,982	)
MainStay VP T. Rowe Price Equity Income—Initial Class		7,625		(1,375	)		6,250			—		—			—
MainStay VP U.S. Small Cap—Initial Class		72		(482	)		(410	)		72		(697	)		(625	)
MainStay VP Van Eck Global Hard Assets—Initial Class		37,216		(6,340	)		30,876			—		—			—
Alger Small Cap Growth Portfolio—Class I-2 Shares		3		(2,363	)		(2,360	)		21		(519	)		(498	)
Calvert VP SRI Balanced Portfolio		131		(2,096	)		(1,965	)		345		(356	)		(11	)
Dreyfus IP Technology Growth Portfolio—Initial Shares		438		(392	)		46			394		(809	)		(415	)
Fidelity® VIP Contrafund® Portfolio—Initial Class		67		(1,420	)		(1,353	)		94		(1,763	)		(1,669	)
Fidelity® VIP Equity-Income Portfolio—Initial Class		100		(799	)		(699	)		99		(1,113	)		(1,014	)
Janus Aspen Balanced Portfolio—Institutional Shares		11		(9,169	)		(9,158	)		61		(1,998	)		(1,937	)
Janus Aspen Worldwide Portfolio—Institutional Shares		134		(895	)		(761	)		71		(910	)		(839	)
MFS® Investors Trust Series—Initial Class		79		(164	)		(85	)		17		(196	)		(179	)
MFS® Research Series—Initial Class		47		(196	)		(149	)		19		(223	)		(204	)
MFS® Utilities Series—Initial Class		—		(145	)		(145	)		43		(32	)		11
Neuberger Berman AMT Mid-Cap Growth—Class I		24		(31	)		(7	)		12		(77	)		(65	)
Royce Micro-Cap Portfolio—Investment Class		737		(930	)		(193	)		1,007		(1,152	)		(145	)
Royce Small-Cap Portfolio—Investment Class		126		(4,879	)		(4,753	)		726		(905	)		(179	)
T. Rowe Price Equity Income Portfolio		16		(5,040	)		(5,024	)		137		(1,261	)		(1,124	)
UIF Emerging Markets Equity Portfolio—Class I		20		(2,069	)		(2,049	)		119		(782	)		(663	)
Van Eck VIP Global Hard Assets		179		(10,348	)		(10,169	)		2,036		(2,483	)		(447	)
MainStay VP Balanced—Service Class		663		(1,092	)		(429	)		784		(1,293	)		(509	)
MainStay VP Bond—Service Class		3,290		(2,699	)		591			3,366		(3,371	)		(5	)
MainStay VP Common Stock—Service Class		137		(501	)		(364	)		150		(633	)		(483	)
MainStay VP Conservative Allocation—Service Class		4,580		(2,985	)		1,595			5,348		(3,455	)		1,893
MainStay VP Convertible—Service Class		826		(1,938	)		(1,112	)		2,024		(1,970	)		54
MainStay VP DFA/DuPont Capital Emerging Markets Equity—Service Class		12,867		(1,885	)		10,982			—		—			—
MainStay VP Eagle Small Cap Growth—Service Class		3,694		(645	)		3,049			—		—			—
MainStay VP Flexible Bond Opportunities—Service Class		4,246		(410	)		3,836			1,988		(299	)		1,689
MainStay VP Floating Rate—Service Class		3,336		(3,550	)		(214	)		4,580		(6,312	)		(1,732	)
MainStay VP Government—Service Class		1,874		(2,311	)		(437	)		2,448		(3,230	)		(782	)
MainStay VP Growth Allocation—Service Class		647		(1,186	)		(539	)		973		(1,494	)		(521	)
MainStay VP Growth Equity—Service Class		417		(556	)		(139	)		192		(487	)		(295	)
MainStay VP High Yield Corporate Bond—Service Class		10,268		(4,038	)		6,230			6,809		(6,616	)		193
MainStay VP ICAP Select Equity—Service Class		845		(2,906	)		(2,061	)		1,234		(3,001	)		(1,767	)

F-44

NYLIAC Variable Annuity Separate Account-III

	2012								2011
	Units Issued		Units Redeemed			Net Increase (Decrease)			Units Issued		Units Redeemed			Net Increase (Decrease)
MainStay VP Income Builder—Service Class		994		(537	)		457			615		(600	)		15
MainStay VP International Equity—Service Class		610		(1,609	)		(999	)		1,152		(1,213	)		(61	)
MainStay VP Janus Balanced—Service Class		17,300		(1,835	)		15,465			—		—			—
MainStay VP Large Cap Growth—Service Class		1,476		(1,288	)		188			1,517		(1,196	)		321
MainStay VP MFS® Utilities—Service Class		43,327		(5,196	)		38,131			—		—			—
MainStay VP Mid Cap Core—Service Class		492		(1,680	)		(1,188	)		817		(1,793	)		(976	)
MainStay VP Moderate Allocation—Service Class		4,849		(4,029	)		820			4,234		(5,615	)		(1,381	)
MainStay VP Moderate Growth Allocation—Service Class		3,789		(2,931	)		858			3,980		(3,138	)		842
MainStay VP PIMCO Real Return—Service Class		18,484		(2,267	)		16,217			—		—			—
MainStay VP S&P 500 Index—Service Class		1,093		(2,101	)		(1,008	)		753		(1,959	)		(1,206	)
MainStay VP T. Rowe Price Equity Income—Service Class		15,661		(2,307	)		13,354			—		—			—
MainStay VP U.S. Small Cap—Service Class		364		(731	)		(367	)		443		(1,008	)		(565	)
Alger Small Cap Growth Portfolio—Class S Shares		—		(1,734	)		(1,734	)		52		(312	)		(260	)
BlackRock® Global Allocation V.I. Fund—Class III Shares		5,099		(877	)		4,222			3,992		(232	)		3,760
Columbia Variable Portfolio—Small Cap Value Fund—Class 2 Shares		404		(730	)		(326	)		789		(1,100	)		(311	)
Dreyfus IP Technology Growth Portfolio—Service Shares		907		(712	)		195			888		(1,013	)		(125	)
Fidelity® VIP Contrafund® Portfolio—Service Class 2		1,120		(2,340	)		(1,220	)		1,117		(2,447	)		(1,330	)
Fidelity® VIP Equity-Income Portfolio—Service Class 2		514		(1,409	)		(895	)		606		(1,536	)		(930	)
Fidelity® VIP Mid Cap Portfolio—Service Class 2		707		(1,490	)		(783	)		1,129		(1,816	)		(687	)
Janus Aspen Balanced Portfolio—Service Shares		189		(10,378	)		(10,189	)		1,621		(1,387	)		234
Janus Aspen Worldwide Portfolio—Service Shares		489		(508	)		(19	)		310		(483	)		(173	)
MFS® Investors Trust Series—Service Class		166		(122	)		44			47		(92	)		(45	)
MFS® Research Series—Service Class		146		(110	)		36			56		(95	)		(39	)
MFS® Utilities Series—Service Class		368		(17,144	)		(16,776	)		2,313		(2,542	)		(229	)
Neuberger Berman AMT Mid-Cap Growth Portfolio—Class S		770		(574	)		196			550		(549	)		1
PIMCO Real Return Portfolio—Advisor Class		1,787		(11,349	)		(9,562	)		7,249		(1,518	)		5,731
T. Rowe Price Equity Income Portfolio—II		63		(10,977	)		(10,914	)		908		(1,772	)		(864	)
UIF Emerging Markets Equity Portfolio—Class II		116		(4,597	)		(4,481	)		771		(1,072	)		(301	)
Victory VIF Diversified Stock Fund—Class A Shares		77		(360	)		(283	)		152		(365	)		(213	)

Not all investment options are available under all policies.

F-45

Notes to Financial Statements (Continued)

NOTE 6—Financial Highlights:

I

n 2012, NYLIAC Variable Annuity Separate Account-III (the “Account”) elected to present in the Financial Highlights appearing in Note 6 the range of lowest and highest expense ratio and the related total returns over the reporting period for each of the Account’s investment options, rather than separate information for each contract expense level as reported in prior periods as permitted by AICPA Statement of Position 03-5. The Account similarly elected to report aggregate period-end units outstanding and the range of period-end unit fair values for each investment option in the Statement of Assets and Liabilities and the Financial Highlights. Prior-period financial highlights appearing in Note 6 have been retrospectively adjusted conforming to the current period presentation.

The following table presents financial highlights for each Investment Division as of December 31, 2012, 2011, 2010, 2009 and 2008:

		Net Assets (in 000’s)		Units Outstanding (in 000’s)		Variable Accumulation Unit Value (Lowest to Highest)	Total Return1 (Lowest to Highest)	Investment Income Ratio2
MainStay VP Bond—Initial Class	2012	$	96,958		4,822	$14.65 to $22.05	2.7%  to    3.2%		2.3	%
	2011		108,114		5,576	14.26 to   21.36	5.3%  to    5.8%		3.1	%
	2010		124,789		6,830	13.55 to   20.20	5.9%  to    6.3%		3.1	%
	2009		129,907		7,598	12.79 to   19.00	5.8%  to    6.3%		4.5	%
	2008		137,706		8,566	12.09 to   17.87	1.8%  to    2.3%		4.1	%
MainStay VP Cash Management	2012	$	216,181		171,514	$  0.97 to $  9.55	(1.8%) to   (0.5%)		0.0	%
	2011		332,005		268,900	0.99 to     9.68	(1.8%) to   (1.3%)		0.0	%
	2010		235,055		198,472	1.01 to     9.82	(1.9%) to   (1.4%)		0.0	%
	2009		309,138		266,114	1.03 to     9.95	(1.8%) to   (0.5%)		0.1	%
	2008		524,660		452,460	1.05 to     1.36	0.3%  to    0.8%		2.0	%
MainStay VP Common Stock—Initial Class	2012	$	84,980		3,836	$  9.39 to $27.24	14.6%  to  15.1%		1.6	%
	2011		89,176		4,720	8.17 to   23.67	(0.3%) to    0.2%		1.5	%
	2010		105,967		5,700	8.17 to   23.63	10.5%  to  11.0%		1.6	%
	2009		114,463		6,943	7.37 to   21.28	20.2%  to  20.7%		2.1	%
	2008		108,917		7,985	6.11 to   17.63	(37.6%) to (37.3%)		1.4	%
MainStay VP Convertible—Initial Class	2012	$	83,964		4,072	$13.26 to $24.95	7.1%  to    7.6%		2.9	%
	2011		94,613		5,006	12.35 to   23.19	(6.5%) to   (6.1%)		2.3	%
	2010		118,002		5,928	13.17 to   24.69	15.7%  to  16.2%		2.8	%
	2009		118,484		6,950	11.36 to   21.24	43.4%  to  44.0%		2.2	%
	2008		91,464		7,696	7.90 to   14.75	(35.6%) to (35.3%)		2.1	%
MainStay VP DFA/DuPont Capital Emerging Markets Equity—Initial Class	2012	$	36,809		3,695	$  9.96 to $10.00	(0.4%) to    0.0%		0.0	%
MainStay VP Eagle Small Cap Growth—Initial Class	2012	$	85,004		8,616	$  9.84 to $  9.88	(1.6%) to   (1.2%)		0.0	%
MainStay VP Government—Initial Class	2012	$	66,743		3,641	$13.55 to $20.35	2.1%  to    2.5%		2.9	%
	2011		79,061		4,419	13.28 to   19.85	4.0%  to    4.5%		3.2	%
	2010		93,465		5,480	12.76 to   18.99	3.4%  to    3.9%		3.0	%
	2009		105,068		6,411	12.34 to   18.28	(0.2%) to    0.2%		3.4	%
	2008		135,441		8,285	12.37 to   18.24	7.8%  to    8.3%		3.2	%
MainStay VP Growth Equity—Initial Class	2012	$	99,063		5,805	$  6.67 to $19.82	12.8%  to  13.3%		0.4	%
	2011		100,612		6,678	5.90 to   17.49	(3.2%) to   (2.7%)		0.4	%
	2010		119,426		7,782	6.08 to   17.98	10.2%  to  10.6%		0.5	%
	2009		125,677		9,090	5.50 to   16.25	31.7%  to  32.3%		0.6	%
	2008		107,856		10,347	4.17 to   12.28	(40.0%) to (39.7%)		0.5	%
MainStay VP High Yield Corporate Bond—Initial Class	2012	$	343,323		11,286	$21.58 to $35.25	11.3%  to  11.8%		5.6	%
	2011		340,625		12,524	19.33 to   31.52	4.3%  to    4.8%		5.9	%
	2010		391,318		15,194	18.48 to   30.08	10.6%  to  11.1%		5.8	%
	2009		403,701		17,470	16.67 to   27.07	40.2%  to  40.8%		7.7	%
	2008		296,546		17,901	11.86 to   19.22	(25.5%) to (25.2%)		8.6	%

F-46

NYLIAC Variable Annuity Separate Account-III

		Net Assets (in 000’s)		Units Outstanding (in 000’s)		Variable Accumulation Unit Value (Lowest to Highest)	Total Return1 (Lowest to Highest)	Investment Income Ratio2
MainStay VP ICAP Select Equity—Initial Class	2012	$	159,708		11,186	$13.12 to $18.29	13.5%  to  14.0%		2.1	%
	2011		170,305		13,605	11.53 to   16.12	(3.2%) to   (2.8%)		1.4	%
	2010		213,777		16,626	11.89 to   16.66	16.0%  to  16.5%		0.8	%
	2009		220,473		19,983	10.23 to   14.37	27.0%  to  27.6%		1.8	%
	2008		147,889		17,061	8.03 to   11.31	(38.7%) to (38.5%)		0.6	%
MainStay VP Income Builder—Initial Class	2012	$	76,975		3,543	$10.74 to $24.81	12.9%  to  13.4%		4.2	%
	2011		76,082		3,965	9.49 to   21.88	2.2%  to    2.7%		3.8	%
	2010		86,265		4,674	9.26 to   21.31	12.7%  to  13.2%		3.1	%
	2009		89,293		5,514	8.20 to   18.82	21.3%  to  21.8%		3.6	%
	2008		86,455		6,523	6.75 to   15.45	(28.3%) to (27.9%)		3.1	%
MainStay VP International Equity—Initial Class	2012	$	38,330		2,009	$13.51 to $22.46	17.3%  to  17.8%		1.7	%
	2011		40,783		2,546	11.49 to   19.07	(17.6%) to (17.2%)		3.1	%
	2010		58,690		3,061	13.90 to   23.03	3.0%  to    3.4%		3.2	%
	2009		68,081		3,686	13.47 to   22.26	17.2%  to  17.7%		6.9	%
	2008		70,226		4,464	11.46 to   18.92	(27.0%) to (26.7%)		1.4	%
MainStay VP Janus Balanced—Initial Class	2012	$	236,295		22,693	$10.38 to $10.43	3.8%  to    4.3%		0.0	%
MainStay VP Large Cap Growth—Initial Class	2012	$	40,619		2,921	$  7.67 to $16.34	11.0%  to  11.5%		0.0	%
	2011		41,125		3,357	6.89 to   14.65	(2.1%) to   (1.7%)		0.0	%
	2010		48,876		3,928	7.02 to   14.90	14.1%  to  14.6%		0.0	%
	2009		50,102		4,696	6.14 to   13.01	37.5%  to  38.1%		0.0	%
	2008		39,464		5,087	4.46 to     9.42	(39.9%) to (39.7%)		0.1	%
MainStay VP MFS® Utilities—Initial Class	2012	$	2,518		234	$10.72 to $10.76	7.2%  to    7.6%		0.0	%
MainStay VP Mid Cap Core—Initial Class	2012	$	59,188		3,265	$18.02 to $20.81	15.4%  to  15.9%		0.7	%
	2011		62,376		3,988	15.55 to   18.04	(4.8%) to   (4.3%)		0.8	%
	2010		78,517		4,796	16.26 to   18.94	21.4%  to  21.9%		0.3	%
	2009		78,869		5,868	13.33 to   15.61	34.4%  to  35.0%		0.4	%
	2008		30,964		3,107	9.87 to   11.61	(43.3%) to (43.0%)		0.3	%
MainStay VP S&P 500 Index—Initial Class	2012	$	185,880		8,406	$10.02 to $27.64	13.5%  to  14.0%		1.6	%
	2011		188,168		9,836	8.80 to   24.23	0.0%  to    0.4%		1.6	%
	2010		221,362		11,818	8.78 to   24.13	12.6%  to  13.1%		1.8	%
	2009		233,206		14,172	7.78 to   21.33	23.9%  to  24.5%		2.8	%
	2008		215,731		16,418	6.26 to   17.13	(38.2%) to (37.9%)		2.2	%
MainStay VP T. Rowe Price Equity Income—Initial Class	2012	$	66,549		6,250	$10.61 to $10.66	6.1%  to    6.6%		0.0	%
MainStay VP U.S. Small Cap—Initial Class	2012	$	25,636		1,870	$12.83 to $20.63	10.7%  to  11.2%		0.4	%
	2011		28,108		2,280	11.55 to   18.63	(4.5%) to   (4.1%)		0.8	%
	2010		37,193		2,905	12.06 to   19.52	22.7%  to  23.3%		0.1	%
	2009		37,500		3,593	9.80 to   15.90	38.4%  to  39.1%		0.0	%
	2008		12,369		1,660	7.06 to   11.49	(48.2%) to (48.0%)		0.0	%
MainStay VP Van Eck Global Hard Assets—Initial Class	2012	$	276,562		30,876	$  8.94 to $10.19	(10.6%) to    1.9%		0.0	%
Alger Small Cap Growth Portfolio—Class I-2 Shares	2012	$	—		—	$            —	—		—
	2011		30,656		2,360	8.91 to   21.07	(5.0%) to   (4.5%)		0.0	%
	2010		38,641		2,858	9.36 to   22.17	23.0%  to  23.6%		0.0	%
	2009		38,215		3,505	7.59 to   18.02	42.8%  to  43.5%		0.0	%
	2008		31,905		4,209	5.30 to   12.62	(47.6%) to (47.3%)		0.0	%
Calvert VP SRI Balanced Portfolio	2012	$	—		—	$            —	—		—
	2011		27,260		1,965	9.60 to   19.23	2.7%  to    3.2%		1.3	%
	2010		27,004		1,976	9.33 to   18.70	10.0%  to  10.6%		1.4	%
	2009		25,754		2,077	8.46 to   16.92	0.5%  to  23.6%		2.1	%
	2008		23,360		2,347	6.86 to   13.69	(32.6%) to (32.3%)		2.4	%

F-47

Notes to Financial Statements (Continued)

NOTE 6—Financial Highlights (Continued):

		Net Assets (in 000’s)		Units Outstanding (in 000’s)		Variable Accumulation Unit Value (Lowest to Highest)	Total Return1 (Lowest to Highest)	Investment Income Ratio2
Dreyfus IP Technology Growth Portfolio—Initial Shares	2012	$	14,983		1,188	$12.34 to $19.23	13.5%  to  14.0%		0.0	%
	2011		12,641		1,142	10.84 to   16.94	(9.5%) to   (9.1%)		0.0	%
	2010		18,952		1,557	11.93 to   18.71	27.6%  to  28.1%		0.0	%
	2009		16,025		1,686	9.31 to   14.67	54.8%  to  55.5%		0.4	%
	2008		8,589		1,401	5.99 to     9.48	(42.3%) to (42.0%)		0.0	%
Fidelity® VIP Contrafund® Portfolio—Initial Class	2012	$	156,076		6,127	$14.84 to $29.92	14.3%  to  14.8%		1.3	%
	2011		163,620		7,480	12.96 to   26.07	(4.3%) to   (3.9%)		0.9	%
	2010		205,022		9,149	13.50 to   27.12	15.1%  to  15.6%		1.2	%
	2009		212,206		11,012	11.71 to   23.46	33.2%  to  33.8%		1.4	%
	2008		186,282		12,983	8.77 to   17.53	(43.6%) to (43.3%)		0.9	%
Fidelity® VIP Equity-Income Portfolio—Initial Class	2012	$	68,188		3,709	$13.09 to $20.78	15.2%  to  15.7%		3.0	%
	2011		69,655		4,408	11.34 to   17.97	(0.9%) to   (0.4%)		2.3	%
	2010		85,212		5,422	11.41 to   18.04	13.0%  to  13.5%		1.7	%
	2009		91,417		6,655	10.07 to   15.89	27.8%  to  28.4%		2.2	%
	2008		84,729		7,939	7.86 to   12.38	(43.7%) to (43.5%)		2.3	%
Janus Aspen Balanced Portfolio—Institutional Shares	2012	$	—		—	$            —	—		—
	2011		220,412		9,158	13.78 to   28.69	(0.2%) to    0.2%		2.4	%
	2010		261,975		11,095	13.78 to   28.62	6.4%  to    6.9%		2.8	%
	2009		288,148		13,100	12.91 to   26.78	23.6%  to  24.1%		3.0	%
	2008		267,979		15,109	10.42 to   21.57	(17.4%) to (17.0%)		2.6	%
Janus Aspen Worldwide Portfolio—Institutional Shares	2012	$	65,403		4,350	$  6.55 to $17.03	17.9%  to  18.4%		0.9	%
	2011		64,388		5,111	5.54 to   14.38	(15.3%) to (14.9%)		0.6	%
	2010		87,318		5,950	6.52 to   16.90	13.7%  to  14.2%		0.6	%
	2009		90,614		7,166	5.72 to   14.80	35.2%  to  35.8%		1.4	%
	2008		75,868		8,172	4.22 to   10.90	(45.7%) to (45.4%)		1.2	%
MFS® Investors Trust Series—Initial Class	2012	$	9,193		764	$10.53 to $17.25	17.0%  to  17.5%		0.9	%
	2011		8,689		849	8.98 to   14.75	(4.0%) to   (3.5%)		0.9	%
	2010		10,882		1,028	9.33 to   15.36	9.1%  to    9.6%		1.3	%
	2009		12,564		1,306	8.53 to   14.08	24.6%  to  25.1%		1.7	%
	2008		12,422		1,621	6.83 to   11.30	(34.3%) to (34.0%)		0.9	%
MFS® Research Series—Initial Class	2012	$	10,832		842	$  9.16 to $17.64	15.1%  to  15.6%		0.8	%
	2011		10,924		991	7.93 to   15.33	(2.3%) to   (1.8%)		0.8	%
	2010		13,315		1,195	8.10 to   15.68	13.8%  to  14.3%		1.0	%
	2009		14,445		1,493	7.10 to   13.78	28.2%  to  28.7%		1.5	%
	2008		13,285		1,768	5.53 to   10.76	(37.3%) to (37.0%)		0.6	%
MFS® Utilities Series—Initial Class	2012	$	—		—	$          —	—		—
	2011		2,918		145	19.24 to   31.31	4.8%  to    5.3%		3.3	%
	2010		2,575		134	18.31 to   29.74	11.7%  to  12.2%		3.3	%
	2009		3,301		194	16.35 to   26.52	30.8%  to  31.4%		5.1	%
	2008		3,296		253	12.47 to   20.20	(38.8%) to (38.5%)		1.5	%
Neuberger Berman AMT Mid-Cap Growth—Class I	2012	$	2,187		139	$15.11 to $21.67	10.3%  to  10.8%		0.0	%
	2011		2,108		146	13.63 to   19.56	(1.4%) to (0.9%)		0.0	%
	2010		3,035		211	13.76 to   19.75	26.7%  to  27.3%		0.0	%
	2009		2,982		262	10.81 to   15.52	29.2%  to  29.8%		0.0	%
	2008		3,030		344	8.33 to   11.97	(44.4%) to (44.2%)		0.0	%
Royce Micro-Cap Portfolio—Investment Class	2012	$	78,610		5,369	$  8.42 to $15.29	5.6%  to    6.2%		0.0	%
	2011		77,789		5,562	13.12 to   14.41	(14.5%) to (13.3%)		2.4	%
	2010		92,834		5,707	15.17 to   16.65	27.6%  to  28.2%		2.0	%
	2009		67,735		5,320	11.87 to   13.01	18.7%  to  55.8%		0.0	%
	2008		38,828		4,735	7.89 to     8.36	(44.3%) to (44.1%)		2.8	%

F-48

NYLIAC Variable Annuity Separate Account-III

		Net Assets (in 000’s)		Units Outstanding (in 000’s)		Variable Accumulation Unit Value (Lowest to Highest)	Total Return1 (Lowest to Highest)	Investment Income Ratio2
Royce Small-Cap Portfolio—Investment Class	2012	$	—		—	$            —	—		—
	2011		61,597		4,753	12.15 to   13.24	(5.2%) to   (4.6%)		0.3	%
	2010		67,157		4,932	12.79 to   13.97	18.3%  to  18.9%		0.1	%
	2009		53,839		4,683	10.81 to   11.75	9.9%  to  33.3%		0.0	%
	2008		38,087		4,405	8.15 to     8.81	(28.5%) to (28.2%)		0.7	%
T. Rowe Price Equity Income Portfolio	2012	$	—		—	$            —	—		—
	2011		71,180		5,024	12.01 to   14.72	(2.5%) to   (2.1%)		1.7	%
	2010		88,811		6,148	12.32 to   15.04	12.9%  to  13.4%		1.9	%
	2009		94,541		7,428	10.91 to   13.26	23.3%  to  23.9%		2.0	%
	2008		94,377		9,191	8.85 to   10.70	(37.3%) to (37.0%)		2.3	%
UIF Emerging Markets Equity Portfolio—Class I	2012	$	—		—	$            —	—		—
	2011		42,138		2,049	15.20 to $29.35	(19.7%) to (19.4%)		0.4	%
	2010		69,014		2,712	18.87 to   36.56	16.8%  to  17.4%		0.6	%
	2009		70,986		3,286	16.10 to   31.29	66.7%  to  67.5%		0.0	%
	2008		42,023		3,249	9.63 to   18.77	(57.4%) to (57.2%)		0.0	%
Van Eck VIP Global Hard Assets	2012	$	—		—	$            —	—		—
	2011		315,058		10,169	11.77 to   41.00	(20.3%) to (17.6%)		1.2	%
	2010		423,785		10,616	14.30 to   49.98	26.9%  to  27.5%		0.4	%
	2009		350,861		10,629	11.22 to   39.40	12.2%  to  55.3%		0.2	%
	2008		215,462		9,963	20.53 to   25.48	(47.1%) to (46.9%)		0.3	%
MainStay VP Balanced—Service Class	2012	$	87,556		6,859	$10.32 to $13.30	3.2%  to  10.5%		1.1	%
	2011		84,264		7,288	11.19 to   12.03	0.7%  to    1.2%		1.3	%
	2010		89,025		7,797	11.10 to   11.91	11.3%  to  11.8%		1.2	%
	2009		86,876		8,486	9.95 to   10.68	(0.5%) to  21.1%		2.9	%
	2008		81,366		9,607	8.40 to     8.51	(26.4%) to (26.1%)		0.0	%
MainStay VP Bond—Service Class	2012	$	199,192		15,300	$10.02 to $13.69	0.2%  to    3.0%		2.2	%
	2011		188,440		14,709	11.34 to   13.25	4.9%  to    5.5%		3.1	%
	2010		180,687		14,714	10.78 to   12.61	5.6%  to    6.1%		3.2	%
	2009		141,196		11,953	10.19 to   11.88	1.9%  to    6.0%		4.5	%
	2008		124,095		11,165	10.87 to   11.21	1.6%  to    2.0%		4.3	%
MainStay VP Common Stock—Service Class	2012	$	37,058		2,538	$10.26 to $14.93	2.6%  to  14.9%		1.4	%
	2011		37,069		2,902	10.31 to   13.00	(0.5%) to    0.0%		1.2	%
	2010		43,375		3,385	10.34 to   13.02	10.3%  to  10.8%		1.4	%
	2009		42,090		3,637	9.35 to   11.75	7.4%  to  20.4%		1.8	%
	2008		36,464		3,785	7.78 to     9.76	(37.7%) to (37.4%)		1.2	%
MainStay VP Conservative Allocation—Service Class	2012	$	297,186		22,895	$10.23 to $13.21	2.3%  to    8.9%		2.0	%
	2011		255,258		21,300	11.75 to   12.12	0.8%  to    1.3%		2.1	%
	2010		230,014		19,407	11.63 to   11.99	9.7%  to  10.2%		2.5	%
	2009		177,527		16,471	10.58 to   10.88	5.8%  to  20.2%		3.1	%
	2008		130,016		14,465	8.88 to     9.05	(20.1%) to (19.7%)		0.0	%
MainStay VP Convertible—Service Class	2012	$	160,845		10,684	$  9.34 to $15.96	1.7%  to    7.4%		2.7	%
	2011		167,566		11,796	12.20 to   14.73	(7.2%) to   (6.3%)		2.2	%
	2010		180,035		11,742	13.05 to   15.87	15.4%  to  16.0%		2.8	%
	2009		146,772		10,984	11.25 to   13.69	12.5%  to  43.7%		2.1	%
	2008		87,248		9,303	8.34 to     9.53	(35.8%) to (35.5%)		2.0	%
MainStay VP DFA/DuPont Capital Emerging Markets Equity—Service Class	2012	$	109,434		10,982	$  9.94 to $10.92	(0.6%) to    9.2%		0.0	%
MainStay VP Eagle Small Cap Growth—Service Class	2012	$	29,977		3,049	$  9.81 to $10.46	(1.9%) to    4.6%		0.0	%
MainStay VP Flexible Bond Opportunities—Service Class	2012	$	60,954		5,525	$10.41 to $10.94	4.1%  to  12.0%		7.6	%
	2011		16,564		1,689	9.73 to     9.76	(2.7%) to   (2.4%)		5.9	%

F-49

Notes to Financial Statements (Continued)

NOTE 6—Financial Highlights (Continued):

		Net Assets (in 000’s)		Units Outstanding (in 000’s)		Variable Accumulation Unit Value (Lowest to Highest)	Total Return1 (Lowest to Highest)	Investment Income Ratio2
MainStay VP Floating Rate—Service Class	2012	$	218,377		18,529	$10.20 to $11.94	2.0%  to    5.4%		3.9	%
	2011		209,517		18,743	10.97 to   11.31	0.1%  to    0.6%		3.9	%
	2010		228,903		20,475	10.94 to   11.27	5.9%  to    6.4%		3.8	%
	2009		204,063		19,335	10.31 to   10.59	3.1%  to  31.4%		3.3	%
	2008		103,269		12,863	8.00 to     8.08	(24.4%) to (24.1%)		5.2	%
MainStay VP Government—Service Class	2012	$	118,054		9,611	$10.01 to $12.78	0.1%  to    2.3%		2.8	%
	2011		121,813		10,048	10.73 to   12.49	3.8%  to    4.3%		3.1	%
	2010		126,944		10,830	10.32 to   12.00	3.2%  to    3.7%		3.1	%
	2009		109,824		9,599	9.99 to   11.60	(0.5%) to    0.7%		3.2	%
	2008		140,853		12,213	11.30 to   11.62	7.5%  to    8.0%		3.5	%
MainStay VP Growth Allocation—Service Class	2012	$	92,730		8,128	$  9.92 to $13.90	4.4%  to  13.6%		0.8	%
	2011		87,159		8,667	9.58 to   12.23	(4.7%) to   (4.2%)		0.7	%
	2010		96,229		9,188	10.05 to   12.76	12.6%  to  13.2%		1.0	%
	2009		85,444		9,276	8.92 to   11.27	7.5%  to  25.9%		2.2	%
	2008		63,099		8,638	7.12 to     7.39	(38.9%) to (38.6%)		0.5	%
MainStay VP Growth Equity—Service Class	2012	$	33,316		2,538	$10.15 to $13.55	1.5%  to  13.1%		0.2	%
	2011		31,101		2,677	10.50 to   12.01	(3.4%) to   (2.9%)		0.2	%
	2010		35,765		2,972	10.84 to   12.41	9.9%  to  10.4%		0.3	%
	2009		34,133		3,141	9.83 to   11.27	10.3%  to  32.0%		0.3	%
	2008		27,820		3,369	7.46 to     8.32	(40.1%) to (39.9%)		0.3	%
MainStay VP High Yield Corporate Bond—Service Class	2012	$	873,062		50,258	$10.40 to $19.27	4.0%  to  11.6%		5.7	%
	2011		707,898		44,028	12.58 to   17.28	3.7%  to    4.6%		6.0	%
	2010		688,680		43,835	12.07 to   16.54	10.3%  to  10.9%		5.9	%
	2009		580,689		40,022	10.92 to   14.93	9.2%  to  40.5%		8.1	%
	2008		317,403		30,353	8.48 to   10.63	(25.7%) to (25.3%)		9.0	%
MainStay VP ICAP Select Equity—Service Class	2012	$	258,965		16,869	$10.18 to $15.88	4.1%  to  13.7%		1.9	%
	2011		257,145		18,930	11.32 to   13.92	(3.5%) to   (3.0%)		1.2	%
	2010		291,788		20,697	11.70 to   14.41	15.7%  to  16.2%		0.7	%
	2009		261,228		21,452	10.08 to   12.40	7.6%  to  27.3%		1.5	%
	2008		130,520		13,623	7.93 to     9.74	(38.9%) to (38.6%)		0.5	%
MainStay VP Income Builder—Service Class	2012	$	53,735		3,655	$10.26 to $15.41	2.6%  to  13.2%		4.2	%
	2011		42,069		3,198	12.05 to   13.63	0.8%  to    2.5%		3.7	%
	2010		41,334		3,183	11.78 to   13.31	12.4%  to  13.0%		3.0	%
	2009		35,854		3,109	10.45 to   11.80	4.9%  to  21.5%		3.4	%
	2008		30,825		3,235	8.62 to     9.71	(28.4%) to (28.1%)		3.0	%
MainStay VP International Equity—Service Class	2012	$	134,786		8,845	$  9.14 to $16.50	5.6%  to  17.6%		1.5	%
	2011		129,225		9,844	9.26 to   13.94	(18.0%) to (17.4%)		3.0	%
	2010		159,775		9,905	11.24 to   17.00	2.7%  to    3.2%		3.1	%
	2009		153,961		9,689	10.92 to   16.47	9.2%  to  17.4%		7.0	%
	2008		136,248		10,025	10.49 to   14.03	(27.2%) to (26.9%)		1.2	%
MainStay VP Janus Balanced—Service Class	2012	$	160,772		15,465	$10.24 to $10.40	2.4%  to    4.0%		0.0	%
MainStay VP Large Cap Growth—Service Class	2012	$	92,835		6,639	$  9.90 to $14.59	1.5%  to  11.3%		0.0	%
	2011		81,716		6,451	11.99 to   13.13	(3.1%) to   (1.8%)		0.0	%
	2010		79,231		6,130	12.28 to   13.40	13.8%  to  14.3%		0.0	%
	2009		66,421		5,853	10.79 to   11.75	13.2%  to  37.7%		0.0	%
	2008		42,167		5,111	7.87 to     8.54	(40.1%) to (39.8%)		0.0	%
MainStay VP MFS® Utilities—Service Class	2012	$	409,415		38,131	$10.39 to $10.74	3.9%  to    7.4%		0.0	%

F-50

NYLIAC Variable Annuity Separate Account-III

		Net Assets (in 000’s)		Units Outstanding (in 000’s)		Variable Accumulation Unit Value (Lowest to Highest)	Total Return1 (Lowest to Highest)	Investment Income Ratio2
MainStay VP Mid Cap Core—Service Class	2012	$	163,677		8,808	$  9.97 to $19.39	5.5%  to  15.6%		0.5	%
	2011		162,258		9,996	11.92 to   16.69	(5.0%) to   (4.5%)		0.6	%
	2010		187,634		10,972	12.51 to   17.57	21.1%  to  21.7%		0.3	%
	2009		165,895		11,756	10.30 to   14.45	12.7%  to  34.7%		0.2	%
	2008		60,108		5,732	7.66 to   10.73	(43.4%) to (43.2%)		0.0	%
MainStay VP Moderate Allocation—Service Class	2012	$	333,621		26,360	$10.31 to $13.15	3.1%  to  10.8%		1.5	%
	2011		291,464		25,540	11.12 to   11.89	(1.2%) to   (0.7%)		1.6	%
	2010		309,034		26,921	11.25 to   12.01	10.7%  to  11.3%		2.0	%
	2009		259,923		25,207	10.16 to   10.82	7.3%  to  22.3%		2.8	%
	2008		177,535		21,033	8.35 to     8.53	(26.8%) to (26.4%)		0.2	%
MainStay VP Moderate Growth Allocation—Service Class	2012	$	301,555		24,373	$10.11 to $13.35	4.0%  to  12.8%		1.0	%
	2011		256,812		23,515	10.30 to   11.84	(3.3%) to   (2.8%)		1.0	%
	2010		253,294		22,673	10.64 to   12.21	12.0%  to  12.5%		1.4	%
	2009		207,085		20,989	9.51 to   10.89	6.8%  to  26.3%		2.7	%
	2008		159,675		20,457	7.56 to     7.88	(33.9%) to (33.6%)		0.4	%
MainStay VP PIMCO Real Return—Service Class	2012	$	169,561		16,217	$10.10 to $10.44	1.0%  to    4.4%		0.0	%
MainStay VP S&P 500 Index—Service Class	2012	$	161,960		11,278	$10.16 to $14.66	1.6%  to  13.8%		1.4	%
	2011		155,859		12,286	10.69 to   12.86	(0.3%) to    0.2%		1.4	%
	2010		171,149		13,492	10.68 to   12.87	12.3%  to  12.9%		1.6	%
	2009		161,484		14,354	9.48 to   11.40	8.0%  to  24.2%		2.5	%
	2008		134,910		14,874	7.65 to     9.18	(38.3%) to (38.0%)		2.0	%
MainStay VP T. Rowe Price Equity Income—Service Class	2012	$	141,752		13,354	$10.36 to $10.64	3.6%  to    6.4%		0.0	%
MainStay VP U.S. Small Cap—Service Class	2012	$	67,965		3,788	$  9.87 to $18.60	5.9%  to  11.0%		0.2	%
	2011		67,996		4,155	12.88 to   16.70	(4.8%) to   (4.3%)		0.7	%
	2010		81,026		4,720	13.46 to   17.53	22.4%  to  23.0%		0.0	%
	2009		69,955		4,990	10.94 to   14.25	9.4%  to  38.7%		0.0	%
	2008		19,448		1,921	8.43 to   10.27	(48.3%) to (48.1%)		0.0	%
Alger Small Cap Growth Portfolio—Class S Shares	2012	$	—		—	$            —	—		—
	2011		32,875		1,734	14.22 to   19.26	(5.2%) to   (4.8%)		0.0	%
	2010		39,768		1,994	14.96 to   20.22	22.7%  to  23.2%		0.0	%
	2009		36,679		2,268	12.16 to   16.42	42.4%  to  43.1%		0.0	%
	2008		28,811		2,544	8.51 to   11.47	(47.7%) to (47.4%)		0.0	%
BlackRock® Global Allocation V.I. Fund—Class III Shares	2012	$	77,641		7,982	$  9.63 to $10.29	2.9%  to    8.5%		1.9	%
	2011		33,823		3,760	8.91 to     8.94	(10.9%) to (10.6%)		6.2	%
Columbia Variable Portfolio—Small Cap Value Fund—Class 2 Shares	2012	$	41,103		3,032	$  9.57 to $14.25	6.7%  to    9.8%		0.3	%
	2011		41,653		3,358	12.04 to   12.98	(7.8%) to   (7.4%)		0.9	%
	2010		49,259		3,669	13.02 to   14.02	24.1%  to  24.8%		1.1	%
	2009		37,576		3,491	10.46 to   11.24	5.6%  to  23.3%		0.9	%
	2008		31,937		3,645	8.50 to     8.84	(29.5%) to (29.2%)		0.5	%
Dreyfus IP Technology Growth Portfolio—Service Shares	2012	$	49,800		3,183	$  9.72 to $16.26	0.1%  to  13.8%		0.0	%
	2011		41,658		2,988	12.57 to   14.15	(10.3%) to   (9.3%)		0.0	%
	2010		48,173		3,113	13.89 to   15.76	27.3%  to  27.9%		0.0	%
	2009		35,400		2,916	10.89 to   12.33	8.9%  to  54.9%		0.2	%
	2008		17,454		2,224	7.35 to     7.96	(42.3%) to (42.1%)		0.0	%

