As filed with the Securities and Exchange Commission on April 30, 2018
Registration No. 333-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933
OF SECURITIES OF UNIT INVESTMENT TRUSTS
REGISTERED ON FORM N-8B-2
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
(Exact Name of Registrant)
METROPOLITAN TOWER LIFE INSURANCE COMPANY
(Name of Depositor)
200 Park Avenue
New York, NY 10166
(Address of Depositor's Principal Executive Offices)
Name and complete address of agent for service:
Stephen W. Gauster, Esq.
Senior Vice President, Interim General Counsel
Metropolitan Tower Life Insurance Company
200 Park Avenue
New York, NY 10166
Copy to:
W. Thomas Conner
Vedder Price PC
1633 Broadway, 31st Floor
New York, New York 10019
Approximate Date of Proposed Public Offering:
On April 30, 2018 or as soon as possible after the effective date of this
registration statement.
The Registrant hereby amends this registration statement on such dates as may
be necessary to delay its effective date until the Registrant shall file a
further amendment that specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall thereafter
become effective on such date as the Commission, acting pursuant to
Section 8(a), may determine.
Title of securities being registered: Flexible Premium Variable Life Insurance
Policy.
This Registration Statement relates to Registration No. 333-53477.
NOTE
Registrant is filing this Registration Statement for the purpose of registering
interests under the following policies (collectively referred to as the
"Policies"):
Flexible Premium Variable Life Insurance Policies (VUL 98/00)
on a new Form S-6. Interests under the Policies were previously registered on
Form S-6 (File No. 333-53477) and funded by General American Separate Account
Eleven. Upon effectiveness of a merger between General American Life Insurance
Company with and into Metropolitan Tower Life Insurance Company ("Met Tower
Life"), (i) Met Tower Life became the Depositor of the Policies and
(ii) General American Separate Account Eleven was transferred intact to Met
Tower Life.
Pursuant to the SEC staff's position in the Great-West Life & Annuity Insurance
Co. No-Action Letter (available October 23, 1990) concerning annual update
requirements for inactive policies, Depositor no longer files annual
post-effective amendments to this Form S-6.
METROPOLITAN TOWER LIFE INSURANCE COMPANY
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
SUPPLEMENT DATED APRIL 30, 2018 TO THE
PROSPECTUS DATED MAY 1, 2002 (AS SUPPLEMENTED)
This supplement updates certain information contained in the last full
prospectus for the above-referenced variable life insurance policy (the
"Policy"), as annually and periodically supplemented (the "Prospectus") and
consists of two parts: PART 1 and PART 2. Part 1 of the supplement describes
the recent merger involving General American Life Insurance Company, the
insurer that issued your Policy, and what it means for you. Part 2 of the
supplement provides additional information regarding your Policy, including
information regarding the separate account, the funds available, and the
underlying fund fees and expenses.
Please read this supplement and keep it with your Prospectus for future
reference. You may obtain a copy of the Prospectus for your Policy, free of
charge, by writing to our Administrative Office, or by calling 1-800-638-9294,
or by accessing the Securities and Exchange Commission's website at
http://www.sec.gov.
PART 1. INFORMATION REGARDING THE MERGER
Effective following the close of business on April 27, 2018, General
American Life Insurance Company was merged into Metropolitan Tower Life
Insurance Company ("Met Tower Life"). Simultaneously, Met Tower Life changed
its domicile from the state of Delaware to Nebraska. Accordingly, all
references in the Prospectus to General American Life Insurance Company or the
Company are deemed to refer to Met Tower Life.
As a result of the merger, Met Tower Life assumed legal ownership of all
of the assets of General American Life Insurance Company, including General
American Separate Account Eleven (the "Separate Account") and the assets held
in the Separate Account. Met Tower Life is now responsible for administering
your Policy and paying any benefits due to you under the Policy. In other
words, you are now a Policy Owner of Met Tower Life. Nevertheless, the transfer
of your Policy to Met Tower Life will not impact the administration of your
Policy. In particular:
. There are no changes in our obligations or your rights and benefits
under your Policy as a result of the merger.
. None of the underlying funds previously available to you under your
Policy have been substituted or terminated by virtue of the merger.
The underlying funds currently available are listed below in Part 2
of this supplement under "THE SEPARATE ACCOUNT."
. Met Tower Life will continue to service and maintain your Policy in
accordance with its terms and there has been no change in the contact
information for the administrative offices for your Policy.
. Your cash value is not affected by the merger and no charges have
been or will be imposed in connection with the merger.
. The merger did not result in any federal income tax consequences to
you.
THE FOLLOWING REPLACES THE SUB-SECTION OF THE PROSPECTUS TITLED "THE COMPANY,"
IN THE SECTION OF THE PROSPECTUS TITLED "THE COMPANY AND THE SEPARATE ACCOUNT,"
AND SUPERSEDES ANY OTHER DISCLOSURE IN THE PROSPECTUS (INCLUDING ANY AND ALL
INTERIM SUPPLEMENTS THERETO) TO THE CONTRARY:
THE COMPANY
Metropolitan Tower Life Insurance Company ("Met Tower Life" or "the
Company") is a stock life insurance company originally incorporated under the
laws of the State of Delaware in 1982 and currently subject to the laws of the
state of Nebraska. Met Tower Life is licensed to issue business in fifty states
and the District of Columbia. Met Tower Life is a direct wholly-owned
subsidiary of MetLife, Inc., a publicly-traded company. MetLife, Inc., through
its subsidiaries and affiliates, is a leading provider of insurance and
financial services to individuals and institutional customers. The principal
executive offices of Met Tower Life are located at 200 Park Avenue New York, NY
10166.
Prior to April 30, 2018, the Policy was issued by General American Life
Insurance Company ("General American"). On April 27, 2018, following the close
of business, General American merged into Met Tower Life which will replace
General American as the issuer of the Policy.
The Administrative Office for various Policy transactions is as follows:
Premium Payments Met Tower Life
P.O. Box 790201
St. Louis, MO 63179-0201
Payment Inquires and Correspondence Met Tower Life
P.O. Box 356
Warwick, RI 02887-0355
Beneficiary and Ownership Changes Met Tower Life
P.O. Box 392
Warwick, RI 02887-0356
Surrenders, Loans, Withdrawals and Met Tower Life
Division Transfers P.O. Box 356
Warwick, RI 02887-0356
Death Claims Met Tower Life
P.O. Box 356
Warwick, RI 02887-0356
All Telephone Transactions and
Inquiries (800) 638-9294
*****
THE FOLLOWING REPLACES THE FIRST PARAGRAPH OF THE DISCLOSURE IN YOUR PROSPECTUS
UNDER THE CAPTION "THE SEPARATE ACCOUNT," IN THE SECTION OF THE PROSPECTUS
TITLED "THE COMPANY AND THE SEPARATE ACCOUNT," AND SUPERSEDES ANY OTHER
DISCLOSURE IN THE PROSPECTUS (INCLUDING ANY AND ALL INTERIM SUPPLEMENTS
THERETO) TO THE CONTRARY:
General American Life Insurance Company Separate Account Eleven ("the
Separate Account") was established by General American as a separate investment
account on January 24, 1985 to hold the assets that underlie the Policy. The
Separate Account will receive and invest the Net Premiums paid under the Policy
and allocated to it. In addition, the Separate Account currently receives and
invests Net Premiums for other classes of flexible premium variable life
insurance policies and might do so for additional classes in the future. On
April 27, 2018, following the close of business, General American merged into
Met Tower Life and the Separate Account became a separate account of Met Tower
Life.
*****
THE FOLLOWING REPLACES THE DISCLOSURE IN YOUR PROSPECTUS UNDER THE SECTION OF
THE PROSPECTUS TITLED "DISTRIBUTION OF THE POLICIES," AND SUPERSEDES ANY OTHER
DISCLOSURE IN THE PROSPECTUS (INCLUDING ANY AND ALL INTERIM SUPPLEMENTS
THERETO) TO THE CONTRARY:
The Policies are no longer offered for sale. Existing Policy Owners may
continue to make additional purchase payments to their Policies.
MetLife Investors Distribution Company ("MLIDC") is the principal
underwriter and distributor of the Policies. MLIDC, which is our affiliate,
also acts as the principal underwriter and distributor of other variable life
insurance policies and variable annuity contracts that we, or affiliated
companies issue. We pay compensation to MLIDC for sales of the Policies by
selling firms. We also pay amounts to MLIDC that may be used for its operating
other expenses, including sales distribution expenses.
MLIDC is a Missouri corporation organized in 2000 and its principal
executive offices are located at 200 Park Avenue, New York, NY 10166. MLIDC is
registered under the Securities Exchange Act of 1934 as a broker-dealer and is
a member of the Financial Industry Regulatory Authority ("FINRA"). FINRA
provides background information about broker-dealers and their registered
representatives through FINRA BrokerCheck. You may contact the FINRA
BrokerCheck Hotline at 1-800-289-9999, or log on to www.finra.org. An investor
brochure that includes information describing FINRA BrokerCheck is available
through the Hotline or on-line.
MLIDC has entered into selling agreements with other broker-dealers
("selling firms") for the sale of the Policies. The Company pays commissions to
these selling firms for the sale of the Policies, and these selling firms
compensate their registered representative agents. Commissions are payable on
net collected premiums received by the Company. A portion of the payments made
to selling firms may be passed on to their registered representatives in
accordance with their internal compensation programs. Those programs may also
include other types of cash and non-cash compensation and other benefits. Ask
your registered representative for further information about what your
registered representative and the selling firm for which he or she works may
receive in connection with your purchase of a Policy.
MLIDC received sales compensation with respect to the Policies in the
following amounts during the periods indicated: $2,895,144 for 2017, $2,424,979
for 2016 and $2,368,157 for 2015.
These commissions and other incentives or payments are not charged
directly to Policy Owners or the Separate Account. We intend to recoup
commissions and other sales expenses through fees and charges deducted under
the Policy.
*****
THE FOLLOWING REPLACES THE DISCLOSURE IN YOUR PROSPECTUS UNDER THE SECTION OF
THE PROSPECTUS TITLED "SAFEKEEPING OF THE SEPARATE ACCOUNT'S ASSETS," AND
SUPERSEDES ANY OTHER DISCLOSURE IN THE PROSPECTUS (INCLUDING ANY AND ALL
INTERIM SUPPLEMENTS THERETO) TO THE CONTRARY:
Metropolitan Tower Life Insurance Company, 200 Park Avenue New York, NY
10166, acts as the custodian of the assets of the Separate Account.
Metropolitan Tower Life Insurance Company maintains records of all purchases
and redemptions of applicable Fund shares by each of the Divisions.
*****
THE FOLLOWING REPLACES THE DISCLOSURE IN YOUR PROSPECTUS UNDER THE SECTION OF
THE PROSPECTUS TITLED "STATE REGULATION OF THE COMPANY," AND SUPERSEDES ANY
OTHER DISCLOSURE IN THE PROSPECTUS (INCLUDING ANY AND ALL INTERIM SUPPLEMENTS
THERETO) TO THE CONTRARY:
The Company, a stock life insurance company organized under the laws of
Nebraska, and the Separate Account are subject to regulation by the Nebraska
Department of Insurance. An annual statement is filed with the Director of
Insurance on or before March 1st of each year covering the operations and
reporting on the financial condition of the Company as of December 31 of the
preceding year. Periodically, the Director of Insurance examines the
liabilities and reserves of the Company and the Separate Account, and the
Director conducts a full examination of the Company's operations at least once
every five years in accordance with standards set forth in Nebraska insurance
law and the National Association of Insurance Commissioners Examiners Handbook.
In addition, the Company is subject to the insurance laws and
regulations of other states within which it is licensed or may become licensed
to operate. Generally, the insurance departments of other states apply the laws
of the state of domicile in determining permissible investments.
*****
THE FOLLOWING REPLACES THE DISCLOSURE IN YOUR PROSPECTUS UNDER THE SECTION OF
THE PROSPECTUS TITLED "MANAGEMENT OF THE COMPANY," AND SUPERSEDES ANY OTHER
DISCLOSURE IN THE PROSPECTUS (INCLUDING ANY AND ALL INTERIM SUPPLEMENTS
THERETO) TO THE CONTRARY:
PRINCIPAL OCCUPATION(S) DURING PAST 5
NAME YEARS*
------------------------------------- -------------------------------------
PRINCIPAL OFFICERS**
Marlene Debel President and Presiding Officer of
the Board since March 2018. Ms. Debel
has served in various capacities with
MetLife, Inc. since 2011.
Richard Leist Executive Vice President and
Executive Investment Officer since
2005.
Jason Manske Executive Vice President and Chief
Hedging Officer since January 2014.
From August 2008 through December
2013, Mr. Manske served in various
capacities within MetLife, Inc.
John McCallion Executive Vice President and
Treasurer July 2016. Mr. McCallion
has held various positions within
MetLife, Inc. since July 2006.
William O'Donnell Executive Vice President and Chief
Accounting Officer since June 2017.
From 1989 to June 2017, Mr. O'Donnell
has held various positions within
MetLife, Inc.
Darrell Hall Senior Vice President and Chief Legal
Officer since October 2016. Mr. Hall
has held various positions within
MetLife, Inc. since 2001.
Zulfi Ahmed Senior Vice President and Chief
Information Security Officer since
August 2017. Prior to joining
MetLife, Inc., Mr. Ahmed was the
Global Chief Information Security
Officer for PepsiCo.
Jeannette Pina Vice President and Secretary since
May 2017. Ms. Pina has held various
positions within MetLife, Inc. since
2013. From 2008 to 2013, Ms. Pina was
senior counsel at ING Insurance
America.
Anne Belden Vice President and Chief Financial
Officer since 2004.
--------
* All positions listed are with Met Tower Life unless otherwise indicated.
** The principal business address of Met Tower Life is 200 Park Avenue, New
York, NY 10166.
PRINCIPAL OCCUPATION(S) DURING PAST 5
NAME YEARS*
------------------------------------- -------------------------------------
DIRECTORS
Micheal Borowski Director effective April 27, 2018 and
Ag Investment Associate for MetLife,
Inc. since November 2005.
Frank Cassandra Director since October 2016.
Mr. Cassandra has held various
positions within MetLife, Inc. since
1986.
Marlene Debel Director since October 2016.
Andrew Kaniuk Director since September 2001.
Mr. Kaniuk has held various positions
within MetLife, Inc. since 1988.
John McCallion Director since July 2016.
Mr. McCallion has held various
positions within MetLife, Inc. since
July 2006.
Richard Leist Director since April 2018. Mr. Leist
has been Executive Vice President and
Executive Investment Officer with
MetLife, Inc. since 2005
Alessandro Papa Director effective April 27, 2018.
Mr. Papa is Head of Group Pricing and
Valuation Oversight and interim US
Chief Risk Officer since December
2017. Mr. Papa is Head of Group
Pricing and Valuation Oversight and
interim US Chief Risk Officer since
December 2017. From 2012 until
December 2017, Mr. Papa was head of
Risk Analytics at AIG.
Michael Zarcone Director effective April 27, 2018.
Mr. Zarcone is Executive Vice
President, Corporate Affairs for
MetLife, Inc. since 2014. Mr. Zarcone
has held various positions within
MetLife, Inc. since 1991.
--------
* All positions listed are with Met Tower Life unless otherwise indicated.
*****
THE FOLLOWING REPLACES THE DISCLOSURE IN YOUR PROSPECTUS UNDER THE SECTION OF
THE PROSPECTUS TITLED "LEGAL PROCEEDINGS," AND SUPERSEDES ANY OTHER DISCLOSURE
IN THE PROSPECTUS (INCLUDING ANY AND ALL INTERIM SUPPLEMENTS THERETO) TO THE
CONTRARY:
In the ordinary course of business, Met Tower Life, similar to other
life insurance companies, is involved in lawsuits (including class action
lawsuits), arbitrations and other legal proceedings. Also, from time to time,
state and federal regulators or other officials conduct formal and informal
examinations or undertake other actions dealing with various aspects of the
financial services and insurance industries. In some legal proceedings
involving insurers, substantial damages have been sought and/or material
settlement payments have been made. It is not possible to predict with
certainty the ultimate outcome of any pending legal proceeding or regulatory
action. However, Met Tower Life does not believe any such action or proceeding
will have a material adverse effect upon the Separate Account or upon the
ability of MetLife Investors Distribution Company to perform it to perform its
contract with the Separate Account or of Met Tower Life to meet its obligations
under the Policies.
*****
THE FOLLOWING REPLACES THE SECTION OF THE PROSPECTUS TITLED "EXPERTS," AND
SUPERSEDES ANY OTHER DISCLOSURE IN THE PROSPECTUS (INCLUDING ANY AND ALL
INTERIM SUPPLEMENTS THERETO) TO THE CONTRARY:
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The financial statements and financial highlights comprising each of the
Divisions of General American Separate Account Eleven included in this
Prospectus, have been audited by Deloitte & Touche LLP, an
independent registered public accounting firm, as stated in their report
appearing herein. Such financial statements and financial highlights are
included in reliance upon the report of such firm given upon their authority as
experts in accounting and auditing.
INDEPENDENT AUDITORS
The consolidated financial statements of Metropolitan Tower Life
Insurance Company and subsidiaries, included in this Prospectus, have been
audited by Deloitte & Touche LLP, independent auditors, as stated in their
report appearing herein (which report expresses an unmodified opinion and
includes an emphasis-of-matter paragraph related to Metropolitan Tower Life
Insurance Company and subsidiaries being a member of a controlled group). Such
financial statements are included in reliance upon the report of such firm
given upon their authority as experts in accounting and auditing.
The consolidated financial statements of General American Life Insurance
Company and subsidiary, included in this Prospectus, have been audited by
Deloitte & Touche LLP, independent auditors, as stated in their report
appearing herein (which report expresses an unmodified opinion and includes an
emphasis-of-matter paragraph related to General American Life Insurance Company
and subsidiary being a member of a controlled group). Such financial statements
are included in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.
The principal business address of Deloitte & Touche LLP is 30
Rockefeller Plaza, New York, New York 10112-0015.
*****
THE FOLLOWING REPLACES THE DISCLOSURE IN YOUR PROSPECTUS UNDER THE SECTION OF
THE PROSPECTUS TITLED "FINANCIAL STATEMENTS," AND SUPERSEDES ANY OTHER
DISCLOSURE IN THE PROSPECTUS (INCLUDING ANY AND ALL INTERIM SUPPLEMENTS
THERETO) TO THE CONTRARY:
The financial statements of General American Separate Account Eleven and
Metropolitan Tower Life Insurance Company are included herewith. Also included
are the financial statements of General American Life Insurance Company (an
affiliate of Met Tower Life that was merged into Met Tower Life effective as of
April 27, 2018) and a narrative description of the PRO FORMA effects of the
merger.
The financial statements of Metropolitan Tower Life Insurance Company
should be distinguished from the financial statements of the Separate Account
and should be considered only as bearing upon the ability of Met Tower Life, to
meet its obligations under the Policy. They should not be considered as bearing
on the investment performance of the assets held in the Separate Account.
*****
PART 2. ADDITIONAL INFORMATION REGARDING YOUR POLICY
THE SEPARATE ACCOUNT
The separate account consists of divisions, each of which corresponds to
an underlying Fund. Each division may either make money or lose money.
Therefore if you invest in a division of the separate account, you may either
make money or lose money, depending on the investment experience of that
division. There is no guaranteed rate of return in the separate account.
The following chart shows the Funds that are available under the Policy
along with the name of the investment adviser, sub-adviser (where applicable)
and investment objective of each Fund. The Funds have different investment
goals and strategies. You should review the prospectus of each Fund carefully
before investing, or seek professional guidance in determining which Fund(s)
best meet your objectives.
NOTE: The Russell Investment Funds are not available to Destiny or Executive
Benefit Policies. For all other Policies, the Russell Investment Funds are only
available for Policies with an issue date prior to January 1, 2000.
--------------------------------------------------------------------------------------------------------------------
FUND INVESTMENT OBJECTIVE INVESTMENT ADVISER/SUBADVISER
--------------------------------------------------------------------------------------------------------------------
AMERICAN FUNDS INSURANCE SERIES(R) --
CLASS 2
--------------------------------------------------------------------------------------------------------------------
American Funds Global Small Seeks long-term growth of capital. Capital Research and Management
Capitalization Fund Company/SM/
--------------------------------------------------------------------------------------------------------------------
American Funds Growth Fund Seeks growth of capital. Capital Research and Management
Company/SM/
--------------------------------------------------------------------------------------------------------------------
American Funds Growth-Income Fund Seeks long-term growth of capital and Capital Research and Management
income. Company/SM/
--------------------------------------------------------------------------------------------------------------------
BRIGHTHOUSE FUNDS TRUST I -- CLASS A
--------------------------------------------------------------------------------------------------------------------
Clarion Global Real Estate Portfolio Seeks total return through investment Brighthouse Investment Advisers, LLC
in real estate securities, Subadviser: CBRE Clarion Securities
emphasizing both capital appreciation LLC
and current income.
--------------------------------------------------------------------------------------------------------------------
ClearBridge Aggressive Growth Seeks capital appreciation. Brighthouse Investment Advisers, LLC
Portfolio Subadviser: ClearBridge Investments,
LLC
--------------------------------------------------------------------------------------------------------------------
Harris Oakmark International Portfolio Seeks long-term capital appreciation. Brighthouse Investment Advisers, LLC
Subadviser: Harris Associates L.P.
--------------------------------------------------------------------------------------------------------------------
Invesco Small Cap Growth Portfolio Seeks long-term growth of capital. Brighthouse Investment Advisers, LLC
Subadviser: Invesco Advisers, Inc.
--------------------------------------------------------------------------------------------------------------------
MFS(R) Research International Seeks capital appreciation. Brighthouse Investment Advisers, LLC
Portfolio Subadviser: Massachusetts Financial
Services Company
--------------------------------------------------------------------------------------------------------------------
Morgan Stanley Mid Cap Growth Seeks capital appreciation. Brighthouse Investment Advisers, LLC
Portfolio Subadviser: Morgan Stanley
Investment Management Inc.
--------------------------------------------------------------------------------------------------------------------
PIMCO Total Return Portfolio Seeks maximum total return, Brighthouse Investment Advisers, LLC
consistent with the preservation of Subadviser: Pacific Investment
capital and prudent investment Management Company LLC
management.
--------------------------------------------------------------------------------------------------------------------
T. Rowe Price Large Cap Value Seeks long-term capital appreciation Brighthouse Investment Advisers, LLC
Portfolio by investing in common stocks Subadviser: T. Rowe Price Associates,
believed to be undervalued. Income is Inc.
a secondary objective.
--------------------------------------------------------------------------------------------------------------------
T. Rowe Price Mid Cap Growth Portfolio Seeks long-term growth of capital. Brighthouse Investment Advisers, LLC
Subadviser: T. Rowe Price Associates,
Inc.
--------------------------------------------------------------------------------------------------------------------
Victory Sycamore Mid Cap Value Seeks high total return by investing Brighthouse Investment Advisers, LLC
Portfolio (formerly Invesco Mid Cap in equity securities of mid-sized Subadviser: Victory Capital
Value Portfolio) companies. Management Inc.
--------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------
FUND INVESTMENT OBJECTIVE INVESTMENT ADVISER/SUBADVISER
-------------------------------------------------------------------------------------------------------------------
BRIGHTHOUSE FUNDS TRUST II -- CLASS A
-------------------------------------------------------------------------------------------------------------------
Baillie Gifford International Stock Seeks long-term growth of capital. Brighthouse Investment Advisers, LLC
Portfolio Subadviser: Baillie Gifford Overseas
Limited
-------------------------------------------------------------------------------------------------------------------
BlackRock Bond Income Portfolio Seeks a competitive total return Brighthouse Investment Advisers, LLC
primarily from investing in Subadviser: BlackRock Advisors, LLC
fixed-income securities.
-------------------------------------------------------------------------------------------------------------------
BlackRock Capital Appreciation Seeks long-term growth of capital. Brighthouse Investment Advisers, LLC
Portfolio Subadviser: BlackRock Advisors, LLC
-------------------------------------------------------------------------------------------------------------------
BlackRock Ultra-Short Term Bond Seeks a high level of current income Brighthouse Investment Advisers, LLC
Portfolio consistent with preservation of Subadviser: BlackRock Advisors, LLC
capital.
-------------------------------------------------------------------------------------------------------------------
Brighthouse/Artisan Mid Cap Value Seeks long-term capital growth. Brighthouse Investment Advisers, LLC
Portfolio Subadviser: Artisan Partners Limited
Partnership
-------------------------------------------------------------------------------------------------------------------
Brighthouse/Wellington Balanced Seeks long-term capital appreciation Brighthouse Investment Advisers, LLC
Portfolio with some current income. Subadviser: Wellington Management
Company LLP
-------------------------------------------------------------------------------------------------------------------
Brighthouse/Wellington Core Equity Seeks to provide a growing stream of Brighthouse Investment Advisers, LLC
Opportunities Portfolio income over time and, secondarily, Subadviser: Wellington Management
long-term capital appreciation and Company LLP
current income.
-------------------------------------------------------------------------------------------------------------------
Frontier Mid Cap Growth Portfolio Seeks maximum capital appreciation. Brighthouse Investment Advisers, LLC
Subadviser: Frontier Capital
Management Company, LLC
-------------------------------------------------------------------------------------------------------------------
Jennison Growth Portfolio Seeks long-term growth of capital. Brighthouse Investment Advisers, LLC
Subadviser: Jennison Associates LLC
-------------------------------------------------------------------------------------------------------------------
MetLife Aggregate Bond Index Portfolio Seeks to track the performance of the Brighthouse Investment Advisers, LLC
Bloomberg Barclays U.S. Aggregate Subadviser: MetLife Investment
Bond Index. Advisors, LLC
-------------------------------------------------------------------------------------------------------------------
MetLife Mid Cap Stock Index Portfolio Seeks to track the performance of the Brighthouse Investment Advisers, LLC
Standard & Poor's MidCap 400(R) Subadviser: MetLife Investment
Composite Stock Price Index. Advisors, LLC
-------------------------------------------------------------------------------------------------------------------
MetLife MSCI EAFE(R) Index Portfolio Seeks to track the performance of the Brighthouse Investment Advisers, LLC
MSCI EAFE(R) Index. Subadviser: MetLife Investment
Advisors, LLC
-------------------------------------------------------------------------------------------------------------------
MetLife Russell 2000(R) Index Seeks to track the performance of the Brighthouse Investment Advisers, LLC
Portfolio Russell 2000(R) Index. Subadviser: MetLife Investment
Advisors, LLC
-------------------------------------------------------------------------------------------------------------------
MetLife Stock Index Portfolio Seeks to track the performance of the Brighthouse Investment Advisers, LLC
Standard & Poor's 500(R) Composite Subadviser: MetLife Investment
Stock Price Index. Advisors, LLC
-------------------------------------------------------------------------------------------------------------------
MFS(R) Total Return Portfolio Seeks a favorable total return Brighthouse Investment Advisers, LLC
through investment in a diversified Subadviser: Massachusetts Financial
portfolio. Services Company
-------------------------------------------------------------------------------------------------------------------
MFS(R) Value Portfolio Seeks capital appreciation. Brighthouse Investment Advisers, LLC
Subadviser: Massachusetts Financial
Services Company
-------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------
FUND INVESTMENT OBJECTIVE INVESTMENT ADVISER/SUBADVISER
--------------------------------------------------------------------------------------------------------------------
Neuberger Berman Genesis Portfolio Seeks high total return, consisting Brighthouse Investment Advisers, LLC
principally of capital appreciation. Subadviser: Neuberger Berman
Investment Advisers LLC
--------------------------------------------------------------------------------------------------------------------
T. Rowe Price Large Cap Growth Seeks long-term growth of capital. Brighthouse Investment Advisers, LLC
Portfolio Subadviser: T. Rowe Price Associates,
Inc.
--------------------------------------------------------------------------------------------------------------------
T. Rowe Price Small Cap Growth Seeks long-term capital growth. Brighthouse Investment Advisers, LLC
Portfolio Subadviser: T. Rowe Price Associates,
Inc.
--------------------------------------------------------------------------------------------------------------------
VanEck Global Natural Resources Seeks long-term capital appreciation Brighthouse Investment Advisers, LLC
Portfolio with income as a secondary Subadviser: Van Eck Associates
consideration. Corporation
--------------------------------------------------------------------------------------------------------------------
Western Asset Management Strategic Seeks to maximize total return Brighthouse Investment Advisers, LLC
Bond Opportunities Portfolio consistent with preservation of Subadviser: Western Asset
capital. Management Company
--------------------------------------------------------------------------------------------------------------------
Western Asset Management U.S. Seeks to maximize total return Brighthouse Investment Advisers, LLC
Government Portfolio consistent with preservation of Subadviser: Western Asset
capital and maintenance of liquidity. Management Company
--------------------------------------------------------------------------------------------------------------------
FIDELITY(R) VARIABLE INSURANCE
PRODUCTS -- INITIAL CLASS
--------------------------------------------------------------------------------------------------------------------
Equity-Income Portfolio Seeks reasonable income. The fund Fidelity Management & Research
will also consider the potential for Company
capital appreciation. The fund's goal Subadviser: FMR Co., Inc.
is to achieve a yield which exceeds
the composite yield on the securities
comprising the S&P 500(R) Index.
--------------------------------------------------------------------------------------------------------------------
Mid Cap Portfolio Seeks long-term growth of capital. Fidelity Management & Research
Company
Subadviser: FMR Co., Inc.
--------------------------------------------------------------------------------------------------------------------
JPMORGAN INSURANCE TRUST -- CLASS 1
--------------------------------------------------------------------------------------------------------------------
JPMorgan Insurance Trust Core Bond Seeks to maximize total return by J.P. Morgan Investment Management
Portfolio investing primarily in a diversified Inc.
portfolio of intermediate- and
long-term debt securities.
--------------------------------------------------------------------------------------------------------------------
JPMorgan Insurance Trust Small Cap Seeks capital growth over the long J.P. Morgan Investment Management
Core Portfolio term. Inc.
--------------------------------------------------------------------------------------------------------------------
RUSSELL INVESTMENT FUNDS
--------------------------------------------------------------------------------------------------------------------
International Developed Markets Fund Seeks to provide long term capital Russell Investment Management
growth. Company
Subadvisers: GQG Partners LLC;
Janus Capital Management LLC and
Perkins Investment Management LLC;
Numeric Investors LLC; Pzena
Investment Management, LLC;
Wellington Management Company
LLP
--------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------
FUND INVESTMENT OBJECTIVE INVESTMENT ADVISER/SUBADVISER
---------------------------------------------------------------------------------------------------------------------
Strategic Bond Fund Seeks to provide total return. Russell Investment Management
Company
Subadvisers: Colchester Global
Investors Limited; Logan Circle
Partners, L.P.; Pareto Investment
Management Limited; Schroder
Investment Management North
America Inc.; Scout Investments, Inc.;
Western Asset Management Company
and Western Asset Management
Company Limited
---------------------------------------------------------------------------------------------------------------------
U.S. Small Cap Equity Fund Seeks to provide long term capital Russell Investment Management
growth. Company
Subadvisers: Ancora Advisors, LLC;
Copeland Capital Management, LLC;
DePrince, Race & Zollo, Inc.; Falcon
Point Capital, LLC; Penn Capital
Management Company, Inc.; Snow
Capital Management L.P.; Timpani
Capital Management LLC
---------------------------------------------------------------------------------------------------------------------
U.S. Strategic Equity Fund Seeks to provide long term capital Russell Investment Management
growth. Company
Subadvisers: Barrow, Hanley,
Mewhinney & Strauss, LLC; Jacobs
Levy Equity Management, Inc.; Mar
Vista Investment Partners, LLC;
Suffolk Capital Management, LLC;
William Blair Investment
Management, LLC
---------------------------------------------------------------------------------------------------------------------
VANECK VIP TRUST -- INITIAL CLASS
---------------------------------------------------------------------------------------------------------------------
VanEck VIP Emerging Markets Fund Seeks long-term capital appreciation Van Eck Associates Corporation
by investing primarily in equity
securities in emerging markets around
the world.
---------------------------------------------------------------------------------------------------------------------
FOR MORE INFORMATION REGARDING THE FUNDS AND THEIR INVESTMENT ADVISERS AND
SUB-ADVISERS, SEE THE FUND PROSPECTUSES AND THEIR STATEMENTS OF ADDITIONAL
INFORMATION, WHICH YOU CAN OBTAIN BY CALLING 1-800-638-9294.
OTHER FUNDS AND SHARE CLASSES
Some of the Funds offer various classes of shares, each of which has a
different level of expenses. The prospectuses for the Funds may provide
information for share classes that are not available through the Policy. When
you consult the prospectus for any Fund, you should be careful to refer to only
the information regarding the class of shares that is available through the
Policy. For the JPMorgan Insurance Trust, we offer Class 1 shares; for
Fidelity(R) Variable Insurance Products and the VanEck VIP Trust, we offer
Initial Class shares; for Brighthouse Funds Trust I, we offer Class A shares;
for Brighthouse Funds Trust II, we offer Class A shares; and for the American
Funds Insurance Series(R), we offer Class 2 shares.
CHARGES AND DEDUCTIONS
Charges will be deducted in connection with the Policy to compensate the
Company for providing the insurance benefits set forth in the Policy and any
additional benefits added by rider, administering the Policies, incurring
expenses in distributing the Policies, and assuming certain risks in connection
with the Policy. We may profit from one or more of the charges deducted under
the Policy, including the cost of insurance charge. We may use these profits
for any corporate purpose.
FEE TABLES
The tables below describe the Fund fees and expenses that a Policy Owner
may pay periodically during the time that he or she owns the Policy. One table
shows the minimum and maximum total operating expenses charged by the Funds for
the fiscal year ended December 31, 2017. The other table describes the annual
operating expenses of each Fund for the year ended December 31, 2017, before
and after any applicable fee waivers and expense reimbursements. Expenses of
the Funds may be higher or lower in the future. Certain Funds may impose a
redemption fee in the future. More detail concerning each Fund's fees and
expenses is contained in the table that follows and in the prospectus for each
Fund.
MINIMUM AND MAXIMUM TOTAL ANNUAL FUND OPERATING EXPENSES
-------------------------------------------------------------------------------------------------------
Minimum Maximum
-------------------------------------------------------------------------------------------------------
Total Annual Fund Operating Expenses (expenses that are deducted from Fund
assets, including management fees, distribution and/or service (12b-1) fees, and other
expenses) 0.27% 1.19%
-------------------------------------------------------------------------------------------------------
FUND FEES AND EXPENSES
(AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS)
The following table is a summary. For more complete information on Fund
fees and expenses, please refer to the prospectus for each Fund.
------------------------------------------------------------------------------------------------------------------
DISTRIBUTION ACQUIRED TOTAL FEE WAIVER NET TOTAL
AND/OR FUND FEES ANNUAL AND/OR ANNUAL
MANAGEMENT SERVICE OTHER AND OPERATING EXPENSE OPERATING
FUND FEE (12B-1) FEES EXPENSES EXPENSES EXPENSES REIMBURSEMENT EXPENSES
------------------------------------------------------------------------------------------------------------------
AMERICAN FUNDS INSURANCE
SERIES(R)
------------------------------------------------------------------------------------------------------------------
American Funds Global Small
Capitalization Fund 0.70% 0.25% 0.04% -- 0.99% -- 0.99%
------------------------------------------------------------------------------------------------------------------
American Funds Growth Fund 0.33% 0.25% 0.02% -- 0.60% -- 0.60%
------------------------------------------------------------------------------------------------------------------
American Funds Growth-Income
Fund 0.26% 0.25% 0.02% -- 0.53% -- 0.53%
------------------------------------------------------------------------------------------------------------------
BRIGHTHOUSE FUNDS TRUST I
------------------------------------------------------------------------------------------------------------------
Clarion Global Real Estate Portfolio 0.61% -- 0.05% -- 0.66% -- 0.66%
------------------------------------------------------------------------------------------------------------------
ClearBridge Aggressive Growth
Portfolio 0.55% -- 0.03% -- 0.58% 0.02% 0.56%
------------------------------------------------------------------------------------------------------------------
Harris Oakmark International
Portfolio 0.77% -- 0.04% -- 0.81% 0.02% 0.79%
------------------------------------------------------------------------------------------------------------------
Invesco Small Cap Growth Portfolio 0.85% -- 0.03% -- 0.88% 0.02% 0.86%
------------------------------------------------------------------------------------------------------------------
MFS(R) Research International
Portfolio 0.69% -- 0.05% -- 0.74% 0.10% 0.64%
------------------------------------------------------------------------------------------------------------------
Morgan Stanley Mid Cap Growth
Portfolio 0.65% -- 0.04% -- 0.69% 0.02% 0.67%
------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
DISTRIBUTION ACQUIRED TOTAL FEE WAIVER NET TOTAL
AND/OR FUND FEES ANNUAL AND/OR ANNUAL
MANAGEMENT SERVICE OTHER AND OPERATING EXPENSE OPERATING
FUND FEE (12B-1) FEES EXPENSES EXPENSES EXPENSES REIMBURSEMENT EXPENSES
-----------------------------------------------------------------------------------------------------------------
PIMCO Total Return Portfolio 0.48% -- 0.08% -- 0.56% 0.03% 0.53%
-----------------------------------------------------------------------------------------------------------------
T. Rowe Price Large Cap Value
Portfolio 0.57% -- 0.02% -- 0.59% 0.03% 0.56%
-----------------------------------------------------------------------------------------------------------------
T. Rowe Price Mid Cap Growth
Portfolio 0.75% -- 0.03% -- 0.78% -- 0.78%
-----------------------------------------------------------------------------------------------------------------
Victory Sycamore Mid Cap Value
Portfolio 0.65% -- 0.03% -- 0.68% 0.09% 0.59%
-----------------------------------------------------------------------------------------------------------------
BRIGHTHOUSE FUNDS TRUST II
-----------------------------------------------------------------------------------------------------------------
Baillie Gifford International Stock
Portfolio 0.79% -- 0.06% -- 0.85% 0.12% 0.73%
-----------------------------------------------------------------------------------------------------------------
BlackRock Bond Income Portfolio 0.33% -- 0.18% -- 0.51% -- 0.51%
-----------------------------------------------------------------------------------------------------------------
BlackRock Capital Appreciation
Portfolio 0.69% -- 0.03% -- 0.72% 0.09% 0.63%
-----------------------------------------------------------------------------------------------------------------
BlackRock Ultra-Short Term Bond
Portfolio 0.35% -- 0.04% -- 0.39% 0.03% 0.36%
-----------------------------------------------------------------------------------------------------------------
Brighthouse/Artisan Mid Cap Value
Portfolio 0.82% -- 0.03% -- 0.85% 0.05% 0.80%
-----------------------------------------------------------------------------------------------------------------
Brighthouse/Wellington Balanced
Portfolio 0.46% -- 0.08% -- 0.54% -- 0.54%
-----------------------------------------------------------------------------------------------------------------
Brighthouse/Wellington Core
Equity Opportunities Portfolio 0.70% -- 0.02% -- 0.72% 0.11% 0.61%
-----------------------------------------------------------------------------------------------------------------
Frontier Mid Cap Growth Portfolio 0.71% -- 0.04% -- 0.75% 0.02% 0.73%
-----------------------------------------------------------------------------------------------------------------
Jennison Growth Portfolio 0.60% -- 0.02% -- 0.62% 0.08% 0.54%
-----------------------------------------------------------------------------------------------------------------
MetLife Aggregate Bond Index
Portfolio 0.25% -- 0.03% -- 0.28% 0.01% 0.27%
-----------------------------------------------------------------------------------------------------------------
MetLife Mid Cap Stock Index
Portfolio 0.25% -- 0.04% 0.01% 0.30% -- 0.30%
-----------------------------------------------------------------------------------------------------------------
MetLife MSCI EAFE(R) Index
Portfolio 0.30% -- 0.07% 0.01% 0.38% -- 0.38%
-----------------------------------------------------------------------------------------------------------------
MetLife Russell 2000(R) Index
Portfolio 0.25% -- 0.06% 0.01% 0.32% -- 0.32%
-----------------------------------------------------------------------------------------------------------------
MetLife Stock Index Portfolio 0.25% -- 0.02% -- 0.27% 0.01% 0.26%
-----------------------------------------------------------------------------------------------------------------
MFS(R) Total Return Portfolio 0.56% -- 0.05% -- 0.61% -- 0.61%
-----------------------------------------------------------------------------------------------------------------
MFS(R) Value Portfolio 0.62% -- 0.02% -- 0.64% 0.06% 0.58%
-----------------------------------------------------------------------------------------------------------------
Neuberger Berman Genesis
Portfolio 0.81% -- 0.04% -- 0.85% 0.01% 0.84%
-----------------------------------------------------------------------------------------------------------------
T. Rowe Price Large Cap Growth
Portfolio 0.60% -- 0.02% -- 0.62% 0.05% 0.57%
-----------------------------------------------------------------------------------------------------------------
T. Rowe Price Small Cap Growth
Portfolio 0.47% -- 0.03% -- 0.50% -- 0.50%
-----------------------------------------------------------------------------------------------------------------
VanEck Global Natural Resources
Portfolio 0.78% -- 0.03% 0.01% 0.82% 0.01% 0.81%
-----------------------------------------------------------------------------------------------------------------
Western Asset Management
Strategic Bond Opportunities
Portfolio 0.56% -- 0.04% -- 0.60% 0.06% 0.54%
-----------------------------------------------------------------------------------------------------------------
Western Asset Management U.S.
Government Portfolio 0.47% -- 0.02% -- 0.49% 0.01% 0.48%
-----------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------
DISTRIBUTION ACQUIRED TOTAL FEE WAIVER NET TOTAL
AND/OR FUND FEES ANNUAL AND/OR ANNUAL
MANAGEMENT SERVICE OTHER AND OPERATING EXPENSE OPERATING
FUND FEE (12B-1) FEES EXPENSES EXPENSES EXPENSES REIMBURSEMENT EXPENSES
-------------------------------------------------------------------------------------------------------------
FIDELITY(R) VARIABLE INSURANCE
PRODUCTS
-------------------------------------------------------------------------------------------------------------
Equity-Income Portfolio 0.44% -- 0.09% 0.03% 0.56% -- 0.56%
-------------------------------------------------------------------------------------------------------------
Mid Cap Portfolio 0.54% -- 0.09% -- 0.63% -- 0.63%
-------------------------------------------------------------------------------------------------------------
JPMORGAN INSURANCE TRUST
-------------------------------------------------------------------------------------------------------------
JPMorgan Insurance Trust Core
Bond Portfolio 0.40% -- 0.23% -- 0.63% 0.03% 0.60%
-------------------------------------------------------------------------------------------------------------
JPMorgan Insurance Trust Small
Cap Core Portfolio 0.65% -- 0.18% -- 0.83% -- 0.83%
-------------------------------------------------------------------------------------------------------------
RUSSELL INVESTMENT FUNDS
-------------------------------------------------------------------------------------------------------------
International Developed Markets
Fund 0.90% -- 0.18% -- 1.08% -- 1.08%
-------------------------------------------------------------------------------------------------------------
Strategic Bond Fund 0.55% -- 0.12% -- 0.67% -- 0.67%
-------------------------------------------------------------------------------------------------------------
U.S. Small Cap Equity Fund 0.90% -- 0.13% -- 1.03% -- 1.03%
-------------------------------------------------------------------------------------------------------------
U.S. Strategic Equity Fund 0.73% -- 0.10% -- 0.83% -- 0.83%
-------------------------------------------------------------------------------------------------------------
VANECK VIP TRUST
-------------------------------------------------------------------------------------------------------------
VanEck VIP Emerging Markets
Fund 1.00% -- 0.19% -- 1.19% 0.00% 1.19%
-------------------------------------------------------------------------------------------------------------
The information shown in the table above was provided by the Funds.
Certain Funds and their investment adviser have entered into expense
reimbursement and/or fee waiver arrangements that will continue from May 1,
2018 through April 30, 2019. These arrangements can be terminated with respect
to these Funds only with the approval of the Fund's board of directors or
trustees. Please see the Funds' prospectuses for additional information
regarding these arrangements.
Certain Funds that have "Acquired Fund Fees and Expenses" are "funds of
funds." A fund of funds invests substantially all of its assets in other
underlying funds. Because the Fund invests in other funds, it will bear its pro
rata portion of the operating expenses of those underlying funds, including the
management fee.
CERTAIN PAYMENTS WE RECEIVE WITH REGARD TO THE FUNDS
An investment adviser or subadviser of a Fund, or its affiliates, may
make payments to us and/or certain of our affiliates. These payments may be
used for a variety of purposes, including payment of expenses for certain
administrative, marketing, and support services with respect to the Policies
and, in our role as an intermediary, with respect to the Funds. We and our
affiliates may profit from these payments. These payments may be derived, in
whole or in part, from the advisory fee deducted from Fund assets. Policy
Owners, through their indirect investment in the Funds, bear the costs of these
advisory fees (see the prospectuses for the Funds for more information). The
amount of the payments we receive is based on a percentage of assets of the
Funds attributable to the Policies and certain other variable insurance
products that we and our affiliates issue. These percentages differ and some
advisers or subadvisers (or their affiliates) may pay us more than others.
These percentages currently range up to 0.50%. Additionally, an investment
adviser or subadviser of a Fund or its affiliates may provide us with
wholesaling services that assist in the distribution of the Policies and may
pay us and/or certain of our affiliates amounts to participate in sales
meetings. These amounts may be significant and may provide the adviser or
subadviser (or its affiliate) with increased access to persons involved in the
distribution of the Policies.
On August 4, 2017, MetLife, Inc. completed the separation of Brighthouse
Financial, Inc. and its subsidiaries ("Brighthouse") where MetLife, Inc.
retained an ownership interest of 19.2% common stock outstanding of Brighthouse
Financial, Inc. Brighthouse subsidiaries include Brighthouse Investment
Advisers,
LLC, which serves as the investment adviser for the Brighthouse Funds Trust I
and Brighthouse Funds Trust II. We and our affiliated companies have entered
into agreements with Brighthouse Investment Advisers, LLC, Brighthouse Funds
Trust I and Brighthouse Funds Trust II whereby we receive payments for certain
administrative, marketing and support services described in the previous
paragraph. Currently, the Funds in Brighthouse Funds Trust I and Brighthouse
Funds Trust II are only available in annuity contracts and variable life
insurance policies issued by Met Tower Life and its affiliates, as well as
Brighthouse Life Insurance Company and its affiliates. As of December 31, 2017,
approximately 85% of Fund assets held in separate accounts of Met Tower Life
and its affiliates were allocated to Funds in Brighthouse Funds Trust I and
Brighthouse Funds Trust II. Should we or Brighthouse Investment Advisers, LLC
decide to terminate the agreements, we could be required to find alternative
Funds which could have higher or lower costs to Policy Owners. In addition, the
amount of payments we receive could cease or be substantially reduced which
would have a material impact on our financial statements.
We select the Funds offered through this Policy based on a number of
criteria, including asset class coverage, the strength of the adviser's or
subadviser's reputation and tenure, brand recognition, performance, and the
capability and qualification of each investment firm. Another factor we
consider during the selection process is whether the Fund's adviser or
subadviser is one of our affiliates or whether the Fund, its adviser, its
subadviser(s), or an affiliate will make payments to us or our affiliates. In
this regard, the profit distributions we receive from our affiliated investment
adviser are a component of the total revenue that we consider in configuring
the features and investment choices available in the variable insurance
products that we and our affiliated insurance companies issue. Since we and our
affiliated insurance companies may benefit more from the allocation of assets
to portfolios advised by our affiliate than those that are not, we may be more
inclined to offer portfolios advised by our affiliate in the variable insurance
products we issue. We review the Funds periodically and may remove a Fund or
limit its availability to new purchase payments and/or transfers of Policy
value if we determine that the Fund no longer meets one or more of the
selection criteria, and/or if the Fund has not attracted significant
allocations from Policy owners. In some cases, we have included Funds based on
recommendations made by selling firms. These selling firms may receive payments
from the Funds they recommend and may benefit accordingly from the allocation
of Policy value to such Funds.
WE DO NOT PROVIDE ANY INVESTMENT ADVICE AND DO NOT RECOMMEND OR ENDORSE
ANY PARTICULAR FUND. YOU BEAR THE RISK OF ANY DECLINE IN THE POLICY VALUE OF
YOUR POLICY RESULTING FROM THE PERFORMANCE OF THE FUNDS YOU HAVE CHOSEN.
*****
THIS SUPPLEMENT SHOULD BE READ AND RETAINED FOR FUTURE REFERENCE
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Policy Owners of
General American Separate Account Eleven
and Board of Directors of
General American Life Insurance Company
OPINION ON THE FINANCIAL STATEMENTS AND FINANCIAL HIGHLIGHTS
We have audited the accompanying statements of assets and liabilities of
General American Separate Account Eleven (the "Separate Account") of General
American Life Insurance Company (the "Company") comprising each of the
individual Divisions listed in Note 2 as of December 31, 2017, the related
statements of operations and changes in net assets for the respective stated
periods in the three years then ended, the financial highlights in Note 8 for
the respective stated periods in the five years then ended, and the related
notes. In our opinion, the financial statements and financial highlights
present fairly, in all material respects, the financial position of each of the
Divisions constituting the Separate Account of the Company as of December 31,
2017, the results of their operations and changes in net assets for the
respective stated periods in the three years then ended, and the financial
highlights for the respective stated periods in the five years then ended, in
conformity with accounting principles generally accepted in the United States
of America.
BASIS FOR OPINION
These financial statements and financial highlights are the responsibility of
the Separate Account's management. Our responsibility is to express an opinion
on the Separate Account's financial statements and financial highlights based
on our audits. We are a public accounting firm registered with the Public
Company Accounting Oversight Board (United States) (PCAOB) and are required to
be independent with respect to the Separate Account in accordance with the U.S.
federal securities laws and the applicable rules and regulations of the
Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those
standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement, whether due to error or fraud. The Separate
Account is not required to have, nor were we engaged to perform, an audit of
its internal control over financial reporting. As part of our audits we are
required to obtain an understanding of internal control over financial
reporting but not for the purpose of expressing an opinion on the effectiveness
of the Separate Account's internal control over financial reporting.
Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material
misstatement of the financial statements and financial highlights, whether due
to error or fraud, and performing procedures that respond to those risks. Such
procedures included examining, on a test basis, evidence regarding the amounts
and disclosures in the financial statements and financial highlights. Our
audits also included evaluating the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of
the financial statements and financial highlights. Our procedures included
confirmation of investments owned as of December 31, 2017, by correspondence
with the custodian or mutual fund companies. We believe that our audits provide
a reasonable basis for our opinion.
/s/ DELOITTE & TOUCHE LLP
Certified Public Accountants
Tampa, Florida
March 23, 2018
We have served as the Separate Account's auditor since 2000.
This page is intentionally left blank.
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
OF GENERAL AMERICAN LIFE INSURANCE COMPANY
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 2017
AMERICAN FUNDS
GLOBAL SMALL AMERICAN FUNDS AMERICAN FUNDS BHFTI BRIGHTHOUSE
CAPITALIZATION GROWTH GROWTH-INCOME ASSET ALLOCATION 100
DIVISION DIVISION DIVISION DIVISION
--------------------- -------------------- --------------------- --------------------
ASSETS:
Investments at fair value........... $ 3,802,348 $ 18,652,569 $ 11,710,351 $ 48,230
Due from General American Life
Insurance Company................. -- -- 1 --
--------------------- -------------------- --------------------- --------------------
Total Assets................... 3,802,348 18,652,569 11,710,352 48,230
--------------------- -------------------- --------------------- --------------------
LIABILITIES:
Accrued fees........................ 51 34 20 --
Due to General American Life
Insurance Company................. 1 1 -- --
--------------------- -------------------- --------------------- --------------------
Total Liabilities.............. 52 35 20 --
--------------------- -------------------- --------------------- --------------------
NET ASSETS............................. $ 3,802,296 $ 18,652,534 $ 11,710,332 $ 48,230
===================== ==================== ===================== ====================
The accompanying notes are an integral part of these financial statements.
1
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
OF GENERAL AMERICAN LIFE INSURANCE COMPANY
STATEMENTS OF ASSETS AND LIABILITIES -- (CONTINUED)
DECEMBER 31, 2017
BHFTI
BHFTI CLARION BHFTI CLEARBRIDGE HARRIS OAKMARK BHFTI INVESCO
GLOBAL REAL ESTATE AGGRESSIVE GROWTH INTERNATIONAL SMALL CAP GROWTH
DIVISION DIVISION DIVISION DIVISION
-------------------- -------------------- -------------------- --------------------
ASSETS:
Investments at fair value..... $ 3,004,130 $ 1,458,808 $ 7,943,407 $ 1,220,600
Due from General American Life
Insurance Company........... -- -- -- --
-------------------- -------------------- -------------------- --------------------
Total Assets............. 3,004,130 1,458,808 7,943,407 1,220,600
-------------------- -------------------- -------------------- --------------------
LIABILITIES:
Accrued fees.................. 44 32 46 58
Due to General American Life
Insurance Company........... 1 -- -- --
-------------------- -------------------- -------------------- --------------------
Total Liabilities........ 45 32 46 58
-------------------- -------------------- -------------------- --------------------
NET ASSETS....................... $ 3,004,085 $ 1,458,776 $ 7,943,361 $ 1,220,542
==================== ==================== ==================== ====================
BHFTI BHFTI BHFTI
MFS RESEARCH MORGAN STANLEY BHFTI T. ROWE PRICE
INTERNATIONAL MID CAP GROWTH PIMCO TOTAL RETURN LARGE CAP VALUE
DIVISION DIVISION DIVISION DIVISION
-------------------- ------------------- ------------------- -------------------
ASSETS:
Investments at fair value..... $ 9,253,974 $ 2,105,291 $ 10,459,480 $ 2,311,993
Due from General American Life
Insurance Company........... -- -- -- --
-------------------- ------------------- ------------------- -------------------
Total Assets............. 9,253,974 2,105,291 10,459,480 2,311,993
-------------------- ------------------- ------------------- -------------------
LIABILITIES:
Accrued fees.................. 11 77 26 41
Due to General American Life
Insurance Company........... -- -- -- --
-------------------- ------------------- ------------------- -------------------
Total Liabilities........ 11 77 26 41
-------------------- ------------------- ------------------- -------------------
NET ASSETS....................... $ 9,253,963 $ 2,105,214 $ 10,459,454 $ 2,311,952
==================== =================== =================== ===================
BHFTI BHFTI
T. ROWE PRICE VICTORY SYCAMORE
MID CAP GROWTH MID CAP VALUE
DIVISION DIVISION
------------------- --------------------
ASSETS:
Investments at fair value..... $ 3,167,024 $ 3,913,386
Due from General American Life
Insurance Company........... -- --
------------------- --------------------
Total Assets............. 3,167,024 3,913,386
------------------- --------------------
LIABILITIES:
Accrued fees.................. 40 33
Due to General American Life
Insurance Company........... -- 1
------------------- --------------------
Total Liabilities........ 40 34
------------------- --------------------
NET ASSETS....................... $ 3,166,984 $ 3,913,352
=================== ====================
The accompanying notes are an integral part of these financial statements.
2
The accompanying notes are an integral part of these financial statements.
3
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
OF GENERAL AMERICAN LIFE INSURANCE COMPANY
STATEMENTS OF ASSETS AND LIABILITIES -- (CONTINUED)
DECEMBER 31, 2017
BHFTII BHFTII BHFTII BHFTII BLACKROCK
BAILLIE GIFFORD BLACKROCK BLACKROCK ULTRA-SHORT
INTERNATIONAL STOCK BOND INCOME CAPITAL APPRECIATION TERM BOND
DIVISION DIVISION DIVISION DIVISION
-------------------- --------------------- -------------------- --------------------
ASSETS:
Investments at fair value..... $ 2,275,303 $ 4,092,121 $ 3,080,218 $ 4,497,307
Due from General American Life
Insurance Company........... -- -- 1 1
-------------------- --------------------- -------------------- --------------------
Total Assets............. 2,275,303 4,092,121 3,080,219 4,497,308
-------------------- --------------------- -------------------- --------------------
LIABILITIES:
Accrued fees.................. 74 32 40 48
Due to General American Life
Insurance Company........... -- -- -- --
-------------------- --------------------- -------------------- --------------------
Total Liabilities........ 74 32 40 48
-------------------- --------------------- -------------------- --------------------
NET ASSETS....................... $ 2,275,229 $ 4,092,089 $ 3,080,179 $ 4,497,260
==================== ===================== ==================== ====================
BHFTII BRIGHTHOUSE BHFTII BRIGHTHOUSE BHFTII BRIGHTHOUSE BHFTII BRIGHTHOUSE
ASSET ALLOCATION 20 ASSET ALLOCATION 40 ASSET ALLOCATION 60 ASSET ALLOCATION 80
DIVISION DIVISION DIVISION DIVISION
-------------------- --------------------- -------------------- --------------------
ASSETS:
Investments at fair value..... $ 108,414 $ 252,266 $ 413,479 $ 912,133
Due from General American Life
Insurance Company........... -- -- -- --
-------------------- --------------------- -------------------- --------------------
Total Assets............. 108,414 252,266 413,479 912,133
-------------------- --------------------- -------------------- --------------------
LIABILITIES:
Accrued fees.................. -- -- -- --
Due to General American Life
Insurance Company........... -- -- -- --
-------------------- --------------------- -------------------- --------------------
Total Liabilities........ -- -- -- --
-------------------- --------------------- -------------------- --------------------
NET ASSETS....................... $ 108,414 $ 252,266 $ 413,479 $ 912,133
==================== ===================== ==================== ====================
BHFTII
BRIGHTHOUSE/ARTISAN BHFTII BRIGHTHOUSE/
MID CAP VALUE WELLINGTON BALANCED
DIVISION DIVISION
--------------------- --------------------
ASSETS:
Investments at fair value..... $ 3,552,034 $ 10,120,063
Due from General American Life
Insurance Company........... -- --
--------------------- --------------------
Total Assets............. 3,552,034 10,120,063
--------------------- --------------------
LIABILITIES:
Accrued fees.................. 39 28
Due to General American Life
Insurance Company........... -- --
--------------------- --------------------
Total Liabilities........ 39 28
--------------------- --------------------
NET ASSETS....................... $ 3,551,995 $ 10,120,035
===================== ====================
The accompanying notes are an integral part of these financial statements.
4
The accompanying notes are an integral part of these financial statements.
5
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
OF GENERAL AMERICAN LIFE INSURANCE COMPANY
STATEMENTS OF ASSETS AND LIABILITIES -- (CONTINUED)
DECEMBER 31, 2017
BHFTII BRIGHTHOUSE/
WELLINGTON BHFTII
CORE EQUITY BHFTII FRONTIER BHFTII METLIFE AGGREGATE
OPPORTUNITIES MID CAP GROWTH JENNISON GROWTH BOND INDEX
DIVISION DIVISION DIVISION DIVISION
-------------------- -------------------- -------------------- --------------------
ASSETS:
Investments at fair value..... $ 5,985,545 $ 3,357,360 $ 27,987,581 $ 13,699,296
Due from General American Life
Insurance Company........... -- -- -- --
-------------------- -------------------- -------------------- --------------------
Total Assets............. 5,985,545 3,357,360 27,987,581 13,699,296
-------------------- -------------------- -------------------- --------------------
LIABILITIES:
Accrued fees.................. 48 47 24 18
Due to General American Life
Insurance Company........... -- -- 1 --
-------------------- -------------------- -------------------- --------------------
Total Liabilities........ 48 47 25 18
-------------------- -------------------- -------------------- --------------------
NET ASSETS....................... $ 5,985,497 $ 3,357,313 $ 27,987,556 $ 13,699,278
==================== ==================== ==================== ====================
BHFTII BHFTII
METLIFE MID CAP METLIFE MSCI BHFTII METLIFE BHFTII METLIFE
STOCK INDEX EAFE INDEX RUSSELL 2000 INDEX STOCK INDEX
DIVISION DIVISION DIVISION DIVISION
-------------------- -------------------- -------------------- --------------------
ASSETS:
Investments at fair value..... $ 3,833,538 $ 4,942,208 $ 3,455,618 $ 59,960,841
Due from General American Life
Insurance Company........... -- -- 1 --
-------------------- -------------------- -------------------- --------------------
Total Assets............. 3,833,538 4,942,208 3,455,619 59,960,841
-------------------- -------------------- -------------------- --------------------
LIABILITIES:
Accrued fees.................. 52 31 49 4
Due to General American Life
Insurance Company........... -- -- -- --
-------------------- -------------------- -------------------- --------------------
Total Liabilities........ 52 31 49 4
-------------------- -------------------- -------------------- --------------------
NET ASSETS....................... $ 3,833,486 $ 4,942,177 $ 3,455,570 $ 59,960,837
==================== ==================== ==================== ====================
BHFTII MFS
TOTAL RETURN BHFTII MFS VALUE
DIVISION DIVISION
-------------------- -------------------
ASSETS:
Investments at fair value..... $ 2,944,634 $ 9,338,319
Due from General American Life
Insurance Company........... -- --
-------------------- -------------------
Total Assets............. 2,944,634 9,338,319
-------------------- -------------------
LIABILITIES:
Accrued fees.................. 45 27
Due to General American Life
Insurance Company........... -- 1
-------------------- -------------------
Total Liabilities........ 45 28
-------------------- -------------------
NET ASSETS....................... $ 2,944,589 $ 9,338,291
==================== ===================
The accompanying notes are an integral part of these financial statements.
6
The accompanying notes are an integral part of these financial statements.
7
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
OF GENERAL AMERICAN LIFE INSURANCE COMPANY
STATEMENTS OF ASSETS AND LIABILITIES -- (CONTINUED)
DECEMBER 31, 2017
BHFTII BHFTII
BHFTII BHFTII NEUBERGER T. ROWE PRICE T. ROWE PRICE
MFS VALUE II BERMAN GENESIS LARGE CAP GROWTH SMALL CAP GROWTH
DIVISION DIVISION DIVISION DIVISION
------------------- -------------------- -------------------- --------------------
ASSETS:
Investments at fair value..... $ 4,928,545 $ 8,669,164 $ 7,354,259 $ 8,016,895
Due from General American Life
Insurance Company........... -- -- -- --
------------------- -------------------- -------------------- --------------------
Total Assets............. 4,928,545 8,669,164 7,354,259 8,016,895
------------------- -------------------- -------------------- --------------------
LIABILITIES:
Accrued fees.................. 32 26 10 26
Due to General American Life
Insurance Company........... -- -- -- --
------------------- -------------------- -------------------- --------------------
Total Liabilities........ 32 26 10 26
------------------- -------------------- -------------------- --------------------
NET ASSETS....................... $ 4,928,513 $ 8,669,138 $ 7,354,249 $ 8,016,869
=================== ==================== ==================== ====================
BHFTII WESTERN
BHFTII ASSET MANAGEMENT BHFTII WESTERN
VAN ECK GLOBAL STRATEGIC BOND ASSET MANAGEMENT FIDELITY VIP
NATURAL RESOURCES OPPORTUNITIES U.S. GOVERNMENT EQUITY-INCOME
DIVISION DIVISION DIVISION DIVISION
-------------------- -------------------- ------------------- -------------------
ASSETS:
Investments at fair value..... $ 4,107,902 $ 6,950,145 $ 723,853 $ 15,458,808
Due from General American Life
Insurance Company........... -- -- -- 1
-------------------- -------------------- ------------------- -------------------
Total Assets............. 4,107,902 6,950,145 723,853 15,458,809
-------------------- -------------------- ------------------- -------------------
LIABILITIES:
Accrued fees.................. 52 53 45 1
Due to General American Life
Insurance Company........... -- -- -- --
-------------------- -------------------- ------------------- -------------------
Total Liabilities........ 52 53 45 1
-------------------- -------------------- ------------------- -------------------
NET ASSETS....................... $ 4,107,850 $ 6,950,092 $ 723,808 $ 15,458,808
==================== ==================== =================== ===================
JPMORGAN INSURANCE
FIDELITY VIP MID CAP TRUST CORE BOND
DIVISION DIVISION
-------------------- --------------------
ASSETS:
Investments at fair value..... $ 4,672,103 $ 750,622
Due from General American Life
Insurance Company........... -- --
-------------------- --------------------
Total Assets............. 4,672,103 750,622
-------------------- --------------------
LIABILITIES:
Accrued fees.................. 51 59
Due to General American Life
Insurance Company........... -- 1
-------------------- --------------------
Total Liabilities........ 51 60
-------------------- --------------------
NET ASSETS....................... $ 4,672,052 $ 750,562
==================== ====================
The accompanying notes are an integral part of these financial statements.
8
The accompanying notes are an integral part of these financial statements.
9
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
OF GENERAL AMERICAN LIFE INSURANCE COMPANY
STATEMENTS OF ASSETS AND LIABILITIES -- (CONCLUDED)
DECEMBER 31, 2017
JPMORGAN INSURANCE RUSSELL RUSSELL
TRUST SMALL INTERNATIONAL RUSSELL U.S. SMALL CAP
CAP CORE DEVELOPED MARKETS STRATEGIC BOND EQUITY
DIVISION DIVISION DIVISION DIVISION
-------------------- -------------------- -------------------- --------------------
ASSETS:
Investments at fair value..... $ 3,341,203 $ 1,542,746 $ 893,733 $ 1,782,819
Due from General American Life
Insurance Company........... -- -- -- 1
-------------------- -------------------- -------------------- --------------------
Total Assets............. 3,341,203 1,542,746 893,733 1,782,820
-------------------- -------------------- -------------------- --------------------
LIABILITIES:
Accrued fees.................. 64 43 60 67
Due to General American Life
Insurance Company........... -- -- -- --
-------------------- -------------------- -------------------- --------------------
Total Liabilities........ 64 43 60 67
-------------------- -------------------- -------------------- --------------------
NET ASSETS....................... $ 3,341,139 $ 1,542,703 $ 893,673 $ 1,782,753
==================== ==================== ==================== ====================
RUSSELL VANECK VIP
U.S. STRATEGIC EQUITY EMERGING MARKETS
DIVISION DIVISION
--------------------- ---------------------
ASSETS:
Investments at fair value..... $ 4,090,917 $ 5,093,874
Due from General American Life
Insurance Company........... -- --
--------------------- ---------------------
Total Assets............. 4,090,917 5,093,874
--------------------- ---------------------
LIABILITIES:
Accrued fees.................. 33 36
Due to General American Life
Insurance Company........... -- 1
--------------------- ---------------------
Total Liabilities........ 33 37
--------------------- ---------------------
NET ASSETS....................... $ 4,090,884 $ 5,093,837
===================== =====================
The accompanying notes are an integral part of these financial statements.
10
The accompanying notes are an integral part of these financial statements.
11
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
OF GENERAL AMERICAN LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2017, 2016 AND 2015
AMERICAN FUNDS GLOBAL SMALL CAPITALIZATION
DIVISION
-------------------------------------------------------------------
2017 2016 2015
-------------------- -------------------- --------------------
INVESTMENT INCOME:
Dividends............................................ $ 15,120 $ 9,379 $ --
-------------------- -------------------- --------------------
EXPENSES:
Mortality and expense risk charges................... 15,564 16,098 18,960
-------------------- -------------------- --------------------
Net investment income (loss).................... (444) (6,719) (18,960)
-------------------- -------------------- --------------------
NET REALIZED AND CHANGES IN UNREALIZED
GAINS (LOSSES) ON INVESTMENTS:
Realized gain distributions.......................... -- 778,254 405,109
Realized gains (losses) on sale of investments....... 41,357 (15,540) 78,853
-------------------- -------------------- --------------------
Net realized gains (losses)..................... 41,357 762,714 483,962
-------------------- -------------------- --------------------
Change in unrealized gains (losses) on investments... 807,841 (711,241) (456,444)
-------------------- -------------------- --------------------
Net realized and changes in unrealized gains (losses)
on investments.................................... 849,198 51,473 27,518
-------------------- -------------------- --------------------
Net increase (decrease) in net assets resulting
from operations................................... $ 848,754 $ 44,754 $ 8,558
==================== ==================== ====================
AMERICAN FUNDS GROWTH
DIVISION
------------------------------------------------------------------
2017 2016 2015
-------------------- -------------------- --------------------
INVESTMENT INCOME:
Dividends............................................ $ 87,908 $ 123,506 $ 102,075
-------------------- -------------------- --------------------
EXPENSES:
Mortality and expense risk charges................... 74,312 70,301 75,298
-------------------- -------------------- --------------------
Net investment income (loss).................... 13,596 53,205 26,777
-------------------- -------------------- --------------------
NET REALIZED AND CHANGES IN UNREALIZED
GAINS (LOSSES) ON INVESTMENTS:
Realized gain distributions.......................... 1,686,428 1,466,761 3,547,677
Realized gains (losses) on sale of investments....... 534,981 214,966 389,196
-------------------- -------------------- --------------------
Net realized gains (losses)..................... 2,221,409 1,681,727 3,936,873
-------------------- -------------------- --------------------
Change in unrealized gains (losses) on investments... 2,080,715 (331,473) (2,894,639)
-------------------- -------------------- --------------------
Net realized and changes in unrealized gains (losses)
on investments.................................... 4,302,124 1,350,254 1,042,234
-------------------- -------------------- --------------------
Net increase (decrease) in net assets resulting
from operations................................... $ 4,315,720 $ 1,403,459 $ 1,069,011
==================== ==================== ====================
AMERICAN FUNDS GROWTH-INCOME
DIVISION
-------------------------------------------------------------------
2017 2016 2015
-------------------- --------------------- --------------------
INVESTMENT INCOME:
Dividends............................................ $ 153,824 $ 145,350 $ 142,667
-------------------- --------------------- --------------------
EXPENSES:
Mortality and expense risk charges................... 42,199 39,492 43,842
-------------------- --------------------- --------------------
Net investment income (loss).................... 111,625 105,858 98,825
-------------------- --------------------- --------------------
NET REALIZED AND CHANGES IN UNREALIZED
GAINS (LOSSES) ON INVESTMENTS:
Realized gain distributions.......................... 714,326 1,121,427 1,601,651
Realized gains (losses) on sale of investments....... 224,108 217,979 219,014
-------------------- --------------------- --------------------
Net realized gains (losses)..................... 938,434 1,339,406 1,820,665
-------------------- --------------------- --------------------
Change in unrealized gains (losses) on investments... 1,145,870 (373,381) (1,796,982)
-------------------- --------------------- --------------------
Net realized and changes in unrealized gains (losses)
on investments.................................... 2,084,304 966,025 23,683
-------------------- --------------------- --------------------
Net increase (decrease) in net assets resulting
from operations................................... $ 2,195,929 $ 1,071,883 $ 122,508
==================== ===================== ====================
(a) For the period April 29, 2016 to December 31, 2016.
The accompanying notes are an integral part of these financial statements.
12
The accompanying notes are an integral part of these financial statements.
13
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
OF GENERAL AMERICAN LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS -- (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 2017, 2016 AND 2015
BHFTI BRIGHTHOUSE ASSET ALLOCATION 100
DIVISION
--------------------------------------------------------------------
2017 2016 2015
--------------------- -------------------- --------------------
INVESTMENT INCOME:
Dividends............................................ $ 647 $ 1,022 $ 772
--------------------- -------------------- --------------------
EXPENSES:
Mortality and expense risk charges................... -- -- --
--------------------- -------------------- --------------------
Net investment income (loss).................... 647 1,022 772
--------------------- -------------------- --------------------
NET REALIZED AND CHANGES IN UNREALIZED
GAINS (LOSSES) ON INVESTMENTS:
Realized gain distributions.......................... 2,420 5,181 3,741
Realized gains (losses) on sale of investments....... 295 962 331
--------------------- -------------------- --------------------
Net realized gains (losses)..................... 2,715 6,143 4,072
--------------------- -------------------- --------------------
Change in unrealized gains (losses) on investments... 5,960 (3,551) (5,733)
--------------------- -------------------- --------------------
Net realized and changes in unrealized gains (losses)
on investments.................................... 8,675 2,592 (1,661)
--------------------- -------------------- --------------------
Net increase (decrease) in net assets resulting
from operations................................... $ 9,322 $ 3,614 $ (889)
===================== ==================== ====================
BHFTI CLARION GLOBAL REAL ESTATE
DIVISION
--------------------------------------------------------------------
2017 2016 2015
--------------------- --------------------- --------------------
INVESTMENT INCOME:
Dividends............................................ $ 103,821 $ 77,055 $ 150,322
--------------------- --------------------- --------------------
EXPENSES:
Mortality and expense risk charges................... 7,639 8,724 9,245
--------------------- --------------------- --------------------
Net investment income (loss).................... 96,182 68,331 141,077
--------------------- --------------------- --------------------
NET REALIZED AND CHANGES IN UNREALIZED
GAINS (LOSSES) ON INVESTMENTS:
Realized gain distributions.......................... -- -- --
Realized gains (losses) on sale of investments....... 19,244 94,113 37,749
--------------------- --------------------- --------------------
Net realized gains (losses)..................... 19,244 94,113 37,749
--------------------- --------------------- --------------------
Change in unrealized gains (losses) on investments... 177,972 (93,220) (239,288)
--------------------- --------------------- --------------------
Net realized and changes in unrealized gains (losses)
on investments.................................... 197,216 893 (201,539)
--------------------- --------------------- --------------------
Net increase (decrease) in net assets resulting
from operations................................... $ 293,398 $ 69,224 $ (60,462)
===================== ===================== ====================
BHFTI CLEARBRIDGE AGGRESSIVE GROWTH
DIVISION
--------------------------------------------------------------------
2017 2016 2015
-------------------- --------------------- ---------------------
INVESTMENT INCOME:
Dividends............................................ $ 13,122 $ 9,112 $ 13,429
-------------------- --------------------- ---------------------
EXPENSES:
Mortality and expense risk charges................... 6,924 6,741 7,573
-------------------- --------------------- ---------------------
Net investment income (loss).................... 6,198 2,371 5,856
-------------------- --------------------- ---------------------
NET REALIZED AND CHANGES IN UNREALIZED
GAINS (LOSSES) ON INVESTMENTS:
Realized gain distributions.......................... -- -- --
Realized gains (losses) on sale of investments....... 68,756 71,427 690,168
-------------------- --------------------- ---------------------
Net realized gains (losses)..................... 68,756 71,427 690,168
-------------------- --------------------- ---------------------
Change in unrealized gains (losses) on investments... 154,155 (43,287) (702,277)
-------------------- --------------------- ---------------------
Net realized and changes in unrealized gains (losses)
on investments.................................... 222,911 28,140 (12,109)
-------------------- --------------------- ---------------------
Net increase (decrease) in net assets resulting
from operations................................... $ 229,109 $ 30,511 $ (6,253)
==================== ===================== =====================
(a) For the period April 29, 2016 to December 31, 2016.
The accompanying notes are an integral part of these financial statements.
14
The accompanying notes are an integral part of these financial statements.
15
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
OF GENERAL AMERICAN LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS -- (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 2017, 2016 AND 2015
BHFTI HARRIS OAKMARK INTERNATIONAL
DIVISION
------------------------------------------------------------------
2017 2016 2015
-------------------- -------------------- --------------------
INVESTMENT INCOME:
Dividends............................................ $ 131,196 $ 148,671 $ 252,393
-------------------- -------------------- --------------------
EXPENSES:
Mortality and expense risk charges................... 31,759 27,377 31,194
-------------------- -------------------- --------------------
Net investment income (loss).................... 99,437 121,294 221,199
-------------------- -------------------- --------------------
NET REALIZED AND CHANGES IN UNREALIZED
GAINS (LOSSES) ON INVESTMENTS:
Realized gain distributions.......................... -- 416,568 720,780
Realized gains (losses) on sale of investments....... 60,004 (262,290) 92,970
-------------------- -------------------- --------------------
Net realized gains (losses)..................... 60,004 154,278 813,750
-------------------- -------------------- --------------------
Change in unrealized gains (losses) on investments... 1,689,235 143,639 (1,386,571)
-------------------- -------------------- --------------------
Net realized and changes in unrealized gains (losses)
on investments..................................... 1,749,239 297,917 (572,821)
-------------------- -------------------- --------------------
Net increase (decrease) in net assets resulting
from operations.................................... $ 1,848,676 $ 419,211 $ (351,622)
==================== ==================== ====================
BHFTI INVESCO SMALL CAP GROWTH
DIVISION
------------------------------------------------------------------
2017 2016 2015
-------------------- -------------------- --------------------
INVESTMENT INCOME:
Dividends............................................ $ -- $ -- $ 1,428
-------------------- -------------------- --------------------
EXPENSES:
Mortality and expense risk charges................... 3,245 2,917 3,103
-------------------- -------------------- --------------------
Net investment income (loss).................... (3,245) (2,917) (1,675)
-------------------- -------------------- --------------------
NET REALIZED AND CHANGES IN UNREALIZED
GAINS (LOSSES) ON INVESTMENTS:
Realized gain distributions.......................... 111,604 166,426 232,597
Realized gains (losses) on sale of investments....... (948) (8,331) 21,190
-------------------- -------------------- --------------------
Net realized gains (losses)..................... 110,656 158,095 253,787
-------------------- -------------------- --------------------
Change in unrealized gains (losses) on investments... 142,459 (50,274) (268,144)
-------------------- -------------------- --------------------
Net realized and changes in unrealized gains (losses)
on investments..................................... 253,115 107,821 (14,357)
-------------------- -------------------- --------------------
Net increase (decrease) in net assets resulting
from operations.................................... $ 249,870 $ 104,904 $ (16,032)
==================== ==================== ====================
BHFTI MFS RESEARCH INTERNATIONAL
DIVISION
------------------------------------------------------------------
2017 2016 2015
-------------------- -------------------- --------------------
INVESTMENT INCOME:
Dividends............................................ $ 181,226 $ 190,554 $ 320,114
-------------------- -------------------- --------------------
EXPENSES:
Mortality and expense risk charges................... 56,141 54,366 68,824
-------------------- -------------------- --------------------
Net investment income (loss).................... 125,085 136,188 251,290
-------------------- -------------------- --------------------
NET REALIZED AND CHANGES IN UNREALIZED
GAINS (LOSSES) ON INVESTMENTS:
Realized gain distributions.......................... -- -- --
Realized gains (losses) on sale of investments....... 96,658 (240,470) 67,399
-------------------- -------------------- --------------------
Net realized gains (losses)..................... 96,658 (240,470) 67,399
-------------------- -------------------- --------------------
Change in unrealized gains (losses) on investments... 1,966,754 (90,823) (423,899)
-------------------- -------------------- --------------------
Net realized and changes in unrealized gains (losses)
on investments..................................... 2,063,412 (331,293) (356,500)
-------------------- -------------------- --------------------
Net increase (decrease) in net assets resulting
from operations.................................... $ 2,188,497 $ (195,105) $ (105,210)
==================== ==================== ====================
(a) For the period April 29, 2016 to December 31, 2016.
The accompanying notes are an integral part of these financial statements.
16
The accompanying notes are an integral part of these financial statements.
17
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
OF GENERAL AMERICAN LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS -- (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 2017, 2016 AND 2015
BHFTI MORGAN STANLEY MID CAP GROWTH
DIVISION
-----------------------------------------------------------------
2017 2016 2015
------------------- -------------------- --------------------
INVESTMENT INCOME:
Dividends............................................ $ 6,844 $ -- $ --
------------------- -------------------- --------------------
EXPENSES:
Mortality and expense risk charges................... 9,208 7,901 9,187
------------------- -------------------- --------------------
Net investment income (loss).................... (2,364) (7,901) (9,187)
------------------- -------------------- --------------------
NET REALIZED AND CHANGES IN UNREALIZED
GAINS (LOSSES) ON INVESTMENTS:
Realized gain distributions.......................... -- -- --
Realized gains (losses) on sale of investments....... 62,637 32,343 47,980
------------------- -------------------- --------------------
Net realized gains (losses)..................... 62,637 32,343 47,980
------------------- -------------------- --------------------
Change in unrealized gains (losses) on investments... 563,488 (179,232) (141,174)
------------------- -------------------- --------------------
Net realized and changes in unrealized gains (losses)
on investments..................................... 626,125 (146,889) (93,194)
------------------- -------------------- --------------------
Net increase (decrease) in net assets resulting
from operations.................................... $ 623,761 $ (154,790) $ (102,381)
=================== ==================== ====================
BHFTI PIMCO TOTAL RETURN
DIVISION
------------------------------------------------------------------
2017 2016 2015
-------------------- -------------------- --------------------
INVESTMENT INCOME:
Dividends............................................ $ 199,256 $ 306,253 $ 693,908
-------------------- -------------------- --------------------
EXPENSES:
Mortality and expense risk charges................... 48,959 51,862 56,892
-------------------- -------------------- --------------------
Net investment income (loss).................... 150,297 254,391 637,016
-------------------- -------------------- --------------------
NET REALIZED AND CHANGES IN UNREALIZED
GAINS (LOSSES) ON INVESTMENTS:
Realized gain distributions.......................... 49,596 -- 151,169
Realized gains (losses) on sale of investments....... (25,156) (142,777) (29,833)
-------------------- -------------------- --------------------
Net realized gains (losses)..................... 24,440 (142,777) 121,336
-------------------- -------------------- --------------------
Change in unrealized gains (losses) on investments... 252,866 198,934 (774,770)
-------------------- -------------------- --------------------
Net realized and changes in unrealized gains (losses)
on investments..................................... 277,306 56,157 (653,434)
-------------------- -------------------- --------------------
Net increase (decrease) in net assets resulting
from operations.................................... $ 427,603 $ 310,548 $ (16,418)
==================== ==================== ====================
BHFTI T. ROWE PRICE LARGE CAP VALUE
DIVISION
-----------------------------------------------------------------
2017 2016 2015
------------------- -------------------- --------------------
INVESTMENT INCOME:
Dividends............................................ $ 48,830 $ 59,566 $ 60,710
------------------- -------------------- --------------------
EXPENSES:
Mortality and expense risk charges................... 11,866 10,620 10,819
------------------- -------------------- --------------------
Net investment income (loss).................... 36,964 48,946 49,891
------------------- -------------------- --------------------
NET REALIZED AND CHANGES IN UNREALIZED
GAINS (LOSSES) ON INVESTMENTS:
Realized gain distributions.......................... 184,070 227,017 7,305
Realized gains (losses) on sale of investments....... 27,777 52,848 316,500
------------------- -------------------- --------------------
Net realized gains (losses)..................... 211,847 279,865 323,805
------------------- -------------------- --------------------
Change in unrealized gains (losses) on investments... 90,317 (41,435) (455,584)
------------------- -------------------- --------------------
Net realized and changes in unrealized gains (losses)
on investments..................................... 302,164 238,430 (131,779)
------------------- -------------------- --------------------
Net increase (decrease) in net assets resulting
from operations.................................... $ 339,128 $ 287,376 $ (81,888)
=================== ==================== ====================
(a) For the period April 29, 2016 to December 31, 2016.
The accompanying notes are an integral part of these financial statements.
18
The accompanying notes are an integral part of these financial statements.
19
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
OF GENERAL AMERICAN LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS -- (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 2017, 2016 AND 2015
BHFTI T. ROWE PRICE MID CAP GROWTH
DIVISION
-------------------------------------------------------------------
2017 2016 2015
-------------------- --------------------- --------------------
INVESTMENT INCOME:
Dividends............................................ $ -- $ -- $ --
-------------------- --------------------- --------------------
EXPENSES:
Mortality and expense risk charges................... 13,959 13,494 14,394
-------------------- --------------------- --------------------
Net investment income (loss).................... (13,959) (13,494) (14,394)
-------------------- --------------------- --------------------
NET REALIZED AND CHANGES IN UNREALIZED
GAINS (LOSSES) ON INVESTMENTS:
Realized gain distributions.......................... 247,525 442,361 531,920
Realized gains (losses) on sale of investments....... 59,859 53,369 72,742
-------------------- --------------------- --------------------
Net realized gains (losses)..................... 307,384 495,730 604,662
-------------------- --------------------- --------------------
Change in unrealized gains (losses) on investments... 395,543 (290,932) (379,732)
-------------------- --------------------- --------------------
Net realized and changes in unrealized gains (losses)
on investments.................................... 702,927 204,798 224,930
-------------------- --------------------- --------------------
Net increase (decrease) in net assets resulting
from operations................................... $ 688,968 $ 191,304 $ 210,536
==================== ===================== ====================
BHFTI VICTORY SYCAMORE MID CAP VALUE
DIVISION
--------------------------------------------------------------------
2017 2016 2015
--------------------- -------------------- ---------------------
INVESTMENT INCOME:
Dividends............................................ $ 43,336 $ 32,057 $ 32,247
--------------------- -------------------- ---------------------
EXPENSES:
Mortality and expense risk charges................... 17,455 16,370 19,128
--------------------- -------------------- ---------------------
Net investment income (loss).................... 25,881 15,687 13,119
--------------------- -------------------- ---------------------
NET REALIZED AND CHANGES IN UNREALIZED
GAINS (LOSSES) ON INVESTMENTS:
Realized gain distributions.......................... -- 171,303 219,685
Realized gains (losses) on sale of investments....... 20,553 (67,586) 167,606
--------------------- -------------------- ---------------------
Net realized gains (losses)..................... 20,553 103,717 387,291
--------------------- -------------------- ---------------------
Change in unrealized gains (losses) on investments... 297,352 399,812 (807,927)
--------------------- -------------------- ---------------------
Net realized and changes in unrealized gains (losses)
on investments.................................... 317,905 503,529 (420,636)
--------------------- -------------------- ---------------------
Net increase (decrease) in net assets resulting
from operations................................... $ 343,786 $ 519,216 $ (407,517)
===================== ==================== =====================
BHFTII BAILLIE GIFFORD INTERNATIONAL STOCK
DIVISION
--------------------------------------------------------------------
2017 2016 2015
--------------------- -------------------- --------------------
INVESTMENT INCOME:
Dividends............................................ $ 24,532 $ 29,005 $ 31,885
--------------------- -------------------- --------------------
EXPENSES:
Mortality and expense risk charges................... 6,987 6,271 6,757
--------------------- -------------------- --------------------
Net investment income (loss).................... 17,545 22,734 25,128
--------------------- -------------------- --------------------
NET REALIZED AND CHANGES IN UNREALIZED
GAINS (LOSSES) ON INVESTMENTS:
Realized gain distributions.......................... -- -- --
Realized gains (losses) on sale of investments....... 21,550 (16,468) (17,092)
--------------------- -------------------- --------------------
Net realized gains (losses)..................... 21,550 (16,468) (17,092)
--------------------- -------------------- --------------------
Change in unrealized gains (losses) on investments... 558,804 84,434 (51,040)
--------------------- -------------------- --------------------
Net realized and changes in unrealized gains (losses)
on investments.................................... 580,354 67,966 (68,132)
--------------------- -------------------- --------------------
Net increase (decrease) in net assets resulting
from operations................................... $ 597,899 $ 90,700 $ (43,004)
===================== ==================== ====================
(a) For the period April 29, 2016 to December 31, 2016.
The accompanying notes are an integral part of these financial statements.
20
The accompanying notes are an integral part of these financial statements.
21
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
OF GENERAL AMERICAN LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS -- (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 2017, 2016 AND 2015
BHFTII BLACKROCK BOND INCOME
DIVISION
------------------------------------------------------------------
2017 2016 2015
-------------------- -------------------- --------------------
INVESTMENT INCOME:
Dividends............................................ $ 116,078 $ 60,489 $ 73,313
-------------------- -------------------- --------------------
EXPENSES:
Mortality and expense risk charges................... 22,650 14,653 8,886
-------------------- -------------------- --------------------
Net investment income (loss).................... 93,428 45,836 64,427
-------------------- -------------------- --------------------
NET REALIZED AND CHANGES IN UNREALIZED
GAINS (LOSSES) ON INVESTMENTS:
Realized gain distributions.......................... -- -- 21,470
Realized gains (losses) on sale of investments....... (7,702) (3,875) 1,441
-------------------- -------------------- --------------------
Net realized gains (losses)..................... (7,702) (3,875) 22,911
-------------------- -------------------- --------------------
Change in unrealized gains (losses) on investments... 43,764 (47,132) (85,628)
-------------------- -------------------- --------------------
Net realized and changes in unrealized gains (losses)
on investments..................................... 36,062 (51,007) (62,717)
-------------------- -------------------- --------------------
Net increase (decrease) in net assets resulting
from operations.................................... $ 129,490 $ (5,171) $ 1,710
==================== ==================== ====================
BHFTII BLACKROCK CAPITAL APPRECIATION
DIVISION
------------------------------------------------------------------
2017 2016 2015
-------------------- -------------------- --------------------
INVESTMENT INCOME:
Dividends............................................ $ 3,082 $ -- $ --
-------------------- -------------------- --------------------
EXPENSES:
Mortality and expense risk charges................... 10,327 9,537 10,861
-------------------- -------------------- --------------------
Net investment income (loss).................... (7,245) (9,537) (10,861)
-------------------- -------------------- --------------------
NET REALIZED AND CHANGES IN UNREALIZED
GAINS (LOSSES) ON INVESTMENTS:
Realized gain distributions.......................... 68,038 235,690 496,837
Realized gains (losses) on sale of investments....... 104,287 60,663 97,006
-------------------- -------------------- --------------------
Net realized gains (losses)..................... 172,325 296,353 593,843
-------------------- -------------------- --------------------
Change in unrealized gains (losses) on investments... 660,446 (299,992) (421,432)
-------------------- -------------------- --------------------
Net realized and changes in unrealized gains (losses)
on investments..................................... 832,771 (3,639) 172,411
-------------------- -------------------- --------------------
Net increase (decrease) in net assets resulting
from operations.................................... $ 825,526 $ (13,176) $ 161,550
==================== ==================== ====================
BHFTII BLACKROCK ULTRA-SHORT TERM BOND
DIVISION
------------------------------------------------------------------
2017 2016 2015
-------------------- -------------------- --------------------
INVESTMENT INCOME:
Dividends............................................ $ 16,364 $ 3,618 $ 179
-------------------- -------------------- --------------------
EXPENSES:
Mortality and expense risk charges................... 21,878 24,233 25,557
-------------------- -------------------- --------------------
Net investment income (loss).................... (5,514) (20,615) (25,378)
-------------------- -------------------- --------------------
NET REALIZED AND CHANGES IN UNREALIZED
GAINS (LOSSES) ON INVESTMENTS:
Realized gain distributions.......................... 95 97 --
Realized gains (losses) on sale of investments....... 3,985 1,569 --
-------------------- -------------------- --------------------
Net realized gains (losses)..................... 4,080 1,666 --
-------------------- -------------------- --------------------
Change in unrealized gains (losses) on investments... 20,890 12,277 --
-------------------- -------------------- --------------------
Net realized and changes in unrealized gains (losses)
on investments..................................... 24,970 13,943 --
-------------------- -------------------- --------------------
Net increase (decrease) in net assets resulting
from operations.................................... $ 19,456 $ (6,672) $ (25,378)
==================== ==================== ====================
(a) For the period April 29, 2016 to December 31, 2016.
The accompanying notes are an integral part of these financial statements.
22
The accompanying notes are an integral part of these financial statements.
23
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
OF GENERAL AMERICAN LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS -- (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 2017, 2016 AND 2015
BHFTII BRIGHTHOUSE ASSET ALLOCATION 20
DIVISION
----------------------------------------------------------------------
2017 2016 2015
--------------------- --------------------- ---------------------
INVESTMENT INCOME:
Dividends............................................ $ 2,607 $ 3,740 $ 2,493
--------------------- --------------------- ---------------------
EXPENSES:
Mortality and expense risk charges................... -- -- --
--------------------- --------------------- ---------------------
Net investment income (loss).................... 2,607 3,740 2,493
--------------------- --------------------- ---------------------
NET REALIZED AND CHANGES IN UNREALIZED
GAINS (LOSSES) ON INVESTMENTS:
Realized gain distributions.......................... 1,793 3,595 3,330
Realized gains (losses) on sale of investments....... (77) (58) 80
--------------------- --------------------- ---------------------
Net realized gains (losses)..................... 1,716 3,537 3,410
--------------------- --------------------- ---------------------
Change in unrealized gains (losses) on investments... 3,429 (2,226) (6,137)
--------------------- --------------------- ---------------------
Net realized and changes in unrealized gains (losses)
on investments.................................... 5,145 1,311 (2,727)
--------------------- --------------------- ---------------------
Net increase (decrease) in net assets resulting
from operations................................... $ 7,752 $ 5,051 $ (234)
===================== ===================== =====================
BHFTII BRIGHTHOUSE ASSET ALLOCATION 40
DIVISION
---------------------------------------------------------------------
2017 2016 2015
--------------------- --------------------- ---------------------
INVESTMENT INCOME:
Dividends............................................ $ 5,349 $ 8,469 $ 1,066
--------------------- --------------------- ---------------------
EXPENSES:
Mortality and expense risk charges................... -- -- --
--------------------- --------------------- ---------------------
Net investment income (loss).................... 5,349 8,469 1,066
--------------------- --------------------- ---------------------
NET REALIZED AND CHANGES IN UNREALIZED
GAINS (LOSSES) ON INVESTMENTS:
Realized gain distributions.......................... 7,395 14,440 12,280
Realized gains (losses) on sale of investments....... (382) (275) (93)
--------------------- --------------------- ---------------------
Net realized gains (losses)..................... 7,013 14,165 12,187
--------------------- --------------------- ---------------------
Change in unrealized gains (losses) on investments... 12,945 (8,803) (19,736)
--------------------- --------------------- ---------------------
Net realized and changes in unrealized gains (losses)
on investments.................................... 19,958 5,362 (7,549)
--------------------- --------------------- ---------------------
Net increase (decrease) in net assets resulting
from operations................................... $ 25,307 $ 13,831 $ (6,483)
===================== ===================== =====================
BHFTII BRIGHTHOUSE ASSET ALLOCATION 60
DIVISION
----------------------------------------------------------------------
2017 2016 2015
--------------------- --------------------- ---------------------
INVESTMENT INCOME:
Dividends............................................ $ 7,315 $ 10,465 $ 2,614
--------------------- --------------------- ---------------------
EXPENSES:
Mortality and expense risk charges................... -- -- --
--------------------- --------------------- ---------------------
Net investment income (loss).................... 7,315 10,465 2,614
--------------------- --------------------- ---------------------
NET REALIZED AND CHANGES IN UNREALIZED
GAINS (LOSSES) ON INVESTMENTS:
Realized gain distributions.......................... 14,690 27,755 22,724
Realized gains (losses) on sale of investments....... 250 142 33,408
--------------------- --------------------- ---------------------
Net realized gains (losses)..................... 14,940 27,897 56,132
--------------------- --------------------- ---------------------
Change in unrealized gains (losses) on investments... 29,679 (16,166) (56,186)
--------------------- --------------------- ---------------------
Net realized and changes in unrealized gains (losses)
on investments.................................... 44,619 11,731 (54)
--------------------- --------------------- ---------------------
Net increase (decrease) in net assets resulting
from operations................................... $ 51,934 $ 22,196 $ 2,560
===================== ===================== =====================
(a) For the period April 29, 2016 to December 31, 2016.
The accompanying notes are an integral part of these financial statements.
24
The accompanying notes are an integral part of these financial statements.
25
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
OF GENERAL AMERICAN LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS -- (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 2017, 2016 AND 2015
BHFTII BRIGHTHOUSE ASSET ALLOCATION 80
DIVISION
--------------------------------------------------------------------
2017 2016 2015
-------------------- --------------------- ---------------------
INVESTMENT INCOME:
Dividends............................................ $ 14,834 $ 22,881 $ 4,019
-------------------- --------------------- ---------------------
EXPENSES:
Mortality and expense risk charges................... -- -- --
-------------------- --------------------- ---------------------
Net investment income (loss).................... 14,834 22,881 4,019
-------------------- --------------------- ---------------------
NET REALIZED AND CHANGES IN UNREALIZED
GAINS (LOSSES) ON INVESTMENTS:
Realized gain distributions.......................... 45,573 84,499 34,263
Realized gains (losses) on sale of investments....... 9,748 13,417 4,416
-------------------- --------------------- ---------------------
Net realized gains (losses)..................... 55,321 97,916 38,679
-------------------- --------------------- ---------------------
Change in unrealized gains (losses) on investments... 79,824 (61,134) (54,209)
-------------------- --------------------- ---------------------
Net realized and changes in unrealized gains (losses)
on investments.................................... 135,145 36,782 (15,530)
-------------------- --------------------- ---------------------
Net increase (decrease) in net assets resulting
from operations................................... $ 149,979 $ 59,663 $ (11,511)
==================== ===================== =====================
BHFTII BRIGHTHOUSE/ARTISAN MID CAP VALUE
DIVISION
--------------------------------------------------------------------
2017 2016 2015
--------------------- --------------------- --------------------
INVESTMENT INCOME:
Dividends............................................ $ 24,071 $ 37,800 $ 39,521
--------------------- --------------------- --------------------
EXPENSES:
Mortality and expense risk charges................... 13,041 12,052 13,354
--------------------- --------------------- --------------------
Net investment income (loss).................... 11,030 25,748 26,167
--------------------- --------------------- --------------------
NET REALIZED AND CHANGES IN UNREALIZED
GAINS (LOSSES) ON INVESTMENTS:
Realized gain distributions.......................... -- 376,674 417,037
Realized gains (losses) on sale of investments....... 60,211 5,740 63,232
--------------------- --------------------- --------------------
Net realized gains (losses)..................... 60,211 382,414 480,269
--------------------- --------------------- --------------------
Change in unrealized gains (losses) on investments... 339,435 264,858 (831,669)
--------------------- --------------------- --------------------
Net realized and changes in unrealized gains (losses)
on investments.................................... 399,646 647,272 (351,400)
--------------------- --------------------- --------------------
Net increase (decrease) in net assets resulting
from operations................................... $ 410,676 $ 673,020 $ (325,233)
===================== ===================== ====================
BHFTII BRIGHTHOUSE/WELLINGTON BALANCED
DIVISION
--------------------------------------------------------------------
2017 2016 2015
-------------------- --------------------- ---------------------
INVESTMENT INCOME:
Dividends............................................ $ 187,694 $ 208,079 $ 157,345
-------------------- --------------------- ---------------------
EXPENSES:
Mortality and expense risk charges................... 56,350 44,467 44,177
-------------------- --------------------- ---------------------
Net investment income (loss).................... 131,344 163,612 113,168
-------------------- --------------------- ---------------------
NET REALIZED AND CHANGES IN UNREALIZED
GAINS (LOSSES) ON INVESTMENTS:
Realized gain distributions.......................... 236,175 351,414 1,348,056
Realized gains (losses) on sale of investments....... 95,977 119,362 168,350
-------------------- --------------------- ---------------------
Net realized gains (losses)..................... 332,152 470,776 1,516,406
-------------------- --------------------- ---------------------
Change in unrealized gains (losses) on investments... 853,760 (135,374) (1,462,562)
-------------------- --------------------- ---------------------
Net realized and changes in unrealized gains (losses)
on investments.................................... 1,185,912 335,402 53,844
-------------------- --------------------- ---------------------
Net increase (decrease) in net assets resulting
from operations................................... $ 1,317,256 $ 499,014 $ 167,012
==================== ===================== =====================
(a) For the period April 29, 2016 to December 31, 2016.
The accompanying notes are an integral part of these financial statements.
26
The accompanying notes are an integral part of these financial statements.
27
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
OF GENERAL AMERICAN LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS -- (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 2017, 2016 AND 2015
BHFTII BRIGHTHOUSE/WELLINGTON CORE EQUITY OPPORTUNITIES
DIVISION
-------------------------------------------------------------------
2017 2016 2015
-------------------- -------------------- --------------------
INVESTMENT INCOME:
Dividends............................................ $ 86,951 $ 101,444 $ 95,607
-------------------- -------------------- --------------------
EXPENSES:
Mortality and expense risk charges................... 21,707 20,721 21,187
-------------------- -------------------- --------------------
Net investment income (loss).................... 65,244 80,723 74,420
-------------------- -------------------- --------------------
NET REALIZED AND CHANGES IN UNREALIZED
GAINS (LOSSES) ON INVESTMENTS:
Realized gain distributions.......................... 205,212 277,052 1,839,176
Realized gains (losses) on sale of investments....... 15,939 (89,709) 37,815
-------------------- -------------------- --------------------
Net realized gains (losses)..................... 221,151 187,343 1,876,991
-------------------- -------------------- --------------------
Change in unrealized gains (losses) on investments... 713,120 121,024 (1,850,670)
-------------------- -------------------- --------------------
Net realized and changes in unrealized gains (losses)
on investments.................................... 934,271 308,367 26,321
-------------------- -------------------- --------------------
Net increase (decrease) in net assets resulting
from operations................................... $ 999,515 $ 389,090 $ 100,741
==================== ==================== ====================
BHFTII FRONTIER MID CAP GROWTH
DIVISION
------------------------------------------------------------------
2017 2016 2015
-------------------- -------------------- --------------------
INVESTMENT INCOME:
Dividends............................................ $ -- $ -- $ --
-------------------- -------------------- --------------------
EXPENSES:
Mortality and expense risk charges................... 21,515 20,381 23,259
-------------------- -------------------- --------------------
Net investment income (loss).................... (21,515) (20,381) (23,259)
-------------------- -------------------- --------------------
NET REALIZED AND CHANGES IN UNREALIZED
GAINS (LOSSES) ON INVESTMENTS:
Realized gain distributions.......................... 81,761 391,022 463,328
Realized gains (losses) on sale of investments....... 152,646 74,041 130,430
-------------------- -------------------- --------------------
Net realized gains (losses)..................... 234,407 465,063 593,758
-------------------- -------------------- --------------------
Change in unrealized gains (losses) on investments... 523,297 (286,708) (476,786)
-------------------- -------------------- --------------------
Net realized and changes in unrealized gains (losses)
on investments.................................... 757,704 178,355 116,972
-------------------- -------------------- --------------------
Net increase (decrease) in net assets resulting
from operations................................... $ 736,189 $ 157,974 $ 93,713
==================== ==================== ====================
BHFTII JENNISON GROWTH
DIVISION
------------------------------------------------------------------
2017 2016 2015
-------------------- -------------------- --------------------
INVESTMENT INCOME:
Dividends............................................ $ 81,209 $ 70,398 $ 71,978
-------------------- -------------------- --------------------
EXPENSES:
Mortality and expense risk charges................... 174,087 156,421 180,974
-------------------- -------------------- --------------------
Net investment income (loss).................... (92,878) (86,023) (108,996)
-------------------- -------------------- --------------------
NET REALIZED AND CHANGES IN UNREALIZED
GAINS (LOSSES) ON INVESTMENTS:
Realized gain distributions.......................... 1,810,961 3,115,503 3,971,059
Realized gains (losses) on sale of investments....... 448,919 199,303 760,787
-------------------- -------------------- --------------------
Net realized gains (losses)..................... 2,259,880 3,314,806 4,731,846
-------------------- -------------------- --------------------
Change in unrealized gains (losses) on investments... 5,682,678 (3,419,832) (2,060,648)
-------------------- -------------------- --------------------
Net realized and changes in unrealized gains (losses)
on investments.................................... 7,942,558 (105,026) 2,671,198
-------------------- -------------------- --------------------
Net increase (decrease) in net assets resulting
from operations................................... $ 7,849,680 $ (191,049) $ 2,562,202
==================== ==================== ====================
(a) For the period April 29, 2016 to December 31, 2016.
The accompanying notes are an integral part of these financial statements.
28
The accompanying notes are an integral part of these financial statements.
29
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
OF GENERAL AMERICAN LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS -- (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 2017, 2016 AND 2015
BHFTII METLIFE AGGREGATE BOND INDEX
DIVISION
-----------------------------------------------------------------
2017 2016 2015
------------------- -------------------- --------------------
INVESTMENT INCOME:
Dividends............................................ $ 401,524 $ 388,718 $ 416,941
------------------- -------------------- --------------------
EXPENSES:
Mortality and expense risk charges................... 85,776 88,106 89,982
------------------- -------------------- --------------------
Net investment income (loss).................... 315,748 300,612 326,959
------------------- -------------------- --------------------
NET REALIZED AND CHANGES IN UNREALIZED
GAINS (LOSSES) ON INVESTMENTS:
Realized gain distributions.......................... -- -- --
Realized gains (losses) on sale of investments....... (1,761) 18,120 21,767
------------------- -------------------- --------------------
Net realized gains (losses)..................... (1,761) 18,120 21,767
------------------- -------------------- --------------------
Change in unrealized gains (losses) on investments... 44,573 (77,577) (396,378)
------------------- -------------------- --------------------
Net realized and changes in unrealized gains (losses)
on investments..................................... 42,812 (59,457) (374,611)
------------------- -------------------- --------------------
Net increase (decrease) in net assets resulting
from operations.................................... $ 358,560 $ 241,155 $ (47,652)
=================== ==================== ====================
BHFTII METLIFE MID CAP STOCK INDEX
DIVISION
-----------------------------------------------------------------
2017 2016 2015
------------------- -------------------- --------------------
INVESTMENT INCOME:
Dividends............................................ $ 47,352 $ 26,432 $ 26,538
------------------- -------------------- --------------------
EXPENSES:
Mortality and expense risk charges................... 10,408 8,987 8,991
------------------- -------------------- --------------------
Net investment income (loss).................... 36,944 17,445 17,547
------------------- -------------------- --------------------
NET REALIZED AND CHANGES IN UNREALIZED
GAINS (LOSSES) ON INVESTMENTS:
Realized gain distributions.......................... 215,851 158,705 144,250
Realized gains (losses) on sale of investments....... 28,355 25,304 271,750
------------------- -------------------- --------------------
Net realized gains (losses)..................... 244,206 184,009 416,000
------------------- -------------------- --------------------
Change in unrealized gains (losses) on investments... 191,763 180,914 (480,822)
------------------- -------------------- --------------------
Net realized and changes in unrealized gains (losses)
on investments..................................... 435,969 364,923 (64,822)
------------------- -------------------- --------------------
Net increase (decrease) in net assets resulting
from operations.................................... $ 472,913 $ 382,368 $ (47,275)
=================== ==================== ====================
BHFTII METLIFE MSCI EAFE INDEX
DIVISION
-----------------------------------------------------------------
2017 2016 2015
------------------- -------------------- --------------------
INVESTMENT INCOME:
Dividends............................................ $ 121,962 $ 103,171 $ 144,319
------------------- -------------------- --------------------
EXPENSES:
Mortality and expense risk charges................... 24,542 22,035 25,232
------------------- -------------------- --------------------
Net investment income (loss).................... 97,420 81,136 119,087
------------------- -------------------- --------------------
NET REALIZED AND CHANGES IN UNREALIZED
GAINS (LOSSES) ON INVESTMENTS:
Realized gain distributions.......................... -- -- --
Realized gains (losses) on sale of investments....... 58,406 4,142 65,063
------------------- -------------------- --------------------
Net realized gains (losses)..................... 58,406 4,142 65,063
------------------- -------------------- --------------------
Change in unrealized gains (losses) on investments... 818,791 (50,058) (237,706)
------------------- -------------------- --------------------
Net realized and changes in unrealized gains (losses)
on investments..................................... 877,197 (45,916) (172,643)
------------------- -------------------- --------------------
Net increase (decrease) in net assets resulting
from operations.................................... $ 974,617 $ 35,220 $ (53,556)
=================== ==================== ====================
(a) For the period April 29, 2016 to December 31, 2016.
The accompanying notes are an integral part of these financial statements.
30
The accompanying notes are an integral part of these financial statements.
31
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
OF GENERAL AMERICAN LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS -- (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 2017, 2016 AND 2015
BHFTII METLIFE RUSSELL 2000 INDEX
DIVISION
-------------------------------------------------------------------
2017 2016 2015
-------------------- -------------------- --------------------
INVESTMENT INCOME:
Dividends............................................ $ 39,345 $ 41,503 $ 43,761
-------------------- -------------------- --------------------
EXPENSES:
Mortality and expense risk charges................... 14,336 13,329 16,029
-------------------- -------------------- --------------------
Net investment income (loss).................... 25,009 28,174 27,732
-------------------- -------------------- --------------------
NET REALIZED AND CHANGES IN UNREALIZED
GAINS (LOSSES) ON INVESTMENTS:
Realized gain distributions.......................... 129,057 174,764 207,375
Realized gains (losses) on sale of investments....... 139,118 143,321 185,460
-------------------- -------------------- --------------------
Net realized gains (losses)..................... 268,175 318,085 392,835
-------------------- -------------------- --------------------
Change in unrealized gains (losses) on investments... 148,566 236,931 (573,131)
-------------------- -------------------- --------------------
Net realized and changes in unrealized gains (losses)
on investments.................................... 416,741 555,016 (180,296)
-------------------- -------------------- --------------------
Net increase (decrease) in net assets resulting
from operations................................... $ 441,750 $ 583,190 $ (152,564)
==================== ==================== ====================
BHFTII METLIFE STOCK INDEX
DIVISION
-------------------------------------------------------------------
2017 2016 2015
-------------------- -------------------- ---------------------
INVESTMENT INCOME:
Dividends............................................ $ 998,595 $ 1,028,948 $ 991,259
-------------------- -------------------- ---------------------
EXPENSES:
Mortality and expense risk charges................... 331,301 303,209 330,673
-------------------- -------------------- ---------------------
Net investment income (loss).................... 667,294 725,739 660,586
-------------------- -------------------- ---------------------
NET REALIZED AND CHANGES IN UNREALIZED
GAINS (LOSSES) ON INVESTMENTS:
Realized gain distributions.......................... 1,569,540 2,255,946 2,384,414
Realized gains (losses) on sale of investments....... 1,844,507 1,668,618 3,150,123
-------------------- -------------------- ---------------------
Net realized gains (losses)..................... 3,414,047 3,924,564 5,534,537
-------------------- -------------------- ---------------------
Change in unrealized gains (losses) on investments... 6,588,528 724,662 (5,754,918)
-------------------- -------------------- ---------------------
Net realized and changes in unrealized gains (losses)
on investments.................................... 10,002,575 4,649,226 (220,381)
-------------------- -------------------- ---------------------
Net increase (decrease) in net assets resulting
from operations................................... $ 10,669,869 $ 5,374,965 $ 440,205
==================== ==================== =====================
BHFTII MFS TOTAL RETURN
DIVISION
-------------------------------------------------------------------
2017 2016 2015
-------------------- -------------------- --------------------
INVESTMENT INCOME:
Dividends............................................ $ 72,570 $ 82,051 $ 86,747
-------------------- -------------------- --------------------
EXPENSES:
Mortality and expense risk charges................... 15,388 15,701 16,503
-------------------- -------------------- --------------------
Net investment income (loss).................... 57,182 66,350 70,244
-------------------- -------------------- --------------------
NET REALIZED AND CHANGES IN UNREALIZED
GAINS (LOSSES) ON INVESTMENTS:
Realized gain distributions.......................... 148,934 117,195 --
Realized gains (losses) on sale of investments....... 64,847 132,172 38,051
-------------------- -------------------- --------------------
Net realized gains (losses)..................... 213,781 249,367 38,051
-------------------- -------------------- --------------------
Change in unrealized gains (losses) on investments... 50,500 (64,607) (128,963)
-------------------- -------------------- --------------------
Net realized and changes in unrealized gains (losses)
on investments.................................... 264,281 184,760 (90,912)
-------------------- -------------------- --------------------
Net increase (decrease) in net assets resulting
from operations................................... $ 321,463 $ 251,110 $ (20,668)
==================== ==================== ====================
(a) For the period April 29, 2016 to December 31, 2016.
The accompanying notes are an integral part of these financial statements.
32
The accompanying notes are an integral part of these financial statements.
33
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
OF GENERAL AMERICAN LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS -- (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 2017, 2016 AND 2015
BHFTII MFS VALUE
DIVISION
-----------------------------------------------------------------
2017 2016 2015
------------------- -------------------- --------------------
INVESTMENT INCOME:
Dividends............................................ $ 180,020 $ 154,264 $ 190,886
------------------- -------------------- --------------------
EXPENSES:
Mortality and expense risk charges................... 49,469 43,825 44,945
------------------- -------------------- --------------------
Net investment income (loss).................... 130,551 110,439 145,941
------------------- -------------------- --------------------
NET REALIZED AND CHANGES IN UNREALIZED
GAINS (LOSSES) ON INVESTMENTS:
Realized gain distributions.......................... 531,486 615,342 1,096,736
Realized gains (losses) on sale of investments....... 43,373 (68,419) 741,069
------------------- -------------------- --------------------
Net realized gains (losses)..................... 574,859 546,923 1,837,805
------------------- -------------------- --------------------
Change in unrealized gains (losses) on investments... 645,393 253,948 (2,085,181)
------------------- -------------------- --------------------
Net realized and changes in unrealized gains (losses)
on investments..................................... 1,220,252 800,871 (247,376)
------------------- -------------------- --------------------
Net increase (decrease) in net assets resulting
from operations.................................... $ 1,350,803 $ 911,310 $ (101,435)
=================== ==================== ====================
BHFTII MFS VALUE II
DIVISION
-----------------------------------------------------------------
2017 2016 2015
-------------------- -------------------- -------------------
INVESTMENT INCOME:
Dividends............................................ $ 125,360 $ 74,678 $ 91,205
-------------------- -------------------- -------------------
EXPENSES:
Mortality and expense risk charges................... 30,501 29,393 33,273
-------------------- -------------------- -------------------
Net investment income (loss).................... 94,859 45,285 57,932
-------------------- -------------------- -------------------
NET REALIZED AND CHANGES IN UNREALIZED
GAINS (LOSSES) ON INVESTMENTS:
Realized gain distributions.......................... -- 341,314 408,128
Realized gains (losses) on sale of investments....... (26,868) (111,743) (44,277)
-------------------- -------------------- -------------------
Net realized gains (losses)..................... (26,868) 229,571 363,851
-------------------- -------------------- -------------------
Change in unrealized gains (losses) on investments... 257,084 479,870 (752,133)
-------------------- -------------------- -------------------
Net realized and changes in unrealized gains (losses)
on investments..................................... 230,216 709,441 (388,282)
-------------------- -------------------- -------------------
Net increase (decrease) in net assets resulting
from operations.................................... $ 325,075 $ 754,726 $ (330,350)
==================== ==================== ===================
BHFTII NEUBERGER BERMAN GENESIS
DIVISION
-----------------------------------------------------------------
2017 2016 2015
-------------------- -------------------- -------------------
INVESTMENT INCOME:
Dividends............................................ $ 34,899 $ 36,124 $ 37,126
-------------------- -------------------- -------------------
EXPENSES:
Mortality and expense risk charges................... 46,413 42,345 48,439
-------------------- -------------------- -------------------
Net investment income (loss).................... (11,514) (6,221) (11,313)
-------------------- -------------------- -------------------
NET REALIZED AND CHANGES IN UNREALIZED
GAINS (LOSSES) ON INVESTMENTS:
Realized gain distributions.......................... 692,292 -- --
Realized gains (losses) on sale of investments....... 357,566 453,637 366,420
-------------------- -------------------- -------------------
Net realized gains (losses)..................... 1,049,858 453,637 366,420
-------------------- -------------------- -------------------
Change in unrealized gains (losses) on investments... 159,525 861,100 (356,362)
-------------------- -------------------- -------------------
Net realized and changes in unrealized gains (losses)
on investments..................................... 1,209,383 1,314,737 10,058
-------------------- -------------------- -------------------
Net increase (decrease) in net assets resulting
from operations.................................... $ 1,197,869 $ 1,308,516 $ (1,255)
==================== ==================== ===================
(a) For the period April 29, 2016 to December 31, 2016.
The accompanying notes are an integral part of these financial statements.
34
The accompanying notes are an integral part of these financial statements.
35
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
OF GENERAL AMERICAN LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS -- (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 2017, 2016 AND 2015
BHFTII T. ROWE PRICE LARGE CAP GROWTH
DIVISION
-------------------------------------------------------------------
2017 2016 2015
-------------------- -------------------- --------------------
INVESTMENT INCOME:
Dividends............................................ $ 19,629 $ 3,198 $ 6,938
-------------------- -------------------- --------------------
EXPENSES:
Mortality and expense risk charges................... 26,159 22,806 25,310
-------------------- -------------------- --------------------
Net investment income (loss).................... (6,530) (19,608) (18,372)
-------------------- -------------------- --------------------
NET REALIZED AND CHANGES IN UNREALIZED
GAINS (LOSSES) ON INVESTMENTS:
Realized gain distributions.......................... 386,850 665,873 887,454
Realized gains (losses) on sale of investments....... 54,433 4,035 124,466
-------------------- -------------------- --------------------
Net realized gains (losses)..................... 441,283 669,908 1,011,920
-------------------- -------------------- --------------------
Change in unrealized gains (losses) on investments... 1,315,448 (657,494) (541,770)
-------------------- -------------------- --------------------
Net realized and changes in unrealized gains (losses)
on investments.................................... 1,756,731 12,414 470,150
-------------------- -------------------- --------------------
Net increase (decrease) in net assets resulting
from operations................................... $ 1,750,201 $ (7,194) $ 451,778
==================== ==================== ====================
BHFTII T. ROWE PRICE SMALL CAP GROWTH
DIVISION
-------------------------------------------------------------------
2017 2016 2015
-------------------- -------------------- --------------------
INVESTMENT INCOME:
Dividends............................................ $ 22,559 $ 15,644 $ 9,423
-------------------- -------------------- --------------------
EXPENSES:
Mortality and expense risk charges................... 39,628 32,689 37,993
-------------------- -------------------- --------------------
Net investment income (loss).................... (17,069) (17,045) (28,570)
-------------------- -------------------- --------------------
NET REALIZED AND CHANGES IN UNREALIZED
GAINS (LOSSES) ON INVESTMENTS:
Realized gain distributions.......................... 416,582 745,099 591,705
Realized gains (losses) on sale of investments....... 277,815 225,407 392,599
-------------------- -------------------- --------------------
Net realized gains (losses)..................... 694,397 970,506 984,304
-------------------- -------------------- --------------------
Change in unrealized gains (losses) on investments... 789,248 (297,835) (777,293)
-------------------- -------------------- --------------------
Net realized and changes in unrealized gains (losses)
on investments.................................... 1,483,645 672,671 207,011
-------------------- -------------------- --------------------
Net increase (decrease) in net assets resulting
from operations................................... $ 1,466,576 $ 655,626 $ 178,441
==================== ==================== ====================
BHFTII VAN ECK GLOBAL NATURAL RESOURCES
DIVISION
-------------------------------------------------------------------
2017 2016 2015
-------------------- -------------------- ---------------------
INVESTMENT INCOME:
Dividends............................................ $ 4,257 $ 32,627 $ 25,042
-------------------- -------------------- ---------------------
EXPENSES:
Mortality and expense risk charges................... 21,505 21,451 24,345
-------------------- -------------------- ---------------------
Net investment income (loss).................... (17,248) 11,176 697
-------------------- -------------------- ---------------------
NET REALIZED AND CHANGES IN UNREALIZED
GAINS (LOSSES) ON INVESTMENTS:
Realized gain distributions.......................... -- -- --
Realized gains (losses) on sale of investments....... (96,669) (266,985) (218,089)
-------------------- -------------------- ---------------------
Net realized gains (losses)..................... (96,669) (266,985) (218,089)
-------------------- -------------------- ---------------------
Change in unrealized gains (losses) on investments... 60,091 1,653,307 (1,446,457)
-------------------- -------------------- ---------------------
Net realized and changes in unrealized gains (losses)
on investments.................................... (36,578) 1,386,322 (1,664,546)
-------------------- -------------------- ---------------------
Net increase (decrease) in net assets resulting
from operations................................... $ (53,826) $ 1,397,498 $ (1,663,849)
==================== ==================== =====================
(a) For the period April 29, 2016 to December 31, 2016.
The accompanying notes are an integral part of these financial statements.
36
The accompanying notes are an integral part of these financial statements.
37
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
OF GENERAL AMERICAN LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS -- (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 2017, 2016 AND 2015
BHFTII WESTERN ASSET
MANAGEMENT STRATEGIC BOND OPPORTUNITIES
DIVISION
--------------------------------------------
2017 2016 (a)
-------------------- --------------------
INVESTMENT INCOME:
Dividends............................................ $ 256,257 $ 97,900
-------------------- --------------------
EXPENSES:
Mortality and expense risk charges................... 35,694 22,646
-------------------- --------------------
Net investment income (loss).................... 220,563 75,254
-------------------- --------------------
NET REALIZED AND CHANGES IN UNREALIZED
GAINS (LOSSES) ON INVESTMENTS:
Realized gain distributions.......................... -- --
Realized gains (losses) on sale of investments....... 33,679 12,923
-------------------- --------------------
Net realized gains (losses)..................... 33,679 12,923
-------------------- --------------------
Change in unrealized gains (losses) on investments... 229,611 184,899
-------------------- --------------------
Net realized and changes in unrealized gains (losses)
on investments.................................... 263,290 197,822
-------------------- --------------------
Net increase (decrease) in net assets resulting
from operations................................... $ 483,853 $ 273,076
==================== ====================
BHFTII WESTERN ASSET MANAGEMENT U.S. GOVERNMENT
DIVISION
-------------------------------------------------------------------
2017 2016 2015
-------------------- -------------------- --------------------
INVESTMENT INCOME:
Dividends............................................ $ 18,877 $ 15,336 $ 25,111
-------------------- -------------------- --------------------
EXPENSES:
Mortality and expense risk charges................... 2,929 2,291 2,794
-------------------- -------------------- --------------------
Net investment income (loss).................... 15,948 13,045 22,317
-------------------- -------------------- --------------------
NET REALIZED AND CHANGES IN UNREALIZED
GAINS (LOSSES) ON INVESTMENTS:
Realized gain distributions.......................... -- -- --
Realized gains (losses) on sale of investments....... (752) (1,395) (1,768)
-------------------- -------------------- --------------------
Net realized gains (losses)..................... (752) (1,395) (1,768)
-------------------- -------------------- --------------------
Change in unrealized gains (losses) on investments... (7,363) 4,332 (16,976)
-------------------- -------------------- --------------------
Net realized and changes in unrealized gains (losses)
on investments.................................... (8,115) 2,937 (18,744)
-------------------- -------------------- --------------------
Net increase (decrease) in net assets resulting
from operations................................... $ 7,833 $ 15,982 $ 3,573
==================== ==================== ====================
FIDELITY VIP EQUITY-INCOME
DIVISION
-------------------------------------------------------------------
2017 2016 2015
-------------------- --------------------- --------------------
INVESTMENT INCOME:
Dividends............................................ $ 254,352 $ 320,613 $ 495,388
-------------------- --------------------- --------------------
EXPENSES:
Mortality and expense risk charges................... 96,459 92,775 100,658
-------------------- --------------------- --------------------
Net investment income (loss).................... 157,893 227,838 394,730
-------------------- --------------------- --------------------
NET REALIZED AND CHANGES IN UNREALIZED
GAINS (LOSSES) ON INVESTMENTS:
Realized gain distributions.......................... 309,975 964,441 1,496,073
Realized gains (losses) on sale of investments....... 88,011 (111,757) 34,354
-------------------- --------------------- --------------------
Net realized gains (losses)..................... 397,986 852,684 1,530,427
-------------------- --------------------- --------------------
Change in unrealized gains (losses) on investments... 1,177,762 1,277,548 (2,639,815)
-------------------- --------------------- --------------------
Net realized and changes in unrealized gains (losses)
on investments.................................... 1,575,748 2,130,232 (1,109,388)
-------------------- --------------------- --------------------
Net increase (decrease) in net assets resulting
from operations................................... $ 1,733,641 $ 2,358,070 $ (714,658)
==================== ===================== ====================
(a) For the period April 29, 2016 to December 31, 2016.
The accompanying notes are an integral part of these financial statements.
38
The accompanying notes are an integral part of these financial statements.
39
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
OF GENERAL AMERICAN LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS -- (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 2017, 2016 AND 2015
FIDELITY VIP MID CAP
DIVISION
--------------------------------------------------------------------
2017 2016 2015
-------------------- -------------------- ---------------------
INVESTMENT INCOME:
Dividends............................................ $ 30,757 $ 20,410 $ 23,403
-------------------- -------------------- ---------------------
EXPENSES:
Mortality and expense risk charges................... 25,229 24,064 28,152
-------------------- -------------------- ---------------------
Net investment income (loss).................... 5,528 (3,654) (4,749)
-------------------- -------------------- ---------------------
NET REALIZED AND CHANGES IN UNREALIZED
GAINS (LOSSES) ON INVESTMENTS:
Realized gain distributions.......................... 201,360 272,451 612,064
Realized gains (losses) on sale of investments....... 85,404 39,317 131,710
-------------------- -------------------- ---------------------
Net realized gains (losses)..................... 286,764 311,768 743,774
-------------------- -------------------- ---------------------
Change in unrealized gains (losses) on investments... 527,778 155,735 (795,687)
-------------------- -------------------- ---------------------
Net realized and changes in unrealized gains (losses)
on investments.................................... 814,542 467,503 (51,913)
-------------------- -------------------- ---------------------
Net increase (decrease) in net assets resulting
from operations................................... $ 820,070 $ 463,849 $ (56,662)
==================== ==================== =====================
JPMORGAN INSURANCE TRUST CORE BOND
DIVISION
--------------------------------------------------------------------
2017 2016 2015
--------------------- -------------------- ---------------------
INVESTMENT INCOME:
Dividends............................................ $ 18,897 $ 19,307 $ 30,525
--------------------- -------------------- ---------------------
EXPENSES:
Mortality and expense risk charges................... 3,796 3,856 4,423
--------------------- -------------------- ---------------------
Net investment income (loss).................... 15,101 15,451 26,102
--------------------- -------------------- ---------------------
NET REALIZED AND CHANGES IN UNREALIZED
GAINS (LOSSES) ON INVESTMENTS:
Realized gain distributions.......................... -- -- --
Realized gains (losses) on sale of investments....... (748) (1,000) (1,941)
--------------------- -------------------- ---------------------
Net realized gains (losses)..................... (748) (1,000) (1,941)
--------------------- -------------------- ---------------------
Change in unrealized gains (losses) on investments... 7,512 (657) (19,927)
--------------------- -------------------- ---------------------
Net realized and changes in unrealized gains (losses)
on investments.................................... 6,764 (1,657) (21,868)
--------------------- -------------------- ---------------------
Net increase (decrease) in net assets resulting
from operations................................... $ 21,865 $ 13,794 $ 4,234
===================== ==================== =====================
JPMORGAN INSURANCE TRUST SMALL CAP CORE
DIVISION
-------------------------------------------------------------------
2017 2016 2015
-------------------- -------------------- --------------------
INVESTMENT INCOME:
Dividends............................................ $ 9,006 $ 11,087 $ 4,187
-------------------- -------------------- --------------------
EXPENSES:
Mortality and expense risk charges................... 11,456 9,976 11,077
-------------------- -------------------- --------------------
Net investment income (loss).................... (2,450) 1,111 (6,890)
-------------------- -------------------- --------------------
NET REALIZED AND CHANGES IN UNREALIZED
GAINS (LOSSES) ON INVESTMENTS:
Realized gain distributions.......................... 19,772 173,271 295,568
Realized gains (losses) on sale of investments....... 71,832 166,566 151,620
-------------------- -------------------- --------------------
Net realized gains (losses)..................... 91,604 339,837 447,188
-------------------- -------------------- --------------------
Change in unrealized gains (losses) on investments... 328,670 1,666 (621,720)
-------------------- -------------------- --------------------
Net realized and changes in unrealized gains (losses)
on investments.................................... 420,274 341,503 (174,532)
-------------------- -------------------- --------------------
Net increase (decrease) in net assets resulting
from operations................................... $ 417,824 $ 342,614 $ (181,422)
==================== ==================== ====================
(a) For the period April 29, 2016 to December 31, 2016.
The accompanying notes are an integral part of these financial statements.
40
The accompanying notes are an integral part of these financial statements.
41
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
OF GENERAL AMERICAN LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS -- (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 2017, 2016 AND 2015
RUSSELL INTERNATIONAL DEVELOPED MARKETS
DIVISION
-----------------------------------------------------------------------
2017 2016 2015
---------------------- --------------------- ---------------------
INVESTMENT INCOME:
Dividends.......................................... $ 38,103 $ 44,466 $ 18,345
---------------------- --------------------- ---------------------
EXPENSES:
Mortality and expense risk charges................. 8,092 8,473 9,313
---------------------- --------------------- ---------------------
Net investment income (loss).................. 30,011 35,993 9,032
---------------------- --------------------- ---------------------
NET REALIZED AND CHANGES IN UNREALIZED
GAINS (LOSSES) ON INVESTMENTS:
Realized gain distributions........................ 51,158 -- --
Realized gains (losses) on sale of investments..... 21,564 30,847 18,277
---------------------- --------------------- ---------------------
Net realized gains (losses)................... 72,722 30,847 18,277
---------------------- --------------------- ---------------------
Change in unrealized gains (losses) on investments. 209,463 (39,455) (51,390)
---------------------- --------------------- ---------------------
Net realized and changes in unrealized gains (losses)
on investments................................... 282,185 (8,608) (33,113)
---------------------- --------------------- ---------------------
Net increase (decrease) in net assets resulting
from operations.................................. $ 312,196 $ 27,385 $ (24,081)
====================== ===================== =====================
RUSSELL STRATEGIC BOND
DIVISION
------------------------------------------------------------------------
2017 2016 2015
---------------------- ---------------------- ----------------------
INVESTMENT INCOME:
Dividends.......................................... $ 12,727 $ 17,013 $ 26,477
---------------------- ---------------------- ----------------------
EXPENSES:
Mortality and expense risk charges................. 5,469 6,422 6,749
---------------------- ---------------------- ----------------------
Net investment income (loss).................. 7,258 10,591 19,728
---------------------- ---------------------- ----------------------
NET REALIZED AND CHANGES IN UNREALIZED
GAINS (LOSSES) ON INVESTMENTS:
Realized gain distributions........................ -- 27,119 12,843
Realized gains (losses) on sale of investments..... (1,391) 2,093 874
---------------------- ---------------------- ----------------------
Net realized gains (losses)................... (1,391) 29,212 13,717
---------------------- ---------------------- ----------------------
Change in unrealized gains (losses) on investments. 25,589 (10,512) (41,255)
---------------------- ---------------------- ----------------------
Net realized and changes in unrealized gains (losses)
on investments................................... 24,198 18,700 (27,538)
---------------------- ---------------------- ----------------------
Net increase (decrease) in net assets resulting
from operations.................................. $ 31,456 $ 29,291 $ (7,810)
====================== ====================== ======================
RUSSELL U.S. SMALL CAP EQUITY
DIVISION
-----------------------------------------------------------------------
2017 2016 2015
---------------------- --------------------- ---------------------
INVESTMENT INCOME:
Dividends.......................................... $ 3,051 $ 12,990 $ 11,352
---------------------- --------------------- ---------------------
EXPENSES:
Mortality and expense risk charges................. 9,638 9,144 10,125
---------------------- --------------------- ---------------------
Net investment income (loss).................. (6,587) 3,846 1,227
---------------------- --------------------- ---------------------
NET REALIZED AND CHANGES IN UNREALIZED
GAINS (LOSSES) ON INVESTMENTS:
Realized gain distributions........................ 115,656 858 154,225
Realized gains (losses) on sale of investments..... 29,365 11,311 13,018
---------------------- --------------------- ---------------------
Net realized gains (losses)................... 145,021 12,169 167,243
---------------------- --------------------- ---------------------
Change in unrealized gains (losses) on investments. 100,755 248,974 (300,458)
---------------------- --------------------- ---------------------
Net realized and changes in unrealized gains (losses)
on investments................................... 245,776 261,143 (133,215)
---------------------- --------------------- ---------------------
Net increase (decrease) in net assets resulting
from operations.................................. $ 239,189 $ 264,989 $ (131,988)
====================== ===================== =====================
(a) For the period April 29, 2016 to December 31, 2016.
The accompanying notes are an integral part of these financial statements.
42
The accompanying notes are an integral part of these financial statements.
43
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
OF GENERAL AMERICAN LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS -- (CONCLUDED)
FOR THE YEARS ENDED DECEMBER 31, 2017, 2016 AND 2015
RUSSELL U.S. STRATEGIC EQUITY
DIVISION
----------------------------------------------------------------------
2017 2016 2015
--------------------- --------------------- ---------------------
INVESTMENT INCOME:
Dividends............................................ $ 39,412 $ 38,106 $ 30,646
--------------------- --------------------- ---------------------
EXPENSES:
Mortality and expense risk charges................... 22,315 21,434 22,287
--------------------- --------------------- ---------------------
Net investment income (loss).................... 17,097 16,672 8,359
--------------------- --------------------- ---------------------
NET REALIZED AND CHANGES IN UNREALIZED
GAINS (LOSSES) ON INVESTMENTS:
Realized gain distributions.......................... 378,230 225,502 313,207
Realized gains (losses) on sale of investments....... 55,257 88,713 45,490
--------------------- --------------------- ---------------------
Net realized gains (losses)..................... 433,487 314,215 358,697
--------------------- --------------------- ---------------------
Change in unrealized gains (losses) on investments... 253,931 15,350 (348,438)
--------------------- --------------------- ---------------------
Net realized and changes in unrealized gains (losses)
on investments.................................... 687,418 329,565 10,259
--------------------- --------------------- ---------------------
Net increase (decrease) in net assets resulting
from operations................................... $ 704,515 $ 346,237 $ 18,618
===================== ===================== =====================
VANECK VIP EMERGING MARKETS
DIVISION
----------------------------------------------------------------------
2017 2016 2015
--------------------- --------------------- ---------------------
INVESTMENT INCOME:
Dividends............................................ $ 14,924 $ 19,433 $ 27,015
--------------------- --------------------- ---------------------
EXPENSES:
Mortality and expense risk charges................... 15,293 13,411 16,334
--------------------- --------------------- ---------------------
Net investment income (loss).................... (369) 6,022 10,681
--------------------- --------------------- ---------------------
NET REALIZED AND CHANGES IN UNREALIZED
GAINS (LOSSES) ON INVESTMENTS:
Realized gain distributions.......................... -- 21,052 266,571
Realized gains (losses) on sale of investments....... 33,302 (288,559) (24,212)
--------------------- --------------------- ---------------------
Net realized gains (losses)..................... 33,302 (267,507) 242,359
--------------------- --------------------- ---------------------
Change in unrealized gains (losses) on investments... 1,574,155 288,392 (973,993)
--------------------- --------------------- ---------------------
Net realized and changes in unrealized gains (losses)
on investments.................................... 1,607,457 20,885 (731,634)
--------------------- --------------------- ---------------------
Net increase (decrease) in net assets resulting
from operations................................... $ 1,607,088 $ 26,907 $ (720,953)
===================== ===================== =====================
(a) For the period April 29, 2016 to December 31, 2016.
The accompanying notes are an integral part of these financial statements.
44
The accompanying notes are an integral part of these financial statements.
45
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
OF GENERAL AMERICAN LIFE INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 2017, 2016 AND 2015
AMERICAN FUNDS GLOBAL SMALL CAPITALIZATION
DIVISION
------------------------------------------------------------------
2017 2016 2015
-------------------- -------------------- --------------------
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss)........................ $ (444) $ (6,719) $ (18,960)
Net realized gains (losses)......................... 41,357 762,714 483,962
Change in unrealized gains (losses) on investments.. 807,841 (711,241) (456,444)
-------------------- -------------------- --------------------
Net increase (decrease) in net assets resulting
from operations................................ 848,754 44,754 8,558
-------------------- -------------------- --------------------
POLICY TRANSACTIONS:
Premium payments received from Policy owners........ 157,039 174,030 209,666
Net transfers (including fixed account)............. (489,820) (804,093) 365,247
Policy charges...................................... (155,094) (191,524) (216,755)
Transfers for Policy benefits and terminations...... (321,268) (293,219) (247,095)
-------------------- -------------------- --------------------
Net increase (decrease) in net assets resulting
from Policy transactions....................... (809,143) (1,114,806) 111,063
-------------------- -------------------- --------------------
Net increase (decrease) in net assets............. 39,611 (1,070,052) 119,621
NET ASSETS:
Beginning of year................................... 3,762,685 4,832,737 4,713,116
-------------------- -------------------- --------------------
End of year......................................... $ 3,802,296 $ 3,762,685 $ 4,832,737
==================== ==================== ====================
AMERICAN FUNDS GROWTH
DIVISION
------------------------------------------------------------------
2017 2016 2015
-------------------- -------------------- -------------------
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss)........................ $ 13,596 $ 53,205 $ 26,777
Net realized gains (losses)......................... 2,221,409 1,681,727 3,936,873
Change in unrealized gains (losses) on investments.. 2,080,715 (331,473) (2,894,639)
-------------------- -------------------- -------------------
Net increase (decrease) in net assets resulting
from operations................................ 4,315,720 1,403,459 1,069,011
-------------------- -------------------- -------------------
POLICY TRANSACTIONS:
Premium payments received from Policy owners........ 767,596 830,232 960,812
Net transfers (including fixed account)............. (865,480) (518,352) (729,180)
Policy charges...................................... (693,537) (692,655) (758,489)
Transfers for Policy benefits and terminations...... (1,429,251) (1,222,645) (653,372)
-------------------- -------------------- -------------------
Net increase (decrease) in net assets resulting
from Policy transactions....................... (2,220,672) (1,603,420) (1,180,229)
-------------------- -------------------- -------------------
Net increase (decrease) in net assets............. 2,095,048 (199,961) (111,218)
NET ASSETS:
Beginning of year................................... 16,557,486 16,757,447 16,868,665
-------------------- -------------------- -------------------
End of year......................................... $ 18,652,534 $ 16,557,486 $ 16,757,447
==================== ==================== ===================
AMERICAN FUNDS GROWTH-INCOME
DIVISION
------------------------------------------------------------------
2017 2016 2015
------------------- -------------------- --------------------
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss)........................ $ 111,625 $ 105,858 $ 98,825
Net realized gains (losses)......................... 938,434 1,339,406 1,820,665
Change in unrealized gains (losses) on investments.. 1,145,870 (373,381) (1,796,982)
------------------- -------------------- --------------------
Net increase (decrease) in net assets resulting
from operations................................ 2,195,929 1,071,883 122,508
------------------- -------------------- --------------------
POLICY TRANSACTIONS:
Premium payments received from Policy owners........ 489,656 528,275 588,440
Net transfers (including fixed account)............. (174,668) (580,379) (245,740)
Policy charges...................................... (423,868) (415,436) (452,321)
Transfers for Policy benefits and terminations...... (611,624) (920,226) (408,414)
------------------- -------------------- --------------------
Net increase (decrease) in net assets resulting
from Policy transactions....................... (720,504) (1,387,766) (518,035)
------------------- -------------------- --------------------
Net increase (decrease) in net assets............. 1,475,425 (315,883) (395,527)
NET ASSETS:
Beginning of year................................... 10,234,907 10,550,790 10,946,317
------------------- -------------------- --------------------
End of year......................................... $ 11,710,332 $ 10,234,907 $ 10,550,790
=================== ==================== ====================
(a) For the period April 29, 2016 to December 31, 2016.
The accompanying notes are an integral part of these financial statements.
46
The accompanying notes are an integral part of these financial statements.
47
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
OF GENERAL AMERICAN LIFE INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 2017, 2016 AND 2015
BHFTI BRIGHTHOUSE ASSET ALLOCATION 100
DIVISION
--------------------------------------------------------------------
2017 2016 2015
-------------------- -------------------- ---------------------
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss)........................ $ 647 $ 1,022 $ 772
Net realized gains (losses)......................... 2,715 6,143 4,072
Change in unrealized gains (losses) on investments.. 5,960 (3,551) (5,733)
-------------------- -------------------- ---------------------
Net increase (decrease) in net assets resulting
from operations................................ 9,322 3,614 (889)
-------------------- -------------------- ---------------------
POLICY TRANSACTIONS:
Premium payments received from Policy owners........ 271 271 3,442
Net transfers (including fixed account)............. 16 (7,962) 2,830
Policy charges...................................... (1,783) (1,794) (2,031)
Transfers for Policy benefits and terminations...... (1,515) (801) (29)
-------------------- -------------------- ---------------------
Net increase (decrease) in net assets resulting
from Policy transactions....................... (3,011) (10,286) 4,212
-------------------- -------------------- ---------------------
Net increase (decrease) in net assets............. 6,311 (6,672) 3,323
NET ASSETS:
Beginning of year................................... 41,919 48,591 45,268
-------------------- -------------------- ---------------------
End of year......................................... $ 48,230 $ 41,919 $ 48,591
==================== ==================== =====================
BHFTI CLARION GLOBAL REAL ESTATE
DIVISION
--------------------------------------------------------------------
2017 2016 2015
-------------------- --------------------- ---------------------
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss)........................ $ 96,182 $ 68,331 $ 141,077
Net realized gains (losses)......................... 19,244 94,113 37,749
Change in unrealized gains (losses) on investments.. 177,972 (93,220) (239,288)
-------------------- --------------------- ---------------------
Net increase (decrease) in net assets resulting
from operations................................ 293,398 69,224 (60,462)
-------------------- --------------------- ---------------------
POLICY TRANSACTIONS:
Premium payments received from Policy owners........ 77,723 72,697 71,590
Net transfers (including fixed account)............. (53,852) (568,321) 18,073
Policy charges...................................... (99,538) (108,794) (108,684)
Transfers for Policy benefits and terminations...... (48,439) -- (96,753)
-------------------- --------------------- ---------------------
Net increase (decrease) in net assets resulting
from Policy transactions....................... (124,106) (604,418) (115,774)
-------------------- --------------------- ---------------------
Net increase (decrease) in net assets............. 169,292 (535,194) (176,236)
NET ASSETS:
Beginning of year................................... 2,834,793 3,369,987 3,546,223
-------------------- --------------------- ---------------------
End of year......................................... $ 3,004,085 $ 2,834,793 $ 3,369,987
==================== ===================== =====================
BHFTI CLEARBRIDGE AGGRESSIVE GROWTH
DIVISION
--------------------------------------------------------------------
2017 2016 2015
-------------------- -------------------- ---------------------
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss)........................ $ 6,198 $ 2,371 $ 5,856
Net realized gains (losses)......................... 68,756 71,427 690,168
Change in unrealized gains (losses) on investments.. 154,155 (43,287) (702,277)
-------------------- -------------------- ---------------------
Net increase (decrease) in net assets resulting
from operations................................ 229,109 30,511 (6,253)
-------------------- -------------------- ---------------------
POLICY TRANSACTIONS:
Premium payments received from Policy owners........ 72,482 72,976 81,096
Net transfers (including fixed account)............. (12,379) (91,266) (1,455,033)
Policy charges...................................... (70,750) (72,833) (102,818)
Transfers for Policy benefits and terminations...... (100,058) (25,128) (29,195)
-------------------- -------------------- ---------------------
Net increase (decrease) in net assets resulting
from Policy transactions....................... (110,705) (116,251) (1,505,950)
-------------------- -------------------- ---------------------
Net increase (decrease) in net assets............. 118,404 (85,740) (1,512,203)
NET ASSETS:
Beginning of year................................... 1,340,372 1,426,112 2,938,315
-------------------- -------------------- ---------------------
End of year......................................... $ 1,458,776 $ 1,340,372 $ 1,426,112
==================== ==================== =====================
(a) For the period April 29, 2016 to December 31, 2016.
The accompanying notes are an integral part of these financial statements.
48
The accompanying notes are an integral part of these financial statements.
49
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
OF GENERAL AMERICAN LIFE INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 2017, 2016 AND 2015
BHFTI HARRIS OAKMARK INTERNATIONAL
DIVISION
------------------------------------------------------------------
2017 2016 2015
-------------------- -------------------- --------------------
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss)........................ $ 99,437 $ 121,294 $ 221,199
Net realized gains (losses)......................... 60,004 154,278 813,750
Change in unrealized gains (losses) on investments.. 1,689,235 143,639 (1,386,571)
-------------------- -------------------- --------------------
Net increase (decrease) in net assets resulting
from operations................................ 1,848,676 419,211 (351,622)
-------------------- -------------------- --------------------
POLICY TRANSACTIONS:
Premium payments received from Policy owners........ 270,612 272,674 291,531
Net transfers (including fixed account)............. 100,407 (1,022,351) (213,410)
Policy charges...................................... (292,798) (276,123) (288,125)
Transfers for Policy benefits and terminations...... (164,112) (310,861) (266,994)
-------------------- -------------------- --------------------
Net increase (decrease) in net assets resulting
from Policy transactions....................... (85,891) (1,336,661) (476,998)
-------------------- -------------------- --------------------
Net increase (decrease) in net assets............. 1,762,785 (917,450) (828,620)
NET ASSETS:
Beginning of year................................... 6,180,576 7,098,026 7,926,646
-------------------- -------------------- --------------------
End of year......................................... $ 7,943,361 $ 6,180,576 $ 7,098,026
==================== ==================== ====================
BHFTI INVESCO SMALL CAP GROWTH
DIVISION
------------------------------------------------------------------
2017 2016 2015
-------------------- -------------------- --------------------
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss)........................ $ (3,245) $ (2,917) $ (1,675)
Net realized gains (losses)......................... 110,656 158,095 253,787
Change in unrealized gains (losses) on investments.. 142,459 (50,274) (268,144)
-------------------- -------------------- --------------------
Net increase (decrease) in net assets resulting
from operations................................ 249,870 104,904 (16,032)
-------------------- -------------------- --------------------
POLICY TRANSACTIONS:
Premium payments received from Policy owners........ 43,445 44,153 45,753
Net transfers (including fixed account)............. (9,268) (35,143) (16,877)
Policy charges...................................... (34,336) (34,190) (36,099)
Transfers for Policy benefits and terminations...... (17,491) (18,398) (17,079)
-------------------- -------------------- --------------------
Net increase (decrease) in net assets resulting
from Policy transactions....................... (17,650) (43,578) (24,302)
-------------------- -------------------- --------------------
Net increase (decrease) in net assets............. 232,220 61,326 (40,334)
NET ASSETS:
Beginning of year................................... 988,322 926,996 967,330
-------------------- -------------------- --------------------
End of year......................................... $ 1,220,542 $ 988,322 $ 926,996
==================== ==================== ====================
BHFTI MFS RESEARCH INTERNATIONAL
DIVISION
------------------------------------------------------------------
2017 2016 2015
-------------------- -------------------- --------------------
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss)........................ $ 125,085 $ 136,188 $ 251,290
Net realized gains (losses)......................... 96,658 (240,470) 67,399
Change in unrealized gains (losses) on investments.. 1,966,754 (90,823) (423,899)
-------------------- -------------------- --------------------
Net increase (decrease) in net assets resulting
from operations................................ 2,188,497 (195,105) (105,210)
-------------------- -------------------- --------------------
POLICY TRANSACTIONS:
Premium payments received from Policy owners........ 499,486 500,995 553,626
Net transfers (including fixed account)............. (939,318) (1,329,078) 317,343
Policy charges...................................... (463,699) (476,499) (524,579)
Transfers for Policy benefits and terminations...... (282,681) (413,471) (384,259)
-------------------- -------------------- --------------------
Net increase (decrease) in net assets resulting
from Policy transactions....................... (1,186,212) (1,718,053) (37,869)
-------------------- -------------------- --------------------
Net increase (decrease) in net assets............. 1,002,285 (1,913,158) (143,079)
NET ASSETS:
Beginning of year................................... 8,251,678 10,164,836 10,307,915
-------------------- -------------------- --------------------
End of year......................................... $ 9,253,963 $ 8,251,678 $ 10,164,836
==================== ==================== ====================
(a) For the period April 29, 2016 to December 31, 2016.
The accompanying notes are an integral part of these financial statements.
50
The accompanying notes are an integral part of these financial statements.
51
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
OF GENERAL AMERICAN LIFE INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 2017, 2016 AND 2015
BHFTI MORGAN STANLEY MID CAP GROWTH
DIVISION
-----------------------------------------------------------------
2017 2016 2015
------------------- -------------------- --------------------
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss)........................ $ (2,364) $ (7,901) $ (9,187)
Net realized gains (losses)......................... 62,637 32,343 47,980
Change in unrealized gains (losses) on investments.. 563,488 (179,232) (141,174)
------------------- -------------------- --------------------
Net increase (decrease) in net assets resulting
from operations................................ 623,761 (154,790) (102,381)
------------------- -------------------- --------------------
POLICY TRANSACTIONS:
Premium payments received from Policy owners........ 116,136 125,831 128,187
Net transfers (including fixed account)............. (56,829) (38,125) (31,990)
Policy charges...................................... (85,464) (83,113) (86,177)
Transfers for Policy benefits and terminations...... (80,116) (48,411) (57,769)
------------------- -------------------- --------------------
Net increase (decrease) in net assets resulting
from Policy transactions....................... (106,273) (43,818) (47,749)
------------------- -------------------- --------------------
Net increase (decrease) in net assets............. 517,488 (198,608) (150,130)
NET ASSETS:
Beginning of year................................... 1,587,726 1,786,334 1,936,464
------------------- -------------------- --------------------
End of year......................................... $ 2,105,214 $ 1,587,726 $ 1,786,334
=================== ==================== ====================
BHFTI PIMCO TOTAL RETURN
DIVISION
------------------------------------------------------------------
2017 2016 2015
-------------------- -------------------- --------------------
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss)........................ $ 150,297 $ 254,391 $ 637,016
Net realized gains (losses)......................... 24,440 (142,777) 121,336
Change in unrealized gains (losses) on investments.. 252,866 198,934 (774,770)
-------------------- -------------------- --------------------
Net increase (decrease) in net assets resulting
from operations................................ 427,603 310,548 (16,418)
-------------------- -------------------- --------------------
POLICY TRANSACTIONS:
Premium payments received from Policy owners........ 539,052 526,508 555,683
Net transfers (including fixed account)............. 246,664 (1,573,215) (201,352)
Policy charges...................................... (446,558) (500,052) (521,279)
Transfers for Policy benefits and terminations...... (305,978) (1,086,148) (265,467)
-------------------- -------------------- --------------------
Net increase (decrease) in net assets resulting
from Policy transactions....................... 33,180 (2,632,907) (432,415)
-------------------- -------------------- --------------------
Net increase (decrease) in net assets............. 460,783 (2,322,359) (448,833)
NET ASSETS:
Beginning of year................................... 9,998,671 12,321,030 12,769,863
-------------------- -------------------- --------------------
End of year......................................... $ 10,459,454 $ 9,998,671 $ 12,321,030
==================== ==================== ====================
BHFTI T. ROWE PRICE LARGE CAP VALUE
DIVISION
-----------------------------------------------------------------
2017 2016 2015
------------------- -------------------- --------------------
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss)........................ $ 36,964 $ 48,946 $ 49,891
Net realized gains (losses)......................... 211,847 279,865 323,805
Change in unrealized gains (losses) on investments.. 90,317 (41,435) (455,584)
------------------- -------------------- --------------------
Net increase (decrease) in net assets resulting
from operations................................ 339,128 287,376 (81,888)
------------------- -------------------- --------------------
POLICY TRANSACTIONS:
Premium payments received from Policy owners........ 171,014 154,224 153,355
Net transfers (including fixed account)............. (53,111) 15,860 (1,179,113)
Policy charges...................................... (191,793) (191,210) (193,744)
Transfers for Policy benefits and terminations...... (40,750) (54,506) (78,413)
------------------- -------------------- --------------------
Net increase (decrease) in net assets resulting
from Policy transactions....................... (114,640) (75,632) (1,297,915)
------------------- -------------------- --------------------
Net increase (decrease) in net assets............. 224,488 211,744 (1,379,803)
NET ASSETS:
Beginning of year................................... 2,087,464 1,875,720 3,255,523
------------------- -------------------- --------------------
End of year......................................... $ 2,311,952 $ 2,087,464 $ 1,875,720
=================== ==================== ====================
(a) For the period April 29, 2016 to December 31, 2016.
The accompanying notes are an integral part of these financial statements.
52
The accompanying notes are an integral part of these financial statements.
53
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
OF GENERAL AMERICAN LIFE INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 2017, 2016 AND 2015
BHFTI T. ROWE PRICE MID CAP GROWTH
DIVISION
-------------------------------------------------------------------
2017 2016 2015
-------------------- --------------------- --------------------
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss)........................ $ (13,959) $ (13,494) $ (14,394)
Net realized gains (losses)......................... 307,384 495,730 604,662
Change in unrealized gains (losses) on investments.. 395,543 (290,932) (379,732)
-------------------- --------------------- --------------------
Net increase (decrease) in net assets resulting
from operations................................ 688,968 191,304 210,536
-------------------- --------------------- --------------------
POLICY TRANSACTIONS:
Premium payments received from Policy owners........ 104,825 109,599 109,713
Net transfers (including fixed account)............. (331,745) (591,851) 765,982
Policy charges...................................... (117,174) (131,145) (142,421)
Transfers for Policy benefits and terminations...... (297,638) (162,405) (135,440)
-------------------- --------------------- --------------------
Net increase (decrease) in net assets resulting
from Policy transactions....................... (641,732) (775,802) 597,834
-------------------- --------------------- --------------------
Net increase (decrease) in net assets............. 47,236 (584,498) 808,370
NET ASSETS:
Beginning of year................................... 3,119,748 3,704,246 2,895,876
-------------------- --------------------- --------------------
End of year......................................... $ 3,166,984 $ 3,119,748 $ 3,704,246
==================== ===================== ====================
BHFTI VICTORY SYCAMORE MID CAP VALUE
DIVISION
--------------------------------------------------------------------
2017 2016 2015
--------------------- -------------------- ---------------------
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss)........................ $ 25,881 $ 15,687 $ 13,119
Net realized gains (losses)......................... 20,553 103,717 387,291
Change in unrealized gains (losses) on investments.. 297,352 399,812 (807,927)
--------------------- -------------------- ---------------------
Net increase (decrease) in net assets resulting
from operations................................ 343,786 519,216 (407,517)
--------------------- -------------------- ---------------------
POLICY TRANSACTIONS:
Premium payments received from Policy owners........ 160,136 201,029 246,302
Net transfers (including fixed account)............. (109,138) (544,756) 520,158
Policy charges...................................... (169,162) (177,172) (213,927)
Transfers for Policy benefits and terminations...... (56,837) (297,355) (264,269)
--------------------- -------------------- ---------------------
Net increase (decrease) in net assets resulting
from Policy transactions....................... (175,001) (818,254) 288,264
--------------------- -------------------- ---------------------
Net increase (decrease) in net assets............. 168,785 (299,038) (119,253)
NET ASSETS:
Beginning of year................................... 3,744,567 4,043,605 4,162,858
--------------------- -------------------- ---------------------
End of year......................................... $ 3,913,352 $ 3,744,567 $ 4,043,605
===================== ==================== =====================
BHFTII BAILLIE GIFFORD INTERNATIONAL STOCK
DIVISION
--------------------------------------------------------------------
2017 2016 2015
--------------------- -------------------- --------------------
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss)........................ $ 17,545 $ 22,734 $ 25,128
Net realized gains (losses)......................... 21,550 (16,468) (17,092)
Change in unrealized gains (losses) on investments.. 558,804 84,434 (51,040)
--------------------- -------------------- --------------------
Net increase (decrease) in net assets resulting
from operations................................ 597,899 90,700 (43,004)
--------------------- -------------------- --------------------
POLICY TRANSACTIONS:
Premium payments received from Policy owners........ 118,094 133,824 147,302
Net transfers (including fixed account)............. (63,789) 24,431 5,816
Policy charges...................................... (84,526) (80,068) (77,294)
Transfers for Policy benefits and terminations...... (99,290) (127,060) (120,467)
--------------------- -------------------- --------------------
Net increase (decrease) in net assets resulting
from Policy transactions....................... (129,511) (48,873) (44,643)
--------------------- -------------------- --------------------
Net increase (decrease) in net assets............. 468,388 41,827 (87,647)
NET ASSETS:
Beginning of year................................... 1,806,841 1,765,014 1,852,661
--------------------- -------------------- --------------------
End of year......................................... $ 2,275,229 $ 1,806,841 $ 1,765,014
===================== ==================== ====================
(a) For the period April 29, 2016 to December 31, 2016.
The accompanying notes are an integral part of these financial statements.
54
The accompanying notes are an integral part of these financial statements.
55
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
OF GENERAL AMERICAN LIFE INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 2017, 2016 AND 2015
BHFTII BLACKROCK BOND INCOME
DIVISION
------------------------------------------------------------------
2017 2016 2015
-------------------- -------------------- --------------------
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss)........................ $ 93,428 $ 45,836 $ 64,427
Net realized gains (losses)......................... (7,702) (3,875) 22,911
Change in unrealized gains (losses) on investments.. 43,764 (47,132) (85,628)
-------------------- -------------------- --------------------
Net increase (decrease) in net assets resulting
from operations................................ 129,490 (5,171) 1,710
-------------------- -------------------- --------------------
POLICY TRANSACTIONS:
Premium payments received from Policy owners........ 104,645 104,805 106,154
Net transfers (including fixed account)............. 478,526 2,025,275 89,471
Policy charges...................................... (170,449) (122,526) (84,993)
Transfers for Policy benefits and terminations...... (178,527) (205,032) (49,470)
-------------------- -------------------- --------------------
Net increase (decrease) in net assets resulting
from Policy transactions....................... 234,195 1,802,522 61,162
-------------------- -------------------- --------------------
Net increase (decrease) in net assets............. 363,685 1,797,351 62,872
NET ASSETS:
Beginning of year................................... 3,728,404 1,931,053 1,868,181
-------------------- -------------------- --------------------
End of year......................................... $ 4,092,089 $ 3,728,404 $ 1,931,053
==================== ==================== ====================
BHFTII BLACKROCK CAPITAL APPRECIATION
DIVISION
------------------------------------------------------------------
2017 2016 2015
-------------------- -------------------- --------------------
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss)........................ $ (7,245) $ (9,537) $ (10,861)
Net realized gains (losses)......................... 172,325 296,353 593,843
Change in unrealized gains (losses) on investments.. 660,446 (299,992) (421,432)
-------------------- -------------------- --------------------
Net increase (decrease) in net assets resulting
from operations................................ 825,526 (13,176) 161,550
-------------------- -------------------- --------------------
POLICY TRANSACTIONS:
Premium payments received from Policy owners........ 154,760 167,532 192,543
Net transfers (including fixed account)............. (182,718) (129,390) (123,712)
Policy charges...................................... (148,128) (149,263) (146,699)
Transfers for Policy benefits and terminations...... (131,594) (148,167) (125,759)
-------------------- -------------------- --------------------
Net increase (decrease) in net assets resulting
from Policy transactions....................... (307,680) (259,288) (203,627)
-------------------- -------------------- --------------------
Net increase (decrease) in net assets............. 517,846 (272,464) (42,077)
NET ASSETS:
Beginning of year................................... 2,562,333 2,834,797 2,876,874
-------------------- -------------------- --------------------
End of year......................................... $ 3,080,179 $ 2,562,333 $ 2,834,797
==================== ==================== ====================
BHFTII BLACKROCK ULTRA-SHORT TERM BOND
DIVISION
------------------------------------------------------------------
2017 2016 2015
-------------------- -------------------- --------------------
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss)........................ $ (5,514) $ (20,615) $ (25,378)
Net realized gains (losses)......................... 4,080 1,666 --
Change in unrealized gains (losses) on investments.. 20,890 12,277 --
-------------------- -------------------- --------------------
Net increase (decrease) in net assets resulting
from operations................................ 19,456 (6,672) (25,378)
-------------------- -------------------- --------------------
POLICY TRANSACTIONS:
Premium payments received from Policy owners........ 415,445 450,687 534,610
Net transfers (including fixed account)............. (33,364) (118,238) 1,192,319
Policy charges...................................... (333,907) (353,827) (423,919)
Transfers for Policy benefits and terminations...... (383,114) (663,241) (1,513,527)
-------------------- -------------------- --------------------
Net increase (decrease) in net assets resulting
from Policy transactions....................... (334,940) (684,619) (210,517)
-------------------- -------------------- --------------------
Net increase (decrease) in net assets............. (315,484) (691,291) (235,895)
NET ASSETS:
Beginning of year................................... 4,812,744 5,504,035 5,739,930
-------------------- -------------------- --------------------
End of year......................................... $ 4,497,260 $ 4,812,744 $ 5,504,035
==================== ==================== ====================
(a) For the period April 29, 2016 to December 31, 2016.
The accompanying notes are an integral part of these financial statements.
56
The accompanying notes are an integral part of these financial statements.
57
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
OF GENERAL AMERICAN LIFE INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 2017, 2016 AND 2015
BHFTII BRIGHTHOUSE ASSET ALLOCATION 20
DIVISION
----------------------------------------------------------------------
2017 2016 2015
--------------------- --------------------- ---------------------
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss)........................ $ 2,607 $ 3,740 $ 2,493
Net realized gains (losses)......................... 1,716 3,537 3,410
Change in unrealized gains (losses) on investments.. 3,429 (2,226) (6,137)
--------------------- --------------------- ---------------------
Net increase (decrease) in net assets resulting
from operations................................ 7,752 5,051 (234)
--------------------- --------------------- ---------------------
POLICY TRANSACTIONS:
Premium payments received from Policy owners........ 1,222 1,222 2,404
Net transfers (including fixed account)............. -- -- 1
Policy charges...................................... (3,289) (2,974) (3,215)
Transfers for Policy benefits and terminations...... (7,481) (2) --
--------------------- --------------------- ---------------------
Net increase (decrease) in net assets resulting
from Policy transactions....................... (9,548) (1,754) (810)
--------------------- --------------------- ---------------------
Net increase (decrease) in net assets............ (1,796) 3,297 (1,044)
NET ASSETS:
Beginning of year................................... 110,210 106,913 107,957
--------------------- --------------------- ---------------------
End of year......................................... $ 108,414 $ 110,210 $ 106,913
===================== ===================== =====================
BHFTII BRIGHTHOUSE ASSET ALLOCATION 40
DIVISION
---------------------------------------------------------------------
2017 2016 2015
--------------------- --------------------- ---------------------
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss)........................ $ 5,349 $ 8,469 $ 1,066
Net realized gains (losses)......................... 7,013 14,165 12,187
Change in unrealized gains (losses) on investments.. 12,945 (8,803) (19,736)
--------------------- --------------------- ---------------------
Net increase (decrease) in net assets resulting
from operations................................ 25,307 13,831 (6,483)
--------------------- --------------------- ---------------------
POLICY TRANSACTIONS:
Premium payments received from Policy owners........ 253 67 --
Net transfers (including fixed account)............. -- -- 227,070
Policy charges...................................... (4,416) (2,353) (1,633)
Transfers for Policy benefits and terminations...... -- -- --
--------------------- --------------------- ---------------------
Net increase (decrease) in net assets resulting
from Policy transactions....................... (4,163) (2,286) 225,437
--------------------- --------------------- ---------------------
Net increase (decrease) in net assets............ 21,144 11,545 218,954
NET ASSETS:
Beginning of year................................... 231,122 219,577 623
--------------------- --------------------- ---------------------
End of year......................................... $ 252,266 $ 231,122 $ 219,577
===================== ===================== =====================
BHFTII BRIGHTHOUSE ASSET ALLOCATION 60
DIVISION
----------------------------------------------------------------------
2017 2016 2015
--------------------- --------------------- ---------------------
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss)........................ $ 7,315 $ 10,465 $ 2,614
Net realized gains (losses)......................... 14,940 27,897 56,132
Change in unrealized gains (losses) on investments.. 29,679 (16,166) (56,186)
--------------------- --------------------- ---------------------
Net increase (decrease) in net assets resulting
from operations................................ 51,934 22,196 2,560
--------------------- --------------------- ---------------------
POLICY TRANSACTIONS:
Premium payments received from Policy owners........ 33,616 31,626 39,530
Net transfers (including fixed account)............. 11 62,669 (9,808)
Policy charges...................................... (8,885) (9,109) (15,462)
Transfers for Policy benefits and terminations...... -- -- (214,052)
--------------------- --------------------- ---------------------
Net increase (decrease) in net assets resulting
from Policy transactions....................... 24,742 85,186 (199,792)
--------------------- --------------------- ---------------------
Net increase (decrease) in net assets............ 76,676 107,382 (197,232)
NET ASSETS:
Beginning of year................................... 336,803 229,421 426,653
--------------------- --------------------- ---------------------
End of year......................................... $ 413,479 $ 336,803 $ 229,421
===================== ===================== =====================
(a) For the period April 29, 2016 to December 31, 2016.
The accompanying notes are an integral part of these financial statements.
58
The accompanying notes are an integral part of these financial statements.
59
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
OF GENERAL AMERICAN LIFE INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 2017, 2016 AND 2015
BHFTII BRIGHTHOUSE ASSET ALLOCATION 80
DIVISION
--------------------------------------------------------------------
2017 2016 2015
-------------------- --------------------- ---------------------
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss)........................ $ 14,834 $ 22,881 $ 4,019
Net realized gains (losses)......................... 55,321 97,916 38,679
Change in unrealized gains (losses) on investments.. 79,824 (61,134) (54,209)
-------------------- --------------------- ---------------------
Net increase (decrease) in net assets resulting
from operations................................ 149,979 59,663 (11,511)
-------------------- --------------------- ---------------------
POLICY TRANSACTIONS:
Premium payments received from Policy owners........ 62,701 64,526 71,665
Net transfers (including fixed account)............. -- (62,668) --
Policy charges...................................... (22,699) (31,158) (37,518)
Transfers for Policy benefits and terminations...... (56,266) (9,543) (894)
-------------------- --------------------- ---------------------
Net increase (decrease) in net assets resulting
from Policy transactions....................... (16,264) (38,843) 33,253
-------------------- --------------------- ---------------------
Net increase (decrease) in net assets............. 133,715 20,820 21,742
NET ASSETS:
Beginning of year................................... 778,418 757,598 735,856
-------------------- --------------------- ---------------------
End of year......................................... $ 912,133 $ 778,418 $ 757,598
==================== ===================== =====================
BHFTII BRIGHTHOUSE/ARTISAN MID CAP VALUE
DIVISION
--------------------------------------------------------------------
2017 2016 2015
--------------------- --------------------- --------------------
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss)........................ $ 11,030 $ 25,748 $ 26,167
Net realized gains (losses)......................... 60,211 382,414 480,269
Change in unrealized gains (losses) on investments.. 339,435 264,858 (831,669)
--------------------- --------------------- --------------------
Net increase (decrease) in net assets resulting
from operations................................ 410,676 673,020 (325,233)
--------------------- --------------------- --------------------
POLICY TRANSACTIONS:
Premium payments received from Policy owners........ 173,476 191,653 261,397
Net transfers (including fixed account)............. (217,122) 172,543 (103,143)
Policy charges...................................... (164,373) (182,301) (235,757)
Transfers for Policy benefits and terminations...... (233,777) (200,747) (236,534)
--------------------- --------------------- --------------------
Net increase (decrease) in net assets resulting
from Policy transactions....................... (441,796) (18,852) (314,037)
--------------------- --------------------- --------------------
Net increase (decrease) in net assets............. (31,120) 654,168 (639,270)
NET ASSETS:
Beginning of year................................... 3,583,115 2,928,947 3,568,217
--------------------- --------------------- --------------------
End of year......................................... $ 3,551,995 $ 3,583,115 $ 2,928,947
===================== ===================== ====================
BHFTII BRIGHTHOUSE/WELLINGTON BALANCED
DIVISION
--------------------------------------------------------------------
2017 2016 2015
-------------------- --------------------- ---------------------
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss)........................ $ 131,344 $ 163,612 $ 113,168
Net realized gains (losses)......................... 332,152 470,776 1,516,406
Change in unrealized gains (losses) on investments.. 853,760 (135,374) (1,462,562)
-------------------- --------------------- ---------------------
Net increase (decrease) in net assets resulting
from operations................................ 1,317,256 499,014 167,012
-------------------- --------------------- ---------------------
POLICY TRANSACTIONS:
Premium payments received from Policy owners........ 409,816 405,104 376,761
Net transfers (including fixed account)............. 18,965 1,022,564 69,367
Policy charges...................................... (402,447) (384,657) (362,701)
Transfers for Policy benefits and terminations...... (395,816) (331,314) (454,436)
-------------------- --------------------- ---------------------
Net increase (decrease) in net assets resulting
from Policy transactions....................... (369,482) 711,697 (371,009)
-------------------- --------------------- ---------------------
Net increase (decrease) in net assets............. 947,774 1,210,711 (203,997)
NET ASSETS:
Beginning of year................................... 9,172,261 7,961,550 8,165,547
-------------------- --------------------- ---------------------
End of year......................................... $ 10,120,035 $ 9,172,261 $ 7,961,550
==================== ===================== =====================
(a) For the period April 29, 2016 to December 31, 2016.
The accompanying notes are an integral part of these financial statements.
60
The accompanying notes are an integral part of these financial statements.
61
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
OF GENERAL AMERICAN LIFE INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 2017, 2016 AND 2015
BHFTII BRIGHTHOUSE/WELLINGTON CORE EQUITY OPPORTUNITIES
DIVISION
-------------------------------------------------------------------
2017 2016 2015
-------------------- -------------------- --------------------
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss)........................ $ 65,244 $ 80,723 $ 74,420
Net realized gains (losses)......................... 221,151 187,343 1,876,991
Change in unrealized gains (losses) on investments.. 713,120 121,024 (1,850,670)
-------------------- -------------------- --------------------
Net increase (decrease) in net assets resulting
from operations................................ 999,515 389,090 100,741
-------------------- -------------------- --------------------
POLICY TRANSACTIONS:
Premium payments received from Policy owners........ 272,089 317,110 306,639
Net transfers (including fixed account)............. (530,226) 301,240 (144,772)
Policy charges...................................... (259,078) (285,220) (242,235)
Transfers for Policy benefits and terminations...... (247,440) (233,430) (219,730)
-------------------- -------------------- --------------------
Net increase (decrease) in net assets resulting
from Policy transactions....................... (764,655) 99,700 (300,098)
-------------------- -------------------- --------------------
Net increase (decrease) in net assets............. 234,860 488,790 (199,357)
NET ASSETS:
Beginning of year................................... 5,750,637 5,261,847 5,461,204
-------------------- -------------------- --------------------
End of year......................................... $ 5,985,497 $ 5,750,637 $ 5,261,847
==================== ==================== ====================
BHFTII FRONTIER MID CAP GROWTH
DIVISION
------------------------------------------------------------------
2017 2016 2015
-------------------- -------------------- --------------------
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss)........................ $ (21,515) $ (20,381) $ (23,259)
Net realized gains (losses)......................... 234,407 465,063 593,758
Change in unrealized gains (losses) on investments.. 523,297 (286,708) (476,786)
-------------------- -------------------- --------------------
Net increase (decrease) in net assets resulting
from operations................................ 736,189 157,974 93,713
-------------------- -------------------- --------------------
POLICY TRANSACTIONS:
Premium payments received from Policy owners........ 203,510 208,222 226,654
Net transfers (including fixed account)............. (83,302) (311,354) (24,124)
Policy charges...................................... (208,120) (216,715) (227,960)
Transfers for Policy benefits and terminations...... (436,017) (99,016) (216,623)
-------------------- -------------------- --------------------
Net increase (decrease) in net assets resulting
from Policy transactions....................... (523,929) (418,863) (242,053)
-------------------- -------------------- --------------------
Net increase (decrease) in net assets............. 212,260 (260,889) (148,340)
NET ASSETS:
Beginning of year................................... 3,145,053 3,405,942 3,554,282
-------------------- -------------------- --------------------
End of year......................................... $ 3,357,313 $ 3,145,053 $ 3,405,942
==================== ==================== ====================
BHFTII JENNISON GROWTH
DIVISION
------------------------------------------------------------------
2017 2016 2015
-------------------- -------------------- --------------------
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss)........................ $ (92,878) $ (86,023) $ (108,996)
Net realized gains (losses)......................... 2,259,880 3,314,806 4,731,846
Change in unrealized gains (losses) on investments.. 5,682,678 (3,419,832) (2,060,648)
-------------------- -------------------- --------------------
Net increase (decrease) in net assets resulting
from operations................................ 7,849,680 (191,049) 2,562,202
-------------------- -------------------- --------------------
POLICY TRANSACTIONS:
Premium payments received from Policy owners........ 1,336,728 1,361,226 1,484,488
Net transfers (including fixed account)............. (330,337) (2,521,193) (1,130,021)
Policy charges...................................... (1,602,837) (1,563,870) (1,574,145)
Transfers for Policy benefits and terminations...... (1,196,802) (1,061,873) (1,491,131)
-------------------- -------------------- --------------------
Net increase (decrease) in net assets resulting
from Policy transactions....................... (1,793,248) (3,785,710) (2,710,809)
-------------------- -------------------- --------------------
Net increase (decrease) in net assets............. 6,056,432 (3,976,759) (148,607)
NET ASSETS:
Beginning of year................................... 21,931,124 25,907,883 26,056,490
-------------------- -------------------- --------------------
End of year......................................... $ 27,987,556 $ 21,931,124 $ 25,907,883
==================== ==================== ====================
(a) For the period April 29, 2016 to December 31, 2016.
The accompanying notes are an integral part of these financial statements.
62
The accompanying notes are an integral part of these financial statements.
63
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
OF GENERAL AMERICAN LIFE INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 2017, 2016 AND 2015
BHFTII METLIFE AGGREGATE BOND INDEX
DIVISION
-----------------------------------------------------------------
2017 2016 2015
------------------- -------------------- --------------------
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss)........................ $ 315,748 $ 300,612 $ 326,959
Net realized gains (losses)......................... (1,761) 18,120 21,767
Change in unrealized gains (losses) on investments.. 44,573 (77,577) (396,378)
------------------- -------------------- --------------------
Net increase (decrease) in net assets resulting
from operations................................ 358,560 241,155 (47,652)
------------------- -------------------- --------------------
POLICY TRANSACTIONS:
Premium payments received from Policy owners........ 515,090 526,120 536,187
Net transfers (including fixed account)............. 37,870 34,078 (10,629)
Policy charges...................................... (630,491) (670,645) (632,399)
Transfers for Policy benefits and terminations...... (348,486) (379,713) (314,883)
------------------- -------------------- --------------------
Net increase (decrease) in net assets resulting
from Policy transactions....................... (426,017) (490,160) (421,724)
------------------- -------------------- --------------------
Net increase (decrease) in net assets............. (67,457) (249,005) (469,376)
NET ASSETS:
Beginning of year................................... 13,766,735 14,015,740 14,485,116
------------------- -------------------- --------------------
End of year......................................... $ 13,699,278 $ 13,766,735 $ 14,015,740
=================== ==================== ====================
BHFTII METLIFE MID CAP STOCK INDEX
DIVISION
-----------------------------------------------------------------
2017 2016 2015
------------------- -------------------- --------------------
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss)........................ $ 36,944 $ 17,445 $ 17,547
Net realized gains (losses)......................... 244,206 184,009 416,000
Change in unrealized gains (losses) on investments.. 191,763 180,914 (480,822)
------------------- -------------------- --------------------
Net increase (decrease) in net assets resulting
from operations................................ 472,913 382,368 (47,275)
------------------- -------------------- --------------------
POLICY TRANSACTIONS:
Premium payments received from Policy owners........ 84,596 76,347 77,604
Net transfers (including fixed account)............. 1,104,945 (105,809) (943,720)
Policy charges...................................... (86,335) (65,494) (66,245)
Transfers for Policy benefits and terminations...... (10,556) (32,709) (90,256)
------------------- -------------------- --------------------
Net increase (decrease) in net assets resulting
from Policy transactions....................... 1,092,650 (127,665) (1,022,617)
------------------- -------------------- --------------------
Net increase (decrease) in net assets............. 1,565,563 254,703 (1,069,892)
NET ASSETS:
Beginning of year................................... 2,267,923 2,013,220 3,083,112
------------------- -------------------- --------------------
End of year......................................... $ 3,833,486 $ 2,267,923 $ 2,013,220
=================== ==================== ====================
BHFTII METLIFE MSCI EAFE INDEX
DIVISION
-----------------------------------------------------------------
2017 2016 2015
------------------- -------------------- --------------------
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss)........................ $ 97,420 $ 81,136 $ 119,087
Net realized gains (losses)......................... 58,406 4,142 65,063
Change in unrealized gains (losses) on investments.. 818,791 (50,058) (237,706)
------------------- -------------------- --------------------
Net increase (decrease) in net assets resulting
from operations................................ 974,617 35,220 (53,556)
------------------- -------------------- --------------------
POLICY TRANSACTIONS:
Premium payments received from Policy owners........ 260,250 269,233 286,853
Net transfers (including fixed account)............. 104,934 (46,984) 79,362
Policy charges...................................... (232,101) (250,940) (265,228)
Transfers for Policy benefits and terminations...... (209,480) (67,532) (407,339)
------------------- -------------------- --------------------
Net increase (decrease) in net assets resulting
from Policy transactions....................... (76,397) (96,223) (306,352)
------------------- -------------------- --------------------
Net increase (decrease) in net assets............. 898,220 (61,003) (359,908)
NET ASSETS:
Beginning of year................................... 4,043,957 4,104,960 4,464,868
------------------- -------------------- --------------------
End of year......................................... $ 4,942,177 $ 4,043,957 $ 4,104,960
=================== ==================== ====================
(a) For the period April 29, 2016 to December 31, 2016.
The accompanying notes are an integral part of these financial statements.
64
The accompanying notes are an integral part of these financial statements.
65
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
OF GENERAL AMERICAN LIFE INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 2017, 2016 AND 2015
BHFTII METLIFE RUSSELL 2000 INDEX
DIVISION
-------------------------------------------------------------------
2017 2016 2015
-------------------- -------------------- --------------------
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss)........................ $ 25,009 $ 28,174 $ 27,732
Net realized gains (losses)......................... 268,175 318,085 392,835
Change in unrealized gains (losses) on investments.. 148,566 236,931 (573,131)
-------------------- -------------------- --------------------
Net increase (decrease) in net assets resulting
from operations................................ 441,750 583,190 (152,564)
-------------------- -------------------- --------------------
POLICY TRANSACTIONS:
Premium payments received from Policy owners........ 118,727 111,560 129,283
Net transfers (including fixed account)............. (15,395) (206,162) (284,372)
Policy charges...................................... (111,452) (109,315) (117,849)
Transfers for Policy benefits and terminations...... (232,395) (242,881) (156,265)
-------------------- -------------------- --------------------
Net increase (decrease) in net assets resulting
from Policy transactions....................... (240,515) (446,798) (429,203)
-------------------- -------------------- --------------------
Net increase (decrease) in net assets............. 201,235 136,392 (581,767)
NET ASSETS:
Beginning of year................................... 3,254,335 3,117,943 3,699,710
-------------------- -------------------- --------------------
End of year......................................... $ 3,455,570 $ 3,254,335 $ 3,117,943
==================== ==================== ====================
BHFTII METLIFE STOCK INDEX
DIVISION
-------------------------------------------------------------------
2017 2016 2015
-------------------- -------------------- ---------------------
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss)........................ $ 667,294 $ 725,739 $ 660,586
Net realized gains (losses)......................... 3,414,047 3,924,564 5,534,537
Change in unrealized gains (losses) on investments.. 6,588,528 724,662 (5,754,918)
-------------------- -------------------- ---------------------
Net increase (decrease) in net assets resulting
from operations................................ 10,669,869 5,374,965 440,205
-------------------- -------------------- ---------------------
POLICY TRANSACTIONS:
Premium payments received from Policy owners........ 2,794,879 2,913,736 3,151,873
Net transfers (including fixed account)............. 4,417 (1,314,555) (2,024,189)
Policy charges...................................... (3,206,860) (3,434,129) (3,576,575)
Transfers for Policy benefits and terminations...... (2,947,853) (2,427,687) (5,025,841)
-------------------- -------------------- ---------------------
Net increase (decrease) in net assets resulting
from Policy transactions....................... (3,355,417) (4,262,635) (7,474,732)
-------------------- -------------------- ---------------------
Net increase (decrease) in net assets............. 7,314,452 1,112,330 (7,034,527)
NET ASSETS:
Beginning of year................................... 52,646,385 51,534,055 58,568,582
-------------------- -------------------- ---------------------
End of year......................................... $ 59,960,837 $ 52,646,385 $ 51,534,055
==================== ==================== =====================
BHFTII MFS TOTAL RETURN
DIVISION
-------------------------------------------------------------------
2017 2016 2015
-------------------- -------------------- --------------------
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss)........................ $ 57,182 $ 66,350 $ 70,244
Net realized gains (losses)......................... 213,781 249,367 38,051
Change in unrealized gains (losses) on investments.. 50,500 (64,607) (128,963)
-------------------- -------------------- --------------------
Net increase (decrease) in net assets resulting
from operations................................ 321,463 251,110 (20,668)
-------------------- -------------------- --------------------
POLICY TRANSACTIONS:
Premium payments received from Policy owners........ 133,421 145,664 145,455
Net transfers (including fixed account)............. 31,528 (487,689) (15,206)
Policy charges...................................... (161,244) (168,857) (164,300)
Transfers for Policy benefits and terminations...... (252,389) (110,198) (63,250)
-------------------- -------------------- --------------------
Net increase (decrease) in net assets resulting
from Policy transactions....................... (248,684) (621,080) (97,301)
-------------------- -------------------- --------------------
Net increase (decrease) in net assets............. 72,779 (369,970) (117,969)
NET ASSETS:
Beginning of year................................... 2,871,810 3,241,780 3,359,749
-------------------- -------------------- --------------------
End of year......................................... $ 2,944,589 $ 2,871,810 $ 3,241,780
==================== ==================== ====================
(a) For the period April 29, 2016 to December 31, 2016.
The accompanying notes are an integral part of these financial statements.
66
The accompanying notes are an integral part of these financial statements.
67
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
OF GENERAL AMERICAN LIFE INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 2017, 2016 AND 2015
BHFTII MFS VALUE
DIVISION
-----------------------------------------------------------------
2017 2016 2015
------------------- -------------------- --------------------
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss)........................ $ 130,551 $ 110,439 $ 145,941
Net realized gains (losses)......................... 574,859 546,923 1,837,805
Change in unrealized gains (losses) on investments.. 645,393 253,948 (2,085,181)
------------------- -------------------- --------------------
Net increase (decrease) in net assets resulting
from operations................................ 1,350,803 911,310 (101,435)
------------------- -------------------- --------------------
POLICY TRANSACTIONS:
Premium payments received from Policy owners........ 216,687 211,751 261,646
Net transfers (including fixed account)............. 1,272,109 (1,151,434) 1,295,988
Policy charges...................................... (278,150) (283,083) (289,889)
Transfers for Policy benefits and terminations...... (331,149) (657,430) (193,581)
------------------- -------------------- --------------------
Net increase (decrease) in net assets resulting
from Policy transactions....................... 879,497 (1,880,196) 1,074,164
------------------- -------------------- --------------------
Net increase (decrease) in net assets............. 2,230,300 (968,886) 972,729
NET ASSETS:
Beginning of year................................... 7,107,991 8,076,877 7,104,148
------------------- -------------------- --------------------
End of year......................................... $ 9,338,291 $ 7,107,991 $ 8,076,877
=================== ==================== ====================
BHFTII MFS VALUE II
DIVISION
-----------------------------------------------------------------
2017 2016 2015
-------------------- -------------------- -------------------
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss)........................ $ 94,859 $ 45,285 $ 57,932
Net realized gains (losses)......................... (26,868) 229,571 363,851
Change in unrealized gains (losses) on investments.. 257,084 479,870 (752,133)
-------------------- -------------------- -------------------
Net increase (decrease) in net assets resulting
from operations................................ 325,075 754,726 (330,350)
-------------------- -------------------- -------------------
POLICY TRANSACTIONS:
Premium payments received from Policy owners........ 339,002 386,121 383,914
Net transfers (including fixed account)............. 146 (62,853) (70,757)
Policy charges...................................... (317,135) (341,311) (353,506)
Transfers for Policy benefits and terminations...... (223,640) (489,112) (492,577)
-------------------- -------------------- -------------------
Net increase (decrease) in net assets resulting
from Policy transactions....................... (201,627) (507,155) (532,926)
-------------------- -------------------- -------------------
Net increase (decrease) in net assets............. 123,448 247,571 (863,276)
NET ASSETS:
Beginning of year................................... 4,805,065 4,557,494 5,420,770
-------------------- -------------------- -------------------
End of year......................................... $ 4,928,513 $ 4,805,065 $ 4,557,494
==================== ==================== ===================
BHFTII NEUBERGER BERMAN GENESIS
DIVISION
-----------------------------------------------------------------
2017 2016 2015
-------------------- -------------------- -------------------
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss)........................ $ (11,514) $ (6,221) $ (11,313)
Net realized gains (losses)......................... 1,049,858 453,637 366,420
Change in unrealized gains (losses) on investments.. 159,525 861,100 (356,362)
-------------------- -------------------- -------------------
Net increase (decrease) in net assets resulting
from operations................................ 1,197,869 1,308,516 (1,255)
-------------------- -------------------- -------------------
POLICY TRANSACTIONS:
Premium payments received from Policy owners........ 334,810 350,134 427,946
Net transfers (including fixed account)............. (340,036) (665,556) (278,138)
Policy charges...................................... (304,353) (322,724) (345,019)
Transfers for Policy benefits and terminations...... (325,200) (377,307) (447,432)
-------------------- -------------------- -------------------
Net increase (decrease) in net assets resulting
from Policy transactions....................... (634,779) (1,015,453) (642,643)
-------------------- -------------------- -------------------
Net increase (decrease) in net assets............. 563,090 293,063 (643,898)
NET ASSETS:
Beginning of year................................... 8,106,048 7,812,985 8,456,883
-------------------- -------------------- -------------------
End of year......................................... $ 8,669,138 $ 8,106,048 $ 7,812,985
==================== ==================== ===================
(a) For the period April 29, 2016 to December 31, 2016.
The accompanying notes are an integral part of these financial statements.
68
The accompanying notes are an integral part of these financial statements.
69
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
OF GENERAL AMERICAN LIFE INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 2017, 2016 AND 2015
BHFTII T. ROWE PRICE LARGE CAP GROWTH
DIVISION
-------------------------------------------------------------------
2017 2016 2015
-------------------- -------------------- --------------------
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss)........................ $ (6,530) $ (19,608) $ (18,372)
Net realized gains (losses)......................... 441,283 669,908 1,011,920
Change in unrealized gains (losses) on investments.. 1,315,448 (657,494) (541,770)
-------------------- -------------------- --------------------
Net increase (decrease) in net assets resulting
from operations................................ 1,750,201 (7,194) 451,778
-------------------- -------------------- --------------------
POLICY TRANSACTIONS:
Premium payments received from Policy owners........ 128,412 146,857 139,638
Net transfers (including fixed account)............. 710,670 (1,331,839) 2,071,915
Policy charges...................................... (250,019) (247,831) (246,584)
Transfers for Policy benefits and terminations...... (136,994) (335,748) (269,520)
-------------------- -------------------- --------------------
Net increase (decrease) in net assets resulting
from Policy transactions....................... 452,069 (1,768,561) 1,695,449
-------------------- -------------------- --------------------
Net increase (decrease) in net assets............. 2,202,270 (1,775,755) 2,147,227
NET ASSETS:
Beginning of year................................... 5,151,979 6,927,734 4,780,507
-------------------- -------------------- --------------------
End of year......................................... $ 7,354,249 $ 5,151,979 $ 6,927,734
==================== ==================== ====================
BHFTII T. ROWE PRICE SMALL CAP GROWTH
DIVISION
-------------------------------------------------------------------
2017 2016 2015
-------------------- -------------------- --------------------
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss)........................ $ (17,069) $ (17,045) $ (28,570)
Net realized gains (losses)......................... 694,397 970,506 984,304
Change in unrealized gains (losses) on investments.. 789,248 (297,835) (777,293)
-------------------- -------------------- --------------------
Net increase (decrease) in net assets resulting
from operations................................ 1,466,576 655,626 178,441
-------------------- -------------------- --------------------
POLICY TRANSACTIONS:
Premium payments received from Policy owners........ 237,047 234,437 262,429
Net transfers (including fixed account)............. 281,335 (147,615) (675,813)
Policy charges...................................... (238,295) (224,255) (222,565)
Transfers for Policy benefits and terminations...... (345,307) (150,228) (140,371)
-------------------- -------------------- --------------------
Net increase (decrease) in net assets resulting
from Policy transactions....................... (65,220) (287,661) (776,320)
-------------------- -------------------- --------------------
Net increase (decrease) in net assets............. 1,401,356 367,965 (597,879)
NET ASSETS:
Beginning of year................................... 6,615,513 6,247,548 6,845,427
-------------------- -------------------- --------------------
End of year......................................... $ 8,016,869 $ 6,615,513 $ 6,247,548
==================== ==================== ====================
BHFTII VAN ECK GLOBAL NATURAL RESOURCES
DIVISION
-------------------------------------------------------------------
2017 2016 2015
-------------------- -------------------- ---------------------
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss)........................ $ (17,248) $ 11,176 $ 697
Net realized gains (losses)......................... (96,669) (266,985) (218,089)
Change in unrealized gains (losses) on investments.. 60,091 1,653,307 (1,446,457)
-------------------- -------------------- ---------------------
Net increase (decrease) in net assets resulting
from operations................................ (53,826) 1,397,498 (1,663,849)
-------------------- -------------------- ---------------------
POLICY TRANSACTIONS:
Premium payments received from Policy owners........ 49,089 59,447 89,204
Net transfers (including fixed account)............. 16,073 (379,476) 135,003
Policy charges...................................... (119,021) (124,113) (136,170)
Transfers for Policy benefits and terminations...... (102,355) -- (164,149)
-------------------- -------------------- ---------------------
Net increase (decrease) in net assets resulting
from Policy transactions....................... (156,214) (444,142) (76,112)
-------------------- -------------------- ---------------------
Net increase (decrease) in net assets............. (210,040) 953,356 (1,739,961)
NET ASSETS:
Beginning of year................................... 4,317,890 3,364,534 5,104,495
-------------------- -------------------- ---------------------
End of year......................................... $ 4,107,850 $ 4,317,890 $ 3,364,534
==================== ==================== =====================
(a) For the period April 29, 2016 to December 31, 2016.
The accompanying notes are an integral part of these financial statements.
70
The accompanying notes are an integral part of these financial statements.
71
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
OF GENERAL AMERICAN LIFE INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 2017, 2016 AND 2015
BHFTII WESTERN ASSET MANAGEMENT
STRATEGIC BOND OPPORTUNITIES
DIVISION
--------------------------------------------
2017 2016 (a)
-------------------- --------------------
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss)........................ $ 220,563 $ 75,254
Net realized gains (losses)......................... 33,679 12,923
Change in unrealized gains (losses) on investments.. 229,611 184,899
-------------------- --------------------
Net increase (decrease) in net assets resulting
from operations................................ 483,853 273,076
-------------------- --------------------
POLICY TRANSACTIONS:
Premium payments received from Policy owners........ 308,320 189,322
Net transfers (including fixed account)............. 363,536 6,269,062
Policy charges...................................... (311,865) (216,730)
Transfers for Policy benefits and terminations...... (151,444) (257,038)
-------------------- --------------------
Net increase (decrease) in net assets resulting
from Policy transactions....................... 208,547 5,984,616
-------------------- --------------------
Net increase (decrease) in net assets............. 692,400 6,257,692
NET ASSETS:
Beginning of year................................... 6,257,692 --
-------------------- --------------------
End of year......................................... $ 6,950,092 $ 6,257,692
==================== ====================
BHFTII WESTERN ASSET MANAGEMENT U.S. GOVERNMENT
DIVISION
-------------------------------------------------------------------
2017 2016 2015
-------------------- -------------------- --------------------
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss)........................ $ 15,948 $ 13,045 $ 22,317
Net realized gains (losses)......................... (752) (1,395) (1,768)
Change in unrealized gains (losses) on investments.. (7,363) 4,332 (16,976)
-------------------- -------------------- --------------------
Net increase (decrease) in net assets resulting
from operations................................ 7,833 15,982 3,573
-------------------- -------------------- --------------------
POLICY TRANSACTIONS:
Premium payments received from Policy owners........ 26,406 32,681 31,387
Net transfers (including fixed account)............. 281,747 (424,015) 18,603
Policy charges...................................... (23,200) (23,895) (38,426)
Transfers for Policy benefits and terminations...... (16,365) (163,851) (89,282)
-------------------- -------------------- --------------------
Net increase (decrease) in net assets resulting
from Policy transactions....................... 268,588 (579,080) (77,718)
-------------------- -------------------- --------------------
Net increase (decrease) in net assets............. 276,421 (563,098) (74,145)
NET ASSETS:
Beginning of year................................... 447,387 1,010,485 1,084,630
-------------------- -------------------- --------------------
End of year......................................... $ 723,808 $ 447,387 $ 1,010,485
==================== ==================== ====================
FIDELITY VIP EQUITY-INCOME
DIVISION
-------------------------------------------------------------------
2017 2016 2015
-------------------- --------------------- --------------------
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss)........................ $ 157,893 $ 227,838 $ 394,730
Net realized gains (losses)......................... 397,986 852,684 1,530,427
Change in unrealized gains (losses) on investments.. 1,177,762 1,277,548 (2,639,815)
-------------------- --------------------- --------------------
Net increase (decrease) in net assets resulting
from operations................................ 1,733,641 2,358,070 (714,658)
-------------------- --------------------- --------------------
POLICY TRANSACTIONS:
Premium payments received from Policy owners........ 711,885 750,160 820,946
Net transfers (including fixed account)............. (182,470) (936,113) (313,064)
Policy charges...................................... (859,005) (900,466) (882,793)
Transfers for Policy benefits and terminations...... (851,560) (1,097,797) (842,313)
-------------------- --------------------- --------------------
Net increase (decrease) in net assets resulting
from Policy transactions....................... (1,181,150) (2,184,216) (1,217,224)
-------------------- --------------------- --------------------
Net increase (decrease) in net assets............. 552,491 173,854 (1,931,882)
NET ASSETS:
Beginning of year................................... 14,906,317 14,732,463 16,664,345
-------------------- --------------------- --------------------
End of year......................................... $ 15,458,808 $ 14,906,317 $ 14,732,463
==================== ===================== ====================
(a) For the period April 29, 2016 to December 31, 2016.
The accompanying notes are an integral part of these financial statements.
72
The accompanying notes are an integral part of these financial statements.
73
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
OF GENERAL AMERICAN LIFE INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 2017, 2016 AND 2015
FIDELITY VIP MID CAP
DIVISION
--------------------------------------------------------------------
2017 2016 2015
-------------------- -------------------- ---------------------
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss)........................ $ 5,528 $ (3,654) $ (4,749)
Net realized gains (losses)......................... 286,764 311,768 743,774
Change in unrealized gains (losses) on investments.. 527,778 155,735 (795,687)
-------------------- -------------------- ---------------------
Net increase (decrease) in net assets resulting
from operations................................ 820,070 463,849 (56,662)
-------------------- -------------------- ---------------------
POLICY TRANSACTIONS:
Premium payments received from Policy owners........ 166,617 195,502 265,812
Net transfers (including fixed account)............. (168,577) (132,030) (462,030)
Policy charges...................................... (249,316) (261,535) (267,240)
Transfers for Policy benefits and terminations...... (177,004) (446,142) (211,095)
-------------------- -------------------- ---------------------
Net increase (decrease) in net assets resulting
from Policy transactions....................... (428,280) (644,205) (674,553)
-------------------- -------------------- ---------------------
Net increase (decrease) in net assets............. 391,790 (180,356) (731,215)
NET ASSETS:
Beginning of year................................... 4,280,262 4,460,618 5,191,833
-------------------- -------------------- ---------------------
End of year......................................... $ 4,672,052 $ 4,280,262 $ 4,460,618
==================== ==================== =====================
JPMORGAN INSURANCE TRUST CORE BOND
DIVISION
--------------------------------------------------------------------
2017 2016 2015
--------------------- -------------------- ---------------------
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss)........................ $ 15,101 $ 15,451 $ 26,102
Net realized gains (losses)......................... (748) (1,000) (1,941)
Change in unrealized gains (losses) on investments.. 7,512 (657) (19,927)
--------------------- -------------------- ---------------------
Net increase (decrease) in net assets resulting
from operations................................ 21,865 13,794 4,234
--------------------- -------------------- ---------------------
POLICY TRANSACTIONS:
Premium payments received from Policy owners........ 49,276 52,595 57,460
Net transfers (including fixed account)............. 36,335 (34,264) 75,813
Policy charges...................................... (37,722) (40,085) (47,058)
Transfers for Policy benefits and terminations...... (18,018) (141,200) (77,675)
--------------------- -------------------- ---------------------
Net increase (decrease) in net assets resulting
from Policy transactions....................... 29,871 (162,954) 8,540
--------------------- -------------------- ---------------------
Net increase (decrease) in net assets............. 51,736 (149,160) 12,774
NET ASSETS:
Beginning of year................................... 698,826 847,986 835,212
--------------------- -------------------- ---------------------
End of year......................................... $ 750,562 $ 698,826 $ 847,986
===================== ==================== =====================
JPMORGAN INSURANCE TRUST SMALL CAP CORE
DIVISION
-------------------------------------------------------------------
2017 2016 2015
-------------------- -------------------- --------------------
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss)........................ $ (2,450) $ 1,111 $ (6,890)
Net realized gains (losses)......................... 91,604 339,837 447,188
Change in unrealized gains (losses) on investments.. 328,670 1,666 (621,720)
-------------------- -------------------- --------------------
Net increase (decrease) in net assets resulting
from operations................................ 417,824 342,614 (181,422)
-------------------- -------------------- --------------------
POLICY TRANSACTIONS:
Premium payments received from Policy owners........ 94,376 98,392 104,803
Net transfers (including fixed account)............. 785,464 (900,618) 59,099
Policy charges...................................... (108,872) (95,987) (115,256)
Transfers for Policy benefits and terminations...... (124,977) (57,794) (130,155)
-------------------- -------------------- --------------------
Net increase (decrease) in net assets resulting
from Policy transactions....................... 645,991 (956,007) (81,509)
-------------------- -------------------- --------------------
Net increase (decrease) in net assets............. 1,063,815 (613,393) (262,931)
NET ASSETS:
Beginning of year................................... 2,277,324 2,890,717 3,153,648
-------------------- -------------------- --------------------
End of year......................................... $ 3,341,139 $ 2,277,324 $ 2,890,717
==================== ==================== ====================
(a) For the period April 29, 2016 to December 31, 2016.
The accompanying notes are an integral part of these financial statements.
74
The accompanying notes are an integral part of these financial statements.
75
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
OF GENERAL AMERICAN LIFE INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 2017, 2016 AND 2015
RUSSELL INTERNATIONAL DEVELOPED MARKETS
DIVISION
-----------------------------------------------------------------------
2017 2016 2015
---------------------- --------------------- ---------------------
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss)........................ $ 30,011 $ 35,993 $ 9,032
Net realized gains (losses)......................... 72,722 30,847 18,277
Change in unrealized gains (losses) on investments.. 209,463 (39,455) (51,390)
---------------------- --------------------- ---------------------
Net increase (decrease) in net assets resulting
from operations................................ 312,196 27,385 (24,081)
---------------------- --------------------- ---------------------
POLICY TRANSACTIONS:
Premium payments received from Policy owners........ 30,791 38,008 38,646
Net transfers (including fixed account)............. (71,504) (212,157) (22,403)
Policy charges...................................... (32,080) (37,882) (39,996)
Transfers for Policy benefits and terminations...... (3,031) (18,425) (9,974)
---------------------- --------------------- ---------------------
Net increase (decrease) in net assets resulting
from Policy transactions....................... (75,824) (230,456) (33,727)
---------------------- --------------------- ---------------------
Net increase (decrease) in net assets............ 236,372 (203,071) (57,808)
NET ASSETS:
Beginning of year................................... 1,306,331 1,509,402 1,567,210
---------------------- --------------------- ---------------------
End of year......................................... $ 1,542,703 $ 1,306,331 $ 1,509,402
====================== ===================== =====================
RUSSELL STRATEGIC BOND
DIVISION
------------------------------------------------------------------------
2017 2016 2015
---------------------- ---------------------- ----------------------
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss)........................ $ 7,258 $ 10,591 $ 19,728
Net realized gains (losses)......................... (1,391) 29,212 13,717
Change in unrealized gains (losses) on investments.. 25,589 (10,512) (41,255)
---------------------- ---------------------- ----------------------
Net increase (decrease) in net assets resulting
from operations................................ 31,456 29,291 (7,810)
---------------------- ---------------------- ----------------------
POLICY TRANSACTIONS:
Premium payments received from Policy owners........ 22,663 24,803 29,017
Net transfers (including fixed account)............. (47,918) (119,683) 6,146
Policy charges...................................... (58,671) (64,781) (63,084)
Transfers for Policy benefits and terminations...... (3,164) (10,131) --
---------------------- ---------------------- ----------------------
Net increase (decrease) in net assets resulting
from Policy transactions....................... (87,090) (169,792) (27,921)
---------------------- ---------------------- ----------------------
Net increase (decrease) in net assets............ (55,634) (140,501) (35,731)
NET ASSETS:
Beginning of year................................... 949,307 1,089,808 1,125,539
---------------------- ---------------------- ----------------------
End of year......................................... $ 893,673 $ 949,307 $ 1,089,808
====================== ====================== ======================
RUSSELL U.S. SMALL CAP EQUITY
DIVISION
-----------------------------------------------------------------------
2017 2016 2015
---------------------- --------------------- ---------------------
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss)........................ $ (6,587) $ 3,846 $ 1,227
Net realized gains (losses)......................... 145,021 12,169 167,243
Change in unrealized gains (losses) on investments.. 100,755 248,974 (300,458)
---------------------- --------------------- ---------------------
Net increase (decrease) in net assets resulting
from operations................................ 239,189 264,989 (131,988)
---------------------- --------------------- ---------------------
POLICY TRANSACTIONS:
Premium payments received from Policy owners........ 48,091 49,566 56,208
Net transfers (including fixed account)............. (35,859) (191,033) 24,881
Policy charges...................................... (46,252) (49,655) (52,663)
Transfers for Policy benefits and terminations...... (58,777) (25,245) --
---------------------- --------------------- ---------------------
Net increase (decrease) in net assets resulting
from Policy transactions....................... (92,797) (216,367) 28,426
---------------------- --------------------- ---------------------
Net increase (decrease) in net assets............ 146,392 48,622 (103,562)
NET ASSETS:
Beginning of year................................... 1,636,361 1,587,739 1,691,301
---------------------- --------------------- ---------------------
End of year......................................... $ 1,782,753 $ 1,636,361 $ 1,587,739
====================== ===================== =====================
(a) For the period April 29, 2016 to December 31, 2016.
The accompanying notes are an integral part of these financial statements.
76
The accompanying notes are an integral part of these financial statements.
77
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
OF GENERAL AMERICAN LIFE INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS -- (CONCLUDED)
FOR THE YEARS ENDED DECEMBER 31, 2017, 2016 AND 2015
RUSSELL U.S. STRATEGIC EQUITY
DIVISION
----------------------------------------------------------------------
2017 2016 2015
--------------------- --------------------- ---------------------
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss)........................ $ 17,097 $ 16,672 $ 8,359
Net realized gains (losses)......................... 433,487 314,215 358,697
Change in unrealized gains (losses) on investments.. 253,931 15,350 (348,438)
--------------------- --------------------- ---------------------
Net increase (decrease) in net assets resulting
from operations................................ 704,515 346,237 18,618
--------------------- --------------------- ---------------------
POLICY TRANSACTIONS:
Premium payments received from Policy owners........ 114,659 135,355 107,638
Net transfers (including fixed account)............. (148,122) (374,679) (72,144)
Policy charges...................................... (132,908) (139,589) (134,202)
Transfers for Policy benefits and terminations...... (12,362) (50,667) (23,948)
--------------------- --------------------- ---------------------
Net increase (decrease) in net assets resulting
from Policy transactions....................... (178,733) (429,580) (122,656)
--------------------- --------------------- ---------------------
Net increase (decrease) in net assets............ 525,782 (83,343) (104,038)
NET ASSETS:
Beginning of year................................... 3,565,102 3,648,445 3,752,483
--------------------- --------------------- ---------------------
End of year......................................... $ 4,090,884 $ 3,565,102 $ 3,648,445
===================== ===================== =====================
VANECK VIP EMERGING MARKETS
DIVISION
----------------------------------------------------------------------
2017 2016 2015
--------------------- --------------------- ---------------------
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss)........................ $ (369) $ 6,022 $ 10,681
Net realized gains (losses)......................... 33,302 (267,507) 242,359
Change in unrealized gains (losses) on investments.. 1,574,155 288,392 (973,993)
--------------------- --------------------- ---------------------
Net increase (decrease) in net assets resulting
from operations................................ 1,607,088 26,907 (720,953)
--------------------- --------------------- ---------------------
POLICY TRANSACTIONS:
Premium payments received from Policy owners........ 129,241 151,482 176,069
Net transfers (including fixed account)............. 751,790 (1,371,737) 358,695
Policy charges...................................... (160,466) (146,221) (169,964)
Transfers for Policy benefits and terminations...... (102,727) (27,728) (239,442)
--------------------- --------------------- ---------------------
Net increase (decrease) in net assets resulting
from Policy transactions....................... 617,838 (1,394,204) 125,358
--------------------- --------------------- ---------------------
Net increase (decrease) in net assets............ 2,224,926 (1,367,297) (595,595)
NET ASSETS:
Beginning of year................................... 2,868,911 4,236,208 4,831,803
--------------------- --------------------- ---------------------
End of year......................................... $ 5,093,837 $ 2,868,911 $ 4,236,208
===================== ===================== =====================
(a) For the period April 29, 2016 to December 31, 2016.
The accompanying notes are an integral part of these financial statements.
78
The accompanying notes are an integral part of these financial statements.
79
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
OF GENERAL AMERICAN LIFE INSURANCE COMPANY
NOTES TO THE FINANCIAL STATEMENTS
1. ORGANIZATION
General American Separate Account Eleven (the "Separate Account"), a separate
account of General American Life Insurance Company (the "Company"), was
established by the Company's Board of Directors on January 30, 1985 to support
operations of the Company with respect to certain variable life insurance
policies (the "Policies"). The Company is a direct wholly-owned subsidiary of
MetLife, Inc., a Delaware corporation. The Separate Account is registered as a
unit investment trust under the Investment Company Act of 1940, as amended, and
exists in accordance with the regulations of the Missouri Department of
Insurance.
The Separate Account is divided into Divisions, each of which is treated as an
individual accounting entity for financial reporting purposes. Each Division
invests in shares of the corresponding fund or portfolio (with the same name)
of registered investment management companies (the "Trusts"), which are
presented below:
American Funds Insurance Series ("American Funds") JPMorgan Insurance Trust ("JP Morgan")
Brighthouse Funds Trust I ("BHFTI") Russell Investment Funds ("Russell")
Brighthouse Funds Trust II ("BHFTII") VanEck VIP Trust ("VanEck VIP")
Fidelity Variable Insurance Products ("Fidelity VIP")
The assets of each of the Divisions of the Separate Account are registered in
the name of the Company. Under applicable insurance law, the assets and
liabilities of the Separate Account are clearly identified and distinguished
from the Company's other assets and liabilities. The portion of the Separate
Account's assets applicable to the Policies cannot be used for liabilities
arising out of any other business conducted by the Company.
2. LIST OF DIVISIONS
Premium payments, less any applicable charges, applied to the Separate Account
are invested in one or more Divisions in accordance with the selection made by
the Policy owner. The following Divisions had net assets as of December 31,
2017:
American Funds Global Small Capitalization Division BHFTII Brighthouse/Wellington Balanced Division (a)
American Funds Growth Division BHFTII Brighthouse/Wellington Core Equity
American Funds Growth-Income Division Opportunities Division
BHFTI Brighthouse Asset Allocation 100 Division BHFTII Frontier Mid Cap Growth Division
BHFTI Clarion Global Real Estate Division BHFTII Jennison Growth Division
BHFTI ClearBridge Aggressive Growth Division BHFTII MetLife Aggregate Bond Index Division
BHFTI Harris Oakmark International Division BHFTII MetLife Mid Cap Stock Index Division
BHFTI Invesco Small Cap Growth Division BHFTII MetLife MSCI EAFE Index Division
BHFTI MFS Research International Division BHFTII MetLife Russell 2000 Index Division
BHFTI Morgan Stanley Mid Cap Growth Division BHFTII MetLife Stock Index Division
BHFTI PIMCO Total Return Division BHFTII MFS Total Return Division
BHFTI T. Rowe Price Large Cap Value Division BHFTII MFS Value Division
BHFTI T. Rowe Price Mid Cap Growth Division BHFTII MFS Value II Division
BHFTI Victory Sycamore Mid Cap Value Division BHFTII Neuberger Berman Genesis Division
BHFTII Baillie Gifford International Stock Division BHFTII T. Rowe Price Large Cap Growth Division
BHFTII BlackRock Bond Income Division BHFTII T. Rowe Price Small Cap Growth Division
BHFTII BlackRock Capital Appreciation Division BHFTII Van Eck Global Natural Resources Division
BHFTII BlackRock Ultra-Short Term Bond Division BHFTII Western Asset Management Strategic Bond
BHFTII Brighthouse Asset Allocation 20 Division Opportunities Division
BHFTII Brighthouse Asset Allocation 40 Division BHFTII Western Asset Management U.S. Government
BHFTII Brighthouse Asset Allocation 60 Division Division
BHFTII Brighthouse Asset Allocation 80 Division Fidelity VIP Equity-Income Division
BHFTII Brighthouse/Artisan Mid Cap Value Division Fidelity VIP Mid Cap Division
80
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
OF GENERAL AMERICAN LIFE INSURANCE COMPANY
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
2. LIST OF DIVISIONS -- (CONCLUDED)
JPMorgan Insurance Trust Core Bond Division Russell U.S. Small Cap Equity Division
JPMorgan Insurance Trust Small Cap Core Division Russell U.S. Strategic Equity Division
Russell International Developed Markets Division VanEck VIP Emerging Markets Division
Russell Strategic Bond Division
(a) This Division invests in two or more share classes within the underlying
fund or portfolio of the Trusts.
3. PORTFOLIO CHANGES
The operations of the Divisions were affected by the following changes that
occurred during the year ended December 31, 2017:
TRUST NAME CHANGES:
Former Trust New Trust
Met Investors Series Trust (MIST) Brighthouse Funds Trust I (BHFTI)
Metropolitan Series Fund (MSF) Brighthouse Funds Trust II (BHFTII)
NAME CHANGES:
Former Name New Name
(BHFTI) Invesco Mid Cap Value Portfolio (BHFTI) Victory Sycamore Mid Cap Value Portfolio
(BHFTII) BlackRock Large Cap Value Portfolio (BHFTII) MFS Value II Portfolio
(MIST) MetLife Asset Allocation 100 Portfolio (BHFTI) Brighthouse Asset Allocation 100 Portfolio
(MSF) Barclays Aggregate Bond Index Portfolio (BHFTII) MetLife Aggregate Bond Index Portfolio
(MSF) Met/Artisan Mid Cap Value Portfolio (BHFTII) Brighthouse/Artisan Mid Cap Value Portfolio
(MSF) Met/Wellington Balanced Portfolio (BHFTII) Brighthouse/Wellington Balanced Portfolio
(MSF) Met/Wellington Core Equity Opportunities (BHFTII) Brighthouse/Wellington Core Equity
Portfolio Opportunities Portfolio
(MSF) MetLife Asset Allocation 20 Portfolio (BHFTII) Brighthouse Asset Allocation 20 Portfolio
(MSF) MetLife Asset Allocation 40 Portfolio (BHFTII) Brighthouse Asset Allocation 40 Portfolio
(MSF) MetLife Asset Allocation 60 Portfolio (BHFTII) Brighthouse Asset Allocation 60 Portfolio
(MSF) MetLife Asset Allocation 80 Portfolio (BHFTII) Brighthouse Asset Allocation 80 Portfolio
(MSF) MSCI EAFE Index Portfolio (BHFTII) MetLife MSCI EAFE Index Portfolio
(MSF) Russell 2000 Index Portfolio (BHFTII) MetLife Russell 2000 Index Portfolio
(MSF) Van Eck Global Natural Resources Portfolio (BHFTII) VanEck Global Natural Resources Portfolio
Russell Aggressive Equity Fund Russell U.S. Small Cap Equity Fund
Russell Core Bond Fund Russell Strategic Bond Fund
Russell Multi-Style Equity Fund Russell U.S. Strategic Equity Fund
Russell Non-U.S. Fund Russell International Developed Markets Fund
4. SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING
The financial statements have been prepared in accordance with accounting
principles generally accepted in the United States of America ("GAAP")
applicable for variable life separate accounts registered as unit investment
trusts, which follow the accounting and reporting guidance in Financial
Accounting Standards Board ACCOUNTING STANDARDS CODIFICATION TOPIC 946,
INVESTMENT COMPANIES.
81
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
OF GENERAL AMERICAN LIFE INSURANCE COMPANY
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
4. SIGNIFICANT ACCOUNTING POLICIES -- (CONCLUDED)
SECURITY TRANSACTIONS
Security transactions are recorded on a trade date basis. Realized gains and
losses on the sales of investments are computed on the basis of the average
cost of the investment sold. Income from dividends and realized gain
distributions are recorded on the ex-distribution date.
SECURITY VALUATION
A Division's investment in shares of a fund or portfolio of the Trusts is
valued at fair value based on the closing net asset value ("NAV") or price per
share as determined by the Trusts as of the end of the year. All changes in
fair value are recorded as changes in unrealized gains (losses) on investments
in the statements of operations of the applicable Divisions.The Separate
Account defines fair value as the price that would be received to sell an asset
or paid to transfer a liability (an exit price) in the principal or most
advantageous market for the asset or liability in an orderly transaction
between market participants on the measurement date. Each Division invests in
shares of open-end mutual funds which calculate a daily NAV based on the fair
value of the underlying securities in their portfolios. As a result, and as
required by law, shares of open-end mutual funds are purchased and redeemed at
their quoted daily NAV as reported by the Trusts at the close of each business
day.
FEDERAL INCOME TAXES
The operations of the Separate Account form a part of the total operations of
the Company and are not taxed separately. The Company is taxed as a life
insurance company under the provisions of the Internal Revenue Code ("IRC").
Under the current provisions of the IRC, the Company does not expect to incur
federal income taxes on the earnings of the Separate Account to the extent the
earnings are credited under the Policies. Accordingly, no charge is currently
being made to the Separate Account for federal income taxes. The Company will
periodically review the status of this policy in the event of changes in the
tax law. A charge may be made in future years for any federal income taxes that
would be attributable to the Policies.
PREMIUM PAYMENTS
The Company deducts a sales charge for certain policies and a state premium tax
charge from premiums before amounts are allocated to the Separate Account. In
the case of certain Policies, the Company also deducts a federal income tax
charge before amounts are allocated to the Separate Account. This federal
income tax charge is imposed in connection with certain Policies to recover a
portion of the federal income tax adjustment attributable to Policy acquisition
expenses. Net premiums are reported as premium payments received from Policy
owners on the statements of changes in net assets of the applicable Divisions
and are credited as units.
NET TRANSFERS
Funds transferred by the policy owner into or out of Divisions within the
Separate Account or into or out of the fixed account, which is part of the
Company's general account, are recorded on a net basis as net transfers in the
statements of changes in net assets of the applicable Divisions.
USE OF ESTIMATES
The preparation of financial statements in accordance with GAAP requires
management to make estimates and assumptions that affect amounts reported
herein. Actual results could differ from these estimates.
5. EXPENSES
The following annual Separate Account charge paid to the Company is an
asset-based charge assessed through a daily reduction in unit values, which is
recorded as an expense in the accompanying statements of operations of the
applicable Divisions:
Mortality and Expense Risk -- The mortality risk assumed by the Company is
the risk that those insured may die sooner than anticipated and therefore,
the Company will pay an aggregate amount of death benefits greater than
anticipated. The expense risk assumed is the risk that expenses incurred
in issuing and administering the Policies will exceed the amounts realized
from the administrative charges assessed against the Policies.
82
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
OF GENERAL AMERICAN LIFE INSURANCE COMPANY
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
5. EXPENSES -- (CONCLUDED)
The table below represents the range of effective annual rates for the
charge for the year ended December 31, 2017:
-------------------------------------------------------------------------------------------------------------------------
Mortality and Expense Risk 0.00% - 0.90%
-------------------------------------------------------------------------------------------------------------------------
The above referenced charge may not necessarily correspond to the costs
associated with providing the services or benefits indicated by the
designation of the charge or associated with a particular Policy.
For some Policies, a Mortality and Expense Risk charge ranging from 0.15% to
0.75% is assessed on a monthly basis through the redemption of units. Other
Policy charges that are assessed through the redemption of units generally
include: cost of insurance ("COI") charges, administrative charges, a Policy
fee, and charges for benefits provided by rider, if any. The COI charge is the
primary charge under the Policy for the death benefit provided by the Company.
Policy administrative charges range from $.03 to $.38 for every $1,000 of the
Policy face amount and are assessed per month for the first 10 Policy years.
Policy fees range from $4 to $25 and are assessed monthly depending on the
Policy and the Policy year. In addition, a surrender charge is imposed if the
Policy is partially or fully surrendered within the specified surrender charge
period that ranges from 0% to 45% of the Policy's target premium. Most Policies
offer optional benefits that can be added to the Policy by rider. The charge
for riders that provide life insurance benefits can range from $.01 to $83.33
per $1,000 of coverage and the charge for riders providing benefits in the
event of disability can range from $2.40 to $61.44 per $100 of the benefit
provided. These charges are paid to the Company and are recorded as Policy
charges in the accompanying statements of changes in net assets of the
applicable Divisions for the years ended December 31, 2017, 2016 and 2015.
83
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
OF GENERAL AMERICAN LIFE INSURANCE COMPANY
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
6. STATEMENTS OF INVESTMENTS
AS OF
DECEMBER 31 FOR THE YEAR ENDED DECEMBER 31
---------------------- -------------------------------------------------------------------
COST OF PROCEEDS
SHARES COST ($) PURCHASES ($) FROM SALES ($)
--------- ---------- --------------------------------- --------------------------------
2017 2017 2017 2016 2015 2017 2016 2015
--------- ---------- --------- --------- --------- --------- --------- ---------
American Funds Global Small
Capitalization Division...... 153,817 3,240,113 162,628 1,095,338 926,294 972,200 1,438,622 429,061
American Funds Growth
Division..................... 241,145 14,600,850 2,388,041 2,135,949 4,156,453 2,908,666 2,219,421 1,762,197
American Funds Growth-Income
Division..................... 235,573 9,321,659 1,406,849 1,572,505 2,183,604 1,301,382 1,733,010 1,001,172
BHFTI Brighthouse Asset
Allocation 100 Division...... 3,621 40,648 3,067 6,203 10,499 3,011 10,286 1,774
BHFTI Clarion Global Real
Estate Division.............. 241,296 2,695,743 252,073 404,355 462,527 279,989 940,487 437,146
BHFTI ClearBridge Aggressive
Growth Division.............. 79,283 905,784 96,908 138,536 396,346 201,428 252,428 1,896,423
BHFTI Harris Oakmark
International Division....... 469,469 6,616,529 772,686 993,106 1,691,059 759,132 1,791,921 1,226,042
BHFTI Invesco Small Cap
Growth Division.............. 78,698 1,152,667 177,070 208,552 348,607 86,376 88,600 141,931
BHFTI MFS Research
International Division....... 723,532 7,893,232 738,668 816,729 2,330,445 1,799,798 2,398,610 2,117,004
BHFTI Morgan Stanley Mid Cap
Growth Division.............. 104,377 1,263,056 77,659 134,284 111,681 186,287 186,016 168,550
BHFTI PIMCO Total Return
Division..................... 904,017 10,787,433 917,070 1,092,151 1,422,891 683,999 3,470,676 1,067,083
BHFTI T. Rowe Price Large Cap
Value Division............... 65,218 2,004,406 374,637 763,751 662,226 268,263 563,423 1,902,891
BHFTI T. Rowe Price Mid Cap
Growth Division.............. 265,690 2,799,810 399,192 695,958 1,564,525 807,350 1,042,930 449,120
BHFTI Victory Sycamore Mid
Cap Value Division........... 187,333 3,519,378 160,022 381,577 4,022,573 309,137 1,012,854 3,501,505
BHFTII Baillie Gifford
International Stock Division. 169,419 1,799,303 132,320 245,236 185,364 244,260 271,392 204,819
BHFTII BlackRock Bond
Income Division.............. 38,269 4,145,018 777,048 2,368,766 577,412 449,413 520,447 430,336
BHFTII BlackRock Capital
Appreciation Division........ 70,940 2,051,061 140,394 338,650 618,011 387,283 371,812 335,571
BHFTII BlackRock Ultra-Short
Term Bond Division........... 44,607 4,464,134 509,634 1,069,048 2,741,583 849,991 1,774,172 2,977,508
BHFTII Brighthouse Asset
Allocation 20 Division....... 9,847 108,271 5,622 8,556 8,201 10,770 2,975 3,188
BHFTII Brighthouse Asset
Allocation 40 Division....... 21,110 267,794 12,996 22,976 240,415 4,416 2,353 1,633
BHFTII Brighthouse Asset
Allocation 60 Division....... 32,506 381,977 52,420 129,523 61,516 5,673 6,117 235,969
BHFTII Brighthouse Asset
Allocation 80 Division....... 64,009 757,012 112,527 154,826 89,858 68,385 86,289 18,323
BHFTII Brighthouse/Artisan
Mid Cap Value Division....... 13,711 2,987,680 169,173 1,041,624 602,805 599,935 658,096 473,598
BHFTII Brighthouse/Wellington
Balanced Division............ 496,627 8,588,997 779,651 2,390,423 1,932,981 781,605 1,163,714 872,036
BHFTII Brighthouse/Wellington
Core Equity Opportunities
Division..................... 185,311 5,591,351 488,577 1,723,467 2,157,947 982,787 1,266,019 2,069,708
BHFTII Frontier Mid Cap
Growth Division.............. 87,363 2,394,055 171,310 472,024 604,941 635,008 520,258 406,843
BHFTII Jennison Growth
Division..................... 1,660,984 21,569,207 2,542,858 4,002,407 4,791,866 2,618,017 4,758,642 3,640,600
(a) For the period April 29, 2016 to December 31, 2016.
