MetLife Life & Annuity CO of Connecticut 10Q 2007 Q2 Quarterly report

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q


(Mark One)
þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

		FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2007

OR

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

		FOR THE TRANSITION PERIOD FROM TO

Commission file number:33-58677

MetLife Life and Annuity Company of Connecticut

(Exact name of registrant as specified in its charter)


Connecticut		06-0904249
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

One Cityplace, Hartford, Connecticut		06103-3415
(Address of principal executive offices)		(Zip Code)

(860) 308-1000

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” inRule 12b-2 of the Exchange Act.

Large accelerated filer o Accelerated filer o Non-accelerated filer þ

Indicate by check mark whether the registrant is a shell company (as defined inRule 12b-2 of the Exchange Act). Yes o No þ

At August 8, 2007, 30,000 shares of the registrant’s common stock, $100 par value per share, were outstanding, all of which are owned by MetLife Insurance Company of Connecticut, a subsidiary of MetLife, Inc.

REDUCED DISCLOSURE FORMAT

The registrant meets the conditions set forth in General Instruction H(1)(a) and (b) ofForm 10-Q and is, therefore, filing thisForm 10-Q with the reduced disclosure format.

Table of Contents


	Page

Part I — Financial Information
Item 1. Financial Statements		4
Interim Condensed Consolidated Balance Sheets at June 30, 2007 (Unaudited) and December 31, 2006		4
Interim Condensed Consolidated Statements of Income for the Three Months and Six Months Ended June 30, 2007 and 2006 (Unaudited)		5
Interim Condensed Consolidated Statement of Stockholder’s Equity for the Six Months Ended June 30, 2007 (Unaudited)		6
Interim Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2007 and 2006 (Unaudited)		7
Notes to Interim Condensed Consolidated Financial Statements (Unaudited)		8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		24
Item 4. Controls and Procedures		29
Part II — Other Information
Item 1. Legal Proceedings		29
Item 1A. Risk Factors		30
Item 6. Exhibits		32
Signatures		33
Exhibit Index		E-1
EX-2.1: AGREEMENT AND PLAN OF MERGER
EX-3.3: CERTIFICATE OF CORRECTION TO THE CERTIFICATE OF AMENDMENT
EX-31.1: CERTIFICATION
EX-31.2: CERTIFICATION
EX-32.1: CERTIFICATION
EX-32.2: CERTIFICATION

Note Regarding Forward-Looking Statements

This Quarterly Report onForm 10-Q, including the Management’s Discussion and Analysis of Financial Condition and Results of Operations, contains statements which constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements relating to trends in the operations and financial results and the business and the products of MetLife Life and Annuity Company of Connecticut and its subsidiary, as well as other statements including words such as “anticipate,” “believe,” “plan,” “estimate,” “expect,” “intend” and other similar expressions. Forward-looking statements are made based upon management’s current expectations and beliefs concerning future developments and their potential effects on MetLife Life and Annuity Company of Connecticut and its subsidiary. Such forward-looking statements are not guarantees of future performance. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Part I — Financial Information


Item 1.	*Financial Statements*

MetLife Life and Annuity Company of Connecticut
(A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut)

Interim Condensed Consolidated Balance Sheets
June 30, 2007 (Unaudited) and December 31, 2006

(In millions, except share and per share data)


	June 30,			December 31,
	2007			2006

Assets
Investments:
Fixed maturity securities available-for-sale, at estimated fair value (amortized cost: $6,374 and $5,967, respectively)	$	6,184		$	5,889
Equity securities available-for-sale, at estimated fair value (cost: $80 and $56, respectively)		79			57
Mortgage loans on real estate		355			295
Policy loans		57			55
Real estate and real estate joint ventures held-for-investment		4			2
Other limited partnership interests		92			68
Short-term investments		70			95
Other invested assets		262			341

Total investments		7,103			6,802
Cash and cash equivalents		217			230
Accrued investment income		75			68
Premiums and other receivables		350			289
Deferred policy acquisition costs and value of business acquired		1,673			1,712
Current income tax recoverable		—			19
Deferred income tax assets		22			8
Goodwill		239			239
Other assets		26			25
Separate account assets		12,161			12,246

Total assets	$	21,866		$	21,638


Liabilities and Stockholder’s Equity
Liabilities:
Future policy benefits	$	1,768		$	1,782
Policyholder account balances		5,012			5,377
Other policyholder funds		85			79
Current income tax payable		6			—
Payables for collateral under securities loaned and other transactions		759			102
Other liabilities		91			119
Separate account liabilities		12,161			12,246

Total liabilities		19,882			19,705

Contingencies, Commitments and Guarantees (Note 4)

Stockholder’s Equity:
Common stock, par value $100 per share; 100,000 shares authorized; 30,000 shares issued and outstanding at June 30, 2007 and December 31, 2006		3			3
Additional paid-in capital		1,730			1,730
Retained earnings		321			230
Accumulated other comprehensive income (loss)		(70	)		(30	)

Total stockholder’s equity		1,984			1,933

Total liabilities and stockholder’s equity	$	21,866		$	21,638

See accompanying notes to interim condensed consolidated financial statements.

MetLife Life and Annuity Company of Connecticut
(A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut)

Interim Condensed Consolidated Statements of Income
For the Three Months and Six Months Ended June 30, 2007 and 2006 (Unaudited)

(In millions)


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2007			2006			2007			2006

Revenues
Premiums	$	9		$	10		$	21		$	22
Universal life and investment-type product policy fees		112			126			224			247
Net investment income		92			94			183			180
Other revenues		6			6			12			13
Net investment gains (losses)		(25	)		(42	)		(21	)		(74	)

Total revenues		194			194			419			388

Expenses
Policyholder benefits and claims		25			46			59			71
Interest credited to policyholder account balances		30			39			64			68
Other expenses		77			67			173			138

Total expenses		132			152			296			277

Income before provision for income tax		62			42			123			111
Provision for income tax		16			9			32			29

Net income	$	46		$	33		$	91		$	82

See accompanying notes to interim condensed consolidated financial statements.

MetLife Life and Annuity Company of Connecticut
(A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut)

Interim Condensed Consolidated Statement of Stockholder’s Equity
For the Six Months Ended June 30, 2007 (Unaudited)

(In millions)


							Accumulated Other
							Comprehensive
							Income (Loss)
							Net
			Additional				Unrealized
	Common		Paid-in		Retained		Investment
	Stock		Capital		Earnings		Gains (Losses)			Total

Balance at January 1, 2007		$ 3		$ 1,730		$ 230		$ (30	)		$ 1,933
Comprehensive income (loss):
Net income						91					91
Other comprehensive income (loss):
Unrealized investment gains (losses), net of related offsets and income tax								(40	)		(40	)

Other comprehensive income (loss)											(40	)

Comprehensive income (loss)											51

Balance at June 30, 2007		$ 3		$ 1,730		$ 321		$ (70	)		$ 1,984

See accompanying notes to interim condensed consolidated financial statements.

MetLife Life and Annuity Company of Connecticut
(A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut)

Interim Condensed Consolidated Statements of Cash Flows
For the Six Months Ended June 30, 2007 and 2006 (Unaudited)

(In millions)


	Six Months Ended
	June 30,
	2007			2006

Net cash provided by operating activities	$	96		$	15

Cash flows from investing activities
Sales, maturities and repayments of:
Fixed maturity securities		1,339			1,844
Equity securities		12			—
Mortgage loans on real estate		20			18
Other limited partnership interests		34			19
Purchases of:
Fixed maturity securities		(1,792	)		(1,777	)
Equity securities		(38	)		—
Mortgage loans on real estate		(80	)		(8	)
Real estate and real estate joint ventures		(2	)		—
Other limited partnership interests		(52	)		(9	)
Net change in policy loans		(2	)		(10	)
Net change in short-term investments		25			(114	)
Net change in other invested assets		21			21

Net cash (used in) investing activities		(515	)		(16	)

Cash flows from financing activities
Policyholder account balances:
Deposits		192			336
Withdrawals		(472	)		(364	)
Net change in payables for collateral under securities loaned and other transactions		657			(5	)
Financing element on certain derivative instruments		29			(10	)

Net cash provided by (used in) financing activities		406			(43	)

Change in cash and cash equivalents		(13	)		(44	)
Cash and cash equivalents, beginning of period		230			233

Cash and cash equivalents, end of period	$	217		$	189

Supplemental disclosures of cash flow information:
Net cash paid during the period for:
Income tax	$	—		$	—

See accompanying notes to interim condensed consolidated financial statements.