F-51

Notes to Financial Statements (Continued)

NOTE 6—Financial Highlights (Continued):

		Net Assets (in 000’s)		Units Outstanding (in 000’s)		Variable Accumulation Unit Value (Lowest to Highest)	Total Return1 (Lowest to Highest)	Investment Income Ratio2
Fidelity® VIP Contrafund® Portfolio—Service Class 2	2012	$	265,143		15,127	$10.08 to $18.67	2.1%  to  14.6%		1.1	%
	2011		255,162		16,347	12.30 to   16.31	(4.7%) to   (4.1%)		0.8	%
	2010		290,391		17,677	12.87 to   17.02	14.8%  to  15.4%		1.0	%
	2009		265,033		18,438	11.19 to   14.77	11.9%  to  33.6%		1.2	%
	2008		202,839		18,787	8.43 to   11.06	(43.7%) to (43.5%)		0.8	%
Fidelity® VIP Equity-Income Portfolio—Service Class 2	2012	$	108,264		7,608	$10.29 to $14.58	2.9%  to  15.5%		2.8	%
	2011		104,588		8,503	10.04 to   12.62	(1.2%) to   (0.7%)		2.2	%
	2010		117,472		9,433	10.13 to   12.72	12.8%  to  13.4%		1.6	%
	2009		113,699		10,345	8.95 to   11.23	6.1%  to  28.1%		2.1	%
	2008		93,294		10,851	7.00 to     8.77	(43.9%) to (43.6%)		2.3	%
Fidelity® VIP Mid Cap Portfolio—Service Class 2	2012	$	167,099		8,508	$  9.31 to $21.17	4.1%  to  13.0%		0.4	%
	2011		164,575		9,291	12.36 to   18.75	(13.1%) to (12.0%)		0.0	%
	2010		205,115		9,978	14.09 to   21.34	26.2%  to  26.8%		0.1	%
	2009		158,614		9,596	11.14 to   16.84	11.4%  to  37.8%		0.5	%
	2008		121,101		10,040	10.84 to   12.23	(40.7%) to (40.4%)		0.2	%
Janus Aspen Balanced Portfolio—Service Shares	2012	$	—		—	$            —	—		—
	2011		148,178		10,189	11.47 to   15.35	(0.8%) to    0.0%		2.2	%
	2010		148,204		9,955	11.50 to   15.43	6.1%  to    6.7%		2.6	%
	2009		129,507		9,079	10.82 to   14.47	8.2%  to  23.8%		2.8	%
	2008		103,401		8,934	10.58 to   11.69	(17.6%) to (17.2%)		2.4	%
Janus Aspen Worldwide Portfolio—Service Shares	2012	$	31,664		2,503	$  9.38 to $13.06	9.8%  to  18.2%		0.8	%
	2011		27,166		2,522	9.23 to   11.00	(15.6%) to (15.1%)		0.5	%
	2010		34,298		2,695	10.90 to   13.03	13.4%  to  14.0%		0.5	%
	2009		30,346		2,709	9.59 to   11.44	6.6%  to  35.5%		1.3	%
	2008		21,160		2,546	7.08 to     8.44	(45.8%) to (45.6%)		1.0	%
MFS® Investors Trust Series—Service Class	2012	$	8,341		564	$10.36 to $15.42	3.6%  to  17.2%		0.7	%
	2011		6,736		520	9.93 to   13.16	(4.3%) to   (0.7%)		0.7	%
	2010		7,628		565	10.34 to   13.69	8.8%  to    9.4%		1.0	%
	2009		7,242		586	9.91 to   12.52	(0.9%) to  24.8%		1.3	%
	2008		5,625		568	8.47 to   10.04	(34.5%) to (34.2%)		0.5	%
MFS® Research Series—Service Class	2012	$	9,074		570	$10.28 to $16.75	2.8%  to  15.3%		0.6	%
	2011		7,566		534	11.64 to   14.52	(2.5%) to   (2.0%)		0.6	%
	2010		8,317		573	11.90 to   14.84	13.5%  to  14.1%		0.7	%
	2009		8,037		630	10.45 to   13.01	7.5%  to  28.4%		1.2	%
	2008		6,567		658	8.15 to   10.14	(37.4%) to (37.1%)		0.3	%
MFS® Utilities Series—Service Class	2012	$	—		—	$            —	—		—
	2011		392,771		16,776	13.04 to   25.78	3.6%  to    5.1%		3.0	%
	2010		392,163		17,005	12.45 to   24.56	11.4%  to  12.0%		3.0	%
	2009		368,937		17,435	11.15 to   21.95	11.5%  to  31.0%		4.6	%
	2008		299,745		18,417	14.17 to   16.76	(39.0%) to (38.7%)		1.3	%
Neuberger Berman AMT Mid-Cap Growth Portfolio—Class S	2012	$	35,906		1,983	$  9.95 to $19.64	2.1%  to  10.6%		0.0	%
	2011		30,337		1,787	13.77 to   17.77	(1.9%) to   (1.1%)		0.0	%
	2010		30,911		1,786	13.97 to   17.98	26.4%  to  27.0%		0.0	%
	2009		22,692		1,654	11.03 to   14.17	10.3%  to  29.5%		0.0	%
	2008		19,412		1,824	8.99 to   10.95	(44.6%) to (44.3%)		0.0	%
PIMCO Real Return Portfolio—Advisor Class	2012	$	—		—	$            —	—		—
	2011		108,557		9,562	11.26 to   11.34	9.6%  to  10.1%		1.7	%
	2010		39,454		3,831	10.27 to   10.30	2.7%  to    3.0%		1.0	%

F-52

NYLIAC Variable Annuity Separate Account-III

		Net Assets (in 000’s)		Units Outstanding (in 000’s)		Variable Accumulation Unit Value (Lowest to Highest)	Total Return1 (Lowest to Highest)	Investment Income Ratio2
T. Rowe Price Equity Income Portfolio—II	2012	$	—		—	$            —	—		—
	2011		140,826		10,914	10.65 to   13.17	(2.8%) to   (2.3%)		1.5	%
	2010		156,463		11,778	10.93 to   13.51	12.6%  to  13.2%		1.7	%
	2009		143,916		12,230	9.67 to   11.94	8.8%  to  23.5%		1.7	%
	2008		124,894		13,095	7.84 to     9.67	(37.4%) to (37.2%)		2.2	%
UIF Emerging Markets Equity Portfolio—Class II	2012	$	—		—	$            —	—		—
	2011		107,162		4,481	10.76 to   27.57	(21.2%) to (19.3%)		0.4	%
	2010		147,783		4,782	13.34 to   34.49	16.8%  to  17.4%		0.6	%
	2009		125,199		4,535	11.36 to   29.40	13.6%  to  67.8%		0.0	%
	2008		67,103		3,998	11.18 to   17.53	(57.5%) to (57.3%)		0.0	%
Victory VIF Diversified Stock Fund—Class A Shares	2012	$	16,202		1,280	$  9.97 to $13.07	3.5%  to  14.7%		0.9	%
	2011		17,292		1,563	10.04 to   11.40	(8.5%) to   (8.1%)		0.7	%
	2010		21,442		1,776	10.94 to   12.40	10.3%  to  10.8%		0.7	%
	2009		20,763		1,902	9.89 to   11.20	2.4%  to  25.3%		0.8	%
	2008		17,200		1,967	7.91 to     8.94	(39.0%) to (38.7%)		0.8	%

Not all investment options are available under all policies.

Charges and fees levied by NYLIAC are disclosed in Note 3.

Expenses as a percent of average variable accumulation value are 1.35% to 1.85%, excluding expenses of the underlying Funds, surrender charges, policy service charges and charges for transferring funds between investment divisions.

¹  Total returns are not annualized for periods less than a year. These amounts represent the total return for the periods indicated, including changes in the value of the underlying Fund, and expenses assessed through the reduction of unit values. These ratios do not include any expenses assessed through the redemption of units. Investment options with a date notation indicate the effective date of that investment option in the variable account. The total returns are calculated for each period indicated or from the effective date through the end of the reporting period.

²  These amounts represent the dividends excluding distributions of capital gains, received by an Investment Division from the underlying Fund, net of management fees assessed by the Fund manager, divided by the average investment at net asset value. These ratios exclude those expenses, such as mortality and expense 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 Investment Division is affected by the timing of the declaration of dividends by the underlying Fund in which the Investment Division invests. Annualized percentages are shown for the Investment Income Ratio for all Investment Divisions in all periods.

F-53

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors of New York Life Insurance and Annuity Corporation

and the Variable Annuity Separate Account-III Policyowners:

In our opinion, the accompanying statement of assets and liabilities and the related statements of operations and of changes in net assets present fairly, in all material respects, the financial position of the investment divisions listed in Note 1 of the New York Life Insurance and Annuity Corporation Variable Annuity Separate Account - III as of December 31, 2012, and the results of each of their operations and the changes in each of their net assets for each of the two years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of New York Life Insurance and Annuity Corporation management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements 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. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of investments by correspondence with the underlying funds’ transfer agents at December 31, 2012, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

New York, New York

March 8, 2013

F-54

NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION

(a wholly owned subsidiary of New York Life Insurance Company)

CONSOLIDATED FINANCIAL STATEMENTS

(GAAP Basis)

December 31, 2012 and 2011

NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION

(a wholly owned subsidiary of New York Life Insurance Company)

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

	December 31,
	2012		2011
	(in millions)
ASSETS
Fixed maturities, at fair value
Available-for-sale (includes securities pledged as collateral that can be sold or repledged of $451 in 2012 and $452 in 2011)	$	72,188	$	69,692
Trading securities		126		147
Equity securities, at fair value
Available-for-sale		130		177
Trading securities		79		2
Mortgage loans, net of allowances		8,488		7,152
Policy loans		872		848
Securities purchased under agreements to resell		59		90
Investments in affiliates		2,522		1,637
Other investments		1,225		1,230
Total investments		85,689		80,975
Cash and cash equivalents		633		520
Deferred policy acquisition costs		2,027		2,313
Interest in annuity contracts		5,978		5,720
Amounts recoverable from reinsurer
Affiliated		7,675		7,345
Unaffiliated		300		278
Other assets		1,317		1,233
Separate account assets		21,638		18,955
Total assets	$	125,257	$	117,339
LIABILITIES AND STOCKHOLDER’S EQUITY
Liabilities
Policyholders’ account balances	$	63,733	$	63,049
Future policy benefits		11,579		9,352
Policy claims		270		282
Obligations under structured settlement agreements		5,978		5,720
Amounts payable to reinsurer
Affiliated		6,626		6,389
Unaffiliated		47		41
Other liabilities		3,291		2,986
Separate account liabilities		21,638		18,955
Total liabilities		113,162		106,774
Stockholder’s Equity
Capital stock — par value $10,000 (20,000 shares authorized, 2,500 issued and outstanding)		25		25
Additional paid in capital		3,928		3,928
Accumulated other comprehensive income		3,024		2,106
Retained earnings		5,118		4,506
Total stockholder’s equity		12,095		10,565
Total liabilities and stockholder’s equity	$	125,257	$	117,339

The accompanying notes are an integral part of the consolidated financial statements

2

NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION

(a wholly owned subsidiary of New York Life Insurance Company)

CONSOLIDATED STATEMENT OF OPERATIONS

	Year Ended December 31,
	2012			2011			2010
	(in millions)
Revenues
Premiums	$	2,816		$	2,427		$	1,892
Fees-universal life and annuity policies		885			838			731
Net investment income		3,611			3,597			3,567
Net investment gains (losses)
Total other-than-temporary impairments on fixed maturities		(63	)		(122	)		(172	)
Total other-than-temporary impairments on fixed maturities recognized in accumulated other comprehensive income		18			14			57
All other net investment gains		75			93			124
Total net investment gains (losses)		30			(15	)		9
Net revenue from reinsurance		85			82			218
Other income		68			55			47
Total revenues		7,495			6,984			6,464
Expenses
Interest credited to policyholders’ account balances		2,055			2,415			2,217
Increase in liabilities for future policy benefits		2,199			1,983			1,516
Policyholder benefits		973			867			674
Operating expenses		1,416			1,307			1,269
Total expenses		6,643			6,572			5,676
Income before income taxes		852			412			788
Income tax expense		240			88			183
Net income	$	612		$	324		$	605

The accompanying notes are an integral part of the consolidated financial statements

3

NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION

(a wholly owned subsidiary of New York Life Insurance Company)

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

	Year Ended December 31,
	2012			2011			2010
	(in millions)
Net income	$	612		$	324		$	605
Other comprehensive income, net of tax
Net unrealized investment gains
Net unrealized investment gains arising during the period		1,004			1,091			1,039
Less: reclassification adjustment for net unrealized investment gains included in net income		(86	)		(85	)		(65	)
Net unrealized investment gains, net		918			1,006			974
Total other comprehensive income, net of tax		918			1,006			974
Comprehensive income	$	1,530		$	1,330		$	1,579

The accompanying notes are an integral part of the consolidated financial statements

4

NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION

(a wholly owned subsidiary of New York Life Insurance Company)

CONSOLIDATED STATEMENT OF STOCKHOLDER’S EQUITY

Years Ended December 31, 2012, 2011 and 2010

(in millions)

					Accumulated Other Comprehensive Income (Loss)
	Capital Stock		Additional Paid In Capital		Net Unrealized Investment Gains		Net Unrealized Gains (Losses) on Other-Than Temporarily Impaired Fixed Maturity Investments			Retained Earnings			Total Stockholder’s Equity
Balance at December 31, 2009	$	25	$	3,628	$	183	$	(72	)	$	4,056		$	7,820
Cumulative effect of change in accounting principle, net tax		–		–		15		–			(479	)		(464	)
Balance at January 1, 2010, as adjusted	$	25	$	3,628	$	198	$	(72	)	$	3,577		$	7,356
Net income											605			605
Other comprehensive income, net of tax						960		14						974
Balance at December 31, 2010	$	25	$	3,628	$	1,158	$	(58	)	$	4,182		$	8,935
Net income											324			324
Other comprehensive income, net of tax						1,003		3						1,006
Capital Contribution				300										300
Balance at December 31, 2011	$	25	$	3,928	$	2,161	$	(55	)	$	4,506		$	10,565
Net income											612			612
Other comprehensive income, net of tax						872		46						918
Balance at December 31, 2012	$	25	$	3,928	$	3,033	$	(9	)	$	5,118		$	12,095

The accompanying notes are an integral part of the consolidated financial statements

5

NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION

(a wholly owned subsidiary of New York Life Insurance Company)

CONSOLIDATED STATEMENT OF CASH FLOWS

	Year Ended December 31,
	2012			2011			2010
	(in millions)
Cash Flows from Operating Activities:
Net income	$	612		$	324		$	605
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Depreciation and amortization		(8	)		11			(8	)
Net capitalization of deferred policy acquisition costs		127			10			(61	)
Universal life and annuity fees		(677	)		(623	)		(570	)
Interest credited to policyholders’ account balances		2,055			2,415			2,217
Capitalized interest and dividends reinvested		(192	)		(153	)		(92	)
Net investment (gains) losses		(30	)		15			(9	)
Equity in earnings of limited partnerships		23			6			(22	)
Deferred income taxes		61			(160	)		47
Net revenue from intercompany reinsurance		(1	)		(1	)		(1	)
Net change in unearned revenue liability		32			25			36
Changes in:
Other assets and other liabilities		25			200			(225	)
Reinsurance payables		(10	)		(1	)		(52	)
Policy claims		(12	)		51			(6	)
Future policy benefits		2,265			1,985			1,525
Net cash provided by operating activities		4,270			4,104			3,384
Cash Flows from Investing Activities:
Proceeds from:
Sale of available-for-sale fixed maturities		3,752			5,233			9,135
Maturity and repayment of available-for-sale fixed maturities		8,683			8,256			7,103
Sale of equity securities		128			120			40
Repayment of mortgage loans		816			657			996
Sale of other investments		1,969			3,083			3,615
Sale of trading securities		39			1			12
Maturity and repayment of trading securities		31			34			10
Cost of:
Available-for-sale fixed maturities acquired		(13,407	)		(16,062	)		(21,387	)
Equity securities acquired		(58	)		(282	)		(11	)
Mortgage loans acquired		(2,149	)		(2,010	)		(1,055	)
Acquisition of other investments		(3,005	)		(3,873	)		(3,854	)
Acquisition of trading securities		(112	)		(86	)		(73	)
Securities purchased under agreements to resell		31			56			26
Cash collateral (paid) received on derivatives		–			(10	)		–
Policy loans (net)		(32	)		(27	)		(18	)
Net cash used in investing activities		(3,314	)		(4,910	)		(5,461	)
Cash Flows from Financing Activities:
Policyholders’ account balances:
Deposits		4,763			6,187			7,756
Withdrawals		(4,370	)		(4,817	)		(4,467	)
Net transfers to the separate accounts		(1,145	)		(806	)		(567	)
Securities sold under agreements to repurchase (net)		(38	)		(68	)		(353	)
Net paydowns from debt		(2	)		(11	)		(52	)
Change in book and bank overdrafts		33			(12	)		17
Cash collateral (paid) received on derivatives		(82	)		(30	)		14
Capital contribution from parent		–			123			–
Net cash provided by financing activities		(841	)		566			2,348
Effect of exchange rate changes on cash and cash equivalents		(2	)		(1	)		3
Net increase (decrease) in cash and cash equivalents		113			(241	)		274
Cash and cash equivalents, beginning of year		520			761			487
Cash and cash equivalents, end of year	$	633		$	520		$	761

The accompanying notes are an integral part of the consolidated financial statements

6

NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION

(a wholly owned subsidiary of New York Life Insurance Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(GAAP BASIS)

DECEMBER 31, 2012, 2011 AND 2010

NOTE 1 — NATURE OF OPERATIONS

New York Life Insurance and Annuity Corporation (the “Company”), domiciled in the State of Delaware, is a direct, wholly owned subsidiary of New York Life Insurance Company (“New York Life”). The Company’s primary business operations are its Insurance and Investment Groups. The Company offers a wide variety of interest sensitive and variable life insurance and annuity products to a large cross section of the insurance market. The Company markets its products in all 50 of the United States, and the District of Columbia, primarily through New York Life’s agency force with certain products also marketed through independent brokers and brokerage general agents.

Basis of Presentation

The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and reflect the consolidation with majority owned and controlled subsidiaries, as well as a variable interest entity in which the Company is considered the primary beneficiary. All intercompany transactions have been eliminated in consolidation.

Certain amounts in prior years have been reclassified to conform to the current year presentation. These reclassifications had no effect on net income or equity as previously reported. Refer to Note 16 — Supplemental Cash Flow Information for further discussion.

The Delaware State Insurance Department (“the Department”) recognizes only statutory accounting practices for determining and reporting the financial condition and results of operations of an insurance company, and for determining its solvency under the Delaware State Insurance Law. Accounting practices used to prepare statutory financial statements for regulatory filings of life insurance companies differ in certain instances from GAAP (refer to Note 17 — Statutory Financial Information) for further discussion.

NOTE 2 — SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates

The preparation of consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

The most significant estimates include those used in determining deferred policy acquisition costs (“DAC”) and related amortization; valuation of investments including derivatives and recognition of other-than-temporary impairments (“OTTI”); future policy benefits including guarantees; provision for income taxes and valuation of deferred tax assets; and reserves for contingent liabilities, including reserves for losses in connection with unresolved legal matters.

Investments

Fixed maturity investments classified as available-for-sale or trading are reported at fair value. For a discussion on valuation methods for fixed maturities reported at fair value, refer to Note 15 — Fair Value Measurements. The amortized cost of fixed maturities is adjusted for amortization of premium and accretion of discounts. Interest income, as well as the related amortization of premium and accretion of discount, is included in net investment income in the accompanying Consolidated Statement of Operations. Unrealized gains and

7

NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION

(a wholly owned subsidiary of New York Life Insurance Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

losses on available-for-sale securities are reported in net unrealized investment gains in accumulated other comprehensive income (“AOCI”), net of deferred taxes and related adjustments, in the accompanying Consolidated Statement of Financial Position. Unrealized gains and losses from fixed maturity investments classified as trading are reflected in net investment gains (losses) in the accompanying Consolidated Statement of Operations.

Included within fixed maturity investments are mortgage-backed and asset-backed securities. Amortization of the premium or accretion of discount from the purchase of these securities considers the estimated timing and amount of cash flows of the underlying loans, including prepayment assumptions based on data obtained from external sources or internal estimates. For mortgage-backed and asset-backed securities, projected future cash flows are updated monthly, and the amortized cost and effective yield of the securities are adjusted as necessary to reflect historical prepayment experience and changes in estimated future prepayments. For high credit quality mortgage-backed and asset-backed securities (those rated AA or above at the date of acquisition) the adjustments to amortized cost are recorded as a charge or credit to net investment income in accordance with the retrospective method. For mortgage-backed and asset-backed securities that are not of high credit quality (those rated below AA at date of acquisition), certain floating rate securities and securities with the potential for a loss of a portion of the original investment due to contractual prepayments (i.e. interest only securities), the effective yield is adjusted prospectively for any changes in estimated cash flows.

The cost basis of fixed maturities are adjusted for impairments in value deemed to be other-than-temporary, and a realized loss is recognized in net investment gains (losses) in the accompanying Consolidated Statement of Operations. The new cost basis is not adjusted for subsequent increases in estimated fair value. In periods subsequent to the recognition of an OTTI, impaired fixed maturities are accounted for as if purchased on the measurement date of the impairment. Accordingly, the discount (or reduced premium) based on the new cost basis may be accreted into net investment income in future periods based on prospective changes in cash flow estimates, to reflect adjustments to the effective yield.

Factors considered in evaluating whether a decline in value is other-than-temporary include: (i) whether the decline is substantial; (ii) the duration of time that the fair value has been less than cost; and (iii) the financial condition and near-term prospects of the issuer. Mortgage-backed and asset-backed securities rated below AA at acquisition, when the fair value is below amortized cost and there are negative changes in estimated future cash flows are deemed other-than-temporary impaired securities.

With respect to fixed maturities in an unrealized loss position, an OTTI is recognized in earnings when it is anticipated that the amortized cost will not be recovered. The entire difference between the fixed maturity security’s cost and its fair value is recognized in earnings only when either the Company (i) has the intent to sell the fixed maturity security or (ii) more likely than not will be required to sell the fixed maturity security before its anticipated recovery. If these conditions do not exist, an OTTI is recognized in earnings (“credit loss”) for the difference between the amortized cost basis of the fixed maturity and the present value of projected future cash flows expected to be collected. The difference between the fair value and the present value of projected future cash flows expected to be collected represents the portion of OTTI related to other-than credit factors (“non-credit loss”) and is recognized in other comprehensive income (loss) (“OCI”). The net present value is calculated by discounting the Company’s best estimate of projected future cash flows at the effective interest rate implicit in the fixed maturity prior to impairment.

The determination of cash flow estimates in the net present value is subjective and methodologies will vary, depending on the type of security. The Company considers all information relevant to the collectability of the security, including past events, current conditions and reasonably supportable assumptions and forecasts in developing the estimate of cash flows expected to be collected. This information generally includes, but may not be limited to, the remaining payment terms of the security, estimated prepayment speeds, defaults and recoveries

8

NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION

(a wholly owned subsidiary of New York Life Insurance Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

upon liquidation of the underlying collateral securing the notes, the financial condition of the issuer(s), credit enhancements and other third-party guarantees. In addition, information such as industry analyst reports and forecasts, sector credit ratings, the financial condition of the bond insurer for insured fixed income securities and other market data relevant to the collectability may also be considered, as well as the expected timing of the receipt of insured payments, if any. The estimated fair value of the collateral may be used to estimate recovery value if the Company determines that the security is dependent on the liquidation of the collateral for recovery.

For the non-agency residential mortgage-backed security (“RMBS”) portfolio, the Company updates cash flow projections quarterly. The projections are determined for each security based upon the evaluation of prepayment, delinquency and default rates for the pool of mortgages collateralizing each security, and the projected impact on the course of future prepayments, defaults and losses in the pool of mortgages, but do not include market prices. As a result, forecasts may change from period to period and additional impairments may be recognized over time as a result of deterioration in the fundamentals of a particular security or group of securities and/or a continuation of heightened mortgage defaults for a period longer than the assumptions used in the previous forecasts. Both qualitative and quantitative factors are used in creating the Company’s non-agency RMBS cash flow models. As such, any estimate of impairments is subject to the inherent limitation on the Company’s ability to predict the aggregate course of future events. It should, therefore, be expected that actual losses may vary from any estimate and the Company may recognize additional OTTI.

Equity securities are carried at fair value. For a discussion on valuation methods for equity securities refer to Note 15 — Fair Value Measurements. Unrealized gains and losses on equity securities classified as available-for-sale are reflected in net unrealized investment gains or losses in AOCI, net of deferred taxes and related adjustments, in the accompanying Consolidated Statement of Financial Position. Unrealized gains and losses from investments in equity securities classified as trading are reflected in net investment gains (losses) in the accompanying Consolidated Statement of Operations.

Factors considered in evaluating whether a decline in value of an available-for-sale equity security is other than temporary include: i) whether the decline is substantial; ii) the duration that the fair value has been less than cost; and iii) the financial condition and near-term prospects of the issuer. For equity securities, the Company also considers in its OTTI analysis its intent and ability to hold a particular equity security for a period of time sufficient to allow for the recovery of its value to an amount equal to or greater than cost. When it is determined that a decline in value is other-than-temporary, the cost basis of the equity security is reduced to its fair value, with the associated realized loss reported in net investment gains (losses) in the accompanying Consolidated Statement of Operations. The new cost basis is not adjusted for subsequent increases in estimated fair value.

Mortgage loans on real estate are carried at unpaid principal balances, net of discounts/premiums and valuation allowances, and are secured. Specific valuation allowances are established for the excess carrying value of the mortgage loan over the estimated fair value of the collateral, when it is probable that based on current information and events, the Company will be unable to collect all amounts due under the contractual terms of the loan agreement. Fair value of the collateral is updated triennially unless a more current appraisal is warranted. The Company also has a general valuation allowance for probable incurred but not specifically identified losses. The general valuation allowance is determined by applying a factor against the commercial and residential mortgage loan portfolios, excluding loans for which a specific allowance has already been recorded, to estimate potential losses in each portfolio. The general allowance factor for the commercial mortgage loan portfolio is based on the Company’s historical loss experience as well as industry data regarding commercial loan delinquency rates. The Company analyzes industry data regarding specific credit risk based on geographic locations and property types as well as probability of default, timing of default and loss severity for each loan in a given portfolio. The general allowance factor for the residential mortgage loan portfolio takes into account loan-to-value ratios (“LTV”) of the portfolio, as well as expected defaults and loss severity of loans deemed to be delinquent.

9

NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION

(a wholly owned subsidiary of New York Life Insurance Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

For commercial and residential mortgage loans, the Company accrues interest income on loans to the extent it is deemed collectible. The Company places loans on non-accrual status and ceases to recognize interest income when management determines that collection of interest and repayment of principal is not probable. Any accrued but uncollected interest is reversed out of interest income once a loan is put on non-accrual status. Interest payments received on loans where interest payments have been deemed uncollectible are recognized on a cash basis and recorded as interest income.

Commercial mortgage and other loans are occasionally restructured in a troubled debt restructuring (“TDR”). The Company assesses loan modifications on a case-by-case basis to evaluate whether a TDR has occurred. A specific valuation allowance is established for mortgage loans restructured in a TDR for the excess carrying value of the mortgage loan over the estimated fair value of the collateral.

Policy loans are stated at the aggregate balance due. A valuation allowance is established for policy loan balances, including capitalized interest that exceeds the related policy’s cash surrender value.

Investment in Affiliates consists of the Company’s investment in the New York Life Short Term Fund (“STIF”) and a revolving loan agreement with Madison Capital Funding LLC (“MCF”). For further discussion refer to Note 4 — Investments.

Other investments consist primarily of direct investments in limited partnerships and limited liability companies, derivatives (see discussion on Derivative Financial Instruments below), short-term investments, real estate and senior secured commercial loans. Investments in limited partnerships and limited liability companies are accounted for using the equity method of accounting. 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 carried at fair value. Investments in real estate, which the Company has the intent to hold for the production of income, are carried at depreciated cost, net of write-downs for other-than-temporary declines in fair value. Properties held-for-sale are carried at the lower of depreciated cost or fair value, less estimated selling costs and are not further depreciated once classified as such.

In many cases, limited partnerships and limited liability companies that the Company invests in qualify as investment companies and apply specialized accounting practices. The Company retains this specialized accounting practice in consolidation and for the equity method, which for limited partnerships results in unrealized gains and losses from underlying investments being recorded in net investment income in the accompanying Consolidated Statement of Operations. For consolidated limited partnerships, the underlying investments, which may consist of various classes of assets, are aggregated and stated at fair value in other investments in the accompanying Consolidated Statement of Financial Position.

Senior secured commercial loans that management has the intent and ability to hold until maturity or payoff are reported at their outstanding unpaid principal balances reduced by any charge-off or loss reserve and net of any deferred fees on originated loans, or unamortized premiums or discounts on purchased loans. The Company assesses its loans on a monthly basis for collectability in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay and prevailing economic conditions. Specific loans are considered for impairment when it is probable that the Company will be unable to collect the scheduled payments of principal and interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status and the financial condition of the borrower. Impaired loan measurement may be based on the present value of expected future cash flows discounted at the loan’s effective interest rate, at the loan’s observable market price or the fair value of the collateral if the loan is collateral dependent. A loss reserve is established for the calculated impairment. A general valuation allowance for probable incurred but not specifically identified losses is determined for the remainder of the portfolio. These loans are assigned internal risk ratings and the Company

10

NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION

(a wholly owned subsidiary of New York Life Insurance Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

utilizes a specific reserve percentage for each category of risk rating. The loss reserve rate is multiplied by outstanding loans in each related risk category to determine the general reserve on these loans.

Net investment gains or losses on sales are generally computed using the specific identification method.

Cash equivalents include investments that have remaining maturities of three months or less at date of purchase and are carried at fair value.

Derivative Financial Instruments

Derivatives are recorded at fair value either as assets, within “Other investments” or as liabilities, within “Other liabilities,” except for embedded derivatives which are recorded with the associated host contract. The classification of changes in the fair value of derivatives depends on the characteristics of the transaction, including whether it has been designated and qualifies for hedge accounting. Changes in fair value, for derivatives that do not qualify or are not designated for hedge accounting, are included in net investment gains (losses) in the accompanying Consolidated Statement of Operations.

To qualify for hedge accounting, the hedge relationship is designated and formally documented at inception by detailing the particular risk management objective and strategy for the hedge. This includes the item and risk that is being hedged, the derivative that is being used, as well as how effectiveness is being assessed and ineffectiveness is measured. A derivative must be highly effective in accomplishing the objective of offsetting either changes in fair value or cash flows for the risk being hedged. The hedging relationship is considered highly effective if the changes in fair value or discounted cash flows of the hedging instrument is within 80% to 125% of the inverse changes in the fair value or discounted cash flows of the hedged item. The Company formally assesses effectiveness of its hedging relationships both at the hedge inception and on a quarterly basis over the life of the hedge relationship in accordance with its risk management policy.

The Company discontinues hedge accounting prospectively if: (i) it is determined that the derivative is no longer effective in offsetting changes in the fair value or cash flows of a hedged item; (ii) the derivative expired or is sold, terminated or exercised; (iii) it is probable that the forecasted transaction will not occur, or (iv) management determines that designation of the derivative as a hedge instrument is no longer appropriate. The Company continually assesses the credit standing of the derivative counterparty and, if the counterparty is deemed to be no longer creditworthy, the hedge will no longer be effective. As a result, the Company will prospectively discontinue hedge accounting.

The Company receives collateral on derivatives with positive fair values, which is included in other liabilities in the accompanying Consolidated Statement of Financial Position, to mitigate its risk of loss from counterparty default. The Company also posts collateral for derivatives that are in a net liability position, which is included in other assets in the accompanying Consolidated Statement of Financial Position (refer to Note 14 — Derivative Financial Instruments and Risk Management).

Cash Flow Hedges

The Company designates and accounts for the following as cash flow hedges, when they have met the requirements of the authoritative guidance related to derivatives and hedging: (i) interest rate swaps to convert floating rate investments to fixed rate investments; and (ii) foreign currency swaps to hedge the foreign currency cash flow exposure of foreign currency denominated investments.

To the extent the derivative is highly effective in offsetting the variability of hedged cash flows; changes in fair value are recorded in OCI until earnings are affected by the variability of cash flows being hedged (e.g., when periodic settlements on a variable-rate asset or liability are recorded in earnings). At that time, the related

11

NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION

(a wholly owned subsidiary of New York Life Insurance Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

portion of deferred gains or losses on the derivative instrument are reclassified and reported in the Consolidated Statement of Operations line item associated with the hedged item’s cash flows, either net investment gains (losses) or net investment income. Any amount of ineffectiveness of the derivative is immediately included in net investment gains (losses) in the accompanying Consolidated Statement of Operations.

Embedded Derivatives

The Company may enter into contracts that are not themselves derivative instruments but contain embedded derivatives. For each contract, the Company assesses whether the economic characteristics of the embedded derivative are clearly and closely related to those of the host contract and determines whether a separate instrument with the same terms as the embedded instrument would meet the definition of a derivative instrument. When it is determined that the embedded derivative possesses economic characteristics that 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 separated from the host contract and accounted for as a stand-alone derivative. Such embedded derivatives are recorded on the Statement of Financial Position at fair value and changes in their fair value are recorded currently in earnings. In certain instances, the Company may elect to carry the entire contract on the Statement of Financial Position at fair value.

For further information on the Company’s derivative instruments and related hedged items and their effect on the Company’s financial position, financial performance and cash flows refer to Note 12 — Derivative Financial Instruments and Risk Management.

Variable Interest Entities (“VIEs”)

In the normal course of its investment activities, the Company enters into relationships with various special purpose entities (“SPEs”) and other entities that are deemed to be VIEs. A VIE is an entity that either (i) has equity investors that lack certain essential characteristics of a controlling financial interest (including the ability to control activities of the entity, the obligation to absorb the entity’s expected losses and the right to receive the entity’s expected residual returns) or (ii) lacks sufficient equity to finance its own activities without financial support provided by other entities, which in turn would be expected to absorb at least some of the expected losses of the VIE. If the Company determines that it is the VIE’s primary beneficiary, it is required to consolidate the VIE.

The Company is the primary beneficiary of a VIE if the Company has (i) the power to direct the activities of the VIE that most significantly impact the economic performance of the entity and (ii) the obligation to absorb losses of or the right to receive benefits from the entity that could be potentially significant to the VIE. If both conditions are present, the Company is required to consolidate the VIE.

This authoritative guidance is deferred indefinitely for certain entities that have the attributes of investment companies, with the exception of securitizations, asset-backed financings, collateralized structures and former qualifying SPEs. In addition, entities are not eligible for the deferral if any obligation to fund losses or guarantee performance exists. In accordance with the deferral provisions, the Company is the primary beneficiary and is required to consolidate the VIE if it stands to absorb a majority of the VIE’s expected losses or to receive a majority of the VIE’s expected residual returns, or both.

Loaned Securities and Repurchase Agreements

The Company enters into securities lending agreements whereby certain securities are loaned to third parties for the purpose of enhancing income on certain securities held. Securities loaned are treated as financing arrangements, and are recorded at the amount of cash advanced or received. With respect to securities loaned, the Company requires initial collateral, usually in the form of cash, equal to 102% of the fair value of domestic

12

NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION

(a wholly owned subsidiary of New York Life Insurance Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

securities loaned. If foreign securities are loaned and the denomination of the collateral is other than the denomination of the currency of the loaned securities, then the initial required collateral is 105% of the face value. The Company monitors the fair value of securities loaned with additional collateral obtained as necessary.

