Document/Exhibit Description Pages Size
1: 485BPOS Form S-6 100 557K
2: EX-1.A(5)(E) Yearly Renewable Term Rider 3 10K
3: EX-1.A(5)(F) Refund of Sales Load Rider 1 5K
4: EX-1.A(5)(G) Amended Policy Specifications Page 2 9K
5: EX-6 Opinion and Consent of Joseph W.S. Yau 2 9K
12: EX-27 Financial Data Schedule - Aggressive Growth Div. 2 11K
9: EX-27 Financial Data Schedule - Diversified Division 2 10K
6: EX-27 Financial Data Schedule - Growth Division 2 11K
7: EX-27 Financial Data Schedule - Income Division 2 11K
10: EX-27 Financial Data Schedule - International Stock Div. 2 11K
8: EX-27 Financial Data Schedule - Money Market Division 2 11K
11: EX-27 Financial Data Schedule - Stock Index Division 2 11K
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 26, 1996
REGISTRATION NO. 33-57320
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
POST-EFFECTIVE AMENDMENT NO. 5
To
FORM S-6
REGISTRATION STATEMENT Under THE SECURITIES ACT OF 1933
----------------
METROPOLITAN LIFE SEPARATE ACCOUNT UL
(Exact name of trust)
METROPOLITAN LIFE INSURANCE COMPANY
(Name of depositor)
1 MADISON AVENUE, NEW YORK, NEW YORK 10010
(COMPLETE ADDRESS OF DEPOSITOR'S PRINCIPAL EXECUTIVE OFFICES)
----------------
RICHARD M. BLACKWELL, ESQ.
SENIOR VICE-PRESIDENT AND GENERAL COUNSEL
METROPOLITAN LIFE INSURANCE COMPANY
1 MADISON AVENUE
NEW YORK, NEW YORK 10010
(NAME AND COMPLETE ADDRESS OF AGENT FOR SERVICE)
----------------
COPIES TO:
GARY O. COHEN, ESQ. AND THOMAS C. LAUERMAN, ESQ.
FREEDMAN, LEVY, KROLL & SIMONDS
1050 CONNECTICUT AVENUE, N.W.
WASHINGTON, D.C. 20036
----------------
It is proposed that the filing will become effective (check appropriate box)
[_]immediately upon filing pursuant to paragraph (b)
[X]on May 1, 1996, pursuant to paragraph (b)
[_]60 days after filing pursuant to paragraph (a)
[_]on (date) pursuant to paragraph (a) of Rule 485
----------------
This filing is made pursuant to Rule 6c-3 and 6e-3(T) under the Investment
Company Act of 1940 to register interests in Metropolitan Life Separate Account
UL which funds certain flexible premium variable and multifunded life insurance
policies.
Registrant elects to be governed by Rule 6e-3(T)(b)(13)(i)(A) under the
Investment Company Act of 1940 with respect to the policy described in the
Prospectus.
Pursuant to Rule 24f-2 under the Investment Company Act of 1940, the
Registrant has registered an indefinite amount of securities pursuant to a
declaration set out in the Form S-6 Registration Statement contained in File
No. 33-32813. THE REGISTRANT'S RULE 24F-2 NOTICE WAS FILED WITH THE COMMISSION
ON FEBRUARY 29, 1996.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
METROPOLITAN LIFE SEPARATE ACCOUNT UL
METROPOLITAN LIFE INSURANCE COMPANY
CROSS-REFERENCE TABLE
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ITEMS OF
FORM N-8B-2 CAPTIONS IN PROSPECTUS
----------- ----------------------
1........................... Cover Page
2........................... SUMMARY--Who is the Issuer of the Policies?
3........................... Inapplicable
4........................... SALES AND ADMINISTRATION OF THE POLICIES; SUMMARY--Who is
the Issuer of the Policies?
5,6,7....................... SEPARATE ACCOUNT AND METROPOLITAN SERIES FUND--The Separate
Account; STATE REGULATION
8........................... FINANCIAL STATEMENTS
9........................... Inapplicable
10........................... OTHER POLICY PROVISIONS--Owner; Beneficiary; Collateral
Assignment
10(c), 10(d)................. DEFINITIONS--Valuation Date; SUMMARY--May the Policy be
Surrendered or the Cash Value Partially Withdrawn; Is There
a "Free Look" Period?; POLICY BENEFITS--Benefit at Final
Date; POLICY RIGHTS--Surrender and Withdrawal Privileges;
Exchange Privilege; PAYMENT AND ALLOCATION OF PREMIUMS--
Allocation of Premiums and Cash Value, Cash Value
Transfers; THE FIXED ACCOUNT--Transfers, Withdrawals,
Surrenders, and Policy Loans; OTHER POLICY PROVISIONS--
Payment and Deferment
10(e)........................ PAYMENT AND ALLOCATION OF PREMIUMS--Policy Termination and
Reinstatement
10(f)........................ VOTING RIGHTS
10(g)(1)-(3), 10(h)(1)-(3)... RIGHTS RESERVED BY METROPOLITAN LIFE
10(g)(4), 10(h)(4)........... Inapplicable
10(i)........................ POLICY BENEFITS--Death Benefits; Death Benefit Options; Cash
Value; Optional Income Plans; Optional Insurance Benefits;
PAYMENT AND ALLOCATION OF PREMIUMS--Issuance of a Policy;
Premiums; Allocation of Premiums and Cash Value; Policy
Termination and Reinstatement
11........................... SUMMARY--What are Separate Account UL, the Fixed Account and
the Metropolitan Series Fund? SEPARATE ACCOUNT AND
METROPOLITAN SERIES FUND--Metropolitan Series Fund
12(a)........................ Cover Page
12(b), 12(e)................. Inapplicable
12(c), 12(d)................. SEPARATE ACCOUNT AND METROPOLITAN SERIES FUND--Metropolitan
Series Fund
13(a), 13(b), 13(c), 13(d)... SUMMARY--What are Separate Account UL, the Fixed Account and
Metropolitan Series Fund?; What Charges are Assessed in
Connection with the Policy? CHARGES AND DEDUCTIONS;
SEPARATE ACCOUNT AND METROPOLITAN SERIES FUND--The Separate
Account; POLICY BENEFITS--Death Benefit Increases
I-1
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ITEMS OF
FORM N-8B-
2 CAPTIONS IN PROSPECTUS
---------- ----------------------
13(e)........................ SALES AND ADMINISTRATION OF THE POLICIES
13(f), 13(g)................. Inapplicable
14........................... PAYMENT AND ALLOCATION OF PREMIUMS--Issuance of a Policy;
SALES AND ADMINISTRATION OF THE POLICIES
15........................... PAYMENT AND ALLOCATION OF PREMIUMS
16........................... SEPARATE ACCOUNT AND METROPOLITAN SERIES FUND--Metropolitan
Series Fund
Captions referenced under Items 10(c), 10(d), 10(e) and
17(a), 17(b)................. 10(i) above
17(c)........................ Inapplicable
18(a), 18(c)................. SEPARATE ACCOUNT AND METROPOLITAN SERIES FUND
18(b), 18(d)................. Inapplicable
19........................... SALES AND ADMINISTRATION OF THE POLICIES; VOTING RIGHTS;
REPORTS
20(a), 20(b)................. RIGHTS RESERVED BY METROPOLITAN LIFE; SEPARATE ACCOUNT AND
METROPOLITAN SERIES FUND--The Separate Account
20(c), 20(d), 20(e), 20(f)... Inapplicable
21(a), 21(b)................. POLICY RIGHTS--Loan Privileges; OTHER POLICY PROVISIONS--
Payment and Deferment
21(c), 22.................... Inapplicable
23........................... SALES AND ADMINISTRATION OF THE POLICIES
24........................... OTHER POLICY PROVISIONS
25........................... SUMMARY--Who is the Issuer of the Policies?
26........................... CHARGES AND DEDUCTIONS-Other Charges
27........................... SUMMARY--Who is the Issuer of the Policies?
28........................... MANAGEMENT
29........................... Inapplicable
30, 31, 32, 33, 34........... Inapplicable
35........................... STATE REGULATION
36, 37....................... Inapplicable
38........................... SALES AND ADMINISTRATION OF THE POLICIES; DISTRIBUTION OF
THE POLICIES
39........................... SUMMARY--Who is the Issuer of the Policies?; SALES AND
ADMINISTRATION OF THE POLICIES; DISTRIBUTION OF THE
POLICIES
40(a)........................ Inapplicable
40(b)........................ SEPARATE ACCOUNT AND METROPOLITAN SERIES FUND--Metropolitan
Series Fund; CHARGES AND DEDUCTIONS--Other Charges
41(a)........................ SUMMARY--Who is the Issuer of the Policies?; SALES AND
ADMINISTRATION OF THE POLICIES
I-2
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ITEMS OF
FORM N-8B-
2 CAPTIONS IN PROSPECTUS
---------- ----------------------
41(b), 41(c), 42, 43......... Inapplicable
44(a)........................ SEPARATE ACCOUNT AND METROPOLITAN SERIES FUND--Metropolitan
Series Fund; POLICY BENEFITS--Cash Value
44(b)........................ Inapplicable
44(c)........................ CHARGES AND DEDUCTIONS--Monthly Deduction From Cash Value
45........................... Inapplicable
46........................... Captions referenced under Item 44 above
47........................... Captions referenced under Items 10(c) and 16 above
48, 49....................... Inapplicable
50........................... SEPARATE ACCOUNT AND METROPOLITAN SERIES FUND--The Separate
Account
51(a), 51(b)................. SUMMARY--Who is the Issuer of the Policies?; Cover Page;
POLICY BENEFITS--Optional Insurance Benefits; POLICY
RIGHTS--Exchange Privileges
51(c), 51(d), 51(e).......... Captions referenced under Item 10(i) above
51(f)........................ PAYMENT AND ALLOCATION OF PREMIUMS--Policy Termination and
Reinstatement
51(g)........................ Captions referenced under Items 10(i) and 13 above
51(h), 51(j)................. Inapplicable
51(i)........................ DISTRIBUTION OF THE POLICIES
52(a), 52(c)................. RIGHTS RESERVED BY METROPOLITAN LIFE
52(b), 52(d)................. Inapplicable
53(a)........................ FEDERAL TAX MATTERS
53(b), 54 through 58......... Inapplicable
59........................... FINANCIAL STATEMENTS
I-3
METFLEX
FLEXIBLE PREMIUM VARIABLE LIFE
PROSPECTUSES FOR
. FLEXIBLE PREMIUM VARIABLE LIFE
INSURANCE POLICIES
ISSUED BY
METROPOLITAN LIFE INSURANCE COMPANY
. METROPOLITAN SERIES FUND, INC.
MAY 1, 1996
PROSPECTUS
for
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICIES
(Minimum Initial Specified Face Amount $100,000)
Issued by
METROPOLITAN LIFE INSURANCE COMPANY
The individual flexible premium variable life insurance policies
("Policies") offered by this Prospectus are issued by Metropolitan Life
Insurance Company ("Metropolitan Life") and are designed to provide lifetime
insurance coverage on the insureds named in the Policies, as well as maximum
flexibility in connection with premium payments and death benefits. This
flexibility allows an owner of a Policy to provide for changing insurance
needs within the confines of a single insurance policy.
The Policies are sold to employers, employer sponsored plans, or other
organizations or individuals associated with such employers or other
organizations and involve employer or organization ownership or sponsorship.
The Policies may be used for financing non-qualified deferred compensation
plans, other post-employment benefits, certain employer sponsored payroll
deduction programs or for other purposes.
Each Policy provides for a death benefit payable at the insured's death as
long as the Policy is still in effect. The Policy owner may choose either
Death Benefit Option A (the death benefit is fixed in amount), Death Benefit
Option B (the death benefit includes the Policy's cash value in addition to a
fixed insurance amount) or Death Benefit Option C (the death benefit includes
the amount of Policy premiums paid that exceeds withdrawals made, in addition
to a fixed insurance amount). If greater than the death benefit otherwise
payable under Option A, B or C, a minimum death benefit equivalent to a
percentage of the cash value will be paid.
The premiums paid, less premium expense charges, will be allocated at the
owner's discretion among one or more investment divisions of Metropolitan Life
Separate Account UL ("Separate Account") and/or a fixed interest account
("Fixed Account") within the General Account of Metropolitan Life. The assets
in each investment division are invested in shares of a corresponding
portfolio of the Metropolitan Series Fund, Inc. ("Fund"). The accompanying
prospectus for the Fund describes the investment objectives and certain
attendant risks of the seven currently available portfolios of the Fund:
Growth Portfolio, Income Portfolio, Money Market Portfolio, Diversified
Portfolio, International Stock Portfolio, Aggressive Growth Portfolio and
Stock Index Portfolio.
The Policy's cash value will vary with the investment experience of the
Separate Account investment divisions to which amounts are allocated and the
fixed rates of interest earned by allocations to the General Account. The cash
value will also be adjusted for other factors, including the amount of charges
imposed and the premium payments made.
The Policy owner may withdraw or borrow a portion of the Policy's cash
surrender value, or the Policy may be fully surrendered, at any time, subject
to certain limitations.
The Policy owner has the flexibility to vary the frequency and amount of
premium payments, subject to certain restrictions and conditions.
Metropolitan Life is the investment manager of the Fund and the distributor
of its shares. Metropolitan Life also distributes and administers the
Policies. State Street Research & Management Company ("State Street Research")
is the sub-investment manager with respect to the Growth, Income, Diversified
and Aggressive Growth Portfolios of the Fund. State Street Research is a
wholly-owned subsidiary of Metropolitan Life. GFM International Investors
Limited ("GFM") is the sub-investment manager with respect to the
International Stock Portfolio of the Fund. GFM is a subsidiary of Metropolitan
Life.
As in the case of other life insurance policies, it may not be advantageous
to purchase flexible premium variable life insurance as a replacement for an
existing life insurance policy or in addition to an existing flexible premium
variable life insurance policy.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THIS PROSPECTUS IS NOT VALID UNLESS ATTACHED TO THE CURRENT PROSPECTUS FOR THE
METROPOLITAN SERIES FUND, INC., WHICH CONTAINS ADDITIONAL INFORMATION ABOUT
THE FUND.
THIS PROSPECTUS SHOULD BE READ AND RETAINED FOR FUTURE REFERENCE.
1 Madison Avenue, New York, New York 10010 Telephone (908) 602-6400
TABLE OF CONTENTS
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PAGE
----
DEFINITIONS................................. 3
SUMMARY..................................... 5
Who is the Issuer of the Policies?......... 5
What are Separate Account UL, the Fixed Ac-
count and the Metropolitan Series Fund?... 5
What Death Benefits are Available under the
Policy?................................... 5
What is the Policy's Cash Value?........... 6
What Flexibility Does a Policy Owner have
to Adjust the Amount of the Death Bene-
fit?...................................... 6
What Flexibility Does a Policy Owner have
in Connection with Premium Payments?...... 6
How Long Will the Policy Remain in Force?.. 6
How are Net Premiums Allocated?............ 6
May the Policy be Surrendered or the Cash
Value Partially Withdrawn?................ 7
Is There a "Free Look" Period?............. 7
What is the Loan Privilege?................ 7
What Charges are Assessed in Connection
with the Policy?.......................... 8
What is the Tax Treatment of Cash Value?... 8
Is the Beneficiary Subject to Federal In-
come Tax on the Death Benefit?............ 9
Is the Death Benefit or the Cash Value Sub-
ject to Federal Estate Tax?............... 9
When are Premium Payments, Policy Owner Re-
quests and Other Communications Deemed to
be Received?.............................. 9
SEPARATE ACCOUNT AND METROPOLITAN
SERIES FUND................................ 9
The Separate Account....................... 9
Metropolitan Series Fund................... 10
POLICY BENEFITS............................. 11
Death Benefits............................. 11
Death Benefit Options...................... 11
Cash Value................................. 16
Benefit at Final Date...................... 24
Optional Income Plans...................... 24
Optional Insurance Benefits................ 24
PAYMENT AND ALLOCATION OF PREMIUMS.......... 24
Issuance of a Policy....................... 24
Premiums................................... 25
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PAGE
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Allocation of Premiums and Cash Value...... 25
Policy Termination and Reinstatement....... 27
CHARGES AND DEDUCTIONS...................... 28
Premium Expense Charges.................... 28
Transfer Charge............................ 28
Monthly Deduction From Cash Value.......... 29
Variations in Charges...................... 30
Charges Against the Separate Account....... 30
Guarantee of Certain Charges............... 31
Other Charges.............................. 31
ILLUSTRATIONS OF DEATH BENEFITS AND CASH
VALUES AND ACCUMULATED
PREMIUMS................................... 31
POLICY RIGHTS............................... 45
Loan Privileges............................ 45
Surrender and Withdrawal Privileges........ 46
Exchange Privilege......................... 47
THE FIXED ACCOUNT........................... 47
General Description........................ 47
Fixed Account Benefits..................... 48
Fixed Account Cash Value................... 48
Transfers, Withdrawals, Surrenders and Pol-
icy Loans................................. 48
RIGHTS RESERVED BY METROPOLITAN LIFE........ 49
OTHER POLICY PROVISIONS..................... 49
SALES AND ADMINISTRATION OF THE POLICIES.... 50
DISTRIBUTION OF THE POLICIES................ 51
FEDERAL TAX MATTERS......................... 51
Taxation of the Policy..................... 51
Taxation of Metropolitan Life.............. 53
MANAGEMENT.................................. 54
VOTING RIGHTS............................... 57
Right to Instruct Voting of Fund Shares.... 57
Disregard of Voting Instructions........... 57
REPORTS..................................... 57
STATE REGULATION............................ 58
REGISTRATION STATEMENT...................... 58
LEGAL MATTERS............................... 58
EXPERTS..................................... 58
FINANCIAL STATEMENTS........................ 58
APPENDIX TO PROSPECTUS...................... 87
THE POLICY IS NOT AVAILABLE IN ALL STATES. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT
LAWFULLY BE MADE. METROPOLITAN LIFE DOES NOT AUTHORIZE ANY INFORMATION OR
REPRESENTATIONS REGARDING THE OFFERING DESCRIBED IN THIS PROSPECTUS OTHER THAN
AS CONTAINED IN THIS PROSPECTUS OR ANY ATTACHED PROSPECTUS OR ANY SUPPLEMENT
THERETO OR IN ANY SUPPLEMENTAL SALES MATERIAL AUTHORIZED BY METROPOLITAN LIFE.
2
DEFINITIONS
Age--The age in full years of the insured at issue of the Policy, plus the
number of full Policy years completed since issue. A full Policy year is
completed upon the commencement of the next succeeding Policy year.
Beneficiary--The beneficiary is the entity or entities and/or person or
persons designated by the owner of the Policy to receive the insurance
proceeds upon the death of the insured.
Cash Surrender Value--The cash value less any indebtedness.
Cash Value--The sum of the Policy cash values in the Fixed Account, the
investment divisions of the Separate Account and the Policy Loan Account.
Date of Policy--The date set forth in the Policy that is used to determine
Policy years and Policy months from issue. Policy anniversaries are measured
from the Date of Policy.
Delivery Receipt--The document signed by the Policy owner and sent to
Metropolitan Life at its Designated Office which acknowledges receipt by the
Policy owner of the Policy.
Designated Office--The home office of Metropolitan Life at 1 Madison Avenue,
New York, New York 10010, to which all Policy owner communications are to be
sent. Metropolitan Life may, by written notice, name other locations within
the United States to serve as designated offices, in place of or in addition
to the home office.
Final Date--The Policy anniversary on which the insured is age 95. In states
where permitted, the Policy owner may elect to continue the Policy after the
Final Date.
Fixed Account--An account which is part of the General Account and to which
Metropolitan Life will allocate net premiums as directed by the owner of a
Policy and credit certain fixed rates of interest.
General Account--The assets of Metropolitan Life other than those allocated
to the Separate Account or any other legally segregated separate account.
Group--An employer, employer sponsored plan or other organization.
Guideline Annual Premium--The level annual amount of premium that would be
payable through the Final Date of a Policy for the specified face amount of
the Policy if premiums were fixed by Metropolitan Life as to both timing and
amount and were based on 1980 Commissioners Standard Ordinary Mortality
Tables, net investment earnings at an annual effective rate of 5%, and fees
and charges as set forth in the Policy and any Policy riders.
Indebtedness--The total of any unpaid Policy loan and loan interest.
Insured--The person upon whose life the Policy is issued.
Investment Start Date--The date the first premium is applied to the Fixed
Account and/or the Separate Account. It is the later of (1) the Date of Policy
and (2) the date the first premium for a Policy is received at the Designated
Office.
Investment Division--A subdivision of the Separate Account. The assets in
each investment division are invested exclusively in the shares of a specified
portfolio.
Large Group--A group that has a large number of individuals associated with
it as determined by Metropolitan Life pursuant to administrative standards
that Metropolitan Life will apply uniformly. However, Metropolitan Life
reserves the right to change the standards for Policies issued subsequent to
the change.
Loan Value--The maximum amount that may be borrowed under the Policy. The
loan value equals the Policy's cash surrender value less two monthly
deductions, or, if greater, 75% (90% in Virginia and Maryland) of the cash
surrender value (or, in Texas, the Policy's cash surrender value less two
monthly deductions or 100% of the cash surrender value in the Fixed Account
and 75% of the cash surrender value in the Separate Account, if greater).
Minimum Initial Specified Face Amount--The minimum specified face amount of
insurance for which a Policy may be issued. Currently, the amount is $100,000.
Monthly Anniversary--The same date in each month as the Date of Policy. For
purposes of the Separate Account, whenever the monthly anniversary date falls
on a date other than a valuation date, the next valuation date will be deemed
to be the monthly anniversary.
Monthly Deduction--Charges deducted monthly from the cash value of a Policy
and which include the monthly cost of term insurance, the monthly cost of any
benefits provided by riders (excluding the interim term insurance benefit
rider), and the monthly mortality and expense risk charge and any underwriting
expense charge.
3
Planned Periodic Premium--The Policy owner's self-determined level-amount
premium planned to be paid at fixed intervals over a specified period of time.
The Policy owner is not required to follow this schedule after the first
premium payment.
Policy--The flexible premium variable life insurance policy offered by
Metropolitan Life and described in this Prospectus.
Policy Loan Account--An account within the General Account to which cash
value from the Separate Account and/or the Fixed Account in an amount equal to
a Policy loan requested by a Policy owner is transferred.
Policy Month--The month beginning on a monthly anniversary.
Policy owner ("Owner")--An employer, employer sponsored plan or other
organization or an individual associated with such employer or organization,
so designated in the application or as subsequently changed. The Policy owner
may designate another person or entity to exercise rights under the Policy
with the approval of Metropolitan Life.
Portfolio--A portfolio represents a different class (or series) of stock of
Metropolitan Series Fund, Inc., a mutual fund in which the Separate Account
assets are invested.
Separate Account--Metropolitan Life Separate Account UL, a separate
investment account of Metropolitan Life through which premiums paid under the
Policy are invested to the extent allocated to the Separate Account by the
Policy owner.
Specified Face Amount--The amount set forth on the face of the Policy.
Target Premium--Currently, for Policies issued prior to May 1, 1996 or
issued to or in connection with large groups, fifty percent of the estimated
annual amount which satisfies the 7-Pay test based on the initial specified
face amount of insurance, as established as of the Date of Policy. Currently,
for Policies issued on or after May 1, 1996, to or in connection with other
groups, 100 percent of the estimated annual amount which satisfies the 7-Pay
test based on the initial specified face amount of insurance, as established
as of the Date of Policy.
Valuation Date--Each day on which the New York Stock Exchange is open for
trading or, on days other than when the New York Stock Exchange is open, on
which it is determined that there is a sufficient degree of trading in the
Fund's portfolio securities that the current net asset value of its redeemable
securities might be materially affected. Valuations for any date other than a
Valuation Date will be determined as of the next Valuation Date.
Valuation Period--The period between two successive Valuation Dates,
commencing at 4:00 p.m., New York City time, on each valuation date and ending
at 4:00 p.m., New York City time, on the next succeeding Valuation Date.
This Prospectus describes only those aspects of the Policy that relate to
the Separate Account since only interests in the Separate Account are being
offered by this Prospectus. Aspects of the Fixed Account are briefly
summarized in order to give a better understanding of how the Policy functions
(see "The Fixed Account").
4
SUMMARY
Unless the context indicates otherwise, this summary and the discussion in
the rest of this Prospectus assume that cash surrender values are sufficient
to pay all charges deducted on monthly anniversaries, that no Policy loans
have been made and that no riders are in effect (see "Loan Privileges--Effect
of a Policy Loan," "Payment and Allocation of Premiums--Policy Termination and
Reinstatement" and "Appendix to Prospectus").
WHO IS THE ISSUER OF THE POLICIES?
Metropolitan Life, the issuer of the Policies, is a mutual life insurance
company. It was incorporated under the laws of the State of New York in 1866
and since 1868 it has been engaged in the life insurance business under the
name Metropolitan Life Insurance Company. Its Home Office is located at 1
Madison Avenue, New York, New York 10010. It is authorized to transact
business in all states of the United States, the District of Columbia, Puerto
Rico and all Provinces of Canada. Metropolitan Life, serving millions of
people, is one of the largest financial services companies in the world with
many of the largest United States corporations for its clients. On December
31, 1995, Metropolitan Life had total life insurance in force of approximately
$1.3 trillion and total assets under management of over $179 billion.
WHAT ARE SEPARATE ACCOUNT UL, THE FIXED ACCOUNT AND THE METROPOLITAN SERIES
FUND?
The owner of a Policy may allocate the net premiums paid under the Policy to
one or more of the investment divisions of the Separate Account, a separate
investment account of Metropolitan Life (see "The Separate Account" and/or to
a Fixed Account established by Metropolitan Life. There are currently seven
investment divisions in the Separate Account. The assets in each division are
invested in a separate class (or series) of stock of the Fund, a "series" type
of mutual fund (see "Metropolitan Series Fund"). Each class of stock
represents a separate portfolio within the Fund. The seven portfolios of the
Fund are the Growth Portfolio, the Income Portfolio, the Money Market
Portfolio, the Diversified Portfolio, the Aggressive Growth Portfolio, the
International Stock Portfolio and the Stock Index Portfolio. Net premiums
allocated to the Fixed Account are held in the General Account of Metropolitan
Life.
Each portfolio of the Fund has a different investment objective and is
managed by Metropolitan Life. For providing investment management services to
the Fund, Metropolitan Life receives a fee from the Fund equivalent to an
annual rate of .25% of the average daily value of the aggregate net assets of
the Growth, Income, Money Market, Diversified and Stock Index Portfolios and
an annual rate of .75% of the average daily value of the aggregate net assets
of the International Stock and Aggressive Growth Portfolios. State Street
Research provides sub-investment management services with respect to the
Growth, Income, Aggressive Growth and Diversified Portfolios. GFM provides
sub-investment management services with respect to the International Stock
Portfolio. For these services, State Street Research and GFM receive an annual
percentage fee from Metropolitan Life. The fees paid to State Street Research
and GFM are the sole responsibility of Metropolitan Life, and not the Fund. In
addition to the investment management fees, other direct expenses are charged
against the assets of the Fund.
For a full description of the Fund, see the prospectus for the Fund, which
is attached at the end of this Prospectus, and the Fund's Statement of
Additional Information referred to therein.
WHAT DEATH BENEFITS ARE AVAILABLE UNDER THE POLICY?
The Policy provides for the payment of a benefit upon the death of the
insured. The Policy contains three death benefit options. The Policy owner
must select one of the options to be in effect at issue. The Policy owner can
change options while the insured is living. Under Death Benefit Option A, the
death benefit is the specified face amount of the Policy. Under Death Benefit
Option B, the death benefit is the specified face amount of the Policy plus
the cash value on the date of death. Under Death Benefit Option C, the death
benefit is the specified face amount of the Policy plus the amount of premiums
paid that exceeds withdrawals made (see "May the Policy be Surrendered or the
Cash Value Partially Withdrawn?"). If greater than the death benefit otherwise
payable under Option A, Option B or Option C, a minimum death benefit
equivalent to a percentage, determined by age at death, of the cash value will
be paid. The insurance proceeds payable will be reduced by any outstanding
indebtedness and any due and unpaid charges accrued during the grace period
(see "Policy Benefits--Death Benefits").
5
In addition, a Policy owner has the flexibility to add optional insurance
benefits by rider. These include an accidental death benefit rider, a
disability waiver benefit rider, an accelerated death benefit rider and an
interim term insurance benefit rider (see "Policy Benefits--Optional Insurance
Benefits). The cost of the first two optional insurance benefits will be
deducted from the cash value as part of the monthly deduction (see "Charges
and Deductions--Monthly Deduction From Cash Value"). There is no charge for
the accelerated death benefit rider. The cost of the interim term insurance
benefit rider is paid for separately from any costs deducted from the Policy
since it provides insurance for a period prior to the Date of Policy. The
Policy owner has the flexibility to include a yearly renewable term rider when
the Policy is issued, the cost of which will be deducted from the cash value
as part of the monthly deduction. This may be more economical for certain
Policies. The yearly renewable term rider is generally not available with
Policies issued to or in connection with large groups.
Proceeds under the Policy may be received in cash or under one of the
optional income plans set forth in the Policy (see "Policy Benefits--Optional
Income Plans").
WHAT IS THE POLICY'S CASH VALUE?
The Policy's cash value in the Separate Account will reflect the amount and
frequency of premium payments allocated to the Separate Account, transfers
from the Fixed Account, loan repayments, the investment experience of the
relevant investment divisions of the Separate Account, any partial
withdrawals, any Policy indebtedness and any charges imposed in connection
with the Policy (see "Policy Benefits--Cash Value"). There is no minimum
guaranteed cash value with respect to amounts allocated to the Separate
Account. The Policy's total cash value will also reflect any amounts allocated
to the Fixed Account (see "The Fixed Account") and the Policy Loan Account
(see "Loan Privileges--Effect of a Policy Loan").
WHAT FLEXIBILITY DOES A POLICY OWNER HAVE TO ADJUST THE AMOUNT OF THE DEATH
BENEFIT?
Subject to certain limitations, the Policy owner may change the death
benefit option or increase or decrease the specified face amount (see "Policy
Benefits--Change in Death Benefit Option"). Any increases in the death benefit
may require additional evidence of insurability satisfactory to Metropolitan
Life (see "Policy Benefits--Change in Specified Face Amount"), and result in
additional charges (see "Policy Benefits--Increases", and "Effect of Changes
in Specified Face Amount on Charges"). An increase or decrease in the death
benefit may have tax consequences (see "Federal Tax Matters").
WHAT FLEXIBILITY DOES A POLICY OWNER HAVE IN CONNECTION WITH PREMIUM PAYMENTS?
A Policy owner has considerable flexibility concerning the amount and
frequency of premium payments. The first premium must equal the planned
periodic premium (see "Premiums--Premium Limitations"). After the first
premium payment, a Policy owner may, subject to certain restrictions, make
premium payments in any amount and at any frequency. However, the Policy owner
may be required to make an unscheduled premium payment in order to keep the
Policy in force (see "Payment and Allocation of Premiums").
HOW LONG WILL THE POLICY REMAIN IN FORCE?
The Policy will terminate only when its cash surrender value is insufficient
to pay the monthly deduction (see "Charges and Deductions--Monthly Deduction
from Cash Value"), and the grace period expires without a sufficient payment
being made (see "Policy Termination and Reinstatement--Termination").
Therefore, the failure to pay a planned periodic premium will not
automatically cause the Policy to terminate. Nevertheless, under the
circumstances described above, the Policy can terminate, even if planned
periodic premiums have been paid. Thus, the payment of planned periodic
premiums does not guarantee that the Policy will remain in force until its
final date.
HOW ARE NET PREMIUMS ALLOCATED?
The portion of the premium available for allocation ("net premium") equals
the premium paid less premium expense charges (see "Charges and Deductions--
Premium Expense Charges"). The Policy owner designates in the application (in
the case where the Owner is an individual) or in the delivery receipt (in the
case where the Owner is other than an individual), what portions, if any, of
net premiums are to be allocated to the investment divisions of the Separate
Account. The Policy owner designates in the application what portion, if any,
of net premiums are to be allocated to the Fixed Account. Allocations with
respect to the Fixed Account are effective as of the Investment Start Date.
Allocations with respect to the investment divisions of the Separate Account
are effective as of the end of the free-look period; prior to the end of the
free-look period, net premium payments allocated to the investment divisions
of the Separate Account will be invested in the Money Market Portfolio as of
the Investment Start Date (see "Is there a "Free Look' Period?").
6
A Policy owner may change allocations of future net premiums at any time
after the end of the free-look period without charge by notifying Metropolitan
Life in writing, subject to certain limitations (see "Payment and Allocation
of Premiums--Allocation of Premiums and Cash Value"). The change will be
effective as of the Date of Receipt at the Designated Office of the written
notification. Because investment performance of a Separate Account investment
division (unlike that of the Fixed Account) is not guaranteed by Metropolitan
Life, allocation of net premiums to the Separate Account investment divisions
increases the amount of investment risk to the Policy owner, and allocation to
the Fixed Account decreases such risk. On the other hand, the potential
benefit of the Fixed Account is limited to the return guaranteed by
Metropolitan Life plus any discretionary return declared by Metropolitan Life
from time to time.
After the end of the free-look period (see "Is there a "Free Look'
Period?"), a Policy owner may transfer amounts among the investment divisions
of the Separate Account or between the Separate Account and the Fixed Account
up to six times a Policy year without charge (see "Charges and Deductions--
Transfer Charge"). In the first 24 Policy months, a Policy owner may transfer
the entire amount in the Separate Account to the Fixed Account without charge
(see "Policy Rights--Exchange Privilege" and "The Fixed Account--Transfers,
Withdrawals, Surrenders, and Policy Loans"). A Policy owner may also elect to
participate in one of the systematic investment strategies (see "Allocation of
Premiums and Cash Value--Systematic Investment Strategies").
MAY THE POLICY BE SURRENDERED OR THE CASH VALUE PARTIALLY WITHDRAWN?
The Policy owner may surrender the Policy at any time and receive the cash
surrender value of the Policy. Subject to certain limitations, the Policy
owner also may make partial withdrawals from the cash surrender value at any
time prior to the final date. The Policy owner must notify Metropolitan Life
in writing requesting a surrender or partial withdrawal (see "Policy Rights--
Surrender and Withdrawal Privileges"). No charge will be imposed on partial
withdrawals or a surrender. If Death Benefit Option A is in effect, partial
withdrawals will reduce the Policy's specified face amount by the amount of
the partial withdrawal. If Death Benefit Option B is in effect, partial
withdrawals will not reduce the Policy's specified face amount. If Death
Benefit Option C is in effect, partial withdrawals will only reduce the
Policy's specified face amount by the excess of cumulative withdrawals over
cumulative premiums paid (see "Death Benefits"). Payment of surrenders and
withdrawals may be delayed under certain circumstances (see "Other Policy
Provisions--Payment and Deferment," and "The Fixed Account--Transfers,
Withdrawals, Surrenders, and Policy Loans"). Surrenders and withdrawals may
have certain tax consequences (see "Federal Tax Matters").
IS THERE A "FREE LOOK" PERIOD?
The Policy provides for a free-look period. The Policy owner may return the
Policy during the free-look period, which is the period ending on the later of
10 days after the Policy owner receives the Policy (except where state law
requires a longer period for replacement policies or other reasons) or the
date Metropolitan Life receives a signed delivery receipt. Metropolitan Life
will send the Policy owner a complete refund of any premiums paid within 7
days. The refund of any premium paid by check, however, may be delayed until
the check has cleared the Policy owner's bank. Net premium payments allocated
to the Separate Account will be invested in the Money Market Portfolio during
the free-look period. Net premium payments will not be allocated to the
Separate Account investment divisions designated by the Policy owner until
Metropolitan Life receives a signed delivery receipt (or, if later, 10 days
after receipt of the Policy by the Policy owner). In addition, no cash value
transfers or participation in systematic investment strategies will be
permitted until after the end of the free-look period.
WHAT IS THE LOAN PRIVILEGE?
A Policy owner may obtain a Policy loan at any time that the Policy has a
loan value. The loan value equals the cash surrender value of the Policy less
two monthly deductions, or if greater, 75% (90% for Policies issued in
Virginia and Maryland) of the cash surrender value (or, for Policies issued in
Texas, the Policy's cash surrender value less two monthly deductions or 100%
of the cash surrender value in the Fixed Account and 75% of the cash surrender
value in the Separate Account, if greater). Loan interest is charged daily at
the rate Metropolitan Life sets from time to time. This rate will never be
more than the maximum allowed by law and will not change more often than once
a year on the anniversary of the date of the Policy. Loan interest is payable
at the end of each Policy year. Loans and accrued interest may be repaid at
any time prior to the Final Date (see "Loan Privileges").
7
WHAT CHARGES ARE ASSESSED IN CONNECTION WITH THE POLICY?
Premium Expense Charges. Total premium expense charges of up to 13.5% in the
first ten Policy years and up to 7.5% in Policy year eleven and later are
deducted from all premium payments. These charges consist of an administrative
charge of up to 1.05%, a charge of 1.2% to recover a portion of Metropolitan
Life's federal income taxes that are based on premium payments, a state
premium tax charge of 2.25% and a sales charge. For Policies issued prior to
May 1, 1996 or to or in connection with large groups, the maximum sales charge
is 1% of each premium. For Policies issued to or in connection with other
groups on or after May 1, 1996, the maximum sales charge is 9% of premiums
paid in each of the first ten Policy years and 3% of premiums paid in each
Policy year thereafter until the total of such payments in each such Policy
year equals the annual target premium for that year. For these Policies, the
sales charge is reduced to 0% for payments made in excess of the annual target
premium in any Policy year (See "Variations in Charges"). For all Policies,
the administrative charge is reduced by 1% on the portion of any premiums paid
in a Policy year which exceeds the annual target premium. (See "Charges and
Deductions--Premium Expense Charges.")