84
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
OF GENERAL AMERICAN LIFE INSURANCE COMPANY
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
6. STATEMENTS OF INVESTMENTS -- (CONCLUDED)
AS OF
DECEMBER 31
----------------------
SHARES COST ($)
--------- ----------
2017 2017
--------- ----------
BHFTII MetLife Aggregate
Bond Index Division.......... 1,256,816 13,730,755
BHFTII MetLife Mid Cap Stock
Index Division............... 189,404 3,255,210
BHFTII MetLife MSCI EAFE
Index Division............... 339,671 4,047,543
BHFTII MetLife Russell 2000
Index Division............... 157,216 2,335,785
BHFTII MetLife Stock Index
Division..................... 1,122,862 36,785,402
BHFTII MFS Total Return
Division..................... 16,634 2,430,689
BHFTII MFS Value Division...... 561,535 8,720,866
BHFTII MFS Value II Division... 520,988 5,029,556
BHFTII Neuberger Berman
Genesis Division............. 382,745 5,902,332
BHFTII T. Rowe Price Large
Cap Growth Division.......... 290,223 6,134,695
BHFTII T. Rowe Price Small
Cap Growth Division.......... 324,702 6,187,461
BHFTII Van Eck Global Natural
Resources Division........... 381,067 4,967,288
BHFTII Western Asset
Management Strategic Bond
Opportunities Division....... 498,934 6,535,634
BHFTII Western Asset
Management U.S. Government
Division..................... 62,133 744,445
Fidelity VIP Equity-Income
Division..................... 647,083 13,908,484
Fidelity VIP Mid Cap Division.. 119,982 3,625,969
JPMorgan Insurance Trust Core
Bond Division................ 68,613 763,124
JPMorgan Insurance Trust Small
Cap Core Division............ 130,312 2,434,166
Russell International Developed
Markets Division............. 117,587 1,208,222
Russell Strategic Bond Division 86,184 902,166
Russell U.S. Small Cap Equity
Division..................... 108,708 1,436,914
Russell U.S. Strategic Equity
Division..................... 220,773 3,279,259
VanEck VIP Emerging Markets
Division..................... 325,904 3,947,242
FOR THE YEAR ENDED DECEMBER 31
------------------------------------------------------------------------
COST OF PROCEEDS
PURCHASES ($) FROM SALES ($)
----------------------------------- -----------------------------------
2017 2016 2015 2017 2016 2015
--------- ------------ --------- --------- ------------ ---------
BHFTII MetLife Aggregate
Bond Index Division.......... 943,551 864,213 936,481 1,053,801 1,053,792 1,031,214
BHFTII MetLife Mid Cap Stock
Index Division............... 1,531,202 284,956 418,822 185,735 236,528 1,279,601
BHFTII MetLife MSCI EAFE
Index Division............... 517,960 285,289 477,233 496,972 300,410 664,426
BHFTII MetLife Russell 2000
Index Division............... 366,981 375,291 439,886 453,433 619,139 633,963
BHFTII MetLife Stock Index
Division..................... 4,154,022 4,522,586 4,959,280 5,272,603 5,803,543 9,389,013
BHFTII MFS Total Return
Division..................... 348,931 286,772 172,928 391,506 724,327 199,950
BHFTII MFS Value Division...... 2,710,633 1,708,492 6,129,934 1,169,104 2,862,929 3,813,042
BHFTII MFS Value II Division... 285,967 603,944 663,667 392,733 724,507 730,521
BHFTII Neuberger Berman
Genesis Division............. 1,255,636 825,562 840,351 1,209,635 1,847,251 1,494,296
BHFTII T. Rowe Price Large
Cap Growth Division.......... 1,434,059 991,996 3,336,345 601,698 2,114,285 771,831
BHFTII T. Rowe Price Small
Cap Growth Division.......... 1,745,081 1,898,350 1,133,703 1,410,775 1,457,966 1,346,890
BHFTII Van Eck Global Natural
Resources Division........... 158,923 218,376 642,333 332,390 651,338 717,710
BHFTII Western Asset
Management Strategic Bond
Opportunities Division....... 1,057,411 6,578,692(a) -- 628,295 518,776(a) --
BHFTII Western Asset
Management U.S. Government
Division..................... 318,408 71,931 89,228 33,872 637,997 144,549
Fidelity VIP Equity-Income
Division..................... 817,059 1,675,094 2,259,996 1,530,341 2,667,058 1,586,389
Fidelity VIP Mid Cap Division.. 302,089 439,977 848,393 523,473 815,389 915,612
JPMorgan Insurance Trust Core
Bond Division................ 89,474 73,695 162,042 44,484 221,215 127,343
JPMorgan Insurance Trust Small
Cap Core Division............ 943,923 306,835 698,146 280,608 1,088,466 490,916
Russell International Developed
Markets Division............. 109,056 120,185 76,001 103,712 314,676 100,630
Russell Strategic Bond Division 66,751 103,965 87,256 146,577 236,026 82,591
Russell U.S. Small Cap Equity
Division..................... 156,693 63,316 264,965 140,395 274,966 81,093
Russell U.S. Strategic Equity
Division..................... 488,542 359,106 411,915 271,919 546,530 213,014
VanEck VIP Emerging Markets
Division..................... 961,152 701,805 908,608 343,716 2,068,955 505,915
(a) For the period April 29, 2016 to December 31, 2016.
85
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
OF GENERAL AMERICAN LIFE INSURANCE COMPANY
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
7. SCHEDULES OF UNITS
FOR THE YEARS ENDED DECEMBER 31, 2017, 2016 AND 2015:
AMERICAN FUNDS GLOBAL SMALL CAPITALIZATION AMERICAN FUNDS GROWTH
DIVISION DIVISION
------------------------------------------- -------------------------------------------
2017 2016 2015 2017 2016 2015
------------ ------------- ------------- ------------- ------------- -------------
Units beginning of year........ 125,474 163,034 159,261 569,479 628,692 673,739
Units issued and transferred
from other funding options.. 15,190 86,267 85,631 49,289 61,204 62,717
Units redeemed and transferred
to other funding options.... (39,133) (123,827) (81,858) (117,193) (120,417) (107,764)
------------ ------------- ------------- ------------- ------------- -------------
Units end of year.............. 101,531 125,474 163,034 501,575 569,479 628,692
============ ============= ============= ============= ============= =============
AMERICAN FUNDS GROWTH-INCOME BHFTI BRIGHTHOUSE ASSET ALLOCATION 100
DIVISION DIVISION
------------------------------------------- -------------------------------------------
2017 2016 2015 2017 2016 2015
------------- ------------- ------------- ------------- ------------- -------------
Units beginning of year........ 401,481 460,171 482,665 210 266 243
Units issued and transferred
from other funding options.. 38,691 42,359 48,067 2 2 34
Units redeemed and transferred
to other funding options.... (63,530) (101,049) (70,561) (16) (58) (11)
------------- ------------- ------------- ------------- ------------- -------------
Units end of year.............. 376,642 401,481 460,171 196 210 266
============= ============= ============= ============= ============= =============
BHFTI CLARION GLOBAL REAL ESTATE BHFTI CLEARBRIDGE AGGRESSIVE GROWTH
DIVISION DIVISION
------------------------------------------- ------------------------------------------
2017 2016 2015 2017 2016 2015
------------- ------------- ------------- ------------- ------------ -------------
Units beginning of year........ 13,092 15,700 16,220 73,866 80,654 156,189
Units issued and transferred
from other funding options.. 6,053 13,388 12,460 11,382 12,290 88,181
Units redeemed and transferred
to other funding options.... (6,615) (15,996) (12,980) (17,035) (19,078) (163,716)
------------- ------------- ------------- ------------- ------------ -------------
Units end of year.............. 12,530 13,092 15,700 68,213 73,866 80,654
============= ============= ============= ============= ============ =============
BHFTI HARRIS OAKMARK INTERNATIONAL BHFTI INVESCO SMALL CAP GROWTH
DIVISION DIVISION
------------------------------------------- -------------------------------------------
2017 2016 2015 2017 2016 2015
------------- ------------- ------------- ------------- ------------- -------------
Units beginning of year........ 211,967 260,788 276,598 31,851 33,362 34,237
Units issued and transferred
from other funding options.. 36,510 89,751 100,288 2,883 3,661 6,864
Units redeemed and transferred
to other funding options.... (40,048) (138,572) (116,098) (3,379) (5,172) (7,739)
------------- ------------- ------------- ------------- ------------- -------------
Units end of year.............. 208,429 211,967 260,788 31,355 31,851 33,362
============= ============= ============= ============= ============= =============
BHFTI MFS RESEARCH INTERNATIONAL BHFTI MORGAN STANLEY MID CAP GROWTH
DIVISION DIVISION
---------------------------------------- -----------------------------------------
2017 2016 2015 2017 2016 2015
------------ ------------ ------------ ------------ ------------ -------------
Units beginning of year........ 505,458 620,513 614,725 253,466 260,351 267,514
Units issued and transferred
from other funding options.. 423,100 576,302 945,195 25,945 39,308 31,792
Units redeemed and transferred
to other funding options.... (486,557) (691,357) (939,407) (39,334) (46,193) (38,955)
------------ ------------ ------------ ------------ ------------ -------------
Units end of year.............. 442,001 505,458 620,513 240,077 253,466 260,351
============ ============ ============ ============ ============ =============
BHFTI PIMCO TOTAL RETURN BHFTI T. ROWE PRICE LARGE CAP VALUE
DIVISION DIVISION
------------------------------------------- ------------------------------------------
2017 2016 2015 2017 2016 2015
------------- ------------- ------------- ------------- ------------- ------------
Units beginning of year........ 507,351 636,895 659,283 82,219 85,892 145,449
Units issued and transferred
from other funding options.. 69,954 74,722 74,450 15,441 27,825 86,360
Units redeemed and transferred
to other funding options.... (68,843) (204,266) (96,838) (19,732) (31,498) (145,917)
------------- ------------- ------------- ------------- ------------- ------------
Units end of year.............. 508,462 507,351 636,895 77,928 82,219 85,892
============= ============= ============= ============= ============= ============
BHFTI T. ROWE PRICE MID CAP GROWTH BHFTI VICTORY SYCAMORE MID CAP VALUE
DIVISION DIVISION
------------------------------------------- ------------------------------------------
2017 2016 2015 2017 2016 2015
------------- ------------- ------------- ------------- ------------ -------------
Units beginning of year........ 91,082 113,903 95,587 108,901 134,329 126,894
Units issued and transferred
from other funding options.. 10,663 38,046 55,692 8,649 13,386 148,944
Units redeemed and transferred
to other funding options.... (27,474) (60,867) (37,376) (13,175) (38,814) (141,509)
------------- ------------- ------------- ------------- ------------ -------------
Units end of year.............. 74,271 91,082 113,903 104,375 108,901 134,329
============= ============= ============= ============= ============ =============
BHFTII BAILLIE GIFFORD INTERNATIONAL STOCK BHFTII BLACKROCK BOND INCOME
DIVISION DIVISION
------------------------------------------- -------------------------------------------
2017 2016 2015 2017 2016 2015
------------- ------------- ------------ ------------- ------------- -------------
Units beginning of year........ 124,728 128,073 131,453 210,062 109,875 105,634
Units issued and transferred
from other funding options.. 11,627 22,510 17,859 46,923 142,784 39,716
Units redeemed and transferred
to other funding options.... (19,880) (25,855) (21,239) (34,731) (42,597) (35,475)
------------- ------------- ------------ ------------- ------------- -------------
Units end of year.............. 116,475 124,728 128,073 222,254 210,062 109,875
============= ============= ============ ============= ============= =============
(a) For the period April 29, 2016 to December 31, 2016.
86
87
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
OF GENERAL AMERICAN LIFE INSURANCE COMPANY
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
7. SCHEDULES OF UNITS -- (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 2017, 2016 AND 2015:
BHFTII BLACKROCK CAPITAL APPRECIATION BHFTII BLACKROCK ULTRA-SHORT TERM BOND
DIVISION DIVISION
------------------------------------------- -------------------------------------------
2017 2016 2015 2017 2016 2015
------------- ------------- ------------- ------------- ------------- -------------
Units beginning of year........ 159,889 178,137 191,991 354,205 405,006 419,869
Units issued and transferred
from other funding options.. 14,008 19,170 25,400 67,365 156,872 258,836
Units redeemed and transferred
to other funding options.... (30,486) (37,418) (39,254) (88,606) (207,673) (273,699)
------------- ------------- ------------- ------------- ------------- -------------
Units end of year.............. 143,411 159,889 178,137 332,964 354,205 405,006
============= ============= ============= ============= ============= =============
BHFTII BRIGHTHOUSE ASSET ALLOCATION 20 BHFTII BRIGHTHOUSE ASSET ALLOCATION 40
DIVISION DIVISION
------------------------------------------- -------------------------------------------
2017 2016 2015 2017 2016 2015
------------- ------------- ------------- ------------- ------------- -------------
Units beginning of year........ 629 640 644 1,238 1,251 4
Units issued and transferred
from other funding options.. 7 7 15 2 -- 1,257
Units redeemed and transferred
to other funding options.... (58) (18) (19) (22) (13) (10)
------------- ------------- ------------- ------------- ------------- -------------
Units end of year.............. 578 629 640 1,218 1,238 1,251
============= ============= ============= ============= ============= =============
BHFTII BRIGHTHOUSE ASSET ALLOCATION 60 BHFTII BRIGHTHOUSE ASSET ALLOCATION 80
DIVISION DIVISION
-------------------------------------------- -------------------------------------------
2017 2016 2015 2017 2016 2015
------------- ------------- -------------- ------------- ------------- -------------
Units beginning of year........ 1,726 1,263 2,326 3,880 4,095 3,918
Units issued and transferred
from other funding options.. 160 512 217 282 338 382
Units redeemed and transferred
to other funding options.... (43) (49) (1,280) (355) (553) (205)
------------- ------------- -------------- ------------- ------------- -------------
Units end of year.............. 1,843 1,726 1,263 3,807 3,880 4,095
============= ============= ============== ============= ============= =============
BHFTII BRIGHTHOUSE/ARTISAN MID CAP VALUE BHFTII BRIGHTHOUSE/WELLINGTON BALANCED
DIVISION DIVISION
------------------------------------------- -------------------------------------------
2017 2016 2015 2017 2016 2015
------------- ------------- ------------- ------------- ------------- -------------
Units beginning of year........ 139,549 140,373 154,007 259,365 253,047 260,192
Units issued and transferred
from other funding options.. 12,929 53,382 18,380 24,653 59,394 28,125
Units redeemed and transferred
to other funding options.... (28,661) (54,206) (32,014) (31,704) (53,076) (35,270)
------------- ------------- ------------- ------------- ------------- -------------
Units end of year.............. 123,817 139,549 140,373 252,314 259,365 253,047
============= ============= ============= ============= ============= =============
BHFTII BRIGHTHOUSE/WELLINGTON
CORE EQUITY OPPORTUNITIES BHFTII FRONTIER MID CAP GROWTH
DIVISION DIVISION
---------------------------------------- ----------------------------------------
2017 2016 2015 2017 2016 2015
------------ ------------ ------------ ------------ ------------ ------------
Units beginning of year........ 230,817 227,185 240,504 116,003 129,380 137,561
Units issued and transferred
from other funding options.. 17,195 121,338 23,405 8,289 9,533 14,315
Units redeemed and transferred
to other funding options.... (44,353) (117,706) (36,724) (25,581) (22,910) (22,496)
------------ ------------ ------------ ------------ ------------ ------------
Units end of year.............. 203,659 230,817 227,185 98,711 116,003 129,380
============ ============ ============ ============ ============ ============
BHFTII JENNISON GROWTH BHFTII METLIFE AGGREGATE BOND INDEX
DIVISION DIVISION
------------------------------------------- ------------------------------------------
2017 2016 2015 2017 2016 2015
------------- ------------- ------------- ------------- ------------- ------------
Units beginning of year........ 137,262 161,430 178,819 554,637 571,075 583,090
Units issued and transferred
from other funding options.. 63,452 69,494 94,341 208,427 182,427 223,771
Units redeemed and transferred
to other funding options.... (72,256) (93,662) (111,730) (222,986) (198,865) (235,786)
------------- ------------- ------------- ------------- ------------- ------------
Units end of year.............. 128,458 137,262 161,430 540,078 554,637 571,075
============= ============= ============= ============= ============= ============
BHFTII METLIFE MID CAP STOCK INDEX BHFTII METLIFE MSCI EAFE INDEX
DIVISION DIVISION
------------------------------------------- -------------------------------------------
2017 2016 2015 2017 2016 2015
------------- ------------- ------------- ------------- ------------- -------------
Units beginning of year........ 56,764 60,247 87,019 191,182 193,536 206,415
Units issued and transferred
from other funding options.. 34,427 9,978 12,550 33,879 24,983 38,090
Units redeemed and transferred
to other funding options.... (10,840) (13,461) (39,322) (37,151) (27,337) (50,969)
------------- ------------- ------------- ------------- ------------- -------------
Units end of year.............. 80,351 56,764 60,247 187,910 191,182 193,536
============= ============= ============= ============= ============= =============
BHFTII METLIFE RUSSELL 2000 INDEX BHFTII METLIFE STOCK INDEX
DIVISION DIVISION
----------------------------------------- ----------------------------------------
2017 2016 2015 2017 2016 2015
------------- ------------ ------------ ------------ ------------ ------------
Units beginning of year........ 109,019 126,144 142,869 1,533,315 1,645,553 1,882,074
Units issued and transferred
from other funding options.. 15,313 26,276 22,683 349,832 352,268 459,235
Units redeemed and transferred
to other funding options.... (23,218) (43,401) (39,408) (447,085) (464,506) (695,756)
------------- ------------ ------------ ------------ ------------ ------------
Units end of year.............. 101,114 109,019 126,144 1,436,062 1,533,315 1,645,553
============= ============ ============ ============ ============ ============
(a) For the period April 29, 2016 to December 31, 2016.
88
89
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
OF GENERAL AMERICAN LIFE INSURANCE COMPANY
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
7. SCHEDULES OF UNITS -- (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 2017, 2016 AND 2015:
BHFTII MFS TOTAL RETURN BHFTII MFS VALUE
DIVISION DIVISION
---------------------------------------- ------------------------------------------
2017 2016 2015 2017 2016 2015
------------ ------------ ------------ ------------- ------------- ------------
Units beginning of year........ 102,854 128,448 131,854 329,931 419,200 370,993
Units issued and transferred
from other funding options.. 8,578 7,833 7,642 766,348 715,209 774,171
Units redeemed and transferred
to other funding options.... (16,735) (33,427) (11,048) (732,451) (804,478) (725,964)
------------ ------------ ------------ ------------- ------------- ------------
Units end of year.............. 94,697 102,854 128,448 363,828 329,931 419,200
============ ============ ============ ============= ============= ============
BHFTII MFS VALUE II BHFTII NEUBERGER BERMAN GENESIS
DIVISION DIVISION
---------------------------------------- -------------------------------------------
2017 2016 2015 2017 2016 2015
------------ ------------ ------------ ------------- ------------- -------------
Units beginning of year........ 117,240 127,118 138,760 249,669 281,941 304,878
Units issued and transferred
from other funding options.. 11,822 15,402 16,451 307,024 336,047 465,634
Units redeemed and transferred
to other funding options.... (15,146) (25,280) (28,093) (324,393) (368,319) (488,571)
------------ ------------ ------------ ------------- ------------- -------------
Units end of year.............. 113,916 117,240 127,118 232,300 249,669 281,941
============ ============ ============ ============= ============= =============
BHFTII T. ROWE PRICE LARGE CAP GROWTH BHFTII T. ROWE PRICE SMALL CAP GROWTH
DIVISION DIVISION
------------------------------------------- ------------------------------------------
2017 2016 2015 2017 2016 2015
------------- ------------- ------------- ------------- ------------ -------------
Units beginning of year........ 222,063 298,914 230,571 239,530 252,940 283,047
Units issued and transferred
from other funding options.. 49,519 100,439 122,782 277,501 273,110 321,866
Units redeemed and transferred
to other funding options.... (35,961) (177,290) (54,439) (278,116) (286,520) (351,973)
------------- ------------- ------------- ------------- ------------ -------------
Units end of year.............. 235,621 222,063 298,914 238,915 239,530 252,940
============= ============= ============= ============= ============ =============
BHFTII WESTERN ASSET
MANAGEMENT STRATEGIC
BHFTII VAN ECK GLOBAL NATURAL RESOURCES BOND OPPORTUNITIES
DIVISION DIVISION
------------------------------------------ ---------------------------
2017 2016 2015 2017 2016 (a)
------------ ------------- ------------- ------------- ------------
Units beginning of year........ 122,401 135,926 138,590 16,545 --
Units issued and transferred
from other funding options.. 34,824 94,178 90,662 9,461 23,501
Units redeemed and transferred
to other funding options.... (39,675) (107,703) (93,326) (8,953) (6,956)
------------ ------------- ------------- ------------- ------------
Units end of year.............. 117,550 122,401 135,926 17,053 16,545
============ ============= ============= ============= ============
BHFTII WESTERN ASSET
MANAGEMENT U.S. GOVERNMENT FIDELITY VIP EQUITY-INCOME
DIVISION DIVISION
------------------------------------------ -------------------------------------------
2017 2016 2015 2017 2016 2015
------------- ------------ ------------- ------------- ------------- -------------
Units beginning of year........ 1,947 4,211 4,552 391,589 454,388 487,769
Units issued and transferred
from other funding options.. 2,365 323 385 25,026 35,763 33,377
Units redeemed and transferred
to other funding options.... (1,228) (2,587) (726) (56,437) (98,562) (66,758)
------------- ------------ ------------- ------------- ------------- -------------
Units end of year.............. 3,084 1,947 4,211 360,178 391,589 454,388
============= ============ ============= ============= ============= =============
FIDELITY VIP MID CAP JPMORGAN INSURANCE TRUST CORE BOND
DIVISION DIVISION
------------------------------------------ -------------------------------------------
2017 2016 2015 2017 2016 2015
------------- ------------ ------------- ------------- ------------- -------------
Units beginning of year........ 97,355 113,273 129,432 44,403 54,729 54,228
Units issued and transferred
from other funding options.. 5,279 9,384 12,716 6,167 4,938 10,328
Units redeemed and transferred
to other funding options.... (14,086) (25,302) (28,875) (4,329) (15,264) (9,827)
------------- ------------ ------------- ------------- ------------- -------------
Units end of year.............. 88,548 97,355 113,273 46,241 44,403 54,729
============= ============ ============= ============= ============= =============
JPMORGAN INSURANCE TRUST SMALL CAP CORE RUSSELL INTERNATIONAL DEVELOPED MARKETS
DIVISION DIVISION
-------------------------------------------- --------------------------------------------
2017 2016 2015 2017 2016 2015
------------- ------------- -------------- -------------- ------------- -------------
Units beginning of year........ 57,449 86,284 89,168 67,002 78,843 80,335
Units issued and transferred
from other funding options.. 24,723 6,379 49,591 1,585 5,148 3,846
Units redeemed and transferred
to other funding options.... (9,370) (35,214) (52,475) (4,851) (16,989) (5,338)
------------- ------------- -------------- -------------- ------------- -------------
Units end of year.............. 72,802 57,449 86,284 63,736 67,002 78,843
============= ============= ============== ============== ============= =============
RUSSELL STRATEGIC BOND RUSSELL U.S. SMALL CAP EQUITY
DIVISION DIVISION
------------------------------------------- -------------------------------------------
2017 2016 2015 2017 2016 2015
------------- ------------- ------------- ------------- ------------- -------------
Units beginning of year........ 39,229 45,991 47,149 50,721 58,685 57,287
Units issued and transferred
from other funding options.. 3,132 3,773 3,643 1,974 3,017 6,985
Units redeemed and transferred
to other funding options.... (6,715) (10,535) (4,801) (4,610) (10,981) (5,587)
------------- ------------- ------------- ------------- ------------- -------------
Units end of year.............. 35,646 39,229 45,991 48,085 50,721 58,685
============= ============= ============= ============= ============= =============
(a) For the period April 29, 2016 to December 31, 2016.
90
91
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
OF GENERAL AMERICAN LIFE INSURANCE COMPANY
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
7. SCHEDULES OF UNITS -- (CONCLUDED)
FOR THE YEARS ENDED DECEMBER 31, 2017, 2016 AND 2015:
RUSSELL U.S. STRATEGIC EQUITY VANECK VIP EMERGING MARKETS
DIVISION DIVISION
-------------------------------------------- --------------------------------------------
2017 2016 2015 2017 2016 2015
-------------- ------------- ------------- ------------- -------------- -------------
Units beginning of year................ 126,635 141,010 146,011 66,650 100,691 96,903
Units issued and transferred
from other funding options.......... 4,521 6,900 7,468 39,001 122,664 90,735
Units redeemed and transferred
to other funding options............ (10,917) (21,275) (12,469) (24,689) (156,705) (86,947)
-------------- ------------- ------------- ------------- -------------- -------------
Units end of year...................... 120,239 126,635 141,010 80,962 66,650 100,691
============== ============= ============= ============= ============== =============
(a) For the period April 29, 2016 to December 31, 2016.
92
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
OF GENERAL AMERICAN LIFE INSURANCE COMPANY
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
8. FINANCIAL HIGHLIGHTS
The Company sells a number of variable life products which have unique
combinations of features and fees, some of which directly affect the unit
values of the Divisions. Differences in the fee structures result in a variety
of unit values, expense ratios, and total returns.
The following table is a summary of unit values and units outstanding for the
Policies, net assets, net investment income ratios, expense ratios, excluding
expenses for the underlying fund or portfolio, and total return ratios for the
respective stated periods in the five years ended December 31, 2017:
AS OF DECEMBER 31 FOR THE YEAR ENDED DECEMBER 31
----------------------------------------- -------------------------------------------------
UNIT VALUE INVESTMENT(1) EXPENSE RATIO(2) TOTAL RETURN(3)
LOWEST TO NET INCOME LOWEST TO LOWEST TO
UNITS HIGHEST ($) ASSETS ($) RATIO (%) HIGHEST (%) HIGHEST (%)
---------- ---------------- ----------- ------------- ---------------- ----------------
American Funds Global Small 2017 101,531 34.77 - 40.55 3,802,296 0.41 0.00 - 0.90 24.77 - 25.89
Capitalization Division 2016 125,474 27.86 - 32.21 3,762,685 0.23 0.00 - 0.90 1.19 - 2.10
2015 163,034 27.54 - 31.55 4,832,737 -- 0.00 - 0.90 (0.63) - 0.27
2014 159,261 27.71 - 31.46 4,713,116 0.12 0.00 - 0.90 1.21 - 2.12
2013 167,877 27.38 - 30.81 4,877,240 0.87 0.00 - 0.90 27.13 - 28.28
American Funds Growth 2017 501,575 34.53 - 39.87 18,652,534 0.49 0.00 - 0.90 27.15 - 28.29
Division 2016 569,479 27.16 - 31.08 16,557,486 0.77 0.00 - 0.90 8.51 - 9.49
2015 628,692 25.03 - 28.38 16,757,447 0.60 0.00 - 0.90 5.90 - 6.86
2014 673,739 23.63 - 26.56 16,868,665 0.77 0.00 - 0.90 7.54 - 8.51
2013 817,414 21.98 - 24.48 18,843,562 0.93 0.00 - 0.90 28.94 - 30.10
American Funds 2017 376,642 28.80 - 32.75 11,710,332 1.39 0.00 - 0.90 21.29 - 22.38
Growth-Income Division 2016 401,481 23.75 - 27.08 10,234,907 1.44 0.00 - 0.90 10.53 - 11.52
2015 460,171 21.49 - 24.29 10,550,790 1.30 0.00 - 0.90 0.55 - 1.45
2014 482,665 21.37 - 23.94 10,946,317 1.23 0.00 - 0.90 9.65 - 10.63
2013 554,860 19.49 - 21.64 11,399,061 1.29 0.00 - 0.90 32.31 - 33.50
BHFTI Brighthouse Asset 2017 196 246.20 48,230 1.45 0.00 23.21
Allocation 100 Division 2016 210 199.82 41,919 2.38 0.00 9.19
2015 266 183.00 48,591 1.56 0.00 (1.67)
2014 243 186.11 45,268 0.92 0.00 5.24
2013 240 176.84 42,449 0.97 0.00 29.77
BHFTI Clarion Global Real 2017 12,530 220.12 - 248.81 3,004,085 3.62 0.00 - 0.90 9.99 - 10.97
Estate Division 2016 13,092 200.14 - 224.21 2,834,793 2.44 0.00 - 0.90 0.25 - 1.15
2015 15,700 199.63 - 221.65 3,369,987 4.18 0.00 - 0.90 (2.11) - (1.23)
2014 16,220 203.93 - 224.41 3,546,223 1.84 0.00 - 0.90 12.66 - 13.67
2013 20,668 181.02 - 197.41 3,945,811 6.89 0.00 - 0.90 2.84 - 3.76
BHFTI ClearBridge 2017 68,213 19.31 - 31.67 1,458,776 0.94 0.00 - 0.90 17.64 - 18.70
Aggressive Growth Division 2016 73,866 16.41 - 26.68 1,340,372 0.67 0.00 - 0.90 2.07 - 2.98
2015 80,654 16.08 - 25.91 1,426,112 0.52 0.00 - 0.90 (4.67) - (3.81)
2014 156,189 16.87 - 26.93 2,938,315 0.31 0.00 - 0.90 18.06 - 19.12
2013 152,062 14.29 - 22.61 2,407,917 0.38 0.00 - 0.90 44.60 - 45.90
BHFTI Harris Oakmark 2017 208,429 35.54 - 40.91 7,943,361 1.81 0.00 - 0.90 29.62 - 30.78
International Division 2016 211,967 27.42 - 31.28 6,180,576 2.35 0.00 - 0.90 7.46 - 8.43
2015 260,788 25.52 - 28.85 7,098,026 3.26 0.00 - 0.90 (5.16) - (4.31)
2014 276,598 26.91 - 30.15 7,926,646 2.64 0.00 - 0.90 (6.37) - (5.52)
2013 297,787 28.74 - 31.91 9,062,309 2.67 0.00 - 0.90 29.64 - 30.80
BHFTI Invesco Small Cap 2017 31,355 35.01 - 41.50 1,220,542 -- 0.00 - 0.90 24.49 - 25.61
Growth Division 2016 31,851 28.13 - 33.04 988,322 -- 0.00 - 0.90 10.73 - 11.72
2015 33,362 25.40 - 29.58 926,996 0.15 0.00 - 0.90 (2.30) - (1.42)
2014 34,237 26.00 - 30.00 967,330 -- 0.00 - 0.90 7.22 - 8.18
2013 35,415 24.25 - 27.73 926,737 0.49 0.00 - 0.90 39.28 - 40.54
93
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
OF GENERAL AMERICAN LIFE INSURANCE COMPANY
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
8. FINANCIAL HIGHLIGHTS -- (CONTINUED)
AS OF DECEMBER 31
------------------------------------------
UNIT VALUE
LOWEST TO NET
UNITS HIGHEST ($) ASSETS ($)
---------- --------------- -----------
BHFTI MFS Research 2017 442,001 18.90 - 24.72 9,253,963
International Division 2016 505,458 14.84 - 19.23 8,251,678
2015 620,513 15.08 - 19.36 10,164,836
2014 614,725 15.44 - 19.66 10,307,915
2013 664,072 16.71 - 21.08 12,004,740
BHFTI Morgan Stanley Mid 2017 240,077 7.96 - 22.86 2,105,214
Cap Growth Division 2016 253,466 5.72 - 16.29 1,587,726
2015 260,351 6.29 - 17.76 1,786,334
2014 267,514 6.67 - 18.65 1,936,464
2013 272,756 6.64 - 18.41 1,958,145
BHFTI PIMCO Total Return 2017 508,462 19.27 - 22.18 10,459,454
Division 2016 507,351 18.56 - 21.17 9,998,671
2015 636,895 18.21 - 20.58 12,321,030
2014 659,283 18.32 - 20.52 12,769,863
2013 691,410 17.69 - 19.64 12,853,474
BHFTI T. Rowe Price Large 2017 77,928 23.76 - 32.58 2,311,952
Cap Value Division 2016 82,219 20.44 - 27.91 2,087,464
2015 85,892 17.75 - 24.13 1,875,720
2014 145,449 18.53 - 25.07 3,255,523
2013 155,132 16.46 - 22.17 3,089,993
BHFTI T. Rowe Price Mid Cap 2017 74,271 39.47 - 47.68 3,166,984
Growth Division 2016 91,082 31.82 - 38.11 3,119,748
2015 113,903 30.14 - 35.77 3,704,246
2014 95,587 28.46 - 33.47 2,895,876
2013 98,132 25.40 - 29.61 2,647,566
BHFTI Victory Sycamore Mid 2017 104,375 31.77 - 42.34 3,913,352
Cap Value Division 2016 108,901 29.20 - 38.57 3,744,567
2015 134,329 25.45 - 33.31 4,043,605
2014 126,894 28.14 - 36.51 4,162,858
2013 140,555 25.71 - 33.20 4,231,405
BHFTII Baillie Gifford 2017 116,475 18.00 - 20.37 2,275,229
International Stock Division 2016 124,728 13.44 - 15.07 1,806,841
2015 128,073 12.87 - 14.54 1,765,014
2014 131,453 13.24 - 14.84 1,852,661
2013 144,655 13.79 - 15.31 2,114,987
BHFTII BlackRock Bond 2017 222,254 17.52 - 20.09 4,092,089
Income Division 2016 210,062 16.98 - 19.36 3,728,404
2015 109,875 16.61 - 18.78 1,931,053
2014 105,634 16.66 - 18.67 1,868,181
2013 95,087 15.70 - 17.43 1,583,484
BHFTII BlackRock Capital 2017 143,411 18.14 - 32.96 3,080,179
Appreciation Division 2016 159,889 13.66 - 24.61 2,562,333
2015 178,137 13.77 - 24.59 2,834,797
2014 191,991 13.08 - 23.14 2,876,874
2013 214,788 12.12 - 21.25 2,948,369
FOR THE YEAR ENDED DECEMBER 31
-------------------------------------------------
INVESTMENT(1) EXPENSE RATIO(2) TOTAL RETURN(3)
INCOME LOWEST TO LOWEST TO
RATIO (%) HIGHEST (%) HIGHEST (%)
------------- ---------------- ----------------
BHFTI MFS Research 2017 2.01 0.00 - 0.90 27.37 - 28.51
International Division 2016 2.22 0.00 - 0.90 (1.56) - (0.67)
2015 3.00 0.00 - 0.90 (2.38) - (1.50)
2014 2.51 0.00 - 0.90 (7.57) - (6.74)
2013 2.71 0.00 - 0.90 18.51 - 19.58
BHFTI Morgan Stanley Mid 2017 0.35 0.00 - 0.90 39.11 - 40.36
Cap Growth Division 2016 -- 0.00 - 0.90 (9.09) - (8.27)
2015 -- 0.00 - 0.90 (5.63) - (4.78)
2014 0.06 0.00 - 0.90 0.38 - 1.29
2013 0.79 0.00 - 0.90 38.06 - 39.30
BHFTI PIMCO Total Return 2017 1.94 0.00 - 0.90 3.84 - 4.77
Division 2016 2.70 0.00 - 0.90 1.93 - 2.85
2015 5.46 0.00 - 0.90 (0.61) - 0.28
2014 2.56 0.00 - 0.90 3.56 - 4.49
2013 4.29 0.00 - 0.90 (2.60) - (1.72)
BHFTI T. Rowe Price Large 2017 2.22 0.00 - 0.90 16.23 - 17.27
Cap Value Division 2016 3.03 0.00 - 0.90 15.17 - 16.20
2015 2.09 0.00 - 0.90 (4.17) - (3.31)
2014 1.53 0.00 - 0.90 12.55 - 13.57
2013 1.49 0.00 - 0.90 32.89 - 34.09
BHFTI T. Rowe Price Mid Cap 2017 -- 0.00 - 0.90 24.02 - 25.13
Growth Division 2016 -- 0.00 - 0.90 5.57 - 6.52
2015 -- 0.00 - 0.90 5.92 - 6.88
2014 -- 0.00 - 0.90 12.03 - 13.04
2013 0.41 0.00 - 0.90 35.74 - 36.96
BHFTI Victory Sycamore Mid 2017 1.14 0.00 - 0.90 8.80 - 9.77
Cap Value Division 2016 0.88 0.00 - 0.90 14.75 - 15.78
2015 0.71 0.00 - 0.90 (9.57) - (8.76)
2014 0.70 0.00 - 0.90 8.98 - 9.96
2013 0.92 0.00 - 0.90 29.46 - 30.63
BHFTII Baillie Gifford 2017 1.20 0.00 - 0.90 33.95 - 35.15
International Stock Division 2016 1.64 0.00 - 0.90 4.44 - 5.38
2015 1.70 0.00 - 0.90 (2.84) - (1.97)
2014 1.46 0.00 - 0.90 (3.97) - (3.10)
2013 1.64 0.00 - 0.90 14.51 - 15.54
BHFTII BlackRock Bond 2017 2.98 0.00 - 0.90 3.18 - 4.10
Income Division 2016 2.22 0.00 - 0.90 2.20 - 3.12
2015 3.83 0.00 - 0.90 (0.30) - 0.59
2014 3.40 0.00 - 0.90 6.13 - 7.08
2013 4.09 0.00 - 0.90 (1.65) - (0.77)
BHFTII BlackRock Capital 2017 0.11 0.00 - 0.90 32.74 - 33.93
Appreciation Division 2016 -- 0.00 - 0.90 (0.81) - 0.09
2015 -- 0.00 - 0.90 5.33 - 6.28
2014 0.06 0.00 - 0.90 7.93 - 8.90
2013 0.81 0.00 - 0.90 33.02 - 34.22
94
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
OF GENERAL AMERICAN LIFE INSURANCE COMPANY
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
8. FINANCIAL HIGHLIGHTS -- (CONTINUED)
AS OF DECEMBER 31
-----------------------------------------
UNIT VALUE
LOWEST TO NET
UNITS HIGHEST ($) ASSETS ($)
--------- --------------- -----------
BHFTII BlackRock 2017 332,964 12.16 - 21.37 4,497,260
Ultra-Short Term Bond 2016 354,205 12.06 - 21.36 4,812,744
Division 2015 405,006 12.02 - 21.47 5,504,035
2014 419,869 12.01 - 21.65 5,739,930
2013 463,735 12.01 - 21.83 6,325,032
BHFTII Brighthouse Asset 2017 578 187.67 108,414
Allocation 20 Division 2016 629 175.14 110,210
2015 640 167.17 106,913
2014 644 167.56 107,957
2013 661 159.99 105,789
BHFTII Brighthouse Asset 2017 1,218 207.18 252,266
Allocation 40 Division 2016 1,238 186.63 231,122
2015 1,251 175.51 219,577
2014 4 176.90 623
2013 5 168.21 829
BHFTII Brighthouse Asset 2017 1,843 224.31 413,479
Allocation 60 Division 2016 1,726 195.16 336,803
2015 1,263 181.60 229,421
2014 2,326 183.41 426,653
2013 2,465 174.19 429,361
BHFTII Brighthouse Asset 2017 3,807 239.61 912,133
Allocation 80 Division 2016 3,880 200.61 778,418
2015 4,095 185.01 757,598
2014 3,918 187.82 735,856
2013 4,064 177.97 723,222
BHFTII Brighthouse/Artisan 2017 123,817 27.02 - 32.05 3,551,995
Mid Cap Value Division 2016 139,549 23.95 - 28.41 3,583,115
2015 140,373 19.48 - 23.10 2,928,947
2014 154,007 21.51 - 25.51 3,568,217
2013 163,386 21.10 - 25.03 3,734,658
BHFTII 2017 252,314 26.49 - 87.34 10,120,035
Brighthouse/Wellington 2016 259,365 23.05 - 76.49 9,172,261
Balanced Division 2015 253,047 21.57 - 72.10 7,961,550
2014 260,192 21.07 - 70.89 8,165,547
2013 242,115 19.08 - 64.67 7,318,486
BHFTII 2017 203,659 27.22 - 31.33 5,985,497
Brighthouse/Wellington Core 2016 230,817 23.07 - 26.31 5,750,637
Equity Opportunities Division 2015 227,185 21.68 - 24.51 5,261,847
2014 240,504 21.37 - 23.94 5,461,204
2013 330,731 19.49 - 21.64 6,737,547
BHFTII Frontier Mid Cap 2017 98,711 26.49 - 43.62 3,357,313
Growth Division 2016 116,003 21.17 - 35.07 3,145,053
2015 129,380 20.09 - 33.50 3,405,942
2014 137,561 19.45 - 32.79 3,554,282
2013 148,284 17.57 - 29.71 3,462,021
FOR THE YEAR ENDED DECEMBER 31
-------------------------------------------------
INVESTMENT(1) EXPENSE RATIO(2) TOTAL RETURN(3)
INCOME LOWEST TO LOWEST TO
RATIO (%) HIGHEST (%) HIGHEST (%)
------------- ---------------- ----------------
BHFTII BlackRock 2017 0.35 0.00 - 0.90 (0.01) - 0.89
Ultra-Short Term Bond 2016 0.07 0.00 - 0.90 (0.55) - 0.35
Division 2015 -- 0.00 - 0.90 (0.89) - 0.00
2014 -- 0.00 - 0.90 (0.89) - 0.00
2013 -- 0.00 - 0.90 (0.89) - 0.00
BHFTII Brighthouse Asset 2017 2.32 0.00 7.16
Allocation 20 Division 2016 3.44 0.00 4.76
2015 2.32 0.00 (0.23)
2014 4.04 0.00 4.73
2013 3.01 0.00 4.50
BHFTII Brighthouse Asset 2017 2.20 0.00 11.01
Allocation 40 Division 2016 3.77 0.00 6.33
2015 0.58 0.00 (0.78)
2014 3.27 0.00 5.16
2013 2.92 0.00 11.20
BHFTII Brighthouse Asset 2017 1.94 0.00 14.93
Allocation 60 Division 2016 3.64 0.00 7.47
2015 0.74 0.00 (0.99)
2014 2.37 0.00 5.29
2013 2.09 0.00 18.29
BHFTII Brighthouse Asset 2017 1.75 0.00 19.44
Allocation 80 Division 2016 3.07 0.00 8.43
2015 0.53 0.00 (1.50)
2014 1.80 0.00 5.53
2013 1.58 0.00 24.51
BHFTII Brighthouse/Artisan 2017 0.68 0.00 - 0.90 11.81 - 12.82
Mid Cap Value Division 2016 1.14 0.00 - 0.90 21.87 - 22.96
2015 1.19 0.00 - 0.90 (10.25) - (9.44)
2014 0.74 0.00 - 0.90 1.02 - 1.93
2013 0.97 0.00 - 0.90 35.63 - 36.85
BHFTII 2017 1.91 0.00 - 0.90 14.12 - 14.95
Brighthouse/Wellington 2016 2.60 0.00 - 0.90 6.04 - 6.99
Balanced Division 2015 1.94 0.00 - 0.90 1.66 - 2.58
2014 2.01 0.00 - 0.90 9.57 - 10.55
2013 2.40 0.00 - 0.90 19.52 - 20.39
BHFTII 2017 1.49 0.00 - 0.90 18.01 - 19.07
Brighthouse/Wellington Core 2016 1.75 0.00 - 0.90 6.39 - 7.34
Equity Opportunities Division 2015 1.78 0.00 - 0.90 1.48 - 2.40
2014 0.69 0.00 - 0.90 9.65 - 10.63
2013 1.42 0.00 - 0.90 32.51 - 33.70
BHFTII Frontier Mid Cap 2017 -- 0.00 - 0.90 24.15 - 25.26
Growth Division 2016 -- 0.00 - 0.90 4.46 - 5.40
2015 -- 0.00 - 0.90 1.96 - 2.88
2014 -- 0.00 - 0.90 10.15 - 11.14
2013 1.25 0.00 - 0.90 31.58 - 32.77
95
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
OF GENERAL AMERICAN LIFE INSURANCE COMPANY
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
8. FINANCIAL HIGHLIGHTS -- (CONTINUED)
AS OF DECEMBER 31 FOR THE YEAR ENDED DECEMBER 31
----------------------------------------- -------------------------------------------------
UNIT VALUE INVESTMENT(1) EXPENSE RATIO(2) TOTAL RETURN(3)
LOWEST TO NET INCOME LOWEST TO LOWEST TO
UNITS HIGHEST ($) ASSETS ($) RATIO (%) HIGHEST (%) HIGHEST (%)
---------- ---------------- ----------- ------------- ---------------- ----------------
BHFTII Jennison Growth 2017 128,458 210.05 - 244.37 27,987,556 0.31 0.00 - 0.90 36.10 - 37.32
Division 2016 137,262 154.33 - 177.95 21,931,124 0.30 0.00 - 0.90 (0.72) - 0.17
2015 161,430 155.46 - 177.65 25,907,883 0.27 0.00 - 0.90 9.80 - 10.78
2014 178,819 141.59 - 160.36 26,056,490 0.26 0.00 - 0.90 8.08 - 9.06
2013 188,489 131.00 - 147.04 25,358,338 0.42 0.00 - 0.90 35.78 - 37.00
BHFTII MetLife Aggregate 2017 540,078 19.14 - 45.02 13,699,278 2.90 0.00 - 0.90 2.34 - 3.26
Bond Index Division 2016 554,637 18.53 - 43.97 13,766,735 2.76 0.00 - 0.90 1.44 - 2.35
2015 571,075 18.11 - 43.33 14,015,740 2.92 0.00 - 0.90 (0.64) - 0.25
2014 583,090 18.06 - 43.58 14,485,116 3.00 0.00 - 0.90 4.86 - 5.81
2013 548,388 17.07 - 41.54 12,382,548 3.39 0.00 - 0.90 (3.20) - (2.33)
BHFTII MetLife Mid Cap 2017 80,351 42.73 - 51.60 3,833,486 1.52 0.00 - 0.90 14.92 - 15.95
Stock Index Division 2016 56,764 36.85 - 44.50 2,267,923 1.27 0.00 - 0.90 19.36 - 20.43
2015 60,247 30.60 - 36.95 2,013,220 1.17 0.00 - 0.90 (3.22) - (2.35)
2014 87,019 31.33 - 37.84 3,083,112 1.05 0.00 - 0.90 8.51 - 9.49
2013 86,252 28.62 - 34.56 2,797,763 1.18 0.00 - 0.90 31.96 - 33.15
BHFTII MetLife MSCI EAFE 2017 187,910 21.49 - 36.45 4,942,177 2.69 0.00 - 0.90 23.79 - 24.90
Index Division 2016 191,182 17.20 - 29.43 4,043,957 2.60 0.00 - 0.90 0.44 - 1.34
2015 193,536 16.98 - 29.29 4,104,960 3.24 0.00 - 0.90 (1.97) - (1.09)
2014 206,415 17.16 - 29.86 4,464,868 2.71 0.00 - 0.90 (6.84) - (6.00)
2013 262,613 18.26 - 32.04 5,974,855 3.07 0.00 - 0.90 20.78 - 21.86
BHFTII MetLife Russell 2000 2017 101,114 31.61 - 37.59 3,455,570 1.20 0.00 - 0.90 13.65 - 14.67
Index Division 2016 109,019 27.82 - 32.78 3,254,335 1.37 0.00 - 0.90 20.20 - 21.28
2015 126,144 23.14 - 27.03 3,117,943 1.22 0.00 - 0.90 (5.13) - (4.27)
2014 142,869 24.39 - 28.23 3,699,710 1.21 0.00 - 0.90 4.10 - 5.04
2013 183,170 23.43 - 26.88 4,556,433 1.58 0.00 - 0.90 37.32 - 38.55
BHFTII MetLife Stock Index 2017 1,436,062 32.13 - 116.39 59,960,837 1.77 0.00 - 0.90 20.46 - 21.54
Division 2016 1,533,315 26.58 - 96.58 52,646,385 2.01 0.00 - 0.90 10.68 - 11.67
2015 1,645,553 21.03 - 87.22 51,534,055 1.78 0.00 - 0.90 0.26 - 1.17
2014 1,882,074 20.79 - 86.95 58,568,582 1.69 0.00 - 0.90 12.35 - 13.36
2013 2,118,048 18.34 - 77.35 58,201,585 1.86 0.00 - 0.90 30.84 - 32.02
BHFTII MFS Total Return 2017 94,697 27.30 - 39.54 2,944,589 2.53 0.00 - 0.90 11.44 - 12.44
Division 2016 102,854 23.68 - 35.41 2,871,810 2.74 0.00 - 0.90 8.23 - 9.20
2015 128,448 21.68 - 32.65 3,241,780 2.61 0.00 - 0.90 (1.05) - (0.16)
2014 131,854 21.71 - 32.93 3,359,749 2.33 0.00 - 0.90 7.67 - 8.64
2013 122,035 20.50 - 30.53 2,940,354 2.57 0.00 - 0.90 17.93 - 18.99
BHFTII MFS Value Division 2017 363,828 24.36 - 28.04 9,338,291 2.13 0.00 - 0.90 16.95 - 18.00
2016 329,931 20.83 - 23.76 7,107,991 2.15 0.00 - 0.90 13.37 - 14.39
2015 419,200 18.38 - 20.77 8,076,877 2.53 0.00 - 0.90 (1.04) - (0.15)
2014 370,993 18.57 - 20.80 7,104,148 1.74 0.00 - 0.90 9.82 - 10.81
2013 387,875 16.91 - 18.77 6,760,489 1.84 0.00 - 0.90 34.52 - 35.73
BHFTII MFS Value II Division 2017 113,916 25.29 - 80.63 4,928,513 2.62 0.00 - 0.90 6.68 - 7.64
2016 117,240 23.50 - 75.54 4,805,065 1.65 0.00 - 0.90 17.46 - 18.51
2015 127,118 19.83 - 64.28 4,557,494 1.82 0.00 - 0.90 (6.83) - (5.99)
2014 138,760 21.09 - 68.96 5,420,770 1.28 0.00 - 0.90 8.94 - 9.92
2013 158,289 19.19 - 63.27 5,636,500 1.40 0.00 - 0.90 30.87 - 32.05
96
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
OF GENERAL AMERICAN LIFE INSURANCE COMPANY
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
8. FINANCIAL HIGHLIGHTS -- (CONTINUED)
AS OF DECEMBER 31 FOR THE YEAR ENDED DECEMBER 31
----------------------------------------- --------------------------------------------------
UNIT VALUE INVESTMENT(1) EXPENSE RATIO(2) TOTAL RETURN(3)
LOWEST TO NET INCOME LOWEST TO LOWEST TO
UNITS HIGHEST ($) ASSETS ($) RATIO (%) HIGHEST (%) HIGHEST (%)
--------- --------------- ----------- ------------- ---------------- -----------------
BHFTII Neuberger Berman 2017 232,300 28.03 - 39.36 8,669,138 0.41 0.00 - 0.90 14.72 - 15.75
Genesis Division 2016 249,669 24.21 - 34.24 8,106,048 0.47 0.00 - 0.90 17.63 - 18.68
2015 281,941 20.40 - 29.05 7,812,985 0.44 0.00 - 0.90 (0.32) - 0.58
2014 304,878 20.28 - 29.09 8,456,883 0.38 0.00 - 0.90 (0.88) - 0.01
2013 341,566 20.28 - 29.29 9,567,958 0.78 0.00 - 0.90 37.29 - 38.52
BHFTII T. Rowe Price Large 2017 235,621 28.05 - 41.30 7,354,249 0.31 0.00 - 0.90 32.67 - 33.86
Cap Growth Division 2016 222,063 21.14 - 30.86 5,151,979 0.06 0.00 - 0.90 0.85 - 1.76
2015 298,914 20.96 - 30.32 6,927,734 0.12 0.00 - 0.90 9.79 - 10.78
2014 230,571 19.09 - 27.37 4,780,507 0.06 0.00 - 0.90 8.11 - 9.09
2013 205,282 17.66 - 25.09 3,998,233 0.25 0.00 - 0.90 37.92 - 39.16
BHFTII T. Rowe Price Small 2017 238,915 30.89 - 47.49 8,016,869 0.31 0.00 - 0.90 21.79 - 22.88
Cap Growth Division 2016 239,530 25.36 - 38.64 6,615,513 0.25 0.00 - 0.90 10.74 - 11.74
2015 252,940 22.90 - 34.58 6,247,548 0.14 0.00 - 0.90 1.79 - 2.71
2014 283,047 22.50 - 33.67 6,845,427 0.02 0.00 - 0.90 5.95 - 6.91
2013 296,588 21.24 - 31.50 6,759,154 0.33 0.00 - 0.90 43.27 - 44.55
BHFTII Van Eck Global 2017 117,550 31.18 - 44.83 4,107,850 0.11 0.00 - 0.90 (1.50) - (0.62)
Natural Resources Division 2016 122,401 31.66 - 45.31 4,317,890 0.83 0.00 - 0.90 42.98 - 44.26
2015 135,926 22.14 - 31.55 3,364,534 0.53 0.00 - 0.90 (33.24) - (32.64)
2014 138,590 33.17 - 47.04 5,104,495 0.51 0.00 - 0.90 (19.36) - (18.63)
2013 75,347 41.13 - 58.08 3,701,909 0.87 0.00 - 0.90 10.07 - 11.06
BHFTII Western Asset 2017 17,053 377.18 - 458.03 6,950,092 3.84 0.00 - 0.90 7.26 - 8.23
Management Strategic Bond 2016 16,545 351.64 - 423.22 6,257,692 1.54 0.00 - 0.90 4.26 - 4.89
Opportunities Division
(Commenced 4/29/2016)
BHFTII Western Asset 2017 3,084 212.75 - 261.85 723,808 3.05 0.00 - 0.90 1.03 - 1.93
Management U.S. Government 2016 1,947 210.59 - 256.88 447,387 2.15 0.00 - 0.90 0.38 - 1.28
Division 2015 4,211 209.79 - 253.62 1,010,485 2.36 0.00 - 0.90 (0.33) - 0.57
2014 4,552 210.47 - 252.18 1,084,630 1.89 0.00 - 0.90 1.89 - 2.81
2013 3,003 206.56 - 245.29 676,204 2.08 0.00 - 0.90 (1.62) - (0.74)
Fidelity VIP Equity-Income 2017 360,178 27.94 - 67.24 15,458,808 1.69 0.00 - 0.90 11.89 - 12.89
Division 2016 391,589 24.75 - 59.98 14,906,317 2.20 0.00 - 0.90 16.97 - 18.02
2015 454,388 20.97 - 51.18 14,732,463 3.11 0.00 - 0.90 (4.82) - (3.96)
2014 487,769 21.83 - 53.66 16,664,345 2.86 0.00 - 0.90 7.75 - 8.72
2013 497,125 20.08 - 49.70 16,000,845 2.33 0.00 - 0.90 27.00 - 28.15
Fidelity VIP Mid Cap 2017 88,548 49.84 - 58.39 4,672,052 0.69 0.00 - 0.90 19.73 - 20.81
Division 2016 97,355 41.63 - 48.34 4,280,262 0.48 0.00 - 0.90 11.23 - 12.23
2015 113,273 37.42 - 43.07 4,460,618 0.48 0.00 - 0.90 (2.27) - (1.39)
2014 129,432 38.29 - 43.67 5,191,833 0.24 0.00 - 0.90 5.34 - 6.29
2013 157,436 36.35 - 41.09 5,966,757 0.50 0.00 - 0.90 35.02 - 36.23
JPMorgan Insurance Trust 2017 46,241 14.95 - 16.49 750,562 2.57 0.45 - 0.90 2.65 - 3.11
Core Bond Division 2016 44,403 14.56 - 15.99 698,826 2.63 0.45 - 0.90 1.20 - 1.66
2015 54,729 14.39 - 15.73 847,986 3.60 0.45 - 0.90 0.22 - 0.67
2014 54,228 14.36 - 15.63 835,212 3.84 0.45 - 0.90 3.98 - 4.45
2013 55,103 13.81 - 14.96 810,630 4.60 0.45 - 0.90 (2.35) - (1.91)
97
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
OF GENERAL AMERICAN LIFE INSURANCE COMPANY
NOTES TO THE FINANCIAL STATEMENTS -- (CONCLUDED)
8. FINANCIAL HIGHLIGHTS -- (CONCLUDED)
AS OF DECEMBER 31 FOR THE YEAR ENDED DECEMBER 31
----------------------------------------- --------------------------------------------------
UNIT VALUE INVESTMENT(1) EXPENSE RATIO(2) TOTAL RETURN(3)
LOWEST TO NET INCOME LOWEST TO LOWEST TO
UNITS HIGHEST ($) ASSETS ($) RATIO (%) HIGHEST (%) HIGHEST (%)
---------- ---------------- ----------- ------------- ---------------- -----------------
JPMorgan Insurance Trust 2017 72,802 37.34 - 47.42 3,341,139 0.32 0.00 - 0.90 14.20 - 15.23
Small Cap Core Division 2016 57,449 32.70 - 41.34 2,277,324 0.50 0.00 - 0.90 19.14 - 20.21
2015 86,284 27.45 - 34.54 2,890,717 0.14 0.00 - 0.90 (6.13) - (5.28)
2014 89,168 29.24 - 36.63 3,153,648 0.15 0.00 - 0.90 8.62 - 9.59
2013 99,271 26.92 - 33.57 3,196,530 0.56 0.00 - 0.90 41.03 - 42.29
Russell International 2017 63,736 20.07 - 24.90 1,542,703 2.62 0.45 - 0.90 23.86 - 24.42
Developed Markets Division 2016 67,002 16.20 - 20.02 1,306,331 3.03 0.45 - 0.90 1.45 - 1.90
2015 78,843 15.97 - 19.64 1,509,402 1.15 0.45 - 0.90 (2.19) - (1.76)
2014 80,335 16.33 - 19.99 1,567,210 2.00 0.45 - 0.90 (5.30) - (4.88)
2013 84,037 17.25 - 21.02 1,727,325 1.95 0.45 - 0.90 20.82 - 21.36
Russell Strategic Bond 2017 35,646 22.04 - 26.49 893,673 1.35 0.45 - 0.90 2.94 - 3.40
Division 2016 39,229 21.41 - 25.63 949,307 1.59 0.45 - 0.90 2.18 - 2.64
2015 45,991 20.95 - 24.98 1,089,808 2.38 0.45 - 0.90 (1.03) - (0.59)
2014 47,149 21.17 - 25.14 1,125,539 1.59 0.45 - 0.90 4.51 - 4.98
2013 61,515 20.25 - 23.96 1,406,359 1.45 0.45 - 0.90 (2.33) - (1.89)
Russell U.S. Small Cap 2017 48,085 25.26 - 40.56 1,782,753 0.18 0.45 - 0.90 14.45 - 14.96
Equity Division 2016 50,721 22.07 - 35.30 1,636,361 0.82 0.45 - 0.90 17.60 - 18.13
2015 58,685 18.77 - 29.90 1,587,739 0.66 0.45 - 0.90 (8.01) - (7.60)
2014 57,287 20.40 - 32.37 1,691,301 0.25 0.45 - 0.90 0.65 - 1.10
2013 59,741 20.27 - 32.04 1,723,890 0.43 0.45 - 0.90 38.75 - 39.38
Russell U.S. Strategic 2017 120,239 24.58 - 39.61 4,090,884 1.02 0.45 - 0.90 19.72 - 20.26
Equity Division 2016 126,635 20.53 - 32.95 3,565,102 1.05 0.45 - 0.90 9.65 - 10.14
2015 141,010 18.73 - 29.94 3,648,445 0.82 0.45 - 0.90 0.20 - 0.65
2014 146,011 18.69 - 29.76 3,752,483 1.17 0.45 - 0.90 10.70 - 11.20
2013 154,054 16.88 - 26.77 3,539,995 1.22 0.45 - 0.90 31.73 - 32.32
VanEck VIP Emerging Markets 2017 80,962 49.12 - 81.81 5,093,837 0.36 0.00 - 0.90 49.69 - 51.03
Division 2016 66,650 32.81 - 54.41 2,868,911 0.53 0.00 - 0.90 (0.79) - 0.10
2015 100,691 33.08 - 54.60 4,236,208 0.55 0.00 - 0.90 (14.76) - (13.99)
2014 96,903 38.80 - 63.77 4,831,803 0.50 0.00 - 0.90 (1.30) - (0.41)
2013 111,107 39.32 - 64.32 5,639,281 1.48 0.00 - 0.90 11.02 - 12.02
1 These amounts represent the dividends, excluding distributions of capital
gains, received by the Division from the underlying fund or portfolio, net of
management fees assessed by the fund manager, divided by the average net
assets, regardless of share class, if any. These ratios exclude those
expenses, such as mortality and expense risk charges, that are assessed
against policy owner accounts either through reductions in the unit values or
the redemption of units. The investment income ratio is calculated for each
period indicated or from the effective date through the end of the reporting
period. The recognition of investment income by the Division is affected by
the timing of the declaration of dividends by the underlying fund or
portfolio in which the Division invests. The investment income ratio is
calculated as a weighted average ratio since the Division may invest in two
or more share classes, within the underlying fund or portfolio of the Trusts
which may have unique investment income ratios.
2 These amounts represent annualized policy expenses of each of the applicable
Divisions, consisting primarily of mortality and expense risk charges, for
each period indicated. The ratios include only those expenses that result in
a direct reduction to unit values. Charges made directly to policy owner
accounts through the redemption of units and expenses of the underlying fund
or portfolio have been excluded.
3 These amounts represent the total return for the period indicated, including
changes in the value of the underlying fund or portfolio, and expenses
assessed through the reduction of unit values. These ratios do not include
any expenses assessed through the redemption of units. The total return is
calculated for each period indicated or from the effective date through the
end of the reporting period. The total return is presented as a range of
minimum to maximum returns, based on the minimum and maximum returns within
each product grouping of the applicable Division.
98
Metropolitan Tower Life Insurance Company and Subsidiaries
Consolidated Financial Statements
As of December 31, 2017 and 2016 and for the Years Ended December 31, 2017,
2016 and 2015 and Independent Auditors' Report
[THIS PAGE INTENTIONALLY LEFT BLANK]
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholder of
Metropolitan Tower Life Insurance Company:
We have audited the accompanying consolidated financial statements of
Metropolitan Tower Life Insurance Company and its subsidiaries (a wholly-owned
subsidiary of MetLife, Inc.) (the "Company") which comprise the consolidated
balance sheet as of December 31, 2017 and 2016, and the related consolidated
statements of operations, comprehensive income (loss), stockholder's equity,
and cash flows for each of the three years in the period ended December 31,
2017, and the related notes to the consolidated financial statements.
Management's Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these
consolidated financial statements in accordance with accounting principles
generally accepted in the United States of America; this includes the design,
implementation, and maintenance of internal control relevant to the preparation
and fair presentation of consolidated financial statements that are free from
material misstatement, whether due to fraud or error.
Auditors' Responsibility
Our responsibility is to express an opinion on these consolidated financial
statements based on our audit. We conducted our audit in accordance with
auditing standards generally accepted in the United States of America. Those
standards require that we plan and perform the audit to obtain reasonable
assurance about whether the consolidated financial statements are free from
material misstatement.
An audit involves performing procedures to obtain audit evidence about the
amounts and disclosures in the consolidated financial statements. The
procedures selected depend on the auditor's judgment, including the assessment
of the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error. In making those risk assessments, the auditor
considers internal control relevant to the Company's preparation and fair
presentation of the consolidated financial statements in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose
of expressing an opinion on the effectiveness of the Company's internal
control. Accordingly, we express no such opinion. An audit also includes
evaluating the appropriateness of accounting policies used and the
reasonableness of significant accounting estimates made by management, as well
as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Metropolitan Tower
Life Insurance Company and its subsidiaries as of December 31, 2017 and 2016,
and the results of their operations and their cash flows for each of the three
years in the period ended December 31, 2017, in accordance with accounting
principles generally accepted in the United States of America.
Emphasis of Matter
As discussed in Note 1 to the consolidated financial statements, 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. Our opinion is not
modified with respect to this matter.
/s/ DELOITTE & TOUCHE LLP
Certified Public Accountants
Tampa, Florida
April 13, 2018
Metropolitan Tower Life Insurance Company and Subsidiaries
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Consolidated Balance Sheets
December 31, 2017 and 2016
(In millions, except share and per share data)
2017 2016
------------ -----------
Assets
Investments:
Fixed maturity securities available-for-sale, at estimated fair value (amortized
cost: $3,421 and $2,939, respectively).......................................... $ 3,712 $ 3,159
Equity securities available-for-sale, at estimated fair value (cost: $11 and $11,
respectively)................................................................... 11 11
Mortgage loans (net of valuation allowances of: $1 and $1, respectively).......... 306 231
Policy loans...................................................................... 250 257
Real estate and real estate joint ventures........................................ 377 296
Short-term investments, at estimated fair value................................... 53 132
Annuities funding structured settlement claims.................................... 4,330 4,372
Other invested assets............................................................. 179 261
------------ -----------
Total investments.............................................................. 9,218 8,719
Cash and cash equivalents, principally at estimated fair value.................... 86 71
Accrued investment income......................................................... 38 34
Premiums, reinsurance and other receivables....................................... 974 971
Current income tax recoverable.................................................... 20 --
Other assets...................................................................... 37 30
Separate account assets........................................................... 123 112
------------ -----------
Total assets................................................................... $ 10,496 $ 9,937
============ ===========
Liabilities and Stockholder's Equity
Liabilities
Future policy benefits............................................................ $ 895 $ 340
Policyholder account balances..................................................... 3,287 3,390
Other policy-related balances..................................................... 4,372 4,416
Payables for collateral under securities loaned and other transactions............ 499 443
Deferred income tax liability..................................................... 119 202
Other liabilities................................................................. 84 61
Separate account liabilities...................................................... 123 112
------------ -----------
Total liabilities.............................................................. 9,379 8,964
------------ -----------
Contingencies, Commitments and Guarantees (Note 11)
Stockholder's Equity
Common stock, par value $2,000 per share; 1,000 shares authorized, issued and
outstanding..................................................................... 3 3
Additional paid-in capital........................................................ 967 967
Retained earnings (deficit)....................................................... (6) (139)
Accumulated other comprehensive income (loss)..................................... 153 142
------------ -----------
Total stockholder's equity..................................................... 1,117 973
------------ -----------
Total liabilities and stockholder's equity..................................... $ 10,496 $ 9,937
============ ===========
See accompanying notes to the consolidated financial statements.
2
Metropolitan Tower Life Insurance Company and Subsidiaries
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Consolidated Statements of Operations
For the Years Ended December 31, 2017, 2016 and 2015
(In millions)
2017 2016 2015
---------- -------- --------
Revenues
Premiums................................................ $ 517 $ -- $ --
Universal life and investment-type product policy fees.. 76 82 84
Net investment income................................... 447 454 487
Other revenues.......................................... 10 15 15
Net investment gains (losses)........................... -- (49) (33)
Net derivative gains (losses)........................... (1) 9 5
---------- -------- --------
Total revenues....................................... 1,049 511 558
---------- -------- --------
Expenses
Policyholder benefits and claims........................ 842 352 364
Interest credited to policyholder account balances...... 112 115 120
Other expenses.......................................... 65 31 51
---------- -------- --------
Total expenses....................................... 1,019 498 535
---------- -------- --------
Income (loss) before provision for income tax........ 30 13 23
Provision for income tax expense (benefit).............. (103) 5 8
---------- -------- --------
Net income (loss).................................... $ 133 $ 8 $ 15
========== ======== ========
See accompanying notes to the consolidated financial statements.
3
Metropolitan Tower Life Insurance Company and Subsidiaries
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Consolidated Statements of Comprehensive Income (Loss)
For the Years Ended December 31, 2017, 2016 and 2015
(In millions)
2017 2016 2015
--------- -------- --------
Net income (loss).......................................... $ 133 $ 8 $ 15
Other comprehensive income (loss):
Unrealized investment gains (losses), net of related
offsets.................................................. 24 34 (129)
Unrealized gains (losses) on derivatives................... (8) 1 4
--------- -------- --------
Other comprehensive income (loss), before income tax.... 16 35 (125)
Income tax (expense) benefit related to items of other
comprehensive income (loss).............................. (5) (13) 43
--------- -------- --------
Other comprehensive income (loss), net of income tax.... 11 22 (82)
--------- -------- --------
Comprehensive income (loss)............................. $ 144 $ 30 $ (67)
========= ======== ========
See accompanying notes to the consolidated financial statements.
4
Metropolitan Tower Life Insurance Company and Subsidiaries
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Consolidated Statements of Stockholder's Equity
For the Years Ended December 31, 2017, 2016 and 2015
(In millions)
Accumulated
Additional Retained Other Total
Common Paid-in Earnings Comprehensive Stockholder's
Stock Capital (Deficit) Income (Loss) Equity
------ ---------- --------- ------------- -------------
Balance at December 31, 2014.............. $ 3 $ 967 $ -- $ 202 $ 1,172
Dividends paid to MetLife, Inc............ (102) (102)
Net income (loss)......................... 15 15
Other comprehensive income (loss), net of
income tax.............................. (82) (82)
------ -------- -------- -------- ----------
Balance at December 31, 2015.............. 3 967 (87) 120 1,003
------ -------- -------- -------- ----------
Dividends paid to MetLife, Inc............ (60) (60)
Net income (loss)......................... 8 8
Other comprehensive income (loss), net of
income tax.............................. 22 22
------ -------- -------- -------- ----------
Balance at December 31, 2016.............. 3 967 (139) 142 973
------ -------- -------- -------- ----------
Net income (loss)......................... 133 133
Other comprehensive income (loss), net of
income tax.............................. 11 11
------ -------- -------- -------- ----------
Balance at December 31, 2017.............. $ 3 $ 967 $ (6) $ 153 $ 1,117
====== ======== ======== ======== ==========
See accompanying notes to the consolidated financial statements.
5
Metropolitan Tower Life Insurance Company and Subsidiaries
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Consolidated Statements of Cash Flows
For the Years Ended December 31, 2017, 2016 and 2015
(In millions)
2017 2016 2015
---------- -------- ----------
Cash flows from operating activities
Net income (loss)................................................... $ 133 $ 8 $ 15
Adjustments to reconcile net income (loss) to net cash provided by
(used in) operating activities:
Depreciation and amortization expenses.............................. 12 9 11
Amortization of premiums and accretion of discounts associated with
investments, net.................................................. (20) (24) (27)
(Gains) losses on investments, net.................................. -- 49 33
(Gains) losses on derivatives, net.................................. 7 13 30
(Income) loss from equity method investments, net of dividends or
distributions..................................................... 3 3 (1)
Interest credited to policyholder account balances.................. 112 115 120
Universal life and investment-type product policy fees.............. (76) (82) (84)
Asset impairment.................................................... -- -- 21
Change in accrued investment income................................. (4) 11 1
Change in premiums, reinsurance and other receivables............... (4) 2 11
Change in income tax................................................ (108) (58) (47)
Change in other assets.............................................. 3 11 16
Change in future policy benefits and policy-related balances........ 504 15 9
Change in other liabilities......................................... 24 (12) (10)
Other, net.......................................................... 4 -- --
---------- -------- ----------
Net cash provided by (used in) operating activities.............. 590 60 98
---------- -------- ----------
Cash flows from investing activities
Sales, maturities and repayments of:
Fixed maturity securities........................................ 1,457 898 1,186
Mortgage loans................................................... 34 67 58
Real estate and real estate joint ventures....................... -- 1 181
Purchases of:
Fixed maturity securities........................................ (1,923) (731) (1,246)
Mortgage loans................................................... (109) (51) (18)
Real estate and real estate joint ventures....................... (19) (8) (16)
Cash received in connection with freestanding derivatives........... 8 5 2
Cash paid in connection with freestanding derivatives............... (10) (1) (2)
Net change in policy loans.......................................... 7 8 12
Net change in short-term investments................................ 79 -- 94
Net change in other invested assets................................. -- 1 --
Net change in property and equipment................................ (10) -- --
---------- -------- ----------
Net cash provided by (used in) investing activities.............. $ (486) $ 189 $ 251
---------- -------- ----------
See accompanying notes to the consolidated financial statements.
6
Metropolitan Tower Life Insurance Company and Subsidiaries
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Consolidated Statements of Cash Flows -- (continued)
For the Years Ended December 31, 2017, 2016 and 2015
(In millions)
2017 2016 2015
-------- -------- --------
Cash flows from financing activities
Policyholder account balances:
Deposits.................................................................. $ 772 $ 348 $ 183
Withdrawals............................................................... (917) (489) (323)
Net change in payables for collateral under securities loaned and other
transactions............................................................... 56 (52) (112)
Dividends paid to MetLife, Inc............................................... -- (60) (102)
Other, net................................................................... -- -- 3
-------- -------- --------
Net cash provided by (used in) financing activities....................... (89) (253) (351)
-------- -------- --------
Change in cash and cash equivalents....................................... 15 (4) (2)
Cash and cash equivalents, beginning of year................................. 71 75 77
-------- -------- --------
Cash and cash equivalents, end of year.................................... $ 86 $ 71 $ 75
======== ======== ========
Supplemental disclosures of cash flow information
Net cash paid (received) for:
Income tax................................................................... $ 5 $ 61 $ 57
======== ======== ========
Non-cash transactions:
Increase in real estate and real estate joint ventures due to the expiration
of a leveraged lease where the underlying asset was real estate............ $ 73 $ -- $ --
======== ======== ========
See accompanying notes to the consolidated financial statements.
7
Metropolitan Tower Life Insurance Company and Subsidiaries
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements
1. Business, Basis of Presentation and Summary of Significant Accounting
Policies
Business
Metropolitan Tower Life Insurance Company ("MTL") and its subsidiaries
(collectively, the "Company") is a wholly-owned subsidiary of MetLife, Inc. The
Company is domiciled in the state of Delaware ("Delaware"), and is licensed to
transact insurance business in, and is subject to regulation by all 50 states
and the District of Columbia. The Company is actively selling structured
settlement annuities, as well as term life insurance sold through the Company's
direct to consumer channel. The Company is no longer actively selling
traditional fixed annuities, variable and universal life insurance, and whole
life insurance.
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 on the consolidated financial statements. In applying
these policies and estimates, management makes subjective and complex judgments
that frequently require assumptions 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.
Consolidation
The accompanying consolidated financial statements include the accounts of
MTL and its subsidiaries, including partnerships in which the Company has
control. Intercompany accounts and transactions have been eliminated.
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.
Separate Accounts
Separate accounts are established in conformity with insurance laws.
Generally, the assets of the separate accounts cannot be used to settle the
liabilities that arise from any other business of the Company. Separate
account assets are subject to general account claims only to the extent the
value of such assets exceeds the separate account liabilities. The Company
reports separately, as assets and liabilities, investments held in separate
accounts and liabilities of the separate accounts if:
. such separate accounts are legally recognized;
. assets supporting the contract liabilities are legally insulated from
the Company's general account liabilities;
. investments are directed by the contractholder; and
. all investment performance, net of contract fees and assessments, is
passed through to the contractholder.
The Company reports separate account assets at their fair value, which is
based on the estimated fair values of the underlying assets comprising the
individual separate account portfolios. Investment performance (including
investment income, net investment gains (losses) and changes in unrealized
gains (losses)) and the corresponding amounts credited to contractholders of
such separate accounts are offset within the same line on the statements of
operations.
The Company's revenues reflect fees charged to the separate accounts,
including mortality charges, risk charges, policy administration fees,
investment management fees and surrender charges. Such fees are included in
universal life and investment-type product policy fees on the statements of
operations.
Reclassifications
Certain amounts in the prior years' consolidated financial statements and
related footnotes thereto have been reclassified to conform with the current
year presentation as discussed throughout the Notes to the Consolidated
Financial Statements.
8
Metropolitan Tower Life Insurance Company and Subsidiaries
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements -- (continued)
1. Business, Basis of Presentation and Summary of Significant Accounting
Policies (continued)
Summary of Significant Accounting Policies
The following are the Company's significant accounting policies with
references to notes providing additional information on such policies and
critical accounting estimates relating to such policies.
Accounting Policy Note
-------------------------------------------------------------------------------
Insurance 2
-------------------------------------------------------------------------------
Deferred Policy Acquisition Costs 3
-------------------------------------------------------------------------------
Reinsurance 4
-------------------------------------------------------------------------------
Investments 5
-------------------------------------------------------------------------------
Derivatives 6
-------------------------------------------------------------------------------
Fair Value 7
-------------------------------------------------------------------------------
Income Tax 10
-------------------------------------------------------------------------------
Litigation Contingencies 11
Insurance
Future Policy Benefit Liabilities and Policyholder Account Balances
The Company establishes liabilities for amounts payable under insurance
policies. Generally, amounts are payable over an extended period of time and
related liabilities are calculated as the present value of future expected
benefits to be paid reduced by the present value of future expected
premiums. Such liabilities are established based on methods and underlying
assumptions in accordance with GAAP and applicable actuarial standards.
Principal assumptions used in the establishment of liabilities for future
policy benefits are mortality, morbidity, policy lapse, renewal, investment
returns, inflation, expenses and other contingent events as appropriate to
the respective product type. These assumptions are established at the time
the policy is issued and are intended to estimate the experience for the
period the policy benefits are payable. Utilizing these assumptions,
liabilities are established on a block of business basis. For long-duration
insurance contracts, assumptions such as mortality, morbidity and interest
rates are "locked in" upon the issuance of new business. However,
significant adverse changes in experience on such contracts may require the
establishment of premium deficiency reserves. Such reserves are determined
based on the then current assumptions and do not include a provision for
adverse deviation.
Liabilities for universal life paid-up guarantees are determined by
estimating the expected value of death benefits payable when the account
balance is projected to be zero and recognizing those benefits ratably over
the accumulation period based on total expected assessments. The assumptions
used in estimating the paid-up guarantee liabilities are consistent with
those used for amortizing deferred policy acquisition costs ("DAC"), and are
thus subject to the same variability and risk as further discussed herein.
The benefits used in calculating the liabilities are based on the average
benefits payable over a range of scenarios.
The Company regularly reviews its estimates of liabilities for future
policy benefits and compares them with its actual experience. Differences
result in changes to the liability balances with related charges or credits
to benefit expenses in the period in which the changes occur.
Policyholder account balances relate to contracts or contract features
where the Company has no significant insurance risk.
Other Policy-Related Balances
Other policy-related balances primarily include obligations assumed under
structured settlement assignments as described in Note 2.
9
Metropolitan Tower Life Insurance Company and Subsidiaries
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements -- (continued)
1. Business, Basis of Presentation and Summary of Significant Accounting
Policies (continued)
Recognition of Insurance Revenues and Deposits
Premiums related to traditional life and annuity contracts with life
contingencies are recognized as revenues when due from policyholders.
Policyholder benefits and expenses are provided to recognize profits over
the estimated lives of the insurance policies. When premiums are due over a
significantly shorter period than the period over which benefits are
provided, any excess profit is deferred and recognized into earnings in a
constant relationship to insurance in-force or, for annuities, the amount of
expected future policy benefit payments.
Deposits related to universal life-type and investment-type products are
credited to policyholder account balances. Revenues from such contracts
consist of fees for mortality, policy administration and surrender charges
and are recorded in universal life and investment-type product policy fees
in the period in which services are provided. Amounts that are charged to
earnings include interest credited and benefit claims incurred in excess of
related policyholder account balances.
All revenues and expenses are presented net of reinsurance, as applicable.
Deferred Policy Acquisition Costs
The Company incurs significant costs in connection with acquiring new and
renewal insurance business. Costs that are related directly to the successful
acquisition or renewal of insurance contracts are capitalized as DAC and
reported in other assets on the balance sheet. Such costs include:
. incremental direct costs of contract acquisition, such as commissions;
. the portion of an employee's total compensation and benefits related to
time spent selling, underwriting or processing the issuance of new and
renewal insurance business only with respect to actual policies acquired
or renewed; and
. other essential direct costs that would not have been incurred had a
policy not been acquired or renewed.
All other acquisition-related costs, including those related to general
advertising and solicitation, market research, agent training, product
development, unsuccessful sales and underwriting efforts, as well as all
indirect costs, are expensed as incurred.
DAC is amortized as follows:
Products: In proportion to the following over
estimated lives of the contracts:
-----------------------------------------------------------------------------
. Nonparticipating and Actual and expected future gross
non-dividend-paying traditional premiums.
contracts (primarily term
insurance)
-----------------------------------------------------------------------------
. Fixed and variable universal life Actual and expected future gross
contracts profits.
-----------------------------------------------------------------------------
See Note 3 for additional information on DAC amortization. Amortization of
DAC is included in other expenses.
The recovery of DAC is dependent upon the future profitability of the
related business.
Reinsurance
For each of its reinsurance agreements, the Company determines whether the
agreement provides indemnification against loss or liability relating to
insurance risk in accordance with applicable accounting standards. Cessions
under reinsurance agreements do not discharge the Company's obligations as
the primary insurer. The Company reviews all contractual features, including
those that may limit the amount of insurance risk to which the reinsurer is
subject or features that delay the timely reimbursement of claims.
10
Metropolitan Tower Life Insurance Company and Subsidiaries
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements -- (continued)
1. Business, Basis of Presentation and Summary of Significant Accounting
Policies (continued)
For reinsurance of existing in-force blocks of long-duration contracts
that transfer significant insurance risk, the difference, if any, between the
amounts paid (received), and the liabilities ceded (assumed) related to the
underlying contracts is considered the net cost of reinsurance at the
inception of the reinsurance agreement. The net cost of reinsurance is
recorded as an adjustment to DAC when there is a gain at inception on the
ceding entity and to other liabilities when there is a loss at inception. The
net cost of reinsurance is recognized as a component of other expenses when
there is a gain at inception and as policyholder benefits and claims when
there is a loss and is subsequently amortized on a basis consistent with the
methodology used for amortizing DAC related to the underlying reinsured
contracts. Subsequent amounts paid (received) on the reinsurance of in-force
blocks, as well as amounts paid (received) related to new business, are
recorded as ceded (assumed) premiums; and ceded (assumed) premiums,
reinsurance and other receivables (future policy benefits) are established.
Amounts currently recoverable under reinsurance agreements are included in
premiums, reinsurance and other receivables and amounts currently payable are
included in other liabilities. Assets and liabilities relating to reinsurance
agreements with the same reinsurer may be recorded net on the balance sheet,
if a right of offset exists within the reinsurance agreement. In the event
that reinsurers do not meet their obligations to the Company under the terms
of the reinsurance agreements, reinsurance recoverable balances could become
uncollectible. In such instances, reinsurance recoverable balances are stated
net of allowances for uncollectible reinsurance.
Premiums, fees and policyholder benefits and claims include amounts
assumed under reinsurance agreements and are net of reinsurance ceded.
Amounts received from reinsurers for policy administration are reported in
other revenues.
If the Company determines that a reinsurance agreement does not expose the
reinsurer to a reasonable possibility of a significant loss from insurance
risk, the Company records the agreement using the deposit method of
accounting. Deposits received are included in other liabilities and deposits
made are included within premiums, reinsurance and other receivables. As
amounts are paid or received, consistent with the underlying contracts, the
deposit assets or liabilities are adjusted. Interest on such deposits is
recorded as other revenues or other expenses, as appropriate. Periodically,
the Company evaluates the adequacy of the expected payments or recoveries and
adjusts the deposit asset or liability through other revenues or other
expenses, as appropriate.
Investments
Net Investment Income and Net Investment Gains (Losses)
Income from investments is reported within net investment income, unless
otherwise stated herein. Gains and losses on sales of investments,
impairment losses and changes in valuation allowances are reported within
net investment gains (losses), unless otherwise stated herein.
Fixed Maturity and Equity Securities
The Company's fixed maturity and equity securities are classified as
available-for-sale ("AFS") and are reported at their estimated fair value.
Unrealized investment gains and losses on these securities are recorded as a
separate component of other comprehensive income (loss) ("OCI"), net of
policy-related amounts and deferred income taxes. All security transactions
are recorded on a trade date basis. Investment gains and losses on sales are
determined on a specific identification basis.
Interest income and prepayment fees are recognized when earned. Interest
income is recognized using an effective yield method giving effect to
amortization of premiums and accretion of discounts, and is based on the
estimated economic life of the securities, which for mortgage-backed and
asset-backed securities considers the estimated timing and amount of
prepayments of the underlying loans. See Note 5 "-- Fixed Maturity and
Equity Securities AFS -- Methodology for Amortization of Premium and
Accretion of Discount on Structured Securities." The amortization of premium
and accretion of discount of fixed maturity securities also takes into
consideration call and maturity dates. Dividends on equity securities are
recognized when declared.
The Company periodically evaluates fixed maturity and equity securities
for impairment. The assessment of whether impairments have occurred is based
on management's case-by-case evaluation of the underlying reasons for the
decline in estimated fair value, as well as an analysis of the gross
unrealized losses by severity and/or age as described in Note 5 "-- Fixed
Maturity and Equity Securities AFS -- Evaluation of AFS Securities for OTTI
and Evaluating Temporarily Impaired AFS Securities."
11
Metropolitan Tower Life Insurance Company and Subsidiaries
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements -- (continued)
1. Business, Basis of Presentation and Summary of Significant Accounting
Policies (continued)
For fixed maturity securities in an unrealized loss position, an
other-than-temporary impairment ("OTTI") is recognized in earnings when it
is anticipated that the amortized cost will not be recovered. When either:
(i) the Company has the intent to sell the security; or (ii) it is more
likely than not that the Company will be required to sell the security
before recovery, the OTTI recognized in earnings is the entire difference
between the security's amortized cost and estimated fair value. If neither
of these conditions exists, the difference between the amortized cost of the
security and the present value of projected future cash flows expected to be
collected is recognized as an OTTI in earnings ("credit loss"). If the
estimated fair value is less than the present value of projected future cash
flows expected to be collected, this portion of OTTI related to
other-than-credit factors ("noncredit loss") is recorded in OCI.
With respect to equity securities, the Company considers in its OTTI
analysis its intent and ability to hold a particular equity security for a
period of time sufficient to allow for the recovery of its estimated fair
value to an amount equal to or greater than cost. If a sale decision is made
for an equity security and recovery to an amount at least equal to cost
prior to the sale is not expected, the security will be deemed to be
other-than-temporarily impaired in the period that the sale decision was
made and an OTTI loss will be recorded in earnings. The OTTI loss recognized
is the entire difference between the security's cost and its estimated fair
value.
Mortgage Loans
The Company disaggregates its mortgage loan investments into two
portfolio segments: commercial and agricultural. The accounting policies
that are applicable to all portfolio segments are presented below and the
accounting policies related to each of the portfolio segments are included
in Note 5.
Mortgage loans are stated at unpaid principal balance, adjusted for any
unamortized premium or discount, deferred fees or expenses, and are net of
valuation allowances. Interest income and prepayment fees are recognized
when earned. Interest income is recognized using an effective yield method
giving effect to amortization of premiums and accretion of discounts.
Policy Loans
Policy loans are stated at unpaid principal balances. Interest income is
recorded as earned using the contractual interest rate. Generally, accrued
interest is capitalized on the policy's anniversary date. Valuation
allowances are not established for policy loans, as they are fully
collateralized by the cash surrender value of the underlying insurance
policies. Any unpaid principal and accrued interest is deducted from the
cash surrender value or the death benefit prior to settlement of the
insurance policy.
Real Estate
Real estate held-for-investment is stated at cost less accumulated
depreciation. Depreciation is recorded on a straight-line basis over the
estimated useful life of the asset (typically 20 to 55 years). Rental income
is recognized on a straight-line basis over the term of the respective
leases. The Company periodically reviews its real estate held-for-investment
for impairment and tests for recoverability whenever events or changes in
circumstances indicate the carrying value may not be recoverable and exceeds
its estimated fair value. Properties whose carrying values are greater than
their undiscounted cash flows are written down to their estimated fair
value, which is generally computed using the present value of expected
future cash flows discounted at a rate commensurate with the underlying
risks.
Real estate for which the Company commits to a plan to sell within one
year and actively markets in its current condition for a reasonable price in
comparison to its estimated fair value is classified as held-for-sale. Real
estate held-for-sale is stated at the lower of depreciated cost or estimated
fair value less expected disposition costs and is not depreciated.
Real Estate Joint Ventures
The Company uses the equity method of accounting for equity securities
when it has significant influence or at least 20% interest and for real
estate joint ventures ("investees") when it has more than a minor ownership
interest or more than a minor influence over the investee's operations. The
Company generally recognizes its share of the investee's earnings on a
three-month lag in instances where the investee's financial information is
not sufficiently timely or when the investee's reporting period differs from
the Company's reporting period.
12
Metropolitan Tower Life Insurance Company and Subsidiaries
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements -- (continued)
1. Business, Basis of Presentation and Summary of Significant Accounting
Policies (continued)
The Company uses the cost method of accounting for investments in which
it has virtually no influence over the investee's operations. The Company
recognizes distributions on cost method investments when such distributions
become payable or received. Because of the nature and structure of these
cost method investments, they do not meet the characteristics of an equity
security in accordance with applicable accounting standards.
The Company routinely evaluates its equity method and cost method
investments for impairment. For equity method investees, the Company
considers financial and other information provided by the investee, other
known information and inherent risks in the underlying investments, as well
as future capital commitments, in determining whether an impairment has
occurred. The Company considers its cost method investments for impairment
when the carrying value of such investments exceeds the net asset value
("NAV"). The Company takes into consideration the severity and duration of
this excess when determining whether the cost method investment is impaired.
Short-term Investments
Short-term investments include securities and other investments with
remaining maturities of one year or less, but greater than three months, at
the time of purchase and are stated at estimated fair value or amortized
cost, which approximates estimated fair value. Short-term investments also
include investments in affiliated money market pools.
Annuities Funding Structured Settlement Claims
Annuities funding structured settlement claims represent annuities
funding claims assumed by the Company in its capacity as a structured
settlements assignment company. The annuities are stated at their contract
value, which represents the present value of the future periodic claim
payments to be provided. The net investment income recognized reflects the
amortization of discount of the annuity at its implied effective interest
rate. See Note 2.
Other Invested Assets
Other invested assets consist principally of the following:
. Leveraged leases which are recorded net of non-recourse debt. Income is
recognized by applying the leveraged lease's estimated rate of return to
the net investment in the lease. Leveraged leases derive investment
returns in part from their income tax treatment. The Company regularly
reviews residual values for impairment.
. Freestanding derivatives with positive estimated fair values which are
described in "-- Derivatives" below.
Securities Lending Program
Securities lending transactions, whereby blocks of securities are loaned
to third parties, primarily brokerage firms and commercial banks, are
treated as financing arrangements and the associated liability is recorded
at the amount of cash received. The Company obtains collateral at the
inception of the loan, usually cash, in an amount generally equal to 102% of
the estimated fair value of the securities loaned, and maintains it at a
level greater than or equal to 100% for the duration of the loan. Securities
loaned under such transactions may be sold or re-pledged by the transferee.
The Company is liable to return to the counterparties the cash collateral
received. Security collateral on deposit from counterparties in connection
with securities lending transactions may not be sold or re-pledged, unless
the counterparty is in default, and is not reflected on the Company's
financial statements. The Company monitors the estimated fair value of the
securities loaned on a daily basis and additional collateral is obtained as
necessary throughout the duration of the loan. Income and expenses
associated with securities lending transactions are reported as investment
income and investment expense, respectively, within net investment income.
Derivatives
Freestanding Derivatives
Freestanding derivatives are carried on the Company's balance sheet
either as assets within other invested assets or as liabilities within other
liabilities at estimated fair value. The Company does not offset the
estimated fair value amounts recognized for derivatives executed with the
same counterparty under the same master netting agreement.
Accruals on derivatives are generally recorded in accrued investment
income or within other liabilities. However, accruals that are not scheduled
to settle within one year are included with the derivative's carrying value
in other invested assets or other liabilities.
13
Metropolitan Tower Life Insurance Company and Subsidiaries
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements -- (continued)
1. Business, Basis of Presentation and Summary of Significant Accounting
Policies (continued)
If a derivative is not designated as an accounting hedge or its use in
managing risk does not qualify for hedge accounting, changes in the
estimated fair value of the derivative are reported in net derivative gains
(losses).
Hedge Accounting
To qualify for hedge accounting, at the inception of the hedging
relationship, the Company formally documents its risk management objective
and strategy for undertaking the hedging transaction, as well as its
designation of the hedge. Hedge designation and financial statement
presentation of changes in estimated fair value of the hedging derivatives
are as follows:
. Fair value hedge (a hedge of the estimated fair value of a recognized
asset or liability) - in net derivative gains (losses), consistent with
the change in estimated fair value of the hedged item attributable to the
designated risk being hedged.
. Cash flow hedge (a hedge of a forecasted transaction or of the
variability of cash flows to be received or paid related to a recognized
asset or liability) - effectiveness in OCI (deferred gains or losses on
the derivative are reclassified into the statement of operations when the
Company's earnings are affected by the variability in cash flows of the
hedged item); ineffectiveness in net derivative gains (losses).
The changes in estimated fair values of the hedging derivatives are
exclusive of any accruals that are separately reported on the statement of
operations within interest income or interest expense to match the location
of the hedged item.
In its hedge documentation, the Company sets forth how the hedging
instrument is expected to hedge the designated risks related to the hedged
item and sets forth the method that will be used to retrospectively and
prospectively assess the hedging instrument's effectiveness and the method
that will be used to measure ineffectiveness. A derivative designated as a
hedging instrument must be assessed as being highly effective in offsetting
the designated risk of the hedged item. Hedge effectiveness is formally
assessed at inception and at least quarterly throughout the life of the
designated hedging relationship. Assessments of hedge effectiveness and
measurements of ineffectiveness are also subject to interpretation and
estimation and different interpretations or estimates may have a material
effect on the amount reported in net income.
The Company discontinues hedge accounting prospectively when: (i) it is
determined that the derivative is no longer highly effective in offsetting
changes in the estimated fair value or cash flows of a hedged item; (ii) the
derivative expires, is sold, terminated, or exercised; (iii) it is no longer
probable that the hedged forecasted transaction will occur; or (iv) the
derivative is de-designated as a hedging instrument.
When hedge accounting is discontinued because it is determined that the
derivative is not highly effective in offsetting changes in the estimated
fair value or cash flows of a hedged item, the derivative continues to be
carried on the balance sheet at its estimated fair value, with changes in
estimated fair value recognized in net derivative gains (losses). The
carrying value of the hedged recognized asset or liability under a fair
value hedge is no longer adjusted for changes in its estimated fair value
due to the hedged risk, and the cumulative adjustment to its carrying value
is amortized into income over the remaining life of the hedged item.
Provided the hedged forecasted transaction is still probable of occurrence,
the changes in estimated fair value of derivatives recorded in OCI related
to discontinued cash flow hedges are released into the statement of
operations when the Company's earnings are affected by the variability in
cash flows of the hedged item.
When hedge accounting is discontinued because it is no longer probable
that the forecasted transactions will occur on the anticipated date or
within two months of that date, the derivative continues to be carried on
the balance sheet at its estimated fair value, with changes in estimated
fair value recognized currently in net derivative gains (losses). Deferred
gains and losses of a derivative recorded in OCI pursuant to the
discontinued cash flow hedge of a forecasted transaction that is no longer
probable are recognized immediately in net derivative gains (losses).
In all other situations in which hedge accounting is discontinued, the
derivative is carried at its estimated fair value on the balance sheet, with
changes in its estimated fair value recognized in the current period as net
derivative gains (losses).
Fair Value
Fair value is defined as the price that would be received to sell an asset
or paid to transfer a liability (an exit price) in the principal or most
advantageous market for the asset or liability in an orderly transaction
between market participants on the measurement date. In most cases, the exit
price and the transaction (or entry) price will be the same at initial
recognition.
14
Metropolitan Tower Life Insurance Company and Subsidiaries
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements -- (continued)
1. Business, Basis of Presentation and Summary of Significant Accounting
Policies (continued)
Subsequent to initial recognition, fair values are based on unadjusted
quoted prices for identical assets or liabilities in active markets that are
readily and regularly obtainable. When such quoted prices are not available,
fair values are based on quoted prices in markets that are not active, quoted
prices for similar but not identical assets or liabilities, or other
observable inputs. If these inputs are not available, or observable inputs are
not determinable, unobservable inputs and/or adjustments to observable inputs
requiring management's judgment are used to determine the estimated fair value
of assets and liabilities.
Income Tax
Metropolitan Tower Life Insurance Company and its includable subsidiaries
join with MetLife, Inc. and its includable subsidiaries in filing a
consolidated U.S. life insurance and non-life insurance federal income tax
return in accordance with the provisions of the Internal Revenue Code of 1986,
as amended. Current taxes (and the benefits of tax attributes such as losses)
are allocated to Metropolitan Tower Life Insurance Company and its subsidiaries
under the consolidated tax return regulations and a tax sharing agreement.
Under the consolidated tax return regulations, MetLife, Inc. has elected the
"percentage method" (and 100% under such method) of reimbursing companies for
tax attributes, e.g., net operating losses. As a result, 100% of tax attributes
are reimbursed by MetLife, Inc. to the extent that consolidated federal income
tax of the consolidated federal tax return group is reduced in a year by tax
attributes. On an annual basis, each of the profitable subsidiaries pays to
MetLife, Inc. the federal income tax which it would have paid based upon that
year's taxable income. If Metropolitan Tower Life Insurance Company or its
includable subsidiaries has current or prior deductions and credits (including
but not limited to losses) which reduce the consolidated tax liability of the
consolidated federal tax return group, the deductions and credits are
characterized as realized (or realizable) by Metropolitan Tower Life Insurance
Company and its includable subsidiaries when those tax attributes are realized
(or realizable) by the consolidated federal tax return group, even if
Metropolitan Tower Life Insurance Company or its includable subsidiaries would
not have realized the attributes on a stand-alone basis under a "wait and see"
method.
The Company's accounting for income taxes represents management's best
estimate of various events and transactions.
Deferred tax assets and liabilities resulting from temporary differences
between the financial reporting and tax bases of assets and liabilities are
measured at the balance sheet date using enacted tax rates expected to apply
to taxable income in the years the temporary differences are expected to
reverse.
The realization of deferred tax assets depends upon the existence of
sufficient taxable income within the carryback or carryforward periods under
the tax law in the applicable tax jurisdiction. Valuation allowances are
established against deferred tax assets when management determines, based on
available information, that it is more likely than not that deferred income
tax assets will not be realized. Significant judgment is required in
determining whether valuation allowances should be established, as well as the
amount of such allowances. When making such determination the Company
considers many factors, including:
. the nature, frequency, and amount of cumulative financial reporting
income and losses in recent years;
. the jurisdiction in which the deferred tax asset was generated;
. the length of time that carryforward can be utilized in the various
taxing jurisdictions;
. future taxable income exclusive of reversing temporary differences and
carryforwards;
. future reversals of existing taxable temporary differences;
. taxable income in prior carryback years; and
. tax planning strategies.
The Company may be required to change its provision for income taxes when
estimates used in determining valuation allowances on deferred tax assets
significantly change or when receipt of new information indicates the need for
adjustment in valuation allowances. Additionally, the effect of changes in tax
laws, tax regulations, or interpretations of such laws or regulations, is
recognized in net income tax expense (benefit) in the period of change.
The Company determines whether it is more likely than not that a tax
position will be sustained upon examination by the appropriate taxing
authorities before any part of the benefit can be recorded on the financial
statements. A tax position is measured at the largest amount of benefit that
is greater than 50% likely of being realized upon settlement. Unrecognized tax
benefits due to tax uncertainties that do not meet the threshold are included
within other liabilities and are charged to earnings in the period that such
determination is made.
15
Metropolitan Tower Life Insurance Company and Subsidiaries
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements -- (continued)
1. Business, Basis of Presentation and Summary of Significant Accounting
Policies (continued)
The Company classifies interest recognized as interest expense and
penalties recognized as a component of income tax expense.
On December 22, 2017, President Trump signed into law H.R.1, commonly
referred to as the Tax Cuts and Jobs Act of 2017 ("U.S. Tax Reform"). See Note
10 for additional information on U.S. Tax Reform and related Staff Accounting
Bulletin ("SAB") 118 provisional amounts.
Litigation Contingencies
The Company is a party to a number of legal actions and is involved in a
number of regulatory investigations. Given the inherent unpredictability of
these matters, it is difficult to estimate the impact on the Company's
financial position. Liabilities are established when it is probable that a
loss has been incurred and the amount of the loss can be reasonably estimated.
Legal costs are recognized as incurred. On an annual basis, the Company
reviews relevant information with respect to liabilities for litigation,
regulatory investigations and litigation-related contingencies to be reflected
on the Company's financial statements.
Other Accounting Policies
Cash and Cash Equivalents
The Company considers all highly liquid securities and other investments
purchased with an original or remaining maturity of three months or less at
the date of purchase to be cash equivalents. Cash equivalents are stated at
amortized cost, which approximates estimated fair value.
Property and Equipment
Property and equipment, which is included in other assets, is stated at
cost less accumulated depreciation. Depreciation is determined using the
straight-line method over the estimated useful lives of the assets, as
appropriate. The estimated life is generally 40 years for company occupied
real estate property and from three to seven years for property and
equipment. The cost basis was $37 million and $36 million at December 31,
2017 and 2016, respectively. Accumulated depreciation was $15 million and
$16 million at December 31, 2017 and 2016, respectively. Related
depreciation expense was $3 million, $3 million and $2 million for the years
ended December 31, 2017, 2016 and 2015, respectively. During the year ended
December 31, 2015, an impairment of $21 million was recognized on company
owned property. As of December 31, 2017, total minimum rental payments to be
received in the future under non-cancelable leases was $6 million,
$7 million, $7 million, $7 million, $1 million and $3 million for the years
ended December 31, 2018, 2019, 2020, 2021, 2022 and years thereafter,
respectively. See Note 12 for information on rental revenues related to a
lease agreement with an affiliate.
Other Revenues
Other revenues include fees on reinsurance financing agreements, as well
as, rental income with affiliates. Such fees are recognized in the period in
which services are performed.
Employee Benefit Plans
Pension, postretirement and postemployment benefits are provided to
associates under plans sponsored and administered by Metropolitan Life
Insurance Company ("MLIC"), an affiliate of the Company. The Company's
obligation and expense related to these benefits is limited to the amount of
associated expense allocated from MLIC.
Foreign Currency
Gains and losses from foreign currency transactions, including the effect
of re-measurement of monetary assets and liabilities to the appropriate
functional currency, are reported as part of net investment gains (losses)
in the period in which they occur.
Adoption of New Accounting Pronouncements
Effective January 1, 2017, the Company early adopted guidance relating to
business combinations. The new guidance clarifies the definition of a business
and requires that an entity apply certain criteria in order to determine when a
set of assets and activities qualifies as a business. The adoption of this
standard will result in fewer acquisitions qualifying as businesses and,
accordingly, acquisition costs for those acquisitions that do not qualify as
businesses will be capitalized rather than expensed. The adoption did not have
a material impact on the Company's consolidated financial statements.
16
Metropolitan Tower Life Insurance Company and Subsidiaries
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements -- (continued)
1. Business, Basis of Presentation and Summary of Significant Accounting
Policies (continued)
Effective January 1, 2017, the Company retrospectively adopted guidance
relating to consolidation. The new guidance does not change the characteristics
of a primary beneficiary under current GAAP. It changes how a reporting entity
evaluates whether it is the primary beneficiary of a variable interest entity
("VIE") by changing how a reporting entity that is a single decisionmaker of a
VIE handles indirect interests in the entity held through related parties that
are under common control with the reporting entity. The adoption did not have a
material impact on the Company's consolidated financial statements.
Effective January 1, 2016, the Company retrospectively adopted guidance
relating to short-duration contracts. The new guidance requires insurance
entities to provide users of financial statements with more transparent
information about initial claim estimates and subsequent adjustments to these
estimates, including information on: (i) reconciling from the claim development
table to the balance sheet liability, (ii) methodologies and judgments in
estimating claims, and (iii) the timing, and frequency of claims. The adoption
did not have an impact on the Company's consolidated financial statements other
than expanded disclosures in Note 2.
Effective January 1, 2016, the Company retrospectively adopted new guidance
relating to the consolidation of certain entities. The objective of the new
standard is to improve targeted areas of the consolidation guidance and to
reduce the number of consolidation models. The new consolidation standard
provides guidance on how a reporting entity (i) evaluates whether the entity
should consolidate limited partnerships and similar entities, (ii) assesses
whether the fees paid to a decisionmaker or service provider are variable
interests in a VIE, and (iii) assesses the variable interests in a VIE held by
related parties of the reporting entity. The new guidance also eliminates the
VIE consolidation model based on majority exposure to variability that applied
to certain investment companies and similar entities. The adoption of the new
guidance did not impact which entities are consolidated by the Company. The
consolidated VIE assets and liabilities and unconsolidated VIE carrying amounts
and maximum exposure to loss as of December 31, 2016, disclosed in Note 5,
reflect the application of the new guidance.
Future Adoption of New Accounting Pronouncements
In February 2018, the Financial Accounting Standards Board ("FASB") issued
new guidance on reporting comprehensive income (Accounting Standards Update
("ASU") 2018-02, Income Statement-Reporting Comprehensive Income (Topic 220):
Reclassification of Certain Tax Effects from AOCI). The new guidance is
effective for fiscal years beginning after December 15, 2018 and interim
periods within those fiscal years and should be applied either in the period of
adoption or retrospectively to each period (or periods) in which the effect of
the change in the U.S. federal corporate income tax rate or law in U.S. Tax
Reform is recognized. Early adoption is permitted. Current GAAP guidance
requires that the effect of a change in tax laws or rates on deferred tax
liabilities or assets to be included in income from continuing operations in
the reporting period that includes the enactment date, even if the related
income tax effects were originally charged or credited directly to accumulated
OCI ("AOCI"). The new guidance allows a reclassification of AOCI to retained
earnings for stranded tax effects resulting from U.S. Tax Reform. Also, the new
guidance requires certain disclosures about stranded tax effects. The Company
will early adopt the new guidance in the first quarter of 2018. The Company
expects the impact of the new guidance at adoption will be a decrease to
retained earnings as of January 1, 2018 of $32 million with a corresponding
increase to AOCI.
In August 2017, the FASB issued new guidance on hedging activities
(ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to
Accounting for Hedging Activities). The new guidance is effective for fiscal
years beginning after December 15, 2018 and interim periods within those fiscal
years and should be applied on a modified retrospective basis through a
cumulative-effect adjustment to retained earnings. Early adoption is permitted.
The new guidance simplifies the application of hedge accounting in certain
situations and amends the hedge accounting model to enable entities to better
portray the economics of their risk management activities in the financial
statements. The Company is currently evaluating the impact of the new guidance
on its consolidated financial statements.
In March 2017, the FASB issued new guidance on purchased callable debt
securities (ASU 2017-08, Receivables-Nonrefundable Fees and Other Costs
(Subtopic 310-20), Premium Amortization on Purchased Callable Debt
Securities). The new guidance is effective for fiscal years beginning after
December 15, 2018 and interim periods within those fiscal years and should be
applied on a modified retrospective basis through a cumulative-effect
adjustment to retained earnings. Early adoption is permitted. The ASU shortens
the amortization period for certain callable debt securities held at a premium
and requires the premium to be amortized to the earliest call date. However,
the new guidance does not require an accounting change for securities held at a
discount whose discount continues to be amortized to maturity. The Company is
currently evaluating the impact of the new guidance on its consolidated
financial statements.
17
Metropolitan Tower Life Insurance Company and Subsidiaries
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements -- (continued)
1. Business, Basis of Presentation and Summary of Significant Accounting
Policies (continued)
In February 2017, the FASB issued new guidance on derecognition of
nonfinancial assets (ASU 2017-05, Other Income-Gains and Losses from the
Derecognition of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of
Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial
Assets). The new guidance is effective for fiscal years beginning after
December 15, 2017 and interim periods within those fiscal years. Early adoption
is permitted for interim or annual reporting periods beginning after
December 15, 2016. The guidance may be applied retrospectively for all periods
presented or retrospectively with a cumulative-effect adjustment to retained
earnings at the date of adoption. The new guidance clarifies the scope and
accounting of a financial asset that meets the definition of an "in-substance
nonfinancial asset" and defines the term, "in-substance nonfinancial asset."
The ASU also adds guidance for partial sales of nonfinancial assets. The
adoption of the new guidance will not have a material impact on the Company's
consolidated financial statements.
In November 2016, the FASB issued new guidance on restricted cash
(ASU 2016-18, Statement of Cash Flows (Topic 230): A consensus of the FASB
Emerging Issues Task Force). The new guidance is effective for fiscal years
beginning after December 15, 2017 and interim periods within those fiscal
years, and should be applied on a retrospective basis. Early adoption is
permitted. The new guidance requires that a statement of cash flows explain the
change during the period in the total of cash, cash equivalents, and amounts
generally described as restricted cash or restricted cash equivalents. As a
result, the new guidance requires that amounts generally described as
restricted cash and restricted cash equivalents should be included with cash
and cash equivalents when reconciling the beginning-of-period and end-of-period
total amounts shown on the statement of cash flows. The new guidance does not
provide a definition of restricted cash or restricted cash equivalents. The
adoption of the new guidance will not have a material impact on the Company's
consolidated financial statements.
In October 2016, the FASB issued new guidance on tax accounting for
intra-entity transfers of assets (ASU 2016-16, Income Taxes (Topic 740):
Intra-Entity Transfers of Assets Other Than Inventory). The new guidance is
effective for fiscal years beginning after December 15, 2017 and interim
periods within those fiscal years, and should be applied on a modified
retrospective basis. The Company will apply the guidance as of January 1, 2018.
Current guidance prohibits the recognition of current and deferred income taxes
for an intra-entity asset transfer until the asset has been sold to an outside
party. The new guidance requires an entity to recognize the income tax
consequences of an intra-entity transfer of an asset other than inventory when
the transfer occurs. Based on the Company's assessment of the intra-entity
asset transfers and related deferred income taxes that are in scope, the
Company expects the adoption of the new guidance will not have a material
impact on the Company's consolidated financial statements.
In August 2016, the FASB issued new guidance on cash flow statement
presentation (ASU 2016-15, Statement of Cash Flows (Topic 230): Classification
of Certain Cash Receipts and Cash Payments). The new guidance is effective for
fiscal years beginning after December 15, 2017 and interim periods within those
fiscal years, and should be applied retrospectively to all periods presented.
Early adoption is permitted in any interim or annual period. The new guidance
addresses diversity in how certain cash receipts and cash payments are
presented and classified in the statement of cash flows. The adoption of the
new guidance will not have a material impact on the Company's consolidated
financial statements.
In June 2016, the FASB issued new guidance on measurement of credit losses
on financial instruments (ASU 2016-13, Financial Instruments - Credit Losses
(Topic 326): Measurement of Credit Losses on Financial Instruments). The new
guidance is effective for fiscal years beginning after December 15, 2019,
including interim periods within those fiscal years. Early adoption is
permitted for fiscal years, and interim periods within those fiscal years,
beginning after December 15, 2018. This ASU replaces the incurred loss
impairment methodology with one that reflects expected credit losses. The
measurement of expected credit losses should be based on historical loss
information, current conditions, and reasonable and supportable forecasts. The
new guidance requires that an OTTI on a debt security will be recognized as an
allowance going forward, such that improvements in expected future cash flows
after an impairment will no longer be reflected as a prospective yield
adjustment through net investment income, but rather a reversal of the previous
impairment and recognized through realized investment gains and losses. The
guidance also requires enhanced disclosures. The Company has assessed the asset
classes impacted by the new guidance and is currently assessing the accounting
and reporting system changes that will be required to comply with the new
guidance. The Company believes that the most significant impact upon adoption
will be to its mortgage loan investments. The Company is continuing to evaluate
the overall impact of the new guidance on its consolidated financial statements.
18
Metropolitan Tower Life Insurance Company and Subsidiaries
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements -- (continued)
1. Business, Basis of Presentation and Summary of Significant Accounting
Policies (continued)
In February 2016, the FASB issued new guidance on leasing transactions
(ASU 2016-02, Leases - Topic 842). The new guidance is effective for the fiscal
years beginning after December 15, 2018, including interim periods within those
fiscal years, and requires a modified retrospective transition approach. Early
adoption is permitted. The new guidance requires a lessee to recognize assets
and liabilities for leases with lease terms of more than 12 months. Leases
would be classified as finance or operating leases and both types of leases
will be recognized on the balance sheet. Lessor accounting will remain largely
unchanged from current guidance except for certain targeted changes. The new
guidance will also require new qualitative and quantitative disclosures. The
Company's implementation efforts are primarily focused on the review of its
existing lease contracts, identification of other contracts that may fall under
the scope of the new guidance, and performing a gap analysis on the current
state of lease-related activities compared with the future state of
lease-related activities. The Company is currently evaluating the overall
impact of the new guidance on its consolidated financial statements.
In January 2016, the FASB issued new guidance (ASU 2016-01, Financial
Instruments-Overall: Recognition and Measurement of Financial Assets and
Financial Liabilities, as amended by ASU 2018-03, Financial
Instruments-Overall: Technical Corrections and Improvements, issued in February
2018) on the recognition and measurement of financial instruments. The new
guidance is effective for fiscal years beginning after December 15, 2017,
including interim periods within those fiscal years. Early adoption is
permitted for the instrument-specific credit risk provision. The new guidance
changes the current accounting guidance related to (i) the classification and
measurement of certain equity investments, (ii) the presentation of changes in
the fair value of financial liabilities measured under the fair value option
("FVO") that are due to instrument-specific credit risk, and (iii) certain
disclosures associated with the fair value of financial instruments.
Additionally, there will no longer be a requirement to assess equity securities
for impairment since such securities will be measured at fair value through net
income. The adoption of the new guidance will not have a material impact on the
Company's consolidated financial statements.
In May 2014, the FASB issued a comprehensive new revenue recognition
standard (ASU 2014-09, Revenue from Contracts with Customers - Topic 606),
effective for fiscal years beginning after December 15, 2017 and interim
periods within those fiscal years. The Company will apply the guidance
retrospectively with a cumulative-effect adjustment as of January 1, 2018. The
new guidance supersedes nearly all existing revenue recognition guidance under
U.S. GAAP. However, it does not impact the accounting for insurance and
investment contracts within the scope of Accounting Standards Codification
(ASC) Topic 944, Financial Services - Insurance, leases, financial instruments
and certain guarantees. For those contracts that are impacted, the new guidance
requires an entity to recognize revenue upon the transfer of promised goods or
services to customers in an amount that reflects the consideration to which the
entity expects to be entitled, in exchange for those goods or services. The
Company did not identify any material revenue streams within the scope of the
guidance. The modified retrospective adoption as of January 1, 2018, did not
have a material impact on the Company's consolidated financial position and the
Company has not identified any material prospective changes in the recognition
and measurement of other revenue.
2. Insurance
Insurance Liabilities
Future policy benefits are measured as follows:
-----------------------------------------------------------------------------
Product Type: Measurement Assumptions:
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
Nonparticipating life Aggregate of the present value of
future expected benefit payments and
related expenses less the present
value of future expected net
premiums. Assumptions as to mortality
and persistency are based upon the
Company's experience when the basis
of the liability is established.
Interest rate assumptions for the
aggregate future policy benefit
liabilities range from 3% to 8%.
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
Traditional fixed annuities after Present value of future expected
annuitization payments. Interest rate assumptions
used in establishing such liabilities
range from 3% to 8%.
-----------------------------------------------------------------------------
Policyholder account balances are equal to: (i) policy account values, which
consist of an accumulation of gross premium payments; and (ii) credited
interest, ranging from 1% to 7%, less expenses, mortality charges and
withdrawals.
19
Metropolitan Tower Life Insurance Company and Subsidiaries
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements -- (continued)
2. Insurance (continued)
Guarantees
The Company previously issued universal life contracts where the Company
contractually guarantees to the contractholder a guaranteed paid-up benefit.
Information regarding the liabilities for guarantees (excluding base policy
liabilities) relating to universal life contracts was as follows:
Universal Life
Contracts
------------------
Paid-Up Guarantees
------------------
(In millions)
Direct:
Balance at January 1, 2015.................................. $ 206
Incurred guaranteed benefits................................ 9
Paid guaranteed benefits.................................... --
--------
Balance at December 31, 2015................................ 215
Incurred guaranteed benefits................................ 14
Paid guaranteed benefits.................................... --
--------
Balance at December 31, 2016................................ 229
Incurred guaranteed benefits................................ 10
Paid guaranteed benefits.................................... --
--------
Balance at December 31, 2017................................ $ 239
========
Ceded:
Balance at January 1, 2015.................................. $ 146
Incurred guaranteed benefits................................ 6
Paid guaranteed benefits.................................... --
--------
Balance at December 31, 2015................................ 152
Incurred guaranteed benefits................................ 9
Paid guaranteed benefits.................................... --
--------
Balance at December 31, 2016................................ 161
Incurred guaranteed benefits................................ 6
Paid guaranteed benefits.................................... --
--------
Balance at December 31, 2017................................ $ 167
========
Net:
Balance at January 1, 2015.................................. $ 60
Incurred guaranteed benefits................................ 3
Paid guaranteed benefits.................................... --
--------
Balance at December 31, 2015................................ 63
Incurred guaranteed benefits................................ 5
Paid guaranteed benefits.................................... --
--------
Balance at December 31, 2016................................ 68
Incurred guaranteed benefits................................ 4
Paid guaranteed benefits.................................... --
--------
Balance at December 31, 2017................................ $ 72
========
20
Metropolitan Tower Life Insurance Company and Subsidiaries
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements -- (continued)
2. Insurance (continued)
Information regarding the Company's guarantee exposure, which includes
direct business, but excludes offsets from hedging or reinsurance, if any, was
as follows at:
December 31,
----------------------
2017 2016
---------- -----------
Paid-Up Guarantees
----------------------
(In millions)
Total account value (1)........................... $ 2,230 $ 2,323
Net amount at risk (2)............................ $ 9,902 $ 10,622
Average attained age of policyholders............. 64 years 63 years
--------
(1)Includes the contractholder's investments in the general account.
(2)Defined as the guarantee amount less the account value, as of the balance
sheet date. It represents the amount of the claim that the Company would
incur if death claims were filed on all contracts on the balance sheet date.
Obligations Assumed Under Structured Settlement Assignments
The Company assumed structured settlement claim obligations when operating
solely as an assignment company. These liabilities are measured at the present
value of the periodic claims to be provided and reported as other
policy-related balances. The Company received a fee for assuming these claim
obligations and, as the assignee of the claim, is legally obligated to ensure
periodic payments are made to the claimant. The Company purchased annuities
from an affiliate to fund these periodic payment claim obligations and
designated payments to be made directly to the claimant by the affiliated
annuity writer. These annuities funding the assigned structured settlement
claims are recorded as an investment. See Note 1.
See Note 5 for additional information on obligations assumed under
structured settlement assignments.
Obligations Under Funding Agreements
MTL is a member of the Federal Home Loan Bank ("FHLB") of Pittsburgh.
Holdings of common stock of the FHLB of Pittsburgh, included in equity
securities, were $11 million at both December 31, 2017 and 2016.
The Company has also entered into funding agreements with the FHLB of
Pittsburgh. The liability for such funding agreements is included in
policyholder account balances. Information related to such funding agreements
was as follows at:
Liability Collateral (2)
------------------- -------------------
December 31,
---------------------------------------
2017 2016 2017 2016
--------- --------- --------- ---------
(In millions)
FHLB of Pittsburgh (1)........ $ 250 $ 250 $ 311 $ 383
--------
(1)Represents funding agreements issued to the FHLB of Pittsburgh in exchange
for cash and for which the FHLB of Pittsburgh has been granted a lien on
certain assets, some of which are in the custody of the FHLB of Pittsburgh,
including residential mortgage-backed securities ("RMBS"), to collateralize
obligations under advances evidenced by funding agreements. The Company is
permitted to withdraw any portion of the collateral in the custody of the
FHLB of Pittsburgh as long as there is no event of default and the remaining
qualified collateral is sufficient to satisfy the collateral maintenance
level. Upon any event of default by the Company, the FHLB of Pittsburgh's
recovery on the collateral is limited to the amount of the Company's
liability to the FHLB of Pittsburgh.
(2)Advances are collateralized by mortgage-backed securities. The amount of
collateral presented is at estimated fair value.
Separate Accounts
Separate account assets and liabilities consist of pass-through separate
accounts totaling $123 million and $112 million at December 31, 2017 and 2016,
respectively, for which the policyholder assumes all investment risk.
21
Metropolitan Tower Life Insurance Company and Subsidiaries
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements -- (continued)
2. Insurance (continued)
For the years ended December 31, 2017, 2016, and 2015, there were no
investment gains (losses) on transfers of assets from the general account to
the separate accounts.
Liabilities for Unpaid Claims and Claim Expenses
Information regarding the liabilities for unpaid claims and claim
adjustment expenses was as follows:
Years Ended December 31,
----------------------------
2017 2016 2015
-------- -------- --------
(In millions)
Balance at January 1,........................ $ 38 $ 31 $ 31
Less: Reinsurance recoverables............ 13 15 14
-------- -------- --------
Net balance at January 1,.................... 25 16 17
-------- -------- --------
Incurred related to:
Current year.............................. 59 67 46
Prior years (1)........................... 5 6 5
-------- -------- --------
Total incurred........................ 64 73 51
-------- -------- --------
Paid related to:
Current year.............................. (59) (59) (47)
Prior years............................... (5) (5) (5)
-------- -------- --------
Total paid............................ (64) (64) (52)
-------- -------- --------
Net balance at December 31,.................. 25 25 16
Add: Reinsurance recoverables............. 15 13 15
-------- -------- --------
Balance at December 31(included in other
policy-related balances),.................. $ 40 $ 38 $ 31
======== ======== ========
--------
(1)During 2017, 2016 and 2015, as a result of changes in estimates of insured
events in the respective prior year, claims and claim adjustment expenses
associated with prior years increased due to events that occurred in prior
years, but reported during the current year.
3. Deferred Policy Acquisition Costs
See Note 1 for a description of capitalized acquisition costs.
Nonparticipating and Non-Dividend-Paying Traditional Contracts
The Company amortizes DAC related to these contracts (primarily term
insurance) over the appropriate premium paying period in proportion to the
actual and expected future gross premiums that were set at contract issue. The
expected premiums are based upon the premium requirement of each policy and
assumptions for mortality, morbidity, persistency and investment returns at
policy issuance, include provisions for adverse deviation, and are consistent
with the assumptions used to calculate future policyholder benefit liabilities.
These assumptions are not revised after policy issuance unless the DAC balance
is deemed to be unrecoverable from future expected profits. Absent a premium
deficiency, variability in amortization after policy issuance is caused only by
variability in premium volumes.
22
Metropolitan Tower Life Insurance Company and Subsidiaries
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements -- (continued)
3. Deferred Policy Acquisition Costs (continued)
Fixed and Variable Universal Life Contracts
The Company amortizes DAC related to these contracts over the estimated
lives of the contracts in proportion to actual and expected future gross
profits. The amortization includes interest based on rates in effect at
inception of the contracts. The amount of future gross profits is dependent
principally upon returns in excess of the amounts credited to policyholders,
mortality, persistency, interest crediting rates, expenses to administer the
business, creditworthiness of reinsurance counterparties, and the effect of
certain economic variables, such as inflation. Of these factors, the Company
anticipates that investment returns, expenses and persistency are reasonably
likely to significantly impact the rate of DAC amortization. Each reporting
period, the Company updates the estimated gross profits with the actual gross
profits for that period. When the actual gross profits change from previously
estimated gross profits, the cumulative DAC amortization is re-estimated and
adjusted by a cumulative charge or credit to current operations. When actual
gross profits exceed those previously estimated, the DAC amortization will
increase, resulting in a current period charge to earnings. The opposite result
occurs when the actual gross profits are below the previously estimated gross
profits. Each reporting period, the Company also updates the actual amount of
business remaining in-force, which impacts expected future gross profits. When
expected future gross profits are below those previously estimated, the DAC
amortization will increase, resulting in a current period charge to earnings.
The opposite result occurs when the expected future gross profits are above the
previously estimated expected future gross profits. Each period, the Company
also reviews the estimated gross profits for each block of business to
determine the recoverability of DAC balances.
Factors Impacting Amortization
Separate account rates of return on variable universal life contracts affect
in-force account balances on such contracts each reporting period, which can
result in significant fluctuations in amortization of DAC. Returns that are
higher than the Company's long-term expectation produce higher account
balances, which increases the Company's future fee expectations and decreases
future benefit payment expectations on minimum death and living benefit
guarantees, resulting in higher expected future gross profits. The opposite
result occurs when returns are lower than the Company's long-term expectation.
The Company's practice to determine the impact of gross profits resulting from
returns on separate accounts assumes that long-term appreciation in equity
markets is not changed by short-term market fluctuations, but is only changed
when sustained interim deviations are expected. The Company monitors these
events and only changes the assumption when its long-term expectation changes.
The Company also periodically reviews other long-term assumptions underlying
the projections of estimated gross profits. These assumptions primarily relate
to investment returns, interest crediting rates, mortality, persistency,
policyholder behavior and expenses to administer business. Management annually
updates assumptions used in the calculation of estimated gross profits which
may have significantly changed. If the update of assumptions causes expected
future gross profits to increase, DAC amortization will decrease, resulting in
a current period increase to earnings. The opposite result occurs when the
assumption update causes expected future gross profits to decrease.
Periodically, the Company modifies product benefits, features, rights or
coverages that occur by the exchange of a contract for a new contract, or by
amendment, endorsement, or rider to a contract, or by election or coverage
within a contract. If such modification, referred to as an internal
replacement, substantially changes the contract, the associated DAC is written
off immediately through income and any new deferrable costs associated with the
replacement contract are deferred. If the modification does not substantially
change the contract, the DAC amortization on the original contract will
continue and any acquisition costs associated with the related modification are
expensed.
Amortization of DAC is attributed to net investment gains (losses) and net
derivative gains (losses), and to other expenses for the amount of gross
profits originating from transactions other than investment gains and losses.
Unrealized investment gains and losses represent the amount of DAC that would
have been amortized if such gains and losses had been recognized.
23
Metropolitan Tower Life Insurance Company and Subsidiaries
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements -- (continued)
3. Deferred Policy Acquisition Costs (continued)
Information regarding DAC was as follows:
Years Ended December 31,
---------------------------
2017 2016 2015
------- -------- --------
(In millions)
DAC:
Balance at January 1,................ $ -- $ -- $ 1
Capitalizations...................... -- -- --
Amortization related to:
Other expenses....................... (7) (7) (13)
------- -------- --------
Total amortization................ (7) (7) (13)
------- -------- --------
Unrealized investment gains (losses). 9 7 12
------- -------- --------
Balance at December 31,.............. $ 2 $ -- $ --
======= ======== ========
4. Reinsurance
The Company enters into reinsurance agreements primarily as a purchaser of
reinsurance for its various insurance products and also as a provider of
reinsurance for some insurance products issued by affiliated and unaffiliated
companies. The Company participates in reinsurance activities in order to limit
losses and minimize exposure to significant risks.
Accounting for reinsurance requires extensive use of assumptions and
estimates, particularly related to the future performance of the underlying
business and the potential impact of counterparty credit risks. The Company
periodically reviews actual and anticipated experience compared to the
aforementioned assumptions used to establish assets and liabilities relating to
ceded and assumed reinsurance and evaluates the financial strength of
counterparties to its reinsurance agreements using criteria similar to that
evaluated in the security impairment process discussed in Note 5.
For its individual life insurance products, the Company has historically
reinsured the mortality risk on new individual life insurance policies
primarily on an excess of retention basis. In addition, the Company has
reinsured a significant portion of the mortality risk on its individual
universal life insurance policies. Placement of reinsurance is done primarily
on an automatic basis and also on a facultative basis for risks with specified
characteristics. The Company evaluates its reinsurance programs routinely and
may increase or decrease its retention at any time.
The Company has reinsured certain of its annuity and supplementary contract
business to an affiliate.
The Company has exposure to catastrophes which could contribute to
significant fluctuations in the Company's results of operations. The Company
uses excess of retention and quota share reinsurance agreements to provide
greater diversification of risk and minimize exposure to larger risks.
The Company reinsures its remaining business through a diversified group of
well-capitalized reinsurers. The Company analyzes recent trends in arbitration
and litigation outcomes in disputes, if any, with its reinsurers. The Company
monitors ratings and evaluates the financial strength of its reinsurers by
analyzing their financial statements. In addition, the reinsurance recoverable
balance due from each reinsurer is evaluated as part of the overall monitoring
process. Recoverability of reinsurance recoverable balances is evaluated based
on these analyses. These reinsurance recoverable balances are stated net of
allowances for uncollectible reinsurance, which at both December 31, 2017 and
2016, were not significant.
The Company had $234 million and $228 million of net unsecured unaffiliated
ceded reinsurance recoverable balances at December 31, 2017 and 2016,
respectively. Of these totals, 100% were with the Company's five largest
unaffiliated ceded reinsurers at both December 31, 2017 and 2016.
24
Metropolitan Tower Life Insurance Company and Subsidiaries
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements -- (continued)
4. Reinsurance (continued)
The amounts on the consolidated statements of operations include the impact
of reinsurance. Information regarding the significant effects of reinsurance
was as follows:
Years Ended December 31,
-------------------------------
2017 2016 2015
--------- --------- ---------
(In millions)
Premiums
Direct premiums............................................... $ 522 $ 11 $ 6
Reinsurance assumed........................................... 1 -- --
Reinsurance ceded............................................. (6) (11) (6)
--------- --------- ---------
Net premiums............................................... $ 517 $ -- $ --
========= ========= =========
Universal life and investment-type product policy fees
Direct universal life and investment-type product policy fees. $ 177 $ 182 $ 188
Reinsurance assumed........................................... -- -- --
Reinsurance ceded............................................. (101) (100) (104)
--------- --------- ---------
Net universal life and investment-type product policy fees. $ 76 $ 82 $ 84
========= ========= =========
Other revenues
Direct other revenues......................................... $ 8 $ 5 $ 5
Reinsurance assumed........................................... 2 5 4
Reinsurance ceded............................................. -- 5 6
--------- --------- ---------
Net other revenues......................................... $ 10 $ 15 $ 15
========= ========= =========
Policyholder benefits and claims
Direct policyholder benefits and claims....................... $ 974 $ 492 $ 492
Reinsurance assumed........................................... -- -- --
Reinsurance ceded............................................. (132) (140) (128)
--------- --------- ---------
Net policyholder benefits and claims....................... $ 842 $ 352 $ 364
========= ========= =========
Interest credited to policyholder account balances
Direct interest credited to policyholder account balances..... $ 133 $ 136 $ 142
Reinsurance assumed........................................... -- -- --
Reinsurance ceded............................................. (21) (21) (22)
--------- --------- ---------
Net interest credited to policyholder account balances..... $ 112 $ 115 $ 120
========= ========= =========
The amounts on the consolidated balance sheets include the impact of
reinsurance. Information regarding the significant effects of reinsurance was
as follows at:
December 31,
-----------------------------------------------------------
2017 2016
----------------------------- -----------------------------
Total Total
Balance Balance
Direct Assumed Ceded Sheet Direct Assumed Ceded Sheet
------ ------- ------ ------- ------ ------- ------ -------
(In millions)
Assets
Premiums, reinsurance and other
receivables................... $ 4 $ 1 $ 969 $ 974 $ -- $ 1 $ 970 $ 971
===== ==== ====== ====== ====== ==== ====== ======
Liabilities
Other liabilities............... $ 56 $ 2 $ 26 $ 84 $ 36 $ 1 $ 24 $ 61
===== ==== ====== ====== ====== ==== ====== ======
25
Metropolitan Tower Life Insurance Company and Subsidiaries
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements -- (continued)
4. Reinsurance (continued)
Reinsurance agreements that do not expose the Company to a reasonable
possibility of a significant loss from insurance risk are recorded using the
deposit method of accounting. The deposit assets on reinsurance are the result
of affiliated reinsurance transactions. See "-- Related Party Reinsurance
Transactions." The deposit liabilities on reinsurance were $2 million and
$1 million at December 31, 2017 and 2016, respectively.
Related Party Reinsurance Transactions
The Company has reinsurance agreements with certain of MetLife, Inc.'s
subsidiaries, including MLIC and MetLife Insurance K.K., each of which is a
related party.
Information regarding the significant effects of affiliated reinsurance
included on the consolidated statements of operations was as follows:
Years Ended December 31,
-------------------------
2017 2016 2015
------- ------- -------
(In millions)
Premiums
Reinsurance assumed.......................................... $ -- $ -- $ --
Reinsurance ceded............................................ (6) (11) (6)
------- ------- -------
Net premiums............................................. $ (6) $ (11) $ (6)
======= ======= =======
Other revenues
Reinsurance assumed.......................................... $ 3 $ 5 $ 4
Reinsurance ceded............................................ -- 5 6
------- ------- -------
Net other revenues....................................... $ 3 $ 10 $ 10
======= ======= =======
Policyholder benefits and claims
Reinsurance assumed.......................................... $ -- $ -- $ --
Reinsurance ceded............................................ (5) (11) (8)
------- ------- -------
Net policyholder benefits and claims..................... $ (5) $ (11) $ (8)
======= ======= =======
Interest credited to policyholder account balances
Reinsurance assumed.......................................... $ -- $ -- $ --
Reinsurance ceded............................................ (21) (21) (22)
------- ------- -------
Net interest credited to policyholder account balances... $ (21) $ (21) $ (22)
======= ======= =======
Information regarding the significant effects of affiliated reinsurance
included on the consolidated balance sheets was as follows at:
December 31,
---------------------------------
2017 2016
---------------- ----------------
Assumed Ceded Assumed Ceded
------- -------- ------- --------
(In millions)
Assets
Premiums, reinsurance and other receivables........... $ 1 $ 709 $ 2 $ 718
====== ======== ====== ========
The Company may secure certain reinsurance recoverable balances with various
forms of collateral, including secured trusts, funds withheld accounts and
irrevocable letters of credit. The Company had $709 million and $718 million of
unsecured affiliated reinsurance recoverable balances at December 31, 2017 and
2016, respectively.
Affiliated reinsurance agreements that do not expose the Company to a
reasonable possibility of a significant loss from insurance risk are recorded
using the deposit method of accounting. The deposit assets on affiliated
reinsurance were $660 million and $667 million at December 31, 2017 and 2016,
respectively. There were no deposit liabilities on affiliated reinsurance at
both December 31, 2017 and 2016.
26
Metropolitan Tower Life Insurance Company and Subsidiaries
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements -- (continued)
5. Investments
See Note 7 for information about the fair value hierarchy for investments
and the related valuation methodologies.
Investment Risks and Uncertainties
Investments are exposed to the following primary sources of risk: credit,
interest rate, liquidity, market valuation, currency and real estate risk. The
financial statement risks, stemming from such investment risks, are those
associated with the determination of estimated fair values, the diminished
ability to sell certain investments in times of strained market conditions, the
recognition of impairments, the recognition of income on certain investments
and the potential consolidation of VIEs. The use of different methodologies,
assumptions and inputs relating to these financial statement risks may have a
material effect on the amounts presented within the consolidated financial
statements.
The determination of valuation allowances and impairments is highly
subjective and is based upon periodic evaluations and assessments of known and
inherent risks associated with the respective asset class. Such evaluations and
assessments are revised as conditions change and new information becomes
available.
The recognition of income on certain investments (e.g. structured
securities, including mortgage-backed securities, asset-backed securities
("ABS") and certain structured investment transactions) is dependent upon
certain factors such as prepayments and defaults, and changes in such factors
could result in changes in amounts to be earned.
Fixed Maturity and Equity Securities AFS
Fixed Maturity and Equity Securities AFS by Sector
The following table presents the fixed maturity and equity securities AFS
by sector. Redeemable preferred stock is reported within U.S. corporate fixed
maturity securities. Included within fixed maturity securities are structured
securities including RMBS, commercial mortgage-backed securities ("CMBS") and
ABS (collectively, "Structured Securities").
December 31, 2017 December 31, 2016
------------------------------------------- -------------------------------------------
Gross Unrealized Gross Unrealized
----------------------- -----------------------
Cost or Estimated Cost or Estimated
Amortized Temporary OTTI Fair Amortized Temporary OTTI Fair
Cost Gains Losses Losses Value Cost Gains Losses Losses Value
--------- ------ --------- ------ --------- --------- ------ --------- ------ ---------
(In millions)
Fixed maturity
securities:
U.S. corporate...... $ 1,076 $ 105 $ 3 $ -- $ 1,178 $ 1,001 $ 87 $ 5 $ -- $ 1,083
U.S. government and
agency............ 565 127 2 -- 690 426 102 1 -- 527
RMBS................ 621 13 2 -- 632 390 14 4 -- 400
Foreign corporate... 400 23 7 -- 416 309 12 12 -- 309
CMBS................ 303 3 -- -- 306 159 3 -- -- 162
ABS................. 287 2 2 -- 287 515 3 5 -- 513
State and political
subdivision....... 131 31 -- -- 162 110 24 -- -- 134
Foreign government.. 38 3 -- -- 41 29 2 -- -- 31
-------- ------ ----- ----- -------- -------- ------ ----- ----- --------
Total fixed
maturity
securities..... $ 3,421 $ 307 $ 16 $ -- $ 3,712 $ 2,939 $ 247 $ 27 $ -- $ 3,159
======== ====== ===== ===== ======== ======== ====== ===== ===== ========
Equity securities:
Common stock........ $ 11 $ -- $ -- $ -- $ 11 $ 11 $ -- $ -- $ -- $ 11
The Company held non-income producing fixed maturity securities with an
estimated fair value of less than $1 million with unrealized gains (losses) of
less than ($1) million at both December 31, 2017 and 2016.
27
Metropolitan Tower Life Insurance Company and Subsidiaries
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements -- (continued)
5. Investments (continued)
Methodology for Amortization of Premium and Accretion of Discount on
Structured Securities
Amortization of premium and accretion of discount on Structured Securities
considers the estimated timing and amount of prepayments of the underlying
loans. Actual prepayment experience is periodically reviewed and effective
yields are recalculated when differences arise between the originally
anticipated and the actual prepayments received and currently anticipated.
Prepayment assumptions for Structured Securities are estimated using inputs
obtained from third-party specialists and based on management's knowledge of
the current market. For credit-sensitive Structured Securities and certain
prepayment-sensitive securities, the effective yield is recalculated on a
prospective basis. For all other Structured Securities, the effective yield is
recalculated on a retrospective basis.
Maturities of Fixed Maturity Securities
The amortized cost and estimated fair value of fixed maturity securities,
by contractual maturity date, were as follows at December 31, 2017:
Due After Five
Due After One Years Total Fixed
Due in One Year Through Through Ten Due After Ten Structured Maturity
Year or Less Five Years Years Years Securities Securities
------------ ------------- -------------- ------------- ---------- -----------
(In millions)
Amortized cost.......................... $ 84 $ 555 $ 671 $ 900 $ 1,211 $ 3,421
Estimated fair value.................... $ 85 $ 571 $ 683 $ 1,148 $ 1,225 $ 3,712
Actual maturities may differ from contractual maturities due to the
exercise of call or prepayment options. Fixed maturity securities not due at a
single maturity date have been presented in the year of final contractual
maturity. Structured Securities are shown separately, as they are not due at a
single maturity.
Continuous Gross Unrealized Losses for Fixed Maturity AFS by Sector
The following table presents the estimated fair value and gross unrealized
losses of fixed maturity securities AFS in an unrealized loss position,
aggregated by sector and by length of time that the securities have been in a
continuous unrealized loss position at:
December 31, 2017 December 31, 2016
---------------------------------------------- ----------------------------------------------
Equal to or Greater than Equal to or Greater than
Less than 12 Months 12 Months Less than 12 Months 12 Months
--------------------- ------------------------ --------------------- ------------------------
Gross Gross Gross Gross
Estimated Unrealized Estimated Unrealized Estimated Unrealized Estimated Unrealized
Fair Value Losses Fair Value Losses Fair Value Losses Fair Value Losses
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
(Dollars in millions)
Fixed maturity securities:
U.S. corporate................... $ 124 $ 1 $ 18 $ 2 $ 89 $ 1 $ 49 $ 4
U.S. government and agency....... 262 2 1 -- 53 1 -- --
RMBS............................. 163 -- 45 2 108 2 49 2
Foreign corporate................ 70 3 28 4 83 2 42 10
CMBS............................. 20 -- -- -- 29 -- 12 --
ABS.............................. 10 -- 44 2 67 1 113 4
State and political
subdivision..................... 5 -- -- -- -- -- -- --
Foreign government............... -- -- -- -- 2 -- -- --
------ ----- ------ ----- ------ ----- ------ -----
Total fixed maturity
securities.................. $ 654 $ 6 $ 136 $ 10 $ 431 $ 7 $ 265 $ 20
====== ===== ====== ===== ====== ===== ====== =====
Total number of securities in an
unrealized loss position........ 131 35 120 80
====== ====== ====== ======
28
Metropolitan Tower Life Insurance Company and Subsidiaries
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements -- (continued)
5. Investments (continued)
Evaluation of AFS Securities for OTTI and Evaluating Temporarily Impaired AFS
Securities
Evaluation and Measurement Methodologies
Management considers a wide range of factors about the security issuer
and uses its best judgment in evaluating the cause of the decline in the
estimated fair value of the security and in assessing the prospects for
near-term recovery. Inherent in management's evaluation of the security are
assumptions and estimates about the operations of the issuer and its future
earnings potential. Considerations used in the impairment evaluation process
include, but are not limited to: (i) the length of time and the extent to
which the estimated fair value has been below cost or amortized cost;
(ii) the potential for impairments when the issuer is experiencing
significant financial difficulties; (iii) the potential for impairments in
an entire industry sector or sub-sector; (iv) the potential for impairments
in certain economically depressed geographic locations; (v) the potential
for impairments where the issuer, series of issuers or industry has suffered
a catastrophic loss or has exhausted natural resources; (vi) with respect to
fixed maturity securities, whether the Company has the intent to sell or
will more likely than not be required to sell a particular security before
the decline in estimated fair value below amortized cost recovers;
(vii) with respect to Structured Securities, changes in forecasted cash
flows after considering the quality of underlying collateral, expected
prepayment speeds, current and forecasted loss severity, consideration of
the payment terms of the underlying assets backing a particular security,
and the payment priority within the tranche structure of the security;
(viii) the potential for impairments due to weakening of foreign currencies
on non-functional currency denominated fixed maturity securities that are
near maturity; and (ix) other subjective factors, including concentrations
and information obtained from regulators and rating agencies.
The methodology and significant inputs used to determine the amount of
credit loss on fixed maturity securities are as follows:
. The Company calculates the recovery value by performing a discounted
cash flow analysis based on the present value of future cash flows. The
discount rate is generally the effective interest rate of the security
prior to impairment.
. When determining collectability and the period over which value is
expected to recover, the Company applies considerations utilized in its
overall impairment evaluation process which incorporates information
regarding the specific security, fundamentals of the industry and
geographic area in which the security issuer operates, and overall
macroeconomic conditions. Projected future cash flows are estimated
using assumptions derived from management's best estimates of likely
scenario-based outcomes after giving consideration to a variety of
variables that include, but are not limited to: payment terms of the
security; the likelihood that the issuer can service the interest and
principal payments; the quality and amount of any credit enhancements;
the security's position within the capital structure of the issuer;
possible corporate restructurings or asset sales by the issuer; and
changes to the rating of the security or the issuer by rating agencies.
. Additional considerations are made when assessing the unique features
that apply to certain Structured Securities including, but not limited
to: the quality of underlying collateral, expected prepayment speeds,
current and forecasted loss severity, consideration of the payment terms
of the underlying loans or assets backing a particular security, and the
payment priority within the tranche structure of the security.
. When determining the amount of the credit loss for U.S. and foreign
corporate securities, state and political subdivision securities and
foreign government securities, the estimated fair value is considered
the recovery value when available information does not indicate that
another value is more appropriate. When information is identified that
indicates a recovery value other than estimated fair value, management
considers in the determination of recovery value the same considerations
utilized in its overall impairment evaluation process as described
above, as well as any private and public sector programs to restructure
such securities.
With respect to securities that have attributes of debt and equity
("perpetual hybrid securities"), consideration is given in the OTTI analysis
as to whether there has been any deterioration in the credit of the issuer
and the likelihood of recovery in value of the securities that are in a
severe and extended unrealized loss position. Consideration is also given as
to whether any perpetual hybrid securities, with an unrealized loss,
regardless of credit rating, have deferred any dividend payments. When an
OTTI loss has occurred, the OTTI loss is the entire difference between the
perpetual hybrid security's cost and its estimated fair value with a
corresponding charge to earnings.
The cost or amortized cost of fixed maturity and equity securities is
adjusted for OTTI in the period in which the determination is made. The
Company does not change the revised cost basis for subsequent recoveries in
value.
29
Metropolitan Tower Life Insurance Company and Subsidiaries
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements -- (continued)
5. Investments (continued)
In periods subsequent to the recognition of OTTI on a fixed maturity
security, the Company accounts for the impaired security as if it had been
purchased on the measurement date of the impairment. Accordingly, the
discount (or reduced premium) based on the new cost basis is accreted over
the remaining term of the fixed maturity security in a prospective manner
based on the amount and timing of estimated future cash flows.
Current Period Evaluation
Based on the Company's current evaluation of its AFS securities in an
unrealized loss position in accordance with its impairment policy, and the
Company's current intentions and assessments (as applicable to the type of
security) about holding, selling and any requirements to sell these
securities, the Company concluded that these securities were not
other-than-temporarily impaired at December 31, 2017. Future OTTI will
depend primarily on economic fundamentals, issuer performance (including
changes in the present value of future cash flows expected to be collected),
changes in credit ratings, collateral valuation, interest rates and credit
spreads. If economic fundamentals deteriorate or if there are adverse
changes in the above factors, OTTI may be incurred in upcoming periods.
Gross unrealized losses on fixed maturity securities decreased
$11 million during the year ended December 31, 2017 to $16 million. The
decrease in gross unrealized losses for the year ended December 31, 2017,
was primarily attributable to narrowing credit spreads and strengthening
foreign currencies on non-functional currency denominated fixed maturity
securities.
At December 31, 2017, $1 million of the total $16 million of gross
unrealized losses were from three below investment grade fixed maturity
securities with an unrealized loss position of 20% or more of amortized cost
for six months or greater. Unrealized losses on below investment grade fixed
maturity securities are principally related to foreign corporate securities
(primarily industrial securities) and non-agency RMBS (primarily alternative
residential mortgage loans) and are the result of significantly wider credit
spreads resulting from higher risk premiums since purchase, in part due to
economic and market uncertainties. Management evaluates foreign corporate
securities based on factors such as expected cash flows and the financial
condition and near-term and long-term prospects of the issuers and evaluates
non-agency RMBS based on actual and projected cash flows after considering
the quality of underlying collateral, expected prepayment speeds, current
and forecasted loss severity, consideration of the payment terms of the
underlying assets backing a particular security and the payment priority
within the tranche structure of the security.
Mortgage Loans
Mortgage Loans by Portfolio Segment
Mortgage loans are summarized as follows at:
December 31,
----------------------------------------
2017 2016
------------------- -------------------
Carrying % of Carrying % of
Value Total Value Total
-------- --------- -------- ---------
(Dollars in millions)
Mortgage loans:
Commercial.................... $ 248 81.0% $ 191 82.7%
Agricultural.................. 59 19.3 41 17.7
-------- --------- -------- ---------
Subtotal(1)................ 307 100.3 232 100.4
Valuation allowances.......... (1) (0.3) (1) (0.4)
-------- --------- -------- ---------
Total mortgage loans, net.. $ 306 100.0% $ 231 100.0%
======== ========= ======== =========
--------
(1)Purchases of commercial mortgage loans were $7 million and $0 for the years
ended December 31, 2017 and 2016, respectively.
30
Metropolitan Tower Life Insurance Company and Subsidiaries
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements -- (continued)
5. Investments (continued)
The Company purchases unaffiliated mortgage loans under a master
participation agreement, from an affiliate, simultaneously with the
affiliate's origination or acquisition of mortgage loans. The aggregate
amount of unaffiliated mortgage loan participation interests purchased by the
Company from an affiliate during the years ended December 31, 2017, 2016 and
2015 were $118 million, $59 million and $15 million, respectively. In
connection with the mortgage loan participations, the affiliate collected
mortgage loan principal and interest payments on the Company's behalf and the
affiliate remitted such payments to the Company in the amount of $43 million,
$81 million and $71 million during the years ended December 31, 2017, 2016
and 2015, respectively.
Mortgage Loans, Valuation Allowance and Impaired Loans by Portfolio Segment
At December 31, 2017 and 2016, the Company had no impaired mortgage loans,
all mortgage loans were evaluated collectively for credit losses and the
related valuation allowances were maintained primarily for the commercial
mortgage loans. For both the years ended December 31, 2017 and 2016, the
change in valuation allowance relating to provision (release) was less than
$1 million.
Valuation Allowance Methodology
Mortgage loans are considered to be impaired when it is probable that,
based upon current information and events, the Company will be unable to
collect all amounts due under the loan agreement. Specific valuation
allowances are established using the same methodology for both portfolio
segments as the excess carrying value of a loan over either (i) the present
value of expected future cash flows discounted at the loan's original
effective interest rate, (ii) the estimated fair value of the loan's
underlying collateral if the loan is in the process of foreclosure or
otherwise collateral dependent, or (iii) the loan's observable market price.
A common evaluation framework is used for establishing non-specific
valuation allowances for both loan portfolio segments; however, a separate
non-specific valuation allowance is calculated and maintained for each loan
portfolio segment that is based on inputs unique to each loan portfolio
segment. Non-specific valuation allowances are established for pools of
loans with similar risk characteristics where a property-specific or
market-specific risk has not been identified, but for which the Company
expects to incur a credit loss. These evaluations are based upon several
loan portfolio segment-specific factors, including the Company's experience
for loan losses, defaults and loss severity, and loss expectations for loans
with similar risk characteristics. These evaluations are revised as
conditions change and new information becomes available.
Commercial and Agricultural Mortgage Loan Portfolio Segments
The Company typically uses several years of historical experience in
establishing non-specific valuation allowances which capture multiple
economic cycles. For evaluations of commercial mortgage loans, in addition
to historical experience, management considers factors that include the
impact of a rapid change to the economy, which may not be reflected in the
loan portfolio, and recent loss and recovery trend experience as compared to
historical loss and recovery experience. For evaluations of agricultural
mortgage loans, in addition to historical experience, management considers
factors that include increased stress in certain sectors, which may be
evidenced by higher delinquency rates, or a change in the number of higher
risk loans. On a quarterly basis, management incorporates the impact of
these current market events and conditions on historical experience in
determining the non-specific valuation allowance established for commercial
and agricultural mortgage loans.
All commercial mortgage loans are reviewed on an ongoing basis which may
include an analysis of the property financial statements and rent roll,
lease rollover analysis, property inspections, market analysis, estimated
valuations of the underlying collateral, loan-to-value ratios, debt service
coverage ratios, and tenant creditworthiness. The monitoring process focuses
on higher risk loans, which include those that are classified as
restructured, delinquent or in foreclosure, as well as loans with higher
loan-to-value ratios and lower debt service coverage ratios. All
agricultural mortgage loans are monitored on an ongoing basis. The
monitoring process for agricultural mortgage loans is generally similar to
the commercial mortgage loan monitoring process, with a focus on higher risk
loans, including reviews on a geographic and property-type basis. Higher
risk loans are reviewed individually on an ongoing basis for potential
credit loss and specific valuation allowances are established using the
methodology described above. Quarterly, the remaining loans are reviewed on
a pool basis by aggregating groups of loans that have similar risk
characteristics for potential credit loss, and non-specific valuation
allowances are established as described above using inputs that are unique
to each segment of the loan portfolio.
31
Metropolitan Tower Life Insurance Company and Subsidiaries
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements -- (continued)
5. Investments (continued)
For commercial mortgage loans, the primary credit quality indicator is
the debt service coverage ratio, which compares a property's net operating
income to amounts needed to service the principal and interest due under the
loan. Generally, the lower the debt service coverage ratio, the higher the
risk of experiencing a credit loss. The Company also reviews the
loan-to-value ratio of its commercial mortgage loan portfolio. Loan-to-value
ratios compare the unpaid principal balance of the loan to the estimated
fair value of the underlying collateral. Generally, the higher the
loan-to-value ratio, the higher the risk of experiencing a credit loss. The
debt service coverage ratio and the values utilized in calculating the ratio
are updated annually on a rolling basis, with a portion of the portfolio
updated each quarter. In addition, the loan-to-value ratio is routinely
updated for all but the lowest risk loans as part of the Company's ongoing
review of its commercial mortgage loan portfolio.
For agricultural mortgage loans, the Company's primary credit quality
indicator is the loan-to-value ratio. The values utilized in calculating
this ratio are developed in connection with the ongoing review of the
agricultural mortgage loan portfolio and are routinely updated.
Credit Quality of Commercial Mortgage Loans
The credit quality of commercial mortgage loans was as follows at:
Recorded Investment
----------------------------------------------
Debt Service Coverage Ratios
----------------------------
1.00x -
> 1.20x 1.20x < 1.00x Total % of Total
-------- ------- ------- ------- ----------
(Dollars in millions)
December 31, 2017
Loan-to-value ratios:
Less than 65%...................... $ 212 $ -- $ -- $ 212 85.5%
65% to 75%......................... 27 -- -- 27 10.9
76% to 80%......................... -- -- -- -- --
Greater than 80%................... -- 9 -- 9 3.6
-------- ------- ------- ------- ------
Total.............................. $ 239 $ 9 $ -- $ 248 100.0%
======== ======= ======= ======= ======
December 31, 2016
Loan-to-value ratios:
Less than 65%...................... $ 173 $ 1 $ 2 $ 176 92.1%
65% to 75%......................... 15 -- -- 15 7.9
76% to 80%......................... -- -- -- -- --
Greater than 80%................... -- -- -- -- --
-------- ------- ------- ------- ------
Total.............................. $ 188 $ 1 $ 2 $ 191 100.0%
======== ======= ======= ======= ======
32
Metropolitan Tower Life Insurance Company and Subsidiaries
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements -- (continued)
5. Investments (continued)
Credit Quality of Agricultural Mortgage Loans
The credit quality of agricultural mortgage loans was as follows at:
December 31,
-----------------------------------------
2017 2016
------------------- --------------------
Recorded % of Recorded % of
Investment Total Investment Total
---------- -------- ---------- ---------
(Dollars in millions)
Loan-to-value ratios:
Less than 65%....................... $ 48 81.4% $ 41 100.0%
65% to 75%.......................... 11 18.6 -- --
------- -------- ------- ---------
Total............................ $ 59 100.0% $ 41 100.0%
======= ======== ======= =========
Past Due and Nonaccrual Mortgage Loans
The Company has a high quality, well performing mortgage loan portfolio,
with all mortgage loans classified as performing at both December 31, 2017
and 2016. The Company defines delinquency consistent with industry practice,
when mortgage loans are past due as follows: commercial mortgage loans -- 60
days and agricultural mortgage loans -- 90 days. The Company had no mortgage
loans past due and no nonaccrual mortgage loans at December 31, 2017 and 2016.
Mortgage Loans Modified in a Troubled Debt Restructuring
The Company may grant concessions related to borrowers experiencing
financial difficulties, which are classified as troubled debt restructurings.
Generally, the types of concessions include: reduction of the contractual
interest rate, extension of the maturity date at an interest rate lower than
current market interest rates, and/or a reduction of accrued interest. The
amount, timing and extent of the concessions granted are considered in
determining any impairment or changes in the specific valuation allowance
recorded with the restructuring. Through the continuous monitoring process, a
specific valuation allowance may have been recorded prior to the quarter when
the mortgage loan is modified in a troubled debt restructuring. There were no
mortgage loans modified in a troubled debt restructuring for both the years
ended December 31, 2017 and 2016.
Real Estate
Real estate investments consisted of traditional real estate at December 31,
2017 and 2016.
The Company classifies within traditional real estate its investment in
income-producing real estate, which is comprised primarily of wholly-owned real
estate and joint ventures with interest in single property income-producing
real estate.
The wholly-owned real estate within traditional real estate is net of
accumulated depreciation of $47 million and $39 million at December 31, 2017
and 2016, respectively. Related depreciation expense on wholly-owned real
estate was $9 million, $6 million and $10 million for the year ended
December 31, 2017, 2016 and 2015, respectively.
There were no real estate impairments recognized for both the year ended
December 31, 2017 and 2016.
As of December 31, 2017, total minimum rental payments to be received in the
future under non-cancelable leases was $17 million, $22 million, $23 million,
$23 million, $23 million and $89 million for the years ended December 31, 2018,
2019, 2020, 2021, 2022 and years thereafter, respectively.
Other Invested Assets
Other invested assets is comprised primarily of leveraged leases and
freestanding derivatives with positive estimated fair values (see Note 6).
33
Metropolitan Tower Life Insurance Company and Subsidiaries
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements -- (continued)
5. Investments (continued)
Leveraged Leases
Investment in leveraged leases consisted of the following at:
December 31,
--------------------
2017 2016
--------- ---------
(In millions)
Rental receivables, net................................ $ -- $ --
Estimated residual values.............................. 189 262
--------- ---------
Subtotal............................................ 189 262
Unearned income........................................ (23) (31)
--------- ---------
Investment in leveraged leases, net of non-recourse
debt.............................................. $ 166 $ 231
========= =========
Rental receivables are generally due in periodic installments. The payment
periods range from one to four years. For rental receivables, the primary
credit quality indicator is whether the rental receivable is performing or
nonperforming, which is assessed monthly. The Company generally defines
nonperforming rental receivables as those that are 90 days or more past due.
Rental receivables, which were less than $1 million at both December 31, 2017
and 2016, were performing.
The deferred income tax liability related to leveraged leases was
$58 million and $102 million at December 31, 2017 and 2016, respectively.
The components of income from investments in leveraged leases, excluding
net investment gains (losses), were as follows:
December 31,
-----------------------
2017 2016 2015
------- ------- -------
(In millions)
Income from investment in leveraged leases............. $ 8 $ 11 $ 12
Less: Income tax expense on leveraged leases........... 3 4 4
------- ------- -------
Investment income after income tax in leveraged
leases............................................ $ 5 $ 7 $ 8
======= ======= =======
Cash Equivalents
The carrying value of cash equivalents, which includes securities and other
investments with an original or remaining maturity of three months or less at
the time of purchase, was $47 million and $48 million at December 31, 2017 and
2016, respectively.
Net Unrealized Investment Gains (Losses)
Unrealized investment gains (losses) on fixed maturity securities AFS and
the effect on DAC and future policy benefits, that would result from the
realization of the unrealized gains (losses), are included in net unrealized
investment gains (losses) in AOCI.
34
Metropolitan Tower Life Insurance Company and Subsidiaries
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements -- (continued)
5. Investments (continued)
The components of net unrealized investment gains (losses), included in
AOCI, were as follows:
Years Ended December 31,
----------------------------
2017 2016 2015
-------- -------- --------
(In millions)
Fixed maturity securities........................... $ 294 $ 225 $ 198
Derivatives......................................... (1) 7 6
-------- -------- --------
Subtotal..................................... 293 232 204
-------- -------- --------
Amounts allocated from:
Future policy benefits........................... (54) -- --
DAC.............................................. (4) (13) (20)
-------- -------- --------
Subtotal..................................... (58) (13) (20)
Deferred income tax benefit (expense)............... (82) (77) (64)
-------- -------- --------
Net unrealized investment gains (losses)..... $ 153 $ 142 $ 120
======== ======== ========
The changes in net unrealized investment gains (losses) were as follows:
Years Ended December 31,
----------------------------
2017 2016 2015
-------- -------- --------
(In millions)
Balance at January 1,.................................................. $ 142 $ 120 $ 202
Unrealized investment gains (losses) during the year................... 61 28 (138)
Unrealized investment gains (losses) relating to:
Future policy benefits................................................. (54) -- 1
DAC related to noncredit OTTI losses recognized in AOCI................ -- -- 1
DAC.................................................................... 9 7 11
Deferred income tax benefit (expense) related to noncredit OTTI losses
recognized in AOCI................................................... -- -- (1)
Deferred income tax benefit (expense).................................. (5) (13) 44
-------- -------- --------
Balance at December 31,................................................ $ 153 $ 142 $ 120
======== ======== ========
Change in net unrealized investment gains (losses).................. $ 11 $ 22 $ (82)
======== ======== ========
Concentrations of Credit Risk
There were no investments in any counterparty that were greater than 10% of
the Company's stockholder's equity, other than the U.S. government and its
agencies, at both December 31, 2017 and 2016.
35
Metropolitan Tower Life Insurance Company and Subsidiaries
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements -- (continued)
5. Investments (continued)
Securities Lending
Elements of the securities lending program are presented below at:
December 31,
-----------------
2017 2016
-------- --------
(In millions)
Securities on loan: (1)
Amortized cost...................................... $ 367 $ 316
Estimated fair value................................ $ 482 $ 415
Cash collateral received from counterparties (2)....... $ 485 $ 417
Security collateral received from counterparties (3)... $ 7 $ 5
Reinvestment portfolio -- estimated fair value......... $ 488 $ 417
--------
(1)Included within fixed maturity securities.
(2)Included within payables for collateral under securities loaned and other
transactions.
(3)Security collateral received from counterparties may not be sold or
re-pledged, unless the counterparty is in default, and is not reflected on
the consolidated financial statements.
The cash collateral liability by loaned security type and remaining tenor of
the agreements was as follows at:
December 31, 2017 December 31, 2016
------------------------------------ ------------------------------------
Remaining Tenor of Securities Remaining Tenor of Securities
Lending Agreements Lending Agreements
----------------------------- -----------------------------
Over 1 Over 1
1 Month to 6 1 Month to 6
Open (1) or Less Months Total Open (1) or Less Months Total
-------- ------- ------ ------ -------- ------- ------ ------
(In millions)
Cash collateral liability by loaned
security type:
U.S. government and agency.......... $ 74 $ 181 $ 230 $ 485 $ 34 $ 87 $ 296 $ 417
----- ------ ------ ------ ----- ----- ------ ------
Total............................ $ 74 $ 181 $ 230 $ 485 $ 34 $ 87 $ 296 $ 417
===== ====== ====== ====== ===== ===== ====== ======
--------
(1)The related loaned security could be returned to the Company on the next
business day, which would require the Company to immediately return the cash
collateral.
If the Company is required to return significant amounts of cash collateral
on short notice and is forced to sell securities to meet the return obligation,
it may have difficulty selling such collateral that is invested in securities
in a timely manner, be forced to sell securities in a volatile or illiquid
market for less than what otherwise would have been realized under normal
market conditions, or both. The estimated fair value of the securities on loan
related to the cash collateral on open at December 31, 2017 was $72 million,
all of which were U.S. government and agency securities which, if put back to
the Company, could be immediately sold to satisfy the cash requirement.
The reinvestment portfolio acquired with the cash collateral consisted
principally of fixed maturity securities (including agency RMBS, ABS, CMBS,
foreign corporate securities) and cash equivalents with 44% invested in agency
RMBS, cash equivalents, U.S. government and agency securities or held in cash.
If the securities on loan or the reinvestment portfolio become less liquid, the
Company has the liquidity resources of most of its general account available to
meet any potential cash demands when securities on loan are put back to the
Company.
36
Metropolitan Tower Life Insurance Company and Subsidiaries
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements -- (continued)
5. Investments (continued)
Invested Assets on Deposit, Held in Trust and Pledged as Collateral
Invested assets on deposit, held in trust and pledged as collateral are
presented below at estimated fair value for all asset classes at:
December 31,
-----------------
2017 2016
-------- --------
(In millions)
Invested assets on deposit (regulatory deposits)............................. $ 8 $ 8
Invested assets held in trust (reinsurance agreements)....................... 10 10
Invested assets pledged as collateral (1).................................... 317 283
-------- --------
Total invested assets on deposit, held in trust and pledged as collateral. $ 335 $ 301
======== ========
--------
(1)The Company has pledged invested assets in connection with various
agreements and transactions, including funding agreements (see Note 2) and
derivative transactions (see Note 6).
See "-- Securities Lending" for information regarding securities on loan.
Variable Interest Entities
The Company has invested in legal entities that are VIEs. In certain
instances, the Company may hold both the power to direct the most significant
activities of the entity, as well as an economic interest in the entity and, as
such, would be deemed the primary beneficiary or consolidator of the entity.
The determination of the VIE's primary beneficiary requires an evaluation of
the contractual and implied rights and obligations associated with each party's
relationship with or involvement in the entity, an estimate of the entity's
expected losses and expected residual returns and the allocation of such
estimates to each party involved in the entity.
Consolidated VIEs
There were no VIEs for which the Company has concluded that it is the
primary beneficiary and which are consolidated at December 31, 2017 and 2016.
Unconsolidated VIEs
The carrying amount and maximum exposure to loss relating to VIEs in which
the Company holds a significant variable interest but is not the primary
beneficiary and which have not been consolidated were as follows at:
December 31,
---------------------------------------------
2017 2016
---------------------- ----------------------
Maximum Maximum
Carrying Exposure Carrying Exposure
Amount to Loss (1) Amount to Loss (1)
---------- ----------- ---------- -----------
(In millions)
Fixed maturity securities AFS:
Structured Securities (2)................. $ 1,225 $ 1,225 $ 1,075 $ 1,075
U.S. corporate............................ 25 25 24 24
Real estate joint ventures................... 57 57 44 44
Other limited partnership interests.......... -- 95 -- --
---------- ---------- ---------- ----------
Total................................. $ 1,307 $ 1,402 $ 1,143 $ 1,143
========== ========== ========== ==========
--------
37
Metropolitan Tower Life Insurance Company and Subsidiaries
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements -- (continued)
5. Investments (continued)
(1)The maximum exposure to loss relating to fixed maturity securities AFS is
equal to their carrying amounts or the carrying amounts of retained
interests. The maximum exposure to loss relating to other limited
partnership interests and real estate joint ventures is equal to the
carrying amounts plus any unfunded commitments. Such a maximum loss would be
expected to occur only upon bankruptcy of the issuer or investee.
(2)For these variable interests, the Company's involvement is limited to that
of a passive investor in mortgage-backed or asset-backed securities issued
by trusts that do not have substantial equity.
Net Investment Income
The components of net investment income were as follows:
Years Ended December 31,
--------------------------
2017 2016 2015
-------- -------- --------
(In millions)
Investment income:
Fixed maturity securities.............................. $ 127 $ 129 $ 137
Equity securities...................................... 1 1 1
Mortgage loans......................................... 12 16 14
Policy loans........................................... 19 20 20
Real estate............................................ 22 14 33
Annuities funding structured settlement claims......... 277 276 288
Other.................................................. 10 13 14
-------- -------- --------
Subtotal............................................ 468 469 507
Less: Investment expenses.............................. 21 15 20
-------- -------- --------
Net investment income............................... $ 447 $ 454 $ 487
======== ======== ========
See "-- Related Party Investment Transactions" for discussion of affiliated
net investment income and investment expenses.
Net Investment Gains (Losses)
Components of Net Investment Gains (Losses)
The components of net investment gains (losses) were as follows:
Years Ended December 31,
-------------------------
2017 2016 2015
-------- ------- -------
(In millions)
Total gains (losses) on fixed maturity securities:
Total OTTI losses recognized-- by sector and industry:
U.S. and foreign corporate securities -- Industrial.... $ -- $ (1) $ --
-------- ------- -------
OTTI losses on fixed maturity securities recognized
in earnings....................................... $ -- $ (1) $ --
Fixed maturity securities -- net gains (losses) on
sales and disposals.................................. $ -- $ (8) $ --
-------- ------- -------
Total gains (losses) on fixed maturity securities... $ -- $ (9) $ --
Real estate............................................ $ -- $ 1 $ (34)
Leveraged lease impairments............................ $ -- $ (41) $ 1
-------- ------- -------
Total net investment gains (losses)................. $ -- $ (49) $ (33)
======== ======= =======
Gains (losses) from foreign currency transactions included within net
investment gains (losses) were less than ($1) million, less than ($1) million
and less than $1 million for the years ended December 31, 2017, 2016 and
2015, respectively.
38
Metropolitan Tower Life Insurance Company and Subsidiaries
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements -- (continued)
5. Investments (continued)
Sales or Disposals and Impairments of Fixed Maturity Securities
Investment gains and losses on sales of securities are determined on a
specific identification basis. Proceeds from sales or disposals of fixed
maturity securities and the components of fixed maturity securities net
investment gains (losses) were as shown in the table below.
Years Ended December 31,
-------------------------
2017 2016 2015
------- ------- -------
(In millions)
Proceeds.......................................... $ 1,161 $ 577 $ 789
======= ======= =======
Gross investment gains............................ $ 4 $ 3 $ 7
Gross investment losses........................... (4) (11) (7)
OTTI losses....................................... -- (1) --
------- ------- -------
Net investment gains (losses).................. $ -- $ (9) $ --
======= ======= =======
Related Party Investment Transactions
The Company transfers invested assets, primarily consisting of fixed
maturity securities, to and from affiliates. The estimated fair value of
invested assets transferred from affiliates was $113 million for the year ended
December 31, 2017.
As a structured settlements assignment company, the Company purchased
annuities from an affiliate to fund the periodic structured settlement claim
payment obligations it assumed. Each annuity purchased is contractually
designated to the assumed claim obligation it funds. The aggregate contract
values of annuities funding structured settlement claims are recorded as an
asset for which the Company has also recorded an unpaid claim obligation of
equal amount. Such aggregated contract values were $4.3 billion and
$4.4 billion at December 31, 2017 and 2016, respectively. The related net
investment income and corresponding policyholder benefits and claims recognized
were $277 million, $276 million and $288 million for the years ended
December 31, 2017, 2016 and 2015 respectively.
The Company receives investment administrative services from an affiliate.
The related investment administrative service charges were $6 million,
$6 million and $5 million for the years ended December 31, 2017, 2016 and 2015,
respectively.
See "-- Mortgage Loans -- Mortgage Loans by Portfolio Segment" for
discussion of mortgage loan participation agreements with an affiliate.
39
Metropolitan Tower Life Insurance Company and Subsidiaries
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements -- (continued)
6. Derivatives
Accounting for Derivatives
See Note 1 for a description of the Company's accounting policies for
derivatives and Note 7 for information about the fair value hierarchy for
derivatives.
Derivative Strategies
The Company is exposed to various risks relating to its ongoing business
operations, including interest rate, foreign currency exchange rate, credit and
equity market. The Company uses a variety of strategies to manage these risks,
including the use of derivatives.
Derivatives are financial instruments with values derived from interest
rates, foreign currency exchange rates, credit spreads and/or other financial
indices. Derivatives may be exchange-traded or contracted in the
over-the-counter ("OTC") market. Certain of the Company's OTC derivatives are
cleared and settled through central clearing counterparties ("OTC-cleared"),
while others are bilateral contracts between two
counterparties ("OTC-bilateral"). The types of derivatives the Company uses
include swaps and option contracts. To a lesser extent, the Company uses credit
default swaps and structured interest rate swaps to synthetically replicate
investment risks and returns which are not readily available in the cash
markets.
Interest Rate Derivatives
The Company uses a variety of interest rate derivatives to reduce its
exposure to changes in interest rates, including interest rate swaps and
floors.
Interest rate swaps are used by the Company primarily to reduce market
risks from changes in interest rates and to alter interest rate exposure
arising from mismatches between assets and liabilities (duration mismatches).
In an interest rate swap, the Company agrees with another party to exchange,
at specified intervals, the difference between fixed rate and floating rate
interest amounts as calculated by reference to an agreed notional amount. The
Company utilizes interest rate swaps in fair value hedging relationships.
The Company purchases interest rate floors primarily to protect its
floating rate liabilities against rises in interest rates above a specified
level, and against interest rate exposure arising from mismatches between
assets and liabilities, as well as to protect its minimum rate guarantee
liabilities against declines in interest rates below a specified level,
respectively. In certain instances, the Company locks in the economic impact
of existing purchased floors by entering into offsetting written floors. The
Company utilizes interest rate floors in nonqualifying hedging relationships.
A synthetic guaranteed interest contract ("GIC") is a contract that
simulates the performance of a traditional GIC through the use of financial
instruments. Under a synthetic GIC, the policyholder owns the underlying
assets. The Company guarantees a rate return on those assets for a premium.
Synthetic GICs are not designated as hedging instruments.
Foreign Currency Exchange Rate Derivatives
The Company uses foreign currency swaps and foreign currency forwards to
reduce the risk from fluctuations in foreign currency exchange rates
associated with its assets denominated in foreign currencies.
In a foreign currency swap transaction, the Company agrees with another
party to exchange, at specified intervals, the difference between one
currency and another at a fixed exchange rate, generally set at inception,
calculated by reference to an agreed upon notional amount. The notional
amount of each currency is exchanged at the inception and termination of the
currency swap by each party. The Company utilizes foreign currency swaps in
fair value, cash flow and nonqualifying hedging relationships.
In a foreign currency forward transaction, the Company agrees with another
party to deliver a specified amount of an identified currency at a specified
future date. The price is agreed upon at the time of the contract and payment
for such a contract is made at the specified future date. The Company
utilizes foreign currency forwards in nonqualifying hedging relationships.
40
Metropolitan Tower Life Insurance Company and Subsidiaries
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements -- (continued)
6. Derivatives (continued)
Credit Derivatives
The Company enters into purchased credit default swaps to hedge against
credit-related changes in the value of its investments. In a credit default
swap transaction, the Company agrees with another party to pay, at specified
intervals, a premium to hedge credit risk. If a credit event occurs, as defined
by the contract, the contract may be cash settled or it may be settled gross by
the delivery of par quantities of the referenced investment equal to the
specified swap notional amount in exchange for the payment of cash amounts by
the counterparty equal to the par value of the investment surrendered. Credit
events vary by type of issuer but typically include bankruptcy, failure to pay
debt obligations and involuntary restructuring for corporate obligors, as well
as repudiation, moratorium or governmental intervention for sovereign obligors.
In each case, payout on a credit default swap is triggered only after the
Credit Derivatives Determinations Committee of the International Swaps and
Derivatives Association, Inc. ("ISDA") deems that a credit event has occurred.
The Company utilizes credit default swaps in nonqualifying hedging
relationships.
The Company enters into written credit default swaps to synthetically create
credit investments that are either more expensive to acquire or otherwise
unavailable in the cash markets. These transactions are a combination of a
derivative and one or more cash instruments, such as U.S. government and agency
securities, or other fixed maturity securities. These credit default swaps are
not designated as hedging instruments.
Primary Risks Managed by Derivatives
The following table presents the primary underlying risk exposure, gross
notional amount and estimated fair value of the Company's derivatives,
excluding embedded derivatives, held at:
December 31,
-----------------------------------------------------------
2017 2016
----------------------------- -----------------------------
Primary Underlying Risk Exposure Estimated Fair Value Estimated Fair Value
-------------------------------- -------------------- --------------------
Gross Gross
Notional Notional
Amount Assets Liabilities Amount Assets Liabilities
-------- ------ ----------- -------- ------ -----------
(In millions)
Derivatives Designated as Hedging Instruments:
Fair value hedges:
Interest rate swaps Interest rate................. $ 10 $ -- $ -- $ 16 $ -- $ --
Foreign currency swaps Foreign currency exchange
rate.......................... 25 3 -- 21 5 --
-------- ------ ------ -------- ------ ------
Subtotal........................................... 35 3 -- 37 5 --
-------- ------ ------ -------- ------ ------
Cash flow hedges:
Foreign currency swaps Foreign currency exchange
rate.......................... 125 3 4 51 7 --
-------- ------ ------ -------- ------ ------
Total qualifying hedges............................ 160 6 4 88 12 --
-------- ------ ------ -------- ------ ------
Derivatives Not Designated or Not Qualifying as Hedging Instruments:
Interest rate floors Interest rate................. -- -- -- 3,100 9 4
Synthetic GICs Interest rate................. 1,504 -- -- -- -- --
Foreign currency swaps Foreign currency exchange
rate.......................... 54 4 1 53 8 --
Foreign currency Foreign currency exchange
forwards rate.......................... 8 -- -- 7 -- --
Credit default swaps -
written Credit........................ 87 2 -- 87 1 --
-------- ------ ------ -------- ------ ------
Total non-designated or nonqualifying
derivatives...................................... 1,653 6 1 3,247 18 4
-------- ------ ------ -------- ------ ------
Total.............................................. $ 1,813 $ 12 $ 5 $ 3,335 $ 30 $ 4
======== ====== ====== ======== ====== ======
41
Metropolitan Tower Life Insurance Company and Subsidiaries
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements -- (continued)
6. Derivatives (continued)
Based on gross notional amounts, a substantial portion of the Company's
derivatives was not designated or did not qualify as part of a hedging
relationship at both December 31, 2017 and 2016. The Company's use of
derivatives includes (i) derivatives that serve as macro hedges of the
Company's exposure to various risks and that generally do not qualify for hedge
accounting due to the criteria required under the portfolio hedging rules;
(ii) derivatives that economically hedge insurance liabilities that contain
mortality or morbidity risk and that generally do not qualify for hedge
accounting because the lack of these risks in the derivatives cannot support an
expectation of a highly effective hedging relationship; and (iii) written
credit default swaps that are used to synthetically create credit investments
and that do not qualify for hedge accounting because they do not involve a
hedging relationship. For these nonqualified derivatives, changes in market
factors can lead to the recognition of fair value changes on the statement of
operations without an offsetting gain or loss recognized in earnings for the
item being hedged.
Net Derivative Gains (Losses)
The components of net derivative gains (losses) were as follows:
Years Ended December 31,
----------------------------
2017 2016 2015
---------- -------- --------
(In millions)
Freestanding derivatives and hedging gains (losses) (1). $ (1) $ 9 $ 5
--------
(1)Includes foreign currency transaction gains (losses) on hedged items in cash
flow and nonqualifying hedging relationships, which are not presented
elsewhere in this note.
The Company recognized net investment income from settlement payments
related to qualifying hedges of $1 million for both the years ended
December 31, 2017 and 2016. The amount the Company recognized in net investment
income from settlement payments related to qualifying hedges for the year ended
December 31, 2015 was not significant.
The Company recognized net derivative gains (losses) from settlement
payments related to nonqualifying hedges of $9 million, $23 million, and
$45 million for the years ended December 31, 2017, 2016, and 2015 respectively.
42
Metropolitan Tower Life Insurance Company and Subsidiaries
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements -- (continued)
6. Derivatives (continued)
Nonqualifying Derivatives and Derivatives for Purposes Other Than Hedging
The following table presents the amount and location of gains (losses)
recognized in income for derivatives that were not designated or not qualifying
as hedging instruments:
Net
Derivative
Gains (Losses)
--------------
(In millions)
Year Ended December 31, 2017
Interest rate derivatives...................................... $ (8)
Foreign currency exchange rate derivatives..................... (5)
Credit derivatives -- written.................................. 1
-----------
Total....................................................... $ (12)
===========
Year Ended December 31, 2016
Interest rate derivatives...................................... $ (20)
Foreign currency exchange rate derivatives..................... 7
Credit derivatives -- written.................................. 1
-----------
Total....................................................... $ (12)
===========
Year Ended December 31, 2015
Interest rate derivatives...................................... $ (40)
Foreign currency exchange rate derivatives..................... 2
Credit derivatives -- written.................................. (1)
-----------
Total....................................................... $ (39)
===========
Fair Value Hedges
The Company designates and accounts for the following as fair value hedges
when they have met the requirements of fair value hedging: (i) interest rate
swaps to convert fixed rate assets to floating rate; and (ii) foreign currency
swaps to hedge the foreign currency fair value exposure of foreign currency
denominated assets.
The amounts the Company recognized in net derivative gains (losses)
representing the ineffective portion of all fair value hedges were less than
$1 million and ($1) million for the years ended December 31, 2017 and 2016,
respectively. The amounts recognized in net derivative gains (losses)
representing the ineffective portion of all fair value hedges was not
significant for the year ended December 31, 2015. Changes in the estimated fair
value of the derivatives recognized in net derivative gains (losses) were ($2)
million, $3 million and $1 million for each of the years ended December 31,
2017, 2016 and 2015, respectively. Changes in the estimated fair value of the
hedged items recognized in net derivative gains (losses) were $2 million, ($4)
million, and ($1) million for each of the years ended December 31, 2017, 2016
and 2015, respectively.
All components of each derivative's gain or loss were included in the
assessment of hedge effectiveness.
Cash Flow Hedges
The Company designates and accounts for foreign currency swaps to hedge the
foreign currency cash flow exposure of foreign currency denominated assets, as
cash flow hedges, when they have met the requirements of cash flow hedging.
In certain instances, the Company discontinued cash flow hedge accounting
because the forecasted transactions were no longer probable of occurring.
Because certain of the forecasted transactions also were not probable of
occurring within two months of the anticipated date, the Company reclassified
certain amounts from AOCI into net derivative gains (losses). For both the
years ended December 31, 2017 and 2016, there were no amounts reclassified into
net derivative gains (losses) related to such discontinued cash flow hedges.
For the year ended December 31, 2015, the amount reclassified into net
derivative gains (losses) related to such discontinued cash flow hedges was not
significant.
There were no hedged forecasted transactions, other than the receipt or
payment of variable interest payments, for each of the years ended December 31,
2017, 2016 and 2015.
43
Metropolitan Tower Life Insurance Company and Subsidiaries
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements -- (continued)
6. Derivatives (continued)
At December 31, 2017, 2016, and 2015, the balance in AOCI associated with
foreign currency swaps designated and qualifying as cash flow hedges were
($1) million, $7 million, and $6 million, respectively .
For the year ended December 31, 2017, there were ($10) million of gains
(losses) deferred in AOCI related to foreign currency swaps. For both the years
ended December 31, 2016 and 2015, there were $4 million of gains (losses)
deferred in AOCI related to foreign currency swaps. For the years ended
December 31, 2017 and 2016, the amounts reclassified to net derivative gains
(losses) related to foreign currency swaps were ($2) million and $3 million,
respectively. For the year ended December 31, 2015, the amounts reclassified to
net derivative gains (losses) related to foreign currency swaps were not
significant. For the year ended December 31, 2017, there were no amounts
reclassified to net investment income related to foreign currency swaps. For
both the years ended December 31, 2016, and 2015 the amounts reclassified to
net investment income related to foreign currency swaps were not significant.
For the year ended December 31, 2017 the amount recognized in net derivative
gains (losses) which represented the ineffective portion of all cash flow
hedges was less than $1 million. For the years ended December 31, 2016 and 2015
the amounts recognized in net derivative gains (losses) which represented the
ineffective portion of all cash flow hedges were not significant.
All components of each derivative's gain or loss were included in the
assessment of hedge effectiveness.
At December 31, 2017, the amounts of deferred net gains (losses) on
derivatives in AOCI that were expected to be reclassified to earnings within
the next 12 months were less than $1 million.
Credit Derivatives
In connection with synthetically created credit investment transactions, the
Company writes credit default swaps for which it receives a premium to insure
credit risk. Such credit derivatives are included within the nonqualifying
derivatives and derivatives for purposes other than hedging table. If a credit
event occurs, as defined by the contract, the contract may be cash settled or
it may be settled gross by the Company paying the counterparty the specified
swap notional amount in exchange for the delivery of par quantities of the
referenced credit obligation. The Company's maximum amount at risk, assuming
the value of all referenced credit obligations is zero, was $87 million at both
December 31, 2017 and 2016. The Company can terminate these contracts at any
time through cash settlement with the counterparty at an amount equal to the
then current estimated fair value of the credit default swaps. At December 31,
2017 and 2016, the Company would have received $2 million and $1 million,
respectively, to terminate all of these contracts.
The following table presents the estimated fair value, maximum amount of
future payments and weighted average years to maturity of written credit
default swaps at:
December 31,
-----------------------------------------------------------------------------
2017 2016
-------------------------------------- --------------------------------------
Maximum Maximum
Estimated Amount Estimated Amount
Fair Value of Future Weighted Fair Value of Future Weighted
of Credit Payments under Average of Credit Payments under Average
Rating Agency Designation of Referenced Default Credit Default Years to Default Credit Default Years to
Credit Obligations (1) Swaps Swaps Maturity (2) Swaps Swaps Maturity (2)
----------------------------------------- ---------- -------------- ------------ ---------- -------------- ------------
(Dollars in millions)
Baa
Credit default swaps referencing indices. $ 2 $ 87 5.0 $ 1 $ 87 4.0
------ ------- ------ -------
Total................................ $ 2 $ 87 5.0 $ 1 $ 87 4.0
====== ======= ====== =======
--------
(1)The rating agency designations are based on availability and the midpoint of
the applicable ratings among Moody's Investors Service ("Moody's"),
Standard & Poor's Global Ratings ("S&P") and Fitch Ratings. If no rating is
available from a rating agency, then an internally developed rating is used.
(2)The weighted average years to maturity of the credit default swaps is
calculated based on weighted average gross notional amounts.
44
Metropolitan Tower Life Insurance Company and Subsidiaries
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements -- (continued)
6. Derivatives (continued)
Credit Risk on Freestanding Derivatives
The Company may be exposed to credit-related losses in the event of
nonperformance by its counterparties to derivatives. Generally, the current
credit exposure of the Company's derivatives is limited to the net positive
estimated fair value of derivatives at the reporting date after taking into
consideration the existence of master netting or similar agreements and any
collateral received pursuant to such agreements.
The Company manages its credit risk related to derivatives by entering into
transactions with creditworthy counterparties and establishing and monitoring
exposure limits. The Company's OTC-bilateral derivative transactions are
governed by ISDA Master Agreements which provide for legally enforceable
set-off and close-out netting of exposures to specific counterparties in the
event of early termination of a transaction, which includes, but is not limited
to, events of default and bankruptcy. In the event of an early termination, the
Company is permitted to set off receivables from the counterparty against
payables to the same counterparty arising out of all included transactions.
Substantially all of the Company's ISDA Master Agreements also include Credit
Support Annex provisions which require both the pledging and accepting of
collateral in connection with its OTC-bilateral derivatives.
The Company's OTC-cleared derivatives are effected through central clearing
counterparties. Such positions are marked to market and margined on a daily
basis (both initial margin and variation margin), and the Company has minimal
exposure to credit-related losses in the event of nonperformance by
counterparties to such derivatives.
See Note 7 for a description of the impact of credit risk on the valuation
of derivatives.
The estimated fair values of the Company's net derivative assets and net
derivative liabilities after the application of master netting agreements and
collateral were as follows at:
December 31,
----------------------------------------
2017 2016
---------------------------------------------------------------------- ------------------- -------------------
Derivatives Subject to a Master Netting Arrangement or a Similar Arrangement Assets Liabilities Assets Liabilities
---------------------------------------------------------------------------- ------- ----------- ------- -----------
(In millions)
Gross estimated fair value of derivatives:
OTC-bilateral (1)................................................................ $ 10 $ 5 $ 29 $ 5
OTC-cleared (1).................................................................. 2 -- 1 --
------- ------- ------- -------
Total gross estimated fair value of derivatives (1).......................... 12 5 30 5
Amounts offset on the consolidated balance sheets................................ -- -- -- --
------- ------- ------- -------
Estimated fair value of derivatives presented on the consolidated balance
sheets (1).................................................................. 12 5 30 5
Gross amounts not offset on the consolidated balance sheets:
Gross estimated fair value of derivatives: (2)
OTC-bilateral.................................................................... (4) (4) (5) (5)
OTC-cleared...................................................................... -- -- -- --
Cash collateral: (3)
OTC-bilateral.................................................................... (6) -- (23) --
OTC-cleared...................................................................... (2) -- (1) --
Securities collateral: (4)
OTC-bilateral.................................................................... -- -- -- --
OTC-cleared...................................................................... -- -- -- --
------- ------- ------- -------
Net amount after application of master netting agreements and
collateral.................................................................. $ -- $ 1 $ 1 $ --
======= ======= ======= =======
--------
45
Metropolitan Tower Life Insurance Company and Subsidiaries
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements -- (continued)
6. Derivatives (continued)
(1)Derivative liabilities included (income) or expense accruals reported in
accrued investment income or in other liabilities were less than $1 million
and $1 million at December 31, 2017 and 2016, respectively. At December 31,
2017, the derivative assets included in income or (expense) accruals
reported in accrued investment income or other liabilities were less than
$1 million. At December 31, 2016, there were no derivative assets included
in income or (expense) accruals reported in accrued investment income or
other liabilities.
(2)Estimated fair value of derivatives is limited to the amount that is subject
to set-off and includes income or expense accruals.
(3)Cash collateral received by the Company for OTC-bilateral and OTC-cleared
derivatives is included in cash and cash equivalents, short-term investments
or in fixed maturity securities, and the obligation to return it is included
in payables for collateral under securities loaned and other transactions on
the balance sheet. The receivable for the return of cash collateral provided
by the Company is inclusive of initial margin on OTC-cleared derivatives and
is included in premiums, reinsurance and other receivables on the balance
sheet. The amount of cash collateral offset in the table above is limited to
the net estimated fair value of derivatives after application of netting
agreements. At December 31, 2017 and 2016, the Company received excess cash
collateral of $5 million and $1 million, respectively. At December 31, 2017
and 2016, the Company did not provide excess cash collateral.
(4)Securities collateral received by the Company is held in separate custodial
accounts and is not recorded on the balance sheet. Subject to certain
constraints, the Company is permitted by contract to sell or re-pledge this
collateral, but at December 31, 2017 and 2016, none of the collateral had
been sold or re-pledged. Securities collateral pledged by the Company is
reported in fixed maturity securities on the balance sheet. Subject to
certain constraints, the counterparties are permitted by contract to sell or
re-pledge this collateral. The amount of securities collateral offset in the
table above is limited to the net estimated fair value of derivatives after
application of netting agreements and cash collateral. At December 31, 2017,
the Company did not receive excess securities collateral, and provided
excess securities collateral with an estimated fair value of $4 million for
its OTC-bilateral derivatives. At December 31, 2016, the Company did not
receive or provide excess securities collateral for its OTC-bilateral
derivatives. At both December 31, 2017 and 2016, the Company did not receive
excess securities collateral, and provided excess securities collateral with
an estimated fair value of $2 million, for its OTC-cleared derivatives,
which are not included in the table above due to the foregoing limitation.
The Company's collateral arrangements for its OTC-bilateral derivatives
generally require the counterparty in a net liability position, after
considering the effect of netting agreements, to pledge collateral when the
collateral amount owed by that counterparty reaches a minimum transfer amount.
In addition, certain of the Company's netting agreements for derivatives
contain provisions that require both MTL and the counterparty to maintain a
specific investment grade credit rating from each of Moody's and S&P. If a
party's credit or financial strength rating, as applicable, were to fall below
that specific investment grade credit rating, that party would be in violation
of these provisions, and the other party to the derivatives could terminate the
transactions and demand immediate settlement and payment based on such party's
reasonable valuation of the derivatives.
At December 31, 2017 , the estimated fair value of the Company's
OTC-bilateral derivatives that are in a net liability position after
considering the effect of netting arrangements were $1 million and was not
significant at December 31, 2016. At December 31, 2017, the estimated fair
value of the collateral pledged was less than $1 million and was not
significant at December 31, 2016. At December 31, 2017 and 2016, there was no
incremental collateral that MTL would be required to provide if there was a
one-notch downgrade in its financial strength rating at the reporting date or
if its financial strength rating sustained a downgrade to a level that
triggered a full overnight collateralization or termination of the derivative
position at reporting date.
46
Metropolitan Tower Life Insurance Company and Subsidiaries
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements -- (continued)
7. Fair Value
When developing estimated fair values, the Company considers three broad
valuation approaches: (i) the market approach, (ii) the income approach, and
(iii) the cost approach. The Company determines the most appropriate valuation
approach to use, given what is being measured and the availability of
sufficient inputs, giving priority to observable inputs. The Company
categorizes its assets and liabilities measured at estimated fair value into a
three-level hierarchy, based on the significant input with the lowest level in
its valuation. The input levels are as follows:
Level 1. Unadjusted quoted prices in active markets for identical assets or
liabilities. The Company defines active markets based on average
trading volume for equity securities. The size of the bid/ask spread
is used as an indicator of market activity for fixed maturity
securities.
Level 2. Quoted prices in markets that are not active or inputs that are
observable either directly or indirectly. These inputs can include
quoted prices for similar assets or liabilities other than quoted
prices in Level 1, quoted prices in markets that are not active, or
other significant inputs that are observable or can be derived
principally from or corroborated by observable market data for
substantially the full term of the assets or liabilities.
Level 3. Unobservable inputs that are supported by little or no market
activity and are significant to the determination of estimated fair
value of the assets or liabilities. Unobservable inputs reflect the
reporting entity's own assumptions about the assumptions that market
participants would use in pricing the asset or liability.
Financial markets are susceptible to severe events evidenced by rapid
depreciation in asset values accompanied by a reduction in asset liquidity. The
Company's ability to sell securities, or the price ultimately realized for
these securities, depends upon the demand and liquidity in the market and
increases the use of judgment in determining the estimated fair value of
certain securities.
Considerable judgment is often required in interpreting market data to
develop estimates of fair value, and the use of different assumptions or
valuation methodologies may have a material effect on the estimated fair value
amounts.
47
Metropolitan Tower Life Insurance Company and Subsidiaries
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements -- (continued)
7. Fair Value (continued)
Recurring Fair Value Measurements
The assets and liabilities measured at estimated fair value on a recurring
basis and their corresponding placement in the fair value hierarchy are
presented below at:
December 31, 2017
------------------------------------------
Fair Value Hierarchy
--------------------------
Total Estimated
Level 1 Level 2 Level 3 Fair Value
-------- -------- -------- ---------------
(In millions)
Assets
Fixed maturity securities:
U.S. corporate.......................... $ -- $ 1,159 $ 19 $ 1,178
U.S. government and agency.............. 313 377 -- 690
RMBS.................................... -- 552 80 632
Foreign corporate....................... -- 351 65 416
CMBS.................................... -- 306 -- 306
ABS..................................... -- 269 18 287
State and political subdivision......... -- 162 -- 162
Foreign government...................... -- 41 -- 41
-------- -------- -------- --------
Total fixed maturity securities...... 313 3,217 182 3,712
-------- -------- -------- --------
Equity securities....................... -- 11 -- 11
Short-term investments.................. 9 44 -- 53
Derivative assets: (1)
Interest rate........................... -- -- -- --
Foreign currency exchange rate.......... -- 10 -- 10
Credit.................................. -- 2 -- 2
-------- -------- -------- --------
Total derivative assets.............. -- 12 -- 12
-------- -------- -------- --------
Separate account assets (2)............. -- 123 -- 123
-------- -------- -------- --------
Total assets......................... $ 322 $ 3,407 $ 182 $ 3,911
======== ======== ======== ========
Liabilities
Derivative liabilities: (1)
Interest rate........................... $ -- $ -- $ -- $ --
Foreign currency exchange rate.......... -- 5 -- $ 5
-------- -------- -------- --------
Total derivative liabilities......... $ -- $ 5 $ -- $ 5
======== ======== ======== ========
48
Metropolitan Tower Life Insurance Company and Subsidiaries
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements -- (continued)
7. Fair Value (continued)
December 31, 2016
--------------------------------------------
Fair Value Hierarchy
----------------------------
Total Estimated
Level 1 Level 2 Level 3 Fair Value
-------- ---------- -------- ---------------
(In millions)
Assets
Fixed maturity securities:
U.S. corporate................................ $ -- $ 1,044 $ 39 $ 1,083
U.S. government and agency.................... 185 342 -- 527
RMBS.......................................... -- 344 56 400
Foreign corporate............................. -- 265 44 309
CMBS.......................................... -- 162 -- 162
ABS........................................... -- 499 14 513
State and political subdivision............... -- 134 -- 134
Foreign government............................ -- 31 -- 31
-------- ---------- -------- ----------
Total fixed maturity securities............ 185 2,821 153 3,159
-------- ---------- -------- ----------
Equity securities............................. -- 11 -- 11
Short-term investments........................ 23 109 -- 132
Derivative assets: (1)
Interest rate................................. -- 9 -- 9
Foreign currency exchange rate................ -- 20 -- 20
Credit........................................ -- 1 -- 1
-------- ---------- -------- ----------
Total derivative assets.................... -- 30 -- 30
-------- ---------- -------- ----------
Separate account assets (2)................... -- 112 -- 112
-------- ---------- -------- ----------
Total assets............................... $ 208 $ 3,083 $ 153 $ 3,444
======== ========== ======== ==========
Liabilities
Derivative liabilities: (1)
Interest rate................................. $ -- $ 4 $ -- $ 4
Foreign currency exchange rate................ -- -- -- --
-------- ---------- -------- ----------
Total derivative liabilities............... $ -- $ 4 $ -- $ 4
======== ========== ======== ==========
--------
(1)Derivative assets are presented within other invested assets on the
consolidated balance sheet and derivative liabilities are presented within
other liabilities on the consolidated balance sheet.
(2)Investment performance related to separate account assets is fully offset by
corresponding amounts credited to contractholders whose liability is
reflected within separate account liabilities. Separate account liabilities
are set equal to the estimated fair value of separate account assets.
The following describes the valuation methodologies used to measure assets
and liabilities at fair value. The description includes the valuation
techniques and key inputs for each category of assets or liabilities that are
classified within Level 2 and Level 3 of the fair value hierarchy.
49
Metropolitan Tower Life Insurance Company and Subsidiaries
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements -- (continued)
7. Fair Value (continued)
Investments
Valuation Controls and Procedures
On behalf of the Company and MetLife, Inc.'s Chief Investment Officer and
Chief Financial Officer, a pricing and valuation committee that is
independent of the trading and investing functions and comprised of senior
management, provides oversight of control systems and valuation policies for
securities, mortgage loans and derivatives. On a quarterly basis, this
committee reviews and approves new transaction types and markets, ensures
that observable market prices and market-based parameters are used for
valuation, wherever possible, and determines that judgmental valuation
adjustments, when applied, are based upon established policies and are
applied consistently over time. This committee also provides oversight of
the selection of independent third party pricing providers and the controls
and procedures to evaluate third party pricing. Periodically, the Chief
Accounting Officer reports to the Audit Committee of MetLife, Inc.'s Board
of Directors regarding compliance with fair value accounting standards.
The Company reviews its valuation methodologies on an ongoing basis and
revises those methodologies when necessary based on changing market
conditions. Assurance is gained on the overall reasonableness and consistent
application of input assumptions, valuation methodologies and compliance
with fair value accounting standards through controls designed to ensure
valuations represent an exit price. Several controls are utilized, including
certain monthly controls, which include, but are not limited to, analysis of
portfolio returns to corresponding benchmark returns, comparing a sample of
executed prices of securities sold to the fair value estimates, comparing
fair value estimates to management's knowledge of the current market,
reviewing the bid/ask spreads to assess activity, comparing prices from
multiple independent pricing services and ongoing due diligence to confirm
that independent pricing services use market-based parameters. The process
includes a determination of the observability of inputs used in estimated
fair values received from independent pricing services or brokers by
assessing whether these inputs can be corroborated by observable market
data. The Company ensures that prices received from independent brokers,
also referred to herein as "consensus pricing," represent a reasonable
estimate of fair value by considering such pricing relative to the Company's
knowledge of the current market dynamics and current pricing for similar
financial instruments. While independent non-binding broker quotations are
utilized, they are not used for a significant portion of the portfolio. For
example, fixed maturity securities priced using independent non-binding
broker quotations represent less than 1% of the total estimated fair value
of fixed maturity securities at December 31, 2016. Independent non-binding
broker quotations were not utilized at December 31, 2017.
The Company also applies a formal process to challenge any prices
received from independent pricing services that are not considered
representative of estimated fair value. If prices received from independent
pricing services are not considered reflective of market activity or
representative of estimated fair value, independent non-binding broker
quotations are obtained, or an internally developed valuation is prepared.
Internally developed valuations of current estimated fair value, which
reflect internal estimates of liquidity and nonperformance risks, compared
with pricing received from the independent pricing services, did not produce
material differences in the estimated fair values for the majority of the
portfolio; accordingly, overrides were not material. This is, in part,
because internal estimates of liquidity and nonperformance risks are
generally based on available market evidence and estimates used by other
market participants. In the absence of such market-based evidence,
management's best estimate is used.
Securities and Short-term Investments
When available, the estimated fair value of these financial instruments
is based on quoted prices in active markets that are readily and regularly
obtainable. Generally, these are the most liquid of the Company's securities
holdings and valuation of these securities does not involve management's
judgment.
When quoted prices in active markets are not available, the determination
of estimated fair value is based on market standard valuation methodologies,
giving priority to observable inputs. The significant inputs to the market
standard valuation methodologies for certain types of securities with
reasonable levels of price transparency are inputs that are observable in
the market or can be derived principally from, or corroborated by,
observable market data. When observable inputs are not available, the market
standard valuation methodologies rely on inputs that are significant to the
estimated fair value that are not observable in the market or cannot be
derived principally from, or corroborated by, observable market data. These
unobservable inputs can be based in large part on management's judgment or
estimation and cannot be supported by reference to market activity. Even
though these inputs are unobservable, management believes they are
consistent with what other market participants would use when pricing such
securities and are considered appropriate given the circumstances.
50
Metropolitan Tower Life Insurance Company and Subsidiaries
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements -- (continued)
7. Fair Value (continued)
The valuation of most instruments listed below is determined using
independent pricing sources, matrix pricing, discounted cash flow
methodologies or other similar techniques that use either observable market
inputs or unobservable inputs.
-----------------------------------------------------------------------------------------------------------------
Instrument Level 2 Level 3
Observable Inputs Unobservable Inputs
-----------------------------------------------------------------------------------------------------------------
Fixed maturity securities
-----------------------------------------------------------------------------------------------------------------
U.S. corporate and Foreign corporate securities
-----------------------------------------------------------------------------------------------------------------
Valuation Approaches: Principally the market and Valuation Approaches: Principally the market
income approaches. approach.
Key Inputs: Key Inputs:
. quoted prices in markets that are not active . illiquidity premium
. benchmark yields; spreads off benchmark yields; . delta spread adjustments to reflect specific
new issuances; issuer rating credit-related issues
. trades of identical or comparable securities; . credit spreads
duration . quoted prices in markets that are not active
. Privately-placed securities are valued using for identical or similar securities that are
the additional key inputs: less liquid and based on lower levels of
. market yield curve; call provisions trading activity than securities classified in
. observable prices and spreads for similar Level 2
public or private securities that . independent non-binding broker quotations
incorporate the credit quality and industry
sector of the issuer
. delta spread adjustments to reflect specific
credit-related issues
-----------------------------------------------------------------------------------------------------------------
U.S. government and agency, State and political subdivision and Foreign government securities
-----------------------------------------------------------------------------------------------------------------
Valuation Approaches: Principally the market Valuation Approaches: Principally the market
approach. approach.
Key Inputs: Key Inputs:
. quoted prices in markets that are not active . independent non-binding broker quotations
. benchmark U.S. Treasury yield or other yields . quoted prices in markets that are not active
. the spread off the U.S. Treasury yield curve for identical or similar securities that are
for the identical security less liquid and based on lower levels of
. issuer ratings and issuer spreads; trading activity than securities classified in
broker-dealer quotes Level 2
. comparable securities that are actively traded . credit spreads
-----------------------------------------------------------------------------------------------------------------
Structured Securities
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------
Valuation Approaches: Principally the market and Valuation Approaches: Principally the market and
income approaches. income approaches.
Key Inputs: Key Inputs:
. quoted prices in markets that are not active . credit spreads
. spreads for actively traded securities; . quoted prices in markets that are not active
spreads off benchmark yields for identical or similar securities that are
. expected prepayment speeds and volumes less liquid and based on lower levels of
. current and forecasted loss severity; ratings; trading activity than securities classified in
geographic region Level 2
. weighted average coupon and weighted average . independent non-binding broker quotations
maturity
. average delinquency rates; debt-service
coverage ratios
. issuance-specific information, including, but
not limited to:
. collateral type; structure of the security;
vintage of the loans
. payment terms of the underlying assets
. payment priority within the tranche; deal
performance
-----------------------------------------------------------------------------------------------------------------
51
Metropolitan Tower Life Insurance Company and Subsidiaries
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements -- (continued)
7. Fair Value (continued)
Instrument Level 2 Level 3
Observable Inputs Unobservable Inputs
-----------------------------------------------------------------------------------------------------------------
Equity securities
-----------------------------------------------------------------------------------------------------------------
Valuation Approaches: Principally the market approach. N/A
Key Input:
.quoted prices in markets that are not considered active
-----------------------------------------------------------------------------------------------------------------
Short-term investments
-----------------------------------------------------------------------------------------------------------------
.Short-term investments are of a similar nature and class to the fixed maturity N/A
and equity securities described above; accordingly, the valuation approaches
and observable inputs used in their valuation are also similar to those
described above.
-----------------------------------------------------------------------------------------------------------------
Separate account assets (1)
-----------------------------------------------------------------------------------------------------------------
Mutual funds without readily determinable fair values as prices are not published publicly
-----------------------------------------------------------------------------------------------------------------
Key Input: N/A
.quoted prices or reported NAV provided by the fund managers
-----------------------------------------------------------------------------------------------------------------
--------
(1)Estimated fair value equals carrying value, based on the value of the
underlying assets, including mutual funds.
Derivatives
The estimated fair value of derivatives is determined through the use of
quoted market prices for exchange-traded derivatives, or through the use of
pricing models for OTC-bilateral and OTC-cleared derivatives. The
determination of estimated fair value, when quoted market values are not
available, is based on market standard valuation methodologies and inputs that
management believes are consistent with what other market participants would
use when pricing such instruments. Derivative valuations can be affected by
changes in interest rates, foreign currency exchange rates, financial indices,
credit spreads, default risk, nonperformance risk, volatility, liquidity and
changes in estimates and assumptions used in the pricing models. The valuation
controls and procedures for derivatives are described in "-- Investments."
The significant inputs to the pricing models for most OTC-bilateral and
OTC-cleared derivatives are inputs that are observable in the market or can be
derived principally from, or corroborated by, observable market data. Certain
OTC-bilateral and OTC-cleared derivatives may rely on inputs that are
significant to the estimated fair value that are not observable in the market
or cannot be derived principally from, or corroborated by, observable market
data. These unobservable inputs may involve significant management judgment or
estimation. Even though unobservable, these inputs are based on assumptions
deemed appropriate given the circumstances and management believes they are
consistent with what other market participants would use when pricing such
instruments.
Most inputs for OTC-bilateral and OTC-cleared derivatives are mid-market
inputs but, in certain cases, liquidity adjustments are made when they are
deemed more representative of exit value. Market liquidity, as well as the use
of different methodologies, assumptions and inputs, may have a material effect
on the estimated fair values of the Company's derivatives and could materially
affect net income.
The credit risk of both the counterparty and the Company are considered in
determining the estimated fair value for all OTC-bilateral and OTC-cleared
derivatives, and any potential credit adjustment is based on the net exposure
by counterparty after taking into account the effects of netting agreements
and collateral arrangements. The Company values its OTC-bilateral and
OTC-cleared derivatives using standard swap curves which may include a spread
to the risk-free rate, depending upon specific collateral arrangements. This
credit spread is appropriate for those parties that execute trades at pricing
levels consistent with similar collateral arrangements. As the Company and its
significant derivative counterparties generally execute trades at such pricing
levels and hold sufficient collateral, additional credit risk adjustments are
not currently required in the valuation process. The Company's ability to
consistently execute at such pricing levels is in part due to the netting
agreements and collateral arrangements that are in place with all of its
significant derivative counterparties. An evaluation of the requirement to
make additional credit risk adjustments is performed by the Company each
reporting period.
52
Metropolitan Tower Life Insurance Company and Subsidiaries
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements -- (continued)
7. Fair Value (continued)
Freestanding Derivatives Valuation Approaches and Key Inputs
Level 2
This level includes all types of derivatives utilized by the Company.
These derivatives are principally valued using the income approach.
Freestanding derivatives are principally valued using the income
approach. Valuations of non-option-based derivatives utilize present value
techniques, whereas valuations of option-based derivatives utilize option
pricing models. Key inputs are as follows:
Instrument Interest Rate Foreign Currency Credit
Exchange Rate
-----------------------------------------------------------------------------------------------------------------------
Inputs common to Level 2 by .swap yield curves .swap yield curves .swap yield curves
instrument type .basis curves .basis curves .credit curves
.interest rate volatility (1) .currency spot rates .recovery rates
.cross currency basis curves
-----------------------------------------------------------------------------------------------------------------------
--------
(1)Option-based only.
Transfers between Levels
Overall, transfers between levels occur when there are changes in the
observability of inputs and market activity. Transfers into or out of any
level are assumed to occur at the beginning of the period.
Transfers between Levels 1 and 2:
There were no transfers between Levels 1 and 2 for assets and liabilities
measured at estimated fair value and still held at both December 31, 2017
and 2016.
Transfers into or out of Level 3:
Assets and liabilities are transferred into Level 3 when a significant
input cannot be corroborated with market observable data. This occurs when
market activity decreases significantly and underlying inputs cannot be
observed, current prices are not available, and/or when there are
significant variances in quoted prices, thereby affecting transparency.
Assets and liabilities are transferred out of Level 3 when circumstances
change such that a significant input can be corroborated with market
observable data. This may be due to a significant increase in market
activity, a specific event, or one or more significant input(s) becoming
observable.
53
Metropolitan Tower Life Insurance Company and Subsidiaries
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements -- (continued)
7. Fair Value (continued)
Assets and Liabilities Measured at Fair Value Using Significant Unobservable
Inputs (Level 3)
The following table presents certain quantitative information about the
significant unobservable inputs used in the fair value measurement, and the
sensitivity of the estimated fair value to changes in those inputs, for the
more significant asset and liability classes measured at fair value on a
recurring basis using significant unobservable inputs (Level 3) at:
December 31, 2017 December 31, 2016 Impact of
-------------------- -------------------- Increase in Input
Significant Weighted Weighted on Estimated
Valuation Techniques Unobservable Inputs Range Average (1) Range Average (1) Fair Value (2)
-------------------- --------------------- -------- ----------- -------- ----------- -----------------
Fixed maturity
securities (3)
U.S. corporate and Matrix pricing Offered quotes (4) 100 -141 110 99 - 138 111 Increase
foreign corporate.......
Market pricing Quoted prices (4) 99 - 103 101 25 - 100 84 Increase
-------------------------------------------------------------------------------------------------------
RMBS..................... Market pricing Quoted prices (4) 84 - 104 99 83 - 105 97 Increase (5)
-------------------------------------------------------------------------------------------------------
ABS...................... Market pricing Quoted prices (4) 90 - 103 99 99 - 101 100 Increase (5)
Consensus pricing Offered quotes (4) 99 - 99 99 Increase (5)
-------------------------------------------------------------------------------------------------------
--------
(1)The weighted average for fixed maturity securities is determined based on
the estimated fair value of the securities.
(2)The impact of a decrease in input would have the opposite impact on the
estimated fair value.
(3)Significant increases (decreases) in expected default rates in isolation
would result in substantially lower (higher) valuations.
(4)Range and weighted average are presented in accordance with the market
convention for fixed maturity securities of dollars per hundred dollars of
par.
(5)Changes in the assumptions used for the probability of default are
accompanied by a directionally similar change in the assumption used for the
loss severity and a directionally opposite change in the assumptions used
for prepayment rates.
54
Metropolitan Tower Life Insurance Company and Subsidiaries
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements -- (continued)
7. Fair Value (continued)
The following tables summarize the change of all assets and (liabilities)
measured at estimated fair value on a recurring basis using significant
unobservable inputs (Level 3):
Fair Value Measurements Using
Significant Unobservable Inputs (Level 3)
----------------------------------------
Fixed Maturity Securities
----------------------------------------
Foreign
Corporate (1) Structured Government
------------- ---------- ----------
(In millions)
Balance, January 1, 2016................................................... $ 94 $ 81 $ 19
Total realized/unrealized gains (losses) included in net income
(loss) (2) (3)........................................................... -- 1 --
Total realized/unrealized gains (losses) included in AOCI.................. (2) -- --
Purchases (4).............................................................. 8 19 --
Sales (4).................................................................. (13) (5) --
Transfers into Level 3 (5)................................................. 8 -- --
Transfers out of Level 3 (5)............................................... (12) (26) (19)
------ ------ ------
Balance, December 31, 2016................................................. $ 83 $ 70 $ --
====== ====== ======
Total realized/unrealized gains (losses) included in net income
(loss) (2) (3)........................................................... -- 1 --
Total realized/unrealized gains (losses) included in AOCI.................. 5 -- --
Purchases (4).............................................................. 40 72 --
Sales (4).................................................................. (4) (31) --
Transfers into Level 3 (5)................................................. 6 -- --
Transfers out of Level 3 (5)............................................... (46) (14) --
------ ------ ------
Balance, December 31, 2017................................................. $ 84 $ 98 $ --
====== ====== ======
Changes in unrealized gains (losses) included in net income (loss) for the
instruments still held at December 31, 2015: (6)......................... $ -- $ 1 $ --
====== ====== ======
Changes in unrealized gains (losses) included in net income (loss) for the
instruments still held at December 31, 2016: (6)......................... $ -- $ 1 $ --
====== ====== ======
Changes in unrealized gains (losses) included in net income (loss) for the
instruments still held at December 31, 2017: (6)......................... $ -- $ -- $ --
====== ====== ======
Gains (Losses) Data for the year ended December 31, 2015:
Total realized/unrealized gains (losses) included in net income
(loss) (2) (3)........................................................... $ 1 $ 1 $ --
Total realized/unrealized gains (losses) included in AOCI.................. $ (9) $ (1) $ (1)
--------
(1)Comprised of U.S. and foreign corporate securities.
(2)Amortization of premium/accretion of discount is included within net
investment income. Impairments charged to net income (loss) on securities
are included in net investment gains (losses).
(3)Interest accruals, as well as cash interest coupons received, are excluded
from the rollforward.
(4)Items purchased and then sold in the same period are excluded from the
rollforward.
(5)Gains and losses, in net income (loss) and OCI, are calculated assuming
transfers into and/or out of Level 3 occurred at the beginning of the
period. Items transferred into and then out of Level 3 in the same period
are excluded from the rollforward.
(6)Changes in unrealized gains (losses) included in net income (loss) relate to
assets and liabilities still held at the end of the period.
55
Metropolitan Tower Life Insurance Company and Subsidiaries
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements -- (continued)
7. Fair Value (continued)
Fair Value of Financial Instruments Carried at Other Than Fair Value
The following tables provide fair value information for financial
instruments that are carried on the balance sheet at amounts other than fair
value. These tables exclude the following financial instruments: cash and cash
equivalents, accrued investment income and payables for collateral under
securities loaned and other transactions. The estimated fair value of the
excluded financial instruments, which are primarily classified in Level 2,
approximates carrying value as they are short-term in nature such that the
Company believes there is minimal risk of material changes in interest rates or
credit quality. All remaining balance sheet amounts excluded from the tables
below are not considered financial instruments subject to this disclosure.
The carrying values and estimated fair values for such financial
instruments, and their corresponding placement in the fair value hierarchy, are
summarized as follows at:
December 31, 2017
-----------------------------------------------
Fair Value Hierarchy
---------------------------
Total
Carrying Estimated
Value Level 1 Level 2 Level 3 Fair Value
-------- -------- -------- --------- ----------
(In millions)
Assets
Mortgage loans.......................... $ 306 $ -- $ -- $ 325 $ 325
Policy loans............................ $ 250 $ -- $ 32 $ 371 $ 403
Premiums, reinsurance and other
receivables........................... $ 661 $ -- $ 1 $ 689 $ 690
Liabilities
Policyholder account balances........... $ 911 $ -- $ -- $ 938 $ 938
Other liabilities....................... $ 8 $ -- $ 8 $ -- $ 8
December 31, 2016
-----------------------------------------------
Fair Value Hierarchy
---------------------------
Total
Carrying Estimated
Value Level 1 Level 2 Level 3 Fair Value
-------- -------- -------- --------- ----------
(In millions)
Assets
Mortgage loans.......................... $ 231 $ -- $ -- $ 237 $ 237
Policy loans............................ $ 257 $ -- $ 32 $ 387 $ 419
Premiums, reinsurance and other
receivables........................... $ 667 $ -- $ -- $ 722 $ 722
Liabilities
Policyholder account balances........... $ 917 $ -- $ -- $ 931 $ 931
Other liabilities....................... $ 8 $ -- $ 8 $ -- $ 8
The methods, assumptions and significant valuation techniques and inputs
used to estimate the fair value of financial instruments are summarized as
follows:
Mortgage Loans
The estimated fair value of mortgage loans is primarily determined by
estimating expected future cash flows and discounting them using current
interest rates for similar mortgage loans with similar credit risk, or is
determined from pricing for similar loans.
56
Metropolitan Tower Life Insurance Company and Subsidiaries
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements -- (continued)
7. Fair Value (continued)
Policy Loans
Policy loans with fixed interest rates are classified within Level 3. The
estimated fair values for these loans are determined using a discounted cash
flow model applied to groups of similar policy loans determined by the nature
of the underlying insurance liabilities. Cash flow estimates are developed by
applying a weighted-average interest rate to the outstanding principal balance
of the respective group of policy loans and an estimated average maturity
determined through experience studies of the past performance of policyholder
repayment behavior for similar loans. These cash flows are discounted using
current risk-free interest rates with no adjustment for borrower credit risk,
as these loans are fully collateralized by the cash surrender value of the
underlying insurance policy. Policy loans with variable interest rates are
classified within Level 2 and the estimated fair value approximates carrying
value due to the absence of borrower credit risk and the short time period
between interest rate resets, which presents minimal risk of a material change
in estimated fair value due to changes in market interest rates.
Premiums, Reinsurance and Other Receivables
Premiums, reinsurance and other receivables are comprised of certain
amounts recoverable under reinsurance agreements.
Amounts recoverable under ceded reinsurance agreements, which the Company
has determined do not transfer significant risk such that they are accounted
for using the deposit method of accounting, have been classified as Level 3.
The valuation is based on discounted cash flow methodologies using significant
unobservable inputs. The estimated fair value is determined using interest
rates determined to reflect the appropriate credit standing of the assuming
counterparty.
Policyholder Account Balances
These policyholder account balances include investment contracts which
primarily include fixed deferred annuities, fixed term payout annuities and
total control accounts. The valuation of these investment contracts is based
on discounted cash flow methodologies using significant unobservable inputs.
The estimated fair value is determined using current market risk-free interest
rates adding a spread to reflect the nonperformance risk in the liability.
Other Liabilities
Other liabilities consist primarily of amounts due for securities purchased
but not yet settled. The Company evaluates the specific terms, facts and
circumstances of each instrument to determine the appropriate estimated fair
values, which are not materially different from the carrying values.
8. Equity
Statutory Equity and Income
The state of domicile of MTL imposes risk-based capital ("RBC") requirements
that were developed by the National Association of Insurance Commissioners
("NAIC"). Regulatory compliance is determined by a ratio of a company's total
adjusted capital, calculated in the manner prescribed by the NAIC ("TAC") to
its authorized control level RBC, calculated in the manner prescribed by the
NAIC ("ACL RBC"), based on the statutory-based filed financial statements.
Companies below specific trigger levels or ratios are classified by their
respective levels, each of which requires specified corrective action. The
minimum level of TAC before corrective action commences is twice ACL RBC ("CAL
RBC"). The CAL RBC ratios for MTL were in excess of 400% at both December 31,
2017 and 2016.
MTL prepares statutory-basis financial statements in accordance with
statutory accounting practices prescribed or permitted by the Delaware
Department of Insurance. The NAIC has adopted the Codification of Statutory
Accounting Principles ("Statutory Codification"). Statutory Codification is
intended to standardize regulatory accounting and reporting to state insurance
departments. However, statutory accounting principles continue to be
established by individual state laws and permitted practices. Modifications by
the state insurance department may impact the effect of Statutory Codification
on the statutory capital and surplus of MTL.
Statutory accounting principles differ from GAAP primarily by charging
policy acquisition costs to expense as incurred, establishing future policy
benefit liabilities using different actuarial assumptions, reporting surplus
notes as surplus instead of debt, reporting of reinsurance agreements and
valuing securities on a different basis.
In addition, certain assets are not admitted under statutory accounting
principles and are charged directly to surplus. The most significant assets not
admitted by MTL are net deferred income tax assets resulting from temporary
differences between statutory accounting principles basis and tax basis not
expected to reverse and become recoverable within three years.
57
Metropolitan Tower Life Insurance Company and Subsidiaries
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements -- (continued)
8. Equity (continued)
The tables below present amounts from MTL, which are derived from the
statutory-basis financial statements as filed with the Delaware Department of
Insurance.
Statutory net income (loss) was as follows:
Years Ended December 31,
------------------------------
Company State of Domicile 2017 2016 2015
------------------------ ----------------- --------- -------- -----------
(In millions)
Metropolitan Tower Life
Insurance Company...... Delaware $ 74 $ 8 $ (42)
Statutory capital and surplus was as follows at:
December 31,
---------------------
Company 2017 2016
--------------------------------------------------- ---------- ----------
(In millions)
Metropolitan Tower Life Insurance Company........... $ 733 $ 669
Dividend Restrictions
The table below sets forth the dividends permitted to be paid by MTL to
MetLife, Inc. without insurance regulatory approval and dividends paid:
2018 2017 2016
----------------- ---------- ---------
Permitted Without
Company Approval (1) Paid Paid
------------------------------------------------- ----------------- ---------- ---------
(In millions)
Metropolitan Tower Life Insurance Company......... $ 73 $ -- $ 60
--------
(1)Reflects dividend amounts that may be paid during 2018 without prior
regulatory approval. However, because dividend tests may be based on
dividends previously paid over a rolling 12-month period, if paid before a
specified date during 2018, some or all of such dividends may require
regulatory approval.
