Document/Exhibit Description Pages Size
1: 485BPOS Post-Effective Amendment 105 574K
5: EX-99.10 Consent of Deloitte & Touche LLP 1 7K
2: EX-99.6.D Ex-99.6.D: Certificate of Correction (Micc) 2 9K
3: EX-99.8.D Participation Agreement 20 67K
4: EX-99.8.E Participation Agreement 20 67K
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 31, 2007
REGISTRATION STATEMENT NO. 333-65926
811-09411
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------
FORM N-4
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
POST-EFFECTIVE AMENDMENT NO. 11
AND
REGISTRATION STATEMENT
UNDER THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 22
METLIFE OF CT SEPARATE ACCOUNT NINE FOR VARIABLE ANNUITIES
(Exact name of Registrant)
METLIFE INSURANCE 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 November 12, 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
This registration statement incorporates herein by reference the Statement
of Additional Information ("SAI") dated April 30, 2007 included in
Post-Effective Amendment No. 10 to the registration statement on Form N-4 (File
Nos. 333-65926/811-09411) filed on April 5, 2007 pursuant to paragraph (b) of
Rule 485.
This registration statement also incorporates by reference the Prospectuses
dated April 30, 2007 (Vintage 3, Portfolio Architect 3, Portfolio Architect L,
Pioneer AnnuiStar Flex and Vintage L) as filed on May 3, 2007 pursuant to Rule
497 (File Nos. 333-65926/811-09411).
This registration statement also incorporates by reference the supplement
dated August 6, 2007 to the Prospectus dated April 30, 2007 (Pioneer AnnuiStar
Flex) as filed on August 6, 2007 pursuant to Rule 497 (File Nos. 333-65926/
811-09411).
This registration statement also incorporates by reference the 403(b)
supplement dated October 19, 2007 to the Prospectuses dated April 30, 2007
(Vintage 3, Portfolio Architect 3, Portfolio Architect L, Pioneer AnnuiStar Flex
and Vintage L) as filed on October 19, 2007 pursuant to Rule 497 (File Nos.
333-65926/811-09411).
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
METLIFE INSURANCE COMPANY OF CONNECTICUT
----------------------------------------
MetLife of CT Separate Account Nine for Variable Annuities
MetLife of CT Separate Account Eleven for Variable Annuities
MetLife of CT Separate Account Thirteen for Variable Annuities
METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT
-----------------------------------------------
MetLife of CT Separate Account Ten for Variable Annuities
MetLife of CT Separate Account Twelve for Variable Annuities
MetLife of CT Separate Account Fourteen for Variable Annuities
PIONEER ANNUISTAR
PIONEER ANNUISTAR FLEX
PIONEER ANNUISTAR PLUS
PIONEER ANNUISTAR VALUE
Supplement dated November 12, 2007
to the
Prospectuses dated April 30, 2007
The following information supplements, and to the extent inconsistent therewith,
replaces the information in the Variable Annuity Prospectuses listed above.
Please retain this supplement and keep it with the Prospectus for future
reference.
1. VARIABLE FUNDING OPTION MERGERS
Effective November 12, 2007, the existing Underlying Funds listed below (the
"Existing Funds"), each a portfolio of Pioneer Variable Contracts Trust, were
consolidated by merger (the "Merger") into certain acquiring Underlying Funds
indicated below (the "Acquiring Funds"). Upon the Merger, the Acquiring Funds,
which were also portfolios of Pioneer Variable Contracts Trust, became available
funding options in your Prospectus. (Please note that Pioneer Bond VCT
Portfolio, an acquiring Underlying Fund, was added as a new Variable Funding
Option in your Prospectus.)
The assets in the Existing Funds were transferred into the indicated Acquiring
Funds below. The aggregate value of your investment in the Existing Funds did
not change as a result of the Merger. Any future allocations that may be
directed towards the Existing Funds, including allocations made under automated
investment strategies such as Dollar Cost Averaging or Automatic Rebalancing,
will be allocated instead to the corresponding Acquiring Funds. References in
the Prospectuses to the Existing Funds shall be deemed to refer to the
corresponding Acquiring Funds, including, where applicable, references to the
investment option restrictions in the GMWB for Life and GMAB rider subsections
within the "Living Benefits" section of the Prospectuses.
The Variable Funding Option mergers were as follows:
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EXISTING FUNDS ACQUIRING FUNDS
-------------------------------------------------------------------------------------------------------
Pioneer America Income VCT Portfolio - Class II Pioneer Bond VCT Portfolio - Class II
-------------------------------------------------------------------------------------------------------
Pioneer Value VCT Portfolio - Class II Pioneer Fund VCT Portfolio - Class II
-------------------------------------------------------------------------------------------------------
The following information supplements, and to the extent inconsistent therewith,
replaces the same information that appears in the table in the "Underlying Fund
Fees and Expenses" section of the Prospectuses for the corresponding Existing
Fund:
[Enlarge/Download Table]
------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTION CONTRACTUAL FEE NET TOTAL
AND/OR TOTAL ANNUAL WAIVER AND/OR ANNUAL
UNDERLYING FUND MANAGEMENT SERVICE(12B-1) OTHER OPERATING EXPENSE OPERATING
FEE FEES EXPENSES EXPENSES REIMBURSEMENT EXPENSES
------------------------------------------------------------------------------------------------------------------------------------
PIONEER VARIABLE CONTRACTS
TRUST - CLASS II
------------------------------------------------------------------------------------------------------------------------------------
Pioneer Bond VCT Portfolio 0.50% 0.25% 0.30% 1.05% 0.18%** 0.87%**
------------------------------------------------------------------------------------------------------------------------------------
** The expenses in the above table are estimated based on Pioneer Bond VCT
Portfolio Class I expenses for the year ended December 31, 2006. The Net
Total Annual Operating Expenses and the Contractual Fee Waiver and/or
Expense Reimbursement reflect the contractual expense limitation in effect
through May 1, 2008 under which Pioneer has contractually agreed not to
impose all or a portion of its management fee and, if necessary, to limit
other expenses to the extent required to reduce Class I expenses to 0.62%
of the average daily net assets attributable to Class I shares. Class II
shares expenses will be reduced only to the extent Portfolio-wide expenses
are reduced for Class I shares.
The following information supplements, and to the extent inconsistent therewith,
replaces the same information that appears under the "The Variable Funding
Options" section of the Prospectuses for the corresponding Existing Fund:
[Enlarge/Download Table]
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FUNDING OPTION INVESTMENT OBJECTIVE INVESTMENT ADVISER/SUBADVISER
------------------------------------------------------------------------------------------------------------------------------------
PIONEER VARIABLE
CONTRACTS TRUST
------------------------------------------------------------------------------------------------------------------------------------
Pioneer Bond VCT Seeks to provide current income from an Pioneer Investment Management, Inc.
Portfolio investment grade portfolio with due regard
to preservation of capital and prudent
investment risk.
------------------------------------------------------------------------------------------------------------------------------------
Certain documents or information you may receive about your Contract may
continue to reflect the Existing Fund names until such time as updates are made.
MORE INFORMATION ABOUT THE VARIABLE FUNDING OPTIONS IS CONTAINED IN THE
UNDERLYING FUND PROSPECTUSES, AS SUPPLEMENTED. CURRENT PROSPECTUSES FOR THE
UNDERLYING FUNDS CAN BE OBTAINED BY CALLING 1-866-547-3793.
2. VARIABLE FUNDING OPTION LIQUIDATION
Pioneer Small and Mid Cap Growth VCT Portfolio and Pioneer Equity Opportunity
VCT Portfolio (the "Portfolios") were liquidated effective November 12, 2007.
The Portfolios were funding options in the prospectuses listed above. The
Trustees of Pioneer Variable Contracts Trust had authorized the liquidation of
the Portfolios. Unless you provided us with reallocation instructions, any
Contract Value you had remaining in the Portfolios on the date of the
liquidation was automatically transferred to the BlackRock Money Market
Portfolio of the Metropolitan Series Fund, Inc. Similarly, if you had selected
the Portfolios as part of the Dollar Cost Averaging, Automatic Rebalancing or
Systematic Withdrawal programs, and you did not provide us with instructions to
redirect those allocations to one or more of the available funding options, any
future allocations that may be directed towards (or, in the case of Systematic
Withdrawals, from) the liquidated Portfolios as a result of these programs will
instead be made to or from the BlackRock Money Market Portfolio of the
Metropolitan Series Fund, Inc.
3. VARIABLE FUNDING OPTION NAME CHANGE
Effective November 12, 2007, the name of the Pioneer Growth Shares VCT Portfolio
of the Pioneer Variable Contracts Trust was changed to the Pioneer Independence
VCT Portfolio of the Pioneer Variable Contracts Trust. There was no change in
the Portfolio's investment objective or investment adviser as a result of the
name change. Our forms and communications with you may temporarily continue to
refer to the Portfolio by its previous name until we are able to revise such
documents.
2
METLIFE INSURANCE COMPANY OF CONNECTICUT
MetLife of CT Fund BD III for Variable Annuities
MetLife of CT Separate Account Nine For Variable Annuities
MetLife Insurance Company of CT Variable Annuity Separate Account 2002
METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT
MetLife of CT Fund BD IV for Variable Annuities
MetLife of CT Separate Account Ten For Variable Annuities
MetLife Life and Annuity Company of CT Variable Annuity Separate Account 2002
VINTAGE II(SM) ANNUITY
VINTAGE II (SERIES II)(SM) VARIABLE ANNUITY
VINTAGE 3(SM) ANNUITY
VINTAGE L(SM) VARIABLE ANNUITY
VINTAGE ACCESS(SM) ANNUITY
VINTAGE XTRA(SM) VARIABLE ANNUITY
VINTAGE XTRA (SERIES II)(SM) VARIABLE ANNUITY
SUPPLEMENT DATED NOVEMBER 12, 2007
TO THE
PROSPECTUSES DATED APRIL 30, 2007, AS SUPPLEMENTED
This supplements the information contained in the Prospectus for the variable
annuity contracts listed above. This supplement should be read in its entirety
and kept together with the Prospectus for future reference.
1. VARIABLE FUNDING OPTION NAME CHANGES
Effective on or about November 12, 2007, the Legg Mason Partners Variable
Multiple Discipline Portfolio - All Cap Growth and Value of Legg Mason Partners
Variable Equity Trust changed its name to Legg Mason Partners Variable Capital
Portfolio, and the Legg Mason Partners Variable Multiple Discipline Portfolio -
Global All Cap Growth and Value of Legg Mason Partners Variable Equity Trust
changed its name to Legg Mason Partners Variable Global Equity Portfolio.
Certain documents or information you may receive about your Contract may
continue to reflect the old Variable Funding Option names until such time as
updates are made.
2. VARIABLE FUNDING OPTION INVESTMENT OBJECTIVE CHANGE
Effective on or about November 12, 2007, the Legg Mason Partners Variable
Capital Portfolio (formerly named Legg Mason Partners Variable Multiple
Discipline Portfolio - All Cap Growth and Value) of Legg Mason Partners Variable
Equity Trust changed its investment objective to the following: "Seeks capital
appreciation through investment in securities which the portfolio managers
believe have above-average capital appreciation potential."
3. UNDERLYING FUND MERGER AND CLOSING
Effective on or about November 12, 2007, the Legg Mason Partners Variable
Multiple Discipline Portfolio - Large Cap Growth and Value of Legg Mason
Partners Variable Equity Trust (Existing Fund) will be merged with and into the
Legg Mason Partners
Variable Appreciation Portfolio (Class II) of Legg Mason Partners Variable
Equity Trust (Acquiring Fund).
The assets in the Existing Fund will be transferred into the Acquiring Fund. The
aggregate value of your investment will not change as a result of the merger.
Immediately after the merger, the Acquiring Fund no longer will be available for
allocations of new purchase payments or transfers of contract value (excluding
dollar cost averaging and automatic rebalancing allocations in existence at the
time of closing). Please note that Legg Mason Partners Variable Appreciation
Portfolio (Class I) remains available for new allocations of purchase payments
and transfers of account value.
The following table presents the Acquiring Fund's management fee, distribution
and/or service fees (12b-1), and other expenses. The Acquiring Fund provided
this information and we have not independently verified it.
[Enlarge/Download Table]
DISTRIBUTION TOTAL CONTRACTUAL FEE NET TOTAL
AND/OR ANNUAL WAIVER ANNUAL
MANAGEMENT SERVICE OTHER OPERATING AND/OR EXPENSE OPERATING
UNDERLYING FUND: FEE (12B-1) FEES EXPENSES* EXPENSES REIMBURSEMENT EXPENSES
---------------------------- --------------- -------------- ---------- ----------- --------------- --------------
Legg Mason Partners
Variable Appreciation
Portfolio (Class II) 0.69% 0.25% 0.04% 0.98% 0.00% 0.98%
*Other expenses are estimated since there are currently no Class II shares
outstanding.
MORE INFORMATION ABOUT THE VARIABLE FUNDING OPTIONS IS CONTAINED IN THE
PROSPECTUSES, AS SUPPLEMENTED, FOR THE UNDERLYING FUNDS. CURRENT PROSPECTUSES
FOR THE UNDERLYING FUNDS CAN BE OBTAINED BY CALLING 1-800-842-9325.
METLIFE INSURANCE COMPANY OF CONNECTICUT
MetLife of CT Fund ABD For Variable Annuities
MetLife of CT Separate Account BD III For Variable Annuities
MetLife of CT Separate Account Nine For Variable Annuities
METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT
MetLife of CT Fund ABD II For Variable Annuities
MetLife of CT Separate Account BD IV For Variable Annuities
MetLife of CT Separate Account Ten For Variable Annuities
PORTFOLIO ARCHITECT 3 ANNUITY
PORTFOLIO ARCHITECT ANNUITY
PORTFOLIO ARCHITECT XTRA ANNUITY
PREMIER ADVISERS ANNUITY
PREMIER ADVISERS - CLASS II ANNUITY
SUPPLEMENT DATED NOVEMBER 12, 2007
TO THE
PROSPECTUSES DATED APRIL 30, 2007, AS SUPPLEMENTED
This supplements the information contained in the Prospectuses for the variable
annuity contracts listed above. This supplement should be read in its entirety
and kept together with the Prospectus for future reference.
For Contract Owners of Premier Advisers Annuity and Premier Advisers -- Class II
Annuity only: Effective November 12, 2007, the Worldwide Growth Portfolio of
Janus Aspen Series is no longer available for allocations of new purchase
payments or transfers of contract value (excluding dollar cost averaging and
automatic rebalancing allocations in existence at the time of closing).
For Contract Owners of Portfolio Architect 3 Annuity, Portfolio Architect
Annuity, and Portfolio Architect XTRA Annuity only: Effective November 12, 2007,
the Templeton Developing Markets Securities Fund of Franklin Templeton Variable
Insurance Products Trust is no longer available for allocations of new purchase
payments or transfers of contract value (excluding dollar cost averaging and
automatic rebalancing allocations in existence at the time of closing).
METLIFE INSURANCE COMPANY OF CONNECTICUT
(THE "COMPANY")
METLIFE OF CT SEPARATE ACCOUNT NINE FOR VARIABLE ANNUITIES
METLIFE OF CT SEPARATE ACCOUNT ELEVEN FOR VARIABLE ANNUITIES
METLIFE OF CT SEPARATE ACCOUNT THIRTEEN FOR VARIABLE ANNUITIES
SUPPLEMENT DATED NOVEMBER 12, 2007
TO THE
STATEMENT OF ADDITIONAL INFORMATION DATED APRIL 30, 2007
This Supplements the information contained in the Statements of Additional
Information ("SAI") for the variable annuity contracts in the insurance company
separate accounts listed above.
FINANCIAL STATEMENTS
The attached financial statements of the Company replace, in their entirety, the
financial statements of the Company set forth in the SAI. The financial
statements of the Company should be considered only as bearing upon its ability
to meet its obligations under the Contracts.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
MetLife Insurance Company of Connecticut:
We have audited the accompanying consolidated balance sheets of MetLife
Insurance Company of Connecticut ("MetLife Connecticut") (formerly known as "The
Travelers Insurance Company") and its subsidiaries (collectively the "Company")
as of December 31, 2006 and 2005, and the related consolidated statements of
income, stockholders' equity, and cash flows for each of the three years in the
period ended December 31, 2006. Our audits also included the financial statement
schedules listed in the Index to Consolidated Financial Statements and
Schedules. 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.
We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement. The Company
is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audits included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Company's internal control
over financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements, assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of MetLife Insurance Company of
Connecticut and its subsidiaries as of December 31, 2006 and 2005, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 2006, in conformity with accounting principles
generally accepted in the United States of America. 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 Notes 1 and 3 to the consolidated financials statements, on
October 11, 2006, MetLife Connecticut entered into a Transfer Agreement with
MetLife Investors Group, Inc. ("MLIG"), both subsidiaries of MetLife, Inc.
("MetLife"), pursuant to which MetLife Connecticut acquired all of the stock of
MetLife Investors USA Insurance Company ("MLI-USA") from MLIG. As the
transaction was between entities under common control, the transaction was
recorded and accounted for in a manner similar to a pooling-of-interests from
July 1, 2005 (the "Acquisition Date"); further, as MLI-USA has been controlled
by MetLife for longer than MetLife Connecticut, all amounts reported for periods
prior to the Acquisition Date are those of MLI-USA.
/S/ DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
New York, New York
March 30, 2007
(October 30, 2007 as to Note 20)
F-1
METLIFE INSURANCE COMPANY OF CONNECTICUT
(A Wholly-Owned Subsidiary of MetLife, Inc.)
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2006 AND 2005
(IN MILLIONS, EXCEPT SHARE AND PER SHARE DATA)
[Enlarge/Download Table]
2006 2005
-------- --------
ASSETS
Investments:
Fixed maturity securities available-for-sale, at estimated
fair value (amortized cost: $48,406 and $53,231,
respectively)............................................. $ 47,846 $ 52,589
Trading securities, at fair value (cost: $0 and $457,
respectively)............................................. -- 452
Equity securities available-for-sale, at estimated fair value
(cost: $777 and $424, respectively)....................... 795 421
Mortgage and consumer loans.................................. 3,595 2,543
Policy loans................................................. 918 916
Real estate and real estate joint ventures held-for-
investment................................................ 173 91
Real estate held-for-sale.................................... 7 5
Other limited partnership interests.......................... 1,082 1,252
Short-term investments....................................... 777 1,769
Other invested assets........................................ 1,241 1,057
-------- --------
Total investments......................................... 56,434 61,095
Cash and cash equivalents...................................... 649 571
Accrued investment income...................................... 597 602
Premiums and other receivables................................. 8,410 7,008
Deferred policy acquisition costs and value of business
acquired..................................................... 5,111 4,914
Current income tax recoverable................................. 94 48
Deferred income tax assets..................................... 1,007 1,120
Goodwill....................................................... 953 924
Other assets................................................... 765 442
Separate account assets........................................ 50,067 44,524
-------- --------
Total assets.............................................. $124,087 $121,248
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Future policy benefits....................................... $ 19,654 $ 18,344
Policyholder account balances................................ 35,099 37,840
Other policyholder funds..................................... 1,513 1,293
Long-term debt -- affiliated................................. 435 435
Payables for collateral under securities loaned and other
transactions.............................................. 9,155 9,737
Other liabilities............................................ 749 1,642
Separate account liabilities................................. 50,067 44,524
-------- --------
Total liabilities......................................... 116,672 113,815
-------- --------
CONTINGENCIES, COMMITMENTS AND GUARANTEES (NOTE 12)
Stockholders' Equity:
Common stock, par value $2.50 per share; 40,000,000 shares
authorized; 34,595,317 shares issued and outstanding at
December 31, 2006 and 2005................................ 86 86
Additional paid-in capital................................... 7,123 7,180
Retained earnings............................................ 520 581
Accumulated other comprehensive income (loss)................ (314) (414)
-------- --------
Total stockholders' equity................................ 7,415 7,433
-------- --------
Total liabilities and stockholders' equity................ $124,087 $121,248
======== ========
See accompanying notes to consolidated financial statements.
F-2
METLIFE INSURANCE COMPANY OF CONNECTICUT
(A Wholly-Owned Subsidiary of MetLife, Inc.)
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 2006, 2005 AND 2004
(IN MILLIONS)
[Download Table]
2006 2005 2004
------ ------ ----
REVENUES
Premiums................................................... $ 308 $ 281 $ 9
Universal life and investment-type product policy fees..... 1,268 862 159
Net investment income...................................... 2,839 1,438 207
Other revenues............................................. 212 132 26
Net investment gains (losses).............................. (521) (198) (9)
------ ------ ----
Total revenues........................................... 4,106 2,515 392
------ ------ ----
EXPENSES
Policyholder benefits and claims........................... 792 570 18
Interest credited to policyholder account balances......... 1,316 720 153
Other expenses............................................. 1,173 678 179
------ ------ ----
Total expenses........................................... 3,281 1,968 350
------ ------ ----
Income before provision for income tax..................... 825 547 42
Provision for income tax................................... 228 156 17
------ ------ ----
Income before cumulative effect of a change in accounting,
net of income tax........................................ 597 391 25
Cumulative effect of a change in accounting, net of income
tax...................................................... -- -- 2
------ ------ ----
Net income................................................. $ 597 $ 391 $ 27
====== ====== ====
See accompanying notes to consolidated financial statements.
F-3
METLIFE INSURANCE COMPANY OF CONNECTICUT
(A Wholly-Owned Subsidiary of MetLife, Inc.)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2006, 2005 AND 2004
(IN MILLIONS)
[Enlarge/Download Table]
ACCUMULATED OTHER
COMPREHENSIVE INCOME (LOSS)
---------------------------
NET FOREIGN
ADDITIONAL UNREALIZED CURRENCY
COMMON PAID-IN RETAINED INVESTMENT TRANSLATION
STOCK CAPITAL EARNINGS GAINS (LOSSES) ADJUSTMENT TOTAL
------ ---------- -------- -------------- ----------- ------
BALANCE AT JANUARY 1, 2004 (NOTE 3)....... $11 $ 171 $ 163 $ 32 $-- $ 377
Capital contribution from MetLife
Investors Group, Inc. .................. 300 300
Comprehensive income (loss):
Net income.............................. 27 27
Other comprehensive income (loss):
Unrealized gains (losses) on
derivative instruments, net of
income tax......................... (2) (2)
------
Other comprehensive income (loss).... (2)
------
Comprehensive income (loss)............. 25
--- ------ ----- ----- --- ------
BALANCE AT DECEMBER 31, 2004.............. 11 471 190 30 -- 702
MetLife Insurance Company of Connecticut's
common stock purchased by MetLife, Inc.
(Notes 2 and 3)......................... 75 6,709 6,784
Comprehensive income (loss):
Net income.............................. 391 391
Other comprehensive income (loss):
Unrealized gains (losses) on
derivative instruments, net of
income tax......................... (1) (1)
Unrealized investment gains (losses),
net of related offsets and income
tax................................ (445) (445)
Foreign currency translation
adjustments........................ 2 2
------
Other comprehensive income (loss).... (444)
------
Comprehensive income (loss)............. (53)
--- ------ ----- ----- --- ------
BALANCE AT DECEMBER 31, 2005.............. 86 7,180 581 (416) 2 7,433
Revisions of purchase price pushed down to
MetLife Insurance Company of
Connecticut's net assets acquired (Note
2)...................................... 40 40
Dividend paid to MetLife, Inc. ........... (259) (658) (917)
Capital contribution of intangible assets
from MetLife, Inc., net of income tax
(Notes 8 and 14)........................ 162 162
Comprehensive income (loss):
Net income.............................. 597 597
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................................ 107 107
Foreign currency translation
adjustments, net of income tax.... (2) (2)
------
Other comprehensive income (loss).... 100
------
Comprehensive income (loss)............. 697
--- ------ ----- ----- --- ------
BALANCE AT DECEMBER 31, 2006.............. $86 $7,123 $ 520 $(314) $-- $7,415
=== ====== ===== ===== === ======
See accompanying notes to consolidated financial statements.
F-4
METLIFE INSURANCE COMPANY OF CONNECTICUT
(A Wholly-Owned Subsidiary of MetLife, Inc.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2006, 2005 AND 2004
(IN MILLIONS)
[Enlarge/Download Table]
2006 2005 2004
-------- -------- -------
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income.................................................... $ 597 $ 391 $ 27
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization expenses................... 6 4 --
Amortization of premiums and accretion of discounts
associated with investments, net....................... 74 112 21
(Gains) losses from sales of investments and businesses,
net.................................................... 521 198 9
Equity earnings of real estate joint ventures and other
limited partnership interests.......................... (83) (19) --
Interest credited to policyholder account balances....... 1,316 720 153
Universal life and investment-type product policy fees... (1,268) (862) (159)
Change in accrued investment income...................... 2 (68) --
Change in premiums and other receivables................. (509) (415) (1,108)
Change in deferred policy acquisition costs, net......... (234) (211) (165)
Change in insurance-related liabilities.................. 234 812 17
Change in trading securities............................. (43) 103 --
Change in income tax payable............................. 156 298 --
Change in income tax recoverable......................... -- -- (29)
Change in other assets................................... 586 574 140
Change in other liabilities.............................. (351) (876) (106)
Other, net............................................... -- 2 --
-------- -------- -------
Net cash provided by (used in) operating activities........... 1,004 763 (1,200)
-------- -------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Sales, maturities and repayments of:
Fixed maturity securities................................ 27,706 24,008 1,521
Equity securities........................................ 218 221 2
Mortgage and consumer loans.............................. 1,034 748 72
Real estate and real estate joint ventures............... 126 65 --
Other limited partnership interests...................... 762 173 --
Purchases of:
Fixed maturity securities................................ (23,840) (32,850) (1,482)
Equity securities........................................ (109) -- --
Mortgage and consumer loans.............................. (2,092) (500) (42)
Real estate and real estate joint ventures............... (56) (13) --
Other limited partnership interests...................... (343) (330) --
Net change in policy loans.................................. (2) 3 --
Net change in short-term investments........................ 991 599 7
Net change in other invested assets......................... (316) 233 1
Other, net.................................................. 1 3 --
-------- -------- -------
Net cash provided by (used in) investing activities........... 4,080 (7,640) 79
-------- -------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Policyholder account balances:
Deposits................................................. 8,185 11,230 4,541
Withdrawals.............................................. (11,637) (12,369) (3,898)
Net change in payables for collateral under securities
loaned and other transactions............................ (582) 7,675 122
Long-term debt issued....................................... -- 400 --
Dividends on common stock................................... (917) -- --
Capital contribution from MetLife Investors Group, Inc. .... -- -- 300
Contribution of MetLife Insurance Company of Connecticut
from MetLife, Inc., net of cash received of $0, $443 and
$0, respectively......................................... -- 443 --
Other, net.................................................. (55) (75) --
-------- -------- -------
Net cash (used in) provided by financing activities........... (5,006) 7,304 1,065
-------- -------- -------
Change in cash and cash equivalents........................... 78 427 (56)
Cash and cash equivalents, beginning of year.................. 571 144 200
-------- -------- -------
CASH AND CASH EQUIVALENTS, END OF YEAR........................ $ 649 $ 571 $ 144
======== ======== =======
Supplemental disclosures of cash flow information:
Net cash paid during the year for:
Interest................................................. $ 31 $ 18 $ 2
======== ======== =======
Income tax............................................... $ 81 $ 87 $ (2)
======== ======== =======
Non-cash transactions during the year:
Net assets of MetLife Insurance Company of Connecticut
acquired by MetLife, Inc. and contributed to MLI-USA
net of cash received of $443 million................... $ -- $ 6,341 $ --
======== ======== =======
Contribution of other intangible assets, net of deferred
income tax............................................. $ 162 $ -- $ --
======== ======== =======
Contribution of goodwill from MetLife, Inc. ............. $ 29 $ -- $ --
======== ======== =======
--------
See Note 2 for further discussion of the net assets of MetLife Insurance Company
of Connecticut acquired by MetLife, Inc. and contributed to MLI-USA.