The administrative charge is used to compensate Metropolitan Life for
expenses incurred in administering, issuing and underwriting of the Policy.
These expenses include the cost of processing applications, conducting medical
examinations, determining insurability and the insured's risk class, and
establishing policy records. Metropolitan Life does not expect to derive a
profit from this charge.
Transfer Charges. At the present time, there is no charge assessed the first
six times in a Policy year that amounts are transferred among the different
investment divisions of the Separate Account and between the investment
divisions and the Fixed Account. For each subsequent transfer in that Policy
year, a charge of $25 is assessed (see "Charges and Deductions--Transfer
Charge"). There is no charge for any transfer made pursuant to a systematic
investment strategy. In addition, transfers made pursuant to any systematic
investment strategy are not included in the six charge free transfers
permitted each Policy year (see "Allocation of Premiums and Cash Value--
Systematic Investment Strategies").
Monthly Deduction. Cash value will be reduced by a monthly deduction equal
to the sum of (1) a monthly cost of term insurance charge, and (2) the cost of
any optional insurance benefits added by rider (except for the interim term
insurance benefit rider) (see "Charges and Deductions--Monthly Deduction from
Cash Value"), and (3) a monthly charge currently equivalent to an effective
annual rate of up to .60% (up to .30% after the ninth policy year) of the
Policy cash value in the Separate Account. This charge is to compensate
Metropolitan Life for its assumption of certain mortality and expense risks
(see "Charges and Deductions--Charge for Mortality and Expense Risks") and is
guaranteed not to exceed an effective annual rate of .90%.
Any increases in specified face amount requested by a Policy owner may
result in a one-time underwriting expense charge of up to $3.00 per thousand
dollars of increase (see "Policy Benefits--Increases"). The monthly deduction
will vary in amount from month to month.
Separate Account Taxes. No charges are currently made against the Separate
Account for federal or state income taxes with respect to earnings or capital
gains which may be attributable to the Separate Account. Should Metropolitan
Life determine that such taxes will be imposed, Metropolitan Life may make
deductions from the Separate Account to pay these taxes (see "Federal Tax
Matters"). The imposition of such taxes would result in a reduction of the
cash value in the Separate Account.
Reduced Charges. Metropolitan Life may reduce the charges in certain
situations. These situations would involve Internal Revenue Code section 1035
exchanges from another Metropolitan Life policy to this Policy and corporate
sales where the premium amount, number of lives, location, or other factors
result in savings in sales, administrative or other costs. These reductions in
charges will not be unfairly discriminatory to any Policy owners.
WHAT IS THE TAX TREATMENT OF CASH VALUE?
Cash value under a Policy is subject to the same federal income tax
treatment as cash value under a conventional fixed benefit life insurance
policy. Under existing tax law, if a Policy is not a modified endowment
contract as discussed in the following paragraphs, a Policy owner generally
will be taxed on cash value withdrawn from the Policy, the cash value received
upon surrender of the Policy or the cash value distributed at the Final Date
of a Policy only to the extent these amounts, when added to previous
distributions, exceed the total premiums paid. Amounts received upon
surrender, withdrawal or on the Final Date of a Policy in excess of premiums
paid will be treated as ordinary income.
Special rules govern pre-death withdrawals from life insurance contracts
referred to as modified endowment contracts. In short, if your Policy fails
the "7-pay test" described under "Federal Tax Matters--Taxation of the Policy"
your Policy would be classified as a modified endowment contract.
8
Pre-death withdrawals (including policy loans) from modified endowment
contracts are treated differently than withdrawals from other life insurance
contracts in the following ways:
--amounts withdrawn would be treated as income first and taxed accordingly;
--an additional 10% income tax penalty would generally be imposed on the
taxable portion of amounts received before age 59 1/2.
If a Policy is part of a collateral assignment equity split dollar
arrangement with an employer, any increase in cash value may be taxable
annually. An individual should consult with and rely on the advice of a tax
advisor with respect to any type of split dollar arrangement involving a
Policy.
For more information, see "Federal Tax Matters."
IS THE BENEFICIARY SUBJECT TO FEDERAL INCOME TAX ON THE DEATH BENEFIT?
Like death benefits payable under conventional fixed benefit life insurance
policies, death benefit proceeds payable under the Policy under current law
are generally completely excludable from the gross income of the beneficiary.
As a result, the beneficiary generally will not be taxed on death benefit
proceeds (see "Federal Tax Matters").
IS THE DEATH BENEFIT OR THE CASH VALUE SUBJECT TO FEDERAL ESTATE TAX?
The death benefit under the Policy or the cash value may be subject to
federal estate tax (see "Federal Tax Matters").
WHEN ARE PREMIUM PAYMENTS, POLICY OWNER REQUESTS AND OTHER COMMUNICATIONS
DEEMED TO BE RECEIVED?
Premium payments and other communications (such as transfer requests, loan
requests, loan repayments, withdrawal requests, surrender requests, changes of
beneficiary, changes of the specified face amount of insurance or death
benefit option, or changes of premium allocation) should be sent to the
Designated Office for the Policy. Metropolitan Life may name different
Designated Offices for different transactions. Premium payments and
communications will be deemed to be received at the Designated Office on the
date they are actually received at such office ("Date of Receipt"), with two
exceptions: (1) when they are received on any day that is not a Valuation Date
and (2) when they are received by means other than U.S. mail after 4:00 p.m.
New York City time. In these two cases, the Date of Receipt will be deemed to
be the next Valuation Date. In the future Metropolitan Life may permit
transfer and withdrawal or other requests to be made by telephone.
To exercise rights under a Policy, the owner must follow the procedures
stated in the Policy. To request a payment, change the allocation among the
investment divisions, change the beneficiary, change the specified face amount
of insurance or death benefit option, change an address or request any other
action by Metropolitan Life, the owner should utilize the forms prepared by
Metropolitan Life for each purpose. The forms are available from the
Designated Offices.
SEPARATE ACCOUNT AND METROPOLITAN SERIES FUND
THE SEPARATE ACCOUNT
The Separate Account, which is a separate investment account of Metropolitan
Life, was established by Metropolitan Life pursuant to the New York Insurance
Law on December 13, 1988. The Separate Account also receives premium payments
in connection with flexible premium multifunded life insurance policies and
group variable universal life insurance policies issued by Metropolitan Life.
The assets allocated to the Separate Account are the property of Metropolitan
Life, and Metropolitan Life is not a trustee by reason of the Separate
Account. Metropolitan Life may accumulate in the Separate Account charges,
mortality gains and investment gains on those assets (which represent such
charges) in the Separate Account and other amounts in excess of Metropolitan
Life's liabilities and reserves with respect to the Separate Account.
The Separate Account meets the definition of "separate account" under the
federal securities laws. All income, gains and losses, whether or not
realized, from assets allocated to the Separate Account are credited to or
charged against the Separate Account without regard to other income, gains or
losses of Metropolitan Life. Each Policy provides that such portion of the
assets in the Separate Account as equals the liabilities (and reserves) of
Metropolitan Life with respect to the Separate Account shall not be chargeable
with liabilities arising out of any other business of Metropolitan Life.
Metropolitan Life may from time to time transfer to its General Account any
assets in the Separate Account in
9
excess of such reserves and liabilities. The liabilities are Metropolitan
Life's total commitments under the Policies; the reserves are the assets
allocated to pay these commitments.
Although the Separate Account is an integral part of Metropolitan Life, the
Separate Account is registered with the Securities and Exchange Commission as
a unit investment trust under the Investment Company Act of 1940 ("1940 Act").
Registration does not involve supervision of management or investment
practices or policies of the Separate Account or of Metropolitan Life by the
Commission.
There currently are seven investment divisions in the Separate Account. The
assets in each investment division are invested in a separate class (or
series) of stock issued by the Fund. Each class of stock represents a separate
portfolio within the Fund. New investment divisions may be added as new
portfolios are added to the Fund and made available to Policy owners. In
addition, investment divisions may be eliminated from the Separate Account.
The owner of a Policy may designate how the net premiums under the Policy are
to be allocated among the then current investment divisions.
METROPOLITAN SERIES FUND
The Fund is a "series" type of mutual fund which is registered with the
Securities and Exchange Commission as a diversified open-end management
investment company under the 1940 Act. The Fund has served as the investment
medium for the Separate Account since the Separate Account commenced
operations. A brief summary of the investment objectives of each Fund
portfolio presently available to Policy owners is set forth below.
Growth Portfolio. The investment objective of this portfolio is to achieve
long-term growth of capital and income, and moderate current income, by
investing primarily in common stocks that are believed to be of good quality
or to have good growth potential or which are considered to be undervalued
based on historical investment standards.
Income Portfolio. The investment objective of this portfolio is to achieve
the highest possible total return, by combining current income with capital
gains, consistent with prudent investment risk and the preservation of
capital, by investing primarily in fixed-income, high-quality debt securities.
Money Market Portfolio. The investment objective of this portfolio is to
achieve the highest possible current income consistent with the preservation
of capital and maintenance of liquidity, by investing primarily in short-term
money market instruments.
Diversified Portfolio. The investment objective of this portfolio is to
achieve a high total return while attempting to limit investment risk and
preserve capital by investing in equity securities, fixed-income debt
securities, or short-term money market instruments, or any combination
thereof, at the discretion of State Street Research.
Aggressive Growth Portfolio. The investment objective of this portfolio is
to achieve maximum capital appreciation by investing primarily in common
stocks (and equity and debt securities convertible into or carrying the right
to acquire common stocks) of emerging growth companies, undervalued securities
or special situations.
International Stock Portfolio. The investment objective of this portfolio is
to achieve long-term growth of capital by investing primarily in common stocks
and equity-related securities of non-United States companies.
Stock Index Portfolio. The investment objective of this portfolio is to
equal the performance of the Standard & Poor's 500 Composite Stock Price Index
(adjusted to assume reinvestment of dividends) by investing in the common
stock of companies which are included in the index.
Metropolitan Life acts as the investment manager for the Fund; State Street
Research, a wholly-owned subsidiary of Metropolitan Life, provides sub-
investment management services with respect to the Growth, Income, Diversified
and Aggressive Growth Portfolios; and GFM, a subsidiary of Metropolitan Life,
provides sub-investment management services with respect to the International
Stock Portfolio.
Metropolitan Life purchases and redeems Fund shares for the Separate Account
at their net asset value without the imposition of any sales or redemption
charges. Such shares represent an interest in one of the portfolios of the
Fund which correspond to the investment divisions of the Separate Account. Any
dividend or capital gain distributions
10
received from the Fund are likewise reinvested in Fund shares at net asset
value as of the dates paid. The distributions have the effect of reducing the
value of each share of the Fund and increasing the number of Fund shares
outstanding. However, the total cash value in the Separate Account does not
change as a result of such distributions.
On each Valuation Date, shares of each portfolio are purchased or redeemed
by Metropolitan Life for the Separate Account, based on, among other things,
the amounts of net premiums allocated to the Separate Account, dividends and
distributions reinvested, transfers to and among investment divisions, Policy
loans, loan repayments and benefit payments to be effected pursuant to the
terms of the Policies as of that date. Such purchases and redemptions for the
Separate Account are effected at the net asset value per share for each
portfolio determined as of 4:00 p.m., New York City time, on that same
Valuation Date.
A full description of the Fund, its investment policies and restrictions,
its charges and other aspects of its operation is contained in the prospectus
for the Fund, which is attached at the end of this Prospectus, and in the
Statement of Additional Information referred to therein. See "The Fund and its
Purpose," in the prospectus for the Fund for a discussion of the different
separate accounts for Metropolitan Life and its affiliates that invest in the
Fund and the risks related thereto.
POLICY BENEFITS
Unless otherwise stated, the discussion below assumes that no riders under
the Policy are in effect. In particular, the discussion below does not take
into account the effect of obtaining a portion of the desired insurance
coverage under the yearly renewable term rider. Obtaining a portion of
insurance coverage in this manner may be more economical than taking the full
amount of insurance coverage under the Policy. In determining whether this
option is more economical, a Policy owner must consider the amount of sales
charge due under the Policy as well as the higher current cost of insurance
charges due under the yearly renewable term rider. See the Appendix to
Prospectus for a discussion of how this and certain other riders can affect
benefits under the Policy.
DEATH BENEFITS
As long as the Policy remains in force (see "Policy Termination and
Reinstatement-Termination"), Metropolitan Life will, upon due proof of the
insured's death, pay the insurance proceeds of the Policy to the named
beneficiary. The proceeds may be received by the beneficiary in a single sum
or under one or more of the optional income plans set forth in the Policy (see
"Optional Income Plans").
The insurance proceeds are: The death benefit provided under Option A,
Option B or Option C, whichever is elected and in effect on the date of death
minus any outstanding indebtedness and any due and unpaid charges accruing
during the grace period.
DEATH BENEFIT OPTIONS
The Policy provides three death benefit options: Option A, Option B and
Option C as described below. The Policy owner designates the desired option in
the application and can change the option by written request (see "Change in
Death Benefit Option").
Option A--The death benefit is equal to the specified face amount of
insurance.
Option B--The death benefit is equal to the specified face amount of
insurance plus the cash value.
Option C--The death benefit is equal to the specified face amount of
insurance plus the amount of premiums paid that exceeds withdrawals made.
Minimum Death Benefit--Under either Option A, Option B or Option C, there is
a minimum death benefit equal to the greater of (1) the death benefit under
the option chosen, and (2 ) a percentage of the cash value as set forth in
Table I below or as computed pursuant to the Cash Value Accumulation test
formula below, and generally reflected in Table II below, depending on which
form of Policy is elected. The standard Policy contains a minimum death
benefit determined under Table I. If the Policy owner elects a Policy with a
special endorsement, the death benefit will be determined in accordance with
the terms of the endorsement which is generally reflected in Table II. Table
II is only
11
available in certain states. Sales representatives registered with
Metropolitan Life will have more information as to whether Table II is
available in a particular case. Once the Policy is issued the Policy owner may
not change the table elected. The minimum death benefit is determined in
accordance with federal income tax laws, to ensure that the Policy qualifies
as a life insurance contract and that the insurance proceeds will be excluded
from the gross income of the beneficiary. Table I ensures that the Policy
qualifies under the Internal Revenue Code Guideline Premium/Cash Value
Corridor test. The Cash Value Accumulation test formula as reflected generally
in Table II ensures that the Policy qualifies under the Internal Revenue Code
Cash Value Accumulation test. The Cash Value Accumulation test can be
advantageous to a Policy owner who intends to pay a greater amount of premiums
into the Policy. This is the case because the Policy will qualify as life
insurance even though the Policy owner is paying a higher level of premium
than allowed under the Guideline Premium/Cash Value Corridor test. However,
the death benefit under the Cash Value Accumulation test (and thus the monthly
cost of term insurance) could be higher. The advantage of the Cash Value
Accumulation test may be eliminated if the Policy owner does not intend to
exceed the 7-pay test limit. The 7-pay test sets a limit on the amount of
premiums which may be paid under a Policy during any 7-pay testing period
(usually the first 7 Policy years after issue or after a material modification
of the Policy) without incurring possible adverse tax consequences. If
premiums paid exceed such limit during any 7-pay testing period, any partial
withdrawals, Policy loans and other distributions may be subject to adverse
federal income tax consequences (see "Federal Tax Matters--Taxation of the
Policy").
TABLE I--GUIDELINE PREMIUM/CASH VALUE CORRIDOR TEST
[Download Table]
ATTAINED AGE AT BEGINNING PERCENTAGE OF
OF POLICY YEAR CASH VALUE
------------------------- -------------
40 and less:............ 250%
45:..................... 215%
50:..................... 185%
55:..................... 150%
60:..................... 130%
65:..................... 120%
70:..................... 115%
[Download Table]
ATTAINED AGE AT BEGINNING PERCENTAGE OF
OF POLICY YEAR CASH VALUE
------------------------- -------------
75:..................... 105%
80:..................... 105%
85:..................... 105%
90:..................... 105%
94:..................... 101%
95:..................... 100%
100 and greater:........ 100%
For the ages not listed, the percentage shall decrease by a ratable portion
for each full year.
12
CASH VALUE ACCUMULATION TEST FORMULA
Using the Cash Value Accumulation test, the death benefit shall never be less
than (a) divided by (b), where
(a) = the Cash Value immediately before the death of the insured, and
(b) = the net single premium immediately before the death of the insured
(computed on the basis of the 1980 CSO mortality table and on the basis
of interest at the greater of an annual effective rate of 4% or the rate
or rates guaranteed on issuance of the policy and as otherwise required
under section 7702 of the Internal Revenue Code) for one dollar of death
benefit.
Generally this means that the death benefit will never be less than the
percentage of cash value shown below.
TABLE II--CASH VALUE ACCUMULATION TEST
[Download Table]
PERCENTAGE OF CASH
VALUE
-----------------------
AGE ON
DATE OF
DEATH MALE FEMALE UNISEX
------- ------- ------- -------
20 661.64% 787.90% 683.29%
21 642.51% 762.72% 663.26%
22 623.75% 738.28% 643.58%
23 605.25% 714.54% 624.22%
24 587.03% 691.42% 605.18%
25 569.05% 669.03% 586.48%
26 551.33% 647.29% 568.12%
27 533.93% 626.21% 550.12%
28 516.96% 605.77% 532.51%
29 500.35% 585.96% 515.36%
30 484.14% 566.76% 498.65%
31 468.43% 548.19% 482.42%
32 453.17% 530.22% 466.68%
33 438.38% 512.82% 451.45%
34 424.11% 495.98% 436.72%
35 410.29% 479.71% 422.46%
36 396.95% 464.02% 408.71%
37 384.10% 448.89% 395.48%
38 371.73% 434.33% 382.72%
39 359.83% 420.38% 370.45%
40 348.37% 406.98% 358.67%
41 337.37% 394.12% 347.35%
42 326.80% 381.78% 336.49%
43 316.66% 369.93% 326.04%
44 306.90% 358.53% 316.01%
45 297.53% 347.55% 306.35%
46 288.52% 336.97% 297.07%
47 279.86% 326.77% 288.15%
48 271.53% 316.94% 279.56%
49 263.51% 307.46% 271.30%
50 255.81% 298.31% 263.35%
51 248.39% 289.50% 255.71%
52 241.28% 281.01% 248.37%
53 234.47% 272.84% 241.32%
54 227.94% 264.98% 234.58%
55 221.70% 257.40% 228.12%
56 215.72% 250.09% 221.94%
57 210.00% 243.02% 216.00%
[Download Table]
PERCENTAGE OF CASH
VALUE
-----------------------
AGE ON
DATE OF
DEATH MALE FEMALE UNISEX
------- ------- ------- -------
58 204.52% 236.17% 210.30%
59 199.25% 229.51% 204.81%
60 194.20% 223.05% 199.55%
61 189.35% 216.79% 194.48%
62 184.72% 210.75% 189.63%
63 180.29% 204.94% 184.99%
64 176.07% 199.39% 180.56%
65 172.04% 194.07% 176.34%
66 168.21% 188.99% 172.31%
67 164.55% 184.10% 168.46%
68 161.05% 179.40% 164.78%
69 157.70% 174.86% 161.24%
70 154.50% 170.47% 157.85%
71 151.44% 166.23% 154.60%
72 148.53% 162.18% 151.51%
73 145.78% 158.31% 148.58%
74 143.20% 154.66% 145.82%
75 140.77% 151.21% 143.21%
76 138.49% 147.96% 140.76%
77 136.34% 144.89% 138.45%
78 134.31% 141.98% 136.25%
79 132.37% 139.21% 134.15%
80 130.51% 136.58% 132.14%
81 128.73% 134.09% 130.21%
82 127.03% 131.72% 128.37%
83 125.42% 129.50% 126.62%
84 123.90% 127.41% 124.97%
85 122.47% 125.44% 123.40%
86 121.10% 123.58% 121.90%
87 119.77% 121.80% 120.45%
88 118.46% 120.07% 119.02%
89 117.12% 118.35% 117.56%
90 115.71% 116.60% 116.03%
91 114.15% 114.75% 114.37%
92 112.35% 112.72% 112.49%
93 110.19% 110.38% 110.26%
94 107.46% 107.54% 107.49%
95 and over 100.00% 100.00% 100.00%
13
Option A, Option B and Option C each provides insurance protection as well
as possible build-up of cash value. Under Option A, the insurance protection
remains level unless the minimum death benefit applies. Under Option B, the
insurance protection varies as the cash value changes. Under Option C, the
insurance protection varies as the (i) sum of premiums paid, and (ii) the
amount of cash value withdrawn, changes.
For any specified face amount, assuming there have been no withdrawals from
the Policy, the amount of the death benefit will be greater under Option B and
Option C, than under Option A, since the cash value or premiums paid is added
to the specified face amount and included in the death benefit under Option B
and Option C, respectively, but not under Option A. By the same token, the
cost of term insurance included in the monthly deduction (see "Charges and
Deductions--Cost of Term Insurance") will be greater, and thus the
accumulation of cash value will be lower, under Option B and Option C than
under Option A, assuming the same specified face amount and the same actual
premiums paid. Since under Option C, the death benefit includes the sum of
premiums paid (less any withdrawals), this Option would be desirable in those
situations where recovery of premiums paid is an important consideration. The
cost of term insurance under Option C would generally be lower than under
Option B, when the sum of premiums paid (less any withdrawals) is less than
the cash value. However, the cost of term insurance under Option C would be
higher when the cash value is less than the sum of premiums paid (less any
withdrawals).
Illustration of Option A. For purposes of this illustration, assume that the
insured is male and is exactly age 40, that under Table II the male column
applies and that there is no outstanding indebtedness and that the insured has
not died during a grace period (see "Policy Termination and Reinstatement--
Termination").
Under Option A, a Policy with a $100,000 specified face amount will
generally pay $100,000 in death benefits. However, because the death benefit
must be equal to or be greater than 250% of cash value under Table I (348.37%
of cash value under Table II), any time the cash value of this Policy exceeds
$40,000 under Table I ($28,705 under Table II), the death benefit will exceed
the $100,000 specified face amount. Each additional dollar of cash value above
$40,000 under Table I ($28,705 under Table II) will increase the death benefit
(assuming the insured is exactly age 40) by $2.50 under Table I ($3.48 under
Table II). Thus a Policy with a cash value of $50,000 will have a death
benefit of $125,000 (250% X $50,000) under Table I or $174,185 (348.37% X
$50,000) under Table II; a cash value of $60,000 will yield a death benefit of
$150,000 (250% X $60,000) under Table I or $209,022 (348.37% X $60,000) under
Table II; and a cash value of $100,000 will yield a death benefit of $250,000
(250% X $100,000) under Table I or $348,370 (348.37% X $100,000) under Table
II.
Similarly, so long as cash value exceeds $40,000 under Table I ($28,705
under Table II), each dollar reduction in cash value will reduce the death
benefit (assuming the insured is exactly age 40) by $2.50 under Table I ($3.48
under Table II). If at any time, however, the cash value multiplied by the
applicable percentage is less than the specified face amount, the death
benefit will equal the specified face amount of the Policy.
Illustration of Option B. For purposes of this illustration, assume that the
insured is male and is exactly age 40, that under Table II the male column
applies and that there is no outstanding indebtedness and that the insured has
not died during a grace period.
Under Option B, a Policy with a specified face amount of $100,000 will
generally pay a death benefit of $100,000 plus the cash value. Thus, for
example, a Policy with a cash value of $25,000 will have a death benefit of
$125,000 ($100,000 + $25,000); a cash value of $50,000 will yield a death
benefit of $150,000 ($100,000 + $50,000); and a cash value of $65,000 will
yield a death benefit of $165,000 ($100,000 + $65,000). The death benefit,
however, must be at least 250% of cash value under Table I (348.37% of cash
value under Table II). As a result, if the cash value of the Policy exceeds
$66,666.67 under Table I ($40,262.51 under Table II), the death benefit will
be greater than the specified face amount plus cash value. Each additional
dollar of cash value above $66,666.67 under Table I ($40,262.51 under Table
II) will increase the death benefit (assuming the insured is exactly age 40)
by $2.50 under Table I (by $3.48 under Table II). A Policy with a cash value
of $75,000 will therefore have a death benefit of $187,500 (250% X $75,000)
under Table I or $261,278 (348.37% x $75,000) under Table II; a cash value of
$85,000 will yield a death benefit of $212,500 (250% x $85,000) under Table I
or $296,115 (348.37% x $85,000) under Table II; a cash value of $100,000 will
yield a death benefit of $250,000 (250% x $100,000) under Table I or $348,370
(348.37% x 100,000) under Table II.
Similarly, any time cash value exceeds $66,666.67 under Table I ($40,262.51
under Table II), each dollar reduction in cash value will reduce the death
benefit (assuming the insured is exactly age 40) by $2.50 under Table I and
$3.48 under Table II. Whenever cash value is less than $66,666.67 under Table
I ($40,262.51 under Table II) each dollar
14
taken out of cash value will reduce the death benefit by one dollar and the
death benefit will be the specified face amount plus the cash value of the
Policy.
Illustration of Option C. For purposes of this illustration, assume that the
insured is male and is exactly age 40, that under Table II the male column
applies and that there is no outstanding indebtedness and that the insured has
not died during a grace period.
Under Option C, a Policy with a specified face amount of $100,000 will
generally pay a death benefit of $100,000 plus the total amount of premiums
paid that exceeds withdrawals made. Thus, for example, assuming there have
been no withdrawals from the Policy, a Policy with premiums paid of $25,000
will have a death benefit of $125,000 ($100,000 + $25,000); premiums paid of
$50,000 will yield a death benefit of $150,000 ($100,000 + $50,000); and
premiums paid of $65,000 will yield a death benefit of $165,000 ($100,000 +
$65,000). The death benefit, however, must be at least 250% of cash value
under Table I (348.37% of cash value under Table II). For example, if the
premiums paid under the Policy are not greater than $25,000, the death benefit
will be greater than the specified face amount plus premiums paid whenever the
cash value exceeds $50,000 under Table I ($35,881.39 under Table II). Each
additional dollar of cash value above $50,000 under Table I ($35,881.39 under
Table II) will increase the death benefit (assuming the insured is exactly age
40) by $2.50 under Table I ($3.48 under Table II). A policy with cash value of
$75,000 will therefore have a death benefit of $187,500 (250% x $75,000) under
Table I or $261,278 (348.37% x $75,000) under Table II; a cash value of
$85,000 will yield a death benefit of $212,500 (250% x $85,000) under Table I
or $296,115 (348.37% x $85,000) under Table II, a cash value of $100,000 will
yield a death benefit of $250,000 (250% x $100,000) under Table I or $348,370
(348.37% x $100,000) under Table II.
Similarly, assume the premiums paid under the Policy are equal to $25,000
under Table I ($40,000 under Table II) and the cash value is equal to $60,000.
Each dollar taken out of the cash value will reduce the death benefit
(assuming the insured is exactly age 40) by $2.50 under Table I ($3.48 under
Table II) until $16,668 under Table I ($27,791 under Table II) is withdrawn
from the cash value. Then the death benefit would be $108,332 ($100,000 +
$25,000 - $16,668) under Table 1 or $112,209 ($100,000 + $40,000 - $27,791)
under Table II since this exceeds $108,330 (250% x ($60,000-$16,668) under
Table I or $112,206 (348.37% X ($60,000 -- $27,791)) under Table II). Then,
each dollar withdrawn will reduce the death benefit by one dollar.
Note generally that the total of premiums paid are limited by Internal
Revenue Service rules (see "Premiums--Premium Limitations"). Thus, these
examples are contingent on satisfying these rules.
Under any of the Options, if the insured dies on a date that is not a
Valuation Date, the amount of death benefit proceeds payable will be
determined as of the next Valuation Date.
Change in Specified Face Amount. Subject to certain limitations, a Policy
owner may increase or decrease the specified face amount of a Policy (see
"Decreases" and "Increases"). Any increase or decrease in the specified face
amount requested by the Policy owner will become effective on the monthly
anniversary on or next following the Date of Receipt of the request, or, if
evidence of insurability is required, the date of approval of the request.
Decreases. The specified face amount remaining in force after any requested
decrease may not be less than the Minimum Initial Specified Face Amount during
the first five Policy years nor less than one-half the Minimum Initial
Specified Face Amount thereafter. No decrease in the specified face amount
will be permitted if it would result in total premiums paid exceeding the then
current maximum premium limitations determined by Internal Revenue Code rules
(see "Premiums--Premium Limitations"). For purposes of determining the cost of
term insurance charge (see "Charges and Deductions--Cost of Term Insurance";
"Cost of Term Insurance Rate"; and "Rate Class"), a decrease in the specified
face amount will reduce the specified face amount in the following order: (a)
the specified face amount provided by the most recent increase; (b) the next
most recent increases successively; and (c) the specified face amount when the
Policy was issued.
Increases. Any change in the specified face amount requested by the Policy
owner which results in an increase in the death benefit may be made only if
the cash surrender value after the change is large enough to cover at least
two monthly deductions based on the most recent cost of term insurance charge
deducted. Any such change may require that additional evidence of insurability
be submitted to Metropolitan Life and may be subject to a one-time
underwriting charge at a rate of up to $3.00 for each $1,000 of specified face
amount increase. Metropolitan Life will deduct this charge from the existing
cash value in the Fixed Account and the investment divisions of the Separate
Account in the same proportion that the Policy's cash value in the Fixed
Account and the Policy's cash value in each investment division bear to the
Policy's total cash value (except for the cash value in the Policy Loan
Account) as of the date deducted (this method hereinafter referred to as the
"Pro Rata Basis").
15
Effect of Changes in Specified Face Amount on Charges. A change in the
specified face amount may affect the cost of term insurance and the net amount
at risk, both of which may affect a Policy owner's cost of term insurance
charge (see "Charges and Deductions-- Cost of Term Insurance"; "Cost of Term
Insurance Rate" and "Rate Class"). This in turn can affect the level of
subsequent cash values and death benefits. A change in the specified face
amount or death benefit may also affect the Policy's status as a modified
endowment contract for tax purposes (see "Federal Tax Matters").
Change in Death Benefit Option. Generally, the death benefit option in
effect may be changed at any time after the first Policy year while the
insured is alive by sending a written request for change to the Designated
Office. A change in death benefit option will not be permitted unless the cash
surrender value of a Policy after the change is effected would be sufficient
to pay at least two monthly deductions. Changing death benefit options may
require evidence of insurability satisfactory to Metropolitan Life and the
effective date of any such change will be the monthly anniversary on or
following the Date of Receipt of the request.
If the death benefit option is changed, the specified face amount will be
increased or decreased such that the death benefit is not altered at the time
of the change. However, the change in death benefit option will affect the
determination of the death benefit from that point on. This will mean that the
cost of term insurance may be higher or lower than it otherwise would have
been (see "Charges and Deductions-Cost of Term Insurance").
For example, if the death benefit option is changed from Option C to Option
A, the specified face amount will be increased by the amount of premiums paid
that exceeds withdrawals made. This ensures that the death benefit is not
altered at the time of the change. However, the change in the death benefit
option will affect the determination of the death benefit from that point on
since the premiums paid less withdrawals made will no longer be added to the
specified face amount in determining the death benefit. From that point on,
the death benefit will equal the new specified face amount (or, if higher, the
minimum death benefit). This will mean that the cost of term insurance may be
higher or lower than it otherwise would have been since any increases or
decreases in cash values will, respectively, reduce or increase the term of
insurance amount under Option A (See "Charges and Deductions--Cost of Term
Insurance").
As a second example, if the death benefit option is changed from Option A to
Option B, the specified face amount will be decreased to equal the death
benefit less the cash value on the effective date of the change. This change
may not be made if it would result in a specified face amount which is less
than the Minimum Initial Specified Face Amount during the first five Policy
years and one-half the Minimum Initial Specified Face Amount thereafter. As
with any option change, a change from Option A to Option B will not alter the
death benefit at the time of the change, but will affect the determination of
the death benefit from that point on. Since, from that point on, the cash
value will be added to the new specified face amount, the death benefit will
vary with the cash value. Moreover, under Option B, the term insurance amount
will not vary unless the minimum death benefit is in effect. Therefore, the
cost of term insurance may be higher or lower than it otherwise would have
been without the change in death benefit option (see "Charges and Deductions--
Cost of Term Insurance"). A change in death benefit option will not be
permitted if it results in total premiums paid exceeding the then current
maximum premium limitations determined by Internal Revenue Service Rules (see
"Premiums--Premium Limitations").
Under Option A, Option B and Option C, cost of term insurance rates
generally increase as the insured's age increases. Nevertheless, assuming a
positive cumulative net investment return with respect to any amounts in the
Separate Account, changing the death benefit option from Option B or Option C
to Option A will generally reduce the term insurance amount and therefore the
cost of term insurance charge for all subsequent monthly deductions compared
to what such charge would have been if no such change were made.
CASH VALUE
The total cash value of a Policy at any time is the sum of the Policy's cash
values in the Fixed Account (see "The Fixed Account"), the Policy Loan Account
(see "Policy Right--Loan Privileges"), and the investment divisions of the
Separate Account at such time. The Policy's cash value in the Separate Account
may increase or decrease on each Valuation Date depending on the investment
return of the chosen investment divisions of the Separate Account (see
"Separate Account Net Investment Return"). There is no guaranteed minimum cash
value in the Separate Account.
Calculation of Separate Account Cash Value. On the Investment Start Date,
the Policy's cash value in an investment division will equal the portion of
any net premium allocated to the investment division, reduced by the
16
portion of any monthly deductions allocated to the Policy's cash value in that
investment division (see "Is there a "Free Look' Period?" and "Payment and
Allocation of Premiums-Allocation of Premiums and Cash Value"). Thereafter, on
each Valuation Date, the Policy's cash value in an investment division of the
Separate Account will equal:
(1) The cumulative net premium payments allocated to the investment division;
plus
(2) All cash values transferred to the investment division from the Fixed
Account, from the Policy Loan Account upon loan repayment (including all
interest credited on loaned amounts) or from another investment division;
minus
(3) Any cash value transferred from the investment division to the Fixed
Account, to the Policy Loan Account upon taking out a loan or to another
investment division; minus
(4) Any partial cash withdrawal from the investment division; minus
(5) The portion of the cumulative monthly deductions allocated to the Policy's
cash value in the investment division (see "Charges and Deductions-Monthly
Deduction from Cash Value"); minus
(6) The portion of any transfer charge allocated to the Policy's cash value in
the investment division (see "Charges and Deductions-Transfer Charge"); plus
(7) The cumulative net investment return (discussed below) on the net amount
of cash value in the investment division.
The Policy's total cash value in the Separate Account equals the sum of the
Policy's cash value in each investment division.
17
Separate Account Net Investment Return. A Separate Account investment
division's net investment return is determined as of 4:00 p.m., New York City
time, on each Valuation Date. All transactions and calculations with respect
to the Policies as of any Valuation Date are determined as of such time.
Each Separate Account division is credited with a rate of net investment
return equal to its gross rate of investment return during the Valuation
Period less a charge for Metropolitan Life's taxes, if any such tax charge
becomes necessary in the future (see "Charges and Deductions--Charges Against
the Separate Account"). The investment division's gross rate of investment
return is equal to the rate of increase or decrease in the net asset value per
share of the underlying Fund portfolio over the Valuation Period, adjusted
upward to take appropriate account of any dividends paid by the portfolio
during the period.
Depending primarily on the investment experience of the underlying Fund
portfolio, a Separate Account investment division's net investment return may
be either positive or negative during a Valuation Period.
Rates of Return. The rates of return for each of the portfolios of the Fund
shown below reflect all charges against the Fund portfolios. However, there
are significant charges against premiums and the cash value in each Policy
that are not imposed against the Fund portfolios and are therefore not
reflected. These charges, i.e., charges against premiums, charges for
mortality and expense risks and cost of term insurance (see "Charges and
Deductions--Premium Expense Charges," and "Monthly Deduction from Cash
Value"), significantly decrease the rates of return on a given Policy. The
rate of return is computed in each case by subtracting the net asset value per
share at the beginning of the period from the net asset value per share at the
end of the period, adjusting for dividends, and dividing the result by the net
asset value per share at the beginning of the period. The resulting ratio is
annualized to obtain the Average Annual Return shown. The annualization makes
the assumption that the rate of return does not vary from any one year period
to another and takes into account the effect of compounding.
Rates of return are useful for reviewing the effectiveness of Fund
management and for comparing the investment returns of the underlying Fund
portfolios. HOWEVER, FOR THE REASONS STATED ABOVE, NO OWNER SHOULD EXPECT TO
RECEIVE FUND RETURN. The hypothetical historical illustrations (see "Cash
Value--Illustrations") demonstrate the effect on the underlying Fund
portfolios' rates of return of all charges against premiums and the cash value
in the Policy illustrated.
The first column shown for each investment division begins on the later of
the date the portfolio of the Fund in which it invests began operations and
the date the first registration statement relating to such portfolio was
declared effective by the Securities and Exchange Commission and ends on the
date indicated. Other periods shown begin on January 1st of the following year
and end on December 31st of that year, except that the Average Annual Return
column is for the entire period shown for the portfolio in question. Thus the
rates of return are based on the actual historical experience of the Fund. The
annual return for the International Stock Portfolio was increased due to the
voluntary assumption by Metropolitan Life of certain expenses for the
International Stock Portfolio in 1993 (see "Management of the Fund," in the
prospectus for the Fund). This subsidization affected annual returns only by
.01%. There was no subsidization in 1994 or 1995.