MetLife Life and Annuity Company of Connecticut
(A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut)

Notes to Interim Condensed Consolidated Financial Statements (Unaudited)


1.	Business, Basis of Presentation, and Summary of Significant Accounting Policies

Business

“MLAC” or the “Company” refers to MetLife Life and Annuity Company of Connecticut, a Connecticut corporation incorporated in 1973 (“MetLife Annuity”), and its subsidiary. MLAC is a wholly-owned subsidiary of MetLife Insurance Company of Connecticut (“MICC”). MICC is a subsidiary of MetLife, Inc. (“MetLife”). The Company’s core offerings include universal and variable life insurance, fixed and variable deferred annuities, structured settlements and payout annuities.

On June 29, 2007, MICC and MetLife Annuity entered into an Agreement and Plan of Merger, pursuant to which MetLife Annuity will be merged into MICC, with MICC being the surviving corporation. The merger is subject to certain regulatory approvals and favorable tax rulings. Upon the effective date of the merger, expected to occur on or about December 7, 2007, the separate existence of MetLife Annuity will cease, all rights and interests of MetLife Annuity in all property will be deemed transferred and vested in MICC, and all liabilities of MetLife Annuity will be vested in MICC.

The Company currently operates as a single segment and, as such, financial results are prepared and reviewed by management as a single operating segment. The Company continually evaluates its operating activities and the method utilized by management to evaluate the performance of such activities and will report on a segment basis when appropriate to do so.

Since the Company is a member of a controlled group of affiliated companies, its results may not be indicative of those of a stand-alone entity.

Basis of Presentation

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to adopt accounting policies and make estimates and assumptions that affect amounts reported in the unaudited interim condensed consolidated financial statements. The most critical estimates include those used in determining:


	(i)	the fair value of investments in the absence of quoted market values;

	(ii)	investment impairments;

	(iii)	the recognition of income on certain investments;

	(iv)	application of the consolidation rules to certain investments;

	(v)	the fair value of and accounting for derivatives;

	(vi)	the capitalization and amortization of deferred policy acquisition costs (“DAC”) and the establishment and amortization of value of business acquired (“VOBA”);

	(vii)	the measurement of goodwill and related impairment, if any;

	(viii)	the liability for future policyholder benefits;

	(ix)	accounting for income taxes and the valuation of deferred income tax assets;

	(x)	accounting for reinsurance transactions; and

	(xi)	the liability for litigation and regulatory matters.

MetLife Life and Annuity Company of Connecticut

(A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut)

Notes to Interim Condensed Consolidated Financial Statements (Unaudited) — (Continued)

insurance and financial services industries; others are specific to the Company’s business and operations. Actual results could differ from these estimates.

The accompanying unaudited interim condensed consolidated financial statements include the accounts of (i) the Company; and (ii) partnerships and joint ventures in which the Company has control. Intercompany accounts and transactions have been eliminated.

The Company uses the equity method of accounting for investments in equity securities in which it has more than a 20% interest and for real estate joint ventures and other limited partnership interests in which it has more than a minor equity interest or more than a minor influence over the joint ventures’ and partnerships’ operations, but does not have a controlling interest and is not the primary beneficiary. The Company uses the cost method of accounting for real estate joint ventures and other limited partnership interests in which it has a minor equity investment and virtually no influence over the joint ventures’ and partnerships’ operations.

Certain amounts in the prior year period’s unaudited interim condensed consolidated financial statements have been reclassified to conform with the 2007 presentation.

The accompanying unaudited interim condensed consolidated financial statements reflect all adjustments (including normal recurring adjustments) necessary to present fairly the consolidated financial position of the Company at June 30, 2007, its consolidated results of operations for the three months and six months ended June 30, 2007 and 2006, its consolidated cash flows for the six months ended June 30, 2007 and 2006, and its consolidated statement of stockholder’s equity for the six months ended June 30, 2007, in conformity with GAAP. Interim results are not necessarily indicative of full year performance. The December 31, 2006 consolidated balance sheet data was derived from audited consolidated financial statements included in the Company’s Annual Report onForm 10-K for the year ended December 31, 2006 (“2006 Annual Report”) filed with the U.S. Securities and Exchange Commission (“SEC”), which includes all disclosures required by GAAP. Therefore, these unaudited interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements of the Company included in the 2006 Annual Report.

Adoption of New Accounting Pronouncements

Income Taxes

Effective January 1, 2007, the Company adopted Financial Accounting Standards Board (“FASB”) Interpretation (“FIN”) No. 48,Accounting for Uncertainty in Income Taxes — An Interpretation of FASB Statement No. 109 (“FIN 48”). FIN 48 clarifies the accounting for uncertainty in income tax recognized in a company’s financial statements. FIN 48 requires companies to determine whether it is “more likely than not” that a tax position will be sustained upon examination by the appropriate taxing authorities before any part of the benefit can be recorded in the financial statements. It also provides guidance on the recognition, measurement and classification of income tax uncertainties, along with any related interest and penalties. Previously recorded income tax benefits that no longer meet this standard are required to be charged to earnings in the period that such determination is made. The adoption of FIN 48 did not have a material impact on the Company’s unaudited interim condensed consolidated financial statements.

Insurance Contracts

Effective January 1, 2007, the Company adopted Statement of Position (“SOP”)05-1,Accounting by Insurance Enterprises for Deferred Acquisition Costs in Connection with Modifications or Exchanges of Insurance Contracts(“SOP 05-1”).SOP 05-1 provides guidance on accounting by insurance enterprises for DAC on internal replacements of insurance and investment contracts other than those specifically described in Statement of Financial Accounting Standards (“SFAS”) No. 97,Accounting and Reporting by Insurance Enterprises for Certain Long-Duration Contracts and for Realized Gains and Losses from the Sale of Investments.SOP 05-1 defines an internal replacement as a modification in product benefits, features, rights, or coverages that occurs by the exchange of a contract for a new contract, or by amendment, endorsement, or rider to a contract, or by the election of a feature or coverage within a contract.SOP 05-1 is effective for

MetLife Life and Annuity Company of Connecticut

(A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut)

Notes to Interim Condensed Consolidated Financial Statements (Unaudited) — (Continued)

internal replacements occurring in fiscal years beginning after December 15, 2006. In addition, in February 2007, the American Institute of Certified Public Accountants (“AICPA”) issued related Technical Practice Aids (“TPAs”) to provide further clarification ofSOP 05-1. The TPAs became effective concurrently with the adoption ofSOP 05-1.

As a result of the adoption ofSOP 05-1 and the related TPAs, the Company assesses internal replacements to determine whether such modifications significantly change the contract terms based on the criteria noted in the guidance. If the modification substantially changes the contract, then the DAC is written off immediately through income and any new deferrable expenses associated with the new replacement are deferred. If the contract modifications do not substantially change the contract, the DAC amortization on the original policy will continue and any acquisition costs associated with the related modification are immediately expensed.

The adoption ofSOP 05-1 and the Company’s interpretation of related TPAs did not have a material impact on the Company’s unaudited interim condensed consolidated financial statements.

Other

Effective January 1, 2007, the Company adopted SFAS No. 156,Accounting for Servicing of Financial Assets — an amendment of FASB Statement No. 140 (“SFAS 156”). Among other requirements, SFAS 156 requires an entity to recognize a servicing asset or servicing liability each time it undertakes an obligation to service a financial asset by entering into a servicing contract in certain situations. The adoption of SFAS 156 did not have an impact on the Company’s unaudited interim condensed consolidated financial statements.

Future Adoption of New Accounting Pronouncements

In June 2007, the AICPA issued SOP 07-1,Clarification of the Scope of the Audit and Accounting Guide Investment Companies and Accounting by Parent Companies and Equity Method Investors for Investments in Investment Companies (“SOP 07-1”) . Upon adoption of SOP 07-1, the Company must also adopt the provisions of FASB Staff Position No. FSPFIN 46(r)-7,Application of FASB Interpretation No. 46(r) to Investment Companies (“FSPFIN 46(r)-7”), which permanently exempts investment companies from applying the provisions of FIN No. 46,Consolidation of Variable Interest Entities — An Interpretation of Accounting Research Bulletin No. 51, and its December 2003 revision (“FIN 46(r)”) to investments carried at fair value. SOP 07-1 provides guidance for determining whether an entity falls within the scope of the AICPA Audit and Accounting GuideInvestment Companies and whether investment company accounting should be retained by a parent company upon consolidation of an investment company subsidiary or by an equity method investor in an investment company. In certain circumstances, SOP 07-1 precludes retention of specialized accounting for investment companies (i.e., fair value accounting), when similar direct investments exist in the consolidated group and are measured on a basis inconsistent with that applied to investment companies. Additionally, SOP 07-1 precludes retention of specialized accounting for investment companies if the reporting entity does not distinguish through documented policies the nature and type of investments to be held in the investment companies from those made in the consolidated group where other accounting guidance is being applied. SOP 07-1 and FSPFIN 46(r)-7 are effective for fiscal years beginning on or after December 15, 2007. The Company is currently evaluating the impact of SOP 07-1 and FSPFIN 46(r)-7 on the Company’s consolidated financial statements.

