-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, R/sMK+fDX8aTmE7Vk4uP2NGYl81KeKkYf23UHSWaRDkQa2F+pni3JieXd3916Wf5 6eSxpePzAJ2dbc9tUjUx3g== 0000950123-07-005168.txt : 20070406 0000950123-07-005168.hdr.sgml : 20070406 20070406144355 ACCESSION NUMBER: 0000950123-07-005168 CONFORMED SUBMISSION TYPE: 485BPOS PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 20070406 DATE AS OF CHANGE: 20070406 EFFECTIVENESS DATE: 20070430 FILER: COMPANY DATA: COMPANY CONFORMED NAME: METLIFE OF CT FUND BD II FOR VARIABLE ANNUITIES CENTRAL INDEX KEY: 0000941729 IRS NUMBER: 060904249 STATE OF INCORPORATION: CT FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: 1933 Act SEC FILE NUMBER: 033-58131 FILM NUMBER: 07754226 BUSINESS ADDRESS: STREET 1: METLIFE LIFE AND ANNUITY CO OF CT STREET 2: ONE CITYPLACE, 185 ASYLUM STREET, 3CP CITY: HARTFORD STATE: CT ZIP: 06103-3415 BUSINESS PHONE: 1-800-842-9325 MAIL ADDRESS: STREET 1: METLIFE LIFE AND ANNUITY CO OF CT STREET 2: ONE CITYPLACE, 185 ASYLUM STREET, 3CP CITY: HARTFORD STATE: CT ZIP: 06103-3415 FORMER COMPANY: FORMER CONFORMED NAME: TRAVELERS FUND BD II FOR VARIABLE ANNUITIES DATE OF NAME CHANGE: 19950316 FILER: COMPANY DATA: COMPANY CONFORMED NAME: METLIFE OF CT FUND BD II FOR VARIABLE ANNUITIES CENTRAL INDEX KEY: 0000941729 IRS NUMBER: 060904249 STATE OF INCORPORATION: CT FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: 1940 Act SEC FILE NUMBER: 811-07259 FILM NUMBER: 07754227 BUSINESS ADDRESS: STREET 1: METLIFE LIFE AND ANNUITY CO OF CT STREET 2: ONE CITYPLACE, 185 ASYLUM STREET, 3CP CITY: HARTFORD STATE: CT ZIP: 06103-3415 BUSINESS PHONE: 1-800-842-9325 MAIL ADDRESS: STREET 1: METLIFE LIFE AND ANNUITY CO OF CT STREET 2: ONE CITYPLACE, 185 ASYLUM STREET, 3CP CITY: HARTFORD STATE: CT ZIP: 06103-3415 FORMER COMPANY: FORMER CONFORMED NAME: TRAVELERS FUND BD II FOR VARIABLE ANNUITIES DATE OF NAME CHANGE: 19950316 0000941729 S000005484 METLIFE OF CT FUND BD II FOR VARIABLE ANNUITIES C000014924 Vintage Annuity 485BPOS 1 m29590e485bpos.txt 485BPOS AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 6, 2007 REGISTRATION STATEMENT NO. 033-58131 811-07259 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------- FORM N-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 POST-EFFECTIVE AMENDMENT NO. 12 AND REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 AMENDMENT NO. 12 METLIFE OF CT FUND BD II FOR VARIABLE ANNUITIES (Exact name of Registrant) METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT (Name of Depositor) ONE CITYPLACE, HARTFORD, CONNECTICUT 06199 (Address of Depositor's Principal Executive Offices) Depositor's Telephone Number, including area code: (860) 308-1000 MARIE C. SWIFT, ESQ. METROPOLITAN LIFE INSURANCE COMPANY 501 BOYLSTON STREET BOSTON, MA 02116 (Name and Address of Agent Agent for Service) Approximate Date of Proposed Public Offering: It is proposed that this filing will become effective (check appropriate box): [ ] immediately upon filing pursuant to paragraph (b) of Rule 485. [X] on April 30, 2007 pursuant to paragraph (b) of Rule 485. [ ] 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: Individual Variable Annuity Contracts - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- VINTAGE(SM) ANNUITY PROSPECTUS: METLIFE OF CT FUND BD FOR VARIABLE ANNUITIES METLIFE OF CT FUND BD II FOR VARIABLE ANNUITIES This prospectus describes VINTAGE(SM) ANNUITY, a flexible premium deferred variable annuity contract (the "Contract") issued by MetLife Insurance Company of Connecticut or MetLife Life and Annuity Company of Connecticut. MetLife Life and Annuity Company of Connecticut does not solicit or issue insurance products in the state of New York. Refer to your Contract for the name of your issuing company. The Contract is available in connection with certain retirement plans that qualify for special federal income tax treatment ("Qualified Contracts") as well as those that do not qualify for such treatment ("Non-qualified Contracts"). We may issue it as an individual contract or as a group contract. When we issue a group contract, you will receive a certificate summarizing the Contract's provisions. For convenience, we refer to contracts and certificates as "Contracts." You can choose to have your premium ("Purchase Payments") accumulate on a variable and/or, subject to availability, fixed basis in one of our funding options. Your Contract Value before the Maturity Date and the amount of monthly income afterwards will vary daily to reflect the investment experience of the Variable Funding Options you select. You bear the investment risk of investing in the Variable Funding Options. The Variable Funding Options available as of April 30, 2007 are: AMERICAN FUNDS INSURANCE SERIES -- CLASS 2 LEGG MASON PARTNERS VARIABLE INCOME TRUST American Funds Global Growth Fund Legg Mason Partners Variable High Income American Funds Growth Fund Portfolio American Funds Growth-Income Fund Legg Mason Partners Variable Money Market DREYFUS VARIABLE INVESTMENT FUND -- INITIAL Portfolio SHARES MET INVESTORS SERIES TRUST Dreyfus Variable Investment Fund Developing Batterymarch Mid-Cap Stock Leaders Portfolio Portfolio -- Class A LEGG MASON PARTNERS VARIABLE EQUITY TRUST BlackRock Large-Cap Core Portfolio -- Class Legg Mason Partners Variable Aggressive E Growth Portfolio -- Class I Lord Abbett Bond Debenture Legg Mason Partners Variable Capital and Portfolio -- Class A Income Portfolio -- Class I Met/AIM Capital Appreciation Legg Mason Partners Variable Dividend Portfolio -- Class A Strategy Portfolio Pioneer Strategic Income Portfolio -- Class Legg Mason Partners Variable Equity Index A Portfolio -- Class II METROPOLITAN SERIES FUND, INC. Legg Mason Partners Variable Fundamental BlackRock Aggressive Growth Value Portfolio -- Class I Portfolio -- Class D Legg Mason Partners Variable International BlackRock Bond Income Portfolio -- Class E All Cap Opportunity Portfolio Capital Guardian U.S. Equity Legg Mason Partners Variable Investors Portfolio -- Class A Portfolio -- Class I FI Large Cap Portfolio -- Class A Legg Mason Partners Variable Large Cap MFS(R) Total Return Portfolio -- Class F Growth Portfolio -- Class I T. Rowe Price Large Cap Growth Legg Mason Partners Variable Lifestyle Portfolio -- Class B Allocation 50% Western Asset Management Strategic Bond Legg Mason Partners Variable Lifestyle Opportunities Portfolio -- Class A Allocation 70% Legg Mason Partners Variable Lifestyle Allocation 85% Legg Mason Partners Variable Small Cap Growth Portfolio -- Class I
- ------- Certain Variable Funding Options have been subject to a merger, substitution or other change. Please see "Appendix C Additional Information Regarding the Underlying Funds." THE CONTRACT IS NO LONGER OFFERED TO NEW PURCHASERS. This prospectus provides the information that you should know before investing in the Contract. Please keep this prospectus for future reference. You can receive additional information about your Contract by requesting a copy of the Statement of Additional Information ("SAI") dated April 30, 2007. We filed the SAI with the Securities and Exchange Commission ("SEC"), and it is incorporated by reference into this prospectus. To request a copy, write to us at One Cityplace, 185 Asylum Street, 3CP, Hartford, Connecticut 06103-3415, call 800- 842-9325 or access the SEC's website (http://www.sec.gov). See Appendix F for the SAI's table of contents. NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR THE ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. VARIABLE ANNUITY CONTRACTS ARE NOT DEPOSITS OF ANY BANK, AND ARE NOT INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY. PROSPECTUS DATED APRIL 30, 2007 TABLE OF CONTENTS Glossary................................ 3 Summary................................. 4 Fee Table............................... 7 Condensed Financial Information......... 10 The Annuity Contract.................... 10 Contract Owner Inquiries.............. 11 Purchase Payments..................... 11 Accumulation Units.................... 11 The Variable Funding Options.......... 12 The Fixed Account....................... 16 Charges and Deductions.................. 16 General............................... 16 Withdrawal Charge..................... 17 Free Withdrawal Allowance............. 17 Administrative Charges................ 17 Mortality and Expense Risk Charge..... 17 Variable Liquidity Benefit Charge..... 17 Variable Funding Option Expenses...... 18 Premium Tax........................... 18 Changes in Taxes Based upon Premium or Value.............................. 18 Transfers............................... 18 Market Timing/Excessive Trading....... 18 Dollar Cost Averaging................. 20 Access to Your Money.................... 21 Systematic Withdrawals................ 22 Loans................................. 22 Ownership Provisions.................... 22 Types of Ownership.................... 22 Contract Owner..................... 22 Beneficiary........................ 22 Annuitant.......................... 23 Death Benefit........................... 23 Death Proceeds before the Maturity Date............................... 23 Payment of Proceeds................... 25 Beneficiary Contract Continuance...... 26 Planned Death Benefit................. 27 Death Proceeds after the Maturity Date............................... 27 The Annuity Period...................... 27 Maturity Date........................... 27 Allocation of Annuity................... 28 Variable Annuity........................ 28 Fixed Annuity........................... 28 Payment Options......................... 28 Election of Options................... 28 Annuity Options....................... 29 Variable Liquidity Benefit............ 29 Miscellaneous Contract Provisions....... 30 Right to Return....................... 30 Termination........................... 30 Required Reports...................... 30 Suspension of Payments................ 30 The Separate Accounts................... 30 Performance Information............... 31 Federal Tax Considerations.............. 31 General Taxation of Annuities......... 32 Types of Contracts: Qualified and Non- qualified.......................... 32 Qualified Annuity Contracts........... 32 Taxation of Qualified Annuity Contracts.......................... 33 Mandatory Distributions for Qualified Plans.............................. 33 Individual Retirement Annuities....... 33 Roth IRAs............................. 34 TSAs (ERISA and non-ERISA)............ 34 Non-qualified Annuity Contracts....... 36 Diversification Requirements for Variable Annuities................. 37 Ownership of the Investments.......... 38 Taxation of Death Benefit Proceeds.... 38 Other Tax Considerations.............. 38 Treatment of Charges for Optional Benefits........................... 38 Puerto Rico Tax Considerations........ 38 Non-Resident Aliens................... 38 Tax Credits and Deductions............ 39 Other Information....................... 39 The Insurance Companies............... 39 Financial Statements.................. 39 Distribution of Variable Annuity Contracts.......................... 39 Conformity with State and Federal Laws............................... 40 Voting Rights......................... 41 Restrictions on Financial Transactions....................... 41 Legal Proceedings..................... 41 Appendix A: Condensed Financial Information for MetLife of CT Fund BD for Variable Annuities................ A-1 Appendix B: Condensed Financial Information for MetLife of CT Fund BD II for Variable Annuities............. B-1 Appendix C: Additional Information Regarding Underlying Funds............ C-1 Appendix D: The Fixed Account........... D-1 Appendix E: Enhanced Death Benefit for Contracts Issued before June 1, 1997.. E-1 Appendix F: Contents of the Statement of Additional Information................ F-1
2 GLOSSARY ACCUMULATION UNIT -- an accounting unit of measure used to calculate the value of this Contract before Annuity Payments begin. ANNUITANT -- the person on whose life the Maturity Date and Annuity Payments depend. ANNUITY PAYMENTS -- a series of periodic payments (a) for life; (b) for life with a minimum number of payments; (c) for the joint lifetime of the Annuitant and another person, and thereafter during the lifetime of the survivor; or (d) for a fixed period. ANNUITY UNIT -- an accounting unit of measure used to calculate the amount of Annuity Payments. CASH SURRENDER VALUE -- the Contract Value less any withdrawal charge and premium tax not previously deducted. CODE -- the Internal Revenue Code of 1986, as amended, and all related laws and regulations that are in effect during the term of this Contract. CONTINGENT ANNUITANT -- the individual who becomes the Annuitant when the Annuitant who is not the owner dies prior to the Maturity Date. CONTRACT DATE -- the date on which the Contract is issued. CONTRACT OWNER (you) -- the person named in the Contract (on the specifications page) as the owner of the Contract. CONTRACT VALUE -- Purchase Payments, plus or minus any investment experience on the amounts allocated to the variable funds or interest on amounts allocated to the Fixed Account, adjusted by any applicable charges and withdrawals. CONTRACT YEARS -- twelve month periods beginning with the Contract Date. DEATH REPORT DATE -- the day on which we have received 1) Due Proof of Death and 2) written payment instructions or election of spousal or beneficiary contract continuation. DUE PROOF OF DEATH -- (I) a copy of a certified death certificate; (ii) a copy of a certified decree of a court of competent jurisdiction as to the finding of death; (iii) a written statement by a medical doctor who attended the deceased; or (iv) any other proof satisfactory to us. FIXED ACCOUNT -- an account that consists of all of the assets under this Contract other than those in the Separate Account. HOME OFFICE -- the Home Office of MetLife Insurance Company of Connecticut or MetLife Life and Annuity Company of Connecticut or any other office that we may designate for the purpose of administering this Contract. For transfer, withdrawal, surrender, and (if applicable) loan requests, our Home Office address is: MetLife, P. O. Box 990014, Hartford, CT 06199-0014. For Purchase Payments and (if applicable) loan repayments, our Home Office address is: MetLife, P. O. Box 371857, Pittsburgh, PA 15250-7857. MATURITY DATE -- the date on which the Annuity Payments are to begin. PAYMENT OPTION -- an annuity option elected under your Contract. PURCHASE PAYMENT -- any premium paid by you to initiate or supplement this Contract. QUALIFIED CONTRACT -- a contract used in a retirement plan or program that is intended to qualify under Sections 401, 403, 408, 408A or 414(d) of the Code. SEPARATE ACCOUNT -- a segregated account registered with the Securities and Exchange Commission ("SEC"), the assets of which are invested solely in the Underlying Funds. The assets of the Separate Account are held exclusively for the benefit of Contract Owners. SUBACCOUNT -- that portion of the assets of a Separate Account that is allocated to a particular Underlying Fund. UNDERLYING FUND -- a portfolio of an open-end management investment company that is registered with the SEC in which the Subaccounts invest. VALUATION DATE -- a date on which a Subaccount is valued. VALUATION PERIOD -- the period between successive valuations. VARIABLE FUNDING OPTION -- a Subaccount of the Separate Account that invests in an Underlying Fund. WE, US, OUR -- MetLife Insurance Company of Connecticut or MetLife Life and Annuity Company of Connecticut. WRITTEN REQUEST -- written information sent to us in a form and content satisfactory to us and received at our Home Office. YOU, YOUR -- the Contract Owner. 3 SUMMARY: VINTAGE(SM) ANNUITY THIS SUMMARY DETAILS SOME OF THE MORE IMPORTANT POINTS THAT YOU SHOULD KNOW AND CONSIDER BEFORE PURCHASING THE CONTRACT. PLEASE READ THE ENTIRE PROSPECTUS CAREFULLY. WHAT COMPANY WILL ISSUE MY CONTRACT? Your issuing company is either MetLife Insurance Company of Connecticut or MetLife Life and Annuity Company of Connecticut ("the Company," "We" or "Us"). MetLife Life and Annuity Company of Connecticut does not solicit or issue insurance products in the state of New York. Refer to your Contract for the name of your issuing company. Each company sponsors its own segregated account ("Separate Account"). MetLife Insurance Company of Connecticut sponsors the MetLife of CT Fund BD for Variable Annuities ("Fund BD "); MetLife Life and Annuity Company of Connecticut sponsors the MetLife of CT Fund BD II for Variable Annuities ("Fund BD II"). When we refer to the Separate Account, we are referring to either Fund BD or Fund BD II, depending upon your issuing Company. The Contract is no longer available for sale. For Contracts issued in New York, a waiver of the withdrawal charge may apply to all Annuity Payments. CAN YOU GIVE ME A GENERAL DESCRIPTION OF THE CONTRACT? We designed the Contract for retirement savings or other long-term investment purposes. The Contract provides a death benefit as well as guaranteed payout options. You direct your payment(s) to one or more of the Variable Funding Options and/or to the Fixed Account that is part of our general account (the "Fixed Account"). We guarantee money directed to the Fixed Account as to principal and interest. The Variable Funding Options fluctuate with the investment performance of the Underlying Funds and are not guaranteed. You can also lose money in the Variable Funding Options. The Contract, like all deferred variable annuity contracts, has two phases: the accumulation phase and the payout phase (annuity period). During the accumulation phase generally, under a Qualified Contract, your pre-tax contributions accumulate on a tax-deferred basis and are taxed as income when you make a withdrawal, presumably when you are in a lower tax bracket. During the accumulation phase, under a Non-qualified Contract, earnings on your after- tax contributions accumulate on a tax-deferred basis and are taxed as income when you make a withdrawal. The payout phase occurs when you begin receiving payments from your Contract. The amount of money you accumulate in your Contract determines the amount of income (Annuity Payments) you receive during the payout phase. During the payout phase, you may choose one of a number of annuity options. You may receive income payments in the form of a variable annuity, a fixed annuity, or a combination of both. If you elect variable income payments, the dollar amount of your payments may increase or decrease. Once you choose one of the annuity options and begin to receive payments, it cannot be changed. WHO CAN PURCHASE THIS CONTRACT? The Contract is currently available for use in connection with (1) individual non-qualified purchases; (2) rollovers from Individual Retirement Annuities (IRAs); (3) rollovers from other qualified retirement plans and (4) beneficiary-directed transfers of death proceeds from another contract. Qualified Contracts include contracts qualifying under Section 401(a), 403(b), 408(b) or 408A of the Internal Revenue Code of 1986, as amended. Purchase of this Contract through a tax qualified retirement plan ("Plan") does not provide any additional tax deferral benefits beyond those provided by the Plan. Accordingly, if you are purchasing this Contract through a Plan, you should consider purchasing this Contract for its death benefit, annuity option benefits, and other non-tax-related benefits. You may purchase the Contract with an initial payment of at least $5,000. You may make additional payments of at least $500 at any time during the accumulation phase. No additional payments are allowed if this Contract is purchased with a beneficiary-directed transfer of death proceeds. CAN I EXCHANGE MY CURRENT ANNUITY CONTRACT FOR THIS CONTRACT? The Code generally permits you to exchange one annuity contract for another in a "tax-free exchange." Therefore, you can transfer the proceeds from another annuity contract to purchase this Contract. Before making an exchange to acquire this Contract, you should carefully compare this Contract to your current contract. You may have to pay a surrender charge under your current contract to exchange it for this Contract, and this Contract has its own surrender charges that would apply to you. The other fees and charges under this Contract may be higher or lower and the benefits may be different than those of your current contract. In addition, you may have to pay federal income or penalty taxes on the exchange if it does not 4 qualify for tax-free treatment. You should not exchange another contract for this Contract unless you determine, after evaluating all the facts, the exchange is in your best interests. Remember that the person selling you the Contract generally will earn a commission on the sale. IS THERE A RIGHT TO RETURN PERIOD? If you cancel the Contract within ten days after you receive it, you will receive a full refund of your Contract Value plus any Contract charges and premium taxes you paid (but not fees and charges assessed by the Underlying Funds). Where state law requires a different right to return period, or the return of Purchase Payments, the Company will comply. You bear the investment risk on the Purchase Payment allocated to a Variable Funding Option during the right to return period; therefore, the Contract Value we return may be greater or less than your Purchase Payment. If you purchased your Contract as an Individual Retirement Annuity, and you return it within the first seven days after delivery, or longer if your state law permits, we will refund your full Purchase Payment. During the remainder of the right to return period, we will refund your Contract Value (including charges we assessed). We will determine your Contract Value at the close of business on the day we receive a Written Request for a refund. CAN YOU GIVE A GENERAL DESCRIPTION OF THE VARIABLE FUNDING OPTIONS AND HOW THEY OPERATE? The Variable Funding Options represent Subaccounts of the Separate Account. At your direction, the Separate Account, through its Subaccounts, uses your Purchase Payments to purchase shares of one or more of the Underlying Funds that holds securities consistent with its own investment policy. Depending on market conditions, you may make or lose money in any of these Variable Funding Options. You can transfer among the Variable Funding Options as frequently as you wish without any current tax implications. Currently there is no charge for transfers, nor a limit to the number of transfers allowed. We may, in the future, charge a fee for any transfer request, or limit the number of transfers allowed. At a minimum, we would always allow one transfer every six months. We reserve the right to restrict transfers that we determine will disadvantage other Contract Owners. You may transfer between the Fixed Account and the Variable Funding Options twice a year (during the 30 days after the six-month Contract Date anniversary), provided the amount is not greater than 15% of the Fixed Account value on that date. Amounts previously transferred from the Fixed Account to the Variable Funding Options may not be transferred back to the Fixed Account for a period of at least six months from the date of the transfer. WHAT EXPENSES WILL BE ASSESSED UNDER THE CONTRACT? The Contract has insurance features and investment features, and there are costs related to each. We deduct an administrative expense charge and a mortality and expense risk ("M&E") charge daily from amounts you allocate to the Separate Account. We deduct the administrative expense charge at an annual rate of 0.15% and deduct the M&E charge at an annual rate of 1.02% for the Standard Death Benefit and 1.30% for the Enhanced Death Benefit. For Contracts with a value of less than $40,000, we also deduct an annual contract administrative charge of $30. Each Underlying Fund also charges for management costs and other expenses. We will apply a withdrawal charge to withdrawals from the Contract, and will calculate it as a percentage of the Purchase Payments withdrawn. The maximum percentage is 6%, decreasing to 0% after six full years. Upon annuitization, if the Variable Liquidity Benefit is selected, there is a maximum charge of 6% of the amounts withdrawn. Please refer to Payment Options for a description of this benefit. HOW WILL MY PURCHASE PAYMENTS AND WITHDRAWALS BE TAXED? Generally, the payments you make to a Qualified Contract during the accumulation phase are made with before-tax dollars. Generally, you will be taxed on your Purchase Payments and on any earnings when you make a withdrawal or begin receiving Annuity Payments. Under a Non-qualified Contract, payments to the Contract are made with after-tax dollars, and earnings will generally accumulate tax-deferred. You will be taxed on these earnings when they are withdrawn from the Contract. If you are younger than 59 1/2 when you take money out, you may be charged a 10% federal penalty tax on the amount withdrawn. For owners of Qualified Contracts, if you reach a certain age, you may be required by federal tax laws to begin receiving payments from your annuity or risk paying a penalty tax. In those cases, we can calculate and pay you the minimum required distribution amounts (see "Access to Your Money - Systematic Withdrawals"). HOW MAY I ACCESS MY MONEY? You can take withdrawals any time during the accumulation phase. Withdrawal charges may apply, as well as income taxes, and/or a penalty tax on amounts withdrawn. 5 WHAT IS THE DEATH BENEFIT UNDER THE CONTRACT? You may choose to purchase the Standard or Enhanced Death Benefit. The death benefit applies upon the first death of the Contract Owner, joint owner, or Annuitant. Assuming you are the Annuitant, the death benefit is as follows: If you die before the Contract is in the payout phase, the person you have chosen as your beneficiary will receive a death benefit. We calculate the death benefit value at the close of the business day on which our Home Office receives (1) Due Proof of Death and (2) written payment instructions. The Enhanced Death Benefit may not be available in all states. Please refer to the Death Benefit section in the prospectus for more details. WHERE MAY I FIND OUT MORE ABOUT ACCUMULATION UNIT VALUES? The Condensed Financial Information in Appendix A or Appendix B to this prospectus provides more information about Accumulation Unit values. ARE THERE ANY ADDITIONAL FEATURES? This Contract has other features you may be interested in. These include: - DOLLAR COST AVERAGING. This is a program that allows you to invest a fixed amount of money in Variable Funding Options each month, theoretically giving you a lower average cost per unit over time than a single one-time purchase. Dollar Cost Averaging requires regular investments regardless of fluctuating price levels, and does not guarantee profits or prevent losses in a declining market. Potential investors should consider their financial ability to continue purchases through periods of low price levels. - SYSTEMATIC WITHDRAWAL OPTION. Before the Maturity Date, you can arrange to have money sent to you at set intervals throughout the year. Of course, any applicable income and penalty taxes will apply on amounts withdrawn. Withdrawals in excess of the annual free withdrawal allowance may be subject to a withdrawal charge. - AUTOMATIC REBALANCING. You may elect to have the Company periodically reallocate the values in your Contract to match the rebalancing allocation selected. - BENEFICIARY CONTRACT CONTINUANCE (NOT PERMITTED FOR NON-NATURAL BENEFICIARIES). If you die before the Maturity Date, and if the value of any beneficiary's portion of the death benefit is between $20,000 and $1,000,000 as of the date of your death, that beneficiary(ies) may elect to continue his/her portion of the Contract and take required distributions over time, rather than have the death benefit paid in a lump sum to the beneficiary. 6 FEE TABLE - -------------------------------------------------------------------------------- The following tables describe the fees and expenses that you will pay when buying, owning, and surrendering the Contract. The first table describes the fees and expenses that you will pay at the time that you buy the Contract, surrender the Contract, or transfer Contract Value between Variable Funding Options. Expenses shown do not include premium taxes, which may be applicable. CONTRACT OWNER TRANSACTION EXPENSES WITHDRAWAL CHARGE:...................................... 6%(1) (as a percentage of the Purchase Payments withdrawn)
VARIABLE LIQUIDITY BENEFIT CHARGE:...................... 6%(2) (as a percentage of the present value of the remaining Annuity Payments that are surrendered. The interest rate used to calculate this present value is 1% higher than the Assumed (Daily) Net Investment Factor used to calculate the Annuity Payments.)
The next table describes the fees and expenses that you will pay periodically during the time that you own the Contract, not including Underlying Fund fees and expenses. CONTRACT ADMINISTRATIVE CHARGES ANNUAL CONTRACT ADMINISTRATIVE CHARGE:.................. $30(3)
- --------- (1) The withdrawal charge declines to zero after the Purchase Payment has been in the Contract for 6 years. The charge is as follows:
YEARS SINCE PURCHASE PAYMENT MADE - ------------------------------------------ GREATER THAN OR EQUAL TO BUT LESS THAN WITHDRAWAL CHARGE - ------------------------ ------------- ----------------- 0 years 3 years 6% 3 years 4 years 3% 4 years 5 years 2% 5 years 6 years 1% 6 years+ 0%
(2) This withdrawal charge only applies when you surrender the Contract after beginning to receive Annuity Payments. The Variable Liquidity Benefit Charge declines to zero after six years. The charge is as follows:
YEARS SINCE INITIAL PURCHASE PAYMENT - ------------------------------------------ GREATER THAN OR EQUAL TO BUT LESS THAN WITHDRAWAL CHARGE - ------------------------ ------------- ----------------- 0 years 3 years 6% 3 years 4 years 3% 4 years 5 years 2% 5 years 6 years 1% 6 years+ 0%
(3) We do not assess this charge if Contract Value is $40,000 or more on the fourth Friday of each August. ANNUAL SEPARATE ACCOUNT CHARGES: (as a percentage of the average daily net assets of the Separate Account)
- --------------------------------------------------------------------------------------------- STANDARD DEATH BENEFIT ENHANCED DEATH BENEFIT - --------------------------------------------------------------------------------------------- Mortality and Expense Risk Charge 1.02%(1) Mortality and Expense Risk Charge 1.30%(1) Administrative Expense Charge 0.15% Administrative Expense Charge 0.15% ---- ---- Total Annual Separate Account Total Annual Separate Account Charges 1.17% Charges 1.45% - ---------------------------------------------------------------------------------------------
- --------- (1) We are waiving the following amount of the Mortality and Expense Risk Charge: an amount equal to the Underlying Fund expenses that are in excess of 0.91% for the Subaccount investing in the Capital Guardian U.S. Equity Portfolio -- Class A. 7 UNDERLYING FUND EXPENSES AS OF DECEMBER 31, 2006 (unless otherwise indicated): The first table below shows the range (minimum and maximum) of the total annual operating expenses charged by all of the Underlying Funds, before any voluntary or contractual fee waivers and/or expense reimbursements. The second table shows each Underlying Fund's management fee, distribution and/or service fees (12b-1) if applicable, and other expenses. The Underlying Funds provided this information and we have not independently verified it. More detail concerning each Underlying Fund's fees and expenses is contained in the prospectus for each Underlying Fund. Current prospectuses for the Underlying Funds can be obtained by calling 1-800-842-9325. MINIMUM AND MAXIMUM TOTAL ANNUAL UNDERLYING FUND OPERATING EXPENSES
MINIMUM MAXIMUM ------- ------- TOTAL ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Underlying Fund assets, including management fees, distribution and/or service fees (12b-1), and other expenses)............................................................. 0.48% 1.04%
UNDERLYING FUND FEES AND EXPENSES (as a percentage of average daily net assets)
DISTRIBUTION TOTAL CONTRACTUAL FEE NET TOTAL AND/OR ANNUAL WAIVER AND/OR ANNUAL MANAGEMENT SERVICE(12b-1) OTHER OPERATING EXPENSE OPERATING UNDERLYING FUND: FEE FEES EXPENSES EXPENSES REIMBURSEMENT EXPENSES* - ---------------- ---------- -------------- -------- --------- --------------- --------------- AMERICAN FUNDS INSURANCE SERIES -- CLASS 2 American Funds Global Growth Fund........ 0.55% 0.25% 0.03% 0.83% -- 0.83% American Funds Growth Fund............... 0.32% 0.25% 0.02% 0.59% -- 0.59% American Funds Growth-Income Fund........ 0.27% 0.25% 0.01% 0.53% -- 0.53% DREYFUS VARIABLE INVESTMENT FUND -- INITIAL SHARES Dreyfus Variable Investment Fund Developing Leaders Portfolio.......... 0.75% -- 0.07% 0.82% -- 0.82% LEGG MASON PARTNERS VARIABLE EQUITY TRUST Legg Mason Partners Variable Aggressive Growth Portfolio -- Class I++......... 0.75% -- 0.02% 0.77% -- 0.77% Legg Mason Partners Variable Capital and Income Portfolio -- Class I........... 0.75% -- 0.08% 0.83% -- 0.83% Legg Mason Partners Variable Dividend Strategy Portfolio++.................. 0.65% -- 0.24% 0.89% -- 0.89% Legg Mason Partners Variable Equity Index Portfolio -- Class II................. 0.31% 0.25% 0.03% 0.59% -- 0.59% Legg Mason Partners Variable Fundamental Value Portfolio -- Class I............ 0.75% -- 0.02% 0.77% -- 0.77% Legg Mason Partners Variable International All Cap Opportunity Portfolio++........................... 0.85% -- 0.09% 0.94% -- 0.94% Legg Mason Partners Variable Investors Portfolio -- Class I.................. 0.65% -- 0.07% 0.72% -- 0.72% Legg Mason Partners Variable Large Cap Growth Portfolio -- Class I++......... 0.75% -- 0.04% 0.79% -- 0.79% Legg Mason Partners Variable Small Cap Growth Portfolio -- Class I........... 0.75% -- 0.21% 0.96% -- 0.96% LEGG MASON PARTNERS VARIABLE INCOME TRUST Legg Mason Partners Variable High Income Portfolio++........................... 0.60% -- 0.06% 0.66% -- 0.66% Legg Mason Partners Variable Money Market Portfolio++........................... 0.45% -- 0.03% 0.48% -- 0.48% MET INVESTORS SERIES TRUST(1) Batterymarch Mid-Cap Stock Portfolio -- Class A.................. 0.70% -- 0.11% 0.81% -- 0.81%(2) BlackRock Large-Cap Core Portfolio -- Class E.................. 0.63% 0.15% 0.22% 1.00% -- 1.00%(2,3,4) Lord Abbett Bond Debenture Portfolio -- Class A.................. 0.50% -- 0.04% 0.54% -- 0.54% Met/AIM Capital Appreciation Portfolio -- Class A.................. 0.77% -- 0.09% 0.86% -- 0.86%(2,3,5) Pioneer Strategic Income Portfolio -- Class A.................. 0.70% -- 0.12% 0.82% -- 0.82%(2,3,5) METROPOLITAN SERIES FUND, INC.(6) BlackRock Aggressive Growth Portfolio -- Class D.................. 0.72% 0.10% 0.06% 0.88% -- 0.88% BlackRock Bond Income Portfolio -- Class E..................................... 0.39% 0.15% 0.07% 0.61% 0.01% 0.60%(7) Capital Guardian U.S. Equity Portfolio -- Class A.................. 0.66% -- 0.06% 0.72% -- 0.72% FI Large Cap Portfolio -- Class A........ 0.78% -- 0.06% 0.84% -- 0.84%(8) MFS(R) Total Return Portfolio -- Class F..................................... 0.53% 0.20% 0.05% 0.78% -- 0.78%(8) T. Rowe Price Large Cap Growth Portfolio -- Class B.................. 0.60% 0.25% 0.08% 0.93% -- 0.93% Western Asset Management Strategic Bond Opportunities Portfolio -- Class A.... 0.63% -- 0.07% 0.70% -- 0.70%
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NET TOTAL ANNUAL OPERATING DISTRIBUTION TOTAL CONTRACTUAL FEE NET TOTAL EXPENSES AND/OR ANNUAL WAIVER AND/OR ANNUAL INCLUDING MANAGEMENT SERVICE(12b-1) OTHER OPERATING EXPENSE OPERATING UNDERLYING UNDERLYING FUND: FEE FEES EXPENSES EXPENSES REIMBURSEMENT EXPENSES* FUND EXPENSES* - ---------------- ---------- -------------- -------- --------- --------------- --------- --------------- LEGG MASON PARTNERS VARIABLE EQUITY TRUST Legg Mason Partners Variable Lifestyle Allocation 50%++++...................... 0.35% -- -- 0.35% -- 0.35% 1.00%(9) Legg Mason Partners Variable Lifestyle Allocation 70%++++...................... 0.35% -- -- 0.35% -- 0.35% 1.03%(9) Legg Mason Partners Variable Lifestyle Allocation 85%++++...................... 0.35% -- -- 0.35% -- 0.35% 1.04%(9)
- --------- * Net Total Annual Operating Expenses do not reflect (1) voluntary waivers of fees or expenses; (2) contractual waivers that are in effect for less than one year from the date of this Prospectus; or (3) expense reductions resulting from custodial fee credits or directed brokerage arrangements. ++ Fees and expenses for this Portfolio are based on the Portfolio's fiscal year ended October 31, 2006. ++++ Fees and expenses for this Portfolio are based on the Portfolio's fiscal year ended January 31, 2006. (1) Other Expenses have been restated to reflect new custodian, fund administration and transfer agent fee schedules, as if these fee schedules had been in effect for the previous fiscal year. (2) Other Expenses have been restated to reflect the current Met Investors Series Trust fee schedule, as if that schedule had applied to the Portfolio for the entire fiscal year. (3) The Management Fee has been restated to reflect an amended management fee agreement, as if the agreement had been in effect during the previous fiscal year. (4) This is a new share class for this Portfolio. Operating expenses are estimated based on the expenses of the Class A shares of the Portfolio. (5) The Portfolio's fiscal year end has been changed from 10/31 to 12/31. The fees and expenses shown are for the Portfolio's last fiscal year ended October 31, 2006. (6) Other Expenses have been restated to reflect current fees, as if current fees had been in effect for the previous fiscal year. (7) MetLife Advisers, LLC has contractually agreed, for the period May 1, 2007 through April 30, 2008, to reduce the Management Fee to the annual rate of 0.325% for amounts over $1 billion but less than $2 billion. (8) The Management Fee has been restated to reflect current fees, as if current fees had been in effect for the previous fiscal year. (9) These Portfolios are "funds of funds" that invest substantially all of their assets in other Legg Mason-affiliated funds. Because the Portfolios invest in other funds, each Portfolio will bear its pro rata portion of the operating expenses of the underlying funds, including the management fee. Based on the expense ratios of the underlying Legg Mason-affiliated funds in which the Portfolios were invested on January 31, 2007, the approximate operating expenses of the underlying funds are expected to be as follows: 0.65% for the Legg Mason Partners Variable Lifestyle Allocation 50%, 0.68% for the Legg Mason Partners Variable Lifestyle Allocation 70%, and 0.69% for the Legg Mason Partners Variable Lifestyle Allocation 85%. EXAMPLE The example is intended to help you compare the cost of investing in the Contract with the cost of investing in other variable annuity contracts. These costs include Contract Owner transaction expenses, contract fees, separate account annual expenses, and Underlying Fund total annual operating expenses. The example does not represent past or future expenses. Your actual expenses may be more or less than those shown. The example assumes that you invest $10,000 in the Contract for the time periods indicated and that your investment has a 5% return each year. The example reflects the annual contract administrative charge, factoring in that the charge is waived for contracts over a certain value. Additionally, the example is based on the minimum and maximum Underlying Fund total annual operating expenses shown above, and does not reflect any Underlying Fund fee waivers and/or expense reimbursements. 9 The example assumes you have allocated all of your Contract Value to either the Underlying Fund with the maximum total annual operating expenses or the Underlying Fund with the minimum total annual operating expenses.
IF CONTRACT IS SURRENDERED AT THE IF CONTRACT IS NOT SURRENDERED OR END OF PERIOD SHOWN: ANNUITIZED AT THE END OF PERIOD SHOWN: ---------------------------------------------- ---------------------------------------------- FUNDING OPTION 1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS - -------------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Underlying Fund with Maximum Total Annual Operating Expenses.. $857 $1,299 $1,517 $2,861 $257 $789 $1,347 $2,861 Underlying Fund with Minimum Total Annual Operating Expenses.. $801 $1,130 $1,235 $2,296 $201 $620 $1,065 $2,296
CONDENSED FINANCIAL INFORMATION - -------------------------------------------------------------------------------- See Appendices A and B. THE ANNUITY CONTRACT - -------------------------------------------------------------------------------- Vintage(SM) Annuity is a contract between the Contract Owner ("you") and the Company. This is the prospectus -- it is not the Contract. The prospectus highlights many Contract provisions to focus your attention on the Contract's essential features. Your rights and obligations under the Contract will be determined by the language of the Contract itself. When you receive your Contract, we suggest you read it promptly and carefully. There may be differences in your Contract from the descriptions in this prospectus because of the requirements of the state where we issued your Contract. We will include any such differences in your Contract. The Company offers several different annuities that your investment professional may be authorized to offer to you. Each annuity offers different features and benefits that may be appropriate for you. In particular, the annuities differ based on variations in the standard and optional death benefit protection provided for your beneficiaries, the availability of optional living benefits, the ability to access your Contract Value if necessary and the charges that you will be subject to if you make a withdrawal or surrender the annuity. The separate account charges and other charges may be different between each annuity we offer. Optional death benefits and living benefits are subject to a separate charge for the additional protections they offer to you and your beneficiaries. Furthermore, annuities that offer greater flexibility to access your Contract Value generally are subject to higher separate account charges than annuities that deduct charges if you make a withdrawal or surrender. We encourage you to evaluate the fees, expenses, benefits and features of this annuity against those of other investment products, including other annuity products offered by us and other insurance companies. Before purchasing this or any other investment product you should consider whether the product you purchase is consistent with your risk tolerance, investment objectives, investment time horizon, financial and tax situation, liquidity needs and how you intend to use the annuity. You make Purchase Payments to us and we credit them to your Contract. We promise to pay you an income, in the form of Annuity Payments, beginning on a future date that you choose, the Maturity Date. The Purchase Payments accumulate tax deferred in the funding options of your choice. We offer multiple Variable Funding Options. We may also offer a Fixed Account option. The Contract Owner assumes the risk of gain or loss according to the performance of the Variable Funding Options. The Contract Value is the amount of Purchase Payments, plus or minus any investment experience on the amounts you allocate to the Separate Account ("Separate Account Contract Value") or interest on the amounts you allocate to the Fixed Account ("Fixed Account Contract Value"). The Contract Value also reflects all withdrawals made and charges deducted. There is generally no guarantee that at the Maturity Date the Contract Value will equal or exceed the total Purchase Payments made under the Contract. The date the Contract and its benefits become effective is referred to as the Contract Date. Each 12-month period following the Contract Date is called a Contract Year. Certain changes and elections must be made in writing to the Company. Where the term "Written Request" is used, it means that you must send written information to our Home Office in a form and content satisfactory to us. 10 The Contract is not offered to new purchasers.
MAXIMUM AGE BASED ON THE OLDER OF THE OWNER AND DEATH BENEFIT/OPTIONAL FEATURE ANNUITANT ON THE CONTRACT DATE - ------------------------------------------------------ ----------------------------------------------- Standard Death Benefit 80 Enhanced Death Benefit 75
Since optional death benefits carry higher charges, you should consider the ages of the owner and Annuitant when electing these benefits, as the additional value provided by the benefit may be significantly reduced or eliminated depending on the ages of the owner and Annuitant at the time of election. Purchase of this Contract through a tax qualified retirement plan or IRA does not provide any additional tax deferral benefits beyond those provided by the plan or the IRA. Accordingly, if you are purchasing this Contract through a plan or IRA, you should consider purchasing this Contract for its death benefit, annuity option benefits, and other non-tax-related benefits. You should consult with your tax adviser to determine if this Contract is appropriate for you. CONTRACT OWNER INQUIRIES Any questions you have about your Contract should be directed to our Home Office at 1-800-842-9325. PURCHASE PAYMENTS Your initial Purchase Payment is due and payable before the Contract becomes effective. The initial Purchase Payment must be at least $5,000. You may make additional payments of at least $500 at any time. No additional Purchase Payments are allowed if this Contract is purchased with a beneficiary-directed transfer of death benefit proceeds. Under certain circumstances, we may waive the minimum Purchase Payment requirement. Purchase Payments over $1,000,000 may be made only with our prior consent. We accept Purchase Payments made by check or cashier's check. We do not accept cash, money orders or traveler's checks. We reserve the right to refuse purchase payments made via a personal check in excess of $100,000. Purchase payments over $100,000 may be accepted in other forms, including but not limited to, EFT/wire transfers, certified checks, corporate checks, and checks written on financial institutions. The form in which we receive a purchase payment may determine how soon subsequent disbursement requests may be fulfilled. (See "Access To Your Money.") We will apply the initial Purchase Payment less any applicable premium tax within two business days after we receive it at our Home Office with a properly completed application or order request. If your request or other information accompanying the initial Purchase Payment is incomplete when received, we will hold the Purchase Payment for up to five business days. If we cannot obtain the necessary information within five business days, we will return the Purchase Payment in full, unless you specifically consent for us to keep it until you provide the necessary information. We will credit any subsequent Purchase Payment to a Contract on the same business day we receive it, if it is received in good order by our Home Office by 4:00 p.m. Eastern time. A business day is any day that the New York Stock Exchange is open for regular trading (except when trading is restricted due to an emergency as defined by the Securities and Exchange Commission). ACCUMULATION UNITS The period between the Contract Date and the Maturity Date is the accumulation period. During the accumulation period, an Accumulation Unit is used to calculate the value of a Contract. Each Variable Funding Option has a corresponding Accumulation Unit value. The Accumulation Units are valued each business day and their values may increase or decrease from day to day. The daily change in value of an Accumulation Unit each day is based on the investment performance of the corresponding Underlying Fund, and the deduction of separate account charges shown in the Fee Table in this prospectus. The number of Accumulation Units we will credit to your Contract once we receive a Purchase Payment or transfer request (or, liquidate for a withdrawal request) is determined by dividing the amount directed to each Variable Funding Option (or, taken from each Variable Funding Option) by the value of its Accumulation Unit. Normally, we calculate the value of an Accumulation Unit for each Variable Funding Option as of the close of regular trading (generally 4:00 p.m. Eastern time) each day the New York Stock Exchange is open. 11 After the value is calculated, we credit your Contract. During the annuity period (i.e., after the Maturity Date), you are credited with Annuity Units. THE VARIABLE FUNDING OPTIONS You choose the Variable Funding Options to which you allocate your Purchase Payments. From time to time we may make new Variable Funding Options available. These Variable Funding Options are Subaccounts of the Separate Account. The Subaccounts invest in the Underlying Funds. You are not investing directly in the Underlying Fund. Each Underlying Fund is a portfolio of an open-end management investment company that is registered with the SEC under the Investment Company Act of 1940. These Underlying Funds are not publicly traded and are only offered through variable annuity contracts, variable life insurance products, and maybe in some instances, certain retirement plans. They are not the same retail mutual funds as those offered outside of a variable annuity or variable life insurance product, although the investment practices and fund names may be similar and the portfolio managers may be identical. Accordingly, the performance of the retail mutual fund is likely to be different from that of the Underlying Fund. We select the Underlying Funds offered through this Contract based on several criteria, including asset class coverage, the strength of the adviser's or subadviser's reputation and tenure, brand recognition, performance, and the capability and qualification of each investment firm. Another factor we consider during the selection process is whether the Underlying Fund's adviser or subadviser is one of our affiliates or whether the Underlying Fund, its adviser, its subadviser(s), or an affiliate will make payments to us or our affiliates. In this regard, the profit distributions we receive from our affiliated investment advisers are a component of the total revenue that we consider in configuring the features and investment choices available in the variable insurance products that we and our affiliated insurance companies issue. Since we and our affiliated insurance companies may benefit more from the allocation of assets to portfolios advised by our affiliates than those that are not, we may be more inclined to offer portfolios advised by our affiliates in the variable insurance products we issue. For additional information on these arrangements, see "Payments We Receive." We review the Underlying Funds periodically and may remove an Underlying Fund or limit its availability to new Purchase Payments and/or transfers of Contract Value if we determine that the Underlying Fund no longer meets one or more of the selection criteria, and/or if the Underlying Fund has not attracted significant allocations from Contract Owners. In some cases, we have included Underlying Funds based on recommendations made by broker-dealer firms. When the Company develops a variable annuity product in cooperation with a fund family or distributor (e.g. a "private label" product) the Company will generally include Underlying Funds based on recommendations made by the fund family or distributor, whose selection criteria may differ from the Company's selection criteria. WE DO NOT PROVIDE ANY INVESTMENT ADVICE AND DO NOT RECOMMEND OR ENDORSE ANY PARTICULAR UNDERLYING FUND. YOU BEAR THE RISK OF ANY DECLINE IN THE CONTRACT VALUE OF YOUR CONTRACT RESULTING FROM THE PERFORMANCE OF THE UNDERLYING FUNDS YOU HAVE CHOSEN. If investment in the Underlying Funds or a particular Underlying Fund is no longer possible, in our judgment becomes inappropriate for purposes of the Contract, or for any other reason in our sole discretion, we may substitute another Underlying Fund or Underlying Funds without your consent. The substituted Underlying Fund may have different fees and expenses. Substitution may be made with respect to existing investments or the investment of future Purchase Payments, or both. However, we will not make such substitutions without any necessary approval of the Securities and Exchange Commission and applicable state insurance departments. Furthermore, we may close Underlying Funds to allocations of Purchase Payments or Contract Value, or both, at any time in our sole discretion. In certain circumstances, the Company's ability to remove or replace an Underlying Fund may be limited by the terms of a five-year agreement between MetLife, Inc. (MetLife) and Legg Mason, Inc. (Legg Mason) relating to the use of certain Underlying Funds advised by Legg Mason affiliates. The agreement sets forth the conditions under which the Company can remove an Underlying Fund, which, in some cases, may differ from the Company's own selection criteria. In addition, during the term of the agreement, subject to the Company's fiduciary and other legal duties, the Company is generally obligated in the first instance to consider Underlying Funds advised by Legg Mason affiliates in seeking to make a substitution for an Underlying Fund advised by a Legg Mason affiliate. The agreement was originally entered into on July 1, 2005 by MetLife and certain affiliates of Citigroup Inc. (Citigroup) as part of MetLife's acquisition of The Travelers Insurance Company (now MetLife Insurance Company of Connecticut) and The Travelers Life and Annuity Company (now MetLife Life and Annuity Company of Connecticut) from Citigroup. Legg Mason replaced the Citigroup affiliates as a party to the agreement when Citigroup sold its asset management business to Legg Mason. The agreement also obligates Legg Mason to continue making payments to the Company 12 with respect to Underlying Funds advised by Legg Mason affiliates, on the same terms provided for in administrative services agreements between Citigroup's asset management affiliates and the Travelers insurance companies that predated the acquisition. PAYMENTS WE RECEIVE. As described above, an investment adviser (other than our affiliates MetLife Advisers, LLC and Met Investors Advisory LLC) or subadviser of an Underlying Fund, or its affiliates, may make payments to the Company and/or certain of our affiliates. These payments may be used for a variety of purposes, including payment of expenses for certain administrative, marketing and support services with respect to the Contracts and, in its role as an intermediary, with respect to the Underlying Funds. The Company and its affiliates may profit from these payments. These payments may be derived, in whole or in part, from the advisory fee deducted from Underlying Fund assets. Contract Owners, through their indirect investment in the Underlying Funds, bear the costs of these advisory fees (see the Underlying Funds' prospectuses for more information). The amount of the payments we receive is based on a percentage of assets of the Underlying Funds attributable to the Contracts and certain other variable insurance products that the Company and its affiliates issue. These percentages differ and some advisers or subadvisers (or other affiliates) may pay the Company more than others. These percentages currently range up to 0.50%. Additionally, an investment adviser or subadviser of an Underlying Fund or its affiliates may provide the Company with wholesaling services that assist in the distribution of the Contracts and may pay the Company and/or certain of our affiliates amounts to participate in sales meetings. These amounts may be significant and may provide the adviser or subadviser (or their affiliate) with increased access to persons involved in the distribution of the Contracts. The Company and/or certain of its affiliated insurance companies have joint ownership interests in its affiliated investment advisers MetLife Advisers, LLC and Met Investors Advisory LLC, which are formed as "limited liability companies." The Company's ownership interests in MetLife Advisers, LLC and Met Investors Advisory LLC entitle us to profit distributions if the adviser makes a profit with respect to the advisory fees it receives from the Underlying Fund. The Company will benefit accordingly from assets allocated to the Underlying Funds to the extent they result in profits to the advisers. (See "Fee Table -- Underlying Fund Fees and Expenses" for information on the management fees paid by the Underlying Funds and the Statement of Additional Information for the Underlying Funds for information on the management fees paid by the advisers to the subadvisers.) Certain Underlying Funds have adopted a Distribution Plan under Rule 12b-1 of the Investment Company Act of 1940. An Underlying Fund's 12b-1 Plan, if any, is described in more detail in the Underlying Fund's prospectus. (See "Fee Table----Underlying Fund Fees and Expenses" and "Other Information----Distribution of Variable Annuity Contracts.") Any payments we receive pursuant to those 12b-1 Plans are paid to us or our distributor, MetLife Investors Distribution Company. Payments under an Underlying Fund's 12b-1 Plan decrease the Underlying Fund's investment return. We make certain payments to American Funds Distributors, Inc., principal underwriter for the American Funds Insurance Series. (See "Distribution of the Contracts") Each Underlying Fund has different investment objectives and risks. The Underlying Fund prospectuses contain more detailed information on each Underlying Fund's investment strategy, investment advisers and its fees. You may obtain an Underlying Fund prospectus by calling 1-800-842-9325 or through your registered representative. We do not guarantee the investment results of the Underlying Funds. The current Underlying Funds are listed below, along with their investment advisers and any subadviser:
FUNDING INVESTMENT INVESTMENT OPTION OBJECTIVE ADVISER/SUBADVISER - --------------------------------- --------------------------------- --------------------------------- AMERICAN FUNDS INSURANCE SERIES -- CLASS 2 American Funds Global Growth Seeks capital appreciation Capital Research and Management Fund through stocks. Company American Funds Growth Fund Seeks capital appreciation Capital Research and Management through stocks. Company American Funds Growth-Income Seeks both capital appreciation Capital Research and Management Fund and income. Company
13
FUNDING INVESTMENT INVESTMENT OPTION OBJECTIVE ADVISER/SUBADVISER - --------------------------------- --------------------------------- --------------------------------- DREYFUS VARIABLE INVESTMENT FUND -- INITIAL SHARES Dreyfus Variable Investment Seeks capital growth. The Dreyfus Corporation Fund Developing Leaders Portfolio LEGG MASON PARTNERS VARIABLE EQUITY TRUST Legg Mason Partners Variable Seeks capital appreciation. Legg Mason Partners Fund Advisor, Aggressive Growth LLC Portfolio -- Class I Subadviser: ClearBridge Advisors, LLC Legg Mason Partners Variable Seeks total return (that is, a Legg Mason Partners Fund Advisor, Capital and Income combination of income and long- LLC Portfolio -- Class I term capital appreciation). Subadviser: ClearBridge Advisors, LLC; Western Asset Management Company Legg Mason Partners Variable Seeks capital appreciation, Legg Mason Partners Fund Advisor, Dividend Strategy Portfolio principally through investments LLC in dividend-paying stocks. Subadviser: ClearBridge Advisors, LLC Legg Mason Partners Variable Seeks investment results that, Legg Mason Partners Fund Advisor, Equity Index before expenses, correspond to LLC Portfolio -- Class II the price and yield performance Subadviser: Batterymarch of the S&P 500 Index. Financial Management, Inc. Legg Mason Partners Variable Seeks long-term capital growth. Legg Mason Partners Fund Advisor, Fundamental Value Current income is a secondary LLC Portfolio -- Class I consideration. Subadviser: ClearBridge Advisors, LLC Legg Mason Partners Variable Seeks total return on assets from Legg Mason Partners Fund Advisor, International All Cap growth of capital and income. LLC Opportunity Portfolio Subadviser: Brandywine Global Investment Management, LLC Legg Mason Partners Variable Seeks long-term growth of Legg Mason Partners Fund Advisor, Investors Portfolio -- Class capital. Current income is a LLC I secondary objective. Subadviser: ClearBridge Advisors, LLC Legg Mason Partners Variable Seeks long-term growth of Legg Mason Partners Fund Advisor, Large Cap Growth capital. LLC Portfolio -- Class I Subadviser: ClearBridge Advisors, LLC Legg Mason Partners Variable Seeks a balance of capital and Legg Mason Partners Fund Advisor, Lifestyle Allocation 50% income. LLC Subadviser: Legg Mason Global Asset Allocation, LLC Legg Mason Partners Variable Seeks long-term growth of Legg Mason Partners Fund Advisor, Lifestyle Allocation 70% capital. LLC Subadviser: Legg Mason Global Asset Allocation, LLC Legg Mason Partners Variable Seeks capital appreciation. Legg Mason Partners Fund Advisor, Lifestyle Allocation 85% LLC Subadviser: Legg Mason Global Asset Allocation, LLC Legg Mason Partners Variable Seeks long term growth of Legg Mason Partners Fund Advisor, Small Cap Growth capital. LLC Portfolio -- Class I Subadviser: ClearBridge Advisors, LLC
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FUNDING INVESTMENT INVESTMENT OPTION OBJECTIVE ADVISER/SUBADVISER - --------------------------------- --------------------------------- --------------------------------- LEGG MASON PARTNERS VARIABLE INCOME TRUST Legg Mason Partners Variable Seeks high current income. Legg Mason Partners Fund Advisor, High Income Portfolio Secondarily, seeks capital LLC appreciation. Subadviser: Western Asset Management Company; Western Asset Management Company Limited Legg Mason Partners Variable Seeks to maximize current income Legg Mason Partners Fund Advisor, Money Market Portfolio consistent with preservation of LLC capital. The fund seeks to Subadviser: Western Asset maintain a stable $1 share price. Management Company MET INVESTORS SERIES TRUST Batterymarch Mid-Cap Stock Seeks growth of capital. Met Investors Advisory LLC Portfolio -- Class A Subadviser: Batterymarch Financial Management, Inc. BlackRock Large-Cap Core Seeks long-term capital growth. Met Investors Advisory LLC Portfolio -- Class E Subadviser: BlackRock Advisors, LLC Lord Abbett Bond Debenture Seeks to provide high current Met Investors Advisory LLC Portfolio -- Class A income and the opportunity for Subadviser: Lord, Abbett & Co. capital appreciation to produce a LLC high total return. Met/AIM Capital Appreciation Seeks capital appreciation. Met Investors Advisory LLC Portfolio -- Class A Subadviser: A I M Capital Management, Inc. Pioneer Strategic Income Seeks a high level of current Met Investors Advisory LLC Portfolio -- Class A income. Subadviser: Pioneer Investment Management, Inc. METROPOLITAN SERIES FUND, INC. BlackRock Aggressive Growth Seeks maximum capital MetLife Advisers, LLC Portfolio -- Class D appreciation. Subadviser: BlackRock Advisors, LLC BlackRock Bond Income Seeks competitive total return MetLife Advisers, LLC Portfolio -- Class E primarily from investing in Subadviser: BlackRock Advisors, fixed-income securities. LLC Capital Guardian U.S. Equity Seeks long-term growth of MetLife Advisers, LLC Portfolio -- Class A capital. Subadviser: Capital Guardian Trust Company FI Large Cap Seeks long-term growth of MetLife Advisers, LLC Portfolio -- Class A capital. Subadviser: Fidelity Management & Research Company MFS(R) Total Return Seeks a favorable total return MetLife Advisers, LLC Portfolio -- Class F through investment in a Subadviser: Massachusetts diversified portfolio. Financial Services Company T. Rowe Price Large Cap Growth Seeks long-term growth of capital MetLife Advisers, LLC Portfolio -- Class B and, secondarily, dividend Subadviser: T. Rowe Price income. Associates, Inc. Western Asset Management Seeks to maximize total return MetLife Advisers, LLC Strategic Bond Opportunities consistent with preservation of Subadviser: Western Asset Portfolio -- Class A income. Management Company
15 FIXED ACCOUNT - -------------------------------------------------------------------------------- We offer our Fixed Account as a funding option. Please see Appendix C for more information. CHARGES AND DEDUCTIONS - -------------------------------------------------------------------------------- GENERAL We deduct the charges described below. The charges are for the service and benefits we provide, costs and expenses we incur, and risks we assume under the Contracts. Services and benefits we provide include: - the ability for you to make withdrawals and surrenders under the Contracts - the death benefit paid on the death of the Contract Owner, Annuitant, or first of the joint owners - the available funding options and related programs (including dollar cost averaging, portfolio rebalancing, and systematic withdrawal programs) - administration of the annuity options available under the Contracts and - the distribution of various reports to Contract Owners Costs and expenses we incur include: - losses associated with various overhead and other expenses associated with providing the services and benefits provided by the Contracts - sales and marketing expenses including commission payments to your registered representative and - other costs of doing business Risks we assume include: - that Annuitants may live longer than estimated when the annuity factors under the Contracts were established - that the amount of the death benefit will be greater than the Contract Value and - that the costs of providing the services and benefits under the Contracts will exceed the charges deducted We may also deduct a charge for taxes. Unless otherwise specified, charges are deducted proportionately from all funding options in which you are invested. We may reduce or eliminate the withdrawal charge, the administrative charges and/or the mortality and expense risk charge under the Contract when certain sales or administration of the Contract result in savings or reduced expenses and/or risks. For certain trust, we may change the order in which Purchase Payments and earnings are withdrawn in order to determine the withdrawal charge. We will not reduce or eliminate the withdrawal charge or the administrative charge where such reduction or elimination would be unfairly discriminatory to any person. The amount of a charge may not necessarily correspond to the costs associated with providing the services or benefits indicated by the designated charge. For example, the withdrawal charge we collect may not fully cover all of the sales and distribution expenses we actually incur. The amount of any fee or charge is not impacted by an outstanding loan. We may also profit on one or more of the charges. We may use any such profits for any corporate purpose, including the payment of sales expenses. 16 WITHDRAWAL CHARGE We do not deduct a sales charge from Purchase Payments when they are made to the Contract. However, a withdrawal charge will apply if Purchase Payments are withdrawn before they have been in the Contract for six years. We will assess the charge as a percentage of the Purchase Payment withdrawn as follows:
YEARS SINCE PURCHASE PAYMENT MADE - ------------------------------------------ GREATER THAN OR EQUAL TO BUT LESS THAN WITHDRAWAL CHARGE - ------------------------ ------------- ----------------- 0 years 3 years 6% 3 years 4 years 3% 4 years 5 years 2% 5 years 6 years 1% 6+years 0%
FREE WITHDRAWAL ALLOWANCE Beginning in the second Contract Year, you may withdraw up to 15% of the Contract Value annually, without a withdrawal charge. We calculate the available withdrawal amount as of the end of the previous Contract Year. We reserve the right to not permit the provision on a full surrender. Any withdrawal is subject to federal income taxes on the taxable portion. In addition, a 10% federal penalty may be assessed on any withdrawal if the Contract Owner is under age 59 1/2. You should consult with your tax adviser regarding the tax consequences of a withdrawal. ADMINISTRATIVE CHARGES There are two administrative charges: the $30 annual Contract administrative charge and the administrative expense charge. We will deduct the annual Contract administrative charge on the fourth Friday of each August. This charge compensates us for expenses incurred in establishing and maintaining the Contract and we will prorate this charge (i.e. calculate) from the date of purchase. We will prorate this charge if you surrender your Contract, or if we terminate your Contract. We will not deduct a Contract administrative charge from the Fixed Account or: (1) from the distribution of death proceeds; (2) after an annuity payout has begun; or (3) if the Contract Value on the date of assessment equals or is greater than $40,000. We deduct the administrative expense charge (sometimes called "Subaccount administrative charge") on each business day from amounts allocated to the Variable Funding Options to compensate the Company for certain related administrative and operating expenses. The charge equals, on an annual basis, 0.15% of the daily net asset value allocated to each of the Variable Funding Options, and is reflected in our Accumulation and Annuity Unit value calculations. MORTALITY AND EXPENSE RISK CHARGE Each business day, we deduct a mortality and expense risk ("M&E") charge from amounts held in the Variable Funding Options. We reflect the deduction in our calculation of Accumulation and Annuity Unit values. The charges stated are the maximum for this product. We reserve the right to lower this charge at any time. If you choose the Standard Death Benefit, the M&E charge is 1.02% annually. If you choose the Enhanced Death Benefit, the M&E charge is 1.30% annually. This charge compensates the Company for risks assumed, benefits provided and expenses incurred, including the payment of commissions to your registered representative. VARIABLE LIQUIDITY BENEFIT CHARGE If the Variable Liquidity Benefit is selected, there is a maximum charge of 6% of the amounts withdrawn. This charge is not assessed during the accumulation phase. 17 We will assess the charge as a percentage of the total benefit received as follows:
YEARS SINCE INITIAL PURCHASE PAYMENT MADE - ------------------------------------------ GREATER THAN OR EQUAL TO BUT LESS THAN WITHDRAWAL CHARGE - ------------------------ ------------- ----------------- 0 years 3 years 6% 3 years 4 years 3% 4 years 5 years 2% 5 years 6 years 1% 6+years 0%
Please refer to Payment Options for a description of this benefit. VARIABLE FUNDING OPTION EXPENSES We summarized the charges and expenses of the Underlying Funds in the fee table. Please review the prospectus for each Underlying Fund for a more complete description of that fund and its expenses. Underlying Fund expenses are not fixed or guaranteed and are subject to change by the Fund. PREMIUM TAX Certain state and local governments charge premium taxes ranging from 0% to 3.5%, depending upon jurisdiction. We are responsible for paying these taxes and will determine the method used to recover premium tax expenses incurred. We will deduct any applicable premium taxes from your Contract Value either upon death, surrender, annuitization, or at the time you make Purchase Payments to the Contract, but no earlier than when we have a tax liability under state law. CHANGES IN TAXES BASED UPON PREMIUM OR VALUE If there is any change in a law assessing taxes against the Company based upon premiums, contract gains or value of the Contract, we reserve the right to charge you proportionately for this tax. TRANSFERS - -------------------------------------------------------------------------------- Subject to the limitations described below, you may transfer all or part of your Contract Value between Variable Funding Options at any time up to 30 days before the Maturity Date. After the Maturity Date, you may make transfers only if allowed by your Contract or with our consent. Transfer requests received at our Home Office that are in good order before the close of the New York Stock Exchange (NYSE) will be processed according to the value(s) next computed following the close of business. Transfer requests received on a non-business day or after the close of the NYSE will be processed based on the value(s) next computed on the next business day. Where permitted by state law, we reserve the right to restrict transfers from the Variable Funding Options to the Fixed Account whenever the credited interest rate on the Fixed Account is equal to the minimum guaranteed interest rate specified under the Contract. Currently, there are no charges for transfers; however, we reserve the right to charge a fee for any transfer request, which exceeds twelve per year. Since each Underlying Fund may have different overall expenses, a transfer of Contract Values from one Variable Funding Option to another could result in your investment becoming subject to higher or lower expenses. Also, when making transfers, you should consider the inherent risks associated with the Variable Funding Options to which your Contract Value is allocated. MARKET TIMING/EXCESSIVE TRADING Frequent requests from Contract Owners to transfer Contract Value may dilute the value of an Underlying Fund's shares if the frequent trading involves an attempt to take advantage of pricing inefficiencies created by a lag between a change in the value of the securities held by the Underlying Fund and the reflection of that change in the Underlying Fund's share price ("arbitrage trading"). Regardless of the existence of pricing inefficiencies, frequent transfers may also increase brokerage and administrative costs of the Underlying Funds and may disrupt Underlying 18 Fund management strategy, requiring an Underlying Fund to maintain a high cash position and possibly resulting in lost investment opportunities and forced liquidations ("disruptive trading"). Accordingly, arbitrage trading and disruptive trading activities (referred to collectively as "market timing") may adversely affect the long-term performance of the Underlying Funds, which may in turn adversely affect Contract Owners and other persons who may have an interest in the Contracts (e.g., annuitants and beneficiaries). We have policies and procedures that attempt to detect and deter frequent transfers in situations where we determine there is a potential for arbitrage trading. Currently, we believe that such situations may be presented in the international, small-cap, and high-yield Underlying Funds, i.e., the American Funds Global Growth Fund, Dreyfus VIF Developing Leaders Portfolio, Lord Abbett Bond Debenture Portfolio, Pioneer Strategic Income Portfolio, Legg Mason Partners Variable High Income Portfolio, Legg Mason Partners Variable International All Cap Opportunity Portfolio, Legg Mason Partners Variable Small Cap Growth Portfolio and Western Asset Management Strategic Bond Opportunities Portfolio (the "Monitored Portfolios"), and we monitor transfer activity in those Monitored Portfolios. In addition, as described below, we treat all American Funds Insurance Series portfolios ("American Funds portfolios") as Monitored Portfolios. We employ various means to monitor transfer activity, such as examining the frequency and size of transfers into and out of the Monitored Portfolios within given periods of time. For example, we currently monitor transfer activity to determine if, for each of the Monitored Portfolios, in a three-month period there were two or more "round-trips" of a certain dollar amount or greater. A round-trip is defined as a transfer in followed by a transfer out within the next 10 calendar days, or a transfer out followed by a transfer in within the next 10 calendar days. In the case of a Contract that has been restricted previously, a single round-trip of a certain dollar amount or greater will trigger the transfer restrictions described below. We do not believe that other Underlying Funds present a significant opportunity to engage in arbitrage trading and therefore do not monitor transfer activity in those Underlying Funds. We may change the Monitored Portfolios at any time without notice in our sole discretion. In addition to monitoring transfer activity in certain Underlying Funds, we rely on the Underlying Funds to bring any potential disruptive trading activity they identify to our attention for investigation on a case-by-case basis. We will also investigate other harmful transfer activity that we identify from time to time. We may revise these policies and procedures in our sole discretion at any time without prior notice. AMERICAN FUNDS MONITORING POLICY. As a condition to making their portfolios available in our products, American Funds requires us to treat all American Funds Insurance Series portfolios as Monitored Portfolios under our current market timing and excessive trading policies and procedures. Further, American Funds requires us to impose additional specified monitoring criteria for all American Funds portfolios available under the Contract, regardless of the potential for arbitrage trading. We are required to monitor transfer activity in American Funds portfolios to determine if there were two or more transfers in followed by transfers out, in each case of a certain dollar amount or greater, in any 30-day period. A first violation of the American Funds monitoring policy will result in a written notice of violation; any additional violation will result in the imposition of the transfer restrictions described below. Further, as Monitored Portfolios, American Funds portfolios will also be subject to our current market timing and excessive trading policies and procedures and restrictions, and transfer restrictions may be imposed upon a violation of either monitoring policy. Our policies and procedures may result in transfer restrictions being applied to deter market timing. Currently, when we detect transfer activity in the Monitored Portfolios that exceeds our current transfer limits, or other transfer activity that we believe may be harmful to other Owners or other persons who have an interest in the Contracts, we will exercise our contractual right to restrict your number of transfers to one every six months. In addition, we also reserve the right, but do not have the obligation, to further restrict the right to request transfers by any market timing firm or any other third party who has been authorized to initiate transfers on behalf of multiple Contract Owners. We may, among other things: - reject the transfer instructions of any agent acting under a power of attorney on behalf of more than one Owner, or - reject the transfer or exchange instructions of individual Owners who have executed pre-authorized transfer forms which are submitted by market timing firms or other third parties on behalf of more than one Owner. Transfers made under a Dollar Cost Averaging Program, a rebalancing program or, if applicable, any asset allocation program described in this prospectus are not treated as transfers when we evaluate trading patterns for market timing. 19 The detection and deterrence of harmful transfer activity involves judgments that are inherently subjective, such as the decision to monitor only those Underlying Funds that we believe are susceptible to arbitrage trading or the determination of the transfer limits. Our ability to detect and/or restrict such transfer activity may be limited by operational and technological systems, as well as our ability to predict strategies employed by Owners to avoid such detection. Our ability to restrict such transfer activity also may be limited by provisions of the Contract. Accordingly, there is no assurance that we will prevent all transfer activity that may adversely affect Owners and other persons with interests in the Contracts. We do not accommodate market timing in any Underlying Fund and there are no arrangements in place to permit any Contract Owner to engage in market timing; we apply our policies and procedures without exception, waiver, or special arrangement. The Underlying Funds may have adopted their own policies and procedures with respect to frequent purchases and redemptions of their respective shares and we reserve the right to enforce these policies and procedures. For example, Underlying Funds may assess a redemption fee (which we reserve the right to collect) on shares held for a relatively short period. The prospectuses for the Underlying Funds describe any such policies and procedures, which may be more or less restrictive than the policies and procedures we have adopted. Although we may not have the contractual authority or the operational capacity to apply the frequent trading policies and procedures of the Underlying Funds, we have entered into a written agreement, as required by SEC regulation, with each Underlying Fund or its principal underwriter that obligates us to provide to the Underlying Fund promptly upon request certain information about the trading activity of individual Contract Owners, and to execute instructions from the Underlying Fund to restrict or prohibit further purchases or transfers by specific Contract Owners who violate the frequent trading policies established by the Underlying Fund. In addition, Contract Owners and other persons with interests in the contracts should be aware that the purchase and redemption orders received by the Underlying Funds generally are "omnibus" orders from intermediaries, such as retirement plans or separate accounts funding variable insurance contracts. The omnibus orders reflect the aggregation and netting of multiple orders from individual owners of variable insurance contracts and/or individual retirement plan participants. The omnibus nature of these orders may limit the Underlying Funds in their ability to apply their frequent trading policies and procedures. In addition, the other insurance companies and/or retirement plans may have different policies and procedures or may not have any such policies and procedures because of contractual limitations. For these reasons, we cannot guarantee that the Underlying Funds (and thus Contract Owners) will not be harmed by transfer activity relating to other insurance companies and/or retirement plans that may invest in the Underlying Funds. If an Underlying Fund believes that an omnibus order reflects one or more transfer requests from Contract Owners engaged in disruptive trading activity, the Underlying Fund may reject the entire omnibus order. In accordance with applicable law, we reserve the right to modify or terminate the transfer privilege at any time. We also reserve the right to defer or restrict the transfer privilege at any time that we are unable to purchase or redeem shares of any of the Underlying Funds, including any refusal or restriction on purchases or redemptions of their shares as a result of their own policies and procedures on market timing activities (even if an entire omnibus order is rejected due to the market timing activity of a single Contract Owner). You should read the Underlying Fund prospectuses for more details. DOLLAR COST AVERAGING Dollar cost averaging or the pre-authorized transfer program (the "DCA Program") allows you to transfer a set dollar amount to other funding options on a monthly or quarterly basis during the accumulation phase of the Contract. Using this method, you will purchase more Accumulation Units in a funding option if the value per unit is low and will purchase fewer Accumulation Units if the value per unit is high. Therefore, you may achieve a lower-than-average cost per unit in the long run if you have the financial ability to continue the program over a long enough period of time. Dollar cost averaging does not assure a profit or protect against a loss. You may elect the DCA Program through Written Request or other method acceptable to us. You must have a minimum total Contract Value of $5,000 to enroll in the DCA Program. The minimum amount that may be transferred through this program is $400. There is no additional fee to participate in the DCA Program. You may establish pre-authorized transfers of Contract Values from the Fixed Account, subject to certain restrictions. Under the DCA Program, automated transfers from the Fixed Account may not deplete your Fixed Account Value in less than twelve months from your enrollment in the DCA Program. 20 In addition to the DCA Program, within the Fixed Account, we may credit increased interest rates to Contract Owners under an administrative Special DCA Program established at our discretion, depending on availability and state law. Under this program, the Contract Owner may pre-authorize level transfers to any of the funding options under a 6 Month, 12 Month or 24 Month Special DCA Program. The programs may have different credited interest rates. We must transfer all Purchase Payments and accrued interest on a level basis to the selected funding options in the applicable time period. Under each program, the interest will accrue only on the remaining amounts in the Special DCA Program. For example, under the 12 Month program, the interest rate can accrue up to 12 months on the remaining amounts in the Special DCA Program and we must transfer all Purchase Payments and accrued interest in this program on a level basis to the selected funding options in 12 months. The pre-authorized transfers will begin after the initial program Purchase Payment and complete enrollment instructions are received by the Company. If we do not receive complete program enrollment instructions within 15 days of receipt of the initial program Purchase Payment, the entire balance in the program will be credited with the non-program interest rate then in effect for the Fixed Account. You may start or stop participation in the DCA Program at any time, but you must give the Company at least 30 days' notice to change any automated transfer instructions that are currently in place. If you stop the Special DCA Program and elect to remain in the Fixed Account, we will credit your Contract Value for the remainder of 6 or 12 months with the interest rate for non-DCA Program funds. You may only have one DCA Program or Special DCA Program in place at one time. We will allocate any subsequent Purchase Payments we receive within the DCA Program period selected to the current funding options over the remainder of that DCA Program transfer period, unless you direct otherwise. All provisions and terms of the Contract apply to the DCA and Special DCA Programs, including provisions relating to the transfer of money between funding options. We reserve the right to suspend or modify transfer privileges at any time and to assess a processing fee for this service. ACCESS TO YOUR MONEY - -------------------------------------------------------------------------------- Any time before the Maturity Date, you may redeem all or any portion of the Cash Surrender Value, that is, the Contract Value less any withdrawal charge, outstanding loans, and any premium tax not previously deducted. Unless you submit a Written Request specifying the Variable Funding Option(s) from which we are to withdraw amounts, we will make the withdrawal on a pro rata basis. We will determine the Cash Surrender Value as of the close of business after we receive your surrender request at our Home Office. The Cash Surrender Value may be more or less than the Purchase Payments you made. You may not make withdrawals during the annuity period. For amounts allocated to the Variable Funding Options, we may defer payment of any Cash Surrender Value for a period of up to five business days after the Written Request is received. For amounts allocated to the Fixed Account, we may defer payment of any Cash Surrender Value for a period up to six months. In either case, it is our intent to pay as soon as possible. We cannot process requests for withdrawals that are not in good order. We will contact you if there is a deficiency causing a delay and will advise what is needed to act upon the withdrawal request. We may withhold payment of surrender or withdrawal proceeds if any portion of those proceeds would be derived from a Contract Owner's check that has not yet cleared (i.e., that could still be dishonored by your banking institution). We may use telephone, fax, Internet or other means of communications to verify that payment from the Contract Owner's check has been or will be collected. We will not delay payment longer than necessary for us to verify that payment has been or will be collected. Contract Owners may avoid the possibility of delay in the disbursement of proceeds coming from a check that has not yet cleared by providing us with a certified check. If your Contract is issued as part of a 403(b) plan, there are restrictions on your ability to make withdrawals from your Contract. You may not withdraw contributions or earnings made to your Contract after December 31, 1988 unless you are (a) age 59 1/2, (b) no longer employed, (c) deceased, (d) disabled, or (e) experiencing a financial hardship. Even if you are experiencing a financial hardship, you may only withdraw contributions, not earnings. You should consult with your tax adviser before making a withdrawal from your Contract. 21 SYSTEMATIC WITHDRAWALS Before the Maturity Date, you may choose to withdraw a specified dollar amount (at least $100) on a monthly, quarterly, semiannual or annual basis. We will deduct any applicable premium taxes and withdrawal charge. To elect systematic withdrawals, you must have a Contract Value of at least $15,000 and you must make the election on the form we provide. We will surrender Accumulation Units pro rata from all funding options in which you have an interest, unless you instruct us otherwise. You may begin or discontinue systematic withdrawals at any time by notifying us in writing, but you must give at least 30 days' notice to change any systematic withdrawal instructions that are currently in place. We reserve the right to discontinue offering systematic withdrawals or to assess a processing fee for this service upon 30 days' written notice to Contract Owners (where allowed by state law). There is currently no additional fee for electing systematic withdrawals. Each systematic withdrawal is subject to federal income taxes on the taxable portion and may be subject to Contract charges. In addition, a 10% federal penalty tax may be assessed on systematic withdrawals if the Contract Owner is under age 59 1/2. You should consult with your tax adviser regarding the tax consequences of systematic withdrawals. LOANS Loans may be available under your Contract. Loans may only be taken against funds allocated or transferred to the Fixed Account. If available, all loan provisions are described in your Contract or loan agreement. OWNERSHIP PROVISIONS - -------------------------------------------------------------------------------- TYPES OF OWNERSHIP CONTRACT OWNER The Contract belongs to the Contract Owner named in the Contract (on the Contract Specifications page), or to any other person to whom you subsequently assign the Contract. You may only make an assignment of ownership or a collateral assignment for Non-qualified Contracts. You have sole power during the Annuitant's lifetime to exercise any rights and to receive all benefits given in the Contract provided you have not named an irrevocable beneficiary and provided you have not assigned the Contract. You receive all payments while the Annuitant is alive unless you direct them to an alternate recipient. An alternate recipient does not become the Contract Owner. Joint Owner. For Non-qualified Contracts only, you may name joint owners (e.g., spouses) in a Written Request before the Contract is in effect. Joint owners may independently exercise transfers allowed under the Contract. All other rights of ownership must be exercised by both owners. Joint owners own equal shares of any benefits accruing or payments made to them. Succeeding Owner. For Non-qualified Contracts only, if joint owners are not named, the Contract Owner may name a succeeding owner in a Written Request. The succeeding owner becomes the Contract Owner if living when the Contract Owner dies. The succeeding owner has no interest in the Contract before then. The Contract Owner may change or delete a succeeding owner by Written Request. BENEFICIARY You name the beneficiary in a Written Request. The beneficiary has the right to receive any death benefit proceeds remaining under the Contract upon the death of the Annuitant or the Contract Owner. If more than one beneficiary survives the Annuitant or Contract Owner, they will share equally in benefits unless you recorded different shares with the Company by Written Request before the death of the Annuitant or Contract Owner. In the case of a non-spousal beneficiary or a spousal beneficiary who has not chosen to assume the Contract, we will not transfer or otherwise remove the death benefit proceeds from either the Variable Funding Options or the Fixed Account, as most recently elected by the Contract Owner, until the Death Report Date. 22 Unless you have named an irrevocable beneficiary you have the right to change any beneficiary by Written Request during the lifetime of the Annuitant and while the Contract continues. ANNUITANT The Annuitant is designated in the Contract (on the Contract Specifications page), and is the individual on whose life the Maturity Date and the amount of the monthly Annuity Payments depend. You may not change the Annuitant after your Contract is in effect. Contingent Annuitant. You may name one individual as a Contingent Annuitant. A Contingent Annuitant may not be changed, deleted or added to the Contract after the Contract Date. If the Annuitant who is not the owner dies prior to the Maturity Date, and the Contingent Annuitant is still living: - the death benefit will not be payable upon the Annuitant's death - the Contingent Annuitant becomes the Annuitant - all other rights and benefits will continue in effect When a Contingent Annuitant becomes the Annuitant, the Maturity Date remains the same as previously in effect. If the Annuitant is also the owner, a death benefit is paid to the beneficiary regardless of whether or not there is a Contingent Annuitant. You may not change, delete, or add a Contingent Annuitant after the Contract becomes effective. DEATH BENEFIT - -------------------------------------------------------------------------------- Before the Maturity Date, generally, a death benefit is payable when either the Annuitant or a Contract Owner dies. At purchase, you elect either the Standard Death Benefit, or the Enhanced Death Benefit (also referred to as the "Roll-Up Death Benefit"). The death benefit is calculated at the close of the business day on which the Company's Home Office receives Due Proof of Death and written payment instructions or election of beneficiary contract continuance ("Death Report Date"). Note: If the owner dies before the Annuitant, the death benefit is recalculated, replacing all references to "Annuitant" with "owner." DEATH PROCEEDS BEFORE THE MATURITY DATE STANDARD DEATH BENEFIT DEATH OF ANY OWNER OR THE ANNUITANT BEFORE AGE 75. We will pay to the beneficiary a death benefit in an amount equal to the greatest of (1), (2) or (3) below, each reduced by any applicable premium tax, withdrawals or outstanding loans not previously deducted: (1) the Contract Value; (2) the total Purchase Payments made under the Contract; or (3) the Contract Value on the latest fifth Contract Year anniversary immediately preceding the date on which the Company receives Due Proof of Death. DEATH OF ANY OWNER OR THE ANNUITANT ON OR AFTER AGE 75. We will pay to the beneficiary a death benefit in an amount equal to the greatest of (1), (2) or (3) below, each reduced by any applicable premium tax, withdrawals or outstanding loans not previously deducted: (1) the Contract Value; (2) the total Purchase Payments made under the Contract; or 23 (3) the Contract Value on the latest fifth Contract Year anniversary occurring on or before the Annuitant's 75(th) birthday. ENHANCED DEATH BENEFIT (ROLL-UP DEATH BENEFIT) (NOT AVAILABLE WHEN EITHER THE ANNUITANT OR OWNER IS AGE 76 OR OLDER ON THE CONTRACT DATE) (Please refer to Appendix D for a description of the Enhanced Death Benefit for contracts purchased prior to June 1, 1997.) All death benefits described below are reduced by any applicable premium tax, prior withdrawals or outstanding loans not previously deducted.