[Enlarge/Download Table]
6/24/83- 1/1/84- 1/1/85- 1/1/86- 1/1/87- 1/1/88- 1/1/89- 1/1/90- 1/1/91- 1/1/92- 1/1/93- 1/1/94-
12/31/83 12/31/84 12/31/85 12/31/86 12/31/87 12/31/88 12/31/89 12/31/90 12/31/91 12/31/92 12/31/93 12/31/94
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Growth.......... -4.64% 0.60% 34.79% 10.17% 7.22% 10.73% 38.89% -10.01% 33.18% 11.57% 14.41% -3.74%
Income.......... 1.98% 13.82% 27.19% 19.54% -1.90% 9.30% 13.30% 9.90% 17.34% 6.90% 11.32% -3.25%
Money Market.... 4.87% 10.47% 8.14% 6.76% 6.22% 7.55% 9.34% 8.08% 6.00% 3.68% 2.90% 3.90%
7/25/86- 1/1/87- 1/1/88- 1/1/89- 1/1/90- 1/1/91- 1/1/92- 1/1/93- 1/1/94-
12/31/86 12/31/87 12/31/88 12/31/89 12/31/90 12/31/91 12/31/92 12/31/93 12/31/94
-------- -------- -------- -------- -------- -------- -------- -------- --------
Diversified................................ 3.43% 3.50% 9.32% 21.73% -0.04% 24.94% 9.49% 12.79% -3.41%
5/1/90- 1/1/91- 1/1/92- 1/1/93- 1/1/94-
12/31/90 12/31/91 12/31/92 12/31/93 12/31/94
-------- -------- -------- -------- --------
Stock Index.................................................................... 1.95% 29.76% 7.44% 9.54% 1.15%
4/29/88- 1/1/89- 1/1/90- 1/1/91- 1/1/92- 1/1/93- 1/1/94-
12/31/88 12/31/89 12/31/90 12/31/91 12/31/92 12/31/93 12/31/94
-------- -------- -------- -------- -------- -------- --------
Aggressive Growth............................................ 4.66% 32.22% -11.35% 66.46% 10.37% 22.66% -3.52%
5/1/91- 1/1/92- 1/1/93- 1/1/94-
12/31/91 12/31/92 12/31/93 12/31/94
-------- -------- -------- --------
International Stock..................................................................... -1.55% -10.21% 47.76% 4.46%
Growth.......... 34.49% 13.06%
Income.......... 19.70% 11.27%
Money Market.... 5.54% 6.64%
AVERAGE
1/1/95- ANNUAL
12/31/95 RETURN
-------- -------
Diversified................................ 27.86% 11.15%
AVERAGE
1/1/95- ANNUAL
12/31/95 RETURN
-------- -------
Stock Index.................................................................... 37.95% 14.66%
AVERAGE
1/1/95- ANNUAL
12/31/95 RETURn
-------- -------
Aggressive Growth............................................ 31.00% 17.70%
AVERAGE
1/1/95- ANNUAL
12/31/95 RETURn
-------- -------
International Stock..................................................................... 1.81% 7.29%
18
Illustrations. In order to demonstrate how the investment experience of the
Separate Account investment divisions would have affected the death benefit
and cash value of a Policy, hypothetical illustrations for each investment
division are set forth below. These hypothetical illustrations are based on
the actual historical experience of the Fund as if the Separate Account had
been in existence and a Policy had been issued on the dates indicated. They do
not represent what may happen in the future.
The illustrations are based on the payment of annual planned premiums of
$1,000 for a specified face amount of $100,000 for a male aged 35. The
illustrations assume that the insured is in Metropolitan Life's standard
nonsmoker full underwriting risk classification. The periods illustrated are
based on the rates of return for such periods set forth in "Rates of Return"
above. Cash surrender values equal the cash values because the illustrations
assume no Policy loans have been made. The death benefits set forth in the
following illustrations are the same whether Table I or Table II is used in
determining the minimum death benefit under the Policy (see "Death Benefit
Options--Minimum Death Benefit"). The illustrations assume that the Policy is
not issued to or in connection with a large group.
The amounts shown for the death benefits and cash values take into account
all charges in connection with the Policy, including the charges against
premiums, the cost of term insurance, the monthly charge for mortality and
expense risks attributable to the Policies, the daily charges to the Fund for
direct Fund expenses and the daily charge to the Fund for investment
management services. (See "Charges and Deductions").
For each investment division, one illustration is based on the guaranteed
charges; the other illustration assumes the current charges were in effect
during the period illustrated (see "Monthly Deduction From Cash Value--Cost of
Term Insurance Rate" and "Charge for Mortality and Expense Risks").
The second column of each example shows the amount which would accumulate if
an amount equal to the annual planned premium were invested to earn the rates
of return of the corresponding portfolio of the Fund as set forth on page 18.
Such amounts do not reflect the effect of income taxes to which an individual
earning such rates might be subject.
These examples of policy performance are for a specific age, sex, rate
class, underwriting class, premium payment pattern and policy anniversary as
set forth above. The benefits are calculated for a specific policy
anniversary. The amount and timing of premium payments would affect individual
policy benefits as would any withdrawals or Policy loans.
Performance may be shown for the systematic investment strategies made
available under the Policies (see "Allocation of Premiums and Cash Value--
Systematic Investment Strategies"). Average annual return for each of the
systematic investment strategies may be calculated by presuming a certain
dollar value at the beginning of a period, and comparing this dollar value
with the dollar value, based on historical performance for the applicable
investment divisions or the Fixed Account, at the end of the period, expressed
as a percentage. The average annual return in each case will assume that no
withdrawals have occurred and will not reflect charges against premiums, cost
of term insurance or monthly policy charges.
This Prospectus also contains illustrations based on assumed rates of
return. See "Illustrations Of Death Benefits, Cash Values And Accumulated
Premiums".
19
The following examples show how the hypothetical net return of each
investment division which invests in the corresponding portfolio of the Fund
would have affected benefits for a Policy issued on the January 1 immediately
following the effective date of such portfolio. These examples assume that net
premiums and related cash values were in the applicable investment division
for the entire period.
GROWTH
BASED ON CURRENT CHARGES
[Enlarge/Download Table]
POLICY PREMIUMS DEATH BENEFIT CASH VALUE
YEAR ENDING ACCUMULATED ------------------------ --------------------------
ON DECEMBER AT FUND RATES OPTION OPTION
31ST OF OF RETURN OPTION A B C OPTION A OPTION B OPTION C
----------- ------------- -------- ------- ------- -------- -------- --------
1984.................... 1,006 100,000 100,786 101,000 787 786 786
1985.................... 2,704 100,000 102,113 102,000 2,116 2,113 2,113
1986.................... 4,081 100,000 103,167 103,000 3,173 3,167 3,167
1987.................... 5,447 100,000 104,194 104,000 4,204 4,194 4,193
1988.................... 7,139 100,000 105,453 105,000 5,471 5,453 5,453
1989.................... 11,305 100,000 108,587 106,000 8,621 8,587 8,589
1990.................... 11,073 100,000 108,343 107,000 8,384 8,343 8,347
1991.................... 16,079 100,000 112,046 108,000 12,115 12,046 12,055
1992.................... 19,055 100,000 114,182 109,000 14,277 14,182 14,197
1993.................... 22,944 100,000 117,020 110,000 17,151 17,020 17,046
1994.................... 23,049 100,000 117,024 111,000 17,175 17,024 17,058
1995.................... 32,343 100,000 123,940 112,000 24,180 23,940 24,002
GROWTH
BASED ON GUARANTEED CHARGES
POLICY PREMIUMS 100,000DEATH BENEFIT CASH VALUE
YEAR ENDING ACCUMULATED ------------------------ --------------------------
ON DECEMBER AT FUND RATES OPTION OPTION
31ST OF OF RETURN OPTION A B C OPTION A OPTION B OPTION C
------------- ------------- -------- ------- ------- -------- -------- --------
1984.................... 1,006 100,000 100,646 101,000 648 646 646
1985.................... 2,704 100,000 101,746 102,000 1,753 1,746 1,744
1986.................... 4,081 100,000 102,589 103,000 2,604 2,589 2,587
1987.................... 5,447 100,000 103,394 104,000 3,418 3,394 3,389
1988.................... 7,139 100,000 104,369 105,000 4,409 4,369 4,361
1989.................... 11,305 100,000 106,828 106,000 6,905 6,828 6,817
1990.................... 11,073 100,000 106,540 107,000 6,632 6,540 6,531
1991.................... 16,079 100,000 109,341 108,000 9,499 9,341 9,330
1992.................... 19,055 100,000 110,860 109,000 11,080 10,860 10,854
1993.................... 22,944 100,000 112,826 110,000 13,134 12,826 12,829
1994.................... 23,049 100,000 112,600 111,000 12,956 12,600 12,613
1995.................... 32,343 100,000 117,480 112,000 18,047 17,480 17,516
INCOME
BASED ON CURRENT CHARGES
[Enlarge/Download Table]
POLICY PREMIUMS DEATH BENEFIT CASH VALUE
YEAR ENDING ACCUMULATED ------------------------ --------------------------
ON DECEMBER AT FUND RATES OPTION OPTION
31ST OF OF RETURN OPTION A B C OPTION A OPTION B OPTION C
----------- ------------- -------- ------- ------- -------- -------- --------
1984.................... 1,138 100,000 100,894 101,000 895 894 894
1985.................... 2,720 100,000 102,129 102,000 2,132 2,129 2,129
1986.................... 4,446 100,000 103,459 103,000 3,465 3,459 3,459
1987.................... 5,343 100,000 104,117 104,000 4,127 4,117 4,117
1988.................... 6,933 100,000 105,299 105,000 5,316 5,299 5,299
1989.................... 8,988 100,000 106,820 106,000 6,848 6,820 6,821
1990.................... 10,977 100,000 108,271 107,000 8,311 8,271 8,273
1991.................... 14,053 100,000 110,522 108,000 10,582 10,522 10,527
1992.................... 16,092 100,000 111,967 109,000 12,046 11,967 11,975
1993.................... 19,027 100,000 114,099 110,000 14,206 14,099 14,114
1994.................... 19,376 100,000 114,294 111,000 14,418 14,294 14,313
1995.................... 24,390 100,000 118,042 112,000 18,217 18,042 18,072
20
INCOME
BASED ON GUARANTEED CHARGES
[Enlarge/Download Table]
POLICY PREMIUMS DEATH BENEFIT CASH VALUE
YEAR ENDING ACCUMULATED ------------------------ --------------------------
ON DECEMBER AT FUND RATES OPTION OPTION
31ST OF OF RETURN OPTION A B C OPTION A OPTION B OPTION C
----------- ------------- -------- ------- ------- -------- -------- --------
1984.................... 1,138 100,000 100,744 101,000 746 744 744
1985.................... 2,720 100,000 101,765 102,000 1,771 1,765 1,763
1986.................... 4,446 100,000 102,842 103,000 2,858 2,842 2,840
1987.................... 5,343 100,000 103,340 104,000 3,364 3,340 3,336
1988.................... 6,933 100,000 104,252 105,000 4,292 4,252 4,246
1989.................... 8,988 100,000 105,411 106,000 5,473 5,411 5,401
1990.................... 10,977 100,000 106,478 107,000 6,568 6,478 6,465
1991.................... 14,053 100,000 108,136 108,000 8,272 8,136 8,119
1992.................... 16,092 100,000 109,121 109,000 9,303 9,121 9,103
1993.................... 19,027 100,000 110,555 110,000 10,805 10,555 10,537
1994.................... 19,376 100,000 110,488 111,000 10,780 10,488 10,471
1995.................... 24,390 100,000 113,024 112,000 13,440 13,024 13,004
MONEY MARKET
BASED ON CURRENT CHARGES
[Enlarge/Download Table]
POLICY PREMIUMS DEATH BENEFIT CASH VALUE
YEAR ENDING ACCUMULATED ------------------------ --------------------------
ON DECEMBER AT FUND RATES OPTION OPTION
31ST OF OF RETURN OPTION A B C OPTION A OPTION B OPTION C
----------- ------------- -------- ------- ------- -------- -------- --------
1984.................... 1,105 100,000 100,867 101,000 868 867 867
1985.................... 2,276 100,000 101,774 102,000 1,777 1,774 1,774
1986.................... 3,497 100,000 102,708 103,000 2,713 2,708 2,708
1987.................... 4,777 100,000 103,669 104,000 3,678 3,669 3,668
1988.................... 6,213 100,000 104,734 105,000 4,749 4,734 4,733
1989.................... 7,887 100,000 105,967 106,000 5,990 5,967 5,965
1990.................... 9,605 100,000 107,216 107,000 7,250 7,216 7,214
1991.................... 11,242 100,000 108,388 108,000 8,434 8,388 8,386
1992.................... 12,692 100,000 109,405 109,000 9,464 9,405 9,403
1993.................... 14,089 100,000 110,400 110,000 10,475 10,400 10,399
1994.................... 15,678 100,000 111,523 111,000 11,618 11,523 11,523
1995.................... 17,601 100,000 112,983 112,000 13,103 12,983 12,984
MONEY MARKET
BASED ON GUARANTEED CHARGES
POLICY PREMIUMS DEATH BENEFIT CASH VALUE
YEAR ENDING ACCUMULATED ------------------------ --------------------------
ON DECEMBER AT FUND RATES OPTION OPTION
31ST OF OF RETURN OPTION A B C OPTION A OPTION B OPTION C
----------- ------------- -------- ------- ------- -------- -------- --------
1984.................... 1,105 100,000 100,719 101,000 721 719 719
1985.................... 2,276 100,000 101,457 102,000 1,463 1,457 1,455
1986.................... 3,497 100,000 102,200 103,000 2,212 2,200 2,196
1987.................... 4,777 100,000 102,951 104,000 2,971 2,951 2,944
1988.................... 6,213 100,000 103,767 105,000 3,801 3,767 3,756
1989.................... 7,887 100,000 104,690 106,000 4,742 4,690 4,674
1990.................... 9,605 100,000 105,596 107,000 5,672 5,596 5,574
1991.................... 11,242 100,000 106,406 108,000 6,511 6,406 6,377
1992.................... 12,692 100,000 107,063 109,000 7,200 7,063 7,025
1993.................... 14,089 100,000 107,643 110,000 7,818 7,643 7,595
1994.................... 15,678 100,000 108,281 111,000 8,502 8,281 8,218
1995.................... 17,601 100,000 109,145 112,000 9,426 9,145 906
21
DIVERSIFIED
BASED ON CURRENT CHARGES
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POLICY PREMIUMS DEATH BENEFIT CASH VALUE
YEAR ENDING ACCUMULATED ------------------------ --------------------------
ON DECEMBER AT FUND RATES OPTION OPTION
31ST OF OF RETURN OPTION A B C OPTION A OPTION B OPTION C
----------- ------------- -------- ------- ------- -------- -------- --------
1987.................... 1,035 100,000 100,810 101,000 810 810 810
1988.................... 2,225 100,000 101,732 102,000 1,734 1,732 1,732
1989.................... 3,925 100,000 103,043 103,000 3,048 3,043 3,042
1990.................... 4,923 100,000 103,783 104,000 3,792 3,783 3,782
1991.................... 7,401 100,000 105,649 105,000 5,667 5,649 5,649
1992.................... 9,198 100,000 106,971 106,000 6,999 6,971 6,971
1993.................... 11,502 100,000 108,659 107,000 8,700 8,659 8,661
1994.................... 12,076 100,000 109,024 108,000 9,075 9,024 9,027
1995.................... 16,719 100,000 112,421 109,000 12,501 12,421 12,427
DIVERSIFIED
BASED ON GUARANTEED CHARGES
POLICY PREMIUMS DEATH BENEFIT CASH VALUE
YEAR ENDING ACCUMULATED ------------------------ --------------------------
ON DECEMBER AT FUND RATES OPTION OPTION
31ST OF OF RETURN OPTION A B C OPTION A OPTION B OPTION C
----------- ------------- -------- ------- ------- -------- -------- --------
1987.................... 1,035 100,000 100,668 101,000 669 668 667
1988.................... 2,225 100,000 101,418 102,000 1,423 1,418 1,416
1989.................... 3,925 100,000 102,478 103,000 2,491 2,478 2,474
1990.................... 4,923 100,000 103,045 104,000 3,067 3,045 3,039
1991.................... 7,401 100,000 104,515 105,000 4,556 4,515 4,505
1992.................... 9,198 100,000 105,509 106,000 5,571 5,509 5,496
1993.................... 11,502 100,000 106,762 107,000 6,856 6,762 6,746
1994.................... 12,076 100,000 106,939 108,000 7,055 6,939 6,921
1995.................... 16,719 100,000 109,430 109,000 9,617 9,430 9,405
STOCK INDEX
BASED ON CURRENT CHARGES
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POLICY PREMIUMS DEATH BENEFIT CASH VALUE
YEAR ENDING ACCUMULATED ------------------------ --------------------------
ON DECEMBER AT FUND RATES OPTION OPTION
31ST OF OF RETURN OPTION A B C OPTION A OPTION B OPTION C
----------- ------------- -------- ------- ------- -------- -------- --------
1991.................... 1,298 100,000 101,025 101,000 1,026 1,025 1,025
1992.................... 2,469 100,000 101,931 102,000 1,934 1,931 1,931
1993.................... 3,799 100,000 102,951 103,000 2,956 2,951 2,951
1994.................... 4,855 100,000 103,736 104,000 3,745 3,736 3,735
1995.................... 8,076 100,000 106,179 105,000 6,199 6,179 6,179
STOCK INDEX
BASED ON GUARANTEED CHARGES
POLICY PREMIUMS DEATH BENEFIT CASH VALUE
YEAR ENDING ACCUMULATED ------------------------ --------------------------
ON DECEMBER AT FUND RATES OPTION OPTION
31ST OF OF RETURN OPTION A B C OPTION A OPTION B OPTION C
----------- ------------- -------- ------- ------- -------- -------- --------
1991.................... 1,298 100,000 100,863 101,000 866 863 863
1992.................... 2,469 100,000 101,600 102,000 1,606 1,600 1,599
1993.................... 3,799 100,000 102,416 103,000 2,429 2,416 2,413
1994.................... 4,855 100,000 103,020 104,000 3,042 3,020 3,015
1995.................... 8,076 100,000 104,967 105,000 5,012 4,967 4,958
22
AGGRESSIVE GROWTH
BASED ON CURRENT CHARGES
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POLICY PREMIUMS DEATH BENEFIT CASH VALUE
YEAR ENDING ACCUMULATED ------------------------ --------------------------
ON DECEMBER AT FUND RATES OPTION OPTION
31ST OF OF RETURN OPTION A B C OPTION A OPTION B OPTION C
---------- ------------- -------- ------- ------- -------- -------- --------
1989.................... 1,322 100,000 101,045 101,000 1,046 1,045 1,045
1990.................... 2,059 100,000 101,605 102,000 1,607 1,605 1,605
1991.................... 5,091 100,000 103,967 103,000 3,975 3,967 3,967
1992.................... 6,723 100,000 105,196 104,000 5,209 5,196 5,197
1993.................... 9,473 100,000 107,268 105,000 7,292 7,268 7,271
1994.................... 10,104 100,000 107,689 106,000 7,721 7,689 7,694
1995.................... 14,547 100,000 111,001 107,000 11,056 11,001 11,011
AGGRESSIVE GROWTH
BASED ON GUARANTEED CHARGES
[Enlarge/Download Table]
POLICY PREMIUMS DEATH BENEFIT CASH VALUE
YEAR ENDING ACCUMULATED ------------------------ --------------------------
ON DECEMBER AT FUND RATES OPTION OPTION
31ST OF OF RETURN OPTION A B C OPTION A OPTION B OPTION C
----------- ------------- -------- ------- ------- -------- -------- --------
1989.................... 1,322 100,000 100,882 101,000 884 882 882
1990.................... 2,059 100,000 101,318 102,000 1,323 1,318 1,317
1991.................... 5,091 100,000 103,271 103,000 3,289 3,271 3,268
1992.................... 6,723 100,000 104,243 104,000 4,274 4,243 4,240
1993.................... 9,473 100,000 105,887 105,000 5,942 5,887 5,884
1994.................... 10,104 100,000 106,148 106,000 6,221 6,148 6,147
1995.................... 14,547 100,000 108,711 107,000 8,836 8,711 8,713
INTERNATIONAL STOCK
BASED ON CURRENT CHARGES
[Enlarge/Download Table]
POLICY PREMIUMS DEATH BENEFIT CASH VALUE
YEAR ENDING ACCUMULATED ------------------------ --------------------------
ON DECEMBER AT FUND RATES OPTION OPTION
31ST OF OF RETURN OPTION A B C OPTION A OPTION B OPTION C
----------- ------------- -------- ------- ------- -------- -------- --------
1992.................... 898 100,000 100,698 101,000 698 698 698
1993.................... 2,804 100,000 102,191 102,000 2,194 2,191 2,191
1994.................... 3,974 100,000 103,082 103,000 2,088 3,082 3,082
1995.................... 5,064 100,000 103,893 104,000 3,903 3,893 3,893
INTERNATIONAL STOCK
BASED ON GUARANTEED CHARGES
POLICY PREMIUMS DEATH BENEFIT CASH VALUE
YEAR ENDING ACCUMULATED ------------------------ --------------------------
ON DECEMBER AT FUND RATES OPTION OPTION
31ST OF OF RETURN OPTION A B C OPTION A OPTION B OPTION C
----------- ------------- -------- ------- ------- -------- -------- --------
1992.................... 898 100,000 100,566 101,000 568 566 566
1993.................... 2,804 100,000 101,809 102,000 1,815 1,809 1,807
1994.................... 3,974 100,000 102,514 103,000 2,528 2,514 2,511
1995.................... 5,064 100,000 103,140 104,000 3,163 3,140 3,135
23
From time to time the Separate Account may advertise performance ranking
information among similar investments as compiled by Lipper Analytical Services
Inc., Morningstar, Inc. and other independent organizations.
From time to time the Separate Account may compare the performance of its
investment divisions with the performance of common stocks, long-term
government bonds, long-term corporate bonds, intermediate-term government
bonds, Treasury Bills, certificates of deposit and savings accounts. The
Separate Account may use the Consumer Price Index in its advertisements as a
measure of inflation for comparison purposes.
BENEFIT AT FINAL DATE
If the insured is living, and unless otherwise notified, Metropolitan Life
will pay to the Policy owner the cash value of the Policy on the Final Date,
reduced by any outstanding indebtedness (see "Policy Benefits-Cash Value"). The
Final Date of a Policy is the Policy anniversary on which the insured is 95
(see "Federal Tax Matters"). The Policy owner may request in writing to
continue the Policy after the Final Date. If the Policy owner so requests, the
death benefit will be equal to the cash value on the date of death of the
insured. The insurance proceeds will equal the death benefit reduced by any
outstanding indebtedness.
OPTIONAL INCOME PLANS
During the insured's lifetime, the Policy owner may arrange for the insurance
proceeds to be paid in a single sum, in an account that earns interest or under
one or more of the available optional income plans. For more specifics
regarding optional income plans, see the Appendix to Prospectus. These choices
are also available at the Final Date and if the Policy is surrendered. If no
election is made, Metropolitan Life will place the amount in an account that
earns interest. The payee will have immediate access to all or any part of the
account.
When the insurance proceeds are payable in a single sum, or if no choice was
in effect on the date of death, the beneficiary may, within one year of the
insured's death, select one or more of the optional income plans, if no
payments have yet been made. If the insurance proceeds become payable under an
optional income plan and the beneficiary has the right to withdraw the entire
amount, the beneficiary may name and change contingent beneficiaries.
OPTIONAL INSURANCE BENEFITS
Subject to certain requirements, one or more of the optional insurance
benefits described in the Appendix to Prospectus, may be included with a Policy
by rider. The cost of any accidental death benefit rider, disability waiver
benefit rider or yearly renewable term rider will be deducted as part of the
monthly deduction (see "Charges and Deductions--Monthly Deduction From Cash
Value"). There is no charge for the accelerated death benefit rider. The cost
of the interim term insurance benefit rider is paid for separately since it
provides insurance for a period prior to the Date of Policy. See the Appendix
to Prospectus, for a discussion of how certain riders affect the benefits under
the Policy.
PAYMENT AND ALLOCATION OF PREMIUMS
ISSUANCE OF A POLICY
Entities wishing to purchase a Policy must complete an application with
respect to each individual to be insured which will be sent to the Designated
Office. A Policy will not be issued with a specified face amount less than the
Minimum Initial Specified Face Amount. A Policy will generally be issued only
on insureds 70 years of age or under who supply evidence of insurability
satisfactory to Metropolitan Life. Metropolitan Life may, however, at its sole
discretion, issue a Policy for an individual above the age of 70. Acceptance is
subject to Metropolitan Life's underwriting rules, and Metropolitan Life
reserves the right to reject an application for any reason permitted by law. If
required by state law, the insured must consent to any insurance purchased on
his or her life.
Metropolitan Life, at its discretion, may use one of three types of
underwriting when selling Policies, depending on the total number of eligible
prospective insureds for whom an entity can purchase a Policy and the
percentage of such prospective insureds on which a Policy is actually
purchased. The three types of underwriting are: Guaranteed Issue, Simplified
Underwriting and Full Underwriting. Generally Full Underwriting requires more
evidence of insurability and rating classification than Simplified
Underwriting. Guaranteed Issue requires the least evidence of insurability. An
insured person who is a standard risk under Simplified Underwriting or
Guaranteed Issue may be subject to a higher cost of term insurance rate than
would apply to the same insured person under Full Underwriting (see "Monthly
Deduction from Cash Value--Underwriting Class").
The Date of Policy is the date used to determine Policy years and Policy
months regardless of when the Policy is delivered. The Date of Policy and the
date insurance protection begins will ordinarily be the date the application is
24
approved. Within limits, Metropolitan Life may establish an earlier Date of
Policy if desired to preserve a younger age at issue for the insured. Entities
may also request that the Date of Policy be the date the planned periodic
premium is received. In these instances, the Policy owner will incur a charge
for insurance protection prior to the time that insurance coverage under the
Policy is in force. However, an earlier Date of Policy has the potential
advantage, to the Policy owner, of an earlier Investment Start Date if a
payment is received.
Metropolitan Life will allocate net premiums to the Separate Account and/or
the Fixed Account on the Investment Start Date (see "Allocation of Premiums
and Cash Value"). The Investment Start Date is the later of (i) the Date of
Policy and (ii) the date the first premium for a Policy is received at the
Designated Office.
PREMIUMS
Payment of Premiums. Each Policy owner will determine a planned periodic
premium schedule that provides for the payment of a level premium at fixed
intervals for a specified period of time. After payment of the first planned
periodic premium, the Policy owner is not required to pay premiums in
accordance with the planned periodic premium schedule.
MOREOVER THE PAYMENT OF PLANNED PERIODIC PREMIUMS WILL NOT GUARANTEE THAT
THE POLICY REMAINS IN FORCE. Instead, the duration of the Policy depends upon
the Policy's cash value (see "Policy Termination and Reinstatement--
Termination").
The Policy owner must designate in the application one of the following ways
to pay the planned periodic premium. The Policy owner may elect to pay the
planned periodic premium annually, semi-annually or through a payroll
deduction plan as permitted by Metropolitan Life.
Subject to the minimum and maximum premium limitations described below, a
Policy owner may make unscheduled premium payments at any time in any amount.
The Policy, therefore, provides the owner with the flexibility to vary the
frequency and amount of premium payments to reflect changing financial
conditions.
All premium payments after the initial premium payment are credited to the
Separate Account or Fixed Account as of the Date of Receipt.
Premium Limitations. Except as described below, the total of all premiums
paid, both planned and unplanned, can never exceed the then current maximum
premium limitation determined by Internal Revenue Code rules relating to the
definition of life insurance. If at any time a premium is paid that would
result in total premiums exceeding the then current maximum premium
limitations, Metropolitan Life will accept only that portion of the premium
that will make total premiums equal the limit. Any part of the premium in
excess of that amount will be refunded, and no further premiums will be
accepted until allowed by the maximum premium limitations. These limitations
will not apply to any premium that is required to be paid in order to prevent
the Policy from terminating.
There may be cases where the total of all premiums paid could cause the
Policy to be classified as a modified endowment contract (see "Federal Tax
Matters"). The annual statement (see "Reports") sent to each Policy owner will
include information regarding the modified endowment contract status of a
Policy. In cases where a Policy is not an irrevocable modified endowment
contract, the annual statement will indicate what action the Policy owner can
take to reverse the modified endowment contract status of the Policy.
The first premium may not be less than the planned premium. Every planned
premium payment after the first Policy year must be at least $100 on an annual
basis or a semi-annual basis. Every unplanned premium payment must be at least
$100. Premium payments less than these minimum amounts will be refunded to the
Policy owner. These minimum premium limits can be increased by Metropolitan
Life. No increase will take effect until 90 days after notice is sent to the
Policy owner.
Metropolitan Life reserves the right not to extend an offer to sell the
Policies to any group or individual associated with such group if the total
amount of annual premium that is expected to be paid in connection with all
Policies sold to the group or individuals associated with such group is less
than $250,000. This annual premium limitation applies in addition to the
individual Policy premium minimum described in the prior paragraph.
ALLOCATION OF PREMIUMS AND CASH VALUE
Net Premiums. The net premium equals the premium paid less premium expense
charges (see "Charges and Deductions--Premium Expense Charges").
25
Allocation of Net Premiums. In the application (in the case where the Owner
is an individual) or in the delivery receipt (in the case where the Owner is
other than an individual) for a Policy, the Policy owner indicates the initial
allocation of net premiums among the investment divisions of the Separate
Account. The Policy owner determines in the application what portion, if any,
of net premiums is to be allocated to the Fixed Account. Allocation
percentages must be in whole numbers; for example, 33 1/3% may not be chosen.
Allocations with respect to the Fixed Account are effective as of the
Investment Start Date. Allocations with respect to the investment divisions of
the Separate Account are effective as of the end of the free-look period;
prior to the end of the free-look period, net premium payments allocated to
the investment divisions of the Separate Account will be invested in the Money
Market Portfolio as of the Investment Start Date (see "Is there a "Free Look'
Period?").The Policy owner may change the allocation of future net premiums
without charge at any time, after the end of the free-look period, by
providing Metropolitan Life with written notification at the Designated
Office. The change will be effective as of the Date of Receipt of the notice
at the Designated Office. For California Policies, cash value allocated to the
International Stock Division is subject to a maximum of 80% of the total cash
value in the Separate Account.
The Policy's cash value in the investment divisions of the Separate Account
will vary with the investment experience of these investment divisions, and
the Policy owner bears this investment risk. Policy owners should periodically
review their allocations of net premiums and cash values in light of market
conditions and their overall financial planning requirements.
Cash Value Transfers. After the end of the free-look period (see "Is there a
"Free Look' Period?"), the Policy owner may transfer cash value between the
Fixed Account and the investment divisions of the Separate Account and among
the investment divisions of the Separate Account. At the present time, there
is no charge for the first six transfers in any Policy year. A charge of $25
will be assessed when any additional amounts are transferred in the same
Policy year (see "Charges and Deductions--Transfer Charge"). Metropolitan Life
reserves the right in the future to assess a charge against all transfers.
There is no charge for any transfer made pursuant to a systematic investment
strategy. In addition, transfers made pursuant to any systematic investment
strategy are not included in the six charge-free transfers permitted each
Policy year (see "Systematic Investment Strategies"). A free transfer will be
permitted for a transfer of the entire amount in the Separate Account to the
Fixed Account at any time during the first 24 Policy months (see "Policy
Rights--Exchange Privilege"). The minimum amount that may be transferred,
other than pursuant to a systematic investment strategy, is the lesser of $50
or the total amount in an investment division or the Fixed Account. The
maximum amount that may be transferred or withdrawn from the Fixed Account in
any Policy year is the greater of $50 or 25% of the largest amount in the
Fixed Account over the last four Policy years. This limit does not apply to a
full surrender, to any loans taken or to any transfers made under a systematic
investment strategy (see "Systematic Investment Strategies"). Transferring
cash value from one or more investment divisions and/or the Fixed Account into
one or more other investment divisions and/or the Fixed Account counts as one
transfer. Metropolitan Life reserves the right to delay the transfer,
withdrawal, surrender and payment of policy loans of amounts from the Fixed
Account for up to six months (see "The Fixed Account--Transfers, Withdrawals,
Surrenders, and Policy Loans"). Metropolitan Life will effectuate transfers
and determine all values in connection with transfers as of the Date of
Receipt of written notice at the Designated Office.
There is no charge for transfers resulting from Policy loans and loan
repayments (or, for California Policies, transfers out of the International
Stock Division pursuant to the following paragraph) and they will not count
against the six charge-free transfers in a Policy year. Transfers are not
taxable transactions under current law. Transfer requests must be in writing
in a form acceptable to Metropolitan Life.
California Policies. Subject to the following limitations, the International
Stock Division is expected to be available for California Policies on or about
June 15, 1996. For California Policies, a Policy's cash value in the
International Stock Division may not exceed 80% of the Policy's total cash
value in the Separate Account. No transfer will be made if it results in a
Policy's cash value in the International Stock Division exceeding this limit.
At the beginning of each quarter as measured from the Policy anniversary, the
Policy will be reviewed by Metropolitan Life to verify that the cash value in
the International Stock Division does not exceed 80% of the total cash value
in the Separate Account. If it does, the excess will be transferred to the
other divisions proportionately. The portion of the excess transferred to each
division will be equal to the ratio (computed prior to the transfer) of the
Policy's cash value in that division to the Policy's total cash value in the
Separate Account, excluding the International Stock Division.
Systematic Investment Strategies. Metropolitan Life may permit the Policy
owner to submit a written authorization directing Metropolitan Life to make
transfers on a continuing periodic basis from one investment division to
another or to the Fixed Account. Metropolitan Life offers three such
investment strategies: the "Equity Generator," the "Equalizer"
26
and the "Allocator." A fourth strategy, the "Rebalancer," is expected to be
available on or about September 1, 1996. Only one systematic investment
strategy may be in effect at any one time. The Owner may submit a written
request electing a strategy or directing Metropolitan Life to cancel a
strategy at any time.
Under the "Equity Generator," Policy owners may have the interest earned on
amounts in the Fixed Account transferred to the Stock Index Division or the
Aggressive Growth Division, as elected by the Policy owner. The Aggressive
Growth Division is expected to be available for use with this strategy on or
about September 1, 1996. Any such transfer from the Fixed Account to the Stock
Index Division or the Aggressive Growth Division will be made at the beginning
of each Policy month following the Policy month in which the interest is
earned. The transfer will only be made for a month during which at least
$20.00 in interest is earned. Amounts earned during a month in which less than
$20.00 in interest is earned will remain in the Fixed Account.
Under the "Equalizer," at the beginning of each Policy quarter, a transfer
is made from the Stock Index Division or the Aggressive Growth Division, as
elected by the Policy owner, to the Fixed Account or from the Fixed Account to
such elected investment division in order to make the Fixed Account and such
elected investment division equal in value. The Aggressive Growth Division is
expected to be available for use with this strategy on or about September 1,
1996. While the "Equalizer" is in effect, any cash value transfer out of the
Stock Index Division or the Aggressive Growth Division that is not part of
this systematic investment strategy will automatically terminate the
"Equalizer" election. The Policy owner may then reelect the "Equalizer"
strategy.
Under the "Allocator," at the beginning of each Policy month, an amount
designated by the Policy owner is transferred from the Money Market Division
to the Fixed Account and/or any investment division(s) specified by the Owner.
The Policy owner may choose to do this in one of the following three ways: (1)
designating an amount to be transferred from the Money Market Division each
month until amounts in that investment division are exhausted; (2) designating
an amount to be transferred from the Money Market Division for a certain
number of months; or (3) designating a total amount to be transferred from the
Money Market Division in equal monthly installments over a certain number of
months. The Policy owner's designations must allow the "Allocator" to remain
in effect for at least three months.
Under the "Rebalancer," Policy owners may elect the periodic redistribution
of cash value so that the cash value is allocated among the Fixed Account and
the investment divisions of the Separate Account in the same proportion as the
net premiums are allocated. Metropolitan Life will redistribute the cash value
at the beginning of each Policy quarter.
POLICY TERMINATION AND REINSTATEMENT
Termination. If the cash surrender value on any monthly anniversary is
insufficient to cover the monthly deduction, Metropolitan Life will notify the
Policy owner and any assignee of record of that shortfall. In either case, the
Policy owner will then have a grace period of 61 days, measured from the
monthly anniversary, to make sufficient payment. The minimum necessary payment
must be an amount sufficient to keep the Policy in force for two months after
the premium expense charges have been deducted. Failure to make a sufficient
payment within the grace period will result in termination of the Policy. The
Policy terminates without any cash surrender value. If the insured dies during
the grace period, the insurance proceeds will still be payable, but any due
and unpaid monthly deductions will be deducted from the proceeds.
Reinstatement. A terminated Policy may be reinstated anytime within 3 years
(5 years in Missouri) after the end of the grace period and before the Final
Date by submitting the following items to Metropolitan Life: (1) a written
application for reinstatement; (2) evidence of insurability satisfactory to
Metropolitan Life; and (3) a premium that, after the deduction of the premium
expense charges (see "Charges and Deductions-- Premium Expense Charges"), is
large enough to cover the monthly deductions for at least the two Policy
months commencing with the effective date of reinstatement.
Indebtedness on the date of termination will be cancelled and need not be
repaid and will not be reinstated. The amount of cash surrender value on the
date of reinstatement will be equal to two monthly deductions plus any amount
of net premiums paid at reinstatement in excess of the amount of premium
required above to reinstate the Policy.
The date of reinstatement will be the date of approval of the application
for reinstatement. The terms of the original Policy, including the insurance
rates provided therein, will apply to the reinstated Policy. A reinstated
Policy is subject to a new two year period of contestability (see "Other
Policy Provisions-- Incontestability").
27
CHARGES AND DEDUCTIONS
PREMIUM EXPENSE CHARGES
Sales Load. A charge (which may be deemed to be a sales load as defined in
the 1940 Act) is deducted from each premium payment received by Metropolitan
Life as described below. For Policies issued prior to May 1, 1996 or to or in
connection with a large group, the sales charge is up to 1% of premiums paid.