In May 2007, the FASB issued FSPNo. FIN 39-1,Amendment of FASB Interpretation No. 39(“FSP 39-1”).FSP 39-1 amends FIN No. 39,Offsetting of Amounts Related to Certain Contracts(“FIN 39”),to permit a reporting entity to offset fair value amounts recognized for the right to reclaim cash collateral (a receivable) or the obligation to return cash collateral (a payable) against fair value amounts recognized for derivative instruments executed with the same counterparty under the same master netting arrangement that have been offset in accordance with FIN 39.FSP 39-1 also amends FIN 39 for certain terminology modifications.FSP 39-1 applies to fiscal years beginning after November 15, 2007.FSP 39-1 will be applied retrospectively, unless it is impracticable to do so. Upon adoption ofFSP 39-1, the Company is permitted to change its accounting policy to offset or not offset fair value amounts recognized for derivative instruments under master netting

MetLife Life and Annuity Company of Connecticut

(A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut)

Notes to Interim Condensed Consolidated Financial Statements (Unaudited) — (Continued)

arrangements. The Company is currently evaluating the impact ofFSP 39-1 on the Company’s consolidated financial statements.

In February 2007, the FASB issued SFAS No. 159,The Fair Value Option for Financial Assets and Financial Liabilities(“SFAS 159”). SFAS 159 permits all entities the option to measure most financial instruments and certain other items at fair value at specified election dates and to report related unrealized gains and losses in earnings. The fair value option will generally be applied on aninstrument-by-instrument basis and is generally an irrevocable election. SFAS 159 is effective for fiscal years beginning after November 15, 2007. The Company is currently evaluating which eligible financial instruments, if any, it will elect to account for at fair value under SFAS 159 and the related impact on the Company’s consolidated financial statements.

In September 2006, the FASB issued SFAS No. 157,Fair Value Measurements (“SFAS 157”). SFAS 157 defines fair value, establishes a framework for measuring fair value under GAAP and requires enhanced disclosures about fair value measurements. SFAS 157 does not require additional fair value measurements. The pronouncement is effective for fiscal years beginning after November 15, 2007. The guidance in SFAS 157 will be applied prospectively with certain exceptions. The Company is currently evaluating the impact that adoption of SFAS 157 will have on the Company’s consolidated financial statements. Implementation of SFAS 157 will require additional disclosures regarding measurement of fair value in the Company’s consolidated financial statements.


2.	Investments

Fixed Maturity and Equity Securities Available-for-Sale

The following tables present the cost or amortized cost, gross unrealized gain and loss, and estimated fair value of the Company’s fixed maturity and equity securities, the percentage that each sector represents by the total fixed maturity securities holdings and by the total equity securities holdings at:


	June 30, 2007
	Cost or		Gross
	Amortized		Unrealized				Estimated		% of
	Cost		Gain		Loss		Fair Value		Total
	(In millions)

U.S. corporate securities	$	2,632	$	7	$	103	$	2,536		41.0	%
Foreign corporate securities		906		4		29		881		14.2
U.S. Treasury/agency securities		785		—		35		750		12.1
Commercial mortgage-backed securities		754		1		19		736		11.9
Residential mortgage-backed securities		971		4		13		962		15.6
Asset-backed securities		154		—		2		152		2.5
State and political subdivision securities		96		—		8		88		1.4
Foreign government securities		76		4		1		79		1.3

Total fixed maturity securities	$	6,374	$	20	$	210	$	6,184		100.0	%

Non-redeemable preferred stock	$	71	$	1	$	2	$	70		88.6	%
Common stock		9		—		—		9		11.4

Total equity securities	$	80	$	1	$	2	$	79		100.0	%

MetLife Life and Annuity Company of Connecticut

(A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut)

Notes to Interim Condensed Consolidated Financial Statements (Unaudited) — (Continued)


	December 31, 2006
	Cost or		Gross
	Amortized		Unrealized				Estimated		% of
	Cost		Gain		Loss		Fair Value		Total
	(In millions)

U.S. corporate securities	$	2,542	$	18	$	62	$	2,498		42.4	%
Foreign corporate securities		892		5		21		876		14.9
U.S. Treasury/agency securities		801		2		20		783		13.3
Commercial mortgage-backed securities		736		4		6		734		12.5
Residential mortgage-backed securities		734		10		5		739		12.5
Asset-backed securities		102		—		2		100		1.7
State and political subdivision securities		91		1		6		86		1.5
Foreign government securities		69		5		1		73		1.2

Total fixed maturity securities	$	5,967	$	45	$	123	$	5,889		100.0	%

Non-redeemable preferred stock	$	55	$	2	$	1	$	56		98.2	%
Common stock		1		—		—		1		1.8

Total equity securities	$	56	$	2	$	1	$	57		100.0	%

Unrealized Loss for Fixed Maturity and Equity Securities Available-for-Sale

The following tables present the estimated fair value and gross unrealized loss of the Company’s fixed maturity (aggregated by sector) and equity securities in an unrealized loss position, aggregated by length of time that the securities have been in a continuous unrealized loss position, at:


	June 30, 2007
					Equal to or Greater
	Less than 12 months				than 12 months				Total
			Gross				Gross				Gross
	Estimated		Unrealized		Estimated		Unrealized		Estimated		Unrealized
	FairValue		Loss		Fair Value		Loss		Fair Value		Loss
	(In millions, except number of securities)

U.S. corporate securities	$	1,845	$	76	$	422	$	27	$	2,267	$	103
Foreign corporate securities		551		17		200		12		751		29
U.S. Treasury/agency securities		565		20		143		15		708		35
Commercial mortgage-backed securities		588		13		101		6		689		19
Residential mortgage-backed securities		695		11		38		2		733		13
Asset-backed securities		73		—		21		2		94		2
State and political subdivision securities		26		4		55		4		81		8
Foreign government securities		27		1		4		—		31		1

Total fixed maturity securities	$	4,370	$	142	$	984	$	68	$	5,354	$	210

Equity securities	$	49	$	1	$	6	$	1	$	55	$	2

Total number of securities in an unrealized loss position		446				381				827

MetLife Life and Annuity Company of Connecticut

(A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut)

Notes to Interim Condensed Consolidated Financial Statements (Unaudited) — (Continued)


	December 31, 2006
					Equal to or Greater
	Less than 12 months				than 12 months				Total
			Gross				Gross				Gross
	Estimated		Unrealized		Estimated		Unrealized		Estimated		Unrealized
	Fair Value		Loss		Fair Value		Loss		Fair Value		Loss
	(In millions, except number of securities)

U.S. corporate securities	$	1,330	$	40	$	500	$	22	$	1,830	$	62
Foreign corporate securities		462		13		174		8		636		21
U.S. Treasury/agency securities		474		17		51		3		525		20
Commercial mortgage-backed securities		304		2		109		4		413		6
Residential mortgage-backed securities		307		4		59		1		366		5
Asset-backed securities		45		—		22		2		67		2
State and political subdivision securities		21		3		54		3		75		6
Foreign government securities		13		1		12		—		25		1

Total fixed maturity securities	$	2,956	$	80	$	981	$	43	$	3,937	$	123

Equity securities	$	37	$	1	$	5	$	—	$	42	$	1

Total number of securities in an unrealized loss position		772				430				1,202

Aging of Gross Unrealized Loss for Fixed Maturity and Equity Securities Available-for-Sale

The following tables present the cost or amortized cost, gross unrealized loss and number of securities for fixed maturity and equity securities, where the estimated fair value had declined and remained below cost or amortized cost by less than 20%, or 20% or more at:


	June 30, 2007
	Cost or				Gross				Number of
	Amortized Cost				Unrealized Loss				Securities
	Less than		20% or		Less than		20% or		Less than		20% or
	20%		more		20%		more		20%		more
	(In millions, except number of securities)

Less than six months	$	4,332	$	1	$	129	$	—		403		1
Six months or greater but less than nine months		228		—		14		—		40		—
Nine months or greater but less than twelve months		1		—		—		—		2		—
Twelve months or greater		1,059		—		69		—		381		—

Total	$	5,620	$	1	$	212	$	—		826		1

MetLife Life and Annuity Company of Connecticut

(A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut)

Notes to Interim Condensed Consolidated Financial Statements (Unaudited) — (Continued)


	December 31, 2006
	Cost or				Gross				Number of
	Amortized Cost				Unrealized Loss				Securities
	Less than		20% or		Less than		20% or		Less than		20% or
	20%		more		20%		more		20%		more
	(In millions, except number of securities)

Less than six months	$	2,763	$	4	$	66	$	2		696		9
Six months or greater but less than nine months		16		—		—		—		24		—
Nine months or greater but less than twelve months		291		—		13		—		43		—
Twelve months or greater		1,029		—		43		—		430		—

Total	$	4,099	$	4	$	122	$	2		1,193		9

At June 30, 2007 and December 31, 2006, $212 million and $122 million, respectively, of unrealized losses related to securities with an unrealized loss position of less than 20% of cost or amortized cost, which represented 4% and 3%, respectively, of the cost or amortized cost of such securities.