AGE AT TIME OF DEATH DEATH BENEFIT - -------------------------------------------------------------------------------------- If the Annuitant dies before age 80, the death benefit will be the greatest of: - the Contract Value on the Death Report Date - the roll-up death benefit value on the Death Report Date (as described below) - the maximum of all step-up death benefit values (as described below) available on the Death Report Date - -------------------------------------------------------------------------------------- If the Annuitant dies on or after age 80, the death benefit will be the greatest of: - the Contract Value on the Death Report Date - the roll-up death benefit value (as described below) on the Annuitant's 80(th) birthday, plus any additional Purchase Payments and minus any partial surrender reductions (as described below) that occur after the Annuitant's 80(th) birthday; or - The maximum of all step-up death benefit values (as described below) in effect on the Death Report Date which are associated with any Contract Date anniversary occurring on or before the Annuitant's 80(th) birthday - --------------------------------------------------------------------------------------
THE ROLL-UP DEATH BENEFIT VALUE. On the Contract Date, the roll-up death benefit value is equal to the Purchase Payment. On each Contract Date anniversary, the roll-up death benefit value will be recalculated to equal (a) plus (b) minus (c), increased by 5%, where: (a) is the roll-up death benefit value as of the previous Contract Date anniversary (b) is any Purchase Payment during the previous Contract Year (c) is any partial surrender reduction (as described below) during the previous Contract Year On dates other than the Contract Date anniversary, the roll-up death benefit value equals (a) plus (b) minus (c) where: (a) is the roll-up death benefit value as of the previous Contract Date anniversary (b) is any Purchase Payment made since the previous Contract Date anniversary (c) is any partial surrender reduction (as described below) since the previous Contract Date anniversary. The maximum roll-up death benefit payable equals 200% of the difference between all Purchase Payments and all partial surrender reductions (as described below). STEP-UP VALUE. We will establish a separate death benefit value on each anniversary of the Contract Date which occurs on or prior to the Death Report Date. The step-up value will initially equal the Contract Value on that anniversary. Whenever you make a Purchase Payment, we will increase the step-up value by the amount of that Purchase Payment. Whenever you take a withdrawal, we will reduce the step-up value by a partial surrender reduction as described below. Recalculations of step-up death benefit values related to any Purchase Payments or any withdrawals will be made in the order that such Purchase Payments or withdrawals occur. 24 THE PARTIAL SURRENDER REDUCTION referenced above is equal to (1) the amount of a death benefit value (step-up or roll-up) immediately prior to the reduction for the withdrawal, multiplied by (2) the amount of the withdrawal divided by the Contract Value immediately prior to the withdrawal. For example, assume your current Contract Value is $55,000. If your original step-up value is $50,000, and you decide to make a withdrawal of $10,000, we would reduce the step-up value as follows: 50,000 x (10,000/55,000) = $9,090 Your new step-up value would be 50,000-9,090 or $40,910. The following example shows what would happen in a declining market. Assume your current Contract Value is $30,000. If your original step-up value is $50,000, and you decide to make a withdrawal of $10,000, we would reduce the step-up value as follows: 50,000 x (10,000/30,000) = $16,666 Your new step-up value would be 50,000-16,666, or $33,334. PAYMENT OF PROCEEDS We describe the process of paying death benefit proceeds before the Maturity Date in the charts below. The charts do not encompass every situation and are merely intended as a general guide. More detailed information is provided in your Contract. Generally, the person(s) receiving the benefit may request that the proceeds be paid in a lump sum, or be applied to one of the settlement options available under the Contract. NON-QUALIFIED CONTRACTS
- --------------------------------------------------------------------------------------------------------------- MANDATORY BEFORE THE MATURITY DATE, THE COMPANY WILL PAYOUT RULES UPON THE DEATH OF THE PAY THE PROCEEDS TO: UNLESS... APPLY* - --------------------------------------------------------------------------------------------------------------- OWNER (WHO IS NOT THE The beneficiary (ies), or if Unless the beneficiary Yes ANNUITANT) (WITH NO JOINT none, to the Contract elects to continue the OWNER) Owner's estate. Contract rather than receive the distribution. - --------------------------------------------------------------------------------------------------------------- OWNER (WHO IS THE ANNUITANT) The beneficiary (ies), or if Unless the beneficiary Yes (WITH NO JOINT OWNER) none, to the Contract elects to continue the Owner's estate. Contract rather than receive the distribution. - --------------------------------------------------------------------------------------------------------------- JOINT OWNER (WHO IS NOT THE The surviving joint owner. Unless the surviving joint Yes ANNUITANT) owner elects to continue the Contract rather than receive the distribution. - --------------------------------------------------------------------------------------------------------------- JOINT OWNER (WHO IS THE The beneficiary (ies), or if Unless the Yes ANNUITANT) none, to the surviving joint beneficiary/surviving joint owner. owner elects to continue the Contract rather than receive the distribution. - --------------------------------------------------------------------------------------------------------------- ANNUITANT (WHO IS THE See death of "owner who is Yes CONTRACT OWNER) the Annuitant" above. - ---------------------------------------------------------------------------------------------------------------
25
- --------------------------------------------------------------------------------------------------------------- MANDATORY BEFORE THE MATURITY DATE, THE COMPANY WILL PAYOUT RULES UPON THE DEATH OF THE PAY THE PROCEEDS TO: UNLESS... APPLY* - --------------------------------------------------------------------------------------------------------------- ANNUITANT (WHERE OWNER IS A The beneficiary (ies) (e.g. Yes (Death of NONNATURAL PERSON/TRUST) the trust) or if none, to Annuitant is the owner. treated as death of the owner in these circumstances.) - --------------------------------------------------------------------------------------------------------------- CONTINGENT ANNUITANT No death proceeds are N/A (ASSUMING ANNUITANT IS STILL payable; contract continues. ALIVE) - --------------------------------------------------------------------------------------------------------------- BENEFICIARY No death proceeds are N/A payable; contract continues. - --------------------------------------------------------------------------------------------------------------- CONTINGENT BENEFICIARY No death proceeds are N/A payable; contract continues. - ---------------------------------------------------------------------------------------------------------------
- --------- * Certain payout rules of the Internal Revenue Code (IRC) are triggered upon the death of any Owner. Non-spousal beneficiaries (as well as spousal beneficiaries who choose not to assume the Contract) must begin taking distributions based on the beneficiary's life expectancy within one year of death or take a complete distribution of Contract proceeds within 5 years of death. If mandatory distributions have begun, the 5 year payout option is not available. QUALIFIED CONTRACTS
- --------------------------------------------------------------------------------------------------------------- MANDATORY BEFORE THE MATURITY DATE, THE COMPANY WILL PAYOUT RULES UPON THE DEATH OF THE PAY THE PROCEEDS TO: UNLESS... APPLY* - --------------------------------------------------------------------------------------------------------------- OWNER/ANNUITANT The beneficiary (ies), or if Unless the beneficiary Yes none, to the Contract elects to continue the Owner's estate. Contract rather than receive a distribution. - --------------------------------------------------------------------------------------------------------------- BENEFICIARY No death proceeds are N/A payable; Contract continues. - --------------------------------------------------------------------------------------------------------------- CONTINGENT BENEFICIARY No death proceeds are N/A payable; Contract continues. - ---------------------------------------------------------------------------------------------------------------
BENEFICIARY CONTRACT CONTINUANCE (NOT PERMITTED FOR NON-NATURAL BENEFICIARIES) If you die before the Maturity Date, and if the value of any beneficiary's portion of the death benefit is between $20,000 and $1,000,000 as of the Death Report Date, (more than $1,000,000 is subject to Home Office approval), your beneficiary(ies) may elect to continue his/her portion of the Contract subject to applicable Internal Revenue Code distribution requirements, rather than receive the death benefit in a lump sum. If the beneficiary chooses to continue the Contract, the beneficiary can extend the payout phase of the Contract enabling the beneficiary to "stretch" the death benefit distributions out over his life expectancy as permitted by the Internal Revenue Code. If your beneficiary elects to continue the Contract, the death benefit will be calculated as of the Death Report Date. The initial Contract Value of the continued Contract (the "adjusted Contract Value") will equal the greater of the Contract Value or the death benefit calculated on the Death Report Date and will be allocated to the funding options in the same proportion as prior to the Death Report Date. If the adjusted Contract Value is allocated to the Variable Funding Options, the beneficiary bears the investment risk. The beneficiary who continues the Contract will be granted the same rights as the owner under the original Contract, except the beneficiary cannot: - transfer ownership 26 - take a loan - make additional Purchase Payments The beneficiary may also name his/her own beneficiary ("succeeding beneficiary") and has the right to take withdrawals at any time after the Death Report Date without a withdrawal charge. All other fees and charges applicable to the original Contract will also apply to the continued Contract. All benefits and features of the continued Contract will be based on the beneficiary's age on the Death Report Date as if the beneficiary had purchased the Contract with the adjusted Contract Value on the Death Report Date. PLANNED DEATH BENEFIT You may request that rather than receive a lump-sum death benefit, the beneficiary(ies) receive all or a portion of the death benefit proceeds either: - as a variable or fixed annuity for life or a period that does not exceed the beneficiary's life expectancy, or - under the terms of the Beneficiary Continuance provision described above. If the Beneficiary Continuance provision is selected as a planned death benefit, no surrenders will be allowed other than payments meant to satisfy minimum distribution amounts or systematic withdrawal amounts, if greater. You must make the planned death benefit request as well as any revocation of this request in writing. Upon your death, your beneficiary(ies) cannot revoke or modify this request. If the death benefit at the time we receive Due Proof of Death is less than $2,000, we will only pay a lump sum to the beneficiary. If periodic payments due under the planned death benefit election are less than $100, we reserve the right to make Annuity Payments at less frequent intervals, resulting in a payment of at least $100 per year. If no beneficiary is alive when death benefits become payable, we will pay the death benefit as provided in your Contract. DEATH PROCEEDS AFTER THE MATURITY DATE If any Contract Owner or the Annuitant dies on or after the Maturity Date, the Company will pay the beneficiary a death benefit consisting of any benefit remaining under the annuity option then in effect. THE ANNUITY PERIOD - -------------------------------------------------------------------------------- MATURITY DATE Under the Contract, you can receive regular payments ("Annuity Payments"). You can choose the month and the year in which those payments begin ("Maturity Date"). You can also choose among payout options or elect a lump sum distribution. While the Annuitant is alive, you can change your selection any time up to the Maturity Date. Annuity Payments will begin on the Maturity Date stated in the Contract unless (1) you fully surrendered the Contract; (2) we paid the proceeds to the beneficiary before that date; or (3) you elected another date. Annuity Payments are a series of periodic payments (a) for life; (b) for life with a minimum number of payments assured; (c) for the joint lifetime of the Annuitant and another person, and thereafter during the lifetime of the survivor; or (d) for a fixed period. We may require proof that the Annuitant is alive before we make Annuity Payments. Not all options may be available in all states. You may choose to annuitize at any time after you purchase your Contract. Unless you elect otherwise, the Maturity Date will be the Annuitant's 70th birthday for Qualified Contracts, or for Non-Qualified Contracts, the Annuitant's 75th birthday or ten years after the effective date of the Contract, if later (this requirement may be changed by us). For Contracts issued in Florida and New York, the Maturity Date you elect may not be later than the Annuitant's 90th birthday. At least 30 days before the original Maturity Date, you may elect to extend the Maturity Date to any time prior to the Annuitant's 90th birthday for Non- qualified Contracts, or 70(th) birthday for Qualified Contracts, or for all Contracts, to a later date with our consent. You may use certain annuity options taken at the Maturity Date to meet the minimum required distribution requirements of federal tax law, or you may use a program of withdrawals instead. These mandatory distribution requirements take effect generally upon the death of the Contract Owner, or with certain Qualified Contracts upon either the later of the Contract Owner's attainment of age 70 1/2 or year of retirement; or the 27 death of the Contract Owner. You should seek independent tax advice regarding the election of minimum required distributions. ALLOCATION OF ANNUITY You may elect to receive your Annuity Payments in the form of a variable annuity, a fixed annuity, or a combination of both. If, at the time Annuity Payments begin, you have not made an election, we will apply your Cash Surrender Value to provide an annuity funded by the same funding options as you have selected during the accumulation period. At least 30 days before the Maturity Date, you may transfer the Contract Value among the funding options in order to change the basis on which we will determine Annuity Payments. (See "Transfers.") VARIABLE ANNUITY You may choose an annuity payout that fluctuates depending on the investment experience of the Variable Funding Options. We determine the number of Annuity Units credited to the Contract by dividing the first monthly Annuity Payment attributable to each Variable Funding Option by the corresponding Accumulation Unit value as of 14 days before the date Annuity Payments begin. We use an Annuity Unit to measure the dollar value of an Annuity Payment. The number of Annuity Units (but not their value) remains fixed during the annuity period. DETERMINATION OF FIRST ANNUITY PAYMENT. Your Contract contains the tables we use to determine your first monthly Annuity Payment. If you elect a variable annuity, the amount we apply to it will be the Cash Surrender Value as of 14 days before the date Annuity Payments begin, less any applicable premium taxes not previously deducted. The amount of your first monthly payment depends on the annuity option you elected and the Annuitant's adjusted age. Your Contract contains the formula for determining the adjusted age. We determine the total first monthly Annuity Payment by multiplying the benefit per $1,000 of value shown in the Contract tables by the number of thousands of dollars of Contract Value you apply to that annuity option. The Contract tables factor in an assumed daily net investment factor of 3.0%. We call this your net investment rate. Your net investment rate of 3% corresponds to an annual interest rate of 3%. This means that if the annualized investment performance, after expenses, of your Variable Funding Options is less than 3%, then the dollar amount of your variable Annuity Payments will decrease. However, if the annualized investment performance, after expenses, of your Variable Funding Options is greater than 3%, then the dollar amount of your variable Annuity Payments will increase. DETERMINATION OF SECOND AND SUBSEQUENT ANNUITY PAYMENTS. The dollar amount of all subsequent Annuity Payments changes from month to month based on the investment experience, as described above, of the applicable funding options. The total amount of each Annuity Payment will equal the sum of the basic payments in each funding option. We determine the actual amounts of these payments by multiplying the number of Annuity Units we credited to each funding option by the corresponding Annuity Unit value as of the date 14 days before the date the payment is due. FIXED ANNUITY You may choose a fixed annuity that provides payments that do not vary during the annuity period. We will calculate the dollar amount of the first fixed Annuity Payment as described under "Variable Annuity," except that the amount we apply to begin the annuity will be your Cash Surrender Value as of the date Annuity Payments begin. Payout rates will not be lower than that shown in the Contract. If it would produce a larger payment, the first fixed Annuity Payment will be determined using the Annuity Tables in effect on the Maturity Date. PAYMENT OPTIONS - -------------------------------------------------------------------------------- ELECTION OF OPTIONS While the Annuitant is alive, you can change your annuity option selection any time up to the Maturity Date. Once Annuity Payments have begun, no further elections are allowed. During the Annuitant's lifetime, if you do not elect otherwise before the Maturity Date, we will pay you (or another designated payee) the first of a series of monthly Annuity Payments based on the life of the Annuitant, in accordance with Annuity Option 2 (Life Annuity with 120 monthly payments assured). For certain Qualified Contracts, Annuity 28 Option 4 (Joint and Last Survivor Life Annuity -- Annuity Reduced on Death of Primary Payee) will be the automatic option as described in the Contract. (See "Annuity Options.") The minimum amount that can be placed under an annuity option will be $1,000 unless we agree to a lesser amount. If any monthly periodic payment due is less than $100, the Company reserves the right to make payments at less frequent intervals, or to pay the Contract Value in a lump-sum. On the Maturity Date, we will pay the amount due under the Contract in accordance with the payment option that you select. You may choose to receive a single lump-sum payment. You must elect an option in writing, in a form satisfactory to the Company. Any election made during the lifetime of the Annuitant must be made by the Contract Owner. ANNUITY OPTIONS Subject to the conditions described in "Election of Options" above, we may pay all or any part of the Cash Surrender Value under one or more of the following annuity options. Payments under the annuity options are generally made on a monthly basis. We may offer additional options. Option 1 -- Life Annuity -- No Refund. The Company will make Annuity Payments during the lifetime of the Annuitant ending with the last payment before death. This option offers the maximum periodic payment, since there is no assurance of a minimum number of payments or provision for a death benefit for beneficiaries. Option 2 -- Life Annuity with 120, 180 or 240 Monthly Payments Assured. The Company will make monthly Annuity Payments during the lifetime of the Annuitant, with the agreement that if, at the death of that person, payments have been made for less than 120, 180 or 240 months, as elected, we will continue making payments to the beneficiary during the remainder of the period. Option 3 -- Joint and Last Survivor Life Annuity -- No Refund. The Company will make regular Annuity Payments during the lifetime of the Annuitant and a second person. When either person dies, we will continue making payments to the survivor. No further payments will be made following the death of the survivor. Option 4 -- Joint and Last Survivor Life Annuity -- Annuity Reduced on Death of Primary Payee. The Company will make Annuity Payments during the lifetimes of the Annuitant and a second person. You will designate one as primary payee, and the other will be designated as secondary payee. On the death of the secondary payee, the Company will continue to make monthly Annuity Payments to the primary payee in the same amount that would have been payable during the joint lifetime of the two persons. On the death of the primary payee, the Company will continue to make Annuity Payments to the secondary payee in an amount equal to 50% of the payments, which would have been made during the lifetime of the primary payee. No further payments will be made once both payees have died. Option 5 -- Payments for a Fixed Period without Life Contingency. We will make periodic payments for the period selected. This option may not satisfy the minimum required distribution rules for Qualified Contracts. Consult a tax adviser before electing this option. Option 6 -- Other Annuity Options. We will make any other arrangements for Annuity Payments as may be mutually agreed upon. VARIABLE LIQUIDITY BENEFIT At any time after annuitization and before death, the Contract Owner may surrender and receive a payment equal to (A) minus (B), where (A) equals the present value of remaining certain payments, and (B) equals a withdrawal charge not to exceed the maximum withdrawal charge rate shown on the specifications page of the Contract multiplied by (A). The interest rate used to calculate the present value is a rate 1% higher than the Assumed (Daily) Net Investment Factor used to calculate the Annuity Payments. The remaining period certain payments are assumed to be level payments equal to the most recent period certain payment prior to the request for this liquidity benefit. A withdrawal charge is not imposed if the surrender is made after the expiration of the withdrawal charge period shown on the specifications page of the Contract. 29 MISCELLANEOUS CONTRACT PROVISIONS - -------------------------------------------------------------------------------- RIGHT TO RETURN You may return the Contract for a full refund of the Contract Value plus any Contract charges and premium taxes you paid (but not any fees and charges the Underlying Fund assessed) within ten days after you receive it (the "right to return period"). You bear the investment risk of investing in the Variable Funding Options during the right to return period; therefore, the Contract Value we return may be greater or less than your Purchase Payment. If you purchase the Contract as an Individual Retirement Annuity, and return it within the first seven days after delivery, or longer if your state law permits, we will refund your Purchase Payment in full; during the remainder of the right to return period, we will refund the Contract Value (including charges). We will determine the Contract Value following the close of the business day on which we receive your Contract and a Written Request for a refund. Where state law requires a different period, or the return of Purchase Payments or other variations of this provision, we will comply. Refer to your Contract for any state-specific information. TERMINATION We reserve the right to terminate the Contract on any business day if your Contract Value as of that date is less than $2,000 and you have not made Purchase Payments for at least two years, unless otherwise specified by state law. Accordingly, no Contract will be terminated due solely to negative investment performance. Termination will not occur until 31 days after we have mailed notice of termination to your last known address and to any assignee of record. If we terminate the Contract, we will pay you the Cash Surrender Value less any applicable taxes. In certain states, we may be required to pay you the Contract Value. Federal tax law may impose additional restrictions on our right to terminate your traditional IRA, Roth IRA or other Qualified Contract. REQUIRED REPORTS As often as required by law, but at least once in each Contract Year before the due date of the first Annuity Payment, we will furnish a report showing the number of Accumulation Units credited to the Contract and the corresponding Accumulation Unit value(s) as of the report date for each funding option to which the Contract Owner has allocated amounts during the applicable period. The Company will keep all records required under federal and state laws. SUSPENSION OF PAYMENTS The Company reserves the right to suspend or postpone the date of any payment or determination of values on any business day (1) when the New York Stock Exchange ("the Exchange") is closed; (2) when trading on the Exchange is restricted; (3) when an emergency exists, as determined by the SEC, so that the sale of securities held in the Separate Account may not reasonably occur, or so that the Company may not reasonably determine the value the Separate Account's net assets; or (4) during any other period when the SEC, by order, so permits for the protection of security holders. At any time, payments from the Fixed Account may be delayed up to 6 months. THE SEPARATE ACCOUNTS - -------------------------------------------------------------------------------- MetLife Insurance Company of Connecticut and MetLife Life and Annuity Company of Connecticut each sponsor Separate Accounts: MetLife of CT Fund BD for Variable Annuities ("Fund BD ") and MetLife of CT Fund BD II for Variable Annuities ("Fund BD II"), respectively. References to "Separate Account" refer either to Fund BD or Fund BD II, depending on the issuer of your Contract. Both Fund BD and Fund BD II were established on October 22, 1993 and are registered with the SEC as unit investment trusts under the Investment Company Act of 1940, as amended. We will invest Separate Account assets attributable to the Contracts exclusively in the shares of the Variable Funding Options. We hold the assets of Fund BD and Fund BD II for the exclusive and separate benefit of the owners of each Separate Account, according to the laws of Connecticut. Income, gains and losses, whether or not realized, from assets allocated to the Separate Account are, in accordance with the Contracts, credited to or charged against the Separate Account without regard to other income, gains and losses of the Company. The assets held by the Separate Account 30 are not chargeable with liabilities arising out of any other business that we may conduct. Obligations under the Contract are obligations of the Company. Any obligations that exceed the assets in the Separate Account are payable by the Company's general account. The amount of the guaranteed death benefit that exceeds the Contract Value is paid from the Company's general account. Benefit amounts paid from the general account are subject to the financial strength and claims-paying ability of the Company. All investment income and other distributions of the funding options are payable to the Separate Account. We reinvest all such income and/or distributions in shares of the respective funding option at net asset value. Shares of the funding options are currently sold only to life insurance company separate accounts to fund variable annuity and variable life insurance contracts. Certain variable annuity separate accounts and variable life insurance separate accounts may invest in the funding options simultaneously (called "mixed" and "shared" funding). It is conceivable that in the future it may be disadvantageous to do so. Although the Company and the Variable Funding Options do not currently foresee any such disadvantages either to variable annuity contract owners or variable life policy owners, each Underlying Fund's Board of Directors intends to monitor events in order to identify any material conflicts between them and to determine what action, if any, should be taken. If a Board of Directors was to conclude that separate funds should be established for variable life and variable annuity separate accounts, the variable annuity contract owners would not bear any of the related expenses, but variable annuity contract owners and variable life insurance policy owners would no longer have the economies of scale resulting from a larger combined fund. We reserve the right to transfer assets of the Separate Account to another separate account, and/or to modify the structure or operation of the Separate Account, subject to the necessary regulatory approvals. If we do so, we guarantee that the modification will not affect your Contract Value. PERFORMANCE INFORMATION In advertisements for the Contract, we may include performance figures to show you how a Variable Funding Option has performed in the past. These figures are rates of return or yield quotations shown as a percent. These figures show past performance of a Variable Funding Option and are not an indication of how a Variable Funding Option will perform in the future. Our advertisements may show performance figures assuming that you do not elect any optional features. However, if you elect any of these optional features, they involve additional charges that will serve to decrease the performance of your Variable Funding Options. You may wish to speak with your registered representative to obtain performance information specific to the optional features you may wish to select. Performance figures for each Variable Funding Option are based in part on the performance of a corresponding Underlying Fund. In some cases, the Underlying Fund may have existed before the technical inception of the corresponding Variable Funding Option. In those cases, we can create "hypothetical historical performance" of a Variable Funding Option. These figures show the performance that the Variable Funding Option would have achieved had it been available during the entire history of the Underlying Fund. In a low interest rate environment, yields for money market Subaccounts, after deduction of the Mortality and Expense Risk Charge, Administrative Expense Charge and the charge for any optional benefit riders (if applicable), may be negative even though the Underlying Fund's yield, before deducting for such charges, is positive. If you allocate a portion of your Contract Value to a money market Subaccount or participate in an asset allocation program where Contract Value is allocated to a money market Subaccount under the applicable asset allocation model, that portion of your Contract Value may decrease in value. FEDERAL TAX CONSIDERATIONS - -------------------------------------------------------------------------------- The following general discussion of the federal income tax consequences related to your investment in this Contract is not intended to cover all situations, and is not meant to provide tax or legal advice. Because of the complexity of the law and the fact that the tax results will vary depending on many factors, you should consult your tax and/or legal adviser regarding the tax implications of purchasing this Contract based upon your individual situation. For further tax information, an additional discussion of certain tax matters is contained in the SAI. 31 GENERAL TAXATION OF ANNUITIES Congress has recognized the value of saving for retirement by providing certain tax benefits, in the form of tax deferral, for premiums paid under an annuity and permitting tax-free transfers between the various investment options offered under the Contract. The Internal Revenue Code ("Code") governs how earnings on your investment in the Contract are ultimately taxed, depending upon the type of contract, qualified or non-qualified, and the manner in which the money is distributed, as briefly described below. In analyzing the benefits of tax deferral it is important to note that the Jobs and Growth Tax Relief Reconciliation Act of 2003 amended Code Section 1 to reduce the marginal tax rates on long-term capital gains and dividends to 5% and 15%. The reduced rates apply during 2003 through 2008, and thereafter will increase to prior levels. Under current federal tax law, the taxable portion of distributions under variable annuity contracts and qualified plans (including IRAs) is not eligible for the reduced tax rate applicable to long-term capital gains and dividends. Earnings under annuity contracts, like interest payable on fixed investments (notes, bonds, etc.), continue to be taxed as ordinary income (top rate of 35%). STATE AND LOCAL TAXES. The rules for state and local income taxes may differ from the federal income tax rules. Purchasers and prospective purchasers of the Contract should consult their own tax advisers and the law of the applicable taxing jurisdiction to determine what rules and tax benefits apply to the Contract. PENALTY TAX FOR PREMATURE DISTRIBUTIONS. For both Qualified and Non-qualified Contracts, taxable distributions taken before the Contract Owner has reached the age of 59 1/2 will be subject to a 10% additional tax penalty unless the distribution is taken in a series of periodic distributions, for life or life expectancy, or unless the distribution follows the death or disability of the Contract Owner. Other exceptions may be available in certain qualified plans. The 10% tax penalty is in addition to any other penalties that may apply under your Contract and the normal income taxes due on the distribution. TAX-FREE EXCHANGES. Code Section 1035 provides that, if certain conditions are met, no gain or loss is recognized when an annuity contract is received in exchange for a life insurance, endowment, or annuity contract. Since different annuity contracts have different expenses, fees and benefits, a tax-free exchange could result in your investment becoming subject to higher or lower fees and/or expenses. FEDERAL ESTATE TAXES. While no attempt is being made to discuss the federal estate tax implications of the Contract, you should keep in mind that the value of an annuity contract owned by a decedent and payable to a beneficiary by virtue of surviving the decedent is included in the decedent's gross estate. Depending on the terms of the annuity contract, the value of the annuity included in the gross estate may be the value of the lump sum payment payable to the designated beneficiary or the actuarial value of the payments to be received by the beneficiary. Consult an estate planning adviser for more information. GENERATION-SKIPPING TRANSFER TAX. Under certain circumstances, the Code may impose a "generation-skipping transfer tax" when all or part of an annuity contract is transferred to, or a death benefit is paid to, an individual two or more generations younger than the Contract Owner. Regulations issued under the Code may require us to deduct the tax from your Contract, or from any applicable payment, and pay it directly to the IRS. TYPES OF CONTRACTS: QUALIFIED AND NON-QUALIFIED QUALIFIED ANNUITY CONTRACTS If you purchase your Contract with proceeds of an eligible rollover distribution from any qualified employee pension plan or individual retirement annuity (IRA), your Contract is referred to as a Qualified Contract. Some examples of Qualified Contracts are: IRAs, tax-sheltered annuities established by public school systems or certain tax-exempt organizations under Code Section 403(b), corporate sponsored pension and profit-sharing plans (including 401(k) plans), Keogh Plans (for self-employed individuals), and certain other qualified deferred compensation plans. Another type of Qualified Contract is a Roth IRA, under which after-tax contributions accumulate until maturity, when amounts (including earnings) may be withdrawn tax-free. The rights and benefits under a Qualified Contract may be limited by the terms of the retirement plan, regardless of the terms and conditions of the Contract. Plan participants making contributions to Qualified Contracts will be subject to the required minimum distribution rules as provided by the Code and described below. All qualified plans (including IRAs) receive tax-deferral under the Code. Although there are no additional tax benefits to funding your qualified plan or IRA with an annuity, it does offer you additional insurance benefits, such as the availability of a guaranteed income for life. 32 The Contract has not been submitted to the IRS for approval as to form as a valid IRA. Such approval would not constitute an IRS approval or endorsement of any funding options under the contract. IRS approval as to form is not required to constitute a valid IRA. Disqualification of the Contract as an IRA could result in the immediate taxation of amounts held in the Contract and other adverse tax consequences. TAXATION OF QUALIFIED ANNUITY CONTRACTS Under a qualified annuity, since amounts paid into the Contract generally have not yet been taxed, the full amount of any distributions (including the amount attributable to Purchase Payments), whether paid in the form of lump sum withdrawals or Annuity Payments, are generally taxed at ordinary income tax rates unless the distribution is transferred to an eligible rollover account or contract. There are special rules which govern the taxation of Qualified Contracts, including withdrawal restrictions, requirements for mandatory distributions, and contribution limits. Amounts rolled over to the Contract from other qualified funding vehicles generally are not subject to current taxation. MANDATORY DISTRIBUTIONS FOR QUALIFIED PLANS Federal tax law requires that minimum annual distributions begin by April 1st of the calendar year following the calendar year in which an IRA owner attains age 70 1/2. Participants in qualified plans and 403(b) annuities may defer minimum distributions until the later of April 1st of the calendar year following the calendar year in which they attain age 70 1/2 or the year of retirement (except for participants who are 5% or more owners of the plan sponsor) . If you own more than one individual retirement annuity and/or account, you may satisfy the minimum distribution rules on an aggregate basis (i.e. determine the total amount of required distributions from all IRAs and take the required amount from any one or more IRAs). A similar aggregate approach is available to meet your 403(b) minimum distribution requirements if you have multiple 403(b) annuities. Recently promulgated Treasury regulations changed the distribution requirements; therefore, it is important that you consult your tax adviser as to the impact of these regulations on your personal situation. Final income tax regulations regarding minimum distribution requirements were released in June 2004. These regulations affect both deferred and income annuities. Under these new rules, effective with respect to minimum distributions required for the 2006 distribution year, in general, the value of all benefits under a deferred annuity (including death benefits in excess of cash value, including the Enhanced Stepped-Up Provision, as well as all living benefits such as GMAB and GMWB, if available in your contract) must be added to the account value in computing the amount required to be distributed over the applicable period. We will provide you with additional information as to the amount of your interest in the Contract that is subject to required minimum distributions under this new rule and either compute the required amount for you or offer to do so at your request. The new rules are not entirely clear and you should consult your personal tax advisor as to how these rules affect your Contract. MINIMUM DISTRIBUTIONS FOR BENEFICIARIES UPON THE CONTRACT OWNER'S DEATH: Upon the death of the Contract Owner and/or Annuitant of a Qualified Contract, the funds remaining in the Contract must be completely withdrawn within five years from the date of death or minimum distributions may be taken over the life expectancy of the individual beneficiaries (or in the case of certain trusts that are contract beneficiaries, over the life expectancy of the individuals who are the beneficiaries of the trust), provided such distributions are payable at least annually and begin within one year from the date of death. Special rules apply where the beneficiary is the surviving spouse, which allow the spouse to assume the Contract and defer the minimum distribution requirements. NOTE TO PARTICIPANTS IN QUALIFIED PLANS INCLUDING 401, 403(b), or 457, INCLUDING IRA OWNERS: While annual plan contribution limits may be increased from time to time by Congress and the IRS for federal income tax purposes, these limits must be adopted by each state for any higher limits to be effective at a state income tax level. In other words, the permissible contribution limits for federal and state income tax purposes may be different. Therefore, in certain states, a portion of the contributions may not be excludible or deductible from state income taxes. Please consult your employer or tax adviser regarding this issue. INDIVIDUAL RETIREMENT ANNUITIES To the extent of earned income for the year and not exceeding the applicable limit for the taxable year, an individual may make contributions, which in some cases may be deductible, to an individual retirement annuity (IRA). The applicable limit is $4,000 in 2007 and $5,000 in 2008 and it may be indexed for inflation in years after 2008. 33 Additional "catch-up contributions" may be made to an IRA by individuals age 50 or over. There are certain limits on the deductible amount based on the adjusted gross income of the individual and spouse and on their participation in a retirement plan. If an individual is married and the spouse is not employed, the individual may establish IRAs for the individual and spouse. Purchase Payments may then be made annually into IRAs for both spouses in the maximum amount of 100% of earned income up to a combined limit based on the individual limits outlined above. Deductible contributions to an IRA and Roth IRA for the year must be aggregated for purposes of the individual Code Section 408A limits and the Code Section 219 limits (age 50+catch-up). Partial or full distributions are treated as ordinary income, except that amounts contributed after 1986 on a non-deductible basis are not includable in income when distributed. An additional tax of 10% will apply to any taxable distribution from the IRA that is received by the participant before the age of 59 1/2 except by reason of death, disability or as part of a series of payments for life or life expectancy. Distributions must commence by April 1st of the calendar year after the close of the calendar year in which the individual attains the age of 70 1/2. Certain other mandatory distribution rules apply on the death of the individual. The individual must maintain personal and tax return records of any non-deductible contributions and distributions. Section 408 (k) of the Code provides for the purchase of a Simplified Employee Pension (SEP) plan. A SEP is funded through an IRA and can accept an annual employer contribution limited to the lesser of $42,000 or 100% of pay for each participant in 2005 ($44,000 for 2006). ROTH IRAS Effective January 1, 1998, Section 408A of the Code permits certain individuals to contribute to a Roth IRA. Eligibility to make contributions is based upon income, and the applicable limits vary based on marital status and/or whether the contribution is a rollover contribution from another IRA or an annual contribution. Contributions to a Roth IRA, which are subject to certain limitations, (similar to the annual limits for traditional IRAs), are not deductible and must be made in cash or as a rollover or transfer from another Roth IRA or other IRA. A conversion of "traditional" IRA to a Roth IRA may be subject to tax and other special rules apply. You should consult a tax adviser before combining any converted amounts with other Roth IRA contributions, including any other conversion amounts from other tax years. Qualified distributions from a Roth IRA are tax-free. A qualified distribution requires that the Roth IRA has been held for at least 5 years, and the distribution is made after age 59 1/2, on death or disability of the owner, or for a limited amount ($10,000) for a qualified first time home purchase for the owner or certain relatives. Income tax and a 10% penalty tax may apply to distributions made (1) before age 59 1/2 (subject to certain exceptions) or (2) during five taxable years starting with the year in which the first contribution is made to the Roth IRA. TSAS (ERISA AND NON-ERISA) GENERAL. TSAs fall under sec.403(b) of the Code, which provides certain tax benefits to eligible employees of public school systems and organizations that are tax exempt under sec.501(c)(3) of the Code. In general contributions to sec.403(b) arrangements are subject to limitations under sec.415(c) of the Code (the lesser of 100% of includable compensation or the applicable limit for the year). Note: Proposed income tax regulations issued in November 2004 would require certain fundamental changes to these arrangements including (a) a requirement that there be a written plan document in addition to the annuity contract or sec.403(b)(7) custodial account, (b) significant restrictions on the ability for participants to direct proceeds between 403(b) annuity contracts and (c) additional restrictions on withdrawals of amounts attributable to contributions other than elective deferrals. The proposed regulations will generally not be effective until taxable years beginning after December 31, 2007 at the earliest, and may not be relied on until issued in final form. However, certain aspects including a proposed prohibition on the use of life insurance contracts under 403(b) arrangements and rules affecting payroll taxes on certain types of contributions are currently effective unless revised or revoked in final regulations. 34 WITHDRAWALS AND INCOME PAYMENTS. If you are under 59 1/2, you cannot withdraw money from your TSA Contract unless the withdrawal: - Relates to purchase payments made prior to 1989 (and pre-1989 earnings on those purchase payments); - Is directly transferred to another permissible investment under sec.403(b) arrangements; - Relates to amounts that are not salary reduction elective deferrals; - Occurs after you die, leave your job or become disabled (as defined by the Code); or - Is for financial hardship (but only to the extent of purchase payments) if your plan allows it. DESIGNATED ROTH ACCOUNT FOR 403(B) PLANS. Effective January 1, 2006, employers that established and maintain a TSA/403(b) plan ("the Plan") may also establish a Qualified Roth Contribution Program under Section 402A of the Code ("Designated Roth Accounts") to accept after-tax contributions as part of the TSA plan. In accordance with our administrative procedures, we may permit these contributions to be made as purchase payments to a Section 403(b) Contract under the following conditions: (1) The employer maintaining the plan has demonstrated to our satisfaction that Designated Roth Accounts are permitted under the Plan. (2) In accordance with our administrative procedures, the amount of elective deferrals has been irrevocably designated as an after-tax contribution to the Designated Roth Account. (3) All state regulatory approvals have been obtained to permit the Contract to accept such after-tax elective deferral contributions (and, where permitted under the Qualified Roth Contribution Program and the Contract, rollovers and trustee-to-trustee transfers from other Designated Roth Accounts). (4) In accordance with our procedures and in a form satisfactory to us, we may accept rollovers from other funding vehicles under any Qualified Roth Contribution Program of the same type in which the employee participates as well as trustee-to-trustee transfers from other funding vehicles under the same Qualified Roth Contribution Program for which the participant is making elective deferral contributions to the Contract. (5) No other contribution types (including employer contributions, matching contributions, etc.) will be allowed as designated Roth contributions, unless they become permitted under the Code. (6) If permitted under the federal tax law, we may permit both pre-tax contributions under a 403(b) plan as well as after-tax contributions under the Plan's Qualified Roth Contribution Program to be made under the same Contract as well as rollover contributions and contributions by trustee-to-trustee transfers. In such cases, we will account separately for the designated Roth contributions and the earnings thereon from the contributions and earnings made under the pre-tax TSA plan (whether made as elective deferrals, rollover contributions or trustee-to-trustee transfers). As between the pre-tax or traditional Plan and the Qualified Roth Contribution Program, we will allocate any living benefits or death benefits provided under the Contract on a reasonable basis, as permitted under the tax law. (7) We may refuse to accept contributions made as rollovers and trustee- to-trustee transfers, unless we are furnished with a breakdown as between participant contributions and earnings at the time of the contribution. Many of the federal income tax rules pertaining to Designated Roth Accounts have not yet been finalized. Both you and your employer should consult their own tax and legal advisors prior to making or permitting contributions to be made to a Qualified Roth Contribution Program. The following general tax rules are based on our understanding of the Code and any regulations issued through December 31, 2005, and are subject to change and to different interpretation as well as additional guidance in respect to areas not previously addressed: The employer must permit contributions under a pre-tax 403(b) plan in order to permit contributions to be irrevocably designated and made part of a Qualified Roth Contribution Program. 35 Elective deferral contributions to the Designated Roth Account must be aggregated with all other elective deferral contributions made by a taxpayer for purposes of the individual Code Section 402(g) limits and the Code Section 414(v) limits (relating to age 50 and over catch-up contributions) as well as contribution limits that apply under the Plan. In general, the same tax law rules with respect to restricted monies, triggering events and permitted distributions will apply to the Designated Roth Accounts under the Plan as apply to the traditional pre-tax accounts under the plan (e.g., death or disability of participant, severance from employment, attainment of age 59 1/2 and hardship withdrawals only with respect to contributions (if permitted under the Plan)). If the amounts have been held under any Designated Roth Account of a participant for at least five years and are made on account of death, disability or after attainment of age 59 1/2, then any withdrawal, distribution or payment of these amounts is generally free of federal income tax ("Qualified Distributions"). Unlike Roth IRAs, withdrawal, distributions and payments that do not meet the five year rule will generally be taxed on a pro-rated basis with respect to earnings and after-tax contributions. The 10% penalty tax will generally apply on the same basis as a traditional pre-tax account under the Plan. Additionally, rollover distributions may only be made tax-free into another Designated Roth Account or into a Roth IRA. Some states may not permit contributions to be made to a Qualified Roth Contribution Program or may require additional conforming legislation for these rules to become effective. LOANS. If your TSA Contract permits loans, such loans will be made only from any Fixed Interest Account balance and only up to certain limits. In that case, we credit your Fixed Interest Account balance up to the amount of the outstanding loan balance with a rate of interest that is less than the interest rate we charge for the loan. The Code and applicable income tax regulations limit the amount that may be borrowed from your Contract and all you employer plans in the aggregate and also require that loans be repaid, at a minimum, in scheduled level payments over a proscribed term. Your Contract will indicated whether loans are permitted. The terms of the loan are governed by the Contract and loan agreement. Failure to satisfy loan limits under the Code or to make any scheduled payments according to the terms of your loan agreement and Federal tax law could have adverse tax consequences. Consult a tax advisor and read your loan agreement and Contract prior to taking any loan. NON-QUALIFIED ANNUITY CONTRACTS If you purchase the Contract on an individual basis with after-tax dollars and not under one of the programs described above, your Contract is referred to as non-qualified. As the owner of a non-qualified annuity, you do not receive any tax benefit (deduction or deferral of income) on Purchase Payments, but you will not be taxed on increases in the value of your Contract until a distribution occurs -- either as a withdrawal made prior to the Maturity Date or in the form of periodic Annuity Payments. As a general rule, there is income in the Contract (earnings) to the extent the Contract Value exceeds your investment in the Contract. The investment in the Contract equals the total Purchase Payments less any amount received previously which was excludible from gross income. Generally, different tax rules apply to Annuity Payments than to withdrawals and payments received before the annuity starting date. When a withdrawal is made, you are taxed on the amount of the withdrawal that is considered earnings under federal tax laws. Similarly, when you receive an Annuity Payment, part of each periodic payment is considered a return of your Purchase Payments and will not be taxed, but the remaining portion of the Annuity Payment (i.e., any earnings) will be considered ordinary income for federal income tax purposes. Annuity Payments are subject to an "excludable amount" or "exclusion ratio" which determines how much of each payment is treated as: - a non-taxable return of your Purchase Payment; or - a taxable payment of earnings. We generally will tell you how much of each Annuity Payment is a non-taxable return of your Purchase Payments. However, it is possible that the IRS could conclude that the taxable portion of Annuity Payments under a non-qualified contract is an amount greater (or less) than the taxable amount determined by us and reported by us to you 36 and the IRS. Generally, once the total amount treated as a non-taxable return of your Purchase Payments equals your Purchase Payments, then all remaining payments are fully taxable. We will withhold a portion of the taxable amount of your Annuity Payment for income taxes, unless you elect otherwise. The amount we withhold is determined by the Code. Code Section 72(s) requires that non-qualified annuity contracts meet minimum mandatory distribution requirements upon the death of the Contract Owner, including the death of either of the Joint Owners. If these requirements are not met, the Contract will not be treated as an annuity contract for federal income tax purposes and earnings under the Contract will be taxable currently, not when distributed. The distribution required depends, among other things, upon whether an annuity option is elected or whether the succeeding Contract Owner is the surviving spouse. We will administer contracts in accordance with these rules and we will notify you when you should begin receiving payments. There is a more complete discussion of these rules in the SAI. If a non-qualified annuity is owned by a non-natural person (e.g., a corporation), increases in the value of the Contract attributable to Purchase Payments made after February 28, 1986 are includable in income annually and taxed at ordinary income tax rates. Furthermore, for contracts issued after April 22, 1987, if the Contract is transferred to another person or entity without adequate consideration, all deferred increases in value will be treated as income for federal income tax purposes at the time of the transfer. PARTIAL WITHDRAWALS: If you make a partial withdrawal of your Contract Value, the distribution generally will be taxed as first coming from earnings (income in the Contract) and then from your Purchase Payments. These withdrawn earnings are includable in your taxable income. (See Penalty Tax for Premature Distributions below.) Any direct or indirect borrowing against the value of the Contract or pledging of the Contract as security for a loan will be treated as a cash distribution under the tax law, and will have tax consequences in the year taken. PARTIAL ANNUITIZATIONS (IF AVAILABLE WITH YOUR CONTRACT): At the present time the IRS has not approved the use of an exclusion ratio or exclusion amount when only part of your Contract Value is applied to a payment option. Currently, we will treat the application of less than your entire Contract Value under a Non- qualified Contract to a payment option (i.e. taking Annuity Payments) as a taxable withdrawal for federal income tax purposes (which may also be subject to the 10% penalty tax if you are under age 59 1/2). We will then treat the amount of the withdrawal (after any deductions for taxes) as the purchase price of an income annuity and tax report the income payments received under that annuity under the rules for variable income annuities. Consult your tax attorney prior to partially annuitizing your Contract. We will determine the excludable amount for each income payment under the Contract as a whole by using the rules applicable to variable income payments in general (i.e. by dividing your after-tax purchase price, as adjusted for any refund or guarantee feature, by the number of expected income payments from the appropriate IRS table). However, the IRS may determine that the excludable amount is different from our computation. The tax law treats all non-qualified deferred annuities issued after October 21, 1988 by the same company (or its affiliates) to the same owner during any one calendar year as one annuity. This may cause a greater portion of your withdrawals from the Contract to be treated as income than would otherwise be the case. Although the law is not clear, the aggregation rule may also adversely affect the tax treatment of payments received under an income annuity where the owner has purchased more than one non-qualified annuity during the same calendar year from the same or an affiliated company after October 21, 1988, and is not receiving income payments from all annuities at the same time. DIVERSIFICATION REQUIREMENTS FOR VARIABLE ANNUITIES The Code requires that any non-qualified variable annuity contracts based on a Separate Account must meet specific diversification standards. Non-qualified variable annuity contracts shall not be treated as an annuity for federal income tax purposes if investments made in the account are not adequately diversified. Final tax regulations define how Separate Accounts must be diversified. The Company constantly monitors the diversification of investments and believes that its accounts are adequately diversified. The consequence of any failure to diversify is essentially the loss to the Contract Owner of tax-deferred treatment, requiring the current inclusion of a proportionate share of the income and gains from the Separate Account assets in the income of each Contract Owner. The Company intends to administer all contracts subject to this provision of law in a manner that will maintain adequate diversification. 37 OWNERSHIP OF THE INVESTMENTS In certain circumstances, owners of variable annuity contracts have been considered to be the owners of the assets of the underlying Separate Account for federal income tax purposes due to their ability to exercise investment control over those assets. When this is the case, the Contract Owners have been currently taxed on income and gains attributable to the Separate Account assets. There is little guidance in this area, and some features of the Contract, such as the number of funds available and the flexibility of the Contract Owner to allocate premium payments and transfer amounts among the funding options, have not been addressed in public rulings. While we believe that the Contract does not give the Contract Owner investment control over Separate Account assets, we reserve the right to modify the Contract as necessary to prevent a Contract Owner from being treated as the owner of the Separate Account assets supporting the Contract. TAXATION OF DEATH BENEFIT PROCEEDS Amounts may be distributed from a Non-qualified Contract because of the death of an owner or Annuitant. Generally, such amounts are includable in the income of the recipient as follows: (i) if distributed in a lump sum, they are taxed in the same manner as a full surrender of the Contract; or (ii) if distributed under a payment option, they are taxed in the same way as Annuity Payments. OTHER TAX CONSIDERATIONS TREATMENT OF CHARGES FOR OPTIONAL BENEFITS The Contract may provide one or more optional enhanced death benefits or other minimum guaranteed benefit that in some cases may exceed the greater of purchase price or the Contract Value. It is possible that the Internal Revenue Service may take the position that the charges for the optional enhanced benefit(s) are deemed to be taxable distributions to you. Although we do not believe that a charge under such optional enhanced benefit should be treated as a taxable withdrawal, you should consult with your tax adviser before selecting any rider or endorsement to the Contract. PUERTO RICO TAX CONSIDERATIONS The Puerto Rico Internal Revenue Code of 1994 (the "1994 Code") taxes distributions from non-qualified annuity contracts differently than in the U.S. Distributions that are not in the form of an annuity (including partial surrenders and period certain payments) are treated under the 1994 Code first as a return of investment. Therefore, a substantial portion of the amounts distributed generally will be excluded from gross income for Puerto Rico tax purposes until the cumulative amount paid exceeds your tax basis. The amount of income on annuity distributions (payable over your lifetime) is also calculated differently under the 1994 Code. Since Puerto Rico residents are also subject to U.S. income tax on all income other than income sourced to Puerto Rico and the Internal Revenue Service issued guidance in 2004 which indicated that the income from an annuity contract issued by a U.S. life insurer would be considered U.S. source income, the timing of recognition of income from an annuity contract could vary between the two jurisdictions. Although the 1994 Code provides a credit against the Puerto Rico income tax for U.S. income taxes paid, an individual may not get full credit because of the timing differences. You should consult with a personal tax adviser regarding the tax consequences of purchasing an annuity contract and/or any proposed distribution, particularly a partial distribution or election to annuitize. NON-RESIDENT ALIENS Distributions to non resident aliens ("NRAs") are subject to special and complex tax and withholding rules under the Code with respect to U.S. source income, some of which are based upon the particular facts and circumstances of the Contract Owner, the beneficiary and the transaction itself. As stated above, the IRS has taken the position that income from the Contract received by NRAs is considered U.S. source income. In addition, Annuity Payments to NRAs in many countries are exempt from U.S. tax (or subject to lower rates) based upon a tax treaty, provided that the Contract Owner complies with the applicable requirements. NRAs should seek guidance from a tax adviser regarding their personal situation. 38 TAX CREDITS AND DEDUCTIONS The Company may be entitled to certain tax benefits related to the assets of the Separate Account. These tax benefits, which may include foreign tax credits and corporate dividends received deductions, are not passed back to the Separate Account or to Contract Owners since the Company is the owner of the assets from which the tax benefits are derived. OTHER INFORMATION - -------------------------------------------------------------------------------- Vintage is a service mark of Citigroup, Inc. or its affiliates and is used by MetLife, Inc. and its affiliates under license. THE INSURANCE COMPANIES Please refer to your Contract to determine which Company issued your Contract. MetLife Insurance Company of Connecticut is a stock insurance company chartered in 1863 in Connecticut and continuously engaged in the insurance business since that time. It is licensed to conduct life insurance business in all states of the United States, the District of Columbia, Puerto Rico, Guam, the U.S. and British Virgin Islands and the Bahamas. The Company is a wholly-owned subsidiary of MetLife, Inc., a publicly-traded company. MetLife, Inc., through its subsidiaries and affiliates, is a leading provider of insurance and other financial services to individual and institutional customers. The Company's Home Office is located at One Cityplace, Hartford, Connecticut 06103-3415. MetLife Life and Annuity Company of Connecticut is a stock insurance company chartered in 1973 in Connecticut and continuously engaged in the insurance business since that time. It is licensed to conduct life insurance business in all states of the United States (except New York), the District of Columbia and Puerto Rico. The Company is an indirect wholly-owned subsidiary of MetLife, Inc., a publicly-traded company. The Company's Home Office is located at One Cityplace, Hartford, Connecticut 06103-3415. FINANCIAL STATEMENTS The financial statements for the Company and its Separate Account are located in the Statement of Additional Information. DISTRIBUTION OF VARIABLE ANNUITY CONTRACTS DISTRIBUTION AND PRINCIPAL UNDERWRITING AGREEMENT. MetLife Insurance Company of Connecticut and MetLife Life and Annuity Company of Connecticut (together the "Company") have appointed MetLife Investors Distribution Company ("MLIDC") to serve as the principal underwriter and distributor of the securities offered through this Prospectus, pursuant to the terms of a Distribution and Principal Underwriting Agreement. Prior to October 20, 2006, the principal underwriter and distributor was MLI Distribution LLC, which merged with and into MLIDC on that date. MLIDC, which is an affiliate of the Company, also acts as the principal underwriter and distributor of other variable annuity contracts and variable life insurance policies issued by the Company and its affiliated companies. The Company reimburses MLIDC for expenses MLIDC incurs in distributing the Contracts (e.g. commissions payable to retail broker-dealers who sell the Contracts). MLIDC does not retain any fees under the Contracts; however, MLIDC may receive 12b-1 fees from the Underlying Funds. MLIDC's principal executive offices are located at 5 Park Plaza, Suite 1900, Irvine, California 92614. MLIDC is registered as a broker-dealer with the Securities and Exchange Commission ("SEC") under the Securities Exchange Act of 1934, as well as the securities commissions in the states in which it operates, and is a member of the National Association of Securities Dealers, Inc. ("NASD"). MLIDC and the Company enter into selling agreements with affiliated and unaffiliated broker-dealers who are registered with the SEC and are members of the NASD, and with entities that may offer the Contracts but are exempt from registration. Applications for the Contract are solicited by registered representatives who are associated persons of such affiliated or unaffiliated broker-dealer firms. Such representatives act as appointed agents of the Company 39 under applicable state insurance law and must be licensed to sell variable insurance products. The Company no longer offers the Contracts to new purchasers but it continues to accept Purchase Payments from Contract Owners. COMPENSATION. Broker-dealers who have selling agreements with MLIDC and the Company are paid compensation for the promotion and sale of the Contracts. Registered representatives who solicit sales of the Contract typically receive a portion of the compensation payable to the broker-dealer firm. The amount the registered representative receives depends on the agreement between the firm and the registered representative. This agreement may also provide for the payment of other types of cash and non-cash compensation and other benefits. A broker- dealer firm or registered representative of a firm may receive different compensation for selling one product over another and/or may be inclined to favor one product provider over another product provider due to differing compensation rates. We generally pay compensation as a percentage of purchase payments invested in the Contract. Alternatively, we may pay lower compensation on purchase payments but pay periodic asset-based compensation based on all or a portion of the Contract Value. The amount and timing of compensation may vary depending on the selling agreement but is not expected to exceed 7.50% of Purchase Payments (if up-front compensation is paid to registered representatives) and up to 1.50% annually of average Contract Value (if asset-based compensation is paid to registered representatives). We pay American Funds Distributors, Inc., principal underwriter for the American Funds Insurance Series, a percentage of all Purchase Payments allocated to the funds in the American Funds Insurance Series for services it provides in marketing the Fund's shares in connection with the Contract. The Company and MLIDC have also entered into preferred distribution arrangements with certain broker-dealer firms. These arrangements are sometimes called "shelf space" arrangements. Under these arrangements, the Company and MLIDC pay separate, additional compensation to the broker-dealer firm for services the broker-dealer provides in connection with the distribution of the Company's products. These services may include providing the Company with access to the distribution network of the broker-dealer, the hiring and training of the broker-dealer's sales personnel, the sponsoring of conferences and seminars by the broker-dealer, or general marketing services performed by the broker-dealer. The broker-dealer may also provide other services or incur other costs in connection with distributing the Company's products. These preferred distribution arrangements will not be offered to all broker- dealer firms and the terms of such arrangements may differ between broker-dealer firms. Compensation payable under such arrangements may be based on aggregate, net or anticipated sales of the Contracts, total assets attributable to sales of the Contract by registered representatives of the broker-dealer firm or based on the length of time that a Contract owner has owned the Contract. Any such compensation payable to a broker-dealer firm will be made by MLIDC or the Company out of their own assets and will not result in any additional direct charge to you. Such compensation may cause the broker-dealer firm and its registered representatives to favor the Company's products. The Company and MLIDC have entered into a preferred distribution arrangement with their affiliate Tower Square Securities, Inc. and with the unaffiliated broker-dealer firms identified in the Statement of Additional Information. The Company and MLIDC may enter into similar arrangements with their other affiliates MetLife Securities, Inc., Walnut Street Securities, Inc., and New England Securities Corporation. See the "Statement of Additional Information -- DISTRIBUTION AND PRINCIPAL UNDERWRITING AGREEMENT" for a list of the broker-dealer firms that received such additional compensation during 2006, as well as the range of additional compensation paid. The Company and MLIDC have entered into selling agreements with certain broker- dealer firms that have an affiliate that acts as investment adviser or sub- adviser to one or more Underlying Funds that may be offered under the Contracts. These investment advisory firms include Fidelity Management & Research Company, Morgan Stanley Investment Advisers Inc., MetLife Investment Funds Management LLC, MetLife Advisers, LLC and Met Investors Advisory LLC. MetLife Investment Funds Management LLC, MetLife Advisers LLC and Met Investors Advisory LLC are affiliates of the Company. Registered representatives of broker-dealer firms with an affiliated company acting as an adviser or a sub-adviser may favor these Funds when offering the Contracts. CONFORMITY WITH STATE AND FEDERAL LAWS The laws of the state in which we deliver a contract govern that Contract. Where a state has not approved a contract feature or funding option, it will not be available in that state. Any paid-up annuity, Cash Surrender Value or death benefits that are available under the Contract are not less than the minimum benefits required by the statutes of the state in which we delivered the Contract. We reserve the right to make any changes, including retroactive changes, 40 in the Contract to the extent that the change is required to meet the requirements of any law or regulation issued by any governmental agency to which the Company, the Contract or the Contract Owner is subject. VOTING RIGHTS The Company is the legal owner of the shares of the Underlying Funds. However, we believe that when an Underlying Fund solicits proxies in conjunction with a vote of shareholders we are required to obtain from you and from other owners instructions on how to vote those shares. We will vote all shares, including those we may own on our own behalf, and those where we have not received instructions from Contract Owners, in the same proportion as shares for which we received voting instructions. The effect of this proportional voting is that a small number of contract owners may control the outcome of a vote. Should we determine that we are no longer required to comply with the above, we will vote the shares in our own right. In certain limited circumstances, and when permitted by law, we may disregard voting instructions. If we do disregard voting instructions, a summary of that action and the reasons for such action would be included in the next annual report to Contract Owners. RESTRICTIONS ON FINANCIAL TRANSACTIONS Federal laws designed to counter terrorism and prevent money laundering might, in certain circumstances, require us to block a Contract Owner's ability to make certain transactions and thereby refuse to accept any request for transfers, withdrawals, surrenders, or death benefits, until the instructions are received from the appropriate regulator. We may also be required to provide additional information about you and your Contract to government regulators. LEGAL PROCEEDINGS In the ordinary course of business, the Company, similar to other life insurance companies, is involved in lawsuits (including class action lawsuits), arbitrations and other legal proceedings. Also, from time to time, state and federal regulators or other officials conduct formal and informal examinations or undertake other actions dealing with various aspects of the financial services and insurance industries. In some legal proceedings involving insurers, substantial damages have been sought and/or material settlement payments have been made. It is not possible to predict with certainty the ultimate outcome of any pending legal proceeding or regulatory action. However, the Company does not believe any such action or proceeding will have a material adverse effect upon the Separate Account or upon the ability of MLIDC to perform its contract with the Separate Account or of the Company to meet its obligations under the Contracts. 41 THIS PAGE INTENTIONALLY LEFT BLANK. APPENDIX A CONDENSED FINANCIAL INFORMATION - -------------------------------------------------------------------------------- METLIFE OF CT FUND BD FOR VARIABLE ANNUITIES ACCUMULATION UNIT VALUES (IN DOLLARS) The following Accumulation Unit Value ("AUV") information should be read in conjunction with the Separate Account's audited financial statement and notes, which are included in the Statement of Additional Information ("SAI"). The first table provides the AUV information for the MINIMUM Separate Account Charge available under the contract. The second table provides the AUV information for the MAXIMUM Separate Account Charge available under the contract. Please refer to the Fee Table section of this prospectus for more information on Separate Account Charges. SEPARATE ACCOUNT CHARGES 1.17%