For Policies issued to or in connection with other groups on or after May 1,
1996, the sales charge may be up to 9% of premiums paid in each of the first
ten Policy years and up to 3% of premiums paid in each Policy year thereafter
until the total of such payments in each such Policy year equals the annual
target premium for that year. For these Policies, the sales charge is reduced
to 0% for payments made in excess of the annual target premium in any Policy
year. The actual sales charge varies based upon factors described under
"Variations in Charges."
For cases other than large cases, if a Policy is surrendered at any time
during the first two Policy years, any sales load deducted within 365 days
prior to the date the request for surrender is received at Metropolitan Life's
Designated Office will be refunded. This refund feature will not be available
until on or about October 15, 1996 and will apply only to surrenders made
after the date it is available.
The amount of the sales load from the premium expense charge in any Policy
year cannot be specifically related to actual sales expenses for that year,
which include any sales compensation and costs of prospectuses, other sales
material and advertising. To the extent that sales expenses are not recovered
from the charges for sales load, such expenses will be recovered from other
sources, including any excess accumulated charges for mortality and expense
risks under the Policies, any other gains attributable to operations with
respect to the Policies and Metropolitan Life's general assets and surplus.
Metropolitan Life does not anticipate that all its total sales expenses will
be recovered from the sales charges. In no case will the premium expense
charge exceed any maximum imposed by state insurance law including that of New
York State. This may necessitate reduced premium expense charges, particularly
at certain higher issue ages.
Administrative Charge. An administrative charge of up to 1.05% of premiums
paid is deducted from all premium payments.
The administrative charge is used to compensate Metropolitan Life for
expenses incurred in administering, issuing and underwriting the Policy. These
expenses include the cost of processing applications, conducting medical
examinations, determining insurability and the insured's risk class, and
establishing policy records. Metropolitan Life does not expect to derive a
profit from this charge.
The administrative charge is reduced by 1% on the portion of any premiums
paid in a Policy year which exceeds the target premium (see "Definitions").
Tax Charges. Two charges are currently made for taxes related to premiums.
These taxes include any federal, state or local taxes measured by or based on
the amount of premiums received by Metropolitan Life. A charge of 1.2% of each
premium payment is made for the purpose of recovering a portion of the federal
income taxes of Metropolitan Life that is determined by the amount of premiums
received in connection with the Policy ("DAC tax charge"). MetLife represents
that this charge is reasonable in relation to MetLife's increased federal
income tax burden under the Internal Revenue Code resulting from receipt of
premiums. An additional charge is made for state premium taxes of 2.25% of
each premium payment. Premium taxes vary from state to state, and may be zero
in some cases. The 2.25% rate approximates the average tax rate expected to be
paid on premiums from all states.
TRANSFER CHARGE
At the present time, a charge of $25 will be assessed against the cash value
of a Policy when amounts are transferred among the investment divisions of the
Separate Account and between the investment divisions and the Fixed Account
more than six times in any Policy year. There is no charge for any transfer
made pursuant to a systematic investment strategy. In addition transfers made
pursuant to any systematic investment strategy are not included in the six
charge-free transfers permitted each Policy year (see "Systematic Investment
Strategies"). Metropolitan Life reserves the right in the future to assess a
charge against all transfers. The charge will be allocated among the Fixed
Account and each investment division of the Separate Account from which
amounts are transferred in the same proportion that the amounts transferred
from the Fixed Account and the amounts transferred from each investment
division bear to the total amount transferred, when the requested transfer is
effected. Thus, for example, if a request is
28
received for a transfer of $100, cash value in the amount of $100 will be
deducted from the particular investment division(s), with $100 being
transferred to the requested new investment division(s). The $25 would be
deducted based on the cash value in each investment division from which
amounts are transferred at the time of the transfer. Transfers resulting from
Policy loans and loan repayments will not be charged and will not count
against the six charge-free transfers in a Policy year. In addition, during
the first 24 Policy months, a complete transfer of all amounts in the
investment divisions of the Separate Account to the Fixed Account will not be
charged and will not count as one of the six charge-free transfers in a Policy
year (see "Policy Rights--Exchange Privilege").
MONTHLY DEDUCTION FROM CASH VALUE
The monthly deduction from cash value includes the cost of term insurance
charge, the charge for any accidental death benefit rider, disability waiver
rider or the yearly renewable term rider (see "Policy Benefits--Optional
Insurance Benefits") and the charge for mortality and expense risks. The cost
of term insurance charge and the charge for mortality and expense risks are
discussed separately in the paragraphs that follow. The monthly deduction will
also include a charge for requested increases in the death benefit for the
month in which the increase occurs, as discussed more fully under "Policy
Benefits--Increases".
The monthly deduction will be deducted as of each monthly anniversary
commencing with the Date of Policy. The monthly deduction (excluding the
monthly mortality and expense risk charge) will be allocated among the Fixed
Account and each investment division of the Separate Account on a Pro Rata
Basis. The monthly mortality and expense risk charge will be allocated
proportionally to values in each investment division of the Separate Account.
See "Payment and Allocation of Premiums--Issuance of a Policy", regarding when
insurance coverage starts under a newly issued Policy.
Cost of Term Insurance. Because the cost of term insurance depends upon a
number of variables, it can vary from month to month. Metropolitan Life will
determine the monthly cost of term insurance charge by multiplying the
applicable cost of term insurance rate or rates by the term insurance amount
for each Policy month. The term insurance amount for a Policy month is (a) the
death benefit at the beginning of the Policy month divided by 1.0032737 (a
discount factor to account for return deemed to be earned during the month),
less (b) the cash value at the beginning of the Policy month.
The term insurance amount may be affected by changes in the cash value or in
the specified face amount of the Policy and will be greater for owners who
have selected Death Benefit Option B or C than for those who have selected
Death Benefit Option A (see "Policy Benefits--Death Benefits"), assuming the
same specified face amount in each case, assuming no withdrawals have been
made and assuming that the minimum death benefit is not in effect. Since the
death benefit under Option A remains constant while the death benefit under
Options B and C vary with the cash value and premiums paid, respectively
(assuming no withdrawals have been made from the Policy), all cash value
increases will generally reduce the term insurance amount under Option A but
not under Option B or C. However, the term insurance amount under Option C
will generally be reduced by cash value increases resulting from investment
experience or interest credited. If the term insurance amount is greater, the
cost of insurance will be greater. If the minimum death benefit is in effect
(see "Death Benefit Options--Minimum Death Benefit"), then the cost of term
insurance may vary directly with the cash value under all death benefit
options.
The cost of term insurance is zero after the Final Date.
If more than one rate class is in effect under a Policy (see "Rate Class"),
the cost of term insurance will decrease if a Policy owner converts from
Option A to Option B or C and will increase if a Policy owner converts from
Option B or C to Option A.
Cost of Term Insurance Rate. Cost of term insurance rates are based on the
sex (except in Montana and Massachusetts, and in the case of Policies sold in
connection with certain corporate sponsored plans), age, underwriting and rate
class of the insured. The actual monthly cost of term insurance rates will be
based on Metropolitan Life's expectations as to future experience. They will
not, however, be greater than the guaranteed cost of term insurance rates set
forth in the Policy. These guaranteed rates are based on certain of the 1980
Commissioners Standard Ordinary Mortality Tables and the insured's sex (except
where unisex is required, as noted above), and age. The Tables used for this
purpose set forth different mortality estimates for males and females (except
as qualified above). Any change in the cost of term insurance rates will apply
to all persons of the same insuring age, sex (except as qualified above),
underwriting and rate class whose Policies have been in force for the same
length of time. Metropolitan Life reviews its cost of term insurance rates
periodically and may adjust the rates from time to time.
29
Underwriting Class. The underwriting class of an insured affects the cost of
term insurance rate. There are three underwriting classes: Guaranteed Issue,
Simplified Underwriting, and Full Underwriting. Generally, Guaranteed Issue
rates are greater than or equal to Simplified Issue rates. Simplified Issue
rates are greater than or equal to Full Underwriting rates. Because only
limited underwriting information is obtained in Guaranteed Issue and
Simplified Underwriting, issuances of Policies under these underwriting
classes may present additional mortality cost to Metropolitan Life relative to
those issued under Full Underwriting and therefore result in higher cost of
term insurance rates for the Policy.
Rate Class. The rate class of an insured affects the cost of term insurance
rate. Metropolitan Life currently places insureds into a standard rate class
or rate classes involving a higher mortality risk. For Ages 20 and over, each
such rate class may be further divided into a smoker division and a nonsmoker
division. In an otherwise identical Policy, insureds in the standard rate
class will have a lower cost of term insurance than those in the rate class
with the higher mortality risk. Also, those insureds in the nonsmoker division
of a rate class will have a lower cost of term insurance than those in the
smoker division of the same rate class. In addition, females will have a lower
cost of term insurance than males in the same rate class (except in Montana
and Massachusetts, and in the case of Policies sold in connection with certain
corporate sponsored plans).
If a Policy owner requests a specified face amount increase at a time when
the insured is in a less favorable rate class or division than previously, a
correspondingly higher cost of insurance rate will apply to that portion of
the underwritten term insurance amount attributable to the increase. On the
other hand, if the insured's rate class or division improves, the lower cost
of insurance rate will apply to the entire underwritten term insurance amount.
Charge for Mortality and Expense Risks. A monthly charge currently
equivalent to an effective annual rate of up to .60% (up to .30% after the
ninth policy year) of the monthly Policy cash value in the Separate Account is
imposed to compensate Metropolitan Life for its assumption of certain
mortality and expense risks and is guaranteed not to exceed an effective
annual rate of .90%. Because the Policies have been offered only since 1993,
the reduced current mortality and expense risk charge after the ninth Policy
year has not yet taken effect as to any Policy.
The mortality risk assumed is that insureds may live for a shorter period of
time than estimated (i.e., the period of time based on the appropriate 1980
Commissioners Standard Ordinary Mortality Table) and, thus, a greater amount
of death benefits than expected will be payable. The expense risk assumed is
that expenses incurred in issuing and administering the Policies will be
greater than estimated. Metropolitan Life will realize a gain if the charges
prove ultimately to be more than sufficient to cover its actual costs of such
mortality and expense commitments. If the charges are not sufficient, the loss
will fall on Metropolitan Life. If its estimates of future mortality and
expense experience are accurate, Metropolitan Life anticipates that it will
realize a profit from the mortality and expense risk charge; however if such
estimates are inaccurate, Metropolitan Life could incur a loss.
VARIATIONS IN CHARGES
Sales and/or administrative charges may vary by group. Variations will
depend upon the anticipated sales and/or administrative costs, respectively,
associated with the sale of the Policy to the group or individuals associated
with the group. Similarly, the charge for mortality and expense risks may vary
by group. Variations in this charge will depend upon the nature of the group
and individuals associated with the group. For example, if Metropolitan Life
anticipates that, because of the nature of the group and individuals
associated with the group, there is a greater risk that the mortality and
administrative expense charges that could be made under the Policies would be
insufficient to cover actual mortality and administrative expense costs, the
mortality and expense risk charge would be higher.
Variations in the charges will be made in accordance with Metropolitan
Life's established and uniformly applied administrative procedures that are in
effect at the time of the application for the Policy. Factors considered by
Metropolitan Life in determining charges include, but are not limited to, the
following: the nature of the group and its organizational framework; the
method by which sales will be made to the individuals associated with the
group; the facility with which premiums will be paid; the group's capabilities
with respect to administrative tasks; the anticipated persistency of the
Policies; the size of the group and the number of years it has been in
existence; and the aggregate amount of premiums expected to be paid on
Policies owned by the group or individuals associated with the group. Any
variations in charges will be reasonable and will not be unfairly
discriminatory to the interests of any Policy owner.
CHARGES AGAINST THE SEPARATE ACCOUNT
Charge for Income Taxes. Currently, no charge is made against the Separate
Account for income taxes. However, Metropolitan Life may decide to make such a
charge in the future (see "Federal Tax Matters--Taxation of Metropolitan
Life").
30
GUARANTEE OF CERTAIN CHARGES
Metropolitan Life guarantees, and may not increase, the charges deducted
from premiums with respect to the Policies.
OTHER CHARGES
Fund Investment Management Fee and Other Expenses. Shares of the Fund are
purchased for the Separate Account at their net asset value. The net asset
value of Fund shares is determined after deduction of the fee paid by the Fund
at the annual rate of .25% (.75% for the International Stock Portfolio and the
Aggressive Growth Portfolio) of the average daily value of the aggregate net
assets of the portfolios for the investment management services provided by
Metropolitan Life, as described more fully under "What are Separate Account
UL, the Fixed Account and the Metropolitan Series Fund?", page 5 and in the
attached prospectus for the Fund. The net asset value of Fund shares also
reflects the deduction of direct expenses from the assets of the Fund as more
fully described in the attached prospectus for the Fund.
ILLUSTRATIONS OF DEATH BENEFITS AND CASH VALUES AND ACCUMULATED PREMIUMS
The tables in this section illustrate the way in which a Policy's death
benefit and cash value could vary over an extended period of time assuming
that all premiums are allocated to and remain in the Separate Account for the
entire period shown and hypothetical gross investment rates of return for the
Fund (i.e., investment income and capital gains and losses, realized or
unrealized) equivalent to constant gross (after tax) annual rates of 0%, 6%
and 12%. The tables are based on the payment of annual planned premiums (see
"Premiums--Premium Limitations," page 27), for a specified face amount of
$100,000 for males aged 35 and 50. Each illustration assumes that the insured
is in Metropolitan Life's standard nonsmoker full underwriting risk
classification. Illustrations for an insured in Metropolitan Life's standard
smoker full underwriting risk classification would show, for the same age and
premium payments, lower cash values and, therefore, for the minimum death
benefit and death benefit Option B, lower death benefits. Illustrations for an
insured in Metropolitan Life's Simplified Issue or Guaranteed Issue
classifications would generally show, for the same age, smoking class, rating
class and premium payments, lower cash values than the corresponding full
underwriting illustration. In addition, these illustrations do not reflect the
refund of sales load discussed under "Charges and Deductions--Sales Load."
The death benefits and cash values would be different from those shown if
the actual gross investment rates of return averaged 0%, 6% or 12% over a
period of years, but fluctuated above or below such averages for individual
policy years. The values would also be different depending on the allocation
of a Policy's total cash value among the investment divisions of the Separate
Account, if the actual rates of return averaged 0%, 6% or 12% but the rates
for each portfolio of the Fund varied above and below such averages.
The amounts shown for the death benefits and cash values take into account
the deductions from premiums and the monthly deduction from cash value and the
daily charge to the Fund for investment management services equivalent to an
annual rate of .392857% of the average daily value of the aggregate net assets
of the Fund (an average of the five available portfolios of the Fund that have
an investment management fee of .25% and the two portfolios that have an
investment management fee of .75%) and .118600% for other direct Fund expenses
(the average daily rate of such expenses for the entire Fund in 1995). (See
"Charges and Deductions.")
The guaranteed maximum charges illustrations assume: (1) a cost of insurance
charge rate equal to 100% of the maximum rates that could be charged based on
the 1980 Commissioners Standard Ordinary Mortality tables; (2) a sales charge
of 9% of premiums paid up to one target premium in each of the first ten
Policy years and 3% of premiums paid up to one target premium in each Policy
year thereafter; (3) an administrative charge of 1.05% of premiums paid up to
one target premium and .05% thereafter; (4) a 1.2% DAC tax charge; (5) a 2.25%
state premium tax charge; and (6) a mortality and expense risk charge of .90%
of the average daily value of the assets in the Separate Account attributable
to the Policies.
The current charges illustrations assume: (1) the current cost of insurance
charge rate; (2) a sales charge of 9% of premiums paid up to one target
premium in each of the first ten Policy years and 3% of premiums paid up to
one target premium in each Policy year thereafter; (3) an administrative
charge of 1.05% of premiums paid up to one target premium and .05% thereafter;
(4) a 1.2% DAC tax charge; (5) a 2.25% state premium tax charge; and (6) a
mortality and expense risk charge of .60% (.30% after the ninth Policy year)
of the average daily value of the assets in the Separate Account attributable
to the Policies.
31
The tables are based on a minimum death benefit calculation using the
Guideline Premium/Cash Value Corridor test. Certain tables have been footnoted
to indicate differences in total cash value and total death benefit that arise
when the Cash Value Accumulation test rather than the Guideline Premium/Cash
Value Corridor test is used to determine minimum death benefit (see "Death
Benefit Options--Minimum Death Benefit"). In general the death benefit
calculated using the Cash Value Accumulation test will be equal to or greater
than the death benefit calculated using the Guideline Premium/Cash Value
Corridor test.
Taking account of the charge for investment management services and other
Fund expenses, the gross annual investment rates of return of 0%, 6% and 12%
correspond to actual (or net) annual rates of: -.51%, 5.46% and 11.43%,
respectively.
The hypothetical returns shown in the tables do not reflect any charges for
income taxes against the Separate Account since no such charges are currently
made. However, if in the future such charges are made, in order to produce the
death benefits and cash values illustrated, the gross annual investment rate
of return would have to exceed 0%, 6% or 12% by a sufficient amount to cover
the tax charges. (See "Federal Tax Matters--Taxation of Metropolitan Life".)
The second column of the tables shows the amount which would accumulate if
an amount equal to the annual planned premium were invested to earn interest,
after taxes, at 5% compounded annually.
Upon request, Metropolitan Life will furnish an illustration reflecting the
proposed insured's age, sex, the specified face amount or premium amount
requested, frequency of planned periodic premium payments, death benefit
option selected and any available rider requested. When the yearly renewable
term rider is available, an additional illustration may be requested showing
the effect on Policy benefits of obtaining a portion of the coverage under
such rider.
32
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY(1)
MALE ISSUE AGE 35
STANDARD NONSMOKER FULL UNDERWRITING RISK
SPECIFIED FACE AMOUNT: $100,000--DEATH BENEFIT OPTION A
GUARANTEED MAXIMUM CHARGES
[Download Table]
TOTAL CASH VALUE(2) TOTAL DEATH BENEFIT(2)
ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT
PREMIUMS RATES OF RETURN RATES OF RETURN OF
END OF ACCUMULATED ----------------------- -----------------------
POLICY AT 5% INTEREST
YEAR PER YEAR 0% 6% 12% 0% 6% 12%
------ -------------- -------------- -------- ------- ------- -------
1 ........ 1,050 640 684 728 100,000 100,000 100,000
2 ........ 2,153 1,256 1,384 1,518 100,000 100,000 100,000
3 ........ 3,310 1,849 2,102 2,375 100,000 100,000 100,000
4 ........ 4,526 2,417 2,834 3,304 100,000 100,000 100,000
5 ........ 5,802 2,958 3,580 4,312 100,000 100,000 100,000
6 ........ 7,142 3,468 4,337 5,402 100,000 100,000 100,000
7 ........ 8,549 3,948 5,106 6,583 100,000 100,000 100,000
8 ........ 10,027 4,394 5,883 7,863 100,000 100,000 100,000
9 ........ 11,578 4,806 6,668 9,252 100,000 100,000 100,000
10 ........ 13,207 5,182 7,459 10,759 100,000 100,000 100,000
15 ........ 22,657 6,849 11,914 21,071 100,000 100,000 100,000
20 ........ 34,719 7,245 16,379 37,338 100,000 100,000 100,000
25 ........ 50,113 5,459 20,003 63,634* 100,000 100,000 100,000*
30 ........ 69,761 160 21,537 107,790* 100,000 100,000 131,503(3)*
-------
(1) Assumes annual planned premium payments of $1,000 paid in full at
beginning of each Policy year. The values would vary from those shown if the
amount or frequency of payments varies.
(2) Assumes no policy loan or partial withdrawal has been made. Excessive
loans or withdrawals, adverse investment performance or insufficient premium
payments may cause the Policy to terminate because of insufficient cash
value.
(3) Minimum death benefit applies; see "Death Benefit Options--Minimum Death
Benefit" for further details.
* If the Cash Value Accumulation test had been used, the following changes
would apply:
[Download Table]
CASH DEATH
YR. VALUE YR. BENEFIT
--- ----- --- -------
25 ...............63,043.25 ......................125,613....
30 ..............101,142.30 ......................178,081.....
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE
ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR
FUTURE INVESTMENT RATES OF RETURN. ACTUAL INVESTMENT RATES OF RETURN MAY BE
MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND UPON A NUMBER OF FACTORS,
INCLUDING THE PREMIUM AND CASH VALUE ALLOCATIONS MADE BY AN OWNER AND THE
DIFFERENT RATES OF RETURN OF THE FUND PORTFOLIOS. THE DEATH BENEFIT AND CASH
VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL
INVESTMENT RATES OF RETURN AVERAGED 0%, 6% AND 12% OVER A PERIOD OF YEARS, BUT
FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS OR IF ANY
PREMIUMS WERE ALLOCATED OR CASH VALUE TRANSFERRED TO THE FIXED ACCOUNT. NO
REPRESENTATIONS CAN BE MADE BY METROPOLITAN LIFE OR THE FUND THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
33
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY(1)
MALE ISSUE AGE 35
STANDARD NONSMOKER FULL UNDERWRITING RISK
SPECIFIED FACE AMOUNT: $100,000--DEATH BENEFIT OPTION B
GUARANTEED MAXIMUM CHARGES
[Enlarge/Download Table]
TOTAL CASH VALUE(2) TOTAL DEATH BENEFIT(2)
ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT
PREMIUMS RATES OF RETURN RATES OF RETURN OF
END OF ACCUMULATED ---------------------------- --------------------------
POLICY AT 5% INTEREST
YEAR PER YEAR 0% 6% 12% 0% 6% 12%
------ -------------- ------- -------- -------- ------- ------- -------
1 ............ 1,050 638 682 727 100,638 100,682 100,727
2 ............ 2,153 1,251 1,379 1,512 101,251 101,379 101,512
3 ............ 3,310 1,840 2,090 2,363 101,840 102,090 102,363
4 ............ 4,526 2,401 2,814 3,281 102,401 102,814 103,281
5 ............ 5,802 2,932 3,549 4,273 102,932 103,549 104,273
6 ............ 7,142 3,432 4,290 5,342 103,432 104,290 105,342
7 ............ 8,549 3,898 5,039 6,494 103,898 105,039 106,494
8 ............ 10,027 4,328 5,790 7,735 104,328 105,790 107,735
9 ............ 11,578 4,721 6,544 9,072 104,721 106,544 109,072
10 ............ 13,207 5,074 7,296 10,513 105,074 107,296 110,513
15 ............ 22,657 6,571 11,396 20,102 106,571 111,396 120,102
20 ............ 34,719 6,671 15,041 34,192 106,671 115,041 134,192
25 ............ 50,113 4,477 16,956 54,307 104,477 116,956 154,307
30 ............ 69,761 0(3) 15,284 82,688 0(3) 115,284 182,688
-------
(1) Assumes annual planned premium payments of $1,000 paid in full at
beginning of each Policy year. The values would vary from those shown if the
amount or frequency of payments varies.
(2) Assumes no policy loan or partial withdrawal has been made. Excessive
loans or withdrawals, adverse investment performance or insufficient premium
payments may cause the Policy to terminate because of insufficient cash
value.
(3) Zero values in cash value and death benefit indicate termination of
insurance coverage in the absence of a sufficient additional premium
payment; see "Payment and Allocation of Premiums--Termination" for further
details.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE
ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR
FUTURE INVESTMENT RATES OF RETURN. ACTUAL INVESTMENT RATES OF RETURN MAY BE
MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND UPON A NUMBER OF FACTORS,
INCLUDING THE PREMIUM AND CASH VALUE ALLOCATIONS MADE BY AN OWNER AND THE
DIFFERENT RATES OF RETURN OF THE FUND PORTFOLIOS. THE DEATH BENEFIT AND CASH
VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL
INVESTMENT RATES OF RETURN AVERAGED 0%, 6% AND 12% OVER A PERIOD OF YEARS, BUT
FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS OR IF ANY
PREMIUMS WERE ALLOCATED OR CASH VALUE TRANSFERRED TO THE FIXED ACCOUNT. NO
REPRESENTATIONS CAN BE MADE BY METROPOLITAN LIFE OR THE FUND THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
34
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY(1)
MALE ISSUE AGE 35
STANDARD NONSMOKER FULL UNDERWRITING RISK
SPECIFIED FACE AMOUNT: $100,000--DEATH BENEFIT OPTION C
GUARANTEED MAXIMUM CHARGES
[Download Table]
TOTAL CASH VALUE(2) TOTAL DEATH BENEFIT(2)
ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT
PREMIUMS RATES OF RETURN RATES OF RETURN OF
END OF ACCUMULATED ---------------------------- --------------------------
POLICY AT 5% INTEREST
YEAR PER YEAR 0% 6% 12% 0% 6% 12%
------ -------------- ------- -------- -------- ------- ------- -------
1.... 1,050 637 682 726 101,000 101,000 101,000
2.... 2,153 1,249 1,377 1,511 102,000 102,000 102,000
3.... 3,310 1,835 2,087 2,359 103,000 103,000 103,000
4.... 4,526 2,392 2,807 3,275 104,000 104,000 104,000
5.... 5,802 2,919 3,537 4,264 105,000 105,000 105,000
6.... 7,142 3,411 4,273 5,329 106,000 106,000 106,000
7.... 8,549 3,868 5,014 6,478 107,000 107,000 107,000
8.... 10,027 4,285 5,756 7,715 108,000 108,000 108,000
9.... 11,578 4,663 6,498 9,049 109,000 109,000 109,000
10.... 13,207 4,996 7,236 10,488 110,000 110,000 110,000
15.... 22,657 6,312 11,217 20,144 115,000 115,000 115,000
20.... 34,719 5,965 14,607 34,762 120,000 120,000 120,000
25.... 50,113 2,663 15,897 57,117 125,000 125,000 125,000
30.... 69,761 0(3) 12,500 93,273* 0(3) 130,000 130,000*
-------
(1) Assumes annual planned premium payments of $1,000 paid in full at
beginning of each Policy year. The values would vary from those shown if the
amount or frequency of payments varies.
(2) Assumes no policy loan or partial withdrawal has been made. Excessive
loans or withdrawals, adverse investment performance or insufficient premium
payments may cause the Policy to terminate because of insufficient cash
value.
(3) Zero values in cash value and death benefit indicate termination of
insurance coverage in the absence of a sufficient additional premium
payment; see "Payment and Allocation of Premiums--Termination" for further
details.
* If the Cash Value Accumulation test had been used, the following changes
would apply:
[Download Table]
CASH DEATH
YR. VALUE YR. BENEFIT
--- ----- --- -------
30 ..............91,958.30 ......................161,911.....
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE
ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR
FUTURE INVESTMENT RATES OF RETURN. ACTUAL INVESTMENT RATES OF RETURN MAY BE
MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND UPON A NUMBER OF FACTORS,
INCLUDING THE PREMIUM AND CASH VALUE ALLOCATIONS MADE BY AN OWNER AND THE
DIFFERENT RATES OF RETURN OF THE FUND PORTFOLIOS. THE DEATH BENEFIT AND CASH
VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL
INVESTMENT RATES OF RETURN AVERAGED 0%, 6% AND 12% OVER A PERIOD OF YEARS, BUT
FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS OR IF ANY
PREMIUMS WERE ALLOCATED OR CASH VALUE TRANSFERRED TO THE FIXED ACCOUNT. NO
REPRESENTATIONS CAN BE MADE BY METROPOLITAN LIFE OR THE FUND THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
35
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY(1)
MALE ISSUE AGE 35
STANDARD NONSMOKER FULL UNDERWRITING RISK
SPECIFIED FACE AMOUNT: $100,000--DEATH BENEFIT OPTION A
CURRENT CHARGES
[Download Table]
TOTAL CASH VALUE(2) TOTAL DEATH BENEFIT(2)
ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT
PREMIUMS RATES OF RETURN RATES OF RETURN OF
END OF ACCUMULATED ------------------------ -----------------------
POLICY AT 5% INTEREST
YEAR PER YEAR 0% 6% 12% 0% 6% 12%
------ -------------- ------- ------- -------- ------- ------- -------
1 ............ 1,050 778 826 875 100,000 100,000 100,000
2 ............ 2,153 1,542 1,689 1,841 100,000 100,000 100,000
3 ............ 3,310 2,294 2,587 2,905 100,000 100,000 100,000
4 ............ 4,526 3,027 3,519 4,073 100,000 100,000 100,000
5 ............ 5,802 3,745 4,489 5,361 100,000 100,000 100,000
6 ............ 7,412 4,451 5,503 6,783 100,000 100,000 100,000
7 ............ 8,549 5,146 6,561 8,356 100,000 100,000 100,000
8 ............ 10,027 5,829 7,668 10,096 100,000 100,000 100,000
9 ............ 11,578 6,500 8,824 12,019 100,000 100,000 100,000
10 ............ 13,207 7,182 10,063 14,191 100,000 100,000 100,000
15 ............ 22,657 10,773 17,621 29,687 100,000 100,000 100,000
20 ............ 34,719 13,965 27,153 55,967* 100,000 100,000 100,000*
25 ............ 50,113 16,499 39,042 100,533* 100,000 100,000 134,714(3)*
30 ............ 69,761 18,018 53,908 175,406* 100,000 100,000 213,996(3)*
-------
(1) Assumes annual planned premium payments of $1,000 paid in full at
beginning of each Policy year. The values would vary from those shown if the
amount or frequency of payments varies.
(2) Assumes no policy loan or partial withdrawal has been made. Excessive
loans or withdrawals, adverse investment performance or insufficient premium
payments may cause the Policy to terminate because of insufficient cash
value.
(3) Minimum death benefit applies; see "Death Benefit Options--Minimum Death
Benefit" for further details.
* If the Cash Value Accumulation test had been used, the following changes
would apply:
[Download Table]
CASH DEATH
YR. VALUE YR. BENEFIT
--- ------- --- -------
20 ................ 55,863 20 ................ 127,333
25 ................ 99,117 25 ................ 197,492
30 ................ 169,907 30 ................ 299,156
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE
ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR
FUTURE INVESTMENT RATES OF RETURN. ACTUAL INVESTMENT RATES OF RETURN MAY BE
MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND UPON A NUMBER OF FACTORS,
INCLUDING THE PREMIUM AND CASH VALUE ALLOCATIONS MADE BY AN OWNER AND THE
DIFFERENT RATES OF RETURN OF THE FUND PORTFOLIOS. THE DEATH BENEFIT AND CASH
VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL
INVESTMENT RATES OF RETURN AVERAGED 0%, 6% AND 12% OVER A PERIOD OF YEARS, BUT
FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS OR IF ANY
PREMIUMS WERE ALLOCATED OR CASH VALUE TRANSFERRED TO THE FIXED ACCOUNT. NO
REPRESENTATIONS CAN BE MADE BY METROPOLITAN LIFE OR THE FUND THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
36
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY(1)
MALE ISSUE AGE 35
STANDARD NONSMOKER FULL UNDERWRITING RISK
SPECIFIED FACE AMOUNT: $100,000--DEATH BENEFIT OPTION B
CURRENT CHARGES
[Download Table]
TOTAL CASH VALUE(2) TOTAL DEATH BENEFIT(2)
ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT
PREMIUMS RATES OF RETURN RATES OF RETURN OF
END OF ACCUMULATED ------------------------ -----------------------
POLICY AT 5% INTEREST
YEAR PER YEAR 0% 6% 12% 0% 6% 12%
------ -------------- ------- ------- -------- ------- ------- -------
1 .......... 1,050 777 826 875 100,777 100,826 100,875
2 .......... 2,153 1,540 1,686 1,838 101,540 101,686 101,838
3 .......... 3,310 2,290 2,582 2,899 102,290 102,582 102,899
4 .......... 4,526 3,020 3,511 4,063 103,020 103,511 104,063
5 .......... 5,802 3,734 4,475 5,343 103,734 104,475 105,343
6 .......... 7,142 4,435 5,482 6,756 104,435 105,482 106,756
7 .......... 8,549 5,123 6,532 8,316 105,123 106,532 108,316
8 .......... 10,027 5,800 7,627 10,039 105,800 107,627 110,039
9 .......... 11,578 6,463 8,770 11,941 106,463 108,770 111,941
10 .......... 13,207 7,135 9,993 14,085 107,135 109,993 114,085
15 .......... 22,657 10,650 17,397 29,277 110,650 117,397 129,277
20 .......... 34,719 13,684 26,537 54,581 113,684 126,537 154,581
25 .......... 50,113 15,923 37,509 96,514 115,923 137,509 196,514
30 .......... 69,761 16,911 50,274 165,953* 116,911 150,274 265,953*
-------
(1) Assumes annual planned premium payments of $1,000 paid in full at
beginning of each Policy year. The values would vary from those shown if the
amount or frequency of payments varies.
(2) Assumes no policy loan or partial withdrawal has been made. Excessive
loans or withdrawals, adverse investment performance or insufficient premium
payments may cause the Policy to terminate because of insufficient cash
value.
* If the Cash Value Accumulation test had been used, the following changes
would apply:
[Download Table]
CASH DEATH
YR. VALUE YR. BENEFIT
--- ----- --- -------
30 ..............165,587 30 ......................291,549
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE
ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR
FUTURE INVESTMENT RATES OF RETURN. ACTUAL INVESTMENT RATES OF RETURN MAY BE
MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND UPON A NUMBER OF FACTORS,
INCLUDING THE PREMIUM AND CASH VALUE ALLOCATIONS MADE BY AN OWNER AND THE
DIFFERENT RATES OF RETURN OF THE FUND PORTFOLIOS. THE DEATH BENEFIT AND CASH
VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL
INVESTMENT RATES OF RETURN AVERAGED 0%, 6% AND 12% OVER A PERIOD OF YEARS, BUT
FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS OR IF ANY
PREMIUMS WERE ALLOCATED OR CASH VALUE TRANSFERRED TO THE FIXED ACCOUNT. NO
REPRESENTATIONS CAN BE MADE BY METROPOLITAN LIFE OR THE FUND THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
37
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY(1)
MALE ISSUE AGE 35
STANDARD NONSMOKER FULL UNDERWRITING RISK
SPECIFIED FACE AMOUNT: $100,000--DEATH BENEFIT OPTION C
CURRENT CHARGES
[Enlarge/Download Table]
TOTAL CASH VALUE(2) TOTAL DEATH BENEFIT(2)
ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT
PREMIUMS RATES OF RETURN RATES OF RETURN OF
END OF ACCUMULATED ------------------------ -----------------------
POLICY AT 5% INTEREST
YEAR PER YEAR 0% 6% 12% 0% 6% 12%
------ -------------- ------- ------- -------- ------- ------- -------
1 ..................... 1,050 777 826 874 101,000 101,000 101,000
2 ..................... 2,153 1,540 1,686 1,838 102,000 102,000 102,000
3 ..................... 3,310 2,289 2,582 2,899 103,000 103,000 103,000
4 ..................... 4,526 3,018 3,509 4,062 104,000 104,000 104,000
5 ..................... 5,802 3,731 4,473 5,343 105,000 105,000 105,000
6 ..................... 7,142 4,430 5,479 6,756 106,000 106,000 106,000
7 ..................... 8,549 5,117 6,528 8,317 107,000 107,000 107,000
8 ..................... 10,027 5,790 7,623 10,042 108,000 108,000 108,000
9 ..................... 11,578 6,450 8,765 11,948 109,000 109,000 109,000
10 ..................... 13,207 7,119 9,987 14,098 110,000 110,000 110,000
15 ..................... 22,657 10,605 17,399 29,388 115,000 115,000 115,000
20 ..................... 34,719 13,572 26,602 55,153* 120,000 120,000 120,000*
25 ..................... 50,113 15,663 37,804 98,795* 125,000 125,000 132,385(3)*
30 ..................... 69,761 16,305 51,252 172,488* 130,000 130,000 210,436(3)*
-------
(1) Assumes annual planned premium payments of $1,000 paid in full at
beginning of each Policy year. The values would vary from those shown if the
amount or frequency of payments varies.
(2) Assumes no policy loan or partial withdrawal has been made. Excessive
loans or withdrawals, adverse investment performance or insufficient premium
payments may cause the Policy to terminate because of insufficient cash
value.
(3) Minimum death benefit applies; see "Death Benefit Options--Minimum Death
Benefit" for further details.