At June 30, 2007, there were no unrealized losses related to securities with an unrealized loss position of 20% or more of cost or amortized cost. At December 31, 2006, $2 million of unrealized losses related to securities with an unrealized loss position of 20% or more of cost or amortized cost, which represented 50% of the cost or amortized cost of such securities. Of such unrealized losses of $2 million, all related to securities that were in an unrealized loss position for a period of less than six months.

The Company held one fixed maturity security with a gross unrealized loss at June 30, 2007 of greater than $10 million. This security represented 7%, or $15 million in the aggregate, of the gross unrealized loss on fixed maturity and equity securities. There were no securities with a gross unrealized loss greater than $10 million at December 31, 2006.

MetLife Life and Annuity Company of Connecticut

(A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut)

Notes to Interim Condensed Consolidated Financial Statements (Unaudited) — (Continued)

At June 30, 2007 and December 31, 2006, the Company had $212 million and $124 million, respectively, of gross unrealized losses related to its fixed maturity and equity securities. These securities are concentrated, calculated as a percentage of gross unrealized loss, as follows:


	June 30,			December 31,
	2007			2006

Sector:
U.S. corporate securities		49	%		50	%
Foreign corporate securities		14			17
U.S. Treasury/agency securities		17			16
Commercial mortgage-backed securities		9			5
Residential mortgage-backed securities		6			4
State and political subdivision securities		4			5
Other		1			3

Total		100	%		100	%

Industry:
Industrial		17	%		26	%
Finance		19			20
Government		17			17
Utility		13			12
Mortgage-backed		15			9
Consumer		7			2
Other		12			14

Total		100	%		100	%

As disclosed in Note 1 of Notes to Consolidated Financial Statements included in the 2006 Annual Report, the Company performs a regular evaluation, on asecurity-by-security basis, of its investment holdings in accordance with its impairment policy in order to evaluate whether such securities are other-than-temporarily impaired. One of the criteria which the Company considers in its other-than-temporary impairment analysis is its intent and ability to hold securities for a period of time sufficient to allow for the recovery of their value to an amount equal to or greater than cost or amortized cost. The Company’s intent and ability to hold securities considers broad portfolio management objectives such as asset/liability duration management, issuer and industry segment exposures, interest rate views and the overall total return focus. In following these portfolio management objectives, changes in facts and circumstances that were present in past reporting periods may trigger a decision to sell securities that were held in prior reporting periods. Decisions to sell are based on current conditions or the Company’s need to shift the portfolio to maintain its portfolio management objectives including liquidity needs or duration targets on asset/liability managed portfolios. The Company attempts to anticipate these types of changes and if a sale decision has been made on an impaired security and that security is not expected to recover prior to the expected time of sale, the security will be deemed other-than-temporarily impaired in the period that the sale decision was made and an other-than-temporary impairment loss will be recognized.

Based upon the Company’s current evaluation of the securities in accordance with its impairment policy, the cause of the decline being principally attributable to the general rise in interest rates during the holding period, and the Company’s current intent and ability to hold the fixed maturity and equity securities with unrealized losses for a period of time sufficient for them to recover, the Company has concluded that the aforementioned securities are not other-than-temporarily impaired.

MetLife Life and Annuity Company of Connecticut

(A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut)

Notes to Interim Condensed Consolidated Financial Statements (Unaudited) — (Continued)

Securities Lending

During the six months ended June 30, 2007, the Company began participating in a securities lending program whereby blocks of securities, which are included in fixed maturity and equity securities, are loaned to third parties, primarily major brokerage firms. The Company requires a minimum of 102% of the fair value of the loaned securities to be separately maintained as collateral for the loans. Securities with a cost or amortized cost of $711 million and an estimated fair value of $675 million were on loan under the program at June 30, 2007. Securities loaned under such transactions may be sold or repledged by the transferee. The Company was liable for cash collateral under its control of $687 million at June 30, 2007. There was no security collateral on deposit from customers in connection with the securities lending transactions at June 30, 2007.

Net Investment Income

The components of net investment income are as follows:


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2007		2006		2007		2006
			(In millions)

Fixed maturity securities	$	87	$	79	$	171	$	156
Equity securities		—		1		1		1
Mortgage loans on real estate		6		4		11		8
Policy loans		1		—		2		1
Other limited partnership interests		6		9		8		11
Cash, cash equivalents and short-term investments		3		3		7		6
Other invested assets		—		—		1		—

Total investment income		103		96		201		183
Less: Investment expenses		11		2		18		3

Net investment income	$	92	$	94	$	183	$	180

Affiliated net investment income related to short-term investments, included in the table above, was $1 million and $3 million for the three months and six months ended June 30, 2007, respectively, and $2 million and $3 million for the three months and six months ended June 30, 2006, respectively.

Net Investment Gains (Losses)

The components of net investment gains (losses) are as follows:


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2007			2006			2007			2006
				(In millions)

Fixed maturity securities	$	(13	)	$	(16	)	$	(21	)	$	(44	)
Equity securities		(4	)		—			(4	)		—
Mortgage loans on real estate		1			—			1			1
Other limited partnership interests		—			—			4			—
Derivatives		(9	)		(26	)		(1	)		(31	)

Net investment gains (losses)	$	(25	)	$	(42	)	$	(21	)	$	(74	)

MetLife Life and Annuity Company of Connecticut

(A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut)

Notes to Interim Condensed Consolidated Financial Statements (Unaudited) — (Continued)

For the three months and six months ended June 30, 2007 and 2006, there were no affiliated net investment gains (losses).

The Company periodically disposes of fixed maturity and equity securities at a loss. Generally, such losses are insignificant in amount or in relation to the cost basis of the investment, are attributable to declines in fair value occurring in the period of the disposition or are as a result of management’s decision to sell securities based on current conditions or the Company’s need to shift the portfolio to maintain its portfolio management objectives.

Losses from fixed maturity and equity securities deemed other-than-temporarily impaired, included within net investment gains (losses), were $4 million for both the three months and six months ended June 30, 2007 and less than $1 million for both the three months and six months ended June 30, 2006.


3.	Derivative Financial Instruments

Types of Derivative Financial Instruments

The following table presents the notional amount and current market or fair value of derivative financial instruments held at:


	June 30, 2007						December 31, 2006
			Current Market						Current Market
	Notional		or Fair Value				Notional		or Fair Value
	Amount		Assets		Liabilities		Amount		Assets		Liabilities
					(In millions)

Interest rate swaps	$	770	$	209	$	5	$	911	$	266	$	32
Financial futures		162		—		1		26		—		—
Foreign currency swaps		37		—		8		32		1		9
Foreign currency forwards		1		—		—		4		—		—
Options		—		37		5		—		53		5
Financial forwards		—		—		—		—		—		1
Credit default swaps		56		—		—		4		—		—

Total	$	1,026	$	246	$	19	$	977	$	320	$	47

The above table does not include notional amounts for equity futures, equity variance swaps and equity options. At June 30, 2007 and December 31, 2006, the Company owned 76 and 156 equity futures contracts, respectively. Fair values of equity futures are included in financial futures in the preceding table. At June 30, 2007 and December 31, 2006, the Company owned 6,000 and 18,000 equity variance swaps, respectively. Fair values of equity variance swaps are included in financial forwards in the preceding table. At June 30, 2007 and December 31, 2006, the Company owned 662,500 and 742,550 equity options, respectively. Fair values of equity options are included in options in the preceding table.

This information should be read in conjunction with Note 4 of Notes to Consolidated Financial Statements included in the 2006 Annual Report.