The Company enters into agreements to sell and repurchase securities for the purpose of enhancing income on the securities portfolio. Under agreements to sell and repurchase securities, the Company obtains the use of funds from a broker for generally one month. Assets to be repurchased are the same, or substantially the same, as the assets transferred. Securities sold under agreements to repurchase are treated as financing arrangements. Cash collateral received is invested in short-term investments with an offsetting collateral liability included in “other liabilities” in the accompanying Consolidated Statement of Financial Position. The Company receives initial collateral equal to at least 95% of the fair value of the securities to be repurchased. The fair value of the securities to be repurchased is monitored and additional collateral is obtained, where appropriate, to protect against credit exposure.

The Company enters into agreements to purchase and resell securities for the purpose of enhancing income on the securities portfolio. Securities purchased under agreements to resell are treated as investing activities and are carried at fair value including accrued interest. It is the Company’s policy to generally take possession or control of the securities purchased under these agreements. However, for tri-party repurchase agreements, the Company’s designated custodian takes possession of the underlying collateral securities. Securities purchased under agreements to resell are reflected separately in the accompanying Consolidated Statement of Financial Position. The Company receives securities as collateral, having a fair value at least equal to 102% of the purchase price paid by the Company for the securities. The fair value of the securities to be resold is monitored and additional collateral is obtained, where appropriate, to protect against credit exposure.

The fair value of the securities to be repurchased or resold is monitored and additional collateral is obtained, where appropriate, to protect against credit exposure.

Deferred Policy Acquisition Costs

The costs of acquiring new and maintaining renewal business and certain costs of issuing policies that are directly related to successful contract acquisition have been deferred and recorded as an asset in the accompanying Consolidated Statement of Financial Position. These costs consist primarily of commissions, certain expenses of underwriting and issuing contracts and certain agency expenses associated with successfully negotiated contracts. Refer to Note 3 Adoption of New Accounting Pronouncements for discussion of the new authoritative guidance adopted effective January 1, 2012, regarding which acquisition costs qualify for deferral.

For universal life and deferred annuity contracts, such costs are amortized in proportion to estimated gross profits over the estimated effective life of those contracts. Changes in assumptions for all policies and contracts are reflected as retroactive adjustments in the current year’s amortization. For these contracts the carrying amount of DAC is adjusted at each balance sheet date as if the unrealized investment gains or losses had been realized and included in the gross margins or gross profits used to determine current period amortization. The increase or decrease in DAC, due to unrealized investment gains or losses, is recorded in OCI.

For single premium immediate annuities with life contingencies, all acquisition costs are charged to expense immediately because generally all premiums are received at the inception of the contract.

The Company assesses internal replacements to determine whether such modifications significantly change the contract terms. When the modification substantially changes the contract, DAC is written-off immediately through income and only new deferrable expenses associated with the replacements are deferred. DAC written-off at the date of lapse cannot be restored when a policy subsequently reinstates. If the contract modifications do not substantially change the contract, DAC amortization on the original policy will continue and any acquisition costs associated with the related modification are expensed.

13

NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION

(a wholly owned subsidiary of New York Life Insurance Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Sales Inducements

For some deferred annuity products, the Company offers policyholders a bonus equal to a specified percentage of the policyholder’s initial deposit and additional credits to the policyholder’s account value related to minimum accumulation benefits, which are considered sales inducements in certain instances. The Company also offers enhanced crediting rates on certain dollar cost averaging programs related to its deferred annuity products. The Company defers these aforementioned sales inducements and amortizes them over the life of the policy using the same methodology and assumptions used to amortize DAC. Deferred sales inducements are reported in other assets in the accompanying Consolidated Statement of Financial Position.

Intangible Assets

The Company holds an intangible asset with a finite life which is amortized over its useful life. Intangible assets with finite useful lives are tested for impairment when facts and circumstances indicate that the carrying amount may not be recoverable, and an impairment loss is recognized when the carrying amount of an asset exceeds the estimated undiscounted cash flows attributable to the asset. The amount of the impairment loss to be recorded is calculated by the excess of the asset’s carrying value over its fair value.

Fair value is generally determined using a discounted cash flow analysis with assumptions that a market participant would use.

All intangible assets are reported in other assets in the accompanying Consolidated Statement of Financial Position.

Policyholders’ Account Balances

The Company’s liability for policyholders’ account balances represents the contract value that has accrued to the benefit of the policyholder as of the balance sheet date. This liability is generally equal to the accumulated account deposits, plus interest credited, less policyholder withdrawals and other charges assessed against the account balance. This liability also includes amounts that have been assessed to compensate the insurer for services to be performed over future periods, and the fair value of embedded derivatives in the above contracts (refer to Note 6 —  Policyholders’ Liabilities).

Future Policy Benefits

The Company’s liability for future policy benefits is primarily comprised of the present value of estimated future payments to or on behalf of policyholders, where the timing and amount of payment depends on policyholder mortality, less the present value of future net premiums. For non-participating traditional life insurance and annuity products, expected mortality and lapse or surrender are generally based on the Company’s historical experience or standard industry tables including a provision for the risk of adverse deviation. Interest rate assumptions are based on factors such as market conditions and expected investment returns. These assumptions are established at the time the policy is issued and are intended to estimate the experience for the period the policy benefits are payable. If experience is less favorable than assumed and future losses are projected under loss recognition testing, then additional liabilities may be required, resulting in a charge to increase in liabilities for future policy benefits in the accompanying Consolidated Statement of Operations. The Company does not establish loss reserves until a loss has occurred.

The Company’s liability for future policy benefits also includes liabilities for guarantee benefits related to certain non-traditional long-duration life and annuity contracts, which are discussed in Note 6 — Policyholders’ Liabilities.

14

NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION

(a wholly owned subsidiary of New York Life Insurance Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Policy Claims

The Company’s liability for policy claims includes a liability for unpaid claims and claim adjustment expenses. Unpaid claims and claim adjustment liability include estimates of claims that the Company believes have been incurred but have not yet been reported as of the balance sheet date.

Debt

Debt is generally carried at unpaid principal balance and is included in other liabilities in the accompanying Consolidated Statement of Financial Position. Refer to Note 15 – Fair Value Measurements for discussion on the fair value of debt.

Separate Account Assets and Liabilities

The Company has separate accounts, some of which are registered with the Securities and Exchange Commission (“SEC”) and others that are not registered with the SEC. The Company reports separately, as separate account assets and separate account 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 separate accounts have varying investment objectives, are segregated from the Company’s general account and are maintained for the benefit of separate account policyholders. Investment risks associated with market value changes are borne by the customers, except to the extent of minimum guarantees made by the Company with respect to certain accounts. All separate account assets are stated at fair value. The separate account liabilities represent the policyholders’ interest in the account, and include accumulated net investment income and realized and unrealized gains and losses on the assets.

Contingencies

Amounts related to contingencies are accrued if it is probable that a liability has been incurred and an amount is reasonably estimable. Regarding litigation, management evaluates whether there are incremental legal or other costs directly associated with the ultimate resolution of the matter that are reasonably estimable and, if so, includes these costs in the accrual.

Other Assets and Other Liabilities

Other assets primarily consist of investment income due and accrued, receivables from affiliates and sales inducements. Other liabilities consist primarily of net deferred tax liabilities, collateral received on securities loaned, employee and agent benefits, and payables to affiliates.

Recognition of Insurance Income and Related Expenses

Premiums from annuity policies with life contingencies and from whole and term life policies are recognized as income when due. The associated benefits and expenses are matched with income so as to result in the recognition of profits over the life of the contracts. This match is accomplished by providing for liabilities for future policy benefits (as discussed in Note 6 — Policyholders’ Liabilities) and the deferral and subsequent amortization of policy acquisition costs.

Amounts received under deferred annuity and universal life type contracts are reported as deposits to policyholders’ account balances (as discussed in Note 6 — Policyholders’ Liabilities). Revenues from these contracts consist of amounts assessed during the period for mortality and expense risk, policy administration and

15

NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION

(a wholly owned subsidiary of New York Life Insurance Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

surrender charges, and are included as fee income in the accompanying Consolidated Statement of Operations. In addition to fees, the Company earns investment income from the investment of policyholders’ deposits in the Company’s general account portfolio. Amounts previously assessed to compensate the Company for services to be performed over future periods are deferred and recognized into income over the period benefited, using the same assumptions and factors used to amortize DAC. Policy benefits and claims that are charged to expense include benefit claims incurred in the period in excess of related policyholders’ account balances.

Premiums for contracts with a single premium or a limited number of premium payments due over a significantly shorter period than the total period over which benefits are provided are recorded as income when due. Any excess profit is deferred and recognized as income in a constant relationship to insurance in-force and, for annuities, in relation to the amount of expected future benefit payments.

Premiums, universal life fee income, benefits and expenses are stated net of reinsurance ceded. Estimated reinsurance ceding allowances are recognized over the life of the reinsured policies using assumptions consistent with those used to account for the underlying policies.

Net revenue from reinsurance primarily represents the experience rated refund, amortization of the deferred gain and the reserve adjustment associated with the reinsurance business ceded to New York Life, as discussed in Note 10 — Reinsurance. This net revenue adjustment excludes ceded universal life fees and ceded policyholder benefits, which are included on these respective lines in the accompanying Consolidated Statement of Operations.

Federal Income Taxes

Current federal income taxes are charged or credited to operations based upon amounts estimated to be payable or recoverable as a result of taxable operations for the current year and any adjustments to such estimates from prior years. Deferred federal income tax assets and liabilities are recognized for expected future tax consequences of temporary differences between GAAP and taxable income. Temporary differences are identified and measured using a balance sheet approach whereby GAAP and tax balance sheets are compared to each other. Deferred income taxes are generally recognized based on enacted tax rates and a valuation allowance is recorded if it is more likely than not that any portion of the deferred tax asset will not be realized.

The authoritative guidance on income taxes requires an evaluation of the recoverability of deferred tax assets and establishment of a valuation allowance, if necessary, to reduce the deferred tax asset to an amount that is more likely than not to be realized. Considerable judgment is required in determining whether a valuation allowance is necessary, and if so, the amount of such valuation allowance. In evaluating the need for a valuation allowance many factors are considered, including: (i) the nature of deferred tax assets and liabilities; (ii) whether they are ordinary or capital; (iii) in which tax jurisdictions they were generated and the timing of their reversal; (iv) taxable income in prior carry-back years as well as projected taxable earnings exclusive of reversing temporary differences and carryforwards; (v) the length of time that carryovers can be utilized in the various tax jurisdictions; (vi) any unique tax rules that would impact the utilization of the deferred tax assets; and (vii) any tax planning strategies that the Company would employ to avoid a tax benefit from expiring unused.

The Company is a member of a group that files a consolidated federal income tax return with New York Life. The consolidated income tax liability is allocated among the members of the group in accordance with a tax allocation agreement. The tax allocation agreement provides that the Company is allocated its share of the consolidated tax provision or benefit, determined generally on a separate company basis, but may, where applicable, recognize the tax benefits of net operating losses or capital losses utilizable in the consolidated group. Intercompany tax balances are generally settled quarterly on an estimated basis with a final settlement within thirty days of the filing of the consolidated return.

16

NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION

(a wholly owned subsidiary of New York Life Insurance Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

In accordance with the authoritative guidance related to income taxes, 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. The amount of tax benefit recognized for an uncertain tax position is the largest amount of benefit that is greater than fifty percent likely of being realized upon settlement. Unrecognized tax benefits are included within other liabilities in the accompanying Consolidated Statement of Financial Position and are charged to earnings in the period that such determination is made. The Company classifies interest and penalties related to tax uncertainties as income tax expense in the accompanying Consolidated Statement of Operations.

Fair Value Measurements

For fair values of various assets and liabilities refer to Note 15 — Fair Value Measurements.

Business Risks and Uncertainties

In periods of extreme volatility and disruptions in the securities and credit markets and under certain interest rate scenarios, the Company could be subject to disintermediation risk and/or reduction in net interest spread or profit margins.

The Company’s investment portfolio consists principally of fixed income securities as well as mortgage loans, policy loans, limited partnerships, limited liability companies, preferred and common stocks and equity real estate. The fair value of the Company’s investments varies depending on economic and market conditions and the interest rate environment. Furthermore, with respect to investments in mortgage loans, mortgage-backed securities and other securities subject to prepayment and/or call risk, significant changes in prevailing interest rates and/or geographic conditions may adversely affect the timing and amount of cash flows on these investments, as well as their related values. In addition, the amortization of market premium and accretion of market discount for mortgage-backed securities is based on historical experience and estimates of future payment experience on the underlying mortgage loans. Actual prepayment timing will differ from original estimates and may result in material adjustments to asset values and amortization or accretion recorded in future periods.

Certain of these investments lack liquidity, such as privately placed fixed income securities, equity real estate and other limited partnership interests. The Company also holds certain investments in asset classes that are liquid but may experience significant market fluctuations, such as mortgage-backed and other asset-backed securities. If the Company were to require significant amounts of cash on short notice in excess of cash on hand and its portfolio of liquid investments, the Company could have difficulty selling these investments in a timely manner, be forced to sell them for less than they otherwise would have been able to realize, or both.

In periods of high or increasing interest rates, life insurance policy loans and surrenders and withdrawals may increase as policyholders seek investments with higher perceived returns. This could result in cash outflows requiring the Company to sell invested assets at a time when the prices of those assets are adversely affected by the increase in market interest rates, which could cause the Company to suffer realized investment losses. In addition, when interest rates rise, the Company may face competitive pressure to increase crediting rates on certain insurance and annuity contracts, and such changes may occur more quickly than corresponding changes to the rates earned on the Company’s general account investments.

During periods of low or declining interest rates, the Company is contractually obligated to credit a fixed minimum rate of interest on certain of its life insurance and annuity policies. Should yields on new investments decline to levels below these guaranteed minimum rates for a long enough period, the Company may be required to credit interest to policyholders at a higher rate than the rate of return the Company earns on its portfolio of investments supporting those products, thus generating losses.

17

NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION

(a wholly owned subsidiary of New York Life Insurance Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Although management of the Company employs a number of asset/liability management strategies to minimize the effects of interest rate volatility, no guarantee can be given that it will be successful in managing the effects of such volatility.

The Company establishes and carries reserves to pay future policyholder benefits and claims. The process of calculating reserve amounts for an insurance organization involves the use of a number of estimates and assumptions including those related to mortality (the relative incidence of death in a given time or place), morbidity (the incidence rate of a disease or medical condition) and interest rates (the rates expected to be paid or received on financial instruments, including insurance or investment contracts). Since the Company cannot precisely determine the amount or timing of actual future benefits and claims, actual results could differ significantly from those assumed. Deviations from one or more of these estimates and assumptions could have a material adverse effect on the Company’s results of operations or financial condition.

The Company sets prices for many of its insurance and annuity products based upon expected claims and payment patterns, using assumptions for mortality, morbidity, persistency (how long a contract stays in force) and interest rates. In addition to the potential effect of natural or man-made disasters, significant increases in mortality could emerge gradually over time, due to changes in the natural environment, the health habits of the insured population, effectiveness of treatment for disease or disability, or other factors. In addition, the Company could fail to accurately provide for changes in other pricing assumptions, including changes in interest and inflation rates. Significant negative deviations in actual experience from the Company’s pricing assumptions could have a material adverse effect on the profitability of its products. The Company’s earnings are significantly influenced by the claims paid under its insurance contracts and will vary from period to period depending upon the amount of claims incurred. There is only limited predictability of claims experience within any given month or year. The Company’s future experience may not match its pricing assumptions or its past results. As a result, its results of operations and financial condition could be materially adversely affected.

Issuers or borrowers whose securities or loans the Company holds, customers, trading counterparties, counterparties under swaps and other derivative contracts, reinsurers, clearing agents, exchanges, clearing houses and other financial intermediaries and guarantors may default on their obligations to us due to bankruptcy, insolvency, lack of liquidity, adverse economic conditions, operational failure, fraud or other reasons. In addition, the underlying collateral supporting the Company’s structured securities, including mortgage-backed securities, may deteriorate or default causing these structured securities to incur losses.

Weak equity market performance may adversely affect sales of variable products, cause potential purchasers of the Company’s products to refrain from new or additional investments, and may cause current customers to surrender or redeem their current products and investments.

Revenues of the Company’s variable products are, to a large extent, based on fees related to the value of assets under management (except for its Elite Annuity product, where future revenue is based on adjusted premium payments). Consequently, poor equity market performance reduces fee revenues. The level of assets under management could also be negatively affected by withdrawals or redemptions.

The Company issues certain variable products with various types of guaranteed minimum benefit features. The Company establishes reserves for the expected payments resulting from these features. The Company bears the risk that payments may be higher than expected as a result of significant, sustained downturns in the stock market. The Company also bears the risk that additional reserves may be required if partial surrender activity increases significantly for some annuity products during the period when account values are less than guaranteed amounts.

The Risk-Based Capital (“RBC”) ratio is the primary measure by which regulators evaluate the capital adequacy of the Company. RBC is determined by statutory rules that consider risks related to the type and quality of invested assets, insurance-related risks associated with the Company’s products, interest rate risk and general

18

NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION

(a wholly owned subsidiary of New York Life Insurance Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

business risks. Disruptions in the capital markets could increase equity and credit losses and reduce the Company’s statutory surplus and RBC ratio. To the extent the Company’s statutory capital resources are deemed to be insufficient to maintain a particular rating by one or more rating agencies, the Company may seek to improve its capital position, including through operational changes and potentially seeking capital from New York Life.

The Company faces significant competition.

The Company faces strong competition in its Insurance and Investment Group businesses. The Company’s ability to compete is based on a number of factors, including product features, investment performance, service, price, distribution capabilities, scale, commission structure, name recognition and financial strength ratings.

New York Life’s career agency force is the primary means by which it distributes life insurance products. In order to continue increasing life insurance sales, the Company must retain and attract additional productive career agents.

Rating agencies assign the Company financial strength/claims paying ability ratings, based on their evaluations of the Company’s ability to meet its financial obligations. These ratings indicate a rating agency’s view of an insurance company’s ability to meet its obligations to its insured. In certain of the Company’s markets, ratings are important competitive factors of insurance companies. Rating organizations continue to review the financial performance and condition of insurers, including the Company. A significant downgrade in the Company’s ratings could materially and adversely affect its competitive position in the life insurance market and increase its cost of funds. In addition, downgrades of the sovereign credit rating of the United States of America would likely result in a corresponding downgrade of the financial strength rating of the Company by certain rating agencies, which could have an adverse effect on the Company’s results of operations.

Regulatory developments in the markets in which the Company operates could affect the Company’s business.

Although the federal government does not directly regulate the business of insurance, federal legislation and administrative policies in several areas, including pension regulation, financial services regulation, derivatives and federal taxation, can significantly and adversely affect the insurance industry and the Company. There are a number of current or potential regulatory measures that may affect the insurance industry. The Company is unable to predict whether any changes will be made, whether any administrative or legislative proposals will be adopted in the future, or the effect, if any, such proposals would have on the Company.

The attractiveness to the Company’s customers of many of its products is due, in part, to favorable tax treatment. Current federal income tax laws generally permit the tax-deferred accumulation of earnings on the premiums paid by the holders of annuities and life insurance products. Taxes, if any, are payable generally on income attributable to a distribution under the contract for the year in which the distribution is made. Death benefits under life insurance contracts are received free of federal income tax. Changes to the favorable tax treatment may reduce the attractiveness of the Company’s products to its customers.

NOTE 3 — RECENT ACCOUNTING PRONOUNCEMENTS

Adoption of New Accounting Pronouncements

In June 2011, the FASB issued updated guidance regarding the presentation of comprehensive income. The updated guidance eliminates the option to present components of OCI as part of the consolidated statement of equity. Under the updated guidance, an entity has the option to present the total of comprehensive income, the components of net income, and the components of OCI either in a single continuous statement of comprehensive

19

NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION

(a wholly owned subsidiary of New York Life Insurance Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

income or in two separate but consecutive statements. The updated guidance does not change the items that are reported in OCI or when an item of OCI must be reclassified to net income. The Company opted to present net income and other comprehensive income in two separate consecutive statements. The Company adopted this guidance effective January 1, 2012. This guidance impacted the financial statement presentation but did not have an impact on the Company’s consolidated financial position or results of operations.

In December 2011, the FASB deferred the effective date for amendments to the presentation of reclassifications of items out of AOCI. The deferral is effective January 1, 2012 and as a result the Company will not be required to comply with the new reclassification presentation requirements.

In May 2011, the FASB issued updated guidance on the fair value measurements and related disclosure requirements. The updated guidance clarifies existing guidance related to the application of fair value measurement methods and requires expanded disclosures. The expanded disclosures required by this guidance are included in Note 15 — Fair Value Measurements. This new guidance is effective for the first interim or annual reporting period beginning after December 15, 2011 and should be applied prospectively. The Company adopted this guidance effective January 1, 2012. The adoption of this guidance did not have a material effect on the Company’s consolidated financial position, results of operations or financial statement disclosures.

In April 2011, the FASB issued updated guidance clarifying which restructurings constitute TDRs. This guidance is intended to assist creditors in their evaluation of whether conditions exist that constitute a TDR. This new guidance is effective for the first interim or annual reporting period beginning on or after June 15, 2011 and should be applied retrospectively to the beginning of the annual reporting period of adoption. The Company’s retroactive adoption of this guidance effective January 1, 2011 did not have a material effect on the Company’s consolidated financial position or results of operations.

In April 2011, the FASB issued updated guidance regarding the assessment of effective control for repurchase agreements. This new guidance is effective for the first annual reporting period beginning on or after December 15, 2011 and should be applied prospectively to transactions or modifications of existing transactions that occur on or after the effective date. The Company adopted this guidance effective January 1, 2012. The adoption of this guidance did not have a material effect on the Company’s consolidated financial position, results of operations, or financial statement disclosures.

In October 2010, the FASB issued guidance to address diversity in practice regarding the interpretation of which costs relating to the acquisition of new or renewal insurance contracts qualify for deferral. Under the new guidance acquisition costs are to include only those costs that are directly related to the acquisition or renewal of insurance contracts by applying a model similar to the accounting for loan origination costs. An entity may defer incremental direct costs of contract acquisition that are incurred in transactions with independent third-parties or employees as well as the portion of employee compensation costs related to underwriting, policy issuance and processing, medical inspection and contract selling for successfully negotiated contracts. Additionally, an entity may capitalize as a DAC asset only those advertising costs meeting the capitalization criteria for direct-response advertising. While the adoption of this amended guidance changes the timing of when certain costs are reflected in the Company’s results of operations, it has no effect on the total acquisition costs to be recognized over time and has no impact on the Company’s cash flows. Effective January 1, 2012, the Company adopted this guidance retrospectively.

20

NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION

(a wholly owned subsidiary of New York Life Insurance Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following tables present amounts as previously reported in 2011, the effect on those amounts of the change due to the retrospective adoption of the amended DAC guidance as described above. The adjusted amounts that are reflected in the accompanying Consolidated Financial Statements, are included herein.

Consolidated Statement of Financial Position:
	2011
	As Previously Reported		Effect of Change			As Currently Reported
Deferred policy acquisition costs	$	2,873	$	(560	)	$	2,313
Total Assets		117,899		(560	)		117,339
Other liabilities		3,182		(196	)		2,986
Total liabilities		106,970		(196	)		106,774
Accumulated other comprehensive income		1,904		202			2,106
Retained earnings		5,072		(566	)		4,506
Total equity		10,929		(364	)		10,565
Total Liabilities and Equity	$	117,899	$	(560	)	$	117,339

Consolidated Statement of Comprehensive income:
	2011
	As Previously Reported		Effect of Change			As Currently Reported
Total Revenues	$	6,984	$	–		$	6,984
Increase in liabilities for future policy benefits		1,953		30			1,983
Operating expenses		1,274		33			1,307
Total Expenses		6,509		63			6,572
Income before income taxes		475		(63	)		412
Income tax expense		110		(22	)		88
Net income	$	365	$	(41	)	$	324

	2010
	As Previously Reported		Effect of Change			As Currently Reported
Total Revenues	$	6,464	$	–		$	6,464
Increase in liabilities for future policy benefits		1,467		49			1,516
Operating expenses		1,247		22			1,269
Total Expenses		5,605		71			5,676
Income before income taxes		859		(71	)		788
Income tax expense		208		(25	)		183
Net income	$	651	$	(46	)	$	605

21

NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION

(a wholly owned subsidiary of New York Life Insurance Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Consolidated Statement of Cash Flows:
	2011
	As Previously Reported			Effect of Change			As Currently Reported
Cash Flows from Operating Activities:
Net income	$	365		$	(41	)	$	324
Changes in:
Deferred policy acquisition costs		(23	)		33			10
Deferred income taxes		(138	)		(22	)		(160	)
Future policy benefits		1,955			30			1,985
Net cash provided by operating activities*	$	4,104		$	–		$	4,104

	2010
	As Previously Reported			Effect of Change			As Currently Reported
Cash Flows from Operating Activities:
Net income	$	651		$	(46	)	$	605
Changes in:
Deferred policy acquisition costs		(83	)		22			(61	)
Deferred income taxes		72			(25	)		47
Future policy benefits		1,476			49			1,525
Net cash provided by operating activities*	$	3,384		$	–		$	3,384

* Restated for prior year reclassifications.

In July 2010, the FASB issued updated guidance that requires enhanced disclosures related to the allowance for credit losses and the credit quality of a company’s financing receivable portfolio. The disclosures were effective for interim and annual reporting periods ending on or after December 15, 2011 for private companies. The Company elected to early adopt this guidance and provided the disclosures required by this guidance in Note 4 — Investments. The disclosures regarding activity that occurs during a reporting period are effective for interim and annual reporting periods beginning after December 15, 2010. In January 2011, the FASB deferred the disclosures required by this guidance related to TDRs. The deferred disclosures, which were retrospectively adopted effective January 1, 2011, did not have a material effect on the Company’s financial statement disclosures.

In April 2010, the FASB issued guidance clarifying that an insurance entity should not consider any separate account interests in an investment held for the benefit of policyholders to be the insurer’s interests, and should not combine those interests with its general account interest in the same investment when assessing the investment for consolidation, unless the separate account interests are held for a related party policyholder, whereby consolidation of such interests must be considered under applicable variable interest guidance. This guidance is effective for interim and annual reporting periods beginning after December 15, 2010 and retrospectively for all prior periods upon the date of adoption, with early adoption permitted. The Company’s adoption of this guidance, effective January 1, 2011, did not have a material effect on the Company’s consolidated financial position, results of operations, or financial statement disclosures.

In March 2010, the FASB issued updated guidance that amends and clarifies the accounting for credit derivatives embedded in interests in securitized financial assets. This new guidance eliminates the scope exception for embedded credit derivatives (except for those that are created solely by subordination) and provides new guidance on how the evaluation of embedded credit derivatives is to be performed. This new guidance is effective for the first interim reporting period beginning after June 15, 2010. The Company’s adoption of this guidance effective January 1, 2010 did not have a material effect on the Company’s consolidated financial position, results of operations, or financial statement disclosures.

22

NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION

(a wholly owned subsidiary of New York Life Insurance Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

In January 2010, the FASB issued updated guidance that requires new fair value disclosures about significant transfers between Level 1 and 2 measurement categories and separate presentation of purchases, sales, issuances, and settlements within the rollforward of Level 3 activity. Also, this updated fair value guidance clarifies the disclosure requirements about the level of disaggregation of asset classes and valuation techniques and inputs. This guidance is effective for interim and annual reporting periods beginning after December 15, 2009, except for the disclosures about purchases, sales, issuances and settlements in the rollforward of Level 3 activity, which are effective for interim and annual reporting periods beginning after December 15, 2010. The required disclosures are provided in Note 15 — Fair Value Measurements.

In June 2009, the FASB issued authoritative guidance which changes the analysis required to determine whether or not an entity is a VIE. In addition, the guidance changes the determination of the primary beneficiary of a VIE from a quantitative to a qualitative model. Under the new qualitative model, the primary beneficiary must have both the power to direct the activities that significantly impact the entities economic performance and the obligation to absorb either losses or gains that could be significant to the VIE. This guidance also changes when reassessment is needed, as well as requires enhanced disclosures, including the effects of a company’s involvement with a VIE on its financial statements. This guidance was effective for interim and annual reporting periods beginning after November 15, 2009.

In February 2010, the FASB issued updated guidance relative to VIEs which defers, except for disclosure requirements, the impact of this guidance for entities that (i) possess the attributes of an investment company, (ii) do not require the reporting entity to fund losses, and (iii) are not financing vehicles or entities that were formerly classified as qualified special purpose entities (“QSPE”). The Company’s adoption of this guidance effective January 1, 2010 did not result in any transition adjustment.

Future Adoption of New Accounting Pronouncements

In February 2013, the FASB issued updated guidance to improve the reporting of reclassifications out of accumulated other comprehensive income. The amendments require an entity to present either on the face of the financial statements or as a separate disclosure in the notes, the effect of significant reclassifications out of accumulated other comprehensive income if the amount being reclassified is required under U.S. GAAP to be reclassified in its entirety to net income. For other amounts that are not required under U.S. GAAP to be reclassified in their entirety to net income in the same reporting period, an entity is required to cross-reference other disclosures required under U.S. GAAP that provide additional detail about those amounts. The guidance is effective for annual reporting periods beginning on or after January 1, 2013. The Company’s adoption of this guidance is expected to have an impact on the financial statement presentation but not on the Company’s consolidated financial position or results of operations.

In January 2013, the FASB issued amendments to clarify that the scope of Disclosures about Offsetting Assets and Liabilities applies to derivatives accounted for in accordance with guidance on Derivatives and Hedging, including bifurcated embedded derivatives, repurchase agreements and reverse repurchase agreements, and securities borrowing and securities lending transactions that are either offset or subject to an enforceable master netting arrangement or similar agreement. The guidance is effective for annual reporting periods beginning on or after January 1, 2013. The Company’s adoption of this guidance is expected to have an impact on the financial statement disclosures but not on the Company’s consolidated financial position or results of operations.

In December 2011, the FASB enhanced the disclosure requirements about financial instruments and derivative instruments that are either offset in accordance with existing guidance for right of setoff or subject to an enforceable master netting arrangement or similar agreement, irrespective of whether they are offset in the financial statements. The guidance is effective for annual reporting periods beginning on or after January 1, 2013. An entity should provide the disclosures required by those amendments retrospectively for all comparative periods presented. The Company’s adoption of this guidance is expected to have an impact on the Company’s

23

NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION

(a wholly owned subsidiary of New York Life Insurance Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

financial statement disclosures, but no impact on the Company’s consolidated financial position or results of operations.

NOTE 4 — INVESTMENTS

Fixed Maturities

The amortized cost and estimated fair value of fixed maturities as of December 31, 2012 and 2011, by contractual maturity, is presented below (in millions). Expected maturities may differ from contractual maturities because borrowers may have the right to call or repay obligations with or without call or prepayment penalties.

	2012				2011
Available-for-sale	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due in one year or less	$	3,086	$	3,142	$	2,524	$	2,564
Due after one year through five years		14,159		15,273		15,009		15,880
Due after five years through ten years		14,916		16,550		14,019		15,218
Due after ten years		7,462		8,711		6,032		7,057
Mortgage-backed and asset-backed securities:
U.S. agency mortgage-backed and asset-backed securities		15,373		16,933		15,625		17,173
Non-agency mortgage-backed securities		7,130		7,521		7,647		7,630
Non-agency asset-backed securities		3,970		4,058		4,136		4,167
Redeemable preferred securities		–		–		3		3
Total available-for-sale	$	66,096	$	72,188	$	64,995	$	69,692

At December 31, 2012 and 2011, the distribution of gross unrealized gains and losses on investments in fixed maturities were as follows (in millions):

	2012
Available-for-sale	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value		OTTI in AOCI1
U.S. Treasury		$857		$89		$1		$945		$ –
U.S. government corporations and agencies		1,558		221		1		1,778		–
U.S. agency mortgage-backed and asset-backed securities		15,373		1,577		17		16,933		–
Foreign governments		737		89		1		825		–
U.S. corporate		26,865		2,859		40		29,684		*
Foreign corporate		9,606		846		8		10,444		–
Non-agency residential mortgage-backed securities		2,580		82		91		2,571		(47	)
Non-agency commercial mortgage-backed securities		4,550		407		7		4,950		–
Non-agency asset-backed securities2		3,970		113		25		4,058		(6	)
Total available-for-sale		$66,096		$6,283		$191		$72,188		$(53	)

24

NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION

(a wholly owned subsidiary of New York Life Insurance Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

	2011
Available-for-sale	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value		OTTI in AOCI1
U.S. Treasury	$	1,715	$	120	$	*	$	1,835	$	–
U.S. government corporations and agencies		1,212		160		*		1,372		–
U.S. agency mortgage-backed and asset-backed securities		15,625		1,549		1		17,173		–
Foreign governments		818		92		3		907		–
U.S. corporate		25,547		2,338		76		27,809		–
Foreign corporate		8,292		559		55		8,796		–
Non-agency residential mortgage-backed securities		2,963		31		330		2,664		(140	)
Non-agency commercial mortgage-backed securities		4,684		309		27		4,966		–
Non-agency asset-backed securities2		4,136		73		42		4,167		(8	)
Redeemable preferred securities		3		–		–		3		–
Total available-for-sale	$	64,995	$	5,231	$	534	$	69,692	$	(148	)

* Amounts less than $1 million

¹  Represents the amount of OTTI losses in AOCI, which were not included in earnings pursuant to authoritative guidance. Amount excludes $22 million and $9 million for the years ended December 31, 2012 and 2011, respectively, of net unrealized gains on impaired securities relating to changes in the value of such securities subsequent to the impairment measurement date.

²  Includes auto loans, credit cards, education loans and other asset types.

At December 31, 2012 and 2011, the Company had outstanding contractual obligations to acquire additional private placement securities amounting to $372 million and $209 million, respectively.

The Company accrues interest income on fixed maturities to the extent it is deemed collectible and the security continues to perform under its original contractual terms. In the event collectability of interest is uncertain, accrual of interest income will cease and income will be recorded when and if received.

Investments in fixed maturities that have been non-income producing for the last twelve months totaled less than $1 million at December 31, 2012 and 2011. These investments have been deemed other-than-temporarily impaired.

Equity Securities

At December 31, 2012 and 2011, the distribution of gross unrealized gains and losses on available-for-sale equity securities were as follows (in millions):

	Cost		Unrealized Gains		Unrealized Losses		Fair Value
2012	$	111	$	21	$	2	$	130
2011	$	171	$	16	$	10	$	177

There were no investments in non-redeemable preferred stock that have been non-income producing for the last twelve months at December 31, 2012 and 2011, respectively.

Mortgage Loans

The Company’s mortgage loan investments are diversified by property type, location and borrower and are collateralized by the related property.

25

NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION

(a wholly owned subsidiary of New York Life Insurance Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

At December 31, 2012 and 2011, contractual commitments to extend credit under mortgage loan agreements amounted to $292 million and $164 million, respectively, at fixed and floating interest rates ranging from 2.74% to 6.11% in 2012, and from 3.75% to 6.14% in 2011. These commitments are diversified by property type and geographic region.

At December 31, 2012 and 2011, the distribution of the mortgage loan portfolio by property type and geographic region was as follows (in millions):

	2012					2011
	Carrying Value		% of Total			Carrying Value		% of Total
Property Type:
Office buildings	$	2,810		33.1	%	$	2,398		33.5	%
Retail facilities		2,278		26.8			1,509		21.1
Apartment buildings		1,808		21.3			1,687		23.6
Industrial		1,310		15.5			1,144		16.0
Residential		241		2.8			372		5.3
Other		41		0.5			42		0.6
Total	$	8,488		100.0	%	$	7,152		100.0	%
Geographic Region:
South Atlantic	$	2,552		30.1	%	$	2,022		28.3	%
Central		1,926		22.7			1,662		23.2
Pacific		1,905		22.4			1,567		21.9
Middle Atlantic		1,745		20.6			1,570		22.0
New England		292		3.4			331		4.6
Other		68		0.8			–		–
Total	$	8,488		100.0	%	$	7,152		100.0	%

The Company monitors the aging of its mortgage loans receivable on a monthly basis to determine delinquencies. An analysis of the aging of the principal balances, excluding the allowance for credit losses that are past due is presented below. The table includes a breakdown of the mortgage loans that are ninety days past due and either are (1) still accruing interest or (2) on non-accrual status (in millions):

	2012
	30-59 Days		60-89 Days		90 Days and Over		Total Past Due		Current		Total Mortgage Loans		Recorded Mortgage Loans > 90 Days Accruing		Non-accrual Mortgage Loans > 90 Days
Property Type:
Office buildings	$	–	$	–	$	–	$	–	$	2,820	$	2,820	$	–	$	–
Retail facilities		–		–		–		–		2,286		2,286		–		–
Apartment buildings		–		–		–		–		1,814		1,814		–		–
Industrial		–		–		–		–		1,315		1,315		–		–
Residential		–		–		7		7		240		247		–		7
Other		–		–		–		–		41		41		–		–
Total	$	–	$	–	$	7	$	7	$	8,516	$	8,523	$	–	$	7

26

NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION

(a wholly owned subsidiary of New York Life Insurance Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

	2011
	30-59 Days		60-89 Days		90 Days and Over		Total Past Due		Current		Total Mortgage Loans		Recorded Mortgage Loans > 90 Days Accruing		Non-accrual Mortgage Loans > 90 Days
Property Type:
Office buildings	$	–	$	–	$	–	$	–	$	2,410	$	2,410	$	–	$	–
Retail facilities		–		–		–		–		1,516		1,516		–		–
Apartment buildings		–		–		–		–		1,696		1,696		–		–
Industrial		–		–		–		–		1,152		1,152		–		–
Residential		–		–		9		9		370		379		–		9
Other		–		–		–		–		43		43		–		–
Total	$	–	$	–	$	9	$	9	$	7,187	$	7,196	$	–	$	9

As discussed in Note 2 — Significant Accounting Policies, the Company establishes a specific reserve when it is probable that the Company will be unable to collect all amounts due under the contractual terms of the loan agreements, and a general reserve for probable incurred but not specifically identified losses. The activity in the mortgage loan specific and general reserves for the years ended December 31, 2012 and 2011 are summarized below (in millions):

	2012
Allowance for credit losses:	Residential			Commercial			Total
Beginning balance	$	7		$	37		$	44
Provision for credit losses		–			–			–
Direct write-downs		–			(6	)		(6	)
Recoveries		(1	)		(2	)		(3	)
Ending balance	$	6		$	29		$	35
Ending balance:
Individually evaluated for impairment (specific)	$	3		$	–		$	3
Collectively evaluated for impairment (general)	$	3		$	29		$	32
Mortgage Loans:
Ending balance (recorded investment, net of allowance for credit losses):
Individually evaluated for impairment (specific)	$	5		$	3		$	8
Collectively evaluated for impairment (general)	$	236		$	8,244		$	8,480

27

NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION

(a wholly owned subsidiary of New York Life Insurance Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

	2011
Allowance for credit losses:	Residential			Commercial			Total
Beginning balance	$	8		$	38		$	46
Provision for credit losses		–			1			1
Direct write-downs		(1	)		(1	)		(2	)
Recoveries		–			(1	)		(1	)
Ending balance	$	7		$	37		$	44
Ending Balance:
Individually evaluated for impairment (specific)	$	3		$	6		$	9
Collectively evaluated for impairment (general)	$	4		$	31		$	35
Mortgage Loans:
Ending balance (recorded investment, net of allowance for credit losses):
Individually evaluated for impairment (specific)	$	6		$	27		$	33
Collectively evaluated for impairment (general)	$	366		$	6,753		$	7,119

For the year ended December 31, 2010, the provision for credit losses was $7 million and direct write-downs were $15 million.