UNIT VALUE AT NUMBER OF UNITS BEGINNING OF UNIT VALUE AT OUTSTANDING AT PORTFOLIO NAME YEAR YEAR END OF YEAR END OF YEAR - -------------- ---- ------------- ------------- --------------- AIM Variable Insurance Funds AIM V.I. Core Equity Subaccount (Series I) (4/06).. 2006 1.000 1.083 36,488 AIM V.I. Premier Equity Subaccount (Series I) (5/01)............................................. 2006 0.825 0.867 -- 2005 0.790 0.825 49,691 2004 0.755 0.790 49,723 2003 0.611 0.755 75,908 2002 0.886 0.611 450,377 2001 1.000 0.886 668,710 AllianceBernstein Variable Products Series Fund, Inc. AllianceBernstein Large-Cap Growth Subaccount (Class B) (5/01)................................... 2006 0.868 0.852 -- 2005 0.764 0.868 273,732 2004 0.714 0.764 445,460 2003 0.585 0.714 511,962 2002 0.857 0.585 546,050 2001 1.000 0.857 297,549 American Funds Insurance Series American Funds Global Growth Subaccount (Class 2) (5/01)............................................. 2006 1.249 1.487 3,816,183 2005 1.108 1.249 4,089,192 2004 0.988 1.108 4,084,784 2003 0.739 0.988 2,904,801 2002 0.876 0.739 2,231,042 2001 1.000 0.876 802,933 American Funds Growth Subaccount (Class 2) (5/01).. 2006 1.099 1.197 7,693,917 2005 0.957 1.099 8,460,306 2004 0.860 0.957 8,964,439 2003 0.636 0.860 8,634,706 2002 0.852 0.636 5,528,439 2001 1.000 0.852 1,775,888
A-1 ACCUMULATION UNIT VALUES (IN DOLLARS) (CONTINUED) SEPARATE ACCOUNT CHARGES 1.17% (CONTINUED)
UNIT VALUE AT NUMBER OF UNITS BEGINNING OF UNIT VALUE AT OUTSTANDING AT PORTFOLIO NAME YEAR YEAR END OF YEAR END OF YEAR - -------------- ---- ------------- ------------- --------------- American Funds Growth-Income Subaccount (Class 2) (5/01)............................................. 2006 1.166 1.328 7,453,818 2005 1.115 1.166 8,543,297 2004 1.022 1.115 9,809,591 2003 0.781 1.022 9,887,549 2002 0.967 0.781 6,543,536 2001 1.000 0.967 2,371,512 Dreyfus Variable Investment Fund Dreyfus VIF Developing Leaders Subaccount (Initial Shares) (5/98)..................................... 2006 1.291 1.324 1,751,850 2005 1.235 1.291 2,149,343 2004 1.122 1.235 2,640,571 2003 0.862 1.122 3,128,195 2002 1.078 0.862 3,595,868 2001 1.162 1.078 3,233,826 2000 1.038 1.162 3,583,484 1999 0.852 1.038 2,129,773 1998 1.000 0.852 1,024,905 Legg Mason Partners Investment Series LMPIS Dividend Strategy Subaccount (5/01).......... 2006 0.805 0.939 283,117 2005 0.816 0.805 221,733 2004 0.799 0.816 281,085 2003 0.655 0.799 554,679 2002 0.895 0.655 364,889 2001 1.000 0.895 441,029 LMPIS Premier Selections All Cap Growth Subaccount (5/01)............................................. 2006 0.919 0.975 929,498 2005 0.875 0.919 1,520,198 2004 0.860 0.875 1,659,510 2003 0.648 0.860 1,657,215 2002 0.896 0.648 680,370 2001 1.000 0.896 233,523
A-2 ACCUMULATION UNIT VALUES (IN DOLLARS) (CONTINUED) SEPARATE ACCOUNT CHARGES 1.17% (CONTINUED)
UNIT VALUE AT NUMBER OF UNITS BEGINNING OF UNIT VALUE AT OUTSTANDING AT PORTFOLIO NAME YEAR YEAR END OF YEAR END OF YEAR - -------------- ---- ------------- ------------- --------------- Legg Mason Partners Lifestyle Series, Inc. LMPLS Balanced Subaccount (3/97)................... 2006 1.505 1.609 1,451,230 2005 1.485 1.505 1,984,977 2004 1.396 1.485 2,221,117 2003 1.174 1.396 2,560,375 2002 1.270 1.174 3,121,798 2001 1.303 1.270 3,742,546 2000 1.258 1.303 3,561,033 1999 1.183 1.258 3,958,544 1998 1.093 1.183 4,046,998 1997 1.000 1.093 3,114,900 LMPLS Growth Subaccount (3/97)..................... 2006 1.378 1.483 746,301 2005 1.331 1.378 862,931 2004 1.239 1.331 1,158,365 2003 0.965 1.239 1,584,448 2002 1.192 0.965 2,169,501 2001 1.338 1.192 2,631,461 2000 1.421 1.338 2,951,806 1999 1.238 1.421 3,487,443 1998 1.099 1.238 3,135,267 1997 1.000 1.099 2,261,767 LMPLS High Growth Subaccount (3/97)................ 2006 1.451 1.570 232,742 2005 1.384 1.451 295,346 2004 1.266 1.384 420,556 2003 0.936 1.266 499,464 2002 1.242 0.936 574,369 2001 1.429 1.242 618,220 2000 1.558 1.429 707,214 1999 1.242 1.558 807,243 1998 1.090 1.242 723,814 1997 1.000 1.090 602,892
A-3 ACCUMULATION UNIT VALUES (IN DOLLARS) (CONTINUED) SEPARATE ACCOUNT CHARGES 1.17% (CONTINUED)
UNIT VALUE AT NUMBER OF UNITS BEGINNING OF UNIT VALUE AT OUTSTANDING AT PORTFOLIO NAME YEAR YEAR END OF YEAR END OF YEAR - -------------- ---- ------------- ------------- --------------- Legg Mason Partners Variable Portfolios I, Inc. LMPVPI Investors Subaccount (Class I) (5/98)....... 2006 1.380 1.613 2,006,577 2005 1.310 1.380 3,009,783 2004 1.201 1.310 3,433,092 2003 0.918 1.201 3,570,075 2002 1.207 0.918 3,952,134 2001 1.275 1.207 4,597,550 2000 1.119 1.275 1,901,624 1999 1.014 1.119 1,845,539 1998 1.000 1.014 704,294 LMPVPI Total Return Subaccount (Class I) (5/98).... 2006 1.203 1.338 346,955 2005 1.178 1.203 550,872 2004 1.096 1.178 792,837 2003 0.956 1.096 996,893 2002 1.039 0.956 1,278,668 2001 1.060 1.039 1,200,238 2000 0.994 1.060 845,563 1999 0.997 0.994 769,348 1998 1.000 0.997 397,259 Legg Mason Partners Variable Portfolios II LMPVPII Equity Index Subaccount (Class II) (5/99).. 2006 0.919 1.046 946,074 2005 0.892 0.919 1,416,432 2004 0.818 0.892 1,746,644 2003 0.648 0.818 2,376,230 2002 0.845 0.648 2,780,694 2001 0.976 0.845 3,052,737 2000 1.088 0.976 2,024,943 1999 1.000 1.088 1,741,701 LMPVPII Fundamental Value Subaccount (11/94)....... 2006 2.948 3.404 14,164,874 2005 2.847 2.948 18,647,860 2004 2.662 2.847 24,106,289 2003 1.942 2.662 29,927,751 2002 2.497 1.942 36,718,095 2001 2.667 2.497 46,360,039 2000 2.240 2.667 55,492,831 1999 1.857 2.240 65,203,019 1998 1.790 1.857 73,467,726 1997 1.538 1.790 75,811,595
A-4 ACCUMULATION UNIT VALUES (IN DOLLARS) (CONTINUED) SEPARATE ACCOUNT CHARGES 1.17% (CONTINUED)
UNIT VALUE AT NUMBER OF UNITS BEGINNING OF UNIT VALUE AT OUTSTANDING AT PORTFOLIO NAME YEAR YEAR END OF YEAR END OF YEAR - -------------- ---- ------------- ------------- --------------- Legg Mason Partners Variable Portfolios III, Inc. LMPVPIII High Income Subaccount (6/94)............. 2006 1.699 1.863 5,684,073 2005 1.675 1.699 7,676,239 2004 1.534 1.675 10,075,486 2003 1.217 1.534 13,435,291 2002 1.273 1.217 17,114,943 2001 1.338 1.273 22,158,369 2000 1.472 1.338 28,815,814 1999 1.452 1.472 38,357,097 1998 1.463 1.452 44,406,204 1997 1.300 1.463 42,964,010 LMPVPIII International All Cap Growth Subaccount (6/94)............................................. 2006 1.320 1.642 14,976,623 2005 1.195 1.320 18,446,461 2004 1.026 1.195 23,196,293 2003 0.814 1.026 29,382,959 2002 1.109 0.814 36,517,428 2001 1.630 1.109 49,462,447 2000 2.164 1.630 63,128,882 1999 1.305 2.164 72,748,400 1998 1.240 1.305 82,330,241 1997 1.222 1.240 87,384,895 LMPVPIII Large Cap Growth Subaccount (5/98)........ 2006 1.423 1.471 5,691,735 2005 1.368 1.423 7,749,638 2004 1.379 1.368 10,814,819 2003 0.945 1.379 13,098,784 2002 1.272 0.945 14,669,240 2001 1.471 1.272 23,676,786 2000 1.599 1.471 27,150,090 1999 1.237 1.599 25,851,563 1998 1.000 1.237 12,224,352 LMPVPIII Large Cap Value Subaccount (6/94)......... 2006 2.229 2.606 12,885,722 2005 2.118 2.229 16,412,848 2004 1.937 2.118 21,065,983 2003 1.536 1.937 25,941,256 2002 2.083 1.536 33,420,816 2001 2.296 2.083 45,558,878 2000 2.053 2.296 55,091,429 1999 2.076 2.053 67,687,987 1998 1.913 2.076 71,417,242 1997 1.528 1.913 71,149,294
A-5 ACCUMULATION UNIT VALUES (IN DOLLARS) (CONTINUED) SEPARATE ACCOUNT CHARGES 1.17% (CONTINUED)
UNIT VALUE AT NUMBER OF UNITS BEGINNING OF UNIT VALUE AT OUTSTANDING AT PORTFOLIO NAME YEAR YEAR END OF YEAR END OF YEAR - -------------- ---- ------------- ------------- --------------- LMPVPIII Money Market Subaccount (6/94)............ 2006 1.329 1.374 7,717,928 2005 1.308 1.329 9,289,976 2004 1.311 1.308 12,948,924 2003 1.318 1.311 19,072,257 2002 1.317 1.318 34,637,166 2001 1.285 1.317 40,479,011 2000 1.226 1.285 33,979,597 1999 1.184 1.226 45,052,907 1998 1.140 1.184 47,120,777 1997 1.098 1.140 38,096,919 Legg Mason Partners Variable Portfolios V LMPVPV Small Cap Growth Opportunities Subaccount (5/01)............................................. 2006 1.156 1.290 697,770 2005 1.115 1.156 1,519,218 2004 0.976 1.115 1,354,383 2003 0.696 0.976 1,401,009 2002 0.947 0.696 529,979 2001 1.000 0.947 443,888 Met Investors Series Trust MIST Batterymarch Mid-Cap Stock Subaccount (Class A) (4/06).......................................... 2006 2.044 1.952 2,428,155 MIST BlackRock Large-Cap Core Subaccount (Class A) (4/06)............................................. 2006 1.083 1.150 706,671 MIST Lord Abbett Bond Debenture Subaccount (Class A) (4/06).......................................... 2006 1.634 1.717 697,927 MIST Met/AIM Capital Appreciation Subaccount (Class A) (4/06).......................................... 2006 1.528 1.514 15,647,229 MIST Pioneer Strategic Income Subaccount (Class A) (4/06)............................................. 2006 1.888 1.961 9,100,597 Metropolitan Series Fund, Inc. MSF BlackRock Aggressive Growth Subaccount (Class D) (4/06).......................................... 2006 1.121 1.097 6,038,096 MSF BlackRock Bond Income Subaccount (Class E) (4/06)............................................. 2006 1.606 1.672 4,325,519 MSF Capital Guardian U.S. Equity Subaccount (Class A) (4/06).......................................... 2006 2.095 2.160 8,916,046 MSF FI Large Cap Subaccount (Class A) (4/06)....... 2006 1.000 1.016 59,467,672 MSF MFS(R) Total Return Subaccount (Class F) (4/06)............................................. 2006 2.628 2.817 18,208,466 MSF T. Rowe Price Large Cap Growth Subaccount (Class B) (4/06)................................... 2006 0.998 1.072 258,683 MSF Western Asset Management Strategic Bond Opportunities Subaccount (Class A) (4/06).......... 2006 1.822 1.905 2,307,590
A-6 ACCUMULATION UNIT VALUES (IN DOLLARS) (CONTINUED) SEPARATE ACCOUNT CHARGES 1.17% (CONTINUED)
UNIT VALUE AT NUMBER OF UNITS BEGINNING OF UNIT VALUE AT OUTSTANDING AT PORTFOLIO NAME YEAR YEAR END OF YEAR END OF YEAR - -------------- ---- ------------- ------------- --------------- The Travelers Series Trust Travelers AIM Capital Appreciation Subaccount (10/95)............................................ 2006 1.433 1.528 -- 2005 1.333 1.433 21,247,306 2004 1.267 1.333 27,573,752 2003 0.991 1.267 34,875,318 2002 1.317 0.991 43,597,234 2001 1.748 1.317 58,613,993 2000 1.974 1.748 74,130,562 1999 1.397 1.974 81,401,202 1998 1.206 1.397 90,905,019 1997 1.088 1.206 91,233,697 Travelers Convertible Securities Subaccount (6/98)............................................. 2006 1.531 1.634 -- 2005 1.543 1.531 863,873 2004 1.469 1.543 1,082,850 2003 1.177 1.469 1,192,485 2002 1.280 1.177 1,982,316 2001 1.306 1.280 2,206,650 2000 1.175 1.306 1,168,231 1999 1.001 1.175 626,884 1998 1.000 1.001 248,991 Travelers Disciplined Mid Cap Stock Subaccount (5/98)............................................. 2006 1.869 2.044 -- 2005 1.682 1.869 3,316,718 2004 1.461 1.682 3,783,231 2003 1.105 1.461 3,810,819 2002 1.305 1.105 4,509,768 2001 1.376 1.305 4,124,695 2000 1.194 1.376 3,158,686 1999 1.064 1.194 1,843,199 1998 1.000 1.064 397,554 Travelers Managed Income Subaccount (6/94)......... 2006 1.619 1.606 -- 2005 1.616 1.619 5,339,484 2004 1.590 1.616 7,066,638 2003 1.483 1.590 9,092,631 2002 1.469 1.483 11,833,198 2001 1.392 1.469 13,910,891 2000 1.306 1.392 13,842,174 1999 1.309 1.306 17,250,745 1998 1.261 1.309 20,492,138 1997 1.163 1.261 17,886,675
A-7 ACCUMULATION UNIT VALUES (IN DOLLARS) (CONTINUED) SEPARATE ACCOUNT CHARGES 1.17% (CONTINUED)
UNIT VALUE AT NUMBER OF UNITS BEGINNING OF UNIT VALUE AT OUTSTANDING AT PORTFOLIO NAME YEAR YEAR END OF YEAR END OF YEAR - -------------- ---- ------------- ------------- --------------- Travelers Mercury Large Cap Core Subaccount (5/98)............................................. 2006 1.019 1.083 -- 2005 0.920 1.019 852,850 2004 0.803 0.920 1,065,482 2003 0.671 0.803 1,579,231 2002 0.906 0.671 2,067,818 2001 1.183 0.906 3,143,694 2000 1.267 1.183 3,989,985 1999 1.037 1.267 3,898,421 1998 1.000 1.037 1,353,759 Travelers MFS(R) Mid Cap Growth Subaccount (2/05).. 2006 1.058 1.121 -- 2005 1.000 1.058 8,070,019 Travelers MFS(R) Total Return Subaccount (6/94).... 2006 2.542 2.628 -- 2005 2.498 2.542 24,050,671 2004 2.268 2.498 29,790,919 2003 1.969 2.268 37,607,488 2002 2.103 1.969 44,972,133 2001 2.127 2.103 54,056,696 2000 1.845 2.127 64,462,637 1999 1.819 1.845 78,484,497 1998 1.648 1.819 86,949,854 1997 1.376 1.648 83,810,525 Travelers Pioneer Strategic Income Subaccount (6/94)............................................. 2006 1.867 1.888 -- 2005 1.822 1.867 11,588,555 2004 1.661 1.822 14,941,189 2003 1.406 1.661 18,272,707 2002 1.344 1.406 23,732,550 2001 1.304 1.344 28,854,109 2000 1.325 1.304 37,822,306 1999 1.326 1.325 45,594,724 1998 1.332 1.326 53,053,274 1997 1.252 1.332 51,751,252
A-8 ACCUMULATION UNIT VALUES (IN DOLLARS) (CONTINUED) SEPARATE ACCOUNT CHARGES 1.17% (CONTINUED)
UNIT VALUE AT NUMBER OF UNITS BEGINNING OF UNIT VALUE AT OUTSTANDING AT PORTFOLIO NAME YEAR YEAR END OF YEAR END OF YEAR - -------------- ---- ------------- ------------- --------------- Travelers Salomon Brothers Strategic Total Return Bond Subaccount (6/94)............................. 2006 1.848 1.822 -- 2005 1.827 1.848 2,904,596 2004 1.739 1.827 3,672,857 2003 1.553 1.739 5,037,212 2002 1.450 1.553 5,507,970 2001 1.378 1.450 5,251,702 2000 1.319 1.378 6,890,789 1999 1.359 1.319 8,990,726 1998 1.397 1.359 11,299,081 1997 1.316 1.397 12,826,830 Travelers Strategic Equity Subaccount (6/94)....... 2006 2.482 2.594 -- 2005 2.461 2.482 30,239,137 2004 2.259 2.461 39,371,551 2003 1.724 2.259 49,020,099 2002 2.627 1.724 60,860,309 2001 3.068 2.627 84,551,493 2000 3.795 3.068 110,497,118 1999 2.903 3.795 131,228,285 1998 2.276 2.903 142,801,580 1997 1.785 2.276 144,292,812 Travelers Van Kampen Enterprise Subaccount (6/94).. 2006 2.015 2.095 -- 2005 1.891 2.015 11,781,590 2004 1.842 1.891 15,562,554 2003 1.484 1.842 19,773,015 2002 2.125 1.484 24,341,031 2001 2.731 2.125 32,559,084 2000 3.238 2.731 43,294,726 1999 2.601 3.238 50,445,762 1998 2.103 2.601 55,902,505 1997 1.655 2.103 55,871,473
SEPARATE ACCOUNT CHARGES 1.45%
UNIT VALUE AT NUMBER OF UNITS BEGINNING OF UNIT VALUE AT OUTSTANDING AT PORTFOLIO NAME YEAR YEAR END OF YEAR END OF YEAR - -------------- ---- ------------- ------------- --------------- AIM Variable Insurance Funds AIM V.I. Core Equity Subaccount (Series I) (4/06).. 2006 1.000 1.081 15,388
A-9 ACCUMULATION UNIT VALUES (IN DOLLARS) (CONTINUED) SEPARATE ACCOUNT CHARGES 1.45% (CONTINUED)
UNIT VALUE AT NUMBER OF UNITS BEGINNING OF UNIT VALUE AT OUTSTANDING AT PORTFOLIO NAME YEAR YEAR END OF YEAR END OF YEAR - -------------- ---- ------------- ------------- --------------- AIM V.I. Premier Equity Subaccount (Series I) (5/01)............................................. 2006 0.814 0.855 -- 2005 0.782 0.814 17,992 2004 0.750 0.782 -- 2003 0.608 0.750 12,043 2002 0.885 0.608 -- 2001 1.000 0.885 62,490 AllianceBernstein Variable Products Series Fund, Inc. AllianceBernstein Large-Cap Growth Subaccount (Class B) (5/01)................................... 2006 0.856 0.839 -- 2005 0.757 0.856 75,075 2004 0.709 0.757 90,390 2003 0.583 0.709 164,993 2002 0.855 0.583 98,794 2001 1.000 0.855 220,509 American Funds Insurance Series American Funds Global Growth Subaccount (Class 2) (5/01)............................................. 2006 1.233 1.463 635,376 2005 1.097 1.233 576,306 2004 0.980 1.097 385,941 2003 0.735 0.980 246,731 2002 0.874 0.735 186,424 2001 1.000 0.874 42,484 American Funds Growth Subaccount (Class 2) (5/01).. 2006 1.084 1.178 1,020,451 2005 0.947 1.084 1,164,467 2004 0.854 0.947 1,170,991 2003 0.633 0.854 1,297,330 2002 0.850 0.633 1,169,096 2001 1.000 0.850 249,033 American Funds Growth-Income Subaccount (Class 2) (5/01)............................................. 2006 1.151 1.307 1,213,983 2005 1.103 1.151 2,026,786 2004 1.014 1.103 2,168,615 2003 0.777 1.014 1,567,244 2002 0.965 0.777 1,363,147 2001 1.000 0.965 735,883
A-10 ACCUMULATION UNIT VALUES (IN DOLLARS) (CONTINUED) SEPARATE ACCOUNT CHARGES 1.45% (CONTINUED)
UNIT VALUE AT NUMBER OF UNITS BEGINNING OF UNIT VALUE AT OUTSTANDING AT PORTFOLIO NAME YEAR YEAR END OF YEAR END OF YEAR - -------------- ---- ------------- ------------- --------------- Dreyfus Variable Investment Fund Dreyfus VIF Developing Leaders Subaccount (Initial Shares) (5/98)..................................... 2006 1.264 1.292 121,376 2005 1.212 1.264 165,344 2004 1.104 1.212 618,001 2003 0.851 1.104 841,633 2002 1.067 0.851 569,457 2001 1.153 1.067 333,484 2000 1.033 1.153 475,404 1999 0.851 1.033 301,650 1998 1.000 0.851 49,426 Legg Mason Partners Investment Series LMPIS Dividend Strategy Subaccount (5/01).......... 2006 0.795 0.924 11,300 2005 0.808 0.795 47,800 2004 0.793 0.808 91,054 2003 0.652 0.793 61,630 2002 0.893 0.652 17,317 2001 1.000 0.893 -- LMPIS Premier Selections All Cap Growth Subaccount (5/01)............................................. 2006 0.907 0.960 121,731 2005 0.866 0.907 122,127 2004 0.854 0.866 243,584 2003 0.645 0.854 182,965 2002 0.894 0.645 426,644 2001 1.000 0.894 90,901 Legg Mason Partners Lifestyle Series, Inc. LMPLS Balanced Subaccount (3/97)................... 2006 1.468 1.566 534,469 2005 1.453 1.468 653,723 2004 1.370 1.453 729,632 2003 1.155 1.370 742,664 2002 1.253 1.155 839,760 2001 1.290 1.253 893,618 2000 1.248 1.290 778,489 1999 1.177 1.248 922,423 1998 1.091 1.177 1,086,882 1997 1.000 1.091 777,806
A-11 ACCUMULATION UNIT VALUES (IN DOLLARS) (CONTINUED) SEPARATE ACCOUNT CHARGES 1.45% (CONTINUED)
UNIT VALUE AT NUMBER OF UNITS BEGINNING OF UNIT VALUE AT OUTSTANDING AT PORTFOLIO NAME YEAR YEAR END OF YEAR END OF YEAR - -------------- ---- ------------- ------------- --------------- LMPLS Growth Subaccount (3/97)..................... 2006 1.345 1.443 765,519 2005 1.302 1.345 794,034 2004 1.216 1.302 847,668 2003 0.950 1.216 917,612 2002 1.176 0.950 989,634 2001 1.323 1.176 1,678,477 2000 1.410 1.323 1,838,058 1999 1.232 1.410 1,847,452 1998 1.097 1.232 1,838,554 1997 1.000 1.097 1,403,455 LMPLS High Growth Subaccount (3/97)................ 2006 1.416 1.527 118,396 2005 1.354 1.416 166,806 2004 1.242 1.354 185,463 2003 0.921 1.242 237,262 2002 1.225 0.921 222,093 2001 1.414 1.225 225,839 2000 1.546 1.414 226,088 1999 1.236 1.546 319,187 1998 1.087 1.236 325,871 1997 1.000 1.087 230,988 Legg Mason Partners Variable Portfolios I, Inc. LMPVPI Investors Subaccount (Class I) (5/98)....... 2006 1.350 1.574 200,080 2005 1.286 1.350 244,035 2004 1.182 1.286 601,184 2003 0.906 1.182 755,600 2002 1.195 0.906 646,567 2001 1.265 1.195 766,415 2000 1.114 1.265 250,413 1999 1.012 1.114 171,466 1998 1.000 1.012 75,864 LMPVPI Total Return Subaccount (Class I) (5/98).... 2006 1.177 1.306 70,592 2005 1.156 1.177 193,217 2004 1.078 1.156 231,724 2003 0.944 1.078 249,017 2002 1.028 0.944 196,277 2001 1.052 1.028 255,785 2000 0.989 1.052 112,585 1999 0.996 0.989 115,789 1998 1.000 0.996 69,952
A-12 ACCUMULATION UNIT VALUES (IN DOLLARS) (CONTINUED) SEPARATE ACCOUNT CHARGES 1.45% (CONTINUED)
UNIT VALUE AT NUMBER OF UNITS BEGINNING OF UNIT VALUE AT OUTSTANDING AT PORTFOLIO NAME YEAR YEAR END OF YEAR END OF YEAR - -------------- ---- ------------- ------------- --------------- Legg Mason Partners Variable Portfolios II LMPVPII Equity Index Subaccount (Class II) (5/99).. 2006 0.902 1.023 159,583 2005 0.878 0.902 328,610 2004 0.808 0.878 391,851 2003 0.642 0.808 501,650 2002 0.839 0.642 647,264 2001 0.971 0.839 199,427 2000 1.086 0.971 172,120 1999 1.000 1.086 78,197 LMPVPII Fundamental Value Subaccount (11/94)....... 2006 2.858 3.290 2,043,548 2005 2.767 2.858 2,746,227 2004 2.595 2.767 3,806,079 2003 1.899 2.595 4,976,343 2002 2.448 1.899 5,662,520 2001 2.622 2.448 6,985,229 2000 2.208 2.622 8,605,537 1999 1.836 2.208 10,465,245 1998 1.775 1.836 11,653,902 1997 1.541 1.775 11,852,617 Legg Mason Partners Variable Portfolios III, Inc. LMPVPIII High Income Subaccount (6/94)............. 2006 1.645 1.799 1,318,593 2005 1.626 1.645 1,763,948 2004 1.494 1.626 2,423,115 2003 1.189 1.494 3,064,466 2002 1.246 1.189 3,806,067 2001 1.314 1.246 4,788,057 2000 1.450 1.314 5,829,717 1999 1.434 1.450 8,209,532 1998 1.448 1.434 9,311,914 1997 1.291 1.448 8,926,610 LMPVPIII International All Cap Growth Subaccount (6/94)............................................. 2006 1.278 1.585 3,053,662 2005 1.161 1.278 3,668,880 2004 0.999 1.161 4,592,678 2003 0.795 0.999 5,570,530 2002 1.086 0.795 6,526,506 2001 1.601 1.086 8,902,580 2000 2.131 1.601 11,816,707 1999 1.289 2.131 15,530,355 1998 1.228 1.289 17,670,056 1997 1.213 1.228 18,730,554
A-13 ACCUMULATION UNIT VALUES (IN DOLLARS) (CONTINUED) SEPARATE ACCOUNT CHARGES 1.45% (CONTINUED)
UNIT VALUE AT NUMBER OF UNITS BEGINNING OF UNIT VALUE AT OUTSTANDING AT PORTFOLIO NAME YEAR YEAR END OF YEAR END OF YEAR - -------------- ---- ------------- ------------- --------------- LMPVPIII Large Cap Growth Subaccount (5/98)........ 2006 1.392 1.435 1,039,927 2005 1.343 1.392 1,502,013 2004 1.357 1.343 2,036,808 2003 0.933 1.357 2,464,721 2002 1.259 0.933 2,575,008 2001 1.460 1.259 3,245,914 2000 1.592 1.460 3,984,628 1999 1.234 1.592 3,416,335 1998 1.000 1.234 1,022,328 LMPVPIII Large Cap Value Subaccount (6/94)......... 2006 2.158 2.516 2,488,509 2005 2.056 2.158 3,206,730 2004 1.886 2.056 4,718,730 2003 1.499 1.886 5,636,938 2002 2.040 1.499 6,591,070 2001 2.254 2.040 8,282,092 2000 2.022 2.254 10,588,184 1999 2.050 2.022 13,629,236 1998 1.894 2.050 14,890,673 1997 1.517 1.894 15,382,871 LMPVPIII Money Market Subaccount (6/94)............ 2006 1.286 1.327 1,316,271 2005 1.270 1.286 1,565,697 2004 1.277 1.270 2,220,744 2003 1.287 1.277 3,445,461 2002 1.289 1.287 5,718,355 2001 1.262 1.289 5,797,292 2000 1.207 1.262 4,483,256 1999 1.169 1.207 6,608,638 1998 1.129 1.169 8,253,674 1997 1.090 1.129 8,609,673 Legg Mason Partners Variable Portfolios V LMPVPV Small Cap Growth Opportunities Subaccount (5/01)............................................. 2006 1.141 1.270 188,838 2005 1.104 1.141 199,104 2004 0.969 1.104 290,200 2003 0.692 0.969 202,946 2002 0.945 0.692 70,815 2001 1.000 0.945 52,916 Met Investors Series Trust MIST Batterymarch Mid-Cap Stock Subaccount (Class A) (4/06).......................................... 2006 1.999 1.905 608,129 MIST BlackRock Large-Cap Core Subaccount (Class A) (4/06)............................................. 2006 1.059 1.123 138,532
A-14 ACCUMULATION UNIT VALUES (IN DOLLARS) (CONTINUED) SEPARATE ACCOUNT CHARGES 1.45% (CONTINUED)
UNIT VALUE AT NUMBER OF UNITS BEGINNING OF UNIT VALUE AT OUTSTANDING AT PORTFOLIO NAME YEAR YEAR END OF YEAR END OF YEAR - -------------- ---- ------------- ------------- --------------- MIST Lord Abbett Bond Debenture Subaccount (Class A) (4/06).......................................... 2006 1.598 1.676 182,207 MIST Met/AIM Capital Appreciation Subaccount (Class A) (4/06).......................................... 2006 1.484 1.467 2,963,465 MIST Pioneer Strategic Income Subaccount (Class A) (4/06)............................................. 2006 1.826 1.894 1,824,738 Metropolitan Series Fund, Inc. MSF BlackRock Aggressive Growth Subaccount (Class D) (4/06).......................................... 2006 1.117 1.092 1,248,208 MSF BlackRock Bond Income Subaccount (Class E) (4/06)............................................. 2006 1.554 1.614 833,885 MSF Capital Guardian U.S. Equity Subaccount (Class A) (4/06).......................................... 2006 2.027 2.085 1,708,948 MSF FI Large Cap Subaccount (Class A) (4/06)....... 2006 1.000 1.014 10,494,522 MSF MFS(R) Total Return Subaccount (Class F) (4/06)............................................. 2006 2.542 2.720 3,728,383 MSF T. Rowe Price Large Cap Growth Subaccount (Class B) (4/06)................................... 2006 0.998 1.070 38,019 MSF Western Asset Management Strategic Bond Opportunities Subaccount (Class A) (4/06).......... 2006 1.762 1.839 527,125 The Travelers Series Trust Travelers AIM Capital Appreciation Subaccount (10/95)............................................ 2006 1.392 1.484 -- 2005 1.299 1.392 3,477,875 2004 1.238 1.299 4,350,099 2003 0.971 1.238 5,476,460 2002 1.294 0.971 6,512,841 2001 1.723 1.294 9,370,593 2000 1.951 1.723 12,252,599 1999 1.385 1.951 14,474,829 1998 1.198 1.385 15,792,402 1997 1.084 1.198 15,590,753 Travelers Convertible Securities Subaccount (6/98)............................................. 2006 1.498 1.598 -- 2005 1.515 1.498 213,805 2004 1.446 1.515 225,069 2003 1.162 1.446 200,298 2002 1.267 1.162 302,585 2001 1.297 1.267 314,155 2000 1.169 1.297 141,023 1999 0.999 1.169 181,058 1998 1.000 0.999 24,086
A-15 ACCUMULATION UNIT VALUES (IN DOLLARS) (CONTINUED) SEPARATE ACCOUNT CHARGES 1.45% (CONTINUED)
UNIT VALUE AT NUMBER OF UNITS BEGINNING OF UNIT VALUE AT OUTSTANDING AT PORTFOLIO NAME YEAR YEAR END OF YEAR END OF YEAR - -------------- ---- ------------- ------------- --------------- Travelers Disciplined Mid Cap Stock Subaccount (5/98)............................................. 2006 1.829 1.999 -- 2005 1.651 1.829 660,058 2004 1.438 1.651 740,971 2003 1.091 1.438 828,184 2002 1.292 1.091 977,077 2001 1.366 1.292 965,597 2000 1.188 1.366 801,701 1999 1.063 1.188 330,146 1998 1.000 1.063 54,397 Travelers Managed Income Subaccount (6/94)......... 2006 1.568 1.554 -- 2005 1.569 1.568 995,169 2004 1.548 1.569 1,524,563 2003 1.448 1.548 2,636,504 2002 1.438 1.448 3,344,464 2001 1.367 1.438 3,524,194 2000 1.286 1.367 3,447,356 1999 1.293 1.286 4,233,630 1998 1.248 1.293 3,895,003 1997 1.154 1.248 3,090,967 Travelers Mercury Large Cap Core Subaccount (5/98)............................................. 2006 0.997 1.059 -- 2005 0.903 0.997 147,003 2004 0.790 0.903 233,259 2003 0.662 0.790 251,631 2002 0.897 0.662 339,786 2001 1.174 0.897 613,613 2000 1.261 1.174 1,310,179 1999 1.035 1.261 1,159,613 1998 1.000 1.035 1,038,696 Travelers MFS(R) Mid Cap Growth Subaccount (2/05).. 2006 1.055 1.117 -- 2005 1.000 1.055 1,598,863
A-16 ACCUMULATION UNIT VALUES (IN DOLLARS) (CONTINUED) SEPARATE ACCOUNT CHARGES 1.45% (CONTINUED)
UNIT VALUE AT NUMBER OF UNITS BEGINNING OF UNIT VALUE AT OUTSTANDING AT PORTFOLIO NAME YEAR YEAR END OF YEAR END OF YEAR - -------------- ---- ------------- ------------- --------------- Travelers MFS(R) Total Return Subaccount (6/94).... 2006 2.461 2.542 -- 2005 2.426 2.461 4,753,839 2004 2.208 2.426 6,564,147 2003 1.922 2.208 8,011,019 2002 2.059 1.922 9,194,869 2001 2.089 2.059 10,752,298 2000 1.817 2.089 12,764,698 1999 1.796 1.817 16,859,973 1998 1.632 1.796 18,458,912 1997 1.366 1.632 17,373,326 Travelers Pioneer Strategic Income Subaccount (6/94)............................................. 2006 1.807 1.826 -- 2005 1.769 1.807 2,511,686 2004 1.618 1.769 3,252,720 2003 1.373 1.618 4,610,898 2002 1.316 1.373 5,513,126 2001 1.281 1.316 6,907,426 2000 1.304 1.281 8,635,386 1999 1.309 1.304 11,060,448 1998 1.319 1.309 12,925,220 1997 1.243 1.319 12,723,780 Travelers Salomon Brothers Strategic Total Return Bond Subaccount (6/94)............................. 2006 1.790 1.762 -- 2005 1.774 1.790 716,888 2004 1.694 1.774 777,079 2003 1.516 1.694 1,113,505 2002 1.420 1.516 1,391,400 2001 1.353 1.420 1,096,011 2000 1.299 1.353 1,562,190 1999 1.342 1.299 2,350,837 1998 1.383 1.342 2,624,158 1997 1.306 1.383 2,883,105
A-17 SEPARATE ACCOUNT CHARGES 1.45% (CONTINUED)
UNIT VALUE AT NUMBER OF UNITS BEGINNING OF UNIT VALUE AT OUTSTANDING AT PORTFOLIO NAME YEAR YEAR END OF YEAR END OF YEAR - -------------- ---- ------------- ------------- --------------- Travelers Strategic Equity Subaccount (6/94)....... 2006 2.403 2.509 -- 2005 2.390 2.403 5,348,116 2004 2.200 2.390 6,967,705 2003 1.684 2.200 8,513,118 2002 2.572 1.684 10,451,939 2001 3.012 2.572 15,076,327 2000 3.737 3.012 20,965,025 1999 2.867 3.737 26,575,989 1998 2.254 2.867 28,709,572 1997 1.772 2.254 30,063,293 Travelers Van Kampen Enterprise Subaccount (6/94).. 2006 1.951 2.027 -- 2005 1.836 1.951 2,311,440 2004 1.794 1.836 3,136,961 2003 1.449 1.794 4,145,363 2002 2.081 1.449 4,915,422 2001 2.682 2.081 7,087,006 2000 3.188 2.682 9,306,589 1999 2.568 3.188 11,751,851 1998 2.083 2.568 12,560,574 1997 1.643 2.083 13,032,150
The date next to each funding option name reflects the date money first came into the funding option through the Separate Account. Funding options not listed above had no amounts allocated to them or were not available as of December 31, 2006. Number of Units Outstanding at End of Year may include units for Contract Owners in payout phase, where appropriate. If an accumulation unit value has no assets and units across all sub-accounts within the Separate Account, and has had no assets and units for the history displayed on the Condensed Financial Information in the past, then it may not be displayed. Variable Funding Option mergers and substitutions that occurred between January 1, 2005 and December 31, 2006, are displayed below. Please see Appendix C for more information on Variable Funding Option name changes, mergers and substitutions. Effective on or about 02/25/2005, The Travelers Series Trust-MFS Emerging Growth Portfolio merged into The Travelers Series Trust-MFS Mid Cap Growth Portfolio and is no longer available as a funding option. Effective on or about 05/01/2006, AIM Variable Insurance Funds-AIM V.I. Premier Equity Fund merged into AIM Variable Insurance Funds-AIM V.I. Core Equity Fund and is no longer available as a funding option. Effective on or about 05/01/2006, AllianceBernstein Variable Products Series Fund, Inc.-AllianceBernstein Large Cap Growth Portfolio was replaced by Metropolitan Series Fund, Inc.-T. Rowe Price Large Cap Growth Portfolio and is no longer available as a funding option. Effective on or about 05/01/2006, The Travelers Series Trust-AIM Capital Appreciation Portfolio merged into Met Investors Series Trust-Met/AIM Capital Appreciation Portfolio and is no longer available as a funding option. A-18 Effective on or about 05/01/2006, The Travelers Series Trust-Convertible Securities Portfolio merged into Met Investors Series Trust-Lord Abbett Bond Debenture Portfolio and is no longer available as a funding option. Effective on or about 05/01/2006, The Travelers Series Trust-Disciplined Mid Cap Stock Portfolio merged into Met Investors Series Trust-Batterymarch Mid-Cap Stock Portfolio and is no longer available as a funding option. Effective on or about 05/01/2006, The Travelers Series Trust-Mercury Large Cap Core Portfolio merged into Met Investors Series Trust-Mercury Large-Cap Core Portfolio and is no longer available as a funding option. Effective on or about 05/01/2006, The Travelers Series Trust-MFS Mid Cap Growth Portfolio merged into Metropolitan Series Fund, Inc.-BlackRock Aggressive Growth Portfolio and is no longer available as a funding option. Effective on or about 05/01/2006, The Travelers Series Trust-MFS Total Return Portfolio merged into Metropolitan Series Fund, Inc.-MFS Total Return Portfolio and is no longer available as a funding option. Effective on or about 05/01/2006, The Travelers Series Trust-Pioneer Strategic Income Portfolio merged into Met Investors Series Trust-Pioneer Strategic Income Portfolio and is no longer available as a funding option. Effective on or about 05/01/2006, The Travelers Series Trust-Salomon Brothers Strategic Total Return Bond Portfolio merged into Metropolitan Series Fund, Inc.-Western Asset Management Strategic Bond Opportunities Portfolio and is no longer available as a funding option. Effective on or about 05/01/2006, The Travelers Series Trust-Strategic Equity Portfolio merged into Metropolitan Series Fund, Inc.-FI Large Cap Portfolio and is no longer available as a funding option. Effective on or about 05/01/2006, The Travelers Series Trust-Travelers Managed Income Portfolio merged into Metropolitan Series Fund, Inc.-BlackRock Bond Income Portfolio and is no longer available as a funding option. Effective on or about 05/01/2006, The Travelers Series Trust-Van Kampen Enterprise Portfolio merged into Metropolitan Series Fund, Inc.-Capital Guardian U.S. Equity Portfolio and is no longer available as a funding option. A-19 THIS PAGE INTENTIONALLY LEFT BLANK. APPENDIX B CONDENSED FINANCIAL INFORMATION - -------------------------------------------------------------------------------- METLIFE OF CT FUND BD II FOR VARIABLE ANNUITIES ACCUMULATION UNIT VALUES (IN DOLLARS) The following Accumulation Unit Value ("AUV") information should be read in conjunction with the Separate Account's audited financial statement and notes, which are included in the Statement of Additional Information ("SAI"). The first table provides the AUV information for the MINIMUM Separate Account Charge available under the contract. The second table provides the AUV information for the MAXIMUM Separate Account Charge available under the contract. Please refer to the Fee Table section of this prospectus for more information on Separate Account Charges. SEPARATE ACCOUNT CHARGES 1.17%
UNIT VALUE AT NUMBER OF UNITS BEGINNING OF UNIT VALUE AT OUTSTANDING AT PORTFOLIO NAME YEAR YEAR END OF YEAR END OF YEAR - -------------- ---- ------------- ------------- --------------- AIM Variable Insurance Funds AIM V.I. Core Equity Subaccount (Series I) (4/06).. 2006 1.000 1.083 57,701 AIM V.I. Premier Equity Subaccount (Series I) (5/01)............................................. 2006 0.825 0.867 -- 2005 0.790 0.825 189,790 2004 0.755 0.790 222,287 2003 0.611 0.755 549,581 2002 0.886 0.611 452,916 2001 1.000 0.886 784,729 AllianceBernstein Variable Products Series Fund, Inc. AllianceBernstein Large-Cap Growth Subaccount (Class B) (5/01)................................... 2006 0.868 0.852 -- 2005 0.764 0.868 440,737 2004 0.714 0.764 552,089 2003 0.585 0.714 541,563 2002 0.857 0.585 591,301 2001 1.000 0.857 1,599,889 American Funds Insurance Series American Funds Global Growth Subaccount (Class 2) (5/01)............................................. 2006 1.249 1.487 3,806,585 2005 1.108 1.249 3,590,509 2004 0.988 1.108 3,073,714 2003 0.739 0.988 2,338,416 2002 0.876 0.739 1,531,673 2001 1.000 0.876 302,319 American Funds Growth Subaccount (Class 2) (5/01).. 2006 1.099 1.197 6,276,573 2005 0.957 1.099 7,327,416 2004 0.860 0.957 7,585,044 2003 0.636 0.860 7,876,123 2002 0.852 0.636 5,204,523 2001 1.000 0.852 1,775,006
B-1 ACCUMULATION UNIT VALUES (IN DOLLARS) (CONTINUED) SEPARATE ACCOUNT CHARGES 1.17% (CONTINUED)
UNIT VALUE AT NUMBER OF UNITS BEGINNING OF UNIT VALUE AT OUTSTANDING AT PORTFOLIO NAME YEAR YEAR END OF YEAR END OF YEAR - -------------- ---- ------------- ------------- --------------- American Funds Growth-Income Subaccount (Class 2) (5/01)............................................. 2006 1.166 1.328 5,795,960 2005 1.115 1.166 7,516,753 2004 1.022 1.115 9,204,918 2003 0.781 1.022 10,455,500 2002 0.967 0.781 8,045,731 2001 1.000 0.967 4,182,477 Dreyfus Variable Investment Fund Dreyfus VIF Developing Leaders Subaccount (Initial Shares) (5/98)..................................... 2006 1.291 1.324 2,760,151 2005 1.235 1.291 3,758,077 2004 1.122 1.235 4,881,409 2003 0.862 1.122 6,426,577 2002 1.078 0.862 7,558,046 2001 1.162 1.078 8,367,551 2000 1.038 1.162 8,748,382 1999 0.852 1.038 4,918,004 1998 1.000 0.852 1,712,698 Legg Mason Partners Investment Series LMPIS Dividend Strategy Subaccount (5/01).......... 2006 0.805 0.939 180,327 2005 0.816 0.805 255,217 2004 0.799 0.816 298,839 2003 0.655 0.799 454,774 2002 0.895 0.655 107,552 2001 1.000 0.895 49,350 LMPIS Premier Selections All Cap Growth Subaccount (5/01)............................................. 2006 0.919 0.975 964,406 2005 0.875 0.919 1,212,270 2004 0.860 0.875 1,422,862 2003 0.648 0.860 1,433,743 2002 0.896 0.648 945,291 2001 1.000 0.896 165,628
B-2 ACCUMULATION UNIT VALUES (IN DOLLARS) (CONTINUED) SEPARATE ACCOUNT CHARGES 1.17% (CONTINUED)
UNIT VALUE AT NUMBER OF UNITS BEGINNING OF UNIT VALUE AT OUTSTANDING AT PORTFOLIO NAME YEAR YEAR END OF YEAR END OF YEAR - -------------- ---- ------------- ------------- --------------- Legg Mason Partners Lifestyle Series, Inc. LMPLS Balanced Subaccount (3/97)................... 2006 1.505 1.609 2,944,515 2005 1.485 1.505 3,657,695 2004 1.396 1.485 4,780,579 2003 1.174 1.396 6,058,621 2002 1.270 1.174 7,016,157 2001 1.303 1.270 8,521,339 2000 1.258 1.303 7,372,296 1999 1.183 1.258 8,078,329 1998 1.093 1.183 7,215,935 1997 1.000 1.093 4,148,291 LMPLS Growth Subaccount (3/97)..................... 2006 1.378 1.483 1,443,610 2005 1.331 1.378 1,803,712 2004 1.239 1.331 2,108,022 2003 0.965 1.239 2,810,456 2002 1.192 0.965 3,477,779 2001 1.338 1.192 4,058,208 2000 1.421 1.338 4,479,543 1999 1.238 1.421 5,037,394 1998 1.099 1.238 5,355,940 1997 1.000 1.099 3,396,120 LMPLS High Growth Subaccount (3/97)................ 2006 1.451 1.570 545,430 2005 1.384 1.451 563,661 2004 1.266 1.384 641,406 2003 0.936 1.266 1,063,284 2002 1.242 0.936 2,145,452 2001 1.429 1.242 2,532,075 2000 1.558 1.429 2,672,371 1999 1.242 1.558 2,931,329 1998 1.090 1.242 3,434,814 1997 1.000 1.090 2,656,918
B-3 ACCUMULATION UNIT VALUES (IN DOLLARS) (CONTINUED) SEPARATE ACCOUNT CHARGES 1.17% (CONTINUED)
UNIT VALUE AT NUMBER OF UNITS BEGINNING OF UNIT VALUE AT OUTSTANDING AT PORTFOLIO NAME YEAR YEAR END OF YEAR END OF YEAR - -------------- ---- ------------- ------------- --------------- Legg Mason Partners Variable Portfolios I, Inc. LMPVPI Investors Subaccount (Class I) (5/98)....... 2006 1.380 1.613 2,359,777 2005 1.310 1.380 3,451,622 2004 1.201 1.310 4,475,846 2003 0.918 1.201 5,788,326 2002 1.207 0.918 7,175,121 2001 1.275 1.207 8,630,494 2000 1.119 1.275 3,800,664 1999 1.014 1.119 2,903,384 1998 1.000 1.014 1,024,070 LMPVPI Total Return Subaccount (Class I) (5/98).... 2006 1.203 1.338 689,822 2005 1.178 1.203 900,666 2004 1.096 1.178 1,229,680 2003 0.956 1.096 1,568,694 2002 1.039 0.956 1,661,014 2001 1.060 1.039 1,775,865 2000 0.994 1.060 1,806,836 1999 0.997 0.994 1,619,636 1998 1.000 0.997 761,112 Legg Mason Partners Variable Portfolios II LMPVPII Equity Index Subaccount (Class II) (5/99).. 2006 0.919 1.046 2,076,143 2005 0.892 0.919 2,872,759 2004 0.818 0.892 4,122,866 2003 0.648 0.818 4,934,524 2002 0.845 0.648 5,023,828 2001 0.976 0.845 5,290,969 2000 1.088 0.976 5,833,689 1999 1.000 1.088 4,474,800 LMPVPII Fundamental Value Subaccount (11/95)....... 2006 2.948 3.404 10,015,797 2005 2.847 2.948 14,138,557 2004 2.662 2.847 18,731,408 2003 1.942 2.662 23,008,144 2002 2.497 1.942 28,541,086 2001 2.667 2.497 35,936,645 2000 2.240 2.667 39,497,603 1999 1.857 2.240 42,818,333 1998 1.790 1.857 42,829,917 1997 1.538 1.790 33,686,043
B-4 ACCUMULATION UNIT VALUES (IN DOLLARS) (CONTINUED) SEPARATE ACCOUNT CHARGES 1.17% (CONTINUED)
UNIT VALUE AT NUMBER OF UNITS BEGINNING OF UNIT VALUE AT OUTSTANDING AT PORTFOLIO NAME YEAR YEAR END OF YEAR END OF YEAR - -------------- ---- ------------- ------------- --------------- Legg Mason Partners Variable Portfolios III, Inc. LMPVPIII High Income Subaccount (11/95)............ 2006 1.699 1.863 4,850,880 2005 1.675 1.699 6,545,929 2004 1.534 1.675 10,157,755 2003 1.217 1.534 14,004,456 2002 1.273 1.217 17,052,242 2001 1.338 1.273 22,082,482 2000 1.472 1.338 25,994,496 1999 1.452 1.472 30,633,089 1998 1.463 1.452 31,054,135 1997 1.300 1.463 21,213,238 LMPVPIII International All Cap Growth Subaccount (11/95)............................................ 2006 1.320 1.642 9,686,634 2005 1.195 1.320 12,878,628 2004 1.026 1.195 16,816,603 2003 0.814 1.026 19,996,518 2002 1.109 0.814 31,080,395 2001 1.630 1.109 37,365,581 2000 2.164 1.630 39,840,894 1999 1.305 2.164 40,313,454 1998 1.240 1.305 38,529,419 1997 1.222 1.240 31,311,119 LMPVPIII Large Cap Growth Subaccount (5/98)........ 2006 1.423 1.471 11,094,038 2005 1.368 1.423 17,888,406 2004 1.379 1.368 24,244,756 2003 0.945 1.379 29,762,936 2002 1.272 0.945 32,882,101 2001 1.471 1.272 41,629,754 2000 1.599 1.471 48,151,480 1999 1.237 1.599 46,287,883 1998 1.000 1.237 12,176,408 LMPVPIII Large Cap Value Subaccount (11/95)........ 2006 2.229 2.606 9,474,803 2005 2.118 2.229 12,966,895 2004 1.937 2.118 18,635,245 2003 1.536 1.937 23,230,901 2002 2.083 1.536 28,614,647 2001 2.296 2.083 36,896,310 2000 2.053 2.296 41,043,900 1999 2.076 2.053 45,773,195 1998 1.913 2.076 40,967,323 1997 1.528 1.913 27,117,422
B-5 ACCUMULATION UNIT VALUES (IN DOLLARS) (CONTINUED) SEPARATE ACCOUNT CHARGES 1.17% (CONTINUED)
UNIT VALUE AT NUMBER OF UNITS BEGINNING OF UNIT VALUE AT OUTSTANDING AT PORTFOLIO NAME YEAR YEAR END OF YEAR END OF YEAR - -------------- ---- ------------- ------------- --------------- LMPVPIII Money Market Subaccount (11/95)........... 2006 1.329 1.374 5,687,571 2005 1.308 1.329 7,790,651 2004 1.311 1.308 12,688,242 2003 1.318 1.311 24,151,440 2002 1.317 1.318 45,287,737 2001 1.285 1.317 49,324,087 2000 1.226 1.285 45,585,702 1999 1.184 1.226 48,631,112 1998 1.140 1.184 41,370,187 1997 1.098 1.140 25,661,233 Legg Mason Partners Variable Portfolios V LMPVPV Small Cap Growth Opportunities Subaccount (6/01)............................................. 2006 1.156 1.290 527,869 2005 1.115 1.156 810,421 2004 0.976 1.115 1,045,618 2003 0.696 0.976 1,327,911 2002 0.947 0.696 565,103 2001 1.000 0.947 471,861 Met Investors Series Trust MIST Batterymarch Mid-Cap Stock Subaccount (Class A) (4/06).......................................... 2006 2.044 1.952 2,768,458 MIST BlackRock Large-Cap Core Subaccount (Class A) (4/06)............................................. 2006 1.083 1.150 1,997,711 MIST Lord Abbett Bond Debenture Subaccount (Class A) (4/06).......................................... 2006 1.634 1.717 767,267 MIST Met/AIM Capital Appreciation Subaccount (Class A) (4/06).......................................... 2006 1.528 1.514 12,726,112 MIST Pioneer Strategic Income Subaccount (Class A) (4/06)............................................. 2006 1.888 1.961 6,817,803 Metropolitan Series Fund, Inc. MSF BlackRock Aggressive Growth Subaccount (Class D) (4/06).......................................... 2006 1.121 1.097 9,500,259 MSF BlackRock Bond Income Subaccount (Class E) (4/06)............................................. 2006 1.606 1.672 3,842,867 MSF Capital Guardian U.S. Equity Subaccount (Class A) (4/06).......................................... 2006 2.095 2.160 7,894,525 MSF FI Large Cap Subaccount (Class A) (4/06)....... 2006 1.000 1.016 40,133,159 MSF MFS(R) Total Return Subaccount (Class F) (4/06)............................................. 2006 2.628 2.817 15,128,976 MSF T. Rowe Price Large Cap Growth Subaccount (Class B) (4/06)................................... 2006 0.998 1.072 382,186 MSF Western Asset Management Strategic Bond Opportunities Subaccount (Class A) (4/06).......... 2006 1.822 1.905 1,585,549
B-6 ACCUMULATION UNIT VALUES (IN DOLLARS) (CONTINUED) SEPARATE ACCOUNT CHARGES 1.17% (CONTINUED)
UNIT VALUE AT NUMBER OF UNITS BEGINNING OF UNIT VALUE AT OUTSTANDING AT PORTFOLIO NAME YEAR YEAR END OF YEAR END OF YEAR - -------------- ---- ------------- ------------- --------------- The Travelers Series Trust Travelers AIM Capital Appreciation Subaccount (11/95)............................................ 2006 1.433 1.528 -- 2005 1.333 1.433 17,196,167 2004 1.267 1.333 23,560,997 2003 0.991 1.267 29,554,141 2002 1.317 0.991 36,609,088 2001 1.748 1.317 48,759,536 2000 1.974 1.748 58,458,248 1999 1.397 1.974 59,794,915 1998 1.206 1.397 59,823,732 1997 1.088 1.206 48,942,402 Travelers Convertible Securities Subaccount (5/98)............................................. 2006 1.531 1.634 -- 2005 1.543 1.531 1,894,620 2004 1.469 1.543 2,910,835 2003 1.177 1.469 3,580,128 2002 1.280 1.177 2,836,081 2001 1.306 1.280 3,229,548 2000 1.175 1.306 2,705,832 1999 1.001 1.175 1,597,497 1998 1.000 1.001 418,194 Travelers Disciplined Mid Cap Stock Subaccount (5/98)............................................. 2006 1.869 2.044 -- 2005 1.682 1.869 3,877,461 2004 1.461 1.682 5,322,574 2003 1.105 1.461 6,731,651 2002 1.305 1.105 7,539,227 2001 1.376 1.305 7,464,051 2000 1.194 1.376 7,288,284 1999 1.064 1.194 3,984,156 1998 1.000 1.064 550,487 Travelers Managed Income Subaccount (11/95)........ 2006 1.619 1.606 -- 2005 1.616 1.619 5,893,607 2004 1.590 1.616 8,132,897 2003 1.483 1.590 11,247,672 2002 1.469 1.483 15,554,389 2001 1.392 1.469 18,765,083 2000 1.306 1.392 18,462,379 1999 1.309 1.306 20,425,251 1998 1.261 1.309 11,544,261 1997 1.163 1.261 4,488,528
B-7 ACCUMULATION UNIT VALUES (IN DOLLARS) (CONTINUED) SEPARATE ACCOUNT CHARGES 1.17% (CONTINUED)
UNIT VALUE AT NUMBER OF UNITS BEGINNING OF UNIT VALUE AT OUTSTANDING AT PORTFOLIO NAME YEAR YEAR END OF YEAR END OF YEAR - -------------- ---- ------------- ------------- --------------- Travelers Mercury Large Cap Core Subaccount (5/98)............................................. 2006 1.019 1.083 -- 2005 0.920 1.019 2,908,628 2004 0.803 0.920 3,507,945 2003 0.671 0.803 4,011,608 2002 0.906 0.671 5,179,705 2001 1.183 0.906 7,294,912 2000 1.267 1.183 8,594,088 1999 1.037 1.267 7,720,777 1998 1.000 1.037 3,295,301 Travelers MFS(R) Mid Cap Growth Subaccount (2/05).. 2006 1.058 1.121 -- 2005 1.000 1.058 13,281,410 Travelers MFS(R) Total Return Subaccount (11/95)... 2006 2.542 2.628 -- 2005 2.498 2.542 21,052,598 2004 2.268 2.498 28,712,973 2003 1.969 2.268 36,279,044 2002 2.103 1.969 44,055,402 2001 2.127 2.103 51,925,016 2000 1.845 2.127 55,043,368 1999 1.819 1.845 64,327,238 1998 1.648 1.819 58,653,278 1997 1.376 1.648 34,927,832 Travelers Pioneer Strategic Income Subaccount (11/95)............................................ 2006 1.867 1.888 -- 2005 1.822 1.867 9,739,686 2004 1.661 1.822 12,908,237 2003 1.406 1.661 17,359,087 2002 1.344 1.406 20,779,858 2001 1.304 1.344 24,095,134 2000 1.325 1.304 27,997,652 1999 1.326 1.325 31,303,028 1998 1.332 1.326 29,566,111 1997 1.252 1.332 19,504,257
B-8 ACCUMULATION UNIT VALUES (IN DOLLARS) (CONTINUED) SEPARATE ACCOUNT CHARGES 1.17% (CONTINUED)
UNIT VALUE AT NUMBER OF UNITS BEGINNING OF UNIT VALUE AT OUTSTANDING AT PORTFOLIO NAME YEAR YEAR END OF YEAR END OF YEAR - -------------- ---- ------------- ------------- --------------- Travelers Salomon Brothers Strategic Total Return Bond Subaccount (11/95)............................ 2006 1.848 1.822 -- 2005 1.827 1.848 2,185,732 2004 1.739 1.827 3,246,313 2003 1.553 1.739 4,620,468 2002 1.450 1.553 6,048,142 2001 1.378 1.450 5,041,930 2000 1.319 1.378 4,408,007 1999 1.359 1.319 5,149,182 1998 1.397 1.359 5,481,141 1997 1.316 1.397 5,016,054 Travelers Strategic Equity Subaccount (11/95)...... 2006 2.482 2.594 -- 2005 2.461 2.482 20,922,781 2004 2.259 2.461 28,494,540 2003 1.724 2.259 35,580,777 2002 2.627 1.724 43,888,761 2001 3.068 2.627 61,361,661 2000 3.795 3.068 72,884,231 1999 2.903 3.795 76,734,335 1998 2.276 2.903 67,639,943 1997 1.785 2.276 47,935,239 Travelers Van Kampen Enterprise Subaccount (11/95)............................................ 2006 2.015 2.095 -- 2005 1.891 2.015 10,614,331 2004 1.842 1.891 14,731,756 2003 1.484 1.842 18,474,416 2002 2.125 1.484 22,699,674 2001 2.731 2.125 30,008,237 2000 3.238 2.731 37,059,764 1999 2.601 3.238 39,297,380 1998 2.103 2.601 35,643,545 1997 1.655 2.103 24,635,450
SEPARATE ACCOUNT CHARGES 1.45%
UNIT VALUE AT NUMBER OF UNITS BEGINNING OF UNIT VALUE AT OUTSTANDING AT PORTFOLIO NAME YEAR YEAR END OF YEAR END OF YEAR - -------------- ---- ------------- ------------- --------------- AIM Variable Insurance Funds AIM V.I. Core Equity Subaccount (Series I) (4/06).. 2006 1.000 1.081 --
B-9 ACCUMULATION UNIT VALUES (IN DOLLARS) (CONTINUED) SEPARATE ACCOUNT CHARGES 1.45% (CONTINUED)
UNIT VALUE AT NUMBER OF UNITS BEGINNING OF UNIT VALUE AT OUTSTANDING AT PORTFOLIO NAME YEAR YEAR END OF YEAR END OF YEAR - -------------- ---- ------------- ------------- --------------- AIM V.I. Premier Equity Subaccount (Series I) (5/01)............................................. 2006 0.814 0.855 -- 2005 0.782 0.814 4,668 2004 0.750 0.782 5,619 2003 0.608 0.750 6,618 2002 0.885 0.608 -- 2001 1.000 0.885 2,179 AllianceBernstein Variable Products Series Fund, Inc. AllianceBernstein Large-Cap Growth Subaccount (Class B) (5/01)................................... 2006 0.856 0.839 -- 2005 0.757 0.856 -- 2004 0.709 0.757 -- 2003 0.583 0.709 2,909 2002 0.855 0.583 8,838 2001 1.000 0.855 234,311 American Funds Insurance Series American Funds Global Growth Subaccount (Class 2) (5/01)............................................. 2006 1.233 1.463 666,217 2005 1.097 1.233 502,635 2004 0.980 1.097 521,068 2003 0.735 0.980 469,609 2002 0.874 0.735 326,225 2001 1.000 0.874 78,492 American Funds Growth Subaccount (Class 2) (5/01).. 2006 1.084 1.178 2,201,349 2005 0.947 1.084 2,439,803 2004 0.854 0.947 2,269,374 2003 0.633 0.854 1,931,622 2002 0.850 0.633 1,310,595 2001 1.000 0.850 438,782 American Funds Growth-Income Subaccount (Class 2) (5/01)............................................. 2006 1.151 1.307 1,713,136 2005 1.103 1.151 1,938,260 2004 1.014 1.103 2,183,878 2003 0.777 1.014 1,786,396 2002 0.965 0.777 1,645,336 2001 1.000 0.965 719,119
B-10 ACCUMULATION UNIT VALUES (IN DOLLARS) (CONTINUED) SEPARATE ACCOUNT CHARGES 1.45% (CONTINUED)
UNIT VALUE AT NUMBER OF UNITS BEGINNING OF UNIT VALUE AT OUTSTANDING AT PORTFOLIO NAME YEAR YEAR END OF YEAR END OF YEAR - -------------- ---- ------------- ------------- --------------- Dreyfus Variable Investment Fund Dreyfus VIF Developing Leaders Subaccount (Initial Shares) (5/98)..................................... 2006 1.264 1.292 624,900 2005 1.212 1.264 814,148 2004 1.104 1.212 919,115 2003 0.851 1.104 1,032,557 2002 1.067 0.851 963,891 2001 1.153 1.067 739,152 2000 1.033 1.153 804,861 1999 0.851 1.033 449,652 1998 1.000 0.851 252,461 Legg Mason Partners Investment Series LMPIS Dividend Strategy Subaccount (5/01).......... 2006 0.795 0.924 41,122 2005 0.808 0.795 58,562 2004 0.793 0.808 87,461 2003 0.652 0.793 88,642 2002 0.893 0.652 26,571 2001 1.000 0.893 10,809 LMPIS Premier Selections All Cap Growth Subaccount (5/01)............................................. 2006 0.907 0.960 182,469 2005 0.866 0.907 317,230 2004 0.854 0.866 378,955 2003 0.645 0.854 359,910 2002 0.894 0.645 506,203 2001 1.000 0.894 80,062 Legg Mason Partners Lifestyle Series, Inc. LMPLS Balanced Subaccount (3/97)................... 2006 1.468 1.566 1,021,362 2005 1.453 1.468 1,131,824 2004 1.370 1.453 1,499,876 2003 1.155 1.370 1,614,838 2002 1.253 1.155 1,984,327 2001 1.290 1.253 2,337,583 2000 1.248 1.290 2,325,059 1999 1.177 1.248 2,374,648 1998 1.091 1.177 2,594,418 1997 1.000 1.091 1,788,610
B-11 ACCUMULATION UNIT VALUES (IN DOLLARS) (CONTINUED) SEPARATE ACCOUNT CHARGES 1.45% (CONTINUED)
UNIT VALUE AT NUMBER OF UNITS BEGINNING OF UNIT VALUE AT OUTSTANDING AT PORTFOLIO NAME YEAR YEAR END OF YEAR END OF YEAR - -------------- ---- ------------- ------------- --------------- LMPLS Growth Subaccount (3/97)..................... 2006 1.345 1.443 1,055,184 2005 1.302 1.345 1,086,138 2004 1.216 1.302 1,155,771 2003 0.950 1.216 1,298,046 2002 1.176 0.950 1,312,996 2001 1.323 1.176 1,443,925 2000 1.410 1.323 1,580,482 1999 1.232 1.410 2,157,254 1998 1.097 1.232 2,329,431 1997 1.000 1.097 1,191,019 LMPLS High Growth Subaccount (3/97)................ 2006 1.416 1.527 37,982 2005 1.354 1.416 49,939 2004 1.242 1.354 113,957 2003 0.921 1.242 117,971 2002 1.225 0.921 107,009 2001 1.414 1.225 389,634 2000 1.546 1.414 403,429 1999 1.236 1.546 447,062 1998 1.087 1.236 622,357 1997 1.000 1.087 391,357 Legg Mason Partners Variable Portfolios I, Inc. LMPVPI Investors Subaccount (Class I) (5/98)....... 2006 1.350 1.574 779,003 2005 1.286 1.350 920,412 2004 1.182 1.286 964,242 2003 0.906 1.182 1,037,658 2002 1.195 0.906 1,141,039 2001 1.265 1.195 1,342,374 2000 1.114 1.265 858,755 1999 1.012 1.114 529,114 1998 1.000 1.012 199,078 LMPVPI Total Return Subaccount (Class I) (5/98).... 2006 1.177 1.306 293,977 2005 1.156 1.177 354,387 2004 1.078 1.156 393,577 2003 0.944 1.078 423,845 2002 1.028 0.944 461,333 2001 1.052 1.028 241,087 2000 0.989 1.052 214,225 1999 0.996 0.989 208,331 1998 1.000 0.996 127,726
B-12 ACCUMULATION UNIT VALUES (IN DOLLARS) (CONTINUED) SEPARATE ACCOUNT CHARGES 1.45% (CONTINUED)
UNIT VALUE AT NUMBER OF UNITS BEGINNING OF UNIT VALUE AT OUTSTANDING AT PORTFOLIO NAME YEAR YEAR END OF YEAR END OF YEAR - -------------- ---- ------------- ------------- --------------- Legg Mason Partners Variable Portfolios II LMPVPII Equity Index Subaccount (Class II) (5/99).. 2006 0.902 1.023 309,979 2005 0.878 0.902 329,523 2004 0.808 0.878 301,119 2003 0.642 0.808 357,783 2002 0.839 0.642 367,027 2001 0.971 0.839 98,319 2000 1.086 0.971 88,601 1999 1.000 1.086 157,335 LMPVPII Fundamental Value Subaccount (11/95)....... 2006 2.858 3.290 3,392,121 2005 2.767 2.858 4,145,278 2004 2.595 2.767 5,059,922 2003 1.899 2.595 5,716,998 2002 2.448 1.899 6,612,767 2001 2.622 2.448 7,518,471 2000 2.208 2.622 7,852,821 1999 1.836 2.208 8,588,178 1998 1.775 1.836 9,424,781 1997 1.541 1.775 5,975,192 Legg Mason Partners Variable Portfolios III, Inc. LMPVPIII High Income Subaccount (11/95)............ 2006 1.645 1.799 1,160,973 2005 1.626 1.645 1,535,138 2004 1.494 1.626 2,066,353 2003 1.189 1.494 2,608,457 2002 1.246 1.189 2,717,395 2001 1.314 1.246 3,063,554 2000 1.450 1.314 3,605,109 1999 1.434 1.450 4,266,126 1998 1.448 1.434 4,739,592 1997 1.291 1.448 2,639,907 LMPVPIII International All Cap Growth Subaccount (11/95)............................................ 2006 1.278 1.585 2,430,095 2005 1.161 1.278 2,745,473 2004 0.999 1.161 3,021,620 2003 0.795 0.999 3,711,209 2002 1.086 0.795 4,109,540 2001 1.601 1.086 5,041,565 2000 2.131 1.601 5,396,144 1999 1.289 2.131 5,906,915 1998 1.228 1.289 6,198,702 1997 1.213 1.228 4,871,826
B-13 ACCUMULATION UNIT VALUES (IN DOLLARS) (CONTINUED) SEPARATE ACCOUNT CHARGES 1.45% (CONTINUED)
UNIT VALUE AT NUMBER OF UNITS BEGINNING OF UNIT VALUE AT OUTSTANDING AT PORTFOLIO NAME YEAR YEAR END OF YEAR END OF YEAR - -------------- ---- ------------- ------------- --------------- LMPVPIII Large Cap Growth Subaccount (5/98)........ 2006 1.392 1.435 1,953,901 2005 1.343 1.392 2,350,632 2004 1.357 1.343 2,809,530 2003 0.933 1.357 3,173,664 2002 1.259 0.933 3,026,159 2001 1.460 1.259 3,755,140 2000 1.592 1.460 4,219,549 1999 1.234 1.592 3,491,177 1998 1.000 1.234 1,447,309 LMPVPIII Large Cap Value Subaccount (11/95)........ 2006 2.158 2.516 2,643,979 2005 2.056 2.158 3,231,996 2004 1.886 2.056 3,761,665 2003 1.499 1.886 4,212,320 2002 2.040 1.499 5,136,381 2001 2.254 2.040 6,460,230 2000 2.022 2.254 7,279,633 1999 2.050 2.022 8,114,092 1998 1.894 2.050 8,248,925 1997 1.517 1.894 4,645,333 LMPVPIII Money Market Subaccount (11/95)........... 2006 1.286 1.327 1,363,733 2005 1.270 1.286 1,550,993 2004 1.277 1.270 2,442,193 2003 1.287 1.277 3,608,001 2002 1.289 1.287 4,582,342 2001 1.262 1.289 4,926,672 2000 1.207 1.262 3,371,813 1999 1.169 1.207 5,840,571 1998 1.129 1.169 6,023,674 1997 1.090 1.129 2,416,649 Legg Mason Partners Variable Portfolios V LMPVPV Small Cap Growth Opportunities Subaccount (6/01)............................................. 2006 1.141 1.270 159,130 2005 1.104 1.141 111,823 2004 0.969 1.104 118,451 2003 0.692 0.969 64,522 2002 0.945 0.692 45,580 2001 1.000 0.945 8,130 Met Investors Series Trust MIST Batterymarch Mid-Cap Stock Subaccount (Class A) (4/06).......................................... 2006 1.999 1.905 615,544 MIST BlackRock Large-Cap Core Subaccount (Class A) (4/06)............................................. 2006 1.059 1.123 718,347
B-14 ACCUMULATION UNIT VALUES (IN DOLLARS) (CONTINUED) SEPARATE ACCOUNT CHARGES 1.45% (CONTINUED)
UNIT VALUE AT NUMBER OF UNITS BEGINNING OF UNIT VALUE AT OUTSTANDING AT PORTFOLIO NAME YEAR YEAR END OF YEAR END OF YEAR - -------------- ---- ------------- ------------- --------------- MIST Lord Abbett Bond Debenture Subaccount (Class A) (4/06).......................................... 2006 1.598 1.676 309,596 MIST Met/AIM Capital Appreciation Subaccount (Class A) (4/06).......................................... 2006 1.484 1.467 3,487,590 MIST Pioneer Strategic Income Subaccount (Class A) (4/06)............................................. 2006 1.826 1.894 1,836,968 Metropolitan Series Fund, Inc. MSF BlackRock Aggressive Growth Subaccount (Class D) (4/06).......................................... 2006 1.117 1.092 2,798,096 MSF BlackRock Bond Income Subaccount (Class E) (4/06)............................................. 2006 1.554 1.614 1,469,856 MSF Capital Guardian U.S. Equity Subaccount (Class A) (4/06).......................................... 2006 2.027 2.085 1,958,832 MSF FI Large Cap Subaccount (Class A) (4/06)....... 2006 1.000 1.014 10,079,751 MSF MFS(R) Total Return Subaccount (Class F) (4/06)............................................. 2006 2.542 2.720 3,953,852 MSF T. Rowe Price Large Cap Growth Subaccount (Class B) (4/06)................................... 2006 0.998 1.070 40,789 MSF Western Asset Management Strategic Bond Opportunities Subaccount (Class A) (4/06).......... 2006 1.762 1.839 368,821 The Travelers Series Trust Travelers AIM Capital Appreciation Subaccount (11/95)............................................ 2006 1.392 1.484 -- 2005 1.299 1.392 4,421,097 2004 1.238 1.299 5,178,947 2003 0.971 1.238 6,091,107 2002 1.294 0.971 7,425,616 2001 1.723 1.294 9,242,361 2000 1.951 1.723 10,759,671 1999 1.385 1.951 10,757,693 1998 1.198 1.385 11,522,469 1997 1.084 1.198 8,844,768 Travelers Convertible Securities Subaccount (5/98)............................................. 2006 1.498 1.598 -- 2005 1.515 1.498 299,120 2004 1.446 1.515 325,676 2003 1.162 1.446 399,307 2002 1.267 1.162 418,382 2001 1.297 1.267 293,689 2000 1.169 1.297 425,068 1999 0.999 1.169 429,444 1998 1.000 0.999 22,352
B-15 ACCUMULATION UNIT VALUES (IN DOLLARS) (CONTINUED) SEPARATE ACCOUNT CHARGES 1.45% (CONTINUED)
UNIT VALUE AT NUMBER OF UNITS BEGINNING OF UNIT VALUE AT OUTSTANDING AT PORTFOLIO NAME YEAR YEAR END OF YEAR END OF YEAR - -------------- ---- ------------- ------------- --------------- Travelers Disciplined Mid Cap Stock Subaccount (5/98)............................................. 2006 1.829 1.999 -- 2005 1.651 1.829 749,382 2004 1.438 1.651 939,042 2003 1.091 1.438 1,049,421 2002 1.292 1.091 1,005,471 2001 1.366 1.292 856,513 2000 1.188 1.366 833,708 1999 1.063 1.188 256,491 1998 1.000 1.063 28,077 Travelers Managed Income Subaccount (11/95)........ 2006 1.568 1.554 -- 2005 1.569 1.568 1,935,772 2004 1.548 1.569 2,072,462 2003 1.448 1.548 2,400,924 2002 1.438 1.448 2,934,020 2001 1.367 1.438 3,093,511 2000 1.286 1.367 2,585,253 1999 1.293 1.286 2,551,368 1998 1.248 1.293 2,823,113 1997 1.154 1.248 1,001,269 Travelers Mercury Large Cap Core Subaccount (5/98)............................................. 2006 0.997 1.059 -- 2005 0.903 0.997 829,347 2004 0.790 0.903 901,192 2003 0.662 0.790 1,017,738 2002 0.897 0.662 1,168,058 2001 1.174 0.897 1,505,832 2000 1.261 1.174 1,788,003 1999 1.035 1.261 1,494,593 1998 1.000 1.035 1,243,396 Travelers MFS(R) Mid Cap Growth Subaccount (2/05).. 2006 1.055 1.117 -- 2005 1.000 1.055 3,622,482
B-16 ACCUMULATION UNIT VALUES (IN DOLLARS) (CONTINUED) SEPARATE ACCOUNT CHARGES 1.45% (CONTINUED)
UNIT VALUE AT NUMBER OF UNITS BEGINNING OF UNIT VALUE AT OUTSTANDING AT PORTFOLIO NAME YEAR YEAR END OF YEAR END OF YEAR - -------------- ---- ------------- ------------- --------------- Travelers MFS(R) Total Return Subaccount (11/95)... 2006 2.461 2.542 -- 2005 2.426 2.461 5,062,739 2004 2.208 2.426 5,979,649 2003 1.922 2.208 7,337,522 2002 2.059 1.922 8,750,063 2001 2.089 2.059 9,333,303 2000 1.817 2.089 10,057,270 1999 1.796 1.817 11,574,413 1998 1.632 1.796 11,645,845 1997 1.366 1.632 6,138,961 Travelers Pioneer Strategic Income Subaccount (11/95)............................................ 2006 1.807 1.826 -- 2005 1.769 1.807 2,288,255 2004 1.618 1.769 2,775,587 2003 1.373 1.618 3,349,980 2002 1.316 1.373 4,163,745 2001 1.281 1.316 4,654,411 2000 1.304 1.281 5,666,775 1999 1.309 1.304 7,148,635 1998 1.319 1.309 7,312,474 1997 1.243 1.319 3,953,118 Travelers Salomon Brothers Strategic Total Return Bond Subaccount (11/95)............................ 2006 1.790 1.762 -- 2005 1.774 1.790 573,409 2004 1.694 1.774 644,955 2003 1.516 1.694 842,127 2002 1.420 1.516 946,999 2001 1.353 1.420 659,392 2000 1.299 1.353 733,479 1999 1.342 1.299 849,705 1998 1.383 1.342 973,254 1997 1.306 1.383 953,563
B-17 SEPARATE ACCOUNT CHARGES 1.45% (CONTINUED)
UNIT VALUE AT NUMBER OF UNITS BEGINNING OF UNIT VALUE AT OUTSTANDING AT PORTFOLIO NAME YEAR YEAR END OF YEAR END OF YEAR - -------------- ---- ------------- ------------- --------------- Travelers Strategic Equity Subaccount (11/95)...... 2006 2.403 2.509 -- 2005 2.390 2.403 5,000,743 2004 2.200 2.390 5,922,162 2003 1.684 2.200 7,124,931 2002 2.572 1.684 8,423,446 2001 3.012 2.572 10,948,574 2000 3.737 3.012 12,646,207 1999 2.867 3.737 13,423,385 1998 2.254 2.867 13,083,045 1997 1.772 2.254 8,482,408 Travelers Van Kampen Enterprise Subaccount (11/95)............................................ 2006 1.951 2.027 -- 2005 1.836 1.951 2,627,676 2004 1.794 1.836 3,074,771 2003 1.449 1.794 3,635,892 2002 2.081 1.449 4,362,576 2001 2.682 2.081 5,412,388 2000 3.188 2.682 6,225,353 1999 2.568 3.188 6,615,143 1998 2.083 2.568 6,741,005 1997 1.643 2.083 4,384,827
The date next to each funding option name reflects the date money first came into the funding option through the Separate Account. Funding options not listed above had no amounts allocated to them or were not available as of December 31, 2006. Number of Units Outstanding at End of Year may include units for Contract Owners in payout phase, where appropriate. If an accumulation unit value has no assets and units across all sub-accounts within the Separate Account, and has had no assets and units for the history displayed on the Condensed Financial Information in the past, then it may not be displayed. Variable Funding Option mergers and substitutions that occurred between January 1, 2005 and December 31, 2006, are displayed below. Please see Appendix C for more information on Variable Funding Option name changes, mergers and substitutions. Effective on or about 02/25/2005, The Travelers Series Trust-MFS Emerging Growth Portfolio merged into The Travelers Series Trust-MFS Mid Cap Growth Portfolio and is no longer available as a funding option. Effective on or about 05/01/2006, AIM Variable Insurance Funds-AIM V.I. Premier Equity Fund merged into AIM Variable Insurance Funds-AIM V.I. Core Equity Fund and is no longer available as a funding option. Effective on or about 05/01/2006, AllianceBernstein Variable Products Series Fund, Inc.-AllianceBernstein Large Cap Growth Portfolio was replaced by Metropolitan Series Fund, Inc.-T. Rowe Price Large Cap Growth Portfolio and is no longer available as a funding option. Effective on or about 05/01/2006, The Travelers Series Trust-AIM Capital Appreciation Portfolio merged into Met Investors Series Trust-Met/AIM Capital Appreciation Portfolio and is no longer available as a funding option. B-18 Effective on or about 05/01/2006, The Travelers Series Trust-Convertible Securities Portfolio merged into Met Investors Series Trust-Lord Abbett Bond Debenture Portfolio and is no longer available as a funding option. Effective on or about 05/01/2006, The Travelers Series Trust-Disciplined Mid Cap Stock Portfolio merged into Met Investors Series Trust-Batterymarch Mid-Cap Stock Portfolio and is no longer available as a funding option. Effective on or about 05/01/2006, The Travelers Series Trust-Mercury Large Cap Core Portfolio merged into Met Investors Series Trust-Mercury Large-Cap Core Portfolio and is no longer available as a funding option. Effective on or about 05/01/2006, The Travelers Series Trust-MFS Mid Cap Growth Portfolio merged into Metropolitan Series Fund, Inc.-BlackRock Aggressive Growth Portfolio and is no longer available as a funding option. Effective on or about 05/01/2006, The Travelers Series Trust-MFS Total Return Portfolio merged into Metropolitan Series Fund, Inc.-MFS Total Return Portfolio and is no longer available as a funding option. Effective on or about 05/01/2006, The Travelers Series Trust-Pioneer Strategic Income Portfolio merged into Met Investors Series Trust-Pioneer Strategic Income Portfolio and is no longer available as a funding option. Effective on or about 05/01/2006, The Travelers Series Trust-Salomon Brothers Strategic Total Return Bond Portfolio merged into Metropolitan Series Fund, Inc.-Western Asset Management Strategic Bond Opportunities Portfolio and is no longer available as a funding option. Effective on or about 05/01/2006, The Travelers Series Trust-Strategic Equity Portfolio merged into Metropolitan Series Fund, Inc.-FI Large Cap Portfolio and is no longer available as a funding option. Effective on or about 05/01/2006, The Travelers Series Trust-Travelers Managed Income Portfolio merged into Metropolitan Series Fund, Inc.-BlackRock Bond Income Portfolio and is no longer available as a funding option. Effective on or about 05/01/2006, The Travelers Series Trust-Van Kampen Enterprise Portfolio merged into Metropolitan Series Fund, Inc.-Capital Guardian U.S. Equity Portfolio and is no longer available as a funding option. B-19 THIS PAGE INTENTIONALLY LEFT BLANK. APPENDIX C - -------------------------------------------------------------------------------- ADDITIONAL INFORMATION REGARDING UNDERLYING FUNDS Certain Underlying Funds were subject to a merger, substitution or other change. The chart below identifies the former name and new name of each of these Underlying Funds, and, where applicable, the former name and new name of the trust of which the Underlying Fund is part. UNDERLYING FUND NAME CHANGES
FORMER NAME NEW NAME - --------------------------------------------- --------------------------------------------- LEGG MASON PARTNERS LIFESTYLE SERIES, INC. LEGG MASON PARTNERS LIFESTYLE SERIES, INC. Legg Mason Partners Variable Lifestyle Legg Mason Partners Variable Lifestyle Balanced Portfolio Allocation 50% Legg Mason Partners Variable Lifestyle Growth Portfolio Legg Mason Partners Variable Lifestyle Legg Mason Partners Variable Lifestyle Allocation 70% High Growth Portfolio Legg Mason Partners Variable Lifestyle Allocation 85% LEGG MASON PARTNERS VARIABLE PORTFOLIOS III, LEGG MASON PARTNERS VARIABLE PORTFOLIOS III, INC. INC. Legg Mason Partners Variable International Legg Mason Partners Variable International All Cap Growth Portfolio All Cap Opportunity Portfolio LEGG MASON PARTNERS VARIABLE PORTFOLIOS IV LEGG MASON PARTNERS VARIABLE PORTFOLIOS IV Legg Mason Partners Variable Multiple Legg Mason Partners Variable Capital and Discipline Portfolio -- Balanced All Income Portfolio Cap Growth and Value Portfolio MET INVESTORS SERIES TRUST MET INVESTORS SERIES TRUST Mercury Large-Cap Core Portfolio BlackRock Large-Cap Core Portfolio
UNDERLYING FUND MERGERS/REORGANIZATIONS The following former Underlying Funds were merged with and into the new Underlying Funds and/or were reorganized into a new trust.