Under Delaware Insurance Code, MTL is permitted, without prior insurance
regulatory clearance, to pay a stockholder dividend to MetLife, Inc. as long as
the amount of the dividend when aggregated with all other dividends in the
preceding 12 months does not exceed the greater of: (i) 10% of its surplus to
policyholders as of the end of the immediately preceding calendar year; or
(ii) its net statutory gain from operations for the immediately preceding
calendar year (excluding realized capital gains), not including pro rata
distributions of each insurer's own securities. MTL will be permitted to pay a
dividend to MetLife, Inc. in excess of the greater of such two amounts only if
it files notice of the declaration of such a dividend and the amount thereof
with the Delaware Commissioner of Insurance (the "Delaware Commissioner") and
the Delaware Commissioner either approves the distribution of the dividend or
does not disapprove the distribution within 30 days of its filing. In addition,
any dividend that exceeds earned surplus (defined as "unassigned funds
(surplus)") as of the immediately preceding calendar year requires insurance
regulatory approval. Under Delaware Insurance Code, the Delaware Commissioner
has broad discretion in determining whether the financial condition of a stock
life insurance company would support the payment of such dividends to its
stockholders.
58
Metropolitan Tower Life Insurance Company and Subsidiaries
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements -- (continued)
8. Equity (continued)
Accumulated Other Comprehensive Income (Loss)
Information regarding changes in the balances of each component of AOCI was
as follows:
Unrealized
Investment Gains Unrealized
(Losses), Net of Gains (Losses)
Related Offsets (1) on Derivatives Total
------------------- -------------- -------
(In millions)
Balance at December 31, 2014.................. $ 202 $ -- $ 202
OCI before reclassifications.................. (129) 4 (125)
Deferred income tax benefit (expense)......... 45 (2) 43
------- ------- -------
AOCI before reclassifications, net of
income tax............................... 118 2 120
Amounts reclassified from AOCI................ -- -- --
Deferred income tax benefit (expense)......... -- -- --
------- ------- -------
Amounts reclassified from AOCI, net of
income tax............................... -- -- --
------- ------- -------
Balance at December 31, 2015.................. 118 2 120
OCI before reclassifications.................. 22 4 26
Deferred income tax benefit (expense)......... (9) (1) (10)
------- ------- -------
AOCI before reclassifications, net of
income tax............................... 131 5 136
Amounts reclassified from AOCI................ 12 (3) 9
Deferred income tax benefit (expense)......... (4) 1 (3)
------- ------- -------
Amounts reclassified from AOCI, net of
income tax............................... 8 (2) 6
------- ------- -------
Balance at December 31, 2016.................. 139 3 142
OCI before reclassifications.................. 27 (10) 17
Deferred income tax benefit (expense)......... (8) 3 (5)
------- ------- -------
AOCI before reclassifications, net of
income tax............................... 158 (4) 154
Amounts reclassified from AOCI................ (3) 2 (1)
Deferred income tax benefit (expense)......... 1 (1) --
------- ------- -------
Amounts reclassified from AOCI, net of
income tax............................... (2) 1 (1)
------- ------- -------
Balance at December 31, 2017.................. $ 156 $ (3) $ 153
======= ======= =======
--------
(1)See Note 5 for information on offsets to investments related to DAC.
59
Metropolitan Tower Life Insurance Company and Subsidiaries
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements -- (continued)
8. Equity (continued)
Information regarding amounts reclassified out of each component of AOCI was
as follows:
Consolidated Statement of
AOCI Components Amounts Reclassified from AOCI Operations Locations
------------------------------------------------- ----------------------------- ------------------------------
Years Ended December 31,
-------------------------------
2017 2016 2015
--------- --------- ---------
(In millions)
Net unrealized investment gains (losses):
Net unrealized investment gains (losses).......... $ 1 $ (9) $ -- Net investment gains (losses)
Net unrealized investment gains (losses).......... 2 (3) -- Net derivative gains (losses)
--------- --------- ---------
Net unrealized investment gains (losses),
before income tax............................ 3 (12) --
Income tax (expense) benefit...................... (1) 4 --
--------- --------- ---------
Net unrealized investment gains (losses), net
of income tax................................ 2 (8) --
--------- --------- ---------
Unrealized gains (losses) on derivatives - cash
flow hedges:
Foreign currency swaps............................ (2) 3 -- Net derivative gains (losses)
--------- --------- ---------
Gains (losses) on cash flow hedges, before
income tax................................... (2) 3 --
Income tax (expense) benefit...................... 1 (1) --
--------- --------- ---------
Gains (losses) on cash flow hedges, net of
income tax................................... (1) 2 --
--------- --------- ---------
Total reclassifications, net of income tax..... $ 1 $ (6) $ --
========= ========= =========
9. Other Expenses
Information on other expenses was as follows:
Years Ended December 31,
-----------------------------
2017 2016 2015
--------- --------- ---------
(In millions)
General and administrative expenses............... $ 34 $ 20 $ 34
Premium taxes, other taxes, and licenses & fees... 2 3 3
Commissions and other variable expenses........... 22 1 1
Amortization of DAC............................... 7 7 13
--------- --------- ---------
Total other expenses........................... $ 65 $ 31 $ 51
========= ========= =========
Certain prior year amounts have been reclassified to conform to the current
year presentation, which has been revised to align the expense categories with
the Company's businesses. The reclassifications did not result in a change to
total other expenses.
Amortization of DAC
See Note 3 for additional information on DAC including impacts of
amortization.
Affiliated Expenses
See Note 12 for a discussion of affiliated expenses included in the table
above.
10. Income Tax
On December 22, 2017, President Trump signed into law U.S. Tax Reform. U.S.
Tax Reform includes numerous changes in tax law, including a permanent
reduction in the federal corporate income tax rate from 35% to 21%, which took
effect for
60
Metropolitan Tower Life Insurance Company and Subsidiaries
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements -- (continued)
10. Income Tax (continued)
taxable years beginning on or after January 1, 2018, and a territorial
international tax system which generally eliminates U.S. federal income tax on
dividends received from foreign subsidiaries.
The incremental financial statement impact related to U.S. Tax Reform was as
follows:
U.S. Tax Reform
---------------
(In millions)
Income (loss) before provision for income tax............... $ (1)
Provision for income tax expense (benefit):
Deferred tax revaluation.................................... (65)
----------
Total provision for income tax expense (benefit)......... (65)
----------
Income (loss), net of income tax............................ 64
Income tax (expense) benefit related to items of other
comprehensive income (loss)............................... 1
----------
Increase to net equity from U.S. Tax Reform................. $ 65
==========
In accordance with SAB 118 issued by the U.S. Securities and Exchange
Commission ("SEC") in December 2017, the Company has recorded provisional
amounts for certain items for which the income tax accounting is not complete.
For these items, the Company has recorded a reasonable estimate of the tax
effects of U.S. Tax Reform. The estimates will be reported as provisional
amounts during a measurement period, which will not exceed one year from the
date of enactment of U.S. Tax Reform. The Company may reflect adjustments to
its provisional amounts upon obtaining, preparing, or analyzing additional
information about facts and circumstances that existed as of the enactment date
that, if known, would have affected the income tax effects initially reported
as provisional amounts.
The following item is considered a provisional estimate due to complexities
and ambiguities in U.S. Tax Reform which resulted in incomplete accounting for
the tax effects of these provisions. Further guidance, either legislative or
interpretive, and analysis will be required to complete the accounting for this
item:
. Alternative Minimum Tax Credits - U.S. Tax Reform eliminates the
corporate alternative minimum tax and allows for minimum tax credit
carryforwards to be used to offset future regular tax or to be refunded
over the next few years. However, pursuant to the requirements of the
Balanced Budget and Emergency Deficit Control Act of 1985, as amended,
refund payments issued for corporations claiming refundable prior year
alternative minimum tax credits are subject to a sequestration rate of
6.9%. The application of this fee to refunds in future years is subject
to further guidance. Additionally, the sequestration reduction rate in
effect at the time is subject to uncertainty. The Company has recorded a
less than $1 million tax charge included within the deferred tax
revaluation.
The provision for income tax was as follows:
Years Ended December 31,
-----------------------------------
2017 2016 2015
---------- ---------- ----------
(In millions)
Current:
Federal........................................... $ (15) $ 10 $ 88
Deferred:
Federal........................................... (88) (5) (80)
---------- ---------- ----------
Provision for income tax expense (benefit)..... $ (103) $ 5 $ 8
========== ========== ==========
61
Metropolitan Tower Life Insurance Company and Subsidiaries
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements -- (continued)
10. Income Tax (continued)
The reconciliation of the income tax provision at the U.S. statutory rate to
the provision for income tax as reported was as follows:
Years Ended December 31,
---------------------------------
2017 2016 2015
---------- ---------- ----------
(In millions)
Tax provision at U.S. statutory rate.......... $ 11 $ 5 $ 8
Tax effect of:
U.S. Tax Reform impact........................ (65) -- --
Distribution of former subsidiary (1)......... (48) -- --
Other, net.................................... (1) -- --
---------- ---------- ----------
Provision for income tax expense (benefit). $ (103) $ 5 $ 8
========== ========== ==========
--------
(1)In 2013, the Company distributed all of the issued and outstanding shares of
common stock of MetLife Reinsurance Company of Delaware ("MRD"), a
wholly-owned subsidiary, to MetLife, Inc. in the form of a dividend and
deferred the related tax benefit. In August 2017, MetLife, Inc. distributed
MRD to third parties and the Company recognized the deferred tax benefit
related to the dividend of MRD.
Deferred income tax represents the tax effect of the differences between the
book and tax bases of assets and liabilities. Net deferred income tax assets
and liabilities consisted of the following at:
December 31,
------------------------
2017 2016
----------- -----------
(In millions)
Deferred income tax assets:
Tax credit carryforwards.......................... $ 6 $ 7
DAC............................................... 6 6
----------- -----------
Total deferred income tax assets............... 12 13
----------- -----------
Deferred income tax liabilities:
Investments, including derivatives................ 47 76
Net unrealized investment gains................... 49 77
Policyholder liabilities and receivables.......... 25 50
Other liabilities................................. 10 12
----------- -----------
Total deferred income tax liabilities.......... 131 215
----------- -----------
Net deferred income tax asset (liability)...... $ (119) $ (202)
=========== ===========
Tax credit carryforwards of $7 million at December 31, 2017 will expire
beginning in 2022.
The Company participates in a tax sharing agreement with MetLife, Inc., as
described in Note 1. Pursuant to this tax sharing agreement, the amounts due
from affiliates included $21 million and $1 million for the years ended
December 31, 2017 and 2016, respectively.
The Company files income tax returns with the U.S. federal government and
various state and local jurisdictions. The Company is under continuous
examination by the Internal Revenue Service ("IRS") and other tax authorities
in jurisdictions in which the Company has significant business operations. The
income tax years under examination vary by jurisdiction and subsidiary. The
Company is no longer subject to U.S. federal, state, or local income tax
examinations for years prior to 2007.
62
Metropolitan Tower Life Insurance Company and Subsidiaries
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements -- (continued)
10. Income Tax (continued)
The Company's liability for unrecognized tax benefits may increase or
decrease in the next 12 months. For example, federal tax legislation could
impact unrecognized tax benefits. A reasonable estimate of the increase or
decrease cannot be made at this time. However, the Company continues to believe
that the ultimate resolution of the pending issues will not result in a
material change to its consolidated financial statements, although the
resolution of income tax matters could impact the Company's effective tax rate
for a particular future period. The Company had no unrecognized tax benefits
for the years ended December 31, 2017, 2016 and 2015.
The Company classifies interest accrued related to unrecognized tax benefits
in interest expense, included within other expenses, while penalties are
included in income tax expense. The Company had no interest or penalties for
the years ended December 31, 2017, 2016 and 2015.
11. Contingencies, Commitments and Guarantees
Contingencies
Litigation
Sales Practices Claims
Over the past several years, the Company has faced claims and regulatory
inquiries and investigations, alleging improper marketing or sales of
individual life insurance policies, annuities, mutual funds or other
products. The Company believes adequate provision has been made in its
consolidated financial statements for all probable and reasonably estimable
losses for sales practices matters.
Summary
Various litigation, claims and assessments against the Company, in
addition to those discussed previously and those otherwise provided for in
the Company's consolidated financial statements, have arisen in the course
of the Company's business, including, but not limited to, in connection with
its activities as an insurer, investor and taxpayer. Further, state
insurance regulatory authorities and other federal and state authorities
regularly make inquiries and conduct investigations concerning the Company's
compliance with applicable insurance and other laws and regulations.
It is not possible to predict the ultimate outcome of all pending
investigations and legal proceedings. In some of the matters, very large
and/or indeterminate amounts, including punitive and treble damages, are
sought. Although in light of these considerations it is possible that an
adverse outcome in certain cases could have a material effect upon the
Company's financial position, based on information currently known by the
Company's management, in its opinion, the outcomes of such pending
investigations and legal proceedings are not likely to have such an effect.
However, given the large and/or indeterminate amounts sought in certain of
these matters and the inherent unpredictability of litigation, it is
possible that an adverse outcome in certain matters could, from time to
time, have a material effect on the Company's consolidated net income or
cash flows in particular annual periods.
Commitments
Mortgage Loan Commitments
The Company commits to lend funds under mortgage loan commitments. The
amounts of these mortgage loan commitments were $6 million at both
December 31, 2017 and 2016.
Commitments to Fund Private Corporate Bond Investments
The Company commits to lend funds under private corporate bond
investments. The amounts of these unfunded commitments were $129 million and
$3 million at December 31, 2017 and 2016, respectively.
63
Metropolitan Tower Life Insurance Company and Subsidiaries
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements -- (continued)
11. Contingencies, Commitments and Guarantees (continued)
Guarantees
In the normal course of its business, the Company has provided certain
indemnities, guarantees and commitments to third parties such that 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 ranging from
less than $1 million to $1 million, with a cumulative maximum of $2 million,
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. Management believes that
it is unlikely the Company will have to make any material payments under these
indemnities, guarantees, or commitments.
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 liabilities were less than $1 million at both
December 31, 2017 and 2016 for indemnities, guarantees and commitments.
12. Related Party Transactions
Service Agreements
The Company has entered into various agreements with affiliates for services
necessary to conduct its activities. Typical services provided under these
agreements include personnel and policy administrative functions. The bases for
such charges are modified and adjusted by management when necessary or
appropriate to reflect fairly and equitably the actual cost incurred by the
Company and/or affiliate. Expenses and fees incurred with affiliates related to
these agreements, recorded in other expenses, were $25 million, $13 million and
$13 million for the years ended December 31, 2017, 2016 and 2015, respectively.
Revenues related to a lease agreement with an affiliate, recorded in other
revenues, were $5 million for each of the years ended December 31, 2017, 2016
and 2015.
The Company had net receivables (payables) to affiliates, related to the
items discussed above, of $3 million and ($1) million at December 31, 2017 and
2016 respectively.
See Notes 4 and 5 for additional information on related party transactions.
13. Subsequent Events
The Company has evaluated events subsequent to December 31, 2017, through
April 13, 2018, which is the date these consolidated financial statements were
available to be issued.
Merger
In February 2018, the Company's Board of Directors approved the merger of
MTL and General American Life Insurance Company ("GALIC"), a wholly-owned
subsidiary of MetLife, Inc. MTL will be the surviving entity and expects to
redomicile to Nebraska. The Company expects the completion of the merger in the
first half of 2018, subject to certain regulatory approvals. At December 31,
2017, GALIC's total stockholder's equity was $2.0 billion.
64
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General American Life Insurance Company and Subsidiary
Consolidated Financial Statements
As of December 31, 2017 and 2016 and for the Years Ended December 31, 2017, 2016
and 2015 and Independent Auditors' Report
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholder of
General American Life Insurance Company:
We have audited the accompanying consolidated financial statements of General
American Life Insurance Company and its subsidiary (a wholly-owned subsidiary
of MetLife, Inc.) (the "Company"), which comprise the consolidated balance
sheets as of December 31, 2017 and 2016, and the related consolidated
statements of operations, comprehensive income (loss), stockholder's equity,
and cash flows for each of the three years in the period ended December 31,
2017, and the related notes to the consolidated financial statements.
Management's Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these
consolidated financial statements in accordance with accounting principles
generally accepted in the United States of America; this includes the design,
implementation, and maintenance of internal control relevant to the preparation
and fair presentation of consolidated financial statements that are free from
material misstatement, whether due to fraud or error.
Auditors' Responsibility
Our responsibility is to express an opinion on these consolidated financial
statements based on our audits. We conducted our audits in accordance with
auditing standards generally accepted in the United States of America. Those
standards require that we plan and perform the audit to obtain reasonable
assurance about whether the consolidated financial statements are free from
material misstatement.
An audit involves performing procedures to obtain audit evidence about the
amounts and disclosures in the consolidated financial statements. The
procedures selected depend on the auditor's judgment, including the assessment
of the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error. In making those risk assessments, the auditor
considers internal control relevant to the Company's preparation and fair
presentation of the consolidated financial statements in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose
of expressing an opinion on the effectiveness of the Company's internal
control. Accordingly, we express no such opinion. An audit also includes
evaluating the appropriateness of accounting policies used and the
reasonableness of significant accounting estimates made by management, as well
as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of General American
Life Insurance Company and its subsidiary as of December 31, 2017 and 2016, and
the results of their operations and their cash flows for each of the three
years in the period ended December 31, 2017, in accordance with accounting
principles generally accepted in the United States of America.
Emphasis of Matter
As discussed in Note 1 to the consolidated financial statements, 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. Our opinion is not
modified with respect to this matter.
/s/ DELOITTE & TOUCHE LLP
Certified Public Accountants
Tampa, Florida
April 12, 2018
2
General American Life Insurance Company and Subsidiary
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Consolidated Balance Sheets
December 31, 2017 and 2016
(In millions, except share and per share data)
2017 2016
----------- ----------
Assets
Investments:
Fixed maturity securities available-for-sale, at estimated fair value (amortized cost: $7,617 and $7,378,
respectively)............................................................................................ $ 8,356 $ 7,808
Equity securities available-for-sale, at estimated fair value (cost: $49 and $49, respectively)........... 51 53
Mortgage loans (net of valuation allowances of $5 and $4, respectively)................................... 980 857
Policy loans.............................................................................................. 1,664 1,680
Real estate and real estate joint ventures................................................................ 78 52
Other limited partnership interests....................................................................... 208 185
Short-term investments, at estimated fair value........................................................... 71 169
Other invested assets..................................................................................... 172 209
----------- ----------
Total investments...................................................................................... 11,580 11,013
Cash and cash equivalents, principally at estimated fair value............................................ 271 130
Accrued investment income................................................................................. 99 97
Premiums, reinsurance and other receivables............................................................... 3,021 2,927
Deferred policy acquisition costs and value of business acquired.......................................... 582 523
Current income tax recoverable............................................................................ 39 9
Other assets.............................................................................................. 146 138
Separate account assets................................................................................... 1,828 824
----------- ----------
Total assets........................................................................................... $ 17,566 $ 15,661
=========== ==========
Liabilities and Stockholder's Equity
Liabilities
Future policy benefits.................................................................................... $ 6,593 $ 6,175
Policyholder account balances............................................................................. 5,272 5,308
Other policy-related balances............................................................................. 238 259
Policyholder dividends payable............................................................................ 100 96
Payables for collateral under securities loaned and other transactions.................................... 420 381
Long-term debt............................................................................................ 104 104
Deferred income tax liability............................................................................. 137 117
Other liabilities......................................................................................... 894 756
Separate account liabilities.............................................................................. 1,828 824
----------- ----------
Total liabilities...................................................................................... 15,586 14,020
----------- ----------
Contingencies, Commitments and Guarantees (Note 12)
Stockholder's Equity
Common stock, par value $1.00 per share; 5,000,000 shares authorized; 3,000,000 shares issued and
outstanding.............................................................................................. 3 3
Additional paid-in capital................................................................................ 852 852
Retained earnings......................................................................................... 741 545
Accumulated other comprehensive income (loss)............................................................. 384 241
----------- ----------
Total stockholder's equity............................................................................. 1,980 1,641
----------- ----------
Total liabilities and stockholder's equity............................................................. $ 17,566 $ 15,661
=========== ==========
See accompanying notes to the consolidated financial statements.
3
General American Life Insurance Company and Subsidiary
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Consolidated Statements of Operations
For the Years Ended December 31, 2017, 2016 and 2015
(In millions)
2017 2016 2015
---------- ---------- ----------
Revenues
Premiums..................................................................... $ 710 $ 750 $ 687
Universal life and investment-type product policy fees....................... 66 64 76
Net investment income........................................................ 516 489 507
Other revenues............................................................... 4 7 6
Net investment gains (losses):
Other-than-temporary impairments on fixed maturity securities................ (1) (3) (1)
Other-than-temporary impairments on fixed maturity securities transferred to
other comprehensive income (loss).......................................... -- -- (1)
Other net investment gains (losses).......................................... (9) (7) (6)
---------- ---------- ----------
Total net investment gains (losses)......................................... (10) (10) (8)
Net derivative gains (losses)................................................ (109) (30) 219
---------- ---------- ----------
Total revenues.............................................................. 1,177 1,270 1,487
---------- ---------- ----------
Expenses
Policyholder benefits and claims............................................. 725 865 763
Interest credited to policyholder account balances........................... 128 131 133
Policyholder dividends....................................................... 146 148 140
Other expenses............................................................... 53 143 153
---------- ---------- ----------
Total expenses.............................................................. 1,052 1,287 1,189
---------- ---------- ----------
Income (loss) before provision for income tax................................ 125 (17) 298
Provision for income tax expense (benefit)................................... (71) (20) 103
---------- ---------- ----------
Net income (loss)........................................................... $ 196 $ 3 $ 195
========== ========== ==========
See accompanying notes to the consolidated financial statements.
4
General American Life Insurance Company and Subsidiary
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Consolidated Statements of Comprehensive Income (Loss)
For the Years Ended December 31, 2017, 2016 and 2015
(In millions)
2017 2016 2015
-------- ------- --------
Net income (loss)........................................................... $ 196 $ 3 $ 195
Other comprehensive income (loss):
Unrealized investment gains (losses), net of related offsets................ 251 87 (473)
Unrealized gains (losses) on derivatives.................................... (40) 7 18
Foreign currency translation adjustments.................................... 2 (2) (3)
Defined benefit plans adjustment............................................ -- -- 1
-------- ------- --------
Other comprehensive income (loss), before income tax...................... 213 92 (457)
Income tax (expense) benefit related to items of other comprehensive income
(loss).................................................................... (70) (32) 161
-------- ------- --------
Other comprehensive income (loss), net of income tax...................... 143 60 (296)
-------- ------- --------
Comprehensive income (loss)............................................... $ 339 $ 63 $ (101)
======== ======= ========
See accompanying notes to the consolidated financial statements.
5
General American Life Insurance Company and Subsidiary
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Consolidated Statements of Stockholder's Equity
For the Years Ended December 31, 2017, 2016 and 2015
(In millions)
Accumulated
Additional Other Total
Common Paid-in Retained Comprehensive Stockholder's
Stock Capital Earnings Income (Loss) Equity
--------- ---------- -------- ------------- -------------
Balance at December 31, 2014..................... $ 3 $ 853 $ 347 $ 477 $ 1,680
Net income (loss)................................ 195 195
Other comprehensive income (loss), net of income
tax............................................ (296) (296)
--------- ---------- -------- ------------- -------------
Balance at December 31, 2015..................... 3 853 542 181 1,579
Return of capital................................ (1) (1)
Net income (loss)................................ 3 3
Other comprehensive income (loss), net of income
tax............................................ 60 60
--------- ---------- -------- ------------- -------------
Balance at December 31, 2016..................... 3 852 545 241 1,641
Net income (loss)................................ 196 196
Other comprehensive income (loss), net of income
tax............................................ 143 143
--------- ---------- -------- ------------- -------------
Balance at December 31, 2017..................... $ 3 $ 852 $ 741 $ 384 $ 1,980
========= ========== ======== ============= =============
See accompanying notes to the consolidated financial statements.
6
General American Life Insurance Company and Subsidiary
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Consolidated Statements of Cash Flows
For the Years Ended December 31, 2017, 2016 and 2015
(In millions)
2017 2016 2015
--------- --------- ---------
Cash flows from operating activities
Net income (loss)........................................... $ 196 $ 3 $ 195
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization expenses...................... 1 1 2
Amortization of premiums and accretion of discounts
associated with investments, net........................... (36) (38) (37)
(Gains) losses on investments, net.......................... 10 10 8
(Gains) losses on derivatives, net.......................... 122 43 (207)
(Income) loss from equity method investments, net of
dividends or distributions................................. (2) (1) 25
Interest credited to policyholder account balances.......... 128 131 133
Interest (income) expense on equity-linked notes............ (16) (7) 1
Universal life and investment-type product policy fees...... (66) (64) (76)
Change in premiums, reinsurance and other receivables....... (116) 16 (39)
Change in deferred policy acquisition costs and value of
business acquired, net..................................... (81) (48) (67)
Change in income tax........................................ (80) (30) 51
Change in other assets...................................... 1 1 12
Change in insurance-related liabilities and policy-related
balances................................................... 359 284 304
Change in other liabilities................................. 5 (8) (39)
Other, net.................................................. 1 2 4
--------- --------- ---------
Net cash provided by (used in) operating activities........ 426 295 270
--------- --------- ---------
Cash flows from investing activities
Sales, maturities and repayments of:
Fixed maturity securities.................................. 2,254 2,231 2,417
Equity securities.......................................... 3 10 16
Mortgage loans............................................. 112 229 196
Real estate and real estate joint ventures................. -- 3 49
Other limited partnership interests........................ 21 42 68
Purchases of:
Fixed maturity securities.................................. (2,407) (2,400) (2,467)
Equity securities.......................................... (2) (1) (5)
Mortgage loans............................................. (207) (194) (308)
Real estate and real estate joint ventures................. (29) (3) (2)
Other limited partnership interests........................ (39) (39) (37)
Cash received in connection with freestanding derivatives... 46 91 131
Cash paid in connection with freestanding derivatives....... (85) (83) (23)
Net change in policy loans.................................. 16 52 17
Net change in short-term investments........................ 102 57 13
Net change in other invested assets......................... (1) (8) (22)
--------- --------- ---------
Net cash provided by (used in) investing activities....... $ (216) $ (13) $ 43
--------- --------- ---------
See accompanying notes to the consolidated financial statements.
7
General American Life Insurance Company and Subsidiary
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Consolidated Statements of Cash Flows -- (continued)
For the Years Ended December 31, 2017, 2016 and 2015
(In millions)
2017 2016 2015
---------- ---------- ----------
Cash flows from financing activities
Policyholder account balances:
Deposits........................................................................... $ 1,340 $ 427 $ 453
Withdrawals........................................................................ (1,445) (598) (739)
Net change in payables for collateral under securities loaned and other transactions. 39 (117) 12
Return of capital.................................................................... -- (1) --
Other, net........................................................................... (3) (2) (1)
---------- ---------- ----------
Net cash provided by (used in) financing activities................................ (69) (291) (275)
---------- ---------- ----------
Change in cash and cash equivalents................................................ 141 (9) 38
Cash and cash equivalents, beginning of year......................................... 130 139 101
---------- ---------- ----------
Cash and cash equivalents, end of year............................................. $ 271 $ 130 $ 139
========== ========== ==========
Supplemental disclosures of cash flow information
Net cash paid (received) for:
Interest............................................................................. $ 8 $ 8 $ 8
========== ========== ==========
Income tax........................................................................... $ 15 $ 6 $ 53
========== ========== ==========
See accompanying notes to the consolidated financial statements.
8
General American Life Insurance Company and Subsidiary
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements
1. Business, Basis of Presentation and Summary of Significant Accounting
Policies
Business
General American Life Insurance Company ("General American") and its
subsidiary (collectively, the "Company") is a wholly-owned subsidiary of
MetLife, Inc. General American is a Missouri corporation incorporated in 1933.
In December 2016, the Company was distributed as a non-cash extraordinary
dividend from Metropolitan Life Insurance Company ("MLIC") to MetLife, Inc.
The Company is licensed to conduct business in 49 states, the District of
Columbia and Puerto Rico. The Company provides annuities and universal,
variable and traditional life insurance, although not marketing these products.
The Company actively sells separate account contracts for the investment
management of defined benefit and contribution plan assets. This business
includes certain products to fund corporate-owned life insurance used to
finance nonqualified benefit programs for executives.
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 on the consolidated financial statements. In applying
these policies and estimates, management makes subjective and complex judgments
that frequently require assumptions 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.
Consolidation
The accompanying consolidated financial statements include the accounts of
General American and its subsidiary. Intercompany accounts and transactions
have been eliminated.
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.
Separate Accounts
Separate accounts are established in conformity with insurance laws.
Generally, the assets of the separate accounts cannot be used to settle the
liabilities that arise from any other business of the Company. Separate
account assets are subject to general account claims only to the extent the
value of such assets exceeds the separate account liabilities. The Company
reports separately, as assets and liabilities, investments held in separate
accounts and liabilities of the separate accounts if:
. such separate accounts are legally recognized;
. assets supporting the contract liabilities are legally insulated from the
Company's general account liabilities;
. investments are directed by the contractholder; and
. all investment performance, net of contract fees and assessments, is
passed through to the contractholder.
The Company reports separate account assets at their fair value, which is
based on the estimated fair values of the underlying assets comprising the
individual separate account portfolios. Investment performance (including
investment income, net investment gains (losses) and changes in unrealized
gains (losses)) and the corresponding amounts credited to contractholders of
such separate accounts are offset within the same line on the statements of
operations.
The Company's revenues reflect fees charged to the separate accounts,
including mortality charges, risk charges, policy administration fees,
investment management fees and surrender charges. Such fees are included in
universal life and investment-type product policy fees on the statements of
operations.
Reclassifications
Certain amounts in the prior years' consolidated financial statements and
related footnotes thereto have been reclassified to conform with the current
year presentation as discussed throughout the Notes to the Consolidated
Financial Statements.
9
General American Life Insurance Company and Subsidiary
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements -- (continued)
1. Business, Basis of Presentation and Summary of Significant Accounting
Policies (continued)
Summary of Significant Accounting Policies
The following are the Company's significant accounting policies with
references to notes providing additional information on such policies and
critical accounting estimates relating to such policies.
----------------------------------------------------------------------
Accounting Policy Note
----------------------------------------------------------------------
Insurance 2
----------------------------------------------------------------------
Deferred Policy Acquisition Costs and Value of Business Acquired 3
----------------------------------------------------------------------
Reinsurance 4
----------------------------------------------------------------------
Investments 5
----------------------------------------------------------------------
Derivatives 6
----------------------------------------------------------------------
Fair Value 7
----------------------------------------------------------------------
Income Tax 11
----------------------------------------------------------------------
Litigation Contingencies 12
----------------------------------------------------------------------
Insurance
Future Policy Benefit Liabilities and Policyholder Account Balances
The Company establishes liabilities for amounts payable under insurance
policies. Generally, amounts are payable over an extended period of time and
related liabilities are calculated as the present value of future expected
benefits to be paid, reduced by the present value of future expected
premiums. Such liabilities are established based on methods and underlying
assumptions in accordance with GAAP and applicable actuarial standards.
Principal assumptions used in the establishment of liabilities for future
policy benefits are mortality, morbidity, policy lapse, renewal, retirement,
disability incidence, disability terminations, investment returns,
inflation, expenses and other contingent events as appropriate to the
respective product type. These assumptions are established at the time the
policy is issued and are intended to estimate the experience for the period
the policy benefits are payable. Utilizing these assumptions, liabilities
are established on a block of business basis. For long-duration insurance
contracts, assumptions such as mortality, morbidity and interest rates are
"locked in" upon the issuance of new business. However, significant adverse
changes in experience on such contracts may require the establishment of
premium deficiency reserves. Such reserves are determined based on the then
current assumptions and do not include a provision for adverse deviation.
Premium deficiency reserves may also be established for short-duration
contracts to provide for expected future losses. These reserves are based on
actuarial estimates of the amount of loss inherent in that period, including
losses incurred for which claims have not been reported. The provisions for
unreported claims are calculated using studies that measure the historical
length of time between the incurred date of a claim and its eventual
reporting to the Company. Anticipated investment income is considered in the
calculation of premium deficiency losses for short-duration contracts.
Liabilities for universal life secondary guarantees are determined by
estimating the expected value of death benefits payable when the account
balance is projected to be zero and recognizing those benefits ratably over
the accumulation period based on total expected assessments. The assumptions
used in estimating the secondary guarantee liabilities are consistent with
those used for amortizing deferred policy acquisition costs ("DAC"), and are
thus subject to the same variability and risk as further discussed herein.
The benefits used in calculating the liabilities are based on the average
benefits payable over a range of scenarios.
The Company regularly reviews its estimates of liabilities for future
policy benefits and compares them with its actual experience. Differences
result in changes to the liability balances with related charges or credits
to benefit expenses in the period in which the changes occur.
Policyholder account balances relate to contracts or contract features
where the Company has no significant insurance risk.
10
General American Life Insurance Company and Subsidiary
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements -- (continued)
1. Business, Basis of Presentation and Summary of Significant Accounting
Policies (continued)
Other Policy-Related Balances
Other policy-related balances include policy and contract claims,
policyholder dividends left on deposit, unearned revenue liabilities,
policyholder dividends due and unpaid and premiums received in advance.
The liability for policy and contract claims generally relates to
incurred but not reported ("IBNR") death and disability claims, as well as
claims which have been reported but not yet settled. The liability for these
claims is based on the Company's estimated ultimate cost of settling all
claims. The Company derives estimates for the development of IBNR claims
principally from analyses of historical patterns of claims by business line.
The methods used to determine these estimates are continually reviewed.
Adjustments resulting from this continuous review process and differences
between estimates and payments for claims are recognized in policyholder
benefits and claims expense in the period in which the estimates are changed
or payments are made.
The unearned revenue liability relates to universal life-type and
investment-type products and represents policy charges for services to be
provided in future periods. The charges are deferred as unearned revenue and
amortized using the product's estimated gross profits, similar to DAC as
discussed further herein. Such amortization is recorded in universal life
and investment-type product policy fees.
The Company accounts for the prepayment of premiums on its individual
life and health contracts as premiums received in advance and applies the
cash received to premiums when due.
Recognition of Insurance Revenues and Deposits
Premiums related to traditional life and annuity contracts with life
contingencies are recognized as revenues when due from policyholders.
Policyholder benefits and expenses are provided to recognize profits over
the estimated lives of the insurance policies. When premiums are due over a
significantly shorter period than the period over which benefits are
provided, any excess profit is deferred and recognized into earnings in a
constant relationship to insurance in-force or, for annuities, the amount of
expected future policy benefit payments.
Premiums related to non-medical health and disability contracts are
recognized on a pro rata basis over the applicable contract term.
Deposits related to universal life-type and investment-type products are
credited to policyholder account balances. Revenues from such contracts
consist of fees for mortality, policy administration and surrender charges
and are recorded in universal life and investment-type product policy fees
in the period in which services are provided. Amounts that are charged to
earnings include interest credited and benefit claims incurred in excess of
related policyholder account balances.
All revenues and expenses are presented net of reinsurance, as applicable.
Deferred Policy Acquisition Costs and Value of Business Acquired
The Company incurs significant costs in connection with acquiring new and
renewal insurance business. Costs that are related directly to the successful
acquisition or renewal of insurance contracts are capitalized as DAC. Such
costs include:
. incremental direct costs of contract acquisition, such as commissions;
. the portion of an employee's total compensation and benefits related to
time spent selling, underwriting or processing the issuance of new and
renewal insurance business only with respect to actual policies acquired
or renewed; and
. other essential direct costs that would not have been incurred had a
policy not been acquired or renewed.
All other acquisition-related costs, including those related to general
advertising and solicitation, market research, agent training, product
development, unsuccessful sales and underwriting efforts, as well as all
indirect costs, are expensed as incurred.
Value of business acquired ("VOBA") is an intangible asset resulting from
a business combination that represents the excess of book value over the
estimated fair value of acquired insurance, annuity, and investment-type
contracts in-force at the acquisition date. The estimated fair value of the
acquired liabilities is based on projections, by
11
General American Life Insurance Company and Subsidiary
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements -- (continued)
1. Business, Basis of Presentation and Summary of Significant Accounting
Policies (continued)
each block of business, of future policy and contract charges, premiums,
mortality and morbidity, separate account performance, surrenders, operating
expenses, investment returns, nonperformance risk adjustment and other
factors. Actual experience on the purchased business may vary from these
projections.
DAC and VOBA are amortized as follows:
------------------------------------------------------------------------------
In proportion to the following over
Products: estimated lives of the contracts:
------------------------------------------------------------------------------
. Nonparticipating and Actual and expected future gross
non-dividend-paying traditional premiums.
contracts:
. Term insurance
. Nonparticipating whole life
insurance
------------------------------------------------------------------------------
. Participating, dividend-paying Actual and expected future gross
traditional contracts margins.
------------------------------------------------------------------------------
. Fixed and variable universal life Actual and expected future gross
contracts profits.
. Fixed and variable deferred
annuity contracts
------------------------------------------------------------------------------
See Note 3 for additional information on DAC and VOBA amortization.
Amortization of DAC and VOBA is included in other expenses.
The recovery of DAC and VOBA is dependent upon the future profitability of
the related business. DAC and VOBA are aggregated on the financial statements
for reporting purposes.
Reinsurance
For each of its reinsurance agreements, the Company determines whether the
agreement provides indemnification against loss or liability relating to
insurance risk in accordance with applicable accounting standards. Cessions
under reinsurance agreements do not discharge the Company's obligations as
the primary insurer. The Company reviews all contractual features, including
those that may limit the amount of insurance risk to which the reinsurer is
subject or features that delay the timely reimbursement of claims.
For reinsurance of existing in-force blocks of long-duration contracts
that transfer significant insurance risk, the difference, if any, between the
amounts paid (received), and the liabilities ceded (assumed) related to the
underlying contracts is considered the net cost of reinsurance at the
inception of the reinsurance agreement. The net cost of reinsurance is
recorded as an adjustment to DAC when there is a gain at inception on the
ceding entity and to other liabilities when there is a loss at inception. The
net cost of reinsurance is recognized as a component of other expenses when
there is a gain at inception and as policyholder benefits and claims when
there is a loss and is subsequently amortized on a basis consistent with the
methodology used for amortizing DAC related to the underlying reinsured
contracts. Subsequent amounts paid (received) on the reinsurance of in-force
blocks, as well as amounts paid (received) related to new business, are
recorded as ceded (assumed) premiums; and ceded (assumed) premiums,
reinsurance and other receivables (future policy benefits) are established.
For prospective reinsurance of short-duration contracts that meet the
criteria for reinsurance accounting, amounts paid (received) are recorded as
ceded (assumed) premiums and ceded (assumed) unearned premiums. Unearned
premiums are reflected as a component of premiums, reinsurance and other
receivables (future policy benefits). Such amounts are amortized through
earned premiums over the remaining contract period in proportion to the
amount of insurance protection provided. For retroactive reinsurance of
short-duration contracts that meet the criteria of reinsurance accounting,
amounts paid (received) in excess of the related insurance liabilities
ceded (assumed) are recognized immediately as a loss and are reported in the
appropriate line item within the statement of operations. Any gain on such
retroactive agreement is deferred and is amortized as part of DAC, primarily
using the recovery method.
Amounts currently recoverable under reinsurance agreements are included in
premiums, reinsurance and other receivables and amounts currently payable are
included in other liabilities. Assets and liabilities relating to reinsurance
agreements with the same reinsurer may be recorded net on the balance sheet,
if a right of offset exists within the reinsurance agreement. In the event
that reinsurers do not meet their obligations to the Company under the terms
of the reinsurance agreements, reinsurance recoverable balances could become
uncollectible. In such instances, reinsurance recoverable balances are stated
net of allowances for uncollectible reinsurance.
12
General American Life Insurance Company and Subsidiary
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements -- (continued)
1. Business, Basis of Presentation and Summary of Significant Accounting
Policies (continued)
The funds withheld liability represents amounts withheld by the Company in
accordance with the terms of the reinsurance agreements. The Company
withholds the funds rather than transferring the underlying investments and,
as a result, records funds withheld liability within other liabilities. The
Company recognizes interest on funds withheld, included in other expenses, at
rates defined by the terms of the agreement which may be contractually
specified or directly related to the investment portfolio.
Premiums, fees and policyholder benefits and claims include amounts
assumed under reinsurance agreements and are net of reinsurance ceded.
Amounts received from reinsurers for policy administration are reported in
other revenues.
If the Company determines that a reinsurance agreement does not expose the
reinsurer to a reasonable possibility of a significant loss from insurance
risk, the Company records the agreement using the deposit method of
accounting. Deposits received are included in other liabilities and deposits
made are included within premiums, reinsurance and other receivables. As
amounts are paid or received, consistent with the underlying contracts, the
deposit assets or liabilities are adjusted. Interest on such deposits is
recorded as other revenues or other expenses, as appropriate. Periodically,
the Company evaluates the adequacy of the expected payments or recoveries and
adjusts the deposit asset or liability through other revenues or other
expenses, as appropriate.
Investments
Net Investment Income and Net Investment Gains (Losses)
Income from investments is reported within net investment income, unless
otherwise stated herein. Gains and losses on sales of investments,
impairment losses and changes in valuation allowances are reported within
net investment gains (losses), unless otherwise stated herein.
Fixed Maturity and Equity Securities
The Company's fixed maturity and equity securities are classified as
available-for-sale ("AFS") and are reported at their estimated fair value.
Unrealized investment gains and losses on these securities are recorded as a
separate component of other comprehensive income (loss) ("OCI"), net of
policy-related amounts and deferred income taxes. All security transactions
are recorded on a trade date basis. Investment gains and losses on sales are
determined on a specific identification basis.
Interest income and prepayment fees are recognized when earned. Interest
income is recognized using an effective yield method giving effect to
amortization of premiums and accretion of discounts, and is based on the
estimated economic life of the securities, which for mortgage-backed and
asset-backed securities considers the estimated timing and amount of
prepayments of the underlying loans. See Note 5 "-- Fixed Maturity and
Equity Securities AFS -- Methodology for Amortization of Premium and
Accretion of Discount on Structured Securities." The amortization of premium
and accretion of discount of fixed maturity securities also takes into
consideration call and maturity dates. Dividends on equity securities are
recognized when declared.
The Company periodically evaluates fixed maturity and equity securities
for impairment. The assessment of whether impairments have occurred is based
on management's case-by-case evaluation of the underlying reasons for the
decline in estimated fair value, as well as an analysis of the gross
unrealized losses by severity and/or age as described in Note 5 "-- Fixed
Maturity and Equity Securities AFS -- Evaluation of AFS Securities for OTTI
and Evaluating Temporarily Impaired AFS Securities."
For fixed maturity securities in an unrealized loss position, an
other-than-temporary impairment ("OTTI") is recognized in earnings when it
is anticipated that the amortized cost will not be recovered. When either:
(i) the Company has the intent to sell the security; or (ii) it is more
likely than not that the Company will be required to sell the security
before recovery, the OTTI recognized in earnings is the entire difference
between the security's amortized cost and estimated fair value. If neither
of these conditions exists, the difference between the amortized cost of the
security and the present value of projected future cash flows expected to be
collected is recognized as an OTTI in earnings ("credit loss"). If the
estimated fair value is less than the present value of projected future cash
flows expected to be collected, this portion of OTTI related to
other-than-credit factors ("noncredit loss") is recorded in OCI.
13
General American Life Insurance Company and Subsidiary
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements -- (continued)
1. Business, Basis of Presentation and Summary of Significant Accounting
Policies (continued)
With respect to equity securities, the Company considers in its OTTI
analysis its intent and ability to hold a particular equity security for a
period of time sufficient to allow for the recovery of its estimated fair
value to an amount equal to or greater than cost. If a sale decision is made
for an equity security and recovery to an amount at least equal to cost
prior to the sale is not expected, the security will be deemed to be
other-than-temporarily impaired in the period that the sale decision was
made and an OTTI loss will be recorded in earnings. The OTTI loss recognized
is the entire difference between the security's cost and its estimated fair
value.
Mortgage Loans
The Company disaggregates its mortgage loan investments into two
portfolio segments: commercial and agricultural. The accounting policies
that are applicable to both portfolio segments are presented below and the
accounting policies related to each of the portfolio segments are included
in Note 5. Mortgage loans are stated at unpaid principal balance, adjusted
for any unamortized premium or discount, deferred fees or expenses, and are
net of valuation allowances. Interest income and prepayment fees are
recognized when earned. Interest income is recognized using an effective
yield method giving effect to amortization of premiums and accretion of
discounts.
Policy Loans
Policy loans are stated at unpaid principal balances. Interest income is
recorded as earned using the contractual interest rate. Generally, accrued
interest is capitalized on the policy's anniversary date. Valuation
allowances are not established for policy loans, as they are fully
collateralized by the cash surrender value of the underlying insurance
policies. Any unpaid principal and accrued interest is deducted from the
cash surrender value or the death benefit prior to settlement of the
insurance policy.
Real Estate
Real estate held-for-investment is stated at cost less accumulated
depreciation. Depreciation is recorded on a straight-line basis over the
estimated useful life of the asset (typically 20 to 55 years). Rental income
is recognized on a straight-line basis over the term of the respective
leases. The Company periodically reviews its real estate held-for-investment
for impairment and tests for recoverability whenever events or changes in
circumstances indicate the carrying value may not be recoverable and exceeds
its estimated fair value. Properties whose carrying values are greater than
their undiscounted cash flows are written down to their estimated fair
value, which is generally computed using the present value of expected
future cash flows discounted at a rate commensurate with the underlying
risks.
Real estate for which the Company commits to a plan to sell within one
year and actively markets in its current condition for a reasonable price in
comparison to its estimated fair value is classified as held-for-sale. Real
estate held-for-sale is stated at the lower of depreciated cost or estimated
fair value less expected disposition costs and is not depreciated.
Real Estate Joint Ventures and Other Limited Partnership Interests
The Company uses the equity method of accounting for equity securities
when it has significant influence or at least 20% interest and for real
estate joint ventures and other limited partnership interests ("investees")
when it has more than a minor ownership interest or more than a minor
influence over the investee's operations. The Company generally recognizes
its share of the investee's earnings on a three-month lag in instances where
the investee's financial information is not sufficiently timely or when the
investee's reporting period differs from the Company's reporting period.
The Company routinely evaluates its equity method investments for
impairment. For equity method investees, the Company considers financial and
other information provided by the investee, other known information and
inherent risks in the underlying investments, as well as future capital
commitments, in determining whether an impairment has occurred.
Short-term Investments
Short-term investments include securities and other investments with
remaining maturities of one year or less, but greater than three months, at
the time of purchase and are stated at estimated fair value or amortized
cost, which approximates estimated fair value. Short-term investments also
include investments in affiliated money market pools.
14
General American Life Insurance Company and Subsidiary
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements -- (continued)
1. Business, Basis of Presentation and Summary of Significant Accounting
Policies (continued)
Other Invested Assets
Other invested assets consist principally of the following:
. Loans to affiliates, which are stated at unpaid principal balance and
adjusted for any unamortized premium or discount.
. Freestanding derivatives with positive estimated fair values which are
described in "-- Derivatives" below.
. Tax credit partnerships which derive a significant source of investment
return in the form of income tax credits or other tax incentives. Where
tax credits are guaranteed by a creditworthy third party, the investment
is accounted for under the effective yield method. Otherwise, the
investment is accounted for under the equity method. See Note 11.
Securities Lending Program
Securities lending transactions, whereby blocks of securities are loaned
to third parties, primarily brokerage firms and commercial banks, are
treated as financing arrangements and the associated liability is recorded
at the amount of cash received. The Company obtains collateral at the
inception of the loan, usually cash, in an amount generally equal to 102% of
the estimated fair value of the securities loaned, and maintains it at a
level greater than or equal to 100% for the duration of the loan. Securities
loaned under such transactions may be sold or re-pledged by the transferee.
The Company is liable to return to the counterparties the cash collateral
received. Security collateral on deposit from counterparties in connection
with securities lending transactions may not be sold or re-pledged, unless
the counterparty is in default, and is not reflected on the Company's
financial statements. The Company monitors the estimated fair value of the
securities loaned on a daily basis and additional collateral is obtained as
necessary throughout the duration of the loan. Income and expenses
associated with securities lending transactions are reported as investment
income and investment expense, respectively, within net investment income.
Derivatives
Freestanding Derivatives
Freestanding derivatives are carried on the Company's balance sheet
either as assets within other invested assets or as liabilities within other
liabilities at estimated fair value. The Company does not offset the
estimated fair value amounts recognized for derivatives executed with the
same counterparty under the same master netting agreement.
Accruals on derivatives are generally recorded in accrued investment
income or within other liabilities. However, accruals that are not scheduled
to settle within one year are included with the derivative's carrying value
in other invested assets or other liabilities.
If a derivative is not designated as an accounting hedge or its use in
managing risk does not qualify for hedge accounting, changes in the
estimated fair value of the derivative are reported in net derivative
gains (losses).
Hedge Accounting
To qualify for hedge accounting, at the inception of the hedging
relationship, the Company formally documents its risk management objective
and strategy for undertaking the hedging transaction, as well as its
designation of the hedge. Hedge designation and financial statement
presentation of changes in estimated fair value of the hedging derivatives
are as follows:
. Fair value hedge (a hedge of the estimated fair value of a recognized
asset or liability) - in net derivative gains (losses), consistent with
the change in estimated fair value of the hedged item attributable to
the designated risk being hedged.
. Cash flow hedge (a hedge of a forecasted transaction or of the
variability of cash flows to be received or paid related to a recognized
asset or liability) - effectiveness in OCI (deferred gains or losses on
the derivative are reclassified into the statement of operations when
the Company's earnings are affected by the variability in cash flows of
the hedged item); ineffectiveness in net derivative gains (losses).
15
General American Life Insurance Company and Subsidiary
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements -- (continued)
1. Business, Basis of Presentation and Summary of Significant Accounting
Policies (continued)
The changes in estimated fair values of the hedging derivatives are
exclusive of any accruals that are separately reported on the statement of
operations within interest income or interest expense to match the location
of the hedged item.
In its hedge documentation, the Company sets forth how the hedging
instrument is expected to hedge the designated risks related to the hedged
item and sets forth the method that will be used to retrospectively and
prospectively assess the hedging instrument's effectiveness and the method
that will be used to measure ineffectiveness. A derivative designated as a
hedging instrument must be assessed as being highly effective in offsetting
the designated risk of the hedged item. Hedge effectiveness is formally
assessed at inception and at least quarterly throughout the life of the
designated hedging relationship. Assessments of hedge effectiveness and
measurements of ineffectiveness are also subject to interpretation and
estimation and different interpretations or estimates may have a material
effect on the amount reported in net income.
The Company discontinues hedge accounting prospectively when: (i) it is
determined that the derivative is no longer highly effective in offsetting
changes in the estimated fair value or cash flows of a hedged item; (ii) the
derivative expires, is sold, terminated, or exercised; (iii) it is no longer
probable that the hedged forecasted transaction will occur; or (iv) the
derivative is de-designated as a hedging instrument.
When hedge accounting is discontinued because it is determined that the
derivative is not highly effective in offsetting changes in the estimated
fair value or cash flows of a hedged item, the derivative continues to be
carried on the balance sheet at its estimated fair value, with changes in
estimated fair value recognized in net derivative gains (losses). The
carrying value of the hedged recognized asset or liability under a fair
value hedge is no longer adjusted for changes in its estimated fair value
due to the hedged risk, and the cumulative adjustment to its carrying value
is amortized into income over the remaining life of the hedged item.
Provided the hedged forecasted transaction is still probable of occurrence,
the changes in estimated fair value of derivatives recorded in OCI related
to discontinued cash flow hedges are released into the statement of
operations when the Company's earnings are affected by the variability in
cash flows of the hedged item.
When hedge accounting is discontinued because it is no longer probable
that the forecasted transaction will occur on the anticipated date or within
two months of that date, the derivative continues to be carried on the
balance sheet at its estimated fair value, with changes in estimated fair
value recognized currently in net derivative gains (losses). Deferred gains
and losses of a derivative recorded in OCI pursuant to the discontinued cash
flow hedge of a forecasted transaction that is no longer probable are
recognized immediately in net derivative gains (losses).
In all other situations in which hedge accounting is discontinued, the
derivative is carried at its estimated fair value on the balance sheet, with
changes in its estimated fair value recognized in the current period as net
derivative gains (losses).
Embedded Derivatives
The Company is a party to certain reinsurance agreements that have
embedded derivatives. The Company assesses each identified embedded
derivative to determine whether it is required to be bifurcated. The
embedded derivative is bifurcated from the host contract and accounted for
as a freestanding derivative if:
. the combined instrument is not accounted for in its entirety at
estimated fair value with changes in estimated fair value recorded in
earnings;
. the terms of the embedded derivative are not clearly and closely related
to the economic characteristics of the host contract; and
. a separate instrument with the same terms as the embedded derivative
would qualify as a derivative instrument.
Such embedded derivatives are carried on the balance sheet at estimated
fair value with the host contract and changes in their estimated fair value
are generally reported in net derivative gains (losses). If the Company is
unable to properly identify and measure an embedded derivative for
separation from its host contract, the entire contract is carried on the
balance sheet at estimated fair value, with changes in estimated fair value
recognized in
16
General American Life Insurance Company and Subsidiary
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements -- (continued)
1. Business, Basis of Presentation and Summary of Significant Accounting
Policies (continued)
the current period in net investment gains (losses) or net investment
income. Additionally, the Company may elect to carry an entire contract on
the balance sheet at estimated fair value, with changes in estimated fair
value recognized in the current period in net investment gains (losses) or
net investment income if that contract contains an embedded derivative that
requires bifurcation.
Fair Value
Fair value is defined as the price that would be received to sell an asset
or paid to transfer a liability (an exit price) in the principal or most
advantageous market for the asset or liability in an orderly transaction
between market participants on the measurement date. In most cases, the exit
price and the transaction (or entry) price will be the same at initial
recognition.
Subsequent to initial recognition, fair values are based on unadjusted
quoted prices for identical assets or liabilities in active markets that are
readily and regularly obtainable. When such quoted prices are not available,
fair values are based on quoted prices in markets that are not active, quoted
prices for similar but not identical assets or liabilities, or other
observable inputs. If these inputs are not available, or observable inputs
are not determinable, unobservable inputs and/or adjustments to observable
inputs requiring management's judgment are used to determine the estimated
fair value of assets and liabilities.
Income Tax
General American joins with MetLife, Inc. and its includable subsidiaries
in filing a consolidated U.S. life insurance and non-life insurance federal
income tax return in accordance with the provisions of the Internal Revenue
Code of 1986, as amended. Current taxes (and the benefits of tax attributes
such as losses) are allocated to General American under the consolidated tax
return regulations and a tax sharing agreement. Under the consolidated tax
return regulations, MetLife, Inc. has elected the "percentage method" (and
100% under such method) of reimbursing companies for tax attributes, e.g.,
net operating losses. As a result, 100% of tax attributes are reimbursed by
MetLife, Inc. to the extent that consolidated federal income tax of the
consolidated federal tax return group is reduced in a year by tax attributes.
On an annual basis, each of the profitable subsidiaries pays to MetLife, Inc.
the federal income tax which it would have paid based upon that year's
taxable income. If General American has current or prior deductions and
credits (including but not limited to losses) which reduce the consolidated
tax liability of the consolidated federal tax return group, the deductions
and credits are characterized as realized (or realizable) by General American
when those tax attributes are realized (or realizable) by the consolidated
federal tax return group, even if General American would not have realized
the attributes on a stand-alone basis under a "wait and see" method.
The Company's accounting for income taxes represents management's best
estimate of various events and transactions.
Deferred tax assets and liabilities resulting from temporary differences
between the financial reporting and tax bases of assets and liabilities are
measured at the balance sheet date using enacted tax rates expected to apply
to taxable income in the years the temporary differences are expected to
reverse.
The realization of deferred tax assets depends upon the existence of
sufficient taxable income within the carryback or carryforward periods under
the tax law in the applicable tax jurisdiction. Valuation allowances are
established against deferred tax assets when management determines, based on
available information, that it is more likely than not that deferred income
tax assets will not be realized. Significant judgment is required in
determining whether valuation allowances should be established, as well as
the amount of such allowances. When making such determination, the Company
considers many factors, including:
. the nature, frequency, and amount of cumulative financial reporting
income and losses in recent years;
. the jurisdiction in which the deferred tax asset was generated;
. the length of time that carryforward can be utilized in the various
taxing jurisdictions;
. future taxable income exclusive of reversing temporary differences and
carryforwards;
. future reversals of existing taxable temporary differences;
17
General American Life Insurance Company and Subsidiary
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements -- (continued)
1. Business, Basis of Presentation and Summary of Significant Accounting
Policies (continued)
. taxable income in prior carryback years; and
. tax planning strategies.
The Company may be required to change its provision for income taxes when
estimates used in determining valuation allowances on deferred tax assets
significantly change or when receipt of new information indicates the need
for adjustment in valuation allowances. Additionally, the effect of changes
in tax laws, tax regulations, or interpretations of such laws or regulations,
is recognized in net income tax expense (benefit) in the period of change.
The Company determines whether it is more likely than not that a tax
position will be sustained upon examination by the appropriate taxing
authorities before any part of the benefit can be recorded on the financial
statements. A tax position is measured at the largest amount of benefit that
is greater than 50% likely of being realized upon settlement. Unrecognized
tax benefits due to tax uncertainties that do not meet the threshold are
included within other liabilities and are charged to earnings in the period
that such determination is made.
The Company classifies interest recognized as interest expense and
penalties recognized as a component of income tax expense.
On December 22, 2017, President Trump signed into law H.R.1, commonly
referred to as the Tax Cuts and Jobs Act of 2017 ("U.S. Tax Reform"). See
Note 11 for additional information on U.S. Tax Reform and related Staff
Accounting Bulletin ("SAB") 118 provisional amounts.
Litigation Contingencies
The Company is a party to a number of legal actions and is involved in a
number of regulatory investigations. Given the inherent unpredictability of
these matters, it is difficult to estimate the impact on the Company's
financial position. Liabilities are established when it is probable that a
loss has been incurred and the amount of the loss can be reasonably
estimated. Legal costs are recognized as incurred. On an annual basis, the
Company reviews relevant information with respect to liabilities for
litigation, regulatory investigations and litigation-related contingencies to
be reflected on the Company's financial statements.
Other Accounting Policies
Cash and Cash Equivalents
The Company considers all highly liquid securities and other investments
purchased with an original or remaining maturity of three months or less at
the date of purchase to be cash equivalents. Cash equivalents are stated at
amortized cost, which approximates estimated fair value.
Policyholder Dividends
Policyholder dividends are approved annually by General American's board
of directors. The aggregate amount of policyholder dividends is related to
actual interest, mortality, morbidity and expense experience for the year,
as well as management's judgment as to the appropriate level of statutory
surplus to be retained by General American.
Foreign Currency
Assets, liabilities and operations of foreign affiliates are recorded
based on the functional currency of each entity. The determination of the
functional currency is made based on the appropriate economic and management
indicators. The local currencies of foreign operations are the functional
currencies. Assets and liabilities of foreign affiliates are translated from
the functional currency to U.S. dollars at the exchange rates in effect at
each year-end and revenues and expenses are translated at the average
exchange rates during the year. The resulting translation adjustments are
charged or credited directly to OCI, net of applicable taxes. Gains and
losses from foreign currency transactions, including the effect of
re-measurement of monetary assets and liabilities to the appropriate
functional currency, are reported as part of net investment gains (losses)
in the period in which they occur.
18
General American Life Insurance Company and Subsidiary
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements -- (continued)
1. Business, Basis of Presentation and Summary of Significant Accounting
Policies (continued)
Employee Benefit Plans
Eligible employees and retirees of the Company are provided pension,
postretirement and postemployment benefits under plans sponsored and
administered by MLIC. The Company's obligation and expense related to these
benefits is limited to the amount of associated expense allocated from MLIC.
Adoption of New Accounting Pronouncements
Effective January 1, 2017, the Company early adopted guidance relating to
business combinations. The new guidance clarifies the definition of a business
and requires that an entity apply certain criteria in order to determine when a
set of assets and activities qualifies as a business. The adoption of this
standard will result in fewer acquisitions qualifying as businesses and,
accordingly, acquisition costs for those acquisitions that do not qualify as
businesses will be capitalized rather than expensed. The adoption did not have
a material impact on the Company's consolidated financial statements.
Effective January 1, 2017, the Company retrospectively adopted guidance
relating to consolidation. The new guidance does not change the characteristics
of a primary beneficiary under current GAAP. It changes how a reporting entity
evaluates whether it is the primary beneficiary of a variable interest entity
("VIE") by changing how a reporting entity that is a single decisionmaker of a
VIE handles indirect interests in the entity held through related parties that
are under common control with the reporting entity. The adoption did not have a
material impact on the Company's consolidated financial statements.
Effective January 1, 2016, the Company retrospectively adopted guidance
relating to short-duration contracts. The new guidance requires insurance
entities to provide users of financial statements with more transparent
information about initial claim estimates and subsequent adjustments to these
estimates, including information on: (i) reconciling from the claim development
table to the balance sheet liability, (ii) methodologies and judgments in
estimating claims, and (iii) the timing, and frequency of claims. The adoption
did not have an impact on the Company's consolidated financial statements other
than expanded disclosures in Note 2.
Effective January 1, 2016, the Company retrospectively adopted new guidance
relating to the consolidation of certain entities. The objective of the new
standard is to improve targeted areas of the consolidation guidance and to
reduce the number of consolidation models. The new consolidation standard
provides guidance on how a reporting entity (i) evaluates whether the entity
should consolidate limited partnerships and similar entities, (ii) assesses
whether the fees paid to a decisionmaker or service provider are variable
interests in a VIE, and (iii) assesses the variable interests in a VIE held by
related parties of the reporting entity. The new guidance also eliminates the
VIE consolidation model based on majority exposure to variability that applied
to certain investment companies and similar entities. The adoption did not
impact which entities are consolidated by the Company. The consolidated VIE
assets and liabilities and unconsolidated VIE carrying amounts and maximum
exposure to loss as of December 31, 2016, disclosed in Note 5, reflect the
application of the new guidance.
Other
Effective January 3, 2017, the Chicago Mercantile Exchange ("CME") amended
its rulebook, resulting in the characterization of variation margin transfers
as settlement payments, as opposed to adjustments to collateral. These
amendments impacted the accounting treatment of the Company's centrally cleared
derivatives for which the CME serves as the central clearing party. As of the
effective date, the application of the amended rulebook did not have a material
impact on the Company's consolidated financial statements.
Future Adoption of New Accounting Pronouncements
In February 2018, the Financial Accounting Standards Board ("FASB") issued
new guidance on reporting comprehensive income (Accounting Standards Update
("ASU") 2018-02, Income Statement-Reporting Comprehensive Income (Topic 220):
Reclassification of Certain Tax Effects from AOCI). The new guidance is
effective for fiscal years beginning after December 15, 2018 and interim
periods within those fiscal years and should be applied either in the period of
adoption or retrospectively to each period (or periods) in which the effect of
the change in the U.S. federal corporate income tax rate or law in U.S. Tax
Reform is recognized. Early adoption is permitted. Current GAAP guidance
requires that the effect of a change in tax laws or rates on deferred tax
liabilities or assets to be included in income from
19
General American Life Insurance Company and Subsidiary
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements -- (continued)
1. Business, Basis of Presentation and Summary of Significant Accounting
Policies (continued)
continuing operations in the reporting period that includes the enactment date,
even if the related income tax effects were originally charged or credited
directly to accumulated OCI ("AOCI"). The new guidance allows a
reclassification of AOCI to retained earnings for stranded tax effects
resulting from U.S. Tax Reform. Also, the new guidance requires certain
disclosures about stranded tax effects. The Company will early adopt the new
guidance in 2018. The Company expects the impact of the new guidance at
adoption will be a decrease to retained earnings as of January 1, 2018 of
$79 million with a corresponding increase to AOCI.
In August 2017, the FASB issued new guidance on hedging activities
(ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to
Accounting for Hedging Activities). The new guidance is effective for fiscal
years beginning after December 15, 2018 and interim periods within those fiscal
years and should be applied on a modified retrospective basis through a
cumulative-effect adjustment to retained earnings. Early adoption is permitted.
The new guidance simplifies the application of hedge accounting in certain
situations and amends the hedge accounting model to enable entities to better
portray the economics of their risk management activities in the financial
statements. The Company is currently evaluating the impact of the new guidance
on its consolidated financial statements.
In March 2017, the FASB issued new guidance on purchased callable debt
securities (ASU 2017-08, Receivables -Nonrefundable Fees and Other Costs
(Subtopic 310-20), Premium Amortization on Purchased Callable Debt Securities).
The new guidance is effective for fiscal years beginning after December 15,
2018 and interim periods within those fiscal years and should be applied on a
modified retrospective basis through a cumulative-effect adjustment to retained
earnings. Early adoption is permitted. The ASU shortens the amortization period
for certain callable debt securities held at a premium and requires the premium
to be amortized to the earliest call date. However, the new guidance does not
require an accounting change for securities held at a discount whose discount
continues to be amortized to maturity. The Company is currently evaluating the
impact of the new guidance on its consolidated financial statements.
In February 2017, the FASB issued new guidance on derecognition of
nonfinancial assets (ASU 2017-05, Other Income -Gains and Losses from the
Derecognition of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of
Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial
Assets). The new guidance is effective for fiscal years beginning after
December 15, 2017 and interim periods within those fiscal years. Early adoption
is permitted for interim or annual reporting periods beginning after
December 15, 2016. The guidance may be applied retrospectively for all periods
presented or retrospectively with a cumulative-effect adjustment to retained
earnings at the date of adoption. The new guidance clarifies the scope and
accounting of a financial asset that meets the definition of an "in-substance
nonfinancial asset" and defines the term, "in-substance nonfinancial asset."
The ASU also adds guidance for partial sales of nonfinancial assets. The
adoption of the new guidance will not have a material impact on the Company's
consolidated financial statements.
In November 2016, the FASB issued new guidance on restricted cash
(ASU 2016-18, Statement of Cash Flows (Topic 230): A consensus of the FASB
Emerging Issues Task Force). The new guidance is effective for fiscal years
beginning after December 15, 2017 and interim periods within those fiscal
years, and should be applied on a retrospective basis. Early adoption is
permitted. The new guidance requires that a statement of cash flows explain the
change during the period in the total of cash, cash equivalents, and amounts
generally described as restricted cash or restricted cash equivalents. As a
result, the new guidance requires that amounts generally described as
restricted cash and restricted cash equivalents should be included with cash
and cash equivalents when reconciling the beginning-of-period and end-of-period
total amounts shown on the statement of cash flows. The new guidance does not
provide a definition of restricted cash or restricted cash equivalents. The
adoption of the new guidance will not have a material impact on the Company's
consolidated financial statements.
In October 2016, the FASB issued new guidance on tax accounting for
intra-entity transfers of assets (ASU 2016-16, Income Taxes (Topic 740):
Intra-Entity Transfers of Assets Other Than Inventory). The new guidance is
effective for fiscal years beginning after December 15, 2017 and interim
periods within those fiscal years, and should be applied on a modified
retrospective basis. The Company will apply the guidance as of January 1, 2018.
Current guidance prohibits the recognition of current and deferred income taxes
for an intra-entity asset transfer until the asset has been sold to an outside
party. The new guidance requires an entity to recognize the income tax
consequences of an intra-entity transfer of an asset other than inventory when
the transfer occurs. Based on the Company's assessment of the intra-entity
asset transfers and related deferred income taxes that are in scope, the
Company expects the adoption of the new guidance will not have a material
impact on the Company's consolidated financial statements.
20
General American Life Insurance Company and Subsidiary
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements -- (continued)
1. Business, Basis of Presentation and Summary of Significant Accounting
Policies (continued)
In August 2016, the FASB issued new guidance on cash flow statement
presentation (ASU 2016-15, Statement of Cash Flows (Topic 230): Classification
of Certain Cash Receipts and Cash Payments). The new guidance is effective for
fiscal years beginning after December 15, 2017 and interim periods within those
fiscal years, and should be applied retrospectively to all periods presented.
Early adoption is permitted in any interim or annual period. The new guidance
addresses diversity in how certain cash receipts and cash payments are
presented and classified in the statement of cash flows. The adoption of the
new guidance will not have a material impact on the Company's consolidated
financial statements.
In June 2016, the FASB issued new guidance on measurement of credit losses
on financial instruments (ASU 2016-13, Financial Instruments - Credit Losses
(Topic 326): Measurement of Credit Losses on Financial Instruments). The new
guidance is effective for fiscal years beginning after December 15, 2019,
including interim periods within those fiscal years. Early adoption is
permitted for fiscal years, and interim periods within those fiscal years,
beginning after December 15, 2018. This ASU replaces the incurred loss
impairment methodology with one that reflects expected credit losses. The
measurement of expected credit losses should be based on historical loss
information, current conditions, and reasonable and supportable forecasts. The
new guidance requires that an OTTI on a debt security will be recognized as an
allowance going forward, such that improvements in expected future cash flows
after an impairment will no longer be reflected as a prospective yield
adjustment through net investment income, but rather a reversal of the previous
impairment and recognized through realized investment gains and losses. The
guidance also requires enhanced disclosures. The Company has assessed the asset
classes impacted by the new guidance and is currently assessing the accounting
and reporting system changes that will be required to comply with the new
guidance. The Company believes that the most significant impact upon adoption
will be to its mortgage loan investments. The Company is continuing to evaluate
the overall impact of the new guidance on its consolidated financial statements.
In January 2016, the FASB issued new guidance (ASU 2016-01, Financial
Instruments-Overall: Recognition and Measurement of Financial Assets and
Financial Liabilities, as amended by ASU 2018-03, Financial Instruments
Overall: Technical Corrections and Improvements, issued in February 2018) on
the recognition and measurement of financial instruments. The new guidance is
effective for fiscal years beginning after December 15, 2017, including interim
periods within those fiscal years. Early adoption is permitted for the
instrument-specific credit risk provision. The new guidance changes the current
accounting guidance related to (i) the classification and measurement of
certain equity investments, (ii) the presentation of changes in the fair value
of financial liabilities measured under the fair value option that are due to
instrument-specific credit risk, and (iii) certain disclosures associated with
the fair value of financial instruments. Additionally, there will no longer be
a requirement to assess equity securities for impairment since such securities
will be measured at fair value through net income. The Company has assessed the
population of financial instruments that are subject to the new guidance and
has determined that the most significant impact will be the requirement to
report changes in fair value in net income each reporting period for all equity
securities currently classified as AFS. The Company will utilize a modified
retrospective approach to adopt the new guidance effective January 1, 2018. The
expected impact related to the change in accounting for equity securities AFS
will be $2 million of net unrealized investment gains, net of income tax, which
will be reclassified from AOCI to retained earnings.
In May 2014, the FASB issued a comprehensive new revenue recognition
standard (ASU 2014-09, Revenue from Contracts with Customers - Topic 606),
effective for fiscal years beginning after December 15, 2017 and interim
periods within those fiscal years. The Company will apply the guidance
retrospectively with a cumulative-effect adjustment as of January 1, 2018. The
new guidance supersedes nearly all existing revenue recognition guidance under
U.S. GAAP. However, it does not impact the accounting for insurance and
investment contracts within the scope of Accounting Standards Codification
(ASC) Topic 944, Financial Services - Insurance, leases, financial instruments
and certain guarantees. For those contracts that are impacted, the new guidance
requires an entity to recognize revenue upon the transfer of promised goods or
services to customers in an amount that reflects the consideration to which the
entity expects to be entitled, in exchange for those goods or services. The
Company identified revenue streams within the scope of the guidance that are
all included within other revenues in the consolidated statements of operations
and evaluated the related contracts, primarily consisting of distribution and
administrative services fees. As other revenues represents less than 1% of
consolidated total revenues for the year ended December 31, 2017, the modified
retrospective adoption as of January 1, 2018, did not have a material impact on
the Company's consolidated financial position and the Company has not
identified any material prospective changes in the recognition and measurement
of other revenue.
21
General American Life Insurance Company and Subsidiary
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements -- (continued)
2. Insurance
Insurance Liabilities
Future policy benefits are measured as follows:
-----------------------------------------------------------------------
Product Type: Measurement Assumptions:
-----------------------------------------------------------------------
-----------------------------------------------------------------------
Participating life Aggregate of (i) net level premium
reserves for death and endowment policy
benefits (calculated based upon the
non-forfeiture interest rate, ranging
from 3% to 6%, and mortality rates
guaranteed in calculating the cash
surrender values described in such
contracts); and (ii) the liability for
terminal dividends.
-----------------------------------------------------------------------
-----------------------------------------------------------------------
Nonparticipating life Aggregate of the present value of future
expected benefit payments and related
expenses less the present value of
future expected net premiums.
Assumptions as to mortality and
persistency are based upon the
Company's experience when the basis of
the liability is established. Interest
rate assumptions for the aggregate
future policy benefit liabilities range
from 3% to 8%.
-----------------------------------------------------------------------
-----------------------------------------------------------------------
Individual and group Present value of future expected
traditional fixed annuities payments. Interest rate assumptions
after annuitization used in establishing such liabilities
range from 3% to 8%.
-----------------------------------------------------------------------
-----------------------------------------------------------------------
Non-medical health The net level premium method and
insurance assumptions as to future morbidity,
withdrawals and interest, which provide
a margin for adverse deviation. The
interest rate assumption used in
establishing such liabilities is 5%.
-----------------------------------------------------------------------
-----------------------------------------------------------------------
Disabled lives Present value of benefits method and
experience assumptions as to claim
terminations, expenses and interest.
Interest rate assumptions used in
establishing such liabilities range
from 3% to 7%.
-----------------------------------------------------------------------
Participating business represented 38% and 34% of the Company's life
insurance in-force at December 31, 2017 and 2016, respectively. Participating
policies represented 94%, 94% and 93% of gross traditional life insurance
premiums for the years ended December 31, 2017, 2016 and 2015, respectively.
Policyholder account balances are equal to: (i) policy account values, which
consist of an accumulation of gross premium payments; and (ii) credited
interest, ranging from 1% to 6%, less expenses, mortality charges and
withdrawals.
Guarantees
The Company issued annuity contracts that apply a lower rate on funds
deposited if the contractholder elects to surrender the contract for cash and a
higher rate if the contractholder elects to annuitize. These guarantees include
benefits that are payable in the event of death, maturity or at annuitization.
Additionally, the Company issued universal life contracts where the Company
contractually guarantees to the contractholder a secondary guarantee benefit.
22
General American Life Insurance Company and Subsidiary
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements -- (continued)
2. Insurance (continued)
Information regarding the liabilities for guarantees (excluding base policy
liabilities) relating to annuity and universal life contracts was as follows:
Annuity Universal Life
Contracts Contracts
------------- --------------
Guaranteed
Annuitization Secondary
Benefits Guarantees Total
------------- -------------- -----
(In millions)
Direct:
Balance at January 1, 2015... $ 6 $121 $127
Incurred guaranteed benefits. -- 10 10
Paid guaranteed benefits..... -- -- --
------------- -------------- -----
Balance at December 31, 2015. 6 131 137
Incurred guaranteed benefits. -- (31) (31)
Paid guaranteed benefits..... -- -- --
------------- -------------- -----
Balance at December 31, 2016. 6 100 106
Incurred guaranteed benefits. -- 13 13
Paid guaranteed benefits..... -- -- --
------------- -------------- -----
Balance at December 31, 2017. $ 6 $113 $119
============= ============== =====
Ceded:
Balance at January 1, 2015... $-- $117 $117
Incurred guaranteed benefits. -- 11 11
Paid guaranteed benefits..... -- -- --
------------- -------------- -----
Balance at December 31, 2015. -- 128 128
Incurred guaranteed benefits. -- (30) (30)
Paid guaranteed benefits..... -- -- --
------------- -------------- -----
Balance at December 31, 2016. -- 98 98
Incurred guaranteed benefits. -- 15 15
Paid guaranteed benefits..... -- -- --
------------- -------------- -----
Balance at December 31, 2017. $-- $113 $113
============= ============== =====
Net:
Balance at January 1, 2015... $ 6 $ 4 $ 10
Incurred guaranteed benefits. -- (1) (1)
Paid guaranteed benefits..... -- -- --
------------- -------------- -----
Balance at December 31, 2015. 6 3 9
Incurred guaranteed benefits. -- (1) (1)
Paid guaranteed benefits..... -- -- --
------------- -------------- -----
Balance at December 31, 2016. 6 2 8
Incurred guaranteed benefits. -- (2) (2)
Paid guaranteed benefits..... -- -- --
------------- -------------- -----
Balance at December 31, 2017. $ 6 $ -- $ 6
============= ============== =====
23
General American Life Insurance Company and Subsidiary
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements -- (continued)
2. Insurance (continued)
Information regarding the Company's guarantee exposure, which includes
direct business, but excludes offsets from hedging or reinsurance, if any,
was as follows at:
December 31,
---------------------
2017 2016
---------- ----------
At
Annuitization
---------------------
(Dollars in millions)
Annuity Contracts:
Other Annuity Guarantees:
Total account value (1)................................. $ 259 $ 262
Net amount at risk (2).................................. $ 47 $ 47
Average attained age of contractholders................... 68 years 67 years
December 31,
-------------------------------
2017 2016
--------------- ---------------
Secondary
Guarantees
-------------------------------
(Dollars in millions)
Universal Life Contracts:
Total account value (1)................................. $ 1,756 $ 1,757
Net amount at risk (3).................................. $ 11,455 $ 11,999
Average attained age of policyholders..................... 67 years 66 years
-----------
(1)Includes the contractholder's investments in the general account and
separate account, if applicable.
(2)Defined as either the excess of the upper tier, adjusted for a profit
margin, less the lower tier, as of the balance sheet date or the amount (if
any) that would be required to be added to the total account value to
purchase a lifetime income stream, based on current annuity rates, equal to
the minimum amount provided under the guaranteed benefit. These amounts
represent the Company's potential economic exposure to such guarantees in
the event all contractholders were to annuitize on the balance sheet date.
(3)Defined as the guarantee amount less the account value, as of the balance
sheet date. It represents the amount of the claim that the Company would
incur if death claims were filed on all contracts on the balance sheet date.
Account balances of contracts with guarantees were invested in separate
account asset classes as follows at:
December 31,
---------------
2017 2016
------- -------
(In millions)
Fund Groupings:
Equity.................................................... $ 24 $ 21
Bond...................................................... 3 2
Balanced.................................................. 2 2
Money Market.............................................. 1 --
------- -------
Total................................................... $ 30 $ 25
======= =======
24
General American Life Insurance Company and Subsidiary
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements -- (continued)
2. Insurance (continued)
Obligations Under Funding Agreements
General American is a member of the Federal Home Loan Bank ("FHLB") of Des
Moines. Holdings of common stock of the FHLB of Des Moines, included in equity
securities, were $35 million at both December 31, 2017 and 2016.
The Company has also entered into funding agreements with the FHLB of Des
Moines. The liability for such funding agreements is included in policyholder
account balances. Information related to such funding agreements was as follows
at:
Liability Collateral (2)
--------------------- ---------------------
December 31,
-------------------------------------------
2017 2016 2017 2016
---------- ---------- ---------- ----------
(In millions)
FHLB of Des Moines (1).................................... $ 625 $ 625 $ 701 $ 811
-----------
(1) Represents funding agreements issued to the FHLB of Des Moines in exchange
for cash and for which the FHLB of Des Moines has been granted a lien on
certain assets, some of which are in the custody of the FHLB of Des Moines,
including residential mortgage-backed securities ("RMBS"), to collateralize
obligations under advances evidenced by funding agreements. The Company is
permitted to withdraw any portion of the collateral in the custody of the
FHLB of Des Moines as long as there is no event of default and the
remaining qualified collateral is sufficient to satisfy the collateral
maintenance level. Upon any event of default by the Company, the FHLB of
Des Moines' recovery on the collateral is limited to the amount of the
Company's liability to the FHLB of Des Moines.
(2) Advances are collateralized by mortgage-backed securities. The amount of
collateral presented is at estimated fair value.
Liabilities for Unpaid Claims and Claim Expenses
Information regarding the liabilities for unpaid claims and claim adjustment
expenses was as follows:
Years Ended December 31,
----------------------------------
2017 2016 (1) 2015 (1)
---------- ---------- ----------
(In millions)
Balance at January 1,................................................ $ 241 $ 271 $ 251
Less: Reinsurance recoverables...................................... 161 184 183
---------- ---------- ----------
Net balance at January 1,............................................ 80 87 68
---------- ---------- ----------
Incurred related to:
Current year........................................................ 248 297 247
Prior years (2)..................................................... 30 46 42
---------- ---------- ----------
Total incurred.................................................... 278 343 289
---------- ---------- ----------
Paid related to:
Current year........................................................ (241) (297) (228)
Prior years......................................................... (32) (53) (42)
---------- ---------- ----------
Total paid........................................................ (273) (350) (270)
---------- ---------- ----------
Net balance at December 31,.......................................... 85 80 87
Add: Reinsurance recoverables....................................... 142 161 184
---------- ---------- ----------
Balance at December 31 (included in future policy benefits and other
policy-related balances),.......................................... $ 227 $ 241 $ 271
========== ========== ==========
-----------
(1) At December 31, 2016 and 2015, the Net balance decreased by $16 million and
$28 million, respectively, and the Reinsurance recoverables increased by
$16 million and $21 million, respectively, from those amounts previously
reported primarily to correct for the improper classification of
reinsurance recoverables.
25
General American Life Insurance Company and Subsidiary
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements -- (continued)
2. Insurance (continued)
(2)During 2017, 2016 and 2015, as a result of changes in estimates of insured
events in the respective prior year, claims and claim adjustment expenses
associated with prior years increased due to events incurred in prior years,
but reported during the current year.
Separate Accounts
Separate account assets and liabilities include two categories of account
types: pass-through separate accounts totaling $1.7 billion and $737 million at
December 31, 2017 and 2016, respectively, for which the policyholder assumes
all investment risk, and separate accounts for which the Company contractually
guarantees either a minimum return or account value to the policyholder which
totaled $127 million and $87 million at December 31, 2017 and 2016,
respectively. The latter category consisted primarily of bank-owned life
insurance. The average interest rate credited on these contracts was 3.72% and
1.88% at December 31, 2017 and 2016, respectively.
For each of the years ended December 31, 2017, 2016 and 2015, there were no
investment gains (losses) on transfers of assets from the general account to
the separate accounts.
3. Deferred Policy Acquisition Costs and Value of Business Acquired
See Note 1 for a description of capitalized acquisition costs.
Nonparticipating and Non-Dividend-Paying Traditional Contracts
The Company amortizes DAC and VOBA related to these contracts (term
insurance and nonparticipating whole life insurance) over the appropriate
premium paying period in proportion to the actual and expected future gross
premiums that were set at contract issue. The expected premiums are based upon
the premium requirement of each policy and assumptions for mortality,
persistency and investment returns at policy issuance, or policy acquisition
(as it relates to VOBA), include provisions for adverse deviation, and are
consistent with the assumptions used to calculate future policyholder benefit
liabilities. These assumptions are not revised after policy issuance or
acquisition unless the DAC or VOBA balance is deemed to be unrecoverable from
future expected profits. Absent a premium deficiency, variability in
amortization after policy issuance or acquisition is caused only by variability
in premium volumes.
Participating, Dividend-Paying Traditional Contracts
The Company amortizes DAC and VOBA related to these contracts over the
estimated lives of the contracts in proportion to actual and expected future
gross margins. The amortization includes interest based on rates in effect at
inception or acquisition of the contracts. The future gross margins are
dependent principally on investment returns, policyholder dividend scales,
mortality, persistency, expenses to administer the business, creditworthiness
of reinsurance counterparties and certain economic variables, such as
inflation. Of these factors, the Company anticipates that investment returns,
expenses, persistency and other factor changes, as well as policyholder
dividend scales are reasonably likely to impact significantly the rate of DAC
and VOBA amortization. Each reporting period, the Company updates the estimated
gross margins with the actual gross margins for that period. When the actual
gross margins change from previously estimated gross margins, the cumulative
DAC and VOBA amortization is re-estimated and adjusted by a cumulative charge
or credit to current operations. When actual gross margins exceed those
previously estimated, the DAC and VOBA amortization will increase, resulting in
a current period charge to earnings. The opposite result occurs when the actual
gross margins are below the previously estimated gross margins. Each reporting
period, the Company also updates the actual amount of business in-force, which
impacts expected future gross margins. When expected future gross margins are
below those previously estimated, the DAC and VOBA amortization will increase,
resulting in a current period charge to earnings. The opposite result occurs
when the expected future gross margins are above the previously estimated
expected future gross margins. Each period, the Company also reviews the
estimated gross margins for each block of business to determine the
recoverability of DAC and VOBA balances.
26
General American Life Insurance Company and Subsidiary
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements -- (continued)
3. Deferred Policy Acquisition Costs and Value of Business Acquired (continued)
Fixed and Variable Universal Life Contracts and Fixed and Variable Deferred
Annuity Contracts
The Company amortizes DAC and VOBA related to these contracts over the
estimated lives of the contracts in proportion to actual and expected future
gross profits. The amortization includes interest based on rates in effect at
inception or acquisition of the contracts. The amount of future gross profits
is dependent principally upon returns in excess of the amounts credited to
policyholders, mortality, persistency, interest crediting rates, expenses to
administer the business, creditworthiness of reinsurance counterparties, the
effect of any hedges used and certain economic variables, such as inflation. Of
these factors, the Company anticipates that investment returns, expenses and
persistency are reasonably likely to significantly impact the rate of DAC and
VOBA amortization. Each reporting period, the Company updates the estimated
gross profits with the actual gross profits for that period. When the actual
gross profits change from previously estimated gross profits, the cumulative
DAC and VOBA amortization is re-estimated and adjusted by a cumulative charge
or credit to current operations. When actual gross profits exceed those
previously estimated, the DAC and VOBA amortization will increase, resulting in
a current period charge to earnings. The opposite result occurs when the actual
gross profits are below the previously estimated gross profits. Each reporting
period, the Company also updates the actual amount of business remaining
in-force, which impacts expected future gross profits. When expected future
gross profits are below those previously estimated, the DAC and VOBA
amortization will increase, resulting in a current period charge to earnings.
The opposite result occurs when the expected future gross profits are above the
previously estimated expected future gross profits. Each period, the Company
also reviews the estimated gross profits for each block of business to
determine the recoverability of DAC and VOBA balances.
Factors Impacting Amortization
Separate account rates of return on variable universal life contracts and
variable deferred annuity contracts affect in-force account balances on such
contracts each reporting period, which can result in significant fluctuations
in amortization of DAC and VOBA. Returns that are higher than the Company's
long-term expectation produce higher account balances, which increases the
Company's future fee expectations and decreases future benefit payment
expectations on minimum death and living benefit guarantees, resulting in
higher expected future gross profits. The opposite result occurs when returns
are lower than the Company's long-term expectation. The Company's practice to
determine the impact of gross profits resulting from returns on separate
accounts assumes that long-term appreciation in equity markets is not changed
by short-term market fluctuations, but is only changed when sustained interim
deviations are expected. The Company monitors these events and only changes the
assumption when its long-term expectation changes.
The Company also periodically reviews other long-term assumptions underlying
the projections of estimated gross margins and profits. These assumptions
primarily relate to investment returns, policyholder dividend scales, interest
crediting rates, mortality, persistency, policyholder behavior and expenses to
administer business. Management annually updates assumptions used in the
calculation of estimated gross margins and profits which may have significantly
changed. If the update of assumptions causes expected future gross margins and
profits to increase, DAC and VOBA amortization will decrease, resulting in a
current period increase to earnings. The opposite result occurs when the
assumption update causes expected future gross margins and profits to decrease.
Periodically, the Company modifies product benefits, features, rights or
coverages that occur by the exchange of a contract for a new contract, or by
amendment, endorsement, or rider to a contract, or by election or coverage
within a contract. If such modification, referred to as an internal
replacement, substantially changes the contract, the associated DAC or VOBA is
written off immediately through income and any new deferrable costs associated
with the replacement contract are deferred. If the modification does not
substantially change the contract, the DAC or VOBA amortization on the original
contract will continue and any acquisition costs associated with the related
modification are expensed.
Amortization of DAC and VOBA is attributed to net investment gains (losses)
and net derivative gains (losses), and to other expenses for the amount of
gross margins or profits originating from transactions other than investment
gains and losses. Unrealized investment gains and losses represent the amount
of DAC and VOBA that would have been amortized if such gains and losses had
been recognized.
27
General American Life Insurance Company and Subsidiary
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements -- (continued)
3. Deferred Policy Acquisition Costs and Value of Business Acquired (continued)
Information regarding DAC and VOBA was as follows:
Years Ended December 31,
----------------------------------
2017 2016 2015
---------- ---------- ----------
(In millions)
DAC:
Balance at January 1,........................................... $ 481 $ 445 $ 345
Capitalizations................................................. 81 128 143
Amortization related to:
Net investment gains (losses) and net derivative gains (losses). 3 2 (6)
Other expenses.................................................. (2) (81) (64)
---------- ---------- ----------
Total amortization............................................. 1 (79) (70)
---------- ---------- ----------
Unrealized investment gains (losses)............................ (20) (13) 27
---------- ---------- ----------
Balance at December 31,......................................... 543 481 445
---------- ---------- ----------
VOBA:
Balance at January 1,........................................... 42 36 41
Amortization related to:
Other expenses.................................................. (2) (2) (6)
---------- ---------- ----------
Total amortization............................................. (2) (2) (6)
---------- ---------- ----------
Unrealized investment gains (losses)............................ (1) 8 1
---------- ---------- ----------
Balance at December 31,......................................... 39 42 36
---------- ---------- ----------
Total DAC and VOBA:
Balance at December 31,......................................... $ 582 $ 523 $ 481
========== ========== ==========
The estimated future amortization expense to be reported in other expenses
for the next five years was as follows:
VOBA
----------
(In millions)
2018.......................... $ 4
2019.......................... $ 4
2020.......................... $ 4
2021.......................... $ 4
2022.......................... $ 4
28
General American Life Insurance Company and Subsidiary
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements -- (continued)
4. Reinsurance
The Company enters into reinsurance agreements as a purchaser of reinsurance
for its various insurance products and also as a provider of reinsurance for
some insurance products issued by affiliated and unaffiliated companies. The
Company participates in reinsurance activities in order to limit losses and
minimize exposure to significant risks.
Accounting for reinsurance requires extensive use of assumptions and
estimates, particularly related to the future performance of the underlying
business and the potential impact of counterparty credit risks. The Company
periodically reviews actual and anticipated experience compared to the
aforementioned assumptions used to establish assets and liabilities relating to
ceded and assumed reinsurance and evaluates the financial strength of
counterparties to its reinsurance agreements using criteria similar to that
evaluated in the security impairment process discussed in Note 5.
For its individual life insurance products, the Company has historically
reinsured the mortality risk primarily on an excess of retention basis or on a
quota share basis. In addition to reinsuring mortality risk as described above,
the Company reinsures other risks, as well as specific coverages. Placement of
reinsurance is done primarily on an automatic basis and also on a facultative
basis for risks with specified characteristics. The Company also reinsures
portions of certain level premium term and universal life policies with
secondary death benefit guarantees to a former affiliate. The Company evaluates
its reinsurance programs routinely and may increase or decrease its retention
at any time.
The Company has exposure to catastrophes which could contribute to
significant fluctuations in the Company's results of operations. The Company
uses excess of retention and quota share reinsurance agreements to provide
greater diversification of risk and minimize exposure to larger risks.
The Company reinsures its business through a diversified group of
well-capitalized reinsurers. The Company analyzes recent trends in arbitration
and litigation outcomes in disputes, if any, with its reinsurers. The Company
monitors ratings and evaluates the financial strength of its reinsurers by
analyzing their financial statements. In addition, the reinsurance recoverable
balance due from each reinsurer is evaluated as part of the overall monitoring
process. Recoverability of reinsurance recoverable balances is evaluated based
on these analyses. The Company generally secures large reinsurance recoverable
balances with various forms of collateral, including secured trusts, funds
withheld accounts and irrevocable letters of credit. These reinsurance
recoverable balances are stated net of allowances for uncollectible
reinsurance, which at both December 31, 2017 and 2016, were not significant.
The Company has secured certain reinsurance recoverable balances with
various forms of collateral, including secured trusts and funds withheld
accounts. The Company had $398 million and $369 million of unsecured
unaffiliated reinsurance recoverable balances at December 31, 2017 and 2016,
respectively.
At December 31, 2017, the Company had $656 million of net unaffiliated ceded
reinsurance recoverables. Of this total, $526 million, or 80%, were with the
Company's five largest unaffiliated ceded reinsurers, including $269 million of
net unaffiliated ceded reinsurance recoverables which were unsecured. At
December 31, 2016, the Company had $582 million of net unaffiliated ceded
reinsurance recoverables. Of this total, $478 million, or 82%, were with the
Company's five largest unaffiliated ceded reinsurers, including $266 million of
net unaffiliated ceded reinsurance recoverables which were unsecured.
29
General American Life Insurance Company and Subsidiary
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements -- (continued)
4. Reinsurance (continued)
The amounts on the consolidated statements of operations include the impact
of reinsurance. Information regarding the significant effects of reinsurance
was as follows:
Years Ended December 31,
---------------------------------------
2017 2016 2015
----------- ------------ ------------
(In millions)
Premiums
Direct premiums............................................... $ 219 $ 228 $ 238
Reinsurance assumed........................................... 754 775 706
Reinsurance ceded............................................. (263) (253) (257)
----------- ------------ ------------
Net premiums................................................. $ 710 $ 750 $ 687
=========== ============ ============
Universal life and investment-type product policy fees
Direct universal life and investment-type product policy fees. $ 288 $ 290 $ 306
Reinsurance assumed........................................... -- -- --
Reinsurance ceded............................................. (222) (226) (230)
----------- ------------ ------------
Net universal life and investment-type product policy fees... $ 66 $ 64 $ 76
=========== ============ ============
Policyholder benefits and claims
Direct policyholder benefits and claims....................... $ 575 $ 537 $ 564
Reinsurance assumed........................................... 606 590 529
Reinsurance ceded............................................. (456) (262) (330)
----------- ------------ ------------
Net policyholder benefits and claims......................... $ 725 $ 865 $ 763
=========== ============ ============
Interest credited to policyholder account balances
Direct interest credited to policyholder account balances..... $ 210 $ 215 $ 219
Reinsurance assumed........................................... -- -- --
Reinsurance ceded............................................. (82) (84) (86)
----------- ------------ ------------
Net interest credited to policyholder account balances....... $ 128 $ 131 $ 133
=========== ============ ============
Other expenses
Direct other expenses......................................... $ 9 $ 58 $ 93
Reinsurance assumed........................................... 56 139 132
Reinsurance ceded............................................. (12) (54) (72)
----------- ------------ ------------
Net other expenses........................................... $ 53 $ 143 $ 153
=========== ============ ============
30
General American Life Insurance Company and Subsidiary
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements -- (continued)
4. Reinsurance (continued)
The amounts on the consolidated balance sheets include the impact of
reinsurance. Information regarding the significant effects of reinsurance was
as follows at:
December 31,
-------------------------------------------------------------------------
2017 2016
------------------------------------ ------------------------------------
Total Total
Balance Balance
Direct Assumed Ceded Sheet Direct Assumed Ceded Sheet
-------- -------- -------- -------- -------- -------- -------- --------
(In millions)
Assets
Premiums, reinsurance and other
receivables...................... $ 16 $ 151 $ 2,854 $ 3,021 $ 38 $ 158 $ 2,731 $ 2,927
Deferred policy acquisition costs
and value of business acquired... 170 498 (86) 582 162 449 (88) 523
-------- -------- -------- -------- -------- -------- -------- --------
Total assets.................... $ 186 $ 649 $ 2,768 $ 3,603 $ 200 $ 607 $ 2,643 $ 3,450
======== ======== ======== ======== ======== ======== ======== ========
Liabilities
Future policy benefits............ $ 4,699 $ 1,894 $ -- $ 6,593 $ 4,625 $ 1,553 $ (3) $ 6,175
Other policy-related balances..... 133 77 28 238 165 67 27 259
Other liabilities................. 174 40 680 894 130 48 578 756
-------- -------- -------- -------- -------- -------- -------- --------
Total liabilities............... $ 5,006 $ 2,011 $ 708 $ 7,725 $ 4,920 $ 1,668 $ 602 $ 7,190
======== ======== ======== ======== ======== ======== ======== ========
Reinsurance agreements that do not expose the Company to a reasonable
possibility of a significant loss from insurance risk are recorded using the
deposit method of accounting. The deposit assets on reinsurance were
$327 million and $325 million at December 31, 2017 and 2016, respectively.
There were no deposit liabilities on reinsurance at both December 31, 2017 and
2016.
Related Party Reinsurance Transactions
The Company has reinsurance agreements with certain of MetLife, Inc.'s
subsidiaries, including MLIC, which is a related party. Additionally, the
Company has reinsurance agreements with Brighthouse Life Insurance Company, a
former subsidiary of MetLife, Inc.
31
General American Life Insurance Company and Subsidiary
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements -- (continued)
4. Reinsurance (continued)
Information regarding the significant effects of affiliated reinsurance
included on the consolidated statements of operations was as follows:
Years Ended December 31,
-------------------------------------
2017 2016 2015
----------- ----------- -----------
(In millions)
Premiums
Reinsurance assumed......................................... $ 542 $ 574 $ 503
Reinsurance ceded........................................... (11) (9) (9)
----------- ----------- -----------
Net premiums............................................... $ 531 $ 565 $ 494
=========== =========== ===========
Universal life and investment-type product policy fees
Reinsurance assumed......................................... $ -- $ -- $ --
Reinsurance ceded........................................... (99) (102) (115)
----------- ----------- -----------
Net universal life and investment-type product policy fees. $ (99) $ (102) $ (115)
=========== =========== ===========
Policyholder benefits and claims
Reinsurance assumed......................................... $ 430 $ 469 $ 388
Reinsurance ceded........................................... (39) (25) (33)
----------- ----------- -----------
Net policyholder benefits and claims....................... $ 391 $ 444 $ 355
=========== =========== ===========
Interest credited to policyholder account balances
Reinsurance assumed......................................... $ -- $ -- $ --
Reinsurance ceded........................................... (82) (84) (86)
----------- ----------- -----------
Net interest credited to policyholder account balances..... $ (82) $ (84) $ (86)
=========== =========== ===========
Other expenses
Reinsurance assumed......................................... $ 24 $ 109 $ 101
Reinsurance ceded........................................... (21) (29) (45)
----------- ----------- -----------
Net other expenses......................................... $ 3 $ 80 $ 56
=========== =========== ===========
Information regarding the significant effects of affiliated reinsurance
included on the consolidated balance sheets was as follows at:
December 31,
--------------------------------------------
2017 2016
--------------------- ---------------------
Assumed Ceded Assumed Ceded
---------- ---------- ---------- ----------
(In millions)
Assets
Premiums, reinsurance and other receivables............. $ 151 $ 2,143 $ 158 $ 2,119
Deferred policy acquisition costs and value of business
acquired.............................................. 498 (40) 449 (71)
---------- ---------- ---------- ----------
Total assets........................................... $ 649 $ 2,103 $ 607 $ 2,048
========== ========== ========== ==========
Liabilities
Future policy benefits.................................. $ 1,807 $ -- $ 1,470 $ (3)
Other policy-related balances........................... 23 28 18 27
Other liabilities....................................... 40 18 48 19
---------- ---------- ---------- ----------
Total liabilities...................................... $ 1,870 $ 46 $ 1,536 $ 43
========== ========== ========== ==========
32
General American Life Insurance Company and Subsidiary
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements -- (continued)
4. Reinsurance (continued)
The Company may secure certain reinsurance recoverable balances with various
forms of collateral, including secured trusts, funds withheld accounts and
irrevocable letters of credit. The Company had $346 million and $2.1 billion of
unsecured affiliated reinsurance recoverable balances at December 31, 2017 and
2016, respectively.
Affiliated reinsurance agreements that do not expose the Company to a
reasonable possibility of a significant loss from insurance risk are recorded
using the deposit method of accounting. The deposit assets on affiliated
reinsurance were $326 million and $324 million at December 31, 2017 and 2016,
respectively. There were no deposit liabilities on affiliated reinsurance at
both December 31, 2017 and 2016.
5. Investments
See Note 7 for information about the fair value hierarchy for investments
and the related valuation methodologies.
Investment Risks and Uncertainties
Investments are exposed to the following primary sources of risk: credit,
interest rate, liquidity, market valuation, currency and real estate risk. The
financial statement risks, stemming from such investment risks, are those
associated with the determination of estimated fair values, the diminished
ability to sell certain investments in times of strained market conditions, the
recognition of impairments, the recognition of income on certain investments
and the potential consolidation of VIEs. The use of different methodologies,
assumptions and inputs relating to these financial statement risks may have a
material effect on the amounts presented within the consolidated financial
statements.
The determination of valuation allowances and impairments is highly
subjective and is based upon periodic evaluations and assessments of known and
inherent risks associated with the respective asset class. Such evaluations and
assessments are revised as conditions change and new information becomes
available.
The recognition of income on certain investments (e.g. structured
securities, including mortgage-backed securities, asset-backed securities
("ABS") and certain structured investment transactions) is dependent upon
certain factors such as prepayments and defaults, and changes in such factors
could result in changes in amounts to be earned.
Fixed Maturity and Equity Securities AFS
Fixed Maturity and Equity Securities AFS by Sector
The following table presents the fixed maturity and equity securities AFS
by sector. Redeemable preferred stock is reported within U.S. corporate and
foreign corporate fixed maturity securities. Included within fixed maturity
securities are structured securities including RMBS, commercial
mortgage-backed securities ("CMBS") and ABS (collectively, "Structured
Securities").
December 31, 2017 December 31, 2016
----------------------------------------------- ------------------------------------------------
Gross Unrealized Gross Unrealized
Cost or -------------------------- Estimated Cost or ---------------------------- Estimated
Amortized Temporary OTTI Fair Amortized Temporary OTTI Fair
Cost Gains Losses Losses (1) Value Cost Gains Losses Losses (1) Value
--------- ------ --------- ---------- --------- --------- ------- --------- ---------- ---------
(In millions)
Fixed maturity
securities:
U.S. corporate........... $ 2,896 $ 260 $ 11 $ -- $ 3,145 $ 2,942 $ 214 $ 34 $ -- $ 3,122
Foreign corporate........ 1,514 164 25 -- 1,653 1,364 85 84 -- 1,365
Foreign government....... 1,067 236 12 -- 1,291 1,059 186 36 -- 1,209
U.S. government and
agency.................. 934 81 4 -- 1,011 720 68 6 -- 782
RMBS..................... 640 31 3 (1) 669 672 31 9 -- 694
CMBS..................... 286 7 1 -- 292 318 8 2 -- 324
ABS...................... 174 1 -- -- 175 180 2 2 -- 180
State and political
subdivision............. 106 15 -- 1 120 123 12 3 -- 132
-------- ------ ------- -------- -------- -------- ------- -------- -------- --------
Total fixed maturity
securities............ $ 7,617 $ 795 $ 56 $ -- $ 8,356 $ 7,378 $ 606 $ 176 $ -- $ 7,808
======== ====== ======= ======== ======== ======== ======= ======== ======== ========
Equity securities:
Common stock............. $ 49 $ 3 $ 1 $ -- $ 51 $ 49 $ 4 $ -- $ -- $ 53
-----------
33
General American Life Insurance Company and Subsidiary
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements -- (continued)
5. Investments (continued)
(1) Noncredit OTTI losses included in AOCI in an unrealized gain position are
due to increases in estimated fair value subsequent to initial recognition
of noncredit losses on such securities. See also "-- Net Unrealized
Investment Gains (Losses)."
The Company held non-income producing fixed maturity securities with an
estimated fair value of $1 million and less than $1 million with unrealized
gains (losses) of ($1) million and less than ($1) million at December 31,
2017 and 2016, respectively.
Methodology for Amortization of Premium and Accretion of Discount on
Structured Securities
Amortization of premium and accretion of discount on Structured Securities
considers the estimated timing and amount of prepayments of the underlying
loans. Actual prepayment experience is periodically reviewed and effective
yields are recalculated when differences arise between the originally
anticipated and the actual prepayments received and currently anticipated.
Prepayment assumptions for Structured Securities are estimated using inputs
obtained from third-party specialists and based on management's knowledge of
the current market. For credit-sensitive Structured Securities and certain
prepayment-sensitive securities, the effective yield is recalculated on a
prospective basis. For all other Structured Securities, the effective yield
is recalculated on a retrospective basis.
Maturities of Fixed Maturity Securities
The amortized cost and estimated fair value of fixed maturity securities,
by contractual maturity date, were as follows at December 31, 2017:
Due After Five
Due After One Years Total Fixed
Due in One Year Through Through Ten Due After Ten Structured Maturity
Year or Less Five Years Years Years Securities Securities
------------- -------------- --------------- -------------- ---------- -----------
(In millions)
Amortized cost....... $ 265 $ 1,378 $ 2,164 $ 2,710 $ 1,100 $ 7,617
Estimated fair value. $ 271 $ 1,470 $ 2,348 $ 3,131 $ 1,136 $ 8,356
Actual maturities may differ from contractual maturities due to the
exercise of call or prepayment options. Fixed maturity securities not due at
a single maturity date have been presented in the year of final contractual
maturity. Structured Securities are shown separately, as they are not due at
a single maturity.
34
General American Life Insurance Company and Subsidiary
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements -- (continued)
5. Investments (continued)
Continuous Gross Unrealized Losses for Fixed Maturity and Equity Securities
AFS by Sector
The following table presents the estimated fair value and gross unrealized
losses of fixed maturity and equity securities AFS in an unrealized loss
position, aggregated by sector and by length of time that the securities have
been in a continuous unrealized loss position at:
December 31, 2017 December 31, 2016
------------------------------------------ ------------------------------------------
Equal to or Greater Equal to or Greater
Less than 12 Months than 12 Months Less than 12 Months than 12 Months
--------------------- -------------------- --------------------- --------------------
Estimated Gross Estimated Gross Estimated Gross Estimated Gross
Fair Unrealized Fair Unrealized Fair Unrealized Fair Unrealized
Value Losses Value Losses Value Losses Value Losses
---------- ---------- --------- ---------- ---------- ---------- --------- ----------
(Dollars in millions)
Fixed maturity securities:
U.S. corporate.......................... $ 235 $ 3 $ 139 $ 8 $ 595 $ 18 $ 144 $ 16
Foreign corporate....................... 138 1 255 24 333 19 281 65
Foreign government...................... 40 1 157 11 266 15 102 21
U.S. government and agency.............. 525 2 20 2 189 6 -- --
RMBS.................................... 120 1 39 1 149 6 51 3
CMBS.................................... 43 -- 7 1 59 2 7 --
ABS..................................... 14 -- 5 -- 17 1 42 1
State and political subdivision......... 6 1 6 -- 41 2 1 1
---------- ------- -------- --------- ---------- -------- -------- ----------
Total fixed maturity securities........ $ 1,121 $ 9 $ 628 $ 47 $ 1,649 $ 69 $ 628 $ 107
========== ======= ======== ========= ========== ======== ======== ==========
Equity securities:
Common stock............................ $ 4 $ 1 $ -- $ -- $ 3 $ -- $ -- $ --
Total number of securities in an
unrealized loss position............... 214 206 500 257
========== ======== ========== ========
Evaluation of AFS Securities for OTTI and Evaluating Temporarily Impaired AFS
Securities
Evaluation and Measurement Methodologies
Management considers a wide range of factors about the security issuer
and uses its best judgment in evaluating the cause of the decline in the
estimated fair value of the security and in assessing the prospects for
near-term recovery. Inherent in management's evaluation of the security are
assumptions and estimates about the operations of the issuer and its future
earnings potential. Considerations used in the impairment evaluation process
include, but are not limited to: (i) the length of time and the extent to
which the estimated fair value has been below cost or amortized cost;
(ii) the potential for impairments when the issuer is experiencing
significant financial difficulties; (iii) the potential for impairments in
an entire industry sector or sub-sector; (iv) the potential for impairments
in certain economically depressed geographic locations; (v) the potential
for impairments where the issuer, series of issuers or industry has suffered
a catastrophic loss or has exhausted natural resources; (vi) with respect to
fixed maturity securities, whether the Company has the intent to sell or
will more likely than not be required to sell a particular security before
the decline in estimated fair value below amortized cost recovers;
(vii) with respect to Structured Securities, changes in forecasted cash
flows after considering the quality of underlying collateral, expected
prepayment speeds, current and forecasted loss severity, consideration of
the payment terms of the underlying assets backing a particular security,
and the payment priority within the tranche structure of the security;
(viii) the potential for impairments due to weakening of foreign currencies
on non-functional currency denominated fixed maturity securities that are
near maturity; and (ix) other subjective factors, including concentrations
and information obtained from regulators and rating agencies.
35
General American Life Insurance Company and Subsidiary
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements -- (continued)
5. Investments (continued)
The methodology and significant inputs used to determine the amount of
credit loss on fixed maturity securities are as follows:
. The Company calculates the recovery value by performing a discounted cash
flow analysis based on the present value of future cash flows. The
discount rate is generally the effective interest rate of the security
prior to impairment.
. When determining collectability and the period over which value is
expected to recover, the Company applies considerations utilized in its
overall impairment evaluation process which incorporates information
regarding the specific security, fundamentals of the industry and
geographic area in which the security issuer operates, and overall
macroeconomic conditions. Projected future cash flows are estimated using
assumptions derived from management's best estimates of likely
scenario-based outcomes after giving consideration to a variety of
variables that include, but are not limited to: payment terms of the
security; the likelihood that the issuer can service the interest and
principal payments; the quality and amount of any credit enhancements;
the security's position within the capital structure of the issuer;
possible corporate restructurings or asset sales by the issuer; and
changes to the rating of the security or the issuer by rating agencies.
. Additional considerations are made when assessing the unique features
that apply to certain Structured Securities including, but not limited
to: the quality of underlying collateral, expected prepayment speeds,
current and forecasted loss severity, consideration of the payment terms
of the underlying loans or assets backing a particular security, and the
payment priority within the tranche structure of the security.
. When determining the amount of the credit loss for U.S. and foreign
corporate securities, foreign government securities and state and
political subdivision securities, the estimated fair value is considered
the recovery value when available information does not indicate that
another value is more appropriate. When information is identified that
indicates a recovery value other than estimated fair value, management
considers in the determination of recovery value the same considerations
utilized in its overall impairment evaluation process as described above,
as well as any private and public sector programs to restructure such
securities.
With respect to securities that have attributes of debt and
equity ("perpetual hybrid securities"), consideration is given in the OTTI
analysis as to whether there has been any deterioration in the credit of the
issuer and the likelihood of recovery in value of the securities that are in
a severe and extended unrealized loss position. Consideration is also given
as to whether any perpetual hybrid securities, with an unrealized loss,
regardless of credit rating, have deferred any dividend payments. When an
OTTI loss has occurred, the OTTI loss is the entire difference between the
perpetual hybrid security's cost and its estimated fair value with a
corresponding charge to earnings.
The cost or amortized cost of fixed maturity and equity securities is
adjusted for OTTI in the period in which the determination is made. The
Company does not change the revised cost basis for subsequent recoveries in
value.
In periods subsequent to the recognition of OTTI on a fixed maturity
security, the Company accounts for the impaired security as if it had been
purchased on the measurement date of the impairment. Accordingly, the
discount (or reduced premium) based on the new cost basis is accreted over
the remaining term of the fixed maturity security in a prospective manner
based on the amount and timing of estimated future cash flows.
Current Period Evaluation
Based on the Company's current evaluation of its AFS securities in an
unrealized loss position in accordance with its impairment policy, and the
Company's current intentions and assessments (as applicable to the type of
security) about holding, selling and any requirements to sell these
securities, the Company concluded that these securities were not
other-than-temporarily impaired at December 31, 2017. Future OTTI will
depend primarily on economic fundamentals, issuer performance (including
changes in the present value of future cash flows expected to be collected),
changes in credit ratings, collateral valuation, interest rates and credit
spreads. If economic fundamentals deteriorate or if there are adverse
changes in the above factors, OTTI may be incurred in upcoming periods.
36
General American Life Insurance Company and Subsidiary
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements -- (continued)
5. Investments (continued)
Gross unrealized losses on fixed maturity securities decreased
$120 million during the year ended December 31, 2017 to $56 million. The
decrease in gross unrealized losses for the year ended December 31, 2017,
was primarily attributable to narrowing credit spreads and strengthening
foreign currencies on non-functional currency denominated fixed maturity
securities.
At December 31, 2017, $1 million of the total $56 million of gross
unrealized losses were from three below investment grade fixed maturity
securities with an unrealized loss position of 20% or more of amortized cost
for six months or greater. Unrealized losses on below investment grade fixed
maturity securities are principally related to state and political
subdivision securities and U.S. corporate securities (primarily financial
industry securities) and are the result of significantly wider credit
spreads resulting from higher risk premiums since purchase, in part due to
economic and market uncertainties. Management evaluates state and political
subdivision securities and U.S. corporate securities based on factors such
as expected cash flows and the financial condition and near-term and
long-term prospects of the issuers.
Mortgage Loans
Mortgage Loans by Portfolio Segment
Mortgage loans are summarized as follows at:
December 31,
--------------------------------------------
2017 2016
--------------------- ---------------------
Carrying % of Carrying % of
Value Total Value Total
---------- --------- ---------- ---------
(Dollars in millions)
Mortgage loans:
Commercial.................. $ 852 86.9% $ 772 90.1%
Agricultural................ 133 13.6 89 10.4
---------- --------- ---------- ---------
Subtotal.................. 985 100.5 861 100.5
Valuation allowances........ (5) (0.5) (4) (0.5)
---------- --------- ---------- ---------
Total mortgage loans, net. $ 980 100.0% $ 857 100.0%
========== ========= ========== =========
The Company purchases unaffiliated mortgage loans under a master
participation agreement, from an affiliate, simultaneously with the
affiliate's origination or acquisition of mortgage loans. The aggregate
amount of unaffiliated mortgage loan participation interests purchased by the
Company from an affiliate during the years ended December 31, 2017, 2016 and
2015 were $216 million, $158 million and $287 million, respectively. In
connection with the mortgage loan participations, the affiliate collected
mortgage loan principal and interest payments on the Company's behalf and the
affiliate remitted such payments to the Company in the amount of $85 million,
$263 million and $138 million during the years ended December 31, 2017, 2016
and 2015, respectively.
See "-- Related Party Investment Transactions" for additional discussion
of related party mortgage loans.
Mortgage Loans, Valuation Allowance and Impaired Loans by Portfolio Segment
All mortgage loans were evaluated collectively for credit losses and the
related valuation allowances were maintained primarily for commercial
mortgage loans. The Company had no impaired mortgage loans during each of the
years ended December 31, 2017, 2016 and 2015.
37
General American Life Insurance Company and Subsidiary
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements -- (continued)
5. Investments (continued)
Valuation Allowance Rollforward by Portfolio Segment
The changes in the valuation allowance, by portfolio segment, were as
follows:
Commercial Agricultural Total
------------ ------------- ------------
(In millions)
Balance at January 1, 2015... $ 3 $ -- $ 3
Provision (release).......... 1 -- 1
------------ ------------- ------------
Balance at December 31, 2015. 4 -- 4
Provision (release).......... -- -- --
------------ ------------- ------------
Balance at December 31, 2016. 4 -- 4
Provision (release).......... 1 -- 1
------------ ------------- ------------
Balance at December 31, 2017. $ 5 $ -- $ 5
============ ============= ============
Valuation Allowance Methodology
Mortgage loans are considered to be impaired when it is probable that,
based upon current information and events, the Company will be unable to
collect all amounts due under the loan agreement. Specific valuation
allowances are established using the same methodology for both portfolio
segments as the excess carrying value of a loan over either (i) the present
value of expected future cash flows discounted at the loan's original
effective interest rate, (ii) the estimated fair value of the loan's
underlying collateral if the loan is in the process of foreclosure or
otherwise collateral dependent, or (iii) the loan's observable market price.
A common evaluation framework is used for establishing non-specific
valuation allowances for both loan portfolio segments; however, a separate
non-specific valuation allowance is calculated and maintained for each loan
portfolio segment that is based on inputs unique to each loan portfolio
segment. Non-specific valuation allowances are established for pools of
loans with similar risk characteristics where a property-specific or
market-specific risk has not been identified, but for which the Company
expects to incur a credit loss. These evaluations are based upon several
loan portfolio segment-specific factors, including the Company's experience
for loan losses, defaults and loss severity, and loss expectations for loans
with similar risk characteristics. These evaluations are revised as
conditions change and new information becomes available.
Commercial and Agricultural Mortgage Loan Portfolio Segments
The Company typically uses several years of historical experience in
establishing non-specific valuation allowances which capture multiple
economic cycles. For evaluations of commercial mortgage loans, in addition
to historical experience, management considers factors that include the
impact of a rapid change to the economy, which may not be reflected in the
loan portfolio, and recent loss and recovery trend experience as compared to
historical loss and recovery experience. For evaluations of agricultural
mortgage loans, in addition to historical experience, management considers
factors that include increased stress in certain sectors, which may be
evidenced by higher delinquency rates, or a change in the number of higher
risk loans. On a quarterly basis, management incorporates the impact of
these current market events and conditions on historical experience in
determining the non-specific valuation allowance established for commercial
and agricultural mortgage loans.
All commercial mortgage loans are reviewed on an ongoing basis which may
include an analysis of the property financial statements and rent roll,
lease rollover analysis, property inspections, market analysis, estimated
valuations of the underlying collateral, loan-to-value ratios, debt service
coverage ratios, and tenant creditworthiness. The monitoring process focuses
on higher risk loans, which include those that are classified as
restructured, delinquent or in foreclosure, as well as loans with higher
loan-to-value ratios and lower debt service coverage ratios. All
agricultural mortgage loans are monitored on an ongoing basis. The
monitoring process for agricultural mortgage loans is generally similar to
the commercial mortgage loan monitoring process, with a focus on higher risk
loans, including reviews on a geographic and property-type basis. Higher
risk loans are reviewed individually on an ongoing basis for potential
credit loss and specific valuation allowances are established using the
methodology described above. Quarterly, the remaining loans are reviewed on
a pool basis by aggregating groups of loans that have similar risk
characteristics for potential credit loss, and non-specific valuation
allowances are established as described above using inputs that are unique
to each segment of the loan portfolio.
38
General American Life Insurance Company and Subsidiary
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements -- (continued)
5. Investments (continued)
For commercial mortgage loans, the primary credit quality indicator is
the debt service coverage ratio, which compares a property's net operating
income to amounts needed to service the principal and interest due under the
loan. Generally, the lower the debt service coverage ratio, the higher the
risk of experiencing a credit loss. The Company also reviews the
loan-to-value ratio of its commercial mortgage loan portfolio. Loan-to-value
ratios compare the unpaid principal balance of the loan to the estimated
fair value of the underlying collateral. Generally, the higher the
loan-to-value ratio, the higher the risk of experiencing a credit loss. The
debt service coverage ratio and the values utilized in calculating the ratio
are updated annually on a rolling basis, with a portion of the portfolio
updated each quarter. In addition, the loan-to-value ratio is routinely
updated for all but the lowest risk loans as part of the Company's ongoing
review of its commercial mortgage loan portfolio.
For agricultural mortgage loans, the Company's primary credit quality
indicator is the loan-to-value ratio. The values utilized in calculating
this ratio are developed in connection with the ongoing review of the
agricultural mortgage loan portfolio and are routinely updated.
Credit Quality of Commercial Mortgage Loans
The credit quality of commercial mortgage loans was as follows at:
Recorded Investment
------------------------------------------------
Debt Service Coverage Ratios
------------------------------- % of
> 1.20x 1.00x - 1.20x < 1.00x Total Total
-------- ------------- -------- -------- -------
(Dollars in millions)
December 31, 2017
Loan-to-value ratios:
Less than 65%......... $ 698 $ 58 $ 2 $ 758 89.0%
65% to 75%............ 81 2 2 85 10.0
76% to 80%............ 9 -- -- 9 1.0
-------- --------- -------- -------- -------
Total............... $ 788 $ 60 $ 4 $ 852 100.0%
======== ========= ======== ======== =======
December 31, 2016
Loan-to-value ratios:
Less than 65%......... $ 671 $ 41 $ 14 $ 726 94.0%
65% to 75%............ 44 -- 2 46 6.0
76% to 80%............ -- -- -- -- --
-------- --------- -------- -------- -------
Total............... $ 715 $ 41 $ 16 $ 772 100.0%
======== ========= ======== ======== =======
Credit Quality of Agricultural Mortgage Loans
The credit quality of agricultural mortgage loans was as follows at:
December 31,
---------------------------------------------------
2017 2016
------------------------- ------------------------
Recorded % of Recorded % of
Investment Total Investment Total
------------ ------------ ----------- ------------
(Dollars in millions)
Loan-to-value ratios:
Less than 65%......... $ 107 80.5% $ 77 86.5%
65% to 75%............ 26 19.5 12 13.5
------------ ------------ ----------- ------------
Total............... $ 133 100.0% $ 89 100.0%
============ ============ =========== ============
39
General American Life Insurance Company and Subsidiary
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements -- (continued)
5. Investments (continued)
Past Due and Nonaccrual Mortgage Loans
The Company has a high quality, well performing mortgage loan portfolio,
with all mortgage loans classified as performing at both December 31, 2017
and 2016. The Company defines delinquency consistent with industry practice,
when mortgage loans are past due as follows: commercial mortgage loans - 60
days and agricultural mortgage loans - 90 days. The Company had no mortgage
loans past due and no nonaccrual mortgage loans at both December 31, 2017 and
2016.
Mortgage Loans Modified in a Troubled Debt Restructuring
The Company may grant concessions related to borrowers experiencing
financial difficulties, which are classified as troubled debt restructurings.
Generally, the types of concessions include: reduction of the contractual
interest rate, extension of the maturity date at an interest rate lower than
current market interest rates, and/or a reduction of accrued interest. The
amount, timing and extent of the concessions granted are considered in
determining any impairment or changes in the specific valuation allowance
recorded with the restructuring. Through the continuous monitoring process, a
specific valuation allowance may have been recorded prior to the quarter when
the mortgage loan is modified in a troubled debt restructuring. There were no
mortgage loans modified in a troubled debt restructuring for both the years
ended December 31, 2017 and 2016.
Cash Equivalents
The carrying value of cash equivalents, which includes securities and other
investments with an original or remaining maturity of three months or less at
the time of purchase, was $136 million and $39 million at December 31, 2017 and
2016, respectively.
Net Unrealized Investment Gains (Losses)
Unrealized investment gains (losses) on fixed maturity and equity securities
AFS and the effect on DAC, VOBA and future policy benefits, that would result
from the realization of the unrealized gains (losses), are included in net
unrealized investment gains (losses) in AOCI.
The components of net unrealized investment gains (losses), included in
AOCI, were as follows:
Years Ended December 31,
----------------------------------
2017 2016 2015
---------- ---------- ----------
(In millions)
Fixed maturity securities............................................. $ 739 $ 430 $ 340
Fixed maturity securities with noncredit OTTI losses included in AOCI. -- -- --
---------- ---------- ----------
Total fixed maturity securities..................................... 739 430 340
Equity securities..................................................... 2 4 (3)
Derivatives........................................................... (12) 28 21
Other................................................................. 2 (3) (2)
---------- ---------- ----------
Subtotal............................................................ 731 459 356
---------- ---------- ----------
Amounts allocated from:
Future policy benefits................................................ (44) (4) --
DAC and VOBA.......................................................... (73) (52) (47)
---------- ---------- ----------
Subtotal............................................................ (117) (56) (47)
---------- ---------- ----------
Deferred income tax benefit (expense)................................. (210) (141) (109)
---------- ---------- ----------
Net unrealized investment gains (losses)............................ $ 404 $ 262 $ 200
========== ========== ==========
40
General American Life Insurance Company and Subsidiary
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements -- (continued)
5. Investments (continued)
The changes in net unrealized investment gains (losses) were as follows:
Years Ended December 31,
----------------------------------
2017 2016 2015
---------- ---------- ----------
(In millions)
Balance at January 1,......................................................... $ 262 $ 200 $ 497
Fixed maturity securities on which noncredit OTTI losses have been recognized. -- -- 1
Unrealized investment gains (losses) during the year.......................... 272 103 (486)
Unrealized investment gains (losses) relating to:
Future policy benefits........................................................ (40) (4) 2
DAC and VOBA.................................................................. (21) (5) 28
Deferred income tax benefit (expense)......................................... (69) (32) 158
---------- ---------- ----------
Balance at December 31,....................................................... $ 404 $ 262 $ 200
========== ========== ==========
Change in net unrealized investment gains (losses).......................... $ 142 $ 62 $ (297)
========== ========== ==========
Concentrations of Credit Risk
Investments in any counterparty that were greater than 10% of the Company's
stockholder's equity, other than the U.S. government and its agencies, were in
fixed income securities of the Canadian federal and provincial governments with
an estimated fair value of $1.2 billion and $1.1 billion at December 31, 2017
and 2016, respectively.
Securities Lending
Elements of the securities lending program are presented below at:
December 31,
-------------------------
2017 2016
------------ ------------
(In millions)
Securities on loan: (1)
Amortized cost..................................... $ 328 $ 246
Estimated fair value............................... $ 365 $ 281
Cash collateral received from counterparties (2)..... $ 373 $ 286
Security collateral received from counterparties (3). $ -- $ 1
Reinvestment portfolio -- estimated fair value....... $ 375 $ 286
-----------
(1) Included within fixed maturity securities.
(2) Included within payables for collateral under securities loaned and other
transactions.
(3) Security collateral received from counterparties may not be sold or
re-pledged, unless the counterparty is in default, and is not reflected on
the consolidated financial statements.
41
General American Life Insurance Company and Subsidiary
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements -- (continued)
5. Investments (continued)
The cash collateral liability by loaned security type and remaining tenor of
the agreements was as follows at:
December 31, 2017 December 31, 2016
------------------------------------ ------------------------------------
Remaining Tenor of Securities Remaining Tenor of Securities
Lending Agreements Lending Agreements
----------------------------- -----------------------------
Over Over
1 Month 1 to 6 1 Month 1 to 6
Open (1) or Less Months Total Open (1) or Less Months Total
-------- ------- ------ ------ -------- ------- ------ ------
(In millions)
Cash collateral liability by loaned
security type:
U.S. government and agency.............. $ 158 $ 66 $ 149 $ 373 $ 43 $ 64 $ 136 $ 243
All other securities.................... -- -- -- -- -- 43 -- 43
------- ------ ------ ------ ------ ------ ------ ------
Total.................................. $ 158 $ 66 $ 149 $ 373 $ 43 $ 107 $ 136 $ 286
======= ====== ====== ====== ====== ====== ====== ======
-----------
(1) The related loaned security could be returned to the Company on the next
business day, which would require the Company to immediately return the
cash collateral.
If the Company is required to return significant amounts of cash collateral
on short notice and is forced to sell securities to meet the return obligation,
it may have difficulty selling such collateral that is invested in securities
in a timely manner, be forced to sell securities in a volatile or illiquid
market for less than what otherwise would have been realized under normal
market conditions, or both. The estimated fair value of the securities on loan
related to the cash collateral on open at December 31, 2017 was $155 million,
all of which were U.S. government and agency securities which, if put back to
the Company, could be immediately sold to satisfy the cash requirement.
The reinvestment portfolio acquired with the cash collateral consisted
principally of fixed maturity securities (including U.S. government and agency
securities, agency RMBS, ABS) short-term investments and cash equivalents with
66% invested in cash equivalents, U.S. government and agency securities, agency
RMBS, short-term investments, or held in cash. If the securities on loan or the
reinvestment portfolio become less liquid, the Company has the liquidity
resources of most of its general account available to meet any potential cash
demands when securities on loan are put back to the Company.
Invested Assets on Deposit and Pledged as Collateral
Invested assets on deposit and pledged as collateral are presented below at
estimated fair value for all asset classes except mortgage loans, which are
presented at carrying value, at:
December 31,
-------------------------
2017 2016
------------ ------------
(In millions)
Invested assets on deposit (regulatory deposits)............ $ 1,445 $ 1,288
Invested assets held in trust (reinsurance agreements)...... 329 --
Invested assets pledged as collateral (1)................... 730 715
------------ ------------
Total invested assets on deposit and pledged as collateral. $ 2,504 $ 2,003
============ ============
-----------
(1) The Company has pledged invested assets in connection with various
agreements and transactions, including funding agreements (see Note 2), and
derivative transactions (see Note 6).
See "-- Securities Lending" for information regarding securities on loan.
42
General American Life Insurance Company and Subsidiary
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements -- (continued)
5. Investments (continued)
Collectively Significant Equity Method Investments
The Company holds investments in real estate joint ventures, real estate
funds and other limited partnership interests consisting of leveraged buy-out
funds, hedge funds, private equity funds, joint ventures and other funds. The
portion of these investments accounted for under the equity method had a
carrying value of $273 million at December 31, 2017. The Company's maximum
exposure to loss related to these equity method investments is limited to the
carrying value of these investments plus unfunded commitments of $95 million at
December 31, 2017. Except for certain real estate joint ventures, the Company's
investments in real estate funds and other limited partnership interests are
generally of a passive nature in that the Company does not participate in the
management of the entities.
As described in Note 1, the Company generally records its share of earnings
in its equity method investments using a three-month lag methodology and within
net investment income. Aggregate net investment income from these equity method
investments exceeded 10% of the Company's consolidated pre-tax income (loss)
for two of the three most recent annual periods: 2017 and 2016. The Company is
providing the following aggregated summarized financial data for such equity
method investments, for the most recent annual periods, in order to provide
comparative information. This aggregated summarized financial data does not
represent the Company's proportionate share of the assets, liabilities, or
earnings of such entities.
The aggregated summarized financial data presented below reflects the latest
available financial information and is as of, and for the years ended
December 31, 2017, 2016 and 2015. Aggregate total assets of these entities
totaled $119.9 billion and $113.8 billion at December 31, 2017 and 2016,
respectively. Aggregate total liabilities of these entities totaled
$11.1 billion and $8.4 billion at December 31, 2017 and 2016, respectively.
Aggregate net income (loss) of these entities totaled $11.4 billion,
$7.4 billion and $10.0 billion for the years ended December 31, 2017, 2016 and
2015, respectively. Aggregate net income (loss) from the underlying entities in
which the Company invests is primarily comprised of investment income,
including recurring investment income and realized and unrealized investment
gains (losses).
Variable Interest Entities
The Company has invested in legal entities that are VIEs. In certain
instances, the Company may hold both the power to direct the most significant
activities of the entity, as well as an economic interest in the entity and, as
such, would be deemed the primary beneficiary or consolidator of the entity.
The determination of the VIE's primary beneficiary requires an evaluation of
the contractual and implied rights and obligations associated with each party's
relationship with or involvement in the entity, an estimate of the entity's
expected losses and expected residual returns and the allocation of such
estimates to each party involved in the entity.
Consolidated VIEs
There were no VIEs for which the Company has concluded that it is the
primary beneficiary and which are consolidated at both December 31, 2017 and
2016.
43
General American Life Insurance Company and Subsidiary
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements -- (continued)
5. Investments (continued)
Unconsolidated VIEs
The carrying amount and maximum exposure to loss relating to VIEs in which
the Company holds a significant variable interest but is not the primary
beneficiary and which have not been consolidated were as follows at:
December 31,
---------------------------------------------------
2017 2016
------------------------- -------------------------
Maximum Maximum
Carrying Exposure Carrying Exposure
Amount to Loss (1) Amount to Loss (1)
------------ ------------ ------------ ------------
(In millions)
Fixed maturity securities AFS:
Structured Securities (2)......... $ 1,136 $ 1,136 $ 1,198 $ 1,198
U.S. and foreign corporate........ 105 105 42 42
Other limited partnership interests. 192 282 181 289
Real estate joint ventures.......... 63 63 -- --
Other invested assets............... 1 1 1 1
------------ ------------ ------------ ------------
Total............................. $ 1,497 $ 1,587 $ 1,422 $ 1,530
============ ============ ============ ============
-----------
(1) The maximum exposure to loss relating to fixed maturity securities AFS is
equal to their carrying amounts or the carrying amounts of retained
interests. The maximum exposure to loss relating to other limited
partnership interests and real estate joint ventures is equal to the
carrying amounts plus any unfunded commitments. For certain of its
investments in other invested assets, the Company's return is in the form
of income tax credits which are guaranteed by creditworthy third parties.
For such investments, the maximum exposure to loss is equal to the carrying
amounts plus any unfunded commitments, reduced by income tax credits
guaranteed by third parties of less than $1 million at both December 31,
2017 and 2016. Such a maximum loss would be expected to occur only upon
bankruptcy of the issuer or investee.
(2) For these variable interests, the Company's involvement is limited to that
of a passive investor in mortgage-backed or asset-backed securities issued
by trusts that do not have substantial equity.
As described in Note 12, the Company makes commitments to fund partnership
investments in the normal course of business. Excluding these commitments,
the Company did not provide financial or other support to investees
designated as VIEs during each of the years ended December 31, 2017, 2016 and
2015.
44
General American Life Insurance Company and Subsidiary
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements -- (continued)
5. Investments (continued)
Net Investment Income
The components of net investment income were as follows:
Years Ended December 31,
--------------------------------------
2017 2016 2015
------------ ------------ ------------
(In millions)
Investment income:
Fixed maturity securities......................... $ 365 $ 349 $ 344
Equity securities................................. 2 2 3
Mortgage loans.................................... 41 47 60
Policy loans...................................... 86 87 91
Real estate and real estate joint ventures........ 3 3 13
Other limited partnership interests............... 29 15 12
Cash, cash equivalents and short-term investments. 2 1 --
Other............................................. 4 2 1
------------ ------------ ------------
Subtotal......................................... 532 506 524
Less: Investment expenses......................... 16 17 17
------------ ------------ ------------
Net investment income............................ $ 516 $ 489 $ 507
============ ============ ============
See "-- Related Party Investment Transactions" for discussion of affiliated
net investment income and investment expenses.
45
General American Life Insurance Company and Subsidiary
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements -- (continued)
5. Investments (continued)
Net Investment Gains (Losses)
Components of Net Investment Gains (Losses)
The components of net investment gains (losses) were as follows:
Years Ended December 31,
----------------------------------------
2017 2016 2015
------------ ------------ ------------
(In millions)
Total gains (losses) on fixed maturity securities:
Total OTTI losses recognized -- by sector and industry:
U.S. and foreign corporate securities -- by industry:
Industrial............................................................. $ -- $ (3) $ --
------------ ------------ ------------
Total U.S. and foreign corporate securities.......................... -- (3) --
RMBS................................................................... -- -- (1)
State and political subdivision........................................ (1) -- (1)
------------ ------------ ------------
OTTI losses on fixed maturity securities recognized in earnings...... (1) (3) (2)
Fixed maturity securities -- net gains (losses) on sales and disposals. (2) -- 1
------------ ------------ ------------
Total gains (losses) on fixed maturity securities.................... (3) (3) (1)
Total gains (losses) on equity securities:
Total OTTI losses recognized -- by sector:
Common stock........................................................... -- (3) (3)
------------ ------------ ------------
OTTI losses on equity securities recognized in earnings.............. -- (3) (3)
Equity securities -- net gains (losses) on sales and disposals......... -- (2) (1)
------------ ------------ ------------
Total gains (losses) on equity securities............................ -- (5) (4)
------------ ------------ ------------
Mortgage loans......................................................... (1) -- (1)
Real estate and real estate joint ventures............................. -- -- 10
Other limited partnership interests.................................... (4) -- 1
Other.................................................................. (2) (2) (13)
------------ ------------ ------------
Total net investment gains (losses).................................. $ (10) $ (10) $ (8)
============ ============ ============
Gains (losses) from foreign currency transactions included within net
investment gains (losses) were ($5) million, ($7) million and ($30) million
for the years ended December 31, 2017, 2016 and 2015, respectively.
Sales or Disposals and Impairments of Fixed Maturity and Equity Securities
Investment gains and losses on sales of securities are determined on a
specific identification basis. Proceeds from sales or disposals of fixed
maturity and equity securities and the components of fixed maturity and
equity securities net investment gains (losses) were as shown in the table
below.
Years Ended December 31,
---------------------------------------------------------------------
2017 2016 2015 2017 2016 2015
---------- ---------- ---------- ---------- ---------- ----------
Fixed Maturity Securities Equity Securities
---------------------------------- ---------------------------------
(In millions)
Proceeds........................ $ 1,803 $ 1,604 $ 1,853 $ 3 $ 6 $ 5
========== ========== ========== ========== ========== ==========
Gross investment gains.......... $ 13 $ 31 $ 25 $ -- $ -- $ 1
Gross investment losses......... (15) (31) (24) -- (2) (2)
OTTI losses..................... (1) (3) (2) -- (3) (3)
---------- ---------- ---------- ---------- ---------- ----------
Net investment gains (losses). $ (3) $ (3) $ (1) $ -- $ (5) $ (4)
========== ========== ========== ========== ========== ==========
46
General American Life Insurance Company and Subsidiary
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements -- (continued)
5. Investments (continued)
Credit Loss Rollforward
The table below presents a rollforward of the cumulative credit loss
component of OTTI loss recognized in earnings on fixed maturity securities
still held for which a portion of the OTTI loss was recognized in OCI:
Years Ended December 31,
--------------------------
2017 2016
------------ ------------
(In millions)
Balance at January 1,............................................................................ $ 4 $ 4
Reductions:
Sales (maturities, pay downs or prepayments) of securities previously impaired as credit loss
OTTI.......................................................................................... (1) --
------------ ------------
Balance at December 31,.......................................................................... $ 3 $ 4
============ ============
Related Party Investment Transactions
The Company transfers invested assets, primarily consisting of fixed
maturity securities, to and from affiliates. Invested assets transferred to and
from affiliates were as follows:
Years Ended December 31,
-----------------------------------
2017 2016 2015
----------- ----------- -----------
(In millions)
Estimated fair value of invested assets transferred to affiliates... $ -- $ 97 $ --
Amortized cost of invested assets transferred to affiliates......... $ -- $ 85 $ --
Net investment gains (losses) recognized on transfers............... $ -- $ 12 $ --
Estimated fair value of invested assets transferred from affiliates. $ 341 $ 102 $ --
The unpaid principal balance of affiliated loans to MetLife, Inc. held by
the Company totals $100 million, bear interest at the following fixed rates,
payable semiannually, and are due as follows: $87 million at 5.64% due July 15,
2021 and $13 million at 5.86% due December 16, 2021. The carrying value of
these affiliated loans totaled $103 million at both December 31, 2017 and 2016,
and are included in other invested assets. Net investment income from these
affiliated loans was $5 million for each of the years ended December 31, 2017,
2016 and 2015.
In August 2015, an affiliated loan with a carrying value of $75 million was
repaid in cash prior to maturity. This affiliated loan was secured by interests
in real estate subsidiaries, which owned operating real estate with an
estimated fair value in excess of the affiliated loan. Net investment income
from this affiliated loan was $4 million for the year ended December 31, 2015.
In addition, mortgage loan prepayment income earned from the repayment prior to
maturity in August 2015 described above was $18 million for the year ended
December 31, 2015.
The Company receives investment administrative services from an affiliate.
The related investment administrative service charges were $11 million,
$13 million and $11 million for the years ended December 31, 2017, 2016 and
2015, respectively.
See "-- Mortgage Loans -- Mortgage Loans by Portfolio Segment" for
discussion of mortgage loan participation agreements with affiliate.
6. Derivatives
Accounting for Derivatives
See Note 1 for a description of the Company's accounting policies for
derivatives and Note 7 for information about the fair value hierarchy for
derivatives.
Derivative Strategies
The Company is exposed to various risks relating to its ongoing business
operations, including interest rate, foreign currency exchange rate, credit and
equity market. The Company uses a variety of strategies to manage these risks,
including the use of derivatives.
47
General American Life Insurance Company and Subsidiary
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements -- (continued)
6. Derivatives (continued)
Derivatives are financial instruments with values derived from interest
rates, foreign currency exchange rates, credit spreads and/or other financial
indices. Derivatives may be exchange-traded or contracted in the
over-the-counter ("OTC") market. Certain of the Company's OTC derivatives are
cleared and settled through central clearing counterparties ("OTC-cleared"),
while others are bilateral contracts between two counterparties
("OTC-bilateral"). The types of derivatives the Company uses include swaps,
forwards and option contracts. To a lesser extent, the Company uses credit
default swaps to synthetically replicate investment risks and returns which are
not readily available in the cash markets.
Interest Rate Derivatives
Interest rate swaps are used by the Company primarily to reduce market
risks from changes in interest rates and to alter interest rate exposure
arising from mismatches between assets and liabilities (duration mismatches).
In an interest rate swap, the Company agrees with another party to exchange,
at specified intervals, the difference between fixed rate and floating rate
interest amounts as calculated by reference to an agreed notional amount. The
Company utilizes interest rate swaps in fair value and nonqualifying hedging
relationships.
Foreign Currency Exchange Rate Derivatives
The Company uses foreign currency exchange rate derivatives, including
foreign currency swaps and foreign currency forwards, to reduce the risk from
fluctuations in foreign currency exchange rates associated with its assets
and liabilities denominated in foreign currencies.
In a foreign currency swap transaction, the Company agrees with another
party to exchange, at specified intervals, the difference between one
currency and another at a fixed exchange rate, generally set at inception,
calculated by reference to an agreed upon notional amount. The notional
amount of each currency is exchanged at the inception and termination of the
currency swap by each party. The Company utilizes foreign currency swaps in
fair value, cash flow and nonqualifying hedging relationships.
In a foreign currency forward transaction, the Company agrees with another
party to deliver a specified amount of an identified currency at a specified
future date. The price is agreed upon at the time of the contract and payment
for such a contract is made at the specified future date. The Company
utilizes foreign currency forwards in nonqualifying hedging relationships.
Credit Derivatives
The Company enters into purchased credit default swaps to hedge against
credit-related changes in the value of its investments. In a credit default
swap transaction, the Company agrees with another party to pay, at specified
intervals, a premium to hedge credit risk. If a credit event occurs, as
defined by the contract, the contract may be cash settled or it may be
settled gross by the delivery of par quantities of the referenced investment
equal to the specified swap notional amount in exchange for the payment of
cash amounts by the counterparty equal to the par value of the investment
surrendered. Credit events vary by type of issuer but typically include
bankruptcy, failure to pay debt obligations and involuntary restructuring for
corporate obligors, as well as repudiation, moratorium or governmental
intervention for sovereign obligors. In each case, payout on a credit default
swap is triggered only after the Credit Derivatives Determinations Committee
of the International Swaps and Derivatives Association, Inc. ("ISDA") deems
that a credit event has occurred. The Company utilizes credit default swaps
in nonqualifying hedging relationships.
The Company enters into written credit default swaps to synthetically
create credit investments that are either more expensive to acquire or
otherwise unavailable in the cash markets. These transactions are a
combination of a derivative and one or more cash instruments, such as
U.S. government and agency securities or other fixed maturity securities.
These credit default swaps are not designated as hedging instruments.
Equity Derivatives
To a lesser extent, the Company uses equity index options in nonqualifying
hedging relationships.
48
General American Life Insurance Company and Subsidiary
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements -- (continued)
6. Derivatives (continued)
Primary Risks Managed by Derivatives
The following table presents the primary underlying risk exposure, gross
notional amount and estimated fair value of the Company's derivatives,
excluding embedded derivatives, held at:
December 31,
--------------------------------------------------------------
2017 2016
-------------------------------- -----------------------------
Estimated Fair Value Estimated Fair Value
---------------------- -------------------
Gross Gross
Notional Notional
Primary Underlying Risk Exposure Amount Assets Liabilities Amount Assets Liabilities
-------------------------------- --------- ------ ----------- --------- ------- -----------
(In millions)
Derivatives Designated as Hedging Instruments:
Fair value hedges:
Interest rate swaps............. Interest rate.............. $ 7 $ -- $ -- $ 12 $ -- $ --
Foreign currency swaps.......... Foreign currency
exchange rate............. 9 -- -- -- -- --
--------- ------ ------ --------- ------- -------
Subtotal....................................................... 16 -- -- 12 -- --
--------- ------ ------ --------- ------- -------
Cash flow hedges:
Foreign currency swaps.......... Foreign currency
exchange rate............. 593 13 24 352 34 3
--------- ------ ------ --------- ------- -------
Total qualifying hedges........................................ 609 13 24 364 34 3
--------- ------ ------ --------- ------- -------
Derivatives Not Designated or Not Qualifying as Hedging Instruments:
Interest rate swaps............. Interest rate.............. 300 36 7 310 44 6
Foreign currency swaps.......... Foreign currency
exchange rate............. 167 11 8 150 19 --
Foreign currency forwards....... Foreign currency
exchange rate............. 628 -- 13 679 1 8
Credit default swaps -- Credit.....................
purchased...................... 5 -- -- 5 1 --
Credit default swaps -- written. Credit..................... 193 5 -- 193 3 --
Equity index options............ Equity market.............. 12 -- -- 35 -- --
--------- ------ ------ --------- ------- -------
Total non-designated or nonqualifying derivatives.............. 1,305 52 28 1,372 68 14
--------- ------ ------ --------- ------- -------
Total.......................................................... $ 1,914 $ 65 $ 52 $ 1,736 $ 102 $ 17
========= ====== ====== ========= ======= =======
Based on gross notional amounts, a substantial portion of the Company's
derivatives was not designated or did not qualify as part of a hedging
relationship at both December 31, 2017 and 2016. The Company's use of
derivatives includes (i) derivatives that serve as macro hedges of the
Company's exposure to various risks and that generally do not qualify for hedge
accounting due to the criteria required under the portfolio hedging rules;
(ii) derivatives that economically hedge insurance liabilities that contain
mortality or morbidity risk and that generally do not qualify for hedge
accounting because the lack of these risks in the derivatives cannot support an
expectation of a highly effective hedging relationship; and (iii) written
credit default swaps that are used to synthetically create credit investments
and that do not qualify for hedge accounting because they do not involve a
hedging relationship. For these nonqualified derivatives, changes in market
factors can lead to the recognition of fair value changes on the statement of
operations without an offsetting gain or loss recognized in earnings for the
item being hedged.
Net Derivative Gains (Losses)
The components of net derivative gains (losses) were as follows:
Years Ended December 31,
-----------------------------------
2017 2016 2015
----------- ---------- ----------
(In millions)
Freestanding derivatives and hedging gains (losses) (1). $ (54) $ (11) $ 139
Embedded derivatives gains (losses)..................... (55) (19) 80
----------- ---------- ----------
Total net derivative gains (losses).................... $ (109) $ (30) $ 219
=========== ========== ==========
-----------
49
General American Life Insurance Company and Subsidiary
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements -- (continued)
6. Derivatives (continued)
(1) Includes foreign currency transaction gains (losses) on hedged items in
cash flow and nonqualifying hedging relationships, which are not presented
elsewhere in this note.
The Company recognized net investment income from settlement payments
related to qualifying hedges of $5 million, $4 million and $2 million for the
years ended December 31, 2017, 2016 and 2015, respectively.
The Company recognized net derivative gains (losses) from settlement
payments related to nonqualifying hedges of $11 million, $12 million and $11
million for the years ended December 31, 2017, 2016 and 2015, respectively.
Nonqualifying Derivatives and Derivatives for Purposes Other Than Hedging
The following table presents the amount and location of gains (losses)
recognized in income for derivatives that were not designated or not qualifying
as hedging instruments:
Net
Derivative
Gains (Losses)
--------------
(In millions)
Year Ended December 31, 2017
Interest rate derivatives........................................ $ (8)
Foreign currency exchange rate derivatives....................... (60)
Credit derivatives -- written.................................... 2
------------
Total.......................................................... $ (66)
============
Year Ended December 31, 2016
Interest rate derivatives........................................ $ (9)
Foreign currency exchange rate derivatives....................... (10)
Credit derivatives -- written.................................... 1
------------
Total.......................................................... $ (18)
============
Year Ended December 31, 2015
Interest rate derivatives........................................ $ (7)
Foreign currency exchange rate derivatives....................... 141
Credit derivatives -- written.................................... (2)
------------
Total.......................................................... $ 132
============
Fair Value Hedges
The Company designates and accounts for the following as fair value hedges
when they have met the requirements of fair value hedging: (i) interest rate
swaps to convert fixed rate assets to floating rate assets; and (ii) foreign
currency swaps to hedge the foreign currency fair value exposure of foreign
currency denominated assets.
The amounts recognized in net derivative gains (losses) representing the
ineffective portion of all fair value hedges were less than $1 million for both
the years ended December 31, 2017 and 2016. The amount recognized in net
derivative gains (losses) representing the ineffective portion of all fair
value hedges was ($1) million for the year ended December 31, 2015. Changes in
the estimated fair value of the derivatives were less than ($1) million, less
than $1 million and less than ($1) million for the years ended December 31,
2017, 2016 and 2015, respectively. Changes in the estimated fair value of the
hedged items were less than $1 million for both the years ended December 31,
2017 and 2016. Change in the estimated fair value of the hedged items was ($1)
million for the year ended December 31, 2015.
All components of each derivative's gain or loss were included in the
assessment of hedge effectiveness.
Cash Flow Hedges
The Company designates and accounts for foreign currency swaps to hedge the
foreign currency cash flow exposure of foreign currency denominated assets, as
cash flow hedges, when they have met the requirements of cash flow hedging.
50
General American Life Insurance Company and Subsidiary
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements -- (continued)
6. Derivatives (continued)
In certain instances, the Company discontinued cash flow hedge accounting
because the forecasted transactions were no longer probable of occurring.
Because certain of the forecasted transactions also were not probable of
occurring within two months of the anticipated date, the Company reclassified
amounts from AOCI into net derivative gains (losses). For both the years ended
December 31, 2017 and 2016, there were no amounts reclassified into net
derivative gains (losses) related to discontinued cash flow hedges. For the
year ended December 31, 2015, the amounts reclassified into net derivative
gains (losses) related to such discontinued cash flow hedges were not
significant.
There were no hedged forecasted transactions, other than the receipt or
payment of variable interest payments, for each of the years ended December 31,
2017, 2016 and 2015.
At December 31, 2017 and 2016, the balance in AOCI associated with foreign
currency swaps designated and qualifying as cash flow hedges was ($12) million
and $28 million, respectively.
For the years ended December 31, 2017, 2016 and 2015, there were ($42)
million, $7 million and $18 million of gains (losses) deferred in AOCI related
to foreign currency swaps, respectively. For the year ended December 31, 2017,
the amount reclassified to net derivative gains (losses) related to foreign
currency swaps was ($2) million. For the years ended December 31, 2016 and
2015, the amounts reclassified to net derivative gains (losses) related to
foreign currency swaps were not significant. For the years ended December 31,
2017, 2016 and 2015, there were no amounts reclassified to net investment
income related to foreign currency swaps and the amount of net derivative gains
(losses) which represented the ineffective portion of all cash flow hedges were
not significant.
All components of each derivative's gain or loss were included in the
assessment of hedge effectiveness.
At December 31, 2017, the Company expected to reclassify ($1) million of
deferred net gains (losses) on derivatives in AOCI to earnings within the next
12 months.
Credit Derivatives
In connection with synthetically created credit investment transactions, the
Company writes credit default swaps for which it receives a premium to insure
credit risk. Such credit derivatives are included within the nonqualifying
derivatives and derivatives for purposes other than hedging table. If a credit
event occurs, as defined by the contract, the contract may be cash settled or
it may be settled gross by the Company paying the counterparty the specified
swap notional amount in exchange for the delivery of par quantities of the
referenced credit obligation. The Company's maximum amount at risk, assuming
the value of all referenced credit obligations is zero, was $193 million at
both December 31, 2017 and 2016. The Company can terminate these contracts at
any time through cash settlement with the counterparty at an amount equal to
the then current estimated fair value of the credit default swaps. At
December 31, 2017 and 2016, the Company would have received $5 million and
$3 million, respectively, to terminate all of these contracts.
The following table presents the estimated fair value, maximum amount of
future payments and weighted average years to maturity of written credit
default swaps at:
December 31,
-------------------------------------------------------------------------------
2017 2016
--------------------------------------- ---------------------------------------
Maximum Maximum
Estimated Amount of Estimated Amount of
Fair Value Future Weighted Fair Value Future Weighted
Rating Agency Designation of of Credit Payments under Average of Credit Payments under Average
Referenced Default Credit Default Years to Default Credit Default Years to
Credit Obligations (1) Swaps Swaps Maturity (2) Swaps Swaps Maturity (2)
---------------------------------- ---------- -------------- ------------- ---------- -------------- -------------
(Dollars in millions)
Baa
Credit default swaps referencing
indices........................... $ 5 $ 193 5.0 $ 3 $ 193 5.0
-----------
(1) The rating agency designations are based on availability and the midpoint
of the applicable ratings among Moody's Investors Service ("Moody's"),
Standard & Poor's Global Ratings ("S&P") and Fitch Ratings. If no rating is
available from a rating agency, then an internally developed rating is used.
51
General American Life Insurance Company and Subsidiary
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements -- (continued)
6. Derivatives (continued)
(2) The weighted average years to maturity of the credit default swaps is
calculated based on weighted average gross notional amounts.
Credit Risk on Freestanding Derivatives
The Company may be exposed to credit-related losses in the event of
nonperformance by its counterparties to derivatives. Generally, the current
credit exposure of the Company's derivatives is limited to the net positive
estimated fair value of derivatives at the reporting date after taking into
consideration the existence of master netting or similar agreements and any
collateral received pursuant to such agreements.
The Company manages its credit risk related to derivatives by entering into
transactions with creditworthy counterparties and establishing and monitoring
exposure limits. The Company's OTC-bilateral derivative transactions are
governed by ISDA Master Agreements which provide for legally enforceable
set-off and close-out netting of exposures to specific counterparties in the
event of early termination of a transaction, which includes, but is not limited
to, events of default and bankruptcy. In the event of an early termination, the
Company is permitted to set-off receivables from the counterparty against
payables to the same counterparty arising out of all included transactions.
Substantially all of the Company's ISDA Master Agreements also include Credit
Support Annex provisions which require both the pledging and accepting of
collateral in connection with its OTC-bilateral derivatives.
The Company's OTC-cleared derivatives are effected through central clearing
counterparties. Such positions are marked to market and margined on a daily
basis (both initial margin and variation margin), and the Company has minimal
exposure to credit-related losses in the event of nonperformance by
counterparties to such derivatives.
See Note 7 for a description of the impact of credit risk on the valuation
of derivatives.
The estimated fair values of the Company's net derivative assets and net
derivative liabilities after the application of master netting agreements and
collateral were as follows at:
December 31,
------------------------------------------------
2017 2016
----------------------- -----------------------
Derivatives Subject to a Master Netting Arrangement or a
Similar Arrangement Assets Liabilities Assets Liabilities
------------------------------------------------------------ ---------- ------------ ---------- ------------
(In millions)
Gross estimated fair value of derivatives:
OTC-bilateral (1)........................................... $ 62 $ 51 $ 100 $ 16
OTC-cleared (1), (5)........................................ 5 -- 4 --
---------- ---------- ---------- ----------
Total gross estimated fair value of derivatives (1)........ 67 51 104 16
Amounts offset on the consolidated balance sheets........... -- -- -- --
---------- ---------- ---------- ----------
Estimated fair value of derivatives presented on the
consolidated balance sheets (1), (5)..................... 67 51 104 16
Gross amounts not offset on the consolidated balance sheets:
Gross estimated fair value of derivatives: (2)
OTC-bilateral............................................... (22) (22) (7) (7)
OTC-cleared................................................. -- -- -- --
Cash collateral: (3)
OTC-bilateral............................................... (40) -- (85) --
OTC-cleared................................................. (5) -- (4) --
Securities collateral: (4)
OTC-bilateral............................................... -- (21) (5) (5)
OTC-cleared................................................. -- -- -- --
---------- ---------- ---------- ----------
Net amount after application of master netting agreements
and collateral........................................... $ -- $ 8 $ 3 $ 4
========== ========== ========== ==========
-----------
(1) At both December 31, 2017 and 2016, derivative assets included income or
(expense) accruals reported in accrued investment income or in other
liabilities of $2 million. At both December 31, 2017 and 2016, derivative
liabilities included (income) or expense accruals reported in accrued
investment income or in other liabilities of ($1) million.
52
General American Life Insurance Company and Subsidiary
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements -- (continued)
6. Derivatives (continued)
(2) Estimated fair value of derivatives is limited to the amount that is
subject to set-off and includes income or expense accruals.
(3) Cash collateral received is included in cash and cash equivalents,
short-term investments or in fixed maturity securities, and the obligation
to return it is included in payables for collateral under securities loaned
and other transactions on the balance sheet. The receivable for the return
of cash collateral provided by the Company is inclusive of initial margin
on OTC-cleared derivatives and is included in premiums, reinsurance and
other receivables on the balance sheet. The amount of cash collateral
offset in the table above is limited to the net estimated fair value of
derivatives after application of netting agreements. At December 31, 2017
and 2016, the Company received excess cash collateral of $2 million and
$6 million, respectively, which is not included in the table above due to
the foregoing limitation. At both December 31, 2017 and 2016, the Company
did not provide any excess cash collateral.
(4) Securities collateral received by the Company is held in separate custodial
accounts and is not recorded on the balance sheet. Subject to certain
constraints, the Company is permitted by contract to sell or re-pledge this
collateral, but at December 31, 2017, none of the collateral had been sold
or re-pledged. Securities collateral pledged by the Company is reported in
fixed maturity securities on the balance sheet. Subject to certain
constraints, the counterparties are permitted by contract to sell or
re-pledge this collateral. The amount of securities collateral offset in
the table above is limited to the net estimated fair value of derivatives
after application of netting agreements and cash collateral. At
December 31, 2017 and 2016, the Company received excess securities
collateral with an estimated fair value of $5 million and $8 million,
respectively, for its OTC-bilateral derivatives, which are not included in
the table above due to the foregoing limitation. At December 31, 2017 and
2016, the Company provided excess securities collateral with an estimated
fair value of $3 million and $0, respectively, for its OTC-bilateral
derivatives. At both December 31, 2017 and 2016, the Company provided
excess securities collateral with an estimated fair value of $5 million,
for its OTC-cleared derivatives, which are not included in the table above
due to the foregoing limitation.
(5) Effective January 3, 2017, the CME amended its rulebook, resulting in the
characterization of variation margin transfers as settlement payments, as
opposed to adjustments to collateral. See Note 1 for further information on
the CME amendments.
The Company's collateral arrangements for its OTC-bilateral derivatives
generally require the counterparty in a net liability position, after
considering the effect of netting agreements, to pledge collateral when the
estimated fair value of that counterparty's derivatives reaches a
pre-determined threshold. Certain of these arrangements also include financial
strength-contingent provisions that provide for a reduction of these thresholds
(on a sliding scale that converges toward zero) in the event of downgrades in
the financial strength ratings of General American and/or the credit ratings of
the counterparty. In addition, certain of the Company's netting agreements for
derivatives contain provisions that require both General American and the
counterparty to maintain a specific investment grade financial strength or
credit rating from each of Moody's and S&P. If a party's financial strength or
credit ratings were to fall below that specific investment grade financial
strength or credit rating, that party would be in violation of these
provisions, and the other party to the derivatives could terminate the
transactions and demand immediate settlement and payment based on such party's
reasonable valuation of the derivatives.
53
General American Life Insurance Company and Subsidiary
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements -- (continued)
6. Derivatives (continued)
The following table presents the estimated fair value of the Company's
OTC-bilateral derivatives that were in a net liability position after
considering the effect of netting agreements, together with the estimated fair
value and balance sheet location of the collateral pledged. The table also
presents the incremental collateral that General American would be required to
provide if there was a one-notch downgrade in its financial strength rating at
the reporting date or if its financial strength rating sustained a downgrade to
a level that triggered full overnight collateralization or termination of the
derivative position. OTC-bilateral derivatives that are not subject to
collateral agreements are excluded from this table.
December 31,
--------------------------
2017 2016
------------- ------------
(In millions)
Estimated Fair Value of Derivatives in a Net Liability Position (1).............................. $ 29 $ 9
Estimated Fair Value of Collateral Provided:
Fixed maturity securities........................................................................ $ 24 $ 5
Cash............................................................................................. $ -- $ --
Estimated Fair Value of Incremental Collateral Provided Upon:
One-notch downgrade in financial strength rating................................................. $ -- $ --
Downgrade in financial strength rating to a level that triggers full overnight collateralization
or termination of the derivative position....................................................... $ 5 $ 4
-----------
(1) After taking into consideration the existence of netting agreements.
Embedded Derivatives
The Company issues certain products that contain embedded derivatives that
are required to be separated from their host contracts and accounted for as
freestanding derivatives. These host contracts are funds withheld on ceded
reinsurance.
The following table presents the estimated fair value and balance sheet
location of the Company's embedded derivatives that have been separated from
their host contracts at:
December 31,
-------------------------
Balance Sheet Location 2017 2016
------------------------ ------------ ------------
(In millions)
Embedded derivatives within liability host contracts:
Funds withheld on ceded reinsurance................... Other liabilities $ 25 $ (30)
The following table presents changes in estimated fair value related to
embedded derivatives:
Years Ended December 31,
---------------------------------------
2017 2016 2015
------------- ------------- -----------
(In millions)
Net derivative gains (losses). $ (55) $ (19) $ 80
54
General American Life Insurance Company and Subsidiary
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements -- (continued)
7. Fair Value
When developing estimated fair values, the Company considers three broad
valuation approaches: (i) the market approach, (ii) the income approach, and
(iii) the cost approach. The Company determines the most appropriate valuation
approach to use, given what is being measured and the availability of
sufficient inputs, giving priority to observable inputs. The Company
categorizes its assets and liabilities measured at estimated fair value into a
three-level hierarchy, based on the significant input with the lowest level in
its valuation. The input levels are as follows:
Level 1 Unadjusted quoted prices in active markets for identical assets or
liabilities. The Company defines active markets based on average
trading volume for equity securities. The size of the bid/ask spread is
used as an indicator of market activity for fixed maturity securities.
Level 2 Quoted prices in markets that are not active or inputs that are
observable either directly or indirectly. These inputs can include
quoted prices for similar assets or liabilities other than quoted
prices in Level 1, quoted prices in markets that are not active, or
other significant inputs that are observable or can be derived
principally from or corroborated by observable market data for
substantially the full term of the assets or liabilities.
Level 3 Unobservable inputs that are supported by little or no market activity
and are significant to the determination of estimated fair value of the
assets or liabilities. Unobservable inputs reflect the reporting
entity's own assumptions about the assumptions that market participants
would use in pricing the asset or liability.
Financial markets are susceptible to severe events evidenced by rapid
depreciation in asset values accompanied by a reduction in asset liquidity. The
Company's ability to sell securities, or the price ultimately realized for
these securities, depends upon the demand and liquidity in the market and
increases the use of judgment in determining the estimated fair value of
certain securities.
Considerable judgment is often required in interpreting market data to
develop estimates of fair value, and the use of different assumptions or
valuation methodologies may have a material effect on the estimated fair value
amounts.
55
General American Life Insurance Company and Subsidiary
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements -- (continued)
7. Fair Value (continued)
Recurring Fair Value Measurements
The assets and liabilities measured at estimated fair value on a recurring
basis and their corresponding placement in the fair value hierarchy are
presented below at:
December 31, 2017
--------------------------------------------------
Fair Value Hierarchy
------------------------------------
Total
Estimated
Level 1 Level 2 Level 3 Fair Value
----------- ------------ ----------- -------------
(In millions)
Assets
Fixed maturity securities:
U.S. corporate........................................... $ -- $ 2,907 $ 238 $ 3,145
Foreign corporate........................................ -- 1,335 318 1,653
Foreign government....................................... -- 1,248 43 1,291
U.S. government and agency............................... 728 283 -- 1,011
RMBS..................................................... -- 580 89 669
CMBS..................................................... -- 287 5 292
ABS...................................................... -- 161 14 175
State and political subdivision.......................... -- 120 -- 120
----------- ------------ ----------- -------------
Total fixed maturity securities........................ 728 6,921 707 8,356
----------- ------------ ----------- -------------
Equity securities........................................ 16 35 -- 51
Short-term investments................................... 53 13 5 71
Derivative assets: (1)
Interest rate............................................ -- 36 -- 36
Foreign currency exchange rate........................... -- 24 -- 24
Credit................................................... -- 5 -- 5
----------- ------------ ----------- -------------
Total derivative assets................................ -- 65 -- 65
----------- ------------ ----------- -------------
Separate account assets (2).............................. 94 1,734 -- 1,828
----------- ------------ ----------- -------------
Total assets........................................... $ 891 $ 8,768 $ 712 $ 10,371
=========== ============ =========== =============
Liabilities
Derivative liabilities: (1)
Interest rate............................................ $ -- $ 7 $ -- $ 7
Foreign currency exchange rate........................... -- 45 -- 45
----------- ------------ ----------- -------------
Total derivative liabilities........................... -- 52 -- 52
----------- ------------ ----------- -------------
Embedded derivatives within liability host contracts (3). -- -- 25 25
----------- ------------ ----------- -------------
Total liabilities...................................... $ -- $ 52 $ 25 $ 77
=========== ============ =========== =============
56
General American Life Insurance Company and Subsidiary
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements -- (continued)
7. Fair Value (continued)
December 31, 2016
----------------------------------------------------
Fair Value Hierarchy
--------------------------------------
Total
Estimated
Level 1 Level 2 Level 3 Fair Value
------------ ------------ ------------ ------------
(In millions)
Assets
Fixed maturity securities:
U.S. corporate........................................... $ -- $ 2,940 $ 182 $ 3,122
Foreign corporate........................................ -- 1,162 203 1,365
Foreign government....................................... -- 1,171 38 1,209
U.S. government and agency............................... 523 259 -- 782
RMBS..................................................... -- 600 94 694
CMBS..................................................... -- 319 5 324
ABS...................................................... -- 168 12 180
State and political subdivision.......................... -- 132 -- 132
------------ ------------ ------------ ------------
Total fixed maturity securities........................ 523 6,751 534 7,808
------------ ------------ ------------ ------------
Equity securities........................................ 18 35 -- 53
Short-term investments................................... 61 108 -- 169
Derivative assets: (1)
Interest rate............................................ -- 44 -- 44
Foreign currency exchange rate........................... -- 54 -- 54
Credit................................................... -- 4 -- 4
------------ ------------ ------------ ------------
Total derivative assets................................ -- 102 -- 102
------------ ------------ ------------ ------------
Separate account assets (2).............................. 23 801 -- 824
------------ ------------ ------------ ------------
Total assets........................................... $ 625 $ 7,797 $ 534 $ 8,956
============ ============ ============ ============
Liabilities
Derivative liabilities: (1)
Interest rate............................................ $ -- $ 6 $ -- $ 6
Foreign currency exchange rate........................... -- 11 -- 11
------------ ------------ ------------ ------------
Total derivative liabilities........................... -- 17 -- 17
------------ ------------ ------------ ------------
Embedded derivatives within liability host contracts (3). -- -- (30) (30)
------------ ------------ ------------ ------------
Total liabilities...................................... $ -- $ 17 $ (30) $ (13)
============ ============ ============ ============
-----------
(1) Derivative assets are presented within other invested assets on the
consolidated balance sheets and derivative liabilities are presented within
other liabilities on the consolidated balance sheets.
(2) Investment performance related to separate account assets is fully offset
by corresponding amounts credited to contractholders whose liability is
reflected within separate account liabilities. Separate account liabilities
are set equal to the estimated fair value of separate account assets.
(3) Embedded derivatives within liability host contracts are presented within
other liabilities on the consolidated balance sheets.
57
General American Life Insurance Company and Subsidiary
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements -- (continued)
7. Fair Value (continued)
The following describes the valuation methodologies used to measure assets
and liabilities at fair value. The description includes the valuation
techniques and key inputs for each category of assets or liabilities that are
classified within Level 2 and Level 3 of the fair value hierarchy.
Investments
Valuation Controls and Procedures
On behalf of the Company and MetLife, Inc.'s Chief Investment Officer and
Chief Financial Officer, a pricing and valuation committee that is
independent of the trading and investing functions and comprised of senior
management, provides oversight of control systems and valuation policies for
securities, mortgage loans and derivatives. On a quarterly basis, this
committee reviews and approves new transaction types and markets, ensures
that observable market prices and market-based parameters are used for
valuation, wherever possible, and determines that judgmental valuation
adjustments, when applied, are based upon established policies and are
applied consistently over time. This committee also provides oversight of
the selection of independent third-party pricing providers and the controls
and procedures to evaluate third-party pricing. Periodically, the Chief
Accounting Officer reports to the Audit Committee of MetLife, Inc.'s Board
of Directors regarding compliance with fair value accounting standards.
The Company reviews its valuation methodologies on an ongoing basis and
revises those methodologies when necessary based on changing market
conditions. Assurance is gained on the overall reasonableness and consistent
application of input assumptions, valuation methodologies and compliance
with fair value accounting standards through controls designed to ensure
valuations represent an exit price. Several controls are utilized, including
certain monthly controls, which include, but are not limited to, analysis of
portfolio returns to corresponding benchmark returns, comparing a sample of
executed prices of securities sold to the fair value estimates, comparing
fair value estimates to management's knowledge of the current market,
reviewing the bid/ask spreads to assess activity, comparing prices from
multiple independent pricing services and ongoing due diligence to confirm
that independent pricing services use market-based parameters. The process
includes a determination of the observability of inputs used in estimated
fair values received from independent pricing services or brokers by
assessing whether these inputs can be corroborated by observable market
data. The Company ensures that prices received from independent brokers,
also referred to herein as "consensus pricing," represent a reasonable
estimate of fair value by considering such pricing relative to the Company's
knowledge of the current market dynamics and current pricing for similar
financial instruments. While independent non-binding broker quotations are
utilized, they are not used for a significant portion of the portfolio. For
example, fixed maturity securities priced using independent non-binding
broker quotations represent less than 1% of the total estimated fair value
of fixed maturity securities at December 31, 2017.
The Company also applies a formal process to challenge any prices
received from independent pricing services that are not considered
representative of estimated fair value. If prices received from independent
pricing services are not considered reflective of market activity or
representative of estimated fair value, independent non-binding broker
quotations are obtained, or an internally developed valuation is prepared.
Internally developed valuations of current estimated fair value, which
reflect internal estimates of liquidity and nonperformance risks, compared
with pricing received from the independent pricing services, did not produce
material differences in the estimated fair values for the majority of the
portfolio; accordingly, overrides were not material. This is, in part,
because internal estimates of liquidity and nonperformance risks are
generally based on available market evidence and estimates used by other
market participants. In the absence of such market-based evidence,
management's best estimate is used.
Securities and Short-term Investments
When available, the estimated fair value of these financial instruments
is based on quoted prices in active markets that are readily and regularly
obtainable. Generally, these are the most liquid of the Company's securities
holdings and valuation of these securities does not involve management's
judgment.
58
General American Life Insurance Company and Subsidiary
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements -- (continued)
7. Fair Value (continued)
When quoted prices in active markets are not available, the determination
of estimated fair value is based on market standard valuation methodologies,
giving priority to observable inputs. The significant inputs to the market
standard valuation methodologies for certain types of securities with
reasonable levels of price transparency are inputs that are observable in
the market or can be derived principally from, or corroborated by,
observable market data. When observable inputs are not available, the market
standard valuation methodologies rely on inputs that are significant to the
estimated fair value that are not observable in the market or cannot be
derived principally from, or corroborated by, observable market data. These
unobservable inputs can be based in large part on management's judgment or
estimation and cannot be supported by reference to market activity. Even
though these inputs are unobservable, management believes they are
consistent with what other market participants would use when pricing such
securities and are considered appropriate given the circumstances.
59
General American Life Insurance Company and Subsidiary
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements -- (continued)
7. Fair Value (continued)
The valuation of most instruments listed below is determined using
independent pricing sources, matrix pricing, discounted cash flow
methodologies or other similar techniques that use either observable market
inputs or unobservable inputs.
Level 2 Level 3
Instrument Observable Inputs Unobservable Inputs
-----------------------------------------------------------------------------------------------------------------
Fixed maturity securities
-----------------------------------------------------------------------------------------------------------------
U.S. corporate and Foreign corporate securities
-----------------------------------------------------------------------------------------------------------------
Valuation Approaches: Principally the market and Valuation Approaches: Principally the market
income approaches. approach.
Key Inputs: Key Inputs:
. quoted prices in markets that are not active . illiquidity premium
. benchmark yields; spreads off benchmark yields; . delta spread adjustments to reflect specific
new issuances; issuer rating credit-related issues
. trades of identical or comparable securities;
duration . credit spreads
. Privately-placed securities are valued using . quoted prices in markets that are not active
the additional key inputs: for identical or similar securities that are
. market yield curve; call provisions less liquid and based on lower levels of
. observable prices and spreads for similar trading activity than securities classified in
public or private securities that incorporate Level 2
the credit quality and industry sector of the . independent non-binding broker quotations
issuer
. delta spread adjustments to reflect specific
credit-related issues
-----------------------------------------------------------------------------------------------------------------
Foreign government, U.S. government and agency and State and political subdivision securities
-----------------------------------------------------------------------------------------------------------------
Valuation Approaches: Principally the market Valuation Approaches: Principally the market
approach. approach.
Key Inputs: Key Inputs:
. quoted prices in markets that are not active . independent non-binding broker quotations
. benchmark U.S. Treasury yield or other yields . quoted prices in markets that are not active
for identical or similar securities that are
. the spread off the U.S. Treasury yield curve less liquid and based on lower levels of
for the identical security trading activity than securities classified in
. issuer ratings and issuer spreads; Level 2
broker-dealer quotes . credit spreads
. comparable securities that are actively traded
-----------------------------------------------------------------------------------------------------------------
Structured Securities
-----------------------------------------------------------------------------------------------------------------
Valuation Approaches: Principally the market and Valuation Approaches: Principally the market and
income approaches. income approaches.
Key Inputs: Key Inputs:
. quoted prices in markets that are not active . credit spreads
. spreads for actively traded securities; spreads . quoted prices in markets that are not active
off benchmark yields for identical or similar securities that are
. expected prepayment speeds and volumes less liquid and based on lower levels of
. current and forecasted loss severity; ratings; trading activity than securities classified in
geographic region Level 2
. weighted average coupon and weighted average . independent non-binding broker quotations
maturity
. average delinquency rates; debt-service
coverage ratios
. issuance-specific information, including, but
not limited to:
. collateral type; structure of the security;
vintage of the loans
. payment terms of the underlying assets
. payment priority within the tranche; deal
performance
-----------------------------------------------------------------------------------------------------------------
Equity securities
-----------------------------------------------------------------------------------------------------------------
Valuation Approaches: Principally the market
approach. . N/A
Key Input:
. quoted prices in markets that are not
considered active
-----------------------------------------------------------------------------------------------------------------
Short-term investments
-----------------------------------------------------------------------------------------------------------------
. Short-term investments are of a similar nature . Short-term investments are of a similar nature
and class to the fixed maturity and equity and class to the fixed maturity securities
securities described above; accordingly, the described above; accordingly, the valuation
valuation techniques and observable inputs used techniques and unobservable inputs used in
in their valuation are also similar to those their valuation are also similar to those
described above. described above.
-----------------------------------------------------------------------------------------------------------------
Separate account assets (1)
-----------------------------------------------------------------------------------------------------------------
Mutual funds and hedge funds without readily determinable fair values as prices are not published publicly
-----------------------------------------------------------------------------------------------------------------
Key Input: . N/A
. quoted prices or reported net asset value
provided by the fund managers
-----------
60
General American Life Insurance Company and Subsidiary
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements -- (continued)
7. Fair Value (continued)
(1)Estimated fair value equals carrying value, based on the value of the
underlying assets, including: mutual fund interests, fixed maturity
securities, equity securities, derivatives, hedge funds, short-term
investments and cash and cash equivalents.
Derivatives
The estimated fair value of derivatives is determined through the use of
quoted market prices for exchange-traded derivatives, or through the use of
pricing models for OTC-bilateral and OTC-cleared derivatives. The
determination of estimated fair value, when quoted market values are not
available, is based on market standard valuation methodologies and inputs
that management believes are consistent with what other market participants
would use when pricing such instruments. Derivative valuations can be
affected by changes in interest rates, foreign currency exchange rates,
financial indices, credit spreads, default risk, nonperformance risk,
volatility, liquidity and changes in estimates and assumptions used in the
pricing models. The valuation controls and procedures for derivatives are
described in "-- Investments."
The significant inputs to the pricing models for most OTC-bilateral and
OTC-cleared derivatives are inputs that are observable in the market or can
be derived principally from, or corroborated by, observable market data.
Certain OTC-bilateral and OTC-cleared derivatives may rely on inputs that are
significant to the estimated fair value that are not observable in the market
or cannot be derived principally from, or corroborated by, observable market
data. These unobservable inputs may involve significant management judgment
or estimation. Even though unobservable, these inputs are based on
assumptions deemed appropriate given the circumstances and management
believes they are consistent with what other market participants would use
when pricing such instruments.
Most inputs for OTC-bilateral and OTC-cleared derivatives are mid-market
inputs but, in certain cases, liquidity adjustments are made when they are
deemed more representative of exit value. Market liquidity, as well as the
use of different methodologies, assumptions and inputs, may have a material
effect on the estimated fair values of the Company's derivatives and could
materially affect net income.
The credit risk of both the counterparty and the Company are considered in
determining the estimated fair value for all OTC-bilateral and OTC-cleared
derivatives, and any potential credit adjustment is based on the net exposure
by counterparty after taking into account the effects of netting agreements
and collateral arrangements. The Company values its OTC-bilateral and
OTC-cleared derivatives using standard swap curves which may include a spread
to the risk-free rate, depending upon specific collateral arrangements. This
credit spread is appropriate for those parties that execute trades at pricing
levels consistent with similar collateral arrangements. As the Company and
its significant derivative counterparties generally execute trades at such
pricing levels and hold sufficient collateral, additional credit risk
adjustments are not currently required in the valuation process. The
Company's ability to consistently execute at such pricing levels is in part
due to the netting agreements and collateral arrangements that are in place
with all of its significant derivative counterparties. An evaluation of the
requirement to make additional credit risk adjustments is performed by the
Company each reporting period.
Freestanding Derivatives Valuation Approaches and Key Inputs:
Level 2 includes all types of derivatives utilized by the Company.
Freestanding derivatives are principally valued using the income
approach. Valuations of non-option-based derivatives utilize present value
techniques. Key inputs are as follows:
Foreign Currency
Instrument Interest Rate Exchange Rate Credit
---------------------------------------------------------------------------------------------------------------------------------
Inputs common to Level 2 by . swap yield curves . swap yield curves . swap yield curves
instrument type . basis curves . basis curves . credit curves
. currency spot rates . recovery rates
. cross currency basis curves
Embedded Derivatives
Embedded derivatives are included within funds withheld on ceded
reinsurance. Embedded derivatives are recorded at estimated fair value with
changes in estimated fair value reported in net income.
61
General American Life Insurance Company and Subsidiary
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements -- (continued)
7. Fair Value (continued)
The estimated fair value of the embedded derivatives within funds withheld
related to certain ceded reinsurance is determined based on the change in
estimated fair value of the underlying assets held by the Company in a
reference portfolio backing the funds withheld liability. The estimated fair
value of the underlying assets is determined as described in "-- Investments
-- Securities and Short-term Investments." The estimated fair value of these
embedded derivatives is included, along with their funds withheld hosts, in
other liabilities on the consolidated balance sheets with changes in
estimated fair value recorded in net derivative gains (losses). Changes in
the credit spreads on the underlying assets, interest rates and market
volatility may result in significant fluctuations in the estimated fair value
of these embedded derivatives that could materially affect net income.
Embedded Derivatives Within Liability Host Contracts
Level 3 Valuation Approaches and Key Inputs:
Embedded derivatives within funds withheld on ceded reinsurance
These embedded derivatives are principally valued using the income
approach. The valuations are based on present value techniques, which
utilize significant inputs that may include the swap yield curves and
the fair value of assets within the reference portfolio. These embedded
derivatives result in Level 3 classification because one or more of the
significant inputs are not observable in the market or cannot be derived
principally from, or corroborated by, observable market data.
Significant unobservable inputs generally include the fair value of
certain assets within the reference portfolio which are not observable
in the market and cannot be derived principally from, or corroborated
by, observable market data.
Transfers between Levels
Overall, transfers between levels occur when there are changes in the
observability of inputs and market activity. Transfers into or out of any
level are assumed to occur at the beginning of the period.
Transfers between Levels 1 and 2:
There were no transfers between Levels 1 and 2 for assets and liabilities
measured at estimated fair value and still held at both December 31, 2017
and 2016.
Transfers into or out of Level 3:
Assets and liabilities are transferred into Level 3 when a significant
input cannot be corroborated with market observable data. This occurs when
market activity decreases significantly and underlying inputs cannot be
observed, current prices are not available, and/or when there are
significant variances in quoted prices, thereby affecting transparency.
Assets and liabilities are transferred out of Level 3 when circumstances
change such that a significant input can be corroborated with market
observable data. This may be due to a significant increase in market
activity, a specific event, or one or more significant input(s) becoming
observable.
Assets and Liabilities Measured at Fair Value Using Significant Unobservable
Inputs (Level 3)
The following table presents certain quantitative information about the
significant unobservable inputs used in the fair value measurement, and the
sensitivity of the estimated fair value to changes in those inputs, for the
more significant asset and liability classes measured at fair value on a
recurring basis using significant unobservable inputs (Level 3) at:
December 31, 2017 December 31, 2016
-------------------------- -------------------------
Significant Weighted Weighted
Valuation Techniques Unobservable Inputs Range Average (1) Range Average (1)
-------------------- ---------------------- ------------- ------------ ------------- -----------
Fixed
maturity
securities
(3)
U.S.
corporate
and
foreign
corporate. . Matrix pricing . Offered quotes (4) 93 - 124 108 94 - 126 106
. Market pricing . Quoted prices (4) 65 - 374 184 6 - 305 195
------------------------------------------------------------------------------------------------------------------
. Consensus pricing . Offered quotes (4) 117 - 117 117
Foreign
government
. Market pricing . Quoted prices (4) 106 - 131 131
------------------------------------------------------------------------------------------------------------------
RMBS....... . Market pricing . Quoted prices (4) 70 - 101 95 61 - 137 91
------------------------------------------------------------------------------------------------------------------
ABS........ . Market pricing . Quoted prices (4) 90 - 103 98 99 - 100 99
------------------------------------------------------------------------------------------------------------------
Impact of
Increase in Input
on Estimated
Fair Value (2)
-----------------
Fixed
maturity
securities
(3)
U.S.
corporate
and
foreign
corporate. Increase
Increase
Increase
Foreign
government
Increase
RMBS....... Increase (5)
ABS........ Increase (5)
-----------
62
General American Life Insurance Company and Subsidiary
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements -- (continued)
7. Fair Value (continued)
(1) The weighted average for fixed maturity securities is determined based on
the estimated fair value of the securities.
(2) The impact of a decrease in input would have the opposite impact on
estimated fair value.
(3) Significant increases (decreases) in expected default rates in isolation
would result in substantially lower (higher) valuations.
(4) Range and weighted average are presented in accordance with the market
convention for fixed maturity securities of dollars per hundred dollars of
par.
(5) Changes in the assumptions used for the probability of default are
accompanied by a directionally similar change in the assumption used for
the loss severity and a directionally opposite change in the assumptions
used for prepayment rates.
The following is a summary of the valuation techniques and significant
unobservable inputs used in the fair value measurement of assets and
liabilities classified within Level 3 that are not included in the preceding
table. Generally, all other classes of securities classified within Level 3,
including embedded derivatives within funds withheld on ceded reinsurance,
use the same valuation techniques and significant unobservable inputs as
previously described for Level 3 securities. This includes matrix pricing and
discounted cash flow methodologies, inputs such as quoted prices for
identical or similar securities that are less liquid and based on lower
levels of trading activity than securities classified in Level 2, as well as
independent non-binding broker quotations. The sensitivity of the estimated
fair value to changes in the significant unobservable inputs for these other
assets and liabilities is similar in nature to that described in the
preceding table.
63
General American Life Insurance Company and Subsidiary
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements -- (continued)
7. Fair Value (continued)
The following tables summarize the change of all assets and (liabilities)
measured at estimated fair value on a recurring basis using significant
unobservable inputs (Level 3):
Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
----------------------------------------------------------------------------
Fixed Maturity Securities
------------------------------------------------
State and
Foreign Structured Political Short-term Net Embedded
Corporate (1) Government Securities Subdivision Investments Derivatives (2)
------------- ---------- ---------- ----------- ----------- ---------------
(In millions)
Balance, January 1, 2016................ $ 285 $ 147 $ 100 $ 2 $ 2 $ 50
Total realized/unrealized gains
(losses) included in net income
(loss) (3) (4)......................... 2 -- 3 -- -- (20)
Total realized/unrealized gains
(losses) included in AOCI.............. 7 -- 1 -- -- --
Purchases (5)........................... 106 -- 29 -- -- --
Sales (5)............................... (10) -- (14) -- -- --
Issuances (5)........................... -- -- -- -- -- --
Settlements (5)......................... -- -- -- -- -- --
Transfers into Level 3 (6).............. 25 -- -- -- -- --
Transfers out of Level 3 (6)............ (30) (109) (8) (2) (2) --
----------- ---------- ---------- ---------- ---------- ----------
Balance, December 31, 2016.............. 385 38 111 -- -- 30
Total realized/unrealized gains
(losses) included in net income
(loss) (3) (4)......................... 2 (1) 2 -- -- (55)
Total realized/unrealized gains
(losses) included in AOCI.............. 89 5 4 -- -- --
Purchases (5)........................... 211 1 23 -- 5 --
Sales (5)............................... (76) -- (29) -- -- --
Issuances (5)........................... -- -- -- -- -- --
Settlements (5)......................... -- -- -- -- -- --
Transfers into Level 3 (6).............. 2 -- 3 -- -- --
Transfers out of Level 3 (6)............ (57) -- (6) -- -- --
----------- ---------- ---------- ---------- ---------- ----------
Balance, December 31, 2017.............. $ 556 $ 43 $ 108 $ -- $ 5 $ (25)
=========== ========== ========== ========== ========== ==========
Changes in unrealized gains (losses)
included in net income (loss) for the
instruments still held at December 31,
2015 (7)............................... $ 1 $ 1 $ 3 $ -- $ -- $ 80
=========== ========== ========== ========== ========== ==========
Changes in unrealized gains (losses)
included in net income (loss) for the
instruments still held at December 31,
2016: (7).............................. $ 2 $ -- $ 2 $ -- $ -- $ (19)
=========== ========== ========== ========== ========== ==========
Changes in unrealized gains (losses)
included in net income (loss) for the
instruments still held at December 31,
2017: (7).............................. $ 2 $ -- $ 2 $ -- $ -- $ (55)
=========== ========== ========== ========== ========== ==========
Gains (Losses) Data for the year ended
December 31, 2015:
Total realized/unrealized gains
(losses) included in net income
(loss) (3) (4)......................... $ 3 $ 1 $ 3 $ -- $ -- $ 80
Total realized/unrealized gains
(losses) included in AOCI.............. $ (10) $ 9 $ (2) $ -- $ -- $ --
-----------
(1) Comprised of U.S. and foreign corporate securities.
(2) Embedded derivative assets and liabilities are presented net for purposes
of the rollforward.
(3) Amortization of premium/accretion of discount is included within net
investment income. Impairments charged to net income (loss) on securities
are included in net investment gains (losses). Lapses associated with net
embedded derivatives are included in net derivative gains (losses).
Substantially all realized/unrealized gains (losses) included in net income
(loss) for net embedded derivatives are reported in net derivative gains
(losses).
(4) Interest accruals, as well as cash interest coupons received, are excluded
from the rollforward.
64
General American Life Insurance Company and Subsidiary
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements -- (continued)
7. Fair Value (continued)
(5) Items purchased/issued and then sold/settled in the same period are
excluded from the rollforward. Fees attributed to embedded derivatives are
included in settlements.
(6) Gains and losses, in net income (loss) and OCI, are calculated assuming
transfers into and/or out of Level 3 occurred at the beginning of the
period. Items transferred into and then out of Level 3 in the same period
are excluded from the rollforward.
(7) Changes in unrealized gains (losses) included in net income (loss) relate
to assets and liabilities still held at the end of the respective periods.
Substantially all changes in unrealized gains (losses) included in net
income (loss) for net embedded derivatives are reported in net derivative
gains (losses).
Fair Value of Financial Instruments Carried at Other Than Fair Value
The following tables provide fair value information for financial
instruments that are carried on the balance sheet at amounts other than fair
value. These tables exclude the following financial instruments: cash and cash
equivalents, accrued investment income and payables for collateral under
securities loaned and other transactions. The estimated fair value of the
excluded financial instruments, which are primarily classified in Level 2,
approximates carrying value as they are short-term in nature such that the
Company believes there is minimal risk of material changes in interest rates or
credit quality. All remaining balance sheet amounts excluded from the tables
below are not considered financial instruments subject to this disclosure.
The carrying values and estimated fair values for such financial
instruments, and their corresponding placement in the fair value hierarchy, are
summarized as follows at:
December 31, 2017
------------------------------------------------------
Fair Value Hierarchy
-------------------------------- Total
Carrying Estimated
Value Level 1 Level 2 Level 3 Fair Value
---------- ---------- ---------- ---------- ----------
(In millions)
Assets
Mortgage loans.............................. $ 980 $ -- $ -- $ 1,033 $ 1,033
Policy loans................................ $ 1,664 $ -- $ 44 $ 2,133 $ 2,177
Other invested assets....................... $ 103 $ -- $ 110 $ -- $ 110
Premiums, reinsurance and other receivables. $ 331 $ -- $ 4 $ 337 $ 341
Liabilities
Policyholder account balances............... $ 1,713 $ -- $ -- $ 1,883 $ 1,883
Long-term debt.............................. $ 104 $ -- $ 130 $ -- $ 130
Other liabilities........................... $ 26 $ -- $ 26 $ -- $ 26
Separate account liabilities................ $ 61 $ -- $ 61 $ -- $ 61
65
General American Life Insurance Company and Subsidiary
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements -- (continued)
7. Fair Value (continued)
December 31, 2016
------------------------------------------------------
Fair Value Hierarchy
--------------------------------
Total
Carrying Estimated
Value Level 1 Level 2 Level 3 Fair Value
---------- ---------- ---------- ---------- ----------
(In millions)
Assets
Mortgage loans.............................. $ 857 $ -- $ -- $ 870 $ 870
Policy loans................................ $ 1,680 $ -- $ 45 $ 2,090 $ 2,135
Other invested assets....................... $ 103 $ -- $ 110 $ -- $ 110
Premiums, reinsurance and other receivables. $ 353 $ -- $ 28 $ 329 $ 357
Liabilities
Policyholder account balances............... $ 1,718 $ -- $ -- $ 1,891 $ 1,891
Long-term debt.............................. $ 104 $ -- $ 126 $ -- $ 126
Other liabilities........................... $ 4 $ -- $ 4 $ -- $ 4
Separate account liabilities................ $ 56 $ -- $ 56 $ -- $ 56
The methods, assumptions and significant valuation techniques and inputs
used to estimate the fair value of financial instruments are summarized as
follows:
Mortgage Loans
The estimated fair value of mortgage loans is primarily determined by
estimating expected future cash flows and discounting them using current
interest rates for similar mortgage loans with similar credit risk, or is
determined from pricing for similar loans.
Policy Loans
Policy loans with fixed interest rates are classified within Level 3. The
estimated fair values for these loans are determined using a discounted cash
flow model applied to groups of similar policy loans determined by the nature
of the underlying insurance liabilities. Cash flow estimates are developed by
applying a weighted-average interest rate to the outstanding principal
balance of the respective group of policy loans and an estimated average
maturity determined through experience studies of the past performance of
policyholder repayment behavior for similar loans. These cash flows are
discounted using current risk-free interest rates with no adjustment for
borrower credit risk, as these loans are fully collateralized by the cash
surrender value of the underlying insurance policy. Policy loans with
variable interest rates are classified within Level 2 and the estimated fair
value approximates carrying value due to the absence of borrower credit risk
and the short time period between interest rate resets, which presents
minimal risk of a material change in estimated fair value due to changes in
market interest rates.
Other Invested Assets
These other invested assets are principally comprised of loans to
affiliates. The estimated fair value of loans to affiliates is determined by
discounting the expected future cash flows using market interest rates
currently available for instruments with similar terms and remaining
maturities.
Premiums, Reinsurance and Other Receivables
Premiums, reinsurance and other receivables are principally comprised of
certain amounts recoverable under reinsurance agreements and amounts
receivable for securities sold but not yet settled.
Amounts recoverable under ceded reinsurance agreements, which the Company
has determined do not transfer significant risk such that they are accounted
for using the deposit method of accounting, have been classified as Level 3.
The valuation is based on discounted cash flow methodologies using
significant unobservable inputs. The estimated fair value is determined using
interest rates determined to reflect the appropriate credit standing of the
assuming counterparty.
The amounts due for securities sold, classified within Level 2, are
generally received over short periods such that the estimated fair value
approximates carrying value.
66
General American Life Insurance Company and Subsidiary
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements -- (continued)
7. Fair Value (continued)
Policyholder Account Balances
These policyholder account balances include investment contracts which
primarily include certain funding agreements, fixed deferred annuities and
total control accounts. The valuation of these investment contracts is based
on discounted cash flow methodologies using significant unobservable inputs.
The estimated fair value is determined using current market risk-free
interest rates adding a spread to reflect the nonperformance risk in the
liability.
Long-term Debt
The estimated fair value of long-term debt is principally determined using
market standard valuation methodologies. Valuations of instruments are based
primarily on quoted prices in markets that are not active or using matrix
pricing that use standard market observable inputs such as quoted prices in
markets that are not active and observable yields and spreads in the market.
Instruments valued using discounted cash flow methodologies use standard
market observable inputs including market yield curve, duration, observable
prices and spreads for similar publicly traded or privately traded issues.
Other Liabilities
Other liabilities consist primarily of interest payable and amounts due
for securities purchased but not yet settled. The Company evaluates the
specific terms, facts and circumstances of each instrument to determine the
appropriate estimated fair values, which are not materially different from
the carrying values.
Separate Account Liabilities
Separate account liabilities represent those balances due to policyholders
under contracts that are classified as investment contracts.
Separate account liabilities classified as investment contracts primarily
represent variable annuities with no significant mortality risk to the
Company such that the death benefit is equal to the account balance and
certain contracts that provide for benefit funding.
Since separate account liabilities are fully funded by cash flows from the
separate account assets which are recognized at estimated fair value as
described in the section "-- Recurring Fair Value Measurements," the value of
those assets approximates the estimated fair value of the related separate
account liabilities. The valuation techniques and inputs for separate account
liabilities are similar to those described for separate account assets.
8. Long-term Debt
The Company's long-term debt outstanding is comprised of a surplus note due
in January 2024, which bears interest at a fixed rate of 7.63%. The outstanding
balance of the surplus note was $104 million at both December 31, 2017 and 2016.
Payments of interest and principal on the Company's surplus note are
subordinate to all other obligations and may be made only with the prior
approval of the insurance department of the state of domicile.
Interest expense related to the surplus note, included in other expenses,
was $9 million for each of the years ended December 31, 2017, 2016 and 2015.
Letters of Credit
The Company had access to credit facilities from various banks indirectly
through letters of credit available to MetLife, Inc. for the benefit of the
Company and certain other affiliates of MetLife, Inc. These facilities were
used for collateral for certain of the Company's affiliated reinsurance
liabilities. Total fees associated with letters of credit were $3 million,
$2 million and $2 million for the years ended December 31, 2017, 2016 and 2015,
respectively, and were included in other expenses. At December 31, 2017, the
Company had $25 million in letters of credit outstanding.
67
General American Life Insurance Company and Subsidiary
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements -- (continued)
9. Equity
Statutory Equity and Income
The state of domicile of General American imposes risk-based capital ("RBC")
requirements that were developed by the National Association of Insurance
Commissioners ("NAIC"). Regulatory compliance is determined by a ratio of a
company's total adjusted capital, calculated in the manner prescribed by the
NAIC ("TAC") to its authorized control level RBC, calculated in the manner
prescribed by the NAIC ("ACL RBC"), based on the statutory-based filed
financial statements. Companies below specific trigger levels or ratios are
classified by their respective levels, each of which requires specified
corrective action. The minimum level of TAC before corrective action commences
is twice ACL RBC ("CAL RBC"). The CAL RBC ratio for General American was in
excess of 500% for all periods presented.
General American prepares statutory-basis financial statements in accordance
with statutory accounting practices prescribed or permitted by the Missouri
Department of Insurance. The NAIC has adopted the Codification of Statutory
Accounting Principles ("Statutory Codification"). Statutory Codification is
intended to standardize regulatory accounting and reporting to state insurance
departments. However, statutory accounting principles continue to be
established by individual state laws and permitted practices. Modifications by
the state insurance department may impact the effect of Statutory Codification
on the statutory capital and surplus of General American.
Statutory accounting principles differ from GAAP primarily by charging
policy acquisition costs to expense as incurred, establishing future policy
benefit liabilities using different actuarial assumptions, reporting surplus
notes as surplus instead of debt, reporting of reinsurance agreements and
valuing securities on a different basis.
In addition, certain assets are not admitted under statutory accounting
principles and are charged directly to surplus. The most significant assets not
admitted by General American are net deferred income tax assets resulting from
temporary differences between statutory accounting principles basis and tax
basis not expected to reverse and become recoverable within three years.
The tables below present amounts from General American, which are derived
from the statutory-basis financial statements as filed with the Missouri
Department of Insurance.
Statutory net income (loss) was as follows:
Years Ended December 31,
-----------------------------------
Company State of Domicile 2017 2016 2015
--------------------------------- ------------------ ---------- -------- ------------
(In millions)
General American Life Insurance
Company........................ Missouri $ 90 $ (2) $ 204
Statutory capital and surplus was as follows at:
December 31,
----------------------
Company 2017 2016
----------------------------------------- --------- ------------
(In millions)
General American Life Insurance Company. $ 988 $ 923
68
General American Life Insurance Company and Subsidiary
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements -- (continued)
9. Equity (continued)
Dividend Restrictions
The table below sets forth the dividends permitted to be paid by General
American to MetLife, Inc. without insurance regulatory approval and dividends
paid:
2018 2017 2016
----------------- ------------ -------------
Permitted Without
Company Approval (1) Paid Paid
----------------------------------------- ----------------- ------------ -------------
(In millions)
General American Life Insurance Company. $ 118 $ 1 $ --
-----------
(1) Reflects dividend amounts that may be paid during 2018 without prior
regulatory approval. However, because dividend tests may be based on
dividends previously paid over a rolling 12-month period, if paid before a
specified date during 2017, some or all of such dividends may require
regulatory approval.
Under Missouri State Insurance Law, General American is permitted, without
prior insurance regulatory clearance, to pay a stockholder dividend to MetLife,
Inc. as long as the amount of such dividend when aggregated with all other
dividends in the preceding 12 months, does not exceed the greater of: (i) 10%
of its surplus to policyholders as of the end of the immediately preceding
calendar year; or (ii) its statutory net gain from operations for the
immediately preceding calendar year (excluding net realized capital gains).
General American will be permitted to pay a dividend to MetLife, Inc. in excess
of the greater of such two amounts only if it files notice of the declaration
of such a dividend and the amount thereof with the Missouri Director of
Insurance (the "Missouri Director") and the Missouri Director either approves
the distribution of the dividend or does not disapprove the distribution within
30 days of its filing. In addition, any dividend that exceeds earned surplus
(defined by the Company as "unassigned funds (surplus)") as of the last filed
annual statutory statement requires insurance regulatory approval. Under
Missouri State Insurance Law, the Missouri Director has broad discretion in
determining whether the financial condition of a stock life insurance company
would support the payment of such dividends to its stockholders.
69
General American Life Insurance Company and Subsidiary
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements -- (continued)
9. Equity (continued)
Accumulated Other Comprehensive Income (Loss)
Information regarding changes in the balances of each component of AOCI was
as follows:
Unrealized Foreign Defined
Investment Gains Unrealized Gains Currency Benefit
(Losses), Net of (Losses) on Translation Plans
Related Offsets (1) Derivatives Adjustments Adjustment Total
-------------------- ----------------- ------------ ------------ ------------
(In millions)
Balance at December 31, 2014............ $ 496 $ 1 $ (11) $ (9) $ 477
OCI before reclassifications............ (471) 18 (3) -- (456)
Deferred income tax benefit (expense)... 164 (7) 3 -- 160
-------------------- ----------------- ------------ ------------ ------------
AOCI before reclassifications, net of
income tax........................... 189 12 (11) (9) 181
Amounts reclassified from AOCI.......... (2) -- -- 1 (1)
Deferred income tax benefit (expense)... 1 -- -- -- 1
-------------------- ----------------- ------------ ------------ ------------
Amounts reclassified from AOCI, net
of income tax........................ (1) -- -- 1 --
-------------------- ----------------- ------------ ------------ ------------
Balance at December 31, 2015............ 188 12 (11) (8) 181
OCI before reclassifications............ 79 7 (2) (1) 83
Deferred income tax benefit (expense)... (28) (2) -- -- (30)
-------------------- ----------------- ------------ ------------ ------------
AOCI before reclassifications, net of
income tax........................... 239 17 (13) (9) 234
Amounts reclassified from AOCI.......... 8 -- -- 1 9
Deferred income tax benefit (expense)... (2) -- -- -- (2)
-------------------- ----------------- ------------ ------------ ------------
Amounts reclassified from AOCI, net
of income tax........................ 6 -- -- 1 7
-------------------- ----------------- ------------ ------------ ------------
Balance at December 31, 2016............ 245 17 (13) (8) 241
OCI before reclassifications............ 245 (42) 2 (1) 204
Deferred income tax benefit (expense)... (81) 15 (1) 1 (66)
-------------------- ----------------- ------------ ------------ ------------
AOCI before reclassifications, net of
income tax........................... 409 (10) (12) (8) 379
Amounts reclassified from AOCI.......... 6 2 -- 1 9
Deferred income tax benefit (expense)... (2) (1) -- (1) (4)
-------------------- ----------------- ------------ ------------ ------------
Amounts reclassified from AOCI, net
of income tax........................ 4 1 -- -- 5
-------------------- ----------------- ------------ ------------ ------------
Balance at December 31, 2017............ $ 413 $ (9) $ (12) $ (8) $ 384
==================== ================= ============ ============ ============
-------------
(1) See Note 5 for information on offsets to investments related to future
policy benefits and DAC and VOBA.
70
General American Life Insurance Company and Subsidiary
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements -- (continued)
9. Equity (continued)
Information regarding amounts reclassified out of each component of AOCI was
as follows:
Consolidated Statements of
AOCI Components Amounts Reclassified from AOCI Operations Locations
-------------------------------------------------- ------------------------------------- ------------------------------
Years Ended December 31,
-------------------------------------
2017 2016 2015
----------- ----------- -----------
(In millions)
Net unrealized investment gains (losses):
Net unrealized investment gains (losses)........... $ (7) $ (7) $ 3 Net investment gains (losses)
Net unrealized investment gains (losses)........... 1 -- -- Net investment income
Net unrealized investment gains (losses)........... -- (1) (1) Net derivative gains (losses)
----------- ----------- -----------
Net unrealized investment gains (losses), before
income tax....................................... (6) (8) 2
Income tax (expense) benefit....................... 2 2 (1)
----------- ----------- -----------
Net unrealized investment gains (losses), net of
income tax....................................... (4) (6) 1
----------- ----------- -----------
Unrealized gains (losses) on derivatives - cash
flow hedges:
Foreign currency swaps............................. (2) -- -- Net derivative gains (losses)
----------- ----------- -----------
Gains (losses) on cash flow hedges, before
income tax....................................... (2) -- --
Income tax (expense) benefit...................... 1 -- --
----------- ----------- -----------
Gains (losses) on cash flow hedges, net of
income tax....................................... (1) -- --
----------- ----------- -----------
Defined benefit plans adjustment: (1)
Amortization of net actuarial gains (losses)....... (1) (1) (1)
Amortization of prior service (costs) credit....... -- -- --
----------- ----------- -----------
Amortization of defined benefit plan items,
before income tax................................ (1) (1) (1)
Income tax (expense) benefit....................... 1 -- --
----------- ----------- -----------
Amortization of defined benefit plan items, net
of income tax................................... -- (1) (1)
----------- ----------- -----------
Total reclassifications, net of income tax....... $ (5) $ (7) $ --
=========== =========== ===========
-----------
(1) These AOCI components are included in the computation of net periodic
benefit costs.
71
General American Life Insurance Company and Subsidiary
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements -- (continued)
10. Other Expenses
Information on other expenses was as follows:
Years Ended December 31,
----------------------------------
2017 2016 2015
---------- ---------- ----------
(In millions)
General and administrative expenses...................... $ 19 $ 10 $ 27
Pension, postretirement and postemployment benefit costs. 3 3 3
Premium taxes, other taxes, and licenses & fees.......... 15 4 6
Commissions and other variable expenses.................. 87 164 175
Capitalization of DAC.................................... (81) (128) (143)
Amortization of DAC and VOBA............................. 1 81 76
Interest expense on debt................................. 9 9 9
---------- ---------- ----------
Total other expenses.................................... $ 53 $ 143 $ 153
========== ========== ==========
Certain prior year amounts have been reclassified to conform to the current
year presentation, which has been revised to align the expense categories with
the Company's businesses. The reclassifications did not result in a change to
total other expenses.
Capitalization of DAC and Amortization of DAC and VOBA
See Note 3 for additional information on DAC and VOBA including impacts of
capitalization and amortization.
Interest Expense on Debt
See Note 8 for additional information on interest expense on debt.
Affiliated Expenses
Commissions and other variable expenses, capitalization of DAC and
amortization of DAC and VOBA include the impact of affiliated reinsurance
transactions. See Notes 4 and 13 for a discussion of affiliated expenses
included in the table above.
11. Income Tax
On December 22, 2017, President Trump signed into law U.S. Tax Reform. U.S.
Tax Reform includes numerous changes in tax law, including a permanent
reduction in the federal corporate income tax rate from 35% to 21%, which took
effect for taxable years beginning on or after January 1, 2018, and a
territorial international tax system which generally eliminates U.S. federal
income tax on dividends received from foreign subsidiaries.
The incremental financial statement impact related to U.S. Tax Reform was as
follows:
U.S. Tax Reform
------------------
(In millions)
Income (loss) before provision for income tax...................................... $ --
Provision for income tax expense (benefit):
Deferred tax revaluation........................................................... (103)
------------------
Total provision for income tax expense (benefit).................................. (103)
------------------
Income (loss), net of income tax................................................... 103
Income tax (expense) benefit related to items of other comprehensive income (loss). 5
------------------
Increase to net equity from U.S. Tax Reform........................................ $ 108
==================
72
General American Life Insurance Company and Subsidiary
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements -- (continued)
11. Income Tax (continued)
In accordance with SAB 118 issued by the U.S. Securities and Exchange
Commission ("SEC") in December 2017, the Company has recorded provisional
amounts for certain items for which the income tax accounting is not complete.
For these items, the Company has recorded a reasonable estimate of the tax
effects of U.S. Tax Reform. The estimates will be reported as provisional
amounts during a measurement period, which will not exceed one year from the
date of enactment of U.S. Tax Reform. The Company may reflect adjustments to
its provisional amounts upon obtaining, preparing, or analyzing additional
information about facts and circumstances that existed as of the enactment date
that, if known, would have affected the income tax effects initially reported
as provisional amounts.
The following item is considered a provisional estimate due to complexities
and ambiguities in U.S. Tax Reform which resulted in incomplete accounting for
the tax effects of these provisions. Further guidance, either legislative or
interpretive, and analysis will be required to complete the accounting for this
item:
. Alternative Minimum Tax Credits - U.S. Tax Reform eliminates the
corporate alternative minimum tax and allows for minimum tax credit
carryforwards to be used to offset future regular tax or to be refunded
over the next few years. However, pursuant to the requirements of the
Balanced Budget and Emergency Deficit Control Act of 1985, as amended,
refund payments issued for corporations claiming refundable prior year
alternative minimum tax credits are subject to a sequestration rate of
6.6%. The application of this fee to refunds in future years is subject
to further guidance. Additionally, the sequestration reduction rate in
effect at the time is subject to uncertainty. The Company has recorded a
less than $1 million tax charge included within the deferred tax
revaluation.
The provision for income tax was as follows:
Years Ended December 31,
------------------------------------
2017 2016 2015
---------- ---------- ------------
(In millions)
Current:
Federal.................................... $ (21) $ 18 $ 7
Foreign.................................... -- -- 20
---------- ---------- ------------
Subtotal................................... (21) 18 27
---------- ---------- ------------
Deferred:
Federal.................................... (50) (38) 76
---------- ---------- ------------
Provision for income tax expense (benefit). $ (71) $ (20) $ 103
========== ========== ============
The reconciliation of the income tax provision at the U.S. statutory rate to
the provision for income tax as reported was as follows:
Years Ended December 31,
--------------------------------------
2017 2016 2015
------------ ----------- -----------
(In millions)
Tax provision at U.S. statutory rate........ $ 44 $ (6) $ 104
Tax effect of:..............................
Tax-exempt income........................... (3) (5) --
Prior year tax.............................. (7) (8) --
U.S. Tax Reform impact...................... (103) -- --
Dividend received deduction................. (1) (1) (1)
Other, net.................................. (1) -- --
------------ ----------- -----------
Provision for income tax expense (benefit). $ (71) $ (20) $ 103
============ =========== ===========
73
General American Life Insurance Company and Subsidiary
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements -- (continued)
11. Income Tax (continued)
Deferred income tax represents the tax effect of the differences between the
book and tax bases of assets and liabilities. Net deferred income tax assets
and liabilities consisted of the following at:
December 31,
----------------------
2017 2016
---------- ----------
(In millions)
Deferred income tax assets:
Tax credit carryforwards.................. $ 26 $ 55
Policyholder liabilities and receivables.. 8 45
Employee benefits......................... 7 12
Investments, including derivatives........ 36 71
Other..................................... 9 --
---------- ----------
Total deferred income tax assets.......... 86 183
---------- ----------
Deferred income tax liabilities:
Net unrealized investment gains........... 129 141
DAC....................................... 85 131
Intangibles............................... 9 17
Other..................................... -- 11
---------- ----------
Total deferred income tax liabilities..... 223 300
---------- ----------
Net deferred income tax asset (liability). $ (137) $ (117)
========== ==========
Tax credit carryforwards of $28 million at December 31, 2017 will expire
beginning in 2022.
The Company participates in a tax sharing agreement with MetLife, Inc., as
described in Note 1. Pursuant to this tax sharing agreement, the amounts due
from affiliates included $26 million and $1 million for the years ended
December 31, 2017 and 2016, respectively.
The Company files income tax returns with the U.S. federal government and
various state and local jurisdictions. The Company is under continuous
examination by the Internal Revenue Service ("IRS") and other tax authorities
in jurisdictions in which the Company has significant business operations. The
income tax years under examination vary by jurisdiction. The Company is no
longer subject to U.S. federal, state, or local income tax examinations in
major taxing jurisdictions for years prior to 2007, except for 2006 where the
IRS disallowance relates to policyholder liability deductions and the Company
is engaged with IRS Appeals. Management believes it has established adequate
tax liabilities and final resolution for the year 2006 is not expected to have
a material impact on the Company's consolidated financial statements.
The Company's liability for unrecognized tax benefits may increase or
decrease in the next 12 months. For example, federal tax legislation could
impact unrecognized tax benefits. A reasonable estimate of the increase or
decrease cannot be made at this time. However, the Company continues to believe
that the ultimate resolution of the pending issues will not result in a
material change to its consolidated financial statements, although the
resolution of income tax matters could impact the Company's effective tax rate
for a particular future period.
The Company had no unrecognized tax benefits for the year ended December 31,
2017. Unrecognized tax benefits were $7 million for both of the years ended
December 31, 2016 and 2015. Unrecognized tax benefits, that if recognized,
would impact the effective tax rate were $7 million for both of the years ended
December 31, 2016 and 2015.
The Company classifies interest accrued related to unrecognized tax benefits
in interest expense, included within other expenses, while penalties are
included in income tax expense.
74
General American Life Insurance Company and Subsidiary
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements -- (continued)
11. Income Tax (continued)
Interest recognized on the consolidated statements of operations was
($2) million for the year ended December 31, 2017. The Company had no interest
recognized on the consolidated statements of operations for both of the years
ended December 31, 2016 and 2015. There was no interest included in other
liabilities on the consolidated balance sheet at December 31, 2017. The Company
had $2 million of interest included in other liabilities on the consolidated
balance sheet at December 31, 2016.
The Company had no penalties for the years ended December 31, 2017, 2016 and
2015.
Prior to U.S. Tax Reform, the dividends received deduction ("DRD") related
to variable life insurance and annuity contracts was generally based on a
company specific percentage referred to as the company's share. The calculation
of this amount was subject to significant dispute between taxpayers and the
IRS. U.S. Tax Reform eliminated this dispute by fixing the calculation to a
specific percentage subsequent to 2017.
The Company recognized an income tax benefit of $1 million related to the
separate account DRD for each of the years ended December 31, 2017, 2016 and
2015.
12. Contingencies, Commitments and Guarantees
Contingencies
Litigation
Sales Practices Claims
The Company and certain of its affiliates have faced numerous claims,
including class action lawsuits, alleging improper marketing or sales of
individual life insurance policies, annuities, mutual funds or other
products. Regulatory authorities in a small number of states and the
Financial Industry Regulatory Authority, and occasionally the SEC, have also
conducted investigations or inquiries relating to sales of individual life
insurance policies or annuities or other products issued by the Company.
These investigations often focus on the conduct of particular financial
services representatives and the sale of unregistered or unsuitable products
or the misuse of client assets. Over the past several years, these and a
number of investigations by other regulatory authorities were resolved for
monetary payments and certain other relief, including restitution payments.
The Company may continue to resolve investigations in a similar manner.
Summary
Various litigation, claims and assessments against the Company, in
addition to those discussed previously and those otherwise provided for in
the Company's consolidated financial statements, have arisen in the course
of the Company's business, including, but not limited to, in connection with
its activities as an insurer, investor, and taxpayer. Further, state
insurance regulatory authorities and other federal and state authorities
regularly make inquiries and conduct investigations concerning the Company's
compliance with applicable insurance and other laws and regulations.
It is not possible to predict the ultimate outcome of all pending
investigations and legal proceedings. In some of the matters, very large
and/or indeterminate amounts, including punitive and treble damages, are
sought. Although in light of these considerations it is possible that an
adverse outcome in certain cases could have a material effect upon the
Company's financial position, based on information currently known by the
Company's management, in its opinion, the outcomes of such pending
investigations and legal proceedings are not likely to have such an effect.
However, given the large and/or indeterminate amounts sought in certain of
these matters and the inherent unpredictability of litigation, it is
possible that an adverse outcome in certain matters could, from time to
time, have a material effect on the Company's consolidated net income or
cash flows in particular annual periods.
Insolvency Assessments
Most of the jurisdictions in which the Company is admitted to transact
business require insurers doing business within the jurisdiction to
participate in guaranty associations, which are organized to pay contractual
benefits owed pursuant to insurance policies issued by impaired, insolvent or
failed insurers. These associations levy assessments, up to prescribed
limits, on all member insurers in a particular state on the basis of the
proportionate share of the
75
General American Life Insurance Company and Subsidiary
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements -- (continued)
12. Contingencies, Commitments and Guarantees (continued)
premiums written by member insurers in the lines of business in which the
impaired, insolvent or failed insurer engaged. Some states permit member
insurers to recover assessments paid through full or partial premium tax
offsets.
Assets and liabilities held for insolvency assessments were as follows:
December 31,
---------------------
2017 2016
---------- ----------
(In millions)
Other Assets:
Premium tax offset for future discounted and undiscounted assessments. $ 3 $ 4
Premium tax offset currently available for paid assessments........... 1 --
---------- ----------
Total................................................................. $ 4 $ 4
========== ==========
Other Liabilities:
Insolvency assessments................................................ $ 4 $ 5
========== ==========
Commitments
Mortgage Loan Commitments
The Company commits to lend funds under mortgage loan commitments. The
amounts of these mortgage loan commitments were $4 million and $19 million at
December 31, 2017 and 2016, respectively.
Commitments to Fund Partnership Investments, Bank Credit Facilities and
Private Corporate Bond Investments
The Company commits to fund partnership investments and to lend funds
under bank credit facilities and private corporate bond investments. The
amounts of these unfunded commitments were $112 million and $160 million at
December 31, 2017 and 2016, respectively.
Guarantees
In the normal course of its business, the Company has provided certain
indemnities, guarantees and commitments to third parties such that 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 of less than
$1 million, with a cumulative maximum of less than $1 million, 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. Management believes that it is unlikely
the Company will have to make any material payments under these indemnities,
guarantees, or commitments.
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 had no liability for indemnities, guarantees and commitments at
both December 31, 2017 and 2016.
76
General American Life Insurance Company and Subsidiary
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements -- (continued)
13. Related Party Transactions
Service Agreements
The Company has entered into various agreements with affiliates for services
necessary to conduct its activities. Typical services provided under these
agreements include personnel, policy administrative functions and distribution
services. The bases for such charges are modified and adjusted by management
when necessary or appropriate to reflect fairly and equitably the actual cost
incurred by the Company and/or affiliate. Expenses and fees incurred with
affiliates related to these agreements, recorded in other expenses, were
$36 million, $29 million and $31 million for the years ended December 31, 2017,
2016 and 2015, respectively. Revenues received from affiliates related to these
agreements, recorded in universal life and investment-type product policy fees,
were $1 million, $1 million and $2 million for the years ended
December 31, 2017, 2016 and 2015, respectively. Revenues received from
affiliates related to these agreements, recorded in other revenues, were $0,
$1 million and $2 million for the years ended December 31, 2017, 2016 and 2015,
respectively.
The Company had net receivables from affiliates, related to the items
discussed above, of $4 million and $5 million at December 31, 2017 and 2016,
respectively.
See Notes 4 and 5 for additional information on related party transactions.
14. Subsequent Event
The Company has evaluated events subsequent to December 31, 2017, through
April 12, 2018, which is the date these consolidated financial statements were
available to be issued.
Merger
In February 2018, the Company's Board of Directors approved the merger of
General American and Metropolitan Tower Life Insurance Company ("MTL"), a
wholly-owned subsidiary of MetLife, Inc. MTL will be the surviving entity and
expects to redomicile from Delaware to Nebraska. The Company expects the
completion of the merger in the first half of 2018, subject to certain
regulatory approvals.
77
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Metropolitan Tower Life Insurance Company and Subsidiaries
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Unaudited Pro Forma Financial Statement Narrative
As of and for the Year Ended December 31, 2017
On April 27, 2018, Metropolitan Tower Life Insurance Company ("MTL") merged
with General American Life Insurance Company ("General American"), both of
which are wholly-owned subsidiaries of MetLife, Inc. The surviving entity of
the merger is MTL. The merger represents a transaction among entities under
common control, which will be accounted for in a manner similar to the
pooling-of-interests method and presented as if the transaction occurred at the
beginning of the earliest date for which the financial statements are presented
and prior periods will be retrospectively adjusted to furnish comparative
information.
Had the transaction occurred on December 31, 2017, the unaudited pro forma
consolidated balance sheet combines the audited historical consolidated balance
sheet of Metropolitan Tower Life Insurance Company and Subsidiaries (the
"Company") and the audited historical consolidated balance sheet of General
American and its subsidiary. There are no pro forma balance sheet adjustments.
As of December 31, 2017, pro forma total assets and total stockholder's equity
would have been $28,062 million and $3,097 million, respectively.
Had the transaction occurred on January 1, 2015, the unaudited pro forma
consolidated statement of operations combines the audited historical
consolidated statement of operations of the Company and the audited historical
consolidated statement of operations of General American and its subsidiary.
The Company's unaudited pro forma statement of operations would have reflected
a pro forma adjustment to eliminate $12 million for non-recurring expenses
recorded during 2017 in connection with completing the merger. The Company's
pro forma net income (loss) would have been $341 million, $11 million and $210
million for the years ended December 31, 2017, 2016 and 2015, respectively.
The unaudited pro forma narrative description of the Merger of MTL and GALIC
(i) is presented based on information currently available, (ii) is intended for
informational purposes only, and (iii) is not intended to reflect the results
of operations or the financial position of the Company that would have resulted
had the Merger been effective as of and during the periods presented or the
results that may be obtained by the Company in the future. There are no
estimates that need to be made.
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FLEXIBLE PREMIUM VL SUPPLEMENT
GENERAL AMERICAN LIFE INSURANCE COMPANY
Variable Life Insurance Policy
(Destiny)
Supplement dated May 1, 2017
to the Prospectus dated May 1, 2004
Flexible Premium
Variable Life Insurance Policies
(Variable Universal Life/Executive Benefit)
Supplement dated May 1, 2017
to the Prospectuses dated May 1, 2002
Flexible Premium Joint and Last Survivor
Variable Life Insurance Policy
Supplement dated May 1, 2017
to the Prospectus dated May 1, 2002
Flexible Premium Variable Life Insurance Policies
(VUL 95/VUL 100/VGSP/Russell VUL)
Supplement dated May 1, 2017
to the Prospectuses dated May 1, 2000
This supplement updates certain information contained in the last full
prospectus for each of the above-referenced variable life insurance Policies,
as annually and periodically supplemented. You should read and retain this
supplement. We will send you an additional copy of the last full prospectus for
your Policy, without charge, on request. These Policies are no longer available
for sale.
General American Life Insurance Company is a wholly-owned subsidiary of
MetLife, Inc., a publicly-traded company. General American's Home Office is
13045 Tesson Ferry Road, St. Louis, Missouri 63128.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE POLICIES OR DETERMINED IF THIS
SUPPLEMENT IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE SECURITIES AND EXCHANGE COMMISSION MAINTAINS A WEB SITE THAT CONTAINS
MATERIAL INCORPORATED BY REFERENCE AND OTHER INFORMATION REGARDING REGISTRANTS
THAT FILE ELECTRONICALLY WITH THE SECURITIES AND EXCHANGE COMMISSION. THE
ADDRESS OF THE SITE IS HTTP://WWW.SEC.GOV.