* If the Cash Value Accumulation test had been used, the following changes
would apply:
[Download Table]
CASH DEATH
YR. VALUE YR. BENEFIT
--- ----- --- -------
20 ...............55,149 20 ......................125,708
25 ...............97,936 25 ......................195,138
30 ..............167,961 30 ......................295,729
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE
ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR
FUTURE INVESTMENT RATES OF RETURN. ACTUAL INVESTMENT RATES OF RETURN MAY BE
MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND UPON A NUMBER OF FACTORS,
INCLUDING THE PREMIUM AND CASH VALUE ALLOCATIONS MADE BY AN OWNER AND THE
DIFFERENT RATES OF RETURN OF THE FUND PORTFOLIOS. THE DEATH BENEFIT AND CASH
VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL
INVESTMENT RATES OF RETURN AVERAGED 0%, 6% AND 12% OVER A PERIOD OF YEARS, BUT
FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS OR IF ANY
PREMIUMS WERE ALLOCATED OR CASH VALUE TRANSFERRED TO THE FIXED ACCOUNT. NO
REPRESENTATIONS CAN BE MADE BY METROPOLITAN LIFE OR THE FUND THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
38
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY(1)
MALE ISSUE AGE 50
STANDARD NONSMOKER FULL UNDERWRITING RISK
SPECIFIED FACE AMOUNT: $100,000--DEATH BENEFIT OPTION A
GUARANTEED CHARGES
[Enlarge/Download Table]
TOTAL CASH VALUE(2) TOTAL DEATH BENEFIT(2)
ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT
PREMIUMS RATES OF RETURN RATES OF RETURN OF
END OF ACCUMULATED --------------------------- --------------------------
POLICY AT 5% INTEREST
YEAR PER YEAR 0% 6% 12% 0% 6% 12%
------ -------------- ------- ------- -------- ------- ------- -------
1 ............ 2,625 1,450 1,556 1,663 100,000 100,000 100,000
2 ............ 5,381 2,829 3,132 3,448 100,000 100,000 100,000
3 ............ 8,275 4,131 4,722 5,364 100,000 100,000 100,000
4 ............ 11,314 5,351 6,320 7,418 100,000 100,000 100,000
5 ............ 14,505 6,483 7,923 9,622 100,000 100,000 100,000
6 ............ 17,855 7,522 9,526 11,992 100,000 100,000 100,000
7 ............ 21,373 8,466 11,127 14,545 100,000 100,000 100,000
8 ............ 25,066 9,311 12,724 17,303 100,000 100,000 100,000
9 ............ 28,945 10,053 14,314 20,292 100,000 100,000 100,000
10 ............ 33,017 10,684 15,890 23,536 100,000 100,000 100,000
15 ............ 56,644 12,699 24,365 46,139 100,000 100,000 100,000
20 ............ 86,798 9,753 31,471 84,797 100,000 100,000 100,000
25 ............ 125,284 0(4) 34,285 151,495 0(4) 100,000 162,099(3)
30 ............ 174,402 0(4) 25,107 259,468 0(4) 100,000 272,442(3)
-------
(1) Assumes annual planned premium payments of $2,500 paid in full at
beginning of each Policy year. The values would vary from those shown if the
amount or frequency of payments varies.
(2) Assumes no policy loan or partial withdrawal has been made. Excessive
loans or withdrawals, adverse investment performance or insufficient premium
payments may cause the Policy to terminate because of insufficient cash
value.
(3) Minimum death benefit applies; see "Death Benefit Options--Minimum Death
Benefit" for further details.
(4) Zero values in cash value and death benefit indicate termination of
insurance coverage in the absence of a sufficient additional premium
payment; see "Payment and Allocation of Premiums--Termination" for further
details.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE
ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR
FUTURE INVESTMENT RATES OF RETURN. ACTUAL INVESTMENT RATES OF RETURN MAY BE
MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND UPON A NUMBER OF FACTORS,
INCLUDING THE PREMIUM AND CASH VALUE ALLOCATIONS MADE BY AN OWNER AND THE
DIFFERENT RATES OF RETURN OF THE FUND PORTFOLIOS. THE DEATH BENEFIT AND CASH
VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL
INVESTMENT RATES OF RETURN AVERAGED 0%, 6% AND 12% OVER A PERIOD OF YEARS, BUT
FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS OR IF ANY
PREMIUMS WERE ALLOCATED OR CASH VALUE TRANSFERRED TO THE FIXED ACCOUNT. NO
REPRESENTATIONS CAN BE MADE BY METROPOLITAN LIFE OR THE FUND THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
39
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY(1)
MALE ISSUE AGE 50
STANDARD NONSMOKER FULL UNDERWRITING RISK
SPECIFIED FACE AMOUNT: $100,000--DEATH BENEFIT OPTION B
GUARANTEED MAXIMUM CHARGES
[Enlarge/Download Table]
TOTAL CASH VALUE(2) TOTAL DEATH BENEFIT(2)
ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT
PREMIUMS RATES OF RETURN RATES OF RETURN OF
END OF ACCUMULATED -----------------------------------------------------------
POLICY AT 5% INTEREST
YEAR PER YEAR 0% 6% 12% 0% 6% 12%
------ -------------- ------- ------- --------------- ------- -------
1 ............ 2,625 1,437 1,543 1,649 101,437 101,543 101,649
2 ............ 5,381 2,791 3,090 3,403 102,791 193,090 103,403
3 ............ 8,275 4,057 4,636 5,265 104,057 104,636 105,265
4 ............ 11,314 5,224 6,168 7,237 105,224 106,168 107,237
5 ............ 14,505 6,288 7,679 9,321 106,288 107,679 109,321
6 ............ 17,855 7,241 9,161 11,522 107,241 109,161 111,522
7 ............ 21,373 8,091 10,605 13,844 108,081 110,605 113,844
8 ............ 25,066 8,801 12,004 16,295 108,801 112,004 116,295
9 ............ 28,945 9,398 13,348 18,881 109,398 113,348 118,881
10 ............ 33,017 9,861 14,624 21,603 109,861 114,624 121,603
15 ............ 56,644 10,618 20,343 38,410 110,618 120,343 138,410
20 ............ 86,798 5,785 21,144 58,789 105.785 121,144 158,789
25 ............ 125,284 0(3) 11,400 79,962 0(3) 111,400 179,962
30 ............ 174,402 0(3) 0(3) 94,291 0(3) 0(3) 194,291
-------
(1) Assumes annual planned premium payments of $2,500 paid in full at
beginning of each Policy year. The values would vary from those shown if the
amount or frequency of payments varies.
(2) Assumes no policy loan or partial withdrawal has been made. Excessive
loans or withdrawals, adverse investment performance or insufficient premium
payments may cause the Policy to terminate because of insufficient cash
value.
(3) Zero values in cash value and death benefit indicate termination of
insurance coverage in the absence of a sufficient additional premium
payment; see "Payment and Allocation of Premiums--Termination" for further
details.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE
ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR
FUTURE INVESTMENT RATES OF RETURN. ACTUAL INVESTMENT RATES OF RETURN MAY BE
MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND UPON A NUMBER OF FACTORS,
INCLUDING THE PREMIUM AND CASH VALUE ALLOCATIONS MADE BY AN OWNER AND THE
DIFFERENT RATES OF RETURN OF THE FUND PORTFOLIOS. THE DEATH BENEFIT AND CASH
VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL
INVESTMENT RATES OF RETURN AVERAGED 0%, 6% AND 12% OVER A PERIOD OF YEARS, BUT
FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS OR IF ANY
PREMIUMS WERE ALLOCATED OR CASH VALUE TRANSFERRED TO THE FIXED ACCOUNT. NO
REPRESENTATIONS CAN BE MADE BY METROPOLITAN LIFE OR THE FUND THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
40
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY(1)
MALE ISSUE AGE 50
STANDARD NONSMOKER FULL UNDERWRITING RISK
SPECIFIED FACE AMOUNT: $100,000--DEATH BENEFIT OPTION C
GUARANTEED MAXIMUM CHARGES
[Enlarge/Download Table]
TOTAL CASH VALUE(2) TOTAL DEATH BENEFIT(2)
ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT
PREMIUMS RATES OF RETURN OF RATES OF RETURN OF
END OF ACCUMULATED ----------------------------- -----------------------------
POLICY AT 5% INTEREST
YEAR PER YEAR 0% 6% 12% 0% 6% 12%
------ -------------- ------- ------- -------- ------- ------- -------
1.. 2,625 1,433 1,538 1,645 102,500 102,500 102,500
2.. 5,381 2,773 3,073 3,387 105,000 105,000 105,000
3.. 8,275 4,014 4,596 5,229 107,500 107,500 107,500
4.. 11,314 5,143 6,094 7,171 110,000 110,000 110,000
5.. 14,505 6,151 7,555 9,214 112,500 112,500 112,500
6.. 17,855 7,027 8,967 11,361 115,000 115,000 115,000
7.. 21,373 7,762 10,319 13,617 117,500 117,500 117,500
8.. 25,066 8,347 11,599 15,988 120,000 120,000 120,000
9.. 28,945 8,769 12,791 18,478 122,500 122,500 122,500
10.. 33,017 9,011 13,875 21,090 125,000 125,000 125,000
15.. 56,644 7,544 17,666 37,222 137,500 137,500 137,500
20.. 86,798 0(3) 12,822 57,466 0(3) 150,000 150,000
25.. 125,284 0(3) 0(3) 82,058 0(3) 0(3) 162,500
30.. 174,402 0(3) 0(3) 112,326 0(3) 0(3) 175,000
-------
(1) Assumes annual planned premium payments of $2,500 paid in full at
beginning of each Policy year. The values would vary from those shown if the
amount or frequency of payments varies.
(2) Assumes no policy loan or partial withdrawal has been made. Excessive
loans or withdrawals, adverse investment performance or insufficient premium
payments may cause the Policy to terminate because of insufficient cash
value.
(3) Zero values in cash value and death benefit indicate termination of
insurance coverage in the absence of a sufficient additional premium
payment; see "Payment and Allocation of Premiums--Termination" for further
details.
(4) Minimum death benefit applies; see "Death Benefit Options--Minimum Death
Benefit" for further details.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE
ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR
FUTURE INVESTMENT RATES OF RETURN. ACTUAL INVESTMENT RATES OF RETURN MAY BE
MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND UPON A NUMBER OF FACTORS,
INCLUDING THE PREMIUM AND CASH VALUE ALLOCATIONS MADE BY AN OWNER AND THE
DIFFERENT RATES OF RETURN OF THE FUND PORTFOLIOS. THE DEATH BENEFIT AND CASH
VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL
INVESTMENT RATES OF RETURN AVERAGED 0%, 6% AND 12% OVER A PERIOD OF YEARS, BUT
FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS OR IF ANY
PREMIUMS WERE ALLOCATED OR CASH VALUE TRANSFERRED TO THE FIXED ACCOUNT. NO
REPRESENTATIONS CAN BE MADE BY METROPOLITAN LIFE OR THE FUND THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
41
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY(1)
MALE ISSUE AGE 50
STANDARD NONSMOKER FULL UNDERWRITING RISK
SPECIFIED FACE AMOUNT: $100,000--DEATH BENEFIT OPTION A
CURRENT CHARGES
[Enlarge/Download Table]
TOTAL CASH VALUE(2) TOTAL DEATH BENEFIT(2)
ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT
PREMIUMS RATES OF RETURN OF RATES OF RETURN OF
END OF ACCUMULATED ------------------------- --------------------------
POLICY AT 5% INTEREST
YEAR PER YEAR 0% 6% 12% 0% 6% 12%
------ -------------- ------- -------- -------- ------- ------- -------
1............. 2,625 1,932 2,054 2,176 100,000 100,000 100,000
2............. 5,381 3,828 4,192 4,571 100,000 100,000 100,000
3............. 8,275 5,685 6,416 7,206 100,000 100,000 100,000
4............. 11,314 7,507 8,733 10,113 100,000 100,000 100,000
5............. 14,505 9,292 11,148 13,320 100,000 100,000 100,000
6............. 17,855 11,042 13,665 16,861 100,000 100,000 100,000
7............. 21,373 12,750 16,284 20,769 100,000 100,000 100,000
8............. 25,066 14,415 19,010 25,083 100,000 100,000 100,000
9............. 28,945 16,040 21,852 29,856 100,000 100,000 100,000
10............. 33,017 17,676 24,889 35,244 100,000 100,000 100,000
15............. 56,644 26,143 43,419 74,056 100,000 100,000 100,000
20............. 86,798 33,395 67,309 140,727 100,000 100,000 163,244(3)
25............. 125,284 38,125 98,824 252,385 100,000 105,742(3) 270,052(3)
30............. 174,402 38,965 139,888 440,108 100,000 146,883(3) 462,113(3)
-------
(1) Assumes annual planned premium payments of $2,500 paid in full at
beginning of each Policy year. The values would vary from those shown if the
amount or frequency of payments varies.
(2) Assumes no policy loan or partial withdrawal has been made. Excessive
loans or withdrawals, adverse investment performance or insufficient premium
payments may cause the Policy to terminate because of insufficient cash
value.
(3) Minimum death benefit applies; see "Death Benefit Options--Minimum Death
Benefit"for further details.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE
ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR
FUTURE INVESTMENT RATES OF RETURN. ACTUAL INVESTMENT RATES OF RETURN MAY BE
MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND UPON A NUMBER OF FACTORS,
INCLUDING THE PREMIUM AND CASH VALUE ALLOCATIONS MADE BY AN OWNER AND THE
DIFFERENT RATES OF RETURN OF THE FUND PORTFOLIOS. THE DEATH BENEFIT AND CASH
VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL
INVESTMENT RATES OF RETURN AVERAGED 0%, 6% AND 12% OVER A PERIOD OF YEARS, BUT
FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS OR IF ANY
PREMIUMS WERE ALLOCATED OR CASH VALUE TRANSFERRED TO THE FIXED ACCOUNT. NO
REPRESENTATIONS CAN BE MADE BY METROPOLITAN LIFE OR THE FUND THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
42
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY(1)
MALE ISSUE AGE 50
STANDARD NONSMOKER FULL UNDERWRITING RISK
SPECIFIED FACE AMOUNT: $100,000--DEATH BENEFIT OPTION B
CURRENT CHARGES
[Download Table]
TOTAL CASH VALUE(2) TOTAL DEATH BENEFIT(2)
ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT
PREMIUMS RATES OF RETURN OF RATES OF RETURN OF
END OF ACCUMULATED ------------------------- -----------------------
POLICY AT 5% INTEREST
YEAR PER YEAR 0% 6% 12% 0% 6% 12%
------ -------------- ------- -------- -------- ------- ------- -------
1 ............ 2,625 1,928 2,050 2,171 101,928 102,050 102,171
2 ............ 5,381 3,815 4,177 4,555 103,815 104,177 104,555
3 ............ 8,275 5,657 6,383 7,169 105,657 106,383 107,169
4 ............ 11,314 7,458 8,675 10,044 107,458 108,675 110,044
5 ............ 14,505 9,215 11,053 13,203 109,215 111,053 113,203
6 ............ 17,855 10,930 13,521 16,676 110,930 113,521 116,676
7 ............ 21,373 12,593 16,075 20,490 112,593 116,075 120,490
8 ............ 25,066 14,203 18,715 24,675 114,203 118,715 124,675
9 ............ 28,945 15,761 21,449 29,276 115,761 121,449 129,276
10 ............ 33,017 17,316 24,349 34,435 117,316 124,349 134,435
15 ............ 56,644 25,072 41,475 70,503 125,072 141,475 170,503
20 ............ 86,798 30,768 61,517 129,340 130,768 161,517 229,340
25 ............ 125,284 32,167 82,627 223,621 132,167 182,627 323,621
30 ............ 174,402 26,908 102,119 374,360 126,908 202,119 474,360
-------
(1) Assumes annual planned premium payments of $2,500 paid in full at
beginning of each Policy year. The values would vary from those shown if the
amount or frequency of payments varies.
(2) Assumes no policy loan or partial withdrawal has been made. Excessive
loans or withdrawals, adverse investment performance or insufficient premium
payments may cause the Policy to terminate because of insufficient cash
value.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE
ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR
FUTURE INVESTMENT RATES OF RETURN. ACTUAL INVESTMENT RATES OF RETURN MAY BE
MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND UPON A NUMBER OF FACTORS,
INCLUDING THE PREMIUM AND CASH VALUE ALLOCATIONS MADE BY AN OWNER AND THE
DIFFERENT RATES OF RETURN OF THE FUND PORTFOLIOS. THE DEATH BENEFIT AND CASH
VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL
INVESTMENT RATES OF RETURN AVERAGED 0%, 6% AND 12% OVER A PERIOD OF YEARS, BUT
FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS OR IF ANY
PREMIUMS WERE ALLOCATED OR CASH VALUE TRANSFERRED TO THE FIXED ACCOUNT. NO
REPRESENTATIONS CAN BE MADE BY METROPOLITAN LIFE OR THE FUND THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
43
FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICY(1)
MALE ISSUE AGE 50
STANDARD NONSMOKER FULL UNDERWRITING RISK
SPECIFIED FACE AMOUNT: $100,000--DEATH BENEFIT OPTION C
CURRENT CHARGES
[Download Table]
TOTAL CASH VALUE(2) TOTAL DEATH BENEFIT(2)
ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT
PREMIUMS RATES OF RETURN OF RATES OF RETURN OF
END OF ACCUMULATED ------------------------- -----------------------
POLICY AT 5% INTEREST
YEAR PER YEAR 0% 6% 12% 0% 6% 12%
------ -------------- ------- -------- -------- ------- ------- -------
1 ........ 2,625 1,927 2,049 2,171 102,500 102,500 102,500
2 ........ 5,381 3,811 4,175 4,553 105,000 105,000 105,000
3 ........ 8,275 5,649 6,377 7,165 107,500 107,500 107,500
4 ........ 11,314 7,444 8,665 10,039 110,000 110,000 110,000
5 ........ 14,505 9,192 11,037 13,197 112,500 112,500 112,500
6 ........ 17,855 10,895 13,498 16,673 115,000 115,000 115,000
7 ........ 21,373 12,542 16,045 20,494 117,500 117,500 117,500
8 ........ 25,066 14,130 18,678 24,694 120,000 120,000 120,000
9 ........ 28,945 15,661 21,403 29,322 122,500 122,500 122,500
10 ........ 33,017 17,183 24,296 34,524 125,000 125,000 125,000
15 ........ 56,644 24,620 41,452 71,456 137,500 137,500 137,500
20 ........ 86,798 29,483 61,937 134,677 150,000 150,000 156,225(3)
25 ........ 125,284 28,438 84,971 242,248 162,500 162,500 259,205(3)
30 ........ 174,402 16,050 110,323 423,099 175,000 175,000 444,254(3)
-------
(1) Assumes annual planned premium payments of $2,500 paid in full at
beginning of each Policy year. The values would vary from those shown if the
amount or frequency of payments varies.
(2) Assumes no policy loan or partial withdrawal has been made. Excessive
loans or withdrawals, adverse investment performance or insufficient premium
payments may cause the Policy to terminate because of insufficient cash
value.
(3) Minimum death benefit applies; see "Death Benefit Options--Minimum Death
Benefit" for further details.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE
ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR
FUTURE INVESTMENT RATES OF RETURN. ACTUAL INVESTMENT RATES OF RETURN MAY BE
MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND UPON A NUMBER OF FACTORS,
INCLUDING THE PREMIUM AND CASH VALUE ALLOCATIONS MADE BY AN OWNER AND THE
DIFFERENT RATES OF RETURN OF THE FUND PORTFOLIOS. THE DEATH BENEFIT AND CASH
VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL
INVESTMENT RATES OF RETURN AVERAGED 0%, 6% AND 12% OVER A PERIOD OF YEARS, BUT
FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS OR IF ANY
PREMIUMS WERE ALLOCATED OR CASH VALUE TRANSFERRED TO THE FIXED ACCOUNT. NO
REPRESENTATIONS CAN BE MADE BY METROPOLITAN LIFE OR THE FUND THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
44
POLICY RIGHTS
The description of rights under the Policy set forth below assumes that no
riders are in effect. See the Appendix to Prospectus for a discussion of how
these rights may be affected by certain riders under the Policy.
LOAN PRIVILEGES
Policy Loan. At any time, the Policy owner may borrow money from
Metropolitan Life using the Policy as the only security for the loan. The
smallest amount the Policy owner can borrow at any one time is $250. The
maximum amount that may be borrowed at any time is the loan value. The loan
value equals the cash surrender value less two monthly deductions or, if
greater, 75% (90% for Policies issued in Virginia or Maryland) of the cash
surrender value (or, in Texas, the Policy's cash surrender value less two
monthly deductions or 100% of the cash surrender value in the Fixed Account
and 75% of the cash surrender value in the separate account, if greater). For
situations where a Policy loan may be treated as a taxable distribution, see
"Federal Tax Matters."
Allocation of Policy Loan. Metropolitan Life will allocate a Policy loan
among the Fixed Account and the investment divisions of the Separate Account
on a Pro Rata Basis.
Interest. Loan interest is charged daily at the rate Metropolitan Life sets
from time to time. This rate will never be more than the maximum allowed by
law and will not change more often than once a year on the anniversary of the
date of the Policy.
The rate of interest Metropolitan Life sets for a Policy year may not be
more than the higher of:
(a) The Published Monthly Average for the calendar month ending 2 months
before the start of the Policy year; and
(b) The rate Metropolitan Life uses to compute the guaranteed cash value
of the Policy for the Policy year, plus no more than 1%.
The Published Monthly Average means:
(a) Moody's Corporate Bond Yield Average Monthly Average Corporates, as
published by Moody's Investors Service, Inc. or any successor to that
service; or
(b) If that average is no longer published, a substantially similar
average, established by regulation issued by the Insurance Supervisory
official of the state in which the Policy is delivered.
If the maximum limit for a Policy year is at least 1/2% higher than the rate
set for the prior Policy year, Metropolitan Life may increase the rate to no
more than that limit. If the maximum limit for a Policy year is at least 1/2%
lower than the rate set for the prior Policy year, Metropolitan Life will
reduce the rate to at least that limit.
When a loan is made, Metropolitan Life will inform the Policy owner of the
initial rate applicable to that loan. Metropolitan Life will mail the Policy
owner advance notice if there is to be an increase in the rate applicable to
an existing loan. The interest charged on a Policy loan accrues daily.
Interest payments are due at the end of each Policy year. If unpaid within
31 days after it is due, interest will be treated as a new loan subject to the
interest rates applicable at that time and an amount equal to such interest
due will be transferred from the Fixed Account and the investment divisions of
the Separate Account on a Pro Rata Basis to the Policy Loan Account.
The Tax Reform Act of 1986 phased out the consumer interest deduction for
federal income tax purposes. Thus, for individuals, interest paid to
Metropolitan Life in connection with Policy loans used for consumer purposes
is no longer deductible.
The Tax Reform Act of 1986 also changed the law with respect to the
deductibility of interest on policyholder loans on life insurance policies
owned by businesses. In the case of life insurance policies owned by a
taxpayer covering the
45
life of an individual who is an officer or employee, or is financially
interested in the taxpayer's trade or business, the interest paid on the
policy loan is not deductible to the extent that the aggregate indebtedness,
under all the policies covering such person, exceeds $50,000. Proposed
legislation would phase out such deductions for Policy loan interest both as
to new and already outstanding Policies. Counsel and other competent advisors
should be consulted with respect to the deductibility of Policy loan interest
for income tax purposes. See "Federal Tax Matters."
Effect of a Policy Loan. As of the Date of Receipt of the loan request, cash
value equal to the portion of the Policy loan allocated to the Fixed Account
and to each investment division will be transferred from the Fixed Account
and/or such investment divisions to a Policy Loan Account within the General
Account, reducing the Policy's cash value in the accounts from which the
transfer was made.
Cash value in the Policy Loan Account equal to indebtedness will be credited
with interest at a rate equal to the loan rate charged less a percentage
charge, based on expenses associated with Policy loans, determined by
Metropolitan Life. This percentage charge will not exceed 2%. In any event the
minimum rate credited to the Policy Loan Account will be 4% per year. NO
ADDITIONAL INTEREST WILL BE CREDITED TO THE CASH VALUE IN THE POLICY LOAN
ACCOUNT, NOR WILL THE CASH VALUE IN THE POLICY LOAN ACCOUNT PARTICIPATE IN ANY
INVESTMENT EXPERIENCE APPLICABLE TO THE SEPARATE ACCOUNT.
The Policy's cash value in the Policy Loan Account will be the outstanding
indebtedness on the valuation date plus any interest credited to the Policy
Loan Account which has not yet been allocated to the Fixed Account or the
investment divisions of the Separate Account as of the Valuation Date.
Interest credited to amounts in the Policy Loan Account will be allocated at
least once a year among the Fixed Account and the investment divisions of the
Separate Account in the same proportion as the net premiums are then being
allocated.
Indebtedness. Indebtedness equals the outstanding Policy loan plus accrued
interest thereon. If, on a monthly anniversary, indebtedness exceeds the cash
value minus the monthly deduction, Metropolitan Life will notify the Policy
owner and any assignee of record. If a sufficient payment is not made to
Metropolitan Life within 61 days from the monthly anniversary, the Policy will
terminate without value. The Policy may, however, later be reinstated, subject
to certain conditions (see "Policy Termination and Reinstatement.")
Repayment of Indebtedness. Indebtedness may be repaid any time before the
Final Date while the insured is living. The minimum repayment is $25. If not
repaid, Metropolitan Life will deduct indebtedness from any amount payable
under the Policy. As of the Date of Receipt of the repayment, the Policy's
cash value in the Policy Loan Account securing indebtedness will be allocated
among the Fixed Account and the investment divisions of the Separate Account
in the same proportion that net premiums are being allocated to those accounts
at the time of repayment, except any amount borrowed from the Fixed Account
will be repaid to the Fixed Account first. The Policy owner should designate
whether a payment is intended as a loan repayment or a premium payment. Any
payment for which no designation is made will be treated as a premium payment.
SURRENDER AND WITHDRAWAL PRIVILEGES
Subject to the limitations set forth below, at any time before the earlier
of the death of the insured and the Final Date, the Policy owner may make a
partial withdrawal or totally surrender the Policy by sending a written
request to Metropolitan Life. The maximum amount available for surrenders or
withdrawal is the cash surrender value on the Date of Receipt of the request.
For any tax consequences in connection with a partial withdrawal or surrender,
see "Federal Tax Matters."
Surrenders. The Policy owner may surrender the Policy for its cash surrender
value. If the Policy is being surrendered, Metropolitan Life may require that
the Policy itself be returned along with the request. A Policy owner may elect
to have the proceeds paid in a single sum or applied under an optional income
plan (see "Appendix to Prospectus.") If the insured dies after the surrender
of the Policy and payment to the Policy owner of the cash surrender value but
before the end of the Policy month in which the surrender occurred, a death
benefit will be payable to the beneficiary in an amount equal to the
difference between the Policy's death benefit and cash value, both computed as
of the surrender date.
Partial Withdrawals. The Policy owner may make a partial withdrawal from the
Policy's cash surrender value. The minimum partial withdrawal is $250. There
is no charge for a partial withdrawal. The amount withdrawn will be deducted
46
from the Policy's cash value as of the Date of Receipt. The amount will be
deducted from the Fixed Account and the investment divisions of the Separate
Account on a Pro Rata Basis.
When death benefit Option A is in effect, any partial withdrawal will reduce
the specified face amount, and thus the death benefit, by the amount
withdrawn. When death benefit Option B is in effect, the amount withdrawn will
not reduce the specified face amount. When death benefit Option C is in
effect, the amount withdrawn will not reduce the specified face amount, except
by the amount that cumulative withdrawals exceed cumulative premiums paid. The
death benefit will be reduced under Option B or C by the amount withdrawn. If
increases in the specified face amount previously have occurred, a partial
withdrawal when Death Benefit Option A is in effect will reduce the specified
face amount in the same manner as would a direct request by the Policy owner
to reduce the specified face amount (see "Policy Benefits--Decreases"). A
decrease in the specified face amount may affect the Policy's status as a
modified endowment contract for tax purposes (see "Federal Tax Matters").
A Policy owner will not be permitted to make any partial withdrawal that
would reduce the specified face amount of the Policy below the Minimum Initial
Specified Face Amount in the first five Policy years or one-half the Minimum
Initial Specified Face Amount thereafter (see "Policy Benefits--Decreases"),
or that would result in total premiums paid exceeding the then current maximum
premium limitation determined by Internal Revenue Code Rules (see "Premiums--
Premium Limitations"). A partial withdrawal will also not be permitted unless
the resulting cash surrender value would be sufficient to pay at least two
monthly deductions. Any time a request for a partial withdrawal is received
that would reduce the specified face amount below the minimum face amount,
result in total premiums paid exceeding maximum premium limitations, or reduce
the cash surrender value below two monthly deductions, Metropolitan Life will
not implement the partial withdrawal request, but will contact the Policy
owner as to whether the request should be withdrawn or reduced to a smaller
amount or changed to a request for the full cash surrender value.
EXCHANGE PRIVILEGE
During the first 24 Policy months following the issuance of the Policy, the
Policy owner may exercise the Policy exchange privilege, which results in the
transfer at any one time of the entire amount in the Separate Account to the
Fixed Account, notwithstanding any charges on transfers described in
"Allocation of Premiums and Cash Value--Cash Value Transfers", and the
allocation of all future net premiums to the Fixed Account. This will, in
effect, serve as an exchange of the Policy for the equivalent of a flexible
premium fixed benefit life insurance policy. No charge will be imposed on such
transfer in exercising this exchange privilege. Moreover, the Policy owner may
subsequently transfer amounts back to one or more of the investment divisions
of the Separate Account at any time, within the limitations described in
"Allocation of Premiums and Cash Value--Cash Value Transfers".
In those states which require it, the Policy owner may also, during the
first 24 Policy months following the issuance of the Policy, without charge,
on one occasion exchange any Policy still in force for a flexible premium
fixed benefit life insurance policy issued by Metropolitan Life. Upon such
exchange, the Policy's cash value will be transferred to the General Account
of Metropolitan Life.
THE FIXED ACCOUNT
A Policy owner may allocate net premiums and transfer cash value to the
Fixed Account, which is part of the General Account of Metropolitan Life.
Because of exemptive and exclusionary provisions, interests in the Fixed
Account have not been registered under the Securities Act of 1933 and neither
the Fixed Account nor the General Account has been registered as an investment
company under the 1940 Act. Accordingly, neither the General Account, the
Fixed Account nor any interests therein are generally subject to the
provisions of these Acts and Metropolitan Life has been advised that the staff
of the Securities and Exchange Commission has not reviewed the disclosures in
this Prospectus relating to the Fixed Account. Disclosures regarding the Fixed
Account may, however, be subject to certain generally applicable provisions of
the Federal securities laws relating to the accuracy and completeness of
statements made in prospectuses.
GENERAL DESCRIPTION
This Prospectus is generally intended to serve as a disclosure document only
for the aspects of the Policy involving the Separate Account and contains only
selected information regarding the Fixed Account. For complete details
regarding the Fixed Account, see the Policy itself.
47
The General Account consists of all assets owned by Metropolitan Life other
than those in the Separate Account and other legally-segregated separate
accounts. Subject to applicable law, Metropolitan Life has sole discretion
over the investment of the assets of the General Account, including those in
the Fixed Account. Unlike the assets of the Separate Account, the assets in
the Fixed Account, as a part of the General Account, are chargeable with
liabilities arising out of any other business of Metropolitan Life.
A Policy owner may elect to allocate net premiums to the Fixed Account or to
transfer cash value from the investment divisions of the Separate Account to
the Fixed Account. The allocation or transfer of funds to the Fixed Account
does not entitle a Policy owner to share in the investment experience of the
General Account. Instead, Metropolitan Life guarantees that cash value in the
Fixed Account will accrue interest at an effective annual rate of at least 4%,
independent of the actual investment experience of the General Account.
Metropolitan Life is not obligated to credit interest at any higher rate,
although Metropolitan Life may, in its sole discretion, do so. Any allocation
of net premium or cash value transfers to the Fixed Account will be subject to
Metropolitan Life's prior approval for each Owner whose cash value in the
Fixed Account is at least $60,000,000 in the aggregate for all of the Owner's
Policies. Without such approval, no further net premium may be allocated to
the Fixed Account and no cash value transfers to the Fixed Account will be
permitted.
FIXED ACCOUNT BENEFITS
The Policy owner may select death benefit Option A, B or C under the Policy
and may change such option or the Policy's specified face amount, subject to
satisfactory evidence of insurability where required and subject to all the
conditions and limitations applicable to such transactions generally (see
"Policy Benefits--Death Benefits").
FIXED ACCOUNT CASH VALUE
Net premiums allocated to the Fixed Account are credited to the Policy.
Metropolitan Life guarantees that interest credited to each Policy owner's
cash value in the Fixed Account will not be less than an effective annual rate
of at least 4% per year. Metropolitan Life may declare any rate of interest in
excess of 4% at any time to be credited to amounts of cash value in the Fixed
Account subject to the following conditions: Metropolitan Life will not change
the rate of excess interest on any premiums paid during any month of the year
before the first day of the same month of the subsequent year; thereafter,
Metropolitan Life will not change the rate of excess interest for a period of
twelve months from the date declared. Different rates of excess interest may
apply to premium payments made in different months of the year and at the end
of each twelve-month period, and different rates of excess interest may apply
to cash value related to premiums received in a given month of each prior
year. Transfers made into the Fixed Account will be treated as new premium
payments for these purposes.
The guaranteed and excess interest are credited each Valuation Date. Once
credited, that interest will be guaranteed and become part of the Policy's
cash value in the Fixed Account. The monthly deduction will be charged against
the most recent premiums paid and interest credited thereto.
ANY INTEREST METROPOLITAN LIFE CREDITS ON THE POLICY'S CASH VALUE IN THE
FIXED ACCOUNT IN EXCESS OF THE GUARANTEED RATE OF 4% PER YEAR WILL BE
DETERMINED IN THE SOLE DISCRETION OF METROPOLITAN LIFE. THE POLICY OWNER
ASSUMES THE RISK THAT INTEREST CREDITED TO AMOUNTS OF CASH VALUE IN THE FIXED
ACCOUNT MAY NOT EXCEED THE GUARANTEED MINIMUM RATE OF 4% PER YEAR. The cash
value in the Fixed Account will be calculated on each Valuation Date.
The Policy's cash value in the Fixed Account will reflect the amount and
frequency of premium payments allocated to the Fixed Account, the amount of
interest credited to amounts in the Fixed Account, any partial withdrawals,
any transfers from or to the investment divisions of the Separate Account, any
Policy indebtedness and any charges imposed on amounts in the Fixed Account in
connection with the Policy.
The portion of the monthly deduction attributable to the Fixed Account will
be determined as of the actual monthly anniversary, even if the monthly
anniversary does not fall on a Valuation Date.
TRANSFERS, WITHDRAWALS, SURRENDERS, AND POLICY LOANS
Amounts in the Fixed Account are subject to the same rights and limitations
as are amounts allocated to the investment divisions of the Separate Account
with respect to transfers, withdrawals, surrenders and Policy loans, except
48
that the maximum amount that may be transferred or withdrawn from the Fixed
Account in any Policy year is the greater of $50.00 or 25% of the largest
amount in the Fixed Account over the last four Policy years. This limit does
not apply to a full surrender, or to any loans taken. See "Allocation of
Premiums and Cash Value--Cash Value Transfers;" "Loan Privileges," "Surrender
and Withdrawal Privileges".
Metropolitan Life reserves the right to delay transfers, withdrawals,
surrenders and the payment of the Policy loans allocated to the Fixed Account
for up to six months (see "Other Policy Provisions--Payment and Deferment").
Payments to pay premiums on another policy with Metropolitan Life will not be
delayed.
RIGHTS RESERVED BY METROPOLITAN LIFE
Metropolitan Life reserves the right to make certain changes if, in its
judgment, they would best serve the interests of the Policy owners or would be
appropriate in carrying out the purposes of the Policies. Any changes will be
made only to the extent and in the manner permitted by applicable laws. Also,
when required by law, Metropolitan Life will obtain Policy owner approval of
the changes and approval from any appropriate regulatory authority. Examples
of the changes Metropolitan Life may make include:
. To operate the Separate Account in any form permitted under the 1940 Act
or in any other form permitted by law.
. To take any action necessary to comply with or obtain and continue any
exemptions from the 1940 Act.
. To transfer any assets in any investment division to another investment
division, or to one or more separate accounts, or to the Fixed Account;
or to add, combine or remove investment divisions in the Separate
Account.
. To substitute, for the Fund shares held in any investment division, the
shares of another portfolio of the Fund or the shares of another
investment company or any other investment permitted by law.
. To change the way Metropolitan Life assesses charges, but without
increasing the aggregate amount charged to the Fixed Account and the
Separate Account in connection with the Policies.
. To make any other necessary technical changes in the Policy in order to
conform with any action the above provisions permit Metropolitan Life to
take.
If any of these changes result in a material change in the underlying
investments of an investment division to which the net premiums of a Policy
are allocated, Metropolitan Life will notify the Policy owner of such change,
and the owner may then make a new choice of investment divisions or the Fixed
Account without charge.
OTHER POLICY PROVISIONS
Owner. The Owner of a Policy is an employer, employer sponsored plan, or
other organization or an individual associated with such employer or
organization so designated in the application or as subsequently changed,
unless another Owner has been named in the application for the Policy. The
Owner is entitled to exercise all rights under a Policy while the insured is
alive, including the right to name a new Owner or a contingent Owner who would
become the Policy owner if the Owner should cease to exist before the insured
dies. The Policy owner may also designate another person or entity to exercise
rights under the Policy with the approval of Metropolitan Life.
Beneficiary. The beneficiary is the entity or entities and/or person or
persons to whom the insurance proceeds are payable upon the insured's death.
The owner may name a contingent beneficiary to become the beneficiary if all
the beneficiaries cease to exist while the insured is alive. If no beneficiary
or contingent beneficiary exists when the insured dies, the owner (or the
owner's estate, if applicable) will be the beneficiary. While the insured is
alive, the owner may change any beneficiary or contingent beneficiary.
If more than one beneficiary exists when the insured dies, they will be paid
in equal shares, unless the owner has chosen otherwise.
Incontestability. Metropolitan Life will not contest the validity of a
Policy after it has been in force during the insured's lifetime for two years
from the Date of Policy (or date of reinstatement if a terminated Policy is
reinstated). Metropolitan Life will not contest the validity of any increase
in the death benefit after such increase has been in force during the
insured's lifetime for two years from its effective date.
49
Suicide. The insurance proceeds will not be paid if the insured commits
suicide, while sane or insane, within two years (one year in Colorado and
North Dakota) from the Date of Policy. Instead, Metropolitan Life will pay the
beneficiary an amount equal to all premiums paid for the Policy, without
interest, less any outstanding Policy loan and accrued loan interest and less
any partial cash withdrawal. If the insured commits suicide, while sane or
insane, more than two years after the Date of Policy but within two years (one
year in Colorado and North Dakota) from the effective date of any increase in
the death benefit, Metropolitan Life's liability with respect to such increase
will be limited to the cost thereof.
Age and Sex. If the insured's age or sex as stated in the application for a
Policy is not correct, benefits under a Policy will be adjusted to reflect the
correct age and sex.