MetLife Life and Annuity Company of Connecticut

(A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut)

Notes to Interim Condensed Consolidated Financial Statements (Unaudited) — (Continued)

Hedging

The following table presents the notional amount and fair value of derivatives by type of hedge designation at:


	June 30, 2007						December 31, 2006
	Notional		Fair Value				Notional		Fair Value
	Amount		Assets		Liabilities		Amount		Assets		Liabilities
					(In millions)

Fair value	$	6	$	—	$	—	$	—	$	—	$	—
Cash flow		4		—		—		—		—		—
Non-qualifying		1,016		246		19		977		320		47

Total	$	1,026	$	246	$	19	$	977	$	320	$	47

For the three months and six months ended June 30, 2007, the Company had $3 million and $5 million, respectively, in settlement payments related to non-qualifying derivatives included within net investment gains (losses). For the three months and six months ended June 30, 2006, the Company had $3 million and $5 million, respectively, in settlement payments related to non-qualifying derivatives included within net investment gains (losses).

Fair Value Hedges

The Company designates and accounts for the following as fair value hedges when they have met the requirements of SFAS No. 133,Accounting for Derivative Instruments and Hedging(“SFAS 133”): (i) interest rate swaps to convert fixed rate investments to floating rate investments; and (ii) foreign currency swaps to hedge the foreign currency fair value exposure of foreign currency denominated investments and liabilities.

The Company did not recognize any net investment gains (losses) representing the ineffective portion of all fair value hedges for the three months and six months ended June 30, 2007. The Company did not have fair value hedges for the three months and six months ended June 30, 2006.

All components of each derivative’s gain or loss were included in the assessment of hedge effectiveness. There were no instances in which the Company discontinued fair value hedge accounting due to a hedged firm commitment no longer qualifying as a fair value hedge.

Cash Flow Hedges

The Company designates and accounts for the following as cash flow hedges when they have met the requirements of SFAS 133: (i) interest rate swaps to convert floating rate investments to fixed rate investments; and (ii) foreign currency swaps to hedge the foreign currency cash flow exposure of foreign currency denominated investments and liabilities.

For the three months and six months ended June 30, 2007 and 2006, the Company did not recognize any net investment gains (losses) which represented the ineffective portion of all cash flow hedges. All components of each derivative’s gain or loss were included in the assessment of hedge effectiveness. In certain instances, the Company discontinued cash flow hedge accounting because the forecasted transactions did not occur on the anticipated date or in the additional time period permitted by SFAS 133. For the three months and six months ended June 30, 2007 and 2006, there were no instances in which the Company discontinued cash flow hedges. There were no hedged forecasted transactions, other than the receipt or payment of variable interest payments, for the three months and six months ended June 30, 2007 and 2006.

Non-qualifying Derivatives and Derivatives for Purposes Other Than Hedging

The Company enters into the following derivatives that do not qualify for hedge accounting under SFAS 133 or for purposes other than hedging: (i) interest rate swaps and interest rate futures to economically hedge its exposure to interest rate volatility; (ii) foreign currency forwards and swaps to economically hedge its exposure to adverse movements in

MetLife Life and Annuity Company of Connecticut

(A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut)

Notes to Interim Condensed Consolidated Financial Statements (Unaudited) — (Continued)

exchange rates; (iii) credit default swaps to economically hedge exposure to adverse movements in credit; (iv) equity futures, equity index options and equity variance swaps to economically hedge liabilities embedded in certain variable annuity products; (v) credit default swaps to synthetically create investments; and (vi) financial forwards to buy and sell securities.

The Company recognized as net investment gains (losses), excluding embedded derivatives, changes in fair value related to derivatives that do not qualify for hedge accounting of ($22) million and ($21) million for the three months and six months ended June 30, 2007, respectively, and ($23) million and ($56) million for the three months and six months ended June 30, 2006, respectively.

Embedded Derivatives

The Company has certain embedded derivatives which are required to be separated from their host contracts and accounted for as derivatives. These host contracts include guaranteed minimum withdrawal contracts and guaranteed minimum accumulation contracts. The fair value of the Company’s embedded derivative assets was $17 million and $9 million at June 30, 2007 and December 31, 2006, respectively. The fair value of the Company’s embedded derivative liabilities was $0 at both June 30, 2007 and December 31, 2006. The amounts recorded and included in net investment gains (losses) were gains (losses) of $11 million and $17 million during the three months and six months ended June 30, 2007, respectively, and ($6) million and $19 million during the three months and six months ended June 30, 2006, respectively.

Credit Risk

The Company may be exposed to credit-related losses in the event of nonperformance by counterparties to derivative financial instruments. Generally, the current credit exposure of the Company’s derivative contracts is limited to the fair value at the reporting date. The credit exposure of the Company’s derivative transactions is represented by the fair value of contracts with a net positive fair value at the reporting date.

The Company manages its credit risk related to over-the-counter derivatives by entering into transactions with creditworthy counterparties, maintaining collateral arrangements and through the use of master agreements that provide for a single net payment to be made by one counterparty to another at each due date and upon termination. Because exchange traded futures are effected through regulated exchanges, and positions are marked to market on a daily basis, the Company has minimal exposure to credit-related losses in the event of nonperformance by counterparties to such derivative instruments.

The Company enters into various collateral arrangements, which require both the pledging and accepting of collateral in connection with its derivative instruments. As of June 30, 2007 and December 31, 2006, the Company was obligated to return cash collateral under its control of $72 million and $102 million, respectively. This unrestricted cash collateral is included in cash and cash equivalents and the obligation to return it is included in payables for collateral under securities loaned and other transactions in the consolidated balance sheets. As of June 30, 2007 and December 31, 2006, the Company had also accepted collateral consisting of various securities with a fair market value of $0 and $6 million, respectively, which are held in separate custodial accounts. The Company is permitted by contract to sell or repledge this collateral, but as of June 30, 2007 and December 31, 2006, none of the collateral had been sold or repledged.

In addition, the Company has exchange traded futures, which require the pledging of collateral. As of June 30, 2007 and December 31, 2006, the Company pledged collateral of $15 million and $14 million, respectively, which is included in fixed maturity securities. The counterparties are permitted by contract to sell or repledge this collateral.

MetLife Life and Annuity Company of Connecticut

(A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut)

Notes to Interim Condensed Consolidated Financial Statements (Unaudited) — (Continued)


4.	Contingencies, Commitments and Guarantees

Contingencies

Litigation

The Company is a defendant in a number of litigation matters. In some of the matters, largeand/or indeterminate amounts, including punitive and treble damages, are sought. Modern pleading practice in the United States permits considerable variation in the assertion of monetary damages or other relief. Jurisdictions may permit claimants not to specify the monetary damages sought or may permit claimants to state only that the amount sought is sufficient to invoke the jurisdiction of the trial court. In addition, jurisdictions may permit plaintiffs to allege monetary damages in amounts well exceeding reasonably possible verdicts in the jurisdiction for similar matters. This variability in pleadings, together with the actual experience of the Company in litigating or resolving through settlement numerous claims over an extended period of time, demonstrate to management that the monetary relief which may be specified in a lawsuit or claim bears little relevance to its merits or disposition value. Thus, unless stated below, the specific monetary relief sought is not noted.

Due to the vagaries of litigation, the outcome of a litigation matter and the amount or range of potential loss at particular points in time may normally be inherently impossible to ascertain with any degree of certainty. Inherent uncertainties can include how fact finders will view individually and in their totality documentary evidence, the credibility and effectiveness of witnesses’ testimony, and how trial and appellate courts will apply the law in the context of the pleadings or evidence presented, whether by motion practice, or at trial or on appeal. Disposition valuations are also subject to the uncertainty of how opposing parties and their counsel will themselves view the relevant evidence and applicable law.

On a quarterly and annual basis, the Company reviews relevant information with respect to liabilities for litigation and contingencies to be reflected in the Company’s consolidated financial statements. The review includes senior legal and financial personnel. Unless stated below, estimates of possible additional losses or ranges of loss for particular matters cannot in the ordinary course be made with a reasonable degree of certainty. Liabilities are established when it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. Liabilities have been established for a number of the matters noted below. It is possible that some of the matters could require the Company to pay damages or make other expenditures or establish accruals in amounts that could not be estimated as of June 30, 2007.

Macomber, et al. v. Travelers Property Casualty Corp., et al. (Conn. Super. Ct., Hartford, filed April 7, 1999).An amended putative class action complaint was filed against The Travelers Life and Annuity Company (now known as MetLife Annuity), Travelers Equity Sales, Inc. and certain former affiliates. The amended complaint alleged Travelers Property Casualty Corporation, a former MetLife Annuity affiliate, purchased structured settlement annuities from MetLife Annuity and spent less on the purchase of those structured settlement annuities than agreed with claimants, and that commissions paid to brokers for the structured settlement annuities, including an affiliate of MetLife Annuity, were paid in part to Travelers Property Casualty Corporation. On May 26, 2004, the Connecticut Superior Court certified a nationwide class action. In March 2006, the Connecticut Supreme Court reversed the trial court’s certification of a class. In June 2007, the matter was settled as to all defendants.