THE UNDERLYING FUND PROSPECTUSES MAY BE OBTAINED BY CALLING 1-800-638-9294.
WE DO NOT GUARANTEE HOW ANY OF THE DIVISIONS OR FUNDS WILL PERFORM. THE
POLICIES AND THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY FINANCIAL INSTITUTION AND ARE NOT FEDERALLY INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER
GOVERNMENT AGENCY.
The Financial Industry Regulatory Authority ("FINRA") provides background
information about broker-dealers and their registered representatives through
FINRA BrokerCheck. You may contact the FINRA BrokerCheck Hotline at
1-800-289-9999, or log on to www.finra.org. An investor brochure that includes
information describing FINRA BrokerCheck is available through the Hotline or
on-line.
THE COMPANY
General American is principally engaged in writing individual life insurance
policies and annuity contracts. It is admitted to do business in 49 states, the
District of Columbia, Puerto Rico, and in four Canadian provinces. The
principal offices (Home Office) of General American are located at 13045 Tesson
Ferry Road, St. Louis, Missouri 63128.
On or about December 1, 2016, Metropolitan Life Insurance Company
("MetLife") terminated a net worth maintenance agreement with General American.
The net worth maintenance agreement was originally entered into between MetLife
and General American on January 6, 2000. Under the agreement, MetLife had
agreed, without limitation as to amount, to cause General American to have
certain minimum capital and surplus levels and liquidity necessary to enable it
to meet its current obligations on a timely basis.
The Administrative Office for various Policy transactions is as follows:
Premium Payments General American
P.O. Box 790201
St. Louis, MO 63179-0201
Payment Inquires and General American
Correspondence P.O. Box 356
Warwick, RI 02887-0355
Beneficiary and Ownership General American
Changes P.O. Box 392
Warwick, RI 02887-0356
Surrenders, Loans, General American
Withdrawals and P.O. Box 356
Division Transfers Warwick, RI 02887-0356
Death Claims General American
P.O. Box 356
Warwick, RI 02887-0356
All Telephone (800) 638-9294
Transactions and Inquiries
You may request a transfer or reallocation of future premiums by written
request (which may be telecopied) to our Administrative Office, by telephoning
us, or over the Internet . To request a transfer or reallocation by telephone,
you should contact your registered representative, or contact us at (800)
638-9294. To request a transfer or reallocation over the Internet, you may log
on to our website at www.genamerica.com. We use reasonable procedures to
confirm that instructions communicated by telephone, facsimile or Internet are
genuine. Any telephone, facsimile or Internet instructions that we reasonably
believe to be genuine will be your responsibility, including losses arising
from any errors in the communication of instructions. However, because
telephone and Internet transactions may be available to anyone who provides
certain information about you and your Policy, you should protect that
information. We may not be able to verify that you are the person providing
telephone or Internet instructions, or that you have authorized any such person
to act for you.
Telephone, facsimile, and computer systems (including the Internet) may not
always be available. Any telephone, facsimile, or computer system, whether it
is yours, your service provider's, your registered representative's, or ours,
can experience outages or slowdowns for a variety of reasons. These outages or
slowdowns may delay or prevent our processing of your request. Although we have
taken precautions to help our systems handle heavy use, we cannot promise
complete reliability under all circumstances. If you are experiencing problems,
you should make your request by writing to our Administrative Office.
If you send premium payments or transaction requests to an address other
than the one we have designated for receipt of such payments or requests, we
may return the premium payment to you, or there may be a delay in applying the
payment or transaction to your Policy.
A-2
THE SEPARATE ACCOUNT
The separate account consists of divisions, each of which corresponds to an
underlying Fund. Each division may either make money or lose money. Therefore
if you invest in a division of the separate account, you may either make money
or lose money, depending on the investment experience of that division. There
is no guaranteed rate of return in the separate account.
The following chart shows the Funds that are available under the Policy
along with the name of the investment adviser, sub-adviser (where applicable)
and investment objective of each Fund. The Funds have different investment
goals and strategies. You should review the prospectus of each Fund carefully
before investing, or seek professional guidance in determining which Fund(s)
best meet your objectives.
NOTE: The Russell Investment Funds are not available to Destiny or Executive
Benefit Policies. For all other Policies, the Russell Investment Funds are only
available for Policies with an issue date prior to January 1, 2000.
FUND INVESTMENT OBJECTIVE INVESTMENT ADVISER/SUBADVISER
--------------------------------------------------------- -------------------------------------- -----------------------------
AMERICAN FUNDS INSURANCE SERIES(R) -- CLASS 2
American Funds Global Small Capitalization Fund Seeks long-term growth of capital. Capital Research and
Management Company
American Funds Growth Fund Seeks growth of capital. Capital Research and
Management Company
American Funds Growth-Income Fund Seeks long-term growth of capital Capital Research and
and income. Management Company
BRIGHTHOUSE FUNDS TRUST I (FORMERLY MET INVESTORS SERIES
TRUST) -- CLASS A
Clarion Global Real Estate Portfolio Seeks total return through Brighthouse Investment
investment in real estate securities, Advisers, LLC
emphasizing both capital Subadviser: CBRE Clarion
appreciation and current income. Securities LLC
ClearBridge Aggressive Growth Portfolio Seeks capital appreciation. Brighthouse Investment
Advisers, LLC
Subadviser: ClearBridge
Investments, LLC
Harris Oakmark International Portfolio Seeks long-term capital appreciation. Brighthouse Investment
Advisers, LLC
Subadviser: Harris
Associates L.P.
Invesco Mid Cap Value Portfolio Seeks high total return by investing Brighthouse Investment
in equity securities of mid-sized Advisers, LLC
companies. Subadviser: Invesco
Advisers, Inc.
Invesco Small Cap Growth Portfolio Seeks long-term growth of capital. Brighthouse Investment
Advisers, LLC
Subadviser: Invesco
Advisers, Inc.
MFS(R) Research International Portfolio Seeks capital appreciation. Brighthouse Investment
Advisers, LLC
Subadviser: Massachusetts
Financial Services
Company
Morgan Stanley Mid Cap Growth Portfolio Seeks capital appreciation. Brighthouse Investment
Advisers, LLC
Subadviser: Morgan
Stanley Investment
Management Inc.
PIMCO Total Return Portfolio Seeks maximum total return, Brighthouse Investment
consistent with the preservation of Advisers, LLC
capital and prudent investment Subadviser: Pacific
management. Investment Management
Company LLC
A-3
FUND INVESTMENT OBJECTIVE INVESTMENT ADVISER/SUBADVISER
----------------------------- ------------------------------------------- -----------------------------
T. Rowe Price Large Cap Value Seeks long-term capital appreciation by Brighthouse Investment
Portfolio investing in common stocks believed to Advisers, LLC
be undervalued. Income is a secondary Subadviser: T. Rowe Price
objective. Associates, Inc.
T. Rowe Price Mid Cap Growth Seeks long-term growth of capital. Brighthouse Investment
Portfolio Advisers, LLC
Subadviser: T. Rowe Price
Associates, Inc.
BRIGHTHOUSE FUNDS TRUST II
(FORMERLY METROPOLITAN
SERIES FUND) -- CLASS A
Baillie Gifford International Seeks long-term growth of capital. Brighthouse Investment
Stock Portfolio Advisers, LLC
Subadviser: Baillie Gifford
Overseas Limited
BlackRock Bond Income Seeks a competitive total return primarily Brighthouse Investment
Portfolio from investing in fixed-income securities. Advisers, LLC
Subadviser: BlackRock
Advisors, LLC
BlackRock Capital Seeks long-term growth of capital. Brighthouse Investment
Appreciation Portfolio Advisers, LLC
Subadviser: BlackRock
Advisors, LLC
BlackRock Large Cap Value Seeks long-term growth of capital. Brighthouse Investment
Portfolio Advisers, LLC
Subadviser: BlackRock
Advisors, LLC
BlackRock Ultra-Short Term Seeks a high level of current income Brighthouse Investment
Bond Portfolio consistent with preservation of capital. Advisers, LLC
Subadviser: BlackRock
Advisors, LLC
Brighthouse/Artisan Mid Cap Seeks long-term capital growth. Brighthouse Investment
Value Portfolio (formerly Advisers, LLC
Met/Artisan Mid Cap Value Subadviser: Artisan
Portfolio) Partners Limited
Partnership
Brighthouse/Wellington Seeks long-term capital appreciation with Brighthouse Investment
Balanced Portfolio some current income. Advisers, LLC
(formerly Met/ Wellington Subadviser: Wellington
Balanced Portfolio) Management Company
LLP
Brighthouse/Wellington Core Seeks to provide a growing stream of Brighthouse Investment
Equity Opportunities income over time and, secondarily, long- Advisers, LLC
Portfolio (formerly term capital appreciation and current Subadviser: Wellington
Met/Wellington Core Equity income. Management Company
Opportunities Portfolio) LLP
Frontier Mid Cap Growth Seeks maximum capital appreciation. Brighthouse Investment
Portfolio Advisers, LLC
Subadviser: Frontier
Capital Management
Company, LLC
Jennison Growth Portfolio Seeks long-term growth of capital. Brighthouse Investment
Advisers, LLC
Subadviser: Jennison
Associates LLC
MetLife Aggregate Bond Index Seeks to track the performance of the Brighthouse Investment
Portfolio (formerly Bloomberg Barclays U.S. Aggregate Advisers, LLC
Barclays Aggregate Bond Bond Index. Subadviser: MetLife
Index Portfolio) Investment Advisors, LLC
MetLife Mid Cap Stock Index Seeks to track the performance of the Brighthouse Investment
Portfolio Standard & Poor's MidCap 400(R) Advisers, LLC
Composite Stock Price Index. Subadviser: MetLife
Investment Advisors, LLC
MetLife MSCI EAFE(R) Index Seeks to track the performance of the Brighthouse Investment
Portfolio (formerly MSCI MSCI EAFE(R) Index. Advisers, LLC
EAFE(R) Index Portfolio) Subadviser: MetLife
Investment Advisors, LLC
A-4
FUND INVESTMENT OBJECTIVE INVESTMENT ADVISER/SUBADVISER
------------------- ---------------------------------- -----------------------------
MetLife Russell Seeks to track the performance
2000(R) Index of the Russell 2000(R) Index. Brighthouse Investment
Portfolio Advisers, LLC
(formerly Russell Subadviser: MetLife
2000(R) Index Investment Advisors,
Portfolio) LLC
MetLife Stock Index Seeks to track the performance Brighthouse Investment
Portfolio of the Standard & Poor's 500(R) Advisers, LLC
Composite Stock Price Index. Subadviser: MetLife
Investment Advisors,
LLC
MFS(R) Total Return Seeks a favorable total return Brighthouse Investment
Portfolio through investment in a Advisers, LLC
diversified portfolio. Subadviser:
Massachusetts Financial
Services Company
MFS(R) Value Seeks capital appreciation. Brighthouse Investment
Portfolio Advisers, LLC
Subadviser:
Massachusetts Financial
Services Company
Neuberger Berman Seeks high total return, Brighthouse Investment
Genesis Portfolio consisting principally of capital Advisers, LLC
appreciation. Subadviser: Neuberger
Berman
Investment Advisers LLC
T. Rowe Price Large Seeks long-term growth of Brighthouse Investment
Cap Growth capital. Advisers, LLC
Portfolio Subadviser: T. Rowe
Price Associates,
Inc.
T. Rowe Price Small Seeks long-term capital growth. Brighthouse Investment
Cap Growth Advisers, LLC
Portfolio Subadviser: T. Rowe
Price Associates, Inc.
VanEck Global Seeks long-term capital Brighthouse Investment
Natural Resources appreciation with income as a Advisers, LLC
Portfolio secondary consideration. Subadviser: Van Eck
Associates Corporation
Western Asset Seeks to maximize total return Brighthouse Investment
Management consistent with preservation of Advisers, LLC
Strategic Bond capital. Subadviser: Western
Opportunities Asset Management
Portfolio Company
Western Asset Seeks to maximize total return Brighthouse Investment
Management U.S. consistent with preservation of Advisers, LLC
Government capital and maintenance of Subadviser: Western
Portfolio liquidity. Asset Management
Company
FIDELITY(R)
VARIABLE
INSURANCE
PRODUCTS --
INITIAL CLASS
Equity-Income Seeks reasonable income. The Fidelity Management &
Portfolio fund will also consider the Research Company
potential for capital Subadviser: FMR Co.,
appreciation. The fund's goal is Inc.
to achieve a yield which
exceeds the composite yield on
the securities comprising the
S&P 500(R) Index.
Mid Cap Portfolio Seeks long-term growth of Fidelity Management &
capital. Research Company
Subadviser: FMR Co.,
Inc.
JPMORGAN INSURANCE
TRUST -- CLASS 1
JPMorgan Insurance Seeks to maximize total return J.P. Morgan Investment
Trust Core Bond by investing primarily in a Management Inc.
Portfolio diversified portfolio of
intermediate- and long-term
debt securities.
JPMorgan Insurance Seeks capital growth over the J.P. Morgan Investment
Trust Small Cap long term. Management Inc.
Core Portfolio
A-5
FUND INVESTMENT OBJECTIVE INVESTMENT ADVISER/SUBADVISER
------------------- ---------------------------------- -----------------------------
RUSSELL INVESTMENT
FUNDS
International Seeks to provide long term Russell Investment
Developed Markets capital growth. Management Company
Fund (formerly
Non-U.S. Fund)
Subadvisers: Barrow,
Hanley,
Mewhinney & Strauss,
LLC;
GQG Partners LLC;
Numeric Investors LLC;
Pzena Investment
Management, LLC;
Wellington Management
Company LLP
Strategic Bond Fund Seeks to provide current Russell Investment
(formerly Core income, and as a secondary Management Company
Bond Fund) objective, capital appreciation.
Subadvisers: Colchester
Global Investors Limited;
Logan Circle Partners,
L.P.;
Pareto Investment
Management Limited;
Schroder Investment
Management North
America Inc.;
Scout Investments, Inc.;
Western Asset
Management Company
and Western Asset
Management Company
Limited
U.S. Small Cap Seeks to provide long term Russell Investment
Equity Fund capital growth. Management Company
(formerly
Aggressive Equity
Fund)
Subadvisers: DePrince,
Race & Zollo, Inc.;
Monarch Partners Asset
Management LLC;
RBC Global Asset
Management (U.S.) Inc.;
Snow Capital
Management L.P.;
Timpani Capital
Management LLC
U.S. Strategic Seeks to provide long term Russell Investment
Equity Fund capital growth. Management Company
(formerly
Multi-Style
Equity Fund)
Subadvisers: Barrow,
Hanley,
Mewhinney & Strauss,
LLC;
Jacobs Levy Equity
Management, Inc.;
Mar Vista Investment
Partners, LLC;
Suffolk Capital
Management, LLC;
William Blair Investment
Management, LLC
VANECK VIP TRUST --
INITIAL CLASS
VanEck VIP Emerging Seeks long-term capital Van Eck Associates
Markets Fund appreciation by investing Corporation
primarily in equity securities in
emerging markets around the
world.
--------
FOR MORE INFORMATION REGARDING THE FUNDS AND THEIR INVESTMENT ADVISERS AND
SUB-ADVISERS, SEE THE FUND PROSPECTUSES AND THEIR STATEMENTS OF ADDITIONAL
INFORMATION, WHICH YOU CAN OBTAIN BY CALLING 1-800-638-9294.
A-6
OTHER FUNDS AND SHARE CLASSES
Some of the Funds offer various classes of shares, each of which has a
different level of expenses. The prospectuses for the Funds may provide
information for share classes that are not available through the Policy. When
you consult the prospectus for any Fund, you should be careful to refer to only
the information regarding the class of shares that is available through the
Policy. For the JPMorgan Insurance Trust, we offer Class 1 shares; for
Fidelity(R) Variable Insurance Products and the VanEck VIP Trust, we offer
Initial Class shares; for Brighthouse Funds Trust I, we offer Class A shares;
for Brighthouse Funds Trust II, we offer Class A shares; and for the American
Funds Insurance Series,(R) we offer Class 2 shares.
CHARGES AND DEDUCTIONS
Charges will be deducted in connection with the Policy to compensate the
Company for providing the insurance benefits set forth in the Policy and any
additional benefits added by rider, administering the Policies, incurring
expenses in distributing the Policies, and assuming certain risks in connection
with the Policy. We may profit from one or more of the charges deducted under
the Policy, including the cost of insurance charge. We may use these profits
for any corporate purpose.
A-7
FEE TABLES
The tables below describe the Fund fees and expenses that a Policy Owner may
pay periodically during the time that he or she owns the Policy. One table
shows the minimum and maximum total operating expenses charged by the Funds for
the fiscal year ended December 31, 2016. The other table describes the annual
operating expenses of each Fund for the year ended December 31, 2016, before
and after any applicable fee waivers and expense reimbursements. Expenses of
the Funds may be higher or lower in the future. Certain Funds may impose a
redemption fee in the future. More detail concerning each Fund's fees and
expenses is contained in the table that follows and in the prospectus for each
Fund.
MINIMUM AND MAXIMUM TOTAL ANNUAL FUND OPERATING EXPENSES
MINIMUM MAXIMUM
------- -------
Total Annual Fund Operating Expenses
(expenses that are deducted from Fund assets, including management fees, distribution and/or service
(12b-1) fees, and other expenses)................................................................... 0.27% 1.18%
FUND FEES AND EXPENSES
(AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS)
The following table is a summary. For more complete information on Fund fees
and expenses, please refer to the prospectus for each Fund.
DISTRIBUTION ACQUIRED TOTAL FEE WAIVER NET TOTAL
AND/OR FUND FEES ANNUAL AND/OR ANNUAL
MANAGEMENT SERVICE OTHER AND OPERATING EXPENSE OPERATING
FUND FEE (12B-1) FEES EXPENSES EXPENSES EXPENSES REIMBURSEMENT EXPENSES
---------------------------------------------- ---------- ------------ -------- --------- --------- ------------- ---------
AMERICAN FUNDS INSURANCE SERIES(R)
American Funds Global Small
Capitalization Fund........................... 0.70% 0.25% 0.04% -- 0.99% -- 0.99%
American Funds Growth Fund.................... 0.33% 0.25% 0.02% -- 0.60% -- 0.60%
American Funds Growth-Income Fund............. 0.27% 0.25% 0.02% -- 0.54% -- 0.54%
BRIGHTHOUSE FUNDS TRUST I
Clarion Global Real Estate Portfolio.......... 0.61% -- 0.04% -- 0.65% -- 0.65%
ClearBridge Aggressive Growth Portfolio....... 0.56% -- 0.01% -- 0.57% 0.02% 0.55%
Harris Oakmark International Portfolio........ 0.77% -- 0.04% -- 0.81% 0.02% 0.79%
Invesco Mid Cap Value Portfolio............... 0.65% -- 0.03% 0.05% 0.73% 0.02% 0.71%
Invesco Small Cap Growth Portfolio............ 0.85% -- 0.03% -- 0.88% 0.02% 0.86%
MFS(R) Research International Portfolio....... 0.70% -- 0.04% -- 0.74% 0.06% 0.68%
Morgan Stanley Mid Cap Growth Portfolio....... 0.65% -- 0.05% -- 0.70% 0.01% 0.69%
PIMCO Total Return Portfolio.................. 0.48% -- 0.05% -- 0.53% 0.03% 0.50%
T. Rowe Price Large Cap Value Portfolio....... 0.57% -- 0.02% -- 0.59% 0.03% 0.56%
T. Rowe Price Mid Cap Growth Portfolio........ 0.75% -- 0.03% -- 0.78% -- 0.78%
BRIGHTHOUSE FUNDS TRUST II
Baillie Gifford International Stock Portfolio. 0.80% -- 0.05% -- 0.85% 0.12% 0.73%
BlackRock Bond Income Portfolio............... 0.33% -- 0.04% -- 0.37% -- 0.37%
BlackRock Capital Appreciation Portfolio...... 0.70% -- 0.02% -- 0.72% 0.09% 0.63%
BlackRock Large Cap Value Portfolio........... 0.63% -- 0.03% -- 0.66% 0.03% 0.63%
BlackRock Ultra-Short Term Bond Portfolio..... 0.35% -- 0.03% -- 0.38% 0.02% 0.36%
Brighthouse/Artisan Mid Cap Value Portfolio... 0.82% -- 0.03% -- 0.85% -- 0.85%
Brighthouse/Wellington Balanced Portfolio..... 0.46% -- 0.09% -- 0.55% -- 0.55%
A-8
DISTRIBUTION ACQUIRED TOTAL FEE WAIVER NET TOTAL
AND/OR FUND FEES ANNUAL AND/OR ANNUAL
MANAGEMENT SERVICE OTHER AND OPERATING EXPENSE OPERATING
FUND FEE (12B-1) FEES EXPENSES EXPENSES EXPENSES REIMBURSEMENT EXPENSES
------------------------- ---------- ------------ -------- --------- --------- ------------- ---------
Brighthouse/Wellington
Core Equity
Opportunities Portfolio 0.70% -- 0.02% -- 0.72% 0.11% 0.61%
Frontier Mid Cap Growth
Portfolio.............. 0.72% -- 0.03% -- 0.75% 0.02% 0.73%
Jennison Growth Portfolio 0.60% -- 0.02% -- 0.62% 0.08% 0.54%
MetLife Aggregate Bond
Index Portfolio........ 0.25% -- 0.03% -- 0.28% 0.01% 0.27%
MetLife Mid Cap Stock
Index Portfolio........ 0.25% -- 0.05% 0.01% 0.31% -- 0.31%
MetLife MSCI EAFE(R)
Index Portfolio........ 0.30% -- 0.08% 0.01% 0.39% -- 0.39%
MetLife Russell 2000(R)
Index Portfolio........ 0.25% -- 0.06% 0.01% 0.32% -- 0.32%
MetLife Stock Index
Portfolio.............. 0.25% -- 0.02% -- 0.27% 0.01% 0.26%
MFS(R) Total Return
Portfolio.............. 0.56% -- 0.05% -- 0.61% -- 0.61%
MFS(R) Value Portfolio... 0.70% -- 0.02% -- 0.72% 0.14% 0.58%
Neuberger Berman Genesis
Portfolio.............. 0.81% -- 0.04% -- 0.85% 0.01% 0.84%
T. Rowe Price Large Cap
Growth Portfolio....... 0.60% -- 0.02% -- 0.62% 0.02% 0.60%
T. Rowe Price Small Cap
Growth Portfolio....... 0.47% -- 0.03% -- 0.50% -- 0.50%
VanEck Global Natural
Resources Portfolio.... 0.78% -- 0.03% -- 0.81% 0.01% 0.80%
Western Asset Management
Strategic Bond
Opportunities Portfolio 0.57% -- 0.03% 0.01% 0.61% 0.05% 0.56%
Western Asset Management
U.S. Government
Portfolio.............. 0.47% -- 0.03% -- 0.50% 0.01% 0.49%
FIDELITY(R) VARIABLE
INSURANCE PRODUCTS
Equity-Income Portfolio.. 0.45% -- 0.09% 0.05% 0.59% -- 0.59%
Mid Cap Portfolio........ 0.55% -- 0.08% -- 0.63% -- 0.63%
JPMORGAN INSURANCE TRUST
JPMorgan Insurance Trust
Core Bond Portfolio.... 0.40% -- 0.24% 0.01% 0.65% 0.05% 0.60%
JPMorgan Insurance Trust
Small Cap Core
Portfolio.............. 0.65% -- 0.22% 0.01% 0.88% 0.01% 0.87%
RUSSELL INVESTMENT FUNDS
International Developed
Markets Fund........... 0.90% -- 0.12% -- 1.02% -- 1.02%
Strategic Bond Fund...... 0.55% -- 0.09% -- 0.64% -- 0.64%
U.S. Small Cap Equity
Fund................... 0.90% -- 0.12% -- 1.02% -- 1.02%
U.S. Strategic Equity
Fund................... 0.73% -- 0.10% -- 0.83% -- 0.83%
VANECK VIP TRUST
VanEck VIP Emerging
Markets Fund........... 1.00% -- 0.18% -- 1.18% -- 1.18%
The information shown in the table above was provided by the Funds. Certain
Funds and their investment adviser have entered into expense reimbursement
and/or fee waiver arrangements that will continue from May 1, 2017 through
April 30, 2018. These arrangements can be terminated with respect to these
Funds only with the approval of the Fund's board of directors or trustees.
Please see the Funds' prospectuses for additional information regarding these
arrangements.
CERTAIN PAYMENTS WE RECEIVE WITH REGARD TO THE FUNDS
An investment adviser (other than Brighthouse Investment Advisers, LLC) or
subadviser of a Fund, or its affiliates, may make payments to us and/or certain
of our affiliates. Prior to March 6, 2017, Brighthouse Investment Advisers, LLC
was known as MetLife Advisers, LLC and as of the date of this prospectus, our
affiliate. These payments may be used for a variety of purposes, including
payment of expenses for certain administrative, marketing, and support services
with respect to the Policies and, in our role as an intermediary, with respect
to the Funds. We and our affiliates may profit from these payments.
A-9
These payments may be derived, in whole or in part, from the advisory fee
deducted from Fund assets. Policy Owners, through their indirect investment in
the Funds, bear the costs of these advisory fees (see the prospectuses for the
Funds for more information). The amount of the payments we receive is based on
a percentage of assets of the Funds attributable to the Policies and certain
other variable insurance products that we and our affiliates issue. These
percentages differ and some advisers or subadvisers (or their affiliates) may
pay us more than others. These percentages currently range up to 0.50%.
Additionally, an investment adviser (other than Brighthouse Investment
Advisers, LLC) or subadviser of a Fund or its affiliates may provide us with
wholesaling services that assist in the distribution of the Policies and may
pay us and/or certain of our affiliates amounts to participate in sales
meetings. These amounts may be significant and may provide the adviser or
subadviser (or its affiliate) with increased access to persons involved in the
distribution of the Policies.
As of the date of this prospectus supplement, we and/or certain of our
affiliated insurance companies have joint ownership interests in our affiliated
investment adviser, Brighthouse Investment Advisers, LLC, which is formed as a
"limited liability company." Our ownership interests in Brighthouse Investment
Advisers, LLC entitle us to profit distributions if the adviser makes a profit
with respect to the advisory fees it receives from the Funds. We will benefit
accordingly from assets allocated to the Funds to the extent they result in
profits to the adviser. (See "Fee Tables -- Fund Fees and Expenses" for
information on the management fees paid by the Funds and the Statements of
Additional Information for the Funds for information on the management fees
paid by the adviser to the subadvisers.) In 2016, MetLife, Inc. announced plans
to pursue the separation, through one or more transactions, of a substantial
portion of its U.S. retail business, including Brighthouse Investment Advisers,
LLC, then known as MetLife Advisers, LLC. The new separate retail business will
be organized under a holding company named Brighthouse Financial, Inc.
("Brighthouse"). Following these transactions, Brighthouse Investment Advisers,
LLC will be a wholly-owned subsidiary of Brighthouse and will no longer be
affiliated with MetLife, Inc., and it is expected that MetLife, Inc. and/or
certain of its affiliates will receive payments from Brighthouse Investment
Advisers and/or its affiliates of the type described in the second preceding
paragraph. Additionally, it is expected that MetLife, Inc. and/or certain of
its affiliates will receive payments from Brighthouse Investment Advisers
and/or its affiliates in an amount approximately equal to the profit
distributions they would have received had these transactions not occurred.
POLICY RIGHTS
TRANSFERS
We have modified the fourth paragraph in the RESTRICTIONS ON TRANSFERS
subsection in TRANSFERS to read as follows:
Our policies and procedures may result in transfer restrictions being
applied to deter frequent transfers. Currently, when we detect transfer
activity in the Monitored Funds that exceeds our current transfer limits, we
require future transfer requests to or from any Monitored Funds under that
Policy to be submitted in writing with an original signature. A first
occurrence will result in a warning letter; the second occurrence will result
in imposition of this restriction for a six-month period; a third occurrence
will result in the permanent imposition of the restriction.
We have also modified the Restrictions on LARGE TRANSFERS subsection in
TRANSFERS to read as follows:
RESTRICTIONS ON LARGE TRANSFERS. Large transfers may increase brokerage and
administrative costs of the underlying Funds and may disrupt fund management
strategy, requiring a Fund to maintain a high cash position and possibly
resulting in lost investment opportunities and forced liquidations. We do not
monitor for large transfers to or from Funds except where the fund manager of a
particular underlying Fund has brought large transfer activity to our attention
for investigation on a case-by-case basis. For example, some fund managers have
asked us to monitor for "block transfers" where transfer requests have been
submitted on behalf of multiple Owners by a third party such as an investment
adviser. When we detect such large trades, we may impose restrictions similar
to those described above where future transfer requests from that third party
must be submitted in writing with an original signature. A first occurrence
will result in a warning letter; a second occurrence will result in the
imposition of this restriction for a six-month period; a third occurrence will
result in the permanent imposition of the restriction.
SEPARATE ACCOUNT CHARGES
We will waive the following amount of the Mortality and Expense Risk Charge:
the amount, if any, equal to the underlying fund expenses that are in excess of
0.68% for the Division investing in the Jennison Growth Portfolio, and that are
in excess of 0.88% for the Division investing in the MFS(R) Research
International Portfolio.
A-10
FEDERAL TAX MATTERS
INTRODUCTION
The following summary provides a general description of the Federal income
tax considerations associated with the Policy and does not purport to be
complete or to cover all tax situations. The summary does not address state,
local or foreign tax issues related to the Policy. This discussion is not
intended as tax advice. Counsel or other competent tax advisers should be
consulted for more complete information. This discussion is based upon General
American's understanding of the present Federal income tax laws. No
representation is made as to the likelihood of continuation of the present
Federal income tax laws or as to how they may be interpreted by the Internal
Revenue Service. It should be further understood that the following discussion
is not exhaustive and that special rules not described herein may be applicable
in certain situations.
TAX STATUS OF THE POLICY
In order to qualify as a life insurance contract for Federal income tax
purposes and to receive the tax treatment normally accorded life insurance
contracts under Federal tax law, a Policy must satisfy certain requirements
which are set forth in the Internal Revenue Code. Guidance as to how these
requirements are to be applied is limited. Nevertheless, we anticipate that the
Policy should be deemed to be a life insurance contract under Federal tax law.
However, if your Policy is issued on a substandard or guaranteed issue basis,
there is additional uncertainty. We may take appropriate steps to bring the
Policy into compliance with applicable requirements, and we reserve the right
to restrict Policy transactions in order to do so. The insurance proceeds
payable on the death of the insured will never be less than the minimum amount
required for the Policy to be treated as life insurance under section 7702 of
the Internal Revenue Code, as in effect on the date the Policy was issued.
In some circumstances, owners of variable contracts who retain excessive
control over the investment of the underlying separate account assets may be
treated as the owners of those assets. Although published guidance in this area
does not address certain aspects of the Policies, we believe that the Owner of
a Policy should not be treated as the owner of the Separate Account assets. We
reserve the right to modify the Policies to bring them into conformity with
applicable standards should such modification be necessary to prevent Owners of
the Policies from being treated as the owners of the underlying Separate
Account assets.
In addition, the Code requires that the investments of the Separate Account
be "adequately diversified" in order for the Policies to be treated as life
insurance contracts for Federal income tax purposes. It is intended that the
Separate Account, through the Funds, will satisfy these diversification
requirements. If Fund shares are sold directly to either non-qualified plans or
to tax-qualified retirement plans that later lose their tax qualified status,
there may be adverse consequences under the diversification rules.
The following discussion assumes that the Policy will qualify as a life
insurance contract for Federal income tax purposes.
TAX TREATMENT OF POLICY BENEFITS. The death benefit under the Policy should
generally be excludable from the gross income of the Beneficiary to the extent
provided in Section 101 of the Code. In the case of employer-owned life
insurance as defined in Section 101(j), the amount of the death benefit
excludable from gross income is limited to premiums paid unless the Policy
falls within certain specified exceptions and a notice and consent requirement
is satisfied before the Policy is issued. Certain specified exceptions are
based on the status of an employee as highly compensated, a director or
recently employed. There are also exceptions for Policy proceeds paid to an
employee's heirs. These exceptions only apply if proper notice is given to the
insured employee and consent is received from the insured employee before the
issuance of the Policy. These rules apply to Policies issued August 18, 2006
and later and also apply to policies issued before August 18, 2006 after a
material increase in the death benefit or other material change. An IRS
reporting requirement applies to employer-owned life insurance subject to these
rules. Because these rules are complex and will affect the tax treatment of
death benefits, it is advisable to consult tax counsel. The death benefit will
also be taxable in the case of a transfer-for-value unless certain exceptions
apply.
Many changes or transactions involving a Policy may have tax consequences,
depending on the circumstances. Such changes include, but are not limited to,
the exchange of the Policy, a change of the Policy's Face Amount, a Policy
Loan, an additional premium payment, a Policy lapse with an outstanding Policy
Loan, a partial withdrawal, or a surrender of the Policy. The transfer of the
Policy or designation of a Beneficiary may have Federal, state, and/or local
transfer and inheritance
A-11
tax consequences, including the imposition of gift, estate, and
generation-skipping transfer taxes. For example, the transfer of the Policy to,
or the designation as a Beneficiary of, or the payment of proceeds to, a person
who is assigned to a generation which is two or more generations below the
generation assignment of the Owner may have generation skipping transfer tax
consequences under Federal tax law. The individual situation of each Owner or
Beneficiary will determine the extent, if any, to which Federal, state, and
local transfer and inheritance taxes may be imposed and how ownership or
receipt of Policy proceeds will be treated for purposes of Federal, state and
local estate, inheritance, generation skipping and other taxes.
A Policy may also be used in various arrangements, including non-qualified
deferred compensation or salary continuation plans, split dollar insurance
plans, executive bonus plans, retiree medical benefit plans and others. The tax
consequences of such plans may vary depending on the particular facts and
circumstances of each individual arrangement. If you are contemplating a change
to an existing Policy or using a Policy in any arrangement the value of which
depends in part on its tax consequences, you should be sure to consult a
qualified tax adviser regarding the tax attributes of the particular
arrangement.
Generally, the Owner will not be deemed to be in constructive receipt of the
Policy's Cash Value, including increments thereof, under the Policy until there
is a distribution or a deemed distribution. Under a complete surrender or lapse
of any Policy, if the amount received plus the amount of outstanding
Indebtedness exceeds the total investments in the Policy, the excess will
generally be treated as ordinary income subject to tax. The tax consequences of
other distributions from, and Policy Loans taken from or secured by, a Policy
depend upon whether the Policy is classified as a "modified endowment contract".
Ownership of the Policy by a corporation, trust or other non-natural person
could jeopardize some (or all) of such entity's interest deduction under Code
section 264, even where such entity's indebtedness is in no way connected to
the Policy. In addition, under section 264(f)(5), if a business (other than a
sole proprietorship) is directly or indirectly a beneficiary of the Policy, the
Policy could be treated as held by the business for purposes of the section
264(f) entity-holder rules. Therefore, it would be advisable to consult with a
qualified tax adviser before any non-natural person is made a Policy Owner or
holder of the Policy or before a business (other than a sole proprietorship) is
made a beneficiary of the Policy.
MODIFIED ENDOWMENT CONTRACTS. A Policy may be treated as a modified
endowment contract depending upon the amount of premiums paid in relation to
the death benefit provided under such Policy. The premium limitation rules for
determining whether a Policy is a modified endowment contract are extremely
complex. In general, however, a Policy will be a modified endowment contract if
the accumulated premiums paid at any time during the first seven Policy Years
exceed the sum of the level premiums which would have been paid on or before
such time if the Policy provided for paid-up future benefits after the payment
of seven level annual premiums.
In addition, if a Policy is "materially changed" it may cause such Policy to
be treated as a modified endowment contract. The material change rules for
determining whether a Policy is a modified endowment contract are also
extremely complex. In general, however, the determination of whether a Policy
will be a modified endowment contract after a material change generally depends
upon the relationship among the death benefit at the time of such change, the
Cash Value at the time of the change and the additional premiums paid in the
seven Policy Years starting with the date on which the material change occurs.
Moreover, a life insurance contract received in exchange for a life
insurance contract classified as a modified endowment contract will also be
treated as a modified endowment contract. A reduction in a Policy's benefits
may also cause such Policy to become a modified endowment contract.
Accordingly, a prospective Owner should contact a competent tax adviser
before purchasing a Policy to determine the circumstances under which the
Policy would be a modified endowment contract. In addition, an Owner should
contact a competent tax adviser before paying any additional premiums or making
any other change to, including an exchange of, a Policy to determine whether
such premium or change would cause the Policy (or the new Policy in the case of
an exchange) to be treated as a modified endowment contract.
NOTE: MOST DESTINY POLICIES WERE MODIFIED ENDOWMENT CONTACTS FROM THE DATE OF
ISSUE, THEREFORE, DISTRIBUTIONS FROM MOST DESTINY POLICIES ARE TAXED AS FOLLOWS:
DISTRIBUTIONS FROM POLICIES CLASSIFIED AS MODIFIED ENDOWMENT CONTRACT.
Policies classified as modified endowment contracts will be subject to the
following tax rules: First, all distributions, including distributions upon
surrender,
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from such a Policy are treated as ordinary income subject to tax up to the
amount equal to the excess (if any) of the Cash Value immediately before the
distribution over the investment in the Policy (described below) at such time.
Second, Policy Loans taken from, or secured by, such a Policy, as well as due
but unpaid interest thereon, are treated as distributions from such a Policy
and taxed accordingly. Third, a 10 percent additional income tax is imposed on
the portion of any distribution from, or Policy Loan taken from or secured by,
such a Policy that is included in income, except where the distribution or
Policy Loan (a) is made on or after the Owner attains age 59 1/2, (b) is
attributable to the Owner's becoming disabled, or (c) is part of a series of
substantially equal periodic payments for the life (or life expectancy) of the
Owner or the joint lives (or joint life expectancies) of the Owner and the
Owner's Beneficiary. The foregoing exceptions to the 10 percent additional
income tax will generally not apply to a Policy Owner that is a non-natural
person, such as a corporation.
DISTRIBUTIONS FROM POLICIES NOT CLASSIFIED AS MODIFIED ENDOWMENT CONTRACT.
Distributions from Policies not classified as a modified endowment contract are
generally treated first as a non-taxable recovery of the investment in the
Policy (described below) and then, only after the return of all such investment
in the Policy, as gain taxable as ordinary income. An exception to this general
rule occurs in the case of a decrease in the Policy's death benefit (possibly
including a partial withdrawal) or any other change that reduces benefits under
the Policy in the first 15 years after the Policy is issued and that results in
cash distribution to the Owner in order for the Policy to continue to qualify
as a life insurance contract for Federal income tax purposes. Such a cash
distribution will be subject to different tax rules and may be treated in whole
or in part as taxable income.
Policy Loans from, or secured by, a Policy that is not a modified endowment
contract should generally not be treated as distributions. Instead, such loans
should generally be treated as indebtedness of the Owner. However, because the
tax consequences associated with Policy Loans are not always clear, in
particular, with respect to Policy Loans outstanding after the tenth Policy
year, you should consult a tax adviser prior to taking any Policy Loan.
Upon a complete surrender or lapse of a Policy that is not a modified
endowment contract, if the amount received plus the amount of indebtedness
exceeds the total investment in the Policy, the excess will generally be
treated as ordinary income subject to tax.
Neither distributions (including distributions upon surrender or lapse) nor
Policy Loans from, or secured by, a Policy that is not a modified endowment
contract are subject to the 10 percent additional income tax.
If a Policy which is not a modified endowment contract subsequently becomes
a modified endowment contract, then any distribution made from the Policy
within two years prior to the date of such change in status may become taxable.
POLICY LOANS. Generally, interest paid on any loan under a life insurance
Policy is not deductible. AN OWNER SHOULD CONSULT A COMPETENT TAX ADVISER IF
THE DEDUCTIBILITY OF LOAN INTEREST IS A CONSIDERATION IN THE PURCHASE OF A
POLICY. If a Policy Loan is outstanding when a Policy is canceled or lapses,
the amount of the outstanding Indebtedness will be added to the amount
distributed and will be taxed accordingly.
INVESTMENT IN THE POLICY. Investment in the Policy means (i) the aggregate
amount of any premiums or other consideration paid for a Policy, minus (ii) the
aggregate amount received under the Policy which is excluded from gross income
of the Owner (except that the amount of any Policy Loan from, or secured by, a
Policy that is a modified endowment contract, to the extent such amount is
excluded from gross income, will be disregarded), plus (iii) the amount of any
Policy Loan from, or secured by, a Policy that is a modified endowment contract
to the extent that such amount is included in the gross income of the Owner.
MULTIPLE POLICIES. All modified endowment contracts that are issued by
General American (or its affiliates) to the same Owner during any calendar year
are treated as one modified endowment contract for purposes of determining the
amount includible in gross income under Section 72(e) of the Code.
LIFE INSURANCE PURCHASES BY NONRESIDENT ALIENS AND FOREIGN CORPORATIONS.
Policy Owners that are not U.S. citizens or residents will generally be subject
to U.S. Federal withholding tax on taxable distributions from life insurance
policies at a 30% rate, unless a lower treaty rate applies. In addition, Policy
Owners may be subject to state and/or municipal taxes and taxes that may be
imposed by the Policy Owner's country of citizenship or residence.
WITHHOLDING. To the extent that Policy distributions are taxable, they are
generally subject to withholding for the recipient's Federal income tax
liability. Recipients can generally elect, however, not to have tax withheld
from distributions.
ESTATE, GIFT AND GENERATION-SKIPPING TRANSFER TAXES. The transfer of the
Policy or the designation of a beneficiary may have Federal, state, and/or
local transfer and inheritance tax consequences, including the imposition of
gift, estate, and
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generation-skipping transfer taxes. When the insured dies, the death proceeds
will generally be includable in the Policy Owner's estate for purposes of the
Federal estate tax if the Policy Owner was the insured, retained incidents of
ownership at death, or made a gift transfer of the Policy within 3 years of
death. If the Policy Owner was not the insured, the fair market value of the
Policy would be included in the Policy Owner's estate upon the Policy Owner's
death.
Moreover, under certain circumstances, the Internal Revenue Code may impose
a "generation-skipping transfer tax" when all or part of a life insurance
policy is transferred to, or a death benefit is paid to, an individual two or
more generations younger than the Policy Owner. Regulations issued under the
Internal Revenue Code may require us to deduct the tax from your Policy, or
from any applicable payment, and pay it directly to the IRS.
Qualified tax advisers should be consulted concerning the estate and gift
tax consequences of Policy ownership and distributions under Federal, state and
local law. The individual situation of each Policy Owner or beneficiary will
determine the extent, if any, to which Federal, state, and local transfer and
inheritance taxes may be imposed and how ownership or receipt of Policy
proceeds will be treated for purposes of Federal, state and local estate,
inheritance, generation-skipping and other taxes.
In general, current rules provide for a $5 million estate, gift and
generation-skipping transfer tax exemption (as indexed for inflation) and a top
tax rate of 40 percent.
The complexity of the tax law, along with uncertainty as to how it might be
modified in coming years, underscores the importance of seeking guidance from a
qualified adviser to help ensure that your estate plan adequately addresses
your needs and those of your beneficiaries under all possible scenarios.
CONTINUATION OF POLICY BEYOND ATTAINED AGE 100. The tax consequences of
continuing the Policy beyond the Insured's Attained Age 100 birthday are
unclear. You should consult a tax adviser if you intend to keep the Policy in
force beyond the Insured's Attained Age 100.
GUIDANCE ON SPLIT DOLLAR PLANS. The IRS has issued guidance on split dollar
insurance plans. A tax adviser should be consulted with respect to this
guidance if your Policy is, or may become, subject to a split dollar insurance
plan. If your Policy is part of an equity split dollar arrangement taxed under
the economic benefit regime, there is a risk that some portion of the Policy
cash value may be taxed prior to any Policy distribution.
In addition, the Sarbanes-Oxley Act of 2002 (the "Act"), which was signed
into law on July 30, 2002, prohibits, with limited exceptions, publicly-traded
companies, including non-U.S. companies that have securities listed on U.S.
exchanges, from extending, directly or indirectly or through a subsidiary, many
types of personal loans to their directors or executive officers. It is
possible that this prohibition may be interpreted to apply to split-dollar life
insurance arrangements for directors and executive officers of such companies,
since such arrangements can arguably be viewed as involving a loan from the
employer for at least some purposes.
Any affected business contemplating the payment of a premium on an existing
Policy or the purchase of new Policy in connection with a split-dollar life
insurance arrangement should consult legal counsel.
Split dollar insurance plans that provide deferred compensation may be
subject to specific tax rules governing deferred compensation arrangements.
Failure to adhere to these rules will result in adverse tax consequences.
CORPORATE ALTERNATIVE MINIMUM TAX. There may also be an indirect tax upon
the income in the Policy or the proceeds of a Policy under the Federal
corporate alternative minimum tax, if the Policy Owner is subject to that tax.
PUERTO RICO. We believe that Policies subject to Puerto Rican tax law will
generally receive treatment similar, with certain modifications, to that
described above. Among other differences, Policies governed by Puerto Rican tax
law are not currently subject to the rules described above regarding Modified
Endowment Contracts. You should consult your tax adviser with respect to Puerto
Rican tax law governing the Policies.
POSSIBLE TAX LAW CHANGES. Although the likelihood of legislative changes is
uncertain, there is always the possibility that the tax treatment of the Policy
could change by legislation or otherwise. Consult a tax adviser with respect to
legislative developments and their effect on the Policy.
FOREIGN TAX CREDITS. To the extent permitted under Federal tax law, we may
claim the benefit of certain foreign tax credits attributable to taxes paid by
certain Eligible Funds to foreign jurisdictions.
POSSIBLE CHARGE FOR TAXES. At the present time, General American makes no
charge to the Separate Account for any Federal, state, or local taxes (as
opposed to Premium Tax Charges which are deducted from premium payments) that
it incurs
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which may be attributable to such Separate Account or to the Policies. General
American, however, reserves the right in the future to make a charge for any
such tax or other economic burden resulting from the application of the tax
laws that it determines to be properly attributable to the Separate Account or
to the Policies.
DISTRIBUTION OF THE POLICIES
The principal executive offices of MetLife Investors Distribution Company,
the principal underwriter and distributor of the Policies, are located at 200
Park Avenue, New York, New York 10166.
RESTRICTIONS ON FINANCIAL TRANSACTIONS
Applicable laws designed to counter terrorism and prevent money laundering
might, in certain circumstances, require us to reject a premium payment and/or
block or "freeze" your Policy. If these laws apply in a particular situation,
we would not be allowed to process any request for withdrawals, surrenders,
loans or death benefits, make transfers or continue making payments under your
death benefit option until instructions are received from the appropriate
regulator. We also may be required to provide additional information about you
or your Policy to government regulators.
LEGAL PROCEEDINGS
In the ordinary course of business, General American, similar to other life
insurance companies, is involved in lawsuits (including class action lawsuits),
arbitrations and other legal proceedings. Also, from time to time, state and
federal regulators or other officials conduct formal and informal examinations
or undertake other actions dealing with various aspects of the financial
services and insurance industries. In some legal proceedings involving
insurers, substantial damages have been sought and/or material settlement
payments have been made. It is not possible to predict with certainty the
ultimate outcome of any pending legal proceeding or regulatory action. However,
General American does not believe any such action or proceeding will have a
material adverse effect upon the Separate Account or upon the ability of
MetLife Investors Distribution Company to perform its contract with the
Separate Account or of General American to meet its obligations under the
Contracts.
FINANCIAL STATEMENTS
The financial statements of General American which are included in this
prospectus supplement should be distinguished from the financial statements of
the Separate Account, which are also included in this prospectus supplement,
and should be considered only as bearing on the ability of General American to
meet its obligations under the Policy. They should not be considered as bearing
on the investment performance of the assets held in the Separate Account.
A-15
FLEXIBLE PREMIUM VL SUPPLEMENT
GENERAL AMERICAN LIFE INSURANCE COMPANY
Variable Life Insurance Policy
(Destiny)
Supplement dated May 1, 2016
to the Prospectus dated May 1, 2004
Flexible Premium
Variable Life Insurance Policies
(Variable Universal Life/Executive Benefit)
Supplement dated May 1, 2016
to the Prospectuses dated May 1, 2002
Flexible Premium Joint and Last Survivor
Variable Life Insurance Policy
Supplement dated May 1, 2016
to the Prospectus dated May 1, 2002
Flexible Premium Variable Life Insurance Policies
(VUL 95/VUL 100/VGSP/Russell VUL)
Supplement dated May 1, 2016
to the Prospectuses dated May 1, 2000
This supplement updates certain information contained in the last full
prospectus for each of the above-referenced variable life insurance Policies,
as annually and periodically supplemented. You should read and retain this
supplement. We will send you an additional copy of the last full prospectus for
your Policy, without charge, on request. These Policies are no longer available
for sale.
General American Life Insurance Company is a wholly-owned subsidiary of
Metropolitan Life Insurance Company ("MetLife"). MetLife is a wholly-owned
subsidiary of MetLife, Inc., a publicly-traded company. General American's Home
Office is 13045 Tesson Ferry Road, St. Louis, Missouri 63128.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE POLICIES OR DETERMINED IF THIS
SUPPLEMENT IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE SECURITIES AND EXCHANGE COMMISSION MAINTAINS A WEB SITE THAT CONTAINS
MATERIAL INCORPORATED BY REFERENCE AND OTHER INFORMATION REGARDING REGISTRANTS
THAT FILE ELECTRONICALLY WITH THE SECURITIES AND EXCHANGE COMMISSION. THE
ADDRESS OF THE SITE IS HTTP://WWW.SEC.GOV.
THE UNDERLYING FUND PROSPECTUSES MAY BE OBTAINED BY CALLING
1-800-638-9294.
WE DO NOT GUARANTEE HOW ANY OF THE DIVISIONS OR FUNDS WILL PERFORM. THE
POLICIES AND THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY FINANCIAL INSTITUTION AND ARE NOT FEDERALLY INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER
GOVERNMENT AGENCY.
The Financial Industry Regulatory Authority ("FINRA") provides background
information about broker-dealers and their registered representatives through
FINRA BrokerCheck. You may contact the FINRA BrokerCheck Hotline at
1-800-289-9999, or log on to www.finra.org. An investor brochure that includes
information describing FINRA BrokerCheck is available through the Hotline or
on-line.
THE COMPANY
General American is principally engaged in writing individual life
insurance policies and annuity contracts. It is admitted to do business in 49
states, the District of Columbia, Puerto Rico, and in four Canadian provinces.
The principal offices (Home Office) of General American are located at 13045
Tesson Ferry Road, St. Louis, Missouri 63128.
On January 12, 2016, MetLife, Inc. announced its plan to pursue the
separation of a substantial portion of its retail segment and is currently
evaluating structural alternatives for such a separation. Any separation
transaction that might occur will be subject to the satisfaction of various
conditions and approvals, including approval of any transaction by the MetLife,
Inc. Board of Directors, satisfaction of any applicable requirements of the
SEC, and receipt of insurance and other regulatory approvals and other
anticipated conditions. Because the form of a separation has not yet been set,
MetLife, Inc. cannot currently provide a specific potential completion date or
information about the potential impact on the financial strength of any company
that issues variable insurance products. No assurance can be given regarding
the form that a separation transaction may take or the specific terms thereof,
or that a separation will in fact occur. However, any separation transaction
will not affect the terms or conditions of your Policy, and General American
Life Insurance Company will remain fully responsible for its respective
contractual obligations to Policy owners.
The Administrative Office for various Policy transactions is as follows:
Premium Payments General American
P.O. Box 790201
St. Louis, MO 63179-0201
Payment Inquires and General American
Correspondence P.O. Box 355
Warwick, RI 02887-0355
Beneficiary and Ownership General American
Changes P.O. Box 357
Warwick, RI 02887-0356
Surrenders, Loans, General American
Withdrawals and P.O. Box 356
Division Transfers Warwick, RI 02887-0356
Death Claims General American
P.O. Box 356
Warwick, RI 02887-0356
All Telephone (800) 638-9294
Transactions and Inquiries
You may request a transfer or reallocation of future premiums by written
request (which may be telecopied) to our Administrative Office, by telephoning
us, or over the Internet . To request a transfer or reallocation by telephone,
you should contact your registered representative, or contact us at (800)
638-9294. To request a transfer or reallocation over the Internet, you may log
on to our website at www.genamerica.com. We use reasonable procedures to
confirm that instructions communicated by telephone, facsimile or Internet are
genuine. Any telephone, facsimile or Internet instructions that we reasonably
believe to be genuine will be your responsibility, including losses arising
from any errors in the communication of instructions. However, because
telephone and Internet transactions may be available to anyone who provides
certain information about you and your Policy, you should protect that
information. We may not be able to verify that you are the person providing
telephone or Internet instructions, or that you have authorized any such person
to act for you.
Telephone, facsimile, and computer systems (including the Internet) may
not always be available. Any telephone, facsimile, or computer system, whether
it is yours, your service provider's, your registered representative's, or
ours, can experience outages or slowdowns for a variety of reasons. These
outages or slowdowns may delay or prevent our processing of your request.
Although we have taken precautions to help our systems handle heavy use, we
cannot promise complete reliability under all circumstances. If you are
experiencing problems, you should make your request by writing to our
Administrative Office.
A-2
If you send premium payments or transaction requests to an address other
than the one we have designated for receipt of such payments or requests, we
may return the premium payment to you, or there may be a delay in applying the
payment or transaction to your Policy.
THE SEPARATE ACCOUNT
The separate account consists of divisions, each of which corresponds to
an underlying Fund. Each division may either make money or lose money.
Therefore if you invest in a division of the separate account, you may either
make money or lose money, depending on the investment experience of that
division. There is no guaranteed rate of return in the separate account.
The following chart shows the Funds that are available under the Policy
along with the name of the investment adviser, sub-adviser (where applicable)
and investment objective of each Fund. The Funds have different investment
goals and strategies. You should review the prospectus of each Fund, or seek
professional guidance in determining which Fund(s) best meet your objectives.
NOTE: The Russell Investment Funds are not available to Destiny or Executive
Benefit Policies. For all other Policies, the Russell Investment Funds are only
available for Policies with an issue date prior to January 1, 2000.
FUND INVESTMENT OBJECTIVE INVESTMENT ADVISER/SUBADVISER
-------------------------------------- ------------------------------------------ ------------------------------------
AMERICAN FUNDS INSURANCE SERIES(R)
-- CLASS 2
American Funds Global Small Seeks long-term growth of capital. Capital Research and Management
Capitalization Fund Company
American Funds Growth Fund Seeks growth of capital. Capital Research and Management
Company
American Funds Growth-Income Fund Seeks long-term growth of capital and Capital Research and Management
income. Company
FIDELITY(R) VARIABLE INSURANCE
PRODUCTS -- INITIAL CLASS
Equity-Income Portfolio Seeks reasonable income. The fund Fidelity Management & Research
will also consider the potential for Company
capital appreciation. The fund's goal is Subadviser: FMR Co., Inc.
to achieve a yield which exceeds the
composite yield on the securities
comprising the S&P 500(R) Index.
Mid Cap Portfolio Seeks long-term growth of capital. Fidelity Management & Research
Company
Subadviser: FMR Co., Inc.
JPMORGAN INSURANCE TRUST --
CLASS 1
JPMorgan Insurance Trust Core Bond Seeks to maximize total return by J.P. Morgan Investment Management
Portfolio investing primarily in a diversified Inc.
portfolio of intermediate- and
long-term debt securities.
JPMorgan Insurance Trust Small Cap Seeks capital growth over the long J.P. Morgan Investment Management
Core Portfolio term. Inc.
MET INVESTORS SERIES TRUST --
CLASS A
Clarion Global Real Estate Portfolio Seeks total return through investment MetLife Advisers, LLC
in real estate securities, emphasizing Subadviser: CBRE Clarion Securities
both capital appreciation and current LLC
income.
A-3
FUND INVESTMENT OBJECTIVE INVESTMENT ADVISER/SUBADVISER
----------------------------------------- ------------------------------------------ --------------------------------------
ClearBridge Aggressive Growth Seeks capital appreciation. MetLife Advisers, LLC
Portfolio Subadviser: ClearBridge Investments,
LLC
Harris Oakmark International Portfolio Seeks long-term capital appreciation. MetLife Advisers, LLC
Subadviser: Harris Associates L.P.
Invesco Mid Cap Value Portfolio Seeks high total return by investing in MetLife Advisers, LLC
equity securities of mid-sized Subadviser: Invesco Advisers, Inc.
companies.
Invesco Small Cap Growth Portfolio Seeks long-term growth of capital. MetLife Advisers, LLC
Subadviser: Invesco Advisers, Inc.
MFS(R) Research International Portfolio Seeks capital appreciation. MetLife Advisers, LLC
Subadviser: Massachusetts Financial
Services Company
Morgan Stanley Mid Cap Growth Seeks capital appreciation. MetLife Advisers, LLC
Portfolio Subadviser: Morgan Stanley
Investment Management Inc.
PIMCO Total Return Portfolio Seeks maximum total return, MetLife Advisers, LLC
consistent with the preservation of Subadviser: Pacific Investment
capital and prudent investment Management Company LLC
management.
T. Rowe Price Large Cap Value Portfolio Seeks long-term capital appreciation MetLife Advisers, LLC
by investing in common stocks Subadviser: T. Rowe Price Associates,
believed to be undervalued. Income is Inc.
a secondary objective.
T. Rowe Price Mid Cap Growth Portfolio Seeks long-term growth of capital. MetLife Advisers, LLC
Subadviser: T. Rowe Price Associates,
Inc.
METROPOLITAN SERIES FUND -- CLASS A
Baillie Gifford International Stock Seeks long-term growth of capital. MetLife Advisers, LLC
Portfolio Subadviser: Baillie Gifford Overseas
Limited
Barclays Aggregate Bond Index Seeks to track the performance of the MetLife Advisers, LLC
Portfolio Barclays U.S. Aggregate Bond Index. Subadviser: MetLife Investment
Advisors, LLC
BlackRock Bond Income Portfolio Seeks a competitive total return MetLife Advisers, LLC
primarily from investing in Subadviser: BlackRock Advisors, LLC
fixed-income securities.
BlackRock Capital Appreciation Seeks long-term growth of capital. MetLife Advisers, LLC
Portfolio Subadviser: BlackRock Advisors, LLC
BlackRock Large Cap Value Portfolio Seeks long-term growth of capital. MetLife Advisers, LLC
Subadviser: BlackRock Advisors, LLC
BlackRock Ultra-Short Term Bond Seeks a high level of current income MetLife Advisers, LLC
Portfolio (formerly BlackRock Money consistent with preservation of capital. Subadviser: BlackRock Advisors, LLC
Market Portfolio)
Frontier Mid Cap Growth Portfolio Seeks maximum capital appreciation. MetLife Advisers, LLC
Subadviser: Frontier Capital
Management Company, LLC
A-4
FUND INVESTMENT OBJECTIVE INVESTMENT ADVISER/SUBADVISER
--------------------------------------- ------------------------------------------ --------------------------------------
Jennison Growth Portfolio Seeks long-term growth of capital. MetLife Advisers, LLC
Subadviser: Jennison Associates LLC
Met/Artisan Mid Cap Value Portfolio Seeks long-term capital growth. MetLife Advisers, LLC
Subadviser: Artisan Partners Limited
Partnership
Met/Wellington Balanced Portfolio Seeks long-term capital appreciation MetLife Advisers, LLC
(formerly WMC Balanced Portfolio) with some current income. Subadviser: Wellington Management
Company LLP
Met/Wellington Core Equity Seeks to provide a growing stream of MetLife Advisers, LLC
Opportunities Portfolio (formerly income over time and, secondarily, Subadviser: Wellington Management
WMC Core Equity Opportunities long-term capital appreciation and Company LLP
Portfolio) current income.
MetLife Mid Cap Stock Index Portfolio Seeks to track the performance of the MetLife Advisers, LLC
Standard & Poor's MidCap 400(R) Subadviser: MetLife Investment
Composite Stock Price Index. Advisors, LLC
MetLife Stock Index Portfolio Seeks to track the performance of the MetLife Advisers, LLC
Standard & Poor's 500(R) Composite Subadviser: MetLife Investment
Stock Price Index. Advisors, LLC
MFS(R) Total Return Portfolio Seeks a favorable total return through MetLife Advisers, LLC
investment in a diversified portfolio. Subadviser: Massachusetts Financial
Services Company
MFS(R) Value Portfolio Seeks capital appreciation. MetLife Advisers, LLC
Subadviser: Massachusetts Financial
Services Company
MSCI EAFE(R) Index Portfolio Seeks to track the performance of the MetLife Advisers, LLC
MSCI EAFE(R) Index. Subadviser: MetLife Investment
Advisors, LLC
Neuberger Berman Genesis Portfolio Seeks high total return, consisting MetLife Advisers, LLC
principally of capital appreciation. Subadviser: Neuberger Berman
Investment Advisers LLC
Russell 2000(R) Index Portfolio Seeks to track the performance of the MetLife Advisers, LLC
Russell 2000(R) Index. Subadviser: MetLife Investment
Advisors, LLC
T. Rowe Price Large Cap Growth Seeks long-term growth of capital. MetLife Advisers, LLC
Portfolio Subadviser: T. Rowe Price Associates,
Inc.
T. Rowe Price Small Cap Growth Seeks long-term capital growth. MetLife Advisers, LLC
Portfolio Subadviser: T. Rowe Price Associates,
Inc.
Van Eck Global Natural Resources Seeks long-term capital appreciation MetLife Advisers, LLC
Portfolio with income as a secondary Subadviser: Van Eck Associates
consideration. Corporation
Western Asset Management Strategic Seeks to maximize total return MetLife Advisers, LLC
Bond Opportunities Portfolio consistent with preservation of capital. Subadviser: Western Asset
Management Company
Western Asset Management Seeks to maximize total return MetLife Advisers, LLC
U.S. Government Portfolio consistent with preservation of capital Subadviser: Western Asset
and maintenance of liquidity. Management Company
A-5
FUND INVESTMENT OBJECTIVE INVESTMENT ADVISER/SUBADVISER
----------------------------------- -------------------------------------- ----------------------------------------
RUSSELL INVESTMENT FUNDS
Aggressive Equity Fund Seeks to provide long term capital Russell Investment Management
growth. Company
Subadvisers: DePrince, Race & Zollo,
Inc.;
Monarch Partners Asset Management
LLC;
RBC Global Asset Management (U.S.)
Inc.;
Snow Capital Management L.P.;
Timpani Capital Management LLC
Core Bond Fund Seeks to provide current income, and Russell Investment Management
as a secondary objective, capital Company
appreciation. Subadvisers: Colchester Global
Investors Limited;
Logan Circle Partners, L.P.;
Macro Currency Group - an investment
group within Principle Global Investors
LLC;
Metropolitan West Asset Management,
LLC;
Scout Investments, Inc.
Multi-Style Equity Fund Seeks to provide long term capital Russell Investment Management
growth. Company
Subadvisers: Barrow, Hanley,
Mewhinney & Strauss, LLC;
Columbus Circle Investors;
Jacobs Levy Equity Management, Inc.;
Mar Vista Investment Partners, LLC;
Suffolk Capital Management, LLC;
Sustainable Growth Advisers, LP
Non-U.S. Fund Seeks to provide long term capital Russell Investment Management
growth. Company
Subadvisers: Barrow, Hanley,
Mewhinney & Strauss, LLC;
MFS Institutional Advisors, Inc.;
Pzena Investment Management, LLC;
William Blair & Company, LLC
VANECK VIP TRUST -- INITIAL CLASS
VanEck VIP Emerging Markets Fund Seeks long-term capital appreciation Van Eck Associates Corporation
by investing primarily in equity
securities in emerging markets around
the world.
----------
FOR MORE INFORMATION REGARDING THE FUNDS AND THEIR INVESTMENT ADVISERS AND
SUB-ADVISERS, SEE THE FUND PROSPECTUSES AND THEIR STATEMENTS OF ADDITIONAL
INFORMATION, WHICH YOU CAN OBTAIN BY CALLING 1-800-638-9294.
OTHER FUNDS AND SHARE CLASSES
Some of the Funds offer various classes of shares, each of which has a
different level of expenses. The prospectuses for the Funds may provide
information for share classes that are not available through the Policy. When
you consult the
A-6
prospectus for any Fund, you should be careful to refer to only the information
regarding the class of shares that is available through the Policy. For the
JPMorgan Insurance Trust, we offer Class 1 shares; for Fidelity Variable
Insurance Products and the VanEck VIP Trust, we offer Initial Class shares; for
the Metropolitan Series Fund, we offer Class A shares; for the Met Investors
Series Trust, we offer Class A shares; and for the American Funds Insurance
Series(R), we offer Class 2 shares.
CHARGES AND DEDUCTIONS
Charges will be deducted in connection with the Policy to compensate the
Company for providing the insurance benefits set forth in the Policy and any
additional benefits added by rider, administering the Policies, incurring
expenses in distributing the Policies, and assuming certain risks in connection
with the Policy. We may profit from one or more of the charges deducted under
the Policy, including the cost of insurance charge. We may use these profits
for any corporate purpose.
A-7
FEE TABLES
The tables below describe the Fund fees and expenses that a Policy Owner
may pay periodically during the time that he or she owns the Policy. One table
shows the minimum and maximum total operating expenses charged by the Funds for
the fiscal year ended December 31, 2015. The other table describes the annual
operating expenses of each Fund for the year ended December 31, 2015, before
and after any applicable fee waivers and expense reimbursements. Expenses of
the Funds may be higher or lower in the future. Certain Funds may impose a
redemption fee in the future. More detail concerning each Fund's fees and
expenses is contained in the table that follows and in the prospectus for each
Fund.
MINIMUM AND MAXIMUM TOTAL ANNUAL FUND OPERATING EXPENSES
MINIMUM MAXIMUM
--------- --------
Total Annual Fund Operating Expenses
(expenses that are deducted from Fund assets, including management fees, distribution
and/or
service (12b-1) fees, and other expenses)............................................. 0.27% 1.14%
FUND FEES AND EXPENSES
(AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS)
The following table is a summary. For more complete information on Fund
fees and expenses, please refer to the prospectus for each Fund.
DISTRIBUTION
AND/OR
MANAGEMENT SERVICE OTHER
FUND FEE (12B-1) FEES EXPENSES
-------------------------------------------------- ------------ -------------- ----------
AMERICAN FUNDS INSURANCE SERIES(R)
American Funds Global Small
Capitalization Fund.............................. 0.69% 0.25% 0.04%
American Funds Growth Fund........................ 0.33% 0.25% 0.02%
American Funds Growth-Income Fund................. 0.27% 0.25% 0.02%
FIDELITY(R) VARIABLE INSURANCE PRODUCTS
Equity-Income Portfolio........................... 0.45% -- 0.09%
Mid Cap Portfolio................................. 0.55% -- 0.08%
JPMORGAN INSURANCE TRUST
JPMorgan Insurance Trust Core Bond
Portfolio........................................ 0.40% -- 0.21%
JPMorgan Insurance Trust Small Cap Core
Portfolio........................................ 0.65% -- 0.22%
MET INVESTORS SERIES TRUST
Clarion Global Real Estate Portfolio.............. 0.60% -- 0.04%
ClearBridge Aggressive Growth Portfolio........... 0.55% -- 0.02%
Harris Oakmark International Portfolio............ 0.77% -- 0.06%
Invesco Mid Cap Value Portfolio................... 0.64% -- 0.04%
Invesco Small Cap Growth Portfolio................ 0.85% -- 0.02%
MFS(R) Research International Portfolio........... 0.69% -- 0.07%
Morgan Stanley Mid Cap Growth Portfolio........... 0.65% -- 0.03%
PIMCO Total Return Portfolio...................... 0.48% -- 0.04%
T. Rowe Price Large Cap Value Portfolio........... 0.57% -- 0.02%
T. Rowe Price Mid Cap Growth Portfolio............ 0.75% -- 0.03%
METROPOLITAN SERIES FUND
Baillie Gifford International Stock Portfolio..... 0.79% -- 0.07%
ACQUIRED TOTAL FEE WAIVER NET TOTAL
FUND FEES ANNUAL AND/OR ANNUAL
AND OPERATING EXPENSE OPERATING
FUND EXPENSES EXPENSES REIMBURSEMENT EXPENSES
-------------------------------------------------- ----------- ----------- --------------- ----------
AMERICAN FUNDS INSURANCE SERIES(R)
American Funds Global Small
Capitalization Fund.............................. -- 0.98% -- 0.98%
American Funds Growth Fund........................ -- 0.60% -- 0.60%
American Funds Growth-Income Fund................. -- 0.54% -- 0.54%
FIDELITY(R) VARIABLE INSURANCE PRODUCTS
Equity-Income Portfolio........................... 0.08% 0.62% -- 0.62%
Mid Cap Portfolio................................. -- 0.63% -- 0.63%
JPMORGAN INSURANCE TRUST
JPMorgan Insurance Trust Core Bond
Portfolio........................................ 0.01% 0.62% 0.02% 0.60%
JPMorgan Insurance Trust Small Cap Core
Portfolio........................................ 0.02% 0.89% -- 0.89%
MET INVESTORS SERIES TRUST
Clarion Global Real Estate Portfolio.............. -- 0.64% -- 0.64%
ClearBridge Aggressive Growth Portfolio........... -- 0.57% 0.00% 0.57%
Harris Oakmark International Portfolio............ -- 0.83% 0.02% 0.81%
Invesco Mid Cap Value Portfolio................... 0.08% 0.76% 0.02% 0.74%
Invesco Small Cap Growth Portfolio................ -- 0.87% 0.02% 0.85%
MFS(R) Research International Portfolio........... -- 0.76% 0.06% 0.70%
Morgan Stanley Mid Cap Growth Portfolio........... -- 0.68% 0.01% 0.67%
PIMCO Total Return Portfolio...................... -- 0.52% 0.04% 0.48%
T. Rowe Price Large Cap Value Portfolio........... -- 0.59% -- 0.59%
T. Rowe Price Mid Cap Growth Portfolio............ -- 0.78% -- 0.78%
METROPOLITAN SERIES FUND
Baillie Gifford International Stock Portfolio..... -- 0.86% 0.12% 0.74%
A-8
DISTRIBUTION
AND/OR
MANAGEMENT SERVICE OTHER
FUND FEE (12B-1) FEES EXPENSES
----------------------------------------------- ------------ -------------- ----------
Barclays Aggregate Bond Index Portfolio........ 0.25% -- 0.03%
BlackRock Bond Income Portfolio................ 0.32% -- 0.04%
BlackRock Capital Appreciation Portfolio....... 0.69% -- 0.02%
BlackRock Large Cap Value Portfolio............ 0.63% -- 0.03%
BlackRock Ultra-Short Term Bond Portfolio...... 0.34% -- 0.03%
Frontier Mid Cap Growth Portfolio.............. 0.71% -- 0.03%
Jennison Growth Portfolio...................... 0.60% -- 0.02%
Met/Artisan Mid Cap Value Portfolio............ 0.81% -- 0.03%
Met/Wellington Balanced Portfolio.............. 0.46% -- 0.08%
Met/Wellington Core Equity Opportunities
Portfolio..................................... 0.70% -- 0.02%
MetLife Mid Cap Stock Index Portfolio.......... 0.25% -- 0.04%
MetLife Stock Index Portfolio.................. 0.25% -- 0.02%
MFS(R) Total Return Portfolio.................. 0.55% -- 0.05%
MFS(R) Value Portfolio......................... 0.70% -- 0.02%
MSCI EAFE(R) Index Portfolio................... 0.30% -- 0.10%
Neuberger Berman Genesis Portfolio............. 0.81% -- 0.03%
Russell 2000(R) Index Portfolio................ 0.25% -- 0.06%
T. Rowe Price Large Cap Growth Portfolio....... 0.60% -- 0.02%
T. Rowe Price Small Cap Growth Portfolio....... 0.47% -- 0.03%
Van Eck Global Natural Resources Portfolio..... 0.78% -- 0.03%
Western Asset Management Strategic
Bond Opportunities Portfolio.................. 0.59% -- 0.04%
Western Asset Management
U.S. Government Portfolio..................... 0.47% -- 0.02%
RUSSELL INVESTMENT FUNDS
Aggressive Equity Fund......................... 0.90% -- 0.16%
Core Bond Fund................................. 0.55% -- 0.12%
Multi-Style Equity Fund........................ 0.73% -- 0.11%
Non-U.S. Fund.................................. 0.90% -- 0.16%
VANECK VIP TRUST
VanEck VIP Emerging Markets Fund............... 1.00% -- 0.14%
ACQUIRED TOTAL FEE WAIVER NET TOTAL
FUND FEES ANNUAL AND/OR ANNUAL
AND OPERATING EXPENSE OPERATING
FUND EXPENSES EXPENSES REIMBURSEMENT EXPENSES
----------------------------------------------- ----------- ----------- --------------- -----------
Barclays Aggregate Bond Index Portfolio........ -- 0.28% 0.01% 0.27%
BlackRock Bond Income Portfolio................ -- 0.36% 0.00% 0.36%
BlackRock Capital Appreciation Portfolio....... -- 0.71% 0.05% 0.66%
BlackRock Large Cap Value Portfolio............ -- 0.66% 0.03% 0.63%
BlackRock Ultra-Short Term Bond Portfolio...... -- 0.37% 0.02% 0.35%
Frontier Mid Cap Growth Portfolio.............. -- 0.74% 0.02% 0.72%
Jennison Growth Portfolio...................... -- 0.62% 0.08% 0.54%
Met/Artisan Mid Cap Value Portfolio............ -- 0.84% -- 0.84%
Met/Wellington Balanced Portfolio.............. -- 0.54% 0.00% 0.54%
Met/Wellington Core Equity Opportunities
Portfolio..................................... -- 0.72% 0.12% 0.60%
MetLife Mid Cap Stock Index Portfolio.......... 0.01% 0.30% 0.00% 0.30%
MetLife Stock Index Portfolio.................. -- 0.27% 0.01% 0.26%
MFS(R) Total Return Portfolio.................. -- 0.60% -- 0.60%
MFS(R) Value Portfolio......................... -- 0.72% 0.14% 0.58%
MSCI EAFE(R) Index Portfolio................... 0.01% 0.41% 0.00% 0.41%
Neuberger Berman Genesis Portfolio............. -- 0.84% 0.01% 0.83%
Russell 2000(R) Index Portfolio................ 0.01% 0.32% 0.00% 0.32%
T. Rowe Price Large Cap Growth Portfolio....... -- 0.62% 0.02% 0.60%
T. Rowe Price Small Cap Growth Portfolio....... -- 0.50% -- 0.50%
Van Eck Global Natural Resources Portfolio..... -- 0.81% 0.01% 0.80%
Western Asset Management Strategic
Bond Opportunities Portfolio.................. -- 0.63% 0.04% 0.59%
Western Asset Management
U.S. Government Portfolio..................... -- 0.49% 0.01% 0.48%
RUSSELL INVESTMENT FUNDS
Aggressive Equity Fund......................... -- 1.06% -- 1.06%
Core Bond Fund................................. 0.01% 0.68% 0.02% 0.66%
Multi-Style Equity Fund........................ -- 0.84% -- 0.84%
Non-U.S. Fund.................................. -- 1.06% -- 1.06%
VANECK VIP TRUST
VanEck VIP Emerging Markets Fund............... -- 1.14% 0.00% 1.14%
The information shown in the table above was provided by the Funds and we
have not independently verified that information. Net Total Annual Operating
Expenses shown in the table reflect any current fee waiver or expense
reimbursement arrangement that will remain in effect for a period of at least
one year from the date of the Fund's 2016 prospectus. "0.00%" in the Fee Waiver
and/or Expense Reimbursement column indicates that there is such an arrangement
in effect for the Fund, but that the expenses of the Fund are below the level
that would trigger the waiver or reimbursement. Fee waiver and expense
reimbursement arrangements with a duration of less than one year, or
arrangements that may be terminated without the consent of the Fund's board of
directors or trustees, are not shown.
A-9
POLICY RIGHTS
SEPARATE ACCOUNT CHARGES
We will waive the following amount of the Mortality and Expense Risk
Charge: the amount, if any, equal to the underlying fund expenses that are in
excess of 0.68% for the Division investing in the Jennison Growth Portfolio,
and that are in excess of 0.88% for the Division investing in the MFS(R)
Research International Portfolio.
FEDERAL TAX MATTERS
INTRODUCTION
The following summary provides a general description of the Federal income
tax considerations associated with the Policy and does not purport to be
complete or to cover all tax situations. The summary does not address state,
local or foreign tax issues related to the Policy. This discussion is not
intended as tax advice. Counsel or other competent tax advisers should be
consulted for more complete information. This discussion is based upon General
American's understanding of the present Federal income tax laws. No
representation is made as to the likelihood of continuation of the present
Federal income tax laws or as to how they may be interpreted by the Internal
Revenue Service. It should be further understood that the following discussion
is not exhaustive and that special rules not described herein may be applicable
in certain situations.
TAX STATUS OF THE POLICY
In order to qualify as a life insurance contract for Federal income tax
purposes and to receive the tax treatment normally accorded life insurance
contracts under Federal tax law, a Policy must satisfy certain requirements
which are set forth in the Internal Revenue Code. Guidance as to how these
requirements are to be applied is limited. Nevertheless, we anticipate that the
Policy should be deemed to be a life insurance contract under Federal tax law.
However, if your Policy is issued on a substandard or guaranteed issue basis,
there is additional uncertainty. We may take appropriate steps to bring the
Policy into compliance with applicable requirements, and we reserve the right
to restrict Policy transactions in order to do so. The insurance proceeds
payable on the death of the insured will never be less than the minimum amount
required for the Policy to be treated as life insurance under section 7702 of
the Internal Revenue Code, as in effect on the date the Policy was issued.
In some circumstances, owners of variable contracts who retain excessive
control over the investment of the underlying separate account assets may be
treated as the owners of those assets. Although published guidance in this area
does not address certain aspects of the Policies, we believe that the Owner of
a Policy should not be treated as the owner of the Separate Account assets. We
reserve the right to modify the Policies to bring them into conformity with
applicable standards should such modification be necessary to prevent Owners of
the Policies from being treated as the owners of the underlying Separate
Account assets.
In addition, the Code requires that the investments of the Separate
Account be "adequately diversified" in order for the Policies to be treated as
life insurance contracts for Federal income tax purposes. It is intended that
the Separate Account, through the Funds, will satisfy these diversification
requirements. If Fund shares are sold directly to either non-qualified plans or
to tax-qualified retirement plans that later lose their tax qualified status,
there may be adverse consequences under the diversification rules.
The following discussion assumes that the Policy will qualify as a life
insurance contract for Federal income tax purposes.
TAX TREATMENT OF POLICY BENEFITS. The death benefit under the Policy
should generally be excludable from the gross income of the Beneficiary to the
extent provided in Section 101 of the Code. In the case of employer-owned life
insurance as defined in Section 101(j), the amount of the death benefit
excludable from gross income is limited to premiums paid unless the Policy
falls within certain specified exceptions and a notice and consent requirement
is satisfied before the Policy is issued. Certain specified exceptions are
based on the status of an employee as highly compensated, a director or
recently employed. There are also exceptions for Policy proceeds paid to an
employee's heirs. These exceptions only apply if proper notice is given to the
insured employee and consent is received from the insured employee before the
issuance of the Policy. These rules apply to Policies issued August 18, 2006
and later and also apply to policies issued before August 18, 2006 after a
material increase in the death benefit or other material change. An IRS
reporting requirement applies to employer-owned
A-10
life insurance subject to these rules. Because these rules are complex and will
affect the tax treatment of death benefits, it is advisable to consult tax
counsel. The death benefit will also be taxable in the case of a
transfer-for-value unless certain exceptions apply.
Many changes or transactions involving a Policy may have tax consequences,
depending on the circumstances. Such changes include, but are not limited to,
the exchange of the Policy, a change of the Policy's Face Amount, a Policy
Loan, an additional premium payment, a Policy lapse with an outstanding Policy
Loan, a partial withdrawal, or a surrender of the Policy. The transfer of the
Policy or designation of a Beneficiary may have Federal, state, and/or local
transfer and inheritance tax consequences, including the imposition of gift,
estate, and generation-skipping transfer taxes. For example, the transfer of
the Policy to, or the designation as a Beneficiary of, or the payment of
proceeds to, a person who is assigned to a generation which is two or more
generations below the generation assignment of the Owner may have generation
skipping transfer tax consequences under Federal tax law. The individual
situation of each Owner or Beneficiary will determine the extent, if any, to
which Federal, state, and local transfer and inheritance taxes may be imposed
and how ownership or receipt of Policy proceeds will be treated for purposes of
Federal, state and local estate, inheritance, generation skipping and other
taxes.
A Policy may also be used in various arrangements, including non-qualified
deferred compensation or salary continuation plans, split dollar insurance
plans, executive bonus plans, retiree medical benefit plans and others. The tax
consequences of such plans may vary depending on the particular facts and
circumstances of each individual arrangement. If you are contemplating a change
to an existing Policy or using a Policy in any arrangement the value of which
depends in part on its tax consequences, you should be sure to consult a
qualified tax adviser regarding the tax attributes of the particular
arrangement.
Generally, the Owner will not be deemed to be in constructive receipt of
the Policy's Cash Value, including increments thereof, under the Policy until
there is a distribution or a deemed distribution. Under a complete surrender or
lapse of any Policy, if the amount received plus the amount of outstanding
Indebtedness exceeds the total investments in the Policy, the excess will
generally be treated as ordinary income subject to tax. The tax consequences of
other distributions from, and Policy Loans taken from or secured by, a Policy
depend upon whether the Policy is classified as a "modified endowment
contract".
Ownership of the Policy by a corporation, trust or other non-natural
person could jeopardize some (or all) of such entity's interest deduction under
Code section 264, even where such entity's indebtedness is in no way connected
to the Policy. In addition, under section 264(f)(5), if a business (other than
a sole proprietorship) is directly or indirectly a beneficiary of the Policy,
the Policy could be treated as held by the business for purposes of the section
264(f) entity-holder rules. Therefore, it would be advisable to consult with a
qualified tax adviser before any non-natural person is made a Policy Owner or
holder of the Policy or before a business (other than a sole proprietorship) is
made a beneficiary of the Policy.
MODIFIED ENDOWMENT CONTRACTS. A Policy may be treated as a modified
endowment contract depending upon the amount of premiums paid in relation to
the death benefit provided under such Policy. The premium limitation rules for
determining whether a Policy is a modified endowment contract are extremely
complex. In general, however, a Policy will be a modified endowment contract if
the accumulated premiums paid at any time during the first seven Policy Years
exceed the sum of the level premiums which would have been paid on or before
such time if the Policy provided for paid-up future benefits after the payment
of seven level annual premiums.
In addition, if a Policy is "materially changed" it may cause such Policy
to be treated as a modified endowment contract. The material change rules for
determining whether a Policy is a modified endowment contract are also
extremely complex. In general, however, the determination of whether a Policy
will be a modified endowment contract after a material change generally depends
upon the relationship among the death benefit at the time of such change, the
Cash Value at the time of the change and the additional premiums paid in the
seven Policy Years starting with the date on which the material change occurs.
Moreover, a life insurance contract received in exchange for a life
insurance contract classified as a modified endowment contract will also be
treated as a modified endowment contract. A reduction in a Policy's benefits
may also cause such Policy to become a modified endowment contract.
Accordingly, a prospective Owner should contact a competent tax adviser
before purchasing a Policy to determine the circumstances under which the
Policy would be a modified endowment contract. In addition, an Owner should
contact a competent tax adviser before paying any additional premiums or making
any other change to, including an exchange of, a
A-11
Policy to determine whether such premium or change would cause the Policy (or
the new Policy in the case of an exchange) to be treated as a modified
endowment contract.
NOTE: MOST DESTINY POLICIES WERE MODIFIED ENDOWMENT CONTACTS FROM THE DATE OF
ISSUE, THEREFORE, DISTRIBUTIONS FROM MOST DESTINY POLICIES ARE TAXED AS
FOLLOWS:
DISTRIBUTIONS FROM POLICIES CLASSIFIED AS MODIFIED ENDOWMENT
CONTRACT. Policies classified as modified endowment contracts will be subject
to the following tax rules: First, all distributions, including distributions
upon surrender, from such a Policy are treated as ordinary income subject to
tax up to the amount equal to the excess (if any) of the Cash Value immediately
before the distribution over the investment in the Policy (described below) at
such time. Second, Policy Loans taken from, or secured by, such a Policy, as
well as due but unpaid interest thereon, are treated as distributions from such
a Policy and taxed accordingly. Third, a 10 percent additional income tax is
imposed on the portion of any distribution from, or Policy Loan taken from or
secured by, such a Policy that is included in income, except where the
distribution or Policy Loan (a) is made on or after the Owner attains age 59
1/2, (b) is attributable to the Owner's becoming disabled, or (c) is part of a
series of substantially equal periodic payments for the life (or life
expectancy) of the Owner or the joint lives (or joint life expectancies) of the
Owner and the Owner's Beneficiary. The foregoing exceptions to the 10 percent
additional income tax will generally not apply to a Policy Owner that is a
non-natural person, such as a corporation.
DISTRIBUTIONS FROM POLICIES NOT CLASSIFIED AS MODIFIED ENDOWMENT
CONTRACT. Distributions from Policies not classified as a modified endowment
contract are generally treated first as a non-taxable recovery of the
investment in the Policy (described below) and then, only after the return of
all such investment in the Policy, as gain taxable as ordinary income. An
exception to this general rule occurs in the case of a decrease in the Policy's
death benefit (possibly including a partial withdrawal) or any other change
that reduces benefits under the Policy in the first 15 years after the Policy
is issued and that results in cash distribution to the Owner in order for the
Policy to continue to qualify as a life insurance contract for Federal income
tax purposes. Such a cash distribution will be subject to different tax rules
and may be treated in whole or in part as taxable income.
Policy Loans from, or secured by, a Policy that is not a modified
endowment contract should generally not be treated as distributions. Instead,
such loans should generally be treated as indebtedness of the Owner. However,
because the tax consequences associated with Policy Loans are not always clear,
in particular, with respect to Policy Loans outstanding after the tenth Policy
year, you should consult a tax adviser prior to taking any Policy Loan.
Upon a complete surrender or lapse of a Policy that is not a modified
endowment contract, if the amount received plus the amount of indebtedness
exceeds the total investment in the Policy, the excess will generally be
treated as ordinary income subject to tax.
Neither distributions (including distributions upon surrender or lapse)
nor Policy Loans from, or secured by, a Policy that is not a modified endowment
contract are subject to the 10 percent additional income tax.
If a Policy which is not a modified endowment contract subsequently
becomes a modified endowment contract, then any distribution made from the
Policy within two years prior to the date of such change in status may become
taxable.
POLICY LOANS. Generally, interest paid on any loan under a life insurance
Policy is not deductible. AN OWNER SHOULD CONSULT A COMPETENT TAX ADVISER IF
THE DEDUCTIBILITY OF LOAN INTEREST IS A CONSIDERATION IN THE PURCHASE OF A
POLICY. If a Policy Loan is outstanding when a Policy is canceled or lapses,
the amount of the outstanding Indebtedness will be added to the amount
distributed and will be taxed accordingly.
INVESTMENT IN THE POLICY. Investment in the Policy means (i) the aggregate
amount of any premiums or other consideration paid for a Policy, minus (ii) the
aggregate amount received under the Policy which is excluded from gross income
of the Owner (except that the amount of any Policy Loan from, or secured by, a
Policy that is a modified endowment contract, to the extent such amount is
excluded from gross income, will be disregarded), plus (iii) the amount of any
Policy Loan from, or secured by, a Policy that is a modified endowment contract
to the extent that such amount is included in the gross income of the Owner.
MULTIPLE POLICIES. All modified endowment contracts that are issued by
General American (or its affiliates) to the same Owner during any calendar year
are treated as one modified endowment contract for purposes of determining the
amount includible in gross income under Section 72(e) of the Code.
LIFE INSURANCE PURCHASES BY NONRESIDENT ALIENS AND FOREIGN
CORPORATIONS. Policy Owners that are not U.S. citizens or residents will
generally be subject to U.S. Federal withholding tax on taxable distributions
from life insurance
A-12
policies at a 30% rate, unless a lower treaty rate applies. In addition, Policy
Owners may be subject to state and/or municipal taxes and taxes that may be
imposed by the Policy Owner's country of citizenship or residence.
WITHHOLDING. To the extent that Policy distributions are taxable, they are
generally subject to withholding for the recipient's Federal income tax
liability. Recipients can generally elect, however, not to have tax withheld
from distributions.
ESTATE, GIFT AND GENERATION-SKIPPING TRANSFER TAXES. The transfer of the
Policy or the designation of a beneficiary may have Federal, state, and/or
local transfer and inheritance tax consequences, including the imposition of
gift, estate, and generation-skipping transfer taxes. When the insured dies,
the death proceeds will generally be includable in the Policy Owner's estate
for purposes of the Federal estate tax if the Policy Owner was the insured,
retained incidents of ownership at death, or made a gift transfer of the Policy
within 3 years of death. If the Policy Owner was not the insured, the fair
market value of the Policy would be included in the Policy Owner's estate upon
the Policy Owner's death.
Moreover, under certain circumstances, the Internal Revenue Code may
impose a "generation-skipping transfer tax" when all or part of a life
insurance policy is transferred to, or a death benefit is paid to, an
individual two or more generations younger than the Policy Owner. Regulations
issued under the Internal Revenue Code may require us to deduct the tax from
your Policy, or from any applicable payment, and pay it directly to the IRS.
Qualified tax advisers should be consulted concerning the estate and gift
tax consequences of Policy ownership and distributions under Federal, state and
local law. The individual situation of each Policy Owner or beneficiary will
determine the extent, if any, to which Federal, state, and local transfer and
inheritance taxes may be imposed and how ownership or receipt of Policy
proceeds will be treated for purposes of Federal, state and local estate,
inheritance, generation-skipping and other taxes.
In general, current rules provide for a $5 million estate, gift and
generation-skipping transfer tax exemption (as indexed for inflation) and a top
tax rate of 40 percent.
The complexity of the tax law, along with uncertainty as to how it might
be modified in coming years, underscores the importance of seeking guidance
from a qualified adviser to help ensure that your estate plan adequately
addresses your needs and those of your beneficiaries under all possible
scenarios.
CONTINUATION OF POLICY BEYOND ATTAINED AGE 100. The tax consequences of
continuing the Policy beyond the Insured's Attained Age 100 birthday are
unclear. You should consult a tax adviser if you intend to keep the Policy in
force beyond the Insured's Attained Age 100.
GUIDANCE ON SPLIT DOLLAR PLANS. The IRS has issued guidance on split
dollar insurance plans. A tax adviser should be consulted with respect to this
guidance if your Policy is, or may become, subject to a split dollar insurance
plan. If your Policy is part of an equity split dollar arrangement taxed under
the economic benefit regime, there is a risk that some portion of the Policy
cash value may be taxed prior to any Policy distribution.
In addition, the Sarbanes-Oxley Act of 2002 (the "Act"), which was signed
into law on July 30, 2002, prohibits, with limited exceptions, publicly-traded
companies, including non-U.S. companies that have securities listed on U.S.
exchanges, from extending, directly or indirectly or through a subsidiary, many
types of personal loans to their directors or executive officers. It is
possible that this prohibition may be interpreted to apply to split-dollar life
insurance arrangements for directors and executive officers of such companies,
since such arrangements can arguably be viewed as involving a loan from the
employer for at least some purposes.
Any affected business contemplating the payment of a premium on an
existing Policy or the purchase of new Policy in connection with a split-dollar
life insurance arrangement should consult legal counsel.
Split dollar insurance plans that provide deferred compensation may be
subject to specific tax rules governing deferred compensation arrangements.
Failure to adhere to these rules will result in adverse tax consequences.
CORPORATE ALTERNATIVE MINIMUM TAX. There may also be an indirect tax upon
the income in the Policy or the proceeds of a Policy under the Federal
corporate alternative minimum tax, if the Policy Owner is subject to that tax.
PUERTO RICO. We believe that Policies subject to Puerto Rican tax law will
generally receive treatment similar, with certain modifications, to that
described above. Among other differences, Policies governed by Puerto Rican tax
law are not currently subject to the rules described above regarding Modified
Endowment Contracts. You should consult your tax adviser with respect to Puerto
Rican tax law governing the Policies.
A-13
POSSIBLE TAX LAW CHANGES. Although the likelihood of legislative changes
is uncertain, there is always the possibility that the tax treatment of the
Policy could change by legislation or otherwise. Consult a tax adviser with
respect to legislative developments and their effect on the Policy.
FOREIGN TAX CREDITS. To the extent permitted under Federal tax law, we may
claim the benefit of certain foreign tax credits attributable to taxes paid by
certain Eligible Funds to foreign jurisdictions.
POSSIBLE CHARGE FOR TAXES. At the present time, General American makes no
charge to the Separate Account for any Federal, state, or local taxes (as
opposed to Premium Tax Charges which are deducted from premium payments) that
it incurs which may be attributable to such Separate Account or to the
Policies. General American, however, reserves the right in the future to make a
charge for any such tax or other economic burden resulting from the application
of the tax laws that it determines to be properly attributable to the Separate
Account or to the Policies.
RESTRICTIONS ON FINANCIAL TRANSACTIONS
Applicable laws designed to counter terrorism and prevent money laundering
might, in certain circumstances, require us to reject a premium payment and/or
block or "freeze" your Policy. If these laws apply in a particular situation,
we would not be allowed to process any request for withdrawals, surrenders,
loans or death benefits, make transfers or continue making payments under your
death benefit option until instructions are received from the appropriate
regulator. We also may be required to provide additional information about you
or your Policy to government regulators.
LEGAL PROCEEDINGS
In the ordinary course of business, General American, similar to other
life insurance companies, is involved in lawsuits (including class action
lawsuits), arbitrations and other legal proceedings. Also, from time to time,
state and federal regulators or other officials conduct formal and informal
examinations or undertake other actions dealing with various aspects of the
financial services and insurance industries. In some legal proceedings
involving insurers, substantial damages have been sought and/or material
settlement payments have been made. It is not possible to predict with
certainty the ultimate outcome of any pending legal proceeding or regulatory
action. However, General American does not believe any such action or
proceeding will have a material adverse effect upon the Separate Account or
upon the ability of MetLife Investors Distribution Company to perform its
contract with the Separate Account or of General American to meet its
obligations under the Contracts.
FINANCIAL STATEMENTS
The financial statements of General American which are included in this
prospectus supplement should be distinguished from the financial statements of
the Separate Account, which are also included in this prospectus supplement,
and should be considered only as bearing on the ability of General American to
meet its obligations under the Policy. They should not be considered as bearing
on the investment performance of the assets held in the Separate Account.
A-14
FLEXIBLE PREMIUM VARIABLE LIFE (VUL 98/00)
GENERAL AMERICAN LIFE INSURANCE COMPANY
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
American Vision Series VUL 2002
Executive Benefit Flexible Premium Variable Life
Flexible Premium Joint and Last Survivor Variable Life (VUL 98)
Flexible Premium Variable Life (General SelectPlus)
Flexible Premium Variable Life (Russell VUL)
Flexible Premium Variable Life (VUL 100)
Flexible Premium Variable Life (VUL 95)
Flexible Premium Variable Life (VUL 98/00)
Variable Life Insurance (Destiny)
Supplement dated December 31, 2016 to the prospectuses for the variable life
insurance policies issued by General American Life Insurance Company, listed
above
The following information supplements, and to the extent inconsistent
therewith, replaces the information in the prospectuses. Please retain this
supplement for future reference.
The Company
-----------
The first paragraph describing the Company under "The Company" is replaced with
the following:
General American is a wholly-owned subsidiary of, and controlled by,
MetLife, Inc., a publicly traded company. General American is principally
engaged in writing individual life insurance policies and annuity contracts.
It is admitted to do business in 49 states, the District of Columbia, Puerto
Rico, and in four Canadian provinces. The principal offices (Home Office) of
General American are located at 13045 Tesson Ferry Road, St. Louis, Missouri
63128.
THIS SUPPLEMENT SHOULD BE READ AND RETAINED FOR FUTURE REFERENCE
SUPP-GALICVL1216
FLEXIBLE PREMIUM VL SUPPLEMENT DATED MAY 1, 2015
GENERAL AMERICAN LIFE INSURANCE COMPANY
Variable Life Insurance Policy
(Destiny)
Supplement dated May 1, 2015
to the Prospectus dated May 1, 2004
Flexible Premium
Variable Life Insurance Policies
(Variable Universal Life/Executive Benefit)
Supplement dated May 1, 2015
to the Prospectuses dated May 1, 2002
Flexible Premium Joint and Last Survivor
Variable Life Insurance Policy
Supplement dated May 1, 2015
to the Prospectus dated May 1, 2002
Flexible Premium Variable Life Insurance Policies
(VUL 95/VUL 100/VGSP/Russell VUL)
Supplement dated May 1, 2015
to the Prospectuses dated May 1, 2000
This supplement updates certain information contained in the last full
prospectus for each of the above-referenced variable life insurance policies,
as annually and periodically supplemented. You should read and retain this
supplement. We will send you an additional copy of the last full prospectus for
your policy, without charge, on request. These policies are no longer available
for sale.
General American Life Insurance Company is a wholly-owned subsidiary of
Metropolitan Life Insurance Company ("MetLife"). MetLife is a wholly-owned
subsidiary of MetLife, Inc., a publicly-traded company. General American's Home
Office is 13045 Tesson Ferry Road, St. Louis, Missouri 63128.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE POLICIES OR DETERMINED IF THIS
SUPPLEMENT IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE SECURITIES AND EXCHANGE COMMISSION MAINTAINS A WEB SITE THAT CONTAINS
MATERIAL INCORPORATED BY REFERENCE AND OTHER INFORMATION REGARDING REGISTRANTS
THAT FILE ELECTRONICALLY WITH THE SECURITIES AND EXCHANGE COMMISSION. THE
ADDRESS OF THE SITE IS HTTP://WWW.SEC.GOV.
THE UNDERLYING FUND PROSPECTUSES MAY BE OBTAINED BY CALLING 1-800-638-9294.
WE DO NOT GUARANTEE HOW ANY OF THE DIVISIONS OR FUNDS WILL PERFORM. THE
POLICIES AND THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY FINANCIAL INSTITUTION AND ARE NOT FEDERALLY INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER
GOVERNMENT AGENCY.
The Financial Industry Regulatory Authority ("FINRA") provides background
information about broker-dealers and their registered representatives through
FINRA BrokerCheck. You may contact the FINRA BrokerCheck Hotline at
1-800-289-9999, or log on to www.finra.org. An investor brochure that includes
information describing FINRA BrokerCheck is available through the Hotline or
on-line.
1
THE COMPANY
General American is principally engaged in writing individual life insurance
policies and annuity contracts. It is admitted to do business in 49 states, the
District of Columbia, Puerto Rico, and in four Canadian provinces. The
principal offices (Home Office) of General American are located at 13045 Tesson
Ferry Road, St. Louis, Missouri 63128. The Administrative Office for various
Policy transactions is as follows:
Premium Payments General American
P.O. Box 790201
St. Louis, MO 63179-0201
Payment Inquires and General American
Correspondence P.O. Box 355
Warwick, RI 02887-0355
Beneficiary and Ownership General American
Changes P.O. Box 357
Warwick, RI 02887-0356
Surrenders, Loans, General American
Withdrawals and P.O. Box 356
Division Transfers Warwick, RI 02887-0356
Death Claims General American
P.O. Box 356
Warwick, RI 02887-0356
All Telephone (800) 638-9294
Transactions and Inquiries
You may request an account transfer or reallocation of future premiums by
written request (which may be telecopied) to our Administrative Office, by
telephoning us, or over the Internet. To request a transfer or reallocation by
telephone, you should contact your registered representative, or contact us at
(800) 638-9294. To request a transfer or reallocation over the Internet, you
may log on to our website at www.genamerica.com. We use reasonable procedures
to confirm that instructions communicated by telephone, facsimile or Internet
are genuine. Any telephone, facsimile or Internet instructions that we
reasonably believe to be genuine will be your responsibility, including losses
arising from any errors in the communication of instructions. However, because
telephone and Internet transactions may be available to anyone who provides
certain information about you and your Policy, you should protect that
information. We may not be able to verify that you are the person providing
telephone or Internet instructions, or that you have authorized any such person
to act for you.
Telephone, facsimile, and computer systems (including the Internet) may not
always be available. Any telephone, facsimile, or computer system, whether it
is yours, your service provider's, your registered representative's, or ours,
can experience outages or slowdowns for a variety of reasons. These outages or
slowdowns may delay or prevent our processing of your request. Although we have
taken precautions to help our systems handle heavy use, we cannot promise
complete reliability under all circumstances. If you are experiencing problems,
you should make your request by writing to our Administrative Office.
If you send premium payments or transaction requests to an address other
than the one we have designated for receipt of such payments or requests, we
may return the premium payment to you, or there may be a delay in applying the
payment or transaction to your Policy.
CYBERSECURITY
Our variable insurance products business is largely conducted through
digital communications and data storage networks and systems operated by us and
our service providers or other business partners (e.g., the Funds and the firms
involved in the distribution and sale of our variable life insurance policies).
For example, many routine operations, such as processing owners' requests and
elections and day-to-day record keeping, are all executed through computer
networks and systems.
2
We have established administrative and technical controls and a business
continuity plan to protect our operations against cybersecurity breaches.
Despite these protocols, a cybersecurity breach could have a material, negative
impact on General American and the separate account, as well as individual
policy owners and their policies. Our operations also could be negatively
affected by a cybersecurity breach at a third party, such as a governmental or
regulatory authority or another participant in the financial markets.
Cybersecurity breaches can be intentional or unintentional events, and can
occur through unauthorized access to computer systems, networks or devices;
infection from computer viruses or other malicious software code; or attacks
that shut down, disable, slow or otherwise disrupt operations, business
processes or website access or functionality. Cybersecurity breaches can
interfere with our processing of policy transactions, including the processing
of transfer orders from our website or with the Funds; impact our ability to
calculate accumulation unit values; cause the release and possible destruction
of confidential policy owner or business information; or impede order
processing or cause other operational issues. Although we continually make
efforts to identify and reduce our exposure to cybersecurity risk, there is no
guarantee that we will be able to successfully manage this risk at all times.
THE SEPARATE ACCOUNT
The separate account consists of divisions, each of which corresponds to an
underlying Fund. Each division may either make money or lose money. Therefore
if you invest in a division of the separate account, you may either make money
or lose money, depending on the investment experience of that division. There
is no guaranteed rate of return in the separate account.
The following chart shows the Funds that are available under the policy
along with the name of the investment adviser, sub-adviser (where applicable)
and investment objective of each Fund. The Funds have different investment
goals and strategies. You should review the prospectus of each Fund, or seek
professional guidance in determining which Fund(s) best meet your objectives.
NOTE: THE RUSSELL INVESTMENT FUNDS ARE NOT AVAILABLE TO DESTINY OR EXECUTIVE
BENEFIT POLICIES. FOR ALL OTHER POLICIES, THE RUSSELL INVESTMENT FUNDS ARE ONLY
AVAILABLE FOR POLICIES WITH AN ISSUE DATE PRIOR TO JANUARY 1, 2000.
AMERICAN FUNDS INSURANCE SERIES(R) ADVISER: CAPITAL RESEARCH AND MANAGEMENT COMPANY
FUND SUB-ADVISER INVESTMENT OBJECTIVE
---- ----------- --------------------
American Funds Global N/A Long-term growth of capital.
Small Capitalization Fund
American Funds N/A Growth of capital.
Growth Fund
American Funds N/A Long-term growth of capital
Growth-Income Fund and income.
FIDELITY(R) VARIABLE INSURANCE PRODUCTS ADVISER: FIDELITY MANAGEMENT & RESEARCH COMPANY
FUND SUB-ADVISER INVESTMENT OBJECTIVE
---- ----------- --------------------
Equity-Income Portfolio FMR Co., Inc. Reasonable income. The fund will
also consider the potential for capital
appreciation. The fund's goal is to
achieve a yield which exceeds the
composite yield of securities
comprising the S&P 500(R) Index.
Mid Cap Portfolio FMR Co., Inc. Long-term growth of capital.
JPMORGAN INSURANCE TRUST ADVISER: J.P. MORGAN INVESTMENT MANAGEMENT INC.
FUND SUB-ADVISER INVESTMENT OBJECTIVE
---- ----------- --------------------
JPMorgan Insurance Trust N/A To maximize total return by investing
Core Bond Portfolio primarily in a diversified portfolio
of intermediate- and long-term
debt securities.
JPMorgan Insurance Trust N/A Capital growth over the long term.
Small Cap Core Portfolio
3
MET INVESTORS SERIES TRUST ADVISER: METLIFE ADVISERS, LLC
FUND SUB-ADVISER INVESTMENT OBJECTIVE
---- ----------- --------------------
Clarion Global Real Estate CBRE Clarion Securities LLC Total return through investment in
Portfolio real estate securities, emphasizing
both capital appreciation and current
income.
ClearBridge Aggressive ClearBridge Investments, LLC Capital appreciation.
Growth Portfolio
Harris Oakmark Harris Associates L.P. Long-term capital appreciation.
International Portfolio
Invesco Mid Cap Value Invesco Advisers, Inc. High total return by investing in
Portfolio equity securities of mid-sized
companies.
Invesco Small Cap Growth Invesco Advisers, Inc. Long-term growth of capital.
Portfolio
Lord Abbett Bond Lord, Abbett & Co. LLC High current income and the
Debenture Portfolio opportunity for capital appreciation to
produce a high total return.
MFS(R) Research Massachusetts Financial Services Company Capital appreciation.
International Portfolio
Morgan Stanley Mid Cap Morgan Stanley Investment Capital appreciation.
Growth Portfolio Management Inc.
PIMCO Total Return Pacific Investment Management Maximum total return, consistent
Portfolio Company LLC with the preservation of capital and
prudent investment management.
T. Rowe Price Large Cap T. Rowe Price Associates, Inc. Long-term capital appreciation by
Value Portfolio investing in common stocks believed
to be undervalued. Income is a
secondary objective.
T. Rowe Price Mid Cap T. Rowe Price Associates, Inc. Long-term growth of capital.
Growth Portfolio
METROPOLITAN SERIES FUND ADVISER: METLIFE ADVISERS, LLC
FUND SUB-ADVISER INVESTMENT OBJECTIVE
---- ----------- --------------------
Baillie Gifford International Baillie Gifford Overseas Limited Long-term growth of capital.
Stock Portfolio
Barclays Aggregate Bond MetLife Investment Management, LLC To track the performance of the
Index Portfolio Barclays U.S. Aggregate Bond Index.
BlackRock Bond Income BlackRock Advisors, LLC A competitive total return primarily
Portfolio from investing in fixed-income
securities.
BlackRock Capital BlackRock Advisors, LLC Long-term growth of capital.
Appreciation Portfolio
BlackRock Large Cap Value BlackRock Advisors, LLC Long-term growth of capital.
Portfolio
BlackRock Money Market BlackRock Advisors, LLC A high level of current income
Portfolio/1/ consistent with preservation of
capital.
Frontier Mid Cap Growth Frontier Capital Management Maximum capital appreciation.
Portfolio Company, LLC
Jennison Growth Portfolio Jennison Associates LLC Long-term growth of capital.
4
FUND SUB-ADVISER INVESTMENT OBJECTIVE
---- ----------- --------------------
Met/Artisan Mid Cap Value Artisan Partners Limited Partnership Long-term capital growth.
Portfolio
MetLife Mid Cap Stock MetLife Investment Management, LLC To track the performance of the
Index Portfolio Standard & Poor's MidCap 400(R)
Composite Stock Price Index.
MetLife Stock Index MetLife Investment Management, LLC To track the performance of the
Portfolio Standard & Poor's 500(R) Composite
Stock Price Index.
MFS(R) Total Return Massachusetts Financial Services Company Favorable total return through
Portfolio investment in a diversified portfolio.
MFS(R) Value Portfolio Massachusetts Financial Services Company Capital appreciation.
MSCI EAFE(R) Index MetLife Investment Management, LLC To track the performance of the MSCI
Portfolio EAFE(R) Index.
Neuberger Berman Genesis Neuberger Berman Management LLC High total return, consisting principally
Portfolio of capital appreciation.
Russell 2000(R) Index MetLife Investment Management, LLC To track the performance of the
Portfolio Russell 2000(R) Index.
T. Rowe Price Large Cap T. Rowe Price Associates, Inc. Long-term growth of capital.
Growth Portfolio
T. Rowe Price Small Cap T. Rowe Price Associates, Inc. Long-term capital growth.
Growth Portfolio
Van Eck Global Natural Van Eck Associates Corporation Long-term capital appreciation with
Resources Portfolio income as a secondary consideration.
Western Asset Western Asset Management Company To maximize total return consistent
Management with preservation of capital and
U.S. Government Portfolio maintenance of liquidity.
WMC Balanced Portfolio Wellington Management Company LLP Long-term capital appreciation with
some current income.
WMC Core Equity Wellington Management Company LLP To provide a growing stream of
Opportunities Portfolio income over time and, secondarily,
long-term capital appreciation and
current income.
RUSSELL INVESTMENT FUNDS ADVISER: RUSSELL INVESTMENT MANAGEMENT COMPANY
FUND SUB-ADVISER INVESTMENT OBJECTIVE
---- ----------- --------------------
Aggressive Equity Fund Conestoga Capital Advisors, LLC To provide long term capital growth.
DePrince, Race & Zollo, Inc.
Jacobs Levy Equity Management, Inc.
RBC Global Asset Management (U.S.) Inc.
Ranger Investment Management, L.P.
Core Bond Fund Colchester Global Investors Limited To provide current income, and as a
Logan Circle Partners, L.P. secondary objective, capital
Macro Currency Group - an investment appreciation.
group within Principle Global Investors LLC
Metropolitan West Asset Management, LLC
Scout Investments, Inc.
Multi-Style Equity Fund Columbus Circle Investors To provide long term capital growth.
Institutional Capital LLC
Jacobs Levy Equity Management, Inc.
Mar Vista Investment Partners, LLC
Suffolk Capital Management, LLC
Sustainable Growth Advisers, LP
5
FUND SUB-ADVISER INVESTMENT OBJECTIVE
---- ----------- --------------------
Non-U.S. Fund Barrow, Hanley, Mewhinney & Strauss, LLC To provide long term capital growth.
MFS Institutional Advisors, Inc.
Pzena Investment Management, LLC
William Blair & Company, LLC
VAN ECK VIP TRUST ADVISER: VAN ECK ASSOCIATES CORPORATION
FUND SUB-ADVISER INVESTMENT OBJECTIVE
---- ----------- --------------------
Van Eck VIP Emerging N/A Long-term capital appreciation by
Markets Fund investing primarily in equity securities
in emerging markets around the world.
----------
/1/An investment in the BlackRock Money Market Portfolio is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. Although the Portfolio seeks to preserve the value of your
investment at $100 per share, it is possible to lose money by investing in
the Portfolio. During extended periods of low interest rates, the yields of
the Division investing in the BlackRock Money Market Portfolio may become
extremely low and possibly negative.
FOR MORE INFORMATION REGARDING THE FUNDS AND THEIR INVESTMENT ADVISERS AND
SUB-ADVISERS, SEE THE FUND PROSPECTUSES AND THEIR STATEMENTS OF ADDITIONAL
INFORMATION, WHICH YOU CAN OBTAIN BY CALLING 1-800-638-9294.
OTHER FUNDS AND SHARE CLASSES
Some of the Funds offer various classes of shares, each of which has a
different level of expenses. The prospectuses for the Funds may provide
information for share classes that are not available through the Policy. When
you consult the prospectus for any Fund, you should be careful to refer to only
the information regarding the class of shares that is available through the
Policy. For the JPMorgan Insurance Trust, we offer Class 1 shares; for Fidelity
Variable Insurance Products and the Van Eck VIP Trust, we offer Initial Class
shares; for the Metropolitan Series Fund, Inc., we offer Class A shares; for
the Met Investors Series Trust, we offer Class A shares; and for the American
Funds Insurance Series(R), we offer Class 2 shares.
CHARGES AND DEDUCTIONS
Charges will be deducted in connection with the Policy to compensate the
Company for providing the insurance benefits set forth in the Policy and any
additional benefits added by rider, administering the Policies, incurring
expenses in distributing the Policies, and assuming certain risks in connection
with the Policy. We may profit from one or more of the charges deducted under
the Policy, including the cost of insurance charge. We may use these profits
for any corporate purpose.
The following table shows the minimum and maximum total operating expenses
charged by the Funds for the fiscal year ended December 31, 2014. Expenses of
the Funds may be higher or lower in the future. Certain Funds may impose a
redemption fee in the future. More detail concerning each Fund's fees and
expenses is contained in the table that follows and in the prospectus for each
Fund.
MINIMUM MAXIMUM
------- -------
TOTAL ANNUAL FUND OPERATING EXPENSES
(expenses that are deducted from Fund assets, including management fees, distribution
and/or service (12b-1) fees, and other expenses).................................... 0.27% 1.17%
6
The following table describes the annual operating expenses for each Fund
for the year ended December 31, 2014, before and after any applicable fee
waivers and expense reimbursements.
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
DISTRIBUTION ACQUIRED TOTAL FEE WAIVER NET TOTAL
AND/OR FUND FEES ANNUAL AND/OR ANNUAL
MANAGEMENT SERVICE (12B-1) OTHER AND OPERATING EXPENSE OPERATING
FEE FEES EXPENSES EXPENSES EXPENSES REIMBURSEMENT EXPENSES
---------- --------------- -------- --------- --------- ------------- ---------
AMERICAN FUNDS INSURANCE
SERIES(R) -- CLASS 2
American Funds Global Small
Capitalization Fund........... 0.70% 0.25% 0.04% -- 0.99% -- 0.99%
American Funds Growth
Fund.......................... 0.33% 0.25% 0.02% -- 0.60% -- 0.60%
American Funds Growth-
Income Fund................... 0.27% 0.25% 0.02% -- 0.54% -- 0.54%
FIDELITY(R) VARIABLE INSURANCE
PRODUCTS -- INITIAL CLASS
Equity-Income Portfolio........ 0.45% -- 0.09% 0.06% 0.60% -- 0.60%
Mid Cap Portfolio.............. 0.55% -- 0.09% -- 0.64% -- 0.64%
JPMORGAN INSURANCE TRUST --
CLASS 1
JPMorgan Insurance Trust
Core Bond Portfolio........... 0.40% -- 0.23% 0.01% 0.64% 0.03% 0.61%
JPMorgan Insurance Trust
Small Cap Core Portfolio...... 0.65% -- 0.22% 0.02% 0.89% -- 0.89%
MET INVESTORS SERIES TRUST --
CLASS A
Clarion Global Real Estate
Portfolio..................... 0.59% -- 0.05% -- 0.64% -- 0.64%
ClearBridge Aggressive Growth
Portfolio..................... 0.55% -- 0.02% -- 0.57% 0.01% 0.56%
Harris Oakmark International
Portfolio..................... 0.77% -- 0.06% -- 0.83% 0.02% 0.81%
Invesco Mid Cap Value
Portfolio..................... 0.64% -- 0.05% 0.04% 0.73% 0.02% 0.71%
Invesco Small Cap Growth
Portfolio..................... 0.84% -- 0.03% -- 0.87% 0.01% 0.86%
Lord Abbett Bond Debenture
Portfolio..................... 0.51% -- 0.04% -- 0.55% 0.01% 0.54%
MFS(R) Research International
Portfolio..................... 0.69% -- 0.07% -- 0.76% 0.06% 0.70%
Morgan Stanley Mid Cap
Growth Portfolio.............. 0.64% -- 0.05% -- 0.69% 0.01% 0.68%
PIMCO Total Return
Portfolio..................... 0.48% -- 0.03% -- 0.51% 0.04% 0.47%
T. Rowe Price Large Cap Value
Portfolio..................... 0.57% -- 0.02% -- 0.59% -- 0.59%
T. Rowe Price Mid Cap Growth
Portfolio..................... 0.75% -- 0.03% -- 0.78% -- 0.78%
7
DISTRIBUTION ACQUIRED TOTAL FEE WAIVER NET TOTAL
AND/OR FUND FEES ANNUAL AND/OR ANNUAL
MANAGEMENT SERVICE (12B-1) OTHER AND OPERATING EXPENSE OPERATING
FEE FEES EXPENSES EXPENSES EXPENSES REIMBURSEMENT EXPENSES
---------- --------------- -------- --------- --------- ------------- ---------
METROPOLITAN SERIES FUND --
CLASS A
Baillie Gifford International
Stock Portfolio............... 0.79% -- 0.08% -- 0.87% 0.12% 0.75%
Barclays Aggregate Bond Index
Portfolio..................... 0.25% -- 0.03% -- 0.28% 0.00% 0.28%
BlackRock Bond Income
Portfolio..................... 0.32% -- 0.03% -- 0.35% 0.00% 0.35%
BlackRock Capital Appreciation
Portfolio..................... 0.69% -- 0.02% -- 0.71% 0.06% 0.65%
BlackRock Large Cap Value
Portfolio..................... 0.63% -- 0.02% -- 0.65% 0.03% 0.62%
BlackRock Money Market
Portfolio..................... 0.34% -- 0.03% -- 0.37% 0.02% 0.35%
Frontier Mid Cap Growth
Portfolio..................... 0.71% -- 0.05% -- 0.76% 0.01% 0.75%
Jennison Growth Portfolio...... 0.59% -- 0.03% -- 0.62% 0.08% 0.54%
Met/Artisan Mid Cap Value
Portfolio..................... 0.81% -- 0.03% -- 0.84% -- 0.84%
MetLife Mid Cap Stock Index
Portfolio..................... 0.25% -- 0.05% 0.01% 0.31% 0.00% 0.31%
MetLife Stock Index
Portfolio..................... 0.25% -- 0.02% -- 0.27% 0.01% 0.26%
MFS(R) Total Return Portfolio.. 0.55% -- 0.05% -- 0.60% -- 0.60%
MFS(R) Value Portfolio......... 0.70% -- 0.02% -- 0.72% 0.14% 0.58%
MSCI EAFE(R) Index Portfolio... 0.30% -- 0.10% 0.01% 0.41% 0.00% 0.41%
Neuberger Berman Genesis
Portfolio..................... 0.80% -- 0.03% -- 0.83% 0.00% 0.83%
Russell 2000(R) Index
Portfolio..................... 0.25% -- 0.07% 0.05% 0.37% 0.01% 0.36%
T. Rowe Price Large Cap
Growth Portfolio.............. 0.60% -- 0.03% -- 0.63% 0.02% 0.61%
T. Rowe Price Small Cap
Growth Portfolio.............. 0.47% -- 0.04% -- 0.51% -- 0.51%
Van Eck Global Natural
Resources Portfolio........... 0.78% -- 0.03% -- 0.81% 0.01% 0.80%
Western Asset Management
U.S. Government
Portfolio..................... 0.47% -- 0.02% -- 0.49% 0.01% 0.48%
WMC Balanced Portfolio......... 0.46% -- 0.07% -- 0.53% 0.00% 0.53%
WMC Core Equity Opportunities
Portfolio..................... 0.70% -- 0.03% -- 0.73% 0.11% 0.62%
RUSSELL INVESTMENT FUNDS
Aggressive Equity Fund......... 0.90% -- 0.16% -- 1.06% -- 1.06%
Core Bond Fund................. 0.55% -- 0.14% 0.01% 0.70% 0.02% 0.68%
Multi-Style Equity Fund........ 0.73% -- 0.13% -- 0.86% -- 0.86%
Non-U.S. Fund.................. 0.90% -- 0.18% -- 1.08% -- 1.08%
8
DISTRIBUTION ACQUIRED TOTAL FEE WAIVER NET TOTAL
AND/OR FUND FEES ANNUAL AND/OR ANNUAL
MANAGEMENT SERVICE (12B-1) OTHER AND OPERATING EXPENSE OPERATING
FEE FEES EXPENSES EXPENSES EXPENSES REIMBURSEMENT EXPENSES
---------- --------------- -------- --------- --------- ------------- ---------
VAN ECK VIP TRUST -- INITIAL CLASS
Van Eck VIP Emerging Markets
Fund........................ 1.00% -- 0.17% -- 1.17% 0.00% 1.17%
The information shown in the table above was provided by the Funds and we
have not independently verified that information. Net Total Annual Operating
Expenses shown in the table reflect any current fee waiver or expense
reimbursement arrangement that will remain in effect for a period of at least
one year from the date of the Fund's 2015 prospectus. "0.00%" in the Fee Waiver
and/or Expense Reimbursement column indicates that there is such an arrangement
in effect for the Fund, but that the expenses of the Fund are below the level
that would trigger the waiver or reimbursement. Fee waiver and expense
reimbursement arrangements with a duration of less than one year, or
arrangements that may be terminated without the consent of the Fund's board of
directors or trustees, are not shown.
POLICY RIGHTS
SEPARATE ACCOUNT CHARGES
We will waive the following amount of the Mortality and Expense Risk Charge:
the amount, if any, equal to the underlying fund expenses that are in excess of
0.68% for the Division investing in the Jennison Growth Portfolio, and that are
in excess of 0.88% for the Division investing in the MFS Research International
Portfolio.
FEDERAL TAX MATTERS
INTRODUCTION
The following summary provides a general description of the Federal income
tax considerations associated with the Policy and does not purport to be
complete or to cover all situations. The summary does not address state, local
or foreign tax issues related to the Policy. This discussion is not intended as
tax advice. Counsel or other competent tax advisers should be consulted for
more complete information. This discussion is based upon General American's
understanding of the present Federal income tax laws. No representation is made
as to the likelihood of continuation of the present Federal income tax laws or
as to how they may be interpreted by the Internal Revenue Service. It should be
further understood that the following discussion is not exhaustive and that
special rules not described herein may be applicable in certain situations.
TAX STATUS OF THE POLICY
In order to qualify as a life insurance contract for Federal income tax
purposes and to receive the tax treatment normally accorded life insurance
contracts under Federal tax law, a Policy must satisfy certain requirements
which are set forth in the Internal Revenue Code. Guidance as to how these
requirements are to be applied is limited. Nevertheless, we believe that the
Policies should satisfy the applicable requirements. However, the rules are not
entirely clear with respect to Policies issued on a substandard or guaranteed
issue basis. We may take appropriate steps to bring the Policy into compliance
with applicable requirements, and we reserve the right to restrict Policy
transactions in order to do so. The insurance proceeds payable on the death of
the insured will never be less than the minimum amount required for the Policy
to be treated as life insurance under section 7702 of the Internal Revenue
Code, as in effect on the date the Policy was issued.
In some circumstances, owners of variable contracts who retain excessive
control over the investment of the underlying separate account assets may be
treated as the owners of those assets. Although published guidance in this area
does not address certain aspects of the Policies, we believe that the Owner of
a Policy should not be treated as the owner of the Separate Account assets. We
reserve the right to modify the Policies to bring them into conformity with
applicable standards should such modification be necessary to prevent Owners of
the Policies from being treated as the owners of the underlying Separate
Account assets.
9
In addition, the Code requires that the investments of the Separate Account
be "adequately diversified" in order for the Policies to be treated as life
insurance contracts for Federal income tax purposes. It is intended that the
Separate Account, through the Eligible Funds, will satisfy these
diversification requirements. If Eligible Fund shares are sold directly to
either non-qualified plans or to tax-qualified retirement plans that later lose
their tax qualified status, there may be adverse consequences under the
diversification rules.
The following discussion assumes that the Policy will qualify as a life
insurance contract for Federal income tax purposes.
TAX TREATMENT OF POLICY BENEFITS. The death benefit under the Policy should
generally be excludable from the gross income of the Beneficiary to the extent
provided in under Section 101 of the Code. In the case of employer-owned life
insurance as defined in Section 101(j), the amount of the death benefit
excludable from gross income is limited to premiums paid unless the Policy
falls within certain specified exceptions and a notice and consent requirement
is satisfied before the Policy is issued. Certain specified exceptions are
based on the status of an employee as highly compensated, a director or
recently employed. There are also exceptions for Policy proceeds paid to an
employee's heirs. These exceptions only apply if proper notice is given to the
insured employee and consent is received from the insured employee before the
issuance of the Policy. These rules apply to Policies issued August 18, 2006
and later and also apply to policies issued before August 18, 2006 after a
material increase in the death benefit or other material change. An IRS
reporting requirement applies to employer-owned life insurance subject to these
rules. Because these rules are complex and will affect the tax treatment of
death benefits, it is advisable to consult tax counsel. The death benefit will
also be taxable in the case of a transfer-for-value unless certain exceptions
apply.
Many changes or transactions involving a Policy may have tax consequences,
depending on the circumstances. Such changes include, but are not limited to,
the exchange of the Policy, a change of the Policy's Face Amount, a Policy
Loan, an additional premium payment, a Policy lapse with an outstanding Policy
Loan, a partial withdrawal, or a surrender of the Policy. The transfer of the
Policy or designation of a Beneficiary may have Federal, state, and/or local
transfer and inheritance tax consequences, including the imposition of gift,
estate, and generation-skipping transfer taxes. For example, the transfer of
the Policy to, or the designation as a Beneficiary of, or the payment of
proceeds to, a person who is assigned to a generation which is two or more
generations below the generation assignment of the Owner may have generation
skipping transfer tax consequences under Federal tax law. The individual
situation of each Owner or Beneficiary will determine the extent, if any, to
which Federal, state, and local transfer and inheritance taxes may be imposed
and how ownership or receipt of Policy proceeds will be treated for purposes of
Federal, state and local estate, inheritance, generation skipping and other
taxes.
A Policy may also be used in various arrangements, including non-qualified
deferred compensation or salary continuation plans, split dollar insurance
plans, executive bonus plans, retiree medical benefit plans and others. The tax
consequences of such plans may vary depending on the particular facts and
circumstances of each individual arrangement. Therefore, if you are
contemplating a change to an existing Policy or using a Policy in any
arrangement the value of which depends in part on its tax consequences, you
should be sure to consult a qualified tax adviser regarding the tax attributes
of the particular arrangement.
Generally, the Owner will not be deemed to be in constructive receipt of the
Policy's Cash Value, including increments thereof, under the Policy until there
is a distribution. Under a complete surrender or lapse of any Policy, if the
amount received plus the amount of outstanding Indebtedness exceeds the total
investments in the Policy, the excess will generally be treated as ordinary
income subject to tax. The tax consequences of other distributions from, and
Policy Loans taken from or secured by, a Policy depend upon whether the Policy
is classified as a "modified endowment contract".
MODIFIED ENDOWMENT CONTRACTS. A policy may be treated as a modified
endowment contract depending upon the amount of premiums paid in relation to
the death benefit provided under such Policy. The premium limitation rules for
determining whether a Policy is a modified endowment contract are extremely
complex. In general, however, a Policy will be a modified endowment contract if
the accumulated premiums paid at any time during the first seven Policy Years
exceed the sum of the level premiums which would have been paid on or before
such time if the Policy provided for paid-up future benefits after the payment
of seven level annual premiums.
10
In addition, if a Policy is "materially changed" it may cause such Policy to
be treated as a modified endowment contract. The material change rules for
determining whether a Policy is a modified endowment contract are also
extremely complex. In general, however, the determination of whether a Policy
will be a modified endowment contract after a material change generally depends
upon the relationship among the death benefit at the time of such change, the
Cash Value at the time of the change and the additional premiums paid in the
seven Policy Years starting with the date on which the material change occurs.
Moreover, a life insurance contract received in exchange for a life
insurance contract classified as a modified endowment contract will also be
treated as a modified endowment contract. A reduction in a Policy's benefits
may also cause such Policy to become a modified endowment contract.
Accordingly, a prospective Owner should contact a competent tax adviser
before purchasing a Policy to determine the circumstances under which the
Policy would be a modified endowment contract. In addition, an Owner should
contact a competent tax adviser before paying any additional premiums or making
any other change to, including an exchange of, a Policy to determine whether
such premium or change would cause the Policy (or the new Policy in the case of
an exchange) to be treated as a modified endowment contract.
NOTE: MOST DESTINY POLICIES WERE MODIFIED ENDOWMENT CONTACTS FROM THE DATE OF
ISSUE, THEREFORE, DISTRIBUTIONS FROM MOST DESTINY POLICIES ARE TAXED AS FOLLOWS:
DISTRIBUTIONS FROM POLICIES CLASSIFIED AS MODIFIED ENDOWMENT
CONTRACT. Policies classified as modified endowment contracts will be subject
to the following tax rules: First, all distributions, including distributions
upon surrender, from such a Policy are treated as ordinary income subject to
tax up to the amount equal to the excess (if any) of the Cash Value immediately
before the distribution over the investment in the Policy (described below) at
such time. Second, Policy Loans taken from, or secured by, such a Policy, as
well as due but unpaid interest thereon, are treated as distributions from such
a Policy and taxed accordingly. Third, a 10 percent additional income tax is
imposed on the portion of any distribution from, or Policy Loan taken from or
secured by, such a Policy that is included in income, except where the
distribution or Policy Loan (a) is made on or after the Owner attains age
59 1/2, (b) is attributable to the Owner's becoming disabled, or (c) is part of
a series of substantially equal periodic payments for the life (or life
expectancy) of the Owner or the joint lives (or joint life expectancies) of the
Owner and the Owner's Beneficiary. The foregoing exceptions to the 10 percent
additional income tax will generally not apply to a Policy Owner that is a
non-natural person, such as a corporation.
DISTRIBUTIONS FROM POLICIES NOT CLASSIFIED AS MODIFIED ENDOWMENT
CONTRACT. Distributions from Policies not classified as a modified endowment
contract are generally treated first as a non-taxable recovery of the
investment in the Policy (described below) and then, only after the return of
all such investment in the Policy, as gain taxable as ordinary income. An
exception to this general rule occurs in the case of a decrease in the Policy's
death benefit (possibly including a partial withdrawal) or any other change
that reduces benefits under the Policy in the first 15 years after the Policy
is issued and that results in cash distribution to the Owner in order for the
Policy to continue to qualify as a life insurance contract for Federal income
tax purposes. Such a cash distribution will be subject to different tax rules
and may be treated in whole or in part as taxable income.
Policy Loans from, or secured by, a Policy that is not a modified endowment
contract should generally not be treated as distributions. Instead, such loans
should generally be treated as indebtedness of the Owner. However, because the
tax consequences associated with Policy Loans are not always clear, in
particular, with respect to Policy Loans outstanding after the tenth Policy
year, you should consult a tax adviser prior to taking any Policy Loan.
Upon a complete surrender or lapse of a Policy that is not a modified
endowment contract, if the amount received plus the amount of indebtedness
exceeds the total investment in the Policy, the excess will generally be
treated as ordinary income subject to tax.
Neither distributions (including distributions upon surrender or lapse) nor
Policy Loans from, or secured by, a Policy that is not a modified endowment
contract are subject to the 10 percent additional income tax.
If a Policy which is not a modified endowment contract subsequently becomes
a modified endowment contract, then any distribution made from the Policy
within two years prior to the date of such change in status may become taxable.
11
POLICY LOANS. Generally, interest paid on any loan under a life insurance
Policy is not deductible. AN OWNER SHOULD CONSULT A COMPETENT TAX ADVISER IF
THE DEDUCTIBILITY OF LOAN INTEREST IS A CONSIDERATION IN THE PURCHASE OF A
POLICY. If a Policy Loan is outstanding when a Policy is canceled or lapses,
the amount of the outstanding Indebtedness will be added to the amount
distributed and will be taxed accordingly.
INVESTMENT IN THE POLICY. Investment in the Policy means (i) the aggregate
amount of any premiums or other consideration paid for a Policy, minus (ii) the
aggregate amount received under the Policy which is excluded from gross income
of the Owner (except that the amount of any Policy Loan from, or secured by, a
Policy that is a modified endowment contract, to the extent such amount is
excluded from gross income, will be disregarded), plus (iii) the amount of any
Policy Loan from, or secured by, a Policy that is a modified endowment contract
to the extent that such amount is included in the gross income of the Owner.
MULTIPLE POLICES. All modified endowment contracts that are issued by the
Company (or its affiliates) to the same Owner during any calendar year are
treated as one modified endowment contract for purposes of determining the
amount includible in gross income under Section 72(e) of the Code.
LIFE INSURANCE PURCHASES BY NONRESIDENT ALIENS AND FOREIGN
CORPORATIONS. Policy Owners that are not U.S. citizens or residents will
generally be subject to U.S. Federal withholding tax on taxable distributions
from life insurance policies at a 30% rate, unless a lower treaty rate applies.
In addition, Policy Owners may be subject to state and/or municipal taxes and
taxes that may be imposed by the Policy Owner's country of citizenship or
residence.
WITHHOLDING. To the extent that Policy distributions are taxable, they are
generally subject to withholding for the recipient's Federal income tax
liability. Recipients can generally elect, however, not to have tax withheld
from distributions.
ESTATE, GIFT AND GENERATION-SKIPPING TRANSFER TAXES. The transfer of the
Policy or the designation of a beneficiary may have Federal, state, and/or
local transfer and inheritance tax consequences, including the imposition of
gift, estate, and generation-skipping transfer taxes. When the insured dies,
the death proceeds will generally be includable in the Policy Owner's estate
for purposes of the Federal estate tax if the Policy Owner was the insured,
retained incidents of ownership at death, or made a gift transfer of the Policy
within 3 years of death. If the Policy Owner was not the insured, the fair
market value of the Policy would be included in the Policy Owner's estate upon
the Policy Owner's death.
Moreover, under certain circumstances, the Internal Revenue Code may impose
a "generation-skipping transfer tax" when all or part of a life insurance
policy is transferred to, or a death benefit is paid to, an individual two or
more generations younger than the Policy Owner. Regulations issued under the
Internal Revenue Code may require us to deduct the tax from your Policy, or
from any applicable payment, and pay it directly to the IRS.
Qualified tax advisers should be consulted concerning the estate and gift
tax consequences of Policy ownership and distributions under Federal, state and
local law. The individual situation of each Policy Owner or beneficiary will
determine the extent, if any, to which Federal, state, and local transfer and
inheritance taxes may be imposed and how ownership or receipt of Policy
proceeds will be treated for purposes of Federal, state and local estate,
inheritance, generation-skipping and other taxes.
In general, current rules provide for a $5 million estate, gift and
generation-skipping transfer tax exemption (as indexed for inflation) and a top
tax rate of 40 percent.
The complexity of the tax law, along with uncertainty as to how it might be
modified in coming years, underscores the importance of seeking guidance from a
qualified adviser to help ensure that your estate plan adequately addresses
your needs and those of your beneficiaries under all possible scenarios.
CONTINUATION OF POLICY BEYOND ATTAINED AGE 100. The tax consequences of
continuing the Policy beyond the Insured's Attained Age 100 birthday are
unclear. You should consult a tax adviser if you intend to keep the Policy in
force beyond the Insured's Attained Age 100.
GUIDANCE ON SPLIT DOLLAR PLANS. The IRS has issued guidance on split dollar
insurance plans. A tax adviser should be consulted with respect to this
guidance if your Policy is, or may become, subject to a split dollar insurance
plan. If your Policy is part of an equity split dollar arrangement taxed under
the economic benefit regime, there is a risk that some portion of the Policy
cash value may be taxed prior to any Policy distribution.
12
In addition, the Sarbanes-Oxley Act of 2002 (the "Act") which was signed
into law on July 30, 2002, prohibits, with exceptions, publicly-traded
companies, including non-U.S. companies that have securities listed on U.S.
exchanges, from extending, directly or indirectly or through a subsidiary, many
types of personal loans to their directors or executive officers. It is
possible that this prohibition may be interpreted to apply to split-dollar life
insurance arrangements for directors and executive officers of such companies,
since such arrangements can arguably be viewed as involving a loan from the
employer for at least some purposes.
Any affected business contemplating the payment of a premium on an existing
Policy or the purchase of new Policy in connection with a split-dollar life
insurance arrangement should consult legal counsel.
Split dollar insurance plans that provide deferred compensation may be
subject to specific tax rules governing deferred compensation arrangements.
Failure to adhere to these rules will result in adverse tax consequences.
CORPORATE ALTERNATIVE MINIMUM TAX. There may also be an indirect tax upon
the income in the Policy or the proceeds of a Policy under the Federal
corporate alternative minimum tax, if the Owner is subject to that tax.
PUERTO RICO. We believe that Policies subject to Puerto Rican tax law will
generally receive treatment similar, with certain modifications, to that
described above. Among other differences, Policies governed by Puerto Rican tax
law are not currently subject to the rules described above regarding Modified
Endowment Contracts. You should consult your tax adviser with respect to Puerto
Rican tax law governing the Policies.
POSSIBLE TAX LAW CHANGES. Although the likelihood of legislative changes is
uncertain, there is always the possibility that the tax treatment of the Policy
could change by legislation or otherwise. Consult a tax adviser with respect to
legislative developments and their effect on the Policy.
FOREIGN TAX CREDITS. To the extent permitted under Federal tax law, we may
claim the benefit of certain foreign tax credits attributable to taxes paid by
certain Eligible Funds to foreign jurisdictions.
POSSIBLE CHARGE FOR TAXES. At the present time, the Company makes no charge
to the Separate Account for any Federal, state, or local taxes (as opposed to
Premium Tax Charges which are deducted from premium payments) that it incurs
which may be attributable to such Separate Account or to the Policies. The
Company, however, reserves the right in the future to make a charge for any
such tax or other economic burden resulting from the application of the tax
laws that it determines to be properly attributable to the Separate Account or
to the Policies.
RESTRICTIONS ON FINANCIAL TRANSACTIONS
Applicable laws designed to counter terrorism and prevent money laundering
might, in certain circumstances, require us to reject a premium payment and/or
block or "freeze" your Policy. If these laws apply in a particular situation,
we would not be allowed to process any request for withdrawals, surrenders,
loans or death benefits, make transfers or continue making payments under your
death benefit option until instructions are received from the appropriate
regulator. We also may be required to provide additional information about you
or your Policy to government regulators.
LEGAL PROCEEDINGS
In the ordinary course of business, General American, similar to other life
insurance companies, is involved in lawsuits (including class action lawsuits),
arbitrations and other legal proceedings. Also, from time to time, state and
federal regulators or other officials conduct formal and informal examinations
or undertake other actions dealing with various aspects of the financial
services and insurance industries. In some legal proceedings involving
insurers, substantial damages have been sought and/or material settlement
payments have been made. It is not possible to predict with certainty the
ultimate outcome of any pending legal proceeding or regulatory action. However,
General American does not believe any such action or proceeding will have a
material adverse effect upon the Separate Account or upon the ability of
MetLife Investors Distribution Company to perform its contract with the
Separate Account or of General American to meet its obligations under the
Contracts.
13
FINANCIAL STATEMENTS
The financial statements of General American which are included in this
prospectus supplement should be distinguished from the financial statements of
the Separate Account, which are also included in this prospectus supplement,
and should be considered only as bearing on the ability of General American to
meet its obligations under the Policy. They should not be considered as bearing
on the investment performance of the assets held in the Separate Account.
14
FLEXIBLE PREMIUM VL SUPPLEMENT DATED APRIL 28, 2014
GENERAL AMERICAN LIFE INSURANCE COMPANY
Variable Life Insurance Policy
(Destiny)
Supplement dated April 28, 2014
to the Prospectus dated May 1, 2004
Flexible Premium
Variable Life Insurance Policies
(Variable Universal Life/Executive Benefit)
Supplement dated April 28, 2014
to the Prospectuses dated May 1, 2002
Flexible Premium Joint and Last Survivor
Variable Life Insurance Policy
Supplement dated April 28, 2014
to the Prospectus dated May 1, 2002
Flexible Premium Variable Life Insurance Policies
(VUL 95/VUL 100/VGSP/Russell VUL)
Supplement dated April 28, 2014
to the Prospectuses dated May 1, 2000
This supplement updates certain information contained in the last full
prospectus for each of the above-referenced variable life insurance policies,
as annually and periodically supplemented. You should read and retain this
supplement. We will send you an additional copy of the last full prospectus for
your policy, without charge, on request. These policies are no longer available
for sale.
General American Life Insurance Company is an indirect wholly-owned
subsidiary of Metropolitan Life Insurance Company ("MetLife"). MetLife is a
wholly-owned subsidiary of MetLife, Inc., a publicly-traded company. General
American's Home Office is 13045 Tesson Ferry Road, St. Louis, Missouri 63128.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE POLICIES OR DETERMINED IF THIS
SUPPLEMENT IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE SECURITIES AND EXCHANGE COMMISSION MAINTAINS A WEB SITE THAT CONTAINS
MATERIAL INCORPORATED BY REFERENCE AND OTHER INFORMATION REGARDING REGISTRANTS
THAT FILE ELECTRONICALLY WITH THE SECURITIES AND EXCHANGE COMMISSION. THE
ADDRESS OF THE SITE IS HTTP://WWW.SEC.GOV.
THE UNDERLYING FUND PROSPECTUSES MAY BE OBTAINED BY CALLING 1-800-638-9294.
WE DO NOT GUARANTEE HOW ANY OF THE DIVISIONS OR FUNDS WILL PERFORM. THE
POLICIES AND THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY FINANCIAL INSTITUTION AND ARE NOT FEDERALLY INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER
GOVERNMENT AGENCY.
The Financial Industry Regulatory Authority ("FINRA") provides background
information about broker-dealers and their registered representatives through
FINRA BrokerCheck. You may contact the FINRA BrokerCheck Hotline at
1-800-289-9999, or log on to www.finra.org. An investor brochure that includes
information describing FINRA BrokerCheck is available through the Hotline or
on-line.
1
THE COMPANY
General American is principally engaged in writing individual life insurance
policies and annuity contracts. It is admitted to do business in 49 states, the
District of Columbia, Puerto Rico, and in four Canadian provinces. The
principal offices (Home Office) of General American are located at 13045 Tesson
Ferry Road, St. Louis, Missouri 63128. The Administrative Office for various
Policy transactions is as follows:
Premium Payments General American
P.O. Box 790201
St. Louis, MO 63179-0201
Payment Inquires and General American
Correspondence P.O. Box 355
Warwick, RI 02887-0355
Beneficiary and Ownership General American
Changes P.O. Box 357
Warwick, RI 02887-0356
Surrenders, Loans, General American
Withdrawals and P.O. Box 356
Division Transfers Warwick, RI 02887-0356
Death Claims General American
P.O. Box 356
Warwick, RI 02887-0356
All Telephone (800) 638-9294
Transactions and Inquiries
You may request an account transfer or reallocation of future premiums by
written request (which may be telecopied) to our Administrative Office, by
telephoning us, or over the Internet. To request a transfer or reallocation by
telephone, you should contact your registered representative, or contact us at
(800) 638-9294. To request a transfer or reallocation over the Internet, you
may log on to our website at www.genamerica.com. We use reasonable procedures
to confirm that instructions communicated by telephone, facsimile or Internet
are genuine. Any telephone, facsimile or Internet instructions that we
reasonably believe to be genuine will be your responsibility, including losses
arising from any errors in the communication of instructions. However, because
telephone and Internet transactions may be available to anyone who provides
certain information about you and your Policy, you should protect that
information. We may not be able to verify that you are the person providing
telephone or Internet instructions, or that you have authorized any such person
to act for you.
Telephone, facsimile, and computer systems (including the Internet) may not
always be available. Any telephone, facsimile, or computer system, whether it
is yours, your service provider's, your registered representative's, or ours,
can experience outages or slowdowns for a variety of reasons. These outages or
slowdowns may delay or prevent our processing of your request. Although we have
taken precautions to help our systems handle heavy use, we cannot promise
complete reliability under all circumstances. If you are experiencing problems,
you should make your request by writing to our Administrative Office.
If you send premium payments or transaction requests to an address other
than the one we have designated for receipt of such payments or requests, we
may return the premium payment to you, or there may be a delay in applying the
payment or transaction to your Policy.
THE SEPARATE ACCOUNT
The separate account consists of divisions, each of which corresponds to an
underlying Fund. Each division may either make money or lose money. Therefore
if you invest in a division of the separate account, you may either make money
or lose money, depending on the investment experience of that division. There
is no guaranteed rate of return in the separate account.
2
The following chart shows the Funds that are available under the policy
along with the name of the investment adviser, sub-adviser (where applicable)
and investment objective of each Fund. The Funds have different investment
goals and strategies. You should review the prospectus of each Fund, or seek
professional guidance in determining which Fund(s) best meet your objectives.
NOTE: THE RUSSELL INVESTMENT FUNDS ARE NOT AVAILABLE TO DESTINY OR EXECUTIVE
BENEFIT POLICIES. FOR ALL OTHER POLICIES, THE RUSSELL INVESTMENT FUNDS ARE ONLY
AVAILABLE FOR POLICIES WITH AN ISSUE DATE PRIOR TO JANUARY 1, 2000.
AMERICAN FUNDS INSURANCE SERIES(R) ADVISER: CAPITAL RESEARCH AND MANAGEMENT COMPANY
FUND SUB-ADVISER INVESTMENT OBJECTIVE
---- ----------- --------------------
American Funds Global N/A Long-term growth of capital.
Small Capitalization Fund
American Funds Growth N/A Growth of capital.
Fund
American Funds Growth- N/A Long-term growth of capital and income.
Income Fund
FIDELITY(R) VARIABLE INSURANCE PRODUCTS ADVISER: FIDELITY MANAGEMENT & RESEARCH COMPANY
FUND SUB-ADVISER INVESTMENT OBJECTIVE
---- ----------- --------------------
Equity-Income Portfolio FMR Co., Inc. Reasonable income. The fund will also consider the
potential for capital appreciation. The fund's goal is to
achieve a yield which exceeds the composite yield of
securities comprising the S&P 500(R) Index.
Mid Cap Portfolio FMR Co., Inc. Long-term growth of capital.
JPMORGAN INSURANCE TRUST ADVISER: J.P. MORGAN INVESTMENT MANAGEMENT INC.
FUND SUB-ADVISER INVESTMENT OBJECTIVE
---- ----------- --------------------
JPMorgan Insurance N/A To maximize total return by investing primarily in a
Trust Core Bond Portfolio diversified portfolio of intermediate- and long-term debt
securities.
JPMorgan Insurance N/A Capital growth over the long term.
Trust Small Cap Core
Portfolio
MET INVESTORS SERIES TRUST ADVISER: METLIFE ADVISERS, LLC
FUND SUB-ADVISER INVESTMENT OBJECTIVE
---- ----------- --------------------
Clarion Global Real Estate CBRE Clarion Securities Total return through investment in real estate securities,
Portfolio LLC emphasizing both capital appreciation and current
income.
ClearBridge Aggressive ClearBridge Investments, Capital appreciation.
Growth Portfolio LLC
Harris Oakmark Harris Associates L.P. Long-term capital appreciation.
International Portfolio
Invesco Mid Cap Value Invesco Advisers, Inc. High total return by investing in equity securities of
Portfolio (formerly Lord mid-sized companies.
Abbett Mid Cap Value
Portfolio)
Invesco Small Cap Invesco Advisers, Inc. Long-term growth of capital.
Growth Portfolio
3
FUND SUB-ADVISER INVESTMENT OBJECTIVE
---- ----------- --------------------
Lord Abbett Bond Lord, Abbett & Co. LLC High current income and the opportunity for capital
Debenture Portfolio appreciation to produce a high total return.
MFS(R) Research Massachusetts Financial Capital appreciation
International Portfolio Services Company
Morgan Stanley Mid Cap Morgan Stanley Capital appreciation.
Growth Portfolio Investment Management
Inc.
PIMCO Total Return Pacific Investment Maximum total return, consistent with the preservation
Portfolio Management Company of capital and prudent investment management.
LLC
T. Rowe Price Large Cap T. Rowe Price Long-term capital appreciation by investing in common
Value Portfolio Associates, Inc. stocks believed to be undervalued. Income is a
secondary objective.
T. Rowe Price Mid Cap T. Rowe Price Long-term growth of capital.
Growth Portfolio Associates, Inc.
METROPOLITAN SERIES FUND ADVISER: METLIFE ADVISERS, LLC
FUND SUB-ADVISER INVESTMENT OBJECTIVE
---- ----------- --------------------
Baillie Gifford Baillie Gifford Overseas Long-term growth of capital.
International Stock Limited
Portfolio
Barclays Aggregate Bond MetLife Investment To track the performance of the Barclays U.S. Aggregate
Index Portfolio Management, LLC Bond Index.
BlackRock Bond Income BlackRock Advisors, LLC A competitive total return primarily from investing in
Portfolio fixed-income securities.
BlackRock Capital BlackRock Advisors, LLC Long-term growth of capital.
Appreciation Portfolio
BlackRock Large Cap BlackRock Advisors, LLC Long-term growth of capital.
Value Portfolio
BlackRock Money Market BlackRock Advisors, LLC A high level of current income consistent with
Portfolio/1/ preservation of capital.
Frontier Mid Cap Growth Frontier Capital Maximum capital appreciation.
Portfolio Management Company,
LLC
Jennison Growth Jennison Associates LLC Long-term growth of capital.
Portfolio
Met/Artisan Mid Cap Artisan Partners Limited Long-term capital growth.
Value Portfolio Partnership
MetLife Mid Cap Stock MetLife Investment To track the performance of the Standard & Poor's
Index Portfolio Management, LLC MidCap 400(R) Composite Stock Price Index.
MetLife Stock Index MetLife Investment To track the performance of the Standard & Poor's
Portfolio Management, LLC 500(R) Composite Stock Price Index.
MFS(R) Total Return Massachusetts Financial Favorable total return through investment in a
Portfolio Services Company diversified portfolio.
MFS(R) Value Portfolio Massachusetts Financial Capital appreciation.
Services Company
MSCI EAFE(R) Index MetLife Investment To track the performance of the MSCI EAFE(R) Index.
Portfolio Management, LLC
4
FUND SUB-ADVISER INVESTMENT OBJECTIVE
---- ----------- --------------------
Neuberger Berman Neuberger Berman High total return, consisting principally of capital
Genesis Portfolio Management LLC appreciation.
Russell 2000(R) Index MetLife Investment To track the performance of the Russell 2000(R) Index.
Portfolio Management, LLC
T. Rowe Price Large Cap T. Rowe Price Long-term growth of capital.
Growth Portfolio Associates, Inc.
T. Rowe Price Small Cap T. Rowe Price Long-term capital growth.
Growth Portfolio Associates, Inc.
Van Eck Global Natural Van Eck Associates Long-term capital appreciation with income as a
Resources Portfolio Corporation secondary consideration.
Western Asset Western Asset To maximize total return consistent with preservation of
Management Management Company capital and maintenance of liquidity.
U.S. Government
Portfolio
WMC Balanced Portfolio Wellington Management Seeks long-term capital appreciation with some current
(formerly BlackRock Company, LLP income.
Diversified Portfolio)
WMC Core Equity Wellington Management Seeks to provide a growing stream of income over time
Opportunities Portfolio Company, LLP and, secondarily, long-term capital appreciation and
(formerly Davis Venture current income.
Value Portfolio)
RUSSELL INVESTMENT
FUNDS ADVISER: RUSSELL INVESTMENT MANAGEMENT COMPANY
FUND SUB-ADVISER INVESTMENT OBJECTIVE
---- ----------- --------------------
Aggressive Equity Fund N/A To provide long term capital growth.
Core Bond Fund N/A To provide current income, and as a secondary
objective, capital appreciation.
Multi-Style Equity Fund N/A To provide long term capital growth.
Non-U.S. Fund N/A To provide long term capital growth.
VAN ECK VIP TRUST ADVISER: VAN ECK ASSOCIATES CORPORATION
FUND SUB-ADVISER INVESTMENT OBJECTIVE
---- ----------- --------------------
Van Eck VIP Emerging N/A Long-term capital appreciation by investing primarily in
Markets Fund equity securities in emerging markets around the world.
----------
/1/An investment in the BlackRock Money Market Portfolio is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. Although the Portfolio seeks to preserve the value of your
investment at $100 per share, it is possible to lose money by investing in
the Portfolio. During extended periods of low interest rates, the yields of
the Division investing in the BlackRock Money Market Portfolio may become
extremely low and possibly negative.
5
FOR MORE INFORMATION REGARDING THE FUNDS AND THEIR INVESTMENT ADVISERS AND
SUB-ADVISERS, SEE THE FUND PROSPECTUSES AND THEIR STATEMENTS OF ADDITIONAL
INFORMATION, WHICH YOU CAN OBTAIN BY CALLING 1-800-638-9294.
OTHER FUNDS AND SHARE CLASSES
Some of the Funds offer various classes of shares, each of which has a
different level of expenses. The prospectuses for the Funds may provide
information for share classes that are not available through the Policy. When
you consult the prospectus for any Fund, you should be careful to refer to only
the information regarding the class of shares that is available through the
Policy. For the JPMorgan Insurance Trust, we offer Class 1 shares; for Fidelity
Variable Insurance Products and the Van Eck VIP Trust, we offer Initial Class
shares; for the Metropolitan Series Fund, Inc., we offer Class A shares; for
the Met Investors Series Trust, we offer Class A shares; and for the American
Funds Insurance Series, we offer Class 2 shares.
CHARGES AND DEDUCTIONS
Charges will be deducted in connection with the Policy to compensate the
Company for providing the insurance benefits set forth in the Policy and any
additional benefits added by rider, administering the Policies, incurring
expenses in distributing the Policies, and assuming certain risks in connection
with the Policy. We may profit from one or more of the charges deducted under
the Policy, including the cost of insurance charge. We may use these profits
for any corporate purpose.
The following table shows the minimum and maximum total operating expenses
charged by the Funds for the fiscal year ended December 31, 2013. Expenses of
the Funds may be higher or lower in the future. Certain Funds may impose a
redemption fee in the future. More detail concerning each Fund's fees and
expenses is contained in the table that follows and in the prospectus for each
Fund.
MINIMUM MAXIMUM
------- -------
TOTAL ANNUAL FUND OPERATING EXPENSES
(expenses that are deducted from Fund assets, including management fees, distribution
and/or service (12b-1) fees, and other expenses).................................... 0.27% 1.23%
The following table describes the annual operating expenses for each Fund
for the year ended December 31, 2013, before and after any applicable fee
waivers and expense reimbursements.
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
DISTRIBUTION ACQUIRED TOTAL FEE WAIVER NET TOTAL
AND/OR FUND FEES ANNUAL AND/OR ANNUAL
MANAGEMENT SERVICE (12B-1) OTHER AND OPERATING EXPENSE OPERATING
FEE FEES EXPENSES EXPENSES EXPENSES REIMBURSEMENT EXPENSES
---------- --------------- -------- --------- --------- ------------- ---------
AMERICAN FUNDS INSURANCE
SERIES(R) -- CLASS 2
American Funds Global Small Capitalization
Fund...................................... 0.70% 0.25% 0.04% -- 0.99% -- 0.99%
American Funds Growth Fund................. 0.33% 0.25% 0.02% -- 0.60% -- 0.60%
American Funds Growth-Income Fund.......... 0.27% 0.25% 0.02% -- 0.54% -- 0.54%
FIDELITY(R) VARIABLE INSURANCE PRODUCTS --
INITIAL CLASS
Equity-Income Portfolio.................... 0.45% -- 0.10% 0.02% 0.57% -- 0.57%
Mid Cap Portfolio.......................... 0.55% -- 0.09% -- 0.64% -- 0.64%
JPMORGAN INSURANCE TRUST -- CLASS 1
JPMorgan Insurance Trust Core Bond
Portfolio................................. 0.40% -- 0.20% 0.01% 0.61% 0.00% 0.61%
JPMorgan Insurance Trust Small Cap Core
Portfolio................................. 0.65% -- 0.26% 0.02% 0.93% 0.00% 0.93%
6
DISTRIBUTION ACQUIRED TOTAL FEE WAIVER NET TOTAL
AND/OR FUND FEES ANNUAL AND/OR ANNUAL
MANAGEMENT SERVICE (12B-1) OTHER AND OPERATING EXPENSE OPERATING
FEE FEES EXPENSES EXPENSES EXPENSES REIMBURSEMENT EXPENSES
---------- --------------- -------- --------- --------- ------------- ---------
MET INVESTORS SERIES TRUST -- CLASS A
Clarion Global Real Estate Portfolio..... 0.60% -- 0.05% -- 0.65% -- 0.65%
ClearBridge Aggressive Growth Portfolio.. 0.59% -- 0.02% -- 0.61% 0.00% 0.61%
Harris Oakmark International Portfolio... 0.77% -- 0.06% -- 0.83% 0.02% 0.81%
Invesco Mid Cap Value Portfolio.......... 0.65% -- 0.05% 0.08% 0.78% 0.02% 0.76%
Invesco Small Cap Growth Portfolio....... 0.85% -- 0.02% -- 0.87% 0.02% 0.85%
Lord Abbett Bond Debenture Portfolio..... 0.51% -- 0.03% -- 0.54% -- 0.54%
MFS(R) Research International Portfolio.. 0.68% -- 0.07% -- 0.75% 0.06% 0.69%
Morgan Stanley Mid Cap Growth
Portfolio............................... 0.64% -- 0.05% -- 0.69% 0.01% 0.68%
PIMCO Total Return Portfolio............. 0.48% -- 0.03% -- 0.51% -- 0.51%
T. Rowe Price Large Cap Value Portfolio.. 0.57% -- 0.02% -- 0.59% -- 0.59%
T. Rowe Price Mid Cap Growth Portfolio... 0.75% -- 0.03% -- 0.78% -- 0.78%
METROPOLITAN SERIES FUND -- CLASS A
Baillie Gifford International Stock
Portfolio............................... 0.79% -- 0.08% -- 0.87% 0.12% 0.75%
Barclays Aggregate Bond Index Portfolio.. 0.25% -- 0.03% -- 0.28% 0.01% 0.27%
BlackRock Bond Income Portfolio.......... 0.33% -- 0.02% -- 0.35% 0.00% 0.35%
BlackRock Capital Appreciation Portfolio. 0.69% -- 0.02% -- 0.71% 0.01% 0.70%
BlackRock Large Cap Value Portfolio...... 0.63% -- 0.02% -- 0.65% 0.06% 0.59%
BlackRock Money Market Portfolio......... 0.33% -- 0.02% -- 0.35% 0.02% 0.33%
Frontier Mid Cap Growth Portfolio........ 0.72% -- 0.03% -- 0.75% 0.01% 0.74%
Jennison Growth Portfolio................ 0.60% -- 0.02% -- 0.62% 0.07% 0.55%
Met/Artisan Mid Cap Value Portfolio...... 0.81% -- 0.02% -- 0.83% -- 0.83%
MetLife Mid Cap Stock Index Portfolio.... 0.25% -- 0.05% 0.02% 0.32% 0.00% 0.32%
MetLife Stock Index Portfolio............ 0.25% -- 0.02% -- 0.27% 0.01% 0.26%
MFS(R) Total Return Portfolio............ 0.55% -- 0.04% -- 0.59% -- 0.59%
MFS(R) Value Portfolio................... 0.70% -- 0.02% -- 0.72% 0.14% 0.58%
MSCI EAFE(R) Index Portfolio............. 0.30% -- 0.10% 0.01% 0.41% 0.00% 0.41%
Neuberger Berman Genesis Portfolio....... 0.80% -- 0.03% -- 0.83% 0.01% 0.82%
Russell 2000(R) Index Portfolio.......... 0.25% -- 0.06% 0.11% 0.42% 0.00% 0.42%
T. Rowe Price Large Cap Growth
Portfolio............................... 0.60% -- 0.03% -- 0.63% 0.01% 0.62%
T. Rowe Price Small Cap Growth
Portfolio............................... 0.48% -- 0.04% -- 0.52% -- 0.52%
Van Eck Global Natural Resources
Portfolio............................... 0.78% -- 0.03% 0.01% 0.82% 0.01% 0.81%
Western Asset Management U.S.
Government Portfolio.................... 0.47% -- 0.02% -- 0.49% 0.01% 0.48%
WMC Balanced Portfolio................... 0.46% -- 0.05% -- 0.51% 0.00% 0.51%
WMC Core Equity Opportunities Portfolio.. 0.70% -- 0.02% -- 0.72% 0.11% 0.61%
RUSSELL INVESTMENT FUNDS
Aggressive Equity Fund................... 0.90% -- 0.15% -- 1.05% 0.05% 1.00%
Core Bond Fund........................... 0.55% -- 0.13% 0.01% 0.69% 0.05% 0.64%
Multi-Style Equity Fund.................. 0.73% -- 0.11% -- 0.84% -- 0.84%
Non-U.S. Fund............................ 0.90% -- 0.14% -- 1.04% 0.05% 0.99%
7
DISTRIBUTION ACQUIRED TOTAL FEE WAIVER NET TOTAL
AND/OR FUND FEES ANNUAL AND/OR ANNUAL
MANAGEMENT SERVICE (12B-1) OTHER AND OPERATING EXPENSE OPERATING
FEE FEES EXPENSES EXPENSES EXPENSES REIMBURSEMENT EXPENSES
---------- --------------- -------- --------- --------- ------------- ---------
VAN ECK VIP TRUST -- INITIAL CLASS
Van Eck VIP Emerging Markets Fund.. 1.00% -- 0.23% -- 1.23% 0.00% 1.23%
The information shown in the table above was provided by the Funds and we
have not independently verified that information. Net Total Annual Operating
Expenses shown in the table reflect any current fee waiver or expense
reimbursement arrangement that will remain in effect for a period of at least
one year from the date of the Fund's 2014 prospectus. "0.00%" in the Fee Waiver
and/or Expense Reimbursement column indicates that there is such an arrangement
in effect for the Fund but that the expenses of the Fund are below the level
that would trigger the waiver or reimbursement. Fee waiver and expense
reimbursement arrangements with a duration of less than one year, or
arrangements that may be terminated without the consent of the Fund's board of
directors or trustees, are not shown.
POLICY RIGHTS
SEPARATE ACCOUNT CHARGES
We will waive the following amount of the Mortality and Expense Risk Charge:
the amount, if any, equal to the underlying fund expenses that are in excess of
0.68% for the Division investing in the Jennison Growth Portfolio, and that are
in excess of 0.88% for the Division investing in the MFS Research International
Portfolio.
FEDERAL TAX MATTERS
INTRODUCTION
The following summary provides a general description of the Federal income
tax considerations associated with the Policy and does not purport to be
complete or to cover all situations. The summary does not address state, local
or foreign tax issues related to the Policy. This discussion is not intended as
tax advice. Counsel or other competent tax advisers should be consulted for
more complete information. This discussion is based upon General American's
understanding of the present Federal income tax laws as they are currently
interpreted by the Internal Revenue Service. No representation is made as to
the likelihood of continuation of the present Federal income tax laws or of the
current interpretations by the Internal Revenue Service. It should be further
understood that the following discussion is not exhaustive and that special
rules not described herein may be applicable in certain situations.
IRS CIRCULAR 230 NOTICE: The tax information contained herein is not
intended to (and cannot) be used by anyone to avoid IRS penalties. It is
intended to support the sale of the Policy. The Policy Owner should seek tax
advice based on the Policy Owner's particular circumstances from an independent
tax adviser.
TAX STATUS OF THE POLICY
In order to qualify as a life insurance contract for Federal income tax
purposes and to receive the tax treatment normally accorded life insurance
contracts under Federal tax law, a Policy must satisfy certain requirements
which are set forth in the Internal Revenue Code. Guidance as to how these
requirements are to be applied is limited, in particular, with respect to joint
and last survivor life insurance policies. Nevertheless, we believe that the
Policies should satisfy the applicable requirements. However, the rules are not
entirely clear with respect to Policies issued on a substandard or guaranteed
issue basis. We may take appropriate steps to bring the Policy into compliance
with applicable requirements, and we reserve the right to restrict Policy
transactions in order to do so. The insurance proceeds payable on the death of
the insured will never be less than the minimum amount required for the Policy
to be treated as life insurance under section 7702 of the Internal Revenue
Code, as in effect on the date the Policy was issued.
8
In some circumstances, owners of variable contracts who retain excessive
control over the investment of the underlying separate account assets may be
treated as the owners of those assets. Although published guidance in this area
does not address certain aspects of the Policies, we believe that the Owner of
a Policy should not be treated as the owner of the Separate Account assets. We
reserve the right to modify the Policies to bring them into conformity with
applicable standards should such modification be necessary to prevent Owners of
the Policies from being treated as the owners of the underlying Separate
Account assets.
In addition, the Code requires that the investments of the Separate Account
be "adequately diversified" in order for the Policies to be treated as life
insurance contracts for Federal income tax purposes. It is intended that the
Separate Account, through the Eligible Funds, will satisfy these
diversification requirements. If Eligible Fund shares are sold directly to
either non-qualified plans or to tax-qualified retirement plans that later lose
their tax qualified status, there may be adverse consequences under the
diversification rules.
The following discussion assumes that the Policy will qualify as a life
insurance contract for Federal income tax purposes.
TAX TREATMENT OF POLICY BENEFITS. In general, the proceeds and Cash Value
increases of a Policy should be treated in a manner consistent with a
fixed-benefit life insurance policy for Federal income tax purposes. Thus, the
death benefit under the Policy should be excludable from the gross income of
the Beneficiary to the extent provided in under Section 101 of the Code. In the
case of employer-owned life insurance as defined in Section 101(j), the amount
of the death benefit excludable from gross income is limited to premiums paid
unless the Policy falls within certain specified exceptions and a notice and
consent requirement is satisfied before the Policy is issued. Certain specified
exceptions are based on the status of an employee as highly compensated, a
director or recently employed. There are also exceptions for Policy proceeds
paid to an employee's heirs. These exceptions only apply if proper notice is
given to the insured employee and consent is received from the insured employee
before the issuance of the Policy. These rules apply to Policies issued
August 18, 2006 and later and also apply to policies issued before August 18,
2006 after a material increase in the death benefit or other material change.
An IRS reporting requirement applies to employer-owned life insurance subject
to these rules. Because these rules are complex and will affect the tax
treatment of death benefits, it is advisable to consult tax counsel. The death
benefit will also be taxable in the case of a transfer-for-value unless certain
exceptions apply.
Many changes or transactions involving a Policy may have tax consequences,
depending on the circumstances. Such changes include, but are not limited to,
the exchange of the Policy, a change of the Policy's Face Amount, a Policy
Loan, an additional premium payment, a Policy lapse with an outstanding Policy
Loan, a partial withdrawal, or a surrender of the Policy. The transfer of the
Policy or designation of a Beneficiary may have Federal, state, and/or local
transfer and inheritance tax consequences, including the imposition of gift,
estate, and generation-skipping transfer taxes. For example, the transfer of
the Policy to, or the designation as a Beneficiary of, or the payment of
proceeds to, a person who is assigned to a generation which is two or more
generations below the generation assignment of the Owner may have generation
skipping transfer tax consequences under Federal tax law. The individual
situation of each Owner or Beneficiary will determine the extent, if any, to
which Federal, state, and local transfer and inheritance taxes may be imposed
and how ownership or receipt of Policy proceeds will be treated for purposes of
Federal, state and local estate, inheritance, generation skipping and other
taxes.
A Policy may also be used in various arrangements, including non-qualified
deferred compensation or salary continuation plans, split dollar insurance
plans, executive bonus plans, retiree medical benefit plans and others. The tax
consequences of such plans may vary depending on the particular facts and
circumstances of each individual arrangement. Therefore, if you are
contemplating the use of a Policy in any arrangement the value of which depends
in part on its tax consequences, you should be sure to consult a qualified tax
adviser regarding the tax attributes of the particular arrangement.
Generally, the Owner will not be deemed to be in constructive receipt of the
Policy's Cash Value, including increments thereof, under the Policy until there
is a distribution. Under a complete surrender or lapse of any Policy, if the
amount received plus the amount of outstanding Indebtedness exceeds the total
investments in the Policy, the excess will generally be treated as ordinary
income subject to tax. The tax consequences of other distributions from, and
Policy Loans taken from or secured by, a Policy depend upon whether the Policy
is classified as a "modified endowment contract".
9
MODIFIED ENDOWMENT CONTRACTS. A policy may be treated as a modified
endowment contract depending upon the amount of premiums paid in relation to
the death benefit provided under such Policy. The premium limitation rules for
determining whether a Policy is a modified endowment contract are extremely
complex. In general, however, a Policy will be a modified endowment contract if
the accumulated premiums paid at any time during the first seven Policy Years
exceed the sum of the net level premiums which would have been paid on or
before such time if the Policy provided for paid-up future benefits after the
payment of seven level annual premiums.
In addition, if a Policy is "materially changed" it may cause such Policy to
be treated as a modified endowment contract. The material change rules for
determining whether a Policy is a modified endowment contract are also
extremely complex. In general, however, the determination of whether a Policy
will be a modified endowment contract after a material change generally depends
upon the relationship among the death benefit at the time of such change, the
Cash Value at the time of the change and the additional premiums paid in the
seven Policy Years starting with the date on which the material change occurs.
Moreover, a life insurance contract received in exchange for a life
insurance contract classified as a modified endowment contract will also be
treated as a modified endowment contract. A reduction in a Policy's benefits
may also cause such Policy to become a modified endowment contract.
Accordingly, a prospective Owner should contact a competent tax adviser
before purchasing a Policy to determine the circumstances under which the
Policy would be a modified endowment contract. In addition, an Owner should
contact a competent tax adviser before paying any additional premiums or making
any other change to, including an exchange of, a Policy to determine whether
such premium or change would cause the Policy (or the new Policy in the case of
an exchange) to be treated as a modified endowment contract.
NOTE: MOST DESTINY POLICIES WERE MODIFIED ENDOWMENT CONTACTS FROM THE DATE OF
ISSUE, THEREFORE, DISTRIBUTIONS FROM MOST DESTINY POLICIES ARE TAXED AS FOLLOWS:
DISTRIBUTIONS FROM POLICIES CLASSIFIED AS MODIFIED ENDOWMENT
CONTRACT. Policies classified as modified endowment contracts will be subject
to the following tax rules: First, all distributions, including distributions
upon surrender, from such a Policy are treated as ordinary income subject to
tax up to the amount equal to the excess (if any) of the Cash Value immediately
before the distribution over the investment in the Policy (described below) at
such time. Second, Policy Loans taken from, or secured by, such a Policy, as
well as due but unpaid interest thereon, are treated as distributions from such
a Policy and taxed accordingly. Third, a 10 percent additional income tax is
imposed on the portion of any distribution from, or Policy Loan taken from or
secured by, such a Policy that is included in income, except where the
distribution or Policy Loan (a) is made on or after the Owner attains age
59 1/2, (b) is attributable to the Owner's becoming disabled, or (c) is part of
a series of substantially equal periodic payments for the life (or life
expectancy) of the Owner or the joint lives (or joint life expectancies) of the
Owner and the Owner's Beneficiary. The foregoing exceptions to the 10 percent
additional income tax will generally not apply to a corporate Policy Owner.
DISTRIBUTIONS FROM POLICIES NOT CLASSIFIED AS MODIFIED ENDOWMENT
CONTRACT. Distributions from Policies not classified as a modified endowment
contracts are generally treated as first recovering the investment in the
Policy (described below) and then, only after the return of all such investment
in the Policy, as distributing taxable income. An exception to this general
rule occurs in the case of a decrease in the Policy's death benefit (possibly
including a partial withdrawal) or any other change that reduces benefits under
the Policy in the first 15 years after the Policy is issued and that results in
cash distribution to the Owner in order for the Policy to continue complying
with the Section 7702 definitional limits. Such a cash distribution will be
taxed in whole or in part as ordinary income (to the extent of any gain in the
Policy) under rules prescribed in Section 7702.
Policy Loans from, or secured by, a Policy that is not a modified endowment
contract should generally not be treated as distributions. Instead, such loans
should generally be treated as indebtedness of the Owner. However, because the
tax consequences associated with Policy Loans are not always clear, in
particular, with respect to Policy Loans outstanding after the tenth Policy
year, you should consult a tax adviser prior to taking any Policy Loan.
Upon a complete surrender or lapse of a Policy that is not a modified
endowment contract, if the amount received plus the amount of indebtedness
exceeds the total investment in the Policy, the excess will generally be
treated as ordinary income subject to tax.
10
Neither distributions (including distributions upon surrender or lapse) nor
Policy Loans from, or secured by, a Policy that is not a modified endowment
contract are subject to the 10 percent additional income tax.
If a Policy which is not a modified endowment contract subsequently becomes
a modified endowment contract, then any distribution made from the Policy
within two years prior to the date of such change in status may become taxable.
POLICY LOANS. Generally, interest paid on any loan under a life insurance
Policy is not deductible. AN OWNER SHOULD CONSULT A COMPETENT TAX ADVISER IF
THE DEDUCTIBILITY OF LOAN INTEREST IS A CONSIDERATION IN THE PURCHASE OF A
POLICY. If a Policy Loan is outstanding when a Policy is canceled or lapses,
the amount of the outstanding Indebtedness will be added to the amount
distributed and will be taxed accordingly.
INVESTMENT IN THE POLICY. Investment in the Policy means (i) the aggregate
amount of any premiums or other consideration paid for a Policy, minus (ii) the
aggregate amount received under the Policy which is excluded from gross income
of the Owner (except that the amount of any Policy Loan from, or secured by, a
Policy that is a modified endowment contract, to the extent such amount is
excluded from gross income, will be disregarded), plus (iii) the amount of any
Policy Loan from, or secured by, a Policy that is a modified endowment contract
to the extent that such amount is included in the gross income of the Owner.
MULTIPLE POLICES. All modified endowment contracts that are issued by the
Company (or its affiliates) to the same Owner during any calendar year are
treated as one modified endowment contract for purposes of determining the
amount includible in gross income under Section 72(e) of the Code.
LIFE INSURANCE PURCHASES BY NONRESIDENT ALIENS AND FOREIGN
CORPORATIONS. Policy Owners that are not U.S. citizens or residents will
generally be subject to U.S. Federal withholding tax on taxable distributions
from life insurance policies at a 30% rate, unless a lower treaty rate applies.
In addition, Policy Owners may be subject to state and/or municipal taxes and
taxes that may be imposed by the Policy Owner's country of citizenship or
residence.
WITHHOLDING. To the extent that Policy distributions are taxable, they are
generally subject to withholding for the recipient's Federal income tax
liability. Recipients can generally elect, however, not to have tax withheld
from distributions.
ESTATE, GIFT AND GENERATION-SKIPPING TRANSFER TAXES. The transfer of the
Policy or the designation of a beneficiary may have Federal, state, and/or
local transfer and inheritance tax consequences, including the imposition of
gift, estate, and generation-skipping transfer taxes. When the insured dies,
the death proceeds will generally be includable in the Policy Owner's estate
for purposes of the Federal estate tax if the Policy Owner was the insured,
retained incidents of ownership at death, or made a gift transfer of the Policy
within 3 years of death. If the Policy Owner was not the insured, the fair
market value of the Policy would be included in the Policy Owner's estate upon
the Policy Owner's death.
Moreover, under certain circumstances, the Internal Revenue Code may impose
a "generation-skipping transfer tax" when all or part of a life insurance
policy is transferred to, or a death benefit is paid to, an individual two or
more generations younger than the Policy Owner. Regulations issued under the
Internal Revenue Code may require us to deduct the tax from your Policy, or
from any applicable payment, and pay it directly to the IRS.
Qualified tax advisers should be consulted concerning the estate and gift
tax consequences of Policy ownership and distributions under Federal, state and
local law. The individual situation of each Policy Owner or beneficiary will
determine the extent, if any, to which Federal, state, and local transfer and
inheritance taxes may be imposed and how ownership or receipt of Policy
proceeds will be treated for purposes of Federal, state and local estate,
inheritance, generation-skipping and other taxes.
In general, current rules provide for a $5 million estate, gift and
generation-skipping transfer tax exemption (as indexed for inflation) and a top
tax rate of 40 percent.
The complexity of the tax law, along with uncertainty as to how it might be
modified in coming years, underscores the importance of seeking guidance from a
qualified adviser to help ensure that your estate plan adequately addresses
your needs and those of your beneficiaries under all possible scenarios.
CONTINUATION OF POLICY BEYOND ATTAINED AGE 100. The tax consequences of
continuing the Policy beyond the Insured's Attained Age 100 birthday are
unclear. You should consult a tax adviser if you intend to keep the Policy in
force beyond the Insured's Attained Age 100.
11
GUIDANCE ON SPLIT DOLLAR PLANS. The IRS has issued guidance on split dollar
insurance plans. A tax adviser should be consulted with respect to this
guidance if your Policy is, or may become, subject to a split dollar insurance
plan. If your Policy is part of an equity split dollar arrangement taxed under
the economic benefit regime, there is a risk that some portion of the Policy
cash value may be taxed prior to any Policy distribution.
In addition, the Sarbanes-Oxley Act of 2002 (the "Act") which was signed
into law on July 30, 2002, prohibits, with exceptions, publicly-traded
companies, including non-U.S. companies that have securities listed on U.S.
exchanges, from extending, directly or indirectly or through a subsidiary, many
types of personal loans to their directors or executive officers. It is
possible that this prohibition may be interpreted to apply to split-dollar life
insurance arrangements for directors and executive officers of such companies,
since such arrangements can arguably be viewed as involving a loan from the
employer for at least some purposes.
Any affected business contemplating the payment of a premium on an existing
Policy or the purchase of new Policy in connection with a split-dollar life
insurance arrangement should consult legal counsel.
Split dollar insurance plans that provide deferred compensation may be
subject to recently enacted rules governing deferred compensation arrangements.
Failure to adhere to these rules will result in adverse tax consequences. A tax
adviser should be consulted with respect to such plans.
CORPORATE ALTERNATIVE MINIMUM TAX. There may also be an indirect tax upon
the income in the Policy or the proceeds of a Policy under the Federal
corporate alternative minimum tax, if the Owner is subject to that tax.
PUERTO RICO. We believe that Policies subject to Puerto Rican tax law will
generally receive treatment similar, with certain modifications, to that
described above. Among other differences, Policies governed by Puerto Rican tax
law are not currently subject to the rules described above regarding Modified
Endowment Contracts. You should consult your tax adviser with respect to Puerto
Rican tax law governing the Policies.
POSSIBLE TAX LAW CHANGES. Although the likelihood of legislative changes is
uncertain, there is always the possibility that the tax treatment of the Policy
could change by legislation or otherwise. Consult a tax adviser with respect to
legislative developments and their effect on the Policy.
FOREIGN TAX CREDITS. To the extent permitted under Federal tax law, we may
claim the benefit of certain foreign tax credits attributable to taxes paid by
certain Eligible Funds to foreign jurisdictions.
POSSIBLE CHARGE FOR TAXES. At the present time, the Company makes no charge
to the Separate Account for any Federal, state, or local taxes (as opposed to
Premium Tax Charges which are deducted from premium payments) that it incurs
which may be attributable to such Separate Account or to the Policies. The
Company, however, reserves the right in the future to make a charge for any
such tax or other economic burden resulting from the application of the tax
laws that it determines to be properly attributable to the Separate Account or
to the Policies.
RESTRICTIONS ON FINANCIAL TRANSACTIONS
Applicable laws designed to counter terrorism and prevent money laundering
might, in certain circumstances, require us to reject a premium payment and/or
block or "freeze" your Policy. If these laws apply in a particular situation,
we would not be allowed to process any request for withdrawals, surrenders,
loans or death benefits, make transfers or continue making payments under your
death benefit option until instructions are received from the appropriate
regulator. We also may be required to provide additional information about you
or your Policy to government regulators.
LEGAL PROCEEDINGS
In the ordinary course of business, General American, similar to other life
insurance companies, is involved in lawsuits (including class action lawsuits),
arbitrations and other legal proceedings. Also, from time to time, state and
federal regulators or other officials conduct formal and informal examinations
or undertake other actions dealing with various aspects of the financial
services and insurance industries. In some legal proceedings involving
insurers, substantial damages have been sought and/or material settlement
payments have been made. It is not
12
possible to predict with certainty the ultimate outcome of any pending legal
proceeding or regulatory action. However, General American does not believe any
such action or proceeding will have a material adverse effect upon the Separate
Account or upon the ability of MetLife Investors Distribution Company to
perform its contract with the Separate Account or of General American to meet
its obligations under the Contracts.
FINANCIAL STATEMENTS
The financial statements of General American which are included in this
prospectus supplement should be distinguished from the financial statements of
the Separate Account, which are also included in this prospectus supplement,
and should be considered only as bearing on the ability of General American to
meet its obligations under the Policy. They should not be considered as bearing
on the investment performance of the assets held in the Separate Account.
13
FLEXIBLE PREMIUM VL SUPPLEMENT DATED APRIL 29, 2013
GENERAL AMERICAN LIFE INSURANCE COMPANY
Variable Life Insurance Policy
(Destiny)
Supplement dated April 29, 2013
to the Prospectus dated May 1, 2004
Flexible Premium
Variable Life Insurance Policies
(Variable Universal Life/Executive Benefit)
Supplement dated April 29, 2013
to the Prospectuses dated May 1, 2002
Flexible Premium Joint and Last Survivor
Variable Life Insurance Policy
Supplement dated April 29, 2013
to the Prospectus dated May 1, 2002
Flexible Premium Variable Life Insurance Policies
(VUL 95/VUL 100/VGSP/Russell VUL)
Supplement dated April 29, 2013
to the Prospectuses dated May 1, 2000
This supplement updates certain information contained in the last full
prospectus for each of the above-referenced variable life insurance policies,
as annually and periodically supplemented. You should read and retain this
supplement. We will send you an additional copy of the last full prospectus for
your policy, without charge, on request. These policies are no longer available
for sale.
General American Life Insurance Company is an indirect wholly-owned
subsidiary of Metropolitan Life Insurance Company ("MetLife"). MetLife is a
wholly-owned subsidiary of MetLife, Inc., a publicly-traded company. General
American's Home Office is 13045 Tesson Ferry Road, St. Louis, Missouri 63128.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE POLICIES OR DETERMINED IF THIS
SUPPLEMENT IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE SECURITIES AND EXCHANGE COMMISSION MAINTAINS A WEB SITE THAT CONTAINS
MATERIAL INCORPORATED BY REFERENCE AND OTHER INFORMATION REGARDING REGISTRANTS
THAT FILE ELECTRONICALLY WITH THE SECURITIES AND EXCHANGE COMMISSION. THE
ADDRESS OF THE SITE IS HTTP://WWW.SEC.GOV.
THE UNDERLYING FUND PROSPECTUSES MAY BE OBTAINED BY CALLING 1-800-638-9294.
WE DO NOT GUARANTEE HOW ANY OF THE DIVISIONS OR FUNDS WILL PERFORM. THE
POLICIES AND THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY FINANCIAL INSTITUTION AND ARE NOT FEDERALLY INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER
GOVERNMENT AGENCY.
The Financial Industry Regulatory Authority ("FINRA") provides background
information about broker-dealers and their registered representatives through
FINRA BrokerCheck. You may contact the FINRA BrokerCheck Hotline at
1-800-289-9999, or log on to www.finra.org. An investor brochure that includes
information describing FINRA BrokerCheck is available through the Hotline or
on-line.
1
THE COMPANY
General American is principally engaged in writing individual life insurance
policies and annuity contracts. It is admitted to do business in 49 states, the
District of Columbia, Puerto Rico, and in four Canadian provinces. The
principal offices (Home Office) of General American are located at 13045 Tesson
Ferry Road, St. Louis, Missouri 63128. The Administrative Office for various
Policy transactions is as follows:
Premium Payments General American
P.O. Box 790201
St. Louis, MO 63179-0201
Payment Inquires and General American
Correspondence P.O. Box 355
Warwick, RI 02887-0355
Beneficiary and Ownership General American
Changes P.O. Box 357
Warwick, RI 02887-0356
Surrenders, Loans, General American
Withdrawals and P.O. Box 356
Division Transfers Warwick, RI 02887-0356
Death Claims General American
P.O. Box 356
Warwick, RI 02887-0356
All Telephone (800) 638-9294
Transactions and Inquiries
You may request an account transfer or reallocation of future premiums by
written request (which may be telecopied) to our Administrative Office, by
telephoning us, or over the Internet. To request a transfer or reallocation by
telephone, you should contact your registered representative, or contact us at
(800) 638-9294. To request a transfer or reallocation over the Internet, you
may log on to our website at www.genamerica.com. We use reasonable procedures
to confirm that instructions communicated by telephone, facsimile or Internet
are genuine. Any telephone, facsimile or Internet instructions that we
reasonably believe to be genuine will be your responsibility, including losses
arising from any errors in the communication of instructions. However, because
telephone and Internet transactions may be available to anyone who provides
certain information about you and your Policy, you should protect that
information. We may not be able to verify that you are the person providing
telephone or Internet instructions, or that you have authorized any such person
to act for you.
Telephone, facsimile, and computer systems (including the Internet) may not
always be available. Any telephone, facsimile, or computer system, whether it
is yours, your service provider's, your registered representative's, or ours,
can experience outages or slowdowns for a variety of reasons. These outages or
slowdowns may delay or prevent our processing of your request. Although we have
taken precautions to help our systems handle heavy use, we cannot promise
complete reliability under all circumstances. If you are experiencing problems,
you should make your request by writing to our Administrative Office.
If you send premium payments or transaction requests to an address other
than the one we have designated for receipt of such payments or requests, we
may return the premium payment to you, or there may be a delay in applying the
payment or transaction to your Policy.
THE SEPARATE ACCOUNT
The separate account consists of divisions, each of which corresponds to an
underlying Fund. Each division may either make money or lose money. Therefore
if you invest in a division of the separate account, you may either make money
or lose money, depending on the investment experience of that division. There
is no guaranteed rate of return in the separate account.
2
The following chart shows the Funds that are available under the policy
along with the name of the investment adviser, sub-adviser (where applicable)
and investment objective of each Fund. The Funds have different investment
goals and strategies. You should review the prospectus of each Fund, or seek
professional guidance in determining which Fund(s) best meet your objectives.
NOTE: THE RUSSELL INVESTMENT FUNDS ARE NOT AVAILABLE TO DESTINY OR EXECUTIVE
BENEFIT POLICIES. FOR ALL OTHER POLICIES, THE RUSSELL INVESTMENT FUNDS ARE ONLY
AVAILABLE FOR POLICIES WITH AN ISSUE DATE PRIOR TO JANUARY 1, 2000.
AMERICAN FUNDS INSURANCE SERIES(R) ADVISER: CAPITAL RESEARCH AND MANAGEMENT COMPANY
FUND SUB-ADVISER INVESTMENT OBJECTIVE
---- ----------- --------------------
American Funds Global N/A Long-term growth of capital.
Small Capitalization Fund
American Funds Growth N/A Growth of capital.
Fund
American Funds Growth- N/A Long-term growth of capital and income.
Income Fund
FIDELITY(R) VARIABLE INSURANCE PRODUCTS ADVISER: FIDELITY MANAGEMENT & RESEARCH COMPANY
FUND SUB-ADVISER INVESTMENT OBJECTIVE
---- ----------- --------------------
Equity-Income Portfolio FMR Co., Inc. Reasonable income. The fund will also consider the
potential for capital appreciation. The fund's goal is to
achieve a yield which exceeds the composite yield of
securities comprising the S&P 500(R) Index.
Mid Cap Portfolio FMR Co., Inc. Long-term growth of capital.
JPMORGAN INSURANCE TRUST ADVISER: J.P. MORGAN INVESTMENT MANAGEMENT INC.
FUND SUB-ADVISER INVESTMENT OBJECTIVE
---- ----------- --------------------
JPMorgan Insurance N/A To maximize total return by investing primarily in a
Trust Core Bond Portfolio diversified portfolio of intermediate- and long-term debt
securities.
JPMorgan Insurance N/A Capital growth over the long term.
Trust Small Cap Core
Portfolio
MET INVESTORS SERIES TRUST ADVISER: METLIFE ADVISERS, LLC
FUND SUB-ADVISER INVESTMENT OBJECTIVE
---- ----------- --------------------
Clarion Global Real Estate CBRE Clarion Securities Total return through investment in real estate securities,
Portfolio LLC emphasizing both capital appreciation and current
income.
ClearBridge Aggressive ClearBridge Investments, Capital appreciation.
Growth Portfolio LLC (formerly ClearBridge
(formerly Legg Mason Advisors, LLC)
ClearBridge Aggressive
Growth Portfolio)
Harris Oakmark Harris Associates L.P. Long-term capital appreciation.
International Portfolio
Invesco Small Cap Invesco Advisers, Inc. Long-term growth of capital.
Growth Portfolio
Lord Abbett Bond Lord, Abbett & Co. LLC High current income and the opportunity for capital
Debenture Portfolio appreciation to produce a high total return.
3
FUND SUB-ADVISER INVESTMENT OBJECTIVE
---- ----------- --------------------
Lord Abbett Mid Cap Lord, Abbett & Co. LLC Capital appreciation through investments, primarily in
Value Portfolio equity securities, which are believed to be undervalued
in the marketplace.
MFS(R) Research Massachusetts Financial Capital appreciation
International Portfolio Services Company
Morgan Stanley Mid Cap Morgan Stanley Capital appreciation.
Growth Portfolio Investment Management
Inc.
PIMCO Total Return Pacific Investment Maximum total return, consistent with the preservation
Portfolio Management Company of capital and prudent investment management.
LLC
T. Rowe Price Large Cap T. Rowe Price Long-term capital appreciation by investing in common
Value Portfolio Associates, Inc. stocks believed to be undervalued. Income is a
secondary objective.
T. Rowe Price Mid Cap T. Rowe Price Long-term growth of capital.
Growth Portfolio Associates, Inc.
METROPOLITAN SERIES FUND ADVISER: METLIFE ADVISERS, LLC
FUND SUB-ADVISER INVESTMENT OBJECTIVE
---- ----------- --------------------
Baillie Gifford Baillie Gifford Overseas Long-term growth of capital.
International Stock Limited
Portfolio
Barclays Aggregate Bond MetLife Investment To track the performance of the Barclays U.S. Aggregate
Index Portfolio (formerly Management, LLC/1/ Bond Index.
Barclays Capital
Aggregate Bond Index
Portfolio)
BlackRock Bond Income BlackRock Advisors, LLC A competitive total return primarily from investing in
Portfolio fixed-income securities.
BlackRock Capital BlackRock Advisors, LLC Long-term growth of capital.
Appreciation Portfolio
(formerly BlackRock
Legacy Large Cap Growth
Portfolio)
BlackRock Diversified BlackRock Advisors, LLC High total return while attempting to limit investment
Portfolio risk and preserve capital.
BlackRock Large Cap BlackRock Advisors, LLC Long-term growth of capital.
Value Portfolio
BlackRock Money Market BlackRock Advisors, LLC A high level of current income consistent with
Portfolio/2/ preservation of capital.
Davis Venture Value Davis Selected Advisers, Growth of capital.
Portfolio L.P.
Frontier Mid Cap Growth Frontier Capital Maximum capital appreciation.
Portfolio (formerly Management Company,
BlackRock Aggressive LLC/3/
Growth Portfolio)
Jennison Growth Jennison Associates LLC Long-term growth of capital.
Portfolio
Met/Artisan Mid Cap Artisan Partners Limited Long-term capital growth.
Value Portfolio Partnership
4
METROPOLITAN SERIES FUND ADVISER: METLIFE ADVISERS, LLC
FUND SUB-ADVISER INVESTMENT OBJECTIVE
---- ----------- --------------------
MetLife Mid Cap Stock MetLife Investment To track the performance of the Standard & Poor's
Index Portfolio Management, LLC/1/ MidCap 400(R) Composite Stock Price Index.
MetLife Stock Index MetLife Investment To track the performance of the Standard & Poor's
Portfolio Management, LLC/1/ 500(R) Composite Stock Price Index.
MFS(R) Total Return Massachusetts Financial Favorable total return through investment in a
Portfolio Services Company diversified portfolio.
MFS(R) Value Portfolio Massachusetts Financial Capital appreciation.
Services Company
MSCI EAFE(R) Index MetLife Investment To track the performance of the MSCI EAFE(R) Index.
Portfolio Management, LLC/1/
Neuberger Berman Neuberger Berman High total return, consisting principally of capital
Genesis Portfolio Management LLC appreciation.
Russell 2000(R) Index MetLife Investment To track the performance of the Russell 2000(R) Index.
Portfolio Management, LLC/1/
T. Rowe Price Large Cap T. Rowe Price Long-term growth of capital and, secondarily, dividend
Growth Portfolio Associates, Inc. income.
T. Rowe Price Small Cap T. Rowe Price Long-term capital growth.
Growth Portfolio Associates, Inc.
Van Eck Global Natural Van Eck Associates Long-term capital appreciation with income as a
Resources Portfolio Corporation secondary consideration.
Western Asset Western Asset To maximize total return consistent with preservation of
Management Management Company capital and maintenance of liquidity.
U.S. Government
Portfolio
RUSSELL INVESTMENT
FUNDS ADVISER: RUSSELL INVESTMENT MANAGEMENT COMPANY
FUND SUB-ADVISER INVESTMENT OBJECTIVE
---- ----------- --------------------
Aggressive Equity Fund N/A To provide long term capital growth.
Core Bond Fund N/A To provide current income, and as a secondary
objective, capital appreciation.
Multi-Style Equity Fund N/A To provide long term capital growth.
Non-U.S. Fund N/A To provide long term capital growth.
VAN ECK VIP TRUST ADVISER: VAN ECK ASSOCIATES CORPORATION
FUND SUB-ADVISER INVESTMENT OBJECTIVE
---- ----------- --------------------
Van Eck VIP Emerging N/A Long-term capital appreciation by investing primarily in
Markets Fund equity securities in emerging markets around the world.
----------
/1/Formerly MetLife Investment Advisors Company, LLC.
/2/An investment in the BlackRock Money Market Portfolio is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. Although the Portfolio seeks to preserve the value of
your investment at $100 per share, it is possible to lose money by investing
in the Portfolio. During extended periods of low interest rates, the yields
of the Division investing in the BlackRock Money Market Portfolio may become
extremely low and possibly negative.
/3/Prior to January 7, 2013, BlackRock Advisors, LLC was the sub-adviser to the
Portfolio.
5
FOR MORE INFORMATION REGARDING THE FUNDS AND THEIR INVESTMENT ADVISERS AND
SUB-ADVISERS, SEE THE FUND PROSPECTUSES AND THEIR STATEMENTS OF ADDITIONAL
INFORMATION, WHICH YOU CAN OBTAIN BY CALLING 1-800-638-9294.
OTHER FUNDS AND SHARE CLASSES
Some of the Funds offer various classes of shares, each of which has a
different level of expenses. The prospectuses for the Funds may provide
information for share classes that are not available through the Policy. When
you consult the prospectus for any Fund, you should be careful to refer to only
the information regarding the class of shares that is available through the
Policy. For the JPMorgan Insurance Trust, we offer Class 1 shares; for Fidelity
Variable Insurance Products and the Van Eck VIP Trust, we offer Initial Class
shares; for the Metropolitan Series Fund, Inc., we offer Class A shares; for
the Met Investors Series Trust, we offer Class A shares; and for the American
Funds Insurance Series, we offer Class 2 shares.
CHARGES AND DEDUCTIONS
Charges will be deducted in connection with the Policy to compensate the
Company for providing the insurance benefits set forth in the Policy and any
additional benefits added by rider, administering the Policies, incurring
expenses in distributing the Policies, and assuming certain risks in connection
with the Policy. We may profit from one or more of the charges deducted under
the Policy, including the cost of insurance charge. We may use these profits
for any corporate purpose.
The following table shows the minimum and maximum total operating expenses
charged by the Funds for the fiscal year ended December 31, 2012. Expenses of
the Funds may be higher or lower in the future. Certain Funds may impose a
redemption fee in the future. More detail concerning each Fund's fees and
expenses is contained in the table that follows and in the prospectus for each
Fund.
MINIMUM MAXIMUM
------- -------
TOTAL ANNUAL FUND OPERATING EXPENSES
(expenses that are deducted from Fund assets, including management fees, distribution
and/or service (12b-1) fees, and other expenses).................................... 0.28% 1.23%
The following table describes the annual operating expenses for each Fund
for the year ended December 31, 2012, before and after any applicable fee
waivers and expense reimbursements.
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
DISTRIBUTION ACQUIRED TOTAL FEE WAIVER NET TOTAL
AND/OR FUND FEES ANNUAL AND/OR ANNUAL
MANAGEMENT SERVICE (12B-1) OTHER AND OPERATING EXPENSE OPERATING
FEE FEES EXPENSES EXPENSES EXPENSES REIMBURSEMENT EXPENSES
---------- --------------- -------- --------- --------- ------------- ---------
AMERICAN FUNDS INSURANCE
SERIES(R) -- CLASS 2
American Funds Global Small Capitalization
Fund...................................... 0.71% 0.25% 0.04% -- 1.00% -- 1.00%
American Funds Growth Fund................. 0.33% 0.25% 0.02% -- 0.60% -- 0.60%
American Funds Growth-Income Fund.......... 0.27% 0.25% 0.02% -- 0.54% -- 0.54%
FIDELITY(R) VARIABLE INSURANCE
PRODUCTS -- INITIAL CLASS
Equity-Income Portfolio.................... 0.46% -- 0.10% -- 0.56% -- 0.56%
Mid Cap Portfolio.......................... 0.56% -- 0.09% -- 0.65% -- 0.65%
JPMORGAN INSURANCE TRUST -- CLASS 1
JPMorgan Insurance Trust Core Bond
Portfolio................................. 0.40% -- 0.22% -- 0.62% 0.02% 0.60%
JPMorgan Insurance Trust Small Cap Core
Portfolio................................. 0.65% -- 0.29% 0.01% 0.95% 0.00% 0.95%
6
DISTRIBUTION ACQUIRED TOTAL FEE WAIVER NET TOTAL
AND/OR FUND FEES ANNUAL AND/OR ANNUAL
MANAGEMENT SERVICE (12B-1) OTHER AND OPERATING EXPENSE OPERATING
FEE FEES EXPENSES EXPENSES EXPENSES REIMBURSEMENT EXPENSES
---------- --------------- -------- --------- --------- ------------- ---------
MET INVESTORS SERIES TRUST -- CLASS A
Clarion Global Real Estate Portfolio..... 0.60% -- 0.06% -- 0.66% -- 0.66%
ClearBridge Aggressive Growth Portfolio.. 0.61% -- 0.03% -- 0.64% -- 0.64%
Harris Oakmark International Portfolio... 0.77% -- 0.06% -- 0.83% 0.02% 0.81%
Invesco Small Cap Growth Portfolio....... 0.85% -- 0.02% -- 0.87% 0.01% 0.86%
Lord Abbett Bond Debenture Portfolio..... 0.51% -- 0.03% -- 0.54% -- 0.54%
Lord Abbett Mid Cap Value Portfolio...... 0.65% -- 0.04% 0.06% 0.75% 0.00% 0.75%
MFS(R) Research International Portfolio.. 0.68% -- 0.07% -- 0.75% 0.05% 0.70%
Morgan Stanley Mid Cap Growth
Portfolio............................... 0.65% -- 0.07% -- 0.72% 0.01% 0.71%
PIMCO Total Return Portfolio............. 0.48% -- 0.03% -- 0.51% -- 0.51%
T. Rowe Price Large Cap Value Portfolio.. 0.57% -- 0.02% -- 0.59% -- 0.59%
T. Rowe Price Mid Cap Growth Portfolio... 0.75% -- 0.03% -- 0.78% -- 0.78%
METROPOLITAN SERIES FUND -- CLASS A
Baillie Gifford International Stock
Portfolio............................... 0.81% -- 0.10% -- 0.91% 0.10% 0.81%
Barclays Aggregate Bond Index Portfolio.. 0.25% -- 0.04% -- 0.29% 0.01% 0.28%
BlackRock Bond Income Portfolio.......... 0.32% -- 0.04% -- 0.36% 0.00% 0.36%
BlackRock Capital Appreciation Portfolio. 0.70% -- 0.03% -- 0.73% 0.01% 0.72%
BlackRock Diversified Portfolio.......... 0.46% -- 0.07% -- 0.53% -- 0.53%
BlackRock Large Cap Value Portfolio...... 0.63% -- 0.03% -- 0.66% 0.03% 0.63%
BlackRock Money Market Portfolio......... 0.33% -- 0.02% -- 0.35% 0.01% 0.34%
Davis Venture Value Portfolio............ 0.70% -- 0.03% -- 0.73% 0.05% 0.68%
Frontier Mid Cap Growth Portfolio........ 0.73% -- 0.05% -- 0.78% 0.02% 0.76%
Jennison Growth Portfolio................ 0.61% -- 0.03% -- 0.64% 0.07% 0.57%
Met/Artisan Mid Cap Value Portfolio...... 0.81% -- 0.04% -- 0.85% -- 0.85%
MetLife Mid Cap Stock Index Portfolio.... 0.25% -- 0.07% 0.02% 0.34% 0.00% 0.34%
MetLife Stock Index Portfolio............ 0.25% -- 0.03% -- 0.28% 0.01% 0.27%
MFS(R) Total Return Portfolio............ 0.55% -- 0.05% -- 0.60% -- 0.60%
MFS(R) Value Portfolio................... 0.70% -- 0.03% -- 0.73% 0.13% 0.60%
MSCI EAFE(R) Index Portfolio............. 0.30% -- 0.11% 0.01% 0.42% 0.00% 0.42%
Neuberger Berman Genesis Portfolio....... 0.82% -- 0.04% -- 0.86% 0.01% 0.85%
Russell 2000(R) Index Portfolio.......... 0.25% -- 0.08% 0.09% 0.42% 0.00% 0.42%
T. Rowe Price Large Cap Growth
Portfolio............................... 0.60% -- 0.04% -- 0.64% 0.01% 0.63%
T. Rowe Price Small Cap Growth
Portfolio............................... 0.49% -- 0.06% -- 0.55% -- 0.55%
Van Eck Global Natural Resources
Portfolio............................... 0.78% -- 0.04% 0.02% 0.84% 0.01% 0.83%
Western Asset Management U.S.
Government Portfolio.................... 0.47% -- 0.03% -- 0.50% 0.02% 0.48%
RUSSELL INVESTMENT FUNDS
Aggressive Equity Fund................... 0.90% -- 0.18% -- 1.08% 0.05% 1.03%
Core Bond Fund........................... 0.55% -- 0.17% -- 0.72% 0.05% 0.67%
Multi-Style Equity Fund.................. 0.73% -- 0.13% -- 0.86% -- 0.86%
Non-U.S. Fund............................ 0.90% -- 0.16% -- 1.06% 0.05% 1.01%
7
DISTRIBUTION ACQUIRED TOTAL FEE WAIVER NET TOTAL
AND/OR FUND FEES ANNUAL AND/OR ANNUAL
MANAGEMENT SERVICE (12B-1) OTHER AND OPERATING EXPENSE OPERATING
FEE FEES EXPENSES EXPENSES EXPENSES REIMBURSEMENT EXPENSES
---------- --------------- -------- --------- --------- ------------- ---------
VAN ECK VIP TRUST -- INITIAL CLASS
Van Eck VIP Emerging Markets Fund.. 1.00% -- 0.23% -- 1.23% 0.00% 1.23%
The information shown in the table above was provided by the Funds and we
have not independently verified that information. Net Total Annual Operating
Expenses shown in the table reflect any current fee waiver or expense
reimbursement arrangement that will remain in effect for a period of at least
one year from the date of the Fund's 2013 prospectus. "0.00%" in the Fee Waiver
and/or Expense Reimbursement column indicates that there is such an arrangement
in effect for the Fund but that the expenses of the Fund are below the level
that would trigger the waiver or reimbursement. Fee waiver and expense
reimbursement arrangements with a duration of less than one year, or
arrangements that may be terminated without the consent of the Fund's board of
directors or trustees, are not shown.
POLICY RIGHTS
TRANSFERS
RESTRICTIONS ON FREQUENT TRANSFERS. Frequent requests from Owners to
transfer cash value may dilute the value of a Fund's shares if the frequent
trading involves an attempt to take advantage of pricing inefficiencies created
by a lag between a change in the value of the securities held by the Fund and
the reflection of that change in the Fund's share price ("arbitrage trading").
Frequent transfers involving arbitrage trading may adversely affect the
long-term performance of the Funds, which may in turn adversely affect Owners
and other persons who may have an interest in the Policies (e.g.,
beneficiaries).
We have policies and procedures that attempt to detect and deter frequent
transfers in situations where we determine there is a potential for arbitrage
trading. Currently, we believe that such situations may be presented in the
international, small-cap, and high-yield Funds (i.e., the American Funds Global
Small Capitalization Fund, JPMorgan Insurance Trust Small Cap Core Portfolio,
Clarion Global Real Estate Portfolio, Harris Oakmark International Portfolio,
Invesco Small Cap Growth Portfolio, Lord Abbett Bond Debenture Portfolio, MFS
Research International Portfolio, Baillie Gifford International Stock
Portfolio, MSCI EAFE Index Portfolio, Neuberger Berman Genesis Portfolio,
Russell 2000 Index Portfolio, T. Rowe Price Small Cap Growth Portfolio, Van Eck
Global Natural Resources Portfolio, Russell Aggressive Equity Fund, Russell
Non-U.S. Fund and Van Eck VIP Emerging Markets Fund--the "Monitored Funds") and
we monitor transfer activity in those Monitored Funds. In addition, as
described below, we treat all American Funds Insurance Series portfolios
("American Funds portfolios") as Monitored Funds. We employ various means to
monitor transfer activity, such as examining the frequency and size of
transfers into and out of the Monitored Funds within given periods of time. For
example, we currently monitor transfer activity to determine if, for each
category of international, small-cap, and high-yield Funds, in a 12-month
period there were: (1) six or more transfers involving the given category;
(2) cumulative gross transfers involving the given category that exceed the
current cash value; and (3) two or more "round-trips" involving any Fund in the
given category. A round-trip generally is defined as a transfer in followed by
a transfer out within the next seven calendar days or a transfer out followed
by a transfer in within the next seven calendar days, in either case subject to
certain other criteria. WE DO NOT BELIEVE THAT OTHER FUNDS PRESENT A
SIGNIFICANT OPPORTUNITY TO ENGAGE IN ARBITRAGE TRADING AND THEREFORE DO NOT
MONITOR TRANSFER ACTIVITY IN THOSE FUNDS. We may change the Monitored Funds at
any time without notice in our sole discretion.
As a condition to making their portfolios available in our products,
American Funds requires us to treat all American Funds portfolios as Monitored
Funds under our current frequent transfer policies and procedures. Further,
American Funds requires us to impose additional specified monitoring criteria
for all American Funds portfolios available under the Policy, regardless of the
potential for arbitrage trading. We are required to monitor transfer activity
in American Funds portfolios to determine if there were two or more transfers
in followed by transfers out, in each case of a certain dollar amount or
greater, in any 30-day period. A first violation of the American Funds
monitoring policy will result in a written notice of violation; each additional
violation will result in the imposition of a six-month restriction, during
which period we will require all transfer requests to or from an
8
American Funds portfolio to be submitted with an original signature. Further,
as Monitored Funds, all American Funds portfolios also will be subject to our
current frequent transfer policies, procedures and restrictions (described
below), and transfer restrictions may be imposed upon a violation of either
monitoring policy.
Our policies and procedures may result in transfer restrictions being
applied to deter frequent transfers. Currently, when we detect transfer
activity in the Monitored Funds that exceeds our current transfer limits, we
require future transfer requests to or from any Monitored Funds under that
Policy to be submitted in writing with an original signature. A first
occurrence will result in the imposition of this restriction for a six-month
period; a second occurrence will result in the permanent imposition of the
restriction.
The detection and deterrence of harmful transfer activity involves judgments
that are inherently subjective, such as the decision to monitor only those
Funds that we believe are susceptible to arbitrage trading or the determination
of the transfer limits. Our ability to detect and/or restrict such transfer
activity may be limited by operational and technological systems, as well as
our ability to predict strategies employed by Owners to avoid such detection.
Our ability to restrict such transfer activity also may be limited by
provisions of the Policy. Accordingly, there is no assurance that we will
prevent all transfer activity that may adversely affect Owners and other
persons with interests in the Policies. We do not accommodate frequent
transfers in any Fund and there are no arrangements in place to permit any
Owner to engage in frequent transfers; we apply our policies and procedures
without exception, waiver, or special arrangement.
The Funds may have adopted their own policies and procedures with respect to
frequent transfers in their respective shares, and we reserve the right to
enforce these policies and procedures. For example, Funds may assess a
redemption fee (which we reserve the right to collect) on shares held for a
relatively short period. The prospectuses for the Funds describe any such
policies and procedures, which may be more or less restrictive than the
policies and procedures we have adopted. Although we may not have the
contractual authority or the operational capacity to apply the frequent
transfer policies and procedures of the Funds, we have entered into a written
agreement, as required by SEC regulation, with each Fund or its principal
underwriter that obligates us to provide to the Fund promptly upon request
certain information about the trading activity of individual Owners, and to
execute instructions from the Fund to restrict or prohibit further purchases or
transfers by specific Owners who violate the frequent transfer policies
established by the Fund.
In addition, Owners and other persons with interests in the Policies should
be aware that the purchase and redemption orders received by the Funds
generally are "omnibus" orders from intermediaries such as retirement plans or
separate accounts funding variable insurance products. The omnibus orders
reflect the aggregation and netting of multiple orders from individual Owners
of variable insurance products and/or individual retirement plan participants.
The omnibus nature of these orders may limit the Funds in their ability to
apply their frequent transfer policies and procedures. In addition, the other
insurance companies and/or retirement plans may have different policies and
procedures or may not have any such policies and procedures because of
contractual limitations. For these reasons, we cannot guarantee that the Funds
(and thus Owners) will not be harmed by transfer activity relating to other
insurance companies and/or retirement plans that may invest in the Funds. If a
Fund believes that an omnibus order reflects one or more transfer requests from
Owners engaged in frequent trading, the Fund may reject the entire omnibus
order.
In accordance with applicable law, we reserve the right to modify or
terminate the transfer privilege at any time. We also reserve the right to
defer or restrict the transfer privilege at any time that we are unable to
purchase or redeem shares of any of the Funds, including any refusal or
restriction on purchases or redemptions of their shares as a result of their
own policies and procedures on frequent transfers (even if an entire omnibus
order is rejected due to the frequent transfers of a single Owner). You should
read the Fund prospectuses for more details.
RESTRICTIONS ON LARGE TRANSFERS. Large transfers may increase brokerage and
administrative costs of the underlying Funds and may disrupt fund management
strategy, requiring a Fund to maintain a high cash position and possibly
resulting in lost investment opportunities and forced liquidations. We do not
monitor for large transfers to or from Funds except where the fund manager of a
particular underlying Fund has brought large transfer activity to our attention
for investigation on a case-by-case basis. For example, some fund managers have
asked us to monitor for "block transfers" where transfer requests have been
submitted on behalf of multiple Owners by a third party such as an investment
adviser. When we detect such large trades, we may impose
9
restrictions similar to those described above where future transfer requests
from that third party must be submitted in writing with an original signature.
A first occurrence will result in the imposition of this restriction for a
six-month period; a second occurrence will result in the permanent imposition
of the restriction.
SEPARATE ACCOUNT CHARGES
We will waive the following amount of the Mortality and Expense Risk Charge:
the amount, if any, equal to the underlying fund expenses that are in excess of
0.68% for the Division investing in the Jennison Growth Portfolio, and that are
in excess of 0.88% for the Division investing in the MFS Research International
Portfolio.
GENERAL MATTERS
BENEFICIARY
The following is added to this section:
Every state has unclaimed property laws which generally declare life
insurance policies to be abandoned after a period of inactivity of three to
five years from the date any death benefit is due and payable. For example, if
the payment of a death benefit has been triggered, and after a thorough search,
we are still unable to locate the beneficiary of the death benefit, the death
benefit will be paid to the abandoned property division or unclaimed property
office of the state in which the beneficiary or the policy owner last resided,
as shown on our books and records. ("Escheatment" is the formal, legal name for
this process.) However, the state is obligated to pay the death benefit
(without interest) if your beneficiary steps forward to claim it with the
proper documentation. To prevent your Policy's death benefit from being paid to
the state's abandoned or unclaimed property office, it is important that you
update your beneficiary designation--including complete names and complete
address--if and as they change. You should contact our Administrative Office in
order to make a change to your beneficiary designation. (See "The Company.")
FEDERAL TAX MATTERS
INTRODUCTION
The following summary provides a general description of the Federal income
tax considerations associated with the Policy and does not purport to be
complete or to cover all situations. The summary does not address state, local
or foreign tax issues related to the Policy. This discussion is not intended as
tax advice. Counsel or other competent tax advisers should be consulted for
more complete information. This discussion is based upon General American's
understanding of the present Federal income tax laws as they are currently
interpreted by the Internal Revenue Service. No representation is made as to
the likelihood of continuation of the present Federal income tax laws or of the
current interpretations by the Internal Revenue Service.
IRS CIRCULAR 230 NOTICE: The tax information contained herein is not
intended to (and cannot) be used by anyone to avoid IRS penalties. It is
intended to support the sale of the Policy. The Policy Owner should seek tax
advice based on the Policy Owner's particular circumstances from an independent
tax adviser.
TAX STATUS OF THE POLICY
In order to qualify as a life insurance contract for Federal income tax
purposes and to receive the tax treatment normally accorded life insurance
contracts under Federal tax law, a Policy must satisfy certain requirements
which are set forth in the Internal Revenue Code. Guidance as to how these
requirements are to be applied is limited, in particular, with respect to joint
and last survivor life insurance policies. Nevertheless, we believe that the
Policies should satisfy the applicable requirements. However, the rules are not
entirely clear with respect to Policies issued on a substandard or guaranteed
issue basis. We may take appropriate steps to bring the Policy into compliance
with applicable requirements, and we reserve the right to restrict Policy
transactions in order to do so. The insurance proceeds payable on the death of
the insured will never be less than the minimum amount required for the Policy
to be treated as life insurance under section 7702 of the Internal Revenue
Code, as in effect on the date the Policy was issued.
10
In some circumstances, owners of variable contracts who retain excessive
control over the investment of the underlying separate account assets may be
treated as the owners of those assets. Although published guidance in this area
does not address certain aspects of the Policies, we believe that the Owner of
a Policy should not be treated as the owner of the Separate Account assets. We
reserve the right to modify the Policies to bring them into conformity with
applicable standards should such modification be necessary to prevent Owners of
the Policies from being treated as the owners of the underlying Separate
Account assets.
In addition, the Code requires that the investments of the Separate Account
be "adequately diversified" in order for the Policies to be treated as life
insurance contracts for Federal income tax purposes. It is intended that the
Separate Account, through the Eligible Funds, will satisfy these
diversification requirements. If Eligible Fund shares are sold directly to
either non-qualified plans or to tax-qualified retirement plans that later lose
their tax qualified status, there may be adverse consequences under the
diversification rules.
The following discussion assumes that the Policy will qualify as a life
insurance contract for Federal income tax purposes.
TAX TREATMENT OF POLICY BENEFITS. In general, the proceeds and Cash Value
increases of a Policy should be treated in a manner consistent with a
fixed-benefit life insurance policy for Federal income tax purposes. Thus, the
death benefit under the Policy should be excludable from the gross income of
the Beneficiary to the extent provided in under Section 101 of the Code. In the
case of employer-owned life insurance as defined in Section 101(j), the amount
of the death benefit excludable from gross income is limited to premiums paid
unless the Policy falls within certain specified exceptions and a notice and
consent requirement is satisfied before the Policy is issued. Certain specified
exceptions are based on the status of an employee as highly compensated or
recently employed. There are also exceptions for Policy proceeds paid to an
employee's heirs. These exceptions only apply if proper notice is given to the
insured employee and consent is received from the insured employee before the
issuance of the Policy. These rules apply to Policies issued August 18, 2006
and later and also apply to policies issued before August 18, 2006 after a
material increase in the death benefit or other material change. An IRS
reporting requirement applies to employer-owned life insurance subject to these
rules. Because these rules are complex and will affect the tax treatment of
death benefits, it is advisable to consult tax counsel. The death benefit will
also be taxable in the case of a transfer-for-value unless certain exceptions
apply.
Many changes or transactions involving a Policy may have tax consequences,
depending on the circumstances. Such changes include, but are not limited to,
the exchange of the Policy, a change of the Policy's Face Amount, a Policy
Loan, an additional premium payment, a Policy lapse with an outstanding Policy
Loan, a partial withdrawal, or a surrender of the Policy. The transfer of the
Policy or designation of a Beneficiary may have Federal, state, and/or local
transfer and inheritance tax consequences, including the imposition of gift,
estate, and generation-skipping transfer taxes. For example, the transfer of
the Policy to, or the designation as a Beneficiary of, or the payment of
proceeds to, a person who is assigned to a generation which is two or more
generations below the generation assignment of the Owner may have generation
skipping transfer tax consequences under Federal tax law. The individual
situation of each Owner or Beneficiary will determine the extent, if any, to
which Federal, state, and local transfer and inheritance taxes may be imposed
and how ownership or receipt of Policy proceeds will be treated for purposes of
Federal, state and local estate, inheritance, generation skipping and other
taxes.
A Policy may also be used in various arrangements, including non-qualified
deferred compensation or salary continuation plans, split dollar insurance
plans, executive bonus plans, retiree medical benefit plans and others. The tax
consequences of such plans may vary depending on the particular facts and
circumstances of each individual arrangement. Therefore, if you are
contemplating the use of a Policy in any arrangement the value of which depends
in part on its tax consequences, you should be sure to consult a qualified tax
adviser regarding the tax attributes of the particular arrangement.
Generally, the Owner will not be deemed to be in constructive receipt of the
Policy's Cash Value, including increments thereof, under the Policy until there
is a distribution. Under a complete surrender or lapse of any Policy, if the
amount received plus the amount of outstanding Indebtedness exceeds the total
investments in the Policy, the excess will generally be treated as ordinary
income subject to tax. The tax consequences of other distributions from, and
Policy Loans taken from or secured by, a Policy depend upon whether the Policy
is classified as a "modified endowment contract".
11
MODIFIED ENDOWMENT CONTRACTS. A policy may be treated as a modified
endowment contract depending upon the amount of premiums paid in relation to
the death benefit provided under such Policy. The premium limitation rules for
determining whether a Policy is a modified endowment contract are extremely
complex. In general, however, a Policy will be a modified endowment contract if
the accumulated premiums paid at any time during the first seven Policy Years
exceed the sum of the net level premiums which would have been paid on or
before such time if the Policy provided for paid-up future benefits after the
payment of seven level annual premiums.
In addition, if a Policy is "materially changed" it may cause such Policy to
be treated as a modified endowment contract. The material change rules for
determining whether a Policy is a modified endowment contract are also
extremely complex. In general, however, the determination of whether a Policy
will be a modified endowment contract after a material change generally depends
upon the relationship among the death benefit at the time of such change, the
Cash Value at the time of the change and the additional premiums paid in the
seven Policy Years starting with the date on which the material change occurs.
Moreover, a life insurance contract received in exchange for a life
insurance contract classified as a modified endowment contract will also be
treated as a modified endowment contract. A reduction in a Policy's benefits
may also cause such Policy to become a modified endowment contract.
Accordingly, a prospective Owner should contact a competent tax adviser
before purchasing a Policy to determine the circumstances under which the
Policy would be a modified endowment contract. In addition, an Owner should
contact a competent tax adviser before paying any additional premiums or making
any other change to, including an exchange of, a Policy to determine whether
such premium or change would cause the Policy (or the new Policy in the case of
an exchange) to be treated as a modified endowment contract.
NOTE: MOST DESTINY POLICIES WERE MODIFIED ENDOWMENT CONTACTS FROM THE DATE OF
ISSUE, THEREFORE, DISTRIBUTIONS FROM MOST DESTINY POLICIES ARE TAXED AS FOLLOWS:
DISTRIBUTIONS FROM POLICIES CLASSIFIED AS MODIFIED ENDOWMENT
CONTRACT. Policies classified as modified endowment contracts will be subject
to the following tax rules: First, all distributions, including distributions
upon surrender, from such a Policy are treated as ordinary income subject to
tax up to the amount equal to the excess (if any) of the Cash Value immediately
before the distribution over the investment in the Policy (described below) at
such time. Second, Policy Loans taken from, or secured by, such a Policy, as
well as due but unpaid interest thereon, are treated as distributions from such
a Policy and taxed accordingly. Third, a 10 percent additional income tax is
imposed on the portion of any distribution from, or Policy Loan taken from or
secured by, such a Policy that is included in income, except where the
distribution or Policy Loan (a) is made on or after the Owner attains age
59 1/2, (b) is attributable to the Owner's becoming disabled, or (c) is part of
a series of substantially equal periodic payments for the life (or life
expectancy) of the Owner or the joint lives (or joint life expectancies) of the
Owner and the Owner's Beneficiary. The foregoing exceptions to the 10 percent
additional income tax will generally not apply to a corporate Policy Owner.
DISTRIBUTIONS FROM POLICIES NOT CLASSIFIED AS MODIFIED ENDOWMENT
CONTRACT. Distributions from Policies not classified as a modified endowment
contracts are generally treated as first recovering the investment in the
Policy (described below) and then, only after the return of all such investment
in the Policy, as distributing taxable income. An exception to this general
rule occurs in the case of a decrease in the Policy's death benefit (possibly
including a partial withdrawal) or any other change that reduces benefits under
the Policy in the first 15 years after the Policy is issued and that results in
cash distribution to the Owner in order for the Policy to continue complying
with the Section 7702 definitional limits. Such a cash distribution will be
taxed in whole or in part as ordinary income (to the extent of any gain in the
Policy) under rules prescribed in Section 7702.
Policy Loans from, or secured by, a Policy that is not a modified endowment
contract should generally not be treated as distributions. Instead, such loans
should generally be treated as indebtedness of the Owner. However, because the
tax consequences associated with Policy Loans are not always clear, in
particular, with respect to Policy Loans outstanding after the tenth Policy
year, you should consult a tax adviser prior to taking any Policy Loan.