See Note 19 for non-cash reinsurance transactions.
See accompanying notes to consolidated financial statements.
F-5
METLIFE INSURANCE COMPANY OF CONNECTICUT
(A Wholly-Owned Subsidiary of MetLife, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BUSINESS, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
BUSINESS
"MICC" or the "Company" refers to MetLife Insurance Company of Connecticut
(formerly, The Travelers Insurance Company), a Connecticut corporation
incorporated in 1863 ("MetLife Connecticut"), and its subsidiaries, including
MetLife Life and Annuity Company of Connecticut ("MLAC", formerly The Travelers
Life and Annuity Company) and MetLife Investors USA Insurance Company ("MLI-
USA"). The Company is a subsidiary of MetLife, Inc. ("MetLife"). The Company
offers individual annuities, individual life insurance, and institutional
protection and asset accumulation products.
On July 1, 2005 (the "Acquisition Date"), MetLife Connecticut became a
wholly-owned subsidiary of MetLife. MetLife Connecticut, together with
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.
On October 11, 2006, MetLife transferred MLI-USA to MetLife Connecticut.
See Note 3.
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 Insurance Company to MetLife Insurance Company of Connecticut,
effective May 1, 2006.
Since the Company is a member of a controlled group of affiliated
companies, its results may not be indicative of those of a stand-alone entity.
BASIS OF PRESENTATION
The accompanying consolidated financial statements include the accounts of
(i) MLI-USA and effective July 1, 2005, MetLife Connecticut and its subsidiaries
(See Notes 2 and 3); (ii) partnerships and joint ventures in which the Company
has control; and (iii) variable interest entities ("VIEs") for which the Company
is deemed to be the primary beneficiary. Intercompany accounts and transactions
have been eliminated.
The Company uses the equity method of accounting for investments in equity
securities in which it has more than a 20% interest and for real estate joint
ventures and other limited partnership interests in which it has more than a
minor equity interest or more than a minor influence over the joint ventures and
partnership's operations, but does not have a controlling interest and is not
the primary beneficiary. The Company uses the cost method of accounting for real
estate joint ventures and other limited partnership interests in which it has a
minor equity investment and virtually no influence over the joint ventures and
partnership's operations.
Minority interest related to consolidated entities included in other
liabilities was $43 million and $180 million at December 31, 2006 and 2005,
respectively. At December 31, 2005, the Company was the majority owner of
Tribeca Citigroup Investments Ltd. ("Tribeca") and consolidated the fund within
its consolidated financial statements. During the second quarter of 2006, the
Company's ownership interests in Tribeca declined to a position whereby Tribeca
is no longer consolidated. See Note 4 for further information.
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
F-6
METLIFE INSURANCE COMPANY OF CONNECTICUT
(A Wholly-Owned Subsidiary of MetLife, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
assumptions that affect amounts reported in the consolidated financial
statements. The most critical estimates include those used in determining:
[Download Table]
(i) the fair value of investments in the absence of quoted market
values;
(ii) investment impairments;
(iii) the recognition of income on certain investments;
(iv) the application of the consolidation rules to certain
investments;
(v) the fair value of and accounting for derivatives;
(vi) the capitalization and amortization of deferred policy
acquisition costs ("DAC") and the establishment and amortization
of value of business acquired ("VOBA");
(vii) the 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, mortgage and consumer loans, policy loans, real estate, real estate
joint ventures and other limited partnerships, short-term investments and other
invested assets. The accounting policies related to each are as follows:
Fixed Maturity and Equity Securities. The Company's fixed maturity
and equity securities are classified as available-for-sale, except for
trading securities, and are reported at their estimated fair value.
Unrealized investment gains and losses on these securities are recorded as
a separate component of other comprehensive income or loss, net of
policyholder related amounts and deferred income taxes. All security
transactions are recorded on a trade date basis. Investment gains and
losses on sales of securities are determined on a specific identification
basis.
Interest income on fixed maturity securities is recorded when earned
using an effective yield method giving effect to amortization of premiums
and accretion of discounts. Dividends on equity securities are recorded
when declared. These dividends and interest income are recorded as part of
net investment income.
Included within fixed maturity securities are loan-backed securities
including mortgage-backed and asset-backed securities. Amortization of the
premium or discount from the purchase of these securities considers the
estimated timing and amount of prepayments of the underlying loans. Actual
prepayment experience is periodically reviewed and effective yields are
recalculated when differences arise between the prepayments originally
anticipated and the actual prepayments received and currently anticipated.
Prepayment assumptions for single class and multi-class mortgage-backed and
asset-backed securities are obtained from broker-dealer survey values or
internal estimates. For credit-sensitive mortgage-backed and asset-backed
securities and certain prepayment-sensitive securities, the effective yield
is recalculated on a prospective basis.
F-7
METLIFE INSURANCE COMPANY OF CONNECTICUT
(A Wholly-Owned Subsidiary of MetLife, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
For all other mortgage-backed and asset-backed securities, the effective
yield is recalculated on a retrospective basis.
The cost of fixed maturity and equity securities is adjusted for
impairments in value deemed to be other-than-temporary in the period in
which the determination is made. These impairments are included within net
investment gains (losses) and the cost basis of the fixed maturity and
equity securities is reduced accordingly. The Company does not change the
revised cost basis for subsequent recoveries in value.
The assessment of whether impairments have occurred is based on
management's case-by-case evaluation of the underlying reasons for the
decline in fair value. The Company's review of its fixed maturity and
equity securities for impairments includes an analysis of the total gross
unrealized losses by three categories of securities: (i) securities where
the estimated fair value had declined and remained below cost or amortized
cost by less than 20%; (ii) securities where the estimated fair value had
declined and remained below cost or amortized cost by 20% or more for less
than six months; and (iii) securities where the estimated fair value had
declined and remained below cost or amortized cost by 20% or more for six
months or greater.
Additionally, management considers a wide range of factors about the
security issuer and uses its best judgment in evaluating the cause of the
decline in the estimated fair value of the security and in assessing the
prospects for near-term recovery. Inherent in management's evaluation of
the security are assumptions and estimates about the operations of the
issuer and its future earnings potential. Considerations used by the
Company in the impairment evaluation process include, but are not limited
to: (i) the length of time and the extent to which the market value has
been below cost or amortized cost; (ii) the potential for impairments of
securities when the issuer is experiencing significant financial
difficulties; (iii) the potential for impairments in an entire industry
sector or sub-sector; (iv) the potential for impairments in certain
economically depressed geographic locations; (v) the potential for
impairments of securities where the issuer, series of issuers or industry
has suffered a catastrophic type of loss or has exhausted natural
resources; (vi) the Company's ability and intent to hold the security for a
period of time sufficient to allow for the recovery of its value to an
amount equal to or greater than cost or amortized cost (See also Note 4);
(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.
Trading Securities. The Company's trading securities portfolio,
principally consisting of fixed maturity and equity securities, supports
investment strategies that involve the active and frequent purchase and
sale of securities and the execution of short sale agreements and supports
asset and liability matching strategies for certain insurance products.
Trading securities and short sale agreement liabilities are recorded at
fair value with subsequent changes in fair value recognized in net
investment income. Related dividends and investment income are also
included in net investment income. Beginning in the second quarter of 2006,
the Company no longer holds a trading securities portfolio. (See also Note
4)
Securities Lending. Securities loaned transactions are treated as
financing arrangements and are recorded at the amount of cash received. The
Company obtains collateral in an amount equal to 102% of the fair value of
the securities loaned. The Company monitors the market value of the
securities loaned on a daily basis with additional collateral obtained as
necessary. Substantially all of the Company's securities loaned
transactions are with large brokerage firms. Income and expenses associated
with securities loaned transactions are reported as investment income and
investment expense, respectively, within net investment income.
Mortgage and Consumer Loans. Mortgage and consumer loans are stated
at unpaid principal balance, adjusted for any unamortized premium or
discount, deferred fees or expenses, net of valuation allowances. Interest
income is accrued on the principal amount of the loan based on the loan's
contractual interest rate. Amortization of premiums and discounts is
recorded using the effective yield method. Interest income,
F-8
METLIFE INSURANCE COMPANY OF CONNECTICUT
(A Wholly-Owned Subsidiary of MetLife, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
amortization of premiums and discounts, and prepayment fees are reported in
net investment income. Loans are considered to be impaired when it is
probable that, based upon current information and events, the Company will
be unable to collect all amounts due under the contractual terms of the
loan agreement. Valuation allowances are established for the excess
carrying value of the loan over the present value of expected future cash
flows discounted at the loan's original effective interest rate, the value
of the loan's collateral if the loan is in the process of foreclosure or
otherwise collateral dependent, or the loan's market value if the loan is
being sold. The Company also establishes allowances for loan losses when a
loss contingency exists for pools of loans with similar characteristics,
such as mortgage loans based on similar property types or loan to value
risk factors. A loss contingency exists when the likelihood that a future
event will occur is probable based on past events. Interest income earned
on impaired loans is accrued on the principal amount of the loan based on
the loan's contractual interest rate. However, interest ceases to be
accrued for loans on which interest is generally more than 60 days past due
and/or where the collection of interest is not considered probable. Cash
receipts on such impaired loans are recorded as a reduction of the recorded
investment. Gains and losses from the sale of loans and changes in
valuation allowances are reported in net investment gains (losses).
Policy Loans. Policy loans are stated at unpaid principal balances.
Interest income on such loans is recorded as earned using the contractually
agreed upon interest rate. Generally, interest is capitalized on the
policy's anniversary date.
Real Estate. Real estate held-for-investment, including related
improvements, is stated at cost less accumulated depreciation. Depreciation
is provided on a straight-line basis over the estimated useful life of the
asset (typically 20 to 55 years). Rental income is recognized on a
straight-line basis over the term of the respective leases. The Company
classifies a property as held-for-sale if it commits to a plan to sell a
property within one year and actively markets the property in its current
condition for a price that is reasonable in comparison to its fair value.
The Company classifies the results of operations and the gain or loss on
sale of a property that either has been disposed of or classified as held-
for-sale as discontinued operations, if the ongoing operations of the
property will be eliminated from the ongoing operations of the Company and
if the Company will not have any significant continuing involvement in the
operations of the property after the sale. Real estate held-for-sale is
stated at the lower of depreciated cost or fair value less expected
disposition costs. Real estate is not depreciated while it is classified as
held-for-sale. The Company periodically reviews its properties held-for-
investment for impairment and tests properties for recoverability whenever
events or changes in circumstances indicate the carrying amount of the
asset may not be recoverable and the carrying value of the property exceeds
its fair value. Properties whose carrying values are greater than their
undiscounted cash flows are written down to their fair value, with the
impairment loss included in net investment gains (losses). Impairment
losses are based upon the estimated fair value of real estate, which is
generally computed using the present value of expected future cash flows
from the real estate discounted at a rate commensurate with the underlying
risks. Real estate acquired upon foreclosure of commercial and agricultural
mortgage loans is recorded at the lower of estimated fair value or the
carrying value of the mortgage loan at the date of foreclosure.
Real Estate Joint Ventures and Other Limited Partnership
Interests. The Company uses the equity method of accounting for
investments in real estate joint ventures and other limited partnership
interests in which it has more than a minor equity interest or more than a
minor influence over the joint ventures and partnership's operations, but
does not have a controlling interest and is not the primary beneficiary.
The Company uses the cost method of accounting for real estate joint
ventures and other limited partnership interests in which it has a minor
equity investment and virtually no influence over the joint ventures and
the partnership's operations. In addition to the investees performing
regular evaluations for the impairment of underlying investments, the
Company routinely evaluates its investments in real estate joint ventures
and limited partnerships for impairments. For its cost method investments,
it follows an impairment analysis which
F-9
METLIFE INSURANCE COMPANY OF CONNECTICUT
(A Wholly-Owned Subsidiary of MetLife, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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.
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, trading securities, etc.) is dependent upon market
conditions, which could result in prepayments and changes in amounts to be
earned.
The fair values of publicly held fixed maturity securities and
publicly held equity securities are based on quoted market prices or
estimates from independent pricing services. However, in cases where quoted
market prices are not available, such as for private fixed maturity
securities, fair values are estimated using present value or valuation
techniques. The determination of fair values is based on: (i) valuation
methodologies; (ii) securities the Company deems to be comparable; and
(iii) assumptions deemed appropriate given the circumstances. The fair
value estimates are made at a specific point in time, based on available
market information and judgments about financial instruments, including
estimates of the timing and amounts of expected future cash flows and the
credit standing of the issuer or counterparty. Factors considered in
estimating fair value include: coupon rate, maturity, estimated duration,
call provisions, sinking fund requirements, credit rating, industry sector
of the issuer, and quoted market prices of comparable securities. The use
of different methodologies and assumptions may have a material effect on
the estimated fair value amounts.
Additionally, when the Company enters into certain 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.
F-10
METLIFE INSURANCE COMPANY OF CONNECTICUT
(A Wholly-Owned Subsidiary of MetLife, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The use of different methodologies and assumptions as to the timing
and amount of impairments, recognition of income and the determination of
the fair value of investments may have a material effect on the amounts
presented within the consolidated financial statements.
Derivative Financial Instruments
Derivatives are financial instruments whose values are derived from
interest rates, foreign currency exchange rates, or other financial indices.
Derivatives may be exchange-traded or contracted in the over-the-counter market.
The Company uses a variety of derivatives, including swaps, forwards, futures
and option contracts, to manage the risk associated with variability in cash
flows or changes in fair values related to the Company's financial instruments.
The Company also uses derivative instruments to hedge its currency exposure
associated with net investments in certain foreign operations. To a lesser
extent, the Company uses credit derivatives to synthetically replicate
investment risks and returns which are not readily available in the cash market.
The Company also purchases certain securities, issues certain insurance policies
and investment contracts and engages in certain reinsurance contracts that have
embedded derivatives.
Freestanding derivatives are carried on the Company's consolidated balance
sheet either as assets within other invested assets or as liabilities within
other liabilities at fair value as determined by quoted market prices or through
the use of pricing models. The determination of fair value, when quoted market
values are not available, is based on valuation methodologies and assumptions
deemed appropriate under the circumstances. Derivative valuations can be
affected by changes in interest rates, foreign currency exchange rates,
financial indices, credit spreads, market volatility, and liquidity. Values can
also be affected by changes in estimates and assumptions used in pricing models.
Such assumptions include estimates of volatility, interest rates, foreign
currency exchange rates, other financial indices and credit ratings. Essential
to the analysis of the fair value is 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"); (ii) a hedge
of a forecasted transaction or of the variability of cash flows to be received
or paid related to a recognized asset or liability ("cash flow hedge"); or (iii)
a hedge of a net investment in a foreign operation. In this documentation, the
Company sets forth how the hedging instrument is expected to hedge the
designated risks related to the hedged item and sets forth the method that will
be used to retrospectively and prospectively assess the hedging instrument's
effectiveness and the method which will be used to measure ineffectiveness. A
derivative designated as a hedging instrument must be assessed as being highly
effective in offsetting the designated risk of the hedged item. Hedge
effectiveness is formally assessed at inception and periodically throughout the
life of the designated hedging relationship. Assessments and 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.
F-11
METLIFE INSURANCE COMPANY OF CONNECTICUT
(A Wholly-Owned Subsidiary of MetLife, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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.
In a hedge of a net investment in a foreign operation, changes in the fair
value of the hedging derivative that are measured as effective are reported
within other comprehensive income (loss) consistent with the translation
adjustment for the hedged net investment in the foreign operation. Changes in
the fair value of the hedging instrument measured as ineffectiveness are
reported within net investment gains (losses).
The Company discontinues hedge accounting prospectively when: (i) it is
determined that the derivative is no longer highly effective in offsetting
changes in the fair value or cash flows of a hedged item; (ii) the derivative
expires, is sold, terminated, or exercised; (iii) it is no longer probable that
the hedged forecasted transaction will occur; (iv) a hedged firm commitment no
longer meets the definition of a firm commitment; or (v) the derivative is de-
designated as a hedging instrument.
When hedge accounting is discontinued because it is determined that the
derivative is not highly effective in offsetting changes in the fair value or
cash flows of a hedged item, the derivative continues to be carried on the
consolidated balance sheet at its fair value, with changes in fair value
recognized currently in net investment gains (losses). The carrying value of the
hedged recognized asset or liability under a fair value hedge is no longer
adjusted for changes in its fair value due to the hedged risk, and the
cumulative adjustment to its carrying value is amortized into income over the
remaining life of the hedged item. Provided the hedged forecasted transaction is
still probable of occurrence, the changes in fair value of derivatives recorded
in other comprehensive income (loss) related to discontinued cash flow hedges
are released into the consolidated statement of income when the Company's
earnings are affected by the variability in cash flows of the hedged item.
When hedge accounting is discontinued because it is no longer probable that
the forecasted transactions will occur by the end of the specified time period
or the hedged item no longer meets the definition of a firm commitment, the
derivative continues to be carried on the consolidated balance sheet at its fair
value, with changes in fair value recognized currently in net investment gains
(losses). Any asset or liability associated with a recognized firm commitment is
derecognized from the consolidated balance sheet, and recorded currently in net
investment gains (losses). Deferred gains and losses of a derivative recorded in
other comprehensive income (loss) pursuant to the cash flow hedge of a
forecasted transaction are recognized immediately in net investment gains
(losses).
In all other situations in which hedge accounting is discontinued, the
derivative is carried at its fair value on the consolidated balance sheet, with
changes in its fair value recognized in the current period as net investment
gains (losses).
F-12
METLIFE INSURANCE COMPANY OF CONNECTICUT
(A Wholly-Owned Subsidiary of MetLife, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company is also a party to financial instruments that contain terms
which are deemed to be embedded derivatives. The Company assesses each
identified embedded derivative to determine whether it is required to be
bifurcated under SFAS 133. If the instrument would not be accounted for in its
entirety at fair value and it is determined that the terms of the embedded
derivative are not clearly and closely related to the economic characteristics
of the host contract, and that a separate instrument with the same terms would
qualify as a derivative instrument, the embedded derivative is bifurcated from
the host contract and accounted for as a freestanding derivative. Such embedded
derivatives are carried on the consolidated balance sheet at fair value with the
host contract and changes in their fair value are reported currently in net
investment gains (losses). If the Company is unable to properly identify and
measure an embedded derivative for separation from its host contract, the entire
contract is carried on the balance sheet at fair value, with changes in fair
value recognized in the current period in net investment gains (losses).
Additionally, the Company may elect to carry an entire contract on the balance
sheet at fair value, with changes in fair value recognized in the current period
in net investment gains (losses) if that contract contains an embedded
derivative that requires bifurcation. There is a risk that embedded derivatives
requiring bifurcation may not be identified and reported at fair value in the
consolidated financial statements and that their related changes in fair value
could materially affect reported net income.
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with an
original or remaining maturity of three months or less at the date of purchase
to be cash equivalents.
Property, Equipment, Leasehold Improvements and Computer Software
Property, equipment and leasehold improvements, which are included in other
assets, are stated at cost, less accumulated depreciation and amortization.
Depreciation is determined using either the straight-line or sum-of-the-years-
digits method over the estimated useful lives of the assets, as appropriate.
Estimated lives generally range from five to ten years for leasehold
improvements and three to seven years for all other property and equipment.
Computer software, which is included in other assets, is stated at cost,
less accumulated amortization. Purchased software costs, as well as internal and
external costs incurred to develop internal-use computer software during the
application development stage, are capitalized. Such costs are amortized
generally over a four-year period using the straight-line method. The cost basis
of computer software was $52 million and $2 million at December 31, 2006 and
2005, respectively. Accumulated amortization was $3 million at December 31, 2006
and the computer software was fully amortized at December 31, 2005. Related
amortization expense was $3 million and $1 million for the years ended December
31, 2006 and 2005, respectively. There was no amortization expense for the year
ended December 31, 2004.
Deferred Policy Acquisition Costs and Value of Business Acquired
The Company incurs significant costs in connection with acquiring new and
renewal insurance business. Costs that vary with and relate to the production of
new business are deferred as DAC. Such costs consist principally of commissions
and agency and policy issue expenses. VOBA is an intangible asset that reflects
the estimated fair value of in-force contracts in a life insurance company
acquisition and represents the portion of the purchase price that is allocated
to the value of the right to receive future cash flows from the business in-
force at the acquisition date. VOBA is based on actuarially determined
projections, by each block of business, of future policy and contract charges,
premiums, mortality and morbidity, separate account performance, surrenders,
operating expenses, investment returns and other factors. Actual experience on
the purchased business may vary from these projections. The recovery of DAC and
VOBA is dependent upon the future profitability of the related business. DAC and
VOBA are aggregated in the financial statements for reporting purposes.
DAC related to internally replaced contracts are generally expensed at the
date of replacement.
F-13
METLIFE INSURANCE COMPANY OF CONNECTICUT
(A Wholly-Owned Subsidiary of MetLife, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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, morbidity, persistency, and investment returns at policy
issuance, or policy acquisition as it relates to VOBA, that include provisions
for adverse deviation and are consistent with the assumptions used to calculate
future policyholder benefit liabilities. These assumptions are not revised after
policy issuance or acquisition unless the DAC or VOBA balance is deemed to be
unrecoverable from future expected profits. Absent a premium deficiency,
variability in amortization after policy issuance or acquisition is caused only
by variability in premium volumes.
The Company amortizes DAC and VOBA related to 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
F-14
METLIFE INSURANCE COMPANY OF CONNECTICUT
(A Wholly-Owned Subsidiary of MetLife, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
a specified percentage of the customer's deposit; and (ii) the policyholder
receives a higher interest rate using a dollar cost averaging method than would
have been received based on the normal general account interest rate credited.
The Company defers sales inducements and amortizes them over the life of the
policy using the same methodology and assumptions used to amortize DAC.
Goodwill
Goodwill is the excess of cost over the fair value of net assets acquired.
Goodwill is not amortized but is tested for impairment at least annually or more
frequently if events or circumstances, such as adverse changes in the business
climate, indicate that there may be justification for conducting an interim
test. Impairment testing is performed using the fair value approach, which
requires the use of estimates and judgment, at the "reporting unit" level. A
reporting unit is the operating segment or a business one level below the
operating segment, if discrete financial information is prepared and regularly
reviewed by management at that level. For purposes of goodwill impairment
testing, goodwill within Corporate & Other is allocated to reporting units
within the Company's business segments. If the carrying value of a reporting
unit's goodwill exceeds its fair value, the excess is recognized as an
impairment and recorded as a charge against net income. The fair values of the
reporting units are determined using a market multiple and a 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, traditional annuities and non-
medical health insurance. Generally, amounts are payable over an extended period
of time and related liabilities are calculated as the present value of future
expected benefits to be paid reduced by the present value of future expected
premiums. Such liabilities are established based on methods and underlying
assumptions in accordance with GAAP and applicable actuarial standards.
Principal assumptions used in the establishment of liabilities for future policy
benefits are mortality, morbidity, policy lapse, renewal, retirement, 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. Interest
rates for future policy benefit liabilities on non-participating traditional
life insurance range from 4% to 7%.
Future policy benefit liabilities for individual and group traditional
fixed annuities after annuitization are equal to the present value of expected
future payments. Interest rates used in establishing such liabilities range from
3% to 9%.
Future policy benefit liabilities for non-medical health insurance are
calculated using the net level premium method and assumptions as to future
morbidity, withdrawals and interest, which provide a margin for adverse
deviation. The interest rate used in establishing such liabilities is 4%.
Future policy benefit liabilities for disabled lives are estimated using
the present value of benefits method and experience assumptions as to claim
terminations, expenses and interest. The interest rate used in establishing such
liabilities is 4%.
Liabilities for unpaid claims and claim expenses for the Company's workers'
compensation business are included in future policyholder benefits and are
estimated based upon the Company's historical experience and other actuarial
assumptions that consider the effects of current developments, anticipated
trends and risk
F-15
METLIFE INSURANCE COMPANY OF CONNECTICUT
(A Wholly-Owned Subsidiary of MetLife, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
management programs, reduced for anticipated subrogation. The effects of changes
in such estimated liabilities are included in the results of operations in the
period in which the changes occur.
The Company establishes future policy benefit liabilities for minimum death
and income 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.
- Guaranteed income benefit ("GMIB") liabilities are determined by
estimating the expected value of the income benefits in excess of the
projected account balance at any future date of annuitization and
recognizing the excess ratably over the accumulation period based on
total expected assessments. The Company regularly evaluates estimates
used and adjusts the additional liability balance, with a related charge
or credit to benefit expense, if actual experience or other evidence
suggests that earlier assumptions should be revised. The assumptions used
for estimating the GMIB liabilities are consistent with those used for
estimating the GMDB liabilities. In addition, the calculation of
guaranteed annuitization benefit liabilities incorporates an assumption
for the percentage of the potential annuitizations that may be elected by
the contractholder.