The Company closely monitors mortgage loans with the potential for impairment by considering a number of factors. For commercial mortgage loans, these factors include, but are not limited to, LTV, asset performance such as debt service coverage ratio, lease rollovers, income/expense hurdles, major tenant or borrower issues, the economic climate and catastrophic events. For residential mortgage loans, loans that are sixty or more days delinquent are monitored for potential impairment.

As mentioned above, the Company uses LTV as one of the key mortgage loan indicators to assess credit quality and to assist in identifying problem loans. As of December 31, 2012 and 2011, LTVs on the Company’s mortgage loans, net of allowance for credit losses, are as follows (in millions):

	2012
	Office Buildings		Retail Facilities		Apartment Buildings		Industrial		Residential		Other		Total
above 95%	$	–	$	–	$	11	$	3	$	1	$	–	$	15
91% to 95%		–		–		12		32		1		–		45
81% to 90%		101		67		47		239		6		–		460
71% to 80%		279		234		375		205		24		19		1,136
below 70%		2,430		1,977		1,363		831		209		22		6,832
Total	$	2,810	$	2,278	$	1,808	$	1,310	$	241	$	41	$	8,488

	2011
	Office Buildings		Retail Facilities		Apartment Buildings		Industrial		Residential		Other		Total
above 95%	$	4	$	–	$	18	$	12	$	2	$	–	$	36
91% to 95%		–		–		24		49		2		–		75
81% to 90%		198		71		61		239		7		21		597
71% to 80%		314		262		415		201		30		–		1,222
below 70%		1,882		1,176		1,169		643		331		21		5,222
Total	$	2,398	$	1,509	$	1,687	$	1,144	$	372	$	42	$	7,152

28

NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION

(a wholly owned subsidiary of New York Life Insurance Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Additional information on impaired mortgage loans is provided below (in millions):

	2012
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With related allowance:
Office buildings	$	–	$	–	$	–	$	–	$	–
Apartment buildings		–		–		–		–		–
Residential		5		8		3		5		*
Industrial		3		3		–		7		*
Total	$	8	$	11	$	3	$	12	$	*
Commercial	$	3	$	3	$	*	$	7	$	*
Residential	$	5	$	8	$	3	$	5	$	*

	2011
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With related allowance:
Office buildings	$	4	$	5	$	1	$	5	$	*
Apartment buildings		11		12		1		13		1
Residential		6		9		3		6		*
Industrial		12		16		4		13		1
Total	$	33	$	42	$	9	$	37	$	2
Commercial	$	27	$	33	$	6	$	31	$	2
Residential	$	6	$	9	$	3	$	6	$	*

* Amounts less than $1 million

At December 31, 2012 and 2011, the Company did not have any impaired loans without a related allowance.

The Company did not have any loan modifications in 2012 and 2011.

Investments in mortgage loans that have been non-income producing for the last twelve months totaled $4 million at December 31, 2012 and 2011.

Investments in Affiliates

	2012		2011
STIF	$	938	$	712
MCF Revolving Loan Agreement		1,584		925
Total investments in affiliates	$	2,522	$	1,637

The STIF was formed by New York Life to improve short-term returns through greater flexibility to choose attractive maturities and enhanced portfolio diversification. The STIF is a pooled fund managed by New York Life Investment Management LLC (“NYL Investments”), an indirect wholly owned subsidiary of New York Life, where all participants are subsidiaries of New York Life.

29

NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION

(a wholly owned subsidiary of New York Life Insurance Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The MCF Revolving Loan Agreement represents a revolving loan agreement the Company entered into with MCF. Refer to Note 14 — Related Party Transactions for further discussion.

Other Investments

The components of other investments as of December 31, 2012 and 2011 were as follows (in millions):

	2012		2011
Limited partnerships/Limited liability companies	$	648	$	563
Senior secured commercial loans		215		318
Derivatives		153		182
Real Estate		56		15
Short-term investments		30		91
Other invested assets		123		61
Total other investments	$	1,225	$	1,230

Senior secured commercial loans are typically collateralized by all assets of the borrower. The Company’s senior secured commercial loans, before loss reserve, amounted to $219 million and $331 million at December 31, 2012 and 2011, respectively. The Company establishes a loss reserve for specifically impaired loans and assigns internal risk ratings for the remainder of the portfolio on which it assesses a general loss reserve. The loss reserve was $4 million and $13 million for the years ended December 31, 2012 and 2011, respectively. Refer to Note 2 — Significant Accounting Policies for further details.

Unfunded commitments on limited partnerships, limited liability companies and senior secured commercial loans amounted to $170 million and $185 million at December 31, 2012 and 2011, respectively.

There was no accumulated depreciation on real estate for the years ended December 31, 2012 or 2011. There was no depreciation expense for the year ended December 31, 2012 or 2011. Depreciation expense was less than $1 million for the year ended December 31, 2010, and was recorded as a component of net investment income in the accompanying Consolidated Statement of Operations.

Investments in Real Estate that have been non-income producing for the last twelve months totaled $5 million and $4 million at December 31, 2012 and 2011, respectively.

VIEs

Consolidated VIE

At December 31, 2012 and 2011, the Company included assets of $44 million and $45 million, respectively, in the accompanying Consolidated Statement of Financial Position, as a result of consolidating a VIE for which it was determined to be the primary beneficiary. The Company performed a qualitative analysis to determine if the Company has (i) the power to direct the activities of the VIE that most significantly impact the economic performance of the entity and (ii) the obligation to absorb losses of or the right to receive benefits from the entity that could be potentially significant to the VIE. In reviewing the transaction documents including trust agreements, limited partnership agreements and purchase agreements, the Company determined that they are the primary beneficiary of one structured investment.

This VIE consists of a trust established for purchasing receivables from the U.S. Department of Energy related to Energy Savings Performance Contracts and issuing certificates representing the right to those receivables. The following table reflects the carrying amount and balance sheet classification of the assets and liabilities of the consolidated VIE as of December 31, 2012 and 2011 (in millions).

30

NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION

(a wholly owned subsidiary of New York Life Insurance Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The Company has a 98.66% interest in this VIE; however, the creditors do not have recourse to the Company in excess of the assets contained within the VIE.

	2012		2011
Cash	$	4	$	4
Other investments*		40		41
Total assets	$	44	$	45
Other liabilities		5		5
Total liabilities	$	5	$	5

* Included in Limited partnerships/Limited liability companies

Unconsolidated VIEs

In the normal course of its activities, the Company will invest in structured investments including VIEs for which it is not the primary beneficiary. These structured investments typically invest in fixed income investments and are managed by third-parties and include asset-backed securities, commercial mortgage-backed securities and residential mortgage-backed securities. The Company’s maximum exposure to loss on these structured investments, both VIEs and non-VIEs, is limited to the amount of its investment. The Company has not provided financial or other support, other than its direct investment, to these structures. The Company has determined that it is not the primary beneficiary of these structures due to the fact that it does not have the power to direct the activities that significantly impact the VIEs economic performance. The Company classifies these investments on its accompanying Consolidated Statement of Financial Position as fixed maturities — available-for-sale and fixed maturities — trading. The maximum exposure to loss associated with these investments was $28,638 million and $29,117 million as of December 31, 2012 and 2011, respectively.

In the normal course of its activities, the Company will invest in joint ventures, limited partnerships and limited liability companies. These investments include hedge funds, private equity funds and real estate related funds and may or may not be VIEs. The Company’s maximum exposure to loss on these investments, both VIEs and non-VIEs, is limited to the amount of its investment. The Company has determined that it is not the primary beneficiary of these structures due to the fact that it does not have the power to direct the activities that significantly impact the entities economic performance. The Company classifies these investments on its accompanying Consolidated Statement of Financial Position as “other investments” and its maximum exposure to loss associated with these entities was $648 million and $563 million as of December 31, 2012 and 2011, respectively.

These investments are subject to ongoing review for impairment and for events that may cause management to reconsider whether or not it is the primary beneficiary. The Company has no additional economic interest in these structures in the form of derivatives, related guarantees, credit enhancement or similar instruments and obligations. Creditors have no recourse against the Company in the event of default. The Company has unfunded commitments in joint ventures, limited partnerships and limited liability companies which are previously disclosed in Note 4 — Investments.

Restricted Assets and Special Deposits

Assets of $4 million at December 31, 2012 and 2011 were on deposit with governmental authorities or trustees as required by certain state insurance laws and are included in available-for-sale fixed maturities in the accompanying Consolidated Statement of Financial Position.

31

NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION

(a wholly owned subsidiary of New York Life Insurance Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Refer to Note 13 — Commitments and Contingencies for additional discussions on assets pledged as collateral.

NOTE 5 — INVESTMENT INCOME AND INVESTMENT GAINS AND LOSSES

The components of net investment income for the years ended December 31, 2012, 2011 and 2010 were as follows (in millions):

	2012			2011			2010
Fixed maturities	$	3,141		$	3,184		$	3,171
Equity securities		8			8			1
Mortgage loans		422			368			352
Policy loans		59			59			56
Other investments		75			65			65
Gross investment income		3,705			3,684			3,645
Investment expenses		(94	)		(87	)		(78	)
Net investment income	$	3,611		$	3,597		$	3,567

For the years ended December 31, 2012, 2011 and 2010, net investment gains (losses) were as follows (in millions):

	2012			2011			2010
Fixed maturities
Total OTTI losses	$	(63	)	$	(122	)	$	(172	)
Portion of OTTI losses recognized in OCI		18			14			57
Net OTTI losses on fixed maturities recognized in earnings		(45	)		(108	)		(115	)
All other gains		181			249			221
Fixed maturities, net		136			141			106
Equity securities		10			(6	)		5
Mortgage loans		1			(2	)		(13	)
Derivative instruments		(110	)		(143	)		(109	)
Other		(7	)		(5	)		20
Net investment gains/(losses)	$	30		$	(15	)	$	9

The net gains or (losses) on trading securities (both fixed maturities and equity securities) amounted to $12 million, $(2) million and $5 million for the years ended December 31, 2012, 2011, and 2010, respectively.

Realized gains on sales of available-for-sale fixed maturities were $192 million for the year ended December 31, 2012 and $270 million for each of the years ended December 31, 2011 and 2010. Realized losses for the years ended December 31, 2012, 2011, and 2010 were $16 million, $19 million and $53 million, respectively. Realized gains on sales of available-for-sale equity securities were $19 million, $7 million and $5 million for the years ended December 31, 2012, 2011 and 2010, respectively, and realized losses were $12 million, $11 million and less than $1 million, respectively.

Losses from OTTI on equity securities (included in net investment gains (losses) on equity securities above) were $3 million, $2 million and less than $1 million for the years ended December 31, 2012, 2011 and 2010, respectively.

32

NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION

(a wholly owned subsidiary of New York Life Insurance Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following tables present the Company’s gross unrealized losses and fair values for available-for-sale fixed maturities and equity securities, aggregated by investment category and length of time the individual securities have been in a continuous unrealized loss position, at December 31, 2012 and 2011 (in millions):

	2012
	Less than 12 Months				Greater than 12 Months				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Available-for-sale fixed maturities
U.S. Treasury	$	105	$	1	$	–	$	–	$	105	$	1
U.S. government corporations and agencies		146		1		–		–		146		1
U.S. agency mortgage-backed and asset-backed securities		879		17		14		*		893		17
Foreign governments		15		*		5		1		20		1
U.S. corporate		930		21		191		19		1,121		40
Foreign corporate		46		5		157		3		203		8
Non-agency residential mortgage-backed securities		64		2		941		89		1,005		91
Non-agency commercial mortgage-backed securities		97		1		72		6		169		7
Non-agency asset-backed securities		404		3		213		22		617		25
Total available-for-sale fixed maturities		2,686		51		1,593		140		4,279		191
Available-for-sale equity securities
Common stock		30		2		1		*		31		2
Preferred stock		*		*		–		–		*		*
Total available-for-sale equity securities		30		2		1		–		31		2
Total	$	2,716	$	53	$	1,594	$	140	$	4,310	$	193

* Unrealized losses are less than $1 million.

33

NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION

(a wholly owned subsidiary of New York Life Insurance Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

	2011
	Less than 12 Months				Greater than 12 Months				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Available-for-sale fixed maturities
U.S. Treasury	$	1	$	*	$	–	$	–	$	1	$	*
U.S. government corporations and agencies		23		*		5		*		28		*
U.S. agency mortgage-backed and asset-backed securities		111		–		1		1		112		1
Foreign governments		19		2		3		1		22		3
U.S. corporate		1,824		51		236		25		2,060		76
Foreign corporate		816		39		145		16		961		55
Non-agency residential mortgage-backed securities		534		17		1,434		313		1,968		330
Non-agency commercial mortgage-backed securities		217		11		85		16		302		27
Non-agency asset-backed securities		1,333		11		200		31		1,533		42
Total available-for-sale fixed maturities		4,878		131		2,109		403		6,987		534
Available-for-sale equity securities
Common stock		86		10		–		–		86		10
Total available-for-sale equity securities		86		10		–		–		86		10
Total	$	4,964	$	141	$	2,109	$	403	$	7,073	$	544

* Unrealized losses are less than $1 million.

At December 31, 2012, the unrealized loss amount consisted of approximately 881 different fixed maturities and 24 equity securities.

At December 31, 2012, unrealized losses on investment grade fixed maturities were $68 million or 36% of the Company’s total fixed maturities’ unrealized losses. Investment grade is defined as a security having a credit rating from the National Association of Insurance Commissioners (‘‘NAIC’’) of 1 or 2; a rating of Aaa, Aa, A or Baa from Moody’s or a rating of AAA, AA, A or BBB from Standard & Poor’s (‘‘S&P’’); or a comparable internal rating if an externally provided rating is not available. Unrealized losses on fixed maturities with a rating below investment grade represent $123 million or 64% of the Company’s total fixed maturities’ unrealized losses at December 31, 2012.

The amount of gross unrealized losses for fixed maturities where the fair value had declined by 20% or more of amortized cost totaled $62 million. The amount of time that each of these securities has continuously been 20% or more below the amortized cost consist of $7 million for 6 months or less, less than $1 million for greater than 6 months through 12 months and $55 million for greater than 12 months. In accordance with the Company’s impairment policy, the Company performed quantitative and qualitative analysis to determine if the decline was temporary. For those securities where the decline was considered temporary, the Company did not take an impairment when it did not have the intent to sell the security or it was more likely than not that it would not be required to sell the security before its anticipated recovery.

Corporate Bonds.    U.S. corporate securities with a fair value below 80% of the security’s amortized cost totaled $12 million or 30% of the total unrealized losses on U.S. corporate securities. Foreign corporate securities with a fair value below 80% of the security’s amortized cost totaled $5 million or 66% of the total unrealized loss on foreign corporate securities. While the losses were spread across all industry sectors, the largest sectors with

34

NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION

(a wholly owned subsidiary of New York Life Insurance Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

unrealized losses on securities with a fair value below 80% of the security’s amortized cost include Banks ($7 million) and Finance ($6 million). These securities are evaluated in accordance with the Company’s impairment policy. Because the securities continue to meet their contractual payments and the Company did not have the intent to sell the security nor was it more likely than not that it would be required to sell the security before its anticipated recovery, the Company did not consider these investments to be other than temporarily impaired.

Non-Agency Mortgage-Backed Securities.    Residential mortgage-backed securities that were priced below 80% of the security’s amortized cost represented $27 million or 30% of total unrealized losses on residential mortgage-backed securities. Commercial mortgage-backed securities that were priced below 80% of the security’s amortized cost represented $4 million or 51% of total unrealized losses on commercial mortgage-backed securities. The Company measures its mortgage-backed portfolio for impairments based on the security’s credit rating and whether the security has an unrealized loss. The Company also evaluates mortgage-backed securities for other-than-temporary impairments in accordance with its impairment policy using cash flow modeling techniques coupled with an evaluation of facts and circumstances. The Company did not have the intent to sell its investments nor was it more likely than not that it would be required to sell the investments before its anticipated recovery in value; therefore, the Company did not consider these investments to be other-than-temporarily impaired.

Non-Agency Asset-Backed Securities.    Similar to mortgage-backed securities, the Company measures its asset-backed portfolio for impairments based on the security’s credit rating and whether the security has an unrealized loss. The Company also evaluates asset-backed securities for other-than-temporary impairments based on facts and circumstances and in accordance with the Company’s impairment policy. Asset-backed securities that were priced below 80% of the securities amortized cost represented $14 million or 56% of the total unrealized losses for asset-backed securities. The Company did not have the intent to sell its investments nor was it more likely than not that it would be required to sell the investments before recovery in value; therefore, the Company did not consider these investments to be other-than-temporarily impaired.

Net Unrealized Investment Gains (Losses)

Net unrealized investment gains (losses) on available-for-sale investments are included in the Consolidated Statement of Financial Position as a component of AOCI. Changes in these amounts include reclassification adjustments for prior period net unrealized gains (losses) that have been recognized as realized gains (losses) during the current year and are included in net investment gains (losses) in the accompanying Consolidated Statement of Operations.

The components of net unrealized investment gains (losses) reported in AOCI at December 31, 2012, 2011 and 2010 are as follows (in millions):

	2012			2011			2010
Fixed maturites, available-for-sale-all other	$	6,123		$	4,836		$	2,525
Fixed maturities on which an OTTI loss has been recognized		(31	)		(139	)		(151	)
Total fixed maturities		6,092			4,697			2,374
Equity securities, available-for-sale		19			6			10
Derivatives designated as cash flow hedges		(7	)		(3	)		(12	)
Other investments		3			3			1
Subtotal		6,107			4,703			2,373
Amounts recognized for:
Deferred policy acquisition costs		(1,383	)		(1,224	)		(723	)
Other assets (sales inducements)		(32	)		(28	)		(17	)
Policyholders’ account balances and future policy benefits		(41	)		(212	)		59
Deferred taxes		(1,627	)		(1,133	)		(592	)
Net unrealized gains on investments	$	3,024		$	2,106		$	1,100

35

NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION

(a wholly owned subsidiary of New York Life Insurance Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The net unrealized gains (losses) for the years ended December 31, 2012, 2011 and 2010, are presented separately for amounts related to fixed maturities on which an OTTI loss has been recognized, and all other net unrealized investment gains and losses, are as follows (in millions):

Net unrealized investment gains and losses on fixed maturities on which an OTTI loss has been recognized

	Net Unrealized Gains (Losses) on Investments			Deferred Policy Acquisition Costs			Sales Inducements			Policyholders’ Account Balances and Future Policy Benefits			Deferred Income Tax Asset (Liability)			Accumulated Other Comprehensive Income (Loss) Related to Net Unrealized Investment Gains (Losses)
Balance, December 31, 2009	$	(179	)	$	67		$	2		$	(2	)	$	40		$	(72	)
Net investment gains (losses) on investments arising during the period		86			–			–			–			(30	)		56
Reclassification adjustment for (gains) losses included in net income		18			–			–			–			(6	)		12
Reclassification adjustment for OTTI losses excluded from net income1		(76	)		–			–			–			27			(49	)
Impact of net unrealized investment (gains) losses on deferred policy acquisition costs and sales inducements		–			(4	)		(1	)		–			1			(4	)
Impact of net unrealized investment (gains) losses on policyholders’ account balances and future policy benefits		–			–			–			(1	)		*			(1	)
Balance, December 31, 2010	$	(151	)	$	63		$	1		$	(3	)	$	32		$	(58	)
Net investment gains (losses) on investments arising during the period		(3	)		–			–			–			1			(2	)
Reclassification adjustment for (gains) losses included in net income		47			–			–			–			(16	)		31
Reclassification adjustment for OTTI losses excluded from net income1		(32	)		–			–			–			11			(21	)
Impact of net unrealized investment (gains) losses on deferred policy acquisition costs and sales inducements		–			(7	)		*			–			2			(5	)
Impact of net unrealized investment (gains) losses on policyholders’ account balances and future policy benefits		–			–			–			–			–			–
Balance, December 31, 2011	$	(139	)	$	56		$	1		$	(3	)	$	30		$	(55	)

36

NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION

(a wholly owned subsidiary of New York Life Insurance Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

	Net Unrealized Gains (Losses) on Investments			Deferred Policy Acquisition Costs			Sales Inducements			Policyholders’ Account Balances and Future Policy Benefits			Deferred Income Tax Asset (Liability)			Accumulated Other Comprehensive Income (Loss) Related to Net Unrealized Investment Gains (Losses)
Net investment gains (losses) on investments arising during the period		113			–			–			–			(39	)		74
Reclassification adjustment for (gains) losses included in net income		4			–			–			–			(1	)		3
Reclassification adjustment for OTTI losses excluded from net income1		(9	)		–			–			–			3			(6	)
Impact of net unrealized investment (gains) losses on deferred policy acquisition costs and sales inducements		–			(38	)		(1	)		–			12			(27	)
Impact of net unrealized investment (gains) losses on policyholders’ account balances and future policy benefits		–			–			–			2			*			2
Balance, December 31, 2012	$	(31	)	$	18		$	–		$	(1	)	$	5		$	(9	)

* Amounts less than $1 million

¹ Represents “transfers in” related to the portion of OTTI losses recognized during the period that were not recognized in earnings for securities with no prior OTTI loss.

37

NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION

(a wholly owned subsidiary of New York Life Insurance Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

All other net unrealized investment gains and losses in AOCI

	Net Unrealized Gains (Losses) on Investments1		Deferred Policy Acquisition Costs		Sales Inducements		Policyholders’ Account Balances and Future Policy Benefits		Deferred Income Tax Asset (Liability)		Accumulated Other Comprehensive Income (Loss) Related to Net Unrealized Investment Gains (Losses)
Balance, December 31, 2009	$	487		$ (184)		$(7)	$	9		$ (107)	$	198
Net investment gains (losses) on investments arising during the period		2,080		–		–		–		(728)		1,352
Reclassification adjustment for (gains) losses included in net income		(119)		–		–		–		42		(77)
Reclassification adjustment for OTTI losses excluded from net income2		76		–		–		–		(27)		49
Impact of net unrealized investment (gains) losses on deferred policy acquisition costs and sales inducements		–		(602)		(11)		–		215		(398)
Impact of net unrealized investment (gains) losses on policyholders’ account balances and future policy benefits		–		–		–		53		(19)		34
Balance, December 31, 2010	$	2,524	$	(786)	$	(18)	$	62	$	(624)	$	1,158
Net investment gains (losses) on investments arising during the period		2,465		–		–		–		(863)		1,602
Reclassification adjustment for (gains) losses included in net income		(179)		–		–		–		63		(116)
Reclassification adjustment for OTTI losses excluded from net income2		32		–		–		–		(11)		21
Impact of net unrealized investment (gains) losses on deferred policy acquisition costs and sales inducements		–		(494)		(11)		–		177		(328)
Impact of net unrealized investment (gains) losses on policyholders’ account balances and future policy benefits		–		–		–		(271)		95		(176)
Balance, December 31, 2011	$	4,842	$	(1,280)	$	(29)	$	(209)	$	(1,163)	$	2,161
Net investment gains (losses) on investments arising during the period		1,425		–		–		–		(499)		926
Reclassification adjustment for (gains) losses included in net income		(138)		–		–		–		49		(89)
Reclassification adjustment for OTTI losses excluded from net income2		9		–		–		–		(3)		6
Impact of net unrealized investment (gains) losses on deferred policy acquisition costs and sales inducements		–		(121)		(3)		–		43		(81)
Impact of net unrealized investment (gains) losses on policyholders’ account balances and future policy benefits		–		–		–		169		(59)		110
Balance, December 31, 2012	$	6,138	$	(1,401)	$	(32)	$	(40)	$	(1,632)	$	3,033

¹ Includes cash flow hedges. Refer to Note 12 – Derivative Financial Instruments and Risk Management for information on cash flow hedges.

² Represents “transfers out” related to the portion of OTTI losses recognized during the period that were not recognized in earnings for securities with no prior OTTI loss.

38

NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION

(a wholly owned subsidiary of New York Life Insurance Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following rollforward provides a breakdown of the cumulative credit loss component of OTTI losses recognized in earnings of fixed maturities still held for which a portion of the loss was recognized in AOCI (in millions):

	2012			2011
Balance at beginning of year	$	208		$	201
Additions
Credit loss impairments recognized in the current period on securities previously not impaired		6			26
Additional credit loss impairments recognized in the current period on securities previously impaired		20			51
Reductions
Credit loss impairments previously recognized on securities which matured, paid down, prepaid or sold during the period		(50	)		(70	)
Balance at end of year	$	184		$	208

NOTE 6 — POLICYHOLDERS’ LIABILITIES

Policyholders’ Account Balances

Policyholders’ account balances at December 31, 2012 and 2011 were as follows (in millions):

	2012		2011
Deferred annuities	$	38,213	$	38,473
Universal life contracts		23,997		22,937
Annuities certain		511		513
Supplementary contracts without life contingencies		335		379
Unearned revenue liability		272		277
Guaranteed minimum accumulation benefit		405		470
Total policyholders’ account balances	$	63,733	$	63,049

Policyholders’ account balances on the above contracts are equal to cumulative deposits plus interest credited less withdrawals and less mortality and expense charges, where applicable.

Unearned revenue liability represents amounts that have been assessed to compensate the insurer for services to be performed over future periods.

The Guaranteed Minimum Accumulation Benefit (“GMAB”) is the fair value of embedded derivatives on deferred annuity contracts.

At December 31, 2012 and 2011, of the total policyholders’ account balances of $63,733 million and $63,049 million, respectively, the total amounts that have surrender privileges were $62,834 million and $62,159 million, respectively. The amounts that can be surrendered for cash by policyholders at December 31, 2012 and 2011 were $60,399 million and $59,636 million, respectively.

39

NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION

(a wholly owned subsidiary of New York Life Insurance Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following table highlights the interest rate assumptions generally utilized in calculating policyholders’ account balances, as well as certain withdrawal characteristics associated with these accounts at December 31, 2012:

Product	Interest Rate	Withdrawal/Surrender Charges
Deferred annuities	0.5% to 10%	Surrender charges 0% to 10% for up to 10 years.
Annuities certain	0.05% to 5%	No surrender or withdrawal charges.
Universal life contracts	2.50% to 8.00%	Various up to 19 years.
Supplementary contracts without life contingencies	1.0% to 3.5%	No surrender or withdrawal charges.

Less than 1% of policyholders’ account balances have interest crediting rates of 6% and greater.

Future Policy Benefits

Future policy benefits at December 31, 2012 and 2011 were as follows (in millions):

	2012		2011
Life insurance:
Taiwan business — 100% coinsured	$	1,028	$	929
Other life		192		165
Total life insurance		1,220		1,094
Individual and group payout annuities		10,316		8,203
Other contract liabilities		43		55
Total future policy benefits	$	11,579	$	9,352

Other than the 100% coinsured business, there were no amounts related to policies that have surrender privileges or amounts redeemable in cash by policyholders.

The following table highlights the key assumptions generally utilized in the calculation of future policy benefit reserves at December 31, 2012:

Product	Mortality	Interest Rate	Estimation Method
Life insurance: Taiwan business — 100% coinsured	Based upon best estimates at time of policy issuance with provision for adverse deviations (“PAD”).	3.80% to 7.50%	Net level premium reserve taking into account death benefits, lapses and maintenance expenses with PAD.
Individual and group payout annuities	Based upon best estimates at time of policy issuance with PAD.	3.08% to 8.75%	Present value of expected future payments at a rate expected at issue with PAD.

Less than 1% of future policy benefits are based on an interest rate of 6% and greater.

40

NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION

(a wholly owned subsidiary of New York Life Insurance Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Guaranteed Minimum Benefits

At December 31, 2012 and 2011, the Company had variable contracts with guarantees. (Note that the Company’s variable contracts with guarantees may offer more than one type of guarantee in each contract; therefore, the amounts listed are not mutually exclusive). For guarantees of amounts in the event of death, the net amount at risk is defined as the current Guaranteed Minimum Death Benefit (“GMDB”) in excess of the current account balance at the balance sheet date. For guarantees of accumulation balances, the net amount at risk is defined as GMAB minus the current account balance at the balance sheet date. For guarantees of income, the net amount at risk is defined as the minimum account balance in excess of the current account balance needed to fund the Guaranteed Future Income Benefit (“GFIB”).

Variable Annuity Contracts — GMDB, GMAB and GFIB

The Company issues certain variable annuity contracts with GMDB and GMAB features that guarantee either:

a) Return of deposits:    the benefit is the greater of current account value or premiums paid (adjusted for withdrawals).

b) Ratchet:    the benefit is the greatest of the current account value, premiums paid (adjusted for withdrawals), or the highest account value on any contractually specified anniversary up to contractually specified ages (adjusted for withdrawals).

Starting in the third quarter of 2012, the Company issues variable annuity contracts with a GFIB feature. This feature provides a minimum fixed annuity payment guarantee that will start on a date chosen by the policyholder.

The following table provides the account value, net amount at risk and average attained age of contract holders at December 31, 2012 and 2011 for GMDB’s, and GMAB’s ($ in millions):

	2012
	Return of Net Deposits				Ratchet
	In the Event of Death (GMDB)		Accumulation at Specified Date (GMAB)		In the Event of Death (GMDB)
Account value	$	9,456	$	4,526	$	10,985
Net amount at risk	$	47	$	51	$	286
Average attained age of contract holders		58		57		62

	2011
	Return of Net Deposits				Ratchet
	In the Event of Death (GMDB)		Accumulation at Specified Date (GMAB)		In the Event of Death (GMDB)
Account value	$	7,195	$	3,559	$	10,920
Net amount at risk	$	117	$	147	$	736
Average attained age of contract holders		58		57		62

41

NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION

(a wholly owned subsidiary of New York Life Insurance Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following summarizes the liabilities for guarantees on variable contracts reflected in the general account in future policy benefits for GMDB and GFIB, and policyholders’ account balances for GMAB in the accompanying Consolidated Statement of Financial Position (in millions):

	GMDB			GMAB			GFIB		Totals
Balance at January 1, 2010	$	44		$	235		$	–	$	279
Incurred guarantee benefits		5			(12	)		–		(7	)
Paid guarantee benefits		(11	)		(1	)		–		(12	)
Balance at December 31, 2010		38			222			–		260
Incurred guarantee benefits		17			248			–		265
Paid guarantee benefits		(7	)		–			–		(7	)
Balance at December 31, 2011		48			470			–		518
Incurred guarantee benefits		(10	)		(65	)		*		(75	)
Paid guarantee benefits		(6	)		–			–		(6	)
Balance at December 31, 2012	$	32		$	405		$	*	$	437

* Amounts less than $1 million

For GMABs, incurred guaranteed minimum benefits incorporate all changes in fair value other than amounts resulting from paid guarantee benefits. GMABs are considered to be embedded derivatives and are recognized at fair value through interest credited to policyholders’ account balances in the accompanying Consolidated Statement of Operations (refer to Note 15 — Fair Value Measurements).

The GMDB liability is determined each period end 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 in accordance with applicable guidance. The Company regularly evaluates estimates used and adjusts the additional liability balance, with a related charge or credit to increase in liabilities for future policy benefits in the accompanying Consolidated Statement of Operations, if actual experience or other evidence suggests that earlier assumptions should be revised.

The following assumptions and methodology were used to determine the GMDB liability at December 31, 2012 and 2011, respectively:

• Data used was 1,000 stochastically generated investment performance scenarios.

• Mean investment performance assumption ranged from 5.21% to 6.75% for 2012 and 5.12% to 7.08% for 2011.

• Volatility assumption ranged from 12.94% to 14.53% for 2012 and was 13.14% to 14.67% for 2011.

• Mortality was assumed to be 100.5% of an internally developed mortality table for 2012 and 91% of the A2000 table for 2011.

• Lapse rates vary by contract type and duration and range from 0.5% to 31.73%, with an average of 5.47% for 2012, and 0.5% to 30.0%, with an average of 6.04% for 2011.

• Discount rates ranged from 6.64% to 7.22% for 2012 and 6.53% to 7.31% for 2011.

42

NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION

(a wholly owned subsidiary of New York Life Insurance Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The GFIB liability is determined each period end by estimating the expected guaranteed minimum income benefit amounts, less the benefit amounts funded by income benefit purchases, and recognizing the excess ratably over the accumulation period based on total expected assessments in accordance with applicable guidance. The Company regularly evaluates estimates used to calculate the GFIB liability and adjusts the liability balance, with a related charge or credit to increase in liabilities for future policy benefits in the accompanying Consolidated Statement of Operations, if actual experience or other evidence suggests that earlier assumptions should be revised.

The following assumptions and methodology were used to determine the GFIB liability at December 31, 2012:

• Data used was 1,000 stochastically generated investment performance scenarios.

• Mean investment performance assumption ranged from -0.04% to 10.01% for 2012.

• Volatility assumption ranged from 0.03% to 30.87% for 2012.

• Mortality was assumed to be 60% of the 94 MGDB table for 2012.

• Lapse rates vary by contract type and duration and range from 1.00% to 20.00%, with an average of 1.00% for 2012.

• Discount rates ranged from 6.64% to 7.22% for 2012.

The following table presents the aggregate fair value of assets at December 31, 2012 and 2011, by major investment fund options (including the general and separate account fund options), held by variable annuity products that are subject to GMDB, GMAB and GFIB benefits and guarantees. Since variable contracts with GMDB guarantees may also offer GMAB and GFIB guarantees in each contract, the GMDB, GMAB and GFIB amounts listed are not mutually exclusive (in millions):

	2012						2011
	GMDB		GMAB		GFIB		GMDB		GMAB
Separate account:
Equity	$	8,822	$	2,212	$	16	$	7,935	$	1,832
Fixed income		4,834		1,170		7		3,987		854
Balanced		3,081		863		1		2,610		625
General account		3,704		281		15		3,583		248
Total	$	20,441	$	4,526	$	39	$	18,115	$	3,559

Additional Liability for Individual Life Products

Certain individual life products require additional liabilities for contracts with excess insurance benefit features. These excess insurance benefit features are generally those that result in profits in early years and losses in subsequent years. For the Company’s individual life contracts, this requirement primarily affects universal life policies with cost of insurance charges that are significantly less than the expected mortality costs in the intermediate and later policy durations.

Generally, the Company has separately defined an excess insurance benefit feature to exist when expected mortality exceeds all assessments. This insurance benefit feature is in addition to the base mortality feature, which the Company defines as expected mortality not in excess of assessments.

43

NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION

(a wholly owned subsidiary of New York Life Insurance Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following table summarizes the liability for excess insurance benefit features reflected in the general account in future policy benefits at December 31, 2012, 2011 and 2010 (in millions):

	2012		2011		2010
Beginning balance	$	101	$	68	$	45
Net liability increase		19		33		23
Ending balance	$	120	$	101	$	68

NOTE 7 — SEPARATE ACCOUNTS

Separate Accounts Registered with the SEC

The Company maintains separate accounts, which are registered with the SEC, for its variable deferred annuity and variable life products with assets of $20,197 million and $17,666 million at December 31, 2012 and 2011, respectively. The assets of the registered separate accounts represent investments in shares of the MainStay VP Series Funds Trust (the “Fund”) managed by NYL Investments, and other non-proprietary funds.

Separate Accounts Not Registered with the SEC

The Company also maintains separate accounts, which are not registered with the SEC, with assets of $1,441 million and $1,289 million at December 31, 2012 and 2011, respectively. The assets in these separate accounts are comprised of the Fund managed by NYL Investments, other non-proprietary funds, and limited partnerships.

Refer to Note 6 — Policyholders’ Liabilities, for information regarding separate accounts with contractual guarantees for GMDB and GMAB.

NOTE 8 — DEFERRED POLICY ACQUISITION COSTS AND SALES INDUCEMENTS

The following is an analysis of DAC for the years ended December 31, 2012, 2011 and 2010 (in millions):

	2012			2011			2010
Balance at beginning of year	$	2,313		$	2,824		$	4,041
Change in Accounting Principle		–			–			(672	)
Adjusted Balance at beginning of year, restated		2,313			2,824			3,369
Current year additions		351			433			529
Amortized during year		(478	)		(443	)		(468	)
Balance at end of year before related adjustments		2,186			2,814			3,430
Adjustment for changes in unrealized net investment gains		(159	)		(501	)		(606	)
Balance at end of year	$	2,027		$	2,313		$	2,824

44

NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION

(a wholly owned subsidiary of New York Life Insurance Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Sales Inducements

The following is an analysis of deferred sales inducements included in other assets in the accompanying Consolidated Statement of Financial Position for the years ended December 31, 2012, 2011 and 2010 (in millions):

	2012			2011			2010
Balance at beginning of year	$	457		$	354		$	313
Current year additions		159			134			103
Amortized during year		(82	)		(20	)		(50	)
Balance at end of year before related adjustments		534			468			366
Adjustment for changes in unrealized net investment gains		(4	)		(11	)		(12	)
Balance at end of year	$	530		$	457		$	354

NOTE 9 — INCOME TAXES

A summary of the components of the net total income tax expense for the years ended December 31, 2012, 2011 and 2010, included in the accompanying Consolidated Statement of Operations are as follows (in millions):

	2012		2011			2010
Current:
Federal	$	174	$	243		$	133
State and local		5		4			3
Foreign		–		1			–
		179		248			136
Deferred:
Federal		61		(160	)		47
Total income tax expense	$	240	$	88		$	183

Pursuant to the tax allocation agreement discussed in Note 2 — Significant Accounting Policies, as of December 31, 2012 and 2011, the Company recorded a net income tax payable to New York Life of $60 million and $113 million, respectively, included in other liabilities in the accompanying Consolidated Statement of Financial Position.