FORMER UNDERLYING FUND/TRUST NEW UNDERLYING FUND/TRUST - --------------------------------------------- --------------------------------------------- LEGG MASON PARTNERS INVESTMENT SERIES LEGG MASON PARTNERS VARIABLE PORTFOLIOS III, Legg Mason Partners Variable Premier INC. Selections All Cap Growth Legg Mason Partners Variable Aggressive Portfolio -- (Single Share Class) Growth Portfolio -- Class I LEGG MASON PARTNERS VARIABLE PORTFOLIOS I, LEGG MASON PARTNERS VARIABLE PORTFOLIOS IV INC. Legg Mason Partners Variable Multiple Legg Mason Partners Variable Total Return Discipline Portfolio -- Balanced All Cap Portfolio Growth and Value Portfolio LEGG MASON PARTNERS VARIABLE PORTFOLIOS III, LEGG MASON PARTNERS VARIABLE PORTFOLIOS I, INC. INC. Legg Mason Partners Variable Large Cap Legg Mason Partners Variable Investors Value Portfolio -- (Single Share Class) Portfolio -- Class I LEGG MASON PARTNERS VARIABLE PORTFOLIOS V LEGG MASON PARTNERS VARIABLE PORTFOLIOS I, Legg Mason Partners Variable Small Cap INC. Growth Opportunities Legg Mason Partners Variable Small Cap Portfolio -- (Single Share Class) Growth Portfolio -- Class I LEGG MASON PARTNERS INVESTMENT SERIES LEGG MASON PARTNERS VARIABLE EQUITY TRUST Legg Mason Partners Variable Dividend Legg Mason Partners Variable Dividend Strategy Portfolio Strategy Portfolio LEGG MASON PARTNERS LIFESTYLE SERIES, INC. LEGG MASON PARTNERS VARIABLE EQUITY TRUST Legg Mason Partners Variable Lifestyle Legg Mason Partners Variable Lifestyle Allocation 50% Allocation 50% Legg Mason Partners Variable Lifestyle Legg Mason Partners Variable Lifestyle Allocation 70% Allocation 70% Legg Mason Partners Variable Lifestyle Legg Mason Partners Variable Lifestyle Allocation 85% Allocation 85%
C-1
FORMER UNDERLYING FUND/TRUST NEW UNDERLYING FUND/TRUST - --------------------------------------------- --------------------------------------------- LEGG MASON PARTNERS VARIABLE PORTFOLIOS I, LEGG MASON PARTNERS VARIABLE EQUITY TRUST INC. Legg Mason Partners Variable Investors Legg Mason Partners Variable Investors Portfolio Portfolio Legg Mason Partners Variable Small Cap Legg Mason Partners Variable Small Cap Growth Portfolio Growth Portfolio LEGG MASON PARTNERS VARIABLE PORTFOLIOS II LEGG MASON PARTNERS VARIABLE EQUITY TRUST Legg Mason Partners Variable Equity Index Legg Mason Partners Variable Equity Index Portfolio Portfolio Legg Mason Partners Variable Fundamental Legg Mason Partners Variable Fundamental Value Portfolio -- (Single Share Class) Value Portfolio LEGG MASON PARTNERS VARIABLE PORTFOLIOS III, LEGG MASON PARTNERS VARIABLE EQUITY TRUST INC. Legg Mason Partners Variable Aggressive Legg Mason Partners Variable Aggressive Growth Portfolio Growth Portfolio Legg Mason Partners Variable International Legg Mason Partners Variable International All Cap Opportunity Portfolio All Cap Opportunity Portfolio Legg Mason Partners Variable Large Cap Legg Mason Partners Variable Large Cap Growth Portfolio Growth Portfolio LEGG MASON PARTNERS VARIABLE PORTFOLIOS III, LEGG MASON PARTNERS VARIABLE INCOME TRUST INC. Legg Mason Partners Variable High Income Legg Mason Partners Variable High Income Portfolio Portfolio Legg Mason Partners Variable Money Market Legg Mason Partners Variable Money Market Portfolio Portfolio LEGG MASON PARTNERS VARIABLE PORTFOLIOS IV LEGG MASON PARTNERS VARIABLE EQUITY TRUST Legg Mason Partners Variable Capital and Legg Mason Partners Variable Capital and Income Portfolio Income Portfolio
UNDERLYING FUND SUBSTITUTIONS The following new Underlying Funds were substituted for the former Underlying Funds.
FORMER UNDERLYING FUND NEW UNDERLYING FUND - --------------------------------------------- --------------------------------------------- AIM VARIABLE INSURANCE FUNDS METROPOLITAN SERIES FUND, INC. AIM V.I. Core Equity Fund -- Series I Capital Guardian U.S. Equity Portfolio -- Class A
UNDERLYING FUND SHARE CLASS EXCHANGE The following former Underlying Fund share class was exchanged into the new Underlying Fund share class.
FORMER UNDERLYING FUND SHARE CLASS NEW UNDERLYING FUND SHARE CLASS - --------------------------------------------- --------------------------------------------- MET INVESTORS SERIES TRUST MET INVESTORS SERIES TRUST BlackRock Large-Cap Core BlackRock Large-Cap Core Portfolio -- Class A Portfolio -- Class E
C-2 APPENDIX D - -------------------------------------------------------------------------------- THE FIXED ACCOUNT The Fixed Account is part of the Company's general account assets. These general account assets include all assets of the Company other than those held in the Separate Accounts sponsored by the Company or its affiliates. The staff of the SEC does not generally review the disclosure in the prospectus relating to the Fixed Account. Disclosure regarding the Fixed Account and the general account may, however, be subject to certain provisions of the federal securities laws relating to the accuracy and completeness of statements made in the prospectus. Under the Fixed Account, the Company assumes the risk of investment gain or loss, guarantees a specified interest rate, and guarantees a specified periodic Annuity Payment. The investment gain or loss of the Separate Account or any of the funding options does not affect the Fixed Account Contract Value, or the dollar amount of fixed Annuity Payments made under any payout option. We guarantee that, at any time, the Fixed Account Contract Value will not be less than the amount of the Purchase Payments allocated to the Fixed Account, plus interest credited as described below, less any applicable premium taxes or prior withdrawals. Purchase Payments allocated to the Fixed Account and any transfers made to the Fixed Account become part of the Company's general account, which supports insurance and annuity obligations. Where permitted by state law, we reserve the right to restrict Purchase Payments into the Fixed Account whenever the credited interest rate on the Fixed Account is equal to the minimum guaranteed interest rate specified in your Contract. The general account and any interest therein are not registered under, or subject to the provisions of, the Securities Act of 1933 or Investment Company Act of 1940. We will invest the assets of the Fixed Account at our discretion. Investment income from such Fixed Account assets will be allocated to us and to the Contracts participating in the Fixed Account. Investment income from the Fixed Account allocated to us includes compensation for mortality and expense risks borne by us in connection with Fixed Account Contracts. The amount of such investment income allocated to the Contracts will vary from year to year in our sole discretion at such rate or rates as we prospectively declare from time to time. We guarantee the initial rate for any allocations into the Fixed Account for one year from the date of such allocation. We guarantee subsequent renewal rates for the calendar quarter. We also guarantee that for the life of the Contract we will credit interest at a rate not less than the minimum interest rate allowed by state law. We reserve the right to change the rate subject to applicable state law. We will determine any interest we credit to amounts allocated to the Fixed Account in excess of the minimum guaranteed rate in our sole discretion. You assume the risk that interest credited to the Fixed Account may not exceed the minimum guaranteed rate for any given year. We have no specific formula for determining the interest rate. Some factors we may consider are regulatory and tax requirements, general economic trends and competitive factors. TRANSFERS You may make transfers from the Fixed Account to any available Variable Funding Option(s) twice a year during the 30 days following the semiannual anniversary of the Contract Date. We limit transfers to an amount of up to 15% of the Fixed Account Contract Value on the semiannual Contract Date anniversary. (This restriction does not apply to transfers under the Dollar Cost Averaging Program.) Amounts previously transferred from the Fixed Account to Variable Funding Options may not be transferred back to the Fixed Account for a period of at least six months from the date of transfer. We reserve the right to waive either of these restrictions. Where permitted by state law, we reserve the right to restrict transfers into the Fixed Account whenever the credited interest rate on the Fixed Account is equal to the minimum guaranteed interest rate specified in your Contract. Automated transfers from the Fixed Account to any of the Variable Funding Options may begin at any time. Automated transfers from the Fixed Account may not deplete your Fixed Account value in a period of less than twelve months from your enrollment in the Dollar Cost Averaging Program. D-1 THIS PAGE INTENTIONALLY LEFT BLANK. APPENDIX E - -------------------------------------------------------------------------------- ENHANCED DEATH BENEFIT FOR CONTRACTS ISSUED BEFORE JUNE 1, 1997 IF THE ANNUITANT DIES BEFORE AGE 75 AND BEFORE THE MATURITY DATE, the Company will pay to the beneficiary a death benefit equal to the greater of (1) the guaranteed death benefit, or (2) the Contract Value less any applicable premium tax or outstanding loans. IF THE ANNUITANT DIES ON OR AFTER AGE 75 AND BEFORE THE MATURITY DATE, the Company will pay to the beneficiary a death benefit in an amount equal to the greater of (1) the guaranteed death benefit as of the Annuitant's 75(th) birthday, plus additional Purchase Payments, minus surrenders, outstanding loans and applicable premium tax; or (2) the Contract Value less any applicable premium tax and outstanding loans. The guaranteed death benefit is equal to the Purchase Payments made to the Contract (minus surrenders, outstanding loans and applicable premium tax) increased by 5% on each Contract Date anniversary, but not beyond the Contract Date anniversary following the Annuitant's 75(th) birthday, with a maximum guaranteed death benefit of 200% of the total Purchase Payments minus surrenders and outstanding loans and applicable premium tax. E-1 APPENDIX F - -------------------------------------------------------------------------------- CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION The Statement of Additional Information contains more specific information and financial statements relating to the Separate Account and MetLife Insurance Company of Connecticut or MetLife Life and Annuity Company of Connecticut. A list of the contents of the Statement of Additional Information is set forth below: The Insurance Company Principal Underwriter Distribution and Principal Underwriting Agreement Valuation of Assets Federal Tax Considerations Independent Registered Public Accounting Firm Financial Statements - -------------------------------------------------------------------------------- Copies of the Statement of Additional Information dated April 30, 2007 are available without charge. To request a copy, please clip this coupon on the line above, enter your name and address in the spaces provided below, and mail to MetLife Insurance Company of Connecticut/MetLife Life and Annuity Company of Connecticut, One Cityplace, 185 Asylum Street, 3CP, Hartford, Connecticut 06103- 3415. For the MetLife Insurance Company of Connecticut Statement of Additional Information please request MIC-Book-02, and for the MetLife Life and Annuity Company of Connecticut Statement of Additional Information please request MLAC- Book-02. Name: ------------------------------------------------- Address: ---------------------------------------------- CHECK BOX: [ ] MIC-Book-02 [ ] MLAC-Book-02 F-1 VINTAGE STATEMENT OF ADDITIONAL INFORMATION DATED APRIL 30, 2007 FOR METLIFE OF CT FUND BD II FOR VARIABLE ANNUITIES ISSUED BY METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT This Statement of Additional Information ("SAI") is not a prospectus but relates to, and should be read in conjunction with the Prospectus dated April 30, 2007. A copy of the Individual Variable Annuity Contract Prospectus may be obtained by writing to MetLife Life and Annuity Company of Connecticut, Annuity Investor Services, One Cityplace, Hartford, Connecticut 06103-3415 or by accessing the Securities and Exchange Commission's website at http://www.sec.gov. TABLE OF CONTENTS THE INSURANCE COMPANY........................................................ 2 PRINCIPAL UNDERWRITER........................................................ 2 DISTRIBUTION AND PRINCIPAL UNDERWRITING AGREEMENT............................ 2 VALUATION OF ASSETS.......................................................... 4 FEDERAL TAX CONSIDERATIONS................................................... 5 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM................................ 9 FINANCIAL STATEMENTS......................................................... 1
THE INSURANCE COMPANY MetLife Life and Annuity Company of Connecticut (the "Company") is a stock insurance company chartered in 1973 in Connecticut and continuously engaged in the insurance business since that time. The Company is licensed to conduct life insurance business in all states of the United States (except New York), the District of Columbia and Puerto Rico. The Company is a wholly-owned subsidiary of MetLife, Inc., a publicly traded company. MetLife, Inc., through its subsidiaries and affiliates, is a leading provider of insurance and other financial services to individual and institutional customers. The Company's Home Office is located at One Cityplace, Hartford, Connecticut 06103-3415. STATE REGULATION. The Company is subject to the laws of the state of Connecticut governing insurance companies and to regulation by the Insurance Commissioner of the state of Connecticut (the "Commissioner"). An annual statement covering the operations of the Company for the preceding year, as well as its financial conditions as of December 31 of such year, must be filed with the Commissioner in a prescribed format on or before March 1 of each year. The Company's books and assets are subject to review or examination by the Commissioner or his agents at all times, and a full examination of its operations is conducted at least once every four years. The Company is also subject to the insurance laws and regulations of all other states in which it is licensed to operate. However, the insurance departments of each of these states generally apply the laws of the home state (jurisdiction of domicile) in determining the field of permissible investments. THE SEPARATE ACCOUNT. MetLife of CT Fund BD II for Variable Annuities (the "Separate Account") meets the definition of a separate account under the federal securities laws, and complies with the provisions of the 1940 Act. Additionally, the operations of the Separate Account are subject to the provisions of Section 38a-433 of the Connecticut General Statutes, which authorizes the Commissioner to adopt regulations under it. Section 38a-433 contains no restrictions on the investments of the Separate Account, and the Commissioner has adopted no regulations under the Section that affect the Separate Account. The Company holds title to the assets of the Separate Account. The assets are kept physically segregated and are held separate and apart from the Company's general corporate assets. Records are maintained of all purchases and redemptions of the Underlying Funds held in each of the Variable Funding Options. PRINCIPAL UNDERWRITER MetLife Investors Distribution Company ("MLIDC")* serves as principal underwriter for the Separate Account and the Contracts. The offering is continuous. MLIDC's principal executive offices are located at 5 Park Plaza, Suite 1900, Irvine, CA 92614. MLIDC is affiliated with the Company and the Separate Account. DISTRIBUTION AND PRINCIPAL UNDERWRITING AGREEMENT Information about the distribution of the Contracts is contained in the prospectus (see "Other Information -- Distribution of the Variable Annuity Contracts"). Additional information is provided below. Under the terms of the Distribution and Principal Underwriting Agreement among the Separate Account, MLIDC and the Company, MLIDC acts as agent for the distribution of the Contracts and as principal underwriter for the Contracts. The Company reimburses MLIDC for certain sales and overhead expenses connected with sales functions. 2 The following table shows the amount of commissions paid to and the amount of commissions retained by the Distributor and Principal Underwriter over the past three years. UNDERWRITING COMMISSIONS
UNDERWRITING COMMISSIONS PAID AMOUNT OF UNDERWRITING TO THE DISTRIBUTOR BY THE COMMISSIONS RETAINED BY THE YEAR COMPANY* DISTRIBUTOR* - -------------------------------- -------------------------------- -------------------------------- 2006............................ $ 62,664,479 $0 2005............................ $ 90,942,874 $0 2004............................ $104,087,148 $0
*Effective as of October 20, 2006, the former principal underwriter for the Separate Account and the Contracts, MLI Distribution LLC, merged with and into MetLife Investors Distribution Company. The Company and MLIDC have also entered into preferred distribution arrangements with certain broker-dealer firms. These arrangements are sometimes called "shelf space" arrangements. Under these arrangements, the Company and MLIDC pay separate, additional compensation to the broker-dealer firms for services the broker-dealer firms provide in connection with the distribution of the Company's products. These services may include providing the Company with access to the distribution network of the broker-dealer firms, the hiring and training of the broker-dealer firms' sales personnel, the sponsoring of conferences and seminars by the broker-dealer firms, or general marketing services performed by the broker-dealer firms. The broker-dealer firms may also provide other services or incur other costs in connection with distributing the Company's products. These preferred distribution arrangements will not be offered to all broker- dealer firms and the terms of such arrangements may differ between broker-dealer firms. Compensation payable under such arrangements may be based on aggregate, net or anticipated sales of the Contract, total assets attributable to sales of the Contract by registered representatives of the broker-dealer firms or based on the length of time that a Contract owner has owned the Contract. Any such compensation payable to a broker-dealer firm will be made by MLIDC or the Company out of their own assets and will not result in any additional direct charge to you. Such compensation may cause the broker-dealer firms and their registered representatives to favor the Company's products. The amount of additional compensation (non-commission amounts) paid to selected broker-dealer firms during 2006 ranged from $2,289 to $5,893,669. The amount of commissions paid to selected broker-dealer firms during 2006 ranged from $650,170 to $26,200,094. The amount of total compensation (includes non-commission as well as commission amounts) paid to selected broker-dealer firms during 2006 ranged from $652,459 to $32,093,763. The following list sets forth the names of broker-dealer firms that have entered into preferred distribution arrangements with the Company and MLIDC under which the broker-dealer firms received additional compensation in 2006 in connection with the sale of our variable annuity contracts, variable life policies and other insurance products (including the Contracts). The broker-dealer firms are listed in alphabetical order: Citicorp Investment Services Citigroup Global Markets Inc. (d/b/a Smith Barney) DWS Scudder Distributors, Inc. Merrill Lynch, Pierce, Fenner & Smith, Incorporated Morgan Stanley DW, Inc. PFS Investments, Inc. (d/b/a Primerica) Pioneer Funds Distributor, Inc. Tower Square Securities, Inc. 3 There are other broker-dealer firms who receive compensation for servicing our contracts, and the account value of the contracts or the amount of added purchase payments received may be included in determining their additional compensation, if any. REDUCTION OR ELIMINATION OF THE WITHDRAWAL CHARGE. We may reduce or eliminate the withdrawal charge under the Contract when certain sales or administration of the Contract result in savings or reduced expenses and/or risks. We will not reduce or eliminate the withdrawal charge where such reduction or elimination would be unfairly discriminatory to any person. VALUATION OF ASSETS FUNDING OPTIONS. The value of the assets of each Funding Option is determined at 4:00 p.m. eastern time on each business day, unless we need to close earlier due to an emergency. A business day is any day the New York Stock Exchange is open. It is expected that the Exchange will be closed on Saturdays and Sundays and on the observed holidays of New Year's Day, Martin Luther King, Jr. Day, President's Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day. Each security traded on a national securities exchange is valued at the last reported sale price on the business day. If there has been no sale on that day, then the value of the security is taken to be the mean between the reported bid and asked prices on the business day or on the basis of quotations received from a reputable broker or any other recognized source. THE CONTRACT VALUE. The value of an Accumulation Unit on any business day is determined by multiplying the value on the preceding business day by the net investment factor for the valuation period just ended. The net investment factor is used to measure the investment performance of a Funding Option from one valuation period to the next. The net investment factor for a Funding Option for any valuation period is equal to the sum of 1.000000 plus the net investment rate (the gross investment rate less any applicable Funding Option deductions during the valuation period relating to the mortality and expense risk charge and the administrative expense charge). The gross investment rate of a Funding Option is equal to (a) minus (b), divided by (c) where: (a) = investment income plus capital gains and losses (whether realized or unrealized); (b) = any deduction for applicable taxes (presently zero); and (c) = the value of the assets of the funding option at the beginning of the valuation period. The gross investment rate may be either positive or negative. A Funding Option's investment income includes any distribution whose ex-dividend date occurs during the valuation period. ACCUMULATION UNIT VALUE. The value of the Accumulation Unit for each Funding Option was initially established at $1.00. The value of an Accumulation Unit on any business day is determined by multiplying the value on the preceding business day by the net investment factor for the valuation period just ended. The net investment factor is calculated for each Funding Option and takes into account the investment performance, expenses and the deduction of certain expenses. ANNUITY UNIT VALUE. The initial Annuity Unit value applicable to each Funding Option was established at $1.00. An Annuity Unit value as of any business day is equal to (a) the value of the Annuity Unit on the preceding business day, multiplied by (b) the corresponding net investment factor for the business day just ended, divided by (c) the assumed net investment factor for the valuation period. (For example, the assumed net investment factor based on an annual assumed net investment rate of 3.0% for a valuation period of one day is 1.000081 and, for a period of two days, is 1.000081 x 1.000081.) 4 CALCULATION OF MONEY MARKET YIELD From time to time, we may quote in advertisements and sales literature the adjusted and unadjusted effective yield for a money market Subaccount for a 7- day period, as described below. On a Contract-specific basis, the effective yield is computed at each month-end according to the following formula: EffectiveYield = ((BaseReturn + 1) to the power of (365 / 7)) - 1 Where: Base Return = (AUV Change -- Contract Charge Adjustment) / Prior AUV. AUV Change = Current AUV -- Prior AUV. Contract Charge Adjustment = Average AUV * Period Charge. Average AUV = (Current AUV + Prior AUV) / 2. Period Charge = Annual Contract Fee * (7/365). Prior AUV = Unit value as of 7 days prior. Current AUV = Unit value as of the reporting period (last day of the month). We may also quote the effective yield of a money market Subaccount for the same 7-day period, determined on an unadjusted basis (which does not deduct Contract- level charges), according to the same formula but where: Base Return = AUV Change / Prior AUV Because of the charges and deductions imposed under the Contract, the yield for the Subaccount will be lower than the yield for the corresponding Underlying Fund. The yields on amounts held in the Subaccount normally will fluctuate on a daily basis. Therefore, the disclosed yield for any given past period is not an indication or representation of future yields or rates of return. The actual yield for the Subaccount is affected by changes in interest rates on money market securities, average portfolio maturity of the Underlying Fund, the types and qualities of portfolio securities held by the Underlying Fund, and the Underlying Fund's operating expenses. Yields on amounts held in the Subaccount may also be presented for periods other than a 7-day period. FEDERAL TAX CONSIDERATIONS The following description of the federal income tax consequences under this Contract is general in nature and is therefore not exhaustive and is not intended to cover all situations. Because of the complexity of the law and the fact that the tax results will vary according to the factual status of the individual involved, a person contemplating purchase of an annuity contract and by a Contract Owner or beneficiary who may make elections under a Contract should consult with a qualified tax or legal adviser. MANDATORY DISTRIBUTIONS FOR QUALIFIED PLANS Federal tax law requires that minimum annual distributions begin by April 1st of the calendar year following the later of calendar year in which a participant under a qualified plan or a Section 403(b) annuity attains age 70 1/2 or retires. Minimum annual distributions under an IRA must begin by April 1st of the calendar year in which the Contract Owner attains 70 1/2 regardless of when he or she retires. Distributions must also begin or be continued according to the minimum distribution rules under the Code following the death of the Contract Owner or the annuitant. You should note that the U.S. Treasury recently issued regulations clarifying the operation of the required minimum distribution rules. NONQUALIFIED ANNUITY CONTRACTS Individuals may purchase tax-deferred annuities without any contribution limits. The purchase payments receive no tax benefit, deduction or deferral,but taxes on the increases in the value of the contract are generally deferred until distribution and transfers between the various investment options are not subject to tax. Generally, if an annuity contract is owned by other than an individual (or an entity such as a trust or other "look-through" entity which owns 5 for an individual's benefit), the owner will be taxed each year on the increase in the value of the contract. An exception applies for purchase payments made before March 1, 1986. The benefits of tax deferral of income earned under a non- qualified annuity should be compared with the relative federal tax rates on income from other types of investments (dividends and capital gains, taxable at 15% or less) relative to the ordinary income treatment received on annuity income and interest received on fixed instruments (notes, bonds, etc.). If two or more annuity contracts are purchased from the same insurer within the same calendar year, such annuity contract will be aggregated for federal income tax purposes. As a result, distributions from any of them will be taxed based upon the amount of income in all of the same calendar year series of annuities. This will generally have the effect of causing taxes to be paid sooner on the deferred gain in the contracts. Those receiving partial distributions made before the maturity date will generally be taxed on an income-first basis to the extent of income in the contract. If you are exchanging another annuity contract for this annuity, certain pre-August 14, 1982 deposits into an annuity contract that have been placed in the contract by means of a tax-deferred exchange under Section 1035 of the Code may be withdrawn first without income tax liability. This information on deposits must be provided to the Company by the other insurance company at the time of the exchange. There is income in the contract generally to the extent the cash value exceeds the investment in the contract. The investment in the contract is equal to the amount of premiums paid less any amount received previously which was excludable from gross income. Any direct or indirect borrowing against the value of the contract or pledging of the contract as security for a loan will be treated as a cash distribution under the tax law. In order to be treated as an annuity contract for federal income tax purposes,Section 72(s) of the Code requires any non-qualified contract to contain certain provisions specifying how your interest in the contract will be distributed in the event of the death of an owner of the contract. Specifically, Section 72(s) requires that (a) if an owner dies on or after the annuity starting date, but prior to the time the entire interest in the contract has been distributed, the entire interest in the contract will be distributed at least as rapidly as under the method of distribution being used as of the date of such owner's death; and (b) if any owner dies prior to the annuity starting date, the entire interest in the contract will be distributed within five years after the date of such owner's death. These requirements will be considered satisfied as to any portion of an owner's interest which is payable to or for the benefit of a designated beneficiary and which is distributed over the life of such designated beneficiary or over a period not extending beyond the life expectancy of that beneficiary, provided that such distributions begin within one year of the owner's death. The designated beneficiary refers to a natural person designated by the owner as a beneficiary and to whom ownership of the contract passes by reason of death. However, if the designated beneficiary is the surviving spouse of the deceased owner, the contract may be continued with the surviving spouse as the successor-owner. Contracts will be administered by the Company in accordance with these rules and the Company will make a notification when payments should be commenced. Special rules apply regarding distribution requirements when an annuity is owned by a trust or other entity for the benefit of one or more individuals. INDIVIDUAL RETIREMENT ANNUITIES To the extent of earned income for the year and not exceeding the applicable limit for the taxable year, an individual may make contributions, which in some cases may be deductible, to an individual retirement annuity (IRA). The applicable limit is $4,000 for calendar year 2007, $5,000 for 2008, and may be indexed for inflation in future years. Additional "catch-up" contributions may be made to an IRA by individuals age 50 or over. There are certain limits on the deductible amount based on the adjusted gross income of the individual and spouse and based on their participation in a retirement plan. If an individual is married and the spouse does not have earned income, the individual may establish IRAs for the individual and spouse. Purchase payments may then be made annually into IRAs for both spouses in the maximum amount of 100% of earned income up to a combined limit based on the individual limits outlined above. The Code provides for the purchase of a Simplified Employee Pension (SEP) plan. A SEP is funded through an IRA with an annual employer contribution limit of up to $45,000 for each participant. The Internal Revenue Services has not reviewed the contract for qualifications as an IRA, and has not addressed in a ruling of general applicability whether a death benefit provision such as the optional enhanced death benefit in the contract comports with IRA qualification requirements. 6 SIMPLE PLAN IRA FORM Employers may establish a savings incentive match plan for employees ("SIMPLE plan") under which employees can make elective salary reduction contributions to an IRA based on a percentage of compensation of up to the applicable limit for the taxable year. The applicable limit is $10,500 in 2007 (which may be indexed for inflation for future years). (Alternatively, the employer can establish a SIMPLE cash or deferred arrangement under IRS Section 401(k)). Under a SIMPLE plan IRA, the employer must either make a matching contribution or a nonelective contribution based on the prescribed formulas for all eligible employees. Early withdrawals are subject to the 10% early withdrawal penalty generally applicable to IRAs, except that an early withdrawal by an employee under a SIMPLE plan IRA, within the first two years of participation, shall be subject to a 25% early withdrawal tax. ROTH IRAS Section 408A of the Code permits certain individuals to contribute to a Roth IRA. Eligibility to make contributions is based upon income, and the applicable limits vary based on marital status and/or whether the contribution is a rollover contribution from another IRA or an annual contribution. Contributions to a Roth IRA, which are subject to certain limitations (similar to the annual limits for the traditional IRA's), are not deductible and must be made in cash or as a rollover or transfer from another Roth IRA or other IRA. A conversion of a "traditional" IRA to a Roth IRA may be subject to tax and other special rules apply. You should consult a tax adviser before combining any converted amounts with other Roth IRA contributions, including any other conversion amounts from other tax years. Qualified distributions from a Roth IRA are tax-free. A qualified distribution requires that the Roth IRA has been held for at least 5 years, and the distribution is made after age 59 1/2, on death or disability of the owner, or for a limited amount ($10,000) for a qualified first time home purchase for the owner or certain relatives. Income tax and a 10% penalty tax may apply to distributions made (1) before age 59 1/2 (subject to certain exceptions) or (2) during five taxable years starting with the year in which the first contribution is made to any Roth IRA of the individual. QUALIFIED PENSION AND PROFIT-SHARING PLANS Like most other contributions made under a qualified pension or profit-sharing plan, purchase payments made by an employer are not currently taxable to the participant and increases in the value of a contract are not subject to taxation until received by a participant or beneficiary. Distributions are generally taxable to the participant or beneficiary as ordinary income in the year of receipt. Any distribution that is considered the participant's "investment in the contract" is treated as a return of capital and is not taxable. Under a qualified plan, the investment in the contract may be zero. The annual limits that apply to the amounts that may be contributed to a defined contribution plan for 2007 is $45,000. The limit on employee salary reduction deferrals (commonly referred to as "401(k) contributions") is $15,500 in 2007. The annual limit may be indexed for inflation in future years. Additional "catch-up contributions" may be made by individuals age 50 or over. Amounts attributable to salary reduction contributions under Code Section 401(k) and income thereon may not be withdrawn prior to severance from employment, death, total and permanent disability, attainment of age 59 1/2, or in the case of hardship. SECTION 403(B) PLANS Under Code section 403(b), payments made by public school systems and certain tax exempt organizations to purchase annuity contracts for their employees are excludable from the gross income of the employee, subject to certain limitations. However, these payments may be subject to FICA (Social Security) taxes. A qualified contract issued as a tax-sheltered annuity under section 403(b) will be amended as necessary to conform to the requirements of the Code. The annual limits under Code Section 403(b) for employee salary reduction deferrals are increased under the same rules applicable to 401(k) plans ($15,500 in 2007). Code section 403(b)(11) restricts this distribution under Code section 403(b) annuity contracts of: (1) elective contributions made in years beginning after December 31, 1998; (2) earnings on those contributions; and (3) earnings in such years on amounts held as of the close of the last year beginning before January 1, 1989. Distribution of those 7 amounts may only occur upon death of the employee, attainment of age 59 1/2, separation from service, disability, or financial hardship. In addition, income attributable to elective contributions may not be distributed in the case of hardship. FEDERAL INCOME TAX WITHHOLDING The portion of a distribution, which is taxable income to the recipient, will be subject to federal income tax withholding as follows: 1. ELIGIBLE ROLLOVER DISTRIBUTION FROM SECTION 403(B) PLANS OR ARRANGEMENTS,FROM QUALIFIED PENSION AND PROFIT-SHARING PLANS, OR FROM 457 PLANS SPONSORED BY GOVERNMENTAL ENTITIES There is a mandatory 20% tax withholding for plan distributions that are eligible for rollover to an IRA or to another qualified retirement plan (including a 457 plan sponsored by a governmental entity) but that are not directly rolled over. A distribution made directly to a participant or beneficiary may avoid this result if: (a) a periodic settlement distribution is elected based upon a life or life expectancy calculation, or (b) a term-for-years settlement distribution is elected for a period of ten years or more, payable at least annually, or (c) a minimum required distribution as defined under the tax law is taken after the attainment of the age of 70 1/2 or as otherwise required by law, or (d) the distribution is a hardship distribution. A distribution including a rollover that is not a direct rollover will be subject to the 20% withholding, and the 10% additional tax penalty on premature withdrawals may apply to any amount not added back in the rollover. The 20% withholding may be recovered when the participant or beneficiary files a personal income tax return for the year if a rollover was completed within 60 days of receipt of the funds, except to the extent that the participant or spousal beneficiary is otherwise underwithheld or short on estimated taxes for that year. 2. OTHER NON-PERIODIC DISTRIBUTIONS (FULL OR PARTIAL REDEMPTIONS) To the extent not subject to 20% mandatory withholding as described in 1. above, the portion of a non-periodic distribution, which constitutes taxable income, will be subject to federal income tax withholding, if the aggregate distributions exceed $200 for the year, unless the recipient elects not to have taxes withheld. If no such election is made, 10% of the taxable portion of the distribution will be withheld as federal income tax; provided that the recipient may elect any other percentage. Election forms will be provided at the time distributions are requested. This form of withholding applies to all annuity programs. 3. PERIODIC DISTRIBUTIONS (DISTRIBUTIONS PAYABLE OVER A PERIOD GREATER THAN ONE YEAR) The portion of a periodic distribution, which constitutes taxable income, will be subject to federal income tax withholding under the wage withholding tables as if the recipient were married claiming three exemptions. A recipient may elect not to have income taxes withheld or have income taxes withheld at a different rate by providing a completed election form. Election forms will be provided at the time distributions are requested. This form of withholding applies to all annuity programs. Recipients who elect not to have withholding made are liable for payment of federal income tax on the taxable portion of the distribution. Recipients may also be subject to penalties under the estimated tax payment rules if withholding and estimated tax payments are not sufficient to cover tax liabilities. Recipients who do not provide a social security number or other taxpayer identification number will not be permitted to elect out of withholding. Additionally, U.S citizens residing outside of the country, or U.S. legal residents temporarily residing outside the country, are subject to different withholding rules and generally cannot elect out of withholding. 8 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The financial statements of MetLife of CT Fund BD II for Variable Annuities (formerly, The Travelers Fund BD II for Variable Annuities) and the consolidated financial statements of MetLife Life and Annuity Company of Connecticut (formerly, The Travelers Life and Annuity Company) (the "Company") (which report expresses an unqualified opinion and includes an explanatory paragraph referring to the acquisition of the Company by MetLife Inc. on July 1, 2005 and the application of the purchase method of accounting to the assets and liabilities of the Company as required by the U.S. Securities and Exchange Commission Staff Accounting Bulletin 5.J., Push Down Basis of Accounting Required in Certain Limited Circumstances and such assets and liabilities were measured at their fair values as of the acquisition date in conformity with Statement of Financial Accounting Standards No. 141, Business Combinations) as of December 31, 2006 and 2005 (SUCCESSOR) and the related consolidated statements of income, stockholder's equity, and cash flows for the year ended December 31, 2006 (SUCCESSOR) and the six months ended December 31, 2005 (SUCCESSOR), and June 30, 2005 (PREDECESSOR) and the financial statement schedules as of December 31, 2006, and 2005 (SUCCESSOR), and for the year ended December 31, 2006 (SUCCESSOR) and the six months ended December 31, 2005 (SUCCESSOR), and June 30, 2005 (PREDECESSOR) included in this Statement of Additional Information have been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their reports appearing herein, and are included in reliance upon the reports of such firm given upon their authority as experts in accounting and auditing. The principal business address of Deloitte & Touche LLP is 201 East Kennedy Boulevard, Suite 1200, Tampa, FL 33602-5827. INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The financial statements and schedules of MetLife Life and Annuity Company of Connecticut (formerly The Travelers Life and Annuity Company) for the year ended December 31, 2004 have been included in reliance upon the reports of KPMG LLP, independent registered public accounting firm, appearing elsewhere herein, and upon the authority of said firm as experts in accounting and auditing. 9 ANNUAL REPORT December 31, 2006 MetLife of CT Fund BD II for Variable Annuities of MetLife Life and Annuity Company of Connecticut REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Policyholders of MetLife of CT Fund BD II for Variable Annuities and the Board of Directors of MetLife Life and Annuity Company of Connecticut: We have audited the accompanying statement of assets and liabilities of the Subaccounts (as disclosed in Appendix A) comprising MetLife of CT Fund BD II for Variable Annuities (formerly, The Travelers Fund BD II for Variable Annuities) (the "Separate Account") of MetLife Life and Annuity Company of Connecticut (formerly, The Travelers Life and Annuity Company) ("MLAC") as of December 31, 2006, the related statement of operations for the period in the year then ended, and the statements of changes in net assets for each of the periods in the two years then ended. These financial statements are the responsibility of the Separate Account's management. Our responsibility is to express an opinion on these financial statements based on our audits. The financial highlights of the Separate Account included in footnote 5 for the periods in the three years ended December 31, 2004, were audited by other auditors whose report, dated March 21, 2005, expressed an unqualified opinion on those financial highlights. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Separate Account is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Separate Account's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2006, by correspondence with the custodian. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of each of the Subaccounts comprising the Separate Account of MLAC as of December 31, 2006, the results of their operations for the period in the year then ended, and the changes in their net assets for each of the periods in the two years then ended, in conformity with accounting principles generally accepted in the United States of America. /s/ DELOITTE & TOUCHE LLP Certified Public Accountants Tampa, Florida March 19, 2007 APPENDIX A AIM V.I. Core Equity Subaccount (Series I) AIM V.I. Premier Equity Subaccount (Series I) AllianceBernstein Large-Cap Growth Subaccount (Class B) American Funds Global Growth Subaccount (Class 2) American Funds Growth Subaccount (Class 2) American Funds Growth-Income Subaccount (Class 2) Dreyfus VIF Developing Leaders Subaccount (Initial Shares) LMPIS Dividend Strategy Subaccount LMPIS Premier Selections All Cap Growth Subaccount LMPLS Balanced Subaccount LMPLS Growth Subaccount LMPLS High Growth Subaccount LMPVPI Investors Subaccount (Class I) LMPVPI Total Return Subaccount (Class I) LMPVPII Equity Index Subaccount (Class II) LMPVPII Fundamental Value Subaccount LMPVPIII High Income Subaccount LMPVPIII International All Cap Growth Subaccount LMPVPIII Large Cap Growth Subaccount LMPVPIII Large Cap Value Subaccount LMPVPIII Money Market Subaccount LMPVPV Small Cap Growth Opportunties Subaccount MIST Batterymarch Mid-Cap Stock Subaccount (Class A) MIST BlackRock Large-Cap Core Subaccount (Class A) MIST Lord Abbett Bond Debenture Subaccount (Class A) MIST Met/AIM Capital Appreciation Subaccount (Class A) MIST Pioneer Strategic Income Subaccount (Class A) MSF BlackRock Aggressive Growth Subaccount (Class D) MSF BlackRock Bond Income Subaccount (Class E) MSF Capital Guardian U.S. Equity Subaccount (Class A) MSF FI Large Cap Subaccount (Class A) MSF MFS(R) Total Return Subaccount (Class F) MSF T. Rowe Price Large Cap Growth Subaccount (Class B) MSF Western Asset Management Strategic Bond Opportunities Subaccount (Class A) Travelers AIM Capital Appreciation Subaccount Travelers Convertible Securities Subaccount Travelers Disciplined Mid Cap Stock Subaccount Travelers Managed Income Subaccount Travelers Mercury Large Cap Core Subaccount Travelers MFS(R) Mid Cap Growth Subaccount Travelers MFS(R) Total Return Subaccount Travelers Pioneer Strategic Income Subaccount Travelers Salomon Brothers Strategic Total Return Bond Subaccount Travelers Strategic Equity Subaccount Travelers Van Kampen Enterprise Subaccount METLIFE OF CT FUND BD II FOR VARIABLE ANNUITIES STATEMENT OF ASSETS AND LIABILITIES December 31, 2006
AIM V.I. American Funds American Funds American Funds Core Equity Global Growth Growth Growth-income Subaccount Subaccount Subaccount Subaccount (Series I) (Class 2) (Class 2) (Class 2) --------------- --------------- --------------- --------------- Assets: Investments at market value $ 62,493 $ 6,634,953 $ 10,104,714 $ 9,933,395 --------------- --------------- --------------- --------------- Total Assets .......... 62,493 6,634,953 10,104,714 9,933,395 --------------- --------------- --------------- --------------- Liabilities: Payables: Insurance charges ....... 3 386 605 589 Administrative fees ..... 1 55 83 82 --------------- --------------- --------------- --------------- Total Liabilities ..... 4 441 688 671 --------------- --------------- --------------- --------------- Net Assets: ................. $ 62,489 $ 6,634,512 $ 10,104,026 $ 9,932,724 =============== =============== =============== ===============
The accompanying notes are an integral part of these financial statements. 1 METLIFE OF CT FUND BD II FOR VARIABLE ANNUITIES STATEMENT OF ASSETS AND LIABILITIES -- (Continued) December 31, 2006
Dreyfus VIF LMPIS Developing LMPIS Premier Leaders Dividend Selections LMPLS Subaccount Strategy All Cap Growth Balanced (Initial Shares) Subaccount Subaccount Subaccount --------------- --------------- --------------- --------------- Assets: Investments at market value $ 4,462,626 $ 207,284 $ 1,115,743 $ 6,337,833 --------------- --------------- --------------- --------------- Total Assets .......... 4,462,626 207,284 1,115,743 6,337,833 --------------- --------------- --------------- --------------- Liabilities: Payables: Insurance charges ....... 262 12 65 379 Administrative fees ..... 37 2 9 52 --------------- --------------- --------------- --------------- Total Liabilities ..... 299 14 74 431 --------------- --------------- --------------- --------------- Net Assets: ................. $ 4,462,327 $ 207,270 $ 1,115,669 $ 6,337,402 =============== =============== =============== ===============
The accompanying notes are an integral part of these financial statements. 2 METLIFE OF CT FUND BD II FOR VARIABLE ANNUITIES STATEMENT OF ASSETS AND LIABILITIES -- (Continued) December 31, 2006
LMPVPV LMPVPI LMPVPI LMPVPII LMPLS LMPLS Small Cap Growth Investors Total Return Equity Index Growth High Growth Opportunties Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount (Class I) (Class I) (Class II) --------------- --------------- --------------- --------------- --------------- --------------- $ 3,662,773 $ 914,198 $ 883,178 $ 5,031,942 $ 1,306,837 $ 2,487,979 --------------- --------------- --------------- --------------- --------------- --------------- 3,662,773 914,198 883,178 5,031,942 1,306,837 2,487,979 --------------- --------------- --------------- --------------- --------------- --------------- 228 52 52 300 79 144 30 8 7 41 10 20 --------------- --------------- --------------- --------------- --------------- --------------- 258 60 59 341 89 164 --------------- --------------- --------------- --------------- --------------- --------------- $ 3,662,515 $ 914,138 $ 883,119 $ 5,031,601 $ 1,306,748 $ 2,487,815 =============== =============== =============== =============== =============== ===============
The accompanying notes are an integral part of these financial statements. 3 METLIFE OF CT FUND BD II FOR VARIABLE ANNUITIES STATEMENT OF ASSETS AND LIABILITIES -- (Continued) December 31, 2006
LMPVPII LMPVPIII LMPVPIII Fundamental LMPVPIII International Large Cap Value High Income All Cap Growth Growth Subaccount Subaccount Subaccount Subaccount -------------- -------------- -------------- -------------- Assets: Investments at market value ......... $ 45,253,836 $ 11,126,375 $ 19,756,841 $ 19,120,285 -------------- -------------- -------------- -------------- Total Assets .................... 45,253,836 11,126,375 19,756,841 19,120,285 -------------- -------------- -------------- -------------- Liabilities: Payables: Insurance charges ................. 2,700 654 1,163 1,112 Administrative fees ............... 372 91 163 157 -------------- -------------- -------------- -------------- Total Liabilities ............... 3,072 745 1,326 1,269 -------------- -------------- -------------- -------------- Net Assets: ........................... $ 45,250,764 $ 11,125,630 $ 19,755,515 $ 19,119,016 ============== ============== ============== ==============
The accompanying notes are an integral part of these financial statements. 4 METLIFE OF CT FUND BD II FOR VARIABLE ANNUITIES STATEMENT OF ASSETS AND LIABILITIES -- (Continued) December 31, 2006
MIST MIST MIST MIST Met/AIM LMPVPIII Batterymarch BlackRock Lord Abbett Capital Large Cap LMPVPIII Mid-Cap Stock Large-Cap Core Bond Debenture Appreciation Value Money Market Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount (Class A) (Class A) (Class A) (Class A) -------------- -------------- -------------- -------------- -------------- -------------- $ 31,341,949 $ 9,625,060 $ 6,575,685 $ 3,104,406 $ 1,836,416 $ 24,381,170 -------------- -------------- -------------- -------------- -------------- -------------- 31,341,949 9,625,060 6,575,685 3,104,406 1,836,416 24,381,170 -------------- -------------- -------------- -------------- -------------- -------------- 1,854 566 386 186 110 1,441 258 79 54 26 15 200 -------------- -------------- -------------- -------------- -------------- -------------- 2,112 645 440 212 125 1,641 -------------- -------------- -------------- -------------- -------------- -------------- $ 31,339,837 $ 9,624,415 $ 6,575,245 $ 3,104,194 $ 1,836,291 $ 24,379,529 ============== ============== ============== ============== ============== ==============
The accompanying notes are an integral part of these financial statements. 5 METLIFE OF CT FUND BD II FOR VARIABLE ANNUITIES STATEMENT OF ASSETS AND LIABILITIES -- (Continued) December 31, 2006
MSF Blackrock MSF Blackrock MSF Capital MIST Aggressive Bond Guardian Pioneer Strategic Growth Income U.S. Equity Income Subaccount Subaccount Subaccount Subaccount (Class A) (Class D) (Class E) (Class A) --------------- --------------- --------------- --------------- Assets: Investments at market value $ 16,849,871 $ 13,479,532 $ 8,797,367 $ 21,134,893 --------------- --------------- --------------- --------------- Total Assets .......... 16,849,871 13,479,532 8,797,367 21,134,893 --------------- --------------- --------------- --------------- Liabilities: Payables: Insurance charges ....... 995 800 528 1,244 Administrative fees ..... 139 111 73 173 --------------- --------------- --------------- --------------- Total Liabilities ..... 1,134 911 601 1,417 --------------- --------------- --------------- --------------- Net Assets: ................. $ 16,848,737 $ 13,478,621 $ 8,796,766 $ 21,133,476 =============== =============== =============== ===============
The accompanying notes are an integral part of these financial statements. 6 METLIFE OF CT FUND BD II FOR VARIABLE ANNUITIES STATEMENT OF ASSETS AND LIABILITIES -- (Concluded) December 31, 2006
MSF Western Asset MSF Management MSF FI MSF MFS(R) T. Rowe Price Strategic Bond Large Cap Total Return Large Cap Opportunities Subaccount Subaccount Growth Subaccount Subaccount (Class A) (Class F) (Class B) (Class A) --------------- --------------- --------------- --------------- $ 51,014,390 $ 53,375,079 $ 453,304 $ 3,697,975 --------------- --------------- --------------- --------------- 51,014,390 53,375,079 453,304 3,697,975 --------------- --------------- --------------- --------------- 3,008 3,148 26 217 420 439 4 31 --------------- --------------- --------------- --------------- 3,428 3,587 30 248 --------------- --------------- --------------- --------------- $ 51,010,962 $ 53,371,492 $ 453,274 $ 3,697,727 =============== =============== =============== ===============
The accompanying notes are an integral part of these financial statements. 7 METLIFE OF CT FUND BD II FOR VARIABLE ANNUITIES STATEMENT OF OPERATIONS For the year ended December 31, 2006
AllianceBernstein AIM V.I. AIM V.I. Large-Cap American Funds Core Equity Premier Equity Growth Global Growth Subaccount Subaccount Subaccount Subaccount (Series I) (Series I) (Class B) (Class 2) -------------- -------------- -------------- -------------- Investment Income: Dividends ........................... $ 334 $ 1,668 $ -- $ 52,340 -------------- -------------- -------------- -------------- Expenses: Insurance charges ................... 666 541 1,698 63,238 Administrative fees ................. 98 79 245 8,919 -------------- -------------- -------------- -------------- Total expenses .................... 764 620 1,943 72,157 -------------- -------------- -------------- -------------- Net investment income (loss) .... (430) 1,048 (1,943) (19,817) -------------- -------------- -------------- -------------- Realized Gain (Loss) and Unrealized Gain (Loss) on Investments: Realized gain distribution ........ -- -- -- -- Realized gain (loss) on sale of investments ..................... 1,934 16,845 82,756 401,544 -------------- -------------- -------------- -------------- Realized gain (loss) ............ 1,934 16,845 82,756 401,544 -------------- -------------- -------------- -------------- Change in unrealized gain (loss) on investments .................. 4,912 (9,657) (87,376) 666,738 -------------- -------------- -------------- -------------- Net increase (decrease) in net assets resulting from operations ......... $ 6,416 $ 8,236 $ (6,563) $ 1,048,465 ============== ============== ============== ==============
The accompanying notes are an integral part of these financial statements. 8 METLIFE OF CT FUND BD II FOR VARIABLE ANNUITIES STATEMENT OF OPERATIONS -- (Continued) For the year ended December 31, 2006
Dreyfus VIF LMPIS American Funds American Funds Developing LMPIS Premier Growth Growth-Income Leaders Dividend Selections LMPLS Subaccount Subaccount Subaccount Strategy All Cap Growth Balanced (Class 2) (Class 2) (Initial Shares) Subaccount Subaccount Subaccount -------------- -------------- -------------- -------------- -------------- -------------- $ 80,473 $ 150,651 $ 22,715 $ 4,216 $ -- $ 176,195 -------------- -------------- -------------- -------------- -------------- -------------- 114,483 112,320 57,197 2,520 13,065 71,027 15,708 15,586 8,026 347 1,819 9,781 -------------- -------------- -------------- -------------- -------------- -------------- 130,191 127,906 65,223 2,867 14,884 80,808 -------------- -------------- -------------- -------------- -------------- -------------- (49,718) 22,745 (42,508) 1,349 (14,884) 95,387 -------------- -------------- -------------- -------------- -------------- -------------- 64,504 244,110 469,752 -- 36,108 -- 813,038 740,630 (86,659) 14,467 68,991 79,778 -------------- -------------- -------------- -------------- -------------- -------------- 877,542 984,740 383,093 14,467 105,099 79,778 -------------- -------------- -------------- -------------- -------------- -------------- 66,795 345,073 (240,631) 14,467 (21,210) 249,748 -------------- -------------- -------------- -------------- -------------- -------------- $ 894,619 $ 1,352,558 $ 99,954 $ 30,283 $ 69,005 $ 424,913 ============== ============== ============== ============== ============== ==============
The accompanying notes are an integral part of these financial statements. 9 METLIFE OF CT FUND BD II FOR VARIABLE ANNUITIES STATEMENT OF OPERATIONS -- (Continued) For the year ended December 31, 2006
LMPVPV Small Cap LMPVPI LMPLS LMPLS Growth Investors Growth High Growth Opportunties Subaccount Subaccount Subaccount Subaccount (Class I) -------------- -------------- -------------- -------------- Investment Income: Dividends ........................... $ 69,030 $ 9,415 $ -- $ 79,554 -------------- -------------- -------------- -------------- Expenses: Insurance charges ................... 41,551 9,130 11,115 59,182 Administrative fees ................. 5,507 1,318 1,562 8,194 -------------- -------------- -------------- -------------- Total expenses .................... 47,058 10,448 12,677 67,376 -------------- -------------- -------------- -------------- Net investment income (loss) .... 21,972 (1,033) (12,677) 12,178 -------------- -------------- -------------- -------------- Realized Gain (Loss) and Unrealized Gain (Loss) on Investments: Realized gain distribution ........ -- -- 58,742 112,844 Realized gain (loss) on sale of investments ..................... 11,536 8,377 61,149 392,624 -------------- -------------- -------------- -------------- Realized gain (loss) ............ 11,536 8,377 119,891 505,468 -------------- -------------- -------------- -------------- Change in unrealized gain (loss) on investments .................. 228,368 62,691 (5,250) 315,977 -------------- -------------- -------------- -------------- Net increase (decrease) in net assets resulting from operations ......... $ 261,876 $ 70,035 $ 101,964 $ 833,623 ============== ============== ============== ==============
The accompanying notes are an integral part of these financial statements. 10 METLIFE OF CT FUND BD II FOR VARIABLE ANNUITIES STATEMENT OF OPERATIONS -- (Continued) For the year ended December 31, 2006
LMPVPI LMPVPII LMPVPII LMPVPIII LMPVPIII Total Return Equity Index Fundamental LMPVPIII International Large Cap Subaccount Subaccount Value High Income All Cap Growth Growth (Class I) (Class II) Subaccount Subaccount Subaccount Subaccount -------------- -------------- -------------- -------------- -------------- -------------- $ 26,792 $ 33,547 $ 706,217 $ 846,154 $ 390,234 $ 29,482 -------------- -------------- -------------- -------------- -------------- -------------- 16,071 29,113 532,544 131,180 212,244 239,253 2,191 4,158 73,563 18,309 29,733 33,978 -------------- -------------- -------------- -------------- -------------- -------------- 18,262 33,271 606,107 149,489 241,977 273,231 -------------- -------------- -------------- -------------- -------------- -------------- 8,530 276 100,110 696,665 148,257 (243,749) -------------- -------------- -------------- -------------- -------------- -------------- 23,378 31,571 1,800,826 -- 398,846 -- 62,727 81,372 2,933,507 (985,346) 2,191,648 1,129,604 -------------- -------------- -------------- -------------- -------------- -------------- 86,105 112,943 4,734,333 (985,346) 2,590,494 1,129,604 -------------- -------------- -------------- -------------- -------------- -------------- 58,865 240,220 2,090,916 1,390,172 1,602,249 (498,966) -------------- -------------- -------------- -------------- -------------- -------------- $ 153,500 $ 353,439 $ 6,925,359 $ 1,101,491 $ 4,341,000 $ 386,889 ============== ============== ============== ============== ============== ==============
The accompanying notes are an integral part of these financial statements. 11 METLIFE OF CT FUND BD II FOR VARIABLE ANNUITIES STATEMENT OF OPERATIONS -- (Continued) For the year ended December 31, 2006
MIST MIST LMPVPIII Batterymarch BlackRock Large Cap LMPVPIII Mid-Cap Stock Large-Cap Core Value Money Market Subaccount Subaccount Subaccount Subaccount (Class A) (Class A) -------------- -------------- -------------- -------------- Investment Income: Dividends ........................... $ 374,970 $ 488,595 $ -- $ -- -------------- -------------- -------------- -------------- Expenses: Insurance charges ................... 356,050 116,100 52,798 23,923 Administrative fees ................. 49,611 16,301 7,408 3,296 -------------- -------------- -------------- -------------- Total expenses .................... 405,661 132,401 60,206 27,219 -------------- -------------- -------------- -------------- Net investment income (loss) .... (30,691) 356,194 (60,206) (27,219) -------------- -------------- -------------- -------------- Realized Gain (Loss) and Unrealized Gain (Loss) on Investments: Realized gain distribution ........ 551,654 -- -- -- Realized gain (loss) on sale of investments ..................... 1,076,570 -- (128,937) (12,570) -------------- -------------- -------------- -------------- Realized gain (loss) ............ 1,628,224 -- (128,937) (12,570) -------------- -------------- -------------- -------------- Change in unrealized gain (loss) on investments .................. 3,497,751 -- (251,058) 199,066 -------------- -------------- -------------- -------------- Net increase (decrease) in net assets resulting from operations ......... $ 5,095,284 $ 356,194 $ (440,201) $ 159,277 ============== ============== ============== ==============
The accompanying notes are an integral part of these financial statements. 12 METLIFE OF CT FUND BD II FOR VARIABLE ANNUITIES STATEMENT OF OPERATIONS -- (Continued) For the year ended December 31, 2006
MIST MIST Met/AIM MIST MSF BlackRock MSF Capital Lord Abbett Capital Pioneer Aggressive MSF BlackRock Guardian Bond Debenture Appreciation Strategic Income Growth Bond Income U.S. Equity Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount (Class A) (Class A) (Class A) (Class D) (Class E) (Class A) -------------- -------------- -------------- -------------- -------------- -------------- $ -- $ 42,784 $ 779,998 $ -- $ -- $ -- -------------- -------------- -------------- -------------- -------------- -------------- 14,767 188,752 135,248 105,806 72,020 163,757 2,046 26,228 18,827 14,630 9,876 22,881 -------------- -------------- -------------- -------------- -------------- -------------- 16,813 214,980 154,075 120,436 81,896 186,638 -------------- -------------- -------------- -------------- -------------- -------------- (16,813) (172,196) 625,923 (120,436) (81,896) (186,638) -------------- -------------- -------------- -------------- -------------- -------------- -- 2,978,911 -- -- -- -- 9,739 (260,275) 94,454 (189,874) 55,775 (30,629) -------------- -------------- -------------- -------------- -------------- -------------- 9,739 2,718,636 94,454 (189,874) 55,775 (30,629) -------------- -------------- -------------- -------------- -------------- -------------- 98,765 (3,033,838) (25,142) (177,535) 409,765 794,555 -------------- -------------- -------------- -------------- -------------- -------------- $ 91,691 $ (487,398) $ 695,235 $ (487,845) $ 383,644 $ 577,288 ============== ============== ============== ============== ============== ==============
The accompanying notes are an integral part of these financial statements. 13 METLIFE OF CT FUND BD II FOR VARIABLE ANNUITIES STATEMENT OF OPERATIONS -- (Continued) For the year ended December 31, 2006
MSF Western MSF Asset Management MSF FI MSF MFS(R) T. Rowe Price Strategic Bond Large Cap Total Return Large Cap Growth Opportunities Subaccount Subaccount Subaccount Subaccount (Class A) (Class F) (Class B) (Class A) -------------- -------------- -------------- -------------- Investment Income: Dividends ........................... $ -- $ -- $ -- $ -- -------------- -------------- -------------- -------------- Expenses: Insurance charges ................... 384,283 414,803 3,273 30,516 Administrative fees ................. 53,606 57,877 465 4,231 -------------- -------------- -------------- -------------- Total expenses .................... 437,889 472,680 3,738 34,747 -------------- -------------- -------------- -------------- Net investment income (loss) .... (437,889) (472,680) (3,738) (34,747) -------------- -------------- -------------- -------------- Realized Gain (Loss) and Unrealized Gain (Loss) on Investments: Realized gain distribution ........ -- -- -- -- Realized gain (loss) on sale of investments ..................... (466,995) 272,120 (596) 30,591 -------------- -------------- -------------- -------------- Realized gain (loss) ............ (466,995) 272,120 (596) 30,591 -------------- -------------- -------------- -------------- Change in unrealized gain (loss) on investments .................. 1,226,437 3,966,783 34,435 187,317 -------------- -------------- -------------- -------------- Net increase (decrease) in net assets resulting from operations ......... $ 321,553 $ 3,766,223 $ 30,101 $ 183,161 ============== ============== ============== ==============
The accompanying notes are an integral part of these financial statements. 14 METLIFE OF CT FUND BD II FOR VARIABLE ANNUITIES STATEMENT OF OPERATIONS -- (Continued) For the year ended December 31, 2006
Travelers Travelers Travelers AIM Travelers Disciplined Travelers Mercury Travelers MFS(R) Capital Convertible Mid Cap Managed Large Cap Mid Cap Appreciation Securities Stock Income Core Growth Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount -------------- -------------- -------------- -------------- -------------- -------------- $ -- $ 19,842 $ 46,364 $ 223,385 $ 8,009 $ -- -------------- -------------- -------------- -------------- -------------- -------------- 107,725 10,656 30,195 41,808 13,450 62,531 15,005 1,506 4,249 5,759 1,863 8,674 -------------- -------------- -------------- -------------- -------------- -------------- 122,730 12,162 34,444 47,567 15,313 71,205 -------------- -------------- -------------- -------------- -------------- -------------- (122,730) 7,680 11,920 175,818 (7,304) (71,205) -------------- -------------- -------------- -------------- -------------- -------------- 161,106 31,081 1,383,240 -- 116,957 935,223 528,453 281,373 1,776,424 (1,032,934) (10,014) 1,325,507 -------------- -------------- -------------- -------------- -------------- -------------- 689,559 312,454 3,159,664 (1,032,934) 106,943 2,260,730 -------------- -------------- -------------- -------------- -------------- -------------- 1,426,339 (103,226) (2,392,097) 759,336 132,864 (1,148,570) -------------- -------------- -------------- -------------- -------------- -------------- $ 1,993,168 $ 216,908 $ 779,487 $ (97,780) $ 232,503 $ 1,040,955 ============== ============== ============== ============== ============== ==============
The accompanying notes are an integral part of these financial statements. 15 METLIFE OF CT FUND BD II FOR VARIABLE ANNUITIES STATEMENT OF OPERATIONS -- (Continued) For the year ended December 31, 2006
Travelers Salomon Travelers Brothers Pioneer Strategic Travelers Travelers MFS(R) Strategic Total Return Strategic Total Return Income Bond Equity Subaccount Subaccount Subaccount Subaccount -------------- -------------- -------------- -------------- Investment Income: Dividends ........................... $ 826,525 $ -- $ 97,391 $ 226,351 -------------- -------------- -------------- -------------- Expenses: Insurance charges ................... 223,410 74,115 16,811 221,751 Administrative fees ................. 31,229 10,365 2,339 30,992 -------------- -------------- -------------- -------------- Total expenses .................... 254,639 84,480 19,150 252,743 -------------- -------------- -------------- -------------- Net investment income (loss) .... 571,886 (84,480) 78,241 (26,392) -------------- -------------- -------------- -------------- Realized Gain (Loss) and Unrealized Gain (Loss) on Investments: Realized gain distribution ........ 897,122 -- -- 2,481,725 Realized gain (loss) on sale of investments ..................... 3,711,686 (2,530,354) (236,426) (13,103,564) -------------- -------------- -------------- -------------- Realized gain (loss) ............ 4,608,808 (2,530,354) (236,426) (10,621,839) -------------- -------------- -------------- -------------- Change in unrealized gain (loss) on investments .................. (3,039,809) 2,855,723 90,746 13,509,557 -------------- -------------- -------------- -------------- Net increase (decrease) in net assets resulting from operations ......... $ 2,140,885 $ 240,889 $ (67,439) $ 2,861,326 ============== ============== ============== ==============
The accompanying notes are an integral part of these financial statements. 16 METLIFE OF CT FUND BD II FOR VARIABLE ANNUITIES STATEMENT OF OPERATIONS -- (Concluded) For the year ended December 31, 2006 Travelers Van Kampen Enterprise Subaccount -------------- $ 8,137 -------------- 90,482 12,635 -------------- 103,117 -------------- (94,980) -------------- 663,293 (12,042,824) -------------- (11,379,531) -------------- 12,492,019 -------------- $ 1,017,508 ============== The accompanying notes are an integral part of these financial statements. 17 METLIFE OF CT FUND BD II FOR VARIABLE ANNUITIES STATEMENTS OF CHANGES IN NET ASSETS For the years ended December 31, 2006 and 2005
AIM V.I. Core Equity AIM V.I. Premier Equity AllianceBernstein Large-Cap Subaccount (Series I) Subaccount (Series I) Growth Subaccount (Class B) ---------------------------- ---------------------------- ---------------------------- 2006 2005 2006 2005 2006 2005 ------------ ------------ ------------ ------------ ------------ ------------ Operations: Net investment income (loss) ... $ (430) $ -- $ 1,048 $ (697) $ (1,943) $ (4,460) Realized gain (loss) ........... 1,934 -- 16,845 1,316 82,756 13,280 Change in unrealized gain (loss) on investments ............... 4,912 -- (9,657) 6,487 (87,376) 36,769 ------------ ------------ ------------ ------------ ------------ ------------ Net increase (decrease) in net assets resulting from operations ................. 6,416 -- 8,236 7,106 (6,563) 45,589 ------------ ------------ ------------ ------------ ------------ ------------ Unit Transactions: Participant purchase payments .. -- -- 11 15,000 5 -- Participant transfers from other funding options .............. 161,152 -- -- -- 264,812 13,450 Administrative charges ......... (62) -- -- (84) -- (89) Contract surrenders ............ (99,570) -- (7,382) (27,903) (26,872) (92,190) Participant transfers to other funding options .............. (5,447) -- (161,152) (13,738) (613,815) (6,370) Other receipts/(payments) ...... -- -- -- -- -- -- ------------ ------------ ------------ ------------ ------------ ------------ Net increase (decrease) in net assets resulting from unit transactions .......... 56,073 -- (168,523) (26,725) (375,870) (85,199) ------------ ------------ ------------ ------------ ------------ ------------ Net increase (decrease) in net assets ................. 62,489 -- (160,287) (19,619) (382,433) (39,610) Net Assets: Beginning of year .............. -- -- 160,287 179,906 382,433 422,043 ------------ ------------ ------------ ------------ ------------ ------------ End of year .................... $ 62,489 $ -- $ -- $ 160,287 $ -- $ 382,433 ============ ============ ============ ============ ============ ============
The accompanying notes are an integral part of these financial statements. 18 METLIFE OF CT FUND BD II FOR VARIABLE ANNUITIES STATEMENTS OF CHANGES IN NET ASSETS -- (Continued) For the years ended December 31, 2006 and 2005
American Funds Global American Funds Growth American Funds Growth-Income Dreyfus VIF Developing Leaders Growth Subaccount (Class 2) Subaccount (Class 2) Subaccount (Class 2) Subaccount (Initial Shares) ---------------------------- ---------------------------- ---------------------------- ---------------------------- 2006 2005 2006 2005 2006 2005 2006 2005 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ $ (19,817) $ (23,625) $ (49,718) $ (49,471) $ 22,745 $ 5,248 $ (42,508) $ (76,868) 401,544 203,973 877,542 520,380 984,740 675,675 383,093 (72,921) 666,738 401,201 66,795 904,034 345,073 (199,364) (240,631) 400,513 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ 1,048,465 581,549 894,619 1,374,943 1,352,558 481,559 99,954 250,724 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ 10,000 10,595 -- 3,181 18,000 7,701 -- 27,119 2,295,774 2,028,153 1,873,944 2,925,636 1,103,094 2,052,159 198,968 429,722 (1,585) (1,084) (2,288) (2,182) (2,595) (2,831) (1,309) (1,621) (1,656,046) (1,278,127) (2,646,515) (2,565,038) (2,983,719) (3,112,710) (1,307,835) (1,624,564) (137,230) (166,923) (426,621) (275,003) (385,838) (714,283) (377,963) (139,712) (29,408) (46,166) (283,765) (170,910) (162,827) (386,470) (29,927) (201,429) ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ 481,505 546,448 (1,485,245) (84,316) (2,413,885) (2,156,434) (1,518,066) (1,510,485) ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ 1,529,970 1,127,997 (590,626) 1,290,627 (1,061,327) (1,674,875) (1,418,112) (1,259,761) 5,104,542 3,976,545 10,694,652 9,404,025 10,994,051 12,668,926 5,880,439 7,140,200 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ $ 6,634,512 $ 5,104,542 $ 10,104,026 $ 10,694,652 $ 9,932,724 $ 10,994,051 $ 4,462,327 $ 5,880,439 ============ ============ ============ ============ ============ ============ ============ ============
The accompanying notes are an integral part of these financial statements. 19 METLIFE OF CT FUND BD II FOR VARIABLE ANNUITIES STATEMENTS OF CHANGES IN NET ASSETS -- (Continued) For the years ended December 31, 2006 and 2005
LMPIS Dividend LMPIS Premier Selections LMPLS Strategy Subaccount All Cap Growth Subaccount Balanced Subaccount ---------------------------- ---------------------------- ---------------------------- 2006 2005 2006 2005 2006 2005 ------------ ------------ ------------ ------------ ------------ ------------ Operations: Net investment income (loss) ... $ 1,349 $ 1,066 $ (14,884) $ (15,869) $ 95,387 $ 63,525 Realized gain (loss) ........... 14,467 8,887 105,099 41,416 79,778 103,517 Change in unrealized gain (loss) on investments ............... 14,467 (14,177) (21,210) 42,137 249,748 (91,506) ------------ ------------ ------------ ------------ ------------ ------------ Net increase (decrease) in net assets resulting from operations ................. 30,283 (4,224) 69,005 67,684 424,913 75,536 ------------ ------------ ------------ ------------ ------------ ------------ Unit Transactions: Participant purchase payments .. -- -- 441 1,035 -- -- Participant transfers from other funding options .............. 74,557 45,151 18,693 71,043 6,513 40,383 Administrative charges ......... (159) (195) (123) (190) (862) (1,110) Contract surrenders ............ (43,502) (83,278) (322,013) (199,557) (1,257,115) (1,857,685) Participant transfers to other funding options .............. (83,790) (20,010) (52,621) (42,434) (271) (166,298) Other receipts/(payments) ...... (22,203) -- -- (68,336) -- (204,666) ------------ ------------ ------------ ------------ ------------ ------------ Net increase (decrease) in net assets resulting from unit transactions .......... (75,097) (58,332) (355,623) (238,439) (1,251,735) (2,189,376) ------------ ------------ ------------ ------------ ------------ ------------ Net increase (decrease) in net assets ................. (44,814) (62,556) (286,618) (170,755) (826,822) (2,113,840) Net Assets: Beginning of year .............. 252,084 314,640 1,402,287 1,573,042 7,164,224 9,278,064 ------------ ------------ ------------ ------------ ------------ ------------ End of year .................... $ 207,270 $ 252,084 $ 1,115,669 $ 1,402,287 $ 6,337,402 $ 7,164,224 ============ ============ ============ ============ ============ ============
The accompanying notes are an integral part of these financial statements. 20 METLIFE OF CT FUND BD II FOR VARIABLE ANNUITIES STATEMENTS OF CHANGES IN NET ASSETS -- (Continued) For the years ended December 31, 2006 and 2005
LMPLS LMPLS LMPVPV Small Cap Growth LMPVPI Investors Growth Subaccount High Growth Subaccount Opportunities Subaccount Subaccount (Class I) ---------------------------- ---------------------------- ---------------------------- ---------------------------- 2006 2005 2006 2005 2006 2005 2006 2005 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ $ 21,972 $ 8,763 $ (1,033) $ (6,557) $ (12,677) $ (14,069) $ 12,178 $ (8,997) 11,536 (34,446) 8,377 12,779 119,891 190,256 505,468 205,075 228,368 151,611 62,691 28,616 (5,250) (147,309) 315,977 114,889 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ 261,876 125,928 70,035 34,838 101,964 28,878 833,623 310,967 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ 1,000 2,200 -- -- -- 1,360 -- 20,728 18,003 11,995 6,250 30,634 292,400 426,581 180,364 575,120 (689) (838) (166) (364) (388) (434) (1,351) (1,665) (425,292) (478,742) (42,830) (203,601) (376,424) (417,162) (1,584,783) (1,575,972) (60,223) (132) (7,607) -- (192,746) (271,392) (253,034) (347,589) (78,051) (26,034) -- (15,270) (6,419) -- (148,100) (81,682) ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ (545,252) (491,551) (44,353) (188,601) (283,577) (261,047) (1,806,904) (1,411,060) ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ (283,376) (365,623) 25,682 (153,763) (181,613) (232,169) (973,281) (1,100,093) 3,945,891 4,311,514 888,456 1,042,219 1,064,732 1,296,901 6,004,882 7,104,975 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ $ 3,662,515 $ 3,945,891 $ 914,138 $ 888,456 $ 883,119 $ 1,064,732 $ 5,031,601 $ 6,004,882 ============ ============ ============ ============ ============ ============ ============ ============
The accompanying notes are an integral part of these financial statements. 21 METLIFE OF CT FUND BD II FOR VARIABLE ANNUITIES STATEMENTS OF CHANGES IN NET ASSETS -- (Continued) For the years ended December 31, 2006 and 2005
LMPVPI Total Return LMPVPII Equity Index LMPVPII Fundamental Subaccount (Class I) Subaccount (Class II) Value Subaccount ---------------------------- ---------------------------- ---------------------------- 2006 2005 2006 2005 2006 2005 ------------ ------------ ------------ ------------ ------------ ------------ Operations: Net investment income (loss) ... $ 8,530 $ 9,236 $ 276 $ (5,683) $ 100,110 $ (224,702) Realized gain (loss) ........... 86,105 50,151 112,943 1,373 4,734,333 5,652,763 Change in unrealized gain (loss) on investments ............... 58,865 (32,654) 240,220 92,425 2,090,916 (3,773,812) ------------ ------------ ------------ ------------ ------------ ------------ Net increase (decrease) in net assets resulting from operations ................. 153,500 26,733 353,439 88,115 6,925,359 1,654,249 ------------ ------------ ------------ ------------ ------------ ------------ Unit Transactions: Participant purchase payments .. -- -- -- -- 31,627 336 Participant transfers from other funding options .............. 71,494 6,348 35,758 74,730 353,164 606,061 Administrative charges ......... (259) (315) (511) (736) (12,153) (14,928) Contract surrenders ............ (339,456) (339,243) (651,440) (963,995) (12,771,820) (12,428,852) Participant transfers to other funding options .............. (46,535) (96,354) (148,373) (130,235) (1,437,754) (1,665,269) Other receipts/(payments) ...... (32,148) -- (37,903) (72,161) (1,373,226) (1,950,956) ------------ ------------ ------------ ------------ ------------ ------------ Net increase (decrease) in net assets resulting from unit transactions .......... (346,904) (429,564) (802,469) (1,092,397) (15,210,162) (15,453,608) ------------ ------------ ------------ ------------ ------------ ------------ Net increase (decrease) in net assets ................. (193,404) (402,831) (449,030) (1,004,282) (8,284,803) (13,799,359) Net Assets: Beginning of year .............. 1,500,152 1,902,983 2,936,845 3,941,127 53,535,567 67,334,926 ------------ ------------ ------------ ------------ ------------ ------------ End of year .................... $ 1,306,748 $ 1,500,152 $ 2,487,815 $ 2,936,845 $ 45,250,764 $ 53,535,567 ============ ============ ============ ============ ============ ============
The accompanying notes are an integral part of these financial statements. 22 METLIFE OF CT FUND BD II FOR VARIABLE ANNUITIES STATEMENTS OF CHANGES IN NET ASSETS -- (Continued) For the years ended December 31, 2006 and 2005
LMPVPIII High Income LMPVPIII International LMPVPIII Large Cap LMPVPIII Large Cap Subaccount All Cap Growth Subaccount Growth Subaccount Value Subaccount ---------------------------- ---------------------------- ---------------------------- ---------------------------- 2006 2005 2006 2005 2006 2005 2006 2005 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ $ 696,665 $ 894,457 $ 148,257 $ 11,344 $ (243,749) $ (341,062) $ (30,691) $ 69,975 (985,346) (1,806,982) 2,590,494 1,545,308 1,129,604 701,677 1,628,224 123,121 1,390,172 1,087,433 1,602,249 434,395 (498,966) 592,229 3,497,751 1,653,955 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ 1,101,491 174,908 4,341,000 1,991,047 386,889 952,844 5,095,284 1,847,051 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ 14,403 1,752 2,449 34,399 3,640 31,309 592 19,101 233,550 150,290 580,306 316,657 134,549 540,750 214,058 256,945 (3,431) (4,580) (6,103) (6,906) (9,315) (11,703) (10,414) (12,806) (3,064,586) (4,858,945) (5,114,740) (4,303,092) (8,201,000) (7,221,372) (7,721,547) (10,987,923) (365,204) (1,026,560) (309,170) (595,023) (1,245,997) (1,524,557) (965,508) (1,166,218) (434,259) (1,166,980) (242,511) (538,951) (667,817) (984,101) (1,152,117) (1,276,562) ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ (3,619,527) (6,905,023) (5,089,769) (5,092,916) (9,985,940) (9,169,674) (9,634,936) (13,167,463) ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ (2,518,036) (6,730,115) (748,769) (3,101,869) (9,599,051) (8,216,830) (4,539,652) (11,320,412) 13,643,666 20,373,781 20,504,284 23,606,153 28,718,067 36,934,897 35,879,489 47,199,901 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ $ 11,125,630 $ 13,643,666 $ 19,755,515 $ 20,504,284 $ 19,119,016 $ 28,718,067 $ 31,339,837 $ 35,879,489 ============ ============ ============ ============ ============ ============ ============ ============
The accompanying notes are an integral part of these financial statements. 23 METLIFE OF CT FUND BD II FOR VARIABLE ANNUITIES STATEMENTS OF CHANGES IN NET ASSETS -- (Continued) For the years ended December 31, 2006 and 2005
MIST Batterymarch MIST BlackRock LMPVPIII Money Mid-Cap Stock Large-Cap Core Market Subaccount Subaccount (Class A) Subaccount (Class A) ---------------------------- ---------------------------- ---------------------------- 2006 2005 2006 2005 2006 2005 ------------ ------------ ------------ ------------ ------------ ------------ Operations: Net investment income (loss) ... $ 356,194 $ 229,475 $ (60,206) $ -- $ (27,219) $ -- Realized gain (loss) ........... -- -- (128,937) -- (12,570) -- Change in unrealized gain (loss) on investments ............... -- -- (251,058) -- 199,066 -- ------------ ------------ ------------ ------------ ------------ ------------ Net increase (decrease) in net assets resulting from operations ................. 356,194 229,475 (440,201) -- 159,277 -- ------------ ------------ ------------ ------------ ------------ ------------ Unit Transactions: Participant purchase payments .. 11,985 57,188 308 -- -- -- Participant transfers from other funding options .............. 3,722,495 3,602,039 8,921,590 -- 3,745,938 -- Administrative charges ......... (3,240) (3,977) (2,067) -- (1,007) -- Contract surrenders ............ (5,744,909) (7,570,198) (1,459,412) -- (720,055) -- Participant transfers to other funding options .............. (417,295) (1,946,942) (406,471) -- (71,146) -- Other receipts/(payments) ...... (647,917) (1,712,145) (38,502) -- (8,813) -- ------------ ------------ ------------ ------------ ------------ ------------ Net increase (decrease) in net assets resulting from unit transactions .......... (3,078,881) (7,574,035) 7,015,446 -- 2,944,917 -- ------------ ------------ ------------ ------------ ------------ ------------ Net increase (decrease) in net assets ................. (2,722,687) (7,344,560) 6,575,245 -- 3,104,194 -- Net Assets: Beginning of year .............. 12,347,102 19,691,662 -- -- -- -- ------------ ------------ ------------ ------------ ------------ ------------ End of year .................... $ 9,624,415 $ 12,347,102 $ 6,575,245 $ -- $ 3,104,194 $ -- ============ ============ ============ ============ ============ ============