Regulatory bodies have contacted the Company and have requested information relating to various regulatory issues regarding mutual funds and variable insurance products, including the marketing of such products. The Company believes that many of these inquiries are similar to those made to many financial services companies as part of industry-wide investigations by various regulatory agencies. The Company is fully cooperating with regard to these information requests and investigations. The Company at the present time is not aware of any systemic problems with respect to such matters that may have a material adverse effect on the Company’s consolidated financial position.

In addition, the Company is a defendant or co-defendant in various other litigation matters in the normal course of business. These may include civil actions, arbitration proceedings and other matters arising in the normal course of business out of activities as an insurance company or otherwise. Further, state insurance regulatory authorities and other federal and

MetLife Life and Annuity Company of Connecticut

(A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut)

Notes to Interim Condensed Consolidated Financial Statements (Unaudited) — (Continued)

state authorities may make inquiries and conduct investigations concerning the Company’s compliance with applicable insurance and other laws and regulations.

In the opinion of the Company’s management, the ultimate resolution of these legal and regulatory proceedings would not be likely to have a material adverse effect on the Company’s consolidated financial position or liquidity, but, if involving monetary liability, may be material to the Company’s operating results for any particular period.

Commitments

Commitments to Fund Partnership Investments

The Company makes commitments to fund partnership investments in the normal course of business. The amounts of these unfunded commitments were $160 million and $46 million at June 30, 2007 and December 31, 2006, respectively. The Company anticipates that these amounts will be invested in partnerships over the next five years.

Mortgage Loan Commitments

The Company commits to lend funds under mortgage loan commitments. The amounts of these mortgage loan commitments were $28 million and $60 million at June 30, 2007 and December 31, 2006, respectively.

Commitments to Fund Bank Credit Facilities and Private Corporate Bond Investments

The Company commits to lend funds under bank credit facilities and private corporate bond investments. The amounts of these unfunded commitments were $12 million and $24 million at June 30, 2007 and December 31, 2006, respectively.

Guarantees

In the normal course of its business, the Company has provided certain indemnities, guarantees and commitments to third parties pursuant to which it may be required to make payments now or in the future. In the context of acquisition, disposition, investment and other transactions, the Company has provided indemnities and guarantees, including those related to tax, environmental and other specific liabilities, and other indemnities and guarantees that are triggered by, among other things, breaches of representations, warranties or covenants provided by the Company. In addition, in the normal course of business, the Company provides indemnifications to counterparties in contracts with triggers similar to the foregoing, as well as for certain other liabilities, such as third party lawsuits. These obligations are often subject to time limitations that vary in duration, including contractual limitations and those that arise by operation of law, such as applicable statutes of limitation. In some cases, the maximum potential obligation under the indemnities and guarantees is subject to a contractual limitation, while in other cases such limitations are not specified or applicable. Since certain of these obligations are not subject to limitations, the Company does not believe that it is possible to determine the maximum potential amount that could become due under these guarantees in the future.

In addition, the Company indemnifies its directors and officers as provided in its charters and by-laws. Also, the Company indemnifies its agents for liabilities incurred as a result of their representation of the Company’s interests. Since these indemnities are generally not subject to limitation with respect to duration or amount, the Company does not believe that it is possible to determine the maximum potential amount that could become due under these indemnities in the future.

The Company’s recorded liability at June 30, 2007 and December 31, 2006 for indemnities, guarantees and commitments was insignificant.

In connection with synthetically created investment transactions, the Company writes credit default swap obligations requiring payment of principal due in exchange for the referenced credit obligation, depending on the nature or occurrence of specified credit events for the referenced entities. In the event of a specified credit event, the Company’s maximum amount at risk, assuming the value of the referenced credits becomes worthless, was $35 million at June 30, 2007. The credit default swaps expire at various times during the next ten years.

MetLife Life and Annuity Company of Connecticut

(A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut)

Notes to Interim Condensed Consolidated Financial Statements (Unaudited) — (Continued)


5.	Comprehensive Income (Loss)

The components of comprehensive income (loss) are as follows:


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2007			2006			2007			2006
				(In millions)

Net income	$	46		$	33		$	91		$	82
Other comprehensive income (loss):
Unrealized investment gains (losses), net of related offsets and income tax		(45	)		(30	)		(40	)		(84	)

Other comprehensive income (loss):		(45	)		(30	)		(40	)		(84	)

Comprehensive income (loss)	$	1		$	3		$	51		$	(2	)


6.	Other Expenses

Information on other expenses is as follows:


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2007			2006			2007			2006
				(In millions)

Compensation	$	6		$	15		$	11		$	33
Commissions		21			45			44			106
Amortization of DAC and VOBA		55			40			121			76
Capitalization of DAC		(14	)		(41	)		(28	)		(96	)
Insurance tax		4			3			6			6
Other		5			5			19			13

Total other expenses	$	77		$	67		$	173		$	138


7.	Related Party Transactions

The Company has entered into various agreements with affiliates for services necessary to conduct its activities. Typical services provided under these agreements include management, policy administrative functions, personnel, investment advice and distribution services. Expenses and fees incurred with affiliates related to these agreements, recorded in other expenses, were $4 million and $8 million for the three months and six months ended June 30, 2007, respectively, and $8 million and $18 million for the three months and six months ended June 30, 2006, respectively.

At June 30, 2007 and December 31, 2006, the Company had net receivables from MICC of $27 million and $13 million, respectively. The Company had net receivables from other affiliates of $9 million and $4 million at June 30, 2007 and December 31, 2006, respectively, excluding affiliated reinsurance balances discussed below.

The Company has reinsurance agreements with certain of MetLife’s subsidiaries, including Reinsurance Group of America, Incorporated, MetLife Reinsurance Company of South Carolina (“MRSC”) and Exeter Reassurance Company, Ltd. At June 30, 2007, the Company had reinsurance-related assets and liabilities from these agreements totaling $131 million and $28 million, respectively. At December 31, 2006, comparable assets and liabilities were $108 million and $12 million, respectively. The Company had ceded premiums of $1 million for both the three months ended June 30, 2007 and 2006 and $3 million for both the six months ended June 30, 2007 and 2006. The Company had ceded universal life and investment-type product policy fees of $6 million and $13 million for the three months and six months ended June 30,

MetLife Life and Annuity Company of Connecticut

(A Wholly-Owned Subsidiary of MetLife Insurance Company of Connecticut)

Notes to Interim Condensed Consolidated Financial Statements (Unaudited) — (Continued)

2007, respectively, and $3 million and $7 million for the three months and six months ended June 30, 2006, respectively. The Company had interest expense associated with a reinsurance contract accounted for under deposit accounting, included in other expenses, of $11 million and $22 million for the three months and six months ended June 30, 2007, respectively, and $2 million and $10 million for the three months and six months ended June 30, 2006, respectively. The Company had ceded benefits included in policyholder benefits and claims of $5 million and $11 million for the three months and six months ended June 30, 2007, respectively, and $11 million and $20 million for the three months and six months ended June 30, 2006, respectively.

Previously, MRSC’s credit standing was enhanced by a letter of credit facility obtained from a third-party which was supported by the guarantee of its parent, MetLife, and which provided Regulation AXXX statutory reserve support for MRSC to be used to collateralize reinsurance obligations under a reinsurance agreement with the Company. During May 2007, MRSC replaced the letter of credit facility with a collateral financing arrangement with a third-party.


Item 2.	*Management’s Discussion and Analysis of Financial Condition and Results of Operations*

For purposes of this discussion, “MLAC” or the “Company” refers to MetLife Life and Annuity Company of Connecticut, a Connecticut corporation incorporated in 1973 (“MetLife Annuity”), and its subsidiary. MLAC is a wholly-owned subsidiary of MetLife Insurance Company of Connecticut (“MICC”). Management’s narrative analysis of the results of operations of MLAC is presented pursuant to General Instruction H(2)(a) ofForm 10-Q. This narrative analysis should be read in conjunction with the Company’s Annual Report onForm 10-K for the year ended December 31, 2006 (“2006 Annual Report”) filed with the U.S. Securities and Exchange Commission (“SEC”), the forward-looking statement information included below and the Company’s unaudited interim condensed consolidated financial statements included elsewhere herein.

This narrative analysis contains statements which constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements relating to trends in the operations and financial results and the business and the products of the Company, as well as other statements including words such as “anticipate,” “believe,” “plan,” “estimate,” “expect,” “intend” and other similar expressions. Forward-looking statements are made based upon management’s current expectations and beliefs concerning future developments and their potential effects on the Company. Such forward-looking statements are not guarantees of future performance.