Collateral Assignment. The owner may assign a Policy as collateral. All
rights under the Policy will be transferred to the extent of the assignee's
interest. Metropolitan Life is not bound by an assignment or release thereof,
unless it is in writing and is recorded at the Designated Office. Metropolitan
Life is not responsible for the validity of any assignment or release thereof.
Payment and Deferment. With respect to amounts in the investment divisions
of the Separate Account, payment of the death benefit, all or a portion of the
cash surrender value, free look proceeds or a loan will ordinarily be made
within seven days after the Date of Receipt of all documents required for such
payment. Metropolitan Life will pay interest on the amount of death benefit at
a rate which is currently 4% per year (or such higher rate as may be required
by state law) from the date of death until the date of payment of the death
benefit.
However, Metropolitan Life may defer the determination, application or
payment of any such amount or any transfer of cash value for any period during
which the New York Stock Exchange is closed (other than customary weekend and
holiday closings), for any period during which any emergency exists as a
result of which it is not reasonably practicable for Metropolitan Life to
determine the investment experience for a Policy or for such other periods as
the Securities and Exchange Commission may by order permit for the protection
of Policy owners, provided the delay is permitted under New York State
Insurance Law and regulations. Metropolitan Life will not defer a loan used to
pay premiums on other policies issued by it.
As with traditional life insurance, Metropolitan Life can delay payment of
the entire insurance proceeds or other Policy benefits if entitlement to
payment is being questioned or is uncertain.
Dividends. The Policies are nonparticipating. This means that they are not
eligible for dividends, and they do not participate in any distribution of
Metropolitan Life's surplus.
The description throughout this Prospectus of the features of the Policies
is subject to the specific terms of the Policies.
SALES AND ADMINISTRATION OF THE POLICIES
Metropolitan Life performs the sales and administrative services relating to
the Policies. The offices of Metropolitan Life which may administer the
Policies are located in New York and Iselin, New Jersey. Each Policy owner
will be notified which office will be the Designated Office for servicing the
Policy. Metropolitan Life may name different Designated Offices for different
transactions.
Metropolitan Life acts as the principal underwriter (distributor) of the
Policies as defined in the 1940 Act (see "Distribution of the Policies," page
52). In addition to selling insurance and annuities, Metropolitan Life also
serves as investment adviser to certain other advisory clients, and is also
principal underwriter for Metropolitan Tower Separate Accounts One and Two of
Metropolitan Tower Life Insurance Company, a wholly-owned subsidiary of
Metropolitan Life, and Metropolitan Life Separate Account E of Metropolitan
Life, each of which is registered as a unit investment trust under the 1940
Act. Finally, Metropolitan Life acts as principal underwriter for its flexible
premium multifunded life insurance policies and group variable universal life
insurance policies, premiums for which may also be allocated to the Separate
Account.
Bonding. The directors, officers and employees of Metropolitan Life are
bonded in the amount of $50,000,000, subject to a $5,000,000 deductible.
50
DISTRIBUTION OF THE POLICIES
The Policies will be sold by individuals who are licensed life insurance
sales representatives, including salaried employees, who are also registered
representatives of Metropolitan Life, the principal underwriter of the
Policies. Metropolitan Life is registered with the Securities and Exchange
Commission under the Securities Exchange Act of 1934 as a broker-dealer and is
a member of the National Association of Securities Dealers, Inc. The Policies
may also be sold through other registered broker-dealers, including MetLife
Securities, Inc., a wholly owned broker-dealer subsidiary of Metropolitan
Life. Maximum commissions payable in Policy years one through ten will be 10%
of premiums paid up to the target premium and 3% of premiums paid above the
target premium in each of those Policy years. Maximum commissions payable in
policy years eleven and later will be 3% of premiums paid in each of those
Policy years. In particular circumstances, Metropolitan Life may also pay
these individuals for their administrative expenses.
In no case will total compensation exceed any maximum imposed by state
insurance law, including that of New York State. This may necessitate reduced
commissions, particularly at certain higher issue ages.
The compensation of the individuals is paid by Metropolitan Life and does
not result in any charges against the Policy in addition to those set forth
under "Charges and Deductions."
FEDERAL TAX MATTERS
The following description is a brief summary of some of the tax rules,
primarily related to federal income and estate taxes, which in the opinion of
Metropolitan Life are currently in effect.
TAXATION OF THE POLICY
The Policy receives the same federal income and estate tax treatment as
fixed benefit life insurance. The death benefit payable under any death
benefit option in the Policy is generally excludable from the gross income of
the beneficiary under Section 101 of the Internal Revenue Code ("Code") and
the Policy owner is not deemed to be in constructive receipt of the cash
values under the Policy until actual withdrawal or surrender. The tax results
are unclear if the Policy is continued beyond the Final Date. It is possible
that the Policy owner will be treated as being in constructive receipt of the
Policy cash surrender value after the Final Date and subject to tax. Policy
owners should consult with and rely on advice of a tax advisor if considering
continuing the Policy beyond the Final Date.
Under existing tax law, unless a Policy is a modified endowment contract as
discussed below, a Policy owner generally will be taxed on cash value
withdrawn from the Policy and cash value received upon surrender of the Policy
or on the Final Date. Under most circumstances, unless the distribution occurs
during the first 15 Policy years, only the amount withdrawn, received upon
surrender or distributed at the Final Date of a Policy that exceeds the total
premiums paid (less previous non-taxable withdrawals) will be treated as
ordinary income. During the first 15 Policy years, cash distributions from a
Policy, made as a result of a Policy change that reduces death benefits or
other benefits under a Policy, will be taxable to the Policy owner, under a
complex formula, to the extent that cash value exceeds premiums paid (less
previous non-taxable withdrawals).
However, if a Policy is part of a collateral assignment equity split dollar
arrangement with an employer, any increase in cash value may be taxable
annually. This type of arrangement involves premium advances by an employer
which are secured through a collateral assignment of the Policy. An individual
should consult with and rely on the advice of a tax advisor with respect to
any type of split dollar arrangement involving the Policy.
The United States Treasury Department has adopted regulations which set
diversification rules for the investments underlying the Policies, in order
for the Policies to be treated as life insurance. Metropolitan Life believes
that these diversification rules will be satisfied. There is a provision in
the regulations which allows for the correction of an inadvertent failure to
diversify. Failure to comply with the rules found in the regulations would
result in immediate taxation to Policy owners of all positive investment
experience credited to a Policy.
There is a possibility that regulations may be proposed or that a
controlling ruling may be issued in the future describing the extent to which
Policy owner control over allocation of cash value may cause Policy owners to
be treated
51
as the owners of Separate Account assets for tax purposes. Metropolitan Life
reserves the right to amend the Policies in any way necessary to avoid any
such result.
Metropolitan Life also believes that loans received under the Policy will be
treated as indebtedness of an owner for federal tax purposes, and, unless the
Policy is totally surrendered, becomes a modified endowment contract as
described below or terminates, that no part of any loan received under a
Policy will constitute income to the Owner. A partial withdrawal may have tax
consequences depending on the circumstances of such withdrawal. If any portion
of a loan is not repaid prior to a surrender or cancellation of the Policy,
such unpaid portion will constitute income to the Owner to the extent it
exceeds the Owner's remaining investment in the Policy (premiums paid less
nontaxable withdrawals).
The Technical and Miscellaneous Revenue Act of 1988 amended the federal
income tax treatment of pre-death withdrawals from a class of life insurance
contracts referred to as modified endowment contracts. Unlike other life
insurance contracts, amounts received before death from a modified endowment
contract, including policy loans, are treated first as income (to the extent
of gain) and then as recovered investment. For purposes of determining the
amount includible in income, all modified endowment contracts issued by the
same company (or affiliate) to the same policyholder during any calendar year
will be treated as one modified endowment contract. Finally, an additional 10%
income tax is generally imposed on the taxable portion of amounts received
before age 59 1/2 under a modified endowment contract.
In general, a modified endowment contract is a life insurance contract
entered into or materially changed after June 20, 1988 that fails to meet a
"7-pay test". Under the 7-pay test, if the amount of premiums paid under the
life insurance contract at any time during the first 7 policy years exceeds
the sum of the net level premiums which would have been paid if the contract
provided for paid-up future benefits after the payment of 7 level annual
payments, the contract is a modified endowment contract. A policy may have to
be reviewed under the 7-pay test even after the first seven policy years in
the case of certain events such as a material modification of the policy as
discussed below. If there is a reduction in benefits under the contract during
any 7-pay testing period, the 7-pay test is applied using the reduced benefits
level.
Any distribution made within two years before a policy fails the 7-pay test
is treated as made in anticipation of such failure. Whether or not a
particular policy meets these definitional requirements is dependent on the
date the contract was entered into, premium payments made and the periodic
premium payments to be made, the level of death benefits, any changes in the
level of death benefits, the extent of any prior cash withdrawals, and other
factors. A life insurance policy which is received in exchange for a modified
endowment contract will also be considered a modified endowment contract.
A Policy should be reviewed upon issuance, upon making a cash withdrawal,
upon making a change in future benefits and upon making a material
modification to the Policy to determine to what extent, if any, these tax
rules apply. A material modification to a Policy includes, but is not limited
to, any increase in the future benefits provided under the Policy. However, in
general, increases that are attributable to the payment of premiums necessary
to fund the lowest death benefit payable in the first 7 Policy years will not
be considered material modifications. The annual statement sent to each Policy
owner will include information regarding the modified endowment contract
status of a Policy (see "Premiums--Premium Limitations").
Counsel and other competent advisors should be consulted to determine how
these rules apply to an individual situation and before making unplanned
premium payments, increasing or decreasing the specified face amount, or
adding or removing a rider.
Congress may, in the future, consider other legislation that, if enacted,
could adversely affect the tax treatment of life insurance policies. In
addition, the Treasury Department may by regulation or interpretation modify
the above described tax effects. Any legislative or administrative action
could be applied retroactively.
The death benefit payable under the Policy is includable in the insured's
gross estate for federal estate tax purposes if the death benefit is paid to
the insured's estate or if the death benefit is paid to a beneficiary other
than the estate and the insured either possessed incidents of ownership in the
Policy at the time of death or transferred incidents of ownership in the
Policy to another person within three years of death.
52
Whether or not any federal estate tax is payable with respect to the death
benefit of the Policy which is included in the insured's gross estate depends
on a variety of factors including the following. A smaller size estate may be
exempt from federal estate tax because of a current estate tax credit which
generally is equivalent to an exemption of $600,000. In addition, a death
benefit paid to a surviving spouse may not be taxable because of a 100% estate
tax marital deduction. Furthermore, a death benefit paid to a tax-exempt
charity may not be taxable because of the allowance of an estate tax
charitable deduction.
If the owner of the Policy is not the insured, and the owner dies before the
insured, the value of the Policy, as determined under Internal Revenue Service
regulations, is includable in the federal gross estate of the owner for
federal estate tax purposes. Whether a federal estate tax is payable depends
on a variety of factors, including those listed in the preceding paragraph.
State and local income, estate, inheritance and other tax consequences of
ownership or receipt of Policy proceeds depend on the circumstances of each
insured, owner or beneficiary.
If the Policy is issued as a result of an IRC Section 1035 exchange,
Metropolitan Life may waive state premium tax charges on the amount of the
cash value rollover (see "Premium Expense Charges").
In no event will the death benefit be lower than the minimum amount required
to maintain the Policy as life insurance under federal income tax law and
applicable Internal Revenue Service rules.
The foregoing summary does not purport to be complete or to cover all
situations. Counsel and other competent advisors should be consulted for more
complete information.
TAXATION OF METROPOLITAN LIFE
Metropolitan Life does not initially expect to incur any federal income tax
upon the earnings or the realized capital gains attributable to the Separate
Account. Based upon these expectations, no charge is currently being made
against the Separate Account for federal income taxes with respect to earnings
or capital gains which may be attributable to the Separate Account. If,
however, Metropolitan Life determines that it may incur such taxes, it may
assess a charge against or make provisions in the Separate Account for those
taxes. There is a 1.2% charge imposed on premiums paid for the purpose of
recovering a portion of the federal income taxes imposed on Metropolitan Life
based on the amount of premiums received in connection with the Policies.
Under present laws, Metropolitan Life may incur state and local taxes (in
addition to premium taxes) in several states. At present, these taxes are not
significant. If they increase, however, Metropolitan Life may decide to make
charges for such taxes against or provisions for such taxes in the Separate
Account. However, there is a 2.25% charge imposed on premiums paid for state
premium taxes.
53
MANAGEMENT
The present directors and the senior officers and secretary of Metropolitan
Life are listed below, together with certain information concerning them:
DIRECTORS, OFFICERS-DIRECTORS
[Enlarge/Download Table]
PRINCIPAL OCCUPATION & POSITIONS AND OFFICES
NAME BUSINESS ADDRESS WITH METROPOLITAN LIFE
------------------------ ------------------------------------ --------------------------
Theodossios Vice-Chairman of the Board,
Athanassiades.......... Metropolitan Life Insurance Company, Vice-Chairman of the Board
One Madison Avenue, and Director
New York, NY 10010.
Curtis H. Barnette...... Chairman and Chief Executive Director
Officer,
Bethlehem Steel Corp.,
1170 Eighth Avenue
Martin Tower 2118
Bethlehem, PA 18016-7699
Joan Ganz Cooney........ Chairman, Executive Committee, Director
Children's Television Workshop,
One Lincoln Plaza,
New York, NY 10023.
James R. Houghton....... Retired Chairman of the Board and Director
Chief Executive Officer,
Corning Incorporated, HQ EQ-08
Corning, NY 14831.
Harry P. Kamen.......... Chairman, President and Chairman, President,
Chief Executive Officer, Chief Executive Officer
Metropolitan Life Insurance Company, and Director
One Madison Avenue,
New York, NY 10010.
Helene L. Kaplan........ Of Counsel, Skadden, Arps, Director
Slate, Meagher & Flom,
919 Third Avenue,
New York, NY 10022.
Richard J. Mahoney...... Chairman of the Executive Committee, Director
Monsanto Company--Mail Code N3L,
800 N. Lindbergh Blvd.,
St. Louis, MO 63167.
Allen E. Murray......... Retired Chairman of the Board Director
and Chief Executive Officer,
Mobil Corporation,
P.O. Box 2072,
New York, NY 10163.
John J. Phelan, Jr...... Retired Chairman and Director
Chief Executive Officer,
New York Stock Exchange, Inc.,
P.O. Box 312
Mill Neck, NY 11765.
54
[Enlarge/Download Table]
PRINCIPAL OCCUPATION & POSITIONS AND OFFICES
NAME BUSINESS ADDRESS WITH METROPOLITAN LIFE
------------------------ -------------------------------------- ----------------------
John B. M. Place........ Former Chairman of the Board, Director
Crocker National Corporation,
111 Sutter Street, 4th Fl.,
San Francisco, CA 94104.
Hugh B. Price........... President and Chief Executive Officer, Director
National Urban League, Inc.,
500 East 62nd Street,
New York, NY 10021.
Robert G. Schwartz...... Retired Chairman of the Board, Director
President and Chief Executive Officer,
Metropolitan Life Insurance Company,
200 Park Avenue, Suite 5700,
New York, NY 10166.
Ruth J. Simmons, President Director
Ph.D. ................. College Hall 20
Smith College
Northampton, MA 01063
William S. Sneath.... Retired Chairman of the Board, Director
Union Carbide Corporation,
41 Leeward Lane,
Riverside, CT 06878.
John R. Stafford..... Chairman, President, and Director
Chief Executive Officer,
American Home Products Corporation,
Five Giralda Farms,
Madison, NJ 07940.
55
OFFICERS*
[Enlarge/Download Table]
NAME OF OFFICER POSITION WITH METROPOLITAN LIFE
--------------- -------------------------------
Harry P. Kamen.......... Chairman, President and Chief Executive Officer
Theodossios
Athanassades........... Vice-Chairman of the Board
Gerald Clark............ Senior Executive Vice-President and Chief Investment Officer
Stewart G. Nagler....... Senior Executive Vice-President and Chief Financial Officer
Gary A. Beller.......... Executive Vice-President and Chief Legal Officer
Robert H. Benmosche..... Executive Vice-President
Anthony C. Cannatella... Executive Vice-President
Robert J. Crimmins...... Executive Vice-President
C. Robert Henrikson..... Executive Vice-President
John D. Moynahan, Jr.... Executive Vice-President
Catherine A. Rein....... Executive Vice-President
John H. Tweedie......... Executive Vice-President
Richard M. Blackwell.... Senior Vice-President and General Counsel
James B. Digney......... Senior Vice-President
William T. Friedewald... Senior Vice-President
Frederick P. Hauser..... Senior Vice-President & Controller
Anne E. Hayden.......... Senior Vice-President
Jeffrey J. Hodgman...... Senior Vice-President
Leland C. Launer, Jr. .. Senior Vice-President
Terence I. Lennon....... Senior Vice-President
David A. Levene......... Senior Vice-President and Chief Actuary
James L. Lipscomb....... Senior Vice-President
James M. Logan.......... Senior Vice-President
Francis P. Lynch........ Senior Vice-President
Thomas F. McDermott..... Senior Vice-President
John C. Morrison, Jr. .. Senior Vice-President
Dominick A. Prezzano.... Senior Vice-President
Leo T. Rasmussen........ Senior Vice-President
Vincent P. Reusing...... Senior Vice-President
Robert E. Sollmann, Jr.. Senior Vice-President
Thomas L. Stapleton..... Senior Vice-President & Tax Director
William J. Toppeta...... Senior Vice-President
Arthur G. Typermass..... Senior Vice-President & Treasurer
James A. Valentino...... Senior Vice-President
Richard F. Wiseman...... Senior Vice-President
Judy E. Weiss........... Senior Vice-President
Stephen E. White........ Senior Vice-President
Harvey M. Young......... Senior Vice-President
Christine M. Markussen.. Vice-President and Secretary
* The principal occupation of each officer, except for Gary A. Beller, Robert
H. Benmosche, and Terence I. Lennon, during the last five years has been as
an officer of Metropolitan Life or an affiliate thereof. Gary A. Beller has
been an officer of Metropolitan Life since November, 1994; prior thereto, he
was a Consultant and Executive Vice-President and General Counsel of the
American Express Company. Robert H. Benmosche has been an officer of
Metropolitan Life since September, 1995; prior thereto, he was an Executive
Vice-President of Paine Webber. Terence I. Lennon has been an officer of
Metropolitan Life since March, 1994; prior thereto he was Assistant Deputy
Superintendent and Chief Examiner of the New York State Department of
Insurance. The business address of each officer is 1 Madison Avenue, New
York, New York 10010.
56
VOTING RIGHTS
RIGHT TO INSTRUCT VOTING OF FUND SHARES
In accordance with its view of present applicable law, Metropolitan Life
will vote the shares of each of the portfolios of the Fund which are deemed
attributable to Policies at regular and special meetings of the shareholders
of the Fund based on instructions received from entities having the voting
interest in corresponding investment divisions of the Separate Account.
However, if the 1940 Act or any rules thereunder should be amended or if the
present interpretation thereof should change, and as a result Metropolitan
Life determines that it is permitted to vote such shares of the Fund in its
own right, it may elect to do so.
Accordingly, the Policy owner will have a voting interest under a Policy.
The number of shares held in each Separate Account investment division deemed
attributable to each owner is determined by dividing a Policy's cash value in
that division, if any, by the net asset value of one share in the
corresponding Fund portfolio in which the assets in that Separate Account
investment division are invested. Fractional votes will be counted. The number
of shares concerning which a Policy owner has the right to give instructions
will be determined as of the record date for the meeting.
Fund shares held in each registered separate account of Metropolitan Life or
any affiliate that are or are not attributable to life insurance policies
(including the Policies) or annuity contracts and for which no timely
instructions are received will be voted in the same proportion as the shares
for which voting instructions are received by that separate account. Fund
shares held in the general accounts or unregistered separate accounts of
Metropolitan Life or its affiliates will be voted in the same proportion as
the aggregate of (i) the shares for which voting instructions are received and
(ii) the shares that are voted in proportion to such voting instructions.
However, if Metropolitan Life or an affiliate determines that it is permitted
to vote any such shares of the Fund in its own right, it may elect to do so
subject to the then current interpretation of the 1940 Act or any rules
thereunder.
The Policy owners may give instructions regarding, among other things, the
election of the Board of Directors of the Fund, ratification of the selection
of the Fund's independent auditors, and the approval of the Fund's investment
manager and sub-investment manager.
Each Policy owner having a voting interest will be sent voting instruction
soliciting material and a form for giving voting instructions to Metropolitan
Life.
DISREGARD OF VOTING INSTRUCTIONS
Notwithstanding contrary Policy owner voting instructions, Metropolitan Life
may vote Fund shares in any manner necessary to enable the Fund to (1) make or
refrain from making any change in the investments or investment policies for
any portfolio of the Fund, if required by any insurance regulatory authority;
(2) refrain from making any change in the investment policies or any
investment adviser or principal underwriter of any portfolio which may be
initiated by Policy owners or the Fund's Board of Directors, provided
Metropolitan Life's disapproval of the change is reasonable and, in the case
of a change in investment policies or investment adviser, based on a good
faith determination that such change would be contrary to state law or
otherwise inappropriate in light of the portfolio's objective and purposes; or
(3) enter into or refrain from entering into any advisory agreement or
underwriting contract, if required by any insurance regulatory authority.
In the event that Metropolitan Life does disregard voting instructions, a
summary of the action and the reasons for such action will be included in the
next semiannual report to Policy owners.
REPORTS
Policy owners will receive promptly statements of significant transactions
such as change in specified face amount, change in death benefit option,
transfers among investment divisions, partial withdrawals, increases in loan
principal by the Policy owner, loan repayments, termination for any reason,
reinstatement and premium payments. Transactions pursuant to systematic
investment strategies and, for California Policies, transactions to assure
that allocations to the International Stock division do not exceed the maximum
(see "Payment and Allocation of Premiums"), may be confirmed quarterly. Policy
owners whose premiums are automatically remitted under certain payroll
deduction plans
57
do not receive individual confirmations of those premium payments from
Metropolitan Life apart from that provided by their employers. An annual
statement will also be sent to the Policy owner within thirty days after a
Policy year summarizing all of the above transactions and deductions of
charges occurring during that Policy year and setting forth the status of the
death benefit, cash and cash surrender values, amounts in the investment
divisions and Fixed Account, any policy loan and unpaid loan interest added to
loan principal. The annual statement will also discuss the modified endowment
contract status of a Policy (see "Premiums--Premium Limitations"). In
addition, an owner will be sent semiannual reports containing financial
statements for the Fund, as required by the 1940 Act.
STATE REGULATION
Metropolitan Life is subject to regulation and supervision by the Insurance
Department of the State of New York, which periodically examines its affairs.
It is also subject to the insurance laws and regulations of all jurisdictions
where it is authorized to do business. Where required, a copy of the form of
Policy has been filed with, and approved by, insurance officials in each
jurisdiction where the Policies are sold. Metropolitan Life intends to satisfy
the necessary requirements to sell the Policies in all fifty states and the
District of Columbia as soon as possible.
Metropolitan Life is required to submit annual statements of its operations,
including financial statements, to the insurance departments of the various
jurisdictions in which is does business, for the purposes of determining
solvency and compliance with local insurance laws and regulations. Such
statements are available for public inspection at state insurance department
offices.
REGISTRATION STATEMENT
A registration statement under the Securities Act of 1933 has been filed
with the Securities and Exchange Commission relating to the offering described
in this Prospectus. This Prospectus does not contain all the information set
forth in the registration statement and amendments thereto and the exhibits
filed as a part thereof, to all of which reference is hereby made for
additional information concerning the Separate Account, Metropolitan Life and
the Policies. The additional information may be obtained at the Commission's
main office in Washington, D.C., upon payment of the prescribed fees.
LEGAL MATTERS
The legality of the Policies described in this Prospectus has been passed
upon by Christopher P. Nicholas, Associate General Counsel of Metropolitan
Life. Messrs. Freedman, Levy, Kroll & Simonds, Washington, D.C., have advised
Metropolitan Life on certain matters relating to the federal securities laws.
EXPERTS
The financial statements included in this Prospectus have been audited by
Deliotte & Touche LLP, independent auditors, as stated in their reports
appearing herein, and have been so included in reliance upon such opinions
given upon the authority of such firm as experts in auditing and accounting.
Actuarial matters included in this Prospectus have been examined by Joseph
W.S. Yau, FSA, MAAA, Vice-President and Actuary of Metropolitan Life, as
stated in his opinion filed as an exhibit to the registration statement.
FINANCIAL STATEMENTS
The financial statements of Metropolitan Life included in this Prospectus
should be considered only as bearing upon the ability of Metropolitan Life to
meet its obligations under the Policies.
58
INDEPENDENT AUDITORS' REPORT
Metropolitan Life Insurance Company:
We have audited the accompanying balance sheets of Metropolitan Life Insurance
Company (the Company) as of December 31, 1995 and 1994 and the related
statements of operations and surplus and of cash flow for each of the three
years in the period ended December 31, 1995. These financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Company at December 31, 1995 and 1994
and the results of its operations and its cash flow for each of the three
years in the period ended December 31, 1995 in conformity with accounting
practices prescribed or permitted by insurance regulatory authorities and
generally accepted accounting principles.
Deloitte & Touche LLP
New York, New York
February 9, 1996
59
METROPOLITAN LIFE INSURANCE COMPANY
BALANCE SHEETS
DECEMBER 31, 1995 AND 1994 (IN MILLIONS)
[Download Table]
NOTES 1995 1994
----- ---- ----
ASSETS
Bonds.................................................. 4,11 $ 70,955 $ 65,592
Stocks................................................. 3,4,11 3,646 3,672
Mortgage loans......................................... 3,4,11 14,211 14,524
Real estate............................................ 9,470 10,417
Policy loans........................................... 11 3,956 3,964
Cash and short-term investments........................ 11 1,923 2,334
Other invested assets.................................. 3 2,480 2,262
Premiums deferred and uncollected...................... 1,568 1,250
Investment income due and accrued...................... 1,589 1,440
Separate Account assets................................ 31,707 25,424
Other assets........................................... 627 298
-------- --------
Total Assets........................................... $142,132 $131,177
======== ========
LIABILITIES AND SURPLUS
Liabilities
Reserves for life and health insurance and annuities... 5,11 $ 76,249 $ 73,204
Policy proceeds and dividends left with the Company.... 11 4,482 3,534
Dividends due to policyholders......................... 1,371 1,407
Premium deposit funds.................................. 11 12,891 14,006
Interest maintenance reserve........................... 1,148 881
Other policy liabilities............................... 3,882 3,364
Investment valuation reserves.......................... 1,860 1,981
Separate Account liabilities........................... 31,226 25,159
-------- --------
Other liabilities...................................... 2,459 1,337
-------- --------
Total Liabilities...................................... 135,568 124,873
======== ========
Surplus
Special contingency reserves........................... 754 682
Surplus notes.......................................... 10 1,400 700
Unassigned funds....................................... 4,410 4,922
-------- --------
Total Surplus.......................................... 6,564 6,304
-------- --------
Total Liabilities and Surplus.......................... $142,132 $131,177
======== ========
See accompanying notes to financial statements.
60
METROPOLITAN LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS AND SURPLUS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 (IN MILLIONS)
[Download Table]
NOTES 1995 1994 1993
----- ---- ---- ----
INCOME
Premiums, annuity considerations and deposit
funds......................................... 5 $19,972 $19,881 $19,442
Considerations for supplementary contracts and
dividend accumulations........................ 2,979 2,879 1,654
Net investment income......................... 7,825 7,143 7,356
Other income.................................. 5 156 80 231
------- ------- -------
Total income.................................. 30,932 29,983 28,683
------- ------- -------
BENEFITS AND EXPENSES
Benefit payments (other than dividends)....... 25,055 23,533 21,417
Changes to reserves, deposit funds and other
policy liabilities........................... 321 1,619 (439)
Insurance expenses and taxes (excluding tax on
capital gains)............................... 6 3,160 2,492 2,595
Net transfers to Separate Accounts............ 675 503 3,239
Dividends to policyholders.................... 1,520 1,676 1,606
------- ------- -------
Total benefits and expenses................... 30,731 29,823 28,418
------- ------- -------
Net gain from operations...................... 201 160 265
Net realized capital losses................... 3,6 (873) (54) (132)
------- ------- -------
NET (LOSS) INCOME (672) 106 133
SURPLUS ADDITIONS (DEDUCTIONS)
Change in general account net unrealized capi-
tal gains.................................... 3 442 150 131
Change in investment valuation reserves....... 121 (306) (169)
Issuance of surplus notes..................... 10 700 -- 700
Other adjustments--net........................ 1,5 (331) (52) 594
------- ------- -------
NET CHANGE IN SURPLUS......................... 260 (102) 1,389
SURPLUS AT BEGINNING OF YEAR.................. 6,304 6,406 5,017
------- ------- -------
SURPLUS AT END OF YEAR........................ $ 6,564 $ 6,304 $ 6,406
======= ======= =======
See accompanying notes to financial statements.
61
METROPOLITAN LIFE INSURANCE COMPANY
STATEMENTS OF CASH FLOW
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 (IN MILLIONS)
[Download Table]
1995 1994 1993
---- ---- ----
CASH PROVIDED
Premiums, annuity considerations and deposit funds
received............................................ $19,662 $19,983 $19,599
Considerations for supplementary contracts and
dividend
accumulations received.............................. 3,051 2,948 1,748
Net investment income received....................... 7,579 6,828 6,931
Other income received................................ 166 80 134
------- ------- -------
Total receipts....................................... 30,458 29,839 28,412
------- ------- -------
Benefits paid (other than dividends)................. 23,939 22,387 20,092
Insurance expenses and taxes paid (excluding tax on
capital gains)...................................... 2,337 2,366 2,532
Net cash transfers to Separate Accounts.............. 692 524 3,304
Dividends paid to policyholders...................... 1,473 1,684 1,596
Other--net........................................... (1,872) 368 (1,051)
------- ------- -------
Total payments....................................... 26,569 27,329 26,473
------- ------- -------
Net cash from operations............................. 3,889 2,510 1,939
Proceeds from long-term investments sold, matured or
repaid after
deducting taxes on capital gains of $102 for 1995,
$60 for 1994
and $546 for 1993................................... 60,790 46,459 55,420
Issuance of surplus notes............................ 700 -- 700
Other cash provided.................................. 370 -- 369
------- ------- -------
Total cash provided.................................. 65,749 48,969 58,428
------- ------- -------
CASH APPLIED
Cost of long-term investments acquired............... 65,122 47,845 58,033
Other cash applied................................... 1,038 162 247
------- ------- -------
Total cash applied................................... 66,160 48,007 58,280
------- ------- -------
NET CHANGE IN CASH AND SHORT-TERM INVESTMENTS........ (411) 962 148
CASH AND SHORT-TERM INVESTMENTS:
BEGINNING OF YEAR.................................... 2,334 1,372 1,224
------- ------- -------
END OF YEAR.......................................... $ 1,923 $ 2,334 $ 1,372
======= ======= =======
See accompanying notes to financial statements.
62
METROPOLITAN LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
1. BUSINESS AND ACCOUNTING POLICIES
Metropolitan Life Insurance Company (the Company) principally provides life
insurance and annuity products and pension, pension-related and investment-
related services to individuals, corporations and other institutions. The
Company and its insurance subsidiaries also provide non-medical health,
disability and property and casualty insurance. Through its non-insurance
subsidiaries, the Company also offers investment management and advisory
services and commercial finance.
The Company's financial statements are prepared on the basis of accounting
practices prescribed or permitted by the Insurance Department of the State of
New York, which practices currently are considered to be generally accepted
accounting principles for mutual life insurance companies (see Note 12). The
primary interest of insurance regulatory authorities is the ability of the
Company to fulfill its obligations to policyholders; therefore, the financial
statements are oriented to the insured public. Significant accounting policies
applied in preparing the financial statements follow.
INVESTED ASSETS AND RELATED RESERVES
Bonds qualifying for amortization are stated at amortized cost; all other
bonds at prescribed values. Unaffiliated preferred stocks are stated
principally at cost; unaffiliated common stocks are carried at market value.
Mortgage loans are stated principally at their amortized indebtedness. Short-
term investments generally mature within one year and are carried at amortized
cost. Policy loans are stated at unpaid principal balances.
Investments in subsidiaries are stated at equity in net assets and are
included in stocks. Changes in net assets, excluding additional amounts
invested, are included in unrealized capital gains or losses. Dividends from
subsidiaries are reported by the Company as earnings in the year the dividends
are declared. The excess of the purchase price of non-insurance subsidiaries
over the fair values of the net assets acquired (goodwill) is amortized on a
straight-line basis.
Investment real estate, other than real estate joint ventures and
subsidiaries, is stated at depreciated cost net of non-recourse debt and an
allowance for losses on real estate expected to be disposed of in the near
term. Depreciation is generally calculated by the constant yield method for
real estate purchased prior to December 1990 and the straight-line method if
purchased thereafter. Real estate acquired in satisfaction of debt is valued
at the lower of cost or estimated fair value at date of foreclosure and is
subsequently stated at depreciated cost. Investments in real estate joint
ventures, included in other invested assets, and real estate subsidiaries,
included in stocks, are reported using the equity method and are generally
adjusted to reflect the constant yield method of depreciation for real estate
assets acquired by such entities prior to December 1990.
In 1994, the Company changed to the straight-line method of determining
depreciation on real estate acquired prior to December 1990 if the estimated
fair value of the real estate is less than ninety percent of depreciated cost.
This change had the effect of increasing depreciation expense by approximately
$80 million in 1994.
Investments in non-real estate partnerships are included in other invested
assets and are accounted for using the equity method. The carrying value
generally reflects the Company's share of unrealized gains and losses relating
to the market value of publicly traded common stocks held by the partnerships.
Impairments of individual investments that are considered to be other than
temporary are recognized when incurred.
Mandatory reserves have been established for general account investments in
accordance with guidelines prescribed by insurance regulatory authorities.
Such reserves consist of an Asset Valuation Reserve (AVR) for all invested
assets and an Interest Maintenance Reserve (IMR), which defers the recognition
of realized capital gains and losses (net of income tax) attributable to
interest rate fluctuations on fixed income investments over the estimated
remaining duration of the investments sold. Prior to 1994, the Company also
established voluntary investment valuation
63
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
reserves for certain general account investments. Changes to the AVR and
voluntary investment reserves are reported as direct additions to or
deductions from surplus. Transfers to the IMR are deducted from realized
capital gains; IMR amortization is included in net investment income.
Net realized capital gains or losses are presented net of federal capital
gains tax or benefit, respectively, and transfers to the IMR.
POLICY RESERVES
Reserves for permanent plans of individual life insurance sold after 1959,
universal life plans and certain term plans sold after 1982 are computed
principally on the Commissioners' Reserve Valuation Method. Reserves for other
life insurance policies are computed on the net level premium method. Reserves
for individual annuity contracts are computed on the net level premium method,
the net single premium method or the Commissioners' Annuity Reserve Valuation
Method, as appropriate. Reserves for group annuity contracts are computed on
the net single premium method. The reserves are based on mortality, morbidity
and interest rate assumptions prescribed by New York State Insurance Law. Such
reserves are sufficient to provide for contractual surrender values.
Periodically to reflect changes in circumstances, the Company may change the
assumptions, methodologies or procedures used to calculate reserves. During
1993, the Company and certain of its wholly-owned life insurance subsidiaries
made certain changes which increased the Company's surplus by $667 million
(substantially all of which related to interest rate changes).
INCOME AND EXPENSES
Premiums are recognized over the premium-paying period. Investment income is
reported as earned. Expenses, including policy acquisition costs and federal
income taxes, are charged to operations as incurred.
During 1995, the Company recorded a restructuring charge of $72 million
related primarily to the consolidation of office space leased for
administration and agency sales offices. The Company anticipates additional
restructuring charges over the next few years.
SEPARATE ACCOUNT OPERATIONS
Investments held in the Separate Accounts (stated at market value) and
liabilities of the Separate Accounts (including participant's corresponding
equity in the Separate Accounts) are reported separately as assets and
liabilities. The Separate Accounts' operating results are reflected in the
changes to these assets and liabilities.
ESTIMATES
The preparation of financial statements in conformity with accounting
practices prescribed or permitted by regulatory authorities and generally
accepted accounting principles requires that management make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period.
2. MERGER
During 1995, the Company and New England Mutual Life Insurance Company (The
New England) entered into a definitive agreement pursuant to which The New
England will be merged with and into the Company (the Merger) subject to
various conditions, including but not limited to, regulatory approvals and the
necessary approvals of the policyholders of the Company and The New England.
Upon consummation of the proposed Merger, the Company will be the surviving
company. It is currently anticipated that the Merger will occur during the
first half of 1996.