- Liabilities for universal and variable life secondary guarantees are
determined by estimating the expected value of death benefits payable
when the account balance is projected to be zero and recognizing those
benefits ratably over the accumulation period based on total expected
assessments. The Company regularly evaluates estimates used and adjusts
the additional liability balances, with a related charge or credit to
benefit expense, if actual experience or other evidence suggests that
earlier assumptions should be revised. The assumptions used in estimating
the secondary and paid up guarantee liabilities are consistent with those
used for amortizing DAC, and are thus subject to the same variability and
risk. The assumptions of investment performance and volatility for
variable products are consistent with historical S&P experience. The
benefits used in calculating the liabilities are based on the average
benefits payable over a range of scenarios.
The Company establishes policyholder account balances ("PAB") for
guaranteed minimum benefit riders relating to certain variable annuity products
as follows:
- Guaranteed minimum withdrawal benefit riders ("GMWB") guarantee the
contractholder a return of their purchase payment via partial
withdrawals, even if the account value is reduced to zero, provided that
the contractholder's cumulative withdrawals in a contract year do not
exceed a certain limit. The initial guaranteed withdrawal amount is equal
to the initial benefit base as defined in the contract (typically, the
initial purchase payments plus applicable bonus amounts). The GMWB is an
embedded derivative, which is measured at fair value separately from the
host variable annuity product.
- Guaranteed minimum accumulation benefit riders ("GMAB") provide the
contractholder, after a specified period of time determined at the time
of issuance of the variable annuity contract, with a minimum accumulation
of their purchase payments even if the account value is reduced to zero.
The initial guaranteed accumulation amount is equal to the initial
benefit base as defined in the contract (typically, the initial
F-16
METLIFE INSURANCE COMPANY OF CONNECTICUT
(A Wholly-Owned Subsidiary of MetLife, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 in liabilities for
future policy benefits, negatively affecting net income.
The Company issues both GMWBs and GMABs directly and assumes risk relating
to GMWBs and GMABs issued by an affiliate through a financing agreement. Some of
the risks associated with GMWBs and GMABs directly written and assumed were
transferred to a different affiliate through another financing agreement and
included in premiums and other receivables.
The Company periodically reviews its estimates of actuarial liabilities for
future policy benefits and compares them with its actual experience. Differences
between actual experience and the assumptions used in pricing these policies,
guarantees and riders and in the establishment of the related liabilities result
in variances in profit and could result in losses. The effects of changes in
such estimated liabilities are included in the results of operations in the
period in which the changes occur.
PABs relate to investment-type contracts and universal life-type policies.
Investment-type contracts principally include traditional individual fixed
annuities in the accumulation phase and non-variable group annuity contracts.
PABs are equal to: (i) policy account values, which consist of an accumulation
of gross premium payments; (ii) credited interest, ranging from 0.5% to 12%,
less expenses, mortality charges, and withdrawals; and (iii) fair value purchase
accounting adjustments relating to the Acquisition.
Other Policyholder Funds
Other policyholder funds include policy and contract claims and unearned
revenue liabilities.
The liability for policy and contract claims generally relates to incurred
but not reported death, disability, and long-term care 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.
F-17
METLIFE INSURANCE COMPANY OF CONNECTICUT
(A Wholly-Owned Subsidiary of MetLife, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Recognition of Insurance Revenue and Related Benefits
Premiums related to traditional life and annuity policies with life
contingencies are recognized as revenues when due from policyholders.
Policyholder benefits and expenses are provided against such revenues to
recognize profits over the estimated lives of the policies. When premiums are
due over a significantly shorter period than the period over which benefits are
provided, any excess profit is deferred and recognized into operations in a
constant relationship to insurance in-force or, for annuities, the amount of
expected future policy benefit payments. Premiums related to non-medical health
and disability contracts are recognized on a pro rata basis over the applicable
contract term.
Deposits related to universal life-type and investment-type products are
credited to PABs. Revenues from such contracts consist of amounts assessed
against PABs for mortality, policy administration and surrender charges and are
recorded in universal life and investment-type product policy fees in the period
in which services are provided. Amounts that are charged to operations include
interest credited and benefit claims incurred in excess of related PABs.
Premiums related to workers' compensation contracts are recognized as
revenue on a pro rata basis over the applicable contract term.
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 and its includable life insurance subsidiaries file a
consolidated U.S. federal income tax return in accordance with the provisions of
the Internal Revenue Code of 1986, as amended ("Code"). Non-includable
subsidiaries file either a separate individual corporate tax return or a
separate consolidated tax return. Prior to the transfer of MLI-USA to MetLife
Connecticut, MLI-USA joined MetLife's includable affiliates in filing a federal
income tax return. MLI-USA joined MetLife Connecticut's includable affiliates as
of October 11, 2006.
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 parent, MetLife. As a result
of this election, the tax basis in the acquired assets and 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
F-18
METLIFE INSURANCE COMPANY OF CONNECTICUT
(A Wholly-Owned Subsidiary of MetLife, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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:
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(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 both a provider and 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 (received), and the liabilities ceded (assumed) related to the underlying
contracts is considered the net cost of reinsurance at the inception of the
contract. The net cost of reinsurance is recorded as an adjustment to DAC and
recognized as a component of other expenses on a basis consistent with the way
the acquisition costs on the underlying reinsured contracts would be recognized.
Subsequent amounts paid (received) on the reinsurance of in-force blocks, as
well as amounts paid (received) related to new business, are recorded as ceded
(assumed) premiums and ceded (assumed) future policy benefit liabilities are
established.
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 contracts
with the same reinsurer may be recorded net on the balance sheet, if a right of
offset exists within the reinsurance contract.
Premiums, fees and policyholder benefits and claims include amounts assumed
under reinsurance contracts and are net of reinsurance ceded.
If the Company determines that a reinsurance contract does not expose the
reinsurer to a reasonable possibility of a significant loss from insurance risk,
the Company records the contract as a deposit, net of related expenses. Deposits
received are included in other liabilities and deposits made are included within
other assets. As amounts
F-19
METLIFE INSURANCE COMPANY OF CONNECTICUT
(A Wholly-Owned Subsidiary of MetLife, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
are paid or received, consistent with the underlying contracts, the deposit
assets or liabilities are adjusted. Interest on such deposits is recorded as
other revenue or other expenses, as appropriate. Periodically, the Company
evaluates the adequacy of the expected payments or recoveries and adjusts the
deposit asset or liability through other revenue or other expenses, as
appropriate.
Amounts received from reinsurers for policy administration are reported in
other revenues.
Accounting for reinsurance requires extensive use of assumptions and
estimates, particularly related to the future performance of the underlying
business and the potential impact of counterparty credit risks. The Company
periodically reviews actual and anticipated experience compared to the
aforementioned assumptions used to establish assets and liabilities relating to
ceded and assumed reinsurance and evaluates the financial strength of
counterparties to its reinsurance agreements using criteria similar to that
evaluated in the security impairment process discussed previously.
Separate Accounts
Separate accounts are established in conformity with insurance laws and are
generally not chargeable with liabilities that arise from any other business of
the Company. Separate account assets are subject to general account claims only
to the extent the value of such assets exceeds the separate account liabilities.
The Company reports separately, as assets and liabilities, investments held in
separate accounts and liabilities of the separate accounts if (i) such separate
accounts are legally recognized; (ii) assets supporting the contract liabilities
are legally insulated from the Company's general account liabilities; (iii)
investments are directed by the contractholder; and (iv) all investment
performance, net of contract fees and assessments, is passed through to the
contractholder. The Company reports separate account assets meeting such
criteria at their fair value. Investment performance (including investment
income, net investment gains (losses) and changes in unrealized gains (losses))
and the corresponding amounts credited to contractholders of such separate
accounts are offset within the same line in the consolidated statements of
income.
The Company's revenues reflect fees charged to the separate accounts,
including mortality charges, risk charges, policy administration fees,
investment management fees and surrender charges. Separate accounts not meeting
the above criteria are combined on a line-by-line basis with the Company's
general account assets, liabilities, revenues and expenses.
Employee Benefit Plans
Eligible employees, sales representatives and retirees of the Company are
provided pension, postretirement and postemployment benefits under plans
sponsored and administered by Metropolitan Life Insurance Company ("Metropolitan
Life"), an affiliate of the Company. The Company's obligation and expense
related to these benefits is limited to the amount of associated expense
allocated from Metropolitan Life.
Foreign Currency
Balance sheet accounts are translated at the exchange rates in effect at
each year-end and income and expense accounts are translated at the average
rates of exchange prevailing during the year. Translation adjustments are
charged or credited directly to other comprehensive income or loss. Gains and
losses from foreign currency transactions are reported as net investment gains
(losses) in the period in which they occur.
Discontinued Operations
The results of operations of a component of the Company that either has
been disposed of or is classified as held-for-sale are reported in discontinued
operations if the operations and cash flows of the component have been or will
be eliminated from the ongoing operations of the Company as a result of the
disposal transaction and the
F-20
METLIFE INSURANCE COMPANY OF CONNECTICUT
(A Wholly-Owned Subsidiary of MetLife, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Company will not have any significant continuing involvement in the operations
of the component after the disposal transaction.
Litigation Contingencies
The Company is a party to a number of legal actions and 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.
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 No. 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:
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(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.
F-21
METLIFE INSURANCE COMPANY OF CONNECTICUT
(A Wholly-Owned Subsidiary of MetLife, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
- Effective January 1, 2006, the Company adopted prospectively SFAS 133
Implementation Issue No. B38, Embedded Derivatives: Evaluation of Net
Settlement with Respect to the Settlement of a Debt Instrument through
Exercise of an Embedded Put Option or Call Option ("Issue B38") and SFAS
133 Implementation Issue No. B39, Embedded Derivatives: Application of
Paragraph 13(b) to Call Options That Are Exercisable Only by the Debtor
("Issue B39"). Issue B38 clarifies that the potential settlement of a
debtor's obligation to a creditor occurring upon exercise of a put or
call option meets the net settlement criteria of SFAS 133. Issue B39
clarifies that an embedded call option, in which the underlying is an
interest rate or interest rate index, that can accelerate the settlement
of a debt host financial instrument should not be bifurcated and fair
valued if the right to accelerate the settlement can be exercised only by
the debtor (issuer/borrower) and the investor will recover substantially
all of its initial net investment. The adoption of Issues B38 and B39 did
not have a material impact on the Company's consolidated financial
statements.
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
F-22
METLIFE INSURANCE COMPANY OF CONNECTICUT
(A Wholly-Owned Subsidiary of MetLife, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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.
In June 2005, the FASB completed its review of EITF Issue No. 03-1, The
Meaning of Other-Than-Temporary Impairment and Its Application to Certain
Investments ("EITF 03-1"). EITF 03-1 provides accounting guidance regarding the
determination of when an impairment of debt and marketable equity securities and
investments accounted for under the cost method should be considered other-than-
temporary and recognized in income. EITF 03-1 also requires certain quantitative
and qualitative disclosures for debt and marketable equity securities classified
as available-for-sale or held-to-maturity under SFAS No. 115, Accounting for
Certain Investments in Debt and Equity Securities, that are impaired at the
balance sheet date but for which an other-than-temporary impairment has not been
recognized. The FASB decided not to provide additional guidance on the meaning
of other-than-temporary impairment but has issued FSP Nos. FAS 115-1 and FAS
124-1, The Meaning of Other-Than-Temporary Impairment and its Application to
Certain Investments ("FSP 115-1"), which nullifies the accounting guidance on
the determination of whether an investment is other-than-temporarily impaired as
set forth in EITF 03-1. As required by FSP 115-1, the Company adopted this
guidance on a prospective basis, which had no material impact on the Company's
consolidated financial statements, and has provided the required disclosures.
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. 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 ("FSP 97-1"). SOP 03-1 provides
guidance on: (i) the classification and valuation of long-duration contract
liabilities; (ii) the accounting for sales inducements; and (iii) separate
account presentation and valuation. As a result of the adoption of SOP 03-1,
effective January 1, 2004, the Company decreased the liability for future
policyholder benefits for changes in the methodology relating to various
guaranteed death and annuitization benefits and for determining liabilities for
certain universal life insurance contracts by $2 million, which was reported as
a cumulative effect of a change in accounting. This amount is net of
corresponding changes in DAC, including unearned revenue liability, under
certain variable annuity and life contracts and income tax. The application of
SOP 03-1 increased the Company's 2004 net income by $3 million, including the
cumulative effect of the adoption.
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
F-23
METLIFE INSURANCE COMPANY OF CONNECTICUT
(A Wholly-Owned Subsidiary of MetLife, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 is to be
applied retrospectively as of the beginning of initial adoption (a limited form
of retrospective application). The Company is currently evaluating the impact of
SFAS 157 on the Company's consolidated financial statements. Implementation of
SFAS 157 will require additional disclosures in the Company's consolidated
financial statements.
In 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. It is
effective for internal replacements occurring in fiscal years beginning after
December 15, 2006.
In addition, in February 2007, related TPAs were issued by the AICPA to
provide further clarification of SOP 05-1. The TPAs are effective concurrently
with the adoption of the SOP. Based on the Company's interpretation of SOP 05-1
and related TPAs, the adoption of SOP 05-1 will result in a reduction to DAC and
VOBA relating primarily to the Company's group life and health insurance
contracts that contain certain rate reset provisions. The Company estimates that
the adoption of SOP 05-1 as of January 1, 2007 will result in a cumulative
effect adjustment of between $75 million and $95 million, net of income tax,
which will be recorded as a reduction
F-24
METLIFE INSURANCE COMPANY OF CONNECTICUT
(A Wholly-Owned Subsidiary of MetLife, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
to retained earnings. In addition, the Company estimates that accelerated DAC
and VOBA amortization will reduce 2007 net income by approximately $5 million to
$15 million, net of income tax.
2. ACQUISITION OF METLIFE INSURANCE COMPANY OF CONNECTICUT BY METLIFE, INC.
FROM CITIGROUP INC.
On the Acquisition Date, MetLife Connecticut became a subsidiary of
MetLife. MetLife Connecticut, together with 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. Prior to the Acquisition, MetLife Connecticut was a subsidiary of
Citigroup Insurance Holding Company ("CIHC"). Primerica was distributed via
dividend from MetLife Connecticut to CIHC on June 30, 2005 in contemplation of
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 MetLife Connecticut be identified and measured at their fair
value as of the acquisition date.
Final Purchase Price Allocation and Goodwill
The purchase price paid by MetLife 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 MetLife Connecticut
increased by $40 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 MetLife Connecticut of $40 million, an increase of
$15 million in the value of the future policy benefit liabilities and other
policyholder funds resulting from the finalization of the evaluation of the
Travelers underwriting criteria, an increase in securities of $24 million
resulting from the finalization of the determination of the fair value of such
securities, an increase in other liabilities of $2 million due to the receipt of
additional information, all resulting in a net impact of the aforementioned
adjustments increasing deferred income tax assets by $4 million. Goodwill
increased by $29 million as a consequence of such revisions to the purchase
price and the purchase price allocation.
F-25
METLIFE INSURANCE COMPANY OF CONNECTICUT
(A Wholly-Owned Subsidiary of MetLife, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
[Enlarge/Download Table]
AS OF JULY 1, 2005
------------------
(IN MILLIONS)
TOTAL PURCHASE PRICE PAID BY METLIFE....................... $12,084
Purchase price attributed to other affiliates............ 5,260
-------
Purchase price attributed to MetLife Connecticut......... 6,824
NET ASSETS OF METLIFE CONNECTICUT ACQUIRED PRIOR TO
PURCHASE ACCOUNTING ADJUSTMENTS.......................... $8,207
ADJUSTMENTS TO REFLECT ASSETS ACQUIRED AT FAIR VALUE:
Fixed maturity securities available-for-sale............. (2)
Mortgage loans on real estate............................ 72
Real estate and real estate joint ventures held-for-
investment............................................ 39
Other limited partnership interests...................... 48
Other invested assets.................................... (36)
Premiums and other receivables........................... 1,001
Elimination of historical deferred policy acquisition
costs................................................. (3,052)
Value of business acquired............................... 3,490
Value of distribution agreements and customer
relationships acquired................................ 73
Net deferred income tax asset............................ 1,751
Elimination of historical goodwill....................... (196)
Other assets............................................. (11)
ADJUSTMENTS TO REFLECT LIABILITIES ASSUMED AT FAIR VALUE:
Future policy benefits................................... (3,766)
Policyholder account balances............................ (1,870)
Other liabilities........................................ 191
------
NET FAIR VALUE OF ASSETS ACQUIRED AND LIABILITIES ASSUMED.. 5,939
-------
GOODWILL RESULTING FROM THE ACQUISITION ATTRIBUTED TO
METLIFE CONNECTICUT...................................... $ 885
=======
Goodwill resulting from the Acquisition has been allocated to the Company's
segments, as well as Corporate & Other, as follows:
[Download Table]
AS OF JULY 1, 2005
------------------
(IN MILLIONS)
Institutional.................................................... $312
Individual....................................................... 163
Corporate & Other................................................ 410
----
TOTAL.......................................................... $885
====
The entire amount of goodwill is expected to be deductible for income tax
purposes.
F-26
METLIFE INSURANCE COMPANY OF CONNECTICUT
(A Wholly-Owned Subsidiary of MetLife, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED STATEMENT OF NET ASSETS ACQUIRED
The condensed statement of net assets acquired reflects the fair value of
MetLife Connecticut's net assets as follows:
[Download Table]
AS OF JULY 1, 2005
------------------
(IN MILLIONS)
ASSETS
Fixed maturity securities available-for-sale................... $41,210
Trading securities............................................. 555
Equity securities available-for-sale........................... 641
Mortgage loans on real estate.................................. 2,363
Policy loans................................................... 884
Real estate and real estate joint ventures held-for-
investment.................................................. 126
Other limited partnership interests............................ 1,120
Short-term investments......................................... 2,225
Other invested assets.......................................... 1,205
-------
Total investments........................................... 50,329
Cash and cash equivalents...................................... 443
Accrued investment income...................................... 494
Premiums and other receivables................................. 4,688
Value of business acquired..................................... 3,490
Goodwill....................................................... 885
Other intangible assets........................................ 73
Deferred income tax asset...................................... 1,178
Other assets................................................... 730
Separate account assets........................................ 30,427
-------
Total assets acquired....................................... 92,737
-------
LIABILITIES:
Future policy benefits......................................... 17,565
Policyholder account balances.................................. 34,251
Other policyholder funds....................................... 115
Current income tax............................................. 36
Other liabilities.............................................. 3,519
Separate account liabilities................................... 30,427
-------
Total liabilities assumed................................... 85,913
-------
Net assets acquired......................................... $ 6,824
=======
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
F-27
METLIFE INSURANCE COMPANY OF CONNECTICUT
(A Wholly-Owned Subsidiary of MetLife, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
business, of future policy and contract charges, premiums, mortality and
morbidity, separate account performance, surrenders, operating expenses,
investment returns and other factors. Actual experience on the purchased
business may vary from these projections. 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 MetLife Connecticut's distribution agreements and customer
relationships 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 or with customer relationships differs from
expectations, the amortization of these intangibles will be adjusted to reflect
actual experience. See Notes 8 and 14 for additional information on the value of
distribution agreements ("VODA") acquired from Citigroup.
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, distribution agreements and customer
relationships acquired are as follows:
[Enlarge/Download Table]
WEIGHTED AVERAGE
AS OF JULY 1, 2005 AMORTIZATION PERIOD
------------------ -------------------
(IN MILLIONS) (IN YEARS)
Value of business acquired.......................... $3,490 16
Value of distribution agreements and customer
relationships acquired............................ 73 16
------
Total value of intangible assets acquired,
excluding goodwill............................. $3,563 16
======
3. CONTRIBUTION OF METLIFE CONNECTICUT FROM METLIFE, INC.
On October 11, 2006, MetLife Connecticut and MetLife Investors Group, Inc.
("MLIG"), both subsidiaries of MetLife, entered into a Transfer Agreement
("Transfer Agreement"), pursuant to which MetLife Connecticut agreed to acquire
all of the outstanding stock of MLI-USA from MLIG in exchange for shares of
MetLife Connecticut's common stock. To effectuate the exchange of shares,
MetLife returned 10,000,000 shares just prior to the closing of the transaction
and retained 30,000,000 shares representing 100% of the then issued and
outstanding shares of MetLife Connecticut. MetLife Connecticut issued 4,595,317
new shares to MLIG in exchange for all of the outstanding common stock of MLI-
USA. After the closing of the transaction, 34,595,317 shares of MetLife
Connecticut's common stock are outstanding, of which MLIG holds 4,595,317
shares, with the remaining shares held by MetLife.
In connection with the Transfer Agreement on October 11, 2006, MLIG
transferred to MetLife Connecticut certain assets and liabilities, including
goodwill, VOBA and deferred income tax liabilities, which remain outstanding
from MetLife's acquisition of MLIG on October 30, 1997. The assets and
liabilities have been included in the financial data of the Company for all
periods presented.
The transfer of MLI-USA to MetLife Connecticut was a transaction between
entities under common control. Since MLI-USA was the original entity under
common control, for financial statement reporting purposes, MLI-USA is
considered the accounting acquirer of MetLife Connecticut. Accordingly, all
financial data included in these financial statements periods prior to July 1,
2005 is that of MLI-USA. For periods subsequent to July 1, 2005, MetLife
Connecticut has been combined with MLI-USA in a manner similar to a pooling of
interests. Information
F-28
METLIFE INSURANCE COMPANY OF CONNECTICUT
(A Wholly-Owned Subsidiary of MetLife, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
regarding the consolidated statements of income of the Company for the years
ended December 31, 2006 and 2005 is as follows:
[Enlarge/Download Table]
UNAUDITED
------------------
THREE MONTHS ENDED YEAR ENDED
UNAUDITED DECEMBER 31, 2006 DECEMBER 31, 2006
-------------------------------------------------------------- ------------------ -----------------
NINE MONTHS ENDED SEPTEMBER 30, 2006
--------------------------------------------------------------
ASSETS AND LIABILITIES
OUTSTANDING
FROM METLIFE'S
ACQUISITION CONSOLIDATED
MICC HISTORICAL MLI-USA OF MLIG COMPANY CONSOLIDATED COMPANY
--------------- ------- ---------------------- ------------ -------------------------------------
(IN MILLIONS)
Total revenues......... $2,509 $623 $-- $3,132 $974 $4,106
Total expenses......... $1,905 $486 $-- $2,391 $890 $3,281
------ ---- --- ------ ---- ------
Income before provision
for income tax....... 604 137 -- 741 $ 84 825
Provision for income
tax.................. 177 35 -- 212 $ 16 228
------ ---- --- ------ ---- ------
Net income............. $ 427 $102 $-- $ 529 $ 68 $ 597
====== ==== === ====== ==== ======
[Enlarge/Download Table]
YEAR ENDED DECEMBER 31, 2005
-----------------------------------------------
ASSETS AND LIABILITIES
SIX MONTHS ENDED OUTSTANDING
DECEMBER 31, 2005 FROM METLIFE'S
----------------- ACQUISITION CONSOLIDATED
MICC HISTORICAL MLI-USA OF MLIG COMPANY
----------------- ------- ---------------------- ------------
(IN MILLIONS)
Total revenues..................... $1,749 $766 $-- $2,515
Total expenses..................... $1,410 $561 $(3) $1,968
------ ---- --- ------
Income before provision for income
tax.............................. 339 205 3 547
Provision for income tax........... 98 57 1 156
------ ---- --- ------
Net income......................... $ 241 $148 $ 2 $ 391
====== ==== === ======
The par value of the common stock presented in the statement of
stockholders' equity for periods prior to the Acquisition Date has been adjusted
to reflect the par value of the MetLife Connecticut shares issued to MLIG in
exchange for MLI-USA's common stock. Information regarding the adjustments to
stockholders' equity is as follows:
[Enlarge/Download Table]
ACCUMULATED
OTHER
COMPREHENSIVE
INCOME
----------------
ADDITIONAL NET UNREALIZED
COMMON PAID IN RETAINED INVESTMENT GAINS
STOCK CAPITAL EARNINGS (LOSSES) TOTAL
------ ---------- -------- ---------------- -----
Balance of MLI-USA's equity at January 1,
2004 $ 2 $ 98 $163 $39 $302
Issuance of MetLife Connecticut's common
stock to MLIG 11 (1) (11) -- -- --
Elimination of MLI-USA's common stock (2) (2) 2 -- -- --
Assets and liabilities outstanding from
MetLife's acquisition of MLIG -- 82 -- (7) 75
--- ---- ---- --- ----
Balance of MICC's equity at January 1, 2004 $11 $171 $163 $32 $377
=== ==== ==== === ====
F-29
METLIFE INSURANCE COMPANY OF CONNECTICUT
(A Wholly-Owned Subsidiary of MetLife, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
--------
(1) Represents the issuance of 4,595,317 shares of MetLife Connecticut's
common stock, at $2.50 par value, by MetLife Connecticut to MLIG in
exchange for all the outstanding common stock of MLI-USA, for a total
adjustment of $11 million.
(2) Represents the elimination of MLI-USA's common stock of $2 million.
The par value of the MetLife Connecticut common stock purchased by MetLife has
been adjusted to reflect the return of the MetLife Connecticut common stock by
MetLife in connection with the transfer of MetLife Connecticut to MLI-USA as
follows:
[Enlarge/Download Table]
ACCUMULATED
OTHER
COMPREHENSIVE
INCOME
----------------
ADDITIONAL NET UNREALIZED
COMMON PAID IN RETAINED INVESTMENT GAINS
STOCK CAPITAL EARNINGS (LOSSES) TOTAL
------ ---------- -------- ---------------- ------
MetLife Connecticut's common stock
purchased by MetLife in the Acquisition
on July 1, 2005 $100 $6,684 $-- $-- $6,784
Return of MetLife Connecticut's common
stock from MetLife (25) (1) 25 -- -- --
---- ------ --- --- ------
MetLife Connecticut's common stock
purchased by MetLife on July 1, 2005, as
adjusted $ 75 $6,709 $-- $-- $6,784
==== ====== === === ======
--------
(1) Represents the return of 10,000,000 shares of MetLife Connecticut's
common stock, at $2.50 par value, by MetLife to MetLife Connecticut in
anticipation of the acquisition of MLI-USA by MetLife Connecticut, for a
total adjustment of $25 million.