Actual results may differ materially from those included in the forward-looking statements as a result of risks and uncertainties including, but not limited to, the following: (i) changes in general economic conditions, including the performance of financial markets and interest rates; (ii) heightened competition, including with respect to pricing, entry of new competitors, the development of new products by new and existing competitors and for personnel; (iii) investment losses and defaults; (iv) unanticipated changes in industry trends; (v) ineffectiveness of risk management policies and procedures; (vi) changes in accounting standards, practicesand/or policies; (vii) changes in assumptions related to deferred policy acquisition costs (“DAC”), value of business acquired (“VOBA”) or goodwill; (viii) discrepancies between actual claims experience and assumptions used in setting prices for the Company’s products and establishing the liabilities for the Company’s obligations for future policy benefits and claims; (ix) discrepancies between actual experience and assumptions used in establishing liabilities related to other contingencies or obligations; (x) adverse results or other consequences from litigation, arbitration or regulatory investigations; (xi) downgrades in the Company’s and its affiliates’ claims paying ability or financial strength ratings; (xii) regulatory, legislative or tax changes that may affect the cost of, or demand for, the Company’s products or services; (xiii) the effects of business disruption or economic contraction due to terrorism or other hostilities; and (xiv) other risks and uncertainties described from time to time in the Company’s filings with the SEC.

The Company specifically disclaims any obligation to update or revise any forward-looking statement, whether as a result of new information, future developments or otherwise.

Business

The Company’s core offerings include universal and variable life insurance, fixed and variable deferred annuities, structured settlements and payout annuities. The Company currently operates as a single segment and, as such, financial results are prepared and reviewed by management as a single operating segment.

Summary of Critical Accounting Estimates


	(i)	the fair value of investments in the absence of quoted market values;


	(ii)	investment impairments;

	(iii)	the recognition of income on certain investments;


	(iv)	application of the consolidation rules to certain investments;

	(v)	the fair value of and accounting for derivatives;

	(vi)	the capitalization and amortization of DAC and the establishment and amortization of VOBA;


	(vii)	the measurement of goodwill and related impairment, if any;

	(viii)	the liability for future policyholder benefits;


	(ix)	accounting for income taxes and the valuation of deferred income tax assets;

	(x)	accounting for reinsurance transactions; and

	(xi)	the liability for litigation and regulatory matters.

In applying these policies, management makes subjective and complex judgments that frequently require estimates about matters that are inherently uncertain. Many of these policies, estimates and related judgments are common in the insurance and financial services industries; others are specific to the Company’s business and operations. Actual results could differ from these estimates.

Results of Operations

Discussion of Results

The following table presents consolidated financial information for the Company for the periods indicated:


	Six Months Ended
	June 30,
	2007			2006
	(In millions)

Revenues
Premiums	$	21		$	22
Universal life and investment-type product policy fees		224			247
Net investment income		183			180
Other revenues		12			13
Net investment gains (losses)		(21	)		(74	)

Total revenues		419			388

Expenses
Policyholder benefits and claims		59			71
Interest credited to policyholder account balances		64			68
Other expenses		173			138

Total expenses		296			277

Income before provision for income tax		123			111
Provision for income tax		32			29

Net income	$	91		$	82

Net Income

Net income increased by $9 million, or 11%, to $91 million for the six months ended June 30, 2007 from $82 million for the comparable 2006 period.

Included in this increase were higher earnings of $34 million, net of income tax, from lower net investment losses, primarily attributable to reduced losses on the mark-to-market of derivatives and reduced losses on sales of fixed maturity securities resulting from the 2006 portfolio repositioning in a rising interest rate environment. Excluding the impact of net investment losses, net income decreased $25 million from the comparable 2006 period.

The comparable decrease in net income, excluding the impact of net investment losses, was primarily driven by the following items:


	•	Higher DAC amortization of $29 million, net of income tax, driven by lower net investment losses and revisions to management’s assumptions used to determine estimated gross profits and margins.

	•	Lower universal life and investment-type product policy fees and other revenues of $11 million, net of income tax, resulting from an increase in ceded reinsurance on certain universal life and annuity products.

	•	An increase in interest credited to policyholder account balances of $3 million, net of income tax, excluding the impact of interest margins discussed below, primarily due to lower amortization of the excess interest reserves on annuity and universal life blocks of business.

The aforementioned decreases in net income were partially offset by the following items:


	•	Lower expenses of $7 million, net of income tax, primarily due to a reduction in the current year period of previously established legal reserves.

	•	Higher net investment income of $6 million, net of income tax, on blocks of business that were not driven by interest margins, due to growth in the average asset base.

	•	Favorable underwriting results primarily in life products of $3 million, net of income tax. Underwriting results are generally the difference between the portion of premium and fee income intended to cover mortality, morbidity or other insurance costs, less claims incurred, and the change in insurance-related liabilities. Underwriting results are significantly influenced by mortality, morbidity, or other insurance-related experience trends, as well as the reinsurance activity related to certain blocks of business. Consequently, results can fluctuate from period to period.

	•	An increase in interest margins of $1 million, net of income tax. Interest margins relate primarily to the general account portion of investment-type products. Management attributed $8 million of the increase to the universal life business mostly offset by a $7 million decrease in other investment-type products. Interest margin is the difference between interest earned and interest credited to policyholder account balances. Interest earned approximates net investment income on invested assets attributed to these businesses with net adjustments for other non-policyholder elements. Interest credited approximates the amount recorded in interest credited to policyholder account balances. Interest credited to policyholder account balances is subject to contractual terms, including some minimum guarantees, and may reflect actions by management to respond to competitive pressures. Interest credited to policyholder account balances tends to move gradually over time to reflect market interest rate movements, subject to any minimum guarantees and, therefore, generally does not introduce volatility in expense.

Income tax expense for the six months ended June 30, 2007 was $32 million, or 26% of income from continuing operations before provision for income tax, compared with $29 million, or 26% of such income, for the comparable 2006 period. The 2007 and 2006 effective tax rates differ from the corporate tax rate of 35% primarily due to the impact of non-taxable investment income.

Revenues

Total revenues, excluding net investment gains (losses), decreased by $22 million to $440 million for the six months ended June 30, 2007 from $462 million in the comparable 2006 period.

Universal life and investment-type product policy fees for universal life and variable annuity products combined with other revenues decreased by $24 million. This decrease was primarily due to higher ceded fees resulting from an increase in ceded reinsurance on certain universal life and annuity products.

Net investment income increased by $3 million primarily due to an increase in securities lending.

Expenses

Total expenses increased by $19 million to $296 million for the six months ended June 30, 2007 from $277 million in the comparable 2006 period.

Policyholder benefits and claims decreased by $12 million primarily due to a prior year increase of $28 million for an excess mortality liability on specific blocks of life insurance policies. Partially offsetting this decrease were the impact of favorable structured settlement reserve refinements of $11 million in the prior year period, and unfavorable mortality in the life products of $5 million.

Interest credited to policyholder account balances decreased by $4 million due to a decrease of $8 million on the general account portion of investment-type products. Management attributed this decrease to lower average policyholder account balances in annuity products. Partially offsetting this decrease was lower amortization of the excess interest reserves of $4 million primarily resulting from growth in the universal life blocks of business.

Other expenses increased by $35 million primarily due to higher DAC amortization of $45 million driven by lower net investment losses and revisions to management’s assumptions used to determine estimated gross profits and margins. Partially offsetting the increase were lower expenses of $10 million, primarily due to a reduction in the current year period of previously established legal reserves. Also impacting other expenses were lower compensation expenses partially offset by higher interest associated with an affiliated reinsurance agreement accounted for as a deposit contract.

Insurance Regulations

Risk-based capital (“RBC”) requirements are used as minimum capital requirements by the National Association of Insurance Commissioners and the state insurance departments to identify companies that merit further regulatory action on an annual basis. RBC is based on a formula calculated by applying factors to various asset, premium and statutory reserve items. The formula takes into account the risk characteristics of the insurer, including asset risk, insurance risk, interest rate risk and business risk and is calculated on an annual basis. The formula is used as an early warning regulatory tool to identify possible inadequately capitalized insurers for purposes of initiating regulatory action, and not as a means to rank insurers generally. State insurance laws provide insurance regulators the authority to require various actions by, or take various actions against, insurers whose total adjusted capital does not exceed certain RBC levels. As of the date of the most recent statutory financial statements filed with insurance regulators, the total adjusted capital of MetLife Annuity was in excess of each of those RBC levels calculated at December 31, 2006.