Upon a complete surrender or lapse of a Policy that is not a modified
endowment contract, if the amount received plus the amount of indebtedness
exceeds the total investment in the Policy, the excess will generally be
treated as ordinary income subject to tax.
12
Neither distributions (including distributions upon surrender or lapse) nor
Policy Loans from, or secured by, a Policy that is not a modified endowment
contract are subject to the 10 percent additional income tax.
If a Policy which is not a modified endowment contract subsequently becomes
a modified endowment contract, then any distribution made from the Policy
within two years prior to the date of such change in status may become taxable.
POLICY LOANS. Generally, interest paid on any loan under a life insurance
Policy is not deductible. AN OWNER SHOULD CONSULT A COMPETENT TAX ADVISER IF
THE DEDUCTIBILITY OF LOAN INTEREST IS A CONSIDERATION IN THE PURCHASE OF A
POLICY. If a Policy Loan is outstanding when a Policy is canceled or lapses,
the amount of the outstanding Indebtedness will be added to the amount
distributed and will be taxed accordingly.
INVESTMENT IN THE POLICY. Investment in the Policy means (i) the aggregate
amount of any premiums or other consideration paid for a Policy, minus (ii) the
aggregate amount received under the Policy which is excluded from gross income
of the Owner (except that the amount of any Policy Loan from, or secured by, a
Policy that is a modified endowment contract, to the extent such amount is
excluded from gross income, will be disregarded), plus (iii) the amount of any
Policy Loan from, or secured by, a Policy that is a modified endowment contract
to the extent that such amount is included in the gross income of the Owner.
MULTIPLE POLICES. All modified endowment contracts that are issued by the
Company (or its affiliates) to the same Owner during any calendar year are
treated as one modified endowment contract for purposes of determining the
amount includible in gross income under Section 72(e) of the Code.
LIFE INSURANCE PURCHASES BY NONRESIDENT ALIENS AND FOREIGN
CORPORATIONS. Policy Owners that are not U.S. citizens or residents will
generally be subject to U.S. Federal withholding tax on taxable distributions
from life insurance policies at a 30% rate, unless a lower treaty rate applies.
In addition, Policy Owners may be subject to state and/or municipal taxes and
taxes that may be imposed by the Policy Owner's country of citizenship or
residence.
WITHHOLDING. To the extent that Policy distributions are taxable, they are
generally subject to withholding for the recipient's Federal income tax
liability. Recipients can generally elect, however, not to have tax withheld
from distributions.
ESTATE, GIFT AND GENERATION-SKIPPING TRANSFER TAXES. The transfer of the
Policy or the designation of a beneficiary may have Federal, state, and/or
local transfer and inheritance tax consequences, including the imposition of
gift, estate, and generation-skipping transfer taxes. When the insured dies,
the death proceeds will generally be includable in the Policy Owner's estate
for purposes of the Federal estate tax if the Policy Owner was the insured,
retained incidents of ownership at death, or made a gift transfer of the Policy
within 3 years of death. If the Policy Owner was not the insured, the fair
market value of the Policy would be included in the Policy Owner's estate upon
the Policy Owner's death.
Moreover, under certain circumstances, the Internal Revenue Code may impose
a "generation-skipping transfer tax" when all or part of a life insurance
policy is transferred to, or a death benefit is paid to, an individual two or
more generations younger than the Policy Owner. Regulations issued under the
Internal Revenue Code may require us to deduct the tax from your Policy, or
from any applicable payment, and pay it directly to the IRS.
Qualified tax advisers should be consulted concerning the estate and gift
tax consequences of Policy ownership and distributions under Federal, state and
local law. The individual situation of each Policy Owner or beneficiary will
determine the extent, if any, to which Federal, state, and local transfer and
inheritance taxes may be imposed and how ownership or receipt of Policy
proceeds will be treated for purposes of Federal, state and local estate,
inheritance, generation-skipping and other taxes.
In general, current rules provide for a $5 million estate, gift and
generation-skipping transfer tax exemption (as indexed for inflation) and a top
tax rate of 40 percent.
The complexity of the tax law, along with uncertainty as to how it might be
modified in coming years, underscores the importance of seeking guidance from a
qualified adviser to help ensure that your estate plan adequately addresses
your needs and those of your beneficiaries under all possible scenarios.
CONTINUATION OF POLICY BEYOND ATTAINED AGE 100. The tax consequences of
continuing the Policy beyond the Insured's Attained Age 100 birthday are
unclear. You should consult a tax adviser if you intend to keep the Policy in
force beyond the Insured's Attained Age 100.
13
GUIDANCE ON SPLIT DOLLAR PLANS. The IRS has issued guidance on split dollar
insurance plans. A tax adviser should be consulted with respect to this
guidance if your Policy is, or may become, subject to a split dollar insurance
plan. If your Policy is part of an equity split dollar arrangement taxed under
the economic benefit regime, there is a risk that some portion of the Policy
cash value may be taxed prior to any Policy distribution.
In addition, the Sarbanes-Oxley Act of 2002 (the "Act") which was signed
into law on July 30, 2002, prohibits, with exceptions, publicly-traded
companies, including non-U.S. companies that have securities listed on U.S.
exchanges, from extending, directly or indirectly or through a subsidiary, many
types of personal loans to their directors or executive officers. It is
possible that this prohibition may be interpreted to apply to split-dollar life
insurance arrangements for directors and executive officers of such companies,
since such arrangements can arguably be viewed as involving a loan from the
employer for at least some purposes.
Any affected business contemplating the payment of a premium on an existing
Policy or the purchase of new Policy in connection with a split-dollar life
insurance arrangement should consult legal counsel.
Split dollar insurance plans that provide deferred compensation may be
subject to recently enacted rules governing deferred compensation arrangements.
Failure to adhere to these rules will result in adverse tax consequences. A tax
adviser should be consulted with respect to such plans.
ALTERNATIVE MINIMUM TAX. There may also be an indirect tax upon the income
in the Policy or the proceeds of a Policy under the Federal corporate
alternative minimum tax, if the Owner is subject to that tax.
PUERTO RICO. We believe that Policies subject to Puerto Rican tax law will
generally receive treatment similar, with certain modifications, to that
described above. Among other differences, Policies governed by Puerto Rican tax
law are not currently subject to the rules described above regarding Modified
Endowment Contracts. You should consult your tax adviser with respect to Puerto
Rican tax law governing the Policies.
POSSIBLE TAX LAW CHANGES. Although the likelihood of legislative changes is
uncertain, there is always the possibility that the tax treatment of the Policy
could change by legislation or otherwise. Consult a tax adviser with respect to
legislative developments and their effect on the Policy.
FOREIGN TAX CREDITS. To the extent permitted under Federal tax law, we may
claim the benefit of certain foreign tax credits attributable to taxes paid by
certain Eligible Funds to foreign jurisdictions.
POSSIBLE CHARGE FOR TAXES. At the present time, the Company makes no charge
to the Separate Account for any Federal, state, or local taxes (as opposed to
Premium Tax Charges which are deducted from premium payments) that it incurs
which may be attributable to such Separate Account or to the Policies. The
Company, however, reserves the right in the future to make a charge for any
such tax or other economic burden resulting from the application of the tax
laws that it determines to be properly attributable to the Separate Account or
to the Policies.
MANAGEMENT
The directors and executive officers of General American Life Insurance
Company and their principal business experience are:
DIRECTORS OF GENERAL AMERICAN
NAME AND PRINCIPAL BUSINESS ADDRESS PRINCIPAL BUSINESS EXPERIENCE
----------------------------------- -----------------------------
Eric T. Steigerwalt/(2)/ Chairman of the Board, President and Chief Executive Officer since 2012 and
Director since 2007 of General American and Executive Vice President of
Metropolitan Life Insurance Company since 2010. Formerly Interim Chief
Financial Officer 2011-2012, Senior Vice President and Treasurer of General
American 2007-2009 and Senior Vice President and Treasurer 2007-2009 of
Metropolitan Life.
Kimberly A. Berwanger/(1)/ Director of General American since 2012 and Vice President of Metropolitan
Life Insurance Company since 2010.
Peter M. Carlson/(1)/ Director, Executive Vice President and Chief Accounting Officer of General
American since 2009 and Executive Vice President and Chief Accounting
Officer of Metropolitan Life Insurance Company since 2009. Formerly
Executive Vice President and Corporate Controller 2006-2009 of Wachovia
Corporation.
14
NAME AND PRINCIPAL BUSINESS ADDRESS PRINCIPAL BUSINESS EXPERIENCE
----------------------------------- -----------------------------
Paul G. Cellupica/(1)/ Director of General American since 2011 and Chief Counsel of Metropolitan
Life Insurance Company since 2004.
Elizabeth M. Forget/(1)/ Director of General American since 2012 and Senior Vice President of
Metropolitan Life Insurance Company since 2007.
Michael P. Harwood/(2)/ Director of General American since 2012 and Senior Vice President and Chief
Actuary of Metropolitan Life Insurance Company since 2010. Formerly Vice
President and Chief Actuary 2005-2009 of Metropolitan Life.
Paul A. LaPiana/(2)/ Director of General American since 2010 and Senior Vice President of
Metropolitan Life Insurance Company since 2008. Formerly Director (Officer)
2003-2008 of Metropolitan Life.
Gene L. Lunman/(4)/ Director of General American since 2012 and Senior Vice President of
Metropolitan Life Insurance Company since 2006.
Stanley J. Talbi/(1)/ Director of General American since 2002 and Executive Vice President of
Metropolitan Life Insurance Company since 2005.
EXECUTIVE OFFICERS OF GENERAL AMERICAN OTHER THAN DIRECTORS
NAME AND PRINCIPAL BUSINESS ADDRESS PRINCIPAL BUSINESS EXPERIENCE
----------------------------------- -----------------------------
Roberto Baron/(1)/ Senior Vice President of General American since 2011 and Senior Vice
President of Metropolitan Life Insurance Company since 2011. Formerly Vice
President 2004-2011 of General American.
Anne M. Belden/(6)/ Vice President--Finance of General American since 2010 and Assistant Vice
President and Actuary of Metropolitan Life Insurance Company since 2010.
Formerly Actuary 2004-2010 of Metropolitan Life.
Marlene B. Debel/(1)/ Senior Vice President and Treasurer of General American since 2011 and
Senior Vice President and Treasurer of Metropolitan Life Insurance Company
since 2011. Formerly Global Head of Liquidity Risk Management and Rating
Agency Relations of 2009-2011 Bank of America and Assistant Treasurer and
Head of Corporate Finance and Liquidity Risk Management 1989-2008 of
Merrill Lynch & Co., Inc.
Robin Lenna/(5)/ Executive Vice President of General American since 2011 and Executive Vice
President of Metropolitan Life Insurance Company since 2010. Formerly
Senior Vice President 2004-2010 of Metropolitan Life.
Jonathan L. Rosenthal/(3)/ Senior Vice President and Chief Hedging Officer of General American since
2010 and Senior Managing Director of Metropolitan Life Insurance Company
since 2008.
----------
/(1)/The principal business address is MetLife, 1095 Avenue of the Americas,
New York, NY 10036.
/(2)/The principal business address is MetLife, 501 Route 22, Bridgewater, NJ
08807
/(3)/The principal business address is MetLife, 10 Park Avenue, Morristown, NJ
07962.
/(4)/The principal business address is MetLife, 1300 Hall Boulevard,
Bloomfield, CT 06002
/(5)/The principal business address is MetLife, 200 Park Avenue, 12/th/ floor,
New York, NY 10166
/(6)/The principal business address is MetLife, 1 MetLife Plaza, 27-01 Queens
Plaza North, Long Island, NY 11101
RESTRICTIONS ON FINANCIAL TRANSACTIONS
Applicable laws designed to counter terrorism and prevent money laundering
might, in certain circumstances, require us to reject a premium payment and/or
block or "freeze" your Policy. If these laws apply in a particular situation,
we would not be allowed to process any request for withdrawals, surrenders,
loans or death benefits, make transfers or continue making payments under your
death benefit option until instructions are received from the appropriate
regulator. We also may be required to provide additional information about you
or your Policy to government regulators.
15
LEGAL PROCEEDINGS
In the ordinary course of business, General American, similar to other life
insurance companies, is involved in lawsuits (including class action lawsuits),
arbitrations and other legal proceedings. Also, from time to time, state and
federal regulators or other officials conduct formal and informal examinations
or undertake other actions dealing with various aspects of the financial
services and insurance industries. In some legal proceedings involving
insurers, substantial damages have been sought and/or material settlement
payments have been made. It is not possible to predict with certainty the
ultimate outcome of any pending legal proceeding or regulatory action. However,
General American does not believe any such action or proceeding will have a
material adverse effect upon the Separate Account or upon the ability of
MetLife Investors Distribution Company to perform its contract with the
Separate Account or of General American to meet its obligations under the
Contracts.
FINANCIAL STATEMENTS
The financial statements of General American which are included in this
prospectus supplement should be distinguished from the financial statements of
the Separate Account, which are also included in this prospectus supplement,
and should be considered only as bearing on the ability of General American to
meet its obligations under the Policy. They should not be considered as bearing
on the investment performance of the assets held in the Separate Account.
16
GENERAL AMERICAN LIFE INSURANCE COMPANY
Variable Life Insurance Policy
(Destiny)
Supplement dated April 30, 2012
to the Prospectus dated May 1, 2004
Flexible Premium
Variable Life Insurance Policies
(Variable Universal Life/Executive Benefit)
Supplement dated April 30, 2012
to the Prospectuses dated May 1, 2002
Flexible Premium Joint and Last Survivor
Variable Life Insurance Policy
Supplement dated April 30, 2012
to the Prospectus dated May 1, 2002
Flexible Premium Variable Life Insurance Policies
(VUL 95/VUL 100/VGSP/Russell VUL)
Supplement dated April 30, 2012
to the Prospectuses dated May 1, 2000
This supplement updates certain information contained in the last full
prospectus for each of the above-referenced variable life insurance policies,
as annually and periodically supplemented. You should read and retain this
supplement. We will send you an additional copy of the last full prospectus for
your policy, without charge, on request. These policies are no longer available
for sale.
General American Life Insurance Company is an indirect wholly-owned
subsidiary of Metropolitan Life Insurance Company ("MetLife"). MetLife is a
wholly-owned subsidiary of MetLife, Inc., a publicly-traded company. General
American's Home Office is 13045 Tesson Ferry Road, St. Louis, Missouri 63128.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE POLICIES OR DETERMINED IF THIS
SUPPLEMENT IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE SECURITIES AND EXCHANGE COMMISSION MAINTAINS A WEB SITE THAT CONTAINS
MATERIAL INCORPORATED BY REFERENCE AND OTHER INFORMATION REGARDING REGISTRANTS
THAT FILE ELECTRONICALLY WITH THE SECURITIES AND EXCHANGE COMMISSION. THE
ADDRESS OF THE SITE IS HTTP://WWW.SEC.GOV.
THE UNDERLYING FUND PROSPECTUSES MAY BE OBTAINED BY CALLING 1-800-638-9294.
WE DO NOT GUARANTEE HOW ANY OF THE DIVISIONS OR FUNDS WILL PERFORM. THE
POLICIES AND THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY FINANCIAL INSTITUTION AND ARE NOT FEDERALLY INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER
GOVERNMENT AGENCY.
The Financial Industry Regulatory Authority ("FINRA") provides background
information about broker-dealers and their registered representatives through
FINRA BrokerCheck. You may contact the FINRA BrokerCheck Hotline at
1-800-289-9999, or log on to www.finra.org. An investor brochure that includes
information describing FINRA BrokerCheck is available through the Hotline or
on-line.
1
THE COMPANY
General American is principally engaged in writing individual life insurance
policies and annuity contracts. It is admitted to do business in 49 states, the
District of Columbia, Puerto Rico, and in four Canadian provinces. The
principal offices (Home Office) of General American are located at 13045 Tesson
Ferry Road, St. Louis, Missouri 63128. The Administrative Office for various
Policy transactions is as follows:
Premium Payments General American
P.O. Box 790201
St. Louis, MO 63179-0201
Payment Inquires and General American
Correspondence P.O. Box 355
Warwick, RI 02887-0355
Beneficiary and Ownership General American
Changes P.O. Box 357
Warwick, RI 02887-0356
Surrenders, Loans, General American
Withdrawals and P.O. Box 356
Division Transfers Warwick, RI 02887-0356
Death Claims General American
P.O. Box 356
Warwick, RI 02887-0356
All Telephone (800) 638-9294
Transactions and Inquiries
You may request an account transfer or reallocation of future premiums by
written request (which may be telecopied) to our Administrative Office, by
telephoning us, or over the Internet. To request a transfer or reallocation by
telephone, you should contact your registered representative, or contact us at
(800) 638-9294. To request a transfer or reallocation over the Internet, you
may log on to our website at www.genamerica.com. We use reasonable procedures
to confirm that instructions communicated by telephone, facsimile or Internet
are genuine. Any telephone, facsimile or Internet instructions that we
reasonably believe to be genuine will be your responsibility, including losses
arising from any errors in the communication of instructions. However, because
telephone and Internet transactions may be available to anyone who provides
certain information about you and your Policy, you should protect that
information. We may not be able to verify that you are the person providing
telephone or Internet instructions, or that you have authorized any such person
to act for you.
Telephone, facsimile, and computer systems (including the Internet) may not
always be available. Any telephone, facsimile, or computer system, whether it
is yours, your service provider's, your registered representative's, or ours,
can experience outages or slowdowns for a variety of reasons. These outages or
slowdowns may delay or prevent our processing of your request. Although we have
taken precautions to help our systems handle heavy use, we cannot promise
complete reliability under all circumstances. If you are experiencing problems,
you should make your request by writing to our Administrative Office.
If you send premium payments or transaction requests to an address other
than the one we have designated for receipt of such payments or requests, we
may return the premium payment to you, or there may be a delay in applying the
payment or transaction to your Policy.
THE SEPARATE ACCOUNT
The separate account consists of divisions, each of which corresponds to an
underlying Fund. Each division may either make money or lose money. Therefore
if you invest in a division of the separate account, you may either make money
or lose money, depending on the investment experience of that division. There
is no guaranteed rate of return in the separate account.
2
The following chart shows the Funds that are available under the policy
along with the name of the investment adviser, sub-adviser (where applicable)
and investment objective of each Fund. The Funds have different investment
goals and strategies. You should review the prospectus of each Fund, or seek
professional guidance in determining which Fund(s) best meet your objectives.
NOTE: THE RUSSELL INVESTMENT FUNDS ARE NOT AVAILABLE TO DESTINY OR EXECUTIVE
BENEFIT POLICIES. FOR ALL OTHER POLICIES, THE RUSSELL INVESTMENT FUNDS ARE ONLY
AVAILABLE FOR POLICIES WITH AN ISSUE DATE PRIOR TO JANUARY 1, 2000.
AMERICAN FUNDS INSURANCE SERIES(R) ADVISER: CAPITAL RESEARCH AND MANAGEMENT COMPANY
FUND SUB-ADVISER INVESTMENT OBJECTIVE
---- ----------- --------------------
American Funds Global N/A Long-term growth of capital.
Small Capitalization Fund
American Funds Growth N/A Growth of capital.
Fund
American Funds Growth- N/A Long-term growth of capital and income.
Income Fund
FIDELITY(R) VARIABLE INSURANCE PRODUCTS ADVISER: FIDELITY MANAGEMENT & RESEARCH COMPANY
FUND SUB-ADVISER INVESTMENT OBJECTIVE
---- ----------- --------------------
Equity-Income Portfolio FMR Co., Inc. Reasonable income. The fund will also consider the
potential for capital appreciation. The fund's goal is to
achieve a yield which exceeds the composite yield of
securities comprising the S&P 500(R) Index.
Mid Cap Portfolio FMR Co., Inc. Long-term growth of capital.
JPMORGAN INSURANCE TRUST ADVISER: J.P. MORGAN INVESTMENT MANAGEMENT INC.
FUND SUB-ADVISER INVESTMENT OBJECTIVE
---- ----------- --------------------
JPMorgan Insurance N/A To maximize total return by investing primarily in a
Trust Core Bond Portfolio diversified portfolio of intermediate- and long-term debt
securities.
JPMorgan Insurance N/A Capital growth over the long term.
Trust Small Cap Core
Portfolio
MET INVESTORS SERIES TRUST ADVISER: METLIFE ADVISERS, LLC
FUND SUB-ADVISER INVESTMENT OBJECTIVE
---- ----------- --------------------
Clarion Global Real Estate CBRE Clarion Securities Total return through investment in real estate securities,
Portfolio LLC (formerly ING Clarion emphasizing both capital appreciation and current
Real Estate Securities LLC) income.
Harris Oakmark Harris Associates L.P. Long-term capital appreciation.
International Portfolio
Invesco Small Cap Invesco Advisers, Inc. Long-term growth of capital.
Growth Portfolio
Lazard Mid Cap Portfolio Lazard Asset Long-term growth of capital.
Management LLC
Legg Mason ClearBridge ClearBridge Advisors, LLC Capital appreciation.
Aggressive Growth
Portfolio
Lord Abbett Bond Lord, Abbett & Co. LLC High current income and the opportunity for capital
Debenture Portfolio appreciation to produce a high total return.
3
FUND SUB-ADVISER INVESTMENT OBJECTIVE
---- ----------- --------------------
Lord Abbett Mid Cap Lord, Abbett & Co. LLC Capital appreciation through investments, primarily in
Value Portfolio equity securities, which are believed to be undervalued
in the marketplace.
MFS(R) Research Massachusetts Financial Capital appreciation
International Portfolio Services Company
Morgan Stanley Mid Cap Morgan Stanley Capital appreciation.
Growth Portfolio Investment Management
Inc.
PIMCO Total Return Pacific Investment Maximum total return, consistent with the preservation
Portfolio Management Company of capital and prudent investment management.
LLC
RCM Technology RCM Capital Management Capital appreciation; no consideration is given to
Portfolio LLC income.
T. Rowe Price Large Cap T. Rowe Price Long-term capital appreciation by investing in common
Value Portfolio Associates, Inc. stocks believed to be undervalued. Income is a
secondary objective.
T. Rowe Price Mid Cap T. Rowe Price Long-term growth of capital.
Growth Portfolio Associates, Inc.
METROPOLITAN SERIES FUND ADVISER: METLIFE ADVISERS, LLC
FUND SUB-ADVISER INVESTMENT OBJECTIVE
---- ----------- --------------------
Baillie Gifford Baillie Gifford Overseas Long-term growth of capital.
International Stock Limited/1/
Portfolio (formerly Artio
International Stock
Portfolio)
Barclays Capital MetLife Investment To track the performance of the Barclays U.S. Aggregate
Aggregate Bond Index Advisors Company, LLC Bond Index.
Portfolio
BlackRock Aggressive BlackRock Advisors, LLC Maximum capital appreciation.
Growth Portfolio
BlackRock Bond Income BlackRock Advisors, LLC A competitive total return primarily from investing in
Portfolio fixed-income securities.
BlackRock Diversified BlackRock Advisors, LLC High total return while attempting to limit investment
Portfolio risk and preserve capital.
BlackRock Large Cap BlackRock Advisors, LLC Long-term growth of capital.
Value Portfolio
BlackRock Legacy Large BlackRock Advisors, LLC Long-term growth of capital.
Cap Growth Portfolio
BlackRock Money Market BlackRock Advisors, LLC A high level of current income consistent with
Portfolio/2/ preservation of capital.
Davis Venture Value Davis Selected Advisers, Growth of capital.
Portfolio L.P./3/
Met/Artisan Mid Cap Artisan Partners Limited Long-term capital growth.
Value Portfolio Partnership
MetLife Mid Cap Stock MetLife Investment To track the performance of the Standard & Poor's
Index Portfolio Advisors Company, LLC MidCap 400(R) Composite Stock Price Index.
MetLife Stock Index MetLife Investment To track the performance of the Standard & Poor's
Portfolio Advisors Company, LLC 500(R) Composite Stock Price Index.
4
METROPOLITAN SERIES FUND ADVISER: METLIFE ADVISERS, LLC
FUND SUB-ADVISER INVESTMENT OBJECTIVE
---- ----------- --------------------
MFS(R) Total Return Massachusetts Financial Favorable total return through investment in a
Portfolio Services Company diversified portfolio.
MFS(R) Value Portfolio Massachusetts Financial Capital appreciation.
Services Company
MSCI EAFE(R) Index MetLife Investment Advisors To track the performance of the MSCI EAFE(R) Index.
Portfolio (formerly Morgan Company, LLC
Stanley EAFE(R) Index
Portfolio)
Neuberger Berman Genesis Neuberger Berman High total return, consisting principally of capital
Portfolio Management LLC appreciation.
Russell 2000(R) Index MetLife Investment Advisors To track the performance of the Russell 2000(R)
Portfolio Company, LLC Index.
T. Rowe Price Large Cap T. Rowe Price Long-term growth of capital and, secondarily,
Growth Portfolio Associates, Inc. dividend income.
T. Rowe Price Small Cap T. Rowe Price Long-term capital growth.
Growth Portfolio Associates, Inc.
Van Eck Global Natural Van Eck Associates Long-term capital appreciation with income as a
Resources Portfolio Corporation secondary consideration.
Western Asset Western Asset Management To maximize total return consistent with preservation
Management Company of capital and maintenance of liquidity.
U.S. Government Portfolio
RUSSELL INVESTMENT FUNDS ADVISER: RUSSELL INVESTMENT MANAGEMENT COMPANY
FUND SUB-ADVISER INVESTMENT OBJECTIVE
---- ----------- --------------------
Aggressive Equity Fund N/A To provide long term capital growth.
Core Bond Fund N/A To provide current income, and as a secondary
objective, capital appreciation.
Multi-Style Equity Fund N/A To provide long term capital growth.
Non-U.S. Fund N/A To provide long term capital growth.
VAN ECK VIP TRUST ADVISER: VAN ECK ASSOCIATES CORPORATION
FUND SUB-ADVISER INVESTMENT OBJECTIVE
---- ----------- --------------------
Van Eck VIP Emerging N/A Long-term capital appreciation by investing primarily
Markets Fund in equity securities in emerging markets around the
world.
----------
/1/Prior to February 1, 2012, Artio Global Management LLC was the sub-adviser
to the Portfolio.
/2/An investment in the BlackRock Money Market Portfolio is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. Although the Portfolio seeks to preserve the value of
your investment at $100 per share, it is possible to lose money by investing
in the Portfolio. During extended periods of low interest rates, the yields
of the Division investing in the BlackRock Money Market Portfolio may become
extremely low and possibly negative.
/3/Davis Selected Advisers, L.P. may also delegate any of its responsibilities
to Davis Selected Advisers--NY, Inc., a wholly-owned subsidiary.
5
FOR MORE INFORMATION REGARDING THE FUNDS AND THEIR INVESTMENT ADVISERS AND
SUB-ADVISERS, SEE THE FUND PROSPECTUSES AND THEIR STATEMENTS OF ADDITIONAL
INFORMATION, WHICH YOU CAN OBTAIN BY CALLING 1-800-638-9294.
OTHER FUNDS AND SHARE CLASSES
Some of the Funds offer various classes of shares, each of which has a
different level of expenses. The prospectuses for the Funds may provide
information for share classes that are not available through the Policy. When
you consult the prospectus for any Fund, you should be careful to refer to only
the information regarding the class of shares that is available through the
Policy. For the JPMorgan Insurance Trust, we offer Class 1 shares; for Fidelity
Variable Insurance Products and the Van Eck VIP Trust, we offer Initial Class
shares; for the Metropolitan Series Fund, Inc., we offer Class A shares; for
the Met Investors Series Trust, we offer Class A shares; and for the American
Funds Insurance Series, we offer Class 2 shares.
CHARGES AND DEDUCTIONS
Charges will be deducted in connection with the Policy to compensate the
Company for providing the insurance benefits set forth in the Policy and any
additional benefits added by rider, administering the Policies, incurring
expenses in distributing the Policies, and assuming certain risks in connection
with the Policy. We may profit from one or more of the charges deducted under
the Policy, including the cost of insurance charge. We may use these profits
for any corporate purpose.
The following table shows the minimum and maximum total operating expenses
charged by the Funds for the fiscal year ended December 31, 2011. Expenses of
the Funds may be higher or lower in the future. Certain Funds may impose a
redemption fee in the future. More detail concerning each Fund's fees and
expenses is contained in the table that follows and in the prospectus for each
Fund.
MINIMUM MAXIMUM
------- -------
TOTAL ANNUAL FUND OPERATING EXPENSES
(expenses that are deducted from Fund assets, including management fees, distribution
and/or service (12b-1) fees, and other expenses).................................... 0.27% 1.26%
The following table describes the annual operating expenses for each Fund
for the year ended December 31, 2011, before and after any applicable
contractual fee waivers and expense reimbursements.
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
CONTRACTUAL
DISTRIBUTION ACQUIRED TOTAL FEE WAIVER NET TOTAL
AND/OR FUND FEES ANNUAL AND/OR ANNUAL
MANAGEMENT SERVICE (12B-1) OTHER AND OPERATING EXPENSE OPERATING
FEE FEES EXPENSES EXPENSES EXPENSES REIMBURSEMENT EXPENSES
---------- --------------- -------- --------- --------- ------------- ---------
AMERICAN FUNDS INSURANCE
SERIES(R) -- CLASS 2
American Funds Global Small Capitalization
Fund...................................... 0.70% 0.25% 0.04% -- 0.99% -- 0.99%
American Funds Growth Fund................. 0.32% 0.25% 0.02% -- 0.59% -- 0.59%
American Funds Growth-Income Fund.......... 0.27% 0.25% 0.01% -- 0.53% -- 0.53%
FIDELITY(R) VARIABLE INSURANCE
PRODUCTS -- INITIAL CLASS
Equity-Income Portfolio.................... 0.46% -- 0.10% -- 0.56% -- 0.56%
Mid Cap Portfolio.......................... 0.56% -- 0.10% -- 0.66% -- 0.66%
JPMORGAN INSURANCE TRUST -- CLASS I
JPMorgan Insurance Trust Core Bond
Portfolio................................. 0.40% -- 0.22% -- 0.62% 0.02% 0.60%
JPMorgan Insurance Trust Small Cap Core
Portfolio................................. 0.65% -- 0.39% 0.01% 1.05% 0.01% 1.04%
6
CONTRACTUAL
DISTRIBUTION ACQUIRED TOTAL FEE WAIVER NET TOTAL
AND/OR FUND FEES ANNUAL AND/OR ANNUAL
MANAGEMENT SERVICE (12B-1) OTHER AND OPERATING EXPENSE OPERATING
FEE FEES EXPENSES EXPENSES EXPENSES REIMBURSEMENT EXPENSES
---------- --------------- -------- --------- --------- ------------- ---------
MET INVESTORS SERIES TRUST -- CLASS A
Clarion Global Real Estate Portfolio..... 0.61% -- 0.06% -- 0.67% -- 0.67%
Harris Oakmark International Portfolio... 0.77% -- 0.08% -- 0.85% 0.02% 0.83%
Invesco Small Cap Growth Portfolio....... 0.85% -- 0.03% -- 0.88% 0.02% 0.86%
Lazard Mid Cap Portfolio................. 0.69% -- 0.06% -- 0.75% -- 0.75%
Legg Mason ClearBridge Aggressive Growth
Portfolio............................... 0.62% -- 0.03% -- 0.65% -- 0.65%
Lord Abbett Bond Debenture Portfolio..... 0.50% -- 0.04% -- 0.54% -- 0.54%
Lord Abbett Mid Cap Value Portfolio...... 0.67% -- 0.06% -- 0.73% 0.02% 0.71%
MFS(R) Research International Portfolio.. 0.68% -- 0.09% -- 0.77% 0.06% 0.71%
Morgan Stanley Mid Cap Growth
Portfolio............................... 0.65% -- 0.07% -- 0.72% 0.01% 0.71%
PIMCO Total Return Portfolio............. 0.48% -- 0.03% -- 0.51% -- 0.51%
RCM Technology Portfolio................. 0.88% -- 0.07% -- 0.95% -- 0.95%
T. Rowe Price Large Cap Value Portfolio.. 0.57% -- 0.02% -- 0.59% -- 0.59%
T. Rowe Price Mid Cap Growth Portfolio... 0.75% -- 0.03% -- 0.78% -- 0.78%
METROPOLITAN SERIES FUND -- CLASS A
Baillie Gifford International Stock
Portfolio............................... 0.83% -- 0.12% -- 0.95% 0.10% 0.85%
Barclays Capital Aggregate Bond Index
Portfolio............................... 0.25% -- 0.03% -- 0.28% 0.01% 0.27%
BlackRock Aggressive Growth Portfolio.... 0.73% -- 0.04% -- 0.77% -- 0.77%
BlackRock Bond Income Portfolio.......... 0.34% -- 0.03% -- 0.37% 0.01% 0.36%
BlackRock Diversified Portfolio.......... 0.46% -- 0.05% -- 0.51% -- 0.51%
BlackRock Large Cap Value Portfolio...... 0.63% -- 0.03% -- 0.66% 0.03% 0.63%
BlackRock Legacy Large Cap Growth
Portfolio............................... 0.71% -- 0.02% -- 0.73% 0.01% 0.72%
BlackRock Money Market Portfolio......... 0.33% -- 0.02% -- 0.35% 0.01% 0.34%
Davis Venture Value Portfolio............ 0.70% -- 0.03% -- 0.73% 0.05% 0.68%
Jennison Growth Portfolio................ 0.62% -- 0.02% -- 0.64% 0.07% 0.57%
Met/Artisan Mid Cap Value Portfolio...... 0.81% -- 0.03% -- 0.84% -- 0.84%
MetLife Mid Cap Stock Index Portfolio.... 0.25% -- 0.05% 0.02% 0.32% 0.00% 0.32%
MetLife Stock Index Portfolio............ 0.25% -- 0.02% -- 0.27% 0.01% 0.26%
MFS(R) Total Return Portfolio............ 0.54% -- 0.05% -- 0.59% -- 0.59%
MFS(R) Value Portfolio................... 0.70% -- 0.03% -- 0.73% 0.13% 0.60%
MSCI EAFE(R) Index Portfolio............. 0.30% -- 0.11% 0.01% 0.42% 0.00% 0.42%
Neuberger Berman Genesis Portfolio....... 0.82% -- 0.04% -- 0.86% 0.01% 0.85%
Russell 2000(R) Index Portfolio.......... 0.25% -- 0.06% 0.08% 0.39% 0.00% 0.39%
T. Rowe Price Large Cap Growth
Portfolio............................... 0.60% -- 0.04% -- 0.64% 0.01% 0.63%
T. Rowe Price Small Cap Growth
Portfolio............................... 0.49% -- 0.06% -- 0.55% -- 0.55%
Van Eck Global Natural Resources
Portfolio............................... 0.78% -- 0.04% 0.02% 0.84% -- 0.84%
Western Asset Management U.S.
Government Portfolio.................... 0.47% -- 0.02% -- 0.49% 0.01% 0.48%
7
CONTRACTUAL
DISTRIBUTION ACQUIRED TOTAL FEE WAIVER NET TOTAL
AND/OR FUND FEES ANNUAL AND/OR ANNUAL
MANAGEMENT SERVICE (12B-1) OTHER AND OPERATING EXPENSE OPERATING
FEE FEES EXPENSES EXPENSES EXPENSES REIMBURSEMENT EXPENSES
---------- --------------- -------- --------- --------- ------------- ---------
RUSSELL INVESTMENT FUNDS
Aggressive Equity Fund............. 0.90% -- 0.18% -- 1.08% 0.05% 1.03%
Core Bond Fund..................... 0.55% -- 0.18% -- 0.73% 0.05% 0.68%
Multi-Style Equity Fund............ 0.73% -- 0.12% -- 0.85% -- 0.85%
Non-U.S. Fund...................... 0.90% -- 0.20% -- 1.10% 0.05% 1.05%
VAN ECK VIP TRUST -- INITIAL CLASS
Van Eck VIP Emerging Markets Fund.. 1.00% -- 0.26% -- 1.26% 0.00% 1.26%
The Net Total Annual Operating Expenses shown in the table reflect
contractual arrangements currently in effect under which the investment
advisers of certain Funds have agreed to waive fees and/or pay expenses of the
Funds until at least April 30, 2013. In the table, "0.00%" in the Contractual
Fee Waiver and/or Expense Reimbursement column indicates that there is a
contractual arrangement in effect for that Fund, but the expenses of the Fund
are below the level that would trigger the waiver or reimbursement. The Net
Total Annual Operating Expenses shown do not reflect voluntary waiver or
expense reimbursement arrangements or arrangements that terminate prior to
April 30, 2013. The Funds provided the information on their expenses, and we
have not independently verified the information.
POLICY RIGHTS
TRANSFERS
The following paragraphs in this section have been revised.
The Funds may have adopted their own policies and procedures with respect to
market timing transactions in their respective shares, and we reserve the right
to enforce these policies and procedures. For example, the Funds may assess a
redemption fee (which we reserve the right to collect) on shares held for a
relatively short period. The prospectuses for the Funds describe any such
policies and procedures, which may be more or less restrictive than the
policies and procedures we have adopted. Although we may not have the
contractual authority or the operational capacity to apply the market timing
policies and procedures of the Funds, we have entered into a written agreement,
as required by SEC regulation, with each Fund or its principal underwriter that
obligates us to provide to the Fund promptly upon request certain information
about the trading activity of individual owners, and to execute instructions
from the Fund to restrict or prohibit further purchases or transfers by
specific owners who violate the frequent trading policies established by the
Fund.
In addition, owners and other persons with interests in the Policies should
be aware that the purchase and redemption orders received by the Funds
generally are "omnibus" orders from intermediaries such as retirement plans or
separate accounts funding variable insurance contracts. The omnibus orders
reflect the aggregation and netting of multiple orders from individual owners
of variable insurance contracts and/or individual retirement plan participants.
The omnibus nature of these orders may limit the Funds in their ability to
apply their market timing policies and procedures. In addition, the other
insurance companies and/or retirement plans may have different policies and
procedures or may not have any such policies and procedures because of
contractual limitations. For these reasons, we cannot guarantee that the Funds
(and thus owners) will not be harmed by transfer activity relating to other
insurance companies and/or retirement plans that may invest in the Funds. If a
Fund believes that an omnibus order reflects one or more transfer requests from
owners engaged in disruptive trading activity, the Fund may reject the entire
omnibus order.
In accordance with applicable law, we reserve the right to modify or
terminate the transfer privilege at any time. We also reserve the right to
defer or restrict the transfer privilege at any time that we are unable to
purchase or redeem shares of any of the Funds, including any refusal or
restriction on purchases or redemptions of their
8
shares as a result of their own policies and procedures on market timing and
disruptive trading activities (even if an entire omnibus order is rejected due
to the market timing or disruptive trading activity of a single owner). You
should read the Fund prospectuses for more details.
SEPARATE ACCOUNT CHARGES
We will waive the following amount of the Mortality and Expense Risk Charge:
the amount, if any, equal to the underlying fund expenses that are in excess of
0.68% for the Division investing in the Jennison Growth Portfolio, and that are
in excess of 0.88% for the Division investing in the MFS Research International
Portfolio.
THE GENERAL ACCOUNT
TRANSFERS, SURRENDERS, PARTIAL WITHDRAWALS AND POLICY LOANS
The following is added to this section:
Although we are not currently limiting transfers from the General Account to
the greater of 25% of the Policy's Cash Surrender Value in the General Account
or the previous Policy Year's Maximum Amount, it is important to note that if
we impose this limit, it could take a number of years to fully transfer a
current balance from the General Account to the Divisions of the Separate
Account. You should keep this in mind when considering whether an allocation of
Cash Value to the General Account is consistent with your risk tolerance and
time horizon.
FEDERAL TAX MATTERS
INTRODUCTION
The following summary provides a general description of the Federal income
tax considerations associated with the Policy and does not purport to be
complete or to cover all situations. The summary does not address state, local
or foreign tax issues related to the Policy. This discussion is not intended as
tax advice. Counsel or other competent tax advisers should be consulted for
more complete information. This discussion is based upon General American's
understanding of the present Federal income tax laws as they are currently
interpreted by the Internal Revenue Service. No representation is made as to
the likelihood of continuation of the present Federal income tax laws or of the
current interpretations by the Internal Revenue Service.
IRS CIRCULAR 230 NOTICE: The tax information contained herein is not
intended to (and cannot) be used by anyone to avoid IRS penalties. It is
intended to support the sale of the Policy. The Policy Owner should seek tax
advice based on the Policy Owner's particular circumstances from an independent
tax adviser.
TAX STATUS OF THE POLICY
In order to qualify as a life insurance contract for Federal income tax
purposes and to receive the tax treatment normally accorded life insurance
contracts under Federal tax law, a Policy must satisfy certain requirements
which are set forth in the Internal Revenue Code. Guidance as to how these
requirements are to be applied is limited, in particular, with respect to joint
and last survivor life insurance policies. Nevertheless, we believe that the
Policies should satisfy the applicable requirements. However, the rules are not
entirely clear with respect to Policies issued on a substandard or guaranteed
issue basis. We may take appropriate steps to bring the Policy into compliance
with applicable requirements, and we reserve the right to restrict Policy
transactions in order to do so. The insurance proceeds payable on the death of
the insured will never be less than the minimum amount required for the Policy
to be treated as life insurance under section 7702 of the Internal Revenue
Code, as in effect on the date the Policy was issued.
In some circumstances, owners of variable contracts who retain excessive
control over the investment of the underlying separate account assets may be
treated as the owners of those assets. Although published guidance in this area
does not address certain aspects of the Policies, we believe that the Owner of
a Policy should not be treated as the owner of the Separate Account assets. We
reserve the right to modify the Policies to bring them into
9
conformity with applicable standards should such modification be necessary to
prevent Owners of the Policies from being treated as the owners of the
underlying Separate Account assets.
In addition, the Code requires that the investments of the Separate Account
be "adequately diversified" in order for the Policies to be treated as life
insurance contracts for Federal income tax purposes. It is intended that the
Separate Account, through the Eligible Funds, will satisfy these
diversification requirements. If Eligible Fund shares are sold directly to
either non-qualified plans or to tax-qualified retirement plans that later lose
their tax qualified status, there may be adverse consequences under the
diversification rules.
The following discussion assumes that the Policy will qualify as a life
insurance contract for Federal income tax purposes.
TAX TREATMENT OF POLICY BENEFITS. In general, the proceeds and Cash Value
increases of a Policy should be treated in a manner consistent with a
fixed-benefit life insurance policy for Federal income tax purposes. Thus, the
death benefit under the Policy should be excludable from the gross income of
the Beneficiary to the extent provided in under Section 101 of the Code. In the
case of employer-owned life insurance as defined in Section 101(j), the amount
of the death benefit excludable from gross income is limited to premiums paid
unless the Policy falls within certain specified exceptions and a notice and
consent requirement is satisfied before the Policy is issued. Certain specified
exceptions are based on the status of an employee as highly compensated or
recently employed. There are also exceptions for Policy proceeds paid to an
employee's heirs. These exceptions only apply if proper notice is given to the
insured employee and consent is received from the insured employee before the
issuance of the Policy. These rules apply to Policies issued August 18, 2006
and later and also apply to policies issued before August 18, 2006 after a
material increase in the death benefit or other material change. An IRS
reporting requirement applies to employer-owned life insurance subject to these
rules. Because these rules are complex and will affect the tax treatment of
death benefits, it is advisable to consult tax counsel. The death benefit will
also be taxable in the case of a transfer-for-value unless certain exceptions
apply.
Many changes or transactions involving a Policy may have tax consequences,
depending on the circumstances. Such changes include, but are not limited to,
the exchange of the Policy, a change of the Policy's Face Amount, a Policy
Loan, an additional premium payment, a Policy lapse with an outstanding Policy
Loan, a partial withdrawal, or a surrender of the Policy. The transfer of the
Policy or designation of a Beneficiary may have Federal, state, and/or local
transfer and inheritance tax consequences, including the imposition of gift,
estate, and generation-skipping transfer taxes. For example, the transfer of
the Policy to, or the designation as a Beneficiary of, or the payment of
proceeds to, a person who is assigned to a generation which is two or more
generations below the generation assignment of the Owner may have generation
skipping transfer tax consequences under Federal tax law. The individual
situation of each Owner or Beneficiary will determine the extent, if any, to
which Federal, state, and local transfer and inheritance taxes may be imposed
and how ownership or receipt of Policy proceeds will be treated for purposes of
Federal, state and local estate, inheritance, generation skipping and other
taxes.
A Policy may also be used in various arrangements, including non-qualified
deferred compensation or salary continuation plans, split dollar insurance
plans, executive bonus plans, retiree medical benefit plans and others. The tax
consequences of such plans may vary depending on the particular facts and
circumstances of each individual arrangement. Therefore, if you are
contemplating the use of a Policy in any arrangement the value of which depends
in part on its tax consequences, you should be sure to consult a qualified tax
adviser regarding the tax attributes of the particular arrangement.
Generally, the Owner will not be deemed to be in constructive receipt of the
Policy's Cash Value, including increments thereof, under the Policy until there
is a distribution. Under a complete surrender or lapse of any Policy, if the
amount received plus the amount of outstanding Indebtedness exceeds the total
investments in the Policy, the excess will generally be treated as ordinary
income subject to tax. The tax consequences of other distributions from, and
Policy Loans taken from or secured by, a Policy depend upon whether the Policy
is classified as a "modified endowment contract".
MODIFIED ENDOWMENT CONTRACTS. A policy may be treated as a modified
endowment contract depending upon the amount of premiums paid in relation to
the death benefit provided under such Policy. The premium limitation rules for
determining whether a Policy is a modified endowment contract are extremely
complex. In
10
general, however, a Policy will be a modified endowment contract if the
accumulated premiums paid at any time during the first seven Policy Years
exceed the sum of the net level premiums which would have been paid on or
before such time if the Policy provided for paid-up future benefits after the
payment of seven level annual premiums.
In addition, if a Policy is "materially changed" it may cause such Policy to
be treated as a modified endowment contract. The material change rules for
determining whether a Policy is a modified endowment contract are also
extremely complex. In general, however, the determination of whether a Policy
will be a modified endowment contract after a material change generally depends
upon the relationship among the death benefit at the time of such change, the
Cash Value at the time of the change and the additional premiums paid in the
seven Policy Years starting with the date on which the material change occurs.
Moreover, a life insurance contract received in exchange for a life
insurance contract classified as a modified endowment contract will also be
treated as a modified endowment contract. A reduction in a Policy's benefits
may also cause such Policy to become a modified endowment contract.
Accordingly, a prospective Owner should contact a competent tax adviser
before purchasing a Policy to determine the circumstances under which the
Policy would be a modified endowment contract. In addition, an Owner should
contact a competent tax adviser before paying any additional premiums or making
any other change to, including an exchange of, a Policy to determine whether
such premium or change would cause the Policy (or the new Policy in the case of
an exchange) to be treated as a modified endowment contract.
NOTE: MOST DESTINY POLICIES WERE MODIFIED ENDOWMENT CONTACTS FROM THE DATE OF
ISSUE, THEREFORE, DISTRIBUTIONS FROM MOST DESTINY POLICIES ARE TAXED AS FOLLOWS:
DISTRIBUTIONS FROM POLICIES CLASSIFIED AS MODIFIED ENDOWMENT
CONTRACT. Policies classified as modified endowment contracts will be subject
to the following tax rules: First, all distributions, including distributions
upon surrender, from such a Policy are treated as ordinary income subject to
tax up to the amount equal to the excess (if any) of the Cash Value immediately
before the distribution over the investment in the Policy (described below) at
such time. Second, Policy Loans taken from, or secured by, such a Policy, as
well as due but unpaid interest thereon, are treated as distributions from such
a Policy and taxed accordingly. Third, a 10 percent additional income tax is
imposed on the portion of any distribution from, or Policy Loan taken from or
secured by, such a Policy that is included in income, except where the
distribution or Policy Loan (a) is made on or after the Owner attains age
59 1/2, (b) is attributable to the Owner's becoming disabled, or (c) is part of
a series of substantially equal periodic payments for the life (or life
expectancy) of the Owner or the joint lives (or joint life expectancies) of the
Owner and the Owner's Beneficiary. The foregoing exceptions to the 10 percent
additional income tax will generally not apply to a corporate Policy Owner.
DISTRIBUTIONS FROM POLICIES NOT CLASSIFIED AS MODIFIED ENDOWMENT
CONTRACT. Distributions from Policies not classified as a modified endowment
contracts are generally treated as first recovering the investment in the
Policy (described below) and then, only after the return of all such investment
in the Policy, as distributing taxable income. An exception to this general
rule occurs in the case of a decrease in the Policy's death benefit (possibly
including a partial withdrawal) or any other change that reduces benefits under
the Policy in the first 15 years after the Policy is issued and that results in
cash distribution to the Owner in order for the Policy to continue complying
with the Section 7702 definitional limits. Such a cash distribution will be
taxed in whole or in part as ordinary income (to the extent of any gain in the
Policy) under rules prescribed in Section 7702.
Policy Loans from, or secured by, a Policy that is not a modified endowment
contract should generally not be treated as distributions. Instead, such loans
should generally be treated as indebtedness of the Owner. However, because the
tax consequences associated with Policy Loans are not always clear, in
particular, with respect to Policy Loans outstanding after the tenth Policy
year, you should consult a tax adviser prior to taking any Policy Loan.
Upon a complete surrender or lapse of a Policy that is not a modified
endowment contract, if the amount received plus the amount of indebtedness
exceeds the total investment in the Policy, the excess will generally be
treated as ordinary income subject to tax.
11
Neither distributions (including distributions upon surrender or lapse) nor
Policy Loans from, or secured by, a Policy that is not a modified endowment
contract are subject to the 10 percent additional income tax.
If a Policy which is not a modified endowment contract subsequently becomes
a modified endowment contract, then any distribution made from the Policy
within two years prior to the date of such change in status may become taxable.
POLICY LOANS. Generally, interest paid on any loan under a life insurance
Policy is not deductible. AN OWNER SHOULD CONSULT A COMPETENT TAX ADVISER IF
THE DEDUCTIBILITY OF LOAN INTEREST IS A CONSIDERATION IN THE PURCHASE OF A
POLICY. If a Policy Loan is outstanding when a Policy is canceled or lapses,
the amount of the outstanding Indebtedness will be added to the amount
distributed and will be taxed accordingly.
INVESTMENT IN THE POLICY. Investment in the Policy means (i) the aggregate
amount of any premiums or other consideration paid for a Policy, minus (ii) the
aggregate amount received under the Policy which is excluded from gross income
of the Owner (except that the amount of any Policy Loan from, or secured by, a
Policy that is a modified endowment contract, to the extent such amount is
excluded from gross income, will be disregarded), plus (iii) the amount of any
Policy Loan from, or secured by, a Policy that is a modified endowment contract
to the extent that such amount is included in the gross income of the Owner.
MULTIPLE POLICES. All modified endowment contracts that are issued by the
Company (or its affiliates) to the same Owner during any calendar year are
treated as one modified endowment contract for purposes of determining the
amount includible in gross income under Section 72(e) of the Code.
LIFE INSURANCE PURCHASES BY NONRESIDENT ALIENS AND FOREIGN
CORPORATIONS. Policy Owners that are not U.S. citizens or residents will
generally be subject to U.S. Federal withholding tax on taxable distributions
from life insurance policies at a 30% rate, unless a lower treaty rate applies.
In addition, Policy Owners may be subject to state and/or municipal taxes and
taxes that may be imposed by the Policy Owner's country of citizenship or
residence.
WITHHOLDING. To the extent that Policy distributions are taxable, they are
generally subject to withholding for the recipient's Federal income tax
liability. Recipients can generally elect, however, not to have tax withheld
from distributions.
ESTATE, GIFT AND GENERATION-SKIPPING TRANSFER TAXES. The transfer of the
Policy or the designation of a beneficiary may have Federal, state, and/or
local transfer and inheritance tax consequences, including the imposition of
gift, estate, and generation-skipping transfer taxes. When the insured dies,
the death proceeds will generally be includable in the Policy Owner's estate
for purposes of the Federal estate tax if the Policy Owner was the insured,
retained incidents of ownership at death, or made a gift transfer of the Policy
within 3 years of death. If the Policy Owner was not the insured, the fair
market value of the Policy would be included in the Policy Owner's estate upon
the Policy Owner's death.
Moreover, under certain circumstances, the Internal Revenue Code may impose
a "generation-skipping transfer tax" when all or part of a life insurance
policy is transferred to, or a death benefit is paid to, an individual two or
more generations younger than the Policy Owner. Regulations issued under the
Internal Revenue Code may require us to deduct the tax from your Policy, or
from any applicable payment, and pay it directly to the IRS.
Qualified tax advisers should be consulted concerning the estate and gift
tax consequences of Policy ownership and distributions under Federal, state and
local law. The individual situation of each Policy Owner or beneficiary will
determine the extent, if any, to which Federal, state, and local transfer and
inheritance taxes may be imposed and how ownership or receipt of Policy
proceeds will be treated for purposes of Federal, state and local estate,
inheritance, generation-skipping and other taxes.
Under previous law, the estate tax applicable exclusion gradually rose to
$3.5 million per person in 2009 and was repealed in 2010 with a modified
carryover basis for heirs. The Tax Relief, Unemployment Insurance
Reauthorization, and Job Creation Act of 2010 (the "2010 Act") has reinstated
the estate and generation-skipping transfer taxes through the end of 2012 with
lower top rates and larger exemptions. The 2010 Act raises the applicable
exclusion amount to $5,000,000. The top tax rate is set at 35%. A special
irrevocable election was provided for estates of decedents who died in 2010.
These estates may generally choose between the reinstated estate tax and the
carryover basis rules which were in effect in 2010.
12
It is not known if Congress will make the temporary changes of the 2010 Act
permanent, enact permanent repeal of the estate and the generation-skipping
transfer taxes or otherwise modify the estate tax or generation-skipping
transfer tax rules for years after 2012. Absent Congressional action, the law
governing estate, gift and generation-skipping transfer taxes will revert on
January 1, 2013 to the law that was in place on June 7, 2001.
The complexity of the tax law, along with uncertainty as to how it might be
modified in coming years, underscores the importance of seeking guidance from a
qualified adviser to help ensure that your estate plan adequately addresses
your needs and those of your beneficiaries under all possible scenarios.
CONTINUATION OF POLICY BEYOND ATTAINED AGE 100. The tax consequences of
continuing the Policy beyond the Insured's Attained Age 100 birthday are
unclear. You should consult a tax adviser if you intend to keep the Policy in
force beyond the Insured's Attained Age 100.
GUIDANCE ON SPLIT DOLLAR PLANS. The IRS has issued guidance on split dollar
insurance plans. A tax adviser should be consulted with respect to this
guidance if your Policy is, or may become, subject to a split dollar insurance
plan. If your Policy is part of an equity split dollar arrangement taxed under
the economic benefit regime, there is a risk that some portion of the Policy
cash value may be taxed prior to any Policy distribution.
In addition, the Sarbanes-Oxley Act of 2002 (the "Act") which was signed
into law on July 30, 2002, prohibits, with exceptions, publicly-traded
companies, including non-U.S. companies that have securities listed on U.S.
exchanges, from extending, directly or indirectly or through a subsidiary, many
types of personal loans to their directors or executive officers. It is
possible that this prohibition may be interpreted to apply to split-dollar life
insurance arrangements for directors and executive officers of such companies,
since such arrangements can arguably be viewed as involving a loan from the
employer for at least some purposes.
Any affected business contemplating the payment of a premium on an existing
Policy or the purchase of new Policy in connection with a split-dollar life
insurance arrangement should consult legal counsel.
Split dollar insurance plans that provide deferred compensation may be
subject to recently enacted rules governing deferred compensation arrangements.
Failure to adhere to these rules will result in adverse tax consequences. A tax
adviser should be consulted with respect to such plans.
ALTERNATIVE MINIMUM TAX. There may also be an indirect tax upon the income
in the Policy or the proceeds of a Policy under the Federal corporate
alternative minimum tax, if the Owner is subject to that tax.
PUERTO RICO. We believe that Policies subject to Puerto Rican tax law will
generally receive treatment similar, with certain modifications, to that
described above. Among other differences, Policies governed by Puerto Rican tax
law are not currently subject to the rules described above regarding Modified
Endowment Contracts. You should consult your tax adviser with respect to Puerto
Rican tax law governing the Policies.
POSSIBLE TAX LAW CHANGES. Although the likelihood of legislative changes is
uncertain, there is always the possibility that the tax treatment of the Policy
could change by legislation or otherwise. Consult a tax adviser with respect to
legislative developments and their effect on the Policy.
FOREIGN TAX CREDITS. To the extent permitted under Federal tax law, we may
claim the benefit of certain foreign tax credits attributable to taxes paid by
certain Eligible Funds to foreign jurisdictions.
POSSIBLE CHARGE FOR TAXES. At the present time, the Company makes no charge
to the Separate Account for any Federal, state, or local taxes (as opposed to
Premium Tax Charges which are deducted from premium payments) that it incurs
which may be attributable to such Separate Account or to the Policies. The
Company, however, reserves the right in the future to make a charge for any
such tax or other economic burden resulting from the application of the tax
laws that it determines to be properly attributable to the Separate Account or
to the Policies.
13
MANAGEMENT
The directors and executive officers of General American Life Insurance
Company and their principal business experience are:
DIRECTORS OF GENERAL AMERICAN
NAME AND PRINCIPAL BUSINESS ADDRESS PRINCIPAL BUSINESS EXPERIENCE
----------------------------------- -----------------------------
Michael K. Farrell/(2)/ Chairman of the Board, President and Chief Executive Officer of General
American since 2009 and Executive Vice President of Metropolitan Life
Insurance Company since 2005. Formerly Director of General American
2004-2009.
Peter M. Carlson/(1)/ Director, Executive Vice President and Chief Accounting Officer of General
American since 2009 and Executive Vice President and Chief Accounting
Officer of Metropolitan Life Insurance Company since 2009. Formerly
Executive Vice President and Corporate Controller of Wachovia Corporation
2006-2009.
Paul G. Cellupica/(1)/ Director of General American since 2011 and Chief Counsel of Metropolitan
Life since 2004.
Todd B. Katz/(3)/ Director of General American since 2009 and Executive Vice President of
Metropolitan Life Insurance Company since 2010. Formerly Senior Vice
President of Metropolitan Life Insurance Company 2005-2009.
Paul A. LaPiana/(4)/ Director of General American since 2010 and Senior Vice President of
Metropolitan Life since 2008. Formerly Director (Officer) of Metropolitan Life
2003-2008.
Maria R. Morris/(1)/ Director of General American since 2009 and Executive Vice President,
Technology and Operations of Metropolitan Life Insurance Company since
2008. Formerly Executive Vice President of Metropolitan Life 2005-2008.
Eric T. Steigerwalt/(3)/ Director of General American since 2007 and Executive Vice President and
Chief Financial Officer of Metropolitan Life Insurance Company since 2011.
Formerly Senior Vice President and Treasurer of General American 2007-2009
and Executive Vice President 2010-2011, Senior Vice President and Treasurer
2007-2009 of Metropolitan Life.
Stanley J. Talbi/(1)/ Director of General American since 2002 and Executive Vice President of
Metropolitan Life Insurance Company since 2005.
EXECUTIVE OFFICERS OF GENERAL AMERICAN OTHER THAN DIRECTORS
NAME AND PRINCIPAL BUSINESS ADDRESS PRINCIPAL BUSINESS EXPERIENCE
----------------------------------- -----------------------------
Anne M. Belden/(7)/ Vice President--Finance of General American since 2010 and Assistant Vice
President and Actuary of Metropolitan Life Insurance Company since 2010.
Formerly Actuary of Metropolitan Life Insurance Company 2004-2010.
William D. Cammarata/(5)/ Senior Vice President of General American since 2007 and Senior Vice
President, Financial Operations of Metropolitan Life Insurance Company since
2007. Formerly Assistant Secretary of General American 2002-2007 and Vice
President and Deputy Controller of Metropolitan Life 1991-2007.
Marlene B. Debel/(1)/ Senior Vice President and Treasurer of General American since 2011 and
Senior Vice President and Treasurer of Metropolitan Life Insurance Company
since 2011. Formerly Global Head of Liquidity Risk Management and Rating
Agency Relations of Bank of America 2009-2011 and Assistant Treasurer and
Head of Corporate Finance and Liquidity Risk Management of Merrill Lynch &
Co., Inc. 1989-2008 (Merrill Lynch was acquired by Bank of America in
January of 2009).
Robin Lenna/(6)/ Executive Vice President of General American since 2011 and Executive Vice
President of Metropolitan Life Insurance Company since 2010. Formerly
Senior Vice President of Metropolitan Life Insurance Company 2004-2010.
14
----------
/(1)/The principal business address is 1095 Avenue of the Americas, New York,
NY 10036.
/(2)/The principal business address is 10 Park Avenue, Morristown, NJ 07962.
/(3)/The principal business address is 501 Route 22, Bridgewater, NJ 08807
/(4)/The principal business address is 5 Park Plaza, Suite 1900, Irvine, CA
92614
/(5)/The principal business address is 18210 Crane Nest Drive, Tampa, FL 33647
/(6)/The principal business address is 200 Park Avenue, 12/th/ floor, New York,
NY 10166
/(7)/The principal business address is 1 MetLife Plaza, 27-01 Queens Plaza
North, Long Island, NY 11101
RESTRICTIONS ON FINANCIAL TRANSACTIONS
Applicable laws designed to counter terrorism and prevent money laundering
might, in certain circumstances, require us to reject a premium payment and/or
block or "freeze" your Policy. If these laws apply in a particular situation,
we would not be allowed to process any request for withdrawals, surrenders,
loans or death benefits, make transfers or continue making payments under your
death benefit option until instructions are received from the appropriate
regulator. We also may be required to provide additional information about you
or your Policy to government regulators.
LEGAL PROCEEDINGS
In the ordinary course of business, General American, similar to other life
insurance companies, is involved in lawsuits (including class action lawsuits),
arbitrations and other legal proceedings. Also, from time to time, state and
federal regulators or other officials conduct formal and informal examinations
or undertake other actions dealing with various aspects of the financial
services and insurance industries. In some legal proceedings involving
insurers, substantial damages have been sought and/or material settlement
payments have been made. It is not possible to predict with certainty the
ultimate outcome of any pending legal proceeding or regulatory action. However,
General American does not believe any such action or proceeding will have a
material adverse effect upon the Separate Account or upon the ability of
MetLife Investors Distribution Company to perform its contract with the
Separate Account or of General American to meet its obligations under the
Contracts.
FINANCIAL STATEMENTS
The financial statements of General American which are included in this
prospectus supplement should be distinguished from the financial statements of
the Separate Account, which are also included in this prospectus supplement,
and should be considered only as bearing on the ability of General American to
meet its obligations under the Policy. They should not be considered as bearing
on the investment performance of the assets held in the Separate Account.
15
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
GENERAL AMERICAN LIFE INSURANCE COMPANY
Variable Life Insurance Policy
(Destiny)
Supplement dated May 1, 2011
to the Prospectus dated May 1, 2004
Flexible Premium
Variable Life Insurance Policies
(Variable Universal Life/Executive Benefit)
Supplement dated May 1, 2011
to the Prospectuses dated May 1, 2002
Flexible Premium Joint and Last Survivor
Variable Life Insurance Policy
Supplement dated May 1, 2011
to the Prospectus dated May 1, 2002
Flexible Premium Variable Life Insurance Policies
(VUL 95/VUL 100/VGSP/Russell VUL)
Supplement dated May 1, 2011
to the Prospectuses dated May 1, 2000
This supplement updates certain information contained in the last full
prospectus for each of the above-referenced variable life insurance policies, as
annually and periodically supplemented. You should read and retain this
supplement. We will send you an additional copy of the last full prospectus for
your policy, without charge, on request. These policies are no longer available
for sale.
General American Life Insurance Company is an indirect wholly-owned
subsidiary of Metropolitan Life Insurance Company ("MetLife"). MetLife is a
wholly-owned subsidiary of MetLife, Inc., a publicly-traded company. General
American's Home Office is 13045 Tesson Ferry Road, St. Louis, Missouri 63128.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE POLICIES OR DETERMINED IF THIS
SUPPLEMENT IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE SECURITIES AND EXCHANGE COMMISSION MAINTAINS A WEB SITE THAT CONTAINS
MATERIAL INCORPORATED BY REFERENCE AND OTHER INFORMATION REGARDING REGISTRANTS
THAT FILE ELECTRONICALLY WITH THE SECURITIES AND EXCHANGE COMMISSION. THE
ADDRESS OF THE SITE IS HTTP://WWW.SEC.GOV.
THE UNDERLYING FUND PROSPECTUSES MAY BE OBTAINED BY CALLING 1-800-638-9294.
WE DO NOT GUARANTEE HOW ANY OF THE DIVISIONS OR FUNDS WILL PERFORM. THE
POLICIES AND THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY FINANCIAL INSTITUTION AND ARE NOT FEDERALLY INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER
GOVERNMENT AGENCY.
The Financial Industry Regulatory Authority ("FINRA") provides background
information about broker-dealers and their registered representatives through
FINRA BrokerCheck. You may contact the FINRA BrokerCheck Hotline at 1-800-289-
9999, or log on to www.finra.org. An investor brochure that includes information
describing FINRA BrokerCheck is available through the Hotline or on-line.
THE COMPANY
General American is principally engaged in writing individual life
insurance policies and annuity contracts. It is admitted to do business in 49
states, the District of Columbia, Puerto Rico, and in four Canadian provinces.
The principal offices (Home Office) of General American are located at 13045
Tesson Ferry Road, St. Louis, Missouri 63128. The Administrative Office for
various Policy transactions is as follows:
<Table>
Premium Payments General American
P.O. Box 790201
St. Louis, MO 63179-0201
Payment Inquires and General American
Correspondence P. O. Box 355
Warwick, RI 02887-0355
Beneficiary and Ownership General American
Changes P. O. Box 357
Warwick, RI 02887-0356
Surrenders, Loans, General American
Withdrawals and P.O. Box 356
Division Transfers Warwick, RI 02887-0356
Death Claims General American
P.O. Box 356
Warwick, RI 02887-0356
All Telephone (800) 638-9294
Transactions and Inquiries
</Table>
You may request an account transfer or reallocation of future premiums by
written request (which may be telecopied) to our Administrative Office, by
telephoning us, or over the Internet. To request a transfer or reallocation by
telephone, you should contact your registered representative, or contact us at
(800) 638-9294. To request a transfer or reallocation over the Internet, you may
log on to our website at www.genamerica.com. We use reasonable procedures to
confirm that instructions communicated by telephone, facsimile or Internet are
genuine. Any telephone, facsimile or Internet instructions that we reasonably
believe to be genuine will be your responsibility, including losses arising from
any errors in the communication of instructions. However, because telephone and
Internet transactions may be available to anyone who provides certain
information about you and your Policy, you should protect that information. We
may not be able to verify that you are the person providing telephone or
Internet instructions, or that you have authorized any such person to act for
you.
Telephone, facsimile, and computer systems (including the Internet) may not
always be available. Any telephone, facsimile, or computer system, whether it is
yours, your service provider's, your registered representative's, or ours, can
experience outages or slowdowns for a variety of reasons. These outages or
slowdowns may delay or prevent our processing of your request. Although we have
taken precautions to help our systems handle heavy use, we cannot promise
complete reliability under all circumstances. If you are experiencing problems,
you should make your request by writing to our Administrative Office.
If you send premium payments or transaction requests to an address other
than the one we have designated for receipt of such payments or requests, we may
return the premium payment to you, or there may be a delay in applying the
payment or transaction to your Policy.
THE SEPARATE ACCOUNT. The separate account consists of divisions, each of
which corresponds to an underlying Fund. Each division may either make money or
lose money. Therefore if you invest in a division of the separate account, you
may either make money or lose money, depending on the investment experience of
that division. There is no guaranteed rate of return in the separate account.
The following chart shows the Funds that are available under the policy
along with the name of the investment adviser, sub-adviser (where applicable)
and investment objective of each Fund. The Funds have different investment goals
and strategies. You should review the prospectus of each Fund, or seek
professional guidance in determining which Fund(s) best meet your objectives.
2
NOTE: THE RUSSELL INVESTMENT FUNDS ARE NOT AVAILABLE TO DESTINY OR EXECUTIVE
BENEFIT POLICIES. FOR ALL OTHER POLICIES, THE RUSSELL INVESTMENT FUNDS ARE ONLY
AVAILABLE FOR POLICIES WITH AN ISSUE DATE PRIOR TO JANUARY 1, 2000.
AMERICAN FUNDS INSURANCE SERIES(R) ADVISER: CAPITAL RESEARCH AND MANAGEMENT
COMPANY
<Table>
<Caption>
FUND SUB-ADVISER INVESTMENT OBJECTIVE
---- ----------- --------------------
American Funds Global N/A Long-term growth of capital.
Small Capitalization
Fund
American Funds Growth N/A Growth of capital.
Fund
American Funds Growth- N/A Long-term growth of capital and income.
Income Fund
</Table>
FIDELITY(R) VARIABLE INSURANCE
PRODUCTS ADVISER: FIDELITY MANAGEMENT & RESEARCH COMPANY
<Table>
<Caption>
FUND SUB-ADVISER INVESTMENT OBJECTIVE
---- ----------- --------------------
Equity-Income Portfolio FMR Co., Inc. Reasonable income. The fund will also
consider the potential for capital
appreciation. The fund's goal is to
achieve a yield which exceeds the
composite yield of securities comprising
the Standard & Poor's 500(R) Index (S&P
500(R)).
Mid Cap Portfolio FMR Co., Inc. Long-term growth of capital.
</Table>
JPMORGAN INSURANCE TRUST ADVISER: J.P. MORGAN INVESTMENT MANAGEMENT INC.
<Table>
<Caption>
FUND SUB-ADVISER INVESTMENT OBJECTIVE
---- ----------- --------------------
JPMorgan Insurance Trust N/A To maximize total return by investing
Core Bond Portfolio primarily in a diversified portfolio of
intermediate- and long-term debt
securities.
JPMorgan Insurance Trust N/A Capital growth over the long term.
Small Cap Core Portfolio
</Table>
MET INVESTORS SERIES TRUST ADVISER: METLIFE ADVISERS, LLC
<Table>
<Caption>
FUND SUB-ADVISER INVESTMENT OBJECTIVE
---- ----------- --------------------
Clarion Global Real ING Clarion Real Estate Total return through investment in real
Estate Portfolio Securities LLC estate securities, emphasizing both
capital appreciation and current income.
Harris Oakmark Harris Associates L.P. Long-term capital appreciation.
International Portfolio
Invesco Small Cap Growth Invesco Advisers, Inc. Long-term growth of capital.
Portfolio
Lazard Mid Cap Portfolio Lazard Asset Management Long-term growth of capital.
LLC
Legg Mason ClearBridge ClearBridge Advisors, Capital appreciation.
Aggressive Growth LLC
Portfolio
Lord Abbett Bond Lord, Abbett & Co. LLC High current income and the opportunity
Debenture Portfolio for capital appreciation to produce a
high total return.
Lord Abbett Mid Cap Lord, Abbett & Co. LLC Capital appreciation through
Value Portfolio investments, primarily in equity
securities, which are believed to be
undervalued in the marketplace.
</Table>
3
<Table>
<Caption>
FUND SUB-ADVISER INVESTMENT OBJECTIVE
---- ----------- --------------------
MFS(R) Research Massachusetts Financial Capital appreciation
International Portfolio Services Company
Morgan Stanley Mid Cap Morgan Stanley Capital appreciation.
Growth Portfolio Investment Management
Inc.
Oppenheimer Capital OppenheimerFunds, Inc. Capital appreciation.
Appreciation Portfolio
PIMCO Total Return Pacific Investment Maximum total return, consistent with
Portfolio Management Company LLC the preservation of capital and prudent
investment management.
RCM Technology Portfolio RCM Capital Management Capital appreciation; no consideration
LLC is given to income.
T. Rowe Price Large Cap T. Rowe Price Long-term capital appreciation by
Value Portfolio Associates, Inc.(1) investing in common stocks believed to
be undervalued. Income is a secondary
objective.
T. Rowe Price Mid Cap T. Rowe Price Long-term growth of capital.
Growth Portfolio Associates, Inc.
</Table>
METROPOLITAN SERIES FUND, INC. ADVISER: METLIFE ADVISERS, LLC
<Table>
<Caption>
FUND SUB-ADVISER INVESTMENT OBJECTIVE
---- ----------- --------------------
Artio International Artio Global Management Long-term growth of capital.
Stock Portfolio LLC
Barclays Capital MetLife Investment To equal the performance of the Barclays
Aggregate Bond Index Advisors Company, LLC Capital U.S. Aggregate Bond Index.
Portfolio
BlackRock Aggressive BlackRock Advisors, LLC Maximum capital appreciation.
Growth Portfolio
BlackRock Bond Income BlackRock Advisors, LLC A competitive total return primarily
Portfolio from investing in fixed-income
securities.
BlackRock Diversified BlackRock Advisors, LLC High total return while attempting to
Portfolio limit investment risk and preserve
capital.
BlackRock Large Cap BlackRock Advisors, LLC Long-term growth of capital.
Value Portfolio
BlackRock Legacy Large BlackRock Advisors, LLC Long-term growth of capital.
Cap Growth Portfolio
BlackRock Money Market BlackRock Advisors, LLC A high level of current income
Portfolio(2) consistent with preservation of capital.
Davis Venture Value Davis Selected Advisers, Growth of capital.
Portfolio L.P.(3)
Met/Artisan Mid Cap Artisan Partners Limited Long-term capital growth.
Value Portfolio Partnership
MetLife Mid Cap Stock MetLife Investment To equal the performance of the Standard
Index Portfolio Advisors Company, LLC & Poor's MidCap 400(R) Composite Stock
Price Index.
MetLife Stock Index MetLife Investment To equal the performance of the Standard
Portfolio Advisors Company, LLC & Poor's 500(R) Composite Stock Price
Index.
</Table>
4
<Table>
<Caption>
FUND SUB-ADVISER INVESTMENT OBJECTIVE
---- ----------- --------------------
MFS(R) Total Return Massachusetts Financial Favorable total return through
Portfolio Services Company investment in a diversified portfolio.
MFS(R) Value Portfolio Massachusetts Financial Capital appreciation.
Services Company
Morgan Stanley EAFE(R) MetLife Investment To equal the performance of the MSCI
Index Portfolio Advisors Company, LLC EAFE(R) Index.
Neuberger Berman Genesis Neuberger Berman High total return, consisting
Portfolio Management LLC principally of
capital appreciation.
Neuberger Berman Mid Cap Neuberger Berman Capital growth.
Value Portfolio Management LLC
Russell 2000(R) Index MetLife Investment To equal the performance of the Russell
Portfolio Advisors Company, LLC 2000(R) Index.
T. Rowe Price Large Cap T. Rowe Price Long-term growth of capital and,
Growth Portfolio Associates, Inc. secondarily, dividend income.
T. Rowe Price Small Cap T. Rowe Price Long-term capital growth.
Growth Portfolio Associates, Inc.
Van Eck Global Natural Van Eck Associates Long-term capital appreciation with
Resources Portfolio(4) Corporation income as a secondary consideration.
Western Asset Management Western Asset Management To maximize total return consistent with
U.S. Government Company preservation of capital and maintenance
Portfolio of liquidity.
</Table>
RUSSELL INVESTMENT FUNDS ADVISER: RUSSELL INVESTMENT
MANAGEMENT COMPANY
<Table>
<Caption>
FUND SUB-ADVISER INVESTMENT OBJECTIVE
---- ----------- --------------------
Aggressive Equity Fund N/A To provide long term capital growth.
Core Bond Fund N/A To provide current income, and as a
secondary objective, capital
appreciation.
Multi-Style Equity Fund N/A To provide long term capital growth.
Non-U.S. Fund N/A To provide long term capital growth.
</Table>
VAN ECK VIP TRUST ADVISER: VAN ECK ASSOCIATES CORPORATION
<Table>
<Caption>
FUND SUB-ADVISER INVESTMENT OBJECTIVE
---- ----------- --------------------
Van Eck VIP Emerging N/A Long-term capital appreciation by
Markets Fund investing primarily in equity securities
in emerging markets around the world.
</Table>
--------
(1) Prior to May 1, 2011, Lord Abbett & Co. LLC was the sub-adviser to the
Portfolio.
(2) An investment in the BlackRock Money Market Portfolio is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. Although the Portfolio seeks to preserve the value of
your investment at $100 per share, it is possible to lose money by investing
in the Portfolio. During extended periods of low interest rates, the yields
of the Division investing in the BlackRock Money Market Portfolio may become
extremely low and possibly negative.
(3) Davis Selected Advisers, L.P. may also delegate any of its responsibilities
to Davis Selected Advisers--NY, Inc., a wholly-owned subsidiary.
(4) Effective May 2, 2011, the Portfolio replaced the Van Eck VIP Global Hard
Assets Fund of the Van Eck VIP Trust.
FOR MORE INFORMATION REGARDING THE FUNDS AND THEIR INVESTMENT ADVISERS AND SUB-
ADVISERS, SEE THE FUND PROSPECTUSES AND THEIR STATEMENTS OF ADDITIONAL
INFORMATION, WHICH YOU CAN OBTAIN BY CALLING 1-800-638-9294.
5
OTHER FUNDS AND SHARE CLASSES
Some of the Funds offer various classes of shares, each of which has a
different level of expenses. The prospectuses for the Funds may provide
information for share classes that are not available through the Policy. When
you consult the prospectus for any Fund, you should be careful to refer to only
the information regarding the class of shares that is available through the
Policy. For the JPMorgan Insurance Trust, we offer Class 1 shares; for Fidelity
Variable Insurance Products and the Van Eck VIP Trust, we offer Initial Class
shares; for the Metropolitan Series Fund, Inc., we offer Class A shares; for the
Met Investors Series Trust, we offer Class A shares; and for the American Funds
Insurance Series, we offer Class 2 shares.
6
CHARGES AND DEDUCTIONS
Charges will be deducted in connection with the Policy to compensate the
Company for providing the insurance benefits set forth in the Policy and any
additional benefits added by rider, administering the Policies, incurring
expenses in distributing the Policies, and assuming certain risks in connection
with the Policy. We may profit from one or more of the charges deducted under
the Policy, including the cost of insurance charge. We may use these profits for
any corporate purpose.
The following table shows the minimum and maximum total operating expenses
charged by the Funds for the fiscal year ended December 31, 2010. Expenses of
the Funds may be higher or lower in the future. Certain Funds may impose a
redemption fee in the future. More detail concerning each Fund's fees and
expenses is contained in the table that follows and in the prospectus for each
Fund.
<Table>
<Caption>
MINIMUM MAXIMUM
------- -------
TOTAL ANNUAL FUND OPERATING EXPENSES
(expenses that are deducted from Fund assets, including
management fees, distribution and/or service (12b-1) fees,
and other expenses)......................................... 0.27% 1.28%
</Table>
The following table describes the annual operating expenses for each Fund
for the year ended December 31, 2010, before and after any applicable
contractual fee waivers and expense reimbursements.
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
<Table>
<Caption>
DISTRIBUTION ACQUIRED TOTAL CONTRACTUAL FEE NET TOTAL
AND/OR FUND FEES ANNUAL WAIVER AND/OR ANNUAL
MANAGEMENT SERVICE(12B-1) OTHER AND OPERATING EXPENSE OPERATING
FEE FEES EXPENSES EXPENSES EXPENSES REIMBURSEMENT EXPENSES
---------- -------------- -------- --------- --------- --------------- ---------
AMERICAN FUNDS INSURANCE
SERIES(R) -- CLASS 2
American Funds Global Small
Capitalization Fund........ 0.71% 0.25% 0.04% -- 1.00% -- 1.00%
American Funds Growth Fund... 0.32% 0.25% 0.02% -- 0.59% -- 0.59%
American Funds Growth-Income
Fund....................... 0.27% 0.25% 0.02% -- 0.54% -- 0.54%
FIDELITY(R) VARIABLE
INSURANCE
PRODUCTS -- INITIAL CLASS
Equity-Income Portfolio...... 0.46% -- 0.10% -- 0.56% -- 0.56%
Mid Cap Portfolio............ 0.56% -- 0.10% -- 0.66% -- 0.66%
JPMORGAN INSURANCE
TRUST -- CLASS I
JPMorgan Insurance Trust Core
Bond Portfolio............. 0.40% -- 0.22% -- 0.62% 0.02% 0.60%(1)
JPMorgan Insurance Trust
Small Cap Core Portfolio... 0.65% -- 0.39% 0.01% 1.05% 0.01% 1.04%(2)
MET INVESTORS SERIES
TRUST -- CLASS A
Clarion Global Real Estate
Portfolio.................. 0.62% -- 0.07% -- 0.69% -- 0.69%
Harris Oakmark International
Portfolio.................. 0.78% -- 0.07% -- 0.85% 0.01% 0.84%(3)
Invesco Small Cap Growth
Portfolio.................. 0.85% -- 0.04% -- 0.89% 0.02% 0.87%(4)
Lazard Mid Cap Portfolio..... 0.69% -- 0.04% -- 0.73% -- 0.73%
Legg Mason ClearBridge
Aggressive Growth
Portfolio.................. 0.64% -- 0.04% -- 0.68% -- 0.68%
Lord Abbett Bond Debenture
Portfolio.................. 0.50% -- 0.03% -- 0.53% -- 0.53%
Lord Abbett Mid Cap Value
Portfolio.................. 0.68% -- 0.07% -- 0.75% -- 0.75%
</Table>
7
<Table>
<Caption>
DISTRIBUTION ACQUIRED TOTAL CONTRACTUAL FEE NET TOTAL
AND/OR FUND FEES ANNUAL WAIVER AND/OR ANNUAL
MANAGEMENT SERVICE(12B-1) OTHER AND OPERATING EXPENSE OPERATING
FEE FEES EXPENSES EXPENSES EXPENSES REIMBURSEMENT EXPENSES
---------- -------------- -------- --------- --------- --------------- ---------
MFS(R) Research International
Portfolio.................. 0.69% -- 0.09% -- 0.78% 0.03% 0.75%(5)
Morgan Stanley Mid Cap Growth
Portfolio.................. 0.66% -- 0.14% -- 0.80% 0.02% 0.78%(6)
Oppenheimer Capital
Appreciation Portfolio..... 0.60% -- 0.06% -- 0.66% -- 0.66%
PIMCO Total Return
Portfolio.................. 0.48% -- 0.03% -- 0.51% -- 0.51%
RCM Technology Portfolio..... 0.88% -- 0.09% -- 0.97% -- 0.97%
T. Rowe Price Large Cap Value
Portfolio.................. 0.57% -- 0.02% -- 0.59% -- 0.59%(7)
T. Rowe Price Mid Cap Growth
Portfolio.................. 0.75% -- 0.04% -- 0.79% -- 0.79%
METROPOLITAN SERIES FUND,
INC. -- CLASS A
Artio International Stock
Portfolio.................. 0.82% -- 0.12% 0.02% 0.96% 0.05% 0.91%(8)
Barclays Capital Aggregate
Bond Index Portfolio....... 0.25% -- 0.03% -- 0.28% 0.01% 0.27%(9)
BlackRock Aggressive Growth
Portfolio.................. 0.73% -- 0.04% -- 0.77% -- 0.77%
BlackRock Bond Income
Portfolio.................. 0.37% -- 0.03% -- 0.40% 0.03% 0.37%(10)
BlackRock Diversified
Portfolio.................. 0.46% -- 0.04% -- 0.50% -- 0.50%
BlackRock Large Cap Value
Portfolio.................. 0.63% -- 0.02% -- 0.65% 0.03% 0.62%(11)
BlackRock Legacy Large Cap
Growth Portfolio........... 0.73% -- 0.04% -- 0.77% 0.02% 0.75%(12)
BlackRock Money Market
Portfolio.................. 0.32% -- 0.02% -- 0.34% 0.01% 0.33%(13)
Davis Venture Value
Portfolio.................. 0.70% -- 0.03% -- 0.73% 0.05% 0.68%(14)
Met/Artisan Mid Cap Value
Portfolio.................. 0.81% -- 0.03% -- 0.84% -- 0.84%
MetLife Mid Cap Stock Index
Portfolio.................. 0.25% -- 0.06% 0.01% 0.32% -- 0.32%
MetLife Stock Index
Portfolio.................. 0.25% -- 0.02% -- 0.27% 0.01% 0.26%(9)
MFS(R) Total Return
Portfolio.................. 0.54% -- 0.04% -- 0.58% -- 0.58%
MFS(R) Value Portfolio....... 0.71% -- 0.02% -- 0.73% 0.11% 0.62%(15)
Morgan Stanley EAFE(R) Index
Portfolio.................. 0.30% -- 0.11% 0.01% 0.42% -- 0.42%
Neuberger Berman Genesis
Portfolio.................. 0.83% -- 0.06% -- 0.89% 0.02% 0.87%(16)
Neuberger Berman Mid Cap
Value Portfolio............ 0.65% -- 0.05% -- 0.70% -- 0.70%
Russell 2000(R) Index
Portfolio.................. 0.25% -- 0.07% 0.01% 0.33% -- 0.33%
T. Rowe Price Large Cap
Growth Portfolio........... 0.60% -- 0.04% -- 0.64% -- 0.64%
T. Rowe Price Small Cap
Growth Portfolio........... 0.50% -- 0.07% -- 0.57% -- 0.57%
Van Eck Global Natural
Resources Portfolio........ 0.79% -- 0.05% 0.01% 0.85% -- 0.85%
</Table>
8
<Table>
<Caption>
DISTRIBUTION ACQUIRED TOTAL CONTRACTUAL FEE NET TOTAL
AND/OR FUND FEES ANNUAL WAIVER AND/OR ANNUAL
MANAGEMENT SERVICE(12B-1) OTHER AND OPERATING EXPENSE OPERATING
FEE FEES EXPENSES EXPENSES EXPENSES REIMBURSEMENT EXPENSES
---------- -------------- -------- --------- --------- --------------- ---------
Western Asset Management U.S.
Government Portfolio....... 0.47% -- 0.03% -- 0.50% 0.01% 0.49%(17)
RUSSELL INVESTMENT FUNDS
Aggressive Equity Fund....... 0.90% -- 0.21% -- 1.11% 0.06% 1.05%(18)
----- ---- ----- ---- ----- ---- -----
Core Bond Fund............... 0.55% -- 0.21% -- 0.76% 0.07% 0.69%(19)
----- ---- ----- ---- ----- ---- -----
Multi-Style Equity Fund...... 0.73% -- 0.16% -- 0.89% -- 0.89%
----- ---- ----- ---- ----- ---- -----
Non-U.S. Fund................ 0.90% -- 0.23% -- 1.13% 0.06% 1.07%(20)
----- ---- ----- ---- ----- ---- -----
VAN ECK VIP TRUST -- INITIAL
CLASS
Van Eck VIP Emerging Markets
Fund....................... 1.00% -- 0.28% -- 1.28% -- 1.28%
</Table>
--------
(1) The Portfolio's adviser and administrator have contractually agreed to
waive fees and/or reimburse expenses to the extent total annual fund
operating expenses of Class 1 Shares (excluding acquired fund fees and
expenses, dividend expenses relating to short sales, interest, taxes and
extraordinary expenses and expenses related to the board of Trustees'
deferred compensation plan) exceed 0.60% of its daily net assets. This
contract cannot be terminated prior to May 1, 2012.
(2) The Portfolio's adviser and administrator have contractually agreed to
waive fees and/or reimburse expenses to the extent total annual fund
operating expenses of Class 1 Shares (excluding acquired fund fees and
expenses, dividend expenses relating to short sales, interest, taxes and
extraordinary expenses and expenses related to the board of Trustees'
deferred compensation plan) exceed 1.03% of its daily net assets. This
contract cannot be terminated prior to May 1, 2012.
(3) MetLife Advisers, LLC has contractually agreed, for the period May 1, 2011
through April 30, 2012, to reduce the Management Fee for each Class of the
Portfolio to the annual rate of 0.725% of the Portfolio's average daily net
assets exceeding $1 billion. This arrangement may be modified or
discontinued prior to April 30, 2012 only with the approval of the Board of
Trustees of the Portfolio.
(4) MetLife Advisers, LLC has contractually agreed, for the period May 1, 2011
through April 30, 2012, to reduce the Management Fee for each Class of the
Portfolio to the annual rate of 0.83% of the Portfolio's average daily net
assets from $250 million to $500 million. This arrangement may be modified
or discontinued prior to April 30, 2012 only with the approval of the Board
of Trustees of the Portfolio.
(5) MetLife Advisers, LLC has contractually agreed, for the period May 1, 2011
through April 30, 2012, to reduce the Management Fee for each Class of the
Portfolio to the annual rate of 0.55% of the Portfolio's average daily net
assets exceeding $1.5 billion. This arrangement may be modified or
discontinued prior to April 30, 2012 only with the approval of the Board of
Trustees of the Portfolio.
(6) MetLife Advisers, LLC has contractually agreed, for the period May 1, 2011
through April 30, 2012, to reduce the Management Fee for each Class of the
Portfolio to the annual rate of 0.65% of the first $500 million of the
Portfolio's average daily net assets plus 0.625% of such assets over $500
million. This arrangement may be modified or discontinued prior to April
30, 2012 only with the approval of the Board of Trustees of the Portfolio.
(7) The Management Fee has been restated to reflect an amended advisory
agreement, as if the fee had been in effect during the previous fiscal
year.
(8) MetLife Advisers, LLC has contractually agreed, for the period May 1, 2011
through April 30, 2012, to reduce the Management Fee for each Class of the
Portfolio to the annual rate of 0.78% for the first $900 million of the
Portfolio's average daily net assets, 0.75% for the next $100 million,
0.725% for the next $500 million and 0.70% on amounts over $1.5 billion.
This arrangement may be modified or discontinued prior to April 30, 2012
only with the approval of the Board of Directors of the Portfolio.
(9) MetLife Advisers, LLC has contractually agreed, for the period May 1, 2011
through April 30, 2012, to reduce the Management Fee for each Class of the
Portfolio to the annual rate of 0.245% for the amounts over $500 million
but
9
less than $1 billion, 0.24% for the next $1 billion and 0.235% on amounts
over $2 billion. This arrangement may be modified or discontinued prior to
April 30, 2012 only with the approval of the Board of Directors of the
Portfolio.
(10) MetLife Advisers, LLC has contractually agreed, for the period May 1, 2011
through April 30, 2012, to reduce the Management Fee for each Class of the
Portfolio to the annual rate of 0.37% for the first $1 billion of the
Portfolio's average daily net assets, 0.325% for the next $2.4 billion and
0.25% on amounts over $3.4 billion. This arrangement may be modified or
discontinued prior to April 30, 2012 only with the approval of the Board of
Directors of the Portfolio.
(11) MetLife Advisers, LLC has contractually agreed, for the period May 1, 2011
through April 30, 2012, to reduce the Management Fee for each Class of the
Portfolio to the annual rate of 0.68% for the first $250 million of the
Portfolio's average daily net assets, 0.625% for the next $500 million,
0.60% for the next $250 million and 0.55% on amounts over $1 billion. This
arrangement may be modified or discontinued prior to April 30, 2012 only
with the approval of the Board of Directors of the Portfolio.
(12) MetLife Advisers, LLC has contractually agreed, for the period May 1, 2011
through April 30, 2012, to reduce the Management Fee for each Class of the
Portfolio to the annual rate of 0.705% for the amounts over $300 million
but less than $1 billion. This arrangement may be modified or discontinued
prior to April 30, 2012 only with the approval of the Board of Directors of
the Portfolio.
(13) MetLife Advisers, LLC has contractually agreed, for the period May 1, 2011
through April 30, 2012, to reduce the Management Fee for each Class of the
Portfolio to the annual rate of 0.325% for the first $1 billion of the
Portfolio's average daily net assets. This arrangement may be modified or
discontinued prior to April 30, 2012 only with the approval of the Board of
Directors of the Portfolio.
(14) MetLife Advisers, LLC has contractually agreed, for the period May 1, 2011
through April 30, 2012, to reduce the Management Fee for each Class of the
Portfolio to the annual rate of 0.75% for the first $50 million of the
Portfolio's average daily net assets, 0.70% for the next $450 million,
0.65% for the next $4 billion and 0.625% on amounts over $4.5 billion. This
arrangement may be modified or discontinued prior to April 30, 2012 only
with the approval of the Board of Directors of the Portfolio.
(15) MetLife Advisers, LLC has contractually agreed, for the period May 1, 2011
through April 30, 2012, to reduce the Management Fee for each Class of the
Portfolio to the annual rate of 0.65% for the first $1.25 billion of the
Portfolio's average daily net assets, 0.60% for the next $250 million and
0.50% on amounts over $1.5 billion. This arrangement may be modified or
discontinued prior to April 30, 2012 only with the approval of the Board of
Directors of the Portfolio.
(16) MetLife Advisers, LLC has contractually agreed, for the period May 1, 2011
through April 30, 2012, to reduce the Management Fee for each Class of the
Portfolio to the annual rate of 0.825% for the first $500 million of the
Portfolio's average daily net assets. This arrangement may be modified or
discontinued prior to April 30, 2012 only with the approval of the Board of
Directors of the Portfolio.
(17) MetLife Advisers, LLC has contractually agreed, for the period May 1, 2011
through April 30, 2012, to reduce the Management Fee for each Class of the
Portfolio to the annual rate of 0.50% for the amounts over $200 million but
less than $500 million. This arrangement may be modified or discontinued
prior to April 30, 2012 only with the approval of the Board of Directors of
the Portfolio.
(18) Until April 30, 2012, RIMCo has contractually agreed to waive 0.06% of its
0.90% advisory fee. This waiver may not be terminated during the relevant
period except with Board approval.
(19) Other Expenses have been restated to reflect the Fund's proportionate share
of the operating expenses of any other fund, including the Russell U.S.
Cash Management Fund, in which the Fund invests. Until April 30, 2012,
RIMCo has contractually agreed to waive 0.07% of its 0.55% advisory fee.
This waiver may not be terminated during the relevant period except with
Board approval.
(20) Other Expenses have been restated to reflect the Fund's proportionate share
of the operating expenses of any other fund, including the Russell U.S.
Cash Management Fund, in which the Fund invests. Until April 30, 2012,
RIMCo has contractually agreed to waive 0.06% of its 0.90% advisory fee.
This waiver may not be terminated during the relevant period except with
Board approval.
10
POLICY RIGHTS
TRANSFERS
The following paragraph is revised.
We have policies and procedures that attempt to detect and deter frequent
transfers in situations where we determine there is a potential for arbitrage
trading. Currently, we believe that such situations may be presented in the
international, small-cap, and high-yield Funds (i.e., the Artio International
Stock Portfolio, Morgan Stanley EAFE(R) Index Portfolio, Neuberger Berman
Genesis Portfolio, Russell 2000(R) Index Portfolio, T. Rowe Price Small Cap
Growth Portfolio, Harris Oakmark International Portfolio, Lord Abbett Bond
Debenture Portfolio, Invesco Small Cap Growth Portfolio, MFS(R) Research
International Portfolio, Clarion Global Real Estate Portfolio, American Funds
Global Small Capitalization Fund, JPMorgan Insurance Trust Small Cap Core
Portfolio, Russell Aggressive Equity Fund, Russell Non-U.S. Fund, Van Eck VIP
Emerging Markets Fund and Van Eck Global Natural Resources Portfolio) and we
monitor transfer activity in those Funds (the "Monitored Portfolios"). In
addition, as described below, we intend to treat all American Funds Insurance
Series portfolios ("American Funds Portfolios") as Monitored Portfolios. We
employ various means to monitor transfer activity, such as examining the
frequency and size of transfers into and out of the Monitored Portfolios within
given periods of time. For example, we currently monitor transfer activity to
determine if, for each category of international, small-cap, and high-yield
Monitored Portfolios, in a 12-month period there were: (1) six or more transfers
involving the given category; (2) cumulative gross transfers involving the given
category that exceed the current Cash Value; and (3) two or more "round-trips"
involving any Monitored Portfolio in the given category. A round-trip generally
is defined as a transfer in followed by a transfer out within the next seven
calendar days or a transfer out followed by a transfer in within the next seven
calendar days, in either case subject to certain other criteria.
SEPARATE ACCOUNT CHARGES
We will waive the following amount of the Mortality and Expense Risk
Charge: the amount, if any, equal to the underlying fund expenses that are in
excess of 0.68% for the Division investing in the Oppenheimer Capital
Appreciation Portfolio, and that are in excess of 0.88% for the Division
investing in the MFS Research International Portfolio.
FEDERAL TAX MATTERS
INTRODUCTION
The following summary provides a general description of the Federal income
tax considerations associated with the Policy and does not purport to be
complete or to cover all situations. This discussion is not intended as tax
advice. Counsel or other competent tax advisers should be consulted for more
complete information. This discussion is based upon General American's
understanding of the present Federal income tax laws as they are currently
interpreted by the Internal Revenue Service. No representation is made as to the
likelihood of continuation of the present Federal income tax laws or of the
current interpretations by the Internal Revenue Service.
IRS CIRCULAR 230 NOTICE: The tax information contained herein is not
intended to (and cannot) be used by anyone to avoid IRS penalties. It is
intended to support the sale of the Policy. The Policy Owner should seek tax
advice based on the Policy Owner's particular circumstances from an independent
tax adviser.
TAX STATUS OF THE POLICY
In order to qualify as a life insurance contract for Federal income tax
purposes and to receive the tax treatment normally accorded life insurance
contracts under Federal tax law, a Policy must satisfy certain requirements
which are set forth in the Internal Revenue Code. Guidance as to how these
requirements are to be applied is limited, in particular, with respect to joint
and last survivor life insurance policies. Nevertheless, we believe that the
Policies should satisfy the applicable requirements. However, the rules are not
entirely clear with respect to Policies issued on a substandard or guaranteed
issue basis. We may take appropriate steps to bring the Policy into compliance
with applicable requirements, and we reserve the right to restrict Policy
transactions in order to do so. The insurance proceeds payable on the death of
the insured will never be less than the minimum amount required for the Policy
to be
11
treated as life insurance under section 7702 of the Internal Revenue Code, as in
effect on the date the Policy was issued.
In some circumstances, owners of variable contracts who retain excessive
control over the investment of the underlying separate account assets may be
treated as the owners of those assets. Although published guidance in this area
does not address certain aspects of the Policies, we believe that the Owner of a
Policy should not be treated as the owner of the Separate Account assets. We
reserve the right to modify the Policies to bring them into conformity with
applicable standards should such modification be necessary to prevent Owners of
the Policies from being treated as the owners of the underlying Separate Account
assets.
In addition, the Code requires that the investments of the Separate Account
be "adequately diversified" in order for the Policies to be treated as life
insurance contracts for Federal income tax purposes. It is intended that the
Separate Account, through the Eligible Funds, will satisfy these diversification
requirements. If Eligible Fund shares are sold directly to either non-qualified
plans or to tax-qualified retirement plans that later lose their tax qualified
status, there may be adverse consequences under the diversification rules.
The following discussion assumes that the Policy will qualify as a life
insurance contract for Federal income tax purposes.
1. TAX TREATMENT OF POLICY BENEFITS. In general, the Company believes that
the proceeds and Cash Value increases of a Policy should be treated in a manner
consistent with a fixed-benefit life insurance policy for Federal income tax
purposes. Thus, the death benefit under the Policy should be excludable from the
gross income of the Beneficiary to the extent provided in under Section 101 of
the Code. In the case of employer-owned life insurance as defined in Section
101(j), the amount of the death benefit excludable from gross income is limited
to premiums paid unless the Policy falls within certain specified exceptions and
a notice and consent requirement is satisfied before the Policy is issued.
Certain specified exceptions are based on the status of an employee as highly
compensated or recently employed. There are also exceptions for Policy proceeds
paid to an employee's heirs. These exceptions only apply if proper notice is
given to the insured employee and consent is received from the insured employee
before the issuance of the Policy. These rules apply to Policies issued August
18, 2006 and later and also apply to policies issued before August 18, 2006
after a material increase in the death benefit or other material change. An IRS
reporting requirement applies to employer-owned life insurance subject to these
rules. Because these rules are complex and will affect the tax treatment of
death benefits, it is advisable to consult tax counsel. The death benefit will
also be taxable in the case of a transfer-for-value unless certain exceptions
apply.
Many changes or transactions involving a Policy may have tax consequences,
depending on the circumstances. Such changes include, but are not limited to,
the exchange of the Policy, a change of the Policy's Face Amount, a Policy Loan,
an additional premium payment, a Policy lapse with an outstanding Policy Loan, a
partial withdrawal, or a surrender of the Policy. The transfer of the Policy or
designation of a Beneficiary may have Federal, state, and/or local transfer and
inheritance tax consequences, including the imposition of gift, estate, and
generation-skipping transfer taxes. For example, the transfer of the Policy to,
or the designation as a Beneficiary of, or the payment of proceeds to, a person
who is assigned to a generation which is two or more generations below the
generation assignment of the Owner may have generation skipping transfer tax
consequences under Federal tax law. The individual situation of each Owner or
Beneficiary will determine the extent, if any, to which Federal, state, and
local transfer and inheritance taxes may be imposed and how ownership or receipt
of Policy proceeds will be treated for purposes of Federal, state and local
estate, inheritance, generation skipping and other taxes.
A Policy may also be used in various arrangements, including non-qualified
deferred compensation or salary continuation plans, split dollar insurance
plans, executive bonus plans, retiree medical benefit plans and others. The tax
consequences of such plans may vary depending on the particular facts and
circumstances of each individual arrangement. Therefore, if you are
contemplating the use of a Policy in any arrangement the value of which depends
in part on its tax consequences, you should be sure to consult a qualified tax
adviser regarding the tax attributes of the particular arrangement.
Generally, the Owner will not be deemed to be in constructive receipt of
the Policy's Cash Value, including increments thereof, under the Policy until
there is a distribution. Under a complete surrender or lapse of any Policy, if
the amount received plus the amount of outstanding Indebtedness exceeds the
total investments in the Policy, the excess will generally be treated as
ordinary income subject to tax. The tax consequences of other distributions
from,
12
and Policy Loans taken from or secured by, a Policy depend upon whether the
Policy is classified as a "modified endowment contract".
2. MODIFIED ENDOWMENT CONTRACTS. A policy may be treated as a modified
endowment contract depending upon the amount of premiums paid in relation to the
death benefit provided under such Policy. The premium limitation rules for
determining whether a Policy is a modified endowment contract are extremely
complex. In general, however, a Policy will be a modified endowment contract if
the accumulated premiums paid at any time during the first seven Policy Years
exceed the sum of the net level premiums which would have been paid on or before
such time if the Policy provided for paid-up future benefits after the payment
of seven level annual premiums.
In addition, if a Policy is "materially changed" it may cause such Policy
to be treated as a modified endowment contract. The material change rules for
determining whether a Policy is a modified endowment contract are also extremely
complex. In general, however, the determination of whether a Policy will be a
modified endowment contract after a material change generally depends upon the
relationship among the death benefit at the time of such change, the Cash Value
at the time of the change and the additional premiums paid in the seven Policy
Years starting with the date on which the material change occurs.
Moreover, a life insurance contract received in exchange for a life
insurance contract classified as a modified endowment contract will also be
treated as a modified endowment contract. A reduction in a Policy's benefits may
also cause such Policy to become a modified endowment contract.
Accordingly, a prospective Owner should contact a competent tax adviser
before purchasing a Policy to determine the circumstances under which the Policy
would be a modified endowment contract. In addition, an Owner should contact a
competent tax adviser before paying any additional premiums or making any other
change to, including an exchange of, a Policy to determine whether such premium
or change would cause the Policy (or the new Policy in the case of an exchange)
to be treated as a modified endowment contract.
NOTE: MOST DESTINY POLICIES WERE MODIFIED ENDOWMENT CONTACTS FROM THE DATE OF
ISSUE, THEREFORE, DISTRIBUTIONS FROM MOST DESTINY POLICIES ARE TAXED AS FOLLOWS:
3. DISTRIBUTIONS FROM POLICIES CLASSIFIED AS MODIFIED ENDOWMENT
CONTRACT. Policies classified as modified endowment contracts will be subject
to the following tax rules: First, all distributions, including distributions
upon surrender, from such a Policy are treated as ordinary income subject to tax
up to the amount equal to the excess (if any) of the Cash Value immediately
before the distribution over the investment in the Policy (described below) at
such time. Second, Policy Loans taken from, or secured by, such a Policy, as
well as due but unpaid interest thereon, are treated as distributions from such
a Policy and taxed accordingly. Third, a 10 percent additional income tax is
imposed on the portion of any distribution from, or Policy Loan taken from or
secured by, such a Policy that is included in income, except where the
distribution or Policy Loan (a) is made on or after the Owner attains age
59 1/2, (b) is attributable to the Owner's becoming disabled, or (c) is part of
a series of substantially equal periodic payments for the life (or life
expectancy) of the Owner or the joint lives (or joint life expectancies) of the
Owner and the Owner's Beneficiary. The foregoing exceptions to the 10 percent
additional income tax will generally not apply to a corporate Policy Owner.
4. DISTRIBUTIONS FROM POLICIES NOT CLASSIFIED AS MODIFIED ENDOWMENT
CONTRACT. Distributions from Policies not classified as a modified endowment
contracts are generally treated as first recovering the investment in the Policy
(described below) and then, only after the return of all such investment in the
Policy, as distributing taxable income. An exception to this general rule occurs
in the case of a decrease in the Policy's death benefit (possibly including a
partial withdrawal) or any other change that reduces benefits under the Policy
in the first 15 years after the Policy is issued and that results in cash
distribution to the Owner in order for the Policy to continue complying with the
Section 7702 definitional limits. Such a cash distribution will be taxed in
whole or in part as ordinary income (to the extent of any gain in the Policy)
under rules prescribed in Section 7702.
Policy Loans from, or secured by, a Policy that is not a modified endowment
contract should generally not be treated as distributions. Instead, such loans
should generally be treated as indebtedness of the Owner. However, because the
tax consequences associated with Policy Loans are not always clear, in
particular, with respect to Policy Loans outstanding after the tenth Policy
year, you should consult a tax adviser prior to taking any Policy Loan.
Upon a complete surrender or lapse of a Policy that is not a modified
endowment contract, if the amount received plus the amount of indebtedness
exceeds the total investment in the Policy, the excess will generally be treated
as ordinary income subject to tax.
13
Neither distributions (including distributions upon surrender or lapse) nor
Policy Loans from, or secured by, a Policy that is not a modified endowment
contract are subject to the 10 percent additional income tax.
If a Policy which is not a modified endowment contract subsequently becomes
a modified endowment contract, then any distribution made from the Policy within
two years prior to the date of such change in status may become taxable.
5. POLICY LOANS. Generally, interest paid on any loan under a life
insurance Policy is not deductible. AN OWNER SHOULD CONSULT A COMPETENT TAX
ADVISER IF THE DEDUCTIBILITY OF LOAN INTEREST IS A CONSIDERATION IN THE PURCHASE
OF A POLICY. If a Policy Loan is outstanding when a Policy is canceled or
lapses, the amount of the outstanding Indebtedness will be added to the amount
distributed and will be taxed accordingly.
6. INTEREST EXPENSE ON UNRELATED INDEBTEDNESS. Under provisions added to
the Code in 1997 for policies issued after June 8, 1997, if a business taxpayer
owns or is the beneficiary of a Policy on the life of any individual who is not
an officer, director, employee, or 20 percent owner of the business, and the
taxpayer also has debt unrelated to the Policy, a portion of the taxpayer's
unrelated interest expense deductions may be lost. No business taxpayer should
purchase, exchange, or increase the death benefit under a Policy on the life of
any individual who is not an officer, director, employee, or 20 percent owner of
the business without first consulting a competent tax adviser.
7. INVESTMENT IN THE POLICY. Investment in the Policy means (i) the
aggregate amount of any premiums or other consideration paid for a Policy, minus
(ii) the aggregate amount received under the Policy which is excluded from gross
income of the Owner (except that the amount of any Policy Loan from, or secured
by, a Policy that is a modified endowment contract, to the extent such amount is
excluded from gross income, will be disregarded), plus (iii) the amount of any
Policy Loan from, or secured by, a Policy that is a modified endowment contract
to the extent that such amount is included in the gross income of the Owner.
8. MULTIPLE POLICES. All modified endowment contracts that are issued by
the Company (or its affiliates) to the same Owner during any calendar year are
treated as one modified endowment contract for purposes of determining the
amount includible in gross income under Section 72(e) of the Code.
9. LIFE INSURANCE PURCHASES BY NONRESIDENT ALIENS AND FOREIGN
CORPORATIONS. Policy Owners that are not U.S. citizens or residents will
generally be subject to U.S. Federal withholding tax on taxable distributions
from life insurance policies at a 30% rate, unless a lower treaty rate applies.
In addition, Policy Owners may be subject to state and/or municipal taxes and
taxes that may be imposed by the Policy Owner's country of citizenship or
residence.
10. WITHHOLDING. To the extent that Policy distributions are taxable, they
are generally subject to withholding for the recipient's Federal income tax
liability. Recipients can generally elect, however, not to have tax withheld
from distributions.
11. ESTATE, GIFT AND GENERATION-SKIPPING TRANSFER TAXES. The transfer of
the Policy or the designation of a beneficiary may have Federal, state, and/or
local transfer and inheritance tax consequences, including the imposition of
gift, estate, and generation-skipping transfer taxes. When the insured dies, the
death proceeds will generally be includable in the Policy Owner's estate for
purposes of the Federal estate tax if the Policy Owner was the insured. If the
Policy Owner was not the insured, the fair market value of the Policy would be
included in the Policy Owner's estate upon the Policy Owner's death. The Policy
would not be includable in the insured's estate if the insured neither retained
incidents of ownership at death nor had given up ownership within three years
before death.
Moreover, under certain circumstances, the Internal Revenue Code may impose
a "generation-skipping transfer tax" when all or part of a life insurance policy
is transferred to, or a death benefit is paid to, an individual two or more
generations younger than the Policy Owner. Regulations issued under the Internal
Revenue Code may require us to deduct the tax from your Policy, or from any
applicable payment, and pay it directly to the IRS.
Qualified tax advisers should be consulted concerning the estate and gift
tax consequences of Policy ownership and distributions under Federal, state and
local law. The individual situation of each Policy Owner or beneficiary will
determine the extent, if any, to which Federal, state, and local transfer and
inheritance taxes may be imposed and how ownership or receipt of Policy proceeds
will be treated for purposes of Federal, state and local estate, inheritance,
generation-skipping and other taxes.
Under previous law, the estate tax applicable exclusion gradually rose to
$3.5 million per person in 2009 and was repealed in 2010 with a modified
carryover basis for heirs. The Tax Relief, Unemployment Insurance
Reauthorization,
14
and Job Creation Act of 2010 (the "2010 Act") has reinstated the estate and
generation-skipping transfer taxes through the end of 2012 with lower top rates
and larger exemptions. The 2010 Act raises the applicable exclusion amount to
$5,000,000. The top tax rate is set at 35%. A special irrevocable election was
provided for estates of decedents who died in 2010. These estates may generally
choose between the reinstated estate tax and the carryover basis rules which
were in effect in 2010.
It is not known if Congress will make the temporary changes of the 2010 Act
permanent, enact permanent repeal of the estate and the generation-skipping
transfer taxes or otherwise modify the estate tax or generation-skipping
transfer tax rules for years after 2012.
The complexity of the tax law, along with uncertainty as to how it might be
modified in coming years, underscores the importance of seeking guidance from a
qualified adviser to help ensure that your estate plan adequately addresses your
needs and those of your beneficiaries under all possible scenarios.
12. CONTINUATION OF POLICY BEYOND ATTAINED AGE 100. The tax consequences
of continuing the Policy beyond the Insured's Attained Age 100 birthday are
unclear. You should consult a tax adviser if you intend to keep the Policy in
force beyond the Insured's Attained Age 100.
13. GUIDANCE ON SPLIT DOLLAR PLANS. The IRS has issued guidance on split
dollar insurance plans. A tax adviser should be consulted with respect to this
guidance if your Policy is, or may become, subject to a split dollar insurance
plan. If your Policy is part of an equity split dollar arrangement taxed under
the economic benefit regime, there is a risk that some portion of the Policy
cash value may be taxed prior to any Policy distribution.
In addition, the Sarbanes-Oxley Act of 2002 (the "Act") which was signed
into law on July 30, 2002, prohibits, with exceptions, publicly-traded
companies, including non-U.S. companies that have securities listed on U.S.
exchanges, from extending, directly or indirectly or through a subsidiary, many
types of personal loans to their directors or executive officers. It is possible
that this prohibition may be interpreted to apply to split-dollar life insurance
arrangements for directors and executive officers of such companies, since such
arrangements can arguably be viewed as involving a loan from the employer for at
least some purposes.
Any affected business contemplating the payment of a premium on an existing
Policy or the purchase of new Policy in connection with a split-dollar life
insurance arrangement should consult legal counsel.
Split dollar insurance plans that provide deferred compensation may be
subject to recently enacted rules governing deferred compensation arrangements.
Failure to adhere to these rules will result in adverse tax consequences. A tax
adviser should be consulted with respect to such plans.
14. ALTERNATIVE MINIMUM TAX. There may also be an indirect tax upon the
income in the Policy or the proceeds of a Policy under the Federal corporate
alternative minimum tax, if the Owner is subject to that tax.
15. PUERTO RICO. We believe that Policies subject to Puerto Rican tax law
will generally receive treatment similar, with certain modifications, to that
described above. Among other differences, Policies governed by Puerto Rican tax
law are not currently subject to the rules described above regarding Modified
Endowment Contracts. You should consult your tax adviser with respect to Puerto
Rican tax law governing the Policies.
16. POSSIBLE TAX LAW CHANGES. Although the likelihood of legislative
changes is uncertain, there is always the possibility that the tax treatment of
the Policy could change by legislation or otherwise. Consult a tax adviser with
respect to legislative developments and their effect on the Policy.
17. FOREIGN TAX CREDITS. To the extent permitted under Federal tax law, we
may claim the benefit of certain foreign tax credits attributable to taxes paid
by certain Eligible Funds to foreign jurisdictions.
18. POSSIBLE CHARGE FOR TAXES. At the present time, the Company makes no
charge to the Separate Account for any Federal, state, or local taxes (as
opposed to Premium Tax Charges which are deducted from premium payments) that it
incurs which may be attributable to such Separate Account or to the Policies.
The Company, however, reserves the right in the future to make a charge for any
such tax or other economic burden resulting from the application of the tax laws
that it determines to be properly attributable to the Separate Account or to the
Policies.
15
MANAGEMENT
The directors and executive officers of General American Life Insurance
Company and their principal business experience are:
DIRECTORS OF GENERAL AMERICAN
<Table>
<Caption>
NAME AND PRINCIPAL BUSINESS
ADDRESS PRINCIPAL BUSINESS EXPERIENCE
--------------------------- -----------------------------
Michael K. Farrell** Chairman of the Board, President and Chief Executive
Officer of General American since 2009 and Executive
Vice President of Metropolitan Life Insurance
Company since 2005. Formerly Director of General
American 2004-2009.
Peter M. Carlson* Director, Executive Vice President and Chief
Accounting Officer of General American since 2009
and Executive Vice President and Chief Accounting
Officer of Metropolitan Life Insurance Company since
2009. Formerly Executive Vice President and
Corporate Controller of Wachovia Corporation 2006-
2009.
Todd B. Katz***** Director of General American since 2009 and
Executive Vice President of Metropolitan Life
Insurance Company since 2010. Formerly Senior Vice
President of Metropolitan Life Insurance Company
2005-2009.
Maria R. Morris* Director of General American since 2009 and
Executive Vice President, Technology and Operations
of Metropolitan Life Insurance Company since 2008.
Formerly Executive Vice President of Metropolitan
Life 2005-2008.
Teresa W. Roseborough Director of General American since 2009 and Senior
Chief Counsel of Metropolitan Life Insurance Company
since 2007. Formerly Chief Counsel of Metropolitan
Life 2006-2007.
Eric T. Steigerwalt Director of General American since 2007 and
Executive Vice President of Metropolitan Life
Insurance Company. Formerly Senior Vice President
and Treasurer of General American 2007-2009 and
Senior Vice President and Treasurer 2007-2009 and
Senior Vice President 2000-2007 of Metropolitan
Life.
Stanley J. Talbi* Director of General American since 2002 and
Executive Vice President of Metropolitan Life
Insurance Company since 2005.
Michael J. Vietri*** Director of General American since 2005 and
Executive Vice President of Metropolitan Life
Insurance Company since 2005.
</Table>
EXECUTIVE OFFICERS OF GENERAL AMERICAN OTHER THAN DIRECTORS
<Table>
<Caption>
NAME AND PRINCIPAL BUSINESS
ADDRESS PRINCIPAL BUSINESS EXPERIENCE
--------------------------- -----------------------------
Robert E. Sollmann, Jr.* Executive Vice President of General American since
2009 and Executive Vice President of Metropolitan
Life Insurance Company since 2010. Formerly Senior
Vice President of Metropolitan Life Insurance
Company 1983-2009.
William D. Cammarata**** Senior Vice President of General American since 2007
and Senior Vice President, Financial Operations of
Metropolitan Life Insurance Company since 2007.
Formerly Assistant Secretary of General American
2002-2007 and Vice President and Deputy Controller
of Metropolitan Life 1991-2007.
Steven J. Goulart* Senior Vice President and Treasurer of General
American since 2009 and Senior Vice President and
Secretary of Metropolitan Life Insurance Company
since 2009. Formerly Senior Vice President of
Metropolitan Life 2006-2009.
</Table>
--------
* The principal business address is 1095 Avenue of the Americas, New York,
NY 10036.
** The principal business address is 10 Park Avenue, Morristown, NJ 07962.
16
*** The principal business address is 177 South Commons Drive, Aurora, IL
60504.
**** 18210 Crane Nest Dr., Tampa, FL 33647
***** 501 Route 22, Bridgewater, NJ 08807
RESTRICTIONS ON FINANCIAL TRANSACTIONS
Applicable laws designed to counter terrorism and prevent money laundering
might, in certain circumstances, require us to reject a premium payment and/or
block or "freeze" your Policy. If these laws apply in a particular situation, we
would not be allowed to process any request for withdrawals, surrenders, loans
or death benefits, make transfers or continue making payments under your death
benefit option until instructions are received from the appropriate regulator.
We also may be required to provide additional information about you or your
Policy to government regulators.
LEGAL PROCEEDINGS
In the ordinary course of business, General American, similar to other life
insurance companies, is involved in lawsuits (including class action lawsuits),
arbitrations and other legal proceedings. Also, from time to time, state and
federal regulators or other officials conduct formal and informal examinations
or undertake other actions dealing with various aspects of the financial
services and insurance industries. In some legal proceedings involving insurers,
substantial damages have been sought and/or material settlement payments have
been made. It is not possible to predict with certainty the ultimate outcome of
any pending legal proceeding or regulatory action. However, General American
does not believe any such action or proceeding will have a material adverse
effect upon the Separate Account or upon the ability of MetLife Investors
Distribution Company to perform its contract with the Separate Account or of
General American to meet its obligations under the Contracts.
FINANCIAL STATEMENTS
The financial statements of General American which are included in this
prospectus supplement should be distinguished from the financial statements of
the Separate Account, which are also included in this prospectus supplement, and
should be considered only as bearing on the ability of General American to meet
its obligations under the Policy. They should not be considered as bearing on
the investment performance of the assets held in the Separate Account.
17
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
GENERAL AMERICAN LIFE INSURANCE COMPANY
Variable Life Insurance Policy
(Destiny)
Supplement dated May 1, 2010
to the Prospectus dated May 1, 2004
Flexible Premium
Variable Life Insurance Policies
(Variable Universal Life/Executive Benefit)
Supplement dated May 1, 2010
to the Prospectuses dated May 1, 2002
Flexible Premium Joint and Last Survivor
Variable Life Insurance Policy
Supplement dated May 1, 2010
to the Prospectus dated May 1, 2002
Flexible Premium Variable Life Insurance Policies
(VUL 95/VUL 100/VGSP/Russell VUL)
Supplement dated May 1, 2010
to the Prospectuses dated May 1, 2000
This supplement updates certain information contained in the last full
prospectus for each of the above-referenced variable life insurance policies, as
annually and periodically supplemented. You should read and retain this
supplement. We will send you an additional copy of the last full prospectus for
your policy, without charge, on request. These policies are no longer available
for sale.
General American Life Insurance Company is an indirect wholly-owned
subsidiary of Metropolitan Life Insurance Company ("MetLife"). MetLife is a
wholly-owned subsidiary of MetLife, Inc., a publicly-traded company. General
American's Home Office is 13045 Tesson Ferry Road, St. Louis, Missouri 63128.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE POLICIES OR DETERMINED IF THIS
SUPPLEMENT IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE SECURITIES AND EXCHANGE COMMISSION MAINTAINS A WEB SITE THAT CONTAINS
MATERIAL INCORPORATED BY REFERENCE AND OTHER INFORMATION REGARDING REGISTRANTS
THAT FILE ELECTRONICALLY WITH THE SECURITIES AND EXCHANGE COMMISSION. THE
ADDRESS OF THE SITE IS HTTP://WWW.SEC.GOV.
THE UNDERLYING FUND PROSPECTUSES MAY BE OBTAINED BY CALLING 1-800-638-9294.
WE DO NOT GUARANTEE HOW ANY OF THE DIVISIONS OR FUNDS WILL PERFORM. THE
POLICIES AND THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY FINANCIAL INSTITUTION AND ARE NOT FEDERALLY INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER
GOVERNMENT AGENCY.
The Financial Industry Regulatory Authority ("FINRA") provides background
information about broker-dealers and their registered representatives through
FINRA BrokerCheck. You may contact the FINRA BrokerCheck Hotline at 1-800-289-
9999, or log on to www.finra.org. An investor brochure that includes information
describing FINRA BrokerCheck is available through the Hotline or on-line.
THE COMPANY
General American is principally engaged in writing individual life
insurance policies and annuity contracts. It is admitted to do business in 49
states, the District of Columbia, Puerto Rico, and in four Canadian provinces.
The principal offices (Home Office) of General American are located at 13045
Tesson Ferry Road, St. Louis, Missouri 63128. The Administrative Office for
various Policy transactions is as follows:
<Table>
Premium Payments General American
P.O. Box 790201
St. Louis, MO 63179-0201
Payment Inquires and General American
Correspondence Remittance Processing
18210 Crane Nest Drive
Tampa, FL 33647
(800) 638-9294
Beneficiary and Ownership General American
Changes P. O. Box 357
Warwick, RI 02887-0356
Surrenders, Loans, General American
Withdrawals and P.O. Box 356
Division Transfers Warwick, RI 02887-0356
Death Claims General American
P.O. Box 356
Warwick, RI 02887-0356
All Telephone (800) 638-9294
Transactions and Inquiries
</Table>
You may request an account transfer or reallocation of future premiums by
written request (which may be telecopied) to our Administrative Office, by
telephoning us, or over the Internet. To request a transfer or reallocation by
telephone, you should contact your registered representative, or contact us at
(800) 638-9294. To request a transfer or reallocation over the Internet, you may
log on to our website at www.genamerica.com. We use reasonable procedures to
confirm that instructions communicated by telephone, facsimile or Internet are
genuine. Any telephone, facsimile or Internet instructions that we reasonably
believe to be genuine will be your responsibility, including losses arising from
any errors in the communication of instructions. However, because telephone and
Internet transactions may be available to anyone who provides certain
information about you and your Policy, you should protect that information. We
may not be able to verify that you are the person providing telephone or
Internet instructions, or that you have authorized any such person to act for
you.
Telephone, facsimile, and computer systems (including the Internet) may not
always be available. Any telephone, facsimile, or computer system, whether it is
yours, your service provider's, your registered representative's, or ours, can
experience outages or slowdowns for a variety of reasons. These outages or
slowdowns may delay or prevent our processing of your request. Although we have
taken precautions to help our systems handle heavy use, we cannot promise
complete reliability under all circumstances. If you are experiencing problems,
you should make your request by writing to our Administrative Office.
If you send premium payments or transaction requests to an address other
than the one we have designated for receipt of such payments or requests, we may
return the premium payment to you, or there may be a delay in applying the
payment or transaction to your Policy.
THE SEPARATE ACCOUNT. The separate account consists of divisions, each of
which corresponds to an underlying Fund. Each division may either make money or
lose money. Therefore if you invest in a division of the separate account, you
may either make money or lose money, depending on the investment experience of
that division. There is no guaranteed rate of return in the separate account.
The following chart shows the Funds that are available under the policy
along with the name of the investment adviser, sub-adviser (where applicable)
and investment objective of each Fund. The Funds have different investment goals
and strategies. You should review the prospectus of each Fund, or seek
professional guidance in determining which Fund(s) best meet your objectives.
2
NOTE: THE RUSSELL INVESTMENT FUNDS ARE NOT AVAILABLE TO DESTINY OR EXECUTIVE
BENEFIT POLICIES. FOR ALL OTHER POLICIES, THE RUSSELL INVESTMENT FUNDS ARE ONLY
AVAILABLE FOR POLICIES WITH AN ISSUE DATE PRIOR TO JANUARY 1, 2000.
AMERICAN FUNDS INSURANCE SERIES(R) ADVISER: CAPITAL RESEARCH AND MANAGEMENT
COMPANY
<Table>
<Caption>
FUND SUB-ADVISER INVESTMENT OBJECTIVE
---- ----------- --------------------
American Funds Global N/A Long-term growth of capital.
Small Capitalization
Fund
American Funds Growth N/A Growth of capital.
Fund
American Funds Growth- N/A Long-term growth of capital and income.
Income Fund
</Table>
FIDELITY(R) VARIABLE INSURANCE
PRODUCTS ADVISER: FIDELITY MANAGEMENT & RESEARCH COMPANY
<Table>
<Caption>
FUND SUB-ADVISER INVESTMENT OBJECTIVE
---- ----------- --------------------
Equity-Income Portfolio FMR Co., Inc. Reasonable income. The fund will also
consider the potential for capital
appreciation. The fund's goal is to
achieve a yield which exceeds the
composite yield of securities comprising
the Standard & Poor's 500(SM) Index (S&P
500(R)).
Mid Cap Portfolio FMR Co., Inc. Long-term growth of capital.
</Table>
JPMORGAN INSURANCE TRUST ADVISER: J.P. MORGAN INVESTMENT MANAGEMENT INC.
<Table>
<Caption>
FUND SUB-ADVISER INVESTMENT OBJECTIVE
---- ----------- --------------------
JPMorgan Insurance Trust N/A To maximize total return by investing
Core Bond Portfolio primarily in a diversified portfolio of
intermediate- and long-term debt
securities.
JPMorgan Insurance Trust N/A Capital growth over the long term.
Small Cap Core Portfolio
</Table>
MET INVESTORS SERIES TRUST ADVISER: METLIFE ADVISERS, LLC
<Table>
<Caption>
FUND SUB-ADVISER INVESTMENT OBJECTIVE
---- ----------- --------------------
Clarion Global Real ING Clarion Real Estate Total return through investment in real
Estate Portfolio Securities LLC estate securities, emphasizing both
capital appreciation and current income.
Harris Oakmark Harris Associates L.P. Long-term capital appreciation.
International Portfolio
Invesco Small Cap Growth Invesco Advisers, Long-term growth of capital.
Portfolio (formerly Inc.(1)
Met/AIM Small Cap Growth
Portfolio)
Lazard Mid Cap Portfolio Lazard Asset Management Long-term growth of capital.
LLC
</Table>
3
<Table>
<Caption>
FUND SUB-ADVISER INVESTMENT OBJECTIVE
---- ----------- --------------------
Legg Mason ClearBridge ClearBridge Advisors, Capital appreciation.
Aggressive Growth LLC
Portfolio (formerly
Legg Mason Partners
Aggressive Growth
Portfolio)
Lord Abbett Bond Lord, Abbett & Co. LLC High current income and the opportunity
Debenture Portfolio for capital appreciation to produce a
high total return.
Lord Abbett Growth and Lord, Abbett & Co. LLC Long-term growth of capital and income
Income Portfolio without excessive fluctuation in market
value.
Lord Abbett Mid Cap Lord, Abbett & Co. LLC Capital appreciation through
Value Portfolio investments, primarily in equity
securities, which are believed to be
undervalued in the marketplace.
MFS(R) Research Massachusetts Financial Capital appreciation
International Portfolio Services Company
Morgan Stanley Mid Cap Morgan Stanley Capital appreciation.
Growth Portfolio Investment Management
Inc.
Oppenheimer Capital OppenheimerFunds, Inc. Capital appreciation.
Appreciation Portfolio
PIMCO Total Return Pacific Investment Maximum total return, consistent with
Portfolio Management Company LLC the preservation of capital and prudent
investment management.
RCM Technology Portfolio RCM Capital Management Capital appreciation; no consideration
LLC is given to income.
T. Rowe Price Mid Cap T. Rowe Price Long-term growth of capital.
Growth Portfolio Associates, Inc.
</Table>
METROPOLITAN SERIES FUND, INC. ADVISER: METLIFE ADVISERS, LLC
<Table>
<Caption>
FUND SUB-ADVISER INVESTMENT OBJECTIVE
---- ----------- --------------------
Artio International Artio Global Management Long-term growth of capital.
Stock Portfolio LLC
Barclays Capital MetLife Investment To equal the performance of the Barclays
Aggregate Bond Index Advisors Company, LLC Capital U.S. Aggregate Bond Index.
Portfolio
BlackRock Aggressive BlackRock Advisors, LLC Maximum capital appreciation.
Growth Portfolio
BlackRock Bond Income BlackRock Advisors, LLC A competitive total return primarily
Portfolio from investing in fixed-income
securities.
BlackRock Diversified BlackRock Advisors, LLC High total return while attempting to
Portfolio limit investment risk and preserve
capital.
BlackRock Large Cap BlackRock Advisors, LLC Long-term growth of capital.
Value Portfolio
BlackRock Legacy Large BlackRock Advisors, LLC Long-term growth of capital.
Cap Growth Portfolio
BlackRock Money Market BlackRock Advisors, LLC A high level of current income
Portfolio(2) consistent with preservation of capital.
</Table>
4
<Table>
<Caption>
FUND SUB-ADVISER INVESTMENT OBJECTIVE
---- ----------- --------------------
Davis Venture Value Davis Selected Advisers, Growth of capital.
Portfolio L.P.(3)
Met/Artisan Mid Cap Artisan Partners Limited Long-term capital growth.
Value Portfolio Partnership
MetLife Mid Cap Stock MetLife Investment To equal the performance of the Standard
Index Portfolio Advisors Company, LLC & Poor's MidCap 400 Composite Stock
Price Index.
MetLife Stock Index MetLife Investment To equal the performance of the Standard
Portfolio Advisors Company, LLC & Poor's 500 Composite Stock Price
Index.
MFS(R) Total Return Massachusetts Financial Favorable total return through
Portfolio Services Company investment in a diversified portfolio.
MFS(R) Value Portfolio Massachusetts Financial Capital appreciation.
Services Company
Morgan Stanley EAFE(R) MetLife Investment To equal the performance of the MSCI
Index Portfolio Advisors Company, LLC EAFE Index.
Neuberger Berman Genesis Neuberger Berman High total return, consisting
Portfolio (formerly Management LLC(4) principally of
BlackRock Strategic capital appreciation.
Value Portfolio)
Neuberger Berman Mid Cap Neuberger Berman Capital growth.
Value Portfolio Management LLC
Russell 2000(R) Index MetLife Investment To equal the performance of the Russell
Portfolio Advisors Company, LLC 2000 Index.
T. Rowe Price Large Cap T. Rowe Price Long-term growth of capital and,
Growth Portfolio Associates, Inc. secondarily, dividend income.
T. Rowe Price Small Cap T. Rowe Price Long-term capital growth.
Growth Portfolio Associates, Inc.
Western Asset Management Western Asset Management To maximize total return consistent with
U.S. Government Company preservation of capital and maintenance
Portfolio of liquidity.
</Table>
RUSSELL INVESTMENT FUNDS ADVISER: RUSSELL INVESTMENT
MANAGEMENT COMPANY
<Table>
<Caption>
FUND SUB-ADVISER INVESTMENT OBJECTIVE
---- ----------- --------------------
Aggressive Equity Fund N/A To provide long term capital growth.
Core Bond Fund N/A To provide current income, and as a
secondary objective, capital
appreciation.
Multi-Style Equity Fund N/A To provide long term capital growth.
Non-U.S. Fund N/A To provide long term capital growth.
</Table>
5
VAN ECK VIP TRUST ADVISER: VAN ECK ASSOCIATES CORPORATION
(FORMERLY VAN ECK WORLDWIDE INSURANCE TRUST)
<Table>
<Caption>
FUND SUB-ADVISER INVESTMENT OBJECTIVE
---- ----------- --------------------
Van Eck VIP Emerging N/A Long-term capital appreciation by
Markets Fund (formerly investing primarily in equity securities
Worldwide Emerging in emerging markets around the world.
Markets Fund)
Van Eck VIP Global Hard N/A Long-term capital appreciation by
Assets Fund (formerly investing primarily in hard asset
Worldwide Hard Assets securities. Income is a secondary
Fund) consideration.
</Table>
--------
(1) Prior to January 1, 2010, the sub-adviser to the Portfolio was known as
Invesco Aim Capital Management, Inc.
(2) An investment in the BlackRock Money Market Portfolio is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. Although the Portfolio seeks to preserve the value of
your investment at $100 per share, it is possible to lose money by investing
in the Portfolio. During extended periods of low interest rates, the yields
of the Division investing in the Money Market Portfolio may become extremely
low and possibly negative.
(3) Davis Selected Advisers, L.P. may also delegate any of its responsibilities
to Davis Selected Advisers--NY, Inc., a wholly-owned subsidiary.
(4) Prior to January 19, 2010, BlackRock Advisors, LLC was the sub-adviser to
the Portfolio.
FOR MORE INFORMATION REGARDING THE FUNDS AND THEIR INVESTMENT ADVISERS AND SUB-
ADVISERS, SEE THE FUND PROSPECTUSES AND THEIR STATEMENTS OF ADDITIONAL
INFORMATION, WHICH YOU CAN OBTAIN BY CALLING 1-800-638-9294.
OTHER FUNDS AND SHARE CLASSES
Some of the Funds offer various classes of shares, each of which has a
different level of expenses. The prospectuses for the Funds may provide
information for share classes that are not available through the Policy. When
you consult the prospectus for any Fund, you should be careful to refer to only
the information regarding the class of shares that is available through the
Policy. For the JPMorgan Insurance Trust, we offer Class 1 shares; for Fidelity
Variable Insurance Products and the Van Eck VIP Trust, we offer Initial Class
shares; for the Metropolitan Series Fund, Inc., we offer Class A shares; for the
Met Investors Series Trust, we offer Class A shares; and for the American Funds
Insurance Series, we offer Class 2 shares.
6
CHARGES AND DEDUCTIONS
Charges will be deducted in connection with the Policy to compensate the
Company for providing the insurance benefits set forth in the Policy and any
additional benefits added by rider, administering the Policies, incurring
expenses in distributing the Policies, and assuming certain risks in connection
with the Policy. We may profit from one or more of the charges deducted under
the Policy, including the cost of insurance charge. We may use these profits for
any corporate purpose.
The following table shows the minimum and maximum total operating expenses
charged by the Funds for the fiscal year ended December 31, 2009. Expenses of
the Funds may be higher or lower in the future. Certain Funds may impose a
redemption fee in the future. More detail concerning each Fund's fees and
expenses is contained in the table that follows and in the prospectus for each
Fund.
<Table>
<Caption>
MINIMUM MAXIMUM
------- -------
TOTAL ANNUAL FUND OPERATING EXPENSES
(expenses that are deducted from Fund assets, including
management fees, distribution and/or service (12b-1) fees,
and other expenses)......................................... 0.28% 1.39%
</Table>
The following table describes the annual operating expenses for each Fund
for the year ended December 31, 2009, before and after any applicable
contractual fee waivers and expense reimbursements.
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
<Table>
<Caption>
DISTRIBUTION ACQUIRED TOTAL CONTRACTUAL FEE NET TOTAL
AND/OR FUND FEES ANNUAL WAIVER AND/OR ANNUAL
MANAGEMENT SERVICE(12B-1) OTHER AND OPERATING EXPENSE OPERATING
FEE FEES EXPENSES EXPENSES* EXPENSES REIMBURSEMENT EXPENSES**
---------- -------------- -------- --------- --------- --------------- ----------
AMERICAN FUNDS INSURANCE
SERIES(R) -- CLASS 2
American Funds Global Small
Capitalization Fund....... 0.72% 0.25% 0.04% -- 1.01% -- 1.01%
American Funds Growth Fund.. 0.33% 0.25% 0.02% -- 0.60% -- 0.60%
American Funds Growth-Income
Fund...................... 0.28% 0.25% 0.01% -- 0.54% -- 0.54%
FIDELITY(R) VARIABLE
INSURANCE PRODUCTS
-- INITIAL CLASS
Equity-Income Portfolio..... 0.46% -- 0.12% -- 0.58% -- 0.58%
Mid Cap Portfolio........... 0.56% -- 0.12% -- 0.68% -- 0.68%
JPMORGAN INSURANCE
TRUST -- CLASS I
JPMorgan Insurance Trust
Core Bond Portfolio....... 0.40% -- 0.27% -- 0.67% 0.07% 0.60%(1)
JPMorgan Insurance Trust
Small Cap Core Portfolio.. 0.65% -- 0.75% -- 1.39% 0.36% 1.03%(2)
MET INVESTORS SERIES
TRUST -- CLASS A
Clarion Global Real Estate
Portfolio................. 0.64% -- 0.09% -- 0.73% -- 0.73%
Harris Oakmark International
Portfolio................. 0.79% -- 0.05% -- 0.84% -- 0.84%
Invesco Small Cap Growth
Portfolio................. 0.86% -- 0.04% -- 0.90% -- 0.90%
Lazard Mid Cap Portfolio.... 0.70% -- 0.04% -- 0.74% -- 0.74%
Legg Mason ClearBridge
Aggressive Growth
Portfolio................. 0.64% -- 0.03% -- 0.67% -- 0.67%
</Table>
7
<Table>
<Caption>
DISTRIBUTION ACQUIRED TOTAL CONTRACTUAL FEE NET TOTAL
AND/OR FUND FEES ANNUAL WAIVER AND/OR ANNUAL
MANAGEMENT SERVICE(12B-1) OTHER AND OPERATING EXPENSE OPERATING
FEE FEES EXPENSES EXPENSES* EXPENSES REIMBURSEMENT EXPENSES**
---------- -------------- -------- --------- --------- --------------- ----------
Lord Abbett Bond Debenture
Portfolio................. 0.51% -- 0.04% -- 0.55% -- 0.55%
Lord Abbett Growth and
Income Portfolio.......... 0.53% -- 0.03% -- 0.56% -- 0.56%
Lord Abbett Mid Cap Value
Portfolio................. 0.68% -- 0.08% -- 0.76% -- 0.76%
MFS(R) Research
International Portfolio... 0.71% -- 0.10% -- 0.81% -- 0.81%
Morgan Stanley Mid Cap
Growth Portfolio.......... 0.70% -- 0.20% -- 0.90% -- 0.90%
Oppenheimer Capital
Appreciation Portfolio.... 0.60% -- 0.07% -- 0.67% -- 0.67%
PIMCO Total Return
Portfolio................. 0.48% -- 0.04% -- 0.52% -- 0.52%
RCM Technology Portfolio.... 0.88% -- 0.08% -- 0.96% -- 0.96%
T. Rowe Price Mid Cap Growth
Portfolio................. 0.75% -- 0.04% -- 0.79% -- 0.79%
METROPOLITAN SERIES FUND,
INC. -- CLASS A
Artio International Stock
Portfolio................. 0.83% -- 0.13% 0.03% 0.99% 0.03% 0.96%(3)
Barclays Capital Aggregate
Bond Index Portfolio...... 0.25% -- 0.05% -- 0.30% 0.01% 0.29%(4)
BlackRock Aggressive Growth
Portfolio................. 0.73% -- 0.06% -- 0.79% -- 0.79%
BlackRock Bond Income
Portfolio................. 0.38% -- 0.05% -- 0.43% 0.03% 0.40%(5)
BlackRock Diversified
Portfolio................. 0.46% -- 0.06% -- 0.52% -- 0.52%
BlackRock Large Cap Value
Portfolio................. 0.64% -- 0.03% -- 0.67% -- 0.67%
BlackRock Legacy Large Cap
Growth Portfolio.......... 0.73% -- 0.10% -- 0.83% 0.01% 0.82%(6)
BlackRock Money Market
Portfolio................. 0.32% -- 0.02% -- 0.34% 0.01% 0.33%(7)
Davis Venture Value
Portfolio................. 0.71% -- 0.03% -- 0.74% 0.05% 0.69%(8)
Met/Artisan Mid Cap Value
Portfolio................. 0.82% -- 0.05% -- 0.87% -- 0.87%(9)
MetLife Mid Cap Stock Index
Portfolio................. 0.25% -- 0.10% 0.01% 0.36% 0.01% 0.35%(4)
MetLife Stock Index
Portfolio................. 0.25% -- 0.03% -- 0.28% 0.01% 0.27%(4)
MFS(R) Total Return
Portfolio................. 0.54% -- 0.06% -- 0.60% -- 0.60%
MFS(R) Value Portfolio...... 0.71% -- 0.03% -- 0.74% 0.08% 0.66%(10)
Morgan Stanley EAFE(R) Index
Portfolio................. 0.30% -- 0.14% 0.01% 0.45% 0.01% 0.44%(11)
Neuberger Berman Genesis
Portfolio................. 0.85% -- 0.09% -- 0.94% 0.03% 0.91%(12)
Neuberger Berman Mid Cap
Value Portfolio........... 0.65% -- 0.07% -- 0.72% -- 0.72%
Russell 2000(R) Index
Portfolio................. 0.25% -- 0.10% -- 0.35% 0.01% 0.34%(4)
T. Rowe Price Large Cap
Growth Portfolio.......... 0.60% -- 0.07% -- 0.67% -- 0.67%
T. Rowe Price Small Cap
Growth Portfolio.......... 0.51% -- 0.11% -- 0.62% -- 0.62%
</Table>
8
<Table>
<Caption>
DISTRIBUTION ACQUIRED TOTAL CONTRACTUAL FEE NET TOTAL
AND/OR FUND FEES ANNUAL WAIVER AND/OR ANNUAL
MANAGEMENT SERVICE(12B-1) OTHER AND OPERATING EXPENSE OPERATING
FEE FEES EXPENSES EXPENSES* EXPENSES REIMBURSEMENT EXPENSES**
---------- -------------- -------- --------- --------- --------------- ----------
Western Asset Management
U.S. Government
Portfolio................. 0.48% -- 0.04% -- 0.52% 0.01% 0.51%(13)
RUSSELL INVESTMENT FUNDS
Aggressive Equity Fund...... 0.90% -- 0.23% 0.01% 1.14% 0.06% 1.08%(14)
Core Bond Fund.............. 0.55% -- 0.18% 0.01% 0.74% 0.07% 0.67%(15)
Multi-Style Equity Fund..... 0.73% -- 0.13% 0.01% 0.87% -- 0.87%
Non-U.S. Fund............... 0.90% -- 0.22% 0.02% 1.14% 0.06% 1.08%(14)
VAN ECK VIP TRUST -- INITIAL
CLASS
Van Eck VIP Emerging Markets
Fund...................... 1.00% -- 0.22% -- 1.22% -- 1.22%
Van Eck VIP Global Hard
Assets Fund............... 0.96% -- 0.14% 0.01% 1.11% -- 1.11%
</Table>
--------
* Acquired Fund Fees and Expenses are fees and expenses incurred indirectly by
a portfolio as a result of investing in shares of one or more underlying
portfolios.
** Net Total Annual Operating Expenses do not reflect: (1) voluntary waivers of
fees or expenses; (2) contractual waivers that are in effect for less than
one year from the date of this Prospectus; or (3) expense reductions
resulting from custodial fee credits or directed brokerage arrangements.
(1) The Portfolio's adviser and administrator have contractually agreed to
waive fees and/or reimburse expenses to the extent total annual operating
expenses of Class 1 Shares (excluding acquired fund fees and expenses,
dividend expenses relating to short sales, interest, taxes and
extraordinary expenses and expenses related to the Board of Trustees'
deferred compensation plan) exceed 0.60% of average daily net assets. This
contract continues through April 30, 2011.
(2) The Portfolio's adviser and administrator have contractually agreed to
waive fees and/or reimburse expenses to the extent total annual operating
expenses of Class 1 Shares (excluding acquired fund fees and expenses,
dividend expenses relating to short sales, interest, taxes and
extraordinary expenses and expenses related to the Board of Trustees'
deferred compensation plan) exceed 1.03% of average daily net assets. This
contract continues through April 30, 2011. On April 24, 2009 the Portfolio
was involved in a reorganization with the JPMorgan Small Company Portfolio
where the accounting survivor is the JPMorgan Small Company Portfolio.
Because of the reorganization, Other Expenses have been calculated based on
the actual other expenses incurred by the accounting survivor in the most
recent fiscal year prior to the reorganization and incurred by the
Portfolio thereafter, except that the accounting survivor's expenses have
been restated to reflect the Portfolio's fund administration fee.
(3) MetLife Advisers, LLC has contractually agreed, for the period May 1, 2010
through April 30, 2011, to reduce the management fee for each Class of the
Portfolio to the annual rate of 0.81% for the first $500 million of the
Portfolio's average daily net assets and 0.78% for the next $500 million.
(4) MetLife Advisers, LLC has contractually agreed, for the period May 1, 2010
through April 30, 2011, to reduce the management fee for each Class of the
Portfolio to 0.243%.
(5) MetLife Advisers, LLC has contractually agreed, for the period May 1, 2010
through April 30, 2011, to reduce the management fee for each Class of the
Portfolio to the annual rate of 0.37% for the first $1 billion of the
Portfolio's average daily net assets, 0.325% for amounts over $1 billion
but less than $3.4 billion and 0.25% on amounts over $3.4 billion.
(6) MetLife Advisers, LLC has contractually agreed, for the period May 1, 2010
through April 30, 2011, to reduce the management fee for each Class of the
Portfolio to the annual rate of 0.705% for amounts over $300 million but
less than $1 billion.
(7) MetLife Advisers, LLC has contractually agreed, for the period May 1, 2010
through April 30, 2011, to reduce the management fee for each Class of the
Portfolio to the annual rate of 0.325% for the first $1 billion of the
Portfolio's
9
average daily net assets. Other Expenses do not reflect fees of 0.03% paid
in connection with the U.S. Treasury Temporary Guarantee Program for Money
Market Funds.
(8) MetLife Advisers, LLC has contractually agreed, for the period May 1, 2010
through April 30, 2011, to reduce the management fee for each Class of the
Portfolio to the annual rate of 0.75% for the first $50 million of the
Portfolio's average daily net assets and 0.70% for the next $450 million
and 0.65% for the next $4 billion and 0.625% for amounts over $4.5 billion.
(9) Pursuant to an amended advisory agreement, management fees have been
restated to reflect current fees as if they were in effect during the
entire fiscal year ended December 31, 2009.
(10) MetLife Advisers, LLC has contractually agreed, for the period May 1, 2010
through April 30, 2011, to reduce the management fee for each Class of the
Portfolio to the annual rate of 0.65% for the first $1.25 billion of the
Portfolio's average daily net assets and 0.60% for the next $250 million
and 0.50% for amounts over $1.5 billion.
(11) MetLife Advisers, LLC has contractually agreed, for the period May 1, 2010
through April 30, 2011, to reduce the management fee for each Class of the
Portfolio to 0.293%.
(12) MetLife Advisers, LLC has contractually agreed, for the period May 1, 2010
through April 30, 2011, to reduce the management fee for each Class of the
Portfolio to the annual rate of 0.825% for the first $500 million of the
Portfolio's average daily net assets.
(13) MetLife Advisers, LLC has contractually agreed, for the period May 1, 2010
through April 30, 2011, to reduce the management fee for each Class of the
Portfolio to the annual rate of 0.50% for amounts over $200 million but
less than $500 million.
(14) Effective May 1, 2010 through April 30, 2011, Russell Investment
Management Company has contractually agreed to waive 0.06% of its 0.90%
advisory fee. This waiver may not be terminated during the relevant period
except with Board approval.
(15) Effective May 1, 2010 through April 30, 2011, Russell Investment
Management Company has contractually agreed to waive 0.07% of its 0.55%
advisory fee. This waiver may not be terminated during the relevant period
except with Board approval.
POLICY RIGHTS
TRANSFERS
The following paragraph is revised.
We have policies and procedures that attempt to detect and deter frequent
transfers in situations where we determine there is a potential for arbitrage
trading. Currently, we believe that such situations may be presented in the
international, small-cap, and high-yield Funds (i.e., the Artio International
Stock Portfolio, Morgan Stanley EAFE Index Portfolio, Neuberger Berman Genesis
Portfolio, Russell 2000 Index Portfolio, T. Rowe Price Small Cap Growth
Portfolio, Harris Oakmark International Portfolio, Lord Abbett Bond Debenture
Portfolio, Invesco Small Cap Growth Portfolio, MFS Research International
Portfolio, Clarion Global Real Estate Portfolio, American Funds Global Small
Capitalization Fund, JPMorgan Insurance Trust Small Cap Core Portfolio, Russell
Aggressive Equity Fund, Russell Non-U.S. Fund, Van Eck VIP Emerging Markets Fund
and Van Eck VIP Global Hard Assets Fund) and we monitor transfer activity in
those Funds (the "Monitored Portfolios"). In addition, as described below, we
intend to treat all American Funds Insurance Series portfolios ("American Funds
Portfolios") as Monitored Portfolios. We employ various means to monitor
transfer activity, such as examining the frequency and size of transfers into
and out of the Monitored Portfolios within given periods of time. For example,
we currently monitor transfer activity to determine if, for each category of
international, small-cap, and high-yield Monitored Portfolios, in a 12-month
period there were: (1) six or more transfers involving the given category; (2)
cumulative gross transfers involving the given category that exceed the current
Cash Value; and (3) two or more "round-trips" involving any Monitored Portfolio
in the given category. A round-trip generally is defined as a transfer in
followed by a transfer out within the next seven calendar days or a transfer out
followed by a transfer in within the next seven calendar days, in either case
subject to certain other criteria.
10
SEPARATE ACCOUNT CHARGES
We will waive the following amount of the Mortality and Expense Risk
Charge: the amount, if any, equal to the underlying fund expenses that are in
excess of 0.68% for the Division investing in the Oppenheimer Capital
Appreciation Portfolio, and that are in excess of 0.88% for the Division
investing in the MFS Research International Portfolio.
FEDERAL TAX MATTERS
INTRODUCTION
The following summary provides a general description of the Federal income
tax considerations associated with the Policy and does not purport to be
complete or to cover all situations. This discussion is not intended as tax
advice. Counsel or other competent tax advisers should be consulted for more
complete information. This discussion is based upon General American's
understanding of the present Federal income tax laws as they are currently
interpreted by the Internal Revenue Service. No representation is made as to the
likelihood of continuation of the present Federal income tax laws or of the
current interpretations by the Internal Revenue Service.
IRS CIRCULAR 230 NOTICE: The tax information contained herein is not
intended to (and cannot) be used by anyone to avoid IRS penalties. It is
intended to support the sale of the Policy. The Policy Owner should seek tax
advice based on the Policy Owner's particular circumstances from an independent
tax adviser.
TAX STATUS OF THE POLICY
In order to qualify as a life insurance contract for Federal income tax
purposes and to receive the tax treatment normally accorded life insurance
contracts under Federal tax law, a Policy must satisfy certain requirements
which are set forth in the Internal Revenue Code. Guidance as to how these
requirements are to be applied is limited, in particular, with respect to joint
and last survivor life insurance policies. Nevertheless, we believe that the
Policies should satisfy the applicable requirements. However, the rules are not
entirely clear with respect to Policies issued on a substandard or guaranteed
issue basis. We may take appropriate steps to bring the Policy into compliance
with applicable requirements, and we reserve the right to restrict Policy
transactions in order to do so. The insurance proceeds payable on the death of
the insured will never be less than the minimum amount required for the Policy
to be treated as life insurance under section 7702 of the Internal Revenue Code,
as in effect on the date the Policy was issued.
In some circumstances, owners of variable contracts who retain excessive
control over the investment of the underlying separate account assets may be
treated as the owners of those assets. Although published guidance in this area
does not address certain aspects of the Policies, we believe that the Owner of a
Policy should not be treated as the owner of the Separate Account assets. We
reserve the right to modify the Policies to bring them into conformity with
applicable standards should such modification be necessary to prevent Owners of
the Policies from being treated as the owners of the underlying Separate Account
assets.
In addition, the Code requires that the investments of the Separate Account
be "adequately diversified" in order for the Policies to be treated as life
insurance contracts for Federal income tax purposes. It is intended that the
Separate Account, through the Eligible Funds, will satisfy these diversification
requirements. If Eligible Fund shares are sold directly to either non-qualified
plans or to tax-qualified retirement plans that later lose their tax qualified
status, there may be adverse consequences under the diversification rules.
The following discussion assumes that the Policy will qualify as a life
insurance contract for Federal income tax purposes.
1. TAX TREATMENT OF POLICY BENEFITS. In general, the Company believes that
the proceeds and Cash Value increases of a Policy should be treated in a manner
consistent with a fixed-benefit life insurance policy for Federal income tax
purposes. Thus, the death benefit under the Policy should be excludable from the
gross income of the Beneficiary to the extent provided in under Section 101 of
the Code. In the case of employer-owned life insurance as defined in Section
101(j), the amount of the death benefit excludable from gross income is limited
to premiums paid unless the Policy falls within certain specified exceptions and
a notice and consent requirement is satisfied before the Policy is issued.
Certain specified exceptions are based on the status of an employee as highly
compensated or
11
recently employed. There are also exceptions for Policy proceeds paid to an
employee's heirs. These exceptions only apply if proper notice is given to the
insured employee and consent is received from the insured employee before the
issuance of the Policy. These rules apply to Policies issued August 18, 2006 and
later and also apply to policies issued before August 18, 2006 after a material
increase in the death benefit or other material change. An IRS reporting
requirement applies to employer-owned life insurance subject to these rules.
Because these rules are complex and will affect the tax treatment of death
benefits, it is advisable to consult tax counsel. The death benefit will also be
taxable in the case of a transfer-for-value unless certain exceptions apply.
Many changes or transactions involving a Policy may have tax consequences,
depending on the circumstances. Such changes include, but are not limited to,
the exchange of the Policy, a change of the Policy's Face Amount, a Policy Loan,
an additional premium payment, a Policy lapse with an outstanding Policy Loan, a
partial withdrawal, or a surrender of the Policy. The transfer of the Policy or
designation of a Beneficiary may have Federal, state, and/or local transfer and
inheritance tax consequences, including the imposition of gift, estate, and
generation-skipping transfer taxes. For example, the transfer of the Policy to,
or the designation as a Beneficiary of, or the payment of proceeds to, a person
who is assigned to a generation which is two or more generations below the
generation assignment of the Owner may have generation skipping transfer tax
consequences under Federal tax law. The individual situation of each Owner or
Beneficiary will determine the extent, if any, to which Federal, state, and
local transfer and inheritance taxes may be imposed and how ownership or receipt
of Policy proceeds will be treated for purposes of Federal, state and local
estate, inheritance, generation skipping and other taxes.
A Policy may also be used in various arrangements, including non-qualified
deferred compensation or salary continuation plans, split dollar insurance
plans, executive bonus plans, retiree medical benefit plans and others. The tax
consequences of such plans may vary depending on the particular facts and
circumstances of each individual arrangement. Therefore, if you are
contemplating the use of a Policy in any arrangement the value of which depends
in part on its tax consequences, you should be sure to consult a qualified tax
adviser regarding the tax attributes of the particular arrangement.
Generally, the Owner will not be deemed to be in constructive receipt of
the Policy's Cash Value, including increments thereof, under the Policy until
there is a distribution. Under a complete surrender or lapse of any Policy, if
the amount received plus the amount of outstanding Indebtedness exceeds the
total investments in the Policy, the excess will generally be treated as
ordinary income subject to tax. The tax consequences of other distributions
from, and Policy Loans taken from or secured by, a Policy depend upon whether
the Policy is classified as a "modified endowment contract".
2. MODIFIED ENDOWMENT CONTRACTS. A policy may be treated as a modified
endowment contract depending upon the amount of premiums paid in relation to the
death benefit provided under such Policy. The premium limitation rules for
determining whether a Policy is a modified endowment contract are extremely
complex. In general, however, a Policy will be a modified endowment contract if
the accumulated premiums paid at any time during the first seven Policy Years
exceed the sum of the net level premiums which would have been paid on or before
such time if the Policy provided for paid-up future benefits after the payment
of seven level annual premiums.
In addition, if a Policy is "materially changed" it may cause such Policy
to be treated as a modified endowment contract. The material change rules for
determining whether a Policy is a modified endowment contract are also extremely
complex. In general, however, the determination of whether a Policy will be a
modified endowment contract after a material change generally depends upon the
relationship among the death benefit at the time of such change, the Cash Value
at the time of the change and the additional premiums paid in the seven Policy
Years starting with the date on which the material change occurs.
Moreover, a life insurance contract received in exchange for a life
insurance contract classified as a modified endowment contract will also be
treated as a modified endowment contract. A reduction in a Policy's benefits may
also cause such Policy to become a modified endowment contract.
Accordingly, a prospective Owner should contact a competent tax adviser
before purchasing a Policy to determine the circumstances under which the Policy
would be a modified endowment contract. In addition, an Owner should contact a
competent tax adviser before paying any additional premiums or making any other
change to, including an exchange of, a Policy to determine whether such premium
or change would cause the Policy (or the new Policy in the case of an exchange)
to be treated as a modified endowment contract.
12
NOTE: MOST DESTINY POLICIES WERE MODIFIED ENDOWMENT CONTACTS FROM THE DATE OF
ISSUE, THEREFORE, DISTRIBUTIONS FROM MOST DESTINY POLICIES ARE TAXED AS FOLLOWS:
3. DISTRIBUTIONS FROM POLICIES CLASSIFIED AS MODIFIED ENDOWMENT
CONTRACT. Policies classified as modified endowment contracts will be subject
to the following tax rules: First, all distributions, including distributions
upon surrender, from such a Policy are treated as ordinary income subject to tax
up to the amount equal to the excess (if any) of the Cash Value immediately
before the distribution over the investment in the Policy (described below) at
such time. Second, Policy Loans taken from, or secured by, such a Policy, as
well as due but unpaid interest thereon, are treated as distributions from such
a Policy and taxed accordingly. Third, a 10 percent additional income tax is
imposed on the portion of any distribution from, or Policy Loan taken from or
secured by, such a Policy that is included in income, except where the
distribution or Policy Loan (a) is made on or after the Owner attains age
59 1/2, (b) is attributable to the Owner's becoming disabled, or (c) is part of
a series of substantially equal periodic payments for the life (or life
expectancy) of the Owner or the joint lives (or joint life expectancies) of the
Owner and the Owner's Beneficiary. The foregoing exceptions to the 10 percent
additional income tax will generally not apply to a corporate Policy Owner.
4. DISTRIBUTIONS FROM POLICIES NOT CLASSIFIED AS MODIFIED ENDOWMENT
CONTRACT. Distributions from Policies not classified as a modified endowment
contracts are generally treated as first recovering the investment in the Policy
(described below) and then, only after the return of all such investment in the
Policy, as distributing taxable income. An exception to this general rule occurs
in the case of a decrease in the Policy's death benefit (possibly including a
partial withdrawal) or any other change that reduces benefits under the Policy
in the first 15 years after the Policy is issued and that results in cash
distribution to the Owner in order for the Policy to continue complying with the
Section 7702 definitional limits. Such a cash distribution will be taxed in
whole or in part as ordinary income (to the extent of any gain in the Policy)
under rules prescribed in Section 7702.
Policy Loans from, or secured by, a Policy that is not a modified endowment
contract should generally not be treated as distributions. Instead, such loans
should generally be treated as indebtedness of the Owner. However, because the
tax consequences associated with Policy Loans are not always clear, in
particular, with respect to Policy Loans outstanding after the tenth Policy
year, you should consult a tax adviser prior to taking any Policy Loan.
Upon a complete surrender or lapse of a Policy that is not a modified
endowment contract, if the amount received plus the amount of indebtedness
exceeds the total investment in the Policy, the excess will generally be treated
as ordinary income subject to tax.
Neither distributions (including distributions upon surrender or lapse) nor
Policy Loans from, or secured by, a Policy that is not a modified endowment
contract are subject to the 10 percent additional income tax.
If a Policy which is not a modified endowment contract subsequently becomes
a modified endowment contract, then any distribution made from the Policy within
two years prior to the date of such change in status may become taxable.
5. POLICY LOANS. Generally, interest paid on any loan under a life
insurance Policy is not deductible. AN OWNER SHOULD CONSULT A COMPETENT TAX
ADVISER IF THE DEDUCTIBILITY OF LOAN INTEREST IS A CONSIDERATION IN THE PURCHASE
OF A POLICY. If a Policy Loan is outstanding when a Policy is canceled or
lapses, the amount of the outstanding Indebtedness will be added to the amount
distributed and will be taxed accordingly.
6. INTEREST EXPENSE ON UNRELATED INDEBTEDNESS. Under provisions added to
the Code in 1997 for policies issued after June 8, 1997, if a business taxpayer
owns or is the beneficiary of a Policy on the life of any individual who is not
an officer, director, employee, or 20 percent owner of the business, and the
taxpayer also has debt unrelated to the Policy, a portion of the taxpayer's
unrelated interest expense deductions may be lost. No business taxpayer should
purchase, exchange, or increase the death benefit under a Policy on the life of
any individual who is not an officer, director, employee, or 20 percent owner of
the business without first consulting a competent tax adviser.
7. INVESTMENT IN THE POLICY. Investment in the Policy means (i) the
aggregate amount of any premiums or other consideration paid for a Policy, minus
(ii) the aggregate amount received under the Policy which is excluded from gross
income of the Owner (except that the amount of any Policy Loan from, or secured
by, a Policy that is a modified endowment contract, to the extent such amount is
excluded from gross income, will be disregarded), plus (iii) the amount of any
Policy Loan from, or secured by, a Policy that is a modified endowment contract
to the extent that such amount is included in the gross income of the Owner.
13
8. MULTIPLE POLICES. All modified endowment contracts that are issued by
the Company (or its affiliates) to the same Owner during any calendar year are
treated as one modified endowment contract for purposes of determining the
amount includible in gross income under Section 72(e) of the Code.
9. LIFE INSURANCE PURCHASES BY NONRESIDENT ALIENS AND FOREIGN
CORPORATIONS. Policy Owners that are not U.S. citizens or residents will
generally be subject to U.S. Federal withholding tax on taxable distributions
from life insurance policies at a 30% rate, unless a lower treaty rate applies.
In addition, Policy Owners may be subject to state and/or municipal taxes and
taxes that may be imposed by the Policy Owner's country of citizenship or
residence.
10. WITHHOLDING. To the extent that Policy distributions are taxable, they
are generally subject to withholding for the recipient's Federal income tax
liability. Recipients can generally elect, however, not to have tax withheld
from distributions.
11. ESTATE, GIFT AND GENERATION-SKIPPING TRANSFER TAXES. The transfer of
the Policy or the designation of a beneficiary may have Federal, state, and/or
local transfer and inheritance tax consequences, including the imposition of
gift, estate, and generation-skipping transfer taxes. When the insured dies, the
death proceeds will generally be includable in the Policy Owner's estate for
purposes of the Federal estate tax if the Policy Owner was the insured. If the
Policy Owner was not the insured, the fair market value of the Policy would be
included in the Policy Owner's estate upon the Policy Owner's death. The Policy
would not be includable in the insured's estate if the insured neither retained
incidents of ownership at death nor had given up ownership within three years
before death.
Moreover, under certain circumstances, the Internal Revenue Code may impose
a "generation-skipping transfer tax" when all or part of a life insurance policy
is transferred to, or a death benefit is paid to, an individual two or more
generations younger than the Policy Owner. Regulations issued under the Internal
Revenue Code may require us to deduct the tax from your Policy, or from any
applicable payment, and pay it directly to the IRS.
Qualified tax advisers should be consulted concerning the estate and gift
tax consequences of Policy ownership and distributions under Federal, state and
local law. The individual situation of each Policy Owner or beneficiary will
determine the extent, if any, to which Federal, state, and local transfer and
inheritance taxes may be imposed and how ownership or receipt of Policy proceeds
will be treated for purposes of Federal, state and local estate, inheritance,
generation-skipping and other taxes.
The Economic Growth and Tax Relief Reconciliation Act of 2001 ("EGTRRA")
repeals the Federal estate tax and replaces it with a carryover basis income tax
regime effective for estates of decedents dying after December 31, 2009. EGTRRA
also repeals the generation-skipping transfer tax, but not the gift tax, for
transfers made after December 31, 2009. EGTRRA contains a sunset provision,
which essentially returns the Federal estate, gift and generation-skipping
transfer taxes to their pre-EGTRRA form, beginning in 2011.
During the period prior to 2010, EGTRRA provides for periodic decreases in
the maximum estate tax rate coupled with periodic increases in the estate tax
exemption. The maximum estate tax rate for 2007-2009 is 45%. The estate tax
exemption is $2,000,000 for 2006-2008 and $3,500,000 in 2009.
In general, the estate tax has been repealed for estates of decedents dying
in 2010, but is scheduled to be reinstated in 2011 with an exemption of $1
million and a maximum rate of 55%. The generation-skipping transfer (GST) tax
has also been repealed for 2010, and is scheduled to return in 2011, with an
exemption of $1 million, plus inflation-indexed increases.
During the repeal of the estate tax in 2010, the basis of assets received
from a decedent generally will carry over from the decedent, rather than being
stepped-up to date-of-death value.
It is not known if Congress will enact permanent repeal of the estate and
GST tax or will reinstate the estate tax or GST tax for 2010, and, if so,
whether the reinstatement will be made retroactive to January 1, 2010. Please
consult your tax adviser.
The complexity of the tax law, along with uncertainty as to how it might be
modified in 2010 and in coming years, underscores the importance of seeking
guidance from a qualified adviser to help ensure that your estate plan
adequately addresses your needs and those of your beneficiaries under all
possible scenarios.
14
12. CONTINUATION OF POLICY BEYOND ATTAINED AGE 100. The tax consequences
of continuing the Policy beyond the Insured's Attained Age 100 birthday are
unclear. You should consult a tax adviser if you intend to keep the Policy in
force beyond the Insured's Attained Age 100.
13. GUIDANCE ON SPLIT DOLLAR PLANS. The IRS has issued guidance on split
dollar insurance plans. A tax adviser should be consulted with respect to this
guidance if your Policy is, or may become, subject to a split dollar insurance
plan. If your Policy is part of an equity split dollar arrangement taxed under
the economic benefit regime, there is a risk that some portion of the Policy
cash value may be taxed prior to any Policy distribution.
In addition, the Sarbanes-Oxley Act of 2002 (the "Act") which was signed
into law on July 30, 2002, prohibits, with exceptions, publicly-traded
companies, including non-U.S. companies that have securities listed on U.S.
exchanges, from extending, directly or indirectly or through a subsidiary, many
types of personal loans to their directors or executive officers. It is possible
that this prohibition may be interpreted to apply to split-dollar life insurance
arrangements for directors and executive officers of such companies, since such
arrangements can arguably be viewed as involving a loan from the employer for at
least some purposes.
Any affected business contemplating the payment of a premium on an existing
Policy or the purchase of new Policy in connection with a split-dollar life
insurance arrangement should consult legal counsel.
Split dollar insurance plans that provide deferred compensation may be
subject to recently enacted rules governing deferred compensation arrangements.
Failure to adhere to these rules will result in adverse tax consequences. A tax
adviser should be consulted with respect to such plans.
14. ALTERNATIVE MINIMUM TAX. There may also be an indirect tax upon the
income in the Policy or the proceeds of a Policy under the Federal corporate
alternative minimum tax, if the Owner is subject to that tax.
15. PUERTO RICO. We believe that Policies subject to Puerto Rican tax law
will generally receive treatment similar, with certain modifications, to that
described above. Among other differences, Policies governed by Puerto Rican tax
law are not currently subject to the rules described above regarding Modified
Endowment Contracts. You should consult your tax adviser with respect to Puerto
Rican tax law governing the Policies.
16. POSSIBLE TAX LAW CHANGES. Although the likelihood of legislative
changes is uncertain, there is always the possibility that the tax treatment of
the Policy could change by legislation or otherwise. Consult a tax adviser with
respect to legislative developments and their effect on the Policy.
17. FOREIGN TAX CREDITS. To the extent permitted under Federal tax law, we
may claim the benefit of certain foreign tax credits attributable to taxes paid
by certain Eligible Funds to foreign jurisdictions.
18. POSSIBLE CHARGE FOR TAXES. At the present time, the Company makes no
charge to the Separate Account for any Federal, state, or local taxes (as
opposed to Premium Tax Charges which are deducted from premium payments) that it
incurs which may be attributable to such Separate Account or to the Policies.
The Company, however, reserves the right in the future to make a charge for any
such tax or other economic burden resulting from the application of the tax laws
that it determines to be properly attributable to the Separate Account or to the
Policies.
MANAGEMENT
The directors and executive officers of General American Life Insurance
Company and their principal business experience are:
DIRECTORS OF GENERAL AMERICAN
<Table>
<Caption>
NAME AND PRINCIPAL BUSINESS
ADDRESS PRINCIPAL BUSINESS EXPERIENCE
--------------------------- -----------------------------
Michael K. Farrell** Chairman of the Board, President and Chief Executive
Officer of General American since 2009 and Executive
Vice President of Metropolitan Life Insurance
Company since 2005. Formerly Director of General
American 2004-2009.
</Table>
15
<Table>
<Caption>
NAME AND PRINCIPAL BUSINESS
ADDRESS PRINCIPAL BUSINESS EXPERIENCE
--------------------------- -----------------------------
Peter M. Carlson* Director, Executive Vice President and Chief
Accounting Officer of General American since 2009
and Executive Vice President and Chief Accounting
Officer of Metropolitan Life Insurance Company since
2009. Formerly Executive Vice President and
Corporate Controller of Wachovia Corporation 2006-
2009.
Todd B. Katz***** Director of General American since 2009 and
Executive Vice President of Metropolitan Life
Insurance Company since 2010. Formerly Senior Vice
President of Metropolitan Life Insurance Company
2005-2009.
James L. Lipscomb* Director of General American since 2002 and
Executive Vice President and General Counsel of
Metropolitan Life Insurance Company since 2003.
Maria R. Morris* Director of General American since 2009 and
Executive Vice President, Technology and Operations
of Metropolitan Life Insurance Company since 2008.
Formerly Executive Vice President of Metropolitan
Life 2005-2008.
Teresa W. Roseborough Director of General American since 2009 and Senior
Chief Counsel of Metropolitan Life Insurance Company
since 2007. Formerly Chief Counsel of Metropolitan
Life 2006-2007.
Eric T. Steigerwalt Director of General American since 2007 and
Executive Vice President of Metropolitan Life
Insurance Company. Formerly Senior Vice President
and Treasurer of General American 2007-2009 and
Senior Vice President and Treasurer 2007-2009 and
Senior Vice President 2000-2007 of Metropolitan
Life.
Stanley J. Talbi* Director of General American since 2002 and
Executive Vice President of Metropolitan Life
Insurance Company since 2005.
Michael J. Vietri*** Director of General American since 2005 and
Executive Vice President of Metropolitan Life
Insurance Company since 2005.
</Table>
EXECUTIVE OFFICERS OF GENERAL AMERICAN OTHER THAN DIRECTORS
<Table>
<Caption>
NAME AND PRINCIPAL BUSINESS
ADDRESS PRINCIPAL BUSINESS EXPERIENCE
--------------------------- -----------------------------
Robert E. Sollmann, Jr.* Executive Vice President of General American since
2009 and Executive Vice President of Metropolitan
Life Insurance Company since 2010. Formerly Senior
Vice President of Metropolitan Life Insurance
Company 1983-2009.
William D. Cammarata**** Senior Vice President of General American since 2007
and Senior Vice President, Financial Operations of
Metropolitan Life Insurance Company since 2007.
Formerly Assistant Secretary of General American
2002-2007 and Vice President and Deputy Controller
of Metropolitan Life 1991-2007.
Steven J. Goulart* Senior Vice President and Treasurer of General
American since 2009 and Senior Vice President and
Secretary of Metropolitan Life Insurance Company
since 2009. Formerly Senior Vice President of
Metropolitan Life 2006-2009.
Jeffrey A. Welikson* Senior Vice President and Assistant Secretary of
General American since 2009 and Senior Vice
President and Secretary of Metropolitan Life
Insurance Company since 2009.
</Table>
--------
* The principal business address is 1095 Avenue of the Americas, New York,
NY 10036.
** The principal business address is 10 Park Avenue, Morristown, NJ 07962.
*** The principal business address is 177 South Commons Drive, Aurora, IL
60504.
**** 18210 Crane Nest Dr., Tampa, FL 33647
***** 501 Route 22, Bridgewater, NJ 08807
16
RESTRICTIONS ON FINANCIAL TRANSACTIONS
Applicable laws designed to counter terrorism and prevent money laundering
might, in certain circumstances, require us to reject a premium payment and/or
block or "freeze" your Policy. If these laws apply in a particular situation, we
would not be allowed to process any request for withdrawals, surrenders, loans
or death benefits, make transfers or continue making payments under your death
benefit option until instructions are received from the appropriate regulator.
We also may be required to provide additional information about you or your
Policy to government regulators.
LEGAL PROCEEDINGS
In the ordinary course of business, General American, similar to other life
insurance companies, is involved in lawsuits (including class action lawsuits),
arbitrations and other legal proceedings. Also, from time to time, state and
federal regulators or other officials conduct formal and informal examinations
or undertake other actions dealing with various aspects of the financial
services and insurance industries. In some legal proceedings involving insurers,
substantial damages have been sought and/or material settlement payments have
been made. It is not possible to predict with certainty the ultimate outcome of
any pending legal proceeding or regulatory action. However, General American
does not believe any such action or proceeding will have a material adverse
effect upon the Separate Account or upon the ability of MetLife Investors
Distribution Company to perform its contract with the Separate Account or of
General American to meet its obligations under the Contracts.
FINANCIAL STATEMENTS
The financial statements of General American which are included in this
prospectus supplement should be distinguished from the financial statements of
the Separate Account, which are also included in this prospectus supplement, and
should be considered only as bearing on the ability of General American to meet
its obligations under the Policy. They should not be considered as bearing on
the investment performance of the assets held in the Separate Account.
17
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
GENERAL AMERICAN LIFE INSURANCE COMPANY
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
VARIABLE LIFE INSURANCE POLICY (DESTINY)
Supplement dated December 16, 2010
To the Prospectus Dated May 1, 2004 (as supplemented)
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICIES (VARIABLE UNIVERSAL
LIFE VUL 98/ VUL 00/EXECUTIVE BENEFIT)
FLEXIBLE PREMIUM JOINT AND LAST SURVIVOR VARIABLE LIFE INSURANCE POLICY
Supplement dated December 16, 2010
To the Prospectuses Dated May 1, 2002 (as supplemented)
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICIES (VUL 95/VUL 100/VGSP/RUSSELL
VUL)
Supplement dated December 16, 2010
To the Prospectuses Dated May 1, 2000 (as supplemented)
Metropolitan Life Insurance Company (the "Company") has filed an
application with the Securities and Exchange Commission ("SEC") requesting an
order to allow the Company to remove a variable investment option ("Existing
Fund") and substitute a new option ("Replacement Fund") as shown below. The
Replacement Fund is a portfolio of Metropolitan Series Fund, Inc. To the extent
that the Replacement Fund is not currently available as an investment option
under your Policy, such Replacement Fund will be added as an investment option
on or before the date of the substitution. Please retain this supplement and
keep it with the prospectus.
To the extent required by law, approval of the proposed substitution is
being obtained from the state insurance regulators in certain jurisdictions.
The Company believes that the proposed substitution is in the best interest
of policyholders. The Replacement Fund will have at least similar investment
objectives and policies as the Existing Fund. The Company will bear all expenses
related to the substitution, and it will have no tax consequences for you. The
Company anticipates that, if such order is granted, the proposed substitution
will occur on or about May 1, 2011.
The proposed substitution and advisers and/or sub-advisers for the
above-listed policies are:
EXISTING FUND AND CURRENT ADVISER (WITH
CURRENT SUB-ADVISER AS NOTED) REPLACEMENT FUND AND SUB-ADVISER
--------------------------------------------------- ----------------------------------------------------
Van Eck VIP Global Hard Assets Fund (Initial Class) Van Eck Global Natural Resources Portfolio (Class A)
Van Eck Associates Corporation Van Eck Associates Corporation
Please note that:
- No action is required on your part at this time. You will not need to
file a new election or take any immediate action if the SEC approves
the substitutions.
- The elections you have on file for allocating your cash value, premium
payments and deductions will be redirected to the Replacement Fund
unless you change your elections and transfer your funds before the
substitution takes place.
- You may transfer amounts in your policy among the variable investment
options and the fixed option as usual. The substitution itself will
not be treated as a transfer for purposes of the transfer provisions
of your policy, subject to the Company's restrictions on transfers to
prevent or limit "market timing" activities by policy owners or agents
of policy owners.
- If you make one transfer from an Existing Fund into one or more other
subaccounts before the substitution, or from a Replacement Fund after
the substitution, any transfer charge that might otherwise be imposed
will be waived from the date of this Notice through the date that is
30 days after the substitution. In addition, if you make one transfer
from an Existing Fund into a subaccount before the substitution or
from a Replacement Fund within 30 days after the substitution, the
transfer will not be treated as one of a limited number of transfers
(or exchanges) permitted under your policy.
- On the effective date of the substitution, your cash value in the
variable investment option will be the same as before the
substitution. However, the number of units you receive in the
Replacement Fund will be different from the number of units in your
Existing Fund, due to the difference in unit values.
- There will be no tax consequences to you.
In connection with the substitution, we will send you a prospectus for the
Replacement Fund as well as notice of the actual date of the substitution and
confirmation of transfer.
Please contact your registered representative if you have any questions.
THIS SUPPLEMENT SHOULD BE READ AND RETAINED FOR FUTURE REFERENCE.
GenAmSS11.Dec2010.supp
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
GENERAL AMERICAN LIFE INSURANCE COMPANY
Variable Life Insurance Policy
(Destiny)
Supplement dated May 1, 2009
to the Prospectus dated May 1, 2004
Flexible Premium
Variable Life Insurance Policies
(Variable Universal Life/Executive Benefit)
Supplement dated May 1, 2009
to the Prospectuses dated May 1, 2002
Flexible Premium Joint and Last Survivor
Variable Life Insurance Policy
Supplement dated May 1, 2009
to the Prospectus dated May 1, 2002
Flexible Premium Variable Life Insurance Policies
(VUL 95/VUL 100/VGSP/Russell VUL)
Supplement dated May 1, 2009
to the Prospectuses dated May 1, 2000
This supplement updates certain information contained in the last full
prospectus for each of the above-referenced variable life insurance policies, as
annually and periodically supplemented. You should read and retain this
supplement. We will send you an additional copy of the last full prospectus for
your policy, without charge, on request. These policies are no longer available
for sale.
General American Life Insurance Company is an indirect wholly-owned
subsidiary of Metropolitan Life Insurance Company ("MetLife"). MetLife is a
wholly-owned subsidiary of MetLife, Inc., a publicly-traded company. General
American's Home Office is 13045 Tesson Ferry Road, St. Louis, Missouri 63128.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE POLICIES OR DETERMINED IF THIS
SUPPLEMENT IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE SECURITIES AND EXCHANGE COMMISSION MAINTAINS A WEB SITE THAT CONTAINS
MATERIAL INCORPORATED BY REFERENCE AND OTHER INFORMATION REGARDING REGISTRANTS
THAT FILE ELECTRONICALLY WITH THE SECURITIES AND EXCHANGE COMMISSION. THE
ADDRESS OF THE SITE IS HTTP://WWW.SEC.GOV.
THE UNDERLYING FUND PROSPECTUSES ARE ATTACHED. INCLUDED ARE PROSPECTUSES
FOR THE RUSSELL INVESTMENT FUNDS, WHICH MAY NOT BE AVAILABLE UNDER YOUR POLICY.
PLEASE READ THE PROSPECTUSES CAREFULLY AND KEEP THEM FOR REFERENCE.
WE DO NOT GUARANTEE HOW ANY OF THE DIVISIONS OR FUNDS WILL PERFORM. THE
POLICIES AND THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY FINANCIAL INSTITUTION AND ARE NOT FEDERALLY INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER
GOVERNMENT AGENCY.
The Financial Industry Regulatory Authority ("FINRA") maintains a Public
Disclosure Program for investors. An investor brochure that includes information
describing the Program is available by calling FINRA's Public Disclosure Program
hotline at 1-800-289-9999, or by visiting FINRA's website at www.finra.org.
THE COMPANY
General American is principally engaged in writing individual life
insurance policies and annuity contracts. It is admitted to do business in 49
states, the District of Columbia, Puerto Rico, and in ten Canadian provinces.
The principal offices (Home Office) of General American are located at 13045
Tesson Ferry Road, St. Louis, Missouri 63128. The Administrative Office for
various Policy transactions is as follows:
<Table>
Premium Payments General American
P.O. Box 790201
St. Louis, MO 63179-0201
Payment Inquires and General American
Correspondence Remittance Processing
18210 Crane Nest Drive
Tampa, FL 33647
(800) 638-9294
Beneficiary and Ownership General American
Changes P. O. Box 990059
Hartford, CT 06199-0059
Surrenders, Loans, General American
Withdrawals and P.O. Box 990090
Division Transfers Hartford, CT 06199-0090
Death Claims General American
P.O. Box 990090
Hartford, CT 06199-0090
All Telephone (800) 638-9294
Transactions and Inquiries
</Table>
You may request an account transfer or reallocation of future premiums by
written request (which may be telecopied) to our Administrative Office, by
telephoning us, or over the Internet. To request a transfer or reallocation by
telephone, you should contact your registered representative, or contact us at
(800) 638-9294. To request a transfer or reallocation over the Internet, you may
log on to our website at www.genamerica.com. We use reasonable procedures to
confirm that instructions communicated by telephone, facsimile or Internet are
genuine. Any telephone, facsimile or Internet instructions that we reasonably
believe to be genuine will be your responsibility, including losses arising from
any errors in the communication of instructions. However, because telephone and
Internet transactions may be available to anyone who provides certain
information about you and your Policy, you should protect that information. We
may not be able to verify that you are the person providing telephone or
Internet instructions, or that you have authorized any such person to act for
you.
Telephone, facsimile, and computer systems (including the Internet) may not
always be available. Any telephone, facsimile, or computer system, whether it is
yours, your service provider's, your registered representative's, or ours, can
experience outages or slowdowns for a variety of reasons. These outages or
slowdowns may delay or prevent our processing of your request. Although we have
taken precautions to help our systems handle heavy use, we cannot promise
complete reliability under all circumstances. If you are experiencing problems,
you should make your request by writing to our Administrative Office.
If you send premium payments or transaction requests to an address other
than the one we have designated for receipt of such payments or requests, we may
return the premium payment to you, or there may be a delay in applying the
payment or transaction to your Policy.
THE SEPARATE ACCOUNT. The separate account consists of divisions, each of
which corresponds to an underlying Fund. Each division may either make money or
lose money. Therefore if you invest in a division of the separate account, you
may either make money or lose money, depending on the investment experience of
that division. There is no guaranteed rate of return in the separate account.
The following chart shows the Funds that are available under the policy
along with the name of the investment adviser, sub-adviser (where applicable)
and investment objective of each Fund. The Funds have different investment goals
and strategies. You should review the prospectus of each Fund, or seek
professional guidance in determining which Fund(s) best meet your objectives.
2
NOTE: THE RUSSELL INVESTMENT FUNDS ARE NOT AVAILABLE TO DESTINY OR EXECUTIVE
BENEFIT POLICIES. FOR ALL OTHER POLICIES, THE RUSSELL INVESTMENT FUNDS ARE ONLY
AVAILABLE FOR POLICIES WITH AN ISSUE DATE PRIOR TO JANUARY 1, 2000.
AMERICAN FUNDS INSURANCE SERIES(R) ADVISER: CAPITAL RESEARCH AND MANAGEMENT
COMPANY
<Table>
<Caption>
FUND SUB-ADVISER INVESTMENT OBJECTIVE
---- ----------- --------------------
American Funds Global N/A Capital appreciation through stocks.
Small Capitalization
Fund
American Funds Growth N/A Capital appreciation through stocks.
Fund
American Funds Growth- N/A Capital appreciation and income.
Income Fund
</Table>
FIDELITY(R) VARIABLE INSURANCE
PRODUCTS ADVISER: FIDELITY MANAGEMENT & RESEARCH COMPANY
<Table>
<Caption>
FUND SUB-ADVISER INVESTMENT OBJECTIVE
---- ----------- --------------------
Equity-Income Portfolio FMR Co., Inc.; Reasonable income. The fund will also
Fidelity Research & consider the potential for capital
Analysis Company appreciation. The fund's goal is to
achieve a yield which exceeds the
composite yield of securities comprising
the Standard & Poor's 500(SM) Index (S&P
500(R)).
Mid Cap Portfolio FMR Co., Inc.; Long-term growth of capital.
Fidelity Research &
Analysis Company
</Table>
JPMORGAN INSURANCE TRUST ADVISER: JPMORGAN INVESTMENT ADVISORS INC.
<Table>
<Caption>
FUND SUB-ADVISER INVESTMENT OBJECTIVE
---- ----------- --------------------
JPMorgan Insurance Trust N/A To maximize total return by investing
Core Bond Portfolio primarily in a diversified portfolio of
intermediate and long-term debt
securities.
ADVISER: J.P. MORGAN INVESTMENT MANAGEMENT INC.
JPMorgan Insurance Trust N/A Capital growth over the long term.
Small Cap Core
Portfolio(1)
</Table>
MET INVESTORS SERIES TRUST ADVISER: METLIFE ADVISERS, LLC(2)
<Table>
<Caption>
FUND SUB-ADVISER INVESTMENT OBJECTIVE
---- ----------- --------------------
Clarion Global Real ING Clarion Real Estate Total return through investment in real
Estate Portfolio Securities, L.P. estate securities, emphasizing both
capital appreciation and current income.
Harris Oakmark Harris Associates L.P. Long-term capital appreciation.
International Portfolio
Lazard Mid Cap Portfolio Lazard Asset Management, Long-term growth of capital.
LLC
Legg Mason Partners ClearBridge Advisors, Capital appreciation.
Aggressive Growth LLC
Portfolio
Lord Abbett Bond Lord, Abbett & Co. LLC High current income and the opportunity
Debenture Portfolio for capital appreciation to produce a
high total return.
Lord Abbett Growth and Lord, Abbett & Co. LLC Long-term growth of capital and income
Income Portfolio without excessive fluctuation in market
value.
</Table>
3
<Table>
<Caption>
FUND SUB-ADVISER INVESTMENT OBJECTIVE
---- ----------- --------------------
Lord Abbett Mid Cap Lord, Abbett & Co. LLC Capital appreciation through
Value Portfolio investments, primarily in equity
securities, which are believed to be
undervalued in the marketplace.
Met/AIM Small Cap Growth Invesco Aim Capital Long-term growth of capital.
Portfolio Management, Inc.
MFS(R) Research Massachusetts Financial Capital appreciation
International Portfolio Services Company
Oppenheimer Capital OppenheimerFunds, Inc. Capital appreciation.
Appreciation Portfolio
PIMCO Total Return Pacific Investment Maximum total return, consistent with
Portfolio Management Company LLC the preservation of capital and prudent
investment management.
RCM Technology Portfolio RCM Capital Management Capital appreciation; no consideration
LLC is given to income.
T. Rowe Price Mid Cap T. Rowe Price Long-term growth of capital.
Growth Portfolio Associates, Inc.
</Table>
METROPOLITAN SERIES FUND, INC. ADVISER: METLIFE ADVISERS, LLC
<Table>
<Caption>
FUND SUB-ADVISER INVESTMENT OBJECTIVE
---- ----------- --------------------
Artio International Artio Global Management Long-term growth of capital.
Stock Portfolio LLC(3)
(formerly Julius Baer
International Stock
Portfolio)
Barclays Capital MetLife Investment To equal the performance of the Barclays
Aggregate Bond Index Advisors Company, LLC Capital U.S. Aggregate Bond Index.
Portfolio (formerly
Lehman Brothers
Aggregate Bond Index
Portfolio)
BlackRock Aggressive BlackRock Advisors, LLC Maximum capital appreciation.
Growth Portfolio
BlackRock Bond Income BlackRock Advisors, LLC A competitive total return primarily
Portfolio from investing in fixed-income
securities.
BlackRock Diversified BlackRock Advisors, LLC High total return while attempting to
Portfolio limit investment risk and preserve
capital.
BlackRock Large Cap BlackRock Advisors, LLC Long-term growth of capital.
Value Portfolio
BlackRock Legacy Large BlackRock Advisors, LLC Long-term growth of capital.
Cap Growth Portfolio
BlackRock Money Market BlackRock Advisors, LLC A high level of current income
Portfolio(4) consistent with preservation of capital.
BlackRock Strategic BlackRock Advisors, LLC High total return, consisting
Value Portfolio principally of capital appreciation.
Davis Venture Value Davis Selected Advisers, Growth of capital.
Portfolio L.P.(5)
FI Mid Cap Opportunities Pyramis Global Advisors, Long-term growth of capital.
Portfolio LLC
</Table>
4
<Table>
<Caption>
FUND SUB-ADVISER INVESTMENT OBJECTIVE
---- ----------- --------------------
Met/Artisan Mid Cap Artisan Partners Limited Long-term capital growth.
Value Portfolio Partnership(6)
(formerly Harris Oakmark
Focused Value Portfolio)
MetLife Mid Cap Stock MetLife Investment To equal the performance of the Standard
Index Portfolio Advisors Company, LLC & Poor's Mid Cap 400 Composite Stock
Price Index.
MetLife Stock Index MetLife Investment To equal the performance of the Standard
Portfolio Advisors Company, LLC & Poor's 500 Composite Stock Price
Index.
MFS(R) Total Return Massachusetts Financial Favorable total return through
Portfolio Services Company investment in a diversified portfolio.
MFS(R) Value Portfolio Massachusetts Financial Capital appreciation.
Services Company
Morgan Stanley EAFE(R) MetLife Investment To equal the performance of the MSCI
Index Portfolio Advisors Company, LLC EAFE Index.
Neuberger Berman Mid Cap Neuberger Berman Capital growth.
Value Portfolio Management LLC
Russell 2000(R) Index MetLife Investment To equal the return of the Russell 2000
Portfolio Advisors Company, LLC Index.
T. Rowe Price Large Cap T. Rowe Price Long-term growth of capital, and
Growth Portfolio Associates, Inc. secondarily, dividend income.
T. Rowe Price Small Cap T. Rowe Price Long-term capital growth.
Growth Portfolio Associates, Inc.
Western Asset Management Western Asset Management To maximize total return consistent with
U.S. Government Company preservation of capital and maintenance
Portfolio of liquidity.
</Table>
RUSSELL INVESTMENT FUNDS ADVISER: RUSSELL INVESTMENT
MANAGEMENT COMPANY
<Table>
<Caption>
FUND SUB-ADVISER INVESTMENT OBJECTIVE
---- ----------- --------------------
Aggressive Equity Fund See prospectus. To provide long term capital growth.
Core Bond Fund See prospectus. To provide current income, and as a
secondary objective, capital
appreciation.
Multi-Style Equity Fund See prospectus. To provide long-term capital growth.
Non-U.S. Fund See prospectus. To provide long-term capital growth.
</Table>
VAN ECK WORLDWIDE INSURANCE TRUST ADVISER: VAN ECK ASSOCIATES CORPORATION
<Table>
<Caption>
FUND SUB-ADVISER INVESTMENT OBJECTIVE
---- ----------- --------------------
Worldwide Emerging N/A Long-term capital appreciation by
Markets Fund investing primarily in equity securities
in emerging markets around the world.
Worldwide Hard Assets N/A Long-term capital appreciation by
Fund investing primarily in hard asset
securities. Income is a secondary
consideration.
</Table>
--------
(1) On or about April 24, 2009, the JPMorgan Insurance Trust Small Cap Equity
Portfolio changed its name to the JPMorgan Insurance Trust Small Cap Core
Portfolio.
5
(2) Prior to May 1, 2009, Met Investors Advisory, LLC was the adviser to the Met
Investors Series Trust. Effective May 1, 2009, Met Investors Advisory, LLC
merged with and into MetLife Advisers, LLC.
(3) Prior to May 1, 2009, Julius Baer Investment Management LLC was the sub-
adviser to the Portfolio.
(4) An investment in the BlackRock Money Market Portfolio is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. Although the Portfolio seeks to preserve the value of
your investment at $100 per share, it is possible to lose money by investing
in the Portfolio. During extended periods of low interest rates, the yields
of the Division investing in the Money Market Portfolio may become extremely
low and possibly negative.
(5) Davis Selected Advisers, L.P. may also delegate any of its responsibilities
to Davis Selected Advisers--NY, Inc., a wholly-owned subsidiary.
(6) Prior to May 1, 2009, Harris Associates L.P. was the sub-adviser to the
Portfolio.
FOR MORE INFORMATION REGARDING THE FUNDS AND THEIR INVESTMENT ADVISERS AND SUB-
ADVISERS, SEE THE FUND PROSPECTUSES ATTACHED AND THEIR STATEMENTS OF ADDITIONAL
INFORMATION.
OTHER FUNDS AND SHARE CLASSES
The Russell Investment Funds may not be available under your Policy, even
though they are described in the attached Fund prospectuses. The Real Estate
Securities Fund described in the Russell Investment Funds prospectus is not
available under any Policy.
Some of the Funds offer various classes of shares, each of which has a
different level of expenses. The prospectuses for the Funds may provide
information for share classes that are not available through the Policy. When
you consult the prospectus for any Fund, you should be careful to refer to only
the information regarding the class of shares that is available through the
Policy. For the JPMorgan Insurance Trust, we offer Class 1 shares; for Fidelity
Variable Insurance Products and the Van Eck Worldwide Insurance Trust, we offer
Initial Class shares; for the Metropolitan Series Fund, Inc., we offer Class A
shares; for the Met Investors Series Trust, we offer Class A shares; and for the
American Funds Insurance Series, we offer Class 2 shares.
6
CHARGES AND DEDUCTIONS
Charges will be deducted in connection with the Policy to compensate the
Company for providing the insurance benefits set forth in the Policy and any
additional benefits added by rider, administering the Policies, incurring
expenses in distributing the Policies, and assuming certain risks in connection
with the Policy. We may profit from one or more of the charges deducted under
the Policy, including the cost of insurance charge. We may use these profits for
any corporate purpose.
The following table describes the annual operating expenses for each Fund
for the year ended December 31, 2008, before and after any applicable
contractual fee waivers and expense reimbursements. Certain Funds may impose a
redemption fee in the future:
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
<Table>
<Caption>
DISTRIBUTION ACQUIRED TOTAL CONTRACTUAL FEE NET TOTAL
AND/OR FUND FEES ANNUAL WAIVER AND/OR ANNUAL
MANAGEMENT SERVICE(12B-1) OTHER AND OPERATING EXPENSE OPERATING
FEE FEES EXPENSES EXPENSES* EXPENSES REIMBURSEMENT EXPENSES**
---------- -------------- -------- --------- --------- --------------- ----------
AMERICAN FUNDS INSURANCE
SERIES(R) -- CLASS 2
American Funds Global Small
Capitalization Fund....... 0.71% 0.25% 0.03% -- 0.99% -- 0.99%
American Funds Growth Fund.. 0.32% 0.25% 0.01% -- 0.58% -- 0.58%
American Funds Growth-Income
Fund...................... 0.27% 0.25% 0.01% -- 0.53% -- 0.53%
FIDELITY(R) VARIABLE
INSURANCE PRODUCTS
-- INITIAL CLASS
Equity-Income Portfolio..... 0.46% -- 0.11% -- 0.57% -- 0.57%
Mid Cap Portfolio........... 0.56% -- 0.12% -- 0.68% -- 0.68%
JPMORGAN INSURANCE
TRUST -- CLASS I
JPMorgan Insurance Trust
Core Bond Portfolio....... 0.40% -- 0.23% -- 0.63% 0.03% 0.60%(1)
JPMorgan Insurance Trust
Small Cap Core Portfolio.. 0.65% -- 0.37% 0.01% 1.03% -- 1.03%(2)
MET INVESTORS SERIES
TRUST -- CLASS A
Clarion Global Real Estate
Portfolio................. 0.63% -- 0.06% -- 0.69% -- 0.69%
Harris Oakmark International
Portfolio................. 0.78% -- 0.07% -- 0.85% -- 0.85%
Lazard Mid Cap Portfolio.... 0.69% -- 0.05% -- 0.74% -- 0.74%(3)
Legg Mason Partners
Aggressive Growth
Portfolio................. 0.63% -- 0.02% -- 0.65% -- 0.65%
Lord Abbett Bond Debenture
Portfolio................. 0.50% -- 0.03% -- 0.53% -- 0.53%
Lord Abbett Growth and
Income Portfolio.......... 0.50% -- 0.03% -- 0.53% -- 0.53%
Lord Abbett Mid Cap Value
Portfolio................. 0.68% -- 0.07% -- 0.75% -- 0.75%(4)
Met/AIM Small Cap Growth
Portfolio................. 0.86% -- 0.03% -- 0.89% -- 0.89%
MFS(R) Research
International Portfolio... 0.70% -- 0.07% -- 0.77% -- 0.77%
Oppenheimer Capital
Appreciation Portfolio.... 0.59% -- 0.03% -- 0.62% -- 0.62%
</Table>
7
<Table>
<Caption>
DISTRIBUTION ACQUIRED TOTAL CONTRACTUAL FEE NET TOTAL
AND/OR FUND FEES ANNUAL WAIVER AND/OR ANNUAL
MANAGEMENT SERVICE(12B-1) OTHER AND OPERATING EXPENSE OPERATING
FEE FEES EXPENSES EXPENSES* EXPENSES REIMBURSEMENT EXPENSES**
---------- -------------- -------- --------- --------- --------------- ----------
PIMCO Total Return
Portfolio................. 0.48% -- 0.04% -- 0.52% -- 0.52%
RCM Technology Portfolio.... 0.88% -- 0.09% -- 0.97% -- 0.97%
T. Rowe Price Mid Cap Growth
Portfolio................. 0.75% -- 0.03% -- 0.78% -- 0.78%
METROPOLITAN SERIES FUND,
INC. -- CLASS A
Artio International Stock
Portfolio................. 0.82% -- 0.13% -- 0.95% 0.03% 0.92%(5)
Barclays Capital Aggregate
Bond Index Portfolio...... 0.25% -- 0.04% -- 0.29% 0.01% 0.28%(6)
BlackRock Aggressive Growth
Portfolio................. 0.72% -- 0.05% -- 0.77% -- 0.77%
BlackRock Bond Income
Portfolio................. 0.38% -- 0.05% -- 0.43% 0.01% 0.42%(7)
BlackRock Diversified
Portfolio................. 0.45% -- 0.04% -- 0.49% -- 0.49%
BlackRock Large Cap Value
Portfolio................. 0.67% -- 0.05% -- 0.72% -- 0.72%
BlackRock Legacy Large Cap
Growth Portfolio.......... 0.73% -- 0.05% -- 0.78% 0.01% 0.77%(8)
BlackRock Money Market
Portfolio................. 0.32% -- 0.02% -- 0.34% 0.01% 0.33%(9)
BlackRock Strategic Value
Portfolio................. 0.84% -- 0.05% -- 0.89% -- 0.89%
Davis Venture Value
Portfolio................. 0.70% -- 0.03% -- 0.73% 0.04% 0.69%(10)
FI Mid Cap Opportunities
Portfolio................. 0.68% -- 0.07% -- 0.75% -- 0.75%
Met/Artisan Mid Cap Value
Portfolio................. 0.81% -- 0.04% -- 0.85% -- 0.85%
MetLife Mid Cap Stock Index
Portfolio................. 0.25% -- 0.08% -- 0.33% 0.01% 0.32%(6)
MetLife Stock Index
Portfolio................. 0.25% -- 0.04% -- 0.29% 0.01% 0.28%(6)
MFS(R) Total Return
Portfolio................. 0.53% -- 0.05% -- 0.58% -- 0.58%
MFS(R) Value Portfolio...... 0.72% -- 0.08% -- 0.80% 0.07% 0.73%(11)
Morgan Stanley EAFE(R) Index
Portfolio................. 0.30% -- 0.12% 0.01% 0.43% 0.01% 0.42%(12)
Neuberger Berman Mid Cap
Value Portfolio........... 0.65% -- 0.04% -- 0.69% -- 0.69%
Russell 2000(R) Index
Portfolio................. 0.25% -- 0.07% 0.01% 0.33% 0.01% 0.32%(6)
T. Rowe Price Large Cap
Growth Portfolio.......... 0.60% -- 0.07% -- 0.67% -- 0.67%
T. Rowe Price Small Cap
Growth Portfolio.......... 0.51% -- 0.08% -- 0.59% -- 0.59%
Western Asset Management
U.S. Government
Portfolio................. 0.48% -- 0.04% -- 0.52% -- 0.52%
RUSSELL INVESTMENT FUNDS
Aggressive Equity Fund...... 0.90% -- 0.34% -- 1.24% 0.06% 1.18%(13)
Core Bond Fund.............. 0.55% -- 0.23% -- 0.78% 0.07% 0.71%(14)
Multi-Style Equity Fund..... 0.73% -- 0.18% -- 0.91% -- 0.91%
Non-U.S. Fund............... 0.90% -- 0.36% 0.01% 1.27% 0.06% 1.21%(13)
</Table>
8
<Table>
<Caption>
DISTRIBUTION ACQUIRED TOTAL CONTRACTUAL FEE NET TOTAL
AND/OR FUND FEES ANNUAL WAIVER AND/OR ANNUAL
MANAGEMENT SERVICE(12B-1) OTHER AND OPERATING EXPENSE OPERATING
FEE FEES EXPENSES EXPENSES* EXPENSES REIMBURSEMENT EXPENSES**
---------- -------------- -------- --------- --------- --------------- ----------
VAN ECK WORLDWIDE INSURANCE
TRUST -- INITIAL CLASS
Worldwide Emerging Markets
Fund...................... 1.00% -- 0.29% -- 1.29% -- 1.29%
Worldwide Hard Assets Fund.. 0.88% -- 0.11% 0.01% 1.00% -- 1.00%
</Table>
--------
* Acquired Fund Fees and Expenses are fees and expenses incurred indirectly by
a portfolio as a result of investing in shares of one or more underlying
portfolios.
** Net Total Annual Operating Expenses do not reflect: (1) voluntary waivers of
fees or expenses; (2) contractual waivers that are in effect for less than
one year from the date of this prospectus supplement; or (3) expense
reductions resulting from custodial fee credits or directed brokerage
arrangements.
(1) JPMorgan Investment Advisors Inc. and JPMorgan Funds Management, Inc. have
contractually agreed to waive fees and/or reimburse expenses to the extent
that total annual operating expenses of the Portfolio's Class 1 Shares
(excluding acquired fund fees and expenses, dividend expenses related to
short sales, interest, taxes and extraordinary expenses and expenses
related to the Board of Trustees' deferred compensation plan) exceed 0.60%
of the average daily net assets through April 30, 2010.
(2) On April 24, 2009 the Portfolio was involved in a reorganization with the
JPMorgan Small Company Portfolio where the accounting survivor is the
JPMorgan Small Company Portfolio. Because of the reorganization, Other
Expenses have been calculated based on the actual other expenses incurred
by the accounting survivor in the most recent fiscal year except that the
expenses have been restated to reflect the Portfolio's fund administration
agreement.
(3) Other Expenses include 0.02% of deferred expense reimbursement from a prior
period.
(4) Other Expenses include 0.03% of deferred expense reimbursement from a prior
period.
(5) MetLife Advisers, LLC has contractually agreed, for the period May 1, 2009
through April 30, 2010, to reduce the management fee for each Class of the
Portfolio to the annual rate of 0.81% for the first $500 million of the
Portfolio's average daily net assets and 0.78% for the next $500 million.
(6) MetLife Advisers, LLC has contractually agreed, for the period May 1, 2009
through April 30, 2010, to reduce the management fee for each Class of the
Portfolio to 0.243%.
(7) MetLife Advisers, LLC has contractually agreed, for the period May 1, 2009
through April 30, 2010, to reduce the management fee for each Class of the
Portfolio to the annual rate of 0.325% for the Portfolio's average daily
net assets in excess of $1 billion but less than $2 billion.
(8) MetLife Advisers, LLC has contractually agreed, for the period May 1, 2009
through April 30, 2010, to reduce the management fee for each Class of the
Portfolio to the annual rate of 0.73% for the first $300 million of the
Portfolio's average daily net assets and 0.705% for the next $700 million.
(9) MetLife Advisers, LLC has contractually agreed, for the period May 1, 2009
through April 30, 2010, to reduce the management fee for each Class of the
Portfolio to the annual rate of 0.345% for the first $500 million of the
Portfolio's average daily net assets and 0.335% for the next $500 million.
Other Expenses include Treasury Guarantee Program expenses of 0.012%
incurred for the period September 19, 2008 through December 31, 2008.
(10) MetLife Advisers, LLC has contractually agreed, for the period May 1, 2009
through April 30, 2010, to reduce the management fee for each Class of the
Portfolio to the annual rate of 0.75% for the first $50 million of the
Portfolio's average daily net assets, 0.70% for the next $450 million,
0.65% for the next $4 billion, and 0.625% for amounts over $4.5 billion.
(11) MetLife Advisers, LLC has contractually agreed, for the period May 1, 2009
through April 30, 2010, to reduce the management fee for each Class of the
Portfolio to the annual rate of 0.65% for the first $1.25 billion of the
Portfolio's average daily net assets, 0.60% for the next $250 million, and
0.50% for amounts over $1.5 billion.
(12) MetLife Advisers, LLC has contractually agreed, for the period May 1, 2009
through April 30, 2010, to reduce the management fee for each Class of the
Portfolio to 0.293%.
9
(13) RIMCo has contractually agreed, until April 30, 2010, to waive 0.06% of its
0.90% advisory fee. This waiver may not be terminated during the relevant
period except at the Board's discretion.
(14) RIMCo has contractually agreed, until April 30, 2010, to waive 0.07% of its
0.55% advisory fee. This waiver may not be terminated during the relevant
period except at the Board's discretion.
CERTAIN PAYMENTS WE RECEIVE WITH REGARD TO THE FUNDS
An investment adviser (other than our affiliate, MetLife Advisers, LLC) or
sub-adviser or its affiliates may make payments to us and/or certain affiliates.
These payments may be used for a variety of purposes, including payment for
expenses for certain administrative, marketing and support services with respect
to the Policies and, in our role as intermediary, with respect to the Funds. We
and our affiliates may profit from these payments. These payments may be
derived, in whole or in part, from the advisory fee deducted from Portfolio
assets. Policy owners, through their indirect investment in the Portfolios, bear
the costs of these advisory fees (see the Fund prospectuses for more
information). The amount of the payments we receive is based on a percentage of
assets of the Fund attributable to the Policies and certain other variable
insurance products that we and our affiliates issue. These percentages differ
and some advisers or sub-advisers (or other affiliates) may pay us more than
others. These percentages currently range up to 0.50%. Additionally, an
investment adviser or sub-adviser of a Fund or its affiliates may provide us
with wholesaling services that assist in the distribution of the Policies and
may pay us and/or certain affiliates amounts to participate in sales meetings.
These amounts may be significant and may provide the adviser or sub-adviser (or
other affiliate) with increased access to persons involved in the distribution
of the Policies.
We and certain of our affiliated insurance companies have joint ownership
interests in our affiliated investment adviser, MetLife Advisers, LLC, which is
organized as a limited liability company. Our ownership interests in MetLife
Advisers, LLC entitle us to profit distributions if the adviser makes a profit
with respect to the management fees it receives from a Fund. We will benefit
accordingly from assets allocated to the Funds to the extent they result in
profits to the adviser. (See "Charges and Deductions -- Annual Fund Operating
Expenses" for information on the management fees paid to the adviser and the
Statement of Additional Information for the Funds for information on the
management fees paid by the adviser to sub-advisers.)
The American Funds Global Small Capitalization Fund, the American Funds
Growth Fund and the American Funds Growth-Income Fund have adopted a
Distribution Plan under Rule 12b-1 of the Investment Company Act of 1940. A
Fund's 12b-1 Plan, if any, is described in more detail in each Fund's
prospectus. (See also "Charges and Deductions -- Annual Fund Operating
Expenses.") Any payments we receive pursuant to a Fund's 12b-1 Plan are paid to
us or our Distributor. Payments under a Fund's 12b-1 Plan decrease the Fund's
investment return.
We pay American Funds Distributors, Inc., principal underwriter for the
American Funds Insurance Series, a percentage of all premiums allocated to the
American Funds Global Small Capitalization Fund, the American Funds Growth Fund
and the American Funds Growth-Income Fund for the services it provides in
marketing the Funds' shares in connection with the Policies.
POLICY BENEFITS
DEATH BENEFIT
The following paragraphs are added.
TOTAL CONTROL ACCOUNT. Unless otherwise requested, the Policy's death
proceeds may be paid to your beneficiary through an account called the Total
Control Account. The Total Control Account is an interest-bearing account
through which the beneficiary has complete access to the proceeds, with
unlimited check writing privileges. We credit interest to the account at a rate
that will not be less than a minimum guaranteed rate. You may also elect to have
any Policy surrender proceeds paid into a Total Control Account established for
you.
Assets backing the Total Control Accounts are maintained in our general
account and are subject to the claims of our creditors. We will bear the
Investment experience of such assets; however, regardless of the investment
experience of such assets, the interest credited to the Total Control Account
will never fall below the applicable guaranteed minimum rate. Because we bear
the investment experience of the assets backing the Total Control
10
Accounts, we may receive a profit from these assets. The Total Control Account
is not insured by the FDIC or any other governmental agency.
POLICY RIGHTS
TRANSFERS
The following paragraph is revised.
We have policies and procedures that attempt to detect and deter frequent
transfers in situations where we determine there is a potential for arbitrage
trading. Currently, we believe that such situations may be presented in the
international, small-cap, and high-yield Funds (i.e., the BlackRock Strategic
Value Portfolio, Artio International Stock Portfolio, Morgan Stanley EAFE Index
Portfolio, Russell 2000 Index Portfolio, T. Rowe Price Small Cap Growth
Portfolio, Harris Oakmark International Portfolio, Lord Abbett Bond Debenture
Portfolio, Met/AIM Small Cap Growth Portfolio, MFS Research International
Portfolio, Clarion Global Real Estate Portfolio, American Funds Global Small
Capitalization Fund, JPMorgan Insurance Trust Small Cap Core Portfolio, Russell
Aggressive Equity Fund, Russell Non-U.S. Fund, Van Eck Worldwide Emerging
Markets Fund and Van Eck Worldwide Hard Assets Fund) and we monitor transfer
activity in those Funds (the "Monitored Portfolios"). In addition, as described
below, we intend to treat all American Funds Insurance Series portfolios
("American Funds Portfolios") as Monitored Portfolios. We employ various means
to monitor transfer activity, such as examining the frequency and size of
transfers into and out of the Monitored Portfolios within given periods of time.
For example, we currently monitor transfer activity to determine if, for each
category of international, small-cap, and high-yield Monitored Portfolios, in a
12-month period there were: (1) six or more transfers involving the given
category; (2) cumulative gross transfers involving the given category that
exceed the current Cash Value; and (3) two or more "round-trips" involving any
Monitored Portfolio in the given category. A round-trip generally is defined as
a transfer in followed by a transfer out within the next seven calendar days or
a transfer out followed by a transfer in within the next seven calendar days, in
either case subject to certain other criteria.
SEPARATE ACCOUNT CHARGES
We will waive the following amount of the Mortality and Expense Risk
Charge: the amount, if any, equal to the underlying fund expenses that are in
excess of 0.68% for the Division investing in the Oppenheimer Capital
Appreciation Portfolio, and that are in excess of 0.88% for the Division
investing in the MFS Research International Portfolio.
FEDERAL TAX MATTERS
INTRODUCTION
The following summary provides a general description of the Federal income
tax considerations associated with the Policy and does not purport to be
complete or to cover all situations. This discussion is not intended as tax
advice. Counsel or other competent tax advisers should be consulted for more
complete information. This discussion is based upon General American's
understanding of the present Federal income tax laws as they are currently
interpreted by the Internal Revenue Service. No representation is made as to the
likelihood of continuation of the present Federal income tax laws or of the
current interpretations by the Internal Revenue Service.
IRS CIRCULAR 230 NOTICE: The tax information contained herein is not
intended to (and cannot) be used by anyone to avoid IRS penalties. It is
intended to support the sale of the Policy. The Policy Owner should seek tax
advice based on the Policy Owner's particular circumstances from an independent
tax adviser.
TAX STATUS OF THE POLICY
In order to qualify as a life insurance contract for Federal income tax
purposes and to receive the tax treatment normally accorded life insurance
contracts under Federal tax law, a Policy must satisfy certain requirements
which are set forth in the Internal Revenue Code. Guidance as to how these
requirements are to be applied is limited, in particular, with respect to joint
and last survivor life insurance policies. Nevertheless, we believe that the
Policies should satisfy the applicable requirements. However, the rules are not
entirely clear with respect to Policies issued on
11
a substandard or guaranteed issue basis. We may take appropriate steps to bring
the Policy into compliance with applicable requirements, and we reserve the
right to restrict Policy transactions in order to do so. The insurance proceeds
payable on the death of the insured will never be less than the minimum amount
required for the Policy to be treated as life insurance under section 7702 of
the Internal Revenue Code, as in effect on the date the Policy was issued.
In some circumstances, owners of variable contracts who retain excessive
control over the investment of the underlying separate account assets may be
treated as the owners of those assets. Although published guidance in this area
does not address certain aspects of the Policies, we believe that the Owner of a
Policy should not be treated as the owner of the Separate Account assets. We
reserve the right to modify the Policies to bring them into conformity with
applicable standards should such modification be necessary to prevent Owners of
the Policies from being treated as the owners of the underlying Separate Account
assets.
In addition, the Code requires that the investments of the Separate Account
be "adequately diversified" in order for the Policies to be treated as life
insurance contracts for Federal income tax purposes. It is intended that the
Separate Account, through the Eligible Funds, will satisfy these diversification
requirements. If Eligible Fund shares are sold directly to either non-qualified
plans or to tax-qualified retirement plans that later lose their tax qualified
status, the variable account investing in the Eligible Fund may fail the
diversification requirements of Section 817(h) of the Internal Revenue Code.
This could have adverse tax consequences for variable life insurance owners,
including losing the benefit of tax deferral.
The following discussion assumes that the Policy will qualify as a life
insurance contract for Federal income tax purposes.
1. TAX TREATMENT OF POLICY BENEFITS. In general, the Company believes that
the proceeds and Cash Value increases of a Policy should be treated in a manner
consistent with a fixed-benefit life insurance policy for Federal income tax
purposes. Thus, the death benefit under the Policy should be excludable from the
gross income of the Beneficiary to the extent provided in under Section 101 of
the Code. In the case of employer-owned life insurance as defined in Section
101(j), the amount of the death benefit excludable from gross income is limited
to premiums paid unless the Policy falls within certain specified exceptions and
a notice and consent requirement is satisfied before the Policy is issued.
Certain specified exceptions are based on the status of an employee as highly
compensated or recently employed. There are also exceptions for Policy proceeds
paid to an employee's heirs. These exceptions only apply if proper notice is
given to the insured employee and consent is received from the insured employee
before the issuance of the Policy. These rules apply to Policies issued August
18, 2006 and later and also apply to policies issued before August 18, 2006
after a material increase in the death benefit or other material change. An IRS
reporting requirement applies to employer-owned life insurance subject to these
rules. Because these rules are complex and will affect the tax treatment of
death benefits, it is advisable to consult tax counsel. The death benefit will
also be taxable in the case of a transfer-for-value unless certain exceptions
apply.
Many changes or transactions involving a Policy may have tax consequences,
depending on the circumstances. Such changes include, but are not limited to,
the exchange of the Policy, a change of the Policy's Face Amount, a Policy Loan,
an additional premium payment, a Policy lapse with an outstanding Policy Loan, a
partial withdrawal, or a surrender of the Policy. The transfer of the Policy or
designation of a Beneficiary may have Federal, state, and/or local transfer and
inheritance tax consequences, including the imposition of gift, estate, and
generation-skipping transfer taxes. For example, the transfer of the Policy to,
or the designation as a Beneficiary of, or the payment of proceeds to, a person
who is assigned to a generation which is two or more generations below the
generation assignment of the Owner may have generation skipping transfer tax
consequences under Federal tax law. The individual situation of each Owner or
Beneficiary will determine the extent, if any, to which Federal, state, and
local transfer and inheritance taxes may be imposed and how ownership or receipt
of Policy proceeds will be treated for purposes of Federal, state and local
estate, inheritance, generation skipping and other taxes.
A Policy may also be used in various arrangements, including non-qualified
deferred compensation or salary continuation plans, split dollar insurance
plans, executive bonus plans, retiree medical benefit plans and others. The tax
consequences of such plans may vary depending on the particular facts and
circumstances of each individual arrangement. Therefore, if you are
contemplating the use of a Policy in any arrangement the value of which depends
in part on its tax consequences, you should be sure to consult a qualified tax
adviser regarding the tax attributes of the particular arrangement.
12
Generally, the Owner will not be deemed to be in constructive receipt of
the Policy's Cash Value, including increments thereof, under the Policy until
there is a distribution. Under a complete surrender or lapse of any Policy, if
the amount received plus the amount of outstanding Indebtedness exceeds the
total investments in the Policy, the excess will generally be treated as
ordinary income subject to tax. The tax consequences of other distributions
from, and Policy Loans taken from or secured by, a Policy depend upon whether
the Policy is classified as a "modified endowment contract".
2. MODIFIED ENDOWMENT CONTRACTS. A policy may be treated as a modified
endowment contract depending upon the amount of premiums paid in relation to the
death benefit provided under such Policy. The premium limitation rules for
determining whether a Policy is a modified endowment contract are extremely
complex. In general, however, a Policy will be a modified endowment contract if
the accumulated premiums paid at any time during the first seven Policy Years
exceed the sum of the net level premiums which would have been paid on or before
such time if the Policy provided for paid-up future benefits after the payment
of seven level annual premiums.
In addition, if a Policy is "materially changed" it may cause such Policy
to be treated as a modified endowment contract. The material change rules for
determining whether a Policy is a modified endowment contract are also extremely
complex. In general, however, the determination of whether a Policy will be a
modified endowment contract after a material change generally depends upon the
relationship among the death benefit at the time of such change, the Cash Value
at the time of the change and the additional premiums paid in the seven Policy
Years starting with the date on which the material change occurs.
Moreover, a life insurance contract received in exchange for a life
insurance contract classified as a modified endowment contract will also be
treated as a modified endowment contract. A reduction in a Policy's benefits may
also cause such Policy to become a modified endowment contract.
Accordingly, a prospective Owner should contact a competent tax adviser
before purchasing a Policy to determine the circumstances under which the Policy
would be a modified endowment contract. In addition, an Owner should contact a
competent tax adviser before paying any additional premiums or making any other
change to, including an exchange of, a Policy to determine whether such premium
or change would cause the Policy (or the new Policy in the case of an exchange)
to be treated as a modified endowment contract.
NOTE: MOST DESTINY POLICIES WERE MODIFIED ENDOWMENT CONTACTS FROM THE DATE OF
ISSUE, THEREFORE, DISTRIBUTIONS FROM MOST DESTINY POLICIES ARE TAXED AS FOLLOWS:
3. DISTRIBUTIONS FROM POLICIES CLASSIFIED AS MODIFIED ENDOWMENT
CONTRACT. Policies classified as modified endowment contracts will be subject
to the following tax rules: First, all distributions, including distributions
upon surrender, from such a Policy are treated as ordinary income subject to tax
up to the amount equal to the excess (if any) of the Cash Value immediately
before the distribution over the investment in the Policy (described below) at
such time. Second, Policy Loans taken from, or secured by, such a Policy, as
well as due but unpaid interest thereon, are treated as distributions from such
a Policy and taxed accordingly. Third, a 10 percent additional income tax is
imposed on the portion of any distribution from, or Policy Loan taken from or
secured by, such a Policy that is included in income, except where the
distribution or Policy Loan (a) is made on or after the Owner attains age
59 1/2, (b) is attributable to the Owner's becoming disabled, or (c) is part of
a series of substantially equal periodic payments for the life (or life
expectancy) of the Owner or the joint lives (or joint life expectancies) of the
Owner and the Owner's Beneficiary. The foregoing exceptions to the 10 percent
additional income tax will generally not apply to a corporate Policy Owner.
4. DISTRIBUTIONS FROM POLICIES NOT CLASSIFIED AS MODIFIED ENDOWMENT
CONTRACT. Distributions from Policies not classified as a modified endowment
contracts are generally treated as first recovering the investment in the Policy
(described below) and then, only after the return of all such investment in the
Policy, as distributing taxable income. An exception to this general rule occurs
in the case of a decrease in the Policy's death benefit (possibly including a
partial withdrawal) or any other change that reduces benefits under the Policy
in the first 15 years after the Policy is issued and that results in cash
distribution to the Owner in order for the Policy to continue complying with the
Section 7702 definitional limits. Such a cash distribution will be taxed in
whole or in part as ordinary income (to the extent of any gain in the Policy)
under rules prescribed in Section 7702.
Policy Loans from, or secured by, a Policy that is not a modified endowment
contract should generally not be treated as distributions. Instead, such loans
should generally be treated as indebtedness of the Owner. However,
13
because the tax consequences associated with Policy Loans are not always clear,
in particular, with respect to Policy Loans outstanding after the tenth Policy
year, you should consult a tax adviser prior to taking any Policy Loan.