The following unaudited pro forma condensed consolidated financial
information presents the results of operations for the Company assuming the
MetLife Connecticut acquisition had been effected as of January 1, 2005. This
unaudited pro forma information does not necessarily represent what the
Company's actual results of operations would have been if the acquisition had
occurred as of the date indicated or what such results would be for any future
periods.
[Enlarge/Download Table]
UNAUDITED
------------------------------------
YEAR ENDED SIX MONTHS ENDED YEAR ENDED
DECEMBER 31, 2005 JUNE 30, 2005 DECEMBER 31, 2005
----------------- ---------------- -----------------
CONSOLIDATED PRO FORMA PRO FORMA
MICC
COMPANY HISTORICAL MICC
----------------- ---------------- -----------------
(IN MILLIONS)
Total revenues $2,515 $2,324 $4,839
Total expenses $1,968 $1,523 $3,491
------ ------ ------
Income before provision for income tax 547 801 1,348
Provision for income tax 156 226 382
------ ------ ------
Net income $ 391 $ 575 $ 966
====== ====== ======
F-30
METLIFE INSURANCE COMPANY OF CONNECTICUT
(A Wholly-Owned Subsidiary of MetLife, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
4. 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:
[Enlarge/Download Table]
DECEMBER 31, 2006
----------------------------------------------
GROSS
COST OR UNREALIZED
AMORTIZED ------------- ESTIMATED % OF
COST GAIN LOSS FAIR VALUE TOTAL
--------- ---- ---- ---------- -----
(IN MILLIONS)
U.S. corporate securities.................... $17,331 $101 $424 $17,008 35.5%
Residential mortgage-backed securities....... 11,951 40 78 11,913 24.9
Foreign corporate securities................. 5,563 64 128 5,499 11.5
U.S. Treasury/agency securities.............. 5,455 7 126 5,336 11.2
Commercial mortgage-backed securities........ 3,353 19 47 3,325 6.9
Asset-backed securities...................... 3,158 14 10 3,162 6.6
State and political subdivision securities... 1,062 6 38 1,030 2.2
Foreign government securities................ 533 45 5 573 1.2
------- ---- ---- ------- -----
Total fixed maturity securities............ $48,406 $296 $856 $47,846 100.0%
======= ==== ==== ======= =====
Non-redeemable preferred stock............... $ 671 $ 22 $ 9 $ 684 86.0%
Common stock................................. 106 6 1 111 14.0
------- ---- ---- ------- -----
Total equity securities.................... $ 777 $ 28 $ 10 $ 795 100.0%
======= ==== ==== ======= =====
[Enlarge/Download Table]
DECEMBER 31, 2005
----------------------------------------------
GROSS
COST OR UNREALIZED
AMORTIZED ------------- ESTIMATED % OF
COST GAIN LOSS FAIR VALUE TOTAL
--------- ---- ---- ---------- -----
(IN MILLIONS)
U.S. corporate securities.................... $18,416 $ 96 $415 $18,097 34.3%
Residential mortgage-backed securities....... 12,398 17 131 12,284 23.4
Foreign corporate securities................. 5,733 50 143 5,640 10.7
U.S. Treasury/agency securities.............. 6,448 24 61 6,411 12.2
Commercial mortgage-backed securities........ 5,157 12 82 5,087 9.7
Asset-backed securities...................... 3,899 10 16 3,893 7.4
State and political subdivision securities... 633 -- 25 608 1.2
Foreign government securities................ 547 25 3 569 1.1
------- ---- ---- ------- -----
Total fixed maturity securities............ $53,231 $234 $876 $52,589 100.0%
======= ==== ==== ======= =====
Non-redeemable preferred stock............... $ 327 $ 1 $ 5 $ 323 76.7%
Common stock................................. 97 4 3 98 23.3
------- ---- ---- ------- -----
Total equity securities.................... $ 424 $ 5 $ 8 $ 421 100.0%
======= ==== ==== ======= =====
F-31
METLIFE INSURANCE COMPANY OF CONNECTICUT
(A Wholly-Owned Subsidiary of MetLife, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company held foreign currency derivatives with notional amounts of $472
million and $275 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 $3.2 billion and $3.3 billion at December 31, 2006 and 2005,
respectively. These securities had a net unrealized gain (loss) of $51 million
and ($33) million at December 31, 2006 and 2005, respectively. Non-income
producing fixed maturity securities were $6 million and $3 million at December
31, 2006 and 2005, respectively. Unrealized gains (losses) associated with non-
income producing fixed maturity securities were $1 million and ($5) 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:
[Enlarge/Download Table]
DECEMBER 31,
-----------------------------------------------
2006 2005
---------------------- ----------------------
COST OR COST OR
AMORTIZED ESTIMATED AMORTIZED ESTIMATED
COST FAIR VALUE COST FAIR VALUE
--------- ---------- --------- ----------
(IN MILLIONS)
Due in one year or less....................... $ 1,620 $ 1,616 $ 1,411 $ 1,405
Due after one year through five years......... 9,843 9,733 10,594 10,490
Due after five years through ten years........ 7,331 7,226 9,556 9,382
Due after ten years........................... 11,150 10,871 10,216 10,048
------- ------- ------- -------
Subtotal.................................... 29,944 29,446 31,777 31,325
Mortgage-backed and asset-backed securities... 18,462 18,400 21,454 21,264
------- ------- ------- -------
Total fixed maturity securities............. $48,406 $47,846 $53,231 $52,589
======= ======= ======= =======
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:
[Enlarge/Download Table]
YEARS ENDED DECEMBER 31,
-----------------------------------------
2006 2005 2004
------------ -------------- ---------
(IN MILLIONS)
Proceeds........................................ $ 23,901 $ 22,241 $ 473
Gross investment gains.......................... $ 73 $ 48 $ 6
Gross investment losses......................... $ (519) $ (347) $(10)
F-32
METLIFE INSURANCE COMPANY OF CONNECTICUT
(A Wholly-Owned Subsidiary of MetLife, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
UNREALIZED LOSS FOR FIXED MATURITY AND EQUITY SECURITIES AVAILABLE-FOR-SALE
The following tables present the estimated fair values and gross unrealized
loss of the Company's fixed maturity securities (aggregated by sector) and
equity securities in an unrealized loss position, aggregated by length of time
that the securities have been in a continuous unrealized loss position at:
[Enlarge/Download Table]
DECEMBER 31, 2006
----------------------------------------------------------------------
EQUAL TO OR GREATER
LESS THAN 12 MONTHS THAN 12 MONTHS TOTAL
---------------------- ---------------------- ----------------------
GROSS GROSS GROSS
ESTIMATED UNREALIZED ESTIMATED UNREALIZED ESTIMATED UNREALIZED
FAIR VALUE LOSS FAIR VALUE LOSS FAIR VALUE LOSS
---------- ---------- ---------- ---------- ---------- ----------
(IN MILLIONS, EXCEPT NUMBER OF SECURITIES)
U.S. corporate securities........... $ 4,895 $104 $ 7,543 $320 $12,438 $424
Residential mortgage-backed
securities........................ 4,113 20 3,381 58 7,494 78
Foreign corporate securities........ 1,381 29 2,547 99 3,928 128
U.S. Treasury/agency securities..... 2,995 48 1,005 78 4,000 126
Commercial mortgage-backed
securities........................ 852 6 1,394 41 2,246 47
Asset-backed securities............. 965 3 327 7 1,292 10
State and political subdivision
securities........................ 29 2 414 36 443 38
Foreign government securities....... 51 1 92 4 143 5
------- ---- ------- ---- ------- ----
Total fixed maturity securities..... $15,281 $213 $16,703 $643 $31,984 $856
======= ==== ======= ==== ======= ====
Equity securities................... $ 149 $ 3 $ 188 $ 7 $ 337 $ 10
======= ==== ======= ==== ======= ====
Total number of securities in an
unrealized loss position.......... 1,955 2,318 4,273
======= ======= =======
[Enlarge/Download Table]
DECEMBER 31, 2005
----------------------------------------------------------------------
EQUAL TO OR GREATER
LESS THAN 12 MONTHS THAN 12 MONTHS TOTAL
---------------------- ---------------------- ----------------------
GROSS GROSS GROSS
ESTIMATED UNREALIZED ESTIMATED UNREALIZED ESTIMATED UNREALIZED
FAIR VALUE LOSS FAIR VALUE LOSS FAIR VALUE LOSS
---------- ---------- ---------- ---------- ---------- ----------
(IN MILLIONS, EXCEPT NUMBER OF SECURITIES)
U.S. corporate securities........... $14,412 $413 $ 40 $ 2 $14,452 $415
Residential mortgage-backed
securities........................ 9,142 129 61 2 9,203 131
Foreign corporate securities........ 4,409 142 23 1 4,432 143
U.S. Treasury/agency securities..... 4,171 61 -- -- 4,171 61
Commercial mortgage-backed
securities........................ 4,040 82 5 -- 4,045 82
Asset-backed securities............. 1,890 16 11 -- 1,901 16
State and political subdivision
securities........................ 550 25 -- -- 550 25
Foreign government securities....... 155 3 2 -- 157 3
------- ---- ---- --- ------- ----
Total fixed maturity securities..... $38,769 $871 $142 $ 5 $38,911 $876
======= ==== ==== === ======= ====
Equity securities................... $ 214 $ 8 $ -- $-- $ 214 $ 8
======= ==== ==== === ======= ====
Total number of securities in an
unrealized loss position.......... 5,061 47 5,108
======= ==== =======
F-33
METLIFE INSURANCE COMPANY OF CONNECTICUT
(A Wholly-Owned Subsidiary of MetLife, Inc.)
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:
[Enlarge/Download Table]
DECEMBER 31, 2006
---------------------------------------------------
GROSS
COST OR UNREALIZED NUMBER OF
AMORTIZED COST LOSSES SECURITIES
---------------- -------------- -----------------
LESS LESS LESS
THAN 20% OR THAN 20% OR THAN 20% OR
20% MORE 20% MORE 20% MORE
-------- ------ ------ ------ ------ ---------
(IN MILLIONS, EXCEPT NUMBER OF SECURITIES)
Less than six months............... $12,922 $ 9 $150 $ 4 1,537 15
Six months or greater but less than
nine months...................... 568 -- 6 -- 78 1
Nine months or greater but less
than twelve months............... 2,134 14 52 4 323 1
Twelve months or greater........... 17,540 -- 650 -- 2,318 --
------- --- ---- --- ----- --
Total............................ $33,164 $23 $858 $ 8 4,256 17
======= === ==== === ===== ==
[Enlarge/Download Table]
DECEMBER 31, 2005
---------------------------------------------------
GROSS
COST OR UNREALIZED NUMBER OF
AMORITIZED COST LOSSES SECURITIES
---------------- -------------- -----------------
LESS LESS LESS
THAN 20% OR THAN 20% OR THAN 20% OR
20% MORE 20% MORE 20% MORE
-------- ------ ------ ------ ------ ---------
(IN MILLIONS, EXCEPT NUMBER OF SECURITIES)
Less than six months............... $39,461 $81 $844 $30 4,960 50
Six months or greater but less than
nine months...................... 204 -- 2 -- 16 --
Nine months or greater but less
than twelve months............... 116 -- 3 -- 35 --
Twelve months or greater........... 147 -- 5 -- 47 --
------- --- ---- --- ----- --
Total............................ $39,928 $81 $854 $30 5,058 50
======= === ==== === ===== ==
At December 31, 2006, $858 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, $854 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, $8 million of unrealized losses related to securities
with an unrealized loss position of 20% or more of cost or amortized cost, which
represented 35% of the cost or amortized cost of such securities. Of such
unrealized losses of $8 million, $4 million related to securities that were in
an unrealized loss position for a period of less than six months. At December
31, 2005, $30 million of unrealized losses related to securities with an
unrealized loss position of 20% or more of cost or amortized cost, which
represented 37% of the cost or amortized cost of such securities. Of such
unrealized losses of $30 million, all related to securities that were in an
unrealized loss position for a period of less than six months.
The Company held two fixed maturity securities and equity securities each
with a gross unrealized loss at December 31, 2006 of greater than $10 million.
These securities represented 3%, or $25 million in the aggregate, of the gross
unrealized loss on fixed maturity and equity securities.
F-34
METLIFE INSURANCE COMPANY OF CONNECTICUT
(A Wholly-Owned Subsidiary of MetLife, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
At December 31, 2006 and 2005, the Company had $866 million and $884
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:
[Download Table]
DECEMBER
31,
-----------
2006 2005
---- ----
SECTOR:
U.S. corporate securities........................................ 49% 47%
Residential mortgage-backed securities........................... 9 15
Foreign corporate securities..................................... 15 16
U.S. Treasury/agency securities.................................. 15 7
Commercial mortgage-backed securities............................ 5 9
Other............................................................ 7 6
--- ---
Total......................................................... 100% 100%
=== ===
INDUSTRY:
Industrial....................................................... 26% 25%
Finance.......................................................... 18 17
Government....................................................... 15 7
Mortgage-backed.................................................. 14 24
Utility.......................................................... 10 6
Other............................................................ 17 21
--- ---
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-35
METLIFE INSURANCE COMPANY OF CONNECTICUT
(A Wholly-Owned Subsidiary of MetLife, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SECURITIES LENDING
The Company participates in a securities lending program whereby blocks of
securities, which are included in fixed maturity and equity securities, are
loaned to third parties, primarily major brokerage firms. The Company requires a
minimum of 102% of the fair value of the loaned securities to be separately
maintained as collateral for the loans. Securities with a cost or amortized cost
of $8.8 billion and $9.4 billion and an estimated fair value of $8.6 billion and
$9.3 billion were on loan under the program at December 31, 2006 and 2005,
respectively. Securities loaned under such transactions may be sold or repledged
by the transferee. The Company was liable for cash collateral under its control
of $8.9 billion and $9.6 billion at December 31, 2006 and 2005, respectively.
Security collateral of $83 million and $174 million on deposit from customers in
connection with the securities lending transactions at December 31, 2006 and
2005, respectively, may not be sold or repledged and is not reflected in the
consolidated financial statements.
ASSETS ON DEPOSIT
The Company had investment assets on deposit with regulatory agencies with
a fair market value of $20 million and $25 million at December 31, 2006 and
2005, respectively, consisting primarily of fixed maturity and equity
securities.
MORTGAGE AND CONSUMER LOANS
Mortgage and consumer loans are categorized as follows:
[Enlarge/Download Table]
DECEMBER 31,
-----------------------------------
2006 2005
---------------- ----------------
AMOUNT PERCENT AMOUNT PERCENT
------ ------- ------ -------
(IN MILLIONS)
Commercial mortgage loans........................... $2,095 58% $1,173 46%
Agricultural mortgage loans......................... 1,460 41 1,300 51
Consumer loans...................................... 46 1 79 3
------ --- ------ ---
Subtotal.......................................... 3,601 100% 2,552 100%
=== ===
Less: Valuation allowances.......................... 6 9
------ ------
Mortgage and consumer loans......................... $3,595 $2,543
====== ======
Mortgage loans are collateralized by properties located in the United
States. At December 31, 2006, 27%, 8% and 7% of the value of the Company's
mortgage and consumer loans were located in California, Texas and New York,
respectively. Generally, the Company, as the lender, only loans up to 75% of the
purchase price of the underlying real estate.
Information regarding loan valuation allowances for mortgage and consumer
loans is as follows:
[Enlarge/Download Table]
YEARS ENDED DECEMBER 31,
------------------------
2006 2005 2004
---- ---- ----
(IN MILLIONS)
Balance at January 1,....................................... $ 9 $ 1 $ 1
Additions................................................... 3 8 --
Deductions.................................................. (6) -- --
--- --- ---
Balance at December 31,..................................... $ 6 $ 9 $ 1
=== === ===
F-36
METLIFE INSURANCE COMPANY OF CONNECTICUT
(A Wholly-Owned Subsidiary of MetLife, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
A portion of the Company's mortgage and consumer loans was impaired and
consists of the following:
[Enlarge/Download Table]
DECEMBER 31,
-------------------------------
2006 2005
-------------- --------------
(IN MILLIONS)
Impaired loans with valuation allowances.................. $-- $ 2
Impaired loans without valuation allowances............... 8 14
--- ---
Subtotal................................................ 8 16
Less: Valuation allowances on impaired loans.............. -- 1
--- ---
Impaired loans.......................................... $ 8 $15
=== ===
Mortgage and consumer loans with scheduled payments of 90 days or more past
due on which interest is still accruing had an amortized cost of $6 million and
$13 million at December 31, 2006 and 2005, respectively. There were no mortgage
and consumer loans on which interest is no longer accrued at both December 31,
2006 and 2005. There were no mortgage and consumer loans in foreclosure at both
December 31, 2006 and 2005.
REAL ESTATE AND REAL ESTATE JOINT VENTURES
Real estate and real estate joint ventures consisted of the following:
[Enlarge/Download Table]
DECEMBER 31,
-------------------------------
2006 2005
-------------- --------------
(IN MILLIONS)
Real estate............................................... $ 37 $36
Accumulated depreciation.................................. (1) --
---- ---
Net real estate........................................... 36 36
Real estate joint ventures................................ 144 60
---- ---
Real estate and real estate joint ventures................ $180 $96
==== ===
The components of real estate and real estate joint ventures are as
follows:
[Download Table]
DECEMBER
31,
-----------
2006 2005
---- ----
(IN
MILLIONS)
Real estate and real estate joint ventures held-for-investment..... $173 $91
Real estate held-for-sale.......................................... 7 5
---- ---
Real estate and real estate joint ventures......................... $180 $96
==== ===
Related depreciation expense was insignificant for all periods presented.
There were no non-income producing real estate and real estate joint
ventures at December 31, 2006. The carrying value of non-income producing real
estate and real estate joint ventures was $3 million at December 31, 2005.
F-37
METLIFE INSURANCE COMPANY OF CONNECTICUT
(A Wholly-Owned Subsidiary of MetLife, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Real estate and real estate joint ventures were categorized as follows:
[Enlarge/Download Table]
DECEMBER 31,
-----------------------------------
2006 2005
---------------- ----------------
AMOUNT PERCENT AMOUNT PERCENT
------ ------- ------ -------
(IN MILLIONS)
Office.............................................. $ 46 26% $53 55%
Apartments.......................................... -- -- 1 1
Retail.............................................. 12 7 -- --
Real estate investment funds........................ 93 52 -- --
Land................................................ 1 -- 3 3
Agriculture......................................... 28 15 31 32
Industrial.......................................... -- -- 8 9
---- --- --- ---
Total............................................. $180 100% $96 100%
==== === === ===
The Company's real estate holdings are primarily located in the United
States. At December 31, 2006, 72%, 7% and 6% of the Company's real estate
holdings were located in New York, Florida and Texas, respectively.
NET INVESTMENT INCOME
The components of net investment income are as follows:
[Download Table]
YEARS ENDED DECEMBER
31,
----------------------
2006 2005 2004
------ ------ ----
(IN MILLIONS)
Fixed maturity securities.................................. $2,719 $1,377 $176
Equity securities.......................................... 17 6 --
Mortgage and consumer loans................................ 182 113 34
Policy loans............................................... 52 26 2
Real estate and real estate joint ventures................. 29 2 --
Other limited partnership interests........................ 238 33 --
Cash, cash equivalents and short-term investments.......... 137 71 6
Other...................................................... 8 -- --
------ ------ ----
Total investment income.................................. 3,382 1,628 218
Less: Investment expenses.................................. 543 190 11
------ ------ ----
Net investment income.................................... $2,839 $1,438 $207
====== ====== ====
For the years ended December 31, 2006, 2005 and 2004, affiliated investment
income of $29 million, $10 million and $4 million, respectively, related to
short-term investments, is included in the table above.
F-38
METLIFE INSURANCE COMPANY OF CONNECTICUT
(A Wholly-Owned Subsidiary of MetLife, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NET INVESTMENT GAINS (LOSSES)
The components of net investment gains (losses) are as follows:
[Download Table]
YEARS ENDED DECEMBER
31,
--------------------
2006 2005 2004
----- ----- ----
(IN MILLIONS)
Fixed maturity securities................................... $(497) $(300) $(5)
Equity securities........................................... 10 1 --
Mortgage and consumer loans................................. 7 (9) --
Real estate and real estate joint ventures.................. 64 7 --
Other limited partnership interests......................... (1) (1) --
Sales of businesses......................................... -- 2 --
Derivatives................................................. 177 (2) (4)
Other....................................................... (281) 104 --
----- ----- ---
Net investment gains (losses)............................. $(521) $(198) $(9)
===== ===== ===
For the years ended December 31, 2006, 2005 and 2004, affiliated investment
gains (losses) of ($87) million, ($25) million and ($4) million, respectively,
are included in the table above.
The Company periodically disposes of fixed maturity and equity securities
at a loss. Generally, such losses are insignificant in amount or in relation to
the cost basis of the investment, are attributable to declines in fair value
occurring in the period of the disposition or are as a result of management's
decision to sell securities based on current conditions or the Company's need to
shift the portfolio to maintain its portfolio management objectives.
Losses from fixed maturity and equity securities deemed other-than-
temporarily impaired, included within net investment gains (losses), were $41
million, $0 and $1 million for the years ended December 31, 2006, 2005 and 2004,
respectively.
NET UNREALIZED INVESTMENT GAINS (LOSSES)
The components of net unrealized investment gains (losses), included in
accumulated other comprehensive income (loss), are as follows:
[Download Table]
YEARS ENDED DECEMBER
31,
--------------------
2006 2005 2004
----- ----- ----
(IN MILLIONS)
Fixed maturity securities................................... $(566) $(639) $ 97
Equity securities........................................... 17 (4) --
Derivatives................................................. (9) (2) (4)
Other....................................................... 7 (19) --
----- ----- ----
Subtotal.................................................. (551) (664) 93
----- ----- ----
Amounts allocated from:
Future policy benefit loss recognition.................... -- (78) --
DAC and VOBA.............................................. 66 102 (47)
----- ----- ----
Subtotal.................................................. 66 24 (47)
Deferred income tax......................................... 171 224 (16)
----- ----- ----
Subtotal.................................................. 237 248 (63)
----- ----- ----
Net unrealized investment gains (losses)............... $(314) $(416) $ 30
===== ===== ====
F-39
METLIFE INSURANCE COMPANY OF CONNECTICUT
(A Wholly-Owned Subsidiary of MetLife, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The changes in net unrealized investment gains (losses) are as follows:
[Download Table]
YEARS ENDED DECEMBER
31,
--------------------
2006 2005 2004
----- ----- ----
(IN MILLIONS)
Balance, January 1,......................................... $(416) $ 30 $ 32
Unrealized investment gains (losses) during the year........ 113 (756) (14)
Unrealized investment gains (losses) relating to:
Future policy benefit gain (loss) recognition............. 78 (78) --
DAC and VOBA.............................................. (36) 148 10
Deferred income tax....................................... (53) 240 2
----- ----- ----
Balance, December 31,....................................... $(314) $(416) $ 30
===== ===== ====
Net change in unrealized investment gains (losses).......... $ 102 $(446) $ (2)
===== ===== ====
TRADING SECURITIES
MetLife Connecticut was the majority owner of Tribeca on the Acquisition
Date. Tribeca was a feeder fund investment structure whereby the feeder fund
invests substantially all of its assets in the master fund, Tribeca Global
Convertible Instruments, Ltd. The primary investment objective of the master
fund is to achieve enhanced risk-adjusted return by investing in domestic and
foreign equities and equity-related securities utilizing such strategies as
convertible securities arbitrage. At December 31, 2005, the Company was the
majority owner of Tribeca and consolidated the fund within its consolidated
financial statements. At December 31, 2005, the Company held $452 million of
trading securities and $190 million of the short sale agreements associated with
the trading securities portfolio, which are included within other liabilities.
Net investment income related to the trading activities of Tribeca, which
included interest and dividends earned and net realized and unrealized gains
(losses), was $12 million and $6 million for the years ended December 31, 2006
and 2005, respectively.
During the second quarter of 2006, the Company's ownership interests in
Tribeca declined to a position whereby Tribeca is no longer consolidated and, as
of June 30, 2006, is accounted for under the equity method of accounting. The
equity method investment at December 31, 2006 of $82 million was included in
other limited partnership interests. Net investment income related to the
Company's equity method investment in Tribeca was $9 million for the six months
ended December 31, 2006.
F-40
METLIFE INSURANCE COMPANY OF CONNECTICUT
(A Wholly-Owned Subsidiary of MetLife, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
VARIABLE INTEREST ENTITIES
The following table presents the total assets of and maximum exposure to
loss relating to VIEs for which the Company has concluded that it holds
significant variable interests but it is not the primary beneficiary and which
have not been consolidated:
[Enlarge/Download Table]
DECEMBER 31, 2006
------------------------
MAXIMUM
TOTAL EXPOSURE TO
ASSETS (1) LOSS (2)
---------- -----------
(IN MILLIONS)
Asset-backed securitizations................................. $ 866 $ 39
Real estate joint ventures(3)................................ 944 63
Other limited partnership interests(4)....................... 2,629 193
Other investments(5)......................................... 14,839 485
------- ----
Total...................................................... $19,278 $780
======= ====
--------
(1) The assets of the asset-backed securitizations are reflected at fair
value at December 31, 2006. The assets of the real estate joint ventures,
other limited partnership interests and other investments are reflected
at the carrying amounts at which such assets would have been reflected on
the Company's balance sheet had the Company consolidated the VIE from the
date of its initial investment in the entity.
(2) The maximum exposure to loss of the asset-backed securitizations is equal
to the carrying amounts of participation. The maximum exposure to loss
relating to real estate joint ventures, other limited partnership
interests and other investments is equal to the carrying amounts plus any
unfunded commitments, reduced by amounts guaranteed by other partners.
(3) Real estate joint ventures include partnerships and other ventures which
engage in the acquisition, development, management and disposal of real
estate investments.
(4) Other limited partnership interests include partnerships established for
the purpose of investing in public and private debt and equity
securities, as well as limited partnerships.
(5) Other investments include securities that are not asset-backed
securitizations.