MetLife Annuity had negative statutory unassigned surplus at December 31, 2006, and therefore cannot pay dividends to MICC without prior regulatory approval from the Connecticut Commissioner of Insurance.

Adoption of New Accounting Pronouncements

Income Taxes

Insurance Contracts

(“SFAS”) No. 97,Accounting and Reporting by Insurance Enterprises for Certain Long-Duration Contracts and for Realized Gains and Losses from the Sale of Investments.SOP 05-1 defines an internal replacement as a modification in product benefits, features, rights, or coverages that occurs by the exchange of a contract for a new contract, or by amendment, endorsement, or rider to a contract, or by the election of a feature or coverage within a contract.SOP 05-1 is effective for internal replacements occurring in fiscal years beginning after December 15, 2006. In addition, in February 2007, the American Institute of Certified Public Accountants (“AICPA”) issued related Technical Practice Aids (“TPAs”) to provide further clarification ofSOP 05-1. The TPAs became effective concurrently with the adoption ofSOP 05-1.

The adoption ofSOP 05-1 and the Company’s interpretation of related TPAs did not have a material impact on the Company’s unaudited interim condensed consolidated financial statements.

Other

Future Adoption of New Accounting Pronouncements

arrangements. The Company is currently evaluating the impact ofFSP 39-1 on the Company’s consolidated financial statements.


Item 4.	*Controls and Procedures*

Management, with the participation of the President and Chief Financial Officer, has evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures as defined in Exchange ActRule 15d-15(e) as of the end of the period covered by this report. Based on that evaluation, the President and Chief Financial Officer have concluded that these disclosure controls and procedures are effective.

There were no changes to the Company’s internal control over financial reporting as defined in Exchange ActRule 13a-15(f) during the quarter ended June 30, 2007 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Part II — Other Information


Item 1.	*Legal Proceedings*

The following should be read in conjunction with (i) Part I, Item 3, of the 2006 Annual Report; (ii) Part II, Item 1, of MetLife Annuity’s Quarterly Report onForm 10-Q for the quarter ended March 31, 2007; and (iii) Note 4 to the unaudited interim condensed consolidated financial statements in Part I of this report.

The Company is a defendant or co-defendant in various other litigation matters in the normal course of business. These may include civil actions, arbitration proceedings and other matters arising in the normal course of business out of activities as an insurance company or otherwise. Further, state insurance regulatory authorities and other federal and state authorities may make inquiries and conduct investigations concerning the Company’s compliance with applicable insurance and other laws and regulations.


Item 1A.	*Risk Factors*

The following should be read in conjunction with and supplements and amends the factors that may affect the Company’s business or operations described under “Risk Factors” in Part I, Item 1A, of the 2006 Annual Report.

Litigation and Regulatory Investigations Are Increasingly Common in the Insurance Business and May Result in Significant Financial Losses and Harm to Our Reputation

We face a significant risk of litigation and regulatory investigations in the ordinary course of operating our business, including the risk of class action lawsuits. Our pending legal and regulatory actions include proceedings specific to us and others generally applicable to business practices in the industries in which we operate. In connection with our insurance operations, plaintiffs’ lawyers may bring or are bringing class actions and individual suits alleging, among other things, issues relating to sales or underwriting practices, claims payments and procedures, product design, disclosure, administration, additional premium charges for premiums paid on a periodic basis, denial or delay of benefits and breaches of fiduciary or other duties to customers. Plaintiffs in class action and other lawsuits against us may seek very large or indeterminate amounts, including punitive and treble damages, and the damages claimed and the amount of any probable and estimable liability, if any, may remain unknown for substantial periods of time. See “Legal Proceedings” in Part I, Item 3, of the 2006 Annual Report.

On a quarterly and annual basis, we review relevant information with respect to liabilities for litigation and contingencies to be reflected in our consolidated financial statements. The review includes senior legal and financial personnel. Unless stated elsewhere herein, estimates of possible additional losses or ranges of loss for particular matters cannot in the ordinary course be made with a reasonable degree of certainty. See “Legal Proceedings” in Part I, Item 3, of the 2006 Annual Report. Liabilities are established when it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. It is possible that some of the matters could require us to pay damages or make other expenditures or establish accruals in amounts that could not be estimated as of June 30, 2007.

We are subject to various regulatory inquiries, such as information requests, subpoenas and books and record examinations, from state and federal regulators and other authorities. A substantial legal liability or a significant regulatory action against us could have a material adverse effect on our business, financial condition and results of operations. Moreover, even if we ultimately prevail in the litigation, regulatory action or investigation, we could suffer significant reputational harm, which could have a material adverse effect on our business, financial condition and results of operations, including our ability to attract new customers and retain our current customers.

The insurance industry has become the focus of increased scrutiny by regulatory and law enforcement authorities. This scrutiny includes the commencement of investigations and other proceedings relating to allegations of improper conduct in connection with the payment of, and disclosure with respect to, contingent commissions paid by insurance companies to intermediaries, the solicitation and provision of fictitious or inflated quotes, the use of inducements in the sale of insurance products and the accounting treatment for finite insurance and reinsurance or other non-traditional or loss mitigation insurance and reinsurance products.

One possible result of these investigations and attendant lawsuits is that many insurance industry practices and customs may change, including, but not limited to, the manner in which insurance is marketed and distributed through independent brokers and agents. We cannot predict how industry regulation with respect to the use of such independent brokers and agents may change. Such changes, however, could adversely affect our ability to implement our business strategy, which could materially affect our growth and profitability.

Recent industry-wide inquiries also include those regarding market timing and late trading in mutual funds and variable insurance products and, generally, the marketing of products. In the past, we have received inquiries regarding market timing and other matters from the SEC.

We cannot give assurance that current claims, litigation, unasserted claims probable of assertion, investigations and other proceedings against us will not have a material adverse effect on our business, financial condition or results of operations. It is also possible that related or unrelated claims, litigation, unasserted claims probable of assertion, investigations and proceedings may be commenced in the future, and we could become subject to further investigations and have lawsuits filed or enforcement actions initiated against us. In addition, increased regulatory scrutiny and any resulting investigations or proceedings could result in new legal actions and precedents and industry-wide regulations that could adversely affect our business, financial condition and results of operations.


Item 6.	*Exhibits*


2	.1	Agreement and Plan of Merger by and between MetLife Insurance Company of Connecticut and MetLife Life and Annuity Company of Connecticut, dated as of June 29, 2007
3	.1	Charter of The Travelers Life and Annuity Company, as effective April 10, 1990 (Incorporated by reference to Exhibit 3.1 to The Travelers Life and Annuity Company’s Annual Report onForm 10-K for the year ended December 31, 2005 (“2005 Annual Report”))
3	.2	Certificate of Amendment of the Charter as Amended and Restated of The Travelers Life and Annuity Company, as effective May 1, 2006 (Incorporated by reference to Exhibit 3.2 to the 2005 Annual Report)
3	.3	Certificate of Correction to the Certificate of Amendment of the Charter of MetLife Life and Annuity Company of Connecticut, filed April 9, 2007
31	.1	Certification of President pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31	.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32	.1	Certification of President pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32	.2	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

METLIFE LIFE AND ANNUITY COMPANY OF CONNECTICUT


	By:	/s/ Joseph J. Prochaska, Jr.

Name: Joseph J. Prochaska, Jr.


	Title:	Executive Vice-President and Chief Accounting Officer

(Authorized Signatory and Chief Accounting Officer)

Date: August 10, 2007

Exhibit Index


Exhibit
Number			Exhibit Name

	2	.1	Agreement and Plan of Merger by and between MetLife Insurance Company of Connecticut and MetLife Life and Annuity Company of Connecticut, dated as of June 29, 2007
	3	.1	Charter of The Travelers Life and Annuity Company, as effective April 10, 1990 (Incorporated by reference to Exhibit 3.1 to The Travelers Life and Annuity Company’s Annual Report onForm 10-K for the year ended December 31, 2005 (“2005 Annual Report”))
	3	.2	Certificate of Amendment of the Charter as Amended and Restated of The Travelers Life and Annuity Company, as effective May 1, 2006 (Incorporated by reference to Exhibit 3.2 to the 2005 Annual Report)
	3	.3	Certificate of Correction to the Certificate of Amendment of the Charter of MetLife Life and Annuity Company of Connecticut, filed April 9, 2007
	31	.1	Certification of President pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
	31	.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
	32	.1	Certification of President pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
	32	.2	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

E-1

Positive
Negative
Uncertain
Constraining
Legalese
Litigious
Readability	H.S. freshman Bad

MetLife Life & Annuity CO of Connecticut Inactive 10-Q2007 Q2 Quarterly report

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