The Company’s actual income tax expense for the years ended December 31, 2012, 2011 and 2010 differs from the expected amount computed by applying the U.S. statutory federal income tax rate of 35% for the following reasons:

	2012			2011			2010
Statutory federal income tax rate		35.0	%		35.0	%		35.0	%
Tax exempt income		(2.1	)		(4.6	)		(3.8	)
Uncertain tax position		0.1			(1.2	)		(6.2	)
Investment credits		(5.2	)		(8.3	)		(1.8	)
Other		0.4			0.5			–
Effective tax rate		28.2	%		21.4	%		23.2	%

45

NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION

(a wholly owned subsidiary of New York Life Insurance Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Deferred income taxes are generally recognized, based on enacted tax rates, when assets and liabilities have different values for financial statement and tax purposes. The Company’s management has concluded that the deferred tax assets are more likely than not to be realized. Therefore, no valuation allowance has been provided.

The components of the net deferred tax liability reported in other liabilities in the accompanying Consolidated Statement of Financial Position as of December 31, 2012 and 2011, are as follows (in millions):

	2012		2011
Deferred tax assets:
Future policyholder benefits	$	662	$	831
Employee and agents benefits		69		63
Other		17		14
Gross deferred tax assets		748		908
Deferred tax liabilities:
DAC		503		563
Investments		1,972		1,517
Other		1		1
Gross deferred tax liabilities		2,476		2,081
Net deferred tax liability	$	1,728	$	1,173

The Company has no net operating or capital loss carryforwards.

The Company’s federal income tax returns are routinely examined by the Internal Revenue Service (“IRS”) and provisions are made in the financial statements in anticipation of the results of these audits. The IRS has completed audits through 2007. In 2012, the IRS began its examination of tax years 2008 through 2010. There were no material effects on the Company’s results of operations as a result of these audits. The Company believes that its recorded income tax liabilities are adequate for all open years.

A reconciliation of the beginning and ending amount of unrecognized tax benefits at December 31, 2012, 2011 and 2010, are as follows (in millions):

	2012		2011			2010
Beginning of period balance	$	71	$	69		$	117
Reductions for tax positions of prior years		–		(2	)		–
Additions for tax positions of current year		–		4			1
Settlements with tax authorities		–		–			(49	)
End of period balance	$	71	$	71		$	69

As of December 31, 2012, 2011, and 2010 the Company had unrecognized tax benefits that, if recognized, would impact the effective tax rate by $2 million, $2 million, and less than $1 million, respectively. Total interest expense associated with the liability for unrecognized tax benefits for the years ended December 31, 2012, 2011 and 2010, aggregated $2 million, $2 million and $3 million, respectively, and are included in income tax expense in the accompanying Consolidated Statement of Operations. At December 31, 2012, 2011 and 2010, the Company had $9 million, $7 million and $14 million, respectively, of accrued interest associated with the liability for unrecognized tax benefits, which are reported in the accompanying Consolidated Statement of Financial Position (included in other liabilities). The $2 million increase from December 31, 2011 in accrued

46

NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION

(a wholly owned subsidiary of New York Life Insurance Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

interest associated with the liability for unrecognized tax benefits is the result of an increase of $2 million of interest expense. The Company does not anticipate any significant changes to its total unrecognized tax benefits within the next twelve months.

NOTE 10 — REINSURANCE

The Company enters into reinsurance agreements in the normal course of its insurance business to reduce overall risk and to be able to issue life insurance policies in excess of its retention limits. As of December 31, 2012, the Company reinsures the mortality risk on new life insurance policies on a quota-share yearly renewable term basis for certain products. The Company had typically retained 10% of each risk until 2005 when it began retaining larger shares on many products. The quota-share currently retained generally ranges from 10% up to 95% with a minimum size policy ceded of $1 million for most traditional products. Most of the reinsured business is on an automatic basis. Cases in excess of the Company’s retention and certain substandard cases are reinsured facultatively. The Company does not have any individual life reinsurance agreements that do not transfer risk or contain risk-limiting features.

The Company remains liable for reinsurance ceded if the reinsurer fails to meet its obligation on the business it has assumed. The Company periodically reviews the financial condition of its reinsurers and amounts recoverable in order to minimize its exposure to losses from reinsurer insolvencies. When necessary, an allowance is recorded for reinsurance the Company cannot collect. Three reinsurance companies account for approximately 75% and 76% of the reinsurance ceded to non-affiliates at December 31, 2012 and 2011, respectively.

In December 2004, the Company reinsured 90% of a block of in-force life insurance business, consisting of Universal Life, Variable Universal Life (“VUL”), Target Life and Asset Preserver, with New York Life. The agreement used a combination of coinsurance with funds withheld for the fixed portion maintained in the general account and modified coinsurance (“MODCO”) for the VUL policies in the Separate Accounts. Under both the MODCO and Funds Withheld treaties, the Company will retain the assets held in relation to the policyholders’ account balances and separate account liabilities. An experience refund will be paid to the Company at the end of each quarterly accounting period for 100% of the profits in excess of $5 million per year. Under authoritative guidance related to derivatives and hedging, the Funds Withheld and the MODCO treaties, along with the experience rating refund represents an embedded derivative, which is required to be carried at fair value. The fair value of this embedded derivative approximated $14 million and $15 million at December 31, 2012 and 2011, respectively, and is included in amounts recoverable from reinsurer in the accompanying Consolidated Statement of Financial Position. The change in fair value of this embedded derivative was $(1) million, $(33) million and $43 million for the years ended December 31, 2012, 2011 and 2010, respectively, and is included in net revenue from reinsurance in the accompanying Consolidated Statement of Operations.

In connection with the above described reinsurance agreement with New York Life, the Company recorded a deferred gain of $244 million, which includes the $25 million purchase price and $219 million of GAAP reserves recoverable from the reinsurer in excess of the funds withheld liability. For the years ended December 31, 2012, 2011 and 2010 $1 million of the deferred gain was amortized and is included in the net revenue from reinsurance in the accompanying Consolidated Statement of Operations.

47

NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION

(a wholly owned subsidiary of New York Life Insurance Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The effect of this affiliated reinsurance agreement for the years ended December 31, 2012, 2011 and 2010 was as follows (in millions):

	2012		2011		2010
Fees-universal life policies ceded	$	252	$	254	$	293
Net revenue from reinsurance	$	85	$	81	$	216
Policyholders’ benefits ceded	$	161	$	136	$	116
Amounts recoverable from reinsurer	$	6,634	$	6,400	$	6,193
Amounts payable to reinsurer	$	6,622	$	6,387	$	6,146
Other liabilities (deferred gain, net of amortization)	$	15	$	17	$	18

Effective July 1, 2002, the Company transferred the Taiwan branch’s insurance book of business to an affiliated company, New York Life Insurance Taiwan Corporation (“NYLT”), an indirect wholly owned subsidiary of New York Life. The Company is jointly liable with NYLT for two years from the giving of notice to all obligees for all matured obligations and for two years after the maturity date of not-yet matured obligations. NYLT is also contractually liable, under indemnification provisions of the transaction, for any liabilities that may be asserted against the Company. The transfer of the branch’s net assets was accounted for as a long-duration coinsurance transaction. Under this accounting treatment, the insurance related liabilities remain on the books of the Company and an offsetting reinsurance recoverable is established. Additionally, premiums and benefits associated with any business sold prior to July 1, 2002 are reflected in the Company’s accompanying Consolidated Statement of Operations.

Accordingly, the Company recorded the following with respect to this transaction (in millions):

	2012		2011		2010
Amounts recoverable from reinsurer	$	1,027	$	929	$	902
Premiums ceded	$	66	$	68	$	68
Benefits ceded	$	28	$	37	$	42

The Company obtains coverage of mortality risk in excess of its retention limits from New York Life on a yearly renewable term basis. The premiums for this coverage were $14 million for the years ended December 31, 2012 and 2011 and $13 million for the year ended December 31, 2010.

48

NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION

(a wholly owned subsidiary of New York Life Insurance Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The effects of all reinsurance for the years ended December 31, 2012, 2011 and 2010 were as follows (in millions):

	2012			2011			2010
Premiums:
Direct	$	2,882		$	2,494		$	1,961
Assumed		3			3			2
Ceded		(69	)		(70	)		(71	)
Net premiums	$	2,816		$	2,427		$	1,892
Fees-universal life and annuity policies ceded	$	583		$	572		$	572
Net revenue from reinsurance	$	85		$	82		$	218
Policyholders’ benefits ceded	$	515		$	503		$	410
Increase in ceded liabilities for future policyholder benefits	$	13		$	14		$	7
Amounts recoverable from reinsurer:
Affiliated	$	7,675		$	7,345		$	7,095
Unaffiliated	$	300		$	278		$	255
Amounts payable to reinsurer:
Affiliated	$	6,626		$	6,389		$	6,148
Unaffiliated	$	47		$	41		$	37
Other liabilities (deferred gain, net of amortization)	$	15		$	17		$	18

NOTE 11 — DEBT

Debt consisted of the following at December 31, 2012 and 2011 (in millions):

	2012		2011
Recourse debt
Promissory note — Aeolus	$	3	$	4
Total recourse debt		3		4
Non-recourse debt
Other		1		1
Total non-recourse debt		1		1
Total debt	$	4	$	5

Recourse Debt

The Company issued a promissory note on November 1, 2006, in the amount of $8 million at a fixed interest rate of 5.5% per annum in connection with the purchase of a membership interest in Aeolus Wind Power II LLC. The note calls for the Company to make quarterly payments of principal and interest with the first installment paid on January 31, 2007 and the final installment due on July 31, 2016. The note may not be prepaid in whole or in part and there are no collateral requirements. The carrying amount of the note was $3 million and $4 million at December 31, 2012 and 2011, respectively.

49

NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION

(a wholly owned subsidiary of New York Life Insurance Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Non-Recourse Debt

At December 31, 2012 and 2011, the Company was required to consolidate one structured investment in which the Company is considered the primary beneficiary with an outstanding debt balance of $1 million and $1 million, respectively. Refer to Note 4 — Investments.

NOTE 12 — DERIVATIVE FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

The Company uses derivative financial instruments to manage interest rate, currency, equity and credit risk. These derivative financial instruments include foreign exchange forward contracts; futures contracts interest rate and equity options; interest rate, credit default, and currency swaps; interest rate caps, and swaptions. The Company does not engage in derivative financial instrument transactions for speculative purposes. Refer to Note 2 — Significant Accounting Policies for a discussion on the accounting for derivative financial instruments.

The Company enters into over-the-counter (“OTC”) derivative financial instruments and exchange traded futures. The Company deals with highly rated OTC counterparties and does not expect the counterparties to fail to meet their obligations under the contracts. The Company has controls in place to monitor credit exposures by limiting transactions with specific OTC counterparties within specified dollar limits and assessing the creditworthiness of OTC counterparties. The Company uses netting arrangements incorporated in master agreements and collateral support agreements with OTC counterparties and adjusts transaction levels, when appropriate, to minimize risk. The Company’s policy is to not offset the fair value amounts recognized for derivatives executed with the same OTC counterparty under the same master netting agreements with the associated collateral.

To further minimize risk, credit support annexes (“CSA”) typically are negotiated as part of OTC swap documentation entered into by the Company with counterparties. The CSA defines the terms under which collateral is transferred in order to mitigate credit risk arising from “in the money” derivative positions. The CSA requires that an OTC derivative counterparty post collateral to secure that portion of its anticipated derivative obligation, taking into account netting arrangements, in excess of a specified threshold. Collateral received is typically invested in short-term investments. Those agreements also include credit contingent provisions whereby the threshold typically declines on a sliding scale with a decline in the OTC counterparties’ rating. In addition, certain of the Company’s contracts contain provisions that require the Company to maintain a specific investment grade credit rating and if the Company’s credit rating were to fall below that specified rating, the counterparty to the derivative instrument could request immediate payout or full collateralization. The aggregate fair value of all over the counter OTC derivative instruments with credit-risk-related contingent features that are in a net liability position as of December 31, 2012 is $56 million, for which the Company has posted collateral with a fair value of $33 million. If the credit contingent features had been triggered as of December 31, 2012, the Company estimates that it would not have to post additional collateral for a one notch downgrade in the Company’s credit rating but would have to post $22 million for a downgrade that would trigger full collateralization.

The Company may be exposed to credit-related losses in the event that an OTC counterparty fails to perform its obligations under its contractual terms. For contracts with OTC counterparties where no netting provisions are specified in the master agreements, in the event of default, credit exposure is defined as the fair value of contracts in a gain position at the reporting date, net of any collateral held under a CSA with that counterparty. Credit exposure to OTC counterparties where a netting arrangement is in place, in the event of default, is defined as the net fair value, if positive, of all outstanding contracts with each specific counterparty, net of any collateral held under a CSA with that counterparty. As of December 31, 2012, the Company held collateral for derivatives of $104 million. Credit exposure in a net gain position, net of offsets and collateral, was $17 million at December 31, 2012.

Certain regulatory measures will come into effect in 2013 governing derivative transactions which will, among other things, require some derivative transactions to be centrally cleared and change the collateralization requirements of some derivative transactions.

50

NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION

(a wholly owned subsidiary of New York Life Insurance Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following table presents the notional amount, number of contracts and gross fair value of derivative instruments that are qualifying and designated for hedge accounting, by type of hedge designation, and those that are not designated for hedge accounting (excluding embedded derivatives) at December 31, 2012 and 2011 (in millions, except for number of contracts). Refer to Note 15 — Fair Value Measurements for a discussion of valuation methods for derivative instruments.

		2012								2011
	Primary Risk Exposure	Volume (a)				Fair Value (b)				Volume (a)				Fair Value (b)
		Notional		Number of Contracts		Asset		Liability		Notional		Number of Contracts		Asset		Liability
Derivatives qualifying and designated:
Cash flow hedges:
Interest rate swaps	Interest	$	37		2	$	11	$	–	$	37		2	$	12	$	–
Currency swaps	Currency		203		13		–		18		203		14		1		15
Total derivatives qualifying and designated			240		15		11		18		240		16		13		15
Derivatives not designated as hedging:
Interest rate swaps	Interest		3,674		61		28		64		816		53		16		14
Interest rate caps	Interest		17,262		55		4		–		17,819		58		17		–
Swaptions	Interest		17,385		52		11		–		17,050		48		44		–
Corridor options	Interest		11,875		122		–		–		14,300		140		4		–
Currency swaps	Currency		209		7		5		12		134		5		4		2
Currency forwards	Currency		–		–		–		–		10		3		*		*
Equity options	Equity		648		81		92		–		412		61		84		*
Futures	Interest		–		–		–		–		3		20		–		*
Credit default swaps:					–
Buy protection	Credit		12		3		–		*		12		3		*		–
Sell protection	Credit		1		1		–		*		1		1		–		*
Average call rate spread	Interest		23		3		1		–		–		–		–		–
Total derivatives not designated			51,088		385		141		75		50,557		392		169		16
Total derivatives		$	51,328		400	$	153	$	94	$	50,797		408	$	182	$	31

* Amounts are less than $1 million.

^(a) Notional or contractual amounts of derivative financial instruments provide a measure of involvement in these types of transactions and do not represent the amounts exchanged between the parties engaged in the transaction. The amounts exchanged are determined by reference to the notional amounts and other terms of the derivative financial instruments, which relate to interest rates, exchange rates or other financial indices.

^(b)  The estimated fair value of all derivatives in an asset position is reported within other investments, and the estimated fair value of all derivatives in a liability position is reported within other liabilities in the accompanying Consolidated Statement of Financial Position. Accrued investment income and investment income payable on derivatives, which are included in investment income due and accrued and other liabilities, respectively, on the accompanying Consolidated Statement of Financial Position, are excluded from the above table.

51

NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION

(a wholly owned subsidiary of New York Life Insurance Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Interest Rate Risk Management

The Company enters into various types of interest rate contracts primarily to minimize exposure of specific assets and liabilities held by the Company to fluctuations in interest rates.

Interest rate swaps are agreements with other parties to exchange, at specified intervals, the difference between interest amounts calculated by reference to an agreed notional value. Generally, no cash is exchanged at the onset of the contract and no principal payments are made by either party. A single net payment is usually made by one counterparty at each interest due date. The Company does not act as an intermediary or broker in interest rate swaps.

Interest rate caps, corridor options and swaptions entered into by the Company hedge the disintermediation risk of increasing interest rates on policyholder liability obligations. The Company will receive payments from counterparties should interest rates exceed an agreed upon strike price.

Currency Risk Management

The Company enters into foreign currency swaps and foreign exchange forward contracts primarily as a cash flow hedge against foreign currency fluctuations. The primary purpose of the Company’s foreign currency hedging activities is to protect the value of foreign currency denominated assets and liabilities from the risk of changes in exchange rates.

The Company enters into foreign currency swaps which are agreements with other parties to exchange, at specified intervals, principal and interest in one currency for the same in another, at a fixed exchange rate generally set at inception, calculated by reference to an agreed upon notional value. Generally, only principal payments are exchanged at the onset and the end of the contract.

The Company enters into foreign exchange forward contracts, which involve the exchange of foreign currencies at a specified future date and at a specified price. No cash is exchanged at the time the agreement is entered into.

Equity Risk Management

The Company purchases equity put options to minimize exposure to the market risk associated with guarantees on certain underlying policyholder liabilities. There are upfront fees paid or received related to option contracts at the time the agreements are entered into.

Credit Risk Management

The Company purchases credit default swaps to hedge the credit exposure of fixed income products.

52

NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION

(a wholly owned subsidiary of New York Life Insurance Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Cash Flow Hedges

The following table presents the effects of derivatives in cash flow hedging relationships in the accompanying Consolidated Statement of Operations and the Consolidated Statement of Stockholder’s Equity for the years ended December 31, 2012, 2011 and 2010 (in millions):

	Gain (Loss) Recognized in OCI (Effective Portion)1			Gain (Loss) Reclassified from AOCI Into Net Income (Effective Portion)
				Net Investment Gains (Losses)			Net Investment Income
For the year ended 12/31/2012:
Interest rate contracts	$	–		$	–		$	1
Currency contracts		(4	)		–			(1	)
Total	$	(4	)	$	–		$	–
For the year ended 12/31/2011:
Interest rate contracts	$	4		$	–		$	1
Currency contracts		4			–			(2	)
Total	$	8		$	–		$	(1	)
For the year ended 12/31/2010:
Interest rate contracts	$	10		$	8		$	1
Currency contracts		(12	)		(7	)		(2	)
Total	$	(2	)	$	1		$	(1	)

¹  The amount of gain (loss) recognized in OCI is reported as a change in net unrealized investment gains (losses), a component of AOCI, in the accompanying Consolidated Statement of Stockholder’s Equity.

In 2012, 2011 and 2010, 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 under the authoritative guidance on derivatives and hedging.

There were no hedged forecasted transactions, other than the receipt or payment of variable interest payments.

The assessment of effectiveness for the year ended December 31, 2012 and 2011 did not exclude any unrealized gains or losses on designated hedges.

Presented below is a rollforward of the components of AOCI, before taxes, related to cash flow hedges (in millions):

	2012			2011			2010
Balance, beginning of year	$	(3	)	$	(12	)	$	(10	)
(Losses) gains deferred in OCI on the effective portion of cash flow hedges		(4	)		8			(2	)
Gains — reclassified to net income		–			1			–
Balance, end of year	$	(7	)	$	(3	)	$	(12	)

For cash flow hedges, the estimated amount of existing gains reported in AOCI at December 31, 2012, related to periodic interest payments on assets being hedged that is expected to be reclassified into earnings within the next 12 months, is $1 million.

53

NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION

(a wholly owned subsidiary of New York Life Insurance Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Derivatives Not Designated

The Company has derivative instruments that are not designated or do not qualify for hedge accounting treatment. The following table provides the income statement classification and the amount of gains and losses on derivative instruments not designated as hedging instruments for the years ended December 31, 2012, 2011 and 2010 (in millions):

	Gain (Loss) Recognized in Income1
	2012			2011			2010
Interest rate swaps		$(30	)		$(1	)		$(6	)
Swaptions		(36	)		(101	)		11
Interest rate caps		(13	)		(45	)		(55	)
Currency swaps		(6	)		6			(2	)
Corridor options		(3	)		(24	)		(47	)
Currency forwards		–			(1	)		2
Equity options		(23	)		23			(6	)
Futures		*			*			(32	)
Bond forwards		–			–			25
Credit default swaps
Buy protection		(1	)		*			*
Sell protection		*			*			*
Average Call Option		1			(1	)		*
Total		$(111	)		$(144	)		$(110	)

* Recognized loss is less than $1 million.

¹  The amount recognized in income is reported within net investment gains (losses) in the Consolidated Statement of Operations.

The Company enters into credit default swaps (“CDS”) both to buy protection from, and sell protection to a counterparty in the event of default of a single name referenced obligation. As of December 31, 2012, all of the underlying referenced obligations of the CDS selling protection are investment grade. The single name CDS contracts mature within 2 years. The maximum amount the Company would be required to pay under swaps in which credit protection was sold, assuming all referenced obligations default at a total loss without recoveries, would be $1 million for December 31, 2012, 2011 and 2010 respectively. The market value of swaps for which credit protection sold was less than $1 million at December 31, 2012 and 2011.

Embedded Derivatives

The Company has certain embedded derivatives that are required to be separated from their host contracts and accounted for as derivatives. As of December 31, 2012 and 2011, there were no embedded derivatives that could not be separated from their host contracts.

54

NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION

(a wholly owned subsidiary of New York Life Insurance Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following table presents the fair value amounts of the Company’s embedded derivatives at December 31, 2012 and 2011 (in millions):

		Fair Value
	Balance Sheet Location	2012		2011
Embedded derivatives in asset host contracts:
Other1	Amounts recoverable from reinsurers	$	14	$	15
Embedded derivatives in liability host contracts:
GMAB1	Policyholders’ account balances	$	405	$	470

¹  For further information on these embedded derivatives refer to Note 15 — Fair Value Measurements.

The following table presents the changes in fair value related to embedded derivatives for the years ended December 31, 2012, 2011 and 2010 (in millions):

	2012			2011			2010
Net revenue from reinsurance	$	(1	)	$	(33	)	$	43
Interest credited to policyholders’ account balances	$	(87	)	$	239		$	(25	)

NOTE 13 — COMMITMENTS AND CONTINGENCIES

Litigation

The Company is a defendant in individual and/or alleged class action suits arising from its agency sales force, insurance (including variable contracts registered under the federal securities law), investment, retail securities and/or other operations, including actions involving retail sales practices. Most of these actions seek substantial or unspecified compensatory and punitive damages. The Company is also from time to time involved in various governmental, administrative and investigative proceedings and inquiries.

Notwithstanding the uncertain nature of litigation and regulatory inquiries, the outcome of which cannot be predicted, the Company believes that, after provisions made in the consolidated financial statements, the ultimate liability that could result from litigation and proceedings would not have a material adverse effect on the Company’s financial position; however, it is possible that settlements or adverse determinations in one or more actions or other proceedings in the future could have a material adverse effect on the Company’s operating results for a given year.

Regulatory Inquiries

By letter dated May 20, 2011, the California Department of Insurance notified the Company that it is conducting a special examination of the Company’s practices regarding payment of benefits under life insurance policies and annuities, termination of annuity payments, payments to holders of retained asset accounts, use of the Social Security Administration “Death Master Index” and other matters. This examination relates to matters also being examined by state departments of revenue (or equivalent state agencies) in a number of states under their respective unclaimed property laws. Subsequent similar notices were received from the Department and the New York and Massachusetts State Attorney Generals’ Offices. In connection with these audits and examinations, the Company has made a number of payments to beneficiaries and identified additional policies that are in the process of settlement or are being investigated for potential settlement. As a result of these ongoing inquiries, the Company recorded a charge to net income of $9 million, net of reserves, reinsurance recoverable and taxes, for the year ended December 31, 2011. The Company recorded an immaterial charge to net income in 2012.

55

NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION

(a wholly owned subsidiary of New York Life Insurance Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Assessments

Most of the jurisdictions in which the Company is licensed to transact business require life insurers to participate in guaranty associations, which are organized to pay contractual benefits pursuant to insurance policies issued by impaired, insolvent or failed life insurers. These associations levy assessments, up to prescribed limits, on all member insurers in a particular state on the basis of the proportionate share of the premiums written by member insurers in the line of business in which the impaired, insolvent or failed life insurer is engaged. Some states permit member insurers to recover assessments through full or partial premium tax offsets.

The Company received notification of the insolvency of various life insurers. It is expected that these insolvencies will result in guaranty fund assessments against the Company of approximately $41 million and $49 million which have been accrued in other liabilities in the accompanying Consolidated Statement of Financial Position for the years ended December 31, 2012 and 2011, respectively. The Company expects to recover $28 million and $27 million at December 31, 2012 and 2011, respectively, of premium offsets reflected in other assets on the accompanying Consolidated Statement of Financial Position.

In 2012, New York Life committed to contribute $20 million, of which $10 million was allocated to the Company, to a voluntary fund that will be established to provide benefits to certain Executive Life Insurance Company of New York (“ELNY”) payees who otherwise would have had their contractual benefits reduced as a result of ELNY’s liquidation.

Guarantees

The Company, in the ordinary course of its business, has numerous agreements with respect to its related parties and other third-parties. In connection with such agreements there may be related commitments or contingent liabilities, which may take the form of guarantees. The Company believes the ultimate liability that could result from any such guarantees would not have a material adverse effect on the Company’s financial position.

Loaned Securities and Repurchase Agreements

The Company participates in a securities lending program for the purpose of enhancing income on certain securities held. At December 31, 2012 and 2011, $451 million and $452 million, respectively, of the Company’s fixed maturities were on loan to others. Such assets reflect the extent of the Company’s involvement in securities lending, not the Company’s risk of loss. At December 31, 2012 and 2011, the Company recorded cash collateral received under these agreements of $461 million, and established a corresponding liability for the same amount, which is included in other liabilities in the accompanying Consolidated Statement of Financial Position. The Company did not hold collateral in the form of securities at December 31, 2012 and 2011.

The Company enters into agreements to purchase and resell securities, and agreements to sell and repurchase securities for the purpose of enhancing income on the securities portfolio. At December 31, 2012 and 2011, the Company had agreements to purchase and resell securities, which are reflected in the accompanying Consolidated Statement of Financial Position, totaling $59 million and $90 million at an average coupon rate of 0.20% and 0.06%, respectively. At December 31, 2012 and 2011, the Company had agreements to sell and repurchase securities, which are reflected in the accompanying Consolidated Statement of Financial Position, totaling $75 million and $114 million at an average coupon rate of 3.50% and 4.22%, respectively.

Liens

Several commercial banks have customary security interests in certain assets of the Company to secure potential overdrafts and other liabilities of the Company that may arise under custody, securities lending and other banking agreements with such banks.

56

NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION

(a wholly owned subsidiary of New York Life Insurance Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

NOTE 14 — RELATED PARTY TRANSACTIONS

The Company has significant transactions with New York Life and its affiliates. Because of these relationships, it is possible that the terms of the transactions are not the same as those that would result from transactions among wholly unrelated parties.

New York Life provides the Company with services and facilities for the sale of insurance and other activities related to the business of insurance. New York Life charges the Company for the identified costs associated with these services and facilities under the terms of an administrative service agreement between New York Life and the Company. Such costs, amounting to $750 million, $731 million and $723 million for the years ended December 31, 2012, 2011 and 2010, respectively, are reflected in operating expenses and net investment income in the accompanying Consolidated Statement of Operations.

In 2011, the Company received a $300 million capital contribution consisting of $123 million of cash and $177 million in the form of release of intercompany payables, from New York Life.

The Company’s interests in commercial mortgage loans are held in the form of participations in mortgages originated or acquired by New York Life. Under the participation agreement for each such mortgage, it is agreed between the Company and New York Life that the Company’s proportionate interest (as evidenced by a participation certificate) in the underlying mortgage, including without limitation, the principal balance thereof, all interest which accrues thereon, and all proceeds generated there from, will be pari passu with New York Life’s and pro rata based upon the respective amounts funded by New York Life and the Company in connection with the applicable mortgage origination or acquisition. Consistent with the participation arrangement, all mortgage documents name New York Life (and not both New York Life and the Company) as the lender but are held for the benefit of both the Company and New York Life pursuant to the applicable participation agreement. New York Life retains general decision making authority with respect to each mortgage loan, although certain decisions require the Company’s approval.

The Company is a party to an affiliated group air transportation service agreement entered into with NYLIFE LLC, a direct wholly owned subsidiary of New York Life, in November 2004. Under the terms of the agreement the Company, in conjunction with certain specified affiliates, leases an aircraft from NYLIFE LLC. The aircraft is to be used by members of senior management and directors for business travel under certain circumstances. Personal use of the aircraft by employees and directors is not permitted. Costs associated with the lease are determined on a fully allocated basis and allotted to the parties based on usage. For the years ended December 31, 2012, 2011and 2010, the Company’s share of expenses associated with the lease of the aircraft were $1 million, $2 million and $1 million, respectively. The agreement expired in November 2009, with automatic one-year renewals, unless terminated earlier. The agreement had an initial term of five years, until November 2009 and was renewed for an additional five years through November 2014.

The Company has entered into investment advisory and administrative services agreements with NYL Investments whereby NYL Investments provides investment advisory services to the Company. At December 31, 2012, 2011 and 2010, the total cost for these services amounted to $84 million, $76 million and $69 million, respectively, which are included in the costs of services billed by New York Life to the Company, as noted above.

In addition, NYL Investments has an Investment Advisory Agreement with the Fund, a registered investment company whose shares are sold to various separate accounts of the Company. NYL Investments, the administrator of the Fund, and the Company have entered into agreements regarding administrative services to be provided by the Company. Under the terms of the agreement, NYL Investments pays the Company administrative fees for providing services to the Fund. The Company recorded fee income from NYL Investments for the years ended December 31, 2012, 2011 and 2010 of $26 million, $17 million, and $16 million, respectively.

At December 31, 2012 and 2011, the Company had a net liability of $201 million and $186 million, respectively, for the above-described services, which are included in other liabilities in the accompanying

57

NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION

(a wholly owned subsidiary of New York Life Insurance Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Consolidated Statement of Financial Position. The terms of the settlement generally require that these amounts be settled in cash within ninety days. The terms of the investment advisory agreements require payment ten days from receipt of bill.

To satisfy its obligations under certain structured settlement agreements with unaffiliated insurance companies, beneficiaries and other non-affiliated entities, the Company owns certain single premium annuities issued by New York Life. The carrying value of the annuity contracts is based upon the actuarially determined value of the obligations under the structured settlement contracts, which generally have some life contingent benefits. The obligations are based upon the actuarially determined present value of expected future payments. Interest rates used in establishing such obligations range from 3.33% to 7.81%. At December 31, 2012 and 2011, the carrying value of the interest in annuity contracts and the obligations under structured settlement agreements in the accompanying Consolidated Statement of Financial Position amounted to $5,978 million and $5,720 million, respectively. The Company has directed New York Life to make the payments under the annuity contracts directly to the payees under the structured settlement agreements.

In addition, the Company has issued certain annuity contracts to New York Life in order that New York Life may satisfy its third-party obligations under certain structured settlement agreements. The interest rate used in establishing such obligations was 5.85% for 2012. The Company has been directed by New York Life to make the payments under the annuity contracts directly to the beneficiaries under these structured settlement agreements. At December 31, 2012 and 2011, the amount of outstanding reserves on these contracts included in future policy benefits was $169 million and $170 million, respectively.

The Company has a variable product distribution agreement with NYLIFE Distributors, an indirect wholly owned subsidiary of New York Life, granting NYLIFE Distributors the exclusive right to distribute, and be the principal underwriter of the Company’s variable product policies. NYLIFE Distributors has an agreement with NYLIFE Securities, another indirect wholly owned subsidiary of New York Life, under which registered representatives of NYLIFE Securities solicit sales of these policies. In connection with this agreement, the Company incurred commission expense to NYLIFE Securities’ registered representatives of $110 million, $98 million and $85 million, for the years ended December 31, 2012, 2011 and 2010, respectively.

In addition, the Company entered into a service fee agreement with NYLIFE Securities effective July 1, 2008, as amended on July 1, 2009, whereby NYLIFE Securities charges the Company a fee for management and supervisory services rendered in connection with variable life and variable annuity sales and in-force business. For the years ended December 31, 2012, 2011 and 2010, the Company incurred an expense of $37 million, $33 million and $29 million, respectively, under this agreement. At December 31 2012 and 2011, the Company recorded no payables to NYLIFE Securities under this agreement.

The Company has a credit agreement with New York Life, dated April 1, 1999, wherein New York Life can borrow funds from the Company. The maximum amount available to New York Life is $490 million. No outstanding balance was due to the Company at December 31, 2012 and 2011.

The Company also has a credit agreement with New York Life, dated September 30, 1993, under which the Company can borrow up to $490 million. During 2012, 2011 and 2010, the credit facility was not used, no interest was paid and no outstanding balance was due.

On December 23, 2004, the Company entered into a credit agreement with Capital Corporation under which the Company can borrow up to $490 million. At December 31, 2012 and 2011, the Company had no outstanding balance due. At December 31, 2010, there was $10 million outstanding to Capital Corporation. The Company had no interest expense for 2012. Interest expense for 2011 and 2010 was less than $1 million.

During August 2003, the Company transferred without recourse several private placement debt securities to MCF. MCF is an indirect wholly owned subsidiary of New York Life. MCF paid the purchase price of the securities transferred by delivering to the Company promissory notes with terms identical to the securities

58

NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION

(a wholly owned subsidiary of New York Life Insurance Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

transferred. The private placement debt securities matured, and the outstanding balance payable totaling $5 million was paid to the Company on June 6, 2011. The Company received interest payments from MCF of less than $1 million for each of the years ended December 31, 2011 and 2010.

The Company has purchased from MCF participations in collateralized loans to third-parties underwritten by MCF. Under the participation agreements, the Company assumes the performance risk on these loans with no recourse against MCF. In 2012 and 2011 the Company did not purchase any new loans only additional debt with existing loans. At December 31, 2012, the Company held loans with an outstanding balance of $60 million and has commitments to fund additional amounts on these existing loans of $13 million. At December 31, 2011, the Company held loans with an outstanding balance of $136 million and has commitments to fund additional amounts on these existing loans of $30 million. These loans are reported in other investments in the accompanying Consolidated Statement of Financial Position.

On April 30, 2010, the Company entered into a revolving loan agreement with MCF (as amended from time to time, the “MCF Loan Agreement”). The MCF Loan Agreement establishes the terms under which the Company may provide funding to MCF for commitments to fund senior debt, subordinated debt and equity investments, each having different terms and conditions, in each case entered into on or after January 1, 2010. The principal amount provided to MCF cannot exceed 2.5% of the Company’s statutory cash and invested assets as of the most recent quarterly statement. All outstanding advances made to MCF under the MCF Loan Agreement, together with unpaid interest or accrued return thereon will be due in full on July 1, 2015. At December 31, 2012 and 2011, the outstanding balance of loans to MCF under the MCF Loan Agreement was $1,584 million and $925 million, respectively. These loans are reported in investments in affiliates in the accompanying Consolidated Statement of Financial Position. During 2012, 2011 and 2010, the Company received interest payments from MCF totaling $62 million, $40 million and $8 million, respectively, which are included in net investment income in the accompanying Consolidated Statement of Operations.

The Company has an arrangement with New York Life whereby a policyholder may convert a New York Life term policy or term rider to a Universal Life policy issued by the Company, without any additional underwriting. As compensation for this arrangement, the Company recorded other income of $15 million, $17 million and $18 million for the years ended December 31, 2012, 2011 and 2010, respectively.

The Company has an arrangement with New York Life whereby a policyholder may convert an individual life insurance policy and rider issued by the Company to a permanent cash value life insurance policy issued by New York Life without any additional underwriting. As compensation for this arrangement, the Company paid New York Life $1 million for the years ended December 31, 2012, 2011 and 2010.

The Company has an arrangement with NYLIFE Insurance Company of Arizona (“NYLAZ”), a wholly owned subsidiary of New York Life, whereby a policyholder may convert a NYLAZ term policy to a universal life policy issued by the Company without any additional underwriting. As compensation for this arrangement, the Company recorded other income of $6 million, $6 million, and $7 million from NYLAZ for the years ended December 31, 2012, 2011 and 2010, respectively.

The Company has issued various Corporate Owned Life Insurance policies to New York Life for the purpose of informally funding certain benefits for New York Life employees and agents. These policies were issued on the same basis as policies sold to unrelated customers. As of December 31, 2012 and 2011, the Company recorded liabilities of approximately $2,943 million and $2,802 million, respectively, which are included in policyholders’ account balances and separate account liabilities in the accompanying Consolidated Statement of Financial Position.

The Company has also issued various Corporate Owned Life Insurance policies to separate Voluntary Employees’ Beneficiary Association (VEBA) trusts formed for the benefit of New York Life’s retired employees and agents. These policies were issued on the same basis as policies sold to unrelated customers. As of

59

NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION

(a wholly owned subsidiary of New York Life Insurance Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

December 31, 2012 and 2011, policyholders’ account balances and separate account liabilities related to these policies aggregated $298 million and $278 million, respectively.