F-41
METLIFE INSURANCE COMPANY OF CONNECTICUT
(A Wholly-Owned Subsidiary of MetLife, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. DERIVATIVE FINANCIAL INSTRUMENTS
TYPES OF DERIVATIVE FINANCIAL INSTRUMENTS
The following table presents the notional amounts and current market or
fair value of derivative financial instruments held at:
[Enlarge/Download Table]
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........... $ 8,841 $ 431 $ 70 $ 6,623 $ 356 $ 52
Interest rate
floors.......... 9,021 71 -- 2,000 26 --
Interest rate
caps............ 6,715 6 -- 3,020 18 --
Financial
futures......... 602 6 1 228 2 2
Foreign currency
swaps........... 2,723 580 66 3,110 429 76
Foreign currency
forwards........ 124 1 -- 488 18 2
Options........... -- 80 7 -- 165 3
Financial
forwards........ 900 -- 15 -- -- 2
Credit default
swaps........... 1,231 1 5 987 2 2
------- ------ ---- ------- ------ ----
Total........... $30,157 $1,176 $164 $16,456 $1,016 $139
======= ====== ==== ======= ====== ====
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 290 and 587 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 85,500 and 75,500 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 1,022,900 and 1,420,650 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:
[Enlarge/Download Table]
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........... $ 980 $ 5,570 $ 1,699 $ 592 $ 8,841
Interest rate
floors.......... -- 551 8,470 -- 9,021
Interest rate
caps............ -- 6,715 -- -- 6,715
Financial
futures......... 602 -- -- -- 602
Foreign currency
swaps........... 67 1,588 996 72 2,723
Foreign currency
forwards........ 124 -- -- -- 124
Financial
forwards........ -- -- -- 900 900
Credit default
swaps........... 30 1,186 15 -- 1,231
------ ------- ------- ------ -------
Total........... $1,803 $15,610 $11,180 $1,564 $30,157
====== ======= ======= ====== =======
F-42
METLIFE INSURANCE COMPANY OF CONNECTICUT
(A Wholly-Owned Subsidiary of MetLife, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Interest rate swaps are used by the Company primarily to reduce market
risks from changes in interest rates and to alter interest rate exposure arising
from mismatches between assets and liabilities (duration mismatches). In an
interest rate swap, the Company agrees with another party to exchange, at
specified intervals, the difference between fixed rate and floating rate
interest amounts as calculated by reference to an agreed notional principal
amount. These transactions are entered into pursuant to master agreements that
provide for a single net payment to be made by the counterparty at each due
date.
The Company also enters into basis swaps to better match the cash flows
from assets and related liabilities. In a basis swap, both legs of the swap are
floating with each based on a different index. Generally, no cash is exchanged
at the outset of the contract and no principal payments are made by either
party. A single net payment is usually made by one counterparty at each due
date. Basis swaps are included in interest rate swaps in the preceding table.
Interest rate caps and floors are used by the Company primarily to protect
its floating rate liabilities against rises in interest rates above a specified
level, and against interest rate exposure arising from mismatches between assets
and liabilities (duration mismatches), as well as to protect its minimum rate
guarantee liabilities against declines in interest rates below a specified
level, respectively.
In exchange-traded interest rate (Treasury and swap) and equity futures
transactions, the Company agrees to purchase or sell a specified number of
contracts, the value of which is determined by the different classes of interest
rate and equity securities, and to post variation margin on a daily basis in an
amount equal to the difference in the daily market values of those contracts.
The Company enters into exchange-traded futures with regulated futures
commission merchants that are members of the exchange.
Exchange-traded interest rate (Treasury and swap) futures are used
primarily to hedge mismatches between the duration of assets in a portfolio and
the duration of liabilities supported by those assets, to hedge against changes
in value of securities the Company owns or anticipates acquiring, and to hedge
against changes in interest rates on anticipated liability issuances by
replicating Treasury or swap curve performance. The value of interest rate
futures is substantially impacted by changes in interest rates and they can be
used to modify or hedge existing interest rate risk.
Exchange-traded equity futures are used primarily to hedge liabilities
embedded in certain variable annuity products offered by the Company.
Foreign currency derivatives, including foreign currency swaps, foreign
currency forwards and currency option contracts, are used by the Company to
reduce the risk from fluctuations in foreign currency exchange rates associated
with its assets and liabilities denominated in foreign currencies. The Company
also uses foreign currency forwards to hedge the foreign currency risk
associated with certain of its net investments in foreign operations.
In a foreign currency swap transaction, the Company agrees with another
party to exchange, at specified intervals, the difference between one currency
and another at a forward exchange rate calculated by reference to an agreed upon
principal amount. The principal amount of each currency is exchanged at the
inception and termination of the currency swap by each party.
In a foreign currency forward transaction, the Company agrees with another
party to deliver a specified amount of an identified currency at a specified
future date. The price is agreed upon at the time of the contract and payment
for such a contract is made in a different currency at the specified future
date.
The Company enters into currency option contracts that give it the right,
but not the obligation, to sell the foreign currency amount in exchange for a
functional currency amount within a limited time at a contracted price. The
contracts may also be net settled in cash, based on differentials in the foreign
exchange rate and the strike price. Currency option contracts are included in
options in the preceding table.
F-43
METLIFE INSURANCE COMPANY OF CONNECTICUT
(A Wholly-Owned Subsidiary of MetLife, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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:
[Enlarge/Download Table]
DECEMBER 31, 2006 DECEMBER 31, 2005
------------------------------- -------------------------------
FAIR VALUE FAIR VALUE
NOTIONAL -------------------- NOTIONAL --------------------
AMOUNT ASSETS LIABILITIES AMOUNT ASSETS LIABILITIES
-------- ------ ----------- -------- ------ -----------
(IN MILLIONS)
Fair value......................... $ 69 $ -- $ 1 $ 71 $ -- $ --
Cash flow.......................... 455 42 -- 442 2 4
Non-qualifying..................... 29,633 1,134 163 15,943 1,014 135
------- ------ ---- ------- ------ ----
Total............................ $30,157 $1,176 $164 $16,456 $1,016 $139
======= ====== ==== ======= ====== ====
The following table presents the settlement payments recorded in income for
the:
[Download Table]
YEARS ENDED DECEMBER
31,
-----------------------
2006 2005 2004
---- ---- ----
(IN MILLIONS)
Qualifying hedges:
Interest credited to policyholder account balances........ $(9) $(1) $--
Non-qualifying hedges:
Net investment gains (losses)............................. 73 (8) --
--- --- ---
Total..................................................... $64 $(9) $--
=== === ===
F-44
METLIFE INSURANCE COMPANY OF CONNECTICUT
(A Wholly-Owned Subsidiary of MetLife, Inc.)
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 recognized net investment gains (losses) representing the
ineffective portion of all fair value hedges as follows:
[Enlarge/Download Table]
YEARS ENDED DECEMBER 31,
------------------------
2006 2005 2004
---- ---- ----
(IN MILLIONS)
Changes in the fair value of derivatives.................... $(1) $-- $(1)
Changes in the fair value of the items hedged............... 2 -- 1
--- --- ---
Net ineffectiveness of fair value hedging activities........ $ 1 $-- $--
=== === ===
All components of each derivative's gain or loss were included in the
assessment of hedge ineffectiveness. There were no instances in which the
Company discontinued fair value hedge accounting due to a hedged firm commitment
no longer qualifying as a fair value hedge.
CASH FLOW HEDGES
The Company designates and accounts for the following as cash flow hedges,
when they have met the requirements of SFAS 133: (i) interest rate swaps to
convert floating rate investments to fixed rate investments; (ii) interest rate
swaps to convert floating rate liabilities into fixed rate liabilities; and
(iii) 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 Company recognized no net
investment gains (losses) as the ineffective portion of all cash flow hedges.
For the years ended December 31, 2005 and 2004, the Company recognized
insignificant net investment gains (losses), which represent the ineffective
portion of all cash flow hedges. All components of each derivative's gain or
loss were included in the assessment of hedge ineffectiveness. For the years
ended December 31, 2006, 2005 and 2004, there were no instances in which the
Company discontinued cash flow hedge accounting because the forecasted
transactions did not occur on the anticipated date or in the additional time
period permitted by SFAS 133. There were no hedged forecasted transactions,
other than the receipt or payment of variable interest payments for the years
ended December 31, 2006, 2005 and 2004.
The following table presents the components of other comprehensive income
(loss), before income tax, related to cash flow hedges:
[Enlarge/Download Table]
YEARS ENDED DECEMBER 31,
------------------------
2006 2005 2004
---- ---- ----
(IN MILLIONS)
Balance at January 1,....................................... $(2) $(4) $(2)
Gains (losses) deferred in other comprehensive income (loss)
on the effective portion of cash flow hedges.............. (7) 2 (2)
--- --- ---
Balance at December 31,..................................... $(9) $(2) $(4)
=== === ===
At December 31, 2006, $19 million of the deferred net gain on derivatives
accumulated in other comprehensive income (loss) are expected to be reclassified
to earnings during the year ending December 31, 2007.
F-45
METLIFE INSURANCE COMPANY OF CONNECTICUT
(A Wholly-Owned Subsidiary of MetLife, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NON-QUALIFYING DERIVATIVES AND DERIVATIVES FOR PURPOSES OTHER THAN HEDGING
The Company enters into the following derivatives that do not qualify for
hedge accounting under SFAS 133 or for purposes other than hedging: (i) interest
rate swaps, purchased caps and floors, and interest rate futures to economically
hedge its exposure to interest rate volatility; (ii) foreign currency forwards,
swaps and option contracts to economically hedge its exposure to adverse
movements in exchange rates; (iii) 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 to synthetically create
investments; and (vi) basis swaps to better match the cash flows of assets and
related liabilities.
For the years ended December 31, 2006, 2005 and 2004, the Company
recognized as net investment gains (losses), excluding embedded derivatives,
changes in fair value of $16 million, ($37) million and ($6) 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 $40 million and $0 at December 31, 2006 and 2005, respectively. The
fair value of the Company's embedded derivative liabilities was $3 million and
$40 million at December 31, 2006 and 2005, respectively. The amounts recorded
and included in net investment gains (losses) for the years ended December 31,
2006 and 2005 were gains of $80 million and $41 million, respectively. There
were no amounts recorded and included in net investment gains (losses) for the
year ended December 31, 2004.
CREDIT RISK
The Company may be exposed to credit-related losses in the event of
nonperformance by counterparties to derivative financial instruments. Generally,
the current credit exposure of the Company's derivative contracts is limited to
the fair value at the reporting date. The credit exposure of the Company's
derivative transactions is represented by the fair value of contracts with a net
positive fair value at the reporting date.
The Company manages its credit risk related to over-the-counter derivatives
by entering into transactions with creditworthy counterparties, maintaining
collateral arrangements and through the use of master agreements that provide
for a single net payment to be made by one counterparty to another at each due
date and upon termination. Because exchange traded futures are effected through
regulated exchanges, and positions are marked to market on a daily basis, the
Company has minimal exposure to credit related losses in the event of
nonperformance by counterparties to such derivative instruments.
The Company enters into various collateral arrangements, which require both
the pledging and accepting of collateral in connection with its derivative
instruments. As of December 31, 2006 and 2005, the Company was obligated to
return cash collateral under its control of $273 million and $145 million,
respectively. This unrestricted cash collateral is included in cash and cash
equivalents and the obligation to return it is included in payables for
collateral under securities loaned and other transactions in the consolidated
balance sheets. As of December 31, 2006 and 2005, the Company had also accepted
collateral consisting of various securities with a fair market value of $410
million and $427 million, respectively, which are held in separate custodial
accounts. The Company is permitted by contract to sell or repledge this
collateral, but as of December 31, 2006 and 2005, none of the collateral had
been sold or repledged.
In addition, the Company has exchange traded futures, which require the
pledging of collateral. As of December 31, 2006 and 2005, the Company pledged
collateral of $25 million and $22 million, respectively, which
F-46
METLIFE INSURANCE COMPANY OF CONNECTICUT
(A Wholly-Owned Subsidiary of MetLife, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
is included in fixed maturity securities. The counterparties are permitted by
contract to sell or repledge this collateral.
6. DEFERRED POLICY ACQUISITION COSTS AND VALUE OF BUSINESS ACQUIRED
Information regarding DAC and VOBA is as follows:
[Download Table]
DAC VOBA TOTAL
------ ------ ------
(IN MILLIONS)
Balance at January 1, 2004................................ $ 502 $ -- $ 502
Capitalizations......................................... 281 -- 281
------ ------ ------
Subtotal............................................. 783 -- 783
Less: Amortization related to:
Net investment gains (losses)........................ (2) -- (2)
Unrealized investment gains (losses)................. (10) -- (10)
Other expenses....................................... 117 -- 117
------ ------ ------
Total amortization................................. 105 -- 105
------ ------ ------
Balance at December 31, 2004.............................. 678 -- 678
Contribution of MetLife Connecticut from MetLife (Note
2)...................................................... -- 3,490 3,490
Capitalizations......................................... 886 -- 886
------ ------ ------
Subtotal............................................. 1,564 3,490 5,054
Less: Amortization related to:
Net investment gains (losses)........................ -- (26) (26)
Unrealized investment gains (losses)................. (41) (107) (148)
Other expenses....................................... 109 205 314
------ ------ ------
Total amortization................................. 68 72 140
------ ------ ------
Balance at December 31, 2005.............................. 1,496 3,418 4,914
Capitalizations......................................... 721 -- 721
------ ------ ------
Subtotal............................................. 2,217 3,418 5,635
Less: Amortization related to:
Net investment gains (losses)........................ (16) (68) (84)
Unrealized investment gains (losses)................. (10) 46 36
Other expenses....................................... 252 320 572
------ ------ ------
Total amortization................................. 226 298 524
------ ------ ------
Balance at December 31, 2006.............................. $1,991 $3,120 $5,111
====== ====== ======
The estimated future amortization expense allocated to other expenses for
the next five years for VOBA is $358 million in 2007, $333 million in 2008, $312
million in 2009, $283 million in 2010 and $253 million in 2011.
Amortization of VOBA and DAC is related to (i) investment gains and losses
and the impact of such gains and losses on the amount of the amortization; (ii)
unrealized investment gains and losses to provide information regarding the
amount that would have been amortized if such gains and losses had been
recognized; and (iii) other expenses to provide amounts related to the gross
margins or profits originating from transactions other than investment gains and
losses.
F-47
METLIFE INSURANCE COMPANY OF CONNECTICUT
(A Wholly-Owned Subsidiary of MetLife, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. GOODWILL
Goodwill is the excess of cost over the fair value of net assets acquired.
Information regarding goodwill is as follows:
[Download Table]
DECEMBER
31,
-----------
2006 2005
---- ----
(IN
MILLIONS)
Balance at January 1,............................................. $924 $ 68
Contribution of MetLife Connecticut from MetLife (Note 2)......... 29 856
---- ----
Balance at December 31,........................................... $953 $924
==== ====
8. INSURANCE
VALUE OF DISTRIBUTION AGREEMENTS AND CUSTOMER RELATIONSHIPS ACQUIRED
Information regarding VODA and the value of customer relationships acquired
("VOCRA"), which are reported in other assets, is as follows:
[Download Table]
YEARS ENDED DECEMBER
31,
----------------------
2006 2005 2004
---- ---- ----
(IN MILLIONS)
Balance at January 1,........................................ $ 72 $-- $--
Contribution of MetLife Connecticut from MetLife (Note 2).... -- 73 --
Contribution of VODA from MetLife............................ 167 -- --
Amortization................................................. (2) (1) --
---- --- ---
Balance at December 31,...................................... $237 $72 $--
==== === ===
The estimated future amortization expense allocated to other expenses for
the next five years for VODA and VOCRA is $5 million in 2007, $7 million in
2008, $9 million in 2009, $11 million in 2010 and $11 million in 2011.
On September 30, 2006, MLI-USA received a capital contribution from MetLife
of $162 million in the form of intangible assets related to VODA of $167
million, net of deferred income tax of $5 million, for which MLI-USA receives
the benefit. The VODA originated through MetLife's acquisition of Travelers and
is reported within other assets in the amount of $166 million at December 31,
2006.
The value of the other identifiable intangibles as discussed above reflects
the estimated fair value of the Citigroup/Travelers distribution agreement
acquired at July 1, 2005 and will be amortized in relation to the expected
economic benefits of the agreement. The weighted average amortization period of
the other intangible assets is 16 years. If actual experience under the
distribution agreements differs from expectations, the amortization of these
intangibles will be adjusted to reflect actual experience.
The use of discount rates was necessary to establish the fair value of the
other identifiable intangible assets. In selecting the appropriate discount
rates, management considered its weighted average cost of capital as well as the
weighted average cost of capital required by market participants. A discount
rate of 11.5% was used to value these intangible assets.
F-48
METLIFE INSURANCE COMPANY OF CONNECTICUT
(A Wholly-Owned Subsidiary of MetLife, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SALES INDUCEMENTS
Information regarding deferred sales inducements, which are reported in
other assets, is as follows:
[Download Table]
YEARS ENDED DECEMBER
31,
----------------------
2006 2005 2004
---- ---- ----
(IN MILLIONS)
Balance at January 1,...................................... $218 $143 $ 94
Capitalization............................................. 129 83 65
Amortization............................................... (17) (8) (16)
---- ---- ----
Balance at December 31,.................................... $330 $218 $143
==== ==== ====
SEPARATE ACCOUNTS
Separate account assets and liabilities at December 31, 2006, include pass-
through separate accounts totaling $50.1 billion for which the policyholder
assumes all investment risk. Separate account assets and liabilities at December
31, 2005, included two categories of account types: pass-through separate
accounts totaling $43.6 billion and separate accounts with a minimum return or
account value for which the Company contractually guarantees either a minimum
return or account value to the policyholder which totaled $943 million. The
average interest rates credited on these contracts were 4.5% at December 31,
2005.
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 $800 million, $467 million and $155 million for the years ended December
31, 2006, 2005 and 2004, respectively.
For the years ended December 31, 2006, 2005 and 2004, there were no
investment gains (losses) on transfers of assets from the general account to the
separate accounts.
OBLIGATIONS UNDER GUARANTEED INTEREST CONTRACT PROGRAM
The Company issues fixed and floating rate obligations under its guaranteed
interest contract ("GIC") program which are denominated in either U.S. dollars
or foreign currencies. During the year ended December 31, 2006, there were no
new issuances in such obligations and there were repayments of $1.1 billion.
During the years ended December 31, 2005 and 2004, there were no new issuances
or repayments of such obligations. Accordingly, at December 31, 2006 and 2005,
GICs outstanding, which are included in PABs, were $4.6 billion and $5.3
billion, respectively. During the years ended December 31, 2006, 2005 and 2004,
interest credited on the contracts, which are included in interest credited to
PABs, was $163 million, $80 million and $0, respectively.
F-49
METLIFE INSURANCE COMPANY OF CONNECTICUT
(A Wholly-Owned Subsidiary of MetLife, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
LIABILITIES FOR UNPAID CLAIMS AND CLAIM EXPENSES
Information regarding the liabilities for unpaid claims and claim expenses
relating to group accident and non-medical health policies and contracts, which
are reported in future policyholder benefits, is as follows:
[Download Table]
YEARS ENDED DECEMBER 31,
-------------------------
2006 2005
----------- -----------
(IN MILLIONS)
Balance at January 1,.......................... $ 512 $ --
Less: Reinsurance recoverables............... (373) --
----------- -----------
Net balance January 1,......................... 139 --
----------- -----------
Contribution of MetLife Connecticut by MetLife
(Note 2)..................................... -- 137
Incurred related to:
Current year................................. 29 19
Prior years.................................. 4 (3)
----------- -----------
33 16
----------- -----------
Paid related to:
Current year................................. (2) (1)
Prior years.................................. (22) (13)
----------- -----------
(24) (14)
----------- -----------
Net balance at December 31,.................... 148 139
Add: Reinsurance recoverables................ 403 373
----------- -----------
Balance at December 31,........................ $ 551 $ 512
=========== ===========
There were no liabilities for unpaid claims and claims expenses for the
year ended December 31, 2004.
Claims and claim adjustment expenses associated with prior periods
increased by $4 million for the year ended December 31, 2006, and decreased by
$3 million for the year ended December 31, 2005. There were no claims and claim
adjustment expenses associated with prior periods for the year ended December
31, 2004. In all periods presented, the change was due to differences between
actual benefit periods and expected benefit periods for long-term care and
disability contracts.
GUARANTEES
The Company issues annuity contracts which may include contractual
guarantees to the contractholder for: (i) return of no less than total deposits
made to the contract less any partial withdrawals ("return of net deposits");
and (ii) the highest contract value on a specified anniversary date minus any
withdrawals following the contract anniversary, or total deposits made to the
contract less any partial withdrawals plus a minimum return ("anniversary
contract value" or "minimum return").
The Company also issues universal and variable life contracts where the
Company contractually guarantees to the contractholder a secondary guarantee.
F-50
METLIFE INSURANCE COMPANY OF CONNECTICUT
(A Wholly-Owned Subsidiary of MetLife, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Information regarding the types of guarantees relating to annuity contracts
and universal and variable life contracts is as follows:
[Enlarge/Download Table]
AT DECEMBER 31,
---------------------------------------------------------------------------
2006 2005
---------------------------------- ----------------------------------
IN THE AT IN THE AT
EVENT OF DEATH ANNUITIZATION EVENT OF DEATH ANNUITIZATION
-------------- ------------- -------------- -------------
(IN MILLIONS)
ANNUITY CONTRACTS(1)
RETURN OF NET DEPOSITS
Separate account value........ $ 8,213 N/A $ 5,537 N/A
Net amount at risk(2)......... $ --(3) N/A $ --(3) N/A
Average attained age of
contractholders............ 61 years N/A 61 years N/A
ANNIVERSARY CONTRACT VALUE OR
MINIMUM RETURN
Separate account value........ $ 44,036 $ 13,179 $ 40,744 $ 10,081
Net amount at risk(2)......... $ 1,422(3) $ 30(4) $ 934(3) $ 38(4)
Average attained age of
contractholders............ 58 years 60 years 60 years 60 years
[Enlarge/Download Table]
AT DECEMBER 31,
---------------------------
2006 2005
---------- ----------
SECONDARY SECONDARY
GUARANTEES GUARANTEES
---------- ----------
(IN MILLIONS)
UNIVERSAL AND VARIABLE LIFE CONTRACTS(1)
Account value (general and separate account)........... $ 3,262 $ 2,849
Net amount at risk(2).................................. $ 48,630(3) $ 44,943(3)
Average attained age of policyholders.................. 57 years 56 years
--------
(1) The Company's annuity and life contracts with guarantees may offer more
than one type of guarantee in each contract. Therefore, the amounts
listed above may not be mutually exclusive.
(2) The net amount at risk is based on the direct amount at risk (excluding
reinsurance).
(3) The net amount at risk for guarantees of amounts in the event of death is
defined as the current guaranteed minimum death benefit in excess of the
current account balance at the balance sheet date.
(4) The net amount at risk for guarantees of amounts at annuitization is
defined as the present value of the minimum guaranteed annuity payments
available to the contractholder determined in accordance with the terms
of the contract in excess of the current account balance.
F-51
METLIFE INSURANCE COMPANY OF CONNECTICUT
(A Wholly-Owned Subsidiary of MetLife, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Information regarding the liabilities for guarantees (excluding base policy
liabilities) relating to annuity and universal and variable life contracts is as
follows:
[Enlarge/Download Table]
ANNUITY UNIVERSAL AND VARIABLE
CONTRACTS LIFE CONTRACTS
-------------- ----------------------
GUARANTEED SECONDARY
DEATH BENEFITS GUARANTEES TOTAL
-------------- ---------------------- -----
(IN MILLIONS)
Balance at January 1, 2004...................... $-- $-- $--
Incurred guaranteed benefits.................... -- -- --
Paid guaranteed benefits........................ -- -- --
--- --- ---
Balance at December 31, 2004.................... -- -- --
Incurred guaranteed benefits.................... 3 9 12
Paid guaranteed benefits........................ -- -- --
--- --- ---
Balance at December 31, 2005.................... 3 9 12
Incurred guaranteed benefits.................... -- 22 22
Paid guaranteed benefits........................ (3) -- (3)
--- --- ---
Balance at December 31, 2006.................... $-- $31 $31
=== === ===
MLI-USA had guaranteed death and annuitization benefit liabilities on its
annuity contracts of $38 million and $28 million at December 31, 2006 and 2005,
respectively. MLI-USA reinsures 100% of this liability with an affiliate and has
a corresponding recoverable from affiliated reinsurers related to such guarantee
liabilities.
Account balances of contracts with insurance guarantees are invested in
separate account asset classes as follows:
[Download Table]
DECEMBER 31,
-----------------
2006 2005
------- -------
(IN MILLIONS)
Mutual Fund Groupings
Equity...................................................... $37,992 $30,480
Bond........................................................ 2,831 2,952
Balanced.................................................... 2,790 3,273
Money Market................................................ 949 791
Specialty................................................... 460 684
------- -------
Total.................................................... $45,022 $38,180
======= =======
9. 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 2004. 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.
F-52
METLIFE INSURANCE COMPANY OF CONNECTICUT
(A Wholly-Owned Subsidiary of MetLife, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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.
MICC's workers' compensation business is reinsured through a 100% quota-
share agreement with The Travelers Indemnity Company, an insurance subsidiary of
The Travelers Companies, Inc.
Effective July 1, 2000, MetLife Connecticut reinsured 90% of its individual
long-term care insurance business with Genworth Life Insurance Company ("GLIC,"
formerly known as General Electric Capital Assurance Company), and its
subsidiary, in the form of indemnity reinsurance agreements. In accordance with
the terms of the reinsurance agreement, GLIC will effect assumption and novation
of the reinsured contracts, to the extent permitted by law, no later than July
1, 2008. Effective June 30, 2005, MetLife Connecticut entered into an agreement
with CIHC to effectively transfer the remaining results from the long-term care
block of business from MetLife Connecticut to CIHC. Under the terms of this
agreement, any gains remaining are payable to CIHC and any losses remaining are
reimbursable from CIHC. MetLife Connecticut does, however, retain limited
investment exposure related to the reinsured contracts. Citigroup
unconditionally guarantees the performance of its subsidiary, CIHC.
The Company reinsures the new production of fixed annuities and 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 19.