If the proposed Merger is consummated, the financial statements of the
Company and The New England will be combined to present the financial position
and results of operations of the combined entity. Summary unaudited pro forma
combined balance sheet information relating to the combined entity and summary
historical balance sheet information relating to The New England as of
December 31, 1995 and 1994 and summary unaudited pro forma
64
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
combined statement of operations information and summary historical statement
of operations information relating to The New England for the years ended
December 31, 1995, 1994, and 1993, are shown below (in millions):
[Download Table]
UNAUDITED THE NEW ENGLAND
------------------- ---------------
PRO FORMA COMBINED HISTORICAL
------------------- ---------------
1995 1994 1995 1994
--------- --------- ------- -------
AT DECEMBER 31:
Total assets............................... $ 157,773 $ 146,260 $16,261 $15,753
Investment valuation reserves.............. 2,012 1,987 429 362
Total surplus (including combined pro forma
surplus notes of $1,548 for 1995 and $848
for 1994 and The New England historical
surplus notes of $148 for 1995 and 1994).. 6,802 6,564 624 632
[Download Table]
UNAUDITED THE NEW ENGLAND
------------------------ --------------------
PRO FORMA COMBINED HISTORICAL
------------------------ --------------------
1995 1994 1993 1995 1994 1993
------- ------- ------- ------ ------ ------
FOR THE YEARS ENDED DECEMBER 31:
Total income..................... $33,668 $32,811 $31,533 $2,758 $2,844 $2,878
Dividends to policyholders....... 1,731 1,883 1,833 211 207 227
Net gain from operations......... 346 231 303 159 88 57
Net (loss) income................ (566) 124 70 60 42 89
Certain adjustments will be made to the Company's financial statements if
the Merger is consummated in order to conform the accounting policies and
practices reflected in the financial statements of the combined entities. The
unaudited pro forma combined amounts presented above include management's
estimate of the effects of such adjustments, related principally to
differences in accounting for real estate and mortgage loans, on summary
combined information as if the Merger had occurred on January 1, 1993. The
amount of the adjustments will be finalized upon consummation of the planned
Merger.
3. UNCONSOLIDATED SUBSIDIARIES AND OTHER AFFILIATES
The Company's subsidiary operations primarily include insurance, real estate
investment and brokerage activities, investment management and advisory
services, mortgage originations and servicing, and commercial finance. At
December 31, 1995 and 1994, subsidiary assets were $23,008 million and $21,476
million, respectively. At December 31, 1995 and 1994, subsidiary liabilities
were $20,393 million and $18,905 million, respectively. Subsidiary revenues
were $4,588 million, $4,715 million and $4,525 million in 1995, 1994 and 1993,
respectively. Dividends from subsidiaries amounted to $558 million, $186
million and $175 million in 1995, 1994 and 1993, respectively.
Unamortized goodwill was $129 million at December 31, 1994. There was no
unamortized goodwill at December 31, 1995.
The Company incurs charges on behalf of its subsidiaries which are
reimbursed pursuant to agreements for shared use of property, personnel and
facilities. Charges under such agreements were approximately $194 million,
$307 million and $355 million in 1995, 1994 and 1993, respectively.
The Company's net equity in joint ventures and other partnerships was $2,424
million and $2,250 million at December 31, 1995 and 1994, respectively. The
Company's share of income from such entities was $97 million, $26 million and
$76 million for 1995, 1994 and 1993, respectively.
Many of the Company's real estate joint ventures have loans with the
Company. The carrying values of such mortgages were $1,054 million and $1,372
million at December 31, 1995 and 1994, respectively. The Company had other
loans outstanding to its affiliates with carrying values of $2,599 million and
$2,073 million at December 31, 1995 and 1994, respectively.
65
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
In January 1995, the Company and The Travelers Insurance Company (Travelers)
contributed their respective group medical health care benefits businesses to
a corporate joint venture, The MetraHealth Companies, Inc. (MetraHealth). In
October 1995, the Company and Travelers sold their investments in MetraHealth
to a non-affiliated health care management services company. For its interest
in MetraHealth, a subsidiary of the Company received $485 million face amount
of shares of redeemable preferred stock of the purchaser, $276 million in cash
and rights to additional consideration based on the 1995 earnings of
MetraHealth. The transaction resulted in post-tax income of $443 million to
the Company, including an amount based on the 1995 estimated financial results
of MetraHealth. The Company also has the right to receive up to an additional
$169 million in cash for each of 1996 and 1997, based on the consolidated
financial results of the purchaser for each of such years.
During 1995, the Company sold Century 21 Real Estate Corporation (real
estate brokerage operation), Metmor Financial Inc. (mortgage banking) and
Metropolitan Trust Company of Canada (trust operation and mortgage
administration) for $127 million, $56 million and $41 million, respectively,
resulting in pre-tax realized capital losses of $167 million, $247 million and
$86 million, respectively. The sales also resulted in $452 million of
unrealized capital gains representing the reversal of prior period unrealized
capital losses relating to the subsidiaries.
4. INVESTMENTS
DEBT SECURITIES
The carrying value, gross unrealized gain (loss) and estimated fair value of
bonds and redeemable preferred stocks (debt securities), by category, as of
December 31, 1995 and 1994 are shown below
[Download Table]
GROSS
UNREALIZED ESTIMATED
CARRYING -------------- FAIR
VALUE GAIN (LOSS) VALUE
-------- ------ ------- ---------
(IN MILLIONS)
DECEMBER 31, 1995:
Bonds:
U.S. Treasury securities and obligations of
U.S. government corporations and agencies.. $12,871 $1,556 $ (2) $14,425
States and political subdivisions........... 1,865 582 (2) 2,445
Foreign governments......................... 1,871 221 -- 2,092
Corporate................................... 29,992 1,872 (105) 31,759
Mortgage-backed securities.................. 18,888 749 (27) 19,610
Other....................................... 5,468 336 (16) 5,788
------- ------ ------- -------
Total bonds................................. $70,955 $5,316 $ (152) $76,119
======= ====== ======= =======
Redeemable preferred stocks................. $ 39 $ -- $ (3) $ 36
======= ====== ======= =======
DECEMBER 31, 1994:
Bonds:
U. S. Treasury securities and obligations of
U.S. government corporations and agencies.. $ 9,807 $ 322 $ (546) $ 9,583
States and political subdivisions........... 1,483 69 (21) 1,531
Foreign governments......................... 1,931 26 (60) 1,897
Corporate................................... 31,262 291 (1,682) 29,871
Mortgage-backed securities.................. 17,485 251 (851) 16,885
Other....................................... 3,624 18 (215) 3,427
------- ------ ------- -------
Total bonds................................. $65,592 $ 977 $(3,375) $63,194
======= ====== ======= =======
Redeemable preferred stocks................. $ 44 $ -- $ (14) $ 30
======= ====== ======= =======
66
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The carrying value and estimated fair value of bonds, by contractual
maturity, at December 31, 1995 are shown below. Bonds not due at a single
maturity date have been included in the table in the year of final maturity.
Expected maturities may differ from contractual maturities because borrowers
may have the right to call or prepay obligations with or without prepayment
penalties.
[Download Table]
ESTIMATED
CARRYING FAIR
VALUE VALUE
-------- ---------
(IN MILLIONS)
Due in one year or less...................................... $ 2,171 $ 2,191
Due after one year through five years........................ 17,277 17,717
Due after five years through ten years....................... 17,188 18,381
Due after ten years.......................................... 15,431 18,220
------- -------
Subtotal..................................................... 52,067 56,509
Mortgage-backed securities................................... 18,888 19,610
------- -------
Total........................................................ $70,955 $76,119
======= =======
Proceeds from the sales of debt securities during 1995, 1994 and 1993 were
$50,831 million, $36,401 million and $50,395 million, respectively. During
1995, 1994 and 1993, respectively, gross gains of $814 million, $577 million
and $1,316 million, and gross losses of $352 million, $561 million and $96
million were realized on those sales. Realized investment gains and losses are
determined by specific identification.
MORTGAGE LOANS
Mortgage loans are collateralized by properties located throughout the
United States and Canada. Approximately 15 percent and 9 percent of the
properties are located in California and Illinois, respectively. Generally,
the Company (as the lender) requires that a minimum of one-fourth of the
purchase price of the underlying real estate be paid by the borrower.
As of December 31, 1995 and 1994, the mortgage loan investments were
categorized as follows:
[Download Table]
1995 1994
---- ----
Office Buildings............................................ 32% 36%
Retail...................................................... 18% 17%
Residential................................................. 20% 21%
Agricultural................................................ 20% 18%
Other....................................................... 10% 8%
--- ---
Total....................................................... 100% 100%
=== ===
FINANCIAL INSTRUMENTS
The Company has a securities lending program whereby large blocks of
securities are loaned to third parties, primarily major brokerage firms.
Company policy requires a minimum of 102 percent of the fair value of the
loaned securities to be separately maintained as collateral for the loans. The
collateral is recorded in memorandum records and not reflected in the
accompanying balance sheets. To further minimize the credit risks related to
this lending program, the Company regularly monitors the financial condition
of counterparties to these agreements.
During the normal course of business, the Company agrees with independent
parties to purchase or sell bonds over fixed or variable periods of time. The
off-balance sheet risks related to changes in the quality of the underlying
bonds are mitigated by the fact that commitment periods are generally short in
duration and provisions in the agreements release the Company from its
commitments in case of significant changes in the financial condition of the
independent party or the issuer of the bond.
67
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The Company engages in a variety of derivative transactions with respect to
the general account. Those derivatives, such as forwards, futures, options,
foreign exchange agreements and swaps, which do not themselves generate
interest or dividend income, are acquired or sold in order to hedge or reduce
risks applicable to assets held, or expected to be purchased or sold, and
liabilities incurred or expected to be incurred. The Company does not engage
in trading of these derivatives.
In 1995 and 1994, the Company engaged in three primary derivatives
strategies. The Company entered into a number of anticipatory hedges using
forwards to limit the interest rate exposures of investments in debt
securities expected to be acquired within one year. The Company also hedged a
number of investments in debt securities denominated in foreign currencies by
executing swaps and forwards to ensure a United States dollar rate of return.
In addition, the Company purchased a limited number of interest rate caps to
hedge against rising interest rates on a portfolio of assets which the Company
purchased to match the liabilities it incurred.
Income and expenses related to derivatives used to hedge or manage risks are
recorded on the accrual basis as an adjustment to the yield of the related
securities over the periods covered by the derivative contracts. Gains and
losses relating to early terminations of interest rate swaps used to hedge or
manage interest rate risk are deferred and amortized over the remaining period
originally covered by the swap. Gains and losses relating to derivatives used
to hedge the risks associated with anticipated transactions are deferred and
utilized to adjust the basis of the transaction once it has closed. If it is
determined that the transaction will not close, such gains and losses are
included in realized capital gains and losses.
ASSETS ON DEPOSIT
As of December 31, 1995 and 1994, the Company had assets on deposit with
regulatory agencies of $5,281 million and $5,145 million, respectively.
5. REINSURANCE AND OTHER INSURANCE TRANSACTIONS
In the normal course of business, the Company assumes and cedes reinsurance
with other insurance companies.
The Company acquired, in part through reinsurance effective in January 1995,
the group life, dental, disability, accidental death and dismemberment, vision
and long-term care insurance businesses from Travelers and certain of its
subsidiaries for $403 million. Commissions of $142 million and $4 million were
charged to earnings during 1995 and 1994, respectively, and considerations in
excess of commissions of $208 million and $49 million were recorded as a
direct charge to surplus in 1995 and 1994, respectively. In January, 1995, the
Company received assets with a fair market value equal to the $1,565 million
of liabilities assumed under the reinsurance agreements. The reinsured
businesses convert to Company contracts at policy anniversary date.
During 1995, the Company entered into reinsurance agreements with
MetraHealth to facilitate the transfer of certain of its group medical health
care business to MetraHealth.
The Company also has reinsurance agreements with certain of its life
insurance subsidiaries. Reserves for insurance assumed pursuant to these
agreements are included in reserves for life and health insurance and
annuities and amounted to $2,143 million and $1,193 million at December 31,
1995 and 1994, respectively.
In 1993, the Company assumed $1,540 million of life insurance and annuity
reserves of a New York life insurance company under rehabilitation and
received assets having a fair value equal to the reserves assumed.
The financial statements are shown net of ceded reinsurance. The amounts
related to reinsurance agreements, including agreements described above but
excluding certain agreements with non-affiliates for which the Company
provides administrative services, are as follows:
[Download Table]
1995 1994 1993
---- ---- ----
(IN MILLIONS)
Reinsurance premiums assumed.............................. $890 $237 $264
Reinsurance ceded:
Premiums................................................ 457 77 86
Other income............................................ 26 1 3
Reduction in insurance liabilities (at December 31)..... 71 31 28
68
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
A contingent liability exists with respect to reinsurance ceded should the
reinsurers be unable to meet their obligations.
Activity in the liability for unpaid group accident and health policy and
contract claims is summarized as follows:
[Download Table]
1995 1994 1993
------ ------ ------
(IN MILLIONS)
Balance at January 1............................. $1,708 $1,588 $1,517
Less reinsurance recoverables.................. 1 1 1
------ ------ ------
Net balance at January 1......................... 1,707 1,587 1,516
------ ------ ------
Incurred related to:
Current year................................... 2,424 1,780 1,797
Prior years.................................... (23) (7) (40)
------ ------ ------
Total incurred................................... 2,401 1,773 1,757
------ ------ ------
Paid related to:
Current year................................... 1,464 1,260 1,306
Prior years.................................... 417 393 380
------ ------ ------
Total paid....................................... 1,881 1,653 1,686
------ ------ ------
Net balance at December 31....................... 2,227 1,707 1,587
Plus reinsurance recoverables.................. 93 1 1
------ ------ ------
Balance at December 31........................... $2,320 $1,708 $1,588
====== ====== ======
6. FEDERAL INCOME TAXES
The Company's federal income tax return is consolidated with certain
affiliates. The consolidating companies have executed a tax allocation
agreement. Under this agreement, the federal income tax provision is computed
on a separate return basis. Members receive reimbursement to the extent that
their losses and other credits result in a reduction of the current year's
consolidated tax liability.
Federal income tax expense has been calculated in accordance with the
provisions of the Internal Revenue Code, as amended (the Code). Under the
Code, the amount of federal income tax expense includes a tax on the Company's
surplus calculated by a prescribed formula that incorporates a differential
earnings rate between stock and mutual life insurance companies. In 1995, the
Company changed its calculation of surplus tax which resulted in an increase
in 1995 federal income tax expense of $95 million. Had such change occurred
prior to 1993, the Company's insurance expenses and taxes (excluding tax on
capital gains) and net loss for the year ended December 31, 1995 would have
been $2,758 million and $270 million, respectively; the Company's surplus,
insurance expenses and taxes (excluding tax on capital gains) and net loss at
and for the year ended December 31, 1994 would have been $5,902 million,
$2,894 million and $296 million, respectively; and the Company's insurance
expenses and taxes (excluding tax on capital gains) and net income for the
year ended December 31, 1993 would have been $2,702 million and $26 million,
respectively. The change would have had no effect on December 31, 1993 surplus
and surplus at December 31, 1992 would have been $5,124 million.
Total federal income taxes on operations and realized capital gains of $479
million, $192 million and $596 million were incurred in 1995, 1994 and 1993,
respectively.
7. EMPLOYEE BENEFIT PLANS
PENSION PLANS
The Company has defined benefit pension plans covering all eligible
employees and sales representatives of the Company and certain of its
subsidiaries. The Company is both the sponsor and administrator of these
plans. Retirement benefits are based on years of credited service and final
average earnings' history. The Company's funding policy is to make the minimum
contribution required by the Employee Retirement Income Security Act of 1974.
69
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Components of the net periodic pension (credit) cost for the years ended
December 31, 1995, 1994 and 1993 for the defined benefit qualified and non-
qualified pension plans are as follows:
[Download Table]
1995 1994 1993
----- ----- -----
(IN MILLIONS)
Service cost....................................... $ 58 $ 88 $ 71
Interest cost on projected benefit obligation...... 215 209 191
Return on assets................................... (262) 15 (380)
Net amortization and deferrals..................... (33) (298) 110
----- ----- -----
Net periodic pension (credit) cost................. $ (22) $ 14 $ (8)
===== ===== =====
The assumed long-term rate of return on assets used in determining the net
periodic pension (credit) cost was 9.5 percent in 1995 and 8.5 percent in 1994
and 1993. The Company is recognizing the unrecognized net asset at transition,
attributable to the adoption of Statement of Financial Accounting Standards
No. 87, Employers' Accounting for Pensions, in 1993, over the average
remaining service period at the transition date of employees expected to
receive benefits under the pension plans.
The funded status of the qualified and non-qualified defined benefit pension
plans and a comparison of the accumulated benefit obligation, plan assets and
projected benefit obligation at December 31, 1995 and 1994 are as follows:
[Download Table]
1995 1994
------- -------
(IN MILLIONS)
Actuarial present value of obligations:
Vested..................................................... $(2,724) $(2,266)
Non vested................................................. (43) (47)
------- -------
Accumulated benefit obligation............................... $(2,767) $(2,313)
======= =======
Projected benefit obligation................................. $(3,094) $(2,676)
Plan assets at contract value................................ 3,286 2,900
------- -------
Plan assets in excess of projected benefit obligation........ 192 224
Unrecognized prior service cost.............................. 73 92
Unrecognized net loss from past experience different from
that assumed................................................ 79 33
Unrecognized net asset at transition......................... (326) (365)
------- -------
Adjustment required to recognize minimum liability........... (19) --
======= =======
Accrued pension cost at December 31.......................... $ (1) $ (16)
======= =======
The weighted average discount rate used in determining the actuarial present
value of the projected benefit obligation was 7.25 percent for 1995, 8.5
percent for 1994 and 7.5 percent for 1993 in the United States and 8.0 percent
for 1995, 7.25 percent for 1994 and 7.0 percent for 1993 in Canada. The
weighted average assumed rate of increase in future compensation levels was
4.5 percent in 1995 and 5.0 percent in 1994 and 1993. In addition, several
other factors, such as expected retirement dates and mortality, enter into the
determination of the actuarial present value of the accumulated benefit
obligation.
The pension plans' assets are principally investment contracts issued by the
Company.
During 1995, the Company recognized a pension plan curtailment gain before
income tax of $8 million. This gain relates to the transfer of Company group
medical health care business personnel to MetraHealth.
SAVINGS AND INVESTMENT PLAN
The Company sponsors a savings and investment plan available for
substantially all employees under which the Company matches a portion of
employee contributions. During 1995, 1994 and 1993, the Company contributed
$34 million, $42 million and $48 million, respectively, to the plan.
70
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
OTHER POSTRETIREMENT BENEFITS
The Company also provides certain postretirement health care and life
insurance benefits for retired employees through insurance contracts.
Substantially all of the Company's employees may, in accordance with the plans
applicable to such benefits, become eligible for these benefits if they attain
retirement age, with sufficient service, while working for the Company.
The costs of non-pension postretirement benefits are recognized on an
accrual basis in accordance with guidelines prescribed by insurance regulatory
authorities. Such guidelines require the recognition of a postretirement
benefit obligation for current retirees and fully eligible or vested
employees. As prescribed by the guidelines, the Company has elected to
recognize over a period of twenty years the unrecognized postretirement
benefit asset and obligation (net asset and obligation at transition) in
existence on January 1, 1993 (effective date of guidelines).
The following table sets forth the postretirement health care and life
insurance plans' combined status reconciled with the amounts included in the
Company's balance sheets at December 31, 1995 and 1994:
[Download Table]
1995 1994
---------------------- ----------------------
OVERFUNDED UNDERFUNDED OVERFUNDED UNDERFUNDED
---------- ----------- ---------- -----------
(IN MILLIONS)
Accumulated postretirement
benefit obligations of retirees
and fully eligible
participants................... $(295) $(776) $(262) $(787)
Plan assets (Company insurance 397 411 393 358
contracts) at contract value... ----- ----- ----- -----
Plan assets in excess of (less
than) accumulated
postretirement benefit
obligation..................... 102 (365) 131 (429)
Unrecognized net loss (gain)
from past experience different
from that assumed and from
changes in assumptions......... 53 (83) (6) (44)
Prior service cost not yet
recognized in net periodic
retirement benefit cost........ (5) -- (5) --
Unrecognized (asset) obligation (102) 438 (108) 464
at transition.................. ----- ----- ----- -----
Prepaid (Accrued) non-pension
postretirement benefit cost at $ 48 $ (10) $ 12 $ (9)
December 31.................... ===== ===== ===== =====
The components of the net periodic non-pension postretirement benefit cost
for the years ended December 31, 1995, 1994 and 1993 are as follows:
[Download Table]
1995 1994 1993
---- ---- ----
(IN MILLIONS)
Service cost.......................................... $ 26 $ 31 $ 32
Interest cost on accumulated postretirement benefit
obligation........................................... 74 76 87
Return on plan assets (Company insurance contracts)... (61) (37) (36)
Amortization of transition asset and obligation....... 18 18 20
Net amortization and deferrals........................ (4) (10) (17)
---- ---- ----
Net periodic non-pension postretirement benefit cost.. $ 53 $ 78 $ 86
==== ==== ====
The assumed health care cost trend rate used in measuring the accumulated
non-pension postretirement benefit obligation was 10.0 percent in 1995, 11.0
percent in 1994 and 12.0 percent in 1993, gradually decreasing to 5.25
percent, 6.5 percent and 5.5 percent, respectively, over twelve years. The
weighted average discount rate used in determining the accumulated
postretirement benefit obligation was 7.25 percent, 8.5 percent, and 7.5
percent at December 31, 1995, 1994 and 1993, respectively.
If the health care cost trend rate assumptions were increased 1.0 percent,
the accumulated postretirement benefit obligation as of December 31, 1995,
1994 and 1993 would be increased 9.0 percent, 7.1 percent, and 7.2 percent
respectively. The effect of this change on the sum of the service and interest
cost components of the net periodic postretirement benefit cost for the years
ended December 31, 1995, 1994 and 1993 would be an increase of 11.0 percent,
7.9 percent and 7.8 percent, respectively.
71
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
8. LEASES
LEASE INCOME
During 1995, 1994 and 1993, the Company received $1,742 million, $1,786
million and $1,482 million, respectively, in lease income related to its
investment real estate. In accordance with standard industry practice, certain
of the Company's lease agreements with retail tenants result in income that is
contingent on the level of the tenants' sales revenues.
LEASE EXPENSE
The Company has entered into various lease agreements for office space, data
processing and other equipment. Rental expense under such leases was $171
million, $193 million and $214 million for the years ended December 31, 1995,
1994 and 1993, respectively. Future gross minimum rental payments under non-
cancelable leases, including those leases for which the Company recorded a
restructuring charge in 1995, are as follows (in millions):
[Download Table]
YEAR ENDING DECEMBER 31,
1996............................................. $107
1997............................................. 82
1998............................................. 66
1999............................................. 48
2000............................................. 32
Thereafter....................................... 53
----
Total.......................................... $388
====
9. OTHER COMMITMENTS AND CONTINGENCIES
GUARANTEES
The Company has entered into certain arrangements in the course of its
business which, under certain circumstances, may impose significant financial
obligations on the Company. The Company has entered into a support agreement
with a subsidiary whereby the Company has agreed to maintain the subsidiary's
net worth at one dollar or more. At December 31, 1995, the subsidiary's
assets, which consist principally of loans to affiliates, amounted to $3,309
million and its net worth amounted to $11 million.
In addition, the Company has entered into arrangements with certain of its
subsidiaries and affiliates to assist such subsidiaries and affiliates in
meeting various jurisdictions' regulatory requirements regarding capital and
surplus. The Company has also entered into a support arrangement with respect
to the reinsurance obligations of a subsidiary.
No material payments have been made under these arrangements and it is the
opinion of management that any payments required pursuant to these
arrangements would not likely have a material adverse effect on the Company's
financial position.
LITIGATION
In 1994, the Company entered into consent agreements (involving the payment
of fines and policyholder restitution payments) with state authorities,
including the insurance departments of all states, arising out of regulatory
proceedings and investigations relating to alleged improper practices in the
sale of individual life insurance. Litigation relating to the Company's
individual life insurance sales practices (including individual actions and
purported class actions) has also been instituted by or on behalf of
policyholders and others, and additional litigation relating to the Company's
sales practices may be commenced in the future. In addition, an investigation
by the Office of the United States Attorney for the Middle District of
Florida, in conjunction with a grand jury, into certain of the sales practices
that were the focus of the state investigations is ongoing. Various
litigation, claims and assessments against the Company, in addition to the
aforementioned, have arisen in the course of the Company's business,
operations and activities.
In certain of the matters referred to above, including actions with multiple
plaintiffs, very large and/or indeterminate amounts, including punitive and
treble damages, are sought. While it is not feasible to predict or determine
the ultimate outcome of all pending investigations and legal proceedings or to
make a meaningful estimate of the amount or range
72
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
of loss that could result from an unfavorable outcome in all such matters, it
is the opinion of the Company's management that their outcome, after
consideration of the provisions made in the Company's financial statements, is
not likely to have a material adverse effect on the Company's financial
position.
10. SURPLUS NOTES
The carrying values of surplus notes at December 31, 1995 and 1994 are shown
below:
[Download Table]
1995 1994
------- ------
(IN MILLIONS)
6.30% surplus notes scheduled to mature on November 1,
2003..................................................... $ 400 $ 400
7.00% surplus notes scheduled to mature on November 1,
2005..................................................... 250 --
7.70% surplus notes scheduled to mature on November 1,
2015..................................................... 200 --
7.45% surplus notes scheduled to mature on November 1,
2023..................................................... 300 300
7.80% surplus notes scheduled to mature on November 1, 250 --
2025..................................................... ------- -----
Total................................................... $ 1,400 $ 700
======= =====
Interest on the Company's surplus notes is scheduled to be paid semi-
annually; principal payments are scheduled to be paid upon maturity. Such
payments of interest and principal may be made only with the prior approval of
the Superintendent of Insurance of the State of New York (Superintendent).
Subject to the prior approval of the Superintendent, the 7.45 percent
surplus notes may be redeemed, as a whole or in part, at the election of the
Company at any time on or after November 1, 2003. During 1995 and 1994, the
Company obtained Superintendent approval for and made total interest payments
of $48 million on the surplus notes.
11. FAIR VALUE INFORMATION
The estimated fair value amounts of financial instruments presented below
have been determined by the Company using market information available as of
December 31, 1995 and 1994 and appropriate valuation methodologies. However,
considerable judgment is necessarily required to interpret market data to
develop the estimates of fair value for financial instruments for which there
are no available market value quotations.
The estimates presented below are not necessarily indicative of the amounts
the Company could have realized in a market exchange. The use of different
market assumptions and/or estimation methodologies may have a material effect
on the estimated fair value amounts.
[Download Table]
NOTIONAL CARRYING ESTIMATED
AMOUNT VALUE FAIR VALUE
-------- -------- ----------
(IN MILLIONS)
DECEMBER 31, 1995:
ASSETS
Bonds........................................... $70,955 $76,119
Stocks, including subsidiaries.................. 3,646 3,608
Mortgage loans.................................. 14,211 14,818
Policy loans.................................... 3,956 4,023
Cash and short-term investments................. 1,923 1,923
LIABILITIES
Investment contracts included in:
Reserves for life and health insurance and an-
nuities....................................... 18,137 18,211
Policy proceeds and dividends left with the
Company....................................... 4,482 4,488
Premium deposit funds.......................... 12,891 13,322
OTHER FINANCIAL INSTRUMENTS
Bond purchase agreements........................ $ 601 3.3
Bond sales agreements........................... 80 (0.5)
Interest rate swaps............................. 280 1.5
Interest rate caps.............................. 231 --
Foreign currency swaps.......................... 89 4.4
Foreign currency forwards....................... 10 --
Covered call options............................ 25 (1.9) 1.9
Futures contracts............................... 1,402 (19.5) --
Unused lines of credit.......................... 1,600 1.1
73
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
[Download Table]
NOTIONAL CARRYING ESTIMATED
AMOUNT VALUE FAIR VALUE
-------- -------- ----------
(IN MILLIONS)
DECEMBER 31, 1994:
ASSETS
Bonds........................................... $65,592 $63,194
Stocks, including subsidiaries.................. 3,672 3,660
Mortgage loans.................................. 14,524 14,269
Policy loans.................................... 3,964 3,645
Cash and short-term investments................. 2,334 2,334
LIABILITIES
Investment contracts included in:
Reserves for life and health insurance and an-
nuities....................................... 16,354 16,370
Policy proceeds and dividends left with the
Company....................................... 3,534 3,519
Premium deposit funds.......................... 14,006 13,997
OTHER FINANCIAL INSTRUMENTS
Bond purchase agreements........................ $2,755 4.1
Bond sales agreements........................... 1,450 0.8
Interest rate swaps............................. 272 (7.1)
Interest rate caps.............................. 185 (0.1)
Foreign currency swaps.......................... 36 (0.4)
Foreign currency forwards....................... 4 (0.2) (0.1)
Covered call options............................ 25 (1.9) 1.9
Unused lines of credit.......................... 1,450 1.0
For bonds that are publicly traded, estimated fair value was obtained from
an independent market pricing service. Publicly traded bonds represented
approximately 78 percent of the carrying value and estimated fair value of the
total bonds as of December 31, 1995 and 77 percent of the carrying value and
estimated fair value of the total bonds as of December 31, 1994. For all other
bonds, estimated fair value was determined by management, based on interest
rates, maturity, credit quality and average life. Included in bonds are loaned
securities with estimated fair values of $8,148 million and $5,154 million at
December 31, 1995 and 1994, respectively. Estimated fair values of stocks were
generally based on quoted market prices, except for investments in common
stock of subsidiaries which are based on equity in net assets of the
subsidiaries. Estimated fair values of mortgage loans were generally based on
discounted projected cash flows using interest rates offered for loans to
borrowers with comparable credit ratings and for the same maturities.
Estimated fair values of policy loans were based on discounted projected cash
flows using U.S. Treasury rates to approximate interest rates and Company
experience to project patterns of loan repayment. For cash and short-term
investments, the carrying amount is a reasonable estimate of fair value.
Included in reserves for life and health insurance and annuities, policy
proceeds and dividends left with the Company and premium deposit funds are
amounts classified as investment contracts representing policies or contracts
that do not incorporate significant insurance risk. The fair values for these
liabilities are estimated using discounted projected cash flows, based on
interest rates being offered for similar contracts with maturities consistent
with those remaining for the contracts being valued. Policy proceeds and
dividends left with the Company also include other liabilities without defined
durations. The estimated fair value of such liabilities, which generally are
of short duration or have periodic adjustments of interest rates, approximates
their carrying value.
Estimated fair values of bond purchase/sale agreements were based on fees
charged to enter into similar arrangements or on the estimated cost to
terminate the outstanding agreements. For interest rate and foreign currency
swaps, interest rate caps, interest rate futures, foreign currency forwards,
futures contracts and covered call options, estimated fair value is the amount
at which the contracts could be settled based on estimates obtained from
dealers. The Company had unused lines of credit under agreements with various
banks. The estimated fair values of unused lines of credit were based on fees
charged to enter into similar agreements.
12. GENERALLY ACCEPTED ACCOUNTING PRINCIPLES FOR MUTUAL LIFE INSURANCE
COMPANIES
The Company, as a mutual life insurance company, prepares its financial
statements in conformity with accounting practices prescribed or permitted by
the Insurance Department of the State of New York (statutory financial
statements)
74
NOTES TO FINANCIAL STATEMENTS--(CONCLUDED)
which currently are considered to be generally accepted accounting principles
(GAAP) for mutual life insurance companies. However, the Financial Accounting
Standards Board (FASB) has issued certain pronouncements effective for 1996
annual financial statements and thereafter. Such pronouncements will no longer
allow statutory financial statements to be described as being prepared in
conformity with GAAP. Upon the effective date of the pronouncements, in order
for their financial statements to be described as being prepared in conformity
with GAAP, mutual life insurance companies will be required to adopt all
applicable accounting principles promulgated by the FASB in any general
purpose financial statements that they may issue. If permitted by insurance
regulatory authorities, the Company will issue 1996 general purpose financial
statements reflecting the adoption of all applicable GAAP pronouncements.
However, the Company has not finalized the quantification of the effects of
the application of the pronouncements on its financial statements.
75
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Metropolitan Life Insurance Company:
We have audited the accompanying statements of assets and liabilities of the
Growth, Income, Money Market, Diversified, International Stock, Stock Index,
and Aggressive Growth Divisions of Metropolitan Life Separate Account UL (the
"Separate Account") as of December 31, 1995, and the related statements of
operations for the year then ended and of changes in net assets for each of
the two years in the period then ended. These financial statements are the
responsibility of the Separate Account's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of December 31, 1995,
by correspondence with the custodian and the depositor of the Separate
Account. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the net assets of the Growth, Income, Money Market, Diversified,
International Stock, Stock Index and Aggressive Growth Divisions of
Metropolitan Life Separate Account UL as of December 31, 1995 and the results
of their operations for the year ended and the changes in their net assets for
each of the two years in the period then ended, in conformity with generally
accepted accounting principles.
DELOITTE & TOUCHE LLP
New York, New York
February 19, 1996
76
METROPOLITAN LIFE SEPARATE ACCOUNT UL
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
[Enlarge/Download Table]
MONEY INTERNATIONAL STOCK AGGRESSIVE
GROWTH INCOME MARKET DIVERSIFIED STOCK INDEX GROWTH
DIVISION DIVISION DIVISION DIVISION DIVISION DIVISION DIVISION
------------ ----------- ---------- ----------- ------------- ----------- -----------
ASSETS:
Investments in Metropol-
itan Series Fund, Inc.
at Value (Note 1A):
Growth Portfolio
(4,099,345 shares; cost
$96,789,176)........... $112,977,954 -- -- -- -- -- --
Income Portfolio
(1,760,947 shares; cost
$22,143,191)........... -- $22,416,853 -- -- -- -- --
Money Market Portfolio
(282,752 shares; cost
$3,047,618)............ -- -- $2,954,758 -- -- -- --
Diversified Portfolio
(5,310,254 shares; cost
$77,330,732)........... -- -- -- $84,698,553 -- -- --
International Stock
Portfolio
(1,414,995 shares; cost
$17,940,365)........... -- -- -- -- $17,390,288 -- --
Stock Index Portfolio
(725,046 shares; cost
$11,289,160)........... -- -- -- -- -- $13,456,861 --
Aggressive Growth Port-
folio
(2,111,288 shares; cost
$50,602,535)........... -- -- -- -- -- -- $54,619,026
------------ ----------- ---------- ----------- ----------- ----------- -----------
Total Investments...... 112,977,954 22,416,853 2,954,758 84,698,553 17,390,288 13,456,861 54,619,026
Cash and Accounts Re-
ceivable............... -- -- 20,391 -- -- -- --
------------ ----------- ---------- ----------- ----------- ----------- -----------
Total Assets........... 112,977,954 22,416,853 2,975,149 84,698,553 17,390,288 13,456,861 54,619,026
LIABILITIES............. 537,332 105,382 409 517,812 94,151 31,091 287,229
------------ ----------- ---------- ----------- ----------- ----------- -----------
NET ASSETS.............. $112,440,622 $22,311,471 $2,974,740 $84,180,741 $17,296,137 $13,425,770 $54,331,797
============ =========== ========== =========== =========== =========== ===========
See Notes to Financial Statements.
77
METROPOLITAN LIFE SEPARATE ACCOUNT UL
STATEMENTS OF OPERATIONS
[Enlarge/Download Table]
FOR THE YEAR ENDED DECEMBER 31, 1995
--------------------------------------------------------------------------------
MONEY INTERNATIONAL STOCK AGGRESSIVE
GROWTH INCOME MARKET DIVERSIFIED STOCK INDEX GROWTH
DIVISION DIVISION DIVISION DIVISION DIVISION DIVISION DIVISION
----------- ---------- -------- ----------- ------------- ---------- ----------
INVESTMENT INCOME:
Income:
Dividends (Note 2)..... $ 5,497,071 $1,312,997 $161,198 $ 5,314,778 $152,268 $ 290,369 $5,091,762
Expenses:
Mortality and expense
charges (Note 3)...... 802,240 165,666 32,690 619,298 124,852 76,564 365,214
----------- ---------- -------- ----------- -------- ---------- ----------
Net investment income... 4,694,831 1,147,331 128,508 4,695,480 27,416 213,805 4,726,548
----------- ---------- -------- ----------- -------- ---------- ----------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVEST-
MENTS:
Net realized gain (loss)
from security transac-
tions.................. 293,233 (8,290) 35,201 248,523 28,349 29,512 152,387
Change in unrealized ap-
preciation of invest-
ments.................. 19,543,807 1,977,261 4,641 10,898,818 136,578 2,271,366 4,188,117
----------- ---------- -------- ----------- -------- ---------- ----------
Net realized and
unrealized gain on in-
vestments (Note 1B).... 19,837,040 1,968,971 39,842 11,147,341 164,927 2,300,878 4,340,504
----------- ---------- -------- ----------- -------- ---------- ----------
NET INCREASE IN NET AS-
SETS RESULTING FROM OP-
ERATIONS............... $24,531,871 $3,116,302 $168,350 $15,842,821 $192,343 $2,514,683 $9,067,052
=========== ========== ======== =========== ======== ========== ==========
See Notes to Financial Statements.
78
METROPOLITAN LIFE SEPARATE ACCOUNT UL
STATEMENTS OF CHANGES IN NET ASSETS
[Enlarge/Download Table]
GROWTH INCOME MONEY MARKET
DIVISION DIVISION DIVISION
-------------------------- ------------------------ ------------------------
FOR THE YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------------------------
1995 1994 1995 1994 1995 1994
------------ ------------ ----------- ----------- ----------- -----------
INCREASE (DECREASE) IN
NET ASSETS:
From operations:
Net investment income
(loss)................ $ 4,694,831 $ 1,529,435 $ 1,147,331 $ 971,668 $ 128,508 $ 130,231
Net realized gain
(loss) from security
transactions.......... 293,233 53,162 (8,290) (9,894) 35,201 (79,321)
Unrealized appreciation
(depreciation) of
investments........... 19,543,807 (4,282,800) 1,977,261 (1,415,108) 4,641 36,172
------------ ------------ ----------- ----------- ----------- -----------
Net increase (decrease)
in net assets resulting
from operations........ 24,531,871 (2,700,203) 3,116,302 (453,334) 168,350 87,082
------------ ------------ ----------- ----------- ----------- -----------
From capital
transactions:
Net premiums........... 41,455,659 45,546,952 8,687,776 10,328,856 2,988,786 6,425,154
Net portfolio
transfers............. (4,142,623) (2,746,223) (1,257,339) 48,939 (3,815,269) (6,647,524)
Other net transfers.... (17,287,875) (16,398,757) (3,439,203) (3,317,903) (661,810) (703,798)
Substitutions (Note
4).................... -- -- -- -- -- --
------------ ------------ ----------- ----------- ----------- -----------
Net increase (decrease)
in net assets resulting
from capital
transactions........... 20,025,161 26,401,972 3,991,234 7,059,892 (1,488,293) (926,168)
------------ ------------ ----------- ----------- ----------- -----------
NET CHANGE IN NET
ASSETS................. 44,557,032 23,701,769 7,107,536 6,606,558 (1,319,943) (839,086)
NET ASSETS--BEGINNING OF
YEAR................... 67,883,590 44,181,821 15,203,935 8,597,377 4,294,683 5,133,769
------------ ------------ ----------- ----------- ----------- -----------
NET ASSETS--END OF
YEAR................... $112,440,622 $ 67,883,590 $22,311,471 $15,203,935 $ 2,974,740 $ 4,294,683
============ ============ =========== =========== =========== ===========
See Notes to Financial Statements.