The accompanying notes are an integral part of these financial statements. 24 METLIFE OF CT FUND BD II FOR VARIABLE ANNUITIES STATEMENTS OF CHANGES IN NET ASSETS -- (Continued) For the years ended December 31, 2006 and 2005
MIST Lord Abbett MIST Met/AIM MIST Pioneer MSF BlackRock Bond Debenture Capital Appreciation Strategic Income Aggressive Growth Subaccount (Class A) Subaccount (Class A) Subaccount (Class A) Subaccount (Class D) ---------------------------- ---------------------------- ---------------------------- ---------------------------- 2006 2005 2006 2005 2006 2005 2006 2005 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ $ (16,813) $ -- $ (172,196) $ -- $ 625,923 $ -- $ (120,436) $ -- 9,739 -- 2,718,636 -- 94,454 -- (189,874) -- 98,765 -- (3,033,838) -- (25,142) -- (177,535) -- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ 91,691 -- (487,398) -- 695,235 -- (487,845) -- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ -- -- 1,250 -- 294 -- 294 -- 2,477,769 -- 30,138,244 -- 20,633,321 -- 17,298,712 -- (411) -- (9,607) -- (4,724) -- (6,000) -- (557,439) -- (4,424,473) -- (3,720,726) -- (2,680,710) -- (27,932) -- (462,078) -- (226,356) -- (404,373) -- (147,387) -- (376,409) -- (528,307) -- (241,457) -- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ 1,744,600 -- 24,866,927 -- 16,153,502 -- 13,966,466 -- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ 1,836,291 -- 24,379,529 -- 16,848,737 -- 13,478,621 -- -- -- -- -- -- -- -- -- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ $ 1,836,291 $ -- $ 24,379,529 $ -- $ 16,848,737 $ -- $ 13,478,621 $ -- ============ ============ ============ ============ ============ ============ ============ ============
The accompanying notes are an integral part of these financial statements. 25 METLIFE OF CT FUND BD II FOR VARIABLE ANNUITIES STATEMENTS OF CHANGES IN NET ASSETS -- (Continued) For the years ended December 31, 2006 and 2005
MSF BlackRock MSF Capital Guardian Bond Income U.S. Equity MSF FI Large Cap Subaccount (Class E) Subaccount (Class A) Subaccount (Class A) ---------------------------- ---------------------------- ---------------------------- 2006 2005 2006 2005 2006 2005 ------------ ------------ ------------ ------------ ------------ ------------ Operations: Net investment income (loss) ..... $ (81,896) $ -- $ (186,638) $ -- $ (437,889) $ -- Realized gain (loss) ............. 55,775 -- (30,629) -- (466,995) -- Change in unrealized gain (loss) on investments ................... 409,765 -- 794,555 -- 1,226,437 -- ------------ ------------ ------------ ------------ ------------ ------------ Net increase (decrease) in net assets resulting from operations ....................... 383,644 -- 577,288 -- 321,553 -- ------------ ------------ ------------ ------------ ------------ ------------ Unit Transactions: Participant purchase payments .... -- -- 576 -- 1,876 -- Participant transfers from other funding options .................. 10,571,802 -- 25,048,181 -- 61,196,025 -- Administrative charges ........... (1,871) -- (8,230) -- (20,419) -- Contract surrenders .............. (1,700,127) -- (3,628,733) -- (8,684,161) -- Participant transfers to other funding options .................. (269,279) -- (573,099) -- (1,087,505) -- Other receipts/(payments) ........ (187,403) -- (282,507) -- (716,407) -- ------------ ------------ ------------ ------------ ------------ ------------ Net increase (decrease) in net assets resulting from unit transactions ................ 8,413,122 -- 20,556,188 -- 50,689,409 -- ------------ ------------ ------------ ------------ ------------ ------------ Net increase (decrease) in net assets ....................... 8,796,766 -- 21,133,476 -- 51,010,962 -- Net Assets: Beginning of year ................ -- -- -- -- -- -- ------------ ------------ ------------ ------------ ------------ ------------ End of year ...................... $ 8,796,766 $ -- $ 21,133,476 $ -- $ 51,010,962 $ -- ============ ============ ============ ============ ============ ============
The accompanying notes are an integral part of these financial statements. 26 METLIFE OF CT FUND BD II FOR VARIABLE ANNUITIES STATEMENTS OF CHANGES IN NET ASSETS -- (Continued) For the years ended December 31, 2006 and 2005
MSF Western Asset MSF MFS(R) MSF T. Rowe Price Management Strategic Travelers AIM Total Return Large Cap Growth Bond Opportunities Capital Appreciation Subaccount (Class F) Subaccount (Class B) Subaccount (Class A) Subaccount ---------------------------- ---------------------------- ---------------------------- ---------------------------- 2006 2005 2006 2005 2006 2005 2006 2005 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ $ (472,680) $ -- $ (3,738) $ -- $ (34,747) $ -- $ (122,730) $ (340,255) 272,120 -- (596) -- 30,591 -- 689,559 (1,284,596) 3,966,783 -- 34,435 -- 187,317 -- 1,426,339 3,740,302 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ 3,766,223 -- 30,101 -- 183,161 -- 1,993,168 2,115,451 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ 22,947 -- -- -- 13,000 -- -- 1,511 62,669,113 -- 612,734 -- 4,634,986 -- 6,215 20,106 (15,174) -- (81) -- (1,430) -- (197) (12,222) (9,975,009) -- (189,480) -- (871,435) -- (2,445,589) (7,370,743) (1,260,995) -- -- -- (143,694) -- (30,280,868) (1,218,949) (1,835,613) -- -- -- (116,861) -- (69,140) (882,199) ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ 49,605,269 -- 423,173 -- 3,514,566 -- (32,789,579) (9,462,496) ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ 53,371,492 -- 453,274 -- 3,697,727 -- (30,796,411) (7,347,045) -- -- -- -- -- -- 30,796,411 38,143,456 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ $ 53,371,492 $ -- $ 453,274 $ -- $ 3,697,727 $ -- $ -- $ 30,796,411 ============ ============ ============ ============ ============ ============ ============ ============
The accompanying notes are an integral part of these financial statements. 27 METLIFE OF CT FUND BD II FOR VARIABLE ANNUITIES STATEMENTS OF CHANGES IN NET ASSETS -- (Continued) For the years ended December 31, 2006 and 2005
Travelers Convertible Travelers Disciplined Mid Travelers Managed Securities Subaccount Cap Stock Subaccount Income Subaccount ---------------------------- ---------------------------- ---------------------------- 2006 2005 2006 2005 2006 2005 ------------ ------------ ------------ ------------ ------------ ------------ Operations: Net investment income (loss) ... $ 7,680 $ 41,365 $ 11,920 $ (115,284) $ 175,818 $ 284,057 Realized gain (loss) ........... 312,454 145,661 3,159,664 928,644 (1,032,934) (146,448) Change in unrealized gain (loss) on investments ............... (103,226) (255,805) (2,392,097) 172,735 759,336 (121,439) ------------ ------------ ------------ ------------ ------------ ------------ Net increase (decrease) in net assets resulting from operations ................. 216,908 (68,779) 779,487 986,095 (97,780) 16,170 ------------ ------------ ------------ ------------ ------------ ------------ Unit Transactions: Participant purchase payments .. -- -- 101 367 92 57,185 Participant transfers from other funding options .............. 8,583 74,080 245,424 925,245 62,692 275,373 Administrative charges ......... (35) (587) (92) (2,750) (65) (2,511) Contract surrenders ............ (1,261,770) (1,067,116) (731,124) (3,160,884) (1,540,153) (3,419,551) Participant transfers to other funding options .............. (2,311,887) (181,668) (8,808,609) (267,066) (10,832,601) (462,157) Other receipts/(payments) ...... (17) (393,055) (100,811) (365,471) (169,474) (283,338) ------------ ------------ ------------ ------------ ------------ ------------ Net increase (decrease) in net assets resulting from unit transactions .......... (3,565,126) (1,568,346) (9,395,111) (2,870,559) (12,479,509) (3,834,999) ------------ ------------ ------------ ------------ ------------ ------------ Net increase (decrease) in net assets ................. (3,348,218) (1,637,125) (8,615,624) (1,884,464) (12,577,289) (3,818,829) Net Assets: Beginning of year .............. 3,348,218 4,985,343 8,615,624 10,500,088 12,577,289 16,396,118 ------------ ------------ ------------ ------------ ------------ ------------ End of year .................... $ -- $ 3,348,218 $ -- $ 8,615,624 $ -- $ 12,577,289 ============ ============ ============ ============ ============ ============
The accompanying notes are an integral part of these financial statements. 28 METLIFE OF CT FUND BD II FOR VARIABLE ANNUITIES STATEMENTS OF CHANGES IN NET ASSETS -- (Continued) For the years ended December 31, 2006 and 2005
Travelers Mercury Large Travelers MFS(R) Mid Cap Travelers MFS(R) Total Travelers Pioneer Strategic Cap Core Subaccount Growth Subaccount Return Subaccount Income Subaccount ---------------------------- ---------------------------- ---------------------------- ---------------------------- 2006 2005 2006 2005 2006 2005 2006 2005 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ $ (7,304) $ (47,100) $ (71,205) $ (198,156) $ 571,886 $ 524,229 $ (84,480) $ 607,041 106,943 (110,295) 2,260,730 40,970 4,608,808 5,245,738 (2,530,354) (829,925) 132,864 541,779 (1,148,570) 1,148,570 (3,039,809) (4,634,836) 2,855,723 815,540 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ 232,503 384,384 1,040,955 991,384 2,140,885 1,135,131 240,889 592,656 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ 31 -- 31 737 227 10,878 121 378 42,342 263,133 6,852 21,228,343 172,363 1,552,737 281,066 662,332 (41) (1,212) (159) (7,890) (308) (19,490) (116) (6,057) (305,400) (655,046) (1,298,558) (3,420,997) (5,091,127) (19,022,087) (2,254,306) (5,952,511) (3,748,542) (184,316) (17,530,167) (589,041) (62,626,259) (1,083,391) (20,343,282) (667,371) (10,419) (57,533) (90,431) (331,059) (568,957) (2,832,066) (238,799) (738,640) ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ (4,022,029) (634,974) (18,912,432) 16,880,093 (68,114,061) (21,393,419) (22,555,316) (6,701,869) ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ (3,789,526) (250,590) (17,871,477) 17,871,477 (65,973,176) (20,258,288) (22,314,427) (6,109,213) 3,789,526 4,040,116 17,871,477 -- 65,973,176 86,231,464 22,314,427 28,423,640 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ $ -- $ 3,789,526 $ -- $ 17,871,477 $ -- $ 65,973,176 $ -- $ 22,314,427 ============ ============ ============ ============ ============ ============ ============ ============
The accompanying notes are an integral part of these financial statements. 29 METLIFE OF CT FUND BD II FOR VARIABLE ANNUITIES STATEMENTS OF CHANGES IN NET ASSETS -- (Concluded) For the years ended December 31, 2006 and 2005
Travelers Salomon Brothers Strategic Total Return Travelers Strategic Travelers Van Kampen Bond Subaccount Equity Subaccount Enterprise Subaccount ---------------------------- ---------------------------- ---------------------------- 2006 2005 2006 2005 2006 2005 ------------ ------------ ------------ ------------ ------------ ------------ Operations: Net investment income (loss) ... $ 78,241 $ 128,816 $ (26,392) $ (478,063) $ (94,980) $ (330,550) Realized gain (loss) ........... (236,426) 17,031 (10,621,839) (5,735,578) (11,379,531) (5,110,048) Change in unrealized gain (loss) on investments ............... 90,746 (86,190) 13,509,557 5,859,894 12,492,019 7,118,166 ------------ ------------ ------------ ------------ ------------ ------------ Net increase (decrease) in net assets resulting from operations ................. (67,439) 59,657 2,861,326 (353,747) 1,017,508 1,677,568 ------------ ------------ ------------ ------------ ------------ ------------ Unit Transactions: Participant purchase payments .. 34 40 227 9,508 147 2,988 Participant transfers from other funding options .............. 45,883 88,374 20,893 180,943 5,370 58,307 Administrative charges ......... (48) (1,855) (636) (27,662) (189) (10,455) Contract surrenders ............ (290,926) (1,409,093) (4,837,360) (15,359,459) (1,907,868) (6,235,030) Participant transfers to other funding options .............. (4,693,701) (521,424) (61,619,002) (3,146,568) (25,465,643) (1,354,797) Other receipts/(payments) ...... (59,604) (226,372) (375,243) (1,634,754) (168,034) (1,130,669) ------------ ------------ ------------ ------------ ------------ ------------ Net increase (decrease) in net assets resulting from unit transactions .......... (4,998,362) (2,070,330) (66,811,121) (19,977,992) (27,536,217) (8,669,656) ------------ ------------ ------------ ------------ ------------ ------------ Net increase (decrease) in net assets ................. (5,065,801) (2,010,673) (63,949,795) (20,331,739) (26,518,709) (6,992,088) Net Assets: Beginning of year .............. 5,065,801 7,076,474 63,949,795 84,281,534 26,518,709 33,510,797 ------------ ------------ ------------ ------------ ------------ ------------ End of year .................... $ -- $ 5,065,801 $ -- $ 63,949,795 $ -- $ 26,518,709 ============ ============ ============ ============ ============ ============
The accompanying notes are an integral part of these financial statements. 30 NOTES TO FINANCIAL STATEMENTS 1. BUSINESS MetLife of CT Fund BD II for Variable Annuities ("Fund BD II") (formerly, The Travelers Fund BD II for Variable Annuities) is a separate account of MetLife Life and Annuity Company of Connecticut (the "Company") (formerly, The Travelers Life and Annuity Company), an indirect wholly owned subsidiary of MetLife, Inc., a Delaware corporation, and is available for funding certain variable annuity contracts issued by the Company. Fund BD II, established on October 22, 1993, is registered under the Investment Company Act of 1940, as amended, as a unit investment trust. The product supported by Fund BD II is Vintage Annuity (formerly, Travelers Vintage Annuity). Fund BD II is divided into Subaccounts, each of which is treated as an individual Separate Account for financial reporting purposes. Each Subaccount invests in shares of the corresponding portfolios, series and funds (with the same name) of registered investment management companies (collectively, the "Funds") which are presented below. For convenience, the portfolios, series or funds are referred to as "portfolios". AIM Variable Insurance Funds American Funds Insurance Series Dreyfus Variable Investment Fund Legg Mason Partners Investment Series Legg Mason Partners Lifestyle Series, Inc. Legg Mason Partners Variable Portfolios V Legg Mason Partners Variable Portfolios I, Inc. Legg Mason Partners Variable Portfolios II Legg Mason Partners Variable Portfolios III, Inc. Met Investors Series Trust Metropolitan Series Fund, Inc. Participant purchase payments applied to Fund BD II are invested in one or more Subaccounts in accordance with the selection made by the contract owner. The following Subaccounts were available for investment as of December 31, 2006 (the share class indicated in parentheses is that of the portfolio in which the Subaccount invests): AIM V.I. Core Equity Subaccount (Series I) American Funds Global Growth Subaccount (Class 2) American Funds Growth Subaccount (Class 2) American Funds Growth-Income Subaccount (Class 2) Dreyfus VIF Developing Leaders Subaccount (Initial Shares) LMPIS Dividend Strategy Subaccount LMPIS Premier Selections All Cap Growth Subaccount LMPLS Balanced Subaccount LMPLS Growth Subaccount LMPLS High Growth Subaccount LMPVPV Small Cap Growth Opportunities Subaccount LMPVPI Investors Subaccount (Class I) LMPVPI Total Return Subaccount (Class I) LMPVPII Equity Index Subaccount (Class II) LMPVPII Fundamental Value Subaccount LMPVPIII High Income Subaccount LMPVPIII International All Cap Growth Subaccount LMPVPIII Large Cap Growth Subaccount LMPVPIII Large Cap Value Subaccount LMPVPIII Money Market Subaccount MIST Batterymarch Mid-Cap Stock Subaccount (Class A) MIST BlackRock Large-Cap Core Subaccount (Class A) 31 NOTES TO FINANCIAL STATEMENTS -- (Continued) 1. BUSINESS -- (Continued) MIST Lord Abbett Bond Debenture Subaccount (Class A) MIST Met/AIM Capital Appreciation Subaccount (Class A) MIST Pioneer Strategic Income Subaccount (Class A) MSF BlackRock Aggressive Growth Subaccount (Class D) MSF BlackRock Bond Income Subaccount (Class E) MSF Capital Guardian U.S. Equity Subaccount (Class A) MSF FI Large Cap Subaccount (Class A) MSF MFS(R) Total Return Subaccount (Class F) MSF T. Rowe Price Large Cap Growth Subaccount (Class B) MSF Western Asset Management Strategic Bond Opportunities Subaccount (Class A) The operations of the Subaccounts changed as follows during the years ended December 31, 2006 and 2005: For the year ended December 31, 2006: - ------------------------------------- Name changes: Old Name New Name -------- -------- Smith Barney Equity Index Subaccount LMPVPII Equity Index Subaccount (Class II) Smith Barney Fundamental Value Subaccount LMPVPII Fundamental Value Subaccount Salomon Brothers Variable Investors Fund Subaccount - Class I LMPVPI Investors Subaccount (Class I) Salomon Brothers Variable Total Return Fund Subaccount - LMPVPI Total Return Subaccount (Class I) Class I Smith Barney Allocation Series Inc. - Select Growth LMPLS Balanced Subaccount Subaccount Smith Barney Allocation Series Inc. - Select Balanced LMPLS Growth Subaccount Subaccount Smith Barney Allocation Series Inc. - Select High LMPVLS High Growth Subaccount Growth Subaccount Smith Barney Dividend Strategy Subaccount LMPIS Dividend Strategy Subaccount Smith Barney Premier Selections All Cap Growth Subaccount LMPIS Premier Selections All Cap Growth Subaccount Smith Barney High Income Subaccount LMPVPIII High Income Subaccount Smith Barney International All Cap Growth Subaccount LMPVPIII International All Cap Growth Subaccount Smith Barney Large Capitalization Growth Subaccount LMPVPIII Large Cap Growth Subaccount Smith Barney Large Cap Value Subaccount LMPVPIII Large Cap Value Subaccount Smith Barney Money Market Subaccount LMPVPIII Money Market Subaccount Mercury Large Cap Core Subaccount MIST BlackRock Large-Cap Core Subaccount Smith Barney Small Cap Growth Opportunities Subaccount LMPVPV Small Cap Growth Opportunities Subaccount
Mergers: Old Portfolio New Portfolio ------------- ------------- AIM V.I. Premier Equity Portfolio (a) AIM V.I. Core Equity Portfolio (b) Travelers AIM Capital Appreciation Portfolio (a) Met\AIM Capital Appreciation Portfolio (b) Travelers Convertible Securities Portfolio (a) Lord Abbett Bond Debenture Portfolio (b) Travelers Disciplined Mid Cap Stock Portfolio (a) MIST Batterymarch Mid-Cap Stock Portfolio (b) Travelers Mercury Large Cap Core Portfolio (a) MIST Mercury Large-Cap Core Portfolio (b) Travelers Pioneer Strategic Income Portfolio (a) MIST Pioneer Strategic Income Portfolio (b) Travelers Mid Cap Growth Portfolio (a) MSF BlackRock Aggressive Growth Portfolio (b) Travelers MFS(R) Total Return Portfolio (a) MSF MFS(R) Total Return Portfolio (b) Travelers Salomon Brothers Strategic Total Return Bond MSF Western Asset Management Strategic Bond Portfolio (a) Opportunities Portfolio (b) Travelers Strategic Equity Portfolio (a) MSF FI Large Cap Portfolio (b)
32 NOTES TO FINANCIAL STATEMENTS -- (Continued) 1. BUSINESS -- (Concluded) For the year ended December 31, 2006 - (Continued): Mergers - (continued): Old Portfolio New Portfolio ------------- ------------- Travelers Managed Income Portfolio (a) BlackRock Bond Income Portfolio (b) Van Kampen Enterprise Portfolio (a) Capital Guardian U.S. Equity Portfolio (b)
(a) For the period January 1, 2006 to April 30, 2006 (b) For the period May 1, 2006 to December 31, 2006 Substitutions: Old Portfolio New Portfolio ------------- ------------- AllianceBernstein Large Cap Growth Portfolio (c) T. Rowe Price Large Cap Growth Portfolio (d)
(c) For the period January 1, 2006 to April 30, 2006 (d) For the period May 1, 2006 to December 31, 2006 For the year ended December 31, 2005: Mergers: Old Portfolio New Portfolio ------------- ------------- Travelers MFS Emerging Growth Portfolio MFS Mid Cap Growth Portfolio
Additions: Travelers Managed Allocation Aggressive Portfolio Travelers Managed Allocation Conservative Portfolio Travelers Managed Allocation Moderate Portfolio Travelers Managed Allocation Moderate-Aggressive Portfolio Travelers Managed Allocation Moderate-Conservative Portfolio Travelers Style Focus Small Cap Value Portfolio Not all funds may be available in all states or to all contract owners. This report is prepared for the general information of contract owners and is not an offer of units of Fund BD II or shares of Fund BD II's underlying funds. It should not be used in connection with any offer except in conjunction with the prospectus for Fund BD II product offered by the Company and the prospectuses of the underlying funds, which collectively contain all pertinent information, including additional information on charges and expenses. 2. SIGNIFICANT ACCOUNTING POLICIES The following is a summary of significant accounting policies consistently followed by Fund BD II in the preparation of its financial statements. Investments are valued daily at the net asset values per share of the underlying funds. Short-term investments are reported at fair value based on quoted market prices. Short-term investments, for which there is no reliable quoted market price, are recorded at amortized cost which approximates fair value. Changes in fair values are recorded in the Statement of Operations. Security transactions are recorded on the trade date basis. Realized gains and losses on the sales of investments are computed on the basis of the average cost of the investment sold. Income from dividends and realized gain distributions are recorded on the ex-distribution date. Included in "Other receipts/(payments)" in the Statement of Changes in Net Assets are primarily contract benefits which have been re-deposited with the Company and distributions for payouts. The operations of Fund BD II form a part of the total operations of the Company and are not taxed separately. The Company is taxed as a life insurance company under the provisions of the Internal Revenue Code of 1986 (the "Code"). Under existing federal income tax law, no taxes are payable on the earnings of Fund BD II. Fund BD II is not taxed as a "regulated investment company" under Subchapter M of the Code. 33 NOTES TO FINANCIAL STATEMENTS -- (Continued) 2. SIGNIFICANT ACCOUNTING POLICIES -- (Continued) Net assets allocated to contracts in the payout period are computed according to the Progressive Annuity Table. The assumed investment return is 3.0 percent. The mortality risk is fully borne by the Company and may result in additional amounts being transferred into the variable annuity account by the Company to cover greater longevity of annuitants than expected. Conversely, if amounts allocated exceed amounts required, transfers may be made to the Company. The financial highlights disclosure is comprised of the units, unit values, net assets, investment income ratios, expense ratios and total returns for each Subaccount. Since each Subaccount offers multiple contract charges, certain information is provided in the form of a range. The range information may reflect varying time periods if assets did not exist with all contract charge options of the Subaccount for the entire year. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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. 3. CONTRACT CHARGES The asset-based charges listed below are deducted, as appropriate, each business day and are assessed through the calculation of accumulation and/or annuity unit values: - - Mortality and expense risks assumed by the Company ("M&E") - - Administrative fees paid for administrative expenses ("ADM") Below is a table displaying separate account charges with their associated products offered in Fund BD II for each funding option. The table displays Standard ("S") and Enhanced ("E") Death Benefit ("Dth Ben") designations.
Asset-based Charges ----------------------------------------- Dth Total Separate Account Charge (1) Ben Product M&E ADM Charge --------------------------- ----- ----------- ----- ----- ------- Separate Account Charge 1.17% S Vintage Annuity 1.02% 0.15% 1.17% Separate Account Charge 1.45% E Vintage Annuity 1.30% 0.15% 1.45%
(1) Certain accumulation and annuity unit values may not be available through certain Subaccounts. For contracts in the accumulation phase with a contract value less than $40,000, an annual charge of $30 (prorated for partial periods) is assessed through the redemption of units and paid to the Company to cover administrative charges. No sales charges are deducted from participant purchase payments when they are received. However, a withdrawal charge for withdrawals from the Contract will be calculated as a percentage of the purchase payments withdrawn. The maximum charge, applied to the amount withdrawn, is 6% decreasing to 0% after six full years. For a full explanation of product charges and associated product features and benefits, please refer to your product prospectus. 34 NOTES TO FINANCIAL STATEMENTS -- (Continued) 4. STATEMENT OF INVESTMENTS
As of and for the period ended December 31, 2006 --------------------------------------------------------- INVESTMENTS No. of Market Cost of Proceeds Shares Value Purchases from Sales ------------ ------------ ------------ ------------ AIM Variable Insurance Funds (0.0%) AIM V.I. Core Equity Subaccount (Series I) (Cost $57,582) 2,296 $ 62,493 $ 161,486 $ 105,839 AIM V.I. Premier Equity Subaccount (Series I) (Cost $0) -- -- 1,668 169,148 ------------ ------------ ------------ ------------ Total (Cost $57,582) 2,296 $ 62,493 $ 163,154 $ 274,987 ============ ============ ============ ============ AllianceBernstein Variable Products Series Fund, Inc. (0.0%) AllianceBernstein Large-Cap Growth Subaccount (Class B) Total (Cost $0) -- $ -- $ 264,564 $ 642,389 ============ ============ ============ ============ American Funds Insurance Series (6.8%) American Funds Global Growth Subaccount (Class 2) (Cost $4,835,878) 284,884 $ 6,634,953 $ 2,127,373 $ 1,665,413 American Funds Growth Subaccount (Class 2) (Cost $7,295,099) 157,689 10,104,714 1,628,925 3,099,060 American Funds Growth-Income Subaccount (Class 2) (Cost $7,546,194) 235,444 9,933,395 1,252,356 3,399,084 ------------ ------------ ------------ ------------ Total (Cost $19,677,171) 678,017 $ 26,673,062 $ 5,008,654 $ 8,163,557 ============ ============ ============ ============ Dreyfus Variable Investment Fund (1.1%) Dreyfus VIF Developing Leaders Subaccount (Initial Shares) Total (Cost $4,608,522) 106,177 $ 4,462,626 $ 715,534 $ 1,806,254 ============ ============ ============ ============ Legg Mason Partners Investment Series (0.3%) LMPIS Dividend Strategy Subaccount (Cost $175,879) 20,646 $ 207,284 $ 78,464 $ 152,206 LMPIS Premier Selections All Cap Growth Subaccount (Cost $910,337) 83,389 1,115,743 55,003 389,375 ------------ ------------ ------------ ------------ Total (Cost $1,086,216) 104,035 $ 1,323,027 $ 133,467 $ 541,581 ============ ============ ============ ============ Legg Mason Partners Lifestyle Series, Inc. (2.8%) LMPLS Balanced Subaccount (Cost $5,781,619) 506,217 $ 6,337,833 $ 181,396 $ 1,337,555 LMPLS Growth Subaccount (Cost $3,429,032) 319,614 3,662,773 69,950 593,110 LMPLS High Growth Subaccount (Cost $745,642) 64,516 914,198 15,666 61,020 ------------ ------------ ------------ ------------ Total (Cost $9,956,293) 890,347 $ 10,914,804 $ 267,012 $ 1,991,685 ============ ============ ============ ============ Legg Mason Partners Variable Portfolios V (0.2%) LMPVPV Small Cap Growth Opportunities Subaccount Total (Cost $811,405) 77,268 $ 883,178 $ 340,766 $ 578,254 ============ ============ ============ ============ Legg Mason Partners Variable Portfolios I, Inc. (1.6%) LMPVPI Investors Subaccount (Class I) (Cost $3,900,153) 304,045 $ 5,031,942 $ 406,043 $ 2,087,786 LMPVPI Total Return Subaccount (Class I) (Cost $1,111,694) 106,420 1,306,837 121,259 436,217 ------------ ------------ ------------ ------------ Total (Cost $5,011,847) 410,465 $ 6,338,779 $ 527,302 $ 2,524,003 ============ ============ ============ ============ Legg Mason Partners Variable Portfolios II (12.1%) LMPVPII Equity Index Subaccount (Class II) (Cost $2,185,439) 72,897 $ 2,487,979 $ 136,275 $ 906,829 LMPVPII Fundamental Value Subaccount (Cost $36,165,760) 1,985,688 45,253,836 2,685,822 15,993,783 ------------ ------------ ------------ ------------ Total (Cost $38,351,199) 2,058,585 $ 47,741,815 $ 2,822,097 $ 16,900,612 ============ ============ ============ ============ Legg Mason Partners Variable Portfolios III, Inc. (23.1%) LMPVPIII High Income Subaccount (Cost $13,863,025) 1,522,076 $ 11,126,375 $ 1,035,218 $ 3,957,792 LMPVPIII International All Cap Growth Subaccount (Cost $11,324,754) 1,143,336 19,756,841 990,313 5,532,337 LMPVPIII Large Cap Growth Subaccount (Cost $16,050,675) 1,212,447 19,120,285 118,518 10,347,884 LMPVPIII Large Cap Value Subaccount (Cost $26,309,692) 1,443,664 31,341,949 1,084,160 10,197,224 LMPVPIII Money Market Subaccount (Cost $9,625,060) 9,625,060 9,625,060 3,863,868 6,586,321 ------------ ------------ ------------ ------------ Total (Cost $77,173,206) 14,946,583 $ 90,970,510 $ 7,092,077 $ 36,621,558 ============ ============ ============ ============ Met Investors Series Trust (13.4%) MIST Batterymarch Mid-Cap Stock Subaccount (Class A) (Cost $6,826,742) 338,429 $ 6,575,685 $ 8,881,784 $ 1,926,105 MIST BlackRock Large-Cap Core Subaccount (Class A) (Cost $2,905,339) 277,179 3,104,406 3,811,985 894,075 MIST Lord Abbett Bond Debenture Subaccount (Class A) (Cost $1,737,652) 146,796 1,836,416 2,473,042 745,130 MIST Met/AIM Capital Appreciation Subaccount (Class A) (Cost $27,415,008) 2,251,262 24,381,170 33,028,240 5,352,956 MIST Pioneer Strategic Income Subaccount (Class A) (Cost $16,875,013) 1,781,170 16,849,871 21,364,876 4,584,317 ------------ ------------ ------------ ------------ Total (Cost $55,759,754) 4,794,836 $ 52,747,548 $ 69,559,927 $ 13,502,583 ============ ============ ============ ============
35 NOTES TO FINANCIAL STATEMENTS -- (Continued) 4. STATEMENT OF INVESTMENTS -- (Continued)
As of and for the period ended December 31, 2006 -- (Continued) --------------------------------------------------------- INVESTMENTS No. of Market Cost of Proceeds Shares Value Purchases from Sales ------------ ------------ ------------ ------------ Metropolitan Series Fund, Inc. (38.6%) MSF BlackRock Aggressive Growth Subaccount (Class D) (Cost $13,657,068) 566,367 $ 13,479,532 $ 17,299,808 $ 3,452,866 MSF BlackRock Bond Income Subaccount (Class E) (Cost $8,387,602) 81,540 8,797,367 10,539,519 2,207,691 MSF Capital Guardian U.S. Equity Subaccount (Class A) (Cost $20,340,339) 1,589,090 21,134,893 25,021,512 4,650,544 MSF FI Large Cap Subaccount (Class A) (Cost $49,787,952) 3,373,968 51,014,390 61,114,084 10,859,137 MSF MFS(R) Total Return Subaccount (Class F) (Cost $49,408,296) 343,535 53,375,079 62,397,408 13,261,232 MSF T. Rowe Price Large Cap Growth Subaccount (Class B) (Cost $418,868) 29,842 453,304 612,437 192,973 MSF Western Asset Management Strategic Bond Opportunities Subaccount (Class A) (Cost $3,510,658) 293,957 3,697,975 4,621,711 1,141,645 ------------ ------------ ------------ ------------ Total (Cost $145,510,783) 6,278,299 $151,952,540 $181,606,479 $ 35,766,088 ============ ============ ============ ============ The Travelers Series Trust (0.0%) Travelers AIM Capital Appreciation Subaccount (Cost $0) -- $ -- $ 161,106 $ 32,913,343 Travelers Convertible Securities Subaccount (Cost $0) -- -- 55,619 3,582,094 Travelers Disciplined Mid Cap Stock Subaccount (Cost $0) -- -- 1,609,074 9,609,311 Travelers Managed Income Subaccount (Cost $0) -- -- 229,956 12,534,074 Travelers Mercury Large Cap Core Subaccount (Cost $0) -- -- 175,276 4,087,781 Travelers MFS(R) Mid Cap Growth Subaccount (Cost $0) -- -- 935,296 18,984,313 Travelers MFS(R) Total Return Subaccount (Cost $0) -- -- 1,790,788 68,438,052 Travelers Pioneer Strategic Income Subaccount (Cost $0) -- -- 226,695 22,867,238 Travelers Salomon Brothers Strategic Total Return Bond Subaccount (Cost $0) -- -- 144,692 5,064,983 Travelers Strategic Equity Subaccount (Cost $0) -- -- 2,708,476 67,066,407 Travelers Van Kampen Enterprise Subaccount (Cost $0) -- -- 672,607 27,641,400 ------------ ------------ ------------ ------------ Total (Cost $0) -- $ -- $ 8,709,585 $272,788,996 ============ ============ ============ ============
36 NOTES TO FINANCIAL STATEMENTS -- (Continued) 5. FINANCIAL HIGHLIGHTS
Expense Total Year Unit Value Net Investment(1) Ratio(2) Return(3) Ended Units Lowest to Assets Income Lowest to Lowest to Dec 31 (000s) Highest ($) ($000s) Ratio (%) Highest (%) Highest (%) ------ ------ ------------- ------- ------------- ----------- ----------------- AIM Variable Insurance Funds AIM V.I. Core Equity Subaccount (Series I) 2006 58 1.081 - 1.083 62 0.35 1.17 - 1.45 8.10 - 8.30 AIM V.I. Premier Equity Subaccount (Series I) 2006 -- 0.855 - 0.867 -- 1.02 1.17 - 1.45 5.04 - 5.09 2005 194 0.814 - 0.825 160 0.78 1.17 - 1.45 4.09 - 4.43 2004 228 0.782 - 0.790 180 0.28 1.17 - 1.45 4.27 - 4.64 2003 556 0.750 - 0.755 420 0.31 1.17 - 1.45 23.36 - 23.57 2002 453 0.611 277 0.23 1.17 (31.04) AllianceBernstein Variable Products Series Fund, Inc. AllianceBernstein Large-Cap Growth Subaccount (Class B) 2006 -- 0.839 - 0.852 -- -- 1.17 - 1.45 (1.99) - (1.84) 2005 441 0.868 382 -- 1.17 13.61 2004 552 0.757 - 0.764 422 -- 1.17 - 1.45 6.77 - 7.00 2003 544 0.709 - 0.714 389 -- 1.17 - 1.45 21.61 - 22.05 2002 600 0.583 - 0.585 351 -- 1.17 - 1.45 (31.81) - (31.74) American Funds Insurance Series American Funds Global Growth Subaccount (Class 2) 2006 4,473 1.463 - 1.487 6,635 0.88 1.17 - 1.45 18.65 - 19.06 2005 4,093 1.233 - 1.249 5,105 0.68 1.17 - 1.45 12.40 - 12.73 2004 3,595 1.097 - 1.108 3,977 0.45 1.17 - 1.45 11.94 - 12.15 2003 2,808 0.980 - 0.988 2,770 0.41 1.17 - 1.45 33.33 - 33.69 2002 1,858 0.735 - 0.739 1,371 1.12 1.17 - 1.45 (15.90) - (15.64) American Funds Growth Subaccount (Class 2) 2006 8,478 1.178 - 1.197 10,104 0.77 1.17 - 1.45 8.67 - 8.92 2005 9,767 1.084 - 1.099 10,695 0.72 1.17 - 1.45 14.47 - 14.84 2004 9,854 0.947 - 0.957 9,404 0.18 1.17 - 1.45 10.89 - 11.28 2003 9,808 0.854 - 0.860 8,425 0.13 1.17 - 1.45 34.91 - 35.22 2002 6,515 0.633 - 0.636 4,141 0.04 1.17 - 1.45 (25.53) - (25.35) American Funds Growth-Income Subaccount (Class 2) 2006 7,509 1.307 - 1.328 9,933 1.45 1.17 - 1.45 13.55 - 13.89 2005 9,455 1.151 - 1.166 10,994 1.27 1.17 - 1.45 4.35 - 4.57 2004 11,389 1.103 - 1.115 12,669 0.86 1.17 - 1.45 8.78 - 9.10 2003 12,242 1.014 - 1.022 12,494 1.11 1.17 - 1.45 30.50 - 30.86 2002 9,691 0.777 - 0.781 7,559 1.22 1.17 - 1.45 (19.48) - (19.23) Dreyfus Variable Investment Fund Dreyfus VIF Developing Leaders Subaccount (Initial Shares) 2006 3,385 1.292 - 1.324 4,462 0.42 1.17 - 1.45 2.22 - 2.56 2005 4,572 1.264 - 1.291 5,880 -- 1.17 - 1.45 4.29 - 4.53 2004 5,801 1.212 - 1.235 7,140 0.18 1.17 - 1.45 9.78 - 10.07 2003 7,459 1.104 - 1.122 8,350 0.03 1.17 - 1.45 29.73 - 30.16 2002 8,522 0.851 - 0.862 7,334 0.04 1.17 - 1.45 (20.24) - (20.04) Legg Mason Partners Investment Series LMPIS Dividend Strategy Subaccount 2006 221 0.924 - 0.939 207 1.82 1.17 - 1.45 16.23 - 16.65 2005 314 0.795 - 0.805 252 1.56 1.17 - 1.45 (1.61) - (1.35) 2004 386 0.808 - 0.816 315 0.75 1.17 - 1.45 1.89 - 2.13 2003 543 0.793 - 0.799 434 0.66 1.17 - 1.45 21.63 - 21.98 2002 134 0.652 - 0.655 88 0.77 1.17 - 1.45 (26.99) - (26.82)
37 NOTES TO FINANCIAL STATEMENTS -- (Continued) 5. FINANCIAL HIGHLIGHTS -- (Continued)
Expense Total Year Unit Value Net Investment(1) Ratio(2) Return(3) Ended Units Lowest to Assets Income Lowest to Lowest to Dec 31 (000s) Highest ($) ($000s) Ratio (%) Highest (%) Highest (%) ------ ------ ------------- ------- ------------- ----------- ----------------- Legg Mason Partners Investment Series -- (Continued) LMPIS Premier Selections All Cap Growth Subaccount 2006 1,147 0.960 - 0.975 1,116 -- 1.17 - 1.45 5.84 - 6.09 2005 1,530 0.907 - 0.919 1,402 0.12 1.17 - 1.45 4.73 - 5.03 2004 1,802 0.866 - 0.875 1,573 -- 1.17 - 1.45 1.41 - 1.74 2003 1,794 0.854 - 0.860 1,541 -- 1.17 - 1.45 32.40 - 32.72 2002 1,451 0.645 - 0.648 939 0.07 1.17 - 1.45 (27.85) - (27.68) Legg Mason Partners Lifestyle Series, Inc. LMPLS Balanced Subaccount 2006 3,966 1.566 - 1.609 6,337 2.70 1.17 - 1.45 6.68 - 6.91 2005 4,790 1.468 - 1.505 7,164 2.01 1.17 - 1.45 1.03 - 1.35 2004 6,280 1.453 - 1.485 9,278 2.18 1.17 - 1.45 6.06 - 6.38 2003 7,673 1.370 - 1.396 10,669 2.48 1.17 - 1.45 18.61 - 18.91 2002 9,000 1.155 - 1.174 10,530 6.47 1.17 - 1.45 (7.82) - (7.56) LMPLS Growth Subaccount 2006 2,499 1.443 - 1.483 3,663 1.88 1.17 - 1.45 7.29 - 7.62 2005 2,890 1.345 - 1.378 3,946 1.49 1.17 - 1.45 3.30 - 3.53 2004 3,264 1.302 - 1.331 4,312 1.44 1.17 - 1.45 7.07 - 7.43 2003 4,109 1.216 - 1.239 5,061 1.59 1.17 - 1.45 28.00 - 28.39 2002 4,791 0.950 - 0.965 4,605 10.56 1.17 - 1.45 (19.22) - (19.04) LMPLS High Growth Subaccount 2006 583 1.527 - 1.570 914 1.07 1.17 - 1.45 7.84 - 8.20 2005 614 1.416 - 1.451 888 0.45 1.17 - 1.45 4.58 - 4.84 2004 755 1.354 - 1.384 1,042 0.28 1.17 - 1.45 9.02 - 9.32 2003 1,181 1.242 - 1.266 1,492 0.45 1.17 - 1.45 34.85 - 35.26 2002 2,252 0.921 - 0.936 2,106 1.07 1.17 - 1.45 (24.82) - (24.64) Legg Mason Partners Variable Portfolios V LMPVPV Small Cap Growth Opportunties Subaccount 2006 687 1.270 - 1.290 883 -- 1.17 - 1.45 11.31 - 11.59 2005 922 1.141 - 1.156 1,065 -- 1.17 - 1.45 3.35 - 3.68 2004 1,164 1.104 - 1.115 1,297 0.07 1.17 - 1.45 13.93 - 14.24 2003 1,392 0.969 - 0.976 1,359 -- 1.17 - 1.45 40.03 - 40.23 2002 611 0.692 - 0.696 425 -- 1.17 - 1.45 (26.77) - (26.50) Legg Mason Partners Variable Portfolios I, Inc. LMPVPI Investors Subaccount (Class I) 2006 3,139 1.574 - 1.613 5,032 1.46 1.17 - 1.45 16.59 - 16.88 2005 4,372 1.350 - 1.380 6,005 1.09 1.17 - 1.45 4.98 - 5.34 2004 5,440 1.286 - 1.310 7,105 1.32 1.17 - 1.45 8.80 - 9.08 2003 6,826 1.182 - 1.201 8,179 1.31 1.17 - 1.45 30.46 - 30.83 2002 8,316 0.906 - 0.918 7,623 1.03 1.17 - 1.45 (24.18) - (23.94)
38 NOTES TO FINANCIAL STATEMENTS -- (Continued) 5. FINANCIAL HIGHLIGHTS -- (Continued)
Expense Total Year Unit Value Net Investment(1) Ratio(2) Return(3) Ended Units Lowest to Assets Income Lowest to Lowest to Dec 31 (000s) Highest ($) ($000s) Ratio (%) Highest (%) Highest (%) ------ ------ ------------- ------- ------------- ----------- ----------------- Legg Mason Partners Variable Portfolios I, Inc. -- (Continued) LMPVPI Total Return Subaccount (Class I) 2006 984 1.306 - 1.338 1,307 1.84 1.17 - 1.45 10.96 - 11.22 2005 1,255 1.177 - 1.203 1,500 1.81 1.17 - 1.45 1.82 - 2.12 2004 1,623 1.156 - 1.178 1,903 1.72 1.17 - 1.45 7.24 - 7.48 2003 1,993 1.078 - 1.096 2,176 1.55 1.17 - 1.45 14.19 - 14.64 2002 2,122 0.944 - 0.956 2,024 1.48 1.17 - 1.45 (8.17) - (7.99) Legg Mason Partners Variable Portfolios II LMPVPII Equity Index Subaccount (Class II) 2006 2,386 1.023 - 1.046 2,488 1.21 1.17 - 1.45 13.41 - 13.82 2005 3,202 0.902 - 0.919 2,937 1.03 1.17 - 1.45 2.73 - 3.03 2004 4,424 0.878 - 0.892 3,941 1.26 1.17 - 1.45 8.66 - 9.05 2003 5,292 0.808 - 0.818 4,328 1.05 1.17 - 1.45 25.86 - 26.23 2002 5,391 0.642 - 0.648 3,492 1.77 1.17 - 1.45 (23.48) - (23.31) LMPVPII Fundamental Value Subaccount 2006 13,408 3.290 - 3.404 45,251 1.44 1.17 - 1.45 15.12 - 15.47 2005 18,284 2.858 - 2.948 53,536 0.85 1.17 - 1.45 3.29 - 3.55 2004 23,791 2.767 - 2.847 67,335 0.61 1.17 - 1.45 6.63 - 6.95 2003 28,725 2.595 - 2.662 76,079 0.58 1.17 - 1.45 36.65 - 37.08 2002 35,154 1.899 - 1.942 67,998 0.96 1.17 - 1.45 (22.43) - (22.23) Legg Mason Partners Variable Portfolios III, Inc. LMPVPIII High Income Subaccount 2006 6,012 1.799 - 1.863 11,126 6.94 1.17 - 1.45 9.36 - 9.65 2005 8,081 1.645 - 1.699 13,644 6.55 1.17 - 1.45 1.17 - 1.43 2004 12,224 1.626 - 1.675 20,374 7.24 1.17 - 1.45 8.84 - 9.19 2003 16,613 1.494 - 1.534 25,383 6.91 1.17 - 1.45 25.65 - 26.05 2002 19,770 1.189 - 1.217 23,989 22.09 1.17 - 1.45 (4.57) - (4.40) LMPVPIII International All Cap Growth Subaccount 2006 12,117 1.585 - 1.642 19,756 1.97 1.17 - 1.45 24.02 - 24.39 2005 15,624 1.278 - 1.320 20,504 1.27 1.17 - 1.45 10.08 - 10.46 2004 19,838 1.161 - 1.195 23,606 0.89 1.17 - 1.45 16.22 - 16.47 2003 23,708 0.999 - 1.026 24,223 0.94 1.17 - 1.45 25.66 - 26.04 2002 35,190 0.795 - 0.814 28,580 0.88 1.17 - 1.45 (26.80) - (26.60) LMPVPIII Large Cap Growth Subaccount 2006 13,048 1.435 - 1.471 19,119 0.13 1.17 - 1.45 3.09 - 3.37 2005 20,239 1.392 - 1.423 28,718 0.12 1.17 - 1.45 3.65 - 4.02 2004 27,054 1.343 - 1.368 36,935 0.33 1.17 - 1.45 (1.03) - (0.80) 2003 32,937 1.357 - 1.379 45,351 0.02 1.17 - 1.45 45.44 - 45.93 2002 35,908 0.933 - 0.945 33,913 0.31 1.17 - 1.45 (25.89) - (25.71) LMPVPIII Large Cap Value Subaccount 2006 12,119 2.516 - 2.606 31,340 1.13 1.17 - 1.45 16.59 - 16.91 2005 16,199 2.158 - 2.229 35,879 1.39 1.17 - 1.45 4.96 - 5.24 2004 22,397 2.056 - 2.118 47,200 1.75 1.17 - 1.45 9.01 - 9.34 2003 27,443 1.886 - 1.937 52,937 1.62 1.17 - 1.45 25.82 - 26.11 2002 33,751 1.499 - 1.536 51,646 3.53 1.17 - 1.45 (26.52) - (26.26)
39 NOTES TO FINANCIAL STATEMENTS -- (Continued) 5. FINANCIAL HIGHLIGHTS -- (Continued)
Expense Total Year Unit Value Net Investment(1) Ratio(2) Return(3) Ended Units Lowest to Assets Income Lowest to Lowest to Dec 31 (000s) Highest ($) ($000s) Ratio (%) Highest (%) Highest (%) ------ ------ ------------- ------- ------------- ----------- ----------------- Legg Mason Partners Variable Portfolios III, Inc. -- (Continued) LMPVPIII Money Market Subaccount 2006 7,051 1.327 - 1.374 9,624 4.50 1.17 - 1.45 3.19 - 3.39 2005 9,342 1.286 - 1.329 12,347 2.70 1.17 - 1.45 1.26 - 1.61 2004 15,130 1.270 - 1.308 19,692 0.83 1.17 - 1.45 (0.55) - (0.23) 2003 27,759 1.277 - 1.311 36,278 0.68 1.17 - 1.45 (0.78) - (0.53) 2002 49,870 1.287 - 1.318 65,591 1.26 1.17 - 1.45 (0.16) - 0.08 Met Investors Series Trust MIST Batterymarch Mid-Cap Stock Subaccount (Class A) 2006 3,384 1.905 - 1.952 6,575 -- 1.17 - 1.45 (4.70) - (4.50) MIST BlackRock Large-Cap Core Subaccount (Class A) 2006 2,716 1.123 - 1.150 3,104 -- 1.17 - 1.45 6.04 - 6.19 MIST Lord Abbett Bond Debenture Subaccount (Class A) 2006 1,077 1.676 - 1.717 1,836 -- 1.17 - 1.45 4.88 - 5.08 MIST Met/AIM Capital Appreciation Subaccount (Class A) 2006 16,214 1.467 - 1.514 24,380 0.17 1.17 - 1.45 (1.15) - (0.92) MIST Pioneer Strategic Income Subaccount (Class A) 2006 8,655 1.894 - 1.961 16,849 4.21 1.17 - 1.45 3.72 - 3.87 Metropolitan Series Fund, Inc. MSF BlackRock Aggressive Growth Subaccount (Class D) 2006 12,298 1.092 - 1.097 13,479 -- 1.17 - 1.45 (2.24) - (2.14) MSF BlackRock Bond Income Subaccount (Class E) 2006 5,313 1.614 - 1.672 8,797 -- 1.17 - 1.45 3.86 - 4.11 MSF Capital Guardian U.S. Equity Subaccount (Class A) 2006 9,853 2.085 - 2.160 21,133 -- 1.17 - 1.45 2.86 - 3.10 MSF FI Large Cap Subaccount (Class A) 2006 50,213 1.014 - 1.016 51,011 -- 1.17 - 1.45 1.40 - 1.60 MSF MFS(R) Total Return Subaccount (Class F) 2006 19,083 2.720 - 2.817 53,371 -- 1.17 - 1.45 7.00 - 7.19 MSF T. Rowe Price Large Cap Growth Subaccount (Class B) 2006 423 1.070 - 1.072 453 -- 1.17 - 1.45 7.21 - 7.41 MSF Western Asset Management Strategic Bond Opportunities Subaccount (Class A) 2006 1,954 1.839 - 1.905 3,698 -- 1.17 - 1.45 4.37 - 4.56 The Travelers Series Trust Travelers AIM Capital Appreciation Subaccount 2006 -- 1.484 - 1.528 -- -- 1.17 - 1.45 6.61 - 6.63 2005 21,617 1.392 - 1.433 30,796 0.20 1.17 - 1.45 7.16 - 7.50 2004 28,740 1.299 - 1.333 38,143 0.13 1.17 - 1.45 4.93 - 5.21 2003 35,645 1.238 - 1.267 44,974 -- 1.17 - 1.45 27.50 - 27.85 2002 44,035 0.971 - 0.991 43,494 -- 1.17 - 1.45 (24.96) - (24.75)
40 NOTES TO FINANCIAL STATEMENTS -- (Continued) 5. FINANCIAL HIGHLIGHTS -- (Continued)
Expense Total Year Unit Value Net Investment(1) Ratio(2) Return(3) Ended Units Lowest to Assets Income Lowest to Lowest to Dec 31 (000s) Highest ($) ($000s) Ratio (%) Highest (%) Highest (%) ------ ------ ------------- ------- ------------- ----------- ----------------- The Travelers Series Trust -- (Continued) Travelers Convertible Securities Subaccount 2006 -- 1.598 - 1.634 -- 0.64 1.17 - 1.45 6.68 - 6.73 2005 2,194 1.498 - 1.531 3,348 2.27 1.17 - 1.45 (1.12) - (0.78) 2004 3,237 1.515 - 1.543 4,985 1.92 1.17 - 1.45 4.77 - 5.04 2003 3,979 1.446 - 1.469 5,836 3.21 1.17 - 1.45 24.44 - 24.81 2002 3,254 1.162 - 1.177 3,824 7.24 1.17 - 1.45 (8.29) - (8.05) Travelers Disciplined Mid Cap Stock Subaccount 2006 -- 1.999 - 2.044 -- 0.53 1.17 - 1.45 9.29 - 9.36 2005 4,627 1.829 - 1.869 8,616 -- 1.17 - 1.45 10.78 - 11.12 2004 6,262 1.651 - 1.682 10,500 0.26 1.17 - 1.45 14.81 - 15.13 2003 7,781 1.438 - 1.461 11,344 0.29 1.17 - 1.45 31.81 - 32.22 2002 8,545 1.091 - 1.105 9,429 0.55 1.17 - 1.45 (15.56) - (15.33) Travelers Managed Income Subaccount 2006 -- 1.554 - 1.606 -- 1.88 1.17 - 1.45 (0.89) - (0.80) 2005 7,829 1.568 - 1.619 12,577 3.21 1.17 - 1.45 (0.06) - 0.19 2004 10,205 1.569 - 1.616 16,396 4.07 1.17 - 1.45 1.36 - 1.64 2003 13,649 1.548 - 1.590 21,597 3.47 1.17 - 1.45 6.91 - 7.22 2002 18,488 1.448 - 1.483 27,324 10.83 1.17 - 1.45 0.70 - 0.95 Travelers Mercury Large Cap Core Subaccount 2006 -- 1.059 - 1.083 -- 0.21 1.17 - 1.45 6.22 - 6.28 2005 3,738 0.997 - 1.019 3,790 -- 1.17 - 1.45 10.41 - 10.76 2004 4,409 0.903 - 0.920 4,040 0.54 1.17 - 1.45 14.30 - 14.57 2003 5,029 0.790 - 0.803 4,026 0.63 1.17 - 1.45 19.34 - 19.67 2002 6,348 0.662 - 0.671 4,246 0.51 1.17 - 1.45 (26.20) - (25.94) Travelers MFS(R) Mid Cap Growth Subaccount 2006 -- 1.117 - 1.121 -- -- 1.17 - 1.45 5.88 - 5.95 2005 16,904 1.055 - 1.058 17,871 -- 1.17 - 1.45 5.50 - 5.80 Travelers MFS(R) Total Return Subaccount 2006 -- 2.542 - 2.628 -- 1.28 1.17 - 1.45 3.29 - 3.38 2005 26,115 2.461 - 2.542 65,973 1.92 1.17 - 1.45 1.44 - 1.76 2004 34,693 2.426 - 2.498 86,231 2.46 1.17 - 1.45 9.87 - 10.14 2003 43,617 2.208 - 2.268 98,463 2.10 1.17 - 1.45 14.88 - 15.19 2002 52,805 1.922 - 1.969 103,552 5.58 1.17 - 1.45 (6.65) - (6.37)
41 NOTES TO FINANCIAL STATEMENTS -- (Continued) 5. FINANCIAL HIGHLIGHTS -- (Concluded)
Expense Total Year Unit Value Net Investment(1) Ratio(2) Return(3) Ended Units Lowest to Assets Income Lowest to Lowest to Dec 31 (000s) Highest ($) ($000s) Ratio (%) Highest (%) Highest (%) ------ ------ ------------- ------- ------------- ----------- ----------------- The Travelers Series Trust -- (Continued) Travelers Pioneer Strategic Income Subaccount 2006 -- 1.826 - 1.888 -- -- 1.17 - 1.45 1.05 - 1.12 2005 12,028 1.807 - 1.867 22,314 3.62 1.17 - 1.45 2.15 - 2.47 2004 15,684 1.769 - 1.822 28,424 6.10 1.17 - 1.45 9.33 - 9.69 2003 20,709 1.618 - 1.661 34,258 8.29 1.17 - 1.45 17.84 - 18.14 2002 24,944 1.373 - 1.406 34,936 22.32 1.17 - 1.45 4.33 - 4.61 Travelers Salomon Brothers Strategic Total Return Bond Subaccount 2006 -- 1.762 - 1.822 -- 2.02 1.17 - 1.45 (1.56) - (1.41) 2005 2,759 1.790 - 1.848 5,066 3.31 1.17 - 1.45 0.90 - 1.15 2004 3,891 1.774 - 1.827 7,076 5.10 1.17 - 1.45 4.72 - 5.06 2003 5,463 1.694 - 1.739 9,463 5.08 1.17 - 1.45 11.74 - 11.98 2002 6,995 1.516 - 1.553 10,826 12.12 1.17 - 1.45 6.76 - 7.10 Travelers Strategic Equity Subaccount 2006 -- 2.509 - 2.594 -- 0.35 1.17 - 1.45 4.41 - 4.51 2005 25,924 2.403 - 2.482 63,950 0.55 1.17 - 1.45 0.54 - 0.85 2004 34,417 2.390 - 2.461 84,282 1.31 1.17 - 1.45 8.64 - 8.94 2003 42,706 2.200 - 2.259 96,052 -- 1.17 - 1.45 30.64 - 31.03 2002 52,312 1.684 - 1.724 89,867 0.52 1.17 - 1.45 (34.53) - (34.37) Travelers Van Kampen Enterprise Subaccount 2006 -- 2.027 - 2.095 -- 0.03 1.17 - 1.45 3.90 - 3.97 2005 13,242 1.951 - 2.015 26,519 0.09 1.17 - 1.45 6.26 - 6.56 2004 17,807 1.836 - 1.891 33,511 0.50 1.17 - 1.45 2.34 - 2.66 2003 22,110 1.794 - 1.842 40,557 0.14 1.17 - 1.45 23.81 - 24.12 2002 27,062 1.449 - 1.484 40,003 0.69 1.17 - 1.45 (30.37) - (30.16)
1 These amounts represent the dividends, excluding distributions of capital gains, received by the Subaccount from the underlying mutual fund, net of management fees assessed by the fund manager, divided by the average net assets. These ratios exclude those expenses, such as mortality and expense 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 Subaccount is affected by the timing of the declaration of dividends by the underlying fund in which the Subaccount invests. 2 These amounts represent the annualized contract expenses of the Separate Account, consisting primarily of mortality and expense charges, for each period indicated. The ratios include only those expenses that result in a direct reduction to unit values. Charges made directly to contract owner accounts through the redemption of units and expenses of the underlying fund have been excluded. 3 These amounts represent the total return for the period 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. The total return is calculated for each period indicated or from the effective date through the end of the reporting period. As the total return is presented as a range of minimum to maximum values, based on the product grouping representing the minimum and maximum expense ratio amounts, some individual contract total returns are not within the ranges presented. 42 NOTES TO FINANCIAL STATEMENTS -- (Continued) 6. Schedules of Accumulation and Annuity Units for the years ended December 31, 2006 and 2005
AllianceBernstein AIM V.I. Core Equity AIM V.I. Premier Equity Large-Cap Growth Subaccount (Series I) Subaccount (Series I) Subaccount (Class B) -------------------------- -------------------------- -------------------------- 2006 2005 2006 2005 2006 2005 ----------- ----------- ----------- ----------- ----------- ----------- Accumulation and annuity units beginning of year .................... -- -- 194,458 227,906 440,737 552,089 Accumulation units purchased and transferred from other funding options 161,157 -- -- 18,892 301,579 16,922 Accumulation units redeemed and transferred to other funding options . (103,456) -- (194,458) (52,340) (742,316) (128,274) Annuity units .......................... -- -- -- -- -- -- ----------- ----------- ----------- ----------- ----------- ----------- Accumulation and annuity units end of year .......................... 57,701 -- -- 194,458 -- 440,737 =========== =========== =========== =========== =========== ===========
American Funds Global Growth American Funds Growth American Funds Growth- Subaccount (Class 2) Subaccount (Class 2) Income Subaccount (Class 2) -------------------------- -------------------------- -------------------------- 2006 2005 2006 2005 2006 2005 ----------- ----------- ----------- ----------- ----------- ----------- Accumulation and annuity units beginning of year .................... 4,093,144 3,594,782 9,767,219 9,854,418 9,455,013 11,388,796 Accumulation units purchased and transferred from other funding options 1,720,472 1,812,393 1,668,721 2,946,022 909,172 1,857,458 Accumulation units redeemed and transferred to other funding options . (1,340,814) (1,314,031) (2,958,018) (3,033,221) (2,855,089) (3,791,241) Annuity units .......................... -- -- -- -- -- -- ----------- ----------- ----------- ----------- ----------- ----------- Accumulation and annuity units end of year .......................... 4,472,802 4,093,144 8,477,922 9,767,219 7,509,096 9,455,013 =========== =========== =========== =========== =========== ===========
Dreyfus VIF Developing Leaders Subaccount LMPIS Dividend Strategy LMPIS Premier Selections (Initial Shares) Subaccount All Cap Growth Subaccount -------------------------- -------------------------- -------------------------- 2006 2005 2006 2005 2006 2005 ----------- ----------- ----------- ----------- ----------- ----------- Accumulation and annuity units beginning of year .................... 4,572,225 5,800,524 313,779 386,299 1,529,501 1,801,817 Accumulation units purchased and transferred from other funding options 147,880 371,982 86,218 56,447 20,628 81,022 Accumulation units redeemed and transferred to other funding options . (1,335,054) (1,600,281) (178,548) (128,967) (403,254) (353,338) Annuity units .......................... -- -- -- -- -- -- ----------- ----------- ----------- ----------- ----------- ----------- Accumulation and annuity units end of year .......................... 3,385,051 4,572,225 221,449 313,779 1,146,875 1,529,501 =========== =========== =========== =========== =========== ===========
LMPLS LMPLS LMPLS Balanced Subaccount Growth Subaccount High Growth Subaccount -------------------------- -------------------------- -------------------------- 2006 2005 2006 2005 2006 2005 ----------- ----------- ----------- ----------- ----------- ----------- Accumulation and annuity units beginning of year .................... 4,789,519 6,280,455 2,889,849 3,263,793 613,600 755,363 Accumulation units purchased and transferred from other funding options 4,428 27,257 13,575 10,652 4,458 21,812 Accumulation units redeemed and transferred to other funding options . (828,069) (1,518,193) (404,631) (384,596) (34,646) (163,575) Annuity units .......................... -- -- -- -- -- -- ----------- ----------- ----------- ----------- ----------- ----------- Accumulation and annuity units end of year .......................... 3,965,878 4,789,519 2,498,793 2,889,849 583,412 613,600 =========== =========== =========== =========== =========== ===========
43 NOTES TO FINANCIAL STATEMENTS -- (Continued) 6. Schedules of Accumulation and Annuity Units for the years ended December 31, 2006 and 2005 -- (Continued)
LMPVPV Small Cap Growth LMPVPI Investors LMPVPI Total Return Opportunities Subaccount Subaccount (Class I) Subaccount (Class I) -------------------------- -------------------------- -------------------------- 2006 2005 2006 2005 2006 2005 ----------- ----------- ----------- ----------- ----------- ----------- Accumulation and annuity units beginning of year .................... 922,243 1,164,069 4,372,034 5,440,088 1,255,053 1,623,257 Accumulation units purchased and transferred from other funding options 236,144 384,525 122,453 459,842 58,733 5,508 Accumulation units redeemed and transferred to other funding options . (471,387) (626,351) (1,354,099) (1,526,102) (329,987) (373,712) Annuity units .......................... -- -- (1,607) (1,794) -- -- ----------- ----------- ----------- ----------- ----------- ----------- Accumulation and annuity units end of year .......................... 687,000 922,243 3,138,781 4,372,034 983,799 1,255,053 =========== =========== =========== =========== =========== ===========
LMPVPII Equity Index LMPVPII Fundamental Value LMPVPIII High Income Subaccount (Class II) Subaccount Subaccount -------------------------- -------------------------- -------------------------- 2006 2005 2006 2005 2006 2005 ----------- ----------- ----------- ----------- ----------- ----------- Accumulation and annuity units beginning of year .................... 3,202,282 4,423,985 18,283,836 23,791,330 8,081,068 12,224,107 Accumulation units purchased and transferred from other funding options 36,464 85,093 125,902 218,943 143,842 91,263 Accumulation units redeemed and transferred to other funding options . (852,625) (1,306,796) (5,001,905) (5,725,700) (2,213,184) (4,233,406) Annuity units .......................... -- -- 85 (737) 128 (896) ----------- ----------- ----------- ----------- ----------- ----------- Accumulation and annuity units end of year .......................... 2,386,121 3,202,282 13,407,918 18,283,836 6,011,854 8,081,068 =========== =========== =========== =========== =========== ===========
LMPVPIII International All LMPVPIII Large Cap LMPVPIII Large Cap Cap Growth Subaccount Growth Subaccount Value Subaccount -------------------------- -------------------------- -------------------------- 2006 2005 2006 2005 2006 2005 ----------- ----------- ----------- ----------- ----------- ----------- Accumulation and annuity units beginning of year .................... 15,624,101 19,838,224 20,239,038 27,054,286 16,198,890 22,396,909 Accumulation units purchased and transferred from other funding options 398,799 291,663 102,320 418,350 91,679 128,240 Accumulation units redeemed and transferred to other funding options . (3,906,316) (4,504,726) (7,291,878) (7,231,878) (4,171,055) (6,324,688) Annuity units .......................... 146 (1,060) (1,541) (1,720) (732) (1,571) ----------- ----------- ----------- ----------- ----------- ----------- Accumulation and annuity units end of year .......................... 12,116,730 15,624,101 13,047,939 20,239,038 12,118,782 16,198,890 =========== =========== =========== =========== =========== ===========
MIST Batterymarch MIST BlackRock LMPVPIII MoneyMarket Mid-Cap Stock Large-Cap Core Subaccount Subaccount (Class A) Subaccount (Class A) -------------------------- -------------------------- -------------------------- 2006 2005 2006 2005 2006 2005 ----------- ----------- ----------- ----------- ----------- ----------- Accumulation and annuity units beginning of year .................... 9,341,645 15,130,435 -- -- -- -- Accumulation units purchased and transferred from other funding options 2,778,713 2,803,768 4,386,885 -- 3,476,108 -- Accumulation units redeemed and transferred to other funding options . (5,069,054) (8,592,558) (1,002,884) -- (760,050) -- Annuity units .......................... -- -- -- -- -- -- ----------- ----------- ----------- ----------- ----------- ----------- Accumulation and annuity units end of year .......................... 7,051,304 9,341,645 3,384,001 -- 2,716,058 -- =========== =========== =========== =========== =========== ===========
44 NOTES TO FINANCIAL STATEMENTS -- (Continued) 6. Schedules of Accumulation and Annuity Units for the years ended December 31, 2006 and 2005 -- (Continued)
MIST Lord Abbett Bond MIST Met/AIM Capital MISTPioneer Strategic Debenture Subaccount Appreciation Subaccount Income Subaccount (Class A) (Class A) (Class A) -------------------------- -------------------------- -------------------------- 2006 2005 2006 2005 2006 2005 ----------- ----------- ----------- ----------- ----------- ----------- Accumulation and annuity units beginning of year .................... -- -- -- -- -- -- Accumulation units purchased and transferred from other funding options 1,522,267 -- 19,850,866 -- 11,000,108 -- Accumulation units redeemed and transferred to other funding options . (445,404) -- (3,637,165) -- (2,366,053) -- Annuity units .......................... -- -- -- -- 20,716 -- ----------- ----------- ----------- ----------- ----------- ----------- Accumulation and annuity units end of year .......................... 1,076,863 -- 16,213,701 -- 8,654,771 -- =========== =========== =========== =========== =========== ===========
MSF BlackRock Aggressive MSF BlackRock Bond MSFCapital Guardian U.S. Growth Subaccount (Class D) Income Subaccount (Class E) Equity Subaccount (Class A) -------------------------- -------------------------- -------------------------- 2006 2005 2006 2005 2006 2005 ----------- ----------- ----------- ----------- ----------- ----------- Accumulation and annuity units beginning of year .................... -- -- -- -- -- -- Accumulation units purchased and transferred from other funding options 15,446,249 -- 6,635,861 -- 12,033,740 -- Accumulation units redeemed and transferred to other funding options . (3,147,895) -- (1,343,811) -- (2,192,793) -- Annuity units .......................... -- -- 20,673 -- 12,410 -- ----------- ----------- ----------- ----------- ----------- ----------- Accumulation and annuity units end of year .......................... 12,298,354 -- 5,312,723 -- 9,853,357 -- =========== =========== =========== =========== =========== ===========
MSF FILarge Cap MSF MFS(R) Total Return MSF T. Rowe Price Large Cap Subaccount (Class A) Subaccount (Class F) Growth Subaccount (Class B) -------------------------- -------------------------- -------------------------- 2006 2005 2006 2005 2006 2005 ----------- ----------- ----------- ----------- ----------- ----------- Accumulation and annuity units beginning of year .................... -- -- -- -- -- -- Accumulation units purchased and transferred from other funding options 61,217,727 -- 24,010,084 -- 613,899 -- Accumulation units redeemed and transferred to other funding options . (11,015,511) -- (4,943,269) -- (190,924) -- Annuity units .......................... 10,694 -- 16,013 -- -- -- ----------- ----------- ----------- ----------- ----------- ----------- Accumulation and annuity units end of year .......................... 50,212,910 -- 19,082,828 -- 422,975 -- =========== =========== =========== =========== =========== ===========
MSF Western Asset Management Strategic Bond Opportunities Subaccount Travelers AIMCapital Travelers Convertible (Class A) Appreciation Subaccount Securities Subaccount -------------------------- -------------------------- -------------------------- 2006 2005 2006 2005 2006 2005 ----------- ----------- ----------- ----------- ----------- ----------- Accumulation and annuity units beginning of year .................... -- -- 21,617,264 28,739,944 2,193,740 3,236,511 Accumulation units purchased and transferred from other funding options 2,569,628 -- 4,076 16,650 5,534 49,589 Accumulation units redeemed and transferred to other funding options . (615,258) -- (21,621,340) (7,139,330) (2,199,274) (1,092,360) Annuity units .......................... -- -- -- -- -- -- ----------- ----------- ----------- ----------- ----------- ----------- Accumulation and annuity units end of year .......................... 1,954,370 -- -- 21,617,264 -- 2,193,740 =========== =========== =========== =========== =========== ===========
45 NOTES TO FINANCIAL STATEMENTS -- (Concluded) 6. Schedules of Accumulation and Annuity Units for the years ended December 31, 2006 and 2005 -- (Concluded)
Travelers Disciplined Mid Cap Travelers Managed Travelers Mercury Large Cap Stock Subaccount Income Subaccount Core Subaccount -------------------------- -------------------------- -------------------------- 2006 2005 2006 2005 2006 2005 ----------- ----------- ----------- ----------- ----------- ----------- Accumulation and annuity units beginning of year .................... 4,626,843 6,261,616 7,829,379 10,205,359 3,737,975 4,409,136 Accumulation units purchased and transferred from other funding options 124,748 539,132 38,911 208,369 39,677 279,550 Accumulation units redeemed and transferred to other funding options . (4,751,591) (2,173,905) (7,847,749) (2,583,378) (3,777,652) (950,711) Annuity units .......................... -- -- (20,541) (971) -- -- ----------- ----------- ----------- ----------- ----------- ----------- Accumulation and annuity units end of year .......................... -- 4,626,843 -- 7,829,379 -- 3,737,975 =========== =========== =========== =========== =========== ===========
Travelers MFS(R) Mid Cap Travelers MFS(R) Total Travelers Pioneer Strategic Growth Subaccount Return Subaccount Income Subaccount -------------------------- -------------------------- -------------------------- 2006 2005 2006 2005 2006 2005 ----------- ----------- ----------- ----------- ----------- ----------- Accumulation and annuity units beginning of year .................... 16,903,891 -- 26,115,337 34,692,622 12,027,941 15,683,824 Accumulation units purchased and transferred from other funding options 6,385 21,237,248 66,749 626,763 150,953 361,879 Accumulation units redeemed and transferred to other funding options . (16,910,276) (4,333,357) (26,165,416) (9,202,474) (12,158,314) (4,016,789) Annuity units .......................... -- -- (16,670) (1,574) (20,580) (973) ----------- ----------- ----------- ----------- ----------- ----------- Accumulation and annuity units end of year .......................... -- 16,903,891 -- 26,115,337 -- 12,027,941 =========== =========== =========== =========== =========== ===========
Travelers Salomon Brothers Strategic Total Return Bond Travelers Strategic Equity Travelers Van Kampen Subaccount Subaccount Enterprise Subaccount -------------------------- -------------------------- -------------------------- 2006 2005 2006 2005 2006 2005 ----------- ----------- ----------- ----------- ----------- ----------- Accumulation and annuity units beginning of year .................... 2,759,141 3,891,268 25,923,524 34,416,703 13,242,008 17,806,526 Accumulation units purchased and transferred from other funding options 25,835 48,231 8,092 81,912 2,635 32,401 Accumulation units redeemed and transferred to other funding options . (2,784,976) (1,180,358) (25,926,788) (8,569,468) (13,232,294) (4,596,335) Annuity units .......................... -- -- (4,828) (5,623) (12,349) (584) ----------- ----------- ----------- ----------- ----------- ----------- Accumulation and annuity units end of year .......................... -- 2,759,141 -- 25,923,524 -- 13,242,008 =========== =========== =========== =========== =========== ===========
46 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES
PAGE ---- Reports of Independent Registered Public Accounting Firm............... F-1 Financial Statements as of December 31, 2006 (SUCCESSOR) and 2005 (SUCCESSOR) and for the year ended December 31, 2006 (SUCCESSOR) and for the six months ended December 31, 2005 (SUCCESSOR) and June 30, 2005 (PREDECESSOR) and for the year ended December 31, 2004 (PREDECESSOR): Consolidated Balance Sheets.......................................... F-4 Consolidated Statements of Income.................................... F-5 Consolidated Statements of Stockholder's Equity...................... F-6 Consolidated Statements of Cash Flows................................ F-7 Notes to Consolidated Financial Statements........................... F-8 Financial Statement Schedules as of December 31, 2006 (SUCCESSOR) and 2005 (SUCCESSOR) and for the year ended December 31, 2006 (SUCCESSOR) and for the six months ended December 31, 2005 (SUCCESSOR) and June 30, 2005 (PREDECESSOR) and for the year ended December 31, 2004 (PREDECESSOR): Schedule I -- Consolidated Summary of Investments -- Other Than Investments in Related Parties.................................... F-58 Schedule III -- Consolidated Supplementary Insurance Information..... F-59 Schedule IV -- Consolidated Reinsurance.............................. F-61
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholder of MetLife Life and Annuity Company of Connecticut: We have audited the accompanying consolidated balance sheets of MetLife Life and Annuity Company of Connecticut and its subsidiary (the "Company") (formerly known as "The Travelers Life and Annuity Company") as of December 31, 2006 and 2005 (SUCCESSOR), and the related consolidated statements of income, stockholder's equity, and cash flows for the year ended December 31, 2006 (SUCCESSOR) and the six months ended December 31, 2005 (SUCCESSOR) and June 30, 2005 (PREDECESSOR). Our audits also included the financial statement schedules as of December 31, 2006 and 2005 (SUCCESSOR), and for the year ended December 31, 2006 (SUCCESSOR) and the six months ended December 31, 2005 (SUCCESSOR) and June 30, 2005 (PREDECESSOR), listed in the accompanying index. These consolidated financial statements and financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on the consolidated financial statements and financial statement schedules based on our audits. The consolidated financial statements and financial statement schedules of the Company for the year ended December 31, 2004 (PREDECESSOR) were audited by other auditors whose report, dated March 28, 2005, expressed an unqualified opinion. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of MetLife Life and Annuity Company of Connecticut and its subsidiary as of December 31, 2006 and 2005 (SUCCESSOR), and the results of their operations and their cash flows for the year ended December 31, 2006 (SUCCESSOR) and the six months ended December 31, 2005 (SUCCESSOR), and June 30, 2005 (PREDECESSOR), in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein. As described in Note 2 to the consolidated financial statements, the Company was acquired by MetLife, Inc. on July 1, 2005. As required by the U.S. Securities and Exchange Commission Staff Accounting Bulletin Topic 5-J, Push Down Basis of Accounting Required in Certain Limited Circumstances, the purchase method of accounting was applied to the assets and liabilities of the Company, and such assets and liabilities were measured at their fair values as of the acquisition date in conformity with Statement of Financial Accounting Standards No. 141, Business Combinations. The accompanying consolidated financial statements for periods subsequent and prior to the acquisition date are labeled "SUCCESSOR" and "PREDECESSOR," respectively. /s/ DELOITTE & TOUCHE LLP DELOITTE & TOUCHE LLP New York, New York March 6, 2007 F-1 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The Board of Directors and Stockholder MetLife Life and Annuity Company of Connecticut: We have audited the accompanying statements of income, stockholder's equity, and cash flows of MetLife Life and Annuity Company of Connecticut (formerly, The Travelers Life and Annuity Company) for the year ended December 31, 2004 (PREDECESSOR). 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 audit. We conducted our audit 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. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the results of the operations, stockholder's equity and cash flows of MetLife Life and Annuity Company of Connecticut for the year ended December 31, 2004 in conformity with U.S. generally accepted accounting principles. /s/ KPMG LLP KPMG LLP Hartford, Connecticut March 28, 2005 F-2 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The Board of Directors and Stockholder MetLife Life and Annuity Company of Connecticut: Under date of March 28, 2005, we reported on the statements of income, stockholder's equity and cash flows of MetLife Life and Annuity Company of Connecticut (formerly, The Travelers Life and Annuity Company) for the year ended December 31, 2004 (PREDECESSOR) , which are included in the Form 10-K. In connection with our audit of the aforementioned financial statements, we also audited the related financial statement schedules as listed in the accompanying index. These financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statement schedules based on our audit. In our opinion, such financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein. /s/ KPMG LLP KPMG LLP Hartford, Connecticut March 28, 2005 F-3 METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut) CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2006 AND 2005 (IN MILLIONS, EXCEPT SHARE AND PER SHARE DATA)
SUCCESSOR ----------------- 2006 2005 ------- ------- ASSETS Investments: Fixed maturity securities available-for-sale, at estimated fair value (amortized cost: $5,967 and $6,158, respectively).............................................. $ 5,889 $ 6,055 Equity securities available-for-sale, at estimated fair value (cost: $56 and $4, respectively)........................... 57 4 Mortgage loans on real estate................................. 295 258 Policy loans.................................................. 55 37 Real estate joint ventures held-for-investment................ 2 -- Other limited partnership interests........................... 68 73 Short-term investments........................................ 95 57 Other invested assets......................................... 341 333 ------- ------- Total investments.......................................... 6,802 6,817 Cash and cash equivalents....................................... 230 233 Accrued investment income....................................... 68 69 Premiums and other receivables.................................. 289 201 Deferred policy acquisition costs and value of business acquired...................................................... 1,712 1,777 Current income tax recoverable.................................. 19 20 Deferred income tax assets...................................... 8 90 Goodwill........................................................ 239 243 Other assets.................................................... 25 22 Separate account assets......................................... 12,246 12,179 ------- ------- Total assets............................................... $21,638 $21,651 ======= ======= LIABILITIES AND STOCKHOLDER'S EQUITY Liabilities: Future policy benefits........................................ $ 1,782 $ 1,740 Policyholder account balances................................. 5,377 5,688 Other policyholder funds...................................... 79 68 Payables for collateral under derivative transactions......... 102 108 Other liabilities............................................. 119 132 Separate account liabilities.................................. 12,246 12,179 ------- ------- Total liabilities.......................................... 19,705 19,915 ------- ------- CONTINGENCIES, COMMITMENTS AND GUARANTEES (NOTE 10) Stockholder's Equity: Common stock, par value $100 per share; 100,000 shares authorized, 30,000 shares issued and outstanding........... 3 3 Additional paid-in capital.................................... 1,730 1,725 Retained earnings............................................. 230 50 Accumulated other comprehensive income (loss)................. (30) (42) ------- ------- Total stockholder's equity................................. 1,933 1,736 ------- ------- Total liabilities and stockholder's equity................. $21,638 $21,651 ======= =======
See accompanying notes to consolidated financial statements. F-4 METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut) CONSOLIDATED STATEMENTS OF INCOME FOR THE YEAR ENDED DECEMBER 31, 2006 AND THE SIX MONTHS ENDED DECEMBER 31, 2005 AND JUNE 30, 2005 AND THE YEAR ENDED DECEMBER 31, 2004 (IN MILLIONS)
SUCCESSOR PREDECESSOR ------------------------------- ------------------------------- YEAR ENDED SIX MONTHS ENDED SIX MONTHS ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, JUNE 30, DECEMBER 31, ------------ ---------------- ---------------- ------------ 2006 2005 2005 2004 ------------ ---------------- ---------------- ------------ REVENUES Premiums........................... $ 43 $ 17 $ 20 $ 40 Universal life and investment-type product policy fees.............. 483 233 221 371 Net investment income.............. 361 167 223 389 Other revenues..................... 27 11 12 19 Net investment gains (losses)...... (83) (35) (6) 17 ---- ---- ---- ---- Total revenues................... 831 393 470 836 ---- ---- ---- ---- EXPENSES Policyholder benefits and claims... 117 90 49 85 Interest credited to policyholder account balances................. 154 76 126 241 Other expenses..................... 306 165 184 303 ---- ---- ---- ---- Total expenses................... 577 331 359 629 ---- ---- ---- ---- Income before provision for income tax.............................. 254 62 111 207 Provision for income tax........... 74 12 35 49 ---- ---- ---- ---- Net income......................... $180 $ 50 $ 76 $158 ==== ==== ==== ====
See accompanying notes to consolidated financial statements. F-5 METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut) CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY FOR THE YEAR ENDED DECEMBER 31, 2006 AND THE SIX MONTHS ENDED DECEMBER 31, 2005 AND JUNE 30, 2005 AND THE YEAR ENDED DECEMBER 31, 2004 (IN MILLIONS)
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) ----------------- ADDITIONAL NET UNREALIZED COMMON PAID-IN RETAINED INVESTMENT STOCK CAPITAL EARNINGS GAINS (LOSSES) TOTAL ------ ---------- -------- ----------------- ------ BALANCE AT JANUARY 1, 2004 (PREDECESSOR)........................ $3 $ 417 $ 764 $ 215 $1,399 Capital contributed by parent.......... 400 400 Comprehensive income (loss): Net income........................... 158 158 Other comprehensive income (loss): Unrealized gains (losses) on derivative instruments, net of income tax...................... (5) (5) Unrealized investment gains (losses), net of related offsets and income tax.................. 9 9 ------ Other comprehensive income (loss).......................... 4 ------ Comprehensive income (loss).......... 162 -- ------ ----- ----- ------ BALANCE AT DECEMBER 31, 2004 (PREDECESSOR)........................ 3 817 922 219 1,961 Comprehensive income (loss): Net income........................... 76 76 Other comprehensive income (loss): Unrealized gains (losses) on derivative instruments, net of income tax...................... (2) (2) Unrealized investment gains (losses), net of related offsets and income tax.................. (5) (5) ------ Other comprehensive income (loss).......................... (7) ------ Comprehensive income (loss).......... 69 Assumption of liabilities by parent.... 4 4 -- ------ ----- ----- ------ BALANCE AT JUNE 30, 2005 (PREDECESSOR)........................ 3 821 998 212 2,034 Effect of push down accounting of MetLife, Inc.'s purchase price on MetLife Life and Annuity Company of Connecticut's net assets acquired (see Note 2)......................... 1,112 (998) (212) (98) -- ------ ----- ----- ------ BALANCE AT JULY 1, 2005 (SUCCESSOR).... 3 1,933 -- -- 1,936 Comprehensive income (loss): Revisions of purchase price pushed down to MetLife Life and Annuity Company of Connecticut's net assets acquired (See Note 2)...... (208) (208) Net income........................... 50 50 Other comprehensive income (loss): Unrealized investment gains (losses), net of related offsets and income tax.................. (42) (42) ------ Other comprehensive income (loss).......................... (42) ------ Comprehensive income (loss).......... 8 -- ------ ----- ----- ------ BALANCE AT DECEMBER 31, 2005 (SUCCESSOR).......................... 3 1,725 50 (42) 1,736 Revisions of purchase price pushed down to MetLife Life and Annuity Company of Connecticut's net assets acquired (See Note 2)......................... 5 5 Comprehensive income (loss): Net income........................... 180 180 Other comprehensive income (loss): Unrealized investment gains (losses), net of related offsets and income tax.................. 12 12 ------ Other comprehensive income (loss).......................... 12 ------ Comprehensive income (loss).......... 192 -- ------ ----- ----- ------ BALANCE AT DECEMBER 31, 2006 (SUCCESSOR).......................... $3 $1,730 $ 230 $ (30) $1,933 == ====== ===== ===== ======
See accompanying notes to consolidated financial statements. F-6 METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut) CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 2006 AND THE SIX MONTHS ENDED DECEMBER 31, 2005 AND JUNE 30, 2005 AND THE YEAR ENDED DECEMBER 31, 2004 (IN MILLIONS)
SUCCESSOR PREDECESSOR ------------------------------- ------------------------------- YEAR ENDED SIX MONTHS ENDED SIX MONTHS ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, JUNE 30, DECEMBER 31, ------------ ---------------- ---------------- ------------ 2006 2005 2005 2004 ------------ ---------------- ---------------- ------------ CASH FLOWS FROM OPERATING ACTIVITIES Net income............................. $ 180 $ 50 $ 76 $ 158 Adjustments to reconcile net income to net cash provided by operating activities: Amortization of premiums and accretion of discounts associated with investments, net............................. 1 12 (8) (18) (Gains) losses from sales of investments, net................ 83 35 6 (17) Equity earnings of real estate joint ventures and other limited partnership interests........... (6) -- -- -- Interest credited to policyholder account balances................ 154 76 126 241 Universal life and investment-type product policy fees............. (483) (233) (221) (371) Change in accrued investment income.......................... 1 11 (4) (7) Change in premiums and other receivables..................... (83) (81) 2 -- Change in deferred policy acquisition costs, net.......... 53 (56) (90) (243) Change in insurance-related liabilities..................... 17 49 (15) (49) Change in income tax payable...... 74 (25) (242) 227 Change in other assets............ 191 90 49 72 Change in other liabilities....... (44) 54 (75) (17) Other, net........................ (1) (1) 34 (21) ------- ------- ----- ------- Net cash provided by (used in) operating activities................. 137 (19) (362) (45) ------- ------- ----- ------- CASH FLOWS FROM INVESTING ACTIVITIES Sales, maturities and repayments of: Fixed maturity securities......... 2,935 3,484 521 1,305 Equity securities................. 8 30 8 19 Mortgage loans on real estate..... 44 37 18 59 Real estate and real estate joint ventures........................ 1 -- 17 9 Other limited partnership interests....................... 24 17 18 23 Purchases of: Fixed maturity securities......... (2,863) (3,557) (448) (2,156) Equity securities................. (8) -- (1) (30) Mortgage loans on real estate..... (81) (20) (75) (136) Real estate and real estate joint ventures........................ (2) -- -- -- Other limited partnership interests....................... (17) (11) (41) (89) Net change in policy loans........... (17) (2) (4) (5) Net change in short-term investments....................... (37) 131 135 (225) Net change in other invested assets.. 30 20 16 43 Other, net........................... -- -- 2 (1) ------- ------- ----- ------- Net cash (used in) provided by investing activities................. 17 129 166 (1,184) ------- ------- ----- ------- CASH FLOWS FROM FINANCING ACTIVITIES Policyholder account balances: Deposits.......................... 551 343 476 1,023 Withdrawals....................... (684) (290) (181) (178) Net change in payables for collateral under derivative transactions..... (6) (2) (98) (16) Financing element of certain derivative instruments............ (18) (13) -- -- Capital contribution from parent..... -- -- -- 400 ------- ------- ----- ------- Net cash (used in) provided by financing activities................. (157) 38 197 1,229 ------- ------- ----- ------- Change in cash and cash equivalents.... (3) 148 1 -- Cash and cash equivalents, beginning of period............................... 233 85 1 1 ------- ------- ----- ------- CASH AND CASH EQUIVALENTS, END OF PERIOD............................... $ 230 $ 233 $ 2 $ 1 ======= ======= ===== ======= Supplemental disclosures of cash flow information: Income tax paid (received)........ $ -- $ 37 $ 277 $ (179) ======= ======= ===== ======= Non-cash transactions during the period: Assumption of liabilities by MetLife Insurance Company of Connecticut.. $ -- $ -- $ 4 $ -- ======= ======= ===== ======= Contribution of goodwill from MetLife, Inc. .................... $ (4) $ -- $ -- $ -- ======= ======= ===== ======= See Note 2 for purchase accounting adjustments.