Upon a complete surrender or lapse of a Policy that is not a modified
endowment contract, if the amount received plus the amount of indebtedness
exceeds the total investment in the Policy, the excess will generally be treated
as ordinary income subject to tax.
Neither distributions (including distributions upon surrender or lapse) nor
Policy Loans from, or secured by, a Policy that is not a modified endowment
contract are subject to the 10 percent additional income tax.
If a Policy which is not a modified endowment contract subsequently becomes
a modified endowment contract, then any distribution made from the Policy within
two years prior to the date of such change in status may become taxable.
5. POLICY LOANS. Generally, interest paid on any loan under a life
insurance Policy is not deductible. AN OWNER SHOULD CONSULT A COMPETENT TAX
ADVISER IF THE DEDUCTIBILITY OF LOAN INTEREST IS A CONSIDERATION IN THE PURCHASE
OF A POLICY. If a Policy Loan is outstanding when a Policy is canceled or
lapses, the amount of the outstanding Indebtedness will be added to the amount
distributed and will be taxed accordingly.
6. INTEREST EXPENSE ON UNRELATED INDEBTEDNESS. Under provisions added to
the Code in 1997 for policies issued after June 8, 1997, if a business taxpayer
owns or is the beneficiary of a Policy on the life of any individual who is not
an officer, director, employee, or 20 percent owner of the business, and the
taxpayer also has debt unrelated to the Policy, a portion of the taxpayer's
unrelated interest expense deductions may be lost. No business taxpayer should
purchase, exchange, or increase the death benefit under a Policy on the life of
any individual who is not an officer, director, employee, or 20 percent owner of
the business without first consulting a competent tax adviser.
7. INVESTMENT IN THE POLICY. Investment in the Policy means (i) the
aggregate amount of any premiums or other consideration paid for a Policy, minus
(ii) the aggregate amount received under the Policy which is excluded from gross
income of the Owner (except that the amount of any Policy Loan from, or secured
by, a Policy that is a modified endowment contract, to the extent such amount is
excluded from gross income, will be disregarded), plus (iii) the amount of any
Policy Loan from, or secured by, a Policy that is a modified endowment contract
to the extent that such amount is included in the gross income of the Owner.
8. MULTIPLE POLICES. All modified endowment contracts that are issued by
the Company (or its affiliates) to the same Owner during any calendar year are
treated as one modified endowment contract for purposes of determining the
amount includible in gross income under Section 72(e) of the Code.
9. LIFE INSURANCE PURCHASES BY NONRESIDENT ALIENS AND FOREIGN
CORPORATIONS. Policy Owners that are not U.S. citizens or residents will
generally be subject to U.S. Federal withholding tax on taxable distributions
from life insurance policies at a 30% rate, unless a lower treaty rate applies.
In addition, Policy Owners may be subject to state and/or municipal taxes and
taxes that may be imposed by the Policy Owner's country of citizenship or
residence.
10. WITHHOLDING. To the extent that Policy distributions are taxable, they
are generally subject to withholding for the recipient's Federal income tax
liability. Recipients can generally elect, however, not to have tax withheld
from distributions.
11. ESTATE, GIFT AND GENERATION-SKIPPING TRANSFER TAXES. The transfer of
the Policy or the designation of a beneficiary may have Federal, state, and/or
local transfer and inheritance tax consequences, including the imposition of
gift, estate, and generation-skipping transfer taxes. When the insured dies, the
death proceeds will generally be includable in the Policy Owner's estate for
purposes of the Federal estate tax if the Policy Owner was the insured. If the
Policy Owner was not the insured, the fair market value of the Policy would be
included in the Policy Owner's estate upon the Policy Owner's death. The Policy
would not be includable in the insured's estate if the insured neither retained
incidents of ownership at death nor had given up ownership within three years
before death.
Moreover, under certain circumstances, the Internal Revenue Code may impose
a "generation-skipping transfer tax" when all or part of a life insurance policy
is transferred to, or a death benefit is paid to, an individual two or more
generations younger than the Policy Owner. Regulations issued under the Internal
Revenue Code may require us to deduct the tax from your Policy, or from any
applicable payment, and pay it directly to the IRS.
Qualified tax advisers should be consulted concerning the estate and gift
tax consequences of Policy ownership and distributions under Federal, state and
local law. The individual situation of each Policy Owner or beneficiary will
14
determine the extent, if any, to which Federal, state, and local transfer and
inheritance taxes may be imposed and how ownership or receipt of Policy proceeds
will be treated for purposes of Federal, state and local estate, inheritance,
generation-skipping and other taxes.
The Economic Growth and Tax Relief Reconciliation Act of 2001 ("EGTRRA")
repeals the Federal estate tax and replaces it with a carryover basis income tax
regime effective for estates of decedents dying after December 31, 2009. EGTRRA
also repeals the generation-skipping transfer tax, but not the gift tax, for
transfers made after December 31, 2009. EGTRRA contains a sunset provision,
which essentially returns the Federal estate, gift and generation-skipping
transfer taxes to their pre-EGTRRA form, beginning in 2011. Congress may or may
not enact permanent repeal between now and then.
During the period prior to 2010, EGTRRA provides for periodic decreases in
the maximum estate tax rate coupled with periodic increases in the estate tax
exemption. The maximum estate tax rate for 2007-2009 is 45%. The estate tax
exemption is $2,000,000 for 2006-2008 and $3,500,000 in 2009.
The complexity of the new tax law, along with uncertainty as to how it
might be modified in coming years, underscores the importance of seeking
guidance from a qualified adviser to help ensure that your estate plan
adequately addresses your needs and those of your beneficiaries under all
possible scenarios.
12. CONTINUATION OF POLICY BEYOND ATTAINED AGE 100. The tax consequences
of continuing the Policy beyond the Insured's Attained Age 100 birthday are
unclear. You should consult a tax adviser if you intend to keep the Policy in
force beyond the Insured's Attained Age 100.
13. GUIDANCE ON SPLIT DOLLAR PLANS. The IRS has issued guidance on split
dollar insurance plans. A tax adviser should be consulted with respect to this
guidance if your Policy is, or may become, subject to a split dollar insurance
plan. If your Policy is part of an equity split dollar arrangement taxed under
the economic benefit regime, there is a risk that some portion of the Policy
cash value may be taxed prior to any Policy distribution.
In addition, the Sarbanes-Oxley Act of 2002 (the "Act") which was signed
into law on July 30, 2002, prohibits, with exceptions, publicly-traded
companies, including non-U.S. companies that have securities listed on U.S.
exchanges, from extending, directly or indirectly or through a subsidiary, many
types of personal loans to their directors or executive officers. It is possible
that this prohibition may be interpreted to apply to split-dollar life insurance
arrangements for directors and executive officers of such companies, since such
arrangements can arguably be viewed as involving a loan from the employer for at
least some purposes.
Any affected business contemplating the payment of a premium on an existing
Policy or the purchase of new Policy in connection with a split-dollar life
insurance arrangement should consult legal counsel.
Split dollar insurance plans that provide deferred compensation may be
subject to recently enacted rules governing deferred compensation arrangements.
Failure to adhere to these rules will result in adverse tax consequences. A tax
adviser should be consulted with respect to such plans.
14. ALTERNATIVE MINIMUM TAX. There may also be an indirect tax upon the
income in the Policy or the proceeds of a Policy under the Federal corporate
alternative minimum tax, if the Owner is subject to that tax.
15. PUERTO RICO. We believe that Policies subject to Puerto Rican tax law
will generally receive treatment similar, with certain modifications, to that
described above. Among other differences, Policies governed by Puerto Rican tax
law are not currently subject to the rules described above regarding Modified
Endowment Contracts. You should consult your tax adviser with respect to Puerto
Rican tax law governing the Policies.
16. POSSIBLE TAX LAW CHANGES. Although the likelihood of legislative
changes is uncertain, there is always the possibility that the tax treatment of
the Policy could change by legislation or otherwise. Consult a tax adviser with
respect to legislative developments and their effect on the Policy.
17. FOREIGN TAX CREDITS. To the extent permitted under Federal tax law, we
may claim the benefit of certain foreign tax credits attributable to taxes paid
by certain Eligible Funds to foreign jurisdictions.
18. POSSIBLE CHARGE FOR TAXES. At the present time, the Company makes no
charge to the Separate Account for any Federal, state, or local taxes (as
opposed to Premium Tax Charges which are deducted from premium payments) that it
incurs which may be attributable to such Separate Account or to the Policies.
The Company,
15
however, reserves the right in the future to make a charge for any such tax or
other economic burden resulting from the application of the tax laws that it
determines to be properly attributable to the Separate Account or to the
Policies.
MANAGEMENT
The directors and executive officers of General American Life Insurance
Company and their principal business experience are:
DIRECTORS OF GENERAL AMERICAN
<Table>
<Caption>
NAME AND PRINCIPAL BUSINESS
ADDRESS PRINCIPAL BUSINESS EXPERIENCE
--------------------------- -----------------------------
Michael K. Farrell* Director of General American since 2003 and Senior
Vice President of Metropolitan Life Insurance
Company since 2002.
James L. Lipscomb** Director of General American since 2002 and
Executive Vice-President and General Counsel of
Metropolitan Life Insurance Company since 2003.
Formerly, Senior Vice President and Deputy General
Counsel 2001-2003 of Metropolitan Life.
William J. Mullaney** Director of NELICO since 2007 and President of
Institutional Business at Metropolitan Life
Insurance Company since 2007. Formerly President
2004-2007 of Metropolitan Property and Casualty.
Stanley J. Talbi** Director of General American since 2002 and Senior
Vice President of Metropolitan Life Insurance
Company since 1974.
Michael J. Vietri**** Director of NELICO since 2005 and Executive Vice
President of Metropolitan Life Insurance Company
since 2005. Formerly, Senior Vice President 1999-
2004 of Metropolitan Life Insurance Company.
Lisa M. Weber** Chairman of the Board, President and Chief Executive
Officer of General American since 2004 and
President, Individual Business of Metropolitan Life
Insurance Company since 2004; formerly, Director of
General American since 2000 and Senior Executive
Vice President and Chief Administrative Officer
2001- 2004.
William J. Wheeler** Director of General American since 2002 and
Executive Vice President and Chief Financial Officer
of Metropolitan Life Insurance Company since 2003.
Formerly, Senior Vice President 1997-2003 of
Metropolitan Life.
</Table>
EXECUTIVE OFFICERS OF GENERAL AMERICAN OTHER THAN DIRECTORS
<Table>
<Caption>
NAME AND PRINCIPAL BUSINESS
ADDRESS PRINCIPAL BUSINESS EXPERIENCE
--------------------------- -----------------------------
Joseph J. Prochaska, Jr.** Executive Vice President and Chief Accounting
Officer of NELICO since 2006 and Executive Vice
President and Chief Accounting Officer of
Metropolitan Life Insurance Company since 2006.
Formerly Senior Vice President and Chief Accounting
Officer 2004-2006 of NELICO and Senior Vice
President and Chief Accounting Officer 2003-2006 of
Metropolitan Life. Senior Vice President and
Controller 2000-2003 of Aon Corporation.
</Table>
--------
The principal business address:
* Metropolitan Life, 10 Park Avenue, Morristown, NJ 07962
** Metropolitan Life, 1095 Avenue of the Americas, New York, NY 10036
*** Metropolitan Life, 501 Boylston Street, Boston, MA 02116
**** Metropolitan Life, 177 South Commons Drive, Aurora, IL 60504
RESTRICTIONS ON FINANCIAL TRANSACTIONS
Applicable laws designed to counter terrorism and prevent money laundering
might, in certain circumstances, require us to reject a premium payment and/or
block or "freeze" your Policy. If these laws apply in a particular situation, we
would not be allowed to process any request for withdrawals, surrenders, loans
or death benefits, make
16
transfers or continue making payments under your death benefit option until
instructions are received from the appropriate regulator. We also may be
required to provide additional information about you or your Policy to
government regulators.
LEGAL PROCEEDINGS
In the ordinary course of business, General American, similar to other life
insurance companies, is involved in lawsuits (including class action lawsuits),
arbitrations and other legal proceedings. Also, from time to time, state and
federal regulators or other officials conduct formal and informal examinations
or undertake other actions dealing with various aspects of the financial
services and insurance industries. In some legal proceedings involving insurers,
substantial damages have been sought and/or material settlement payments have
been made. It is not possible to predict with certainty the ultimate outcome of
any pending legal proceeding or regulatory action. However, General American
does not believe any such action or proceeding will have a material adverse
effect upon the Separate Account or upon the ability of MetLife Investors
Distribution Company to perform its contract with the Separate Account or of
General American to meet its obligations under the Contracts.
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The financial statements of each of the Divisions of General American
Separate Account Eleven included in this Prospectus Supplement have been audited
by Deloitte & Touche LLP, an independent registered public accounting firm, as
stated in their report appearing herein, and are included in reliance upon the
report of such firm given upon their authority as experts in accounting and
auditing. The principal address of Deloitte & Touche LLP is 201 East Kennedy
Boulevard, Suite 1200, Tampa, Florida 33602-5827.
The consolidated financial statements of General American Life Insurance
Company (the "Company") included in this Prospectus Supplement have been audited
by Deloitte & Touche LLP, an independent registered public accounting firm, as
stated in their report appearing herein (which report expresses an unqualified
opinion and includes an explanatory paragraph referring to the fact that the
Company changed its method of accounting for deferred acquisition costs, and for
income taxes, as required by accounting guidance adopted on January 1, 2007, and
changed its method of accounting for defined benefit pension and other
postretirement plans, as required by accounting guidance adopted on December 31,
2006), and are included in reliance upon the report of such firm given upon
their authority as experts in accounting and auditing. The principal address of
Deloitte & Touche LLP is 201 East Kennedy Boulevard, Suite 1200, Tampa, Florida
33602-5827.
FINANCIAL STATEMENTS
The financial statements of General American which are included in this
prospectus supplement should be distinguished from the financial statements of
the Separate Account, which are also included in this prospectus supplement, and
should be considered only as bearing on the ability of General American to meet
its obligations under the Policy. They should not be considered as bearing on
the investment performance of the assets held in the Separate Account.
17
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
GENERAL AMERICAN LIFE INSURANCE COMPANY
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
Variable Life Insurance Policy (Destiny)
Flexible Premium Variable Life Insurance Policies
(Variable Universal Life/Executive Benefit/
VUL 95/VUL 100/VGSP/Russell VUL)
Flexible Premium Joint and Last Survivor Variable Life Insurance Policy
Supplement dated April 13, 2009 to the
Prospectuses dated May 1, 2000, May 1, 2002, and May 1, 2004
This supplement updates certain information contained in the last full
prospectus for each of the above-referenced variable life insurance policies, as
annually and periodically supplemented. You should read and retain this
supplement.
Effective after the close of business on April 24, 2009, the JPMorgan Bond
Portfolio and the JPMorgan Small Company Portfolio of the J.P. Morgan Series
Trust II (the "Acquired Portfolios") will merge into the JPMorgan Insurance
Trust Core Bond Portfolio and the JPMorgan Insurance Trust Small Cap Equity
Portfolio, respectively, of the JPMorgan Insurance Trust (the "Acquiring
Portfolios"). Immediately following the merger the JPMorgan Insurance Trust
Small Cap Equity Portfolio will change its name to the JPMorgan Insurance Trust
Small Cap Core Portfolio. Certain forms and communications you receive from us
may refer to the JPMorgan Insurance Trust Small Cap Equity Portfolio for a
certain period of time.
JPMorgan Investment Advisors Inc. is the adviser to the JPMorgan Insurance
Trust Core Bond Portfolio and J.P. Morgan Investment Management Inc. is the
adviser to the JPMorgan Insurance Trust Small Cap Equity Portfolio. The
investment objective of the JPMorgan Insurance Trust Core Bond Portfolio is to
maximize total return by investing primarily in a diversified portfolio of
intermediate and long-term debt securities. The investment objective of the
JPMorgan Insurance Trust Small Cap Equity Portfolio is capital growth over the
long-term.
After the close of business on April 24, 2009, any cash value you have
invested in the Acquired Portfolios will be transferred to the Acquiring
Portfolios. Moreover, if you are currently allocating premiums or cash value
(under a dollar cost averaging or portfolio re-balancing program) to the
Acquired Portfolios, these allocations will automatically be re-directed to the
Acquiring Portfolios after the merger.
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
GENERAL AMERICAN LIFE INSURANCE COMPANY
Variable Life Insurance Policy
(Destiny)
Supplement dated April 28, 2008
to the Prospectus dated May 1, 2004
Flexible Premium
Variable Life Insurance Policies
(Variable Universal Life/Executive Benefit)
Supplement dated April 28, 2008
to the Prospectuses dated May 1, 2002
Flexible Premium Joint and Last Survivor
Variable Life Insurance Policy
Supplement dated April 28, 2008
to the Prospectus dated May 1, 2002
Flexible Premium Variable Life Insurance Policies
(VUL 95/VUL 100/VGSP/Russell VUL)
Supplement dated April 28, 2008
to the Prospectuses dated May 1, 2000
This supplement updates certain information contained in the last full
prospectus for each of the above-referenced variable life insurance policies, as
annually and periodically supplemented. You should read and retain this
supplement. We will send you an additional copy of the last full prospectus for
your policy, without charge, on request. These policies are no longer available
for sale.
General American Life Insurance Company is an indirect wholly-owned
subsidiary of Metropolitan Life Insurance Company ("MetLife"). MetLife is a
wholly-owned subsidiary of MetLife, Inc., a publicly-traded company. General
American's Home Office is 13045 Tesson Ferry Road, St. Louis, Missouri 63128.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE POLICIES OR DETERMINED IF THIS
SUPPLEMENT IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE SECURITIES AND EXCHANGE COMMISSION MAINTAINS A WEB SITE THAT CONTAINS
MATERIAL INCORPORATED BY REFERENCE AND OTHER INFORMATION REGARDING REGISTRANTS
THAT FILE ELECTRONICALLY WITH THE SECURITIES AND EXCHANGE COMMISSION. THE
ADDRESS OF THE SITE IS HTTP://WWW.SEC.GOV.
THE UNDERLYING FUND PROSPECTUSES ARE ATTACHED. INCLUDED ARE PROSPECTUSES
FOR THE RUSSELL INVESTMENT FUNDS, WHICH MAY NOT BE AVAILABLE UNDER YOUR POLICY.
PLEASE READ THE PROSPECTUSES CAREFULLY AND KEEP THEM FOR REFERENCE.
WE DO NOT GUARANTEE HOW ANY OF THE DIVISIONS OR FUNDS WILL PERFORM. THE
POLICIES AND THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY FINANCIAL INSTITUTION AND ARE NOT FEDERALLY INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER
GOVERNMENT AGENCY.
THE COMPANY
General American is principally engaged in writing individual life
insurance policies and annuity contracts. It is admitted to do business in 49
states, the District of Columbia, Puerto Rico, and in ten Canadian provinces.
The principal offices (Home Office) of General American are located at 13045
Tesson Ferry Road, St. Louis, Missouri 63128. The Administrative Office for
various Policy transactions is as follows:
<Table>
Premium Payments General American
P.O. Box 790201
St. Louis, MO 63179-0201
Payment Inquires and General American
Correspondence Remittance Processing
18210 Crane Nest Drive
Tampa, FL 33647
(800) 638-9294
Beneficiary and Ownership General American
Changes P. O. Box 990059
Hartford, CT 06199-0059
Surrenders, Loans, General American
Withdrawals and P.O. Box 990090
Division Transfers Hartford, CT 06199-0090
Death Claims General American
P.O. Box 990090
Hartford, CT 06199-0090
All Telephone (800) 638-9294
Transactions and Inquiries
</Table>
You may request an account transfer or reallocation of future premiums by
written request (which may be telecopied) to our Administrative Office, by
telephoning us, or over the Internet. To request a transfer or reallocation by
telephone, you should contact your registered representative, or contact us at
(800) 638-9294. To request a transfer or reallocation over the Internet, you may
log on to our website at www.genamerica.com. We use reasonable procedures to
confirm that instructions communicated by telephone, facsimile or Internet are
genuine. Any telephone, facsimile or Internet instructions that we reasonably
believe to be genuine will be your responsibility, including losses arising from
any errors in the communication of instructions. However, because telephone and
Internet transactions may be available to anyone who provides certain
information about you and your Policy, you should protect that information. We
may not be able to verify that you are the person providing telephone or
Internet instructions, or that you have authorized any such person to act for
you.
Telephone, facsimile, and computer systems (including the Internet) may not
always be available. Any telephone, facsimile, or computer system, whether it is
yours, your service provider's, your registered representative's, or ours, can
experience outages or slowdowns for a variety of reasons. These outages or
slowdowns may delay or prevent our processing of your request. Although we have
taken precautions to help our systems handle heavy use, we cannot promise
complete reliability under all circumstances. If you are experiencing problems,
you should make your request by writing to our Administrative Office.
If you send premium payments or transaction requests to an address other
than the one we have designated for receipt of such payments or requests, we may
return the premium payment to you, or there may be a delay in applying the
payment or transaction to your Policy.
THE SEPARATE ACCOUNT. The separate account consists of divisions, each of
which corresponds to an underlying Fund. Each division may either make money or
lose money. Therefore if you invest in a division of the separate account, you
may either make money or lose money, depending on the investment experience of
that division. There is no guaranteed rate of return in the separate account.
The following chart shows the Funds that are available under the policy
along with the name of the investment adviser, sub-adviser (where applicable)
and investment objective of each Fund. The Funds have different investment goals
and strategies. You should review the prospectus of each Fund, or seek
professional guidance in determining which Fund(s) best meet your objectives.
2
NOTE: THE RUSSELL INVESTMENT FUNDS ARE NOT AVAILABLE TO DESTINY OR EXECUTIVE
BENEFIT POLICIES. FOR ALL OTHER POLICIES, THE RUSSELL INVESTMENT FUNDS ARE ONLY
AVAILABLE FOR POLICIES WITH AN ISSUE DATE PRIOR TO JANUARY 1, 2000.
AMERICAN FUNDS INSURANCE SERIES(R) Adviser: Capital Research and Management
Company
<Table>
<Caption>
FUND SUB-ADVISER INVESTMENT OBJECTIVE
---- ----------- --------------------
American Funds Global N/A Capital appreciation through stocks.
Small Capitalization
Fund
American Funds Growth N/A Capital appreciation through stocks.
Fund
American Funds Growth- N/A Capital appreciation and income.
Income Fund
</Table>
FIDELITY(R) VARIABLE INSURANCE
PRODUCTS ADVISER: FIDELITY MANAGEMENT & RESEARCH COMPANY
<Table>
<Caption>
FUND SUB-ADVISER INVESTMENT OBJECTIVE
---- ----------- --------------------
Equity-Income Reasonable income. The fund will also
Portfolio consider the potential for capital
appreciation. The fund's goal is to achieve
a yield which exceeds the composite yield of
securities comprising the Standard & Poor's
500(SM) Index (S&P 500(R)).
Mid Cap Portfolio Long-term growth of capital.
</Table>
J.P. MORGAN SERIES TRUST II ADVISER: J.P. MORGAN INVESTMENT MANAGEMENT INC.
<Table>
<Caption>
FUND SUB-ADVISER INVESTMENT OBJECTIVE
---- ----------- --------------------
JPMorgan Bond N/A To provide high total return consistent with
Portfolio moderate risk of capital and maintenance of
liquidity.
JPMorgan Small Company N/A To provide high total return from a
Portfolio portfolio of small company stocks.
</Table>
MET INVESTORS SERIES TRUST ADVISER: MET INVESTORS ADVISORY LLC
<Table>
<Caption>
FUND SUB-ADVISER INVESTMENT OBJECTIVE
---- ----------- --------------------
Clarion Global Real ING Clarion Real To provide total return through investment
Estate Portfolio Estate Securities, in real estate securities, emphasizing both
(formerly Neuberger L.P.(1) capital appreciation and current income.
Berman Real Estate
Portfolio)
Harris Oakmark Harris Associates L.P. Long-term capital appreciation.
International
Portfolio
Lazard Mid Cap Lazard Asset Long-term growth of capital.
Portfolio Management, LLC
Legg Mason Partners ClearBridge Advisors, Capital appreciation.
Aggressive Growth LLC
Portfolio
Lord Abbett Bond Lord, Abbett & Co. LLC High current income and the opportunity for
Debenture Portfolio capital appreciation to produce a high total
return.
Lord Abbett Growth and Lord, Abbett & Co. LLC Long-term growth of capital and income
Income Portfolio without excessive fluctuation in market
value.
</Table>
3
<Table>
<Caption>
FUND SUB-ADVISER INVESTMENT OBJECTIVE
---- ----------- --------------------
Lord Abbett Mid Cap Lord, Abbett & Co. LLC Capital appreciation through investments,
Value Portfolio primarily in equity securities, which are
believed to be undervalued in the
marketplace.
Met/AIM Small Cap Invesco Aim Capital Long-term growth of capital.
Growth Portfolio Management, Inc.
MFS(R) Research Massachusetts Capital appreciation
International Financial Services
Portfolio Company
Oppenheimer Capital OppenheimerFunds, Inc. Capital appreciation.
Appreciation Portfolio
PIMCO Total Return Pacific Investment Maximum total return, consistent with the
Portfolio Management Company LLC preservation of capital and prudent
investment management.
RCM Technology RCM Capital Management Capital appreciation; no consideration is
Portfolio LLC given to income.
T. Rowe Price Mid Cap T. Rowe Price Long-term growth of capital.
Growth Portfolio Associates, Inc.
</Table>
METROPOLITAN SERIES FUND, INC. ADVISER: METLIFE ADVISERS, LLC
<Table>
<Caption>
FUND SUB-ADVISER INVESTMENT OBJECTIVE
---- ----------- --------------------
BlackRock Aggressive BlackRock Advisors, Maximum capital appreciation.
Growth Portfolio LLC
BlackRock Bond Income BlackRock Advisors, A competitive total return primarily from
Portfolio LLC investing in fixed-income securities.
BlackRock Diversified BlackRock Advisors, High total return while attempting to limit
Portfolio LLC investment risk and preserve capital.
BlackRock Large Cap BlackRock Advisors, Long-term growth of capital.
Value Portfolio LLC
BlackRock Legacy Large BlackRock Advisors, Long-term growth of capital.
Cap Growth Portfolio LLC
BlackRock Money Market BlackRock Advisors, A high level of current income consistent
Portfolio(2) LLC with preservation of capital.
BlackRock Strategic BlackRock Advisors, High total return, consisting principally of
Value Portfolio LLC capital appreciation.
Davis Venture Value Davis Selected Growth of capital.
Portfolio Advisers, L.P.(3)
FI Mid Cap Pyramis Global Long-term growth of capital.
Opportunities Advisors, LLC(4)
Portfolio
Harris Oakmark Focused Harris Associates L.P. Long-term capital appreciation.
Value Portfolio
Julius Baer Julius Baer Investment Long-term growth of capital.
International Stock Management LLC(5)
Portfolio (formerly FI
International Stock
Portfolio)
</Table>
4
<Table>
<Caption>
FUND SUB-ADVISER INVESTMENT OBJECTIVE
---- ----------- --------------------
Lehman Brothers(R) MetLife Investment To equal the performance of the Lehman
Aggregate Bond Index Advisors Company, LLC Brothers Aggregate Bond Index.
Portfolio
MetLife Mid Cap Stock MetLife Investment To equal the performance of the Standard &
Index Portfolio Advisors Company, LLC Poor's Mid Cap 400 Composite Stock Price
Index.
MetLife Stock Index MetLife Investment To equal the performance of the Standard &
Portfolio Advisors Company, LLC Poor's 500 Composite Stock Price Index.
MFS(R) Total Return Massachusetts Favorable total return through investment in
Portfolio Financial Services a diversified portfolio.
Company
MFS(R) Value Portfolio Massachusetts Capital appreciation and reasonable income.
(formerly Harris Financial Services
Oakmark Large Cap Company(6)
Value Portfolio)
Morgan Stanley EAFE(R) MetLife Investment To equal the performance of the MSCI EAFE
Index Portfolio Advisors Company, LLC Index.
Neuberger Berman Mid Neuberger Berman Capital growth.
Cap Value Portfolio Management Inc.
Russell 2000(R) Index MetLife Investment To equal the return of the Russell 2000
Portfolio Advisors Company, LLC Index.
T. Rowe Price Large T. Rowe Price Long-term growth of capital, and
Cap Growth Portfolio Associates, Inc. secondarily, dividend income.
T. Rowe Price Small T. Rowe Price Long-term capital growth.
Cap Growth Portfolio Associates, Inc.
Western Asset Western Asset To maximize total return consistent with
Management U.S. Management Company preservation of capital and maintenance of
Government Portfolio liquidity.
</Table>
RUSSELL INVESTMENT FUNDS ADVISER: FRANK RUSSELL INVESTMENT
MANAGEMENT COMPANY
<Table>
<Caption>
FUND SUB-ADVISER INVESTMENT OBJECTIVE
---- ----------- --------------------
Aggressive Equity Fund Multiple sub-advisers To provide long term capital growth.
Core Bond Fund Multiple sub-advisers To provide current income, and as a
secondary objective, capital appreciation.
Multi-Style Equity Multiple sub-advisers To provide long-term capital growth.
Fund
Non-U.S. Fund Multiple sub-advisers To provide long-term capital growth.
</Table>
VAN ECK WORLDWIDE INSURANCE TRUST ADVISER: VAN ECK ASSOCIATES CORPORATION
<Table>
<Caption>
FUND SUB-ADVISER INVESTMENT OBJECTIVE
---- ----------- --------------------
Worldwide Emerging N/A Long-term capital appreciation by investing
Markets Fund primarily in equity securities in emerging
markets around the world.
Worldwide Hard Assets N/A Long-term capital appreciation by investing
Fund primarily in hard asset securities. Income
is a secondary consideration.
</Table>
5
---------------
(1) Prior to April 28, 2008, Neuberger Berman Management Inc. was the
sub-adviser to the Portfolio.
(2) An investment in the BlackRock Money Market Portfolio is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. Although the Portfolio seeks to preserve the value of
your investment at $100 per share, it is possible to lose money by investing
in the Portfolio. During extended periods of low interest rates, the yields
of the Division investing in the Money Market Portfolio may become extremely
low and possibly negative.
(3) Davis Selected Advisers, L.P. may also delegate any of its responsibilities
to Davis Selected Advisers--NY, Inc., a wholly-owned subsidiary.
(4) Prior to April 28, 2008, Fidelity Management & Research Company was the
sub-adviser to the Portfolio.
(5) Prior to January 7, 2008, Fidelity Management & Research Company was the
sub-adviser to the Portfolio.
(6) Prior to January 7, 2008, Harris Associates L.P. was the sub-adviser to the
Portfolio.
FOR MORE INFORMATION REGARDING THE FUNDS AND THEIR INVESTMENT ADVISERS AND
SUB-ADVISERS, SEE THE FUND PROSPECTUSES ATTACHED AND THEIR STATEMENTS OF
ADDITIONAL INFORMATION.
OTHER FUNDS AND SHARE CLASSES
The Russell Investment Funds may not be available under your Policy, even
though they are described in the attached Fund prospectuses. The Real Estate
Securities Fund described in the Russell Investment Funds prospectus is not
available under any Policy.
Some of the Funds offer various classes of shares, each of which has a
different level of expenses. The prospectuses for the Funds may provide
information for share classes that are not available through the Policy. When
you consult the prospectus for any Fund, you should be careful to refer to only
the information regarding the class of shares that is available through the
Policy. For Fidelity Variable Insurance Products and the Van Eck Worldwide
Insurance Trust, we offer Initial Class shares; for the Metropolitan Series
Fund, Inc., we offer Class A shares; for the Met Investors Series Trust, we
offer Class A shares; and for the American Funds Insurance Series, we offer
Class 2 shares.
6
CHARGES AND DEDUCTIONS
The following table describes the annual operating expenses for each Fund
for the year ended December 31, 2007, before and after any applicable
contractual fee waivers and expense reimbursements:
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
<Table>
<Caption>
DISTRIBUTION ACQUIRED TOTAL CONTRACTUAL FEE NET TOTAL
AND/OR FUND FEES ANNUAL WAIVER AND/OR ANNUAL
MANAGEMENT SERVICE(12B-1) OTHER AND OPERATING EXPENSE OPERATING
FEE FEES EXPENSES EXPENSES* EXPENSES REIMBURSEMENT EXPENSES**
---------- -------------- -------- --------- --------- --------------- ----------
AMERICAN FUNDS INSURANCE
SERIES(R) -- CLASS 2
American Funds Global Small
Capitalization Fund........ 0.70% 0.25% 0.03% -- 0.98% -- 0.98%
American Funds Growth Fund... 0.32% 0.25% 0.01% -- 0.58% -- 0.58%
American Funds Growth-Income
Fund....................... 0.26% 0.25% 0.01% -- 0.52% -- 0.52%
FIDELITY(R) VARIABLE
INSURANCE
PRODUCTS -- INITIAL CLASS
Equity-Income Portfolio...... 0.46% -- 0.09% -- 0.55% -- 0.55%
Mid Cap Portfolio............ 0.56% -- 0.11% -- 0.67% -- 0.67%
J.P. MORGAN SERIES TRUST II
JPMorgan Bond Portfolio...... 0.30% -- 0.48% 0.01% 0.79% 0.18% 0.61%(1)
JPMorgan Small Company
Portfolio.................. 0.60% -- 0.55% 0.01% 1.16% 0.07% 1.09%(2)
MET INVESTORS SERIES TRUST
-- CLASS A
Clarion Global Real Estate
Portfolio.................. 0.61% -- 0.04% -- 0.65% -- 0.65%
Harris Oakmark International
Portfolio.................. 0.77% -- 0.09% -- 0.86% -- 0.86%
Lazard Mid Cap Portfolio..... 0.69% -- 0.07% -- 0.76% -- 0.76%
Legg Mason Partners
Aggressive Growth
Portfolio.................. 0.62% -- 0.05% -- 0.67% -- 0.67%
Lord Abbett Bond Debenture
Portfolio.................. 0.49% -- 0.05% -- 0.54% -- 0.54%
Lord Abbett Growth and Income
Portfolio.................. 0.49% -- 0.03% -- 0.52% -- 0.52%
Lord Abbett Mid Cap Value
Portfolio.................. 0.67% -- 0.08% -- 0.75% -- 0.75%
Met/AIM Small Cap Growth
Portfolio.................. 0.86% -- 0.06% -- 0.92% -- 0.92%
MFS(R)Research International
Portfolio.................. 0.70% -- 0.09% -- 0.79% -- 0.79%
Oppenheimer Capital
Appreciation Portfolio..... 0.58% -- 0.04% -- 0.62% -- 0.62%
PIMCO Total Return
Portfolio.................. 0.48% -- 0.04% -- 0.52% -- 0.52%(3)
RCM Technology Portfolio..... 0.88% -- 0.09% -- 0.97% -- 0.97%
T. Rowe Price Mid Cap Growth
Portfolio.................. 0.75% -- 0.05% -- 0.80% -- 0.80%
METROPOLITAN SERIES FUND,
INC. -- CLASS A
BlackRock Aggressive Growth
Portfolio.................. 0.71% -- 0.05% -- 0.76% -- 0.76%
</Table>
7
<Table>
<Caption>
DISTRIBUTION ACQUIRED TOTAL CONTRACTUAL FEE NET TOTAL
AND/OR FUND FEES ANNUAL WAIVER AND/OR ANNUAL
MANAGEMENT SERVICE(12B-1) OTHER AND OPERATING EXPENSE OPERATING
FEE FEES EXPENSES EXPENSES* EXPENSES REIMBURSEMENT EXPENSES**
---------- -------------- -------- --------- --------- --------------- ----------
BlackRock Bond Income
Portfolio.................. 0.38% -- 0.06% -- 0.44% 0.01% 0.43%(4)
BlackRock Diversified
Portfolio.................. 0.44% -- 0.06% -- 0.50% -- 0.50%
BlackRock Large Cap Value
Portfolio.................. 0.68% -- 0.06% -- 0.74% -- 0.74%
BlackRock Legacy Large Cap
Growth Portfolio........... 0.73% -- 0.06% -- 0.79% -- 0.79%
BlackRock Money Market
Portfolio.................. 0.33% -- 0.07% -- 0.40% 0.01% 0.39%(5)
BlackRock Strategic Value
Portfolio.................. 0.82% -- 0.06% -- 0.88% -- 0.88%
Davis Venture Value
Portfolio.................. 0.69% -- 0.04% -- 0.73% -- 0.73%
FI Mid Cap Opportunities
Portfolio.................. 0.68% -- 0.05% -- 0.73% -- 0.73%
Harris Oakmark Focused Value
Portfolio.................. 0.72% -- 0.04% -- 0.76% -- 0.76%
Julius Baer International
Stock Portfolio............ 0.84% -- 0.12% -- 0.96% 0.04% 0.92%(6)
Lehman Brothers(R) Aggregate
Bond Index Portfolio....... 0.25% -- 0.05% -- 0.30% 0.01% 0.29%(7)
MetLife Mid Cap Stock Index
Portfolio.................. 0.25% -- 0.07% 0.01% 0.33% 0.01% 0.32%(8)
MetLife Stock Index
Portfolio.................. 0.25% -- 0.04% -- 0.29% 0.01% 0.28%(8)
MFS(R)Total Return
Portfolio.................. 0.53% -- 0.05% -- 0.58% -- 0.58%
MFS(R)Value Portfolio........ 0.72% -- 0.05% -- 0.77% 0.07% 0.70%(9)
Morgan Stanley EAFE(R) Index
Portfolio.................. 0.30% -- 0.12% 0.01% 0.43% 0.01% 0.42%(10)
Neuberger Berman Mid Cap
Value Portfolio............ 0.64% -- 0.05% -- 0.69% -- 0.69%
Russell 2000(R) Index
Portfolio.................. 0.25% -- 0.07% 0.01% 0.33% 0.01% 0.32%(8)
T. Rowe Price Large Cap
Growth Portfolio........... 0.60% -- 0.07% -- 0.67% -- 0.67%
T. Rowe Price Small Cap
Growth Portfolio........... 0.51% -- 0.08% -- 0.59% -- 0.59%
Western Asset Management U.S.
Government Portfolio....... 0.49% -- 0.05% -- 0.54% -- 0.54%
RUSSELL INVESTMENT FUNDS
Aggressive Equity Fund....... 0.90% -- 0.24% -- 1.14% 0.08% 1.06%(11)
Core Bond Fund............... 0.55% -- 0.22% 0.01% 0.78% 0.07% 0.71%(11)
Multi-Style Equity Fund...... 0.73% -- 0.15% -- 0.88% -- 0.88%(11)
Non-U.S. Fund................ 0.90% -- 0.28% 0.01% 1.19% 0.03% 1.16%(11)
VAN ECK WORLDWIDE INSURANCE
TRUST -- INITIAL CLASS
Worldwide Emerging Markets
Fund....................... 1.00% -- 0.23% -- 1.23% -- 1.23%
Worldwide Hard Assets Fund... 1.00% -- 0.01% 0.01% 1.02% -- 1.02%
</Table>
---------------
* Acquired Fund Fees and Expenses are fees and expenses incurred indirectly by
a portfolio as a result of investing in shares of one or more underlying
portfolios.
** Net Total Annual Operating Expenses do not reflect: (1) voluntary waivers of
fees or expenses; (2) contractual waivers that are in effect for less than
one year from the date of this prospectus supplement; or (3) expense
reductions resulting from custodial fee credits or directed brokerage
arrangements.
(1) JPMorgan Funds Management, Inc. has contractually agreed to waive fees
and/or reimburse expenses to the extent that total annual operating
expenses (excluding acquired fund fees and expenses, dividend expenses
8
related to short sales, interest, taxes and extraordinary expenses) exceed
0.60% of the average daily net assets through 4/30/09.
(2) JPMorgan Funds Management, Inc. has contractually agreed to waive fees
and/or reimburse expenses to the extent that total annual operating
expenses (excluding acquired fund fees and expenses, dividend expenses
related to short sales, interest, taxes and extraordinary expenses ) exceed
1.08% of the average daily net assets through 4/30/09.
(3) The Management Fee has been restated to reflect an amended management fee
agreement, as if the agreement had been in effect during the preceding
fiscal year.
(4) MetLife Advisers, LLC has contractually agreed, for the period April 28,
2008 through April 30, 2009, to reduce the Management Fee for each Class of
the Portfolio to the annual rate of 0.325% for the amounts over $1 billion
but less than $2 billion.
(5) MetLife Advisers, LLC has contractually agreed, for the period April 28,
2008 through April 30, 2009, to reduce the Management Fee for each Class of
the Portfolio to the annual rate of 0.345% for the first $500 million of
the Portfolio's average daily net assets and 0.335% for the next $500
million.
(6) MetLife Advisers, LLC has contractually agreed, for the period April 28,
2008 through April 30, 2009, to reduce the Management Fee for each Class of
the Portfolio to the annual rate of 0.81% for the first $500 million of the
Portfolio's average daily net assets and 0.78% for the next $500 million.
(7) MetLife Advisers, LLC has contractually agreed, for the period April 28,
2008 through April 30, 2009, to reduce the Management Fee for each Class of
the Portfolio to 0.244%.
(8) MetLife Advisers, LLC has contractually agreed, for the period April 28,
2008 through April 30, 2009, to reduce the Management Fee for each Class of
the Portfolio to 0.243%.
(9) MetLife Advisers, LLC has contractually agreed, for the period April 28,
2008 through April 30, 2009, to reduce the Management Fee for each Class of
the Portfolio to the annual rate of 0.65% for the first $1.25 billion of
the Portfolio's average daily net assets, 0.60% for the next $250 million
and 0.50% for amounts over $1.5 billion.
(10) MetLife Advisers, LLC has contractually agreed, for the period April 28,
2008 through April 30, 2009, to reduce the Management Fee for each Class of
the Portfolio to 0.293%.
(11) The Fund's Manager has contractually agreed to waive, at least until April
28, 2009, a portion of its management fee, up to the full amount of that
fee, and to then reimburse the Fund for all remaining expenses, after fee
waivers, in order to prevent total operating expenses, excluding "Acquired
Fund Fees and Expenses", from exceeding the following amounts of the Fund's
average daily net assets on an annual basis: 1.05% for the Aggressive
Equity Fund; 0.70% for the Core Bond Fund; 0.87% for the Multi-Style Equity
Fund; and, 1.15% for the Non-U.S. Fund.
CERTAIN PAYMENTS WE RECEIVE WITH REGARD TO THE FUNDS
An investment adviser (other than our affiliate, MetLife Advisers, LLC and
Met Investors Advisory LLC) or sub-adviser or its affiliates may make payments
to us and/or certain affiliates. These payments may be used for a variety of
purposes, including payment for expenses for certain administrative, marketing
and support services with respect to the Policies and, in our role as
intermediary, with respect to the Funds. We and our affiliates may profit from
these payments. These payments may be derived, in whole or in part, from the
advisory fee deducted from Portfolio assets. Policy owners, through their
indirect investment in the Portfolios, bear the costs of these advisory fees
(see the Fund prospectuses for more information). The amount of the payments we
receive is based on a percentage of assets of the Fund attributable to the
Policies and certain other variable insurance products that we and our
affiliates issue. These percentages differ and some advisers or sub-advisers (or
other affiliates) may pay us more than others. These percentages currently range
up to 0.50%. Additionally, an investment adviser or sub-adviser of a Fund or its
affiliates may provide us with wholesaling services that assist in the
distribution of the Policies and may pay us and/or certain affiliates amounts to
participate in sales meetings. These amounts may be significant and may provide
the adviser or sub-adviser (or other affiliate) with increased access to persons
involved in the distribution of the Policies.
We and certain of our affiliated insurance companies have joint ownership
interests in our affiliated investment advisers, MetLife Advisers, LLC and Met
Investors Advisory LLC, which are organized as limited liability companies.
9
Our owner interests in MetLife Advisers, LLC and Met Investors Advisory LLC
entitle us to profit distributions if the adviser makes a profit with respect to
the management fees it receives from a Fund. We will benefit accordingly from
assets allocated to the Funds to the extent they result in profits to the
advisers. (See "Charges and Deductions -- Annual Fund Operating Expenses" for
information on the management fees paid to the advisers and the Statement of
Additional Information for the Funds for information on the management fees paid
by the adviser to sub-advisers.)
The American Funds Global Small Capitalization Fund, the American Funds
Growth Fund and the American Funds Growth-Income Fund have adopted a
Distribution Plan under Rule 12b-1 of the Investment Company Act of 1940. A
Fund's 12b-1 Plan, if any, is described in more detail in each Fund's
prospectus. (See also "Charges and Deductions -- Annual Fund Operating
Expenses.") Any payments we receive pursuant to a Fund's 12b-1 Plan are paid to
us or our Distributor. Payments under a Fund's 12b-1 Plan decrease the Fund's
investment return.
We pay American Funds Distributors, Inc., principal underwriter for the
American Funds Insurance Series, a percentage of all premiums allocated to the
American Funds Global Small Capitalization Fund, the American Funds Growth Fund
and the American Funds Growth-Income Fund for the services it provides in
marketing the Funds' shares in connection with the Policies.
SELECTION OF THE FUNDS
We select the Funds offered through the Policy based on a number of
criteria, including asset class coverage, the strength of the adviser's or
sub-adviser's reputation and tenure, brand recognition, performance, and the
capability and qualification of each investment firm. Another factor we consider
during the selection process is whether the Fund's adviser or sub-adviser is one
of our affiliates or whether the Fund, its adviser, its sub-adviser(s), or an
affiliate will make payments to us or our affiliates. For additional information
on these arrangements, see "Certain Payments We Receive with Regard to the
Funds" above. In this regard, the profit distributions we receive from our
affiliated investment advisers are a component of the total revenue that we
consider in configuring the features and investment choices available in the
variable insurance products that we and our affiliated insurance companies
issue. Since we and our affiliated insurance companies may benefit more from the
allocation of assets to portfolios advised by our affiliates than those that are
not, we may be more inclined to offer portfolios advised by our affiliates in
the variable insurance products we issue. We review the Funds periodically and
may remove a Fund or limit its availability to new premium payments and/or
transfers of cash value if we determine that the Fund no longer meets one or
more of the selection criteria, and/or if the Fund has not attracted significant
allocations from Policy Owners.
WE DO NOT PROVIDE INVESTMENT ADVICE AND DO NOT RECOMMEND OR ENDORSE ANY
PARTICULAR FUND. YOU BEAR THE RISK OF ANY DECLINE IN THE CASH VALUE OF YOUR
POLICY RESULTING FROM THE PERFORMANCE OF THE FUNDS YOU HAVE CHOSEN.
POLICY RIGHTS
TRANSFERS
Frequent requests from Policy Owners to transfer cash value may dilute the
value of a Fund's shares if the frequent trading involves an attempt to take
advantage of pricing inefficiencies created by a lag between a change in the
value of the securities held by the Fund and the reflection of that change in
the Fund's share price ("arbitrage trading"). Regardless of the existence of
pricing inefficiencies, frequent transfers may also increase brokerage and
administrative costs of the underlying Funds and may disrupt portfolio
management strategy, requiring a Fund to maintain a high cash position and
possibly resulting in lost investment opportunities and forced liquidations
("disruptive trading"). Accordingly, arbitrage trading and disruptive trading
activities (referred to collectively as "market timing") may adversely affect
the long-term performance of the Funds, which may in turn adversely affect
Policy Owners and other persons who may have an interest in the Policies (e.g.,
beneficiaries).
We have policies and procedures that attempt to detect and deter frequent
transfers in situations where we determine there is a potential for arbitrage
trading. Currently, we believe that such situations may be presented in the
international, small-cap, and high-yield Funds (i.e., the BlackRock Strategic
Value Portfolio, Julius Baer International Stock Portfolio, Morgan Stanley EAFE
Index Portfolio, Russell 2000 Index Portfolio, T. Rowe Price Small Cap Growth
Portfolio, Harris Oakmark International Portfolio, Lord Abbett Bond Debenture
Portfolio, Met/AIM Small Cap Growth
10
Portfolio, MFS Research International Portfolio, Clarion Global Real Estate
Portfolio, American Funds Global Small Capitalization Fund, JPMorgan Small
Company Portfolio, Russell Aggressive Equity Fund, Russell Non-U.S. Fund, Van
Eck Worldwide Emerging Markets Fund and Van Eck Worldwide Hard Assets Fund) and
we monitor transfer activity in those Funds (the "Monitored Portfolios"). In
addition, as described below, we intend to treat all American Funds Insurance
Series portfolios ("American Funds Portfolios") as Monitored Portfolios. We
employ various means to monitor transfer activity, such as examining the
frequency and size of transfers into and out of the Monitored Portfolios within
given periods of time. For example, we currently monitor transfer activity to
determine if, for each category of international, small-cap, and high-yield
Monitored Portfolios, in a 12-month period there were: (1) six or more transfers
involving the given category; (2) cumulative gross transfers involving the given
category that exceed the current Cash Value; and (3) two or more "round-trips"
involving any Monitored Portfolio in the given category. A round-trip generally
is defined as a transfer in followed by a transfer out within the next seven
calendar days or a transfer out followed by a transfer in within the next seven
calendar days, in either case subject to certain other criteria.
We do not believe that other Funds present a significant opportunity to
engage in arbitrage trading and therefore do not monitor transfer activity in
those Funds. We may change the Monitored Portfolios at any time without notice
in our sole discretion. In addition to monitoring transfer activity in certain
Funds, we rely on the underlying Funds to bring any potential disruptive trading
activity they identify to our attention for investigation on a case-by-case
basis. We will also investigate any other harmful transfer activity that we
identify from time to time. We may revise these policies and procedures in our
sole discretion at any time without prior notice.
AMERICAN FUNDS MONITORING POLICY. As a condition to making their
portfolios available in our products, American Funds requires us to treat all
American Funds portfolios as Monitored Portfolios under our current market
timing and excessive trading policies and procedures. Further, American Funds
requires us to impose additional specified monitoring criteria for all American
Funds portfolios available under the Policy, regardless of the potential for
arbitrage trading. We are required to monitor transfer activity in American
Funds portfolios to determine if there were two or more transfers in followed by
transfers out, in each case of a certain dollar amount or greater, in any 30-
day period. A first violation of the American Funds monitoring policy will
result in a written notice of violation; each additional violation will result
in the imposition of a six-month restriction, during which period we will
require all transfer requests to or from an American Funds portfolio to be
submitted with an original signature. Further, as Monitored Portfolios, all
American Funds portfolios also will be subject to our current market timing and
excessive trading policies, procedures and restrictions (described below), and
transfer restrictions may be imposed upon a violation of either monitoring
policy.
Our policies and procedures may result in transfer restrictions being
applied to deter market timing. Currently, when we detect transfer activity in
the Monitored Portfolios that exceeds our current transfer limits, or other
transfer activity that we believe may be harmful to other Policy Owners or other
persons who have an interest in the Policies, we require all future transfer
requests to or from any Monitored Portfolios or other identified Portfolios
under that Policy to be submitted either (i) in writing with an original
signature or (ii) by telephone prior to 10:00 a.m.
Transfers made under the dollar cost averaging program or the portfolio
rebalancing program are not treated as transfers when we evaluate trading
patterns for market timing.
The detection and deterrence of harmful transfer activity involves
judgments that are inherently subjective, such as the decision to monitor only
those Funds that we believe are susceptible to arbitrage trading or the
determination of the transfer limits. Our ability to detect and/or restrict such
transfer activity may be limited by operational and technological systems, as
well as our ability to predict strategies employed by Policy Owners to avoid
such detection. Our ability to restrict such transfer activity may also be
limited by provisions of the Policy. Accordingly, there is no assurance that we
will prevent all transfer activity that may adversely affect Policy Owners and
other persons with interests in the Policies. We do not accommodate market
timing in any Funds and there are no arrangements in place to permit any Policy
Owner to engage in market timing; we apply our policies and procedures without
exception, waiver, or special arrangement.
The Funds may have adopted their own policies and procedures with respect
to frequent purchases and redemptions of their respective shares, and we reserve
the right to enforce these policies and procedures. For example, Funds may
assess a redemption fee (which we reserve the right to collect) on shares held
for a relatively
11
short period. The prospectuses for the Funds describe any such policies and
procedures, which may be more or less restrictive than the policies and
procedures we have adopted. Although we may not have the contractual authority
or the operational capacity to apply the frequent trading policies and
procedures of the Funds, we have entered into a written agreement, as required
by SEC regulation, with each Fund or its principal underwriter that obligates us
to provide to the Fund promptly upon request certain information about the
trading activity of individual Policy Owners, and to execute instructions from
the Fund to restrict or prohibit further purchases or transfers by specific
Policy Owners who violate the frequent trading policies established by the Fund.
In addition, Policy Owners and other persons with interests in the Policies
should be aware that the purchase and redemption orders received by the Funds
are generally "omnibus" orders from intermediaries such as retirement plans or
separate accounts funding variable insurance contracts. The omnibus orders
reflect the aggregation and netting of multiple orders from individual owners of
variable insurance policies and/or individual retirement plan participants. The
omnibus nature of these orders may limit the Funds in their ability to apply
their frequent trading policies and procedures. In addition, the other insurance
companies and/or retirement plans may have different policies and procedures or
may not have any such policies and procedures because of contractual
limitations. For these reasons, we cannot guarantee that the Funds (and thus
Policy Owners) will not be harmed by transfer activity relating to the other
insurance companies and/or retirement plans that may invest in the Funds. If a
Fund believes that an omnibus order reflects one or more transfer requests from
Contract Owners engaged in disruptive trading activity, the Fund may reject the
entire omnibus order.
In accordance with applicable law, we reserve the right to modify or
terminate the transfer privilege at any time. We also reserve the right to defer
or restrict the transfer privilege at any time that we are unable to purchase or
redeem shares of any of the Funds, including any refusal or restriction on
purchases or redemptions of their shares as a result of their own policies and
procedures on market timing activities (even if an entire omnibus order is
rejected due to the market timing activity of a single Policy Owner). You should
read the Fund prospectuses for more details.
SEPARATE ACCOUNT CHARGES
We will waive the following amount of the Mortality and Expense Risk
Charge: the amount, if any, equal to the underlying fund expenses that are in
excess of 0.68% for the Division investing in the Oppenheimer Capital
Appreciation Portfolio, and that are in excess of 0.88% for the Division
investing in the MFS Research International Portfolio.
FEDERAL TAX MATTERS
INTRODUCTION
The following summary provides a general description of the Federal income
tax considerations associated with the Policy and does not purport to be
complete or to cover all situations. This discussion is not intended as tax
advice. Counsel or other competent tax advisers should be consulted for more
complete information. This discussion is based upon General American's
understanding of the present Federal income tax laws as they are currently
interpreted by the Internal Revenue Service. No representation is made as to the
likelihood of continuation of the present Federal income tax laws or of the
current interpretations by the Internal Revenue Service.
IRS CIRCULAR 230 NOTICE: The tax information contained herein is not
intended to (and cannot) be used by anyone to avoid IRS penalties. It is
intended to support the sale of the Policy. The Policy Owner should seek tax
advice based on the Policy Owner's particular circumstances from an independent
tax adviser.
TAX STATUS OF THE POLICY
In order to qualify as a life insurance contract for Federal income tax
purposes and to receive the tax treatment normally accorded life insurance
contracts under Federal tax law, a Policy must satisfy certain requirements
which are set forth in the Internal Revenue Code. Guidance as to how these
requirements are to be applied is limited, in particular, with respect to joint
and last survivor life insurance policies. Nevertheless, we believe that the
Policies should satisfy the applicable requirements. However, the rules are not
entirely clear with respect to Policies issued
12
on a substandard or guaranteed issue basis. We may take appropriate steps to
bring the Policy into compliance with applicable requirements, and we reserve
the right to restrict Policy transactions in order to do so. The insurance
proceeds payable on the death of the insured will never be less than the minimum
amount required for the Policy to be treated as life insurance under section
7702 of the Internal Revenue Code, as in effect on the date the Policy was
issued.
In some circumstances, owners of variable contracts who retain excessive
control over the investment of the underlying separate account assets may be
treated as the owners of those assets. Although published guidance in this area
does not address certain aspects of the Policies, we believe that the Owner of a
Policy should not be treated as the owner of the Separate Account assets. We
reserve the right to modify the Policies to bring them into conformity with
applicable standards should such modification be necessary to prevent Owners of
the Policies from being treated as the owners of the underlying Separate Account
assets.
In addition, the Code requires that the investments of the Separate Account
be "adequately diversified" in order for the Policies to be treated as life
insurance contracts for Federal income tax purposes. It is intended that the
Separate Account, through the Eligible Funds, will satisfy these diversification
requirements. If Eligible Fund shares are sold directly to either non-qualified
plans or to tax-qualified retirement plans that later lose their tax qualified
status, the variable account investing in the Eligible Fund may fail the
diversification requirements of Section 817(h) of the Internal Revenue Code.
This could have adverse tax consequences for variable life insurance owners,
including losing the benefit of tax deferral.
The following discussion assumes that the Policy will qualify as a life
insurance contract for Federal income tax purposes.
1. TAX TREATMENT OF POLICY BENEFITS. In general, the Company believes that
the proceeds and Cash Value increases of a Policy should be treated in a manner
consistent with a fixed-benefit life insurance policy for Federal income tax
purposes. Thus, the death benefit under the Policy should be excludable from the
gross income of the Beneficiary to the extent provided in under Section 101 of
the Code. In the case of employer-owned life insurance as defined in Section
101(j), the amount of the death benefit excludable from gross income is limited
to premiums paid unless the Policy falls within certain specified exceptions and
a notice and consent requirement is satisfied before the Policy is issued.
Certain specified exceptions are based on the status of an employee as highly
compensated or recently employed. There are also exceptions for Policy proceeds
paid to an employee's heirs. These exceptions only apply if proper notice is
given to the insured employee and consent is received from the insured employee
before the issuance of the Policy. These rules apply to Policies issued August
18, 2006 and later and also apply to policies issued before August 18, 2006
after a material increase in the death benefit or other material change. An IRS
reporting requirement applies to employer-owned life insurance subject to these
rules. Because these rules are complex and will affect the tax treatment of
death benefits, it is advisable to consult tax counsel. The death benefit will
also be taxable in the case of a transfer-for-value unless certain exceptions
apply.
Many changes or transactions involving a Policy may have tax consequences,
depending on the circumstances. Such changes include, but are not limited to,
the exchange of the Policy, a change of the Policy's Face Amount, a Policy Loan,
an additional premium payment, a Policy lapse with an outstanding Policy Loan, a
partial withdrawal, or a surrender of the Policy. The transfer of the Policy or
designation of a Beneficiary may have Federal, state, and/or local transfer and
inheritance tax consequences, including the imposition of gift, estate, and
generation-skipping transfer taxes. For example, the transfer of the Policy to,
or the designation as a Beneficiary of, or the payment of proceeds to, a person
who is assigned to a generation which is two or more generations below the
generation assignment of the Owner may have generation skipping transfer tax
consequences under Federal tax law. The individual situation of each Owner or
Beneficiary will determine the extent, if any, to which Federal, state, and
local transfer and inheritance taxes may be imposed and how ownership or receipt
of Policy proceeds will be treated for purposes of Federal, state and local
estate, inheritance, generation skipping and other taxes.
A Policy may also be used in various arrangements, including non-qualified
deferred compensation or salary continuation plans, split dollar insurance
plans, executive bonus plans, retiree medical benefit plans and others. The tax
consequences of such plans may vary depending on the particular facts and
circumstances of each individual arrangement. Therefore, if you are
contemplating the use of a Policy in any arrangement the value of which depends
in part on its tax consequences, you should be sure to consult a qualified tax
adviser regarding the tax attributes of the particular arrangement.
13
Generally, the Owner will not be deemed to be in constructive receipt of
the Policy's Cash Value, including increments thereof, under the Policy until
there is a distribution. Under a complete surrender or lapse of any Policy, if
the amount received plus the amount of outstanding Indebtedness exceeds the
total investments in the Policy, the excess will generally be treated as
ordinary income subject to tax. The tax consequences of other distributions
from, and Policy Loans taken from or secured by, a Policy depend upon whether
the Policy is classified as a "modified endowment contract".
2. MODIFIED ENDOWMENT CONTRACTS. A policy may be treated as a modified
endowment contract depending upon the amount of premiums paid in relation to the
death benefit provided under such Policy. The premium limitation rules for
determining whether a Policy is a modified endowment contract are extremely
complex. In general, however, a Policy will be a modified endowment contract if
the accumulated premiums paid at any time during the first seven Policy Years
exceed the sum of the net level premiums which would have been paid on or before
such time if the Policy provided for paid-up future benefits after the payment
of seven level annual premiums.
In addition, if a Policy is "materially changed" it may cause such Policy
to be treated as a modified endowment contract. The material change rules for
determining whether a Policy is a modified endowment contract are also extremely
complex. In general, however, the determination of whether a Policy will be a
modified endowment contract after a material change generally depends upon the
relationship among the death benefit at the time of such change, the Cash Value
at the time of the change and the additional premiums paid in the seven Policy
Years starting with the date on which the material change occurs.
Moreover, a life insurance contract received in exchange for a life
insurance contract classified as a modified endowment contract will also be
treated as a modified endowment contract. A reduction in a Policy's benefits may
also cause such Policy to become a modified endowment contract.
Accordingly, a prospective Owner should contact a competent tax adviser
before purchasing a Policy to determine the circumstances under which the Policy
would be a modified endowment contract. In addition, an Owner should contact a
competent tax adviser before paying any additional premiums or making any other
change to, including an exchange of, a Policy to determine whether such premium
or change would cause the Policy (or the new Policy in the case of an exchange)
to be treated as a modified endowment contract.
NOTE: MOST DESTINY POLICIES WERE MODIFIED ENDOWMENT CONTACTS FROM THE DATE OF
ISSUE, THEREFORE, DISTRIBUTIONS FROM MOST DESTINY POLICIES ARE TAXED AS FOLLOWS:
3. DISTRIBUTIONS FROM POLICIES CLASSIFIED AS MODIFIED ENDOWMENT
CONTRACT. Policies classified as modified endowment contracts will be subject
to the following tax rules: First, all distributions, including distributions
upon surrender, from such a Policy are treated as ordinary income subject to tax
up to the amount equal to the excess (if any) of the Cash Value immediately
before the distribution over the investment in the Policy (described below) at
such time. Second, Policy Loans taken from, or secured by, such a Policy, as
well as due but unpaid interest thereon, are treated as distributions from such
a Policy and taxed accordingly. Third, a 10 percent additional income tax is
imposed on the portion of any distribution from, or Policy Loan taken from or
secured by, such a Policy that is included in income, except where the
distribution or Policy Loan (a) is made on or after the Owner attains age
59 1/2, (b) is attributable to the Owner's becoming disabled, or (c) is part of
a series of substantially equal periodic payments for the life (or life
expectancy) of the Owner or the joint lives (or joint life expectancies) of the
Owner and the Owner's Beneficiary.
4. DISTRIBUTIONS FROM POLICIES NOT CLASSIFIED AS MODIFIED ENDOWMENT
CONTRACT. Distributions from Policies not classified as a modified endowment
contracts are generally treated as first recovering the investment in the Policy
(described below) and then, only after the return of all such investment in the
Policy, as distributing taxable income. An exception to this general rule occurs
in the case of a decrease in the Policy's death benefit (possibly including a
partial withdrawal) or any other change that reduces benefits under the Policy
in the first 15 years after the Policy is issued and that results in cash
distribution to the Owner in order for the Policy to continue complying with the
Section 7702 definitional limits. Such a cash distribution will be taxed in
whole or in part as ordinary income (to the extent of any gain in the Policy)
under rules prescribed in Section 7702.
Policy Loans from, or secured by, a Policy that is not a modified endowment
contract should generally not be treated as distributions. Instead, such loans
should generally be treated as indebtedness of the Owner. However, because the
tax consequences associated with Policy Loans are not always clear, in
particular, with respect to Policy Loans outstanding after the tenth Policy
year, you should consult a tax adviser prior to taking any Policy Loan.
14
Upon a complete surrender or lapse of a Policy that is not a modified
endowment contract, if the amount received plus the amount of indebtedness
exceeds the total investment in the Policy, the excess will generally be treated
as ordinary income subject to tax.
Neither distributions (including distributions upon surrender or lapse) nor
Policy Loans from, or secured by, a Policy that is not a modified endowment
contract are subject to the 10 percent additional income tax.
If a Policy which is not a modified endowment contract subsequently becomes
a modified endowment contract, then any distribution made from the Policy within
two years prior to the date of such change in status may become taxable.
5. POLICY LOANS. Generally, interest paid on any loan under a life
insurance Policy is not deductible. AN OWNER SHOULD CONSULT A COMPETENT TAX
ADVISER IF THE DEDUCTIBILITY OF LOAN INTEREST IS A CONSIDERATION IN THE PURCHASE
OF A POLICY. If a Policy Loan is outstanding when a Policy is canceled or
lapses, the amount of the outstanding Indebtedness will be added to the amount
distributed and will be taxed accordingly.
6. INTEREST EXPENSE ON UNRELATED INDEBTEDNESS. Under provisions added to
the Code in 1997 for policies issued after June 8, 1997, if a business taxpayer
owns or is the beneficiary of a Policy on the life of any individual who is not
an officer, director, employee, or 20 percent owner of the business, and the
taxpayer also has debt unrelated to the Policy, a portion of the taxpayer's
unrelated interest expense deductions may be lost. No business taxpayer should
purchase, exchange, or increase the death benefit under a Policy on the life of
any individual who is not an officer, director, employee, or 20 percent owner of
the business without first consulting a competent tax adviser.
7. INVESTMENT IN THE POLICY. Investment in the Policy means (i) the
aggregate amount of any premiums or other consideration paid for a Policy, minus
(ii) the aggregate amount received under the Policy which is excluded from gross
income of the Owner (except that the amount of any Policy Loan from, or secured
by, a Policy that is a modified endowment contract, to the extent such amount is
excluded from gross income, will be disregarded), plus (iii) the amount of any
Policy Loan from, or secured by, a Policy that is a modified endowment contract
to the extent that such amount is included in the gross income of the Owner.
8. MULTIPLE POLICES. All modified endowment contracts that are issued by
the Company (or its affiliates) to the same Owner during any calendar year are
treated as one modified endowment contract for purposes of determining the
amount includible in gross income under Section 72(e) of the Code.
9. LIFE INSURANCE PURCHASES BY NONRESIDENT ALIENS AND FOREIGN
CORPORATIONS. Policy Owners that are not U.S. citizens or residents will
generally be subject to U.S. Federal withholding tax on taxable distributions
from life insurance policies at a 30% rate, unless a lower treaty rate applies.
In addition, Policy Owners may be subject to state and/or municipal taxes and
taxes that may be imposed by the Policy Owner's country of citizenship or
residence.
10. WITHHOLDING. To the extent that Policy distributions are taxable, they
are generally subject to withholding for the recipient's Federal income tax
liability. Recipients can generally elect, however, not to have tax withheld
from distributions.
11. ESTATE, GIFT AND GENERATION-SKIPPING TRANSFER TAXES. The transfer of
the Policy or the designation of a beneficiary may have Federal, state, and/or
local transfer and inheritance tax consequences, including the imposition of
gift, estate, and generation-skipping transfer taxes. When the insured dies, the
death proceeds will generally be includable in the Policy Owner's estate for
purposes of the Federal estate tax if the Policy Owner was the insured. If the
Policy Owner was not the insured, the fair market value of the Policy would be
included in the Policy Owner's estate upon the Policy Owner's death. The Policy
would not be includable in the insured's estate if the insured neither retained
incidents of ownership at death nor had given up ownership within three years
before death.
Moreover, under certain circumstances, the Internal Revenue Code may impose
a "generation-skipping transfer tax" when all or part of a life insurance policy
is transferred to, or a death benefit is paid to, an individual two or more
generations younger than the Policy Owner. Regulations issued under the Internal
Revenue Code may require us to deduct the tax from your Policy, or from any
applicable payment, and pay it directly to the IRS.
Qualified tax advisers should be consulted concerning the estate and gift
tax consequences of Policy ownership and distributions under Federal, state and
local law. The individual situation of each Policy Owner or beneficiary will
determine the extent, if any, to which Federal, state, and local transfer and
inheritance taxes may be imposed and
15
how ownership or receipt of Policy proceeds will be treated for purposes of
Federal, state and local estate, inheritance, generation-skipping and other
taxes.
The Economic Growth and Tax Relief Reconciliation Act of 2001 ("EGTRRA")
repeals the Federal estate tax and replaces it with a carryover basis income tax
regime effective for estates of decedents dying after December 31, 2009. EGTRRA
also repeals the generation-skipping transfer tax, but not the gift tax, for
transfers made after December 31, 2009. EGTRRA contains a sunset provision,
which essentially returns the Federal estate, gift and generation-skipping
transfer taxes to their pre-EGTRRA form, beginning in 2011. Congress may or may
not enact permanent repeal between now and then.
During the period prior to 2010, EGTRRA provides for periodic decreases in
the maximum estate tax rate coupled with periodic increases in the estate tax
exemption. The maximum estate tax rate for 2007-2009 is 45%. The estate tax
exemption is $2,000,000 for 2006-2008 and $3,500,000 in 2009.
The complexity of the new tax law, along with uncertainty as to how it
might be modified in coming years, underscores the importance of seeking
guidance from a qualified adviser to help ensure that your estate plan
adequately addresses your needs and those of your beneficiaries under all
possible scenarios.
12. CONTINUATION OF POLICY BEYOND ATTAINED AGE 100. The tax consequences
of continuing the Policy beyond the Insured's Attained Age 100 birthday are
unclear. You should consult a tax adviser if you intend to keep the Policy in
force beyond the Insured's Attained Age 100.
13. Ownership of the Policy by a corporation, trust or other non-natural
person could jeopardize some (or all) of such entity's interest deduction under
Internal Revenue Code Section 264, even where such entity's indebtedness is in
no way connected to the Policy. In addition, under Section 264(f)(5), if a
business (other than a sole proprietorship) is directly or indirectly a
beneficiary of the Policy, the Policy could be treated as held by the business
for purposes of the Section 264(f) entity-holder rules. Therefore, it would be
advisable to consult with a qualified tax adviser before any non-natural person
is made an owner or holder of the Policy, or before a business (other than a
sole proprietorship) is made a beneficiary of the Policy.
14. GUIDANCE ON SPLIT DOLLAR PLANS. The IRS has issued guidance on split
dollar insurance plans. A tax adviser should be consulted with respect to this
guidance if your Policy is, or may become, subject to a split dollar insurance
plan. If your Policy is part of an equity split dollar arrangement taxed under
the economic benefit regime, there is a risk that some portion of the Policy
cash value may be taxed prior to any Policy distribution.
In addition, the Sarbanes-Oxley Act of 2002 (the "Act") which was signed
into law on July 30, 2002, prohibits, with exceptions, publicly-traded
companies, including non-U.S. companies that have securities listed on U.S.
exchanges, from extending, directly or indirectly or through a subsidiary, many
types of personal loans to their directors or executive officers. It is possible
that this prohibition may be interpreted to apply to split-dollar life insurance
arrangements for directors and executive officers of such companies, since such
arrangements can arguably be viewed as involving a loan from the employer for at
least some purposes.
Any affected business contemplating the payment of a premium on an existing
Policy or the purchase of new Policy in connection with a split-dollar life
insurance arrangement should consult legal counsel.
Split dollar insurance plans that provide deferred compensation may be
subject to recently enacted rules governing deferred compensation arrangements.
Failure to adhere to these rules will result in adverse tax consequences. A tax
adviser should be consulted with respect to such plans.
15. ALTERNATIVE MINIMUM TAX. There may also be an indirect tax upon the
income in the Policy or the proceeds of a Policy under the Federal corporate
alternative minimum tax, if the Owner is subject to that tax.
16. PUERTO RICO. We believe that Policies subject to Puerto Rican tax law
will generally receive treatment similar, with certain modifications, to that
described above. Among other differences, Policies governed by Puerto Rican tax
law are not currently subject to the rules described above regarding Modified
Endowment Contracts. You should consult your tax adviser with respect to Puerto
Rican tax law governing the Policies.
17. POSSIBLE TAX LAW CHANGES. Although the likelihood of legislative
changes is uncertain, there is always the possibility that the tax treatment of
the Policy could change by legislation or otherwise. Consult a tax adviser with
respect to legislative developments and their effect on the Policy.
16
18. FOREIGN TAX CREDITS. To the extent permitted under Federal tax law, we
may claim the benefit of certain foreign tax credits attributable to taxes paid
by certain Eligible Funds to foreign jurisdictions.
19. POSSIBLE CHARGE FOR TAXES. At the present time, the Company makes no
charge to the Separate Account for any Federal, state, or local taxes (as
opposed to Premium Tax Charges which are deducted from premium payments) that it
incurs which may be attributable to such Separate Account or to the Policies.
The Company, however, reserves the right in the future to make a charge for any
such tax or other economic burden resulting from the application of the tax laws
that it determines to be properly attributable to the Separate Account or to the
Policies.
MANAGEMENT
The directors and executive officers of General American Life Insurance
Company and their principal business experience are:
DIRECTORS OF GENERAL AMERICAN
<Table>
<Caption>
NAME AND PRINCIPAL BUSINESS ADDRESS PRINCIPAL BUSINESS EXPERIENCE
----------------------------------- -----------------------------
Michael K. Farrell* Director of General American since 2003 and Senior Vice
President of Metropolitan Life Insurance Company since
2002.
James L. Lipscomb** Director of General American since 2002 and Executive
Vice-President and General Counsel of Metropolitan Life
Insurance Company since 2003. Formerly, Senior Vice
President and Deputy General Counsel 2001-2003 of
Metropolitan Life.
William J. Mullaney** Director of NELICO since 2007 and President of
Institutional Business at Metropolitan Life Insurance
Company since 2007. Formerly President 2004-2007 of
Metropolitan Property and Casualty.
Stanley J. Talbi** Director of General American since 2002 and Senior Vice
President of Metropolitan Life Insurance Company since
1974.
Michael J. Vietri**** Director of NELICO since 2005 and Executive Vice President
of Metropolitan Life Insurance Company since 2005.
Formerly, Senior Vice President 1999-2004 of Metropolitan
Life Insurance Company.
Lisa M. Weber** Chairman of the Board, President and Chief Executive
Officer of General American since 2004 and President,
Individual Business of Metropolitan Life Insurance Company
since 2004; formerly, Director of General American since
2000 and Senior Executive Vice President and Chief
Administrative Officer 2001- 2004.
William J. Wheeler** Director of General American since 2002 and Executive Vice
President and Chief Financial Officer of Metropolitan Life
Insurance Company since 2003. Formerly, Senior Vice
President 1997-2003 of Metropolitan Life.
</Table>
17
EXECUTIVE OFFICERS OF GENERAL AMERICAN OTHER THAN DIRECTORS
<Table>
<Caption>
NAME AND PRINCIPAL BUSINESS ADDRESS PRINCIPAL BUSINESS EXPERIENCE
----------------------------------- -----------------------------
Joseph J. Prochaska, Jr.** Executive Vice President and Chief Accounting Officer of
NELICO since 2006 and Executive Vice President and Chief
Accounting Officer of Metropolitan Life Insurance Company
since 2006. Formerly Senior Vice President and Chief
Accounting Officer 2004-2006 of NELICO and Senior Vice
President and Chief Accounting Officer 2003-2006 of
Metropolitan Life. Senior Vice President and Controller
2000-2003 of Aon Corporation.
</Table>
---------------
The principal business address:
* Metropolitan Life, 10 Park Avenue, Morristown, NJ 07962
** Metropolitan Life, One MetLife Plaza, 27-01 Queens Plaza, North, Long
Island City, NY 11101
*** Metropolitan Life, 501 Boylston Street, Boston, MA 02116
**** Metropolitan Life, 177 South Commons Drive, Aurora, IL 60504
VOTING RIGHTS
Based on its understanding of current applicable legal requirements, the
Company will vote the shares of the Funds held in the Separate Account at
regular and special shareholder meetings of the mutual funds in accordance with
the instructions received from persons having voting interests in the
corresponding Divisions of the Separate Account. If, however, the 1940 Act or
any regulation thereunder should be amended or if the present interpretation
thereof should change, and as a result the Company determines that it is
permitted to vote shares of the Fund in its own right, it may elect to do so. No
voting privileges apply to the Policies with respect to Cash Value removed from
the Separate Account as a result of a Policy Loan.
The number of votes which an Owner has the right to instruct will be
calculated separately for each Division. Voting rights reflect the dollar value
of the total number of units of each Division of the Separate Account credited
to the Owner at the record date, rather than the number of units alone.
Fractional shares will be counted. The number of votes of the Fund which the
Owner has the right to instruct will be determined as of the date coincident
with the date established by that Fund for determining shareholders eligible.
Voting instructions will be solicited by written communications prior to such
meeting in accordance with procedures established by the mutual funds.
The company will vote shares of a Fund for which no timely instructions are
received in proportion to the voting instructions which are received with
respect to that Fund. The Company will also vote any shares of the Funds which
are not attributable to Policies in the same proportion. The effect of this
proportional voting is that a smaller number of Policy Owners may control the
outcome of a vote.
Each person having a voting interest in a Division will receive any proxy
material, reports, and other materials relating to the appropriate Fund.
DISREGARD OF VOTING INSTRUCTIONS. The Company may, when required by state
insurance regulatory authorities, disregard voting instructions if the
instructions require that the shares be voted so as to cause a change in the
subclassification or investment objective of the Fund or to approve or
disapprove an investment Advisory contract for a Fund. In addition, the Company
itself may disregard voting instructions in favor of changes initiated by an
Owner in the investment policy or the investment adviser or sub-adviser of a
Fund if the Company reasonably disapproves of such changes. A proposed change
would be disapproved only if the proposed change is contrary to state law or
prohibited by state regulatory authorities, or the Company determined that the
change would have an adverse effect on its General Account in that the proposed
investment policy for a Fund may result in overly speculative or unsound
investments. If the Company disregards voting instructions, a summary of that
action and the reasons for such action will be included in the next annual
report to Owners.
18
RESTRICTIONS ON FINANCIAL TRANSACTIONS
Applicable laws designed to counter terrorism and prevent money laundering
might, in certain circumstances, require us to reject a premium payment and/or
block or "freeze" your Policy. If these laws apply in a particular situation, we
would not be allowed to process any request for withdrawals, surrenders, loans
or death benefits, make transfers or continue making payments under your death
benefit option until instructions are received from the appropriate regulator.
We also may be required to provide additional information about you or your
Policy to government regulators.
LEGAL PROCEEDINGS
In the ordinary course of business, General American, similar to other life
insurance companies, is involved in lawsuits (including class action lawsuits),
arbitrations and other legal proceedings. Also, from time to time, state and
federal regulators or other officials conduct formal and informal examinations
or undertake other actions dealing with various aspects of the financial
services and insurance industries. In some legal proceedings involving insurers,
substantial damages have been sought and/or material settlement payments have
been made. In addition, in May 2004, General American received a Wells Notice
stating that the SEC staff was considering recommending that the SEC bring a
civil action alleging violations of the U.S. securities laws against General
American with respect to market timing and late trading in a limited number of
privately-placed variable insurance contracts that were sold through General
American. General American responded to the SEC staff and cooperated with the
investigation. On August 9, 2007, the SEC announced that it had settled an
enforcement action regarding late trading against General American with, among
other things, General American agreeing to pay a civil penalty and to comply
with certain undertakings. General American consented to the SEC's order without
admitting or denying the findings. It is not possible to predict with certainty
the ultimate outcome of any pending legal proceeding or regulatory action.
However, General American does not believe any such action or proceeding will
have a material adverse effect upon the Separate Account or upon the ability of
MetLife Investors Distribution Company to perform its contract with the Separate
Account or of General American to meet its obligations under the Contracts.
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The financial statements of each of the Divisions of General American
Separate Account Eleven included in this Prospectus Supplement have been audited
by Deloitte & Touche LLP, an independent registered public accounting firm, as
stated in their report appearing herein, and are included in reliance upon the
report of such firm given upon their authority as experts in accounting and
auditing. The principal address of Deloitte & Touche LLP is 201 East Kennedy
Boulevard, Suite 1200, Tampa, Florida 33602-5827.
The consolidated financial statements of General American Life Insurance
Company (the "Company") included in this Prospectus Supplement have been audited
by Deloitte & Touche LLP, an independent registered public accounting firm, as
stated in their report appearing herein (which report expresses an unqualified
opinion and includes an explanatory paragraph referring to the fact that the
Company changed its method of accounting for deferred acquisition costs, and for
income taxes, as required by accounting guidance adopted on January 1, 2007, and
changed its method of accounting for defined benefit pension and other
postretirement plans, as required by accounting guidance adopted on December 31,
2006), and are included in reliance upon the report of such firm given upon
their authority as experts in accounting and auditing. The principal address of
Deloitte & Touche LLP is 201 East Kennedy Boulevard, Suite 1200, Tampa, Florida
33602-5827.
FINANCIAL STATEMENTS
The financial statements of General American which are included in this
prospectus supplement should be distinguished from the financial statements of
the Separate Account, which are also included in this prospectus supplement, and
should be considered only as bearing on the ability of General American to meet
its obligations under the Policy. They should not be considered as bearing on
the investment performance of the assets held in the Separate Account.
19
FLEXIBLE LIFE VUL 98/00
GENERAL AMERICAN LIFE INSURANCE COMPANY
---------------------------------------
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
VARIABLE LIFE INSURANCE POLICY
(DESTINY)
SUPPLEMENT TO THE PROSPECTUS DATED MAY 1, 2004 (AS SUPPLEMENTED)
FLEXIBLE PREMIUM
VARIABLE LIFE INSURANCE POLICIES
(VARIABLE UNIVERSAL LIFE/EXECUTIVE BENEFIT)
FLEXIBLE PREMIUM JOINT AND LAST SURVIVOR
VARIABLE LIFE INSURANCE POLICY
SUPPLEMENT TO THE PROSPECTUSES DATED MAY 1, 2002 (AS SUPPLEMENTED)
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICIES
(VUL 95/VUL 100/VGSP/RUSSELL VUL)
SUPPLEMENT TO THE PROSPECTUSES DATED MAY 1, 2000 (AS SUPPLEMENTED)
AMERICAN VISION SERIES VUL 2002
SUPPLEMENT TO THE PROSPECTUS DATED APRIL 30, 2007
DECEMBER 27, 2007
General American Life Insurance Company (the "Company") has filed an application
with the Securities and Exchange Commission ("SEC") requesting an order to allow
the Company to remove certain variable investment options ("Existing Funds") and
substitute new options ("Replacement Funds") as shown below. The Replacement
Funds are portfolios of the Met Investors Series Trust. To the extent that a
Replacement Fund is not currently available as an investment option under your
Policy, such Replacement Fund will be added as an investment option on or before
the date of the substitution. Please retain this supplement and keep it with the
prospectus.
To the extent required by law, approval of the proposed substitution is being
obtained from the state insurance regulators in certain jurisdictions.
The Company believes that the proposed substitutions are in the best interest of
Policy owners. In each case, the Replacement Fund will have at least similar
investment objectives and policies as the Existing Fund. The Company will bear
all expenses related to the substitutions, and they will have no tax
consequences for you. The Company anticipates that, if such order is granted,
the proposed substitutions will occur on or about April 28, 2008.
The proposed substitutions and respective advisers and/or sub-advisers for the
above-listed Policies are:
1
EXISTING FUND AND CURRENT ADVISER (WITH CURRENT
SUB-ADVISER AS NOTED) REPLACEMENT FUND AND SUB-ADVISER
----------------------------------------------------- ------------------------------------------
Fidelity(R) Variable Insurance Products - VIP Growth Met Investors Series Trust - Oppenheimer
Portfolio (Initial Class) Capital Appreciation Portfolio (Class A)
Fidelity Management & Research Company OppenheimerFunds, Inc.
(Fidelity International Investment Advisers, Fidelity
International Investment Advisors (UK) Limited,
Fidelity Management & Research (U.K.) Inc., Fidelity
Research & Analysis Company, FMR Co., Inc. and
Fidelity Investments Japan Limited)
----------------------------------------------------- ------------------------------------------
----------------------------------------------------- ------------------------------------------
Fidelity(R) Variable Insurance Products - VIP Overseas Met Investors Series Trust - MFS(R) Research
Portfolio (Initial Class) International Portfolio (Class A)
Fidelity Management & Research Company Massachusetts Financial Services Company
(Fidelity International Investment Advisers, Fidelity
International Investment Advisors (UK) Limited,
Fidelity Management & Research (U.K.) Inc., Fidelity
Research & Analysis Company, FMR Co., Inc. and
Fidelity Investments Japan Limited)
----------------------------------------------------- ------------------------------------------
Please note that:
o No action is required on your part at this time. You will not need to
file a new election or take any immediate action if the SEC approves the
substitution.
o The elections you have on file for allocating your cash value, premium
payments and deductions will be redirected to the Replacement Fund
unless you change your elections and transfer your funds before the
substitution takes place.
o You may transfer amounts in your Policy among the variable investment
options and the fixed option as usual. The substitution itself will not
be treated as a transfer for purposes of the transfer provisions of your
Policy, subject to the Company's restrictions on transfers to prevent or
limit "market timing" activities by Policy owners or agents of Policy
owners.
o If you make one transfer from one of the above Existing Funds into one
or more other subaccounts before the substitution, or from the
Replacement Fund after the substitution, any transfer charge that might
otherwise be imposed will be waived from the date of this Notice through
the date that is 30 days after the substitution.
o On the effective date of the substitution, your cash value in the
variable investment option will be the same as before the substitution.
However, the number of units you receive in the Replacement Fund will be
different from the number of units in your Existing Fund, due to the
difference in unit values.
o There will be no tax consequences to you.
In connection with the substitutions, we will send you a prospectus for Met
Investors Series Trust, as well as notice of the actual date of the
substitutions and confirmation of transfers.
Please contact your registered representative if you have any questions.
THIS SUPPLEMENT SHOULD BE READ AND RETAINED FOR FUTURE REFERENCE.
2
GENERAL AMERICAN LIFE INSURANCE COMPANY
Variable Life Insurance Policy
(Destiny)
Supplement dated April 30, 2007
to the Prospectus dated May 1, 2004
Flexible Premium
Variable Life Insurance Policies
(Variable Universal Life/Executive Benefit)
Supplement dated April 30, 2007
to the Prospectuses dated May 1, 2002
Flexible Premium Joint and Last Survivor
Variable Life Insurance Policy
Supplement dated April 30, 2007
to the Prospectus dated May 1, 2002
Flexible Premium Variable Life Insurance Policies
(VUL 95/VUL 100/VGSP/Russell VUL)
Supplement dated April 30, 2007
to the Prospectuses dated May 1, 2000
This supplement updates certain information contained in the last full
prospectus for each of the above-referenced variable life insurance policies, as
annually and periodically supplemented. You should read and retain this
supplement. We will send you an additional copy of the last full prospectus for
your policy, without charge, on request. These policies are no longer available
for sale.
General American Life Insurance Company is an indirect wholly-owned
subsidiary of Metropolitan Life Insurance Company ("MetLife"). MetLife is a
wholly-owned subsidiary of MetLife, Inc., a publicly-traded company. General
American's Home Office is 13045 Tesson Ferry Road, St. Louis, Missouri 63128.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE POLICIES OR DETERMINED IF THIS
SUPPLEMENT IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE SECURITIES AND EXCHANGE COMMISSION MAINTAINS A WEB SITE THAT CONTAINS
MATERIAL INCORPORATED BY REFERENCE AND OTHER INFORMATION REGARDING REGISTRANTS
THAT FILE ELECTRONICALLY WITH THE SECURITIES AND EXCHANGE COMMISSION. THE
ADDRESS OF THE SITE IS HTTP://WWW.SEC.GOV.
THE UNDERLYING FUND PROSPECTUSES ARE ATTACHED. INCLUDED ARE PROSPECTUSES
FOR THE RUSSELL INVESTMENT FUNDS, WHICH MAY NOT BE AVAILABLE UNDER YOUR POLICY.
PLEASE READ THE PROSPECTUSES CAREFULLY AND KEEP THEM FOR REFERENCE.
WE DO NOT GUARANTEE HOW ANY OF THE DIVISIONS OR FUNDS WILL PERFORM. THE
POLICIES AND THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY FINANCIAL INSTITUTION AND ARE NOT FEDERALLY INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER
GOVERNMENT AGENCY.
YOUR PRIVACY NOTICE IS AT THE BACK OF THIS BOOK
AND IS NOT PART OF THE PROSPECTUS
THE COMPANY
General American is principally engaged in writing individual life
insurance policies and annuity contracts. It is admitted to do business in 49
states, the District of Columbia, Puerto Rico, and in ten Canadian provinces.
The principal offices (Home Office) of General American are located at 13045
Tesson Ferry Road, St. Louis, Missouri 63128. The Administrative Office for
various Policy transactions is as follows:
<Table>
Premium Payments General American
P.O. Box 790201
St. Louis, MO 63179-0201
Payment Inquires and General American
Correspondence Remittance Processing
18210 Crane Nest Drive
Tampa, FL 33647
(800) 638-9294
Beneficiary and Ownership General American
Changes P. O. Box 990059
Hartford, CT 06199-0059
Surrenders, Loans, General American
Withdrawals and P.O. Box 990090
Division Transfers Hartford, CT 06199-0090
Death Claims General American
P.O. Box 990090
Hartford, CT 06199-0090
All Telephone (800) 638-9294
Transactions and Inquiries
</Table>
You may request an account transfer or reallocation of future premiums by
written request (which may be telecopied) to our Administrative Office, by
telephoning us, or over the Internet. To request a transfer or reallocation by
telephone, you should contact your registered representative, or contact us at
(800) 638-9294. To request a transfer or reallocation over the Internet, you may
log on to our website at www.genamerica.com. We use reasonable procedures to
confirm that instructions communicated by telephone, facsimile or Internet are
genuine. Any telephone, facsimile or Internet instructions that we reasonably
believe to be genuine will be your responsibility, including losses arising from
any errors in the communication of instructions. However, because telephone and
Internet transactions may be available to anyone who provides certain
information about you and your Policy, you should protect that information. We
may not be able to verify that you are the person providing telephone or
Internet instructions, or that you have authorized any such person to act for
you.
Telephone, facsimile, and computer systems (including the Internet) may not
always be available. Any telephone, facsimile, or computer system, whether it is
yours, your service provider's, your registered representative's, or ours, can
experience outages or slowdowns for a variety of reasons. These outages or
slowdowns may delay or prevent our processing of your request. Although we have
taken precautions to help our systems handle heavy use, we cannot promise
complete reliability under all circumstances. If you are experiencing problems,
you should make your request by writing to our Administrative Office.
THE SEPARATE ACCOUNT. The separate account consists of divisions, each of
which corresponds to an underlying Fund. Each division may either make money or
lose money. Therefore if you invest in a division of the separate account, you
may either make money or lose money, depending on the investment experience of
that division. There is no guaranteed rate of return in the separate account.
The following chart shows the Funds that are available under the policy
along with the name of the investment adviser, sub-adviser (where applicable)
and investment objective of each Fund. The Funds have different investment goals
and strategies. You should review the prospectus of each Fund, or seek
professional guidance in determining which Fund(s) best meet your objectives.
2
NOTE: THE RUSSELL INVESTMENT FUNDS ARE NOT AVAILABLE TO DESTINY OR EXECUTIVE
BENEFIT POLICIES. FOR ALL OTHER POLICIES, THE RUSSELL INVESTMENT FUNDS ARE ONLY
AVAILABLE FOR POLICIES WITH AN ISSUE DATE PRIOR TO JANUARY 1, 2000.
AMERICAN FUNDS INSURANCE SERIES ADVISER: CAPITAL RESEARCH AND MANAGEMENT
COMPANY
<Table>
<Caption>
FUND SUB-ADVISER INVESTMENT OBJECTIVE
---- ----------- --------------------
American Funds Global N/A Capital appreciation through stocks.
Small Capitalization
Fund
American Funds Growth N/A Capital appreciation through stocks.
Fund
American Funds Growth- N/A Capital appreciation and income.
Income Fund
</Table>
FIDELITY(R) VARIABLE INSURANCE
PRODUCTS ADVISER: FIDELITY MANAGEMENT & RESEARCH COMPANY
<Table>
<Caption>
FUND SUB-ADVISER INVESTMENT OBJECTIVE
---- ----------- --------------------
VIP Equity-Income Reasonable income. The fund will also
Portfolio consider the potential for capital
appreciation. The fund's goal is to achieve
a yield which exceeds the composite yield of
securities comprising the Standard & Poor's
500(SM) Index (S&P 500(R)).
VIP Growth Portfolio Capital appreciation.
VIP Mid Cap Portfolio Long-term growth of capital.
VIP Overseas Portfolio Long-term growth of capital.
</Table>
J.P. MORGAN SERIES TRUST II ADVISER: J.P. MORGAN INVESTMENT MANAGEMENT INC.
<Table>
<Caption>
FUND SUB-ADVISER INVESTMENT OBJECTIVE
---- ----------- --------------------
JPMorgan Bond N/A To provide high total return consistent with
Portfolio moderate risk of capital and maintenance of
liquidity.
JPMorgan Small Company N/A To provide high total return from a
Portfolio portfolio of small company stocks.
</Table>
MET INVESTORS SERIES TRUST ADVISER: MET INVESTORS ADVISORY LLC
<Table>
<Caption>
FUND SUB-ADVISER INVESTMENT OBJECTIVE
---- ----------- --------------------
Harris Oakmark Harris Associates L.P. Long-term capital appreciation.
International
Portfolio
Lazard Mid-Cap Lazard Asset Long-term growth of capital.
Portfolio Management, LLC
Legg Mason Partners ClearBridge Advisors, Capital appreciation.
Aggressive Growth LLC
Portfolio (formerly
Legg Mason Aggressive
Growth Portfolio)
Lord Abbett Bond Lord, Abbett & Co. LLC To provide high current income and the
Debenture Portfolio opportunity for capital appreciation to
produce a high total return.
Lord Abbett Growth and Lord, Abbett & Co. LLC Long-term growth of capital and income
Income Portfolio without excessive fluctuation in market
value.
</Table>
3
<Table>
<Caption>
FUND SUB-ADVISER INVESTMENT OBJECTIVE
---- ----------- --------------------
Lord Abbett Mid-Cap Lord, Abbett & Co. LLC Capital appreciation through investments,
Value Portfolio primarily in equity securities, which are
believed to be undervalued in the
marketplace.
Met/AIM Small Cap A I M Capital Long-term growth of capital.
Growth Portfolio Management, Inc.
MFS Research Massachusetts Capital appreciation
International Financial Services
Portfolio Company
Neuberger Berman Real Neuberger Berman Total return through investment in real
Estate Portfolio Management Inc. estate securities, emphasizing both capital
appreciation and current income.
PIMCO Total Return Pacific Investment Maximum total return, consistent with the
Portfolio Management Company LLC preservation of capital and prudent
investment management.
RCM Technology RCM Capital Management Capital appreciation; no consideration is
Portfolio (formerly LLC given to income.
RCM Global Technology
Portfolio)
T. Rowe Price Mid-Cap T. Rowe Price Long-term growth of capital.
Growth Portfolio Associates, Inc.
</Table>
METROPOLITAN SERIES FUND, INC. ADVISER: METLIFE ADVISERS, LLC
<Table>
<Caption>
FUND SUB-ADVISER INVESTMENT OBJECTIVE
---- ----------- --------------------
BlackRock Aggressive BlackRock Advisors, Maximum capital appreciation.
Growth Portfolio LLC
BlackRock Bond Income BlackRock Advisors, A competitive total return primarily from
Portfolio LLC investing in fixed-income securities.
BlackRock Diversified BlackRock Advisors, High total return while attempting to limit
Portfolio LLC investment risk and preserve capital.
BlackRock Large Cap BlackRock Advisors, Long-term growth of capital.
Value Portfolio LLC
BlackRock Legacy Large BlackRock Advisors, Long-term growth of capital.
Cap Growth Portfolio LLC
BlackRock Money Market BlackRock Advisors, A high level of current income consistent
Portfolio(1) LLC with preservation of capital.
BlackRock Strategic BlackRock Advisors, High total return, consisting principally of
Value Portfolio LLC capital appreciation.
Davis Venture Value Davis Selected Growth of capital.
Portfolio Advisers, L.P.(3)
FI International Stock Fidelity Management & Long-term growth of capital.
Portfolio Research Company
FI Mid Cap Fidelity Management & Long-term growth of capital.
Opportunities Research Company
Portfolio
Harris Oakmark Focused Harris Associates L.P. Long-term capital appreciation.
Value Portfolio
Harris Oakmark Large Harris Associates L.P. Long-term capital appreciation.
Cap Value Portfolio
</Table>
4
<Table>
<Caption>
FUND SUB-ADVISER INVESTMENT OBJECTIVE
---- ----------- --------------------
Lehman Brothers(R) MetLife Investment To equal the performance of the Lehman
Aggregate Bond Index Advisors Company, Brothers Aggregate Bond Index.
Portfolio LLC(3)
MetLife Mid Cap Stock MetLife Investment To equal the performance of the Standard &
Index Portfolio Advisors Company, Poor's Mid Cap 400 Composite Stock Price
LLC(3) Index.
MetLife Stock Index MetLife Investment To equal the performance of the Standard &
Portfolio Advisors Company, Poor's 500 Composite Stock Price Index.
LLC(3)
MFS Total Return Massachusetts Favorable total return through investment in
Portfolio Financial Services a diversified portfolio.
Company
Morgan Stanley EAFE(R) MetLife Investment To equal the performance of the MSCI EAFE
Index Portfolio Advisors Company, Index.
LLC(3)
Neuberger Berman Mid Neuberger Berman Capital growth.
Cap Value Portfolio Management Inc.
Russell 2000(R) Index MetLife Investment To equal the return of the Russell 2000
Portfolio Advisors Company, Index.
LLC(3)
T. Rowe Price Large T. Rowe Price Long-term growth of capital, and
Cap Growth Portfolio Associates, Inc. secondarily, dividend income.
T. Rowe Price Small T. Rowe Price Long-term capital growth.
Cap Growth Portfolio Associates, Inc.
Western Asset Western Asset To maximize total return consistent with
Management U.S. Management Company preservation of capital and maintenance of
Government Portfolio liquidity.
</Table>
RUSSELL INVESTMENT FUNDS ADVISER: FRANK RUSSELL INVESTMENT
MANAGEMENT COMPANY
<Table>
<Caption>
FUND SUB-ADVISER INVESTMENT OBJECTIVE
---- ----------- --------------------
Aggressive Equity Fund Multiple sub-advisers To provide long term capital growth.
Core Bond Fund Multiple sub-advisers To provide current income and the
preservation of capital.
Multi-Style Equity Multiple sub-advisers To provide long-term capital growth.
Fund
Non-U.S. Fund Multiple sub-advisers To provide long-term capital growth.
</Table>
VAN ECK WORLDWIDE INSURANCE TRUST ADVISER: VAN ECK ASSOCIATES CORPORATION
<Table>
<Caption>
FUND SUB-ADVISER INVESTMENT OBJECTIVE
---- ----------- --------------------
Worldwide Emerging N/A Long-term capital appreciation by investing
Markets Fund primarily in equity securities in emerging
markets around the world.
Worldwide Hard Assets N/A Long-term capital appreciation by investing
Fund primarily in "hard asset securities." Hard
asset securities are the stocks and bonds
and other securities of companies that
derive at least 50% of gross revenue or
profit from the exploration, development,
production or distribution of precious
metals, natural resources, real estate and
commodities. Income is a secondary
consideration.
</Table>
5
---------------
(1) An investment in the BlackRock Money Market Portfolio is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. Although the Portfolio seeks to preserve the value of
your investment at $100 per share, it is possible to lose money by investing
in the Portfolio. During extended periods of low interest rates, the yields
of the Division investing in the Money Market Portfolio may become extremely
low and possibly negative.
(2) Davis Selected Advisers, L.P. may also delegate any of its responsibilities
to Davis Selected Advisers--NY, Inc., a wholly-owned subsidiary.
(3) Prior to April 30, 2007, Metropolitan Life Insurance Company was the
sub-adviser to this Portfolio.
FOR MORE INFORMATION REGARDING THE FUNDS AND THEIR INVESTMENT ADVISERS AND
SUB-ADVISERS, SEE THE FUND PROSPECTUSES ATTACHED AND THEIR STATEMENTS OF
ADDITIONAL INFORMATION.
OTHER FUNDS AND SHARE CLASSES
The Russell Investment Funds may not be available under your Policy, even
though they are described in the attached Fund prospectuses. The Real Estate
Securities Fund described in the Russell Investment Funds prospectus is not
available under any Policy.
Some of the Funds offer various classes of shares, each of which has a
different level of expenses. The prospectuses for the Funds may provide
information for share classes that are not available through the Policy. When
you consult the prospectus for any Fund, you should be careful to refer to only
the information regarding the class of shares that is available through the
Policy. For Fidelity Variable Insurance Products and the Van Eck Worldwide
Insurance Trust, we offer Initial Class shares; for the Metropolitan Series
Fund, Inc., we offer Class A shares; for the Met Investors Series Trust, we
offer Class A shares; and for the American Funds Insurance Series, we offer
Class 2 shares.
6
CHARGES AND DEDUCTIONS
The following table describes the annual operating expenses for each Fund
for the year ended December 31, 2006, before and after any applicable
contractual fee waivers and expense reimbursements:
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
<Table>
<Caption>
FEE
GROSS WAIVERS
TOTAL AND NET TOTAL
MANAGEMENT OTHER 12B-1 ANNUAL EXPENSE ANNUAL
FEES EXPENSES FEES EXPENSES REIMBURSEMENTS EXPENSES(1)
---------- -------- ----- -------- -------------- -----------
AMERICAN FUNDS INSURANCE SERIES
(CLASS 2 SHARES)
American Funds Global Small
Capitalization Fund.................... .72% .05% .25% 1.02% .00% 1.02%
American Funds Growth Fund............... .32% .02% .25% .59% .00% .59%
American Funds Growth-Income Fund........ .27% .01% .25% .53% .00% .53%
FIDELITY(R) VARIABLE INSURANCE PRODUCTS
(INITIAL CLASS SHARES)
VIP Equity-Income Portfolio.............. .47% .10% .00% .57% .00% .57%
VIP Growth Portfolio..................... .57% .11% .00% .68% .00% .68%
VIP Mid Cap Portfolio.................... .57% .11% .00% .68% .00% .68%
VIP Overseas Portfolio................... .72% .16% .00% .88% .00% .88%
J.P. MORGAN SERIES TRUST II
JPMorgan Bond Portfolio.................. .30% .46% .00% .76% .00% .76%(2)
JPMorgan Small Company Portfolio......... .60% .56% .00% 1.16% .00% 1.16%(2)
MET INVESTORS SERIES TRUST (3)
(CLASS A SHARES)
Harris Oakmark International Portfolio... .78% .13% .00% .91% .00% .91%
Lazard Mid-Cap Portfolio................. .70% .06% .00% .76% .00% .76%
Legg Mason Partners Aggressive Growth
Portfolio.............................. .63% .09% .00% .72% .00% .72%(4)
Lord Abbett Bond Debenture Portfolio..... .50% .04% .00% .54% .00% .54%
Lord Abbett Growth and Income
Portfolio.............................. .50% .03% .00% .53% .00% .53%
Lord Abbett Mid-Cap Value Portfolio...... .68% .07% .00% .75% .00% .75%
Met/AIM Small Cap Growth Portfolio....... .87% .06% .00% .93% .00% .93%(4)
MFS Research International Portfolio..... .72% .14% .00% .86% .00% .86%
Neuberger Berman Real Estate Portfolio... .64% .04% .00% .68% .00% .68%
PIMCO Total Return Portfolio............. .50% .05% .00% .55% .00% .55%
RCM Technology Portfolio................. .88% .14% .00% 1.02% .00% 1.02%(4,5)
T. Rowe Price Mid-Cap Growth Portfolio... .75% .04% .00% .79% .00% .79%
METROPOLITAN SERIES FUND, INC.
(CLASS A SHARES)(6)
BlackRock Aggressive Growth Portfolio.... .72% .06% .00% .78% .00% .78%
BlackRock Bond Income Portfolio.......... .39% .07% .00% .46% .01% .45%(7)
BlackRock Diversified Portfolio.......... .44% .07% .00% .51% .00% .51%
BlackRock Large Cap Value Portfolio...... .70% .11% .00% .81% .00% .81%(8)
BlackRock Legacy Large Cap Growth
Portfolio.............................. .73% .07% .00% .80% .00% .80%
BlackRock Money Market Portfolio......... .34% .04% .00% .38% .01% .37%(9)
BlackRock Strategic Value Portfolio...... .82% .06% .00% .88% .00% .88%
</Table>
7
<Table>
<Caption>
FEE
GROSS WAIVERS
TOTAL AND NET TOTAL
MANAGEMENT OTHER 12B-1 ANNUAL EXPENSE ANNUAL
FEES EXPENSES FEES EXPENSES REIMBURSEMENTS EXPENSES(1)
---------- -------- ----- -------- -------------- -----------
Davis Venture Value Portfolio............ .71% .04% .00% .75% .00% .75%
FI International Stock Portfolio......... .85% .13% .00% .98% .00% .98%
FI Mid Cap Opportunities Portfolio....... .68% .06% .00% .74% .00% .74%
Harris Oakmark Focused Value Portfolio... .72% .05% .00% .77% .00% .77%
Harris Oakmark Large Cap Value
Portfolio.............................. .72% .06% .00% .78% .00% .78%
Lehman Brothers Aggregate Bond Index
Portfolio.............................. .25% .06% .00% .31% .01% .30%(10)
MetLife Mid Cap Stock Index Portfolio.... .25% .08% .00% .33% .01% .32%(2,11)
MetLife Stock Index Portfolio............ .25% .05% .00% .30% .01% .29%(11)
MFS Total Return Portfolio............... .53% .05% .00% .58% .00% .58%(12)
Morgan Stanley EAFE Index Portfolio...... .30% .15% .00% .45% .01% .44%(13,14)
Neuberger Berman Mid Cap Value
Portfolio.............................. .65% .06% .00% .71% .00% .71%(12)
Russell 2000 Index Portfolio............. .25% .11% .00% .36% .01% .35%(11,14)
T. Rowe Price Large Cap Growth
Portfolio.............................. .60% .08% .00% .68% .00% .68%
T. Rowe Price Small Cap Growth
Portfolio.............................. .51% .07% .00% .58% .00% .58%
Western Asset Management U.S. Government
Portfolio.............................. .50% .07% .00% .57% .00% .57%
RUSSELL INVESTMENT FUNDS
Aggressive Equity Fund................... .95% .17% .00% 1.12% .06% 1.06%(2,15)
Core Bond Fund........................... .60% .13% .00% .73% .01% .72%(14,16)
Multi-Style Equity Fund.................. .78% .10% .00% .88% .00% .88%(2,17)
Non-U.S. Fund............................ .95% .27% .00% 1.22% .06% 1.16%(2,18)
VAN ECK WORLDWIDE INSURANCE TRUST
(INITIAL CLASS SHARES)
Worldwide Emerging Markets Fund.......... 1.00% .33% .00% 1.33% .00% 1.33%
Worldwide Hard Assets Fund............... 1.00% .13% .00% 1.13% .00% 1.13%
</Table>
---------------
(1) Net Total Annual Expenses do not reflect any voluntary waivers of fees and
expenses, or any expense reductions resulting from directed brokerage
arrangements.
(2) Other Expenses include 0.01% of "Acquired Fund Fees and Expenses," which
are fees and expenses attributable to underlying portfolios in which the
Portfolio invested during the preceding fiscal year.
(3) Other Expenses have been restated to reflect new custodian, fund
administration and transfer agent fee schedules, as if these fee schedules
had been in effect for the previous fiscal year.
(4) The Management Fee has been restated to reflect an amended management fee
agreement, as if the agreement had been in effect during the previous
fiscal year.
(5) Other Expenses reflect the repayment of fees previously waived or expenses
previously paid by the Investment Adviser, under the terms of prior expense
limitation agreements, in the amount of 0.04%.
(6) Other Expenses have been restated to reflect current fees, as if current
fees had been in effect for the previous fiscal year.
(7) MetLife Advisers, LLC has contractually agreed, for the period May 1, 2007
through April 30, 2008, to reduce the Management Fee to the annual rate of
0.325% for amounts over $1 billion but less than $2 billion.
(8) Other Expenses reflect the repayment of expenses previously paid by the
Investment Adviser, under the terms of prior expense limitation agreements,
in the amount of 0.02%.
8
(9) MetLife Advisers, LLC has contractually agreed, for the period May 1, 2007
through April 30, 2008, to reduce the Management Fee to the annual rate of
0.345% for the first $500 million of the Portfolio's average daily net
assets and 0.335% for the next $500 million.
(10) MetLife Advisers, LLC has contractually agreed, for the period May 1, 2007
through April 30, 2008, to reduce the Management Fee of the Portfolio to
0.244%.
(11) MetLife Advisers, LLC has contractually agreed, for the period May 1, 2007
through April 30, 2008, to reduce the Management Fee of the Portfolio to
0.243%.
(12) The Management Fee has been restated to reflect current fees, as if current
fees had been in effect during the previous fiscal year.
(13) MetLife Advisers, LLC has contractually agreed, for the period May 1, 2007
through April 30, 2008, to reduce the Management Fee of the Portfolio to
0.293%.
(14) Other Expenses include 0.02% of "Acquired Fund Fees and Expenses," which
are fees and expenses attributable to underlying portfolios in which the
Portfolio invested during the preceding fiscal year.
(15) The Fund's Manager has contractually agreed to waive, at least until April
30, 2008, a portion of its management fee, up to the full amount of that
fee, and to then reimburse the Fund for all remaining expenses, after fee
waivers, in order to prevent total operating expenses, excluding "Acquired
Fund Fees and Expenses," from exceeding 1.05% of the Fund's average daily
net assets on an annual basis.
(16) The Fund's Manager has contractually agreed to waive, at least until April
30, 2008, a portion of its management fee, up to the full amount of that
fee, and to then reimburse the Fund for all remaining expenses, after fee
waivers, in order to prevent total operating expenses, excluding "Acquired
Fund Fees and Expenses," from exceeding 0.70% of the Fund's average daily
net assets on an annual basis.
(17) The Fund's Manager has contractually agreed to waive, at least until April
30, 2008, a portion of its management fee, up to the full amount of that
fee, and to then reimburse the Fund for all remaining expenses, after fee
waivers, in order to prevent total operating expenses, excluding "Acquired
Fund Fees and Expenses," from exceeding 0.87% of the Fund's average daily
net assets on an annual basis.
(18) The Fund's Manager has contractually agreed to waive, at least until April
30, 2008, a portion of its management fee, up to the full amount of that
fee, and to then reimburse the Fund for all remaining expenses, after fee
waivers, in order to prevent total operating expenses, excluding "Acquired
Fund Fees and Expenses," from exceeding 1.15% of the Fund's average daily
net assets on an annual basis.
CERTAIN PAYMENTS WE RECEIVE WITH REGARD TO THE FUNDS
An investment adviser (other than our affiliate, MetLife Advisers, LLC and
Met Investors Advisory LLC) or sub-adviser or its affiliates may make payments
to us and/or certain affiliates. These payments may be used for a variety of
purposes, including payment for expenses for certain administrative, marketing
and support services with respect to the Policies and, in our role as
intermediary, with respect to the Funds. We and our affiliates may profit from
these payments. These payments may be derived, in whole or in part, from the
advisory fee deducted from Portfolio assets. Policy owners, through their
indirect investment in the Portfolios, bear the costs of these advisory fees
(see the Fund prospectuses for more information). The amount of the payments we
receive is based on a percentage of assets of the Fund attributable to the
Policies and certain other variable insurance products that we and our
affiliates issue. These percentages differ and some advisers or sub-advisers (or
other affiliates) may pay us more than others. These percentages currently range
up to 0.50%. Additionally, an investment adviser or sub-adviser of a Fund or its
affiliates may provide us with wholesaling services that assist in the
distribution of the Policies and may pay us and/or certain affiliates amounts to
participate in sales meetings. These amounts may be significant and may provide
the adviser or sub-adviser (or other affiliate) with increased access to persons
involved in the distribution of the Policies.
We and certain of our affiliated insurance companies have joint ownership
interests in our affiliated investment advisers, MetLife Advisers, LLC and Met
Investors Advisory LLC, which are organized as limited liability companies. Our
owner interests in MetLife Advisers, LLC and Met Investors Advisory LLC entitle
us to profit distributions if the adviser makes a profit with respect to the
management fees it receives from a Fund. We will benefit accordingly from
9
assets allocated to the Funds to the extent they result in profits to the
advisers. (See "Charges and Deductions -- Annual Fund Operating Expenses" for
information on the management fees paid to the advisers and the Statement of
Additional Information for the Funds for information on the management fees paid
by the adviser to sub-advisers.)
The American Funds Global Small Capitalization Fund, the American Funds
Growth Fund and the American Funds Growth-Income Fund have adopted a
Distribution Plan under Rule 12b-1 of the Investment Company Act of 1940. A
Fund's 12b-1 Plan, if any, is described in more detail in each Fund's
prospectus. (See also "Charges and Deductions -- Annual Fund Operating
Expenses.") Any payments we receive pursuant to a Fund's 12b-1 Plan are paid to
us or our Distributor. Payments under a Fund's 12b-1 Plan decrease the Fund's
investment return.
We pay American Funds Distributors, Inc., principal underwriter for the
American Funds Insurance Series, a percentage of all premiums allocated to the
American Funds Global Small Capitalization Fund, the American Funds Growth Fund
and the American Funds Growth-Income Fund for the services it provides in
marketing the Funds' shares in connection with the Policies.
SELECTION OF THE FUNDS
We select the Funds offered through the Policy based on several criteria,
including asset class coverage, the strength of the adviser's or sub-adviser's
reputation and tenure, brand recognition, performance, and the capability and
qualification of each investment firm. Another factor we consider during the
selection process is whether the Fund's adviser or sub-adviser is one of our
affiliates or whether the Fund, its adviser, its sub-adviser(s), or an affiliate
will make payments to us or our affiliates. For additional information on these
arrangements, see "Certain Payments We Receive with Regard to the Funds" above.
In this regard, the profit distributions we receive from our affiliated
investment advisers are a component of the total revenue that we consider in
configuring the features and investment choices available in the variable
insurance products that we and our affiliated insurance companies issue. Since
we and our affiliated insurance companies may benefit more from the allocation
of assets to portfolios advised by our affiliates than those that are not, we
may be more inclined to offer portfolios advised by our affiliates in the
variable insurance products we issue. We review the Funds periodically and may
remove a Fund or limit its availability to new premium payments and/or transfers
of cash value if we determine that the Fund no longer meets one or more of the
selection criteria, and/or if the Fund has not attracted significant allocations
from Policy Owners.
WE DO NOT PROVIDE INVESTMENT ADVICE AND DO NOT RECOMMEND OR ENDORSE ANY
PARTICULAR FUND. YOU BEAR THE RISK OF ANY DECLINE IN THE CASH VALUE OF YOUR
POLICY RESULTING FROM THE PERFORMANCE OF THE FUNDS YOU HAVE CHOSEN.
POLICY RIGHTS
TRANSFERS
Frequent requests from Policy Owners to transfer cash value may dilute the
value of a Fund's shares if the frequent trading involves an attempt to take
advantage of pricing inefficiencies created by a lag between a change in the
value of the securities held by the Fund and the reflection of that change in
the Fund's share price ("arbitrage trading"). Regardless of the existence of
pricing inefficiencies, frequent transfers may also increase brokerage and
administrative costs of the underlying Funds and may disrupt portfolio
management strategy, requiring a Fund to maintain a high cash position and
possibly resulting in lost investment opportunities and forced liquidations
("disruptive trading"). Accordingly, arbitrage trading and disruptive trading
activities (referred to collectively as "market timing") may adversely affect
the long-term performance of the Funds, which may in turn adversely affect
Policy Owners and other persons who may have an interest in the Policies (e.g.,
beneficiaries).
We have policies and procedures that attempt to detect and deter frequent
transfers in situations where we determine there is a potential for arbitrage
trading. Currently, we believe that such situations may be presented in the
international, small-cap, and high-yield Funds (i.e., the BlackRock Strategic
Value Portfolio, FI International Stock Portfolio, Morgan Stanley EAFE Index
Portfolio, Russell 2000 Index Portfolio, T. Rowe Price Small Cap Growth
Portfolio, Harris Oakmark International Portfolio, Lord Abbett Bond Debenture
Portfolio, Met/AIM Small Cap Growth Portfolio, Fidelity VIP Overseas Portfolio,
American Funds Global Small Capitalization Fund, JPMorgan Small Company Stock
Portfolio, Russell Aggressive Equity Fund, Russell Non-U.S. Fund, Van Eck
Worldwide Emerging
10
Markets Fund and Van Eck Worldwide Hard Assets Fund) and we monitor transfer
activity in those Funds (the "Monitored Portfolios"). In addition, as described
below, we intend to treat all American Funds Insurance Series portfolios
("American Funds Portfolios") as Monitored Portfolios. We employ various means
to monitor transfer activity, such as examining the frequency and size of
transfers into and out of the Monitored Portfolios within given periods of time.
For example, we currently monitor transfer activity to determine if, for each
category of international, small-cap, and high-yield Monitored Portfolios, in a
12-month period there were: (1) six or more transfers involving the given
category; (2) cumulative gross transfers involving the given category that
exceed the current Cash Value; and (3) two or more "round-trips" involving any
Monitored Portfolio in the given category. A round-trip generally is defined as
a transfer in followed by a transfer out within the next seven calendar days or
a transfer out followed by a transfer in within the next seven calendar days, in
either case subject to certain other criteria.
We do not believe that other Funds present a significant opportunity to
engage in arbitrage trading and therefore do not monitor transfer activity in
those Funds. We may change the Monitored Portfolios at any time without notice
in our sole discretion. In addition to monitoring transfer activity in certain
Funds, we rely on the underlying Funds to bring any potential disruptive trading
activity they identify to our attention for investigation on a case-by-case
basis. We will also investigate any other harmful transfer activity that we
identify from time to time. We may revise these policies and procedures in our
sole discretion at any time without prior notice.
AMERICAN FUNDS MONITORING POLICY. As a condition to making their
portfolios available in our products, American Funds requires us to treat all
American Funds portfolios as Monitored Portfolios under our current market
timing and excessive trading policies and procedures. Further, American Funds
requires us to impose additional specified monitoring criteria for all American
Funds portfolios available under the Policy, regardless of the potential for
arbitrage trading. We are required to monitor transfer activity in American
Funds portfolios to determine if there were two or more transfers in followed by
transfers out, in each case of a certain dollar amount or greater, in any 30-
day period. A first violation of the American Funds monitoring policy will
result in a written notice of violation; each additional violation will result
in the imposition of a six-month restriction, during which period we will
require all transfer requests to or from an American Funds portfolio to be
submitted with an original signature. Further, as Monitored Portfolios, all
American Funds portfolios also will be subject to our current market timing and
excessive trading policies, procedures and restrictions (described below), and
transfer restrictions may be imposed upon a violation of either monitoring
policy. Although we do not have the operational or systems capability at this
time to impose the American Funds monitoring policy and/or to treat all of the
American Funds portfolios as Monitored Portfolios under our policy, we intend to
do so in the future.
Our policies and procedures may result in transfer restrictions being
applied to deter market timing. Currently, when we detect transfer activity in
the Monitored Portfolios that exceeds our current transfer limits, or other
transfer activity that we believe may be harmful to other Policy Owners or other
persons who have an interest in the Policies, we require all future transfer
requests to or from any Monitored Portfolios or other identified Portfolios
under that Policy to be submitted either (i) in writing with an original
signature or (ii) by telephone prior to 10:00 a.m.
Transfers made under the dollar cost averaging program or the portfolio
rebalancing program are not treated as transfers when we evaluate trading
patterns for market timing.
The detection and deterrence of harmful transfer activity involves
judgments that are inherently subjective, such as the decision to monitor only
those Funds that we believe are susceptible to arbitrage trading or the
determination of the transfer limits. Our ability to detect and/or restrict such
transfer activity may be limited by operational and technological systems, as
well as our ability to predict strategies employed by Policy Owners to avoid
such detection. Our ability to restrict such transfer activity may also be
limited by provisions of the Policy. Accordingly, there is no assurance that we
will prevent all transfer activity that may adversely affect Policy Owners and
other persons with interests in the Policies. We do not accommodate market
timing in any Funds and there are no arrangements in place to permit any Policy
Owner to engage in market timing; we apply our policies and procedures without
exception, waiver, or special arrangement.
The Funds may have adopted their own policies and procedures with respect
to frequent purchases and redemptions of their respective shares, and we reserve
the right to enforce these policies and procedures. For example, Funds may
assess a redemption fee (which we reserve the right to collect) on shares held
for a relatively short period. The prospectuses for the Funds describe any such
policies and procedures, which may be more or less
11
restrictive than the policies and procedures we have adopted. Although we may
not have the contractual authority or the operational capacity to apply the
frequent trading policies and procedures of the Funds, we have entered into a
written agreement, as required by SEC regulation, with each Fund or its
principal underwriter that obligates us to provide to the Fund promptly upon
request certain information about the trading activity of individual Policy
Owners, and to execute instructions from the Fund to restrict or prohibit
further purchases or transfers by specific Policy Owners who violate the
frequent trading policies established by the Fund.
In addition, Policy Owners and other persons with interests in the Policies
should be aware that the purchase and redemption orders received by the Funds
are generally "omnibus" orders from intermediaries such as retirement plans or
separate accounts funding variable insurance contracts. The omnibus orders
reflect the aggregation and netting of multiple orders from individual owners of
variable insurance policies and/or individual retirement plan participants. The
omnibus nature of these orders may limit the Funds in their ability to apply
their frequent trading policies and procedures. In addition, the other insurance
companies and/or retirement plans may have different policies and procedures or
may not have any such policies and procedures because of contractual
limitations. For these reasons, we cannot guarantee that the Funds (and thus
Policy Owners) will not be harmed by transfer activity relating to the other
insurance companies and/or retirement plans that may invest in the Funds. If a
Fund believes that an omnibus order reflects one or more transfer requests from
Contract Owners engaged in disruptive trading activity, the Fund may reject the
entire omnibus order.
In accordance with applicable law, we reserve the right to modify or
terminate the transfer privilege at any time. We also reserve the right to defer
or restrict the transfer privilege at any time that we are unable to purchase or
redeem shares of any of the Funds, including any refusal or restriction on
purchases or redemptions of their shares as a result of their own policies and
procedures on market timing activities (even if an entire omnibus order is
rejected due to the market timing activity of a single Policy Owner). You should
read the Fund prospectuses for more details.
GENERAL MATTERS
POSTPONEMENT OF PAYMENTS FROM THE SEPARATE ACCOUNT
We may withhold payment of surrender, withdrawal or loan proceeds if any
portion of those proceeds would be derived from a Policy Owner's check that has
not yet cleared (i.e., that could still be dishonored by your banking
institution). We may use telephone, fax, Internet or other means of
communications to verify that payment from the Policy Owner's check has been or
will be collected. We will not delay payment longer than necessary for us to
verify that payment has been or will be collected. Policy Owners may avoid the
possibility of delay in the disbursement of proceeds coming from a check that
has not yet cleared by providing us with a certified check.
FEDERAL TAX MATTERS
INTRODUCTION
The following summary provides a general description of the Federal income
tax considerations associated with the Policy and does not purport to be
complete or to cover all situations. This discussion is not intended as tax
advice. Counsel or other competent tax advisers should be consulted for more
complete information. This discussion is based upon General American's
understanding of the present Federal income tax laws as they are currently
interpreted by the Internal Revenue Service. No representation is made as to the
likelihood of continuation of the present Federal income tax laws or of the
current interpretations by the Internal Revenue Service.
IRS CIRCULAR 230 NOTICE: The tax information contained herein is not
intended to (and cannot) be used by anyone to avoid IRS penalties. It is
intended to support the sale of the Policy. The Policy Owner should seek tax
advice based on the Policy Owner's particular circumstances from an independent
tax adviser.
TAX STATUS OF THE POLICY
In order to qualify as a life insurance contract for Federal income tax
purposes and to receive the tax treatment normally accorded life insurance
contracts under Federal tax law, a Policy must satisfy certain requirements
which
12
are set forth in the Internal Revenue Code. Guidance as to how these
requirements are to be applied is limited, in particular, with respect to joint
and last survivor life insurance policies. Nevertheless, we believe that the
Policies should satisfy the applicable requirements. There is less guidance,
however, with respect to Policies issued on a substandard or guaranteed issue
basis and Policies with term riders added, and it is not clear whether such
policies will in all cases satisfy the applicable requirements, particularly if
the owner pay the full amount of premiums under the Policy. We may take
appropriate steps to bring the Policy into compliance with applicable
requirements, and we reserve the right to restrict Policy transactions in order
to do so. The insurance proceeds payable on the death of the insured will never
be less than the minimum amount required for the Policy to be treated as life
insurance under section 7702 of the Internal Revenue Code, as in effect on the
date the Policy was issued.
In some circumstances, owners of variable contracts who retain excessive
control over the investment of the underlying separate account assets may be
treated as the owners of those assets. Although published guidance in this area
does not address certain aspects of the Policies, we believe that the Owner of a
Policy should not be treated as the owner of the Separate Account assets. We
reserve the right to modify the Policies to bring them into conformity with
applicable standards should such modification be necessary to prevent Owners of
the Policies from being treated as the owners of the underlying Separate Account
assets.
In addition, the Code requires that the investments of the Separate Account
be "adequately diversified" in order for the Policies to be treated as life
insurance contracts for Federal income tax purposes. It is intended that the
Separate Account, through the Eligible Funds, will satisfy these diversification
requirements.
The following discussion assumes that the Policy will qualify as a life
insurance contract for Federal income tax purposes.
1. TAX TREATMENT OF POLICY BENEFITS. In general, the Company believes that
the proceeds and Cash Value increases of a Policy should be treated in a manner
consistent with a fixed-benefit life insurance policy for Federal income tax
purposes. Thus, the death benefit under the Policy should be excludable from the
gross income of the Beneficiary to the extent provided in under Section 101 of
the Code. In the case of employer-owned life insurance as defined in Section
101(j), the amount of the death benefit excludable from gross income is limited
to premiums paid unless the Policy falls within certain specified exceptions and
a notice and consent requirement is satisfied before the Policy is issued.
Certain specified exceptions are based on the status of an employee as highly
compensated or recently employed. There are also exceptions for Policy proceeds
paid to an employee's heirs. These exceptions only apply if proper notice is
given to the insured employee and consent is received from the insured employee
before the issuance of the Policy. These rules apply to Policies issued August
18, 2006 and later and also apply to policies issued before August 18, 2006
after a material increase in the death benefit or other material change. An IRS
reporting requirement applies to employer-owned life insurance subject to these
rules. Because these rules are complex and will affect the tax treatment of
death benefits, it is advisable to consult tax counsel. The death benefit will
also be taxable in the case of a transfer-for-value unless certain exceptions
apply.
Many changes or transactions involving a Policy may have tax consequences,
depending on the circumstances. Such changes include, but are not limited to,
the exchange of the Policy, a change of the Policy's Face Amount, a Policy Loan,
an additional premium payment, a Policy lapse with an outstanding Policy Loan, a
partial withdrawal, or a surrender of the Policy. The transfer of the Policy or
designation of a Beneficiary may have Federal, state, and/or local transfer and
inheritance tax consequences, including the imposition of gift, estate, and
generation-skipping transfer taxes. For example, the transfer of the Policy to,
or the designation as a Beneficiary of, or the payment of proceeds to, a person
who is assigned to a generation which is two or more generations below the
generation assignment of the Owner may have generation skipping transfer tax
consequences under Federal tax law. The individual situation of each Owner or
Beneficiary will determine the extent, if any, to which Federal, state, and
local transfer and inheritance taxes may be imposed and how ownership or receipt
of Policy proceeds will be treated for purposes of Federal, state and local
estate, inheritance, generation skipping and other taxes.
A Policy may also be used in various arrangements, including non-qualified
deferred compensation or salary continuation plans, split dollar insurance
plans, executive bonus plans, retiree medical benefit plans and others. The tax
consequences of such plans may vary depending on the particular facts and
circumstances of each individual arrangement. Therefore, if you are
contemplating the use of a Policy in any arrangement the value of which depends
in part on its tax consequences, you should be sure to consult a qualified tax
adviser regarding the tax attributes of the particular arrangement.
13
Generally, the Owner will not be deemed to be in constructive receipt of
the Policy's Cash Value, including increments thereof, under the Policy until
there is a distribution. Under a complete surrender or lapse of any Policy, if
the amount received plus the amount of outstanding Indebtedness exceeds the
total investments in the Policy, the excess will generally be treated as
ordinary income subject to tax. The tax consequences of other distributions
from, and Policy Loans taken from or secured by, a Policy depend upon whether
the Policy is classified as a "modified endowment contract".
2. MODIFIED ENDOWMENT CONTRACTS. A policy may be treated as a modified
endowment contract depending upon the amount of premiums paid in relation to the
death benefit provided under such Policy. The premium limitation rules for
determining whether a Policy is a modified endowment contract are extremely
complex. In general, however, a Policy will be a modified endowment contract if
the accumulated premiums paid at any time during the first seven Policy Years
exceed the sum of the net level premiums which would have been paid on or before
such time if the Policy provided for paid-up future benefits after the payment
of seven level annual premiums.
In addition, if a Policy is "materially changed" it may cause such Policy
to be treated as a modified endowment contract. The material change rules for
determining whether a Policy is a modified endowment contract are also extremely
complex. In general, however, the determination of whether a Policy will be a
modified endowment contract after a material change generally depends upon the
relationship among the death benefit at the time of such change, the Cash Value
at the time of the change and the additional premiums paid in the seven Policy
Years starting with the date on which the material change occurs.
Moreover, a life insurance contract received in exchange for a life
insurance contract classified as a modified endowment contract will also be
treated as a modified endowment contract. A reduction in a Policy's benefits may
also cause such Policy to become a modified endowment contract.
Accordingly, a prospective Owner should contact a competent tax adviser
before purchasing a Policy to determine the circumstances under which the Policy
would be a modified endowment contract. In addition, an Owner should contact a
competent tax adviser before paying any additional premiums or making any other
change to, including an exchange of, a Policy to determine whether such premium
or change would cause the Policy (or the new Policy in the case of an exchange)
to be treated as a modified endowment contract.
NOTE: MOST DESTINY POLICIES WERE MODIFIED ENDOWMENT CONTACTS FROM THE DATE OF
ISSUE, THEREFORE, DISTRIBUTIONS FROM MOST DESTINY POLICIES ARE TAXED AS FOLLOWS:
3. DISTRIBUTIONS FROM POLICIES CLASSIFIED AS MODIFIED ENDOWMENT
CONTRACT. Policies classified as modified endowment contracts will be subject
to the following tax rules: First, all distributions, including distributions
upon surrender, from such a Policy are treated as ordinary income subject to tax
up to the amount equal to the excess (if any) of the Cash Value immediately
before the distribution over the investment in the Policy (described below) at
such time. Second, Policy Loans taken from, or secured by, such a Policy, as
well as due but unpaid interest thereon, are treated as distributions from such
a Policy and taxed accordingly. Third, a 10 percent additional income tax is
imposed on the portion of any distribution from, or Policy Loan taken from or
secured by, such a Policy that is included in income, except where the
distribution or Policy Loan (a) is made on or after the Owner attains age
59 1/2, (b) is attributable to the Owner's becoming disabled, or (c) is part of
a series of substantially equal periodic payments for the life (or life
expectancy) of the Owner or the joint lives (or joint life expectancies) of the
Owner and the Owner's Beneficiary.
4. DISTRIBUTIONS FROM POLICIES NOT CLASSIFIED AS MODIFIED ENDOWMENT
CONTRACT. Distributions from Policies not classified as a modified endowment
contracts are generally treated as first recovering the investment in the Policy
(described below) and then, only after the return of all such investment in the
Policy, as distributing taxable income. An exception to this general rule occurs
in the case of a decrease in the Policy's death benefit (possibly including a
partial withdrawal) or any other change that reduces benefits under the Policy
in the first 15 years after the Policy is issued and that results in cash
distribution to the Owner in order for the Policy to continue complying with the
Section 7702 definitional limits. Such a cash distribution will be taxed in
whole or in part as ordinary income (to the extent of any gain in the Policy)
under rules prescribed in Section 7702.
Policy Loans from, or secured by, a Policy that is not a modified endowment
contract should generally not be treated as distributions. Instead, such loans
should generally be treated as indebtedness of the Owner. However, because the
tax consequences associated with Policy Loans are not always clear, in
particular, with respect to Policy Loans outstanding after the tenth Policy
year, you should consult a tax adviser prior to taking any Policy Loan.
14
Upon a complete surrender or lapse of a Policy that is not a modified
endowment contract, if the amount received plus the amount of indebtedness
exceeds the total investment in the Policy, the excess will generally be treated
as ordinary income subject to tax.
Neither distributions (including distributions upon surrender or lapse) nor
Policy Loans from, or secured by, a Policy that is not a modified endowment
contract are subject to the 10 percent additional income tax.
If a Policy which is not a modified endowment contract subsequently becomes
a modified endowment contract, then any distribution made from the Policy within
two years prior to the date of such change in status may become taxable.
5. POLICY LOANS. Generally, interest paid on any loan under a life
insurance Policy is not deductible. AN OWNER SHOULD CONSULT A COMPETENT TAX
ADVISER IF THE DEDUCTIBILITY OF LOAN INTEREST IS A CONSIDERATION IN THE PURCHASE
OF A POLICY. If a Policy Loan is outstanding when a Policy is canceled or
lapses, the amount of the outstanding Indebtedness will be added to the amount
distributed and will be taxed accordingly.
6. INTEREST EXPENSE ON UNRELATED INDEBTEDNESS. Under provisions added to
the Code in 1997 for policies issued after June 8, 1997, if a business taxpayer
owns or is the beneficiary of a Policy on the life of any individual who is not
an officer, director, employee, or 20 percent owner of the business, and the
taxpayer also has debt unrelated to the Policy, a portion of the taxpayer's
unrelated interest expense deductions may be lost. No business taxpayer should
purchase, exchange, or increase the death benefit under a Policy on the life of
any individual who is not an officer, director, employee, or 20 percent owner of
the business without first consulting a competent tax adviser.
7. INVESTMENT IN THE POLICY. Investment in the Policy means (i) the
aggregate amount of any premiums or other consideration paid for a Policy, minus
(ii) the aggregate amount received under the Policy which is excluded from gross
income of the Owner (except that the amount of any Policy Loan from, or secured
by, a Policy that is a modified endowment contract, to the extent such amount is
excluded from gross income, will be disregarded), plus (iii) the amount of any
Policy Loan from, or secured by, a Policy that is a modified endowment contract
to the extent that such amount is included in the gross income of the Owner.
8. MULTIPLE POLICES. All modified endowment contracts that are issued by
the Company (or its affiliates) to the same Owner during any calendar year are
treated as one modified endowment contract for purposes of determining the
amount includible in gross income under Section 72(e) of the Code.
9. LIFE INSURANCE PURCHASES BY NONRESIDENT ALIENS AND FOREIGN
CORPORATIONS. Policy Owners that are not U.S. citizens or residents will
generally be subject to U.S. Federal withholding tax on taxable distributions
from life insurance policies at a 30% rate, unless a lower treaty rate applies.
In addition, Policy Owners may be subject to state and/or municipal taxes and
taxes that may be imposed by the Policy Owner's country of citizenship or
residence.
10. WITHHOLDING. To the extent that Policy distributions are taxable, they
are generally subject to withholding for the recipient's Federal income tax
liability. Recipients can generally elect, however, not to have tax withheld
from distributions.
11. ESTATE, GIFT AND GENERATION-SKIPPING TRANSFER TAXES. The transfer of
the Policy or the designation of a beneficiary may have Federal, state, and/or
local transfer and inheritance tax consequences, including the imposition of
gift, estate, and generation-skipping transfer taxes. When the insured dies, the
death proceeds will generally be includable in the Policy Owner's estate for
purposes of the Federal estate tax if the Policy Owner was the insured. If the
Policy Owner was not the insured, the fair market value of the Policy would be
included in the Policy Owner's estate upon the Policy Owner's death. The Policy
would not be includable in the insured's estate if the insured neither retained
incidents of ownership at death nor had given up ownership within three years
before death.
Moreover, under certain circumstances, the Internal Revenue Code may impose
a "generation-skipping transfer tax" when all or part of a life insurance policy
is transferred to, or a death benefit is paid to, an individual two or more
generations younger than the Policy Owner. Regulations issued under the Internal
Revenue Code may require us to deduct the tax from your Policy, or from any
applicable payment, and pay it directly to the IRS.
Qualified tax advisers should be consulted concerning the estate and gift
tax consequences of Policy ownership and distributions under Federal, state and
local law. The individual situation of each Policy Owner or beneficiary will
determine the extent, if any, to which Federal, state, and local transfer and
inheritance taxes may be imposed and
15
how ownership or receipt of Policy proceeds will be treated for purposes of
Federal, state and local estate, inheritance, generation-skipping and other
taxes.
The Economic Growth and Tax Relief Reconciliation Act of 2001 ("EGTRRA")
repeals the Federal estate tax and replaces it with a carryover basis income tax
regime effective for estates of decedents dying after December 31, 2009. EGTRRA
also repeals the generation-skipping transfer tax, but not the gift tax, for
transfers made after December 31, 2009. EGTRRA contains a sunset provision,
which essentially returns the Federal estate, gift and generation-skipping
transfer taxes to their pre-EGTRRA form, beginning in 2011. Congress may or may
not enact permanent repeal between now and then.
During the period prior to 2010, EGTRRA provides for periodic decreases in
the maximum estate tax rate coupled with periodic increases in the estate tax
exemption. The maximum estate tax rate for 2007-2009 is 45%. The estate tax
exemption is $2,000,000 for 2006-2008 and $3,500,000 in 2009.
The complexity of the new tax law, along with uncertainty as to how it
might be modified in coming years, underscores the importance of seeking
guidance from a qualified adviser to help ensure that your estate plan
adequately addresses your needs and those of your beneficiaries under all
possible scenarios.
12. CONTINUATION OF POLICY BEYOND ATTAINED AGE 100. The tax consequences
of continuing the Policy beyond the Insured's Attained Age 100 birthday are
unclear. You should consult a tax adviser if you intend to keep the Policy in
force beyond the Insured's Attained Age 100.
13. Ownership of the Policy by a corporation, trust or other non-natural
person could jeopardize some (or all) of such entity's interest deduction under
Internal Revenue Code Section 264, even where such entity's indebtedness is in
no way connected to the Policy. In addition, under Section 264(f)(5), if a
business (other than a sole proprietorship) is directly or indirectly a
beneficiary of the Policy, the Policy could be treated as held by the business
for purposes of the Section 264(f) entity-holder rules. Therefore, it would be
advisable to consult with a qualified tax adviser before any non-natural person
is made an owner or holder of the Policy, or before a business (other than a
sole proprietorship) is made a beneficiary of the Policy.
14. GUIDANCE ON SPLIT DOLLAR PLANS. The IRS has issued guidance on split
dollar insurance plans. A tax adviser should be consulted with respect to this
guidance if your Policy is, or may become, subject to a split dollar insurance
plan. If your Policy is part of an equity split dollar arrangement, there is a
risk that some portion of the Policy cash value may be taxed prior to any Policy
distribution.
In addition, the Sarbanes-Oxley Act of 2002 (the "Act") which was signed
into law on July 30, 2002, prohibits, with exceptions, publicly-traded
companies, including non-U.S. companies that have securities listed on U.S.
exchanges, from extending, directly or indirectly or through a subsidiary, many
types of personal loans to their directors or executive officers. It is possible
that this prohibition may be interpreted to apply to split-dollar life insurance
arrangements for directors and executive officers of such companies, since such
arrangements can arguably be viewed as involving a loan from the employer for at
least some purposes.
Although the prohibition on loans generally took effect as of July 30,
2002, there is an exception for loans outstanding as of the date of enactment,
so long as there is no material modification to the loan terms and the loan is
not renewed after July 30, 2002. Any affected business contemplating the payment
of a premium on an existing Policy or the purchase of new Policy in connection
with a split-dollar life insurance arrangement should consult legal counsel.
Split dollar insurance plans that provide deferred compensation may be
subject to recently enacted rules governing deferred compensation arrangements.
Failure to adhere to these rules will result in adverse tax consequences. A tax
adviser should be consulted with respect to such plans.
15. ALTERNATIVE MINIMUM TAX. There may also be an indirect tax upon the
income in the Policy or the proceeds of a Policy under the Federal corporate
alternative minimum tax, if the Owner is subject to that tax.
16. PUERTO RICO. We believe that Policies subject to Puerto Rican tax law
will generally receive treatment similar, with certain modifications, to that
described above. Among other differences, Policies governed by Puerto Rican tax
law are not currently subject to the rules described above regarding Modified
Endowment Contracts. You should consult your tax adviser with respect to Puerto
Rican tax law governing the Policies.
16
17. POSSIBLE TAX LAW CHANGES. Although the likelihood of legislative
changes is uncertain, there is always the possibility that the tax treatment of
the Policy could change by legislation or otherwise. Consult a tax adviser with
respect to legislative developments and their effect on the Policy.
18. FOREIGN TAX CREDITS. To the extent permitted under Federal tax law, we
may claim the benefit of certain foreign tax credits attributable to taxes paid
by certain Eligible Funds to foreign jurisdictions.
19. POSSIBLE CHARGE FOR TAXES. At the present time, the Company makes no
charge to the Separate Account for any Federal, state, or local taxes (as
opposed to Premium Tax Charges which are deducted from premium payments) that it
incurs which may be attributable to such Separate Account or to the Policies.
The Company, however, reserves the right in the future to make a charge for any
such tax or other economic burden resulting from the application of the tax laws
that it determines to be properly attributable to the Separate Account or to the
Policies.
MANAGEMENT
The directors and executive officers of General American Life Insurance
Company and their principal business experience are:
DIRECTORS OF GENERAL AMERICAN
<Table>
<Caption>
NAME AND PRINCIPAL BUSINESS ADDRESS PRINCIPAL BUSINESS EXPERIENCE
----------------------------------- -----------------------------
Michael K. Farrell* Director of General American since 2003 and Senior Vice
President of Metropolitan Life Insurance Company since
2002.
James L. Lipscomb** Director of General American since 2002 and Executive
Vice-President and General Counsel of Metropolitan Life
Insurance Company since 2003. Formerly, Senior Vice
President and Deputy General Counsel 2001-2003 of
Metropolitan Life.
William J. Mullaney** Director of NELICO since 2007 and President of
Institutional Business at Metropolitan Life Insurance
Company since 2007. Formerly President 2004-2007 of
Metropolitan Property and Casualty.
Catherine A. Rein** Director of General American since 2004 and Senior
Executive Vice President and Chief Administrative Officer
of Metropolitan Life Insurance Company since 2005.
Formerly, President and Chief Executive Officer 1999- 2004
of Metropolitan Property and Casualty.
Stanley J. Talbi** Director of General American since 2002 and Senior Vice
President of Metropolitan Life Insurance Company since
1974.
Michael J. Vietri**** Director of NELICO since 2005 and Executive Vice President
of Metropolitan Life Insurance Company since 2005.
Formerly, Senior Vice President 1999-2004 of Metropolitan
Life Insurance Company.
Lisa M. Weber** Chairman of the Board, President and Chief Executive
Officer of General American since 2004 and President,
Individual Business of Metropolitan Life Insurance Company
since 2004; formerly, Director of General American since
2000 and Senior Executive Vice President and Chief
Administrative Officer 2001- 2004.
William J. Wheeler** Director of General American since 2002 and Executive Vice
President and Chief Financial Officer of Metropolitan Life
Insurance Company since 2003. Formerly, Senior Vice
President 1997-2003 of Metropolitan Life.
Anthony J. Williamson** Director, Vice President and Treasurer of General American
since 2002 and Senior Vice President and Treasurer of
Metropolitan Life Insurance Company since 2001.
</Table>
17
EXECUTIVE OFFICERS OF GENERAL AMERICAN OTHER THAN DIRECTORS
<Table>
<Caption>
NAME AND PRINCIPAL BUSINESS ADDRESS PRINCIPAL BUSINESS EXPERIENCE
----------------------------------- -----------------------------
Joseph J. Prochaska, Jr.** Executive Vice President and Chief Accounting Officer of
NELICO since 2006 and Executive Vice President and Chief
Accounting Officer of Metropolitan Life Insurance Company
since 2006. Formerly Senior Vice President and Chief
Accounting Officer 2004-2006 of NELICO and Senior Vice
President and Chief Accounting Officer 2003-2006 of
Metropolitan Life. Senior Vice President and Controller
2000-2003 of Aon Corporation.
</Table>
---------------
The principal business address:
* Metropolitan Life, 10 Park Avenue, Morristown, NJ 07962
** Metropolitan Life, One MetLife Plaza, 27-01 Queens Plaza, North, Long
Island City, NY 11101
*** Metropolitan Life, 501 Boylston Street, Boston, MA 02116
**** Metropolitan Life, 177 South Commons Drive, Aurora, IL 60504
VOTING RIGHTS
Based on its understanding of current applicable legal requirements, the
Company will vote the shares of the Funds held in the Separate Account at
regular and special shareholder meetings of the mutual funds in accordance with
the instructions received from persons having voting interests in the
corresponding Divisions of the Separate Account. If, however, the 1940 Act or
any regulation thereunder should be amended or if the present interpretation
thereof should change, and as a result the Company determines that it is
permitted to vote shares of the Fund in its own right, it may elect to do so. No
voting privileges apply to the Policies with respect to Cash Value removed from
the Separate Account as a result of a Policy Loan.
The number of votes which an Owner has the right to instruct will be
calculated separately for each Division. Voting rights reflect the dollar value
of the total number of units of each Division of the Separate Account credited
to the Owner at the record date, rather than the number of units alone.
Fractional shares will be counted. The number of votes of the Fund which the
Owner has the right to instruct will be determined as of the date coincident
with the date established by that Fund for determining shareholders eligible.
Voting instructions will be solicited by written communications prior to such
meeting in accordance with procedures established by the mutual funds.
The company will vote shares of a Fund for which no timely instructions are
received in proportion to the voting instructions which are received with
respect to that Fund. The Company will also vote any shares of the Funds which
are not attributable to Policies in the same proportion. The effect of this
proportional voting is that a smaller number of Policy Owners may control the
outcome of a vote.
Each person having a voting interest in a Division will receive any proxy
material, reports, and other materials relating to the appropriate Fund.
DISREGARD OF VOTING INSTRUCTIONS. The Company may, when required by state
insurance regulatory authorities, disregard voting instructions if the
instructions require that the shares be voted so as to cause a change in the
subclassification or investment objective of the Fund or to approve or
disapprove an investment Advisory contract for a Fund. In addition, the Company
itself may disregard voting instructions in favor of changes initiated by an
Owner in the investment policy or the investment adviser or sub-adviser of a
Fund if the Company reasonably disapproves of such changes. A proposed change
would be disapproved only if the proposed change is contrary to state law or
prohibited by state regulatory authorities, or the Company determined that the
change would have an adverse effect on its General Account in that the proposed
investment policy for a Fund may result in overly speculative or unsound
investments. If the Company disregards voting instructions, a summary of that
action and the reasons for such action will be included in the next annual
report to Owners.
18
RESTRICTIONS ON FINANCIAL TRANSACTIONS
Applicable laws designed to counter terrorism and prevent money laundering
might, in certain circumstances, require us to reject a premium payment and/or
block or "freeze" your Policy. If these laws apply in a particular situation, we
would not be allowed to process any request for withdrawals, surrenders, loans
or death benefits, make transfers or continue making payments under your death
benefit option until instructions are received from the appropriate regulator.
We also may be required to provide additional information about you or your
Policy to government regulators.
LEGAL PROCEEDINGS
General American, like other insurance companies, is involved in lawsuits,
including class action lawsuits. In some class action lawsuits involving
insurers, substantial damages have been sought and/or material settlement
payments have been made. In addition, on May 14, 2004, MetLife, Inc. announced
that General American had received a "Wells Notice" from the Securities and
Exchange Commission in connection with an SEC investigation regarding market
timing and late trading in a limited number of its privately-placed variable
insurance contracts. The Wells Notice provides notice that the SEC staff is
considering recommending that the SEC bring a civil action alleging violations
of U.S. securities laws. Under SEC procedures, General American can avail itself
of the opportunity to respond to the SEC staff before it makes a formal
recommendation regarding whether any action alleging violations of the U.S.
securities laws should be considered. General American has responded to the
Wells Notice. General American continues to cooperate fully with the SEC in its
investigation and is not aware of any systemic problems with respect to such
matters. Although the outcome of any litigation or administrative or other
proceedings cannot be predicted with certainty, General American does not
believe any such litigation or proceedings will have a materially adverse impact
upon the Separate Account, or upon the ability of MetLife Investors Distribution
Company to perform its contract with the Separate Account, or of General
American to meet its obligations under the Policies.
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The financial statements of General American Separate Account Eleven and
the consolidated financial statements of General American Life Insurance Company
(the "Company") (which report expresses an unqualified opinion and includes an
explanatory paragraph referring to the change in the method of accounting for
defined benefit pension and other postretirement plans, and for certain
non-traditional long duration contracts and separate accounts as required by new
accounting guidance which the Company adopted on December 31, 2006, and January
1, 2004, respectively), included in this Prospectus Supplement have been audited
by Deloitte & Touche LLP, an independent registered public accounting firm, as
stated in their reports appearing herein, and are included in reliance upon the
reports of such firm given upon their authority as experts in accounting and
auditing. The principal address of Deloitte & Touche LLP is 201 East Kennedy
Boulevard, Suite 1200, Tampa, Florida 33602-5827.
FINANCIAL STATEMENTS
The financial statements of General American which are included in this
prospectus supplement should be distinguished from the financial statements of
the Separate Account, and should be considered only as bearing on the ability of
General American to meet its obligations under the Policy. They should not be
considered as bearing on the investment performance of the assets held in the
Separate Account.
19
GENERAL AMERICAN LIFE INSURANCE COMPANY
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICIES
AMERICAN VISION SERIES VUL 2002
SUPPLEMENT DATED SEPTEMBER 22, 2006 TO THE
PROSPECTUS DATED MAY 1, 2006
VARIABLE UNIVERSAL LIFE
JOINT AND LAST SURVIVOR VARIABLE LIFE
SUPPLEMENT DATED SEPTEMBER 22, 2006 TO THE
PROSPECTUSES DATED MAY 1, 2002
VUL 95
VUL 100
VGSP
RUSSELL VUL
SUPPLEMENT DATED SEPTEMBER 22, 2006 TO THE
PROSPECTUSES DATED MAY 1, 2000
This supplement updates certain information in the prospectuses for the above
flexible premium variable life insurance policies, as annually and periodically
supplemented. You should read and retain this supplement.
The following is added under TAX TREATMENT OF POLICY BENEFITS in the TAX
CONSIDERATIONS section of the American Vision Series VUL 2002 prospectus and in
the FEDERAL TAX MATTERS section of all other prospectuses:
Employer-Owned Life Insurance. In the case of employer-owned life
insurance as defined in Section 101(j) of the Internal Revenue Code, the
amount excludable from gross income is limited to premiums paid unless the
Policy falls within certain specified exceptions and a notice and consent
requirement is satisfied before the Policy is issued. Certain specified
exceptions are based on the status of an employee as highly compensated or
recently employed. There are also exceptions for policy proceeds paid to an
employee's heirs. These exceptions only apply if proper notice is given to
the insured employee and consent is received from the insured employee
before the issuance of the Policy. These rules apply to Policies issued
August 18, 2006 and later and also apply to Policies issued before August
18, 2006 after a material increase in the death benefit or other material
change. An IRS reporting requirement applies to employer-owned life
insurance subject to these rules. Because these rules are complex and will
affect the tax treatment of death benefits, it is advisable to consult tax
counsel. The death benefit will also be taxable in the case of a
transfer-for-value unless certain exceptions apply.
GENERAL AMERICAN LIFE INSURANCE COMPANY
Variable Life Insurance Policy
(Destiny)
Supplement dated May 1, 2006
to the Prospectus dated May 1, 2004
Flexible Premium
Variable Life Insurance Policies
(Variable Universal Life/Executive Benefit)
Supplement dated May 1, 2006
to the Prospectuses dated May 1, 2002
Flexible Premium Joint and Last Survivor
Variable Life Insurance Policy
Supplement dated May 1, 2006
to the Prospectus dated May 1, 2002
Flexible Premium Variable Life Insurance Policies
(VUL 95/VUL 100/VGSP/Russell VUL)
Supplement dated May 1, 2006
to the Prospectuses dated May 1, 2000
This supplement updates certain information contained in the last full
prospectus for each of the above-referenced variable life insurance policies, as
annually and periodically supplemented. You should read and retain this
supplement. We will send you an additional copy of the last full prospectus for
your policy, without charge, on request. These policies are no longer available
for sale.
General American Life Insurance Company is an indirect wholly-owned
subsidiary of Metropolitan Life Insurance Company ("MetLife"). MetLife is a
wholly-owned subsidiary of MetLife, Inc., a publicly-traded company. General
American's Home Office is 13045 Tesson Ferry Road, St. Louis, Missouri 63128.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE POLICIES OR DETERMINED IF THIS
SUPPLEMENT IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE SECURITIES AND EXCHANGE COMMISSION MAINTAINS A WEB SITE THAT CONTAINS
MATERIAL INCORPORATED BY REFERENCE AND OTHER INFORMATION REGARDING REGISTRANTS
THAT FILE ELECTRONICALLY WITH THE SECURITIES AND EXCHANGE COMMISSION. THE
ADDRESS OF THE SITE IS HTTP://WWW.SEC.GOV.
THE UNDERLYING FUND PROSPECTUSES ARE ATTACHED. INCLUDED ARE PROSPECTUSES
FOR THE RUSSELL INVESTMENT FUNDS, WHICH MAY NOT BE AVAILABLE UNDER YOUR POLICY.
PLEASE READ THE PROSPECTUSES CAREFULLY AND KEEP THEM FOR REFERENCE.
WE DO NOT GUARANTEE HOW ANY OF THE DIVISIONS OR FUNDS WILL PERFORM. THE
POLICIES AND THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY FINANCIAL INSTITUTION AND ARE NOT FEDERALLY INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER
GOVERNMENT AGENCY.
YOUR PRIVACY NOTICE IS AT THE BACK OF THIS BOOK
AND IS NOT PART OF THE PROSPECTUS
THE COMPANY
General American is principally engaged in writing individual life
insurance policies and annuity contracts. It is admitted to do business in 49
states, the District of Columbia, Puerto Rico, and in ten Canadian provinces.
The principal offices (Home Office) of General American are located at 13045
Tesson Ferry Road, St. Louis, Missouri 63128. The Administrative Office for
various Policy transactions is as follows:
FOR EXECUTIVE BENEFIT POLICY OWNERS:
<Table>
Premium Payments General American
P.O. Box 14490
St. Louis, MO 63178-4490
Surrenders, Loans, General American
Withdrawals and P.O. Box 543
Division Transfers Warwick, RI 02887-0543
Death Claims General American
P.O. Box 353
Warwick, RI 02887-0353
All Other Inquiries and General American
Transactions Attention: COLI
700 Quaker Lane
Warwick, RI 02887-0355
(800) 638-9294
</Table>
FOR ALL OTHER POLICY OWNERS:
<Table>
Premium Payments General American
P.O. Box 14490
St. Louis, MO 63178-4490
Payment Inquires and General American
Correspondence Remittance Processing
4100 Boy Scout Blvd.
Tampa, FL 33607
(800) 638-9294
Beneficiary and Ownership General American
Changes P. O. Box 355
Warwick, RI 02887-0355
Surrenders, Loans, General American
Withdrawals and P.O. Box 543
Division Transfers Warwick, RI 02887-0543
Death Claims General American
P.O. Box 353
Warwick, RI 02887-0353
All Telephone (800) 638-9294
Transactions and Inquiries
</Table>
You may request an account transfer or reallocation of future premiums by
written request (which may be telecopied) to our Administrative Office, by
telephoning us, or over the Internet. To request a transfer or reallocation by
telephone, you should contact your registered representative, or contact us at
(800) 638-9294. To request a transfer or reallocation over the Internet, you may
log on to our website at www.genamerica.com. We use reasonable procedures to
confirm that instructions communicated by telephone, facsimile or Internet are
genuine. Any telephone, facsimile or Internet instructions that we reasonably
believe to be genuine will be your responsibility, including losses arising from
any errors in the communication of instructions. However, because telephone and
Internet transactions may be available to anyone who provides certain
information about you and your Policy, you should protect that information. We
may not be able to verify that you are the person providing telephone or
Internet instructions, or that you have authorized any such person to act for
you.
2
Telephone, facsimile, and computer systems (including the Internet) may not
always be available. Any telephone, facsimile, or computer system, whether it is
yours, your service provider's, your registered representative's, or ours, can
experience outages or slowdowns for a variety of reasons. These outages or
slowdowns may delay or prevent our processing of your request. Although we have
taken precautions to help our systems handle heavy use, we cannot promise
complete reliability under all circumstances. If you are experiencing problems,
you should make your request by writing to our Administrative Office.
THE SEPARATE ACCOUNT. The separate account consists of divisions, each of
which corresponds to an underlying Fund. Each division may either make money or
lose money. Therefore if you invest in a division of the separate account, you
may either make money or lose money, depending on the investment experience of
that division. There is no guaranteed rate of return in the separate account.
The following chart shows the Funds that are available under the policy
along with the name of the investment adviser, sub-adviser (where applicable)
and investment objective of each Fund. The Funds have different investment goals
and strategies. You should review the prospectus of each Fund, or seek
professional guidance in determining which Fund(s) best meet your objectives.
NOTE: THE RUSSELL INVESTMENT FUNDS ARE NOT AVAILABLE TO DESTINY OR EXECUTIVE
BENEFIT POLICIES. FOR ALL OTHER POLICIES, THE RUSSELL INVESTMENT FUNDS ARE ONLY
AVAILABLE FOR POLICIES WITH AN ISSUE DATE PRIOR TO JANUARY 1, 2000.
AMERICAN FUNDS INSURANCE SERIES ADVISER: CAPITAL RESEARCH AND MANAGEMENT
COMPANY
<Table>
<Caption>
FUND SUB-ADVISER INVESTMENT OBJECTIVE
---- ----------- --------------------
American Funds Global N/A Capital appreciation through stocks.
Small Capitalization
Fund
American Funds Growth N/A Capital appreciation through stocks.
Fund
American Funds Growth- N/A Capital appreciation and income.
Income Fund
</Table>
FIDELITY(R) VARIABLE INSURANCE ADVISER: FIDELITY MANAGEMENT & RESEARCH COMPANY
PRODUCTS
<Table>
<Caption>
FUND SUB-ADVISER INVESTMENT OBJECTIVE
---- ----------- --------------------
VIP Equity-Income FMR Co., Inc. Reasonable income by investing primarily in
Portfolio income producing equity securities. The fund
will also consider the potential for capital
appreciation. The fund's goal is to achieve
a yield which exceeds the composite yield of
securities comprising the Standard & Poor's
500(SM) Index (S&P 500(R)).
VIP Growth Portfolio FMR Co., Inc. Capital appreciation.
VIP Mid Cap Portfolio FMR Co., Inc. Long-term growth of capital.
VIP Overseas Portfolio FMR Co., Inc. Long-term growth of capital.
</Table>
J.P. MORGAN SERIES TRUST II ADVISER: J.P. MORGAN INVESTMENT MANAGEMENT INC.
<Table>
<Caption>
FUND SUB-ADVISER INVESTMENT OBJECTIVE
---- ----------- --------------------
JPMorgan Bond N/A To provide high total return consistent with
Portfolio moderate risk of capital and maintenance of
liquidity.
JPMorgan Small Company N/A To provide high total return from a
Portfolio portfolio of small company stocks.
</Table>
3
MET INVESTORS SERIES TRUST ADVISER: MET INVESTORS ADVISORY LLC
<Table>
<Caption>
FUND SUB-ADVISER INVESTMENT OBJECTIVE
---- ----------- --------------------
Harris Oakmark Harris Associates L.P. Long-term capital appreciation.
International
Portfolio
Janus Aggressive Janus Capital Long-term growth of capital.
Growth Portfolio Management LLC
Lazard Mid-Cap Lazard Asset Long-term capital appreciation.
Portfolio (formerly Management, LLC(1)
Met/AIM Mid Cap Core
Equity Portfolio)
Lord Abbett Bond Lord, Abbett & Co. LLC High current income and the opportunity for
Debenture Portfolio capital appreciation to produce a high total
return.
Lord Abbett Growth and Lord, Abbett & Co. LLC Long-term growth of capital and income
Income Portfolio without excessive fluctuation in market
value.
Lord Abbett Mid-Cap Lord, Abbett & Co. LLC Capital appreciation through investments,
Value Portfolio primarily in equity securities, which are
believed to be undervalued in the
marketplace.
Met/AIM Small Cap AIM Capital Long-term growth of capital.
Growth Portfolio Management, Inc.
MFS Research Massachusetts Capital appreciation
International Financial Services
Portfolio Company
Neuberger Berman Real Neuberger Berman Total return through investment in real
Estate Portfolio Management Inc. estate securities, emphasizing both capital
appreciation and current income.
PIMCO Total Return Pacific Investment Maximum total return, consistent with the
Portfolio Management Company LLC preservation of capital and prudent
investment management.
RCM Global Technology RCM Capital Management Capital appreciation; no consideration is
LLC given to income.
T. Rowe Price Mid-Cap T. Rowe Price Long-term growth of capital.
Growth Portfolio Associates, Inc.
</Table>
METROPOLITAN SERIES FUND, INC. ADVISER: METLIFE ADVISERS, LLC
<Table>
<Caption>
FUND SUB-ADVISER INVESTMENT OBJECTIVE
---- ----------- --------------------
BlackRock Aggressive BlackRock Advisors, Maximum capital appreciation.
Growth Portfolio Inc
BlackRock Bond Income BlackRock Advisors, A competitive total return primarily from
Portfolio Inc. investing in fixed-income securities.
BlackRock Diversified BlackRock Advisors, High total return while attempting to limit
Portfolio Inc. investment risk and preserve capital.
BlackRock Large Cap BlackRock Advisors, Long-term growth of capital.
Value Portfolio Inc.
BlackRock Legacy Large BlackRock Advisors, Long-term growth of capital.
Cap Growth Portfolio Inc.
BlackRock Money Market BlackRock Advisors, A high level of current income consistent
Portfolio(2) Inc. with preservation of capital.
</Table>
4
<Table>
<Caption>
FUND SUB-ADVISER INVESTMENT OBJECTIVE
---- ----------- --------------------
BlackRock Strategic BlackRock Advisors, High total return, consisting principally of
Value Portfolio Inc. capital appreciation.
Davis Venture Value Davis Selected Growth of capital.
Portfolio Advisers, L.P.(3)
FI International Stock Fidelity Management & Long-term growth of capital.
Portfolio Research Company
FI Mid Cap Fidelity Management & Long-term growth of capital.
Opportunities Research Company
Portfolio
Harris Oakmark Focused Harris Associates L.P. Long-term capital appreciation.
Value Portfolio
Harris Oakmark Large Harris Associates L.P. Long-term capital appreciation.
Cap Value Portfolio
Lehman Brothers(R) Metropolitan Life To equal the performance of the Lehman
Aggregate Bond Index Insurance Company Brothers Aggregate Bond Index.
Portfolio
MetLife Mid Cap Stock Metropolitan Life To equal the performance of the Standard &
Index Portfolio Insurance Company Poor's Mid Cap 400 Composite Stock Price
Index.
MetLife Stock Index Metropolitan Life To equal the performance of the Standard &
Portfolio Insurance Company Poor's 500 Composite Stock Price Index.
MFS Total Return Massachusetts Favorable total return through investment in
Portfolio Financial Services a diversified portfolio.
Company
Morgan Stanley EAFE(R) Metropolitan Life To equal the performance of the MSCI EAFE
Index Portfolio Insurance Company Index.
Neuberger Berman Mid Neuberger Berman Capital growth.
Cap Value Portfolio Management Inc.
Russell 2000(R) Index Metropolitan Life To equal the return of the Russell 2000
Portfolio Insurance Company Index.
T. Rowe Price Large T. Rowe Price Long-term growth of capital, and
Cap Growth Portfolio Associates, Inc. secondarily, dividend income.
T. Rowe Price Small T. Rowe Price Long-term capital growth.
Cap Growth Portfolio Associates, Inc.
Western Asset Western Asset To maximize total return consistent with
Management U.S. Management Company(4) preservation of capital and maintenance of
Government Portfolio liquidity.
(formerly Salomon
Brothers U.S.
Government Portfolio)
</Table>
RUSSELL INVESTMENT FUNDS ADVISER: FRANK RUSSELL INVESTMENT
MANAGEMENT COMPANY
<Table>
<Caption>
FUND SUB-ADVISER INVESTMENT OBJECTIVE
---- ----------- --------------------
Aggressive Equity Fund Multiple sub-advisers To provide long term capital growth.
Core Bond Fund Multiple sub-advisers To provide current income and the
preservation of capital.
</Table>
5
<Table>
<Caption>
FUND SUB-ADVISER INVESTMENT OBJECTIVE
---- ----------- --------------------
Multi-Style Equity Multiple sub-advisers To provide long-term capital growth.
Fund
Non-U.S. Fund Multiple sub-advisers To provide long-term capital growth.
</Table>
VAN ECK WORLDWIDE INSURANCE TRUST ADVISER: VAN ECK ASSOCIATES CORPORATION
<Table>
<Caption>
FUND SUB-ADVISER INVESTMENT OBJECTIVE
---- ----------- --------------------
Worldwide Emerging N/A Long-term capital appreciation by investing
Markets Fund primarily in equity securities in emerging
markets around the world.
Worldwide Hard Assets N/A Long-term capital appreciation by investing
Fund primarily in "hard asset securities." Hard
asset securities are the stocks and bonds
and other securities of companies that
derive at least 50% of gross revenue or
profit from the exploration, development,
production or distribution of precious
metals, natural resources, real estate and
commodities. Income is a secondary
consideration.
</Table>
---------------
(1) Prior to December 19, 2005, AIM Capital Management, Inc. was the sub-adviser
to this Portfolio.
(2) An investment in the State Street Research Money Market Portfolio is not
insured or guaranteed by the Federal Deposit Insurance Corporation or any
other government agency. Although the Portfolio seeks to preserve the value
of your investment at $100 per share, it is possible to lose money by
investing in the Portfolio. During extended periods of low interest rates,
the yields of the Division investing in the Money Market Portfolio may
become extremely low and possibly negative.
(3) Davis Selected Advisers, L.P. may also delegate any of its responsibilities
to Davis Selected Advisers--NY, Inc., a wholly-owned subsidiary.
(4) Prior to May 1, 2006, Salomon Brothers Asset Management Inc was the
sub-adviser to this Portfolio.
FOR MORE INFORMATION REGARDING THE FUNDS AND THEIR INVESTMENT ADVISERS AND
SUB-ADVISERS, SEE THE FUND PROSPECTUSES ATTACHED AT THE END OF THIS PROSPECTUS
AND THEIR STATEMENTS OF ADDITIONAL INFORMATION.
OTHER FUNDS AND SHARE CLASSES
The Russell Investment Funds may not be available under your Policy, even
though they are described in the attached Fund prospectuses. The Real Estate
Securities Fund described in the Russell Investment Funds prospectus is not
available under any Policy.
Some of the Funds offer various classes of shares, each of which has a
different level of expenses. The prospectuses for the Funds may provide
information for share classes that are not available through the Policy. When
you consult the prospectus for any Fund, you should be careful to refer to only
the information regarding the class of shares that is available through the
Policy. For Fidelity Variable Insurance Products and the Van Eck Worldwide
Insurance Trust, we offer Initial Class shares; for the Metropolitan Series
Fund, Inc., we offer Class A shares; for the Met Investors Series Trust, we
offer Class A shares; and for the American Funds Insurance Series, we offer
Class 2 shares.
6
CHARGES AND DEDUCTIONS
The following table describes the annual operating expenses for each Fund
for the year ended December 31, 2005, before and after any applicable
contractual fee waivers and expense reimbursements:
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
<Table>
<Caption>
FEE
GROSS WAIVERS
TOTAL AND NET TOTAL
MANAGEMENT OTHER 12B-1 ANNUAL EXPENSE ANNUAL
FEES EXPENSES FEES EXPENSES REIMBURSEMENTS EXPENSES(1)
---------- -------- ----- -------- -------------- -----------
AMERICAN FUNDS INSURANCE SERIES
(CLASS 2 SHARES)
American Funds Global Small
Capitalization Fund.................... .74% .05% .25% 1.04% .00% 1.04%
American Funds Growth Fund............... .33% .02% .25% .60% .00% .60%
American Funds Growth-Income Fund........ .28% .01% .25% .54% .00% .54%
FIDELITY(R) VARIABLE INSURANCE PRODUCTS
(INITIAL CLASS SHARES)
VIP Equity-Income Portfolio.............. .47% .09% .00% .56% .00% .56%
VIP Growth Portfolio..................... .57% .10% .00% .67% .00% .67%
VIP Mid Cap Portfolio.................... .57% .12% .00% .69% .00% .69%
VIP Overseas Portfolio................... .72% .17% .00% .89% .00% .89%
J.P. MORGAN SERIES TRUST II
JPMorgan Bond Portfolio.................. .30% .45% .00% .75% .00% .75%(2)
JPMorgan Small Company Portfolio......... .60% .55% .00% 1.15% .00% 1.15%(2)
MET INVESTORS SERIES TRUST
(CLASS A SHARES)
Harris Oakmark International Portfolio... .82% .13% .00% .95% .00% .95%(3)
Janus Aggressive Growth Portfolio........ .67% .05% .00% .72% .00% .72%(3)
Lazard Mid-Cap Portfolio................. .70% .10% .00% .80% .00% .80%(3,4)
Lord Abbett Bond Debenture Portfolio..... .51% .05% .00% .56% .00% .56%
Lord Abbett Growth and Income
Portfolio.............................. .50% .04% .00% .54% .00% .54%(4)
Lord Abbett Mid-Cap Value Portfolio...... .68% .08% .00% .76% .00% .76%
Met/AIM Small Cap Growth Portfolio....... .90% .10% .00% 1.00% .00% 1.00%(3,5)
MFS Research International Portfolio..... .74% .22% .00% .96% .00% .96%(3,5)
Neuberger Berman Real Estate Portfolio... .67% .03% .00% .70% .00% .70%(3)
PIMCO Total Return Portfolio............. .50% .07% .00% .57% .00% .57%(5)
RCM Global Technology Portfolio.......... .92% .27% .00% 1.19% .00% 1.19%(3,5)
T. Rowe Price Mid-Cap Growth Portfolio... .75% .07% .00% .82% .00% .82%(3)
METROPOLITAN SERIES FUND, INC.
(CLASS A SHARES)
BlackRock Aggressive Growth Portfolio.... .73% .06% .00% .79% .00% .79%
BlackRock Bond Income Portfolio.......... .40% .07% .00% .47% .00% .47%(6)
BlackRock Diversified Portfolio.......... .44% .06% .00% .50% .00% .50%
BlackRock Large Cap Value Portfolio...... .70% .15% .00% .85% .00% .85%
BlackRock Legacy Large Cap Growth
Portfolio.............................. .73% .07% .00% .80% .00% .80%
BlackRock Money Market Portfolio......... .35% .07% .00% .42% .01% .41%(6)
BlackRock Strategic Value Portfolio...... .83% .06% .00% .89% .00% .89%
</Table>
7
<Table>
<Caption>
FEE
GROSS WAIVERS
TOTAL AND NET TOTAL
MANAGEMENT OTHER 12B-1 ANNUAL EXPENSE ANNUAL
FEES EXPENSES FEES EXPENSES REIMBURSEMENTS EXPENSES(1)
---------- -------- ----- -------- -------------- -----------
Davis Venture Value Portfolio............ .72% .04% .00% .76% .00% .76%
FI International Stock Portfolio......... .86% .20% .00% 1.06% .00% 1.06%
FI Mid Cap Opportunities Portfolio....... .68% .07% .00% .75% .00% .75%
Harris Oakmark Focused Value Portfolio... .73% .04% .00% .77% .00% .77%
Harris Oakmark Large Cap Value
Portfolio.............................. .72% .06% .00% .78% .00% .78%
Lehman Brothers Aggregate Bond Index
Portfolio.............................. .25% .06% .00% .31% .01% .30%(6)
MetLife Mid Cap Stock Index Portfolio.... .25% .09% .00% .34% .01% .33%(6)
MetLife Stock Index Portfolio............ .25% .04% .00% .29% .01% .28%(6)
MFS Total Return Portfolio............... .57% .16% .00% .73% .00% .73%(7)
Morgan Stanley EAFE Index Portfolio...... .30% .22% .00% .52% .01% .51%(6)
Neuberger Berman Mid Cap Value
Portfolio.............................. .67% .09% .00% .76% .00% .76%
Russell 2000 Index Portfolio............. .25% .11% .00% .36% .01% .35%(6)
T. Rowe Price Large Cap Growth
Portfolio.............................. .60% .12% .00% .72% .00% .72%(6)
T. Rowe Price Small Cap Growth
Portfolio.............................. .51% .09% .00% .60% .00% .60%
Western Asset Management U.S. Government
Portfolio.............................. .54% .07% .00% .61% .00% .61%
RUSSELL INVESTMENT FUNDS
Aggressive Equity Fund................... .95% .18% .00% 1.13% .08% 1.05%(8)
Core Bond Fund........................... .60% .12% .00% .72% .02% .70%(8)
Multi-Style Equity Fund.................. .78% .09% .00% .87% .00% .87%(8)
Non-U.S. Fund............................ .95% .31% .00% 1.26% .11% 1.15%(8)
VAN ECK WORLDWIDE INSURANCE TRUST
(INITIAL CLASS SHARES)
Worldwide Emerging Markets Fund.......... 1.00% .35% .00% 1.35% .00% 1.35%
Worldwide Hard Assets Fund............... 1.00% .17% .00% 1.17% .00% 1.17%
</Table>
---------------
(1) Net Total Annual Expenses do not reflect any voluntary waivers of fees and
expenses, or any expense reductions resulting from directed brokerage
arrangements.
(2) Net Total Annual Expenses reflect a written agreement pursuant to which JP
Morgan Funds Management, Inc. agrees that it will reimburse the Portfolios
to the extent total annual operating expenses of the Portfolios' shares
(excluding dividend expenses on securities sold short, interest, taxes and
extraordinary expenses) exceed .75% for the JP Morgan Bond Portfolio and
1.15% for the JP Morgan Small Company Portfolio through April 30, 2007.
(3) Our affiliate, Met Investors Advisory LLC ("Met Investors Advisory"), and
Met Investors Series Trust have entered into an Expense Limitation Agreement
under which Met Investors Advisory has agreed to waive or limit its fees and
to assume other expenses so that Net Total Annual Expenses of each Portfolio
(other than interest, taxes, brokerage commissions, other expenditures which
are capitalized in accordance with generally accepted accounting principles
and other extraordinary expenses not incurred in the ordinary course of each
Portfolio's business) will not exceed, at any time prior to April 30, 2007,
the following percentages: 1.10% for the Harris Oakmark International
Portfolio, .90% for the Janus Aggressive Growth Portfolio, .80% for the
Lazard Mid-Cap Portfolio, 1.05% for the Met/AIM Small Cap Growth Portfolio,
1.00% for the MFS Research International Portfolio, .90% for the Neuberger
Berman Real Estate Portfolio, 1.10% for the RCM Global Technology Portfolio
and .90% for the T. Rowe Price Mid-Cap Growth Portfolio. Under certain
circumstances, any fees waived or expenses reimbursed by Met Investors
Advisory may, with the approval of the Trust's Board of Trustees, be repaid
to Met Investors Advisory. Due to certain brokerage commission recaptures
not shown in the table, actual Net Total Annual Expenses for the RCM Global
Technology Portfolio were 1.10% for the year ended December 31, 2005.
8
(4) Management Fees have been restated to reflect a new management fee schedule
that became effective on December 19, 2005 for the Lazard Mid-Cap Portfolio
and January 1, 2006 for the Lord Abbett Growth and Income Portfolio.
(5) Other Expenses reflect the repayment of fees previously waived and/or
expenses previously paid by Met Investors Advisory under the terms of prior
expense limitation agreements in the following amounts: .04% for the Met/AIM
Small Cap Growth Portfolio, .05% for the MFS Research International
Portfolio, .01% for the PIMCO Total Return Portfolio, and .14% for the RCM
Global Technology Portfolio.
(6) Our affiliate, MetLife Advisers, LLC ("MetLife Advisers"), and the
Metropolitan Series Fund, Inc. (the "Met Series Fund") have entered into an
Expense Agreement under which MetLife Advisers will waive, until April 30,
2007, the management fee payable by certain Portfolios in the following
percentage amounts: .006% for the Lehman Brothers Aggregate Bond Index
Portfolio, .007% for the MetLife Stock Index Portfolio, .007% for the
MetLife Mid Cap Stock Index Portfolio, .007% for the Morgan Stanley EAFE
Index Portfolio, .007% for the Russell 2000 Index Portfolio, .025% on assets
in excess of $1 billion and less than $2 billion for the BlackRock Bond
Income Portfolio, .005% on the first $500 million of assets and .015% on the
next $500 million of assets for the BlackRock Money Market Portfolio and
.015% on the first $50 million of assets for the T. Rowe Price Large Cap
Growth Portfolio.
(7) The Management Fee for the MFS Total Return Portfolio has been restated to
reflect a new management fee schedule that became effective on May 1, 2006.
(8) The Funds' Manager, Frank Russell Investment Company (FRIMCo) has
contractually agreed to waive, at least until April 30, 2006, a portion of
its management fee, up to the full amount of that fee, equal to the amount
by which the funds' operating expenses exceed 1.05% for the Aggressive
Equity Fund, .70% for the Core Bond Fund, .87% for the Multi-Style Equity
Fund and 1.15% for the Non-U.S. Fund, and to reimburse the Funds for all
remaining expenses, after fee waivers, that exceed these amounts for each
Fund.
CERTAIN PAYMENTS WE RECEIVE WITH REGARD TO THE FUNDS
An investment adviser (other than our affiliate Met Life Advisers and Met
Investors Advisory) or sub-adviser or its affiliates may compensate us and/or
certain affiliates for administrative or other services relating to the Funds.
The amount of the compensation is not deducted from Fund assets and does not
decrease the Fund's investment return. The amount of the compensation is based
on a percentage of assets of the Fund attributable to the Policies and certain
other variable insurance products that we and our affiliates issue. These
percentages differ and some advisers or sub-advisers (or other affiliates) may
pay us more than others. These percentages currently range up to 0.50%.
Additionally, an investment adviser or sub-adviser of a Fund or its affiliates
may provide us with wholesaling services that assist in the distribution of the
Policies and may pay us and/or certain affiliates amounts to participate in
sales meetings. These amounts may be significant and may provide the adviser or
sub-adviser (or other affiliate) with increased access to persons involved in
the distribution of the Policies.
We and certain of our affiliated insurance companies have membership
interests in our affiliated investment advisers, MetLife Advisers and Met
Investors Advisory, which are formed as limited liability companies. Our
membership interests entitle us to profit distributions if the adviser makes a
profit with respect to the management fees it receives from a Fund. We may
benefit accordingly from assets allocated to the Funds to the extent they result
in profits to the advisers. (See "Charges and Deductions -- Annual Fund
Operating Expenses" for information on the management fees paid to the advisers
and the Statement of Additional Information for the Funds for information on the
management fees paid by the adviser to sub-advisers.)
The American Funds Global Small Capitalization Fund, the American Funds
Growth Fund and the American Funds Growth-Income Fund have adopted a
Distribution Plan under Rule 12b-1 of the Investment Company Act of 1940 under
which the Funds make payments to our Distributor, MetLife Investors Distribution
Company, in consideration of services provided and expenses incurred by our
Distributor in distributing the Funds' shares. The payments, which are equal to
0.25% of the Separate Account assets invested in Funds, are deducted from the
assets of the Funds and decrease the Funds' investment return. The Distribution
Plan is described in more detail in each Fund's prospectus. (See also "Charges
and Deductions -- Annual Fund Operating Expenses.")
9
We pay American Funds Distributors, Inc., principal underwriter for the
American Funds Insurance Series, a percentage of all premiums allocated to the
American Funds Global Small Capitalization Fund, the American Funds Growth Fund
and the American Funds Growth-Income Fund for the services it provides in
marketing the Funds' shares in connection with the Policies.
SELECTION OF THE FUNDS
We select the Funds offered through the Policy based on several criteria,
including asset class coverage, the strength of the adviser's or sub-adviser's
reputation and tenure, brand recognition, performance, and the capability and
qualification of each investment firm. Another factor we consider during the
selection process is whether the Fund's adviser or sub-adviser is one of our
affiliates or whether the Fund, its adviser, its sub-adviser(s), or an affiliate
will compensate us or our affiliates for providing certain administrative and
other services, as described above. We review the Funds periodically and may
remove a Fund or limit its availability to new premium payments and/or transfers
of cash value if we determine that the Fund no longer meets one or more of the
selection criteria, and/or if the Fund has not attracted significant allocations
from Policy Owners. We do not provide investment advice and do not recommend or
endorse any particular Fund.
POLICY RIGHTS
TRANSFERS
Frequent requests from Policy Owners to transfer cash value may dilute the
value of a Fund's shares if the frequent trading involves an attempt to take
advantage of pricing inefficiencies created by a lag between a change in the
value of the securities held by the Fund and the reflection of that change in
the Fund's share price ("arbitrage trading"). Regardless of the existence of
pricing inefficiencies, frequent transfers may also increase brokerage and
administrative costs of the underlying Funds and may disrupt portfolio
management strategy, requiring a Fund to maintain a high cash position and
possibly resulting in lost investment opportunities and forced liquidations
("disruptive trading"). Accordingly, arbitrage trading and disruptive trading
activities (referred to collectively as "market timing") may adversely affect
the long-term performance of the Funds, which may in turn adversely affect
Policy Owners and other persons who may have an interest in the Policies (e.g.,
beneficiaries).
We have policies and procedures that attempt to detect and deter frequent
transfers in situations where we determine there is a potential for arbitrage
trading. Currently, we believe that such situations may be presented in the
international, small-cap, and high-yield Funds (i.e., the BlackRock Strategic
Value Portfolio, FI International Stock Portfolio, Morgan Stanley EAFE Index
Portfolio, Russell 2000 Index Portfolio, T. Rowe Price Small Cap Growth
Portfolio, Harris Oakmark International Portfolio, Lord Abbett Bond Debenture
Portfolio, Met/AIM Small Cap Growth Portfolio, VIP Overseas Portfolio, American
Funds Global Small Capitalization Fund, JPMorgan Small Company Stock Portfolio,
Russell Aggressive Equity Fund, Russell Non-U.S. Fund, Van Eck Worldwide
Emerging Markets Fund and Van Eck Worldwide Hard Assets Fund) and we monitor
transfer activity in those Funds (the "Monitored Portfolios"). We employ various
means to monitor transfer activity, such as examining the frequency and size of
transfers into and out of the Monitored Portfolios within given periods of time.
For example, we currently monitor transfer activity to determine if, for each
category of international, small-cap, and high-yield Monitored Portfolios, in a
12-month period there were: (1) six or more transfers involving the given
category; (2) cumulative gross transfers involving the given category that
exceed the current Cash Value; and (3) two or more "round-trips" involving any
Monitored Portfolio in the given category. A round-trip generally is defined as
a transfer in followed by a transfer out within the next seven calendar days or
a transfer out followed by a transfer in within the next seven calendar days, in
either case subject to certain other criteria.
Our policies and procedures may result in transfer restrictions being
applied to deter market timing. Currently, when we detect transfer activity in
the Monitored Portfolios that exceeds our current transfer limits, or other
transfer activity that we believe may be harmful to other Policy Owners or other
persons who have an interest in the Policies, we require all future transfer
requests to or from any Monitored Portfolios or other identified Portfolios
under that Policy to be submitted either (i) in writing with an original
signature or (ii) by telephone prior to 10:00 a.m.
10
Transfers made under the dollar cost averaging program or the portfolio
rebalancing program are not treated as transfers when we evaluate trading
patterns for market timing.
The detection and deterrence of harmful transfer activity involves
judgments that are inherently subjective, such as the decision to monitor only
those Funds that we believe are susceptible to arbitrage trading or the
determination of the transfer limits. Our ability to detect and/or restrict such
transfer activity may be limited by operational and technological systems, as
well as our ability to predict strategies employed by Policy Owners to avoid
such detection. Our ability to restrict such transfer activity may also be
limited by provisions of the Policy. Accordingly, there is no assurance that we
will prevent all transfer activity that may adversely affect Policy Owners and
other persons with interests in the Policies. We do not accommodate market
timing in any Funds and there are no arrangements in place to permit any Policy
Owner to engage in market timing; we apply our policies and procedures without
exception, waiver, or special arrangement.
The Funds may have adopted their own policies and procedures with respect
to frequent purchases and redemptions of their respective shares, and we reserve
the right to enforce these policies and procedures. For example, Funds may
assess a redemption fee (which we reserve the right to collect) on shares held
for a relatively short period. The prospectuses for the Funds describe any such
policies and procedures, which may be more or less restrictive than the policies
and procedures we have adopted. Policy Owners and other persons with interests
in the Policies should be aware that we may not have the contractual obligation
or the operational capacity to apply the frequent trading policies and
procedures of the Funds. However, under rules recently adopted by the Securities
and Exchange Commission, effective October 16, 2006 we will be required to (1)
enter into a written agreement with each Fund or its principal underwriter that
will obligate us to provide to the Fund promptly upon request certain
information about the trading activity of individual Policy Owners, and (2)
execute instructions from the Fund to restrict or prohibit further purchases or
transfers by specific Policy Owners who violate the frequent trading policies
established by the Fund.
In addition, Policy Owners and other persons with interests in the Policies
should be aware that some Funds may receive "omnibus" purchase and redemption
orders from other insurance companies or intermediaries such as retirement
plans. The omnibus orders reflect the aggregation and netting of multiple orders
from individual owners of variable insurance policies and/or individual
retirement plan participants. The omnibus nature of these orders may limit the
Funds in their ability to apply their frequent trading policies and procedures.
In addition, the other insurance companies and/or retirement plans may have
different policies and procedures or may not have any such policies and
procedures because of contractual limitations. For these reasons, we cannot
guarantee that the Funds (and thus Policy Owners) will not be harmed by transfer
activity relating to the other insurance companies and/or retirement plans that
may invest in the Funds.
In accordance with applicable law, we reserve the right to modify or
terminate the transfer privilege at any time. We also reserve the right to defer
or restrict the transfer privilege at any time that we are unable to purchase or
redeem shares of any of the Funds, including any refusal or restriction on
purchases or redemptions of their shares as a result of their own policies and
procedures on market timing activities (even if an entire omnibus order is
rejected due to the market timing activity of a single Policy Owner). You should
read the Fund prospectuses for more details.
THE GENERAL ACCOUNT
TRANSFERS, SURRENDERS, PARTIAL WITHDRAWALS AND POLICY LOANS
We are not currently imposing the Maximum Amount limit on transfers and
withdrawals from the General Account, but we reserve the right to do so.
11
FEDERAL TAX MATTERS
INTRODUCTION
The following summary provides a general description of the Federal income
tax considerations associated with the Policy and does not purport to be
complete or to cover all situations. This discussion is not intended as tax
advice. Counsel or other competent tax advisers should be consulted for more
complete information. This discussion is based upon General American's
understanding of the present Federal income tax laws as they are currently
interpreted by the Internal Revenue Service. No representation is made as to the
likelihood of continuation of the present Federal income tax laws or of the
current interpretations by the Internal Revenue Service.
TAX STATUS OF THE POLICY
In order to qualify as a life insurance contract for Federal income tax
purposes and to receive the tax treatment normally accorded life insurance
contracts under Federal tax law, a Policy must satisfy certain requirements
which are set forth in the Internal Revenue Code. Guidance as to how these
requirements are to be applied is limited, in particular, with respect to joint
and last survivor life insurance policies. Nevertheless, we believe that the
Policies should satisfy the applicable requirements. There is less guidance,
however, with respect to Policies issued on a substandard or guaranteed issue
basis and Policies with term riders added, and it is not clear whether such
policies will in all cases satisfy the applicable requirements, particularly if
the owner pay the full amount of premiums under the Policy. We may take
appropriate steps to bring the Policy into compliance with applicable
requirements, and we reserve the right to restrict Policy transactions in order
to do so. The insurance proceeds payable on the death of the insured will never
be less than the minimum amount required for the Policy to be treated as life
insurance under section 7702 of the Internal Revenue Code, as in effect on the
date the Policy was issued.
In some circumstances, owners of variable contracts who retain excessive
control over the investment of the underlying separate account assets may be
treated as the owners of those assets. Although published guidance in this area
does not address certain aspects of the Policies, we believe that the Owner of a
Policy should not be treated as the owner of the Separate Account assets. We
reserve the right to modify the Policies to bring them into conformity with
applicable standards should such modification be necessary to prevent Owners of
the Policies from being treated as the owners of the underlying Separate Account
assets.
In addition, the Code requires that the investments of the Separate Account
be "adequately diversified" in order for the Policies to be treated as life
insurance contracts for Federal income tax purposes. It is intended that the
Separate Account, through the Eligible Funds, will satisfy these diversification
requirements.
The following discussion assumes that the Policy will qualify as a life
insurance contract for Federal income tax purposes.
1. TAX TREATMENT OF POLICY BENEFITS. In general, the Company believes that
the proceeds and Cash Value increases of a Policy should be treated in a manner
consistent with a fixed-benefit life insurance policy for Federal income tax
purposes. Thus, the death benefit under the Policy should be excludable from the
gross income of the Beneficiary under Section 101(a)(1) of the Code, unless a
transfer for value (generally a sale of the policy) has occurred. Many changes
or transactions involving a Policy may have tax consequences, depending on the
circumstances. Such changes include, but are not limited to, the exchange of the
Policy, a change of the Policy's Face Amount, a Policy Loan, an additional
premium payment, a Policy lapse with an outstanding Policy Loan, a partial
withdrawal, or a surrender of the Policy. The transfer of the Policy or
designation of a Beneficiary may have Federal, state, and/or local transfer and
inheritance tax consequences, including the imposition of gift, estate, and
generation-skipping transfer taxes. For example, the transfer of the Policy to,
or the designation as a Beneficiary of, or the payment of proceeds to, a person
who is assigned to a generation which is two or more generations below the
generation assignment of the Owner may have generation skipping transfer tax
consequences under Federal tax law. The individual situation of each Owner or
Beneficiary will determine the extent, if any, to which Federal, state, and
local transfer and inheritance taxes may be imposed and how ownership or receipt
of Policy proceeds will be treated for purposes of Federal, state and local
estate, inheritance, generation skipping and other taxes.
A Policy may also be used in various arrangements, including non-qualified
deferred compensation or salary continuation plans, split dollar insurance
plans, executive bonus plans, retiree medical benefit plans and others. The tax
consequences of such plans may vary depending on the particular facts and
circumstances of each individual
12
arrangement. Therefore, if you are contemplating the use of a Policy in any
arrangement the value of which depends in part on its tax consequences, you
should be sure to consult a qualified tax adviser regarding the tax attributes
of the particular arrangement.
Generally, the Owner will not be deemed to be in constructive receipt of
the Policy's Cash Value, including increments thereof, under the Policy until
there is a distribution. Under a complete surrender or lapse of any Policy, if
the amount received plus the amount of outstanding Indebtedness exceeds the
total investments in the Policy, the excess will generally be treated as
ordinary income subject to tax. The tax consequences of other distributions
from, and Policy Loans taken from or secured by, a Policy depend upon whether
the Policy is classified as a "modified endowment contract".
2. MODIFIED ENDOWMENT CONTRACTS. A policy may be treated as a modified
endowment contract depending upon the amount of premiums paid in relation to the
death benefit provided under such Policy. The premium limitation rules for
determining whether a Policy is a modified endowment contract are extremely
complex. In general, however, a Policy will be a modified endowment contract if
the accumulated premiums paid at any time during the first seven Policy Years
exceed the sum of the net level premiums which would have been paid on or before
such time if the Policy provided for paid-up future benefits after the payment
of seven level annual premiums.
In addition, if a Policy is "materially changed" it may cause such Policy
to be treated as a modified endowment contract. The material change rules for
determining whether a Policy is a modified endowment contract are also extremely
complex. In general, however, the determination of whether a Policy will be a
modified endowment contract after a material change generally depends upon the
relationship among the death benefit at the time of such change, the Cash Value
at the time of the change and the additional premiums paid in the seven Policy
Years starting with the date on which the material change occurs.
Moreover, a life insurance contract received in exchange for a life
insurance contract classified as a modified endowment contract will also be
treated as a modified endowment contract. A reduction in a Policy's benefits may
also cause such Policy to become a modified endowment contract.
Accordingly, a prospective Owner should contact a competent tax adviser
before purchasing a Policy to determine the circumstances under which the Policy
would be a modified endowment contract. In addition, an Owner should contact a
competent tax adviser before paying any additional premiums or making any other
change to, including an exchange of, a Policy to determine whether such premium
or change would cause the Policy (or the new Policy in the case of an exchange)
to be treated as a modified endowment contract.
NOTE: MOST DESTINY POLICIES WERE MODIFIED ENDOWMENT CONTACTS FROM THE DATE OF
ISSUE, THEREFORE, DISTRIBUTIONS FROM MOST DESTINY POLICIES ARE TAXED AS FOLLOWS:
3. DISTRIBUTIONS FROM POLICIES CLASSIFIED AS MODIFIED ENDOWMENT
CONTRACT. Policies classified as modified endowment contracts will be subject
to the following tax rules: First, all distributions, including distributions
upon surrender, from such a Policy are treated as ordinary income subject to tax
up to the amount equal to the excess (if any) of the Cash Value immediately
before the distribution over the investment in the Policy (described below) at
such time. Second, Policy Loans taken from, or secured by, such a Policy, as
well as due but unpaid interest thereon, are treated as distributions from such
a Policy and taxed accordingly. Third, a 10 percent additional income tax is
imposed on the portion of any distribution from, or Policy Loan taken from or
secured by, such a Policy that is included in income, except where the
distribution or Policy Loan (a) is made on or after the Owner attains age
59 1/2, (b) is attributable to the Owner's becoming disabled, or (c) is part of
a series of substantially equal periodic payments for the life (or life
expectancy) of the Owner or the joint lives (or joint life expectancies) of the
Owner and the Owner's Beneficiary.
4. DISTRIBUTIONS FROM POLICIES NOT CLASSIFIED AS MODIFIED ENDOWMENT
CONTRACT. Distributions from Policies not classified as a modified endowment
contracts are generally treated as first recovering the investment in the Policy
(described below) and then, only after the return of all such investment in the
Policy, as distributing taxable income. An exception to this general rule occurs
in the case of a decrease in the Policy's death benefit (possibly including a
partial withdrawal) or any other change that reduces benefits under the Policy
in the first 15 years after the Policy is issued and that results in cash
distribution to the Owner in order for the Policy to continue complying with the
Section 7702 definitional limits. Such a cash distribution will be taxed in
whole or in part as ordinary income (to the extent of any gain in the Policy)
under rules prescribed in Section 7702.
13
Policy Loans from, or secured by, a Policy that is not a modified endowment
contract should generally not be treated as distributions. Instead, such loans
should generally be treated as indebtedness of the Owner. However, because the
tax consequences associated with Policy Loans are not always clear, in
particular, with respect to Policy Loans outstanding after the tenth Policy
year, you should consult a tax adviser prior to taking any Policy Loan.
Upon a complete surrender or lapse of a Policy that is not a modified
endowment contract, if the amount received plus the amount of indebtedness
exceeds the total investment in the Policy, the excess will generally be treated
as ordinary income subject to tax.
Neither distributions (including distributions upon surrender or lapse) nor
Policy Loans from, or secured by, a Policy that is not a modified endowment
contract are subject to the 10 percent additional income tax.
If a Policy which is not a modified endowment contract subsequently becomes
a modified endowment contract, then any distribution made from the Policy within
two years prior to the date of such change in status may become taxable.
5. POLICY LOANS. Generally, interest paid on any loan under a life
insurance Policy is not deductible. AN OWNER SHOULD CONSULT A COMPETENT TAX
ADVISER IF THE DEDUCTIBILITY OF LOAN INTEREST IS A CONSIDERATION IN THE PURCHASE
OF A POLICY. If a Policy Loan is outstanding when a Policy is canceled or
lapses, the amount of the outstanding Indebtedness will be added to the amount
distributed and will be taxed accordingly.
6. INTEREST EXPENSE ON UNRELATED INDEBTEDNESS. Under provisions added to
the Code in 1997 for policies issued after June 8, 1997, if a business taxpayer
owns or is the beneficiary of a Policy on the life of any individual who is not
an officer, director, employee, or 20 percent owner of the business, and the
taxpayer also has debt unrelated to the Policy, a portion of the taxpayer's
unrelated interest expense deductions may be lost. No business taxpayer should
purchase, exchange, or increase the death benefit under a Policy on the life of
any individual who is not an officer, director, employee, or 20 percent owner of
the business without first consulting a competent tax adviser.
7. INVESTMENT IN THE POLICY. Investment in the Policy means (i) the
aggregate amount of any premiums or other consideration paid for a Policy, minus
(ii) the aggregate amount received under the Policy which is excluded from gross
income of the Owner (except that the amount of any Policy Loan from, or secured
by, a Policy that is a modified endowment contract, to the extent such amount is
excluded from gross income, will be disregarded), plus (iii) the amount of any
Policy Loan from, or secured by, a Policy that is a modified endowment contract
to the extent that such amount is included in the gross income of the Owner.
8. MULTIPLE POLICES. All modified endowment contracts that are issued by
the Company (or its affiliates) to the same Owner during any calendar year are
treated as one modified endowment contract for purposes of determining the
amount includible in gross income under Section 72(e) of the Code.
9. LIFE INSURANCE PURCHASES BY NONRESIDENT ALIENS AND FOREIGN
CORPORATIONS. Policy Owners that are not U.S. citizens or residents will
generally be subject to U.S. Federal withholding tax on taxable distributions
from life insurance policies at a 30% rate, unless a lower treaty rate applies.
In addition, Policy Owners may be subject to state and/or municipal taxes and
taxes that may be imposed by the Policy Owner's country of citizenship or
residence.
10. WITHHOLDING. To the extent that Policy distributions are taxable, they
are generally subject to withholding for the recipient's Federal income tax
liability. Recipients can generally elect, however, not to have tax withheld
from distributions.
11. ESTATE, GIFT AND GENERATION-SKIPPING TRANSFER TAXES. The transfer of
the Policy or the designation of a beneficiary may have Federal, state, and/or
local transfer and inheritance tax consequences, including the imposition of
gift, estate, and generation-skipping transfer taxes. When the insured dies, the
death proceeds will generally be includable in the Policy Owner's estate for
purposes of the Federal estate tax if the Policy Owner was the insured. If the
Policy Owner was not the insured, the fair market value of the Policy would be
included in the Policy Owner's estate upon the Policy Owner's death. The Policy
would not be includable in the insured's estate if the insured neither retained
incidents of ownership at death nor had given up ownership within three years
before death.
Moreover, under certain circumstances, the Internal Revenue Code may impose
a "generation-skipping transfer tax" when all or part of a life insurance policy
is transferred to, or a death benefit is paid to, an individual two or more
14
generations younger than the Policy Owner. Regulations issued under the Internal
Revenue Code may require us to deduct the tax from your Policy, or from any
applicable payment, and pay it directly to the IRS.
Qualified tax advisers should be consulted concerning the estate and gift
tax consequences of Policy ownership and distributions under Federal, state and
local law. The individual situation of each Policy Owner or beneficiary will
determine the extent, if any, to which Federal, state, and local transfer and
inheritance taxes may be imposed and how ownership or receipt of Policy proceeds
will be treated for purposes of Federal, state and local estate, inheritance,
generation-skipping and other taxes.
The Economic Growth and Tax Relief Reconciliation Act of 2001 ("EGTRRA")
repeals the Federal estate tax and replaces it with a carryover basis income tax
regime effective for estates of decedents dying after December 31, 2009. EGTRRA
also repeals the generation-skipping transfer tax, but not the gift tax, for
transfers made after December 31, 2009. EGTRRA contains a sunset provision,
which essentially returns the Federal estate, gift and generation-skipping
transfer taxes to their pre-EGTRRA form, beginning in 2011. Congress may or may
not enact permanent repeal between now and then.
During the period prior to 2010, EGTRRA provides for periodic decreases in
the maximum estate tax rate coupled with periodic increases in the estate tax
exemption. For 2006, the maximum estate tax rate is 46% and the maximum rate for
2007-2009 is 45%. The estate tax exemption is $2,000,000 for 2006-2008 and
$3,500,000 in 2009.
The complexity of the new tax law, along with uncertainty as to how it
might be modified in coming years, underscores the importance of seeking
guidance from a qualified adviser to help ensure that your estate plan
adequately addresses your needs and those of your beneficiaries under all
possible scenarios.
12. CONTINUATION OF POLICY BEYOND ATTAINED AGE 100. The tax consequences
of continuing the Policy beyond the Insured's Attained Age 100 birthday are
unclear. You should consult a tax adviser if you intend to keep the Policy in
force beyond the Insured's Attained Age 100.
13. Ownership of the Policy by a corporation, trust or other non-natural
person could jeopardize some (or all) of such entity's interest deduction under
Internal Revenue Code Section 264, even where such entity's indebtedness is in
no way connected to the Policy. In addition, under Section 264(f)(5), if a
business (other than a sole proprietorship) is directly or indirectly a
beneficiary of the Policy, the Policy could be treated as held by the business
for purposes of the Section 264(f) entity-holder rules. Therefore, it would be
advisable to consult with a qualified tax adviser before any non-natural person
is made an owner or holder of the Policy, or before a business (other than a
sole proprietorship) is made a beneficiary of the Policy.
14. GUIDANCE ON SPLIT DOLLAR PLANS. The IRS has issued guidance on split
dollar insurance plans. A tax adviser should be consulted with respect to this
guidance if your Policy is, or may become, subject to a split dollar insurance
plan. If your Policy is part of an equity split dollar arrangement, there is a
risk that some portion of the Policy cash value may be taxed prior to any Policy
distribution.
In addition, the Sarbanes-Oxley Act of 2002 (the "Act") which was signed
into law on July 30, 2002, prohibits, with exceptions, publicly-traded
companies, including non-U.S. companies that have securities listed on U.S.
exchanges, from extending, directly or indirectly or through a subsidiary, many
types of personal loans to their directors or executive officers. It is possible
that this prohibition may be interpreted to apply to split-dollar life insurance
arrangements for directors and executive officers of such companies, since such
arrangements can arguably be viewed as involving a loan from the employer for at
least some purposes.
Although the prohibition on loans generally took effect as of July 30,
2002, there is an exception for loans outstanding as of the date of enactment,
so long as there is no material modification to the loan terms and the loan is
not renewed after July 30, 2002. Any affected business contemplating the payment
of a premium on an existing Policy or the purchase of new Policy in connection
with a split-dollar life insurance arrangement should consult legal counsel.
Split dollar insurance plans that provide deferred compensation may be
subject to recently enacted rules governing deferred compensation arrangements.
Failure to adhere to these rules will result in adverse tax consequences. A tax
adviser should be consulted with respect to such plans.
15
15. ALTERNATIVE MINIMUM TAX. There may also be an indirect tax upon the
income in the Policy or the proceeds of a Policy under the Federal corporate
alternative minimum tax, if the Owner is subject to that tax.
16. PUERTO RICO. We believe that Policies subject to Puerto Rican tax law
will generally receive treatment similar, with certain modifications, to that
described above. Among other differences, Policies governed by Puerto Rican tax
law are not currently subject to the rules described above regarding Modified
Endowment Contracts. You should consult your tax adviser with respect to Puerto
Rican tax law governing the Policies.
17. POSSIBLE TAX LAW CHANGES. Although the likelihood of legislative
changes is uncertain, there is always the possibility that the tax treatment of
the Policy could change by legislation or otherwise. Consult a tax adviser with
respect to legislative developments and their effect on the Policy.
18. FOREIGN TAX CREDITS. To the extent permitted under Federal tax law, we
may claim the benefit of certain foreign tax credits attributable to taxes paid
by certain Eligible Funds to foreign jurisdictions.
19. POSSIBLE CHARGE FOR TAXES. At the present time, the Company makes no
charge to the Separate Account for any Federal, state, or local taxes (as
opposed to Premium Tax Charges which are deducted from premium payments) that it
incurs which may be attributable to such Separate Account or to the Policies.
The Company, however, reserves the right in the future to make a charge for any
such tax or other economic burden resulting from the application of the tax laws
that it determines to be properly attributable to the Separate Account or to the
Policies.
MANAGEMENT
The directors and executive officers of General American Life Insurance
Company and their principal business experience are:
DIRECTORS OF GENERAL AMERICAN
<Table>
<Caption>
NAME AND PRINCIPAL BUSINESS ADDRESS PRINCIPAL BUSINESS EXPERIENCE
----------------------------------- -----------------------------
Michael K. Farrell* Director of General American since 2003 and Senior Vice
President of Metropolitan Life Insurance Company since
2002.
Leland C. Launer, Jr.** Director of NELICO since 2005 and President, Institutional
Business of Metropolitan Life Insurance Company since 2005.
Formerly, Executive Vice President and Chief Investment
Officer 2003-2005 of Metropolitan Life Insurance Company.
James L. Lipscomb** Director of General American since 2002 and Executive
Vice-President and General Counsel of Metropolitan Life
Insurance Company since 2003. Formerly, Senior Vice
President and Deputy General Counsel 2001-2003 of
Metropolitan Life; President and Chief Executive Officer
2000-2001 of Conning Corporation.
Hugh C. McHaffie*** Director of General American since 2004 and Senior Vice
President of Metropolitan Life Insurance Company since
2000.
Catherine A. Rein** Director of General American since 2004 and Senior
Executive Vice President and Chief Administrative Officer
of Metropolitan Life Insurance Company since 2005.
Formerly, President and Chief Executive Officer 1999- 2004
of Metropolitan Property and Casualty.
Stanley J. Talbi** Director of General American since 2002 and Senior Vice
President of Metropolitan Life Insurance Company since
1974.
Michael J. Vietri**** Director of NELICO since 2005 and Executive Vice President
of Metropolitan Life Insurance Company since 2005.
Formerly, Senior Vice President 1999-2004 of Metropolitan
Life Insurance Company.
Lisa M. Weber** Chairman of the Board, President and Chief Executive
Officer of General American since 2004 and President,
Individual Business of Metropolitan Life Insurance Company
since 2004; formerly, Director of General American since
2000 and Senior Executive Vice President and Chief
Administrative Officer 2001- 2004.
</Table>
16
<Table>
<Caption>
NAME AND PRINCIPAL BUSINESS ADDRESS PRINCIPAL BUSINESS EXPERIENCE
----------------------------------- -----------------------------
William J. Wheeler** Director of General American since 2002 and Executive Vice
President and Chief Financial Officer of Metropolitan Life
Insurance Company since 2003. Formerly, Senior Vice
President 1997-2003 of Metropolitan Life.
Anthony J. Williamson** Director, Vice President and Treasurer of General American
since 2002 and Senior Vice President and Treasurer of
Metropolitan Life Insurance Company since 2001.
</Table>
EXECUTIVE OFFICERS OF GENERAL AMERICAN OTHER THAN DIRECTORS
<Table>
<Caption>
NAME AND PRINCIPAL BUSINESS ADDRESS PRINCIPAL BUSINESS EXPERIENCE
----------------------------------- -----------------------------
Joseph J. Prochaska, Jr.** Senior Vice President and Chief Accounting Officer of
General American since 2004 and Senior Vice President and
Chief Accounting Officer of Metropolitan Life Insurance
Company since 2003. Formerly, Senior Vice President and
Controller 2000-2003 of Aon Corporation.
</Table>
---------------
The principal business address:
* Metropolitan Life, 10 Park Avenue, Morristown, NJ 07962
** Metropolitan Life, One MetLife Plaza, 27-01 Queens Plaza, North, Long
Island City, NY 11101
*** Metropolitan Life, 501 Boylston Street, Boston, MA 02116
**** Metropolitan Life, 177 South Commons Drive, Aurora, IL 60504
VOTING RIGHTS
Based on its understanding of current applicable legal requirements, the
Company will vote the shares of the Funds held in the Separate Account at
regular and special shareholder meetings of the mutual funds in accordance with
the instructions received from persons having voting interests in the
corresponding Divisions of the Separate Account. If, however, the 1940 Act or
any regulation thereunder should be amended or if the present interpretation
thereof should change, and as a result the Company determines that it is
permitted to vote shares of the Fund in its own right, it may elect to do so. No
voting privileges apply to the Policies with respect to Cash Value removed from
the Separate Account as a result of a Policy Loan.
The number of votes which an Owner has the right to instruct will be
calculated separately for each Division. Voting rights reflect the dollar value
of the total number of units of each Division of the Separate Account credited
to the Owner at the record date, rather than the number of units alone.
Fractional shares will be counted. The number of votes of the Fund which the
Owner has the right to instruct will be determined as of the date coincident
with the date established by that Fund for determining shareholders eligible.
Voting instructions will be solicited by written communications prior to such
meeting in accordance with procedures established by the mutual funds.
The company will vote shares of a Fund for which no timely instructions are
received in proportion to the voting instructions which are received with
respect to that Fund. The Company will also vote any shares of the Funds which
are not attributable to Policies in the same proportion.
Each person having a voting interest in a Division will receive any proxy
material, reports, and other materials relating to the appropriate Fund.
DISREGARD OF VOTING INSTRUCTIONS. The Company may, when required by state
insurance regulatory authorities, disregard voting instructions if the
instructions require that the shares be voted so as to cause a change in the
subclassification or investment objective of the Fund or to approve or
disapprove an investment Advisory contract for a Fund. In addition, the Company
itself may disregard voting instructions in favor of changes initiated by an
Owner in the investment policy or the investment adviser or sub-adviser of a
Fund if the Company reasonably disapproves of such changes. A proposed change
would be disapproved only if the proposed change is contrary to state law or
prohibited by state regulatory authorities, or the Company determined that the
change would have an adverse effect on its General Account in that the proposed
investment policy for a Fund may result in overly speculative or unsound
investments. If the Company disregards voting instructions, a summary of that
action and the reasons for such action will be included in the next annual
report to Owners.
17
RESTRICTIONS ON FINANCIAL TRANSACTIONS
Applicable laws designed to counter terrorism and prevent money laundering
might, in certain circumstances, require us to reject a premium payment and/or
block or "freeze" your Policy. If these laws apply in a particular situation, we
would not be allowed to process any request for withdrawals, surrenders, loans
or death benefits, make transfers or continue making payments under your death
benefit option until instructions are received from the appropriate regulator.
We also may be required to provide additional information about you or your
Policy to government regulators.
LEGAL PROCEEDINGS
General American, like other insurance companies, is involved in lawsuits,
including class action lawsuits. In some class action lawsuits involving
insurers, substantial damages have been sought and/or material settlement
payments have been made. In addition, on May 14, 2004, MetLife, Inc. announced
that General American had received a "Wells Notice" from the Securities and
Exchange Commission in connection with an SEC investigation regarding market
timing and late trading in a limited number of its privately-placed variable
insurance contracts. The Wells Notice provides notice that the SEC staff is
considering recommending that the SEC bring a civil action alleging violations
of U.S. securities laws. Under SEC procedures, General American can avail itself
of the opportunity to respond to the SEC staff before it makes a formal
recommendation regarding whether any action alleging violations of the U.S.
securities laws should be considered. General American has responded to the
Wells Notice. General American continues to cooperate fully with the SEC in its
investigation and is not aware of any systemic problems with respect to such
matters. Although the outcome of any litigation or administrative or other
proceedings cannot be predicted with certainty, General American does not
believe any such litigation or proceedings will have a materially adverse impact
upon the Separate Account, or upon the ability of MetLife Investors Distribution
Company to perform its contract with the Separate Account, or of General
American to meet its obligations under the Policies.
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The financial statements of General American Separate Account Eleven and
General American Life Insurance Company (which report expresses an unqualified
opinion and includes an explanatory paragraph referring to the change in the
method of accounting for certain non-traditional long duration contracts and
separate accounts, and for embedded derivatives in certain insurance products as
required by new accounting guidance which became effective on January 1, 2004
and October 1, 2003, respectively), included in this Prospectus Supplement have
been audited by Deloitte & Touche LLP, an independent registered public
accounting firm, as stated in their reports appearing herein, and are included
in reliance upon the reports of such firm given upon their authority as experts
in accounting and auditing. The principal address of Deloitte & Touche LLP is
201 East Kennedy Boulevard, Suite 1200, Tampa, Florida 33602-5827.
FINANCIAL STATEMENTS
The financial statements of General American which are included in this
prospectus supplement should be distinguished from the financial statements of
the Separate Account, and should be considered only as bearing on the ability of
General American to meet its obligations under the Policy. They should not be
considered as bearing on the investment performance of the assets held in the
Separate Account.
18
GENERAL AMERICAN LIFE SUPPLEMENT
GENERAL AMERICAN LIFE INSURANCE COMPANY
13045 TESSON FERRY ROAD
ST. LOUIS, MISSOURI 63128
AMERICAN VISION SERIES VUL 2002
VARIABLE LIFE INSURANCE POLICY (DESTINY)
Supplement dated February 15, 2005
to the Prospectuses dated May 1, 2004
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICIES
(VARIABLE UNIVERSAL LIFE/EXECUTIVE BENEFIT)
FLEXIBLE PREMIUM JOINT AND LAST SURVIVOR POLICIES
Supplement dated February 15, 2005
to the Prospectuses dated May 1, 2002
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICIES
(VUL 95/VUL 100/VGSP/RUSSELL VUL)
Supplement dated February 15, 2005
to the Prospectuses dated May 1, 2000
General American Life Insurance Company (the "Company") has filed an
application with the Securities and Exchange Commission ("SEC") requesting an
order to allow the Company to remove the VIP High Income Portfolio as an
investment option under the Company's variable life insurance policies and to
replace it with the Lord Abbett Bond Debenture Portfolio, which is an existing
investment option under your Policy. Fidelity Management & Research Company is
the adviser to the High Income Portfolio. Lord, Abbett & Co. LLC is the
subadviser to the Lord Abbett Bond Debenture Portfolio.
The Company believes that the proposed substitution is in the best interest
of policy owners. The Lord Abbett Bond Debenture Portfolio has investment
objectives and policies similar to the VIP High Income Portfolio. The Company
will bear all expenses related to the substitution, and it will have no tax
consequences for you. The Company anticipates that, if such order is granted,
the proposed substitution will occur on or about May 1, 2005.
Please note that:
- No action is required on your part at this time. You will not need to
file a new election or take any immediate action if the SEC approves the
substitution.
- The elections you have on file for allocating your premium payments and
your cash value (under the Dollar Cost Averaging or Portfolio Rebalancing
programs) to the VIP High Income Division will be redirected to the Lord
Abbett Bond Debenture Division unless you change your elections or
transfer your cash value before the substitution takes place.
- You may transfer your Policy cash value among the investment Divisions
and the General Account as usual. The substitution itself will not be
treated as a transfer for purposes of the transfer provisions of your
Policy.
- You may transfer your Policy cash value in the VIP High Income Division
(before the substitution) or the Lord Abbett Bond Debenture Division
(after the substitution) to any other investment Division without charge.
- On the effective date of the substitution, your cash value in the
investment Divisions will be the same as before the substitution.
However, the number of units you receive in the Lord Abbett Bond
Debenture Portfolio will be different from the number of your units in
the VIP High Income Portfolio due to the differences in unit values.
THIS SUPPLEMENT SHOULD BE RETAINED WITH YOUR PROSPECTUS FOR FUTURE REFERENCE.
GENERAL AMERICAN LIFE INSURANCE COMPANY
Variable Life Insurance Policy
(Destiny)
Supplement dated May 1, 2005
to the Prospectus dated May 1, 2004
Flexible Premium
Variable Life Insurance Policies
(Variable Universal Life/Executive Benefit)
Supplement dated May 1, 2005
to the Prospectuses dated May 1, 2002
Flexible Premium Joint and Last Survivor
Variable Life Insurance Policy
Supplement dated May 1, 2005
to the Prospectus dated May 1, 2002
Flexible Premium Variable Life Insurance Policies
(VUL 95/VUL 100/VGSP/Russell VUL)
Supplement dated May 1, 2005
to the Prospectuses dated May 1, 2000
This supplement updates certain information contained in the last full
prospectus for each of the above-referenced variable life insurance policies, as
annually and periodically supplemented. You should read and retain this
supplement. We will send you an additional copy of the last full prospectus for
your policy, without charge, on request. These policies are no longer available
for sale.
General American Life Insurance Company is an indirect wholly-owned
subsidiary of Metropolitan Life Insurance Company ("MetLife"). MetLife is a
wholly-owned subsidiary of MetLife, Inc., a publicly-traded company. General
American's Home Office is 13045 Tesson Ferry Road, St. Louis, Missouri 63128.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE POLICIES OR DETERMINED IF THIS
SUPPLEMENT IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE SECURITIES AND EXCHANGE COMMISSION MAINTAINS A WEB SITE THAT CONTAINS
MATERIAL INCORPORATED BY REFERENCE AND OTHER INFORMATION REGARDING REGISTRANTS
THAT FILE ELECTRONICALLY WITH THE SECURITIES AND EXCHANGE COMMISSION. THE
ADDRESS OF THE SITE IS HTTP://WWW.SEC.GOV.
THE UNDERLYING FUND PROSPECTUSES ARE ATTACHED. INCLUDED ARE PROSPECTUSES
FOR THE RUSSELL INVESTMENT FUNDS, WHICH MAY NOT BE AVAILABLE UNDER YOUR POLICY.
PLEASE READ THE PROSPECTUSES CAREFULLY AND KEEP THEM FOR REFERENCE.
WE DO NOT GUARANTEE HOW ANY OF THE DIVISIONS OR FUNDS WILL PERFORM. THE
POLICIES AND THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY FINANCIAL INSTITUTION AND ARE NOT FEDERALLY INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER
GOVERNMENT AGENCY.
YOUR PRIVACY NOTICE AND BUSINESS CONTINUITY PLAN DISCLOSURE ARE AT THE BACK OF
THIS BOOK AND ARE NOT PART OF THE PROSPECTUS
THE COMPANY
General American is principally engaged in writing individual life
insurance policies and annuity contracts. It is admitted to do business in 49
states, the District of Columbia, Puerto Rico, and in ten Canadian provinces.
The principal offices (Home Office) of General American are located at 13045
Tesson Ferry Road, St. Louis, Missouri 63128. The Administrative Office for
various Policy transactions is as follows:
FOR EXECUTIVE BENEFIT POLICY OWNERS:
<Table>
Premium Payments General American
P.O. Box 14490
St. Louis, MO 63178-4490
Surrenders, Loans, General American
Withdrawals and P.O. Box 543
Division Transfers Warwick, RI 02887-0543
Death Claims General American
P.O. Box 353
Warwick, RI 02887-0353
All Other Inquiries and General American
Transactions Attention: COLI
700 Quaker Lane
Warwick, RI 02887-0355
(800) 638-9294
</Table>
FOR ALL OTHER POLICY OWNERS:
<Table>
Premium Payments General American
P.O. Box 14490
St. Louis, MO 63178-4490
Payment Inquires and General American
Correspondence Remittance Processing
4100 Boy Scout Blvd.
Tampa, FL 33607
(800) 638-9294
Beneficiary and Ownership General American
Changes P. O. Box 355
Warwick, RI 02887-0355
Surrenders, Loans, General American
Withdrawals and P.O. Box 543
Division Transfers Warwick, RI 02887-0543
Death Claims General American
P.O. Box 353
Warwick, RI 02887-0353
All Telephone (800) 638-9294
Transactions and Inquiries
</Table>
You may request an account transfer or reallocation of future premiums by
written request (which may be telecopied) to our Administrative Office, by
telephoning us, or over the Internet. To request a transfer or reallocation by
telephone, you should contact your registered representative, or contact us at
(800) 638-9294. To request a transfer or reallocation over the Internet, you may
log on to our website at www.genamerica.com. We use reasonable procedures to
confirm that instructions communicated by telephone, facsimile or Internet are
genuine. Any telephone, facsimile or Internet instructions that we reasonably
believe to be genuine will be your responsibility, including losses arising from
any errors in the communication of instructions. However, because telephone and
Internet transactions may be available to anyone who provides certain
information about you and your Policy, you should protect that information. We
may not be able to verify that you are the person providing telephone or
Internet instructions, or that you have authorized any such person to act for
you.
2
Telephone, facsimile, and computer systems (including the Internet) may not
always be available. Any telephone, facsimile, or computer system, whether it is
yours, your service provider's, your registered representative's, or ours, can
experience outages or slowdowns for a variety of reasons. These outages or
slowdowns may delay or prevent our processing of your request. Although we have
taken precautions to help our systems handle heavy use, we cannot promise
complete reliability under all circumstances. If you are experiencing problems,
you should make your request by writing to our Administrative Office.
THE SEPARATE ACCOUNT. The separate account consists of divisions, each of
which corresponds to an underlying Fund. Each division may either make money or
lose money. Therefore if you invest in a division of the separate account, you
may either make money or lose money, depending on the investment experience of
that division. There is no guaranteed rate of return in the separate account.
The following chart shows the Funds that are available under the policy
along with the name of the investment adviser, sub-adviser (where applicable)
and investment objective of each Fund. The Funds have different investment goals
and strategies. You should review the prospectus of each Fund, or seek
professional guidance in determining which Fund(s) best meet your objectives.
NOTE: THE RUSSELL INVESTMENT FUNDS ARE NOT AVAILABLE TO DESTINY OR EXECUTIVE
BENEFIT POLICIES. FOR ALL OTHER POLICIES, THE RUSSELL INVESTMENT FUNDS ARE ONLY
AVAILABLE FOR POLICIES WITH AN ISSUE DATE PRIOR TO JANUARY 1, 2000.