79
[Enlarge/Download Table]
DIVERSIFIED INTERNATIONAL STOCK STOCK INDEX AGGRESSIVE GROWTH
DIVISION DIVISION DIVISION DIVISION
--------------------------- ------------------------ ------------------------ --------------------------
FOR THE YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------------------------------------------------
1995 1994 1995 1994 1995 1994 1995 1994
------------ ------------ ----------- ----------- ----------- ----------- ------------ ------------
$ 4,695,480 $ 1,734,612 $ 27,416 $ 485,015 $ 213,805 $ 132,182 $ 4,726,548 $ (98,251)
248,523 22,275 28,349 80,235 29,512 5,039 152,387 5,076
10,898,818 (3,636,719) 136,578 (842,359) 2,271,366 (129,802) 4,188,117 (100,707)
------------ ------------ ----------- ----------- ----------- ----------- ------------ ------------
15,842,821 (1,879,832) 192,343 (277,109) 2,514,683 7,419 9,067,052 (193,882)
------------ ------------ ----------- ----------- ----------- ----------- ------------ ------------
31,888,789 41,263,327 12,024,423 11,498,165 7,870,004 4,316,325 32,859,273 28,325,697
(5,102,550) (4,980,679) (1,502,438) 1,014,621 876,498 (301,802) (190,487) (15,434)
(13,529,725) (14,095,050) (4,797,949) (3,556,411) (2,682,256) (1,454,580) (12,996,305) (10,302,089)
-- 2,235,074 -- -- -- -- -- --
------------ ------------ ----------- ----------- ----------- ----------- ------------ ------------
13,256,514 24,422,672 5,724,036 8,956,375 6,064,246 2,559,943 19,672,481 18,008,174
------------ ------------ ----------- ----------- ----------- ----------- ------------ ------------
29,099,335 22,542,840 5,916,379 8,679,266 8,578,929 2,567,362 28,739,533 17,814,292
55,081,406 32,538,566 11,379,758 2,700,492 4,846,841 2,279,479 25,592,264 7,777,972
------------ ------------ ----------- ----------- ----------- ----------- ------------ ------------
$ 84,180,741 $ 55,081,406 $17,296,137 $11,379,758 $13,425,770 $ 4,846,841 $ 54,331,797 $ 25,592,264
============ ============ =========== =========== =========== =========== ============ ============
80
METROPOLITAN LIFE SEPARATE ACCOUNT UL
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
Metropolitan Life Separate Account UL (the "Separate Account") is a multi-
division unit investment trust registered under the Investment Company Act of
1940 and presently consists of seven investment divisions used to support
variable universal life insurance policies. The assets in each division are
invested in shares of the corresponding portfolio of the Metropolitan Series
Fund, Inc. (the "Fund"). Each portfolio has varying investment objectives
relative to growth of capital and income.
The Separate Account was formed by Metropolitan Life Insurance Company
("Metropolitan Life") on December 13, 1988, and registered as a unit investment
trust on January 5, 1990. The assets of the Separate Account are the property
of Metropolitan Life.
A summary of significant accounting policies, all of which are in accordance
with generally accepted accounting principles, is set forth below:
1. SIGNIFICANT ACCOUNTING POLICIES
A. VALUATION OF INVESTMENTS
Investments in shares of the Fund are valued at the reported net asset
values of the respective portfolios. A summary of investments of the
seven designated portfolios of the Fund in which the seven investment
divisions of the Separate Account invest as of December 31, 1995 is
included as Note 5. The methods used to value the Fund's investments at
December 31, 1995 are described in Note 1A of the Fund's 1994 Annual
Report.
B.SECURITY TRANSACTIONS
Purchases and sales are recorded on the trade date. Realized gains and
losses on sales of investments are determined on the basis of identified
cost.
C.FEDERAL INCOME TAXES
In the opinion of counsel of Metropolitan Life, the Separate Account will
be treated as a part of Metropolitan Life and its operations, and the
Separate Account will not be taxed separately as a "regulated investment
company" under existing law. Metropolitan Life is taxed as a life
insurance company. The policies permit Metropolitan Life to charge
against the Separate Account any taxes, or reserves for taxes,
attributable to the maintenance or operation of the Separate Account.
Metropolitan Life is not currently charging any federal income taxes
against the Separate Account arising from the earnings or realized
capital gains attributable to the Separate Account. Such charges may be
imposed in future years depending on market fluctuations and transactions
involving the Separate Account.
D. NET PREMIUMS
Metropolitan Life deducts a sales load and a state premium tax charge from
premiums before amounts are allocated to the Separate Account. In the case
of certain of the policies, Metropolitan Life also deducts a Federal
income tax charge before amounts are allocated to the Separate Account.
The Federal income tax charge is imposed in connection with certain of the
policies to recover a portion of the Federal income tax adjustment
attributable to policy acquisition expenses.
2. DIVIDENDS
On April 19, 1995 and December 19, 1995, the Fund declared dividends for all
shareholders of record on April 25, 1995 and December 27, 1995, respectively.
The amount of dividends received by the Separate Account was $17,820,443. The
dividends were paid to Metropolitan Life on April 26, 1995 and December 28,
1995, respectively, and were immediately reinvested in additional shares of the
portfolios in which the investment divisions invest. As a result of this
reinvestment, the number of shares of the Fund held by each of the seven
investment divisions increased by the following: Growth Portfolio 203,974
shares, Income Portfolio 103,768 shares, Money Market Portfolio 15,439 shares,
Diversified Portfolio 334,236 shares, International Stock Portfolio 12,446
shares, Stock Index Portfolio 15,791 shares, and Aggressive Growth Portfolio
199,098 shares.
81
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
3. EXPENSES
With respect to assets in the Separate Account that support certain
policies, Metropolitan Life applies a daily charge against the Separate
Account for the mortality and expense risks assumed by Metropolitan Life. This
charge is equivalent to the effective annual rate of .90% of the average daily
value of the net assets in the Separate Account which are attributable to such
policies.
4. SUBSTITUTION OF DIVISION
On June 1, 1994, the net assets of the Equity Income Division were
transferred to the Diversified Division under a substitution plan.
82
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
5.SUMMARY OF INVESTMENTS AS OF DECEMBER 31, 1995
METROPOLITAN SERIES FUND, INC.
[Enlarge/Download Table]
GROWTH INCOME MONEY MARKET DIVERSIFIED
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
-------------- ------- ------------ ------- ------------ ------- --------------
VALUE VALUE VALUE VALUE
(NOTE 1A) (NOTE 1A) (NOTE 1A) (NOTE 1A)
COMMON STOCK
Aerospace.............. $ 46,873,200 (4.3%) $ 24,440,850 (2.2%)
Automotive............. 8,400,388 (0.8%) 3,604,913 (0.3%)
Banking................ 46,664,450 (4.3%) 27,106,325 (2.4%)
Building............... 6,695,350 (0.6%) 3,872,713 (0.4%)
Business Services...... 17,307,250 (1.6%) 10,205,126 (0.9%)
Chemical............... 62,351,063 (5.7%) 37,025,888 (3.3%)
Computer Software &
Service............... 64,486,020 (5.9%) 38,000,276 (3.4%)
Drug................... 68,975,425 (6.3%) 42,703,588 (3.8%)
Electrical Equipment... 18,014,400 (1.6%) 10,512,000 (1.0%)
Electronics............ 60,681,096 (5.5%) 37,210,134 (3.3%)
Financial Services..... 50,077,876 (4.6%) 33,011,138 (3.0%)
Food & Beverage........ 56,499,225 (5.1%) 33,167,400 (3.0%)
Hospital Management.... 23,432,125 (2.1%) 16,054,075 (1.4%)
Hospital Supply........ 46,253,650 (4.2%) 25,576,525 (2.3%)
Hotel & Restaurant..... 22,954,525 (2.1%) 13,319,088 (1.2%)
Insurance.............. 31,977,600 (2.9%) 18,682,688 (1.7%)
Machinery.............. 47,891,562 (4.4%) 28,921,275 (2.6%)
Metals & Mining........ 7,637,612 (0.7%) 4,655,687 (0.4%)
Office Equipment....... 68,138,213 (6.2%) 39,834,663 (3.6%)
Oil.................... 69,771,787 (6.4%) 42,551,035 (3.8%)
Oil Services........... 18,143,500 (1.7%) 10,505,225 (0.9%)
Paper.................. 8,429,400 (0.8%) 4,914,800 (0.4%)
Personal Care.......... 24,817,000 (2.3%) 15,836,400 (1.4%)
Retail Trade........... 82,486,135 (7.5%) 48,731,799 (4.4%)
Tobacco................ 26,525,550 (2.4%) 16,507,200 (1.5%)
Toys & Musical Instru-
ments................. 9,913,984 (0.9%) 5,967,406 (0.5%)
Utilities--Telephone... 31,793,450 (2.9%) 18,417,625 (1.7%)
Video.................. 49,360,428 (4.5%) 28,511,540 (2.6%)
-------------- --------------
Total Common Stock..... 1,076,552,264 (98.3%) 639,847,382 (57.4%)
-------------- --------------
CONVERTIBLE PREFERRED
STOCK
Oil Services........... 154,500 (0.0%)
PREFERRED STOCK
Retail Trade........... 209,061 (0.0%)
-------------- --------------
Total Stock Securi-
ties.................. $1,076,552,264 (98.3%) $ 640,210,943 (57.4%)
-------------- --------------
LONG-TERM DEBT SECURI-
TIES
Corporate Bonds:
Banking................ $ 13,202,211 (3.7%) $ 20,432,477 (1.8%)
Financial Services..... 27,942,460 (8.0%) 38,284,443 (3.5%)
Industrial--Miscellane-
ous................... 29,715,375 (8.5%) 39,027,649 (3.5%)
Mortgage Backed........ 12,183,305 (3.5%) 12,889,132 (1.2%)
------------ --------------
Total Corporate Bonds.. 83,043,351 (23.7%) 110,633,701 (10.0%)
------------ --------------
Federal Agency Obliga-
tions................. 19,288,010 (5.5%) 24,303,049 (2.2%)
Federal Treasury Obli-
gations............... 173,723,485 (49.7%) 227,577,120 (20.4%)
Foreign Obligations.... 31,751,086 (9.1%) 43,686,100 (3.9%)
Government Sponsored... 5,854,471 (1.7%) 7,073,233 (0.6%)
Yankee Bonds........... 18,464,936 (5.3%) 26,274,500 (2.4%)
------------ --------------
Total Bonds............ 249,081,988 (95.0%) 328,914,002 (29.5%)
------------ --------------
SHORT-TERM OBLIGATIONS
Bank Note.............. $ 1,999,841 (4.9%)
Bankers' Acceptance.... 1,966,149 (4.8%)
Commercial Paper....... $ 19,775,000 (1.8%) 13,785,000 (3.9%) 17,760,043 (43.9%) 31,189,000 (2.8%)
Corporate Note......... 2,006,689 (5.0%)
Federal Agency Obliga-
tions................. 9,613,137 (23.8%)
Federal Treasury Obli-
gations............... 6,874,040 (17.0%)
-------------- ------------ ----------- --------------
Total Short-Term Obli-
gations............... 19,775,000 (1.8%) 13,785,000 (3.9%) 40,219,899 (99.4%) 31,189,000 (2.8%)
-------------- ------------ ----------- --------------
TOTAL INVESTMENTS....... 1,096,327,264 (100.1%) 345,910,339 (98.9%) 40,219,899 (99.4%) 1,110,947,646 (99.7%)
Other Assets Less Lia-
bilities.............. (1,576,667) (-0.1%) 4,002,689 (1.1%) 236,376 (0.6%) 3,885,951 (0.3%)
-------------- ------------ ----------- --------------
NET ASSETS.............. $1,094,750,597 (100.0%) $349,913,028 (100.0%) $40,456,275 (100.0%) $1,114,833,597 (100.0%)
============== ============ =========== ==============
83
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
5.SUMMARY OF INVESTMENTS AS OF DECEMBER 31, 1995--(CONTINUED)
METROPOLITAN SERIES FUND, INC.
[Download Table]
INTERNATIONAL
STOCK
PORTFOLIO
-------------
VALUE
(NOTE 1A)
COMMON STOCK
Airlines................................................ $ 778,273 (0.3%)
Automotive.............................................. 5,547,826 (1.9%)
Banking................................................. 9,258,655 (3.1%)
Beverages............................................... 6,315,913 (2.1%)
Broadcasting & Publishing............................... 755,063 (0.3%)
Building................................................ 7,676,572 (2.6%)
Business Services....................................... 5,642,530 (1.9%)
Chemicals............................................... 5,969,074 (2.0%)
Electrical Equipment.................................... 9,578,893 (3.2%)
Financial Services...................................... 9,274,046 (3.1%)
Foods................................................... 6,130,161 (2.1%)
Health & Personal Care.................................. 10,013,145 (3.4%)
Industrial--Miscellaneous............................... 5,939,198 (2.0%)
Insurance............................................... 8,712,224 (2.9%)
Leisure................................................. 5,033,575 (1.7%)
Machinery............................................... 10,540,444 (3.5%)
Metals--Steel & Iron.................................... 3,707,213 (1.2%)
Metals--Gold............................................ 17,292,196 (5.8%)
Metals--Miscellaneous................................... 11,269,782 (3.8%)
Miscellaneous........................................... 1,417,500 (0.5%)
Miscellaneous Materials................................. 10,149,225 (3.4%)
Office Equipment........................................ 205,063 (0.1%)
Offshore Funds & Investment Trusts...................... 5,181,098 (1.7%)
Oil--Domestic........................................... 9,941,445 (3.3%)
Oil--International...................................... 783,833 (0.3%)
Paper................................................... 527,824 (0.2%)
Railroad................................................ 2,987,040 (1.0%)
Real Estate............................................. 5,468,829 (1.8%)
Recreation.............................................. 3,126,583 (1.1%)
Retail Trade............................................ 9,116,882 (3.1%)
Telecommunications...................................... 888,768 (0.3%)
Textiles & Apparel...................................... 1,304,293 (0.4%)
Transportation--Trucking................................ 624,375 (0.2%)
Utilities--Electric..................................... 4,080,974 (1.4%)
Utilities--Water........................................ 998,366 (0.3%)
Wholesale & International Trade......................... 4,857,355 (1.6%)
------------
Total Common Stock....................................... 201,094,236 (67.6%)
Convertible Preferred Stock.............................. 426,075 (0.1%)
Preferred Stock.......................................... 2,488,326 (0.9%)
------------
Total Equity Securities.................................. 204,008,637 (68.6%)
Convertible Bonds........................................ 17,774,377 (6.0%)
------------
TOTAL INVESTMENTS........................................ 221,783,014 (74.6%)
Other Assets Less Liabilities............................ 75,678,027 (25.4%)
------------
NET ASSETS............................................... $297,461,041 (100.0%)
============
84
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
5.SUMMARY OF INVESTMENTS AS OF DECEMBER 31, 1995--(CONTINUED)
METROPOLITAN SERIES FUND, INC.
[Download Table]
STOCK
INDEX
PORTFOLIO
---------
VALUE
(NOTE 1A)
COMMON STOCK
Aerospace............................................... $ 13,979,982 (2.2%)
Airlines................................................ 2,644,937 (0.4%)
Automotive.............................................. 16,087,052 (2.5%)
Banking................................................. 41,224,016 (6.5%)
Beverages............................................... 35,762,761 (5.6%)
Building................................................ 6,721,186 (1.1%)
Chemical................................................ 22,748,995 (3.6%)
Container............................................... 769,825 (0.1%)
Cosmetics............................................... 4,724,749 (0.7%)
Drug.................................................... 41,170,632 (6.5%)
Electrical Connectors................................... 1,504,050 (0.2%)
Electrical Equipment.................................... 23,767,938 (3.7%)
Electronics............................................. 26,279,796 (4.1%)
Financial Services...................................... 19,611,919 (3.1%)
Foods................................................... 16,942,138 (2.7%)
Hospital Management..................................... 6,287,681 (1.0%)
Hospital Supply......................................... 19,150,108 (3.0%)
Hotel & Restaurant...................................... 6,409,988 (1.0%)
Industrials--Miscellaneous.............................. 13,838,876 (2.2%)
Insurance............................................... 22,054,204 (3.5%)
Leisure................................................. 1,010,300 (0.2%)
Machinery............................................... 9,363,339 (1.5%)
Metals--Aluminum........................................ 2,557,576 (0.4%)
Metals--Gold............................................ 3,688,584 (0.6%)
Metals--Miscellaneous................................... 2,603,457 (0.4%)
Metals--Steel & Iron.................................... 2,102,738 (0.3%)
Office Equipment........................................ 35,293,640 (5.6%)
Oil--Crude Producers.................................... 577,675 (0.1%)
Oil--Domestic........................................... 12,288,633 (1.9%)
Oil--International...................................... 37,270,188 (5.9%)
Oil Services............................................ 6,695,613 (1.1%)
Paper................................................... 8,585,105 (1.4%)
Photography............................................. 4,004,325 (0.6%)
Printing & Publishing................................... 7,978,951 (1.3%)
Railroad................................................ 7,750,478 (1.2%)
Retail Trade............................................ 29,479,447 (4.6%)
Services................................................ 4,541,599 (0.7%)
Shoes................................................... 1,906,875 (0.3%)
Soaps................................................... 12,378,362 (1.9%)
Textiles & Apparel...................................... 1,231,638 (0.2%)
Tire & Rubber........................................... 1,576,100 (0.2%)
Toys & Musical Instruments.............................. 792,458 (0.1%)
Transportation-Trucking................................. 907,625 (0.1%)
Utilities--Electric..................................... 21,261,693 (3.3%)
Utilities--Gas Distribution............................. 3,778,086 (0.6%)
Utilities--Gas Pipeline................................. 3,294,056 (0.5%)
Utilities--Telephone.................................... 53,586,928 (8.5%)
Video................................................... 14,232,219 (2.2%)
------------
Total Common Stock....................................... 632,418,521 (99.4%)
TOTAL SHORT-TERM OBLIGATIONS--U.S. TREASURY BILLS........ 5,503,636 (0.9%)
------------
TOTAL INVESTMENTS........................................ 637,922,157 (100.3%)
Other Assets Less Liabilities............................ (2,098,918) (-0.3%)
------------
NET ASSETS............................................... $635,823,239 (100.0%)
============
85
NOTES TO FINANCIAL STATEMENTS--(CONCLUDED)
5. SUMMARY OF INVESTMENTS AS OF DECEMBER 31, 1995--(CONCLUDED)
METROPOLITAN SERIES FUND, INC.
[Download Table]
AGGRESSIVE
GROWTH
PORTFOLIO
------------
VALUE
(NOTE 1A)
COMMON STOCK
Aerospace................................................ $ 37,289,175 (3.9%)
Airlines................................................. 23,823,062 (2.5%)
Automotive............................................... 3,636,625 (0.4%)
Business Services........................................ 43,265,943 (4.5%)
Chemical................................................. 9,393,750 (1.0%)
Computer Software & Service.............................. 83,974,480 (8.8%)
Diversified.............................................. 9,028,800 (0.9%)
Drug..................................................... 23,960,467 (2.5%)
Electrical Equipment..................................... 27,345,600 (2.9%)
Electronics.............................................. 15,239,300 (1.6%)
Financial Services....................................... 14,461,700 (1.5%)
Food & Beverage.......................................... 18,494,325 (1.9%)
Hospital Supply.......................................... 236,600 (0.0%)
Hotel & Restaurant....................................... 57,102,144 (6.0%)
Insurance................................................ 52,168,826 (5.4%)
Machinery................................................ 32,567,513 (3.4%)
Office Equipment......................................... 41,544,576 (4.3%)
Oil...................................................... 37,022,038 (3.9%)
Oil Services............................................. 24,723,888 (2.6%)
Personal Care............................................ 1,040,775 (0.1%)
Printing & Publishing.................................... 7,862,175 (0.8%)
Recreation............................................... 49,853,613 (5.2%)
Retail Trade............................................. 120,841,866 (12.6%)
Textiles & Apparel....................................... 72,565,958 (7.6%)
Tobacco.................................................. 22,317,300 (2.3%)
Utilities--Telephone..................................... 19,429,313 (2.0%)
------------
Total Common Stock....................................... 849,189,812 (88.6%)
CONVERTIBLE PREFERRED STOCK
Machinery................................................ 6,481,163 (0.7%)
PREFERRED STOCK
Airlines................................................. 7,062,000 (0.7%)
------------
Total Equity Securities.................................. 862,732,975 (90.0%)
TOTAL LONG-TERM DEBT SECURITIES--CONVERTIBLE BONDS........ 9,658,850 (1.0%)
TOTAL SHORT-TERM OBLIGATIONS--COMMERCIAL PAPER............ 58,265,000 (6.1%)
------------
TOTAL INVESTMENTS......................................... 930,656,825 (97.1%)
Other Assets Less Liabilities............................. 28,258,408 (2.9%)
------------
NET ASSETS................................................ $958,915,233 (100.0%)
============
86
APPENDIX TO PROSPECTUS
OPTIONAL INCOME PLANS
The insurance proceeds when the insured dies, or the cash surrender value
payable on full surrender of a Policy or on the Final Date, instead of being
paid in one lump sum, may be applied under one or more of the following income
plans. Values under the income plans do not depend upon the investment
experience of a separate account. The selection of an income plan can
significantly affect the federal income tax consequences associated with the
Policy proceeds. Owners and beneficiaries should consult with qualified tax
advisers in this regard.
OPTION 1. Interest income
The amount applied will earn interest which will be paid monthly.
Withdrawals of at least $500 each may be made at any time by written request.
OPTION 2. Installment Income for a Stated Period
Monthly installment payments will be made so that the amount applied, with
interest, will be paid over the period chosen (from 1 to 30 years).
OPTION 2A. Installment Income of a Stated Amount
Monthly installment payments of a chosen amount will be made until the
entire amount applied, with interest, is paid.
OPTION 3. Single Life Income--Guaranteed Payment Period
Monthly payments will be made during the lifetime of the payee with a chosen
guaranteed payment period of 10, 15 or 20 years.
OPTION 3A. Single Life Income--Guaranteed Return
Monthly payments will be made during the lifetime of the payee. If the payee
dies before the total amount applied under this plan has been paid, the
remainder will be paid in one sum as a death benefit.
OPTION 4. Joint and Survivor Life Income
Monthly payments will be made jointly to two persons during their lifetime
and will continue during the remaining lifetime of the survivor. A total
payment period of 10 years is guaranteed.
Other Frequencies and Plans. Instead of monthly payments, the owner may
elect to have payments made quarterly, semiannually or annually. Other income
plans may be arranged with Metropolitan Life's approval.
Choice of Income Plans. See "Policy Benefits--Optional Income Plans" and
"Policy Rights--Surrenders", regarding how optional income plans may be
chosen. When an income plan starts, a separate contract will be issued
describing the terms of the plan. Specimen contracts may be obtained from
Metropolitan Life sales representatives, and reference should be made to these
forms for further details.
Limitations. If the payee is not a natural person, the choice of an income
plan will be subject to Metropolitan Life's approval. A collateral assignment
will modify a prior choice of income plan. The amount due the assignee will be
payable in one sum and the balance will be applied under the income plan. A
choice of an income plan will not become effective unless each payment under
the plan would be at least $50. Income plan payments may not be assigned and,
to the extent permitted by law, will not be subject to the claims of
creditors.
Income Plan Rates. Amounts applied under the interest income and installment
income plans will earn interest at a rate set from time to time by
Metropolitan Life but never less than 3% per year. Life income payments will
be based on a rate set by Metropolitan Life and in effect on the date the
amount to be applied becomes payable, but never less than the minimum payments
guaranteed in the Policy. Such minimum guaranteed payments are based on
certain assumed mortality rates and an interest rate of 3%.
87
OPTIONAL INSURANCE BENEFITS
Optional insurance benefit riders may be attached to a Policy, subject to
certain insurance underwriting requirements and the payment of additional
premiums. The yearly renewable term rider is expected to be available on or
about October 15, 1996. The riders are described in general terms below.
Limitations and conditions are contained in the riders, and the description
below is subject to the specific terms of the riders. A prospective purchaser
may obtain a specimen Policy with riders (when available) from a Metropolitan
Life sales representative. The duration, but not the amount, of rider benefits
may depend on the investment experience of a separate account.
Disability Waiver Benefit. This rider waives the monthly deduction (except
the charge for mortality and expense risks) during the total disability of the
insured if the insured is totally and continuously disabled for at least six
months beginning prior to age 60. If the total disability continues without
interruption to the Policy anniversary at age 65, it will be deemed permanent
and all further monthly deductions will be waived as they fall due. If there
has been an increase in the death benefit resulting from a request by the
Policy owner and the Policy owner at the time of the increase did not request
or did not qualify for this rider with respect to such increase, monthly
deductions for charges related to such increase will continue to be made
against the cash value of the Policy. This could result in the cash value
being insufficient to cover the monthly deductions related to the increase. In
such a case, the grace period and termination provisions of the Policy would
apply only to such increase in death benefit. Since the monthly deduction with
respect to the increase in the death benefit could reduce the cash value of
the Policy to zero, it may be advantageous for the Policy owner, at the time
of the total disability, to reduce the death benefit to that amount which is
subject to this rider. This rider is available at issue only.
Accidental Death Benefit. This rider provides additional insurance equal to
an amount stated in the Policy if the insured dies from an accident prior to
age 70. It also provides an additional amount equal to twice the stated amount
if the insured dies from an accident occurring while the insured is a fare-
paying passenger on a common carrier. This rider is available at issue only.
Interim Term Insurance Benefit. This rider provides a term insurance benefit
if any insured person dies on or after the date of this rider and before the
Date of Policy. The single premium for this rider is due and payable on the
date of this rider.
Accelerated Death Benefit. This rider provides for payment of an accelerated
death benefit during the lifetime of the insured if the insured is terminally
ill. There is no charge for this rider. The payment under this rider may be
taxable or may affect eligibility for benefits under state or federal law.
Under some legislative proposals, the benefits under riders like this rider
would be free of federal income tax. Counsel and other competent advisors
should be consulted to determine the effect on an individual situation.
Yearly Renewable Term. This rider provides annual renewable term coverage on
the insured under the Policy to age 95. This rider is available at Policy
issue only, although the amount of coverage under an existing rider may be
decreased, or subject to evidence of insurability, increased at a later date.
The amount of target premium under a Policy is not affected by the amount of
term insurance coverage provided under this rider. Accordingly, the amount of
the sales charge paid by the Owner may be less if coverage is purchased under
this rider, rather than as part of the Policy. In addition, the amount of
compensation paid by Metropolitan Life to the selling insurance agent or
broker may be lower if coverage is purchased under this rider. On the other
hand, the current cost of insurance rates are higher under this rider than
they are under the Policy. These factors should be considered before
allocating the insurance coverage between the Policy and this rider. The
yearly renewable term rider generally is not available in connection with
large groups.
88
METFLEX
FLEXIBLE PREMIUM VARIABLE LIFE
PROSPECTUSES FOR
. FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICIES
ISSUED BY
METROPOLITAN LIFE INSURANCE
COMPANY
. METROPOLITAN SERIES FUND, INC.
FORM NO. (0596)
96041 B29 (EXP0597) MLIC-LD
PART II
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises the following papers and documents:
The facing sheet.
Cross-Reference Table.
The Prospectus, consisting of 88 pages.
Undertaking to File Reports as filed with the initial filing of this
Registration Statement on January 22, 1993.
Undertaking pursuant to Rule 484(b)(1) under the Securities Act of 1933
as filed with the initial filing of this Registration Statement on
January 22, 1993.
Representation, Description and Undertaking pursuant to rule 6e-
3(T)(b)(13)(iii)(F) under the Investment Company Act of 1940 as filed
with Pre-Effective Amendment No. 1 to this Registration Statement on
July 29, 1993.
The signatures.
Written Consents of the following persons:
Joseph W.S. Yau (filed with Exhibit 6 below).
Freedman, Levy, Kroll & Simonds as filed with the initial filing of
this Registration Statement on January 22, 1993.
Deloitte & Touche LLP
The following exhibits:
[Enlarge/Download Table]
1.A (1) --Resolution of Board of Directors of Metropolitan Life effecting the
establishment of Metropolitan Life Separate Account UL..................... *
(2) --Not Applicable
(3) --(a)Not Applicable
--(b)Form of Selected Broker Agreement...................................... ****
--(c)Schedule of Sales Commissions.......................................... +++
(4) --Not Applicable
(5) --(a)Specimen Flexible Premium Variable Life Insurance Policy .............. ****
--(b)Form of riders for policy except for Accelerated Death Benefit rider,
Zero Cost Loan rider, Yearly Renewable Term rider and refund of sales load
rider...................................................................... ****
--(c)Endorsement for calculation of minimum death benefit using the Cash
Value Accumulation test.................................................... *****
--(d)Accelerated Death Benefit rider........................................ ++++
--(e)Yearly Renewable Term rider............................................ +
--(f)Refund of sales load rider............................................. +
--(g)Amended Policy Specifications Page indicating new premium expense
charges.................................................................... +
(6) --(a)Charter and By-Laws of Metropolitan Life............................... ++
--(b)Amendment to By-laws................................................... ++
(7) --Not Applicable
(8) --Not Applicable
(9) --Not Applicable
(10) --Application Form for Policy and Form of Receipt........................... ****
2. --Opinion and consent of Counsel as to the legality of the securities being ***
registered.................................................................
II-1
[Enlarge/Download Table]
3. --Not Applicable
4. --Not Applicable
5. --See Exhibit 27 below.
6. --Opinion and consent of Joseph W.S. Yau, relating to the Policies,
including representations required under the terms of an SEC exemptive
order (File No.
812-9452) permitting the deduction of a charge to compensate Metropolitan
Life for the tax impact of deferral of acquisition costs................... +
7. --Not Applicable
8. --Powers of Attorney........................................................ **
9. --Method of Computing Exchange pursuant to Rule 6e-3(T)(b)(13)(v)(B) under
the Investment Company Act of 1940 (not required because there will be no
cash value adjustments)
10. --Statement of Metropolitan Life pursuant to Rule 27d-2 under the Investment
Company Act of 1940........................................................ ++
11. --Memoranda describing certain procedures filed pursuant to Rule 6e- ****
3(T)(b)(12)(iii)...........................................................
12. --Election pursuant to Section 27(g)........................................ ***
27. --Financial Data Schedule................................................... +
--------
+ Filed herewith.
* Incorporated by reference to the initial filing of the Registration
Statement of Separate Account UL (File No. 33-32813) on January 5, 1990.
** Powers of Attorney for signatories other than Theodossios Athanassiades,
Harry P. Kamen, Stewart G. Nagler, Curtis H. Barnette, Hugh B. Price and
Ruth J. Simmons were filed with the filing of Post-Effective Amendment No.
1 to the Registration Statement of Separate Account UL (File No. 33-32813)
on March 1, 1991. Powers of Attorney for Theodossios Athanassiades and
Harry P. Kamen were filed with the initial filing of this Registration
Statement on January 22, 1993. A Power of Attorney for Stewart G. Nagler
was filed with Pre-Effective Amendment No. 1 to this Registration
Statement on July 29, 1993. A Power of Attorney for Curtis H. Barnette was
filed with the filing of Post-Effective Amendment No. 3 to the
Registration Statement of Separate Account UL (File No. 33-47927) on April
21, 1995. Powers of Attorney for Hugh B. Price and Ruth J. Simmons were
filed with the filing of Pre-Effective Amendment No. 1 to the Registration
Statement of Separate Account UL (File No. 33-91226) on September 8, 1995.
The foregoing Powers of Attorney are incorporated by reference.
*** Included in the initial filing of this Registration Statement on January
22, 1993.
**** Included in the filing of Pre-Effective Amendment No. 1 to this
Registration Statement on July 29, 1993.
***** Included in the filing of Post-Effective Amendment No. 1 to this
Registration Statement on March 31, 1994.
++ Included in the filing of Post-Effective Amendment No. 4 to this
Registration Statement on March 1, 1996.
+++ Incorporated by reference from "Distribution of the Policies" in the
Prospectus included herein.
++++ Incorporated by reference to the filing of Post-Effective Amendment No. 1
to the Registration Statement of Separate Account UL (File No. 33-32813)
on March 1, 1991.
II- 2
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, METROPOLITAN LIFE
INSURANCE COMPANY CERTIFIES THAT IT MEETS ALL OF THE REQUIREMENTS FOR
EFFECTNESS OF THIS AMENDED REGISTRATION STATEMENT PURSUANT TO RULE 485(B) UNDER
THE SECURITIES ACT OF 1933 AND HAS DULY CAUSED THIS AMENDED REGISTRATION
STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED THEREUNTO DULY
AUTHORIZED, AND ITS SEAL TO BE HEREUNTO AFFIXED AND ATTESTED, ALL IN THE CITY
OF NEW YORK, STATE OF NEW YORK, THIS 26TH DAY OF APRIL, 1996.
Metropolitan Life Insurance Company
(Seal)
/s/ Richard M. Blackwell
By: ____________________________________
RICHARD M. BLACKWELL, ESQ.
Senior Vice-President & General Counsel
/s/ Ruth Gluck
Attest: ___________________________
RUTH GLUCK, ESQ.
Assistant Secretary
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDED
REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE IN
THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
* Chairman,
-------------------------------- President, Chief
(HARRY P. KAMEN) Executive Officer
and Director
(Principal
Executive Officer)
*
-------------------------------- Vice-Chairman of
(THEODOSSIOS ATHANASSIADES) the Board, and
Director
* Senior Executive
-------------------------------- Vice-President and
(STEWART G. NAGLER) Chief Financial
Officer (Principal
Financial Officer)
* Senior Vice-
-------------------------------- President and
(FREDERICK P. HAUSER) Controller
(Principal
Accounting
Officer)
* Director
--------------------------------
CURTIS H. BARNETTE
* Director
--------------------------------
(JOAN GANZ COONEY)
/s/ Christopher P. Nicholas April 26, 1996
*By ____________________________
CHRISTOPHER P. NICHOLAS, ESQ.
Attorney-in-fact
II-3
SIGNATURE TITLE DATE
* Director
--------------------------------
(JAMES R. HOUGHTON)
* Director
--------------------------------
(HELENE L. KAPLAN)
* Director
--------------------------------
(RICHARD J. MAHONEY)
* Director
--------------------------------
(ALLEN E. MURRAY)
* Director
--------------------------------
(JOHN J. PHELAN, JR.)
* Director
--------------------------------
(JOHN B.M. PLACE)
* Director
--------------------------------
(HUGH B. PRICE)
* Director
--------------------------------
(ROBERT G. SCHWARTZ)
* Director
--------------------------------
(RUTH J. SIMMONS, PH.D)
* Director
--------------------------------
(WILLIAM S. SNEATH)
* Director
--------------------------------
(JOHN R. STAFFORD)
/s/ Christopher P. Nicholas
*By_____________________________
CHRISTOPHER P. NICHOLAS, ESQ.
April 26, 1996
Attorney-in-fact
II-4
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT,
METROPOLITAN LIFE SEPARATE ACCOUNT UL, CERTIFIES THAT IT MEETS ALL OF THE
REQUIREMENTS FOR EFFECTIVENESS OF THIS AMENDED REGISTRATION STATEMENT PURSUANT
TO RULE 485(b) AND HAS DULY CAUSED THIS AMENDED REGISTRATION STATEMENT TO BE
SIGNED, ON ITS BEHALF BY THE UNDERSIGNED THEREUNTO DULY AUTHORIZED, AND ITS
SEAL TO BE HEREUNTO AFFIXED AND ATTESTED, ALL IN THE CITY OF NEW YORK, STATE OF
NEW YORK THIS 26TH DAY OF APRIL 1996.
Metropolitan Life Separate Account UL
(Registrant)
By: Metropolitan Life Insurance Company
(Depositor)
(Seal)
/s/ Richard M. Blackwell
By:_____________________________________
RICHARD M. BLACKWELL, ESQ.
Senior Vice-President and General
Counsel
/s/ Ruth Gluck
Attest:_____________________________
RUTH GLUCK, ESQ.
Assistant Secretary
II-5
INDEPENDENT AUDITORS' CONSENT
Metropolitan Life Insurance Company:
We consent to the use in this Post-Effective Amendment No. 5 to the
Registration Statement No. 33-57320 of Metropolitan Life Separate Account UL on
Form S-6 of our report dated February 19, 1996 relating to Metropolitan Life
Separate Account UL appearing in the Prospectus, which is a part of such
Registration Statement, our report dated February 9, 1996 relating to
Metropolitan Life Insurance Company also appearing in the Prospectus, and to
the reference to us under the heading "Experts" in such Prospectus.
Deloitte & Touche LLP
New York, New York
April 26, 1996
II-6
Dates Referenced Herein and Documents Incorporated by Reference
6 Subsequent Filings that Reference this Filing
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