See accompanying notes to consolidated financial statements. F-7 METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. BUSINESS, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BUSINESS "MLAC" or the "Company" refers to MetLife Life and Annuity Company of Connecticut (formerly, The Travelers Life and Annuity Company), a Connecticut corporation incorporated in 1973, and its subsidiary. MLAC is a wholly-owned subsidiary of MetLife Insurance Company of Connecticut ("MICC," formerly The Travelers Insurance Company). MICC is a subsidiary of MetLife, Inc. ("MetLife"). The Company's core offerings include universal and variable life insurance, fixed and variable deferred annuities, structured settlements and payout annuities. On July 1, 2005 ("Acquisition Date"), the Company became a subsidiary of MetLife. The Company and its parent, including substantially all of Citigroup Inc's ("Citigroup") international insurance businesses, excluding Primerica Life Insurance Company and its subsidiaries ("Primerica") (collectively, "Travelers"), were acquired by MetLife from Citigroup (the "Acquisition") for $12.1 billion. See Note 2 for further information on the Acquisition. The Company currently operates as a single segment and, as such, financial results are prepared and reviewed by management as a single operating segment. The Company continually evaluates its operating activities and the method utilized by management to evaluate the performance of such activities and will report on a segment basis when appropriate to do so. On February 14, 2006, a Certificate of Amendment was filed with the State of Connecticut Office of the Secretary of the State changing the name of The Travelers Life and Annuity Company to MetLife Life and Annuity Company of Connecticut, effective May 1, 2006. BASIS OF PRESENTATION The accompanying consolidated financial statements include the accounts of i) the Company and its subsidiary and ii) partnerships and joint ventures in which the Company has control. Assets, liabilities, revenues and expenses of the Company's general account for 2005 and 2004 include amounts related to certain separate accounts previously reported in separate account assets and liabilities. See "Adoption of New Accounting Pronouncements." Intercompany accounts and transactions have been eliminated. The Company uses the equity method of accounting for investments in equity securities in which it has more than a 20% interest and for real estate joint ventures and other limited partnership interests in which it has more than a minor equity interest or more than a minor influence over the joint ventures and partnership's operations, but does not have a controlling interest and is not the primary beneficiary. The Company uses the cost method of accounting for real estate joint ventures and other limited partnership interests in which it has a minor equity investment and virtually no influence over the joint ventures and partnership's operations. Certain amounts in the prior year periods' consolidated financial statements have been reclassified to conform with the 2006 presentation. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND CRITICAL ACCOUNTING ESTIMATES The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP") requires management to adopt accounting policies and make estimates and assumptions that affect amounts reported in the consolidated financial statements. The most critical estimates include those used in determining: (i) the fair value of investments in the absence of quoted market values; (ii) investment impairments; (iii) the recognition of income on certain investments; F-8 METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (iv) the application of the consolidation rules to certain investments; (v) fair value of and accounting for derivatives; (vi) the capitalization and amortization of deferred policy acquisition costs ("DAC") and the establishment and amortization of value of business acquired ("VOBA"); (vii) the measurement of goodwill and related impairment, if any; (viii) the liability for future policyholder benefits; (ix) accounting for income taxes and the valuation of deferred income tax assets; (x) accounting for reinsurance transactions; and (xi) the liability for litigation and regulatory matters. A description of such critical estimates is incorporated within the discussion of the related accounting policies which follow. The application of purchase accounting requires the use of estimation techniques in determining the fair value of the assets acquired and liabilities assumed -- the most significant of which relate to the aforementioned critical estimates. In applying these policies, management makes subjective and complex judgments that frequently require estimates about matters that are inherently uncertain. Many of these policies, estimates and related judgments are common in the insurance and financial services industries; others are specific to the Company's businesses and operations. Actual results could differ from these estimates. Investments The Company's principal investments are in fixed maturity and equity securities, policy loans, mortgage loans on real estate, real estate joint ventures and other limited partnership interests, short-term investments and other invested assets. The accounting policies related to each are as follows: Fixed Maturity and Equity Securities. The Company's fixed maturity and equity securities are classified as available-for-sale, and are reported at their estimated fair value. Unrealized investment gains and losses on these securities are recorded as a separate component of other comprehensive income or loss, net of policyholder related amounts and deferred income taxes. All security transactions are recorded on a trade date basis. Investment gains and losses on sales of securities are determined on a specific identification basis. Interest income on fixed maturity securities is recorded when earned using an effective yield method giving effect to amortization of premiums and accretion of discounts. Dividends on equity securities are recorded when declared. These dividends and interest income are recorded as part of net investment income. Included within fixed maturity securities are loan-backed securities including mortgage-backed and asset-backed securities. Amortization of the premium or discount from the purchase of these securities considers the estimated timing and amount of prepayments of the underlying loans. Actual prepayment experience is periodically reviewed and effective yields are recalculated when differences arise between the prepayments originally anticipated and the actual prepayments received and currently anticipated. Prepayment assumptions for single class and multi-class mortgage-backed and asset-backed securities are obtained from broker-dealer survey values or internal estimates. For credit-sensitive mortgage-backed and asset-backed securities and certain prepayment-sensitive securities, the effective yield is recalculated on a prospective basis. For all other mortgage-backed and asset-backed securities, the effective yield is recalculated on a retrospective basis. The cost of fixed maturity and equity securities is adjusted for impairments in value deemed to be other-than-temporary in the period in which the determination is made. These impairments are included within net investment gains (losses) and the cost basis of the fixed maturity and equity securities is reduced accordingly. The Company does not change the revised cost basis for subsequent recoveries in value. F-9 METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The assessment of whether impairments have occurred is based on management's case-by-case evaluation of the underlying reasons for the decline in fair value. The Company's review of its fixed maturity and equity securities for impairments includes an analysis of the total gross unrealized losses by three categories of securities: (i) securities where the estimated fair value had declined and remained below cost or amortized cost by less than 20%; (ii) securities where the estimated fair value had declined and remained below cost or amortized cost by 20% or more for less than six months; and (iii) securities where the estimated fair value had declined and remained below cost or amortized cost by 20% or more for six months or greater. Additionally, management considers a wide range of factors about the security issuer and uses its best judgment in evaluating the cause of the decline in the estimated fair value of the security and in assessing the prospects for near-term recovery. Inherent in management's evaluation of the security are assumptions and estimates about the operations of the issuer and its future earnings potential. Considerations used by the Company in the impairment evaluation process include, but are not limited to: (i) the length of time and the extent to which the market value has been below cost or amortized cost; (ii) the potential for impairments of securities when the issuer is experiencing significant financial difficulties; (iii) the potential for impairments in an entire industry sector or sub-sector; (iv) the potential for impairments in certain economically depressed geographic locations; (v) the potential for impairments of securities where the issuer, series of issuers or industry has suffered a catastrophic type of loss or has exhausted natural resources; (vi) the Company's ability and intent to hold the security for a period of time sufficient to allow for the recovery of its value to an amount equal to or greater than cost or amortized cost (See also Note 3); (vii) unfavorable changes in forecasted cash flows on asset-backed securities; and (viii) other subjective factors, including concentrations and information obtained from regulators and rating agencies. Mortgage Loans on Real Estate. Mortgage loans on real estate are stated at unpaid principal balance, adjusted for any unamortized premium or discount, deferred fees or expenses, net of valuation allowances. Interest income is accrued on the principal amount of the loan based on the loan's contractual interest rate. Amortization of premiums and discounts is recorded using the effective yield method. Interest income, amortization of premiums and discounts, and prepayment fees are reported in net investment income. Loans are considered to be impaired when it is probable that, based upon current information and events, the Company will be unable to collect all amounts due under the contractual terms of the loan agreement. Valuation allowances are established for the excess carrying value of the loan over the present value of expected future cash flows discounted at the loan's original effective interest rate, the value of the loan's collateral if the loan is in the process of foreclosure or otherwise collateral dependent, or the loan's market value if the loan is being sold. The Company also establishes allowances for loan losses when a loss contingency exists for pools of loans with similar characteristics, such as mortgage loans based on similar property types or loan to value risk factors. A loss contingency exists when the likelihood that a future event will occur is probable based on past events. Interest income earned on impaired loans is accrued on the principal amount of the loan based on the loan's contractual interest rate. However, interest ceases to be accrued for loans on which interest is generally more than 60 days past due and/or where the collection of interest is not considered probable. Cash receipts on such impaired loans are recorded as a reduction of the recorded investment. Gains and losses from the sale of loans and changes in valuation allowances are reported in net investment gains (losses). Policy Loans. Policy loans are stated at unpaid principal balances. Interest income on such loans is recorded as earned using the contractually agreed upon interest rate. Generally, interest is capitalized on the policy's anniversary date. F-10 METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Real Estate Joint Ventures and Other Limited Partnership Interests. The Company uses the equity method of accounting for investments in real estate joint ventures and other limited partnership interests in which it has more than a minor equity interest, or more than a minor influence over the joint ventures and partnership's operations, but does not have a controlling interest and is not the primary beneficiary. The Company uses the cost method of accounting for real estate joint ventures and other limited partnership interests in which it has a minor equity investment and virtually no influence over the joint ventures and the partnership's operations. In addition to the investees performing regular evaluations for the impairment of underlying investments, the Company routinely evaluates its investments in real estate joint ventures and limited partnerships for impairments. For its cost method investments it follows an impairment analysis which is similar to the process followed for its fixed maturity and equity securities as described previously. For equity method investees, the Company considers financial and other information provided by the investee, other known information and inherent risks in the underlying investments, as well as future capital commitments, in determining whether an impairment has occurred. When an other-than- temporary impairment is deemed to have occurred, the Company records a realized capital loss within net investment gains (losses) to record the investment at its fair value. Prior to the Acquisition, the Company used the equity method of accounting for all real estate joint ventures and other limited partnership interests in which it had an ownership interest but did not control, including those in which it had a minor equity investment or virtually no influence over operations. Short-term Investments. Short-term investments include investments with remaining maturities of one year or less, but greater than three months, at the time of acquisition and are stated at amortized cost, which approximates fair value. Other Invested Assets. Other invested assets consist primarily of stand-alone derivatives with positive fair values. Estimates and Uncertainties. The Company's investments are exposed to three primary sources of risk: credit, interest rate and market valuation. The financial statement risks, stemming from such investment risks, are those associated with the recognition of impairments, the recognition of income on certain investments; and the determination of fair values. The determination of the amount of allowances and impairments, as applicable, are described above by investment type. The determination of such allowances and impairments is highly subjective and is based upon the Company's periodic evaluation and assessment of known and inherent risks associated with the respective asset class. Such evaluations and assessments are revised as conditions change and new information becomes available. Management updates its evaluations regularly and reflects changes in allowances and impairments in operations as such evaluations are revised. The recognition of income on certain investments (e.g. loan-backed securities including mortgage-backed and asset-backed securities, certain investment transactions, etc.) is dependent upon market conditions, which could result in prepayments and changes in amounts to be earned. The fair values of publicly held fixed maturity securities and publicly held equity securities are based on quoted market prices or estimates from independent pricing services. However, in cases where quoted market prices are not available, such as for private fixed maturity securities fair values are estimated using present value or valuation techniques. The determination of fair values is based on: (i) valuation methodologies; (ii) securities the Company deems to be comparable; and (iii) assumptions deemed appropriate given the circumstances. The fair value estimates are made at a specific point in time, based on available market information and judgments about financial instruments, including estimates of the timing and amounts of expected future cash flows and the credit standing of the issuer or counterparty. Factors considered in estimating fair value include: coupon rate, F-11 METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) maturity, estimated duration, call provisions, sinking fund requirements, credit rating, industry sector of the issuer, and quoted market prices of comparable securities. The use of different methodologies and assumptions may have a material effect on the estimated fair value amounts. Additionally, when the Company enters into certain real estate joint ventures and other limited partnerships for which the Company may be deemed to be the primary beneficiary under Financial Accounting Standards Board ("FASB") Interpretation ("FIN") No. 46(r), Consolidation of Variable Interest Entities -- An Interpretation of ARB No. 51, it may be required to consolidate such investments. The accounting rules for the determination of the primary beneficiary are complex and require evaluation of the contractual rights and obligations associated with each party involved in the entity, an estimate of the entity's expected losses and expected residual returns and the allocation of such estimates to each party. The use of different methodologies and assumptions as to the timing and amount of impairments, recognition of income and the determination of the fair value of investments may have a material effect on the amounts presented within the consolidated financial statements. Derivative Financial Instruments Derivatives are financial instruments whose values are derived from interest rates, foreign currency exchange rates, or other financial indices. Derivatives may be exchange traded or contracted in the over-the-counter market. The Company uses a variety of derivatives, including swaps, forwards, futures and option contracts, to manage the risk associated with variability in cash flows or changes in fair values related to the Company's financial instruments. To a lesser extent, the Company uses credit derivatives to synthetically replicate investment risks and returns which are not readily available in the cash market. The Company also purchases certain securities, issues certain insurance policies and investment contracts and engages in certain reinsurance contracts that have embedded derivatives. Freestanding derivatives are carried on the Company's consolidated balance sheet either as assets within other invested assets or as liabilities within other liabilities at fair value as determined by quoted market prices or through the use of pricing models. The determination of fair value, when quoted market values are not available, is based on valuation methodologies and assumptions deemed appropriate under the circumstances. Derivative valuations can be affected by changes in interest rates, foreign currency exchange rates, financial indices, credit spreads, market volatility, and liquidity. Values can also be affected by changes in estimates and assumptions used in pricing models. Such assumptions include estimates of volatility, interest rates, foreign currency exchange rates, other financial indices and credit ratings. Essential to the analysis of the fair value is a risk of counterparty default. The use of different assumptions may have a material effect on the estimated derivative fair value amounts as well as the amount of reported net income. If a derivative is not designated as an accounting hedge or its use in managing risk does not qualify for hedge accounting pursuant to Statement of Financial Accounting Standards ("SFAS") No. 133, Accounting for Derivative Instruments and Hedging Activities ("SFAS 133"), as amended changes in the fair value of the derivative are reported in net investment gains (losses). The fluctuations in fair value of derivatives which have not been designated for hedge accounting can result in significant volatility in net income. To qualify for hedge accounting, at the inception of the hedging relationship, the Company formally documents its risk management objective and strategy for undertaking the hedging transaction, as well as its designation of the hedge as either: (i) a hedge of the fair value of a recognized asset or liability or an unrecognized firm commitment ("fair value hedge"); or (ii) a hedge of a forecasted transaction or of the variability of cash flows to be received or paid related to a recognized asset or liability ("cash flow hedge"). In this documentation, the Company sets forth how the hedging instrument is expected to hedge the designated risks related to the hedged item F-12 METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) and sets forth the method that will be used to retrospectively and prospectively assess the hedging instrument's effectiveness and the method which will be used to measure ineffectiveness. A derivative designated as a hedging instrument must be assessed as being highly effective in offsetting the designated risk of the hedged item. Hedge effectiveness is formally assessed at inception and periodically throughout the life of the designated hedging relationship. Assessments and measurement of hedge effectiveness are also subject to interpretation and estimation and different interpretations or estimates may have a material effect on the amount reported in net income. The accounting for derivatives is complex and interpretations of the primary accounting standards continue to evolve in practice. Judgment is applied in determining the availability and application of hedge accounting designations and the appropriate accounting treatment under these accounting standards. If it was determined that hedge accounting designations were not appropriately applied, reported net income could be materially affected. Differences in judgment as to the availability and application of hedge accounting designations and the appropriate accounting treatment may result in a differing impact on the consolidated financial statements of the Company from that previously reported. Under a fair value hedge, changes in the fair value of the hedging derivative, including amounts measured as ineffectiveness, and changes in the fair value of the hedged item related to the designated risk being hedged, are reported within net investment gains (losses). The fair values of the hedging derivatives are exclusive of any accruals that are separately reported in the consolidated statement of income within interest income or interest expense to match the location of the hedged item. Under a cash flow hedge, changes in the fair value of the hedging derivative measured as effective are reported within other comprehensive income (loss), a separate component of stockholders' equity, and the deferred gains or losses on the derivative are reclassified into the consolidated statement of income when the Company's earnings are affected by the variability in cash flows of the hedged item. Changes in the fair value of the hedging instrument measured as ineffectiveness are reported within net investment gains (losses). The fair values of the hedging derivatives are exclusive of any accruals that are separately reported in the consolidated statement of income within interest income or interest expense to match the location of the hedged item. The Company discontinues hedge accounting prospectively when: (i) it is determined that the derivative is no longer highly effective in offsetting changes in the fair value or cash flows of a hedged item; (ii) the derivative expires, is sold, terminated, or exercised; (iii) it is no longer probable that the hedged forecasted transaction will occur; (iv) a hedged firm commitment no longer meets the definition of a firm commitment; or (v) the derivative is de- designated as a hedging instrument. When hedge accounting is discontinued because it is determined that the derivative is not highly effective in offsetting changes in the fair value or cash flows of a hedged item, the derivative continues to be carried on the consolidated balance sheet at its fair value, with changes in fair value recognized currently in net investment gains (losses). The carrying value of the hedged recognized asset or liability under a fair value hedge is no longer adjusted for changes in its fair value due to the hedged risk, and the cumulative adjustment to its carrying value is amortized into income over the remaining life of the hedged item. Provided the hedged forecasted transaction is still probable of occurrence, the changes in fair value of derivatives recorded in other comprehensive income (loss) related to discontinued cash flow hedges are released into the consolidated statement of income when the Company's earnings are affected by the variability in cash flows of the hedged item. When hedge accounting is discontinued because it is no longer probable that the forecasted transactions will occur by the end of the specified time period or the hedged item no longer meets the definition of a firm commitment, the derivative continues to be carried on the consolidated balance sheet at its fair value, with changes in fair value recognized currently in net investment gains (losses). Any asset or liability associated with a recognized firm commitment is derecognized from the consolidated balance sheet, and recorded currently in net F-13 METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) investment gains (losses). Deferred gains and losses of a derivative recorded in other comprehensive income (loss) pursuant to the cash flow hedge of a forecasted transaction are recognized immediately in net investment gains (losses). In all other situations in which hedge accounting is discontinued, the derivative is carried at its fair value on the consolidated balance sheet, with changes in its fair value recognized in the current period as net investment gains (losses). The Company is also a party to financial instruments that contain terms which are deemed to be embedded derivatives. The Company assesses each identified embedded derivative to determine whether it is required to be bifurcated under SFAS 133. If the instrument would not be accounted for in its entirety at fair value and it is determined that the terms of the embedded derivative are not clearly and closely related to the economic characteristics of the host contract, and that a separate instrument with the same terms would qualify as a derivative instrument, the embedded derivative is bifurcated from the host contract and accounted for as a freestanding derivative. Such embedded derivatives are carried on the consolidated balance sheet at fair value with the host contract and changes in their fair value are reported currently in net investment gains (losses). If the Company is unable to properly identify and measure an embedded derivative for separation from its host contract, the entire contract is carried on the balance sheet at fair value, with changes in fair value recognized in the current period in net investment gains (losses). Additionally, the Company may elect to carry an entire contract on the balance sheet at fair value, with changes in fair value recognized in the current period in net investment gains (losses) if that contract contains an embedded derivative that requires bifurcation. There is a risk that embedded derivatives requiring bifurcation may not be identified and reported at fair value in the consolidated financial statements and that their related changes in fair value could materially affect reported net income. Cash and Cash Equivalents The Company considers all highly liquid investments purchased with an original or remaining maturity of three months or less at the date of purchase to be cash equivalents. Deferred Policy Acquisition Costs and Value of Business Acquired The Company incurs significant costs in connection with acquiring new and renewal insurance business. Costs that vary with and relate to the production of new business are deferred as DAC. Such costs consist principally of commissions and agency and policy issue expenses. VOBA is an intangible asset that reflects the estimated fair value of in-force contracts in a life insurance company acquisition and represents the portion of the purchase price that is allocated to the value of the right to receive future cash flows from the business in- force at the acquisition date. VOBA is based on actuarially determined projections, by each block of business, of future policy and contract charges, premiums, mortality, separate account performance, surrenders, operating expenses, investment returns and other factors. Actual experience on the purchased business may vary from these projections. The recovery of DAC and VOBA is dependent upon the future profitability of the related business. DAC and VOBA are aggregated in the financial statements for reporting purposes. DAC related to internally replaced contracts are generally expensed at the date of replacement. DAC and VOBA on life insurance or investment-type contracts are amortized in proportion to gross premiums or gross profits, depending on the type of contract as described below. The Company amortizes DAC and VOBA related to non-participating traditional contracts (term insurance and non-participating whole life insurance) over the entire premium paying period in proportion to the present value of actual historic and expected future gross premiums. The present value of expected premiums is based upon the premium requirement of each policy and assumptions for mortality, persistency, and investment returns at policy F-14 METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) issuance, or policy acquisition as it relates to VOBA, that include provisions for adverse deviation and are consistent with the assumptions used to calculate future policyholder benefit liabilities. These assumptions are not revised after policy issuance or acquisition unless the DAC or VOBA balance is deemed to be unrecoverable from future expected profits. Absent a premium deficiency, variability in amortization after policy issuance or acquisition is caused only by variability in premium volumes. The Company amortizes DAC and VOBA related to fixed and variable universal life contracts and fixed and variable deferred annuity contracts over the estimated lives of the contracts in proportion to actual and expected future gross profits. The amortization includes interest based on rates in effect at inception or acquisition of the contracts. The amount of future gross profits is dependent principally upon returns in excess of the amounts credited to policyholders, mortality, persistency, interest crediting rates, expenses to administer the business, creditworthiness of reinsurance counterparties, the effect of any hedges used, and certain economic variables, such as inflation. Of these factors, the Company anticipates that investment returns, expenses, and persistency are reasonably likely to impact significantly the rate of DAC and VOBA amortization. Each reporting period, the Company updates the estimated gross profits with the actual gross profits for that period. When the actual gross profits change from previously estimated gross profits, the cumulative DAC and VOBA amortization is re-estimated and adjusted by a cumulative charge or credit to current operations. When actual gross profits exceed those previously estimated, the DAC and VOBA amortization will increase, resulting in a current period charge to earnings. The opposite result occurs when the actual gross profits are below the previously estimated gross profits. Each reporting period, the Company also updates the actual amount of business remaining in-force, which impacts expected future gross profits. Separate account rates of return on variable universal life contracts and variable deferred annuity contracts affect in-force account balances on such contracts each reporting period. Returns that are higher than the Company's long-term expectation produce higher account balances, which increases the Company's future fee expectations and decreases future benefit payment expectations on minimum death benefit guarantees, resulting in higher expected future gross profits. The opposite result occurs when returns are lower than the Company's long-term expectation. The Company's practice to determine the impact of gross profits resulting from returns on separate accounts assumes that long- term appreciation in equity markets is not changed by short-term market fluctuations, but is only changed when sustained interim deviations are expected. The Company monitors these changes and only changes the assumption when its long-term expectation changes. The Company also reviews periodically other long-term assumptions underlying the projections of estimated gross profits. These include investment returns, policyholder dividend scales, interest crediting rates, mortality, persistency, and expenses to administer business. Management annually updates assumptions used in the calculation of estimated gross profits which may have significantly changed. If the update of assumptions causes expected future gross profits to increase, DAC and VOBA amortization will decrease, resulting in a current period increase to earnings. The opposite result occurs when the assumption update causes expected future gross profits to decrease. Sales Inducements The Company has two different types of sales inducements which are included in other assets: (i) the policyholder receives a bonus whereby the policyholder's initial account balance is increased by an amount equal to a specified percentage of the customer's deposit; and (ii) the policyholder receives a higher interest rate using a dollar cost averaging method than would have been received based on the normal general account interest rate credited. The Company defers sales inducements and amortizes them over the life of the policy using the same methodology and assumptions used to amortize DAC. F-15 METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Goodwill Goodwill is the excess of cost over the fair value of net assets acquired. Goodwill is not amortized but is tested for impairment at least annually or more frequently if events or circumstances, such as adverse changes in the business climate, indicate that there may be justification for conducting an interim test. Impairment testing is performed using the fair value approach, which requires the use of estimates and judgment, at the "reporting unit" level. A reporting unit is the operating segment or a business one level below the operating segment, if discrete financial information is prepared and regularly reviewed by management at that level. If the carrying value of a reporting unit's goodwill exceeds its fair value, the excess is recognized as an impairment and recorded as a charge against net income. The fair values of the reporting units are determined using a market multiple and discounted cash flow model. The critical estimates necessary in determining fair value are projected earnings, comparative market multiples and the discount rate. Liability for Future Policy Benefits and Policyholder Account Balances The Company establishes liabilities for amounts payable under insurance policies, including traditional life insurance and traditional annuities. Generally, amounts are payable over an extended period of time and related liabilities are calculated as the present value of future expected benefits to be paid reduced by the present value of future expected premiums. Such liabilities are established based on methods and underlying assumptions in accordance with GAAP and applicable actuarial standards. Principal assumptions used in the establishment of liabilities for future policy benefits are mortality, policy lapse, renewal, retirement, investment returns, inflation, expenses and other contingent events as appropriate to the respective product type. Utilizing these assumptions, liabilities are established on a block of business basis. Future policy benefit liabilities for non-participating traditional life insurance policies are equal to the aggregate of the present value of future benefit payments and related expenses less the present value of future net premiums. Assumptions as to mortality and persistency are based upon the Company's experience when the basis of the liability is established. The interest rates for future policy benefit liabilities on non-participating traditional life insurance is 4%. Future policy benefit liabilities for individual annuities after annuitization are equal to the present value of expected future payments. Interest rates used in establishing such liabilities range from 3% to 6%. The Company establishes future policy benefit liabilities for minimum death benefit guarantees relating to certain annuity contracts and secondary guarantees relating to certain life policies as follows: - Annuity guaranteed death benefit ("GMDB") liabilities are determined by estimating the expected value of death benefits in excess of the projected account balance and recognizing the excess ratably over the accumulation period based on total expected assessments. The Company regularly evaluates estimates used and adjusts the additional liability balance, with a related charge or credit to benefit expense, if actual experience or other evidence suggests that earlier assumptions should be revised. The assumptions used in estimating the GMDB liabilities are consistent with those used for amortizing DAC, and are thus subject to the same variability and risk. The assumptions of investment performance and volatility are consistent with the historical experience of the Standard & Poor's 500 Index ("S&P"). The benefits used in calculating the liabilities are based on the average benefits payable over a range of scenarios. - Liabilities for universal and variable life secondary guarantees are determined by estimating the expected value of death benefits payable when the account balance is projected to be zero and recognizing those benefits ratably over the accumulation period based on total expected assessments. The Company regularly evaluates estimates used and adjusts the additional liability balances, with a related charge or credit to benefit expense, if actual experience or other evidence suggests that earlier assumptions should be revised. F-16 METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The assumptions used in estimating the secondary and paid up guarantee liabilities are consistent with those used for amortizing DAC, and are thus subject to the same variability and risk. The assumptions of investment performance and volatility for variable products are consistent with historical S&P experience. The benefits used in calculating the liabilities are based on the average benefits payable over a range of scenarios. The Company establishes policyholder account balances ("PAB") for guaranteed minimum benefit riders relating to certain variable annuity products as follows: - Guaranteed minimum withdrawal benefit riders ("GMWB") guarantee the contractholder a return of their purchase payment via partial withdrawals, even if the account value is reduced to zero, provided that the contractholder's cumulative withdrawals in a contract year do not exceed a certain limit. The initial guaranteed withdrawal amount is equal to the initial benefit base as defined in the contract (typically, the initial purchase payments plus applicable bonus amounts). The GMWB is an embedded derivative, which is measured at fair value separately from the host variable annuity product. - Guaranteed minimum accumulation benefit riders ("GMAB") provide the contractholder, after a specified period of time determined at the time of issuance of the variable annuity contract, with a minimum accumulation of their purchase payments even if the account value is reduced to zero. The initial guaranteed accumulation amount is equal to the initial benefit base as defined in the contract (typically, the initial purchase payments plus applicable bonus amounts). The GMAB is also an embedded derivative, which is measured at fair value separately from the host variable annuity product. - For both GMWB and GMAB, the initial benefit base is increased by additional purchase payments made within a certain time period and decreases by benefits paid and/or withdrawal amounts. After a specified period of time, the benefit base may also increase as a result of an optional reset as defined in the contract. - The fair values of the GMWB and GMAB riders are calculated based on actuarial and capital market assumptions related to the projected cash flows, including benefits and related contract charges, over the lives of the contracts, incorporating expectations concerning policyholder behavior. In measuring the fair value of GMWBs and GMABs, the Company attributes a portion of the fees collected from the policyholder equal to the present value of expected future guaranteed minimum withdrawal and accumulation benefits (at inception). The changes in fair value are reported in net investment gains (losses). Any additional fees represent "excess" fees and are reported in universal life and investment-type product policy fees. These riders may be more costly than expected in volatile or declining markets, causing an increase to liabilities for future policy benefits, negatively affecting net income. The Company periodically reviews its estimates of actuarial liabilities for future policy benefits and compares them with actual experience. Differences between actual experience and the assumptions used in pricing these policies, guarantees and riders and in the establishment of the related liabilities result in variances in profit and could result in losses. The effects of changes in such estimated liabilities are included in the results of operations in the period in which the changes occur. PABs relate to investment-type contracts and universal life-type policies. Investment-type contracts principally include traditional individual fixed annuities in the accumulation phase. PABs are equal to: (i) policy account values, which consist of an accumulation of gross premium payments; (ii) credited interest, ranging from 0.5% to 12% less expenses, mortality charges, and withdrawals; and (iii) fair value purchase accounting adjustments relating to the Acquisition. F-17 METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Other Policyholder Funds Other policyholder funds include policy and contract claims and unearned revenue liabilities. The liability for policy and contract claims generally relates to incurred but not reported claims as well as claims which have been reported but not yet settled. The liability for these claims is based on the Company's estimated ultimate cost of settling all claims. The Company derives estimates for the development of incurred but not reported claims principally from actuarial analyses of historical patterns of claims and claims development for each line of business. The methods used to determine these estimates are continually reviewed. Adjustments resulting from this continuous review process and differences between estimates and payments for claims are recognized in policyholder benefits and claims expense in the period in which the estimates are changed or payments are made. The unearned revenue liability relates to universal life-type and investment-type products and represents policy charges for services to be provided in future periods. The charges are deferred as unearned revenue and amortized using the product's estimated gross profits similar to DAC. Such amortization is recorded in universal life and investment-type product policy fees. Recognition of Insurance Revenue and Related Benefits Premiums related to traditional life and annuity policies with life contingencies are recognized as revenues when due from policyholders. Policyholder benefits and expenses are provided against such revenues to recognize profits over the estimated lives of the policies. When premiums are due over a significantly shorter period than the period over which benefits are provided, any excess profit is deferred and recognized into operations in a constant relationship to insurance in-force or, for annuities, the amount of expected future policy benefit payments. Deposits related to universal life-type and investment-type products are credited to PABs. Revenues from such contracts consist of amounts assessed against PABs for mortality, policy administration and surrender charges and are recorded in universal life and investment-type product policy fees in the period in which services are provided. Amounts that are charged to operations include interest credited and benefit claims incurred in excess of related PABs. Premiums, policy fees, policyholder benefits and expenses are presented net of reinsurance. Other Revenues Other revenues include advisory fees, broker-dealer commissions and fees and administrative service fees. Such fees and commissions are recognized in the period in which services are performed. Income Taxes The Company files a consolidated U.S. federal income tax return in accordance with the provisions of the Internal Revenue Code of 1986, as amended (the "Code"). The Company's accounting for income taxes represents management's best estimate of various events and transactions. Deferred income tax assets and liabilities resulting from temporary differences between the financial reporting and tax bases of assets and liabilities are measured at the balance sheet date using enacted tax rates expected to apply to taxable income in the years the temporary differences are expected to reverse. For U.S. federal income tax purposes, an election in 2005 under Internal Revenue Code Section 338 was made by the Company's ultimate parent, MetLife. As a result of this election, the tax basis in the acquired assets and F-18 METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) liabilities was adjusted as of the acquisition date and the related deferred income tax asset established for the taxable difference from the book basis. The realization of deferred income tax assets depends upon the existence of sufficient taxable income within the carryback or carryforward periods under the tax law in the applicable tax jurisdiction. Valuation allowances are established when management determines, based on available information, that it is more likely than not that deferred income tax assets will not be realized. Significant judgment is required in determining whether valuation allowances should be established as well as the amount of such allowances. When making such determination, consideration is given to, among other things, the following: (i) future taxable income exclusive of reversing temporary differences and carryforwards; (ii) future reversals of existing taxable temporary differences; (iii) taxable income in prior carryback years; and (iv) tax planning strategies. The Company may be required to change its provision for income taxes in certain circumstances. Examples of such circumstances include when the ultimate deductibility of certain items is challenged by taxing authorities or when estimates used in determining valuation allowances on deferred income tax assets significantly change or when receipt of new information indicates the need for adjustment in valuation allowances. Additionally, future events such as changes in tax legislation could have an impact on the provision for income tax and the effective tax rate. Any such changes could significantly affect the amounts reported in the consolidated financial statements in the year these changes occur. The Company classifies interest recognized as interest expense and penalties recognized as a component of income tax. Reinsurance The Company enters into reinsurance transactions as a purchaser of reinsurance for its insurance products. For each of its reinsurance contracts, the Company determines if the contract provides indemnification against loss or liability relating to insurance risk in accordance with applicable accounting standards. The Company reviews all contractual features, particularly those that may limit the amount of insurance risk to which the reinsurer is subject or features that delay the timely reimbursement of claims. For reinsurance of existing in-force blocks of long-duration contracts that transfer significant insurance risk, the difference, if any, between the amounts paid, and the liabilities ceded related to the underlying contracts is considered the net cost of reinsurance at the inception of the contract. The net cost of reinsurance is recorded as an adjustment to DAC and recognized as a component of other expenses on a basis consistent with the way the acquisition costs on the underlying reinsured contracts would be recognized. Subsequent amounts paid on the reinsurance of in-force blocks, as well as amounts paid related to new business are recorded as ceded premiums and ceded future policy benefit liabilities are established. The assumptions used to account for long-duration reinsurance contracts are consistent with those used for the underlying contracts. Ceded policyholder and contract related liabilities, other than those currently due, are reported gross on the balance sheet. Amounts currently recoverable under reinsurance contracts are included in premiums and other receivables and amounts currently payable are included in other liabilities. Such assets and liabilities relating to reinsurance F-19 METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) contracts with the same reinsurer may be recorded net on the balance sheet, if a right of offset exists within the reinsurance contract. Premiums, fees and policyholder benefits and claims are net of reinsurance ceded. If the Company determines that a reinsurance contract does not expose the reinsurer to a reasonable possibility of a significant loss from insurance risk, the Company records the contract as a deposit, net of related expenses. Deposits received are included in other liabilities and deposits made are included within other assets. As amounts are paid or received, consistent with the underlying contracts, the deposit assets or liabilities are adjusted. Interest on such deposits is recorded as other revenue or other expenses, as appropriate. Periodically, the Company evaluates the adequacy of the expected payments or recoveries and adjusts the deposit asset or liability through other revenue or other expenses, as appropriate. Amounts received from reinsurers for policy administration are reported in other revenues. Accounting for reinsurance requires extensive use of assumptions and estimates, particularly related to the future performance of the underlying business and the potential impact of counterparty credit risks. The Company periodically reviews actual and anticipated experience compared to the aforementioned assumptions used to establish assets and liabilities relating to ceded reinsurance and evaluates the financial strength of counterparties to its reinsurance agreements using criteria similar to that evaluated in the security impairment process discussed previously. Separate Accounts Separate accounts are established in conformity with insurance laws and are generally not chargeable with liabilities that arise from any other business of the Company. Separate account assets are subject to general account claims only to the extent the value of such assets exceeds the separate account liabilities. The Company reports separately, as assets and liabilities, investments held in separate accounts and liabilities of the separate accounts if: (i) such separate accounts are legally recognized; (ii) assets supporting the contract liabilities are legally insulated from the Company's general account liabilities; (iii) investments are directed by the contractholder; and (iv) all investment performance, net of contract fees and assessments, is passed through to the contractholder. The Company reports separate account assets meeting such criteria at their fair value. Investment performance (including investment income, net investment gains (losses) and changes in unrealized gains (losses)) and the corresponding amounts credited to contractholders of such separate accounts are offset within the same line in the consolidated statements of income. The Company's revenues reflect fees charged to the separate accounts, including mortality charges, risk charges, policy administration fees, investment management fees and surrender charges. Separate accounts not meeting the above criteria are combined on a line-by-line basis with the Company's general account assets, liabilities, revenues and expenses. Litigation Contingencies The Company is a party to a number of legal actions and regulatory investigations. Given the inherent unpredictability of these matters, it is difficult to estimate the impact on the Company's consolidated financial position. Liabilities are established when it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. On a quarterly and annual basis, the Company reviews relevant information with respect to liabilities for litigation, regulatory investigations and litigation-related contingencies to be reflected in the Company's consolidated financial statements. It is possible that an adverse outcome in certain of the Company's litigation and regulatory investigations, or the use of different assumptions in the determination of amounts recorded could have a material effect upon the Company's consolidated net income or cash flows in particular quarterly or annual periods. F-20 METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) ADOPTION OF NEW ACCOUNTING PRONOUNCEMENTS Derivative Financial Instruments The Company has adopted guidance relating to derivative financial instruments as follows: - Effective January 1, 2006, the Company adopted prospectively SFAS No. 155, Accounting for Certain Hybrid Instruments ("SFAS 155"). SFAS 155 amends SFAS 133 and SFAS No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities ("SFAS 140"). SFAS 155 allows financial instruments that have embedded derivatives to be accounted for as a whole, eliminating the need to bifurcate the derivative from its host, if the holder elects to account for the whole instrument on a fair value basis. In addition, among other changes, SFAS 155: (i) clarifies which interest-only strips and principal-only strips are not subject to the requirements of SFAS 133; (ii) establishes a requirement to evaluate interests in securitized financial assets to identify interests that are freestanding derivatives or that are hybrid financial instruments that contain an embedded derivative requiring bifurcation; (iii) clarifies that concentrations of credit risk in the form of subordination are not embedded derivatives; and (iv) amends SFAS 140 to eliminate the prohibition on a qualifying special-purpose entity ("QSPE") from holding a derivative financial instrument that pertains to a beneficial interest other than another derivative financial interest. The adoption of SFAS 155 did not have a material impact on the Company's consolidated financial statements. - Effective October 1, 2006, the Company adopted SFAS 133 Implementation Issue No. B40, Embedded Derivatives: Application of Paragraph 13(b) to Securitized Interests in Prepayable Financial Assets ("Issue B40"). Issue B40 clarifies that a securitized interest in prepayable financial assets is not subject to the conditions in paragraph 13(b) of SFAS 133, if it meets both of the following criteria: (i) the right to accelerate the settlement if the securitized interest cannot be controlled by the investor; and (ii) the securitized interest itself does not contain an embedded derivative (including an interest rate-related derivative) for which bifurcation would be required other than an embedded derivative that results solely from the embedded call options in the underlying financial assets. The adoption of Issue B40 did not have a material impact on the Company's consolidated financial statements. - Effective January 1, 2006, the Company adopted prospectively SFAS 133 Implementation Issue No. B38, Embedded Derivatives: Evaluation of Net Settlement with Respect to the Settlement of a Debt Instrument through Exercise of an Embedded Put Option or Call Option ("Issue B38") and SFAS 133 Implementation Issue No. B39, Embedded Derivatives: Application of Paragraph 13(b) to Call Options That Are Exercisable Only by the Debtor ("Issue B39"). Issue B38 clarifies that the potential settlement of a debtor's obligation to a creditor occurring upon exercise of a put or call option meets the net settlement criteria of SFAS 133. Issue B39 clarifies that an embedded call option, in which the underlying is an interest rate or interest rate index, that can accelerate the settlement of a debt host financial instrument should not be bifurcated and fair valued if the right to accelerate the settlement can be exercised only by the debtor (issuer/borrower) and the investor will recover substantially all of its initial net investment. The adoption of Issues B38 and B39 did not have a material impact on the Company's consolidated financial statements. F-21 METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Other Pronouncements Effective November 15, 2006, the Company adopted U.S. Securities and Exchange Commission ("SEC") Staff Accounting Bulletin ("SAB") No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements ("SAB 108"). SAB 108 provides guidance on how prior year misstatements should be considered when quantifying misstatements in current year financial statements for purposes of assessing materiality. SAB 108 requires that registrants quantify errors using both a balance sheet and income statement approach and evaluate whether either approach results in quantifying a misstatement that, when relevant quantitative and qualitative factors are considered, is material. SAB 108 permits companies to initially apply its provisions by either restating prior financial statements or recording a cumulative effect adjustment to the carrying values of assets and liabilities as of January 1, 2006 with an offsetting adjustment to retained earnings for errors that were previously deemed immaterial but are material under the guidance in SAB 108. The adoption of SAB 108 did not have a material impact on the Company's consolidated financial statements. Effective January 1, 2006, the Company adopted SFAS No. 154, Accounting Changes and Error Corrections, a replacement of APB Opinion No. 20 and FASB Statement No. 3 ("SFAS 154"). SFAS 154 requires retrospective application to prior periods' financial statements for a voluntary change in accounting principle unless it is deemed impracticable. It also requires that a change in the method of depreciation, amortization, or depletion for long-lived, non- financial assets be accounted for as a change in accounting estimate rather than a change in accounting principle. The adoption of SFAS 154 did not have a material impact on the Company's consolidated financial statements. In June 2005, the Emerging Issues Task Force ("EITF") reached consensus on Issue No. 04-5, Determining Whether a General Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights ("EITF 04-5"). EITF 04-5 provides a framework for determining whether a general partner controls and should consolidate a limited partnership or a similar entity in light of certain rights held by the limited partners. The consensus also provides additional guidance on substantive rights. EITF 04-5 was effective after June 29, 2005 for all newly formed partnerships and for any pre-existing limited partnerships that modified their partnership agreements after that date. For all other limited partnerships, EITF 04-5 required adoption by January 1, 2006 through a cumulative effect of a change in accounting principle recorded in opening equity or applied retrospectively by adjusting prior period financial statements. The adoption of the provisions of EITF 04-5 did not have a material impact on the Company's consolidated financial statements. Effective November 9, 2005, the Company prospectively adopted the guidance in FASB Staff Position ("FSP") No. FAS 140-2, Clarification of the Application of Paragraphs 40(b) and 40(c) of FAS 140 ("FSP 140-2"). FSP 140-2 clarified certain criteria relating to derivatives and beneficial interests when considering whether an entity qualifies as a QSPE. Under FSP 140-2, the criteria must only be met at the date the QSPE issues beneficial interests or when a derivative financial instrument needs to be replaced upon the occurrence of a specified event outside the control of the transferor. The adoption of FSP 140-2 did not have a material impact on the Company's consolidated financial statements. Effective July 1, 2005, the Company adopted SFAS No. 153, Exchanges of Nonmonetary Assets, an amendment of APB Opinion No. 29 ("SFAS 153"). SFAS 153 amended prior guidance to eliminate the exception for nonmonetary exchanges of similar productive assets and replaced it with a general exception for exchanges of nonmonetary assets that do not have commercial substance. A nonmonetary exchange has commercial substance if the future cash flows of the entity are expected to change significantly as a result of the exchange. The provisions of SFAS 153 were required to be applied prospectively for fiscal periods beginning after June 15, 2005. The adoption of SFAS 153 did not have a material impact on the Company's consolidated financial statements. F-22 METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) In June 2005, the FASB completed its review of EITF Issue No. 03-1, The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments ("EITF 03-1"). EITF 03-1 provides accounting guidance regarding the determination of when an impairment of debt and marketable equity securities and investments accounted for under the cost method should be considered other-than-temporary and recognized in income. EITF 03-1 also requires certain quantitative and qualitative disclosures for debt and marketable equity securities classified as available-for-sale or held-to- maturity under SFAS No. 115, Accounting for Certain Investments in Debt and Equity Securities, that are impaired at the balance sheet date but for which an other-than-temporary impairment has not been recognized. The FASB decided not to provide additional guidance on the meaning of other-than-temporary impairment but has issued FSP FAS 115-1 and FAS 124-1, The Meaning of Other-Than-Temporary Impairment and its Application to Certain Investments ("FSP 115-1"), which nullifies the accounting guidance on the determination of whether an investment is other-than-temporarily impaired as set forth in EITF 03-1. As required by FSP 115-1, the Company adopted this guidance on a prospective basis, which had no material impact on the Company's consolidated financial statements, and has provided the required disclosures. Effective July 1, 2004, the Company adopted EITF Issue No. 03-16, Accounting for Investments in Limited Liability Companies ("EITF 03-16"). EITF 03-16 provides guidance regarding whether a limited liability company should be viewed as similar to a corporation or similar to a partnership for purposes of determining whether a noncontrolling investment should be accounted for using the cost method or the equity method of accounting. EITF 03-16 did not have a material impact on the Company's consolidated financial statements. Effective January 1, 2004, the Company adopted Statement of Position ("SOP") 03-1, Accounting and Reporting by Insurance Enterprises for Certain Nontraditional Long-Duration Contracts and for Separate Accounts ("SOP 03-1"), as interpreted by a Technical Practice Aid ("TPA") issued by the American Institute of Certified Public Accountants ("AICPA") and FSP No. FAS 97-1, Situations in Which Paragraphs 17(b) and 20 of FASB Statement No. 97, Accounting and Reporting by Insurance Enterprises for Certain Long-Duration Contracts and for Realized Gains and Losses from the Sale of Investments, Permit or Require Accrual of an Unearned Revenue Liability. SOP 03-1 provides guidance on (i) the classification and valuation of long-duration contract liabilities; (ii) the accounting for sales inducements; and (iii) separate account presentation and valuation. FUTURE ADOPTION OF NEW ACCOUNTING PRONOUNCEMENTS In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities ("SFAS 159"). SFAS 159 permits all entities the option to measure most financial instruments and certain other items at fair value at specified election dates and to report related unrealized gains and losses in earnings. The fair value option will generally be applied on an instrument-by-instrument basis and is generally an irrevocable election. SFAS 159 is effective for fiscal years beginning after November 15, 2007. The Company is evaluating which eligible financial instruments, if any, it will elect to account for at fair value under SFAS 159 and the related impact on the Company's consolidated financial statements. In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements ("SFAS 157"). SFAS 157 defines fair value, establishes a framework for measuring fair value in GAAP and requires enhanced disclosures about fair value measurements. SFAS 157 does not require any new fair value measurements. The pronouncement is effective for fiscal years beginning after November 15, 2007. The guidance in SFAS 157 will be applied prospectively with the exception of: (i) block discounts of financial instruments; and (ii) certain financial and hybrid instruments measured at initial recognition under SFAS 133 which are to be applied retrospectively as of the beginning of initial adoption (a limited form of retrospective application). The Company is currently evaluating the impact of SFAS 157 on the Company's consolidated financial statements. Implementation of SFAS 157 will require additional disclosures in the Company's consolidated financial statements. F-23 METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) In June 2006, the FASB issued FIN No. 48, Accounting for Uncertainty in Income Taxes -- an interpretation of FASB Statement No. 109 ("FIN 48"). FIN 48 clarifies the accounting for uncertainty in income tax recognized in a company's financial statements. FIN 48 requires companies to determine whether it is "more likely than not" that a tax position will be sustained upon examination by the appropriate taxing authorities before any part of the benefit can be recorded in the financial statements. It also provides guidance on the recognition, measurement and classification of income tax uncertainties, along with any related interest and penalties. Previously recorded income tax benefits that no longer meet this standard are required to be charged to earnings in the period that such determination is made. FIN 48 will also require significant additional disclosures. FIN 48 is effective for fiscal years beginning after December 15, 2006. Based upon the Company's evaluation work completed to date, the Company expects to recognize a reduction to the January 1, 2007 balance of retained earnings of less than $1 million. In March 2006, the FASB issued SFAS No. 156, Accounting for Servicing of Financial Assets -- an amendment of FASB Statement No. 140 ("SFAS 156"). Among other requirements, SFAS 156 requires an entity to recognize a servicing asset or servicing liability each time it undertakes an obligation to service a financial asset by entering into a servicing contract in certain situations. SFAS 156 will be applied prospectively and is effective for fiscal years beginning after September 15, 2006. The Company does not expect SFAS 156 to have a material impact on the Company's consolidated financial statements. In September 2005, the AICPA issued SOP 05-1, Accounting by Insurance Enterprises for Deferred Acquisition Costs in Connection with Modifications or Exchanges of Insurance Contracts ("SOP 05-1"). SOP 05-1 provides guidance on accounting by insurance enterprises for DAC on internal replacements of insurance and investment contracts other than those specifically described in SFAS No. 97, Accounting and Reporting by Insurance Enterprises for Certain Long- Duration Contracts and for Realized Gains and Losses from the Sale of Investments. SOP 05-1 defines an internal replacement as a modification in product benefits, features, rights, or coverages that occurs by the exchange of a contract for a new contract, or by amendment, endorsement, or rider to a contract, or by the election of a feature or coverage within a contract. Under SOP 05-1, modifications that result in a substantially unchanged contract will be accounted for as a continuation of the replaced contract. It is effective for internal replacements occurring in fiscal years beginning after December 15, 2006. In addition, in February 2007 related TPAs were issued by the AICPA to provide further clarification of SOP 05-1. The TPAs are effective concurrently with the adoption of the SOP. Based on the Company's interpretation of SOP 05-1 and related TPAs, the adoption of SOP 05-1 is not expected to have a material impact on the Company's financial statements. 2. ACQUISITION OF THE TRAVELERS INSURANCE COMPANY BY METLIFE, INC. FROM CITIGROUP INC. On the Acquisition Date, MetLife Life and Annuity Company of Connecticut, and other affiliated entities, including the Company's parent, MetLife Insurance Company of Connecticut, and substantially all of Citigroup Inc.'s international insurance businesses, excluding Primerica Life Insurance Company and its subsidiaries, were acquired by MetLife from Citigroup for $12.1 billion. The accounting policies of the Company were conformed to those of MetLife upon the Acquisition. The total consideration paid by MetLife for the purchase consisted of $11.0 billion in cash and 22,436,617 shares of MetLife's common stock with a market value of $1.0 billion to Citigroup and $100 million in other transaction costs. In accordance with FASB SFAS No. 141, Business Combinations, and SFAS No. 142, Goodwill and Other Intangible Assets, the Acquisition was accounted for by MetLife using the purchase method of accounting, which requires that the assets and liabilities of the Company be identified and measured at their fair value as of the acquisition date. As required by the SEC SAB Topic 5-J, Push Down Basis of Accounting Required in Certain Limited Circumstances, the purchase method of accounting applied by MetLife to the acquired assets and liabilities associated with the Company has been "pushed down" to the consolidated financial statements of the Company, F-24 METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) thereby establishing a new basis of accounting. This new basis of accounting is referred to as the "successor basis," while the historical basis of accounting is referred to as the "predecessor basis." Financial statements included herein for periods prior and subsequent to the Acquisition Date are labeled "predecessor" and "successor," respectively. Final Purchase Price Allocation and Goodwill The purchase price has been allocated to the assets acquired and liabilities assumed using management's best estimate of their fair values as of the acquisition date. The computation of the purchase price and the allocation of the purchase price to the net assets acquired based upon their respective fair values as of July 1, 2005, and the resulting goodwill, as revised, are presented below. Based upon MetLife's method of allocating the purchase price to the entities acquired, the purchase price attributed to the Company increased by $5 million. The increase in purchase price was a result of additional consideration paid in 2006 by MetLife to Citigroup of $115 million and an increase in transaction costs of $3 million, offset by a $4 million reduction in restructuring costs for a total purchase price increase of $114 million. The allocation of purchase price was updated as a result of the additional purchase price attributed to the Company of $5 million, an increase of $11 million in the value of the future policy benefit liabilities resulting from the finalization of the evaluation of the Travelers underwriting criteria, an increase of $6 million in other invested assets, an increase of $3 million in other assets and a decrease of $14 million in other liabilities due to the receipt of additional information, all resulting in a net impact of the aforementioned adjustments decreasing deferred income tax assets by $3 million. Goodwill decreased by $4 million as a consequence of such revisions to the purchase price and the purchase price allocation. F-25 METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SUCCESSOR ----------------- AS OF JULY 1, 2005 ----------------- (IN MILLIONS) TOTAL PURCHASE PRICE:.................................... $12,084 Purchase price attributed to other affiliates.......... 10,351 ------- Purchase price attributed to the Company............... 1,733 NET ASSETS ACQUIRED PRIOR TO PURCHASE ACCOUNTING ADJUSTMENTS............................................ $ 2,034 ADJUSTMENTS TO REFLECT ASSETS ACQUIRED AT FAIR VALUE: Fixed maturity securities available-for-sale........... (4) Mortgage loans on real estate.......................... 7 Real estate and real estate joint ventures held-for- investment.......................................... (1) Other limited partnership interests.................... 3 Other invested assets.................................. (4) Premiums and other receivables......................... (47) Elimination of historical deferred policy acquisition costs............................................... (1,622) Value of business acquired............................. 1,676 Value of distribution agreements acquired.............. 8 Net deferred income tax asset.......................... 258 Other assets........................................... 8 ADJUSTMENTS TO REFLECT LIABILITIES ASSUMED AT FAIR VALUE: Future policy benefits................................. (303) Policyholder account balances.......................... (464) Other liabilities...................................... (55) ------- NET FAIR VALUE OF ASSETS ACQUIRED AND LIABILITIES ASSUMED................................................ 1,494 ------- GOODWILL RESULTING FROM THE ACQUISITION.................. $ 239 =======
The entire amount of goodwill is expected to be deductible for income tax purposes. F-26 METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) CONDENSED STATEMENT OF NET ASSETS ACQUIRED The condensed statement of net assets acquired reflects the fair value of the Company's net assets as follows:
SUCCESSOR ------------------ AS OF JULY 1, 2005 ------------------ (IN MILLIONS) ASSETS: Fixed maturity securities available-for-sale............. $ 6,135 Equity securities available-for-sale..................... 35 Mortgage loans on real estate............................ 277 Policy loans............................................. 36 Other limited partnership interests...................... 80 Short-term investments................................... 188 Other invested assets.................................... 338 ------- Total investments..................................... 7,089 Cash and cash equivalents................................ 85 Accrued investment income................................ 80 Premiums and other receivables........................... 175 Value of business acquired............................... 1,676 Goodwill................................................. 239 Other intangible assets.................................. 8 Deferred income tax asset................................ 97 Other assets............................................. 9 Separate account assets.................................. 11,617 ------- Total assets acquired................................. 21,075 ------- LIABILITIES: Future policy benefits................................... 1,739 Policyholder account balances............................ 5,684 Other policyholder funds................................. 15 Current income tax payable............................... 37 Other liabilities........................................ 250 Separate account liabilities............................. 11,617 ------- Total liabilities assumed............................. 19,342 ------- Net assets acquired................................... $ 1,733 =======
Other Intangible Assets VOBA reflects the estimated fair value of in-force contracts acquired and represents the portion of the purchase price that is allocated to the value of the right to receive future cash flows from the life insurance and annuity contracts in-force at the Acquisition Date. VOBA is based on actuarially determined projections, by each block of business, of future policy and contract charges, premiums, mortality and morbidity, separate account performance, surrenders, operating expenses, investment returns and other factors. Actual experience on the purchased business F-27 METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) may vary from these projections. If estimated gross profits or premiums differ from expectations, the amortization of VOBA is adjusted to reflect actual experience. The value of the other identifiable intangibles reflects the estimated fair value of the Company's distribution agreements acquired at July 1, 2005 and will be amortized in relation to the expected economic benefits of the agreements. If actual experience under the distribution agreements differs from expectations, the amortization of these intangibles will be adjusted to reflect actual experience. The use of discount rates was necessary to establish the fair value of VOBA, as well as the other identifiable intangible assets. In selecting the appropriate discount rates, management considered its weighted average cost of capital, as well as the weighted average cost of capital required by market participants. A discount rate of 11.5% was used to value these intangible assets. The fair values of business acquired and distribution agreements acquired are as follows:
SUCCESSOR ------------- WEIGHTED AVERAGE AS OF JULY 1, AMORTIZATION 2005 PERIOD ------------- ---------------- (IN MILLIONS) (IN YEARS) Value of business acquired........................ $1,676 16 Value of distribution agreements acquired......... 8 16 ------ Total value of intangible assets acquired, excluding goodwill........................... $1,684 16 ======
F-28 METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 3. INVESTMENTS FIXED MATURITY AND EQUITY SECURITIES AVAILABLE-FOR-SALE The following tables present the cost or amortized cost, gross unrealized gain and loss, and estimated fair value of the Company's fixed maturity and equity securities, the percentage that each sector represents by the total fixed maturity securities holdings and by the total equity securities holdings at:
SUCCESSOR ------------------------------------------------------ DECEMBER 31, 2006 ------------------------------------------------------ GROSS COST OR UNREALIZED AMORTIZED --------------- ESTIMATED % OF COST GAIN LOSS FAIR VALUE TOTAL --------- ---- ---- ---------- ----- (IN MILLIONS) U.S. corporate securities.......... $2,542 $18 $ 62 $2,498 42.4% Foreign corporate securities....... 892 5 21 876 14.9 U.S. Treasury/agency securities.... 801 2 20 783 13.3 Commercial mortgage-backed securities....................... 736 4 6 734 12.5 Residential mortgage-backed securities....................... 734 10 5 739 12.5 Asset-backed securities............ 102 -- 2 100 1.7 State and political subdivision securities....................... 91 1 6 86 1.5 Foreign government securities...... 69 5 1 73 1.2 ------ --- ---- ------ ----- Total fixed maturity securities.. $5,967 $45 $123 $5,889 100.0% ====== === ==== ====== ===== Nonredeemable preferred stock...... $ 55 $ 2 $ 1 $ 56 98.2% Common stock....................... 1 -- -- 1 1.8 ------ --- ---- ------ ----- Total equity securities.......... $ 56 $ 2 $ 1 $ 57 100.0% ====== === ==== ====== =====
SUCCESSOR ------------------------------------------------------ DECEMBER 31, 2005 ------------------------------------------------------ GROSS COST OR UNREALIZED AMORTIZED --------------- ESTIMATED % OF COST GAIN LOSS FAIR VALUE TOTAL --------- ---- ---- ---------- ----- (IN MILLIONS) U.S. corporate securities.......... $2,811 $ 6 $ 70 $2,747 45.4% Foreign corporate securities....... 562 4 16 550 9.1 U.S. Treasury/agency securities.... 793 4 6 791 13.0 Commercial mortgage-backed securities....................... 665 3 9 659 10.9 Residential mortgage-backed securities....................... 1,021 1 17 1,005 16.6 Asset-backed securities............ 147 -- 2 145 2.4 State and political subdivision securities....................... 84 -- 3 81 1.3 Foreign government securities...... 75 3 1 77 1.3 ------ --- ---- ------ ----- Total fixed maturity securities.. $6,158 $21 $124 $6,055 100.0% ====== === ==== ====== ===== Nonredeemable preferred stock...... $ 3 $-- $ -- $ 3 75.0% Common stock....................... 1 1 1 1 25.0 ------ --- ---- ------ ----- Total equity securities.......... $ 4 $ 1 $ 1 $ 4 100.0% ====== === ==== ====== =====
F-29 METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The Company held foreign currency derivatives with notional amounts of $11 million and $10 million to hedge the exchange rate risk associated with foreign denominated fixed maturity securities at December 31, 2006 and 2005, respectively. Excluding investments in U.S. Treasury securities and obligations of U.S. government corporations and agencies, the Company is not exposed to any significant concentration of credit risk in its fixed maturity securities portfolio. The Company held fixed maturity securities at estimated fair values that were below investment grade or not rated by an independent rating agency that totaled $361 million and $395 million at December 31, 2006 and 2005, respectively. These securities had a net unrealized gain (loss) of ($2) million and ($10) million at December 31, 2006 and 2005, respectively. Non-income producing fixed maturity securities were $2 million at both December 31, 2006 and 2005. Unrealized gains (losses) associated with non-income producing fixed maturity securities were $2 million and ($3) million at December 31, 2006 and 2005, respectively. The cost or amortized cost and estimated fair value of fixed maturity securities, by contractual maturity date (excluding scheduled sinking funds), are shown below:
SUCCESSOR ----------------------------------------------- DECEMBER 31, 2006 DECEMBER 31, 2005 ---------------------- ---------------------- COST OR COST OR AMORTIZED ESTIMATED AMORTIZED ESTIMATED COST FAIR VALUE COST FAIR VALUE --------- ---------- --------- ---------- (IN MILLIONS) Due in one year or less................. $ 362 $ 361 $ 347 $ 346 Due after one year through five years... 948 931 1,192 1,171 Due after five years through ten years.. 1,273 1,242 1,577 1,534 Due after ten years..................... 1,812 1,782 1,209 1,195 ------ ------ ------ ------ Subtotal.............................. 4,395 4,316 4,325 4,246 Mortgage-backed and other asset-backed securities............................ 1,572 1,573 1,833 1,809 ------ ------ ------ ------ Total fixed maturities................ $5,967 $5,889 $6,158 $6,055 ====== ====== ====== ======
Fixed maturity securities not due at a single maturity date have been included in the above table in the year of final contractual maturity. Actual maturities may differ from contractual maturities due to the exercise of prepayment options. Sales or disposals of fixed maturity and equity securities classified as available-for-sale are as follows:
SUCCESSOR PREDECESSOR ------------------------------- ------------------------------- YEAR ENDED SIX MONTHS ENDED SIX MONTHS ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, JUNE 30, DECEMBER 31, ------------ ---------------- ---------------- ------------ 2006 2005 2005 2004 ------------ ---------------- ---------------- ------------ (IN MILLIONS) Proceeds..................... $2,503 $3,351 $212 $820 Gross investment gains....... $ 5 $ 3 $ 9 $ 25 Gross investment losses...... $ (70) $ (54) $(12) $(25)
F-30 METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) UNREALIZED LOSS FOR FIXED MATURITY AND EQUITY SECURITIES AVAILABLE-FOR-SALE The following table presents the estimated fair values and gross unrealized loss of the Company's fixed maturity securities (aggregated by sector) and equity securities in an unrealized loss position, aggregated by length of time that the securities have been in a continuous unrealized loss position at:
SUCCESSOR ------------------------------------------------------------------------------------- DECEMBER 31, 2006 ------------------------------------------------------------------------------------- EQUAL TO OR GREATER LESS THAN 12 MONTHS THAN 12 MONTHS TOTAL --------------------------- --------------------------- --------------------------- ESTIMATED GROSS ESTIMATED GROSS ESTIMATED GROSS FAIR VALUE UNREALIZED LOSS FAIR VALUE UNREALIZED LOSS FAIR VALUE UNREALIZED LOSS ---------- --------------- ---------- --------------- ---------- --------------- (IN MILLIONS, EXCEPT NUMBER OF SECURITIES) U.S. corporate securities..... $1,330 $40 $500 $22 $1,830 $ 62 Foreign corporate securities.. 462 13 174 8 636 21 U.S. Treasury/agency securities.................. 474 17 51 3 525 20 Commercial mortgage-backed securities.................. 304 2 109 4 413 6 Residential mortgage-backed securities.................. 307 4 59 1 366 5 Asset-backed securities....... 45 -- 22 2 67 2 State and political subdivision securities...... 21 3 54 3 75 6 Foreign government securities.................. 13 1 12 -- 25 1 ------ --- ---- --- ------ ---- Total fixed maturity securities............... $2,956 $80 $981 $43 $3,937 $123 ====== === ==== === ====== ==== Equity securities............. $ 37 $ 1 $ 5 $-- $ 42 $ 1 ====== === ==== === ====== ==== Total number of securities in an unrealized loss position.................... 772 430 1,202 ====== ==== ======
All fixed maturity and equity securities in an unrealized loss position at December 31, 2005 had been in a continuous unrealized loss position for less than twelve months, as a new cost basis was established at the Acquisition Date. The number of securities in an unrealized loss position at December 31, 2005 was 1,504. F-31 METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) AGING OF GROSS UNREALIZED LOSS FOR FIXED MATURITY AND EQUITY SECURITIES AVAILABLE-FOR-SALE The following tables present the cost or amortized cost, gross unrealized loss and number of securities for fixed maturity securities and equity securities, where the estimated fair value had declined and remained below cost or amortized cost by less than 20%, or 20% or more at:
SUCCESSOR ------------------------------------------------------------ DECEMBER 31, 2006 ------------------------------------------------------------ COST OR GROSS NUMBER AMORTIZED COST UNREALIZED LOSS OF SECURITIES ------------------ ------------------ ------------------ LESS THAN 20% OR LESS THAN 20% OR LESS THAN 20% OR 20% MORE 20% MORE 20% MORE --------- ------ --------- ------ --------- ------ (IN MILLIONS, EXCEPT NUMBER OF SECURITIES) Less then six months........... $2,763 $ 4 $ 66 $ 2 696 9 Six months or greater but less than nine months............. 16 -- -- -- 24 -- Nine months or greater but less than twelve months........... 291 -- 13 -- 43 -- Twelve months or greater....... 1,029 -- 43 -- 430 -- ------ --- ---- --- ----- -- Total........................ $4,099 $ 4 $122 $ 2 1,193 9 ====== === ==== === ===== ==
SUCCESSOR ------------------------------------------------------------ DECEMBER 31, 2005 ------------------------------------------------------------ COST OR GROSS NUMBER OF AMORTIZED COST UNREALIZED LOSS SECURITIES ------------------ ------------------ ------------------ LESS THAN 20% OR LESS THAN 20% OR LESS THAN 20% OR 20% MORE 20% MORE 20% MORE --------- ------ --------- ------ --------- ------ (IN MILLIONS, EXCEPT NUMBER OF SECURITIES) Less than six months........... $4,843 $14 $119 $6 1,480 24 ------ --- ---- -- ----- -- Total........................ $4,843 $14 $119 $6 1,480 24 ====== === ==== == ===== ==