AMERICAN FUNDS INSURANCE SERIES ADVISER: CAPITAL RESEARCH AND MANAGEMENT
COMPANY
<Table>
<Caption>
FUND SUB-ADVISER INVESTMENT OBJECTIVE
---- ----------- --------------------
American Funds Global N/A Capital appreciation through stocks.
Small Capitalization
Fund
American Funds Growth N/A Capital appreciation through stocks.
Fund
American Funds Growth- N/A Capital appreciation and income.
Income Fund
</Table>
FIDELITY(R) VARIABLE INSURANCE PRODUCTS ADVISER: FIDELITY MANAGEMENT & RESEARCH
COMPANY
<Table>
<Caption>
FUND SUB-ADVISER INVESTMENT OBJECTIVE
---- ----------- --------------------
VIP Equity-Income FMR Co., Inc. Reasonable income by investing primarily in
Portfolio income producing equity securities. The fund
will also consider the potential for capital
appreciation. The fund's goal is to achieve
a yield which exceeds the composite yield of
securities comprising the Standard & Poor's
500(SM) Index (S&P 500(R)).
VIP Growth Portfolio FMR Co., Inc. Capital appreciation.
VIP Mid Cap Portfolio FMR Co., Inc. Long-term growth of capital.
VIP Overseas Portfolio FMR Co., Inc. Long-term growth of capital.
</Table>
J.P. MORGAN SERIES TRUST II ADVISER: J.P. MORGAN INVESTMENT MANAGEMENT INC.
<Table>
<Caption>
FUND SUB-ADVISER INVESTMENT OBJECTIVE
---- ----------- --------------------
JPMorgan Bond N/A To provide high total return consistent with
Portfolio moderate risk of capital and maintenance of
liquidity.
JPMorgan Small Company N/A To provide high total return from a
Portfolio portfolio of small company stocks.
</Table>
3
MET INVESTORS SERIES TRUST ADVISER: MET INVESTORS ADVISORY LLC
<Table>
<Caption>
FUND SUB-ADVISER INVESTMENT OBJECTIVE
---- ----------- --------------------
Harris Oakmark Harris Associates L.P. Long-term capital appreciation.
International
Portfolio
Janus Aggressive Janus Capital Long-term growth of capital.
Growth Portfolio Management LLC
Lord Abbett Bond Lord, Abbett & Co. LLC High current income and the opportunity for
Debenture Portfolio capital appreciation to produce a high total
return.
Lord Abbett Growth and Lord, Abbett & Co. LLC Long-term growth of capital and income
Income Portfolio without excessive fluctuation in market
value.
Lord Abbett Mid-Cap Lord, Abbett & Co. LLC Capital appreciation through investments,
Value Portfolio primarily in equity securities, which are
believed to be undervalued in the
marketplace.
Met/AIM Mid Cap Core AIM Capital Long-term growth of capital.
Equity Portfolio Management, Inc.
Met/AIM Small Cap AIM Capital Long-term growth of capital.
Growth Portfolio Management, Inc.
MFS Research Massachusetts Capital appreciation
International Financial Services
Portfolio Company
Neuberger Berman Real Neuberger Berman Total return through investment in real
Estate Portfolio Management Inc. estate securities, emphasizing both capital
appreciation and current income.
PIMCO Total Return Pacific Investment Maximum total return, consistent with the
Portfolio Management Company LLC preservation of capital and prudent
investment management.
RCM Global Technology RCM Capital Management Capital appreciation; no consideration is
(formerly PIMCO PEA LLC(4) given to income.
Innovation)
T. Rowe Price Mid-Cap T. Rowe Price Long-term growth of capital.
Growth Portfolio Associates, Inc.
</Table>
METROPOLITAN SERIES FUND, INC. ADVISER: METLIFE ADVISERS,
LLC
<Table>
<Caption>
FUND SUB-ADVISER INVESTMENT OBJECTIVE
---- ----------- --------------------
BlackRock Aggressive BlackRock Advisors, Maximum capital appreciation.
Growth Portfolio Inc(1)
(formerly State Street
Research Aggressive
Growth)
BlackRock Bond Income BlackRock Advisors, A competitive total return primarily from
Portfolio (formerly Inc.(1) investing in fixed-income securities.
State Street Research
Bond Income)
BlackRock Diversified BlackRock Advisors, High total return while attempting to limit
Portfolio (formerly Inc.(1) investment risk and preserve capital.
State Street Research
Diversified)
</Table>
4
<Table>
<Caption>
FUND SUB-ADVISER INVESTMENT OBJECTIVE
---- ----------- --------------------
BlackRock Large Cap BlackRock Advisors, Long-term growth of capital.
Value Portfolio Inc.(1)
(formerly State Street
Research Large Cap
Value)
BlackRock Legacy Large BlackRock Advisors, Long-term growth of capital.
Cap Growth Portfolio Inc.(1)
(formerly State Street
Research Large Cap
Growth)
BlackRock Money Market BlackRock Advisors, A high level of current income consistent
Portfolio (formerly Inc.(1) with preservation of capital.
State Street Research
Money Market
Portfolio)(2)
BlackRock Strategic BlackRock Advisors, High total return, consisting principally of
Value Portfolio Inc.(1) capital appreciation.
(formerly State Street
Research Aurora)
Davis Venture Value Davis Selected Growth of capital.
Portfolio Advisers, L.P.(3)
FI International Stock Fidelity Management & Long-term growth of capital.
Portfolio Research Company
FI Mid Cap Fidelity Management & Long-term growth of capital.
Opportunities Research Company
Portfolio
Harris Oakmark Focused Harris Associates L.P. Long-term capital appreciation.
Value Portfolio
Harris Oakmark Large Harris Associates L.P. Long-term capital appreciation.
Cap Value Portfolio
Lehman Brothers(R) Metropolitan Life To equal the performance of the Lehman
Aggregate Bond Index Insurance Company Brothers Aggregate Bond Index.
Portfolio
MetLife Mid Cap Stock Metropolitan Life To equal the performance of the Standard &
Index Portfolio Insurance Company Poor's Mid Cap 400 Composite Stock Price
Index.
MetLife Stock Index Metropolitan Life To equal the performance of the Standard &
Portfolio Insurance Company Poor's 500 Composite Stock Price Index.
MFS Total Return Massachusetts Favorable total return through investment in
Portfolio Financial Services a diversified portfolio.
Company
Morgan Stanley EAFE(R) Metropolitan Life To equal the performance of the MSCI EAFE
Index Portfolio Insurance Company Index.
Neuberger Berman Mid Neuberger Berman Capital growth.
Cap Value Portfolio Management Inc.
(formerly Neuberger
Berman Partners Mid
Cap Value)
Russell 2000(R) Index Metropolitan Life To equal the return of the Russell 2000
Portfolio Insurance Company Index.
Salomon Brothers U.S. Salomon Brothers Asset To maximize total return consistent with
Government Portfolio Management Inc. preservation of capital and maintenance of
liquidity.
</Table>
5
<Table>
<Caption>
FUND SUB-ADVISER INVESTMENT OBJECTIVE
---- ----------- --------------------
T. Rowe Price Large T. Rowe Price Long-term growth of capital, and
Cap Growth Portfolio Associates, Inc. secondarily, dividend income.
T. Rowe Price Small T. Rowe Price Long-term capital growth.
Cap Growth Portfolio Associates, Inc.
</Table>
RUSSELL INVESTMENT FUNDS ADVISER: FRANK RUSSELL INVESTMENT MANAGEMENT
COMPANY
<Table>
<Caption>
FUND SUB-ADVISER INVESTMENT OBJECTIVE
---- ----------- --------------------
Aggressive Equity Fund Multiple sub-advisers To provide long term capital growth.
Core Bond Fund Multiple sub-advisers To provide current income and the
preservation of capital.
Multi-Style Equity Multiple sub-advisers To provide long-term capital growth.
Fund
Non-U.S. Fund Multiple sub-advisers To provide long-term capital growth.
</Table>
VAN ECK WORLDWIDE INSURANCE TRUST ADVISER: VAN ECK ASSOCIATES
CORPORATION
<Table>
<Caption>
FUND SUB-ADVISER INVESTMENT OBJECTIVE
---- ----------- --------------------
Worldwide Emerging N/A Long-term capital appreciation by investing
Markets Fund primarily in equity securities in emerging
markets around the world.
Worldwide Hard Assets N/A Long-term capital appreciation by investing
Fund primarily in "hard asset securities." Hard
asset securities are the stocks and bonds
and other securities of companies that
derive at least 50% of gross revenue or
profit from the exploration, development,
production or distribution of precious
metals, natural resources, real estate and
commodities. Income is a secondary
consideration.
</Table>
---------------
(1) Prior to January 31, 2005, State Street Research & Management Company was
the sub-adviser to this Portfolio.
(2) An investment in the State Street Research Money Market Portfolio is not
insured or guaranteed by the Federal Deposit Insurance Corporation or any
other government agency. Although the Portfolio seeks to preserve the value
of your investment at $100 per share, it is possible to lose money by
investing in the Portfolio. During extended periods of low interest rates,
the yields of the Division investing in the Money Market Portfolio may
become extremely low and possibly negative.
(3) Davis Selected Advisers, L.P. may also delegate any of its responsibilities
to Davis Selected Advisers--NY, Inc., a wholly-owned subsidiary.
(4) Prior to January 15, 2005, PEA Capital LLC was the sub-adviser to this
Portfolio.
FOR MORE INFORMATION REGARDING THE FUNDS AND THEIR INVESTMENT ADVISERS AND
SUB-ADVISERS, SEE THE FUND PROSPECTUSES ATTACHED AT THE END OF THIS PROSPECTUS
AND THEIR STATEMENTS OF ADDITIONAL INFORMATION.
OTHER FUNDS AND SHARE CLASSES
The Russell Investment Funds may not be available under your Policy, even
though they are described in the attached Fund prospectuses. The Real Estate
Securities Fund described in the Russell Investment Funds prospectus is not
available under any Policy.
Some of the Funds offer various classes of shares, each of which has a
different level of expenses. The prospectuses for the Funds may provide
information for share classes that are not available through the Policy. When
you consult the prospectus for any Fund, you should be careful to refer to only
the information regarding the class of shares that is available through the
Policy. For Fidelity Variable Insurance Products and the Van Eck Worldwide
Insurance Trust, we offer Initial Class shares; for the Metropolitan Series
Fund, Inc., we offer Class A
6
shares; for the Met Investors Series Trust, we offer Class A shares; and for the
American Funds Insurance Series, we offer Class 2 shares.
CHARGES AND DEDUCTIONS
The following table describes the annual operating expenses for each Fund
for the year ended December 31, 2004, before and after any applicable
contractual fee waivers and expense reimbursements:
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
<Table>
<Caption>
FEE
GROSS WAIVERS
TOTAL AND NET TOTAL
MANAGEMENT OTHER 12B-1 ANNUAL EXPENSE ANNUAL
FEES EXPENSES FEES EXPENSES REIMBURSEMENTS EXPENSES(1)
---------- -------- ----- -------- -------------- -----------
AMERICAN FUNDS INSURANCE SERIES
(CLASS 2 SHARES)
American Funds Global Small
Capitalization Fund.................... .77% .04% .25% 1.06% .00% 1.06%
American Funds Growth Fund............... .35% .01% .25% .61% .00% .61%
American Funds Growth-Income Fund........ .29% .02% .25% .56% .00% .56%
FIDELITY(R) VARIABLE INSURANCE PRODUCTS
(INITIAL CLASS SHARES)
VIP Equity-Income Portfolio.............. .47% .11% .00% .58% .00% .58%
VIP Growth Portfolio..................... .58% .10% .00% .68% .00% .68%
VIP Mid Cap Portfolio.................... .57% .14% .00% .71% .00% .71%
VIP Overseas Portfolio................... .72% .19% .00% .91% .00% .91%
J.P. MORGAN SERIES TRUST II(7)
JPMorgan Bond Portfolio.................. .30% .45% .00% .75% .00% .75%
JPMorgan Small Company Portfolio......... .60% .55% .00% 1.15% .00% 1.15%
MET INVESTORS SERIES TRUST
(CLASS A SHARES)
Harris Oakmark International Portfolio... .84% .20% .00% 1.04% .00% 1.04%(2,3)
Janus Aggressive Growth Portfolio........ .68% .14% .00% .82% .00% .82%(2,3)
Lord Abbett Bond Debenture Portfolio..... .52% .06% .00% .58% .00% .58%(2)
Lord Abbett Growth and Income
Portfolio.............................. .52% .05% .00% .57% .00% .57%(3)
Lord Abbett Mid-Cap Value Portfolio...... .69% .09% .00% .78% .00% .78%
Met/AIM Mid Cap Core Equity Portfolio.... .73% .12% .00% .85% .00% .85%(2,3)
Met/AIM Small Cap Growth Portfolio....... .90% .13% .00% 1.03% .00% 1.03%(2,3)
MFS Research International Portfolio..... .77% .29% .00% 1.06% .06% 1.00%(2,3)
Neuberger Berman Real Estate Portfolio... .70% .14% .00% .84% .00% .84%(2)
PIMCO Total Return Portfolio............. .50% .07% .00% .57% .00% .57%
RCM Global Technology Portfolio.......... .90% .01% .00% .91% .00% .91%(2)
T. Rowe Price Mid-Cap Growth Portfolio... .75% .15% .00% .90% .00% .90%(2,3)
METROPOLITAN SERIES FUND, INC.
(CLASS A SHARES)
BlackRock Aggressive Growth Portfolio.... .73% .06% .00% .79% .00% .79%
BlackRock Bond Income Portfolio.......... .40% .06% .00% .46% .00% .46%(4)
BlackRock Diversified Portfolio.......... .44% .06% .00% .50% .00% .50%
BlackRock Large Cap Value Portfolio...... .70% .23% .00% .93% .00% .93%(4)
</Table>
7
<Table>
<Caption>
FEE
GROSS WAIVERS
TOTAL AND NET TOTAL
MANAGEMENT OTHER 12B-1 ANNUAL EXPENSE ANNUAL
FEES EXPENSES FEES EXPENSES REIMBURSEMENTS EXPENSES(1)
---------- -------- ----- -------- -------------- -----------
BlackRock Legacy Large Cap Growth
Portfolio.............................. .74% .06% .00% .80% .00% .80%
BlackRock Money Market Portfolio......... .35% .07% .00% .42% .01% .41%(4)
BlackRock Strategic Value Portfolio...... .83% .06% .00% .89% .00% .89%
Davis Venture Value Portfolio............ .72% .06% .00% .78% .00% .78%
FI International Stock Portfolio......... .86% .22% .00% 1.08% .00% 1.08%
FI Mid Cap Opportunities Portfolio....... .68% .07% .00% .75% .00% .75%
Harris Oakmark Focused Value Portfolio... .73% .05% .00% .78% .00% .78%
Harris Oakmark Large Cap Value
Portfolio.............................. .73% .06% .00% .79% .00% .79%
Lehman Brothers Aggregate Bond Index
Portfolio.............................. .25% .07% .00% .32% .01% .31%(4)
MetLife Mid Cap Stock Index Portfolio.... .25% .10% .00% .35% .01% .34%(4)
MetLife Stock Index Portfolio............ .25% .05% .00% .30% .01% .29%(4)
MFS Total Return Portfolio............... .50% .14% .00% .64% .00% .64%
Morgan Stanley EAFE Index Portfolio...... .30% .29% .00% .59% .01% .58%(4)
Neuberger Berman Mid Cap Value
Portfolio.............................. .68% .08% .00% .76% .00% .76%
Russell 2000 Index Portfolio............. .25% .12% .00% .37% .01% .36%(4)
Salomon Brothers U.S. Government
Portfolio.............................. .55% .09% .00% .64% .00% .64%
T. Rowe Price Large Cap Growth
Portfolio.............................. .62% .12% .00% .74% .00% .74%(4)
T. Rowe Price Small Cap Growth
Portfolio.............................. .52% .08% .00% .60% .00% .60%
RUSSELL INVESTMENT FUNDS
(CLASS 2 SHARES)(5)
Aggressive Equity Fund................... .95% .22% .00% 1.17% .12% 1.05%
Core Bond Fund........................... .60% .13% .00% .73% .03% .70%
Multi-Style Equity Fund.................. .78% .10% .00% .88% .01% .87%
Non-U.S. Fund............................ .95% .33% .00% 1.28% .13% 1.15%
VAN ECK WORLDWIDE INSURANCE TRUST
(INITIAL CLASS SHARES)
Worldwide Emerging Markets Fund.......... 1.00% .39% .00% 1.39% .00% 1.39%(6)
Worldwide Hard Assets Fund............... 1.00% .20% .00% 1.20% .00% 1.20%
</Table>
---------------
(1) Net Total Annual Expenses do not reflect any voluntary waivers of fees and
expenses, or any expense reductions resulting from directed brokerage
arrangements.
(2) Our affiliate, Met Investors Advisory LLC ("Met Investors Advisory"), and
Met Investors Series Trust have entered into an Expense Limitation Agreement
under which Met Investors Advisory has agreed to waive or limit its fees and
to assume other expenses so that Net Total Annual Expenses of each Portfolio
(other than interest, taxes, brokerage commissions, other expenditures which
are capitalized in accordance with generally accepted accounting principles
and other extraordinary expenses not incurred in the ordinary course of each
Portfolio's business) will not exceed, at any time prior to April 30, 2006,
the following percentages: 1.10% for the Harris Oakmark International
Portfolio, .90% for the Janus Aggressive Growth Portfolio, .90% for the
Met/AIM Mid Cap Core Equity Portfolio, 1.05% for the Met/AIM Small Cap
Growth Portfolio, 1.00% for the MFS Research International Portfolio, .90%
for the Neuberger Berman Real Estate Portfolio, 1.10% for the RCM Global
Technology Portfolio and .90% for the T. Rowe Price Mid-Cap Growth
Portfolio. Under certain circumstances, any fees waived or expenses
reimbursed by Met Investors Advisory may, with the approval of the Trust's
Board of Trustees, be repaid to Met Investors Advisory. Expenses of the MFS
Research International Portfolio have been restated to reflect the terms of
the Expense Limitation Agreement. Expenses of the Janus Aggressive Growth
8
Portfolio, the Lord Abbett Bond Debenture Portfolio and the RCM Global
Technology Portfolio have been restated to reflect management fee reductions
that became effective May 1, 2005.
(3) Other Expenses reflect the repayment of fees previously waived and/or
expenses previously paid by Met Investors Advisory under the terms of prior
expense limitation agreements in the following amounts: .01% for the Harris
Oakmark International Portfolio, .05% for the Janus Aggressive Growth
Portfolio, .01% for the Lord Abbett Growth and Income Portfolio, .02% for
the Met/AIM Mid Cap Core Equity Portfolio, .01% for the Met/AIM Small Cap
Growth Portfolio, .12% for the MFS Research International Portfolio and .07%
for the T. Rowe Price Mid-Cap Growth Portfolio.
(4) Our affiliate, MetLife Advisers, LLC ("MetLife Advisers"), and the
Metropolitan Series Fund, Inc. (the "Met Series Fund") have entered into an
Expense Agreement under which MetLife Advisers will waive management fees
and/or pay expenses (other than brokerage costs, interest, taxes or
extraordinary expenses) ("Expenses") attributable to the Class A shares of
certain Portfolios of the Met Series Fund, so that Net Total Annual Expenses
will not exceed, at any time prior to April 30, 2006, .95% for the BlackRock
Large Cap Value Portfolio. Under the agreement, if certain conditions are
met, the Portfolio may reimburse MetLife Advisers for fees waived and
Expenses paid if, in the future, actual Expenses are less than this expense
limit. Under the Expense Agreement, MetLife Advisers will also waive the
management fee payable by certain Portfolios in the following percentage
amounts: .006% for the Lehman Brothers Aggregate Bond Index Portfolio, .007%
for the MetLife Stock Index Portfolio, .007% for the MetLife Mid Cap Stock
Index Portfolio, .007% for the Morgan Stanley EAFE Index Portfolio, .007%
for the Russell 2000 Index Portfolio, .025% on assets in excess of $1
billion and less than $2 billion for the BlackRock Bond Income Portfolio,
.005% on the first $500 million of assets and .015% on the next $500 million
of assets for the BlackRock Money Market Portfolio and .015% on the first
$50 million of assets for the T. Rowe Price Large Cap Growth Portfolio.
(5) The Funds' Manager, Frank Russell Investment Company (FRIMCo) has
contractually agreed to waive, at least until April 30, 2006, a portion of
its management fee, up to the full amount of that fee, equal to the amount
by which the funds' operating expenses exceed 1.05% for the Aggressive
Equity Fund, .70% for the Core Bond Fund, .87% for the Multi-Style Equity
Fund and 1.15% for the Non-U.S. Fund, and to reimburse the Funds for all
remaining expenses, after fee waivers, that exceed these amounts for each
Fund.
(6) For the period May 1, 2005 through April 30, 2006, the Adviser to the
Worldwide Emerging Markets Fund has contractually agreed to waive fees and
reimburse certain operating expenses (excluding brokerage fees and expenses,
transaction fees, interest, dividends paid on securities sold short, taxes
and extraordinary expenses) to the extent total annual operating expenses
exceed 1.40% of average daily net assets.
(7) Net Total Annual Expenses reflect a written agreement pursuant to which
JPMorgan Funds Management, Inc. agrees that it will reimburse the Portfolios
to the extent total annual operating expenses of the Portfolios' Shares
(excluding interest, taxes and extraordinary expenses) exceed .75% for the
JP Morgan Bond Portfolio and 1.15% for the JP Morgan Small Company Portfolio
through April 30, 2006.
CERTAIN PAYMENTS WE RECEIVE WITH REGARD TO THE FUNDS
An investment adviser (other than our affiliate Met Life Advisers and Met
Investors Advisory) or sub-adviser or its affiliates may compensate us and/or
certain affiliates for administrative or other services relating to the Funds.
The amount of the compensation is not deducted from Fund assets and does not
decrease the Fund's investment return. The amount of the compensation is based
on a percentage of assets of the Fund attributable to the Policies and certain
other variable insurance products that we and our affiliates issue. These
percentages differ and some advisers or sub-advisers (or other affiliates) may
pay us more than others. These percentages currently range up to .11%.
Additionally, an investment adviser or sub-adviser of a Fund or its affiliates
may provide us with wholesaling services that assist in the distribution of the
Policies and may pay us and/or certain affiliates amounts to participate in
sales meetings. These amounts may be significant and may provide the adviser or
sub-adviser (or other affiliate) with increased access to persons involved in
the distribution of the Policies.
We and certain of our affiliated insurance companies are joint owners of
our affiliated investment advisers, MetLife Advisers and Met Investors Advisory,
which are formed as limited liability companies. Our ownership interests entitle
us to profit distributions if the adviser makes a profit with respect to the
management fees it receives
9
from a Fund. We may benefit accordingly from assets allocated to the Funds to
the extent they result in profits to the advisers. (See "Charges and
Deductions -- Annual Fund Operating Expenses" for information on the management
fees paid to the advisers and the Statement of Additional Information for the
Funds for information on the management fees paid by the adviser to
sub-advisers.)
The American Funds Global Small Capitalization Fund, the American Funds
Growth Fund and the American Funds Growth-Income Fund have adopted a
Distribution Plan under Rule 12b-1 of the Investment Company Act of 1940 under
which the Funds make payments to our Distributor, MetLife Investors Distribution
Company, in consideration of services provided and expenses incurred by our
Distributor in distributing the Funds' shares. The payments, which are equal to
0.25% of the Separate Account assets invested in Funds, are deducted from the
assets of the Funds and decrease the Funds' investment return. The Distribution
Plan is described in more detail in each Fund's prospectus. (See also "Charges
and Deductions -- Annual Fund Operating Expenses.")
We pay American Funds Distributors, Inc., principal underwriter for the
American Funds Insurance Series, a percentage of all premiums allocated to the
American Funds Global Small Capitalization Fund, the American Funds Growth Fund
and the American Funds Growth-Income Fund for the services it provides in
marketing the Funds' shares in connection with the Policies.
SELECTION OF THE FUNDS
We select the Funds offered through the Policy based on several criteria,
including asset class coverage, the strength of the adviser's or sub-adviser's
reputation and tenure, brand recognition, performance, and the capability and
qualification of each investment firm. Another factor we consider during the
selection process is whether the Fund's adviser or sub-adviser is one of our
affiliates or whether the Fund, its adviser, its sub-adviser(s), or an affiliate
will compensate us or our affiliates for providing certain administrative and
other services, as described above. We review the Funds periodically and may
remove a Fund or limit its availability to new premium payments and/or transfers
of cash value if we determine that the Fund no longer meets one or more of the
selection criteria, and/or if the Fund has not attracted significant allocations
from Policy Owners. We do not provide investment advice and do not recommend or
endorse any particular Fund.
10
POLICY RIGHTS
TRANSFERS
Frequent requests from Policy Owners to transfer cash value may dilute the
value of a Fund's shares if the frequent trading involves an attempt to take
advantage of pricing inefficiencies created by a lag between a change in the
value of the securities held by the Fund and the reflection of that change in
the Fund's share price ("arbitrage trading"). Regardless of the existence of
pricing inefficiencies, frequent transfers may also increase brokerage and
administrative costs of the underlying Funds and may disrupt portfolio
management strategy, requiring a Fund to maintain a high cash position and
possibly resulting in lost investment opportunities and forced liquidations
("disruptive trading"). Accordingly, arbitrage trading and disruptive trading
activities (referred to collectively as "market timing") may adversely affect
the long-term performance of the Funds, which may in turn adversely affect
Policy Owners and other persons who may have an interest in the Policies (e.g.,
beneficiaries).
We have policies and procedures that attempt to detect and deter frequent
transfers in situations where we determine there is a potential for arbitrage
trading. Currently, we believe that such situations may be presented in the
international, small-cap, and high-yield Funds (i.e., the BlackRock Strategic
Value Portfolio, FI International Stock Portfolio, Morgan Stanley EAFE Index
Portfolio, Russell 2000 Index Portfolio, T. Rowe Price Small Cap Growth
Portfolio, Harris Oakmark International Portfolio, Lord Abbett Bond Debenture
Portfolio, Met/AIM Small Cap Growth Portfolio, VIP Overseas Portfolio, American
Funds Global Small Capitalization Fund, JPMorgan Small Company Stock Portfolio,
Russell Aggressive Equity Fund, Russell Non-U.S. Fund, Van Eck Worldwide
Emerging Markets Fund and Van Eck Worldwide Hard Assets Fund) and we monitor
transfer activity in those Funds (the "Monitored Portfolios"). We employ various
means to monitor transfer activity, such as examining the frequency and size of
transfers into and out of the Monitored Portfolios within given periods of time.
We do not believe that other Funds present a significant opportunity to engage
in arbitrage trading and therefore do not monitor transfer activity in those
Funds. We may change the Monitored Portfolios at any time without notice in our
sole discretion. In addition to monitoring transfer activity in certain Funds,
we rely on the underlying Funds to bring any potential disruptive trading
activity they identify to our attention for investigation on a case-by-case
basis. We will also investigate any other harmful transfer activity that we
identify from time to time. We may revise these policies and procedures in our
sole discretion at any time without prior notice.
Our policies and procedures may result in transfer restrictions being
applied to deter market timing. Currently, when we detect transfer activity in
the Monitored Portfolios that exceeds our current transfer limits, or other
transfer activity that we believe may be harmful to other Policy Owners or other
persons who have an interest in the Policies, we require all future transfer
requests to or from any Monitored Portfolios or other identified Portfolios
under that Policy to be submitted either (i) in writing with an original
signature or (ii) by telephone prior to 10:00 a.m. If we impose this restriction
on your transfer activity, we will reverse upon discovery any transaction
inadvertently processed in contravention of such restrictions. The cash value
will not be affected by any gain or loss due to the transfer and your cash value
will be the same as if the transfer had not occurred. You will receive written
confirmation of the transactions effecting such reversal.
The detection and deterrence of harmful transfer activity involves
judgments that are inherently subjective, such as the decision to monitor only
those Funds that we believe are susceptible to market timing. Our ability to
detect such transfer activity may be limited by operational and technological
systems, as well as our ability to predict strategies employed by Policy Owners
to avoid such detection. Our ability to restrict such transfer activity may be
limited by provisions of the Policy. We do not accommodate market timing in any
Funds and there are no arrangements in place to permit any Policy Owner to
engage in market timing; we apply our policies and procedures without exception,
waiver, or special arrangement. Accordingly, there is no assurance that we will
prevent all transfer activity that may adversely affect Policy Owners and other
persons with interests in the Policies.
The Funds may have adopted their own policies and procedures with respect
to frequent purchases and redemptions of their respective shares. The
prospectuses for the Funds describe any such policies and procedures, which may
be more or less restrictive than the policies and procedures we have adopted.
Policy Owners and other persons with interests in the Policies should be aware
that we may not have the contractual obligation or the operational capacity to
apply the frequent trading policies and procedures of the Funds.
11
In addition, Policy Owners and other persons with interests in the Policies
should be aware that some Funds may receive "omnibus" purchase and redemption
orders from other insurance companies or intermediaries such as retirement
plans. The omnibus orders reflect the aggregation and netting of multiple orders
from individual owners of variable insurance policies and/or individual
retirement plan participants. The omnibus nature of these orders may limit the
Funds in their ability to apply their frequent trading policies and procedures,
and we cannot guarantee that the Funds (and thus Policy Owners) will not be
harmed by transfer activity relating to the other insurance companies and/or
retirement plans that may invest in the Funds.
In accordance with applicable law, we reserve the right to modify or
terminate the transfer privilege at any time. We also reserve the right to defer
or restrict the transfer privilege at any time that we are unable to purchase or
redeem shares of any of the Funds, including any refusal or restriction on
purchases or redemptions of their shares as a result of their own policies and
procedures on market timing activities (even if an entire omnibus order is
rejected due to the market timing activity of a single Policy Owner). You should
read the Fund prospectuses for more details.
FEDERAL TAX MATTERS
INTRODUCTION
The following summary provides a general description of the Federal income
tax considerations associated with the Policy and does not purport to be
complete or to cover all situations. This discussion is not intended as tax
advice. Counsel or other competent tax advisers should be consulted for more
complete information. This discussion is based upon General American's
understanding of the present Federal income tax laws as they are currently
interpreted by the Internal Revenue Service. No representation is made as to the
likelihood of continuation of the present Federal income tax laws or of the
current interpretations by the Internal Revenue Service.
TAX STATUS OF THE POLICY
In order to qualify as a life insurance contract for Federal income tax
purposes and to receive the tax treatment normally accorded life insurance
contracts under Federal tax law, a Policy must satisfy certain requirements
which are set forth in the Internal Revenue Code. Guidance as to how these
requirements are to be applied is limited, in particular, with respect to joint
and last survivor life insurance policies. Nevertheless, we believe that the
Policies should satisfy the applicable requirements. There is less guidance,
however, with respect to Policies issued on a substandard or guaranteed issue
basis and Policies with term riders added, and it is not clear whether such
policies will in all cases satisfy the applicable requirements, particularly if
the owner pay the full amount of premiums under the Policy. We may take
appropriate steps to bring the Policy into compliance with applicable
requirements, and we reserve the right to restrict Policy transactions in order
to do so. The insurance proceeds payable on the death of the insured will never
be less than the minimum amount required for the Policy to be treated as life
insurance under section 7702 of the Internal Revenue Code, as in effect on the
date the Policy was issued.
In some circumstances, owners of variable contracts who retain excessive
control over the investment of the underlying separate account assets may be
treated as the owners of those assets. Although published guidance in this area
does not address certain aspects of the Policies, we believe that the Owner of a
Policy should not be treated as the owner of the Separate Account assets. We
reserve the right to modify the Policies to bring them into conformity with
applicable standards should such modification be necessary to prevent Owners of
the Policies from being treated as the owners of the underlying Separate Account
assets.
In addition, the Code requires that the investments of the Separate Account
be "adequately diversified" in order for the Policies to be treated as life
insurance contracts for Federal income tax purposes. It is intended that the
Separate Account, through the Eligible Funds, will satisfy these diversification
requirements.
The following discussion assumes that the Policy will qualify as a life
insurance contract for Federal income tax purposes.
1. TAX TREATMENT OF POLICY BENEFITS. In general, the Company believes that
the proceeds and Cash Value increases of a Policy should be treated in a manner
consistent with a fixed-benefit life insurance policy for Federal income tax
purposes. Thus, the death benefit under the Policy should be excludable from the
gross income of the
12
Beneficiary under Section 101(a)(1) of the Code, unless a transfer for value
(generally a sale of the policy) has occurred. Many changes or transactions
involving a Policy may have tax consequences, depending on the circumstances.
Such changes include, but are not limited to, the exchange of the Policy, a
change of the Policy's Face Amount, a Policy Loan, an additional premium
payment, a Policy lapse with an outstanding Policy Loan, a partial withdrawal,
or a surrender of the Policy. The transfer of the Policy or designation of a
Beneficiary may have Federal, state, and/or local transfer and inheritance tax
consequences, including the imposition of gift, estate, and generation-skipping
transfer taxes. For example, the transfer of the Policy to, or the designation
as a Beneficiary of, or the payment of proceeds to, a person who is assigned to
a generation which is two or more generations below the generation assignment of
the Owner may have generation skipping transfer tax consequences under Federal
tax law. The individual situation of each Owner or Beneficiary will determine
the extent, if any, to which Federal, state, and local transfer and inheritance
taxes may be imposed and how ownership or receipt of Policy proceeds will be
treated for purposes of Federal, state and local estate, inheritance, generation
skipping and other taxes.
A Policy may also be used in various arrangements, including non-qualified
deferred compensation or salary continuation plans, split dollar insurance
plans, executive bonus plans, retiree medical benefit plans and others. The tax
consequences of such plans may vary depending on the particular facts and
circumstances of each individual arrangement. Therefore, if you are
contemplating the use of a Policy in any arrangement the value of which depends
in part on its tax consequences, you should be sure to consult a qualified tax
adviser regarding the tax attributes of the particular arrangement.
Generally, the Owner will not be deemed to be in constructive receipt of
the Policy's Cash Value, including increments thereof, under the Policy until
there is a distribution. Under a complete surrender or lapse of any Policy, if
the amount received plus the amount of outstanding Indebtedness exceeds the
total investments in the Policy, the excess will generally be treated as
ordinary income subject to tax. The tax consequences of other distributions
from, and Policy Loans taken from or secured by, a Policy depend upon whether
the Policy is classified as a "modified endowment contract".
2. MODIFIED ENDOWMENT CONTRACTS. A policy may be treated as a modified
endowment contract depending upon the amount of premiums paid in relation to the
death benefit provided under such Policy. The premium limitation rules for
determining whether a Policy is a modified endowment contract are extremely
complex. In general, however, a Policy will be a modified endowment contract if
the accumulated premiums paid at any time during the first seven Policy Years
exceed the sum of the net level premiums which would have been paid on or before
such time if the Policy provided for paid-up future benefits after the payment
of seven level annual premiums.
In addition, if a Policy is "materially changed" it may cause such Policy
to be treated as a modified endowment contract. The material change rules for
determining whether a Policy is a modified endowment contract are also extremely
complex. In general, however, the determination of whether a Policy will be a
modified endowment contract after a material change generally depends upon the
relationship among the death benefit at the time of such change, the Cash Value
at the time of the change and the additional premiums paid in the seven Policy
Years starting with the date on which the material change occurs.
Moreover, a life insurance contract received in exchange for a life
insurance contract classified as a modified endowment contract will also be
treated as a modified endowment contract. A reduction in a Policy's benefits may
also cause such Policy to become a modified endowment contract.
Accordingly, a prospective Owner should contact a competent tax adviser
before purchasing a Policy to determine the circumstances under which the Policy
would be a modified endowment contract. In addition, an Owner should contact a
competent tax adviser before paying any additional premiums or making any other
change to, including an exchange of, a Policy to determine whether such premium
or change would cause the Policy (or the new Policy in the case of an exchange)
to be treated as a modified endowment contract.
NOTE: MOST DESTINY POLICIES WERE MODIFIED ENDOWMENT CONTACTS FROM THE DATE OF
ISSUE, THEREFORE, DISTRIBUTIONS FROM MOST DESTINY POLICIES ARE TAXED AS FOLLOWS:
3. DISTRIBUTIONS FROM POLICIES CLASSIFIED AS MODIFIED ENDOWMENT
CONTRACT. Policies classified as modified endowment contracts will be subject
to the following tax rules: First, all distributions, including distributions
upon surrender, from such a Policy are treated as ordinary income subject to tax
up to the amount equal to the excess (if any) of the Cash Value immediately
before the distribution over the investment in the Policy (described below) at
such time. Second, Policy Loans taken from, or secured by, such a Policy, as
well as due but unpaid interest
13
thereon, are treated as distributions from such a Policy and taxed accordingly.
Third, a 10 percent additional income tax is imposed on the portion of any
distribution from, or Policy Loan taken from or secured by, such a Policy that
is included in income, except where the distribution or Policy Loan (a) is made
on or after the Owner attains age 59 1/2, (b) is attributable to the Owner's
becoming disabled, or (c) is part of a series of substantially equal periodic
payments for the life (or life expectancy) of the Owner or the joint lives (or
joint life expectancies) of the Owner and the Owner's Beneficiary.
4. DISTRIBUTIONS FROM POLICIES NOT CLASSIFIED AS MODIFIED ENDOWMENT
CONTRACT. Distributions from Policies not classified as a modified endowment
contracts are generally treated as first recovering the investment in the Policy
(described below) and then, only after the return of all such investment in the
Policy, as distributing taxable income. An exception to this general rule occurs
in the case of a decrease in the Policy's death benefit (possibly including a
partial withdrawal) or any other change that reduces benefits under the Policy
in the first 15 years after the Policy is issued and that results in cash
distribution to the Owner in order for the Policy to continue complying with the
Section 7702 definitional limits. Such a cash distribution will be taxed in
whole or in part as ordinary income (to the extent of any gain in the Policy)
under rules prescribed in Section 7702.
Policy Loans from, or secured by, a Policy that is not a modified endowment
contract should generally not be treated as distributions. Instead, such loans
should generally be treated as indebtedness of the Owner. However, because the
tax consequences associated with Policy Loans are not always clear, in
particular, with respect to Policy Loans outstanding after the tenth Policy
year, you should consult a tax adviser prior to taking any Policy Loan.
Upon a complete surrender or lapse of a Policy that is not a modified
endowment contract, if the amount received plus the amount of indebtedness
exceeds the total investment in the Policy, the excess will generally be treated
as ordinary income subject to tax.
Neither distributions (including distributions upon surrender or lapse) nor
Policy Loans from, or secured by, a Policy that is not a modified endowment
contract are subject to the 10 percent additional income tax.
If a Policy which is not a modified endowment contract subsequently becomes
a modified endowment contract, then any distribution made from the Policy within
two years prior to the date of such change in status may become taxable.
5. POLICY LOANS. Generally, interest paid on any loan under a life
insurance Policy is not deductible. AN OWNER SHOULD CONSULT A COMPETENT TAX
ADVISER IF THE DEDUCTIBILITY OF LOAN INTEREST IS A CONSIDERATION IN THE PURCHASE
OF A POLICY. If a Policy Loan is outstanding when a Policy is canceled or
lapses, the amount of the outstanding Indebtedness will be added to the amount
distributed and will be taxed accordingly.
6. INTEREST EXPENSE ON UNRELATED INDEBTEDNESS. Under provisions added to
the Code in 1997 for policies issued after June 8, 1997, if a business taxpayer
owns or is the beneficiary of a Policy on the life of any individual who is not
an officer, director, employee, or 20 percent owner of the business, and the
taxpayer also has debt unrelated to the Policy, a portion of the taxpayer's
unrelated interest expense deductions may be lost. No business taxpayer should
purchase, exchange, or increase the death benefit under a Policy on the life of
any individual who is not an officer, director, employee, or 20 percent owner of
the business without first consulting a competent tax adviser.
7. INVESTMENT IN THE POLICY. Investment in the Policy means (i) the
aggregate amount of any premiums or other consideration paid for a Policy, minus
(ii) the aggregate amount received under the Policy which is excluded from gross
income of the Owner (except that the amount of any Policy Loan from, or secured
by, a Policy that is a modified endowment contract, to the extent such amount is
excluded from gross income, will be disregarded), plus (iii) the amount of any
Policy Loan from, or secured by, a Policy that is a modified endowment contract
to the extent that such amount is included in the gross income of the Owner.
8. MULTIPLE POLICES. All modified endowment contracts that are issued by
the Company (or its affiliates) to the same Owner during any calendar year are
treated as one modified endowment contract for purposes of determining the
amount includible in gross income under Section 72(e) of the Code.
9. LIFE INSURANCE PURCHASES BY NONRESIDENT ALIENS AND FOREIGN
CORPORATIONS. Policy Owners that are not U.S. citizens or residents will
generally be subject to U.S. Federal withholding tax on taxable distributions
from life insurance policies at a 30% rate, unless a lower treaty rate applies.
In addition, Policy Owners may be subject to
14
state and/or municipal taxes and taxes that may be imposed by the Policy Owner's
country of citizenship or residence.
10. WITHHOLDING. To the extent that Policy distributions are taxable, they
are generally subject to withholding for the recipient's Federal income tax
liability. Recipients can generally elect, however, not to have tax withheld
from distributions.
11. ESTATE, GIFT AND GENERATION-SKIPPING TRANSFER TAXES. The transfer of
the Policy or the designation of a beneficiary may have Federal, state, and/or
local transfer and inheritance tax consequences, including the imposition of
gift, estate, and generation-skipping transfer taxes. When the insured dies, the
death proceeds will generally be includable in the Policy Owner's estate for
purposes of the Federal estate tax if the Policy Owner was the insured. If the
Policy Owner was not the insured, the fair market value of the Policy would be
included in the Policy Owner's estate upon the Policy Owner's death. The Policy
would not be includable in the insured's estate if the insured neither retained
incidents of ownership at death nor had given up ownership within three years
before death.
Moreover, under certain circumstances, the Internal Revenue Code may impose
a "generation-skipping transfer tax" when all or part of a life insurance policy
is transferred to, or a death benefit is paid to, an individual two or more
generations younger than the Policy Owner. Regulations issued under the Internal
Revenue Code may require us to deduct the tax from your Policy, or from any
applicable payment, and pay it directly to the IRS.
Qualified tax advisers should be consulted concerning the estate and gift
tax consequences of Policy ownership and distributions under Federal, state and
local law. The individual situation of each Policy Owner or beneficiary will
determine the extent, if any, to which Federal, state, and local transfer and
inheritance taxes may be imposed and how ownership or receipt of Policy proceeds
will be treated for purposes of Federal, state and local estate, inheritance,
generation-skipping and other taxes.
The Economic Growth and Tax Relief Reconciliation Act of 2001 ("EGTRRA")
repeals the Federal estate tax and replaces it with a carryover basis income tax
regime effective for estates of decedents dying after December 31, 2009. EGTRRA
also repeals the generation-skipping transfer tax, but not the gift tax, for
transfers made after December 31, 2009. EGTRRA contains a sunset provision,
which essentially returns the Federal estate, gift and generation-skipping
transfer taxes to their pre-EGTRRA form, beginning in 2011. Congress may or may
not enact permanent repeal between now and then.
During the period prior to 2010, EGTRRA provides for periodic decreases in
the maximum estate tax rate coupled with periodic increases in the estate tax
exemption. For 2005, the maximum estate tax rate is 47% and the estate tax
exemption is $1,500,000.
The complexity of the new tax law, along with uncertainty as to how it
might be modified in coming years, underscores the importance of seeking
guidance from a qualified adviser to help ensure that your estate plan
adequately addresses your needs and those of your beneficiaries under all
possible scenarios.
12. CONTINUATION OF POLICY BEYOND ATTAINED AGE 100. The tax consequences
of continuing the Policy beyond the Insured's Attained Age 100 birthday are
unclear. You should consult a tax adviser if you intend to keep the Policy in
force beyond the Insured's Attained Age 100.
13. Ownership of the Policy by a corporation, trust or other non-natural
person could jeopardize some (or all) of such entity's interest deduction under
Internal Revenue Code Section 264, even where such entity's indebtedness is in
no way connected to the Policy. In addition, under Section 264(f)(5), if a
business (other than a sole proprietorship) is directly or indirectly a
beneficiary of the Policy, the Policy could be treated as held by the business
for purposes of the Section 264(f) entity-holder rules. Therefore, it would be
advisable to consult with a qualified tax adviser before any non-natural person
is made an owner or holder of the Policy, or before a business (other than a
sole proprietorship) is made a beneficiary of the Policy.
14. GUIDANCE ON SPLIT DOLLAR PLANS. The IRS has issued guidance on split
dollar insurance plans. A tax adviser should be consulted with respect to this
guidance if your Policy is, or may become, subject to a split dollar insurance
plan. If your Policy is part of an equity split dollar arrangement, there is a
risk that some portion of the Policy cash value may be taxed prior to any Policy
distribution.
In addition, the Sarbanes-Oxley Act of 2002 (the "Act") which was signed
into law on July 30, 2002, prohibits, with exceptions, publicly-traded
companies, including non-U.S. companies that have securities listed on U.S.
15
exchanges, from extending, directly or indirectly or through a subsidiary, many
types of personal loans to their directors or executive officers. It is possible
that this prohibition may be interpreted to apply to split-dollar life insurance
arrangements for directors and executive officers of such companies, since such
arrangements can arguably be viewed as involving a loan from the employer for at
least some purposes.
Although the prohibition on loans generally took effect as of July 30,
2002, there is an exception for loans outstanding as of the date of enactment,
so long as there is no material modification to the loan terms and the loan is
not renewed after July 30, 2002. Any affected business contemplating the payment
of a premium on an existing Policy or the purchase of new Policy in connection
with a split-dollar life insurance arrangement should consult legal counsel.
15. ALTERNATIVE MINIMUM TAX. There may also be an indirect tax upon the
income in the Policy or the proceeds of a Policy under the Federal corporate
alternative minimum tax, if the Owner is subject to that tax.
16. PUERTO RICO. We believe that Policies subject to Puerto Rican tax law
will generally receive treatment similar, with certain modifications, to that
described above. Among other differences, Policies governed by Puerto Rican tax
law are not currently subject to the rules described above regarding Modified
Endowment Contracts. You should consult your tax adviser with respect to Puerto
Rican tax law governing the Policies.
17. POSSIBLE TAX LAW CHANGES. Although the likelihood of legislative
changes is uncertain, there is always the possibility that the tax treatment of
the Policy could change by legislation or otherwise. Consult a tax adviser with
respect to legislative developments and their effect on the Policy.
18. FOREIGN TAX CREDITS. To the extent permitted under Federal tax law, we
may claim the benefit of certain foreign tax credits attributable to taxes paid
by certain Eligible Funds to foreign jurisdictions.
19. POSSIBLE CHARGE FOR TAXES. At the present time, the Company makes no
charge to the Separate Account for any Federal, state, or local taxes (as
opposed to Premium Tax Charges which are deducted from premium payments) that it
incurs which may be attributable to such Separate Account or to the Policies.
The Company, however, reserves the right in the future to make a charge for any
such tax or other economic burden resulting from the application of the tax laws
that it determines to be properly attributable to the Separate Account or to the
Policies.
MANAGEMENT
The directors and executive officers of General American Life Insurance
Company and their principal business experience are:
DIRECTORS OF GENERAL AMERICAN
<Table>
<Caption>
NAME AND PRINCIPAL BUSINESS ADDRESS PRINCIPAL BUSINESS EXPERIENCE
----------------------------------- -----------------------------
Michael K. Farrell*** Director of General American since 2003 and Senior Vice
President of Metropolitan Life Insurance Company since
2002.
James L. Lipscomb**** Director of General American since 2002 and Executive
Vice-President and General Counsel of Metropolitan Life
Insurance Company since 2003. Formerly, Senior Vice
President and Deputy General Counsel 2001-2003 of
Metropolitan Life; President and Chief Executive Officer
2000-2001 of Conning Corporation and Head of Corporate
Planning and Strategy Department 1998-2000 of Metropolitan
Life Insurance Company.
Hugh C. McHaffie***** Director of General American since 2004 and Senior Vice
President of Metropolitan Life Insurance Company since
2000.
Catherine A. Rein**** Director of General American since 2004 and Senior
Executive Vice President and Chief Administrative Officer
of Metropolitan Life Insurance Company since 2005.
Formerly, President and Chief Executive Officer 1999- 2004
of Metropolitan Property and Casualty.
Stewart G. Nagler**** Director of General American since 2000 and Vice Chairman
of Metropolitan Life Insurance Company since 2003.
Formerly, Vice Chairman and Chief Financial Officer
1998-2003 of Metropolitan Life.
</Table>
16
<Table>
<Caption>
NAME AND PRINCIPAL BUSINESS ADDRESS PRINCIPAL BUSINESS EXPERIENCE
----------------------------------- -----------------------------
Stanley J. Talbi**** Director of General American since 2002 and Senior Vice
President of Metropolitan Life Insurance Company since
1974.
Lisa M. Weber**** Chairman of the Board, President and Chief Executive
Officer of General American since 2004 and President,
Individual Business of Metropolitan Life Insurance Company
since 2004; formerly, Director of General American since
2000 and Senior Executive Vice President and Chief
Administrative Officer 2001- 2004 and Executive Vice
President 1998-2001 of Metropolitan Life.
William J. Wheeler**** Director of General American since 2002 and Executive Vice
President and Chief Financial Officer of Metropolitan Life
Insurance Company since 2003. Formerly, Senior Vice
President 1997-2003 of Metropolitan Life.
Anthony J. Williamson**** Director, Vice President and Treasurer of General American
since 2002 and Senior Vice President and Treasurer of
Metropolitan Life Insurance Company since 2001. Formerly,
Senior Vice President 1998-2001 of Metropolitan Life.
</Table>
EXECUTIVE OFFICERS OF GENERAL AMERICAN OTHER THAN DIRECTORS
<Table>
<Caption>
NAME AND PRINCIPAL BUSINESS ADDRESS PRINCIPAL BUSINESS EXPERIENCE
----------------------------------- -----------------------------
James P. Bossert*** Vice President and Chief Financial Officer of General
American since 2003 and Vice President of Metropolitan Life
Insurance Company and since 1998.
Jerome M. Mueller* Senior Vice President of General American since 1998.
John E. Petersen* Senior Vice President of General American since 2000.
Formerly, Vice President 1999-2000 of General American.
Joseph J. Prochaska, Jr.**** Senior Vice President and Chief Accounting Officer of
General American since 2004 and Senior Vice President and
Chief Accounting Officer of Metropolitan Life Insurance
Company since 2003. Formerly, Senior Vice President and
Controller 2000-2003 of Aon Corporation.
A. Greig Woodring** Executive Vice President, Reinsurance and President and
Chief Executive Officer of Reinsurance Group of America
since 1992.
</Table>
---------------
The principal business address:
* General American, 13045 Tesson Ferry Road, St. Louis, Missouri 63128
** Reinsurance Group of America, 1370 Timberlake Manor Parkway, Chesterfield,
Missouri 63017
*** Metropolitan Life, 10 Park Avenue, Morristown, NJ 07962
**** Metropolitan Life, One MetLife Plaza, 27-01 Queens Plaza, North, Long
Island City, NY 11101
***** Metropolitan Life, 501 Boylston Street, Boston, MA 02116
17
VOTING RIGHTS
Based on its understanding of current applicable legal requirements, the
Company will vote the shares of the Funds held in the Separate Account at
regular and special shareholder meetings of the mutual funds in accordance with
the instructions received from persons having voting interests in the
corresponding Divisions of the Separate Account. If, however, the 1940 Act or
any regulation thereunder should be amended or if the present interpretation
thereof should change, and as a result the Company determines that it is
permitted to vote shares of the Fund in its own right, it may elect to do so. No
voting privileges apply to the Policies with respect to Cash Value removed from
the Separate Account as a result of a Policy Loan.
The number of votes which an Owner has the right to instruct will be
calculated separately for each Division. Voting rights reflect the dollar value
of the total number of units of each Division of the Separate Account credited
to the Owner at the record date, rather than the number of units alone.
Fractional shares will be counted. The number of votes of the Fund which the
Owner has the right to instruct will be determined as of the date coincident
with the date established by that Fund for determining shareholders eligible.
Voting instructions will be solicited by written communications prior to such
meeting in accordance with procedures established by the mutual funds.
The company will vote shares of a Fund for which no timely instructions are
received in proportion to the voting instructions which are received with
respect to that Fund. The Company will also vote any shares of the Funds which
are not attributable to Policies in the same proportion.
Each person having a voting interest in a Division will receive any proxy
material, reports, and other materials relating to the appropriate Fund.
DISREGARD OF VOTING INSTRUCTIONS. The Company may, when required by state
insurance regulatory authorities, disregard voting instructions if the
instructions require that the shares be voted so as to cause a change in the
subclassification or investment objective of the Fund or to approve or
disapprove an investment Advisory contract for a Fund. In addition, the Company
itself may disregard voting instructions in favor of changes initiated by an
Owner in the investment policy or the investment adviser or sub-adviser of a
Fund if the Company reasonably disapproves of such changes. A proposed change
would be disapproved only if the proposed change is contrary to state law or
prohibited by state regulatory authorities, or the Company determined that the
change would have an adverse effect on its General Account in that the proposed
investment policy for a Fund may result in overly speculative or unsound
investments. If the Company disregards voting instructions, a summary of that
action and the reasons for such action will be included in the next annual
report to Owners.
RESTRICTIONS ON FINANCIAL TRANSACTIONS
Applicable laws designed to counter terrorism and prevent money laundering
might, in certain circumstances, require us to reject a premium payment and/or
block or "freeze" your Policy. If these laws apply in a particular situation, we
would not be allowed to process any request for withdrawals, surrenders, loans
or death benefits, make transfers or continue making payments under your death
benefit option until instructions are received from the appropriate regulator.
We also may be required to provide additional information about you or your
Policy to government regulators.
LEGAL MATTERS
Legal matters in connection with the Policies have been passed upon by
Marie C. Swift, Associate General Counsel of Metropolitan Life Insurance
Company. Sutherland Asbill & Brennan LLP, of Washington, D.C., has provided
advice on certain matters relating to Federal securities laws.
LEGAL PROCEEDINGS
General American, like other insurance companies, is involved in lawsuits,
including class action lawsuits. In some class action lawsuits involving
insurers, substantial damages have been sought and/or material settlement
payments have been made. In addition, on May 14, 2004, MetLife, Inc. announced
that General American had
18
received a "Wells Notice" from the Securities and Exchange Commission in
connection with an SEC investigation regarding market timing and late trading in
a limited number of its privately-placed variable insurance contracts. The Wells
Notice provides notice that the SEC staff is considering recommending that the
SEC bring a civil action alleging violations of U.S. securities laws. Under SEC
procedures, General American can avail itself of the opportunity to respond to
the SEC staff before it makes a formal recommendation regarding whether any
action alleging violations of the U.S. securities laws should be considered.
General American has responded to the Wells Notice. General American continues
to cooperate fully with the SEC in its investigation and is not aware of any
systemic problems with respect to such matters. Although the outcome of any
litigation or administrative or other proceedings cannot be predicted with
certainty, General American does not believe any such litigation or proceedings
will have a materially adverse impact upon the Separate Account, or upon the
ability of MetLife Investors Distribution Company to perform its contract with
the Separate Account, or of General American to meet its obligations under the
Policies.
EXPERTS
The financial statements of General American Separate Account Eleven and
General American Life Insurance Company (which report expresses an unqualified
opinion and includes an explanatory paragraph referring to the change in the
method of accounting for certain non-traditional long duration contracts and
separate accounts, and for embedded derivatives in certain insurance products as
required by new accounting guidance which became effective on January 1, 2004
and October 1, 2003, respectively) included in this Prospectus Supplement have
been audited by Deloitte & Touche LLP, an independent registered public
accounting firm, as stated in their reports appearing herein, and are included
in reliance upon the reports of such firm given upon their authority as experts
in accounting and auditing. The principal address of Deloitte &Touche LLP is 201
East Kennedy Boulevard, Suite 1200, Tampa, FL 33602-5827.
FINANCIAL STATEMENTS
The financial statements of General American which are included in this
prospectus supplement should be distinguished from the financial statements of
the Separate Account, and should be considered only as bearing on the ability of
General American to meet its obligations under the Policy. They should not be
considered as bearing on the investment performance of the assets held in the
Separate Account.
19
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
GENERAL AMERICAN LIFE INSURANCE COMPANY
13045 Tesson Ferry Road
St. Louis, Missouri 63128
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
(American Vision Series VUL 2002)
VARIABLE LIFE INSURANCE POLICY (Destiny)
Supplement dated June 10, 2004
to the Prospectuses dated May 1, 2004
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICIES
(Variable Universal Life/Executive Benefit)
FLEXIBLE PREMIUM JOINT AND LAST SURVIVOR
VARIABLE LIFE INSURANCE POLICY
Supplement dated June 10, 2004
to the Prospectuses dated May 1, 2002
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICIES
(VUL 95/VUL 100/VGSP/Russell VUL)
Supplement dated June 10, 2004
to the Prospectuses dated May 1, 2000
This supplement updates certain information contained in the prospectuses
for each of the above-referenced variable life insurance policies, as annually
and periodically supplemented. You should read and retain this supplement.
On May 14, 2004, MetLife, Inc. announced that General American Life
Insurance Company ("General American") had received a "Wells Notice" from the
Securities and Exchange Commission ("SEC") in connection with the SEC
investigation described in the prospectuses and the prospectus supplements
regarding market timing and late trading in a limited number of its
privately-placed variable insurance contracts. The "Wells Notice" provides
notice that the SEC staff is considering recommending that the SEC bring a civil
action alleging violations of U.S. securities laws. Under SEC procedures,
General American can avail itself of the opportunity to respond to the SEC staff
before it makes a formal recommendation regarding whether any action alleging
violations of the U.S. securities laws should be considered. General American
continues to cooperate fully with the SEC in its investigation and is not aware
of any systemic problems with respect to such matters. General American does not
believe any such SEC civil action would have an adverse effect on General
American's ability to meet its obligations under the policies.
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
GENERAL AMERICAN LIFE INSURANCE COMPANY
700 MARKET STREET
ST. LOUIS, MISSOURI 63101
(314) 231-1700
VARIABLE LIFE INSURANCE POLICY (DESTINY)
SUPPLEMENT DATED JANUARY 16, 2004
TO THE PROSPECTUS DATED AUGUST 8, 2003
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICIES
(VARIABLE UNIVERSAL LIFE/EXECUTIVE BENEFIT)
FLEXIBLE PREMIUM JOINT AND LAST SURVIVOR POLICIES
SUPPLEMENT DATED JANUARY 16, 2004
TO THE PROSPECTUSES DATED MAY 1, 2002
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICIES
(VUL 95/VUL 100/VGSP/RUSSELL VUL)
SUPPLEMENT DATED JANUARY 16, 2004
TO THE PROSPECTUSES DATED MAY 1, 2000
General American Life Insurance Company (the "Company") has filed an
application with the Securities and Exchange Commission ("SEC") requesting an
order to allow the Company to remove certain investment options (the "Existing
Funds") under its variable life insurance policies and to substitute new options
("Replacement Funds") as shown below.
The Company believes that the proposed substitutions are in the best
interest of policy holders. In each case, the Replacement Fund will have at
least similar investment objectives and policies as the Existing Fund. The
Company will bear all expenses related to the substitutions, and they will have
no tax consequences for you. The Company anticipates that, if such order is
granted, the proposed substitutions will occur on or about May 1, 2004.
The proposed substitutions and respective advisers and/or sub-advisers are:
<Table>
<Caption>
EXISTING FUND AND CURRENT ADVISER REPLACEMENT FUND AND SUBADVISER
VP Income and Growth Fund Lord Abbett Growth and Income Portfolio
(American Century Investment Management, (Lord Abbett & Co. LLC) ("Lord Abbett")
Inc.)
("American Century")
VP International Fund MFS Research International Portfolio
(American Century) (Massachusetts Financial Services Company)
("MFS")
VP Value Fund Lord Abbett Mid-Cap Value Portfolio
(American Century) (Lord Abbett)
VIP Asset Manager Portfolio MFS Total Return Portfolio
(Fidelity Management & Research Company) (MFS)
</Table>
Please note that:
- No action is required on your part at this time. You will not need to file a
new election or take any immediate action if the SEC approves the
substitution.
- The elections you have on file for allocating your premium payments, or your
cash value under the Dollar Cost Averaging or Premium Rebalancing programs,
will be redirected to the Replacement Funds unless you change your elections
or transfer your cash value before the substitutions takes place.
- You may transfer your Policy cash value among the investment Divisions and the
General Account as usual. The substitutions themselves will not be treated as
transfers for purposes of the transfer provisions of your Policy.
- You may transfer your Policy cash value in the Existing Funds (before the
substitution) or the Replacement Funds (after the substitution) to any other
investment Division without charge.
- On the effective date of the substitutions, your cash value in the investment
Divisions will be the same as before the substitution. However, the number of
units you are credited in the Replacement Funds will be different from the
number of units in the Existing Funds due to the differences in unit values.
THIS SUPPLEMENT SHOULD BE RETAINED WITH YOUR PROSPECTUS FOR FUTURE REFERENCE.
GENERAL AMERICAN LIFE INSURANCE COMPANY
Flexible Premium
Variable Life Insurance Policies
(Variable Universal Life/Executive Benefit/Destiny)
Supplement dated May 1, 2003
to the Prospectuses dated May 1, 2002
Flexible Premium Joint and Last Survivor
Variable Life Insurance Policy
Supplement dated May 1, 2003
to the Prospectus dated May 1, 2002
Flexible Premium Variable Life Insurance Policies
(VUL 95/VUL 100/VGSP/Russell VUL)
Supplement dated May 1, 2003
to the Prospectuses dated May 1, 2000
This supplement updates certain information contained in the last full
prospectus prepared for each of the above-referenced flexible premium variable
life insurance policies. You should read and retain this supplement. We will
send you an additional copy of the last full prospectus for your policy, without
charge, on request. These policies are no longer available for sale.
General American Life Insurance Company is an indirect wholly-owned
subsidiary of Metropolitan Life Insurance Company ("MetLife"). MetLife is a
wholly-owned subsidiary of MetLife, Inc., a publicly-traded company. General
American's Home Office is 700 Market Street, St. Louis, Missouri 63101.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE POLICIES OR DETERMINED IF THE
PROSPECTUSES ARE ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE SECURITIES AND EXCHANGE COMMISSION MAINTAINS A WEB SITE THAT CONTAINS
MATERIAL INCORPORATED BY REFERENCE AND OTHER INFORMATION REGARDING REGISTRANTS
THAT FILE ELECTRONICALLY WITH THE SECURITIES AND EXCHANGE COMMISSION. THE
ADDRESS OF THE SITE IS HTTP://WWW.SEC.GOV.
THE ELIGIBLE FUND PROSPECTUSES ARE ATTACHED. INCLUDED ARE PROSPECTUSES FOR
THE RUSSELL INVESTMENT FUNDS (FORMERLY, RUSSELL INSURANCE FUNDS), WHICH MAY NOT
BE AVAILABLE UNDER YOUR POLICY. PLEASE READ THE PROSPECTUSES CAREFULLY AND KEEP
THEM FOR REFERENCE.
WE DO NOT GUARANTEE HOW ANY OF THE DIVISIONS OR ELIGIBLE FUNDS WILL
PERFORM.
YOUR PRIVACY NOTICE IS ON THE LAST TWO PAGES OF THIS BOOK
THE COMPANY
General American is principally engaged in writing individual life
insurance policies and annuity contracts. It is admitted to do business in 49
states, the District of Columbia, Puerto Rico, and in ten Canadian provinces.
The principal offices (Home Office) of General American are located at 700
Market Street, St. Louis, Missouri 63101. The Administrative Office for various
Policy transactions is as follows:
FOR EXECUTIVE BENEFIT POLICY OWNERS:
<Table>
Premium Payments General American
P.O. Box 14490
St. Louis, MO 63178-4490
All Other Inquiries and General American
Transactions Attention: COLI
700 Quaker Lane
Warwick, RI 02887-0355
(800) 638-9294
</Table>
FOR ALL OTHER POLICY OWNERS:
<Table>
Premium Payments General American
P.O. Box 14490
St. Louis, MO 63178-4490
Payment Inquires and General American
Correspondence Remittance Processing
4100 Boy Scout Blvd.
Tampa, FL 33607
(800) 638-9294
Beneficiary and Ownership General American
Changes P. O. Box 355
Surrenders, Loans Warwick, RI 02887-0355
and Withdrawals (800) 638-9294
Division Transfers
Death Claims
Cancellations (Free Look General American
Period) 13045 Tesson Ferry Road
St. Louis, MO 63128
All Other Telephone (800) 638-9294
Transactions and Inquiries
</Table>
THE SEPARATE ACCOUNT. The separate account consists of divisions, each of
which corresponds to an underlying Fund. Each division may either make money or
lose money. Therefore if you invest in a division of the separate account, you
may either make money or lose money, depending on the investment experience of
that division. There is no guaranteed rate of return in the separate account.
The following chart shows the Funds that are available under the policy
along with the name of the investment adviser, sub-adviser (where applicable)
and investment objective of each Fund. The Funds have different investment goals
and strategies. You should review the prospectus of each Fund, or seek
professional guidance in determining which Fund(s) best meet your objectives.
NOTE: THE RUSSELL INVESTMENT FUNDS ARE NOT AVAILABLE TO DESTINY AND EXECUTIVE
BENEFIT POLICIES. FOR ALL OTHER POLICIES, THE RUSSELL INVESTMENT FUNDS ARE ONLY
AVAILABLE FOR POLICIES WITH AN ISSUE DATE PRIOR TO JANUARY 1, 2000.
THE SEI INSURANCE PRODUCTS TRUST FUNDS ARE ONLY AVAILABLE UNTIL AUGUST 22, 2003.
AFTER THAT DATE, ALL CASH VALUE ALLOCATED TO THE FUNDS WILL BE REDEEMED AND THE
LIQUIDATION PROCEEDS WILL BE TRANSFERRED TO THE STATE STREET RESEARCH MONEY
MARKET PORTFOLIO.
2
AMERICAN CENTURY VARIABLE PORTFOLIOS ADVISER: AMERICAN CENTURY INVESTMENT
MANAGEMENT, INC.
<Table>
<Caption>
ELIGIBLE FUND SUB-ADVISER INVESTMENT OBJECTIVE
------------- ----------- --------------------
Income & Growth Fund N/A Current income and capital appreciation by
investing in a diversified portfolio of
common stocks.
International Fund N/A Capital growth.
Value Fund N/A Long-term capital growth, with income as a
secondary objective.
</Table>
AMERICAN FUNDS INSURANCE SERIES ADVISER: CAPITAL RESEARCH AND MANAGEMENT
COMPANY
<Table>
<Caption>
ELIGIBLE FUND SUB-ADVISER INVESTMENT OBJECTIVE
------------- ----------- --------------------
American Funds Global N/A Capital appreciation through stocks.
Small Capitalization
Fund
American Funds Growth N/A Capital appreciation through stocks.
Fund
American Funds Growth- N/A Capital appreciation and income.
Income Fund
</Table>
FIDELITY(R) VARIABLE INSURANCE PRODUCTS ADVISER: FIDELITY MANAGEMENT & RESEARCH
COMPANY
<Table>
<Caption>
ELIGIBLE FUND SUB-ADVISER INVESTMENT OBJECTIVE
------------- ----------- --------------------
VIP Asset Manager FMR Co., Inc. To obtain high total return with reduced
Portfolio risk over the long term by allocating its
assets among stocks, bonds and short-term
instruments.
VIP Equity-Income FMR Co., Inc. Reasonable income. The fund will also
Portfolio consider the potential for capital
appreciation. The fund's goal is to achieve
a yield which exceeds the composite yield of
securities comprising the Standard & Poor's
500(SM) Index (S&P 500(R)).
VIP Growth Portfolio FMR Co., Inc. To achieve capital appreciation.
VIP High Income FMR Co., Inc. A high level of current income while also
Portfolio considering growth of capital.
VIP Mid Cap Portfolio FMR Co., Inc. Long-term growth of capital.
VIP Overseas Portfolio FMR Co., Inc. Long-term growth of capital.
</Table>
J.P. MORGAN SERIES TRUST II ADVISER: J.P. MORGAN INVESTMENT MANAGEMENT, INC.
<Table>
<Caption>
ELIGIBLE FUND SUB-ADVISER INVESTMENT OBJECTIVE
------------- ----------- --------------------
JPMorgan Bond N/A To provide high total return consistent with
Portfolio moderate risk of capital and maintenance of
liquidity.
JPMorgan Small Company N/A To provide high total return from a
Portfolio portfolio of small company stocks.
</Table>
3
MET INVESTORS SERIES TRUST ADVISER: MET INVESTORS ADVISORY LLC
<Table>
<Caption>
ELIGIBLE FUND SUB-ADVISER INVESTMENT OBJECTIVE
------------- ----------- --------------------
Harris Oakmark Harris Associates Long-term growth of capital.
International L.P.(1)
Portfolio (formerly,
State Street Research
Concentrated
International
Portfolio)
Janus Aggressive Janus Capital Long-term growth of capital.
Growth Portfolio Management LLC
Met/AIM Mid Cap Core AIM Capital Long-term growth of capital.
Equity Portfolio Management, Inc.
Met/AIM Small Cap AIM Capital Long-term growth of capital.
Growth Portfolio Management, Inc.
PIMCO Innovation PIMCO Equity Advisors Capital appreciation; no consideration is
Portfolio given to income.
PIMCO Total Return Pacific Investment Maximum total return, consistent with the
Portfolio Management Company LLC preservation of capital and prudent
investment management.
T. Rowe Price Mid-Cap T. Rowe Price To provide long-term growth of capital.
Growth Portfolio Associates, Inc.(2)
(formerly, MFS Mid Cap
Growth Portfolio)
</Table>
METROPOLITAN SERIES FUND, INC. ADVISER: METLIFE ADVISERS, LLC(3)
<Table>
<Caption>
ELIGIBLE FUND SUB-ADVISER INVESTMENT OBJECTIVE
------------- ----------- --------------------
Alger Equity Growth Fred Alger Management, Long-term capital appreciation.
Portfolio(4) Inc.
Davis Venture Value Davis Selected Growth of capital.
Portfolio(4) Advisers, L.P.(5)
Harris Oakmark Focused Harris Associates L.P. Long-term capital appreciation.
Value Portfolio(4)
Harris Oakmark Large Harris Associates L.P. Long-term capital appreciation.
Cap Value Portfolio
Janus Mid Cap Janus Capital Long-term growth of capital.
Portfolio Management LLC
Lehman Brothers(R) Metropolitan Life To equal the performance of the Lehman
Aggregate Bond Index Insurance Company Brothers Aggregate Bond Index.
Portfolio
MetLife Mid Cap Stock Metropolitan Life To equal the performance of the Standard &
Index Portfolio Insurance Company Poor's Mid Cap 400 Composite Stock Price
Index ("S&P MidCap 400 Index").
MetLife Stock Index Metropolitan Life To equal the performance of the Standard &
Portfolio Insurance Company Poor's 500 Composite Stock Price Index ("S&P
500 Index").
Morgan Stanley EAFE(R) Metropolitan Life To equal the performance of the MSCI EAFE
Index Portfolio Insurance Company Index.
</Table>
4
<Table>
<Caption>
ELIGIBLE FUND SUB-ADVISER INVESTMENT OBJECTIVE
------------- ----------- --------------------
Neuberger Berman Neuberger Berman Capital growth.
Partners Mid Cap Value Management Inc.
Portfolio
Putnam International Putnam Investment Long-term growth of capital.
Stock Portfolio Management, LLC
Russell 2000(R) Index Metropolitan Life To equal the return of the Russell 2000
Portfolio Insurance Company Index.
State Street Research State Street Research Maximum capital appreciation.
Aggressive Growth & Management Company
Portfolio
State Street Research State Street Research High total return, consisting principally of
Aurora Portfolio & Management Company capital appreciation.
State Street Research State Street Research A competitive total return primarily from
Bond Income & Management Company investing in fixed-income securities.
Portfolio(4)
State Street Research State Street Research High total return while attempting to limit
Diversified Portfolio & Management Company investment risk and preserve capital.
State Street Research State Street Research Long-term growth of capital.
Large Cap Value & Management Company
Portfolio
State Street Research State Street Research A high level of current income consistent
Money Market & Management Company with preservation of capital.
Portfolio(4,6)
T. Rowe Price Large T. Rowe Price Long-term capital growth, and secondarily,
Cap Growth Portfolio Associates, Inc. dividend income.
T. Rowe Price Small T. Rowe Price Long-term capital growth.
Cap Growth Portfolio Associates, Inc.
</Table>
RUSSELL INVESTMENT FUNDS ADVISER: FRANK RUSSELL INVESTMENT MANAGEMENT COMPANY
<Table>
<Caption>
ELIGIBLE FUND SUB-ADVISER INVESTMENT OBJECTIVE
------------- ----------- --------------------
Aggressive Equity Fund Multiple sub-advisers To provide capital appreciation by assuming
a higher level of volatility than is
ordinarily expected from the Multi-Style
Equity Fund by investing in equity
securities.
Core Bond Fund Multiple sub-advisers To maximize total return through capital
appreciation and income by assuming a level
of volatility consistent with the broad
fixed-income market, by investing in
fixed-income securities.
Multi-Style Equity Multiple sub-advisers To provide income and capital growth by
Fund investing principally in equity securities.
Non-U.S. Fund Multiple sub-advisers To provide favorable total return and
additional diversification for US investors
by investing primarily in equity and
fixed-income securities of non-US companies,
and securities issued by non-US governments.
</Table>
5
SEI INSURANCE PRODUCTS TRUST(7) ADVISER: SEI INVESTMENTS MANAGEMENT CORPORATION
<Table>
<Caption>
ELIGIBLE FUND SUB-ADVISER INVESTMENT OBJECTIVE
------------- ----------- --------------------
VP Core Fixed Income Multiple sub-advisers To provide current income consistent with
Fund the preservation of capital.
VP Emerging Markets Multiple sub-advisers To maximize total return from a portfolio
Debt Fund consisting primarily of high yield,
below-investment grade fixed income
securities from emerging markets of foreign
countries.
VP Emerging Markets Multiple sub-advisers To provide long-term capital appreciation by
Equity Fund investing primarily in a diversified
portfolio of equity securities of emerging
market issuers.
VP High Yield Bond Multiple sub-advisers To maximize total return by investing
Fund primarily in a diversified portfolio of
higher yielding, lower rated fixed income
securities.
VP International Multiple sub-advisers To provide long-term capital appreciation by
Equity Fund investing primarily in a diversified
portfolio of equity securities of foreign
issuers.
VP Large Cap Growth Multiple sub-advisers Capital appreciation by investing in the
Fund equity securities of large companies.
VP Large Cap Value Multiple sub-advisers To provide long-term growth of capital and
Fund income by investing in the equity securities
of large companies.
VP Small Cap Growth Multiple sub-advisers To provide long-term capital appreciation by
Fund investing in equity securities of smaller
companies.
VP Small Cap Value Multiple sub-advisers To provide a broad level of diversification
Fund in U.S. small capitalization in a
risk-controlled framework, which includes
stocks with value characteristics.
</Table>
VAN ECK WORLDWIDE INSURANCE TRUST ADVISER: VAN ECK ASSOCIATES CORPORATION
<Table>
<Caption>
ELIGIBLE FUND SUB-ADVISER INVESTMENT OBJECTIVE
------------- ----------- --------------------
Worldwide Hard Assets N/A To seek long-term capital appreciation by
Fund investing primarily in "hard asset
securities." Hard asset securities are the
stocks and bonds and other securities of
companies that derive at least 50% of gross
revenue or profit from the exploration,
development, production or distribution of
precious metals, natural resources, real
estate and commodities. Income is a
secondary consideration.
Worldwide Emerging N/A To seek long-term capital appreciation by
Markets Fund investing in primarily equity securities in
emerging markets around the world.
</Table>
---------------
(1) Prior to January 1, 2003, State Street Research & Management Company was the
sub-adviser to this Portfolio.
(2) Prior to January 1, 2003, Massachusetts Financial Services Company was the
sub-adviser to this Portfolio.
(3) Prior to May 1, 2001, Metropolitan Life Insurance Company was the adviser to
the Metropolitan Series Fund, Inc.
(4) Prior to May 1, 2003, this Portfolio was a Series of the New England Zenith
Fund. On that date, all Series of the New England Zenith Fund became newly
organized Portfolios of the Metropolitan Series Fund, Inc. The
reorganization had no effect on the investment objectives, policies or
advisory fees of any Series, nor was there any change in investment adviser
or sub-adviser for any Series.
(5) Davis Selected Advisers, L.P. may also delegate any of its responsibilities
to Davis Selected Advisers--NY, Inc., a wholly-owned subsidiary.
6
(6) An investment in the State Street Research Money Market Portfolio is not
insured or guaranteed by the Federal Deposit Insurance Corporation or any
other government agency. Although the Portfolio seeks to maintain a net
asset value of $100 per share, it is possible to lose money by investing in
the Portfolio. During extended periods of low interest rates, the yields of
the Division investing in the Money Market Portfolio may become extremely
low and possibly negative.
(7) The SEI Insurance Products Trust will cease operation and all Funds will
close and be liquidated on August 29, 2003.
OTHER FUNDS AND SHARE CLASSES
The Russell Investment Funds may not be available under your Policy, even
though they are described in the attached Fund prospectuses. The Real Estate
Securities Fund described in the Russell Investment Funds prospectus is not
available under any Policy.
Some of the Funds offer various classes of shares, each of which has a
different level of expenses. The prospectuses for the Funds may provide
information for share classes that are not available through the Policy. When
you consult the prospectus for any Fund, you should be careful to refer to only
the information regarding the class of shares that is available through the
Policy. For the American Century Variable Portfolios, we offer Class I shares;
for Fidelity Variable Insurance Products, we offer Initial Class shares; for the
SEI Insurance Products Trust, we offer Class A shares; for the Metropolitan
Series Fund, Inc., we offer Class A shares; for the Met Investors Series Trust,
we offer Class A shares; and for the American Funds Insurance Series, we offer
Class 2 shares.
CHARGES AND DEDUCTIONS.
The following chart shows the operating expenses of the Funds for the year
ended December 31, 2002, before and after any applicable fee waivers and expense
reimbursements.
ANNUAL OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
<Table>
<Caption>
GROSS FEE WAIVERS NET TOTAL
MANAGEMENT OTHER 12B-1 TOTAL ANNUAL AND EXPENSE ANNUAL
FEES EXPENSES FEES EXPENSES REIMBURSEMENTS EXPENSES
---------- -------- ----- ------------ -------------- ---------
AMERICAN CENTURY VARIABLE PORTFOLIOS
(CLASS I SHARES)(1)
Income & Growth Fund.................. .70% .00% .00% .70% .00% .70%
International Fund.................... 1.30% .01% .00% 1.31% .00% 1.31%
Value Fund............................ .95% .00% .00% .95% .00% .95%
AMERICAN FUNDS INSURANCE SERIES (CLASS
2 SHARES)
American Funds Global Small
Capitalization Fund................. .80% .04% .25% 1.09% .00% 1.09%
American Funds Growth Fund............ .38% .02% .25% .65% .00% .65%
American Funds Growth-Income Fund..... .34% .01% .25% .60% .00% .60%
FIDELITY VARIABLE INSURANCE PRODUCTS
(INITIAL CLASS SHARES)
VIP Asset Manager Portfolio........... .53% .10% .00% .63% .00% .63%
VIP Equity-Income Portfolio........... .48% .09% .00% .57% .00% .57%
VIP Growth Portfolio.................. .58% .09% .00% .67% .00% .67%
VIP High Income Portfolio............. .58% .12% .00% .70% .00% .70%
VIP Mid Cap Portfolio................. .58% .12% .00% .70% .00% .70%
VIP Overseas Portfolio................ .73% .17% .00% .90% .00% .90%
J.P. MORGAN SERIES TRUST II(2)
Bond Portfolio........................ .30% .45% .00% .75% .00% .75%
Small Company Portfolio............... .60% .56% .00% 1.16% .01% 1.15%
</Table>
7
<Table>
<Caption>
GROSS FEE WAIVERS NET TOTAL
MANAGEMENT OTHER 12B-1 TOTAL ANNUAL AND EXPENSE ANNUAL
FEES EXPENSES FEES EXPENSES REIMBURSEMENTS EXPENSES
---------- -------- ----- ------------ -------------- ---------
MET INVESTORS SERIES TRUST (CLASS A
SHARES)
Harris Oakmark International
Portfolio........................... .85% 1.64% .00% 2.49% 1.29% 1.20%(3,4)
Janus Aggressive Growth Portfolio..... .80% .62% .00% 1.42% .52% .90%(3,4)
Met/AIM Mid Cap Core Equity
Portfolio........................... .75% .89% .00% 1.64% .69% .95%(3,4)
Met/AIM Small Cap Growth Portfolio.... .90% 1.20% .00% 2.10% 1.05% 1.05%(3,4)
PIMCO Innovation Portfolio............ .95% .78% .00% 1.73% .63% 1.10%(3,4)
PIMCO Total Return Portfolio.......... .50% .15% .00% .65% .00% .65%
T. Rowe Price Mid-Cap Growth
Portfolio........................... .75% .45% .00% 1.20% .25% .95%(3,4)
METROPOLITAN SERIES FUND, INC. (CLASS
A SHARES)
Alger Equity Growth Portfolio......... .75% .04% .00% .79% .00% .79%
Davis Venture Value Portfolio......... .75% .05% .00% .80% .00% .80%(5)
Harris Oakmark Focused Value
Portfolio........................... .75% .07% .00% .82% .00% .82%
Harris Oakmark Large Cap Value
Portfolio........................... .75% .08% .00% .83% .00% .83%(5)
Janus Mid Cap Portfolio............... .69% .06% .00% .75% .00% .75%
Lehman Brothers Aggregate Bond Index
Portfolio........................... .25% .09% .00% .34% .00% .34%
MetLife Mid Cap Stock Index
Portfolio........................... .25% .18% .00% .43% .00% .43%
MetLife Stock Index Portfolio......... .25% .06% .00% .31% .00% .31%
Morgan Stanley EAFE Index Portfolio... .30% .49% .00% .79% .04% .75%(6)
Neuberger Berman Partners Mid Cap
Value Portfolio..................... .69% .11% .00% .80% .00% .80%(5)
Putnam International Stock
Portfolio........................... .90% .22% .00% 1.12% .00% 1.12%
Russell 2000 Index Portfolio.......... .25% .24% .00% .49% .00% .49%
State Street Research Aggressive
Growth Portfolio.................... .73% .06% .00% .79% .00% .79%(5)
State Street Research Aurora
Portfolio........................... .85% .10% .00% .95% .00% .95%
State Street Research Bond Income
Portfolio........................... .40% .11% .00% .51% .00% .51%
State Street Research Diversified
Portfolio........................... .44% .05% .00% .49% .00% .49%(5)
State Street Research Large Cap Value
Portfolio........................... .70% 1.63% .00% 2.33% 1.38% .95%(6)
State Street Research Money Market
Portfolio........................... .35% .08% .00% .43% .00% .43%
T. Rowe Price Large Cap Growth
Portfolio........................... .63% .14% .00% .77% .00% .77%(5)
T. Rowe Price Small Cap Growth
Portfolio........................... .52% .09% .00% .61% .00% .61%
RUSSELL INVESTMENT FUNDS(7)
Aggressive Equity Fund................ .95% .41% .00% 1.36% .31% 1.05%
Core Bond Fund........................ .60% .20% .00% .80% .10% .70%
Multi-Style Equity Fund............... .78% .21% .00% .99% .12% .87%
Non-U.S. Fund......................... .95% .53% .00% 1.48% .33% 1.15%
</Table>
8
<Table>
<Caption>
GROSS FEE WAIVERS NET TOTAL
MANAGEMENT OTHER 12B-1 TOTAL ANNUAL AND EXPENSE ANNUAL
FEES EXPENSES FEES EXPENSES REIMBURSEMENTS EXPENSES
---------- -------- ----- ------------ -------------- ---------
SEI INSURANCE PRODUCTS TRUST (CLASS A
SHARES)(8)
VP Core Fixed Income Fund............. .28% .55% .00% .83% .23% .60%
VP Emerging Markets Debt Fund......... .84% 1.08% .00% 1.92% .57% 1.35%
VP Emerging Markets Equity Fund....... .65% 2.84% .00% 3.49% 1.54% 1.95%
VP High Yield Bond Fund............... .35% .87% .00% 1.22% .37% .85%
VP International Equity Fund.......... .45% 1.63% .00% 2.08% .80% 1.28%
VP Large Cap Growth Fund.............. .35% .68% .00% 1.03% .18% .85%
VP Large Cap Value Fund............... .35% .66% .00% 1.01% .16% .85%
VP Small Cap Growth Fund.............. .34% .99% .00% 1.33% .23% 1.10%
VP Small Cap Value Fund............... .35% .95% .00% 1.30% .20% 1.10%
VAN ECK WORLDWIDE INSURANCE TRUST
Worldwide Emerging Markets Fund....... 1.00% .36% .00% 1.36% .03% 1.33%(9)
Worldwide Hard Assets Fund............ 1.00% .23% .00% 1.23% .00% 1.23%
</Table>
---------------
(1) American Century Variable Portfolios, Inc. has entered into a Management
Agreement with American Century Investment Management, Inc. (ACIM) under
which ACIM provides investment advisory and management services in exchange
for a single, unified management fee per class. The Agreement provides that
ACIM will pay all expenses of the Funds other than brokerage commissions,
taxes, interest, fees and expenses of those directors who are not considered
"interested persons" and extraordinary expenses. For the Income & Growth
Fund the fee is .70% of average net assets. For the International Fund, the
fee is equal to the following percentages of average net assets: 1.50% of
the first $250 million, 1.20% of the next $250 million and 1.10% on balances
above $500 million. For the Value Fund the fee is equal to the following
percentages of average net assets: 1.00% of the first $500 million, .95% of
the next $500 million and .90% on balances over $1 billion.
(2) Pursuant to an Administration Agreement between JP Morgan Chase Bank (the
"Administrator") and the Portfolios, the Administrator will reimburse the
Portfolios if Other Expenses exceed .45% of the average daily net assets of
the Bond Portfolio and .55% of the average daily net assets of the Small
Company Portfolio.
(3) Net Total Annual Expenses do not reflect certain expense reductions due to
directed brokerage arrangements. If we included these reductions, Net Total
Annual Expenses would have been: 1.18% for the Harris Oakmark International
Portfolio; .82% for the Janus Aggressive Growth Portfolio; .91% for the
Met/AIM Mid Cap Core Equity Portfolio; 1.03% for the Met/AIM Small Cap
Growth Portfolio; 1.04% for the PIMCO Innovation Portfolio; and .88% for the
T. Rowe Price Mid-Cap Growth Portfolio.
(4) Our affiliate, Met Investors Advisory LLC ("Met Investors Advisory"), and
Met Investors Series Trust have entered into an Expense Limitation Agreement
under which Met Investors Advisory has agreed to waive or limit its fees and
to assume other expenses so that Net Total Annual Expenses of each Portfolio
(other than interest, taxes, brokerage commissions, other expenditures which
are capitalized in accordance with generally accepted accounting principles
and other extraordinary expenses not incurred in the ordinary course of each
Portfolio's business) will not exceed, at any time prior to April 30, 2004,
the percentages shown in the table. Under certain circumstances, any fees
waived or expenses reimbursed by Met Investors Advisory may, with the
approval of the Trust's Board of Trustees, be repaid to Met Investors
Advisory. Net Total Annual Expenses for the Harris Oakmark International
Portfolio, the Janus Aggressive Growth Portfolio, the Met/AIM Mid Cap Core
Equity Portfolio and the T. Rowe Price Mid-Cap Growth Portfolio have been
restated to reflect the terms of the Expense Limitation Agreement.
(5) Net Total Annual Expenses do not reflect certain expense reductions due to
directed brokerage arrangements. If we included these reductions, Net Total
Annual Expenses would have been: .78% for the Davis Venture Value Portfolio;
.82% for the Harris Oakmark Large Cap Value Portfolio; .77% for the
Neuberger Berman Partners Mid
9
Cap Value Portfolio; .78% for the State Street Research Aggressive Growth
Portfolio; .76% for the T. Rowe Price Large Cap Growth Portfolio; and .48%
for the State Street Research Diversified Portfolio.
(6) Our affiliate, MetLife Advisers, LLC ("MetLife Advisers"), and the
Metropolitan Series Fund, Inc. (the "Met Series Fund") have entered into an
Expense Agreement under which MetLife Advisers will waive management fees
and/or pay expenses (other than brokerage costs, interest, taxes or
extraordinary expenses) ("Expenses") attributable to the Class A shares of
certain Portfolios of the Met Series Fund, so that Net Total Annual Expenses
of these Portfolios will not exceed, at any time prior to April 30, 2004,
the percentages shown in the table. Under the agreement, if certain
conditions are met, MetLife Advisers may be reimbursed for fees waived and
Expenses paid with respect to the State Street Large Cap Value Portfolio if,
in the future, actual Expenses of this Portfolio are less than the expense
limit. Net Total Annual Expenses for the State Street Research Large Cap
Value Portfolio have been restated to reflect the terms of the Expense
Agreement.
(7) The Manager of the Russell Investment Funds has contractually agreed to
waive, at least until April 30, 2004, a portion of its management fee for
each of the Funds, up to the full amount of those fees, and to reimburse
each of the Funds for all remaining expenses after fee waivers, so that Net
Total Annual Expenses for each of the Funds will not exceed the percentages
shown in the table. Net Total Annual Expenses for each of the Funds have
been restated to reflect the terms of this agreement.
(8) Pursuant to a management agreement between the SEI Insurance Products Trust
and SEI Investments Fund Management (the "Manager"), the Manager will
provide overall administrative and accounting services and act as transfer
agent and dividend disbursing agent for an annual fee, all or a portion of
which it has agreed to waive in order to limit Net Total Annual Expenses of
the Funds to the percentages shown in the table. Any such waiver is
voluntary and may be terminated at any time.
(9) Van Eck Associates Corporation has agreed to assume expenses exceeding 1.30%
of the average daily net assets of the Worldwide Emerging Markets Fund,
other than interest, taxes, brokerage commissions and extraordinary
expenses.
An investment adviser or affiliates thereof may compensate General American
and/or certain affiliates for administrative, distribution, or other services
relating to the Funds. We (or our affiliates) may also be compensated with 12b-1
fees from the Funds. This compensation is based on assets of the Funds
attributable to the Policies and certain other variable insurance products that
we and our affiliates issue. Some Funds or their advisers (or other affiliates)
may pay us more than others, and the amounts paid may be significant. An
affiliate of General American may also receive brokerage commissions on
securities transactions initiated by an investment adviser.
FEDERAL TAX MATTERS
INTRODUCTION
The following summary provides a general description of the Federal income
tax considerations associated with the Policy and does not purport to be
complete or to cover all situations. This discussion is not intended as tax
advice. Counsel or other competent tax advisers should be consulted for more
complete information. This discussion is based upon General American's
understanding of the present Federal income tax laws as they are currently
interpreted by the Internal Revenue Service. No representation is made as to the
likelihood of continuation of the present Federal income tax laws or of the
current interpretations by the Internal Revenue Service.
TAX STATUS OF THE POLICY
In order to qualify as a life insurance contract for Federal income tax
purposes and to receive the tax treatment normally accorded life insurance
contracts under Federal tax law, a Policy must satisfy certain requirements
which are set forth in the Internal Revenue Code. Guidance as to how these
requirements are to be applied is limited, in particular, with respect to joint
and last survivor life insurance policies. Nevertheless, we believe that the
Policies should satisfy the applicable requirements. There is less guidance,
however, with respect to Policies issued on a substandard or guaranteed issue
basis and Policies with term riders added, and it is not clear whether such
policies will in all cases satisfy the applicable requirements, particularly if
the owner pay the full amount of premiums under
10
the Policy. We may take appropriate steps to bring the Policy into compliance
with applicable requirements, and we reserve the right to restrict Policy
transactions in order to do so.
In certain circumstances, owners of variable life insurance contracts have
been considered for Federal income tax purposes to be the owners of the assets
of the variable account supporting their contracts, due to their ability to
exercise investment control over those assets. Where this is the case, the
contract owners have been currently taxed on income and gains attributable to
variable account assets. There is little guidance in this area, and some
features of the Policies, such as the number of available Investment Funds and
the flexibility of a Policy Owner to allocate premiums and cash values, have not
been explicitly addressed in published rulings. While we believe that the
Policies do not give Policy Owners investment control over Separate Account
assets, we reserve the right to modify the Policies as necessary to prevent a
Policy Owner from being treated as the owner of the Separate Account assets
supporting the Policy.
In addition, the Code requires that the investments of the Separate Account
be "adequately diversified" in order for the Policies to be treated as life
insurance contracts for Federal income tax purposes. It is intended that the
Separate Account, through the Eligible Funds, will satisfy these diversification
requirements.
The following discussion assumes that the Policy will qualify as a life
insurance contract for Federal income tax purposes.
1. TAX TREATMENT OF POLICY BENEFITS. In general, the Company believes that
the proceeds and Cash Value increases of a Policy should be treated in a manner
consistent with a fixed-benefit life insurance policy for Federal income tax
purposes. Thus, the death benefit under the Policy should be excludable from the
gross income of the Beneficiary under Section 101(a)(1) of the Code, unless a
transfer for value (generally a sale of the policy) has occurred. Many changes
or transactions involving a Policy may have tax consequences, depending on the
circumstances. Such changes include, but are not limited to, the exchange of the
Policy, a change of the Policy's Face Amount, a Policy Loan, an additional
premium payment, a Policy lapse with an outstanding Policy Loan, a partial
withdrawal, or a surrender of the Policy. The transfer of the Policy or
designation of a Beneficiary may have Federal, state, and/or local transfer and
inheritance tax consequences, including the imposition of gift, estate, and
generation-skipping transfer taxes. For example, the transfer of the Policy to,
or the designation as a Beneficiary of, or the payment of proceeds to, a person
who is assigned to a generation which is two or more generations below the
generation assignment of the Owner may have generation skipping transfer tax
consequences under Federal tax law. The individual situation of each Owner or
Beneficiary will determine the extent, if any, to which Federal, state, and
local transfer and inheritance taxes may be imposed and how ownership or receipt
of Policy proceeds will be treated for purposes of Federal, state and local
estate, inheritance, generation skipping and other taxes.
A Policy may also be used in various arrangements, including non-qualified
deferred compensation or salary continuation plans, split dollar insurance
plans, executive bonus plans, retiree medical benefit plans and others. The tax
consequences of such plans may vary depending on the particular facts and
circumstances of each individual arrangement. Therefore, if you are
contemplating the use of a Policy in any arrangement the value of which depends
in part on its tax consequences, you should be sure to consult a qualified tax
adviser regarding the tax attributes of the particular arrangement.
Generally, the Owner will not be deemed to be in constructive receipt of
the Policy's Cash Value, including increments thereof, under the Policy until
there is a distribution. Under a complete surrender or lapse of any Policy, if
the amount received plus the amount of outstanding Indebtedness exceeds the
total investments in the Policy, the excess will generally be treated as
ordinary income subject to tax. The tax consequences of other distributions
from, and Policy Loans taken from or secured by, a Policy depend upon whether
the Policy is classified as a "modified endowment contract".
2. MODIFIED ENDOWMENT CONTRACTS. A policy may be treated as a modified
endowment contract depending upon the amount of premiums paid in relation to the
death benefit provided under such Policy. The premium limitation rules for
determining whether a Policy is a modified endowment contract are extremely
complex. In general, however, a Policy will be a modified endowment contract if
the accumulated premiums paid at any time during the first seven Policy Years
exceed the sum of the net level premiums which would have been paid on or before
such time if the Policy provided for paid-up future benefits after the payment
of seven level annual premiums.
In addition, if a Policy is "materially changed" it may cause such Policy
to be treated as a modified endowment contract. The material change rules for
determining whether a Policy is a modified endowment contract are also
11
extremely complex. In general, however, the determination of whether a Policy
will be a modified endowment contract after a material change generally depends
upon the relationship among the death benefit at the time of such change, the
Cash Value at the time of the change and the additional premiums paid in the
seven Policy Years starting with the date on which the material change occurs.
Moreover, a life insurance contract received in exchange for a life
insurance contract classified as a modified endowment contract will also be
treated as a modified endowment contract. A reduction in a Policy's benefits may
also cause such Policy to become a modified endowment contract.
Accordingly, a prospective Owner should contact a competent tax adviser
before purchasing a Policy to determine the circumstances under which the Policy
would be a modified endowment contract. In addition, an Owner should contact a
competent tax adviser before paying any additional premiums or making any other
change to, including an exchange of, a Policy to determine whether such premium
or change would cause the Policy (or the new Policy in the case of an exchange)
to be treated as a modified endowment contract.
NOTE: MOST DESTINY POLICIES WERE MODIFIED ENDOWMENT CONTACTS FROM THE DATE OF
ISSUE, THEREFORE, DISTRIBUTIONS FROM MOST DESTINY POLICIES ARE TAXED AS FOLLOWS:
3. DISTRIBUTIONS FROM POLICIES CLASSIFIED AS MODIFIED ENDOWMENT
CONTRACT. Policies classified as modified endowment contracts will be subject
to the following tax rules: First, all distributions, including distributions
upon surrender, from such a Policy are treated as ordinary income subject to tax
up to the amount equal to the excess (if any) of the Cash Value immediately
before the distribution over the investment in the Policy (described below) at
such time. Second, Policy Loans taken from, or secured by, such a Policy, as
well as due but unpaid interest thereon, are treated as distributions from such
a Policy and taxed accordingly. Third, a 10 percent additional income tax is
imposed on the portion of any distribution from, or Policy Loan taken from or
secured by, such a Policy that is included in income, except where the
distribution or Policy Loan (a) is made on or after the Owner attains age
59 1/2, (b) is attributable to the Owner's becoming disabled, or (c) is part of
a series of substantially equal periodic payments for the life (or life
expectancy) of the Owner or the joint lives (or joint life expectancies) of the
Owner and the Owner's Beneficiary.
4. DISTRIBUTIONS FROM POLICIES NOT CLASSIFIED AS MODIFIED ENDOWMENT
CONTRACT. Distributions from Policies not classified as a modified endowment
contracts are generally treated as first recovering the investment in the Policy
(described below) and then, only after the return of all such investment in the
Policy, as distributing taxable income. An exception to this general rule occurs
in the case of a decrease in the Policy's death benefit (possibly including a
partial withdrawal) or any other change that reduces benefits under the Policy
in the first 15 years after the Policy is issued and that results in cash
distribution to the Owner in order for the Policy to continue complying with the
Section 7702 definitional limits. Such a cash distribution will be taxed in
whole or in part as ordinary income (to the extent of any gain in the Policy)
under rules prescribed in Section 7702.
Policy Loans from, or secured by, a Policy that is not a modified endowment
contract should generally not be treated as distributions. Instead, such loans
should generally be treated as indebtedness of the Owner. However, because the
tax consequences associated with Policy Loans are not always clear, in
particular, with respect to Policy Loans outstanding after the tenth Policy
year, you should consult a tax adviser prior to taking any Policy Loan.
Upon a complete surrender or lapse of a Policy that is not a modified
endowment contract, if the amount received plus the amount of indebtedness
exceeds the total investment in the Policy, the excess will generally be treated
as ordinary income subject to tax.
Neither distributions (including distributions upon surrender or lapse) nor
Policy Loans from, or secured by, a Policy that is not a modified endowment
contract are subject to the 10 percent additional income tax.
If a Policy which is not a modified endowment contract subsequently becomes
a modified endowment contract, then any distribution made from the Policy within
two years prior to the date of such change in status may become taxable.
5. POLICY LOANS. Generally, interest paid on any loan under a life
insurance Policy is not deductible. AN OWNER SHOULD CONSULT A COMPETENT TAX
ADVISER IF THE DEDUCTIBILITY OF LOAN INTEREST IS A CONSIDERATION IN THE PURCHASE
OF A POLICY. If a Policy Loan is outstanding when a Policy is canceled or
lapses, the amount of the outstanding Indebtedness will be added to the amount
distributed and will be taxed accordingly.
12
6. INTEREST EXPENSE ON UNRELATED INDEBTEDNESS. Under provisions added to
the Code in 1997 for policies issued after June 8, 1997, if a business taxpayer
owns or is the beneficiary of a Policy on the life of any individual who is not
an officer, director, employee, or 20 percent owner of the business, and the
taxpayer also has debt unrelated to the Policy, a portion of the taxpayer's
unrelated interest expense deductions may be lost. No business taxpayer should
purchase, exchange, or increase the death benefit under a Policy on the life of
any individual who is not an officer, director, employee, or 20 percent owner of
the business without first consulting a competent tax adviser.
7. INVESTMENT IN THE POLICY. Investment in the Policy means (i) the
aggregate amount of any premiums or other consideration paid for a Policy, minus
(ii) the aggregate amount received under the Policy which is excluded from gross
income of the Owner (except that the amount of any Policy Loan from, or secured
by, a Policy that is a modified endowment contract, to the extent such amount is
excluded from gross income, will be disregarded), plus (iii) the amount of any
Policy Loan from, or secured by, a Policy that is a modified endowment contract
to the extent that such amount is included in the gross income of the Owner.
8. MULTIPLE POLICES. All modified endowment contracts that are issued by
the Company (or its affiliates) to the same Owner during any calendar year are
treated as one modified endowment contract for purposes of determining the
amount includible in gross income under Section 72(e) of the Code.
9. WITHHOLDING. To the extent that Policy distributions are taxable, they
are generally subject to withholding for the recipient's Federal income tax
liability. Recipients can generally elect, however, not to have tax withheld
from distributions.
10. CONTINUATION OF POLICY BEYOND ATTAINED AGE 100. The tax consequences
of continuing the Policy beyond the Insured's Attained Age 100 birthday are
unclear. You should consult a tax adviser if you intend to keep the Policy in
force beyond the Insured's Attained Age 100.
11. NEW GUIDANCE ON SPLIT DOLLAR PLANS. The IRS has recently issued
guidance on split dollar insurance plans. A tax adviser should be consulted with
respect to this new guidance if your Policy is, or may become, subject to a
split dollar insurance plan. If your Policy is part of an equity split dollar
arrangement, there is a risk that some portion of the Policy cash value may be
taxed prior to any Policy distribution.
In addition, the Sarbanes-Oxley Act of 2002 (the "Act") which was signed
into law on July 30, 2002, prohibits, with exceptions, publicly-traded
companies, including non-U.S. companies that have securities listed on U.S.
exchanges, from extending, directly or indirectly or through a subsidiary, many
types of personal loans to their directors or executive officers. It is possible
that this prohibition may be interpreted to apply to split-dollar life insurance
arrangements for directors and executive officers of such companies, since such
arrangements can arguably be viewed as involving a loan from the employer for at
least some purposes.
Although the prohibition on loans generally took effect as of July 30,
2002, there is an exception for loans outstanding as of the date of enactment,
so long as there is no material modification to the loan terms and the loan is
not renewed after July 30, 2002. Any affected business contemplating the payment
of a premium on an existing Policy or the purchase of new Policy in connection
with a split-dollar life insurance arrangement should consult legal counsel.
12. ALTERNATIVE MINIMUM TAX. There may also be an indirect tax upon the
income in the Policy or the proceeds of a Policy under the Federal corporate
alternative minimum tax, if the Owner is subject to that tax.
13. PUERTO RICO. We believe that Policies subject to Puerto Rican tax law
will generally receive treatment similar, with certain modifications, to that
described above. Among other differences, Policies governed by Puerto Rican tax
law are not currently subject to the rules described above regarding Modified
Endowment Contracts. You should consult your tax adviser with respect to Puerto
Rican tax law governing the Policies.
14. POSSIBLE TAX LAW CHANGES. Although the likelihood of legislative
changes is uncertain, there is always the possibility that the tax treatment of
the Policy could change by legislation or otherwise. Consult a tax adviser with
respect to legislative developments and their effect on the Policy.
15. FOREIGN TAX CREDITS. To the extent permitted under Federal tax law, we
may claim the benefit of certain foreign tax credits attributable to taxes paid
by certain Eligible Funds to foreign jurisdictions.
16. POSSIBLE CHARGE FOR TAXES. At the present time, the Company makes no
charge to the Separate Account for any Federal, state, or local taxes (as
opposed to Premium Tax Charges which are deducted from premium
13
payments) that it incurs which may be attributable to such Separate Account or
to the Policies. The Company, however, reserves the right in the future to make
a charge for any such tax or other economic burden resulting from the
application of the tax laws that it determines to be properly attributable to
the Separate Account or to the Policies.
MANAGEMENT
The directors and executive officers of General American Life Insurance
Company and their principal business experience during the past five years are:
DIRECTORS OF GENERAL AMERICAN
<Table>
<Caption>
NAME AND PRINCIPAL BUSINESS ADDRESS PRINCIPAL BUSINESS EXPERIENCE DURING THE PAST FIVE YEARS
----------------------------------- --------------------------------------------------------
C. Robert Henrikson**** Chairman, President and Chief Executive Officer of General
American since 2002 and President, U.S. Insurance and
Financial Services Division of Metropolitan Life Insurance
Company since 2002. Formerly, President, Institutional
Business 1999-2002 and Senior Executive Vice President
1997-1999 of Metropolitan Life.
Nicholas D. Latrenta**** Director of General American since 2002 and Senior Vice
President of Metropolitan Life Insurance Company since
1997.
James L. Lipscomb**** Director of General American since 2002 and Senior
Vice-President and Deputy General Counsel of Metropolitan
Life Insurance Company since 2001. Formerly, President and
Chief Executive Officer 2000-2001 of Conning Corporation
and Head of Corporate Planning and Strategy Department
1998-2000 of Metropolitan Life Insurance Company.
Stewart G. Nagler**** Director of General American since 2000 and Vice Chairman
and Chief Financial Officer of Metropolitan Life Insurance
Company since 1998.
Stanley J. Talbi**** Director of General American since 2002 and Senior Vice
President of Metropolitan Life Insurance Company since
1974.
Lisa M. Weber**** Director of General American since 2000 and Senior
Executive Vice President and Chief Administrative Officer
of Metropolitan Life Insurance Company since 2001.
Formerly, Executive Vice President 1998-2001 of
Metropolitan Life.
William J. Wheeler**** Director of General American since 2002 and Senior Vice
President of Metropolitan Life Insurance Company since
1997.
Anthony J. Williamson****** Director, Vice President and Treasurer (Principal Financial
Officer) of General American since 2002 and Senior Vice
President and Treasurer of Metropolitan Life Insurance
Company since 2001. Formerly, Senior Vice President
1998-2001 of Metropolitan Life.
</Table>
EXECUTIVE OFFICERS OF GENERAL AMERICAN OTHER THAN DIRECTORS
<Table>
<Caption>
NAME AND PRINCIPAL BUSINESS ADDRESS PRINCIPAL BUSINESS EXPERIENCE DURING THE PAST FIVE YEARS
----------------------------------- --------------------------------------------------------
Richard D. Evans* Senior Vice President of General American since 1999.
Formerly, Regional Vice President 1995-1999 of General
American.
James D. Gaughan**** Secretary and Clerk of General American since 2002 and
Assistant Vice President and Assistant Secretary of
Metropolitan Life Insurance Company since 2001. Formerly,
Corporate Counsel 1999-2001 in private practice and Senior
Corporate Counsel and Assistant Secretary 1993-1999 of
Tenneco Inc.
Jerome M. Mueller* Senior Vice President of General American since 1998.
John E. Petersen* Senior Vice President of General American since 2000.
Formerly, Vice President 1999-2000 and Regional Vice
President 1992-1999 of General American.
</Table>
14
<Table>
<Caption>
NAME AND PRINCIPAL BUSINESS ADDRESS PRINCIPAL BUSINESS EXPERIENCE DURING THE PAST FIVE YEARS
----------------------------------- --------------------------------------------------------
Virginia M. Wilson****** Vice President and Controller (Principal Accounting
Officer) of General American since 2002 and Senior Vice
President and Controller of Metropolitan Life Insurance
Company since 1999.
Bernard H. Wolzenski* Executive Vice President, Individual Insurance of General
American since 1991.
A. Greig Woodring*** Executive Vice President, Reinsurance and President and
Chief Executive Officer of Reinsurance Group of America
since 1992.
</Table>
---------------
The principal business address:
* General American Life Insurance Company, 700 Market Street, St. Louis,
Missouri 63101.
** General American, 13045 Tesson Ferry Road, St. Louis, Missouri 63128
*** Reinsurance Group of America, 1370 Timberlake Manor Parkway,
Chesterfield, Missouri 63017
**** Metropolitan Life Insurance Company, One Madison Avenue, New York NY
10010
***** Metropolitan Life, One Gateway Center, 6th Floor North, Pittsburgh, PA
15222
****** Metropolitan Life, One MetLife Plaza, 27-01 Queens Plaza, North, Long
Island City, NY 11101
VOTING RIGHTS
Based on its understanding of current applicable legal requirements, the
Company will vote the shares of the Funds held in the Separate Account at
regular and special shareholder meetings of the mutual funds in accordance with
the instructions received from persons having voting interests in the
corresponding Divisions of the Separate Account. If, however, the 1940 Act or
any regulation thereunder should be amended or if the present interpretation
thereof should change, and as a result the Company determines that it is
permitted to vote shares of the Fund in its own right, it may elect to do so. No
voting privileges apply to the Policies with respect to Cash Value removed from
the Separate Account as a result of a Policy Loan.
The number of votes which an Owner has the right to instruct will be
calculated separately for each Division. Voting rights reflect the dollar value
of the total number of units of each Division of the Separate Account credited
to the Owner at the record date, rather than the number of units alone.
Fractional shares will be counted. The number of votes of the Fund which the
Owner has the right to instruct will be determined as of the date coincident
with the date established by that Fund for determining shareholders eligible.
Voting instructions will be solicited by written communications prior to such
meeting in accordance with procedures established by the mutual funds.
The company will vote shares of a Fund for which no timely instructions are
received in proportion to the voting instructions which are received with
respect to that Fund. The Company will also vote any shares of the Funds which
are not attributable to Policies in the same proportion.
Each person having a voting interest in a Division will receive any proxy
material, reports, and other materials relating to the appropriate Fund.
DISREGARD OF VOTING INSTRUCTIONS. The Company may, when required by state
insurance regulatory authorities, disregard voting instructions if the
instructions require that the shares be voted so as to cause a change in the
subclassification or investment objective of the Fund or to approve or
disapprove an investment Advisory contract for a Fund. In addition, the Company
itself may disregard voting instructions in favor of changes initiated by an
Owner in the investment policy or the investment adviser or sub-adviser of a
Fund if the Company reasonably disapproves of such changes. A proposed change
would be disapproved only if the proposed change is contrary to state law or
prohibited by state regulatory authorities, or the Company determined that the
change would have an adverse effect on its General Account in that the proposed
investment policy for a Fund may result in overly speculative or unsound
investments. If the Company disregards voting instructions, a summary of that
action and the reasons for such action will be included in the next annual
report to Owners.
RESTRICTIONS ON FINANCIAL TRANSACTIONS
Federal laws designed to counter terrorism and prevent money laundering by
criminals might, in certain circumstances, require us to reject a premium
payment and/or block or "freeze" your account. If these laws apply in
15
a particular situation, we would not be allowed to process any request for
withdrawals, surrenders, or death benefits, make transfers or continue making
payments under your death benefit option until instructions are received from
the appropriate regulator. We also may be required to provide additional
information about your account to government regulators.
LEGAL MATTERS
Legal matters in connection with the Policies have been passed upon by Anne
M. Goggin, Chief Counsel--Individual Business of Metropolitan Life Insurance
Company. Sutherland Asbill & Brennan LLP, of Washington, D.C., has provided
advice on certain matters relating to Federal securities laws.
LEGAL PROCEEDINGS
General American, like other insurance companies, is involved in lawsuits,
including class action lawsuits. In some class action lawsuits involving
insurers, substantial damages have been sought and/or material settlement
payments have been made. Although the outcome of any litigation cannot be
predicted with certainty, General American believes that, as of the date of this
prospectus supplement, there are no pending or threatened lawsuits that will
have a materially adverse impact on it, the Separate Account or General American
Distributors, Inc.
EXPERTS
The consolidated financial statements of General American and Subsidiaries
included in this prospectus supplement and the related financial statement
schedules included elsewhere in the registration statement have been audited by
Deloitte & Touche LLP, independent auditors, as stated in their report appearing
herein and elsewhere in the registration statement (which report expresses an
unqualified opinion and includes an explanatory paragraph referring to the
change in method of accounting for goodwill and other intangible assets to
conform to Statement of Financial Accounting Standards No. 142), and are
included in reliance upon the report of such firm given upon their authority as
experts in accounting and auditing.
The financial statements of the Separate Account included in this
prospectus supplement and the related financial statement schedules included
elsewhere in the registration statement have been audited by Deloitte & Touche
LLP, independent auditors, as stated in their report appearing herein and
elsewhere in the registration statement, and are included in reliance upon the
report of such firm given upon their authority as experts in accounting and
auditing. Deloitte & Touche LLP, 201 E. Kennedy Boulevard, Tampa, Florida,
33602, serves as independent public accountants for the Separate Account and
General American.
FINANCIAL STATEMENTS
The financial statements of General American which are included in this
prospectus supplement should be distinguished from the financial statements of
the Separate Account, and should be considered only as bearing on the ability of
General American to meet its obligations under the Policy. They should not be
considered as bearing on the investment performance of the assets held in the
Separate Account.
16
FLEXIBLE PREMIUM VARIABLE LIFE SUPPLEMENT DATED 12/30/04
GENERAL AMERICAN LIFE INSURANCE COMPANY
13045 Tesson Ferry Road
St. Louis, Missouri 63128
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
(American Vision Series VUL 2002)
VARIABLE LIFE INSURANCE POLICY (Destiny)
Supplement dated December 30, 2004
to the Prospectuses dated May 1, 2004
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICIES
(Variable Universal Life/Executive Benefit)
FLEXIBLE PREMIUM JOINT AND LAST SURVIVOR
VARIABLE LIFE INSURANCE POLICY
Supplement dated December 30, 2004
to the Prospectuses dated May 1, 2002
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICIES
(VUL 95/VUL 100/VGSP/Russell VUL)
Supplement dated December 30, 2004
to the Prospectuses dated May 1, 2000
This supplement updates certain information contained in the prospectuses for
each of the above-referenced variable life insurance policies, as annually and
periodically supplemented. You should read and retain this supplement.
The Administrative Office address for certain Policy transactions has been
changed as follows:
Surrenders, Loans, Withdrawals and General American
Division Transfers P.O. Box 543
Warwick, RI 02887-0543
Death Claims General American
P.O. Box 353
Warwick, RI 02887-0353
On December 1, 2004, the principal underwriter of the policies, General
American Distributors, Inc. ("GAD"), was acquired by and became a wholly-owned
subsidiary of its affiliate MetLife Investors Group, Inc. Immediately
thereafter, GAD's affiliate, MetLife Investors Distribution Company, was merged
with and into GAD and GAD changed its name to "MetLife Investors Distribution
Company." As a result of the merger, GAD's executive offices have changed to 22
Corporate Plaza, Newport Beach, CA 91108, and its telephone number has changed
to (800) 989-3752. It is not anticipated that the merger will have an impact on
the distribution of the policies or the level of compensation paid in
connection with such distribution. References in the prospectus and the
statement of additional information to the principal underwriter of the
policies shall be deemed to refer to MetLife Investors Distribution Company.
GENERAL AMERICAN LIFE INSURANCE COMPANY
Flexible Premium
Variable Life Insurance Policies
(Variable Universal Life/Executive Benefit/Destiny)
Supplement dated May 1, 2003
to the Prospectuses dated May 1, 2002
Flexible Premium Joint and Last Survivor
Variable Life Insurance Policy
Supplement dated May 1, 2003
to the Prospectus dated May 1, 2002
Flexible Premium Variable Life Insurance Policies
(VUL 95/VUL 100/VGSP/Russell VUL)
Supplement dated May 1, 2003
to the Prospectuses dated May 1, 2000
This supplement updates certain information contained in the last full
prospectus prepared for each of the above-referenced flexible premium variable
life insurance policies. You should read and retain this supplement. We will
send you an additional copy of the last full prospectus for your policy, without
charge, on request. These policies are no longer available for sale.
General American Life Insurance Company is an indirect wholly-owned
subsidiary of Metropolitan Life Insurance Company ("MetLife"). MetLife is a
wholly-owned subsidiary of MetLife, Inc., a publicly-traded company. General
American's Home Office is 700 Market Street, St. Louis, Missouri 63101.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE POLICIES OR DETERMINED IF THE
PROSPECTUSES ARE ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE SECURITIES AND EXCHANGE COMMISSION MAINTAINS A WEB SITE THAT CONTAINS
MATERIAL INCORPORATED BY REFERENCE AND OTHER INFORMATION REGARDING REGISTRANTS
THAT FILE ELECTRONICALLY WITH THE SECURITIES AND EXCHANGE COMMISSION. THE
ADDRESS OF THE SITE IS HTTP://WWW.SEC.GOV.
THE ELIGIBLE FUND PROSPECTUSES ARE ATTACHED. INCLUDED ARE PROSPECTUSES FOR
THE RUSSELL INVESTMENT FUNDS (FORMERLY, RUSSELL INSURANCE FUNDS), WHICH MAY NOT
BE AVAILABLE UNDER YOUR POLICY. PLEASE READ THE PROSPECTUSES CAREFULLY AND KEEP
THEM FOR REFERENCE.
WE DO NOT GUARANTEE HOW ANY OF THE DIVISIONS OR ELIGIBLE FUNDS WILL
PERFORM.
YOUR PRIVACY NOTICE IS ON THE LAST TWO PAGES OF THIS BOOK
THE COMPANY
General American is principally engaged in writing individual life
insurance policies and annuity contracts. It is admitted to do business in 49
states, the District of Columbia, Puerto Rico, and in ten Canadian provinces.
The principal offices (Home Office) of General American are located at 700
Market Street, St. Louis, Missouri 63101. The Administrative Office for various
Policy transactions is as follows:
FOR EXECUTIVE BENEFIT POLICY OWNERS:
<Table>
Premium Payments General American
P.O. Box 14490
St. Louis, MO 63178-4490
All Other Inquiries and General American
Transactions Attention: COLI
700 Quaker Lane
Warwick, RI 02887-0355
(800) 638-9294
</Table>
FOR ALL OTHER POLICY OWNERS:
<Table>
Premium Payments General American
P.O. Box 14490
St. Louis, MO 63178-4490
Payment Inquires and General American
Correspondence Remittance Processing
4100 Boy Scout Blvd.
Tampa, FL 33607
(800) 638-9294
Beneficiary and Ownership General American
Changes P. O. Box 355
Surrenders, Loans Warwick, RI 02887-0355
and Withdrawals (800) 638-9294
Division Transfers
Death Claims
Cancellations (Free Look General American
Period) 13045 Tesson Ferry Road
St. Louis, MO 63128
All Other Telephone (800) 638-9294
Transactions and Inquiries
</Table>
THE SEPARATE ACCOUNT. The separate account consists of divisions, each of
which corresponds to an underlying Fund. Each division may either make money or
lose money. Therefore if you invest in a division of the separate account, you
may either make money or lose money, depending on the investment experience of
that division. There is no guaranteed rate of return in the separate account.
The following chart shows the Funds that are available under the policy
along with the name of the investment adviser, sub-adviser (where applicable)
and investment objective of each Fund. The Funds have different investment goals
and strategies. You should review the prospectus of each Fund, or seek
professional guidance in determining which Fund(s) best meet your objectives.
NOTE: THE RUSSELL INVESTMENT FUNDS ARE NOT AVAILABLE TO DESTINY AND EXECUTIVE
BENEFIT POLICIES. FOR ALL OTHER POLICIES, THE RUSSELL INVESTMENT FUNDS ARE ONLY
AVAILABLE FOR POLICIES WITH AN ISSUE DATE PRIOR TO JANUARY 1, 2000.
THE SEI INSURANCE PRODUCTS TRUST FUNDS ARE ONLY AVAILABLE UNTIL AUGUST 22, 2003.
AFTER THAT DATE, ALL CASH VALUE ALLOCATED TO THE FUNDS WILL BE REDEEMED AND THE
LIQUIDATION PROCEEDS WILL BE TRANSFERRED TO THE STATE STREET RESEARCH MONEY
MARKET PORTFOLIO.
2
AMERICAN CENTURY VARIABLE PORTFOLIOS ADVISER: AMERICAN CENTURY INVESTMENT
MANAGEMENT, INC.
<Table>
<Caption>
ELIGIBLE FUND SUB-ADVISER INVESTMENT OBJECTIVE
------------- ----------- --------------------
Income & Growth Fund N/A Current income and capital appreciation by
investing in a diversified portfolio of
common stocks.
International Fund N/A Capital growth.
Value Fund N/A Long-term capital growth, with income as a
secondary objective.
</Table>
AMERICAN FUNDS INSURANCE SERIES ADVISER: CAPITAL RESEARCH AND MANAGEMENT
COMPANY
<Table>
<Caption>
ELIGIBLE FUND SUB-ADVISER INVESTMENT OBJECTIVE
------------- ----------- --------------------
American Funds Global N/A Capital appreciation through stocks.
Small Capitalization
Fund
American Funds Growth N/A Capital appreciation through stocks.
Fund
American Funds Growth- N/A Capital appreciation and income.
Income Fund
</Table>
FIDELITY(R) VARIABLE INSURANCE PRODUCTS ADVISER: FIDELITY MANAGEMENT & RESEARCH
COMPANY
<Table>
<Caption>
ELIGIBLE FUND SUB-ADVISER INVESTMENT OBJECTIVE
------------- ----------- --------------------
VIP Asset Manager FMR Co., Inc. To obtain high total return with reduced
Portfolio risk over the long term by allocating its
assets among stocks, bonds and short-term
instruments.
VIP Equity-Income FMR Co., Inc. Reasonable income. The fund will also
Portfolio consider the potential for capital
appreciation. The fund's goal is to achieve
a yield which exceeds the composite yield of
securities comprising the Standard & Poor's
500(SM) Index (S&P 500(R)).
VIP Growth Portfolio FMR Co., Inc. To achieve capital appreciation.
VIP High Income FMR Co., Inc. A high level of current income while also
Portfolio considering growth of capital.
VIP Mid Cap Portfolio FMR Co., Inc. Long-term growth of capital.
VIP Overseas Portfolio FMR Co., Inc. Long-term growth of capital.
</Table>
J.P. MORGAN SERIES TRUST II ADVISER: J.P. MORGAN INVESTMENT MANAGEMENT, INC.
<Table>
<Caption>
ELIGIBLE FUND SUB-ADVISER INVESTMENT OBJECTIVE
------------- ----------- --------------------
JPMorgan Bond N/A To provide high total return consistent with
Portfolio moderate risk of capital and maintenance of
liquidity.
JPMorgan Small Company N/A To provide high total return from a
Portfolio portfolio of small company stocks.
</Table>
3
MET INVESTORS SERIES TRUST ADVISER: MET INVESTORS ADVISORY LLC
<Table>
<Caption>
ELIGIBLE FUND SUB-ADVISER INVESTMENT OBJECTIVE
------------- ----------- --------------------
Harris Oakmark Harris Associates Long-term growth of capital.
International L.P.(1)
Portfolio (formerly,
State Street Research
Concentrated
International
Portfolio)
Janus Aggressive Janus Capital Long-term growth of capital.
Growth Portfolio Management LLC
Met/AIM Mid Cap Core AIM Capital Long-term growth of capital.
Equity Portfolio Management, Inc.
Met/AIM Small Cap AIM Capital Long-term growth of capital.
Growth Portfolio Management, Inc.
PIMCO Innovation PIMCO Equity Advisors Capital appreciation; no consideration is
Portfolio given to income.
PIMCO Total Return Pacific Investment Maximum total return, consistent with the
Portfolio Management Company LLC preservation of capital and prudent
investment management.
T. Rowe Price Mid-Cap T. Rowe Price To provide long-term growth of capital.
Growth Portfolio Associates, Inc.(2)
(formerly, MFS Mid Cap
Growth Portfolio)
</Table>
METROPOLITAN SERIES FUND, INC. ADVISER: METLIFE ADVISERS, LLC(3)
<Table>
<Caption>
ELIGIBLE FUND SUB-ADVISER INVESTMENT OBJECTIVE
------------- ----------- --------------------
Alger Equity Growth Fred Alger Management, Long-term capital appreciation.
Portfolio(4) Inc.
Davis Venture Value Davis Selected Growth of capital.
Portfolio(4) Advisers, L.P.(5)
Harris Oakmark Focused Harris Associates L.P. Long-term capital appreciation.
Value Portfolio(4)
Harris Oakmark Large Harris Associates L.P. Long-term capital appreciation.
Cap Value Portfolio
Janus Mid Cap Janus Capital Long-term growth of capital.
Portfolio Management LLC
Lehman Brothers(R) Metropolitan Life To equal the performance of the Lehman
Aggregate Bond Index Insurance Company Brothers Aggregate Bond Index.
Portfolio
MetLife Mid Cap Stock Metropolitan Life To equal the performance of the Standard &
Index Portfolio Insurance Company Poor's Mid Cap 400 Composite Stock Price
Index ("S&P MidCap 400 Index").
MetLife Stock Index Metropolitan Life To equal the performance of the Standard &
Portfolio Insurance Company Poor's 500 Composite Stock Price Index ("S&P
500 Index").
Morgan Stanley EAFE(R) Metropolitan Life To equal the performance of the MSCI EAFE
Index Portfolio Insurance Company Index.
</Table>
4
<Table>
<Caption>
ELIGIBLE FUND SUB-ADVISER INVESTMENT OBJECTIVE
------------- ----------- --------------------
Neuberger Berman Neuberger Berman Capital growth.
Partners Mid Cap Value Management Inc.
Portfolio
Putnam International Putnam Investment Long-term growth of capital.
Stock Portfolio Management, LLC
Russell 2000(R) Index Metropolitan Life To equal the return of the Russell 2000
Portfolio Insurance Company Index.
State Street Research State Street Research Maximum capital appreciation.
Aggressive Growth & Management Company
Portfolio
State Street Research State Street Research High total return, consisting principally of
Aurora Portfolio & Management Company capital appreciation.
State Street Research State Street Research A competitive total return primarily from
Bond Income & Management Company investing in fixed-income securities.
Portfolio(4)
State Street Research State Street Research High total return while attempting to limit
Diversified Portfolio & Management Company investment risk and preserve capital.
State Street Research State Street Research Long-term growth of capital.
Large Cap Value & Management Company
Portfolio
State Street Research State Street Research A high level of current income consistent
Money Market & Management Company with preservation of capital.
Portfolio(4,6)
T. Rowe Price Large T. Rowe Price Long-term capital growth, and secondarily,
Cap Growth Portfolio Associates, Inc. dividend income.
T. Rowe Price Small T. Rowe Price Long-term capital growth.
Cap Growth Portfolio Associates, Inc.
</Table>
RUSSELL INVESTMENT FUNDS ADVISER: FRANK RUSSELL INVESTMENT MANAGEMENT COMPANY
<Table>
<Caption>
ELIGIBLE FUND SUB-ADVISER INVESTMENT OBJECTIVE
------------- ----------- --------------------
Aggressive Equity Fund Multiple sub-advisers To provide capital appreciation by assuming
a higher level of volatility than is
ordinarily expected from the Multi-Style
Equity Fund by investing in equity
securities.
Core Bond Fund Multiple sub-advisers To maximize total return through capital
appreciation and income by assuming a level
of volatility consistent with the broad
fixed-income market, by investing in
fixed-income securities.
Multi-Style Equity Multiple sub-advisers To provide income and capital growth by
Fund investing principally in equity securities.
Non-U.S. Fund Multiple sub-advisers To provide favorable total return and
additional diversification for US investors
by investing primarily in equity and
fixed-income securities of non-US companies,
and securities issued by non-US governments.
</Table>
5
SEI INSURANCE PRODUCTS TRUST(7) ADVISER: SEI INVESTMENTS MANAGEMENT CORPORATION
<Table>
<Caption>
ELIGIBLE FUND SUB-ADVISER INVESTMENT OBJECTIVE
------------- ----------- --------------------
VP Core Fixed Income Multiple sub-advisers To provide current income consistent with
Fund the preservation of capital.
VP Emerging Markets Multiple sub-advisers To maximize total return from a portfolio
Debt Fund consisting primarily of high yield,
below-investment grade fixed income
securities from emerging markets of foreign
countries.
VP Emerging Markets Multiple sub-advisers To provide long-term capital appreciation by
Equity Fund investing primarily in a diversified
portfolio of equity securities of emerging
market issuers.
VP High Yield Bond Multiple sub-advisers To maximize total return by investing
Fund primarily in a diversified portfolio of
higher yielding, lower rated fixed income
securities.
VP International Multiple sub-advisers To provide long-term capital appreciation by
Equity Fund investing primarily in a diversified
portfolio of equity securities of foreign
issuers.
VP Large Cap Growth Multiple sub-advisers Capital appreciation by investing in the
Fund equity securities of large companies.
VP Large Cap Value Multiple sub-advisers To provide long-term growth of capital and
Fund income by investing in the equity securities
of large companies.
VP Small Cap Growth Multiple sub-advisers To provide long-term capital appreciation by
Fund investing in equity securities of smaller
companies.
VP Small Cap Value Multiple sub-advisers To provide a broad level of diversification
Fund in U.S. small capitalization in a
risk-controlled framework, which includes
stocks with value characteristics.
</Table>
VAN ECK WORLDWIDE INSURANCE TRUST ADVISER: VAN ECK ASSOCIATES CORPORATION
<Table>
<Caption>
ELIGIBLE FUND SUB-ADVISER INVESTMENT OBJECTIVE
------------- ----------- --------------------
Worldwide Hard Assets N/A To seek long-term capital appreciation by
Fund investing primarily in "hard asset
securities." Hard asset securities are the
stocks and bonds and other securities of
companies that derive at least 50% of gross
revenue or profit from the exploration,
development, production or distribution of
precious metals, natural resources, real
estate and commodities. Income is a
secondary consideration.
Worldwide Emerging N/A To seek long-term capital appreciation by
Markets Fund investing in primarily equity securities in
emerging markets around the world.
</Table>
---------------
(1) Prior to January 1, 2003, State Street Research & Management Company was the
sub-adviser to this Portfolio.
(2) Prior to January 1, 2003, Massachusetts Financial Services Company was the
sub-adviser to this Portfolio.
(3) Prior to May 1, 2001, Metropolitan Life Insurance Company was the adviser to
the Metropolitan Series Fund, Inc.
(4) Prior to May 1, 2003, this Portfolio was a Series of the New England Zenith
Fund. On that date, all Series of the New England Zenith Fund became newly
organized Portfolios of the Metropolitan Series Fund, Inc. The
reorganization had no effect on the investment objectives, policies or
advisory fees of any Series, nor was there any change in investment adviser
or sub-adviser for any Series.
(5) Davis Selected Advisers, L.P. may also delegate any of its responsibilities
to Davis Selected Advisers--NY, Inc., a wholly-owned subsidiary.
6
(6) An investment in the State Street Research Money Market Portfolio is not
insured or guaranteed by the Federal Deposit Insurance Corporation or any
other government agency. Although the Portfolio seeks to maintain a net
asset value of $100 per share, it is possible to lose money by investing in
the Portfolio. During extended periods of low interest rates, the yields of
the Division investing in the Money Market Portfolio may become extremely
low and possibly negative.
(7) The SEI Insurance Products Trust will cease operation and all Funds will
close and be liquidated on August 29, 2003.
OTHER FUNDS AND SHARE CLASSES
The Russell Investment Funds may not be available under your Policy, even
though they are described in the attached Fund prospectuses. The Real Estate
Securities Fund described in the Russell Investment Funds prospectus is not
available under any Policy.
Some of the Funds offer various classes of shares, each of which has a
different level of expenses. The prospectuses for the Funds may provide
information for share classes that are not available through the Policy. When
you consult the prospectus for any Fund, you should be careful to refer to only
the information regarding the class of shares that is available through the
Policy. For the American Century Variable Portfolios, we offer Class I shares;
for Fidelity Variable Insurance Products, we offer Initial Class shares; for the
SEI Insurance Products Trust, we offer Class A shares; for the Metropolitan
Series Fund, Inc., we offer Class A shares; for the Met Investors Series Trust,
we offer Class A shares; and for the American Funds Insurance Series, we offer
Class 2 shares.
CHARGES AND DEDUCTIONS.
The following chart shows the operating expenses of the Funds for the year
ended December 31, 2002, before and after any applicable fee waivers and expense
reimbursements.
ANNUAL OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
<Table>
<Caption>
GROSS FEE WAIVERS NET TOTAL
MANAGEMENT OTHER 12B-1 TOTAL ANNUAL AND EXPENSE ANNUAL
FEES EXPENSES FEES EXPENSES REIMBURSEMENTS EXPENSES
---------- -------- ----- ------------ -------------- ---------
AMERICAN CENTURY VARIABLE PORTFOLIOS
(CLASS I SHARES)(1)
Income & Growth Fund.................. .70% .00% .00% .70% .00% .70%
International Fund.................... 1.30% .01% .00% 1.31% .00% 1.31%
Value Fund............................ .95% .00% .00% .95% .00% .95%
AMERICAN FUNDS INSURANCE SERIES (CLASS
2 SHARES)
American Funds Global Small
Capitalization Fund................. .80% .04% .25% 1.09% .00% 1.09%
American Funds Growth Fund............ .38% .02% .25% .65% .00% .65%
American Funds Growth-Income Fund..... .34% .01% .25% .60% .00% .60%
FIDELITY VARIABLE INSURANCE PRODUCTS
(INITIAL CLASS SHARES)
VIP Asset Manager Portfolio........... .53% .10% .00% .63% .00% .63%
VIP Equity-Income Portfolio........... .48% .09% .00% .57% .00% .57%
VIP Growth Portfolio.................. .58% .09% .00% .67% .00% .67%
VIP High Income Portfolio............. .58% .12% .00% .70% .00% .70%
VIP Mid Cap Portfolio................. .58% .12% .00% .70% .00% .70%
VIP Overseas Portfolio................ .73% .17% .00% .90% .00% .90%
J.P. MORGAN SERIES TRUST II(2)
Bond Portfolio........................ .30% .45% .00% .75% .00% .75%
Small Company Portfolio............... .60% .56% .00% 1.16% .01% 1.15%
</Table>
7
<Table>
<Caption>
GROSS FEE WAIVERS NET TOTAL
MANAGEMENT OTHER 12B-1 TOTAL ANNUAL AND EXPENSE ANNUAL
FEES EXPENSES FEES EXPENSES REIMBURSEMENTS EXPENSES
---------- -------- ----- ------------ -------------- ---------
MET INVESTORS SERIES TRUST (CLASS A
SHARES)
Harris Oakmark International
Portfolio........................... .85% 1.64% .00% 2.49% 1.29% 1.20%(3,4)
Janus Aggressive Growth Portfolio..... .80% .62% .00% 1.42% .52% .90%(3,4)
Met/AIM Mid Cap Core Equity
Portfolio........................... .75% .89% .00% 1.64% .69% .95%(3,4)
Met/AIM Small Cap Growth Portfolio.... .90% 1.20% .00% 2.10% 1.05% 1.05%(3,4)
PIMCO Innovation Portfolio............ .95% .78% .00% 1.73% .63% 1.10%(3,4)
PIMCO Total Return Portfolio.......... .50% .15% .00% .65% .00% .65%
T. Rowe Price Mid-Cap Growth
Portfolio........................... .75% .45% .00% 1.20% .25% .95%(3,4)
METROPOLITAN SERIES FUND, INC. (CLASS
A SHARES)
Alger Equity Growth Portfolio......... .75% .04% .00% .79% .00% .79%
Davis Venture Value Portfolio......... .75% .05% .00% .80% .00% .80%(5)
Harris Oakmark Focused Value
Portfolio........................... .75% .07% .00% .82% .00% .82%
Harris Oakmark Large Cap Value
Portfolio........................... .75% .08% .00% .83% .00% .83%(5)
Janus Mid Cap Portfolio............... .69% .06% .00% .75% .00% .75%
Lehman Brothers Aggregate Bond Index
Portfolio........................... .25% .09% .00% .34% .00% .34%
MetLife Mid Cap Stock Index
Portfolio........................... .25% .18% .00% .43% .00% .43%
MetLife Stock Index Portfolio......... .25% .06% .00% .31% .00% .31%
Morgan Stanley EAFE Index Portfolio... .30% .49% .00% .79% .04% .75%(6)
Neuberger Berman Partners Mid Cap
Value Portfolio..................... .69% .11% .00% .80% .00% .80%(5)
Putnam International Stock
Portfolio........................... .90% .22% .00% 1.12% .00% 1.12%
Russell 2000 Index Portfolio.......... .25% .24% .00% .49% .00% .49%
State Street Research Aggressive
Growth Portfolio.................... .73% .06% .00% .79% .00% .79%(5)
State Street Research Aurora
Portfolio........................... .85% .10% .00% .95% .00% .95%
State Street Research Bond Income
Portfolio........................... .40% .11% .00% .51% .00% .51%
State Street Research Diversified
Portfolio........................... .44% .05% .00% .49% .00% .49%(5)
State Street Research Large Cap Value
Portfolio........................... .70% 1.63% .00% 2.33% 1.38% .95%(6)
State Street Research Money Market
Portfolio........................... .35% .08% .00% .43% .00% .43%
T. Rowe Price Large Cap Growth
Portfolio........................... .63% .14% .00% .77% .00% .77%(5)
T. Rowe Price Small Cap Growth
Portfolio........................... .52% .09% .00% .61% .00% .61%
RUSSELL INVESTMENT FUNDS(7)
Aggressive Equity Fund................ .95% .41% .00% 1.36% .31% 1.05%
Core Bond Fund........................ .60% .20% .00% .80% .10% .70%
Multi-Style Equity Fund............... .78% .21% .00% .99% .12% .87%
Non-U.S. Fund......................... .95% .53% .00% 1.48% .33% 1.15%
</Table>
8
<Table>
<Caption>
GROSS FEE WAIVERS NET TOTAL
MANAGEMENT OTHER 12B-1 TOTAL ANNUAL AND EXPENSE ANNUAL
FEES EXPENSES FEES EXPENSES REIMBURSEMENTS EXPENSES
---------- -------- ----- ------------ -------------- ---------
SEI INSURANCE PRODUCTS TRUST (CLASS A
SHARES)(8)
VP Core Fixed Income Fund............. .28% .55% .00% .83% .23% .60%
VP Emerging Markets Debt Fund......... .84% 1.08% .00% 1.92% .57% 1.35%
VP Emerging Markets Equity Fund....... .65% 2.84% .00% 3.49% 1.54% 1.95%
VP High Yield Bond Fund............... .35% .87% .00% 1.22% .37% .85%
VP International Equity Fund.......... .45% 1.63% .00% 2.08% .80% 1.28%
VP Large Cap Growth Fund.............. .35% .68% .00% 1.03% .18% .85%
VP Large Cap Value Fund............... .35% .66% .00% 1.01% .16% .85%
VP Small Cap Growth Fund.............. .34% .99% .00% 1.33% .23% 1.10%
VP Small Cap Value Fund............... .35% .95% .00% 1.30% .20% 1.10%
VAN ECK WORLDWIDE INSURANCE TRUST
Worldwide Emerging Markets Fund....... 1.00% .36% .00% 1.36% .03% 1.33%(9)
Worldwide Hard Assets Fund............ 1.00% .23% .00% 1.23% .00% 1.23%
</Table>
---------------
(1) American Century Variable Portfolios, Inc. has entered into a Management
Agreement with American Century Investment Management, Inc. (ACIM) under
which ACIM provides investment advisory and management services in exchange
for a single, unified management fee per class. The Agreement provides that
ACIM will pay all expenses of the Funds other than brokerage commissions,
taxes, interest, fees and expenses of those directors who are not considered
"interested persons" and extraordinary expenses. For the Income & Growth
Fund the fee is .70% of average net assets. For the International Fund, the
fee is equal to the following percentages of average net assets: 1.50% of
the first $250 million, 1.20% of the next $250 million and 1.10% on balances
above $500 million. For the Value Fund the fee is equal to the following
percentages of average net assets: 1.00% of the first $500 million, .95% of
the next $500 million and .90% on balances over $1 billion.
(2) Pursuant to an Administration Agreement between JP Morgan Chase Bank (the
"Administrator") and the Portfolios, the Administrator will reimburse the
Portfolios if Other Expenses exceed .45% of the average daily net assets of
the Bond Portfolio and .55% of the average daily net assets of the Small
Company Portfolio.
(3) Net Total Annual Expenses do not reflect certain expense reductions due to
directed brokerage arrangements. If we included these reductions, Net Total
Annual Expenses would have been: 1.18% for the Harris Oakmark International
Portfolio; .82% for the Janus Aggressive Growth Portfolio; .91% for the
Met/AIM Mid Cap Core Equity Portfolio; 1.03% for the Met/AIM Small Cap
Growth Portfolio; 1.04% for the PIMCO Innovation Portfolio; and .88% for the
T. Rowe Price Mid-Cap Growth Portfolio.
(4) Our affiliate, Met Investors Advisory LLC ("Met Investors Advisory"), and
Met Investors Series Trust have entered into an Expense Limitation Agreement
under which Met Investors Advisory has agreed to waive or limit its fees and
to assume other expenses so that Net Total Annual Expenses of each Portfolio
(other than interest, taxes, brokerage commissions, other expenditures which
are capitalized in accordance with generally accepted accounting principles
and other extraordinary expenses not incurred in the ordinary course of each
Portfolio's business) will not exceed, at any time prior to April 30, 2004,
the percentages shown in the table. Under certain circumstances, any fees
waived or expenses reimbursed by Met Investors Advisory may, with the
approval of the Trust's Board of Trustees, be repaid to Met Investors
Advisory. Net Total Annual Expenses for the Harris Oakmark International
Portfolio, the Janus Aggressive Growth Portfolio, the Met/AIM Mid Cap Core
Equity Portfolio and the T. Rowe Price Mid-Cap Growth Portfolio have been
restated to reflect the terms of the Expense Limitation Agreement.
(5) Net Total Annual Expenses do not reflect certain expense reductions due to
directed brokerage arrangements. If we included these reductions, Net Total
Annual Expenses would have been: .78% for the Davis Venture Value Portfolio;
.82% for the Harris Oakmark Large Cap Value Portfolio; .77% for the
Neuberger Berman Partners Mid
9
Cap Value Portfolio; .78% for the State Street Research Aggressive Growth
Portfolio; .76% for the T. Rowe Price Large Cap Growth Portfolio; and .48%
for the State Street Research Diversified Portfolio.
(6) Our affiliate, MetLife Advisers, LLC ("MetLife Advisers"), and the
Metropolitan Series Fund, Inc. (the "Met Series Fund") have entered into an
Expense Agreement under which MetLife Advisers will waive management fees
and/or pay expenses (other than brokerage costs, interest, taxes or
extraordinary expenses) ("Expenses") attributable to the Class A shares of
certain Portfolios of the Met Series Fund, so that Net Total Annual Expenses
of these Portfolios will not exceed, at any time prior to April 30, 2004,
the percentages shown in the table. Under the agreement, if certain
conditions are met, MetLife Advisers may be reimbursed for fees waived and
Expenses paid with respect to the State Street Large Cap Value Portfolio if,
in the future, actual Expenses of this Portfolio are less than the expense
limit. Net Total Annual Expenses for the State Street Research Large Cap
Value Portfolio have been restated to reflect the terms of the Expense
Agreement.
(7) The Manager of the Russell Investment Funds has contractually agreed to
waive, at least until April 30, 2004, a portion of its management fee for
each of the Funds, up to the full amount of those fees, and to reimburse
each of the Funds for all remaining expenses after fee waivers, so that Net
Total Annual Expenses for each of the Funds will not exceed the percentages
shown in the table. Net Total Annual Expenses for each of the Funds have
been restated to reflect the terms of this agreement.
(8) Pursuant to a management agreement between the SEI Insurance Products Trust
and SEI Investments Fund Management (the "Manager"), the Manager will
provide overall administrative and accounting services and act as transfer
agent and dividend disbursing agent for an annual fee, all or a portion of
which it has agreed to waive in order to limit Net Total Annual Expenses of
the Funds to the percentages shown in the table. Any such waiver is
voluntary and may be terminated at any time.
(9) Van Eck Associates Corporation has agreed to assume expenses exceeding 1.30%
of the average daily net assets of the Worldwide Emerging Markets Fund,
other than interest, taxes, brokerage commissions and extraordinary
expenses.
An investment adviser or affiliates thereof may compensate General American
and/or certain affiliates for administrative, distribution, or other services
relating to the Funds. We (or our affiliates) may also be compensated with 12b-1
fees from the Funds. This compensation is based on assets of the Funds
attributable to the Policies and certain other variable insurance products that
we and our affiliates issue. Some Funds or their advisers (or other affiliates)
may pay us more than others, and the amounts paid may be significant. An
affiliate of General American may also receive brokerage commissions on
securities transactions initiated by an investment adviser.
FEDERAL TAX MATTERS
INTRODUCTION
The following summary provides a general description of the Federal income
tax considerations associated with the Policy and does not purport to be
complete or to cover all situations. This discussion is not intended as tax
advice. Counsel or other competent tax advisers should be consulted for more
complete information. This discussion is based upon General American's
understanding of the present Federal income tax laws as they are currently
interpreted by the Internal Revenue Service. No representation is made as to the
likelihood of continuation of the present Federal income tax laws or of the
current interpretations by the Internal Revenue Service.
TAX STATUS OF THE POLICY
In order to qualify as a life insurance contract for Federal income tax
purposes and to receive the tax treatment normally accorded life insurance
contracts under Federal tax law, a Policy must satisfy certain requirements
which are set forth in the Internal Revenue Code. Guidance as to how these
requirements are to be applied is limited, in particular, with respect to joint
and last survivor life insurance policies. Nevertheless, we believe that the
Policies should satisfy the applicable requirements. There is less guidance,
however, with respect to Policies issued on a substandard or guaranteed issue
basis and Policies with term riders added, and it is not clear whether such
policies will in all cases satisfy the applicable requirements, particularly if
the owner pay the full amount of premiums under
10
the Policy. We may take appropriate steps to bring the Policy into compliance
with applicable requirements, and we reserve the right to restrict Policy
transactions in order to do so.
In certain circumstances, owners of variable life insurance contracts have
been considered for Federal income tax purposes to be the owners of the assets
of the variable account supporting their contracts, due to their ability to
exercise investment control over those assets. Where this is the case, the
contract owners have been currently taxed on income and gains attributable to
variable account assets. There is little guidance in this area, and some
features of the Policies, such as the number of available Investment Funds and
the flexibility of a Policy Owner to allocate premiums and cash values, have not
been explicitly addressed in published rulings. While we believe that the
Policies do not give Policy Owners investment control over Separate Account
assets, we reserve the right to modify the Policies as necessary to prevent a
Policy Owner from being treated as the owner of the Separate Account assets
supporting the Policy.
In addition, the Code requires that the investments of the Separate Account
be "adequately diversified" in order for the Policies to be treated as life
insurance contracts for Federal income tax purposes. It is intended that the
Separate Account, through the Eligible Funds, will satisfy these diversification
requirements.
The following discussion assumes that the Policy will qualify as a life
insurance contract for Federal income tax purposes.
1. TAX TREATMENT OF POLICY BENEFITS. In general, the Company believes that
the proceeds and Cash Value increases of a Policy should be treated in a manner
consistent with a fixed-benefit life insurance policy for Federal income tax
purposes. Thus, the death benefit under the Policy should be excludable from the
gross income of the Beneficiary under Section 101(a)(1) of the Code, unless a
transfer for value (generally a sale of the policy) has occurred. Many changes
or transactions involving a Policy may have tax consequences, depending on the
circumstances. Such changes include, but are not limited to, the exchange of the
Policy, a change of the Policy's Face Amount, a Policy Loan, an additional
premium payment, a Policy lapse with an outstanding Policy Loan, a partial
withdrawal, or a surrender of the Policy. The transfer of the Policy or
designation of a Beneficiary may have Federal, state, and/or local transfer and
inheritance tax consequences, including the imposition of gift, estate, and
generation-skipping transfer taxes. For example, the transfer of the Policy to,
or the designation as a Beneficiary of, or the payment of proceeds to, a person
who is assigned to a generation which is two or more generations below the
generation assignment of the Owner may have generation skipping transfer tax
consequences under Federal tax law. The individual situation of each Owner or
Beneficiary will determine the extent, if any, to which Federal, state, and
local transfer and inheritance taxes may be imposed and how ownership or receipt
of Policy proceeds will be treated for purposes of Federal, state and local
estate, inheritance, generation skipping and other taxes.
A Policy may also be used in various arrangements, including non-qualified
deferred compensation or salary continuation plans, split dollar insurance
plans, executive bonus plans, retiree medical benefit plans and others. The tax
consequences of such plans may vary depending on the particular facts and
circumstances of each individual arrangement. Therefore, if you are
contemplating the use of a Policy in any arrangement the value of which depends
in part on its tax consequences, you should be sure to consult a qualified tax
adviser regarding the tax attributes of the particular arrangement.
Generally, the Owner will not be deemed to be in constructive receipt of
the Policy's Cash Value, including increments thereof, under the Policy until
there is a distribution. Under a complete surrender or lapse of any Policy, if
the amount received plus the amount of outstanding Indebtedness exceeds the
total investments in the Policy, the excess will generally be treated as
ordinary income subject to tax. The tax consequences of other distributions
from, and Policy Loans taken from or secured by, a Policy depend upon whether
the Policy is classified as a "modified endowment contract".
2. MODIFIED ENDOWMENT CONTRACTS. A policy may be treated as a modified
endowment contract depending upon the amount of premiums paid in relation to the
death benefit provided under such Policy. The premium limitation rules for
determining whether a Policy is a modified endowment contract are extremely
complex. In general, however, a Policy will be a modified endowment contract if
the accumulated premiums paid at any time during the first seven Policy Years
exceed the sum of the net level premiums which would have been paid on or before
such time if the Policy provided for paid-up future benefits after the payment
of seven level annual premiums.
In addition, if a Policy is "materially changed" it may cause such Policy
to be treated as a modified endowment contract. The material change rules for
determining whether a Policy is a modified endowment contract are also
11
extremely complex. In general, however, the determination of whether a Policy
will be a modified endowment contract after a material change generally depends
upon the relationship among the death benefit at the time of such change, the
Cash Value at the time of the change and the additional premiums paid in the
seven Policy Years starting with the date on which the material change occurs.
Moreover, a life insurance contract received in exchange for a life
insurance contract classified as a modified endowment contract will also be
treated as a modified endowment contract. A reduction in a Policy's benefits may
also cause such Policy to become a modified endowment contract.
Accordingly, a prospective Owner should contact a competent tax adviser
before purchasing a Policy to determine the circumstances under which the Policy
would be a modified endowment contract. In addition, an Owner should contact a
competent tax adviser before paying any additional premiums or making any other
change to, including an exchange of, a Policy to determine whether such premium
or change would cause the Policy (or the new Policy in the case of an exchange)
to be treated as a modified endowment contract.
NOTE: MOST DESTINY POLICIES WERE MODIFIED ENDOWMENT CONTACTS FROM THE DATE OF
ISSUE, THEREFORE, DISTRIBUTIONS FROM MOST DESTINY POLICIES ARE TAXED AS FOLLOWS:
3. DISTRIBUTIONS FROM POLICIES CLASSIFIED AS MODIFIED ENDOWMENT
CONTRACT. Policies classified as modified endowment contracts will be subject
to the following tax rules: First, all distributions, including distributions
upon surrender, from such a Policy are treated as ordinary income subject to tax
up to the amount equal to the excess (if any) of the Cash Value immediately
before the distribution over the investment in the Policy (described below) at
such time. Second, Policy Loans taken from, or secured by, such a Policy, as
well as due but unpaid interest thereon, are treated as distributions from such
a Policy and taxed accordingly. Third, a 10 percent additional income tax is
imposed on the portion of any distribution from, or Policy Loan taken from or
secured by, such a Policy that is included in income, except where the
distribution or Policy Loan (a) is made on or after the Owner attains age
59 1/2, (b) is attributable to the Owner's becoming disabled, or (c) is part of
a series of substantially equal periodic payments for the life (or life
expectancy) of the Owner or the joint lives (or joint life expectancies) of the
Owner and the Owner's Beneficiary.
4. DISTRIBUTIONS FROM POLICIES NOT CLASSIFIED AS MODIFIED ENDOWMENT
CONTRACT. Distributions from Policies not classified as a modified endowment
contracts are generally treated as first recovering the investment in the Policy
(described below) and then, only after the return of all such investment in the
Policy, as distributing taxable income. An exception to this general rule occurs
in the case of a decrease in the Policy's death benefit (possibly including a
partial withdrawal) or any other change that reduces benefits under the Policy
in the first 15 years after the Policy is issued and that results in cash
distribution to the Owner in order for the Policy to continue complying with the
Section 7702 definitional limits. Such a cash distribution will be taxed in
whole or in part as ordinary income (to the extent of any gain in the Policy)
under rules prescribed in Section 7702.
Policy Loans from, or secured by, a Policy that is not a modified endowment
contract should generally not be treated as distributions. Instead, such loans
should generally be treated as indebtedness of the Owner. However, because the
tax consequences associated with Policy Loans are not always clear, in
particular, with respect to Policy Loans outstanding after the tenth Policy
year, you should consult a tax adviser prior to taking any Policy Loan.
Upon a complete surrender or lapse of a Policy that is not a modified
endowment contract, if the amount received plus the amount of indebtedness
exceeds the total investment in the Policy, the excess will generally be treated
as ordinary income subject to tax.
Neither distributions (including distributions upon surrender or lapse) nor
Policy Loans from, or secured by, a Policy that is not a modified endowment
contract are subject to the 10 percent additional income tax.
If a Policy which is not a modified endowment contract subsequently becomes
a modified endowment contract, then any distribution made from the Policy within
two years prior to the date of such change in status may become taxable.
5. POLICY LOANS. Generally, interest paid on any loan under a life
insurance Policy is not deductible. AN OWNER SHOULD CONSULT A COMPETENT TAX
ADVISER IF THE DEDUCTIBILITY OF LOAN INTEREST IS A CONSIDERATION IN THE PURCHASE
OF A POLICY. If a Policy Loan is outstanding when a Policy is canceled or
lapses, the amount of the outstanding Indebtedness will be added to the amount
distributed and will be taxed accordingly.
12
6. INTEREST EXPENSE ON UNRELATED INDEBTEDNESS. Under provisions added to
the Code in 1997 for policies issued after June 8, 1997, if a business taxpayer
owns or is the beneficiary of a Policy on the life of any individual who is not
an officer, director, employee, or 20 percent owner of the business, and the
taxpayer also has debt unrelated to the Policy, a portion of the taxpayer's
unrelated interest expense deductions may be lost. No business taxpayer should
purchase, exchange, or increase the death benefit under a Policy on the life of
any individual who is not an officer, director, employee, or 20 percent owner of
the business without first consulting a competent tax adviser.
7. INVESTMENT IN THE POLICY. Investment in the Policy means (i) the
aggregate amount of any premiums or other consideration paid for a Policy, minus
(ii) the aggregate amount received under the Policy which is excluded from gross
income of the Owner (except that the amount of any Policy Loan from, or secured
by, a Policy that is a modified endowment contract, to the extent such amount is
excluded from gross income, will be disregarded), plus (iii) the amount of any
Policy Loan from, or secured by, a Policy that is a modified endowment contract
to the extent that such amount is included in the gross income of the Owner.
8. MULTIPLE POLICES. All modified endowment contracts that are issued by
the Company (or its affiliates) to the same Owner during any calendar year are
treated as one modified endowment contract for purposes of determining the
amount includible in gross income under Section 72(e) of the Code.
9. WITHHOLDING. To the extent that Policy distributions are taxable, they
are generally subject to withholding for the recipient's Federal income tax
liability. Recipients can generally elect, however, not to have tax withheld
from distributions.
10. CONTINUATION OF POLICY BEYOND ATTAINED AGE 100. The tax consequences
of continuing the Policy beyond the Insured's Attained Age 100 birthday are
unclear. You should consult a tax adviser if you intend to keep the Policy in
force beyond the Insured's Attained Age 100.
11. NEW GUIDANCE ON SPLIT DOLLAR PLANS. The IRS has recently issued
guidance on split dollar insurance plans. A tax adviser should be consulted with
respect to this new guidance if your Policy is, or may become, subject to a
split dollar insurance plan. If your Policy is part of an equity split dollar
arrangement, there is a risk that some portion of the Policy cash value may be
taxed prior to any Policy distribution.
In addition, the Sarbanes-Oxley Act of 2002 (the "Act") which was signed
into law on July 30, 2002, prohibits, with exceptions, publicly-traded
companies, including non-U.S. companies that have securities listed on U.S.
exchanges, from extending, directly or indirectly or through a subsidiary, many
types of personal loans to their directors or executive officers. It is possible
that this prohibition may be interpreted to apply to split-dollar life insurance
arrangements for directors and executive officers of such companies, since such
arrangements can arguably be viewed as involving a loan from the employer for at
least some purposes.
Although the prohibition on loans generally took effect as of July 30,
2002, there is an exception for loans outstanding as of the date of enactment,
so long as there is no material modification to the loan terms and the loan is
not renewed after July 30, 2002. Any affected business contemplating the payment
of a premium on an existing Policy or the purchase of new Policy in connection
with a split-dollar life insurance arrangement should consult legal counsel.
12. ALTERNATIVE MINIMUM TAX. There may also be an indirect tax upon the
income in the Policy or the proceeds of a Policy under the Federal corporate
alternative minimum tax, if the Owner is subject to that tax.
13. PUERTO RICO. We believe that Policies subject to Puerto Rican tax law
will generally receive treatment similar, with certain modifications, to that
described above. Among other differences, Policies governed by Puerto Rican tax
law are not currently subject to the rules described above regarding Modified
Endowment Contracts. You should consult your tax adviser with respect to Puerto
Rican tax law governing the Policies.
14. POSSIBLE TAX LAW CHANGES. Although the likelihood of legislative
changes is uncertain, there is always the possibility that the tax treatment of
the Policy could change by legislation or otherwise. Consult a tax adviser with
respect to legislative developments and their effect on the Policy.
15. FOREIGN TAX CREDITS. To the extent permitted under Federal tax law, we
may claim the benefit of certain foreign tax credits attributable to taxes paid
by certain Eligible Funds to foreign jurisdictions.
16. POSSIBLE CHARGE FOR TAXES. At the present time, the Company makes no
charge to the Separate Account for any Federal, state, or local taxes (as
opposed to Premium Tax Charges which are deducted from premium
13
payments) that it incurs which may be attributable to such Separate Account or
to the Policies. The Company, however, reserves the right in the future to make
a charge for any such tax or other economic burden resulting from the
application of the tax laws that it determines to be properly attributable to
the Separate Account or to the Policies.
MANAGEMENT
The directors and executive officers of General American Life Insurance
Company and their principal business experience during the past five years are:
DIRECTORS OF GENERAL AMERICAN
<Table>
<Caption>
NAME AND PRINCIPAL BUSINESS ADDRESS PRINCIPAL BUSINESS EXPERIENCE DURING THE PAST FIVE YEARS
----------------------------------- --------------------------------------------------------
C. Robert Henrikson**** Chairman, President and Chief Executive Officer of General
American since 2002 and President, U.S. Insurance and
Financial Services Division of Metropolitan Life Insurance
Company since 2002. Formerly, President, Institutional
Business 1999-2002 and Senior Executive Vice President
1997-1999 of Metropolitan Life.
Nicholas D. Latrenta**** Director of General American since 2002 and Senior Vice
President of Metropolitan Life Insurance Company since
1997.
James L. Lipscomb**** Director of General American since 2002 and Senior
Vice-President and Deputy General Counsel of Metropolitan
Life Insurance Company since 2001. Formerly, President and
Chief Executive Officer 2000-2001 of Conning Corporation
and Head of Corporate Planning and Strategy Department
1998-2000 of Metropolitan Life Insurance Company.
Stewart G. Nagler**** Director of General American since 2000 and Vice Chairman
and Chief Financial Officer of Metropolitan Life Insurance
Company since 1998.
Stanley J. Talbi**** Director of General American since 2002 and Senior Vice
President of Metropolitan Life Insurance Company since
1974.
Lisa M. Weber**** Director of General American since 2000 and Senior
Executive Vice President and Chief Administrative Officer
of Metropolitan Life Insurance Company since 2001.
Formerly, Executive Vice President 1998-2001 of
Metropolitan Life.
William J. Wheeler**** Director of General American since 2002 and Senior Vice
President of Metropolitan Life Insurance Company since
1997.
Anthony J. Williamson****** Director, Vice President and Treasurer (Principal Financial
Officer) of General American since 2002 and Senior Vice
President and Treasurer of Metropolitan Life Insurance
Company since 2001. Formerly, Senior Vice President
1998-2001 of Metropolitan Life.
</Table>
EXECUTIVE OFFICERS OF GENERAL AMERICAN OTHER THAN DIRECTORS
<Table>
<Caption>
NAME AND PRINCIPAL BUSINESS ADDRESS PRINCIPAL BUSINESS EXPERIENCE DURING THE PAST FIVE YEARS
----------------------------------- --------------------------------------------------------
Richard D. Evans* Senior Vice President of General American since 1999.
Formerly, Regional Vice President 1995-1999 of General
American.
James D. Gaughan**** Secretary and Clerk of General American since 2002 and
Assistant Vice President and Assistant Secretary of
Metropolitan Life Insurance Company since 2001. Formerly,
Corporate Counsel 1999-2001 in private practice and Senior
Corporate Counsel and Assistant Secretary 1993-1999 of
Tenneco Inc.
Jerome M. Mueller* Senior Vice President of General American since 1998.
John E. Petersen* Senior Vice President of General American since 2000.
Formerly, Vice President 1999-2000 and Regional Vice
President 1992-1999 of General American.
</Table>
14
<Table>
<Caption>
NAME AND PRINCIPAL BUSINESS ADDRESS PRINCIPAL BUSINESS EXPERIENCE DURING THE PAST FIVE YEARS
----------------------------------- --------------------------------------------------------
Virginia M. Wilson****** Vice President and Controller (Principal Accounting
Officer) of General American since 2002 and Senior Vice
President and Controller of Metropolitan Life Insurance
Company since 1999.
Bernard H. Wolzenski* Executive Vice President, Individual Insurance of General
American since 1991.
A. Greig Woodring*** Executive Vice President, Reinsurance and President and
Chief Executive Officer of Reinsurance Group of America
since 1992.
</Table>
---------------
The principal business address:
* General American Life Insurance Company, 700 Market Street, St. Louis,
Missouri 63101.
** General American, 13045 Tesson Ferry Road, St. Louis, Missouri 63128
*** Reinsurance Group of America, 1370 Timberlake Manor Parkway,
Chesterfield, Missouri 63017
**** Metropolitan Life Insurance Company, One Madison Avenue, New York NY
10010
***** Metropolitan Life, One Gateway Center, 6th Floor North, Pittsburgh, PA
15222
****** Metropolitan Life, One MetLife Plaza, 27-01 Queens Plaza, North, Long
Island City, NY 11101
VOTING RIGHTS
Based on its understanding of current applicable legal requirements, the
Company will vote the shares of the Funds held in the Separate Account at
regular and special shareholder meetings of the mutual funds in accordance with
the instructions received from persons having voting interests in the
corresponding Divisions of the Separate Account. If, however, the 1940 Act or
any regulation thereunder should be amended or if the present interpretation
thereof should change, and as a result the Company determines that it is
permitted to vote shares of the Fund in its own right, it may elect to do so. No
voting privileges apply to the Policies with respect to Cash Value removed from
the Separate Account as a result of a Policy Loan.
The number of votes which an Owner has the right to instruct will be
calculated separately for each Division. Voting rights reflect the dollar value
of the total number of units of each Division of the Separate Account credited
to the Owner at the record date, rather than the number of units alone.
Fractional shares will be counted. The number of votes of the Fund which the
Owner has the right to instruct will be determined as of the date coincident
with the date established by that Fund for determining shareholders eligible.
Voting instructions will be solicited by written communications prior to such
meeting in accordance with procedures established by the mutual funds.
The company will vote shares of a Fund for which no timely instructions are
received in proportion to the voting instructions which are received with
respect to that Fund. The Company will also vote any shares of the Funds which
are not attributable to Policies in the same proportion.
Each person having a voting interest in a Division will receive any proxy
material, reports, and other materials relating to the appropriate Fund.
DISREGARD OF VOTING INSTRUCTIONS. The Company may, when required by state
insurance regulatory authorities, disregard voting instructions if the
instructions require that the shares be voted so as to cause a change in the
subclassification or investment objective of the Fund or to approve or
disapprove an investment Advisory contract for a Fund. In addition, the Company
itself may disregard voting instructions in favor of changes initiated by an
Owner in the investment policy or the investment adviser or sub-adviser of a
Fund if the Company reasonably disapproves of such changes. A proposed change
would be disapproved only if the proposed change is contrary to state law or
prohibited by state regulatory authorities, or the Company determined that the
change would have an adverse effect on its General Account in that the proposed
investment policy for a Fund may result in overly speculative or unsound
investments. If the Company disregards voting instructions, a summary of that
action and the reasons for such action will be included in the next annual
report to Owners.
RESTRICTIONS ON FINANCIAL TRANSACTIONS
Federal laws designed to counter terrorism and prevent money laundering by
criminals might, in certain circumstances, require us to reject a premium
payment and/or block or "freeze" your account. If these laws apply in
15
a particular situation, we would not be allowed to process any request for
withdrawals, surrenders, or death benefits, make transfers or continue making
payments under your death benefit option until instructions are received from
the appropriate regulator. We also may be required to provide additional
information about your account to government regulators.
LEGAL MATTERS
Legal matters in connection with the Policies have been passed upon by Anne
M. Goggin, Chief Counsel--Individual Business of Metropolitan Life Insurance
Company. Sutherland Asbill & Brennan LLP, of Washington, D.C., has provided
advice on certain matters relating to Federal securities laws.
LEGAL PROCEEDINGS
General American, like other insurance companies, is involved in lawsuits,
including class action lawsuits. In some class action lawsuits involving
insurers, substantial damages have been sought and/or material settlement
payments have been made. Although the outcome of any litigation cannot be
predicted with certainty, General American believes that, as of the date of this
prospectus supplement, there are no pending or threatened lawsuits that will
have a materially adverse impact on it, the Separate Account or General American
Distributors, Inc.
EXPERTS
The consolidated financial statements of General American and Subsidiaries
included in this prospectus supplement and the related financial statement
schedules included elsewhere in the registration statement have been audited by
Deloitte & Touche LLP, independent auditors, as stated in their report appearing
herein and elsewhere in the registration statement (which report expresses an
unqualified opinion and includes an explanatory paragraph referring to the
change in method of accounting for goodwill and other intangible assets to
conform to Statement of Financial Accounting Standards No. 142), and are
included in reliance upon the report of such firm given upon their authority as
experts in accounting and auditing.
The financial statements of the Separate Account included in this
prospectus supplement and the related financial statement schedules included
elsewhere in the registration statement have been audited by Deloitte & Touche
LLP, independent auditors, as stated in their report appearing herein and
elsewhere in the registration statement, and are included in reliance upon the
report of such firm given upon their authority as experts in accounting and
auditing. Deloitte & Touche LLP, 201 E. Kennedy Boulevard, Tampa, Florida,
33602, serves as independent public accountants for the Separate Account and
General American.
FINANCIAL STATEMENTS
The financial statements of General American which are included in this
prospectus supplement should be distinguished from the financial statements of
the Separate Account, and should be considered only as bearing on the ability of
General American to meet its obligations under the Policy. They should not be
considered as bearing on the investment performance of the assets held in the
Separate Account.
16
FLEXIBLE PREMIUM VARIABLE LIFE (VUL 2000)
GENERAL AMERICAN LIFE INSURANCE COMPANY
700 MARKET STREET
ST. LOUIS, MISSOURI 63101
(314) 231-1700
FLEXIBLE PREMIUM VARIABLE LIFE (VARIABLE UNIVERSAL LIFE)
FLEXIBLE PREMIUM JOINT AND LAST SURVIVOR VARIABLE LIFE
EXECUTIVE BENEFIT FLEXIBLE PREMIUM VARIABLE LIFE
SUPPLEMENT
DATED JULY 1, 2002
TO
PROSPECTUSES DATED MAY 1, 2002
This supplement describes a change to the features of the variable life
insurance policies identified above. The following paragraph, which appears in
each of the prospectuses under PAYMENT AND ALLOCATION OF PREMIUMS, is modified
to read as follows:
PREMIUM ON DELIVERY. If you pay the initial premium on delivery of the
Policy, the Issue Date is generally the date on which the Policy is delivered to
you. The Investment Start Date is the date on which your initial premium payment
is received at our Administrative Office. Monthly Deductions and insurance
coverage both begin on the Issue Date. In New Jersey, both the Issue Date and
the Investment Start Date are generally the date on which your initial premium
payment is received at our Administrative Office.
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
REGISTRATION STATEMENT ON FORM S-6
CROSS-REFERENCE SHEET
Form N-8b-2
Item No. Caption in Prospectus
--------------- ----------------------------------------------------------------------
1 Cover Page
2 Cover Page
3 Inapplicable
4 Distribution of the Policies
5 The Company
6 The Separate Account
9 Inapplicable
10(a) Policy Rights
10(b) Policy Benefits; Payment and Allocation of Premiums
10(c), (d), (e) Death Benefit; Cash Value; Conversion Privilege; Surrender, Partial
Withdrawals and Pro Rata Surrender; Right to Examine Policy; Loans;
Transfers; Payment and Allocation Premiums
10(f), (g), (h) Voting Rights; Conformity with Statutes
10(i) Incontestability; Suicide; Misstatement of Age or Sex and
Corrections; Postponement of Payments from the Separate Account;
Allocation of Net Premiums and Cash Value
11 The Separate Account
12 Summary--The Separate Account; Distribution of the Policies
13 Charges and Deductions; Distribution of the Policies; Separate
Account Charges; Appendix A
14 Premiums; Distribution of the Policies
15 Premiums
16 Summary-The Separate Account
17 Captions referenced under Items 10(c), (d), (e) and (i) above
18 The Separate Account
19 Records and Reports; Distribution of the Policies
20 Captions referenced under Items 6 and 10(g) above
21 Loans
22 Inapplicable
23 Distribution of the Policies
24 Incontestability; Suicide; Misstatement of Age or Sex and Corrections
25 The Company
26 Distribution of the Policies
27 The Company
28 Management
29 The Company
30 Inapplicable
31 Inapplicable
32 Inapplicable
33 Inapplicable
34 Distribution of the Policies
35 The Company
36 Inapplicable
37 Inapplicable
38 Distribution of the Policies
39 Distribution of the Policies
40 Distribution of the Policies
41(a) Distribution of the Policies
Form N-8b-2
Item No. Caption in Prospectus
----------- --------------------------------------------------------------------------
42 Inapplicable
43 Inapplicable
44(a) Summary-The Separate Account; Premiums; Premium Expense Charges; Premiums
44(b) Charges and Deductions
44(c) Premiums; Premium Expense Charges
45 Inapplicable
Summary-The Separate Account; Captions referenced under Items 10(c),
46 (d) and (e) above
47 Inapplicable
48 Inapplicable
49 Inapplicable
50 Inapplicable
Cover Page; Death Benefit; Policy Lapse and Reinstatement; Charges
and Deductions; Additional Insurance Benefits; Conversion Privilege;
51 Control of Policy; Beneficiary; Premiums; Distribution of the Policies
52 Conformity with Statutes
53 Federal Tax Matters
54 Inapplicable
55 Inapplicable
59 Financial Statements
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
Issued by
GENERAL AMERICAN LIFE INSURANCE COMPANY
700 Market Street
St. Louis, MO 63101
(314) 231-1700
This Prospectus describes an individual flexible premium variable life
insurance Policy ("the Policy") offered by General American Life Insurance
Company ("General American" or "the Company"). The Policy is designed to
provide lifetime insurance protection and to provide maximum flexibility to
vary premium payments and change the level of death benefits payable under the
Policy. This flexibility allows you to provide for changing insurance needs
under a single insurance policy. You also have the opportunity to allocate Net
Premiums among several investment portfolios with different investment
objectives.
The Policy provides:
(1) a Cash Surrender Value that can be obtained by surrendering
the Policy;
(2) Policy Loans; and
(3) a death benefit payable at the Insured's death.
As long as a Policy remains in force before the Insured's Attained Age
100, the death benefit will be at least the current Face Amount of the Policy.
A Policy will remain in force as long as its Cash Surrender Value is sufficient
to pay the monthly charges.
After the end of the "Right to Examine Policy" period, you may allocate
the Net Premiums to one or more of the Divisions of General American Separate
Account Eleven ("the Separate Account") or, in some contracts, to General
American's General Account.
You will find a list of the Funds in the Separate Account, their
investment managers, and their investment objectives in the Summary that begins
on page A-5. Note that investment results in the Separate Account are not
guaranteed--you may either make money or lose money. Depending on investment
results, the policy could lapse or the death benefit could change. The
Prospectus of each Fund contains a full description of the Fund, including the
investment policies, restrictions, risks, and charges. You should receive a
Prospectus for each Fund along with this Prospectus for the Policy.
In most policies you may also invest all or part of your cash value in the
General Account, which guarantees at least 4% interest.
It may not be advantageous to purchase a Policy as a replacement for
another type of life insurance or as a means to obtain additional insurance
protection if the purchaser already owns another flexible premium variable life
insurance policy.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
THE SECURITIES AND EXCHANGE COMMISSION MAINTAINS A WEB SITE THAT CONTAINS
MATERIAL INCORPORATED BY REFERENCE AND OTHER INFORMATION REGARDING REGISTRANTS
THAT FILE ELECTRONICALLY WITH THE SECURITIES AND EXCHANGE COMMISSION. THE
ADDRESS OF THE SITE IS HTTP://WWW.SEC.GOV.
PLEASE READ THIS PROSPECTUS CAREFULLY AND KEEP IT FOR FUTURE REFERENCE.
THE POLICIES ARE NOT AVAILABLE IN ALL STATES.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN
WHICH SUCH OFFERING MAY NOT BE LAWFULLY MADE. NO DEALER, SALESMAN, OR OTHER
PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATIONS IN
CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS,
AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON.
THE POLICIES AND FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
BY, ANY FINANCIAL INSTITUTION AND ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER
GOVERNMENT AGENCY.
TABLE OF CONTENTS
Summary............................................................... 1
Definitions........................................................... 17
The Company and The Separate Account.................................. 18
The Separate Account.................................................. 19
Policy Benefits....................................................... 23
Policy Rights......................................................... 28
Payment and Allocation of Premiums.................................... 35
Charges and Deductions................................................ 39
The General Account................................................... 44
General Matters....................................................... 46
Distribution of the Policies.......................................... 51
Federal Tax Matters................................................... 52
Unisex Requirements Under Montana Law................................. 56
Voting Rights......................................................... 56
State Regulation of the Company....................................... 57
Management of the Company............................................. 58
Restrictions on Financial Transactions................................ 60
Legal Matters......................................................... 60
Legal Proceedings..................................................... 60
Experts............................................................... 61
Additional Information................................................ 61
Financial Statements.................................................. 61
Appendix A Illustrations Of Death Benefits and Cash Values............ A-1
-i-
SUMMARY
THROUGHOUT THIS SUMMARY, THE TERMS "YOU" AND "YOUR" REFER TO THE OWNER OF
THE POLICY. THE OWNER MAY OR MAY NOT BE THE PERSON INSURED UNDER THE POLICY.
THE TERMS "WE," "US," AND "OUR" REFER TO GENERAL AMERICAN LIFE INSURANCE
COMPANY.
THE INFORMATION IN THIS SECTION IS JUST A SUMMARY, WRITTEN IN "LAYMEN'S
TERMS" TO HELP YOU UNDERSTAND THE POLICY. HOWEVER, BOTH YOUR POLICY AND THIS
PROSPECTUS ARE LEGAL DOCUMENTS. IF YOU HAVE QUESTIONS ABOUT THEM, YOU SHOULD
CONTACT YOUR AGENT OR OTHER COMPETENT PROFESSIONAL ADVISERS.
IN PREPARING THIS SUMMARY, WE ASSUME THAT THE POLICY IS IN FORCE, AND THAT
YOU HAVE NOT BORROWED ANY OF THE CASH VALUE.
The Policy. You are purchasing a life insurance policy. Like many life
insurance policies, it has both a death benefit and a cash value. The death
benefit is the amount of money that we will pay to the beneficiary if the
person insured under the policy dies while the policy is in force. The cash
value is the amount of money accumulated in your policy as an investment at any
time. The cash value consists of the premiums you have paid, reduced by the
expenses deducted for operation of the policy, and either increased or
decreased by investment results.
You have certain rights, including the right to borrow or withdraw money
from the policy's cash value and the right to select the Funds in which you
will invest your premiums.
You have the right to review the policy and decide whether you want to
keep it. If you decide not to keep the policy, you may return it to us or to
your agent during the "Right to Examine Policy Period." This period is
sometimes referred to as the "Free Look Period." It normally ends on the later
of:
1. twenty days after you receive the policy or
2. forty-five days after you signed the application.
In some states the period may be longer. Your agent can tell you if this
is the case.
During the "Right to Examine Policy Period" we will hold any premiums you
have paid in the Money Market Fund. If you return the policy before the end of
the free look period, we will cancel the policy and return any premiums you
have paid. (For policies issued in Kansas, the rules are different. Your agent
can provide you with the details.) (See Policy Rights--Right to Examine Policy.)
When the "Right to Examine Policy Period" ends, we will deduct any charges
due and transfer the rest of the money (your "net premium") into the Funds that
you have selected. We will continue to transfer future net premiums into the
Funds that you select as soon as we receive the premiums.
The policy is a "flexible premium" policy. This means that you may, within
limits described below, make premium payments at any time and in any amount you
choose. You do not have to make premium payments according to a fixed schedule,
although you may choose to do so.
There are limits on the amount that you may pay into the policy without
creating tax consequences. If you make a premium payment that exceeds the
limit, we will notify you and offer to refund the excess paid.
1
We will deduct certain expenses from your cash value. These expenses are
described below. In addition, your cash value may increase or decrease,
depending on the investment experience of the Funds you select. Because it is
possible for your cash value to decrease, you may have to pay additional
premiums in order to keep the policy in force.
As long as there is enough money in your cash value to pay the monthly
charges, your death benefit prior to age 100 will always be at least the face
amount of your policy, minus any amount that you have borrowed from the policy.
The face amount of your policy means the amount of insurance that you have
purchased. It is shown on the specifications page of your policy.
We will notify you if your cash value is not enough to pay the monthly
charges. If that happens, you will have 62 days to make a premium payment big
enough to bring your cash value up to the amount required to pay the charges.
If you make the premium payment, the policy will stay in force. If you don't,
the policy will lapse, or terminate with no value. (See Payment and Allocation
of Premiums--Policy Lapse and Reinstatement.)
For information concerning compensation paid for the sale of the Policies,
see Distribution of the Policies.
Investing Your Cash Value. You may tell us to invest your cash value in
either the general account or the separate account, or you may split your cash
value between them.
The General Account. The general account is an interest-bearing account.
Money in the general account is guaranteed to earn at least 4% interest, and it
may earn more. General American determines the current interest rate from time
to time, and we will notify you in advance of any changes. We have the right to
limit the amount of premium payments and cash value that you may put into the
general account.
The Separate Account. The separate account consists of divisions, each of
which corresponds to an underlying Fund. Each division may either make money or
lose money. Therefore if you invest in a division of the separate account, you
may either make money or lose money, depending on the investment experience of
that division. There is no guaranteed rate of return in the separate account.
The following chart shows the Funds that are available under the policy
along with the name of the investment company, the investment manager and the
investment objective of each Fund. The Funds have different investment goals
and strategies. You should review the prospectus of each Fund, or seek
professional guidance in determining which Fund(s) best meet your objectives.
NOTE: THE RUSSELL INSURANCE FUNDS ARE ONLY AVAILABLE ON POLICIES WITH AN
ISSUE DATE PRIOR TO JANUARY 1, 2000.
Investment Investment
Company Manager Fund Name Objective
----------------- ------------------- ------------------- --------------------------------------
General American Conning Asset S&P 500 Index Fund To provide investors with a long-
Capital Company Management Company term capital appreciation that is
consistent with investment returns of
the Standard and Poor's 500 Stock
Index.
2
Investment Investment
Company Manager Fund Name Objective
------------------- ------------------- ---------------------- ---------------------------------------
Conning Asset Money Market Fund To provide investors with current
Management Company income while preserving capital and
maintaining liquidity. During
extended periods of low interest
rates, the yields of the Division
investing in the Money Market Fund
may become extremely low and
possibly negative.
Conning Asset Bond Index Fund To provide investors with current
Management Company income that reflects the performance
of the publicly traded Government
and Corporate bond markets, by
primarily purchasing corporate and
government bonds contained in the
Lehman Brothers Government/
Corporate Bond Index.
Conning Asset Asset Allocation Fund To provide investors with a long-
Management Company term investment return, composed of
capital growth and income payments.
Conning Asset Managed Equity Fund To provide investors with long-term
Management Company capital growth that is consistent with
the investment returns of U.S.
common stocks.
Conning Asset International Index To provide investors with long-term
Management Company Fund growth of capital that is consistent
with the investment returns of
foreign stocks, primarily by
purchasing foreign publicly-traded
common stocks in the Morgan
Stanley Capital International,
Europe, Australia, and Far East
Index ("EAFE(R) Index").
Conning Asset Mid-Cap Equity Fund To provide investors with long-term
Management Company growth of capital that is consistent
with investment returns of mid-sized
companies.
Conning Asset Small-Cap Equity To provide investors with long-term
Management Company Fund growth of capital through investment
primarily in the common stock of
companies no larger than the largest
companies in the Russell
2000(R)Value Index.
Fidelity Variable Fidelity Growth Portfolio To seek to achieve capital
Insurance Products Management appreciation.
Fund & Research Company
3
Investment Investment
Company Manager Fund Name Objective
------------------- ------------------- ------------------------ ---------------------------------------
Fidelity Equity-Income Portfolio To seek reasonable income. The
Management & fund will also consider the potential
Research Company for capital appreciation. The fund's
goal is to achieve a yield which
exceeds the composite yield of
securities comprising the S&P 500.
Fidelity Overseas Portfolio To seek long-term growth of capital.
Management &
Research Company
Fidelity High Income Portfolio To seek a high level of current
Management & income, while also considering
Research Company growth of capital.
Fidelity Variable Fidelity Asset Manager Portfolio To seek a high total return with
Insurance Products Management & reduced risk over the long-term by
Fund II Research Company allocating its assets among stocks,
bonds, and short-term instruments.
Fidelity Mid Cap Portfolio To seek long-term growth of capital.
Management &
Research Company
Van Eck Worldwide Van Eck Associates Worldwide Hard Assets To seek long-term capital
Insurance Trust Corporation Fund appreciation by investing primarily
in "hard asset securities." Hard asset
securities are the stocks and bonds
and other securities of companies
that derive at least 50% of gross
revenue or profit from the
exploration, development,
production or distribution of
precious metals, natural resources,
real estate and commodities. Income
is a secondary consideration.
Van Eck Associates Worldwide Emerging To seek long-term capital
Corporation Markets Fund appreciation by investing in
primarily equity securities in
emerging markets around the world.
Russell Insurance Frank Russell Multi-Style Equity Fund To provide income and capital
Funds Investment growth by investing principally in
Management Company equity securities.
Frank Russell Aggressive Equity Fund To provide capital appreciation by
Investment assuming a higher level of volatility
Management Company than is ordinarily expected from the
Multi-Style Equity Fund, by
investing in equity securities.
4
Investment Investment
Company Manager Fund Name Objective
----------------------- ------------------- ------------------------ --------------------------------------
Frank Russell Non-U.S. Fund To provide favorable total return and
Investment additional diversification for US
Management Company investors by investing primarily in
equity and fixed-income securities of
non-US companies and securities
issued by non-US governments.
Frank Russell Core Bond Fund To maximize total return through
Investment capital appreciation and income by
Management Company assuming a level of volatility
consistent with the broad fixed-
income market, by investing in
fixed-income securities.
J.P. Morgan Series J.P. Morgan JPMorgan Bond Portfolio To provide high total return
Trust II Investment consistent with moderate risk of
Management, Inc. capital and maintenance of liquidity.
J.P. Morgan JPMorgan Small Company To provide high total return from a
Investment Portfolio portfolio of small company stocks.
Management, Inc.
American Century American Century Income & Growth Fund To seek capital growth by investing
Variable Portfolios Investment in common stocks. Income is a
Management, Inc. secondary objective.
American Century International Fund To seek capital growth.
Investment
Management, Inc.
American Century Value Fund To seek long-term capital growth.
Investment Income is a secondary objective.
Management, Inc.
SEI Insurance Products SEI Investments VP Large Cap Value Fund To provide long-term growth of
Trust Management capital and income by investing in
Corporation large cap income-producing U.S.
common stocks.
SEI Investments VP Large Cap Growth To provide capital appreciation by
Management Fund investing in large cap U.S. common
Corporation stocks.
SEI Investments VP Small Cap Value Fund To provide capital appreciation by
Management investing in common stocks of
Corporation smallerU.S. companies.
SEI Investments VP Small Cap Growth To provide long-term capital
Management Fund appreciation by investing in
Corporation commonstocks of smaller U.S.
companies.
5
Investment Investment
Company Manager Fund Name Objective
-------------------------- ----------------------- --------------------------- --------------------------------------
SEI Investments VP International Equity To provide capital appreciation by
Management Corporation Fund investing in equity securities of
foreign companies.
SEI Investments VP Emerging Markets To provide capital appreciation by
Management Corporation Equity Fund investing in equity securities of
emerging markets companies.
SEI Investments VP Core Fixed Income To provide current income and
Management Corporation Fund preservation of capital by investing
in investment grade U.S. fixed
income securities.
SEI Investments VP High Yield Bond Fund To provide total return by investing
Management Corporation in high yield, high risk fixed income
securities rated below investment
grade.
SEI Investments VP International Fixed To provide capital appreciation and
Management Corporation Income Fund current income by investing in
investment grade fixed income
securities of foreign government and
corporate issuers.
SEI Investments VP Emerging Markets To provide total return by investing
Management Corporation Debt Fund in U.S. dollar denominated debt
securities of emerging market
issuers.
Metropolitan Series Fund, MetLife Advisers, LLC Janus Mid Cap Portfolio Long-term growth of capital.
Inc.
MetLife Advisers, LLC Janus Growth Portfolio Long-term growth of capital.
MetLife Advisers, LLC Russell 2000 Index To equal the return of the Russell
Portfolio 2000 Index.
MetLife Advisers, LLC T. Rowe Price Large Cap Long-term growth of capital and,
Growth Portfolio secondarily, dividend income.
MetLife Advisers, LLC Putnam International Stock Long-term growth of capital.
Portfolio
MetLife Advisers, LLC Neuberger Berman Capital growth.
Partners Mid Cap Value
Portfolio
MetLife Advisers, LLC Harris Oakmark Large Cap Long-term capital appreciation.
Value Portfolio
MetLife Advisers, LLC T. Rowe Price Small Cap Long-term capital growth.
Growth Portfolio
6
Investment Investment
Company Manager Fund Name Objective
--------------------------- ----------------------- --------------------------- -------------------------------------
New England Zenith Fund MetLife Advisers, LLC Alger Equity Growth Long-term capital appreciation.
Series
MetLife Advisers, LLC Harris Oakmark Focused Long-term capital appreciation.
Value Series
MetLife Advisers, LLC Davis Venture Value Growth of capital.
Series
MetLife Advisers, LLC State Street Research Bond Competitive total return primarily
Income Series from investing in fixed-income
securities.
Met Investors Series Trust Met Investors Advisory PIMCO Innovation To seek capital appreciation; no
LLC Portfolio consideration is given to income.
Met Investors Advisory MFS Mid Cap Growth Long-term growth of capital.
LLC Portfolio
Met Investors Advisory Met/AIM Mid Cap Core Long-term growth of capital.
LLC Equity Portfolio
Met Investors Advisory Met/AIM Small Cap Long-term growth of capital.
LLC Growth Portfolio
Met Investors Advisory State Street Research Long-term growth of capital.
LLC Concentrated International
Portfolio
Met Investors Advisory PIMCO Total Return To seek maximum total return,
LLC Portfolio consistent with the preservation of
capital and prudent investment
management.
American Funds Insurance Capital Research and American Funds Growth To seek capital appreciation through
Series Management Company Fund stocks.
Capital Research and American Funds Growth- To seek capital appreciation and
Management Company Income Fund income.
Capital Research and American Funds Global To seek capital appreciation through
Management Company Small Capitalization Fund stocks.
You may change the investments that you want to use for your future
premiums by notifying our Administrative Office.
You may allocate your Policy's cash value to a cumulative maximum of 49
accounts (including the General Account) over the life of the Policy. You may
transfer your cash value among the various investment funds, and you may
withdraw money, but there are certain rules. We don't charge you a transaction
fee for the first twelve transfers or withdrawals in a policy year, but we may
charge a $25 fee for each transfer or withdrawal after the first twelve. (A
policy year is measured beginning on the anniversary of the date that the
policy was issued, and ending on the day before the next anniversary.)
7
We have the right to change or eliminate transfers in the future, although
we don't currently intend to do so.
Charges and Deductions. There are certain costs that we charge you for
issuing your policy and keeping it in force. This section describes those
charges--what they are and what they cover.
Sales Charge. Each time you pay a premium, we deduct a portion to cover
expenses of the policy. Part of this deduction covers sales charges. We
guarantee that this part of the deduction will never exceed the following
amounts:
o in the first policy year, 15% of the amount you pay up to the target
premium and 5% of the amount you pay above the target premium. (The
amount of the target premium varies by age and risk class, and is
shown in your policy.)
o in the 2nd through 10th Policy Years, 5% of the actual premium you pay;
o in the 11th Policy Year and later, 2% of the actual premium you pay.
For policies issued in the state of Oregon we deduct an additional 2% of
actual premium paid in all policy years.
Tax Charge. The Federal government and many states and territories impose
taxes or charges on insurance premiums. We deduct from your premium payment the
amount required to pay these taxes and charges. We deduct 1.3% of each premium
payment to pay the Federal charge. The amount we deduct to pay the state and
territory charges varies by state. It ranges from 0% to 4%, with an average of
about 2.1%.
If the tax rates change, we may change the amount of the deduction to
cover the new charge. (See Charges and Deductions--Premium Expense Charges.)
If we are required by law to pay taxes based on the separate account, we
may charge an appropriate share to policies that invest in the separate
account. (See Federal Tax Matters.)
Surrender Charge. If you surrender your policy or let it lapse during the
first ten policy years, we will keep part of the cash value to help us recover
the costs of selling and issuing the policy. This charge is called a Contingent
Deferred Sales Charge (CDSC) or, more simply, a surrender charge. If you
withdraw money from your policy or if you surrender a portion of your policy, a
pro-rated portion of the surrender charge will generally be due. (See Charges
and Deductions--Contingent Deferred Sales Charge.)
The maximum surrender charge is 45% of the target premium if you surrender
the policy or let it lapse during the first five policy years. After that the
amount of the surrender charge goes down each month. After the 10th policy year
there is no charge.
There is a table in your policy that shows the amount of the target
premium and the percentage of the surrender charge for each month.
Of course, if you don't surrender all or part of your policy, or let it
lapse, or withdraw cash from it, then you will not pay a surrender charge.
If you increase the face amount of your policy, the increase will have its
own surrender charge for the first 10 policy years following the increase.
8
(See Policy Rights--Surrender, Partial Withdrawals, and Pro-Rata
Surrender; Policy Benefits--Death Benefit; and Charges and
Deductions--Contingent Deferred Sales Charge.)
Under certain conditions, applied in a uniform and nondiscriminatory
manner, we may reduce the surrender charge. (See Adjustment of Charges.)
Administrative Fee. We charge a monthly fee to cover your policy's
administrative cost. This charge is $25 each month for the first policy year,
and $6 each month after the first policy year. We will deduct the charge from
your cash value each month.
Selection and Issue Expense Charge. This charge allows us to recover part
of the commissions and other costs of issuing your policy. We determine the
amount of the charge based on the size of your policy and on the age, sex, and
risk class of the person insured under the policy.
The charge ranges from about 4 cents per $1,000 of Face Amount to about
65 cents per $1,000. We deduct the charge from your cash value each month for
the first ten policy years. If you increase the face amount of your policy,
there is a new charge associated with that increase until it has been in effect
for ten policy years.
Cost of Insurance. Because this is a life insurance policy, it has a
death benefit. We charge an insurance cost each month to cover the risk that
you will die and we will have to pay the death benefit.
The amount of this charge varies with the age, sex, risk class of the
person insured under the policy, and the amount of the death benefit at
risk--if the risk of death or the amount of the death benefit is greater, then
the cost of insurance is also greater. We deduct the cost of insurance from
your cash value each month.
We make another charge to cover mortality and expense risks under the
Policy. We calculate this charge based on a percentage of the net assets in
each division of the separate account. Rather than deducting the charge from
the cash value, we apply the charge by adjusting the net rate of return in the
separate account. We guarantee that the charge will not exceed the following
amounts, shown on an annual percentage basis:
Policy years 1-10............. .55% of net separate account assets
Policy years 11-20............ .45% of net separate account assets
Policy years 21+.............. .35% of net separate account assets
(See Charges and Deductions--Separate Account Charges.)
We pay the operating expenses of the separate account. The Funds pay for
their own operating expenses and management fees. For a description of these
charges, see Charges and Deductions--Separate Account Charges.
The following chart shows the operating expenses of the Funds as reported
for the fiscal year ending December 31, 2001, after any applicable expense
subsidy.
Annual Fund Operating Expenses/(1)/
As A Percentage of Average Net Assets
Fund Management Fee Other Expenses Total
------------------------------------------------- -------------- -------------- -----
General American Capital Company
S&P 500 Index Fund................................ .10% .05% .15%
9
Fund Management Fee Other Expenses Total
-------------------------------------------------- -------------- -------------- -----
Money Market Fund................................. .13% .08% .21%
Bond Index Fund................................... .25% .05% .30%
Managed Equity Fund(2)............................ .50% .10% .60%
Asset Allocation Fund(2).......................... .55% .10% .65%
International Index Fund.......................... .50% .30% .80%
Mid-Cap Equity Fund............................... .55% .10% .65%
Small-Cap Equity Fund............................. .75% .05% .80%
Russell Insurance Funds/(3)/
Multi-Style Equity Fund........................... .71% .21% .92%
Aggressive Equity Fund............................ .82% .43% 1.25%
Non-U.S. Fund..................................... .82% .48% 1.30%
Core Bond Fund.................................... .52% .28% .80%
American Century Variable Portfolios (Class I
Shares)/(4)/
Income & Growth Fund.............................. .70% .00% .70%
International Fund................................ 1.26% .00% 1.26%
Value Fund........................................ .97% .00% .97%
J.P. Morgan Series Trust II
Bond Portfolio.................................... .30% .45% .75%
Small Company Portfolio........................... .60% .55% 1.15%
Fidelity Variable Insurance Products Fund
(Initial Class Shares)/(5)/
Equity-Income Portfolio........................... .48% .10% .58%
Growth Portfolio.................................. .58% .10% .68%
Overseas Portfolio................................ .73% .19% .92%
High Income Portfolio............................. .58% .13% .71%
Fidelity Variable Insurance Products Fund II
(Initial Class Shares)
Asset Manager Portfolio(5)........................ .53% .11% .64%
Fidelity Variable Insurance Products Fund III
(Initial Class Shares)
Mid Cap Portfolio(5).............................. .58% .11% .69%
Van Eck Worldwide Insurance Trust
Worldwide Hard Assets Fund........................ 1.00% .18% 1.18%
Worldwide Emerging Markets Fund................... 1.00% .30% 1.30%
SEI Insurance Products Trust (Class A Shares)/(6)/
Large Cap Value Fund.............................. .23% .62% .85%
Large Cap Growth Fund............................. .32% .53% .85%
Small Cap Value Fund.............................. .61% .49% 1.10%
Small Cap Growth Fund............................. .62% .48% 1.10%
International Equity Fund......................... .47% .81% 1.28%
Emerging Markets Equity Fund...................... .73% 1.22% 1.95%
Core Fixed Income Fund............................ .20% .40% .60%
High Yield Bond Fund.............................. .46% .39% .85%
International Fixed Income Fund................... .30% .70% 1.00%
Emerging Markets Debt Fund........................ .53% .82% 1.35%
Metropolitan Series Fund, Inc. (Class A Shares)
Janus Mid Cap Portfolio........................... .67% .07% .74%
Janus Growth Portfolio(7)......................... .80% .15% .95%
Russell 2000 Index Portfolio(7)................... .25% .30% .55%
T. Rowe Price Large Cap Growth Portfolio(8)....... .63% .13% .76%
Putnam International Stock Portfolio(8)........... .90% .26% 1.16%
Neuberger Berman Partners Mid Cap Value
Portfolio(8).................................... .69% .12% .81%
Harris Oakmark Large Cap Value Portfolio(8)....... .75% .11% .86%
T. Rowe Price Small Cap Growth Portfolio.......... .52% .09% .61%
10
Fund Management Fee Other Expenses Total
------------------------------------------------- -------------- -------------- -----
New England Zenith Fund (Class A Shares)
Alger Equity Growth Series........................ .75% .09% .84%
Harris Oakmark Focused Value Series(9)............ .75% .12% .87%
Davis Venture Value Series(9)..................... .75% .08% .83%
State Street Research Bond Income Series.......... .40% .09% .49%
Met Investors Series Trust (Class A Shares)/(10)/
PIMCO Innovation Portfolio........................ .00% 1.10% 1.10%
MFS Mid Cap Growth Portfolio...................... .00% .80% .80%
Met/AIM Mid Cap Core Equity Portfolio............. .00% .90% .90%
Met/AIM Small Cap Growth Portfolio................ .00% 1.05% 1.05%
State Street Research Concentrated International
Portfolio....................................... .00% 1.10% 1.10%
PIMCO Total Return Portfolio...................... .00% .65% .65%
12b-1 Other
Management Fee Fee Expenses Total
--------------- ------ --------- --------
American Funds Insurance Series (Class 2 Shares)
American Funds Growth Fund........................ .37% .25% .01% .63%
American Funds Growth-Income Fund................. .33% .25% .02% .60%
American Funds Global Small Capitalization Fund... .80% .25% .03% 1.08%
--------
(1) The Fund expenses shown above are collected from the underlying Fund, and
are not direct charges against the Separate Account assets or reductions
from the Policy's Cash Value. These underlying Fund Expenses are taken
into consideration in computing each Fund's net asset value, which is used
to calculate the unit values in the Separate Account. The management fees
and other expenses are more fully described in the prospectus of each
individual Fund. The information relating to the Fund expenses was
provided by the Fund and was not independently verified by General
American. Except as otherwise specifically noted, the management fees and
other expenses are not currently subject to fee waivers or expense
reimbursements.
(2) The expenses shown for the Managed Equity Fund and the Asset Allocation
Fund have been restated to reflect an increase in management fees that
became effective January 6, 2002.
(3) The Manager of Russell Insurance Funds has voluntarily agreed to waive a
portion of its management fee, up to the full amount of that fee, equal to
the amount by which each Fund's total operating expenses exceed specified
levels, and to reimburse the Funds for all remaining expenses after fee
waivers which exceed specified percentages of average daily net assets on
an annual basis. The management fee waivers and reimbursements are
intended to be in effect for the coming year, but may be revised or
eliminated at any time thereafter without notice to shareholders. The
specified maximum expense levels are the totals shown in the chart above.
Absent the waiver, the management fees and total expenses would have been:
Multi-Style Equity Fund, management fee 0.78%, total expenses 0.99% of
average daily net assets; Aggressive Equity Fund, management fee 0.95%,
total expenses 1.38% of average daily net assets; Non-U.S. Fund,
management fee 0.95%, total expenses 1.43% of average daily net assets;
Core Bond Fund, management fee 0.60%, total expenses 0.88% of average
daily net assets.
(4) The Adviser to the American Century Variable Portfolios has agreed to
provide investment advisory and management services in exchange for a
single, unified management fee per class. Under the agreement, the Adviser
will pay all expenses other than brokerage commissions, taxes, interest,
fees and expenses of those directors who are not considered "interested
persons" and extraordinary expenses. For the Income & Growth Fund the fee
is .70% of average net assets. For the International Fund, the fee is
equal to the following percentages of average net assets: 1.50% of the
first $250 million, 1.20% of the next $250 million and 1.10% on balances
above $500 million. For the Value Fund the fee is equal to the following
percentages of average net assets: 1.00% of the first $500 million, .95%
of the next $500 million and .90% on balances over $1 billion.
(5) Total expenses do not reflect certain expense reductions due to directed
brokerage arrangements and custodian interest credits. If these reductions
were included, total expenses would have been .57% for the Equity-Income
Portfolio, .65% for the Growth Portfolio, .87% for the Overseas Portfolio,
.70% for the High Income Portfolio, .63% for the Asset Manager Portfolio
and .62% for the Mid Cap Portfolio.
(6) The SEI Insurance Products Trust's Adviser and Administrator have
voluntarily waived a portion of their fee in order to keep total operating
expenses at a specified level. Either may discontinue all or part of its
waiver at any time. Absent the fee waiver, the Funds' total operating
expenses would have been: Large Cap Value Fund, 1.14%; Large Cap Growth
Fund, 1.19%; Small Cap Value Fund, 1.45%; Small Cap Growth Fund, 1.46%;
International Equity Fund, 2.04%;
11
Emerging Markets Equity Fund, 3.70%; Core Fixed Income Fund, 1.00%; High
Yield Bond Fund, 1.31%; International Fixed Income Fund, 1.51%; Emerging
Markets Debt Fund, 2.07%.
(7) MetLife Advisers and the Metropolitan Series Fund have entered into an
Expense Agreement under which MetLife Advisers will waive management fees
and/or pay expenses (other than brokerage costs, interest, taxes or
extraordinary expenses) ("Expenses") attributable to the Class A shares of
certain Portfolios of the Metropolitan Series Fund, so that total annual
expenses of these Portfolios will not exceed, at any time prior to
April 30, 2003, the following percentages: .95% for the Janus Growth
Portfolio and .55% for the Russell 2000 Index Portfolio. Under the
agreement, if certain conditions are met, MetLife Advisers may be
reimbursed for fees waived and Expenses paid with respect to the Janus
Growth Portfolio, if, in the future, actual Expenses of the Portfolio are
less than the expense limit. Absent this agreement, total annual expenses
for the year ended December 31, 2001 would have been 2.26% for the Janus
Growth Portfolio and .56% for the Russell 2000 Index Portfolio.
(8) Total expenses do not reflect certain expense reductions due to directed
brokerage arrangements. If we included these reductions, total expenses
would have been .75% for the T. Rowe Price Large Cap Growth Portfolio,
1.14% for the Putnam International Stock Portfolio, .69% for the Neuberger
Berman Partners Mid Cap Value Portfolio and .84% for the Harris Oakmark
Large Cap Value Portfolio.
(9) Total expenses do not reflect certain expense reductions due to directed
brokerage arrangements. If we included these reductions, total expenses
would have been .84% for the Harris Oakmark Focused Value Series and .82%
for the Davis Venture Value Series.
(10) Met Investors Advisory and Met Investors Series Trust have entered into an
Expense Limitation Agreement under which Met Investors Advisory has agreed
to waive or limit its fees and to assume other expenses so that the total
annual expenses of each Portfolio (other than interest, taxes, brokerage
commissions, other expenditures which are capitalized in accordance with
generally accepted accounting principles, and other extraordinary expenses
not incurred in the ordinary course of each Portfolio's business) will not
exceed, at any time prior to April 30, 2003, the following percentages:
1.10% for the PIMCO Innovation Portfolio, .80% for the MFS Mid Cap Growth
Portfolio, .90% for the Met/AIM Mid Cap Core Equity Portfolio, 1.05% for
the Met/AIM Small Cap Growth Portfolio, 1.10% for the State Street
Research Concentrated International Portfolio and .65% for the PIMCO Total
Return Portfolio. Absent this Agreement, total annual expenses (and
management fees) for the period ended December 31, 2001 would have been
3.97% (1.05%) for the PIMCO Innovation Portfolio, 2.35% (.65%) for the MFS
Mid Cap Growth Portfolio and 1.15% (.50%) for the PIMCO Total Return
Portfolio (annualized from the February 12, 2001 start date for these
Portfolios); and 6.93% (.75%) for the Met/AIM Mid Cap Core Equity
Portfolio, 4.97% (.90%) for the Met/AIM Small Cap Growth Portfolio and
5.44% (.85%) for the State Street Research Concentrated International
Portfolio (annualized from the October 9, 2001 start date for these
Portfolios). Under certain circumstances, any fees waived or expenses
reimbursed by Met Investors Advisory may, with the approval of the Trust's
Board of Trustees, be repaid to Met Investors Advisory.
An investment adviser or affiliates thereof may compensate General
American and/or certain affiliates for administrative, distribution, or other
services relating to the Funds. We (or our affiliates) may also be compensated
with 12b-1 fees from the Funds. This compensation is based on assets of the
Funds attributable to the Policies and certain other variable insurance
products that we and our affiliates issue. Some Funds or their advisers (or
other affiliates) may pay us more than others, and the amounts paid may be
significant. An affiliate of General American may also receive brokerage
commissions on securities transactions initiated by an investment adviser.
Premiums. Within limits, you decide how much money you want to put into
the policy. There is a minimum premium that you have to pay to put the policy
in force. That amount is 1/12 of the "minimum initial annual premium amount"
shown on the specifications page of your policy.
After the policy is in force, you may pay any amount you want as long as
the cash value is always enough to cover the surrender charge and the current
month's expenses. If you continue to pay at least 1/12 of the minimum initial
annual premium each month (or to prepay it), and if you don't withdraw or
borrow cash from the policy, we guarantee that the policy will not lapse during
the first five policy years, even if the cash value is not enough to cover the
charges.
If you have borrowed or withdrawn money from your cash value, you can
still keep your no-lapse guarantee in force for the first five years. Here is
how it works. Each month, we look at the total amount of premium that you have
paid into the policy since it was issued. We then subtract the amount of money
that you have withdrawn or borrowed. If the amount left is at least equal to
1/12 of the annual minimum premium, multiplied by the number of months the
policy has been in force, then your no-lapse guarantee
12
still applies. If not, then we will notify you that you have 62 days to make
enough of a premium payment to restore the no-lapse guarantee. If you do not
make the payment, your policy could lapse, or end with no value.
If you have converted a General American term insurance policy to this
policy, and if the term policy includes conversion credits, you may apply those
credits to reduce your first-year minimum premium.
You can set up a schedule of payments, and we will send you reminders,
but you are not required to make the payments as long as the cash value covers
the surrender charge and the current month's expenses. (See Payment and
Allocation of Premiums.)
Death Benefit. If the person insured under the policy dies while the
policy is in force, we will pay a death benefit to the beneficiary. You can
select one of three death benefits at the time the policy is issued:
o Option A: The death benefit is the greater of the face amount of the
policy or an "applicable percentage" of the cash value.
o Option B: The death benefit is the greater of the face amount of the
policy plus the cash value, or an "applicable percentage" of the cash
value.
o Option C: The death benefit is the greater of the face amount of the
policy, or the cash value multiplied by an attained age factor.
As long as the policy remains in force and the person insured is less
than 100 years old, the minimum death benefit under any death benefit option
will be at least the current face amount.
We will increase the death benefit by any dividends earned prior to the
death of the person insured, and by the cost of insurance from the date of
death to the end of the month, and will reduce it by any outstanding loans and
interest. (Dividends are only paid on participating Policies, which we no
longer issue.) We will pay the death benefit according to the settlement
options available at the time of death. (See Policy Benefits--Death Benefit.)
The minimum face amount at issue is generally $50,000 under our current
rules. Subject to certain restrictions, you may change the face amount and the
death benefit option. In certain cases we may require evidence that the person
insured under the policy is still insurable. (See Change in Death Benefit
Option, and Change In Face Amount.)
You may include additional insurance benefits with your policy, such as
term insurance. Term riders generally provide death benefit coverage at a lower
overall rate than coverage under the base policy; however; term riders have no
surrenderable cash value. The available additional insurance benefits are
described under General Matters--Additional Insurance Benefits. If you elect
any additional benefits, we will deduct the charges for those benefits from
your Cash Value.
Cash Value. Your Policy has a cash value that is the total amount
credited to you in the separate account, the loan account, and the general
account. The cash value increases by the amount of net premium payments, and
decreases by partial withdrawals and expense charges for the policy. It may
either increase or decrease based on the investment experience of the separate
account divisions that you have selected. (See Policy Benefits--Cash Value.)
There is no minimum guaranteed cash value.
13
Policy Loans. You may borrow against the cash value of your policy. The
loan value is the maximum amount that you may borrow. The loan value is:
o the cash value on the date we receive the loan request;
o plus interest on the cash value to the next anniversary date,
calculated at the guaranteed general account interest rate;
o minus interest on the loan value to the next policy anniversary;
o minus any loans and interest already outstanding;
o minus any surrender charges;
o minus monthly deductions to the next policy anniversary.
When you borrow against the policy, we will take the money from the
general account and the divisions of the separate account in proportion to your
balances in each account.
Loan interest is due at each policy anniversary. If you don't pay the
loan interest, we will add it to the amount of the loan.
You may repay all or part of the loan at any time. When you make a loan
payment, we will put the money back into the general account or the divisions
of the separate account in the same proportion that the cash value in each loan
subaccount bears to the total cash value in the loan account. (See Policy
Rights--Loans.)
When we pay out the proceeds of your policy, either as a death benefit or
as a policy surrender, we will deduct any outstanding loans and interest from
the amount we pay. (See Policy Rights--Loans.)
Loans taken from or secured by a policy may have Federal income tax
consequences. (See Federal Tax Matters.)
Surrender, Partial Withdrawals, and Pro-Rata Surrender. You may surrender
the policy at any time while it is in force. We will pay you the cash surrender
value, plus dividends (if any) earned prior to the surrender.
After the first year you may request a partial withdrawal of your cash
surrender value. Normally, withdrawing a portion of your cash surrender value
will reduce your death benefit by the amount of the withdrawal. However, if you
have included the Anniversary Partial Withdrawal Rider on your policy, you may
withdraw a portion of your cash surrender value without reducing the death
benefit. Under this rider, there are limits on how much you can withdraw, and
the withdrawal must be at the policy anniversary. You can find more information
about the rider under General Matters--Additional Insurance Benefits.
You may also request a pro-rata surrender of the policy, which allows you
to surrender part of the policy and keep the rest in force. You can find more
information under Policy Rights--Surrender, Partial Withdrawals, and Pro-Rata
Surrender.
A surrender, partial withdrawal, or Pro-Rata Surrender may have Federal
income tax consequences. We suggest that you discuss your situation with a
competent tax adviser before taking one of these steps. (See Federal Tax
Matters.)
14
Illustrations of Death Benefits and Cash Surrender Values. The death
benefit and cash surrender value of your policy will depend on how well your
investments perform. In Appendix A we have illustrated some sample policies.
Depending on the rate of return, the values may increase or decrease. In order
to help you to understand the cost of the policy, we also show how your premium
would grow if you simply invested it at 5% interest, compounded annually.
If you surrender your policy in the first few years, the cash surrender
value that you receive may be low compared to what you would have accumulated
by investing the premiums at interest. In this case, the insurance protection
that you received while the policy was in force will have been expensive.
We will provide you with a personalized illustration showing hypothetical
future cash values if you request it in writing. There is no charge for the
first illustration you request per year. We may charge a fee of up to $25 for
preparing each additional illustration.
Tax Consequences of The Policy. If your policy was issued in a standard
premium class, then we believe that it should qualify as a life insurance
contract for Federal income tax purposes. Similarly, if your policy was issued
on a guaranteed issue or simplified issue basis, we believe that it should
qualify as a life insurance contract. However, if the policy was issued on a
substandard basis, it is not clear whether it will qualify as a life insurance
contract for tax purposes. The IRS has provided very limited guidance in this
area.
Assuming that the policy does qualify as a life insurance contract for
Federal income tax purposes, then we believe that the cash value should be
subject to the same tax treatment as the cash value of a conventional
fixed-benefit contract. This means that growth in the cash value will not be
taxed until you receive a distribution.
There are some actions that may trigger a tax. If you transfer ownership
to someone else, or if you surrender the policy or withdraw cash from it, you
may have to pay a tax. Similarly, if you let the policy lapse while there is an
outstanding loan, or if you exchange the policy for another policy, you may owe
a tax. (See Federal Tax Matters.)
If you pay too much in premium, your policy may become a "modified
endowment contract." If that happens, then some pre-death distributions of cash
(including loans) will be taxable income. If there is more cash value in the
policy than what you actually paid in premiums, you will be taxed on the
excess, to the extent of the amount distributed, in the year in which you
receive the distribution. You may withdraw the amount that you paid into the
policy without being taxed, but only after you have received the excess as
taxable income. In addition, any taxable distribution that you receive before
age 59 1/2 will generally be subject to an additional 10% tax.
On the other hand, if the policy is not a modified endowment contract,
then distributions are normally treated first as a return of your "cost basis,"
or investment in the contract. In this case, you may withdraw up to the amount
of the premiums you paid with no tax consequences. After that, any additional
distributions are treated as taxable income. In addition, loans from the policy
are not treated as distributions, so they are not considered taxable income.
Finally, if your policy is not a modified endowment contract, neither
distributions or loans are subject to the 10% additional tax (See Federal Tax
Matters.)
Please note that General American is neither a law firm nor a tax
adviser, so we cannot give you legal or tax advice. If you have specific legal
or tax questions, we suggest that you consult a qualified professional in these
fields.
* * *
15
This Prospectus describes only those aspects of the Policy that relate to
the Separate Account, except where General Account matters are specifically
mentioned. For a brief summary of the aspects of the Policy relating to the
General Account, see The General Account.
16
DEFINITIONS
Attained Age. The Issue Age of the Insured plus the number of completed
Policy Years.
Beneficiary. The person(s) named in the application or by later
designation to receive Policy proceeds in the event of the Insured's death. A
Beneficiary may be changed as set forth in the Policy and this Prospectus.
Cash Value. The total amount that a Policy provides for investment at any
time. It is equal to the total of the amounts credited to the Owner in the
Separate Account and the General Account, including the Loan Account.
Cash Surrender Value. The Cash Value of a Policy on the date of surrender,
less any Indebtedness, and less any surrender charges.
Division. A subaccount of the Separate Account.
Effective Date. The date as of which insurance coverage begins under a
policy.
Face Amount. The minimum death benefit under the Policy prior to the
Insured's Attained Age 100, so long as the Policy remains in force.
Fund. A separate investment portfolio of a registered open-end investment
company. Although sometimes referred to elsewhere as "portfolios," they are
referred to in this prospectus as "Funds," except where "Portfolio" is part of
their name.
General Account. The assets of the Company other than those allocated to
the Separate Account or any other separate account. The Loan Account is part of
the General Account.
Indebtedness. The sum of all unpaid Policy Loans and accrued interest on
loans.
Insured. The person whose life is insured under the Policy.
Investment Start Date. The date the initial premium is applied to the
Money Market Division of the Separate Account. This date is the later of the
Issue Date or the date the initial premium is received at General American's
Administrative Office.
Issue Age. The Insured's age at his or her nearest birthday as of the date
the Policy is issued.
Issue Date. The date from which Policy Anniversaries, Policy Years, and
Policy Months are measured.
Loan Account. The account of the Company to which amounts securing Policy
Loans are allocated. The Loan Account is part of General American's General
Account.
Loan Subaccount. A Loan Subaccount exists for the General Account and for
each Division of the Separate Account. Any Cash Value transferred to the Loan
Account will be allocated to the appropriate Loan Subaccount to reflect the
origin of the Cash Value. At any point in time, the Loan Account will equal the
sum of all the Loan Subaccounts.
Monthly Anniversary. The same date in each succeeding month as the Issue
Date except that whenever the Monthly Anniversary falls on a date other than a
Valuation Date, the Monthly Anniversary will be deemed the next Valuation Date.
If any Monthly Anniversary would be the 29th, 30th, or 31st
17
day of a month that does not have that number of days, then the Monthly
Anniversary will be the last day of that month.
Net Premium. The premium less the premium expense charges (consisting of
the sales charge and the premium tax charge).
Owner. The Owner of a Policy, as designated in the application or as
subsequently changed.
Policy. The flexible premium variable life insurance Policy offered by the
Company and described in this Prospectus.
Policy Anniversary. The same date each year as the Issue Date. POLICY
MONTH. A month beginning on the Monthly Anniversary.
Policy Year. A period beginning on a Policy Anniversary and ending on the
day immediately preceding the next Policy Anniversary.
Portfolio. See Fund.
Pro-Rata Surrender. A requested reduction of both the Face Amount and the
Cash Value by a given percentage.
SEC. The United States Securities and Exchange Commission.
Separate Account. General American Separate Account Eleven, a separate
investment account established by the Company to receive and invest the Net
Premiums paid under the Policy, and certain other variable life policies, and
allocated by the Owner to provide variable benefits.
Target Premium. A premium calculated when a Policy is issued, based on the
Insured's age, sex (except in unisex policies) and risk class. The target
premium is used to calculate the first year's premium expense charge, the
contingent deferred sales charge, and agent compensation under the Policy. (See
Charges and Deductions.)
Valuation Date. Each day that the New York Stock Exchange is open for
trading.
Valuation Period. The period between two successive Valuation Dates,
commencing at 4:00 p.m. (Eastern Standard Time) on a Valuation Date and ending
4:00 p.m. on the next succeeding Valuation Date.
THE COMPANY AND THE SEPARATE ACCOUNT
The Company
General American Life Insurance Company ("General American" or "the
Company") was originally incorporated as a stock company in 1933. In 1936,
General American initiated a program to convert to a mutual life insurance
company. In 1997, General American's policyholders approved a reorganization of
the Company into a mutual holding company structure under which General
American became a stock company wholly owned by GenAmerica Corporation, an
intermediate stock holding company.
18
On January 6, 2000 The Metropolitan Life Insurance Company of New York
("MetLife") acquired GenAmerica Corporation, which became GenAmerica Financial
Corporation. As a result of that transaction, General American became an
indirect, wholly-owned subsidiary of MetLife.
Headquartered in New York City since 1868, MetLife is a leading provider
of insurance and financial services to a broad spectrum of individual and group
customers. The company, with approximately $282.4 billion worth of assets under
management as of December 31, 2001, provides individual insurance and
investment products to approximately 9 million households in the United States.
MetLife also serves over 33 million people by providing group insurance and
investment products to corporations and other institutions.
General American is principally engaged in writing individual life insurance
policies and annuity contracts. As of December 31, 2001, it had consolidated
assets of approximately $26 billion. It is admitted to do business in 49
states, the District of Columbia, Puerto Rico, and in ten Canadian provinces.
The principal offices (Home Office) of General American are located at 700
Market Street, St. Louis, Missouri 63101. The Administrative Office for various
Policy transactions is as follows:
Premium Payments General American
P.O. Box 14490
St. Louis, MO 63178-4490
Payment Inquiries and Correspondence General American
Remittance Processing
4100 Boy Scout Blvd.
Tampa, FL 33607
(800) 638-9294
Beneficiary and Ownership Changes Surrenders, Loans and Withdrawals
Division Transfers
Death Claims
Cancellations (Free Look Period)
General American
P.O. Box 355
Warwick, RI 02887-0355
(800) 638-9294
Other Inquiries General American
13045 Tesson Ferry Road
St. Louis, MO 63128
(800) 638-9294
THE SEPARATE ACCOUNT
General American Life Insurance Company Separate Account Eleven ("the
Separate Account") was established by General American as a separate investment
account on January 24, 1985 under Missouri law. The Separate Account will
receive and invest the Net Premiums paid under this Policy and allocated to it.
In addition, the Separate Account currently receives and invests Net Premiums
for other classes of flexible premium variable life insurance policies and
might do so for additional classes in the future. These other variable life
insurance policies impose different costs, and provide different benefits, from
the Policy. To obtain more information about these other policies, contact our
Home Office or your registered representative.
19
The Separate Account has been registered with the SEC as a unit investment
trust under the Investment Company Act of 1940 ("the 1940 Act") and meets the
definition of a "separate account" under Federal securities laws. Registration
with the SEC does not involve supervision of the management or investment
practices or policies of the Separate Account or General American by the SEC.
The Separate Account is divided into Divisions. Divisions invest in
corresponding Funds from various open-end, diversified management investment
companies. Income and both realized and unrealized gains or losses from the
assets of each Division of the Separate Account are credited to or charged
against that Division without regard to income, gains, or losses from any other
Division of the Separate Account or arising out of any other business General
American may conduct.
Although the assets of the Separate Account are the property of General
American, the assets in the Separate Account equal to the reserves and other
liabilities of the Separate Account are not chargeable with liabilities arising
out of any other business which General American may conduct. The assets of the
Separate Account are available to cover the general liabilities of General
American only to the extent that the Separate Account's assets exceed its
liabilities arising under the Policies. From time to time, the Company may
transfer to its General Account any assets of the Separate Account that exceed
the reserves and the Policy liabilities of the Separate Account (which will
always be at least equal to the aggregate Policy value allocated to the
Separate Account under the Policies). Before making any such transfers, General
American will consider any possible adverse impact the transfer may have on the
Separate Account.
The investment objectives and policies of certain Funds are similar to the
investment objectives and policies of other funds that may be managed by the
same investment adviser or subadviser. The investment results of the Funds may
be higher or lower than the results of these funds. There is no assurance, and
no representation is made, that the investment results of any of the Funds will
be comparable to the investment results of any other fund.