The Company has an agreement with NYLINK Insurance Agency Incorporated (“NYLINK”), an indirect wholly owned subsidiary of New York Life, granting NYLINK the right to solicit applications for the Company’s products through NYLINK’s subagents. For the years ended December 31, 2012, 2011 and 2010, the Company recorded commission and fee expense to NYLINK agents of $2 million, $2 million, and $4 million, respectively.

In connection with the acquisition of an office building by REEP-OFC Westory DC, LLC, an indirect wholly-owned subsidiary of New York Life, the Company provided a first mortgage loan in the principal amount of $83 million to REEP-OFC Westory DC, LLC. The mortgage loan is interest-only throughout the term and all outstanding principal shall be due and payable on August 10, 2022.

In connection with a $150 million acquisition of a fee estate containing an office building and related improvements by a ground lease by New York Life (73.8% interest) and the Company (26.2% interest), the Company and New York Life entered into a Tenancy-in-Common Agreement dated as of June 11, 2012 which agreement sets forth the terms that will govern, in part, each entity’s interest in the property.

Effective December 31, 2004, the Company entered into a reinsurance agreement with New York Life (refer to Note 10 — Reinsurance for more details).

Effective July 1, 2002, the Company transferred its Taiwan branch insurance book of business to NYLT, which is accounted for as a long-duration coinsurance transaction (refer to Note 10 — Reinsurance for more details).

NOTE 15 — FAIR VALUE MEASUREMENTS

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The authoritative guidance around fair value establishes a framework for measuring fair value that includes a hierarchy used to classify the inputs used in measuring fair value. The hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three levels. The level in the fair value hierarchy within which the fair value measurement falls is determined based on the lowest level input that is significant to the fair value measurement.

The levels of the fair value hierarchy are based on the inputs to the valuation as follows:

Level 1	Fair value is based on unadjusted quoted prices for identical assets or liabilities in an active market. Active markets are defined as a market in which many transactions occur with sufficient frequency and volume to provide pricing information on an ongoing basis.
Level 2	Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active, or other model driven inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 2 inputs include quoted market prices in active markets for similar assets and liabilities, quoted market prices in markets that are not active for identical or similar assets or liabilities and other market observable inputs. Valuations are generally obtained from third-party pricing services for identical or comparable assets or liabilities or through the use of valuation methodologies using observable market inputs.
Level 3	Instruments whose values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. These inputs reflect management’s own assumptions in pricing the asset or liability. Pricing may also be based upon broker quotes that do not represent an offer to transact. Prices are determined using valuation methodologies such as option pricing models, discounted cash flow models and other similar techniques. Non-binding broker quotes, which are utilized when pricing service information is not available, are reviewed for reasonableness based on the Company’s understanding of the market, and are generally considered Level 3. To the extent the internally developed valuations use significant unobservable inputs, they are classified as Level 3.

60

NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION

(a wholly owned subsidiary of New York Life Insurance Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following tables represent the balances of assets and liabilities measured at fair value on a recurring basis as of December 31, 2012 and 2011 (in millions):

	2012
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Fixed maturities — available-for-sale:
U.S. Treasury	$	–	$	945	$	–	$	945
U.S. government corporations and agencies		–		1,738		40		1,778
U.S. agency mortgage-backed and asset-backed securities		–		16,897		36		16,933
Foreign governments		–		815		10		825
U.S. corporate		–		29,515		169		29,684
Foreign corporate		–		10,419		25		10,444
Non-agency residential mortgage-backed securities		–		2,472		99		2,571
Non-agency commercial mortgage-backed securities		–		4,948		2		4,950
Non-agency asset-backed securities		–		3,304		754		4,058
Total fixed maturities — available-for-sale		–		71,053		1,135		72,188
Fixed maturities — trading
Non-agency residential mortgage-backed securities		–		25		–		25
Non-agency commercial mortgage-backed securities		–		22		–		22
Non-agency asset-backed securities		–		78		1		79
Total fixed maturities — trading		–		125		1		126
Equity securities — available-for-sale
Common stock		115		–		4		119
Non-redeemable preferred stock		–		1		–		1
Mutual Funds		10		–		–		10
Total equity securities — available-for-sale		125		1		4		130
Equity securities — trading
Common stock		77		–		2		79
Total equity securities — trading		77		–		2		79
Derivative assets		–		152		1		153
Securities purchased under agreements to resell		–		59		–		59
Other invested assets		–		16		11		27
Cash equivalents		–		480		–		480
Short-term investments		–		30		–		30
Amounts recoverable from reinsurers		–		–		14		14
Separate account assets1		21,228		232		178		21,638
Total assets accounted for at fair value on a recurring basis	$	21,430	$	72,148	$	1,346	$	94,924
Policyholders’ account balances2	$	–	$	–	$	405	$	405
Derivative liabilities		–		94		–		94
Total liabilities accounted for at fair value on a recurring basis	$	–	$	94	$	405	$	499

¹ Separate account liabilities are not included above, as they are reported at contract value in the accompanying Consolidated Statement of Financial Position in accordance with the Company’s policy (refer to Note 2 —Significant Accounting Policies).

² Policyholders’ account balances represent embedded derivatives bifurcated from host contracts.

61

NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION

(a wholly owned subsidiary of New York Life Insurance Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

	2011
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Fixed maturities — available-for-sale:
U.S. Treasury	$	–	$	1,835	$	–	$	1,835
U.S. government corporations and agencies		–		1,366		6		1,372
U.S. agency mortgage-backed and asset-backed securities		–		17,089		84		17,173
Foreign governments		–		897		10		907
U.S. corporate		–		27,599		210		27,809
Foreign corporate		–		8,668		128		8,796
Non-agency residential mortgage-backed securities		–		2,475		189		2,664
Non-agency commercial mortgage-backed securities		–		4,966		–		4,966
Non-agency asset-backed securities		–		3,659		508		4,167
Redeemable preferred securities		–		3		–		3
Total fixed maturities — available-for-sale		–		68,557		1,135		69,692
Fixed maturities — trading
Non-agency residential mortgage-backed securities		–		32		–		32
Non-agency commercial mortgage-backed securities		–		6		–		6
Non-agency asset-backed securities		–		92		17		109
Total fixed maturities — trading		–		130		17		147
Equity securities — available-for-sale
Common stock		160		–		2		162
Non-redeemable preferred stock		–		2		3		5
Mutual Funds		10		–		–		10
Total equity securities — available-for-sale		170		2		5		177
Equity securities — trading
Common stock		–		–		2		2
Total equity securities — trading		–		–		2		2
Derivative assets		–		182		–		182
Securities purchased under agreements to resell		–		90		–		90
Other invested assets		–		18		–		18
Cash equivalents		6		485		–		491
Short-term investments		–		91		–		91
Amounts recoverable from reinsurers		–		–		15		15
Separate account assets1		18,544		261		150		18,955
Total assets accounted for at fair value on a recurring basis	$	18,720	$	69,816	$	1,324	$	89,860
Policyholders’ account balances2	$	–	$	–	$	470	$	470
Derivative liabilities		–		31		–		31
Total liabilities accounted for at fair value on a recurring basis	$	–	$	31	$	470	$	501

¹ Separate account liabilities are not included above, as they are reported at contract value in the accompanying Consolidated Statement of Financial Position in accordance with the Company’s policy (refer to Note 2 — Significant Accounting Policies).

² Policyholders’ account balances represent embedded derivatives bifurcated from host contracts.

62

NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION

(a wholly owned subsidiary of New York Life Insurance Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Determination of Fair Value

The Company has an established and well-documented process for determining fair value. Security pricing is applied using a hierarchy approach whereby publicly available prices are first sought from nationally recognized third-party pricing services. The remaining un-priced securities are submitted to independent brokers for prices and lastly securities are priced using an internal pricing model. The Company performs various analyses to ascertain that the prices represent fair value. Examples of procedures performed include, but are not limited to, back testing recent trades, monitoring trading volumes, and performing variance analysis of monthly price changes using different thresholds based on asset type. The Company also performs an annual review of all third-party pricing services. During this review, the Company obtains an understanding of the process and sources used by the pricing service to ensure that they maximize the use of observable inputs, the pricing service’s frequency of updating prices, and the controls that the pricing service uses to ensure that their prices reflect market assumptions.

The Company also selects a sample of securities and obtains a more detailed understanding from each pricing service regarding how they derived the price assigned to each security. Where inputs or prices do not reflect market participant assumptions, the Company will challenge these prices and apply different methodologies that will enhance the use of observable inputs and data. The number of price challenges at December 31, 2012 and 2011 was insignificant.

In addition, the Company has a pricing committee that provides oversight over the Company’s prices and fair value process for securities. The committee is comprised of representatives from the Company’s Investment Management group, Controller’s, Compliance and Security Operations. The committee meets quarterly and is responsible for the review and approval of the Company’s valuation procedures. The committee is also responsible for the review of pricing exception reports as well as the review of significant inputs used in the valuation of assets that are valued internally.

For Level 1 investments, valuations are generally based on observable inputs that reflect quoted prices for identical assets in active markets.

The fair value for Level 2 and Level 3 valuations are generally based on a combination of the market and income approach. The market approach generally utilizes market transaction data for the same or similar instruments, while the income approach involves determining fair values from discounted cash flow methodologies.

The following represents a summary of significant valuation techniques for assets and liabilities used to determine fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy.

Level 1 measurements

Equity securities and cash equivalents

These securities are comprised of certain exchange traded U.S. and foreign common stock and mutual funds, including money market funds. Valuation of these securities is based on unadjusted quoted prices in active markets that are readily and regularly available.

Separate account assets

These assets are comprised of exchange traded funds, actively traded open-end mutual funds with a daily NAV and equity securities. The NAV can be observed by redemption and subscription transactions between third-parties, or may be obtained from fund managers. Equity securities are generally traded on an exchange.

63

NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION

(a wholly owned subsidiary of New York Life Insurance Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Level 2 measurements

Fixed maturities available-for-sale and trading securities

The fair value of fixed maturities is obtained from third-party pricing services and internal pricing models. Vendors generally use a discounted cash flow model or a market approach. Typical inputs used by these pricing sources include, but are not limited to: benchmark yields, reported trades, issuer spreads, bids, offers, benchmark securities, estimated cash flows and prepayment speeds, which the Company has determined are observable prices.

Private placement securities are primarily priced by internally developed discounted cash flow models. These models use observable inputs with a discount rate based off spreads of comparable public bond issues, adjusted for liquidity, rating and maturity. The Company assigns a credit rating for the private placement based upon internal analysis. The liquidity premium is based upon observable transactions, while the maturity and rating adjustments are based upon data obtained from Bloomberg.

While the Company generally considers the public bond spreads, which are based on vendor prices, to be observable inputs, an evaluation is made of the similarities of private placements with the public bonds to determine whether the spreads utilized would be considered observable inputs for the private placement being valued. Examples of procedures performed include, but are not limited to, initial and on-going review of third-party pricing services’ methodologies, review of pricing statistics and trends, back testing recent trades and monitoring of trading volumes, new issuance activity and other market activities.

For some of the private placement securities priced through the model, the liquidity adjustments may not be based on market data, but rather, calculated internally. If the impact of the liquidity adjustment is not significant to the overall value of the security, it is classified as Level 2.

Equity securities

These securities are valued using the market approach in which market quotes are available but are not considered actively traded. Valuations are based principally on observable inputs including quoted prices in markets that are not considered active.

Securities purchased under agreements to resell

Due to the short-term nature (generally one month) of this investment, the asset’s carrying value approximates fair value.

Derivative assets and liabilities

The fair value of derivative instruments is generally derived through valuation models, which utilize observable market data. The market factors which have the most significant impact on the fair value of these instruments are U.S. swap rates and foreign exchange rates.

OTC derivatives are privately negotiated financial contracts. OTC derivatives are valued using models based on actively quoted or observable market input values from external market data providers, third-party pricing vendors and/or recent trading activity. The selection of a particular model depends upon the contractual terms of, and specific risks inherent in the instrument, as well as the availability of pricing information in the market. The Company generally uses similar models to value similar instruments. Valuation model inputs include contractual terms, market prices, yield curves, credit curves, and for options such as caps, floors and swaptions, measures of volatility. For OTC derivatives that trade in liquid markets, such as currency forwards, swaps and options, model inputs are observable in the market for substantially the full term and can be verified.

64

NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION

(a wholly owned subsidiary of New York Life Insurance Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Valuations of OTC derivatives are adjusted for non-performance risk. The Company uses default estimates implied by CDS spreads on senior obligations of the counterparty in order to provide an objective basis for such estimates. When in a liability position, the Company uses its own medium term note spread to estimate the default rate. The non-performance risk adjustment is applied only to the uncollateralized portion of the OTC derivative assets and liabilities. OTC derivative contracts are executed under master netting agreements with counterparties with a CSA, which is a bilateral ratings-sensitive agreement that requires collateral postings at established credit threshold levels. These agreements protect the interests of the Company and its counterparties should either party suffer a credit-rating deterioration. The vast majority of the Company’s derivative agreements are with highly rated major international financial institutions.

Other invested assets

This represents a surplus note investment, priced by a third party pricing service, where the inputs to the valuation are deemed to be observable.

Cash equivalents

These include treasury bills, commercial paper and other highly liquid instruments. These instruments are generally not traded in active markets; however their fair value is based on observable inputs. The prices are either obtained from a pricing vendor or amortized cost is used as the best estimate of fair value.

Short term investments

For certain short term investments, amortized cost is used as the best estimate of fair value.

Separate account assets

Separate account assets are primarily related to investments in limited partnerships that use NAV and the investment can be redeemed with the investee at NAV at the measurement date or in the near-term (generally within 90 days).

The following tables provide further information about the limited partnership and hedge funds in which the separate accounts invest as of December 31, 2012 and 2011 (in millions):

		2012
Category of Investment	Investment Strategy	Fair Value Determined Using NAV		Unfunded Commitments		Redemption Frequency	Redemption Notice Period
Hedge Fund	Multi-strategy	$	232		–	Quarterly, Monthly	90 days or less

		2011
Category of Investment	Investment Strategy	Fair Value Determined Using NAV		Unfunded Commitments		Redemption Frequency	Redemption Notice Period
Hedge Fund	Multi-strategy	$	262		–	Quarterly, Monthly	90 days or less

Level 3 measurements

Fixed maturities available-for-sale and trading securities

The valuation techniques for most Level 3 fixed maturities are generally the same as those described in Level 2, however, if the investments are less liquid or are lightly traded, there is generally less observable market data, and therefore these investments will be classified as Level 3. Circumstances where observable market data is not available may include events such as market illiquidity and credit events related to the security. In addition, certain securities are priced based upon internal valuations using significant unobservable inputs.

65

NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION

(a wholly owned subsidiary of New York Life Insurance Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

If the price received from third-party pricing services does not appear to reflect market activity, the Company may challenge the price. For securities which go through this formal price challenge process, if the vendor does not update the price, a non-binding broker quote, another vendor price or current methodology is used to support the fair value instead. The Company also uses non-binding broker quotes to fair value certain bonds, when the Company is unable to obtain prices from third-party vendors.

Private placement securities where adjustments for liquidity are considered significant to the overall price are classified as Level 3.

Equity securities

These securities include equity investments with privately held entities where the prices are derived from internal valuations or the Company’s private placement models since the securities are not traded in an active market.

Derivatives

These derivatives are valued based upon models with any significant unobservable market inputs or inputs from less actively traded markets.

Other invested assets

This represents a residual interest of securitizations, priced by a third party pricing service, where the inputs to the valuation are deemed to be unobservable.

Separate account assets

Separate account assets are primarily related to limited partnership investments that are restricted with respect to transfer or withdrawals. The limited partnerships are valued based on the latest NAV received, if applicable, or an estimate of fair value provided by the investment manager.

The following tables provide further information about the limited partnership and hedge funds in which the separate accounts invest as of December 31, 2012 and 2011 (in millions):

		2012
Category of Investment	Investment Strategy	Fair Value Determined Using NAV		Unfunded Commitments		Redemption Frequency	Redemption Notice Period
Hedge Fund	Multi-strategy	$	178		–	Annual, Semi-annual, Quarterly	More than 90 days

		2011
Category of Investment	Investment Strategy	Fair Value Determined Using NAV		Unfunded Commitments		Redemption Frequency	Redemption Notice Period
Hedge Fund	Multi-strategy	$	150		–	Annual, Semi-annual, Quarterly	More than 90 days

Policyholders’ account balances

Policyholders’ account balances consist of embedded derivatives bifurcated from the GMAB contracts.

The fair values of GMAB liabilities are calculated as the present value of future expected payments to customers less the present value of assessed rider fees attributable to the embedded derivative feature. The

66

NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION

(a wholly owned subsidiary of New York Life Insurance Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

expected cash flows are discounted using the swap rate plus a spread based upon the Company’s medium term notes. The spread reflects the market’s perception of the Company’s non-performance risk. Since there is no observable active market for the transfer of these obligations, the valuations are calculated using internally developed models. Significant inputs to these models include capital market assumptions, such as interest rate, equity market and implied volatility assumptions, as well as various policyholder behavior assumptions that are actuarially determined, including lapse rates, benefit utilization rates, mortality rates and withdrawal rates. These assumptions are reviewed at least annually, and updated based upon historical experience. Since many of the assumptions utilized are unobservable and are considered to be significant inputs to the liability valuation, the liability included in policyholders’ account balances has been reflected within Level 3 in the fair value hierarchy.

Valuation Process for Fair Value Measurements Categorized within Level 3

For a description of the Company’s valuation processes and controls, refer to the “Determination of Fair Value” section above.

Level 3 Assets and Liabilities by Price Source

The following table presents the balances of Level 3 assets and liabilities measured at fair value with their corresponding pricing sources as of December 31, 2012.

	2012
	Internal (1)		External (2)		Total
Fixed maturities — available-for-sale
U.S. government corporations & agencies	$	–	$	40	$	40
U.S. agency mortgage-backed and asset-backed securities		–		36		36
Foreign governments		–		10		10
U.S. corporate		20		149		169
Foreign corporate		–		25		25
Non-agency residential mortgage-backed securities		–		99		99
Non-agency commercial mortgage-backed securities		–		2		2
Non-agency asset-backed securities		92		662		754
Total fixed maturities — available-for-sale		112		1,023		1,135
Fixed maturities — trading
Non-agency asset-backed securities		–		1		1
Total fixed maturities — trading		–		1		1
Equity securities
Common stock		2		4		6
Total equity securities		2		4		6
Derivative assets		–		1		1
Other invested assets		–		11		11
Amounts recoverable from reinsurance		14		–		14
Separate account assets1		–		178		178
Total assets accounted for at fair value on a recurring basis	$	128	$	1,218	$	1,346
Policyholders’ account balances	$	405	$	–		405
Total liabilities accounted for at fair value on a recurring basis	$	405	$	–	$	405

⁽¹⁾  Represents valuations reflecting both internally-derived and market inputs, as well as third-party pricing information where pricing inputs that are deemed to be unobservable.

⁽²⁾  Primarily represents independent non-binding broker quotes where pricing inputs are not readily available.

67

NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION

(a wholly owned subsidiary of New York Life Insurance Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Quantitative Information Regarding Internally-Priced Level 3 Assets and Liabilities

The following table presents quantitative information on significant internally priced Level 3 assets and liabilities as of December 31, 2012:

	2012
	Fair Value		Valuation Techniques		Unobservable Input		Range (Weighted Average)
	(in millions)
Assets:
U.S. corporate	$	20		Discounted Cash Flow		Discount Rate	1.1% – 4.3%(2.7%)
Non-agency asset — backed securities	$	92		Discounted Cash Flow		Discount Rate	3.3% – 5.6%(3.7%)
Liabilities:
Policyholders’ account balances	$	405		Discounted Cash Flow		Equity returns	0.2% – 7.6%
						Equity volatility curve	3% – 40%
						Lapse rate	0.5% – 20%
						Mortality rate	0.04% – 40.00%
						Utilization Rate	10% – 100%
						Withdrawal rate	2.50%

The following is a description of the sensitivity to changes in unobservable inputs of the estimated fair value of the Company’s level 3 assets included above, for which we have access to the valuation inputs, as well as the sensitivity to changes in unobservable inputs of the level 3 assets that are value based on external pricing information:

U.S. corporate securities and foreign corporate securities

Most corporate securities are valued using a discounted cash flow analysis based on the expected cash flows of each security. The most significant unobservable input to the valuation is the discount rate as it usually includes spread adjustments. Significant spread widening would decrease the value of these securities. The opposite effect would occur if spreads tightened significantly. Default rates are also a component of the valuation. If expected default rates on these securities significantly increase, the fair value will decrease, with the opposite being true for significant decreases in default rates.

Non-agency residential mortgage-backed, commercial mortgage-backed and asset-backed securities

These securities are mainly valued using discounted cash flow models. Significant spread widening, spread tightening and increases and decreases in default rates will have the same impact on the fair values of these securities as described above under U.S. Corporate Securities and Foreign Corporate Securities. Significant increases in loss severity assumptions will decrease the estimated fair value of these securities with the opposite being true for decreases in expected loss severities.

Policyholders’ account balances

Polcyholders’ account balances consist of embedded derivatives bifurcated from host contracts, which represent the embedded derivatives for GMAB contracts.

68

NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION

(a wholly owned subsidiary of New York Life Insurance Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The fair values of GMAB liabilities are calculated as the present value of future expected payments to customers less the present value of assessed rider fees attributable to the embedded derivative feature. Generally, higher (lower) equity returns will result in lower (higher) fair value liability while higher (lower) implied volatility assumptions will result in higher (lower) fair value liability.

Transfers between levels

Transfers between levels may occur due to changes in valuation sources, or changes in the availability of market observable inputs, which generally are caused by changes in market conditions such as liquidity, trading volume or bid-ask spreads. The Company’s policy is to assume the transfer occurs at the beginning of the period.

Transfers between Levels 1 and 2

Periodically the Company has transfers between Level 1 and Level 2 for assets and liabilities.

Transfers between Levels 1 and 2 were not significant during the twelve months ended December 31, 2012, 2011 and 2010.

Transfers into and out of Level 3

The Company’s basis for transferring assets and liabilities into and/or out of Level 3 is based on the changes in the observability of data.

Assets and liabilities are transferred into Level 3 when a significant input cannot be corroborated with market observable data. This occurs when market activity decreases significantly and underlying inputs cannot be observed, current prices are not available, and/or when there are significant variances in quoted prices, thereby affecting transparency. Assets and liabilities are transferred out of Level 3 when circumstances change such that a significant input can be corroborated with market observable data. This may be due to a significant increase in market activity, a specific event, or one or more significant input(s) becoming observable.

During the years ended December 31, 2012 and 2011, the Company transferred $175 million and $181 million, respectively, of securities into Level 3 consisting of fixed maturities available-for-sale securities, other invested assets and separate account assets in 2012, fixed maturities available-for-sale securities in 2011 and fixed maturities available-for-sale securities and separate account assets in 2010. The transfers into Level 3 related to fixed maturities available-for-sale securities were primarily due to unobservable inputs utilized within valuation methodologies and the use of broker quotes (that could not be validated) when previously, information from third-party pricing services (that could be validated) was utilized. For the separate account assets, transfers into Level 3 are related to limited partnership investments that are restricted with respect to transfers or withdrawals.

Transfers out of Level 3 of $456 million and $965 million during the years ended December 31, 2012, and 2011, respectively, were primarily due to significant increases in market activity, or one or more significant input(s) becoming observable for fixed maturities available-for-sale securities and separate account assets in 2012, fixed maturities available-for-sale securities in 2011 and fixed maturities available-for-sale and trading securities in 2010.

69

NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION

(a wholly owned subsidiary of New York Life Insurance Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following tables present a reconciliation of all Level 3 assets and liabilities for the years ended December 31, 2012, 2011 and 2010 (in millions):

	2012
	U.S. Government Corporations and Agencies			U.S. Agency Mortgage- Backed and Asset- Backed Securities			Foreign Governments			U.S. Corporate			Foreign Corporate			Non- Agency Residential Mortgage- Backed Securities
Changes in fair value of level 3 assets and liabilities
Fair value, beginning of year	$	6		$	84		$	10		$	210		$	128		$	189
Total gains (losses) (realized/unrealized):
Included in earnings
Net investment gains (losses)		–			–			–			(3	)		(2	)
Net investment income1		–			–			–			–						–
Net revenue from reinsurance		–			–			–			–			–			(1	)
Interest credited to policyholders’ account balances		–			–			–			–			–			–
Other comprehensive income		1			–			1			4			–			1
Purchases		40			1			–			38			1			–
Sales		–			–			–			(12	)		(2	)		–
Issuances		–			–			–			–			–			–
Settlements		–			(7	)		–			(48	)		(3	)		(89	)
Transfers into Level 32		–			–			(1	)		21			–			–
Transfers (out of) Level 32		(7	)		(42	)		–			(41	)		(97	)		(1	)
Fair value, end of year	$	40		$	36		$	10		$	169		$	25		$	99

	Non- Agency Commercial Mortgage- Backed Securities		Non- Agency Asset- Backed Securities			Other Fixed Maturities Securities			Total Fixed Maturities- Available- for-Sale			Non- Agency Asset- Backed Securities			Total Fixed Maturities- Trading			Common Stock- Available- for-Sale
Changes in fair value of level 3 assets and liabilities
Fair value, beginning of year	$	–	$	508		$	–		$	1,135		$	17		$	17		$	2
Total gains (losses) (realized/unrealized):
Included in earnings
Net investment gains (losses)		–		2			2			(3	)		–			–			–
Net investment income1		–		3			–			3			–			–			–
Net revenue from reinsurance		–		–			–			(1	)		–			–			–
Interest credited to policyholders’ account balances		–		–			–			–			–			–			–
Other comprehensive income		–		14			(3	)		21			–			–			2
Purchases		–		491			3			571			1			1			–
Sales		–		(11	)		(2	)		(25	)		(17	)		(17	)		–
Issuances		–		–			–			–			–			–			–
Settlements		–		(82	)		–			(229	)		–			–			–
Transfers into Level 32		2		73			–			95			–			–			–
Transfers (out of) Level 32		–		(244	)		–			(432	)		–			–			–
Fair value, end of year	$	2	$	754		$	–		$	1,135		$	1		$	1		$	4

70

NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION

(a wholly owned subsidiary of New York Life Insurance Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Non- Redeemable Preferred Stock

Common Stock- Trading

Total Equity Securities

Derivatives

Other Invested Assets

Amounts Recoverable from Reinsurers

Separate Account Assets

Total Assets

Changes in fair value of level 3 assets and liabilities

Fair value, beginning of year

$

3

$

2

$

7

$

–

$

–

$

15

$

150

$

1,324

Total gains (losses) (realized/unrealized):

Included in earnings

Net investment gains (losses)

–

–

–

1

1

–

(14

)

(15

)

Net investment income1

–

–

–

–

–

–

–

3

Net revenue from reinsurance

–

–

–

–

–

–

–

(1

)

Interest credited to policyholders’ account balances

–

–

–

–

–

–

–

–

Other comprehensive income

–

–

2

–

–

(1

)

–

22

Purchases

–

–

–

–

–

–

27

599

Sales

–

–

–

–

–

–

(31

)

(73

)

Issuances

–

–

–

–

–

–

–

–

Settlements

(3

)

–

(3

)

–

–

–

–

(232

)

Transfers into Level 32

–

–

–

–

10

–

70

175

Transfers (out of) Level 32

–

–

–

–

–

–

(24

)

(456

)

Fair value, end of year

$

–

$

2

$

6

$

1

$

11

$

14

$

178

$

1,346

	2012
	Policyholders’ Account Balances			Total Liabilities
Changes in fair value of level 3 assets and liabilities
Fair value, beginning of year	$	470		$	470
Total (gains) losses (realized/unrealized):
Included in earnings
Net investment (gains) losses		–			–
Net investment income1		–			–
Net revenue from reinsurance		–			–
Interest credited to policyholders’ account balances		(87	)		(87	)
Other comprehensive income		–			–
Purchases		22			22
Sales		–			–
Issuances		–			–
Settlements		–			–
Transfers into Level 32		–			–
Transfers (out of) Level 32		–			–
Fair value, end of year	$	405		$	405

¹  Net investment income/loss includes amortization of discount and premium on fixed maturities.

²  Transfers into or out of Level 3 are reported at the value as of beginning of the period.

71

NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION

(a wholly owned subsidiary of New York Life Insurance Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

	2011
	U.S. Government Corporations and Agencies		U.S. Agency Mortgage- Backed and Asset- Backed Securities			Foreign Governments			U.S. Corporate			Foreign Corporate			Non- Agency Residential Mortgage-Backed Securities
Changes in fair value of level 3 assets and liabilities
Fair value, beginning of year	$	6	$	655		$	11		$	144		$	82		$	352
Total gains (losses) (realized/unrealized):
Included in earnings
Net investment gains (losses)		–		–			–			(8	)		(5	)		–
Net investment income1		–		–			–			–			–			(1	)
Net revenue from reinsurance		–		–			–			–			–			–
Interest credited to policyholders’ account balances		–		–			–			–			–			–
Other comprehensive income		–		4			–			(10	)		(5	)		4
Purchases		–		82			–			74			4			–
Sales		–		(22	)		–			(6	)		(26	)		–
Issuances		–		–			–			–			–			–
Settlements		–		(1	)		(1	)		(21	)		(4	)		(166	)
Transfers into Level 32		–		–			–			60			83			–
Transfers (out of) Level 32		–		(634	)		–			(23	)		(1	)		–
Fair value, end of year	$	6	$	84		$	10		$	210		$	128		$	189

	Non- Agency Commercial Mortgage-Backed Securities			Non-Agency Asset-Backed Securities			Total Fixed Maturities- Available- for-Sale			Non- Agency Asset- Backed Securities			Total Fixed Maturities- Trading			Common Stock- Available- for-Sale
Changes in fair value of level 3 assets and liabilities
Fair value, beginning of year	$	3		$	657		$	1,910		$	19		$	19		$	3
Total gains (losses) (realized/unrealized):
Included in earnings
Net investment gains (losses)		–			1			(12	)		(2	)		(2	)		–
Net investment income1		–			2			1			–			–			–
Net revenue from reinsurance		–			–			–			–			–			–
Interest credited to policyholders’ account balances		–			–			–			–			–			–
Other comprehensive income		–			18			11			–			–			(1	)
Purchases		–			254			414			–			–			–
Sales		–			(13	)		(67	)		–			–			–
Issuances		–			–			–			–			–			–
Settlements		–			(145	)		(338	)		–			–			–
Transfers into Level 32		–			38			181			–			–			–
Transfers (out of) Level 32		(3	)		(304	)		(965	)		–			–			–
Fair value, end of year	$	–		$	508		$	1,135		$	17		$	17		$	2

72

NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION

(a wholly owned subsidiary of New York Life Insurance Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

	Non- Redeemable Preferred Stock		Common Stock- Trading			Total Equity Securities			Amounts Recoverable from Reinsurers			Separate Account Assets			Total Assets
Changes in fair value of level 3 assets and liabilities
Fair value, beginning of year	$	3	$	3		$	9		$	48		$	114		$	2,100
Total gains (losses) (realized/unrealized):
Included in earnings
Net investment gains (losses)		–		(1	)		(1	)		–			–			(15	)
Net investment income1		–		–			–			–			–			1
Net revenue from reinsurance		–		–			–			(33	)		–			(33	)
Interest credited to policyholders’ account balances		–		–			–			–			–			–
Other comprehensive income		–		–			(1	)		–			–			10
Purchases		–		–			–			–			39			453
Sales		–		–			–			–			(3	)		(70	)
Issuances		–		–			–			–			–			–
Settlements		–		–			–			–			–			(338	)
Transfers into Level 32		–		–			–			–			–			181
Transfers (out of) Level 32		–		–			–			–			–			(965	)
Fair value, end of year	$	3	$	2		$	7		$	15		$	150		$	1,324

	2011
	Policyholders’ Account Balances		Total Liabilities
Changes in fair value of level 3 assets and liabilities
Fair value, beginning of year	$	222	$	222
Total (gains) losses (realized/unrealized):
Included in earnings
Net investment (gains) losses		–		–
Net investment income1		–		–
Net revenue from reinsurance		–		–
Interest credited to policyholders’ account balances		238		238
Other comprehensive income		–		–
Purchases		10		10
Sales		–		–
Issuances		–		–
Settlements		–		–
Transfers into Level 32		–		–
Transfers (out of) Level 32		–		–
Fair value, end of year	$	470	$	470

¹  Net investment income/loss includes amortization of discount and premium on fixed maturities.

²  Transfers into or out of Level 3 are reported at the value as of beginning of the period.

73

NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION

(a wholly owned subsidiary of New York Life Insurance Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

	2010
	U.S. Government Corporations and Agencies			U.S. Agency Mortgage- Backed and Asset- Backed Securities			Foreign Governments			U.S. Corporate			Foreign Corporate			Non-Agency Residential Mortgage- Backed Securities
Changes in fair value of level 3 assets and liabilities
Fair value, beginning of year	$	8		$	240		$	25		$	142		$	328		$	535
Total gains (losses) (realized/unrealized):
Included in earnings
Net investment gains (losses)		–			–			–			(2	)		(13	)		(1	)
Net investment income1		–			22			–			–			–			(2	)
Net revenue from reinsurance		–			–			–			–			–			–
Interest credited to policyholders’ account balances		–			–			–			–			–			–
Other comprehensive income		1			19			–			5			(2	)		3
Purchases, sales, issuances and settlements		(3	)		406			11			25			(75	)		(166	)
Transfers into Level 32		–			139			–			25			69			–
Transfers (out of) Level 32		–			(171	)		(25	)		(51	)		(225	)		(17	)
Fair value, end of year	$	6		$	655		$	11		$	144		$	82		$	352

	Non-agency Commercial Mortgage- Backed Securities			Non-Agency Asset-Backed Securities			Total Fixed Maturities- Available- for-Sale			Non-Agency Commercial Mortgage- Backed Securities			Non- Agency Asset- Backed Securities			Total Fixed- Maturities Trading
Changes in fair value of level 3 assets and liabilities
Fair value, beginning of year	$	26		$	510		$	1,814		$	1		$	21		$	22
Total gains (losses) (realized/unrealized):
Included in earnings
Net investment gains (losses)		–			(5	)		(21	)		–			–			–
Net investment income1		–			2			22			–			–			–
Net revenue from reinsurance		–			–			–			–			–			–
Interest credited to policyholders’ account balances		–			–			–			–			–			–
Other comprehensive income		4			31			61			–			–			–
Purchases, sales, issuances and settlements		(23	)		251			426			(1	)		–			(1	)
Transfers into Level 32		1			2			236			–			–			–
Transfers (out of) Level 3 2		(5	)		(134	)		(628	)		–			(2	)		(2	)
Fair value, end of year	$	3		$	657		$	1,910		$	–		$	19		$	19

74

NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION

(a wholly owned subsidiary of New York Life Insurance Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Common Stock- Available- for-Sale

Non- Redeemable Preferred Stock

Common Stock- Trading

Total Equity Securities

Derivative Assets, Net

Amounts Recoverable from Reinsurers

Changes in fair value of level 3 assets and liabilities

Fair value, beginning of year

$

4

$

–

$

–

$

4

$

1

$

5

Total gains (losses) (realized/unrealized):

Included in earnings

Net investment gains (losses)

–

–

2

2

–

–

Net investment income 1

–

–

–

–

–

–

Net revenue from reinsurance

–

–

–

–

–

43

Interest credited to policyholders’ account balances

–

–

–

–

–

–

Other comprehensive income

(2

)

3

1

2

(1

)

–

Purchases, sales, issuances and settlements

1

–

–

1

–

–

Transfers into Level 32

–

–

–

–

–

–

Transfers (out of) Level 32

–

–

–

–

–

–

Fair value, end of year

$

3

$

3

$

3

$

9

$

–

$

48

	Separate Account Assets		Total Assets
Changes in fair value of level 3 assets and liabilities
Fair value, beginning of year	$	49	$	1,895
Total gains (losses) (realized/unrealized):
Included in earnings
Net investment gains (losses)		–		(19	)
Net investment income1		–		22
Net revenue from reinsurance		–		43
Interest credited to policyholders’ account balances		–		–
Other comprehensive income		4		66
Purchases, sales, issuances and settlements		27		453
Transfers into Level 32		34		270
Transfers (out of) Level 32		–		(630	)
Fair value, end of year	$	114	$	2,100

75

NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION

(a wholly owned subsidiary of New York Life Insurance Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

	2010
	Policyholders’ Account Balances			Total Liabilities
Changes in fair value of level 3 assets and liabilities
Fair value, beginning of year	$	235		$	235
Total (gains) losses (realized/unrealized):
Included in earnings
Net investment (gains) losses		–			–
Net investment income1		–			–
Net revenue from reinsurance		–			–
Interest credited to policyholders’ account balances		(25	)		(25	)
Other comprehensive income		–			–
Purchases, sales, issuances and settlements		12			12
Transfers into Level 32		–			–
Transfers (out of) Level 32		–			–
Fair value, end of year	$	222		$	222

¹  Net investment income/loss includes amortization of discount and premium on fixed maturities.

²  Transfers into or out of Level 3 are reported at the value as of beginning of the year.