At December 31, 2006, $122 million of unrealized losses related to securities with an unrealized loss position of less than 20% of cost or amortized cost, which represented 3% of the cost or amortized cost of such securities. At December 31, 2005, $119 million of unrealized losses related to securities with an unrealized loss position of less than 20% of cost or amortized cost, which represented 2% of the cost or amortized cost of such securities. At December 31, 2006, $2 million of unrealized losses related to securities with an unrealized loss position of 20% or more of cost or amortized cost, which represented 50% of the cost or amortized cost of such securities. Of such unrealized losses of $2 million, all related to securities that were in an unrealized loss position for a period of less than six months. At December 31, 2005, $6 million of unrealized losses related to securities with an unrealized loss position of 20% or more of cost or amortized cost, which represented 43% of the cost or amortized cost of such securities. Of such unrealized losses of $6 million, all related to securities that were in an unrealized loss position for a period of less than six months. The Company held no fixed maturity securities and equity securities with a gross unrealized loss at December 31, 2006 of greater than $10 million. F-32 METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) At December 31, 2006 and 2005, the Company had $124 million and $125 million, respectively, of gross unrealized loss related to its fixed maturity and equity securities. These securities are concentrated, calculated as a percentage of gross unrealized loss, as follows:
SUCCESSOR ------------- DECEMBER 31, ------------- 2006 2005 ---- ---- SECTOR: U.S. corporate securities.................................. 50% 56% Foreign corporate securities............................... 17 13 U.S. Treasury/agency securities............................ 16 5 Commercial mortgage-backed securities...................... 5 7 Residential mortgage-backed securities..................... 4 14 Other...................................................... 8 5 --- --- Total................................................... 100% 100% === === INDUSTRY: Industrial................................................. 26% 21% Finance.................................................... 20 17 Government................................................. 17 5 Utility.................................................... 12 5 Mortgage-backed............................................ 9 21 Consumer................................................... 2 11 Other...................................................... 14 20 --- --- Total................................................... 100% 100% === ===
As described more fully in Note 1, the Company performs a regular evaluation, on a security-by-security basis, of its investment holdings in accordance with its impairment policy in order to evaluate whether such securities are other-than-temporarily impaired. One of the criteria which the Company considers in its other-than-temporary impairment analysis is its intent and ability to hold securities for a period of time sufficient to allow for the recovery of their value to an amount equal to or greater than cost or amortized cost. The Company's intent and ability to hold securities considers broad portfolio management objectives such as asset/liability duration management, issuer and industry segment exposures, interest rate views and the overall total return focus. In following these portfolio management objectives, changes in facts and circumstances that were present in past reporting periods may trigger a decision to sell securities that were held in prior reporting periods. Decisions to sell are based on current conditions or the Company's need to shift the portfolio to maintain its portfolio management objectives including liquidity needs or duration targets on asset/liability managed portfolios. The Company attempts to anticipate these types of changes and if a sale decision has been made on an impaired security and that security is not expected to recover prior to the expected time of sale, the security will be deemed other-than- temporarily impaired in the period that the sale decision was made and an other- than-temporary impairment loss will be recognized. Based upon the Company's current evaluation of the securities in accordance with its impairment policy, the cause of the decline being principally attributable to the general rise in rates during the holding period, and the Company's current intent and ability to hold the fixed maturity and equity securities with unrealized losses for a period of time sufficient for them to recover, the Company has concluded that the aforementioned securities are not other-than-temporarily impaired. F-33 METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) ASSETS ON DEPOSIT The Company had investment assets on deposit with regulatory agencies with a fair market value of $7 million and $5 million at December 31, 2006 and 2005, respectively, consisting primarily of fixed maturity and equity securities. MORTGAGE LOANS ON REAL ESTATE Mortgage loans on real estate are categorized as follows:
SUCCESSOR ----------------------------------- DECEMBER 31, ----------------------------------- 2006 2005 ---------------- ---------------- AMOUNT PERCENT AMOUNT PERCENT ------ ------- ------ ------- Commercial mortgage loans..................... $140 47% $123 47% Agricultural mortgage loans................... 155 53 136 53 ---- --- ---- --- Total....................................... 295 100% 259 100% === === Less: Valuation allowances.................... -- 1 ---- ---- Mortgage and consumer loans................... $295 $258 ==== ====
Mortgage loans are collateralized by properties located in the United States. At December 31, 2006, 19%, 18% and 8% of the value of the Company's mortgage loans on real estate were located in California, New York and Maryland, respectively. Generally, the Company, as the lender, only loans up to 75% of the purchase price of the underlying real estate. REAL ESTATE JOINT VENTURES The Company held $2 million in real estate joint ventures held-for- investment at December 31, 2006. The Company did not hold any interest in real estate joint ventures at December 31, 2005. Both accumulated depreciation on real estate joint ventures and the related depreciation expense were less than $1 million at December 31, 2006. At December 31, 2006, 100% of the Company's real estate joint ventures were located in New York. F-34 METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) NET INVESTMENT INCOME The components of net investment income are as follows:
SUCCESSOR PREDECESSOR ------------------------------- ------------------------------- YEAR ENDED SIX MONTHS ENDED SIX MONTHS ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, JUNE 30, DECEMBER 31, ------------ ---------------- ---------------- ------------ 2006 2005 2005 2004 ------------ ---------------- ---------------- ------------ (IN MILLIONS) Fixed maturity securities...... $314 $155 $185 $341 Equity securities.............. 1 -- -- 2 Mortgage loans on real estate.. 16 8 9 18 Policy loans................... 3 -- 1 1 Real estate joint ventures..... 1 -- -- -- Other limited partnership interests.................... 23 2 27 28 Cash, cash equivalents and short-term investments....... 14 5 4 5 ---- ---- ---- ---- Total investment income...... 372 170 226 395 Less: Investment expenses...... 11 3 3 6 ---- ---- ---- ---- Net investment income........ $361 $167 $223 $389 ==== ==== ==== ====
NET INVESTMENT GAINS (LOSSES) The components of net investment gains (losses) are as follows:
SUCCESSOR PREDECESSOR ------------------------------- ------------------------------- YEAR ENDED SIX MONTHS ENDED SIX MONTHS ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, JUNE 30, DECEMBER 31, ------------ ---------------- ---------------- ------------ 2006 2005 2005 2004 ------------ ---------------- ---------------- ------------ (IN MILLIONS) Fixed maturity securities...... $(69) $(51) $(5) $(6) Equity securities.............. -- -- 2 (1) Mortgage loans on real estate.. 1 (1) -- -- Real estate and real estate joint ventures............... (3) -- -- -- Derivatives.................... (12) 20 (3) 21 Other.......................... -- (3) -- 3 ---- ---- --- --- Net investment gains (losses).................. $(83) $(35) $(6) $17 ==== ==== === ===
The Company periodically disposes of fixed maturity and equity securities at a loss. Generally, such losses are insignificant in amount or in relation to the cost basis of the investment, are attributable to declines in fair value occurring in the period of the disposition or are as a result of management's decision to sell securities based on current conditions or the Company's need to shift the portfolio to maintain its portfolio management objectives. Losses from fixed maturity and equity securities deemed other-than- temporarily impaired, included within net investment gains (losses), were $4 million, $0, $0 and $7 million for the year ended December 31, 2006, the six months ended December 31, 2005 and June 30, 2005 and the year ended December 31, 2004, respectively. F-35 METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) NET UNREALIZED INVESTMENT GAINS (LOSSES) The components of net unrealized investment gains (losses), included in accumulated other comprehensive income (loss), are as follows:
SUCCESSOR PREDECESSOR ------------------------------ ------------------------------ YEAR ENDED SIX MONTHS ENDED SIX MONTHS ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, JUNE 30, DECEMBER 31, ------------ ---------------- ---------------- ------------ 2006 2005 2005 2004 ------------ ---------------- ---------------- ------------ (IN MILLIONS) Fixed maturity securities.......... $(78) $(103) $ 319 $ 332 Equity securities.................. 1 -- 3 3 Derivatives........................ -- -- -- 2 Other.............................. (2) (6) 4 -- ---- ----- ----- ----- Subtotal......................... (79) (109) 326 337 Allocated amounts: DAC and VOBA..................... 33 45 -- -- Deferred income tax................ 16 22 (114) (118) ---- ----- ----- ----- Net unrealized investment gains (losses).............. $(30) $ (42) $ 212 $ 219 ==== ===== ===== =====
The changes in net unrealized investment gains (losses) are as follows:
SUCCESSOR PREDECESSOR ------------------------------ ------------------------------ YEAR ENDED SIX MONTHS ENDED SIX MONTHS ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, JUNE 30, DECEMBER 31, ------------ ---------------- ---------------- ------------ 2006 2005 2005 2004 ------------ ---------------- ---------------- ------------ (IN MILLIONS) Balance at end of previous of period............................ $(42) $ 212 $219 $215 Effect of purchase accounting push down (See Note 2)................. -- (212) -- -- ---- ----- ---- ---- Balance at beginning of period...... (42) -- 219 215 ---- ----- ---- ---- Unrealized investment gains (losses) during the period................. 30 (109) (10) 6 Unrealized investment gains (losses) relating to: DAC and VOBA...................... (12) 45 -- -- Deferred income tax............... (6) 22 3 (2) ---- ----- ---- ---- Balance at end of period............ $(30) $ (42) $212 $219 ==== ===== ==== ==== Net change in unrealized investment gains (losses).................... $ 12 $ (42) $ (7) $ 4 ==== ===== ==== ====
F-36 METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) VARIABLE INTEREST ENTITIES The following table presents the total assets of and maximum exposure to loss relating to variable interest entities for which the Company has concluded that it holds significant variable interests but it is not the primary beneficiary and which have not been consolidated:
SUCCESSOR (REVISED) ------------------------ DECEMBER 31, 2005 ------------------------ NOT PRIMARY BENEFICIARY ------------------------ MAXIMUM TOTAL EXPOSURE TO ASSETS(1) LOSS(2) --------- ----------- (IN MILLIONS) Other investments(3)................................... $3,450 $25 ------ --- Total................................................ $3,450 $25 ====== ===
- -------- (1) The assets of the other limited partnerships are reflected at the carrying amounts at which such assets would have been reflected on the Company's consolidated balance sheet had the Company consolidated the VIE from the date of its initial investment in the entity. (2) The maximum exposure to loss of the other limited partnerships is equal to the carrying amounts plus any unfunded commitments, reduced by amounts guaranteed by other partners. (3) Other investments include investments in public and private debt and equity securities that are not asset-backed securitizations or collateralized debt obligations. 4. DERIVATIVE FINANCIAL INSTRUMENTS TYPES OF DERIVATIVE FINANCIAL INSTRUMENTS At the Acquisition Date, the Company's derivative positions which previously qualified for hedge accounting were dedesignated in accordance with SFAS 133. Such derivative positions were not redesignated in hedging relationships. Accordingly, all changes in such derivative fair values for the year ended December 31, 2006 and the six months ended December 31, 2005 are recorded in net investment gains (losses). The following table presents the notional amounts and current market or fair value of derivative financial instruments held at:
SUCCESSOR ----------------------------------------------------------------- DECEMBER 31, 2006 DECEMBER 31, 2005 ------------------------------- ------------------------------- CURRENT MARKET CURRENT MARKET OR FAIR VALUE OR FAIR VALUE NOTIONAL -------------------- NOTIONAL -------------------- AMOUNT ASSETS LIABILITIES AMOUNT ASSETS LIABILITIES -------- ------ ----------- -------- ------ ----------- (IN MILLIONS) Interest rate swaps............. $911 $266 $32 $1,069 $202 $ 2 Financial futures............... 26 -- -- 64 1 1 Foreign currency swaps.......... 32 1 9 31 -- 7 Foreign currency forwards....... 4 -- -- 8 -- -- Options......................... -- 53 5 -- 115 3 Financial forwards.............. -- -- 1 -- -- 2 Credit default swaps............ 4 -- -- 4 -- -- ---- ---- --- ------ ---- --- Total......................... $977 $320 $47 $1,176 $318 $15 ==== ==== === ====== ==== ===
F-37 METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The above table does not include notional values for equity futures, equity financial forwards and equity options. At December 31, 2006 and 2005, the Company owned 156 and 413 equity futures contracts, respectively. Market values of equity futures are included in financial futures in the preceding table. At December 31, 2006 and 2005, the Company owned 18,000 and 36,500 equity financial forwards, respectively. Market values of equity financial forwards are included in financial forwards in the preceding table. At December 31, 2006 and 2005, the Company owned 742,550 and 1,058,300 equity options, respectively. Market values of equity options are included in options in the preceding table. The following table presents the notional amounts of derivative financial instruments by maturity at December 31, 2006:
SUCCESSOR ----------------------------------------------------------------------------------- REMAINING LIFE ----------------------------------------------------------------------------------- AFTER ONE YEAR AFTER FIVE YEARS ONE YEAR OR LESS THROUGH FIVE YEARS THROUGH TEN YEARS AFTER TEN YEARS TOTAL ---------------- ------------------ ----------------- --------------- ----- (IN MILLIONS) Interest rate swaps......... $167 $352 $392 $-- $911 Financial futures........... 26 -- -- -- 26 Foreign currency swaps...... -- 8 24 -- 32 Foreign currency forwards... 4 -- -- -- 4 Credit default swaps........ -- 1 3 -- 4 ---- ---- ---- --- ---- Total..................... $197 $361 $419 $-- $977 ==== ==== ==== === ====
Interest rate swaps are used by the Company primarily to reduce market risks from changes in interest rates and to alter interest rate exposure arising from mismatches between assets and liabilities (duration mismatches). In an interest rate swap, the Company agrees with another party to exchange, at specified intervals, the difference between fixed rate and floating rate interest amounts as calculated by reference to an agreed notional principal amount. These transactions are entered into pursuant to master agreements that provide for a single net payment to be made by the counterparty at each due date. In exchange-traded interest rate (Treasury and swap) and equity futures transactions, the Company agrees to purchase or sell a specified number of contracts, the value of which is determined by the different classes of interest rate and equity securities, and to post variation margin on a daily basis in an amount equal to the difference in the daily market values of those contracts. The Company enters into exchange-traded futures with regulated futures commission merchants that are members of the exchange. Exchange-traded interest rate (Treasury and swap) futures are used primarily to hedge mismatches between the duration of assets in a portfolio and the duration of liabilities supported by those assets, to hedge against changes in value of securities the Company owns or anticipates acquiring, and to hedge against changes in interest rates on anticipated liability issuances by replicating Treasury or swap curve performance. The value of interest rate futures is substantially impacted by changes in interest rates and they can be used to modify or hedge existing interest rate risk. Exchange-traded equity futures are used primarily to hedge liabilities embedded in certain variable annuity products offered by the Company. Foreign currency derivatives, including foreign currency swaps and foreign currency forwards are used by the Company to reduce the risk from fluctuations in foreign currency exchange rates associated with its assets and liabilities denominated in foreign currencies. F-38 METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) In a foreign currency swap transaction, the Company agrees with another party to exchange, at specified intervals, the difference between one currency and another at a forward exchange rate calculated by reference to an agreed upon principal amount. The principal amount of each currency is exchanged at the inception and termination of the currency swap by each party. In a foreign currency forward transaction, the Company agrees with another party to deliver a specified amount of an identified currency at a specified future date. The price is agreed upon at the time of the contract and payment for such a contract is made in a different currency at the specified future date. Equity index options are used by the Company primarily to hedge minimum guarantees embedded in certain variable annuity products offered by the Company. To hedge against adverse changes in equity indices, the Company enters into contracts to sell the equity index within a limited time at a contracted price. The contracts will be net settled in cash based on differentials in the indices at the time of exercise and the strike price. Equity index options are included in options in the preceding table. The Company enters into financial forwards to buy and sell securities. The price is agreed upon at the time of the contract and payment for such a contract is made at a specified future date. Equity variance swaps are used by the Company primarily to hedge minimum guarantees embedded in certain variable annuity products offered by the Company. In an equity variance swap, the Company agrees with another party to exchange amounts in the future, based on changes in equity volatility over a defined period. Equity variance swaps are included in financial forwards in the preceding table. Certain credit default swaps are used by the Company to hedge against credit-related changes in the value of its investments and to diversify its credit risk exposure in certain portfolios. In a credit default swap transaction, the Company agrees with another party, at specified intervals, to pay a premium to insure credit risk. If a credit event, as defined by the contract, occurs, generally the contract will require the swap to be settled gross by the delivery of par quantities of the referenced investment equal to the specified swap notional in exchange for the payment of cash amounts by the counterparty equal to the par value of the investment surrendered. Credit default swaps are also used to synthetically create investments that are either more expensive to acquire or otherwise unavailable in the cash markets. These transactions are a combination of a derivative and usually a U.S. Treasury or Agency security. HEDGING The following table presents the notional amounts and fair value of derivatives by type of hedge designation at:
SUCCESSOR ----------------------------------------------------------------- DECEMBER 31, 2006 DECEMBER 31, 2005 ------------------------------- ------------------------------- FAIR VALUE FAIR VALUE NOTIONAL -------------------- NOTIONAL -------------------- AMOUNT ASSETS LIABILITIES AMOUNT ASSETS LIABILITIES -------- ------ ----------- -------- ------ ----------- (IN MILLIONS) Non-qualifying.................. $977 $320 $47 $1,176 $318 $15 ---- ---- --- ------ ---- --- Total......................... $977 $320 $47 $1,176 $318 $15 ==== ==== === ====== ==== ===
For the year ended December 31, 2006, the Company had $10 million in settlement payments related to non-qualifying derivatives included within net investment gains (losses). F-39 METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) FAIR VALUE HEDGES The Company designates and accounts for the following as fair value hedges when they have met the requirements of SFAS 133: (i) interest rate swaps to convert fixed rate investments to floating rate investments; (ii) foreign currency swaps to hedge the foreign currency fair value exposure of foreign- currency-denominated investments and liabilities; and (iii) interest rate futures to hedge against changes in value of fixed rate securities. The Company did not recognize any net investment gains (losses) representing the ineffective portion of all fair value hedges for the year ended December 31, 2006 and the six months ended December 31, 2005. The Company recognized net investment gains (losses) representing the ineffective portion of all fair value hedges as follows:
PREDECESSOR ------------------------------- SIX MONTHS ENDED YEAR ENDED JUNE 30, DECEMBER 31, ---------------- ------------ 2005 2004 ---------------- ------------ (IN MILLIONS) Changes in the fair value of derivatives.......... $-- $(3) Changes in the fair value of the items hedged..... (1) (1) --- --- Net ineffectiveness of fair value hedging activities...................................... $(1) $(4) === ===
All components of each derivative's gain or loss were included in the assessment of hedge ineffectiveness, except for financial futures where the time value component of the derivative was excluded from the assessment of ineffectiveness. For the year ended December 31, 2006 and the six months ended December 31, 2005, there was no cost of carry for financial futures. For the six months ended June 30, 2005 and the year ended December 31, 2004, the cost of carry for financial futures was ($1) million and ($4) million, respectively. There were no instances in which the Company discontinued fair value hedge accounting due to a hedged firm commitment no longer qualifying as a fair value hedge. CASH FLOW HEDGES The Company designates and accounts for the following as cash flow hedges, when they have met the requirements of SFAS 133: (i) interest rate swaps to convert floating rate investments to fixed rate investments; and (ii) foreign currency swaps to hedge the foreign currency cash flow exposure of foreign currency denominated investments and liabilities. For the year ended December 31, 2006, the six months ended December 31, 2005 and June 30, 2005 and the year ended December 31, 2004, the Company recognized no net investment gains (losses) as the ineffective portion of all cash flow hedges. All components of each derivative's gain or loss were included in the assessment of hedge ineffectiveness. In certain instances, the Company may discontinue cash flow hedge accounting because the forecasted transactions did not occur on the anticipated date or in the additional time period permitted by SFAS 133. For the year ended December 31, 2006, the six months ended December 31, 2005 and June 30, 2005 and the year ended December 31, 2004, there were no instances in which the Company discontinued cash flow hedges. There were no hedged forecasted transactions, other than the receipt or payment of variable interest payments for the year ended December 31, 2006, the six months ended December 31, 2005 and June 30, 2005 and the year ended December 31, 2004. F-40 METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The following table presents the components of other comprehensive income (loss), before income tax, related to cash flow hedges:
PREDECESSOR ------------------------------ SIX MONTHS ENDED YEAR ENDED JUNE 30, DECEMBER 31, ---------------- ------------ 2005 2004 ---------------- ------------ (IN MILLIONS) Other comprehensive income balance at the beginning of the period.................................... $ 2 $ 10 Gains (losses) deferred in other comprehensive income (loss) on the effective portion of cash flow hedges...................................... (3) (14) Amounts reclassified to net investment income...... 1 6 --- ---- Other comprehensive income balance at the end of the period....................................... $-- $ 2 === ====
The Company has not entered into any cash flow hedges since June 30, 2005. NON-QUALIFYING DERIVATIVES AND DERIVATIVES FOR PURPOSES OTHER THAN HEDGING The Company enters into the following derivatives that do not qualify for hedge accounting under SFAS 133 or for purposes other than hedging: (i) interest rate swaps and interest rate futures to economically hedge its exposure to interest rate volatility; (ii) foreign currency forwards and swaps to economically hedge its exposure to adverse movements in exchange rates; (iii) credit default swaps to minimize its exposure to adverse movements in credit; (iv) equity futures, equity index options, and equity variance swaps to economically hedge liabilities embedded in certain variable annuity products; (v) credit default swaps used to synthetically create investments; and (vi) financial forwards to buy and sell securities. Effective at the Acquisition Date, the Company's derivative positions which previously qualified for hedge accounting were dedesignated in accordance with SFAS 133. Such derivative positions were not redesignated and were included with the Company's other non-qualifying derivative positions from the Acquisition Date through December 31, 2006. For the year ended December 31, 2006, the six months ended December 31, 2005 and June 30, 2005 and the year ended December 31, 2004, the Company recognized as net investment gains (losses), excluding embedded derivatives, changes in fair value of ($72) million, ($14) million, $11 million and ($39) million, respectively, related to derivatives that do not qualify for hedge accounting. EMBEDDED DERIVATIVES The Company has certain embedded derivatives which are required to be separated from their host contracts and accounted for as derivatives. These host contracts include guaranteed minimum withdrawal contracts and guaranteed minimum accumulation contracts. The fair value of the Company's embedded derivative assets was $25 million and $0 at December 31, 2006 and 2005, respectively. The fair value of the Company's embedded derivative liabilities was $0 and $22 million at December 31, 2006 and 2005, respectively. The amounts recorded and included in net investment gains (losses) for the year ended December 31, 2006, the six months ended December 31, 2005 and June 30, 2005, and during the year ended December 31, 2004 were gains (losses) of $46 million, $23 million, ($2) million, and $19 million, respectively. CREDIT RISK The Company may be exposed to credit-related losses in the event of nonperformance by counterparties to derivative financial instruments. Generally, the current credit exposure of the Company's derivative contracts is F-41 METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) limited to the fair value at the reporting date. The credit exposure of the Company's derivative transactions is represented by the fair value of contracts with a net positive fair value at the reporting date. The Company manages its credit risk related to over-the-counter derivatives by entering into transactions with creditworthy counterparties, maintaining collateral arrangements and through the use of master agreements that provide for a single net payment to be made by one counterparty to another at each due date and upon termination. Because exchange traded futures are effected through regulated exchanges, and positions are marked to market on a daily basis, the Company has minimal exposure to credit related losses in the event of nonperformance by counterparties to such derivative instruments. The Company enters into various collateral arrangements, which require both the pledging and accepting of collateral in connection with its derivative instruments. As of December 31, 2006 and 2005, the Company was obligated to return cash collateral under its control of $102 million and $108 million, respectively. This unrestricted cash collateral is included in cash and cash equivalents and the obligation to return it is included in payables for collateral under derivative transactions in the consolidated balance sheets. As of December 31, 2006 and 2005, the Company had also accepted collateral consisting of various securities with a fair market value of $6 million and $22 million, respectively, which are held in separate custodial accounts. In addition, the Company has exchange traded futures, which require the pledging of collateral. As of both December 31, 2006 and 2005, the Company pledged collateral of $14 million, which is included in fixed maturity securities. The Company is permitted by contract to sell or repledge this collateral, but as of December 31, 2006 and 2005, none of the collateral had been sold or repledged. F-42 METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 5. DEFERRED POLICY ACQUISITION COSTS AND VALUE OF BUSINESS ACQUIRED Information regarding DAC and VOBA is as follows:
DAC VOBA TOTAL ------- ------ ------ (IN MILLIONS) Balance at January 1, 2004 (PREDECESSOR)........... $ 1,279 $ 12 $1,291 Capitalizations.................................. 469 -- 469 Less: Amortization............................... 226 1 227 ------- ------ ------ Balance at December 31, 2004 (PREDECESSOR)......... 1,522 11 1,533 Capitalizations.................................. 222 -- 222 Less: Amortization............................... 132 1 133 ------- ------ ------ Balance at June 30, 2005 (PREDECESSOR)............. 1,612 10 1,622 ------- ------ ------ Effect of purchase accounting push down (See Note 2)............................................... (1,612) 1,666 54 ------- ------ ------ Balance at July 1, 2005 (SUCCESSOR)................ -- 1,676 1,676 ------- ------ ------ Capitalizations.................................. 164 -- 164 ------- ------ ------ Less: Amortization related to: Net investment gains (losses)................. (3) (7) (10) Unrealized investment gains (losses).......... (17) (28) (45) Other expenses................................ 12 106 118 ------- ------ ------ Total amortization.......................... (8) 71 63 ------- ------ ------ Balance at December 31, 2005 (SUCCESSOR)........... 172 1,605 1,777 ------- ------ ------ Capitalizations.................................. 135 -- 135 Less: Amortization related to: Net investment gains (losses)................. (3) (33) (36) Unrealized investment gains (losses).......... 1 11 12 Other expenses................................ 53 171 224 ------- ------ ------ Total amortization.......................... 51 149 200 ------- ------ ------ Balance at December 31, 2006 (SUCCESSOR)........... $ 256 $1,456 $1,712 ======= ====== ======
The estimated future amortization expense allocated to other expenses for the next five years for VOBA is $188 million in 2007, $169 million in 2008, $156 million in 2009, $139 million in 2010 and $120 million in 2011. F-43 METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 6. GOODWILL Goodwill is the excess of cost over the fair value of net assets acquired. Information regarding goodwill is as follows:
SUCCESSOR ----------- DECEMBER 31, ----------- 2006 2005 ---- ---- (IN MILLIONS) Balance at January 1,....................................... $243 $ -- Effect of purchase accounting push down (See Note 2)........ (4) 243 ---- ---- Balance at December 31,..................................... $239 $243 ==== ====
7. INSURANCE VALUE OF DISTRIBUTION AGREEMENTS Information regarding the value of distribution agreements ("VODA"), which is reported in other assets, is as follows:
SUCCESSOR PREDECESSOR ------------------------------- ------------------------------- YEAR ENDED SIX MONTHS ENDED SIX MONTHS ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, JUNE 30, DECEMBER 31, ------------ ---------------- ---------------- ------------ 2006 2005 2005 2004 ------------ ---------------- ---------------- ------------ (IN MILLIONS) Balance at beginning of period....................... $ 8 $-- $-- $-- Effect of purchase accounting push down (See Note 2)....... -- 8 -- -- Amortization................... (1) -- -- -- --- --- --- --- Balance at end of period....... $ 7 $ 8 $-- $-- === === === ===
The estimated future amortization expense allocated to other expenses for VODA is $1 million per year for each of the years from 2007 to 2011. SALES INDUCEMENTS Information regarding deferred sales inducements, which are reported in other assets, is as follows:
SUCCESSOR PREDECESSOR ------------------------------- ------------------------------- YEAR ENDED SIX MONTHS ENDED SIX MONTHS ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, JUNE 30, DECEMBER 31, ------------ ---------------- ---------------- ------------ 2006 2005 2005 2004 ------------ ---------------- ---------------- ------------ (IN MILLIONS) Balance at end of previous period....................... $ 8 $ 36 $25 $-- Effect of purchase accounting push down (See Note 2)....... -- (36) -- -- --- ---- --- --- Balance at beginning of period....................... 8 -- 25 -- Capitalization................. 9 8 12 25 Amortization................... (1) -- (1) -- --- ---- --- --- Balance at end of period....... $16 $ 8 $36 $25 === ==== === ===
F-44 METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) SEPARATE ACCOUNTS Separate account assets and liabilities include pass-through separate accounts totaling $12.2 billion at both December 31, 2006 and 2005 for which the policyholder assumes all investment risk. Fees charged to the separate accounts by the Company (including mortality charges, policy administration fees and surrender charges) are reflected in the Company's revenues as universal life and investment-type product policy fees and totaled $246 million, $124 million, $95 million and $200 million for the year ended December 31, 2006, the six months ended December 31, 2005 and June 30, 2005, and the year ended December 31, 2004, respectively. For the year ended December 31, 2006, the six months ended December 31, 2005 and June 30, 2005 and the year ended December 31, 2004, there were no investment gains (losses) on transfers of assets from the general account to the separate accounts. GUARANTEES The Company issues annuity contracts which may include contractual guarantees to the contractholder for the highest contract value on a specified anniversary date minus any withdrawals following the contract anniversary, or total deposits made to the contract less any partial withdrawals plus a minimum return ("anniversary contract value" or "minimum return"). The Company also issues universal and variable life contracts where the Company contractually guarantees to the contractholder a secondary guarantee. Information regarding the types of guarantees relating to annuity contracts and universal and variable life contracts is as follows:
SUCCESSOR --------------------- DECEMBER 31, --------------------- 2006 2005 --------- --------- IN THE EVENT OF DEATH --------------------- (IN MILLIONS) ANNUITY CONTRACTS(1) ANNIVERSARY CONTRACT VALUE OR MINIMUM RETURN Separate account value................................ $ 14,156 $ 14,507 Net amount at risk(2)................................. $ 440(3)$ 569(3) Average attained age of contractholders............... 64 years 63 years SUCCESSOR --------------------- DECEMBER 31, --------------------- 2006 2005 --------- --------- SECONDARY GUARANTEES --------------------- (IN MILLIONS) UNIVERSAL AND VARIABLE LIFE CONTRACTS(1) Account value (General and Separate account).......... $ 1,807 $ 1,694 Net amount at risk(2)................................. $ 21,459(3)$ 21,719(3) Average attained age of policyholders................. 59 years 57 years
- -------- (1) The Company's annuity and life contracts with guarantees may offer more than one type of guarantee in each contract. Therefore, the amounts listed above may not be mutually exclusive. (2) The net amount at risk is based on the direct amount at risk (excluding reinsurance). F-45 METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (3) The net amount at risk for guarantees of amounts in the event of death is defined as the current guaranteed minimum death benefit in excess of the current account balance at the balance sheet date. Liabilities incurred, relating to annuity contracts, for guaranteed death benefits were $1 million for the six months ended December 31, 2005. There were no guaranteed death benefits incurred for the six months ended June 30, 2005 or the year ended December 31, 2004. Liabilities incurred, relating to universal and variable life contracts, for secondary guarantees were $13 million for the year ended December 31, 2006, $4 million for each of the six months ended December 31, 2005 and June 30, 2005 and $1 million for the year ended December 31, 2004. Account balances of contracts with insurance guarantees are invested in separate account asset classes as follows:
SUCCESSOR ----------------- DECEMBER 31, ----------------- 2006 2005 ------- ------- (IN MILLIONS) Mutual Fund Groupings Equity................................................ $ 9,336 $ 9,055 Bond.................................................. 940 1,055 Balanced.............................................. 1,070 1,261 Money Market.......................................... 282 286 Specialty............................................. 152 218 ------- ------- Total.............................................. $11,780 $11,875 ======= =======
8. REINSURANCE The Company's life insurance operations participate in reinsurance activities in order to limit losses, minimize exposure to large risks, and provide additional capacity for future growth. The Company has historically reinsured the mortality risk on new individual life insurance policies primarily on an excess of retention basis or a quota share basis. The Company has reinsured up to 90% of the mortality risk for all new individual life insurance policies. This practice was initiated by the Company for different products starting at various points in time between 1997 and 2002. On a case by case basis, the Company may retain up to $5 million per life on single life individual policies and reinsure 100% of amounts in excess of the Company's retention limits. The Company evaluates its reinsurance programs routinely and may increase or decrease its retention at any time. Placement of reinsurance is done primarily on an automatic basis and also on a facultative basis for risks with specific characteristics. In addition to reinsuring mortality risk, as described above, the Company reinsures other mortality and non-mortality risks, and specific coverages. The Company routinely reinsures certain classes of risks in order to limit its exposure to particular travel, avocation and lifestyle hazards. The Company has exposure to catastrophes, which could contribute to significant fluctuations in the Company's results of operations. The Company uses excess of retention and quota share reinsurance arrangements to provide greater diversification of risk and minimize exposure to larger risks. The Company reinsures its business through a diversified group of reinsurers. No single unaffiliated reinsurer has a material obligation to the Company nor is the Company's business substantially dependent upon any reinsurance contracts. The Company is contingently liable with respect to ceded reinsurance should any reinsurer be unable to meet its obligations under these agreements. F-46 METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The Company reinsures the riders containing benefit guarantees related to variable annuities to affiliated and non-affiliated reinsurers. The Company reinsures its risk associated with the secondary death benefit guarantee rider on certain universal life contracts to an affiliate. See Note 14. The amounts in the consolidated statements of income are presented net of reinsurance ceded. Information regarding the effect of reinsurance is as follows:
SUCCESSOR PREDECESSOR ------------------------------- ------------------------------- YEAR ENDED SIX MONTHS ENDED SIX MONTHS ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, JUNE 30, DECEMBER 31, ------------ ---------------- ---------------- ------------ 2006 2005 2005 2004 ------------ ---------------- ---------------- ------------ (IN MILLIONS) Direct premiums.............. $ 79 $ 41 $ 39 $ 74 Reinsurance ceded............ (36) (24) (19) (34) ---- ---- ---- ---- Net premiums earned.......... $ 43 $ 17 $ 20 $ 40 ==== ==== ==== ==== Reinsurance recoverables netted against policyholder benefits and claims........ $169 $ 42 $ 61 $ 95 ==== ==== ==== ====
Reinsurance recoverables, included in premiums and other receivables, were $139 million and $77 million at December 31, 2006 and 2005, respectively. Reinsurance and ceded commissions payables, included in other liabilities, were $16 million and $12 million at December 31, 2006 and 2005, respectively. For the year ended December 31, 2006 and the six months ended December 31, 2005 and June 30, 2005, reinsurance ceded include affiliated transactions of $5 million, $2 million and $3 million, respectively. For the year ended December 31, 2004 there were no affiliated reinsurance transactions. 9. INCOME TAX The provision for income tax from continuing operations is as follows:
SUCCESSOR PREDECESSOR ------------------------------- ------------------------------- YEAR ENDED SIX MONTHS ENDED SIX MONTHS ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, JUNE 30, DECEMBER 31, ------------ ---------------- ---------------- ------------ 2006 2005 2005 2004 ------------ ---------------- ---------------- ------------ (IN MILLIONS) Current Federal.............. $-- $(20) $ 50 $ 96 Deferred Federal............. 74 32 (15) (47) --- ---- ---- ---- Provision for income tax..... $74 $ 12 $ 35 $ 49 === ==== ==== ====
F-47 METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The reconciliation of the income tax provision at the U.S. statutory rate to the provision for income tax as reported for continuing operations is as follows:
SUCCESSOR PREDECESSOR ------------------------------- ------------------------------- YEAR ENDED SIX MONTHS ENDED SIX MONTHS ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, JUNE 30, DECEMBER 31, ------------ ---------------- ---------------- ------------ 2006 2005 2005 2004 ------------ ---------------- ---------------- ------------ (IN MILLIONS) Tax provision at U.S. statutory rate............. $ 89 $ 22 $39 $ 72 Tax effect of: Tax exempt investment income.................. (15) (10) (4) (15) Tax reserve release........ -- -- -- (8) ---- ---- --- ---- Provision for income tax..... $ 74 $ 12 $35 $ 49 ==== ==== === ====
Deferred income tax represents the tax effect of the differences between the book and tax basis of assets and liabilities. Net deferred income tax assets and liabilities consisted of the following:
SUCCESSOR --------------------- DECEMBER 31, --------------------- 2006 2005 ---------- -------- (IN MILLIONS) Deferred income tax assets: Benefit, reinsurance and other reserves......... $ 487 $ 580 Capital loss carryforwards...................... 20 17 Net unrealized investment losses................ 16 22 Other........................................... 8 8 ----- ----- 531 627 ----- ----- Deferred income tax liabilities: DAC and VOBA.................................... (518) (525) Investments..................................... (5) (12) ----- ----- (523) (537) ----- ----- Net deferred income tax asset..................... $ 8 $ 90 ===== =====
At December 31, 2006, the Company has a net deferred income tax asset. If the Company determines that any of its deferred income tax assets will not result in future tax benefits, a valuation allowance must be established for the portion of these assets that are not expected to be realized. Based predominantly upon a review of the Company's anticipated future taxable income, but also including all other available evidence, both positive and negative, the Company's management concluded that it is "more likely than not" that the net deferred income tax assets will be realized. Capital loss carryforwards amount to $59 million at December 31, 2006 and will expire beginning in 2010. The Company files a consolidated tax return with its parent, MICC. Under the Tax Allocation Agreement, the federal income tax will be allocated between the companies on a separate return basis and adjusted for credits and other amounts required by the Tax Allocation Agreement. F-48 METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 10. CONTINGENCIES, COMMITMENTS AND GUARANTEES CONTINGENCIES LITIGATION The Company is a defendant in a number of litigation matters. In some of the matters, large and/or indeterminate amounts, including punitive and treble damages, are sought. Modern pleading practice in the United States permits considerable variation in the assertion of monetary damages or other relief. Jurisdictions may permit claimants not to specify the monetary damages sought or may permit claimants to state only that the amount sought is sufficient to invoke the jurisdiction of the trial court. In addition, jurisdictions may permit plaintiffs to allege monetary damages in amounts well exceeding reasonably possible verdicts in the jurisdiction for similar matters. This variability in pleadings, together with the actual experience of the Company in litigating or resolving through settlement numerous claims over an extended period of time, demonstrate to management that the monetary relief which may be specified in a lawsuit or claim bears little relevance to its merits or disposition value. Thus, unless stated below, the specific monetary relief sought is not noted. Due to the vagaries of litigation, the outcome of a litigation matter and the amount or range of potential loss at particular points in time may normally be inherently impossible to ascertain with any degree of certainty. Inherent uncertainties can include how fact finders will view individually and in their totality documentary evidence, the credibility and effectiveness of witnesses' testimony, and how trial and appellate courts will apply the law in the context of the pleadings or evidence presented, whether by motion practice, or at trial or on appeal. Disposition valuations are also subject to the uncertainty of how opposing parties and their counsel will themselves view the relevant evidence and applicable law. The Company is a party to a number of legal actions and is and/or has been involved in regulatory investigations. Given the inherent unpredictability of these matters, it is difficult to estimate the impact on the Company's consolidated financial position. On a quarterly and yearly basis, the Company reviews relevant information with respect to liabilities for litigation, regulatory investigations and litigation-related contingencies to be reflected in the Company's consolidated financial statements. Unless stated below, estimates of possible additional losses or ranges of loss for particular matters cannot in the ordinary course be made with a reasonable degree of certainty. The limitations of available data and uncertainty regarding numerous variables make it difficult to estimate liabilities. Liabilities are established when it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. It is possible that some of the matters could require the Company to pay damages or make other expenditures or establish accruals in amounts that could not be estimated as of December 31, 2006. Furthermore, it is possible that an adverse outcome in certain of the Company's litigation and regulatory investigations, or the use of different assumptions in the determination of amounts recorded, could have a material effect upon the Company's consolidated net income or cash flows in particular quarterly or annual periods. Macomber, et al. v. Travelers Property Casualty Corp., et al. (Conn. Super. Ct., Hartford, filed April 7, 1999). An amended putative class action complaint was filed against the Company, Travelers Equity Sales, Inc. and certain former affiliates. The amended complaint alleges Travelers Property Casualty Corporation, a former MLAC affiliate, purchased structured settlement annuities from the Company and spent less on the purchase of those structured settlement annuities than agreed with claimants, and that commissions paid to brokers for the structured settlement annuities, including an affiliate of MLAC, were paid in part to Travelers Property Casualty Corporation. On May 26, 2004, the Connecticut Superior Court certified a nationwide class action involving the following claims against the Company: violation of the Connecticut Unfair Trade Practice Statute, unjust enrichment, and civil conspiracy. On June 15, 2004, the defendants appealed the class certification order. In March 2006, the Connecticut Supreme Court reversed the trial court's certification of a class. Plaintiff may seek to file another motion for class F-49 METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) certification. Defendants have moved for summary judgment. The Company is continuing to vigorously defend against the claims in this matter. Regulatory bodies have contacted the Company and have requested information relating to various regulatory issues regarding mutual funds and variable insurance products, including the marketing of such products. The Company believes that many of these inquiries are similar to those made to many financial services companies as part of industry-wide investigations by various regulatory agencies. The Company is fully cooperating with regard to these information requests and investigations. The Company at the present time is not aware of any systemic problems with respect to such matters that may have a material adverse effect on the Company's consolidated financial position. In addition, the Company is a defendant or co-defendant in various other litigation matters in the normal course of business. These may include civil actions, arbitration proceedings and other matters arising in the normal course of business out of activities as an insurance company or otherwise. Further, state insurance regulatory authorities and other federal and state authorities may make inquiries and conduct investigations concerning the Company's compliance with applicable insurance and other laws and regulations. In the opinion of the Company's management, the ultimate resolution of these legal and regulatory proceedings would not be likely to have a material adverse effect on the Company's consolidated financial position or liquidity, but, if involving monetary liability, may be material to the Company's operating results for any particular period. INSOLVENCY ASSESSMENTS Most of the jurisdictions in which the Company is admitted to transact business require life insurers doing business within the jurisdiction to participate in guaranty associations, which are organized to pay contractual benefits owed pursuant to insurance policies issued by impaired, insolvent or failed life insurers. These associations levy assessments, up to prescribed limits, on all member insurers in a particular state on the basis of the proportionate share of the premiums written by member insurers in the lines of business in which the impaired, insolvent or failed insurer engaged. Some states permit member insurers to recover assessments paid through full or partial premium tax offsets. Assets and liabilities held for insolvency assessments are as follows:
SUCCESSOR ------------- DECEMBER 31, ------------- 2006 2005 ---- ---- (IN MILLIONS) Other Assets: Premium tax offset for future undiscounted assessments..... $ 1 $1 Premium tax offsets currently available for paid assessments............................................. -- 1 --- -- $ 1 $2 === == Liability: Insolvency assessments..................................... $ 1 $1 === ==
Assessments levied against the Company were less than $1 million for the year ended December 31, 2006, the six months ended December 31, 2005 and June 30, 2005 and the year ended December 31, 2004. F-50 METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) COMMITMENTS COMMITMENTS TO FUND PARTNERSHIP INVESTMENTS The Company makes commitments to fund partnership investments in the normal course of business. The amounts of these unfunded commitments were $46 million and $15 million at December 31, 2006 and 2005, respectively. The Company anticipates that these amounts will be invested in partnerships over the next five years. MORTGAGE LOAN COMMITMENTS The Company commits to lend funds under mortgage loan commitments. The amounts of these mortgage loan commitments were $60 million and $20 million at December 31, 2006 and 2005, respectively. COMMITMENTS TO FUND BANK CREDIT FACILITIES The Company commits to lend funds under bank credit facilities. The amount of these unfunded commitments was $24 million at December 31, 2006. The Company did not have any unfunded commitments related to bank credit facilities at December 31, 2005. GUARANTEES In the normal course of its business, the Company has provided certain indemnities, guarantees and commitments to third parties pursuant to which it may be required to make payments now or in the future. In the context of acquisition, disposition, investment and other transactions, the Company has provided indemnities and guarantees, including those related to tax, environmental and other specific liabilities, and other indemnities and guarantees that are triggered by, among other things, breaches of representations, warranties or covenants provided by the Company. In addition, in the normal course of business, the Company provides indemnifications to counterparties in contracts with triggers similar to the foregoing, as well as for certain other liabilities, such as third party lawsuits. These obligations are often subject to time limitations that vary in duration, including contractual limitations and those that arise by operation of law, such as applicable statutes of limitation. In some cases, the maximum potential obligation under the indemnities and guarantees is subject to a contractual limitation, while in other cases such limitations are not specified or applicable. Since certain of these obligations are not subject to limitations, the Company does not believe that it is possible to determine the maximum potential amount that could become due under these guarantees in the future. In addition, the Company indemnifies its directors and officers as provided in its charters and by-laws. Also, the Company indemnifies its agents for liabilities incurred as a result of their representation of the Company's interests. Since these indemnities are generally not subject to limitation with respect to duration or amount, the Company does not believe that it is possible to determine the maximum potential amount that could become due under these indemnities in the future. The Company's recorded liability at December 31, 2006 and 2005 for indemnities, guarantees and commitments is insignificant. 11. EQUITY DIVIDEND RESTRICTIONS Under Connecticut State Insurance Law, the Company is permitted, without prior insurance regulatory clearance, to pay stockholder dividends to its parent as long as the amount of such dividends, when aggregated with all other dividends in the preceding 12 months, does not exceed the greater of (i) 10% of its surplus to policyholders as of the end of the immediately preceding calendar year; or (ii) its statutory net gain from operations for the F-51 METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) immediately preceding calendar year. The Company will be permitted to pay a cash dividend in excess of the greater of such two amounts only if it files notice of its declaration of such a dividend and the amount thereof with the Connecticut Commissioner of Insurance (the "Commissioner") and the Commissioner does not disapprove the payment within 30 days after notice. In addition, any dividend that exceeds earned surplus (unassigned funds, reduced by 25% of unrealized appreciation in value or revaluation of assets or unrealized profits on investments) as of the last filed annual statutory statement requires insurance regulatory approval. Under Connecticut State Insurance Law, the Commissioner has broad discretion in determining whether the financial condition of a stock life insurance company would support the payment of such dividends to its stockholders. The Connecticut State Insurance Law requires prior approval for any dividends for a period of two years following a change in control. As a result of the acquisition on July 1, 2005, under Connecticut State Insurance Law all dividend payments by the Company through June 30, 2007 require prior approval of the Commissioner. The Company did not pay any dividends in 2006. However, since the Company's statutory unassigned funds surplus is negative, the Company cannot pay any dividends without prior approval of the Commissioner. CAPITAL CONTRIBUTIONS In 2005, the Company had an increase of $4 million in paid-in capital due to an assumption of all tax liabilities for potential audit liabilities for federal and state income taxes and other taxes with respect to pre-Acquisition tax periods. The Acquisition Agreement between MetLife and Citigroup, dated as of January 31, 2005, provides for an indemnification by Citigroup to MetLife for specified tax liabilities incurred prior to the Acquisition Date. During 2004, the Company received a capital contribution of $400 million from its parent, MICC. STATUTORY EQUITY AND INCOME The Connecticut Insurance Department (the "Department") imposes minimum risk-based capital ("RBC") requirements that were developed by the National Association of Insurance Commissioners ("NAIC"). The formulas for determining the amount of RBC specify various weighting factors that are applied to financial balances or various levels of activity based on the perceived degree of risk. Regulatory compliance is determined by a ratio of total adjusted capital, as defined by the NAIC, to authorized control level RBC, as defined by the NAIC. Companies below specific trigger points or ratios are classified within certain levels, each of which requires specified corrective action. MetLife Annuity exceeded the minimum RBC requirements for all periods presented herein. The NAIC adopted the Codification of Statutory Accounting Principles ("Codification") in 2001. Codification was intended to standardize regulatory accounting and reporting to state insurance departments. However, statutory accounting principles continue to be established by individual state laws and permitted practices. The Department has adopted Codification, with certain modifications, for the preparation of statutory financial statements of insurance companies domiciled in Connecticut. Modifications by the Department may impact the effect of Codification on statutory capital and surplus of the Company. Statutory accounting principles differ from GAAP primarily by charging policy acquisition costs to expense as incurred, establishing future policy benefit liabilities using different actuarial assumptions and valuing securities on a different basis. In addition, certain assets are not admitted under statutory accounting principles and are charged directly to surplus. The most significant asset not admitted by the Company is the net deferred tax assets resulting from temporary differences between statutory accounting principles basis and tax basis not expected to reverse and become recoverable within a year. Further, statutory accounting principles do not give recognition to amounts "pushed down" as a result of the Acquisition. F-52 METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Statutory net income (loss) of MLAC, a Connecticut domiciled insurer, was $107 million, ($97) million and ($211) million for the years ended December 31, 2006, 2005 and 2004, respectively. Statutory capital and surplus, as filed with the Department, was $740 million and $765 million at December 31, 2006 and 2005, respectively. OTHER COMPREHENSIVE INCOME (LOSS) The following table sets forth the reclassification adjustments required for the year ended December 31, 2006, the six months ended December 31, 2005 and June 30, 2005 and the year ended December 31, 2004, in other comprehensive income (loss) that are included as part of net income for the current year that have been reported as a part of other comprehensive income (loss) in the current or prior period:
SUCCESSOR PREDECESSOR ------------------------------ ------------------------------ YEAR ENDED SIX MONTHS ENDED SIX MONTHS ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, JUNE 30, DECEMBER 31, ------------ ---------------- ---------------- ------------ 2006 2005 2005 2004 ------------ ---------------- ---------------- ------------ (IN MILLIONS) Holding gains (losses) on investments arising during the period.................... $ 98 $(75) $(5) $ 18 Income tax effect of holding gains (losses)............................. (34) 26 1 (6) Reclassification adjustments: Recognized holding gains (losses) included in current period income............................ (68) (46) 3 6 Amortization of premiums and accretion of discounts associated with investments....................... -- 12 (8) (18) Income tax effect of reclassification adjustments....................... 24 12 2 4 Allocation of holding gains (losses) on investments relating to other policyholder amounts................. (12) 45 -- -- Income tax effect of allocation of holding gains (losses) to other policyholder amounts.............................. 4 (16) -- -- ---- ---- --- ---- Other comprehensive income (loss).......................... $ 12 $(42) $(7) $ 4 ==== ==== === ====
12. OTHER EXPENSES Information on other expenses is as follows:
SUCCESSOR PREDECESSOR ------------------------------- ------------------------------- YEAR ENDED SIX MONTHS ENDED SIX MONTHS ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, JUNE 30, DECEMBER 31, ------------ ---------------- ---------------- ------------ 2006 2005 2005 2004 ------------ ---------------- ---------------- ------------ (IN MILLIONS) Compensation......................... $ 47 $ 27 $ 19 $ 45 Commissions.......................... 159 156 180 373 Amortization of DAC and VOBA......... 188 108 133 227 Capitalization of DAC................ (135) (164) (222) (469) Rent, net of sublease income......... 2 2 1 4 Other................................ 45 36 73 123 ----- ----- ----- ----- Total other expenses............... $ 306 $ 165 $ 184 $ 303 ===== ===== ===== =====
F-53 METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 13. FAIR VALUE INFORMATION The estimated fair value of financial instruments have been determined by using available market information and the valuation methodologies described below. Considerable judgment is often required in interpreting market data to develop estimates of fair value. Accordingly, the estimates presented herein may not necessarily be indicative of amounts that could be realized in a current market exchange. The use of different assumptions or valuation methodologies may have a material effect on the estimated fair value amounts. Amounts related to the Company's financial instruments are as follows:
SUCCESSOR ---------------------------------- NOTIONAL CARRYING ESTIMATED AMOUNT VALUE FAIR VALUE -------- -------- ---------- (IN MILLIONS) DECEMBER 31, 2006 Assets: Fixed maturity securities............................ $5,889 $5,889 Equity securities.................................... $ 57 $ 57 Mortgage loans on real estate........................ $ 295 $ 289 Policy loans......................................... $ 55 $ 55 Short-term investments............................... $ 95 $ 95 Cash and cash equivalents............................ $ 230 $ 230 Accrued investment income............................ $ 68 $ 68 Mortgage loan commitments............................ $60 $ -- $ -- Commitments to fund bank credit facilities........... $24 $ -- $ -- Liabilities: Policyholder account balances........................ $2,740 $2,457 Payables for collateral under derivative transactions...................................... $ 102 $ 102
SUCCESSOR ---------------------------------- NOTIONAL CARRYING ESTIMATED AMOUNT VALUE FAIR VALUE -------- -------- ---------- (IN MILLIONS) DECEMBER 31, 2005 Assets: Fixed maturity securities............................ $6,055 $6,055 Equity securities.................................... $ 4 $ 4 Mortgage loans on real estate........................ $ 258 $ 258 Policy loans......................................... $ 37 $ 37 Short-term investments............................... $ 57 $ 57 Cash and cash equivalents............................ $ 233 $ 233 Accrued investment income............................ $ 69 $ 69 Mortgage loan commitments............................ $20 $ -- $ -- Liabilities: Policyholder account balances........................ $3,185 $2,972 Payables for collateral under derivative transactions...................................... $ 108 $ 108
F-54 METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The methods and assumptions used to estimate the fair value of financial instruments are summarized as follows: FIXED MATURITY SECURITIES AND EQUITY SECURITIES The fair values of publicly held fixed maturity securities and publicly held equity securities are based on quoted market prices or estimates from independent pricing services. However, in cases where quoted market prices are not available, such as for private fixed maturity securities, fair values are estimated using present value or valuation techniques. The determination of fair values is based on: (i) valuation methodologies; (ii) securities the Company deems to be comparable; and (iii) assumptions deemed appropriate given the circumstances. The fair value estimates are based on available market information and judgments about financial instruments, including estimates of the timing and amounts of expected future cash flows and the credit standing of the issuer or counterparty. Factors considered in estimating fair value include; coupon rate, maturity, estimated duration, call provisions, sinking fund requirements, credit rating, industry sector of the issuer, and quoted market prices of comparable securities. MORTGAGE LOANS ON REAL ESTATE, MORTGAGE LOAN COMMITMENTS AND COMMITMENTS TO FUND BANK CREDIT FACILITIES Fair values for mortgage loans on real estate are estimated by discounting expected future cash flows, using current interest rates for similar loans with similar credit risk. For mortgage loan commitments and commitments to fund bank credit facilities, the estimated fair value is the net premium or discount of the commitments. POLICY LOANS The carrying values for policy loans approximate fair value. CASH AND CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS The carrying values for cash and cash equivalents and short-term investments approximated fair values due to the short-term maturities of these instruments. ACCRUED INVESTMENT INCOME The carrying value for accrued investment income approximates fair value. POLICYHOLDER ACCOUNT BALANCES The fair value of PABs which have final contractual maturities are estimated by discounting expected future cash flows based upon interest rates currently being offered for similar contracts with maturities consistent with those remaining for the agreements being valued. The fair value of PABs without final contractual maturities are assumed to equal their current net surrender value. PAYABLES FOR COLLATERAL UNDER DERIVATIVE TRANSACTIONS The carrying value for payables for collateral under derivative transactions approximate fair value. DERIVATIVE FINANCIAL INSTRUMENTS The fair value of derivative financial instruments, including financial futures, financial forwards, interest rate, credit default and foreign currency swaps, foreign currency forwards, and options are based upon quotations obtained from dealers or other reliable sources. See Note 4 for derivative fair value disclosures. F-55 METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 14. RELATED PARTY TRANSACTIONS In 2006, the Company entered into a Master Service Agreement with Metropolitan Life Insurance Company ("Metropolitan Life"), a wholly-owned subsidiary of MetLife, who provides administrative, accounting, legal and similar services to the Company. Metropolitan Life charged the Company $5 million, included in other expenses, for services performed under the Master Service Agreement for the year ended December 31, 2006. The Company entered into a Service Agreement with MetLife Group, Inc. ("MetLife Group"), a wholly-owned subsidiary of MetLife under which MetLife Group provides personnel services, as needed, to support the activities of the Company. MetLife Group charged the Company $28 million, included in other expenses, for services performed under the Service Agreement for the year ended December 31, 2006. There were no charges for the six months ended December 31, 2005. At December 31, 2006 and 2005, the Company had receivables from MICC of $13 million and $20 million, respectively. The Company had receivables from other affiliates of $4 million and payables to other affiliates of $2 million at December 31, 2006 and 2005, respectively, excluding affiliated reinsurance balances discussed below. Since the Company is a member of a controlled group of affiliate companies, its results may not be indicative of those of a stand-alone entity. As of December 31, 2006 and 2005, the Company held $89 million and $16 million, respectively, of its total invested assets in the MetLife Money Market Pool which is an affiliated partnership. These amounts are included in short- term investments. In the normal course of business, the Company transfers fixed maturity securities to affiliates and receives other fixed maturity securities from affiliates. The Company transferred invested assets to affiliates with both an amortized cost and fair market value of $15 million for the year ended December 31, 2006. The Company did not transfer assets to affiliates for the six months ended December 31, 2005. The realized capital losses recognized on these transfers were less than $1 million for the year ended December 31, 2006. The Company received invested assets from affiliates with a fair market value of $13 million for the year ended December 31, 2006. The Company did not receive transfers of assets from affiliates for the six months ended December 31, 2005. The Company also has reinsurance agreements with MetLife and certain of its subsidiaries, including Reinsurance Group of America, Incorporated ("RGA"), MetLife Reinsurance Company of South Carolina ("MRSC"), and Exeter Reassurance Company, Ltd. ("Exeter"). As of December 31, 2006, the Company had reinsurance related assets and liabilities from these agreements totaling $108 million and $12 million, respectively. Prior-year comparable assets and liabilities were $78 million and $47 million, respectively. The following tables reflect related party reinsurance information:
SUCCESSOR ------------------------------- YEAR ENDED SIX MONTHS ENDED DECEMBER 31, DECEMBER 31, ------------ ---------------- 2006 2005 ------------ ---------------- (IN MILLIONS) Ceded premiums.................................... $ 5 $ 2 Ceded fees, included in universal life and investment-type product policy fees............. 22 19 Ceded benefits, included in policyholder benefits and claims...................................... 38 39 Ceded fees, included in other expenses............ 37 12 ---- --- Total ceded..................................... $102 $72 ==== ===
F-56 METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SUCCESSOR ----------- DECEMBER 31, ----------- 2006 2005 ---- ---- (IN MILLIONS) Reinsurance recoverables, included in premiums and other receivables................................................ $108 $78 Ceded balances payable, included in other liabilities........ $ 12 $47
Prior to the Acquisition, the Company had related party transactions with its parent and/or affiliates. These transactions are described as follows: In December 2004, MLAC entered into a reinsurance agreement with MRSC related to guarantee features included in certain of their universal life and variable universal life products. All information subsequent to the Acquisition is included in the tables above. Fees associated with this agreement, included within other expenses, were $22 million for the six months ended June 30, 2005. In addition, MLAC's individual insurance mortality risk is reinsured, in part, to RGA, an affiliate subsequent to the Acquisition Date. All information subsequent to the Acquisition is included in the tables above. Ceded premiums were $3 million for the six months ended June 30, 2005. Ceded fees, included within universal life and investment-type product policy fees, were $7 million for the six months ended June 30, 2005. Ceded benefits, included within policyholder benefits and claims, were $5 million for the six months ended June 30, 2005. At June 30, 2005, MLAC had investments in Tribeca Citigroup Investments Ltd. ("Tribeca"), an affiliate of the Company, in the amount of $10 million. Income (loss) of ($1) million and $1 million was recognized on these investments in the six months ended June 30, 2005 and the year ended December 31, 2004, respectively. In July 2005, MLAC sold its investment in Tribeca. Citigroup and certain of its subsidiaries provided investment management and accounting services, payroll, internal auditing, benefit management and administration, property management and investment technology services to the Company. The Company paid MICC an insignificant amount for both the six months ended June 30, 2005 and the year ended December 31, 2004 for these services. In the ordinary course of business, the Company distributed fixed and variable annuity products through its former affiliate Smith Barney. Premiums and deposits related to these products were $506 million in 2004. The Company also marketed term and universal life products through Smith Barney. Premiums related to such products were $108 million in 2004. Commissions and fees paid to Smith Barney were $50 million in 2004. The Company also distributed deferred annuity products through its former affiliates, Primerica Financial Services, Inc. ("PFS"), CitiStreet Retirement Services, a division of CitiStreet LLC, (together with its subsidiaries, "CitiStreet") and Citibank, N.A. ("Citibank"). Deposits received from PFS were $636 million and commissions and fees paid to PFS were $48 million for the year ended December 31, 2004. Deposits received from CitiStreet were $116 million and related commissions and fees paid to CitiStreet were $3 million for the year ended December 31, 2004. Deposits received from Citibank were $112 million and commissions and fees paid to Citibank were $13 million for the year ended December 31, 2004. The leasing functions for the Company were administered by a Citigroup subsidiary. Rent expense related to leases was shared by the companies on a cost allocation method based generally on estimated usage by department. The Company's rent expense was insignificant in 2004. F-57 METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut) SCHEDULE I CONSOLIDATED SUMMARY OF INVESTMENTS -- OTHER THAN INVESTMENTS IN RELATED PARTIES DECEMBER 31, 2006 (IN MILLIONS)
SUCCESSOR ----------------------------------------- COST OR AMOUNT AT AMORTIZED ESTIMATED WHICH SHOWN ON COST(1) FAIR VALUE BALANCE SHEET --------- ---------- -------------- TYPE OF INVESTMENTS Fixed maturity securities: Bonds: U.S. Treasury/agency securities.............. $ 801 $ 783 $ 783 State and political subdivision securities... 91 86 86 Foreign government securities................ 69 73 73 Public utilities............................. 276 271 271 All other corporate bonds.................... 2,959 2,907 2,907 Mortgage-backed and asset-backed securities..... 1,572 1,573 1,573 Redeemable preferred stock...................... 199 196 196 ------ ------ ------ Total fixed maturity securities.............. 5,967 5,889 5,889 ------ ------ ------ Equity securities: Common stock: Industrial, miscellaneous and all other...... 1 1 1 Non-redeemable preferred stock.................. 55 56 56 ------ ------ ------ Total equity securities...................... 56 57 57 ------ ------ ------ Mortgage loans on real estate..................... 295 295 Policy loans...................................... 55 55 Real estate joint ventures........................ 2 2 Other limited partnership interests............... 68 68 Short-term investments............................ 95 95 Other invested assets............................. 341 341 ------ ------ Total investments............................... $6,879 $6,802 ====== ======
- -------- (1) Cost for fixed maturity securities and mortgage loans on real estate represents original cost reduced by repayments, net valuation allowances and writedowns from other-than-temporary declines in value and adjusted for amortization of premiums or accretion of discount; for equity securities, cost represents original cost reduced by writedowns from other-than-temporary declines in value; cost for real estate joint ventures and other limited partnership interests represents original cost reduced for other-than-temporary impairments or original cost adjusted for equity in earnings and distributions. F-58 METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut) SCHEDULE III CONSOLIDATED SUPPLEMENTARY INSURANCE INFORMATION AS OF DECEMBER 31, 2006 AND 2005 (IN MILLIONS)
DAC FUTURE POLICY POLICYHOLDER AND BENEFITS AND OTHER ACCOUNT UNEARNED VOBA POLICYHOLDER FUNDS BALANCES REVENUE(1) ------ ------------------ ------------ ---------- 2006 (SUCCESSOR).......................... $1,712 $1,861 $5,377 $45 ====== ====== ====== === 2005 (SUCCESSOR).......................... $1,777 $1,808 $5,688 $18 ====== ====== ====== ===
- -------- (1) Amounts are included within the future policy benefits and other policyholder funds column. F-59 METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut) SCHEDULE III CONSOLIDATED SUPPLEMENTARY INSURANCE INFORMATION FOR THE YEAR ENDED DECEMBER 31, 2006 AND FOR THE SIX MONTHS ENDED DECEMBER 31, 2005 AND JUNE 30, 2005 AND FOR THE YEAR ENDED DECEMBER 31, 2004 (IN MILLIONS)
PREMIUM POLICYHOLDER AMORTIZATION OF REVENUE NET BENEFITS DAC AND VOBA OTHER PREMIUMS AND POLICY INVESTMENT AND INTEREST CHARGED TO OPERATING WRITTEN CHARGES INCOME CREDITED OTHER EXPENSES EXPENSES(1) (EXCLUDING LIFE) ---------- ---------- ------------ --------------- ----------- ---------------- For the Year Ended December 31, 2006 (SUCCESSOR)..... $526 $361 $271 $188 $118 $-- ==== ==== ==== ==== ==== === For the Six Months Ended December 31, 2005 (SUCCESSOR).............. $250 $167 $166 $108 $ 57 $-- ==== ==== ==== ==== ==== === For the Six Months Ended June 30, 2005 (PREDECESSOR)............ $241 $223 $175 $133 $ 51 $ 4 ==== ==== ==== ==== ==== === For the Year Ended December 31, 2004 (PREDECESSOR)... $411 $389 $326 $227 $ 76 $ 6 ==== ==== ==== ==== ==== ===
- -------- (1) Includes other expenses excluding amortization of DAC and VOBA charged to other expenses. F-60 METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT (A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut) SCHEDULE IV CONSOLIDATED REINSURANCE AS OF DECEMBER 31, 2006 AND 2005 AND FOR THE YEAR ENDED DECEMBER 31, 2006 AND FOR THE SIX MONTHS ENDED DECEMBER 31, 2005 AND JUNE 30, 2005 AND FOR THE YEAR ENDED DECEMBER 31, 2004 (IN MILLIONS)
% AMOUNT GROSS NET ASSUMED AMOUNT CEDED ASSUMED AMOUNT TO NET ------- ------- ------- ------- -------- AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2006 (SUCCESSOR) Life insurance in-force..................... $63,138 $47,897 $-- $15,241 --% ======= ======= === ======= Insurance premium........................... $ 79 $ 36 $-- $ 43 --% ======= ======= === ======= AS OF AND FOR THE SIX MONTHS ENDED DECEMBER 31, 2005 (SUCCESSOR) Life insurance in-force..................... $63,023 $48,618 $-- $14,405 --% ======= ======= === ======= Insurance premium........................... $ 41 $ 24 $-- $ 17 --% ======= ======= === ======= FOR THE SIX MONTHS ENDED JUNE 30, 2005 (PREDECESSOR) Insurance premium........................... $ 39 $ 19 $-- $ 20 --% ======= ======= === ======= AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2004 (PREDECESSOR) Life insurance in-force..................... $54,886 $44,286 $-- $10,600 --% ======= ======= === ======= Insurance premium........................... $ 74 $ 34 $-- $ 40 --% ======= ======= === =======
For the year ended December 31, 2006, and the six months ended December 31, 2005 and June 30, 2005, reinsurance ceded include affiliated transactions of $5 million, $2 million and $3 million, respectively. For the year ended December 31, 2004, there were no affiliated reinsurance transactions. F-61 VINTAGE STATEMENT OF ADDITIONAL INFORMATION METLIFE OF CT FUND BD II FOR VARIABLE ANNUITIES INDIVIDUAL VARIABLE ANNUITY CONTRACT ISSUED BY METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT ONE CITYPLACE HARTFORD, CONNECTICUT 06103-3415 MLAC-BOOK-02 APRIL 30, 2007 PART C OTHER INFORMATION ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS (a) The financial statements of the Registrant and the report of Independent Registered Public Accounting Firm thereto are contained in the Registrant's Annual Report and are included in the Statement of Additional Information. The financial statements of the Registrant include: (1) Statement of Assets and Liabilities as of December 31, 2006 (2) Statement of Operations for the year ended December 31, 2006 (3) Statement of Changes in Net Assets for the years ended December 31, 2006 and 2005 (4) Notes to Financial Statements The consolidated financial statements and schedules of MetLife Life and Annuity Company of Connecticut and its subsidiary (formerly The Travelers Life and Annuity Company) and the reports of Independent Registered Public Accounting Firms, are contained in the Statement of Additional Information. The consolidated financial statements of MetLife Life and Annuity Company of Connecticut and subsidiaries include: (1) Consolidated Balance Sheets as of December 31, 2006 and 2005 (2) Consolidated Statements of Income for the year ended December 31, 2006 and the six months ended December 31, 2005 and June 30, 2005 and the year ended December 31, 2004 (3) Consolidated Statements of Stockholder's Equity for the year ended December 31, 2006 and the six months ended December 31, 2005 and June 30, 2005 and the year ended December 31, 2004 (4) Consolidated Statements of Cash Flows for the year ended December 31, 2006 and the six months ended December 31, 2005 and June 30, 2005 and the year ended December 31, 2004 (5) Notes to Consolidated Financial Statements (6) Financial Statement Schedules (b) Exhibits
EXHIBIT NUMBER DESCRIPTION - ------- ----------- 1. Resolution of The Travelers Life and Annuity Company Board of Directors authorizing the establishment of the Registrant. (Incorporated herein by reference to Registrant's Registration Statement on Form N-4, File No. 033-58131, filed via Edgar on March 17, 1995.) 2. Not Applicable. 3(a) Distribution and Principal Underwriting Agreement among the Registrant, The Travelers Life and Annuity Company and Travelers Distribution LLC (Incorporated herein by reference to Exhibit 3(a) to The Travelers Separate Account Six for Variable Annuities' Registration Statement on Form N-4, File No. 333-58809 filed February 26, 2001.) 3(b) Form of Selling Agreement. (Incorporated herein by reference to Exhibit 3(b) to Post-Effective Amendment No. 14 to The Travelers Fund ABD for Variable Annuities' Registration Statement on Form N-4, File No. 033-65343 filed April 6, 2006.) 3(c) Agreement and Plan of Merger (10-26-06) (MLIDLLC into MLIDC). (Incorporated herein by reference to Exhibit 3(c) to Post-Effective Amendment No. 16 to MetLife of CT Fund ABD II for Variable Annuities' Registration Statement on Form N-4, File No. 033-65339/811-07463 filed April 6, 2007.) 3(d) Master Retail Sales Agreement (MLIDC). (Incorporated herein by reference to Exhibit 3(d) to Post-Effective Amendment No. 16 to MetLife of CT Fund ABD II for Variable Annuities' Registration Statement on Form N-4, File No. 033-65339/811-07463 filed April 6, 2007.) 4(a). Variable Annuity Contracts. (Incorporated herein by reference to the Registrant's Registration Statement on Form N-4, File No. 033-58131, filed via Edgar on March 17, 1995.)