The amounts in the consolidated statements of income are presented net of
reinsurance ceded. Information regarding the effect of reinsurance is as
follows:
[Download Table]
YEARS ENDED DECEMBER
31,
--------------------
2006 2005 2004
----- ----- ----
(IN MILLIONS)
Direct premiums........................................ $ 599 $ 413 $13
Reinsurance assumed.................................... 21 38 --
Reinsurance ceded...................................... (312) (170) (4)
----- ----- ---
Net premiums........................................... $ 308 $ 281 $ 9
===== ===== ===
Reinsurance recoverables netted against policyholder
benefits and claims.................................. $ 635 $ 560 $(1)
===== ===== ===
Reinsurance recoverables, included in premiums and other receivables, were
$4.6 billion and $4.3 billion at December 31, 2006 and 2005, respectively,
including $3.0 billion and $2.8 billion at December 31, 2006 and 2005,
respectively, relating to reinsurance on the runoff of long-term care business
and $1.3 billion and $1.4 billion at December 31, 2006 and 2005, respectively,
relating to reinsurance on the runoff of workers compensation business.
Reinsurance and ceded commissions payables, included in other liabilities were
$99 million and $64 million at December 31, 2006 and 2005, respectively.
For the year ended December 31, 2006, both reinsurance ceded and assumed
include affiliated transactions of $21 million. For the year ended December 31,
2005, reinsurance ceded and assumed include affiliated transactions
F-53
METLIFE INSURANCE COMPANY OF CONNECTICUT
(A Wholly-Owned Subsidiary of MetLife, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
of $12 million and $38 million, respectively. For the year ended December 31,
2004, both reinsurance ceded and assumed include affiliated transactions of $1
million.
10. LONG-TERM DEBT -- AFFILIATED
Long-term debt outstanding is as follows:
[Download Table]
DECEMBER
31,
-----------
2006 2005
---- ----
(IN
MILLIONS)
Surplus notes, interest rate 7.349%, due 2035..................... $400 $400
Surplus notes, interest rate 5%, due upon request................. 25 25
Surplus notes, interest rate LIBOR plus 0.75%, due upon request... 10 10
---- ----
Total long-term debt -- affiliated.............................. $435 $435
==== ====
Payments of interest and principal on these surplus notes, which are
subordinate to all other debt, may be made only with the prior approval of the
Delaware Insurance Commissioner.
MetLife is the holder of a surplus note issued by MLI-USA in the amount of
$400 million at December 31, 2006 and 2005.
MLIG is the holder of two surplus notes issued by MLI-USA in the amounts of
$25 million and $10 million at both December 31, 2006 and 2005. These surplus
notes may be redeemed, in whole or in part, at the election of the Company at
any time, subject to the prior approval of the Delaware Insurance Commissioner.
The aggregate maturities of long-term debt as of December 31, 2006 are $400
million in 2035, and $35 million payable upon request and regulatory approval.
Interest expense related to the Company's indebtedness, included in other
expenses, was $31 million, $25 million and $2 million for the years ended
December 31, 2006, 2005 and 2004, respectively.
11. INCOME TAX
The provision for income tax from continuing operations is as follows:
[Download Table]
YEARS ENDED
DECEMBER 31,
------------------
2006 2005 2004
---- ---- ----
(IN MILLIONS)
Current:
Federal.............................................. $ 18 $ (3) $(91)
State................................................ -- (2) 4
---- ---- ----
Subtotal.......................................... 18 (5) (87)
---- ---- ----
Deferred:
Federal.............................................. 212 162 100
State................................................ (2) (1) 4
---- ---- ----
Subtotal.......................................... 210 161 104
---- ---- ----
Provision for income tax............................... $228 $156 $ 17
==== ==== ====
F-54
METLIFE INSURANCE COMPANY OF CONNECTICUT
(A Wholly-Owned Subsidiary of MetLife, Inc.)
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:
[Download Table]
YEARS ENDED
DECEMBER 31,
------------------
2006 2005 2004
---- ---- ----
(IN MILLIONS)
Tax provision at U.S. statutory rate................... $288 $191 $15
Tax effect of:
Tax-exempt investment income......................... (62) (27) (3)
Prior year tax....................................... (9) (9) (1)
Foreign operations, net of foreign income tax........ 12 -- --
State tax, net of federal benefit.................... -- 2 6
Other, net........................................... (1) (1) --
---- ---- ----
Provision for income tax............................... $228 $156 $ 17
==== ==== ====
Deferred income tax represents the tax effect of the differences between
the book and tax basis of assets and liabilities. Net deferred income tax assets
and liabilities consisted of the following:
[Download Table]
DECEMBER 31,
-----------------
2006 2005
------- -------
(IN MILLIONS)
Deferred income tax assets:
Benefit, reinsurance and other reserves...................... $ 2,238 $ 2,346
Net unrealized investment losses............................. 171 224
Capital loss carryforwards................................... 155 92
Investments.................................................. 63 --
Operating lease reserves..................................... 13 13
Net operating loss carryforwards............................. 10 --
Employee benefits............................................ 3 3
Litigation-related........................................... 1 --
Other........................................................ 20 25
------- -------
2,674 2,703
Less: Valuation allowance.................................... 4 --
------- -------
2,670 2,703
------- -------
Deferred income tax liabilities:
DAC and VOBA................................................. (1,663) (1,558)
Investments.................................................. -- (25)
------- -------
(1,663) (1,583)
------- -------
Net deferred income tax asset.................................. $ 1,007 $ 1,120
======= =======
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
F-55
METLIFE INSURANCE COMPANY OF CONNECTICUT
(A Wholly-Owned Subsidiary of MetLife, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Company's management concluded that it is "more likely than not" that the net
deferred income tax assets will be realized.
Domestic net operating loss carryforwards amount to $15 million at December
31, 2006 and will expire beginning in 2025. Foreign net operating loss
carryforwards amount to $35 million at December 31, 2006 with an expiration
period of infinity. Capital loss carryforwards amount to $443 million at
December 31, 2006 and will expire beginning in 2010.
The Company has recorded a valuation allowance related to tax benefits of
certain foreign net operating loss carryforwards. The valuation allowance
reflects management's assessment, based on available information, that it is
more likely than not that the deferred income tax asset for certain foreign net
operating loss carryforwards will not be realized. The tax benefit will be
recognized when management believes that it is more likely than not that these
deferred income tax assets are realizable. In 2006, the Company recorded a $4
million deferred income tax valuation allowance related to certain foreign net
operating loss carryforwards.
The Company will file a consolidated tax return with its includable life
insurance subsidiaries. Non-includable subsidiaries file either a separate
individual corporate tax return or a separate consolidated tax return. 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.
12. 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.
On a quarterly and yearly basis, the Company reviews relevant information
with respect to liabilities for litigation and contingencies to be reflected in
the Company's consolidated financial statements. The review includes senior
legal and financial personnel. Unless stated below, estimates of possible
additional losses or ranges of loss for particular matters cannot in the
ordinary course be made with a reasonable degree of certainty. Liabilities are
established when it is probable that a loss has been incurred and the amount of
the loss can be reasonably estimated. Liabilities have been established for a
number of the matters noted below. It is possible that some of the
F-56
METLIFE INSURANCE COMPANY OF CONNECTICUT
(A Wholly-Owned Subsidiary of MetLife, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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.
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 MLAC, 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 MLAC 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 MLAC: 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 certification. Defendants
have moved for summary judgment.
A former registered representative of Tower Square Securities, Inc. ("Tower
Square"), a broker-dealer subsidiary of MICC, is alleged to have defrauded
individuals by diverting funds for his personal use. In June 2005, the SEC
issued a formal order of investigation with respect to Tower Square and served
Tower Square with a subpoena. The Securities and Business Investments Division
of the Connecticut Department of Banking and NASD are also reviewing this
matter. On April 18, 2006, the Connecticut Department of Banking issued a notice
to Tower Square asking it to demonstrate its prior compliance with applicable
Connecticut securities laws and regulations. In the context of the above, a
number of NASD arbitration matters and litigation matters were commenced in 2005
and 2006 against Tower Square. It is reasonably possible that other actions will
be brought regarding this matter. Tower Square intends to fully cooperate with
the SEC, NASD and the Connecticut Department of Banking, as appropriate, with
respect to the matters described above.
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, a broker and dealer in
securities 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
F-57
METLIFE INSURANCE COMPANY OF CONNECTICUT
(A Wholly-Owned Subsidiary of MetLife, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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:
[Download Table]
DECEMBER
31,
-----------
2006 2005
---- ----
(IN
MILLIONS)
Other Assets:
Premium tax offset for future undiscounted assessments........... $ 9 $ 9
Premium tax offsets currently available for paid assessments..... 1 2
--- ---
$10 $11
=== ===
Liability:
Insolvency assessments........................................... $19 $19
=== ===
Assessments levied against the Company were less than $1 million for each
of the years ended December 31, 2006, 2005 and 2004.
COMMITMENTS
LEASES
The Company, as lessee, has entered into lease agreements for office space.
Future sublease income is projected to be insignificant. Future minimum rental
income and minimum gross rental payments relating to these lease agreements are
as follows:
[Download Table]
RENTAL GROSS RENTAL
INCOME PAYMENTS
------ ------------
(IN MILLIONS)
2007......................................................... $ 1 $15
2008......................................................... $ 1 $15
2009......................................................... $ 1 $ 8
2010......................................................... $ 1 $ 6
2011......................................................... $-- $ 6
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 $616 million
and $715 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 $665 million and $339 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 $173 million at December 31, 2006. The Company
did not have any unfunded commitments related to bank credit facilities at
December 31, 2005.
F-58
METLIFE INSURANCE COMPANY OF CONNECTICUT
(A Wholly-Owned Subsidiary of MetLife, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
OTHER COMMITMENTS
MICC is a member of the Federal Home Loan Bank of Boston ("FHLB of Boston")
and holds $70 million of common stock of the FHLB of Boston, which is included
in equity securities on the Company's consolidated balance sheets. MICC has also
entered into several funding agreements with the FHLB of Boston whereby MICC has
issued such funding agreements in exchange for cash and for which the FHLB of
Boston has been granted a blanket lien on certain MICC assets, including
residential mortgages, mortgage-backed securities, obligations of or guaranteed
by the United States, state and municipal obligations and corporate debt, to
collateralize MICC's obligations under the funding agreements. MICC maintains
control over these pledged assets, and may use, commingle, encumber or dispose
of any portion of the collateral as long as there is no event of default and the
remaining qualified collateral is sufficient to satisfy the collateral
maintenance level. The funding agreements and the related security agreement
represented by this blanket lien provide that upon any event of default by MICC,
the FHLB of Boston's recovery is limited to the amount of MICC's liability to
the FHLB of Boston. The amount of the Company's liability for funding agreements
with the FHLB of Boston was $926 million and $1.1 billion at December 31, 2006
and 2005, respectively, which is included in PABs.
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, such as in the case of MetLife International Insurance Company, Ltd.
("MLII," formerly, Citicorp International Life Insurance Company, Ltd.), an
affiliate, discussed below, 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.
The Company has provided a guarantee on behalf of MLII. This guarantee is
triggered if MLII cannot pay claims because of insolvency, liquidation or
rehabilitation. The agreement was terminated as of December 31, 2004, but
termination does not affect policies previously guaranteed. Life insurance
coverage in-force under this guarantee was $444 million and $447 million at
December 31, 2006 and 2005, respectively. The Company does not hold any
collateral related to this guarantee.
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.
In connection with synthetically created investment transactions, the
Company writes credit default swap obligations requiring payment of principal
due in exchange for the referenced credit obligation, depending on the nature or
occurrence of specified credit events for the referenced entities. In the event
of a specified credit event, the Company's maximum amount at risk, assuming the
value of the referenced credits becomes worthless, was $54 million at December
31, 2006. The credit default swaps expire at various times during the next two
years.
F-59
METLIFE INSURANCE COMPANY OF CONNECTICUT
(A Wholly-Owned Subsidiary of MetLife, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
13. EMPLOYEE BENEFIT PLANS
Subsequent to the Acquisition, the Company became a participating affiliate
in qualified and non-qualified, noncontributory defined benefit pension and
other postretirement plans sponsored by Metropolitan Life. Employees were
credited with prior service recognized by Citigroup, solely (with regard to
pension purposes) for the purpose of determining eligibility and vesting under
the Metropolitan Life Retirement Plan for United States Employees ("Plan"), a
noncontributory qualified defined benefit pension plan, with respect to benefits
earned under the Plan subsequent to the Acquisition Date. Net periodic expense
related to these plans is based on the employee population as of the valuation
date at the beginning of the year. Pension expense of $8 million related to the
Metropolitan Life plans was allocated to the Company for the year ended December
31, 2006. There were no expenses allocated to the Company for the six months
ended December 31, 2005.
14. EQUITY
COMMON STOCK
The Company has 40,000,000 authorized shares of common stock, 34,595,317
shares of which are outstanding as of December 31, 2006. Of such outstanding
shares, 30,000,000 shares are owned directly by MetLife and the remaining shares
are owned by MLIG. The par value of the common stock presented in the statement
of stockholders' equity prior to the Acquisition Date has been adjusted to
reflect the par value of MetLife Connecticut's shares issued to MLIG in exchange
for MLI-USA's outstanding common stock. See Note 3.
DIVIDEND RESTRICTIONS
The table below sets forth the dividends permitted to be paid to MetLife
without insurance regulatory approval and actual dividends paid to MetLife:
[Enlarge/Download Table]
2007
-------------
2005 2006
------- -----------------------
PERMITTED W/O PERMITTED W/O
COMPANY PAID(1) PAID(1) APPROVAL (2) APPROVAL(3)
------- ------- ------- ------------- -------------
(IN MILLIONS)
MetLife Insurance Company of Connecticut...... $-- $917(4) $-- $690
--------
(1) Includes amounts paid including those requiring regulatory approval.
(2) Reflects dividend amounts paid during the relevant year without prior
regulatory approval.
(3) Reflects dividend amounts that may be paid during 2007 without prior
regulatory approval. If paid before a specified date during 2007, some or
all of such dividend amounts may require regulatory approval.
(4) Includes a return of capital of $259 million.
Under Connecticut State Insurance Law, MetLife Connecticut 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
immediately preceding calendar year. MetLife Connecticut 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 ("Connecticut Commissioner") and the
Connecticut 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 Connecticut 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
F-60
METLIFE INSURANCE COMPANY OF CONNECTICUT
(A Wholly-Owned Subsidiary of MetLife, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Acquisition on July 1, 2005, under Connecticut State Insurance Law, all dividend
payments by MetLife Connecticut through June 30, 2007 require prior approval of
the Connecticut Commissioner.
DIVIDEND RESTRICTIONS OF SUBSIDIARIES
MLAC is regulated under Connecticut State Insurance Law as described above.
As a result of the acquisition on July 1, 2005, under Connecticut State
Insurance Law all dividend payments by MLAC through June 30, 2007 to the Company
require prior approval of the Connecticut Commissioner. MLAC did not pay any
dividends in 2006. Since MLAC's statutory unassigned funds surplus is negative,
MLAC cannot pay any dividends without prior approval of the Commissioner.
Under Delaware State Insurance Law, MLI-USA is permitted, without prior
insurance regulatory clearance, to pay a stockholder dividend to its parent as
long as the amount of the dividend 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 immediately preceding calendar
year (excluding realized capital gains). MLI-USA will be permitted to pay a cash
dividend to MetLife Connecticut in excess of the greater of such two amounts
only if it files notice of the declaration of such a dividend and the amount
thereof with the Delaware Commissioner of Insurance ("Delaware Commissioner")
and the Delaware Commissioner does not disapprove the distribution within 30
days of its filing. In addition, any dividend that exceeds earned surplus
(defined as unassigned funds) as of the last filed annual statutory statement
requires insurance regulatory approval. Under Delaware State Insurance Law, the
Delaware 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. MLI-USA did not pay dividends for the year ended
December 31, 2006. Since MLI-USA's statutory unassigned funds surplus is
negative, MLI-USA cannot pay any dividends without prior approval of the
Delaware Commissioner.
CAPITAL CONTRIBUTIONS
On September 30, 2006, MLI-USA received a capital contribution from MetLife
of $162 million in the form of intangible assets related to VODA, and the
associated deferred income tax liability, which is more fully described in Note
8.
See also Note 3 for information related to the change in the reporting
entity.
MLI-USA received a cash contribution of $300 million from MLIG during the
year ended December 31, 2004.
STATUTORY EQUITY AND INCOME
Each insurance company's state of domicile imposes minimum risk-based
capital ("RBC") requirements that were developed by the National Association of
Insurance Commissioners ("NAIC"). The formulas for determining the amount of RBC
specify various weighting factors that are applied to financial balances or
various levels of activity based on the perceived degree of risk. Regulatory
compliance is determined by a ratio of total adjusted capital, as defined by the
NAIC, to authorized control level RBC, as defined by the NAIC. Companies below
specific trigger points or ratios are classified within certain levels, each of
which requires specified corrective action. The Company and its insurance
subsidiaries each exceeded the minimum RBC requirements for all periods
presented herein.
The NAIC adopted the Codification of Statutory Accounting Principles
("Codification") in 2001. Codification was intended to standardize regulatory
accounting and reporting to state insurance departments. However, statutory
accounting principles continue to be established by individual state laws and
permitted practices. The Connecticut Insurance Department and the Delaware
Insurance Department have adopted Codification with certain modifications for
the preparation of statutory financial statements of insurance companies in
Connecticut and
F-61
METLIFE INSURANCE COMPANY OF CONNECTICUT
(A Wholly-Owned Subsidiary of MetLife, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Delaware, respectively. Modifications by the various state insurance departments
may impact the effect of Codification on the statutory capital and surplus of
MetLife Connecticut and each of its insurance subsidiaries.
Statutory accounting principles differ from GAAP primarily by charging
policy acquisition costs to expense as incurred, establishing future policy
benefit liabilities using different actuarial assumptions, reporting surplus
notes as surplus instead of debt and valuing securities on a different basis.
In addition, certain assets are not admitted under statutory accounting
principles and are charged directly to surplus. The most significant assets not
admitted by the Company is the net deferred income tax assets resulting from
temporary differences between statutory accounting principles basis and tax
basis not expected to reverse and become recoverable within a year.
Further, statutory accounting principles do not give recognition to
purchase accounting adjustments made as a result of the Acquisition.
Statutory net income of MetLife Connecticut, a Connecticut domiciled
insurer, was $749 million, $1.0 billion and $975 million for the years ended
December 31, 2006, 2005 and 2004, respectively. Statutory capital and surplus,
as filed with the Connecticut Insurance Department, was $4.1 billion and $4.0
billion at December 31, 2006 and 2005, respectively.
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 Connecticut Insurance Department, was $740 million and $765 million at
December 31, 2006 and 2005, respectively.
Statutory net income (loss) of MLI-USA, a Delaware domiciled insurer, was
($116) million, ($227) million and ($201) million for the years ended December
31, 2006, 2005 and 2004, respectively. Statutory capital and surplus, as filed
with the Delaware Insurance Department, was $575 million and $555 million at
December 31, 2006 and 2005, respectively.
OTHER COMPREHENSIVE INCOME (LOSS)
The following table sets forth the reclassification adjustments required
for the years ended December 31, 2006, 2005 and 2004, in other comprehensive
income (loss) that are included as part of net income for the current year that
have been reported as a part of other comprehensive income (loss) in the current
or prior year:
[Enlarge/Download Table]
YEARS ENDED DECEMBER
31,
----------------------
2006 2005 2004
----- ------- ----
(IN MILLIONS)
Holding gains (losses) on investments arising during the
year...................................................... $(434) $(1,148) $(37)
Income tax effect of holding gains (losses)................. 147 402 14
Reclassification adjustments:
Recognized holding (gains) losses included in current year
income................................................. 487 295 2
Amortization of premiums and accretion of discounts
associated with investments............................ 60 96 21
Income tax effect......................................... (186) (137) (8)
Allocation of holding losses on investments relating to
other policyholder amounts................................ 42 71 10
Income tax effect of allocation of holding losses to other
policyholder amounts...................................... (14) (25) (4)
----- ------- ----
Net unrealized investment gains (losses).................... 102 (446) (2)
----- ------- ----
Foreign currency translation adjustment..................... (2) 2 --
----- ------- ----
Other comprehensive income (loss)...................... $ 100 $ (444) $ (2)
===== ======= ====
F-62
METLIFE INSURANCE COMPANY OF CONNECTICUT
(A Wholly-Owned Subsidiary of MetLife, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
15. OTHER EXPENSES
Information on other expenses is as follows:
[Enlarge/Download Table]
YEARS ENDED DECEMBER 31,
------------------------------
2006 2005 2004
------ ------------- -----
(IN MILLIONS)
Compensation............................................ $ 211 $ 100 $ --
Commissions............................................. 712 931 237
Interest and debt issue costs........................... 31 25 2
Amortization of DAC and VOBA............................ 488 288 115
Capitalization of DAC................................... (721) (886) (281)
Rent, net of sublease income............................ 11 7 --
Minority interest....................................... 26 1 --
Insurance tax........................................... 42 10 3
Other................................................... 373 202 103
------ ----- -----
Total other expenses.................................. $1,173 $ 678 $ 179
====== ===== =====
16. BUSINESS SEGMENT INFORMATION
Prior to the acquisition of MetLife Connecticut by MetLife, MLI-USA
operated as a single segment. On the Acquisition Date, MetLife reorganized the
Company's operations into two operating segments, Individual and Institutional,
as well as Corporate & Other, so as to more closely align the acquired business
with the manner in which MetLife manages its existing businesses. Individual
offers a wide variety of protection and asset accumulation products, including
life insurance, annuities and mutual funds. Institutional offers a broad range
of group insurance and retirement & savings products and services, including
group life insurance and other insurance products and services. These segments
are managed separately because they either provide different products and
services, require different strategies or have different technology
requirements. Corporate & Other contains the excess capital not allocated to the
business segments, various start-up entities and run-off business, the Company's
ancillary international operations, interest expense related to the majority of
the Company's outstanding debt, expenses associated with certain legal
proceedings and the elimination of intersegment transactions.
Economic capital is an internally developed risk capital model, the purpose
of which is to measure the risk in the business and to provide a basis upon
which capital is deployed. The economic capital model accounts for the unique
and specific nature of the risks inherent in the Company's businesses. As a part
of the economic capital process, a portion of net investment income is credited
to the segments based on the level of allocated equity.
The accounting policies of the segments are the same as those of the
Company, except for the method of capital allocation and the accounting for
gains (losses) from intercompany sales, which are eliminated in consolidation.
Subsequent to the Acquisition Date, the Company allocates equity to each segment
based upon the economic capital model used by MetLife that allows MetLife and
the Company to effectively manage its capital. The Company evaluates the
performance of each segment based upon net income excluding net investment gains
(losses), net of income tax, and adjustments related to net investment gains
(losses), net of income tax.
F-63
METLIFE INSURANCE COMPANY OF CONNECTICUT
(A Wholly-Owned Subsidiary of MetLife, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Set forth in the tables below is certain financial information with respect
to the Company's segments, as well as Corporate & Other, for the years ended
December 31, 2006 and 2005.
[Enlarge/Download Table]
CORPORATE &
FOR THE YEAR ENDED DECEMBER 31, 2006 INDIVIDUAL INSTITUTIONAL OTHER TOTAL
------------------------------------ ---------- ------------- ----------- --------
(IN MILLIONS)
STATEMENT OF INCOME:
Premiums......................................... $ 218 $ 65 $ 25 $ 308
Universal life and investment-type product policy
fees........................................... 1,244 24 -- 1,268
Net investment income............................ 985 1,449 405 2,839
Other revenues................................... 195 15 2 212
Net investment gains (losses).................... (194) (282) (45) (521)
Policyholder benefits and claims................. 315 450 27 792
Interest credited to policyholder account
balances....................................... 669 647 -- 1,316
Other expenses................................... 1,045 16 112 1,173
------- ------- ------- --------
Income before provision for income tax........... 419 158 248 825
Provision for income tax......................... 145 55 28 228
------- ------- ------- --------
Net income....................................... $ 274 $ 103 $ 220 $ 597
======= ======= ======= ========
BALANCE SHEET:
Total assets..................................... $76,897 $35,982 $11,208 $124,087
DAC and VOBA..................................... $ 4,946 $ 165 $ -- $ 5,111
Goodwill......................................... $ 234 $ 312 $ 407 $ 953
Separate account assets.......................... $47,566 $ 2,501 $ -- $ 50,067
Policyholder liabilities......................... $24,429 $27,391 $ 4,446 $ 56,266
Separate account liabilities..................... $47,566 $ 2,501 $ -- $ 50,067
F-64
METLIFE INSURANCE COMPANY OF CONNECTICUT
(A Wholly-Owned Subsidiary of MetLife, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
[Enlarge/Download Table]
CORPORATE &
FOR THE YEAR ENDED DECEMBER 31, 2005(1) INDIVIDUAL INSTITUTIONAL OTHER TOTAL
--------------------------------------- ---------- ------------- ----------- --------
(IN MILLIONS)
STATEMENT OF INCOME:
Premiums......................................... $ 152 $ 116 $ 13 $ 281
Universal life and investment-type product policy
fees........................................... 845 17 -- 862
Net investment income............................ 530 712 196 1,438
Other revenues................................... 121 10 1 132
Net investment gains (losses).................... (113) (87) 2 (198)
Policyholder benefits and claims................. 224 324 22 570
Interest credited to policyholder account
balances....................................... 417 303 -- 720
Other expenses................................... 640 30 8 678
------- ------- ------- --------
Income before provision for income tax........... 254 111 182 547
Provision for income tax......................... 53 38 65 156
------- ------- ------- --------
Net income....................................... $ 201 $ 73 $ 117 $ 391
======= ======= ======= ========
BALANCE SHEET:
Total assets..................................... $71,385 $38,072 $11,791 $121,248
DAC and VOBA..................................... $ 4,753 $ 161 $ -- $ 4,914
Goodwill......................................... $ 227 $ 305 $ 392 $ 924
Separate account assets.......................... $41,347 $ 3,177 $ -- $ 44,524
Policyholder liabilities......................... $24,855 $28,340 $ 4,282 $ 57,477
Separate account liabilities..................... $41,347 $ 3,177 $ -- $ 44,524
--------
(1) Includes six months of results for MetLife Connecticut and its
subsidiaries and twelve months of results for MLI-USA.