The following tables include the unrealized gains or losses for the years ended December 31, 2012, 2011 and 2010 by category for Level 3 assets and liabilities still held at December 31, 2012 and 2011 (in millions):

	2012
	U.S. Agency Mortgage- Backed and Asset- Backed Securities		Foreign Corporate		U.S. Corporate			Non-Agency Residential Mortgage- Backed Securities			Non-Agency Asset-Backed Securities
Unrealized gains (losses) relating to Level 3 assets still held
Earnings:
Total gains (losses) (realized/unrealized)
Included in earnings:
Net investment gains (losses)	$	–	$	–	$	–		$	–		$	(1	)
Net investment income		–		–		(1	)		(1	)		3
Net revenue from reinsurance		–		–		–			–			–
Interest credited to policyholders’ account balances		–		–		–			–			–
Other comprehensive gains/(losses)		1		1		5			1			14
Total change in unrealized gains (losses)	$	1	$	1	$	4		$	–		$	16

76

NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION

(a wholly owned subsidiary of New York Life Insurance Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

	Total Fixed Maturities- Available- for-Sale			Common Stock		Total Equity Securities		Amounts Recoverable from Reinsurers			Separate Account Assets1			Total Assets
Unrealized gains (losses) relating to Level 3 assets still held
Earnings:
Total gains (losses) (realized/unrealized)
Included in earnings:
Net investment gains (losses)	$	(1	)	$	–	$	–	$	–		$	(13	)	$	(14	)
Net investment income		1			2		2		–			–			3
Net revenue from reinsurance		–			–		–		(1	)		–			(1	)
Interest credited to policyholders’ account balances		–			–		–		–			–			–
Other comprehensive gains/(losses)		22			1		1		–			–			23
Total change in unrealized gains (losses)	$	22		$	3	$	3	$	(1	)	$	(13	)	$	11

	2012
	Policyholders’ Account Balance			Total Liabilities
Unrealized (gains) losses relating to Level 3 assets and liabilities still held
Earnings:
Total (gains) losses (realized/unrealized)
Included in earnings:
Net investment (gains) losses	$	–		$	–
Net investment income		–			–
Net revenue from reinsurance		–			–
Interest credited to policyholders’ account balances		(71	)		(71	)
Other comprehensive (gains)/losses		–			–
Total change in unrealized (gains) losses	$	(71	)	$	(71	)

¹ The net investment gains (losses) included for separate account assets are offset by an equal amount for separate account liabilities, which results in a net zero impact on net income for the Company. Separate account liabilities are not included above, as they are reported at contract value in the accompanying Consolidated Statement of Financial Position in accordance with the Company’s policy (refer to Note 2 —Significant Accounting Policies).

77

NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION

(a wholly owned subsidiary of New York Life Insurance Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

	2011
	U.S. Agency Mortgage- Backed and Asset- Backed Securities		U.S. Corporate			Foreign Corporate			Non- Agency Residential Mortgage- Backed Securities			Non- Agency Asset- Backed Securities
Unrealized gains (losses) relating to Level 3 assets still held
Earnings:
Total gains (losses) (realized/unrealized)
Included in earnings:
Net investment gains (losses)	$	–	$	(7	)	$	–		$	–		$	(2	)
Net investment income		–		–			–			(1	)		2
Net revenue from reinsurance		–		–			–			–			–
Interest credited to policyholders’ account balances		–		–			–			–			–
Other comprehensive gains/(losses)		1		(11	)		(4	)		4			11
Total change in unrealized gains (losses)	$	1	$	(18	)	$	(4	)	$	3		$	11

	Total Fixed Maturities- Available- for-Sale			Non-Agency Asset- Backed Securities			Total Fixed Maturities- Trading			Amounts Recoverable from Reinsurers			Total Assets
Unrealized gains (losses) relating to Level 3 assets still held
Earnings:
Total gains (losses) (realized/unrealized)
Included in earnings:
Net investment gains (losses)	$	(9	)	$	(1	)	$	(1	)	$	–		$	(10	)
Net investment income		1			–			–			–			1
Net revenue from reinsurance		–			–			–			(33	)		(33	)
Interest credited to policyholders’ account balances		–			–			–			–			–
Other comprehensive gains/(losses)		1			–			–			–			1
Total change in unrealized gains (losses)	$	(7	)	$	(1	)	$	(1	)	$	(33	)	$	(41	)

78

NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION

(a wholly owned subsidiary of New York Life Insurance Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

	2011
	Policyholders’ Account Balance		Total Liabilities
Unrealized gains (losses) relating to Level 3 assets and liabilities still held
Earnings:
Total gains (losses) (realized/unrealized)
Included in earnings:
Net investment (gains) losses	$	–	$	–
Net investment income		–		–
Net revenue from reinsurance		–		–
Interest credited to policyholders’ account balances		247		247
Other comprehensive (gains)/losses		–		–
Total change in unrealized (gains) losses	$	247	$	247

	2010
	U.S. Government Corporations and Agencies		U.S. Agency Mortgage- Backed & Asset- Backed Securities		U.S. Corporate		Foreign Crporate			Non-Agency Residential Mortgage- Backed securities			Non-Agency Commercial Mortgage- Backed Securities
Unrealized gains (losses) relating to Level 3 assets still held
Earnings:
Total gains (losses) (realized/unrealized)
Included in earnings:
Net investment gains (losses)	$	–	$	–	$	–	$	(20	)	$	(1	)	$	–
Net investment income		–		21		–		–			(1	)		–
Net revenue from reinsurance		–		–		–		–			–			–
Interest credited to policyholders’ account balances		–		–		–		–			–			–
Other comprehensive gains/(losses)		1		19		4		5			3			(1	)
Total change in unrealized gains (losses)	$	1	$	40	$	4	$	(15	)	$	1		$	(1	)

79

NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION

(a wholly owned subsidiary of New York Life Insurance Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

	Non-Agency Asset- Backed Securities			Total Fixed Maturity- Available- for-Sale			Common Stock- Trading		Non- Redeemable Preferred Stock		Total Equity Securities		Amounts Recoverable from Reinsurers
Unrealized gains (losses) relating to Level 3 assets still held
Earnings:
Total gains (losses) (realized/unrealized)
Included in earnings:
Net investment gains (losses)	$	(6	)	$	(27	)	$	2	$	–	$	2	$	–
Net investment income		1			21			–		–		–		–
Net revenue from reinsurance		–			–			–		–		–		43
Interest credited to policyholders’ account balances		–			–			–		–		–		–
Other comprehensive gains/(losses)		24			55			–		3		3		–
Total change in unrealized gains (losses)	$	19		$	49		$	2	$	3	$	5	$	43

	Separate Account Assets1		Total Assets
Unrealized gains (losses) relating to Level 3 assets and liabilities still held
Earnings:
Total gains (losses) (realized/unrealized)
Included in earnings:
Net investment gains (losses)	$	–	$	(25	)
Net investment income		–		21
Net revenue from reinsurance		–		43
Interest credited to policyholders’ account balances		–		–
Other comprehensive gains/(losses)		4		62
Total change in unrealized gains (losses)	$	4	$	101

80

NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION

(a wholly owned subsidiary of New York Life Insurance Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

	Policyholders’ Account Balances			Total Liabilities
Unrealized (gains) losses relating to Level 3 assets still held
Earnings:
Total (gains) losses (realized/unrealized)	$	–		$	–
Included in earnings:
Net investment (gains) losses
Net investment income		–			–
Net revenue from reinsurance		–			–
Interest credited to policyholders’ account balances		(16	)		(16	)
Other comprehensive (gains)/losses		–			–
Total change in unrealized (gains) losses	$	(16	)	$	(16	)

¹ The net investment gains (losses) included for separate account assets are offset by an equal amount for separate account liabilities, which results in a net zero impact on net income for the Company. Separate account liabilities are not included above, as they are reported at contract value in the accompanying Consolidated Statement of Financial Position in accordance with the Company’s policy (refer to Note 2 — Significant Accounting Policies).

Non-recurring fair value measurements

Assets and liabilities measured at fair value on a non-recurring basis include mortgage loans, which are described in detail below.

The following table represents certain assets measured at estimated fair value during the period and still held as of December 31, 2012 and 2011 (in millions):

	2012
	Carrying Value Prior to Impairment		Estimated Fair Value After Impairment		Net Investment Gains (Losses)
Mortgage loans	$	12	$	9	$	(3	)

	2011
	Carrying Value Prior to Impairment		Estimated Fair Value After Impairment		Net Investment Gains (Losses)
Mortgage loans	$	42	$	33	$	(9	)

The impaired mortgage loans presented above were written down to the estimated fair value of the collateral at the date the impairments were recognized, and have been categorized as level 3.

Fair value of other financial instruments

Authoritative guidance related to financial instruments requires disclosure of fair value information of financial instruments whether or not fair value is recognized in the Consolidated Statement of Financial Position, for which it is practicable to estimate fair value.

81

NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION

(a wholly owned subsidiary of New York Life Insurance Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The carrying value and estimated fair value of financial instruments not otherwise disclosed in Notes 4, 6, 11 and 13 of Notes to the Consolidated Financial Statements at December 31, 2012 and 2011 are presented below (in millions):

			2012
	Carrying Value		Estimated Fair Value						Estimated Fair Value
			Level 1		Level 2		Level 3		Total
Assets
Mortgage loans	$	8,479	$	–	$	–	$	9,106	$	9,106
Senior secured commercial loans		216		–		–		228		228
Cash & cash equivalents		153		153		–		–		153
Other invested assets		94		–		33		67		100
Liabilities
Policyholders’ account balances — Investment contracts	$	35,355	$	–	$	135	$	37,273	$	37,408
Debt		3		–		4		–		4
Collateral received on securities lending and repurchase agreements		461		–		461		–		461
Collateral received on derivative transactions		78		–		78		–		78

	2011
	Carrying Value		Estimated Fair Value
Assets
Mortgage loans	$	7,119	$	7,604
Senior secured commercial loans		318		344
Cash & cash equivalent		29		29
Other invested assets		43		43
Liabilities
Policyholders’ account balances — Investment contracts	$	35,780	$	37,631
Debt		9		9
Collateral received on securities lending and repurchase agreements		461		461
Collateral received on derivative transactions		137		137

Mortgage loans

The estimated fair value of mortgage loans is determined based upon the present value of the expected cash flows discounted at an interpolated treasury yield plus a spread. The spread is based on management’s judgment and assumptions and it takes into account property type, loan to value (LTV) and remaining term of each loan. The spread is a significant component of the pricing inputs.

Senior secured commercial loans

The estimated fair value for the loan portfolio is based on prevailing interest rate spreads in the market. Fair value was calculated by discounting future cash flows using prevailing interest rates on similar loans plus a spread adjustment. The spread is based on management’s judgment and assumptions and is significant to the valuation.

82

NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION

(a wholly owned subsidiary of New York Life Insurance Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Cash and cash equivalents

The Company believes that due to the short-term nature of cash, the carrying value approximates fair value.

Other invested assets

Represents third party loans, which are fair valued by discounting estimated cash flows for each loan at the prevailing interest rates on similar loans plus spread adjustment. The spread is based on management’s judgment and assumptions and is significant to the valuation.

Policyholders’ account balances — investment contracts

This includes supplementary contracts without life contingencies and other deposit type contracts where account value approximates fair value. For fixed deferred annuities, fair value is based upon a stochastic valuation using risk neutral assumptions for financial variables and Company specific assumptions for lapses, mortality and expenses. The cash flows were discounted using the yield on the Company’s medium term notes. For annuity certain liabilities, fair values are estimated using discounted cash flow calculations based on interest rates currently being offered for similar contracts with maturities consistent with those remaining for the contracts being valued.

Debt

The carrying amount of the Company’s non-recourse debt and other debt approximates fair value.

Collateral received on securities lending, repurchase agreements and derivative transactions

The carrying value of these liabilities approximates fair value since these borrowings are generally short-term in nature.

NOTE 16 — SUPPLEMENTAL CASH FLOW INFORMATION

Income taxes paid were $233 million, $102 million and $356 million during 2012, 2011 and 2010, respectively.

Total interest paid was $17 million, $16 million and $10 million during 2012, 2011 and 2010, respectively.

Non-cash transactions

In 2012, the Company determined it had misstated certain cash and non-cash items in 2011 and 2010 within and between “Net cash provided by operating activities” and “Net cash used in investing activities” in the Company’s Consolidated Statement of Cash Flow and, therefore, such items were corrected for the years ended December 31, 2011 and 2010. Although the Company does not consider these amounts to be material, the 2011 and 2010 amounts were revised to conform to the current year presentation. As a result of the correction, “Net cash provided by operating activities” decreased by $153 million, and “Net cash used by investing activities” increased by $153 million due to the removal of capitalized interest on bonds which is a non-cash transaction. For December 31, 2010, the impact of the reclass was $92 million.

In addition, offsetting adjustments of $5,299 million and $7,783 million for the years ended December 31, 2011 and 2010, were made to the “proceeds from” and “cost of” investments purchased within the investing section of the cash flow statement. These adjustments relate to the removal of “to be announced” (“TBA”) security purchase and sale commitments as they are non-cash transactions and the removal of dollar roll transactions as this is financing not investing activity. This correction of the Company’s Consolidated Statement

83

NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION

(a wholly owned subsidiary of New York Life Insurance Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

of Cash Flow did not impact the Company’s previously reported Consolidated Statement of Income or the Consolidated Balance Sheet and, in particular, “Cash and cash equivalents” reported at the end of 2011 and 2010 in the Company’s Consolidated Statement of Cash Flow remain unchanged.”

There was a non-cash capital contribution transaction of $177 million in the form of the release of intercompany payables for the year ended December 31, 2011 from New York Life.

Other non-cash investing transaction were $3 million for the year ended December 31, 2012, related to non-cash acquisitions of foreclosed property and non-redeemable preferred stock. Other non-cash investing transactions were $7 million for the year ended December 31, 2011, primarily related to transfers between mortgage loans, real estate and other invested assets. Other non-cash investing transactions were $134 million for the year ended December 31, 2010, primarily related to transfers between other invested assets, fixed maturities and mortgage loans.

NOTE 17 — STATUTORY FINANCIAL INFORMATION

The NAIC Accounting Practices and Procedures Manual (“NAIC SAP”) has been adopted as a component of prescribed or permitted practices by the state of Delaware. Prescribed statutory accounting practices include state laws and regulations. Permitted statutory accounting practices encompass accounting practices that are not prescribed; such practices differ from state to state, may differ from company to company within a state, and may change in the future. The state of Delaware has adopted all prescribed accounting practices found in NAIC SAP. The Company has one permitted practice related to certain separate account assets that are valued at book value instead of market value.

A reconciliation of the Company’s statutory surplus at December 31, 2012 and 2011 between NAIC SAP and practices prescribed or permitted by the Department is shown below (in millions):

	2012		2011
Statutory Surplus, Delaware Basis	$	6,399	$	5,794
State prescribed or permitted practices:
Presenting Guaranteed and Variable Universal Life Separate Accounts at book value		415		314
Statutory Surplus, NAIC SAP	$	6,814	$	6,108

Statutory net income for the years ended December 31, 2012, 2011 and 2010 was $639 million, $294 million and $562 million, respectively.

The Company is restricted as to the amounts it may pay as dividends to New York Life. Under Delaware Insurance Law, dividends on capital stock can be distributed only out of earned surplus. Furthermore, without prior approval of the Delaware Insurance Commissioner, dividends cannot be declared or distributed which exceed the greater of ten percent of the Company’s surplus or one hundred percent of net gain from operations. The Company did not pay or declare a dividend to its sole shareholder, New York Life at December 31, 2012 or 2011. As of December 31, 2012, the amount of available and accumulated funds derived from earned surplus from which the Company can pay dividends is $2,446 million. The maximum amount of dividends that may be paid in 2013 without prior approval is $637 million.

NOTE 18 — SUBSEQUENT EVENTS

As of March 14, 2013, the date the financial statements were available to be issued, there have been no events occurring subsequent to the close of the Company’s books or accounts for the accompanying consolidated financial statements that would have a material effect on the financial condition of the Company.

84

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholder of

New York Life Insurance and Annuity Corporation:

In our opinion, the accompanying consolidated statement of financial position and the related consolidated statements of operations, of comprehensive income, of stockholder’s equity and of cash flows present fairly, in all material respects, the financial position of New York Life Insurance and Annuity Corporation and its subsidiaries (the “Company”) at December 31, 2012 and 2011, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2012 in conformity with accounting principles generally accepted in the United States of America. 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 of these statements 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. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

As discussed in Note 3 to the consolidated financial statements, the Company changed the manner in which it accounts for the deferral of acquisition costs.

As disclosed in Note 14 to the consolidated financial statements, the Company has significant transactions with New York Life Insurance Company and its affiliates. Because of these relationships, it is possible that the terms of the transactions are not the same as those that would result from transactions among wholly unrelated parties.

PricewaterhouseCoopers LLP

March 14, 2013

85

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(NYLIAC) NI070

PART C. OTHER INFORMATION

ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS

a. Financial Statements.

All required financial statements are included in Part B of this Registration Statement.

b. Exhibits.

(1)	Resolution of the Board of Directors of New York Life Insurance and Annuity Corporation (“NYLIAC”) authorizing establishment of the Separate Account - Previously filed as Exhibit (1) to Registrant’s initial Registration Statement, re-filed in accordance with Regulation S-T, 17 CFR 232.102(e) as Exhibit (1) to Registrant’s Post-Effective Amendment No. 6 on Form N-4, and incorporated herein by reference.
(2)	Not applicable.
(3)(a)	Distribution Agreement between NYLIFE Securities Inc. and NYLIAC - Previously filed as Exhibit (3)(a) to Post-Effective Amendment No. 1 to the registration statement on Form S-6 for NYLIAC MFA Separate Account-I (File No. 2-86084), re-filed in accordance with Regulation S-T, 17 CFR 232.102(e) as Exhibit (3)(a) to Post-Effective Amendment No. 4 to the registration statement on Form S-6 for NYLIAC Variable Universal Life Separate Account-I (File No. 033-64410), and incorporated herein by reference.
(3)(b)	Distribution Agreement between NYLIFE Distributors Inc. and NYLIAC - Previously filed as Exhibit (3)(b) to Registrant’s Post-Effective Amendment No. 5 on Form N-4 , and incorporated herein by reference.
(3)(c)	Distribution and Underwriting Agreement, dated April 27, 2006, between New York Life Insurance and Annuity Corporation and NYLIFE Distributors LLC - Previously filed in accordance with Regulation S-T, 17 CFR 232.102(e) as Exhibit(c)(3) to Post-Effective Amendment No. 16 on Form N-6 for NYLIAC Corporate Sponsored Variable Universal Life Separate Account-I (File No. 333-48300), filed 8/15/06 and incorporated herein by reference.
(4)	Specimen Policy - Previously filed as Exhibit (4) to Registrant’s initial Registration Statement, re-filed in accordance with Regulation S-T, 17 CFR 232.102(e) as Exhibit (4) to Registrant’s Post-Effective Amendment No. 6 on Form N-4, and incorporated herein by reference.
(5)	Form of application for a Policy - Previously filed as Exhibit (5) to Registrant’s initial Registration Statement, re-filed in accordance with Regulation S-T, 17 CFR 232.102(e) as Exhibit (5) to Registrant’s Post-Effective Amendment No. 6 on Form N-4, and incorporated herein by reference.
(5)(a)	Form of Application for LifeStages Deferred Variable Annuities (204-593) - Previously filed in accordance with Regulation S-T, 17 CFR 232.102(e) as Exhibit (5)(e) to Post-Effective Amendment No. 3 to the registration statement on Form N-4 for NYLIAC Variable Annuity Separate Account - IV (File No. 333-106806), filed 8/26/04 and incorporated herein by reference.
(6)(a)	Certificate of Incorporation of NYLIAC - Previously filed as Exhibit (6)(a) to the registration statement on Form S-6 for NYLIAC MFA Separate Account-I (File No. 002-86083), re-filed in accordance with Regulation S-T, 17 CFR 232.102(e) as Exhibit (6)(a) to the initial registration statement on Form S-6 for NYLIAC Corporate Sponsored Variable Universal Life Separate Account-I (File No. 333-07617), and incorporated herein by reference.
(6)(a)(1)	Amended and Restated Certificate of Incorporation of NYLIAC (executed May 1, 2009) – Previously filed as Exhibit (6)(a)(1) to the registration statement on Form N-4 for the NYLIAC MFA Separate Account – I (File No. 2-86083), filed April 11, 2013 and incorporated herein by reference.
(6)(b)(1)	By-Laws of NYLIAC - Previously filed as Exhibit (6)(b) to the registration statement on Form S-6 for NYLIAC MFA Separate Account-I (File No. 002-86083), re-filed in accordance with Regulation S-T, 17 CFR 232.102(e) as Exhibit (6)(b) to the initial registration statement on Form S-6 for NYLIAC Corporate Sponsored Variable Universal Life Separate Account-I (File No. 333-07617), and incorporated herein by reference.
(6)(b)(2)	Amendments to By-Laws of NYLIAC - Previously filed in accordance with Regulation S-T, 17 CFR 232.102(e) as Exhibit (6)(b) to Pre-Effective Amendment No. 1 to the registration statement on Form S-6 for NYLIAC Variable Universal Life Separate Account-I (File No. 333-39157), and incorporated herein by reference.
(6)(b)(3)	Amended and Restated By-Laws of NYLIAC (effective May 1, 2009) – Previously filed as Exhibit (6)(b)(3) to the registration statement on Form N-4 for the NYLIAC MFA Separate Account – I (File No. 2-86083), filed April 11, 2013 and incorporated herein by reference.
(7)	Not applicable.
(8)(a)	Stock Sale Agreement between NYLIAC and MainStay VP Series Fund, Inc. (formerly New York Life MFA Series Fund, Inc.) - Previously filed as Exhibit (8)(a) to Pre-Effective Amendment No. 1 to the registration

C-1

	statement on Form N-1A for New York Life MFA Series Fund, Inc. (File No. 002-86082), re-filed in accordance with Regulation S-T, 17 CFR 232.102(e) as Exhibit (9)(a) to Pre-Effective Amendment No. 1 to the registration statement on Form S-6 for NYLIAC Corporate Sponsored Variable Universal Life Separate Account-I (File No. 333-07617), and incorporated herein by reference.
(8)(b)	Participation Agreement among Acacia Capital Corporation, Calvert Asset Management Company, Inc. and NYLIAC, as amended - Previously filed in accordance with Regulation S-T, 17 CFR 232.102(e) as Exhibit (9)(b)(1) to Pre-Effective Amendment No. 1 to the registration statement on Form S-6 for NYLIAC Corporate Sponsored Variable Universal Life Separate Account-I (File No. 333-07617), and incorporated herein by reference.
(8)(c)	Participation Agreement among The Alger American Fund, Fred Alger and Company, Incorporated and NYLIAC - Previously filed in accordance with Regulation S-T, 17 CFR 232.102(e) as Exhibit (9)(b)(2) to Pre-Effective Amendment No. 1 to the registration statement on Form S-6 for NYLIAC Corporate Sponsored Variable Universal Life Separate Account-I (File No. 333-07617), and incorporated herein by reference.
(8)(d)	Participation Agreement between Janus Aspen Series and NYLIAC - Previously filed in accordance with Regulation S-T, 17 CFR 232.102(e) as Exhibit (9)(b)(3) to Pre-Effective Amendment No. 1 to the registration statement on Form S-6 for NYLIAC Corporate Sponsored Variable Universal Life Separate Account-I (File No. 333-07617), and incorporated herein by reference.
(8)(e)	Participation Agreement among Morgan Stanley Universal Funds, Inc., Morgan Stanley Asset Management Inc. and NYLIAC - Previously filed in accordance with Regulation S-T, 17 CFR 232.102(e) as Exhibit (9)(b)(4) to Pre-Effective Amendment No. 1 to the registration statement on Form S-6 for NYLIAC Corporate Sponsored Variable Universal Life Separate Account-I (File No. 333-07617), and incorporated herein by reference.
(8)(f)	Amended and Restated Participation Agreement among Variable Insurance Products Funds, Fidelity Distributors Corporation and NYLIAC, as amended, dated November 23, 2009 - Previously filed in accordance with Regulation S-T, 17 CFR 232.102(e) as Exhibit (8)(f) to Post-Effective Amendment 24 to the registration statement on Form N-4 for NYLIAC Variable Annuity Separate Account-I (File No. 033-53342), filed 4/13/10 and incorporated herein by reference.
(8)(g)	Form of Participation Agreement among T. Rowe Price Equity Series, Inc., T. Rowe Price Associates, Inc. and NYLIAC - Previously filed in accordance with Regulation S-T, 17 CFR 232.102(e) as Exhibit 8(h) to Registrant’s Post-Effective Amendment No. 8 on Form N-4, and incorporated herein by reference.
(8)(h)	Form of Participation Agreement among Van Eck Worldwide Insurance Trust, Van Eck Associates Corporation and NYLIAC - Previously filed in accordance with Regulation S-T, 17 CFR 232.102(e) as Exhibit 8(i)to Registrant’s Post-Effective Amendment No. 8 on Form N-4, and incorporated herein by reference.
(8)(i)	Form of Participation Agreement among MFS Variable Insurance Trust, Massachusetts Financial Services Company and NYLIAC - Previously filed in accordance with Regulation S-T, 17 CFR 232.102(e) as Exhibit 8(j) to Registrant’s Post-Effective Amendment No. 8 on Form N-4, and incorporated herein by reference.
(8)(j)	Form of Participation Agreement among Dreyfus Investment Portfolios. The Dreyfus Corporation, Dreyfus Service Corporation and NYLIAC - Previously filed in accordance with Regulation S-T, 17 CFR 232.102(e) as Exhibit (9)(r) to Pre-Effective Amendment No. 1 to the registration statement on Form S-6 for NYLIAC Variable Universal Life Separate Account-I (File No. 333-57210), filed 6/4/01 and incorporated herein by reference.
(8)(k)	Form of Substitution Agreement among NYLIAC, MainStay Management LLC, and New York Life Investment Management LLC - Previously filed in accordance with Regulation S-T, 17 CFR 232.102(e) as Exhibit (9)(s) to Pre-Effective Amendment No. 1 to the registration statement on Form S-6 for NYLIAC Variable Universal Life Separate Account-I (File No. 333-57210), filed 6/4/01 and incorporated herein by reference.
(8)(l)	Amendment dated September 27, 2002 to Stock Sale Agreement dated June 4, 1993 between NYLIAC and MainStay VP Series Fund, Inc. - Previously filed in accordance with Regulation S-T, 17 CFR 232.102(e) as Exhibit (8)(m) to Post-Effective Amendment No. 18 to the registration statement on Form N-4 for NYLIAC Variable Annuity Separate Account-III (File No. 033-87382), filed 4/9/03 and incorporated herein by reference.
(8)(m)	Form of Participation Agreement among Neuberger Berman Advisors Management Trust, Neuberger Berman Management Inc. and NYLIAC - Previously filed in accordance with Regulation S-T, 17 CFR 232.102(e) as Exhibit (9)(q) to Pre-Effective Amendment No. 1 to the registration statement on Form S-6 for NYLIAC Variable Universal Life-Separate Account-I (File No. 333-57210), filed 6/4/01 and incorporated herein by reference.
(8)(n)	Form of Distribution and Administrative Services Agreement, Class S Shares, between Neuberger Berman Management, Inc. and NYLIAC - Previously filed in accordance with Regulation S-T, 17 CFR 232.102(e) as Exhibit (8)(w) to Post-Effective Amendment No. 19 to the registration statement on Form N-4 for NYLIAC Variable Annuity Separate Account-III (File No. 033-87382), file 5/14/03 and incorporated herein by reference.
(8)(o)	Form of Participation Agreement among Victory Variable Insurance Funds, BISYS Fund Services Limited Partnership, Victory Capital Management, Inc. and NYLIAC - Previously filed in accordance with Regulation S-T, 17 CFR 232.102(e) as Exhibit (8)(p) to Post-Effective Amendment No. 16 to the registration statement on Form N-4 for NYLIAC Variable Annuity Separate Account - I (File No. 033-53342), filed 4/5/04 and incorporated herein by reference.
(8)(p)	Form of Distribution and Service Agreement, Class A Shares, between BISYS Fund Services Limited Partnership and NYLIFE Securities Inc. - Previously filed in accordance with Regulation S-T, 17 CFR 232.102(e) as Exhibit (8)(q) to Post-Effective Amendment No. 16 to the registration statement on Form N-4 for NYLIAC Variable Annuity Separate Account - I (File No. 033-53342), filed 4/5/04 and incorporated herein by reference.
(8)(q)	Form of Participation Agreement among Liberty Variable Investment Trust, Columbia Funds Distributor, Inc. and NYLIAC - Previously filed in accordance with Regulation S-T, 17 CFR 232.102(e) as Exhibit (8)(a)(a) to Post-Effective Amendment No. 4 to the registration statement on Form N-4 for NYLIAC Variable Annuity Separate Account - IV (File No. 333-106806), filed 10/25/04 and incorporated herein by reference.
(8)(r)	Form of Participation agreement among Royce Capital Fund, Royce & Associates, LLC and NYLIAC - Previously filed in accordance with Regulation S-T, 17 CFR 232.102(e) as Exhibit (h)(19) to Post-Effective Amendment No. 10 to the registration statement on Form N-6 for NYLIAC Corporate Sponsored Variable Universal Life Separate Account - I (File No. 333-48300), filed 6/24/04 and incorporated herein by reference.
(8)(s)	Administrative Services Letter of Agreement between Columbia Funds Distributor, Inc. and NYLIAC - Previously filed in accordance with Regulation S-T, 17 CFR 231.102(e) as Exhibit (8)(t) to Post-Effective Amendment No. 18 to the registration statement on Form N-4 for NYLIAC Variable Annuity Separate Account-I (File No. 033-53342), filed 4/12/05 and incorporated herein by reference.
(8)(t)	Agreement between Royce & Associates, LLC and NYLIAC - Previously filed in accordance with Regulation S-T, 17 CFR 231.102(e) as Exhibit (8)(u) to Post-Effective Amendment No. 18 to the registration statement on Form N-4 for NYLIAC Variable Annuity Separate Account-I (File No. 033-53342), filed 4/12/05 and incorporated herein by reference.
(8)(u)	Form of Administrative and Shareholder Services Letter of Agreement dated 1/15/98 between Van Eck Worldwide Insurance Trust and NYLIAC - Previously filed in accordance with Regulation S-T, 17 CFR 232.102(e) as Exhibit (i)(9) to Post-Effective Amendment No. 11 to the registration statement on Form N-4 for NYLIAC Variable Universal Life Separate Account - 1 (File No. 333-79309), filed 9/13/05 and incorporated herein by reference.
(8)(v)	Administrative Services Agreement between New York Life Investment Management LLC and NYLIAC dated 1/1/05 - Previously filed in accordance with Regulation S-T, 17 CFR 232.102(e) as Exhibit (8)(w) to Post Effective Amendment No. 20 to the registration statement on Form N-4 for NYLIAC Variable Annuity Separate Account-I (File No. 033-53342), filed 4/10/06 and incorporated herein by reference.
(8)(w)	12b-1 Plan Services Agreement for the Service Class Shares of MainStay VP Series Fund, Inc. between NYLIFE Distributors LLC and NYLIAC dated 12/22/05 - Previously filed in accordance with Regulation S-T, 17 CFR 232.102(e) as Exhibit (8)(x) to Post Effective Amendment No. 20 to the registration statement on Form N-4 for NYLIAC Variable Annuity Separate Account-I (File No.033-53342), filed 4/10/06 and incorporated herein by reference.
(8)(x)	Participation Agreement among New York Life Insurance and Annuity Corporation, MainStay VP Series Fund, Inc., and New York Life Investment Management LLC dated 10/7/04 - Previously filed in accordance with Regulation S-T, 17 CFR 232.102(e) as Exhibit (8)(y) to Post Effective Amendment No. 20 to the registration statement on Form N-4 for NYLIAC Variable Annuity Separate Account-I (File No. 033-53342), filed 4/10/06 and incorporated herein by reference.
(8)(y)	Form of Participation Agreement among NYLIAC, PIMCO Variable Insurance Trust and PIMCO Advisors Distributors LLC - Previously filed in accordance with Regulation S-T, 17 CFR 232.102(e) ad Exhibit (h)(17) to Post-Effective Amendment No. 9 to the registration statement on Form N-6 for NYLIAC, Corporate Sponsored Variable Universal Life Separate Account-I (File No. 333-48300), filed 4/14/04 and incorporated herein by reference.
(8)(z)	Form of PIMCO Services Agreement For Advisor Class Shares of PIMCO Variable Insurance Trust, dated as of January 14, 2010, between NYLIAC and Pacific Investment Management Company LLC- Previously filed in accordance with Regulation S-T, 17 CFR 232.102(e) as Exhibit (8)(z) to Post-Effective Amendment No. 24 to the registration statement on Form N-4 for NYLIAC Variable Annuity Separate Account-I (File No. 033-53342), filed 4/13/10 and incorporated herein by reference.
(8)(a)(a)	Form of Administrative Services Agreement, dated March 25, 2011, and effective as of May 1, 2011, between Blackrock Advisors, LLC and NYLIAC - Previously filed in accordance with Regulation S-T, 17 CFR 232.102(e) as Exhibit (8)(a)(a) to Post-Effective Amendment No. 25 to the registration statement on Form N-4 for NYLIAC Variable Annuity Separate Account-I (File No. 033-53342), filed 4/14/11 and incorporated herein by reference.
(8)(b)(b)	Form of Fund Participation Agreement, dated March 25, 2011, and effective as of May 1, 2011, among Blackrock Variable Series Funds, Inc., Blackrock Investments, LLC, and NYLIAC - Previously filed in accordance with Regulation S-T, 17 CFR 232.102(e) as Exhibit (8)(b)(b) to Post-Effective Amendment No. 25 to the registration statement on Form N-4 for NYLIAC Variable Annuity Separate Account-I (File No. 033-53342), filed 4/14/11 and incorporated herein by reference.
8(c)(c)	Amended and Restated Administrative Services Agreement, dated 2/17/12, between New York Life Insurance and Annuity Corporation and New York Life Investment Management LLC - Previously filed in accordance with Regulation S-T, 17 CFR 232.102(e) as Exhibit (8)(c)(c) to Post-Effective Amendment No. 26 to the registration statement on Form N-4 for NYLIAC variable Annuity Separate Account-I (File No. 033-53342), filed 4/11/12 and incorporated herein by reference.
8(d)(d)	Amended and Restated 12b-1 Plan Services Agreement for the Service Class Shares of MainStay VP Funds Trust, dated 4/29/11, between NYLIFE Distributors LLC and New York Life Insurance and Annuity Corporation - Previously filed in accordance with Regulation S-T, 17 CFR 232.102(e) as Exhibit (8)(d)(d) to Post-Effective Amendment No. 26 to the Registration Statement on Form N-4 for NYLIAC variable Annuity Separate Account-I (File No. 033-53342), filed 4/11/12 and incorporated herein by reference.
(9)	Opinion and Consent of George S. Shively, Esq. - filed herewith.
(10)(a)	Consent of PricewaterhouseCoopers LLP - filed herewith.
(10)(b)	Powers of Attorney for Christopher T. Ashe, Director and Senior Vice President of NYLIAC - Filed herewith.
(10)(c)	Powers of Attorney for Christopher O. Blunt, Director and Executive Vice President of NYLIAC - Filed herewith.
(10)(d)	Powers of Attorney for Frank M. Boccio, Director and Executive Vice President of NYLIAC - Filed herewith.
(10)(e)	Powers of Attorney for John T. Fleurant, Director of NYLIAC - Filed herewith.
(10)(f)	Powers of attorney for Robert M. Gardner, First Vice President and Controller of NYLIAC - Filed herewith.
(10)(g)	Powers of Attorney for Steven D. Lash, Director and Senior Vice President of NYLIAC - Filed herewith.
(10)(h)	Powers of Attorney for Drew E. Lawton, Director and Senior Vice President of NYLIAC - Filed herewith.
(10)(i)	Powers of Attorney for Theodore A. Mathas, Chairman and President of NYLIAC - Filed herewith.
10(j)	Powers of Attorney for Angelo J. Scialabba, Vice President and Controller of NYLIAC - Filed herewith.
(10)(k)	Powers of Attorney for Arthur H. Seter, Director and Senior Vice President of NYLIAC - Filed herewith.
(10)(l)	Powers of Attorney for Michael E. Sproule, Director, Executive Vice President and Chief Financial Officer of NYLIAC - Filed herewith.
(10)(m)	Powers of Attorney for Joel M. Steinberg, Director and Senior Vice President of NYLIAC - Filed herewith.
(10)(n)	Powers of Attorney for Susan A. Thrope, Director of NYLIAC - Filed herewith.

C-2

(11)	Not applicable.
(12)	Not applicable.
(13)	Schedule of Computations - previously filed as Exhibit 13 to Registrant’s Post-Effective Amendment No. 8 on Form N-4 and incorporated herein by reference.

C-3

ITEM 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR

The principal business address of each director and officer of NYLIAC is 51 Madison Avenue, New York, NY 10010.