EXHIBIT NUMBER DESCRIPTION - ------- ----------- 4(b). Company Name Change Endorsement The Travelers Life and Annuity Company effective May 1, 2006. (Incorporated herein by reference to Exhibit 4(c) to Post-Effective Amendment No. 14 to The Travelers Fund ABD II for Variable Annuities' Registration Statement on Form N-4, File No. 033-65339 filed on April 7, 2006.) 5(a). Form of Applications. (Incorporated herein by reference to Pre- Effective Amendment No. 1 to the Registrant's Registration Statement on Form N-4, filed September 8, 1995.) 5(b). Form of Variable Annuity Application. (Incorporated herein by reference to Exhibit 5 to Post-Effective Amendment No. 14 to The Travelers Fund ABD for Variable Annuities' Registration Statement on Form N-4, File No. 033-65343 filed April 6, 2006.) 6(a) Charter of The Travelers Life and Annuity Company, as amended on April 10, 1990. (Incorporated herein by reference to Registrant's Registration Statement on Form N-4, File No. 033-58131, filed via Edgar on March 17, 1995.) 6(b) By-Laws of The Travelers Life and Annuity Company, as amended on October 20, 1994. (Incorporated herein by reference to Registrant's Registration Statement on Form N-4, File No. 033-58131, filed via Edgar on March 17, 1995.) 6(c). Certificate of Amendment of the Charter as Amended and Restated of The Travelers Life and Annuity Company effective May 1, 2006. (Incorporated herein by reference to Exhibit 6(c) to Post-Effective Amendment No. 14 to The Travelers Fund ABD II for Variable Annuities' Registration Statement on Form N-4, File No. 033-65339 filed April 7, 2006.) 7. Specimen Reinsurance Agreement. (Incorporated herein by reference to Exhibit 7 to Post-Effective Amendment No. 2 to The Travelers Fund ABD II for Variable Annuities' Registration Statement on Form N-4, File No. 333-65942 filed April 15, 2003.) 8(a). Form of Participation Agreement. (Incorporated herein by reference to Exhibit 8 to Post-Effective Amendment No. 8 to The Travelers Separate Account Eleven for Variable Annuities' Registration Statement on Form N-4, File No. 333-101778 filed April 21, 2005.) 8(b). Participation Agreement Among Metropolitan Series Fund, Inc., MetLife Advisers, LLC, Metropolitan Life Insurance Company, The Travelers Insurance Company and The Travelers Life and Annuity Company effective November 1, 2005. (Incorporated herein by reference to Exhibit 8(b) to Post-Effective Amendment No. 14 to The Travelers Fund ABD for Variable Annuities' Registration Statement on Form N-4, File No. 033-65343 filed April 6, 2006.) 8(c). Participation Agreement Among Met Investors Series Trust, Met Investors Advisory, LLC, MetLife Investors Distribution Company, The Travelers Insurance Company and The Travelers Life and Annuity Company effective November 1, 2005. (Incorporated herein by reference to Exhibit 8(c) to Post-Effective Amendment No. 14 to The Travelers Fund ABD for Variable Annuities' Registration Statement on Form N-4, File No. 033-65343 filed April 6, 2006.) 9. Opinion of Counsel as to the legality of securities being registered. (Incorporated herein by reference to Exhibit 9 to Post-Effective Amendment No. 3 to the Registrant's Registration Statement on Form N- 4 filed April 29, 1997.) 10(a) Consent of KPMG LLP, Independent Registered Public Accounting Firm. Filed herewith. 10(b) Consent of Deloitte & Touche LLP, Independent Registered Public Accounting Firm. Filed herewith. 11. Not applicable. 12. Not applicable. 13. Power of Attorney authorizing Michele H. Abate, John E. Connolly, Jr., James L. Lipscomb, Gina C. Sandonato, Myra L. Saul, and Marie C. Swift to act as signatory for Michael K. Farrell, William J. Mullaney, Lisa M. Weber, Stanley J. Talbi, and Joseph J. Prochaska, Jr. Filed herewith.
ITEM 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR Principal Business Address: MetLife Life and Annuity Company of Connecticut One Cityplace Hartford, CT 06103-3415
NAME AND PRINCIPAL POSITIONS AND OFFICES BUSINESS ADDRESS WITH INSURANCE COMPANY - -------------------------------- --------------------------------------------------------------------- Michael K. Farrell Director and President 10 Park Avenue Morristown, NJ 07962 William J. Mullaney Director 700 Quaker Lane Warrick, RI 02886 Lisa M. Weber Director One MetLife Plaza 27-01 Queens Plaza North Long Island City, New York 11101 Steven A. Kandarian Executive Vice President and Chief Investment Officer 10 Park Avenue Morristown, NJ 07962 James L. Lipscomb Executive Vice President and General Counsel One MetLife Plaza 27-01 Queens Plaza North Long Island City, New York 11101 Joseph J. Prochaska, Jr. Executive Vice President and Chief Accounting Officer One MetLife Plaza 27-01 Queens Plaza North Long Island City, New York 11101 Stanley J. Talbi Executive Vice President and Chief Financial Officer One MetLife Plaza 27-01 Queens Plaza North Long Island City, New York 11101 Gwenn L. Carr Senior Vice President and Secretary One MetLife Plaza 27-01 Queens Plaza North Long Island City, New York 11101 Anthony J. Williamson Senior Vice President and Treasurer One MetLife Plaza 27-01 Queens Plaza North Long Island City, New York 11101 Roberto Baron Vice President and Senior Actuary One MetLife Plaza 27-01 Queens Plaza North Long Island City, New York 11101 S. Peter Headley Vice President and Assistant Secretary 6750 Poplar Avenue Germantown, TN 38138 Daniel D. Jordan Vice President and Assistant Secretary 501 Boylston Street Boston, MA 02116 Bennett Kleinberg Vice President and Actuary 185 Asylum Street Hartford, CT 06103 Paul L. LeClair Vice President and Actuary 501 Boylston Street Boston, MA 02116 Linn K. Richardson Vice President and Actuary 10 Park Avenue Morristown, NJ 07962
NAME AND PRINCIPAL POSITIONS AND OFFICES BUSINESS ADDRESS WITH INSURANCE COMPANY - -------------------------------- --------------------------------------------------------------------- Jonathan L. Rosenthal Vice President and Chief Hedging Officer 10 Park Avenue Morristown, NJ 07962 Jeffrey N. Altman Vice President 10 Park Avenue Morristown, NJ 07962 Steven J. Brash Vice President One MetLife Plaza 27-01 Queens Plaza North Long Island City, New York 11101 William D. Cammarata Vice President 18210 Crane Nest Drive Tampa, FL 33647 Vincent Cirulli Vice President 10 Park Avenue Morristown, NJ 07962 James R. Dingler Vice President 10 Park Avenue Morristown, NJ 07962 Elizabeth M. Forget Vice President 260 Madison Ave New York, NY 10016 Judith A. Gulotta Vice President 10 Park Avenue Morristown, NJ 07962 C. Scott Inglis Vice President 10 Park Avenue Morristown, NJ 07962 Gene L. Lunman Vice President 185 Asylum Street Hartford, CT 06103 Joseph J. Massimo Vice President 18210 Crane Nest Drive Tampa, FL 33647 Daniel A. O'Neill Vice President 10 Park Avenue Morristown, NJ 07962 Mark S. Reilly Vice President 185 Asylum Street Hartford, CT 06103 Mark J. Remington Vice President 185 Asylum Street Hartford, CT 06103 Ragai A. Roushdy Vice President 10 Park Avenue Morristown, NJ 07962 Erik V. Savi Vice President 10 Park Avenue Morristown, NJ 07962
NAME AND PRINCIPAL POSITIONS AND OFFICES BUSINESS ADDRESS WITH INSURANCE COMPANY - -------------------------------- --------------------------------------------------------------------- Kevin M. Thorwarth Vice President 10 Park Avenue Morristown, NJ 07962 Mark. H. Wilsmann Vice President 10 Park Avenue Morristown, NJ 07962
ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR REGISTRANT The Registrant is a separate account of MetLife Life and Annuity Company of Connecticut under Connecticut insurance law. The Depositor is a wholly owned subsidiary of MetLife, Inc., a publicly traded company. No person is controlled by the Registrant. The following outline indicates those entities that are controlled by MetLife, Inc. or are under the common control of MetLife, Inc. ORGANIZATIONAL STRUCTURE OF METLIFE, INC. AND SUBSIDIARIES AS OF DECEMBER 31, 2006 The following is a list of subsidiaries of MetLife, Inc. updated as of December 31, 2006. Those entities which are listed at the left margin (labeled with capital letters) are direct subsidiaries of MetLife, Inc. Unless otherwise indicated, each entity which is indented under another entity is a subsidiary of that other entity and, therefore, an indirect subsidiary of MetLife, Inc. Certain inactive subsidiaries have been omitted from the MetLife, Inc. organizational listing. The voting securities (excluding directors' qualifying shares, (if any)) of the subsidiaries listed are 100% owned by their respective parent corporations, unless otherwise indicated. The jurisdiction of domicile of each subsidiary listed is set forth in the parenthetical following such subsidiary. A. MetLife Group, Inc. (NY) B. MetLife Bank National Association (USA) C. Exeter Reassurance Company, Ltd. (Bermuda) D. MetLife Taiwan Insurance Company Limited (Taiwan) E. Metropolitan Tower Life Insurance Company (DE) 1. TH Tower NGP, LLC (DE) 2. Partners Tower, L.P. (DE) - a 99% limited partnership interest of Partners Tower, L.P. is held by Metropolitan Tower Life Insurance Company and 1% general partnership interest is held by TH Tower NGP, LLC (DE) 3. TH Tower Leasing, LLC (DE) 4. MetLife Reinsurance Company of Charleston (SC) F. MetLife Pensiones S.A. (Mexico)- 97.4738% is owned by Metlife, Inc. and 2.5262% is owned by Metropolitan Asset Management Corporation. G. MetLife Chile Inversiones Limitada (Chile)- 99.9999999% is owned by MetLife, Inc. and 0.0000001% is owned by Natiloportem Holdings, Inc. 1. MetLife Chile Seguros de Vida S.A. (Chile)- 99.99% is owned by MetLife Chile Inversiones Limitada, and 0.01% is owned by MetLife International Holdings, Inc. a) MetLife Chile Administradora de Mutuos Hipotecarios S.A. (Chile)- 99.99% is owned by MetLife Chile Seguros de Vida S.A., and 0.01% is owned by MetLife Chile Inversiones Limitada. H. MetLife Mexico S.A. (Mexico)- 98.70541% is owned by Metlife, Inc., 1.27483% is owned by Metropolitan Asset Management Corporation and 0.01976% is owned by Metlife International Holdings, Inc. 1. MetLife Afore, S.A. de C.V. (Mexico)- 99.99% is owned by MetLife Mexico S.A. (Mexico) and 0.01% is owned by MetLife Pensiones S.A. a) Met1 SIEFORE, S.A. de C.V. (Mexico)- 99.99% is owned by MetLife Afore, S.A. de C.V. and 0.01% is owned by MetLife Mexico S.A. (Mexico) b) Met2 SIEFORE, S.A. de C.V. (Mexico)- 99.99% is owned by MetLife Afore, S.A. de C.V. and 0.01% is owned by MetLife Mexico S.A. (Mexico) c) Met3 SIEFORE, S.A. de C.V. (Mexico)- 99.9% is owned by MetLife Afore, S.A. de C.V. and 0.01% is owned by MetLife Mexico S.A. (Mexico) I. MetLife Mexico Servicios, S.A. de C.V. (Mexico)- 98% is owned by MetLife, Inc. and 2% is owned by MetLife International Holdings, Inc. J. Metropolitan Life Seguros de Vida S.A. (Uruguay) K. MetLife Securities, Inc. (DE) L. Enterprise General Insurance Agency, Inc. (DE) 1. MetLife General Insurance Agency of Texas, Inc. (DE) 2. MetLife General Insurance Agency of Massachusetts, Inc. (MA) 1 M. Metropolitan Property and Casualty Insurance Company (RI) 1. Metropolitan General Insurance Company (RI) 2. Metropolitan Casualty Insurance Company (RI) 3. Metropolitan Direct Property and Casualty Insurance Company (RI) 4. Met P&C Managing General Agency, Inc. (TX) 5. MetLife Auto & Home Insurance Agency, Inc. (RI) 6. Metropolitan Group Property and Casualty Insurance Company (RI) a) Metropolitan Reinsurance Company (U.K.) Limited (United Kingdom) 7. Metropolitan Lloyds, Inc. (TX) a) Metropolitan Lloyds Insurance Company of Texas (TX)- Metropolitan Lloyds Insurance Company of Texas, an affiliated association, provides automobile, homeowner and related insurance for the Texas market. It is an association of individuals designated as underwriters. Metropolitan Lloyds, Inc., a subsidiary of Metropolitan Property and Casualty Insurance Company, serves as the attorney-in-fact and manages the association. 8. Economy Fire & Casualty Company (IL) a) Economy Preferred Insurance Company (IL) b) Economy Premier Assurance Company (IL) N. Cova Corporation (MO) 1. Texas Life Insurance Company (TX) 2. Cova Life Management Company (DE) O. MetLife Investors Insurance Company (MO) P. First MetLife Investors Insurance Company (NY) Q. Walnut Street Securities, Inc. (MO) R. Newbury Insurance Company, Limited (BERMUDA) S. MetLife Investors Group, Inc. (DE) 1. MetLife Investors Distribution Company (MO) 2. Met Investors Advisory, LLC (DE) 3. MetLife Investors Financial Agency, Inc. (TX) 2 T. MetLife International Holdings, Inc. (DE) 1. MetLife Mexico Cares, S.A. de C.V. (Mexico) a) Fundacion MetLife Mexico, A.C. (Mexico) 2. Natiloportem Holdings, Inc. (DE) a) Servicios Administrativos Gen, S.A. de C.V. (Mexico) (1) MLA Comercial, S.A. de C.V. (Mexico) 99% is owned by Servicios Administrativos Gen, S.A. de C.V. and 1% is owned by MetLife Mexico Cares, S.A. de C.V. (2) MLA Servicios, S.A. de C.V. (Mexico) 99% is owned by Servicios Administrativos Gen, S.A. de C.V. and 1% is owned by MetLife Mexico Cares, S.A. de C.V. 3. MetLife India Insurance Company Private Limited (India)- 26% is owned by MetLife International Holdings, Inc. and 74% is owned by third parties. 4. Metropolitan Life Insurance Company of Hong Kong Limited (Hong Kong)- 99.9989% is owned by MetLife International Holdings, Inc. and 0.0011% is owned by Natiloporterm Holdings, Inc. 5. Metropolitan Life Seguros de Retiro S.A. (Argentina)- 95.23% is owned by MetLife International Holdings, Inc. and 4.77% is owned by Natiloportem Holdings, Inc. 6. Metropolitan Life Seguros de Vida S.A. (Argentina)- 95.2499% is owned by MetLife International Holdings, Inc. and 4.7473% is owned by Natiloportem Holdings, Inc. 7. MetLife Insurance Company of Korea Limited (South Korea)- 21.22% of MetLife Insurance Company of Korea Limited is owned by MetLife, Mexico, S.A. and 78.78% is owned by Metlife International Holdings, Inc. 8. Metropolitan Life Seguros e Previdencia Privada S.A. (Brazil)- 91.227896580% is owned by MetLife International Holdings, Inc. and 8.772103054% is owned by MetLife Vida e Previdencia S.A., and 0.000000366% is owned by Natiloportem Holdings, Inc. 9. MetLife Global, Inc. (DE) 10. MetLife Administradora de Fundos Multipatrocinados Ltda (Brazil) - 95.4635% is owned by MetLife International Holdings, Inc. and 4.5364% is owned by Natiloportem Holdings, Inc. 11. MetLife Insurance Limited (United Kingdom) 12. MetLife General Insurance Limited (Australia) 13. MetLife Limited (United Kingdom) 14. MetLife Insurance S.A./NV (Belgium) - 99.9% is owned by MetLife International Holdings, Inc. and 0.1% is owned by third parties. 15. MetLife Services Limited (United Kingdom) 16. Siembra Seguros de Vida S.A. (Argentina) - 97.9327% is owned by MetLife International Holdings, Inc. and 2.0672% is owned by Natiloportem Holdings, Inc. 17. MetLife International Insurance Ltd. (Bermuda) 18. MetLife Insurance Limited (Australia) a) MetLife Insurance and Investment Trust (Australia) b) MetLife Investments Pty Limited (Australia) c) MetLife Trustee Pty Limited (Australia) d) MetLife Services (Singapore) PTE Limited (Australia) 19. Siembra Seguros de Retiro S.A. (Argentina) - 96.8819% is owned by MetLife International Holdings, Inc. and 3.1180% is owned by; Natiloportem Holdings, Inc. 20. Best Market S.A. (Argentina) - 5% of the shares are held by Natiloportem Holdings, Inc., and 94.9999% is owned by MetLife International Holdings Inc. 21. Compania Previsional MetLife S.A. (Brazil) - 95.4635% is owned by MetLife International Holdings, Inc. and 4.5364% is owned by Natiloportem Holdings, Inc. (a) Met AFJP S.A. (Argentina) - 75.4088% of the shares of Met AFJP S.A. are held by Compania Previsional MetLife SA, 19.5912% is owned by Metropolitan Life Seguros de Vida SA, 3.9689% is held by Natiloportem Holdings, Inc., and 1.0310% is held by Metropolitan Life Seguros de Retiro SA. 22. MetLife Worldwide Holdings, Inc. (DE) a) MetLife Towarzystwo Ubezpieczen na Zycie S.A. (Poland) b) MetLife Reinsurance (Bermuda) Ltd. (Bermuda) c) MetLife Direct Co., Ltd. (Japan) d) MetLife Vida e Previdencia S.A. (Brazil) U. Metropolitan Life Insurance Company (NY) 1. 334 Madison Euro Investments, Inc. (DE) a) Park Twenty Three Investments Company (United Kingdom)- 1% voting control of Park Twenty Three Investments Company is held by St. James Fleet Investments Two Limited. (1) Convent Station Euro Investments Four Company (United Kingdom)- 1% voting control of Convent Station Euro Investments Four Company is held by 334 Madison Euro Investments, Inc. as nominee for Park Twenty Three Investments Company. 2. St. James Fleet Investments Two Limited (Cayman Islands)- 34% of the shares of St. James Fleet Investments Two Limited is held by Metropolitan Life Insurance Company. 3. One Madison Investments (Cayco) Limited (Cayman Islands)- 10.1% voting control of One Madison Investments (Cayco) Limited is held by Convent Station Euro Investments Four Company. 4. CRB Co, Inc. (MA)- AEW Real Estate Advisors, Inc. holds 49,000 preferred non-voting shares and AEW Advisors, Inc. holds 1,000 preferred non-voting shares of CRB, Co., Inc. 5. GA Holding Corp. (MA) 3 6. Thorngate, LLC (DE) 7. Alternative Fuel I, LLC (DE) 8. Transmountain Land & Livestock Company (MT) 9. MetPark Funding, Inc. (DE) 10. HPZ Assets LLC (DE) 11. Missouri Reinsurance (Barbados), Inc. (Barbados) 12. Metropolitan Tower Realty Company, Inc. (DE) a) Midtown Heights, LLC (DE) 13. MetLife (India) Private Ltd. (India) 14. Metropolitan Marine Way Investments Limited (Canada) 15. MetLife Private Equity Holdings, LLC (DE) 16. 23rd Street Investments, Inc. (DE) a) Mezzanine Investment Limited Partnership-BDR (DE). Metropolitan Life Insurance Company holds a 99% limited partnership interest in Mezzanine Investment Limited Partnership-BDR and 23rd Street Investments, Inc. is a 1% general partner. b) Mezzanine Investment Limited Partnership-LG (DE). 23rd Street Investments, Inc. is a 1% general partner of Mezzanine Investment Limited Partnership-LG. Metropolitan Life Insurance Company holds a 99% limited partnership interest in Mezzanine Investment Limited Partnership-LG. 17. Metropolitan Realty Management, Inc. (DE) 18. Dewey Square South, LLC (NY) 19. Hyatt Legal Plans, Inc. (DE) a) Hyatt Legal Plans of Florida, Inc. (FL) 20. MetLife Holdings, Inc. (DE) a) MetLife Credit Corp. (DE) b) MetLife Funding, Inc. (DE) 4 21. Bond Trust Account A (MA) 22. Metropolitan Asset Management Corporation (DE) a) MetLife Capital Credit L.P. (DE)- 90% of MetLife Capital Credit L.P. is held directly by Metropolitan Life Insurance Company. b) MetLife Capital Limited Partnership (DE)- 73.78% Limited Partnership interest is held directly by Metropolitan Life Insurance Company. c) MetLife Investments Asia Limited (Hong Kong)- One share of MetLife Investments Asia Limited is held by W&C Services, Inc., a nominee of Metropolitan Asset Management Corporation. d) MetLife Investments Limited (United Kingdom)- 23rd Street Investments, Inc. holds one share of MetLife Investments Limited and LA Investments, S.A. and 1% of MetLife Latin America Asesorias e Inversiones Limitada. e) LA Investments, S.A. (Argentina)- 23rd Street Investments, Inc. holds one share of MetLife Investments Limited and LA Investments, S.A. and 1% of MetLife Latin America Asesorias e Inversiones Limitada. f) MetLife Latin America Asesorias e Inversiones Limitada (Chile)- 23rd Street Investments, Inc. holds one share of MetLife Investments Limited and LA Investments, S.A. and 1% of MetLife Latin America Asesorias e Inversiones Limitada. 23. New England Life Insurance Company (MA) a) MetLife Advisers, LLC (MA) b) New England Securities Corporation (MA) c) Omega Reinsurance Corporation (AZ) 24. GenAmerica Financial, LLC (MO) a) GenAmerica Capital I (DE) b) General American Life Insurance Company (MO) (1) GenAmerica Management Corporation (MO) 5 (2) Reinsurance Group of America, Incorporated (MO) - (52.8%) (a) Reinsurance Company of Missouri, Incorporated (MO) (i) Timberlake Financial, L.L.C. (DE) (A) Timberlake Reinsurance Company II (SC) (ii) RGA Reinsurance Company (MO) (A) Fairfield Management Group, Inc. (MO) (aa) Reinsurance Partners, Inc. (MO) (b) RGA Worldwide Reinsurance Company, Ltd. (Barbados) (c) RGA Americas Reinsurance Company, Ltd. (Barbados) (d) RGA Reinsurance Company (Barbados) Ltd. (Barbados) (80%) (i) RGA Financial Group, L.L.C. (DE)- RGA Reinsurance Company also owns a 20% non- equity membership in RGA Financial Group, L.L.C. (e) RGA Life Reinsurance Company of Canada (Canada) (f) RGA International Corporation (Nova Scotia) (g) RGA Holdings Limited (U.K.) (United Kingdom) (i) RGA UK Services Limited (United Kingdom) (ii) RGA Capital Limited U.K. (United Kingdom) (iii) RGA Reinsurance (UK) Limited (United Kingdom) (iv) RGA Services India Private Limited (India) (h) RGA South African Holdings (Pty) Ltd. (South Africa) (i) RGA Reinsurance Company of South Africa Limited (South Africa) (i) RGA Australian Holdings PTY Limited (Australia) (i) RGA Reinsurance Company of Australia Limited (Australia) (ii) RGA Asia Pacific PTY, Limited (Australia) (j) General American Argentina Seguros de Vida, S.A. (Argentina) - 95% of General American Argentina Seguros de Vida, S.A. is owned by Reinsurance Group of America, Incorporated and 5% is owned by RGA Reinsurance Company (Barbados) Ltd. 6 (k) RGA Technology Partners, Inc. (MO) (l) RGA International Reinsurance Company (Ireland) (m) RGA Capital Trust I (DE) (n) RGA Global Reinsurance Company, Ltd. (Bermuda) 25. Corporate Real Estate Holdings, LLC (DE) 26. Ten Park SPC (CAYMAN ISLANDS ) - 1% voting control of Ten Park SPC is held by Metropolitan Asset Management Corporation 27. MetLife Tower Resources Group, Inc. (DE) 28. Headland - Pacific Palisades, LLC (CA) 29. Headland Properties Associates (CA) 30. Krisman, Inc. (MO) 31. Special Multi-Asset Receivables Trust (DE) 32. White Oak Royalty Company (OK) 33. 500 Grant Street GP LLC (DE) 34. 500 Grant Street Associates Limited Partnership (CT) - 99% of 500 Grant Street Associates Limited Partnership is held by Metropolitan Life Insurance Company and 1% by 500 Grant Street GP LLC 35. MetLife Canada/MetVie Canada (Canada) 36. MetLife Retirement Services LLC (NJ) a) MetLife Investment Funds Services LLC (NJ) b) MetLife Investment Funds Management LLC (NJ) c) MetLife Associates LLC (DE) 37. Euro CL Investments LLC (DE) 38. MEXDF Properties, LLC (DE) 39. MSV Irvine Property, LLC (DE) - 4% of MSV Irvine Property, LLC is owned by Metropolitan Tower Realty Company, Inc. and 96% is owned by Metropolitan Life Insurance Company V. MetLife Capital Trust II (DE) W. MetLife Capital Trust III (DE) X. MetLife Insurance Company of Connecticut (Life Department) (Accident Department) (CT) 1. 440 South LaSalle LLC (DE) 2. Pilgrim Investments Oakmont Lane, LLC (DE) - 50% is owned by MetLife Insurance Company of Connecticut and 50% is owned by a third party 3. Pilgrim Alternative Investments Opportunity Fund I, LLC (DE) - 67% is owned by MetLife Insurance Company of Connecticut, and 33% is owned by third party 4. Pilgrim Alternative Investments Opportunity Fund III Associates, LLC (CT) - 67% is owned by MetLife Insurance Company of Connecticut, and 33% is owned by third party 5. Pilgrim Investments Highland Park, LLC (DE) 6. Pilgrim Investments Schaumberg Windy Point, LLC (DE) 7. Pilgrim Investments York Road, LLC (DE) 8. Euro TI Investments LLC (DE) 9. Greenwich Street Investments, LLC (DE) a) Greenwich Street Capital Offshore Fund, Ltd. (Virgin Islands) b) Greenwich Street Investments, L.P. (DE) 10. Hollow Creek, L.L.C. (CT) 11. One Financial Place Corporation (DE) - 100% is owned in the aggregate by MetLife Insurance Company of Connecticut and MetLife Life and Annuity Company of Connecticut. 12. One Financial Place Holdings, LLC (DE)-100% is owned in the aggregate by MetLife Insurance Company of Connecticut and MetLife Life and Annuity Company of Connecticut. 13. Plaza LLC (CT) a) Travelers Asset Management International Company LLC (NY) b) Tower Square Securities, Inc. (CT) 1) Tower Square Securities Insurance Agency of New Mexico, Inc. (NM) 2) Tower Square Securities Insurance Agency of Ohio, Inc. (OH) (99%) c) Travelers Investment Adviser, Inc. (DE) 14. TIC European Real Estate LP, LLC (DE) 15. MetLife European Holdings, Inc. (UK) a) MetLife Europe Limited, Inc. (UK) b) MetLife Pensions Trustees Limited (UK) 16. Travelers European Investments LLC (CT) 17. Travelers International Investments Ltd. (Cayman Islands) 18. Trumbull Street Equity Investments LLC (DE) a) Tandem EGI/C Investments, L.P. (DE) - The General Partner is Trumbull Street Equity Investments LLC. 19. MetLife Life and Annuity Company of Connecticut (CT) a) Euro TL Investments LLC (DE) 20. TLA Holdings LLC (DE) a) The Prospect Company (DE) 1) Panther Valley, Inc. (NJ) 21. TRAL & Co. (CT) - TRAL & Co. is a general partnership. Its partners are MetLife Insurance Company of Connecticut and MetLife Life and Annuity Company of Connecticut. 22. Tribeca Distressed Securities L.L.C. (DE) 23. MetLife Investors USA Insurance Comapny (DE) Y. MetLife Reinsurance Company of South Carolina (SC) Z. MetLife Investment Advisors Company, LLC (DE) AA. Trumbull Street Investments LLC (DE) BB. MetLife Standby I, LLC (DE) 1. MetLife Exchange Trust I (DE) The voting securities (excluding directors' qualifying shares, if any) of each subsidiary shown on the organizational chart are 100% owned by their respective parent corporation, unless otherwise indicated. In addition to the entities shown on the organizational chart, MetLife, Inc. (or where indicated, a subsidiary) also owns interests in the following entities: 1) Metropolitan Life Insurance Company owns varying interests in certain mutual funds distributed by its affiliates. These ownership interests are generally expected to decrease as shares of the funds are purchased by unaffiliated investors. 2) Metropolitan Life Insurance Company indirectly owns 100% of the non-voting preferred stock of Nathan and Lewis Associates Ohio, Incorporated, an insurance agency. 100% of the voting common stock of this company is held by an individual who has agreed to vote such shares at the direction of N.L. HOLDING CORP. (DEL), a direct wholly owned subsidiary of MetLife, Inc. 3) Mezzanine Investment Limited Partnerships ("MILPs"), Delaware limited partnerships, are investment vehicles through which investments in certain entities are held. A wholly owned subsidiary of Metropolitan Life Insurance Company serves as the general partner of the limited partnerships and Metropolitan Life Insurance Company directly owns a 99% limited partnership interest in each MILP. The MILPs have various ownership and/or debt interests in certain companies. 4) New England Life Insurance Company ("NELICO"), owns 100% of the voting common stock of Omega Reinsurance Corporation, which is 100% of all the stock outstanding as of 12/31/06. 5) The Metropolitan Money Market Pool and MetLife Intermediate Income Pool are pass-through investment pools, of which Metropolitan Life Insurance Company and/or its subsidiaries and/or affiliates are general partners. NOTE: THE METLIFE, INC. ORGANIZATIONAL CHART DOES NOT INCLUDE REAL ESTATE JOINT VENTURES AND PARTNERSHIPS OF WHICH METLIFE, INC. AND/OR ITS SUBSIDIARIES IS AN INVESTMENT PARTNER. IN ADDITION, CERTAIN INACTIVE SUBSIDIARIES HAVE ALSO BEEN OMITTED. 7 ITEM 27. NUMBER OF CONTRACT OWNERS As of January 31, 2007, there were 1,488 qualified contracts and 5,329 non- qualified contracts of Vintage Annuity offered by the Registrant. ITEM 28. INDEMNIFICATION The Depositor's parent, MetLife, Inc. has secured a Financial Institutions Bond in the amount of $50,000,000, subject to a $5,000,000 deductible. MetLife, Inc. also maintains a Directors and Officers Liability and Corporate Reimbursement Insurance Policy with limits of $400 million under which the Depositor and MetLife Investors Distribution Company, the Registrant's underwriter (the "Underwriter"), as well as certain other subsidiaries of MetLife are covered. A provision in MetLife, Inc.'s by-laws provides for the indemnification (under certain circumstances) of individuals serving as directors or officers of certain organizations, including the Depositor and the Underwriter. Sections 33-770 to 33-778, inclusive of the Connecticut General Statutes ("C.G.S.") regarding indemnification of directors and officers of Connecticut corporations provides in general that Connecticut corporations shall indemnify their officers, directors and certain other defined individuals against judgments, fines, penalties, amounts paid in settlement and reasonable expenses actually incurred in connection with proceedings against the corporation. The corporation's obligation to provide such indemnification generally does not apply unless (1) the individual is wholly successful on the merits in the defense of any such proceeding; or (2) a determination is made (by persons specified in the statute) that the individual acted in good faith and in the best interests of the corporation and in all other cases, his conduct was at least not opposed to the best interests of the corporation, and in a criminal case he had no reasonable cause to believe his conduct was unlawful; or (3) the court, upon application by the individual, determines in view of all of the circumstances that such person is fairly and reasonably entitled to be indemnified, and then for such amount as the court shall determine. With respect to proceedings brought by or in the right of the corporation, the statute provides that the corporation shall indemnify its officers, directors and certain other defined individuals, against reasonable expenses actually incurred by them in connection with such proceedings, subject to certain limitations. C.G.S. Section 33-778 provides an exclusive remedy; a Connecticut corporation cannot indemnify a director or officer to an extent either greater or less than that authorized by the statute, e.g., pursuant to its certificate of incorporation, by-laws, or any separate contractual arrangement. However, the statute does specifically authorize a corporation to procure indemnification insurance to provide greater indemnification rights. The premiums for such insurance may be shared with the insured individuals on an agreed basis. Insofar as indemnification for liability arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. ITEM 29. PRINCIPAL UNDERWRITER (a) MetLife Investors Distribution Company 5 Park Plaza, Suite 1900 Irvine, CA 92614 Prior to October 20, 2006, MLI Distribution LLC was the principal underwriter and distributor. On that date MLI Distribution LLC merged into MetLife Investors Distribution Company. MetLife Investors Distribution Company also serves as principal underwriter and distributor for the following investment companies (other than the Registrant): MetLife of CT Fund U for Variable Annuities MetLife of CT Fund BD for Variable Annuities MetLife of CT Fund BD II for Variable Annuities MetLife of CT Fund BD III for Variable Annuities MetLife of CT Fund BD IV for Variable Annuities MetLife of CT Fund ABD for Variable Annuities MetLife of CT Fund ABD II for Variable Annuities MetLife of CT Separate Account PF for Variable Annuities MetLife of CT Separate Account PF II for Variable Annuities MetLife of CT Separate Account QP for Variable Annuities MetLife of CT Separate Account QPN for Variable Annuities MetLife of CT Separate Account TM for Variable Annuities MetLife of CT Separate Account TM II for Variable Annuities MetLife of CT Separate Account Five for Variable Annuities MetLife of CT Separate Account Six for Variable Annuities MetLife of CT Separate Account Seven for Variable Annuities MetLife of CT Separate Account Eight for Variable Annuities MetLife of CT Separate Account Nine for Variable Annuities MetLife of CT Separate Account Ten for Variable Annuities MetLife of CT Fund UL for Variable Life Insurance, MetLife of CT Fund UL II for Variable Life Insurance MetLife of CT Fund UL III for Variable Life Insurance MetLife of CT Variable Life Insurance Separate Account One MetLife of CT Variable Life Insurance Separate Account Two MetLife of CT Variable Life Insurance Separate Account Three Metropolitan Life Variable Annuity Separate Account I Metropolitan Life Variable Annuity Separate Account II MetLife of CT Separate Account Eleven for Variable Annuities MetLife of CT Separate Account Twelve for Variable Annuities MetLife of CT Separate Account Thirteen for Variable Annuities MetLife of CT Separate Account Fourteen for Variable Annuities MetLife Insurance Company of Connecticut Variable Annuity Separate Account 2002 MetLife Life and Annuity Company of Connecticut Variable Annuity Separate Account 2002 Met Investors Series Trust MetLife Investors Variable Annuity Account One MetLife Investors Variable Annuity Account Five MetLife Investors Variable Life Account One MetLife Investors Variable Life Account Five MetLife Investors USA Separate Account A MetLife Investors USA Variable Life Account A First MetLife Investors Variable Annuity Account One General American Separate Account Eleven General American Separate Account Twenty-Eight General American Separate Account Twenty-Nine General American Separate Account Two Security Equity Separate Account Twenty-Six Security Equity Separate Account Twenty-Seven (b) MetLife Investors Distribution Company is the principal underwriter for the Contracts. The following persons are officers and managers of MetLife Investors Distribution Company. The principal business address for MetLife Investors Distribution Company is 5 Park Plaza, Suite 1900, Irvine, CA 92614.
NAME AND PRINCIPAL POSITIONS AND OFFICES BUSINESS ADDRESS WITH UNDERWRITER - -------------------------- --------------------------------------------------------------------- Michael K. Farrell Director 5 Park Plaza Suite 1900 Irvine, CA 92614 Craig W. Markham Director and Vice President 13045 Tesson Ferry Road St. Louis, MO 63128 William J. Toppeta Director 1 MetLife Plaza 27-01 Queens Plaza North Long Island City, NY 11101 Paul A. Sylvester President, National Sales Manager- Annuities & LTC 10 Park Avenue Morristown, NJ 07962 Elizabeth M. Forget Executive Vice President, Investment Fund Management & Marketing 260 Madison Avenue New York, NY 10016 Paul A. LaPiana Executive Vice President, National Sales Manager-Life 5 Park Plaza Suite 1900 Irvine, CA 92614 Richard C. Pearson Executive Vice President, General Counsel and Secretary 5 Park Plaza Suite 1900 Irvine, CA 92614
NAME AND PRINCIPAL POSITIONS AND OFFICES BUSINESS ADDRESS WITH UNDERWRITER - -------------------------- --------------------------------------------------------------------- Andrew Aiello Senior Vice President, Channel Head-National Accounts Channel 1 MetLife Plaza 27-01 Queens Plaza North Long Island City, NY 11101 Jeffrey A. Barker Senior Vice President, Channel Head-Independent Accounts 1 MetLife Plaza 27-01 Queens Plaza North Long Island City, NY 11101 Douglas P. Rodgers Senior Vice President, Channel Head-LTC 10 Park Avenue, 1st Floor Morristown, NJ 07962 Myrna F. Solomon Senior Vice President, Channel Head-Banks 501 Boylston Street Boston, MA 02116 Leslie Sutherland Senior Vice President, Channel Head-Broker/Dealers 1 MetLife Plaza Long Island City, NY 11101 Edward C. Wilson Senior Vice President, Channel Head-Wirehouse 5 Park Plaza Suite 1900 Irvine, CA 92614 Curtis Wohlers Senior Vice President, Channel Head-Planners 1 MetLife Plaza 27-01 Queens Plaza North Long Island City, NY 11101 Anthony J. Williamson Treasurer 1 MetLife Plaza 27-01 Queens Plaza North Long Island City, NY 11101 Peter Gruppuso Vice President and Chief Financial Officer 485-E US Highway 1 South Iselin, NJ 08830 Debora L. Buffington Vice President, Director of Compliance 5 Park Plaza Suite 1900 Irvine, CA 92614 David DeCarlo Vice President 5 Park Plaza Suite 1900 Irvine, CA 92614 Charles M. Deuth Vice President, National Accounts 5 Park Plaza Suite 1900 Irvine, CA 92614 Jay S. Kaduson Senior Vice President 10 Park Avenue Morristown, NJ 07962 James R. Fitzpatrick Vice President 5 Park Plaza Suite 1900 Irvine, CA 92614
NAME AND PRINCIPAL POSITIONS AND OFFICES BUSINESS ADDRESS WITH UNDERWRITER - -------------------------- --------------------------------------------------------------------- Paul M. Kos Vice President 5 Park Plaza Suite 1900 Irvine, CA 92614 Deron J. Richens Vice President 5 Park Plaza Suite 1900 Irvine, CA 92614 Cathy Sturdivant Vice President 5 Park Plaza Suite 1900 Irvine, CA 92614 Paulina Vakouros Vice President 5 Park Plaza Suite 1900 Irvine, CA 92614
(c) Compensation from the Registrant. The following commissions and other compensation were received by the Distributor, directly or indirectly, from the Registrant during the Registrant's last fiscal year:
(2) NET (1) UNDERWRITING (3) (4) (5) NAME OF PRINCIPAL DISCOUNTS AND COMPENSATION ON BROKERAGE OTHER UNDERWRITER COMMISSIONS REDEMPTION COMMISSIONS COMPENSATION ----------------- --------------- --------------- --------------- --------------- MLI Distribution LLC................... $62,664,479 $0 $0 $0
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS (1) MetLife Life and Annuity Company of Connecticut One Cityplace Hartford, Connecticut 06103-3415 ITEM 31. MANAGEMENT SERVICES Not Applicable. ITEM 32. UNDERTAKINGS The undersigned Registrant hereby undertakes: (a) To file a post-effective amendment to this registration statement as frequently as is necessary to ensure that the audited financial statements in the registration statement are never more than sixteen 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 N-4 promptly upon written or oral request. The Company hereby represents: (a) That the aggregate charges under the Contracts of the Registrant described herein are reasonable in relation to the services rendered, the expenses expected to be incurred, and the risks assumed by the Company. 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 amendment to this Registration Statement and has caused this amendment to this Registration Statement to be signed on its behalf, in the City of Hartford, and State of Connecticut, on this April 6, 2007. METLIFE OF CT FUND BD II FOR VARIABLE ANNUITIES (Registrant) METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT (Depositor) By: /s/ MICHAEL K. FARRELL ------------------------------------ Michael K. Farrell, President As required by the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities indicated on the April 6, 2007.
/s/ *MICHAEL K. FARRELL President and Director - --------------------------------------------- (Michael K. Farrell) /s/ *STANLEY J. TALBI Executive Vice President and Chief - --------------------------------------------- Financial Officer (Stanley J. Talbi) /s/ *JOSEPH J. PROCHASKA, JR. Executive Vice President and Chief - --------------------------------------------- Accounting Officer (Joseph J. Prochaska, Jr.) /s/ *WILLIAM J. MULLANEY Director - --------------------------------------------- (William J. Mullaney) /s/ *LISA M. WEBER Director - --------------------------------------------- (Lisa M. Weber)
By: /s/ MICHELE H. ABATE ------------------------------------ Michele H. Abate, Attorney-in-Fact * MetLife Life and Annuity Company of Connecticut. Executed by Michele H. Abate on behalf of those indicated pursuant to powers of attorney filed herewith. EXHIBIT INDEX 10(a) Consent of KPMG LLP, Independent Registered Public Accounting Firm. 10(b) Consent of Deloitte & Touche LLP, Independent Registered Public Accounting Firm. 13 Powers of Attorney.
EX-99.10.A 2 m29590exv99w10wa.txt CONSENT OF KPMG LLP CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The Board of Directors MetLife Life and Annuity Company of Connecticut: We consent to the use of our reports included herein and to the reference to our firm under the heading "Independent Registered Public Accounting Firm". /s/ KPMG LLP Hartford, Connecticut April 5, 2007 EX-99.10.B 3 m29590exv99w10wb.txt CONSENT OF DELOITTE & TOUCHE LLP Consent Of Independent Registered Public Accounting Firm We consent to the use in this Post-Effective Amendment No. 12/Amendment No. 12 to the Registration Statement No. 033-58131/811-07259 on Form N-4 of our report dated March 19, 2007, relating to the financial statements of MetLife of CT Fund BD II for Variable Annuities (formerly, The Travelers Fund BD II for Variable Annuities), and our report on the consolidated financial statements and financial schedules dated March 6, 2007 (which report expresses an unqualified opinion and includes an explanatory paragraph referring to the acquisition of MetLife Life and Annuity Company of Connecticut, (the "Company") (formerly, The Travelers Life and Annuity Company) by MetLife Inc. on July 1, 2005, and as required by the U.S. Securities and Exchange Commission Staff Accounting Bulletin 5.J., Push Down Basis of Accounting Required in Certain Limited Circumstances, the purchase method of accounting was applied to the assets and liabilities of the Company, and such assets and liabilities were measured at their fair values as of the acquisition date in conformity with Statement of Financial Accounting Standards No. 141, Business Combinations) of the Company both appearing in the Statement of Additional Information, which is part of such Registration Statement. We also consent to the reference to us under the heading "Independent Registered Public Accounting Firm" appearing in the Statement of Additional information, which is a part of such Registration Statement. /s/ Deloitte & Touche LLP Certified Public Accountants Tampa, Florida April 5, 2007 EX-99.13 4 m29590exv99w13.txt POWERS OF ATTORNEY MetLife Life and Annuity Company of Connecticut Power of Attorney Michael K. Farrell Director and President KNOW ALL MEN BY THESE PRESENTS, that I, Michael K. Farrell, a director and President of MetLife Life and Annuity Company of Connecticut, a Connecticut company, do hereby appoint Michele H. Abate, John E. Connolly, Jr., James L. Lipscomb, Gina C. Sandonato, Myra L. Saul and Marie C. Swift, and each of them severally, my true and lawful attorney-in-fact, for me and in my name, place and stead to execute and file any instrument or document to be filed as part of or in connection with or in any way related to the Registration Statements and any and all amendments thereto, filed by said Company under the Securities Act of 1933 and/or the Investment Company Act of 1940, in connection with: - MetLife of CT Fund ABD II for Variable Annuities (Premier Advisers II, Premier Advisers III and Premier Advisers III (Series II) File No. 333-65500, Portfolio Architect, Portfolio Architect Select, Premier Advisers (Class I), Premier Advisers (Class II) File No. 033-65339, MetLife Access Annuity and MetLife Access Select Annuity File No. 333-23327), - MetLife of CT Fund BD II for Variable Annuities (Vintage Annuity File No. 033-58131), - MetLife of CT Fund BD IV for Variable Annuities (Protected Equity Portfolio File No. 333-65946, Index Annuity File No. 333-27687, Vintage XTRA Annuity, Portfolio Architect XTRA, Vintage XTRA (Series II) File No. 333-70659), - MetLife of CT Separate Account Six for Variable Annuities (MetLife Retirement Account Annuity File No. 333-58809), - MetLife of CT Separate Account Eight for Variable Annuities (Premier Advisers AssetManager, Premier Advisers L, Premier Advisers L (Series II) File No. 333-60215), - MetLife of CT Separate Account Ten for Variable Annuities (Vintage II and Vintage II (Series II) File No. 333-82013, Vintage 3, Portfolio Architect 3, Portfolio Architect L, Vintage L, Pioneer AnnuiStar Flex File No. 333-65922), - MetLife of CT Separate Account PF II for Variable Annuities (PrimElite Annuity File No. 333-32581 and PrimElite II Annuity File No. 333-72336), - MetLife of CT Separate Account TM II for Variable Annuities (Marquis Portfolios File No 333-40191), - MetLife of CT Separate Account Twelve for Variable Annuities (Pioneer AnnuiStar Plus, Portfolio Architect Plus, Scudder Advocate Rewards Annuity File No. 333-101814), - MetLife of CT Separate Account Fourteen for Variable Annuities (Pioneer AnnuiStar, Portfolio Architect II and Pioneer AnnuiStar Value File No. 333-101815), - MetLife Life and Annuity Company of CT Variable Annuity Separate Account 2002 (Vintage Access, Portfolio Architect Access, Scudder Advocate Advisor and Scudder Advocate Advisor- STI File No. 333-100434, Scudder Advocate Advisor TL4 File No. 333-109611), - MetLife of CT Fund UL II for Variable Life Insurance (MarketLife File No. 033-63927, Variable Survivorship Life File No. 333-69773, Variable Life Accumulator and Accumulator Series II File No. 333-96521, Variable Life File No. 333-96517, Variable Survivorship Life II File No. 333-56958, Variable Life Accumulator Series III File No. 333-113110), - MetLife of CT Variable Life Insurance Separate Account One (VintageLife File No.033-88578), - MetLife of CT Variable Life Insurance Separate Account Two (Portfolio Architect Life File No. 333-15053), or any other separate accounts for variable contracts that are created or become separate accounts of said Company in the future, and to have full power and authority to do or cause to be done in my name, place and stead each and every act and thing necessary or appropriate in order to effectuate the same, as fully to all intents and purposes as I might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact or any of them, may do or cause to be done by virtue hereof. Each said attorney-in-fact shall have power to act hereunder with or without the others. IN WITNESS WHEREOF, I have hereunto set my hand this 8th day of March, 2007. /s/ Michael K. Farrell ---------------------------------------- Michael K. Farrell MetLife Life and Annuity Company of Connecticut Power of Attorney William J. Mullaney Director KNOW ALL MEN BY THESE PRESENTS, that I, William J. Mullaney, a director of MetLife Life and Annuity Company of Connecticut, a Connecticut company, do hereby appoint Michele H. Abate, John E. Connolly, Jr., James L. Lipscomb, Gina C. Sandonato, Myra L. Saul and Marie C. Swift, and each of them severally, my true and lawful attorney-in-fact, for me and in my name, place and stead to execute and file any instrument or document to be filed as part of or in connection with or in any way related to the Registration Statements and any and all amendments thereto, filed by said Company under the Securities Act of 1933 and/or the Investment Company Act of 1940, in connection with: - MetLife of CT Fund ABD II for Variable Annuities (Premier Advisers II, Premier Advisers III and Premier Advisers III (Series II) File No. 333-65500, Portfolio Architect, Portfolio Architect Select, Premier Advisers (Class I), Premier Advisers (Class II) File No. 033-65339, MetLife Access Annuity and MetLife Access Select Annuity File No. 333-23327), - MetLife of CT Fund BD II for Variable Annuities (Vintage Annuity File No. 033-58131), - MetLife of CT Fund BD IV for Variable Annuities (Protected Equity Portfolio File No. 333-65946, Index Annuity File No. 333-27687, Vintage XTRA Annuity, Portfolio Architect XTRA, Vintage XTRA (Series II) File No. 333-70659), - MetLife of CT Separate Account Six for Variable Annuities (MetLife Retirement Account Annuity File No. 333-58809), - MetLife of CT Separate Account Eight for Variable Annuities (Premier Advisers AssetManager, Premier Advisers L, Premier Advisers L (Series II) File No. 333-60215), - MetLife of CT Separate Account Ten for Variable Annuities (Vintage II and Vintage II (Series II) File No. 333-82013, Vintage 3, Portfolio Architect 3, Portfolio Architect L, Vintage L, Pioneer AnnuiStar Flex File No. 333-65922), - MetLife of CT Separate Account PF II for Variable Annuities (PrimElite Annuity File No. 333-32581 and PrimElite II Annuity File No. 333-72336), - MetLife of CT Separate Account TM II for Variable Annuities (Marquis Portfolios File No 333-40191), - MetLife of CT Separate Account Twelve for Variable Annuities (Pioneer AnnuiStar Plus, Portfolio Architect Plus, Scudder Advocate Rewards Annuity File No. 333-101814), - MetLife of CT Separate Account Fourteen for Variable Annuities (Pioneer AnnuiStar, Portfolio Architect II and Pioneer AnnuiStar Value File No. 333-101815), - MetLife Life and Annuity Company of CT Variable Annuity Separate Account 2002 (Vintage Access, Portfolio Architect Access, Scudder Advocate Advisor and Scudder Advocate Advisor- STI File No. 333-100434, Scudder Advocate Advisor TL4 File No. 333-109611), - MetLife of CT Fund UL II for Variable Life Insurance (MarketLife File No. 033-63927, Variable Survivorship Life File No. 333-69773, Variable Life Accumulator and Accumulator Series II File No. 333-96521, Variable Life File No. 333-96517, Variable Survivorship Life II File No. 333-56958, Variable Life Accumulator Series III File No. 333-113110), - MetLife of CT Variable Life Insurance Separate Account One (VintageLife File No.033-88578), - MetLife of CT Variable Life Insurance Separate Account Two (Portfolio Architect Life File No. 333-15053), or any other separate accounts for variable contracts that are created or become separate accounts of said Company in the future, and to have full power and authority to do or cause to be done in my name, place and stead each and every act and thing necessary or appropriate in order to effectuate the same, as fully to all intents and purposes as I might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact or any of them, may do or cause to be done by virtue hereof. Each said attorney-in-fact shall have power to act hereunder with or without the others. IN WITNESS WHEREOF, I have hereunto set my hand this 8th day of March, 2007. /s/ William J. Mullaney ---------------------------------------- William J. Mullaney MetLife Life and Annuity Company of Connecticut Power of Attorney Lisa M. Weber Director KNOW ALL MEN BY THESE PRESENTS, that I, Lisa M. Weber, a director of MetLife Life and Annuity Company of Connecticut, a Connecticut company, do hereby appoint Michele H. Abate, John E. Connolly, Jr., James L. Lipscomb, Gina C. Sandonato, Myra L. Saul and Marie C. Swift, and each of them severally, my true and lawful attorney-in-fact, for me and in my name, place and stead to execute and file any instrument or document to be filed as part of or in connection with or in any way related to the Registration Statements and any and all amendments thereto, filed by said Company under the Securities Act of 1933 and/or the Investment Company Act of 1940, in connection with: - MetLife of CT Fund ABD II for Variable Annuities (Premier Advisers II, Premier Advisers III and Premier Advisers III (Series II) File No. 333-65500, Portfolio Architect, Portfolio Architect Select, Premier Advisers (Class I), Premier Advisers (Class II) File No. 033-65339, MetLife Access Annuity and MetLife Access Select Annuity File No. 333-23327), - MetLife of CT Fund BD II for Variable Annuities (Vintage Annuity File No. 033-58131), - MetLife of CT Fund BD IV for Variable Annuities (Protected Equity Portfolio File No. 333-65946, Index Annuity File No. 333-27687, Vintage XTRA Annuity, Portfolio Architect XTRA, Vintage XTRA (Series II) File No. 333-70659), - MetLife of CT Separate Account Six for Variable Annuities (MetLife Retirement Account Annuity File No. 333-58809), - MetLife of CT Separate Account Eight for Variable Annuities (Premier Advisers AssetManager, Premier Advisers L, Premier Advisers L (Series II) File No. 333-60215), - MetLife of CT Separate Account Ten for Variable Annuities (Vintage II and Vintage II (Series II) File No. 333-82013, Vintage 3, Portfolio Architect 3, Portfolio Architect L, Vintage L, Pioneer AnnuiStar Flex File No. 333-65922), - MetLife of CT Separate Account PF II for Variable Annuities (PrimElite Annuity File No. 333-32581 and PrimElite II Annuity File No. 333-72336), - MetLife of CT Separate Account TM II for Variable Annuities (Marquis Portfolios File No 333-40191), - MetLife of CT Separate Account Twelve for Variable Annuities (Pioneer AnnuiStar Plus, Portfolio Architect Plus, Scudder Advocate Rewards Annuity File No. 333-101814), - MetLife of CT Separate Account Fourteen for Variable Annuities (Pioneer AnnuiStar, Portfolio Architect II and Pioneer AnnuiStar Value File No. 333-101815), - MetLife Life and Annuity Company of CT Variable Annuity Separate Account 2002 (Vintage Access, Portfolio Architect Access, Scudder Advocate Advisor and Scudder Advocate Advisor- STI File No. 333-100434, Scudder Advocate Advisor TL4 File No. 333-109611), - MetLife of CT Fund UL II for Variable Life Insurance (MarketLife File No. 033-63927, Variable Survivorship Life File No. 333-69773, Variable Life Accumulator and Accumulator Series II File No. 333-96521, Variable Life File No. 333-96517, Variable Survivorship Life II File No. 333-56958, Variable Life Accumulator Series III File No. 333-113110), - MetLife of CT Variable Life Insurance Separate Account One (VintageLife File No.033-88578), - MetLife of CT Variable Life Insurance Separate Account Two (Portfolio Architect Life File No. 333-15053), or any other separate accounts for variable contracts that are created or become separate accounts of said Company in the future, and to have full power and authority to do or cause to be done in my name, place and stead each and every act and thing necessary or appropriate in order to effectuate the same, as fully to all intents and purposes as I might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact or any of them, may do or cause to be done by virtue hereof. Each said attorney-in-fact shall have power to act hereunder with or without the others. IN WITNESS WHEREOF, I have hereunto set my hand this 8th day of March, 2007. /s/ Lisa M. Weber ---------------------------------------- Lisa M. Weber MetLife Life and Annuity Company of Connecticut Power of Attorney Joseph J. Prochaska, Jr. Executive Vice President and Chief Accounting Officer KNOW ALL MEN BY THESE PRESENTS, that I, Joseph J. Prochaska, Jr., Executive Vice President and Chief Accounting Officer of MetLife Life and Annuity Company of Connecticut, a Connecticut company, do hereby appoint Michele H. Abate, John E. Connolly, Jr., James L. Lipscomb, Gina C. Sandonato, Myra L. Saul and Marie C. Swift, and each of them severally, my true and lawful attorney-in-fact, for me and in my name, place and stead to execute and file any instrument or document to be filed as part of or in connection with or in any way related to the Registration Statements and any and all amendments thereto, filed by said Company under the Securities Act of 1933 and/or the Investment Company Act of 1940, in connection with: - MetLife of CT Fund ABD II for Variable Annuities (Premier Advisers II, Premier Advisers III and Premier Advisers III (Series II) File No. 333-65500, Portfolio Architect, Portfolio Architect Select, Premier Advisers (Class I), Premier Advisers (Class II) File No. 033-65339, MetLife Access Annuity and MetLife Access Select Annuity File No. 333-23327), - MetLife of CT Fund BD II for Variable Annuities (Vintage Annuity File No. 033-58131), - MetLife of CT Fund BD IV for Variable Annuities (Protected Equity Portfolio File No. 333-65946, Index Annuity File No. 333-27687, Vintage XTRA Annuity, Portfolio Architect XTRA, Vintage XTRA (Series II) File No. 333-70659), - MetLife of CT Separate Account Six for Variable Annuities (MetLife Retirement Account Annuity File No. 333-58809), - MetLife of CT Separate Account Eight for Variable Annuities (Premier Advisers AssetManager, Premier Advisers L, Premier Advisers L (Series II) File No. 333-60215), - MetLife of CT Separate Account Ten for Variable Annuities (Vintage II and Vintage II (Series II) File No. 333-82013, Vintage 3, Portfolio Architect 3, Portfolio Architect L, Vintage L, Pioneer AnnuiStar Flex File No. 333-65922), - MetLife of CT Separate Account PF II for Variable Annuities (PrimElite Annuity File No. 333-32581 and PrimElite II Annuity File No. 333-72336), - MetLife of CT Separate Account TM II for Variable Annuities (Marquis Portfolios File No 333-40191), - MetLife of CT Separate Account Twelve for Variable Annuities (Pioneer AnnuiStar Plus, Portfolio Architect Plus, Scudder Advocate Rewards Annuity File No. 333-101814), - MetLife of CT Separate Account Fourteen for Variable Annuities (Pioneer AnnuiStar, Portfolio Architect II and Pioneer AnnuiStar Value File No. 333-101815), - MetLife Life and Annuity Company of CT Variable Annuity Separate Account 2002 (Vintage Access, Portfolio Architect Access, Scudder Advocate Advisor and Scudder Advocate Advisor- STI File No. 333-100434, Scudder Advocate Advisor TL4 File No. 333-109611), - MetLife of CT Fund UL II for Variable Life Insurance (MarketLife File No. 033-63927, Variable Survivorship Life File No. 333-69773, Variable Life Accumulator and Accumulator Series II File No. 333-96521, Variable Life File No. 333-96517, Variable Survivorship Life II File No. 333-56958, Variable Life Accumulator Series III File No. 333-113110), - MetLife of CT Variable Life Insurance Separate Account One (VintageLife File No.033-88578), - MetLife of CT Variable Life Insurance Separate Account Two (Portfolio Architect Life File No. 333-15053), or any other separate accounts for variable contracts that are created or become separate accounts of said Company in the future, and to have full power and authority to do or cause to be done in my name, place and stead each and every act and thing necessary or appropriate in order to effectuate the same, as fully to all intents and purposes as I might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact or any of them, may do or cause to be done by virtue hereof. Each said attorney-in-fact shall have power to act hereunder with or without the others. IN WITNESS WHEREOF, I have hereunto set my hand this 12th day of March, 2007. /s/ Joseph J. Prochaska, Jr. ---------------------------------------- Joseph J. Prochaska, Jr. MetLife Life and Annuity Company of Connecticut Power of Attorney Stanley J. Talbi Executive Vice President and Chief Financial Officer KNOW ALL MEN BY THESE PRESENTS, that I, Stanley J. Talbi, Executive Vice President and Chief Financial Officer of MetLife Life and Annuity Company of Connecticut, a Connecticut company, do hereby appoint Michele H. Abate, John E. Connolly, Jr., James L. Lipscomb, Gina C. Sandonato, Myra L. Saul and Marie C. Swift, and each of them severally, my true and lawful attorney-in-fact, for me and in my name, place and stead to execute and file any instrument or document to be filed as part of or in connection with or in any way related to the Registration Statements and any and all amendments thereto, filed by said Company under the Securities Act of 1933 and/or the Investment Company Act of 1940, in connection with: - MetLife of CT Fund ABD II for Variable Annuities (Premier Advisers II, Premier Advisers III and Premier Advisers III (Series II) File No. 333-65500, Portfolio Architect, Portfolio Architect Select, Premier Advisers (Class I), Premier Advisers (Class II) File No. 033-65339, MetLife Access Annuity and MetLife Access Select Annuity File No. 333-23327), - MetLife of CT Fund BD II for Variable Annuities (Vintage Annuity File No. 033-58131), - MetLife of CT Fund BD IV for Variable Annuities (Protected Equity Portfolio File No. 333-65946, Index Annuity File No. 333-27687, Vintage XTRA Annuity, Portfolio Architect XTRA, Vintage XTRA (Series II) File No. 333-70659), - MetLife of CT Separate Account Six for Variable Annuities (MetLife Retirement Account Annuity File No. 333-58809), - MetLife of CT Separate Account Eight for Variable Annuities (Premier Advisers AssetManager, Premier Advisers L, Premier Advisers L (Series II) File No. 333-60215), - MetLife of CT Separate Account Ten for Variable Annuities (Vintage II and Vintage II (Series II) File No. 333-82013, Vintage 3, Portfolio Architect 3, Portfolio Architect L, Vintage L, Pioneer AnnuiStar Flex File No. 333-65922), - MetLife of CT Separate Account PF II for Variable Annuities (PrimElite Annuity File No. 333-32581 and PrimElite II Annuity File No. 333-72336), - MetLife of CT Separate Account TM II for Variable Annuities (Marquis Portfolios File No 333-40191), - MetLife of CT Separate Account Twelve for Variable Annuities (Pioneer AnnuiStar Plus, Portfolio Architect Plus, Scudder Advocate Rewards Annuity File No. 333-101814), - MetLife of CT Separate Account Fourteen for Variable Annuities (Pioneer AnnuiStar, Portfolio Architect II and Pioneer AnnuiStar Value File No. 333-101815), - MetLife Life and Annuity Company of CT Variable Annuity Separate Account 2002 (Vintage Access, Portfolio Architect Access, Scudder Advocate Advisor and Scudder Advocate Advisor- STI File No. 333-100434, Scudder Advocate Advisor TL4 File No. 333-109611), - MetLife of CT Fund UL II for Variable Life Insurance (MarketLife File No. 033-63927, Variable Survivorship Life File No. 333-69773, Variable Life Accumulator and Accumulator Series II File No. 333-96521, Variable Life File No. 333-96517, Variable Survivorship Life II File No. 333-56958, Variable Life Accumulator Series III File No. 333-113110), - MetLife of CT Variable Life Insurance Separate Account One (VintageLife File No.033-88578), - MetLife of CT Variable Life Insurance Separate Account Two (Portfolio Architect Life File No. 333-15053), or any other separate accounts for variable contracts that are created or become separate accounts of said Company in the future, and to have full power and authority to do or cause to be done in my name, place and stead each and every act and thing necessary or appropriate in order to effectuate the same, as fully to all intents and purposes as I might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact or any of them, may do or cause to be done by virtue hereof. Each said attorney-in-fact shall have power to act hereunder with or without the others. IN WITNESS WHEREOF, I have hereunto set my hand this 8th day of March, 2007. /s/ Stanley J. Talbi ---------------------------------------- Stanley J. Talbi -----END PRIVACY-ENHANCED MESSAGE-----