Net investment income and net investment gains (losses) are based upon the
actual results of each segment's specifically identifiable asset portfolio
adjusted for allocated equity. Other costs are allocated to each of the segments
based upon: (i) a review of the nature of such costs; (ii) time studies
analyzing the amount of employee compensation costs incurred by each segment;
and (iii) cost estimates included in the Company's product pricing.
Revenues derived from any customer did not exceed 10% of consolidated
revenues for the years ended December 31, 2006, 2005 and 2004. Substantially all
of the Company's revenues originated in the United States.
17. DISCONTINUED OPERATIONS
REAL ESTATE
The Company actively manages its real estate portfolio with the objective
of maximizing earnings through selective acquisitions and dispositions. Income
related to real estate classified as held-for-sale or sold is presented in
discontinued operations. These assets are carried at the lower of depreciated
cost or fair value less expected disposition costs.
In the Institutional segment, the Company had $1 million of investment
income and $1 million of investment expense related to discontinued operations
resulting in no change to net investment income for the year ended December 31,
2006. The Company had no investment income or expense related to discontinued
operations for the years ended December 31, 2005 and 2004.
F-65
METLIFE INSURANCE COMPANY OF CONNECTICUT
(A Wholly-Owned Subsidiary of MetLife, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The carrying value of real estate related to discontinued operations was $7
million and $5 million at December 31, 2006 and 2005, respectively.
18. 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:
[Enlarge/Download Table]
NOTIONAL CARRYING ESTIMATED
AMOUNT VALUE FAIR VALUE
DECEMBER 31, 2006 -------- -------- ----------
(IN MILLIONS)
Assets:
Fixed maturity securities............................ $47,846 $47,846
Equity securities.................................... $ 795 $ 795
Mortgage and consumer loans.......................... $ 3,595 $ 3,547
Policy loans......................................... $ 918 $ 918
Short-term investments............................... $ 777 $ 777
Cash and cash equivalents............................ $ 649 $ 649
Accrued investment income............................ $ 597 $ 597
Mortgage loan commitments............................ $665 $ -- $ 1
Commitments to fund bank credit facilities........... $173 $ -- $ --
Liabilities:
Policyholder account balances........................ $29,780 $28,028
Long-term debt -- affiliated......................... $ 435 $ 425
Payables for collateral under securities loaned and
other transactions................................ $ 9,155 $ 9,155
[Enlarge/Download Table]
NOTIONAL CARRYING ESTIMATED
AMOUNT VALUE FAIR VALUE
DECEMBER 31, 2005 -------- -------- ----------
(IN MILLIONS)
Assets:
Fixed maturity securities............................ $52,589 $52,589
Trading Securities................................... $ 452 $ 452
Equity securities.................................... $ 421 $ 421
Mortgage and consumer loans.......................... $ 2,543 $ 2,553
Policy loans......................................... $ 916 $ 916
Short-term investments............................... $ 1,769 $ 1,769
Cash and cash equivalents............................ $ 571 $ 571
Accrued investment income............................ $ 602 $ 602
Mortgage loan commitments............................ $339 $ -- $ (2)
Liabilities:
Policyholder account balances........................ $32,877 $31,621
Long-term debt -- affiliated......................... $ 435 $ 443
Payables for collateral under securities loaned and
other transactions................................ $ 9,737 $ 9,737
F-66
METLIFE INSURANCE COMPANY OF CONNECTICUT
(A Wholly-Owned Subsidiary of MetLife, Inc.)
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, TRADING SECURITIES AND EQUITY SECURITIES
The fair values of publicly held fixed maturity securities and publicly
held equity securities are based on quoted market prices or estimates from
independent pricing services. However, in cases where quoted market prices are
not available, such as for private fixed maturity securities, fair values are
estimated using present value or valuation techniques. The determination of fair
values is based on: (i) valuation methodologies; (ii) securities the Company
deems to be comparable; and (iii) assumptions deemed appropriate given the
circumstances. The fair value estimates 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 AND CONSUMER LOANS, MORTGAGE LOAN COMMITMENTS AND COMMITMENTS TO FUND
BANK CREDIT FACILITIES
Fair values for mortgage and consumer loans are estimated by discounting
expected future cash flows, using current interest rates for similar loans with
similar credit risk. For mortgage loan commitments and commitments to fund bank
credit facilities, 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.
LONG-TERM DEBT
The fair values of long-term debt are determined by discounting expected
future cash flows using risk rates currently available for debt with similar
terms and remaining maturities.
PAYABLES FOR COLLATERAL UNDER SECURITIES LOANED AND OTHER TRANSACTIONS
The carrying value for payables for collateral under securities loaned and
other transactions approximate fair value.
F-67
METLIFE INSURANCE COMPANY OF CONNECTICUT
(A Wholly-Owned Subsidiary of MetLife, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DERIVATIVE FINANCIAL INSTRUMENTS
The fair value of derivative financial instruments, including financial
futures, financial forwards, interest rate, credit default and foreign currency
swaps, foreign currency forwards, caps, floors, and options are based upon
quotations obtained from dealers or other reliable sources. See Note 5 for
derivative fair value disclosures.
19. RELATED PARTY TRANSACTIONS
SERVICE AGREEMENTS
The Company has entered into a Master Service Agreement with Metropolitan
Life who provides administrative, accounting, legal and similar services to the
Company. Metropolitan Life charged the Company $167 million, $15 million and $14
million, included in other expenses, for services performed under the Master
Service Agreement for the years ended December 31, 2006, 2005 and 2004,
respectively.
The Company entered into a Service Agreement with MetLife Group, Inc.
("MetLife Group"), a wholly-owned subsidiary of MetLife, under which MetLife
Group provides personnel services, as needed, to support the activities of the
Company. MetLife Group charged the Company $154 million, $49 million and $43
million, included in other expenses, for services performed under the Service
Agreement for the years ended December 31, 2006, 2005 and 2004, respectively.
The Company has entered into various agreements with other affiliates for
services necessary to conduct its activities. Typical services provided under
these agreements include management, policy administrative functions, investment
advice and distribution services. Expenses and fees incurred with affiliates
related to these agreements, recorded in other expenses, were $190 million, $48
million and $52 million for the years ended December 31, 2006, 2005 and 2004,
respectively.
In 2005, MLI-USA entered into Broker-Dealer Wholesale Sales Agreements with
several affiliates ("Distributors"), in which the Distributors agree to sell, on
MLI-USA's behalf, fixed rate insurance products through authorized retailers.
MLI-USA agrees to compensate the Distributors for the sale and servicing of such
insurance products in accordance with the terms of the agreements. The
Distributors charged MLI-USA $65 million, included in other expenses, for the
year ended December 31, 2006. MLI-USA did not incur any such expenses for the
years ended December 31, 2005 and 2004.
The Company had payables from affiliates of $9 million and $3 million at
December 31, 2006 and 2005, respectively, excluding affiliated reinsurance
balances discussed below.
INVESTMENT TRANSACTIONS
As of December 31, 2006 and 2005, the Company held $581 million and $346
million, respectively, of its total invested assets in the MetLife Money Market
Pool and the MetLife Intermediate Income Pool which are affiliated partnerships.
These amounts are included in short-term investments.
In the normal course of business, the Company transfers invested assets,
primarily consisting of fixed maturity securities, to and from affiliates.
Assets transferred to and from affiliates, inclusive of amounts related to
reinsurance agreements, are as follows:
[Download Table]
YEARS ENDED
DECEMBER 31,
------------------
2006 2005 2004
---- ---- ----
(IN MILLIONS)
Fair market value of assets transferred to affiliates........ $164 $ 79 $320
Amortized cost of assets transferred to affiliates........... $164 $ 78 $324
Net investment gains (losses) recognized on transfers........ $ -- $ 1 $ (4)
Fair market value of assets transferred from affiliates...... $ 89 $830 $ --
F-68
METLIFE INSURANCE COMPANY OF CONNECTICUT
(A Wholly-Owned Subsidiary of MetLife, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
REINSURANCE TRANSACTIONS
As of December 1, 2006, the Company acquired a block of structured
settlement business from Texas Life Insurance Company ("Texas Life"), a wholly-
owned subsidiary of MetLife, through an assumptive reinsurance agreement. This
transaction increased future policyholder benefits of the Company by $1.3
billion and decreased deferred income tax liabilities by $142 million. A
receivable at December 31, 2006 was held by the Company of $1.2 billion, related
to premiums and other consideration which is expected to be paid by Texas Life
during the first quarter of 2007.
The Company also has reinsurance agreements with MetLife and certain of its
subsidiaries, including Metropolitan Life, Reinsurance Group of America,
Incorporated, MetLife Reinsurance Company of South Carolina, Exeter Reassurance
Company, Ltd., General American Life Insurance Company ("GALIC"), and Mitsui
Sumitomo MetLife Insurance Co., Ltd. As of December 31, 2006, the Company had
reinsurance related assets and liabilities from these agreements totaling $2.8
billion and $1.2 billion, respectively. Prior-year comparable assets and
liabilities were $2.5 billion and $1.2 billion, respectively.
Effective January 1, 2005, MLI-USA entered into a reinsurance agreement to
assume an in-force block of business from GALIC. This agreement covered certain
term and universal life policies issued by GALIC on and after January 1, 2000
through December 31, 2004. This agreement also covers certain term and universal
life policies issued on or after January 1, 2005. Under this agreement GALIC
transferred $797 million of liabilities and $411 million in assets to MLI-USA
related to the policies in-force as of December 31, 2004. MLI-USA also paid and
deferred 100% of a ceding commission to GALIC of $386 million resulting in no
gain or loss on the transfer of the in-force business as of January 1, 2005.
The following tables reflect related party reinsurance information:
[Download Table]
YEARS ENDED
DECEMBER 31,
-------------------
2006 2005 2004
---- ----- ----
(IN MILLIONS)
Assumed premiums....................................... $ 21 $ 37 $--
Assumed fees, included in universal life and
investment-type product policy fees.................. 65 194 --
Assumed fees, included in net investment gains
(losses)............................................. -- 6 --
Assumed benefits, included in policyholder benefits and
claims............................................... 11 32 --
Assumed benefits, included in interest credited to
policyholder account balances........................ 49 42 --
Assumed fees, included in other expenses............... 39 543 --
Assumed deferred acquisition costs, included in other
expenses............................................. 19 (432) --
---- ----- ---
Total assumed........................................ $204 $ 422 $--
==== ===== ===
Ceded premiums......................................... $ 21 $ 12 $ 1
Ceded fees, included in universal life and investment-
type product policy fees............................. 130 93 37
Ceded fees, included in other revenues................. 68 55 12
Ceded benefits, included in policyholder benefits and
claims............................................... 86 92 19
Ceded fees, included in other expenses................. 64 97 --
Ceded deferred acquisition costs, included in other
expenses............................................. 13 85 --
Ceded derivative gains (loss), included in net
investment gains (losses)............................ (31) 5 --
---- ----- ---
Total ceded.......................................... $351 $ 439 $69
==== ===== ===
F-69
METLIFE INSURANCE COMPANY OF CONNECTICUT
(A Wholly-Owned Subsidiary of MetLife, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
[Download Table]
DECEMBER 31,
---------------
2006 2005
------ ------
(IN MILLIONS)
Reinsurance recoverables, included in premiums and other
receivables................................................... $2,359 $2,079
Reinsurance recoverables, included in other assets.............. $ 89 $ 88
Assumed (ceded) deferred acquisition costs, included in DAC..... $ 306 $ 342
Assumed liabilities, included in other liabilities.............. $ 8 $ 24
Ceded balances payable, included in other liabilities........... $ 55 $ 140
Derivative liabilities, included in policyholder account
balances...................................................... $ (57) $ (23)
Assumed liabilities, included in future policy benefits......... $ 26 $ 23
Assumed liabilities, included in other policyholder funds....... $1,182 $1,001
20. SUBSEQUENT EVENT
On March 27, 2007, the Company entered into a secured demand note with
MetLife Securities, Inc. ("MSI") under which the Company agreed to fund MSI with
up to $60 million of cash upon MSI's request. In connection with this agreement,
the Company transferred securities with a fair value of $71 million to an MSI
custody account to secure the note.
On September 28, 2007, the Board of Directors declared a dividend of up to
$690 million. On October 22, 2007, MICC paid a $690 million dividend, of which
$404 million was a return of capital.
F-70
METLIFE INSURANCE COMPANY OF CONNECTICUT
(A Wholly-Owned Subsidiary of MetLife, Inc.)
SCHEDULE I
CONSOLIDATED SUMMARY OF INVESTMENTS --
OTHER THAN INVESTMENTS IN RELATED PARTIES
DECEMBER 31, 2006
(IN MILLIONS)
[Enlarge/Download Table]
AMOUNT AT
COST OR ESTIMATED WHICH SHOWN ON
AMORTIZED COST(1) FAIR VALUE BALANCE SHEET
----------------- ---------- --------------
TYPE OF INVESTMENTS
Fixed Maturity Securities:
Bonds:
U.S. Treasury/agency securities.......... $ 5,455 $ 5,336 $ 5,336
State and political subdivision
securities............................. 1,062 1,030 1,030
Foreign government securities............ 533 573 573
Public utilities......................... 2,274 2,233 2,233
All other corporate bonds................ 19,390 19,057 19,057
Mortgage-backed and other asset-backed
securities............................... 18,462 18,400 18,400
Redeemable preferred stock.................. 1,230 1,217 1,217
------- ------- -------
Total fixed maturity securities.......... 48,406 47,846 47,846
------- ------- -------
Equity Securities:
Common stock:
Banks, trust and insurance companies..... 1 1 1
Industrial, miscellaneous and all other.. 105 110 110
Non-redeemable preferred stock.............. 671 684 684
------- ------- -------
Total equity securities.................. 777 795 795
------- ------- -------
Mortgage and consumer loans................... 3,595 3,595
Policy loans.................................. 918 918
Real estate and real estate joint ventures.... 180 180
Other limited partnership interests........... 1,082 1,082
Short-term investments........................ 777 777
Other invested assets......................... 1,241 1,241
------- -------
Total investments........................ $56,976 $56,434
======= =======
--------
(1) Cost for fixed maturity securities and mortgage and consumer loans
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; for real estate, cost represents
original cost reduced by writedowns and adjusted for valuation allowances
and depreciation; 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-71
METLIFE INSURANCE COMPANY OF CONNECTICUT
(A Wholly-Owned Subsidiary of MetLife, Inc.)
SCHEDULE II
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
DECEMBER 31, 2006 AND 2005
(IN MILLIONS)
[Download Table]
2006 2005
------- -------
CONDENSED BALANCE SHEETS
ASSETS
Investments:
Fixed maturity securities available-for-sale, at estimated
fair value (amortized cost: $38,293 and $42,526,
respectively)............................................ $37,794 $41,947
Equity securities available-for-sale, at estimated fair
value (cost: $703 and $418, respectively)................ 719 415
Mortgage and consumer loans................................. 2,822 1,837
Policy loans................................................ 825 843
Real estate and real estate joint ventures held-for-
investment............................................... 143 71
Real estate held-for-sale................................... 7 --
Other limited partnership interests......................... 884 1,106
Short-term investments...................................... 186 1,219
Investment in subsidiaries.................................. 3,499 3,187
Other invested assets....................................... 893 698
------- -------
Total investments........................................ 47,772 51,323
Cash and cash equivalents..................................... 291 331
Accrued investment income..................................... 473 474
Premiums and other receivables................................ 6,128 4,706
Deferred policy acquisition costs and value of business
acquired.................................................... 1,849 1,924
Current income tax recoverable................................ -- 56
Deferred income tax assets.................................... 1,281 1,113
Goodwill...................................................... 646 612
Other assets.................................................. 129 102
Separate account assets....................................... 19,205 19,058
------- -------
Total assets............................................. $77,774 $79,699
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Future policy benefits...................................... $17,613 $16,337
Policyholder account balances............................... 24,764 27,298
Other policyholder funds.................................... 213 219
Current income taxes payable................................ 46 --
Payables for collateral under securities loaned and other
transactions............................................. 8,152 8,620
Other liabilities........................................... 366 734
Separate account liabilities................................ 19,205 19,058
------- -------
Total liabilities........................................ 70,359 72,266
------- -------
STOCKHOLDERS' EQUITY:
Common stock, par value $2.50 per share; 40,000,000 shares
authorized; 34,595,317 shares issued and outstanding at
December 31, 2006 and 2005.................................. 86 86
Additional paid-in capital.................................... 7,123 7,180
Retained earnings............................................. 520 581
Accumulated other comprehensive income (loss)................. (314) (414)
------- -------
Total stockholders' equity............................... 7,415 7,433
------- -------
Total liabilities and stockholders' equity............... $77,774 $79,699
======= =======
See accompanying notes to condensed financial information.
F-72
METLIFE INSURANCE COMPANY OF CONNECTICUT
(A Wholly-Owned Subsidiary of MetLife, Inc.)
SCHEDULE II
CONDENSED FINANCIAL INFORMATION OF REGISTRANT -- (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005
(IN MILLIONS)
[Download Table]
YEARS ENDED DECEMBER
31,
--------------------
2006 2005
------ ------
CONDENSED STATEMENTS OF INCOME
REVENUES
Premiums..................................................... $ 176 $ 206
Universal life and investment-type product policy fees....... 381 185
Net investment income........................................ 2,167 1,044
Equity in earnings of subsidiaries........................... 277 225
Other revenues............................................... 42 32
Net investment gains (losses)................................ (397) (159)
------ ------
Total revenues............................................. 2,646 1,533
------ ------
EXPENSES
Policyholder benefits and claims............................. 599 433
Interest credited to policyholder account balances........... 926 429
Other expenses............................................... 388 195
------ ------
Total expenses............................................. 1,913 1,057
------ ------
Income before provision for income tax....................... 733 476
Provision for income tax..................................... 136 85
------ ------
Net income................................................... $ 597 $ 391
====== ======
See accompanying notes to condensed financial information.
F-73
METLIFE INSURANCE COMPANY OF CONNECTICUT
(A Wholly-Owned Subsidiary of MetLife, Inc.)
SCHEDULE II
CONDENSED FINANCIAL INFORMATION OF REGISTRANT -- (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005
(IN MILLIONS)
[Enlarge/Download Table]
YEARS ENDED DECEMBER
31,
-----------------------
2006 2005
-------- --------
CONDENSED STATEMENT OF CASH FLOWS
Net cash provided by operating activities.................. $ 899 $ 2,000
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Sales, maturities and repayments of:
Fixed maturity securities............................. 22,406 18,453
Equity securities..................................... 218 181
Mortgage and consumer loans........................... 878 687
Real estate and real estate joint ventures............ 127 44
Other limited partnership interests................... 537 152
Purchases of:
Fixed maturity securities............................. (19,021) (26,517)
Equity securities..................................... (62) --
Mortgage and consumer loans........................... (1,870) (460)
Real estate and real estate joint ventures............ (53) --
Other limited partnership interests................... (295) (233)
Net change in policy loans............................... 18 5
Net change in short-term investments..................... 1,033 633
Net change in other invested assets...................... (129) (728)
Other, net............................................... (1) 17
-------- --------
Net cash provided by (used in) investing activities........ $ 3,786 $ (7,766)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Policyholder account balances:
Deposits.............................................. $ 1,633 $ 7,075
Withdrawals........................................... (4,936) (8,682)
Net change in payables for collateral under securities
loaned and other transactions......................... (468) 7,458
Dividends on common stock................................ (917) --
Other, net............................................... (37) (61)
-------- --------
Net cash (used in) provided by financing activities........ (4,725) 5,790
-------- --------
Change in cash and cash equivalents........................ (40) 24
Cash and cash equivalents, beginning of period............. 331 307
-------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD................... $ 291 $ 331
======== ========
Supplemental disclosures of cash flow information:
Net cash paid during the year for:
Income tax............................................ $ 88 $ 51
======== ========
Non-cash transactions during the period:
Contribution of other intangible assets, net of income
tax................................................. $ 162 $ --
Contribution of goodwill from MetLife, Inc. .......... $ 32 $ --
======== ========
F-74
METLIFE INSURANCE COMPANY OF CONNECTICUT
(A Wholly-Owned Subsidiary of MetLife, Inc.)
SCHEDULE II
NOTES TO CONDENSED FINANCIAL INFORMATION OF REGISTRANT
1. SUMMARY OF ACCOUNTING POLICIES
BUSINESS
"MICC" or the "Company" refers to MetLife Insurance Company of Connecticut
(formerly, The Travelers Insurance Company), a Connecticut corporation
incorporated in 1863 ("MetLife Connecticut"), and its subsidiaries, including
MetLife Life and Annuity Company of Connecticut ("MLAC," formerly The Travelers
Life and Annuity Company) and MetLife Investors USA Insurance Company ("MLI-
USA"). The Company is a subsidiary of MetLife, Inc. ("MetLife"). The Company
offers individual annuities, individual life insurance, and institutional
protection and asset accumulation products.
On July 1, 2005 (the "Acquisition Date"), MetLife Connecticut became a
wholly-owned subsidiary of MetLife. MetLife Connecticut, together with
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 of the consolidated
financial statements for further information on the Acquisition.
On October 11, 2006, MetLife Connecticut and MetLife Investors Group, Inc.
("MLIG"), both subsidiaries of MetLife, entered into a Transfer Agreement
("Transfer Agreement"), pursuant to which MetLife Connecticut agreed to acquire
all of the outstanding stock of MLI-USA from MLIG in exchange for shares of
MetLife Connecticut's common stock. To effectuate the exchange of shares,
MetLife returned 10,000,000 shares just prior to the closing of the transaction
and retained 30,000,000 shares representing 100% of the issued and outstanding
shares of MetLife Connecticut. MetLife Connecticut issued 4,595,317 new shares
to MLIG in exchange for all of the outstanding common stock of MLI-USA. After
the closing of the transaction, 34,595,317 shares of MetLife Connecticut's
common stock are outstanding, of which MLIG holds 4,595,317 shares, with the
remaining shares held by MetLife.
The transfer of MLI-USA to MetLife Connecticut was a transaction between
entities under common control. Since MLI-USA was the original entity under
common control, for financial statement reporting purposes, MLI-USA is
considered the accounting acquirer of MetLife Connecticut. Accordingly,
financial information of the registrant has been provided for periods subsequent
to the Acquisition Date only.
BASIS OF PRESENTATION
The condensed financial information of MetLife Connecticut should be read
in conjunction with the Consolidated Financial Statements of MICC and the notes
thereto (the "Consolidated Financial Statements"). These condensed
nonconsolidated financial statements reflect the results of operations,
financial condition and cash flows for MetLife Connecticut. Investments in
subsidiaries are accounted for using the equity method of accounting prescribed
by Accounting Principles Board ("APB") Opinion No. 18, The Equity Method of
Accounting for Investments in Common Stock. The condensed statement of income
and statement of cash flows for the year ended December 31, 2005 included herein
reflect the full year of operating results for MLI-USA in equity in earnings of
subsidiaries.
MetLife Connecticut's financial statements are prepared in conformity with
accounting principles generally accepted in the United States of America
("GAAP") except as stated above which requires management to make certain
estimates and assumptions. The most important of these estimates and assumptions
relate to fair value measurements, the accounting for goodwill and identifiable
intangible assets and the provision for potential losses that may arise from
litigation and regulatory proceedings and tax audits, which may affect the
amounts reported in the condensed financial statements and accompanying notes.
Actual results could differ materially from these estimates.
For information on the following, refer to the indicated Notes to the
Consolidated Financial Statements of MICC:
- Business, Basis of Presentation and Summary of Significant Accounting
Policies (Note 1)
- Acquisition of MetLife Insurance Company of Connecticut by MetLife, Inc.
from Citigroup Inc. (Note 2)
F-75
- Contingencies, Commitments and Guarantees (Note 12)
- Equity (Note 14)
2. SUPPORT AGREEMENT
MetLife Connecticut entered into a net worth maintenance agreement with its
indirect subsidiary, MetLife Europe Limited, an Irish company ("MetLife
Europe"), in connection with MetLife Europe's formation. Under the agreement,
MetLife Connecticut has agreed, without limitation as to amount, to cause
MetLife Europe to have a minimum capital and surplus of the greater of EUR 14
million or an amount sufficient to provide solvency cover equal to 200% of the
minimum solvency cover required by applicable law and regulation, as interpreted
by the Irish Financial Services Regulatory Authority or any successor body,
during MetLife Europe's first three years of operation and 150% thereafter, and
liquidity necessary to enable it to meet its current obligations on a timely
basis. At December 31, 2006, the capital and surplus of MetLife Europe was in
excess of the minimum capital and surplus amount referenced above.
F-76
METLIFE INSURANCE COMPANY OF CONNECTICUT
(A Wholly-Owned Subsidiary of MetLife, Inc.)
SCHEDULE III
CONSOLIDATED SUPPLEMENTARY INSURANCE INFORMATION
AS OF DECEMBER 31, 2006, 2005 AND 2004
(IN MILLIONS)
[Enlarge/Download Table]
DAC FUTURE POLICY POLICYHOLDER
AND BENEFITS AND OTHER ACCOUNT UNEARNED
SEGMENT VOBA POLICYHOLDER FUNDS BALANCES REVENUE(1)
------- ------ ------------------ ------------ ----------
2006
Individual................................ $4,946 $ 3,769 $20,660 $260
Institutional............................. 165 12,895 14,496 3
Corporate & Other......................... -- 4,503 (57) --
------ ------- ------- ----
$5,111 $21,167 $35,099 $263
====== ======= ======= ====
2005
Individual................................ $4,753 $ 3,452 $21,403 $141
Institutional............................. 161 11,880 16,460 1
Corporate & Other......................... -- 4,305 (23) --
------ ------- ------- ----
$4,914 $19,637 $37,840 $142
====== ======= ======= ====
2004(2)................................... $ 678 $ 149 $ 4,591 $ 6
====== ======= ======= ====
--------
(1) Amounts are included within the future policy benefits and other
policyholder funds column.
(2) Prior to the Acquisition of MetLife Connecticut by MetLife, MLI-USA
operated as a single segment.
F-77
METLIFE INSURANCE COMPANY OF CONNECTICUT
(A Wholly-Owned Subsidiary of MetLife, Inc.)