Name:	Title:
Mathas, Theodore A.	Director, Chairman and President
Sproule, Michael E.	Director, Executive Vice President and Chief Financial Officer
Blunt, Christopher O.	Director and Executive Vice President
Boccio, Frank M.	Director and Executive Vice President
Ashe, Christopher	Director and Senior Vice President
Lash, Steven D.	Director and Senior Vice President
Lawton, Drew E.	Director and Senior Vice President
Seter, Arthur H.	Director, Senior Vice President and Chief Investment Officer
Steinberg, Joel M.	Director, Senior Vice President, Chief Risk Officer and Chief Actuary
Gardner, Robert M.	Director and Vice President
Fleurant, John T.	Director
Thrope, Susan A.	Director
Kim, John Y.	Executive Vice President - CEO and President of New York Life Investments
Pfaff, Mark W.	Executive Vice President
Bennett, Joseph M.	Senior Vice President
Berlin, Scott L.	Senior Vice President
Cole, Thomas	Senior Vice President
DeSanto, Craig L.	Senior Vice President and Actuary
DiMella, Robert A.	Senior Vice President
DiRago, John C.	Senior Vice President
English, Thomas F.	Senior Vice President and Chief Legal Officer
Fisher, Stephen P.	Senior Vice President
Girard, Thomas J.	Senior Vice President
Hebron, Robert J.	Senior Vice President
Hendry, Thomas A.	Senior Vice President and Treasurer
Loffredo, John M.	Senior Vice President
Malloy, Anthony R.	Senior Vice President
McInerney, Barbara J.	Senior Vice President and Chief Compliance Officer
Oleske, Michael M.	Senior Vice President and Chief Tax Counsel
Pasteris, Paul T.	Senior Vice President
Paternoster, Susan L.	Senior Vice President
Pell, Gideon A.	Senior Vice President
Ramos, Edward	Senior Vice President
Roberts, Dan C.	Senior Vice President
Rocchi, Gerard A.	Senior Vice President
Senser, Jerrold K.	Senior Vice President
Shively, George S.	Senior Vice President
Talgo, Mark W.	Senior Vice President
Warren, Julia A.	Senior Vice President
Abramo, Stephen	Vice President
Ascione, Mitchell P.	Vice President
Bain, Karen	Vice President - Tax
Bartlett, Judy R.	Vice President and Associate Legal Officer
Barton, Jacqueline M.	Vice President
Bloom, Stephen A.	Vice President and Chief Underwriter
Brill, Elizabeth	Vice President and Actuary
Carbone, Jeanne M.	Vice President
Carey, Christopher H.	Vice President
Cohen, Louis N.	Vice President
Cristallo, James J.	Vice President and Actuary
Cunningham, Paul K.	Vice President
Dial, Robert H.	Vice President
Diaz, Mayra L.	Vice President
Donnelly, Kathleen A.	Vice President
Dubrow, Michael G.	Vice President
Feinstein, Jonathan	Vice President
Ferguson, Robert E.	Vice President
Ferraro, Anthony	Vice President and Actuary
Fitzgerald, Edward J.	Vice President
Fong, Michael	Vice President and Actuary
Frawley, Stephanie A.	Vice President
Friedman, Barbara T.	Vice President, Associate Legal Officer and Assistant Secretary
Furlong, Brian	Vice President
Galdi, Frank	Vice President
Gangemi, Thomas J.	Vice President
Greene, Paul G.	Vice President
Grove, Matthew M.	Vice President
Hamrick, Jane L.	Vice President and Actuary
Hoffman, Eric S.	Vice President
Huang, Dylan W.	Vice President and Actuary
Hynes, Joseph E.	Vice President
Hynes, Robert J.	Vice President
Joannides, Minas C. M.D.	Vice President and Chief Medical Officer
Karmen, Robert	Vice President and Associate Legal Officer
Kimble, Michael	Vice President
Koltisko, Joseph D.	Vice President
Kraus, Linda M.	Vice President
Kravitz, Jodi L.	Vice President and Actuary
Lackey, Michael P.	Vice President
Lamp, Karen J.	Vice President and Associate Legal Officer
Leber, Richard B.	Vice President, Associate Legal Officer and Assistant Secretary
Lenz, Scott L.	Vice President and Associate Tax Counsel
Loutrel, Brian C.	Vice President and Chief Privacy Officer
Lynn, Eric J.	Vice President and Actuary
Marinaccio, Ralph S.	Vice President
McDermott, Gail A.	Vice President
McGinnis, Timothy M.	Vice President
McNamara, Stephen	Vice President and Actuary
Moffitt, Eric A.	Vice President
Multer, Corey B.	Vice President
Murphy, Marijo F.	Vice President
Ok, Francis	Vice President
Oliviero, Michael J.	Vice President
Pasyanos, Nicholas	Vice President and Actuary
Perry, Valerie L.	Vice President - Underwriting
Petty, Mike	Vice President
Reimer, Linda M.	Vice President and Associate Legal Officer
Rubin, Janis C.	Vice President
Rzad, Amaury J.	Vice President
Saccullo, Kathi P.	Vice President
Scialabba, Angelo J.	Vice President and Controller
Seewald, Scott R.	Vice President
Serek, Donald R.	Vice President
Shannon, Joseph J.	Vice President
Shea, Thomas P.	Vice President
Sherman, Eric	Vice President and Actuary
Silber, Irwin	Vice President and Actuary
Smith, Kevin M.	Vice President
Tate, William P.	Vice President
Troeller, Thomas J.	Vice President and Actuary
Turner, Teresa A.	Vice President
Vaccaro, John	Vice President
Wagenseil, Taylor	Vice President
Wagner, Robin M.	Vice President
Walsh, Richard M.	Vice President
Weinstein, Scott W.	Vice President
Wion, Matthew D.	Vice President and Actuary
Yashnyk, Michael A.	Vice President
Bidwell, Anna Louise	Associate Legal Officer and Secretary

C-4

ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH DEPOSITOR OR REGISTRANT

The Depositor, NYLIAC, is a wholly-owned subsidiary of New York Life Insurance Company (“New York Life”). The Registrant is a segregated asset account of NYLIAC. The following chart indicates persons presumed to be controlled by New York Life(+), unless otherwise indicated. Subsidiaries of other subsidiaries are indented accordingly, and ownership is 100% unless otherwise indicated.

Name	Jurisdiction of Organization	Percent of Voting Securities Owned
Eclipse Funds Inc.(1)	Maryland
ICAP Funds Inc.	Maryland
Eclipse Funds(1)	Massachusetts
The MainStay Funds(1)	Massachusetts
MainStay VP Funds Trust(1)(2)	Maryland
MainStay Funds Trust	Delaware
New York Life Insurance and Annuity Corporation	Delaware
Pacific Square Investments LLC	Delaware
29 Park Investments No. 2 Limited	Cayman Islands
NYLIFE LLC	Delaware
Eagle Strategies LLC	Delaware

(1) Registered investment company as to which New York Life (“NYL”) and/or its subsidiaries perform one or more of the following services: investment management, administrative, distribution, transfer agency and underwriting services. It is not a subsidiary of NYL and is included for informational purposes only.

(2) New York Life Investment Management LLC serves as investment adviser to this entity, the shares of which are held of record by separate accounts of NYLIAC. New York Life disclaims any beneficial ownership and control of this entity. New York Life and NYLIAC as depositors of said separate accounts have agreed to vote their shares as to matters covered in the proxy statement in accordance with voting instructions received from holders of variable annuity and variable life insurance policies at the shareholders meeting of this entity. It is not a subsidiary of New York Life, but is included here for informational purposes only.

(+) By including the indicated corporations in this list, New York Life is not stating or admitting that said corporations are under its actual control; rather, these corporations are listed here to ensure full compliance with the requirements of this Form N-4.

C-5

Name	Jurisdiction of Organization	Percent of Voting Securities Owned
Biris Holdings LLC	Delaware
NYL Wind Investments LLC	Delaware
New York Life Short Term Fund	New York
NYLIFE Insurance Company of Arizona	Arizona
29 Park Investments No. 1 Limited	Cayman Islands
New York Life Insurance and Annuity Corporation	Delaware
Pacific Square Investments LLC	Delaware
29 Park Investments No. 2 Limited	Cayman Islands
New York Life Enterprises LLC	Delaware
SEAF Sichuan SME Investment Fund LLC	Delaware		39.98%
New York Life Insurance Taiwan Corporation	Taiwan
New York Life International Holdings Limited	Mauritius		12%
New York Life International India Fund (Mauritius) LLC	Mauritius		92.97%
NYL Cayman Holdings Ltd.	Cayman Islands
NYL Worldwide Capital Investments LLC	Delaware
FM Holdco LLC	Delaware
Fianzas Monterrey, S.A.	Mexico		99.95%
Operadora FMA, S.A. de C.V.	Mexico		99.99%
NYLIFE Thailand, Inc.	Delaware
PMCC Ltd.	Thailand		100%
NYLI-VB Asset Management Co. (Mauritius) LLC	Mauritius		90%
Seguros Monterrey New York Life, S.A. de C.V.	Mexico		99.998%
Administradora de Conductos SMNYL, S.A. de C.V.	Mexico		99%
Agencias de Distribucion SMNYL, S.A. de C.V.	Mexico		99%
New York Life Investment Management Holdings LLC	Delaware
Institutional Capital LLC	Delaware
MacKay Shields LLC	Delaware
MacKay Shields Core Plus Opportunities Fund GP LLC	Delaware
MacKay Shields Core Plus / Opportunities Fund LP	Delaware
MacKay Municipal Managers Opportunities GP LLC	Delaware
MacKay Municipal Opportunities Master Fund, L.P.	Delaware
MacKay Municipal Opportunities Fund, L.P.	Delaware
MacKay Municipal Managers Credit Opportunities GP LLC	Delaware
MacKay Municipal Credit Opportunities Master Fund, L.P.	Delaware
MacKay Municipal Credit Opportunities Fund, L.P.	Delaware
MacKay Municipal Short Term Opportunities Fund GP LLC	Delaware
MacKay Municipal Short Term Opportunities Fund LP	Delaware
Plainview Funds plc – Emerging Markets Credit Portfolio	Ireland
Plainview Funds plc – Flexible Bond Fund	Ireland
MacKay Shields Statutory Trust – High Yield Bond Series	Connecticut
MacKay Shields High Yield Active Core Fund GP LLC	Delaware
MacKay Shields High Yield Active Core Fund LP	Delaware
MacKay Shields Credit Strategy Fund Ltd	Cayman Islands
MacKay Shields Defensive Bond Arbitrage Fund Ltd.	Bermuda		18.47%
MacKay Shields Core Plus Opportunities Fund Ltd.	Cayman Islands
MacKay Shields General Partner (L/S) LLC	Delaware
MacKay Shields Long/Short Fund LP	Delaware
MacKay Shields Long/Short Fund (Master) LP	Delaware
MacKay Shields Long/Short Fund (QP) LP	Delaware
MacKay Shields Long/Short Fund (Offshore) LP	Cayman Islands
MacKay Shields Credit Strategy Partners LP	Delaware
MacKay Shields Core Fixed Income Fund GP LLC	Delaware
MacKay Shields Core Fixed Income Fund LP	Delaware
MacKay Shields Income Opportunities Fund GP, LLC	Delaware
MacKay Shields Income Opportunities Delaware Fund, L.P.	Delaware
MacKay Shields Income Opportunities Master Fund I, L.P.	Delaware
MacKay Shields Income Opportunities Master Fund II, L.P.	Delaware
MacKay Shields Income Opportunities Master Fund III, L.P.	Delaware
MacKay Shields Income Opportunities SPV 2, LLC	Delaware
MacKay Shields (International) Ltd.	UK
MacKay Shields (Services) Ltd.	UK
MacKay Shields UK LLP	UK
Madison Capital Funding LLC	Delaware
Faraday Holdings, LLC	Delaware		17.75%
Interior Specialists, Inc.	California
Heritage Interiors ISI, LLC	Arizona
SuperFloors ISI, LLC	Washington
Home Acres Holdings LLC	Delaware		50%
Home Acres Building Supply Co. LLC (“HASBC”)	Michigan
Kobrin Builder’s Supply Holdings, LLC (“KBSH”)	Michigan		54.95%
Kobrin Builders Supply, LLC	Florida
V-Line Logistics, LLC	Indiana
IDG Holdco, LLC	Delaware		45.24%
Identity Group Holdings Corp.	Delaware
Identity Group Holdings LLC	Delaware
Business Stationery LLC	Ohio
IDG, LLC	Delaware
SigLet, Inc.	Delaware
Redi-Tag Corporation	California
Graphics Systems, Inc.	Kansas
Scott Sign Systems, Inc.	Florida
AdMart Attractions, Inc.	New York
MCF Co-Investment GP, LLC	Delaware
MCF Co-Investment GP, LP	Delaware
Madison Capital Funding Co-Investment Fund, LP	Delaware
MCF Fund I LLC	Delaware
PSA-MHF Acquisition LLC	Delaware		28.3%
WDC Liquidation Trust
MCF Capital Management LLC	Delaware
OFS Capital WM, LLC	Delaware
Kirkwood Fund I LLC	Delaware		2.416%
Kirkwood Fund II LLC	Delaware		2.38%
Kirkwood Fund III LLC	Delaware
Madison Square Investors LLC	Delaware
Madison Square Investors Asian Equity Market Neutral Master Fund Ltd.	Cayman Islands
Madison Square Investors Large-Cap Enhanced Index Fund GP, LLC	Delaware
Madison Square Investors Large-Cap Enhanced Index Fund L.P.	Delaware

C-6

Name	Jurisdiction of Organization	Percent of Voting Securities Owned
GoldPoint Partners LLC	Delaware
New York Life Capital Partners, L.L.C.	Delaware
New York Life Capital Partners, L.P.	Delaware
New York Life Capital Partners II, L.L.C.	Delaware
New York Life Capital Partners II, L.P.	Delaware
New York Life Capital Partners III GenPar GP, LLC	Delaware
New York Life Capital Partners III GenPar, L.P.	Delaware
New York Life Capital Partners III, L.P.	Delaware
NYLCAP III RBG Corp.	Delaware
New York Life Capital Partners III-A, L.P.	Delaware
NYLCAP III-A RBG Corp.	Delaware
New York Life Capital Partners IV GenPar GP, LLC	Delaware
New York Life Capital Partners IV GenPar, L.P.	Delaware
New York Life Capital Partners IV, L.P.	Delaware
New York Life Capital Partners IV-A, L.P.	Delaware
GoldPoint Partners Co-Investment V GenPar GP LLC	Delaware
GoldPoint Partners Co-Investment V GenPar, L.P.	Delaware
GoldPoint Partners Co-Investment V, L.P.	Delaware
NYLCAP 2010 Co-Invest GenPar GP, LLC	Delaware
NYLCAP 2010 Co-Invest GenPar L.P.	Delaware
NYLCAP 2010 Co-Invest L.P.	Delaware
NYLCAP 2010 Co-Invest ECI Blocker Holdco A L.P.	Delaware
NYLCAP 2010 Co-Invest ECI Blocker A L.P.	Delaware
NYLCAP 2010 Co-Invest ECI Blocker Holdco B L.P.	Delaware
NYLCAP 2010 Co-Invest ECI Blocker B L.P.	Delaware
NYLCAP 2010 Co-Invest ECI Blocker Holdco C L.P.	Delaware
NYLCAP 2010 Co-Invest ECI Blocker C L.P.	Delaware
NYLCAP 2010 Co-Invest ECI Blocker Holdco D L.P.	Delaware
NYLCAP 2010 Co-Invest ECI Blocker D L.P.	Delaware
NYLCAP 2010 Co-Invest ECI Blocker Holdco E L.P.	Delaware
NYLCAP 2010 Co-Invest ECI Blocker E L.P.	Delaware
NYLCAP 2010 Co-Invest ECI Blocker Holdco F L.P.	Delaware
NYLCAP 2010 Co-Invest ECI Blocker F L.P.	Delaware
NYLCAP Canada GenPar Inc.	Canada
NYLCAP Select Manager Canada Fund, LP	Canada
NYLCAP Canada II GenPar Inc.	Canada
NYLCAP Select Manager Canada Fund II, L.P.	Canada
NYLIM Mezzanine GenPar GP, LLC	Delaware
NYLIM Mezzanine GenPar, LP	Delaware
New York Life Investment Management Mezzanine Partners, LP	Delaware
NYLIM Mezzanine Partners Parallel Fund, LP	Delaware
NYLIM Mezzanine Partners II GenPar GP, LLC	Delaware
NYLIM Mezzanine Offshore Partners II, LP	Cayman Islands
NYLIM Mezzanine Partners II GenPar, LP	Delaware
New York Life Investment Management Mezzanine Partners II, LP	Delaware
NYLIM Mezzanine II Luxco S.a.r.l.	Luxembourg
NYLIM Mezzanine Partners II Parallel Fund, LP	Delaware
NYLIM Mezzanine II Parallel Luxco S.a.r.l.	Luxembourg
NYLCAP Mezzanine Partners III GenPar GP, LLC	Delaware
NYLCAP Mezzanine Offshore Partners II-S GP, Limited	Scotland
NYLCAP Mezzanine Partners III GenPar, LP	Delaware
NYLCAP Mezzanine Partners III-K Fund, LP	Delaware
NYLCAP Mezzanine Offshore Partners III-S, LP	Scotland
NYLCAP Mezzanine Partners III, LP	Delaware
NYLCAP Mezzanine III Luxco S.a.r.l.	Luxembourg
NYLCAP Mezzanine Partners III Parallel Fund, LP	Delaware
NYLCAP Mezzanine Partners III 2012 Co-Invest, LP	Delaware
NYLCAP Mezzanine III 2012 Luxco S.à.r.l	Luxembourg
NYLCAP Mezzanine Partners III 2012 Co-Invest ECI Blocker Holdco A, LP	Delaware
NYLCAP Mezzanine Partners III 2012 Co-Invest ECI Blocker A, LP	Delaware
NYLCAP Mezzanine Offshore Partners III, L.P.	Cayman Islands
NYLCAP Select Manager GenPar GP, LLC	Delaware
NYLCAP Select Manager GenPar, LP	Delaware
NYLCAP Select Manager Fund, LP	Delaware
NYLCAP Select Manager Cayman Fund, LP	Cayman Islands
NYLCAP Select Manager II GenPar GP, LLC	Delaware
NYLCAP Select Manager II GenPar, L.P.	Cayman Islands
NYLCAP Select Manager Fund II, L.P.	Cayman Islands
NYLCAP India Funding LLC	Delaware
NYLIM-JB Asset Management Co., LLC	Mauritius		24.66%
New York Life Investment Management India Fund II, LLC	Mauritius
New York Life Investment Management India Fund (FVCI) II, LLC	Mauritius
NYLCAP India Funding III LLC	Delaware
NYLIM-Jacob Ballas Asset Management Co. III, LLC	Mauritius		24.66%
NYLIM Jacob Ballas India Fund III (Mauritius) LLC
NYLIM Jacob Ballas Capital India (FVCI) III (Mauritius) LLC
NYLIM Jacob Ballas India (FII) III (Mauritius) LLC
NYLCAP Holdings	Mauritius
Jacob Ballas Capital India PVT. Ltd.	Mauritius		23.30%
NYLIM Service Company LLC	Delaware
NYL Workforce GP LLC	Delaware
New York Life Investment Management LLC	Delaware
New York Life Investment Management (U.K.) Limited	United Kingdom
NYLIM Large Cap Enhanced Index Fund p.l.c.	Ireland
NYLIM Fund II GP, LLC	Delaware
NYLIM Real Estate Mezzanine Fund II, LP	Delaware
NYLIM-TND, LLC	Delaware
NYLIM-DCM, LLC	Delaware
NYLIM-MM, LLC	Delaware
DCM-N, LLC	Delaware		80%
DCM Warehouse Series A, LLC	Delaware
DCM Warehouse Series One, LLC	Delaware
Sixteen West Savannah, LLC	Indiana
Metropolis II Construction, LLC	Delaware
Streets Las Vegas, LLC	Arizona		90%
NYLIM RE Mezzanine Fund II Investment Corporation	Delaware
Albany Hills Holding, LLC	Arkansas
Joplin Holding, LLC	Delaware
Joplin Properties, LLC	Arkansas		50%
NYLIM-JP, LLC	Delaware
Jefferson at Maritime Holding, L.P.	Delaware
Jefferson at Maritime GP, LLC	Delaware
Jefferson at Maritime, L.P.	Delaware

C-7

Name	Jurisdiction of Organization	Percent of Voting Securities Owned
NYLIM-GCR Fund I, LLC	Delaware		50%
WFHG GP, LLC	Delaware		50%
Workforce Housing Fund I-2007 LP	Delaware
New York Life Investments International Limited	Ireland
NYLIFE Distributors LLC	Delaware
NYLIM Holdings NCVAD GP, LLC	Delaware
Private Advisors L.L.C.	Delaware
Private Advisors Small Company Buyout Fund V, LP	Delaware		60%
Madison Core Property Fund LLC	Delaware		3.565%
MIREF 1500 Quail, LLC	Delaware
MIREF Mission Heritage, LLC	Delaware
MIREF Linpro Center, LLC	Delaware
MIREF Mill Creek, LLC	Delaware
MIREF Gateway, LLC	Delaware
MIREF Delta Court, LLC	Delaware
MIREF Seaside, LLC	Delaware
MIREF Zanker Road, LLC	Delaware
MIREF Fremont Distribution Center, LLC	Delaware
1101 Taylor Road LLC	Delaware
MIREF Century, LLC	Delaware
MIREF York Road, LLC	Delaware
York Road EW, LLC	Delaware
York Road Retail West, LLC	Delaware
MIREF Saddle River LLC	Delaware
Via Verde San Dimas, LLC	Delaware
MIREF DC Corp.	Delaware
MIREF L Street, LLC	Delaware
1901 L Street Corp.	Delaware
1901 L Street LLC	District of Columbia
MIREF Broadstone Uptown Lofts, LLC	Delaware
Texas Broadstone Uptown Lofts, L.P.	Texas
MIREF Newpoint Commons, LLC	Delaware
MIREF Carol Point, LLC	Delaware
MIREF Broadstone Westway Park, LLC	Delaware
Texas Broadstone Westway Park, L.P.	Texas
MIREF Northsight, LLC	Delaware
MIREF Riverside, LLC	Delaware
MIREF Corporate Woods, LLC	Delaware
MIREF Bedminster, LLC	Delaware
MIREF Barton’s Creek, LLC	Delaware
Barton’s Lodge Apartments, LLC	Delaware
MIREF Marketpointe, LLC	Delaware
MIREF 101 East Crossroads, LLC	Delaware
101 East Crossroads, LLC	Delaware
MIREF Waterview, LLC	Delaware
MIREF Chain Bridge, LLC	Delaware
1991 Chain Bridge Road, LLC	Delaware
MIREF Aptakisic, LLC	Delaware
Aptakisic Creek Corporate Park, LLC	Delaware
MIREF 250 Montgomery, LLC
MIREF Hawthorne, LLC	Delaware
MIREF Auburn 277, LLC	Delaware
MIREF Sumner North, LLC	Delaware
MIREF Wellington, LLC	Delaware
MIREF Warner Center, LLC	Delaware
Valley Business Park LLC	Delaware
NYLIM Flatiron CLO 2003-1 Ltd.	Cayman Islands
NYLIM Flatiron CLO 2003-1 Equity Holdings LLC, Series A	Cayman Islands
NYLIM Flatiron CLO 2004-1 Ltd.	Cayman Islands
NYLIM Flatiron CLO 2004-1 Equity Holdings LLC, Series A	Cayman Islands
NYLIM Flatiron CLO 2005-1 Ltd.	Cayman Islands
NYLIM Flatiron CLO 2005-1 Equity Holdings LLC, Series A	Cayman Islands
NYLIM Flatiron CLO 2006-1 Ltd.	Cayman Islands
NYLIM Flatiron CLO 2006-1 Equity Holdings LLC, Series A	Cayman Islands
Flatiron CLO 2007-1 Ltd.	Cayman Islands
NYLIM Flatiron CLO 2007-1 Equity Holdings LLC, Series A	Cayman Islands
Flatiron CLO 2011-1 Ltd.	Cayman Islands
Flatiron CLO 2012-1 Ltd.	Cayman Islands
Flatiron CLO 2013-1-Ltd.	Cayman Islands
Stratford CDO 2001-1 Ltd.	Cayman Islands
Silverado CLO 2006-II Limited	Cayman Islands
Silverado 2006-II Equity Holdings LLC, Series A	Cayman Islands
NYLIFE LLC	Delaware
Eagle Strategies LLC	Delaware
New York Life Capital Corporation	Delaware
NYL Management Limited	United Kingdom
New York Life Trust Company	New York
NYL Executive Benefits LLC	Delaware
NYLIFE Securities LLC	Delaware
NYLINK Insurance Agency Incorporated	Delaware
NYLUK I Company	United Kingdom
NYLUK II Company	United Kingdom
Gresham Mortgage	United Kingdom
W Construction Company	United Kingdom
WUT	United Kingdom
WIM (AIM)	United Kingdom
Silver Spring, LLC	Delaware
Silver Spring Associates, L.P.	Pennsylvania
SCP 2005-C21-002 LLC	Delaware
SCP 2005-C21-003 LLC	Delaware
SCP 2005-C21-006 LLC	Delaware
SCP 2005-C21-007 LLC	Delaware
SCP 2005-C21-008 LLC	Delaware
SCP 2005-C21-009 LLC	Delaware
SCP 2005-C21-017 LLC	Delaware
SCP 2005-C21-018 LLC	Delaware
SCP 2005-C21-021 LLC	Delaware
SCP 2005-C21-025 LLC	Delaware
SCP 2005-C21-031 LLC	Delaware
SCP 2005-C21-036 LLC	Delaware
SCP 2005-C21-041 LLC	Delaware
SCP 2005-C21-043 LLC	Delaware
SCP 2005-C21-044 LLC	Delaware
SCP 2005-C21-048 LLC	Delaware
SCP 2005-C21-061 LLC	Delaware
SCP 2005-C21-063 LLC	Delaware
SCP 2005-C21-067 LLC	Delaware
SCP 2005-C21-069 LLC	Delaware
SCP 2005-C21-070 LLC	Delaware
NYMH-Ennis GP, LLC	Delaware
NYMH-Ennis, L.P.	Texas
NYMH-Freeport GP, LLC	Delaware
NYMH-Freeport, L.P.	Texas
NYMH-Houston GP, LLC	Delaware
NYMH-Houston, L.P.	Texas
NYMH-Plano GP, LLC	Delaware
NYMH-Plano, L.P.	Texas
NYMH-San Antonio GP, LLC	Delaware
NYMH-San Antonio, L.P.	Texas
NYMH-Stephenville GP, LLC	Delaware
NYMH-Stephenville, L.P.	Texas
NYMH-Taylor GP, LLC	Delaware
NYMH-Taylor, L.P.	Texas
NYMH-Attleboro MA, LLC	Delaware
NYMH-Farmingdale, NY LLC	Delaware
NYLMDC-King of Prussia GP, LLC	Delaware
NYLMDC-King of Prussia Realty, LP	Delaware
NYLife Real Estate Holdings LLC	Delaware
Huntsville NYL LLC	Delaware
CC Acquisitions, LP	Delaware
NYL Midwest Apartments LLC	Delaware
REEP-IND Fridley MN LLC	Minnesota
REEP-IND Green Oaks IL LLC	Delaware
REEP-IND NJ LLC	Delaware
NJIND JV LLC	Delaware		93%
NJIND Hook Road LLC	Delaware
NJIND Old Post Road LLC	Delaware
NJIND Brunswick Avenue LLC	Delaware
NJIND Raritan Center LLC	Delaware
NJIND Talmadge Road LLC	Delaware
NJIND Bay Avenue LLC	Delaware
NJIND Melrich Road LLC	Delaware
NJIND Carter Drive LLC	Delaware
NJIND Corbin Street LLC	Delaware
REEP-IND Kent LLC	Delaware
REEP-MF Enclave TX LLC	Delaware
REEP-MF Issaquah WA LLC	Delaware
REEP-MF Mira Loma II TX LLC	Delaware
REEP-MF Mount Vernon GA LLC	Delaware
REEP-MF Verde NC LLC	Delaware
REEP-MF Summitt Ridge CO LLC	Delaware
REEP-MF Woodridge IL LLC	Delaware
REEP-OF Centerpointe VA LLC	Delaware
REEP-OFC 575 Lex NY LLC	Delaware
REEP-OFC 575 Lex NY GP LLC	Delaware
REEP OFC Westory DC LLC	Delaware
REEP-RTL SASI GA LLC	Delaware
PTC Acquisitions, LLC	Delaware
Martingale Road LLC	Delaware		71.4693%
North Andrews Avenue LLC	Delaware
New York Life Funding	Cayman Islands
New York Life Global Funding	Delaware
Government Energy Savings Trust 2003-A (GEST)	New York
UFI-NOR Federal Receivables Trust, Series 2009B	New York
NYLARC Holding Company Inc.	Arizona
New York Life Agents Reinsurance Company	Arizona

C-8

ITEM 27. NUMBER OF CONTRACT OWNERS

As of January 31, 2013, there were approximately 11,329 owners of Non-Qualified Policies offered under NYLIAC Variable Annuity Separate Account-I.

ITEM 28. INDEMNIFICATION

The Officers and Directors of NYLIAC are indemnified pursuant to Section 141(f) of the General Corporation Law of the State of Delaware and under Section 8.01 of the By-Laws of New York Life Insurance and Annuity Corporation, as adopted on November 3, 1980 and amended on April 6, 1988, May 13, 1997, and May 1, 2009.

Section 8.01 of the NYLIAC By-Laws provide for indemnification as follows:

8.01 – LIMITATION OF LIABILITY: INDEMNIFICATION AND ADVANCEMENT OF EXPENSES

(a) LIMITATION OF LIABILITY FOR DIRECTORS – No director of the Corporation shall be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the directors duty of loyalty of the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the General Corporation Law of the State of Delaware, or (iv) for any transaction from which the director derived an improper personal benefit. If the General Corporation Law of the State of Delaware is amended to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the General Corporation Law of the State of Delaware, as so amended.

(b) INDEMNIFICATION AND ADVANCEMENT OF EXPENSES OF DIRECTORS AND OFFICERS – Except to the extent expressly prohibited by the General Corporation Law of the State of Delaware, the Corporation shall indemnify any director or officer who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation), by reason of the fact that such person is or was a director or officer of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against judgments, fines, amounts paid in settlement and reasonable expenses (including attorneys’ fees) actually and reasonably incurred by such person in connection with such action, suit or proceeding if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe such person’s conduct was unlawful.

Except to the extent expressly prohibited by the General Corporation Law of the State of Delaware, the Corporation shall indemnify any director or officer who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that such person is or was a director or officer of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against reasonable expenses (including attorneys’ fees) actually and reasonably incurred by such person in connection with the defense or settlement of such action, suit or proceeding if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the Corporation; provided, that, no indemnification shall be made in respect of any action, suit or proceeding as to which such person shall have been adjudged to be liable to the Corporation unless and only to the extent that the Court of Chancery or the court in which such action, suit or proceeding was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper.

The Corporation shall advance to or promptly reimburse upon request reasonable expenses (including attorneys’ fees) incurred by a director or officer in defending any civil, criminal, administrative or investigative action, suit or proceeding in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such director or officer to repay such amount if it shall ultimately be determined that such person is not entitled to be indemnified by the Corporation as authorized in this Section 8.01; provided, however, that such director or officer shall cooperate in good faith with any request by the Corporation that common counsel be utilized by the parties to an action or proceeding who are similarly situated unless to do so would be inappropriate due to actual or potential differing interests between or among such parties.

The indemnification of any person provided by this Section 8.01 shall continue after such person has ceased to be a director or officer of the Corporation and shall inure to the benefit of such person’s heirs, executors, administrators or legal representative.

The Corporation is authorized to enter into agreements with any of its directors, officers or employees extending rights to indemnification and advancement of expenses to any such person to the fullest extent permitted by applicable law, but the failure to enter into any such agreement shall not affect or limit the rights of any such person pursuant to this Section 8.01.

In case any provision in this Section 8.01 shall be determined at any time to be unenforceable in any respect, the other provisions hereof shall not in any way be affected or impaired thereby, and the affected provision shall be given the fullest possible enforcement in the circumstances, it being the intention of the Corporation to afford indemnification and advancement of expenses to its directors and officers, acting in such capacities or in the other capacities mentioned herein, to the fullest extent permitted by law.

(c) DETERMINATION OF INDEMNIFICATION

(i) DIRECTORS AND OFFICERS – Subject to the General Corporation Law of the State of Delaware, any indemnification of directors and officers shall be made by either (A) the Corporation’s Board of Directors or (B) the Corporation’s shareholders, upon a determination that such indemnification is proper in the circumstances.

(ii) EMPLOYEES AND AGENTS – Subject to the General Corporation of the State of Delaware, the Corporation may indemnify persons who are or were employees (other than officers of the Corporation), agents, or independent contractors of the Corporation upon the advice of the Corporation’s legal counsel and a determination by (A) the Corporation’s Board of Directors or (B) the Corporation’s shareholders, that such indemnification is proper in the circumstances.

ITEM 29. PRINCIPAL UNDERWRITERS

(a) Investment companies (other than the Registrant) for which NYLIFE Distributors LLC is currently acting as underwriter:

NYLIAC Corporate Sponsored Variable Universal Life Separate Account-I

NYLIAC Variable Universal Life Separate Account-I

NYLIAC MFA Separate Account-I

NYLIAC MFA Separate Account-II

NYLIAC Variable Annuity Separate Account-II

NYLIAC Variable Annuity Separate Account-III

NYLIAC Variable Annuity Separate Account-IV

C-9

NYLIAC VLI Separate Account

Eclipse Funds

MainStay Funds

MainStay VP Funds Trust

McMorgan Funds

NYLIM Institutional Funds

(b) Directors and Officers.

The principal business address of each director and officer of NYLIFE Distributors LLC is 169 Lackawanna Avenue, Parsippany, New Jersey 07054.

Names of Directors and Officers	Positions and Offices with Underwriter
Drew E. Lawton	Chairman and Chief Executive Officer
Stephen P. Fisher	President and Chief Operating Officer
Robert Gardner	Manager
Robert J. Hebron	Executive Vice President, AMN Executive Benefits and Retail Distribution
Christopher Ashe	Senior Vice President and Chief Financial Officer
John Akkerman	Senior Managing Director, MacKay Shields Institutional Sales
Robert M. Barrack	Managing Director, GoldPoint Partners Institutional Sales
Todd Childress	Managing Director, Private Advisors Institutional Sales
David J. Castellani	Senior Managing Director, Retirement Plan Services
Barbara McInerney	Senior Managing Director, Compliance
Daniel A. Andriola	Manager
Mark A. Gomez	Managing Director and General Counsel
Joseph J. Henehan	Managing Director, Retirement Plan Services
Rebekah M. Mueller	Managing Director, Retirement Plan Services
Mark. S. Niziak	Managing Director, Retirement Plan Services
John J. O’Gara	Managing Director, Life Distribution, Retirement Income Security
Amanda Parness	Managing Director, GoldPoint Partners Institutional Sales
Stephen Sexeny	Managing Director, Cornerstone Capital Management Institutional Sales
Robin Wagner	Managing Director and Chief Compliance Officer
Brian Wickwire	Managing Director and Controller
Mary Ann Aull	Director - Financial Operations and Treasurer
Christine M. Dempsey	Director
David S. Nescheles	Director, Independent Channel, Retirement Income Security
Linda M. Howard	Director, Compliance and Anti-Money Laundering Officer
Paula Taylor	Director, Retirement Plan Services
Kaven Bain	Vice President, Tax
Marta Hansen	Vice President
Rafaela Herrera	Vice President, Compliance

C-10

ITEM 30. LOCATION OF ACCOUNTS AND RECORDS

All accounts and records required to be maintained by Section 31(a) of the 1940 Act and the rules under it are maintained by NYLIAC at its home office, 51 Madison Avenue, Room 0150, New York, New York 10010; New York Life – Records Division, 110 Cokesbury Road, Lebanon, New Jersey 08833 and with Iron Mountain Records Management, Inc. at both 8 Neptune Drive, Poughkeepsie, New York 12601 and Route 9W South, Port Ewen, New York 12466-0477.

ITEM 31. MANAGEMENT SERVICES – Not applicable.

ITEM 32. UNDERTAKINGS – Registrant hereby undertakes:

(a) to a file 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 16 months old for so long as payments under the variable annuity contracts may be accepted;

(b) to include either (1) as part of any application to purchase a contract offered by the prospectus, a space that an applicant can check to request a Statement of Additional Information, or (2) a post card or similar written communication affixed to or included in the prospectus that the applicant can remove to send for a Statement of Additional Information; and

(c) to deliver any Statement of Additional Information and any financial statements required to be made available under this Form promptly upon written or oral request.

REPRESENTATION AS TO THE REASONABLENESS OF AGGREGATE FEES AND CHARGES

New York Life Insurance and Annuity Corporation (“NYLIAC”), the sponsoring insurance company of the NYLIAC Variable Annuity Separate Account-I, hereby represents that the fees and charges deducted under the NYLIAC New York Life Flexible Premium (formerly New York Life LifeStages Flexible Premium) Variable Annuity Policies are reasonable in relation to the services rendered, the expenses expected to be incurred and the risks assumed by NYLIAC.

SECTION 403(b) REPRESENTATIONS

Registrant represents that it is relying on a no-action letter dated November 28, 1988, to the American Council of Life Insurance (Ref. No. IP-6-88) regarding Sections 22(e), 27(c)(1), and 27(d) of the Investment Company Act of 1940, in connection with redeemability restrictions on Section 403(b) Policies, and that paragraphs numbered (1) through (4) of that letter will be complied with.

C-11

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 Amendment to the Registration Statement to be signed on its behalf, in the City and State of New York on this 15th day of April, 2013.

NYLIAC VARIABLE ANNUITY SEPARATE ACCOUNT-I                 (Registrant)
By	/s/    Dylan W. Huang
	Dylan W. Huang Vice President

NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION                 (Depositor)
By	/s/    Dylan W. Huang
	Dylan W. Huang Vice President

As required by the Securities Act of 1933, this Amendment to the Registration Statement has been signed by the following persons in the capacities and on the date indicated:

Christopher T. Ashe*	Director
Christopher O. Blunt*	Director
Frank M. Boccio*	Director
John T. Fleurant*	Director
Robert M. Gardner*	Director and Vice President
Steven D. Lash*	Director
Drew E. Lawton*	Director and Senior Vice President
Theodore A. Mathas*	Director, Chairman and President (Principal Executive Officer)
Angelo J. Scialabba*	Vice President and Controller (Principal Accounting Officer)
Arthur H. Seter*	Director
Michael E. Sproule*	Director and Chief Financial Officer
Joel M. Steinberg*	Director
Susan A. Thrope*	Director

/s/    Dylan W. Huang        

Dylan W. Huang

Attorney-in-Fact
April 15, 2013

* Pursuant to Powers of Attorney filed herewith.

EXHIBIT INDEX

Exhibit Number	Description
(9)	Opinion and Consent of George S. Shively
(10)(a)	Consent of PricewaterhouseCoopers LLP
(10)(b)	Powers of Attorney, Christopher T. Ashe
(10)(c)	Powers of Attorney, Christopher O. Blunt
(10)(d)	Powers of Attorney, Frank M. Boccio
(10)(e)	Powers of Attorney, John T. Fleurant
(10)(f)	Powers of Attorney, Robert M. Gardner
(10)(g)	Powers of Attorney, Steven D. Lash
(10)(h)	Powers of Attorney, Drew E. Lawton
(10)(i)	Powers of Attorney, Theodore A. Mathas
(10)(j)	Power of Attorney, Angelo J. Scialabba
(10)(k)	Powers of Attorney, Arthur H. Seter
(10)(l)	Powers of Attorney, Michael E. Sproule
(10)(m)	Powers of Attorney, Joel M. Steinberg
(10)(n)	Powers of Attorney, Susan A. Thrope