General American Capital Company. General American Capital Company (the
"Capital Company") is a diversified, open-end management investment company.
Shares of Capital Company are currently offered to separate accounts
established by General American Life Insurance Company and affiliates. The
Capital Company's investment adviser is Conning Asset Management Company, an
indirect, majority-owned subsidiary of General American.
The Capital Company's Asset Allocation Fund, Managed Equity Fund, Mid-Cap
Equity Fund, and Small-Cap Equity Fund are subadvised by State Street
Research & Management Company, which is responsible for the day-to-day
portfolio management of these funds.
Russell Insurance Funds. Russell Insurance Funds ("RIF") is a diversified,
open-end management investment company organized as a Massachusetts business
trust. General management of RIF is provided by Frank Russell Investment
Management Company, a wholly-owned subsidiary of Frank Russell Company, which
furnishes officers and staff required to manage and administer RIF on a
day-to-day basis.
American Century Variable Portfolios. American Century Variable
Portfolios, Inc., a part of American Century Investments, is a diversified,
open-end management investment company organized as a Maryland corporation.
American Century Investment Management, Inc. serves as the investment manager
of the fund.
J.P. Morgan Series Trust II. J.P. Morgan Series Trust II is a diversified,
open-end management investment company organized as a Delaware business trust.
The Trust's investment adviser is J.P.
20
Morgan Investment Management, Inc., a registered investment adviser and a
wholly-owned subsidiary of J.P. Morgan Chase & Co.
Fidelity Variable Insurance Products Funds. Fidelity Variable Insurance
Products Fund ("VIP"), Fidelity Variable Insurance Products Fund II ("VIP II")
and Fidelity Variable Insurance Products Fund III ("VIP III") is each a
diversified, open-end management investment company organized as a
Massachusetts business trust. VIP, VIP II and VIP III shares are purchased by
insurance companies to fund benefits under variable insurance and annuity
policies. Fidelity Management & Research Company ("FMR") of Boston,
Massachusetts is the Funds' Manager.
Van Eck Worldwide Insurance Trust. Van Eck Worldwide Insurance Trust ("Van
Eck") is an open-end management investment company organized as a Massachusetts
business trust. Shares of Van Eck are offered only to separate accounts of
various insurance companies to support benefits of variable insurance and
annuity policies. The assets of Van Eck are managed by Van Eck Associates
Corporation of New York, New York.
SEI Insurance Products Trust. SEI Insurance Products Trust is an open-end
management investment company that offers shares in separate investment
portfolios (Funds). The Funds have individual investment goals and strategies
and are designed primarily as funding vehicles for variable life insurance and
variable annuity contracts. SEI Investments Management Corporation is the
investment adviser to the Funds of SEI Insurance Products Trust.
Metropolitan Series Fund, Inc. The Metropolitan Series Fund, Inc. is a
"series" type of mutual fund, which is registered as an open-end management
investment company under the 1940 Act. MetLife Advisers, LLC ("MetLife
Advisers") serves as the investment adviser to the Metropolitan Series Fund.
MetLife Advisers oversees and recommends the hiring or replacement of its
sub-investment managers and is ultimately responsible for the investment
performance of these Funds.
New England Zenith Fund. New England Zenith Fund is an open-end management
investment company, more commonly known as a mutual fund, consisting of
multiple investment portfolios, known as the Series. MetLife Advisers serves as
the investment adviser to the Series. MetLife Advisers oversees and recommends
the hiring or replacement of its subadvisers and is ultimately responsible for
the investment performance of these Funds.
Met Investors Series Trust. Met Investors Series Trust is a diversified
open-end management investment company that offers a selection of managed
investment Portfolios or mutual funds, a number of which are offered through
the Policy. Met Investors Advisory LLC (formerly known as Met Investors
Advisory Corp.) has overall responsibility for the general management and
administration of all of the Portfolios.
American Funds Insurance Series. The American Funds Insurance Series is a
diversified, open-end management investment company. Capital Research and
Management Company serves as the investment adviser to the Series.
There is No Assurance That Any of the Funds Will Achieve Its Stated
Objective. It is conceivable that in the future it may be disadvantageous for
Funds to offer shares to separate accounts of various insurance companies to
serve as the investment medium for their variable products, or to qualified
plans, if applicable, or for variable life and annuity separate accounts and
qualified plans to invest simultaneously in a Fund. The Boards of Trustees, the
Boards of Directors, and the respective Advisors of each Fund, and the Company
and any other insurance companies participating in the Funds are required to
monitor events to identify any material irreconcilable conflicts that may
possibly arise, and to determine what action, if any, should be taken in
response to those events or conflicts.
21
A more detailed description of the Funds, their investment policies,
restrictions, risks, and charges is in the prospectuses for each Fund, which
must accompany or precede this Prospectus and which should be read carefully.
Addition, Deletion or Substitution of Investments
The Company reserves the right, subject to compliance with applicable law,
to make additions to, deletions from, or substitutions for the shares that are
held by the Separate Account or that the Separate Account may purchase. The
Company reserves the right to eliminate the shares of any of the Funds and to
substitute shares of another Fund if the shares of a Fund are no longer
available for investment, if in its judgment further investment in any Fund
becomes inappropriate in view of the purposes of the Separate Account or for
any other reason in our sole discretion. A substituted Fund may have different
fees and expenses. Substitution may be made with respect to existing
investments or the investment of future premium payments, or both. The Company
will not substitute any shares attributable to an Owner's interest in a
Division of the Separate Account without notice to the Owner and prior approval
of the SEC, to the extent required by the 1940 Act or other applicable law.
Nothing contained in this Prospectus shall prevent the Separate Account from
purchasing other securities for other series or classes of policies, or from
permitting a conversion between series or classes of policies on the basis of
requests made by Owners.
The Company also reserves the right to establish additional Divisions of
the Separate Account, each of which would invest in a Fund with a specified
investment objective. New Divisions may be established when, in the sole
discretion of the Company, marketing needs or investment conditions warrant.
Any new Division will be made available to existing Owners on a basis to be
determined by the Company in our sole discretion. Furthermore, we may make
available or close Divisions of the Separate Account to allocation of premiums
or cash value, or both, for some or all classes of Policies, at any time in our
sole discretion. To the extent approved by the SEC, the Company may also
eliminate or combine one or more Divisions, substitute one Division for another
Division, or transfer assets between Divisions if, in its sole discretion,
marketing, tax, or investment conditions warrant.
In the event of a substitution or change, the Company may, if it considers
it necessary, make such changes in the Policy by appropriate endorsement and
offer conversion options required by law, if any. The Company will notify all
Owners of any such changes.
If deemed by the Company to be in the best interests of persons having
voting rights under the Policy, and to the extent any necessary SEC approvals
or Owner votes are obtained, the Separate Account may be: (a) operated as a
management company under the 1940 Act; (b) de-registered under that Act in the
event such registration is no longer required; or (c) combined with other
separate accounts of the Company. To the extent permitted by applicable law,
the Company may also transfer the assets of the Separate Account associated
with the Policy to another separate account.
Other Funds and Share Classes
Only the Funds described in this Prospectus are currently available as
investment choices for the Policy, even though additional Funds may be
described in the Fund prospectuses.
Some of the Funds offer various classes of shares, each of which has a
different level of expenses. The prospectuses for the Funds may provide
information for share classes that are not available through the Policy. When
you consult the prospectus for any Fund, you should be careful to refer to only
the information regarding the class of shares that is available through the
Policy. For the American Century Variable Portfolios, we offer Class I shares;
for VIP, VIP II, and VIP III, we offer Initial Class shares; for the SEI
Insurance Products Trust, we offer Class A shares; for the Metropolitan Series
Fund, Inc., we
22
offer Class A shares; for the New England Zenith Fund, we offer Class A shares;
for the Met Investors Series Trust, we offer Class A shares; and for the
American Funds Insurance Series, we offer Class 2 shares.
POLICY BENEFITS
This prospectus provides a general description of the Policy. Policies
issued in your state may provide different features and benefits from, and
impose different costs than, those described in this prospectus. Your actual
Policy and any endorsements are the controlling documents. You should read the
Policy carefully for any variations in your state. If you would like to review
a copy of the Policy and endorsements, contact our Home Office.
Death Benefit
As long as the Policy remains in force (See Payment and Allocation of
Premiums--Policy Lapse and Reinstatement), the Company will, upon receipt of
proof of the Insured's death at its Administrative Office, pay the death
benefit in a lump sum. (See The Company and the Separate Account--The Company.)
The amount of the death benefit payable will be determined at the end of the
Valuation Period during which the Insured's death occurred. The death benefit
will be paid to the surviving Beneficiary or Beneficiaries specified in the
application or as subsequently changed.
The Policy provides three death benefit options: "Death Benefit Option A,"
"Death Benefit Option B," and "Death Benefit Option C." The death benefit under
all options prior to the Insured's attained age 100 will never be less than the
current Face Amount of the Policy (less Indebtedness) as long as the Policy
remains in force. (See Payment and Allocation of Premiums--Policy Lapse and
Reinstatement.) The current minimum Face Amount is generally $50,000.
Death Benefit Option A. Under Death Benefit Option A, the death benefit
until the Insured reaches Attained Age 100 is the current Face Amount of the
Policy or, if greater, the applicable percentage of Cash Value on the date of
death. At Attained Age 100 and above, the death benefit is 101% of the Cash
Value (100% if required by state law). The applicable percentage is 250% for an
Insured reaching Attained Age 40 or below on the Policy Anniversary prior to
the date of death. For Insureds with an a Attained Age over 40 on that Policy
Anniversary, the percentage is lower and declines with age as shown in the
Applicable Percentage of Cash Value Table shown below. Accordingly, under Death
Benefit Option A the death benefit will remain level at the Face Amount unless
the applicable percentage of Cash Value exceeds the current Face Amount, in
which case the amount of the death benefit will vary as the Cash Value varies.
(See Illustrations of Death Benefits and Cash Values, Appendix A.)
Death Benefit Option B. Under Death Benefit Option B, the death benefit
until the Insured reaches Attained Age 100 is equal to the current Face Amount
plus the Cash Value of the Policy on the date of death or, if greater, the
applicable percentage of the Cash Value on the date of death. At Attained Age
100 and above, the death benefit is 101% of the Cash Value (100% if required by
state law). The applicable percentage is the same as under Death Benefit Option
A: 250% for an Insured Attained Age 40 or below on the Policy Anniversary prior
to the date of death, and for Insureds with an Attained Age over 40 on that
Policy Anniversary the percentage declines as shown in the Applicable
Percentage of Cash Value Table shown below. Accordingly, under Death Benefit
Option B the amount of the death benefit will always vary as the Cash Value
varies (but will never be less than the Face Amount). (See Illustrations of
Death Benefits and Cash Values, Appendix A.)
23
Applicable Percentage of Cash Value Table
For Insureds Less Than Age 100/*/
Policy Account Multiple
Insured Person's Age Percentage
-------------------- -----------------------
40 or under 250%
45 215%
50 185%
55 150%
60 130%
65 120%
70 115%
75 to 90 105%
95 to 99 101%
--------
* For ages that are not shown on this table, the applicable percentage
multiples will decrease by a ratable portion for each full year.
Death Benefit Option C. Under Death Benefit Option C, the death benefit is
equal to the current Face Amount of the Policy or, if greater, the Cash Value
on the date of death multiplied by the "Attained Age factor" (a list of sample
Attained Age factors is shown in the Sample Attained Age Factor Table below).
At Attained Age 100 and above, the death benefit is 101% of the Cash Value
(100% if required by state law). Accordingly, under Death Benefit Option C the
death benefit will remain level at the Face Amount unless the Cash Value
multiplied by the Attained Age factor exceeds the current Face Amount, in which
case the amount of the death benefit will vary as the Cash Value varies. (See
Illustrations of Death Benefits and Cash Values, Appendix A.)
Death Benefit Option C
Sample Attained Age Factor Table
Non-Smoker Rates
Male Lives Female Lives
Insured Attained Age Factor Factor
-------------------- ---------- ------------
20 7.005753 7.978495
25 6.022987 6.777620
30 5.118855 5.739715
35 4.326687 4.852022
40 3.657390 4.105161
45 3.101789 3.489815
50 2.642973 2.978976
55 2.266395 2.555211
60 1.962872 2.203321
65 1.720583 1.909085
70 1.531494 1.672354
75 1.386501 1.480860
80 1.280475 1.337304
85 1.201521 1.231035
90 1.145430 1.156319
95 1.089164 1.090579
Changes In Death Benefit Option. If the Policy was issued with either
Death Benefit Option A or Death Benefit Option B, the death benefit option may
be changed. A request for change must be made to the Company in writing. The
effective date of such a change will be the Monthly Anniversary on or
24
following the date the Company receives the change request. A change in death
benefit option may have Federal income tax consequences. (See Federal Tax
Matters.)
A Death Benefit Option A Policy may be changed to have Death Benefit
Option B. The Face Amount will be decreased to equal the death benefit less the
Cash Value on the effective date of change. A Death Benefit Option B Policy may
be changed to have Death Benefit Option A. The Face Amount will be increased to
equal the death benefit on the effective date of change. A Policy issued under
Death Benefit Option C may not change to either Death Benefit Option A or Death
Benefit Option B for the entire lifetime of the Contract. Similarly, a Policy
issued under either Death Benefit Option A or B may not change to Death Benefit
Option C for the lifetime of the Policy.
Satisfactory evidence of insurability may be required in connection with a
request for a change from Death Benefit Option A to Death Benefit Option B. A
change may not be made if it would result in a Face Amount of less than the
minimum Face Amount.
A change in death benefit option will not in itself result in an immediate
change in the amount of a Policy's death benefit or Cash Value. In addition,
if, prior to or accompanying a change in the death benefit option, there has
been an increase in the Face Amount, the cost of insurance charge may be
different for the increased amount. (See Monthly Deduction--Cost of Insurance.)
Change In Face Amount. Subject to certain limitations set forth below, an
Owner may increase or decrease the Face Amount of a Policy once each Policy
Year but not before the first Policy Anniversary. A written request is required
for a change in the Face Amount. A change in Face Amount may affect the cost of
insurance rate and the net amount at risk, both of which affect an Owner's cost
of insurance charge. (See Monthly Deduction--Cost of Insurance.) A change in
the Face Amount of a Policy may have Federal income tax consequences. (See
Federal Tax Matters.)
For an increase in the Face Amount, the Company requires that satisfactory
evidence of insurability be submitted. An application for an increase must be
received by the Company. If approved, the increase will become effective as of
the Monthly Anniversary on or following receipt of the application by the
Company, but not before the first Policy Anniversary. In addition, the Insured
must have an Attained Age of not greater than 80 on the effective date of the
increase. The increase may not be less than $5,000 ($2,000 for policies issued
in qualified pension plans). Although an application for an increase need not
be accompanied by an additional premium, the Cash Surrender Value in effect
immediately after the increase must be sufficient to cover the next monthly
deduction. To the extent the Cash Surrender Value is not sufficient, an
additional premium must be paid. (See Charges and Deductions--Monthly
Deduction.) An increase in the Face Amount may result in certain additional
charges. (See Charges and Deductions--Monthly Deduction.)
For the Owner's rights upon an increase in Face Amount, see Policy
Rights--Right to Examine Policy. Owners should consult their sales
representative before deciding whether to increase coverage by increasing the
Face Amount of a Policy.
Any decrease in the Face Amount will become effective on the Monthly
Anniversary on or following receipt of the written request by the Company. The
amount of the requested decrease must be at least $5,000 ($2,000 for policies
issued in qualified pension plans) and the Face Amount remaining in force after
any requested decrease may not be less than minimum Face Amount. If following a
decrease in Face Amount, the Policy would not comply with the maximum premium
limitations required by Federal tax law (see Payment and Allocation of
Premiums), the decrease may be limited or Cash Value may be returned to the
Owner (at the Owner's election), to the extent necessary to meet these
requirements. Decreases will generally be applied to prior increases in the
Face Amount, if any, in the reverse order in which such increases occurred, and
then to the original Face Amount. This order of
25
reduction will be used to determine the amount of subsequent cost of insurance
charges (See Monthly Deduction--Cost of Insurance; and Charges and
Deductions--Contingent Deferred Sales Charge.)
Payment of The Death Benefit. The death benefit under the Policy will
ordinarily be paid in a lump sum within seven days after the Administrative
Office receives all documentation required for such a payment. (See The Company
and the Separate Account--The Company) Payment may, however, be postponed in
certain circumstances. (See General Matters--Postponement of Payment from the
Separate Account.) The death benefit will be increased by the amount of the
monthly cost of insurance for the portion of the month from the date of death
to the end of the month, and reduced by any outstanding Indebtedness. For
participating Policies--which we no longer issue--the death benefit will also
be increased by any unpaid dividends determined prior to the Insured's death.
(See General Matters--Additional Insurance Benefits and Charges and
Deductions.) The Company will pay interest on the death benefit from the date
of the Insured's death to the date of payment. Interest will be at an annual
rate determined by the Company, but will never be less than the guaranteed rate
of 4%. Provisions for settlement of proceeds other than a lump sum payment may
only be made upon written agreement with the Company.
Cash Value
The Cash Value of the Policy is equal to the total of the amounts credited
to the Owner in the Separate Account, the Loan Account (securing Policy Loans),
and, in certain contracts, the General Account. The Policy's Cash Value in the
Separate Account will reflect the investment performance of the chosen
Divisions of the Separate Account as measured by each Division's Net Investment
Factor (defined below), the frequency and amount of Net Premiums paid,
transfers, partial withdrawals, loans and the charges assessed in connection
with the Policy. An Owner may at any time surrender the Policy and receive the
Policy's Cash Surrender Value. (See Policy Rights--Surrender, Partial
Withdrawals, and Pro-Rata Surrender.) The Policy's Cash Value in the Separate
Account equals the sum of the Policy's Cash Values in each Division. There is
no guaranteed minimum Cash Value.
Determination Of Cash Value. For each Division of the Separate Account,
the Cash Value is determined on each Valuation Date. On the Investment Start
Date, the Cash Value in a Division will equal the portion of any Net Premium
allocated to the Division, reduced by the portion allocated to that Division of
the monthly deduction(s) due from the Issue Date through the Investment Start
Date. (See Payment and Allocation of Premiums.) Thereafter, on each Valuation
Date, the Cash Value in a Division of the Separate Account will equal:
(1) The Cash Value in the Division on the preceding Valuation Date,
multiplied by the Division's Net Investment Factor (defined below) for the
current Valuation Period; plus
(2) Any Net Premium payments received during the current Valuation
Period which are allocated to the Division; plus
(3) Any loan repayments allocated to the Division during the
current Valuation Period; plus
(4) Any amounts transferred to the Division from the General
Account or from another Division during the current Valuation Period; plus
(5) That portion of the interest credited on outstanding loans
which is allocated to the Division during the current Valuation Period;
minus
26
(6) Any amounts transferred from the Division to the General
Account, Loan Account, or to another Division during the current Valuation
Period (including any transfer charges); minus
(7) Any partial withdrawals from the Division during the current
Valuation Period; minus
(8) Any withdrawal due to a Pro-Rata Surrender from the Division
during the current Valuation Period; minus
(9) Any withdrawal or surrender charges incurred during the current
Valuation Period attributed to the Division in connection with a partial
withdrawal or Pro-Rata Surrender; minus
(10) If a Monthly Anniversary occurs during the current Valuation
Period, the portion of the monthly deduction allocated to the Division
during the current Valuation Period to cover the Policy Month which starts
during that Valuation Period (See Charges and Deductions.); plus
(11) If a Policy Anniversary occurs during the current Valuation
Period, if applicable, the portion of the dividend paid, if any, allocated
to the Division.
Net Investment Factor: The Net Investment Factor measures the investment
performance of a Division during a Valuation Period. The Net Investment Factor
for each Division for a Valuation period is calculated as follows:
(1) The value of the assets at the end of the preceding Valuation
Period; plus
(2) The investment income and capital gains, realized or
unrealized, credited to the assets in the Valuation Period for which the
Net Investment Factor is being determined; minus
(3) The capital losses, realized or unrealized, charged against
those assets during the Valuation Period; minus
(4) Any amount charged against each Division for taxes, including
any tax or other economic burden resulting from the application of the tax
laws determined by the Company to be properly attributable to the
Divisions of the Separate Account, or any amount set aside during the
Valuation Period as a reserve for taxes attributable to the operation or
maintenance of each Division; minus
(5) A charge equal to a percentage of the average net assets for
each day in the Valuation Period. This charge, for mortality and expense
risks, is determined by the length of time the policy has been in force.
It will not exceed the amounts shown in the following table:
Percentage Of Effective
Policy Years Avg. Net Assets Annual Rate
------------ --------------- -----------
1-10 0.0015027 0.55%
11-20 0.0012301 0.45%
21+ 0.0009572 0.35%;
divided by
(6) The value of the assets at the end of the preceding Valuation
Period.
27
POLICY RIGHTS
Loans
Loan Privileges. The Owner may, by written request to General American,
borrow an amount up to the Loan Value of the Policy, with the Policy serving as
sole security for such loan. A loan taken from, or secured by, a Policy may
have Federal income tax consequences. (See Federal Tax Matters.)
The Loan Value is the Cash Value of the Policy on the date the loan
request is received, less interest to the next loan interest due date, less
anticipated monthly deductions to the next loan interest due date, less any
existing loan, less any surrender charge, plus interest expected to be earned
on the loan balance to the next loan interest due date. Policy Loan interest is
payable on each Policy Anniversary.
The minimum amount that may be borrowed is $500. The loan may be
completely or partially repaid at any time while the Insured is living. Any
amount due to an Owner under a Policy Loan ordinarily will be paid within seven
days after General American receives the loan request at its Administrative
Office, although payments may be postponed under certain circumstances. (See
General Matters--Postponement of Payments from the Separate Account.)
When a Policy Loan is made, Cash Value equal to the amount of the loan
plus interest due will be transferred to the Loan Account as security for the
loan. A Loan Subaccount exists within the Loan Account for the General Account
and each Division of the Separate Account. Amounts transferred to the Loan
Account to secure Indebtedness are allocated to the appropriate Loan Subaccount
to reflect its origin. Unless the Owner requests a different allocation,
amounts will be transferred from the Divisions of the Separate Account and the
General Account in the same proportion that the Policy's Cash Value in each
Division and the General Account, if any, bears to the Policy's total Cash
Value, less the Cash Value in the Loan Account, at the end of the Valuation
Period during which the request for a Policy Loan is received. This will reduce
the Policy's Cash Value in the General Account and Separate Account. These
transactions will not be considered transfers for purposes of the limitations
on transfers between Divisions or to or from the General Account.
Cash Value in the Loan Account is expected to earn interest at a rate
("the earnings rate") which is lower than the rate charged on the Policy Loan
("the borrowing rate"). Cash Value in the Loan Account will accrue interest
daily at an annual earnings rate of 4%.
Interest credited on the Cash Value held in the Loan Account will be
allocated on Policy Anniversaries to the General Account and the Divisions of
the Separate Account in the same proportion that the Cash Value in each Loan
Subaccount bears to the Cash Value in the Loan Account. The interest credited
will also be transferred: (1) when a new loan is made; (2) when a loan is
partially or fully repaid; and (3) when an amount is needed to meet a monthly
deduction.
Interest Charged. The borrowing rate we charge for Policy Loan interest
will be based on the following schedule:
For Loans Outstanding During Annual Interest Rate
---------------------------- --------------------
Policy Years 1-10........ 4.50%
Policy Years 11-20....... 4.25%
Policy Years 21+......... 4.15%
General American will inform the Owner of the current borrowing rate when
a Policy Loan is requested.
28
Policy Loan interest is due and payable annually on each Policy
Anniversary. If the Owner does not pay the interest when it is due, the unpaid
loan interest will be added to the outstanding Indebtedness as of the due date
and will be charged interest at the same rate as the rest of the Indebtedness.
(See Effect of Policy Loans below.) The amount of Policy Loan interest which is
transferred to the Loan Account will be deducted from the Divisions of the
Separate Account and from the General Account in the same proportion that the
portion of the Cash Value in each Division and in the General Account,
respectively, bears to the total Cash Value of the Policy minus the Cash Value
in the Loan Account.
Effect Of Policy Loans. Whether or not a Policy Loan is repaid, it will
permanently affect the Cash Value of a Policy, and may permanently affect the
amount of the death benefit. The collateral for the loan (the amount held in
the Loan Account) does not participate in the performance of the Separate
Account while the loan is outstanding. If the Loan Account earnings rate is
less than the investment performance of the selected Division(s), the Cash
Value of the Policy will be lower as a result of the Policy Loan. Conversely,
if the Loan Account earnings rate is higher than the investment performance of
the Division(s), the Cash Value may be higher.
In addition, if the Indebtedness (See Definitions) exceeds the Cash Value
minus the surrender charge on any Monthly Anniversary, the Policy will lapse,
subject to a grace period. (See Payment and Allocation of Premiums--Policy
Lapse and Reinstatement.) A sufficient payment must be made within the later of
the grace period of 62 days from the Monthly Anniversary immediately before the
date Indebtedness exceeds the Cash Value less any surrender charges, or 31 days
after notice that a Policy will terminate unless a sufficient payment has been
mailed, or the Policy will lapse and terminate without value. A lapsed Policy,
however, may later be reinstated subject to certain limitations. (See Payment
and Allocation of Premiums--Policy Lapse and Reinstatement.)
Any outstanding Indebtedness will be deducted from the proceeds payable
upon the death of the Insured or the surrender of the Policy. Upon a complete
surrender or lapse of any Policy, if the amount received plus the amount of
outstanding Indebtedness exceeds the total investment in the Policy, the excess
will generally be treated as ordinary income subject to tax. Since amounts
borrowed and withdrawn from the Policy reduce the Policy's cash value, any cash
value remaining on surrender or lapse may be insufficient to pay the income tax
due. (See Federal Tax Matters.)
We believe that a loan from or secured by a Policy that is not classified
as a Modified Endowment Contract should generally not be treated as a taxable
distribution. However, the tax consequences associated with Policy Loans
outstanding after the tenth policy year are less clear, and you should consult
a tax adviser about such Policy Loans.
Repayment Of Indebtedness. A Policy Loan may be repaid in whole or in part
at any time prior to the death of the Insured and as long as a Policy is in
force. When a loan repayment is made, an amount securing the Indebtedness in
the Loan Account equal to the loan repayment will be transferred to the
Divisions of the Separate Account and the General Account in the same
proportion that the Cash Value in each Loan Subaccount bears to Cash Value in
the Loan Account. Amounts paid while a Policy Loan is outstanding will be
treated as premiums unless the Owner requests in writing that they be treated
as repayment of Indebtedness.
Department of Labor regulations impose requirements for participant loans
under tax-qualified pension plans. Therefore, plan loan provisions may differ
from Policy loan provisions. (See Federal Tax Matters).
29
Surrender, Partial Withdrawals and Pro-Rata Surrender
At any time during the lifetime of the Insured and while a Policy is in
force, the Owner may surrender the Policy by sending a written request to the
Company. After the first Policy Year, an Owner may make a partial withdrawal by
sending a written request to the Company. The amount available for surrender is
the Cash Surrender Value at the end of the Valuation Period during which the
surrender request is received at the Company's Administrative Office. Amounts
payable from the Separate Account upon surrender, partial withdrawal, or a
Pro-Rata Surrender will ordinarily be paid within seven days of receipt of the
written request. (See General Matters--Postponement of Payments from the
Separate Account.)
Surrenders. To effect a surrender, either the Policy itself must be
returned to the Company along with the request, or the request must be
accompanied by a completed affidavit of loss, which is available from the
Company. Upon surrender, the Company will pay the Cash Surrender Value to the
Owner in a single sum. (If your Policy is a participating Policy--which we no
longer offer--we will also pay any unpaid dividends determined prior to
surrender.) The Cash Surrender Value equals the Cash Value on the date of
surrender, less any Indebtedness, and less any surrender charge. (See Charges
and Deductions--Contingent Deferred Sales Charge.) The Company will determine
the Cash Surrender Value as of the date that an Owner's written request is
received at the Company's Administrative Office. If the request is received on
a Monthly Anniversary, the monthly deduction otherwise deductible will be
included in the amount paid. Coverage under a Policy will terminate as of the
date of surrender. The Insured must be living at the time of a surrender. A
surrender may have Federal income tax consequences. (See Federal Tax Matters.)
Partial Withdrawals. After the first Policy Year, an Owner may make
partial withdrawals from the Policy's Cash Surrender Value. There is no
transaction charge for the first twelve partial withdrawals or requested
transfers in a Policy Year. General American may impose a charge of $25 for
each partial withdrawal or requested transfer in excess of twelve in a Policy
Year. A partial withdrawal may have Federal income tax consequences. (See
Federal Tax Matters.)
The minimum amount of a partial withdrawal request, net of any applicable
surrender charges, is the lesser of a) $500 from a Division of the Separate
Account, or b) the Policy's Cash Value in a Division. (See Charges and
Deductions--Contingent Deferred Sales Charge.) The maximum amount that may be
withdrawn from a Division of the Separate Account during a Policy Year is the
Policy's Cash Value net of any applicable surrender charges in that Division.
(For limits on partial withdrawals and transfers from the General Account, see
The General Account).
The Owner may allocate the amount withdrawn plus any applicable surrender
charge, subject to the above conditions, among the Divisions of the Separate
Account and the General Account. If no allocation is specified, then the
partial withdrawal will be allocated among the Divisions of the Separate
Account and the General Account in the same proportion that the Policy's Cash
Value in each Division and the General Account bears to the total Cash Value of
the Policy, less the Cash Value in the Loan Account, on the date the request
for the partial withdrawal is received. If the limitations on withdrawals from
the General Account will not permit this proportionate allocation, the Owner
will be requested to provide an alternate allocation. (See The General Account.)
No amount may be withdrawn that would result in there being insufficient
Cash Value to meet any surrender charge that would be payable immediately
following the withdrawal upon the surrender of the remaining Cash Value.
The death benefit will be affected by a partial withdrawal, unless Death
Benefit Option A or Option C is in effect and the withdrawal is made under the
terms of an anniversary partial withdrawal
30
rider. (See General Matters--Additional Insurance Benefits.) If Death Benefit
Option A or Death Benefit Option C is in effect and the death benefit equals
the Face Amount, then a partial withdrawal will decrease the Face Amount by an
amount equal to the partial withdrawal plus the applicable surrender charge
resulting from that partial withdrawal. If the death benefit is based on a
percentage of the Cash Value, then a partial withdrawal will decrease the Face
Amount by an amount by which the partial withdrawal plus the applicable
surrender charge exceeds the difference between the death benefit and the Face
Amount. If Death Option B is in effect, the Face Amount will not change.
The Face Amount remaining in force after a partial withdrawal may not be
less than the minimum Face Amount. Any request for a partial withdrawal that
would reduce the Face Amount below this amount will not be implemented.
Partial withdrawals may affect the way in which the cost of insurance
charge is calculated and the amount of pure insurance protection afforded under
a Policy. (See Monthly Deduction--Cost of Insurance.) Partial withdrawals will
be applied first to reduce the initial Face Amount and then to each increase in
Face Amount in order, starting with the first increase. The Company may change
the minimum amount required for a partial withdrawal or the number of times
partial withdrawals may be made.
Pro-Rata Surrender. After the first Policy Year, an Owner can make a
Pro-Rata Surrender of the Policy. The Pro-Rata Surrender will reduce the Face
Amount and the Cash Value by a percentage chosen by the Owner. This percentage
must be any whole number. A Pro-Rata Surrender may have Federal income tax
consequences. (See Federal Tax Matters.) The percentage will be applied to the
Face Amount on the Monthly Anniversary on or following our receipt of the
request.
The Owner may allocate the amount of decrease in Cash Value plus any
applicable surrender charge among the Divisions of the Separate Account and the
General Account. (See Charges and Deductions--Contingent Deferred Sales
Charge.) If no allocation is specified, then the decrease in Cash Value and any
applicable surrender charge will be allocated among the Divisions of the
Separate Account and the General Account in the same proportion that the
Policy's Cash Value in each Division and the General Account bears to the total
Cash Value of the Policy, less the Cash Value in the Loan Account, on the date
the request for Pro-Rata Surrender is received.
A Pro-Rata Surrender cannot be processed if it will reduce the Face Amount
below the minimum Face Amount of the Policy. No Pro-Rata Surrender will be
processed for more Cash Surrender Value than is available on the date of the
Pro-Rata Surrender. A cash payment will be made to the Owner for the amount of
Cash Value reduction less any applicable surrender charges.
Pro-Rata Surrenders may affect the way in which the cost of insurance
charge is calculated and the amount of the pure insurance protection afforded
under the Policy. (See Monthly Deduction--Cost of Insurance.) Pro-Rata
Surrenders will be applied to prior increases in the Face Amount, if any, in
the reverse order in which such increases occurred, and then to the original
Face Amount.
Charges on Surrender, Partial Withdrawals and Pro-Rata Surrender. If a
Policy is surrendered within the first ten Policy Years, the Contingent
Deferred Sales Charge will apply. (See Contingent Deferred Sales Charge.)
A partial withdrawal or Pro-Rata Surrender may also result in a Contingent
Deferred Sales Charge. The amount of the charge assessed is a portion of the
Contingent Deferred Sales Charge that would be deducted upon surrender or
lapse. Charges are described in more detail under Charges and
Deductions--Contingent Deferred Sales Charge.
31
While partial withdrawals and Pro-Rata Surrenders are each methods of
reducing a Policy's Cash Value, a Pro-Rata Surrender differs from a partial
withdrawal in that a partial withdrawal does not typically have a proportionate
effect on a Policy's death benefit by reducing the Policy's Face Amount, while
a Pro-Rata Surrender does. Assuming that a Policy's death benefit is not a
percentage of the Policy's Cash Value, a Pro-Rata Surrender will reduce the
Policy's death benefit in the same proportion that the Policy's Cash Value is
reduced, while a partial withdrawal will reduce the death benefit by one dollar
for each dollar of Cash Value withdrawn. Partial Withdrawals and Pro-Rata
Surrenders will also result in there being different cost of insurance charges
subsequently deducted. (See Monthly Deduction--Cost of Insurance; Surrender,
Partial Withdrawals and Pro-Rata Surrender--Partial Withdrawals; and
Surrenders, Partial Withdrawals, and Pro-Rata Surrenders--Pro-Rata Surrender.)
Conversion Privilege
Generally, during the first two Policy years, you may convert the Policy
to fixed benefit coverage by transferring all of your Policy's cash value to
the General Account. The transfer will not be subject to a transfer charge, if
any, and it will have no effect on the Policy's death benefit, face amount, net
amount at risk, risk classification or issue age. The request to convert to
fixed benefit coverage must be in written form satisfactory to us.
You may exercise this privilege only once within the first two Policy
years. If you do so, we will automatically allocate all future net premiums to
the General Account and transfers of cash value to the Separate Account will no
longer be permitted.
The Policy permits us to limit allocations to the General Account under
some circumstances. (See The General Account.) If we limit such allocations you
may still exercise the Conversion Privilege.
In a limited number of states you may also have the ability to exchange
the face amount of your Policy within the first two Policy years for a fixed
benefit life insurance policy. Contact our Administrative Office or your
registered representative for information about the availability of this
exchange right in your state.
Transfers
Under General American's current practices, a Policy's Cash Value, except
amounts credited to the Loan Account, may be transferred among the Divisions of
the Separate Account and for certain contracts, between the General Account and
the Divisions. Transfers to and from the General Account are subject to
restrictions (See The General Account). Requests for transfers from or among
Divisions of the Separate Account may be made in writing, by telephone or, for
Policies that are not business-owned, over the Internet. Transfers from or
among the Divisions of the Separate Account must be in amounts of at least $500
or, if smaller, the Policy's Cash Value in a Division. The first twelve
requested transfers or partial withdrawals per policy year will be allowed free
of charge. Thereafter, the Company may impose a charge of $25 for each
requested transfer or partial withdrawal. General American ordinarily will make
transfers and determine all values in connection with transfers as of the end
of the Valuation Period during which the transfer request is received at our
Administrative Office.
Telephone and computer systems may not always be available. Any telephone
or computer system, whether it is yours, your service provider's, your
registered representative's, or ours, can experience outages or slowdowns for a
variety of reasons. These outages or slowdowns may delay or prevent our
processing of your request. Although we have taken precautions to help our
systems handle heavy use, we cannot promise complete reliability under all
circumstances. If you are experiencing problems, you should make your request
by writing to our Administrative Office.
32
All requests received on the same Valuation Date will be considered a
single transfer request. Each transfer must meet the minimum requirement of
$500 or the entire Cash Value in a Division, whichever is smaller. Where a
single transfer request calls for more than one transfer, and not all of the
transfers would meet the minimum requirements, General American will make those
transfers that do meet the requirements. Transfers resulting from Policy Loans
will not be counted for purposes of the limitations on the amount or frequency
of transfers allowed in each Policy Month or Policy Year.
We did not design the Policy's transfer privilege to give you a way to
speculate on short-term market movements. To prevent excessive transfers that
could disrupt the management of the Funds and increase transaction costs, we
may adopt procedures to limit excessive transfer activity. For example, we may
impose conditions and limits on, or refuse to accept, transfer requests that we
receive from third parties. Third parties include investment advisers or
registered representatives acting under power(s) of attorney from one or more
Policy owners. In addition, certain Funds may restrict or refuse transactions
as a result of certain market timing activities. You should read the
prospectuses of the Funds for more details.
Although General American currently intends to continue to permit
transfers for the foreseeable future, the Policy provides that General American
may at any time revoke, modify, or limit the transfer privilege, including the
minimum amount transferable, the maximum General Account allocation percent,
and the frequency of such transfers.
Portfolio Rebalancing
Over time, the funds in the General Account and the Divisions of the
Separate Account will accumulate at different rates as a result of different
investment returns. The Owner may direct that from time to time we
automatically restore the balance of the Cash Value in the General Account and
in the Divisions of the Separate Account to the percentages determined in
advance. There are two methods of rebalancing available--periodic and variance.
Periodic Rebalancing. Under this option the Owner elects a frequency
(monthly, quarterly, semiannually or annually), measured from the Policy
Anniversary. On each date elected, we will rebalance the funds by generating
transfers to reallocate the funds according to the investment percentages
elected.
Variance Rebalancing. Under this option the Owner elects a specific
allocation percentage for the General Account and each Division of the Separate
Account. For each such account, the allocation percentage (if not zero) must be
a whole percentage and must not be less than five percent (5%). The Owner also
elects a maximum variance percentage (5%, 10%, 15%, or 20% only), and can
exclude specific funds from being rebalanced. On each Monthly Anniversary we
will review the current fund balances to determine whether any fund balance is
outside of the variance range (either above or below) as a percentage of the
specified allocation percentage for that fund. If any fund is outside of the
variance range, we will generate transfers to rebalance all of the specified
funds back to the predetermined percentages.
Owners should consider that portfolio rebalancing entails the transfer of
Cash Value from better performing portfolios to lesser performing portfolios.
Transfers resulting from portfolio rebalancing will not be counted against
the total number of transfers allowed in a Policy Year before a charge is
applied.
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The Owner may elect either form of portfolio rebalancing by specifying it
on the policy application, or may elect it later for an in-force Policy, or may
cancel it, by submitting a change form acceptable to General American under its
administrative rules.
Only one form of portfolio rebalancing may be elected at any one time, and
portfolio rebalancing may not be used in conjunction with dollar cost averaging
(see below).
General American reserves the right to suspend portfolio rebalancing at
any time on any class of Policies on a nondiscriminatory basis, or to charge an
administrative fee for election changes in excess of a specified number in a
Policy Year in accordance with its administrative rules.
Dollar Cost Averaging
The Owner may direct the Company to transfer amounts on a monthly basis
from the Money Market Fund to any other Division of the Separate Account. This
service is intended to allow the Owner to utilize "dollar cost averaging"
("DCA"), a long-term investment technique which provides for regular, level
investments over time. The Company makes no guarantee that DCA will result in a
profit or protect against loss.
The following rules and restrictions apply to DCA transfers:
(1) The minimum DCA transfer amount is $100.
(2) A written election of the DCA service, on a form provided by
the Company, must be completed by the Owner and on file with the Company
in order to begin DCA transfers.
(3) In the written election of the DCA service, the Owner indicates
how DCA transfers are to be allocated among the Divisions of the Separate
Account. For any Division chosen to receive DCA transfers, the minimum
percentage that may be allocated to a Division is 1% of the DCA transfer
amount, and fractional percentages may not be used.
(4) DCA transfers can only be made from the Money Market Fund.
(5) The DCA transfers will not count against the Policy's normal
transfer restrictions. (See Policy Rights--Transfers.)
(6) The DCA transfer percentages may differ from the allocation
percentages the Owner specifies for the allocation of Net Premiums. (See
Payment and Allocation of Premiums--Allocation of Net Premiums and Cash
Values.)
(7) Once elected, DCA transfers from the Money Market Fund will be
processed monthly until the Owner instructs the Company in writing to
cancel the DCA service.
(8) Transfers as a result of a Policy Loan or repayment, or in
exercise of the conversion privilege, are not subject to the DCA rules and
restrictions. The DCA service terminates at the time the conversion
privilege is exercised when any outstanding amount in any Division of the
Separate Account is immediately transferred to the General Account. (See
Policy Rights--Loans, and Policy Rights--Conversion Privilege.)
(9) DCA transfers will not be made until the Right to Examine
Policy period has expired (See Policy Rights--Right to Examine Policy).
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The Company reserves the right to assess a processing fee for the DCA
service. The Company reserves the right to discontinue offering DCA upon 30
days' written notice to Owners. However, any such discontinuation will not
affect DCA services already commenced. The Company reserves the right to impose
a minimum total Cash Value, less outstanding Indebtedness, in order to qualify
for DCA service. Also, the Company reserves the right to change the minimum
necessary Cash Value and the minimum required DCA transfer amount.
Transfers made under Dollar Cost Averaging do not count against the total
of twelve requested transfers or partial withdrawals allowed without charge in
a Policy Year.
Right To Examine Policy
The Owner may cancel a Policy within 20 days after receiving it (30 days
if the Owner is a resident of California and is age 60 or older) or within 45
days after the application was signed, whichever is later. If a Policy is
canceled within this time period, a refund will be paid. The refund will equal
all premiums paid under the Policy. Where required by state law, General
American will refund an amount equal to the greater of premiums paid or
(1) plus (2) where (1) is the difference between the premiums paid, including
any policy fees or other charges, and the amounts allocated to the Separate
Account under the Policy and (2) is the value of the amounts allocated to the
Separate Account under the Policy on the date the returned Policy is received
by General American or its agent.
To cancel the Policy, the Owner should mail or deliver the Policy to
either General American's Administrative Office or the agent who sold it. A
refund of premiums paid by check may be delayed until the Owner's check has
cleared the bank upon which it was drawn. (See General Matters--Postponement of
Payments from the Separate Account.)
A request for an increase in Face Amount (see Policy Benefits--Death
Benefit) may also be canceled. The request for cancellation must be made within
the later of 20 days from the date the Owner received the new Policy
specifications page for the increase, or 45 days after the application for the
increase was signed.
Death Benefit At Attained Age 100
If the Insured is living and the Policy is in force when the Insured
reaches Attained Age 100, the death benefit will be equal to 101% of the Cash
Value of the Policy (100% if required by state law) unless the Lifetime
Coverage Rider is in effect. (See Additional Insurance Benefits.) At that
point, no further premium payments will be required or accepted, and no further
monthly deductions will be taken to cover the cost of insurance.
PAYMENT AND ALLOCATION OF PREMIUMS
Issuance of A Policy
Individuals wishing to purchase a Policy must complete an application and
submit it to an authorized registered agent of General American or to General
American's Administrative Office. A Policy will generally be issued to Insureds
of Issue Ages 0 through 85 for regularly underwritten contracts, and to
Insureds of Issue Ages 20 through 70 for Policies issued in qualified pension
plans, for guaranteed issue contracts and, should they become available in the
future, for simplified issue contracts. General American may, in its sole
discretion, issue Policies to individuals falling outside of those Issue Ages.
Acceptance of an application is subject to General American's underwriting
rules and General American reserves the right to reject an application for any
reason.
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The Issue Date is determined by General American in accordance with its
standard underwriting procedures for variable life insurance policies. The
Issue Date is used to determine Policy Anniversaries, Policy Years, and Policy
Months. Insurance coverages under a Policy will not take effect until the
Policy has been delivered and the initial premium has been paid prior to the
Insured's death and prior to any change in health as shown in the application.
Premiums
The initial premium is due on the Issue Date, and may be paid to an
authorized registered agent of General American or to General American at its
Administrative Office. General American currently requires that the initial
premium for a Policy be at least equal to one-twelfth (1/12) of the Minimum
Premium for the Policy. The Minimum Premium is the amount specified for each
Policy based on the requested initial Face Amount and the charges under the
Policy which vary according to the Issue Age, sex, underwriting risk class, and
smoker status of the Insured. (See Charges and Deductions.) For policies issued
as a result of a term conversion from certain General American term policies,
the Company requires the Owner to pay an initial premium, which combined with
conversion credits given, if any, will equal one full "Minimum Premium" for the
Policy.
Following the initial premium, subject to the limitations described below,
premiums may be paid in any amount and at any interval. Premiums after the
first premium payment must be paid to General American at its Administrative
Office.
An Owner may establish a schedule of planned premiums which will be billed
by the Company at regular intervals. Failure to pay planned premiums, however,
will not itself cause the Policy to lapse. (See Policy Lapse and
Reinstatement.) Premium receipts will be furnished upon request. You may also
choose to have us withdraw your premiums from your bank checking account. (This
is known as the Pre-Authorized Checking Arrangement.)
An Owner may make unscheduled premium payments at any time in any amount,
or skip planned premium payments, subject to the minimum and maximum premium
limitations described below.
If a Policy is in the intended Owner's possession but the initial premium
has not been paid, the Policy is not in force. The intended Owner is deemed to
have the Policy for inspection only.
Premium With Application. If you make a premium payment with the
application, the Issue Date is generally the later of the date a medical
supplement or Part II (if any) of the application is signed and receipt of the
premium payment. In that case, the Issue Date and investment start date are the
same. You may only make one premium payment before the Policy is issued. When
the Policy is delivered to you, you will need to pay any remaining monthly No
Lapse Premiums for the period between the Issue Date and the delivery date.
If you make a premium payment with the application, we will cover the
insured under a temporary insurance agreement for a limited period that usually
begins when we receive the premium for the Policy (or, if later, on the date
when a medical supplement or Part II of the application is signed). The maximum
temporary coverage is the lesser of the amount of insurance applied for and
$500,000. We may increase this limit. These provisions vary in some states.
If we issue a Policy, Monthly Deductions begin from the Issue Date, even
if we delayed the Policy's issuance for underwriting. The deductions are for
the face amount of the Policy issued, even if the temporary insurance coverage
during underwriting was for a lower amount. If we decline an application, we
refund the premium payment made.
36
Premium On Delivery. If you pay the initial premium on delivery of the
Policy, the Issue Date is generally up to 21 days after issue. When you receive
the Policy, you will have an opportunity to redate it to a current date. The
investment start date is the later of the Issue Date and the date we received
the premium. Monthly Deductions begin on the Issue Date. Insurance coverage
under the Policy begins when we receive the monthly No Lapse Premiums for the
period since the Issue Date.
Backdating. We may sometimes backdate a Policy, if you request, by
assigning an Issue Date earlier than the date the application is signed. You
may wish to backdate so that you can obtain lower cost of insurance rates,
based on a younger insurance age. For a backdated Policy, you must also pay the
No Lapse Premiums due for the period between the Issue Date and the investment
start date. As of the investment start date, we allocate to the Policy those
net premiums, adjusted for monthly Policy charges.
Premium Limitations. Every premium payment must be at least $10. In no
event may the total of all premiums paid in any Policy Year exceed the current
maximum premium limitations for that Policy Year. Maximum premium limits for
the Policy Year will be shown in an Owner's annual report.
In general, for policies issued with Death Benefit Option A or Death
Benefit Option B, the maximum premium limit for a Policy Year is the largest
amount of premium that can be paid in that Policy Year such that the sum of the
premiums paid under the Policy will not at any time exceed the guideline
premium limitations needed to comply with the tax definition of life insurance.
For policies issued with Death Benefit Option C, the company reserves the right
to impose other restrictions upon the amount of premium that may be paid into
the Policy. If at any time a premium is paid which would result in total
premiums exceeding the current maximum premium limitations, the Company will
only accept that portion of the premium which will make total premiums equal
the maximum. Any part of the premium in excess of that amount will be returned
or applied as otherwise agreed, and no further premiums will be accepted until
allowed under the current maximum premium limitations.
In addition to the foregoing tax definitional limits on premiums, for
purposes of determining whether distributions (including loans) are a return of
income first, the Company monitors the Policy to detect whether the "seven pay
limit" has been exceeded. If the seven pay limit is exceeded, the Policy
becomes a "Modified Endowment Contract". The Company has adopted administrative
steps designed to notify an Owner when it is believed that a premium payment
will cause a Policy to become a modified endowment contract. The Owner will be
given a limited amount of time to request that the premium be reversed in order
to avoid the Policy's being classified as a modified endowment contract. (See
Federal Tax Matters.) However, when we receive a premium payment prior to the
Policy anniversary in response to a premium bill, if allocating the premium
immediately would cause the Policy to become a modified endowment contract, we
will wait until the day after the Policy anniversary to allocate the premium to
the Divisions.
If the Company receives a premium payment which would cause the death
benefit to increase by an amount that exceeds the Net Premium portion of the
payment, then the Company reserves the right to (1) refuse that premium
payment, or (2) require additional evidence of insurability before it accepts
the premium.
Allocation of Net Premiums and Cash Value
Allocation of Net Premiums. In the application for a Policy, the Owner
indicates how Net Premiums are to be allocated among the Divisions of the
Separate Account, to the General Account (if available), or both. For each
Division chosen, the minimum percentage that may be allocated to a Division is
1% of the Net Premium, and fractional percentages may not be used. Certain
other restrictions apply to allocations made to the General Account (see
General Account). For policies issued
37
with an allowable percentage to the General Account of more than 1%, the
minimum percentage is 1%, and fractional percentages may not be used.
You can allocate to a cumulative maximum of 49 accounts (including the
General Account) over the life of the Policy. We will maintain an ongoing
record of the accounts to which you allocate premiums and cash values. Each
time you make an allocation to an account that has not previously received an
allocation, the account will be added to your cumulative lifetime total. An
account will not be counted more than once. You may therefore transfer all cash
value out of an account and later reallocate cash value or premiums to that
same account without increasing the number of accounts utilized. Allocating
premiums and cash value among a large number of accounts in early Policy years
may limit your ability to take advantage of new funds that may be added in
later years.
The allocation for future Net Premiums may be changed without charge at
any time by providing notice to the Company at its Administrative Office. (See
The Company and the Separate Account--The Company.) Any change in allocation
will take effect immediately upon receipt by the Company of written notice. No
charge is imposed for changing the allocations of future premiums. The initial
allocation will be shown on the application which is attached to the Policy.
The Company may at any time modify the maximum percentage of future Net
Premiums that may be allocated to the General Account.
During the period from the Investment Start Date to the end of the Right
to Examine Policy Period (See Policy Rights--Right to Examine Policy), Net
Premiums will automatically be allocated to the Division that invests in the
Money Market Fund of Capital Company. When this period expires, the Policy's
Cash Value in that Division will be transferred to the Divisions of the
Separate Account and to the General Account (if available) in accordance with
the allocation requested in the application for the Policy, or any allocation
instructions received subsequent to receipt of the application. Net Premiums
received after the Right to Examine Policy Period will be allocated according
to the allocation instructions most recently received by the Company unless
otherwise instructed for that particular premium receipt.
The Policy's Cash Value may also be transferred between Divisions of the
Separate Account, and, if the General Account is available under the Policy,
between those Divisions and the General Account. (See Policy Rights--Transfers.)
The value of amounts allocated to Divisions of the Separate Account will
vary with the investment performance of the chosen Divisions and the Owner
bears the entire investment risk. This will affect the Policy's Cash Value, and
may affect the death benefit as well. Owners should periodically review their
allocations of Net Premiums and the Policy's Cash Value in light of market
conditions and their overall financial planning requirements.
Policy Lapse and Reinstatement
Lapse. Unlike conventional whole life insurance policies, the failure to
make a premium payment following the initial premium will not itself cause a
Policy to lapse. If, during the first five Policy Years, the sum of all
premiums paid on the Policy, reduced by any partial withdrawals and any
outstanding loan balance, is greater than or equal to the sum of the No Lapse
Monthly Premiums for the elapsed months since the Issue Date, the Policy will
not lapse as a result of the Cash Value less any loans, loan interest due, and
any surrender charge being insufficient to pay the monthly deduction. Lapse
will occur when the Cash Surrender Value is insufficient to cover the monthly
deduction, and a grace period expires without a sufficient payment being made
to cover the lesser of the outstanding monthly deductions and premium expense
charges or the amount necessary to satisfy the No Lapse requirement.
38
The grace period, which is 62 days, begins on the Monthly Anniversary on
which the Cash Surrender Value becomes insufficient to meet the next monthly
deduction. The Company will notify the Owner at the beginning of the grace
period by mail addressed to the last known address on file with the Company.
The notice to the Owner will indicate the amount of additional premium that
must be paid. The amount of the premium required to keep the Policy in force
will be the amount to cover the outstanding monthly deductions and premium
expense charges (or, as noted above, the No Lapse requirement, if less, in the
first five Policy years). (See Charges and Deductions--Monthly Deduction.) If
the Company does not receive the required amount within the grace period, the
Policy will lapse and terminate without Cash Value.
If the Insured dies during the grace period, any overdue monthly
deductions will be deducted from the death benefit otherwise payable.
Reinstatement. The Owner may reinstate a lapsed Policy by written
application any time within five years after the date of lapse and before the
Insured's Attained Age 100. Reinstatement is subject to the following
conditions:
1. Evidence of the insurability of the Insured satisfactory to the
Company (including evidence of insurability of any person covered by a
rider to reinstate the rider).
2. Payment of a premium that, after the deduction of premium
expense charges, is large enough to cover: (a) the monthly deductions due
at the time of lapse, and (b) two times the monthly deduction due at the
time of reinstatement.
3. Payment or reinstatement of any Indebtedness. Any Indebtedness
reinstated will cause Cash Value of an equal amount also to be reinstated.
Any loan interest due and unpaid on the Policy Anniversary prior to
reinstatement must be repaid at the time of reinstatement. Any loan paid
at the time of reinstatement will cause an increase in Cash Value equal to
the amount to be reinstated.
The Policy cannot be reinstated if it has been surrendered.
The amount of Cash Value on the date of reinstatement will be equal to the
amount of any Policy Loan reinstated, increased by the Net Premiums paid at
reinstatement, any Policy Loan paid at the time of reinstatement, and the
amount of any surrender charge paid at the time of lapse.
The Insured must be alive on the date the Company approves the application
for reinstatement. If the Insured is not then alive, such approval is void and
of no effect.
The effective date of reinstatement will be the date the Company approves
the application for reinstatement. There will be a full monthly deduction for
the Policy Month which includes that date. (See Charges and Deductions--Monthly
Deduction.)
The surrender charge in effect at the time of reinstatement will equal the
surrender charge in effect at the time of lapse.
CHARGES AND DEDUCTIONS
Charges will be deducted in connection with the Policy to compensate the
Company for providing the insurance benefits set forth in the Policy and any
additional benefits added by rider, administering the Policies, incurring
expenses in distributing the Policies, and assuming certain risks in connection
with the
39
Policy. We may profit from one or more of the charges deducted under the
Policy. We may use these profits for any corporate purpose, including financing
the distribution of the Policies.
Premium Expense Charges
Prior to allocation of Net Premiums, premium payments will be reduced by
premium expense charges consisting of a sales charge and a charge for premium
taxes. The premium payment less the premium expense charge equals the Net
Premium.
Sales Charge. A sales charge will be deducted from each premium payment to
partially compensate the Company for expenses incurred in distributing the
Policy and any additional benefits provided by riders. The Company currently
intends to deduct a sales charge determined according to the following schedule:
Policy Year 1................. 15% of premium up to Target
5% of premium above Target
Policy Years 2-10............. 5% of all premium paid
Policy Years 11+.............. 2% of all premium paid
For policies issued in the state of Oregon, the amounts shown above are
increased by 2%. Consistent with the requirements of the Texas non-forfeiture
laws, the guaranteed sales charge varies for policies issued in Texas. As of
the date of this prospectus, the current sales charge for Texas policies is the
same as shown above.
The expenses covered by the sales charge include agent sales commissions,
the cost of printing Prospectuses and sales literature, and any advertising
costs. Where Policies are issued to Insureds with higher mortality risks or to
Insureds who have selected additional insurance benefits, a portion of the
amount deducted for sales charge is used to pay distribution expenses and other
costs associated with these additional coverages. No increase in this sales
charge will occur that would result in an increase in the sales charge
percentage deducted in any previous Policy year.
A Contingent Deferred Sales Charge is also imposed under certain
circumstances for expenses incurred in distributing the Policies. That charge
is discussed below.
To the extent that sales expenses are not recovered from the sales charge
and the surrender charge, those expenses may be recovered from other sources,
including the mortality and expense risk charge described below.
Premium Taxes. Various states or other governing jurisdictions and their
subdivisions impose a tax on premiums received by insurance companies. Premium
taxes vary by jurisdiction. A deduction equal to the amount of the actual
premium tax (if any) is taken from each premium payment for these taxes. The
deduction allows the Company to pass through the amount of the taxes imposed on
the policy by the state or other governing jurisdiction and any subdivisions
thereof. State premium taxes currently range from 0% to 3.5% (4% in Puerto
Rico), with an average of approximately 2.1%.
Federal Tax Charge. This charge is designed to pass through the equivalent
of the federal tax consequences applicable to the policy. The charge is
currently 1.3% of premium paid, and is guaranteed not to increase except to the
extent of any increases in the federal tax.
Monthly Deduction
Charges will be deducted on each monthly anniversary from the Cash Value
of each Policy ("the monthly deduction") to compensate the Company for
(a) certain administrative costs; (b) the cost of
40
insurance; and (c) the cost of optional benefits added by rider. The monthly
deduction will begin as of the Issue Date. It will be allocated among the
General Account and each Division of the Separate Account in the same
proportion that a Policy's Cash Value in the General Account and the Policy's
Cash Value in each Division bear to the total Cash Value of the Policy, less
the Cash Value in the Loan Account, on the date the deduction is taken. Because
portions of the monthly deduction, such as the cost of insurance, can vary from
month to month, the monthly deduction itself can vary in amount from month to
month.
Selection and Issue Expense Charge. During the first ten Policy Years, and
during the first ten Policy Years following an increase in Face Amount, the
Company generally assesses a monthly charge to cover the costs associated with
the underwriting and issue of the policy or the increase. The monthly charge
per $1,000 of face amount ranges from approximately 4 cents to 65 cents, and
varies by issue age, risk class, and (except on unisex Policies) sex of the
Insured. The duration of the guaranteed charges varies for policies issued in
Texas to ensure compliance with the Texas non-forfeiture laws. On a current
basis, as of the date of this prospectus, the duration is the same as described
above.
Monthly Administrative Charge. The Company has responsibility for the
administration of the Policies and the Separate Account. Administrative
expenses include premium billing and collection, record keeping, processing
death benefit claims, cash surrenders, partial withdrawals, Policy changes, and
reporting and overhead costs, processing applications, and establishing Policy
records. As reimbursement for administrative expenses related to the
maintenance of each Policy and the Separate Account, the Company assesses a
monthly administration charge from each Policy. This charge is generally $25
per month in the first Policy Year, and $6 per month for all Policy Years
thereafter, and is guaranteed not to increase while the Policy is in force.
The Company may administer the Policy itself, or may purchase
administrative services from such sources (including affiliates) as may be
available. Such services will be acquired on a basis which, in the Company's
sole discretion, affords the best services at the lowest cost. The Company
reserves the right to select a company to provide services which the Company
deems, in its sole discretion, is the best able to perform such services in a
satisfactory manner even though the costs for such services may be higher than
would prevail elsewhere.
Cost of Insurance. The cost of insurance is deducted on each Monthly
Anniversary for the following Policy Month. Because the cost of insurance
depends upon a number of variables, the cost will vary for each Policy Month.
The cost of insurance is determined separately for the initial Face Amount and
for any subsequent increases in Face Amount. The Company will determine the
cost of insurance charge by multiplying the applicable cost of insurance rate
or rates by the net amount at risk (defined below) for each Policy Month.
The cost of insurance rates are determined at the beginning of each Policy
Year for the initial Face Amount and each increase in Face Amount. The rates
will be based on the Attained Age, duration, rate class, and (except for unisex
Policies) sex of the Insured at issue or the date of an increase in Face
Amount. (See Unisex Requirements Under Montana Law.) The cost of insurance
rates generally increase as the Insured's Attained Age increases. The rate
class of an Insured also will affect the cost of insurance rate. For the
initial Face Amount, the Company will use the rate class on the Issue Date. For
each increase in Face Amount, other than one caused by a change in the death
benefit option, the Company will use the rate class applicable to that
increase. If the death benefit equals a percentage of Cash Value, an increase
in Cash Value will cause an automatic increase in the death benefit. The rate
class for such increase will be the same as that used for the most recent
increase that required proof of insurability.
The Company currently places Insureds into an elite rate class, a
preferred rate class, a standard rate class, or into rate classes involving a
higher mortality risk. The degree of underwriting imposed may vary from full
underwriting, to simplified issue underwriting, to guaranteed issue
underwriting.
41
Actual cost of insurance rates may change, and the actual monthly cost of
insurance rates will be determined by the Company based on its expectations as
to future mortality experience. However, the actual cost of insurance rates
will not be greater than the guaranteed cost of insurance rates set forth in
the Policy. For fully underwritten, guaranteed issue and simplified issue
Policies which are not in a substandard risk class, the guaranteed cost of
insurance rates are equal to 100% of the rates set forth in the male/female
smoker/non- smoker 1980 CSO Mortality Tables (1980 CSO Tables NA and SA and
1980 CSO Tables NG and SG for sex distinct; 1980 CSO Tables NB and SB for
unisex policies issued in qualified pension plans; 1980 CSO Tables NA and SA
for unisex policies issued in compliance with Montana law), for the age nearest
birthday. Higher rates apply if the Insured is determined to be in a
substandard risk class.
In two otherwise identical Policies, an Insured in the elite or preferred
rate class will have a lower cost of insurance than an Insured in a rate class
involving higher mortality risk. Each rate class other than the elite rate
class is also divided into two categories: smokers and nonsmokers. The elite
rate class is only available to nonsmokers. Nonsmoker Insureds will generally
incur a lower cost of insurance than similarly situated Insureds who smoke.
(Insureds under Attained Age 20 are automatically assigned to the non-smoker
rate class.) Policies issued with simplified underwriting or guaranteed issue
will in general incur a higher cost of insurance than fully underwritten
Policies. Guaranteed issue Policies will in general incur the highest current
or actual cost of insurance rates.
The net amount at risk for a Policy Month is (a) the death benefit under
the option chosen at the beginning of the Policy Month, with the face amount
divided by 1.0032737 (which reduces the net amount at risk, solely for purposes
of computing the cost of insurance, by taking into account assumed monthly
earnings at an annual rate of 4%), less (b) the Cash Value at the beginning of
the Policy Month. If there is an increase in the Face Amount, a net amount at
risk will be calculated separately for the initial Face Amount and for each
increase in Face Amount. If Death Benefit Option A or Death Option C is in
effect, for purposes of determining the net amounts at risk for the initial
Face Amount and for each increase in Face Amount, Cash Value will first be
considered a part of the initial Face Amount. If the Cash Value is greater than
the initial Face Amount, the excess Cash Value will then be considered a part
of each increase in order, starting with the first increase. If Death Benefit
Option B is in effect, the net amount at risk will be determined separately for
the initial Face Amount and for each increase in Face Amount. In calculating
the cost of insurance charges, the cost of insurance rate for a Face Amount is
applied to the net amount at risk for that Face Amount.
Additional Insurance Benefits. The monthly deduction will include charges
for any additional benefits provided by rider. (See General Matters--Additional
Insurance Benefits.)
Contingent Deferred Sales Charge ("CDSC")
For a period of up to ten years after the Issue Date, and for a period of
up to ten years following an increase in the Face Amount, the Company will
impose a CDSC upon surrender or lapse of the Policy, upon a partial withdrawal,
or upon a Pro-Rata Surrender. The amount of the charge assessed will depend
upon a number of factors, including the type of event (a full surrender, lapse,
or partial withdrawal), the amount of any premium payments made under the
Policy prior to the event, and the number of Policy Years having elapsed since
the Policy was issued.
The Contingent Deferred Sales Charge compensates the Company for expenses
relating to the distribution of the Policy, including agents' commissions,
advertising, and the printing of the Prospectus and sales literature.
42
Calculation of Charge. If a Policy is surrendered, the charge will not
exceed the Contingent Deferred Sales Charge Percentage multiplied by the annual
Target Premium attributable to the base policy or to the increase in Face
Amount.
The Contingent Deferred Sales Charge Percentage is shown in the following
table.
Contingent Deferred Sales Charge Percentage Table
If Surrender or Lapse The Percentage of
Occurs in The Last Month The Annual Target
of Policy Year: Premium Payable Is:
------------------------ -------------------
1 through 5 45%
6 40%
7 30%
8 20%
9 10%
10 and later 0%
In addition, the percentages are reduced equally for each Policy Month
during the years shown. For example, during the seventh year, the percentage is
reduced equally each month from 40% at the end of the sixth Year to 30% at the
end of the seventh Year. This table may be modified if required by law or
regulation of the governing jurisdiction.
Charge Assessed Upon Partial Withdrawals Or Pro-Rata Surrender. The amount
of the Contingent Deferred Sales Charge deducted upon a partial withdrawal or
Pro-Rata Surrender depends on the amount of the associated decrease in face
amount and will equal a fraction of the charge that would be deducted if the
Policy were surrendered at that time. If the face amount is decreased by some
fraction of any previous increase in face amount and/or the face amount at
issue, the charge deducted will be the surrender charge for the increase or
face amount at issue multiplied by that fraction. Immediately after a
withdrawal, the Policy's remaining surrender charge will equal the amount of
the surrender charge immediately before the withdrawal less the amount deducted
in connection with the withdrawal.
Transaction Charges
There are no transaction charges for processing the first twelve transfers
or partial withdrawals in a policy year. There may be a charge of $25 for each
transfer or partial withdrawal in excess of twelve.
Adjustment of Charges.
The Policy is available for purchase by individuals, corporations, and
other institutions. For certain individuals and certain corporate or other
group or sponsored arrangements purchasing one or more Policies, General
American may waive or adjust the amount of the Sales Charge, Contingent
Deferred Sales Charge, monthly administrative charge, or other charges where
the expenses associated with the sale of the Policy or Policies or the
underwriting or other administrative costs associated with the Policy or
Policies warrant an adjustment.
Sales, underwriting, or other administrative expenses may be reduced for
reasons such as expected economies resulting from a corporate purchase or a
group or sponsored arrangement; from the amount of the initial premium payment
or payments; or from the amount of projected premium payments. General American
will determine in its discretion if, and in what amount, an adjustment is
appropriate. The Company may modify its criteria for qualification for
adjustment of charges as experience is gained,
43
subject to the limitation that such adjustments will not be unfairly
discriminatory against the interests of any Owner.
In certain states, an Executive Benefit version of the Policy is available
for qualifying business-sponsored arrangements, under which reduced charges may
apply. You should ask your registered representative for more information about
the availability of this version of the Policy.
Separate Account Charges
Mortality and Expense Risk Charge. General American will deduct a daily
charge from the Separate Account. The amount of the deduction is determined as
a percentage of the average net assets of each Division of the Separate Account.
The daily deduction percentages, and the equivalent effective annual rate,
are:
Daily Charge Annual
Policy Years Factor Equivalent
------------ ------------ ----------
1-10................ .0015027% 0.55%
11-20............... .0012301% 0.45%
21+................. .0009572% 0.35%
This deduction is guaranteed not to increase while the Policy is in force.
General American may realize a profit from this charge.
The mortality risk assumed by General American is that Insureds may die
sooner than anticipated and that therefore General American will pay an
aggregate amount of death benefits greater than anticipated. The expense risk
assumed is that expenses incurred in issuing and administering the Policy will
exceed the amounts realized from the administrative charges assessed against
the Policy.
Fund Expenses. The value of the net assets of the Separate Account will
reflect the investment advisory fee and other expenses incurred by the
underlying investment companies. A summary of the annual Fund operating
expenses is provided on pages A-11 and A-12 of this prospectus. See the
prospectuses for the respective Funds for a description of investment advisory
fees and other expenses.
Taxes. No charges are currently made to the Separate Account for Federal,
state, or local taxes that the Company incurs which may be attributable to such
Separate Account or to the Policy. The Company may make such a charge for any
such taxes or economic burden resulting from the application of the tax laws
that it determines to be properly attributable to the Separate Account or to
the Policy. (See Federal Tax Matters.)
THE GENERAL ACCOUNT
Because of exemptive and exclusionary provisions, interests in the General
Account have not been registered under the Securities Act of 1933 and the
General Account has not been registered as an investment company under the 1940
Act. Accordingly, neither the General Account nor any interests therein are
subject to the provisions of these Acts and, as a result, the staff of the SEC
has not reviewed the disclosure in this Prospectus relating to the General
Account. The disclosure regarding the General 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.
44
General Description
The General Account consists of all assets owned by General American other
than those in the Separate Account and other separate accounts. Subject to
applicable law, General American has sole discretion over the investment of the
assets of the General Account.
At issue, General American will determine the maximum percentage of the
non-borrowed Cash Value that may be allocated, either initially or by transfer,
to the General Account. The ability to allocate Net Premiums or to transfer
Cash Value to the General Account may not be made available, in the Company's
discretion, under certain Policies. Further, the option may be limited with
respect to some Policies. The Company may, from time to time, adjust the extent
to which premiums or Cash Value may be allocated to the General Account (the
"maximum allocation percentage"). General American may at any time modify the
General Account maximum allocation percent. Subject to this maximum, an Owner
may elect to allocate Net Premiums to the General Account, the Separate
Account, or both. Subject to this maximum, the Owner may also transfer Cash
Value from the Divisions of the Separate Account to the General Account, or
from the General Account to the Divisions of the Separate Account. The
allocation of Net Premiums or the transfer of Cash Value to the General Account
does not entitle an Owner to share in the investment experience of the General
Account. Instead, General American guarantees that Cash Value allocated to the
General Account will accrue interest at a rate of at least 4%, compounded
annually, independent of the actual investment experience of the General
Account.
The Loan Account is part of the General Account.
The Policy
This Prospectus describes a flexible premium variable life insurance
policy. This Prospectus is generally intended to serve as a disclosure document
only for the aspects of the Policy relating to the Separate Account. For
complete details regarding the General Account, see the Policy itself.
General Account Benefits
If the Owner allocates all Net Premiums only to the General Account and
makes no transfers, partial withdrawals, Pro-Rata Surrenders, or Policy Loans,
the entire investment risk will be borne by General American, and General
American guarantees that it will pay at least a minimum specified death
benefit. The Owner may select Death Benefit Option A, B or C under the Policy
and may change the Policy's Face Amount subject to satisfactory evidence of
insurability.
General Account Cash Value
Net Premiums allocated to the General Account are credited to the Cash
Value. General American bears the full investment risk for these amounts and
guarantees that interest will be credited to each Owner's Cash Value in the
General Account at a rate of no less than 4% per year, compounded annually.
General American may, AT ITS SOLE DISCRETION, credit a higher rate of interest,
although it is not obligated to credit interest in excess of 4% per year, and
might not do so. ANY INTEREST CREDITED ON THE POLICY'S CASH VALUE IN THE
GENERAL ACCOUNT IN EXCESS OF THE GUARANTEED MINIMUM RATE OF 4% PER YEAR WILL BE
DETERMINED IN THE SOLE DISCRETION OF GENERAL AMERICAN. THE POLICY OWNER ASSUMES
THE RISK THAT INTEREST CREDITED MAY NOT EXCEED THE GUARANTEED MINIMUM RATE OF
4% PER YEAR. If excess interest is credited, a different rate of interest may
be applied to the Cash Value in the Loan Account. The Cash Value in the General
Account is calculated daily.
45
General American guarantees that, on each Valuation Date, the Cash Value
in the General Account will be the amount of the Net Premiums allocated or Cash
Value transferred to the General Account, plus interest at the rate of 4% per
year, plus any excess interest which General American credits and any amounts
transferred into the General Account, less the sum of all Policy charges
allocable to the General Account and any amounts deducted from the General
Account in connection with partial withdrawals, Pro-Rata Surrenders, surrender
charges or transfers to the Separate Account.
Transfers, Surrenders, Partial Withdrawals and Policy Loans
After the first Policy Year, a portion of Cash Value may be withdrawn from
the General Account or transferred from the General Account to the Separate
Account. A partial withdrawal, net of any applicable surrender charges, and any
transfer must be at least $500 or, the Policy's entire Cash Value in the
General Account if less than $500. No amount may be withdrawn from the General
Account that would result in there being insufficient Cash Value to meet any
surrender charges that would be payable immediately following the withdrawal
upon the surrender of the remaining Cash Value of the Policy. The total amount
of transfers and withdrawals in a Policy Year may not exceed a Maximum Amount
equal to the greater of (a) 25% of a Policy's Cash Surrender Value in the
General Account at the beginning of the Policy Year, or (b) the previous Policy
Year's Maximum Amount (not to exceed the total Cash Surrender Value of the
Policy).
Transfers to the General Account are limited by the maximum allocation
percentage (described below) in effect for a Policy at the time a transfer
request is made.
Policy Loans may also be made from the Policy's Cash Value in the General
Account.
Loans and withdrawals from the General Account may have Federal income tax
consequences. (See Federal Tax Matters.)
There is no transaction charge for the first twelve partial withdrawals or
requested transfers in a Policy Year. General American may impose a charge of
$25 for each partial withdrawal or requested transfer in excess of twelve in a
Policy Year. General American may revoke or modify the privilege of
transferring amounts to or from the General Account at any time. Partial
withdrawals and Pro-Rata Surrenders will result in the imposition of the
applicable surrender charge.
Transfers, surrenders, partial withdrawals and Pro-Rata Surrenders payable
from the General Account and the payment of Policy Loans allocated to the
General Account may, subject to certain limitations, be delayed for up to six
months. However, if payment is deferred for 30 days or more, General American
will pay interest at the rate of 2.5% per year for the period of the deferment.
Amounts from the General Account used to pay premiums on policies with General
American will not be delayed.
GENERAL MATTERS
Postponement of Payments From the Separate Account
The Company usually pays amounts payable on partial withdrawal, Pro-Rata
Surrender, surrender, death of the Insured or Policy Loan allocated to the
Separate Account Divisions within seven days after written notice is received.
Payment of any amount payable from the Divisions of the Separate Account upon
surrender, partial withdrawals, Pro-Rata Surrender, or death of Insured, as
well as payments of a Policy Loan and transfers, may be postponed whenever:
(1) the New York Stock Exchange is closed other than customary weekend and
holiday closings, or trading on the New York Stock Exchange is restricted as
determined by the SEC; (2) the SEC by order permits postponement for
46
the protection of Owners; or (3) an emergency exists, as determined by the SEC,
as a result of which disposal of securities is not reasonably practicable or it
is not reasonably practicable to determine the value of the Separate Account's
net assets. The Company may defer payment of the portion of any Policy Loan
from the General Account for not more than six months.
Payments under the Policy of any amounts derived from premiums paid by
check may be delayed until the Owner's check has cleared the bank upon which it
was drawn.
The Contract
The Policy, the attached application, any riders, endorsements, any
application for an increase in Face Amount, and any application for
reinstatement constitute the entire contract. All statements made by the
Insured in the application and any supplemental applications can be used to
contest a claim or the validity of the Policy. Any change to the Policy must be
in writing and approved by the President, a Vice President, or the Secretary of
the Company. No agent has the authority to alter or modify any of the terms,
conditions, or agreements of the Policy or to waive any of its provisions.
Control of Policy
The Insured is the Owner of the Policy unless another person or entity is
shown as the Owner in the application. Ownership may be changed, however, as
described below. The Owner is entitled to all rights provided by the Policy.
Any person whose rights of ownership depend upon some future event does not
possess any present rights of ownership. If there is more than one Owner at a
given time, all Owners must exercise the rights of ownership by joint action.
If the Owner dies, and the Owner is not the Insured, the Owner's interest in
the Policy becomes the property of his or her estate unless otherwise provided.
Unless otherwise provided, the Policy is jointly owned by all Owners named in
the Policy or by the survivors of those joint Owners. Unless otherwise stated
in the Policy, the final Owner is the estate of the last joint Owner to die.
The Company may rely on the written request of any trustee of a trust which is
the Owner of the Policy, and the Company is not responsible for the proper
administration of any such trust.
Beneficiary
The Beneficiary(ies) is (are) the person(s) specified in the application
or by later designation. Unless otherwise stated in the Policy, the Beneficiary
has no rights in a Policy before the death of the Insured. If there is more
than one Beneficiary at the death of the Insured, each Beneficiary will receive
equal payments unless otherwise provided by the Owner. If no Beneficiary is
living at the death of the Insured, the proceeds will be payable to the Owner
or, if the Owner is not living, to the Owner's estate.
The Company permits the designation of various types of trusts as
Beneficiary(ies), including trusts for minor beneficiaries, trusts under a
will, and trusts under a separate written agreement. An Owner is also permitted
to designate several types of beneficiaries, including business beneficiaries.
Change of Owner or Beneficiary
The Owner may change the ownership and/or Beneficiary designation by
written request in a form acceptable to the Company at any time during the
Insured's lifetime subject to any restrictions stated in the Policy and this
Prospectus. The Company may require that the Policy be returned for endorsement
of any change. If acceptable to us, the change will take effect as of the date
the request is signed, whether or not the Insured is living when the request is
received at the Company's Administrative Office. The Company is not liable for
any payment made or action taken before the Company received the written
request for change. If the Owner is also a Beneficiary of the Policy at the
time of the Insured's death, the
47
Owner may, within sixty days of the Insured's death, designate another person
to receive the Policy proceeds. Any change will be subject to any assignment of
the Policy or any other legal restrictions.
Policy Changes
The Company reserves the right to limit the number of changes to a Policy
to one per Policy Year and to restrict changes in the first Policy Year.
Currently, only one change is permitted during any Policy Year and no
change may be made during the first Policy Year. For this purpose, changes
include increases or decreases in Face Amount and changes in the death benefit
option.
No change will be permitted, if as a result, the Policy would fail to
satisfy the definition of life insurance in Section 7702 of the Internal
Revenue Code or any applicable successor provision.
Conformity With Statutes
If any provision in a Policy is in conflict with the laws of the state
governing the Policy, the provision will be deemed to be amended to conform to
such laws. In addition, the Company reserves the right to change the Policy if
it determines that a change is necessary to cause this Policy to comply with,
or give the Owner the benefit of any Federal or state statute, rule, or
regulation, including, but not limited to, requirements of the Internal Revenue
Code, or its regulations or published rulings.
Claims of Creditors
To the extent permitted by law, neither the Policy nor any payment under
it will be subject to the claims of creditors or to any legal process.
Incontestability
The Policy is incontestable after it has been in force for two years from
the Issue Date during the lifetime of the Insured. An increase in Face Amount
or addition of a rider after the Issue Date is incontestable after such
increase or addition has been in force for two years from its effective date
during the lifetime of the Insured. Any reinstatement of a Policy is
incontestable only after it has been in force during the lifetime of the
Insured for two years after the effective date of the reinstatement.
Assignment
The Company will be bound by an assignment of a Policy only if: (a) the
assignment is in writing; (b) the original assignment instrument or a certified
copy thereof is filed with the Company at its Administrative Office; and
(c) the Company returns an acknowledged copy of the assignment instrument to
the Owner. The Company is not responsible for determining the validity of any
assignment. Payment of Policy proceeds is subject to the rights of any assignee
of record. If a claim is based on an assignment, the Company may require proof
of the interest of the claimant. A valid assignment will take precedence over
the claim of any Beneficiary.
Suicide
Suicide within two years of the Issue Date is not covered by the Policy.
If the Insured dies by suicide, while sane or insane, within two years from the
Issue Date (or within the maximum period permitted by the laws of the state in
which the Policy was delivered, if less than two years), the amount payable
will be limited to premiums paid, less any partial withdrawals and outstanding
indebtedness. Subject to certain limitations, if the Insured, while sane or
insane, dies by suicide within two years after
48
the effective date of an increase in Face Amount, the death benefit for that
increase will be limited to the amount of the monthly deductions for the
increase.
If the Insured is a Missouri citizen when the Policy is issued, this
provision does not apply on the Issue Date of the Policy, or on the effective
date of any increase in Face Amount, unless the Insured intended suicide when
the Policy, or the increase in Face Amount, was applied for.
Misstatement of Age or Sex and Corrections
If the age or sex (except in unisex Policies, see Unisex Requirements
Under Montana Law) of the Insured has been misstated in the application, the
amount of the death benefit will be that which the most recent cost of
insurance charge would have purchased for the correct age and sex.
Any payment or Policy changes made by the Company in good faith, relying
on its records or evidence supplied with respect to such payment, will fully
discharge the Company's duty. The Company reserves the right to correct any
errors in the Policy.
Additional Insurance Benefits
Subject to certain requirements, one or more of the following additional
insurance benefits may be added to a Policy by rider. The descriptions below
are intended to be general; the terms of the Policy riders providing the
additional benefits may vary from state to state, and the Policy should be
consulted. The rider benefits available with the Policies provide fixed
benefits that do not vary with the investment experience of the Separate
Account. The cost of any additional insurance benefits which require additional
charges will be deducted as part of the monthly deduction from the Policy's
Cash Value. (See Charges and Deductions--Monthly Deduction.) Certain
restrictions may apply and are described in the applicable rider. Samples of
the provisions are available from General American upon written request.
The term riders discussed below permit you, by purchasing term insurance,
to increase your insurance coverage. Term riders have no surrenderable cash
value. If you seek to reduce the overall cost of your insurance protection, it
is generally to your economic advantage to include a significant portion or
percentage of your insurance coverage under a Supplemental Coverage Term
Insurance Rider. Both current and guaranteed charges for the Rider are lower
than for the base Policy. Unlike the base Policy, however, the Supplemental
Coverage Term Rider terminates at age 100, and the benefit provided by the
Lifetime Coverage Rider (described below) is not available for coverage under
the Supplemental Coverage Term Rider.
Reductions in or elimination of term rider coverage do not trigger a
surrender charge, and use of a term rider generally reduces sales compensation.
Because the term insurance riders don't have surrender charges, a Policy
providing insurance coverage with a combination of base Policy and term rider
will have a lower maximum surrender charge than a Policy with the same amount
of insurance coverage provided solely by the base Policy. However, like the
cost of coverage under the Policy, charges deducted from the Policy's cash
value to pay for term rider coverage no longer participate in the investment
experience of the Separate Account and usually increase with the age of the
covered individual. Your determination as to how to purchase a desired level of
insurance coverage should be based on your specific insurance needs. Your
registered representative can provide you more information on the uses of term
rider coverage.
Waiver of Monthly Deduction Rider. Provides for the waiver of the monthly
deductions while the Insured is totally disabled, subject to certain
limitations described in the rider. The Insured must have become disabled after
age 5 and before age 65.
49
Waiver of Specified Premium Rider. Provides for crediting the Policy's
Cash Value with a specified monthly premium while the Insured is totally
disabled. The monthly premium selected at issue is not guaranteed to keep the
Policy in force. The Insured must have become disabled after age 5 and before
age 65.
Adjustable Benefit Term Rider. This rider allows an employer who is the
Owner to provide adjustable term insurance to comply with the terms of an
associated employee benefit plan. The increase in coverage occurs on each
Policy Anniversary.
Anniversary Partial Withdrawal Rider. This rider allows the owner to
withdraw up to 15% of the Policy's Cash Surrender Value on any Policy
Anniversary without reducing the Face Amount.
Guaranteed Survivor Purchase Option (GSPO-Plus). This rider grants the
policy Owner or the Insured's Beneficiary the option to purchase, upon the
death of the Insured, on the 10th anniversary of the rider, and on the rider
anniversary nearest the Designated Life's 65th birthday, a specified amount of
additional insurance coverage on the Designated Life (or Lives) without
furnishing evidence of insurability.
Supplemental Coverage Term Rider. This rider provides level term insurance
on the life of the Insured under the base policy. It can be added only at
issue. It cannot be increased or added to an existing Policy.
Preliminary Term Insurance. This rider provides preliminary term insurance
from the date of hire of a new employee until the plan anniversary when a
corporate-sponsored Policy is issued. The rider provides level term insurance
equal to the initial face amount of the Policy and all attached riders.
Accelerated Benefit Rider. This rider provides a benefit to the Owner if
the Insured becomes terminally ill and is not expected to live more then twelve
months. The Owner may receive 25%, 50% or 75% (but no more than $250,000) of
the eligible proceeds in a lump sum. "Eligible proceeds" means the death
benefit, including amounts payable under the Supplemental Coverage Term Rider
(unless within three years of the rider's termination date) that would have
been payable had the insured died on the date the rider is exercised. You
should consult a qualified tax adviser about the consequences of adding this
rider to your Policy or requesting payment under this rider.
Secondary Guarantee Rider. This rider guarantees that if, during the
secondary guarantee period, the sum of all premiums paid on the Policy, reduced
by any partial withdrawals and any outstanding loan balance, is greater than or
equal to the sum of the secondary guarantee premiums required since the Issue
Date, the Policy will not lapse as a result of a Cash Value less any loans,
loans interest due, and any surrender charge being insufficient to pay the
monthly deduction.
The secondary guarantee period is the lesser of twenty Policy Years, or
the number of Policy Years until the Insured reaches Attained Age 70. For
Policies issued after Attained Age 60, the secondary guarantee period is ten
Policy Years.
Lifetime Coverage Rider. This rider provides the continuation of the
Policy's face amount beyond age 100, provided the policy remains in force to
age 100 with a positive cash surrender value. If the Policy is in force after
the Insured's Attained Age 100, the death benefit will be the greater of the
face amount or 101% of the Cash Value. The tax consequences of continuing the
Policy after the Insured's Attained Age 100 are unclear. You should consult a
tax adviser if you intend to continue your Policy after the Insured's Attained
Age 100.
50
The Company will maintain all records relating to the Separate Account and
will mail to the Owner once each Policy Year, at the last known address of
record, a report which shows the current Policy values, premiums paid,
deductions made since the last report, and any outstanding Policy Loans. The
Owner will also be sent a periodic report for each Fund. Receipt of premium
payments, transfers, partial withdrawals, Pro-Rata Surrenders, Policy Loans,
loan repayments, changes in death benefit options, increases or decreases in
Face Amount, surrenders and reinstatements will be confirmed promptly following
each transaction.
An Owner may request in writing a personalized illustration of
hypothetical Cash Surrender Values and death benefits. There is no charge for
the first illustration requested per year. Additional illustrations will be
furnished by the Company for a nominal fee which will not exceed $25.
DISTRIBUTION OF THE POLICIES
The Policy will be sold by individuals who, in addition to being licensed
as life insurance agents for General American, are also registered
representatives of broker-dealers that have entered into written sales
agreements with General American Distributors, Inc. ("General American
Distributors"), 700 Market Street, St. Louis, Missouri, 63101. General American
Distributors, a Missouri corporation organized in 2000 and a wholly-owned
subsidiary of GenAmerica Financial Corporation, serves as the principal
underwriter for the Policies under a Distribution Agreement with General
American. General American Distributors is registered with the SEC as a
broker-dealer under the Securities Exchange Act of 1934, as well as with the
securities commissions in the states in which it operates, and is a member of
the National Association of Securities Dealers, Inc. More information about
General American Distributors is available at http://www.nasdr.com or by
calling 1-800-289-9999. You also can obtain an investor brochure from NASD
Regulation describing its Public Disclosure Program.
As principal underwriter for the Policies, General American Distributors
may receive a fee of up to 2% of premium for distribution of the Policies.
General American Distributors has entered into a selling agreement with an
affiliated broker-dealer under which selling agents will receive commissions
based on commission schedules and rules that vary based on the agent's
contract. Under contracts that are based on agent level commissions, agent
first year commissions are 50% of Target Premium and 2.25% of excess premium
paid in year 1. In years 2-10, the agent commissions range from 1% to 1.75% of
premium depending on the agent's contract type. In years 11 and later there is
a service fee from 1.50% to 2% of premium depending on the agent's contract
type. An additional service fee determined as a percentage of the Policy's
unloaned cash value may also be paid. The maximum percentage paid varies by
Policy year decreasing from 0.20% to 0.12% of average monthly unloaned assets.
For certain contracts there is no cash value based fee.
General American, the General Agent, and the selling agent may enter into
agreements that compensate the selling agent for basic expenses, renewal
overrides, and incentive bonuses. Reductions may be possible under certain
circumstances (see Charges and Deductions--Adjustment of Charges). In addition
to commissions, General American may also pay the following sales expenses:
General Agent and agency manager compensation; agent training allowances;
deferred compensation and insurance benefits of agents, General Agents and
agency managers; advertising expenses and other expenses of distributing the
Policies. General Agents' compensation may be in part based on the level of
productivity of agents in their agencies. Agents receive less compensation for
the sale of Policies that provide a significant portion of death benefit
coverage through the use of term riders.
General American Distributors also enters into selling agreements with
unaffiliated broker-dealers, the terms of which may, under certain
circumstances, also apply to affiliated broker-dealers.
51
Under these agreements, which are based on gross dealer concessions payable to
the broker-dealer, first year compensation ranges from 80% to 95% of Target
Premium and from 3% to 4% of excess premium paid in year 1, depending on
contract type. In years 2-10, the compensation is 2% of premium. In years 11
and later there is a service fee from 1% to 2% of premium depending on the
contract type. An additional service fee determined as a percentage of the
Policy's unloaned cash value may also be paid. The maximum percentage paid
varies by Policy year decreasing from 0.20% to 0.10% of average monthly
unloaned assets. For certain contracts there is no cash value based fee. The
broker-dealer may also receive additional compensation, which in some cases
will vary based on the productivity of the registered representatives. General
American, General American Distributors and the broker- dealer may enter into
an agreement that compensates the broker-dealer for expenses associated with
the distribution of the policies. The compensation payable to the registered
representatives and General Agents will be determined by their agreement with
the broker-dealer. Reductions may be possible under certain circumstances (see
Charges and Deductions--Adjustment of Charges). Broker-dealers receive less
compensation for the sale of Policies that provide a significant portion of
death benefit coverage through the use of term riders.
An affiliate of General American Distributors may receive 12b-1 fees from
the American Funds Growth Fund, the American Funds Growth-Income Fund and the
American Funds Global Small Capitalization Fund.
Registered representatives of an affiliated broker-dealer who are also
agents of General American are eligible for various cash benefits, such as
bonuses, insurance benefits and financing arrangements, and non-cash
compensation programs that General American offers, such as conferences, trips,
prizes, and awards. Other payments may be made for other services that do not
directly involve the sale of Policies. These services may include the
recruitment and training of personnel, production of promotional literature,
and similar services.
The General Agent commission schedules and rules differ for different
types of agency contracts.
We intend to recoup commissions and other sales expenses through fees and
charges imposed under the Policy. Commissions paid on the Policy, including
other incentives or payments, are not charged directly to the Policy Owners or
the Separate Account.
We offer the Policies to the public on a continuous basis. We anticipate
continuing to offer the Policies, but reserve the right to discontinue the
offering.
FEDERAL TAX MATTERS
Introduction
The following summary provides a general description of the Federal income
tax considerations associated with the Policy and does not purport to be
complete or to cover all situations. This discussion is not intended as tax
advice. Counsel or other competent tax advisers should be consulted for more
complete information. This discussion is based upon General American's
understanding of the present Federal income tax laws as they are currently
interpreted by the Internal Revenue Service. No representation is made as to
the likelihood of continuation of the present Federal income tax laws or of the
current interpretations by the Internal Revenue Service.
52
Tax Status of the Policy
In order to qualify as a life insurance contract for Federal income tax
purposes and to receive the tax treatment normally accorded life insurance
contracts under Federal tax law, a Policy must satisfy certain requirements
which are set forth in the Internal Revenue Code. Guidance as to how these
requirements are to be applied is limited. Nevertheless, we believe that the
Policies should satisfy the applicable requirements. There is less guidance,
however, with respect to Policies issued on a substandard or guaranteed issue
basis and Policies with term riders added, and it is not clear whether such
policies will in all cases satisfy the applicable requirements. We may take
appropriate steps to bring the Policy into compliance with applicable
requirements, and we reserve the right to restrict Policy transactions in order
to do so.
In certain circumstances, owners of variable life insurance contracts have
been considered for Federal income tax purposes to be the owners of the assets
of the variable account supporting their contracts, due to their ability to
exercise investment control over those assets. Where this is the case, the
contract owners have been currently taxed on income and gains attributable to
variable account assets. There is little guidance in this area, and some
features of the Policies, such as the flexibility of a Policy Owner to allocate
premiums and cash values, have not been explicitly addressed in published
rulings. While we believe that the Policies do not give Policy Owners
investment control over Separate Account assets, we reserve the right to modify
the Policies as necessary to prevent a Policy Owner from being treated as the
owner of the Separate Account assets supporting the Policy.
In addition, the Code requires that the investments of the Separate
Account be "adequately diversified" in order for the Policies to be treated as
life insurance contracts for Federal income tax purposes. It is intended that
the Separate Account, through the Eligible Funds, will satisfy these
diversification requirements.
The following discussion assumes that the Policy will qualify as a life
insurance contract for Federal income tax purposes.
1. Tax Treatment of Policy Benefits. In general, the Company believes
that the proceeds and Cash Value increases of a Policy should be treated in a
manner consistent with a fixed-benefit life insurance policy for Federal income
tax purposes. Thus, the death benefit under the Policy should be excludable from
the gross income of the Beneficiary under Section 101(a)(1) of the Code, unless
a transfer for value (generally a sale of the policy) has occurred. Many changes
or transactions involving a Policy may have tax consequences, depending on the
circumstances. Such changes include, but are not limited to, the exchange of the
Policy, a change of the Policy's Face Amount, a Policy Loan, an additional
premium payment, a Policy lapse with an outstanding Policy Loan, a partial
withdrawal, or a surrender of the Policy. The transfer of the Policy or
designation of a Beneficiary may have Federal, state, and/or local transfer and
inheritance tax consequences, including the imposition of gift, estate, and
generation-skipping transfer taxes. For example, the transfer of the Policy to,
or the designation as a Beneficiary of, or the payment of proceeds to, a person
who is assigned to a generation which is two or more generations below the
generation assignment of the Owner may have generation skipping transfer tax
consequences under Federal tax law. The individual situation of each Owner or
Beneficiary will determine the extent, if any, to which Federal, state, and
local transfer and inheritance taxes may be imposed and how ownership or receipt
of Policy proceeds will be treated for purposes of Federal, state and local
estate, inheritance, generation skipping and other taxes.
A Policy may also be used in various arrangements, including non-qualified
deferred compensation or salary continuation plans, split dollar insurance
plans, executive bonus plans, retiree medical benefit plans and others. The tax
consequences of such plans may vary depending on the particular facts and
circumstances of each individual arrangement. Therefore, if you are
contemplating
53
the use of a Policy in any arrangement the value of which depends in part on
its tax consequences, you should be sure to consult a qualified tax adviser
regarding the tax attributes of the particular arrangement.
Generally, the Owner will not be deemed to be in constructive receipt of
the Policy's Cash Value, including increments thereof, under the Policy until
there is a distribution. Under a complete surrender or lapse of any Policy, if
the amount received plus the amount of outstanding Indebtedness exceeds the
total investments in the Policy, the excess will generally be treated as
ordinary income subject to tax. The tax consequences of other distributions
from, and Policy Loans taken from or secured by, a Policy depend upon whether
the Policy is classified as a "modified endowment contract".
2. Modified Endowment Contracts. A policy may be treated as a modified
endowment contract depending upon the amount of premiums paid in relation to
the death benefit provided under such Policy. The premium limitation rules for
determining whether a Policy is a modified endowment contract are extremely
complex. In general, however, a Policy will be a modified endowment contract if
the accumulated premiums paid at any time during the first seven Policy Years
exceed the sum of the net level premiums which would have been paid on or
before such time if the Policy provided for paid-up future benefits after the
payment of seven level annual premiums.
In addition, if a Policy is "materially changed" it may cause such Policy
to be treated as a modified endowment contract. The material change rules for
determining whether a Policy is a modified endowment contract are also
extremely complex. In general, however, the determination of whether a Policy
will be a modified endowment contract after a material change generally depends
upon the relationship among the death benefit at the time of such change, the
Cash Value at the time of the change and the additional premiums paid in the
seven Policy Years starting with the date on which the material change occurs.
Moreover, a life insurance contract received in exchange for a life
insurance contract classified as a modified endowment contract will also be
treated as a modified endowment contract. A reduction in a Policy's benefits
may also cause such Policy to become a modified endowment contract.
Accordingly, a prospective Owner should contact a competent tax adviser
before purchasing a Policy to determine the circumstances under which the
Policy would be a modified endowment contract. In addition, an Owner should
contact a competent tax adviser before paying any additional premiums or making
any other change to, including an exchange of, a Policy to determine whether
such premium or change would cause the Policy (or the new Policy in the case of
an exchange) to be treated as a modified endowment contract.
3. Distributions From Policies Classified as Modified Endowment Contract.
Policies classified as modified endowment contracts will be subject to the
following tax rules: First, all distributions, including distributions upon
surrender, from such a Policy are treated as ordinary income subject to tax up
to the amount equal to the excess (if any) of the Cash Value immediately before
the distribution over the investment in the Policy (described below) at such
time. Second, Policy Loans taken from, or secured by, such a Policy, as well as
due but unpaid interest thereon, are treated as distributions from such a
Policy and taxed accordingly. Third, a 10 percent additional income tax is
imposed on the portion of any distribution from, or Policy Loan taken from or
secured by, such a Policy that is included in income, except where the
distribution or Policy Loan (a) is made on or after the Owner attains age 59
1/2, (b) is attributable to the Owner's becoming disabled, or (c) is part of a
series of substantially equal periodic payments for the life (or life
expectancy) of the Owner or the joint lives (or joint life expectancies) of the
Owner and the Owner's Beneficiary. The IRS has promulgated a procedure for the
correction of inadvertent modified endowment contracts.
54
4. Distributions From Policies Not Classified as Modified Endowment
Contract. Distributions from Policies not classified as a modified endowment
contracts are generally treated as first recovering the investment in the
Policy (described below) and then, only after the return of all such investment
in the Policy, as distributing taxable income. An exception to this general
rule occurs in the case of a decrease in the Policy's death benefit (possibly
including a partial withdrawal) or any other change that reduces benefits under
the Policy in the first 15 years after the Policy is issued and that results in
cash distribution to the Owner in order for the Policy to continue complying
with the Section 7702 definitional limits. Such a cash distribution will be
taxed in whole or in part as ordinary income (to the extent of any gain in the
Policy) under rules prescribed in Section 7702.
Policy Loans from, or secured by, a Policy that is not a modified
endowment contract are not treated as distributions. Instead, such loans are
generally treated as indebtedness of the Owner. However, the tax consequences
associated with Policy Loans that are outstanding after the tenth Policy Year
are less clear, and you should consult a tax adviser about such Policy Loans.
Upon a complete surrender or lapse of a Policy that is not a modified
endowment contract, if the amount received plus the amount of indebtedness
exceeds the total investment in the Policy, the excess will generally be
treated as ordinary income subject to tax.
Neither distributions (including distributions upon surrender or lapse)
nor Policy Loans from, or secured by, a Policy that is not a modified endowment
contract are subject to the 10 percent additional income tax.
If a Policy which is not a modified endowment contract subsequently
becomes a modified endowment contract, then any distribution made from the
Policy within two years prior to the date of such change in status may become
taxable.
5. Policy Loans. Generally, interest paid on any loan under a life
insurance Policy owned by an individual is not deductible. In addition,
interest on any loan under a life insurance Policy owned by a business taxpayer
on the life of any individual who is an officer of or is financially interested
in the business carried on by that taxpayer is deductible only under certain
very limited circumstances. AN OWNER SHOULD CONSULT A COMPETENT TAX ADVISER
BEFORE DEDUCTING ANY LOAN INTEREST. If a Policy Loan is outstanding when a
Policy is canceled or lapses, the amount of the outstanding Indebtedness will
be added to the amount distributed and will be taxed accordingly.
6. Interest Expense on Unrelated Indebtedness. Under provisions added to
the Code in 1997 for policies issued after June 8, 1997, if a business taxpayer
owns or is the beneficiary of a Policy on the life of any individual who is not
an officer, director, employee, or 20 percent owner of the business, and the
taxpayer also has debt unrelated to the Policy, a portion of the taxpayer's
unrelated interest expense deductions may be lost. No business taxpayer should
purchase, exchange, or increase the death benefit under a Policy on the life of
any individual who is not an officer, director, employee, or 20 percent owner
of the business without first consulting a competent tax adviser.
7. Investment in the Policy. Investment in the Policy means (i) the
aggregate amount of any premiums or other consideration paid for a Policy,
minus (ii) the aggregate amount received under the Policy which is excluded
from gross income of the Owner (except that the amount of any Policy Loan from,
or secured by, a Policy that is a modified endowment contract, to the extent
such amount is excluded from gross income, will be disregarded), plus (iii) the
amount of any Policy Loan from, or secured by, a Policy that is a modified
endowment contract to the extent that such amount is included in the gross
income of the Owner.
55
8. Multiple Policies. All modified endowment contracts that are issued by
the Company (or its affiliates) to the same Owner during any calendar year are
treated as one modified endowment contract for purposes of determining the
amount includible in gross income under Section 72(e) of the Code.
9. Withholding. To the extent that Policy distributions are taxable, they
are generally subject to withholding for the recipient's Federal income tax
liability. Recipients can generally elect, however, not to have tax withheld
from distributions.
10. Lifetime Coverage Rider. The tax consequences of continuing the Policy
beyond the Insured's Attained Age 100 birthday are unclear. You should consult
a tax adviser if you intend to keep the Policy in force beyond the Insured's
Attained Age 100.
11. New Guidance on Split Dollar Plans. The IRS has recently issued
guidance on split dollar insurance plans. A tax adviser should be consulted
with respect to this new guidance if you have purchased or are considering the
purchase of a Policy for a split dollar insurance plan. If your Policy is part
of an equity split dollar arrangement, there is a risk that some portion of the
Policy cash value may be taxed prior to any Policy distribution.
12. Alternative Minimum Tax. There may also be an indirect tax upon the
income in the Policy or the proceeds of a Policy under the Federal corporate
alternative minimum tax, if the Owner is subject to that tax.
13. Puerto Rico. We believe that Policies subject to Puerto Rican tax law
will generally receive treatment similar, with certain modifications, to that
described above. Among other differences, Policies governed by Puerto Rican tax
law are not currently subject to the rules described above regarding Modified
Endowment Contracts. You should consult your tax adviser with respect to Puerto
Rican tax law governing the Policies.
14. Possible Tax Law Changes. Although the likelihood of legislative
changes is uncertain, there is always the possibility that the tax treatment of
the Policy could change by legislation or otherwise. Consult a tax adviser with
respect to legislative developments and their effect on the Policy.
15. Possible Charge For Taxes. At the present time, the Company makes no
charge to the Separate Account for any Federal, state, or local taxes (as
opposed to Premium Tax Charges which are deducted from premium payments) that
it incurs which may be attributable to such Separate Account or to the
Policies. The Company, however, reserves the right in the future to make a
charge for any such tax or other economic burden resulting from the application
of the tax laws that it determines to be properly attributable to the Separate
Account or to the Policies.
UNISEX REQUIREMENTS UNDER MONTANA LAW
The State of Montana generally prohibits the use of actuarial tables that
distinguish between men and women in determining premiums and Policy benefits
for policies issued on the lives of its residents. Therefore, all Policies
offered by this Prospectus to insure residents of Montana will have premiums
and benefits which are based on actuarial tables that do not differentiate on
the basis of sex.
VOTING RIGHTS
Based on its understanding of current applicable legal requirements, the
Company will vote the shares of the Funds held in the Separate Account at
regular and special shareholder meetings of the
56
mutual funds in accordance with the instructions received from persons having
voting interests in the corresponding Divisions of the Separate Account. If,
however, the 1940 Act or any regulation thereunder should be amended or if the
present interpretation thereof should change, and as a result the Company
determines that it is permitted to vote shares of the Fund in its own right, it
may elect to do so. No voting privileges apply to the Policies with respect to
Cash Value removed from the Separate Account as a result of a Policy Loan.
The number of votes which an Owner has the right to instruct will be
calculated separately for each Division. Voting rights reflect the dollar value
of the total number of units of each Division of the Separate Account credited
to the Owner at the record date, rather than the number of units alone.
Fractional shares will be counted. The number of votes of the Fund which
the Owner has the right to instruct will be determined as of the date
coincident with the date established by that Fund for determining shareholders
eligible. Voting instructions will be solicited by written communications prior
to such meeting in accordance with procedures established by the mutual funds.
The company will vote shares of a Fund for which no timely instructions
are received in proportion to the voting instructions which are received with
respect to that Fund. The Company will also vote any shares of the Funds which
are not attributable to Policies in the same proportion.
Each person having a voting interest in a Division will receive any proxy
material, reports, and other materials relating to the appropriate Fund.
Disregard of Voting Instructions. The Company may, when required by state
insurance regulatory authorities, disregard voting instructions if the
instructions require that the shares be voted so as to cause a change in the
subclassification or investment objective of the Fund or to approve or
disapprove an investment Advisory contract for a Fund. In addition, the Company
itself may disregard voting instructions in favor of changes initiated by an
Owner in the investment policy or the investment adviser or sub-adviser of a
Fund if the Company reasonably disapproves of such changes. A proposed change
would be disapproved only if the proposed change is contrary to state law or
prohibited by state regulatory authorities, or the Company determined that the
change would have an adverse effect on its General Account in that the proposed
investment policy for a Fund may result in overly speculative or unsound
investments. If the Company disregards voting instructions, a summary of that
action and the reasons for such action will be included in the next annual
report to Owners.
STATE REGULATION OF THE COMPANY
The Company, a stock life insurance company organized under the laws of
Missouri, and the Separate Account are subject to regulation by the Missouri
Department of Insurance. An annual statement is filed with the Director of
Insurance on or before March 1st of each year covering the operations and
reporting on the financial condition of the Company as of December 31 of the
preceding year. Periodically, the Director of Insurance examines the
liabilities and reserves of the Company and the Separate Account and certifies
their adequacy, and a full examination of the Company's operations is conducted
by the National Association of Insurance Commissioners at least once every
three years.
In addition, the Company is subject to the insurance laws and regulations
of other states within which it is licensed or may become licensed to operate.
Generally, the insurance departments of other states apply the laws of the
state of domicile in determining permissible investments.
57
MANAGEMENT OF THE COMPANY
Directors
Name Principal Occupations(s) During Past Five Years*
------------------------------------ ----------------------------------------------------------------
James M. Benson Chairman, President and Chief Executive Officer of General
Metropolitan Life American since 2002, Chairman, President and Chief Executive
Insurance Company Officer of New England Life Insurance Company ("NELICO")
One Madison Avenue since 1998 and President, Individual Business of Metropolitan
New York, NY 10010 Life Insurance Company since 1999; formerly, Director,
President and Chief Operating Officer 1997-1998 of NELICO;
President and Chief Executive Officer 1996-1997 of Equitable
Life Assurance Society.
William E. Cornelius Retired Chairman and Chief Executive Officer, Union Electric
Union Electric Company Company
P.O. Box 149
St. Louis, Missouri 63166
John C. Danforth Partner, Bryan Cave (law firm). Formerly, U. S. Senator, State
Bryan Cave of Missouri
One Metropolitan Square, Suite 3600
St. Louis, Missouri 63102
Arnold W. Donald Chairman and Chief Executive Officer, Merisant Company
1 N. Brentwood Blvd. since 2000; formerly, Senior Vice President 1977-2000 of
St. Louis, MO 63105 Monsanto Ste. 510
Jerald L. Kent Founder and Chief Executive Officer, 1993-2001 Charter
13351 Buckland Hall Road Communications
Town & Country, MO 63131
Stewart G. Nagler Vice Chairman of Board and Chief Financial Officer, MetLife
Metropolitan Life Insurance Company
One Madison Avenue
New York, NY 10010
Craig D. Schnuck Chairman and Chief Executive Officer, Schnuck Markets, Inc.
Schnuck Markets, Inc.
11420 Lackland Road
P.O. Box 46928
St. Louis, Missouri 63146
William P. Stiritz Chairman, Chief Executive Officer and President, Agribrands
Agribrands International, Inc. International, Inc. Formerly Chairman, Chief Executive Officer
9811 So. Forty Drive and President, Ralston Purina Company (pet food, batteries, and
St. Louis, Missouri 63124 bread business). Chairman, Ralcorp Holdings, Inc.
Andrew C. Taylor Chief Executive Officer and President, Enterprise Rent-A-Car
Enterprise Rent-A-Car
600 Corporate Park Drive
St. Louis, Missouri 63105
58
Name Principal Occupations(s) During Past Five Years*
------------------------------------- -------------------------------------------------------------
Robert L. Virgil Principal, Edward Jones Edward Jones
12555 Manchester St. Louis, Missouri
63131-3729
Lisa M. Weber Executive Vice President--Human Resources, MetLife
Metropolitan Life Insurance Company
One Madison Avenue
New York, NY 10010
Virginia V. Weldon, M.D Director, Center for the Study of American Business,
Monsanto Company Washington University. Retired Senior Vice President, Public
800 North Lindbergh Policy, Monsanto Company St. Louis, Missouri 63167
--------
* All positions listed are with General American unless otherwise indicated.
Principal Officers Other Than Directors**
Name Principal Occupation(s) During Past Five Years*
------------------------------------ -----------------------------------------------------------------
Richard D. Evans Senior Vice President, 1/99-present. Regional Vice President,
7/95-1/99.
Timothy J. Klopfenstein Chief Financial Officer, GenAmerica Financial Corp., 1/2001-
present. Vice President and CFO--Individual Line,
6/99-12/2000. Actuarial Consultant, 6/98-5/99. Vice President,
Connecticut General Life Insurance, 1/98-5/98. Vice President,
Healthsource--Provident Administrators, 6/95-12/97.
Donald Lambert Vice President--10/2000-present. Vice President, GenServe,
1998-present. Regional Vice President, 1990-1998.
Richard A. Liddy Chairman, 9/2000-present. Chairman, President and CEO,
1/95-9/2000. Chairman of the Executive Committee,
5/92-9/2000. President and CEO, 5/92-1/95.
Matthew P. McCauley Vice President, General Counsel, and Secretary, 1/2001-present.
Vice President, Associate General Counsel, 1/95-1/2001.
Daniel J. McDonald Senior Vice President--10/2000-present. Senior Vice
President--Special Markets, 8/99-10/2000. President, Applied
Innovative Monetary Solutions, 9/96-8/2000.
Richard J. Miller Executive Vice President and Chief Marketing Officer 2/2002-
present. Senior Vice President, 8/2000-2/2002. --GenAmerica
Advisory Sales, 8/2000-present. President and CEO, Walnut
Street Securities, 1/97-present. General Agent, Wrenshall-Miller
Agency, 1989-1/97.
Jerome M. Mueller Senior Vice President--National Marketing, 4/98-present.
Senior Vice President, Mercantile Bancorporation, 9/91-4/98.
John E. Petersen Senior Vice President--Sales, 10/2000-present. Vice
President--Sales, 1/99-10/2000. Regional Vice President,
1/92-1/99.
William S. Slater Senior Vice President, 10/2000-present. Chief Executive
Officer, General American Retirement Plans Group,
9/99-present. Vice President, Retirement Plans Group,
1/99-9/2000. Executive Vice President, Genelco, 6/97-12/98.
Vice President Pension Sales & Client Services,
59
Name Principal Occupation(s) During Past Five Years*
------------------------------------ --------------------------------------------------------------
New England Life Insurance Co., 1/95-6/97.
Bernard H. Wolzenski Executive Vice President-Individual Insurance, 10/91-present.
A. Greig Woodring President and Chief Executive Officer, Reinsurance Group of
America, 12/92-present.
--------
* All positions listed are with General American unless otherwise indicated.
** The principal business address of Messrs. McCauley, Evans, Lambert,
McDonald, Miller, Mueller, Petersen, Slater and Wolzenski is General
American Life Insurance Company, 700 Market Street, St. Louis, Missouri
63101. The principal business address for Mr. Woodring is 1370 Timberlake
Manor Parkway, Chesterfield, MO 63017. The principal business address for
Mr. Klopfenstein is 13045 Tesson Ferry Road, St. Louis, MO 63128.
RESTRICTIONS ON FINANCIAL TRANSACTIONS
If mandated under applicable law, we may be required to reject a premium
payment. We may also be required to block a Policy Owner's account and thereby
refuse to pay any request for transfers, withdrawals, surrenders, loans or
death benefits, until instructions are received from the appropriate regulator.
LEGAL MATTERS
All matters of Missouri law pertaining to the Policy, including the
validity of the Policy and General American's right to issue the Policy under
Missouri insurance law, have been passed upon by Matthew P. McCauley, Vice
President, General Counsel, and Secretary of General American. Sutherland
Asbill & Brennan LLP, of Washington, D.C., has provided advice on certain
matters relating to Federal securities laws.
LEGAL PROCEEDINGS
Various litigation, claims, and assessments against General American have
arisen in the course of its business, including, without limitation, matters
relating to its activities as an insurer, employer, investor and taxpayer. In
addition, state insurance regulatory authorities and other Federal and state
authorities regularly make inquiries and conduct investigations concerning
General American's compliance with applicable insurance and other laws and
regulations. However, there are no pending legal proceedings to which the
Separate Account is a party or to which the assets of the Separate Account are
subject, and General American is not a party to any pending legal proceeding
that it considers to be material with respect to Policy Owners by reason of the
nature of the claim or the amount thereof.
General American has received and responded to subpoenas for documents and
other information from the office of the U.S. Attorney for the Eastern District
of Missouri with respect to certain administrative services provided by its
former Medicare Unit during the period January 1, 1988 through December 31,
1998, which services ended and which unit was disbanded prior to MetLife's
acquisition of General American. The subpoenas were issued as part of the
Government's criminal investigation alleging that General American's former
Medicare Unit engaged in improper billing and claims payment practices. The
Government is also conducting a civil investigation under the Federal False
Claims Act. General American is cooperating fully with the Government's
investigations. In March 2002, General American and the Government reached an
agreement in principle to resolve all issues through a civil settlement. The
agreement is subject to approvals and there can be no assurance that it will be
approved.
60
On April 11, 2002, it was announced that General American will take a
$48 million after-tax charge to cover costs associated with the civil
settlement. (See Notes to Financial Statements.)
EXPERTS
The consolidated financial statements as of and for the years ended
December 31, 2000 and December 31, 2001 of the Company included in this
Prospectus and in the registration statement have been audited by Deloitte &
Touche LLP, independent auditors, as stated in their report appearing herein
(which report expresses an unqualified opinion and includes an explanatory
paragraph that discusses the Company's change in basis of accounting as of
January 1, 2000, as a result of a business combination accounted for as a
purchase), and have been included in reliance upon the report of such firm
given upon their authority as experts in accounting and auditing.
The financial statements of the Separate Account as of December 31, 2001,
and for each of the periods in the two-year period ended December 31, 2001,
included in this Prospectus and in the registration statement have been audited
by Deloitte & Touche LLP, independent auditors, as stated in their report
appearing herein, and have been so included in reliance upon the report of such
firm given upon their authority as experts in accounting and auditing.
The consolidated financial statements of the Company for the year ended
December 31, 1999, and the statement of operations and changes in net assets of
the Separate Account for the year ended December 31, 1999, have been included
in this prospectus in reliance on the reports of KPMG LLP, independent
certified public accountants, and on the authority of said firm as experts in
accounting and auditing.
Actuarial matters included in this Prospectus have been examined by Karen
A. King, FSA, MAAA, Assistant Vice President and Actuary of General American,
as stated in the opinion filed as an exhibit to the registration statement.
ADDITIONAL INFORMATION
A registration statement has been filed with the Securities and Exchange
Commission, under the Securities Act of 1933, as amended, with respect to the
Policy offered hereby. This Prospectus does not contain all the information set
forth in the registration statement and the amendments and exhibits to the
registration statement, to all of which reference is made for further
information concerning the Separate Account, General American and the Policy
offered hereby. Statements contained in this Prospectus as to the contents of
the Policy and other legal instruments are summaries. For a complete statement
of the terms thereof reference is made to such instruments as filed.
FINANCIAL STATEMENTS
The financial statements of General American which are included in this
Prospectus should be distinguished from the financial statements of the
Separate Account, and should be considered only as bearing on the ability of
General American to meet its obligations under the Policy. They should not be
considered as bearing on the investment performance of the assets held in the
Separate Account.
61
APPENDIX A
ILLUSTRATIONS OF DEATH BENEFITS AND CASH VALUES
The following tables illustrate how the Cash Value, Cash Surrender Value,
and death benefit of a Policy change with the investment experience of a
Division of the Separate Account. The tables show how the Cash Value, Cash
Surrender Value, and death benefit of a Policy issued to an insured of a given
age and at a given premium would vary over time if the investment return on the
assets held in each Division of the Separate Account were a uniform, gross,
after-tax annual rate of 0%, 6%, or 12%. The tables illustrate Policies issued
in Missouri (using a 2% premium tax rate and a 1.3% federal tax charge) to
males, age 35 and 50 in a preferred nonsmoker rate class. If the insured falls
into a smoker rate class, the Cash Values, Cash Surrender Values, and death
benefits would be lower than those shown in the tables. In addition, the Cash
Values, Cash Surrender Values, and death benefits could be significantly
different from those shown if the gross annual investment rates of return
averaged 0%, 6%, and 12% over a period of years, but fluctuated above and below
those averages for individual Policy Years. Actual returns will fluctuate over
time and likely will be both positive and negative. Depending on the timing and
degree of fluctuation, the actual values could be substantially less than those
shown, and may, under certain circumstances, result in the lapse of the Policy
unless the owner pays more than the stated premium.
The Cash Value column under the "Guaranteed" heading shows the accumulated
value of the Net Premiums paid at the stated interest rate, reflecting
deduction of all policy charges described in this prospectus at the guaranteed
maximum rate. The Cash Surrender Value column under the "Guaranteed" heading
shows the projected Cash Surrender Value of the Policy, which is calculated by
taking the Cash Value under the "Guaranteed" heading and deducting any
appropriate Contingent Deferred Sales Charge. The Cash value column under the
"Current" heading shows the accumulated value of the Net Premiums paid at the
stated interest rate, reflecting deduction of all policy charges as described
in this prospectus at the current rate. The Cash Surrender Value column under
the "Current" heading shows the projected Cash Surrender Value of the Policy,
which is calculated by taking the Cash Value under the "Current" heading and
deducting any appropriate Contingent Deferred Sales Charge. The illustrations
of death benefits reflect the above assumptions. The death benefits also vary
between tables depending upon whether Death Benefit Options A or C (Level Type)
or Death Benefit Option B (Increasing Type) are illustrated.
The amounts deducted from the Cash Value in the illustrations include the sales
charge, premium tax, federal tax charge, selection and issue expense charge,
monthly administrative charge, and cost of insurance. These charges are
described in the prospectus under Charges and Deductions.
The amounts shown for Cash Value, Cash Surrender Value, and death benefit
reflect charges that produce an investment rate of return that is lower than
the gross return on the assets held in a Division of the Separate Account. The
charges include a charge for mortality and expense risk (equivalent to .55% for
Policy Years 1-10, .45% for Policy Years 11-20, and .35% thereafter), and an
assumed average of the investment advisory fees and operating expenses of the
Funds that are currently available for new Policies, at an annual rate of .85%
of the average daily net assets of the Funds. This average reflects expense
waivers and reimbursements by the investment advisers of certain Funds that may
be voluntary and of limited duration. Values illustrated would be lower if
these waivers and reimbursements had not been taken into account. After
deduction for these amounts, the illustrated gross annual investment rates of
return of 0%, 6%, and 12% correspond to approximate initial net annual rates of
-1.40%, 4.60%, and 10.60%, respectively. The Prospectuses for each Fund should
be consulted for details about the nature and extent of their expenses.
A-1
The hypothetical values shown in the tables do not reflect any charges for
Federal income taxes against the Separate Account (as opposed to Premium
Charges which are deducted from premium payments), since General American is
not currently making any such charges. However, such charges may be made in the
future and, in that event, the gross annual investment rate of return of the
Divisions of the Separate Account would have to exceed 0%, 6%, and 12% by an
amount sufficient to cover the tax charges in order to produce the death
benefit and Cash Value illustration. (See Federal Tax Matters.)
The tables illustrate the Policy values that would result based upon the
investment rates of return if premiums are paid as indicated, if all Net
Premiums are allocated to the Separate Account, if no Policy Loans have been
made. The tables are also based on the assumptions that the Owner has not
requested an increase or decrease in the Face Amount, that no partial
withdrawals have been made, that no transfer charges were incurred, and that no
optional riders have been requested.
Upon request, General American will provide a comparable illustration
based upon the proposed Insured's age, sex, and rate class, the Face Amount or
premium requested, the proposed frequency of premium payments, and any
available riders requested. Because these and other assumptions will differ,
the values shown in the personalized illustrations can differ very
substantially from those shown in the tables below. Therefore, you should
carefully review the information that accompanies any personalized
illustration. That information will disclose all the assumptions on which the
personalized illustration is based. Where applicable, we will also furnish on
request a personalized illustration for a Policy which is not affected by the
sex of the insured.
General American Life Insurance Company
Flexible Premium Variable Life Insurance
Policy Face Amount: $250,000
Death Benefit Level (Option A)
Male Preferred Nonsmoker Age 35
Annual Premium = $3,000
For Separate Account Eleven A Hypothetical Gross Annual Rate Of
Return Of 0.00% (Net Rate Of -1.40%)
---------------------------------------------------------------
Assuming Current Charges Assuming Guaranteed Charges
-------------------------------- ------------------------------
Premium Cash Cash
End of Annual Accum @ Surrender Cash Death Surrender Cash Death
Year Age Payment 5% Value Value Benefit Value Value Benefit
------ --- ------- ------- --------- ------ ------- --------- ------ -------
1 36 3,000 3,150 893 1,771 250,000 655 1,533 250,000
2 37 3,000 6,458 3,036 3,913 250.000 2,568 3,446 250,000
3 38 3,000 9,930 5,102 5,980 250,000 4,432 5,309 250,000
4 39 3,000 13,577 7,121 7,998 250,000 6,244 7,121 250,000
5 40 3,000 17,406 9,095 9,973 250,000 8,001 8,878 250,000
6 41 3,000 21,426 11,134 11,914 250.000 9,799 10,579 250,000
7 42 3,000 25,647 13,228 13,813 250,000 11,632 12,217 250,000
8 43 3,000 30,080 15,282 15,672 250,000 13,404 13,794 250,000
9 44 3,000 34,734 17,296 17,491 250,000 15,110 15,305 250,000
10 45 3,000 39,620 19,276 19,276 250,000 16,750 16,750 250,000
11 46 3,000 44,751 21,411 21,411 250,000 18,506 18,506 250,000
12 47 3,000 50,139 23,517 23,517 250,000 20,185 20,185 250,000
13 48 3,000 55,796 25,590 25,590 250,000 21,781 21,781 250,000
14 49 3,000 61,736 27,635 27,635 250,000 23,294 23,294 250,000
15 50 3,000 67,972 29,656 29,656 250,000 24,715 24,715 250,000
16 51 3,000 74,521 31,625 31,625 250,000 26,043 26,043 250,000
17 52 3,000 81,397 33,530 33,530 250,000 27,263 27,263 250,000
18 53 3,000 88,617 35,370 35,370 250,000 28,362 28,362 250,000
19 54 3,000 96,198 37,140 37,140 250,000 29,328 29,328 250,000
20 55 3,000 104,158 38,839 38,839 250,000 30,145 30,145 250,000
A-2
For Separate Account Eleven A Hypothetical Gross Annual Rate Of
Return Of 0.00% (Net Rate Of -1.40%)
---------------------------------------------------------------
Assuming Current Charges Assuming Guaranteed Charges
-------------------------------- ------------------------------
Premium Cash Cash
End of Annual Accum @ Surrender Cash Death Surrender Cash Death
Year Age Payment 5% Value Value Benefit Value Value Benefit
------ --- ------- ------- --------- ------ ------- --------- ------ -------
21 56 3,000 112,516 40,504 40,504 250,000 30,832 30,832 250,000
22 57 3,000 121,291 42,090 42,090 250,000 31,340 31,340 250,000
23 58 3,000 130,506 43,591 43,591 250,000 31,662 31,662 250,000
24 59 3,000 140,181 45,000 45,000 250,000 31,782 31,782 250,000
25 60 3,000 150,340 46,308 46,308 250,000 31,675 31,675 250,000
26 61 3,000 161,007 47,505 47,505 250,000 31,316 31,316 250,000
27 62 3,000 172,208 48,584 48,584 250,000 30,676 30,676 250,000
28 63 3,000 183,968 49,534 49,534 250,000 29,713 29,713 250,000
29 64 3,000 196,317 50,348 50,348 250,000 28,376 28,376 250,000
30 65 3,000 209,282 51,013 51,013 250,000 26,612 26,612 250,000
CURRENT VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES FOR THE EXACT COMBINATION OF PREMIUMS AND BENEFITS SHOWN.
GUARANTEED VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF
INSURANCE RATES.
THE HYPOTHETICAL INVESTMENT RATE OF RETURN SHOWN ABOVE IS ILLUSTRATIVE
ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE RESULTS.
ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND
UPON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATION MADE BY THE
POLICY OWNER AND THE INVESTMENT RESULTS OF THE FUNDS SELECTED. THE CASH VALUE,
CASH SURRENDER VALUE AND DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM
THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED THE RATE SHOWN ABOVE OVER A
PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATION CAN BE MADE BY THE COMPANY, WALNUT STREET
SECURITIES, THE FUNDS, OR ANY REPRESENTATIVE THEREOF, THAT THIS HYPOTHETICAL
RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR, OR SUSTAINED OVER ANY PERIOD
OF TIME.
ILLUSTRATED VALUES SHOWN ABOVE ARE AS OF THE END OF THE POLICY YEARS
INDICATED AND ASSUME ANY ADDITIONAL PREMIUMS SHOWN ARE RECEIVED ON THE POLICY
ANNIVERSARIES. ILLUSTRATED VALUES ASSUME ALL PREMIUM TAXES ARE PAID BY THE
COMPANY.
A-3
General American Life Insurance Company
Flexible Premium Variable Life Insurance
Policy Face Amount: $250,000
Death Benefit Level (Option A)
Male Preferred Nonsmoker Age 35
Annual Premium = $3,000
For Separate Account Eleven A Hypothetical Gross Annual Rate Of
Return Of 6.00% (Net Rate Of 4.60%)
---------------------------------------------------------------
Assuming Current Charges Assuming Guaranteed Charges
------------------------------- -------------------------------
Premium Cash Cash
End of Annual Accum @ Surrender Cash Death Surrender Cash Death
Year Age Payment 5% Value Value Benefit Value Value Benefit
------ --- ------- ------- --------- ------- ------- --------- ------- -------
1 36 3,000 3,150 1,022 1,900 250,000 776 1,654 250,000
2 37 3,000 6,458 3,424 4,302 250.000 2,927 3,805 250,000
3 38 3,000 9,930 5,890 6,768 250,000 5,154 6,032 250,000
4 39 3,000 13,577 8,450 9,327 250,000 7,458 8,336 250,000
5 40 3,000 17,406 11,112 11,989 250,000 9,838 10,716 250,000
6 41 3,000 21,426 13,990 14,770 250.000 12,395 13,175 250,000
7 42 3,000 25,647 17,078 17,663 250,000 15,125 15,710 250,000
8 43 3,000 30,080 20,287 20,677 250,000 17,935 18,325 250,000
9 44 3,000 34,734 23,624 23,819 250,000 20,824 21,019 250,000
10 45 3,000 39,620 27,097 27,097 250,000 23,796 23,796 250,000
11 46 3,000 44,751 30,927 30,927 250,000 27,058 27,058 250,000
12 47 3,000 50,139 34,938 34,938 250,000 30,424 30,424 250,000
13 48 3,000 55,796 39,136 39,136 250,000 33,897 33,897 250,000
14 49 3,000 61,736 43,533 43,533 250,000 37,480 37,480 250,000
15 50 3,000 67,972 48,145 48,145 250,000 41,172 41,172 250,000
16 51 3,000 74,521 52,953 52,953 250,000 44,977 44,977 250,000
17 52 3,000 81,397 57,959 57,959 250,000 48,890 48,890 250,000
18 53 3,000 88,617 63,168 63,168 250,000 52,905 52,905 250,000
19 54 3,000 96,198 68,592 68,592 250,000 57,021 57,021 250,000
20 55 3,000 104,158 74,238 74,238 250,000 61,230 61,230 250,000
21 56 3,000 112,516 80,193 80,193 250,000 65,593 65,593 250,000
22 57 3,000 121,291 86,399 86,399 250,000 70,052 70,052 250,000
23 58 3,000 130,506 92,867 92,867 250,000 74,609 74,609 250,000
24 59 3,000 140,181 99,610 99,610 250,000 79,267 79,267 250,000
25 60 3,000 150,340 106,638 106,638 250,000 84,019 84,019 250,000
26 61 3,000 161,007 113,964 113,964 250,000 88,863 88,863 250,000
27 62 3,000 172,208 121,606 121,606 250,000 93,793 93,793 250,000
28 63 3,000 183,968 129,582 129,582 250,000 98,801 98,801 250,000
29 64 3,000 196,317 137,913 137,913 250,000 103,875 103,875 250,000
30 65 3,000 209,282 146,624 146,624 250,000 109,005 109,005 250,000
CURRENT VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES FOR THE EXACT COMBINATION OF PREMIUMS AND BENEFITS SHOWN.
GUARANTEED VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF
INSURANCE RATES.
THE HYPOTHETICAL INVESTMENT RATE OF RETURN SHOWN ABOVE IS ILLUSTRATIVE
ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE RESULTS.
ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND
UPON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATION MADE BY THE
POLICY OWNER AND THE INVESTMENT
A-4
RESULTS OF THE FUNDS SELECTED. THE CASH VALUE, CASH SURRENDER VALUE AND DEATH
BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF
RETURN AVERAGED THE RATE SHOWN ABOVE OVER A PERIOD OF YEARS, BUT ALSO
FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. NO
REPRESENTATION CAN BE MADE BY THE COMPANY, WALNUT STREET SECURITIES, THE FUNDS,
OR ANY REPRESENTATIVE THEREOF, THAT THIS HYPOTHETICAL RATE OF RETURN CAN BE
ACHIEVED FOR ANY ONE YEAR, OR SUSTAINED OVER ANY PERIOD OF TIME.
ILLUSTRATED VALUES SHOWN ABOVE ARE AS OF THE END OF THE POLICY YEARS
INDICATED AND ASSUME ANY ADDITIONAL PREMIUMS SHOWN ARE RECEIVED ON THE POLICY
ANNIVERSARIES. ILLUSTRATED VALUES ASSUME ALL PREMIUM TAXES ARE PAID BY THE
COMPANY.
General American Life Insurance Company
Flexible Premium Variable Life Insurance
Policy Face Amount: $250,000
Death Benefit Level (Option A)
Male Preferred Nonsmoker Age 35
Annual Premium = $3,000
For Separate Account Eleven A Hypothetical Gross Annual Rate Of
Return Of 12.00% (Net Rate Of 10.60%)
---------------------------------------------------------------
Assuming Current Charges Assuming Guaranteed Charges
------------------------------- -------------------------------
Premium Cash Cash
End of Annual Accum @ Surrender Cash Death Surrender Cash Death
Year Age Payment 5% Value Value Benefit Value Value Benefit
------ --- ------- ------- --------- ------- ------- --------- ------- -------
1 36 3,000 3,150 1,152 2,029 250,000 898 1,776 250,000
2 37 3,000 6,458 3,829 4,707 250,000 3,302 4,180 250,000
3 38 3,000 9,930 6,743 7,620 250,000 5,937 6,815 250,000
4 39 3,000 13,577 9,946 10,823 250,000 8,827 9,704 250,000
5 40 3,000 17,406 13,473 14,351 250,000 11,994 12,872 250,000
6 41 3,000 21,426 17,470 18,250 250,000 15,565 16,345 250,000
7 42 3,000 25,647 21,963 22,548 250,000 19,567 20,152 250,000
8 43 3,000 30,080 26,902 27,292 250,000 23,940 24,330 250,000
9 44 3,000 34,734 32,335 32,530 250,000 28,718 28,913 250,000
10 45 3,000 39,620 38,321 38,321 250,000 33,949 33,949 250,000
11 46 3,000 44,751 45,155 45,155 250,000 39,910 39,910 250,000
12 47 3,000 50,139 52,727 52,727 250,000 46,472 46,472 250,000
13 48 3,000 55,796 61,115 61,115 250,000 53,702 53,702 250,000
14 49 3,000 61,736 70,412 70,412 250,000 61,674 61,674 250,000
15 50 3,000 67,972 80,719 80,719 250,000 70,468 70,468 250,000
16 51 3,000 74,521 92,125 92,125 250,000 80,180 80,180 250,000
17 52 3,000 81,397 104,742 104,742 250,000 90,908 90,908 250,000
18 53 3,000 88,617 118,706 118,706 250,000 102,766 102,766 250,000
19 54 3,000 96,198 134,168 134,168 250,000 115,886 115,886 250,000
20 55 3,000 104,158 151,297 151,297 250,000 130,416 130,416 250,000
21 56 3,000 112,516 170,436 170,436 255,654 146,663 146,663 250,000
22 57 3,000 121,291 191,629 191,629 279,778 164,725 164,725 250,000
23 58 3,000 130,506 215,072 215,072 305,403 184,816 184,816 262,439
24 59 3,000 140,181 241,008 241,008 332,590 207,026 207,026 285,696
25 60 3,000 150,340 269,702 269,702 361,401 231,552 231,552 310,279
26 61 3,000 161,007 301,456 301,456 391,893 258,648 258,648 336,242
27 62 3,000 172,208 336,568 336,568 430,807 288,525 288,525 369,312
28 63 3,000 183,968 375,394 375,394 472,996 321,466 321,466 405,047
29 64 3,000 196,317 418,329 418,329 518,728 357,783 357,783 443,651
A-5
For Separate Account Eleven A Hypothetical Gross Annual Rate Of
Return Of 12.00% (Net Rate Of 10.60%)
---------------------------------------------------------------
Assuming Current Charges Assuming Guaranteed Charges
------------------------------- -------------------------------
Premium Cash Cash
End of Annual Accum @ Surrender Cash Death Surrender Cash Death
Year Age Payment 5% Value Value Benefit Value Value Benefit
------ --- ------- ------- --------- ---------- ------- --------- ---------- -------
30 65 3,000 209,282 465,812 465,812 568,291 397,827 397,827 485,348
CURRENT VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES FOR THE EXACT COMBINATION OF PREMIUMS AND BENEFITS SHOWN.
GUARANTEED VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF
INSURANCE RATES.
THE HYPOTHETICAL INVESTMENT RATE OF RETURN SHOWN ABOVE IS ILLUSTRATIVE
ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE RESULTS.
ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND
UPON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATION MADE BY THE
POLICY OWNER AND THE INVESTMENT RESULTS OF THE FUNDS SELECTED. THE CASH VALUE,
CASH SURRENDER VALUE AND DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM
THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED THE RATE SHOWN ABOVE OVER A
PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATION CAN BE MADE BY THE COMPANY, WALNUT STREET
SECURITIES, THE FUNDS, OR ANY REPRESENTATIVE THEREOF, THAT THIS HYPOTHETICAL
RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR, OR SUSTAINED OVER ANY PERIOD
OF TIME.
ILLUSTRATED VALUES SHOWN ABOVE ARE AS OF THE END OF THE POLICY YEARS
INDICATED AND ASSUME ANY ADDITIONAL PREMIUMS SHOWN ARE RECEIVED ON THE POLICY
ANNIVERSARIES. ILLUSTRATED VALUES ASSUME ALL PREMIUM TAXES ARE PAID BY THE
COMPANY.
General American Life Insurance Company Flexible Premium Variable Life Insurance
Policy Face Amount: $250,000
Death Benefit Level (Option B)
Male Preferred Nonsmoker Age 35
Annual Premium = $3,000
For Separate Account Eleven A Hypothetical Gross Annual Rate Of
Return Of 0.00% (Net Rate Of -1.40%)
---------------------------------------------------------------
Assuming Current Charges Assuming Guaranteed Charges
------------------------------- -------------------------------
Premium Cash Cash
End of Annual Accum @ Surrender Cash Death Surrender Cash Death
Year Age Payment 5% Value Value Benefit Value Value Benefit
------ --- ------- ------- --------- ---------- ------- --------- ---------- -------
1 36 3,000 3,150 892 1,769 251,769 652 1,529 251,529
2 37 3,000 6,458 3,031 3,908 253,908 2,558 3,436 253,436
3 38 3,000 9,930 5,091 5,969 255,969 4,411 5,289 255,289
4 39 3,000 13,577 7,100 7,978 257,978 6,208 7,086 257,086
5 40 3,000 17,406 9,063 9,940 259,940 7,946 8,823 258,823
6 41 3,000 21,426 11,088 11,868 261,868 9,719 10,499 260,499
7 42 3,000 25,647 13,164 13,749 263,749 11,522 12,107 262,107
A-6
For Separate Account Eleven A Hypothetical Gross Annual Rate Of
Return Of 0.00% (Net Rate Of -1.40%)
---------------------------------------------------------------
Assuming Current Charges Assuming Guaranteed Charges
------------------------------- -------------------------------
Premium Cash Cash
End of Annual Accum @ Surrender Cash Death Surrender Cash Death
Year Age Payment 5% Value Value Benefit Value Value Benefit
------ --- ------- ------- --------- ---------- ------- --------- ---------- -------
8 43 3,000 30,080 15,197 15,587 265,587 13,258 13,648 263,648
9 44 3,000 34,734 17,188 17,383 267,383 14,921 15,116 265,116
10 45 3,000 39,620 19,140 19,140 269,140 16,511 16,511 266,511
11 46 3,000 44,751 21,244 21,244 271,244 18,207 18,207 268,207
12 47 3,000 50,139 23,314 23,314 273,314 19,815 19,815 269,815
13 48 3,000 55,796 25,349 25,349 275,349 21,330 21,330 271,330
14 49 3,000 61,736 27,352 27,352 277,352 22,749 22,749 272,749
15 50 3,000 67,972 29,328 29,328 279,328 24,063 24,063 274,063
16 51 3,000 74,521 31,245 31,245 281,245 25,268 25,268 275,268
17 52 3,000 81,397 33,090 33,090 283,090 26,348 26,348 276,348
18 53 3,000 88,617 34,858 34,858 284,858 27,288 27,288 277,288
19 54 3,000 96,198 36,546 36,546 286,546 28,075 28,075 278,075
20 55 3,000 104,158 38,149 38,149 288,149 28,689 28,689 278,689
21 56 3,000 112,516 39,703 39,703 289,703 29,144 29,144 279,144
22 57 3,000 121,291 41,160 41,160 291,160 29,394 29,394 279,394
23 58 3,000 130,506 42,514 42,514 292,514 29,427 29,427 279,427
24 59 3,000 140,181 43,756 43,756 293,756 29,230 29,230 279,230
25 60 3,000 150,340 44,871 44,871 294,871 28,775 28,775 278,775
26 61 3,000 161,007 45,850 45,850 295,850 28,036 28,036 278,036
27 62 3,000 172,208 46,678 46,678 296,678 26,984 26,984 276,984
28 63 3,000 183,968 47,346 47,346 297,346 25,578 25,578 275,578
29 64 3,000 196,317 47,840 47,840 297,840 23,771 23,771 273,771
30 65 3,000 209,282 48,148 48,148 298,148 21,513 21,513 271,513
CURRENT VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES FOR THE EXACT COMBINATION OF PREMIUMS AND BENEFITS SHOWN.
GUARANTEED VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF
INSURANCE RATES.
THE HYPOTHETICAL INVESTMENT RATE OF RETURN SHOWN ABOVE IS ILLUSTRATIVE
ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE RESULTS.
ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND
UPON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATION MADE BY THE
POLICY OWNER AND THE INVESTMENT RESULTS OF THE FUNDS SELECTED. THE CASH VALUE,
CASH SURRENDER VALUE AND DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM
THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED THE RATE SHOWN ABOVE OVER A
PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATION CAN BE MADE BY THE COMPANY, WALNUT STREET
SECURITIES, THE FUNDS, OR ANY REPRESENTATIVE THEREOF, THAT THIS HYPOTHETICAL
RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR, OR SUSTAINED OVER ANY PERIOD
OF TIME.
ILLUSTRATED VALUES SHOWN ABOVE ARE AS OF THE END OF THE POLICY YEARS
INDICATED AND ASSUME ANY ADDITIONAL PREMIUMS SHOWN ARE RECEIVED ON THE POLICY
ANNIVERSARIES. ILLUSTRATED VALUES ASSUME ALL PREMIUM TAXES ARE PAID BY THE
COMPANY.
A-7
General American Life Insurance Company
|Flexible Premium Variable Life Insurance
Policy Face Amount: $250,000
Death Benefit Level (Option B)
Male Preferred Nonsmoker Age 35
Annual Premium = $3,000
For Separate Account Eleven A Hypothetical Gross Annual Rate Of
Return Of 6.00% (Net Rate Of 4.60%)
---------------------------------------------------------------
Assuming Current Charges Assuming Guaranteed Charges
------------------------------- -------------------------------
Premium Cash Cash
End of Annual Accum @ Surrender Cash Death Surrender Cash Death
Year Age Payment 5% Value Value Benefit Value Value Benefit
------ --- ------- ------- --------- ---------- ------- --------- ---------- -------
1 36 3,000 3,150 1,021 1,898 251,898 773 1,650 251,650
2 37 3,000 6,458 3,419 4,296 254,296 2,916 3,794 253,794
3 38 3,000 9,930 5,877 6,755 256,755 5,130 6,008 256,008
4 39 3,000 13,577 8,426 9,303 259,303 7,416 8,293 258,293
5 40 3,000 17,406 11,072 11,950 261,950 9,770 10,648 260,648
6 41 3,000 21,426 13,930 14,710 264,710 12,292 13,072 263,072
7 42 3,000 25,647 16,992 17,577 267,577 14,977 15,562 265,562
8 43 3,000 30,080 20,169 20,559 270,559 17,731 18,121 268,121
9 44 3,000 34,734 23,466 23,661 273,661 20,549 20,744 270,744
10 45 3,000 39,620 26,892 26,892 276,892 23,433 23,433 273,433
11 46 3,000 44,751 30,664 30,664 280,664 26,588 26,588 276,588
12 47 3,000 50,139 34,607 34,607 284,607 29,821 29,821 279,821
13 48 3,000 55,796 38,727 38,727 288,727 33,132 33,132 283,132
14 49 3,000 61,736 43,034 43,034 293,034 36,520 36,520 286,520
15 50 3,000 67,972 47,544 47,544 297,544 39,977 39,977 289,977
16 51 3,000 74,521 52,231 52,231 302,231 43,502 43,502 293,502
17 52 3,000 81,397 57,089 57,089 307,089 47,081 47,081 297,081
18 53 3,000 88,617 62,121 62,121 312,121 50,697 50,697 300,697
19 54 3,000 96,198 67,331 67,331 317,331 54,338 54,338 304,338
20 55 3,000 104,158 72,720 72,720 322,720 57,981 57,981 307,981
21 56 3,000 112,516 78,367 78,367 328,367 61,669 61,669 311,669
22 57 3,000 121,291 84,204 84,204 334,204 65,327 65,327 315,327
23 58 3,000 130,506 90,234 90,234 340,234 68,941 68,941 318,941
24 59 3,000 140,181 96,452 96,452 346,452 72,490 72,490 322,490
25 60 3,000 150,340 102,855 102,855 352,855 75,941 75,941 325,941
26 61 3,000 161,007 109,438 109,438 359,438 79,259 79,259 329,259
27 62 3,000 172,208 116,193 116,193 366,193 82,404 82,404 332,404
28 63 3,000 183,968 123,117 123,117 373,117 85,321 85,321 335,321
29 64 3,000 196,317 130,203 130,203 380,203 87,946 87,946 337,946
30 65 3,000 209,282 137,442 137,442 387,442 90,209 90,209 340,209
CURRENT VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES FOR THE EXACT COMBINATION OF PREMIUMS AND BENEFITS SHOWN.
GUARANTEED VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF
INSURANCE RATES.
THE HYPOTHETICAL INVESTMENT RATE OF RETURN SHOWN ABOVE IS ILLUSTRATIVE
ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE RESULTS.
ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND
UPON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATION MADE BY THE
POLICY OWNER AND THE INVESTMENT
A-8
RESULTS OF THE FUNDS SELECTED. THE CASH VALUE, CASH SURRENDER VALUE AND DEATH
BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF
RETURN AVERAGED THE RATE SHOWN ABOVE OVER A PERIOD OF YEARS, BUT ALSO
FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. NO
REPRESENTATION CAN BE MADE BY THE COMPANY, WALNUT STREET SECURITIES, THE FUNDS,
OR ANY REPRESENTATIVE THEREOF, THAT THIS HYPOTHETICAL RATE OF RETURN CAN BE
ACHIEVED FOR ANY ONE YEAR, OR SUSTAINED OVER ANY PERIOD OF TIME.
ILLUSTRATED VALUES SHOWN ABOVE ARE AS OF THE END OF THE POLICY YEARS
INDICATED AND ASSUME ANY ADDITIONAL PREMIUMS SHOWN ARE RECEIVED ON THE POLICY
ANNIVERSARIES. ILLUSTRATED VALUES ASSUME ALL PREMIUM TAXES ARE PAID BY THE
COMPANY.
General American Life Insurance Company
Flexible Premium Variable Life Insurance
Policy Face Amount: $250,000
Death Benefit Level (Option B)
Male Preferred Nonsmoker Age 35
Annual Premium = $3,000
For Separate Account Eleven A Hypothetical Gross Annual Rate Of
Return Of 12.00% (Net Rate Of 10.60%)
---------------------------------------------------------------
Assuming Current Charges Assuming Guaranteed Charges
------------------------------- -------------------------------
Premium Cash Cash
End of Annual Accum @ Surrender Cash Death Surrender Cash Death
Year Age Payment 5% Value Value Benefit Value Value Benefit
------ --- ------- ------- --------- ---------- ------- --------- ---------- -------
1 36 3,000 3,150 1,150 2,027 252,027 894 1,772 251,772
2 37 3,000 6,458 3,823 4,701 254,701 3,290 4,167 254,167
3 38 3,000 9,930 6,728 7,606 257,606 5,910 6,787 256,787
4 39 3,000 13,577 9,917 10,795 260,795 8,777 9,654 259,654
5 40 3,000 17,406 13,425 14,302 264,302 11,910 12,787 262,787
6 41 3,000 21,426 17,393 18,173 268,173 15,434 16,214 266,214
7 42 3,000 25,647 21,849 22,434 272,434 19,370 19,955 269,955
8 43 3,000 30,080 26,738 27,128 277,128 23,656 24,046 274,046
9 44 3,000 34,734 32,108 32,303 282,303 28,321 28,516 278,516
10 45 3,000 39,620 38,012 38,012 288,012 33,404 33,404 283,404
11 46 3,000 44,751 44,743 44,743 294,743 39,173 39,173 289,173
12 47 3,000 50,139 52,189 52,189 302,189 45,488 45,488 295,488
13 48 3,000 55,796 60,422 60,422 310,422 52,402 52,402 302,402
14 49 3,000 61,736 69,529 69,529 319,529 59,974 59,974 309,974
15 50 3,000 67,972 79,612 79,612 329,612 68,264 68,264 318,264
16 51 3,000 74,521 90,737 90,737 340,737 77,344 77,344 327,344
17 52 3,000 81,397 103,002 103,002 353,002 87,280 87,280 337,280
18 53 3,000 88,617 116,523 116,523 366,523 98,144 98,144 348,144
19 54 3,000 96,198 131,430 131,430 381,430 110,021 110,021 360,021
20 55 3,000 104,158 147,865 147,865 397,865 122,995 122,995 372,995
21 56 3,000 112,516 166,135 166,135 416,135 137,289 137,289 387,289
22 57 3,000 121,291 186,296 186,296 436,296 152,914 152,914 402,914
23 58 3,000 130,506 208,544 208,544 458,544 170,000 170,000 420,000
24 59 3,000 140,181 233,091 233,091 483,091 188,685 188,685 438,685
25 60 3,000 150,340 260,171 260,171 510,171 209,112 209,112 459,112
26 61 3,000 161,007 290,044 290,044 540,044 231,437 231,437 481,437
27 62 3,000 172,208 322,996 322,996 572,996 255,831 255,831 505,831
28 63 3,000 183,968 359,346 359,346 609,346 282,468 282,468 532,468
29 64 3,000 196,317 399,446 399,446 649,446 311,538 311,538 561,538
A-9
For Separate Account Eleven A Hypothetical Gross Annual Rate Of
Return Of 12.00% (Net Rate Of 10.60%)
---------------------------------------------------------------
Assuming Current Charges Assuming Guaranteed Charges
------------------------------- -------------------------------
Premium Cash Cash
End of Annual Accum @ Surrender Cash Death Surrender Cash Death
Year Age Payment 5% Value Value Benefit Value Value Benefit
------ --- ------- ------- --------- ---------- ------- --------- ---------- -------
30 65 3,000 209,282 443,685 443,685 693,685 343,243 343,243 593,243
CURRENT VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES FOR THE EXACT COMBINATION OF PREMIUMS AND BENEFITS SHOWN.
GUARANTEED VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF
INSURANCE RATES.
THE HYPOTHETICAL INVESTMENT RATE OF RETURN SHOWN ABOVE IS ILLUSTRATIVE
ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE RESULTS.
ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND
UPON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATION MADE BY THE
POLICY OWNER AND THE INVESTMENT RESULTS OF THE FUNDS SELECTED. THE CASH VALUE,
CASH SURRENDER VALUE AND DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM
THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED THE RATE SHOWN ABOVE OVER A
PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATION CAN BE MADE BY THE COMPANY, WALNUT STREET
SECURITIES, THE FUNDS, OR ANY REPRESENTATIVE THEREOF, THAT THIS HYPOTHETICAL
RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR, OR SUSTAINED OVER ANY PERIOD
OF TIME.
ILLUSTRATED VALUES SHOWN ABOVE ARE AS OF THE END OF THE POLICY YEARS
INDICATED AND ASSUME ANY ADDITIONAL PREMIUMS SHOWN ARE RECEIVED ON THE POLICY
ANNIVERSARIES. ILLUSTRATED VALUES ASSUME ALL PREMIUM TAXES ARE PAID BY THE
COMPANY.
General American Life Insurance Company
Flexible Premium Variable Life Insurance
Policy Face Amount: $250,000
Death Benefit Level (Option C)
Male Preferred Nonsmoker Age 35
Annual Premium = $3,000
For Separate Account Eleven A Hypothetical Gross Annual Rate Of
Return Of 0.00% (Net Rate Of -1.40%)
---------------------------------------------------------------
Assuming Current Charges Assuming Guaranteed Charges
------------------------------- -------------------------------
Premium Cash Cash
End of Annual Accum @ Surrender Cash Death Surrender Cash Death
Year Age Payment 5% Value Value Benefit Value Value Benefit
------ --- ------- ------- --------- ---------- ------- --------- ---------- -------
1 36 3,000 3,150 893 1,771 250,000 655 1,533 250,000
2 37 3,000 6,458 3,036 3,913 250.000 2,568 3,446 250,000
3 38 3,000 9,930 5,102 5,980 250,000 4,432 5,309 250,000
4 39 3,000 13,577 7,121 7,998 250,000 6,244 7,121 250,000
5 40 3,000 17,406 9,095 9,973 250,000 8,001 8,878 250,000
6 41 3,000 21,426 11,134 11,914 250.000 9,799 10,579 250,000
A-10
For Separate Account Eleven A Hypothetical Gross Annual Rate Of
Return Of 0.00% (Net Rate Of -1.40%)
---------------------------------------------------------------
Assuming Current Charges Assuming Guaranteed Charges
------------------------------- -------------------------------
Premium Cash Cash
End of Annual Accum @ Surrender Cash Death Surrender Cash Death
Year Age Payment 5% Value Value Benefit Value Value Benefit
------ --- ------- ------- --------- ---------- ------- --------- ---------- -------
7 42 3,000 25,647 13,228 13,813 250,000 11,632 12,217 250,000
8 43 3,000 30,080 15,282 15,672 250,000 13,404 13,794 250,000
9 44 3,000 34,734 17,296 17,491 250,000 15,110 15,305 250,000
10 45 3,000 39,620 19,276 19,276 250,000 16,750 16,750 250,000
11 46 3,000 44,751 21,411 21,411 250,000 18,506 18,506 250,000
12 47 3,000 50,139 23,517 23,517 250,000 20,185 20,185 250,000
13 48 3,000 55,796 25,590 25,590 250,000 21,781 21,781 250,000
14 49 3,000 61,736 27,635 27,635 250,000 23,294 23,294 250,000
15 50 3,000 67,972 29,656 29,656 250,000 24,715 24,715 250,000
16 51 3,000 74,521 31,625 31,625 250,000 26,043 26,043 250,000
17 52 3,000 81,397 33,530 33,530 250,000 27,263 27,263 250,000
18 53 3,000 88,617 35,370 35,370 250,000 28,362 28,362 250,000
19 54 3,000 96,198 37,140 37,140 250,000 29,328 29,328 250,000
20 55 3,000 104,158 38,839 38,839 250,000 30,145 30,145 250,000
21 56 3,000 112,516 40,504 40,504 250,000 30,832 30,832 250,000
22 57 3,000 121,291 42,090 42,090 250,000 31,340 31,340 250,000
23 58 3,000 130,506 43,591 43,591 250,000 31,662 31,662 250,000
24 59 3,000 140,181 45,000 45,000 250,000 31,782 31,782 250,000
25 60 3,000 150,340 46,308 46,308 250,000 31,675 31,675 250,000
26 61 3,000 161,007 47,505 47,505 250,000 31,316 31,316 250,000
27 62 3,000 172,208 48,584 48,584 250,000 30,676 30,676 250,000
28 63 3,000 183,968 49,534 49,534 250,000 29,713 29,713 250,000
29 64 3,000 196,317 50,348 50,348 250,000 28,376 28,376 250,000
30 65 3,000 209,282 51,013 51,013 250,000 26,612 26,612 250,000
CURRENT VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES FOR THE EXACT COMBINATION OF PREMIUMS AND BENEFITS SHOWN.
GUARANTEED VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF
INSURANCE RATES.
THE HYPOTHETICAL INVESTMENT RATE OF RETURN SHOWN ABOVE IS ILLUSTRATIVE
ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE RESULTS.
ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND
UPON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATION MADE BY THE
POLICY OWNER AND THE INVESTMENT RESULTS OF THE FUNDS SELECTED. THE CASH VALUE,
CASH SURRENDER VALUE AND DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM
THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED THE RATE SHOWN ABOVE OVER A
PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATION CAN BE MADE BY THE COMPANY, WALNUT STREET
SECURITIES, THE FUNDS, OR ANY REPRESENTATIVE THEREOF, THAT THIS HYPOTHETICAL
RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR, OR SUSTAINED OVER ANY PERIOD
OF TIME.
ILLUSTRATED VALUES SHOWN ABOVE ARE AS OF THE END OF THE POLICY YEARS
INDICATED AND ASSUME ANY ADDITIONAL PREMIUMS SHOWN ARE RECEIVED ON THE POLICY
ANNIVERSARIES. ILLUSTRATED VALUES ASSUME ALL PREMIUM TAXES ARE PAID BY THE
COMPANY.
A-11
General American Life Insurance Company
Flexible Premium Variable Life Insurance
Policy Face Amount: $250,000
Death Benefit Level (Option C)
Male Preferred Nonsmoker Age 35
Annual Premium = $3,000
For Separate Account Eleven A Hypothetical Gross Annual Rate Of
Return Of 6.00% (Net Rate Of 4.60%)
---------------------------------------------------------------
Assuming Current Charges Assuming Guaranteed Charges
------------------------------- -------------------------------
Premium Cash Cash
End of Annual Accum @ Surrender Cash Death Surrender Cash Death
Year Age Payment 5% Value Value Benefit Value Value Benefit
------ --- ------- ------- --------- ---------- ------- --------- ---------- -------
1 36 3,000 3,150 1,022 1,900 250,000 776 1,654 250,000
2 37 3,000 6,458 3,424 4,302 250,000 2,927 3,805 250,000
3 38 3,000 9,930 5,890 6,768 250,000 5,154 6,032 250,000
4 39 3,000 13,577 8,450 9,327 250,000 7,458 8,336 250,000
5 40 3,000 17,406 11,112 11,989 250,000 9,838 10,716 250,000
6 41 3,000 21,426 13,990 14,770 250,000 12,395 13,175 250,000
7 42 3,000 25,647 17,078 17,663 250,000 15,125 15,710 250,000
8 43 3,000 30,080 20,287 20,677 250,000 17,935 18,325 250,000
9 44 3,000 34,734 23,624 23,819 250,000 20,824 21,019 250,000
10 45 3,000 39,620 27,097 27,097 250,000 23,796 23,796 250,000
11 46 3,000 44,751 30,927 30,927 250,000 27,058 27,058 250,000
12 47 3,000 50,139 34,938 34,938 250,000 30,424 30,424 250,000
13 48 3,000 55,796 39,136 39,136 250,000 33,897 33,897 250,000
14 49 3,000 61,736 43,533 43,533 250,000 37,480 37,480 250,000
15 50 3,000 67,972 48,145 48,145 250,000 41,172 41,172 250,000
16 51 3,000 74,521 52,953 52,953 250,000 44,977 44,977 250,000
17 52 3,000 81,397 57,959 57,959 250,000 48,890 48,890 250,000
18 53 3,000 88,617 63,168 63,168 250,000 52,905 52,905 250,000
19 54 3,000 96,198 68,592 68,592 250,000 57,021 57,021 250,000
20 55 3,000 104,158 74,238 74,238 250,000 61,230 61,230 250,000
21 56 3,000 112,516 80,193 80,193 250,000 65,593 65,593 250,000
22 57 3,000 121,291 86,399 86,399 250,000 70,052 70,052 250,000
23 58 3,000 130,506 92,867 92,867 250,000 74,609 74,609 250,000
24 59 3,000 140,181 99,610 99,610 250,000 79,267 79,267 250,000
25 60 3,000 150,340 106,638 106,638 250,000 84,019 84,019 250,000
26 61 3,000 161,007 113,964 113,964 250,000 88,863 88,863 250,000
27 62 3,000 172,208 121,606 121,606 250,000 93,793 93,793 250,000
28 63 3,000 183,968 129,582 129,582 250,000 98,801 98,801 250,000
29 64 3,000 196,317 137,913 137,913 250,000 103,875 103,875 250,000
30 65 3,000 209,282 146,594 146,594 258,654 109,005 109,005 250,000
CURRENT VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES FOR THE EXACT COMBINATION OF PREMIUMS AND BENEFITS SHOWN.
GUARANTEED VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF
INSURANCE RATES.
THE HYPOTHETICAL INVESTMENT RATE OF RETURN SHOWN ABOVE IS ILLUSTRATIVE
ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE RESULTS.
ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE
A-12
SHOWN AND WILL DEPEND UPON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT
ALLOCATION MADE BY THE POLICY OWNER AND THE INVESTMENT RESULTS OF THE FUNDS
SELECTED. THE CASH VALUE, CASH SURRENDER VALUE AND DEATH BENEFIT FOR A POLICY
WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED THE
RATE SHOWN ABOVE OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW
THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATION CAN BE MADE BY THE
COMPANY, WALNUT STREET SECURITIES, THE FUNDS, OR ANY REPRESENTATIVE THEREOF,
THAT THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR, OR
SUSTAINED OVER ANY PERIOD OF TIME.
ILLUSTRATED VALUES SHOWN ABOVE ARE AS OF THE END OF THE POLICY YEARS
INDICATED AND ASSUME ANY ADDITIONAL PREMIUMS SHOWN ARE RECEIVED ON THE POLICY
ANNIVERSARIES. ILLUSTRATED VALUES ASSUME ALL PREMIUM TAXES ARE PAID BY THE
COMPANY.
General American Life Insurance Company
Flexible Premium Variable Life Insurance
Policy Face Amount: $250,000
Death Benefit Level (Option C)
Male Preferred Nonsmoker Age 35
Annual Premium = $3,000
For Separate Account Eleven A Hypothetical Gross Annual Rate Of
Return Of 12.00% (Net Rate Of 10.60%)
---------------------------------------------------------------
Assuming Current Charges Assuming Guaranteed Charges
------------------------------- -------------------------------
Premium Cash Cash
End of Annual Accum @ Surrender Cash Death Surrender Cash Death
Year Age Payment 5% Value Value Benefit Value Value Benefit
------ --- ------- ------- --------- ---------- ------- --------- ---------- -------
1 36 3,000 3,150 1,152 2,029 250,000 898 1,776 250,000
2 37 3,000 6,458 3,829 4,707 250,000 3,302 4,180 250,000
3 38 3,000 9,930 6,743 7,620 250,000 5,937 6,815 250,000
4 39 3,000 13,577 9,946 10,823 250,000 8,827 9,704 250,000
5 40 3,000 17,406 13,473 14,351 250,000 11,994 12,872 250,000
6 41 3,000 21,426 17,470 18,250 250,000 15,565 16,345 250,000
7 42 3,000 25,647 21,963 22,548 250,000 19,567 20,152 250,000
8 43 3,000 30,080 26,902 27,292 250,000 23,940 24,330 250,000
9 44 3,000 34,734 32,335 32,530 250,000 28,718 28,913 250,000
10 45 3,000 39,620 38,321 38,321 250,000 33,949 33,949 250,000
11 46 3,000 44,751 45,155 45,155 250,000 39,910 39,910 250,000
12 47 3,000 50,139 52,727 52,727 250,000 46,472 46,472 250,000
13 48 3,000 55,796 61,115 61,115 250,000 53,702 53,702 250,000
14 49 3,000 61,736 70,412 70,412 250,000 61,674 61,674 250,000
15 50 3,000 67,972 80,719 80,719 250,000 70,468 70,468 250,000
16 51 3,000 74,521 92,125 92,125 250,000 80,180 80,180 250,000
17 52 3,000 81,397 104,730 104,730 268,248 90,908 90,908 250,000
18 53 3,000 88,617 118,624 118,624 294,531 102,763 102,763 255,151
19 54 3,000 96,198 133,934 133,934 322,466 115,775 115,775 278,745
20 55 3,000 104,158 150,800 150,800 352,192 129,994 129,994 303,599
21 56 3,000 112,516 169,529 169,529 384,220 145,654 145,654 330,111
22 57 3,000 121,291 190,169 190,169 418,424 162,761 162,761 358,120
23 58 3,000 130,506 212,909 212,909 454,991 181,441 181,441 387,744
24 59 3,000 140,181 237,954 237,954 494,101 201,831 201,831 419,092
25 60 3,000 150,340 265,526 265,526 535,941 224,066 224,066 452,257
26 61 3,000 161,007 295,869 295,869 580,755 248,294 248,294 487,372
27 62 3,000 172,208 329,248 329,248 628,785 274,674 274,674 524,562
A-13
For Separate Account Eleven A Hypothetical Gross Annual Rate Of
Return Of 12.00% (Net Rate Of 10.60%)
---------------------------------------------------------------
Assuming Current Charges Assuming Guaranteed Charges
------------------------------- -------------------------------
Premium Cash Cash
End of Annual Accum @ Surrender Cash Death Surrender Cash Death
Year Age Payment 5% Value Value Benefit Value Value Benefit
------ --- ------- ------- --------- ---------- ------- --------- ---------- -------
28 63 3,000 183,968 365,958 365,958 680,316 303,363 303,363 563,952
29 64 3,000 196,317 406,321 406,321 735,669 334,523 334,523 605,674
30 65 3,000 209,282 450,688 450,688 795,207 368,325 368,325 649,884
CURRENT VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES FOR THE EXACT COMBINATION OF PREMIUMS AND BENEFITS SHOWN.
GUARANTEED VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF
INSURANCE RATES.
THE HYPOTHETICAL INVESTMENT RATE OF RETURN SHOWN ABOVE IS ILLUSTRATIVE
ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE RESULTS.
ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND
UPON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATION MADE BY THE
POLICY OWNER AND THE INVESTMENT RESULTS OF THE FUNDS SELECTED. THE CASH VALUE,
CASH SURRENDER VALUE AND DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM
THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED THE RATE SHOWN ABOVE OVER A
PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATION CAN BE MADE BY THE COMPANY, WALNUT STREET
SECURITIES, THE FUNDS, OR ANY REPRESENTATIVE THEREOF, THAT THIS HYPOTHETICAL
RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR, OR SUSTAINED OVER ANY PERIOD
OF TIME.
ILLUSTRATED VALUES SHOWN ABOVE ARE AS OF THE END OF THE POLICY YEARS
INDICATED AND ASSUME ANY ADDITIONAL PREMIUMS SHOWN ARE RECEIVED ON THE POLICY
ANNIVERSARIES. ILLUSTRATED VALUES ASSUME ALL PREMIUM TAXES ARE PAID BY THE
COMPANY.
General American Life Insurance Company
Flexible Premium Variable Life Insurance
Policy Face Amount: $250,000
Death Benefit Level (Option A)
Male Preferred Nonsmoker Age 50
Annual Premium = $6,000
For Separate Account Eleven A Hypothetical Gross Annual Rate Of
Return Of 0.00% (Net Rate Of -1.40%)
---------------------------------------------------------------
Assuming Current Charges Assuming Guaranteed Charges
------------------------------- -------------------------------
Premium Cash Cash
End of Annual Accum @ Surrender Cash Death Surrender Cash Death
Year Age Payment 5% Value Value Benefit Value Value Benefit
------ --- ------- ------- --------- ---------- ------- --------- ---------- -------
1 51 6,000 6,300 2,191 3,912 250,000 1,299 3,020 250,000
2 52 6,000 12,915 6,543 8,264 250,000 4,791 6,513 250,000
3 53 6,000 19,861 10,752 12,473 250,000 8,133 9,854 250,000
4 54 6,000 27,154 14,830 16,551 250,000 11,313 13,034 250,000
A-14
For Separate Account Eleven A Hypothetical Gross Annual Rate Of
Return Of 0.00% (Net Rate Of -1.40%)
---------------------------------------------------------------
Assuming Current Charges Assuming Guaranteed Charges
------------------------------- -------------------------------
Premium Cash Cash
End of Annual Accum @ Surrender Cash Death Surrender Cash Death
Year Age Payment 5% Value Value Benefit Value Value Benefit
------ --- ------- ------- --------- ---------- ------- --------- ---------- -------
5 55 6,000 34,811 18,785 20,506 250,000 14,317 16,038 250,000
6 56 6,000 42,852 22,824 24,354 250,000 17,325 18,855 250,000
7 57 6,000 51,295 26,949 28,096 250,000 20,324 21,471 250,000
8 58 6,000 60,159 30,978 31,743 250,000 23,117 23,882 250,000
9 59 6,000 69,467 34,902 35,284 250,000 25,694 26,076 250,000
10 60 6,000 79,241 38,716 38,716 250,000 28,033 28,033 250,000
11 61 6,000 89,503 42,748 42,748 250,000 30,482 30,482 250,000
12 62 6,000 100,278 46,647 46,647 250,000 32,652 32,652 250,000
13 63 6,000 111,592 50,431 50,431 250,000 34,508 34,508 250,000
14 64 6,000 123,471 54,119 54,119 250,000 36,013 36,013 250,000
15 65 6,000 135,945 57,725 57,725 250,000 37,123 37,123 250,000
16 66 6,000 149,042 61,011 61,011 250,000 37,799 37,799 250,000
17 67 6,000 162,794 64,119 64,119 250,000 38,007 38,007 250,000
18 68 6,000 177,234 67,035 67,035 250,000 37,702 37,702 250,000
19 69 6,000 192,396 69,748 69,748 250,000 36,839 36,839 250,000
20 70 6,000 208,316 72,242 72,242 250,000 35,355 35,355 250,000
21 71 6,000 225,031 74,581 74,581 250,000 33,189 33,189 250,000
22 72 6,000 242,583 76,673 76,673 250,000 30,047 30,047 250,000
23 73 6,000 261,012 78,506 78,506 250,000 26,015 26,015 250,000
24 74 6,000 280,363 80,060 80,060 250,000 20,759 20,759 250,000
25 75 6,000 300,681 81,308 81,308 250,000 14,044 14,044 250,000
26 76 6,000 322,015 82,221 82,221 250,000 5,638 5,638 250,000
27 77 6,000 344,415 82,773 82,773 250,000 -- -- --
28 78 6,000 367,936 82,921 82,921 250,000 -- -- --
29 79 6,000 392,633 82,617 82,617 250,000 -- -- --
30 80 6,000 418,565 81,811 81,811 250,000 -- -- --
CURRENT VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES FOR THE EXACT COMBINATION OF PREMIUMS AND BENEFITS SHOWN.
GUARANTEED VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF
INSURANCE RATES.
THE HYPOTHETICAL INVESTMENT RATE OF RETURN SHOWN ABOVE IS ILLUSTRATIVE
ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE RESULTS.
ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND
UPON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATION MADE BY THE
POLICY OWNER AND THE INVESTMENT RESULTS OF THE FUNDS SELECTED. THE CASH VALUE,
CASH SURRENDER VALUE AND DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM
THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED THE RATE SHOWN ABOVE OVER A
PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATION CAN BE MADE BY THE COMPANY, WALNUT STREET
SECURITIES, THE FUNDS, OR ANY REPRESENTATIVE THEREOF, THAT THIS HYPOTHETICAL
RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR, OR SUSTAINED OVER ANY PERIOD
OF TIME.
ILLUSTRATED VALUES SHOWN ABOVE ARE AS OF THE END OF THE POLICY YEARS
INDICATED AND ASSUME ANY ADDITIONAL PREMIUMS SHOWN ARE RECEIVED
A-15
ON THE POLICY ANNIVERSARIES. ILLUSTRATED VALUES ASSUME ALL PREMIUM TAXES ARE
PAID BY THE COMPANY.
(*) UNLESS ADDITIONAL PREMIUM IS PAID, POLICY WILL LAPSE WITHOUT VALUE
General American Life Insurance Company
Flexible Premium Variable Life Insurance
Policy Face Amount: $250,000
Death Benefit Level (Option A)
Male Preferred Nonsmoker Age 50
Annual Premium = $6,000
For Separate Account Eleven A Hypothetical Gross Annual Rate Of
Return Of 6.00% (Net Rate Of 4.60%)
---------------------------------------------------------------
Assuming Current Charges Assuming Guaranteed Charges
------------------------------- -------------------------------
Premium Cash Cash
End of Annual Accum @ Surrender Cash Death Surrender Cash Death
Year Age Payment 5% Value Value Benefit Value Value Benefit
------ --- ------- ------- --------- ---------- ------- --------- ---------- -------
1 51 6,000 6,300 2,461 4,183 250,000 1,541 3,262 250,000
2 52 6,000 12,915 7,358 9,080 250,000 5,496 7,218 250,000
3 53 6,000 19,861 12,398 14,119 250,000 9,532 11,254 250,000
4 54 6,000 27,154 17,597 19,318 250,000 13,642 15,363 250,000
5 55 6,000 34,811 22,972 24,693 250,000 17,813 19,535 250,000
6 56 6,000 42,852 28,738 30,268 250,000 22,230 23,760 250,000
7 57 6,000 51,295 34,906 36,053 250,000 26,883 28,031 250,000
8 58 6,000 60,159 41,305 42,070 250,000 31,580 32,345 250,000
9 59 6,000 69,467 47,939 48,321 250,000 36,316 36,699 250,000
10 60 6,000 79,241 54,814 54,814 250,000 41,075 41,075 250,000
11 61 6,000 89,503 62,321 62,321 250,000 46,255 46,255 250,000
12 62 6,000 100,278 70,126 70,126 250,000 51,482 51,482 250,000
13 63 6,000 111,592 78,266 78,266 250,000 56,738 56,738 250,000
14 64 6,000 123,471 86,778 86,778 250,000 62,000 62,000 250,000
15 65 6,000 135,945 95,698 95,698 250,000 67,246 67,246 250,000
16 66 6,000 149,042 104,859 104,859 250,000 72,459 72,459 250,000
17 67 6,000 162,794 114,404 114,404 250,000 77,630 77,630 250,000
18 68 6,000 177,234 124,357 124,357 250,000 82,749 82,749 250,000
19 69 6,000 192,396 134,750 134,750 250,000 87,808 87,808 250,000
20 70 6,000 208,316 145,620 145,620 250,000 92,791 92,791 250,000
21 71 6,000 225,031 157,160 157,160 250,000 97,760 97,760 250,000
22 72 6,000 242,583 169,294 169,294 250,000 102,499 102,499 250,000
23 73 6,000 261,012 182,088 182,088 250,000 107,124 107,124 250,000
24 74 6,000 280,363 195,618 195,618 250,000 111,480 111,480 250,000
25 75 6,000 300,681 209,973 209,973 250,000 115,505 115,505 250,000
26 76 6,000 322,015 225,262 225,262 250,000 119,155 119,155 250,000
27 77 6,000 344,415 241,598 241,598 253,678 122,383 122,383 250,000
28 78 6,000 367,936 258,724 258,724 271,660 125,141 125,141 250,000
29 79 6,000 392,633 276,610 276,610 290,440 127,378 127,378 250,000
30 80 6,000 418,565 295,281 295,281 310,046 129,003 129,003 250,000
CURRENT VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES FOR THE EXACT COMBINATION OF PREMIUMS AND BENEFITS SHOWN.
GUARANTEED VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF
INSURANCE RATES.
A-16
THE HYPOTHETICAL INVESTMENT RATE OF RETURN SHOWN ABOVE IS ILLUSTRATIVE
ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE RESULTS.
ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND
UPON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATION MADE BY THE
POLICY OWNER AND THE INVESTMENT RESULTS OF THE FUNDS SELECTED. THE CASH VALUE,
CASH SURRENDER VALUE AND DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM
THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED THE RATE SHOWN ABOVE OVER A
PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATION CAN BE MADE BY THE COMPANY, WALNUT STREET
SECURITIES, THE FUNDS, OR ANY REPRESENTATIVE THEREOF, THAT THIS HYPOTHETICAL
RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR, OR SUSTAINED OVER ANY PERIOD
OF TIME.
ILLUSTRATED VALUES SHOWN ABOVE ARE AS OF THE END OF THE POLICY YEARS
INDICATED AND ASSUME ANY ADDITIONAL PREMIUMS SHOWN ARE RECEIVED ON THE POLICY
ANNIVERSARIES. ILLUSTRATED VALUES ASSUME ALL PREMIUM TAXES ARE PAID BY THE
COMPANY.
General American Life Insurance Company
Flexible Premium Variable Life Insurance
Policy Face Amount: $250,000
Death Benefit Level (Option A)
Male Preferred Nonsmoker Age 50
Annual Premium = $6,000
For Separate Account Eleven A Hypothetical Gross Annual Rate Of
Return Of 12.00% (Net Rate Of 10.60%)
---------------------------------------------------------------
Assuming Current Charges Assuming Guaranteed Charges
------------------------------- -------------------------------
Premium Cash Cash
End of Annual Accum @ Surrender Cash Death Surrender Cash Death
Year Age Payment 5% Value Value Benefit Value Value Benefit
------ --- ------- ------- --------- ---------- ------- --------- ---------- -------
1 51 6,000 6,300 2,732 4,454 250,000 1,783 3,505 250,000
2 52 6,000 12,915 8,207 9,929 250,000 6,233 7,954 250,000
3 53 6,000 19,861 14,179 15,901 250,000 11,053 12,775 250,000
4 54 6,000 27,154 20,714 22,435 250,000 16,276 17,998 250,000
5 55 6,000 34,811 27,880 29,601 250,000 21,932 23,654 250,000
6 56 6,000 42,852 35,957 37,487 250,000 28,254 29,784 250,000
7 57 6,000 51,295 45,024 46,172 250,000 35,286 36,433 250,000
8 58 6,000 60,159 54,991 55,756 250,000 42,898 43,663 250,000
9 59 6,000 69,467 65,949 66,332 250,000 51,157 51,539 250,000
10 60 6,000 79,241 78,009 78,009 250,000 60,129 60,129 250,000
11 61 6,000 89,503 91,730 91,730 250,000 70,353 70,353 250,000
12 62 6,000 100,278 106,916 106,916 250,000 81,579 81,579 250,000
13 63 6,000 111,592 123,757 123,757 250,000 93,930 93,930 250,000
14 64 6,000 123,471 142,466 142,466 250,000 107,553 107,553 250,000
15 65 6,000 135,945 163,276 163,276 250,000 122,624 122,624 250,000
16 66 6,000 149,042 186,341 186,341 250,000 139,367 139,367 250,000
17 67 6,000 162,794 212,034 212,034 252,320 158,059 158,059 250,000
18 68 6,000 177,234 240,504 240,504 283,794 179,033 179,033 250,000
19 69 6,000 192,396 271,940 271,940 318,169 202,699 202,699 250,000
20 70 6,000 208,316 306,648 306,648 355,712 229,394 229,394 266,097
21 71 6,000 225,031 345,280 345,280 397,072 259,039 259,039 297,895
22 72 6,000 242,583 388,028 388,028 438,472 291,754 291,754 329,682
23 73 6,000 261,012 435,356 435,356 483,245 327,944 327,944 364,018
A-17
For Separate Account Eleven A Hypothetical Gross Annual Rate Of
Return Of 12.00% (Net Rate Of 10.60%)
---------------------------------------------------------------
Assuming Current Charges Assuming Guaranteed Charges
------------------------------- -------------------------------
Premium Cash Cash
End of Annual Accum @ Surrender Cash Death Surrender Cash Death
Year Age Payment 5% Value Value Benefit Value Value Benefit
------ --- ------- ------- --------- ---------- ------- --------- ---------- -------
24 74 6,000 280,363 487,787 487,787 531,687 368,006 368,006 401,127
25 75 6,000 300,681 545,911 545,911 584,125 412,440 412,440 441,310
26 76 6,000 322,015 610,406 610,406 640,926 461,842 461,842 484,934
27 77 6,000 344,415 681,709 681,709 715,795 516,258 516,258 542,071
28 78 6,000 367,936 760,521 760,521 798,547 576,166 576,166 604,974
29 79 6,000 392,633 847,608 847,608 889,989 642,086 642,086 674,191
30 80 6,000 418,565 943,815 943,815 991,006 714,581 714,581 750,310
CURRENT VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES FOR THE EXACT COMBINATION OF PREMIUMS AND BENEFITS SHOWN.
GUARANTEED VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF
INSURANCE RATES.
THE HYPOTHETICAL INVESTMENT RATE OF RETURN SHOWN ABOVE IS ILLUSTRATIVE
ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE RESULTS.
ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND
UPON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATION MADE BY THE
POLICY OWNER AND THE INVESTMENT RESULTS OF THE FUNDS SELECTED. THE CASH VALUE,
CASH SURRENDER VALUE AND DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM
THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED THE RATE SHOWN ABOVE OVER A
PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATION CAN BE MADE BY THE COMPANY, WALNUT STREET
SECURITIES, THE FUNDS, OR ANY REPRESENTATIVE THEREOF, THAT THIS HYPOTHETICAL
RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR, OR SUSTAINED OVER ANY PERIOD
OF TIME.
ILLUSTRATED VALUES SHOWN ABOVE ARE AS OF THE END OF THE POLICY YEARS
INDICATED AND ASSUME ANY ADDITIONAL PREMIUMS SHOWN ARE RECEIVED ON THE POLICY
ANNIVERSARIES. ILLUSTRATED VALUES ASSUME ALL PREMIUM TAXES ARE PAID BY THE
COMPANY.
A-18
General American Life Insurance Company
Flexible Premium Variable Life Insurance
Policy Face Amount: $250,000
Death Benefit Level (Option B)
Male Preferred Nonsmoker Age 50
Annual Premium = $6,000
For Separate Account Eleven A Hypothetical Gross Annual Rate Of
Return Of 0.00% (Net Rate Of -1.40%)
---------------------------------------------------------------
Assuming Current Charges Assuming Guaranteed Charges
------------------------------- -------------------------------
Premium Cash Cash
End of Annual Accum @ Surrender Cash Death Surrender Cash Death
Year Age Payment 5% Value Value Benefit Value Value Benefit
------ --- ------- ------- --------- ---------- ------- --------- ---------- -------
1 51 6,000 6,300 2,185 3,907 253,907 1,279 3,000 253,000
2 52 6,000 12,915 6,522 8,244 258,244 4,732 6,453 256,453
3 53 6,000 19,861 10,704 12,426 262,426 8,010 9,731 259,731
4 54 6,000 27,154 14,741 16,462 266,462 11,101 12,823 262,823
5 55 6,000 34,811 18,638 20,359 270,359 13,986 15,707 265,707
6 56 6,000 42,852 22,603 24,133 274,133 16,842 18,372 268,372
7 57 6,000 51,295 26,634 27,781 277,781 19,651 20,798 270,798
8 58 6,000 60,159 30,550 31,315 281,315 22,213 22,978 272,978
9 59 6,000 69,467 34,338 34,720 284,720 24,515 24,897 274,897
10 60 6,000 79,241 37,991 37,991 287,991 26,530 26,530 276,530
11 61 6,000 89,503 41,819 41,819 291,819 28,594 28,594 278,594
12 62 6,000 100,278 45,474 45,474 295,474 30,310 30,310 280,310
13 63 6,000 111,592 48,976 48,976 298,976 31,638 31,638 281,638
14 64 6,000 123,471 52,343 52,343 302,343 32,530 32,530 282,530
15 65 6,000 135,945 55,593 55,593 305,593 32,937 32,937 282,937
16 66 6,000 149,042 58,406 58,406 308,406 32,818 32,818 282,818
17 67 6,000 162,794 60,965 60,965 310,965 32,138 32,138 282,138
18 68 6,000 177,234 63,245 63,245 313,245 30,858 30,858 280,858
19 69 6,000 192,396 65,224 65,224 315,224 28,942 28,942 278,942
20 70 6,000 208,316 66,875 66,875 316,875 26,338 26,338 276,338
21 71 6,000 225,031 68,245 68,245 318,245 22,992 22,992 272,992
22 72 6,000 242,583 69,236 69,236 319,236 18,625 18,625 268,625
23 73 6,000 261,012 69,825 69,825 319,825 13,408 13,408 263,408
24 74 6,000 280,363 69,981 69,981 319,981 7,045 7,045 257,045
25 75 6,000 300,681 69,664 69,664 319,664 -- -- --
26 76 6,000 322,015 68,832 68,832 318,832 -- -- --
27 77 6,000 344,415 67,452 67,452 317,452 -- -- --
28 78 6,000 367,936 65,467 65,467 315,467 -- -- --
29 79 6,000 392,633 62,823 62,823 312,823 -- -- --
30 80 6,000 418,565 59,465 59,465 309,465 -- -- --
CURRENT VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES FOR THE EXACT COMBINATION OF PREMIUMS AND BENEFITS SHOWN.
GUARANTEED VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF
INSURANCE RATES.
THE HYPOTHETICAL INVESTMENT RATE OF RETURN SHOWN ABOVE IS ILLUSTRATIVE
ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE RESULTS.
ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND
UPON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATION MADE BY THE
POLICY OWNER AND THE INVESTMENT
A-19
RESULTS OF THE FUNDS SELECTED. THE CASH VALUE, CASH SURRENDER VALUE AND DEATH
BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF
RETURN AVERAGED THE RATE SHOWN ABOVE OVER A PERIOD OF YEARS, BUT ALSO
FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. NO
REPRESENTATION CAN BE MADE BY THE COMPANY, WALNUT STREET SECURITIES, THE FUNDS,
OR ANY REPRESENTATIVE THEREOF, THAT THIS HYPOTHETICAL RATE OF RETURN CAN BE
ACHIEVED FOR ANY ONE YEAR, OR SUSTAINED OVER ANY PERIOD OF TIME.
ILLUSTRATED VALUES SHOWN ABOVE ARE AS OF THE END OF THE POLICY YEARS
INDICATED AND ASSUME ANY ADDITIONAL PREMIUMS SHOWN ARE RECEIVED ON THE POLICY
ANNIVERSARIES. ILLUSTRATED VALUES ASSUME ALL PREMIUM TAXES ARE PAID BY THE
COMPANY.
(*)UNLESS ADDITIONAL PREMIUM IS PAID, POLICY WILL LAPSE WITHOUT VALUE
General American Life Insurance Company
Flexible Premium Variable Life Insurance
Policy Face Amount: $250,000
Death Benefit Level (Option B)
Male Preferred Nonsmoker Age 50
Annual Premium = $6,000
For Separate Account Eleven A Hypothetical Gross Annual Rate Of
Return Of 6.00% (Net Rate Of 4.60%)
---------------------------------------------------------------
Assuming Current Charges Assuming Guaranteed Charges
------------------------------ -----------------------------
Premium Cash Cash
End of Annual Accum @ Surrender Cash Death Surrender Cash Death
Year Age Payment 5% Value Value Benefit Value Value Benefit
------ --- ------- ------- --------- --------- --------- --------- ------- --------
1 51 6,000 6,300 2,455 4,177 254,177 1,519 3,241 253,241
2 52 6,000 12,915 7,336 9,057 259,057 5,430 7,152 257,152
3 53 6,000 19,861 12,343 14,064 264,064 9,391 11,112 261,112
4 54 6,000 27,154 17,491 19,212 269,212 13,388 15,110 265,110
5 55 6,000 34,811 22,790 24,511 274,511 17,401 19,122 269,122
6 56 6,000 42,852 28,453 29,983 279,983 21,603 23,133 273,133
7 57 6,000 51,295 34,484 35,632 285,632 25,974 27,122 277,122
8 58 6,000 60,159 40,709 41,474 291,474 30,309 31,074 281,074
9 59 6,000 69,467 47,122 47,505 297,505 34,588 34,971 284,971
10 60 6,000 79,241 53,722 53,722 303,722 38,779 38,779 288,779
11 61 6,000 89,503 60,869 60,869 310,869 43,247 43,247 293,247
12 62 6,000 100,278 68,223 68,223 318,223 47,594 47,594 297,594
13 63 6,000 111,592 75,813 75,813 325,813 51,766 51,766 301,766
14 64 6,000 123,471 83,670 83,670 333,670 55,703 55,703 305,703
15 65 6,000 135,945 91,818 91,818 341,818 59,337 59,337 309,337
16 66 6,000 149,042 99,943 99,943 349,943 62,603 62,603 312,603
17 67 6,000 162,794 108,225 108,225 358,225 65,442 65,442 315,442
18 68 6,000 177,234 116,642 116,642 366,642 67,787 67,787 317,787
19 69 6,000 192,396 125,174 125,174 375,174 69,566 69,566 319,566
20 70 6,000 208,316 133,797 133,797 383,797 70,694 70,694 320,694
21 71 6,000 225,031 142,620 142,620 392,620 71,116 71,116 321,116
22 72 6,000 242,583 151,493 151,493 401,493 70,465 70,465 320,465
23 73 6,000 261,012 160,389 160,389 410,389 68,849 68,849 318,849
24 74 6,000 280,363 169,272 169,272 419,272 65,908 65,908 315,908
A-20
For Separate Account Eleven A Hypothetical Gross Annual Rate Of
Return Of 6.00% (Net Rate Of 4.60%)
---------------------------------------------------------------
Assuming Current Charges Assuming Guaranteed Charges
-------------------------------- ------------------------------
Premium Cash Cash
End of Annual Accum @ Surrender Cash Death Surrender Cash Death
Year Age Payment 5% Value Value Benefit Value Value Benefit
------ --- ------- ------- --------- ------- ------- --------- ------- -------
25 75 6,000 300,681 178,095 178,095 428,095 61,426 61,426 311,426
26 76 6,000 322,015 186,806 186,806 436,806 55,225 55,225 305,225
27 77 6,000 344,415 195,359 195,359 445,359 47,126 47,126 297,126
28 78 6,000 367,936 203,681 203,681 453,681 36,957 36,957 286,957
29 79 6,000 392,633 211,696 211,696 461,696 24,553 24,553 274,553
30 80 6,000 418,565 219,327 219,327 469,327 9,701 9,701 259,701
CURRENT VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES FOR THE EXACT COMBINATION OF PREMIUMS AND BENEFITS SHOWN.
GUARANTEED VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF
INSURANCE RATES.
THE HYPOTHETICAL INVESTMENT RATE OF RETURN SHOWN ABOVE IS ILLUSTRATIVE
ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE RESULTS.
ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND
UPON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATION MADE BY THE
POLICY OWNER AND THE INVESTMENT RESULTS OF THE FUNDS SELECTED. THE CASH VALUE,
CASH SURRENDER VALUE AND DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM
THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED THE RATE SHOWN ABOVE OVER A
PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATION CAN BE MADE BY THE COMPANY, WALNUT STREET
SECURITIES, THE FUNDS, OR ANY REPRESENTATIVE THEREOF, THAT THIS HYPOTHETICAL
RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR, OR SUSTAINED OVER ANY PERIOD
OF TIME.
ILLUSTRATED VALUES SHOWN ABOVE ARE AS OF THE END OF THE POLICY YEARS
INDICATED AND ASSUME ANY ADDITIONAL PREMIUMS SHOWN ARE RECEIVED ON THE POLICY
ANNIVERSARIES. ILLUSTRATED VALUES ASSUME ALL PREMIUM TAXES ARE PAID BY THE
COMPANY.
A-21
General American Life Insurance Company
Flexible Premium Variable Life Insurance
Policy Face Amount: $250,000
Death Benefit Level (Option B)
Male Preferred Nonsmoker Age 50
Annual Premium = $6,000
For Separate Account Eleven A Hypothetical Gross Annual Rate Of
Return Of 12.00% (Net Rate Of 10.60%)
---------------------------------------------------------------
Assuming Current Charges Assuming Guaranteed Charges
--------------------------------- -----------------------------
Premium Cash Cash
End of Annual Accum @ Surrender Cash Death Surrender Cash Death
Year Age Payment 5% Value Value Benefit Value Value Benefit
------ --- ------- ------- --------- ------- --------- --------- ------- -------
1 51 6,000 6,300 2,726 4,447 254,447 1,761 3,482 253,482
2 52 6,000 12,915 8,182 9,904 259,904 6,160 7,882 257,882
3 53 6,000 19,861 14,117 15,838 265,838 10,892 12,613 262,613
4 54 6,000 27,154 20,588 22,310 272,310 15,975 17,696 267,696
5 55 6,000 34,811 27,657 29,378 279,378 21,422 23,144 273,144
6 56 6,000 42,852 35,593 37,123 287,123 27,447 28,977 278,977
7 57 6,000 51,295 44,464 45,611 295,611 34,068 35,215 285,215
8 58 6,000 60,159 54,167 54,932 304,932 41,123 41,888 291,888
9 59 6,000 69,467 64,774 65,157 315,157 48,642 49,024 299,024
10 60 6,000 79,241 76,372 76,372 326,372 56,640 56,640 306,640
11 61 6,000 89,503 89,465 89,465 339,465 65,585 65,585 315,585
12 62 6,000 100,278 103,828 103,828 353,828 75,144 75,144 325,144
13 63 6,000 111,592 119,613 119,613 369,613 85,337 85,337 335,337
14 64 6,000 123,471 136,994 136,994 386,994 96,175 96,175 346,175
15 65 6,000 135,945 156,156 156,156 406,156 107,670 107,670 357,670
16 66 6,000 149,042 176,949 176,949 426,949 119,839 119,839 369,839
17 67 6,000 162,794 199,734 199,734 449,734 132,712 132,712 382,712
18 68 6,000 177,234 224,697 224,697 474,697 146,314 146,314 396,314
19 69 6,000 192,396 252,040 252,040 502,040 160,677 160,677 410,677
20 70 6,000 208,316 281,989 281,989 531,989 175,817 175,817 425,817
21 71 6,000 225,031 315,076 315,076 565,076 191,899 191,899 441,899
22 72 6,000 242,583 351,351 351,351 601,351 208,589 208,589 458,589
23 73 6,000 261,012 391,128 391,128 641,128 226,121 226,121 476,121
24 74 6,000 280,363 434,747 434,747 684,747 244,259 244,259 494,259
25 75 6,000 300,681 482,576 482,576 732,576 262,913 262,913 512,913
26 76 6,000 322,015 535,018 535,018 785,018 282,031 282,031 532,031
27 77 6,000 344,415 592,530 592,530 842,530 301,565 301,565 551,565
28 78 6,000 367,936 655,591 655,591 905,591 321,474 321,474 571,474
29 79 6,000 392,633 724,736 724,736 974,736 341,733 341,733 591,733
30 80 6,000 418,565 800,555 800,555 1,050,555 362,270 362,270 612,270
CURRENT VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES FOR THE EXACT COMBINATION OF PREMIUMS AND BENEFITS SHOWN.
GUARANTEED VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF
INSURANCE RATES.
THE HYPOTHETICAL INVESTMENT RATE OF RETURN SHOWN ABOVE IS ILLUSTRATIVE
ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE RESULTS.
ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND
UPON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATION MADE BY THE
POLICY OWNER AND THE INVESTMENT
A-22
RESULTS OF THE FUNDS SELECTED. THE CASH VALUE, CASH SURRENDER VALUE AND DEATH
BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF
RETURN AVERAGED THE RATE SHOWN ABOVE OVER A PERIOD OF YEARS, BUT ALSO
FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. NO
REPRESENTATION CAN BE MADE BY THE COMPANY, WALNUT STREET SECURITIES, THE FUNDS,
OR ANY REPRESENTATIVE THEREOF, THAT THIS HYPOTHETICAL RATE OF RETURN CAN BE
ACHIEVED FOR ANY ONE YEAR, OR SUSTAINED OVER ANY PERIOD OF TIME.
ILLUSTRATED VALUES SHOWN ABOVE ARE AS OF THE END OF THE POLICY YEARS
INDICATED AND ASSUME ANY ADDITIONAL PREMIUMS SHOWN ARE RECEIVED ON THE POLICY
ANNIVERSARIES. ILLUSTRATED VALUES ASSUME ALL PREMIUM TAXES ARE PAID BY THE
COMPANY.
General American Life Insurance Company
Flexible Premium Variable Life Insurance
Policy Face Amount: $250,000
Death Benefit Level (Option C)
Male Preferred Nonsmoker Age 50
Annual Premium = $6,000
For Separate Account Eleven A Hypothetical Gross Annual Rate Of
Return Of 0.00% (Net Rate Of -1.40%)
---------------------------------------------------------------
Assuming Current Charges Assuming Guaranteed Charges
------------------------------- -------------------------------
Premium Cash Cash
End of Annual Accum @ Surrender Cash Death Surrender Cash Death
Year Age Payment 5% Value Value Benefit Value Value Benefit
------ --- ------- ------- --------- ---------- ------- --------- ---------- -------
1 51 6,000 6,300 2,191 3,912 250,000 1,299 3,020 250,000
2 52 6,000 12,915 6,543 8,264 250,000 4,791 6,513 250,000
3 53 6,000 19,861 10,752 12,473 250,000 8,133 9,854 250,000
4 54 6,000 27,154 14,830 16,551 250,000 11,313 13,034 250,000
5 55 6,000 34,811 18,785 20,506 250,000 14,317 16,038 250,000
6 56 6,000 42,852 22,824 24,354 250,000 17,325 18,855 250,000
7 57 6,000 51,295 26,949 28,096 250,000 20,324 21,471 250,000
8 58 6,000 60,159 30,978 31,743 250,000 23,117 23,882 250,000
9 59 6,000 69,467 34,902 35,284 250,000 25,694 26,076 250,000
10 60 6,000 79,241 38,716 38,716 250,000 28,033 28,033 250,000
11 61 6,000 89,503 42,748 42,748 250,000 30,482 30,482 250,000
12 62 6,000 100,278 46,647 46,647 250,000 32,652 32,652 250,000
13 63 6,000 111,592 50,431 50,431 250,000 34,508 34,508 250,000
14 64 6,000 123,471 54,119 54,119 250,000 36,013 36,013 250,000
15 65 6,000 135,945 57,725 57,725 250,000 37,123 37,123 250,000
16 66 6,000 149,042 61,011 61,011 250,000 37,799 37,799 250,000
17 67 6,000 162,794 64,119 64,119 250,000 38,007 38,007 250,000
18 68 6,000 177,234 67,035 67,035 250,000 37,702 37,702 250,000
19 69 6,000 192,396 69,748 69,748 250,000 36,839 36,839 250,000
20 70 6,000 208,316 72,242 72,242 250,000 35,355 35,355 250,000
21 71 6,000 225,031 74,581 74,581 250,000 33,189 33,189 250,000
22 72 6,000 242,583 76,673 76,673 250,000 30,047 30,047 250,000
23 73 6,000 261,012 78,506 78,506 250,000 26,015 26,015 250,000
24 74 6,000 280,363 80,060 80,060 250,000 20,759 20,759 250,000
25 75 6,000 300,681 81,308 81,308 250,000 14,044 14,044 250,000
26 76 6,000 322,015 82,221 82,221 250,000 5,638 5,638 250,000
27 77 6,000 344,415 82,773 82,773 250,000 -- -- --
28 78 6,000 367,936 82,921 82,921 250,000 -- -- --
29 79 6,000 392,633 82,617 82,617 250,000 -- -- --
A-23
For Separate Account Eleven A Hypothetical Gross Annual Rate Of
Return Of 0.00% (Net Rate Of -1.40%)
---------------------------------------------------------------
Assuming Current Charges Assuming Guaranteed Charges
------------------------------- -------------------------------
Premium Cash Cash
End of Annual Accum @ Surrender Cash Death Surrender Cash Death
Year Age Payment 5% Value Value Benefit Value Value Benefit
------ --- ------- ------- --------- ---------- ------- --------- ---------- --------
30 80 6,000 418,565 81,811 81,811 250,000 -- -- --
CURRENT VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES FOR THE EXACT COMBINATION OF PREMIUMS AND BENEFITS SHOWN.
GUARANTEED VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF
INSURANCE RATES.
THE HYPOTHETICAL INVESTMENT RATE OF RETURN SHOWN ABOVE IS ILLUSTRATIVE
ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE RESULTS.
ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND
UPON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATION MADE BY THE
POLICY OWNER AND THE INVESTMENT RESULTS OF THE FUNDS SELECTED. THE CASH VALUE,
CASH SURRENDER VALUE AND DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM
THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED THE RATE SHOWN ABOVE OVER A
PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATION CAN BE MADE BY THE COMPANY, WALNUT STREET
SECURITIES, THE FUNDS, OR ANY REPRESENTATIVE THEREOF, THAT THIS HYPOTHETICAL
RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR, OR SUSTAINED OVER ANY PERIOD
OF TIME.
ILLUSTRATED VALUES SHOWN ABOVE ARE AS OF THE END OF THE POLICY YEARS
INDICATED AND ASSUME ANY ADDITIONAL PREMIUMS SHOWN ARE RECEIVED ON THE POLICY
ANNIVERSARIES. ILLUSTRATED VALUES ASSUME ALL PREMIUM TAXES ARE PAID BY THE
COMPANY.
(*) UNLESS ADDITIONAL PREMIUM IS PAID, POLICY WILL LAPSE WITHOUT VALUE
General American Life Insurance Company
Flexible Premium Variable Life Insurance
Policy Face Amount: $250,000
Death Benefit Level (Option C)
Male Preferred Nonsmoker Age 50
Annual Premium = $6,000
For Separate Account Eleven A Hypothetical Gross Annual Rate Of
Return Of 6.00% (Net Rate Of 4.60%)
---------------------------------------------------------------
Assuming Current Charges Assuming Guaranteed Charges
------------------------------- -------------------------------
Premium Cash Cash
End of Annual Accum @ Surrender Cash Death Surrender Cash Death
Year Age Payment 5% Value Value Benefit Value Value Benefit
------ --- ------- ------- --------- ---------- ------- --------- --------- -------
1 51 6,000 6,300 2,461 4,183 250,000 1,541 3,262 250,000
2 52 6,000 12,915 7,358 9,080 250,000 5,496 7,218 250,000
3 53 6,000 19,861 12,398 14,119 250,000 9,532 11,254 250,000
4 54 6,000 27,154 17,597 19,318 250,000 13,642 15,363 250,000
A-24
For Separate Account Eleven A Hypothetical Gross Annual Rate Of
Return Of 6.00% (Net Rate Of 4.60%)
---------------------------------------------------------------
Assuming Current Charges Assuming Guaranteed Charges
------------------------------ -------------------------------
Premium Cash Cash
End of Annual Accum @ Surrender Cash Death Surrender Cash Death
Year Age Payment 5% Value Value Benefit Value Value Benefit
------ --- ------- ------- --------- ---------- --------- --------- ---------- --------
5 55 6,000 34,811 22,972 24,693 250,000 17,813 19,535 250,000
6 56 6,000 42,852 28,738 30,268 250,000 22,230 23,760 250,000
7 57 6,000 51,295 34,906 36,053 250,000 26,883 28,031 250,000
8 58 6,000 60,159 41,305 42,070 250,000 31,580 32,345 250,000
9 59 6,000 69,467 47,939 48,321 250,000 36,316 36,699 250,000
10 60 6,000 79,241 54,814 54,814 250,000 41,075 41,075 250,000
11 61 6,000 89,503 62,321 62,321 250,000 46,255 46,255 250,000
12 62 6,000 100,278 70,126 70,126 250,000 51,482 51,482 250,000
13 63 6,000 111,592 78,266 78,266 250,000 56,738 56,738 250,000
14 64 6,000 123,471 86,778 86,778 250,000 62,000 62,000 250,000
15 65 6,000 135,945 95,698 95,698 250,000 67,246 67,246 250,000
16 66 6,000 149,042 104,859 104,859 250,000 72,459 72,459 250,000
17 67 6,000 162,794 114,404 114,404 250,000 77,630 77,630 250,000
18 68 6,000 177,234 124,357 124,357 250,000 82,749 82,749 250,000
19 69 6,000 192,396 134,750 134,750 250,000 87,808 87,808 250,000
20 70 6,000 208,316 145,620 145,620 250,000 92,791 92,791 250,000
21 71 6,000 225,031 157,160 157,160 250,000 97,760 97,760 250,000
22 72 6,000 242,583 169,281 169,281 253,742 102,499 102,499 250,000
23 73 6,000 261,012 181,862 181,862 267,064 107,124 107,124 250,000
24 74 6,000 280,363 194,892 194,892 280,521 111,480 111,480 250,000
25 75 6,000 300,681 208,378 208,378 294,240 115,505 115,505 250,000
26 76 6,000 322,015 222,329 222,329 308,262 119,155 119,155 250,000
27 77 6,000 344,415 236,757 236,757 322,613 122,383 122,383 250,000
28 78 6,000 367,936 251,667 251,667 337,299 125,141 125,141 250,000
29 79 6,000 392,633 267,065 267,065 352,321 127,378 127,378 250,000
30 80 6,000 418,565 282,963 282,963 367,667 129,003 129,003 250,000
CURRENT VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES FOR THE EXACT COMBINATION OF PREMIUMS AND BENEFITS SHOWN.
GUARANTEED VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF
INSURANCE RATES.
THE HYPOTHETICAL INVESTMENT RATE OF RETURN SHOWN ABOVE IS ILLUSTRATIVE
ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE RESULTS.
ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND
UPON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATION MADE BY THE
POLICY OWNER AND THE INVESTMENT RESULTS OF THE FUNDS SELECTED. THE CASH VALUE,
CASH SURRENDER VALUE AND DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM
THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED THE RATE SHOWN ABOVE OVER A
PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATION CAN BE MADE BY THE COMPANY, WALNUT STREET
SECURITIES, THE FUNDS, OR ANY REPRESENTATIVE THEREOF, THAT THIS HYPOTHETICAL
RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR, OR SUSTAINED OVER ANY PERIOD
OF TIME.
ILLUSTRATED VALUES SHOWN ABOVE ARE AS OF THE END OF THE POLICY YEARS
INDICATED AND ASSUME ANY ADDITIONAL PREMIUMS SHOWN ARE RECEIVED
A-25
ON THE POLICY ANNIVERSARIES. ILLUSTRATED VALUES ASSUME ALL PREMIUM TAXES ARE
PAID BY THE COMPANY.
General American Life Insurance Company
Flexible Premium Variable Life Insurance
Policy Face Amount: $250,000
Death Benefit Level (Option C)
Male Preferred Nonsmoker Age 50
Annual Premium = $6,000
For Separate Account Eleven A Hypothetical Gross Annual Rate Of
Return Of 12.00% (Net Rate Of 10.60%)
---------------------------------------------------------------
Assuming Current Charges Assuming Guaranteed Charges
---------------------------------- ----------------------------
Premium Cash Cash
End of Annual Accum @ Surrender Cash Death Surrender Cash Death
Year Age Payment 5% Value Value Benefit Value Value Benefit
------ --- ------- ------- --------- ---------- --------- --------- ---------- -------
1 51 6,000 6,300 2,732 4,454 250,000 1,783 3,505 250,000
2 52 6,000 12,915 8,207 9,929 250,000 6,233 7,954 250,000
3 53 6,000 19,861 14,179 15,901 250,000 11,053 12,775 250,000
4 54 6,000 27,154 20,714 22,435 250,000 16,276 17,998 250,000
5 55 6,000 34,811 27,880 29,601 250,000 21,932 23,654 250,000
6 56 6,000 42,852 35,957 37,487 250,000 28,254 29,784 250,000
7 57 6,000 51,295 45,024 46,172 250,000 35,286 36,433 250,000
8 58 6,000 60,159 54,991 55,756 250,000 42,898 43,663 250,000
9 59 6,000 69,467 65,949 66,332 250,000 51,157 51,539 250,000
10 60 6,000 79,241 78,009 78,009 250,000 60,129 60,129 250,000
11 61 6,000 89,503 91,730 91,730 250,000 70,353 70,353 250,000
12 62 6,000 100,278 106,916 106,916 250,000 81,579 81,579 250,000
13 63 6,000 111,592 123,757 123,757 250,000 93,930 93,930 250,000
14 64 6,000 123,471 142,459 142,459 257,930 107,553 107,553 250,000
15 65 6,000 135,945 163,104 163,104 287,785 122,624 122,624 250,000
16 66 6,000 149,042 185,684 185,684 319,487 139,367 139,367 250,000
17 67 6,000 162,794 210,480 210,480 353,384 157,936 157,936 265,165
18 68 6,000 177,234 237,697 237,697 389,663 178,077 178,077 291,928
19 69 6,000 192,396 267,558 267,558 428,531 199,885 199,885 320,145
20 70 6,000 208,316 300,307 300,307 470,199 223,481 223,481 349,910
21 71 6,000 225,031 336,515 336,515 515,372 249,203 249,203 381,654
22 72 6,000 242,583 376,236 376,236 563,955 276,903 276,903 415,060
23 73 6,000 261,012 419,799 419,799 616,476 306,842 306,842 450,598
24 74 6,000 280,363 467,566 467,566 673,000 339,052 339,052 488,022
25 75 6,000 300,681 519,918 519,918 734,150 373,644 373,644 527,604
26 76 6,000 322,015 577,274 577,274 800,396 410,765 410,765 569,530
27 77 6,000 344,415 640,095 640,095 872,213 450,579 450,579 613,972
28 78 6,000 367,936 708,866 708,866 950,065 493,276 493,276 661,118
29 79 6,000 392,633 784,121 784,121 1,034,436 539,079 539,079 711,169
30 80 6,000 418,565 866,444 866,444 1,125,814 588,213 588,213 764,294
CURRENT VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES FOR THE EXACT COMBINATION OF PREMIUMS AND BENEFITS SHOWN.
GUARANTEED VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF
INSURANCE RATES.
THE HYPOTHETICAL INVESTMENT RATE OF RETURN SHOWN ABOVE IS ILLUSTRATIVE
ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR
A-26
FUTURE RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN
AND WILL DEPEND UPON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATION
MADE BY THE POLICY OWNER AND THE INVESTMENT RESULTS OF THE FUNDS SELECTED. THE
CASH VALUE, CASH SURRENDER VALUE AND DEATH BENEFIT FOR A POLICY WOULD BE
DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED THE RATE
SHOWN ABOVE OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THAT
AVERAGE FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATION CAN BE MADE BY THE
COMPANY, WALNUT STREET SECURITIES, THE FUNDS, OR ANY REPRESENTATIVE THEREOF,
THAT THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR, OR
SUSTAINED OVER ANY PERIOD OF TIME.
ILLUSTRATED VALUES SHOWN ABOVE ARE AS OF THE END OF THE POLICY YEARS
INDICATED AND ASSUME ANY ADDITIONAL PREMIUMS SHOWN ARE RECEIVED ON THE POLICY
ANNIVERSARIES. ILLUSTRATED VALUES ASSUME ALL PREMIUM TAXES ARE PAID BY THE
COMPANY.
A-27
PART II
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities Exchange
Act of 1934, the undersigned Registrant hereby undertakes to file with the
Securities and Exchange Commission such supplementary and periodic information,
documents, and reports as may be prescribed by any rule or regulation of the
Commission heretofore or hereafter duly adopted pursuant to authority conferred
in that section.
RULE 484 UNDERTAKING
As described in its governing documents, MetLife, Inc. (the ultimate parent of
the Depositor and MetLife Investors Distribution Company, the Registrant's
underwriter (the "Underwriter"), which is incorporated in the state of
Missouri) shall indemnify any person who is made or is threatened to be made a
party to any civil or criminal suit, or any administrative or investigative
proceeding, by reason of that person's service as a director, officer, or agent
of MetLife, Inc., under certain circumstances, against liabilities and expenses
incurred by such person.
As described in its governing documents, the Depositor, which is incorporated
in the state of Nebraska shall indemnify any person, who was or is a party or
is threatened to be made a party to any threatened, pending, or completed
action, suit, or proceeding, whether civil, criminal, administrative,
arbitrative or investigative, and whether formal or informal, by reason of the
fact that such person (i) is or was a director or officer of the Depositor
(except as described below regarding MetLife Employees serving as directors or
officers of the Depositor) or (ii) with respect to acts or omissions prior to
the date of domestication of the Depositor to Nebraska as to which any director
or officer requested indemnification from the Depositor prior to the date of
domestication of the Depositor to Nebraska, (A) is or was an officer or
director of the Depositor or (B) is or was serving, in any capacity at the
request of the Depositor, as a director, officer, partner, member, trustee,
employee or agent of another domestic or foreign corporation, partnership,
limited liability company, joint venture, trust, employee benefit plan or other
entity, against expenses, including attorneys' fees, judgments, fines and
amounts paid in settlement actually and reasonably incurred by such person in
connection with such action, suit or proceeding. The indemnification provisions
set forth herein shall apply to any situation arising before or after the date
of domestication of the Depositor to Nebraska.
As described in its governing documents, the Underwriter, which is incorporated
in the state of Missouri, may indemnify, under certain circumstances, any
person who is made a party to any civil or criminal suit, or made a subject of
any administrative or investigative proceeding by reason of the fact that he is
or was a director, officer, or agent of the Underwriter. The Underwriter also
has such other and further powers of indemnification as are not inconsistent
with the laws of Missouri.
MetLife, Inc. also has adopted a policy to indemnify employees ("MetLife
Employees") of MetLife, Inc. or its affiliates ("MetLife"), including any
MetLife Employees serving as directors or officers of the Depositor or the
Underwriter. Under the policy, MetLife, Inc. will, under certain circumstances,
indemnify MetLife Employees for losses and expenses incurred in connection with
legal actions threatened or brought against them as a result of their service
to MetLife. The policy excludes MetLife directors and others who are not
MetLife Employees, whose rights to indemnification, if any, are as described in
the charter, bylaws or other arrangement of the relevant company. MetLife, Inc.
also maintains a Directors and Officers Liability and Corporate Reimbursement
Insurance Policy under which the Registrant, the Depositor and the Underwriter,
as well as certain other subsidiaries of MetLife, are covered.
MetLife, Inc. also has secured a Financial Institutions Bond. Insofar as
indemnification for liability arising under the Securities Act of 1933 may be
permitted to directors, officers and controlling persons of the Company
pursuant to the foregoing provisions, or otherwise, the Company has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Company of expenses incurred or
paid by a director, officer or controlling person of the Company in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Company will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication
of such issue.
REPRESENTATIONS
Metropolitan Tower Life Insurance Company hereby represents that the fees and
charges deducted under the flexible premium variable life insurance policies
described in this registration statement, in the aggregate, are reasonable in
relation to the services rendered, the expenses expected to be incurred, and
the risks assumed by Metropolitan Tower Life Insurance Company.
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises the following papers and documents:
The facing sheet.
A reconciliation and tie-in of the information shown in the prospectus with the
items of Form N-8B-2.
The prospectus.
The undertaking to file reports.
The undertaking pursuant to Rule 484(b) under the Securities Act of 1933.
Representations.
The signatures.
Written consents of the following persons:
Opinion and Consent of Marie C. Swift, Esq. (See Exhibit 3(2) below)
Independent Registered Public Accounting Firm (See Exhibit 6 below)
The following exhibits:
1. Copies of all exhibits required by paragraph A of instructions for Exhibits
in Form N-8B-2.
(1) (a) Resolution of the Board of Directors of General American
authorizing establishment of the Separate Account. (Incorporated
by reference to the Post-Effective Amendment No. 16 to the
Registration Statement, File No. 33-10146, (VUL 95), April 28,
2000.)
(b) Resolutions of the Board of Directors of General American
(including Agreement and Plan of Merger attached as Exhibit A to
the resolutions) (adopted February 7, 2018). Filed herewith.
(c) Resolutions of the Board of Directors of the Company authorizing
acceptance of the Separate Account (adopted February 7, 2018).
Filed herewith.
(2) Not Applicable.
(3) (a) Principal Underwriting Agreement. Incorporated by reference to the
Registration Statement on Form S-6, File No. 333-64216 (EBVUL),
filed June 29, 2001.
(b) Form of Amended and Restated Principal Underwriting Agreement
between Metropolitan
Tower Life Insurance Company and MetLife Investors Distribution
Company. Filed herewith.
(c) Form of Selling Agreement. Incorporated by reference to
Post-Effective Amendment No. 16 to the Registration Statement on
Form S-6, File No. 033-10146 (VUL 95) filed April 28, 2000.
(d) Commission Schedule for Policies. (Incorporated by reference to
the Post-Effective Amendment No. 16 to the Registration
Statement, File No. 33-10146, (VUL 95), April 28, 2000.)
(4) Not Applicable.
(5) (a) Forms of Variable Universal Life 98 Policy. (Incorporated by
reference to Pre-Effective Amendment No. 1 to the Registration
Statement, File No. 333-53477 (VUL 98), July 31, 1998.)
(b) Riders to the Policy. (Incorporated by reference to
Pre-Effective Amendment No. 1 to the Registration Statement,
File No. 333-53477 (VUL 98), July 31, 1998.)
(c) Merger endorsement. Filed herewith.
(6) (a) Copy of the Certificate of Incorporation and Certificate of
Amendment of the Company. Filed herewith.
(b) Copy of the By-laws of the Company. Filed herewith.
(7) Not Applicable.
(8) (a) Participation Agreement with Variable Insurance Products Fund
(Incorporated by reference Post-Effective Amendment No. 3 to the
Registration Statement, File No. 333-53477 (VUL 98) filed on
April 28, 2000.)
(b) Form of Participation Agreement with Van Eck Investment Trust
(Incorporated by reference to Post-Effective Amendment No. 7 to
the Registration Statement File No. 033-84104 (VUL 100), filed
on April 28, 2000.)
(c) Participation Agreement with Variable Insurance Products Fund II
(Incorporated by reference Post-Effective Amendment No. 3 to the
Registration Statement, File No. 333-53477 (VUL 98) filed on
April 28, 2000.)
(d) Form of Participation Agreement with American Funds Insurance
Series, Capital Research and Management Company, General
American Distributors, Inc. and General American Life Insurance
Company. (Incorporated by reference to Post-Effective Amendment
No. 5 to the Registration Statement on Form S-6, File No.
333-53477 filed on April 30, 2002.)
(e) Amended and Restated Participation Agreement dated January 24,
2018 Among Variable Insurance Products Fund, Fidelity
Distributors Corporation and General American Life Insurance
Company (Filed herewith.)
(f) Participation Agreement dated March 6, 2017 by and among
Brighthouse Funds Trust I, General American Life Insurance
Company, Brighthouse Investment Advisers, LLC and Brighthouse
Securities, LLC (Filed with Post-Effective Amendment No. 64 to
the Registration Statement filed on Form N-4, File Nos.
002-39272/811-02162 filed on April 27, 2017 and hereby
incorporated by reference.)
(g) Participation Agreement dated March 6, 2017 by and among
Brighthouse Funds Trust II, General American Life Insurance
Company, Brighthouse Investment Advisers, LLC and Brighthouse
Securities, LLC (Filed with Post-Effective Amendment No. 64 to
the Registration Statement filed on Form N-4, File Nos.
002-39272/811-02162 filed on April 27, 2017 and hereby
incorporated by reference.)
(h) Form of Fund Participation Agreement between General American
Life Insurance Company and JPMorgan Series Trust II
(Incorporated by reference to Pre-Effective Amendment No. 1 to
the Registration Statement, File No. 333-53477 (VUL 98) filed on
July 31, 1998.
(i) Participation Agreement with Russell Insurance Funds, Inc. and
General American Life Insurance Company. Filed with
Post-Effective Amendment No. 12 to the Registration Statement on
Form S-6 (Filed No. 033-48550) filed on April 28, 2000 and is
hereby incorporated by reference.
(9) Not Applicable.
(10) Form of Application for each insured. (Incorporated by reference
to Pre-Effective Amendment No. 1 to the Registration Statement,
File No. 333-53477 (VUL 98), July 31, 1998.)
(11) There are no codes of ethics applicable to the trust because the
trust invests only in shares issued by open-end Funds.
2. Memorandum describing the Company's issuance, transfer, and redemption
procedures for the Policies and the Company's procedure for conversion to a
fixed benefit policy. Incorporated by reference to Post-Effective Amendment
No. 16 to the Registration Statement on Form S-6, File No. 033-10146
(VUL 95) filed April 28, 2000.
3. The following exhibits are numbered to correspond to the numbers in the
instructions as to exhibits for Form S-6:
(1) See above.
(2) Opinion and Consent of Marie C. Swift, Esq. as to legality of
securities being registered. Incorporated by reference to
Post-Effective Amendment No. 7 to the Registration Statement on
Form S-6, File No. 333-53477, filed on April 30, 2004.
(3) No financial statements are omitted from the prospectus pursuant to
prospectus instructions 1(b) or (c).
4. Not Applicable.
5. Powers of Attorney. Filed herewith.
6. Consent of Independent Registered Public Accounting Firm. Filed herewith.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant, General American Separate Account Eleven, has duly caused this
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, on the 27th day of April, 2018.
General American Separate Account Eleven
(Registrant)
(Seal) By: Metropolitan Tower Life
Insurance Company (Depositor)
By: /s/ Darrell Hall
----------------------
Darrell Hall
Senior Vice President
Metropolitan Tower Life Insurance Company
Attest:
/s/ Heather C. Harker
----------------------
Heather C. Harker
Pursuant to the requirements of the Securities Act of 1933, Metropolitan
Tower Life Insurance Company has duly caused this 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, on the 27th day of April, 2018.
Metropolitan Tower Life Insurance Company
(Seal)
Attest: /s/ Heather C. Harker By: /s/ Darrell Hall
--------------------- ----------------------
Heather C. Harker Darrell Hall
Senior Vice President
Metropolitan Tower Life Insurance Company
SIGNATURES
As required by the Securities Act of 1933, this Registration Statement has been
signed by the following persons in the capacities indicated on April 27, 2018.
* President and Presiding officer of the Board
-----------------------
Marlene Debel
* Executive Vice President and Chief Accounting Officer
-----------------------
William O'Donnell
* Vice President and Chief Financial Officer
-----------------------
Anne Belden
* Director
-----------------------
Michael Borowski
* Director
-----------------------
Frank Cassandra
* Director
-----------------------
Andrew Kaniuk
* Director
-----------------------
John McCallion
* Director
-----------------------
Richard Leist
* Director
-----------------------
Alessandro Papa
* Director
-----------------------
Michael Zarcone
By: /s/ Heather Harker
-----------------------
Heather Harker
Attorney-In-Fact
April 27, 2018
* Metropolitan Tower Life Insurance Company. Executed by Heather Harker, on
behalf of those indicated pursuant to powers of attorney filed herewith.
EXHIBIT INDEX
1. (1) (b) Resolutions of the Board of Directors of General American
(including Agreement and Plan of Merger attached as Exhibit A to
the resolutions) (adopted February 7, 2018).
(c) Resolutions of the Board of Directors of the Company authorizing
acceptance of the Separate Account (adopted February 7, 2018).
(3) (b) Form of Amended and Restated Principal Underwriting Agreement
between Metropolitan Tower Life Insurance Company and MetLife
Investors Distribution Company.
(5) (c) Merger Endorsement.
(6) (a) Copy of the Certificate of Incorporation and Certificate of
Amendment of the Company.
(b) Copy of the By-laws of the Company.
(8) (e) Amended and Restated Participation Agreement dated January 24,
2018 Among Variable Insurance Products Fund, Fidelity Distributors
Corporation and General American Life Insurance Company.
5. Powers of Attorney.
6. Consent of Independent Registered Public Accounting Firm.