SCHEDULE III
CONSOLIDATED SUPPLEMENTARY INSURANCE INFORMATION
FOR THE YEARS ENDED DECEMBER 31, 2006, 2005 AND 2004
(IN MILLIONS)
[Enlarge/Download Table]
PREMIUM POLICYHOLDER AMORTIZATION OF
REVENUE NET BENEFITS AND DAC AND VOBA OTHER PREMIUMS
AND POLICY INVESTMENT INTEREST CHARGED TO OPERATING WRITTEN
SEGMENT CHARGES INCOME CREDITED OTHER EXPENSES EXPENSES(1) (EXCLUDING LIFE)
------- ---------- ---------- ------------ --------------- ----------- ----------------
2006
Individual................. $1,462 $ 985 $ 984 $481 $564 $--
Institutional.............. 89 1,449 1,097 6 10 9
Corporate & Other.......... 25 405 27 1 111 25
------ ------ ------ ---- ---- ---
$1,576 $2,839 $2,108 $488 $685 $34
====== ====== ====== ==== ==== ===
2005(2)
Individual................. $ 997 $ 530 $ 641 $287 $353 $--
Institutional.............. 133 712 627 1 29 9
Corporate & Other.......... 13 196 22 -- 8 13
------ ------ ------ ---- ---- ---
$1,143 $1,438 $1,290 $288 $390 $22
====== ====== ====== ==== ==== ===
2004(3).................... $ 168 $ 207 $ 171 $115 $ 64 $--
====== ====== ====== ==== ==== ===
--------
(1) Includes other expenses excluding amortization of deferred acquisition
costs and value of business acquired charged to other expenses.
(2) Includes six months of results for MetLife Connecticut and twelve months
of results for MLI-USA.
(3) Prior to the acquisition of MetLife Connecticut by MetLife, MLI-USA
operated as a single segment.
F-78
METLIFE INSURANCE COMPANY OF CONNECTICUT
(A Wholly-Owned Subsidiary of MetLife, Inc.)
SCHEDULE IV
CONSOLIDATED REINSURANCE
FOR THE YEARS ENDED DECEMBER 31, 2006, 2005 AND 2004
(IN MILLIONS)
[Download Table]
% AMOUNT
ASSUMED
GROSS AMOUNT CEDED ASSUMED NET AMOUNT TO NET
------------ -------- ------- ---------- --------
2006
Life insurance in force....... $153,390 $119,281 $14,374 $48,483 29.6%
======== ======== ======= =======
Insurance premium
Life insurance................ $ 323 $ 72 $ 21 $ 272 7.7%
Accident and health........... 276 240 -- 36 --%
-------- -------- ------- -------
Total insurance premium..... $ 599 $ 312 $ 21 $ 308 6.8%
======== ======== ======= =======
[Download Table]
% AMOUNT
ASSUMED
GROSS AMOUNT CEDED ASSUMED NET AMOUNT TO NET
------------ ------- ------- ---------- --------
2005
Life insurance in force....... $126,362 $93,686 $16,921 $49,597 34.1%
======== ======= ======= =======
Insurance premium
Life insurance................ $ 269 $ 45 $ 38 $ 262 14.5%
Accident and health........... 144 125 -- 19 --%
-------- ------- ------- -------
Total insurance premium..... $ 413 $ 170 $ 38 $ 281 13.5%
======== ======= ======= =======
[Download Table]
% AMOUNT
ASSUMED
GROSS AMOUNT CEDED ASSUMED NET AMOUNT TO NET
------------ ------ ------- ---------- --------
2004
Life insurance in force........ $4,310 $2,759 $-- $1,551 --%
====== ====== === ======
Insurance premium
Life insurance................. $ 13 $ 4 $-- $ 9 --%
------ ------ --- ------
Total insurance premium...... $ 13 $ 4 $-- $ 9 --%
====== ====== === ======
For the year ended December 31, 2006, both reinsurance ceded and assumed
include affiliated transactions of $21 million. For the year ended December 31,
2005, reinsurance ceded and assumed include affiliated transactions of $12
million and $38 million, respectively. For the year ended December 31, 2004,
both reinsurance ceded and assumed include affiliated transactions of $1
million.
F-79
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 Insurance Company
of Connecticut and subsidiaries and the report of Independent Registered Public
Accounting Firm thereto are contained in the Statement of Additional
Information. The consolidated financial statements of MetLife Insurance Company
of Connecticut and subsidiaries include:
(1) Consolidated Balance Sheets as of December 31, 2006 and 2005
(2) Consolidated Statements of Income for the years ended December 31,
2006, 2005 and 2004
(3) Consolidated Statements of Stockholder's Equity for the years ended
December 31, 2006, 2005 and 2004.
(4) Consolidated Statements of Cash Flows for the years ended December 31,
2006, 2005 and 2004
(5) Notes to Consolidated Financial Statements
(6) Financial Statement Schedules
(b) Exhibits
[Download Table]
EXHIBIT
NUMBER DESCRIPTION
------- -----------
1. Resolution of The Travelers Insurance Company Board of Directors
authorizing the establishment of the Registrant. (Incorporated herein
by reference to Exhibit 1 to the Registration Statement on Form N-4,
File No. 333-82009, filed June 30, 1999.)
2. Not Applicable.
3(a). Distribution and Principal Underwriting Agreement among the
Registrant, The Travelers Insurance Company and Travelers
Distribution LLC (Incorporated herein by reference to Exhibit 3(a)
to Post Effective Amendment No. 4 to the Registration Statement on
Form N-4, File No. 333-58783 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 to the 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 for Variable Annuities to
the Registration Statement on Form N-4, File No. 033-65343/811-07465
filed April 4, 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 for Variable Annuities to the Registration
Statement on Form N-4, File No. 033-65343/811-07465 filed April 4,
2007.)
4(a). Variable Annuity Contract. (Incorporated herein by reference to
Exhibit 4 to the Registration Statement on Form N-4, File No. 333-
82009, filed on September 29, 1999.)
4(b). Variable Annuity Contract. (Incorporated herein by reference to
Exhibit 4(b) to the Registration Statement on Form N-4, File No. 333-
65926, filed on June 11, 2003.)
4(c). Death Benefit Endorsement A. (Incorporated herein by reference to
Exhibit 4(c) to the Registration Statement on Form N-4, File No. 333-
65926, filed on June 11, 2003.)
[Download Table]
EXHIBIT
NUMBER DESCRIPTION
------- -----------
4(d). Death Benefit Endorsement B. (Incorporated herein by reference to
Exhibit 4(d) to the Registration Statement on Form N-4, File No. 333-
65926, filed on June 11, 2003.)
4(e). Deferred Annual Step-Up Death Benefit Endorsement. (Incorporated
herein by reference to Exhibit 4(e) to the Registration Statement on
Form N-4, File No. 333-65926, filed on June 11, 2003.)
4(f). Guaranteed Minimum Withdrawal Rider. (Incorporated herein by
reference to Exhibit 4(f) to the Registration Statement on Form N-4,
File No. 333-65926, filed on June 11, 2003.)
4(f)(1). Form of Guaranteed Minimum Withdrawal Rider. (Incorporated herein by
reference to Exhibit 4 to Post-Effective Amendment No. 4 to the
Registration Statement on Form N-4, file No. 333-101778, filed
November 19, 2004.)
4(g). Spousal Continuation Rider. (Incorporated herein by reference to
Exhibit 4(g) to the Registration Statement on Form N-4, File No. 333-
65926, filed on June 11, 2003.)
4(h). Beneficiary Rider. (Incorporated herein by reference to Exhibit 4(h)
to the Registration Statement on Form N-4, File No. 333-65926, filed
on June 11, 2003.)
4(i). Planned Death Benefit Settlement Options Rider. (Incorporated herein
by reference to Exhibit 4(i) to the Registration Statement on Form N-
4, File No. 333-65926, filed on June 11, 2003.).
4(j). Inherited Contract Rider. (Incorporated herein by reference to
Exhibit 4(j) to the Registration Statement on Form N-4, File No. 333-
65926, filed on June 11, 2003.)
4(k). Fixed Account Interest Rate Endorsement. (Incorporated herein by
reference to Exhibit 4(k) to the Registration Statement on Form N-4,
File No. 333-65926, filed on June 11, 2003.).
4(l). Enhanced Stepped-Up Provision Rider 15 -- Vintage L. (Incorporated
herein by reference to Exhibit 4(l) to the Registration Statement on
Form N-4, File No. 333-65926, filed on June 11, 2003.).
4(m). Enhanced Stepped-Up Provision Rider 20 -- Portfolio Architect L,
Pioneer L. (Incorporated herein by reference to Exhibit 4(m) to the
Registration Statement on Form N-4, File No. 333-65926, filed on June
11, 2003.)
4(n). Guaranteed Minimum Withdrawal Rider For Life. (Incorporated herein
by reference to Exhibit 4(n) to Post-Effective Amendment No. 7 to the
Registration Statement on Form N-4, File No. 333-65926, filed on
December 23, 2005.)
4(o). Company Name Change Endorsement The Travelers Insurance Company
effective May 1, 2006. (Incorporated herein by reference to Exhibit
4(c) to Post-Effective Amendment No. 14 to The Travelers Fund ABD for
Variable Annuities to the Registration Statement on Form N-4, File
No. 033-65343 filed April 6, 2006.)
4(p). Roth 401 Endorsement. (Incorporated herein by reference to Exhibit
4(d) to Post-Effective Amendment No. 14 to The Travelers Fund ABD for
Variable Annuities to the Registration Statement on Form N-4, File
No. 033-65343 filed April 6, 2006.
4(q). Roth 403(b) Endorsement. (Incorporated herein by reference to
Exhibit 4(e) to Post-Effective Amendment No. 14 to The Travelers Fund
ABD for Variable Annuities to the Registration Statement on Form N-4,
File No. 033-65343 filed April 6, 2006.
5(a). Application. (Incorporated herein by reference to Exhibit 5 to Post-
Effective Amendment No. 5 to the Registration Statement on Form N-4,
File No. 333-82009 filed on June 11, 2003.)
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 to the Registration
Statement on Form N-4, File No. 033-65343 filed April 6, 2006.)
6(a). Charter of The Travelers Insurance Company, as amended on October 19,
1994. (Incorporated herein by reference to Exhibit 6(a) to the
Registration Statement on Form N-4, File No. 333-40193, filed
November 13, 1998.)
6(b). By-Laws of The Travelers Insurance Company, as amended on October 20,
1994. (Incorporated herein by reference to Exhibit 6(b) to the
Registration Statement on Form N-4, File No. 333-40193, filed
November 13, 1998.)
[Download Table]
EXHIBIT
NUMBER DESCRIPTION
------- -----------
6(c). Certificate of Amendment of the Charter as Amended and Restated of
The Travelers Insurance Company effective May 1, 2006. (Incorporated
herein by reference to Exhibit 6(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.)
6(d). Certificate of Correction of MetLife Insurance Company of
Connecticut. Filed herewith.
7. Specimen Reinsurance Agreement. (Incorporated herein by reference to
Exhibit 7 to Post-Effective Amendment No. 2 to the 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 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.)
8(d). Participation Agreement Among Metropolitan Series Fund, Inc., MetLife
Advisors, LLC, MetLife Securities, Inc. and MetLife Insurance Company
of Connecticut (effective April 30, 2007). Filed herewith.
8(e). Participation Agreement Among Metropolitan Series Fund, Inc., MetLife
Advisors, LLC, MetLife Investors Distribution Company and MetLife
Insurance Company of Connecticut (effective August 31, 2007). Filed
herewith.
9(a). Opinion of Counsel as to the legality of securities being registered.
(Incorporated herein by reference to Exhibit 9 to the Registration
Statement on Form N-4, File No. 333-82009, filed June 30, 1999.)
9(b). Opinion of Counsel as to the legality of securities being registered.
(Incorporated herein by reference to Exhibit 9(b) to the Registration
Statement on Form N-4, File No. 333-65926, filed on June 11, 2003.)
10. 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. (Incorporated herein by reference to Exhibit 13 to Post-Effective
Amendment No. 10 to the Registration Statement on Form N-4, File No.
33-65926, filed on April 5, 2007.)
ITEM 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
Principal Business Address:
MetLife Insurance Company of Connecticut
One Cityplace
Hartford, CT 06103-3415
[Download Table]
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
1 Metlife Plaza
27-01 Queens Plaza North
Long Island City, NY 11101
Lisa M. Weber Director
1 MetLife Plaza
27-01 Queens Plaza North
Long Island City, NY 11101
[Enlarge/Download Table]
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH INSURANCE COMPANY
-------------------------------- ---------------------------------------------------------------------
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
1 MetLife Plaza
27-01 Queens Plaza North
Long Island City, NY 11101
Joseph J. Prochaska, Jr. Executive Vice President and Chief Accounting Officer
1 MetLife Plaza
27-01 Queens Plaza North
Long Island City, NY 11101
Stanley J. Talbi Executive Vice President and Chief Financial Officer
1 MetLife Plaza
27-01 Queens Plaza North
Long Island City, NY 11101
Gwenn L. Carr Senior Vice President and Secretary
1 MetLife Plaza
27-01 Queens Plaza North
Long Island City, NY 11101
Eric T. Steigerwalt Senior Vice President and Treasurer
1 MetLife Plaza
27-01 Queens Plaza North
Long Island City, NY 11101
William D. Cammarata Senior Vice President
1 MetLife Plaza
27-01 Queens Plaza North
Long Island City, NY 11101
Elizabeth M. Forget Senior Vice President
260 Madison Avenue
New York, NY 10016
Gene L. Lunman Senior Vice President
185 Asylum Street
Hartford, CT 06103
Roberto Baron Vice President and Senior Actuary
1 MetLife Plaza
27-01 Queens Plaza North
Long Island City, NY 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
Christopher A. Kremer Vice President and Actuary
501 Boylston Street
Boston, MA 02116
Patrick D. Studley Vice President and Actuary
1 MeftLife Plaza
27-01 Queens Plaza North
Long Island City, NY 11101
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
1 MetLife Plaza
27-01 Queens Plaza North
Long Island City, NY 11101
[Enlarge/Download Table]
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH INSURANCE COMPANY
-------------------------------- ---------------------------------------------------------------------
Herbert B. Brown Vice President
1 MetLife Plaza
27-01 Queens Plaza North
Long Island City, New York 11101
Vincent Cirulli Vice President
10 Park Avenue
Morristown, NJ 07962
Judith A. Gulotta Vice President
10 Park Avenue
Morristown, NJ 07962
Gregory M. Harrison Vice President
1 MetLife Plaza
27-01 Queens Plaza North
Long Island City, NY 11101
C. Scott Inglis Vice President
10 Park Avenue
Morristown, NJ 07962
James W. Koeger Vice President
13045 Tesson Ferry Road
St. Louis, MO 63128
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
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 Insurance 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 SEPTEMBER 30, 2007
The following is a list of subsidiaries of MetLife, Inc. updated as of September
30, 2007. 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)
5. Entrecap Real Estate II, LLC (DE)
a) PREFCO Dix-Huit LLC (CT)
b) PREFCO X Holdings LLC (CT)
c) PREFCO Ten Limited Partnership (CT) - a 99.9% limited
partnership interest of PREFCO Ten Limited Partnership is held
by Entrecap Real Estate II, LLC and 0.1% general
partnership is held by PREFCO X Holdings LLC.
a) PREFCO Vingt LLC (CT)
b) PREFCO Twenty Limited Partnership (CT) - a 99% limited
partnership interest of PREFCO Twenty Limited Partnership is
held by Entrecap Real Estate II, LLC and 1% general
partnership is held by PREFCO Vingt LLC.
6. Plaza Drive Properties, LLC (DE)
7. MTL Leasing, LLC (DE)
a) PREFCO IX Realty LLC (CT)
b) PREFCO XIV Holdings LLC (CT)
c) PREFCO Fourteen Limited Partnership (CT) - a 99.9% limited
partnership interest of PREFCO Fourteen Limited Partnership
is held by MTL Leasing, LLC and 0.1% general partnership is
held by PREFCO XIV Holdings LLC.
F. MetLife Pensiones 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)- 99.99905% is owned by MetLife International Holdings, Inc.
and 0.00095% 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)-
74.5485235740% is owned by MetLife International Holdings, Inc.
and 25.451476126% is owned by MetLife Worldwide Holdings, Inc. and
0.0000003% 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 Insurance Limited (Australia)
a) MetLife Insurance and Investment Trust (Australia)
b) MetLife Investments Pty Limited (Australia)
c) MetLife Services (Singapore) PTE Limited (Australia)
18. 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.
19. 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.
20. 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.
21. MetLife Worldwide Holdings, Inc. (DE)
a) MetLife Towarzystwo Ubezpieczen na Zycie Spolka Akcyjna.
(Poland)
b) MetLife Direct Co., Ltd. (Japan)
c) MetLife Fubon Limited (Japan)
U. Metropolitan Life Insurance Company (NY)
1. 334 Madison Euro Investments, Inc. (DE)
a) Park Twenty Three Investments Company (United Kingdom)- 1%
voting control of Park Twenty Three Investments Company is
held by St. James Fleet Investments Two Limited. 1% of the
shares of Park Twenty Three Investments Company is held by
Metropolitan Life Insurance Company. 99% is owned by 334
Madison Euro Investment, Inc.
(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. 99% is owned by Park Twenty Three
Investments Company.
2. St. James Fleet Investments Two Limited (Cayman Islands)- 34% of the
shares of St. James Fleet Investments Two Limited is held by
Metropolitan Life Insurance Company.
3. One Madison Investments (Cayco) Limited (Cayman Islands)- 10.1%
voting control of One Madison Investments (Cayco) Limited is held by
Convent Station Euro Investments Four Company. 89.9% of the shares
of One Madison Investments (Cayco) Limited is held by Metropolitan
Life Insurance Company.
4. CRB Co, Inc. (MA)- AEW Real Estate Advisors, Inc. holds 49,000
preferred non-voting shares and AEW Advisors, Inc. holds 1,000
preferred non-voting shares of CRB, Co., Inc.
5. GA Holding Corp. (MA)
3
6. Thorngate, LLC (DE)
7. Alternative Fuel I, LLC (DE)
8. Transmountain Land & Livestock Company (MT)
9. MetPark Funding, Inc. (DE)
10. HPZ Assets LLC (DE)
11. Missouri Reinsurance (Barbados), Inc. (Barbados)
12. Metropolitan Tower Realty Company, Inc. (DE)
a) Midtown Heights, LLC (DE)
13. MetLife Real Estate Cayman Company (Cayman Islands)
14. Metropolitan Marine Way Investments Limited (Canada)
15. MetLife Private Equity Holdings, LLC (DE)
16. 23rd Street Investments, Inc. (DE)
a) Mezzanine Investment Limited Partnership-BDR (DE).
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. Hyatt Legal Plans, Inc. (DE)
a) Hyatt Legal Plans of Florida, Inc. (FL)
19. MetLife Holdings, Inc. (DE)
a) MetLife Credit Corp. (DE)
b) MetLife Funding, Inc. (DE)
4
20. Bond Trust Account A (MA)
21. Metropolitan Asset Management Corporation (DE)
a) MetLife Capital Credit L.P. (DE)- 1% General Partnership
interest is held by 23rd Street Investments, Inc., 9% General
Partnership interest is held by Metropolitan Asset Management
Corporation and 90% Limited Partnership interest is held by
Metropolitan Life Insurance Company.
b) MetLife Capital Limited Partnership (DE)- 1% General
Partnership interest is held by 23rd Street Investments, Inc.,
78.5% Limited Partnership interest is held by Metropolitan
Life Insurance Company and 20.5% Limited Partnership interest
is held by Metropolitan Asset Management Corporation.
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.
e) MetLife Latin America Asesorias e Inversiones Limitada
(Chile)- 23rd Street Investments, Inc. holds one share of
MetLife Investments Limited and 0.01% of MetLife Latin America
Asesorias e Inversiones Limitada.
22. New England Life Insurance Company (MA)
a) MetLife Advisers, LLC (MA)
b) New England Securities Corporation (MA)
c) Omega Reinsurance Corporation (AZ)
23. 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%
is owned by General American Life Insurance Company.
(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)
(i) RGA Financial Group, L.L.C. (DE)- 80% is
owned by RGA Reinsurance Company (Barbados)
Ltd. 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/Canada)
(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) -
Reinsurance Group of America Incorporated
owns 99% of RGA Services India Private
Limited and RGA Holdings Limited owns 1%.
(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)
(i) RGA Global Reinsurance Company, Ltd.
(Bermuda)
24. Corporate Real Estate Holdings, LLC (DE)
25. Ten Park SPC (CAYMAN ISLANDS ) - 1% voting control of Ten Park SPC
is held by Metropolitan Asset Management Corporation
26. MetLife Tower Resources Group, Inc. (DE)
27. Headland - Pacific Palisades, LLC (CA)
28. Headland Properties Associates (CA) - 1% is owned by Headland -
Pacific Palisades, LLC and 99% is owned by Metropolitan
Life Insurance Company.
29. Krisman, Inc. (MO)
30. Special Multi-Asset Receivables Trust (DE)
31. White Oak Royalty Company (OK)
32. 500 Grant Street GP LLC (DE)
33. 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
34. MetLife Canada/MetVie Canada (Canada)
35. MetLife Retirement Services LLC (NJ)
a) MetLife Investment Funds Services LLC (NJ)
b) MetLife Investment Funds Management LLC (NJ)
c) MetLife Associates LLC (DE)
36. Euro CL Investments LLC (DE)
37. MEX DF Properties, LLC (DE)
38. 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
39. MetLife Properties Ventures, LLC (DE)
a) Citypoint Holdings II Limited (UK)
40. Housing Fund Manager, LLC (DE)
41. MTC Fund I, LLC (DE) 0.01% of MTC Fund I, LLC is held by Housing
Fund Manager, LLC.
V. MetLife Capital Trust II (DE)
W. MetLife Capital Trust III (DE)
X. MetLife Insurance Company of Connecticut (Life Department) (Accident
Department) (CT) 86.72% is owned by MetLife, Inc. and 13.28% is owned by
MetLife Investors Group, Inc.
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. Metropolitan Connecticut Properties Ventures, LLC (DE)
7. Metropolitan Canadian Property Ventures LLC (NY)
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) 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% is owned by Tower Square Securities,
Inc.
14. TIC European Real Estate LP, LLC (DE)
15. MetLife European Holdings, Inc. (UK)
a) MetLife Europe Limited (IRELAND)
(i) MetLife Pensions Trustees Limited (UK)
b) MetLife Assurance Limited (UK)
16. Travelers European Investments LLC (CT)
17. Travelers International Investments Ltd. (Cayman Islands)
18. MetLife Life and Annuity Company of Connecticut (CT)
a) Euro TL Investments LLC (DE)
19. TLA Holdings LLC (DE)
a) The Prospect Company (DE)
1) Panther Valley, Inc. (NJ)
20. 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.
21. Tribeca Distressed Securities L.L.C. (DE)
22. MetLife Investors USA Insurance Comapny (DE)
23. MetLife Property Ventures Canada ULC (Canada)
Y. MetLife Reinsurance Company of South Carolina (SC)
Z. MetLife Investment Advisors Company, LLC (DE)
AA. MetLife Standby I, LLC (DE)
1. MetLife Exchange Trust I (DE)
BB. MetLife Services and Solutions, LLC (DE)
1. MetLife Solutions Pte. Ltd. (Singapore)
(i) MetLife Services East Private Limited (India)
CC. Soap Acquisition Corporation (NY)
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) 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 516 qualified contracts and 762 non-qualified
contracts of Vintage 3; there were 93 qualified contracts and 63 non-qualified
contracts of Portfolio Architect 3; there were 353 qualified contracts and 343
non-qualified contracts of Portfolio Architect L; there were 2,400 qualified
contracts and 2,719 non-qualified contracts of Vintage L; and there were 277
qualified contracts and 318 non-qualified contracts of Pioneer Annuistar Flex
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.
[Enlarge/Download Table]
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH UNDERWRITER
-------------------------- ---------------------------------------------------------------------
Michael K. Farrell Director
10 Park Avenue
Morristown, NJ 07962
Craig W. Markham Director and Vice President
13045 Tesson Ferry Road
St. Louis, MO 63128
William J. Toppeta Director
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
Andrew Aiello Senior Vice President, Channel Head-National Accounts
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
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NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH UNDERWRITER
-------------------------- ---------------------------------------------------------------------
Douglas P. Rodgers Senior Vice President, Channel Head-LTC
10 Park Avenue
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
1 MetLife Plaza
27-01 Queens Plaza North
Long Island City, NY 11101
Curtis Wohlers Senior Vice President, Channel Head-Planners
1 MetLife Plaza
27-01 Queens Plaza North
Long Island City, NY 11101
Jay S. Kaduson Senior Vice President
10 Park Avenue
Morristown, NJ 07962
Eric T. Steigerwalt 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
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
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NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH UNDERWRITER
-------------------------- ---------------------------------------------------------------------
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:
[Enlarge/Download Table]
(2)
NET
(1) UNDERWRITING (3) (4) (5)
NAME OF PRINCIPAL DISCOUNTS AND COMPENSATION ON BROKERAGE OTHER
UNDERWRITER COMMISSIONS REDEMPTION COMMISSIONS COMPENSATION
----------------- --------------- --------------- --------------- ---------------
MetLife Investors Distribution Company... $192,981,365 $0 $0 $0
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
(1) MetLife Insurance 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 31st day of
October 2007.
METLIFE OF CT SEPARATE ACCOUNT NINE FOR VARIABLE ANNUITIES
(Registrant)
METLIFE INSURANCE 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 31st day of
October 2007.
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/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 Insurance Company of Connecticut. Executed by Michele H. Abate on
behalf of those indicated pursuant to powers of attorney incorporated by
reference to Post-Effective Amendment No. 10 to Form N-4 (File Nos.
333-65926/811-09411) filed as Exhibit 13 on April 5, 2007.
EXHIBIT INDEX
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6(d) Certificate of Correction (MICC)
8(d) 4/30/07 Participation Agreement (Metropolitan Series Fund, Inc.)
8(e) 8/31/07 Participation Agreement (Metropolitan Series Fund, Inc.)
10 Consent of Deloitte & Touche LLP, Independent Registered Public
Accounting Firm.
Dates Referenced Herein and Documents Incorporated by Reference
101 Subsequent Filings that Reference this Filing
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